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Solomon Islands Gold Pty Ltd

2014 Fourth Quarterly Report

1st October – 30th December 2014

Cape Esperance PL 04/14

Approved for Submission by

Clinton Cain

Managing Director

Solomon Islands Gold Pty Ltd

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CONTENTS

1   EXECUTIVE SUMMARY 3  

2   TENEMENT STATUS AND LOCATION 4  

3   GEOLOGY 6  3.1   Regional Setting 6  3.2   Cape Esperance Geology 6  

4   PREVIOUS EXPLORATION 9  

5   TARGET PRIORITIES 9  

6   WORK ACCOMPLISHED 9  

7   GEOCHEMISTRY RESULTS 10  

8   CONCLUSION 12  

9   RECOMMENDATIONS 13  

10   EXPENDITURE 15  

11   WORK FORCE 16  

12   WORK PLAN 17  

13   REFERENCES 18  

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1 Executive summary

This is the second quarterly report of Solomon Islands Gold Pty Ltd for the period of 1st October 2014 to 31st December 2014 on the Prospecting License PL: 04/14 Cape Esperance Tenement since the company was granted a Prospecting License on the northwest portion of Guadalcanal Island on 22nd July 2014.

The objectives of geological surveys are to evaluate the possibility of epithermal gold and porphyry copper gold mineralisation systems, and finally to discover an economically exploitable gold deposits in northwest Guadalcanal Island. To help achieve this objective, SIG had established four priority target areas, see Table 1.

Table 1 Prospect Catchments for Pan Concentrate Sampling Survey Catchment Priority Mineralization style Volcanic Centre Sasaa, Kotina, Talanga, Tachuchui, Tamba Lakoivo

1 Low S carbonate basemetal – epithermal Au

Gallego volcanic centre

Chovuna 2 Low S epithermal Au-Ag Vuvunga volcanic centre Lapeti 3 Low S epithermal Au-Ag Vuvunga volcanic centre Kunjuku 4 Intrusive related deep epi. Au Paru volcanic centre

The work so far consisted of cleaning up old logging rump roads, local paths, temporary camp construction, geological field reconnaissance, initial deployment of a geochemical exploration sampling method such as stream sediment sampling survey and specifically pan concentrate survey and finally laboratory geochemical analysis of pan concentrate samples at ALS Laboratory in Brisbane, Australia. The current period consisted mainly of geologist confirmation of previous work, as well as in field retesting to confirm results. SIG employed a total of 13 employees for field exploration, and hired a number of vehicles for logistic support in northwest Guadalcanal Island. Total expenditure of this quarterly period was over SBD800 000 see expenditure report table 3 on page 15.

SIG will pass through eight stages to get to operation, summarised into 3 exploration stages (Phase-I, Phase-II and Phase-III), see page 4. The Phase-I prospecting program consists mainly of geological field reconnaissance, geological mapping and stream sediment sampling survey. SIG is planning to commence the phase-II and Phase-III exploration program simultaneously in February 2015 and June 2016. The Phase-II will consist predominantly of grid soil sampling survey, rock sampling survey and trench mapping. And the Phase-III will be undertaking further trenching, systematic soil sampling, geological mapping to obtain more detailed geological, geochemical and geophysical data prior to plan drill program in mid-2016.

SIG remains totally debt free, fully funded by its current shareholders and directors, and intends to remain debt free.

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The results to date as part of Phase-I:

• Sasaa River drainage in the east of the tenement produced pan concentrates ranging from <0.01ppm to 0.82ppm Au The lower Sasaa River returned values of <0.01ppm Au whereas the upper river gave 0.82ppm Au.

• The second target catchment and with high gold grades are the streams that drains the Vuvunga crater in the north of the tenement. These include the two northeasterly draining streams, the Chovuna and the adjacent Ghambughasi. The gold assays gave strongly anomalous gold results in pan concentrates samples which ranges from 0.02ppm Au to 333ppm Au with silver assays ranging from <0.2ppm Ag to 39.6ppm Ag. This strongly gold anomaly associated with this Chovuna drainage may be derived from a mineralizing event associated with the development of the Vuvunga volcanic structure.

