GEOLOGY & MINING RESEARCH INSTITUTE SYSTEMIC TARGET ORIENTED PROGNOSIS TECHNOLOGY November 2012

CONTENT 1. FLASHBACK 2. HISTORY – USSR 3. HISTORY – RUSSIA 4. EXAMPLE – METHODOLOGY IN PRACTICE 5. CONTACTS

FLASHBACK SYSTEMIC TARGET ORIENTED PROGNOSIS TECHNOLOGY A. Given presentation provides insight information on application of Systemic Target Oriented Prognosis technology in practice. Our services include processing of gravity and magnetic data, seismic data and satellite images B. Number of our projects presented in the list have taken place during Union of Soviet Socialist Republic’s period from 1973 to 1994 and rest of them after the break up and transition to market economy from 1994 to present. C. Our objective is to search, identify and locate mineral deposits of commercial value to interested industry participants. Please note that initiation of drilling or production process is a decision that depends on our clients. D. We would like to emphasize that due to strict confidentiality agreements we are in position to disclose only some of our projects of practical application of technology in the past. E. Technology is based on analysis of aggregate indicators and methods are applied stage by stage and selectively for oil, gas, diamonds and ore minerals in order to achieve operative outcome for projects at any stage of prospecting process.

Systemic Target Oriented Prognosis Technology for evaluation of territories for complex of mineral deposits is principally based on Geophysical Fields analysis and contains following methods: A. Evaluation method based on the nature of relationships between magnetic and gravitational fields. Presence, strength and direction of relationship between gravity and magnetic fields is measured by fractal coefficient. This relationship has been derived, tested, and proved by Professor Pakhomov during his doctoral thesis in 1989, Moscow, Union of Soviet Socialist Republics. B. Evaluation method based on the principle of systemic approach. This “telescoping” principle advocates procedure of going from general to private. It is the mechanism of the Systemic Target-Oriented Prognosis Technology and is applied to identify dynamic systems in any given territory. Also given principle is necessary for controlling factors such as time, effectiveness and expenditures associated with prospecting process. C. Evaluation method based on parameters of fractality of geological environment. In short, given method is centered around application of fractal mathematics for examination of complexity of geological environment. For instance it has been proven that for any given geological block, the more energy passes through the block, the more complex is the block. Where excess complexity is one of indicators of territory potential. D. Evaluation method based on characteristics analysis of substance differentiation. This method postulates that substance shall be more differentiated, if there was more energy for each unit of volume. Characteristics of substance differentiation are statistical parameters such as asymmetry, dispersion, entropy and excess. All calculated using gravity and magnetic data. FLASHBACK

HISTORY - USSR Application of Systemic Target Oriented Prognosis Technology Projects completed 1973 to 1994

* Gravitational & Magnetic Application of Systemic Target Oriented Prognosis Technology Projects completed 2003 to 2012 HISTORY - RUSSIA

1. Process of evaluation of any given territory, onshore and offshore, begins with gathering and processing airborne gravity and magnetic data of 1:1,000,000 scale. 2. Next is to calculate FRACTAL COEFFICIENT of relationship between gravity and magnetic data. Fractal coefficient measures direction and strength of relationship between gravity and magnetic fields. It was proven by professor Pakhomov that for all types of rock formations the value of fractal coefficient is positive, meaning relationship between gravity and magnetic fields is positive. According to further findings, to put it simply, the value of fractal coefficient is negative for potential oil bearing bodies. For ore bearing bodies, ranging from industrial to precious metals, analysis of the gradient of fractal coefficient indicates presence of potential ore bearing bodies. For diamond bearing tubes the value of fractal coefficient should be positive and saddlebacks represent areas of indication of potential. 3. At the same time using gravity & magnetic data of 1:1,000,000 scale, we calculate statistical parameters, such as differentiation, concentration, excess, asymmetry, entropy and line-brokenness. We calculate these parameters first for gravity and magnetic data separately, then for both data sets together. After calculating above mentioned statistical parameters, we apply HOUSDORFF METRIC to define what is “norm” and proceed to inspect for presence of “anomalies” of these parameters. 4. Provided that stage 1,2,3 leads to emergence of “potential” areas, next stage is to repeat stage 1,2,3 by processing gravity & magnetic data of larger scale 1:200,000 then 1:50,000 on the surface of “potential” and analyse the effect further. 5. If “potential” areas continue emerging through repetition of larger scale gravity & magnetic data processing, then, depending on the potential type of mineral deposit, we collect seismic data or conduct electric prospecting on relatively small, localized area to confirm results. Applied in complex, effectiveness of given technology is above EXAMPLE METHODOLOGY IN PRACTICE

