West Lombok Project Activities

Southern Arc's exploration team started full-scale activities on the West Lombok property and completed setting up its field office and base of operations in the community of Pelangan at the start of 2006. As part of establishing full-scale operations on the West Lombok property, socialization meetings with local government and communities related to exploration activities on the West Lombok property were also started by Southern Arc and are ongoing.

Southern Arc then commenced exploration work aimed at identifying targets suitable for subsequent scout drilling and detailed evaluation. Early exploration activities focused on prospect-scale stream sediment sampling, re-establishment of survey control in the Pelangan area, and evaluation of previous Newmont data related to the former Block I. Follow-up work on the remaining unchecked drainage anomalies in the east-southeast of the property was also carried out.

View over the Pelangan area

Southern Arc's intensive exploration activities on the West Lombok Property has included work carried out on various promising prospects outside of the Pelangan Gold Prospect and the Selodong Intrusive Complex. Phase 1 geo-drilling has been completed at the Pelangan prospect, together with semi-detailed geological mapping and outcrop channel sampling of sub-parallel vein structures at Lala, followed by the start of Phase 2 drilling in late August 2008. Concurrently, mapping, surface sampling and channel cutting is under way at the Mencanggah Epithermal District areas including Bising, Waterfall, Aek Pertama, and Tebu Serai veins. Assay results received for the submitted samples showed encouraging results. These are shown in the maps (see maps page). At Selodong, field activities focused on the Phase 1 deep diamond drilling program, which was completed in early September 2008. All core from historical Newmont drill campaigns (7,956.5 m in total) was received by Southern Arc, and it was sorted and reviewed in order to better define the company’s exploration targets.

A study was started in October 2006 to relate Pelangan surface and down-hole geochemistry with quartz vein textures in the hope of establishing mineralization paragenesis and general geological/geochemical trends or vectors to aid further exploration. This correlation of vein geochemistry with vein textures is ongoing and was expanded to incorporate all of the Phase 1 drilling at Pelangan. Activities specific to the Pelangan prospect are detailed on the Pelangan Development Activities page.

At the Mahoni target located immediately west of Belikat, geologic mapping identified propylitically altered diorites intruding volcanics, with a series of north to northwest trending altered structures, locally hosting quartz veining. Quartz vein dimensions range to a maximum 5 m wide by 400 m long. Quartz veining is multiphase with abundant iron-oxides and pyrite locally abundant with lesser chalcopyrite and enargite. Most of the veins are Au anomalous, with those in the south returning elevated values to a maximum tenor of 54 g/t Au.

Selodong Intrusive Complex

Early in its exploration program at Selodong, Southern Arc obtained both the previously carried out airborne geophysical data (magnetics & radiometrics) for the Block I area and the ground geophysical data (magnetics & IP/resistivity) for the Selodong prospect area. This was subsequently sent to consultant Nigel Hungerford for evaluation.

Subsequently, further outstanding Block I data were received late in October 2006. Southern Arc continues to compile the data into a Micromine modeling software format. After several attempts, a workable data set was received of the previous (1990 to 1992) airborne geophysical data. This will be modeled once the geological database is completed and includes Southern Arc's diamond drilling data. The majority of the ex-Newmont data has been compiled into the Micromine format as well as all of Southern Arc's first phase diamond drilling data. The resultant program and field logistical preparations for the current deep diamond drilling program were initiated in December 2006. A 35-man semi-permanent camp that has since then been expanded to accommodate at least 100 persons, drill pads (both at new and historical locations) and access roads were completed. Phase 1 drilling on the SIC was completed in early September 2008, targeting 15 gold-rich copper porphyry prospects with over 17,800 m of diamond drilling.

Simba Prospect

Remapping of vein zones and historical Newmont bulldozer trenches at Simba was completed during September 2006 with 31 continuous rock chip submitted for assaying.

