Gold Price USD 1257.50 /oz (AIM:CGH)21.13p

Exploration

There is significant exploration potential within the existing licence areas in both the Tulkubash and Kyzyltash zones. The ore bodies are wide, strongly continuous along strike, and open both down-dip and along strike.

Tulkubash deposit section

Tulkubash

Up to 2016 exploration primarily focused on the Kyzyltash formation. In 2017, in-line with the phased development approach, the exploration focus moved to the Tulkubash oxide zone. Significant gold in soil anomalies at >1g/t have been defined within the mining licence area.

The strongest of these are located in the north east of the licence, coincident with the strongest mineralisation seen in Kyzyltash. To date, all Tulkubash exploration has been targeted in the south-west of the licence area. As exploration moves further north-east in 2018 and 2019 significant growth in mineral resources is anticipated.

Chaarat Geology

Further exploration potential exists along strike in the East Chaarat exploration licence. Large soil anomalies have been defined in this licence area at grades >1.0g/t and surface work will continue in 2018. These areas will be the target of resource definition drilling once the full extent of the oxide mineralisation within the current mining licence is understood.

Chaarat Project Geology

The Chaarat Project is located along the Sandalash River Valley, which marks the northeast-trending hinge zone of an anticline. Mineralisation occurs on the north-western limb of the anticline, hosted in a sequence of Cambro-Ordovician siliciclastic rocks (the Kyzyltash Zone), which have been overthrust by Devonian-age massive quartzites (the Tulkubash Zone). The sedimentary rocks strike northeasterly and dip at 40-60 degrees northwest.

Permo-Triassic age granodiorite and diorite intrusive rocks are associated with gold mineralisation. The diorite dykes seem to be closely related to mineralisation and, in some areas, their contacts are mineralised. Gold mineralisation is structurally controlled and occurs in two sub-parallel mineralised zones, the Tulkubash and Kyzyltash Zones.

Tulkubash

Mineralisation within the Tulkubash Zone is characterized by zones of intense silicification and quartz flooding. The widespread silicification and deep oxidation is in distinct contrast to the Kyzyltash Zone, where there are only minor amounts of quartz, mostly in thin veinlets and occasional veins with no significant oxidation. The low arsenic and consistently low arsenic-to-antimony ratios of the Tulkubash Zone are another distinct difference.

Metallurgical testing and cyanide soluble gold assays indicate that much of the developed ore is amenable to heap leach. The similarities in alteration along the Tulkubash Zone suggest that the geochemical environment may result in predominantly oxide ores throughout the zone.

The Tulkubash Zone is a mineralized structural zone, trending northeast-southwest parallel to the Kyzyltash Zone. The Tulkubash Zone dips steeply to the northeast (60-90 degrees) and is up to 250m wide, composed of multiple lodes ranging up to 45m thickness. Development drilling indicates that the Zone blossoms and thins along its defined length.

Kyzyltash

The Kyzyltash Zone is a sulphide-bearing ore body made up of the Main Zone and Contact Zone mineralisation.

The Main Zone is a northeast-southwest trending system of anastomising and braided oblique slip faults steeply dipping to the northwest. Abundant conjugate structures and riedel shear intersections provide favourable areas for mineralisation. The Main Zone structure is developed within the siltstones of the Kyzyltash Zone on the lower slopes of the Sandalash River Valley and includes several discrete mineralised bodies along the strike.

The Contact Zone is a shear system developed between the Tulkubash and Kyzyltash Zones. Mineralisation in this zone has been discovered intermittently over a length of 10km. The Contact Zone structure strikes northeast-southwest and dips at 45-60 degrees to the northwest.

Three separate project areas occurring along the strike have been drilled at Sections 5300, 4600 and 4000 with extensive underground development at Section 5300. Gold mineralisation is hosted in sheared siltstones, which display sericitic alteration with minor quartz veins and calcite-ankerite and contain some 10-15% pyrite, stibnite, tetrahedrite and arsenopyrite – all associated with gold mineralisation.

The Mineralised System

Mineralisation and associated hydrothermal alteration at Charaat is genetically associated with igneous intrusive rocks along a system of regional-scale, sinistral, oblique-slip faults. Within this setting, there are two distinct styles of mineralisation. Boiling textures in the Tulkubash Zone, along with widespread oxidation, silicification and the geochemical association of gold with antimony and arsenic, indicate a shallow epithermal setting analogous to the sediment hosted deposits.

The Kyzyltash Zone formed in a deeper environment. The pervasive sericitization, disseminated sulphides and ankeritization within mineralised lodes and the relative paucity of quartz veinlets (usually less than 5% of volume) indicate the prevalent mode of deposition was controlled by the reaction of hydrothermal fluids with feldspar-rich wall rocks. These zones are classified as mesothermal mineralisation. These deposits are formed in nearly isothermal conditions and can extend to great depths. Mineralisation in the Contact Zone has been demonstrated over a vertical range of 1.3km and is open at depth and along strike.