Airborne Magnetic Map 1:1,000,000 scaleAirborne Gravity Map 1:1,000,000 scale 1. As mentioned earlier, process of evaluation of any given territory begins with collecting airborne gravity and magnetic data. 2. Next step is to calculate coefficient of relationship between gravity and magnetic fields, namely Fractal coefficient, as shown on the next slide. 3. Gravity and magnetic values are in continuous form and in order to calculate fractal coefficient we have developed and adopted proprietary formula that measures magnitude and direction of relationship of gravity and magnetic fields providing rational results. EXAMPLE

1. Map of isolines of Fractal coefficient of relationship between gravitational and magnetic field. 2. Positive values of Fractal coefficient are represented on the map in brown. 3. Areas that most likely to contain diamond tubes are saddlebacks represented by letter A on the map above. 4. Map of potential rough diamond content, areas within red lines on the map above, which is an extract of positive values of fractal coefficient map on the left. 5. Further analysis of greater scale gravity and magnetic data are needed to ascertain indication and provide meaningful conclusions. Fractal coefficient map1:1,000,000 scaleFractal coefficient map 1:1,000,000 scale, +ve values EXAMPLE

1. Optimally, area A on map above should be selected for further prospecting process and gravity and magnetic data of 1:200,000 scale should be analyzed. 2. In order to see if results of previous gravity & magnetic analysis of 1:1,000,000 scale are coincide and confirmed by inner analysis of localized area at 1:200,000 scale. Optimally we would like the effect to continue as we zoom in or go through telescoping process. EXAMPLE 3. Due to availability of gravity and magnetic fields data of 1:200,000 scale for the whole territory, we conducted processing of given data for all five distinguished areas, where results are presented on next slide… Gravity Map 1:200,000 Magnetic Map 1:200,000

1. Map of isolines of Fractal coefficient of relationship between gravity and magnetic fields of 1:200,000 scale. 2. Map of potential diamond bearingness of given area of 1:200,000 scale, represented by areas within yellow boxes above. Detailed analysis on next slide… EXAMPLE

1. Map of potential diamond bearingness of given area derived as a result of 1:1,000,000 and 1:200,000 scale gravity and magnetic fields analysis. 2. Area within red lines derived from 1:1,000,000 scale analysis and smaller areas within green lines derived from 1:200,000 scale gravity and magnetic fields analysis. 3. Areas colored in yellow are where analysis of 1:1,00,000 and 1:200,000 scale gravity and magnetic data analysis coincide, confirming initial indication of potential diamondiferous bodies. 4. Red dots within yellow box of area A represent known and discovered diamond tubes located in Russian Federation. 5. We continue further by zooming in to area A with gravity and magnetic fields analysis, as presented on the next slide… EXAMPLE

Gravity Map 1:50,000 Magnetic Map 1:50,000 Fractal coefficient Map 1:50, As mentioned before, we shall localize further by applying telescoping process and continue by analyzing gravity and magnetic data of various scales, namely 1,000,000, then 200,000 and at last 50, We focused on area A (previous slide) due to the fact that 50,000 scale gravity & magnetic data was available. Optimally, we would conduct 50,000 scale analysis on all yellow painted areas of previous slide since they all represent potential diamondiferous bodies. EXAMPLE

1. Map of potential diamond bearingness of area A of 1:50,000 scale gravity & magnetic fields analysis. 2. As mentioned before, saddlebacks are areas we are interested in. And emergence of existing diamond mines in form of red dots provides extra support for systemic target oriented prognosis technology. 3. Black dot on area B on the map is potential diamondiferous body that emerged through 1,000,000 scale, 200,000 scale and 50,000 scale analysis of gravity & magnetic data analysis. 4. Therefore given diamond tube was successfully opened in 1989 which contained rough diamonds. 5. Today it is Grib diamond mine, located in Zimnebrejni diamondiferous area, Archangelsk region, Russia. EXAMPLE