Henning Gold Mines Inc. · 2015-11-05 · Henning Gold Mines Inc. Eight Mile Lake Placer Deposit...

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Henning Gold Mines Inc. Eight Mile Lake Placer Deposit Cariboo Regional District, British Columbia NI 43-101 Technical Report Authors and Qualified Persons: Bruce Davis, FAusIMM, BD Resource Consulting, Inc. (Principal) Robert Sim, P. Geo, SIM Geological Inc. Detlef Eberle, Pr.Sci.Nat. (RSA), Dr. rer.nat.habil (TU Berlin), geotec Rohstoffe GmbH, Germany Effective Date: August 7, 2014 Release Date: November 10, 2014

Transcript of Henning Gold Mines Inc. · 2015-11-05 · Henning Gold Mines Inc. Eight Mile Lake Placer Deposit...

Page 1: Henning Gold Mines Inc. · 2015-11-05 · Henning Gold Mines Inc. Eight Mile Lake Placer Deposit Cariboo Regional District, British Columbia NI 43-101 Technical Report Authors and

Henning Gold Mines Inc.

Eight Mile Lake Placer Deposit Cariboo Regional District, British Columbia

NI 43-101 Technical Report

Authors and Qualified Persons:

Bruce Davis, FAusIMM, BD Resource Consulting, Inc. (Principal) Robert Sim, P. Geo, SIM Geological Inc. Detlef Eberle, Pr.Sci.Nat. (RSA), Dr. rer.nat.habil (TU Berlin), geotec Rohstoffe GmbH, Germany

Effective Date: August 7, 2014

Release Date: November 10, 2014

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BD RESOURCE CONSULTING INC. | SIM GEOLOGICAL INC. | GEOTEC ROHSTOFFE GMBH AUGUST 2014

HENNING GOLD MINES INC. NI 43-101 TECHNICAL REPORT EIGHT MILE LAKE PLACER DEPOSIT TOC-I

TABLE OF CONTENTS

1 SUMMARY ......................................................................................................................................... 1-1

2 INTRODUCTION ................................................................................................................................ 2-1

3 RELIANCE ON OTHER EXPERTS ................................................................................................... 3-1

4 PROPERTY DESCRIPTION AND LOCATION ................................................................................. 4-1

5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE & PHYSIOGRAPHY .. 5-1

5.1 ACCESSIBILITY ............................................................................................................................. 5-1 5.2 CLIMATE ...................................................................................................................................... 5-1 5.3 LOCAL RESOURCES ...................................................................................................................... 5-2 5.4 INFRASTRUCTURE ......................................................................................................................... 5-2 5.5 PHYSIOGRAPHY ............................................................................................................................ 5-3

6 HISTORY ........................................................................................................................................... 6-1

7 GEOLOGICAL SETTING AND MINERALIZATION.......................................................................... 7-1

7.1 REGIONAL GEOLOGY .................................................................................................................... 7-1 7.2 LOCAL GEOLOGY .......................................................................................................................... 7-1 7.3 PROPERTY GEOLOGY ................................................................................................................... 7-2 7.4 MINERALIZATION ........................................................................................................................... 7-3

8 DEPOSIT TYPES ............................................................................................................................... 8-1

9 EXPLORATION ................................................................................................................................. 9-1

9.1 SEISMIC REFRACTION ................................................................................................................... 9-3 9.2 2D RESISTIVITY ............................................................................................................................ 9-6 9.3 TEST PITTING ............................................................................................................................... 9-8 9.4 CONCLUSIONS .............................................................................................................................. 9-9

10 DRILLING .................................................................................................................................... 10-1

11 SAMPLE PREPARATION, ANALYSES AND SECURITY ......................................................... 11-1

11.1 SAMPLE COLLECTION ................................................................................................................. 11-2 11.2 SAMPLE PREPARATION ............................................................................................................... 11-2 11.3 SAMPLE ANALYSIS ...................................................................................................................... 11-2 11.4 SAMPLE SECURITY ..................................................................................................................... 11-5

12 DATA VERIFICATION ................................................................................................................. 12-1

13 MINERAL PROCESSING AND METALLURGICAL TESTING .................................................. 13-1

14 MINERAL RESOURCE ESTIMATES .......................................................................................... 14-1

14.1 INTRODUCTION ........................................................................................................................... 14-1 14.2 AVAILABLE DATA ........................................................................................................................ 14-2 14.3 GEOLOGIC MODEL ...................................................................................................................... 14-5 14.4 EVALUATION OF OUTLIER GRADES .............................................................................................. 14-7 14.5 COMPOSITING ............................................................................................................................ 14-8 14.6 VARIOGRAPHY .......................................................................................................................... 14-11

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14.7 MODEL SETUP AND LIMITS ........................................................................................................ 14-12 14.8 INTERPOLATION PARAMETERS ................................................................................................... 14-13 14.9 VALIDATION .............................................................................................................................. 14-14 14.10 RESOURCE CLASSIFICATION ................................................................................................. 14-16 14.11 MINERAL RESOURCES .......................................................................................................... 14-16 14.12 COMPARISON OF 3D AND 2D MODELS ................................................................................... 14-18

15 MINERAL RESERVE ESTIMATES ............................................................................................. 15-1

16 MINING METHODS ..................................................................................................................... 16-1

17 RECOVERY METHODS .............................................................................................................. 17-1

18 PROJECT INFRASTRUCTURE .................................................................................................. 18-1

19 MARKET STUDIES AND CONTRACTS ..................................................................................... 19-1

20 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL OR COMMUNITY IMPACT ........ 20-1

21 CAPITAL AND OPERATING COSTS ......................................................................................... 21-1

22 ECONOMIC ANALYSIS .............................................................................................................. 22-1

23 ADJACENT PROPERTIES ......................................................................................................... 23-1

24 OTHER RELEVANT DATA ......................................................................................................... 24-1

25 INTERPRETATION AND CONCLUSIONS ................................................................................. 25-1

26 RECOMMENDATIONS ................................................................................................................ 26-1

27 REFERENCES ............................................................................................................................. 27-1

28 CERTIFICATES AND SIGNATURES ......................................................................................... 28-1

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LIST OF TABLES

Table 1.1: Inferred Mineral Resource Estimate for Eight Mile Lake Placer Deposit ................. 1-3

Table 4.1: Tenures Overview .................................................................................................. 4-4

Table 6.1: Record of Historic Gold Production at Eight Mile Lake (Kocsis, 2012) .................... 6-1

Table 9.1: Exploration at Eight Mile Lake ................................................................................ 9-1

Table 9.2: Seismic Interpretation (Frontier, 2014) ................................................................... 9-3

Table 9.3: Geological Interpretation of the Measured 2D Resistivity (Arctic, 2014) .................. 9-6

Table 10.1: Unit Description (Timmermann, 2013) ................................................................ 10-2

Table 10.2: Drill Hole Details ................................................................................................. 10-5

Table 14.1: Basic Statistical Summary of Sample Data ......................................................... 14-4

Table 14.2: Correlogram Parameters .................................................................................. 14-12

Table 14.3: Block Model Limits ........................................................................................... 14-13

Table 14.4: Inferred Mineral Resource Estimate for Eight Mile Lake Placer Deposit ........... 14-17

Table 14.5: Comparison of Resources by Model Type ........................................................ 14-18

LIST OF FIGURES

Figure 4-1: Location Map ........................................................................................................ 4-1

Figure 4-2: Claims Map ........................................................................................................... 4-4

Figure 5-1: Accessibility Map .................................................................................................. 5-1

Figure 6-1: Historic Mining Areas at Eight Mile Lake (Kocsis, 2012) ........................................ 6-2

Figure 7-1: Regional Geology (modified after BCGS, 2014) .................................................... 7-1

Figure 7-2: Local Geology (modified after BCGS, 2014) ......................................................... 7-2

Figure 9-1: Overview of Exploration Work at Eight Mile Lake .................................................. 9-2

Figure 9-2: Seismic Refraction Traverses Crossing the Thistle Valley ..................................... 9-5

Figure 9-3: 2D Resistivity Image (Arctic Geophysics, 2014) .................................................... 9-7

Figure 9-4: 2007 Test Pit (Kocsis, 2012) ................................................................................. 9-8

Figure 9-5: 2007 Test Pit - Example of Gold Grain Size (Kocsis, 2012) .................................. 9-8

Figure 10-1: Nodwell-Mounted Reverse Circulation Drill Rig ................................................. 10-1

Figure 10-2: Various Drilling Campaigns ............................................................................... 10-4

Figure 11-1: Sample Gold Recovery Sluices ......................................................................... 11-1

Figure 11-2: Sample Analysis Work Flow Chart (Timmermann, 2013) .................................. 11-4

Figure 11-3: Sample Collection Buckets with Labels ............................................................. 11-5

Figure 13-1: Upper and Lower Sections of the Wash Plant ................................................... 13-2

Figure 14-1: Drill Hole and Topographic Plan ........................................................................ 14-3

Figure 14-2: Drill Hole and Topographic Plan in Main Area ................................................... 14-3

Figure 14-3: Boxplot1 of Gold by Lithology Type ................................................................... 14-5

Figure 14-4: Boxplot2 of Gold by Lithology Type ................................................................... 14-6

Figure 14-5: Plan Showing Contours of Overburden Thickness in the Main Area .................. 14-7

Figure 14-6: Cumulative Probability Plot of Gold Assay Sample Data ................................... 14-8

Figure 14-7: Isometric View of 1.5-m Composite Samples in the Main Area ....................... 14-10

Figure 14-8: Isometric View of Composites Over Full Thickness of Overburden ................. 14-10

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Figure 14-9: Plan View Showing the Thickness of Overburden and Gold Grades in Full-

Thickness Composites ........................................................................................................ 14-11

Figure 14-10: Isometric View of Additional Points Used to Control the Thickness Estimates in

the 2D Model ...................................................................................................................... 14-14

Figure 14-11: Swath Plot of OK vs NN Gold in 3D Model .................................................... 14-15

Figure 14-12: Swath Plots of 2D Model Estimates .............................................................. 14-15

Figure 14-13: Plan Showing the Limit of Inferred Mineral Resource .................................... 14-17

Figure 14-14: Isometric Views of the Extent of Inferred Mineral Resource .......................... 14-18

Figure 14-15: Plan Showing Area of Production during June-July 2014 .............................. 14-19

Figure 26-1: Plan Showing Areas for Future Exploration Activity (Kocsis, 2012) ................... 26-1

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1 SUMMARY

Property Description and Location

The Eight Mile Lake Placer Deposit is located in the Cariboo Regional District of British

Columbia, Canada, approximately 460 km north-northeast of Vancouver, British Columbia.

Quesnel, British Columbia, is the closest town of reasonable size; it is situated to the west

about 89 km from the property. Eight Mile Lake is located in UTM Zone 10 at 597800 E

(easting), 5890000 N (northing).

Ownership

The property is currently comprised of four placer claims and two placer leases. Mr.

Stephen Kocsis holds a 100% interest in all four claims and one of the leases. RHD

Holdings Corp. (RHD) currently holds a 100% interest in the other lease (RHD Lease).

Pursuant to a Mining Agreement with Mr. Kocsis, a subsidiary of Henning Gold Mines Inc.

(HGMI) has the right to mine and produce gold from the property, subject to a 12.5%

production royalty in favour of Mr. Kocsis. Pursuant to a Claim Purchase Agreement with

RHD, HGMI has the right to mine and produce gold from the RHD Lease and to purchase

the RHD Lease in consideration for an initial $60,000 cash payment (which has been

made) and delivery of a total of 120 ounces of gold produced from the property covered by

the lease.

Mining permits with 5-year terms have been granted. The operation is currently permitted to

process up to 300,000 m3 of gold-bearing sediments per year total.

