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Zun Ospa, Buryatia, Russia

Zun Ospa Gold Occurrence Project

Exploration report

Property location:

Republic of Buryatia, Russia

Latitude: 52E14’N

Longitude: 101E23’E

Prepared for

Eurasia Gold Fields Inc.

1505-1060
Alberni Street
Vancouver, BC V6E 4K2
Canada

Report by

Pavel M. Mukhin

RDDM Company

28 February 2005

Irkutsk, The Russian Federation

Table of contents

  1. Introduction
  2. Concession and ownership
  3. Geology of Zun Ospa

3.1. Regional geology

3.2. Property geology

  1. Exploration 2003-2004

Exploration summary

4.1.Prospecting

4.2.Surface sampling

4.3.Diamond drilling

  1. Road construction
  2. Drilling operation
  3. Mapping and survey
  4. Analysis
  1. Budget
  2. Detailed expenses report 2003-2004

6. Exploration program 2005

  1. Scope of works
  2. Detailed exploration budget for 2005

7.Conclusion

Annexes

A. Exploration license

  1. Geology Surface Plan
  2. Veins cross-sections parameters
D.Sosnovgeologia Laboratory Certificate
  1. Lab Tests Reports
  2. Operational expenses 2003
  3. Operational expenses 2004

H. Detailed exploration budget 2005

  1. Introduction

Geography.

Zun Ospa mineral deposit is located in Okinsky region of The Republic of Buryatia, in 124 kilometers to North-West from Mondy town, 330 kilometers from Southshore of The Baikal Lake, Eastern Siberia, Russia. The center of the property is near Latitude: 52E14’N, Longitude: 101E23’E . Elevation of the property is from 2050 (camp) to 2700 (top of Zun Ospa hill) meters above sea level. The deposit is found in Eastern Sayany , Kitoy mountain chain. Landscape is Alpine- type. The deposit is laid on hills slopes. Slopes have decline of 20-30 degrees and more flat at the feet. Hills feet are mainly covered with pro-alluvium cones. Middle and upper parts of slopes are covered with hill gravels. Vegetation here is absent or poor developed with grass cover.

Climate is continental. According to the local weather control reports, annual average air temperature is minus 7.4 degrees Celsius. Average monthly temperature of the hottest month (July) is plus 15.0 degrees Celsius, the coldest one is January with minus 22 Celsius.

Ground. Permafrost is widely spread out there. Thawing depth is .5 meters at the northern slopes and 1.5 meters on the south slopes. Permafrost created marshes at flat parts of the valley. Annual precipitation volume is 500 milimeters with 70% in June-July period. The deposit is located in seismic zone with likely strongest earthqake strike upto 9.0 points by Geofian.

Local population is only less than .2 person per 1 sq.km. Local people live mainly in Oka river valley as well as Samarta and Zun Ospa towns. The main business is cattle breeding.

Access. The deposit is hard accessed and in remote distance from administrative and industrial places, i.e. Samarta - 70 kilometers by temporary road, Mondy - 150 kilometers, inclusive 70 kilometers by temporary road. While exploration, temporary roads have been built for all terrain vehicles only. The nearest railway station, Kultuk is laid on South shore of The Baikal Lake, in 330 km from the property by roads.

  1. Concession and Ownership

Zun Ospa property is an exploration concession of 21,0 square kilometers that is valid from November 14, 1997 to May 26, 2018.The registered owner is mining artel “Kitoy”. Zun Ospa concession license number UDE 00179. Exploration license copy is attached herein as Annex A. The concession license covers area of 21,0 square kilometers and incorporates a portion of Ospainsky ore belt.

The property (1) is the integral part of perspective 21,0 square kilometers area that incorporates Tainsky (2) and Canyon mineral occurrences. The entire area called Ilchir complex is known as gold field territory with presently operational gold mines “Zun Kholba” (3) and “Samarta” (4).

Mining artel “Kitoy” is locally registered legal entity. (Orlik, Republic of Buryatia, Russia) It is wholly owned by RDDM (Moscow, Russia), which is subsidiary of Eurasia Goldfields Inc. (Vancouver, B.C., Canada).

Detailed concession plan with coordinates for corners of the concession is attached herein as Appendix A2.

  1. Geology of Zun Ospa

3.1 Regional geology

The property is in Caledonid system of Eastern Sayany mountains and laid in Ilchir zone of Djida structural –and- formational zone, that frames in Khubsugul-Dzabkhansk paleo-microcontinenet of Central Asia structural belt.

In metalogenetical point of view, the property relates to Ospinsky ore belt of Urik-Kitoy gold-bearing zone.

3.2. Property geology

The stratigraphy of Zun Ospa property is outlines in Appendix B herein.

