RNS Number:4580U
Moydow Mines International Inc
04 April 2007
MOYDOW MINES INTERNATIONAL INC.
Annual Information Form
For the year ended December 31, 2006
March 30, 2007
Moydow Mines International Inc.
Suite 1220, 20 Toronto Street
Toronto, Ontario M5C 2B8
TABLE OF CONTENTS
Item 1. Cover Page Cover
Item 2. Table of Contents 2
Item 3. Corporate Structure 3
3.1. Name and Incorporation 3
3.2. Intercorporate Relationships 3
Item 4 General Development of the Business 4
History of the Moydow Group 4
Item 5. Description of the Business 15
General 16
Dala 16
Hwidem 43
Okumpreko 49
Kanyankaw 64
Port Loko 76
Other properties 97
Risk Factors 98
Item 6. Dividends 101
Item 7. Description of Capital Structure 101
Item 8. Market for Securities 102
Item 9. Escrowed Securities 103
Item 10. Directors and Officers 103
Item 11. Promoters 105
Item 12. Legal Proceedings 105
Item 13. Interest of Management and Others in
Material Transactions 105
Item 14. Transfer Agent and Registrar 105
Item 15. Material Contracts 106
Item 16. Interest of Experts 106
Item 17. Audit Committee 106
Item 18. Additional Information 107
Appendix "A" 109
ITEM 3: CORPORATE STRUCTURE
3.1 Name and Incorporation
Moydow Mines International Inc. (the "Company") was incorporated under the laws
of the province of Alberta, Canada, by certificate of incorporation issued
December 12, 1972, continued under the laws of the province of British Columbia
on January 16, 1981 by certificate of incorporation and continued under the laws
of the province of Ontario by articles of continuance effective on December 9,
1998. On December 18, 2006 the Company continued under the laws of the province
of British Columbia. The Company's registered office is located at Suite 2100,
1075 Georgia Street West, Vancouver, British Columbia V6E 3G2 and the head
office is located at 20 Toronto Street, 12th Floor, Toronto, Ontario, M5C 2B8.
The Company also has offices in Dublin, Ireland, in Accra, Ghana, in Freetown,
Sierra Leone and in Gander, Newfoundland. The Company's outstanding common
shares are listed on both the Toronto Stock Exchange and the Alternative
Investment Market ("AIM") of the London Stock Exchange under the symbol "MOY".
Further information on the Company can be found on the Company's website at
www.moydow.com or on the public filings on SEDAR at www.sedar.com.
3.2 Intercorporate Relationships
The following sets forth the relationship of the Company including its material
subsidiaries and associated companies (the Company together with such
subsidiaries and associated companies is collectively referred to herein as the
"Moydow Group"), including their jurisdictions of incorporation, and the
percentage interests of the Moydow Group in its current material mineral
properties:
Moydow Mines International Inc is registered under the law of British Columbia.
It holds 100% of the shares of Haddington Limited and Shankill Resources
Limited, both Isle of Man companies.
Moydow Mines holds the company's interests in the Alluvial and Kimberlite
licences in Angola and the net smelter royalty derived from the Ntotoroso
property in Ghana.
Haddington Limited (Isle of Man) was incorporated under the laws of the Isle of
Man on May 7, 2003 to hold the shares in Wassa Holdings Limited.
Shankill Limited (Isle of Man) was incorporated under the laws of the Isle of
Man on April 5, 2003. Shankill (IOM) holds the company's interest in the Port
Loko Bauxite project in Sierra Leone. Shankill (Isle of Man)'s subsidiary was
created as follows:
Shankill Limited (Ghana) ("Shankill (Ghana)"): incorporated on August 7, 2003
Shankill (Ghana) holds the company's interest in the Hwidiem, Okumpreko and
Kanyankaw projects in Ghana.
ITEM 4: GENERAL DEVELOPMENT OF THE BUSINESS
Overview
The Company is engaged primarily in the acquisition, exploration and development
of mineral properties. The Company has focused its exploration efforts in
Africa and, in particular, the historical gold producing regions of Ghana
(formerly the Gold Coast), Angola and Sierra Leone. The property portfolio
currently includes interests in properties in Ghana - Kanyankaw, Hwidem and
Okumpreko, properties in Sierra Leone and Angola.
