ORSU METALS CORPORATION NI 43-101 TECHNICAL … · orsu metals corporation ni 43-101 technical report for the sergeevskoe property, zabaikalskiy krai, russian federation 10 march

ORSU METALS CORPORATION

NI 43-101 TECHNICAL REPORT FOR THE SERGEEVSKOE PROPERTY, ZABAIKALSKIY KRAI,

RUSSIAN FEDERATION

10 March 2017

Wardell ArmstrongBaldhu House, Wheal Jane Earth Science Park, Baldhu, Truro, Cornwall, TR3 6EH, United KingdomTelephone: +44 (0)1872 560738 Fax: +44 (0)1872 561079 www.wardell-armstrong.com

Wardell Armstrong is the trading name of Wardell Armstrong International Ltd,Registered in England No. 3813172.

Registered office: Sir Henry Doulton House, Forge Lane, Etruria, Stoke-on-Trent, ST1 5BD, United Kingdom

UK Offices: Stoke-on-Trent, Cardiff, Carlisle, Edinburgh, Greater Manchester, London, Newcastle upon Tyne,Sheffield, Taunton, Truro, West Bromwich. International Offices: Almaty, Moscow

ENERGY AND CLIMATE CHANGE

ENVIRONMENT AND SUSTAINABILITY

INFRASTRUCTURE AND UTILITIES

LAND AND PROPERTY

MINING AND MINERAL PROCESSING

MINERAL ESTATES

WASTE RESOURCE MANAGEMENT

DATE ISSUED: 15 March 2017

JOB NUMBER: ZT61-1569

VERSION:

REPORT NUMBER:

STATUS:

V1.0

MM1117

Final

ORSU METALS CORPORATION

NI 43-101 TECHNICAL REPORT FOR THE SERGEEVSKOE PROPERTY, ZABAIKALSKIY KRAI, RUSSIAN

FEDERATION

MARCH 2017

PREPARED BY:

Phil Newall BSc (ARSM), PhD (ACSM), CEng, FIMMM

APPROVED BY:

Mark Mounde Technical Director

.

ORSU METALS CORPORATIONNI 43-101 TECHNICAL REPORT FOR SERGEEVSKOE PROPERTY, ZABAIKALSKIY KRAI,RUSSIAN FEDERATION

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CONTENTS

EXECUTIVE SUMMARY ................................................................................................................. 1

1 INTRODUCTION ................................................................................................................... 4

1.1 Scope of Work............................................................................................................................4

1.2 Independent Consultant ............................................................................................................5

1.3 Source of Information................................................................................................................5

1.4 Personal Inspection....................................................................................................................6

1.5 Units and Currency ....................................................................................................................6

1.6 Limitations, Reliance, and WAI Declaration...............................................................................6

2 RELIANCE ON OTHER EXPERTS.............................................................................................. 8

3 PROPERTY DESCRIPTION AND LOCATION.............................................................................. 9

3.1 Location......................................................................................................................................9

3.2 Mineral Tenure ........................................................................................................................10

4 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ........ 14

4.1 Accessibility..............................................................................................................................14

4.2 Climate .....................................................................................................................................14

4.3 Local Resources and Infrastructure .........................................................................................15

4.4 Physiography............................................................................................................................16

5 HISTORY ............................................................................................................................ 17

5.1 Introduction .............................................................................................................................17

5.2 Kluchevskoye ...........................................................................................................................17

5.3 Sergeevskoe .............................................................................................................................18

5.4 Resource Potential of the Sergeevskoe Property ....................................................................30

6 GEOLOGICAL SETTING AND MINERALISATION..................................................................... 31

6.1 Regional Geology .....................................................................................................................31

6.2 Sergeevskoe Property ..............................................................................................................33

6.3 Mineral Occurrences................................................................................................................35

7 DEPOSIT TYPES .................................................................................................................. 46

8 EXPLORATION.................................................................................................................... 49

9 DRILLING ........................................................................................................................... 51

10 SAMPLE PREPARATION, ANALYSES AND SECURITY.............................................................. 52

11 DATA VERIFICATION........................................................................................................... 53

12 MINERAL PROCESSING AND METALLURGICAL TESTING ....................................................... 54

13 MINERAL RESOURCE ESTIMATES ........................................................................................ 55

14 MINERAL RESERVE ESTIMATES ........................................................................................... 56

15 MINING METHODS............................................................................................................. 57

16 RECOVERY METHODS......................................................................................................... 58

17 PROJECT INFRASTRUCTURE ................................................................................................ 59

18 MARKET STUDIES AND CONTRACTS.................................................................................... 60

19 ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY IMPACT................. 61

20 CAPITAL AND OPERATING COSTS........................................................................................ 62

21 ECONOMIC ANALYSES........................................................................................................ 63

22 ADJACENT PROPERTIES ...................................................................................................... 64


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22.1 Introduction ..........................................................................................................................64

22.2 The Kluchevskoe Deposit ......................................................................................................64

22.3 The Alexandrovka Project .....................................................................................................66

23 OTHER RELEVANT DATA AND INFORMATION...................................................................... 69

24 INTERPRETATION AND CONCLUSIONS ................................................................................ 70

25 RECOMMENDATIONS......................................................................................................... 71

25.1 Introduction ..........................................................................................................................71

25.2 Budget and Work Programme ..............................................................................................71

26 REFERENCES ...................................................................................................................... 74

TABLES

Table 3.1: Sergeevskoe Concession Area Coordinates .........................................................................12

Table 5.1: Historical Exploration Activities ...........................................................................................19

Table 8.1: Orsu Exploration Results ......................................................................................................49

Table 22.1:Recorded Historical Production from Kluchevskoye...........................................................66

Table 25.1: Sergeevskoe Phase 1 Exploration Budget ..........................................................................72

Table 25.2: Sergeevskoe Phase 2 Exploration Budget ..........................................................................73

FIGURES

Figure 3.1: Location Map of the Sergeevskoe Property..........................................................................9

Figure 3.2: Concession Area..................................................................................................................12

Figure 4.1: Route Map from Davenda to Chita Airport (579km via M58/AH30)..................................14

Figure 5.1: Typical Drilling Passport from Soviet Era ............................................................................22

Figure 5.2: Composite Geological/Sampling Map Over Zone 23..........................................................23

Figure 5.3: Shallow Shaft 28 and 29 Showing Geological Logging, Kozie .............................................24

Figure 5.4: Cross Section for Borehole C-139 and C-140 at Kozie Occurrence.....................................26

Figure 5.5: Kozie Occurrence, Sampling for Gold .................................................................................26

Figure 5.6: 3D View of Sampling Activity, Kozie Occurrence ................................................................27

Figure 5.7: Sampling Plan at Ore Zone 23 Occurrence .........................................................................28

Figure 5.8: 3D View of Ore Zone 23 Occurrence ..................................................................................29

Figure 5.9: Vein 7-38 Structure Sampling Plan, Karamaevskoe Occurrence ........................................30

Figure 6.1: Regional Geology, Kluchevskoye District ............................................................................32

Figure 6.2: Geological Map of Concession Area ...................................................................................34

Figure 6.3: Main Ore Controlling Faults, Sergeevskoe..........................................................................35

Figure 6.4: Main Mineral Occurrences in the Sergeevskoe License .....................................................36

Figure 6.5: Geology and Exploration Works, Kozie...............................................................................37

Figure 6.6: Simplified 3D Model for Zone 23 and Kozie Occurences, (Orsu Metals, 2016)..................38

Figure 6.7: Ore Zone 23 Occurrence (Eastern Part, Adit-5) ..................................................................38

Figure 6.8: Ore Zone 23 Occurrence (Western Part) ............................................................................39

Figure 6.9: Pik Kluchi Occurrence .........................................................................................................41

Figure 6.10: Karamaevskoe Occurrence, Geological Plan.....................................................................42

Figure 7.1: Comparison of Tonnage and Tenor for RIRGS Deposits .....................................................46


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Figure 7.2: Generalised Model for RIRGS Deposits...............................................................................47

Figure 7.3: Global Distribution of RIRGS Deposits ................................................................................47

Figure 22.1: Location of Adjacent Properties .......................................................................................64

PHOTOGRAPHS

Photo 4.1: Kluchevskiy Village with Open Pit in Background ...............................................................15

Photo 5.1: Adit Portal, Kluchevskoye....................................................................................................17

Photo 5.2: Trench K996, Zone 23, from the Soviet Era.........................................................................20

Photo 5.3: Shaft 28 at Kozie..................................................................................................................21

Photo 5.4: Collar of Hole C142, Kozie ...................................................................................................25

Photo 22.1: The Alexandrovka Project Area (Zapadnaya, 2016) .........................................................67


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EXECUTIVE SUMMARY

The Sergeevskoe Property is located in the Zabaikalsky Region in the Russian Federation. The property

is situated 40km to the southwest of Mogocha town – the district capital with a large railway station

on the Trans-Siberian Railway. The newly built Chita-Khaborovsk motorway passes within 8km to the

south of the property. The distance from Chita to Sergeevskoe is 560km.

As the result of an auction held 22.11.2013, LLC SC "Alexandrovskoe", a subsidiary of Sibzoloto

Investments Limited (“Sibzoloto”), a Cyprus registered company and the sole owner of LLC GK

Alexandrovskoe, acquired the license from the Russian Government. The shares of Sibzoloto are

owned by four arm’s length parties. The license was issued on 31 December 2013 and it is valid until

31 December 2031. In 2016, the license (Licence CHIT 02454 BR) was actualised by the Ministry of

Natural Resources of the Russian Federation. This confirmed the validity of the license.

The terms of the acquisition of the Sergeevskoe Project are tied to Orsu’s successful completion of the

sale of Orsu’s interest in its Karchiga Project located in Kazakhstan for US$7.75 million by June 30,

2017.

Closing of the Sergeevskoe Project acquisition is subject to the receipt of regulatory approval from

TSX-V for this fundamental acquisition. On closing, Orsu will purchase 300 (30%) of the €1 par value

shares of Sibzoloto from the Sellers by the issue of 146,605,683 new common shares in Orsu and

payment of US$180,000 cash. If the sale of Karchiga completes prior to June 30, 2017, then within 10

days, the Sellers will sell and Orsu will purchase the remaining 700 (70%) of the shares of Sibzoloto for

consideration of €700 and US$420,000 cash.

At that point, Orsu will own 100% of Sibzoloto and the Sellers will own in aggregate 44.5% of Orsu. No

one Seller will own more than 20% of Orsu and the Sellers have confirmed they will individually govern

their investment in Orsu.

The license is irregular in shape, covers some 7.6km2 and is approximately 6km in an east-west

direction and 3km north-south. Orsu advises that the license is currently valid and in good standing

according to the rules, regulations, and laws of the Russian Federation.

The Sergeevskoe licence area is located within the Mogocha Mineral Field, within a major tectonic

Proterozoic to Mesozoic fold belt of the southwestern margin of the Aldan-Stanovoi Shield of the

Siberian Craton. The region predominantly comprises various intrusive granites surrounded by

metamorphic rocks. Plutons from the Middle Palaeozoic (Olekminskiy Complex), Permian (Bichurskiy

Complex) and Jurassic (Amudzhikano-Sretenskiy and Amanansky Complexes) intrude the fold belt

sediments and host a number of gold and molybdenum deposits and occurrences.

The granitoid complexes are located adjacent to a marked flexure (dilational jog) in the regional east-

west trending “Latitudinal Fault”, a segment of the regional Mogocha-Bushuleysk Fault Zone, marking

the contact between Proterozoic and Mesozoic granitoids.


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The deposit cluster in the area is hosted by the Davenda granite massif which has a strike length of

50km and a width of 2-3km. Gold and molybdenum mineralisation is related with the porphyry

intrusions of Amudzhikano-Sretenskiy complex and associated with the zones of north-west

endocontact and exocontact of the Davenda massif.

