June 5, 2012
RE: TESORO GOLD PROJECT, PERU
St. Elias Mines Ltd. (the "Company") has received numerous requests for clarification with respect to the Tesoro Gold Project (the "Property") and, in particular, the recent drilling program. The following newsletter summarizes the exploration history to date and provides details with respect to the 2011-2012 drilling program.
Background - Tesoro Gold Project
In 2004, St. Elias acquired a 100% interest in the Tesoro Gold Project with no underlying royalties or agreements in consideration of USD$130,000. At that time, the Property covered approximately 4,000 acres (Note: The size of the Property has since been increased to approximately 17,000 acres.)
Exploration History 2004 - 2010
St. Elias has been systematically exploring the Tesoro Gold Project since 2004. Results of each exploration program are used to guide the next phase of exploration. This is a summary of exploration history only and past news releases (2004 - 2010) should be referred to for complete details.
2004 Phase I Exploration Program
Prior to the Phase I Exploration Program, the Property was primarily unexplored however there were some past underground workings of informales at the C1 Vein. The Phase I Program consisted of control grid emplacement, reconnaissance mapping and prospecting over the entire Property, detailed geological mapping and sampling of all identified veins, trenching and sampling of wider structures that flank the veins and the underground sampling of the C1 Vein. The Phase I Program resulted in the identification of multiple gold-bearing veins traced for a strike length of 6.5km across a structural corridor of 300m (the "Main Structural Corridor"). In addition, four main gold bearing zones within the Main Structural Corridor (Zona Canchete, Zona Central, Zona Sur, Zona Incognito) and one gold bearing zone outside the Main Structural Corridor (Zona Este) were identified.
2005 Phase II Exploration Program
The Phase II Exploration Program was designed to follow up the results of the Phase I Program. The Phase II Program consisted of drifting and sampling of the C1 Vein at Zona Canchete in order to establish the economic feasibility of exploiting the vein using narrow vein mining techniques and to establish the length, continuity and grade of the C1 Vein.
2006 - 2008 Underground Exploration and Development Programs
From 2006 - 2008, St. Elias carried out underground exploration/development programs and bulk sampling programs at the C1 Vein at Zona Canchete and at the A4 Vein at Zona Central. In addition, the Company continued with a program of follow-up exploration to evaluate anomalies defined from previous reconnaissance.
2009-2010 Titan 24 Geophysical Surveys
In order to evaluate the Property at depth, St. Elias retained Quantec Geoscience Limited ("Quantec") to conduct a Titan 24 Geophysical Survey. The Titan 24 Survey was designed to identify deep targets for drilling.
The Titan 24 Geophyscial Survey on the Property was conducted in two stages. During the fall of 2009, Quantec completed Stage 1 of the survey which consisted of nine Titan 24 lines covering approximately 21.6 line kilometres over the Tesoro Project area. Stage 2 of the survey, designed to follow-up the results of the 2009 Stage 1 survey, was completed in spring of 2010 and comprised 18 Titan lines totalling 43.2 line kilometres infilling the area within the lines from the Stage 1 survey.
Results from the Titan 24 Survey outlined geophysical targets (both near surface and to depth) including a large "ovoid" anomaly below Zona Central (1,800m long X 1,700m wide and 1,300m thick) and an anomaly below Zona Sur (800m long X 1,000m wide and 300m thick). Quantec, through detailed analysis of their Titan 24 data, recommended a total of 52 drill holes to test first and second priority targets. An initial drilling program was designed to test the near-surface and deeper-seated geophysical anomalies identified by the Titan 24.
Results of Exploration
Highlights from the results of the 2004 - 2010 exploration programs include:
· the identification of five mineralized zones with more than 50 quartz veins (having a total combined length of 9km);
· the completion of 1,700m of underground development on the C1, C2 and A4 Veins;
· the calculation of a 43-101 inferred mineral resource at the C1 Vein of 4,290 tons grading 1.04 oz/t with a total gold content of 4,460 ounces for the C1 Vein (based on a conservative figure of 100m X 100m);
· the extraction and processing of 1,157 tons of bulk sample material averaging 0.93 oz/t gold from underground exploration and development at several locations on the Tesoro Property including:
- 643 tons averaging 0.77 oz/t gold from the A4 Vein;
- 451 tons averaging 0.99 oz/t gold from the C1 Vein;
- 63 tons averaging 2.04 oz/t gold from the C2 Vein;
· the identification of first and second priority Titan 24 geophysical targets (both near surface and to depth) to be tested with exploratory drilling.
