Fuller Project. Preliminary Economic Assessment March VETRIN Mine Planners Ltd. P.A. Bevan P. Eng. Consulting Mining Geologist

Transcription

1 VG Gold Corp. Fuller Project Preliminary Economic Assessment March 2008 VETRIN R. D. Moran P. Eng. P.A. Bevan P. Eng. Consulting Mining Geologist J. R. Doran P. Eng.

2 TABLE OF CONTENTS Section 1.0 SUMMARY... INTRODUCTION: PROPERTY DESCRIPTION AND LOCATION: LOCAL INFRASTRUCTURE AND RESOURCES: HISTORIC DRILLING: GEOLOGICAL SETTING: DEPOSIT TYPES: DATA VERIFICATION: MINERAL PROCESSING: MINERAL RESOURCE ESTIMATES: ECONOMIC ANALYSIS: RECOMMENDATIONS: Section 2.0 TERMS OF REFERENCE Section 3.0 RELIANCE ON OTHER EXPERTS Section 4.0 PROJECT BACKGROUND INFORMATION Section 5.0 GEOLOGICAL SETTING Section 6.0 EXPLORATION DRILLING Section 7.0 ASSAY QUALITY CONTROLS Section 8.0 MINERAL PROCESSING Section 9.0 HW and CW ZONE RESOURCES Section 10.0 PERMITTING, SOCIAL CONSULTATION & ENVIRONMENTAL COMPLIANCE Section 11.0 PROJECT BUDGET & ECONOMICS Section 12.0 CONCLUSIONS Section 13.0 RECOMMENDATIONS Section 14.0 REFERENCES Section 15.0 APPENDIX

3 List of Tables Table Mining Resource Summary Table LOM Cash Flow Table 4.1- Claim List Table 9.1- Undiluted Resource oz cut-off Table 9.2- Stope Block Tons & Grade Summary Table Closure Bond, Surface plant & Mine Dewatering Budget Table Unit Mining Costs Table Mining Cost Summary Table Internal rate of Return Table Cash Flow Sensitivity Analysis Table Cash Flow Forecast

4 List of Figures Figure 1.1- Regional Location Map Figure 1.2- Fuller Project Location in the Timmins Gold Camp Figure 4.1- Timmins Mining Camp Gold Production Figure 4.2- Fuller Property & VG Gold Corp. Adjoining Property Figure 4.3- MNDM Land Tenure Figure 5.1- Regional Geology Figure 5.2- Property Geology Figure 9.1- Hanging Wall Zone Long Section Figure 9.2- Contact Zone Long Section Figure Fuller Project Location & Surroundings Figure Haulage GA Figure Haulage GA Figure Sill GA Figure Sill GA

5 1.0 SUMMARY Introduction: The Fuller Project is a proposed underground mining program which will extract 824,400 tons of ore in order to recover 153,970 ounces of gold bullion. Phase I of the mine plan expands the existing ramp access and lateral development to the 650 foot level in order to mine 476,000 tons while Phase II of the plan involves deepening of the ramp to the 950 foot horizon and associated lateral work to extract an additional 348,400 tons. The overall activities will consist of dewatering, mine rehab, surface plant procurement and setup, 22,000 feet of lateral and vertical development and shrinkage mining of multiple ore blocks. The waste produced during this project will be stockpiled on site. Ore grade material will be trucked via highway haulage equipment to a local mill for processing under a custom milling agreement. The tailings will be stored in the custom mill s existing tailings pond and will be treated and monitored by the custom miller. Exploration on the property began in 1910 through to the 1920 s and 30 s resulting in a small scale mining operation in Belmoral Mines completed 10,000 feet of underground development work during the period from 1986 to VG Gold Corp. s direct exploration activity began in 1996 in the form of over 120,000 feet of diamond drilling from 1996 to Wardrop prepared the NI compliant mineral resource estimate in May of Access to this report can be achieved by viewing VG Gold s press releases on the Sedar.com website. The mineral resources outlined in this report were reviewed with the assistance of Peter Bevan, P. Eng., an independent consulting geologist with over 25 years of mine operations, exploration and property evaluation experience. From this review, ore grade mining blocks where delineated and volumes and grade calculated. These mining resources then became the basis for the overall mining plan and budget. VG Gold Corp. has also advanced the permitting process up to and including, submission of an application for a C of A to discharge process water, and is in the final stage of fulfilling the requirements in order to submit a closure plan for approval. Public consultations have been held to respond to and address their issues. The writer has been informed by VG Gold personnel that consultations with the First Nations have taken place. Mr. Tom Meredith, President of VG Gold Corp., has engaged Vetrin (VMPL) to prepare a preliminary economic assessment study for the Fuller deposit using the resources above the 950 level elevation.

