History of the Atlanta Gold Mine

The Atlanta project lies within the historic Middle Boise Mining District in an area with a history of exploration, development, and production of gold and silver ore since its discovery in 1863. The project site is located on top of Atlanta Hill, which rises approximately 1,900 feet above the town of Atlanta, Idaho, to a maximum elevation of 7,200 feet above mean sea level (msl).

Gold was discovered in the vicinity of Atlanta in 1863 and the region has since undergone sporadic periods of metal production. The most productive years were during the periods from about 1870 to 1885, 1902 to 1917, and 1932 to 1957. Estimated production from the Atlanta lodes during those time periods was 297,000 ounces of gold and 2.6 million ounces of silver. The Atlanta lode and associated lateral veins occur in a biotite granodiorite, which has been affected to varying degrees by hydrothermal alteration.

Gold and silver mineralization is closely associated with the more intensely silicified zones of the biotite granodiorite. A geologic alteration model has been developed for the deposit to represent this association. Present day exploration activities started with Atlanta Gold in 1985 and have continued through to the present. Several joint ventures were established over these years in order to explore the deposit. These included the Ramrod Gold Corporation and Newmont Mining Ltd. Atlanta Gold Inc. is the current operator of the property through its wholly-owned subsidiary Atlanta Gold Corporation.

Atlanta Gold Corporation holds 100% operating interest in the property, with a firm option to acquire 100% ownership of the property.

 

Mineral Reserves and Resources

Cautionary note to U.S. investors concerning Measured, Indicated and Inferred mineral resources: These terms are required by the CIM's "Standards on Mineral Resources and Reserves, Definitions and Guidelines". U.S. investors are cautioned not to assume that all or any part of the stated mineral resources will be converted into reserves. Please also see additional cautionary notes under Legal Notice.


Permits and Environmental

The Atlanta gold property operates under a variety of permits issued by local, State and Federal agencies. Current activities at Atlanta are in compliance with all required permit conditions, including monitoring and reporting conditions. Certain operating permits may be amended to more closely reflect planned operations.


Exploration

Overview – November 12, 2007

In this day and age, when much of the globe has been well explored for gold and silver, the opportunity to participate in a new and promising regional exploration play at an early stage represents an enticing prospect.  Major mining companies have been struggling to replace reserves and this partially accounts for the rise in gold and silver prices in the past year or so.  We appear to be in a generational bull market for mineral commodities, with prices for gold and silver at levels not seen in decades.  Investment in gold and silver exploration and development is now an attractive value proposition.  This bodes well for Company shareholders, and should result in some exciting investment opportunities in the coming period as the Company’s Atlanta gold property (“Atlanta”) in Elmore County, Idaho moves forward toward production.

2007 Technical Report

To independently verify the impacts of higher gold and silver prices on the open-pit mineable reserves at Atlanta and the corresponding increase in the value of Atlanta, mine engineering and geological consultants were contracted by the Company to prepare a NI 43-101compliant Technical Report (the “2007 Technical Report”) which was completed at the end of the second quarter of 2007.  The 2007 Technical Report provided the following reserve and resource estimates for Atlanta: reserves of 747,000 ounces of open-pit heap-leach recoverable gold with a weighted average grade of 0.05 ounces of gold per ton, resources (measured and indicated) of 1,468,000 ounces of gold at a cut-off grade of 0.02 ounces of gold per ton and potential additional resources of 635,000 ounces of gold in the inferred category.

New open-pit designs were completed for the proposed Monarch and Idaho Pits, using gold and silver prices of US$550 and US$10 per ounce respectively.  The 2007 open-pit designs will yield 747,000 ounces of saleable gold (equivalent) by cyanide heap leaching.  This is an increase of 222,000 ounces over the previous 43-101 Report, which incorporated results of the 2005 Feasibility Study with gold and silver prices of US$350 and US$6 per ounce respectively.

Using open-pit and heap-leach technologies based on proposed open pit designs in the 2007 Technical Report, the projected gross revenue and net profit from Atlanta are US$411 million and US$173 million respectively.  If the recent gold price of $750 is applied, the Atlanta 2007 open-pit designs will generate gross production revenue of approximately US$560 million.

The 2007 open pit designs are significantly larger than those contemplated in the 2005 Feasibility Study.  Table 1 below highlights this important factor, at three gold prices.  (Note:  The “2007 Estimate” data using a gold price of US$750 per ounce is not based on a specific pit design and is only an estimate using the same modeling database which was used in the 2007 Technical Report to illustrate the expected increase in excavated tonnage and gross production revenue which would be realized at this gold price.)

