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Mangalisa Project

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Minerals: Gold, uranium

Location: Eastern Homestead Trend in the Free State Goldfield of the Witwatersrand Basin in Welkom District, Free State Province of the Republic of South Africa. (see location map).

Area: 19,586.62 ha property that is mostly under-explored

Status: Exploration drilling. Phase 1 and Phase 2 drilling completed. Phase 3 drilling in planning stage.

Ownership: Prospecting Right - FS 30/5/1/1/2/447 PR, - was granted to Turquoise Moon Trading 403 (Pty.) Ltd., Registration Number 2006/005923/07 (“Turquoise Moon”), by the Department of Minerals and Energy in terms of section 17(1) of the Mineral and Petroleum Resources Development Act, 2002 (Act No. 28 of 2002), for “Gold Ore, Silver Ore and Uranium Ore”, on September 5, 2007. Superior Mining is the 74% direct and 13% indirect (total 87%) owner of Turquoise Moon, with the other 13% held through a legally-obliged Black Economic Empowerment (BEE) group (MGI).

The Company has executed a sale agreement with Castlehill Trading CC (“Castlehill”), a private energy Investment Company based in Johannesburg, South Africa for the purchase of Superior’s ownership in Mangalisa. (see News Release). The Agreement is for the complete purchase of all shares of Turquoise Moon for a total sum of US$3 million. This agreement is subject to a number of conditions, including:

(a) Canadian regulatory and shareholder approval, which have been both received;
(b) receipt by Superior Mining of an initial US$1 million tranche; and
(c) a final payment of USD$2 million, be paid to Superior once the Department of Mineral Resources (DMR) of South Africa gives approval for the transfer of shares to Castlehill.

Project Setting

South Africa has been the largest producers of gold in the world, with 98% of the country's gold believed to have been produced from the goldfields located in the Witwatersrand Basin, which contains almost as much gold as the rest of the Earth's surface combined. The gold is recovered from ancient sedimentary conglomerate bands or "reefs" found mainly in the Central Rand Group in the upper Witwatersrand. The Witwatersrand Basin is a vast mining district prolific for gold, having produced over 1.8 billion ounces of gold since the first Central Rand gold-mineralized reef was discovered in 1886. The Free State Goldfield has produced over 320 million ounces of gold at an average grade of 8.4 g/t.

The Mangalisa Project, is located over a potential eastwards extension or trend of the Free State Goldfield of the Witwatersrand Basin. The Free State Goldfield consists of two mineralized trends, the western Target trend and the eastern Homestead trend, separated by an uplifted non-mineralized block known as the De Bron Horst (see map of Free State Goldfield mineralized trends).  The Mangalisa property covers 68 farms and portions of farms, contained within an irregular polygon over the Homestead trend. Currently, Superior Mining‘s exploration activities are being carried out on the Erfenis and Nooitgedacht farms (see map showing farms on which Superior Mining is operating).

The Mangalisa property is located immediately north of the operating Masimong #5 (formerly Erfdeel) gold mine (see map of drill hole locations and significant assay results). Superior Mining has named this reef the Erfenis Reef. The Masimong gold mine was opened in 1987 by Anglo American, but is now operated by Harmony Gold. In FY2011, Harmony Gold produced 1.3 million ounces of gold, making it one of the world’s largest gold producing companies.

Geological Model

Historical drilling by Genco and two subsequent drilling programs carried out by Superior Mining at Mangalisa have confirmed the presence of gold and uranium bearing Elsburg-type conglomerate reefs at relatively shallow depths. 

Superior Mining's exploration program at Mangalisa is targeting gold-bearing Late Archaean, Central Rand Group sediments that traditionally host highly economic gold-uranium-bearing conglomerate reefs (namely the A, B, Leader and Basal Reefs) of the Free State Goldfield. The Central Rand Group is unconformably overlain by variable thicknesses of Late Archaean Ventersdorp lavas and Palaeozoic Karoo sediments. See Geology page for more details on the history of the geological formation of the Witwatersrand basin and the Free State Goldfield and of the geology of the Mangalisa property.

The exploration model is based on the Target Mine, which lies some 25 km to the northwest of Mangalisa.  At Target, Elsburg Reefs occur along a very narrow strike zone, typically only 100 m to 300 m wide and running parallel to a subcrop zone.  This zone extends for more than 12 km along strike. 

Conglomerate-hosted alluvial gold deposits in the Free State Goldfield typically occur as a series of ancient alluvial fans along this strike.  Multiple, stacked reefs occur in this geological environment and high grades are most commonly associated with the apex of these fans. These apices represent a series of ancient alluvial sediment fan entry points from the De Bron Horst into the lower-lying alluvial plain.  The apex of each fan is the site where gold and uranium was preferentially concentrated. Where best developed, these fans may extend in an easterly direction for up to 300 m.  Conglomerate reefs may be developed in the areas between the fans, however they tend to contain less gold mineralisation. This model is believed to be replicated at Mangalisa.

