Taliwang Geology

Southern Arc's Taliwang project is located on the island of Sumbawa, which is located immediately to the east of Lombok Island in the central part of Indonesia's tectonically active, east-west trending Sunda-Banda magmatic arc. The geology of Sumbawa is characterized by an island arc-type volcano-sedimentary succession of Late Oligocene to Quaternary age. The southern parts of Sumbawa Island are overlain by Late Oligocene to Middle Miocene, calc-alkaline to weakly alkaline andesitic volcanic and interbedded volcaniclastic rocks, associated intermediate intrusions and shallow marine sedimentary rocks and limestones (Garwin, 2002).

The geology of the Taliwang property presents three main structural grains, northwest, north-south and north-east trends, relating to copper and gold mineralization in the region. The NNE to NE trends form the mineralized corridors hosting porphyry Cu-Au mineralization, whereas late-stage epithermal veins and post mineral dykes are developed along the northwest and north-south trending faults.

The Maps page contains three maps showing details of the overall geology of the Taliwang property, namely:

West Sumbawa Structural Elements map;
Sumbawa - Taliwang SIPP Geochemical Anomalies map; and
Sumbawa - Taliwang SIPP Geology map.

Lemonga Prospect Geology

The Lemonga prospect is a low-sulphidation epithermal system over which surface mapping by Southern Arc and previous operators confirmed hydrothermal argillic alteration within an area approximately 1 km east-west by 1.5 km north-south.

Five gold-bearing quartz veins, named Amy, Betty, Cici, Dessy and Evi, were identified within the alteration zone. These veins generally trend between north-south and northeast-southwest and have widths up to 10 meters at the surface. The best exposed vein, the Amy Vein, has a mapped strike extent of at least 950 metres.

The area appears structurally complex, yet it is highly prospective. For instance, Aneka Tambang, the Indonesian state-owned mining company, in 1991 had reported seven diamond drill holes totaling 260.1 m with intersections of up to 12 m and grades ranging between 1.84 g/t and 3.63 g/t Au. The veins typically pinch and swell, with strike and dip orientations often variable. Localized stockworks and orthogonal cross-cutting veinlets occur, contained within irregular patchy argillic alteration envelopes.

Further geological mapping and selective sampling of the breccia zone underlying Olat Beleong, east of drill hole LDG-013, was carried out in September 2005 by Southern Arc. The current consensus on the appearance and origin of the extensive breccia body is that it represents an original capping of dacitic volcanic breccia, hydrothermally altered and re-brecciated, with some silica-quartz rich zones preferentially hosting gold-silver-minor barite mineralization, with adjacent, but non-correlative (in a geochemical sense) base metal anomalous zones. Rare narrow quartz veins/veinlets found within the extension area mostly tend to parallel the strike of the main Lemonga vein set.

A petrological report from consultants SKM on 62 core samples taken from Southern Arc's first phase drilling program proved highly encouraging in suggesting that at least 450m vertical extent of potential Au-Ag mineralization remains intact largely above the boiling zones of an extensive paleo-hydrothermal upflow regime. Contouring the fluid inclusion homogenization temperatures on a long section of the Amy vein (see Amy Vein FI Homogenization Temperature Distribution below) reveals a more or less horizontally stratified temperature gradient, which reflects upflow from beneath the entire sampled vein, and is also evident in the vector diagram. The pronounced upward-trending "bulge" disturbing the strata in the vicinity of drill holes LDG-01 and LDG-03 intersections possibly reflects locally enhanced structural permeability in that portion of the vein, thus allowing hotter fluids access to higher levels and thereby resulting in the higher gold and silver grades returned from those intersections. Certainly the milder bulge around the LDG-05 intersection in the north requires further examination by way of drilling. The section displaying Au/Ag ratios does not prove to be as conclusive, but this is probably because the broader geochemical sampling covered different paragenetic sequences (earlier mesothermal versus later epithermal events).

