PROPERTY VALUATION FOR THE BLUE HORIZON …sulaironandgold.com/wp-content/uploads/2014/07/SRK-Blue-Horizon-Property-valuation-21...Property Valuation for the Blue Horizon Exploration

Report Prepared by

SRK Exploration Services Ltd

ES 7536

PROPERTY VALUATION FOR THE BLUE HORIZON EXPLORATION LICENCE

(EL54/2011), SIERRA LEONE

Prepared For

Sula Iron & Gold plc

190 High Street Tonbridge

Kent TN9 1BE

Report Author Report Reviewer

Gareth O‟Donovan William Kellaway

Blue Horizon Property Valuation

Final_Blue Horizon Property valuation update 2014_v8_DJM.docx January 2014 Page 2 of 30

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© SRK Exploration Services Ltd 2014

SRK ES Legal Entity: SRK Exploration Services Ltd

SRK ES Address:

12 St Andrew‟s Crescent Cardiff

CF10 3DD.

Date: January 2014

Project Number: ES 7536

SRK ES Project Manager: Gareth O‟Donovan Principal Exploration Geologist

Client Legal Entity: Sula Iron & Gold plc

Client Address:

190 High Street Tonbridge

Kent TN9 1BE

mailto:[email protected]

Blue Horizon Property Valuation – Executive Summary


Executive Summary

The Blue Horizon (SL) Ltd licence EL54/2011 covers an area of 153 km2 and is located in the

central part of the Sula Mountains of Sierra Leone; an elongated chain some 120 km long by

16 km wide which forms an open, northerly-trending arc and contains Sierra Leone`s richest

and most historic gold fields.

The geology of the area consists of a broad north-easterly trending band of ultramafic rocks,

juxtaposed against amphibolites, which contain horizons of banded iron formation to the

southeast. An intrusive granite occurs in the south-eastern corner of the licence and a

northeast-trending shear brings metasediments (possibly tectonic schists) into contact with

syn-kinematic granites.

Gold

The area has numerous artisanal gold workings lying within a prominent structure

approximately 9 km long and 5 km wide, refered to previously as the Yanfarina-Dalakuru-

Sende (YDS) gold zone. Historical trenching in this zone identified a series of northwest

trending high grade tourmaline and gold-bearing narrow veins (stockworks) of 0.1-1 m width

and 75 m of strike length. Grades range from 0.2 to 108 g/t Au and with an average grade of

5.97 g/t Au.

Drilling in 1969 reportedly intersected an 85 m wide zone of sulphide mineralization (2-3 %

sulphides). Two geophysical anomalies were also reportedly identified at that time, coincident

with the geochemical anomaly at a depth 45-60 m continuing for over 2,000 m to the north.

Further drilling in 2008, also intersected high grade zones of massive sulphides, and ground

geophysical IP surveys conducted in 2010 to follow-up the results of the 2008, reportedly

generated several other new targets.

In excess of 5,000 m core diamond drilling was completed by previous owners and though

detailed results of this drilling have not been located, significant intersections have been

commented on in various reports and SRK ES has viewed some of the old cores.

Several other deposits have been located and delineated in the region since the start of

exploration at Dalakuru. SRK ES considers the exploration model of mesothermal shear zone

gold to be a reasonable model and the target of 250,000 – 400,000 ounces of gold to be an

achievable target.

Iron

During the production of the CPR for the AIM listing documents, airborne magnetic data

published by AML, who own the licence to the south, revealed the extension of a magnetic

anomaly, thought to be a BIF, into the Sula Licence. Thus, in early 2012 Sula conducted a

ground magnetic survey over the main BIF target zone in the SW corner of the licence area.

This work confirmed the prescence of a BIF and the exploration model for the Iron was a

target of 500Mt of BIF or above.

In April 2013 Sula conducted a reconnaissance drilling campaign over the BIF target area

defined by the ground magnetic survey, this programme totalled 2000 m from 9 holes, clearly

outlining a robust zone of BIF extending up to 3km to a depth of 150 m plus and with a

thickness exceeding 100 m.

Blue Horizon Property Valuation – Executive Summary


The scale of the first phase drilling was constrained by budget. SRK ES has outlined a 2nd

phase of drilling designed to cover the remaining strike extent of the Target BIF zone and be

sufficient to allow a Resource Estimate to be calculated. In addition to this a short hole

programme has been designed to delineate a resource for the potential of DSO.

Blue Horizon Property Valuation – Table of Contents


Table of Contents

1 Introduction 7 1.1 Disclaimer 8

2 Sierra Leone 8 2.1 Mining Law in Sierra Leone 8 2.2 Royalties, Back-in rights, payments & Required Permits 8 2.3 Environmental Liabilities 12

3 Accessibility of the property 12

4 History of exploration 12 4.1 Gold exploration 12 4.2 Iron Exploration 13

5 Geology of Sierra Leone 17 5.1 Regional Geology 18

5.1.1 The Sula-Kangari Greenstone Belt 19 5.1.2 Structural Controls on the Sula-Kangari Greenstone Belt 21

6 Valuation 24 6.1 Approach 24 6.2 Project Status 24 6.3 Company Fit 25 6.4 Country Risk 25 6.5 Minimum Values 25 6.6 Potential Values 26 6.7 Technical Value 27

7 References 28

Blue Horizon Property Valuation – Table of Contents


List of Figures

Figure 2-1 Previously published map of property with the YDS geochemical anomaly illustrated. The dashed line illustrates the northern EXPL licence and the solid line the “wrap around” EPL licence subject of this report. 11

Figure 4-1 locality plan of drill holes and geology of the main BIF zone, SIG 16 Figure 4-2 Cross section through the Main BIF target, SIG 16 Figure 5-1 Sierra Leone Regional Geology. Location of the Blue Horizon licence

area in solid black line. 17 Figure 5-2 Geology of the Sula–Kangari Greenstone Belt 20 Figure 5-3 Airborne Total Field Magnetic Survey at 100m Resolution (SLDC,

