// Gold Exploration

The Alta Floresta Gold Project is located within the Southern Amazon Craton in the northern part of Mato Grosso State in central west Brazil. The project comprises three discrete groups of tenements covering approximately 1,450 square kms within a 330 long portion of the Alta Floresta gold belt, where government records estimate past production in excess of five million ounces of gold. The tenement groups are locate in Peixoto/Novo Mundo, Paranaita and Apiacas regions respectively.

Location of Alta Floresta Project in Mato Grosso State, Brazil

The project offers significant potential for discovery of large tonnage, disseminates gold deposits, as well as high-grade quartz-sulphide vein gold deposits. The potential for large deposits is evidenced by the plus 1 million ounce gold discovery 25km north of Peixoto, and by widespread mineralisation now being outlined in Cougar’s Apaicas and Peixoto tenements.

Peixoto

The Peixoto District surrounds the towns of Peixoto de Avazedo and Matupa. The project comprises 51 exploration permits for gold covering a total area of 610 square kms.

The region is host to four significant gold deposits, including the Paraiba Mine, which is the only significant hardrock mine within the AFGP to date. The Paraiba Mine comprises discontinuous quartz veins hosted in a north-south trending shear zone, and associated with chlorite-sulphide and quartz-sericite-sulphide (potassic) alteration. Anecdotal information is that the mine is currently developed to 350 metres below surface, and the average reported grade of mineralisation 18.7g/t gold.

Exploration by Cougar has led to the recognition of four styles of mineralisation in the Peixoto area:

Type (I)

West-northwest to northwest trending shear zones associated with chloritic schist and typified by deformed quartz veins and by the presence of iron and copper sulphides in addition to gold. Rock chip sampling typically returns grades up to 30g/t gold. Two major trends of this orientation are recognised in Cougar’s tenements; the Luizão-Pezão trend and the Flor de Serra-Filão de Peteca trend.

Cougar completed eight RC drillholes during 2006 at Pezãoto depths ranging between 48 metres and 96 metres and testing 200 metres of strike. Mineralisation was intersected as zones of broad low grade mineralisation hosted in altered granite. Intersections include up to 8 metres averaging 2.56g/t gold (PZRC006 from 0 metres) and 16 metres averaging 1.05g/t gold (PZRC005 from 28 metres). Exploration along the Flor de Serra-Filão de Peteca trend is limited to rock chip sampling, mapping and limited trenching.

This style of mineralisation is considered to have potential for moderate to large tonnage and medium average gold grade. Copper in these deposits may prove to be of economic potential.

Type (II)

Northeast trending quartz veins with strike continuity, such as Cidiñha. Sampling suggests that veins of this type are typified by high gold grades, anomalous but not high base metal values and anomalous tellurium.

Sampling by Cougar along Cidiñha vein consistently gave high gold grades, inclusing a 333 kilogram bulk sample that returned 21g/t gold by gravimetry.

Veins of this type appear to be associated with narrow zones of shearing, and represent typical narrow vein high gold grade targets.

Type (III)

North-south veins described as hosted by shear zones and associated with both potassic (quartz-sericite) and chlorite alteration. This style of mineralisation is typified by the only operating narrow vein underground mine at Filão de Paraiba. Type II and Type III veins may be variations of the same style.

Type (IV)

Quartz-sericite-sulphide alteration systems that typically overprint granodiorite to granite rock types and which are broadly regarded as associated with the cupolas of late or post-orogenic granites, such as Teles Piris Granite. Deposits of this style, which include the X1 Deposit, where Canadian explorer Rio Novo Inc has identified a mineral resource which includes Measured + Indicated Resources of 8 million tonnes averaging 1.35g/t gold and 4.6g/t silver.

Deposits of this type are geochemically anomalous in tellurium and bismuth and are regarded as potential intrusive related or RIRG deposits with potential for large tonnage, low grade deposits.

Type I to Type III deposits represent attractive narrow to medium width vein-style exploration targets. Deposits of this type may support small open pits but are likely to be developed as underground mines if sufficient mineral resources can be identified. Given the large number of as yet undrilled targets of these types within the Peixoto District, it is conceivable that successful exploration could identify a number of smaller mining operations which could be processed through a central processing facility, in doing so spreading the cost of overheads and the capital cost associated with construction of a processing plant.

Paranaita

The Paranaíta District is located approximately 12 kilometres north of the town of Paranaíta and comprises six exploration permits for gold covering a total area of 340 square kilometres. The area is serviced by poorly maintained, unsealed roads off the unsealed MT208 and variably cleared for grazing of beef cattle. The topography is moderately undulating, with localised ephemeral creeks and rivers systems draining north into the Rio São ManoelTelesPires.

Cougar conducted an initial phase of exploration at Paranaíta during 2006 but did not complete any significant follow-up until the commencement of small scale mining activities at ZéVermelho in late 2010.