The Sergeevskoe license lies immediately to the west of the historic Kluchevskoye open pit gold mine

which has produced well over 1Moz Au, and has a resource potential of several more million ounces

gold and which is now the focus of a BRICS consortium looking to re-start the project. Furthermore,

to the west of Sergeevskoe lies the recently opened Alexandrovskoe open pit gold mine.

The major ore-controlling faults at Kluchevskoye pass westwards into the Sergeevskoe license and it

is quite clear that the mineralising structures that were mined at Kluchevskoye are continuous to a

greater or lesser extent into the Sergeevskoe area, although the information is not necessarily

indicative of the mineralisation on the property that is the subject of the technical report.

Previous works at Sergeevskoe included geochemical sampling and geophysical surveys, trenching and

limited core drilling resulting in the delineation of a number of gold, copper and molybdenum

anomalous areas.

In total, and to varying degrees of study, more than 10 gold occurrences and numerous mineralised

points for gold, molybdenum and copper have been identified at the Sergeevskoe property. Numerous

geochemical anomalies of Au, Cu and Mo were also delineated in the area.

The gold mineralisation is generally related to quartz vein-veinlet system/zone which is often

accompanied by alteration (tourmalinisation, pyritisation, sericitisation) together with sulphide

polymetallic mineralisation.

However, due to the age of the data (often more than 50 years old), little reliance can be placed on

the absolute values seen from trenches, outcrops and drillholes, although the structures and

lithologies defined by the work hold good to this day. Certainly, no resources can be defined at this

time, nor any of the Soviet estimates incorporated into internationally acceptable reporting codes

without further reconciliation work.

Thus, Orsu has possession of a highly attractive exploration license containing many of the structural,

mineralogical and lithological controls as are seen at Kluchevskoye, but with the added advantage of

a number of drill-ready targets.

It is likely that some of these will be mineralised extensions from ore zones mined at the western end

of the Kluchevskoye pit whilst others might represent faulted continuations of the same Kluchevskoye

system. Either way, the magnitude of the Kluchevskoye body should not be underestimated and as

such, Sergeevskoe presents an excellent opportunity to develop near surface oxide mineralisation

with the possibility of deeper primary mineralisation development.


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Furthermore, WAI believes that the budgeted work programmes put forward by Orsu are both

practical and prudent and will greatly enhance the understanding of this exciting area.


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1 INTRODUCTION

1.1 Scope of Work

Wardell Armstrong International (WAI) was commissioned by Orsu Metals Corporation (“Orsu” or the

“Client”) to prepare a Baseline Technical Report under the Requirements of the Canadian National

Instrument 43-101 (NI 43-101) for the Sergeevskoe Property, located in the Mogocha District,

Zabaikalskiy Krai of Russia.

Orsu Metals Corporation is a base and precious metals exploration and development company, with

its headquarters in London and is listed on the Toronto Stock Exchange.

Sergeevskoe is considered as a greenfield site, even though the previously operated large

Kluchevskoye open pit lies immediately to the east of the licence area. Previous works at Sergeevskoe

included geochemical sampling and geophysical surveys, trenching and limited core drilling resulting

in the delineation of a number of gold, copper and molybdenum anomalous areas.

However, the majority of the data stem from the Soviet era, and although very useful for delineating

targets, cannot be incorporated into internationally acceptable reporting codes without further

reconciliation work.

The report has been prepared in accordance with the guidelines of the Canadian Institute of Mining,

Metallurgy and Petroleum (CIM) Mineral Resource and Mineral Reserve definitions and in conformity

with generally accepted CIM “Exploration Best Practices” guidelines. However due to the early stage

nature of a greenfield site, WAI has only considered the following aspects of the Property:

Location;

Historical work done;

Regional geology;

Local geology stratigraphy, rock types, structural control;

Mineralogy and physical properties;

Overburden and weathering profiles;

Geological interpretation and mineralisation morphology;

Exploration and drilling to date;

Sampling methods;

Assay testwork;

Current exploration programme;

Database review;

Mineral Resource Potential; and

Conclusions.


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Orsu plans to undertake further trenching and limited drilling during the next few months to better

define the mineralised targets, and in particular test the near surface, oxide portions of the

mineralisation.

1.2 Independent Consultant

WAI has provided the mineral industry with specialised geological, mining, and processing expertise

since 1987, initially as an independent company, but from 1999 as part of the Wardell Armstrong

Group. WAI’s experience is worldwide and has been developed in the coal and metalliferous mining

sector.

Our parent company is a mining engineering/environmental consultancy that services the industrial

minerals sector from ten regional offices in the UK and international offices in Almaty, Kazakhstan,

and Moscow, Russia. Total worldwide staff complement is now close to 500.

WAI, its directors, employees and associates neither has nor holds:

Any rights to subscribe for shares in Orsu Metals Corporation either now or in the future;

Any vested interests in any concessions held by Orsu Metals Corporation;

Any rights to subscribe to any interests in any of the concessions held by Orsu Metals

Corporation either now or in the future;

Any vested interests in either any concessions held by Orsu Metals Corporation or any

adjacent concessions; or

Any right to subscribe to any interests or concessions adjacent to those held by Orsu Metals

Corporation, either now or in the future.

WAI’s only financial interest is the right to charge professional fees at normal commercial rates, plus

normal overhead costs, for work carried out in connection with the investigations reported here.

Payment of professional fees is not dependent on the success of the Admission or linked to the value

of the Company.

1.3 Source of Information

This report is based on information provided by Orsu and collected by WAI during the site visit, as well

as personal knowledge of the adjacent Kluchevskoye deposit.

Although the majority of the data viewed derives from the Soviet era, WAI has no reason to doubt the

reliability and robustness of information provided by the Client.

The information in this technical report is based on the following sources:

Technical discussion with Orsu personnel on site visit;

Inspection of the Sergeevskoe Property area, including geological investigation;

Review of exploration data provided by Orsu; and


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Additional information from public domains such as company news, presentation and reports.

1.4 Personal Inspection

In compliance with National Instrument 43-101 guidelines, Phil Newall, BSc (ARSM), PhD (ACSM),

CEng, FIMMM, Managing Director of WAI, conducted a personal inspection of the Sergeevskoe

property between 02 to 03 November 2016, primarily covering the geology, exploration and the

previous drilling programmes.

1.5 Units and Currency

All units of weight and measurement in this report are metric, unless otherwise noted. Units of

currency are in US dollars, unless otherwise specified. Specific abbreviations used include:

Abbreviation Unit

m Metre

km Kilometre

g Gramme

t Tonne

oz Ounce

lb Pound

% Percentage

cm CentimetreoC Degrees centigrade

1.6 Limitations, Reliance, and WAI Declaration

WAI’s opinion contained herein is based on information collected throughout the course of WAI’s

work, which in turn reflects various technical and economic conditions as of the effective date. Given

the nature of the mining business, these conditions can change significantly over relatively short

periods of time. Consequently, actual results may be significantly more or less favourable than

assumed according to changes in metal prices or other variables.

This report may include technical information that requires subsequent calculations to derive sub-

totals, totals and weighted averages. Such calculations inherently involve a degree of rounding, and

consequently introduce a margin of error. Where these occur, WAI does not consider them to be

material.

WAI is not an insider, associate, or affiliate of Orsu, (or the vendor Sibzoloto Investments Limited) nor

has WAI acted as an advisor to this company or its subsidiaries or affiliates in connection with this

Project. The results of the technical review by WAI are not dependent on any prior agreements

concerning the conclusions to be reached, nor are there any undisclosed understandings concerning

any future business dealings.


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Except as specifically required by law, WAI does not assume any responsibility and will not accept any

liability to any other person for any loss suffered by any such other person as a result of, arising out

of, or in connection with this Technical Report or statements contained herein, except required by

and given solely for the purpose of complying with the mandate as outlined in this Technical Report

and compliance with NI 43-101. WAI has no reason to believe that any relevant additional information

or material facts have been withheld by Orsu.

The authors hereby acknowledge Orsu for assistance with field review and data gathering.


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2 RELIANCE ON OTHER EXPERTS

This technical report has been prepared by WAI on behalf of Orsu Metals Corporation.

For the purposes of this report, WAI has relied on ownership information provided by Orsu Metals

Corporation, and although WAI has not researched property title or mineral rights, WAI believes the

asset to be secure and unencumbered.

This is supported by a title opinion document, provided to Orsu in November 2016 by Saveliev,

Batanov & Partners, a Russian legal firm. This document opines on the overall validity of the license

as well as whether there were any grounds for early revocation, following the successful Auction.

The conclusions from this work were that Orsu does have secure title to the property and is in full

compliance with Russian regulations.

WAI has seen this document and it is on this opinion that WAI relies in respect of Section 3.2 of this

report.


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3 PROPERTY DESCRIPTION AND LOCATION

3.1 Location

The Sergeevskoe Property is located in the Zabaikalsky Region in the Russian Federation (Figure 3.1).

The property is situated 40km to the southwest of Mogocha town – the district capital with a large

railway station on the Trans-Siberian Railway. The newly built Chita-Khaborovsk motorway passes

within 8km to the south of the property. The distance from Chita to Sergeevskoe is 560km.

Figure 3.1: Location Map of the Sergeevskoe Property


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3.2 Mineral Tenure

The Sergeevskoe license area occupies 7.6km2. The LLC SC "Alexandrovskoe", a subsidiary of Sibzoloto

Investments Limited (“Sibzoloto”), a Cyprus registered company and the sole owner of LLC GK

Alexandrovskoe, acquired the license at a public auction from the Russian Government that took place

on 22 November 2013. The shares of Sibzoloto are owned by four arm’s length parties together

defined as the Sellers. The license was issued on 31 December 2013 and it is valid until 31 December

2031. In 2016, the license was actualised by the Ministry of Natural Resources of the Russian

Federation. This confirmed the validity of the license.

On the 21 September 2016, Orsu Metals Corporation announced the terms of the Exclusive and

Binding Heads of Agreement. On the 12 January 2017, Orsu announced amended terms of the

agreement and signed a definitive share purchase agreement.

The terms of the acquisition of the Sergeevskoe Project are tied to Orsu’s successful completion of the

sale of Orsu’s interest in its Karchiga Project located in Kazakhstan for US$7.75 million by June 30,

2017.

Closing of the Sergeevskoe Project acquisition is subject to the receipt of regulatory approval from

TSX-V for this fundamental acquisition. On closing, Orsu will purchase 300 (30%) of the €1 par value

shares of Sibzoloto from the Sellers by the issue of 146,605,683 new common shares in Orsu and

payment of US$180,000 cash. If the sale of Karchiga completes prior to June 30, 2017, then within 10

days, the Sellers will sell and Orsu will purchase the remaining 700 (70%) of the shares of Sibzoloto for

consideration of €700 and US$420,000 cash.

At that point, Orsu will own 100% of Sibzoloto and the Sellers will own in aggregate 44.5% of Orsu. No

one Seller will own more than 20% of Orsu and the Sellers have confirmed they will individually govern

their investment in Orsu.

If the sale of Karchiga does not complete prior to June 30, 2017 then Orsu will own 100% of the

Karchiga project located in Kazakhstan and a 30% participating interest in Sibzoloto. Orsu and the

Sellers will negotiate the terms of a shareholder’s agreement at that time to govern the operations of

Sibzoloto, the terms of which will provide for an option for Orsu to acquire, and the Sellers to sell, the

remaining 700 (70%) shares of Sibzoloto on terms to be negotiated at that time. Prior regulatory

approval will be obtained in the event the parties determine that the consideration for the remaining

700 shares of Sibzoloto be paid and settled in shares of Orsu.

