XRA Exeter Resource Corp. Ordinary Shares (Canada)

---

---

---

 

 

---

 

---

 

---

 

 

---

 

 

---

Cube Consulting Pty Ltd (Cube) was requested in December 2009, by Exeter Resource Corporation (Exeter) to undertake a site visit to the Cerro Moro Project located in the Santa Cruz province in Argentina. The primary aim of Cube’s engagement was to independently verify resource definition drilling and exploration activities on the Cerro Moro Project during 2009 in preparation for an updated resource estimate to be undertaken during the first quarter of 2010. It is anticipated that the updated resource estimate will form the basis of an internal mining scoping study to be submitted to government during 2010 as part of an Environmental Impact Assessment (EIA) for mine permitting.

This independent technical report details the current status of resource definition drilling and exploration activities on the Cerro Moro Gold-Silver Project (Cerro Moro Project). This report is intended to comply with disclosure and reporting requirements set forth in the Toronto Stock Exchange (TSX) Company Manual, National Instrument 43-101 Companion Policy 43-101CP, and Form 43-101F1.

 

The Cerro Moro Project is located in southern Argentina, some 60 kilometres (100 kilometres by road) southwest of Puerto Deseado, a port city in the Province of Santa Cruz. The project area is geographically centred at approximately 48° 01’ 55” south latitude and 66° 33’ 45” west longitude.

 

On July 8, 2009 Exeter announced an initial NI 43-101 compliant Inferred mineral resource estimate for Cerro Moro of 646,000 ounces of gold equivalent. Based on the current resource inventory, Exeter’s internal assessment indicates that the Cerro Moro project has the potential to support a low capital cost high grade gold mining operation. Of particular importance is the high grade Escondida prospect.

The focus of Exeter’s extensive drilling activities at Cerro Moro during 2009 has been infill and extensional drilling on the Escondida prospect. Infill drilling to 20m x 20m spacing is currently being undertaken to upgrade the current Inferred resources to the Indicated category in key areas where open-pit and underground mining activity is likely to be scheduled in the early stages of a mine development. In addition, resource drilling is also being undertaken in order to define resource extensions to the Escondida prospect.

 

The property was discovered in 1993 by Mincorp Explorations S.A. (“Mincorp”), while investigating Landsat Thematic Mapper (“TM”) satellite imagery colour alteration anomalies. The ensuing exploration program, comprising geological mapping, rock chip geochemistry, and drilling led to the discovery of widespread quartz vein structures, variably mineralized, over more than a hundred square kilometre area.

Mincorp collected a total 2,982 surface samples: 2,163 of these were from trenches and rock chip channel samples, with the remaining 819 samples being spot rock chip samples. In addition, Mincorp completed a total of 34 drill holes for 2,593 metres, comprised of 19 diamond drill holes for 1,016 metres and 15 reverse circulation (“RC”) percussion drill holes for 1,577 metres.

 

In 2001 the rights of the property were transferred to Cerro Vanguardia Sociedad Anonima (“CVSA”) following the corporate takeover of Mincorp.

On the 30th of December, 2003 CVSA and Estelar Resources (“Estelar” ¹ ) signed an Exploration and Option Agreement (“Agreement”) granting Exeter Resource Corporation (“Exeter”) the right to undertake exploration and prospecting work on 39 CVSA properties described in schedule “A” of the Agreement. The Agreement groups the properties into four projects; “Cerro Moro”, “Other Santa Cruz properties”, “Chubut properties” and “Rio Negro properties”. The Agreement provided Exeter with the option (“Option”) to acquire the properties upon incurring $3,000,000 ² in expenditures, including completing 8,000 metres of drilling over five years subject to CVSA retaining the right to back-in to a 60% interest in any project once Exeter completed 10,000 metres of drilling on that project. In the event that CVSA exercises its back-in right, it is required to pay Exeter 2.5 times the expenditures, less certain CVSA expenditures, incurred on the project. CVSA can further increase its interest to 70% in the project by funding Exeter’s 30% development share at industry terms with repayment by Exeter on an agreed basis. If CVSA does not exercise its back-in right its interest reverts to a 2% net smelter royalty. This Technical Report details only the exploration activities conducted at Cerro Moro.

In May of 2007, Exeter served notice to CVSA that it was exercising its Option to acquire the properties, having incurred the required exploration expenditures, as detailed in the Agreement. Further, in September of 2007, Exeter served notice of the completion of 10,000 metres of drilling on Cerro Moro, and as required in the Agreement provided CVSA “all relevant geological and technical data and results obtained from the exploration and prospecting works conducted” on the project to that time. This notice triggered CVSA’s once only right to back-in to a 60% project equity interest in Cerro Moro. At the end of October 2007, CVSA gave notice of its decision not to exercise the back-in right and its interest in Cerro Moro has reverted to a 2% net smelter return royalty. All of the Cerro Moro properties have now been transferred to Estelar, and designated as the current owner.

Since commencing work in June 2003 Exeter has carried out diverse exploration activities at Cerro Moro that included; geological mapping, various ground geophysical surveys, surface sampling and drilling.

In March 2009, Exeter and Fomicruz, the Santa Cruz provincial mining company, signed a definitive agreement over ten Fomicruz concessions located adjacent to the Cerro Moro concessions. By spending a total of $10,000,000 on exploration on these concessions Exeter will acquire an 80% interest in the Fomicruz properties. In addition, Fomicruz will acquire a 5% participating interest in Exeter’s Cerro Moro project following the granting of all the required exploitation concessions and permits to commence mining.

 

The polymetallic gold-silver mineralisation at Cerro Moro is of the low sulphidation epithermal vein type. Individual prospects vary from simple, single veins to complex vein systems with spur and

_________________________

¹  The Agreement was made between CVSA, Estelar and Exeter. Whereas Exeter offered to conduct exploration works on, and potentially acquire an interest in, the mining properties in the agreement. Such exploration works were carried out by its wholly owned subsidiary Estelar. For simplicity this Technical Report only refers to “Exeter”.

²  All monetary units are in United States of America dollars (“US$”), unless specified otherwise.

 

cymoid loop structures. Limited quartz stock-work veinlets are also present peripheral to the main veins.

The mineralisation is hosted in sub-volcanic and volcanic rocks, which are interpreted to belong to the Jurassic age Chon Aike and La Matilde Formations. In general, the project area is composed of many structural blocks produced by a conjugate set of north-west and north-east faults. Both fault directions contain mineralised quartz veins. In the east and central part of the project the north-easterly trending faults control the mineralisation at the Deborah, Belen, Maria, Michelle, Barbara and Ana prospects. In the central and west part of the project the north-westerly trending structures control the mineralisation at the Escondida, Esperanza (including Esperanza South-East), Nini, Dora, Moro, Florencia, Gabriela, Natalia, Tres Lomas and Lala prospects. Several secondary east-west structures occur between the primary north-west structures, and these control the mineralisation at the Patricia, Loma Escondida, Carla and Carlita prospects. The thickness of the veins varies generally from 1 to 5 metres, but there are examples of veins up to 10 metres in width. The strike length of individual veins is variable, generally between 200 metres and 1 kilometre. The Escondida structure has been defined by drilling for more than 3 kilometres, and remains open along strike and at depth.

