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News From Vangold's Papua New Guinea Properties

February 21, 2004

It has taken a quite a bit longer than expected, but the news of the surveys on Vangold's (75%) and New Guinea Gold's (25%) Feni Island properties is finally out. The incredible potential of the Feni Islands (Ambitle Island) was previously reported on in The Bluest of Blue Sky Potential and in More Bright Blue Skies Over Feni. These reports explained the combination of geological circumstances which couldmean that Ambitle Island will turn out to be one of the largest gold deposits in the world, like its sister island, Lihir. But the news is not limited to Vangold's Feni Islands Property! The recent acquisition of Kanon Resources means that Vangold and New Guinea Gold now have a share in seven exciting and prospective land packages in Papua New Guinea. Three drilling programs will be in the news within the next few months on three of these properties with the drills turning first, on the Ambitle Island and Mt. Penck properties, both scheduled to begin within weeks!

Ambitle Island Exploration Results

As expected, the results from the exploration of the central and southern portions of Ambitle Island have yielded impressive results. Both the biogeochemical survey and the stream panned concentrate surveys were conducted in portions of the "Central Caldera" and the "Old Caldera Zone" on Ambitle Island. (Both "calderas" are actually volcanic craters.)

The biogeochemical survey started near the mouth of the Nanum River and the scientists worked their way up the hill close to the river toward the Central Caldera sampling along the way. The first priority was the Kabang area north of the large and intense I.P. anomaly, where drilling and soil sampling was previously done. Unfortunately, the geologist heading up the survey fell ill with malaria, and, as a result, the survey was cut short, and many prospective areas have yet to be tested. Even the area of the I.P. anomaly was largely untested. However, the program is likely to be continued sometime within the next couple of months. Still, enough work was done on the panned concentrate survey, along with previous evidence collected, to provide some excellent drill targets.

Dr. David Lindley, Vangold's lead consulting geologist overseeing the Feni project, reported the following on the stream panned concentrate survey:

81 panned concentrate samples were collected. Panned concentrate sampling was conducted along the Nanum River and its major tributaries. 72% of all panned samples had visible gold.

This must mean there are numerous sources of gold throughout the approximately 14 square kilometers of the Nanum River Valley. Large areas are yet to be surveyed.

The radar image below has been modified to show the results of the stream panned concentrate survey, the four highest values found in the biogeochemical survey and their relationship to the I.P. anomaly, major faults on the island, and the potassic alteration (displayed in my previous report).

There are several important points to be made about the results so far: The major I.P. anomaly, showing a major conducting body underground, overlies the junctions of the major NE-SW trending fault with two NW-SE faults. Previous stream panned concentrate surveys in the northern part of the central crater with high values are shown as orange dots. The I.P. anomaly is also open to the north in the same general area. However, this map strongly suggests that the greatest prospects are in the southern crater, where the I.P. anomaly is open to the south, southeast and southwest, and is highly correlated with the highest values of the intense potassic alteration. This high potassium in the soil is often associated with gold ore as it is in the area of the Louise Caldera of Lihir Island where some 50 million ounces in reserves have been proven up. Judging from the size of this alteration, the potential exists to find a huge gold deposit. The other colored dots indicate significant values in the recent surveys. The following picture gives a closer look at the southern crater in the Nanum River Valley.

The golden yellow, red, magenta and blue dots show the relative amounts of gold, from highest to lowest respectively, found in the steam panned concentrate survey. (Values below 1 ppm are not shown, though anything above 0.1 ppm (ppm = g/t) is considered to be anomalous.) Most of the blue dots are along the main river and show the widespread occurrence of gold. It is more significant when high levels of gold are associated with a spring rather than a main river or a large creek, because it shows that the gold is coming up from the ground below rather than having come from upstream. Highly significant, therefore, is the spring found in the area indicated by the golden yellow dot. Gold values in that area ranged to as high as 1,710 ppm! The nearby green dot from the biogeochemical survey confirms the presence of high values of gold there. It is within the area of the high potassic alteration, too. Although the I.P. survey did not go that far south, the graph shows that the I.P. anomaly was intensifying in that direction. High gold in pan values also occurred in the area indicated by the red dot with values up to 395 ppm.

The most intense portion of the I.P. anomaly, which shows up as the orangish-red area is some 650 meters long by 280 m wide at its largest dimensions.. How deep is the mineralization at the I.P. anomaly? The manner in which the I.P. survey was performed on Ambitle (150 m spaced dipole array) allows a conducting body to be detected at a maximum of about seventy five meters in depth. Considering the combined evidence, it appears that there is a large gold deposit 75 meters deep or less. Of course, it could go much deeper than that. Deep drilling through this area might be able to reach all the way down to the much larger area detected as the aeromagnetic anomaly, which may be a lower grade pyrite and gold deposit.