History

The first documented production from the property occurred for several years just prior to

and just after 1900. Approximately 22,000 ounces of gold were produced during that

period. Production in 1988-1989 and again in 2007-2009 amounted to another several

hundred ounces.

Geology and Mineralization

The geology indicates an interglacial or glacial depositional environment that includes

interglacial alluvial systems, glacial deposition, as well as single events such as mudflows.

The gold tends to be associated with coarser gravels and larger cobble and is not

necessarily linked to bedrock. This suggests gold is deposited during the higher energy

phases and is, therefore, erratically distributed throughout the column of sediments.

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Sample Database and Validation

As of August 7, 2014, 54 vertical holes have been drilled at Eight Mile Lake for a total of

1,896 m. Drilling results have been validated against recovery results from current

production. The correspondence suggests the drill information is adequate to estimate

Inferred resources.

Status of Exploration, Development and Operations

Drilling is continuing in an effort to expand the resource base. The main focus of the

ongoing drilling is to delineate additional gravel-bearing channels on the property

Mineral Resource Estimate

The resource estimate has been generated from the reverse circulation drill hole sample

assay results and the associated gravel thickness. The resources have been classified by

their proximity to the sample locations and are reported according to CIM standards on

Mineral Resources and Reserves.

As required under NI 43-101, mineral resources must exhibit reasonable prospects for

eventual economic extraction. The Eight Mile Lake Placer Deposit is comprised of

unconsolidated overburden which contains variable quantities of free gold. There is no

additional sampling during mining and it is assumed that there is no vertical selectivity of

ore versus waste after an area has been selected for mining; essentially, all the material

between surface and bedrock is removed and run through the wash plant.

A series of resource limiting pit shells was generated using a 3D block model and a series

of projected technical and economic parameters that were deemed appropriate for this

deposit. Shells based on gold prices as low as $1,000/oz, site operating costs of $7.50/m3,

and a pit slope of 35° indicated that the majority of the overburden in the Main area of the

deposit exhibits reasonable prospects for eventual economic extraction. The northern crest

of most pit shells remain outside the 10-m buffer from the shore of Eight Mile Lake.

A base case cut-off grade of 0.2 g/m3 is determined assuming site operating costs of

$7.50/m3, a gold price, based on an approximate average price over the past year, of

$1300/oz and projected recoveries of 85%. Using the 2D model, portions of overburden

above this cut-off threshold have been identified and this boundary limit has been used to

identify the parts of the 3D block model that can be included in the mineral resource

estimate. The Inferred mineral resource estimate for the Eight Mile Lake Placer Deposit is

shown in Table 1.1.

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TABLE 1.1: INFERRED MINERAL RESOURCE ESTIMATE FOR EIGHT MILE LAKE PLACER DEPOSIT

Cubic Metres (000)

Grade (g/m

3)

Contained Gold (oz)

2,459 0.43 34,000

Note: Includes areas where the vertical extent of overburden

has a gold grade > 0.2 g/m3. Mineral resources are not mineral

reserves and do not have demonstrated economic viability.

Conclusions and Recommendations

The drill data available are adequate to estimate mineral resources in the Inferred category.

The current resource remains open in several directions and additional drilling is required to

define the ultimate limits of the deposit. There are indications that additional satellite

deposits may be present on the property and additional exploration drilling is

recommended.

Inferred resources are too uncertain to have economic factors applied to them. Mineral

resources, which are not mineral reserves, do not have demonstrated economic viability.

The quantity and grade of reported Inferred resources are uncertain in nature and there has

been insufficient exploration to classify these Inferred resources as Indicated or Measured,

and it is uncertain if further exploration will result in upgrading them to an Indicated or

Measured category.

Although, at this stage, there are no mineral reserves at the Eight Mile Lake deposit, the

deposit is currently in operation. As stated above, the estimate of contained ounces is

necessarily uncertain due to the intrinsic variability of the mineralization and the drill hole

spacing. Whether any or all of the placer gold contained in the estimate can be recovered is

unknown and mining a deposit based on resources in the Inferred category is potentially

risky.

It is typical to develop production decisions on feasibility studies based on Proven and

Probable reserves derived from Measured and Indicated resources. In the case of the Eight

Mile property, current operations are not based on the results of a feasibility study. The

operation uses Inferred resources that are too uncertain to be the foundation of a feasibility

study. As such there is more technical and economic uncertainty associated with the Eight

Mile mining and gold recovery than is usually associated with a producing mine.

Historically, projects that have gone into production without first establishing mineral

reserves and the support of a feasibility study, have a higher risk of economic and technical

failure.

The following actions are recommended for the Eight Mile Lake Placer Deposit:

Drill additional holes on a 50-m grid pattern to identify the lateral extents of the

current resource (approximately 20 holes, total 700 m = $100,000)

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Drill additional exploration holes to identify other gravel-bearing channels in the

exploration areas (20 holes, total 700 m = $100,000).

Continue to validate drill results against gold recovery efforts. Current mining

activities are directed using Inferred-class mineral resources. Additional close-

spaced drilling may be required to improve production reconciliation.

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2 INTRODUCTION

Henning Gold Mines Inc. (HGMI) commissioned Robert Sim, P.Geo of SIM Geological Inc.

(SIM Geological) and Bruce Davis, FAusIMM of BD Resource Consulting, Inc. (BDRC) to

provide a mineral resource estimate for the Eight Mile Lake Placer Deposit in northern

British Columbia, Canada. Additional input has been made by Dr. Detlef Eberle of geotec

Rohstoffe GmbH, Germany. Robert Sim, P. Geo, Bruce Davis, FAusIMM, and Dr. Eberle

are all independent “qualified persons”, within the meaning of the Canadian National

Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101). They are

responsible for the preparation of this technical report on the Eight Mile Lake Placer

Deposit (Technical Report) which was prepared in accordance with NI 43-101 and Form

43-101F1. The information, conclusions, opinions, and estimates contained herein are

based on:

The qualified persons’ field observations.

Data, reports and other information supplied by HGMI and other third parties.

Bruce Davis visited the site on August 6-7, 2014. He was accompanied by Dr. Eberle and,

Stephen Kocsis, the owner. Although drilling was not active at the time, they reviewed RC

sampling procedures, and inspected several drill hole locations and most of the tenures

comprising the property. They also reviewed all aspects of the current mining operations

which are producing gold on the property.

In preparing this Technical Report, the authors reviewed and used several in-house

geological reports, maps, and miscellaneous technical papers, and relied on discussions

with Stephen Kocsis during the site visit. Both HGMI personnel and Stephen Kocsis were

very open during these discussions and provided all information that was requested by the

qualified persons. This report is based on drilling and sampling data available as of August

7, 2014.

HGMI possesses a valid “Occupant License to Cut and Remove Timber” on the property

and is currently permitted by the Ministry of Mines to remove up to 1,500 m3 of

merchantable timber.

All measurement units used in this report are metric, and currency is expressed in US

dollars (US$) unless stated otherwise.

The effective date for this Technical Report and the mineral resource estimate is August 7,

2014.

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3 RELIANCE ON OTHER EXPERTS

The report was prepared by Robert Sim, P.Geo of SIM Geological Inc. (SIM Geological)

and Bruce Davis, FAusIMM of BD Resource Consulting, Inc. (BDRC), and Dr. Detlef

Eberle; all are independent “qualified persons” for the purposes of NI 43-101.

For the purpose of Section 4 (Property Description and Location) of this Technical Report,

the qualified persons have relied on the ownership data (mineral, surface, access rights,

and royalty rights) provided by HGMI. The qualified persons believe these data and

information are essentially complete and correct to the best of their knowledge and that no

information was intentionally withheld that would affect the conclusions made herein. The

qualified persons have not researched the property title or mineral rights for the Eight Mile

Lake property and express no legal opinion as to the ownership status of the property.

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4 PROPERTY DESCRIPTION AND LOCATION

The Eight Mile Lake property, shown in Figure 4-1, is located in the Cariboo Regional

District of British Columbia, Canada, approximately 460 km north-northeast of Vancouver,

British Columbia. Quesnel, British Columbia, is the closest town of reasonable size; it is

situated to the west about 89 km from the property. Prince George is the largest population

centre in this part of central British Columbia; it is situated to the northwest about 190 km

from the property (driving distance). In UTM coordinates, Eight Mile Lake is located in Zone

10 at 597800 E (easting), 5890000 N (northing).

FIGURE 4-1: LOCATION MAP

The property is currently comprised of four placer claims and two placer leases. Details

regarding the tenures are shown in Table 4.1 and in Figure 4-2. In order to maintain the

aforementioned tenures in good standing, the recorded owner is required, in the case of the

claims, to either do the statutorily required amount of annual exploration and development

work on the claims, or pay the required amount of cash in lieu of such work, as set out in

the British Columbia Mineral Tenure Act (MTA) and the Mineral Tenure Act Regulation

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(MTA Regulation). In the case of the leases, the recorded owner is required to make the

annual lease rental payment as set out in the MTA and MTA Regulation.

All of the tenures listed in Table 4.1 are 100% owned by Stephen Kocsis, with the

exception of placer lease 391993, which is 100% owned by RHD Holdings Corp.

Effective March 15, 2013, Henning Gold Mines Inc. (HGMI) and its wholly-owned indirect

subsidiary Wildhorse River Gold Mines Inc. (Wildhorse) entered into a Mining Agreement

(Mining Agreement) with Stephen Kocsis (Kocsis) to extract gold from the Eight Mile Lake

property. Under the terms of the Mining Agreement, Kocsis agreed to provide Wildhorse

with access to the property in order to conduct an initial exploration program, and to

subsequently conduct mining activities for a period of 10 years from the date of

commencement of mining operations. In September 2013, HGMI began mining activities

on the property pursuant to the terms of the Mining Agreement.

The Mining Agreement provides that in consideration for providing HGMI with the right to

conduct mining operations, Kocsis shall be entitled to a percentage of production royalty on

the following basis:

(a) 12.5% of all gold produced if such production is equal to or greater than 25 ounces

per day; or

(b) on any day, if the amount of gold recovered is less than 25 ounces, Kocsis shall

receive 10% of the amount of gold recovered; however, if the amount of gold recovered

for the production year exceeds an average of 25 ounces per day, Kocsis shall be paid

an additional amount of gold, such that the total amount of gold Kocsis will recover for a

production year shall be the average of 12.5% of all gold recovered.

The Mining Agreement also provides that if:

(a) a mining Technical Report can substantiate a minimum grade of 0.5 g/m3 and a total

Inferred resource of at least 10,000 ounces of raw gold (with an average 86% finesse);

or

(b) an average and a minimum of 500 ounces per month would have been produced in

two consecutive months,

then, whichever is earlier, (a) or (b), Wildhorse will:

(c) purchase a private house (selected by Kocsis) and land having a minimum purchase

price of $450,000 (the Milestone House) and furniture value of $50,000; and

(d) rent the Milestone House to Kocsis for the monthly rate of $1.00 during the term of

the mining operation. However, in the event that production during the period up to

December 31, 2014 is at least 3,000 ounces of gold in aggregate, then Wildhorse will

forthwith sell the Milestone House, land and furniture to Kocsis for $1.00.

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With respect to placer lease number 391993, Wildhorse entered into a Claim Purchase

Agreement (Claim Purchase Agreement) on September 1, 2013 with Robert Davie; this

agreement gave Wildhorse the right to acquire a 100% interest in such lease. Mr. Davie is

now deceased, and, as a result, the Claim Purchase Agreement and the lease were

transferred via Mr. Davie’s estate to RHD Holdings Corp. on August 5, 2014.

Pursuant to the terms of the Claim Purchase Agreement, Wildhorse may acquire the lease

by fulfilling the following requirements: make an initial $60,000 payment (this payment has

been made, and Wildhorse has obtained the right to commence mining), and deliver a total

of 120 ounces of gold produced from the property covered by the lease in instalments of 12

ounces per month. Wildhorse commenced production from the lease in June 2014.