Improved geological, structural and mineralisation models in the past two years have led to the discovery of numerous high-grade gold-silver polymetallic veins at Cerro Moro. These base metal anomalous Au-Ag veins tend to be recessive and are represented on the surface by either very poorly outcropping quartz vein material or none at all. Extensive cover of Tertiary marine sediments and Quaternary gravels also hinder the location or extensions of the various veins and targets. Detailed ground magnetic survey data, coupled with IP and resistivity data, has highlighted potential targets that are initially tested via trenching, as in the case of the Escondida prospect.

Presently structures in an east-west orientation are the preferred targets, where this orientation is interpreted to be due to tensional, pull apart structures resulting from minor strike-slip movement of the larger north-west structures. Examples include Loma Escondida and Carla which host high-grade gold-silver mineralisation. The Escondida prospect is an example of a high-grade gold-silver shoot in an east-west orientation on a major north-west trending structure.

The discontinuous ore shoots within the larger structures appear to be locally controlled by changes in strike, which are thought to have produced dilational flexures and jogs allowing for greater fluid flow. Changes in wall-rock lithology, along the structures, may be an important factor in controlling the local strike direction of the structures. It has also been noted that the brittle, felsic units have a tendency to produce stronger stock-work style development around the main structures than the intermediate units.

 

The Cerro Moro Project is in an exploration phase which has focussed on a number of discrete deposits within the property boundary. Exploration activities are currently targeting mineralisation identified as having potential for extraction by open pit and underground mining methods.

Development on site is limited to farm buildings, portable accommodation, gravel roads and minor service infrastructure to support exploration activities.

There is no historical or small scale artisanal mining on the property.

 

On July 8, 2009 Exeter announced the first NI 43-101 compliant mineral resource estimate for the Cerro Moro Project. The independent resource estimate was prepared by Dr. S. C. Dominy, FGS (CGeol) FAusIMM (CP) MIMM (CEng), General Manager (UK) and Executive Consultant, and Mr. C. J. Bargmann, FGS (CGeol) MAusIMM Pr.Sci.Nat, Principal Consultant, both of Snowden UK. Both Dr. Dominy and Mr. Bargmann are “independent” and “qualified persons” as defined in NI 43-101. The mineral resource estimate was prepared in accordance with CIM guidelines (CIM 2005) which have been adopted as part of NI 43-101. The following table summarises the Inferred Mineral Resource for Escondida, Esperanza and Gabriela. These figures are based on the Escondida zone lower grade option (2 g/t Au cut-off grade) and the Esperanza/Gabriela zones utilising a 150 g/t Ag cut-off. The gold equivalent values shown in Table 1.1 were not calculated by Snowden in their original report.

 

Table 1.1 Inferred Mineral Resource for Escondida, Esperanza and Gabriela

*Gold equivalent values have been calculated by Exeter on the basis of the following parameters:

The gold equivalent value is calculated by dividing the silver grade (ppm) by 60 (approximate ratio of gold/silver US$ value) and adding it to the gold grade (ppm).

 

A comprehensive program of metallurgical testwork was carried out during 2008, looking principally at precious metal recovery and comminution characteristics.

Eight quarter-core composites were assembled for 7 of the Cerro Moro shoots where there were sufficient drill-holes to be confident that the composites would be representative. The Escondida Central shoot was split into separate “oxide” and “fresh” composites while the others represented Escondida West, Escondida East, Esperanza, Esperanza SE, Gabriela and Loma Escondida. The testwork flowsheet incorporated flash flotation and gravity concentration to remove coarse electrum and soft silver minerals such as acanthite. Conventional cyanide leaching was then compared with flotation on a simulated grinding circuit product with a P80 size of 75 microns. Gold recoveries using leaching were very high on all 8 composites tested with indicated recoveries averaging greater than 95% on all samples and around 99% on the higher grade Escondida shoots. Silver

 

recoveries were also high with leaching with an average of almost 90%. Importantly there was very little variation in the recovery of either precious metal from shoot to shoot in spite of widely varying head grades.

In comparison to leaching, flotation resulted in lower gold recoveries in most shoots, even though on the Escondida veins they averaged 95%. On the remainder the average was closer to 75% and the individual results were much more variable. With silver, the average recovery was around 85% but again with substantially more variability than leaching.

Seven large diameter PQ holes were drilled during 2008 specifically to obtain samples for comminution tests. Both conventional Bond indices and JK Tech parameters were obtained for each of the samples which were from Escondida Central (2), Escondida West and Far West, Esperanza SE, Gabriela and Silvia. The Cerro Moro materials were generally rated medium to moderately hard in the SMC JK tests. Bond ball mill work indices approached 20 kWh/tonne however abrasion indices were relatively low and averaged about 0.35.

Ongoing work is proposed to further check the flowsheet performance on additional shoots and on individual samples. This is aimed at assessing variability and it is similarly intended to extend the range of comminution results. In addition, test products will be taken and used for additional testwork to define engineering parameters for individual circuits and equipment items.

 

During 2009, drilling has focussed primarily on the Escondida prospect, where, at the end of December 2009, 275 diamond drill holes had been completed for a total of 32,758.55 metres. Diamond drilling at Escondida was ongoing during December 2009 and there were three rigs active during Cube’s site visit between the 12 ^th and 20 ^th December 2009. Drilling activity ceased for the 2009 year on the 18 ^th December.

Around 78% of the drilling by Exeter has been conducted on the Escondida, Gabriela, Esperanza and Loma Escondida propects, with over 65% of the drilling solely at the Escondida prospect.

The initial drilling program was designed during the first quarter of 2009 to upgrade the main areas of the Escondida Inferred mineral resource to the Indicated mineral resource category. Assuming a drill spacing of approximately 20 x 20 metres, a program of 18,000 metres was designed. This program was initially aimed to drill in areas where the mineralisation could potentially be extracted by open pit methods, and to test the main high grade shoots in the deeper portions. Included was drilling to potentially expand portions of the resource, albeit to remain in the inferred category.

This report proposes a two component drilling program; firstly, continue the infill drilling program at Escondida to be complete at the end of the 2009 calendar year, to allow a revised resource estimate to be made publicly available during Quarter 2, 2010; and secondly, continue to test new targets with the aim of discovering more Escondida-style mineralisation. Other exploration activities will focus on the discovery of new high-grade gold-silver targets, for later drill testing.

