on the CHAMBE BASIN AREA OF EXCLUSIVE PROSPECTING LICENCE EPL 0325… · 2015. 12. 22. · November...

Geological report

on the

CHAMBE BASIN AREA

OF

EXCLUSIVE PROSPECTING LICENCE

EPL 0325/11

MULANJE MASSIF

SOUTHERN MALAWI

EAST AFRICA

to

Gold Canyon Resources Inc

Suite 810,

609 Granville St,

Vancouver, BC,

Canada, V7Y 1G5

by

P.C. Le Couteur, Ph.D (UBC), P.Eng (BC)

President, Micron Geological Ltd.

Effective date: November 25, 2011 Vancouver, BC

2

TABLE OF CONTENTS

Item page

1 Summary 5

2 Introduction 6

3 Reliance on Other Experts 11

4 Property Description and Location 15

5 Accessibility, Climate, Local Resources,

Infrastructure, and Physiography

19

6 History 21

7 Geological Setting and Mineralization 23

8 Deposit types 34

9 Exploration 39

10 Drilling 40

11 Sample Preparation, Analyses and Security 40

12 Data Verification 41

13 Mineral Processing and Metallurgical Testing 67

14 Mineral Resource Estimates 67

15 Mineral Reserve Estimates 67

16 Mining Methods 67

17 Recovery Methods 67

18 Project Infrastructure 67

19 Market Studies and Contracts 68

20 Environmental Studies , Permitting and Social or

Community Impact

68

21 Capital and Operating Costs 68

22 Economic Analysis

23 Adjacent Properties 68

24 Other Relevant Data and Information 69

25 Interpretation and Conclusions 69

26 Recommendations 69

27 References 72

Date and Signature Page 74

3

List of Figures

page

Fig 1 Relationships of companies involved in the Malawi Project 6

Fig 2 Location of Malawi 8

Fig 3 Map of Malawi 9

Fig 4 Map of southern Malawi to show location of the Mulanje Massif 10

Fig 5 View of Mulanje Massif 10

Fig 6 View of Chambe Basin 12

Fig 7 View of Chambe Basin 12

Fig 8 Geology of Mulanje Massif showing EPL 0325/11 13

Fig 9 Geology of Chambe Basin 14

Fig 10 Contour map of soil depth in Chambe Basin 26

Fig 11 Chondrite normalized REE distributions of REE deposits 37

Fig 12 Location of samples taken by Ishikawa, MINDECO, Le Couteur 38

Fig 13 Chondrite-normalized REE distribution of leached ore 55

Fig 14 Example of roadside cut sample (CHA-4) 56

Fig 15 Photo of plus 0.25 mm fraction of screened soil sample E686956 57

Fig 16 Photomicrograph of soil E 686956, crossed polars 58

Fig 17 Photomicrograph of soil E 686956, plain light 58

Fig 18 XRD scan of sample E686964 60

Fig 19 Alkali v silica classification plot for Chambe Basin syenite 61

Fig 20 Polished surface of syenite sample E686961 62

Fig 21 Sample E686961 stained for potassium (K’spar) 62

Fig 22 Photomicrograph of syenite E686961 , crossed polars 64

Fig 23 Photomicrograph of syenite E686961 , plain light 64

Fig 24 Drill plan proposed by MINDECO for phase 1 exploration 70

4

List of tables

page

Table 1 Property boundaries 15

Table 2 Soil samples collected by J. Ishikawa 27

Table 3 Soil samples collected by MINDECO 28

Table 4 REE analyses of Ishikawa samples 29

Table 5 Total and leached REE in MINDECO samples 30

Table 6 Recovery of leachable REE from MINDECO samples 31

Table 7 Leachable REE in Ishikawa samples by MINDECO 31

Table 8 Samples collected by P. Le Couteur 44

Table 9 Reanalysis of 3 Ishikawa samples 45

Table 10 Total REE in Le Couteur samples 48

Table 11 Leachable REE in Le Couteur samples (method ME-MS04) 49

Table 12 Ratio of soil REE to syenite REE 50

Table 13 Leachable REE in Le Couteur samples (method ME-MS23) 50

Table 14 Comparative analyses by Ishikawa, MINDECO, Le Couteur 51

Table 15 Screen size of 2 soils 57

Table 16 Composition of Chambe Basin syenite 61

Table 17 Energy dispersive analyses of minerals in syenite E686961 63

Table 18 Exploration expenditures estimated by MINDECO for phase 1 70

5

1 SUMMARY

Property Description Chambe Basin is part of Malawi Exclusive Prospecting Licence 0325/11, a rectangular block about 40 km E-W and 27 km N-S with an area of 1,050 sq km, within which the licencee has exclusive rights to prospect for rare earths (“REE”) and bauxite. Location The Property is located in southernmost Malawi (south central East Africa) and covers the Mulanje Massif. The centre of the Property is at approximately 15˚ 57”S, 35˚ 37”E. Ownership EPL 0325/11 is held in the name of Spring Stone Limited, a private Malawi company that is a 100% subsidiary of Spring Stone Exploration Inc., a private company registered in British Columbia and a 100% subsidiary of Canadian public company Gold Canyon Resources Inc. The project is a joint venture between Gold Canyon Resources Inc, and Japan Oil, Gas and Metals National Corporation (“JOGMEC”), which provides 67% of funding for Spring Stone Exploration Inc. and consequently has a 67% equity option holding in licence-holder Spring Stone Ltd. Geology A gneissic basement complex of Precambrian to Lower Paleozoic age forms the oldest rocks in the area. This is intruded by a series of partly overlapping, subcircular, mostly syenitic plutons that are part of the Chilwa Alkaline Province, of Upper Jurassic to Lower Cretaceous age. Chambe Basin is an area of low relief covered by thick, bouldery, residual kaolinitic soils in the middle of one of these syenite intrusions that is surrounded by a circular outer rim of bare syenite. Mineralization A small number of reconnaissance samples of soils collected in 2010 and early 2011 from Chambe Basin and analysed for leachable rare earths (“REE”) suggest there is potential for a bulk REE deposit in these soils. Exploration concept Chambe Basin is being explored for a REE deposit of the “ion adsorption” type. Such deposits are quite important REE producers in China but few have been found elsewhere. Typically the REE content is low, but a significant part is easily extractable by ion exchange using dilute solutions of common chemicals such as ammonium sulphate. Other characteristics include very low U and Th, a large proportion of high value “mid” and “heavy” REE, and they may be mined by relatively inexpensive shallow surface excavations or in situ. Status of exploration The Property licence was acquired on 18 March of 2011, mostly on the basis of reconnaissance samples by Geological Survey Dept headed by J. Ishikawa in 2010. An exploration program of systematic short-hole drilling, with some pitting, initial environmental sampling, and analysis of soils for leachable REE is currently being carried out by Mitsui Mineral Development Engineering Co. Ltd (“MINDECO”) under contract to Spring Stone Exploration Inc., the vehicle for the joint venture between Gold Canyon Resources Inc and JOGMEC. Conclusions and recommendations Only a small number of reconnaissance samples of soils from the Chambe Basin have so far been analyzed, but from review of these and verifying analyses the author agrees with the interpretation by J. Ishikawa, JOGMEC and MINDECO that there is potential for a REE deposit of the ion adsorption type. A US~$1.1 M program proposed by MINDECO, and accepted by the Malawi Government, is currently under way. While the author has had no opportunity to recommend changes to this approved program he endorses it as a well-designed and thorough first phase plan of exploration of the Chambe Basin for ion-adsorption REE potential.

6

2 INTRODUCTION

(a) Company for which the technical report is prepared.

This report concerning exploration for rare earth elements (“REE”) in the Chambe Basin area

of Malawi, East Africa, was made at the request of A. Levinson, President and Director of Gold

Canyon Resources Inc (“Gold Canyon”). Gold Canyon is a public Canadian-based mineral

exploration company that trades on the Toronto Stock Exchange (TSX Venture Exchange,

symbol GCU), is incorporated under the laws of British Columbia, and has a business address at

Suite 810, 609 Granville St, Vancouver, BC, Canada, V7Y 1G5. Some details on Gold Canyon

and its exploration activities are available on the company’s website www.goldcanyon.ca .

Figure 1. Relationships between companies involved in the Malawi REE project

http://www.goldcanyon.ca/

7

Relationships between companies involved in the Malawi project are shown in Figure 1.

Chambe Basin lies within Exclusive Prospecting Licence EPL 0325/11 (the “Property”) in the

Mulanje Mountain area of southern Malawi, also referred to as the Mulanje Massif. This licence

was initially granted in March of 2011 to the Japan Oil, Gas and Metals National Corporation

(“JOGMEC”). JOGMEC is a semi-governmental corporation of the Japanese Government, with

office address 2-10-1, Toranomon Minato-ku, Tokyo, 105-0001, Japan. Subject to a then-existing

agreement between Gold Canyon and JOGMEC, at the request of JOGMEC and with the assent

of Gold Canyon, the Malawi Government agreed to transfer Licence EPL 0325/11 to Spring

Stone Limited, a limited private company incorporated in Blantyre, Malawi under the Government

of Malawi Companies Act on 15th June 2011 with registration number 11406. The office address

of Spring Stone Limited is c/o Sacranie, Gow and Company Legal Practitioners, Realty House,

Churchill Road, PO .Box 5133, Limbe, Malawi. Spring Stone Limited, an indirect wholly-owned

subsidiary of Gold Canyon, was formed to acquire and maintain the Property and other properties

in Malawi and to facilitate mineral exploration and development in Malawi.

Spring Stone Limited is a wholly-owned subsidiary of Spring Stone Exploration

Limited, an indirect wholly-owned subsidiary of Gold Canyon (with the same office address)

formed for the purpose of managing the Malawi project and is the operator of a joint venture

between Gold Canyon and JOGMEC to explore for REE in Malawi. Details of this joint venture are

contained in a Project Venture Agreement (“PVA”) between JOGMEC, Gold Canyon, Spring

Stone Limited and Spring Stone Exploration Inc. dated September 13, 2011, but effective on

November 14, the date of transfer by the Malawi Government of EPL 0325/11 from JOGMEC to

Spring Stone Limited. Under the PVA JOGMEC has the option to acquire a 67% interest in the

Malawi Project and Gold Canyon 33%. Some details of the PVA are contained in a news release

on September 8 of 2011 by Gold Canyon, which is available on their website. This PVA

supersedes a 2009 joint venture agreement between JOGMEC and Gold Canyon to explore for

rare earth resources, initially in the USA and more recently in Malawi, through private USA

company Gold Canyon Kratz Springs LLC.

Exploration on EPL 0325/ 11 will be carried out by Mitsui Mineral Development

Engineering Co. Ltd (“MINDECO” ) a wholly-owned subsidiary of Mitsui Mining and Smelting

Co of Japan under a Technical Service Agreement with Spring Stone Exploration Inc. (Figure 1).

8

The author of this report, P.C. Le Couteur, is President of Micron Geological Ltd, a

geological service company with office address at 4900 Skyline Drive, North Vancouver, British

Columbia, Canada, V7R 3J3, is independent of Gold Canyon and is a "qualified person" as

defined by Canadian Securities Administrators (“CSA”) National Instrument (“NI”) 43-101. This

report has been prepared in compliance with the requirements of NI 43-101 of the CSA, as set out

in Form 43-101F1, with effective date June 30, 2011.

Figure 2 Location of Malawi in east Africa, showing towns of Lilongwe (the capital) and Blantyre

(the main commercial centre). Source Magellan Geographixs.

9

Figure 3. More detailed map of Malawi. The town of Mulanje in the SE is close to the Property. .

Source: Magellan Geographix

10

Figure 4 Southern Malawi showing general location of Mulanje Massif. Towns of Blantyre, Zomba

and Mulanje shown. Source :Google

Figure 5. The Mulanje Massif, including Chambe Basin.

Source :Landsat image, NASA Earth Observatory Sept 12, 2004.

11

(b) Purpose of report

According to J. Larkins, corporate legal counsel to Gold Canyon Resources Inc, “This report

has been commissioned for the purposes of evaluating the geological, geophysical, geochemical,

metallurgical, and other similar information concerning the Mulanje property for the purposes of

defining or delineating the potential mineral prospects of this property for the Issuer or any

successor thereto.”

(c) Sources of information

Published information sources are acknowledged in the report and listed in the reference

section. Unpublished company reports, analyses, correspondence and other documents that are

also acknowledged in the references were made available from Gold Canyon records by A.

Levinson, President and Director of Gold Canyon and by S. Miyatake, Director, Exploration

Technology Division, Metals Exploration Dept. of JOGMEC.

(d) Details of personal inspection

The author has neither worked in, nor previously visited the Mulanje Mountain area of

Malawi. For the purpose of this report the author visited the Chambe Basin part of EPL 0325/11

on the 22nd and 23rd of August of 2011. Chambe Basin was accessed on foot via the Likhubula

Skyline Path in company with R. Kojima, General Manager of Spring Stone Ltd in Zomba , and M.

Nyirongo, Geologist with the Geological Survey of Malawi in Zomba, but currently employed by

Spring Stone Ltd on this project, and 9 porters from Nakoya Village.

Some samples were collected on 22nd August, the night was spent at Frances Cottage in

Chambe Basin, and further sampling was done on the 23rd August. Road-side samples were

taken by the author and M. Nyirongo, and from pits by porters under direction of the author and M.

Nyirongo.

3 RELIANCE ON OTHER EXPERTS

Not applicable

12

Figure 6 View from the south lip of Chambe Basin north across the basin toward the east face of

Chambe Peak (8,390 feet).

