Continued from Part 1 ...

Here are some further notes on Kodiak’s presentation January 18 at the Cambridge mining show in Vancouver.

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Hercules - A 43-101 Resource Estimate for Hercules is hoped for in time for the PDAC Toronto mining show in March. The outside resource consultant has made site visits, has all data, and is building the model now. After developing the initial estimate, KXL will further drill and build the model up. Six Hercules veins are "in the hopper", although valid polygons are most likely for GM and Lucky Strike, possibly for Wilkinson Lake and Bobby Ore. The first-time-through 43-101 result will be potentially recoverable ounces, as a basis for determining if mining the deposit is economic. Marino, 7 of 9 and other veins will all eventually contribute in future iterations of the resource estimate.

The Hercules geophysical map was referred to with regard to the much improved understanding that Kodiak has gained about the subsurface, which is what they said they were working to achieve in 2008 and 2009. A structural understanding of the region has been put together and this will provide an incisive guide to further drilling plans. The magnetic map (shown below), highly interpreted with new algorithms, is superimposed with structures KXL has identified, as well as maps from the field. 5000 surface samples have been gathered over its area, so the gold bearing areas are well identified. The high magnetic signature in the middle (salmon colour) is centered over the iron-rich rocks, and the iron-depleted rocks on the western and eastern flanks (green and yellow) demonstrate valuable gold replacement.



The east side of the Hercules land package contains the known gold zones of the Elmhirst intrusion, where work is to be carried out now, including on Golden Pond on the Golden Mile (visible above with Golden Pond at the NW end of the GM), Lucky Strike and Bobby Ore. 12 drill sites have been selected and there are 3000 meters of drilling in this specific program. The pond has 18 inches of ice, and needs 30 for the rig as well as for an access pathway. Hercules boasts clean mineralization - quartz carbonate, gangue, pyrite (darker materials) and gold, which is good for mining and makes for a cleaner tailings pond. New veins have been discovered to the southwest of the existing structures.

On the west side of the magnetic map, the general signature is similar enough to the east that advanced reconnaissance will be carried out this year in the hope of finding a new set of gold-bearing zones there.

Slapshot from Agoracom asked how much of the long section of the GM is likely to be in the 43-101. This will be a matter of geostatistics - how far you can project from a known drill hole. The modeling polygons will have different dimensions in different directions to make the best statistical use of the data available. All data from 2006 to the present is in. The Kodiak team anticipated the 43-101 and finished a mineral inventory as well as additional drilling in 2009 to complete polygons expected for the model, so as to help demonstrate indicated rather than inferred blocks of gold mineralization where possible and maximize the quality of the resource estimate. The outside consultant will go through all the holes looking as well at assay standards, QA/QC, how holes are logged and survey procedures. With time, lone holes will be paired up and exploration will continue to greater depths, extending the well-defined portion of the region from 400m down to 1000m or beyond.

Ramp and Bulk Sample - A bulk sample would contribute not only to confirming grades and mineability, but also extending the resource model. The consultant will suggest whether going underground with a ramp as a next step is advisable, then permitting would be completed, a ramp would be built, a bulk sample produced, and then mine feasibility would be determined. A sample would be mined and run through a mill, to demonstrate how extraction compares with projections, and to adjust the average grade in the 43-101. Detailed confirmatory drilling from depth will plug into the feasibility study to follow the 43-101 w.r.t. the decision on whether mining is economic.

A question was also posed by an Agoracom regular as to what the plans for a ramp are. There are two main options being considered, and preliminary permitting has been begun. A geologically and geomechanically sound portal would be needed. There is little relief on site, although there is a small hill just southeast of Golden Pond, and the most likely ramp would begin here, descending 1000m at a 15% to reach 150m below surface. A switchback turn in the ramp would allow the ramp-end to be just below the richest zone of the West Shoot, to facilitate further confirmatory and exploratory drilling there. It remains to be seen how discoveries of ore under Golden Pond would affect ramp routing. To illustrate my approximate recollection of a possible ramp routing from Brian's depiction I have drawn a light blue line on the key section of Kodiak's long-section drawing, shown below (squares are 50m on a side, and Golden Pond is at upper left):