On March 1, 2006, the Company announced that it had reached an agreement with
Diamond Fields International Ltd. (Diamond Fields) effective February 28, 2006;
pursuant to which, Moydow common shareholders will exchange their Moydow
securities for securities of Diamond Fields (the acquisition). As all the
necessary stipulations required under the terms of agreement were not reached by
May 31, 2006, therefore, the agreement automatically terminated.
Newmont Mining Corporation ("Newmont") announced that on July 18, 2006 it had
poured its first gold at the Ahafo project on the Sefwi gold belt in Ghana. The
Ahafo project is projected to produce about 500,000 ounces of gold per year.
Moydow sold its participating interest in the Ntotoroso property to Newmont in
2004 but retained a 2% net smelter return royalty on all recovered ounces of
gold and silver produced from Ntotoroso after the first 1.2 million gold
equivalent ounces. Disclosure by Newmont on the Ahafo project indicate
resources in excess of 2.8 million ounces of gold on the Ntotoroso property.
4.1 History of the Moydow Group
The Chairman of the Board of the Company, Noel Kiernan, has over 20 years of
experience in West Africa and is the Ghanaian Honorary Consul to Ireland. Mr
Kiernan was the original applicant for the property now known as the Teberebie
gold mine located in Ghana and, as managing director of the project, brought the
mine through feasibility and into production. The Teberebie gold mine has
produced over one million ounces of gold since it commenced production in the
early 1990's and is now owned and operated by Ashanti Goldfields Co. Ltd. Noel
Kiernan is also the Chairman of Pontil Minerex Limited, a drilling company that
is active in West Africa and from time to time provides drilling and other
services to the Moydow Group.
In March 1989, Noel Kiernan formed Moydow (Ghana) to acquire the Kanyankaw
property, which was subsequently the subject of an agreement with Glencar.
Brian Kiernan joined the management of the Moydow Group in 1993, as Chief
Executive Officer of Moydow (Isle of Man), and Joseph Breen joined as Chief
Operating Officer of Moydow (Isle of Man) in 1996 after three years of
consulting for Moydow (Isle of Man).
Moydow (Isle of Man) began operations in June 1994 with the acquisition of a 42%
interest in Wassa Holdings, which held a 90% interest in Satellite, which held a
100% interest in the Wassa Property. Over the next three years, Moydow (Isle of
Man)'s interest in Wassa Holdings was diluted to 34%; the remaining 66% of Wassa
Holdings is held by Antubia, a subsidiary of Glencar. Satellite holds a 30-year
gold mining lease for the Wassa Property, which expires in the year 2022.
Moydow (Isle of Man)'s interest in the Ntotoroso Property was obtained in
September 1996 with the acquisition of Moydow (Ghana) from Noel Kiernan, then
Chairman of the Company. Moydow (Ghana) held the property indirectly through
its 60% ownership of Rank. Pursuant to an October 1997 agreement, Normandy
LaSource, a subsidiary of Normandy Mining Limited, held 40% through their
commitment to fund $2.5 million of exploration expenditures by June 30, 1999,
which was achieved. Normandy LaSource increased its ownership through its $4
million funding of further exploration expenditures and holds a 50% beneficial
interest in Rank. In early 2002, Newmont Mining Corporation acquired Normandy
Mining Limited.
Moydow (Isle of Man)'s interest in the Kanyankaw prospecting licence was
obtained in September 1996 with the acquisition of Moydow (Ghana) from Noel
Kiernan, a related party. Moydow (Ghana) held the licence as a joint venture
with Antubia. Currently, the partners have agreed to split the property into
two parcels and application for the property split was approved by the Ghanaian
Minerals Commission.
4.2 History of West Africa
History of the West Africa has a long history of mineral production that dates
back to the 10th century A.D. and possibly as early as the 5th century B.C. A
significant gold trade began with overland transportation to North Africa and
the Middle East in the 12th and 13th centuries. As European economies grew and
the great marine explorers of the 15th century took to the seas, Portuguese,
Dutch, English, and French merchants launched aggressive trading activities
between Europe and West Africa. Gold was the most valuable commodity in this
lucrative trade.