In-house engineering and mine planning studies are proposed that will lead to an internal mining scoping study mid 2010. This work will continue through Quarter 2, 2010 and be undertaken at a level to allow a decision to mine later in that year.

A 12 month preliminary budget estimate of US$ 7,455,000 is recommended to complete the above proposed programs.

 

 

Work at Cerro Moro during 2009 has concentrated on drilling the Escondida Prospect. Other regional exploration activities have included target generation through geophysical surveys and satellite imagery, minor RC scout drilling, mapping and sampling.

It is Cube’s opinion that the current exploration and resource definition strategy is well considered and appropriate for the advancement of the Cerro Moro project towards mining exploitation. Cube agrees that infill drilling at the Escondida prospect to 20m x 20m is sufficient and necessary to upgrade current Inferred mineral resources to the Indicated category. The current strategy of three rigs being deployed on infill and strike extension drilling at Escondida is logical as this prospect is clearly the focus of current mining evaluation and the prospect offers significant potential for additional high grade resources.

It is anticipated that the infill drilling conducted at the Escondida prospect during 2009 and early 2010 will result in material changes to the resource classification with significant proportions of the resource being converted from the Inferred to Indicated mineral resource category. In addition, it is likely that the Escondida resource base will be increased due to the discovery of resource extensions in the western portion of the Escondida prospect.

All logging, sampling and data QAQC procedures during 2009 have been carried out to a high industry standard and record keeping and database management is excellent. Cube believes that the current database provides an accurate and robust representation of the Cerro Moro project and is appropriate for ongoing resource evaluation.

Exeter has undertaken significant metallurgical testwork during 2008 which is representative of the most likely styles of mineralisation to be encountered during mining. This testwork indicates that gold and silver recoveries of 95% and 90% respectively can be achieved using a three stage process flow of gravity concentration, flash flotation and tails leaching.

Exeter has been undertaking ongoing environmental base line studies since mid-2008 at the Cerro Moro project with the objective of establishing the pre-development environmental and social characteristics of the project and its surrounds. The author noted Exeter's strong commitment to environmental sustainability surrounding its current exploration activities. Drill site rehabilitation and general cleanliness around areas of intensive drilling activity was particularly impressive.

The author held discussions with Exeter's specialist Argentine mining lawyer Dra. Patricia Inzirillo with respect to the status of the exploration concessions at Cerro Moro and the Argentine mining law in general. Cube has relied upon the opinion of Dra. Inzirillo with respect to the agreement between Exeter, Estelar Resources Limited and CVSA and the definitive agreement between Exeter and Fomicruz. Exeter, through specialist legal counsel Dra. Inzirillo, appears to have a comprehensive understanding of the Argentine mining laws and all associated legal obligations. Cube has no reason to doubt the validity of any current contracts or agreements and is not aware of any material issues affecting the legal tenure of the project concessions.

 

 

Exeter Resource Corporation (Exeter), a Canadian company based in Vancouver, British Columbia requested Cube Consulting Pty Ltd (Cube) to prepare a report detailing the current status of exploration activities on the Cerro Moro Gold-Silver Project (“Cerro Moro”) located in Santa Cruz Province, Argentina. This “Technical Report” as defined by National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) conforms with the requirements of Form 43-101F1.

Much of the information contained in this report has been provided by Exeter or drawn directly from three previous NI 43-101 Technical Reports compiled by Exeter in February 2009 (Williams & Perkins, 2009a) and October 2009 (Williams, 2009b) and Snowden Mining Industry Consultants Limited (Snowden) 2009 (Bargmann et al, 2009).

This report provides an update with respect to exploration activities at the Cerro Moro Project undertaken by Exeter during 2009 and serves as an independent verification of the exploration activities described in detail by Exeter in the October 2009 NI 43-101 Technical Report authored by Mr M T Williams (Williams, 2009b). In many instances, information provided in the Exeter October 2009 NI 43-101 is still current and is directly reproduced in this report for convenience.

The Qualified Person responsible for the preparation of this report is Mr Ted Coupland of Cube who visited the Cerro Moro project between 12 ^th December and 20 ^th December 2009.

 

This report is intended to comply with the requirements of the Canadian National Instrument 43-101, “Standards of Disclosure for Mineral Properties” as required for reports to be filed under Canadian jurisdiction. The report specifically details the results of the Cerro Moro Project’s ongoing drilling activities and the associated requirement for an updated Mineral Resource estimate due to be undertaken during Quarter 1, 2010. In order to fully comply with the requirements of the Form 43-101F1, this technical report includes information and conclusions on specific aspects of the project from previous technical reports despite no additional information or work being conducted in respect of these aspects.

The scope of Cube’s engagement is as follows:

The estimation work will commence during January 2010 with completion scheduled during March 2010.

 

Much of the information contained in this report has been provided by Exeter or drawn directly from three previous NI 43-101 Technical Reports compiled by Exeter in February 2009 and October 2009 (Exeter, 2009a and 2009b) and Snowden Mining Industry Consultants Limited (Snowden) August 2009 (Bargmann et al, 2009). This report is an update of the previous report by Exeter (2009b), primarily providing an update of Exeter´s 2009 work programs and results to date.

Cube also reviewed several internal company reports including; Callan (2008), Corbet (2007i & 2007ii), Coughlin (2005), Gómez (2006), Grahame (2007), Houston (2007i & 2007ii), Mason (2008), Nash (2004), Perkins & Williams (2007 & 2008), Scarbrough (2009), Van Kerkvoort (2005), Van Kerkvoort et al (2007) and Williams (2006).

Technical reports and other documents used in the preparation of this report are listed in Section 21 of this report.

Consultations were made with an Argentine mining lawyer regarding land disposition and the acquisition of mineral rights in Argentina.

Other digital information provided to Cube includes:

 

The Cube site visit was undertaken by Mr Ted Coupland, between 12 ^th December and 20 ^th December 2009. Cube undertook several visits to the field where the main mineralised prospects were inspected. In addition, three active Boart Longyear diamond drill rigs were observed drilling the Far West portion of the Escondida prospect.

Cube also inspected representative drill core, observed geological and geotechnical logging activities, sample mark-up, core cutting, sample numbering and recording, insertion of QAQC reference material, sample bagging and dispatch. Whilst on site Cube had the opportunity to discuss various project details with several senior Exeter staff including Mr Matt Williams (Exploration Manager), Dr Eric Roth (Geology Manager; Development Team) and Mr Fernando Chacon (Cerro Moro Site Manager).

An additional day was spent in Mendoza where Cube met with Exeter's specialist Argentine mining lawyer Dra. Patricia Inzirillo to discuss details regarding the status of the exploration concessions at Cerro Moro and the Argentine mining law in general.

