Semoan-Raboya Prospect

Southern Arc carried out geological mapping and mineral work activities and exploration on the the Semoan-Reboya Prospect of the Taliwang property on west Sumbawa Island during the second half of 2005 up into the third quarter of 2006. This work was carried out over the Samporea/Semoan and Raboya peak areas. The prospect is currently on a care and maintenance basis with rehabilitation programs on-going. Future exploration activities are planned.

A heli-mag geophysical survey of the complete Taliwang SIPP had been carried out in 2005. The Semoan-Reboya prospect is a quartz vein system that appears to be genetically related to the large Ramit porphyry structure located between Semoan and Reboya (see maps pages).

In September 2006 geological field work activities on this prospect were focused on the Reboya peak and comprised geological mapping and sampling.

During September 2006 the prospect was re-examined in more detail in view of recent comments by international geological consultant Gerry Clark and assay results, with the aim of generating valid drill hole targets for a future scout drilling program. Three dominant structural directions were noted as likely controlling alteration and mineralization mapped thus far (see Taliwang - Reboya Prospect Geology and Alteration map on Maps page).

The largest vuggy silica body mapped to date (260 m by 130m) wide), is centered about 175m NE of the Olat Raboya peak and displays a strong 030-degree 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 about 150 degrees) 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 feature that can be mapped having a length of around 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-degree 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 might 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, see maps), 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 petrology report considered 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 are concentrated and constitute valid exploration targets.

A 1,500m to 2,000m future diamond drilling program is being formulated over the Raboya-Samporea area to test the above hypotheses.

Assay results from sampling in September 2006 of mainly advanced argillic altered dacitic breccia, and vuggy quartz±pyrite alteration are shown in the Taliwang - Reboya Prospect Gold in Rock map on the Maps page. Twenty-one percent of submitted samples yielded gold values greater than 0.5 g/t Au (maximum 1.29 g/t Au) with an average gold value of 0.25 g/t Au (n=52).

Exploration Activity Rationale

Southern Arc has been carrying out exploration activities on the Taliwang property since 2004, including on the Semoan-Reboya prospect.

Early on, a total of seven IP-Resistivity survey lines totalling 13,900 m were established in December 2005 for the ground geophysical survey on the Semoan-Reboya prospect. This work commenced on December 22 with the lines oriented NW-SE and ranging from 1.3 km to 2.5 km in length, with 50-m survey points. The ground IP/resistivity survey was completed by the third week of January.

The lines traversed areas of potential high and low sulfidation epithermal mineralization, along with porphyry-copper targets outlined by the previous helimag survey. IP results and subsequent interpretation highlighted Line D, in the Jorokramit valley midway between the Semoan and Raboya Prospects, as holding the most potential for initial drill target (see Semoan-Reboya Prospect Helimag & IP Resistivity Anomalies map on Semoan & Reboya map page). This has the added bonus of multiple large targets (a porphyry and an adjacent quartz vein/stockwork zone), subsequently named the Ramit Prospect (see Ramit Prospect Development page), able to be drilled from close to one another in a logistically easy area. Activities are based on the premise that the Ramit porphyry is the source and the Samporea structural zone the feeder to both Semoan-Reboya high-sulfidation mineralization.

Follow-up geologic mapping and sampling was conducted over the Raboya and Samporea peak areas mid-month July 2006, realizing 34 RC and 5 CH samples.

Significant outcrops of oxidized vuggy silica were re-identified at the peak of Raboya (EL. 522m a.s.l). In addition a north-south to N30E trending, oxidized vuggy silica outcrop having an area of 200 m long by 90 m was delineated. The vuggy silica body is enveloped by quartz-alunite altered volcanics with a gradational to sharp contact.

Assay results from five of 39 rock samples returned grades ranging from 0.35ppm to 1.04ppm Au. Further detailed mapping and sampling was subsequently carried out to fully outline the extent and alteration distribution of the advanced argillic (AA) zone.

Both the Semoan and Raboya Prospects were put on hold for some time while drilling work on the Ramit Prospect was carried out in April and May 2006.