Tonkolili Iron Ore Region Preliminary Geophysical Investigation, 2006). 21 Figure 5-4 Geology and Structural Interpretation of SIG licence area and the YDS

and Dalakuru Au anomaly. 23

List of Tables

Table 2-1 Exploration and Mining Licence types issued by the Sierra Leone Government and Minerals Advisory Board 9

Table 4-1 Table of the Best Drilling Intersections 13 Table 4-2 Selected Channel sample results 14 Table 4-3 Phase I drilling best intersections** 15

SRK Exploration Services Registered Address:

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NP9 4PG

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United Kingdom

15th January 2014

Property Valuation for the Blue Horizon Exploration

Licence (EL54/2011)

1 Introduction

SRK Exploration Services Ltd (SRK ES) has been commissioned by Mr. N. Warrell, CEO of

Sula Iron and Gold Ltd (SIG) to provide an updated technical valuation of the company‟s

exploration assets in Sierra Leone, namely Licence EL54/2011 held by a 100% subsidiary

company, Blue Horizon (SL) Ltd. The licence was previously reviewed in February 2012 and a

technical valuation was provided at that time. Since then SIG has conducted a drilling

campaign over the main iron target and undertaken some preliminary ground work over

several of the gold targets.

This report summarises the work conducted on the licence which is located in the Sula

Mountain region of Sierra Leone, which wraps around the “Lake Sonfon” mining licence

(Figure 2-1).

The majority of the early work conducted on the licence was the result of a joint venture

agreement between African Aura Mining Inc (AAM) (formerly Mano River Resources Inc) and

Golden Star Ltd. (GSR), under the umbrella of the “Sonfon JV gold project”. The work was

conducted under the EPL licence type which allows for prospecting for specific minerals only,

excluding sub surface work (e.g. drilling) unless stipulated in the agreement.

SRK ES has reviewed all of the historical data provided by Sula as well as public domain data.

In addition, SRK ES is familiar with Sierra Leone and has visited the property on a number of

occasions. SRK ES also designed and managed the collection of ground geophysical data

over the Iron and gold targets, designed and managed the drilling programme conducted on

the iron targets in the summer of 2013 and designed and managed the geochemical soil

sampling programme conducted in November 2013.

This valuation supersedes the valuation report written in February 2012 by SRK ES.

SRK Exploration Services Ltd 12 St Andrews Crescent, Cardiff, United Kingdom CF10 3DD

e-mail: [email protected]

URL: www.srkexploration.com

Tel: + 44 (0)29 20 233 233 Fax: + 44 (0)29 20 233 211

mailto:[email protected]

Blue Horizon Property Valuation – Main Report


1.1 Disclaimer

The historical data presented in this report is a summary of the current available information

for the project and SRK ES has not been able to verify any of this information. Drill; cores from

previous drilling is available on site but in a very poor condition and thus of limited quantitative

value. SRK ES is responsible for the geological field work conducted on site between April

2013 and December 2013 and thus happy to accept responsibility for the data generated by

that work.

2 Sierra Leone

Sierra Leone is located in West Africa bordering the North Atlantic, between Guinea and

Liberia. The democracy is slowly being re-established after the civil war which lasted from

1991 to 2002. At the end of 2005 the military took over full responsibility for security, following

the departure of UN peacekeepers, and are increasingly developing as a guarantor of the

countries stability.

The new government`s priorities include furthering development, creating jobs and stamping

out endemic corruption. The legal system is based on English law and customary laws

indigenous to local tribes.

2.1 Mining Law in Sierra Leone

Mining and exploration in Sierra Leone is regulated by the Mines and Minerals Act of 2009,

which entirely replaced the Act of 1994, including major changes to how the sector is to be

governed. The new Act is more comprehensive and has a more balanced view between the

interests of investors and communities.

The Ministry of Mineral Resources (MMR) is responsible for the administration, licence

issuing, field monitoring and enforcement of Mineral Rights. Records are maintained at the

ministry in Freetown and in local, district level mining offices. The MMR includes two technical

divisions; the Mines Division and the Geological Survey Division.

The Mines Division administers the provisions of the Mines and Mineral Act, which include the

issue of all Mineral Rights upon the recommendation of the Mineral Advisory Board (MAB),

and the administration and supervision of all activities under these rights. The Geological

Survey Division provides advice to the MMR on all geological matters. It also compiles,

publishes and disseminates data and information concerning the geology and mineral

resources of Sierra Leone and supervises prospecting and mineral exploration activities in the

country.

There are five types of Mineral Rights in Sierra Leone, three of which are relevant to foreign

investors seeking to explore and/or develop mines (Table 2-1).

2.2 Royalties, Back-in rights, payments & Required Permits

The Mining Lease is subject to a four percent government royalty on revenue and a three

percent Export Duty is payable to the Government Gold and Diamond Office (GGDO). In the

case of gold, the fee is related to gold purity.



Table 2-1 Exploration and Mining Licence types issued by the Sierra Leone Government and Minerals Advisory Board

MAB = Minerals Advisory Board of the Ministry of Mineral Resources

Mineral Licence Type Code Granting Body Duration Renewal Area

Reconnaissance Licence RL Minister 1 year 1 year 10,000 sq km

Exploration Licence EL Minister on MAB*

advice 4 years

3 years with the option for another 2 years

250 sq km

Artisanal Mining Licence AML Director of Mines and

Paramount Chief 1 year

Further three times each not exceeding a period of a year

0.5 hectare

Small-Scale Mining Licence SSML Minister on MAB

advice 3 years

Renewable upon application if approved by MAB

1 sq km

Large-Scale Mining Licence LSML Minister on MAB

advice 25 years Further 15 year periods at a time 250 sq km



Table 2-1 cont:

Code Surrender Obligation

Expenditure Commitment Comment

RL Nil

As indicated in the approved costed work programme submitted by the

applicant and indicated in the licence

This allows for the prospecting of specific mineral(s), only by the holder of the licence within the licence boundaries. The licences are non-exclusive with sub-surface work including drilling and excavation not being permitted. The holder must submit a confidential annual report to

the Director of Mines.