The property is localized in intensive tectonicly metasomatic zone represented by mélange olisostrome layer called “Ilchir suite” of Ordovic-Syloury time. The zone is represented by olistostolites and olistoplacks of dolomites, hyperbasites, gabbroids and other types of carbonate- and quartz- carbonaceous rocks matrix. The zone is injected by Paleozoic granitoids. Intensive and multifold metasomotose is widely developed throughout the property layout. Three tectonicly metasomatic zones of 200 to 300 meters each of North-West extension are traversed on the property. In South-East direction they are tied into entire zone that is traversed for 8 kilometers toward to Tainsky gold occurrence and leaves to the East then. Gold occurrences Bornitovoye, Veresen, Brod and gold-and-silver occurrence Medvezheye have been allocated there. Interval area between Zun Ospa and Tainsky gold occurrences is incorporated into concession license UDE 00179. While prospecting, gold occurrence Canyon has been defined therein with a number of ore locations containing high grades of gold and silver. Though the interval is poorly studied, yet it should be of great potential as the area similar to the large gold deposit ZunKholba by geological structure. The interval needs extensive prospecting works with sampling program, geophysical studies, geochemistry analysis. Prospective local zones should be stripped with channels and solitary holes.

In North-Western direction, the zone reaches concession license boundary, crosses that and extends for another 3 kilometers beyond, and is melted with granite intrusion further. While prospecting, ore locations with up to 14 g/t of gold have been identified. It should be appropriative to include this section into concession boundaries because ore structures of Zun Ospa are traversed therein. The zone extends beyond granite intrusion, and in its Eastern slope, more than 20 gold occurrences were defined with some large potencies over 80 tons of probable reserves each. In present time, Zun Ospa main reserves of gold and silver are concentrated in ore body 1 that is located on mountain top at 2610 meters above sea level. Geological reserves are proved by State Natural Reserves Committee and presented below.

Reserves category / Ore in thousand tons / Content gram per ton / Reserves in tons
gold / silver / Gold / silver
С1 / 66 / 20,3 / 601,1 / 1,350 / 39,9
С2 / 660 / 7,7 / 170,2 / 5,078 / 112,6
Р1 / 40,5 / 974,4
Р2 / 143,7 / 3323,6

The deposit is represented by vein-type sulfide-quartz body of 4.5 meters in thickness and 115 meters in extension. Ore body 1 is not studied properly yet. In its depth it has only two prospecting adits, i.e. at level 2575 and 2525. The ore body has not been studied in-strike at all. In 2004 with 7 drill holes made, gold occurrence of ore has been proved at levels 2590-2575.

Besides ore body 1, other ore bodies, i.e. Visyachaya, Zagadochnaya, No’s.4, 5, 6, 10,11,12 are poorly studied too. Vertical ore zone extension exceeds 600 meters. Mineralization is multi-staged. At sole erosion cross-section, diversified stages of hydrothermal process from high to low temperatures are developed.

The deposit relation to the extended gold-bearing zone, that incorporates almost 50 gold occurrences, intensive metasomatic alternations of rocks (propilitizations, berezitization, listuinitization, quartzing, sulfidization), intensive vertical ore extension, multistaged gold occurrence process should prove high potency of the deposit. Meanwhile, deposit is studied improperly. It is highly recommended to proceed studying in depth and boundaries.

On the property alluvium gold has been defined that is localized in neogenous alluvium gravels covered by basalt plates. Further exploration is recommended for alluvium reserves evaluation.

4. Exploration 2003-2004.

Exploration summary

2003 Exploration results

  1. One (1) hole of 134 meters was drilled to evaluate metasomatic zones assumed at the depth of 80-90 meters while geophisycal probing. Low resistance zone. The whole has opened granodiorites and plagiogranites with poor hydrothermal metasomatic alternations. According to atomic-absorption test, gold grade varies from .001 to .051 g/t.
  2. Five (5) engineering holes were drilled of total 148 meters for pilot dressing plant installation design. Holes also promoted to study North-Western flange of Northern zone.
  3. Defined and tested gold-bearing sub-basalt sands. For that purpose 21 trenches were made, 50 grabs and channel samples extracted.
  4. 1900 meters of road were built to the Main vein.

2004 Exploration results

The main goal for 2004 exploration was to proceed evaluation of the ore body 1 for depth with diamond drilling and the property frontiers evaluation with prospecting.

Exploration results are presented below.

Item # / Scope of works / U.O.M. / Actual production
1 / 2 / 3 / 5
1. / Road to the main vein construction, drill sites flattering / Thous. Cu meters / 22,83
2. / Diamond drilling / Meter / 893
3. / Manual excavation / Cu meters / 388
4. / Prospecting routing / Km / 8,7
5. / Sampling
Geochemical / Sample / 407
Channel / - / 138
Grab / - / 51
Spot / - / 503
Core / - / 184
Geochemical in-core / - / 55
6. / Samples quartering and lab tests / Samples / 1209
7. / 1:2000 scale topographic mapping / Sq. Km / 1,5
8. / Central area topographic surveying at 1:500 scale / Sq. Km / 0,08

4.1. Prospecting

Prospecting works carried out on property edges have included survey, reviewing, geochemical profiling and manual excavation of channels.