Figure 7. View of Chambe Basin west toward Chambe Peak. Soils in this area are reported by Garson and Walshaw (1969) to be about 25 feet (7.6 m) thick. Large grey boulders are syenite , probably residual joint-bounded blocks (“core stones”). Bare rock of the far basin rim is syenite of the outer ring dike.

Figure 8 General geology of the Mulanje Massif, from “Mlanje Sheet” 1:100,000 scale, by Garson and Walshaw (1969).

Rectangular outline shows the extent of Prospecting Licence 0325/11 and of the Chambe Basin area.

Figure 9. Detail of geology of Chambe area . From Mlanje Sheet 1:100,000 scale, Garson and

Walshaw (1969). For detail of outlined “Chambe Basin area” see Figure 10.

15

4 PROPERTY DESCRIPTION AND LOCATION

(a) Area of property

Exclusive Prospecting Licence EPL 0325/11 (Figure 8) has a rectangular shape about

40 km E-W and 27 km N-S, minus a small triangular area at the SE corner. According to

the licence document the area of the Property is 1, 050 sq km.

(b) Location of property

The general location of the Property in southernmost Malawi is shown on Figure 3

and in more detail in Figure 4 and 5. The Property is covered by the “Blantyre” 1:250,000

scale topographic map and the 1:100,000 scale “Mlanje” geological map sheet. Chambe

Basin is covered by the 1:50,000 scale “Mulanje” topographic sheet 1535D3. The

approximate latitude and longitude at the centre of the Property is 15˚ 57’S, 35˚ 37’ E. The

Property boundaries are defined in the licence document by the UTM coordinates (Zone

36L, Clarke (1880) modified spheroid) listed in Table 1.

Table 1 Property boundaries

Corner Easting Northing

m m

A (NW) 760000 8247000

B (NE) 800000 8247000

C (SE) 800000 8226000

D (SE) 790000 8220000

E (SW) 760000 8220000

(c) Type of mineral tenure, identifying number

The Property is an “Exclusive Prospecting Licence” EPL (no 0325/11) issued

on 18th March of 2011 by the Government of the Republic of Malawi acting through the

Minister of Natural Resources, Mining, Energy and Environment.

Licence EPL 0325/11 was issued for exclusive rights to carry out prospecting for

REE and bauxite.

16

(d) Ownership, surface rights, legal access, obligations, expiration date.

The Chambe Basin lies within the Mulanje Mountain Forest Reserve and the mineral

and surface rights are owned by the Government of the Republic of Malawi. Licence EPL

0325/11 permits exclusive rights to carry on prospecting operations for rare earth elements

and bauxite. Legal access is by public roads and paths administered by the Likhubula

Forestry Office of the Department of Forestry .

Obligations assumed by licence-holder Spring Stone Ltd include the carrying out of

the exploration program for rare earths and bauxite as proposed in the licence application

(Anonymous (2011), Anonymous (2011a), Kojima (2011), Kojima (2011a). The originally

proposed expenditure of US $2.5 million was later reduced to US$1.0 million. The

exploration program was designed and will be carried out by Mitsui Mineral Development

Engineering Co (“MINDECO”) under contract to Spring Stone Exploration Inc. Phase I of

this program is to be carried out in fiscal year 2011 and consists of systematic shallow

drilling and pitting in Chambe Basin, with analysis and testing of soils for recovery of rare

earths. Environmental observations will also be made.

Conditions specified in the licence include requirements to commence operations

within 3 months of granting of the licence, to supply quarterly progress reports and annual

reports, to annually report the proposed program and budget for the next year’s work, to

employ and train Malawian citizens, to use goods and services from Malawi whenever

possible, to conserve the environment, and to reclaim and restore areas damaged by

exploration activities. Any shortfall from the proposed expenditures is considered a debt to

the Republic of Malawi.

The Licence was granted on the 18th day of March of 2011 for a period of 3 years, with

an option to renew the Licence in accordance with Section 50 of the Malawi Mines and

Minerals Act 1981.

(e) Royalties, back-in rights, payments, agreements, encumbrances

The joint venture between JOGMEC and Gold Canyon concerning a program for

exploration of minerals in Malawi, defined as the “Malawi Project”, is detailed in a Project

Joint Venture Agreement (”PVA”) made on September 13 of 2011 between JOGMEC, Gold

Canyon, Spring Stone Limited and Spring Stone Exploration Inc and effective on November

14 of 2011, the date of reassignment of Exclusive Prospecting Licence 0325/11 from

17

JOGMEC to Spring Stone Limited by the Government of Malawi. Some details of this

agreement are contained in a news release made on September 8 of 2011 by Gold Canyon

and available on the Gold Canyon website.

Among other provisions and conditions of the PVA the Malawi Project is defined to

include EPL 0325/11 and any other properties that may be acquired in Malawi. JOGMEC

holds the option to acquire 67% equity interest in the Malawi Project, which may be

converted to a proportionate shareholding in any Joint Venture formed from the Malawi

Project. Gold Canyon holds the option to acquire 33% by contributing to the PVA. The PVA

also addresses matters such as conversion to net smelter royalty interests of 1.5% if diluted

to <5%, and further reduction to 0.5% on payment of US$0.5 M on each property. It also

addresses conditions of transfer of rights, obligations and interests and disposal or

encumbrance of equity interest by JOGMEC or Gold Canyon. The structure of the

Operating Committee, and assignment and obligations of Spring Stone Exploration Inc. as

Operator are also included.

(f) Environmental liabilities

The forests of the Mulanje Massif have been logged since the early 1900’s, initially for

the indigenous Mulanje Cypress. The Mexican pine was then introduced as shelter for

replantings of the cypress, but soon became dominant and was eventually logged

throughout the Chambe Basin, the logs being transported on a network of dirt roads to the

southern basin rim and then by a cable-way SW down to the lower Likhubula River valley.

The pine is also now nearly exhausted, the dwindling stands supporting small manual pit-

sawing operations, the sawn lumber being carried down toward Nakoya Village on the

heads and shoulders of porters. Several streams drain the basin south into the Likhubula

River and a network of dirt roads and footpaths remain from logging activities. As a result of

nearly complete deforestation the Chambe Basin today has a bare, denuded appearance

(Figure 6, 7) with a gently rolling, rounded topography and thick bouldery soils, thinly

covered by low bushes and grass.

Even though the Chambe Basin is far from a pristine environment the current

exploration phase being carried out by MINDECO on behalf of the JOGMEC-Gold Canyon

Joint Venture has been designed to have minimal impact. For example, drilling is being

done by small drills that will be moved by porters, one is a human-powered drill (Banka

18

drill) and the other a small portable diesel-powered drill (YBM-05). Drilling will be mostly

dry, chemicals will not be used, drill-sites should have minimal disturbance and holes will

be backfilled. Topsoil from pits and trenches will be stripped and replaced when backfilled.

Accommodation will be in existing huts with piped water supplies. The Joint Venture has

retained a biologist familiar with the area to ensure environmental issues of the current

exploration are monitored. In the author’s opinion the environmental impact of the current

exploration will be insignificant.

However, the Chambe Basin lies within the Mulanje Mountain Reserve, which was

established in 1927, and environmental issues for any eventual mining operation are

important. Although mining can apparently proceed within this reserve, development must

be done in a way that conserves the environment, especially water catchment areas such

as the Chambe Basin. There is also now an interest in eradicating introduced plants such

as the Mexican pine, Himalayan raspberry and the Australian eucalyptus and in replanting

the native cypress. Clearly, it is too early to consider the impact of any eventual mine but

the Joint Venture has proposed that it might be possible to combine restoration of a mined

area with reforestation of the basin with cypress.

The Mulanje Mountain Conservation Trust was founded in 2000 with funding by the

World Bank for research and conservation of biological diversity and promotion of

sustainable use of natural resources in the Mulanje Mountain Forest Reserve. It has

advocated removal of introduced flora and restoration of endemic species, particularly the

Mulanje cypress, and has lead opposition to proposed mining of bauxite from the Mulanje

Massif, principally on the Lichenya Plateau. While solution extraction of REE from soils in

Chambe Basin has little in common with the stripping and removal of large tonnages of

bauxite, environmental issues of REE resource extraction if it affected streams or created

dust, etc. will need to be considered.

(g) Work permits

No work permit is required for the current work on the Joint Venture, but approval

was required by the Ministry of Environmental Affairs before this work began.

If the project proceeds to a second phase (in 2012) an Environmental Impact Study

(“EIS”) will need to be initiated. Should the project eventually prove feasible the EIS will

need to be completed and a “Mining Licence” from the Ministry of Natural Resources would

19

be required, and also a “Licence to Operate in a Forest Reserve” from the Ministry of

Forests.

(h) Other significant factors and risks affecting access, title, and ability to perform

work.

In the author’s opinion there are no significant factors and risks affecting access and

ability to perform exploration for REE in the Chambe Basin. Although the Property covers a

forest reserve, exploration and mining within the reserve is apparently possible. However, if

a mine proves feasible it is clear that environmental impacts will be closely scrutinized and

the benefits to the local community and to Malawi will be weighed against environmental

risks of development.

5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY (a) Topography, elevation and vegetation

The Mulanje Massif rises steeply above the densely-populated surrounding Chilwa-

Phalombe Plain at 650-750 m to Mt Sapitwa at 3,002 m, the highest peak in south-central

East Africa. The massif is covered by the Mulanje Mountain Forest Reserve and contains a

diverse and partly endemic vegetation, particularly the once more common Mulanje

Cypress, (Widdringtonia whytei) which became scarce by the 1950’s due to logging. The

Mulanje Cypress is one of 4 African Widdringtonia species of the Family Cupressaceae and

is often erroneously referred to as a “cedar”, which belong to the Family Pinacea and are

unrelated to cypresses. A smaller cypress (Widdringtonia Nodiflora) and gladioli, ground

orchids, proteas, aloe, crysanthemum, ferns, mosses, wild peach, yellow wood and other

plants are also present. Lists of some of the 6 endemic trees, the 66 mammals, 300 birds,

31 snakes, 25 lizards, 33 frogs, 233 butterflies and 7 fish known from the Mulanje Forest

Reserve can be found in Deppe and Bishop (2010). Introduced plants include the Mexican

Pine (Pinus patula), eucalyptus and the Himalayan raspberry.

The floor of the Chambe Basin has a rolling, subdued topography (Figure 6, 7, 9)

ranging from about 1,690 m at the southern lip to about 1,875 m and is surrounded by a

circular rim, partly of bare rock ( Figure 6, 7), which rises to a maximum height of 2,557 m

at Chambe Peak. Chambe Basin apparently was once covered by a forest of the Mulanje

20

Cypress, but few of these trees remain there today and the basin was later planted in

Mexican pine and most of this has also now been logged. The basin today has only a thin

cover of small bushes and grasses (Figure 6, 7).

(b) Means of access

Chambe Basin can be reached from Blantyre by vehicle on a good sealed road ESE

about 1 hour to Chitikale Village and then east a few km to the road end at the Likhubula

Forestry Station by a gravel road, which passes through Nakoya Village. Several footpaths

lead to Chambe Basin from the lower southern slopes, the main one being the Skyline

Path, which begins at the Likhubula Forestry Station at about 835 m and climbs to the

south rim of the basin at about 1,690 m and takes 2 to 3 hours. From this point the footpath

continues across the approximately 3.5 km wide basin and connects with a network of dirt

roads that lead to several forestry / tourist huts.

The present access to the property by footpaths is clearly insufficient for any

significant mining activity and would need to be improved. In the past a cable-way, which

runs for about 2.1 km from a short road above the Likhubula Forestry Station to the Upper

Skyline Station on the south rim of the basin, was used to bring logs down from the basin.

The load bearing cables (about 1.5 inch) are still in place and, if the project continues, the

cable-way might be re-activated or replaced and used to transport materials and perhaps

people to and from Chambe Basin. It is understood the Joint Venture will evaluate this

option and any other access possibilities if the first phase of the project is encouraging.

(c) Proximity to population centres, nature of transport

The nearest population centre to the Chambe Basin is Nakoya Village in the

lower Likhubula Valley, where many mountain porters live, about 8 km SW of the basin.

Chitikale, the commercial centre of the Mulanje district, lies a few km west of the Likhubula

Forestry Station and the small town of Mulanje is about 9 km to the south on a paved road.

Blantyre, the largest town (population ~730,000) and main commercial centre in Malawi,

lies about 60 km in a direct line to the WNW.

21

(d) Climate, length of operating season

The climate of Malawi is hot and wet from November to April, cool and dry from

May to August and hot and dry from September to October. Annual rainfall is very different

on the Mulanje Massif (>100 inches) than on the surrounding plains (~40 inches). Rain may

fall at higher elevations at any time of the year, although it is more frequent and intense

during the wet season. Intermittent rain and mist centred on the massif is common.

Temperatures on the Phalombe Plain range from about 15˚ to 35˚C but on the massif

temperatures are generally lower, especially at night, and in June and August may drop

below zero and snow may fall occasionally at higher elevations.

Conditions may be more difficult in the wet season, but exploration and mining

operations could continue throughout the year.

(e) Sufficiency of surface rights, availability of mining operation

infrastructure, areas for tailings, waste, leach pad areas and plants

Surface rights are owned by the Government of Malawi. There is very little mining

infrastructure in Malawi, mostly quarrying operations, and mining equipment would

probably need to be brought from South Africa or from outside Africa. The only significant

mine in Malawi is the Keyelekera uranium mine, which opened in 2009. The World Bank

(Land and others (2009)) identified unreliable power and transport as significant

impediments to developing mining operations in Malawi.

At the present preliminary stage of exploration no study of areas for tailings, waste or

plants has been made or is warranted.