Whilst in Mendoza, Cube took the opportunity to inspect the ACME sample preparation facility where all Exeter drill samples submitted during 2009 have been prepared prior analysis in Santiago, Chile.

 

All units are metric unless otherwise stated. Local drilling grids are used over the main prospects based on the strike direction of the mineralised units. These grids can be referenced back to the Argentinean Gauss-Krüger projection (similar to UTM), Faja 2, Campo Inchauspe datum.

All monetary units are in United States of America dollars (“US$”), unless specified otherwise.

This report is an update of the previous Technical Report on Cerro Moro by Exeter (2009b).

 

Cube has based this Technical Report on the Cerro Moro Project on information provided by Exeter. This report is intended to be read as a whole including references, in particular, to three previously lodged NI 43-101 Technical reports compiled by Exeter in February 2009 (Williams & Perkins, 2009a) and October 2009 (Williams, 2009b) and Snowden Mining Industry Consultants Limited in August 2009 (Bargmann et al, 2009).

The data includes third party technical reports and relevant published and unpublished third party information. Cube has made all reasonable endeavours, including a site visit to the Cerro Moro Project to confirm the authenticity and completeness of the technical data on which this report is based, however Cube cannot guarantee the authenticity or completeness of such third party information.

Cube has not independently investigated the tenement status of the project or the requirements of the Argentine mining law. The author of this report is not qualified to provide comment on the legal issues associated with the Cerro Moro Project, including any agreements, joint venture terms or the legal status of the concessions included in the Cerro Moro Project. The author has relied upon the expert opinion of Dra. Patricia Inzirillo, a specialist Argentine mining lawyer, as to the status of the exploration concessions at the Cerro Moro Project and the Argentine mining law in general.

 

 

 

 

 

 

A comprehensive property description and location of Cerro Moro is detailed in the following Technical Reports:@@

 

 

Both of these documents have been previously lodged with the Canadian Securities Administrators and are available for viewing on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at http://www.sedar.com .

 

 

The Cerro Moro Project is located in southern Argentina, some 60 kilometres (100 kilometres by road) southwest of Puerto Deseado, a port city in the Province of Santa Cruz. The project area is geographically centered at approximately 48° 01’ 55” south latitude and 66° 33’ 45” west longitude (refer to Figure 4.1).

The Cerro Moro Project currently comprises eighteen titles covering the main prospects. Two of these titles are Cateos de Exploracion (“Cateo”) and the remainder are Manifestaciones de Discubrimiento (“MD”) covering approximately 177 square kilometres as shown in Figure 4.2.

 

 

Figure 4.1 Location and Access Map (Source Exeter, 2009a)

 

 

 

Figure 4.2 Exeter Property Tenement Map (Source Exeter, 2009a)

 

   

On the 30th of December, 2003 CVSA and Exeter signed an Agreement, granting Exeter the right to undertake exploration and prospecting work on 39 CVSA properties (“Properties”) described in schedule “A” of the Agreement.

The Agreement provides Exeter with the exclusive right to acquire a 100% interest in the Properties contained in four projects (located in three Argentine provinces; Rio Negro, Chubut and Santa Cruz) by incurring exploration expenditures of US$3 million over five years, with minimum expenditures in years one and two of $250,000 and $500,000, respectively, followed by $750,000 in each of years three through five including completing 8,000 metres of drilling. Exeter completed a legal due diligence review over of the Properties in March, 2004. The Agreement does not require Exeter to issue shares or make any cash payment to CVSA, other than a signature fee of US$100,000 which was fully paid in September, 2004.

Exeter exercised its Option to acquire the Properties in 2007, having incurred US$3 million on exploration. Once Exeter completes 10,000 metres of drilling on any project, CVSA has the right to back into a 60% interest in that project by paying Exeter 2.5 times Exeter's expenditures on that project and by carrying Exeter to the completion of a bankable feasibility study. CVSA may earn an additional 10% project interest (to bring its total interest to 70%) by financing Exeter's share of mine development costs (to be repaid at an agreed rate). Should CVSA not elect to back-in to a project, its interest will reverts to a 2% net smelter return (NSR) from production on that project.

 

Exeter completed 10,000 metres of drilling at Cerro Moro at the end of July, 2007 and following data collation and the receipt of drilling assays, delivered to CVSA a detailed report containing all geological data in early September 2007. CVSA then had a 45 day period in which to exercise its back-in right or its interest would revert to a 2% NSR. On the 29th of October, 2007 CVSA notified Exeter that they would not to exercise their back-in right. The properties have been transferred to Estelar, and 100% ownership of them.

 

On the 5th of March, 2008 Exeter and Fomento Minera de Santa Cruz Sociedad del Estado ³ (“Fomicruz”), announced it had signed a letter of intent (“LOI”) that set out the key terms of a strategic agreement between Exeter and Fomicruz for the future development of the Cerro Moro project which also provides access to Fomicruz’s significant land holding around Cerro Moro.

The LOI states that Exeter and Fomicruz SE will, subject to approval by the parties, enter into a detailed agreement which will include the following terms:

 

Figure 4.3 Fomicruz Property Tenement Map (Source Exeter, 2009a)

 

_________________________

³  Fomicruz is a company owned by the Government of Santa Cruz Province, Argentina.

 

 

A comprehensive description of accessibility, climate, local resources, infrastructure and physiography of Cerro Moro is detailed in Bargmann et al (2009) and Williams & Perkins (Exeter, 2009a). Both of these documents have been previously lodged with the Canadian Securities Administrators and are available for viewing on SEDAR at http://www.sedar.com .

 

 

 

 

 

 

 

 

A comprehensive description of the history of Cerro Moro is detailed in Bargmann et al (2009) and Williams & Perkins (Exeter, 2009a). Both of these documents have been previously lodged with the Canadian Securities Administrators and are available for viewing on SEDAR at http://www.sedar.com .

 

 

 

 

 

   

Cerro Moro is geologically located within the Deseado Massif, which is a tectonic block in the central-portion of the Santa Cruz Province, covering an area of approximately 60,000 square kilometres.

The oldest rocks within the Deseado Massif are the Upper Pre-Cambrian and Lower Palaeozoic metamorphics of the La Modesta Formation (also known as the Rio Deseado Complex). This formation is intruded by granites of Lower to Middle Palaeozoic age. These rocks are in turn unconformably overlain by continental sandstone of the La Golondrina and El Tranquilo Formations, which were deposited in a series of graben and half-graben structures.