The Sergeevskoe license was granted by Zabaikalnedra, a local administrative branch of Rosnedra, a

Federal Agency responsible for issuing such licenses. The license is not listed as a strategic asset by the

Russian Government. There is no previous ownership in relation to the territory or its part covered by

the Sergeevskoe license. The surface rights belong to the Russian Government, which granted a license

to LLC SC "Alexandrovskoe". The license holder obtained all necessary permits, including a consent

from the Forest Protection Authorities, to conduct exploration works. This permit allows to undertake

trenching and drilling works.


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The license was issued for geological study, exploration and mining and has no limitation to the depth

of mining. In addition, there is no obligation on financial expenditure at the license, although the

license holder has to achieve certain milestones:

Completion of resource assessment to Russian-style “C2 and P1” standards by 31.12.2018;

Completion of resource assessment to Russian-style “C1 and C2” standards by 31.12.2022;

Construction to start by 31.12.2024; and

Production to start by 31.12.2025.

During geological study, the license holder must pay 208 Rubles per km2 per annum. This will increase

to 10,115 Rubles per km2 during the detailed exploration stage. Taxes during mining will be applied in

accordance with the typical practices in the Russian Federation.

The license holder must obey all environmental regulations of the Russian Government, such as water

and forest protection, contamination of the ground. The license holder must conduct background

environmental monitoring.

To comply, in late 2016, GK Aleksandrovskoe contracted a Chita-based Laboratory of Environmental

Problems (“LEP”) to undertake a baseline study, which involved assessment of the environmental

situation prior to the new exploration works. As part of the programme, chemical, radiometric and

physical property studies of 126 soil samples from 12 sites were undertaken. Also, 50 water samples

from 12 sites were collected in different parts around the license area. Seven samples were collected

from stream bed sediments draining different parts of the license area.

A final report from LEP was received in mid-February 2017. Its main conclusions are as follows:

Surface waters are insignificantly contaminated due to the technogenic impact of the

historical operations. Their chemical and physical properties are similar to natural

concentrations;

Some soil and stream bed samples contain elevated concentrations of copper, zinc,

arsenic and sulphur due to the influence of historical mining works.

No other permits are necessary to conduct exploration works at the Sergeevskoe license area.

A plan view of the concession area is shown in Figure 3.2 below and coordinates are presented in

Table 3.1.


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Figure 3.2: Concession Area

Table 3.1: Sergeevskoe Concession Area Coordinates

No Easting Northing

1 20659841 5936878

2 20659899 5936261

3 20659945 5935860

4 20659141 5936297

5 20658758 5936748

6 20658475 5936445

7 20657809 5936734

8 20657107 5936765

9 20656565 5937274

10 20656033 5937440

11 20654659 5937296

12 20654655 5937565

13 20656414 5938357

14 20656841 5938322

15 20657961 5937934

16 20658415 5937276

17 20658572 5937297

18 20658123 5937930

19 20658735 5937918

20 20658729 5938002

21 20657926 5938064

22 20656712 5938491

23 20657608 5938888

24 20660062 5938467

Klyuchevskoe

Open Pit


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WAI notes that the concession coordinates are presented in the Pulkovo 1942 GK Zone 20 coordinates

system.

WAI Comment: WAI has seen the license for the Sergeevskoe area and can confirm the license

number, coordinates and expiry date. In addition, WAI has also seen legal opinion on the

property and therefore can conclude that all documentation is in place for Orsu to have legal

tenure over the property.


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4 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

4.1 Accessibility

The Sergeevskoe property is accessed via a recently constructed M58 road from Chita (560km) which

runs approximately 8km south of the site (Figure 4.1); or alternatively from the town of Mogocha

(36km) which has regular train services to Chita, Moscow and other major Russian cities.

The regional transport infrastructure includes the Trans-Siberian and BAM rail-roads which provide

links to the Far East and Central Russia. The region also has direct rail connections with China and

Mongolia.

All principal cities and towns are connected by paved and all-season gravel roads. There is an airport

in Chita with regular flights to Moscow and other major Russian cities.

Figure 4.1: Route Map from Davenda to Chita Airport (579km via M58/AH30)

4.2 Climate

The climatic conditions in the Zabaikalsky Region are extreme continental, exhibiting long cold winters

and short cool summers. Historical weather observation records are available from a weather station

situated in Mogocha, along with a weather station installed at site during the summer of 2013.

The coldest recorded annual month is January with an average temperature of -28°C; the warmest

annual average month is July with an average temperature of +17°C. The overall average temperature

of the region is -4.8°C.

Sergeevskoe

Mogocha


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The recorded data indicates that the region is subject to relatively low snowfall during the winter

period, with the maximum annual precipitation occurring in July (430mm), with variations ranging

between 269.4mm (1954) and 691.5mm (1934). Precipitation in the form of snowfall occurs on

average between the end of October and March, giving an average snow-cover thickness of between

0.15m and 0.20m. The snow-cover typically melts between March and April.

The location of the project is within a transitional zone of permafrost and seasonal ground-frost. The

maximum depth of ground/permafrost is recorded to be between 70m and 120m below ground level.

However, notwithstanding the harsh climate, exploration and mining operations are possible all year

round. In reality, much exploration drilling is preferably done in winter when the ground is frozen.

4.3 Local Resources and Infrastructure

The property is located between the Davenda and Kluchevskiy villages (Photo 4.1). Davenda has a

population of 978 and is located approximately 4km west of the property area. Kluchevskiy has a

population of 1,200, the property is approximately 3km east of the property area. The roads to the

camp from the villages are graded dirt roads.

Photo 4.1: Kluchevskiy Village with Open Pit in Background

The main industries in the region are alluvial and hard rock gold mining, with forestry enterprises and

railway maintenance. The populations of Kluchevskiy village and the nearby settlement of Davenda


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are in part populated by former employees of closed and operating mining enterprises and provide a

pool of skilled labour. The main power grid is available through 110kV transmission lines.

Aggregate, dimension stone, construction sand and refractory clays are all available locally.

4.4 Physiography

The region has an elevation of 900-1,200m above sea level (mASL), in the drainage basin of the Shilka

River. The project area comprises moderate relief hills with approximate peaks of 1,200mASL and river

valleys at 900mASL.

Vegetation comprises coniferous and broadleaf forest, typical of the boreal zone. Areas of permafrost

in the area are discontinuous and can extend to depths of 120m below the surface. It is reported that

permafrost is not present in the area of the current open pit at Kluchevskoye, but is in some areas of

the waste dumps. Seasonal freezing within the soil profile is reported to reach depths of 2.3m to 3.6m.

In terms of the license area to sustain the infrastructure required for mining, although the project is

at a very early stage of exploration, the author believes there will be sufficient space for plant, tailings

and waste dumps should a viable operation be developed.


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5 HISTORY

5.1 Introduction

Much of the history of the Sergeevskoe licence area is intimately related to the exploration and

development of the adjacent Kluchevskoye deposit as many of the mineralised occurrences at

Sergeevskoe are thought to be continuations or off-sets from the Kluchevskoye ore zones, although

the information is not necessarily indicative of the mineralisation on the property that is the subject

of this technical report.

5.2 Kluchevskoye

In the second half of the 19th century alluvial gold mining operations commenced within the Mogocha

region, within the Zheltuga River and its tributaries. In 1860, alluvial gold was mined from the Bolshaya

Kudech River, to the south of the project area. In 1901 a joint Anglo-Russian company, the

Nerchinskoye Gold Production Society commenced hardrock mining of the Kluchevskoye deposit by

an underground system of drives, cross-cuts and rises on the 848mASL and 818mASL. The main targets

of this mining were the quartz-tourmaline veins with the ore being processed by mercury

amalgamation. The operational mine life between 1901 and 1910 produced approximately 688kg of

gold at an unknown grade.

Further exploration commenced in the 1930s and continued through to 1941, and it was during this

period that the first formal reserve statements were produced. Underground mining operations

restarted in 1936 and continued until 1952 (Photo 5.1) using shrink stoping and “Glory Hole” mining

to extract pipe-shaped high grade shoots. Between 1936 and 1952 a reported 5,855kg of gold was

produced by mercury amalgamation, with the plant having a throughput of 150t/day.

Photo 5.1: Adit Portal, Kluchevskoye


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By 1955 the open pit mining had reached the sulphide reserves. During the initial operation of the

open pit, the ore was processed in a new flotation plant, which was decommissioned in 2002. The

derelict building shell remains on site. It is reported that when operational, these processing facilities

had a capacity of 530,000tpa of ore. The concentrate produced was shipped to the Ural copper

smelters for further processing and gold recovery.

Underground exploration was advanced between 1947 and 1951 with the development and sampling

on the 888mASL, 848mASL, 830mASL and 780mASL levels. These exploration activities resulted in five

separate levels of underground sampling (including those developed in 1901) which were sampled

and estimated for both vein-type and stockwork-type mineralisation. To complement the sampling,

underground drilling was completed, resulting in a revised reserve estimate in 1955.

Exploration work in 1970 included underground development on the 730mASL and 630mASL levels. A

new reserve in 1977 formed the basis for the more recent open pit gold mining.

Exploitation at the Kluchevskoye deposit spanned a period of 25 years, from 1977 to 2002. During this

period approximately 8.9Mt or ore was milled at an average grade of 1.68g/t Au. In 2003 production

ceased due to increased processing and transportation costs against the background of lower gold

prices. The third stage of the open pit design projected in 1982 to reach an elevation of 680mASL

(depth of 250m below surface) was not completed.

5.3 Sergeevskoe

5.3.1 General

Prior to the issue of the license to the LLC SC “Alexandrovskoe”, the property was owned by the

Russian Government. No other ownership is recorded for this property.

Historical exploration works were conducted in the 1950-60s. They consisted of geological mapping,

geophysical surveys, exploration trenching (>16,000 m) and drilling (8,500 m). The exploration works

were conducted by the geological party affiliated to the mining enterprise that operated an open pit

at the nearby Klyuchevskoe gold deposit. No exploration works of any kind were conducted at the

property since the 1970s.

Table 5.1 below details the works completed.


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Table 5.1: Historical Exploration Activities

Year Project and work stage Basic operations Unit Scope

1960 Geological surveying 1:200,000 Survey km2 8

1962 Geological surveying 1:50,000 Survey km2 8

1966-1978

Prospecting works Geophysical operations:MR 1:10 000

Resistivity method 1:10,000IP 1:10,000

Lithochemical survey 1:10,000Analytical works

km2

km2

km2

LMsample

88

2.380

4,000

1951-1954

Project for geophysicaloperations 1:10,000 Davenda

exploration crew

Core drillingDriving 2 pits (40.8 LM)Roadway driving (38 m)

Coring acquisitionTrench sampling

Analytical operations

LMm3

m3

samplesLM

samples

40040.81528052

130

1953-1955

Project for geophysicaloperations 1:10,000, Davenda

exploration crew

TrenchingCore drilling (underground)

Tunneling (195m)Cross cutting (38m)

Trench samplingCoring acquisition

Chemical analytical operations

m3

LMm3

m3

LMsamplessamples

2,650240780152

1,001100

1,101

1952-1955

Project for geologicalexploration, Davenda

exploration crew

TrenchingCore drilling

Driving 2 adits (305m)Shaft sinking (50m)

Driving 5 pits (120 m)Trench sampling

Coring acquisitionChemical analytical operations

m3

LMm3

m3

LMsamplessamplessamples

45,0006,1001,120380120650370

1,020

1961-1962

Project for verification oflithogeochemical anomalies by

ChSU Eastern Expedition

TrenchingTrench sampling


m3

LMsamples

1,5002929

1963-1967

Project for geologicalexploration, Kluchi exploration

crew

TrenchesCore drilling

Trench samplingCoring acquisition


m3

LMLM

samplessamples

26,8002,10053080

610

1972 Project for geologicalexploration, Kluchi exploration

crew

TrenchesTrench sampling


m3

LMsamples

3,990532532

Due to the very historical nature of the data described above, it is difficult to read too much into the

data other than as preliminary target delineation work.