• The third catchment is Lapeti River of which two pan concentrate samples revealed low order anomalous gold of 0.07ppm Au with <0.2ppm Ag to 0.7ppm Ag. Lapeti drainage is also of interest as one sample site had high copper, lead, and zinc assays

Results of phase 2:

The results of phase 2 are still currently being completed by a group geologists with laboratory support. The results will be ready for dissemination in the next report.

2 Tenement Status and location

The Cape Esperance Project is located on the northwest end of Guadalcanal Island in the Guadalcanal Province of the Solomon Islands. Figure 1 shows the location of Cape Esperance Project and other targeted license areas within Solomon Islands.

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Figure 1 Location of Cape Esperance and other SIG targeted license areas in the Solomon Islands

The Cape Esperance Prospecting License PL: 04/14 of Northwest Guadalcanal Island was granted to Solomon Islands Gold on 22nd August 2014 and is valid for 3 years. The boundaries and surfaced/unsurfaced roads are shown in

Figure 2.

Figure 2 Location and boundaries for PL04/14. Surfaced and unsurfaced roads in green and in black showing 200m contours

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3 Geology 3.1 Regional Setting

The Solomon Islands and New Guinea are part of a continental island arc system formed by the collision of the north moving Australia-India plate with the south-west moving Pacific Plate. Subduction of the Pacific Plate beneath the Australia-India Plate resulted in partial melting of the Pacific Plate and diapiric rise of magma domes into the Australia-India Plate. Initial subduction occurred in a south-westerly direction and this process may have been initiated as early as late Eocene time. A reversal of the subduction is thought to have occurred near the end of the Miocene when north-east directed subduction along the south west margin of the archipelago was initiated. The tectonic setting of the Solomon Islands is presented in Figure 3.

3.2 Cape Esperance Geology

The area essentially comprises of a pre-Miocene complex of diorites extruded and overlain by andesitic volcanic rocks-the Gallego Volcanics Group.

The oldest rocks are the Vaturanga Microdiorites which are frequently highly altered and confined largely to exposures in the upper Malanjili River and the middle reaches of the Kunjuku River. Locally the microdiorite is pyritised; elsewhere the upper surface is laterised and overlain by volcanic rudite.

The Gallego Volcanics Group (at least 1000m thick) here comprise predominantly of andesitic pyroclastics with lavas and interbedded volcaniclastic wackes; the latter are lithologically similar to the

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Figure 3 Tectonic setting of the Solomon Islands with Guadalcanal Island

Lungga Beds. The pyroclastics are mostly massive agglomeratic tuff with subsidiary lapilli tuff, tuff and volcanic breccia. The lavas are typically finely porphyritic andesites with variable proportions of megacysts of black hornblende and white plagioclase (often visibly zoned) in a dark to medium grey groundmass. Small xenoliths of dioritic gabbro are not infrequent in the lavas; basaltic xenoliths are less common. The Gallego Volcanics are essentially calc-alkaline in type.

Weathering and erosion of the volcanic with frequent laha formations led to rapid deposition of the Lungga Beds. These comprise a sequence of massive paraconglomeratic colluvial and fluvatile wackes with some finer-grained lenticular beds: the deposits partly interdigitating with the volcanic and forming fringing aprons around the volcanoes. The paraconglomerates are stratified, usually ill-sorted and contain sub-angular to sub-rounded pebbles to boulders of the Gallego Volcanics; limestone pebbles are locally present. Bedding is traceable in areas of well-stratified siltite.

The Tanasali Lutite which floors the Vuvunga Crater indicates a former crater lake recently drained by back-cutting of the Tanasali River.

Cape Esperance Prospect

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The Honiara Beds (Honiara Reef Limestones) occur as widely separated small outcrops and at discrete altitudes namely 20-30m, 100m, 190-200m and 500m; they are remnants of uplifted reef terraces and as such are important indicators of the regional uplift. The deposits comprise pale cream, rubbly, partly brecciated recrystallised limestone which include coral fragments and poorly-preserved shell fauna.