Clearly there are widespread gold occurrences on the island. The aeromagnetic anomaly and potassic alteration show that a extensive mineralization exists in the southern portion of the Nanum River valley, but it is not known if it is near enough to the surface and or if it is high enough grade to be mined. The I.P. anomaly and high values in the stream panned concentrate and biogeochemical surveys indicate areas where hydrothermal enrichment, or "feeder zones", from a deeper deposit exists. Deep drilling will determine if these zones are economical to mine. It will also determine if the large underlying deposit can be mined, and, in a word, if Ambitle Island really is another Lihir!

Preparations are underway to begin drilling several of the many drill targets. A camp has already been completed which will house the drill crews, geological staff and other workers. The drill contract has been awarded, and drilling is scheduled to begin by the end of this month. At the same time, additional survey work will take place. The next few months will be exciting times for Vangold and its shareholders!

The Kanon Properties

During the precious metals bear market, the less savvy mining companies found themselves out of business. The smarter managers found ways to survive even if it meant becoming a dot-com business for a while. The most able management teams, however, knew that the bear market was merely a cyclical bottom and that precious metals would be back in vogue in a few years. So they spent the time acquiring cheap or abandoned precious metal properties with inherent value. This is exactly what the managers of Kanon Resources Ltd did. They went 'cherry picking' throughout Papua New Guinea grabbing up the best and most prospective properties available. Papau New Guinea, with its unique geology, having two fracture zones going through it, has had quite a lot of geological activity past and present. It hosts some of the largest gold deposits in the world. All of the Kanon properties were selected for their potential to be multimillion ounce resources. Vangold and New Guinea Gold, through Kanon Resources, have a share in the "crème de la crème" of Papua New Guinea's exploration properties!

At the time that Kanon was acquired by Vangold and New Guinea Gold, Kanon's huge properties totaled to 1399 square kilometers (139,900 hectares) which is just over 0.3% of the entire land area of Papua New Guinea or the equivalent of about 52% of the land area of the state of Rhode Island in the United States or almost 25% of the land area of Prince Edward Island in Canada!

There were five properties in the original package. However, since that time, the management of Kanon has agreed to a 50:50 joint venture with NGG in one of the previously held NGG properties, Mt. Nakru. Since Vangold has a 50% interest in Kanon, that gives Vangold an effective 25% in Mt. Nakru. So, including the Feni Islands, Vangold has an interest in seven properties in Papua New Guinea now!

Both VAN and NGG had the right to increase their interest in one of the initial Kanon properties to 60% by funding the first $300,000 worth of exploration, which NGG opted to do with regards to the Mt. Penck property. As it currently stands then, here is the interest each company holds in the seven projects:

Feni Islands:
Mt. Penck
Yup River
Mt. Nakru

An estimated $15 to $17 million dollars (Australian or Canadian) has been spent on exploring these properties. Based on the amazing widespread results obtained so far, it can be truly said that all of these properties have the potential to host rich sources of gold, while especially Mt. Penck, Yup River and Bismarck have the potentialto be another Porgera-like find!

I asked Peter McNeil, Managing Director of Kanon, to send me more information about the properties owned by Kanon. These properties contain over 60 areas of proven anomalous mineralization! The vast majority are gold properties but some also contain silver, platinum group metals, copper, and/or other base metals. They range from findings with high grade veins to large lower grade prospects with bulk tonnage potential. Some have had only minimal work done on them, but have already produced promising results with discoveries of gold in veins, soil or streams. Others have had enough work done on them to begin diamond drilling. Some already have inferred resources. The detailed data that Mr. McNeil sent me pertaining to these properties and the discoveries and work already done on them, excluding the numerous maps, filled some 22 pages of A-4 size (standard letter size) paper! There is no way that a 3000 word report like this one can do justice to the discoveries already made and catalogued. Considering in more detail the vast extent of past work performed and the results obtained on just 1 of 6 Kanon properties, should aptly illustrate the excellent potential of all of the properties.

Of the five original properties of Kanon, three are not rectangular blocks of land, but are irregularly shaped to include only known mineralized areas. All have been selected to cover highly prospective land areas.

The Bismarck Property (Vangold 50%)

Consider the map of the 206.2 square kilometer Bismarck property below:

The entire licensed area stretches for approximately 55 km from its SE to NW corner. Why does it have this unusual boundary shape and the sixteen names of locations within it? It is because the property has been carefully selected for known gold occurrences and to cover the entire Bismarck Fault Zone. There are sixteen areas with known gold anomalies and a total of some A$6 million has already been spent on exploring this property. The most advanced work within this property has been done at the Tekim and Semben Projects. The Bismarck property is about 100 km NE of the 25 million ounce Porgera Mine and the Tekim project is geologically similar. Access is by air only. Here are some highlights:


A 1400 meter long gold in soil zone
A large magnetic anomaly
Trenching of 20 m of 6.99 g/t Au, 90 m of 1.42 g/t, 75 m of 1.0 g/t and 25 m of 4.8 g/t
Five shallow diamond drill holes revealed wide zones of low-grade mineralization including 80 m of 1.5 g/t, within which is a gold oxide zone of 29 m of 2.1 g/t and a high grade area of 0.75 m of 23 g/t Au.
Gold in soil up to 18.8 g/t and in rocks up to 5.8 g/t
Ready for drilling