Although Sergeevskoe remains a greenfield site, previous works have included soil-geochemistry and

sampling at 1:10,000 scale as well as different ground and airborne geophysical survey methods

resulting in the delineation of a number of gold, copper and molybdenum anomalous areas. From

these, the most promising occurrences include:

Ore Zone 23;

Kozie;

Karamaevskoe;


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Vodorasdelnoe (Peak Kluchi);

Sergeeva;

Severnoe; and

Kladbischenskoe.

The prospecting/exploration activities at the occurrences include surface trenching (Photo 5.2),

restricted amounts of drilling and underground developments (shallow shafts (Photo 5.3) and adits

with cross-cuts). Predominately the exploration activities were between 1950s-1970s.

Photo 5.2: Trench K996, Zone 23, from the Soviet Era


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Photo 5.3: Shaft 28 at Kozie

In summary, the exploration activities included >8,500m of historical drilling to a maximum depth of

300m, but more typically 50-70m, with grades similar to those historically exploited at Kluchevskoye

immediately to the east, although the information is not necessarily indicative of the mineralisation

on the property that is the subject of this technical report.

Importantly, the majority of the original trenches, drillholes and shafts/adits could be located at

surface, although as most are around 50 years’ old, the absolute location was not always completely

accurate.

An example of the sample records for Hole 197 at Karamaevskoe, drilled in 1967, can be seen in Figure

5.1 whilst a snap shot of the composite sampling plan is shown in Figure 5.2 below.


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Figure 5.1: Typical Drilling Passport from Soviet Era

The author was able to undertake a circuit of the main occurrences and can confirm that the sampling

plan (Figure 5.2) appears to be an accurate representation of the works done.


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Figure 5.2: Composite Geological/Sampling Map Over Zone 23

5.3.2 Kozie

A gold anomaly (at 0.025g/t Au level) was detected on the Kozie property based on soil geochemistry

sampling, whilst geophysical SP (up to 150mV) and IP (up to 7%) anomalies were also recorded.

However, the magnetic field was rather subdued (190-230 gamma) with few local anomalies above

the background level.

As a result, the eastern part of the Kozie area was explored by trenches and two shallow shafts (No 28

and 29 excavated in 1951-54) which had depths of 15.8 and 25.6m respectively (Figure 5.3). The

shallow shafts were sunk along a quartz-tourmaline vein which demonstrated high gold grades (up to

19.8g/t Au). Three drives were developed out from the shafts with a cumulative length of 38m (10m,

10m and 18m). Sampling showed irregular gold distribution within the vein and wallrock, with grades

varying from 0.1g/t Au to 30.0g/t Au for 1m sampling intervals.


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Figure 5.3: Shallow Shaft 28 and 29 Showing Geological Logging, Kozie

Four inclined holes (No 139, 140, 141 and 142 - Photo 5.4) were drilled to trace the vein. The depth of

the holes was from 50 to 100m. All holes intersected the vein and returned gold grades varying from

0.4g/t to 3.8g/t Au.


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Photo 5.4: Collar of Hole C142, Kozie

In general gold grades in trenches and boreholes were from 0.1 to 1.0g/t Au with some isolated

intervals which demonstrated gold grades from 3.8g/t Au to 8.67g/t Au. Again, sampling was carried

out selectively focusing mainly on the quartz-tourmaline vein ignoring wall-rock intervals. The cross-

section through boreholes 139 and 140 and shallow shaft 29 is presented below, in Figure 5.4.

Considering the trench results for the eastern part of the occurrence, the gold grades in most cases

were poor. Using the sampling results of the stringer-disseminated zones, a few intervals showed gold

grades from 0.1g/t to 3.0g/t Au with thicknesses of a few metres (Figure 5.5).


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Figure 5.4: Cross Section for Borehole C-139 and C-140 at Kozie Occurrence

Figure 5.5: Kozie Occurrence, Sampling for Gold


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The northwest trending fault zone was also trenched in 1965. The trenches crossed a few narrow

zones with stringer-disseminated mineralisation, but these could not be linked together due to the

sparse trenching grid. Typical grade values were from 0.1g/t to 2.0-3.0g/t Au.

A few trenches and two boreholes were drilled in the western part of the Kozie Occurrence in 1965.

They intersected a few quartz-tourmaline veins which were accompanied by zones of intensively

altered (tourmalinisation and pyritisation) explosive breccia.

Sampling of drill core and trenches returned lower gold grades from 0.1g/t to 0.4-0.6g/t Au. The very

few higher grade gold intervals (2-3g/t Au) could not be linked together. The best intersection was

one interval of 4.3m thickness with an average gold grade of 5.0g/t in a trench.

Boreholes drilled to check this interval at depth returned lower gold grades of 0.1-0.5g/t. Only one

sample at a depth of 163.5m showed a gold grade of 5.5g/t over a true thickness of 0.6m. The average

grade for the whole western section was estimated at 0.5g/t Au.

A 3D view of the sampling plan at Kozie is shown in Figure 5.6 below.

Figure 5.6: 3D View of Sampling Activity, Kozie Occurrence

It is likely that the perceived increase in the gold grade in the eastern part of the Kozie occurrence is

related to superimposition of the quartz-polymetallic mineral association onto the quartz-tourmaline-

pyrite mineralisation. Therefore, in general, the geochemical feature of the eastern part of Kozie is

similar to that seen at Ore Zone 10 which belong to the western extension of the main Kluchevskoe

gold deposit, although the information is not necessarily indicative of the mineralisation on the

property that is the subject of this technical report.


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WAI Comment: As with all the data from the Sergeevskoe project, the age of the information

(in many cases more than 50 years), coupled with the uncertainty of both the exploratory

techniques used as well as the quality of the assays returned, means that at best the Kozie

area has been identified as a major target for future exploration. This is due to the presence

of similar mineralisation and structures that have been identified and mined in the

Kluchevskoye open pit, although the information is not necessarily indicative of the

mineralisation on the property that is the subject of the technical report. The unspectacular

assays seen in trenches and drillholes are indicative of mineralisation, but should not be taken

as a guide to the tenor of mineralisation likely to be encountered.

5.3.3 Zone 23

The historical sampling data for Zone 23 has been captured by Orsu and is presented on the sampling

plans of the occurrence in Figure 5.7 and a 3D image in Figure 5.8 below.

Figure 5.7: Sampling Plan at Ore Zone 23 Occurrence

Results from the trenching and drilling as well as geophysics (self-potential electric survey method),

show that Ore Zone 23 appears fragmentary and separated by negative anomalies of -225mV intensity

which correspond to the sections of hydrothermally altered and sulphidised rock. The geophysical

data allows Zone 23 to be traced for 600m in a northwest direction where some individual soil

geochemical anomalies with gold grades from 1g/t Au and above were noted.

±


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Figure 5.8: 3D View of Ore Zone 23 Occurrence

5.3.4 Pik Kluchi

Historically, Pik Kluchi has only attracted minimum exploration. Based on the trenching data, there

were 6 separate sub-zones which have strike lengths from 100m to 305m and thicknesses from 2.58m

to 14.0m and with average gold grades from 1.0g/t Au to 3.45g/t Au.

5.3.5 Karamaevskoe Occurrence

The Daveendinskaya Exploration Team performed prospecting works in this area in 1952-1955. There

were various works undertaken, including numerous surface trenches (6,000m), a number of test pits,

two adits, a shallow shaft and few tens of boreholes (about 6,100m of drilling).

As a result of this work, preliminary indications were that the mineralisation is complex and has a

multi-stage sequence.

Most of the exploration activity was focused on exploring for quartz-molybdenite veins; part of them

were also sampled for gold. Some of the developments were sampled by 5m long interval or by

combined/group samples. This sampling method for gold is not able to give a realistic impression of

the intensity, or otherwise, of the gold mineralisation.

In 1963-1967, the Kluchevskaya Exploration Team carried out additional exploration (mainly in the

southwestern part of the area) where work focused on the gold mineralisation. Some old trenches

were cleaned up as well as new trenches developed. In addition, 10 boreholes from 50m to 150m

depth were drilled at Karamaevskoe.


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The gold grade varied from 0.2g/t Au to 117.1g/t Au (Figure 5.9). The sampling was focused on the

vein itself leaving intra-vein altered rock unsampled. Thus, the high grade sections were detected as

isolate intervals in the trenches. The average gold grade for the whole zone is from 0.2g/t Au to 0.8g/t

Au.

Figure 5.9: Vein 7-38 Structure Sampling Plan, Karamaevskoe Occurrence

Similar results were received from borehole samples. The gold grade varied from 0.3g/t Au to 0.8g/t.

In some intervals, gold grade reached 5.4g/t, although the average zone grade was 0.5g/t Au.

5.4 Resource Potential of the Sergeevskoe Property

License holder GK Aleksandrovskoe LLC has produced a prognostic potential for the Sergeevskoe

License area in accordance with the existing Russian methodology for estimation of greenfield

projects. However, this estimation is not in accordance with international standards and is not

reported further here.


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6 GEOLOGICAL SETTING AND MINERALISATION

6.1 Regional Geology

The Sergeevskoe licence area is located within the Mogocha Mineral Field, within a major tectonic

Proterozoic to Mesozoic fold belt of the southwestern margin of the Aldan-Stanovoi Shield of the

Siberian Craton. The region predominantly comprises various intrusive granites surrounded by



sediments and host a number of gold and molybdenum deposits and occurrences.

Lithologies include biotitic granites, granodiorites, diorites, quartz-diorites and granitic-porphyries,

with swarms of late northwest-trending granite porphyries. Some later dolerite dykes and porphyries

have intruded the granitoid and granitic rock sequences, as illustrated in Figure 6.1.

The granitoid complexes are located adjacent to a marked flexure (dilational jog) in the regional east-

west trending “Latitudinal Fault”, a segment of the regional Mogocha-Bushuleysk Fault Zone, marking

the contact between Proterozoic and Mesozoic granitoids.

The deposit cluster in the area is hosted by the Davenda granite massif which has a strike length of

50km and a width of 2-3km. Gold and molybdenum mineralisation is related with the porphyry

intrusions of Amudzhikano-Sretenskiy complex and associated with the zones of north-west

endocontact and exocontact of the Davenda massif.

There are seven deposits and several other occurrences of gold, molybdenum or copper

mineralisation, the most important being the Kluchevskoye and Alexandrovskoye gold deposits, and

the mined out Davenda molybdenum deposit.

Intrusive formations of the Amudzhikanskiy and Sretenskiy complexes can be subdivided into the

following three phases:

Phase I (qμЈ3аs) – quartz monzonites, quartz diorites, quartz monzonite-porphyry, diorites,

subalkalic quartz diorites;

Phase II (γδπ2Ј3 аs) – granodiorite-porphyry and diorite porphyry, granite-porphyry,

porphyritic granodiorite, quartz syenite, granites; and

Phase III (γ3Ј3аs) – magnophyric granite, granodiorite, granite-porphyry, granodiorite-

porphyry, quartz syenite-porphyry.

The final dyke series of the complex is quite diverse. It is represented by granite-porphyry, microdiorite

(crowded) porphyry, quartz diorite porphyry, microsyenite (hybrid) porphyry, sub-alkalic leucocratic

granite-porphyry, and orthoclasite.


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Figure 6.1: Regional Geology, Kluchevskoye District

Legend


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Hybrid porphyry can be found only in the form of dykes and, similar to granite-porphyry, they are

associated to the Davendinskiy massif, although their area of distribution is much broader. They are

peculiar rocks, composition of their impregnations (quartz, potassic feldspar) is inherent for acidic

mineralisation and composition of ground mass (glass, plagioclase, protobase) is inherent to the basic

mineralisation.

Gold mineralisation in the zones of sericitisation, tourmalinisation and silicification is associated with

the late dykes – microdiorite (crowded) porphyry, microsyenite (hybrid) porphyry and lamprophyres.