6 HISTORY

(a) Prior ownership and ownership changes

Previous interest in the mineral resources of the Mulanje Mountain area has

centred on their extensive bauxite deposits, developed by weathering mainly on the Linje

and Lichenya plateaux at elevations of 1,800 -2,000 metres (Garson and Walshaw (1969)).

According to Garson and Walshaw (1969) and Anonymous (1994) the bauxite deposits

were discovered in 1924 and have been explored by various companies, including the

22

Anglo American Corporation (1934, 1943), the British Aluminium Co. (1951-1958) and, on

behalf of the Malawi Government, Lonrho (1969-1973)..

According to Chimwala (2009) in 2001 BHP Billiton considered developing the

Mulanje bauxite for their Mozal Smelter in Mozambique, and in 2005 South African

company Gondo Resources was granted an exclusive prospective licence over about 29 sq

km covering Mulanje bauxite. This licence expired in 2008, and although the company

requested an extension until Sept 3 of 2010 to produce a feasibility study and an

environmental impact assessment, this was rejected in January of 2010. There has been

considerable opposition to this project, especially because of the possible effects of dust

on the important tea-growing area near Mulanje, on water sources flowing from the Mulanje

Massif, and on further loss of the Mulanje Cypress by surface stripping, mainly on the

Lichenya Plateau. .

(b) Nature, extent and general results of previous exploration.

No exploration is known to the author from the Chambe Basin prior to the analyses

by Ishikawa and MINDECO described in Item 7b. These two reconnaissance sampling

programs consist of a small number (25 samples in total) of mainly roadside samples and

analyses indicate some samples contain easily-leachable REE.

According to Garson and Walshaw (1969) there is negligible bauxite in the Chambe

Basin, but as noted above significant bauxite resources have been found on other areas of

the Mulanje Massif within EPL0325/11. A study of feasibility of development of the Mulanje

bauxite on these other areas was made by Met-Chem (Anonymous (1994)) on behalf of the

Mineral Investment Development Corporation (MIDCOR), acting for the Government of

Malawi and funded by the African Development Bank. They recommended development of

bauxite (for aluminum) at a mining rate of 589,000 TpA, that an aerial tramway be

constructed to transport the bauxite to the plains below, and construction of a 200,000 TpA

alumina plant. They also recommended that an aluminum smelter should not be built in

Malawi, but instead that a commitment be sought from the aluminum smelter at Richards

Bay in South Africa to purchase Mulanje alumina. They estimated capital costs at US$820

M, which did not include a US$50 M investment in power, railways, and port facilities.

23

(c) Significant historical mineral resources or reserves

Using the Lonrho data Met-Chem (Anonymous (1994)) reported a resource of 25.6

MT of bauxite, using a cutoff grade of 30% Al2O3, with an average grade of 43.3% Al2O3.

However, it must be clearly stated that this historical resource is not 43-101

compliant, it is not relied upon in this report, and it is not of exploration interest to

Gold Canyon. More specifically, the bauxite resources, whatever their size or economic

potential, are not germane to the potential REE resources of the Chambe Basin that are the

present interest of Gold Canyon on the Mulanje Massif.

(d) Production

The author knows of no mineral production from the Property.

7 GEOLOGICAL SETTING AND MINERALIZATION

(a) Regional, local and Property geology

This part of southern Malawi (Figure 8) is underlain by a basement complex (Garson

and Walshaw, 1969) consisting of folded and metamorphosed rocks of Precambrian to

Lower Paleozoic age, mostly paragneiss, but also including granulites, calcareous gneiss,

marble, several types of amphibolite and varieties of mostly migmatitic and anatectic

granite.

Intruding the basement complex are rocks of the Chilwa Alkaline Province of Upper

Jurassic to Lower Cretaceous age. The major alkaline rocks are a series of overlapping

sub-circular intrusions of mainly syenite, some quartz syenite and granite that form the

Mulanje Massif, an inselberg (Figure 5) that rises high above the surrounding plains.

The Chambe ring structure (Figure 5, 9) is one of several syenite complexes of the

Mulanje Massif and is about 8.5 Km across. The outer ring dike syenite(s) form a

prominent bare rock rim (Figure 6, 7) that encloses a basin about 3.5 km across within

which a central syenite plug has recessively weathered to soils that are up to about 15 m

thick and contain scattered syenite boulders (Figure 6, 7) , probably residual joint-bounded

blocks (“core stones”). Leachable rare earths in these soils are the main target of the

24

current exploration begun in August of 2011 under the direction of H. Harada of MINDECO

on behalf of Gold Canyon.

(b) Mineralized zones, rock types, controls, length, width, depth and continuity of

mineralization. Description of type, character, and distribution of mineralization.

The REE mineralization in the Chambe Basin is so far known only from a very small

number (total 25) of soil and rock samples collected on several days of reconnaissance

sampling, mostly from road cuts along old forestry tracks. The controls on mineralization

and the vertical and horizontal extent of the mineralization are therefore unknown at

present, and the principal objectives of the current exploration program of systematic

drilling and detailed sampling being carried out by MINDECO are to document the REE-

mineralized material and investigate the distribution of the REE in the soil profile, the size

and grade of any resource, and the recoverability of the REE.

An indication of the size of the soil mantle over the central syenite plug in Chambe

Basin is given by the work of Garson and Walshaw (1969, Plate X), who mapped the basin

and described the soils from 69 pits ranging in depth from 5 feet to 50 feet (1.5 to 15.2 m).

A contoured map of thickness of the soils from the pit data reported by Garson and

Walshaw (1969) is shown as Figure 10. Garson and Walshaw described the deposits as

mainly kaolinitic, with bauxite only in small patches, and the following summary of the soil

profiles is derived from their account (with inferred standard soil horizons A to C added).

Weathered rock (C soil horizon?) immediately above the bedrock syenite plug may

preserve the texture of the parent syenite, may also contain fragments of feldspar,

amphibole and biotite and is mainly white, with pink, yellow and black mottling. The mottling

increases upward and red, pink and purple colours predominate, and in the upper parts (B

soil horizon?) the soil is red-brown and only quartz from the weathered syenite survives. A

yellowish-brown subsoil is locally present and the uppermost soil (A soil horizon?) contains

humus and is dark grey to black and rooty.

The possibility that the Mulanje Mountain area might contain REE deposits of the

ion-adsorption type was proposed by Ishikawa (2010), a geologist from the Japan

International Cooperation Agency currently working with the Geological Survey of Malawi in

Zomba. Ishikawa collected 8 samples (Table 2) from Chambe Basin in September of 2010.

25

The following year, on May 22-23 of 2011, a group of 7 geologists from MINDECO,

JOGMEC and the Geological Survey of Malawi collected 16 samples at 9 sites (Table 3)

including 13 soil samples from 6 sites and 3 rocks.

It should be noted that only a small number of samples have been analyzed so far,

that these are scattered over a large area, and that most are shallow (generally less than 3

m) relative to the deep soils (Figure 10) reported by Garson and Walshaw (1969).

Analyses (Table 4) of 3 “kaolinitic” samples (Table 2) collected by Ishikawa indicated

these soils contain from 475 to 739 ppm total REE of which 31% to 74 % is easily-

leachable (41% to 86% if Ce is excluded). Subsequent “weathered rock” samples taken by

MINDECO, JOGMEC and Geological Survey of Malawi were found to contain (Table 5 and

6) between 198 and 642 ppm total REE, and recoveries by leaching were in the range 0.1

to 30% (38% if Ce is excluded), with 8 of 13 samples having 5% or less of their total REE

leachable. This high variability of recovery of REE and the lower % of recovery than the

Ishikawa samples was considered by JOGMEC as possibly due to natural variability or

perhaps to differences in leaching chemistry or methods between the earlier analyses

(Nittetsu Lab) and the later analyses (Mitsui Lab). However, as an inter-laboratory check

two original Ishikawa samples were leached by the Mitsui Lab and these show fair

agreement in % of leached REE (see Table 7, 66% vs 74% for CHA-4 and 56 % vs 70% for

CHA-6). This result suggests the methods produce comparable results and therefore imply

a fair degree of natural variability. These analyses show that Ce is 13 to 32% of the total

REE in the soils, but only 1 to 16% of the leachable REE, suggesting that Ce occurs in a

different form than other REE, an observation that is consistent with studies of ion

adsorption deposits elsewhere.

Samples were collected by the author from Chambe Basin on 22-23 of August of

2011 from 11 sites (Table 8) for verification purposes and are discussed in Item 12. Many

of these samples were taken as checks at sites originally sampled by Ishikawa, and the

author is also grateful to J. Ishikawa for providing 3 of his original samples for re-analysis

(see Table 9 under Item 12). Re-analysis of these samples has essentially confirmed his

initial reports that the Chambe Basin may contain a REE deposit of the “ion-adsorption clay

type “.

26

Figure 10 Contour map of depth of soils (in feet) above bedrock in Chambe Basin. Depth

data are from Garson and Walshaw (1969, Plate X). Shallower areas shown in blue. The

black enclosing line is the approximate boundary drawn by Garson and Walshaw (1969)

between weathered and bare rock.

Table 2 Samples collected by J. Ishikawa in Sept of 2010

Sample latitude longitude error

m Sample

Organic depth(cm)

Sampling depth(cm)

Colour rock

fragments (mm)

radiometric (μSv/hr)

CHA 1 15°54'40.7"S

35°32'25.5"E4 Kaolinite 10 85 white-pale brown 1 0.15

CHA 2 15°54'55.2"S


CHA 3 15°55'08.8"S

35°32'21.1"E4 Laterite 30 100 brown 1 0.15

CHA 4 15°55'11.6"S

35°32'16.1"E4 Kaolinite 20 160 pale brown 1 0.15

CHA 5 15°55'13.3"S


CHA 6 15°55'22.4"S


CHA 7 15°55'27.5"S


CHA 8 15°55'32.0"S

35°31'46.7"E3 Kaolinite 20 100 pale brown 2 0.15

28Table 3 Samples collected by MINDECO / JOGMEC / Geol Survey of Malawi in May of 2011

WGS84 WGS84 Sample ID Type Zone Easting Northing Description Depth (cm) Site type 11052201A WR 36L 770837 8237604 Reddish brown weathered syenite 80 Road cut 11052201B WR 36L 770837 8237604 Pale pink weathered syenite 200 Road cut 11052201C WR 36L 770837 8237604 Pale pinkish white weathered syenite 80 Road cut 11052301A WR 36L 772317 8239705 Grey surface soil 10 Road cut 11052301B WR 36L 772317 8239705 Reddish brown weathered syenite soil 40 Road cut 11052302A WR 36L 772073 8239945 Grey white weathered syenite, rock texture remains 800 Road cut 11052302B WR 36L 772073 8239945 Grey white weathered syenite, rock texture remains 1200 Road cut 11052303A WR 36L 771825 8240116 Pale brown weathered syenite with feldspar 20 Road cut 11052303B WR 36L 771825 8240116 Pale brownish white weathered syenite 200 Road cut 11052303C WR 36L 771825 8240116 Pale brownish white weathered syenite 350 Road cut 11052304A WR 36L 771861 8238542 Brownish grey surface muddy soil 20 Surface 11052304B WR 36L 771865 8238567 Reddish brown weathered syenite soil 50 Road cut 11052305 Rock 36L 771862 8239064 Grey white medium grain biotite syenite, not fresh 0 Boulder

11052306 Rock 36L 771745 8238371 Brown fine grain weathered dyke, weathered to soft brick

0 Road

surface 11052307 WR 36L 770972 8237830 Dark reddish brown weathered syenite soil 0 Road cut 11052308 Rock 36L 770582 8237383 Yellowish white fine grain syenite dyke, not fresh 0 Trail surface WR: weathered rock (saprolite)

29Table 4 REE analyses of 3 leached samples collected by J. Ishikawa in September of 2010.

Total REE

Sample La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu Y TREETREE-

Ce no ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm

CHA-4 125 126 31 127 23 9 22 3 18 4 11 1 9 1 111 620 495CHA-6 104 88 24 93 17 6 17 3 14 3 8 1 6 1 92 475 387CHA-8 127 203 34 140 27 11 27 4 22 4 11 1 8 1 120 739 536

REE in leach liquor


Ce no ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm

CHA-4 100 31 26 107 19 7 21 3 16 3 10 1 7 1 104 456 425CHA-6 57 8 17 74 14 5 17 3 14 3 8 1 5 1 105 332 324CHA-8 20 11 7 35 9 5 12 2 12 3 8 1 6 1 100 232 221

Percentage of total REE leached from solid


Ce no ％％％％％％％％％％％％％％％％％

CHA-4 80 25 84 85 84 77 95 94 87 81 92 69 80 77 94 74 86CHA-6 55 9 72 80 83 85 102 120 99 108 103 101 83 110 114 70 84CHA-8 16 5 21 25 33 46 45 51 55 72 70 74 75 84 83 31 41

30Table 5 Analyses of REE in solid samples and leach solutions by MINDECO on samples listed in Table 3 .

Assays by Tokyo University by ICP/MS. Leaching by Mitsui Mining R&D Centre, Japan.