Assessment of the Simba Prospect and southerly extensions was completed during September to aid in planning for additional work requirements. The assessment involved re-mapping of the vein zones and re-sampling of outcrops and old Newmont trenches (see Simba Prospect Geology and Geochemistry Compilation map on Simba maps page).

The Simba vein system is traceable along strike for 1.6 km, trending north to northwest and dipping between 60 degrees to 75 degrees southwest. Vein outcrops are typically 'pinch and swell' and vary between 1 and 30 m wide with individual lenses between 30 to 150 m long. Vein swells appear to be associated with north-south structural intersections and vein junctions. Vein zones are characterized by irregular breccias with locally developed banding of fine to medium-grained saccharoidal quartz, drusy cavities and localized vuggy textures. Pyrite occurs as disseminations and fracture filling veinlets up to 5 percent. Strong silicification is developed peripheral to veins for up to several meters within the host rock.

Thirty-one continuous rock chip samples were collected along outcrops and historical Newmont trenches, but results from these largely failed to replicate grades seen in Newmont trench samples. This may be in part due to soil and debris obscuring previously excavated vein outcrops. The Newmont drill program proved the down-dip continuity of quartz veining, but failed to intersect the high-grade gold intercepts seen in trenching. These results may be due in part to the presence of coarse gold and surface enrichment. Two to three drill holes may be proposed based on further consideration and discussion of these results, in combination with interpretation of the pending CSAMT survey.

Remapping and check sampling at the Simba Prospect was carried out during the latter half of 2006. Initial plotting of GPS mapping data indicates a discontinuous vein zone traceable over a strike length of 2.4 km open at either end. Silicic altered zones with oxidized quartz-pyrite veins range in size from 1 to 40m wide with strike lengths between of 30 to 150 m. As of the end of August 2006 a total of 31 continuous chip/channel samples had been collected along old trenches and outcrops at ±100 m intervals along strike.

The new Lala Vein zone was discovered in June 2006. It is located immediately east of the Raja Vein. Dimensions of the zone are still being defined, but discontinuous outcrops have been recorded over an approximate strike length of 300 m. Outcrop sampling of the western extension of the Lala Vein and along strike extensions of the Raja Vein resulted in the submission of 96 rock chip samples (2 to 3 m intervals) for assaying in the following month.

Subsidiary vein zones mapped earlier by Southern Arc in June 2006 and the presence of historical vein occurrences indicate mineralization likely persists over a broad area east of the Pelangan veins. Part of the exploration strategy that will follow on from a review of ex-Newmont data throughout this area involves rapid reconnaissance using prospecting crews to locate quickly, extend and sample previously mapped quartz vein exposures in order to rank them for more detailed follow-up programs.

In May 2006, survey teams focused on the Mendorot and Timur Kali creeks and tributaries; along with mapping of quartz vein bodies and possible extensions and splays. Mapping data has been manually plotted at 1:2,000 and 1:500 scales and later inputted digitally into a MapInfo format.

August 2006 saw the start of the Phase 1 geo-drilling and CSAMT survey activities on the Pelangan prospect. It was subsequently completed early in 2007.

A porphyry consultant was retained to undertake a 2 to 5-week geological data review of all previous exploration work undertaken at the large Selodong porphyry gold-copper prospect.

Mencanggah Epithermal District

DGPS mapping and rock chip and channel sampling at Mencanggah has been carried out since the autumn of 2006. Seven new quartz breccia/stockwork zones were mapped and sampled comprising the Telekur; Talat Talat and Lendek Bulan Vein Zones (see Mencanggah-Bising Vein System Compilation map on the Maps page).

Sampling and mapping on the Mencanggah Prospect further defined the extent of epithermal quartz veining over a broad area along with the presence of potential porphyry Cu+Au style mineralization at Lepangan Geres. As of the end of November 2007 five major vein targets including Tebu Serai; Bising; Telekur; Talat Tala, and Gunayang had been sampled and mapped. High-sulfidation quartz veining within these targets comprises north to northwest trending multi-phase breccia/stockworks with low sulfidation overprinting veins.

