Talas Exploration Area

Talas, Kyrgyzstan - Exploration Area

The Talas exploration area is located on the north slope of the Talas Valley, in the Talas Oblast, north-western Kyrgyzstan.

At elevations of 1,800 to 3,000m, the project is accessible year round via the main Bishkek-Talas road (270km from Bishkek). The Talas exploration area comprises four exploration licences: Barkol, Taldybulak, Kentash and Korgontash with a combined area of 371km².

Orsu’s premier project within this area is the Taldybulak copper-gold porphyry.

The Taldybulak prospect is the main focus of exploration activity within the Taldybulak-Talas licence which covers an area of 43km². The Kentash licence is situated immediately east of Taldybulak and covers an area of 42km². The Korgontash licence which covers an area of 66km² is located approximately 25km east of Taldybulak. The Barkol licence is the westernmost licence, located immediately west of Taldybulak and covers an area of 223km².

The Tien Shan region, in which the Taldybulak-Talas exploration area is located, includes deposits such as Andash (1Moz), Aktash, Jerooy (2.5Moz), Taldybulak Levoberezhny (3Moz), and Centerra’s world class Kumtor deposit (17Moz).

NI 43-101 Compliant Mineral Resource for Taldybulak-Talas

In April 2008, Orsu completed a National Instrument 43-101 compliant resource estimate for Taldybulak-Talas porphyry.

The resource estimate was calculated at various gold cut-off grades and incorporates all drilling data obtained for the Taldybulak-Talas copper-gold project by Q1 2008. At a 0.30g/t gold cut-off, the Indicated resource is 79Mt @ 0.63g/t Au and 0.17% Cu and the Inferred resources is 163Mt @ 0.58g/t Au and 0.14% Cu (Table 1).

Table 1; Taldybulak-Talas Copper-Gold Project, Mineral Resource Estimate

(Lero Gold Corp. - April 2008)

Indicated

Inferred

Note: Au_eq=Au g/t + 2.5x Cu %

Metal equivalent: metallurgical recoveries and net smelter returns are assumed to be 100%

The resource is based on 20 historical Soviet holes (5,078m) and 34 diamond holes (8,484m) drilled from 2005 through to 2008; a total of 9,534m of surface trenching data was also included in the modelling and interpolation. The mineralisation is located within an east-west trending linear porphyry, with a surface exposure of 1,000m x 400m. The above resource is calculated down to a depth of 500m below surface and is fully supported by drilling; no extrapolation of the resource below the base of the current drilling information was undertaken. The mineralisation remains open to the west and at depth, where an interpreted high-grade core (0.7-0.9g/t Au) was intersected during the 2007 drilling programme.

The resources were calculated within a constrained geological wireframe, limited by external pyrite halo defined by an induced polarization survey and verified by drilling. Post-mineral dykes were modelled and excluded from the reported volume and interpolation run.

Gold Fields Joint Venture Option

In November 2006, Gold Fields Exploration B.V. (an indirect wholly owned subsidiary of Gold Fields Limited) was granted an option to enter into a joint venture agreement with the Company under which Gold Fields Exploration B.V. has the right to:

• earn up to a 60% interest in exploration licences on the Kentash, Taldybulak and Korgontash tenements in the Talas Region by funding exploration expenditures of up to CAD$10 million, and
• increase its interest in the project by a further 10% (to a total of 70%) by funding the expenditure of up to a further CAD$10 million on a feasibility study. Thereafter, Gold Fields Exploration B.V. and Orsu will contribute to the project requirements on a pro-rata basis through to development, if appropriate.

In May 2007, a Barkol license was added to this JV option under the same terms.

Licence Information

The Talas exploration area comprises core assets of the Company in Kyrgyzstan including the Taldybulak, Kentash, Barkol and Korgontash licences (Table 2). The primary exploration property is the Taldybulak copper-gold porphyry prospect.

Table 2; Licence details

For avoidance of confusion;

1. The Taldybulak copper-gold porphyry prospect within the Taldybulak exploration licence area is a separate asset from the Taldybulak Levoberezhny gold deposit previously owned by Central Asia Gold Limited, and
2. The Talas Copper Gold Limited Liability Company, the holder of the Lero’s Taldybulak licence, is a separate company from Talas Gold Mining Company, which was the owner of the Jerooy Gold Project.