During the Jurassic and Cretaceous Periods the region underwent extensional tectonics, which initially resulted in the epiclastic and pyroclastic Roca Blanca Formation, followed by the widespread mafic volcanic field of the Bajo Pobre Formation during the Mid-Jurassic. During the Mid and Upper Jurassic these rocks were overlain by felsic and intermediate volcanics and sediments of the Bahia Laura Group. The Bahia Laura Group includes the Chon Aike and La Matilde Formations. The Chon Aike Formation constitutes a thick sequence of rhyolitic ignimbrites, tuffs and volcaniclastics, and is interpreted to host the gold mineralisation at Cerro Moro.

During the Early Tertiary Period – Paleocene Epoch the region was draped with continental and marine sediments. More recently, during the Late Tertiary Period to Pleistocene Epoch, basaltic lava flows were extruded but these are not observed at Cerro Moro (refer to Figure 7.1).

 

 

 

 

 

Figure 7.1 Regional Geology and Schematic Columnar Section (Source Exeter, 2009a)

 

 

 

The Cerro Moro property is interpreted to be underlain by shallow south dipping Jurassic age volcanic stratigraphy broadly assigned to the Bahia Laura Group which is regionally documented to encompass:

 

 

 

 

A little over 30% of the project is covered by Tertiary marine sediments and Quaternary gravels.

In 2008 contract geologist Nick Callan mapped the entire Moro project at a scale of 1:10,000 (refer to Figure 7.2 to Figure 7.5 for an Interpreted Geology map and accompanying legends). The following geological description is largely taken from his report (Callan, 2008).

Some 14 stratified volcanic units, were defined, that form mappable entities at 1:10,000 scale. These units may be grouped into five broad packages based on inferred ages (refer to Figure 7.6), composition, lithological characteristics and spatial relationships:

 

The P1 group forms an extensive litho-structural domain covering a large part of the property, the southern boundary of which is defined by an arcuate, linked normal fault system formed by the interaction of the northwest striking Escondida Fault and the informally named northeast striking Deborah South Fault. Post-P1 group stratigraphy, showing shallow south to southeast dips, is generally confined to the corresponding down-thrown structural domain lying to the south of this linked normal fault system. Field evidence suggests that this linked fault system was active during deposition of the post-P1 group volcanic stratigraphy.

 

The area mapped by Callan (2008) is characterized by complex structural architecture comprising a mesh of steeply dipping to sub-vertical fault structures showing principally northwest to west-northwest strikes, northeast strikes, west-southwest strikes and more northeast to north-northeast strikes. “Several of the major mapped fault structures (e.g.: the west-northwest to northwest striking Escondida Fault, the northeast striking Deborah South Fault, and the northwest striking Deborah-Belen Fault) record evidence of a significant normal component of displacement over much of their kinematic history. Normal displacement occurred on some structures (e.g.: Escondida Fault, Deborah South Fault) synchronously with deposition of the post-P1 sequence and these structures very likely exerted some control on the primary distribution of volcanic units and Jurassic palaeo-topography. Normal or oblique faulting and associated dilation on variably oriented fault structures also likely controlled emplacement and geometry of rhyolite flow-domes and related dykes, and more importantly provided sites for epithermal Au-Ag vein mineralization. Post-mineral movement also occurred, localizing late rhyolitic intrusive activity, offsetting and brecciating vein mineralization, and locally preserving high-level alteration types. Thus a long-lived extensional structural regime prevailed and played an active role during much of the geological development of the area. This extensional regime is now manifest as widespread block-faulting with generally minor dip-slip or oblique slip on most faults, but with a locally more significant normal component of displacement across master faults (e.g.: Escondida Fault, Deborah South Fault).” (Callan, 2008).

 

 

 

 

Figure 7.2 Interpreted Geology and Vein Location Map (Source Exeter, 2009a)

 

 

 

Figure 7.3 Legend for Figure 7.2 (Part 1 of 3) (Source Exeter, 2009a)

 

 

 

 

Figure 7.4 Legend for Figure 7.2 (Part 2 of 3) (Source Exeter, 2009a)

 

 

 

Figure 7.5 Legend for Figure 7.2 (Part 3 of 3) (Source Exeter, 2009a)

 

 

 

Figure 7.6 Geological Summary Map (Source Exeter, 2009a)

 

 

 

A comprehensive description of the deposit types of Cerro Moro is detailed in Bargmann et al (2009) and Williams & Perkins (Exeter, 2009a). Both of these documents have been previously lodged with the Canadian Securities Administrators and are available for viewing on SEDAR at http://www.sedar.com .

 

 

 

 

 

 

Polymetallic gold-silver mineralization is associated with epithermal veins. High-grade gold and silver mineralisation is strongly associated with the presence of sulphides such as: pyrite, sphalerite, galena, acanthite and chalcopyrite. Detrimental toxic elements such as arsenic and mercury are at relatively low levels. The presence of yellow sphalerite and adularia are indicative of low temperature ore formation. At least two mineralisation pulses have been observed. The first pulse deposited clean white quartz veins with low sulphide content and is generally poorly mineralised. This has been interpreted as the product of shallow, circulating meteoric dominated water with scarce mixing of magmatic water. A second, later pulse, consisting of black silica is rich in sulphides and hosts high-grade mineralisation. Precious metal deposition is interpreted to be the product of mixing of magmatic dominated water with meteoric waters. Boiling textures, vein breccias and repeated quartz overgrowths with sulphidic ginguro bands are also observed. Coarse silver sulphide (acanthite) and electrum have been observed in several ore shoots and are common in the Escondida prospects. Figure 9.1 shows the distribution of the various veins at Cerro Moro.

 

Figure 9.1 Cerro Moro Prospect Locations (Source Exeter, 2009a)

 

 

 

A comprehensive description of the various veins at Cerro Moro is detailed in Bargmann et al (2009) and Williams & Perkins (Exeter, 2009a). Both of these documents have been previously lodged with the Canadian Securities Administrators and are available for viewing on SEDAR at http://www.sedar.com .

 

 

A comprehensive description of exploration activities prior to 2009 at Cerro Moro is detailed in Bargmann et al (2009) and Williams & Perkins (Exeter, 2009a). Both of these documents have been previously lodged with the Canadian Securities Administrators and are available for viewing on SEDAR at http://www.sedar.com .

Exploration activities undertaken by Exeter during 2009 are described in detail in the NI 43-101 Technical Report authored by Williams (Exeter, 2009b) which was also previously lodged with the Canadian Securities Administrators and is available for viewing on the SEDAR website. Exploration activities described in Williams (Exeter, 2009b) are still current and have been summarised again in this Technical Report for convenience.

 

Work at Cerro Moro during 2009 has concentrated on drilling at the Escondida Prospect. Other exploration activities are summarised in Table 10.1.

 

Table 10.1 Summary of Exploration Work undertaken by Exeter

 

 

No material additional geological mapping or geochemical sampling has been conducted at Cerro Moro during 2009.