Amy Vein FI Homogenization Temperature Distribution

Jereweh Prospect Geology

The J3 Prospect is situated in the southeastern corner of the property, approximately 12km north of Newmont's Batu Hijau porphyry Cu-Au mine. It was initially identified by Newmont during first pass regional drainage sampling in 1987 and subsequently prospected using grid-based geologic, geochemical and geophysical (magnetics and gradient array IP/resistivity) programs. Significant Au-Ag±base metal grades were reported from a contact zone of a flat-lying silicified limestone and argillized volcaniclastic sediment, exhibiting dominant sub-vertical northwest and lesser north, northeast and east trending structural elements. Maximum values from the partly exposed silicified limestone unit registered an average grade of 6.75 g/t Au from a 2.7m thick bed. The anomalous outcrop is situated on the eastern edge of a 1.8 by 1.3km area of interest encompassing widespread anomalous Au soil geochemistry. The most significant anomaly, centered 1.25km west-northwest from the above contact, comprises a 700 by 200m NW trending zone of greater than 50 ppb Au soil geochemistry. This zone was interpreted by Newmont as an erosional window through unaltered limestone cover re-exposing the mineralized limestone/volcanic contact. Broad zones of weak to moderate base metal and, locally, As, Sb, and Mo anomalism is associated with elevated gold soil geochemistry throughout the area. A broad zone of relatively high resistivity (greater than 140 Ωm) corresponds with the largest Au soil anomaly and this is flanked on its western margin by a major chargeability high. A broad magnetic low signature, with localized highs, characterizes the area of interest. Newmont noted that the magnetic highs coincide with fresh to weakly altered volcanics bounding the limits of mineralization to the east and west of the prospect.

Preliminary orientation surveys by Southern Arc personnel during November to December 2006 relocated the historical Newmont discovery outcrop (6.75 g/t Au over 2.7 metres), subsequently named "Hitam Manis" (HM). Initial outcrop channel sampling and mapping of the main silicified zone (interpreted as jasperoid ledges) and peripheral alteration envelope reported significant high grade Au-Ag intersections. From 14 rock samples submitted, 6 samples assayed >1.0 g/t Au, including 216.0 g/t Au & 330 g/t Ag over 3.0 metres, 64.0 g/t Au & 52 g/t Ag over 3.0 metres and 10.40 g/t Au & 50 g/t Ag over 3.3 metres respectively (see Jereweh maps page). Re -assays using multi-element ICP scans reported moderate to strong correlations between Au, Ag, Sb, Se, Mo and Pb geochemistry. Immediately south of HM, a possible fault offset of similar jasperoidal material returned a value of 33.6 g/t Au & 17 g/t Ag over 2.5m. Assay results from additional surface rock chip sampling peripheral to HM confirm the widespread Au anomalism previously defined by Newmont. Significant rock chip values including 10.1 g/t Au and 14.3 g/t Au had been reported as far as 720m northwest and 635m west of HM respectively, while a substantial area immediately west of HM displays low level Au anomalism in jasperoidal outcrop and subcrop. On-going mapping noted the presence of several small to large pods of jasperoid outcrop and subcrop up to 2,500 m west of HM. These zones coincide with historical Newmont Au-As-Sb soil anomalies.

Preliminary geological and geochemical signatures, along with historical Newmont findings, suggest the potential for carbonate replacement Au-Ag mineralization, with a simplistic model of steeply-dipping fault/fracture structures channeling Au-Ag rich hydrothermal fluids into receptive flat-lying carbonate basinal horizons. However, scout drilling completed in May 2007 by Southern Arc on the Jereweh J3 prospect returned low tenor Au-Ag assays from the jasperoid drill intersections,

