Kestanelik, Turkey

(Chesser 100%, Turkish Partner 2.5% NSR)

Kestanelik — Location

Map of Turkey – showing location of Kestanelik prospect in NW Turkey.

The Kestanelik property is situated on the Biga peninsula, in western Turkey, some 10 kilometres southeast of the Dardanelles, and enjoys good access together with excellent infrastructure, power, roads and other services in close proximity.

Kestanelik – Geology

The Kestanelik property consists of a series of low sulphidation epithermal quartz veins of up to 30 metres thickness, outcropping over an aggregate strike length of approximately 2,550 metres and with a further 18,500 metres of quartz veins occurring under shallow cover, for a total of at least 22 kilometres of epithermal quartz veining. Drilling to date has identified high-grade gold mineralisation and bonanza grades however, a large proportion of these veins remain untested by drilling. The host sequence is partially covered by a post-mineral sequence of sediments, volcanics and alluvium. (Figure 2). Mineralisation on the property is typical of low sulphidation epithermal vein systems, examples of which include Vera Nancy in Queensland (North Queensland Metals) and the Eureka project in Argentina (Andean Resources, now Goldcorp Inc).

Figure 1 – Geology Plan of Kestanelik showing outcropping quartz veins in red

Kestanelik – History

Chesser negotiated the right to earn a 100 percent interest in the Kestanelik epithermal gold property in March 2009. Exploration commenced on the property after the operating license was granted in late 2009 – initially on a small number of permitted drill sites but expanding to 150 permitted drill sites in mid 2010.

Kestanelik – Completed Exploration Program

Seventy-seven epithermal quartz veins have been identified on the Kestanelik property for a combined total strike length of some 22 kilometres. The average widths of the veins is approximately 3.5 metres but have been recorded to a maximum width of up to 30 metres. Of these veins meaningful drilling has been conducted on only six of the veins, for approximately 11% of the total strike length. In addition, twenty-seven veins for 9,057 metres of strike, have had significant surface gold occurrences recorded against them but, as of mid 2011, have not yet had any drilling on them (41%). Forty-three veins (48%) have yet to be sampled or drilled.

A complete record of drilling results obtained are contained in the ASX Releases but a selection of the better drill intercepts on each of the veins drilled to date are shown in Figure 2.

Three separate reviews of the exploration carried out thus far by independent expert epithermal vein geological consultants, have concluded that drilling to date has been in the upper regions of the ‘epithermal boiling-zone’ and as such there is a strong expectation that the good grades recorded in the drilling to date will extend to depth.

Limited metallurgical studies have been carried out as at mid 2011 but indications are that metallurgical recoveries will be good with a majority of fine gold and little gravity recovery. Metallurgical investigations are ongoing.

Figure 2 – Panorama of Kestanelik showing selected drilling results on the outcropping quartz veins

Kestanelik – 2011 Exploration drilling program

A program of 30,000 metres of RC and diamond drilling started in mid July 2011 on the seventy-seven quartz veins, which are known to extend over a twenty-two kilometre strike length on the Kestanelik property. Drilling will expand the known zones of mineralisation that have been identified on the six veins that have received meaningful drilling to date, including the higher-grade mineralised shoots identified on the K3 vein. A further twenty-seven quartz veins, which have a strike length of more than nine kilometers, are known to contain gold mineralisation, but as yet have had no drilling on them. Initial drill testing on these veins, which represent forty one percent of the identified strike length of veins, will be carried out as part of the 2011 program. An initial scout drill program will also test the remaining forty-three veins, which to date have received no follow-up exploration work.

More details of the proposed program are set out as follows:

Karakovan Vein
Three zones of high-grade veining and stockwork, which extend over a 150 metre strike length, a 100 metre width and down to a 50 metre depth, have been drilled. The veins are closed off to the northeast by faulting but there are some high-grade intercepts further to the southwest, which will be tested by a planned 1,000 metres of drilling.

K1 Vein
This vein has been defined over a strike length approximately 375 metres and is still open in both directions. A program of 5,000 metres of drilling is planned which will also test the down dip and strike extension of the KERC-66 high-grade intercept (75m @ 2.3g/t Au from 18 metres, including 5m @ 26.5g/t Au at 68 metres).

K2 Vein
The K2 vein has a strike length of about 300 metres and appears to be a link structure between the K1 and K3 veins. Five drill holes have so far been completed but drilling is only to a depth of some 80m below surface. The K2 vein is open at depth and 2,000 metres of drilling is planned.

K3 Vein
The K3 has, to date, had the most amount of drilling due to easier access to the permitted drill sites. 31 holes have been completed with two high-grade shoots identified over a strike length of about 400 metres. The K3 vein is open in both directions and Chesser believes that drilling thus far has only been testing the upper levels of the “boiling zone” of the epithermal system, consequently 5,000 metres of drilling is planned to test deeper in the system as well as along strike in both directions.

Meydan Zone
The Meydan zone is a two-kilometre zone of silicification, stockwork and sheeted veining. A soil geochemical survey over this zone has shown highly anomalous area of gold in soils (with one float/’boulder’ sample returning 419 g/t gold). The survey also returned high levels of mercury and antimony indicating that the veins in this area are likely to be at a high level in the epithermal system and therefore any high grades will have been preserved and not eroded away. Due to timing and some access difficulties in the past, no drilling has yet taken place and Chesser has planned 3,000 metres of drilling to test a series of locations along the Meydan zone.

Kara Tepe Vein
Three holes have been drilled into the Kara Tepe vein and examination of the vein textures and the gold/silver ratio in the mineralisation has led to the conclusion that economic grades would lie at deeper depths than the three holes drilled to date have reached – consequently deeper holes, for 1,000 metres of deeper drilling is planned.

Scout Drilling
8,000 metres of RC drilling are planned at the Meydan North zone where strong soil anomalies and numerous high-grade surface samples have been collected in previously conducted soil sampling programs. As part of the overall regional exploration effort a further 5,000 metres of other scout drilling is planned to be drilled on other veins which have so far had no drill testing at all.

Kestanelik – Mineral Resource estimate

Chesser expects to be in a position to release a maiden Mineral Resource estimate by the end of 2011.

Figure 3 – 3D view of veins looking northeast, showing areas drilled and the Phase 4 drill program

Kestanelik – Ownership

Chesser completed its 100 percent earn-in on the Kestanelik property in January 2011 by expending US$2.5 million on exploration and by issuing 800,000 shares to the underlying owner of the property. The underlying owner retains a 2.5% Net Smelter Return Royalty (NSR) on production.