Sample no

Light REE Mid REE Heavy REE

La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu Y TREE ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm

solid 77 133 24 94 17 5 13 2 9 2 5 1 4 1 38 424 11052201A

leach 13 4 4 15 2 1 2 0.2 1 0.2 1 0.1 0.4 0.1 8 52 solid 88 181 26 99 19 5 15 2 11 2 5 1 4 1 54 513

11052201B leach 21 5 7 29 5 2 5 1 3 1 2 0.2 1 0.2 19 99 solid 100 144 29 117 25 8 26 4 22 4 12 2 10 2 139 642

11052201C leach 33 5 10 43 8 3 11 1 9 2 5 1 3 0.5 59 192

11052301A solid 109 162 29 102 19 5 14 2 10 2 4 1 4 1 31 494

leach 1 2 0 1 0.1 0.0 0.1 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.3 5

11052301B solid 100 139 26 88 16 4 12 2 8 1 3 0 3 0 21 423

leach 0.1 0.2 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1

11052302A solid 38 64 10 38 7 4 6 1 5 1 2 0 2 0 20 199

leach 0.1 0.2 0.1 1 0 0.1 1 0.1 0.5 0.1 0.3 0.0 0.1 0.0 3 7

11052302B solid 33 72 10 37 7 4 6 1 5 1 2 0.3 2 0.3 19 198

leach 0.3 0.2 0.2 1 0.4 0.1 0.5 0.1 0.4 0.1 0.2 0.0 0 0.0 3 7

11052303A solid 54 150 15 53 10 3 7 1 5 1 3 0.5 3 0.5 24 330

leach 2 7 1 3 1 0.2 0.4 0.0 0.2 0.0 0.1 0.0 0 0.0 1 16

11052303B solid 54 139 17 70 12 5 8 1 5 1 2 0.3 2 0.4 19 337

leach 11 3 4 18 3 1 2 0.2 1 0.2 1 0.1 0.4 0.1 5 50

11052303C solid 44 96 15 62 14 6 16 3 16 3 8 1 5 1 86 375

leach 6 1 3 17 4 2 7 1 7 1 4 0.4 2 0.3 45 101

11052304A solid 107 217 31 113 22 5 17 2 14 3 8 1 7 1 55 603

leach 6 12 2 7 1 0 1 0.2 1 0.2 1 0.1 0.4 0.1 6 38

11052304B solid 85 287 24 81 15 3 10 2 9 2 5 1 5 1 35 564

leach 6 10 2 6 1 0 1 0.1 1 0.1 0.3 0.0 0.2 0.0 3 31

11052305 solid 80 186 19 62 12 2 11 2 13 3 9 1 8 1 71 479

11052306 solid 127 1447 76 353 129 8 176 43 347 82 264 39 241 31 2131 5495

11052307 solid 49 226 11 36 6 2 4 1 3 1 1 0 1 0 9 350

leach 0 0 0 0 0 0 0 0 0 0 0

11052308 solid 40 87 10 34 6 1 4 1 4 1 2 0 2 0 14 207

31Table 6 REE recovered from leach liquors of samples of Table 3 as a % of REE in the solid samples.

Calculated from data of Table 5 above for the “weathered rock” samples ( rock samples were not leached)

Sample La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu Y TREE TREE-Ce

no rec %

rec %

rec %

rec %

rec %

rec %

rec %

rec %

rec %

rec %

rec %

rec %

rec %

rec %

rec % rec % rec %

11052201A 17 3 16 16 13 16 16 13 13 14 14 11 9 10 20 12 1611052201B 24 3 26 29 26 32 31 29 29 32 32 30 27 27 36 19 2811052201C 33 3 34 36 34 37 41 40 39 40 40 37 34 33 42 30 3811052301A 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 111052301B 0.1 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.3 0.2 0.1 0.111052302A 0.3 0.4 1 3 5 4 9 9 9 11 11 10 8 7 17 4 511052302B 1 0.3 3 4 5 3 8 8 8 9 9 8 6 5 14 3 511052303A 5 4 5 6 5 5 6 5 5 5 4 3 3 3 5 5 511052303B 20 2 23 26 22 22 25 21 20 22 23 20 19 18 27 15 2411052303C 14 1 22 27 31 31 43 44 45 47 47 44 41 39 53 27 3611052304A 6 5 6 6 6 7 9 8 8 8 7 6 6 5 11 6 711052304B 7 4 7 8 7 8 8 7 6 6 5 4 3 3 9 5 7

11052307 0.1 0.1 0.1 0.1 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1

Table 7 Re-analysis of 4 Ishikawa samples (CHA-2, 4, 6, 7) by MINDECO (WR-2, 4, 6, 7).

Analyses by ICP/MS at Tokyo University, leach tests at Mitsui R & D Centre, Japan

7A REE concentrations in the solid sample

LRE ppm MRE ppm HRE ppm TREE TREE-

Ce Sample La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu Y ppm ppm CHA-2 132 144 35 134 25 6 21 3 13 2 5 1 3 0 43 568 424 WR2 129 215 35 132 26 6 21 3 16 3 8 1 7 1 62 663 448

CHA-4 125 126 31 127 23 9 22 3 18 4 11 1 9 1 111 620 495 WR4 143 158 38 150 29 11 28 4 22 5 13 2 10 2 125 739 581

CHA-6 104 88 24 93 17 6 17 3 14 3 8 1 6 1 92 475 387 WR6 104 82 29 121 25 9 28 4 23 5 13 2 10 2 149 606 525

CHA-7 215 132 42 146 21 5 18 2 12 2 6 1 5 1 59 665 533 WR7 221 234 45 152 23 5 18 2 13 2 7 1 6 1 64 794 560

327B Individual REE in the solid sample as a % of total REE

Light REE % Mid REE % Heavy REE % TREE TREE-

Ce Sample La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu Y % % CHA-2 23 25 6 24 4 1 4 1 2 0 1 0 1 0 8 100 75 WR2 19 32 5 20 4 1 3 0 2 0 1 0 1 0 9 100 68

CHA-4 20 20 5 20 4 1 4 1 3 1 2 0 1 0 18 100 80 WR4 19 21 5 20 4 1 4 1 3 1 2 0 1 0 17 100 79

CHA-6 22 19 5 20 4 1 3 1 3 1 2 0 1 0 19 100 81 WR6 17 13 5 20 4 1 5 1 4 1 2 0 2 0 25 100 87

CHA-7 32 20 6 22 3 1 3 0 2 0 1 0 1 0 9 100 80 WR7 28 29 6 19 3 1 2 0 2 0 1 0 1 0 8 100 71

7C Concentration of REE leached from solid into liquor

Light REE ppm Mid REE ppm Heavy REE ppm TREE TREE-

Ce Sample La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu Y ppm ppm CHA-2 - - - - - - - - - - - - - - - - WR2 10 8 3 11 2 0 2 0 1 0 1 0 1 0 10 49 42

CHA-4 100 31 26 107 19 7 21 3 16 3 10 1 7 1 104 456 425 WR4 105 35 28 115 20 8 23 3 18 4 10 1 7 1 113 490 455

CHA-6 57 8 17 74 14 5 17 3 14 3 8 1 5 1 105 332 324 WR6 57 9 17 75 15 5 19 3 15 3 8 1 6 1 109 342 333

CHA-7 - - - - - - - - - - - - - - - - WR7 160 5 30 105 14 2 12 1 7 1 4 1 3 0 48 394 389

33

7D Individual REE composition of leached liquor as a % of total REE in liquor


Ce Sample La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu Y % % CHA-2 - - - - - - - - - - - - - - - - WR2 21 16 5 23 3 1 4 0 3 1 2 0 1 0 21 100 84

CHA-4 22 7 6 23 4 2 5 1 4 1 2 0 2 0 23 100 93 WR4 22 7 6 23 4 2 5 1 4 1 2 0 2 0 23 100 93

CHA-6 17 2 5 22 4 2 5 1 4 1 2 0 2 0 32 100 98 WR6 17 3 5 22 4 2 6 1 4 1 2 0 2 0 32 100 97

CHA-7

WR7 41 1 8 27 3 0 3 0 2 0 1 0 1 0 12 100 99

7E Percentage extraction of the REE in the solid sample into the leach liquor


Ce Sample La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu Y % % CHA-2 - - - - - - - - - - - - - - - - WR2 8 4 8 9 6 7 9 8 8 10 10 9 8 9 17 7 9

CHA-4 80 25 84 85 84 77 95 94 87 81 92 69 80 77 94 74 86 WR4 74 22 72 77 70 74 82 79 78 78 79 75 71 70 90 66 78

CHA-6 55 9 72 80 83 85 102 120 99 108 103 101 83 110 114 70 84 WR6 54 11 56 62 59 62 69 65 65 64 63 60 56 55 73 56 63

CHA-7 WR7 73 2 67 69 59 39 66 59 55 59 60 59 54 54 74 50 69

8 DEPOSIT TYPES

The type of REE deposit being explored for in the Chambe Basin is

commonly referred to as the “ion-adsorption clay type”, although various other

names have been used including “south China type”, “Jiangxi rare earth ores” ,

“weathered crust elution-deposited rare earth ores”, “MEX-REY ores”, and “ionic

REE ores” . The following summary is taken from a number of sources, including

Bao and Zhao (2008), Chi (1988), Chi and others (2005) , Chi and Tian (2008),

Ishihara and others (2008), Kanazawa and Kamitami (2005), Maksimovic and

Panto (1996), Morteani and Preinfalk (1996), Murakami and Ishihara (2008),

Orris and Grauch (2002), Sanematsu and others (2009), and Wu and others

(1996).

Ion adsorption type REE deposits are fairly common in China, where they

were first discovered in the 1970’s, and now number at least 214 deposits (Bao

and Zhao (2008)), but are almost unknown elsewhere in the world. About 90% of

the Chinese ionic deposits are in the southern provinces, principally Jiangxi,

Guang Dong, and Guang Xi, but also in Hunan and Fujian. These areas are

generally subtropical areas south of 28˚ N with warm, humid conditions and

annual rainfalls exceeding 1,500 mm. In these areas they generally develop in

the weathering zone where topography is gentle, denudation rates are low but

long-continued, and soils are consequently deep and well preserved. Most

appear to have formed by in situ weathering of granite, but some have developed

by weathering of other igneous rock types (eg pyroclastics), and rarely even from

other types of rock (eg phyllite). There is also evidence from clays washed into

karst depressions in eastern Europe (Maksimovic and Panto (1996)) that REE

concentrations can develop in clays not formed in situ.

Whatever the environment, REE enrichments of the ionic type appear to

be due to continuous ground water leaching that mainly decomposes accessory

REE minerals in soils, and to a lesser extent trace REE in rock- forming minerals,

from the upper soils . The REE are progressively leached in upper layers and

redeposited at greater depths. In China it appears the REE are mostly loosely

bound to clays, However, in soils developed on REE-bearing carbonatites in

Brazil (Morteani and Preinfalk (1996) the REE may be mainly held in phosphates,

35

(such as apatite or the barium aluminum phosphate gorceixite ), or in REE

fluorocarbonates of the bastnäsite group. Less is known of the leachability of

these minerals but it likely is less than the ionic clay type.

Weathered soil profiles in the REE deposits of south China are of lateritic

character and range from 5 to 30 m depth, are generally 8-10 m thick but may

locally reach as much as 60 m (Chi and Tian (2008) , Bao and Zhao (2008)).

Typically there is a surface layer of organic soils (A soil layer), a strongly

weathered clayey, grey, yellow to red coloured layer (B soil layer) which usually

has the highest REE enrichment, and a lower pale-coloured layer with remnant

silicate minerals in clay (C soil layer) that may also retain primary igneous

textures (“saprolite”).

About 60 to 90% of the total REE are adsorbed on clays such as kaolinite

and halloysite (Chi and Tian (2008)).The grade of raw ore is between 0.05 % and

0.35% total RE oxides but there is considerable variability (2 to 6 times) in grade

within a single deposit, commonly with better grades on ridges than gullies. The

deposits are relatively small, generally 3,000 to 12,000 tonnes but the annual

output from this type of deposit from China is about 10,000 tonnes REE oxide

according to Bao and Zhao (2008). According to Chi and Tian (2008) “proven

reserves of RE are approximately 1.48 million tons” in ion-adsorption deposits,

inferior only to the resource at Bayan Obo.

This type of deposit is important as providing a significant proportion of mid

and heavy REE in China. Figure 11 shows the REE distribution in two important

Chinese ion-adsorption deposits (Longnan and Xunwu) compared with three

carbonatite-related REE deposits Mountain Pass REE Mine, the Bayan Obo REE

Mine and the Mt Weld REE deposit. Individual ion-adsorption deposits vary in

their distribution of the REE but Figure 11 shows some characteristic features.

The carbonatite deposits have a high proportion of light REE, while the ionic

deposits have low light REE, higher mid and heavy REE. They also commonly

show a distinctive deficiency in Ce and sometimes in Eu. The Ce deficiency has

been explained (eg Bao and Zhao , 2008) by the tendency of Ce to oxidize from

Ce3+ to Ce4+ , the formation of cerianite or absorption of Ce on Fe and Al

oxyhydroxides .

36

The ion-adsorption REE deposits can only be processed chemically.

Extraction is by ion exchange using a variety of common chemicals such as the

sulphate, nitrate or chloride of ammonium, which provide the NH4+ cations to

replace REE ions, but Na+, K+ and other cations are also effective. The REE

may be extracted by batch-leaching, by heap-leaching or can be extracted by in

situ leaching (“ISR”). The leached REE are commonly recovered from the

leachate by precipitation with oxalic acid or ammonium bicarbonate.

The principal features of the ion-adsorption REE deposits are summarized

below

1 The REE deposits are soils developed in tropical areas with high rainfall by

long-continued weathering, generally on granite bedrock.

2 Much of the REE is derived from weathered accessory minerals, naturally

leached by ground waters in the upper soils (A layer) and redeposited at greater

depth where it is loosely bound to clays, generally in the B soil layer but also in

the C layer.

3 Although ion-adsorption deposits vary in their composition of individual REE,

they tend to have a distinctly different distribution than other sources such as

carbonatites, with less light REE, and higher proportions of the valuable mid-REE

and heavy REE. They also often have a Ce deficiency and a smaller Eu

deficiency.

