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[ Kermode Newfoundland Property ] [Project Summary ]

Project Summary

UPDATED JANUARY 19, 2004

Kermode Resources Ltd.
A publicly traded company on the TSX Venture Exchange: KLM
A High Grade Carlin Style Gold Target

30+ Diamond Drill Hole Program Ongoing

Recent Drilling Results (Announced January 12, 2004)

DDH JA-03-01: 33.2m of continuous gold mineralization of which 22.6m were in sedimentary rocks averaging 1.52 gpt gold and including 10.02 gpt gold over 1.0 metre.
DDH JA-03-02: 45.4m of continuous gold mineralization of which 34.3m were in sedimentary rocks, including 7.0 metres averaging 1.48 gpt gold with a best individual sample reporting 9.77 gpt gold over 0.5 metres.

HISTORY

The project has an interesting history. A prospector first discovered gold mineralization in 1983 during construction of the Cat Arm Hydro access road. Labrador Mining and Exploration carried out preliminary exploration up to late 1985 and then sold the project to BP Canada Ltd. During 1986 to 1990 BP carried out intermittent gridding, mapping, soil sampling, prospecting and some geophysics over about one third of the original property. From 1985 to 1991 BP drilled 63 holes. Up until that point the exploration program was driven by the extremely favorable results. In 1991 BP made a corporate decision to discontinue mineral exploration in Canada and ceased work on all projects including Jackson's Arm. The property remained idle from 1991 to 1999 when licenses expired due to lack of work credits. It was at this time that South Coast Ventures immediately staked the ground. With a rising gold market this property once again comes into the limelight as a special property with great potential.

LOCATION

The project is in Canada. Located in northwestern Newfoundland, the Jackson's Arm property is 3 km west of the fishing village of Jackson's Arm and is linked by paved road 75 km to the Trans Canada Highway. The northeastern limit of the property is on tidewater. The Cat Arm hydroelectric site road provides access through the complete 17 km length of the property. The mining exploration friendly tax environment within Canada and Newfoundland provides federal and provincial tax credits that will be available to Kermode investor's. Exploration tax benefits are available to the company from the province, which will provide additional financing to the company.



THE DEAL

The project is affordable. Kermode has the option to earn 100% in the Jackson's Arm property.

In the summer of 2002 Kermode announced the option agreement with South Coast Ventures. Consequently, Kermode must spend an aggregate of $2,000,000 on exploration over a five and a half year period and pay $285,000 and 570,000 shares of Kermode over a four-year period. The property is subject to a 3% net smelter return, 1.5% of which is recoverable for $1.5 million dollars.

Since acquiring the property Kermode has staked additional ground, extending the property boundaries to the southeast and north.


OUR GOAL

The company's primary objective is to find a Carlin-style fracture controlled-sediment hosted disseminated gold deposit at Jackson's Arm. Previous exploration efforts on the property were primarily focused on a bulk tonnage granite hosted gold target. The gold mineralization identified in drill and trench samples collected from the surrounding sedimentary rocks was largely ignored. Nevertheless, the property has the added potential to host both a high-grade structurally related gold deposit and a bulk tonnage gold deposit. Kermode's drill programs will be tailored to test these three prospective gold targets concurrently.

SUMMARY

The Jackson's Arm acquisition is in the Major Leagues in terms of upside potential. Previous sustained work by BP Exploration from 1985 to 1991 totalling 63 drill holes (8700 meters of core available for review and further analyses), 4 established gold zones, and most importantly, previously overlooked in the drill logs, a definitive section of drill log and assay information clearly demonstrating the projects immense potential for Carlin style gold mineralization.

Over the past year Kermode carried out a property wide geochemical and prospecting program. This program identified numerous geochemically anomalous areas, which have been recently covered by detailed soil-till sampling. Consequently, a number of new potential targets, with Carlin style pathfinder elemental signatures, have been identified. Kermode started an extensive diamond drill program in December of 2003. When complete, this initial drill program will likely boast more than thirty shallow holes. The current strategy is to limit the depth of these holes to less than 150 meters, on average.

The company recently completed financings for a total of 1.05 million dollars. These funds are being used to fund the First Phase Drill Program.



[ Kermode Newfoundland Property ] [Geological Summary ]

Geological Summary

Kermode's Jackson's Arm property in Newfoundland has the potential to contain two different, but related, deposit types. Firstly a bulk tonnage open pittable gold deposit and secondly a Carlin-type gold deposit. The 63 holes drilled to date on the property have partially defined the bulk tonnage potential and also point the way to the Carlin-type potential.