A mining permit has been granted for tenure numbers 398947, 559739, and 391993. There

is a second mine permit for tenure number 391993. Both permits have 5-year terms: Kocsis

(July 1, 2013 to December 31, 2017) and RHD Holdings Corp. (May 15, 2014 to December

31, 2018). Each permit includes approval for 150,000-m3 production of pay-gravel sluicing,

so the mine is currently permitted to process up to 300,000 m3 of gold-bearing sediments

per year total.

HGMI intends to submit an application this year to increase production to 500,000 m3 or

more. The permits include authorization to drill 210 holes and excavate 65 test pits.

Permitting also includes seismic and other geophysical surveys, a 4-km access road,

construction, camp, fuel storage, ERP, settling ponds, and sufficient areas for overburden

and tailings disposal.

HGMI possesses a valid “Occupant License to Cut and Remove Timber” on the Property.

HGMI is currently permitted by the Ministry of Mines to remove up to 1,500 m3 of

merchantable timber. Water for sluicing is 100% recycled in a closed-circuit, four-pond

system. No water license is required for groundwater extracted from the ponds and or

neighbouring flooded mine pits. However, the mine is permitted to rejuvenate the ponds by

pumping water from Eight Mile Lake; this is sometimes needed during the summer dry

season.

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TABLE 4.1: TENURES OVERVIEW

Property Name Owner Tenure Number

Area (ha)

Tenure Type

Tenure Sub-Type

Expiry Date

Eight Mile Lake

Stephen Kocsis 398947 200.50 Placer Lease March 21, 2017

RHD Holdings Corp. 391993 28.84 Placer Lease October 11, 2014

Stephen Kocsis 559739 213.29 Placer Claim June 2, 2016

Stephen Kocsis 1022444 38.77 Placer Claim May 10, 2016

Stephen Kocsis 1022445 19.39 Placer Claim May 10, 2016

Stephen Kocsis 1015736 38.97 Placer Claim January 5, 2015

FIGURE 4-2: CLAIMS MAP

Eight Mile Lake extends across some parts of the property. Wetland areas and streams,

which require environmental protection, are associated with the lake. It is understood that

any activity that causes surface disturbance will require a minimum distance of 10 m to the

water or wetland areas; sediment must not be transported into water bodies such as Eight

Mile Lake.

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5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES,

INFRASTRUCTURE & PHYSIOGRAPHY

5.1 ACCESSIBILITY

The Eight Mile Lake property is located in the Cariboo Regional District of British Columbia,

Canada, approximately 460 km north-northeast of Vancouver, British Columbia shown in

Figure 5-1. It is easily accessible by vehicle from Quesnel, British Columbia on a series of

paved highways and gravel roads. The route is as follows: take Highway 97 from Quesnel,

proceed 7 km north to Highway 26, continue 80 km east on Highway 26 towards

Wells/Barkerville; proceed approximately 10 km north on the Bowron Lake Road towards

Bowron Lakes and then 1.5 km west on 2200 Road to the Eight Mile Lake site. Numerous

logging roads crisscross the claims. All claim sections can be accessed by a vehicle.

FIGURE 5-1: ACCESSIBILITY MAP

5.2 CLIMATE

Eight Mile Lake has significantly higher rainfall and snowfall than the Quesnel area; this is

due to its higher elevation and proximity to the Cariboo Mountains. The climate is cooler

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than Quesnel. The weather conditions can change quickly, and temperature drops can

occur at any time of the year. Frost and snow can occur even during the summer season.

Due to its higher elevation (approximately 1,220 m above mean sea level), the hottest

month rarely exceeds an average temperature of 22°C. The climate at Eight Mile Lake is

boreal, with warm summer months and full humidity. The area is covered in snow from the

end of October to the middle of May; snowfall is usually between 100 and 200 cm.

Depending on winter temperatures, drilling and seismic activities can occur year round,

except when temperatures reach only daily highs of -25°C or colder. All other operations

are shut down during the winter period. In 2013, production (sluicing) ended in late

November and restarted again in early April 2014; production can occur approximately 8

months per year. Overburden removal can extend into December and restart in March;

removal can occur approximately 10 months per year.

5.3 LOCAL RESOURCES

Local resources have been established on site. The mine site is accessible by paved

highways and well-maintained gravel roads. Electrical power is provided by on-site diesel

generators. Diesel fuel is stored in tanks, which are regularly refilled by fuel trucks. Timber,

water, and mining surface rights have been obtained (Eight Mile Lake permit number:

Permit P-11-133, Mine No. 1101348, and Thistle Mining Company (391933) permit

number: Permit P-11-563, Mine Number 1101075).

Water is supplied by the nearby Eight Mile Lake, other surface sources, and several man-

made ponds located on site. HGMI has established areas for the processing plant, settling

ponds, process material storage, waste material storage, overburden stockpiles, as well as

an office complex. There are approximately 10 operating personnel who commute daily

from their homes to the production site.

5.4 INFRASTRUCTURE

The closest settlement is the community of Wells (see Figure 5-1), approximately 10 km

southwest of the property. Wells provides grocery stores and basic accommodations.

The closest town from Eight Mile Lake is Quesnel, about 89 km to the west. Quesnel has a

population of approximately 10,000 and about 25,000 in the metro area. Quesnel is

accessible from Vancouver via Williams Lake on Highway 97, or from Vancouver by plane

or train. Flight time is about 1.5 hours; driving time is about 8 hours. The closest railway

access is at Quesnel.

Additional services are available in Prince George; it has a population of approximately

70,000 and about 88,000 in the metro area. Prince George is located about 190 km

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northwest of Eight Mile Lake and 115 km north of Quesnel. Driving time is about 1.5 hours

from Quesnel (Highway 97) and 2.5 hours from Eight Mile Lake (Highways 26 and 97).

5.5 PHYSIOGRAPHY

Eight Mile Lake is situated at the edge of the Cariboo Plateau, which forms a part of the

Interior Plateau between the Coast and Hazelton Mountains to the west, and the Cariboo

Mountains to the east. The placer gold tenures at Eight Mile Lake cover an area of

approximately 4.66 km2. From north to south, the maximum extension is about 2,800 m;

from east to west, the maximum extension is about 2,900 m. Elevation of the property

ranges between 1,200 m and 1,340 m above mean sea level (amsl). Although the property

is located in the Cariboo Mountains, the topography is not mountainous but undulating. The

landscape gently slopes towards the lake located in the centre of the property. The lake

extends about 860 m from the northwest to the southeast, and its maximum width is about

240 m. The groundwater table ranges around 1,219 m amsl. The maximum depth is

assumed to be between 40 m and 50 m below ground surface; however, there are no

reliable records. Most of the Eight Mile Lake property is covered by boreal coniferous

forest. There is some clear-cutting from previous exploration or mining activities.

During the summer, ferns and a variety of shrubs grow all over the property. Due to

reforestation that resulted from previous mining activities, some small areas have

deciduous trees.

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6 HISTORY

Historic gold production is summarized in Table 6.1 and shown in plan in Figure 6-1.

From 1897 to 1906, the Thistle Mining Company (Thistle) mined in and around the Eight

Mile Lake property (Kocsis, 2012). Thistle produced about 22,000 ounces of placer gold

from a hydraulic mine pit that was about 400 m long by 50 m to 100 m wide. Approximately

275,000 m3 of placer ground were processed from a surface mine cut averaging 12 m thick.

In the winter of 1988-89, the Eight Mile Lake property was the focus of a large operation

that targeted the gravels below the lake bottom. Although the lake was drained during the

mining activity, operations encountered major problems with lake-bottom sediments and

organics. A successful suction-dredging operation was also conducted at this site before

the more recent open-pit mining attempts (Levson and Giles, 1993).

TABLE 6.1: RECORD OF HISTORIC GOLD PRODUCTION AT EIGHT MILE LAKE (KOCSIS, 2012)

1 These areas correspond to areas shown in Figure 6-1.

2 This is an estimate based on the royalty received by Steve Kocsis.

Company Name Year Area1

Production (ounces)

Description

Thistle Mining Company 1897-1906 A 22,000 Hydraulic Pit Mine

Church Mining Ltd. 1988 B No Records Open Pit Mine

Church Mining Ltd. 1989 C No Records Open Pit Mine

Stephen Kocsis 2007 D 48 Test Pit

2 Can Mining Ltd. 2008 E 160 Open Pit Mine

2 Can Mining Ltd. 2009 F 4202 Open Pit Mine

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FIGURE 6-1: HISTORIC MINING AREAS AT EIGHT MILE LAKE (KOCSIS, 2012)

HGMI resumed operating activities at Eight Mile Lake in late September 2013 to the middle

of November 2013. During that time period, according to HGMI records, 254 raw ounces

were recovered from 24,876 bank cubic metres (bcm), resulting in an overall gold grade of

0.28 g/m3. During 2014, an additional 365 raw ounces were recovered from 27,498 bcm for

a recovered grade of 0.41 g/m3. These production grades correlate reasonably well with the

mineral resource estimates described in Section 14 of this report.

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7 GEOLOGICAL SETTING AND MINERALIZATION

7.1 REGIONAL GEOLOGY

The Eight Mile Lake Placer Deposit lies within the Upper Proterozoic to Upper Triassic

continental margin carbonates of the Cariboo/Cassiar Terrane. This portion of the terrane is

thrust-bound between the intensely deformed, variably metamorphosed, and poorly dated

Proterozoic to Triassic, siliceous clastic sediments with subordinate volcanics and

limestones of the Kootenay Terrane to the southeast and the oceanic marginal basin

volcanics and sediments of Devonian to Late Triassic Slide Mountains Terrane to the

northeast (Figure 7-1).

FIGURE 7-1: REGIONAL GEOLOGY (MODIFIED AFTER BCGS, 2014)

7.2 LOCAL GEOLOGY

The local geology of the property is characterized by the lithologies of the Snowshoe

Group, the Cariboo Group, and the Black Stuart Group. The Snowshoe Group consists of

metamorphic rocks: predominantly black silite, phyllite, micaceous quartzite, limestone, and

gneiss of Palaeozoic age. The Cariboo Group consists of sedimentary rocks: predominantly

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mudstone, siltstone, limestone, dolostone, and marble. The Black Stuart Group consists of

undivided sedimentary rocks: predominantly chert, limestone, dolostone, derived

conglomerate, and breccia. The property is traversed by northwesterly trending faults,

which separate the Snowshoe and Cariboo Groups (see Figure 7-2).

FIGURE 7-2: LOCAL GEOLOGY (MODIFIED AFTER BCGS, 2014)

7.3 PROPERTY GEOLOGY

Natural bedrock outcrops occur over less than 3% of the property area. Bedrock is

predominately a steeply dipping, variably orange weathered limestone to fresh and

competent grey limestone. Most of these outcrops are located along the eastern boundary

of the property. Mining along the south central border in 1988 and 2009 exposed additional

bedrock, most of which is orange weathered limestone and large limestone boulders

(Timmermann, 2013).

Seismic surveys, drilling, and mine/test pit results show that the property surrounds an area

occupied by at least two deeply-buried valleys or paleochannel bedrock floors reaching up

to 60 m deep: one extends northwest parallel along the length of Eight Mile Lake and Big

Valley, and a second smaller buried tributary (Thistle paleochannel) extends in a

northeasterly direction.

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The bedrock floors are buried from top to bottom by five distinct sedimentological units:

1. thin layer of postglacial alluvium (Holocene)

2. non-weathered grey-coloured lodgement till (Fraser Glacial Period)

3. weathered red-brown interglacial alluvium (Pleistocene) made up of gravel, debris

flow facies, sand, and lacustrine mud layers

4. a second older glacial lodgement till layer weathered red-brown in most parts

5. a second older weathered sequence of interglacial alluvium (Pleistocene and

possibly Tertiary?) which is similar to unit 3.