In the 18th and 19th centuries, the region was colonized and the "Gold Coast"
was carved into dependencies of Portugal, England, and France. France colonized
most of the region covering Senegal, Guinea, Cote d'Ivoire, Mali, Dahomey, and
Niger. England became the protector of Sierra Leone, Ghana, Upper Volta and
Nigeria. The early history of Ghana and Mali is somewhat entwined because the
tribes of this region were nomadic. Ghana appears to have been the principal
source of West African gold and Mali a subsidiary source and main route for gold
that found its way to North America, Europe and the Middle East in the 13th and
14th centuries. The first record of gold from the region is connected with an
account that Emperor Cainca Moussa brought four tons of gold to Mecca on a
pilgrimage in 1433.
4.3 Mineral Rights
Mineral Rights and Mining in Ghana
Under the constitution and the mining laws of Ghana, all minerals in Ghana in
their natural state are the property of the state and title to them is vested in
the President on behalf of and in trust for the people of Ghana, with rights of
prospecting, recovery and associated land usage granted by the state under
licences or leases. Three types of tenure are granted as a company progresses
through the reconnaissance, exploration, development and production phases: a
reconnaissance licence, a prospecting licence and a mining lease. In addition,
a licence is required for the export or disposal of minerals and the government
has a pre-emptive right over all minerals produced. Activities such as the
diversion of water require separate licences or consents. A rental fee is
payable to the government in respect of licences and leases.
A reconnaissance licence permits the holder to carry out geophysical,
geochemical and photo-geological surveys, but not drilling, excavation or
subsurface activities. They are granted for a period of up to twelve months and
may be renewed, provided the renewal application is made at least three months
prior to the expiration of the licence and the government determines that the
renewal is in the public interest. While a reconnaissance licence is not
necessary in order to secure a prospecting licence, it does grant the holder
with the exclusive right to obtain a prospecting licence in respect of the lands
/minerals.
A prospecting licence permits the holder to carry out both reconnaissance work
and surface excavation and drilling work, including trenching. Prospecting
licences are granted for a period of up to three years and may be renewed for
additional periods of two years, provided the renewal application is made at
least three months prior to the expiration of the licence and the government
determines that the renewal is in the public interest. Upon the renewal of a
prospecting licence, the area covered by the initial licence may be reduced by
one-half of the area covered by the previous licence. The licence holder is
able to select the areas to be eliminated upon renewal. If a licence holder
fails to expend any monies that the holder designated in its program for
exploration under the prospecting licence, then such non-expended monies will
become a debt due to the Republic of Ghana.
A mining lease grants rights to take all reasonable measures on or under the
surface to mine the mineral to which the mining lease relates, to erect
necessary equipment, plant and buildings, to prospect within the mining area and
to stack or dump mineral waste in an approved manner. A mining lease may only
be obtained by the holder of a prospecting licence who has given notice to the
government that a mineral covered by the terms of the licence exists in
commercial quantities, provided the proposed development plan ensures that
mining operations will be carried on in an efficient and environmentally safe
manner. The application for the mining lease must be made within three months
of such notice. A mining lease may also be obtained on request by persons who
do not hold a relevant prospecting licence over an area, but such grants are
discretionary.
A mining lease normally is valid for 30 years although the Ghanaian Government
may, where it considers that it is in the national interest to exceed this time
limit, direct that the grant of a mining lease exceed 30 years. A mining lease
may be renewed for an additional period of 30 years provided that the renewal
application is made no later than one year before expiry of the initial lease.
Persons proposing to undertake the mining and processing of minerals are
required to register the undertaking with the Environmental Protection Agency
(the "EPA") and obtain an environmental permit prior to commencing this
undertaking. Additionally, no person may commence activities in respect of the
undertaking which, in the opinion of the EPA, has, or is likely to have an
adverse effect on the environment or public health unless, prior to the
commencement, the undertaking has been registered with the EPA and an
environmental permit has been issued by the EPA in respect of the undertaking.
An environmental impact assessment ("EIA") is required to be submitted to the
EPA prior to issuance by the EPA of any environmental permit where the
undertaking is the mining and processing of minerals in areas where the mining
lease covers a total area in excess of 10 hectares. The grant of a mining lease
takes place upon approval of the EIA. A holder of a mining lease is obliged to
commence commercial production on the date specified in a program which it has
submitted to the government and to develop/mine the mineral in accordance with
such programs.