The historical Liang-Jereweh, or J6, Prospect, is located approximately 4 km west of the J3 prospect. Mineralization comprises auriferous base-metal veins hosted within structurally hydrothermal breccia bodies, volcaniclatics sediments and pyroclastics. Historical trenching of quartz stockwork zones within breccia bodies returned significant results including 110m @ 1.09 g/t Au (includes 25m @ 2.46 g/t Au). Contoured soil geochemistry shows anomalous Au and Mo within a broad base-metal (Pb-Zn-Cu) background. Scout diamond drilling (seven holes totaling 651.3m) in 1998 by Newmont intersected erratic quartz base-metal sulfide (pyrite-galena-sphalerite-chalcopyrite) sheeted veins and stockworks, with maximum grades of 8.41 g/t Au over 3.9m and 20.8 g/t Au over 0.70m from drill hole PJL 02, along with 10.2 g/t Au over 1.73 from hole PJL 06.

Semoan & Raboya Prospect Geology

The Semoan & Reboya Prospect appears to be a coupled, genetically related set of prospects. They are a helimag-inferred silica alteration of epithermal veins. These two areas of alteration lie to the immediate north and south of the Ramit Prospect, a deeper porphyry/structural vein/stockwork target that could be genetically related to the Semoan & Reboya Propsect.

The geology of the road cuttings between Poto Batu and Labuhan Lalat on the western edge of the Semoan & Reboya prospect is dominated by an andestic sequence of fine to coarse pyroclastics and columnar-jointed lava. The exposures are strongly argillically altered at both northern and southern extremities, with a weakly propylitically altered central section rarely visible beneath the scree cover. Quartz-limonite veinlets, 2-5 cm wide, trending N-S and dipping generally 70°E, are sporadically dispersed within the northern argillic zone. Channel sampling here revealed the presence of sulfides (pyrite, chalcopyrite-malachite, sphalerite/galena) and anhydrite(?) coatings along fracture and joint planes.

There appears to be strong conjugate structural control of certain alteration zones. The NE-NNE trending structural zones cutting through the altered upper dacitic pyroclastics are particularly important in localizing Au-anomalous vuggy quartz±pyrite zones and appear through-going towards the Semoan area.

Final geochemical gold results from the initial Raboya sampling program confirmed the bulk of Au anomalism (a substantial cluster ranging from 0.1 to 4.93 g/t Au) is confined to the main peak and the immediate surrounding ridges, covering an area of 400m N-S by 550m E-W. Elevated Cu (max. 0.19% Cu), As (max. 469 g/t) and Sb (max. 99 g/t) geochemistry were also reported from the area, possibly indicating slight leakage from enargite mineralization at depth.

At Poto Batu, channel sampling of the road cuttings revealed relatively high base metal ± silver values (up to 0.29% Cu, 4% Pb, 2.5% Zn, and 103 g/t Ag accompanied by 1.23 g/t Au). This is not typical of the geochemistry associated with high-sulfidation cores, and might indicate a remnant alteration/mineralization regime related to more neutral waters associated with porphyry emplacement at depth.

Geological mapping carried out by Southern Arc suggests that the Semoan massif to the north is underlain by an andesitic sequence of pyroclastics and flows, which is extensively overlain by a dacitic sequence, with minor limestone caps to the north. The sequence has subsequently been intruded by pre-alteration coarse-grained, felsic intrusive bodies and dykes, and subsequently by post-alteration fine-grained mafic dykes. The sequence is also extensively zoned by propylitic alteration alternating with argillic alteration, both of variable widths and trending generally NNE to NE, although WNW trends have also been recorded. Sporadic quartz veins, varying from 0.1 to 1m width and hosted within argillic rocks, trend between 035-060° and dip steeply to the SE. The veins appear finely compact, sometimes vuggy, and host sparsely disseminated sulfides (pyrite, chalcopyrite+malachite, sphalerite/galena).