The initial discovery hole (PG-1) showed the hallmarks of a Target type deposition.  Superior Mining's at Mangalisa exploration program is based on this model.  The exploration strategy has been to determine the position of the PG-1 occurrence within such a fan system and confirm the extent of the stratigraphy. 

The assessment of the exploration results to date suggests that the apex of the fan with which PG1 is associated is situated a few hundred metres to the southwest, west or northwest of the completed Phase 1 and Phase 2 drilling.  It is expected that higher grades and a greater number of payable reefs would most likely occur further towards the west, closer to the De Bron Horst.  The next phase of drilling is planned to focus on these areas. 

Status of Mangalisa Exploration

(see Mangalisa Project Activities page for a more detailed account of Superior Mining's exploration activities on the Mangalisa property)

The results from the two phases of drilling already completed by Superior Mining strongly suggest the Company has discovered a new, hitherto unknown Elsberg-type fan, gold-bearing reef, which the Company has called the Erfenis Reef. Economic development of Elsburg gold-bearing reefs occurs at the Target Mine, some 25 km northwest of Erfenis. Very high grades were reported in several of these reefs, which provide a good exploration model for the newly discovered Erfenis Reef. The Erfenis Reef occurs at the comparatively shallow depth of 780 m. As such, the Erfenis Reef probably presents one of the most favourable exploration targets in the Witwatersrand Goldfield today.

After reviewing the results from historical exploration, Superior Mining concluded that the Mangalisa property warranted careful exploration to confirm previous work, and to this end drilled a twin of PG-1, drilled by Gencor (now a part of BHP Billiton), as well as a number of other holes and deflections during the Company's 2008 to 2009 Phase 1 drilling program to explore for gold and uranium mineralization. Phase 1 was primarily designed to test and confirm the stratigraphic and structural setting of the area. Subsequently, from May 2010 to early 2011 Superior Mining embarked on a Phase 2 diamond drilling program. The Phase 2 drilling program was designed to step out from the PG1 discovery hole intercept and construct a geological model.

The encouraging results from Superior Mining's first two phases of exploration drilling confirmed the new Erfenis Reef, and that this reef contains previously unknown high grade gold/uranium mineralization occurring at a depth of about 780 m. This is much shallower than that found in the majority of mines currently operating within the Witwatersrand Basin. It also confirms that Superior Mining appears to have made a significant discovery.

The geological evidence and data from the drilling programs to date support the concept that a Target-type Eldorado fan deposit may be present beneath the farms Erfenis and Nooitgedacht, with PG-1 likely located towards the distal end of the fan. As such, a Phase 3 drilling program to test the area further westward, up-dip and towards the apex of the fan, is currently in the planning stage.

Phase 1 Drilling

The Phase 1 drilling program was aimed at confirming the original drill hole PG-1 intersection, which is recorded as returning values of 50 g/t gold and 5 kg/t uranium over one metre at a depth of 776 m. Phase 1 drilling was primarily designed to test the stratigraphic and structural setting of the area. This drilling depth is unusually shallow for the Free State, where typical Witwatersrand depths are over 2,500 m. Harmony Gold’s Masimong #5 shaft, 10 km south of the Mangalisa property, is 2,300 m deep.

Up to four exploratory Phase 1 diamond drill holes with multiple deflections were initially planned for the Mangalisa Property. In planning the first phase of diamond drilling it had been anticipated that drilling would be to depths of up to 1,500 m from surface, however the Erfenis Reef target mineralization was again intercepted at a depth of only about 776 m, as had been the case with PG-1. Two diamond drill holes were drilled; ERF-1; a twin hole to PG-1 and ERF-2, 500m to the south of ERF-1. ERF-1 failed to intersect auriferous development of the Erfenis Reef, possibly due to faulting, or an ‘out of channel’ situation. ERF-2 intersected a quartzitic succession that could not be directly correlated with that in ERF-1 and drilling was stopped. PG-1 was successfully re-opened and three deflections were attempted. One deflection was abandoned due to drilling problems while two were successful in intersecting the Erfenis Reef at 776 m.

The review of the historical drilling and the results from the Phase 1 drilling program concluded that the diamond drilling had intersected a richly mineralised Witwatersrand Elsburg-type gold deposit at the unusually shallow depth of about 780 m. This constituted a significant find as most gold-mineralized reefs in the Witwatersrand basin have been and continue to be mined at depths greater than 2,000 m. For example, the current Harmony Gold shaft levels at their mines on the Target trend and at the Masimong 5 Mine, are at depths of about 2,300 m. Masimong 5 exploits the Basal and B reefs. In the financial year ending June 2011; 868,000 metric tons were mined and 4,280 kg (137,000 Toz) of gold produced at an average grade of 4.93 g/t (0.144 Toz/t). Total Mineral Resources (SAMREC-compliant) were: 90 million tons at 6.28 g/t containing 565,000 kg (18,160,000 T oz) gold. Mineral Reserves, also SAMREC-compliant, were: 6.6 million tons at 5.44 g/t containing 36,000 kg (1,150,000 T oz) gold. (Information from the Harmony Gold website: www.harmony.co.za)

Phase 2 Drilling

The Phase 2 drilling program was designed to step out from the PG-1 discovery hole intercept and to construct a geological model. Pre-collar drilling through non-target lava sequences to depths of approximately 300 m was carried out using percussion drilling.