Alluvial and littoral deposits form the coastal strip extending 2km or more inland along some of the larger rivers. The narrow low beach of shelly coralline detritus is fringed by sand but may be underlain by andesitic shingle as exposed at Aruligo Point. Areas behind storm beaches often enclose swamps. Offshore coral is mostly dead or degenerate with minor backreef or lagoonal areas.

Cape Esperance mineralisation displays a strong structural control and exhibit metal assemblages typical of Southwest Pacific gold epithermal and porphyry copper-gold mineralisation systems. The source of which is the volcanism episode associated with the second subduction tectonic phase that gave rise to the alkaline and calc-alkaline volcanism found within the New Georgia Group, Russell Island Group, Savo and West Guadalcanal;

Mineralisation is controlled by three northwest trending series of Tertiary to recent composite volcanic centres namely Vuvunga volcanic centre, Paru volcanic centre and Gallego volcanic centre and possible originally basaltic stratovolcanoes in West Guadalcanal.

Figure 4 Three Volcanic Centre cross sections of Cape Esperance volcanic- hydrothermal and geothermal system

Vuvunga Crater, other crater rims, the Vaturanga microdiorites and fault line intersections are favourable sites for the localisation of epithermal gold and porphyry copper gold style mineralisation at depth and near surface. As such, there is potential for copper-gold porphyry and epithermal mineralization systems localized near the three volcanic centres.

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4 Previous Exploration

Previous work conducted on Cape Esperance Tenement was by Austpac/Aurex joint venture in 1986/7. Their work was limited to reconnaissance scale stream sediment, panned concentrate and rock chip sampling. The geochemical exploration they had done lead to discovery of anomalous alluvial gold in Ghambughasi and Chovuna Creeks in the north-central part of the tenement. The ridge between the two creeks named Chovuna Ridge was found to consist of weakly to intensely phyllically altered andesitic volcanic over approximately 400m. But trench channel sampling on the hydrothermal alteration zone did not indicate any significant gold mineralization and the source of the anomalous gold values in the creeks were not clearly delineated.

5 Target Priorities

SIGs goal is to find an ore body preferably gold which can be developed and mined. The company plans to employ two exploration processes, with initial stage now focusing on gathering surface data which is mostly pan concentrate survey. And later stage will be focusing on gathering subsurface data mainly scout drilling for exploratory drill holes. The 4 target catchments are highlighted in the Table 2.

Table 2 Prospect Catchments for Pan Concentrate Sampling Survey Catchment Priority Mineralization style Volcanic Centre Sasaa, Kotina, Talanga, Tachuchui, Tamba Lakoivo

1 Low S carbonate basemetal – epithermal Au

Gallego volcanic centre

Chovuna 2 Low S epithermal Au-Ag Vuvunga volcanic centre Lapeti 3 Low S epithermal Au-Ag Vuvunga volcanic centre Kunjuku 4 Intrusive related deep epi. Au Paru volcanic centre

6 Work Accomplished

Up to the time of writing this report, priorities 1, 2, and 3 were well underway. And specifically pan concentrate sampling was carried out at Sasaa, Talalouki, Talangia, Tachcuchui, Kotina, Chovuna, Lapeti and Naro. All collected pan concentrates are assayed for 19 elements namely Au (gold), Ag (silver), As (arsenic), Sb (antimony), Cu (copper), Pb (lead), Zn (zinc), Ba (barium), Bi (Bismuth), Ca (calcium), Cd (cadium), Co (cobalt), Fe (iron), Mg (magnesium), Mn (manganese), Mo (molybdenum), Ni (nickel), P (phosphorous) , and S (sulfur).

Pan concentrate sampling was carried out by using a team of 5 to 7 field assistants’ mainly local young men recruited. They were employed as casual labours during the first field visits to:

• carry the pan concentrate sampling equipment • dig sampling pits • screened coarse material using screen mesh into a bucket • pan down some of the screened stream sediments to produce a concentrate.

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7 Geochemistry results

Assay results for gold and other elements in 20 pan concentrate sample submitted to ALS Laboratory in Brisbane, Australia have outlined some high and lower order anomalies for the river catchments of Chovuna River, Sasaa River, and lower Lapeti River.