 

 

Exeter has had success in tracing the majority of the structures at Cerro Moro that in many locations host significant gold-silver mineralisation, utilising the detailed ground magnetics that covers the majority of the project. However the magnetic data does not appear to highlight where significant mineralisation (that is the high grade mineralised shoots) is located along these structures. Following consultations with geophysical consulting company, Zonge Ingenieria y Geofísica (Chile) S.A. (“Zonge”) a trial survey of Magneto-Telluric (“MT”) was proposed.

 

A total of 9.9 line kilometres of 25 metre dipole MT data was acquired on 9 survey lines, between 20 June and 15 July, 2009. The first 7 orientation lines were conducted over the known mineralisation at the Escondida, Esperanza and Gabriela prospects. An additional 2 reconnaissance lines were conducted to the south of the property to test for potential new mineralisation. In addition, Zonge also conducted 5.8 line kilometres of Transient Electromagnetic (“TEM”) surveying using a 100 metre coincident loop to evaluate potential water sources in an area of sedimentary cover. The location of the MT and TEM surveys is displayed on Figure 10.1.

 

 

 

Figure 10.1 MT (dark blue lines) and TEM (light blue lines) Survey Locations (Source Exeter, 2009b)

 

 

 

The trial MT survey commenced over the known mineralisation at Escondida, comprising six north-south orientated lines. Continuing the trial MT survey, additional lines of data were obtained over the Esperanza and Gabriela prospects.

Zonge reported that “The 2D inversion modelling of MT data has defined discrete zones of high resistivity associated with the Escondida quartz bearing vein system and further zones of similar resistivity characteristics indicate likely westerly extensions to the Loma Escondida and Ornella structures and a possible parallel structure north of the Escondida Central / East trend. At Esperanza and Gabriela, narrow zones of high resistivity are also noted coincident with Au mineralization intersected in exploratory drill holes. Similar, sub-parallel, features are also

 

interpreted consistent with lineaments observed in processed ground magnetic images.” (Scarbrough, 2009).

 

In regard to the TEM survey, Zonge reported that “The TEM data acquired to the southeast of the main Escondida area defined a broad, shallow, sub-horizontal conductive layer of approximately 100m thickness in the southern part of the survey area that may be associated with an elevated water content in shallow sedimentary cover. A deeper conductive zone towards the northwest might represent a significant water resource at depth.” (Scarbrough, 2009).

 

 

A comprehensive description of drilling prior to 2009 at Cerro Moro is detailed in Bargmann et al (2009) and Williams & Perkins (Exeter, 2009a). Both of these documents have been previously lodged with the Canadian Securities Administrators and are available for viewing on SEDAR at http://www.sedar.com .

Prior to Exeter being involved in the project, a program of 34 drill holes for 2,593 metres was undertaken by Mincorp, comprising 19 diamond drill holes for 1,016 metres and 15 RC percussion drill holes for 1,577 metres.

As at the end of 2008, Exeter had drilled a total of 472 drill holes for 50,257.15 metres, comprising 264 diamond holes for 20,876.85 metres and 208 RC percussion drill holes for 29,380.30 metres.

During 2009 the drilling has focussed primarily on the Escondida prospect, with 275 diamond drill holes being drilled for 32,758.55 metres to the end of December 2009. Diamond drilling with three rigs continued at the Escondida prospect until 18 ^th December 2009. Drilling is scheduled to recommence at Escondida in the first half of January 2010.

In addition, an RC percussion drill rig arrived on site during August 2009 and at the end of December 2009 had drilled 44 holes for a total of 4,729.3 metres at Cerro Moro. Of these, 35 holes were sited at eight new exploratory targets to test for either conceptual geological/structural targets or geophysical anomalies with the remaining 9 holes drilled for water supply.

The current total of Exeter drilling at Cerro Moro to the end of December 2009 equates to 791 holes for 87,445.2 metres.

Table 11.1 shows the total drill metres (including pre-Exeter) conducted and the percentage by prospect as at the end of November 2009. Table 11.1 shows that around 76% of the drilling has been conducted on the Escondida, Gabriela, Esperanza and Loma Escondida veins, with nearly 63% of the drilling solely at the Escondida prospect.

 

 

Table 11.1 Drilling Details for Cerro Moro at End of December 2009

 

* Note: Table includes pre-Exeter drilling figures.

 

Prior to 2009 the majority of drilling by Exeter had been undertaken by Major Perforaciones Argentina; a subsidiary of the Major Drilling group based in Canada, with a limited number of diamond holes drilled by Patagonia Drill Mining Services S.A. Experienced expatriate drilling supervisors supervised the drilling operations.

All drilling during 2009 has been undertaken by Connors Argentina, S.A., a wholly owned subsidiary of Boart Longyear, with corporate headquarters in Utah, U.S.A.

All diamond core drilling has been HQ3 size utilising triple tube equipment. The majority of diamond core holes were drilled using the Ballmark orientation system to provide accurate core orientations. Where water was intersected in RC percussion holes, resulting in lower sample recoveries, the holes were completed using diamond core to test the target zones.

RC percussion holes and percussion pre-collars to diamond drill holes were drilled with face-sampling hammers with hole diameters between 13.0 and 14.0 centimetres.

Exeter drill collars from MRC001 to MD268 (includes RC percussion and diamond drill holes), as well as the Mincorp RC percussion and diamond drill collars from ARC01 to ARC16 and DDH01 to DDH19 have been surveyed by a surveying contractor using a total station EDM theodolite and a differential GPS. The remaining drill collars (from MD269 to MD749) have been positioned by a surveying contractor using a differential GPS. Down-hole surveys by Exeter were performed at the time of drilling initially utilising an Ausmine (“Eastman-type”) down-hole camera, and since March 2007, using a digital Reflex down-hole camera.

Figure 11.1 summarises the location of the drill collars relative to the various prospects.

 

 

Figure 11.1 Drill Collars and Prospects Location Map (see insert below for location) (Source Exeter, 2009b)

 

 

As at the end of 2008, Exeter had drilled a total of 175 drill holes for 23,702.9 metres, comprising 144 diamond holes for 11,741.4 metres and 31 RC percussion drill holes for 11,961.5 metres This includes RC percussion metres drilled as pre-collars to diamond drill holes. Drilling has traced the Escondida structure for approximately 3 kilometres, with approximately 2.5 kilometres of the

 

 

structure hosting significant gold-silver mineralisation. The mineralisation has been divided into five zones; Escondida Far West, Escondida West, Escondida Central, Escondida East and Escondida Far East.