At Porto Aberta, gold in soils show a coherent northwest trend over approximately 2.5 kilometres, plus weak west-northwest and east-northeast trends. Cougar collected 43 grab samples through the area, of which 11 analysed greater than 1g/t gold and five gave between 11.7g/t and 24.3g/t gold. Drilling along the predominant northwest trend has intersected sporadic gold results, with the best intersection two metres averaging 9g/t gold (PARC004 from 58 metres). The most coherent results are in three drillholes distributed over 60 metres of strike.

Radiometric and magnetic data show that the primary Garimpeiro workings at Paranaíta are broadly located in an east-west band through the centre of the project area. The workings are located to the south of a trend of anomalous high potassium response in radiometric data which cross-cuts the mapped regional scale geology. Hardrock prospects at Porto Aberta are located within this band and within a weak negative magnetic anomaly, which may reflect more intense potassic alteration. Diamond drilling at Porto Aberta shows localised potassic-quartz alteration, but no systematic relationship between alteration intensity and anomalous gold.

The controls on gold at Porto Aberta remain unresolved, and systematic geological mapping and exploration is required. As in each of Cougar’s project areas, local structural mapping and interpretation should be a priority for future work.

Apiacas

The Apiacas District is located north of the town of Apiacas and comprises 8 exploration permits for gold covering a total area of 59 square kms.

The Apiacás area was intensely mined for gold, with reported production between 1996 and 2000 of 4.2 tonnes of gold. More than 95% of production is estimated to have come from alluvial and colluvial deposits, with a small number of shallow shafts sunk on mineralised veins. The area hosts a numerous historic garimpeiro workings developed on quartz veins hosted in sheared and quartz-sericite-sulphide altered granitoid.

Cougar completed a number of soil surveys which were followed with limited trenching. A three hole diamond drill program was completed at Jacaré, and a nine hole diamond drill program at Porto Estrela. At both locations, drilling intersected gold mineralisation hosted within a zones of with intense quartz-sericitealteration and disseminated sulphide.

The best intersection in drilling at Jacaré is 1 metre @ 31g/t gold (JD002 from 137.2 metres), and 10 metres averaging 0.42g/t gold (JD003 from 62 metres; 0.1g/t cutoff).

Drilling at Porto Estrela intersected two zones of strong mineralisation in PEDDH007, with alteration overprinting biotite-magnetite granite. Results include a high grade intercept of 9 metres averaging 7.93g/t gold (from 79 metres) and a broad lower grade intercept of 14 metres averaging 1.20g/t gold (from 5 metres).

Sampling was undertaken during 2010 at Ceará Prospect, which is a northeast trending quartz vein system located 450 metres south-southeast of Porto Estrela. The vein is being actively mined by garimpeiro which have opened up a 60 metre long slot to fresh graniodiorite bedrock, which is approximately 12 metres deep.

Mineralisation occurs as up to three vertical, <2 centimetre wide parallel quartz-sulphide veins in a zone up to 1.1 metres wide. The veins are semi-continuous over a strike length of at least 100 metres and hosted by weathered massive granite.

Sampling by Cougar of the veins and saprolitic wallrock gave very high grades of gold, including a quartz single vein giving up to 1,420g/t gold, two 30 centimetre channel samples including quartz veins giving 230g/t gold and 105g/t gold and a one metre channel including quartz veins giving 20.5g/t gold.

Exploration by Cougar has highlighted two styles of mineral potential, both associated with moderate to high sulphide abundances and elevated base metals, bismuth, tellurium and molybdenum. Detailed geochemistry suggests that mineralisation is characterised by calcic-alkali alteration and moderate gold-sulphide mineralisation, which is overprinted by potassicsilica (quartz-sericite) alteration with high gold-sulphide alteration.

This geochemical signature is typical of intrusive related mineralisation and in particular reduced intrusion related granitoid (“RIRG”) systems, suggesting that large tonnage, low grade RIRG mineralisation models should form one arm of an exploration strategy.

Nevertheless, narrow vein systems as represented by Ceará are considered to represent highly prospective exploration targets. The veins appear to have potential for long strike length, up to 800 metres as indicated at Sítio Santa Fe. The magnitude and consistency of gold grades in fresh rock are yet to be confirmed in drilling, as garimpeiro are typically unable to continue low cost mining into fresh rock. However, drilling at Jacaré and the very high grades in surface sampling at Ceará provide encouragement for exploration of narrow vein targets.

Competent Persons Statement

The information above that relates to exploration results is based on information compiled by Dr Christopher Stephens who is a consultant to the Company. Dr Stephens is Principal of CJ Stephens Consulting Pty Ltd is a member of the Australian Institute of Geoscientists (AIG) and the Australia Institute of Mining and Metallurgy (AusIMM). Dr Stephens has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 edition of the “Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Dr Stephens consents to the inclusion of the matters based on his information in the form and context in which it appears.