Snowden Mining Industry Consultants completed a Technical Report on the Kalana Mine in 2005 to support the application for the listing on the Toronto Stock Exchange. The Report included the estimation of Mineral Resources and Mineral Reserves in compliance with National Instrument 43-101.

The Mineral Resources and Mineral Reserves have been updated as at December 2008. These estimates were approved by the Company’s Qualified Person, Mr Roy Meade (BSc Mining Engineering, C Eng) under the terms of National Instrument 43-101- “Standards for Disclosure of Mineral Projects”.

Mineral resources at Kalana Gold Mine have been estimated in compliance with CIM Standards of Mineral Resources and Reserves (CIM, 2000).  The tonnage of the underground and open pit resources have been estimated using polygonal interpretation within a horizontal projection of each vein.  The areal extent of the resource blocks were defined by using a cut-off of 7.0 metre-grams, equivalent to 3.5 g/t Au over a 2 m thickness, using the drill hole information, i.e. the block did not include a drill-hole with an intersection below 7.0 metre-grams.  The grade of the resource blocks was estimated by calculating the length weighted average grades of the intersections (after top-cutting) for the vein within the block. Where sampling data from mining was available, the tonnes and grade of the resource block have been estimated using this data.

A mineral resource classification scheme compliant with CIM (2000) definitions and standards was applied.  The resource estimates are categorised as Measured, Indicated and Inferred Mineral Resources.  The classified Mineral Resource is tabulated in the following table:

The Mineral Resources are shown for underground, surface tailings and surface open pit.

1. The Measured and Indicated Underground Vein Resources are 1,761,000 tonnes at a grade of 10.9 g/t containing 617,000 ounces. These veins lie between 100m and 370m below surface.
2. The Measured Surface Tailings Mineral Resource is the gold contained in the tailings dam produced from the plant. The tailings are located approximately 600m east of the Kalana Mine.
3. The Open Pit Mineral Resources are outlined in 3 potential open pits, namely Kalana I, Kalana II and Kalana III.

• Kalana I contains 144,000 ounces in 777,000 tonnes at a grade of 5.76 g/t, down to 100m below surface in the Indicated Resource. Kalana I lies partially below the existing mine shaft infrastructure. Kalana I contains Inferred Mineral Resources of 88,000 ounces in 842,000 tonnes at a grade of 3.25g/t down to 150m below surface
• Kalana III is a high grade, 7.2 g/t, Indicated Resource of 95,000 tonnes containing 56,000 ounces down to 50m below surface. Kalana III lies close to the existing crusher plant and administrative surface structures.
• Kalana II is located 600m east of the Kalana Mine. Kalana II contains 76,000 ounces in 720,000 tonnes at a grade of 3.3 g/t. These tonnes are in vein structures. In addition there is a low grade, 0.8g/t, halo around the vein stockwork of 280,000 tonnes containing 7,000 ounces. These are Inferred Resources to a depth of 50m below surface and further drilling is required to convert these resources into Indicated Resources. 

The Mineral Resources have been converted into Underground Reserves as shown in the table below.

Mineral reserve estimates are derived from the mineral resources by applying mining, metallurgical, economic, legal, environmental, social and governmental factors. The classification of reserves has been based on the resource category and the level of detail (degree of confidence) that resources have been planned for extraction as part of the Kalana Gold Mine’s business plan, and hence classified as a reserve.  All reserves reported for 200 8 within the mineral reserve statement are included within the quoted mineral resource statement  above.

The current plant capacity is 60,000 tonnes per annum and the mine life would be approximately two years to exploit the remaining 120,000 tonnes from existing mine infrastructure. The underground mineral reserves are estimated at 123,000 tonnes at 13.1g/t containing 52,000 ounces of which 90% or 47,000 ounces will be recovered at a gravity plant.  A long term gold price of $800 per ounce was used and the pay limit grade is 10.9g/t.

The mineral reserves are contained in four quartz veins located between 100m and 200m below surface. These veins are located north and south of the No. 1 and No. 2 shafts. The veins are narrow, with an average diluted mining width of 1.77m, and generally shallow dipping. The veins are sub-parallel and are stacked one above the other, approximately on average 30 metres apart.

Kalana Main Project

Initial work on the exploration of the Kalana Permit area was carried out by SONAREM and SOGEMORK between 1967 and 1982.  In this period, 815 diamond drill holes (totalling 81,524 m) were drilled focusing on an area adjacent to the Kalana village. This area eventually became the Kalana Gold Mine.