The EPA is required to hold a public hearing in respect of an application for an
environmental permit where there is material adverse public reaction to the
commencement of the proposed undertaking, where the undertaking will involve
dislocation, relocation or resettlement of communities, or where the undertaking
could have extensive and far reaching effects on the environment. Where an EIA
is ultimately found to be acceptable to the EPA, the environmental permit will
be required to be issued to the applicant. The permit is valid for 18 months
from the date of issuance. Failure to commence operations of the undertaking
within that time renders the permit invalid and the applicant is required to
resubmit an application to the EPA and provide reasons for the new application.
After commencement of mining operations, the applicant is required to apply for
an environmental certificate that may be issued subject to terms and conditions.
A certificate may not be issued by the EPA until the person responsible for
the certificate application has submitted to the EPA evidence or confirmation of
actual commencement of operations, acquisition of other permits and approvals
where required and compliance with mitigation commitments indicated in the EIA
or preliminary environmental report.
A mineral right or interest may not be transferred, assigned or otherwise dealt
with in any other manner without the Minister of Energy and Mines' prior written
approval. Also, a company holding, directly or indirectly, a mining lease in
Ghana must obtain the written consent of the Minister of Energy and Mines before
it undertakes any action which would result in a change of control of such
holder. The Ghanaian government must be advised of all changes in "significant
shareholders" of such a company, as well, which refers to shareholders holding
5% or more of the voting rights thereof.
The Minister of Energy and Mines has the power to negotiate, grant, revoke,
suspend or renew any mineral right, subject to a power of disallowance
exercisable within 30 days of such grant, revocation, suspension or renewal by
the cabinet. The powers of the Ministry of Energy and Mines are to be exercised
on the advice of the Minerals Commission, which is responsible for regulating
and managing the utilization of mineral material and coordinating policies
relating to them. The grant of a mining lease by the Ministry of Energy and
Mines is subject to parliamentary ratification.
The Ghanaian government holds, as of right and without payment of any
compensation, a 10% interest in all mineral rights in Ghana. The government has
the option to acquire a further 20% interest where any mineral is discovered in
commercial quantities on terms agreed between the government and the holder of
the mining lease or, failing such agreement, on terms established through
arbitration. The government normally secures its 10% interest upon the grant of
a mining lease through a special class of shares in the company holding the
lease, which are typically non-assessable shares entitling the holder to 10% of
any dividends distributed by the holder. The Ghanaian government is also
entitled to a royalty of 3% to 12% of mineral sales after direct expenses.
Companies are required to make a payment on account of every quarter based on a
3% rate. At the end of each year, companies are required to compute the actual
royalty due on the basis of the profitability of the mine and to make any
further payment that may arise from the computation. The specific royalty rate
is determined by discussion with the Minister of Mines at the time of
commencement of feasibility studies and commencement of production.
Furthermore, the government may, if it so desires, acquire a "special share" in
a company holding, directly or indirectly, a mining lease in Ghana, which would
result in such company having to obtain the government's approval for: any
amendment to the regulations of the company that would have the effect of making
a person control of the company; the voluntary liquidation of the company; or
the disposal of any mining lease or the whole or a material part of the
company's assets. Control is considered a person who either directly or
indirectly directs the affairs of the mining company or controls at least 20% of
the voting power of the company, either alone or with an associate or
associates. The issuance of a "special share" may, at the government's option,
be for no consideration or at such consideration as the government and the
mining company may agree.
Mineral Rights and Mining in Sierra Leone
Since independence, the Government of Sierra Leone has encouraged foreign
investment. Investors are protected by an agreement that allows for arbitration
under the 1965 World Bank Convention. Legislation provides for transfer of
interest, dividends, and capital. The government passed the Investment
Promotion Act in August 2004 to attract foreign investors and has been working
with international financial institutions to lower its administrative barriers
to trade.
Licenses and Requirements
The Mines and Minerals Act of 1996 and the Environmental Protection Act of 2000
are the main acts regulating the mining licensing regime.
For major mining companies there are three different licenses available:
* A prospecting license (exclusive and non-exclusive);
* An exploration license;
* A mining lease;
In addition to the application form, an applicant for a mining lease has to
submit to the Director for Geological Surveys at the Ministry of Mineral
Resources the following documents:
* Survey plan of area;
* Work program;
* Evidence for work ability;
* Available technical resources; and
* For a mining lease also among others:
o Feasibility study;
o Determination of reserves and profitability;
o Cash flow forecast; and
o Evidence for funding.