The main goal of prospecting was to study geological structure of the property, to define and extract samples from new ore bodies.

While prospecting gold-bearing structures of the property were traversed in North-Western direction for 3 kilometers away from main ore bodies. Zones of metasomaticly altered rocks with gold-bearing sulfide-quartz bodies have been identified therein. Single samples contained 9.31 g/t and 14.1 g/t of gold and 11.0 to 65.0 g/t of silver. Ore bodies are not studied properly. It is recommended to strip the bodies with trenches. Prospecting grid is rare therefore large ore bodies availability is high.

On prospected area of Zun Ospa property (levels 2610-2525) grade ratio gold to silver is 1:100. At levels 2200-2000 the ration runs to 1:1 in most cases. This proves central part is not erodized and vertical gold mineralization strike may run to 800-1200 meters.

On North-West edge of the property, in slope deposits multifold ore piles have been defined which characterize different ore stages from galenite-quartz to magnetite-arsenopyrite-pyrrhotine and pyrite- tourmaline-quartz. That proves multi-staged mineralization process. Bed rock of piles have not bees defined yet. It is recommended to proceed prospecting and channeling in this area.

Sphalerite-quartz ore / Magnetinte- arsenopyrite-chalcopyrite-
galenite-pyrite-quartz ore

Property surface is studied poorly. Obtained material is insufficient for 1:5000 scale geological map creation. All available drafts are schematic plans only. It is highly recommended to perform geological mapping of the property surface by prospecting at targeted and designed profiles.

4.2.Surface sampling

In 2004 geochemical profiles have been made to evaluate gold-bearing of metasomaticly alternated ore at South slope (between platobasalt and upper Zun-Ospa) and South zone extension to the west from body 4. 7 profiles have been made totally. 4 in South zone and 3 in South slope of the property. Samples have been analyzed through ultimate spectrum analysis and gold and silver through atomic absorption test. Lab test results are available.

Channels manual excavation has been done to allocate bed rocks sources and sub-basalts sends sampling.

Prospecting and evaluation of sub-basalt sands for gold occurrences have been done while routings and manual excavations

.

In 2003 on South slope of basalt cover, sub-basalt alluvium outcrop had been allocated. The outcrop was tested at by-bed rock area.

In 2004 evaluation studies of depositions were continued. Southern slope sands were stripped from bed rock to the foot of the cover and tested with benches of .5 meters each.

Alluvium depositions have 5.1 meters thickness and 3m3 meters at Karovy creek area. Gold grade varies from 20.0 mg to 2354 mg per cubic meter. Although gold grade is distributed unevenly, it is presented in each sample. More than likely it proves that tested intervals are represented with mixed slope depositions. With average sand thickness of 4,2 meters, probable reserves of placer run to 66 kg.

Channeling and manual stripping were conducted for the purpose of bedrocks sources identification as well as sampling of sub-basalt outcrops.

4.3.Diamond drilling

a. Road construction

Prior to commence drilling, 3,5 kilometers road had to be built with explosives application. Road construction lasted for one-and-a-half year in such extreme obstacles caused by severe climate and topography, equipment extensive operations.

b. Drilling operation

By reported time, 7 holes have been drilled thoroughly. Four holes had initiated to cross ore body 1 at 2575 level and three at 2550 level.

Upon completion of drilling 9 exploration cross-sections of ore body 1 were obtained with commercial grades of gold. Conditional gold grade in exploration cross-sections vary from .81 g/t to 102.69 g/t. Such variation is determined by uneven gold distribution in ore body. New exploration cross-sections can promote now to raise the deposit geological reserves at category C-1 by involving C-2 block reserves into estimation. Ore body cross-section parameters are represented in Annex C herein.

4.4.Mapping and survey

Tacheometric survey in 1:2000 scale was done on property in its South-Eastern edge. Central are of the property has been surveyed with 1:500 scale map design. All samples and exploration points have been tied into universal map. Drill holes, exploration points and samples coordinates are inserted into general journal (catalog).

4.5.Analysis

Artel Kitoy has an agreement with Geological Exploration Laboratory “Sosnovgeologia”. Irkutsk based laboratory is duly certified research-and-analytical center with state control proof. Governmental control license for the lab tests is attached herein as Appendix D

All samples selected by Kitoy’s geologist on site for tests are tested at the lab with confidential lab protocols (reports) issue. By reporting time, more than 1,200 tests were made, and namely: ultimate spectrum, complete spectrum, fair assay, metal detection.