Significant gold concentrations occur in units 3, 4, and 5. Highest gold grades are confined

to high-energy cobble/boulder-rich interglacial fluvial gravel and debris flow layers found in

units 3 and 5. The sequence of alluvial layers in units 3 and 5 are horizontally and vertically

complex or exhibit typical reworking of underlying sediments in a wandering stream

environment.

The historic watercourses that contain gravels tend to meander which might, in part,

account for the erratic spatial distribution of gold deposition. Gravel thickness varies from

less than one metre to tens of metres. No relationship between gravel thickness and gold

grade has been identified.

7.4 MINERALIZATION

Drilling results from Eight Mile Lake Placer Deposit show that gold is heterogeneously

scattered throughout the entire sedimentary cover. Visual observations show typical

rounded placer-type gold nuggets and particles. Gold occasionally occurs near the bedrock

surface, but it might also be very close to surface. As discussed in Section 7.3,

mineralization occurs more often when the gravel is coarse. This relationship suggests a

debris-flow placer environment (Stanway, 2012).

Mineralization within the considered area at Eight Mile Lake cannot be explained using the

model of a pre-glacial alluvial channel. The geology model indicates an interglacial or

glacial depositional environment that includes interglacial alluvial systems, glacial

deposition, as well as single events such as mudflows.

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8 DEPOSIT TYPES

The following excerpt describes the placer units and recovered gold morphology (Johnston

and Uglow, 1926):

“Eight Mile Lake is one of the few areas in the Cariboo where a placer

deposit has been documented between two till units and, therefore, is

clearly interglacial or interstadial. The gold was concentrated in a bouldery

unit between two diamictons interpreted as tills. The lower diamicton was

partially cemented and acted as false bedrock. It was underlain by

limestone bedrock and overlain by poorly stratified glacial gravel, silt and an

upper diamicton. The lower diamicton contained erratic clasts and was

believed to have been deposited by a north-eastward-flowing glacier that

had incorporated gold from an older bedrock channel. Recovered gold was

flattened and worn with nuggets up to approximately 20 grams. The

channel was only mined above lake level and was believed to extend below

the lake”.

In addition to the potential of buried paleo-channel deposits in the Eight Mile Lake valley,

there is further potential for the discovery of gold-bearing gravels in buried tributary

channels. The original hydraulic mine at the site exploited a tributary channel that drains

the slope south of Eight Mile Lake. The Pleasant Valley thrust lies just to the southwest of

the lake and, together with related structures, might control the distribution of gold in source

rocks in the area (Levson and Giles, 1993).

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9 EXPLORATION

All exploration activities conducted at Eight Mile Lake since 1993, excluding drilling, are

shown in Table 9.1 and Figure 9-1. The goal of the various exploration programs was to

identify the gold-bearing paleo-channels.

TABLE 9.1: EXPLORATION AT EIGHT MILE LAKE

Exploration Method

Subcontractor Year

(No. of Profiles) Reference

Seismic Refraction Frontier Geosciences Inc.

1993 (8)

2001 (5)

2013 (2)

Frontier, 1993

Frontier, 2001

Frontier, 2013

Seismic Refraction Brental Resources Limited 2008 (2) Kocsis, 2012

2D Resistivity Arctic Geophysics Inc. 2013 (1) Arctic, 2014

Test Pitting Geologist Stephen Kocsis 2007 Kocsis, 2012

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FIGURE 9-1: OVERVIEW OF EXPLORATION WORK AT EIGHT MILE LAKE

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9.1 SEISMIC REFRACTION

Frontier Geosciences Inc. (Frontier) conducted two measurement campaigns comprising

seismic lines (SL) numbered SL2 to SL9 in 1993 and lines SL14 to SL15 in 2013 (Figure 9-

1) (Frontier, 1993/2001/2013). Lines numbered SL8-extended and SL13 were measured by

Brental Resources Limited in 2008 (Kocsis, 2012).

Most of the seismic lines are located parallel to each other along the southern margin of

Eight Mile Lake. This is because a northwest-southeast trending paleo-channel was

assumed to run parallel to the southern site of the lake. The seismic traverses are shown in

Figure 9-1.

Table 9.2 shows Frontier's interpretation of its seismic measurement of line SL14 and

SL15.

TABLE 9.2: SEISMIC INTERPRETATION (FRONTIER, 2014)

Layer Velocity

(m/s) Geological Interpretation

Thickness (m)

1 360 – 460 Surficial layer: inconsistent with surficial exposures of loose surficial sand, gravels, and cobbles.

Approximately 1.5

2 1,215 – 1,340 Relatively thin intermediate layer: might correspond to moderately dense silt, sand, gravels, and cobbles.

2.5 (SL14) to 7 (SL15)

3 1,850 – 2,390 Thicker intermediate layer: believed to correspond to saturated, coarse, dense glacial till.

Unknown

4 2,815 – 6,150 Bedrock surface. Depth varies significantly

between 4.5 to 70+

The basal layer, with velocities from 2,815 m/s to 6,150 m/s, is the interpreted competent

bedrock surface (Frontier, 2013):

“The 2,815 m/s low velocity zone may be indicative of a deeper depression

in the bedrock. The 2,815 m/s velocity may be due to a diffraction from the

edge of competent bedrock located between geophones 4 and 5."

Some profiles show depressions that might indicate a pre-glacial channel incised into the

bedrock surface (Frontier, 2013). However, most of the sections suggest an uneven

surface abraded by glacier movements. The depressions picked up in some sections could

not be correlated or tracked.

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The situation looks different for the three traverses crossing the Thistle Valley shown in

Figure 9-2. Those profiles show strong depressions that basically agree with the course of

the valley and might indicate a real channel structure that runs towards the main valley.

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FIGURE 9-2: SEISMIC REFRACTION TRAVERSES CROSSING THE THISTLE VALLEY

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9.2 2D RESISTIVITY

A single 2D resistivity traverse was measured across the main valley just north of the lake

with a total length of 495 m (see Figure 9-1). The first objective was to locate a paleo-

channel structure in the centre of the valley. The second objective was to determine the

bedrock depth. The interpreted image from Arctic Geophysics Inc. is shown in Figure 9-3

and Table 9.3 (Arctic, 2014).

TABLE 9.3: GEOLOGICAL INTERPRETATION OF THE MEASURED 2D RESISTIVITY (ARCTIC, 2014)

Layer Resistivity Values Geological Interpretation Depth

(m)

1 High Surficial Layer: coarse overburden with very little

fine sediments; probably fairly dry. up to 10

2 Moderate Intermediate Layer: same material as layer 1 but

more groundwater. Otherwise material with matrix supported fine sediments.

up to 27

3 Very Low Thicker Intermediate Layer: lacustrine sediments or other clay-dominated sediments; groundwater

saturated. up to 47

4 Moderate Bedrock: “softer” bedrock; most likely sedimentary rocks such as limestone or a metamorphic rock.

-

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FIGURE 9-3: 2D RESISTIVITY IMAGE (ARCTIC GEOPHYSICS, 2014)

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9.3 TEST PITTING

In 2007, Stephen Kocsis dug a number of test pits in the gravels to test for gold

mineralization (see Figures 9-4 and 9-5). The test pits were excavated over a relatively

small area of the property, but the type of samples collected are considered to be

representative of placer gold mineralization in the local area. A total of 48 ounces of placer

gold was recovered from the pits (Kocsis, 2012).

FIGURE 9-4: 2007 TEST PIT (KOCSIS, 2012)

FIGURE 9-5: 2007 TEST PIT - EXAMPLE OF GOLD GRAIN SIZE (KOCSIS, 2012)

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9.4 CONCLUSIONS

The geophysical exploration successfully defined bedrock surfaces and areas of potential

mineralized gravel deposition.

The test pits were excavated over a relatively small area of the property, but the type of

samples collected were representative of placer gold mineralization in the immediate area.

The pits and the recovery of gold from the material collected indicated that successful

recovery of gold on a larger scale might be possible. Overall, the test pits were not

designed to be used in any resource calculation; instead, the program was completed to

demonstrate the viability of placer gold recovery.

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10 DRILLING

As of August 7, 2014, 54 vertical drill holes for a total of 1,896 m have been drilled at Eight

Mile Lake. The average drill hole depth is 35.1 m. As of August 7, 2014, the effective date

of this report, gold grade data is pending for one of these holes (EM14-RC053).

Figure 10-1 shows the drill rig that was used: a Nodwell-mounted reverse circulation (RC)

drill manufactured in 1979. A 6.25-in. tri-cone bit was used with a 5.50-in. diameter drill rod.

Each rod section was 10 feet long.

RC drilling produces rock cuttings with a particle size range (16 mm to 32 mm) of coarse

pebbles. Coarser particle fractions get destroyed during the drilling process which results

in more fine material. The drill cuttings do not preserve the particle size distribution of the

gravels. Samples for gold recovery from the drilling were collected at the cyclone discharge

in five-gallon, plastic pails. Samples were typically taken every five feet down-the-hole.

FIGURE 10-1: NODWELL-MOUNTED REVERSE CIRCULATION DRILL RIG

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Geologic logging was done under the direction of Stephen Kocsis, and supervised by

geotec Rohstoffe GmbH. The geologist logged the cuttings as they were discharged from

the cyclone located on the drill rig. Particular attention was paid to the colour of the cuttings

and the behaviour of the drill rig; these parameters helped determine when the cuttings

were collected. The sediment types shown in Table 10.1 were used to log the RC rock

chips.

TABLE 10.1: UNIT DESCRIPTION (TIMMERMANN, 2013)

Unit Number

Unit Name Unit Description

1 Postglacial Alluvium Represents recent Holocene alluvium (< 11,000 ybp) and melt-water sediment accumulation during ablation of the Fraser ice sheet.

2 Glacial Sediments Wisconsinan Fraser Glacial Sediments (25,000 - 9,000 ybp) dominated by light to medium grey-coloured lodgement till and lacustrine mud.

3 Interglacial Alluvium Including "older gravel" accumulation during the mid-Wisconsin Interstadial (45,000 to 30,000 ybp) or possibly Sangamon Interglacial.

3a Mud/Silts Glaciolacustrine mud. Medium brown to orange-brown containing minor clasts of limited size suspended in a > 80% mud and silt matrix.

3b Sandy Gravel Sand-rich matrix with clast size varying from granules to cobbles. Medium brown to orange-brown.

3c Granule Pebble Gravel

Granule to pebble-rich gravel matrix with rare cobbles and varying mud content from 5% to < 50%. Medium brown to orange-brown.

3d Cobble Gravel Abundant cobbles and minor boulders in a granule to pebble-rich gravel matrix with varying mud content from 5% to < 50%. Medium brown to orange-brown.

4a Older Glacial Sediments

Partly cemented with weathered tops, densely compacted, commonly dark grey to black coloured, deposited during the early Wisconsin (75,000 to 45,000 ybp) or late Illinoian (200,000 to 131,000 ybp) or older glacial period.

4b Pre-Glacial Alluvium Highly weathered bedrock boulders with fresh interiors if large enough. Greater than 2.58 million years (GSSP) with textures exhibiting long periods of weathering.

The initial drilling campaign was conducted during the spring and summer of 2013. This

campaign consisted of 22 drill holes. The holes were drilled in three different areas: west of

the lake, south of the lake, and southeast of the lake. The three areas were selected based

on the assumption of a northwest-southeast trending paleo-channel running south of the

southern margin of the lake (see Section 9.1).

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In the area west of the lake, a second drilling program was carried out in the fall of 2013.