Sasaa River drainage in the east of the tenement produced pan concentrates ranging from <0.01ppm to 0.82ppm Au (see Figure 5).The lower Sasaa River returned values of <0.01ppm Au whereas the upper river gave 0.82ppm Au.

Figure 5 Gold assay results of two Pan Concentrates from Sasaa River

The anomalous gold in stream sediments most likely had been transported to their present position on the Sasaa River by the Kotina and Talangia drainages. This weakly anomalous gold may have originated from the eastern rim of the Talalu crater and reworked materials deposited in the epiclastic rocks derived from the Mount Gallego volcanic complex.

The second target catchment and with high gold grades is the short stream that drains the Vuvunga crater in the north of the tenement, Figure 6. These include the two northeasterly draining streams, the Chovuna and the adjacent Ghambughasi. The gold assays gave strongly anomalous gold results in pan concentrates samples which ranges from 0.02ppm Au to 333ppm Au with silver assays ranging from <0.2ppm Ag to 39.6ppm Ag.

3m deep pits dug in the lower alluvial plain of the Chovuna near the village showed alluvial gold at depth, summarised in a form of graph in Figure 7.

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Figure 6 Gold assay results of seven Pan Concentrates from Chovuna River

The in-situ concentration of gold at the base of the pit at 3m was 0.26 g/t near the river, the bed rock was not reached. Whereas the pits away from the river at the edge of the alluvial flat the concentration down the pit was less, with a maximum half way down and zero at the base of the pit where bed rock was present.

This strong gold anomaly associated with this Chovuna drainage may be derived from a mineralising event associated with the development of the Vuvunga volcanic structure.

Figure 7 Graph illustrating alluvial gold in depth and distance from river.

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Figure 8 Gold assay results of two Pan Concentrates from Lapeti River

The third catchment is Lapeti River, see Figure 8, of which two pan concentrate samples revealed low order anomalous gold of 0.07ppm Au with <0.2ppm Ag to 0.7ppm Ag. Lapeti drainage is also of interest as one sample site had high copper, lead, and zinc assays:

• 0.22% Cu • >0.4% Pb • 0.05% Zn

The pan concentrate assays depict elements in stream load transported to their present position from the upper Lapeti streams draining the Vuvunga Crater area.

8 Conclusion

Both Lapeti and Sasaa assay samples indicated gold but at this stage whilst we are still awaiting final geologist results, it is concluded that capital needs to be raised to establish more infrastructure such as a few roads in the licence area. Interestingly Lapeti and Chovuna contained high lead (in the form of round ‘shot’ like pellets), zinc and copper which required conformation to eliminate the possibility of anthropogenic origin.

The 18 pan concentrates samples that were detected with low and high anomalous gold, 8 samples were from Chovuna Stream which gave strong anomalous gold assay results ranges from 0.02ppm Au to 333ppm Au. Small nuggets of around 4mm of gold have been found up the whole length of the 1.5km long stream except the head water. These results are in line with the historic reconnaissance expeditions by Austpac in years 1986/7 which identify Chovuna Ridge to be the hydrothermal alteration zone. Quote “The ridge between the two creeks (since named Chovuna Ridge) was found to consist of weakly to intensely phyllically altered andesitic volcanic over approximately 400m”.

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To locate the source of the gold further samples have been collected in the other rivers bordering the Chovuna watershed. The preliminary samples from the following river valleys are awaiting analysis:

• Veravaolu • Chovuna • Ghambughasi • Tughu • Tanaemba

During sampling of the Gambughasi sediments, gold particles were identified in the pan. This suggests that the ridge dividing the Chovuna and Ghambughasi river holds the source for the gold. Identifying this source is our next goal. A road closer to the source is planned as soon as capital is made available to complete this.

During the next quarter, sampling will continue along the Chovuna ridges and the associated river systems.

9 Recommendations

The first available assay results of the first geochemical survey of Cape Esperance Tenement indicate drainages of Chovuna and Ghambughasi appearing to be of most immediate interest and worthy to investigate further. As such, SIG suggested the ridge dividing the rivers to holds the source for the gold and will continue more detail pitting and trenching.

Austpac likewise in year 1987 encountered weak gold anomaly in stream geochemical sampling of Sasaa drainage with 0.025ppm Au to 0.065ppm Au and copper of 0.004% Cu to 0.057% Cu. The Sasaa tributary is also worthy of further gold investigation, highlighted on Figure 9.