6 Property Description & Location: The Fuller project is located within the city limits of Timmins Ontario which is located approximately 700 kms. north of Toronto, Ontario (figure 1.1). The Fuller property is on the south-central boundary of Tisdale Township, approximately 3.5 miles southeast of the Timmins city centre. VG Gold holds 100% interest in the Fuller property. The Fuller property consists of 14 patented mining claims covering an area of about hectares in Tisdale and Deloro Townships within the Porcupine Mining Division. The claims comprise parts of nine separate surveyed lots and five unsurveyed lots. An inclined shaft excavated in 1920 s and a ramp-decline excavated in the 1980's are collared on a single patented claim, called the Fuller claim (P13189). VG Gold owns both the surface and mineral rights of the Fuller claim. The Fuller claim is the only claim that is not subject to net profits interest (NPI). VG Gold also owns the mineral rights to surrounding properties; of which 50 claims are subject to an NPI with The Summit Organization, Inc amounting to a 10 % NPI royalty on all tons mined within the 50 claims. This study does not analyse whether any part of the mining resource to the 950 level falls outside the Fuller claim. Figure 1.1 Regional Map Timmins Ontario Timmins

7 Local Infrastructure and Resources: The Timmins area is well serviced by mine contracting and mine equipment suppliers. Several underground gold mines (Hoyle Pond & Dome) are active under the Porcupine Joint Venture between Kinross and Goldcorp. Xstrata and Liberty Resources are operating base metal mines for nickel, zinc and copper and an open pit over the former Pamour mine is also active through the Porcupine Joint Venture group. Figure 1.2 illustrates the density of past mining activity around the project site. Figure 1.2 Fuller Project Location in the Timmins Gold Camp VG Gold Corp. Fuller Project Paymaster Mine ,192,206 oz. City of Timmins Delnite Mine ,404 oz. Buffalo Ankerite/March Mine Aunor Mine ,019,130 oz. 2,502,214 oz. VG Gold Corp. Buffalo Ankerite South Pit Project

8 Historic Exploration: A 228-foot inclined shaft (the Edwards shaft ) was sunk some time after In Nakhodas Mining Company Limited ( Nakhodas ) developed 2,100 feet of lateral workings at the 160 foot level, and mined 44,028 tons grading oz/t Au (recovered) above the level in four stopes. Nakhodas also drilled at least 10,919 feet of surface drilling in 41 drill holes (S 1 to S41). In the late 1930's, Hollinger Consolidated Gold Mines conducted a 14,000 foot drilling program in 25 holes on the claims in Tisdale Township. In the early 1950 s the Buffalo Ankerite mine explored the apparent down plunge onto their property of the north limb of the Fuller zone from their #5 Shaft. This work was done on the 1,550 ft. and 2,550 ft. levels and records indicate the removal of 14,000 tons grading 0.21 ounces per ton. The Buffalo Ankerite mine suspended operations in Geological Setting: Geology mapping in Tisdale Township depicts the Property as being underlain by a generally eastwest trending assemblage of massive and pillowed mafic metavolcanic flows with minor variolitic flows. These have been traced onto the adjacent Goldcorp s (formerly Placer Dome) Paymaster mine and Dome mine properties to the east. To the west the units are traceable into complex fold structures; part of the package is believed to be folded to the south around the South Tisdale anticline, while the northerly part of the package appears to trend onto the Hollinger mine property (Ferguson and others, 1968). Deposit Type: Gold mineralization on the VG Gold property belongs to the structurally controlled Archean lode gold class of deposits. Structurally hosted, low-sulphide, lode gold vein systems in metamorphic terrains from around the world possess many characteristics in common, spatially and through time; they constitute a single class of epigenetic precious metal deposits, formed during accretionary tectonics or continental delamitation. Data Verification: Wardrop carried out an internal validation from the original drill hole logs and the drill hole database on 45 (5%) of the 880 drill holes in the total database. Data verification was completed on collar coordinates, end of hole depth, down-the-hole survey measurements, from and to footage measurements of geology and assay sampling intervals, lithological unit and gold grades that were compiled from hand written drill logs into an ACCESS database. Most errors were insignificant and related to mistakes in transcription. Details of the verification are

9 set out in Table 14.1 of the May 2006 Wardrop NI report. The digitizing of drawings and maps were validated on an on-going basis, with information being visually checked while importing the digitized areas to Gemcom geological software. The data verification had an error rate lower then less than 1%. Mineral Processing: At the time of this report VG Gold Corp. had not pursued any metallurgical testing on the Fuller material. Records of the milling during the 1988 exploration program are not available for review. Data recovered previously while evaluating VG Gold s Buffalo Ankerite Project established a historic figure for mill recoveries in the economic model. Production statistics from the Ontario Department of Mines annual reports from the 1940 s indicate that gold recoveries above 92% using the Merrill Crowe metallurgical process was the norm for the Buffalo Ankerite, the property directly to the south of the Fuller claim. The potential custom mill that is being considered for this project is a Merrill Crowe operation built in the late 1980 s. Establishing milling characteristics such as energy requirements, retention times, and filtration rates will be beneficial in establishing a base line for a custom milling agreement. Barring the discovery of technical reports from the past, the option of sending core samples to a qualified lab would be recommended to establish a base line for a custom milling agreement. Mining Resource Estimate: Ore polygons greater then 0.10 where grouped into practical mining blocks or stopes. In some cases lower grade material was added to the stope profile to account for actual mining practices where the use of gravity flow of material has to be designed into the stope profiles. These lower grade portions have been factored into the overall grade calculation. After accounting for 15% external dilution, a minimum mining width of 5 feet was used for volume and grade estimates. Stope sizes ranged from 16,000 to 40,000 tons and in some cases carried through to several haulage levels. There was no accounting for sill pillars or stope backfilling which can occur during an actual mining operation. Table 1.1 Mining Resource Summary to the 950 Elevation 15 % Diluted Tons and Grade Tons Grade Ounces Total Diluted Tons & Grade 824, ,678