The intent was to extend drilling to the west (see Figure 10-2). The fall program comprised

an additional 13 drill holes.

A third drilling campaign, conducted in winter 2013 and spring 2014, included 19 additional

drill holes to increase data density in and around the western area. The 19 holes were part

of an exploration program designed by geotec Rohstoffe GmbH (geotec, 2014a) in January

2014.

All drill hole locations and details are shown in Table 10.2.

A sample recovery factor could not be calculated for the drilling. Also, the extent of gold

loss caused by the RC drilling method could not be determined.

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FIGURE 10-2: VARIOUS DRILLING CAMPAIGNS

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TABLE 10.2: DRILL HOLE DETAILS

Drill Hole ID Date Easting Northing Depth

(m)

Elevation (amsl)

(m) Dip

EM13-RC001 13-Apr-2013 598560 5889441 36.58 1,229 vertical

EM13-RC002 15-Apr-2013 598575 5889398 45.72 1,230 vertical

EM13-RC003 17-Apr-2013 598572 5889353 53.64 1,232 vertical

EM13-RC004 19-Apr-2013 598430 5889494 57.14 1,228 vertical

EM13-RC005 22-Apr-2013 598459 5889525 32.00 1,228 vertical

EM13-RC006 25-Apr-2013 597644 5889953 46.79 1,228 vertical

EM13-RC007 29-Apr-2013 597604 5889925 36.58 1,230 vertical

EM13-RC008 01-May-2013 597668 5889896 23.47 1,223 vertical

EM13-RC009 02-May-2013 597699 5889935 18.44 1,222 vertical

EM13-RC010 07-May-2013 597718 5889883 14.78 1,222 vertical

EM13-RC011 08-May-2013 597696 5889857 16.76 1,224 vertical

EM13-RC012 09-May-2013 597651 5889926 31.70 1,225 vertical

EM13-RC013 16-May-2013 598010 5889637 22.86 1,235 vertical

EM13-RC014 23-May-2013 597944 5889628 24.38 1,237 vertical

EM13-RC015 28-May-2013 597962 5889676 12.19 1,231 vertical

EM13-RC016 29-May-2013 598002 5889599 19.81 1,234 vertical

EM13-RC017 30-May-2013 598114 5889551 4.57 1,229 vertical

EM13-RC018 30-May-2013 598132 5889593 14.94 1,228 vertical

EM13-RC019 31-May-2013 598202 5889539 26.52 1,226 vertical

EM13-RC020 03-Jun-2013 598646 5889523 6.10 1,220 vertical

EM13-RC021 04-Jun-2013 597731 5889930 27.43 1,221 vertical

EM13-RC022 05-Jun-2013 597574 5889892 28.35 1,229 vertical

EM13-RC023 19-Sep-2013 597568 5889930 42.67 1,231 vertical

EM13-RC024 23-Sep-2013 597541 5889933 40.54 1,232 vertical

EM13-RC025 24-Sep-2013 597509 5889943 37.34 1,231 vertical

EM13-RC026 26-Sep-2013 597591 5889961 48.77 1,230 vertical

EM13-RC027 01-Oct-2013 597559 5889806 43.59 1,229 vertical

EM13-RC028 02-Oct-2013 597523 5889829 42.67 1,231 vertical

EM13-RC029 04-Oct-2013 597500 5889857 27.43 1,232 vertical

EM13-RC030 07-Oct-2013 597559 5889854 36.58 1,231 vertical

EM13-RC031 10-Oct-2013 597498 5890599 39.47 1,226 vertical

EM13-RC032 15-Oct-2013 597584 5890644 33.53 1,229 vertical

EM13-RC033 17-Oct-2013 597685 5890654 20.57 1,240 vertical

EM13-RC034 17-Oct-2013 597781 5890663 7.01 1,249 vertical

EM13-RC035 18-Oct-2013 597301 5890432 57.76 1,233 vertical

EM13-RC036 17-Feb-2014 597645 5890000 50.90 1,226 vertical

EM13-RC037 20-Feb-2014 597550 5890050 62.79 1,230 vertical

EM13-RC038 25-Feb-2014 597500 5890050 43.59 1,229 vertical

EM13-RC039 27-Feb-2014 597504 5890002 60.96 1,233 vertical

EM13-RC040 04-Mar-2014 597506 5889896 34.75 1,231 vertical

EM13-RC041 07-Mar-2014 597546 5889892 35.36 1,229 vertical

EM13-RC042 11-Mar-2014 597600 5890050 42.67 1,226 vertical

EM14-RC043 16-Apr-2014 597550 5890000 47.55 1,231 vertical

EM14-RC044 22-Apr-2014 597600 5890000 64.01 1,234 vertical

EM14-RC045 12-May-2014 597482 5889786 32.00 1,237 vertical

EM14-RC046 13-May-2014 597506 5889772 59.44 1,234 vertical

EM14-RC047 15-May-2014 597443 5889756 15.24 1,241 vertical

EM14-RC048 15-May-2014 597518 5889798 28.96 1,232 vertical

EM14-RC049 16-May-2014 597430 5889817 33.53 1,241 vertical

EM14-RC050 20-May-2014 597445 5889841 57.91 1,240 vertical

EM14-RC051 20-May-2014 597428 5889903 35.05 1,239 vertical

EM14-RC052 23-May-2014 597444 5889950 32.00 1,237 vertical

EM14-RC053 26-May-2014 597450 5890000 41.76 1,241 vertical

EM14-RC054 ? 597477 5889716 41.15 1,241 Vertical

Total

1,895.72

Average

35.1

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11 SAMPLE PREPARATION, ANALYSES AND

SECURITY

Commercial laboratories typically do not provide a gold-recovery-by-gravity service on a

scale that is necessary to support a drilling program the size of Eight Mile Lake. Some

metallurgical-testing laboratories might conduct gravity recovery gold analyses, but results

might not be made available in a timely manner. For these reasons, HGMI built an on-site

facility to analyze the placer samples.

Note: The HGMI laboratory does not hold a certification from any standards organization,

and there might not be any specific standards associated with processing placer deposit

samples. In addition, it is difficult to verify results in an independent laboratory setting

because entire samples are consumed as a result of the gold recovery process; therefore,

no duplicates can be collected during the drilling process.

Figure 11-1 shows the sample processing sluices. This historic method of recovering placer

gold has proved to be very efficient: sample tailings tests show that almost no gold (< 1%)

reports to the tailings.

FIGURE 11-1: SAMPLE GOLD RECOVERY SLUICES

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11.1 SAMPLE COLLECTION

The following sample collection procedures were set up by HGMI:

1. All drilling material derived from the cyclone during RC drilling was collected in

five-gallon, plastic pails. Sample intervals were typically five feet, with an

average of 2 to 3 pails collected per interval.

2. Both the pail and the lid were labelled with the project name, date, pail number,

and total number of pails collected per interval. All pails were photographed

before the lids were securely sealed.

3. At the end of each day, all samples were transported to the laboratory where

they were securely stored in locked metal Sea-Can containers until they were

ready to be processed. During processing, the handling of all samples was

restricted to authorized laboratory personnel only.

11.2 SAMPLE PREPARATION

The following sample preparation procedures were set up by HGMI:

1. All the pails to be processed during the interval are moved from the secured

Sea-Can container to the processing room where the excess water is removed

from each pail.

2. Each pail is then weighed to the nearest hundredth of a kilogram, and the

height of the material in the pail is measured; this is later converted to a volume.

All values are recorded on the whiteboard.

11.3 SAMPLE ANALYSIS

The following sample processing procedures were set up by HGMI (Timmermann, 2013):

1. Once the sample has been prepared, it is washed through the jig which

classifies the material by size: fine, coarse or oversized material.

2. Both the fine and coarse materials are panned by hand to a concentrate. The

oversized material is removed and visually inspected for coarse nuggets before

it is weighed and recorded on the whiteboard.

3. Trace gold from the concentrate is photographed and documented; gold with

more than trace amounts is retrieved, dried, weighed, photographed, and

recorded on the whiteboard.

4. Concentrate from any fine material that contains more than trace amounts of

gold are sent through a secondary separation process to retrieve all the fine

gold.

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5. Concentrate from any coarse material that contains more than trace amounts of

gold are placed in filter paper and dried in an oven. The gold is then weighed,

photographed, recorded on the whiteboard, and stored with the recovered gold.

6. All recovered gold is placed in labelled glass vials and stored with the

concentrate.

7. Any data that is recorded on the white board is transferred to sample sheets

before being inputted to an electronic spreadsheet.

8. Tailings from samples with more than trace amounts of recovered gold are

stored; tailings and concentrates from samples with no gold or only trace

amounts of gold are discarded.

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The sample process procedures are also shown in Figure 11-2 (Timmermann, 2013).

FIGURE 11-2: SAMPLE ANALYSIS WORK FLOW CHART (TIMMERMANN, 2013)

Note: When more than trace gold is recovered, the entire sample is securely stored. Only

samples with less than trace gold are discarded.

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The average time required to process a sample is approximately one hour. All equipment is

thoroughly washed to ensure no contamination occurs between sampling intervals.

11.4 SAMPLE SECURITY

Figure 11-3 shows sample collection buckets and labelling.

FIGURE 11-3: SAMPLE COLLECTION BUCKETS WITH LABELS

Samples are delivered from the site to the processing laboratory in Quesnel by truck.

Although it might be possible for someone to access and tamper with the samples, there

would be little incentive to do this; inflated sample grades would tend to be viewed as a

detriment because the objective is to produce gold. Salting would possibly divert attention

away from areas where gold actually exists. The author saw nothing to indicate that

samples had been compromised before they were processed through the washing process.

Sample preparation, security, and analytical procedures are adequate for the intended

purposes. Drill holes are appropriately located by map coordinates and physical location.

Observations and inspections conducted during the site visit indicate that the data collected

to characterize placer gold mineralization on the property is adequate for the estimation of

Inferred resources.

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12 DATA VERIFICATION

All available data have been reviewed in order to verify their correctness and integrity. For

the 54 drill holes, the checks include the sediment logging, log sheets, and a sample

collection process. Dr. D. Eberle has monitored drilling activities to validate correct

operating procedures and sample collection. The geophysical data from seismic refraction

and 2D resistivity have been reviewed and interpretations have been collated with current

scientific knowledge, historic data, and property geology.

The authors reviewed the sample processing during their site visits. The analytical data

have been reviewed regarding measured volume, gold recovery, and gold-grade

calculations. No errors were found. The documentation during sample processing and

grade calculations has been verified to be correct.

To verify the sample grades, an area in the resource estimation model (see Section 14)

was outlined around drill holes 27, 28, 46, and 48; it was estimated to contain 16,000 m3.

The grade in the model for this volume was 0.36 g/m3. Production from approximately the

same area was 16,815 m3 with an average grade of 0.49 g/m3.

The rough agreement between drill hole sample results interpolated into a model and the

actual production suggests that the sample grades derived in the lab are reasonable. The

reconciliation test gives no indication that sample results are inflated or otherwise

inappropriate.

Sample verification results observations, and inspections conducted during the site visit

indicate that the data collected and analyzed to characterize placer gold mineralization on

the property are adequate for the estimation of Inferred resources.

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13 MINERAL PROCESSING AND METALLURGICAL

TESTING

Placer gold is recovered through gravity separation of gold from the sediments that contain

the mineralization. In the case of Eight Mile Lake, the main recovery mechanism is the

sluice. Sluices have been used to recover placer gold from ancient times and the basic

principle remains the same. The gravel to be processed is mixed with water which runs

down an inclined channel containing ridges or riffles which trap the gold. Lighter material is

discharged at the end of the channel. The material trapped behind the riffles contains the

gold nuggets. Typically the trapped material is extracted from the sluice and then panned to

remove everything but the gold. A sluice can be a very effective and efficient method of

recovering gold from unconsolidated material.