EL 50% on renewal

As indicated in the approved costed work programme submitted by the

applicant and indicated in the licence

This allows for the prospecting of any mineral within the licence area, including drilling and excavations. The removal of specimens and samples for analysis are permitted as well as the

instalment of temporary buildings. The holder must submit a confidential semi-annual to annual report for the Director of Mines and the Director of Geological Survey.

AML Nil No expenditure commitments

Restricted to Sierra Leoneans nationals, co-operative societies, corporate bodies, joint ventures and partnerships with majority Sierra Leonean interest in areas specified and

declared for artisanal mining. Allows mining of specified mineral(s) by the holder within the area covered by the licence

SSML Nil No expenditure commitments

May be held by wholly-owned Sierra Leone companies registered in Sierra Leone, or by a corporate body that is incorporated in Sierra Leone with a minimum of 25% Sierra Leone share

holding, preferably held by the community in which the proposed mining area is located. Required to register with the Director of Mines for approval to participate in small-scale mining

of precious minerals and pay the specified fees

LSML Nil As specified in the lease This allows for mine development and exploration of specified mineral(s) by the holder in the

area covered by the lease. Requires an Environmental Impact Assessment and for the holder to enter into a binding Community Development Agreement with affected communities



Figure 2-1 Previously published map of property with the YDS geochemical anomaly illustrated. The dashed line illustrates the northern EXPL licence and the solid line the “wrap around” EPL licence subject of this report.



2.3 Environmental Liabilities

Legislation governing environmental and social regulations are found as Acts from various

government institutions and ministries. Environmental regulations are governed by the

Environmental Protection Agency under the Environmental Protection Agency Act, 2008.

3 Accessibility of the property

Access to the property from the country‟s capital, Freetown is via a 300 km tarred road

followed by a 50 km track via four wheeled drive vehicle taking between 7 and 8 hours. The

Blue Horizon licence is located in mountainous terrain with elevations ranging from 100 to

700 m a.m.s.l. Vegetation consists of seasonal savannah type forest, which in generally is

fairly open and passable in lowland areas. In upland areas, vegetation consists of relatively

open forest and grasslands.

4 History of exploration

Prior to SIG historical work in the licence area has predominantly focussed on the gold

potential, and all work on the iron ore potential has been conducted since 2012. The current

geological knowledge is largely provided by the technical reports of ACA Howe (1989), the

technical report by Carl G. Verly (2005) and Mackay & Schnellman (1994) and research done

by Davies, Friedrich and Wiechowski (1988).

4.1 Gold exploration

The gold bearing alluvials within the Property are considered to be derived from primary

mineralization within the Sula Mountains Greenstone Belt and form part of a much larger gold

field which was discovered in 1926 and studied by the Geological Survey of Sierra Leone

between 1926 and 1930. A comprehensive drainage survey undertaken by the Geological

Survey in the 1930`s demonstrated the presence of alluvial gold in most of the streams which

drains the area around Lake Sonfon. Alluvial gold has been worked extensively by local

miners in the area for some time. Alluvial gold within the region has an angular to hackley

characteristic indicating a close proximity to its source. Small flecks of gold have also been

seen within quartz clasts associated with mafic host material.

Wilson and Marmo conducted a number of field visits covering the Sula Mountains in the late

1950‟s aimed at prospecting for primary gold and geological mapping funded by the

Geological Survey of Sierra Leone. They published their finding in “Geomorphology and

Mineral Resources of the Sula Mountains” (Wilson and Marmo, 1958) which discussed the

presence of gold bearing quartz veins near the village of Dalakuru within the licence area.

In the 1960`s drilling of a geochemical anomaly reportedly intersected a 85 m wide zone of

sulphide mineralization (2-3 % sulphides). Two geophysical anomalies (Zone A and B) were

also reportedly identified at that time, with Zone A coincident with the geochemical anomaly at

a depth 45-60 m continuing for over 2,000 m to the north (Patrick 1998b).

In the early 1990`s Dr. L. Wright conducted Landsat imagery mapping as part of the target

selection and licence application procedures for the Sonfon licence areas on behalf of AAM

subsidiary, Golden Leo Resources (GLR).

Golden Leo Resources BVI (“GLR”) is an entity which was formed as a joint venture between

Golden Star Resources (TSX) and Mano River Resources (BVI). They held the exploration

licence EXPL 07/2007 between 2007 and 2011, which covered the same area as the current



licence. Prior to 2007 the licence was held by Mano River Resources a subsidiary of Aureus

Mining Plc (AIM & TSX). From 2002 Mano River Resources had been the joint venture partner

with Golden Prospect PLC who held the Lake Sonfon Licence, which is to the immediate north

and contiguous with the current Blue Horizon Property.

In 2004 GLR undertook a regional soil sampling programme which covered the entirety of the

licence with samples taken along an 800 m x 100 m grid and analysed for trace gold at ppb

levels via BLEG methods. This produced a number of target anomalies some of which were

investigated by an infill regolith soil sampling follow up programme along a 200 m x 50 m grid

in 2006.

This infill soil sampling appears to have been accompanied by the re-sampling of the trenches

dug by Wilson and Marmo in 1958, and it is this data that GLR used to delineate the Yafarina-

Dalakuru-Sende (YDS) NNW-SSE trending gold target zone. (Figure 2-1).

Following the results of the regolith sampling programmes a RAB drilling programme was

established and ran from late 2007 to 2008. A total of 388 holes were completed along fences

spaced every 200 m with holes drilled every 25 m on an azimuth of 287° at an inclination of -

50°.

Diamond core drilling commenced in 2008, consisting of 14 holes targeting areas defined from

previous regolith and RAB sampling. GLR reported intersections of high grade zones

associated with massive sulphides and magnetite related to quartz veining. This was followed

by ground geophysical IP surveys to generate more targets for the diamond drilling in 2010.