10 Economic Analysis: For the purpose of this evaluation, a 750 $US gold price and an exchange rate of 1.0 CDN was used to establish a base price of $750 / oz. CDN for the revenue calculation. No inflation factor has been included in the production costs. The cost of capital and corporate taxation has not been factored into this evaluation. Table 1.2 provides the LOM cumulative cash flow of the project. A detailed cost and revenue stream is contained in Section 11, Table Total recovered ounces for the project stands at 153,790 using a mill recovery of 92%, which produces a recovered grade of ounce per ton. The project achieves a positive cash flow in year three in this model and generates a gross value of $13 million. Total cost per ounce is estimated at $ CDN. The calculated capital and operating cost per ounce is $ and $ respectively. A daily ore production rate of 500 tons per day was used to produce the development and mining schedule. Milling of the ore would be batched through a custom mill in 15,000 ton monthly lots. Table 1.2 LOM Cash Flow in (000 s) $CDN CUMMULATIVE CASH FLOW UNITS YEAR TOTAL TOTAL TOTAL TOTAL TOTAL PROJECT TOTAL CASH FLOW AFTER CAPEX -$3,611 -$10,911 -$9,321 -$2,901 $5,004 $13,112 $13,112 Recommendations: The economic model demonstrates a healthy IRR return of 28% using the parameters specified. The Fuller deposit s advanced nature in terms of completed diamond drilling and underground development provides a major lead time advantage in achieving positive cash flow by the third year of production. Vetrin (VMPL) recommends that VG Gold Corp. proceed with permitting and procurement of a milling agreement which are critical components to the project going forward. All other data is available to proceed to a full feasibility study in order to optimize and firm up the production plan. The short and long term benefits of the alternative mining methods outlined in Section 13 can be evaluated and if warranted be incorporated in this study.

11 2.0 TERMS OF REFERENCE The Fuller property located in Timmins, Ontario contains historic underground mine production and underground exploration workings dating back to 1924 in the form of the 228 foot deep Edwards Shaft and a decline ramp to the 650 foot level dating from the 1980 s. Mr. Tom Meredith, President of VG Gold Corp., has secured the services of Vetrin Mine Planners Ltd. to complete a preliminary economic assessment for the mining of the Fuller Property s resources. A mining resource estimate has been prepared by Mr. Peter Bevan, P.Eng., an independent consulting geologist. All information contained in this report was compiled and gathered by VG Gold Corp. from recent and past compliant exploration drilling, and from past production data and studies completed by others. The Qualified Persons who contributed to this report include Mr. Peter Bevan, P.Eng., Mr. Rodney Doran P.Eng., and Mr. Ronald Moran P.Eng. All three individuals have visited the project site as recently as April The physical conditions of the project location were studied in order to locate the following; ore stockpile, waste stockpile and settling pond & surface plant locations. For the purpose of this study the ore will be trucked and milled via a custom milling agreement with a local mill facility. This study includes inferred mineral resources which are defined as being too speculative, to be counted on as having a positive economic impact on the project.

12 3.0 RELIANCE ON OTHER EXPERTS The authors of this Technical Report have reviewed and analyzed data provided by VG Gold Corp. and the technical team listed in Section 15.1 and have drawn their own conclusions therefrom, augmented by its direct field examination. Vetrin has not carried out any independent exploration work, drilled any holes or carried out any sampling and assaying. However, the presence of gold in the local rocks is substantiated by the previous exploration and historic development work completed on the property. The authors have relied upon the data presented by VG Gold Corp. and from the feasibility technical team in formulating its opinion, although all reasonable diligence in checking, confirming and validating data was exercised. Vetrin accepts in good faith that VG Gold Corp. and the members of the feasibility technical team, not working under Vetrin s direct supervision, disclosed all relevant data during the development and preparation of the feasibility study. The various agreements under which VG Gold Corp. holds title to the mineral lands for this project have not been investigated or confirmed by Vetrin and Vetrin offers no opinion as to the validity of the mineral title claims. The description of the property, and ownership thereof, lease payments, royalties, etc. as set out in this report, are provided for general information purposes only. The description of the geology, mineralization, exploration and resource estimate included in the Preliminary Economic Assessment (PEA) study and this report are based on the NI Technical Report completed by Wardrop in May of 2006 and referred to as Mineral Resource Estimate of the Fuller Gold Property. The location and volume calculations of the mining blocks used in this study were compiled by the author with the assistance of P. Bevan, P. Eng. All currency amounts are stated in Canadian dollars. Quantities are stated solely in Imperial Units, due to the historical and current database existing in Imperial Units, unless otherwise specified. Vetrin is pleased to acknowledge the helpful cooperation of VG Gold Corp. s management and the following consultants, Peter Bevan, P. Eng., Rodney Doran, P. Eng., and Ken Guy, P.Geo., all of whom made available and all data requested, and responded promptly, openly and helpfully to all questions, queries and requests for material.

13 4.1 Property Description and Location 4.0 PROJECT BACKROUND INFORMATION The Fuller property is located in the heart of the Timmins gold mining district, about three kilometres southeast of Timmins (Figure 4.1). A paved road to Timmins, locally referred to as the Timmins Back Road, crosses the northern part of the property. The dormant underground workings on the Fuller claim are accessible by gravel covered side-roads. The southeastern portion of the property is undeveloped, but there are roads within two kilometres of any point. There is an electrical power line to the Fuller underground workings, an old warehouse building and a small core shack building. Figure 4.1 Timmins Mining Camp Gold Production

