Initial metallurgical testing demonstrates ore can be

Results from initial metallurgical testing from the Borden Lake gold deposit

showed recoveries of 90.4% on a 1.6g/t sample and 92.6% on a 4.2g/t sample

with the best results coming from a combination of flotation followed by

cyanidation.

These results are positive in that they demonstrate the Borden Lake ore can be

processed by conventional means and does not appear to be refractory, and

further testing to optimize the grind size and processing circuit could improve

recoveries.

However, lower grade ore could result in lower recoveries as the two samples

reported were significantly higher than the current resource grade of 0.7g/t

using a 0.3g/t cut-off, or 0.95g/t at 0.5g/t.

As we do not have lower grade recovery data for Borden Lake at this time, we

have tweaked the recoveries in our model to line up with other comparable

projects (Exhibit 1).

We now model a gold recovery of 88.9% during the high grade phase of the

mine life and 80.0% for the low grade phase, down from 90%.

This took our NAV down to $3.65 from $4.26 and our price target remains at

$4.00. These recoveries are likely to change as further testing is completed and

the processing circuit is optimized and a sensitivity to gold recovery is shown

in Exhibit 2.

We believe the Borden Lake Gold Deposit can grow from

4MMoz to 7MMoz based on extending the current strike length of 1.6km to

2.0km and extending the deposit to a depth of 500m from 340m.

We expect a

resource update in Q1/12 with 5-6MMoz at 0.7g/t.

The fold nose of the Borden

Lake belt is previously untested; however, it exhibits a similar geophysical

signature to the known deposit and drilling has identified similar rock types

with assays expected in the next few weeks.

A significant discovery in the

fold nose could be a key driver for the share price and the potential