Karelian Gold Line

1. Mapping and sampling at the deposit Hosko. 2. Stripping at the central part of Hosko deposit. 3. The portal of Pampalo mine.

Regional Geology of the Ilomantsi-Kostamuksha greenstone belt (Hattu Schist Belt). From Ward 1993

The Karelian Gold Line covers part of the Achaean Ilomantsi greenstone belt in the easternmost part of Finland and continues to Russia. The Karelian Gold Line is more than 40 km long in north-south direction and generally less than five km wide. Endomines’ most important gold deposits are located along the Karelian Gold Line. Endomines’ deposits along the Karelian Gold Line include 23 deposits and occurrences. The most developed deposits are Pampalo, Pampalo East, Hosko, Rämepuro, Muurinsuo, Kuivisto and Kuivisto East.

Geography and Climate

The Karelian Gold Line runs through Ilomantsi municipality in North Karelia in the easternmost part of Finland. Endomines’ claims extend about 40 km in the Hattuvaara village, only couple of kilometres from the Russian border. Accessibility to the area is good. A pavement road follows the gold line from south to north with numerous diverging forestry roads, which make the basis for a well functioning communications net to the Company’s exploration targets.

The municipality of Ilomantsi was founded in 1875. The area totals 3 172 square kilometres from which 402 square kilometres consist of lakes. Distance to the closest central place, Joensuu, is 73 kilometres. In Joensuu there is an airport, port and railway station. Distance to Helsinki is around 500 km.

There are around 6 000 inhabitants in the municipality. The rate of unemployment is high. At the moment the biggest employers are the municipality and the border guard.

The climate in Ilomantsi is sub-continental with precipitation of about 650 mm per year. Much of the precipitation falls as snow, and the average snow depth during winter is 60 cm. The annual average temperature is 2,1°C. The average temperature in July is about 21°C.

The Karelian Gold Line. The identified and significant gold findings named in the map. Source: Geological Survey of Finland.

Background

The gold mining history along the Karelian Gold Line goes back to the mid 1980s when the exploration by Geological Survey of Finland (GTK) led to the discovery of auriferous quartz-calcite veins. Some significant geochemical gold and arsenic anomalies in the southern part of the Karelian Gold Line were also found. Outokumpu’s geologists noticed simultaneous some significant gold contents relating to a copper deposit in Rämepuro, south of Pampalo. The geological and structural environment in the Ilomantsi area is similar to other well-known Archaean gold fields like the Australian Kalgoorlie and Canadian Timmins.

In 1986 the GTK initiated the”Ilomantsi Gold Project”. According the exploration results they concluded that the bedrock along the Karelian Gold Line was highly auriferous in several locations. Until 1990 Geological Survey had identified a gold mineralisation in Pampalo and more than ten additional gold findings along the southern part of the Karelian Gold Line.

After that GTK extended their exploration to north and was able to identify even there several gold bearing structures. Hosko, Korpilampi,Sivakko, Kivijärvi and Kuivisto findings were results of that study.

Ministry of Trade and Industry (MIT) that through a competitive bidding offered the southern claim areas to various mining and exploration companies in 1994 sold the claim rights of the southern part of the Karelian Gold Line, including Pampalo, to Outokumpu Mining. Later they were transferred to Polar Mining Oy, a subsidiary of Australian Dragon Mining NL. All the existing mining licences and claims, including all exploration results, along the Karelian Gold Line’s southern part were in October 2006 transferred to Endomines, who already 1996 had acquired the northern claim areas from MIT.

Mineral Resources

The independent Australian consultant Runge Limited has executed the estimates of mineral resources along the Karelian Gold Line for Pampalo, Pampalo East, Muurinsuo, Hosko and Rämepuro deposits.

Endomines mineral resources in the Karelian Gold Line reported in the table below.