2011-2012 Drilling Program
The 2011-2012 drilling program was designed to test near-surface and deeper-seated geophysical anomalies identified by the Titan 24 Geophysical Surveys. The initial drill program consisted of 43 drill holes totalling 12,740 metres. Results from drill hole TE-1 to TE-35 have been received and announced (refer to news releases dated Jan. 23, 2012 and May 24, 2012.) Results are pending for holes TE-36 to TE-43.
Drilling to date has confirmed that the gold mineralization occurring at Tesoro is not a surface phenomenon. The deepest drill intercepts of economic interest came from drill hole TE-14 (7.08 grams per tonne gold at a depth of 276m) and drill hole TE-29 (6.08 g/t Au at a depth of 275m.) This demonstrates conclusively that gold does in fact go to depth at Tesoro, however, drilling to date has not yet been able to determine the causative sources of the geophysical anomalies including the "ovoid" anomaly beneath Zona Central.
To the Company's knowledge, following are the most commonly-asked questions by shareholders and/or prospective investors with respect to the Tesoro Gold Project:
Did the Company drill into the peripheral of or into the center of the "ovoid" anomaly?
Drilling to date has tested a variety of targets including:
- Titan 24 geophysical targets "surrounding and within" the large "ovoid" anomaly at Zona Central.;
- down-dip and along-strike extensions of known gold-bearing quartz veins; and
- coincident geophysical and geological targets.
The results of drilling to date have not explained the causative sources of the geophysical anomalies reported by Quantec. The Quantec data and interpretations are being independently examined by Canadian geophysicists.
A map (plan view) of drill hole locations has been posted on St. Elias' website [Note: all holes were drilled on angle(s)] The Company is in the process of completing an additional maps to compliment the existing drill hole location map.
Why didn't the Company assay all of the drill core?
In accordance with industry-standards, both mineralized and non-mineralized sections of drill holes were assayed. In total, approximately 2,500 individual sections of drill core have been assayed. The Company has reported in its news releases results where drill intercepts assayed greater than 1.0g/t Au and drill intercepts grading between 0.5 g/t and 1.0 g/ Au.
Has the Company stopped drilling?
The drilling program at Tesoro has been temporarily suspended as the Company has not yet been able to determine the causative sources nor found gold mineralization associated with the large Quantec Titan 24 anomalies to date. The Quantec survey data is continuously being re-evaluated and re-interpreted to take into account all drill data to enable fine tuning of drill targets.
When will the deep drill rig arrive?
The deeper drill rig has been put on hold pending the re-interpretation of all data.
Who is on St. Elias' technical (geological) team and who makes the decisions?
St. Elias' geological expertise consists of:
James Thom, M.Sc., Exploration Project Manager, has been involved in various capacities in the mineral exploration business for over 10 years.
George Sivertz, B.Sc. (Honors), P.Geo. has over 35 years of mineral industry experience to the Company and has extensive experience exploring and developing gold, silver and copper deposits in Latin America, especially in Peru.
Lloyd Brewer, Exploration Manager, has more than 30 years of international experience in the mineral exploration business, and has worked to build St. Elias since the Company`s inception in 1995.
Paul D. Gray, B.Sc. (Honors), P.Geo, obtained his degree from Dalhousie University in Nova Scotia, Canada, and is a member in good standing with the Association of Professional Engineers and Geoscientists of British Columbia. Mr. Gray has worked extensively as a geologist in the Mineral Exploration Industry in Canada, the United States, Asia, Central and South America for more than 13 years concentrating on base, precious metals and uranium exploration.
The Company also retains outside additional geological expertise as needed.
Geological decisions are not made by any one person. St. Elias utilizes its entire geological team, including independent geologist, Paul D. Gray, to review results and make plans for each exploration step.
What is the status of the trenching?
An announcement regarding the trenching program will be made upon receipt of all required information.
Tesoro Gold Project
The Tesoro Gold Project is 100% owned by the Company with no underlying royalties. The property covers approximately 6,974 hectares (17,436 acres) and lies within the 300 km by 30 km Nazca-Ocona gold province, which trends northwest parallel to the Pacific coastline. The Nazca-Ocona gold belt has a long mining history dating from pre-Incan time. Gold is associated with disseminated sulphides in quartz veins and vein-faults within the Coast intrusive complex. The Nazca-Ocona belt is noted for the strike continuity of many of its quartz vein systems and associated faults. While the veins are often narrow (less than one metre), their gold grades can be high, especially in localized “shoots” that occur where the vein geometries change.
Thank you.
ST. ELIAS MINES LTD.
Lori McClenahan
President