Silver Grail Resources

Clone

High-grade gold-bearing shear zones were discovered by Teuton-Silver Grail prospectors in 1995 at the head of Sutton Glacier, 20 kilometres southeast of Stewart, BC. The discovery triggered a staking rush in the immediate area and ultimately led to a cash infusion of $2.6 million into joint owners Teuton and Silver Grail by Prime Resources-Homestake Canada, at that time the companies which controlled the rich Eskay Creek mine.

Drilling programs carried out from 1995-97 defined several high-grade gold shoots within the Main Zone, situated at the southeastern end of a 3 km long package of volcanic and sedimentary rocks (see illustration below, under the “History and Property Status” section).

Due to low gold prices, little work was done on the Clone between 1999 and 2003. However, in 2003, Lateegra Resources Corp. optioned the property and carried out further drilling, primarily in the Main Zone, confirming and expanding the results of the 1995-7 work.

After Lateegra relinquished its option, in November, 2005 on the strength of rising gold prices the Clone property was again optioned out, this time to Canasia Industries Corp. ("CAJ.H"). Canasia carried out an Aeroquest helicopter-borne survey which identified several new targets on the property. Subsequently Canasia drilled seven holes into the Main Zone, all intersecting gold values consistent with previous drilling.

Location

The Clone property is situated 20 kilometres southeast of Stewart, British Columbia. The Red Mountain gold project of Seabridge Gold (now in pre-feasibility) is located about 16 km to the north.

History and Property Status

The property was staked by Teuton-Silver Grail in 1994, as part of a regional effort aimed at exploration of virgin ground exposed by rapidly melting snow and icefields.

After discovery of high-grade gold-bearing shears on the Clone by Teuton-Silver Grail prospectors in 1995, several major mining companies attempted to option the property. Teuton-Silver Grail finally settled on Homestake Mining Canada and Prime Resources, at that time co-owners of the Eskay Creek mine. These two companies collectively agreed to take equity positions in Teuton-Silver Grail, raising $1.3 million for each of the Teuton and Silver Grail treasuries. The private placements were done at a significant premium to market at the time: $2.40 per share for Teuton, and $3.79 per share for Silver Grail.

Approximately $3,000,000 combined was spent on the Clone property by Teuton and Silver Grail between 1995 and 1998. Due to low gold prices, little work was done on the property between 1999 and 2002.

In June of 2003, the Clone property was optioned to Lateegra Resources Inc. Several holes were drilled by Lateegra in 2003, the best of which returned a 27.8 ft. interval grading 2.357 oz/ton gold (Hole CL-03-3). Lateegra did not carry out any work on the property in 2004 and the property was returned to Teuton-Silver Grail in early 2005.

In November, 2005, Canasia Industries Corporation ("CAJ.H") entered into an option to acquire a 50% interest in the Clone property under terms whereby it agreed to make staged cash payments totaling $120,000, issue 200,000 shares, and undertake exploration expenditures of $1,800,000 over the five year term of the option. Option cash and share payments are to be divided equally between Teuton and Silver Grail, joint owners of the Clone. Teuton-Silver Grail will act as operator during the term of the option.

Mineralized Showings

Main Zone

High-grade gold and gold-cobalt mineralization was discovered by Teuton-Silver Grail prospectors in 1995 within a series of shears exposed over a strike length of 500m and a vertical range of 130m. Trenching of the shears returned values ranging up to 3.59 oz/ton gold over 5.5m (18 feet). Significant cobalt values were found to accompany gold in the southeast portion of the zone.

TABLE A TRENCH RESULTS
Trench #	Structure	Width (feet)	Gold (oz/ton)
4	H-1	18.0	3.59
7	S-1	9.5	1.65
10	S-2B	14.8	2.08
11	H-1	8.9	0.71
12	H-1	22.0	0.56
14	H-1	24.0	1.50
15	H-1	24.6	0.76
16	H-2	4.9	7.18
25	S-2A	9.8	1.03
28	S-2A	6.6	1.15
29	S-2A	8.7	0.96
64	S	11.0	0.52
78	H-1	26.3	0.90
81	H-1/S-2A	29.5	0.24

Drilling in 1995-96 was confined to the 500m long Main Zone at the south end of the mineralized system, overlapping the original discovery area. The most promising structure outlined by the drilling was the "H-1" which yielded many holes carrying high-grade gold mineralization over significant widths. The best of these was Hole #110 which contained a 32.9 foot intercept grading 1.28 oz/ton gold. Some outstanding intersections were also reported from the parallel S-2A structure, known from trenching to host both gold and cobalt mineralization. Hole #18 into the S-2A contained a 19.7 foot intercept grading 1.53 oz/ton gold and 0.33% cobalt.