Figure 13-1 shows the production scale wash plant that is currently operating on the Eight

Mile Lake property.

The wash plant has several distinct sections. The light-coloured upper bin is the loading

receptacle; it also acts as the rocker to remove large boulders. The boulders are

discharged at the lower end of the rocker. Smaller particles are discharged into the sluice

below the rocker. In this sluice there is a nugget trap that will capture nuggets larger than

1.25 cm in diameter. Following this initial sluice, there is a rotating trommel. Nuggets

greater than 1.25 cm are discharged at the end of the trommel. This discharge is examined

daily to ensure no gold is being lost. Nuggets less than 1.25 cm pass through the screens

in the trommel and into the set of sluices below. The first set captures most of the gold in

the riffles of the sluice. The second set has flexible mesh or carpet to capture finer particles

that were not deposited in the riffles, mentioned above. The remaining material is

discharged into the tailings. The tailings are checked by sampling and washing through a

separate wash system in the HGMI laboratory to make sure no gold is being lost from the

last set of sluices.

The sampling of discharge material has shown that 98-99% of the placer gold is being

recovered by the wash plant. Most of the gold recovered (more than 95%) is captured in

the first and second sets of sluices. Less than 5% of the recovered gold is fine enough to

report to the third set of sluices and get captured there.

The recovery achieved by the wash plant is typical for placer gold processing plants, as is

the particle size distribution of the gold on the property.

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FIGURE 13-1: UPPER AND LOWER SECTIONS OF THE WASH PLANT

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14 MINERAL RESOURCE ESTIMATES

14.1 INTRODUCTION

The mineral resource estimates for the Eight Mile Lake Placer Deposit were prepared

under the direction of Robert Sim, P.Geo, with the assistance of Bruce Davis. Estimations

are made from 3D block models based on geostatistical applications using commercial

mine planning software (MineSight® v9.10). The project limits are in metric units based in

UTM (Zone 10) coordinates.

During the past two years, a total of 54 reverse circulation (RC) holes have been completed

on the property. Data has been provided by the property owner, Stephen Kocsis, in a series

of MS Excel spreadsheet files. One file contains drilling data, including drill hole collar

locations, logged lithology type designations, and sample intervals with corresponding gold

grades calculated in grams per cubic metre (g/m3). Also provided was an MS Excel file

containing point data representing the estimated depth to bedrock determined from several

seismic refraction campaigns conducted over the property. The combination of seismic and

drilling data has been used to estimate the depth to the bedrock interface over the property.

An AutoCAD drawing (DWG) file was provided that contains 3D contour and point data that

represent the topographic surface over the property area.

The modeling approach assumes that there is essentially no grade selectivity in the

resource estimate; in other words, all material above the bedrock surface will be processed

through the wash plant. The estimate of mineral resources is derived using a traditional 3D

block model in which grade estimates are integrated into a regular matrix of model blocks

using the available drill hole sample data. The block size in the 3D model is 5 x 5 x 2 m (L x

W x H). A second model was produced for validation purposes, which represents a

transition between a traditional block model and a gridded-seam model traditionally used

with relatively thin tabular ore bodies. The blocks in the 2D model cover the extents of the

deposit in both the X (east-west) and Y (north-south) dimensions, but only one level of

blocks is generated in the Z (vertical) dimension. Both the thickness and grade x thickness

have been interpolated into the 2D model from which volume (cubic metres) and mining

grades (g/m3) are determined.

As described in Section 6, mining activity has taken place on the property at various times

and locations dating back to the 1880s. Records of this past production are not well

documented. Areas of past production are reflected in the current 3D topographic surface

and this ensures that all past production is excluded from the current estimate of mineral

resources.

The mineral resource estimate has been generated using drill hole sample results which

define both the grade and thickness of the unconsolidated material occurring above

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bedrock. A geostatistical approach has been taken to develop a block model and the

estimate of mineral resources. The mineral resources have been classified according to

their proximity to the sample locations, and they are reported as required by NI 43-101,

according to the CIM standards for Mineral Resources and Reserves.

This report includes estimates for mineral resources. There are no mineral reserves

prepared or reported.

14.2 AVAILABLE DATA

Beginning in the spring of 2013, 54 reverse circulation (RC) drill holes, with a combined

length of 1,896 m, have been completed on the property. As of August 7, 2014, the

effective date of this report, gold grade data is pending for one of these holes (EM14-

RC053). All holes are drilled in a vertical orientation. The distribution of drilling is shown in

plan view in Figures 14-1 and 14-2. Thirty-five drill holes are spaced at 30 m to 50 m

intervals in an area roughly measuring 300 x 300 m in the western or Main area of the

property. The remaining holes are irregularly distributed to the north and southeast of this

Main cluster of holes. Although gold is present in these peripheral areas, there is

insufficient drilling at this time to support the estimation of mineral resources in the North

and Southeast areas.

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FIGURE 14-1: DRILL HOLE AND TOPOGRAPHIC PLAN

FIGURE 14-2: DRILL HOLE AND TOPOGRAPHIC PLAN IN MAIN AREA

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Drill holes typically penetrate through overburden material until they intersect bedrock.

Logging of RC chips defines the nature of the overburden material and marks the depth-to-

bedrock in most holes; some drill holes did not reach bedrock. Comparisons of gold content

versus material type, described below, indicate that the gold grade is higher in the coarser

fractions, a feature which is generally typical in deposits of this type.

Drilling is conducted using imperial units, which are converted into metric equivalents. The

amount of gold in each sample interval is determined, and the grade, in grams per cubic

metre, is calculated. There are 1,223 individual sample intervals that have been tested for

gold content. Of these, 955 samples do not contain any measurable gold content (zero

grade). The remaining 268 samples contain gold grades ranging from 0.017 g/m3 to a

maximum of 22.642 g/m3. Individual sample intervals range from 0.3 m to 3.05 m, and

average 1.49 m in length. The majority of samples have been collected using a standard

1.52-m (5-foot) length.

The general distribution of sample data is presented in Table 14.1. In general, some of the

drill holes in the North and Southeast areas have encountered gold, but these holes are not

as well mineralized as the Main area. Further exploration of the zones between the Main-

to-North and Main-to-Southeast areas is warranted.

TABLE 14.1: BASIC STATISTICAL SUMMARY OF SAMPLE DATA

Area # of

Holes # of

Samples

Sample Length

(m)

Minimum

(Au g/m3)

Maximum

(Au g/m3)

Mean

(Au g/m3)

Standard Deviation

Main 36 899 1,345 0 22.642 0.411 1.586

North 5 105 158 0 2.387 0.033 0.249

Southeast 13 218 316 0 6.398 0.080 0.493

Total 54 1,222 1,820 0 22.642 0.320 1.390

An AutoCAD drawing file (ACAD-Henning Gold Site Plan.dwg) was provided that contains

3D contour line and point data for the current topographic surface. A 3D digital terrain

surface was generated from this data. Areas of past production are evident in this data.

Several seismic refraction surveys have been conducted on the property, as described in

Section 9. The depth to bedrock derived from these surveys was provided in an MS Excel

spreadsheet file. Each station contains the projected x, y, z locations of both the bedrock

and the surface location where the readings were taken. Although some local differences

exist in the topographic elevations between the GPS-measured seismic survey and the

digital terrain surface generated from the AutoCAD (DWG) file, the relative depths to

bedrock from these two surveys correlate reasonably well with the drilling data. The seismic

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data was used to generate a series of points that represent the top of bedrock in areas

outside of the current drilling. These additional points were used to produce a triangulated

3D surface that represents the top of bedrock over the project area.

14.3 GEOLOGIC MODEL

The RC chips are logged during drilling and the lithology type is recorded. Logging is

conducted while drilling and the logged (from-to) intervals do not necessarily correlate with

the standard (1.52-m/5-ft) sample intervals. There are 15 different lithologic types defined in

the database; these generally identify material of different particle sizes, ranging from silt

and mud, to gravel and boulders. Gold content versus lithology type is evaluated in the

boxplots shown in Figures 14-3 and 14-4; these figures show that, in general, gold tends to

occur in the coarser fractions. This is a common feature in this type of placer deposit where

gold is deposited during periods of high energy water flow. The fact that these features are

evident in the data suggests that there is limited contamination of gold between samples

during RC drilling.

The distribution of the various lithology types is quite complex and individual units cannot

be interpreted into unique domains with any degree of confidence. As a result, there is no

geologic model, in the typical sense, used in this resource estimate. The Main area of the

deposit contains about 60% coarse and 40% fine fractions in drilling. The North area

contains about 40% coarse and 60% fine fractions, and the Southeast area contains about

55% coarse and 45% fine fractions. This very general trend suggests that future expansion

of the resource may be more successful to the Southeast.

FIGURE 14-3: BOXPLOT1 OF GOLD BY LITHOLOGY TYPE

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FIGURE 14-4: BOXPLOT2 OF GOLD BY LITHOLOGY TYPE

A surface that represents the top of bedrock is interpreted using the combined drilling and

seismic data. Resources are confined to the overburden material between the topographic

surface and bedrock. The thickness of overburden in the Main deposit area is shown in

plan view in Figure 14-5.

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FIGURE 14-5: PLAN SHOWING CONTOURS OF OVERBURDEN THICKNESS IN THE MAIN AREA

14.4 EVALUATION OF OUTLIER GRADES

The presence of anomalous, “outlier” grades in the sample database was evaluated using

the cumulative probability plot shown in Figure 14-6. Samples begin to deviate from the

overall trend above 4 g/m3. Above 7 g/m3, the distribution becomes somewhat erratic

suggesting that these are potentially anomalous and their influence on the resource

estimate should be restricted. As a result, a top-cut threshold has been applied to a total of

16 samples with grades above 7 g/m3. This step has reduced the contained gold in the

resource model by about 12%. This reduction is considered appropriate for the deposit at

this stage of evaluation. Additional, more closely spaced drilling is required to confidently

delineate these higher-grade parts of the deposit.

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FIGURE 14-6: CUMULATIVE PROBABILITY PLOT OF GOLD ASSAY SAMPLE DATA

14.5 COMPOSITING

Compositing of drill hole samples is carried out in order to prepare the samples to be used

in the development of the resource models. The approach to compositing is different

depending on which model is being developed: 2D or 3D. The 3D model is generated from

composites of constant length and roughly equivalent to the original sample interval. The

2D model is generated from composites of varying lengths produced over the full thickness

of the overburden at each drill hole location.

To retain the original characteristics of the underlying data, the composite length used in

the 3D model is a reflection of the average original sample length. The generation of

longer composites results in some degree of smoothing which could mask certain features

of the data. Sample intervals are relatively consistent in the database, with approximately

95% at exactly 1.52 m in length (i.e., representing a 5-ft rod length during RC drilling). As a

result, a standard composite length of 1.5 m has been applied to the sample data. Drill

hole composites are length-weighted and have been generated down-the-hole, which

means that composites begin at the top of each hole and are generated at 1.5-m intervals

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down the length of the hole. Figure 14-7 shows the distribution of gold grades in the 1.5-m

composites.

The 2D model is produced using drill hole composites generated over the full thickness of

overburden. Individual samples are length-weighted over this interval resulting in one

composite per drill hole that contains an average grade over varying thicknesses. The gold

grades in these full-thickness composites are shown in isometric view in Figure 14-8 and in

plan, relative to the overburden thickness contours, in Figure 14-9.

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.