The Telekur Vein is located between Tebu Serai and South Raja. Initial mapping in the area identified lensoidal outcrops of multi-phase quartz breccia/stockwork over a 1 km strike length. The vein zone remains open to the northwest. Dimensions of individual vein lenses range from 50 to 120 m along strike, by 2 to 20 m width. Telekur could be the possible southern extension to the structure which hosts Raja Vein, 1.5 km to the northwest.

Tibu Serai comprises five sub-parallel northwest trending lensoidal veins within a 1,300 by 800 m area. Individual lens dimensions vary between 50 to 800 m, by 4 to 20 m thick. Semi-continuous rock chip-channel samples (1 to 5 metre intervals across the vein strike) were collected at 50 m intervals along the vein. Follow-up infill chip-channel sampling and mapping has been completed for this area prior to geo-drill targeting.

Mapping and sampling have been carried out at Bising, with the vein being still open to the southeast. The Bising vein system comprises two major veins with east-west and north-northwest orientations. Chip-channel samples between 1 and 5 m lengths were collected across strike at 30 to 50 m intervals along vein lenses. Sample assays received to date have defined an up to 400-m long gold anomalous zone in the southeast part of the vein, with a maximum gold value of 10.3 g/t Au. Previous Newmont trenching at this location returned 239 g/t Au from a 2 m channel sample. Sampling and mapping continued at this location early in 2007.

Mapping along creeks within and on the periphery of the magnetic anomaly show well-exposed outcrops of fractured volcanics intruded by diorite. Altered polymictic breccias mapped on the east side of the anomaly host dacitic and rare marbleized limestone clasts. Alteration at creek level is predominantly propylitic to argillic with localized zones of moderately dense quartz-limonite stockwork in the diorite and volcanics. Silicic to argillic altered sub crops are seen on the surrounding ridges and hill tops. Magnetite is locally abundant in the diorite as disseminations and fracture-fill. Sulfides within the volcanics, diorite and breccia include variable amounts of pyrite, chalcopyrite, bornite and covellite as fracture-fill and disseminations. Localized malachite staining is also noted.

Nineteen semi-continuous chip-channel samples between 0.5 to 10 m lengths were collected from the altered diorite on the southern periphery of the anomaly. Preliminary assay results gave an average of 519 ppm Cu (maximum 1434 ppm - see Mencanggah-Bising Vein System Copper Geochemistry Compilation Map) and 0.12 g/t Au (maximum 0.25 g/t) from the 19 assayed samples. Preliminary assay results of 181 rock chip samples collected in the central and western parts of the anomaly indicate low-level gold anomalism with a peak result of 0.56 g/t Au from an oxidized stockwork zone.

A 1.3-km long northeast trending multi-phase quartz breccia vein occurs 1 km east of Lepangan Geres. Quartz breccia lenses between 4 to 20 m wide host variable amounts of pyrite, chalcopyrite, bornite, covellite and fine-grained dark sulfides. A broad zone of silicic-argillic alteration envelopes the vein. Results from 23 submitted samples taken along the vein indicate a low to moderate level of gold anomalism, with an average of 0.46 g/t and a peak result of 1.38 g/t.

Telekur -- comprises several vein lenses occurring over a 1 km strike length. Individual vein lenses have dimensions of 80 to 180 m length by 2 to 20 m widths. Thirty-nine chip-channel samples of 2 to 5 m lengths have been collected across strike of veining at this location. Preliminary assay results reported 16 samples with gold values >0.4 g/t Au, to a peak of 1.62 g/t Au.

The Talat Talat Vein Zone located immediately east of Tebu Serai, comprises four sub-parallel northwest trending multi-phase quartz breccia/stockworks veins. The veins dip steeply to the southwest, with strike lengths ranging from 100 to 650 m and vein widths between of 2 to 25 m. Of 44 samples collected only two returned values greater than 0.4 g/t Au.