14 4.1.2 Claims VG Gold holds 100% interest in the Fuller property. The Fuller property consists of 14 patented mining claims covering an area of about hectares in Tisdale and Deloro Townships within the Porcupine Mining Division. The claims comprise parts of nine separate surveyed lots and five unsurveyed lots as shown in Figure 4.2 and Figure 4.3, and as outlined in Table 4.1. An inclined shaft excavated in 1920 s and a ramp-decline excavated in the 1980's are collared on a single patented claim, called the Fuller claim (P13189). VG Gold owns both the surface and mineral rights of the Fuller claim. The Fuller claim is the only claim that is not subject to net profits interest (NPI). Table 4.1 Claim List

15 Figure 4.2 Fuller Property & VG Gold Corp. Adjoining Properties

16 VETRIN Figure 4.3 MNDM Land Tenure Map Fuller claim Dobie claim

17 5.0 GEOLOGICAL SETTING (The following material has been extracted by the author from the NI report by Wardrop Engineering, dated May 3 rd This report can be read in full by downloading it from under VG Gold Corp s May 5 th news release) Regional Geology The geology of Tisdale Township and the northern part of Deloro Township is shown in Figure 5.1. The Timmins area is underlain principally by Archean-aged supracrustal rocks of the southern Abitibi greenstone belt. These rocks are subdivided into two major assemblages: the Deloro and Tisdale groups. The Deloro group, approximately 4,500 to 5,000 metres in thickness, consists of a lower volcanic formation of ultramafic rocks and diorite, a middle volcanic member of calc-alkaline basalt and andesite with minor pyroclastic rocks, and an upper volcanic member consisting mainly of calc-alkaline felsic pyroclastic rocks. Iron formation is common at or near the top of the sequence (Pyke, 1982). In the stratigraphic reassignment of Jackson and Fyon (1991), the Deloro assemblage consists only of the middle volcanic member, and the Eldorado assemblage consists of the upper volcanic member. The Tisdale group, estimated to be up to 7,000 metres thick, consists of a 300 to 3,000 metre thick lower volcanic formation of komatiitic and tholeiitic basalt flows, a middle volcanic formation of tholeiitic basalt, and an upper volcanic formation consisting dominantly of felsic calc-alkaline pyroclastic rocks (Pyke, 1982). Jackson and Fyon (1991) include only the lower two formations in the Tisdale assemblage, and the upper formation in the Krist assemblage. A roughly 3,000 metre thick sequence of clastic sedimentary rocks (turbidites), known as the Porcupine group was deposited from the time of the upper Deloro group through the period of deposition of the Tisdale group (Pyke, 1982). Jackson and Fyon (1991) have included in the Porcupine assemblage only those rocks within the Porcupine syncline. Intrusive rocks in the district include sill-like bodies of ultramafic rocks intruded into the Deloro group; they may be related to the overlying Tisdale group ultramafic volcanic rocks. There are many small epizonal quartz-feldspar porphyry intrusions in the Porcupine district. Pyke (1982) notes that many of them occur within a restricted stratigraphic interval, and they may therefore be subvolcanic intrusions or volcanic domes; they tend to coalesce at depth, however, suggesting a deep-seated intrusive origin (Jackson and Fyon, 1991). Most have been subjected to intense deformation. There is also a strong spatial and possible genetic link between gold mineralization and porphyries. There are northeast and north trending diabase dykes of early to late Precambrian age.

18 Figure 5.1 Regional Geology (not to scale)

19 5.0.2 Regional Structures The Porcupine-Destor fault is a major structural zone, which can probably be traced for a total distance of 440 kilometres. It is at least 150 metres wide, shows evidence of left-lateral displacement, and is offset by younger, brittle faults. On the north side of the fault zone, there have been at least two periods of folding, consisting of a north trending series of folds and folds with an east-northeast axis such as the Porcupine syncline. Hattori and Hodgson (1991) have interpreted five periods of deformation; the Porcupine Destor fault zone and the Porcupine syncline are thought to be relatively old General Setting 5.1 GEOLOGY of the PROPERTY In the 1980's, VG Gold and Belmoral mapped the Fuller claim and immediately adjacent areas. Wardrop is unaware of any recent detailed mapping of the main areas of interest. The simplified geology of the Property is shown in Figure 5.2. The most recent mapping available is by the Ontario Department of Mines (Ferguson, 1959 a,b; Carlson, 1967; Ferguson and others, 1968). Geology mapping in Tisdale Township depicts the Property as being underlain by a generally eastwest trending assemblage of massive and pillowed mafic metavolcanic flows with minor variolitic flows. These have been traced onto the adjacent Placer Dome s Paymaster mine and Dome mine properties to the east. To the west the units are traceable into complex fold structures; part of the package is believed to be folded to the south around the South Tisdale anticline, while the northerly part of the package appears to trend onto the Hollinger mine property (Ferguson and others, 1968). It has long been thought that the structure from the Edwards shaft to the Buffalo Ankerite south zone is dominated by an S-shaped fold pattern expressed by the contact between an assemblage of largely massive to pillowed metavolcanic flows on the west, and talc-chlorite schist (meta-ultramafic rocks) with lesser mafic volcanic rock to the east and south (see Figure 5.2). The mineralization on the VG Gold property occurs stratigraphically above what appears to be the contact between the older ultramafic lower formation and the basaltic middle formation of the Tisdale group. The area south of the Porcupine Destor fault is underlain by metasedimentary rocks (slate and argillite), rhyodacite and other metamorphosed felsic volcanic rocks (sericitic schist), mafic metavolcanic flows and agglomerate. The geology is best known in the immediate area of the Fuller deposit in and around the VG Gold ramp where the most thorough geological data has been collected in recent years.