FIGURE 14-7: ISOMETRIC VIEW OF 1.5-M COMPOSITE SAMPLES IN THE MAIN AREA

FIGURE 14-8: ISOMETRIC VIEW OF COMPOSITES OVER FULL THICKNESS OF OVERBURDEN

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FIGURE 14-9: PLAN VIEW SHOWING THE THICKNESS OF OVERBURDEN AND GOLD GRADES IN FULL-THICKNESS

COMPOSITES

14.6 VARIOGRAPHY

The degree of spatial variability in a mineral deposit depends on both the distance and

direction between points of comparison. Typically, the variability between samples

increases as the distance between those samples increases. If the degree of variability is

related to the direction of comparison, then the deposit is said to exhibit anisotropic

tendencies which can be summarized with the search ellipse. The semi-variogram is a

common function used to measure the spatial variability within a deposit.

The components of the variogram include the nugget, the sill and the range. Often

samples compared over very short distances, even samples compared from the same

location, show some degree of variability. As a result, the curve of the variogram often

begins at some point on the y-axis above the origin; this point is called the nugget. The

nugget is a measure of not only the natural variability of the data over very short distances

but also a measure of the variability which can be introduced due to errors during sample

collection, preparation, and analysis.

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The amount of variability between samples typically increases as the distance between the

samples increases. Eventually, the degree of variability between samples reaches a

constant, maximum value; this is called the sill, and the distance between samples at which

this occurs is called the range.

The spatial evaluation of the data in this report has been conducted using a correlogram

rather than the traditional variogram. The correlogram is normalized to the variance of the

data and is less sensitive to outlier values, which generally gives better results.

Correlograms were generated using the commercial software package Sage 2001©

developed by Isaaks & Co.

From the 1.5-m composite data, used in the 3D block model, multi-directional correlograms

were generated for the distribution of gold grades. For the full interval composites, a series

of 2D correlograms were developed based on variables produced from gold grade x

thickness. Note: Because this is essentially a 2D block model, the search parameters are

defined in only the X and Y dimensions (see Table 14.2).

TABLE 14.2: CORRELOGRAM PARAMETERS

1st Structure 2nd Structure

Type Nugget S1 S2 Range

(ft) AZ Dip

Range (ft)

AZ Dip

Gold in 1.5-m Composites

0.148 0.552 0.301 148 82 3 140 297 0

15 173 10 46 25 88

10 334 80 28 207 2

Gold x Thickness in Full-Thickness Composites

0.308 0.387 0.305 47 139 0 191 90 0

39 49 0 35 0 0

10 0 0 10 0 0

Note: All models are spherical. AZ stands for azimuth.

14.7 MODEL SETUP AND LIMITS

Two block models were initialized in MineSight®. The dimensions of both models are

identical in the X (west-east) and Y (north-south) directions, but they differ in the Z (vertical)

direction. The 3D model is comprised of blocks that are 2 m in the vertical dimension and

cover the vertical extent of the deposit. The 2D model has only one model block in the

vertical dimension located at the 1,150-m elevation. The 3D model contains grade

estimates, and the 2D model stores both grade and thickness variables at each X-Y

location.

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The selection of a nominal block size measuring 5 x 5 x 2 m (L x W x H) is considered

appropriate with respect to the shape and size of the deposit and the current drill hole

spacing. The limits of the models are shown in Table 14.3.

TABLE 14.3: BLOCK MODEL LIMITS

Direction Minimum Maximum Block size

(m) # Blocks

East 597300 597850 5 110

North 5889600 5890150 5 110

Elevation 1150 1250 2 50

Note: The 2D model has only one bench of blocks at the 1,150-m elevation.

Blocks located inside the overburden domain in the 3D model are assigned Zone codes to

be used during interpolation.

14.8 INTERPOLATION PARAMETERS

In the 3D block model, gold grade estimates are made in model blocks, located in the

overburden domain, using ordinary kriging (OK). A maximum search range of 200 m is

applied and estimates are made using a maximum of 4, 1.5-m composite samples from a

single drill hole and maximum total of 12 composites per block. Using these parameters,

block gold grades are estimated using data from the three closest drill holes.

Prior to estimation in the 2D model, all full-thickness drill hole composites are assigned a

default elevation equal to that of the model at 1,150 m. This step ensures that the search

properties during interpolation are in a horizontal (X-Y) plane. In the 2D block model,

estimates are made of thickness (T) and gold grade x thickness (GT) and, following this,

individual block gold grades are determined using GT/T. Both Thickness and Grade x

Thickness estimates are made using OK with a 200-m maximum search range. Block

estimates are made using data from the four closest drill holes.

Also prior to estimation in the 2D model, a series of 19 additional data points were added at

a distance of 50 m laterally outside of the existing drill holes. The thickness of overburden

at these additional points is derived from the thickness of the interpreted overburden

domain. As described previously in this report, seismic data indicates that the overburden

narrows in some locations and this step ensures that these trends are reflected in the 2D

resource model. The locations of these additional points are shown in Figure 14-10.

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FIGURE 14-10: ISOMETRIC VIEW OF ADDITIONAL POINTS USED TO CONTROL THE THICKNESS ESTIMATES IN THE

2D MODEL

14.9 VALIDATION

The results of the modeling process were validated using a combination of visual and

statistical comparisons between the estimated values in the blocks and the analyzed grade

values in the drill holes.

Visual Inspection

A detailed visual inspection of the block model was conducted in both section and plan to

ensure the desired results following interpolation. This includes confirmation of the proper

coding of blocks within the overburden domain. The distribution of block grades, and

thickness in the 2D model, were compared relative to the drill hole samples in order to

ensure the proper representation in the model.

Swath Plots (Drift Analysis)

A swath plot is a graphical display of the grade distribution derived from a series of bands,

or swaths, generated in several directions through the deposit. Grade variations from the

OK model are compared using the swath plot to the distribution derived from the

declustered nearest neighbour (NN) grade model.

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On a local scale, the NN model does not provide reliable estimations of grade, but, on a

larger scale, the NN is an unbiased estimator of the average grade based on the underlying

data. Therefore, if the OK model is performing correctly, the grade OK model plot will be

somewhat smoother than the NN values.

Swath plots have been generated in three orthogonal directions for gold grades in the 3D

block model; these are shown in Figure 14-11. For the 2D model, swath plots have been

generated for T, GT, and gold grades. Examples from west-east-oriented swaths are

shown in Figure 14-12.

Overall there is good correspondence between the OK and NN models. The degree of

smoothing in the OK estimates is evident in the swaths.

FIGURE 14-11: SWATH PLOT OF OK VS NN GOLD IN 3D MODEL

FIGURE 14-12: SWATH PLOTS OF 2D MODEL ESTIMATES

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14.10 RESOURCE CLASSIFICATION

The mineral resources for the Eight Mile Lake Placer Deposit have been classified in

accordance with the CIM Definition Standards for Mineral Resources and Mineral Reserves

(May 10, 2014). The classification parameters are based on the distance between blocks

estimated in the model and the drill hole sample data; these are intended to encompass

zones of reasonably continuous mineralization. The applied distances are derived, in part,

from ranges exhibited in the variograms.

The Eight Mile Lake Placer Deposit is relatively small in size and contains somewhat

variable gold grades in the sample database. The current distribution of drilling in the Main

area of the deposit is deemed sufficient to support the estimation of mineral resources in

only the Inferred category. Additional, more closely spaced drilling is required to exhibit the

level of confidence required for resources in the Indicated or Measured categories.

Inferred Resources refer to model blocks located within a maximum distance of 50 m from

a drill hole.

14.11 MINERAL RESOURCES

As required under NI 43-101, mineral resources must exhibit reasonable prospects for

eventual economic extraction. The Eight Mile Lake Placer Deposit is comprised of

unconsolidated overburden which contains variable quantities of free gold. There is no

additional sampling during mining and it is assumed that there is no vertical selectivity of

ore versus waste after an area has been selected for mining; essentially all the material

between surface and bedrock is removed and run through the wash plant.

A series of resource limiting pit shells were generated using the 3D block model and a

series of projected technical and economic parameters that were deemed appropriate for

this deposit. Shells based on gold prices as low as $1,000/oz, site operating costs of

$7.50/m3, and a pit slope of 35° indicated that the majority of the overburden in the Main

area of the deposit exhibits reasonable prospects for eventual economic extraction. The

northern crest of most pit shells remain outside the 10-m buffer from the shore of Eight Mile

Lake.

A base case cut-off grade of 0.2 g/m3 is determined assuming site operating costs of

$7.50/m3, a gold price, based on an approximate average price over the past year, of

$1300/oz and projected recoveries of 85%. Using the 2D model, portions of overburden

above this cut-off threshold have been identified and this boundary limit has been used to

identify the parts of the 3D block model that can be included in the mineral resource

estimate. The limits of the Inferred mineral resource are shown in plan view in Figure 14-

13. The Inferred mineral resource estimate for the Eight Mile Lake Placer Deposit is shown

in Table 14.4.

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TABLE 14.4: INFERRED MINERAL RESOURCE ESTIMATE FOR EIGHT MILE LAKE PLACER DEPOSIT

Cubic Metres (000)

Grade (g/m

3)

Contained Gold (oz)

2,459 0.43 34,000

Note: Includes areas where the vertical extent of overburden

has a gold grade > 0.2 g/m3. Mineral resources are not mineral

reserves and do not have demonstrated economic viability.

There are no known factors related to mining, metallurgical, infrastructure, environmental,

permitting, legal, title, taxation, socio-economic, marketing or political issues which could

materially affect the mineral resource.

FIGURE 14-13: PLAN SHOWING THE LIMIT OF INFERRED MINERAL RESOURCE

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The extent of the Inferred mineral resource is shown in a series of isometric viewpoints in

Figure 14-14.

FIGURE 14-14: ISOMETRIC VIEWS OF THE EXTENT OF INFERRED MINERAL RESOURCE

14.12 COMPARISON OF 3D AND 2D MODELS

Table 14.5 shows a comparison of the volume and grade of resources generated from the

2D and 3D block models.

TABLE 14.5: COMPARISON OF RESOURCES BY MODEL TYPE

Model Cubic Metres

(000) Grade (g/m

3)

Contained Gold (oz)

3D 2,459 0.430 34,000

2D 2,567 0.467 38,500

Note: Includes areas where the vertical extent of overburden has a gold grade > 0.2 g/m3.

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There is about a 12% difference in the amount of contained gold between the two model

types, with the 3D model providing a somewhat more conservative estimate than the 2D

model. And although the 2D model is considered to be an acceptable approach to

estimating resources in a placer deposit, the 3D model method is more robust and, as a

result, has been used to provide the statement of mineral resources for the Eight Mile Lake

Placer Deposit. The similarity between these two modeling approaches serves to increase

the level of confidence in the overall mineral resource estimate for the deposit.

14.13 RECONCILIATION

During the period from June 2014 to July 2014, HGMI extracted and processed a total of

16,800 m3 of material from the Eight Mile Lake Placer Deposit producing 6,836 grams of

gold. This equates to an average in-situ (bank) grade of 0.49 g/m3. The general location of

this production is shown in plan in Figure 14-15. A query of the resource model in this

location gives a somewhat conservative average grade of 0.36 g/m3, but that higher grade

material is present in the immediate vicinity. Although this represents a relatively small

volume in which to conduct reconciliation analyses, these results suggest that the resource

model correlates reasonably well with actual production.

FIGURE 14-15: PLAN SHOWING AREA OF PRODUCTION DURING JUNE-JULY 2014

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15 MINERAL RESERVE ESTIMATES

At present there are no mineral reserve estimates for the Eight Mile Lake property.

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16 MINING METHODS

This section is not applicable.

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17 RECOVERY METHODS

This section is not applicable.

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18 PROJECT INFRASTRUCTURE

This section is not applicable.

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19 MARKET STUDIES AND CONTRACTS

This section is not applicable.

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20 ENVIRONMENTAL STUDIES, PERMITTING, AND

SOCIAL OR COMMUNITY IMPACT

This section is not applicable.

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21 CAPITAL AND OPERATING COSTS

This section is not applicable.

