Mr. William Wright reports

GREENFLAG SIGNS AGREEMENT TO ACQUIRE KOUROUSSA GOLD MINING PROJECT, GUINEA, WEST AFRICA

Greenflag Ventures Inc. has signed an agreement to acquire a 51-per-cent interest in the Kouroussa gold mining project in eastern Guinea, West Africa.

Kouroussa is reported to host an indicated resource of approximately 680,000 ounces of gold (National Instrument 43-101-compliant; source: 2011 SRK Consulting preliminary economic assessment, also called the scoping study). The property comprises exploration licences that cover 933 square kilometres, with two main exploitation licences that cover a total area of 16 square kilometres. All resources and areas of more significant exploration potential defined to date lie within the Kouroussa exploration permits. The neighbouring town of Kouroussa is easily accessed from Bamako, capital of Mali, within five hours via a well-paved road, with well-maintained dirt roads accessing the Kouroussa claim blocks.

Kouroussa's basement geology incorporates the Siguiri basin, which is a palaeo-Proterozoic sedimentary sequence. The Siguiri basin represents part of the Birmian volcano-sedimentary series that dominates the basement geology of the West African shield. The Birmian series of West Africa is host to some of the largest gold deposits in the world, including Sadiola (13 million ounces of gold), Yatela (4.5 million ounces of gold), Morila (seven million ounces of gold) and Syama (seven million ounces of gold) in Mali; Obuasi (10.5 million ounces of gold), Bogoso (2.5 million ounces of gold), Prestea (10 million ounces of gold), Ahafo (16 million ounces of gold) and Akyem (eight million ounces of gold) in Ghana; and Siguiri in Guinea (five million ounces of gold), the latter also lying within the Siguiri basin.

Based on the work carried out for the Kouroussa scoping study, SRK Consulting has made the following conclusions and recommendations.

Economic analysis:

• The project base case generates cash flows sufficient to cover operating and capital expenditure;
• The resulting net present value (NPV) is positive and supports progression to the next level of technical study, which is a preliminary feasibility study (PFS);
• The metallurgical testwork suggests several viable process routes available with gravity and CIL generating the highest NPV at this stage of evaluation;
• The option of a heap leach process is being considered and is warranted in the view of SRK;
• With the 8-per-cent discount rate on the base case process option, the open-pit studies suggest that the gold production cost is around $865 (U.S.) per ounce.

Mineral processing:

• The Kouroussa material is shown to be relatively easy to process with high recoveries achievable by gravity and cyanidation;
• Of particularly note is that the gold is relatively coarse, and very high recoveries of gold (greater than 60 per cent) can be achieved by gravity concentration into a high-grade concentrate;
• Heap leach processing is still under evaluation, and may be appropriate providing that recovery issues to do with clay minerals and preg robbing minerals are overcome. Samples are currently undergoing column tests by SGS in Cornwall in the United Kingdom. A heap leach approach could reduce plant capital down to $15-million (U.S.) to $20-million (U.S.) and process operating costs could be as low as $5 (U.S.) to $10 (U.S.) per tonne.

Mineral resources:

• A full review of the geology and mineralization should be conducted at the Kouroussa project, including review of the methods and parameters used in the modelling of the mineralization wire frames;
• A closely spaced drilling program should be completed in an area of well-defined mineralization, the results of which will provide increased information which can be used for more in-depth geostatistical analysis;
• Future infill drilling programs should target the shallower portions of the deposit, as current block modelling results indicate the bulk of the resource is located in the shallower portions of the project area.

To earn a 51-per-cent interest in Kouroussa, Greenflag must provide initial project financing and issue company shares as follows:

1. Pay $250,000 toward the operation of the mining concession over the initial six-month period based on a mutually agreeable project budget. At least $50,000 must be paid within 90 days of closing or the seller shall have the right to cancel the agreement;
2. Issue a minimum of one million common shares of company within six months of initiation of the project. Additional shares shall be distributed on the first anniversary (up to four million shares) and second anniversary (up to five million shares) based on the project's success. A successful project will be one that upon execution of the initial project budget, the project returns adequate valuations in the concession to substantiate the initial reserve report. If the concession proves to lack adequate reserves to substantiate the valuation, the amount of stock to be issued may be renegotiated by the parties;
3. The project partnership may be withdrawn by either party as follows: a) the purchaser may withdraw and cancel the project if adequate reserves are not proven out; in such case, no further compensation beyond what has already been paid is owed, or b) the seller will withdraw and cancel the project if the purchaser fails to pay the initial investment amount or proposes to pay an amount of stock less that the scheduled amount above.