Diamond drilling on the licence totalled 34 holes, with the best intersections shown in Table

4-1. Sadly most of the original data from this work is not available to SIG.

Table 4-1 Table of the Best Drilling Intersections

Hole ID Programme Inclination

and Azimuth From (m) To (m) Grade (g/t)

Interval (m)

SDD04 2008 -50 to 287° 83.14 85.1 8.76 2

SDD04 2008 -50 to 287° 89.4 98.1 10.46 8.72

Including 21.39 3.45

SDD13 2008 -50 to 287° 31.25 37.7 1.72 6.4

SDD16 2010 -50 to 287° 170 173 11.68 1.55

SDD33 2010 -50 to 107° 161.37 170 6.63 9.03

Including 15.98 3.34

In 2011, Blue Horizon acquired the licence and Sula Iron & Gold listed on AIM as 100% owner

of Blue Horizon. Legal issues with GS delayed field work for some time, however these

appear to be resolved now.

In early 2013 Sula engaged Exploration Alliance Ltd to purchase detailed satellite imagery and

to interpret that data with respect to the licences prospectivity for gold.

In November 2013 SRK ES conducted a ground magnetic survey and geochemical soil

sampling over selected gold targets to the NW of Dalakuru. Soil samples were screened

using a field XRF reader and selected samples have been submitted for chemical analysis

with ALS. Results from these assays are expected in April 2014.

4.2 Iron Exploration

During the production of the CPR for the AIM listing documents, airborne magnetic data

published by AML, who own the licence to the south, revealed the extension of a magnetic



anomaly, thought to be a BIF, into the Sula Licence.

In early 2012 Sula engaged SRK ES to conduct a ground magnetic survey over the main BIF

target zone in the SW corner of the licence area. The resulting magnetic map and geological

mapping confirmed the existence of the anomaly and its association with a 3km long BIF. A

small number of channel samples were collected during this phase, results from these are

shown below in Table 4-2.

Table 4-2 Selected Channel sample results

Channel ID

From To Interval Fe (%) Al2O3 (%) P (%) SiO2 (%)

BHC00001 0.00 18.00 18.00 51.83 13.13 0.10 1.23

BHC00001* 20.00 22.00 2.00 60.50 5.90 0.18 1.30

BHC00002 0.00 22.00 22.00 56.22 8.64 0.12 1.55

* no sample collected between 18 and 20 metres due to break in outcrop

In April 2013 Sula engaged SRK ES to design and manage a reconnaissance drilling

campaign over the BIF target area defined by the ground magnetic survey, this programme

totalled 2000 m from 9 holes. The results of this drilling were published in a report in

September 2013 and summarised below in Table 4-3.

The exploration model for the iron was a target of 500Mt of BIF or above and thus far the

drilling has supported this model. See Figure 4-1 and Figure 4-2.

The scale of the first phase drilling was constrained by budget, however the results clearly

outline a robust zone of BIF extending up to 3km to a depth of 150 m or greater with a

thickness exceeding 100 m. SRK ES has outlined a drilling programme designed to cover the

remaining strike extent of the Target BIF zone and be sufficient to allow a Resource Estimate

to be calculated. In addition to this a short hole programme has been designed to delineate a

resource for the potential of DSO.



Table 4-3 Phase I drilling best intersections**

HOLE_ID FROM

(m)

TO

(m)

INTERVAL

(m)

TRUE

WIDTH*

(m)

Fe

(%)

P

(%)

SiO2

(%)

Al2O3

(%)

Comment

BHDD001 0.00 84.50 84.50 73.18 43.66 0.06 12.40 14.48 Oxidised BIF

BHDD001 129.60 163.30 33.70 29.19 32.09 0.04 42.53 3.68 BIF

BHDD002 75.75 92.60 16.85 14.59 40.30 0.09 22.15 10.33 BIF

BHDD002 98.40 213.65 115.25 99.81 31.17 0.04 43.04 3.40 BIF with Amphibolite

BHDD002 249.70 272.20 22.50 19.49 31.27 0.04 43.85 3.97 BIF



BHDD003 57.15 102.55 45.40 30.96 38.89 0.04 34.94 4.13 BIF

BHDD004 88.65 120.17 31.52 27.30 35.97 0.05 40.95 2.81 BIF

BHDD004 150.10 168.50 18.40 15.93 37.43 0.04 39.28 1.22 BIF

BHDD004 176.80 199.75 22.95 19.88 34.82 0.04 41.69 2.51 BIF

BHDD005 49.00 62.10 13.10 11.10 54.41 0.08 8.14 6.36 Oxidised BIF Zone

BHDD005 80.35 109.50 29.15 24.70 32.13 0.06 43.42 5.59 BIF

BHDD006 51.65 132.95 81.30 69.70 37.28 0.06 32.66 6.13 BIF

BHDD006 141.00 155.95 14.95 12.81 37.84 0.04 38.97 1.03 BIF

BHDD006 208.75 225.00 16.25 13.29 36.70 0.04 40.23 1.11 BIF

BHDD006 227.00 230.55 3.55 3.04 38.32 0.05 39.21 0.71 BIF

BHDD007 11.00 45.30 34.30 29.70 52.25 0.07 4.75 10.72 BIF

BHDD007 48.95 65.80 16.85 14.59 55.54 0.07 8.13 4.18 BIF

BHDD008 1.28 11.90 10.62 9.19 36.52 0.14 6.91 24.14 Surface Material

BHDD008 25.30 39.00 13.70 1.86 42.08 0.15 15.48 13.48 BIF

BHDD008 42.80 47.10 4.30 3.72 41.59 0.06 26.27 6.69 BIF




BHDD009 86.70 118.50 31.80 27.54 32.04 0.05 25.99 6.56 BIF

*calculated using alpha angle intersection trigonometry, which assumes the units to be constantly dipping at 70o NW and no hole deviation.