20 Figure 5.2 Property Geology (not to scale)

21 The ramp was put down in the vicinity of a proposed hinge of an interpreted easterly plunging, local synclinal fold (the Fuller syncline ). In a general south to north direction, the succession of rocks includes talc-chlorite schist (metamorphosed ultramafic rocks), quartzfeldspar porphyry, pillowed amygdaloidal basaltic flows, massive basaltic flows, and a series of alternating units of massive, pillowed and amygdaloidal volcanic rocks (see Figure 5.2). The porphyry is interpreted to have been intruded prior to folding. Hydro thermally altered volcanic rocks, including a strongly altered unit with more than 50% quartz flooding, green mica and pyrite mineralization, are spatially associated with the porphyry; there are also large folded zones of highly carbonate altered volcanic rocks in contact with the porphyry stocks. Although the concept of an easterly plunging local fold (the Fuller syncline) in the ramp area has been used since at least the early 1980's, there is some doubt regarding its validity. In the 1980's VG Gold interpreted a fold axis apparently plunging at 40 degrees ( ) to 50 to the east, based on the north limb of the syncline dipping about 70 to the south (to a depth of about 500 feet in the vicinity of the Fuller deposit) and the western limb (around the nose of the fold) dipping about 50 to the east. It should be noted, however, that a dip of at least 62 (probably about 70 ) is apparent in the Contact Zone through the Edwards shaft just north of the interpreted fold axis (see Figure 7.2). Drilling well west of the projected theoretical fold axis at depth (1,550 to 2,550 foot levels) has failed to identify any sign of a major fold within a few hundred feet of the Imperial shaft. There is little doubt that the north limb of the Fuller Deposit is broadly folded from a roughly east-west strike in its eastern portions, to roughly southwest in its western, presently delineated portions. The trend may eventually turn to the south and southeast, and be connected to the southeast trending limb of the large scale S fold on which the north and south workings of the Buffalo Ankerite deposit are located. The mineralization on the east-west trending north limb can be alternately interpreted to be offset by an as yet unidentified fault. At depth, below the VG Gold ramp-decline between the Buffalo Ankerite 1,550 foot and 2,550 foot levels, the north limb appears to dip steeply to the north. Older ultramafic units structurally overlie younger rocks in the area of the ramp-decline, suggesting that the stratigraphic sequence is overturned in upper levels.

22 5.1.2 Deposit Type The following section has been extracted from ACA Howe 2004 Report. Gold mineralization on the VG Gold property belongs to the structurally controlled Archean lode gold class of deposits. Structurally hosted, low-sulphide, lode gold vein systems in metamorphic terrains from around the world possess many characteristics in common, spatially and through time; they constitute a single class of epigenetic precious metal deposits, formed during accretionary tectonics or continental delamination. The observation that a large proportion of lode gold deposits in Archean cratons formed between 2.75 and 2.62 Ga (Barley et al., 1998) is instrumental in formulating a depositional model. However, the gold endowment of individual Late Archean granite-greenstone belts is highly variable. For example, most of Canada's world-class lode gold deposits occur within a small region of the Ga Abitibi sub-province (Robert and Poulsen, 1997). Gold production from this area represents approximately 5,000 tons of the total 8,000 tons extracted from the entire Superior Province. In contrast, the dominantly Late Archean Wabigoon sub province lacks major gold deposits. Any deposit model must account for this apparent discrepancy. The majority of lode gold deposits formed proximal to regional terrain-boundary structures that acted as vertically extensive hydrothermal plumbing systems. Major mining camps are sited near deflections, strike slip or dilational jogs on the major structures. In detail, most deposits are situated in second or third order splays, or fault intersections that define domains of low mean stress and correspondingly high fluid fluxes. Accordingly, the mineralization and associated alteration is most intense in these flanking domains. The largest lode gold mining camps are in terrains that possess greenschist facies hydrothermal alteration assemblages developed in cyclic ductile to brittle deformation. Smaller deposits are present in amphibolite to granulite facies terrains characterized by amphibolite to granulite facies alteration assemblages, ductile shear zones, and ductilely deformed veins (McCuaig and Kerrich, 1998). In order to formulate a workable exploration model for this class of deposit it has been assumed that most, if not all, Archean lode gold deposits are fundamentally similar. Based on this premise, researchers and field geologists have assembled data from many individual deposits and mining camps into a composite depositional/genetic lode gold model. Inherent characteristics common to most lode gold deposits are their occurrence within regional scale linear composite shear systems, their apparently similar late Archean age, and their spatial association with a late Archean suite of felsic intrusions. Form and distribution of gold mineralization and associated wall rock alteration, however, show a high degree of variability from one deposit to another. Research during the past several decades has focused on understanding the fundamental characteristics of lode gold deposits and has therefore focused on topics such as the tectonic framework of the mineralizing systems, the relative and absolute age of gold emplacement, the tenor

