site visit 3 - exploration

[Caution: Much of the stuff that follows doesn't refer to JORC resources or reserves. It is really at the level of opinion and 'pub chat' along with some GEOL 101 from me]

BSM have put a lot of focus in their presentations about the exploration upside on their tenements and talk of 'elephants'.

For me, I've never really focused on that as a reason to invest. My investment rationale has been the mis-pricing, IMO, of the gold tailings resource with the "known" VMS resources as the way to provide the equity to develop the gold project in the short term.

However, after talking with the BSM exploration team I am more convinced that there could be some real upside to this component of their business.

BSM have done a really good job of talking about the new techniques that they have and the new interpretation of where VMS ore bodies may be hidden on their property so I wont rehash that stuff here - just read any BSM presentation.

What I can do is show you some photos of their treasure trove of historical cores and relay some 'pub chat' and history.


BSM TEAM

I am convinced that in exploration - like most parts of BSM's business - the competency and experience of the people are key. This is especially so when 'hunting' for ore.

There is a mix of Hellyer and global geologic experience amongst the BSM team with some members being around during Aberfoyle's days and some coming from other projects.

We were hosted by BSM's exploration manager and I was very impressed by his interpretation of the Hellyer geology, his global experience and the explanation of how BSM was targeting new targets on their tenements.


HELLYER TENEMENT HISTORY

Aberfoyle first mined Hellyer at Que River. As part of this operation they found the 3.3mt ore body by chance and their traditional exploration techniques failed to find it (late 1970's from memory)

They invited academics to come to Hellyer and develop techniques that would 'pick up' Que River type ore that remained hidden from traditional methods.

As a result a Canadian University developed a technique (from memory it was TEM) that Aberfoyle then used and subsequently found Hellyer (16mt in the early 1980's from memory).

Through this period all the geological theories were based on the ore being hosted on a certain 'horizon'. Drilling then targeted this horizon, not bothering to go deeper if the drill holes down to the horizon level (and sometimes a little beyond it) were 'barren'.

We now know via Fossey that ore is hosted below this horizon zone and it thus opens up huge new areas that could be hosting ore bodies.

When BSM took over the tenement (prior to Fossey's discovery) the traditional model was still valid. That is no longer the case.


FOSSEY - BLOODY LUCKY/ UNLUCKY

VMS deposits are very 'poddy' like raisins in a fruit cake. They are also very dense rock (S.G. >4) so a large tonnage can hide in a small volume.

Aberfoyle was incredibly unlucky not to find Fossey. Think of an analogy of a North American Indian Teepee.

Aberfoyle positioned their rig at the apex of the teepee and then drilled a fan pattern all around. Not finding anything of interest they then moved on.

Years later, BSM used the same rig location and instead of drilling a fan pattern put a vertical hole straight down and found Fossey...

Likewise with Fossey East - it was pure luck. Mancala was drilling a hole to test for water-bearing structures as part of the tunneling programme to Fossey.... and they drilled into Fossey East.

The 3D image of the ore body then showed that the Easy Street Fault had truncated the ore body and some might be relocated... they then went searching (not luck, smart!) and they've found McKay...

Thus there is a lot of luck and chance in finding VMS ore, but that is coupled with a lot of exploration tools that pick up 'signatures' and prospective zones. Mix that with hard earned experience and the chances of finding something improve.


MCKAY


I've included McKay here because it is still exploratory in nature. BSM have 'hit' a very high grade BMS zone and, on the same axis have defined the alteration extent to be at least 60m vertical.

They now need to extend this drilling along strike (N and S) to see where it goes.

As discussed in a previous post, IMO BSM would want to find at least 100kt BMS to make it worth while and, due to the low capex it could net +$10m. 100kt would only take up 25k cubic metres (S.G. >4). This equates to a cube 30m x 30m x 30m .... a very small volume space.

Drill results should be out soon.