2007 Surface Drilling Program and Proposed Underground Exploration Program
 

With the objective of further enhancing the value of Atlanta, the Company commenced a surface drilling program in the second quarter of 2007 aimed at increasing ore reserves along the Atlanta Shear Zone.  This zone remains open along strike both east and west, and at depth below the current open pit designs. 

While some assays from the 2007 surface drilling are still pending, data received to date indicates an expansion of the Monarch Pit eastward is likely.  Mine design engineering to quantify this resource will be undertaken after drilling ceases for the winter shutdown. A table showing the 2007 surface drilling results to date for Atlanta is available on the Company's website under Properties – Atlanta Gold Table - 2007 Atlanta Surface Drilling Results to Date.

Strong potential exists for discovery of underground mineable zones beneath the Monarch Pit. Since 1985, most drill holes have been aimed at establishing open pit mineable reserves, to a depth of less than 700 feet.  During the first and second quarter of 2007, as indicated in the 2006 Annual Report, the Company has evaluated the potential for deeper ore by compiling and interpreting the existing geologic and drilling data at Atlanta.  The resulting database has been reviewed by number of consultants and potential investors.  Included in this data are 47 deep holes drilled to depths of 701 – 1,891 feet, with assays up to 2.1 ounces of gold per ton.  These deep holes demonstrate that gold mineralization continues at depth and there is the potential for both underground and open-pit mining. For the past six months Atlanta has been developing a new three-dimensional mine modeling database to further define future pits and possible drill targets.   This identified potential drilling targets in a significant mineralized zone (New Target Zone #1) which is approximately 700 feet below the west end of the Monarch Pit.  

An underground bulk sample for metallurgical test work is the next logical step in moving Atlanta forward into the pre-feasibility stage of development of an underground mining operation. The Company has designed an underground portal and all supporting infrastructure to proceed with underground test mining and bulk sampling. All facilities related to an underground exploration program are on private property for which surface and mineral rights are controlled by the Company. If the bulk sample results and the underground pre-feasibility study are positive, the decline could be used to achieve limited production from a test milling facility. By staying on private property, the transition from underground exploration to underground mining could be accomplished smoothly and without permitting delays.

Elsewhere on the Atlanta property (off the Shear Zone), there are numerous target areas which supported historic underground mining operations.  There has only been limited exploration of those targets using modern exploration methods, and the Company believes that further exploration drilling is warranted in 2008.

The overall objective of the Company’s underground and surface exploration is to expand reserves at Atlanta to exceed one million ounces of recoverable gold.  As the above discussion suggests, this objective appears to be achievable.

Environmental Permitting

In addition to obvious economic benefits, Table 1 illustrates that gold price increases from US$350 in 2005 to US$550 in 2006 and to US$750 per ounce in 2007 would cause significant increases in heap leach pad area for ore and in waste rock disposal area. Such an increase in pit dimensions would have significant implications for environmental planning and permitting efforts at Atlanta. 

The surface area implications of an increase in the gold price from US$350 to US$750 per ounce and implementation of either the pit design envisaged by the 2007 Technical Report or a design based on the 2007 Estimate would be as follows:

1. The surface area of the heap-leach pads would increase by 1.7 times in the US$550 (2007 Technical Report) case and would almost double in the US$750 (2007 Estimate) case.  The Atlanta site is in rugged mountainous terrain, devoid of any flatlands.  The availability of potential pad construction sites is very limited, and heap leach pads must be located on U.S. Forest Service land, as the private property owned by Atlanta Gold would be essentially consumed by the proposed open-pits.

2. The quantity of waste rock that must be mined from the larger pits would increase from 46 million in the US$550 (2007 Technical Report) case to 71 million tons in the US$750 (2007 Estimate) case. This exceeds the planned capacity of the Company-controlled Quartz Gulch canyon that had previously been proposed by the Company as the location for waste rock storage.  New 2007 open-pit mine designs have included 2 or 3 new waste dumps on U.S .Forest Service land, to contain the greater tonnage of waste rock.

The Environmental Impact Statement (“EIS”) permitting process in the United States requires that “reasonably foreseeable future impacts” must be evaluated along with the more immediate impacts of the basic project as proposed under price, cost and market conditions prevailing at the time of the EIS.  Whereas larger open pits were previously only a possibility, at US$750 gold, they could now be the base case proposal which the environmental agencies must address.