The Maps page contains two maps showing details of the overall geology of the Semoan Prospect, namely:

Taliwang - Semoan Prospect Geology and Alteration map; and
Taliwang - Semoan Prospect Gold-in-Rock map

Approximately halfway up hill slopes the andesitic sequence disappears beneath a cover of soil supporting argillic/advanced argillic altered dacitic scree/boulders. Outcropping is very rarely observed above this line, and it generally represents structurally-controlled higher quartz/silica content in the alteration assemblage. The advanced argillic scree displays quite a variety of textures and compositions, also implying a strong degree of zonation within the upper sequence. Generally, iron-oxide stained massive to vuggy± chalcedonic banded quartz boulders are prevalent.

The prospect has a rather more complex system than it initially appeared to be (see Taliwang-Semoan Prospect Geology and Alteration map). A Miocene andesitic volcanic pile has apparently been intruded by felsic to intermediate rock types comprising extensive quartz-feldspar porphyry bodies and lesser quartz diorite and [possibly] tonalite.

Remnant small limestone caps overlie this sequence in the far NW and SE, but are also thought to pre-date the alteration/mineralization events. Relative timings of intrusive emplacement are unclear at this stage, but all of the larger intrusive bodies appear to have been subject to the same alteration events (propylitic±; phyllic±; argillic), accompanied by weakly developed quartz ± base metal and minor precious metal veining.

Overprinted on this, and areally restricted to an upper central dacitic breccia mass having an area of about 1 km², is a poorly outcropping advanced argillic alteration assemblage of zoned vuggy quartz ± pyrite/hematite, massive quartz, rare chalcedony, and quartz-alunite ± kaolinte. Again, it is unclear whether the original breccia texture represents a remnant capping of dacitic volcaniclastic breccia, or an eruptive center coeval with the more felsic intrusive. Regardless, it has relatively high permeability, having attracted and capturing the bulk of the latter stage mineralized fluids. Such permeability also would have been enhanced by the well-developed NW, NNE, and NE structures mapped in the field. These could possibly also have provided feeder channels. A strong E-W structural component is also noted in the direction of certain streams, particularly in the Bertong valley to the south, and those draining along the central E-W axis of the prospect area. Mafic dykes/sills are found in the NE quartz diorite.

Results from the PIMA analysis of 695 samples taken from the Semoan-Raboya Prospect area broadly define 4 alteration zones: advanced argillic, advanced argillic/argillic, argillic, and propylitic.

At the Semoan Prospect advanced argillic alteration is mainly distributed in the central, south, and southeast portions. The central zone, around Olat Semoan, is characterized by the mineral assemblage of pyrophyllite + dickite present in either volcanic breccia or QFP lithologies.

Advanced argillic-argillic alteration is adjacent to the above zone in the center and north area, and also affects both lithologies.

At the Raboya Prospect, an extensive zone of advanced argillic alteration, characterized by the assemblage alunite-dickite, affects both volcanic breccia and andesitic lava lithologies underlying a broad, essentially N-S tract from Olat Samporea to south of Olat Raboya.

The Maps page contains two maps showing details of the overall geology of the Reboya Prospect, namely:

Taliwang - Reboya Prospect Geology and Alteration map; and
Taliwang - Reboya Prospect Gold-in-Rock map

Three dominant structural directions were noted as likely controlling alteration and mineralization mapped to October 2006. The largest vuggy silica body mapped (260 m x 130m) wide), is centered about 175m NE of Olat Raboya peak and displays a strong 030° structural grain. Host rock lithology appears mainly as a dacitic (remnant quartz phenocrysts common) breccia, the origins (volcanic or hydrothermal, or combination) remain yet unclear. The body is characterized by strongly oxidized vuggy quartz-hematite-manganese oxide (the latter two partly infilling the vughs and occasional micro-fractures). Quartz-alunite±kaolinite alteration is noted as pods within the body. A late stage event has sporadically flooded and infilled the vugs and micro-fractures with either fine grained sacchroidal quartz, or chalcedony, with accompanying disseminated sulfides.