**At this stage SRK ES considers the use of assigning a 0% Fe grade to the areas of core loss to be acceptable rather than inferring a distribution of

constant grade throughout the areas of no or poor core recovery. This will be further tested during Phase II and further exploration



Figure 4-1 locality plan of drill holes and geology of the main BIF zone, SIG

Figure 4-2 Cross section through the Main BIF target, SIG



5 Geology of Sierra Leone

Sierra Leone has not been geologically mapped in great detail due to the thick laterite cover

as well as dense vegetation, high rainfall, hot climate and poor internal communications. The

work presented here is based on the geological work of the Geological Survey of Sierra Leone

and updated by more recent work such as Umeji (1983) and the Geology and Mineral

Resources of West Africa by Wright et al. (1985), and references therein.

Sierra Leone is divided into distinct geological provinces (Figure 5-1). The Freetown

Peninsular is formed of an ultramafic intrusion, east of this is the Coastal Basin which forms a

50 km coastal strip that comprises marine and estuarine sediments of Cenozoic and

Quaternary to Recent age. The Western Mobile Zone is composed of the Kasila Group,

metamorphic supra crustal rocks. The Rokel River Group that lies unconformably on Archean

granites, deposited in a late Precambrian basin (500 Ma) (Williams and Culver, 1988). The

eastern two-thirds of Sierra Leone is underlain by rocks of Precambrian age (Archean and

Proterozoic) composed of Archean granite-greenstone terrain (Williams & Culver, 1988)

referred to as the Eastern Craton.

The greenstone belt rocks have been folded and both the basement granite and the

greenstone sequence have been crosscut by syn-kinematic and late-kinematic (younger)

granite and pegmatite, and deformed by later shearing. They are seen in the Mandiri River,

where roads surfaces are washed away or in isolated outcrops such as at the Gbnikoro

Village.

Figure 5-1 Sierra Leone Regional Geology. Location of the Blue Horizon licence area in solid black line.



5.1 Regional Geology

The Blue Horizon property is located within the northernmost part limits of the Sula Mountains

(Figure 5-2) which are composed of a mixture of greenstone volcano-sedimentary

metamorphosed units (2700-2600Ma) (Hurley et al 1971) of the Sula-Kangari Greenstone Belt

as well as the Late and Syn-kinematic granites.

The Sula-Kangari Greenstone Belt has undergone two main periods of deformation related to

major orogenic cycles; the Leonean episode (>2700Ma) and the younger Liberian episode

(~2700Ma) (Macfarlane et al 1981).

The Leonean orogenic episode can be split into two major events, the initial deformation (D1),

creating folding structures with E-W trends with shallow plunging axial planes, and a late-

kinematic granite emplacement. This was known to occur between 2950–3200Ma. The

sedimentary elements of the Kumbi Group were deposited between the Leonean and Liberian

events, as well as various mafic and ultramafic intrusions. The geology which constitute the

Sula Mountains are interpreted by Macfarlane et al (1981) to have been initiated by a magma

source underlying the terrain, tapping fractures orientated parallel to the present axis which

sourced the intrusions leading to minor extension. This created a basin, which combined with

the diminished vulcanicity, lead to infilling by sediments (the Kumbi Supergroup), including the

Banded Iron Formation which make up the Tonkolili deposit above the Leonean basement.

During the time between the two episodes, the Leonean granites were emplaced. This group

is also known as the syn-kinematic granite (Wilson and Marmo 1958) as they contain fabrics

from the later Liberian episode. These granites are thought to not be related to the

mineralisation, trending NE.

The Liberian episode can be dated at ca. 2700Ma (Umeji 1982) and can also be split into two

major events; the deformation and late granite emplacement. This deformation event created

folding with NNW to NE orientations and fabrics trending N-S (Macfarlane et al 1981). The

effect of this orogenic event can be seen to be very complicated throughout Sierra Leone, and

is largely due to the in-homogeneity in intensity of the deformation. The Blue Horizon licence

lies within a domain of moderate-high intensity, in which new fabrics become superimposed

upon the existing fabrics of the Leonean, creating multiple deformation zones, Class 1C and

Class 3 folding (Ramsay 1967 in Macfarlane et al 1981). It was the Liberian episode which

created the amphibolite facies, metamorphosing the sediments and igneous units of the Kumbi

Supergroup to create the Sula-Kangari Schist Belt.

The granite emplacement occurred during the late Liberian episode, forming within fabric-free

domains (Macfarlane et al 1981), including some pegmatites. It is this granite which Wilson

and Marmo (1958) name the late-kinematic granites, forming along the contacts of the

greenstone-basement contact, along areas of high deformation and shearing. The late-

kinematic granites are thought to be related to the mineralisation within the Sula Mountains

(Macfarlane et al 1981, Wilson and Marmo, 1958).

The supracrustal rocks of Sierra Leone comprise several greenstone belts (or belt relics)

denominated the Sula-Kangari belt (comprising the Sula Mountains and the Kangari Hills)

(Figure 5-2) the Kambui, Nimini and Giori Hills; the Marampa Group; and the two small

Serekolia and Sankarama greenstone belts in the northeast. The greenstone sequence

comprises abundant basal ultramafic lavas and intrusive rocks, overlain by mafic and felsic

volcanic rocks and younger clastic sedimentary rocks. The belts were metamorphosed from

upper greenschist to amphibolite facies grade, increasing to granulite facies in south-western

Sierra Leone and towards the eastern limit of the craton.

The greenstone belts are the principal host of the primary gold mineralisation of the country.



The Sula-Kangari Greenstone Belt 5.1.1

Rocks of the Sula-Kangari Greenstone Belt comprise the Kambui Group which is divided into

three sub-groups; a lower ultrabasic, a middle basic and an upper meta-sedimentary group. In

the northern Sula-Kangari belt the lower ultrabasic subgroup is typically composed of chlorite

talc schists or tremolite, anthophyllite schists and serpentinites interbedded with amphibolite

and more rarely with metasediments. The middle basic group is almost entirely composed of

amphibolites of olivine-tholeiitic composition which were originally pillow and massive lavas,

and intrusive sills.