4 REE grades are low (0.05-0.35 % total RE oxide), but the soils can be mined

by relatively inexpensive shallow surface excavations or by in situ recovery.

5 In contrast to other types of REE deposits, which commonly require complex

and expensive processing, REE in ion-adsorption deposits can be extracted by

simple leaching of common chemicals. The amount recoverable is commonly 60

to 90% of the total REE in the soil.

37

6 U and Th, which are generally associated with REE deposits of other types,

are typically very low in the soils of ion-adsorption REE deposits and of this low

U and Th in the soil only a small percentage reports to the leach solution.

10

100

1000

10000

100000

La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu Y

Mt Pass Bayan Obo Mt Weld Longnan Xunwu

Figure 11 Chondrite-normalized REE distributions of REE from REE deposits in

China , Australia and USA. Chondrite values from Anders and Grevesse (1989)

x 1.36 (volatile-free CI chondrite). Longnan and Xunwu are important ion-

adsorption REE mines in China. Mountain Pass is an important bastnäsite mine

in carbonatite in California. Bayan Obo REE Mine in China is the largest REE

deposit in the World, with debated origin but probably carbonatite-related ?. Mt

Weld is an undeveloped REE deposit derived by secondary enrichment from a

carbonatite in Australia. Note steep smooth curves for carbonatite-related

deposits, flatter REE distributions for ionic deposits and Ce and Eu deficiencies.

Figure 12. Location of samples taken by Ishikawa (Table 2), MINDECO/JOGMEC/Geol Survey of Malawi (Table 3) and by

Le Couteur (Table 8).

9 EXPLORATION

Reconnaissance samples taken include 9 samples taken in 2010 before

the Prospecting Licence was granted and another 16 after granting of the licence

in early 2011.

(a) Procedures and parameters

Samples taken so far (Table 2 and 3) are only of a reconnaissance nature,

were taken mainly from convenient roadside exposures and are 1 to 5 kg in size.

(b) Sampling methods and sample quality, representativeness, bias.

Samples shown in Tables 2 and 3 were scraped mainly from available road

cuts and appear typical of the soils exposed at shallow depths. There is

insufficient data to determine how representative these soils are of those

throughout the basin. As the leachable REE content is not directly observable in

the field it cannot be said whether they are biased toward higher or lower values.

(c) Location, number, type, nature, sample spacing, size of area covered.

Locations of the 21 soils and 3 rocks taken are listed in Table 2 and 3 and

shown in Figure 12. These are mainly from exposures along logging tracks,

spaced from 50 m to 500 m apart over about 2.5 km and mainly in the eastern

and southern part of the basin.

(d) Significant results and interpretation of exploration information

The most significant result of the analyses from the few samples so far

analyzed (Table 2 to 7) is that some of them contain easily-leachable REE (up to

74% recovery from TREE of 620 ppm in one sample). The interpretation of this

meagre information is that it suggests the possibility that Chambe Basin may

contain REE mineralization of the ion adsorption type. The purpose of the current

drill program is to provide sufficient data to evaluate this possibility.

Of interest is MINDECO dike sample 11052306 with 5,495 ppm TREE

(Table 5), including 2,131 ppm Y and high levels of other REE, an indication of

the presence of primary REE enrichment in the rocks of Chambe Basin.

40

10 DRILLING

Drilling soils in Chambe Basin using two hand-portable drills was carried out

by MINDECO from August to October of 2011 but no details are currently

available, and as no analyses have yet been made there is no new information

on the REE potential.

11 SAMPLE PREPARATION, ANALYSES AND SECURITY

(a) Sample preparation methods, quality control prior to analyses.

The author was not involved in taking the samples listed in Tables 2 and 3,

collected in Sept of 2010 and May of 2011, and has no information on these

aspects for these samples. However, it is thought samples were placed in plastic

bags and submitted in this form to the analyzing laboratories.

(b) Sample preparation and analysis procedures, laboratory.

Samples collected by J. Ishikawa listed in Table 2 were split, pulverized and

analyzed for 14 REE and other elements (Ba, Co, Cr, Cs, Ga, Hf, Mo, Nb, Rb,

Sn, Sr, Ta, Th, Tl, U, V, W, Zr) using method ME-MS81 at the North Vancouver

Laboratory of ALS-Chemex. This method involves fusing the sample to a glass

with Li tetraborate, dissolution in acids and analysis by ICP-MS and is intended

to break down refractory minerals and provide total contents of the elements

analyzed. The results are listed in Table 4. The ALS-Chemex North Vancouver

lab is accredited to ISO-9001 standard. At the laboratory of Nittetsu Mining R &

D Centre in Japan splits of the samples were dried at 105˚ C for 24 hours,

ground to 2 mm, and 50 g was leached in 500 mg of 2% ammonium sulphate for

6 hours. The leach liquor was separated by centrifuge and analyzed by ICP-MS,

with the results listed in Table 4.

Samples listed in Table 3 collected by MINDECO/JOGMEC and the

Geological Survey of Malawi were analyzed for REE by ICP-MS at Tokyo

University. Samples of 15 g were leached in 150 ml solution of ammonium

sulphate.

41

(c) Quality control procedures.

The author has no information on quality control procedures for samples

listed in Tables 4 to 7.

(d) Opinion on adequacy of sample preparation, security, analytical

procedures.

The author was not involved in the sampling program in Sept of 2010 or in

May of 2011 and has no opinion on sample preparation and security prior to

analyses. Analyses for REE were made by accepted and appropriate methods by

major laboratories and leaching for loosely-held REE was done by a variant of a

standard method (Chi (1988), Chi and Tian (2008)).

12 DATA VERIFICATION

(a) Data verification by qualified person.

A principal purpose of the property visit by the author was to re-collect soils

from some sites where samples taken by J. Ishikawa in September 2010 were

found to contain easily-leachable REE (Table 4 and 7). Work done for

verification purposes included re-analysis of three samples collected by J.

Ishikawa in 2010, analysis of samples re-collected at 4 of the Ishikawa sites and

at several other sites, two samples were checked for the identity of the clay

minerals, two samples were screened for size distribution, and two soil samples

and one syenite were thin-sectioned and examined by petrographic microscope.

Samples were exported on Export Permit EP 02911, issued by the

Commissioner for Mines and Minerals of Malawi on 23August of 2011.

All analyses were done by ALS Chemex at their North Vancouver laboratory

(2103 Dollarton Hwy, North Vancouver, BC, V7H 0A7) except for leach

procedure ME-MS04 which was done at their Perth laboratory (ALS Ammtec, 6

Macadam Place, Balcatta, Western Australia, 6021). Both laboratories have ISO

9001 accreditation, and also have ISO 17025 accreditation for their most

common procedures, but not for ME-MS81, MS-ICP06 or the selective leaches

One syenite rock analyzed for total REE was first crushed with procedure

CRU-31 (fine crush below 2 mm) and it and the soils were then pulverized by

42

procedure PUL-21 (pulverized to 85% -75 microns). Samples were analyzed for

total REE and other trace elements by procedure ME-MS81 and for major

elements by method MS-IP06. Samples of 0.2 g sample were fused with 0.9 g

lithium metaborate at 1,000˚ C, the glass was dissolved in 100 ml 4% HNO3/2%

HCl and analyzed by ICP-MS for method ME-MS81 and by ICP-AES for method

ME-ICP06. The REE results are reported in Table 10.

Soil samples were analyzed for leachable REE by ALS-Chemex as follows.

Soils were first air dried using procedure DRY-23 and leached by procedure ME-

MS23 (a selective leach of weakly bound ions by sodium cyanide with chelating

agents ammonium chloride, citric acid and EDTA, with the leachant buffered at

pH 8.5, analysis by ICP-MS) and by procedure ME-MS04 ( a weak leach with 1.0

g sample mixed with 25 ml of ammonium acetate solution in acetic acid, shaken

for 2 hours, the leachant separated by centrifuge and decantation, analysis by

ICP-MS and by ICP-AES). The leached residues from ME-MS04 were also

pulverized (PUL-21) and analyzed for REE by method ME-MS81 and ME-ICP06..

Results by method ME-MS04 for the samples listed in Table 8 are shown

in Table 10 (total REE) and in Table 11, (leachable REE).

1 Resampling and analysis of samples taken by J. Ishikawa On 21 August

of 2011 the author visited J. Ishikawa in his office at the Geological Survey of

Malawi in Zomba and was given sub-samples of 3 of his original samples for

check analyses both of total REE and leachable REE. These results are reported

in Table 9 along with the original analyses of these samples and analyses by

MINDECO of the same samples.

Samples CHA-4, CHA-6 and CHA-8 have now been analyzed for leachable

REE by 3 laboratories and these results are compared in Table 9 and Figure 12.

The result of re-analysis of the 3 original Ishikawa samples generally confirms

their high percentage of leachable REE, from 31 to 74% for all REE or 41 to 86%

for all REE except Ce. As previously noted, ionic REE deposits generally show a

lower percentage of leachable Ce than other REE.

It appears that method ME-MS04 gives results similar to the ammonium

sulphate leach used by Nittetsu and University of Tokyo. However, the ME-MS23

43

leach gives much lower values (see Table 13), is therefore considered unreliable

and unsuitable for testing REE deposits of the ionic type and is not discussed

further.

2 Resampling at previously sampled sites. Four of the roadside sites

sampled by Ishikawa (CHA-1, CHA-4, CHA-6, CHA-8) were relocated by hand-

held GPS and resampled at the same depths and from the same scrape as the

original samples. As it is conceivable that sampling only of roadside samples

might bias results, perhaps reducing leachable REE by rain washing or

increasing the leachable REE by evaporation of REE-bearing ground water at the

free surface, at 2 sites (CHA-1, CHA8) samples were taken from new pits dug

about 10 m away from the road cuts. These results are reported in Table 10 and

11 and compared with analyses of the original samples in Table 14.

Considering that these samples include subsamples of the original samples,

others re-collected at the same sites and nearby, and that analyses were done at

several labs using different methods the agreement is reasonably good. It is

concluded that the results at least demonstrate that some samples contain a

substantial percentage (31 to 74% in Table 14 c) of easily leachable REE.

However, the number of samples examined is very small and much more close-

spaced sampling and repeated reanalysis of a standard sample is needed to

separate analytical uncertainty from natural variability. Work on these aspects will

be part of the MINDECO program.

3 Blank and standard. A barren quartz sand sample was submitted as a

blank and a sample of REE standard SARF-1 was submitted as a standard.

These results are shown in Table 10. Analysis of this standard gave results

within 2 std deviations except for La. The blank gave a total of 25 ppm, slightly

high, with the larger values for the more abundant REE (Ce, La, Nd, Y).

Standards, blanks and duplicates analyzed by ALS Chemex as part of their

quality control gave acceptable results, although the standards used for the

leaches generally had much lower concentrations than the samples.

Table 8 Samples collected by P. Le Couteur on August 22 and 23, 2011

Assay UTM WGS84 WGS84 Sample comment Sampler Date Sample Depth Colour Weight

no E- zone Easting

m Northing

m type cm g 686951 36L 771708 8238275 CHA-4 original Ishikawa 7 Sept 10 soil 160 pale brown 169686952 36L 771338 8237947 CHA-6 original Ishikawa 7 Sept 10 soil 300 pale brown 308686953 36L 770825 8237658 CHA-8 original Ishikawa 7 Sept 10 soil 100 pale brown 523686954 36L Sarf-1 standard (pulp) standard 73686955 36L Quartz sand blank blank 300686956 36L 770825 8237658 CHA-8 resample Le Couteur 22-Aug-11 soil 100 pale grey 625686957 36L 771342 8237947 CHA-6 resample Le Couteur 22-Aug-11 soil 300 pale brown 642686958 36L 771712 8238278 CHA-4 resample Le Couteur 22-Aug-11 soil 150 brown 673686959 36L 772200 8239800 Pit near Frances Hut Le Couteur 23-Aug-11 soil 100 red brown 710686960 36L 772202 8239603 Pit near Frances Hut Le Couteur 23-Aug-11 soil 100 red brown 618686961 36L 772190 8239512 Unit 3 syenite Le Couteur 23-Aug-11 soil outcrop pale grey 544686962 36L 772006 8239223 10m from CHA-1 Le Couteur 23-Aug-11 soil 85 pale grey 700686963 36L 770831 8237667 10m from CHA-8 Le Couteur 23-Aug-11 soil 100 pale grey 867

686964 36L 772001 8239224 CHA-1 resample Le Couteur 23-Aug-11 soil 100 pale brown 750

TABLE 9 Analyses of REE in 3 Ishikawa soil samples and leached liquors by 3 labs

REE concentrations in the raw solid sample in ppm Light REE Mid REE Heavy REE

Sample by** La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu Y TREE

ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm CHA-4 ISH 125 126 31 127 23 9 22 3 18 4 11 1 9 1 111 620

MIN 143 158 38 150 29 11 28 4 22 5 13 2 10 2 125 739 PCL 147 154 37 147 28 11 26 4 23 5 13 2 10 2 140 745

CHA-6 ISH 104 88 24 93 17 6 17 3 14 3 8 1 6 1 92 475 MIN 104 82 29 121 25 9 28 4 23 5 13 2 10 2 149 606 PCL 117 144 32 134 28 9 28 4 25 5 14 2 10 2 165 717