The total inferred mineral resource (April 2009) along Karelian Gold Line is 4 400 kt with a grade of 3,2 g/ton gold. The gold amount is 450 000 oz of which the measured category is 75 400 oz and the indicated category is 222 100 oz. In the measured category there are 379 kt ore while the indicated tonnage is 1924 kt.

The used top cut’s varies from 21 to 80 grams gold per tonne for depending of the nature of the deposit.

Ore Reserves

The estimates of ore reserves along the Karelian Gold Line from deposits Pampalo, Muurinsuo, Hosko and Pampalo East have been made by independent consultants. Gemell Mining Service Pty Ltd from Sydney (AUS) carried out the underground estimation of Pampalo deposit and Maptek/ KRJA Systems Ltd, Edinburgh (UK) did take care of the open pit deposits.

The present ore reserves of the Karelian Gold Line deposits has been estimated to be 1 378 kt containing 198 480 oz of gold. This is an increase of 84 per cent from 108 115 oz gold previously. 28% of ore reserves has classified as proven and 72 per cent as probable. For Pampalo mine the corresponding figures are 41 per cent proven and 59 per cent probable. At a planned mine production of 180 kt/a the reported reserves provide ore for more than 7,5 years production time. The detailed information according reserves is available in Table 2.

1) Used gold price 720 USD/oz
2) Cut-off: 0,5 g/t; 5% Ore loss & 15% dilution
3) Cut-off: 2,5 g/t. Ore losses: drifting 0 %, stoping 5 % and stoping nearby talc chlorite rock 40 %
4) Cut-off: 1,0 g/t; 5% Ore loss & 15% dilution
5) Used gold price 574 USD/oz. Cut-off: 2,5 g/t. Stock Pile top cut 10 g/t Au
6) 1 oz = 31,104 g

The mineral resources reported according the JORC Code were the basis for the ore estimations. In accordance with the JORC Code, only the measured and indicated resources have been used for ore reserve estimations. For more detailed information see: http://www.endomines.com/statementsgold.php.

The gold price of 720 USD per oz of has been used for reserve estimations, which is significantly lower than the average price for 2009 (904 USD per oz gold). A dollar rate of 1,3 USD / EUR has been presumed in the calculations.

For the open pit ore reserve estimations a waste rock dilution of 15 per cent has been presumed while an ore loss is estimated to be 5 per cent.

For underground mining in Pampalo have a cost-based "stoping cut-off" of 2,5 g/t gold used. The ore loss of 5 per cent is used for underground mining but this is supposed to increase to 40 per cent in the areas where the ore is in contact with chalk chlorite schist. Drifting in the ore does not crease any ore loss. Waste rock dilution in the underground mining has estimated to be 27 per cent at an average. The recovery of process plant has been estimated at 91 per cent.

Figure. The increases in ore reserves in the ore deposits along the Karelian Gold Line.

Endomines owns 41 claims and two mining licences along the Karelian Gold Line. Map source: © Affecto Finland Oy, Genimap, Lupa L7136/07.

Reservations, Claims and Mining Licences

Endomines owns 41 claims totalling areas of 2 689 hectares along the Karelian Gold Line as well as 3 reservations for claims over 487 hectares’ areas.

Endomines Oy acquired its first claims along the Karelian Gold Line in 1996 from the State of Finland. The trade included, apart from the actual claims, also the right to all exploration results in the possession of Geological Survey of Finland. According to the purchasing contract between the State of Finland and Endomines Oy, the Company shall in the eventual future mining of the bought claims north of Pampalo pay royalties of 0,39 EUR/t to the State of Finland from the first two million tonnes that will be mined and after that 1,31 EUR/t up to the maximum amount of 2,5 M EUR.

The remaining claims do not oblige Endomines into any future royalty engagements.

Endomines possesses mining licences for two different areas along the Karelian Gold Line, Pampalo and Rämepuro. The Pampalo deposit includes two mining licences 297 hectares. The Rämepuro deposit is covered by a mining licence of a 61 hectares’ area.