The application form asks the following information to be provided, in the case
of an individual applying for the lease, the name of the applicant, his
nationality and period of residence in Sierra Leone. For corporate bodies, in
addition to the name of the organisation, its details such as place and date of
registration or incorporation, registration number, names of the directors and
the principal shareholders with more than 5% shares is required.
In addition to this information the applicant must also provide the following:
* Address in Sierra Leone;
* Record of previous of previous applications for mineral rights;
* Record of minerals rights held in the last four years;
* Information on the minerals that are being sought and their locations;
* Required duration of the lease sought;
* A detailed financial and technical proposal for the mining of the minerals
including sources of support and finances; and
* A proposed programme of development and mining operations and an
environmental impact Statement that will include mitigation plan.
Licenses for prospecting are issued on a first come first served basis within 60
days of application by the Board comprising the Director of Mines (chairman),
Solicitor-General, Director of Environment, Representative of Local Government,
Chamber of Mines and two nominees of the Minister of Mines. Applications for
renewal of Licenses must be made three months before the expiry of the existing
Licenses.
Non-exclusive Prospecting License: This license allows the holder to prospect
for specific mineral(s) in the specified area. The duration of the license is 1
year with a possible extension of 1 year. The licensing fee is US$ 10-50 per
sq. mile depending on the mineral(s). Standard fee is US$ 20 per sq. mile.
Exclusive Prospecting License: This License gives the holder exclusive
prospecting rights in the specific area for a specified mineral(s). The
duration of the license is two years with an option to extend it for another
year. Licensing fees are US$ 50-200 per sq. mile depending on the mineral(s).
Standard fee for precious minerals is US$ 200 per sq. mile.
Exploration License: This license gives the holder the right of exploration for
the specified mineral(s) in a specific area. The duration of the License is
three years with the option to renew for additional two years. The licensing
fee is US$ 100 - 400 per sq. mile depending on the mineral(s). Standard fee is
US$ 400 for precious minerals.
Mining Lease: The mining lease gives the holder the right for mines development
and exploitation of specified mineral(s) in the area covered by the lease. The
duration is 25 years maximum with the possibility of renewing for a further
period of 15 years. The lease cost US$ 500 - 5,000 per sq. mile depending on
the mineral(s) and type of deposit.
In order to receive a mining lease an application has to be made to the Minister
of Mines that will include the following:
* Plan of the area for which the License is being sought;
* An indication of the period for which the lease is being sought;
* Details of mineral deposits in the site for which the lease is being
sought including details of all known minerals proved, estimated or
inferred, ore reserved and mineral deposits;
* A technical report on mining and treatment possibilities and the
applicant's intentions in this regard; and
* A statement giving the particulars of the applicant's programme of works
for exploiting the reserves.
There is no fixed period between the date of submission of application and the
reply from the Minister of Mines. Once received the Minister and the Board must
amongst other things ensure that;
(1) the rights of the holder of any other exploration License should not be
substantially prejudiced by the grant of the mining lease; and
(2) that the public interest requires that the mining lease should be granted.
It should also be noted that:
(3) No mining lease shall be granted to an applicant, unless -
(a) A programme of proposed mining operations is submitted and approved and is
accompanied by an environmental impact assessment statement consistent with the
provisions of Part XIII;
Once the Minister of Mines notifies the applicant that his lease is granted the
applicant must within 60 days, give notice of his willingness to accept the
proposed lease.
Mineral Rights and Surface Rights
The Mines and Minerals Act makes provision for and recognises the surface rights
of a lawful occupier of land. In this regard a holder of a mining lease is
required under law to pay compensation to the owner or lawful occupier of the
land for: - disturbance of the rights of the occupier and for the destruction of
crops trees and buildings. The basis of the payment shall be the fair market
value. It should be noted that unless specifically agreed to in writing the
compensation paid is not for the purchase of the land but for the right of
access to the land and compensation for the destruction of all on it.
Should the parties not come to an agreement or should the occupier be
dissatisfied with the compensation offered then there is recourse to the
Minister of Mines and the Board for arbitration and fixing of a fair price.
A claim for compensation for land occupation should be addressed to the mining
company by the lawful owner of the land within two years of occupancy failing
this; a claim to the land is not enforceable.