Metallogenic zone

The Taldybulak-Talas licences are located within Talas-Kemin metallogenic zone, which is hosted by lower Palaeozoic island arc terrane. Lower Palaeozoic sedimentary formations are interlaid with units of the andesitic lavas, tuffs, and eruptive breccias and have been intruded by diorites, monzodiorites, granodiorites, and syenites. Deposit types and examples from the area include:

• Porphyry-copper-gold:  Taldybulak-Talas, Andash, Uzunbulak
• Gold skarns:  Aktash, Kanterek, Nason, Tokhtonnisai
• High sulphidation (?) gold-silver:  Taldybulak Levoberezhny, Tuyuk
• Gold-rare earth elements and metals:  Karadzhiga, Borubai, Kutesai-2

Historic Exploration

The Taldybulak deposit was discovered in 1976 during regional geochemical survey. During 1977 to 1979 a trenching programme over the copper-gold-silver-molybdenum anomalies outlined an elliptical gold-copper mineralisation zone with dimensions of 1,200 by 700m. The anomalies were tested at depth by sixteen 100m to 500m deep vertical diamond drill holes drilled in one north-south and one east-west fence. Ten of the drill holes intersected gold-copper mineralisation, in spite of only sporadic intervals being assayed. Two of the drill holes terminated in strong mineralisation at a depth of over 400m. No further work was conducted on the deposit until the late 1990s when a British company drilled 11 shallow reverse circulation holes near the centre of the deposit. Oriel Resources plc, later splitting its Cu-Au assets into Lero Gold Corp., entered into an option agreement for the project during 2005. By August 2006, Lero Gold Corp. had completed an extensive infill trenching programme and 2,800m of core drilling.

Geology of the Taldybulak deposit

At Taldybulak, an irregular shaped composite multiphase dacite stock with dimensions of 1,400 x 1,000m intrudes Ordovician andesitic volcaniclastics. Within the stock there is an abundance of large wall rock xenoliths, and the presence of pegmatite dykes in the wall rocks adjacent to intrusive contacts indicates that only the upper part of the intrusive body is currently exposed. The dacite stock is cut by a series of late- to post-mineral dykes of various compositions including: gabbro, lamprophyre, granite, felsic porphyry, pyroxene-diabase, syenites and diorite dykes. A complex of concentric granodiorite dykes surrounding the stock indicates that it is likely to be underlain by a substantial multi-stage intrusive body; the source for the porphyry-type mineralising fluids. Zones of mineralisation, a quartz-tourmaline breccia body and post-mineral dykes parallel the elongate East-West axis.

Mineralisation

The mineralisation forms an ellipse-shaped, east-west trending zone over an area of 1,100 by 600m centred on the stock. The mineralised zone appears to be strongly influenced by a number of structural directions and is interpreted as representing the upper part of a larger underlying porphyry-type mineralised body. The 2007 exploration drilling identified a previously unknown area of potassic alteration in the western part of Taldybulak Central, which substantially added volume to the above-mentioned NI 43-101 resource (Table 1).

The mineralisation consists of 1 to 20mm thick quartz-stockwork veins with minor pyrite and chalcopyrite +/- molybdenite, generally associated with quartz-sericite alteration. Locally potassium feldspar alteration is associated with the quartz stockwork veins. Disseminated and veinlet sulphide mineralisation is only weakly developed in the host intrusives, however the adjacent volcanics are extensively mineralised by disseminated and veinlet sulphides, with or without quartz stockwork veining.

Historic mapping, geochemistry and geophysics has outlined a 4-5km zone striking East-South-East from Taldybulak to the Dzhangyztal prospect that hosts several occurrences of porphyry style mineralisation which have yet to be adequately tested. The similarity in the age, geological setting, alignment and clustering of porphyry-related mineralised bodies at Taldybulak with deposits such as Cadia (New South Wales, Australia) and Oyu Tolgoi (Mongolia), together with the encouraging intercepts on surface and in drill holes, indicates that Taldybulak is a favourable environment for the occurrence of a substantial Au-Cu resource. Cadia, operated by Newcrest Mining, contains at least six discrete orebodies, spread out over a 6km length, with an aggregate resource in excess of 31 million ounces of gold and 4.59 million tonnes of copper at similar grades to Taldybulak Talas.