Quartz dike with high grade gold veining
Within a 700 meter long structure that appears to be about 3 km long in aerial photographs
Trenching revealed 3 m of 156 g/t, 4.5 m of 23.5 g/t and 2.0 m of 17.0 g/t with coarse gold
Four diamond drill holes showed gold in quartz veins with 0.75 m at 23.5 g/t containing 8.2 m of 3.4 g/t Au
Ready for further drilling


Rich amounts of gold in streams in 23 of 26 samples draining an area of roughly 4 square kilometers
Panned concentrates to 30.9 g/t and 76.1 g/t Au


Trenching showed 17 m of 1.2 g/t Au including 5 m of 2.1 g/t 3.8 g/t in an outcrop


Anomalous gold in soil over a large 1 km by 0.4 km area Rock samples up to 10.7 g/t Au A channel sample of chalcedonic quartz showed 3.33 g/t Au over 5 meters. No trenching done on soil anomalies yet


Rock chip samples up to 43.2 g/t of gold


An area of roughly 600 m by 500 m with 500 ppm copper with low grade gold (max. 0.94 g/t)
Rock chip samples average 0.15% copper with a maximum of double that


Rock samples up to 9.6 g/t gold and 2.8% copper
Average of copper in rock samples was 0.3%


Rock chip samples up to 6.7 g/t Au
Copper in significant grades


Rock chip samples up to 1.5% copper and 1.1 g/t gold

These are only 10 of the 16 prospects within the Bismarck Property. (See Bismarck Gold Property for additional details.) Space does not permit this kind of detail to be given about all of Kanon's Papua New Guinea properties. But each of them has produced similarly excellent and widespread results. Drilling on Bismarck is to begin the second quarter of 2004.

Following is a brief discussion of the other five Kanon properties.

The Mt. Penck Property (Vangold 40%)

101.4 square kilometers
6 major prospects
Major prospects within an area 1.5 km by 0.8 km
Near the sea coast (1.5 km away) making sea transport possible
New Guinea Gold to begin drilling first quarter 2004

The Kavola East Prospect has produced tremendous results in the June 2003 trenching program showing extensive gold mineralization right on the surface.. Highlights include the following:

Trench # 1 97 meters at 3.39 g/t Au
Trench # 4 131 meters at 2.36 g/t Au
Trench # 11 88 meters at 2.5 g/t Au
Drilling highlights at Kavola East thus far:

55 m at 2.75 g/t gold
15 m at 11.73 g/t gold
40 m of 8.89 g/t gold

Early results: minimum inferred resources at 50 m in depth or less: 100,000 oz. of gold at 2.1 g/t Au

Excellent results from the other five prospects within the Mt. Penck Property. Drilling to begin this quarter

See The Mt. Penck Gold Property.

The Yup River Property (Vangold 50%)

378.6 square kilometers
Exploration is still at the basic stage, but promising results have been produced.
"Extensive reconnaissance sampling has defined three large and one smaller, coherent high-grade anomalies, plus numerous smaller ones."-Peter McNeil's report.
Three large anomalies named Yumor, Amanab and Biaka
Amanab anomaly is 20 km long by an average of 3 km wide
Biaka anomaly is 15 km long by an average of 4 km wide
Yumor anomaly is over 6 km long

For these three properties, stream sediment measured at up to 107 g/t, 91 g/t, and 77.5 g/t respectively.

Property selected to include only areas of known mineralization.
Road access is limited. Access by plane to three government airstrips within the property

See The Yup River Gold Prospect.

The Mt. Allemata Property (Vangold 50%)

243.4 square kilometers
15 prospective areas with good results so far.
Historically, 14,000 oz. gold mined from high grade veins
Trenching in many areas produced medium to high grade results over significant distances:

Such as 30 meters at 9 g/t Au; 3.5 m of 61.5 g/t; 20 m of 5.58 g/t

Twelve drill holes showed medium grade mineralization from the surface.

Gold vein rock sample: 1 m of 70 g/t
Pan concentrates up to 91.3 g/t

Good access by road, air and sea

See The Mt. Allemata Gold Project.

The Fergusson Property (Vangold 50%)

469.8 square kilometers
More than 32 prospective areas
Access by boat.
Wide spread low to high grade near surface mineralization.
Property carefully selected to include only known mineral occurrences.

See The Fergusson Property

The Mt. Nakru Property (Vangold 25%)

47 square kilometers
Mt. Nakru has widespread medium to low grade copper accompanied by low grade gold with potential for higher grade finds.

Vangold's market capitalization, fully diluted, at C$0.65 per share is a mere C$19.4 million (US$14.7 million) and, with its share in these seven PNG properties it is obviously considerably undervalued. Vangold also derives significant income from its interest in an oil and gas project, and has important high grade gold properties in Canada and the United States.

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