Up to nine individual conglomerate bands or reefs were intersected in the Erfenis Reef Zone during the Phase 2 drilling. Of the six holes drilled during the second phase, four holes intersected the full conglomeratic facies of the Erfenis Reef Zone (ERZ). Borehole ERF-2 intersected a distal facies with attenuation of the conglomerate development while borehole NGT-3 intersected the top of the ERZ. The lower portion was truncated by an intrusive. The Phase 2 drilling returned encouraging gold-uranium results from the ERZ, confirming the presence of high gold and uranium grades in the quartz pebble conglomerate reef.

The results of this drilling support an "Elsburg Fan" geological model, which formed the basis for the exploration at Mangalisa. The two phases of drilling suggest the stratigraphy and mineralization to be continuous. The gold and uranium reef discovered in PG-1 is not an isolated occurrence, as the grades in ERF-7 have confirmed, and there is a presence of significant gold and uranium values in this zone, in particular to the south of PG-1. Boreholes ERF-5 and ERF-6 also intersected gold and uranium mineralization, albeit at a lower tenor. The values obtained from these boreholes give a clear indication that gold and uranium concentration has occurred in the system. The results from NGT-2 confirm that the mineralisation extends westwards.

The Erfenis Reef forms part of a reef package that was intersected at a depth of less than 800 m within the Mangalisa Project area. In comparison, Harmony Gold's operating Masimong gold mine, immediately to the south of the Mangalisa property, reported producing 137,605 ounces of gold in their June 2011 Annual Report, from reefs approximately 2,300 m deep. Masimong mines gold at an average grade of 4.93 g/t. By comparison, diluting Superior Mining's core hole ERF 7-0, for example, to a one-metre mining width (0.29 m @ 36.6 g/t) equates to 1.0 m @ 10.61 g/t, which is nearly double the grade being mined at Masimong 5.

Surface Rights

Adequate unencumbered surface exists on Erfenis and Nooitgedacht farms as well as the surrounding properties for mining infrastructure to be developed for a Witwatersrand-type gold mine. This includes potential sites for mine infrastructure as well as rock dumps, tailings dams and disposal of mine waste. Access and surface prospecting permissions have been obtained from the owners of the Erfenis and Nooitgedacht farms.

Royalties

The Property does not appear to have any extra-ordinary royalties or other payments over and above the normal royalty applied to gold mines as promulgated in current South African law.

Access & Infrastructure

There is very easy access to the Mangalisa property, and the area is well served with supporting infrastructure such as roads and railways (see Mangalisa Locality & Infrastructure map).

The property is located about 270 km southwest of Johannesburg's Oliver Tambo International Airport. From Johannesburg, the property is accessed via the N1 national toll road to Kroonstad and then via the asphalt-paved R34 road that leads to Welkom, a total distance of 225 km. The R34 joins the N1 at Kroonstad about 40 km to the northeast of Erfenis.

Rail lines pass within 15 to 20 km south and east of the property. The main electric railway line in the area is the Bloemfontein–Virginia-Johannesburg line. There is an airport and 13 airstrips situated in the area.

The city of Welkom lies 20 km to the southwest of the property, and the towns of Odendaalsrus and Hennenman area are located 20km west and 25 km south, respectively. The town of Kroonstad lies about 40 km to the northeast. These towns are business centers that serve the Free State Goldfield and the surrounding agricultural areas.

Industrial electrical power can be supplied from the Escom supply grid which passes within 20 km of Erfenis.

Water is generally scarce in the Free State, however adequate water for exploration drilling is available from water boreholes on the property. Industrial water is currently available from the nearby Free State Goldfield. It is expected that this source of water will be adequate for future mining operations within the Mangalisa Project Area. However, a detailed water availability study will only be conducted at the prefeasibility study stage.

The topography of the region is that of an open gently rolling to flat-lying peneplain with elevations ranging from 1,380 to 1,400 meters above mean sea level. The project area comprising Erfenis 328 and Nooitgedacht 245 lies at an altitude of about 1,400m.

The vegetation on Erfenis comprises pristine grassland and the land is used exclusively for game farming, whereas Nooitgedacht is utilized for maize cultivation and grazing. The remainder of the Mangalisa Permit area is put to various agricultural uses.

The Free State experiences a continental climate, characterized by warm, wet summers and cold, dry winters. Average midday temperatures range from 17°C in June to 29°C in January. During the winter months the night-time temperatures may drop to 0°C, with occasional snow reported. The annual rainfall averages 401 mm, falling mostly during the summer months of November through March. January is the wettest month with an average 70 mm rainfall. Exploration and mining operations are possible throughout the year.

Mineral resource and mineral reserve estimates

No historical or recent resource or reserve estimates have been made for the Mangalisa Project area. No mining or production has taken place within the Mangalisa project area.

 

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