Ann: Steam Engine Gold Deposit - Commencement of Drilling, page-15

Hi Reon - don't know much about these guys but of course I do wish them luck. At Steam Engine they currently have a small, inferred lode gold resource at 90,000oz. At a grade of 2.3g/t, in a narrow lode system, it looks both uneconomic and quite risky but that's just my view. To make it economic they need to find either more oz or higher grades or preferably both! Their drill program is for 50 shallow holes each approximately 50m deep (2500m total); suggesting they are going to follow the surface expression gold geochem anomaly with a view to establishing a bulk volume, open-cast mine operation.

Their mapping data (below) suggests there's a splay fault zone at 400m depth in the "main zone". If their data is good then there should be reasonable grounds to hope for a high grade gold target at the splay. In the eastern ridge zone it shows an extension of the fault mostly running between 200m and 400m deep. Based on their drilling program their 50m average holes are too shallow to target these possible higher grade zones.

So it appears they're going to rely on pattern drilling of the surface geochem anomalies to produce the increased oz. This is quite a risky strategy when you are dealing with metamorphic lode gold, as the surface geochem is really just metal fluid "leakage" from the buried vein(s) or the result of local erosion and dispersion of the narrow veins. And from the map we can see that the dispersion halos are not wide, even if they're long ie they're not huge targets.

In my view there's a Catch 22 - while the surface drilling is quite likely to increase the resource, it's also quite likely to reduce the grade and negatively impact the economics. And all the while the mystery of the deeper high grade splay fault target will remain.

Overall, there's potential to get the oz up. And since they've said they'll be transparent with the assay results (hopefully not just limited highlights) so we'll quickly see whether the grades are looking supportive or not. In turn it should be possible to figure out early whether this is a flyer or not. I don't think you'll see any bonanza grades in the surface drilling. Let's just hope for the 2g/t average.