TABLE B
Selected Intercepts from the 1995-1996 Drilling on the Clone Property
Drill Hole	Interval (feet)	Gold (oz/ton)
4	16.4	0.61
8	9.8	1.67
10	26.2	1.85
11	30.0	0.64
11	13.1	0.89
18	19.7	1.53
25	12.0	0.64
68	8.9	1.29
72	27.5	0.38
74	12.9	0.63
84	11.5	0.90
91	50.9	0.22
110	32.9	1.28
124	23.0	0.43

An abbreviated 1997 program involved further diamond drilling, trenching and Induced Polarization geophysical surveys. Gold and or gold-cobalt mineralization consistent with previous drilling was encountered in many of the 15 holes drilled into the Main Zone area. A narrow gold-bearing intersection was obtained in one of the two holes drilled into the Bidwhacker (formerly known as the "Anderson") zone. The IP surveys indicated 13 anomalous areas but budget constraints did not allow drill testing.

A structural study of the Main zone area was carried out in 1998. This work indicated that the previous drilling had proceeded under an incorrect understanding of the structural controls for the gold-bearing shoots within the Main zone shears. This work was done by Ross Sherlock, Ph.D. of SRK Consultants who also prepared a geological and resource model for the Clone Project. This latter work included a resource estimate for the Main zone. Although several different methodologies were used to calculate tonnage/grade estimates (resulting in a wide range of results depending upon selection of most restrictive to least restrictive parameters), none of the estimates established sufficient gold ounces for an economic resource.

In 2003, while the property was under option to Lateegra Resources, 4 out of 5 holes drilled into the Main zone intersected gold values. Results are summarized below:

TABLE C
Selected Intercepts from the 2003 Drilling on the Clone Property
Drill Hole	Interval (feet)	Gold (oz/ton)
CLO3-1	5.0	0.769
CLO3-2	27.8	2.357
CLO3-3	5.0	0.159
CLO3-4	5.0	3.023

Three short holes were also drilled on another target, the C-2 area, located 1 mile to the west and consisting of a number of narrow shears striking perpendicular to the main trend. None of these holes intersected significant mineralization.

In 2006, Canasia drilled 7 holes into the Main Zone. Significantly, all 7 holes of the 3,240 foot, 2006 drill program cut gold-bearing intercepts, varying in length from 3 to 35.5 feet, as follows:

TABLE D
Hole #	From (feet)	To (feet)	Interval (feet)	Gold (oz/ton)
CL06-1	392.5	409.0	16.5	0.125
...including	402.0	405.0	3.0	0.303
CL06-2	233.0	236.0	3.0	0.153
CL06-3	32.0	52.0	20.0	0.178
...including	42.0	48.5	6.5	0.390
CL06-5	40.5	76.0	35.5	0.178
...including	50.0	73.0	23.0	0.232
and	107.0	110.5	3.5	0.579
CL06-6	113.0	116.0	3.0	0.629
...including	157.0	162.0	5.0	0.448
CL06-7	113.0	116.0	3.0	0.332
...including	151.0	156.5	5.5	0.824

The 2006 drill program was designed to shed further light on the attitude of the gold-bearing “H” (hematite) and “S” (sulfide) structures/horizons identified within the 1,600 foot long Main Zone by trenching and drilling in 1996-8 and 2003.

Three holes were drilled from the first collar to test the principal H-1 structure. The first two of these holes did not intersect the H-1 zone where expected, possibly due to faulting. However, after adjusting the azimuth, H-1 type gold mineralization was successfully intercepted at shallow depth in the third hole. Deeper, gold-bearing intersections obtained in the first two holes are interpreted to be from parallel shears.

Holes CL06-4 & 5, collared above Trench #10, successfully tested the S-1 horizon. The final two holes drilled from the third collar tested the H-1 zone at moderate depth, each encountering two separate gold-bearing zones. True widths of the intervals are not known at this time.

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