6.2 Sergeevskoe Property

The Sergeevskoe property is part of Davenda-Kluchevskoe metallogenic zone (Figure 6.2). More than

60% of Sergeevskoe area is occupied by Early Jurassic Davendinskaya intrusion of the Amanskiy

intrusion complex which is represented by biotite-hornblende diorite, diorite, quartz diorite, granite

and porphyry granite.

Proterozoic granitoid occupies the northern part of the area. The intrusive rock is represented by

biotite granite, granite-diorite and migmatite. The contact of the Davendinskaya intrusion and

Proterozoic granitoid has a northeast strike.

Both the granitoid and Amankan intrusion are protruded by porphyry stocks and dykes of the

Amudzhikanskiy complex of Late Jurassic age.

The largest tectonic structure in the area is the Kluchevsko-Davendinskaya tectonic zone. It is

represented by sequenced bands of rock which in various degrees are crushed, cataclasised,

carbonised, ocherised, and in some places, tourmalinised and sulphidised. The eastern extent of

Kluchevsko-Davendinskaya fault is the Glavnyi (Main) west-east fault. This fault is one of the main ore

controlling structures of the Kluchevskoe gold deposit.

In addition, the Alekseevsko-Glubokinskiy east-west trending fault is located to the north of the

Kluchevsko-Davendinskaya fault. Both these large regional faults are accompanied by numerous splay

structures which have predominately northwest strike for the Kluchevsko-Davendinskaya fault and

northeast strike for the Alekseevsko-Glubokinskiy fault (Figure 6.3).

Intensively fractured rocks occur along the northwest contact of the Davendiskiy intusion and

Proterozoic granitoid.

ORSU METALS CORPORATIONNI 43-101 TECHNICAL REPORT FOR SERGEEVSKOE PROPERTY, ZABAIKALSKIY KRAI, RUSSIAN FEDERATION

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Figure 6.2: Geological Map of Concession Area

ORSU METALS CORPORATIONNI 43-101 TECHNICAL REPORT FOR SERGEEVSKOE PROPERTY, ZABAIKALSKIYKRAI, RUSSIAN FEDERATION

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Figure 6.3: Main Ore Controlling Faults, Sergeevskoe

6.3 Mineral Occurrences

6.3.1 Introduction

In total, and to varying degrees of study, more than 10 gold occurrences and numerous mineralised

points for gold, molybdenum and copper have been identified at the Sergeevskoe property. Numerous

geochemical anomalies of Au, Cu and Mo were also delineated in the area.

From an initial consideration of the data, the most encouraging occurrences are Kozie, Ore Zone 23,

Karamaevskoe, Pik Kluchi, Sergeeva, Severnoe, Vodorazdelnoe and Kladbishsenskoe (Figure 6.4).

Sergeevskoe

Licence


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Figure 6.4: Main Mineral Occurrences in the Sergeevskoe License

The description of the individual occurrences is given below.

6.3.2 Kozie Occurrence

The Kozie occurrence (0.208km2) is located on the eastern slope of Kluchi hill some 200m to the

northwest from the western border of the Kluchevskoe gold deposit. The predominant host rock is

granite-diorite-porphyry of sub-volcanic type with varying amounts of explosive breccia.

Medium-grained granite of the Shakhmatino-Davendiskiy sub-complex occupies the eastern part of

the occurrence. In some places the contact between granite-diorite-porphyry and granite is along

tectonic structures with steep dips to the west. The younger formation is represented by dykes of

hybrid porphyry or diorite porphyry composition.

There are two main faults in the area which may be the boundaries of the occurrence. One of them

has a strike of 330-340° with a steep dip to the southwest, and is presumably a feather structure off

the east-west trending Kluchevsko-Davendinskiy fault, which is considered to be a major ore

controlling structure.

The other major tectonic structure is represented by a series of sub-parallel faults/fractures with

azimuth strike of 030-040° and dip to the northwest at 60-85°.

Thus, the fracturing system in the area is related to both faults, although the predominant fracturing

has a northwest strike, with northeast fractures also well-developed.


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Figure 6.5 below shows the geology, structure and exploration works over the Kozie area.

Figure 6.5: Geology and Exploration Works, Kozie

Most of the dykes and quartz-tourmaline veins are located in fractures with a northwest strike. Vein

minerals are mainly represented by quartz, tourmaline and disseminated pyrite. Chalcopyrite,

arsenopyrite and galena are not common within the veins.

Veins are accompanied by zones of altered rock (tourmalinisation and pyritisation); the width of these

zones is from a few centimetres to individual metres. Zones with stringer porphyry mineralisation are

also present and the thickness of these zones can reach tens of metres.

6.3.3 Ore Zone 23 Occurrence (Adit No5)

The Ore Zone 23 Occurrence (0.316km2) is located on the southeastern slope of Kluchi Hill in the

footwall of the main Kluchevsko-Davendinskaya fault (Figure 6.6). The occurrence is hosted by

medium grained biotite-granite of the Davendinskiy complex which is intruded by a number of

porphyry diorite and hybrid porphyry dykes.


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Figure 6.6: Simplified 3D Model for Zone 23 and Kozie Occurences, (Orsu Metals, 2016)

(Looking northwest , showing lump samples-red stars,)

The occurrence can be traced for a distance of 600-650m having a width of 100-150m. The

southeastern part of the zone has a strike of 300-320°, whereas the western part has an east-west

strike (Figure 6.7 and Figure 6.8).

Figure 6.7: Ore Zone 23 Occurrence (Eastern Part, Adit-5)


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Figure 6.8: Ore Zone 23 Occurrence (Western Part)

In broad terms, the zone is comprised of quartz-tourmaline and tourmaline veins which belong to a

gold-quartz-pyrite and gold-quartz-tourmaline association. Veins have a predominately northwest

strike, dipping to the northeast at 80-85°.

Some large-size veins have a north-south or east-west strike. The veins in the western part of the

occurrence have significant strike lengths of 100-150m and thicknesses from tens of centimetres to a

few metres. Some veins are branching, merging with each other, forming splay structures, or pinching

out both in strike and dip direction.

The veins in the eastern part (Adit 5 area) are relatively short in strike (a few tens of metres, up to

100m), although having significant thickness (1-4m).

In addition, all veins are accompanied by wide zones of intensive tourmalinisation which often makes

the definition of the vein thickness itself difficult. Zones of intensive tourmalinisation often have

thicknesses of 10-15m, or greater.

The distance between individual veins within the zone is variable. There is a dense system of

predominately narrow sub-parallel stringers, the distance between stringers is tens of centimetres.

The distance between bigger veins varies from 1-2m to 20-15m. The intra vein space comprises

tourmalinised, in some places silicified, intensively bleached and in different degrees pyritised granite.


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There is permanent presence of disseminated and veinlet pyrite within both veins and intra vein space.

Apart from the pyrite, some chalcopyrite, arsenopyrite and tetrahedrite also occur within zones.

Gold grades within the zone vary from 0.1g/t to 22.6g/t Au. Within this, sub-zones have thicknesses

from 2 to 11.6m and strike lengths up to 627m with an average grade of more than 1g/t Au.

WAI comment: The mineralisation type and alteration seen at Zone 23 is similar to the

Kluchevskoye deposit, although the information is not necessarily indicative of the

mineralisation on the property that is the subject of the technical report. Moreover, the

occurrence already has encouraging sampling results. Structurally, it does look as though the

occurrence is a southern extension of the Kluchevskoye gold deposit through dislocation to the

west along the Glavnyi Shirotnyi Fault. However, additional drilling and trenching will allow a

better understanding of the internal structure and gold grade distribution.

6.3.4 Pik Kluchi Occurrence

The Pik Kluchi Occurrence (0.105km2) occupies the south-eastern slope and the peak area of Kluchi

hill. There is a distinct step up in the slope gradient around the peak area.

The occurrence comprises a granite-diorite of porphyry appearance with large bodies of explosive

breccia. The large isometric body of porphyry diorite was mapped on the top of the peak. Dykes of

hybrid porphyry are widespread having a strike of 300-320° with steep dips to the northeast.

A fault zone of northeast strike with a dip to the northwest at 70-85° crosses the area as well as a

number of higher order northwest striking faults.

In general, the occurrence represents a few zones of intensively tourmalinised, sometimes oxidised,

kaolinised and in some place silicified, sub-volcanic porphyry-granite-diorite with impregnations of

pyrite. There are numerous quartz-tourmaline, tourmaline, quartz-pyrite, narrow pyrite (from a few

millimetres to 1cm) and discontinuous stringers in these zones. In addition, there are a few continuous

quartz-tourmaline veins which have a northwest strike (300-320°) and dip to the northeast at 80-85°.

The structure of these zones is similar and the differences are related only to shape and size. In

general, there are bands of hydrothermally altered rock, affected by faulting and minor intrusions,

which presents a package of variably altered rocks. However, on the whole these individual zones form

the single mineralised zone with a thickness of 100-120m (Figure 6.9).

The thickness of individual sub-zones varies from 5-10m to 60m. The gold grade in sub-zones and veins

varies from traces to 13.6g/t Au.


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Figure 6.9: Pik Kluchi Occurrence

WAI comment: The Pik Kluchi occurrence has an intermediate position between Zone 23 and

Kozie occurrences, although historically only limited sampling has taken place. However, the

structural position of the occurrence is analogous to a similar intrusion related zone to the

northwest of main mineralisation at Kluchevskoye, although the information is not necessarily

indicative of the mineralisation on the property that is the subject of the technical report.

Under this hypothesis, Pik Kluchi could be a northwest off-shoot extension of Zone 23, although

its relation to the Glavnyi Shirotnyi Fault is unclear.

6.3.5 Karamaevskoe Occurrence

The occurrence (0.855km2) is located in the watershed of the upper stream of the Glubokiy and

Alekseevskiy springs and is considered to have potential for molybdenum mineralisation.

Mineralisation is represented by veins and veinlets of complex composition due to multi-phase fluid

deposition in the same fractures.

Wallrock alteration is related to silicification with sulphide dissemination and sericitisation with an

average thickness of 0.7m. Quartz-molybdenite (quartz-molybdenite association) veins and veinlets

are the most abundant in the area. The mineralisation of later quartz-polysulphide and quartz-barite-

carbonate association are superimposed onto these veins.


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The ore bodies comprise a complex mineral association including quartz, pyrite, chalcopyrite,

tennantite-tetrahedrite, galena and sphalerite.

More than 40 veins are known at the Karamaevskoe occurrence. The largest strike length is seen by

veins 8, 5, 38, 21, 22, 1, 19, 36 and 61 (Figure 6.10). Most of these veins have lengths from 50m to

100m-150m. Two veins were traced for 300m and 500m. The vein thickness varies from centimetres

to a few metres.

Figure 6.10: Karamaevskoe Occurrence, Geological Plan

The bulk of the veins are located within fractures trending in a northwesterly direction (310-320°)

dipping to the northeast at 75-85°. Some veins have northwest or east-west strike. Almost all veins

are related to the zone of intensive fracturing striking in a northwest direction.

This zone represents a wide section of granite intensively crossed by veins, dykes of late lamprophyre

and dislocated by tectonic structures which have different thickness and strike.

Further work in 1963-1967 demonstrated that the mineralised vein zone was uncovered and is

represented by separate veins and veinlets. The zone width including wallrock alteration is from 0.15m

to 4m with an average thickness of 0.51m. The vein minerals are represented by quartz, tourmaline,

pyrite, molybdenite, chalcopyrite and tetrahedrite.


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The gold grade in veins varied from 0.2g/t Au to 117.1g/t Au, whilst the average gold grade for the

whole zone was from 0.2g/t Au to 0.8g/t Au. Similar results were received from borehole samples.