The survey gridding program was curtailed mid-month March 2006 to allow construction of two scout drill pads on IP line D, plus upgrading of access tracks. The Maxi 195 rig was collared on pad RMD-A by April 3. This hole displayed sufficient visual mineralization so that two more holes drilled at opposed directions from a common drill pad were drilled on line D midway between RMD-A and B, giving an initial scout drilling program of 1,260 m.

Slabbing of selected rock specimens randomly collected from the extensive diatreme breccia boulder field revealed strongly mineralized clasts consistent with the porphyry environment (see photographs of ramit diatreme breccia). Although strong to intensely oxidized, four representative samples are to be dispatched for lab analysis.

The soil/bedrock auger program completed by the third week of December 2005 resulted in a total of 372 SO, 7 RF, and 29 RC samples collected and submitted for assaying. Aside from bedrock geochemistry the program was used to supplement information from outcrop alteration mapping.

Infill soil/bedrock sampling was completed in January 2006 with 130 SO samples collected from 7.5 line km of surveying. Drafting of updates of soil, rock, and geology/alteration/mineralization maps of the prospects is ongoing and expected to be finalized some time in February. Final assay results have been received from the laboratory for the SO samples and 12 rock samples.

A total of 297 soil assays were received during December 2005, with preliminary peak values of 0.86ppm Au (Raboya) and 6,180 ppm Zn (Semoan) reported. Semoan Au soil geochemistry (>70ppb) highlights both NNE (625m by 250m) and NE (1000m by 125m) trends, that coincide with the distribution of silicified breccias (controlling structures?????). Gold soil geochemistry at Raboya is limited to the hill crest which coincides with mapped vuggy and pseudo-vuggy occurrences.

Previously, results were received from the Semoan prospect rock chip sampling program, allowing a brief statistical treatment of the numbers and a comparison between Raboya (150 samples) and Semoan (212 samples) rock geochemistry. A correlation co-efficient of 0.25, though quite low, appears to best demonstrate element association trends. The following comments can be made:

• Consistent with observed mineralization, the Semoan group was divided into two populations of high (HS) and low sulfidation (LS) types (134 HS and 78 LS). The distribution of the HS (?) overprint appears broadly elongated from the SW to the center of the prospect area, coinciding with observed mineral-controlling structures (Figure 1).
• Comparing the two populations, for the most part mean values are higher in the LS. This is most likely due to selective sampling of the more obvious veins/veinlets in the LS. HS samples cover a broader range of alteration types.
• Gold displays a moderate correlation with Ag in the HS but no correlation in the LS.
• Gold displays a weak correlation with both Sb & Hg in the HS, but only weak correlation with Pb in the LS.
• Silver also displays a weak correlation with Sb & Hg in the HS, but appears much more mobile in the LS, with weak to moderate correlations with all of the base and volatile (As, Sb, Hg) metals.
• The volatile metals appear to have a greater restriction in the HS, correlating with the precious metals and copper only.
• Mo & Ba correlate with nothing.
• Comparing the Semoan HS with Raboya HS, the latter displays substantially higher mean Au, reflecting higher degrees of structural control over the Raboya prospect alteration zones at the levels sampled.
• Mo displays probably higher mobility in the Raboya population, correlating with all of the metal groups.
• Again, Ba does not positively correlate with any other element.
• Overall, the Raboya metal groupings appear somewhat more discrete than those from Semoan, possibly implying discrete mineralizing events, whereas with the Semoan mineralization, one gets the feeling it was a more transitional affair from LS to HS types over a protracted period.

Most available stream exposures have been geologically mapped and sampled. Semi-detailed geological mapping of stream traverses has been completed with 35.4 km surveyed realizing a total of 60 RF, 151 RC, 8 CH and 146 petrological (128 PIMA and 12 TS) samples.

The highest geochemical results up to October 2005 over the Semoan Prospect were derived from two different sources (See Taliwang-Semoan Prospect Gold-in-Rock Map). Anomalous northern rock float samples (1.82 and 1.07 g/t Au, low Ag) are typical low to intermediate sulfidation quartz vein material, whereas the rock chip sample (1.56 g/t Au & 62 g/t Ag) taken from a somewhat higher elevation near the center of the prospect, comprises advanced argillic, high sulfidation-style, vuggy quartz altered breccia.