A mine construction contractor would bring in a mining office, dry ore processing, and water bladders for water ingress control, so there would be no capital cost to Kodiak for those items. The ramp would be placed into the footwall crosscutting over to the veins. This would provide not only a drilling platform 150m down, but also prebuilt production access if and when a mine is built. In terms of drilling in the Hercules area to support 43-101 expansion efforts, shallower drilling including from an underground platform is more effective, as blocks of ore near the top would be mined soonest. An ideal timeframe for a ramp is the 3rd-4th quarter 2010, assuming recommendation and permitting has been completed first. A ramp could be put in in as little as 100-125 days.

An advantage of being underground is to determine precisely where the veins are, and their quality; this decreases investment risk in the market for KXL stockholders, and market value per ounce tends to increase, so the 43-101 and ramp/bulk sample are value adding processes. The same Agoracom reader posing the ramp question asked about mills availability. There are many mills of modest tonnage e.g. 2000tpd out there, and purchasing a used mill saves roughly 50%. However, any mill must be carefully matched with the output of a mine. Brian pointed to instances e.g. in Manitoba where mills are outsize and green rock ends up going through the mill.

Milestone - At Milestone, broad gold-bearing zones have been identified, similar to the deposits at Cdn. Malartic (Osisko), Hammond Reef (Brett), and Fort Knox (Kinross) - i.e. large deposits of roughly 1-1.5g/t rock. At Milestone a broad shear zone with widely disseminated gold is being drilled to further determine continuity both in depth and along strike. Existing VLF and magnetic data suggests a good size system, with a clear linear anomaly guiding exploration through the center of the system, 150-200m in depth so far, with a 4 km strike length further open to the east. The Pag North zone has been verified to continue at depth. The Pag South zone was discovered by extending on the original sampling depth while confirming historic data. The system is clean and clear in geometry and shows strong continuity so far. In the light of Milestone's potential comparability to other important deposits KXL mused as to why Milestone was not yet perceived as a huge asset to the company. A 4000m drill program has been started now.

West Geraldton - Kodiak is now drilling in the cedar swamp east of Bonanza to extend the WG strike. 4km of likely strike has been identified; long strikes quickly build up tonnage and the system is high grade. The drilling is between the Boomerang (2008) and Bonanza (2008/2009) areas, close to where competitors are drilling (the swamp is in the marshes of Magnet Creek, see topo map on page 9 of previous 2009 Fall .pdf writeup at (link here). The motivation to drill was supported by the rich 82.5g/t 2.1meter finding in the 194m-deep hole on Bonanza, and 120g/t channel samples, which had to be followed up with further exploration at West Geraldton. South of KXL, Premier Gold will have a resource estimate soon (I attended Premier’s talk and the expected date of a 1m+ oz 43-101 is February). The western end of West Geraldton is found under increasing levels of overburden - it will be explored but primary exploration will have to be geophysical.

Shields - Shields is a new project in the initial exploration phase. Surface samples of 6 ounces/ton (185g/t) were obtained. The recently obtained Shields claim interests paired up with Kodiak's existing land there between PG’s projects..

Wild Goose - Located on the Bankfield-Tombill fault zone (cf. the old Bankfield and Tombill mines) just west of PG’s Hardrock and just south of West Geraldton, Wild Goose had 30g/t in one hole already and will probably have a couple more drill holes this year.

Kaby Lake - just east of Hercules, is in the same setting as the Elmhirst Lake intrusion and will be pursued in 2010.

Brenbar - High grade gold was discovered in discontinuous veins. The geologic model is becoming better understood and the broad regional structure can be used as control. An update on this project on the website should appear this Spring. The potential deposit type would be similar to those at Noranda and Val D’Or in the greenstone belt.

Trench Lake - is listed on the bottom tier of the exploration pyramid. It is at the eastern end of Kodiak’s BG claims and is a metavolcanic prospect sitting on strike with the historic and high-grade Leach mine.

Other Projects - Names already on the exploration pyramid but not discussed, together with other projects not yet named, will be pursued this year to take further advantage of Kodiak’s claims

... Part 3