HISTORICAL CORES + NEW 'MATRIX'


BSM have discussed how they are using a 'matrix' of geological signatures to try and target prospective zones to explore for VMS ore. There are 12 different signatures that they overlay to identify prospective zones.

Armed with the new interpretation of where ore may be located the exploration team has "several" targets to follow up on.

Making their job easier is that Aberfoyle have stored and maintained ALL of their drill cores from the property. There is literally 10's of thousands of metres of core data available to the BSM team.

Many of the Aberfoyle cores, whilst only targeting down to the 'host horizon' punched through this and the data in the cores shows some "interesting signatures" which may (or may not) indicate proximity to VMS ore.


D ZONE

This is the area between Hellyer and Que River. This is a very large area and, at the very Northern area, down deep, is where Fossey and Fossey East are located.

Aberfoyle drilled in this area using 200m spacings drilling down to the host horizon. They would then undertake a down-hole EM and if no signature came back they would claim the area 'sterilized' and move on.

Thus, there is very little exploration in this zone due to (a) model interpretation of the time not thinking ore was below the host horizon and (b) Techniques available today not being available when Aberfoyle drilled.

From an economic perspective this zone is also attractive for BSM due to only incremental capex being required if an ore body is found close to Fossey as tunnels an infrastructure are already in place.

SOUTH OF QUE RIVER

Another area that has had little exploration attention but shows up as a high priority target using BSM's 'matrix' is south of the Que River area.


SWITCHBACK

Switchback has made a discovery (adjacent to D Zone). The way it was described to us is: They have found 'clasts' which are smaller pieces of BMS material mixed up in an alteration zone. How this has occurred is that in the geologic past a VMS ore body was precipitated out of a 'black smoker'. Sometime later, possibly by an underwater landslide the top (or all) of this ore body was displaced and broken up into clasts.

BSM is betting (hoping) that only the top of the VMS body was displaced and it is still sitting there, somewhere. A Phd academic and their supervisor are working on this discovery and believe that the clasts are located only a matter of 100's of metres from the source as opposed to km's away (??)


LAKE MARGARET

In Dec 2009 BSM announced that it had successfully won EL28/2009 in Lake Margaret.

This is located just North of Mt Lyell a massive Cu-Ag-Au deposit that has been mined for over 100 years.

BSM's exploration manager did his Phd at Mt Lyell and says that the Lake Margaret area has all the same characteristics and signatures to Mt Lyell.

Importantly three large Cu rich boulders have previously been found on the Lake Margaret tenement. The interpretation is that they have been trans-located by glacial action and that they have not originated from the Mt Lyell deposit.

In addition there has been 20,000m of drilling done on the Lake Margaret property targeting Henty style gold which BSM can utilise - using their new matrix to possibly narrow the search.

I have done my Geology 101 (don't rely on it!) and roughly mapped the tenement (blue) onto google earth terrain. I have then roughly outlined the water catchment areas (orange) and the direction of travel that glaciers may move rocks around on their tenement (red).... it may be worthless but I found it interesting...

...If I am not completely inept it shows that if 3 x Cu rocks were found on BSM's tenement (I don't know where), and that (a) glaciers move the rocks down hill within a single water catchment area and (b) it did not come from Mt Lyell, in the case of the Southern most valley, then there is a good chance that an ore body exists on the Lake Margaret tenement...

If you do a flyover using Google Earth you'll see just how difficult the terrain is and how expensive exploration would be.

BSM have drilled one hole at Lake Margaret. Anecdotally (pub chat) they found everything they thought they would but started the drill hole too far away from the (assumed) contact zone so didn't find copper. My interpretation of what was said is that they are very keen on Lake Margaret but need a good exploration budget.... The prize, however, could be very very large going by Mt Lyell.


CONCLUSION

- VMS ore bodies are poddy and hard to find.

- New geological understanding + BSM matrix + good people mean that there is a good chance that BSM find more stuff on their tenements

- Switchback, D Zone, South of Que River, McKay all offer good upside near the Hellyer Mill

- Lake Margaret could be the elephant that they are hunting

Cheers
John