Geology

Regional Introduction
The Central Rand Basin of the greater Witwatersrand basin is situated immediately to the south of Johannesburg and has been host to one of the most extensive and important gold deposits in the world.

The Witwatersrand Basin can be best described as an enormous inland sea with many rivers and braided streams feeding it from its vast margins. Gold deposits in the hinterland are thought to have been eroded by these feeder river systems and the gold essentially dumped into the Witwatersrand sea in the form of pebble bed conglomerates.

The initial conglomerate discovery by George Walker and George Harrison in 1886  on the farm Langlaagte became known as the Main Reef Leader and was demonstrated to be remarkably consistent in terms of its grade, as it was traced east and west along strike.  The Main Reef Leader is one of the most important orebodies of the Central Rand Goldfield, resulting in the formation and growth of Johannesburg.  The reef has been mined continuously on strike for approximately 32 km in an east/west direction and down-dip, to the south, for about 6 km from its outcrop position, to depths of greater than 3 km.

Between 1897 and 1984, some 9 000 tonnes of gold were extracted from the Central Rand Basin.  By the late 1960’s and early 1970’s, most of the mining in the Central Rand Goldfield had ceased as a result of decreasing gold prices and escalating working costs.   At the time of closure of these Central Rand Mines (1960’s – 70’s), recovery grades were in excess of 8 g/t.

Local Geology

The CRG tenements are underlain by rocks of the Central Rand Group within the upper part of the Witwatersrand Supergroup (Wits).  The Central Rand Group comprises a 7 km thick sequence of quartz-rich sediments within which there are three principal packages of quartz pebble reefs namely the Main, Bird and Kimberley packages.  Within these reef packages heavy minerals, including gold and pyrite, have been concentrated to a greater or lesser extent.

The Main Conglomerate Package

The Main Reef package lies at or near the base of the Central Rand Group and is by far the most important of the three reef packages encountered.  It contains several distinct sheet-like reefs dipping about 40° south.  The principal gold bearing reefs within this package, named from the bottom upwards, are North Reef, Main Reef, Main Reef Leader, South Reef and South-South Reef.  The Main Reef Leader was by far the most important gold bearing reef and was comprehensively mined out (except for a few small reef blocks left unmined) over all the old mine leases down to a vertical depth of about 2,800 m below surface.

The North Reef conglomerate is generally poorly mineralised and is separated from the Main Conglomerate Formation by a quartzite parting that thins towards the east of the basin.  Although limited exploitation of the North Reef occurred at Rose Deep Mine, gold grades associated with the North Reef are generally too low and erratic for sustained economic exploitation.

The Main Reef conglomerate is the most robustly developed conglomerate within the Main Conglomerate Package. It is generally of lower grade than the Main Reef Leader or South Reef,  but does carry appreciable gold grades within well defined pay channels.

The reef generally consists of several conglomerate bands that are separated by quartzite partings. Pebbles of up to 5 cm in size are common and are usually poorly sorted and generally set in a pyritic matrix.

The Main Reef is the primary target for extraction by CRG. As it was generally lower grade relative to the overlying Main Reef Leader, much of the reef was left unmined despite grades averaging between 3 g/t and 6 g/t over widths averaging at around 1.3m. In areas, the Main Reef becomes very thin (often less than 20cm in width). However, it has been observed that gold grades increase substantially in these thin reef areas, thus preserving the total gold content.

Gold grades are distributed in sinuous channels in a southerly and south easterly direction, thought to be controlled by the direction of the original river systems depositing into the Witwatersrand sea.

The parting between the Main Reef and the Main Reef leader, known colloquially at CRG as the Middling, consists of a 50cm to 3m thick quartzite layer often carrying significant quantities of gold. The middling can be divided into two separate units, namely a generally barren siliceous quartzite and a gold carrying pebbly quartzite. Pebble lags carrying moderate quantities of gold are also observed in the middling from time to time. The fact that the middling does carry gold has important implications regarding dilution and total extraction for the CRG mining process.

Although the Main Reef Leader is generally thinner than the Main Reef, it contains, on average, larger (commonly up to 7.5 cm) pebbles, is better sorted, and contains higher gold grades (averaging around 12 g/t).

The Main Reef Leader conglomerate is not developed west of the centre of DRD mine. Between DRD and CMR mines, the Main Reef Leader displays a patchy, lens-like character.  It has been observed that in some areas of CMR mine, this reef thins to a contact plane on which scattered pebbles are present with substantial amounts of gold. Where the Main Reef Leader thickens, especially in the area centred in the vicinity of Robinson Deep Mine, it typically consists of two or more (up to seven) individual conglomerate bands.