Two other structural trends (N-S and ~150°) were mapped. The former is expressed by a resistant ridge topped by vuggy quartz scree cobbles and sub-crop trending from the south of Olat Raboya up towards the peak and slightly beyond (as evidenced by RC geochemistry), forming a mapable length of ~250m. On the eastern side of the peak, the N-S direction is also noted as grossly aligning small outcrops of resistant vuggy quartz, more or less elongated in the 150° direction (en-echelon?), and forming a very steep east facing slope of about 250m length. Gold-anomalous rock chip samples from the outcrops and highly anomalous soil samples immediately down-slope of the scarp indicate this structural combination may also control additional mineralization.

Both upflow and outflow high-sulfidation models could be applicable here. The outflow model is supported by IP anomaly responses, with a source centered near the Olat Samporea area (Line E), and fluids out-flowing towards the south utilizing dominant SW-S-SE structural directions and/or relatively permeable/porous dacitic lithology as conduits. Alternatively, the widespread envelope of argillic altered rocks around the advanced argillic at Olat Raboya suggests a somewhat more vertical vector for fluid flow. SKM's recent petrology report considers the possibility of multiple mineralization events with complex overprinting between them, but also cautions that the presence of zunyite in one of the samples suggests that the level of erosion is below that where auriferous mineralization normally occurs. However, that particular sample was collected from the Semoan Prospect, and might not apply to the Raboya situation at all. Gerry Clark's report, whilst mentioning "barren shoulders", concludes that the silica-capped ridges, including cross-structures, could indicate sites where alteration and gold mineralization is concentrated and constitute valid exploration targets.

Ramit Prospect Geology

The Ramit Prospect is a porphyry/structurally-controlled vein/stockwork system situated between the Semoan and Reboya prospects, to the north and south, respectively. It appears it could be genetically related to the Semoan and Reboya silica alteration prospects.

The strong chargeability anomaly centered beneath 1,100 m along IP line D in the Jorokramit Valley midway between the Semoan and Raboya Prospects (see Ramit Prospects map page, Helimag & IP Resistivity Anomalies map) was interpreted as a large and perhaps significant porphyry target. This is also supported by observable geology, particularly in the form of a large boulder field of breccia, possibly representing a diatreme apron, overlying much of the eastern segment of line D, with an adjacent western structurally-controlled variably altered and mineralized shoulder zone extending to and linking the advanced argillic zone of Raboya peak with that found on the west side of Semoan peak. A survey grid was prepared in February 2006 prior to mapping and sampling, followed by an infill ground magnetic survey and subsequent scout diamond drilling. Locations of the holes are shown on the Ramit Prospect Scout Drill Hole Locations map. Drill hole descriptions are summarized below:

RMD-01

Below 2.5m of hematitic soil and rubble, a surficial breccia (either mass-flow or diatreme apron?) extends to 23.7m. The breccia is a chaotic mix of variably altered and oxidized dacite and andesite clasts of various sizes and roundness supported in pyritic illite clay. An old land surface, characterized by a large wood fragment in sand, was intersected between 23.7m and 25.35m. Porphyritic andesite was intersected from 25.35m to 333m (EOH). The andesite generally exhibits a crowded assemblage of medium even-grained equant plagioclase feldspar and rarer hornblende phenocrysts in a fine grained mat of the above minerals. Alteration varies considerably downhole between zones of illite-pyrite, silica-pyrite, sericite-silica-pyrite (particularly below 115m), and chlorite±carbonate±epidote. Quartz±pyrite vein/veinlet density rarely reaches 10/m, but is usually 1-3/m, and most often between 0.5 and 1cm thick, once up to 40cm thick. Rare weak stockworks were noted. Fine to medium grained euhedral pyrite crystals, usually as clumps, are disseminated throughout and generally range between 1 to 2% of the rock volume. Some of the pyrite exhibits a bright iridescent multicoloured tarnish. A fine grained metallic black mineral is also found weakly disseminated throughout, sometimes associated with the pyrite clumps, but often isolated. Occasional small zones of massive secondary magnetite occur sporadically downhole from 123.5m, achieving greatest density between 317.7 to 333m.

RMD-02