WAI comment: Historically only one vein structure (Vein 7 - Vein 38) out of nine large veins

was explored and sampled for gold. Although the actual vein grade results are encouraging,

as stand-alone targets, these are of little interest. Therefore, it is imperative to ascertain

whether the intra-vein host rocks are weakly mineralised, i.e. enough to begin to carry

potentially economic mineralisation over a reasonable width. Therefore, at this time, WAI

would place the Karamaevskoe occurrence as lower priority than Kozie, Zone 23 and Pik Kluchi.

6.3.6 Other Occurrences

6.3.6.1 Sergeeva Occurrence

The Sergeeva Occurrence (0.271km2) is located in the area of Sergeeva Hill and comprises of

mineralised zones No22 and No29 and a number of veins and veinlet-disseminated mineralisation

located in between the zones.

The area is comprised of rocks of the Davenda complex: medium- and fine-grained aplite-like granite

protruded by porphyry granite-diorite of sub-volcanic profile with large bodies of explosive breccia.

The porphyritic grano-diorite was mapped in the southern part of the area in the footwall of the

Glavny latitudinal fault. All these formations are crossed by dykes of different composition: porphyritic

grano-diorite, diorite porphyry and dykes of the late lamprophyre.

The faults are represented by a fragment of the Glavny latitudinal fault which is accompanied by east-

west and northwest striking faults of higher order. Most of these faults control quartz-tourmaline

veins, which are located in east-west (270-290°) and northwest (300-310°) trending fractures with

steep dips to the north and northeast.

The key element of the occurrence is the presence of a few sub-parallel zones of intensively

tourmalinised and pyritised rock which often contains quartz-tourmaline veins and veinlets. The

thickness of such zones is varying from a few metres to 20m. The thickness of the quartz-tourmaline

veins is inconsistent and is varying from tens of centimetres to a few metres and having a strike length

up to 150-200m.

There are sharp changes in vein thickness over short distances as well as branching and re-joining, and

breccia texture is often observed.

In general, these veins are characteristic of the quartz-tourmaline-pyrite mineral association which is

widespread in the southern part of the Kluchevskoye ore field. They are separated into two

mineralised zones of 100-120m thickness.

Gold grade within veins is varies from trace to 8.1g/t Au. Unfortunately, the sampling was carried out

only for the quartz-tourmaline veins, whereas the near-contact altered rock was not sampled.


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6.3.6.2 Severnoe Occurrence

The Severnoe occurrence (0.322km2) is located on the right slope of the Glubokiy stream valley, some

1.8km to the east of the Zapadnoe deposit which occurs to the north of the Sergeevskoe license area.

The occurrence is related to a zone of intensive fracturing of northeast strike (050-060°). This zone is

developed within Lower Proterozoic granitoid and controlled by dykes of the Amanskiy complex. The

zone is apparently a splay structure of the Alekseevsko-Glubokinskiy fault.

The rock is intensively limonitised and in some areas cataclasised and silicified. The zone width is

124m, the zone strike is to the northeast (080-085°) with steep dips (80-85°) to the northwest.

A 1.2m wide mineralised zone was intersected with an average gold grade of 2.0g/t Au within

fractured rock on the contact with a quartz porphyry dyke. The mineralised zone is represented by

silicified, intensively limonitised and kaolinised rock with numerous quartz-sulphide stringers. The

zone width is increased up to 3m in the south, whilst the average grade is 3.8g/t Au with a maximum

grade of 9.2g/t Au over 1m thickness.

The zone width to the northeast increases to 6.5m, although the gold grade does not exceed 0.1g/t.

The total strike length of the zone is 200m.

Apart from this mineralised zone, other areas of veinlet-disseminated mineralisation within sections

of fractured rock were identified. The rock alteration here is represented by K-feldspar altered,

silicification and tourmalinisation. Quartz-tourmaline veins and veinlets as well as lens-like veins of

milk-white and grey quartz occur within the zone.

The veinlet-disseminated mineralisation is represented by pyrite, chalcopyrite, arsenopyrite, and in

some cases by molybdenite, bismuthine and oxidised forms of these minerals.

In general, the geological structure and structural position of the Severnoe occurrence is similar to the

structures of the Zapadnoe deposit. There is an impression that they are related echelon-like

structures.

6.3.6.3 Vodorazdelnoe Occurrence

The Vodorazdelnoe occurrence (1.111km2) is located on the watershed of the rivers Glybokaya and

Malaya Borovaya some 1.4km to the southeast of the Zapadnoe deposit.

The occurrence occupies the apical part of the Davedinskiy granitoid massif which is crossed by dykes

of porphyry granite-diorite and porphyry quartz-diorite, as well as dykes of late lamprophyre.

The ore bearing structures have a northwest and east-west strike.


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Numerous quartz-tourmaline-pyrite veins with molybdenite were inserted by trenching. The host rock

has been subjected to silicification, K-feldspar altered and pyritisation. Thickness of the veins varies

from 0.1m to 0.3m, whilst the strike is 310-315°, dipping at 60-70° to the southwest.

Some 800m to the west of the intersected veins, one trench uncovered a zone in the granite which is

silicified, K-feldspar altered and pyritised. The zone width is 8m, with gold grades within the veins from

0.1-3.8g/t Au, and a gold grade for the zone averaging 3.0g/t.

6.3.6.4 Kladbischenskoe Occurrence

The Kladbischenskoe Occurrence (0.605km2) is located on the west slope of the river Malaya Pad

valley, some 7km to the west of the Kluchevskoye mine. The occurrence is situated within Proterozoic

granitoid which is cut by dykes of porphyritic diorite, lamprophyre and extended in a northeast

direction.

The occurrence is represented by a contiguous zone of veinlet-disseminated mineralisation type. The

host rock alteration is related to silicification, K-feldspar altered and pyritisation. Quartz-tourmaline

veins and veinlets occur within the zone. Mineralisation is represented by pyrite, chalcopyrite,

arsenopyrite, sometimes by molybdenite, bismuth and oxidised forms of these minerals – limonite,

malachite, azurite. The gold grade varies from 0.2g/t to 1.9g/t Au.

The combined thickness of the zones is 100-120m. In addition, quartz veinlets with a thickness of 3cm

containing bismuth and visible gold have been described on the left slope of the occurrence.

WAI Comment: The other occurrences within the Sergeevskoe area have very limited data

compared to Karamaevskoe, Kozie, Pik Kluchi and Zone 23 projects. Therefore, the potential of

these occurrences is not quantifiable at this time.


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7 DEPOSIT TYPES

The Sergeesvkoe Deposit can be classified as a Reduced Intrusion Related Gold System (RIRGS) hosted

in Jurassic intrusions associated with well-preserved moderate to high-temperature Mesozoic

collisional belts.

RIRGS are a recently recognised class of gold only mineral deposit styles with a direct genetic link to

cooling felsic intrusion during their formation. Mineralisation in RIRGS may be present as skarns, veins,

disseminations, stockworks, replacements, and breccias.

The resource grade and tonnages of known RIRGS deposits are displayed in Figure 7.1 below, which

also notes the host of the mineralisation. However, it should be noted that the information contained

therein is not necessarily indicative of the mineralisation on the property that is the subject of this

technical report.

Figure 7.1: Comparison of Tonnage and Tenor for RIRGS Deposits

Most RIRGS consist of intrusion-hosted, sheeted arrays of thin, low-sulphide Au-Bi-Te-W quartz veins;

gold grade is mainly controlled by vein density, a generalised model for RIRGS deposits is displayed in

Figure 7.2.

The RIRGS model was developed from Au deposits in Alaska (USA) and Yukon (Canada) which were

discovered in the 1990s, including Fort Knox, Dublin Gulch, Scheelite Dome and Clear Creek, which are

found in the Tombstone Gold Belt that reaches 1,000km across central Yukon and Alaska.


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Figure 7.2: Generalised Model for RIRGS Deposits

(Modified after Thompson and Newberry (2000))

Other deposits that may be RIRGS include Timbarra and Kidston (Australia), Penedona and Jales

(Portugal), Salave and Solomon (Spain), Mokrsko and Petrackova Hora (Czech Republic), Vasilkovskoye

(Kazakhstan), Niuxinshan (China), Kori Kollo (Bolivia), and Petza River and Miller Mountain (USA). The

global distribution of known RIRGS deposits is displayed in Figure 7.3 below.

Figure 7.3: Global Distribution of RIRGS Deposits

Most RIRGS are emplaced at a depth of between 1km and 7km, with the majority forming at depths

ranging from 3km to 6km. Gold mineralisation is spatially associated with intermediate to felsic

cupolas and contact aureoles of volatile-rich plutons of leucocratic and felsic magmatic phases.

These generally fall within the ilmentite series medium- to high-K magma field.


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Magnetite contents are low due to relatively low magmatic oxidation states; such conditions inhibit

early sulphide or SO2 formation, maintaining the solubility of gold in the melt fraction of the magma

until the magma is emplaced into shallow crustal levels.

RIRGS generally lack the vein stockworks characteristic of porphyry deposits due to their deeper levels

of emplacement. Fluid flow and mineralisation in most RIRGS systems is largely controlled by

structural features. The dominant structural control is arrays of parallel fractures infilled with thin

(0.1–5cm), auriferous, low-sulphide quartz veins in extensive intrusion-hosted sheeted arrays.

Melt inclusions taken from RIRGS mineralising intrusions contain gold, and are therefore suggestive

of a magmatic origin for the gold. Fluid inclusion evidence from RIRGS at shallow crustal levels (< km)

suggests a high temperature (>350°C) immiscible brines, and low-salinity CO2 vapours. At deeper

crustal levels (>5 km) the mineralising fluids are dominated by high temperature low-salinity, CO2-H2O

fluids. Isotopic data are indicative of a large crustal contamination component to the melt.

The RIRGS metal assemblage may contain high fineness Au (>700) with or without Bi, W, Mo, Te, As,

Sb, Cu, and Sn. Unlike porphyry-copper mineralisation, significant Cu is lacking. Scheelite-rich systems

(Mo-W or Sn-W) occur, but there does not appear to be a direct correlation with gold.

An overlapping metal zonation has been noted for RIRGS from the host Intrusion (Au-Bi-W-Te-Mo- As-

Cu) out through a Proximal Assemblage (Au-As-W-Sb) and a Distal Association (Au-As-Sb-Pb- Zn-Ag).

Deposits show evolution from early, high temperature magmatic stages to lower temperature

hydrothermal veins. Metal zonation occurs in response to a steep temperature and fluid chemical

gradient away from the mineralising pluton.

RIRGS consistently exhibit low sulphide contents (<5% by volume); sulphide minerals include pyrite,

arsenopyrite and pyrrhotite. RIRGS alteration mineralogy is highly variable both in style and intensity

due to the range of potential host lithologies and structural settings associated with steep

temperature and fluid chemical gradients away from the pluton.

Most notable alteration types range from potassic (K-feldspar), sodic (albite), sericitic, greisen, and

skarn. Tourmalinisation is rarely developed and trace element associations include B, F, Cs, Rb and Li.

Granites associated with RIRGS deposits exhibit subequal ratios of quartz, plagioclase and alkali

feldspar. Biotite is the dominant mafic mineral with lesser amounts of hornblende and pyroxene.

Associated with the intrusions are dykes of aplite and pegmatite, together with more mafic phases

such as lamprophyres. Pluton characteristics indicate high volatile contents, which are identified by

unidirectional solidification textures, miarolitic cavities, tourmaline veins, and greisen alteration.

RIRGS associated granitoids exhibit low aeromagnetic and gravity response, together with low

magnetic susceptibility readings. Elevated K and U signatures are characteristically associated with

highly fractionated granitoids, together with Th anomalies in metaluminous I-type granitoids.


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8 EXPLORATION

To date, Orsu has done very limited work on site which has been restricted to some re-survey work

and grab sampling from selected trench intersections.