CHA-8 ISH 127 203 34 140 27 11 27 4 22 4 11 1 8 1 120 739 PCL 100 194 26 111 24 10 23 4 21 5 12 2 10 2 152 695

% of individual REE in the raw solid sample Light REE Mid REE Heavy REE

Sample by La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu Y TREE

% % % % % % % % % % % % % % % % CHA-4 ISH 20 20 5 20 4 1 4 1 3 1 2 0 1 0 18 100

MIN 19 21 5 20 4 1 4 1 3 1 2 0 1 0 17 100 PCL 20 21 5 20 4 1 3 1 3 1 2 0 1 0 19 100

CHA-6 ISH 22 19 5 20 4 1 3 1 3 1 2 0 1 0 19 100 MIN 17 13 5 20 4 1 5 1 4 1 2 0 2 0 25 100 PCL 16 20 4 19 4 1 4 1 3 1 2 0 1 0 23 100

CHA-8 ISH 17 27 5 19 4 1 4 1 3 1 2 0 1 0 16 100 PCL 14 28 4 16 3 1 3 1 3 1 2 0 1 0 22 100

REE removed from the solid into the leach solution in ppm Light REE Mid REE Heavy REE


ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm CHA-4 ISH 100 31 26 107 19 7 21 3 16 3 10 1 7 1 104 456

MIN 105 35 28 115 20 8 23 3 18 4 10 1 7 1 113 490 PCL 96 33 26 113 21 9 23 3 18 3 10 1 7 1 99 463

CHA-6 ISH 57 8 17 74 14 5 17 3 14 3 8 1 5 1 105 332 MIN 57 9 17 75 15 5 19 3 15 3 8 1 6 1 109 342 PCL 57 10 17 79 16 6 20 3 17 3 9 1 6 1 106 348

CHA-8 ISH 20 11 7 35 9 5 12 2 12 3 8 1 6 1 100 232 PCL 26 14 8 39 9 5 15 2 13 3 8 1 6 1 107 257

Individual REE as % of the total REE in solution Light REE Mid REE Heavy REE


% % % % % % % % % % % % % % % %

CHA-4 ISH 22 7 6 23 4 2 5 1 4 1 2 0 2 0 23 100 MIN 22 7 6 23 4 2 5 1 4 1 2 0 2 0 23 100 PCL 21 7 6 24 4 2 5 1 4 1 2 0 2 0 21 100

CHA-6 ISH 17 2 5 22 4 2 5 1 4 1 2 0 2 0 32 100 MIN 17 3 5 22 4 2 6 1 4 1 2 0 2 0 32 100 PCL 16 3 5 23 4 2 6 1 5 1 2 0 2 0 30 100

CHA-8 ISH 9 5 3 15 4 2 5 1 5 1 3 0 3 0 43 100 PCL 10 5 3 15 4 2 6 1 5 1 3 0 2 0 42 100

REE leached as a % of original REE in the solid (% REE recovered) Light REE Mid REE Heavy REE TREE


-Ce % % % % % % % % % % % % % % % % %

CHA-4 ISH 80 25 84 85 84 77 95 94 87 81 92 69 80 77 94 74 86 MIN 74 22 72 77 70 74 82 79 78 78 79 75 71 70 90 66 78 PCL 66 22 71 77 74 79 89 73 80 72 78 70 69 66 71 62 73

CHA-6 ISH 55 9 72 80 83 85 102 120 99 108 103 101 83 110 114 70 84 MIN 54 11 56 62 59 62 69 65 65 64 63 60 56 55 73 56 63 PCL 49 7 54 59 56 65 71 59 67 57 63 58 56 55 64 49 59

CHA-8 ISH 16 5 21 25 33 46 45 51 55 72 70 74 75 84 83 31 41 PCL 26 7 30 35 39 52 63 53 59 56 68 63 64 63 70 37 48

**KEY

ISH=Ishikawa samples (Table 4. REE by ALS Chemex, leach by Nittetsu)

MIN=MINDECO samples (Table 7. REE by University of Tokyo, leach by Mitsui)

PCL=Le Couteur samples (Table 10. REE by ALS Chemex, leach by ALS Chemex)

CHA-4

0

50

100

150

200


REE

pp

m

ISH

MIN

PCL

CHA-6

0

50

100

150

200


pp

m

ISH

MIN

PCL

CHA-8

0

50

100

150

200

250


pp

m

ISH

PCL

Figure 12. Comparison of analyses of 3 Ishikawa samples by 3 labs . Data

of Table 9.

TABLE 10. Analyses of total REE in samples collected by P. Le Couteur for verification purposes

(samples of Table 8). Analyses by ALS Chemex by ICP-MS. res=resampled, orig=original Ishikawa sample)

REE in solid soil samples (except syenite E686961 ) , method ME-MS81

Sample SAMPLE Ce Dy Er Eu Gd Ho La Lu Nd Pr Sm Tb Tm Y Yb TREETREE-

Ce no ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm CHA-4 orig E686951 154 23 13 11 26 5 147 2 147 37 28 4 2 140 10 745 592CHA-6 orig E686952 144 25 14 9 28 5 117 2 134 32 28 4 2 165 10 717 573CHA-8 orig E686953 194 21 12 10 23 5 100 2 111 26 24 4 2 152 10 695 502CHA-8 res E686956 140 22 12 9 22 5 83 2 93 22 21 4 2 153 9 598 458CHA-6 res E686957 177 24 13 8 25 5 104 2 118 28 25 4 2 164 11 710 533CHA-4 res E686958 136 17 10 8 18 3 111 1 107 27 21 3 1 104 8 574 439 Pit E686959 369 9 6 2 9 2 76 1 59 17 11 1 1 46 7 615 246 Pit E686960 195 9 4 4 12 2 104 1 88 25 16 2 1 37 4 502 307 Syenite E686961 96 6 3 3 8 1 49 0 50 13 10 1 0 29 2 272 176near CHA-1 E686962 146 16 9 6 19 3 101 1 105 27 19 3 1 94 8 556 410near CHA-8 E686963 126 13 8 8 15 3 61 1 72 17 15 2 1 88 6 435 310CHA-1res E686964 155 9 5 3 10 2 72 1 64 17 12 1 1 46 5 401 246

Standard

SAMPLE Ce Dy Er Eu Gd Ho La Lu Nd Pr Sm Tb Tm Y Yb Total REE

no ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm E686954 6830 26 3 53 99 3 2990 0 2490 780 248 9 0 49 1 13581SARF-1 6768 26 51 2665 2615 746 235 2SD 572 2.2 2.8 196 272 62 16 Blank E686955 9.8 0.5 0.3 0.1 0.5 0.1 4.7 0.1 3.9 1.1 0.7 0.1 0.0 2.6 0.3 24.7Blank 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

49Table 11 Results of leaching REE from samples of Table 8 by ALS Chemex ( method ME-MS04 )

REE in leach solution

Sample Sample Ce Dy Er Eu Gd Ho La Lu Nd Pr Sm Tb Tm Y Yb TREETREE-

Ce ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm CHA-4 orig E686951 33 18 10 9 23 3 96 1 113 26 21 3 1 99 7 463 429 CHA-6 orig E686952 10 16 9 6 20 3 57 1 79 17 16 3 1 106 6 347 337 CHA-8 orig E686953 14 13 8 5 15 3 26 1 39 8 9 2 1 107 6 257 243 CHA-8 res E686956 10 13 8 4 13 3 16 1 26 5 7 2 1 106 6 221 211 CHA-6 res E686957 12 17 9 6 20 3 51 1 73 16 15 3 1 110 6 342 330 CHA-4 res E686958 22 11 6 5 14 2 58 1 68 16 12 2 1 70 4 292 270 Pit E686959 12 1 0.35 0.22 1 0.12 6 0.04 7 2 1 0.13 0.05 3 0.30 33 22 Pit E686960 3 0.07 0.03 0.04 0.12 0.01 1 <0.005 0.77 0.19 0.14 0.02 <0.005 0.32 0.02 5 2 Syenite E686961 near CHA-1 E686962 5 11 6 4 13 2.00 39 1 60 13 11 2 0.72 69 4 240 235 near CHA-8 E686963 9 7 4 4 7 1 11 1 20 4 5 1 1 57 3 133 124 CHA-res E686964 6 3 2 1 4 0.55 12 0.17 19 4 4 0.53 0.18 19 1 77 71

Recovery of REE in leach solution as % of total REE in sample

Sample SAMPLE Ce Dy Er Eu Gd Ho La Lu Nd Pr Sm Tb Tm Y Yb TREETREE-

Ce Th U no % % % % % % % % % % % % % % % % % % % CHA-4 orig E686951 22 79 78 79 89 72 66 66 77 71 74 73 70 71 69 62 73 4 3CHA-6 orig E686952 7 63 63 65 71 57 49 55 59 54 56 59 58 64 56 48 59 2 2CHA-8 orig E686953 7 59 68 52 63 56 26 63 35 30 39 53 63 70 64 37 48 2 1CHA-8 res E686956 7 58 67 45 59 56 20 67 28 23 33 52 63 69 67 37 46 1 2CHA-6 res E686957 7 71 72 72 79 64 49 56 62 56 59 67 61 67 59 48 62 2 3CHA-4 res E686958 16 64 64 67 76 59 52 53 64 59 60 61 56 67 55 51 62 3 3 Pit E686959 3 9 6 10 12 6 7 4 12 11 12 10 5 6 4 5 9 2 4 Pit E686960 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 4 Syenite E686961 near CHA-1 E686962 3 68 67 73 72 64 38 55 57 48 58 68 61 74 57 43 57 2 3near CHA-8 E686963 7 50 56 48 45 49 18 53 28 22 32 46 57 65 54 31 40 2 2CHA-res E686964 4 37 34 44 41 33 16 23 30 25 33 39 28 41 25 19 29 2 4

50Table 12 REE in soils as a % of REE in parent syenite E686961 (data of Table 10)

Ratio of REE in soils to REE in syenite E686961 SAMPLE Ce Dy Er Eu Gd Ho La Lu Nd Pr Sm Tb Tm Y Yb TREE Th U

no % % % % % % % % % % % % % % % % % % E686951 2 4 5 4 3 4 3 4 3 3 3 4 4 5 4 3 5 5E686952 2 4 5 3 4 5 2 4 3 3 3 4 5 6 4 3 11 10E686953 2 3 4 4 3 4 2 4 2 2 2 3 4 5 4 3 2 2E686956 1 3 4 3 3 4 2 4 2 2 2 3 4 5 4 2 2 2E686957 2 4 5 3 3 4 2 4 2 2 3 4 5 6 5 3 18 12E686958 1 3 3 3 2 3 2 3 2 2 2 3 3 4 3 2 5 5E686959 4 1 2 1 1 2 2 2 1 1 1 1 2 2 3 2 24 16E686960 2 2 2 2 2 1 2 1 2 2 2 2 1 1 1 2 11 8E686961 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1E686962 2 3 3 2 2 3 2 3 2 2 2 2 3 3 3 2 5 4E686963 1 2 3 3 2 2 1 2 1 1 2 2 3 3 3 2 2 1E686964 2 1 2 1 1 1 1 2 1 1 1 1 2 2 2 1 6 5

Table 13 REE leached from samples of Table 8 by method ME-MS23

ME-MS23

ME-MS04

Sample Ce Dy Er Eu Gd Ho La Lu Nd Pr Sm Tb Tm Y Yb TREE TREE ppb ppb ppb ppb ppb ppb ppb ppb ppb ppb ppb ppb ppb ppb ppb ppm ppm E686951 885 2610 2090 476 1530 716 2180 204 4970 871 1085 336 254 19100 1405 39 463E686952 2610 4160 2330 1875 6120 895 17900 240 28700 5730 5230 842 274 29200 1560 108 347E686953 4860 5240 3500 2550 6670 1225 11400 444 20200 3640 4780 993 449 43600 2710 112 257E686956 2750 4530 3000 1740 4890 1070 5660 364 11300 1920 2980 813 383 38200 2300 82 221E686957 1905 3790 2100 1545 5420 807 12200 209 20700 3980 4160 776 236 25300 1335 84 342E686958 1.9 1.4 0.9 0.9 1.8 0.3 3.7 0.1 6.7 1.2 1.4 0.3 0.1 12.3 0.7 0.03 292E686959 2110 149 101.5 65.9 305 30.7 448 23.1 2020 330 439 34 15.9 718 133 7 33E686960 19.5 0.5 0.4 0.2 1 0.1 3.9 0.1 9.7 1.7 1.4 0.1 0.1 3 0.5 0.04 5E686962 736 3700 2050 1690 5330 789 9870 225 22700 3950 4490 756 240 20400 1415 78 240E686963 2920 3110 2070 1875 3420 739 3520 248 9790 1500 2440 553 266 25100 1565 59 133E686964 1615 1745 871 915 2450 345 1845 95.8 10350 1465 2350 356 100.5 8800 609 34 77

51Table 14 Soils analyzed by Ishikawa, MINDECO and the author for comparative purposes

14 a Total REE concentration in soils

Sample Ishikawa Comment Ce Dy Er Eu Gd Ho La Lu Nd Pr Sm Tb Tm Y Yb TREE TREE-Ce

no no ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm

CHA-4 Ishikawa analysis 126 18 11 9 22 4 125 1 127 31 23 3 1 111 9 620 495

WR4 CHA-4 MINDECO reanalysis 158 22 13 11 28 5 143 2 150 38 29 4 2 125 10 740 582

E686951 CHA-4 PCL reanalysis 154 23 13 11 26 5 147 2 147 37 28 4 2 140 10 745 592

E686958 CHA-4 resample PCL 136 17 10 8 18 3 111 1 107 27 21 3 1 104 8 574 439






E686953 CHA-8 PCL reanalysis 194 21 12 10 23 5 100 2 111 26 24 4 2 152 10 695 502 E686956 CHA-8 resample PCL 140 22 12 9 22 5 83 2 93 22 21 4 2 153 9 598 458

E686963 CHA-8 10 m from original 126 13 8 8 15 3 61 1 72 17 15 2 1 88 6 435 310




52

Table 14b REE concentrations leached from soil


no no ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm ppm













CHA-1 Ishikawa analysis



53

Table 14 c REE leached from soil as a % of total REE in soil

Values below 50% recovery highlighted

Note some values for CHA-6 are >100% possibly because two laboratories were involved (ALS and Nittetsu)

<50% of total REE recovered in the leach solution


no no % % % % % % % % % % % % % % % % %





Averages 21 78 78 74 85 73 68 61 75 72 72 76 61 81 69 63 75





Averages 8 74 75 69 80 72 52 68 66 60 65 80 67 80 65 56 67





Averages 7 55 65 48 53 58 20 67 29 24 34 50 64 72 65 34 44



Averages 4 52 51 59 57 49 27 39 44 37 45 53 45 57 41 31 43

54

Table 14d Differences in values in Table 14c as a % difference from the averages

(differences higher than 20% highlighted ).