Lendek Bulan Vein Zone is located east of Gunayang and comprises two sub parallel northwest trending vein structures, characterized by discontinuous lenses of multi-phase quartz vein breccia and stockwork. The vein zone covers a strike length of 900 m with individual lenses between 100 and 300 m long by 5 to 70 m wide. Mineralization is characterized by partly oxidized highly siliceous vuggy quartz vein breccias and stock works, with locally up to 10% fine grained disseminated and fracture-filling cubic pyrite and lesser fine-grained dark sulfides (?tellurides). A broad oxidized silicic to argillic alteration zone is seen adjacent to the veining. Of the 46 rock samples assayed, three returned values >1.0 g/t Au, with a peak value of 3.94 g/t Au. This vein zone is believed to be an extension of the Bising Vein previously mapped by Newmont.

Similarly, GPS mapping and continuous rock chip-channel sampling was previously carried out on several of the vein targets (Gunayang; Aek Pertama and Lendek Bare) at the Bising-Mencanggah Prospect during September 2006. One hundred and fourteen continuous rock chip samples (1-3 m intervals) were collected from quartz veins and altered diorite outcrops in the prospect area. Preliminary (Au only) results were received for these samples and are plotted on the Mencanggah Prospect Geochemical Compilation map (see Mencanggah Epithermal District maps page), along with results from historical Newmont soil sampling.

The Gunayang vein target comprises a northwest trending oxidized silicic alteration zone, over 1 km in strike length and open to the northwest and southeast. Discontinuous quartz vein outcrops are between 10 to 20 m wide and comprise quartz breccias with abundant iron oxides and locally disseminated sulfides. Maximum values reported to date include a chip-channel sample of 0.91 g/t Au.

The Aik Pertama-Lendek Bare area comprises six sub-parallel northwest trending veins, open to the northwest and southeast. Mapping to date has indicated vein dimensions between 400 to 1,300 m in strike length, with individual vein widths between 2 and 20 m. Veining is characterized by intensely silicified breccia clasts within a saccharoidal quartz matrix. These zones are cross-cut by quartz vein stockworks hosting black fine-grained sulfides (?tellurides). Located centrally within the vein zone is a strongly chlorite altered and brecciated quartz-feldspar porphyry. Initial results had reported a maximum tenor of 6.12 g/t Au from a 3m continuous chip sample.

Follow-up work in the remaining drainage anomalies in the north of the property (original SA holdings) was also completed in January 2006. The drainage anomaly areas (Lendang Guar, Gili Genting and Lendang Bile) were infill stream sediment sampled. Geological mapping both within and peripheral to anomaly areas was also completed.

An Indonesian government Mines & Energy Department surveyor was retained to re-establish a survey grid over the extent of veining at the historical Kayu Putih and Tanjung veins. Subsequently, a program of selected twinning of historical Newmont outcrop channel samples was undertaken to confirm old Newmont data and to confirm the congruency of Southern Arc's data bases before the start of the Phase 1 geo-drilling program.

Semi-detailed BLEG sampling program was completed for the Pelangan, Simba and Mencanggah prospect areas in April 2006, with 40 BG samples submitted from Mencanggah area.

Results of semi-detailed regional BLEG sampling clearly define the historical Mencanggah, Simba and Pelangan prospect areas, with signatures of greater than 3ppb Au. Higher gold values of up to 40.2ppb Au were reported from tributaries draining the Simba and Kayu Putih veins.

North Sepi -- Batu Kidung

The North Sepi-Batu Kidung anomaly is located along strike of the Red Rock-Sepi HS epithermal mineralization. Historically Newmont identified a number of weak to moderate Au anomalous creeks, whilst in 2004 sampling by Southern Arc identified 7 anomalous creeks.

All anomalous creeks were checked and sampled where required.. The area is underlain predominantly by andesite and dacite pyroclastics and locally capped by limestone. Porphyry diorite intrusives are exposed at lower elevations and intrude the volcanic pile, especially in the southern part of the anomaly area.