In addition, the act makes provision for the Government to compulsorily acquire
the land or the rights to for land for the holder of a mining lease. This can
only happen when the holder of the mining lease shows that he has made all
reasonable efforts to acquire the rights to the land and failed and that that
area is essential to his work.
Though not included in the Mines and Minerals Act of 1996, it is government
policy that all mining companies should pay what is known as surface rent. The
purpose of surface rent is for compensation for land loss, and to provide the
community development seed money. The area for which surface rent is paid must
lie with in the mining lease and could be part of or the whole of the lease
area.
This money is to be paid to the District Councils to be split into three parts,
with 1/3rd going to the District Council, 1/3rd (one-third) for the Paramount
Chief, and the final 1/3rd for the land owners. The quantum of money paid is
generally negotiated between the government and the mining company that has
taken out a mining lease for a specific area. It is paid annually and is paid
per acre of land.
The implications of the surface rent may vary but in general the payment of such
money means that:
1. No new capital developments are allowed to take place within the area
without the consent of the consent of the holder of the mining lease;
2. General access to the area may be restricted for vehicular and
pedestrian traffic;
3. The company has the right to start mining the area provided it has paid
compensation to the landowners for crops and buildings on the land at the time
of payment of the surface rent.
The agreements made between the company and the Government and the company
regarding surface rent are to be included in an agreement and ratified by
parliament.
At local level the issue of Surface Rent is a controversial one in general the
affected communities are unhappy regarding the quantum and distribution of the
monies paid by the companies. Because of this, there have been interventions by
locals resulting in work stoppages and bad publicity.
A possible means of resolving this is to include a programme of development that
is agreeable to the government and the community for which the monies accrued
from the surface rent could be put towards. Such projects could include:
* Construction of school buildings and support to them;
* Construction of and support to medical centres; and
* Community development support.
Support to agricultural development is provided for in the act and should not be
provided for from the surface rent.
Royalties
In accordance with the provisions of Part XIII of the act, the holder of a
mineral right shall pay to the government the following royalties:
* 5% for precious stones;
* 4% for precious metals; and
* 3% for all other minerals and the price shall be calculated ad valorem on
the ex-mine price as defined by the regulations.
Failure to pay royalties shall result in the Minister prohibiting the disposal
of any mineral in his possession from the mining area concerned of from any
other mining area under the mining leaseholder's control. If the lease holder
fails to comply with this order he is then liable to a fine not exceeding Le
100,000.00 or 2 years imprisonment or in the case of a body corporate Le
5,000,000.
Environment
Part XIII of the Mines and Minerals Decree of 1994 relates to the "Protection of
the Environment" and provides for the prevention and limitation and treatment of
pollution, and the minimisation of the effects of mining on adjoining of
neighbouring areas and their inhabitants. This part of the Act is now also
strengthened by the Environmental Protection of 2000 that sets out and
establishes the frame work requiring the preparation of Environmental impact
statements for major capital projects and developments.
The first schedule of the Act makes it mandatory for a License to be obtained
for projects that include extractive industries i.e. mining, quarrying etc. In
addition Licenses are also required for waste management and disposal, housing
construction and road and bridge construction.
In order for the Environmental Board to issue a License for any project or part
of a project, an application has to be submitted to the Director of the
Environment Department. The Director will, taking into consideration the
provisions in the second Schedule, decide into which category the project falls.
This may range from projects that do not require an EIA or require only a
statement to projects that require a full EIA.
Where the Director determines that the project requires a full EIA then one
shall be prepared and shall contain information as laid out in the Third
Schedule. Once the EIA is received by the Director he is required to distribute
it to professional bodies and other concerned organisations for their comments.
The comments should be returned in seven days and these in addition to the EIA
will be submitted to the environmental Board. The Board will review all the
submitted documentation and recommend to the Director either to issue the
License, request for additional information or disapprove the application.
The License shall be valid for 12 months and will require renewal. In making
the application the sum of Le 10,000.00 will have to be paid for the application
form. This must be submitted with a screening form with which the board will
assess into which category the project falls. If it is deemed to be a category
C project an EIA will be required.