>20% difference from the average

Sample Ishikawa Comment Ce Dy Er Eu Gd Ho La Lu Nd Pr Sm Tb Tm Y Yb TREE TREE-

Ce

no no % % % % % % % % % % % % % % % % %


WR4 CHA-4 MINDECO reanalysis 5 5 -1 -1 -4 10 8

-19 2 3 -4 -1 -18 12 2 5 5

E686951 CHA-4 PCL reanalysis 2 1 1 7 4 -2 -3 7 2 -1 4 -4 14 -

12 1 -2 -3

E686958 CHA-4 resample PCL -

25 -

18 -

18 -9 -

11 -

19 -

23 -

13 -

15 -

18 -17 -

20 -9 -

16 -

19 -20 -17


WR6 CHA-6 MINDECO reanalysis 31

-12

-18

-20

-15

-17 6

-26 -6 -2 -7 -7 -26 -8 -7 1 -5

E686952 CHA-6 PCL reanalysis -

19 -

16 -

15 -6 -

11 -

21 -6 -

18 -

10 -

10 -13 -

26 -13 -

19 -

14 -13 -12

E686957 CHA-6 resample PCL -

21 -5 -4 3 -2 -

11 -6 -

17 -6 -7 -9 -

17 -10 -

15 -8 -14 -8

CHA-8 Ishikawa analysis -

18 -1 8 -3 -

15 24 -

20 26 -

13 -

14 -4 2 14 16 16 -8 -6

E686953 CHA-8 PCL reanalysis 6 6 4 10 18 -4 30 -6 22 27 14 5 -2 -2 -2 9 10

E686956 CHA-8 resample PCL 7 5 3 -6 11 -4 0 0 -4 -5 -3 2 -2 -4 3 9 5

E686963 CHA-8 10 m from original 6 -

11 -

14 0 -

14 -

16 -

10 -

21 -5 -9 -7 -9 -11 -

10 -

17 -10 -9

E686964 CHA-1 resample PCL 10 -

30 -

33 -

24 -

27 -

32 -

40 -

40 -

31 -

32 -28 -

28 -37 -

29 -

39 -38 -33

E686962 CHA-1 10 m from original -

10 30 33 24 27 32 40 40 31 32 28 28 37 29 39 38 33

55

Figure 13 Chondrite-normalized REE distribution of leached REE in samples E686956, E685957, and E686958.

.

10

100

1000

10000

100000


Mt Pass Bayan Obo Mt Weld E686956

Longnan Xunwu E686957 E686958

Chondrite values of Anders and Grevesse (1989) x 1.36 (ie volatile-free CI chondrite).

4 Nature of soils

Two samples (E686956 and E866964) were screened to determine grain

sizes, were scanned by X-ray diffraction to determine clay type, and thin

sectioned to examine their mineralogy.

Figure 14 Example of a roadside-cut sample site. Sample E686958 repeats

Ishikawa sample CHA-4, both from the hollowed scrape at 1.5 m depth. This

sample contained 574 ppm TREE, of which 51% was leachable.

57

(a) Appearance The general appearance of a roadside bank initially sampled

by Ishikawa (CHA-4) and resampled by the author is shown in Figure 14. A thin

rooty grey A soil layer overlies a pale yellow-brown B soil horizon.

(b) Grain sizes. The size distributions of two screened samples are listed in

Table 15. Material coarser than 0.25 mm is shown for E686956 as Figure 15 ,

forms a large part (79% by weight) of this sample and consists of corroded-

looking grey-white feldspar with scattered flakes of golden-brown biotite.

Table 15 Grain size of two samples

Size E686 956 E686 964

mm gram % gram % +5 0.0 0 0.0 0

-5+1 20.5 14 10.2 6-1+0.5 30.4 20 26.0 14

-0.5+0.25 67.4 45 31.6 17-0.25+0.15 28.5 19 55.4 30

-0.15 4.4 3 60.8 33Total 151 100 184 100

Figure 15 Screened fraction of sample E686956 coarser than 0.25 mm. Field of

view 5 mm. Mainly composed of corroded (weathered) K’spar.

58

Figure 16. Photomicrograph of sample E686956 . Crossed polars. Field of

view=4.5 mm. Abundant fragments of K’spar and biotite in clay.

Figure 17. Same area as above figure. Plain light. Surprisingly fresh K’spar and

fresh and altered biotite in clay.

59

(c) Clay type

Two samples analyzed for clay type by X-ray diffraction (“XRD”) were

reported by J.A. McLeod (MASc, P.Eng) to contain kaolinite, along with residual

silicates from the syenite, as listed below.

Sample E686956 (re-sample of CHA-8) contains

1. Albite - significant. 2. Orthoclase - moderate. 3. Kaolinite - minor to moderate. 4. Phlogopite(?) - minor. Sample E685964 ( re-sample of CHA-1) contains: 1. Kaolinite - significant to abundant. 2. Orthoclase - minor. 3. Muscovite - minor. 4. Quartz - minor. One XRD scan is displayed as Figure 18.

5 Parent syenite A sample (E686961) of the central syenite plug (unit SY-

c of Garson and Walshaw,1969) was taken from an outcrop beside Frances

Hut (location Table 8) to determine the mineralogy and total REE content in this

rock, which appears to be the main source of the soils. Major and trace elements

are listed in Table 16, and REE are listed in Table 10. The major elements are

fairly typical of syenites, and the trace elements are unexceptional. The 3

samples in Table 16 are shown on an alkali vs silica classification plot as Figure

19.

Figure 18. Xray diffraction scan of sample E686964. Kaolinite and unaltered silicates from parent syenite

Table 16 Composition of Chambe Basin syenite plug.

W1026 and W1030 from Garson and Walshaw (1969, page 80)

E686961 W1026 W1030

unit Ag ppm <1 63.05 65.86

SiO2 % 64 Ba ppm 286 17.5 16.64

Al2O3 % 17.15 Co ppm <0.5 1.88 1.79

FeO total % 4.15 Cr ppm 10 1.76 1.2

CaO % 0.85 Cs ppm 0.14 0.82 0.73

MgO % 0.67 Cu ppm <5 6.47 5.4

Na2O % 6.62 Ga ppm 28 5.43 6.12

K2O % 6.3 Hf ppm 3

Cr2O3 % <0.01 Mo ppm <2 0.72 0.46 TiO2 % 0.94 Nb ppm 33 0.12 0.12 MnO % 0.18 Ni ppm <5 0.25 0.14 P2O5 % 0.26 Pb ppm <5 SrO % <0.01 Rb ppm 77 BaO % 0.03 Sn ppm 1 0.34 0.58 LOI % 0.8 Sr ppm 6 98.34 99.04 Total % 102 Ta ppm 2 Th ppm 1 Tl ppm <0.5 U ppm 0.3 V ppm 12 W ppm <1 Zn ppm 100 Zr ppm 93

Figure 19. Alkali v silica classification plot. Red dot=E686961, stars are W1026,

W1030 from Table 16 above. Syenite is the intrusive equivalent of trachyte.

62

Figure 20. Polished slab 40 mm long of Chambe Basin syenite E686961.

Slightly weathered (brown stain), mostly grey microperthite K’spar with thin rims

of cream albite, and interstitial black amphibole, biotite, and ilmenite.

Figure 21 . Same slab as above, stained for potassium (yellow). Mostly yellow-

stained K’spar, tracery of paler rimming albite.

63

The appearance of sample E686961 in hand specimen is shown in Figure

20 as a polished surface and stained for the abundant K’spar in Figure 21.

In thin section syenite E686961 (Figure 22, 23) consists mostly of

microperthite K’spar (~90%). Two sizes of K’spar are present; coarser anhedral

blocky equant grains reach 9 mm across, some with corroded K’spar cores

surrounded by clouds of minute (<0.05 mm) inclusions of biotite, amphibole and

ilmenite, and a finer-grained feldspar, tabular to rectangular in shape and

showing a weak common alignment. The feldspar has well-developed string

texture, slender spindle-shaped parallel lamellae, generally 0.01 to 0.04 mm

wide. Many K’spars are mantled by thin (0.1 mm) serrated albite rims (2%).

Angular anhedral bright green to olive-brown Na-Ca amphibole (4%) to 3 mm

across fills interstices between K’spar (Figure 20 to 23) and there is a little deep

green pyroxene. Red-brown to dark brown biotite (~2 %) forms anhedral

interstitial flakes to 1.2 mm across, commonly associated with amphibole.

Anhedral to subhedral, blocky ilmenite (~2 %) to 0.6 mm across shows slight

hematization. Apatite (<1 %) forms mostly blocky rounded grains to 1 mm

across, generally inclusions in K’spar. Quartz is a very minor interstitial

constituent.

Some typical analyses of minerals are listed in Table 17, made on the thin

section by an EDAX energy-dispersive X-ray unit attached to an AMRAY 1810T

scanning electron microscope.

Table 17 Energy dispersive analyses of minerals in syenite E686961

Mineral Na2O MgO Al2O3 SiO2 K2O CaO TiO2 MnO Fe2O3 Total

% % % % % % % % % %

microperthite 6 19 69 6 100

amphibole 4 11 5 50 2 8 2 1 18 99

biotite 1 11 9 42 7 2 3 1 23 99

albite 11 20 69 100

ilmenite 50 5 46 101

64

Figure 22 Photomicrograph of syenite E686961, Crossed polars, field of

view=4.5 mm.

Figure 23 Same area as above figure. Plain light. Inclusions of biotite, ilmenite.

(b) Limitations or failure to verify data

The soils analyzed for leachable REE are considered a reasonable test of the

small number of previously reported results from Chambe Basin soils.

(c) Opinion on adequacy of verification data

The amount and composition of easily-leachable REE are the principal matters

that required verification. However, obtaining a laboratory to provide the most

appropriate method for leaching proved difficult in the short time available. In the

opinion of the author better leaching methods should be found before further analyses

are done. The author initially attempted to persuade ALS Chemex to carry out exactly

the same procedure used by Nittetsu Mining R & D on the original Ishikawa samples,

a simple leach with a 2% ammonium sulphate aqueous solution described by Chi

(1988). Unfortunately, ALS declined to carry out this procedure, perhaps partly

because of pressure of work, partly due to the small number of samples involved, and

partly because they would first have to develop quality control procedures and

leachable-REE standard samples. Other commercial laboratories would likely have a

similar response and, while it may have been possible to persuade a university or

other laboratory to carry out these leaches these likely lack accreditation or even the

sort of quality assurance provided by commercial labs and required for 43-101 reports.

Because the ammonium sulphate leach noted above was not available two

different leach procedures (see Item 11 (b)) offered by ALS Chemex were chosen as

alternatives, both very weak leaches that selectively strip loosely bound ions. The

leach method ME-MS04 (ammonium acetate) gave results comparable to the

ammonium sulphate leaches at the Nittetsu and Mitsui laboratories, but method ME-

MS23 (ammonium chloride) appears to extract much lower percentages of REE

(Table 13).

Summary From the author’s brief August visit the following were verified.

1 Chambe basin is a large bowl in a subcircular syenite intrusion that contains thick

soils. The soils appear to be derived from the underlying syenite, which crops out in

many places and also occurs as residual boulders in the soils.

2 Soils consist of fragments of feldspar and ferromagnesian minerals from

breakdown of the syenite, mixed with kaolinite from weathering of the rock. Soil

66

profiles have well developed lower grey-white C layers, brown B layers, and thin

dark-grey organic A layers, although only shallow sections were seen. Analyses

suggest the soils generally have 2 to 3 times the REE values of the parent syenite.

3 Samples collected by J. Ishikawa were re-analyzed and the results of total REE

and leachable REE found to be generally consistent with the previous analyses.

4 Sample sites reported by J Ishikawa were re-located within a metre or two of the

positions he reported, four were resampled and analyzed, and 2 of them repeated also

from fresh pits dug nearby. Results from these samples are broadly consistent with

the previously reported total and leachable REE results at these locations. Eight

Ishikawa samples contained 234 to 739 ppm TREE, MINDECO (13 samples) 194-642

ppm TREE, this report (11 samples) 401-745 ppm TREE. Th and U contents of all

analyses are low, with Th from 1 to 29 ppm and U from <1 to 5 ppm.

5 Recoveries of leachable REE are quite variable, but can be substantial. Eight

Ishikawa samples gave recoveries of 31 to 74 %, MINDECO (11 samples) 0.1 to 30%,

and this report (11 samples) 1 to 62%. Recoveries of Th and U are generally <5%.

6 The distribution of REE shows similarities to the ion-adsorption clay deposits of

China (Figure 13), with a lower proportion of light REE and a higher proportion of

heavy REE, a different pattern than REE derived from carbonatites.

