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Silver Coin Gold Project, British Columbia

Silver Coin is a gold-silver base metal property located 25 kilometers north of Stewart, British Columbia in the Skeena Mining Division. The project covers approximately 1,500 hectares and features a zone of faulting and shearing with accompanying mineralization up to 300 meters wide that has been traced for 2.5 kilometers.  Silver Coin shares many characteristics with the nearby Silbak-Premier Mine, located just 5km to the south.  Over its mine life, the Silbak-Premier Mine produced 4.7 million tons yielding approximately 1.8 million ounces gold, 41 million ounces silver, 4.2 million pounds copper, 62 million pounds lead and 20 million pounds zinc.

Background

To date, 714 drill holes totaling over approximately 85,844 meters have been completed at Silver Coin. This drilling has partially outlined a gold-silver-zinc mineralized body that remains open to depth and to the north. According to a resource calculation completed in 2007 by Minefill Services Inc., Silver Coin hosts a NI 43-101 compliant resource of 488,202 ounces of gold in the Measured + Indicated category and 1,000,499 ounces of gold in the Inferred category at an average grade of 2.317 g/t and 6,179,000 ounces of silver (grade 7.49 g/t) at cut-off grade of 0.75 g/t. The following table breaks down the Silver Coin resource:

* Gold Equivalent values calculated using $525/oz for Gold, $10/oz for Silver, $2.4/lb for Copper & $2/lb for Zinc. Metallurgical recoveries and net smelter returns are assumed to be 100%.

It is important to note that the above resource calculation does not include results of a further 1.26 kilometers of diamond drilling carried out during the 2008 diamond drilling program.

Between June and November 2008, a further 88 diamond drill holes were completed with over 97% of the holes showing significant mineralization with results of holes over 1 g/t gold. Assay results, from the 2008 program continued to build on the size and significance of earlier Silver Coin drill results.

During 2008, drilled widths of up to 54.87 meters grading 4.45 gpt gold;  77.72 meters grading 2.41 gpt gold;  42.37 meters grading 6.26 gpt gold;  45.72 meters grading 3.78 gpt gold and 27.43 meters grading 5.40 gpt gold were included in the results.  Much higher grades were intersected over narrower widths such as: 12.19 meters grading 12.66 gpt gold;  3.05 meters grading 20.47 gpt gold;  15.24 meters grading 4.43 gpt gold;  4.57 meters grading 15.57 gpt gold; and 6.09 meters grading 9.0 gpt gold.

Further exploration potential of the property remains excellent with numerous zones remaining to be tested. A body of andesite containing a network of mineralized quartz veins and veinlets, as well as disseminated gold-sphalerite mineralization forms an open-ended, N-S-elongate body approximately 700 meters along strike and 200 meters in depth.

Due to the high concentration of mineralized zones, exploration is focused on not only an underground mining situation but also on the possibility of mining by a large open pit.  In addition, past exploration has been solely focused on the precious metal values rather than both the precious and base metal values of the property.

Current Work

1.         Engineering Study

The Company has contracted Tetra Tech Inc., a well-known engineering consulting firm to complete a new NI 43-101 compliant Preliminary Economic Assessment (“PEA”) and an updated Resource Estimate incorporating the 2008 drill results on the Silver Coin project.  The PEA will proceed in two stages that will include a complete review of the Silver Coin drilling data base from which they will generate a new block model of grade, lithology and resource classification (Measured, Indicated, and Inferred). The block model in turn will be the basis for designing a hypothetical open pit and estimating the tonnage and grade of the resource, along with the volume of waste rock. In sequential fashion they will optimize a mine plan and then apply site-relevant economic parameters to develop a cash flow model and estimate the potential economic return expected from mining the deposit. Their review and report will also incorporate the metallurgical and environmental studies already underway (see below) as well as propose a layout of the required infrastructure to develop the project.

2.         Environmental Study

Pinnacle engaged Cambria Gordon Ltd., an environmental consulting firm based in Terrace, B.C. to complete environmental base line studies of the Silver Coin project with the goal of assessing existing water quality, fauna and flora concerns and potential sites for tailings disposal. Specifically, their work included:

• Preliminary limnology of No-Name lake, a proposed site for tailings disposal;
• Stream flow measurements to commence hydrological database and provide information for year-round water supply for the project;
• Preliminary base line water quality monitoring plan to determine sampling locations for sample collection sites for chemical analyses; and
• Assessment of the presence, or absence, of rare and/or endangered species.

3.         Metallurgical studies

Metallurgical testing at Silver Coin has been ongoing since November 2008 by Frank Wright of F. Wright Consulting Inc.  His results to date have shown that Silver Coin exhibits very favourable metallurgical characteristics. The laboratory test program to date has investigated flotation and cyanide leaching procedures.

Depending on the sample and procedures that were used, the gold recoveries varied from 85% to 95% for cyanidation. However, due to anticipated considerations in using cyanide on site, most of the process evaluation has focused on flotation. Initial open cycle flotation tests provided an excellent bulk yield of over 95% gold into a rougher concentrate. The results from a locked cycle test provided gold and silver recoveries of approximately 90%. Future metallurgical work will focus on optimizing flotation procedures for rejecting pyrite to produce a cleaned bulk gold-silver concentrate. The nearby deep water port and loading facility at Stewart is ideally located for transport of Silver Coin concentrate.

During September 2009, bulk samples were collected from trenches in the mineralized zone at Silver Coin to provide samples for work index studies.

4.         Conclusion

Silver Coin is a significant gold resource which has yet to be fully delimited by drilling. Potential to significantly expand the resource exists with depth, and along strike, particularly to the north. It is located in a district which contains widespread and abundant alteration and mineralized prospects, including one of B.C.’s most important past-producers, the Silbak-Premier mine. The project work outlined above should be completed during the first quarter of 2010. Based on the results of the currently-progressing work, a decision will be made whether or not to carry on with feasibility and/or further drilling to take Silver Coin closer to production.

With the presence of a high tension power line grid within kilometers, a nearby mill and the wide-well maintained Granduc Road crossing the property leading to the Pacific’s Portland Canal and a concentrate shipping facility in Stewart, Silver Coin is a very attractive mining project.

Click here to view the 2009 technical report on the Silver Coin property.

2005/2006 Silver Coin Drilling Results:

Click here to view drilling results