West Lombok Project

Minerals: Copper, gold, silver
Location: Southwest Lombok Island, Indonesia
Area: 18,483 ha (45,671 acres)
Status: Exploration Drilling
Ownership: 90% interest held by Southern Arc

An outstanding property held previously by Newmont Mining, West Lombok contains at least four prospect areas (see prospect map):

1. Selodong Intrusive Complex (Phase 1 drilling completed in September 2008)
2. Pelangan Gold Prospect (Current Focus)
3. Mencanggah Epithermal District
4. Simba Prospect

The West Lombok property also includes the former Block 1 property, acquired from Newmont in a separate transaction.

Southern Arc acquired a large tract of land covering most of southern Lombok Island, including the West Lombok property, after Newmont was obliged to relinquish the ground, except for its Block 1 property, to the Indonesian government and focused on developing the Batu Hijau copper-gold mine on the nearby island of Sumbawa. Southern Arc started detailed surface exploration activities and diamond drilling on West Lombok in May 2006.

1. Selodong Intrusive Complex - 15 Porphyry Targets Identified
An exceptional gold-rich copper prospect, the Selodong Intrusive Complex (SIC) hosts 15 porphyry copper-gold targets with associated peripheral epithermal gold-silver mineralization. Newmont drill-tested six of the targets; nine more were subsequently identified by Southern Arc. Independent 3-D geophysical modeling has confirmed the potential for significant depth and size of all 15 targets. The porphyry complex lies at the southeast end of a 13-km long, northwest-southeast trending structural corridor of mineralization and alteration within the West Lombok Property.

2008 Drilling at Selodong
Southern Arc started drill testing each of the porphyry targets at Selodong in April 2007. The focus of this program was to establish the size, geometry and potential grade of mineralization as definition drilling. This drilling work was completed in September 2008. See our news releases and the Selodong Intrusive Complex synopsis for a description and results from the program.

The Focus at the SIC
Although we had planned to drill-test all of the 15 porphyry bodies (see targets map), we focused on six key targets: Montong Botek, Blongas I, Blongas II, Kekalik, Belikat and Kedaro.

Drilling in the Montong Botek and Blongas II targets has produced outstanding results over a number of very long interecepts: see SIC Drilling & Assay Statistics Summary.

Magnetic modeling and modeling from drilling results suggests that the Montong Botek and Blongas II porphyries coalesce at depth. For a detailed review of the SIC history, geology and current exploration activities, please see our Selodong Intrusive Complex activities page or the less detailed SIC Synopsis page.

2. Pelangan Gold Prospect - Significant Gold-Silver Mineralization
Pelangan lies on the northwest end of the 13-km long northwest-southeast trending structural corridor on the West Lombok property (see Prospect Map). Southern Arc carried out extensive exploration activities on Pelangan through 2006 and into 2007, including scout drilling, surface mapping and ground CSAMT surveying.

The 50-hole scout drilling program intersected significant gold-silver mineralization. This drilling program of shallow holes was designed to test five structurally-controlled, gold mineralized breccia zones or vein systems. A hitherto unknown sixth vein, the Lala Vein, was discovered by Southern Arc, however drilling has not been carried out on it yet.

Gawa Bongor is a new potential mineralized target in the Pelangan area that was located in March 2008. The area is located north of the Lala MSB and east-northeast of Kayu Putih.

Phase 2 drilling commenced on selected vein targets in late August 2008. For a detailed review of the history, geology and exploration activities on Pelangan, please see our regularly updated Pelangan Gold Prospect Activities page.

3. Mencanggah Epithermal District
The Mencanggah Epithermal District lies in the centre of the 13-km long, northwest-southeast trending structural corridor (see Prospect Map). Surface prospecting and mapping have defined the extent of epithermal quartz veining over a broad area, along with the presence of potential copper-gold porphyry style mineralization at Lapangan Geres. Up to the end of August 2008, five major vein targets, including Tebu Serai, Bising, Telekut, Talat Talat and Gunayang were sampled and mapped as part of a data-acquisition program leading up to a scout drilling program.

The Block 1 Agreement

The Block 1, previously held and explored extensively by Newmont, adjoined Southern Arc’s Lombok property.  Although Newmont was aware of significant mineralization in the Block 1, its Batu Hijau project was further advanced and therefore Block 1 was put on hold while the new mine on the adjacent Sumbawa Island was developed and brought into production. As the Block I property was not being advanced, Newmont was obliged to relinquish it, in accordance to the requirements of its Contract of Work. Through an agreement with Newmont, Southern Arc acquired the Block 1 property on west Lombok Island contemporaneously as the property was relinquished by Newmont in an expansion of the company’s Lombok property.

Newmont provided Southern Arc with all historic Block 1 exploration data, including all drilling data and core. In consideration for the exploration data, Southern Arc granted to Newmont:

• a 2 percent net smelter royalty; and
• the right of first refusal to joint venture with Southern Arc in the exploitation of any mineable resources only on the former Block 1.

Permitting and Issuing of IUP

The Lombok SIPP was granted on December 4, 2002. Relevant SIPP extensions and expansions to the property area were granted until February 15, 2006, when the CoW application came into conflict with an unconstitutional provincial land utilization regulation (West Nusa Tenggara provincial land utilization regulation No. 11/2006, also referred to as 'the Perda'). Because both the central and regency government have supported the revision of the conflicting regulation, in the form of endorsement letters and instructions to the Governor, the Company continued exploration activities unabated through to Q4 2008, whereupon field operations were suspended because of the global economic downturn.

The revision of the contentious land utilization regulation went through all the relevant central government's obligatory regulatory steps as the new provincial spatial plan, or the RAPERDA No.3/2010. The RAPERDA was voted upon by the provincial legislature and passed.  It was subsequently proclamed into law by the Governor of West Nusa Tenggara Province on July 1, 2010. With this enactment of the RAPERDA, the West Lombok Project lies within areas zoned for mining activities. This new regulation has cleared the path for Southern Arc to be issued an IUP for its West Lombok property, as all prior restrictions to mining activities on the property have been effectively removed. The West Lombok regency is now free to respond to the company's application for the IUP.

With respect to processing the application for the IUP, the Company has been in intensive negotiations with the West Lombok Regent (the issuing authority) since February to ensure that the issuing of the relevant IUP is not hindered in any manner. Given the positive developments, the company re-opened the Selodong field camp in late February 2010, after purchasing the land on which it is situated, and initiated the process to resume exploration and drilling programs on the West Lombok property once the IUP has been awarded.

West Lombok Infrastructure and Facilities

The property is approximately a 1.5 hour drive from the provincial capital of Mataram over a paved road. Mataram is serviced by a modern airport that is also a destination of Singapore Airlines. A new, international airport is currently being constructed in central Lombok. The island can also be easily reached by ferry from Bali and elsewhere in Indonesia. A network of logging and local government roads provides good access throughout the property.

Southern Arc's operations on the West Lombok property are based in the community of Pelangan, on the southwestern peninsula of the island. Pelangan has good infrastructure and provides an ideal base from which to carry out exploration activities on the property, particularly on the epithermal vein and porphyry prospects on the former Block 1 area.  A semi-permanent base camp for drilling operations on the SIC was constructed near the village of Selodong, complete with core facilities and supporting infrastructure.