In 2016, Hand held GPS devices (with an 8m accuracy) were used to check the location of the historical

trenches. Several trenches with significant mineralised intercepts as shown on historical maps were

then selected for field inspection and grab sampling. The grab samples were then delivered to the SGS

Vostok laboratory for assaying (Table 8.1). In total, some forty-one samples (plus one laboratory and

two field duplicates) were collected from the Sergeevskoe area.

Table 8.1: Orsu Exploration ResultsSample # Easting Northing Au, g/t Ag, g/t

1 20659375 5937084 0.58 2

2 20659377 5937090 0.3 1

3 20659486 5937157 0.21 1.8

4 20659486 5937157 0.22 1.7

5 20659486 5937157 0.21 0.9

6 20659500 5937139 14.5 7.2

7 20659569 5937158 0.51 2

8 20659569 5937152 0.26 0.7

9 20659410 5937100 2.24 1.8

10 20659410 5937100 0.69 0.8

11 20659442 5937091 0.27 0.15

12 20659442 5937091 0.78 0.6

13 20659563 5937069 1.5 1.7

14 20659560 5937052 0.92 0.5

15 20659542 5936742 0.33 0.8

16 20659006 5936595 0.15 1.5

17 20659007 5936603 0.1 0.4

18 20659008 5936626 0.34 26.1

19 20659008 5936626 0.71 14.3

20 20659723 5936455 0.46 2.6

21 20659723 5936455 0.23 0.15

22 20659723 5936455 11.3 4.7

23 20660240 5936872 0.26 0.6

24 20660240 5936872 0.16 0.4

K-1 20659603 5938257 0.18 3

K-2 20659577 5938279 1.17 1.3

Ser-01 20659514 5936482 5.69 3.1

Ser-02 20659523 5936561 0.42 1.7

Ser-03 20659525 5936578 0.53 3.2

Ser-03 20659525 5936578 0.55 3.1

Ser-04 20659542 5936693 0.08 1.3

Ser-05 20659536 5936718 0.04 0.4

Ser-06 20659535 5936783 0.21 0.4

Ser-07 20659542 5936860 1.60 11.4

Ser-08 20659565 5936975 0.16 1.6

Ser-09 20659552 5937032 0.34 3.8

Ser-10 20659562 5937109 0.07 <0.3

Ser-11 20659564 5937145 0.18 0.5

Ser-12 20659751 5937014 0.35 1.2

Ser-13/28 20659529 5937078 1.25 2.7

Ser-TR 20659072 5937108 0.58 3.4

Ser-14 20659456 5938057 0.40 1.2


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As samples were collected from poorly preserved trenches, they largely represent the randomly

available material and cannot be treated as representative material.

Furthermore, the samples were not collected using any specific spacing or density, although most

samples were collected from the historical trench K-679, one of the longest historical trenches which

exhibits several mineralised intervals across both Zone 23 and Kozie occurrences.

The samples were assayed using standard fire assay technique for gold and atomic absorption for

silver at the SGS Vostok Limited laboratory, which is independent from Orsu.

However, it should be noted that the grab samples are not representative and can be used only as an

indication for the presence of gold and silver mineralisation in the Sergeevskoe license area. As such,

Orsu is treating the assay results shown in Table 8.1 as indicative for the presence of gold

mineralisation, although further verification works are required.


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9 DRILLING

As the majority of drill holes at the site are more than 50 years old, little reliance should be placed on

the absolute values indicated by the holes, particularly with the knowledge that the holes generally

had very poor core recovery.

No further information is available about the techniques used, nor is there any remaining core on

which to pass comment.


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10 SAMPLE PREPARATION, ANALYSES AND SECURITY

Due to the historical nature of the data, no information is available other than to say that sample

preparation, analysis and security would have been undertaken following stringent Soviet protocols

which were common across the whole FSU.


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11 DATA VERIFICATION

The Sergeevskoe property was recently acquired by Orsu, primarily on the basis of the location of the

area immediately to the west of the historically important large Kluchevskoe gold deposit which is

currently being re-evaluated by a consortium of companies.

Therefore, at the time of the visit, Orsu had yet to undertake any physical exploration, and historic

trenches were in a poor condition and snow filled. Thus, the author had no opportunity to collect any

direct samples for data verification purposes.

However, as part of the site visit, the author was able to follow a number of trenches, identify the

location of boreholes and collapsed shafts.

In detail, this involved identification of the collar of hole C222A at Zone 23 (Figure 5.7) which lies in

the western part of the area, then following trench K996 north into the Kozie area to drill hole C237

(Figure 6.5). Close to here, C238 collar was also observed.

Walking eastwards, many trenches were identified as well as the site of hole C141, Shaft 29, C139,

C140 and Shaft 28 and C142 (Figure 6.5).

Turning south, and returning down slope, hole C215 collar was observed in the heart of Zone 23

occurrence (Figure 5.7).

Therefore, the author can, to a large extent, verify the positions of the historic trenching and drilling

undertaken at Sergeevskoye.


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12 MINERAL PROCESSING AND METALLURGICAL TESTING

Although no data are available at this time, Orsu will be concentrating efforts to define oxide gold

mineralisation that may be amenable to heap leach processing.


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13 MINERAL RESOURCE ESTIMATES

The Sergeevskoe property is an early-stage exploration prospect, and as such, no Mineral Resources

have been defined at this time.


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14 MINERAL RESERVE ESTIMATES

The Sergeevskoe property is an early-stage exploration prospect, and as such, no Mineral Reserves

have been defined at this time.


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15 MINING METHODS

Sergeevskoe is not an advanced property, and therefore this section does not apply.


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16 RECOVERY METHODS



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17 PROJECT INFRASTRUCTURE



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18 MARKET STUDIES AND CONTRACTS



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19 ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY IMPACT

To the best of our knowledge, WAI believes that Orsu are in compliance with local environmental and

social protocols.

WAI is aware that the company is waiting for a Forestry License to enable tree-felling as part of the

trench re-opening exercise, and a decision on this is due shortly.


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20 CAPITAL AND OPERATING COSTS



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21 ECONOMIC ANALYSES



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22 ADJACENT PROPERTIES

22.1 Introduction

The following information comes from various sources including the public domain, although the

author has been unable to verify the information and that the information is not necessarily indicative

of the mineralisation on the property that is the subject of this technical report.

Sergeevskoe lies within the well-developed mining area in the Trans-Baikal region effectively

sandwiched between two significant gold assets hosting multi-million ounce deposits.

The eastern boundary of Sergeevskoe license lies immediately adjacent to the Kluchevskoe open pit

mine, which historically produced 1.3Moz of gold, whilst the recently commissioned (Dec 2014)

Alexandrovskoe gold mine, lies just to the west of the Sergeevskoe license (Figure 22.1).

Figure 22.1: Location of Adjacent Properties

22.2 The Kluchevskoe Deposit

22.2.1 Introduction

The abandoned Kluchevskoe mine is located immediately to the east of the Sergeevskoe licence area,

and it is the mineralisation extensions from this deposit that form the main target at Sergeevskoe.

The Kluchevskoe mining operations date back to the 1930s from which time open pit mining, crushing

and milling and floatation metallurgical operations were operated.


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The village of Kluchevskoe, which is home to approximately 1,500 people, is established near the

abandoned open pit.

22.2.2 Geology & Mineralisation

The Kluchevskoye gold deposit is located within the Mogocha Mineral Field, within a major Mongol-

Okhotsk fold belt. The region predominantly comprises various intrusive granites surrounded by



sediments and host a number of gold and molybdenum deposits.

Lithologies include biotitic granites, granodiorites, diorites, quartz-diorites and granitic-porphyries,

with swarms of late northwest-trending granite porphyries. Some later dolerite dykes and porphyries

have intruded the granitoid and granitic rock sequences, as illustrated in Figure 6.1.

At Kluchevskoye, the granitoid complexes are located adjacent to a marked flexure (dilational jog) in

the regional east-west trending “Latitudinal Fault”, a segment of the regional Mogocha-Bushuleysk

Fault Zone, marking the contact between Proterozoic and Mesozoic granitoids. The Kluchevskoye-

Davenda deposit cluster is hosted by the Davenda granite massif which has a strike length of 50km

and a width of 2-3km.

Gold and molybdenum mineralisation is related with the porphyry intrusions of Amudzhikano-

Sretenskiy complex and associated with the endocontact and exocontact zones of the Davenda massif.

There are seven deposits and several other occurrences of gold, molybdenum or copper

mineralisation, the most important being the Kluchevskoye and Alexandrovskoye gold deposits, and

the mined out Davenda molybdenum deposit.

22.2.3 Historic Production

The Kluchevskoye deposit has had a long history of mining and a summary of the production data is

given in Table 22.1 below.

However, over and above the reserves produced from Kluchevskoye, the deposit also still contains

significant resources which have formed the target of recent interest at the deposit, culminating in

the proposed deal signed October 16th 2016 (see below).

22.2.4 Current Status

Five players from BRICS nations have signed an agreement to develop the Kluchevskoye gold deposit

at a pre-production investment of US$400-500M.

The five players are SUN Gold Ltd, China National Gold Group Corp (China National Gold or CG), the

Russian Sovereign Investment Fund, Far East and Baikal Region Development Fund (FEDF), and


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partners from Brazil and South Africa, SUN Gold said in a statement. The project, in the mining sector,

is the first BRICS investment project.

Table 22.1:Recorded Historical Production from Kluchevskoye

YearTonnage

(kt)Grade

(g/t Au)Au(oz)

1936-1976 8,130 3.65 954,057

1977 246 1.94 15,344

1978 322 1.86 19,256

1979 1,469 2.24 105,764

1980 1,002 2.25 72,484

1981 626 2.20 44,278

1982 238 1.79 13,697

1983 390 1.73 21,692

1894 279 1.77 15,877

1985 198 1.72 10,949

1986 164 1.46 7,698

1987 166 1.75 9,340

1988 239 1.95 14,984

1989 251 1.57 12,670

1990 332 1.55 16,545

1991 345 1.46 16,194

1992 308 1.58 15,646

1993 272 1.43 12,505

1994 355 1.59 18,147

1995 122 1.61 6,315

1996 34 1.56 1,705

1997 44 0.64 905

2000 170 1.49 8,144

2001 184 1.83 10,826

2002 81 1.15 2,995

Total from 1977-2002 7,837 1.88 473,965

Project Total 1936-2002 15,967 2.78 1,427,116

According to the feasibility study completed by Changchun Gold Design Institute, the proposed joint

venture aims to develop the Kluchevskoye gold deposit into a significant open pit mine and heap leach

operation with an expected production rate of 12 million tonnes of ore per year and gold doré

production of over 6.5 tonnes per annum. The pre-production investment is expected to be US$400-

500M.

22.3 The Alexandrovka Project

22.3.1 Introduction

The information herein is sourced from the Zapadnaya Gold Mining website

(http://www.zapadnaya.com/qa/assets.html). However, it should be noted that the information


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presented here is not necessarily indicative of the mineralisation at Sergeevskoye that is the subject

of this technical report.

The Alexandrovka deposit is a large scale developing project which lies immediately to the west of the

Sergeevskoe licence (Photo 22.1).

Photo 22.1: The Alexandrovka Project Area (Zapadnaya, 2016)

In 2011, geological exploration works were completed at the Alexandrovka deposit, a report with

reserves calculation was prepared and a final mining feasibility study was done.

By the end of 2012, by Protocol No.2853 of State reserves committee, reserves at Alexandrovka gold

ore deposit were approved, amounting to approximately 7.9Mt (С1+С2), equivalent to around 24t of

Au. In addition, resources at Alexandrovskoye are estimated to be more than 2 million ounces of gold.

In 2013, State expertise approval for the ore processing plant was obtained, and in September of that

year, the processing plant with an annual processing output of 750kt of ore was commissioned. Annual

saleable production will amount to at least 1.5t.

In the long term it is planned to increase the capacity of the ore processing plant up to 1.5 million tons

of ore per annum, and production up to at least 3 tons of gold per annum.

