Regional Geology

The South Tally Pond VMS Project is situated within the Cambrian Tally Pond volcanic belt, a 45 km long by up to 8 km wide northeast-trending volcanic belt that extends from Sandy Lake in the northeast to Victoria Lake in the southwest. The volcanic rocks consist of a bi-modal sequence of felsic and mafic volcanics, associated pyroclastic rocks and related intrusive rocks. The belt has a high proportion of subaqueous rhyolite flow domes which are particularly important hosts for VMS-style mineralization. Thin beds of graphitic argillite and siltstone are often intercalated with the volcanic rocks and represent local hiatuses in the volcanic activity. The volcanic sequences are capped by younger Ordovician black graphitic argillite, siltstone and greywacke.

The Tally Pond volcanic belt is host to Teck's Duck Pond Mine, a precious metal-rich Cu-Zn-Pb VMS deposit containing 5.48 million tonnes of 3.3% copper, 5.8% zinc, 0.9% lead, 59 g/t silver and 0.86 g/t gold. The Duck Pond deposit consists of a number of relatively flat-lying massive to semi-massive sulphide lenses composed of pyrite, chalcopyrite, sphalerite and galena at, or near the top of, an altered felsic volcanic horizon located between 200 and 850 metres below surface. The Cu-Zn mineralized envelope is tabular shaped with a plan view dimension of 250 metres by 450 metres and thickness of about 20 metres.  Lenses of barren massive pyrite occur peripheral to, and between, the Cu-Zn-Pb mineralized lenses.

2013 Diamond Drill Program

Lemarchant Discovery

The Lemarchant Deposit is a precious metal-rich polymetalic massive sulphide deposit. The mineralization occurs at, or near the top of, a subaqueous rhyolite dome that is hydrothermally altered and fractured. The altered and mineralized rhyolite are overlain by discontinuous thin beds of pyrite-rich graphitic argillite which in turn are overlain to the east by pillowed to massive mafic volcanic rocks. Sulphides are medium grained and consist of various proportions of sphalerite, pyrite, chalcopyrite and galena. Barite is often present and can locally be massive and intensely fractured by the sulphides.

A surface alteration zone associated with the mineralization has been outlined over a strike length of at least 2 kilometres and has strong similarities to the alteration signature at the Duck Pond Mine. Both areas display intense feldspar-destruction and aluminum-enrichment with concomitant magnesium-enrichment peripheral to the mineralization.

From 2007 and 2011, Paragon Minerals Corporation completed 60 drillholes for 21,260 metres at the Lemarchant Prospect. This drilling outlined a significant zone of semi-massive to massive sulphide mineralization over a 500 metre strike length. The mineralization remains open for expansion.

In January 2012, Paragon Minerals completed an initial NI 43-101 mineral resource estimate on the Lemarchant Main Zone. The resource estimate was completed by Gary Giroux of Giroux Consultants Limited (“Giroux”) and provided the following indicated and inferred resource estimate for a range of zinc equivalent (ZnEQ) cut-off values.

1. CIM definitions were followed for the estimation of mineral resources and include drillholes up to September 2011.
2. Mineral resources are estimated at a ZnEQ cut-off where ZnEQ% = ((Zn% * 22.05 * Zn Recovery * Zn Price) + (Cu% *22.05 * Cu Recovery * Cu Price) + (Pb%*22.05*Pb Recovery*Pb Price) + (Au * Au Recovery * Au Price / 31.1035) + (Ag *Ag Recovery * Ag Price/31.1035)) / (22.05*Zn Recovery*Zn Price).
3. Metal price assumptions are US$0.88/lb Zn, US$3.15/lb Cu, US$0.91/lb Pb, US$1350/oz Au and US$26.57/oz Ag.
4. Metal recovery assumptions are based on preliminary metallurgical results of 68.4% Zn, 83.4% Cu, 92.9% Pb, 75.6% Au and 86.9% Ag.
5. Zinc, Copper, Lead, Gold and Silver assays were capped at 46.0% Zn, 5.5% Cu, 12.5% Pb, 14.0g/t Au and 800g/t Ag.
6. Specific gravity (SG) measurements were taken on most of the samples, where actual measurements were not available either stoichiometric values were calculated or average SG values were used.
7.  No economic evaluation has been undertaken.  A ZnEQ cut-off grade of 7.5% was selected as a reasonable cut-off grade for underground development.