During the resource estimation process in the first half of 2009, it became apparent to Exeter that the preliminary gold-silver inventory of the Escondida prospect, coupled with the high grades, would be sufficient to take the project to the next level. It was also known that the entire mineral resource for Escondida (and also the other prospects estimated) would be classified as Inferred. It was therefore decided to undertake a drilling program during the 2009 calendar year to upgrade the main areas of the Inferred Escondida resource to the Indicated mineral resource category. Assuming a drill spacing of approximately 20 x 20 metres would be appropriate a program of 18,000 metres was designed. This program initially focused in areas where the mineralisation could potentially be extracted by open pit methods, and to test the main high grade shoots in the deeper portions. It also included drilling to potentially expand portions of the resource, knowing that they would remain in the inferred category.

As at the end of December 2009, 275 diamond drill holes had been completed at Escondida during the 2009 calendar year for a total of 32,758.55 metres. Assay results were available for the first 195 of these holes.

Longitudinal projections, constructed in the plane of the main vein, have been prepared and colour coded based on estimated true widths multiplied by the gold equivalent values. Gold equivalent values have been calculated on the basis of the following parameters adopted by Exeter:

The gold equivalent value is calculated by dividing the silver grade (ppm) by 60 (approximate ratio of gold/silver US$ value) and adding it to the gold grade (ppm).

Figure 11.2 shows the entire known mineralised vein drilled to date at Escondida. Longitudinal projections and selected schematic cross-sections are shown for the five main zones within the Escondida prospect (Figure 11.3 to Figure 11.10).

A list of the pierce points with assay values used to construct the series of longitudinal projections is included in Appendix 1.

 

 

 

Figure 11.2 Escondida Total Project Longitudinal Projection - November 2009 Drilling (Local Grid)

 

 

 

Figure 11.3 Escondida Far West Shoot - Longitudinal Projection - November 2009 Drilling (Local Grid)

 

 

 

Figure 11.4 Escondida Far West Shoot - Schematic Cross-Section 29502E (Local Grid)

 

 

Figure 11.5 Escondida West Shoot - Longitudinal Projection - November 2009 Drilling (Local Grid)

 

 

Figure 11.6 Escondida West Shoot - Schematic Cross-Section 30117E (Local Grid)

 

 

Figure 11.7 Escondida Central-East Shoots - Longitudinal Projection - November 2009 Drilling (Local Grid)

 

 

Figure 11.8 Escondida Central Shoot - Schematic Cross-Section 30475E (Local Grid)

 

 

Figure 11.9 Escondida Far East Shoot - Longitudinal Projection - November 2009 Drilling (Local Grid)

 

 

Figure 11.10 Escondida Far West Shoot - Schematic Cross-Section 21215E (Local Grid)

 

 

 

The Escondida Far West discovery was the result of scout fence drilling designed to locate the potential north-western extension of the main Escondida structure, in an area with extensive post mineralisation cover. The detailed ground magnetic data was utilised to estimate the position of the structure. None of the mineralisation outcrops at surface. In addition to being a blind mineralised body, near surface holes, as well as holes on the margin of the higher grade shoot, intersected only low grade to anomalous gold and silver values. This has implications over the entire property, where many of the veins are low grade near surface, and were previously assigned a low priority.

Additional infill drilling is still required at Far West, both internally within the high grade shoot, but more importantly, to also test for potential extensions where the mineralisation is still open; for example, below holes MD593, MD604, and MD471, and in the vicinity of hole MD609. The main mineralised shoot is still open to the west and down deep to the west.

 

Following the discovery of the two higher grade shoots at the central and western portions of Escondida, drilling focussed on tracing these plunging zones. Initially Escondida Central and Escondida West were interpreted to be two separate veins systems, or represented a faulted offset of the structure. However, diamond drilling demonstrated that the two zones are in fact one continuous structural zone.

Drilling at Escondida Central during 2007 and 2008 focussed on the detailed delineation of bonanza-grade and high-grade shoots, to an approximate vertical depth of over 200 metres from surface.

Additional drilling is still required at Escondida West, particularly where the system is still open at depth. Infill drilling at 20 x 20 metres was initially directed at the zone from near surface to an approximate depth of 50 metres, and most of this has now been completed. Drilling to test deeper mineralisation and extensions is being conducted by firstly drilling at approximately 40 x 40 metres and awaiting assay results before deciding on additional follow-up and/or infill.

 

A significant event for Cerro Moro was the “bonanza” intercept in MD373 located at Escondida Far East in mid-2008. It was a “blind discovery” below shallow RC percussion holes that were drilled to test the south-eastern extension of the Escondida structure beneath gravel cover which was predicted by geophysical surveys. A number of additional holes have been drilled around MD373 all of which have returned lower tenor results. This area of Escondida Far East appears to the complex and additional drilling and interpretation is required prior to inclusion in any reportable resources.

 

As mentioned previously, 35 RC percussion drill holes have been drilled on eight new Cerro Moro targets, as summarised below

 

geological mapping conducted in 2008 also suggested a similar geological setting as to that observed at the Escondida prospect. No significant results were returned.

 

 

A comprehensive description of the sample method and approach prior to 2009 at Cerro Moro is detailed in Bargmann et al (2009) and Williams & Perkins (Exeter, 2009a), and these practices have remained the same during the 2009 drilling. Both of these documents have been previously lodged with the Canadian Securities Administrators and are available for viewing on SEDAR at http://www.sedar.com .

 

No information is available on Mincorp´s sampling procedures and protocols.

 

All the diamond holes drilled by Exeter were orientated using the Ballmark system. The system uses gravity to make a mark on an aluminium disk with a small ball. This mark which represents the bottom of the hole in the oriented core. An Exeter technician on the drill site measures core recovery and draws an initial orientation line on the core. The drill core is then placed in marked wooden core boxes at the drill site and transported to the Exeter camp (located at the north-western corner of the property) for processing.

The orientation is verified at the camp before detailed geotechnical logging by trained specialist technicians. Geotechnical logging documents rock quality, which includes structural measurements of defects. All data is recorded on a metre by metre basis and include; recovery, rock quality designation (“RQD”), strength, weathering, and the orientation of fractures. Utilising the orientation line (which represents the bottom of the hole) “alpha” and “beta” measurements are taken of the fractures. The alpha angle is the angle between the fracture plane and core axis. The beta angle is the angle between the axis of the fracture and orientation line measured in clockwise direction. Knowing the alpha and beta angles of the fractures and the orientation of the hole (dip and azimuth), the true spatial position of the fractures can be calculated (dip and dip direction) using Dips software.

Core recoveries are estimated, per drill run, using the core marker blocks and are also calculated on a metre by metre basis. Good recoveries have been obtained with an average of over 95 percent.

Every diamond hole is digitally photographed, wet and dry, by technicians before cutting and sampling.

The geology is recorded by geologists following orientation of the core. The stratigraphic and lithologic units are recorded and entered into the data-base to allow the construction of geological sections. Alteration and mineralisation data are also recorded. Structural measurements of faults, veins and geological contact are taken with a Brunton compass in an orientation frame utilising the orientation line as a reference.