Figure 9 Sasaa Creek and Confluence worthy for further pan concentrate sampling.

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The other tributary also worthy of further investigation in Figure 10 below which Austpac showed to have anomaly gold of 0.035ppm Au and 0.025ppm Au with 0.057% Cu and 0.018% Cu. This tributary is situated exactly within eastern part of the paru volcanic centre.

Figure 10 Tamba Lakoivo creek worthy for further pan concentrate sampling.

Making comparison of Austpac’s prospecting license from 1980’s and Solomon Islands Gold prospecting licence in Cape Esperance, SIG concluded that western part of the tenement required further exploration, see Figure 11. This includes upper Kunjunku catchment and Imbatasi catchment especially where the hot springs and microdiorites are located. The head waters of the two catchments drains through the western portion of the Paru Volcanic centre.

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Figure 11 West Tenement Portion unexplored by Austpac in 1986/1987 exploration

10 Expenditure

Work during the quarter was dominated by desk studies and confirmation of results, pan concentrate sampling survey and geochemical laboratory analysis. Refer to Table 3 for preliminary expenditure during the quarter.

Area requiring exploration

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Table 3 Expenditure from August to 30th September 2014. Direct Costs Amount in SBD 1.Savaolu Camp Management and administration expenditure 298,550 Office automation equipment 23,991 Savaolu Camp Rental 8,000 Consulting service fee for geologists 288,300 Logistics contracting fee Educational awareness 3500 GST & Duty Miscellaneous expenditure 5,677 Manpower related 6,024 1-2 Laboratory Geochemical Analysis (ALS Lab) Chemicals The others 8,690 Manpower related cost 2.Prospecting Operations (Cape Esperance PL) Fuel, Oil, Lubricant 350 Equipment 3,500 Vehicle costs 56,778 Rations 12,150 Sub-contracting Manpower related 16,650 Tenement Fees Community Relations 56,600 Others, flights and transport 33,200 Business license Total for 2nd Quarter 821,960

11 Work force

During this quarter, the Cape Esperance survey team of SIG consisted of a number of Solomon Islander employees. The survey team was composed of two Australian geologists in Australia to evaluate samples and data, two Solomon Islander geologists, 2 house keepers and driver (who were recruited from Honiara) and 12 field assistants (who were recruited upon village chiefs’ recommendation at the present survey areas).

In its camp in Savaolu prospecting main base Camp, SIG stationed 2 employees who consisted of an Australian, an Australian Manager for Mining and Exploration, and a Landowner, Community and Exploration officer

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12 Work plan

SIG will continue to conduct three stages (Phase-I, Phase-II and Phase-III) of geochemical exploration within three years period.

The Phase-I prospecting program consists mainly of field reconnaissance and geochemical pan concentrate sampling survey. SIG had already initiated most of the Phase-I program with pan concentrate sampling survey on Sasaa, Talangia, Tachuchui, Chovuna, Ghambughasi, and Lapeti catchments. The Phase-I program in Lapeti catchment were partly conducted with pan concentrates only during the quarter due to land access misunderstanding, and geochemical exploration will continue in September/October 2014.

SIG is planning to commence the phase-II and Phase-III exploration program simultaneously in 2015. The Phase-II will consist predominantly of soil sampling survey and trenching, as well as requiste roads to engage the areas better. The Phase-III will be diamond drilling (hole depth of up to 150 meters) to obtain more detailed geological data.

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13 References

Austpac Gold N.L, Oct.1986: Aurex Solomons Limited & Austpac Gold N.L, Quarterly Report for the Period Ending January 1987, report date October 1986.

Austpac Gold N.L, Oct.1987: Aurex Solomons Limited & Austpac Gold N.L, Quarterly Report for the Period Ending January 1987, report date October 1987.

Grover, J.C, Thompson, R.B, Coleman, P.J, Stanton, R.L, Beli, J.D, 1959-1962, Reports on the Geology, mineral resources, petroleum possibilities, volcanoes and seismicity in the Solomon Islands, Vol.II.