The upper sedimentary group of middle amphibolite metamorphic grade is mostly composed

of greywacke, turbidite and quartzite with minor meta-chert and metamorphosed banded iron

formation rocks. These units have been heavily deformed during the two thermo-tectonic

events, creating tight folded structures with vertical to near vertical dips with a NE-SW

orientation.

The greenstone belt rocks have been folded and both the basement granite and the

greenstone sequence have been crosscut by syn-kinematic and late-kinematic (younger)

granites and pegmatite, thought to be deformed by later shearing although field evidence of

the latter has not been seen by SRK ES. The Granites can be seen on the east access road

from Kondembaia, showing vertical minor quartz veining trending NNE-SSW (025/90°).

The geological map (Figure 5-2 & Figure 5-4 shows a BIF unit coming up from the SW into the

licence area trending NE-SW. Directly to the south of the property is the Tonkolili iron ore

deposit which began mining the 12.8 Bt JORC compliant iron BIF resource in Q4 2011. Due to

the unit‟s highly magnetic properties, an airborne magnetic survey was flown to identify its

location (Figure 5-3). The results from the survey show the magnetic anomalies to be

en echelon tabular structures trending NE-SW conforming to the regional deformation (Figure

5-3). The most northerly anomaly can be seen to extend into the licence from the Tonkolili

property, matching the pattern of the BIF unit identified on the geological map (Figure 5-4).



Figure 5-2 Geology of the Sula–Kangari Greenstone Belt



Figure 5-3 Airborne Total Field Magnetic Survey at 100m Resolution (SLDC, Tonkolili Iron Ore Region Preliminary Geophysical Investigation, 2006).

Structural Controls on the Sula-Kangari Greenstone Belt 5.1.2

According to Foster and Piper (1993), gold mineralisation in Sierra Leone is associated with

structurally-controlled quartz-sulphide veins and sulphide-rich shear zones. The Sula-Kangari

greenstone belt is a location of intense deformation. Thrusting lead to detachment horizons,

brittle failure and the generation of dilational zones which hosted the gold-bearing fluids,

significant orebodies are confined to these zones. Reverse dip-slip tectonism superimposed

on earlier strike-slip deformation is noted to be important in the activation and promotion of

fluid-flow through shear zones.

Major tectonic lineaments in Sierra Leone, can be clearly observed in Archaean basement

characterised by complex fracture patterns. Linear features are related to lines of brittle

fracturing, faulting, jointing, or veining and possibly to shear zones.

Satellite images comprising a Landsat (ETM+ Pan Mosaic) N_29_05_2000 false colour image;

SPOT simulated natural colour and SPOT 321 red-green-blue images; and 90 m resolution

SRTM (Shuttle Radar Topography Mission) Digital Elevation Model (DEM) data were



interpreted by SRK ES, (Kellaway and Nash, 2011).

Drainage patterns including rivers, dry creeks and breaks of slope are clearly visible in the

SPOT survey images and SRTM topographic image. Three principal orientations of lineament

can be interpreted from the data, i) NE-SW, ii) NW-SE, and iii) N-S.

To the west of the Property a major N-S trending lineament causes the Sula-Kangari

greenstone belt to be deflected and folded from a northwest-southeast orientation to north-

south. This is interpreted to be a Leonean (~3000Ma) structure, reactivated during east-west

Cretaceous (100 Ma) Atlantic opening. This north-south trend of structures is observed within

the Property area.

It is probable that the greenstone belt orientation has been controlled to a large extent by a

NE-SW shear orientation. Major shear zones trending NE-SW to ENE-WSW appear to offset

the greenstone belt in a dextral sense south of the Property area. These shear zones are

interpreted as brittle Archaean structures, reactivated during the Rokelide Orogeny (950-

550Ma). Williams (1978) describes a conjugate set of Archaean brittle structures, i.e. dextral

NNE-SSW and sinistral ENE-WSW faults with small displacement. These indicate a principal

compressional stress axis orientated NE-SW during the Archaean collision event. The major

N-S fault to the west caused buttressing of the shear zones.

It is possible that the ENE-WSW trending shear zone south of the Property area controls the

limit of BIF occurrence within the belt. This assumption is supported by the lack of mapped BIF

northeast of this zone towards Lake Sonfon (Figure 5-4). This may have a control on the type

of primary gold mineralisation found in the Property area. BIF and chert units are important in

gold mineralisation as deformation and fluid flow are often focused along the lithological

contacts of rocks of different competence.

The northwest trending linear structures interpreted from satellite and DEM as faults are

relatively straight lines and are not strongly affected by topography, suggesting they are steep

to sub vertical in nature. These NW-SE faults are interpreted as Leone an (~3000Ma)

structures, slightly reactivated. Most interpreted faults are based on small drainage features;

however several individual faults define major breaks of slope, indicating they have strongly

influenced the geomorphological development of the Sula Mountain range. A major structure

~50 km long clearly intersects the Property in the south-western corner.

Significant primary lode gold deposits are commonly located within a few kilometres of major

shear-zones, but are often hosted by related second-order and even third-order structures.

The „YDS‟ gold anomaly appears to be a NNW-SSE trending second order structure

associated with and to the south of the major NW-SE fault (Figure 2-1 & Figure 5-4).



Figure 5-4 Geology and Structural Interpretation of SIG licence area and the YDS and Dalakuru Au anomaly.



6 Valuation

It is generally accepted in the exploration industry that the valuation of exploration properties is

a subjective process and is greatly influenced by the prevailing market conditions and to some

extent the experience and qualifications of the person conducting the exploration. The

observations, comments and results of technical analyses presented in this report represent

SRK ES‟ opinions as of the date of this report. SRK ES has visited this specific property on

numerous occasions and is familiar with the region. We are confident that the opinions

presented here are reasonable and that the overall valuation is a fair reflection of the value of

the property in January 2014.We cannot, however, accept any liability, either direct or

consequential, for the validity of historical data accepted in good faith.