A gold price of US$750 per ounce also increases the likelihood that a significant portion of the underground resources will become economic at the Atlanta site.  For this reason, the potential impacts of an underground mine will be included in the permitting studies. 

Economic, Environmental and Permitting Improvements

On September 27, 2007, the Company issued a news release describing engineering studies that were underway for a new ore processing plan for the Atlanta ore reserves.  This new plan would combine heap leaching of lower grade ore from open-pit mining, with milling of higher grade ore from underground mining.  The mill would also process high grade ore selectively mined from the open pits, which would result in higher recovery rates than those from the heap-leach operation.

The primary objective of all proposed revisions to development plans for Atlanta is to improve profitability while demonstrating to investors and the local community that gold mining at Atlanta will have a positive impact on the environment. Recovery from milling is expected to be 85-90%, far exceeding the predicted 64% from heap leaching and this will result in a significant increase in production revenue.  Milling costs are estimated to be much less than the increase in production revenue.

More critically however, the parallel heap leach and milling plan offers significant opportunities for permitting of the overall Atlanta project for the following reasons. 

a)      Open pit tonnages (ore and waste) could be reduced if underground mining can economically remove ore from the lower 100-200 feet of what would otherwise be open pits.

b)      A significant percentage of the sulphides that exist in the Atlanta Shear Zone ore could be removed from the heap leach feed, if the milling operation was to include a flotation circuit.

c)      A large decrease in U.S. Forest Service land requirements could be achieved if on-off (load-unload-reload) leach pads were adopted.  With on-off pads, the ore processing sequence is (1) loading ore on a pad, (2) cyanide leaching of the ore on the pad, (3) rinsing of the heaped ore to State-mandated specifications of purity, (4) unloading of the leached / rinsed ore to a designated disposal area, and finally (5) re-loading of the pad with fresh ore to renew the cycle of heap leaching using the same pad area.

d)      Lower sulphide content in the heap leach feed improves the potential for using on-off (load-unload-reload) heap leach pads, minimizing the acreage of pads required.

e)      On-off (load-unload-reload) heap leaching would increase the tons of material available for backfilling into the open pits, reducing the footprint of the project.

f)       On-off (load-unload-reload) heap leaching would allow for greater application of concurrent reclamation, thus reducing visual impacts, surface area required and environmental bonds.

g)      A longer-life project at Atlanta with greater socio-economic benefits would result if underground mining was to supplement the annual gold production expected from heap leaching.

h)      Water requirements for ore processing can be reduced if milling is incorporated.

i)        For the ore reserves processed by milling, no cyanide would be required.  In addition, the removal of high-grade ore from the heap leach feed (and into the mill) would allow lower cyanide concentration and usage on the heaps.

Underground Program at Atlanta

Subject to the availability of financing, the planned exploration program in 2008 will help to identify the presence or absence of additional ore reserves and resources. The objectives of the underground exploration of the Atlanta deposit are to test the down-dip projection of ore shoots in the Atlanta Shear Zone. The drilling program will facilitate development of future mine plans and more comprehensive modeling of hydro-geological conditions and mineralization.

The Company expects to commence construction of a portal in Quartz Gulch, north of the Atlanta Shear in the fourth quarter of 2007. The exploration decline will be 10 feet wide and 13 feet high, declining at 15% along a 1,000-foot length. It will be driven south to cross the Atlanta Shear, with drill stations established along the decline. The initial drilling will probe the Shear zone to evaluate rock mechanics and to precisely locate high-grade zones within the Shear. Where the decline cuts across the Shear Zone, valuable bulk ore samples of varying grades and rock character will be obtained for metallurgical testing of milling processes. Crosscuts within the Shear Zone will allow for the evaluation of underground mining methods.

Construction of the decline will facilitate more effective exploration of underground targets, confirmation of grade and continuity of existing mineral resources using shorter and more closely-spaced drill holes than would have been practical from surface. Evaluation of underground mining feasibility requires actual drifting in ore and collection of geotechnical data. The decline may be suitable for use as part of a future underground mine. The decline is expected to reach the 1,000-foot target within nine months and once exploration drilling commences, it is expected to continue to the end of 2008. This is the first phase of an advanced exploration program with the objective of determining the presence of sufficient high grade gold reserves to justify the establishment of an economic underground gold mine operation.