On completion of logging and photography a geologist marks the core for sampling. Sample lengths through the obvious mineralised zones vary between 0.3 and 1.5 metres dependent on geological and structural contacts, and these samples are classified as “high priority”. The remainder of each drill hole, classified as “low priority”, is generally sampled every one metre. To date, generally the complete hole has been sampled. Exeter technicians utilise a diamond saw on-site to cut the core in half. One half of the core is sampled and sent to the laboratory and the remaining half is stored on-site in the core boxes. The core saw is cleaned with a brick or other abrasive stone between each high priority sample to eliminate contamination between potential

 

high grade samples. The samples are placed in marked plastic bags, sealed and transported to the assay laboratory.

 

RC percussion drilling samples are collected using a cyclone attached to the drill rig at one metre intervals. The geological logging is performed by Exeter geologists at the drill site. On completion of the logging the geologist determines the sample interval lengths of the high and low priority zones. The high priority, potentially mineralized, zones are sampled at one metre intervals and composite samples of three metres are collected through the low priority zones. Each of the one metre samples are stored in plastic bags and are weighed and recorded by technicians at the drill site. The geologist records the diameter of the drilling tools (bit and shoes) at the beginning and end of each hole and uses these measurements to calculate an estimated weight of each sample. In this way the recovery of each sample can be calculated, assuming a density of 2.5, where recoveries average above 85 percent. The sampling is performed at the Exeter camp by technicians, utilising a riffle splitter, where each metre sample is split 3 times. The average 1 metre sample weight is approximately 3 kilograms, with an average of 9 kilograms for the 3 metre composite samples.

 

This section is mostly summarised from Bargmann et al (2009).

Since August 2007, Exeter has routinely calculated the specific gravity (“SG”) from core samples at Cerro Moro. The methodology used is to calculate the ratio of the weight of sample in air to the difference between the weight in air and weight in water. Core samples, generally > 10 cm in length are oven dried to 100° C, sprayed with waterproof sealant and weighed. The sample is then weighed whilst suspended in water and the SG is calculated as follows:

 

Wp – Wps

 

Where:

Wp = Weight of the sealed sample

Wps = Weight of the sealed suspended sample in water

 

The SG data is recorded for all lithologies encountered and will be used as the basis for assigning density values in future scoping studies. Vein samples, which include all types of quartz vein lithologies, vein breccias and stockworks, have SG values that vary between 2.45 and 2.81. Non veins samples, which include all other stratigraphic units, have SG values that vary between 2.34 and 2.61. The variations of the vein results are interpreted to mostly reflect the sulphide content associated with the veins.

 

As part of the quality control process, a set of check samples were submitted to Mecanica de Rocas in Santiago, Chile for SG determination. Ninety five percent (95%) of the 106 samples returned an error of <5%.

 

 

A comprehensive description of the sample preparation, analyses and security prior to 2009 at Cerro Moro is detailed in Bargmann et al (2009) and Williams & Perkins (Exeter, 2009a). Both of these documents have been previously lodged with the Canadian Securities Administrators and are available for viewing on SEDAR at http://www.sedar.com .

The only sample preparation conducted by Exeter is the diamond saw cutting of diamond drill core samples and riffle splitting for the RC percussion samples (as detailed in sections 12.1.1 and 12.1.2 respectively), and finally the bagging of the samples on site. All of this work is conducted by Exeter employees. No other part of the sample preparation or analysis process, as detailed in the following sections, is conducted by an employee, officer, director or associate of Exeter.

 

During 2009 the majority of samples at Cerro Moro have been sent for preparation to the ACME Analytical Laboratories (Argentina) S.A. (“ACME”), located in Mendoza, Argentina, with analysis undertaken at the ACME laboratory in Santiago, Chile ⁴ . The sole exception was the first diamond drill hole that was dispatched to the ALS Chemex ⁵ sample preparation facility in Mendoza, Argentina with analysis undertaken at the ALS Chemex laboratory in La Serena, Chile. At the time of preparing this report the samples from this diamond drill hole were in the process of being sent to ACME for analysis.

 

All of the batches of drilling samples dispatched to the ACME laboratory are flagged, on the sample dispatch order form, as either “high priority” (obvious mineralized zones) or “low priority” (not obviously mineralised).

A description of high and low priority sample preparation and analytical methods for ACME are detailed below in Sections 13.1.1.1 and 13.1.1.2.

_________________________

 

⁴             The ACME laboratory in Mendoza is fully credited to ISO-9001:2000.

⁵            ALS Chemex is of the Mineral Division of the ALS Laboratory Group; where both the Argentine preparation facility and the Chilean laboratory are ISO-9001:2000 certified laboratories.

 

 

 

The two batches of drilling samples dispatched to the ALS Chemex laboratory were flagged, on the sample dispatch order form, as either “high priority” (obvious mineralized zones) or “low priority” (not obviously mineralised).

A description of high and low priority sample preparation and analytical methods for ALS Chemex are detailed below in Sections 13.1.2.1 and 13.1.2.2.

 

 

Quality control procedures include the regular use of client initiated geochemical standards, sample duplicates (RC percussion and lag soil samples only), geochemical blanks, check assaying of samples returning greater than 1.0 g/t gold, and twins of existing drill holes. These are fully discussed in Section 14.0 Data Verification. The results from the quality control sampling demonstrate that there were no obvious errors or bias in the sample preparation or analysis, and as such no corrective actions were required.

 

Sampling of rock chips, trenches and rock chip channel samples, percussion chips and drill cores has been conducted on-site by Company personnel under the supervision of experienced Company geologists.

Assay samples are placed in sealed plastic bags with a numbered sample tag firmly stapled inside the bag. Depending on individual sample size, two to six samples are then placed in larger woven plastic bags which are then sealed with cable ties and numbered in readiness for transport to the laboratory.

The majority of Exeter samples were transported from site by Company vehicle to the bus station in either Caleta Olivia City or to Comodoro Rivadavia City. The samples were then transported by bus to the ALS Chemex preparation facility in Mendoza, Argentina. Commencing in July, 2008, due to the quantity of samples being generated at the time, samples were transported by a private contractor (30 tonne capacity truck) from site directly to the ACME sample preparation facility in Mendoza, Argentina.

 

The Author has witnessed all aspects of sample preparation and dispatch carried out by Exeter staff. In addition, the author has visited the ACME sample preparation facility in Mendoza, Argentina and found it to be a well organised, clean and high quality facility. Although the author has not visited the ACME analytical facility in Santiago, Chile there is no reason to doubt the integrity of this facility. In the author’s opinion, the sample preparation, security and analytical procedures employed by Exeter are consistent with standard industry practice particularly in the exploration for precious metals.