Historically the South Reef has been the second-most economically important reef in the Central Rand Goldfield, after the Main Reef Leader.  It can be traced along the entire strike length of the Central Rand and continues into the East and West Rand Basins. The high grade South Reef was mined quite extensively across the project area although mining was terminated at a much shallower depth than was the case for the Main Reef Leader.  Records suggest that in the case of the South Reef, gold grades within the reef diminished progressively down dip.

Other Conglomerate Reefs

Mining of the White Reef, a particular reef within the Bird Reef Sequence, is known to have occurred only on a very limited scale, with mining restricted to the west of the Central Rand Goldfield.  This was also the case for the Kimberley Reef Sequence where, amongst its numerous pebble reefs, only one, the K9A Reef, was mined, albeit to a limited extent. The remaining Kimberley Reefs, such as the K7 Reef, are known to be auriferous and may hold potential for surface slot operations in the future.

A number of other reefs occur within the Central Rand Project, such as the Johnstone and Livingstone reefs. These reefs were not exploited during previous mining operations due to poor development and low grades.

Exploration

In 2006, CRG commenced a shallow drilling exploration programme to identify the most important and immediately available shallow gold mining opportunities within the Central Rand Project. A large component of this programme was aimed at evaluating areas between known reefs in an attempt to identify zones of previously undiscovered gold mineralisation by means of Reverse Circulation (RC) drilling.

During early 2007, a significant database of regularised underground assay information representing sampling on the Main Reef and the Main Reef Leader was discovered and after rigorous verification by independent experts, was used to generate JORC and SAMREC compliant Mineral Resource estimates for these two reefs.

The exploration diamond drilling focus was thereafter changed to evaluate the reefs where underground sampling data was not readily available or where confidence in continuity and mineralisation was not sufficient to rank in a SAMREC or JORC category that could be converted ultimately to Mineral Reserves. This drilling resulted in a modest increase in Indicated Resources on the Kimberley and White Reefs. RC drilling was suspended in late 2008, having identified several priority surface slot mining targets for follow-up mechanical trenching and sampling. This process was successful as it allowed for the identification and evaluation of a significant amount of surface material to potentially supplement underground ore during the commissioning stages of the operation. No continuous mineralization was discovered outside of known reef areas.

In mid 2009, diamond drilling focus shifted from more regional exploration and resource drilling of secondary reef targets to focused systematic diamond drilling ahead of the developing decline and in and around the potential footprint of the second decline. The focus of these holes was as much to evaluate ground conditions and mining block availability ahead of mining as it was to obtain grade information.

These drilling results are not intended to supplement nor be included in the current Resource estimates of Main Reef or Main Reef Leader.

Approximately 32,000m of diamond drilling has been undertaken to date across the CMR, Crown Mines, Langlaagte, Village and City Deep areas comprising some 258 holes. Similarly, some 32,000m of RC drilling has been conducted on CMR, Crown and Langlaagte areas  totalling 552 holes.

During the resource evaluation drilling phases, independent quality control audits were regularly undertaken on the various analytical laboratories used, as well as on the drilling database itself. Quality control and assurance procedures for the drilling in the decline area are currently being undertaken internally.

Resources

Since 2004, CRG has commissioned a number of Johannesburg based geological and/or mining consulting firms to compile estimates of the gold mineral resources remaining within its Central Rand project area.  The approach taken in each study differed, with each focussing on a particular aspect of the mineralisation.  The resource estimates compiled by Snowden Mining Industry Consultants rely on two particular sets of studies, namely those of the well known Viljoen brothers and that of noted geostatistician Dr Lemmer.

Global Mineral Resource estimates were compiled by Viljoen and Viljoen for the Main Reef, Main Reef Leader, Pyritic Quartzite, South Reef, Bird Reef and Kimberley Reef in the Central Rand project, but excluding the Simmer and Jack (old order) mining lease, and documented in a series of reports issued in 2004 and 2006.  A more selective geostatistically-based independent Mineral Resource estimate was presented by Dr Lemmer for the Main Reef on Consolidated Main Reef, Crown Mines, City Deep and Robinson Deep and for the Main Reef Leader on Consolidated Main Reef, Crown Mines, City Deep, Robinson Deep (including a portion of Village Main Reef) and Simmer and Jack old order mining leases.

Snowden has accepted the Indicated and Inferred Main Reef and Main Reef Leader Resource and Resource classification for the Bird and Kimberley Reefs as estimated by Lemmer and also accept the classification of the remaining reefs estimated by Viljoen and Viljoen as presented below.

The total Indicated Resource combining the estimates of Lemmer and Viljoen is 87.4 Mt at 8.3 g/t and the total Inferred Resource is 58.5 Mt at 7.1 g/t.

Total Classified Mineral Resource Estimate for CRG’s project area

CMR Main Reef Probable Ore Reserve estimate March 2010*

* Estimate rounded to significant figures