Bulk Tonnage

The Jackson's Arm alteration zone is exposed for 1.7 kilometres along the Cat Arm Road to the north and south of Rattling Brook. Gold mineralization occurs in this alteration zone and was the focus of most of the work carried out on the property to date. The exposed hydrothermal alteration zone is in late Proterozoic granitoid rocks. The gold mineralization is associated with sulphides occurring in veins, fractures and disseminations in the alteration zone.

Two main zones of gold mineralization of this type are known to occur about 1 kilometre apart and have been partially drilled. The Road zone is in alkali-enriched granite with strong alteration and mineralization over an area greater than 600 metres by greater than 300 metres. Drilled widths such as 47 metres grading 1.1 g/t Au are encountered in this zone. The Apsy zone is of similar extent and intersections such as 1.1 g/t Au over 67 metres are reported.

Kermode's target is an open pittable deposit of 50 to 100 million tonnes, grading 1 to 1.25 g/t Au similar to Kennecott's Ridgeway Mine in South Carolina. Ridgeway produced 1.47 million ounces of gold from 60 million tons of ore over an 11 year mine life -- a recovered grade of 0.0245 opt Au or 0.84 g/t Au. Ridgeway was not a heap leach operation, rather the ore was milled to less than 200 mesh and the gold extracted by a conventional carbon-in-pulp process.

Carlin-type

The alteration zones and gold mineralization in the granites on the Jackson's Arm property have been shown to extend into the unconformably overlying favourable Lower Paleozoic platform sediments. On regional, district and deposit scales the Jackson's Arm property shows strong similarities to gold deposits in the Carlin District of Nevada.

The major distinguishing features of Carlin-type deposits are the presence of micron-scale gold disseminated throughout mainly carbonate-bearing sedimentary host rocks. Orebodies tend to be stratabound disseminated zones, irregular breccia bodies and/or siliceous replacement zones near steep faults. The gold-bearing rocks typically underwent de-calcification, silicification and argillic alteration and are associated closely with replacement of the carbonate rock by jasperoid. The deposits also show a distinctive suite of trace elements including arsenic, antimony and mercury.

At Jackson's Arm, the alteration zones in the granite are characterized by argillic alteration and silicification in addition to the gold the mineralization contains arsenic, antimony and mercury. Drilling has shown that the alteration zones continue upward from the granite and mineralize the overlying platform sediments. One hole shows a 35 metre section of altered limestones bearing gold, within this a 23.35 metre section averages 1.12 g/t Au. This intersection has not been followed up. Many holes encountered significant gold values in the quartzites immediately overlying the mineralized granites. Mineralization is known over a 4 kilometre strike length, 3 gold zones have been discovered but the majority of the area is untested.

Zones of jasperoid have recently been discovered on the Jackson's Arm property near to lakes with highly anomalous gold values in the lake sediments. These areas are unexplored.

Kermode's target is a Carlin-type deposit in the calcareous platform sediments overlying the known gold zones in the granites. Carlin-deposits range from small (less than 100,000 tonnes) to very large (greater than 200,000,000 tonnes) and vary in grade from 1 to 20 g/t Au. The Carlin deposit itself is reported to contain 20 million tonnes grading 11.4 g/t Au. The Carlin district is one of the most significant gold producing areas in the United States and the 50 millionth ounce of gold was produced from the Carlin trend, Nevada on 16 May 2002.

[ Kermode Newfoundland Property ] [Exploration Plans ]

Exploration Plans

Planned Work on Jackson's Arm Project Summer/Fall 2002

The planned work has two thrusts:

  1. Compilation of previous work. Relogging and resampling of old drillcore.
  2. Prospecting, geological mapping and soil/till geochemistry of unexplored parts of the property
Previous work on the property included 63 drillholes, totalling 8,752 metres. All of this drillcore is preserved in the Newfoundland Government's core storage facility about 2 hours from the property.

Examination of the drillhole logs and sections assayed leads us to believe that considerable new information will be obtained by re-examining the core and assaying sections not previously assayed because they were thought to represent unfavourable rocks.

The focus of most of the old drilling was gold in granites but there is also evidence that the gold zones in the granites cut across the different rock types into the limestones. With more detailed work this trend should be tracked into the sediments and point to areas to focus future work. This provides us with solid evidence of gold occurrences in the overlying sediments in a Carlin-type geological environment.

We also plan to examine the known gold zones and calculate a mineral resource if the data is adequate.

There is a 17 kilometre strike length of essentially unexplored carbonate rocks on the Jackson's Arm property. If a Carlin-type deposit is present on the property this is where it will be. We plan to do initial exploration of these rocks by prospecting, geological mapping and soil and/or till geochemical sampling. This is basic, relatively quick, exploration with the potential to bring excellent results.

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