6.1 Approach

Based on SRK ES experience, information provided by Sula Gold and information obtained

from the public domain regarding the status of the asset in question, SRK ES has combined

several valuation methods to provide a technical value for the property. SRK ES‟ approach is

firstly to establish a minimum value for the asset based primarily on the historical and

proposed expenditures and discounted to account for our view on the validity of the

expenditure. Secondly, we establish a potential maximum value based on our opinion and

understanding of the geology, the exploration model, the level of work conducted and the

results obtained to date. The third stage is to establish the status of each asset and to allocate

a reasonable technical value based upon the progression from minimum to potential value.

This technical value is the value that SRK ES considers to be reasonable based on the

geology status and potential of the project to succeed, it may not equate to the value that

someone is prepared to pay for the asset, particularly in times of low market sentiment. The

technical value in essence represents the value added by the owners having made their

investment and conducted works on the licence.

SRK ES has not undertaken any legal due diligence study to confirm that all statutory

consents are in force and current. There are several non-geological factors that are taken into

consideration during a valuation of this sort, these are briefly explained below.

6.2 Project Status

For the purposes of this valuation SRK ES considers the progression of an exploration

property to comprise the following five stages:

Grass-roots projects - Desk studies, target generation and very early field work has been

conducted;

Intermediate projects – Follow-up field work, trenching, geological drilling;

Advanced projects - RC or Diamond drilling for geological modelling;

Resource Definition projects - Drilling conducted specifically for resource purposes;

Full feasibility projects - All economic and technical parameters analysed.

As a property progresses from one stage to another the overall range between the minimum

and maximum values should decrease. Whilst the maximum potential value would remain

similar during the early stages the minimum value, being based on exploration expenditure,

would increase. As a property reaches the final stages the maximum potential value is more

likely to change as more quantitative methods tend to be applied to valuing defined resources.



The chances of successfully realising the maximum potential value are increased as the

property progresses with positive results being obtained. During the early stages of exploration

the possibility of success is lower than in latter stages. SRK ES applies an incremental scale

to the probability of attaining the maximum potential value, thus:

Grass-roots projects 0 - 10%,

Intermediate projects 10 - 25%,

Advanced projects 25 - 50%,

Resource Definition projects 50 - 80%,

Full feasibility projects 80 - 100%.

In this case there are two specific exploration targets, the Iron and the Gold. SRK ES

considers that the Iron target falls in the late intermediate to early advanced category and the

Gold targets fall in to the grass-roots category.

6.3 Company Fit

The second factor is an assessment of “company fit” and the relative ability to conduct

exploration within a particular country/environment. This factor attempts to consider the

attractiveness of a particular project for investment or purchase and hence the value that a

third party would be willing to pay for the property.

Mr. Nick Warrell has very significant mining industry experience and has access to suitably

skilled and experienced expatriate and in-country personnel. Additionally, he has established

important links with government and community both locally and in the Republic capital and is

an Honorary Paramount Chief of the Diang Chiefdom and member of the Tribal Council, the

body which represents all the Chiefdoms to the President. SRK ES considers that Sula Iron &

Gold is capable of conducting exploration work in the region without any difficulty.

6.4 Country Risk

The third factor is an assessment of “country risk” whereby the risks involved in conducting

exploration in a particular country are quantified.

Sierra Leone has suffered greatly in the past however recent exploration projects are

progressing well and several projects are in advanced stages of development.

SRK ES does not consider that Sierra Leone poses any specific country risks to the Company.

6.5 Minimum Values

Under normal circumstances establishing minimum values for an exploration property is

generally the simplest part of a valuation exercise. If a property is purchased, then the

purchase price is the minimum value assigned to that property by the purchaser. Historical

exploration expenditure is also used to assist in this process and SRK ES tends to apply 65-

80% of the historical spend as being valid, “in the ground” expenditure. The minimum value

should also include the amount that the current owner intends to expend on exploration during

the next phase of work, as this is a further indication of the perceived value of the property;

again, SRK ES applies a discount factor of 65-80% to this.

All of the above assumes that the interested party is a willing, able and informed body.

In this case SRK ES would suggest a minimum value for the licence of US$ 8 Million.



6.6 Potential Values

Philosophically, the maximum “potential” value of an exploration property may be linked to the

target mineralisation being sought, however all explorers are seeking the best possible deposit

and it is essential to establish a realistic view of the geological potential. SRK ES‟s approach

here is to establish the maximum potential value of the properties based on the currently

available geological data and our understanding of the geological models applied.

SRK ES considers that the highest level of prospectivity for gold is the geological model for

mesothermal gold which could be expected to contain in the region of 250,000 – 400,000 OZ‟s

of gold and may be as large as 40 Mt. Lower prospectivity may be represented by the model

for gold associated with banded iron formation or laterite.

Current resource estimates at the nearby Komahun gold deposit are 3.6 Mt @ 4.69g/t

Indicated and 2.6Mt @ 4.08 g/t Inferred (cut-off 2.4 g/t).(company web site)

Current resource estimates at the Baomahun gold deposit (southern Sula-Kangari greenstone

belt) are 23.3 MT @ 1.62g/t probable reserves and 38.4 MT @ 1.82 g/t Indicated Resources

with additional inferred resources. (company web site)

In addition to the prospectivity for gold SRK ES also consider that the licence area has

excellent potential for an iron ore resource to be delineated, demonstrated by the drilling

conducted in mid-2013, on an extension of the Tonkolili BIF. The existence of BIF

mineralisation over a strike extent exceeding 3km has now been proven, though further drilling

is required to outline a resource. SRK ES is confident that the exploration target of 500 MT is

achievable, and the potential for a DSO component is good. Whilst the potential for iron is

unlikely to be on the same scale as Tonkolili it is still substantial.

It should be noted that the “potential” value for the gold targets has been heavily discounted

due to their stage of development and the potential value of the Iron target has been equally

discounted on the basis of its size. In this case, SRK ES would suggest a maximum potential

value for the combined targets of approximately US$ 200 Million would be a reasonable figure

for the licence area.