Tests protocols sample is attached herein as Appendix E.

  1. Budget

5.1. Expenses 2003-2004

  1. Detailed list of operational expenses for 2003 is represented in Annex F.
  2. Detailed list of operational expenses for 2004 is represented in Annex G.
  1. 2005 Exploration program

6.1.Scope of works.

For the purpose of further exploration on property, it is recommended to fulfill below listed exploration field season program in 2005.

1. To evaluate Northern Slope and Central area of the property by completion of diamond drilling at levels 2550 2525.

Scope of works:

  • Total holes – 6;
  • Total line meters – 2840 meters;
  • Total core samples extraction – 150 samples;
  • Total geochemistry samples extraction – 500 samples.

RDDM, Moscow, Russia

1

Zun Ospa, Buryatia, Russia

2. Dozer ripper’s stripping. 60 meters section at South edge of Vein # 1.

Scope of works:

  • Dozer ripper’s stripping – 1200 cu meters;
  • Channels manual excavation – 50 cu meters;
  • Total geochemistry samples extraction – 15 samples;
  • Total channel samples extraction – 8 samples;
  • Total grab samples extraction – 10 samples.

3. To strip Northern Slope of the Main vein between ore bodies 10 and 11 with two dozer’s trenches of 100 and 50 meters each.

Scope of works:

  • Dozer ripper’s stripping – 3000 cu meters;
  • Channels manual excavation – 100 cu meters;
  • Total geochemistry samples extraction – 40 samples;
  • Total channel samples extraction – 10 samples;
  • Total grab samples extraction – 20 samples.

4. To perform geological mapping of the area at 1:5000 scale while prospecting at targeted profiles. Distance between profiles should be 50 meters and 20 meters between pickets. To test outcrops with geochemistry sampling. To strip with cahnnels mineralized intervals.

Scope of works:

  • Profiles setup and routings – 20 km;
  • Channels manual excavation – 50 cu meters
  • Total geochemistry samples extraction – 200 samples
  • Total channel samples extraction – 30 samples;
  • Total grab samples extraction – 50 samples;
  • Total pit samples extraction – 50 samples.

5. To evaluate Northern edge of the Main vein for gold occurrence at the left bank of Onot-Ospa creeks and upper Bazovy creek.

Scope of works:

  • Prospecting routes – 10 km;
  • Total geochemistry samples extraction – 30 samples;
  • Total channel samples extraction – 10 samples;
  • Total grab samples extraction – 20 samples;
  • Total pit samples extraction – 50 samples.

6. To trace for gold occurrence evaluation the Western slope of the South ore zone.

Scope of works:

  • Prospecting routes – 10 km;
  • Channels manual excavation – 50 cu meters;
  • Total geochemistry samples extraction – 30 samples;
  • Total channel samples extraction – 10 samples;
  • Total grab samples extraction – 20 samples;
  • Total pit samples extraction – 40 samples.

7. To allocate ore piles and outcrops while pit sampling.

Scope of works:

  • Prospecting routes – 5 km;
  • Channels manual excavation – 30 cu meters;
  • Total channel samples extraction – 10 samples;
  • Total grab samples extraction – 15 samples;
  • Total pit samples extraction – 20 samples.

8. To evaluate sub-basalt sands with two pit lines. Distance between pits should be 20 meters in line.

Scope of works:

  • Pits excavation: 1,25 sq. Meters in cross-section, depth – 5 meters, support – 30 meters;
  • Free gold and fines washout – 25 cu meters;
  • samples blowout – 105 samples;
  • gold measuring - 70 samples

Upon completion of above program, the following results are expected to be achieved:

6.2. 2005 Exploration budget.

In order to complete 2005 exploration program, attached in Annex H Budget was prepared.

Please note that attached 20005 budget includes only direct “exploration expenses”. Any other expenses such as infrastructure (camp, lodging, communication, etc.); transportation (goods, products, materials delivery; fuel and lubricants for vehicles transporting goods to the camp); administrative cost (Irkutsk office clerical works, communication, rental, office supply, etc.) should be added upon.

  1. Ore body 1 should be explored to the level 2525. Reserves calculation of the body should be calculated. In case the body’s parameters are proved and remained it is expected to raise gold reserves by C-1 category to 8800 kg, and 188.1 tons for silver. C-2 category reserves are expected to raise to 10 tons of gold and 101 tons of silver.
  2. Alluvium gold reserves should be evaluated at C-2 and P-1 categories with expectation of 60-70 kg of gold total.
  3. Geological structure of the deposit should be verified. That will promote further exploration strategy.
  4. Probable reserves at P-1 category are expected to raise with new ore bodies identification.

7. Conclusion