Once the EIA is completed and submitted to the Environmental Board for approval
then the fees are determined and charged, depending on the capital cost of the
project. For instance, for a project with a cost proposal of US$ 50 to 0.3 grams Au per tonne) over an area
of larger than 4.0 square kilometres (6 km by 0.8 km). The area is elongated
towards the northeast, parallel with the regional strike.
Reportedly, drilling on widely spaced lines on the Kayeya Prospect (outside the
Lease area) defined a marginal economic resource of about 200,000 tr. oz. gold.
About half of the resource was economic. The mineralization grade improved
towards the southern end. The marginally economic portion was at the southern
end of their prospect (only a few hundred meters from the Nyaduom lease north
boundary). Drilling results from further south at Kayeya, suggests the
mineralization had either petered-out or been pulled off strike. Soil samples
south of the boundary reveal a scattered or much weaker response than the
mineralized zone north of the boundary.
The Kayeya Prospect, though sub-economic at present, is important because the
global bedrock resource (though low grade) is enormous and it is the only
significant hydrothermal gold mineralization, other than the Abosso Demang
deposit, defined in the Tarkwaian. Leo Shield suggested the mineralization may
be the result of a broader weakly constrained hydrothermal system or that the
portion exposed maybe higher in the system.
An explanation for absence of the Kayeya anomaly south of the boundary is it
being offset along a fault or it being masked by colluvium. Airborne geophysics
indicates a fault that offsets the basement rocks to the east. The straight
section along the Ofin River to the east also suggests major fracturing. These
faults move the southern block eastward by several hundred meters. This throw
distance is enough to place the new location of the anomaly beneath the Ofin
River in some places. The geochemical expression could easily be masked or at
least altered by the river's erosional and depositional phases. Results of the
soil sampling program would appear to support this possibility. Given this
situation, the scattered anomalies on the Nyaduom lease are highly prospective.
Ground magnetic surveys over the Kayeya Prospect should help confirm the shift
in location of the Kayeya mineralization. Marker beds with a definitive
geophysical response may define the faults offset.
7. Drilling
A 34-hole RC drilling program with a total of 1683 meter was executed in
January-March 2006. Location and amount of drilling was decided following an
evaluation of the soil sampling results and of older data. Drill hole spotting,
drilling, sampling, logging and sampling were done following standard
procedures. Drill holes were labelled ORC01 to ORC34. The coordinates of the
drill holes were established with GPS with the spacing verified by tape and
compass.
Drill samples were collected and logged each meter. Three adjacent samples were
combined for analysis. Samples were analysed for gold at SGS Tarkwa the same as
had been the soil samples (see Item 8). See above for results.
8. Sampling and Analysis
The geochemical soil sampling program is done following standard procedures. A
similar procedure for the recovery and recording of samples was applied as that
used in the Robertson and GeoCoS exploration phases. See paragraph 3. All soil
samples were collected from a depth of 50cm and each weighed approximately 500g.
Samples were sent to SGS in Tarkwa for analysis. Analysis was done - after
drying, crushing, pulverizing, and splitting - on 50g sub samples. The assay
pulp is fused in a lead collection fire assay. The resulting lead button
contains the precious metal. The lead is separated from the silver and precious
metals to form a prill or bead. The bead is dissolved in aqua regia and
presented to an AAS to quantify the gold in the sample. The detection limit for
gold (Au) is 0.01ppm. Infill samples were analysed to a lower detection level
of 2ppb (using DIBK and AAS).
A drill sample was collected from each one meter interval. The primary weight
of the samples varied from 2 to above 50kg (wet samples). Three adjacent
samples were combined after one, two or three times splitting (depending on the
primary weight). The combined samples were split again to a final weight of 1
to 3kg. Split combined samples were sent to the SGS laboratory in Tarkwa. The
samples were analysed the same as the soil samples were. Duplicate splits from
each one-meter sample were transported to Accra for storage at Shankill's
office.
9. Security of Samples
Handling of all soil samples was supervised, by the Moydow geologists Dr. Yuriy
Deriouguine and Victor Litvinov. Handling of all drill samples was supervised,
by the Moydow geologist Victor Litvinov.
10. Mineral Resource and Mineral Reserve Estimates
No resource estimates have been made.
11. Mining Operations
No hard rock mining operations have been done or are planned.
12. Explorations and Development
Neither further exploration nor any development has been planned. Following an
evaluation of the exploration results, the Company wrote off its investment in
this property.
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