In a second phase of drilling between 1989 and 1991, a further 56 holes (totalling 16,000 m) were drilled by SOGEMORK to test the deeper parts of the Kalana Gold Mine. The result of the exploration drilling was a final drill spacing of approximately 50 m by 50 m. Sampling of core was generally only where high gold grades were apparent, i.e. the gold bearing quartz veins as the perception was that only the high grade free milling quartz veins could be profitably mined with the technology available in Mali at that time.  The quartz veins and their immediate hanging and foot walls were analysed with the result that only a fraction of the core was analysed (likely being significantly less than 10%).

The majority of the drill holes were either vertical or sub vertical as the veins targeted were flat dipping. As such this drilling was not optimally oriented to intersect steeply dipping mineralized zones.

Borehole information was interpreted by SOGEMORK on northeast-southwest sections that are spaced at intervals of between 45 m and 50 m.  In addition, there are longitudinal sections aligned northwest-southeast at intervals of approximately 60 m.  The SOGEMORK exploration staff interpreted rock types, structure and the mineralized features, such as quartz veins and areas of stockwork, on these sections in great detail.

SONAREM-SOGEMORK also conducted exploration within the Kalanako I prospect area that is approximately 3.0 km to the northeast of the Kalana Gold Mine. SONAREM-SOGEMORK reported a historical resource of 600,000 tonnes at a grade of 3.6 g/t Au.  Snowden cannot comment on the reliability of this historical resource as information regarding the estimate was not available for Snowden’s review.

From 1963 until the 1980s, intermittent exploration activities were carried out by SONAREM-SOGEMORK on grids in the southern part of the Kalana Permit area.  Most of the work within these grids involved mapping, selective sampling, and ground geophysics. No drilling or systematic soil geochemistry was conducted in the southern grid areas. 
With this very large technical database Avnel determined during 2008 to commence an optimisation programme entitled The Kalana Main Project.

The objective of the Kalana Main Project is to (i) capture the very large geological database generated in paper form by SONAREM and into a digital database, and (ii) re-interpret that data to assess the potential for gold mineralization outside of the flat dipping quartz vein structures mapped and assayed by SONAREM and SOGEMORK and (iii) optimise a future drill program to enhance the existing mineral resource base.  These quartz vein structures host substantially all of the Kalana Gold Mine’s mineral resources, reported in the NI 43-101 compliant “Kalana Gold Mine Technical Report 17 January, 2005” prepared by Snowden Mining Industry Consultants (the “2005 Snowden Technical Report”) and filed on SEDAR. Avnel has continued underground exploration by development and diamond drilling and this data will be included in the database. Underground mining has exposed numerous quartz vein, stockworks and mineralization in the metasediments that had not been incorporated by SONAREM and SOGEMORK into their geological model of the deposit.
The SONAREM and SOGEMORK exploration in its first and most substantive phase aimed at establishing a high grade free milling gravity gold recoverable underground mine targeting a set of stacked, flatly dipping quartz veins that occur in and around a diorite stock.  This has a number of implications in terms of the Russian exploration methodology, being:

• As the target was perceived by SONAREM and SOGEMORK to consist of flatly dipping veins, more than 98% of their drilling was vertical or sub-vertical. The joint venture between Ashanti Gold Fields Ltd. (“Ashanti”) and Johannesburg Consolidated Investments Ltd. which studied the mine in 1995/1996 and the surrounding area also drilled predominantly vertical holes.
• With SONAREM and SOGEMORK’s perception that only the high grade free milling quartz veins could be profitably mined, they analysed the quartz veins and their immediate hanging and foot walls with the result that only a portion of the core was analysed and incorporated into their geological model.
• All drilling by SONAREM and SOGEMORK was core drilling but the core was not kept, although it was meticulously logged.  Ashanti drilled two twin holes (one vertical and one inclined) which had good correlation with the SONAREM and SOGEMORK holes that they twinned.
• As SONAREM and SOGEMORK were only targeting free milling gold, they have neglected the oxide cap (except for the Kalana, I pit) the potential for mineralization in the wallrocks with disseminated sulphides, stockworks and other quartz vein structures.

The focus of the Kalana Main Project is to study the potential for non-quartz vein hosted gold mineralization and explore the potential for the mining of the Kalana Gold Mine or parts of it either as an open pit or by underground bulk mining methods.