Several narrow zones of clay-silica-pyrite/limonite alteration locally associated with weak to moderate limonite-quartz stockworking were found within and peripheral to E-W and lesser NE and NW trending structures. Localized quartz-barite veins (5 cm to 50cm width) were also mapped following NE and NW structural trends.

No further work is recommended until assay data become available.

Sekotong Tengah

A total of 4 days of field work in December 2005 was spent following up low to medium order anomalous drainages in the Sekotong Tengah area. A total of 40 RC and 9 RF samples were collected from stream traverses.

Preliminary mapping indicates that andesite and dacite pyroclastics underlay the majority of the anomaly area. Limestone locally caps the older volcanic units at higher elevations. Fresh to weakly propylitized andesite porphyry intrude volcanic units in the northern part of the anomaly area.

Silica-clay-pyrite/limonite alteration is widely observed at higher elevations, especially along the ridge crests where dacite pyroclastic units are found. NW trending quartz veins hosted by brecciated, argillic altered dacite volcanics were noted at several locations.

No further work is recommended until assay data become available.

Lendang Guar/Lendang Bile

Previously, two weeks in December 2005 were spent evaluating the Lendang Guar and Lendang Bile drainage anomalies. Historical geochemistry (from Newmont) includes:

Lendang Guar - 8 anomalous creeks BG; 3.9-10.4ppb Au,and SS; 8-36 ppm Au (SA 2004) and, Lendang Bile -- PT NNT (1989) BG; 3 anomalous creeks BG; 3-5ppb Au, SA (2004) 5 anomalous Creeks, BG: 4.2-21.2ppb Au, SS: 8-89ppb Au, RF: max. 1.34 g/t Au/0.24% Cu.

A total of 34 RC, 10 RF and 42 BG samples were collected in initial follow-up stream traverses.

Argillic altered dacite pyroclastics and propylitized andesites cover the majority of the anomaly area. Quartz diorite and tonalitie intrusives are exposed in the south and central parts of the anomaly area. Limestone cappings are noted in areas of higher elevations.

A number of large silicified breccia bodies and associated sub-parallel quartz veins were mapped. Breccia bodies comprise numerous quartz vein fragments and quartz-chlorite-hematite to silica-pyrite alteration zones (locally vughy-silica textures) hosted by dacite lithologies. Zones of 500 m width and 2000 m length were reported by field personnel. Quartz veining is variable with trends ranging from N to NW and N to NE, with strike lengths of up to 350 m and widths to a maximum of 25 m. Sulfide content is minor, with late-stage barite often noted.

Southern Arc carried out a helicopter-borne aeromagnetic survey over the West Lombok property with the survey completed in mid-May 2005. A total 2,175 line-km were flown over Lombok (including the West Lombok property) by contractor EGI under the supervision of an independent consultant geophysicist. Flight line spacing was 400 metres with certain areas detailed with 200-m in-fill lines. Lines were flown north-south with east-west tie lines at 2,000 m and 1,000m respectively.

On December 23, 2005 the Nusa Tenggara Barat provincial Governor finally issued the decree for inclusion of the ex-Newmont Block I area (8,860 Ha) into Southern Arc's Lombok SIPP license. Relevant socialization meetings were held late that month with local communities, government officials and interested stakeholders in order to introduce the company and its exploration work program.

Historical Results

Previous geological mapping and geochemical results within the West Lombok property confirmed the presence of anomalous gold, silver and base metals from low sulfidation epithermal and high sulfidation epithermal mineralized systems.

Exploration by Newmont in the late 1980s and early 1990s within the West Lombok area noted that alteration lithocaps are commonly above mineralized intrusions or above known or untested porphyry gold-copper systems.

The presence of both high sulfidation and low sulfidation vein outcrop and hill talus in the vicinity, along with good prospectivity in the Pelanggan prospect, suggests that the West Lombok property has significant potential for hybrid high-low sulfidation systems or structurally controlled, high sulfidation gold-copper systems.