23 of mineralizing fluids, the interaction of ore-bearing fluids with host lithologies, and the nature of local structural controls on ground preparation and gold emplacement. Much of the basic data, both empirical and theoretical has come from deposits within the Canadian Superior Province and most specifically from those deposits in the Abitibi sub-province. Although the deposits of the district have been extensively studied, little consensus has emerged regarding several key points of district geology. In particular, the interrelationships among early mineralizing events, felsic porphyry emplacement, and formation of the exploited ores remain contentious. The Superior Province is the largest exposed Archean craton in the world, and has accounted for more gold production than any other Archean craton, with more than 55 million ounces produced to date. The Abitibi belt is the most prolific gold-producing greenstone terrain in the Superior Province: the Timmins (Porcupine) camp alone has contributed in excess of 51 million ounces of gold, far greater than production from the Kalgoorlie camp in Western Australia, or from the Homestake deposits in South Dakota. Characteristically the largest gold deposits of the district are spatially associated with, but not in, porphyries similar to those exposed at the Dome mine. This association has led to considerable speculation regarding the genetic relationship of felsic porphyry emplacement to ore formation. The results of a study on the various generations of gold mineralization in the Porcupine Camp by Gray (2001) indicates that although some gold was deposited during a copper goldmolybdenum (Cu-Au-Mo) event temporally linked to porphyry emplacement, most of the gold was emplaced significantly later than the porphyries. The documentation of at least three broad periods of gold emplacement, two of which were pre-metamorphic, is permissive and supportive of genetic hypotheses that invoke metamorphogenic remobilization of Au from earlier formed deposits. Lowsulfide quartz gold deposits of all ages constitute a coherent group in terms of geological characteristics, chemistry of ore-fluids, and occurrence in accretionary tectonic environments (Hodgson 1993). The origin of these deposits must be linked to convergent margin processes accompanying the generation of major volumes of syn- to post- tectonic felsic intrusions. The genesis of the ore fluids is more complex than a simple dewatering of oceanic crust and sediments. The evidence points toward deposit formation late in the evolution of a convergent continental margin. The origin of the fluid is complex. From the evidence, it can be concluded that the ore fluid is a product of deep crustal prograde metamorphism. Input of CO2 from the mantle is not necessary, and the field data speaks against this idea. The deposits are associated with deep transcrustal faults that are characterized by carbonation, thus implying that the primary fluid reservoirs are deep and large. Virtually all lode gold deposits are hosted in metamorphosed terrains, and this feature is arguably one of the most significant unifying characteristics. On this basis and from the structural style of the host terrains it can be argued that many lode gold provinces are an integral part of the development of high-temperature, low-pressure type subduction- accretion complexes.

24 5.1.3 Mineralization The following section has been extracted from ACA Howe 2004 Report. The bulk of the more than 60 million ounces of gold production in the Porcupine district in the Timmins area has been from well-known deposits in Tisdale Township north of the Porcupine- Destor fault zone. These include the producing Dome Mine (more than 12 million ounces) and the past-producing Hollinger (19.35 million ounces), McIntyre (10.36 million ounces), Coniaurum (1.11 million ounces), Paymaster (1.19 million ounces) and Preston East Dome mines (1.54 million ounces). In the northern part of Deloro Township are the former Buffalo Ankerite (1.0 million ounces), Aunor (2.5 million ounces) and Delnite (0.92 million ounces) mines, as well as one of the Paymaster shafts on the Placer Dome property. Most of the production has been from deposits, which occur within or immediately adjacent to the Tisdale group. The average historical underground-recovered grade of Timmins area deposits has been about 0.25 oz/t Au. The Dome mine is currently producing from an open pit (the superpit ) at a grade of about 0.07 oz/t Au, as well as underground operations at a grade of about 0.13 oz/t Au. Within the district, gold mineralization occurs as quartz-carbonate vein (lode) type and as sulphiderich zones (disseminated-type). A common feature of all gold deposits is carbonate-rich rocks (Karvinen, 1982). Most of the lode-type mineralization occurs in and adjacent to shear-hosted quartz veins or small veins associated with fold closures. Mineralized veins are associated with alteration zones consisting of chlorite, dolomite, ankerite, sericite and green mica. Stock work stringers and veins occurring within or at the margins of porphyry bodies have comprised a relatively small but locally important source of gold ore (Jackson and Fyon, 1991), such as at the Preston East Dome mine (Hawley and Hart, 1948) and the #2 and #3 shaft area on the Paymaster property (Longley and Lazier, 1948). Disseminated type mineralization is exemplified by the Bell Creek deposit in Hoyle Township. Copper and molybdenum were also produced from a disseminated sulphide and veinlets ore body in the Pearl Lake porphyry intrusion within the McIntyre mine property. Mineralization consists of the native element and in fine-grained pyrite, concentrated along sericitic wall rock selvages. There are other sulfides in ore mineralization, but pyrite dominates; tellurides are uncommon. The gold:silver ratio in the district varies from 1:6 to 1:10.

25 6.0 EXPLORATION DRILLING (The following material has been extracted by the author from the NI report by Wardrop Engineering, dated May 3 rd This report can be read in full by downloading it from under VG Gold Corp s May 5 th news release) 6.1 Historical Drilling The current VG Gold property has a long history of exploration and limited gold production. Since 1910, periodic surface exploration, underground and limited production has been carried out on the Fuller deposit on the Fuller claim. A 228-foot inclined shaft (the Edwards shaft ), was sunk some time after In Nakhodas Mining Company Limited ( Nakhodas ) developed 2,100 feet of lateral workings at the 160 foot level, and mined 44,028 tons grading oz/t Au (recovered) above the level in four stopes. The rock was processed in the Faymar mill in Deloro Township (Ferguson, 1968). The mill was destroyed by fire in 1942, and was not rebuilt. In addition to 83 underground drill holes, Nakhodas also drilled at least 10,919 feet of surface drilling in 41 drill holes (S 1 to S41). In the late 1930's, Hollinger Consolidated Gold Mines conducted a 14,000 foot drilling program in 25 holes on the claims in Tisdale Township, previously referred to as the Tisdale Ankerite claims (Ferguson and others, 1968). Drilling was also done by Pamour (Noranda Explorations Ltd.) in 1974 to One of these drill holes deviated onto the (then) single VG Gold claim, and intersected three well-mineralized zones at a depth of about 500 feet, encouraging VG Gold to drill beneath the 160 foot level (Vedron, 1979). In 1985, VG Gold consolidated the Fuller and Dobie claim, which together hosts the Fuller property. Exploration work from 1986 to 1989 focused on the area of the synclinal structure previously mined from the inclined Edwards shaft. Exploration conducted by VG Gold on the Fuller property was a , multi-phase drilling program. The initial phases of the program began on July 22, 1997 and were completed on March 25, During this program holes VG through VG were completed producing a total of 20,993 feet of BQ drill core in 15 holes. An additional phase of drilling was completed during November Holes VG through VG were completed during this phase generating a total of 3,164 feet of BQ drill core in five holes. The purpose of the overall program was twofold: i) to locate and define the on-strike and down dip continuation of the gold bearing horizons within the Fuller deposit between 1,600 feet and 2,500 feet below surface, and ii) to investigate the probability of additional gold zones proximal to the VG