6.7 Technical Value

The technical valuation applied here is the value that SRK ES considers to be a fair and

reasonable value for the property, based upon the geological information available and our

view on the status of the assets and their probability of success. In this case, SRK ES has

applied a technical value of US$ 36.7 Million to the property. This does not address the

market sentiment of such investments and as such a potential investor‟s valuation may differ

greatly from the technical valuation as the result of their view of the current status of the

mining industry or the sellers financial position.

For and on behalf of SRK Exploration Services

Gareth O’Donovan

Managing Director

William Kellaway

Director



7 References

A.C.A. Howe International Limited, 1989. Preliminary Assessment of Alluvial Gold

Mineralisation at Lake Sonfon, Republic of Sierra Leone

Davies, T.C., Friedrich, G. and Wiechowski, A., 1989, Geochemistry and mineralogy of

laterites in the Sula Mountains greenstone belt, Lake Sonfon gold district, Sierra Leone

Journal of Geochemical Exploration, 32, 75-98

Foster R.P. and Piper D.P., 1993, Archean lode gold deposits in Africa: Crustal setting,

metallogenesis and cratonisation, Ore Geology Reviews, No 8, pp. 303-347

GSR 2010: Golden Star Resources Annual Report, 2010;

(http://216.139.227.101/interactive/gss2010/)

Macfarlane, A., Crow, M. J., Arthurs, J.W., Wilkinson, A.F. and Aucott, J.W., 1981, The

geology and mineral resources of northern Sierra Leone, Overseas Memoir 7. Institute of

Geological Sciences, Natural Environment Research Council, p 0-99

Mackay & Schnellman, 1994. Independent Appraisal of the gold potential of Special

Exploration Licence No: EXPL9/94 Lake Sonfon Area Sierra Leone

Morel, s. W., 1979, The Geology and Mineral Resources of Sierra Leone, Economic Geology,

v. 74, No 7., pp. 1563-1576

Patrick D. J. 1998b: Geology and Mineral Potential Of Exploration permits Held by Mano

River Resources Limited In Sierra Leone, Report for Mano River Resources Inc.

SLDC Tonkolili Iron Ore Region Preliminary Geophysical Investigation May 2006. Publically

available on African Minerals Website

Umeji, AC 1983. Archean greenstone belts of Sierra Leone with comments on the stratigraphy

and metallogeny. Journal of African Earth Sciences, 1, 1-8

Verley C. G. 2005; Technical report on Mano River Resources Inc gold properties in Liberia,

Sierra Leone and Guinea. For Mano River Resources Inc. Amerlin Exploration Services Ltd.

Williams H.R., 1978, The Archean geology of Sierra Leone, Precambrian Research, Volume 6, Issues 3-

4, pp. 251-268

Williams H.R. and Culver S.J., 1988, Structural terranes and their relationships in Sierra

Leone, Journal of African Earth Sciences, Vol. 7, No. 2, pp. 473—47

Wilson, N.W. & Marmo, V., 1958, Geology, Geomorphology and Mineral Resources of the

Sula Mountains, Geological Survey of Sierra Leone, No. 1

Wright, JB, Hastings DA, Jones, WB, Williams, HR, 1985. Geology and Mineral Resources

of West Africa, George Allen & Unwin, London

Web 1: (http://www.gsr.com/News_Releases/Index.asp. (20/5/2011))

http://216.139.227.101/interactive/gss2010/

http://www.sciencedirect.com/science/journal/03019268

http://www.sciencedirect.com/science?_ob=PublicationURL&_tockey=%23TOC%235932%231978%23999939996%23421505%23FLP%23&_cdi=5932&_pubType=J&view=c&_auth=y&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=03406c0212b2324552fbe4da260e8d2c

http://www.sciencedirect.com/science?_ob=PublicationURL&_tockey=%23TOC%235932%231978%23999939996%23421505%23FLP%23&_cdi=5932&_pubType=J&view=c&_auth=y&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=03406c0212b2324552fbe4da260e8d2c

http://www.gsr.com/News_Releases/Index.asp



EAL, 2013, Blue Horizon Exploration Licence – Reconnaissance and Work Program design,

Exploration Alliance Limited

EAL, 2013, Reconnaissance and work programme design, Blue Horizon exploration Licence

Diang Chiefdom, Sierra Leone, Exploration Alliance Limited

EAL, 2013, Final Satellite Data Interpretation, Blue Horizon Exploration Licence, Sierra

Leone, Exploration Alliance Limited

EAL, 2012, Blue Horizon Exploration Licence – Notes on gold potential, Exploration Alliance

Limited

Hurley, P.M., Leo, G.W., White, R.W. and Fairbairn, H.W. 1971. Liberian Age Province

(about 2700 m.y.) and adjacent Provinces in Liberia and Sierra. Geol. Soc. Am. Bull. 82.

SRK ES, 2012, Competent person’s report (CPR) on exploration licence no. El 54/2011 for

Sula Iron & Gold Plc, Sierra Leone’

SRK ES, 2012, Property valuation for Sula Gold Plc for the Blue Horizon Exploration Licence

(El54/2011), Sierra Leone’

SRK ES, 2012, ‘Ground magnetic survey over the south western part of the Blue Horizon

exploration property, Sierra Leone’

Tunningley, A.T., 2012, Blue Horizon Exploration Licence – Field Review and Work

Program design, Exploration Alliance Limited



SRK Exploration Services Report Distribution Record

Report No. ES7536

Copy No. Final

Name/Title Company Copy Date Authorised by

Mr Nick Warrell Sula Iron & Gold Draft 16/01/2014 O’Donovan

Mr Nick Warrell Sula Iron & Gold Final 20/1/2014 O’Donovan

Approval Signature:

This report is protected by copyright vested in SRK Exploration Services Ltd. It may not be

reproduced or transmitted in any form or by any means whatsoever to any person without the written

permission of the copyright holder, SRK ES

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