22.3.2 Geology & Mineralisation

The Alexandrovskoye deposit occurs in the Mogocha Mineral Field within a major tectonic early

Palaeozoic fold belt of the southwestern part of the regional Aldan-Vitim Shelf.

Jurassic plutonic complexes intrude the fold belt sediments and host gold and molybdenum deposits.

They comprise biotitic granites, granodiorites, diorites, quartz-diorites and granitic-porphyries. A


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swarm of northwest trending later granite porphyries occur in the eastern parts of the Mineral Field.

Some later dolerite dykes and porphyries have intruded the granitoid and granitic rock sequences.

The mineralisation is associated with a 3km long, northwest striking fault (the Main Fault), a second

order structure (the Alexandrovskoye Fault) and smaller, third order structures that are part of the

same fault system as the two larger faults.

Gold mineralisation at Alexandrovskoye occurs as pyritic quartz veins and quartz stockworks hosted

in coarse-grained biotite granites and dark green diorites. The quartz veins are surrounded by a halo

of intense quartz-sericite alteration. The quartz veins are structurally controlled, occurring in two NNE

striking zones (Eastern and Western) that are in second and third order splays off the main meridional

structure (the Main Fault).

More than 20 separate lodes and five stockworks have been interpreted. The mineralised lodes range

from 15m to 150m in strike length, and vary from 2m to 10m thick.

The strike extent of the lodes varies from 10-15m to almost 150m, with at least five lenses exceeding

100m. The quartz veins average 1.2m thick, and are surrounded by haloes of intense alteration

accompanied by bleaching of the host rock.


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23 OTHER RELEVANT DATA AND INFORMATION

No other relevant data are available.


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24 INTERPRETATION AND CONCLUSIONS

The Sergeevskoe license lies immediately to the west of the historic Kluchevskoye open pit gold mine

which has produced well over 1Moz Au and has resource potential of several million ounces gold (WAI

Technical Report) and which is now the focus of a BRICS consortium looking to re-start the project.

Furthermore, to the west of Sergeevskoe, lies the recently opened Alexandrovskoe open pit gold mine.

Although the similarity and direct connection to the large Kluchevskoye deposit immediately to the

east remains unproven at this time, results from historic exploration and recent Orsu check sampling

has shown that the potential of the Sergeevskoe area remains promising for further gold discoveries,

although the information is not necessarily indicative of the mineralisation on the property that is the

subject of the technical report.

This statement is corroborated by the fact that the major ore-controlling faults at Kluchevskoye pass

westwards into the Sergeevskoe license and it is clear that the mineralising structures that were mined

at Kluchevskoye are continuous to a greater or lesser extent into the Sergeevskoe area.

To date, historic Soviet work, done at a similar time as the Kluchevskoye deposit was being developed,

has identified a number of gold occurrences in the Sergeevskoe license, but only from relatively limited

exploration data comprising primarily trenching and limited drilling with associated geochemistry and

geophysics.

However, due to the age of the data (often more than 50 years old), little reliance can be placed on

the absolute values seen from trenches, outcrops and drillholes, although the structures and

lithologies defined by the work hold good to this day.

Thus, Orsu has possession of a highly attractive exploration license containing many of the structural,

mineralogical and lithological controls as are seen at Kluchevskoye, but with the added advantage of

a number of drill-ready targets.

It is likely that some of these will be mineralised extensions from ore zones mined at the western end

of the Kluchevskoye pit, whilst others might represent faulted continuation of the same Kluchevskoye

system. Either way, the magnitude of the Kluchevskoye body should not be underestimated and as

such, Sergeevskoe presents an excellent opportunity to develop near surface oxide mineralisation

with the possibility of later deeper primary mineralisation development.

In summary, although knowledge on the Sergeevskoe property is limited at this time, results are

encouraging and some drill targets are identified. The primary risk to the Project relates to the inability

to define a sufficient economically viable target suitable for open pit mining, although the potential

for more limited underground extraction should not be discounted at this time.


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25 RECOMMENDATIONS

25.1 Introduction

Given the preliminary nature of the exploration works at Sergeevskoe, WAI supports the Company’s

plan to minimise the initial efforts during the winter months.

Therefore, WAI recommends that the Company:

Undertakes a license-wide ground magnetics survey to better define the structure and

metallogeny of the area;

Re-open a number of historic trenches at Zone 23 and Kozie;

Instigate a modest exploration drilling programme to define an Inferred resource at Zone 23

and to better define the target at Kozie;

Re-survey all historic trenches, drillholes and shafts;

Collect samples for preliminary metallurgical testwork; and

Proceed at an early stage to a Scoping Study to define the economic potential of the license

area.

25.2 Budget and Work Programme

25.2.1 Work Programme

Moving forward, Orsu plans to undertake further trenching and limited drilling during the next few

months, concentrated over the Kozie and Zone 23 areas, to better define the mineralised targets, and

in particular test the near surface oxide portions of the mineralisation.

In addition, Orsu is about to start a ground magnetics survey across the whole license, based on north-

south lines, 50m apart. This work is expected to take approximately 3 weeks.

More specifically, at Zone 23, Orsu plan to re-open K679 and sample the southern 400m of the trench

which hosted the historical best intersections, 250m of the southern end of K684 will be re-opened as

well as the central part (200m) of K996. At this time, due to the constraints of operating in winter, the

western trench (K697) will be left.

Samples will be sent to SGS laboratories in Chita and initial assays are expected in first half of 2017.

Assuming the results are successful, a modest 3,000m drill campaign will be instigated, including two

twin holes.

The main programme will have two holes per fence, with fences 100m apart which combined with the

trench data will be sufficient to demonstrate mineralisation continuity for Inferred resources.


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At Kozie, the northern 220m of trench K679 will be re-opened, 150m of K752, and the excavation of a

small trench over the high grade area in the centre of the occurrence. In addition, it is likely that a

couple of structural core holes will also be drilled. There is no requirement for classified resources at

Kozie within this next phase of work.

Therefore, overall, Orsu are adopting a very modest approach over the winter months, in effect to

validate previous data, as well as collect new geophysical data that will help target selection in the

coming months.

25.2.2 Budget

Orsu has presented a budgeted work programme for Phase 1 works at Sergeevskoe, the details of

which are presented in Table 25.1 below.

Table 25.1: Sergeevskoe Phase 1 Exploration Budget

Task Total US $

Baseline NI43-101 report 33,000

Environmental Impact Assessments 7,937

Land & licence management 9,665

Trenching, Supervision & Transportation 180,369

Assays 63,751

Ground Magnetic Survey 23,810

Travel costs 7,937

Geologists and Field Expenses 23,760

Total 350,229

Upon completion of First Phase trenching and analysis of assays results in combination with magnetic

survey data, Orsu is planning to undertake various Phase 2 activities which will include initial diamond

drilling to test the mineralised intervals in the new trenches and to twin some of the historical drill

holes at Zone 23 and Kozie occurrences.

Should the results be positive, Orsu is planning to proceed with an additional drilling and trenching,

predominantly at the Zone 23 occurrence in order to achieve Inferred Resources.

The details of the Phase 2 exploration programme are given in Table 25.2 below.


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Table 25.2: Sergeevskoe Phase 2 Exploration Budget

Task Total US $

Electric Survey 16000m $48,000

Drilling 2000m $390,000

Assays (core samples) $79,200

Trenching 6500m $200,000

Assays (channel samples) $162,800

Preliminary Metallurgical studies $60,000

Geological support, transportation& other costs $150,000

NI43-101 report with Inferred Resources $60,000

Total $1,150,000

Taken together, for 2016-17, WAI believes that the work programmes outlined will provide key data

in being able to better understand the true potential of this exciting exploration area.


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26 REFERENCES

Litvinov, V.L., Vovchenko RG et al. Report on" Study of the distribution of minerals with the

preparation of geological descriptions of fields, assessment of their prospects and recommendations

for the direction of search and exploration of gold Davendinskogo Klyuchevskoy-node. "LLC"

ZabNTGeo "- Lviv, 1978 - 408 ."

"Литвинов В.Л., Вовченко Р.Г. и др. Отчет по теме «Изучение

закономерностей размещения полезных ископаемых с

составлением геологических описаний месторождений, оценкой

их перспективности и рекомендации по направлению поисков и

разведки Ключевско-Давендинского золоторудного узла». ООО

«ЗабНТГео» - Львов, 1978 - 408 с."

WAI report for Sun Gold, NI 43-101 Compliant Mineral Resource Estimate for the Kluchevskoye Gold

Deposit, Zabaikalsky Region, Eastern Russia, January 2014.

Title Opinion Letter to the TSX Venture Exchange, Saveliev, Batanov & Partners, November 2016.

Yazkov NM, Greshilov AS "The explanatory note to the justification of forecast resources of gold ore

Sergeyevka area (Mogochinsky District Trans-Baikal Territory)," Chita 2015.

“Язков Н.М., Грешилов А.С. «Пояснительная записка к

обоснованию прогнозных ресурсов рудного золота сергеевской

площади (Могочинский район Забайкальского края)», Чита, 2015”

Yazkov NM, Truschenko IS "Project" Search engine - evaluation work on the gold ore to ore-bearing

area Sergeyevka "Limited Liability Company" Geoekspert "Chita 2014

“Язков Н.М., Трущенко И.С. «Проект «Поисково - оценочных работ

на рудное золото на Сергеевской рудоносной площади»,

Общество с ограниченной ответственностью «Геоэксперт», Чита,

2014”

Zapadnaya Gold Mining Limited-Company Website, Main Page-Alexandrovka

(Accessed November 04, 2016, at http://www.zapadnaya.com/qa/alexandrovka.html )

APPENDIX 1: CERTIFICATE OF AUTHOR

CERTIFICATE OF AUTHOR

I, Phil Newall, BSc (ARSM), PhD (ACSM), CEng, FIMMM do hereby certify that as author of this NI 43-

101 Technical Report for the Sergeevskoe Property, Zabaikalskiy Krai, Russian Federation (“Report”),

with an effective date of 18 November 2016 and dated 10 March 2017, I hereby make the following

statements:

I am the Managing Director of: Wardell Armstrong International Ltd Baldhu House, Wheal Jane

Earth Science Park, Baldhu, Truro, Cornwall, United Kingdom TR3 6EH;

I graduated with a Bachelor Degree in Geology from Imperial College, London, UK in 1983 and

with PhD – “The use of lithogeochemistry as an exploration tool at the Redmoor sheeted vein

Sn/W complex, east Cornwall”, Camborne School of Mines in 1991;

I am a Fellow and Chartered Engineer of the Institution of Materials, Minerals & Mining;

I have practised my profession as a Mining Geologist for the past 30 years in areas of gold and

base metals evaluation in a number of countries around the world;

I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-

101”) and certify that I am a “qualified person” for the purposes of NI 43-101;

I take full responsibility for all of the items, “NI 43-101 Technical Report for the Sergeevskoe

Property, Zabaikalskiy Krai, Russian Federation” with and effective date of 18 November

2016 and dated 10 March 2017;

I visited the Sergeevskoe site at Kluchevskoye that is the subject of this report from 2-3rd

November 2016;

As of the effective date of this report and to the best of my knowledge, information and belief,

the Report contains all scientific and technical information that is required to be disclosed to

make the Report not misleading;

I have had no prior involvement with the Sergeevskoe Project, which is the subject of this

Report;

I am independent of Orsu Metals Corporation, LLC SC Alexandrovskoe and Sibzoloto

Investments Limited, and I have not received, nor do I expect to receive, any interest, directly

or indirectly in the Sergeevskoe Property or securities of Orsu Metals Corporation; and

I have read the instrument NI-43-101 and the 2016 Report has been prepared in compliance

with NI 43-101.

Date: 10 March 2017

Name: P Newall, BSc (ARSM), PhD (ACSM), CEng, FIMMM

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