26 Gold underground workings as well as confirm the wide mineralized zone intersected along the south limb- 375 foot level where pervasive gold values were detected in drifting and in bazooka holes. Following their optioning of the property in 2001, Placer Dome carried out both field exploration and office database management activities on the Fuller property including the VG Gold s North target area and the Paymaster 31 Zone Extension in the main Fuller area. The following is a summary of the 2002 exploration activities conducted by Placer Dome (CLA) Limited - Dome Mine and the Porcupine Joint Venture on the Vedron (now VG Gold) property option in All the underground and surface diamond drill hole logs available from the Fuller deposit were recoded to Dome Mine terminology, which includes lithology, assays, alteration, percent sulphides and percent veining. The down hole surveys and X, Y, Z drill hole collar co-ordinates for these holes were converted to the Dome Mine co-ordinate system. Validation of the drill holes was checked from plots including the Fuller-Dobie level plans. The diamond drill hole database was created in Access and imported into Vulcan for 3-D modeling. Initial field activities in early 2002 involved a surface diamond-drilling program on the North VG Gold target. The four holes, 2,050.4 metre (6,727 foot) drill program was carried out between January 16th and February 19th, It was designed to test along the highly prospective Central and Vipond Series contact for gold mineralization, focusing on the strong sericite/ankerite alteration, increased pyrite content and coincident gravity high anomaly in the hanging wall of the contact zone. The North VG Gold target geology is the structurally controlled North VG Gold Shear and the Paymaster 18 Vein Shear between the Central and Vipond series mafic volcanic units. The Paymaster 31 Zone Extension surface diamond drill program was carried out on the VG Gold portion of the South Tisdale Anticline ( STA ) project between April 7th and May 10th, The five hole, 2,032.7 metre (6,669.0 foot) drill program was designed to test: i) a porphyry trend with associated gold values intersected in hole VG98-82, and ii) the western strike projection of the 31 Vein structure on 150 m (500 ft) step-outs between 3500E and 4500E (Dome co-ordinates). Holes were also designed to test the up-plunge potential of the porphyry trend defined by underground exploration on the Paymaster 2575 (Dome 3493 elevation) and 4075 levels (Dome 2007 elevation). Eight core samples from the 31 Zone, along with selective geochemical data, were submitted for petrographic analysis, gold mineralogy and interpretation EXPLORATION During 2006 and 2007, VG Gold drilled 11 drill holes targeting the Fuller zones plus, a Buffalo

27 Ankerite deep hole which was collar on the Fuller property, with the following results Fuller Green Carb Zone Five holes, totaling 937 metres, were drilled to test for extensions of the Green Carb Zones 1 and 2 of the Vedron Fuller deposit. The drill holes tested for extensions of the Green Carb zone within 50 metres of the existing ramp and underground workings, 50 to 100 metres along strike from historic green carb zone intersects. Every hole intersected gold mineralization within or adjacent to the fuchsite and ankerite altered Quartz Feldspar porphyry, host rock to the Fuller Green Carb zone mineralization. Assays include 9.22 grams Au per tonne over 1.22 metres within a wider zone of 3.17 grams Au per tonne over 9.14 metres including 5.08 grams Au per tonne over 4.88 metres hole VG and grams Au per tonne over 0.98 metres hole VG Fuller North Four holes, totaling 1,243 metres, were drilled to test for new mineralized zones to the north of the Fuller deposit and the known mineralization on the Vedron property. The drill holes tested for strike extensions of known mineralization and historic mining on the Goldcorp/Kinross PJV owned Paymaster property to the east. The holes intersected wide widths of favourable alteration and mineralization, but gold values were low, 1.6 grams Au per tonne over 3.2 metres including 3.43 grams Au per tonne over 1.19 metres hole VG Historic underground drilling between 300 metres deep and 1,500 metres deep near the east boundary with the Paymaster property had intersected values over 30 grams Au per tonne. The shallow Vedron drilling reported here failed to repeat the high grade assays but was successful in intersecting wide zones of alteration and mineralization with anomalous gold at shallow depths Fuller ML Zone Two holes, 358 metres were drilled to test for extensions of the ML Zone of the Vedron Fuller deposit. The ML zone has not been included in the compliant resource of the Fuller deposit. The ML zone likely represents the extension of the more extensively drilled Green Carb Zones that are located on the east side of the fold from the Fuller deposit underground workings. Exploration data is very sparse on the western extensions of the Fuller deposit situated on the west side of the fold. Historic interpretation of the Fuller deposit was that of a single fold, however evidence existed that in fact the Fuller deposit was an S fold with the stratigraphy and mineralization extending to the west rather than trending southeast. Earlier exploration had just begun to confirm this. Drill Holes VG and 105 confirmed the existence of the Fuller zones with wide intersections of fuchsite ankerite alteration corresponding to the extension of the Green Carb 1 and 2 Zones. Near surface assays include 2.08 grams Au per

