The Gaolong Gold Project - Guangxi Province

Terms

Blackwatch has signed a LOI with the Guangxi Tianlin Gaolong Gold Mine Ltd Co (�GTGGML�). Under the terms of the LOI, Blackwatch can earn an 81% equity stake in the Gaolong and Badu gold projects, as well as a further 300 square kilometres of promising exploration ground in the �Golden Triangle� area of northwest Guangxi.

Under the terms of the LOI, Caledon has the right to earn a 81% equity stake in the combined mining and exploration project through the expenditure of US$1 million on exploration over a three year period and by completing staged payments totalling US$350,000 over the same time frame. In addition, upon Caledon�s decision to initiate commercial production on any ore-bodies discovered within the JV tenements, Caledon must make a final cash payment of US$5 million to the project partners.

Geology and Immediate Exploration Potential

The Gaolong project and mine site area is situated 60 kilometres north west of the regional town of Tianlin in northwestern Guangxi. The main target area is the Gaolong mine, an active gold mine producing gold from a number of small open-pit operations, with gold reserves of approximately 400,000 ozs.

The mineralisation at Gaolong occupies a brecciated and silicified structure that has a semi-continuous strike length in excess of three kilometres. Individual ore-bodies at Gaolong are up to 850 m long and are up to 20 m thick (to a maximum of 60 m) and have been traced to a depth of 200 m where they remain open.

Gold grades well in excess of 10 g/t Au are common throughout the deposit, and it is these higher grade, bulk-tonnage �feeder zones� that will form the main focus of Caledon�s exploration work over the coming months. Preliminary assessment of the area has highlighted the multi-million ounce gold potential on extension from existing mined zones, which to date have only been mined to shallow depths.

Regional Exploration Potential

The Gaolong �trend� extends as a series of arcuate faults around a dome complex with a diameter of approximately seven kilometres. The silicified and brecciated horizon (jasperoid) that hosts the main Gaolong deposit can be traced around the dome for a total of twenty-eight kilometres. Numerous gold anomalies and limited small scale production occur along the dome�s margins. Future exploration by Caledon will also be targeted at such anomalies. 

The deposit has been cited in various United States Geological Survey (USGS) studies as having clear similarities to multi-million ounce gold deposits in the Carlin districts of Nevada, USA :

�Deformation textures along the main host structural zone in the Gaolong Au deposit, such as intense folding, brecciation, phacoid development, and silicification are similar to many structurally-controlled Carlin-type ore-bodies in Nevada, such as the Betze orebody�      (from USGS publication: Peters, 1997, 2000a, b; Peters and others, 1998, 2000).