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22 ECONOMIC ANALYSIS

There was no economic analysis done for this project.

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23 ADJACENT PROPERTIES

This section is not applicable.

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24 OTHER RELEVANT DATA

There is no other relevant data or information.

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25 INTERPRETATION AND CONCLUSIONS

The drill data available are adequate to estimate mineral resources in the Inferred category.

The current resource remains open in several directions and additional drilling is required to

define the ultimate limits of the deposit. There are indications that additional satellite

deposits may be present on the property and additional exploration drilling is

recommended.

Inferred resources are too uncertain to have economic factors applied to them. Mineral

resources, which are not mineral reserves, do not have demonstrated economic viability.

The quantity and grade of reported Inferred resources are uncertain in nature and there has

been insufficient exploration to classify these Inferred resources as Indicated or Measured,

and it is uncertain if further exploration will result in upgrading them to an Indicated or

Measured category.

Although, at this stage, there are no mineral reserves at the Eight Mile Lake deposit, the

deposit is currently in operation. As stated above, the estimate of contained ounces is

necessarily uncertain due to the intrinsic variability of the mineralization and the drill hole

spacing. Whether any or all of the placer gold contained in the estimate can be recovered is

unknown and mining a deposit based on resources in the Inferred category is potentially

risky.

It is typical to develop production decisions on feasibility studies based on Proven and

Probable reserves derived from Measured and Indicated resources. In the case of the Eight

Mile property, current operations are not based on the results of a feasibility study. The

operation uses Inferred resources that are too uncertain to be the foundation of a feasibility

study. As such there is more technical and economic uncertainty associated with the Eight

Mile mining and gold recovery than is usually associated with a producing mine.

Historically, projects that have gone into production without first establishing mineral

reserves and the support of a feasibility study, have a higher risk of economic and technical

failure.

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26 RECOMMENDATIONS

The following actions are recommended for the Eight Mile Lake Placer Deposit:

Drill additional holes on a 50-m grid pattern to identify the lateral extents of the

current resource (approximately 20 holes, total 700 m = $100,000).

Drill additional exploration holes to identify other gravel-bearing channels in the

exploration areas shown in Figure 26-1 (20 holes, total 700 m = $100,000).

Continue to validate drill results against gold recovery efforts. Current mining

activities are directed using Inferred-class mineral resources. Additional close-

spaced drilling may be required to improve production reconciliation.

FIGURE 26-1: PLAN SHOWING AREAS FOR FUTURE EXPLORATION ACTIVITY (KOCSIS, 2012)

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27 REFERENCES

Arctic Geophysics (2014). Geophysical Survey with 2D Resistivity for Placer Prospecting at Eight Mile, British

Columbia. Dawson City, February 2014.

British Columbia Geological Survey (BCGS) (2014). Geospatial Data Downloads. http://www.empr.gov.bc.ca/Mining/Geoscience/MapPlace/GeoData/pages/defa ult.aspx. retrieved on March the 17th 2014. Coldwell, James R. (2002). Economic Prefeasibility Studies of Mining n the Koyukuk Mining District, Northern Alaska, BLM-Alaska Technical Report 38, February 2002, U. S. Department of the Interior Bureau of Land Management Frontier Geosciences Inc. (2013). Seismic Refraction Survey Toop Mine, Eight Mile Lake and Fraser River Projects, Quesnel Area, B.C. Vancouver, May 2013. Frontier Geosciences Inc. (2001). A1 Cats. Report on Seismic Refraction Investigation Eight Mile Lake Prospect, Cariboo Mining District, Wells Area, B.C. Vancouver, September 2001. Frontier Geosciences Inc. (1993). Jeslin Resources. Report on Seismic Refraction Investigation Eight Mile Lake Prospect, Wells Area, B.C. Vancouver, September 1993. geotec Rohstoffe GmbH. (2014a). Mining Plan 2014 – Eight Mile Lake Production Site. Confidential. Berlin, February 2014. geotec Rohstoffe GmbH. (2014b). Summary - Quotations for Mining Equipment. Eight Mile Lake Production Site, British Columbia, Canada. Berlin, February 2014. geotec Rohstoffe GmbH. (2014c). Technical Report – Exploration Drill Road Map 2014. Confidential. Berlin, February 2014. geotec Rohstoffe GmbH. (2014d). Draft Technical Report Eight Mile Lake Property, Berlin, July 2014. Google Inc., Google Maps (2014). retrieved on March the 17th, 2014. G.U.B. INGENIEUR AG (2009). Technischer Bericht. Fact Finding Mission Gold Exploration. Cottonwood and Mary Creek Claims, Quesnel, B.C. Kanada. July 2009. Jacob, Gerhard (2013). Eight Mile Lake Placer Project, B.C. Canada. An Executive Summary and Valuation Summary. April 2013. Kocsis, S. (2012). Eight Mile Placer Gold Property, British Columbia, Canada. Quesnel, December 2012. Levson, V. M. and Giles, T. R. (1993). Geology of Tertiary and Quaternary gold-bearing placers in the Cariboo region, British Columbia (93A, B, G, H). Canada. Ministry of Energy and Mines. British Columbia (2013). Notice of work. Tracking Number: 100006219, 2013. Silva, M. (1986). Placer Gold Recovery Methods. Sacramento: California Department of Conservation - Division Mines and Geology. Stanway, K.J. (2012) Ten Placer Deposit Models from Five Sedimentary Environments, Applied Earth Science (Trans. Inst. Min. Metall. B), vol. 121, no. 1, pp. 43-51. Stewart, Alex (2013). Gold Analysis Report. Dubai, United Arab Emirates, October 2013. Timmermann, J. (2013). Eight Mile Property 2013 Drilling Report. Quesnel, August 2013.

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28 CERTIFICATES AND SIGNATURES

Bruce Davis, FAusIMM, BD Resource Consulting, Inc.

I, Bruce Davis, FAusIMM, do hereby certify that:

1. I am an independent consultant of BD Resource Consulting, Inc., located at 4253 Cheyenne Drive, Larkspur, CO, U.S.A., 80118, and incorporated January 18, 2008.

2. I graduated with a Doctor of Philosophy in Geostatistics from the University of Wyoming in 1978.

3. I am a fellow of the Australasian Institute of Mining and Metallurgy, Registration Number 2111185.

4. I have practiced my profession continuously for 33 years and have been involved in geostatistical studies, mineral resource and reserve estimations and feasibility studies on numerous underground and open pit base metal and gold deposits in Canada, the United States, Central and South America, Europe, Asia, Africa and Australia.

5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past work experience on gold placer deposits in California, Alaska and Wyoming, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101.

6. I am the primary author responsible for the preparation of all sections (except Sections 7, 8, 9 and 14) of the technical report titled “Eight Mile Lake Placer Deposit, Cariboo Regional District, British Columbia, NI 43-101 Technical Report” dated November 10, 2014, with an effective date of August 7, 2014 (the “Technical Report”).

7. I visited the property on August 6-7, 2014.

8. I have had no prior involvement with the property that is the subject of the Technical Report.

9. I am independent of Henning Gold Mines Inc. applying all of the tests in Section 1.5 of NI 43-101.

10. I have read National Instrument 43-101, Form 43-101F1, and the Technical Report, and the Technical Report has been prepared in compliance with that instrument and form.

11. As of the effective date of the Technical Report, to the best of my knowledge, information and belief, the Technical Report contains all scientific and technical information that is required to make the Technical Report not misleading.

Dated this 10th day of November, 2014.

“original signed and sealed”

_

Bruce M. Davis, FAusIMM

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Robert Sim, P.Geo, SIM Geological Inc.

I, Robert Sim, P.Geo, do hereby certify that:

1. I am an independent consultant of:

SIM Geological Inc.

6810 Cedarbrook Place

Delta, British Columbia, Canada V4E 3C5

2. I graduated from Lakehead University with an Honours Bachelor of Science (Geology) in 1984.

3. I am a member, in good standing, of the Association of Professional Engineers and Geoscientists of British Columbia, License Number 24076.

4. I have practiced my profession continuously for 30 years and have been involved in mineral exploration, mine site geology and operations, mineral resource and reserve estimations and feasibility studies on numerous underground and open pit base metal and gold deposits in Canada, the United States, Central and South America, Europe, Asia, Africa and Australia.

5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience in Alaska, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101.

6. I am a co-author of the technical report titled Eight Mile Lake Placer Deposit, Cariboo Regional District, British Columbia, NI 43-101 Technical Report, dated November 10, 2014, with an effective date of August 7,

2014 (the “Technical Report”), and accept professional responsibility for Section 14 and portions of 1, 2, 25 and 26.

7. I have not visited the Property.

8. I have no prior involvement with the Property.

9. As of as of the effective date of the Technical Report, to the best of my knowledge, information and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make the Technical Report not misleading.

10. I am independent of Henning Gold Mines Inc. applying all of the tests in Section 1.5 of NI 43-101.

11. I have read National Instrument 43-101, Form 43-101F1, and the Technical Report, and the Technical Report has been prepared in compliance with that instrument and form.

Dated this 10th day of November, 2014.

“original signed and sealed”

_____________________________________

Robert Sim, P.Geo

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Detlef Eberle, Pr.Sci.Nat. (RSA), Dr.rer.nat.habil. (TU Berlin), geotec Rohstoffe GmbH,

Germany

I, Detlef Eberle, Pr.Sci.Nat. (RSA), Dr.rer.nat.habil., do hereby certify that:

1. I am an independent consultant of geotec Rohstoffe GmbH, Germany, located at 95 Friedrichstrasse,

10117 Berlin, Germany.

2. I graduated with a Doctor degree in Geophysics from Ludwig-Maximilian-University Munich, Germany,

in 1978 and a Habilitation degree from Berlin Technical University in 1993.

3. I satisfy the requirements determined by the South African Council for Natural Scientific Professions

(SACNASP) for the Earth Science category. I am subject to a Code of Conduct administered by

SACNASP. I am a member, in good standing, of the Society of Exploration Geophysicists (SEG), Tulsa,

Oklahoma, registration number 3390, the Australian Society of Exploration Geophysicists (ASEG), the

European Association of Geoscientists and Engineers, registration no. M2001-1037, the South African

Geophysical Association (SAGA) and the Austrian Geophysical Society (AGS, Vienna).

4. I have practiced my profession continuously for 45 years and have been involved in geostatistical

research, in ground- and air-borne exploration of mineral, hydrocarbon and groundwater resources as

well as in environmental and engineering investigations in Europe, Latin America, Canada, sub-

Saharan Africa and SE-Asia. My mineral exploration experience includes the search for placer deposits

of gold and heavy minerals in palaeo-valleys of Brazil, Canada, West and Southern Africa.

5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-101”) and

certify that by reason of my education, affiliation with a professional association (as defined in NI 43-

101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the

purposes of NI 43-101.

6. I am responsible for the preparation of Sections 7-9 of the technical report titled “Eight Mile Lake Placer

Deposit, Cariboo Regional District, British Columbia: NI 43-101 Technical Report” dated November 10,

2014 with an effective date of August 7, 2014 (the “Technical Report”).

7. Beginning in April 2012, I visited the property on several occasions to direct geophysical exploration

programs and geology studies in support of those programs. My most recent visit was from July 24 to

August 14, 2014.

8. I am independent of Henning Gold Mines Inc. applying all of the tests in Section 1.5 of NI 43-101.

9. I have read National Instrument 43-101, Form 43-101F1, and the Technical Report, and the Technical

Report has been prepared in compliance with that instrument and form.

10. As of the effective date of the Technical Report, to the best of my knowledge, information and belief, the

Technical Report contains all scientific and technical information that is required to make the Technical

Report not misleading.

Dated this 10th day of November, 2014.

“original signed and sealed”

_

Detlef Eberle, Pr.Sci.Nat.(RSA)