28 tonne over 4.54 metres and 3.09 grams Au per tonne over 3.51 metres Hole VG This was a deep hole collared north of the Fuller zone, targeted on a postulated depth extension of the Buffalo Ankerite South zone at a depth of 3500 to 4000 feet below surface. The hole passed below and to the east of the Fuller fold nose and therefore did not intersect the Fuller stratigraphic package. 6.3 Vedron Drilling 2004 In the summer of 2004, VG Gold completed a total of seven diamond drill holes, totaling feet. The purpose of the program was to test some of the targets recommended in the 2004 ACA Howe technical report, including the east Paymaster boundary area and the south to southeast extension of Contact Zone mineralization on the south limb of the Fuller syncline towards the Buffalo Ankerite 5 shaft area. Assay results, in general, were mixed. Several mineralized /carbonate altered zones were intersected, but gold assay results associated with these altered zones were predominantly not anomalous. The best assays returned included: from VG04-90 (east property boundary area), ounces per ton Au/5.3 feet at feet, ounces per ton/7.1 feet at feet, and ounces per ton/1.5 feet at feet; from VG04-92 (infill drill hole testing contact zone), ounces per ton/7.9 feet including ounces per ton/1.3 feet at feet and ounces per ton/5.3 feet at feet. 6.4 Placer Dome Drilling 2002 The North VG Gold surface diamond drill program was carried out between January 16 th and February 19 th, The four holes, 2,050.4 metre (6,727 foot) drill program was designed to test along the highly prospective Central and Vipond Series contact for gold mineralization, focusing on the strong sericite/ankerite alteration, increased pyrite content and a coincident gravity high anomaly in the hanging wall of the contact zone. According to the interpretation of Placer Dome the general geology in the VG Gold North area consists of east west trending Tisdale Group rocks of the Vipond and Central Series. This is a sequence of Fe-rich tholeiitic massive, pillowed and amygdaloidal flows. All units are sub-vertical to steeply dipping to the north. Felsic to intermediate porphyries and late northwest trending diabase dykes intrude the rocks. The North VG Gold target geology is the structurally controlled North VG Gold Shear and the Paymaster 18 Vein Shear between the Central and Vipond series mafic volcanic units. The Vipond Series mafic volcanic units, which form the hanging wall, are strongly sericite-ankerite altered with elevated pyrite content. The strongest alteration in this area has an associated gravity high anomaly. Historical drilling has located gold intercepts along the contact of 193 grams per tonne gold over 0.2 metres, to the west and 8.6 grams per tonne gold over 0.2 metres; 6.9 grams per tonne gold over 0.4 metres to the east.

29 The Paymaster 31 Zone Extension surface diamond drill program was carried out on the VG Gold portion of the South Tisdale Anticline project between April 7 th, and May 10 th, The five hole, 2,032.7 metre (6,669.0 foot) drill program was designed to test: 1) a porphyry trend with associated gold values intersected in hole VG98-82, and 2) the western strike projection of the 31 Vein structure on 150 metre (500 foot) step-outs between -3500E and E (Dome co-ordinates). Holes were also designed to test the up-plunge potential of the porphyry trend defined by underground exploration on the Paymaster 2575 and 4075 levels. The drill program intersected a number of wide intervals of encouraging 31 Zone style alteration and sulphide mineralization, but only scattered gold values in the 1.7 to 3.4 grams per tonne gold range were returned. Eight core samples from the 31 Zone, along with selective geochemical data, were submitted for petrographic analysis, gold mineralogy and interpretation. According to Placer Dome (Gliddon, 2003) the petrography and geochemistry are interpreted to suggest gold mineralization on the projected trend of the 31 Zone structure on the Vedron property has syn-volcanic and lode gold characteristics (low gold/silver ratios <1, high base metals copper, lead, zinc, high arsenic, potassium metasomatism and sodium depletion), whereas the Simpson Lake (along trend to the east on Placer Dome property) samples have lode gold characteristics with intense deformation, carbonate-sericitetourmaline alteration, K metasomatism, gold/silver ratios between 1 and 10 (average 5) and low base metals (copper, lead, zinc). 6.5 Holes VG to 110 Four holes were targeted to follow up on 2 holes drilled in 1988, testing the south west edge of the ultramafic, between the Buffalo Ankerite North zone and the Fuller deposit. Historic holes S and 119 had intersected gold values in this gap between the 2 mineralized zones. Hole S intersected 0.11opt/10 ft, and S returned values of 0.10opt/3.6 ft, as well anomalous gold assays. Four holes, feet, were drilled to follow up on historic results and to test the gap area. Results were negative with no significant assays to 1998 Program In 1996 VG Gold (then called Vedron Gold) completed the Phase 1 diamond drill program on the property. A total of 105,772 feet of BQ diamond drill core were completed in 63 holes: VG96-01 to VG Kuehnbaum (1997) recommended in his report, following the historical resource estimate by Bevan (1997), that additional drilling be conducted on main Fuller deposit area and high priority adjacent targets. The purpose was to locate and define the on-strike and down dip continuation of the gold bearing horizons within the Fuller deposit between 1,600 feet and 2,500 feet below surface.