7 Features that suggest Chambe Basin contains REE mineralization of the ion-

adsorption type include the following. The REE occur in thick clayey soils developed

on igneous rocks in a tropical high-rainfall area. Values of total REE are fairly low

(~200 to 700 ppm) but a high proportion (to 74%) are easily leachable, suggesting

they are loosely attached to clays. The fairly flat distribution of the REE on a chondrite-

normalized plot, the anomalously low values of Ce, and low U and Th are all typical of

this type of deposit. It is concluded that the Chambe Basin soils fit the model of ionic

REE deposits known mostly from China, as first proposed by J. Ishikawa.

67

13 MINERAL PROCESSING AND METALLURGICAL TESTING

No mineral processing or metallurgical studies have been made. However, the

only feasible method of processing this type of deposit is by chemical leaching. In Item

8 it was noted that one of the attractions of the ion-adsorption REE type of deposit is

their metallurgical simplicity relative to the often-complex processing required for other

types of REE deposit. Analyses of REE leached from exploration samples, by dilute

solutions of ammonium salts for example, should be a good initial indication of their

extractability with such solutions on a commercial scale. However, these analyses are

no substitute for metallurgical tests.

14 MINERAL RESOURCE ESTIMATES

The scattered meagre data do not allow any estimate of a REE mineral

resource in the Chambe Basin.

15 MINERAL RESERVE ESTIMATES

The data are not yet available to estimate a REE mineral resource in the

Chambe Basin.

16 MINING METHODS

No consideration of mining methods has been made at the present time.

However, the potential material is surficial soil and is known to be shallow, extending

from surface down to about 15 m depth. Presumably, shallow surface mining and in

situ recovery will be considered if the project obtains encouraging results.

17 RECOVERY METHODS

At this preliminary stage of exploration no specific information on any recovery

method is appropriate, but would likely involve ion exchange of loosely-held REE by

dilute aqueous solutions.

18 PROJECT INFRASTUCTURE

No consideration has yet been given to project infrastructure. However, in Item

5 (c) the necessity of rehabilitating the existing cableway, or some other means of

68

transporting material and people to and from the basin should the project prove

encouraging was noted.

19 MARKET STUDIES AND CONTRACTS

Market studies or contracts for possible mineral products have not been made.

20 ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY

IMPACT

No environmental studies have yet been made but Initial environmental studies

(see Item 27) are part of the current phase of exploration.

Permitting is not required for the current activities and possible future permit

requirements have already been commented on in Item 4 (g).

The present phase of exploration has a significant beneficial community impact.

It provides work and training (Anonymous (2011b) for at least 25 citizens of Malawi

including geologists, drillers, porters, samplers, and drivers, many from nearby villages

such as Nakoya. As required by the terms of the licence, labour and supplies are

obtained within Malawi to the extent possible.

21 CAPITAL AND OPERATING COSTS

No estimation of capital and operating costs has been made or is appropriate at

the present preliminary stage of exploration.

22 ECONOMIC ANALYSIS

At this early stage there is insufficient data to carry out an economic analysis

and none has been made.

23 ADJACENT PROPERTIES

Although a number of REE deposits are known in Malawi, some of which are

being evaluated economically, none are of the ion-adsorption REE type and therefore

cannot usefully be compared with the Chambe Basin.

69

24 OTHER RELEVANT DATA AND INFORMATION

To the author’s knowledge, there is no additional information or explanation

necessary to make this report understandable and not misleading.

25 INTERPRETATION AND CONCLUSIONS

Despite current interest in exploration for REE deposits, few deposits of the

ion-adsorption type are known outside China, where they are a significant source of

REE, especially of the mid and heavy REE, and they appear to have some

advantages over other types of REE deposit. Although only a small amount of

information is yet available, some soil samples of the Chambe Basin have high

percentages of leachable REE and suggest it may have potential for a REE deposit of

the ion adsorption type, as originally suggested by J. Ishikawa, JOGMEC and

MINDECO. The Chambe Basin deserves a thorough sampling to determine the size,

grade, recovery, and economic potential of leachable REE.

27 RECOMMENDATIONS

The program briefly described below to explore for a REE deposit of the ion

adsorption type was prepared by MINDECO and, as the work and the expenditures

have both been presented to and approved as commitments by the Government of

Malawi in the course of applying for the licence, the author has no opportunity to

recommend anything different. However, in the author’s opinion the MINDECO

program is well designed, systematic, and should provide the data to make an initial

evaluation of the leachable REE mineralization in the Chambe Basin. The author has

no hesitation in endorsing this program.

Field work on the exploration program, being conducted by MINDECO under

direction of H. Harada, began in August of 2011. Estimated expenditures are listed in

Table 18 and the principal activities of this program are as follows (Anonymous,

2011b).

Geology Drilling of about 160 shallow drill holes in soils on a 200 m grid (Figure 24)

using two portable drills. Holes will be logged lithologically and radiometrically, and

specific gravity of soils measured. Samples will be taken every metre or at lithological

70

boundaries. Pits and trenches will be excavated to examine the nature of the soil

profile. Surface geology will be mapped in Chambe Basin and a geological traverse

made on the bauxite of the nearby Lichenya Plateau to the east.

Analyses About 1,650 samples will be analyzed for 27 elements by ICP-MS and

leaching tests made on about 500 samples using dilute ammonium sulphate solution.

Selected samples will be examined petrographically and by X-Ray diffraction..

Environmental. Flow of streams will be monitored, their pH and electrical

conductivity measured and water samples taken. Growth of plants in leach residues

will be tested.

Table 18 Expenditures estimated by MINDECO for the first phase of

exploration in Chambe Basin.

Cost centre US $ Preliminary visits and presentations $ 98,393 Wages , including overheads $ 362,199 Personnel travel expenses $ 97,181 Equipment and supplies, transport to site $ 175,346 Laboratory analyses, tests $ 222,793 Spring Stone Ltd office costs $ 75,000 Local contractor costs $ 68,053 Accommodation, food, sample shipping, fuel $ 9,927

Total $ 1,108,892

If results in this initial exploration are encouraging then further phases of

exploration will be carried out, and will likely include closer-spaced drilling, pitting,

metallurgical tests, consideration of mining and REE recovery methods and costs,

improvement to access, evaluation of environmental issues, and market studies.

Accurate analyses of total REE appear to be readily obtained from several

laboratories, including ALS-Chemex. However, although the leachable REE analyses

by ALS Chemex method ME-MS04 appear to be compatible with analyses by Nittetsu

and Mitsui labs it is suggested the amount of soil analyzed is too small and should be

71

increased from 1 gram to at least 50 grams. If possible, a laboratory willing to carry out

the simpler ammonium sulphate leach should be found and appropriate testing of

leach performance done. No standard sample for leached REE is available and it is

recommended that a leach standard sample be made from soil on the Property,

perhaps from site CHA-4, which gave high recovery (74%) of leachable REE from a

sample with relatively high TREE (~620 ppm) and is easily accessed at the roadside.

Figure 24. The drill plan (200 m centres) by two man-portable drills proposed by

MINDECO in the first phase of exploration of the Chambe Basin in 2011

72

REFERENCES

Anders, E., Grevesse, N. (1989) Abundances of the elements: meteoric and solar.

Geochim. Cosmochim Acta 53, pp197-214.

Anonymous (1994) Feasibility study for Mulanje Mountain Bauxite in Malawi.

Prepared by MET-CHEM for MIDCOR . 11 Volumes.

Anonymous (2011) Exploration Plan of the Mulanje Project in Malawi. Prepared for

JOGMEC by MINDECO. Unpublished report, June 2011. Gold Canyon records.

Anonymous (2011a) Exploration plan of the Mulanje Project in Malawi. Prepared for

JOGMEC by MINDECO , June, 2011. Unpublished. Gold Canyon records.

Anonymous (2011b) Phase I exploration cost of the Mulanje Mountain project in

Malawi. Unpublished cost estimation prepared by MINDECO. Gold Canyon records.

Bao, Z., Zhao, Z. (2008) Geochemistry of mineralization with exchangeable REY in

the weathering crusts of granitic rocks in South China. Ore Geology Reviews

v 38, pp 519-535

Chi, R. (1988) Extraction of rare earths from a low-grade, kaolinitic ore by percolation

leaching in Bautista, R.G., Wong, M.M( eds). “ Rare Earths, Extraction, Preparation

and Application” , pp221-234. The Minerals and Metals Society.

Chi, R, Zhongjan, L., Cui, P., Shenming, X. (2005) Partitioning properties of rare

earth ores in China. Rare Metals v24 (3), pp205-209

Chi, R., Tian, J. (2008) Weathered crust elution-deposited rare earth ores. Nova

Science Publishers Inc, 286 p.

Chimwala, M. (2009) SA company ready to launch Malawi bauxite project feasibility

study. Mining Weekly, 16th Jan.

Chimwala , M. (2009a) Mining operations to contribute $500 a year to Malawi fiscus. .

Mining Weekly, 25th Sept,

Deppe , C., Bishop, T. (2010) Mount Mulanje Global Biosphere Reserve Visitor’s

Handbook. Published by Mulanje Mountain Conservation Trust. 30p

Garson, M.S., Walshaw, R.D. (1969) The geology of the Mlanje area. Bulletin 21 ,

Geological Survey Dept of Malawi, 157p.

Ishihara, S., Hua,R., Hoshino, M., Murakami, H. (2008) REE abundance and REE

minerals in granitic rocks in the Nanling Range, Jiangxi Province, Southern China, and

generation of REE-rich weathered crust deposits.Resource Geol. v 58(4), pp 355-372.

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Ishikawa, J. (2010) Exploration for ion-adsorption REE deposit in Mulanje Mountains,

Malawi (Draft). Unpublished report dated 14 August of 2010. Gold Canyon records.

Kojima, R. (2011) Project brief for EPL 0325/11, Mulanje Mountain. On behalf of Joint

Venture between JOGMEC and Gold Canyon. Unpublished company report, July

2011. Gold Canyon Records.

Kojima, R. (2011a) Quarterly activity report for EPL0325/11, Mulanje Mountain.

Unpublished company report to Joint Venture between JOGMEC and Gold Canyon,

July 2011. Gold Canyon records.

Land, B., Husband, C., Walser, G., Loayza, F. (2009) Malawi Mineral Sector

Review. World Bank Report.

Maksimovic, Z.J., Panto, G. (1996) Authigenic rare earth minerals in karst-bauxites

and karstic nickel deposits. (In “Rare earth Minerals” eds Jones, A.P., Wall, F.,

Williams, C.T) Mineralogical Society Series no 7, pp 257-278.

Miyatake, S. (2011) REE resource evaluation program in Malawi. Unpublished

presentation to Malawi Government in Lilongwe, Malawi by Gold Canyon and

JOGMEC on June 27, 2011. Gold Canyon records.

Morteani, G. , Preinfalk, C. (1996) Rare earth distribution and REE carriers in

laterites formed on the alkaline complexes of Araxa and Catalao (Brazil) (In “Rare

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no 7 , pp 221-252.

Murakami, H. Ishihara, S. (2008) REE mineralization of weathered crust and clay

sediment on granitic rocks in the Sanyo belt, SW Japan and southern Jiangxi

Province. China Resource Geology 58(4) pp 373-401.

Ruan, C. (1988) Extraction of rare earths from a low-grade kaolinitic ore by

percolation leaching. (In “Rare earths, extraction, preparation and applications” eds

Bautista, R.G. Wong, M.M.) The Minerals, Metals and Materials Society, pp 228-234.

Sanematsu, K. Murakami, H. Watanabe,Y, Duangsurigna, S. Vilayhack, S. (2009) .

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'74

DATE AND SIGNATURE PAGE \

l, Peter G. Lecouteur, certify that:

(a) | am a geologist employed by Micron Geological Ltd as President. The businessaddress of Micron Geological Ltd is 4900 Skyline Drive, North Vancouver, BC, Canada,V7R 3J3, tel (604) 9804471, email [email protected].

(b) This certificate applies to the report titled "Geological Report on the ChambeBasin Area, Exclusive Prospecting Licence no EPL 0325111", dated November 25 of2011.

(c) I graduated in geology from the University of Auckland (New Zealand) with degrees ofB.Sc (1964) and M.Sc. (1967) in geology, and from the University of British Columbia witha Ph.D (1972) in geology.

I have been a Fellow (#F1378) of the Geological Association of Canada since 1969,and a Professional Engineer (#10,963) in good standing with the Association ofProfessional Engineers and Geoscientists of British Columbia since 1977.

I have been involved as a geologist since 1973 in mineral exploration for variouscommodities including base metals, precious metals, specialmetals, uranium, anddiamonds in North America, South America, Africa, Europe, Greenland, Asia andAustralasia. I have worked on rare earth properties in USA, BC, Greenland and theNorthwest Tenitories of Canada.

I have read the definition of "qualified person" set out in Nl 43-10'1 and certify that byreason of my education, current affiliation with a professional association and past relevantwork experience, I fulfill the requirements of a "qualified person" for the purposes of Nl 43-101 .

(d) I conducted a personal inspection of the property that is the subject of this report onthe 22nd and 23'd of August of 2011 for a duration of about 28 hours.

(e) | am responsible for all sections of this report.

(f) According to the test of independence in section 1.5 of Nl 43-101 , I am independentof Gold Canyon Resources Inc.

(g) | have had no prior involvement with the Property.

(h) | have read Nl 43-101, and this report has been prepared in compliance with Nl 43-101 and Form 43-101Fl (effective date June 30, 2011).

(i) As of the date of this certificate, to the best of my knowledge, information and belief,the technical report contains all scientific and technical information that is required to bedisclosed to make the technical report not misleading.

Effective date of report : November 25,2011

Signature date : November 25,2011

C. Le Couteur, PhD (UBC), P.Eng (BC)

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