Overview

Sheltered Oak Resources Corp. owns a 100% interest in the Kerrs gold property in Kerrs Township in Northern Ontario, Canada. Comprised of 27 claims and 12 mining leasehold patents covering a total surface of 4,176 hectares, the Kerrs property is situated in the Abitibi area of the Canadian Shield East of Timmins/Matheson Ontario. This area is the largest Archean-aged greenstone belt in the world in terms of gold and base metal production. The Belt has produced in excess of 180 million ounces of gold and 450 million tonnes of copper-zinc ore over the last 100 years.

A total of 32,088 m of diamond drilling has been completed on the property to date.

The phase 5 drilling program was completed in 2010 for a total of 5,994 m and OAK management is proposing an aggressive 11,500 m drilling program on the Kerrs quartz carbonate breccia deposit for 2011.

Highlights

• The inferred resource defined to date comprises 7,041,460 tonnes at an average grade of 1.71 g/t Au and contains 386,467 troy oz of Au. These resources are reported at a base case cut-off grade of 0.5 g/t Au
  
• The Phase 5 drilling campaign has confirmed that the gold enrichment occurs in sheeted, pyritic quartz vein breccias zones conforming to a trough structure developed along the fold axis over an 800 metre strike length and have lateral down-dip extensions up to 350 metres. Also, step-out drilling confirms that the Kerrs Gold Deposit trend extends 400 m to the southwest and airborne geophysics indicates a further extension of 400 m along the trough structure towards the adjacent property, (on which the Company has an option to earn a 60% interest in from Goldcorp Canada Ltd. and Goldcorp Inc. (the “Adjacent Property”). As well, there is a strike length of 1,500 m of favorable volcanic stratigraphy indicated by historic drilling on the Adjacent Property
• An 11,500 m exploraion drilling program is proposed for the Kerrs Property, including the Adjacent Property, in the summer of 2011, using the funds from the Company’s recent financing, with three main objectives:
  a) 8,300 m of in-fill and extensional drilling on the Kerrs Gold Deposit
  b) 1,200 m of reconnaissance drilling on parallel structure supported by mobile metal ion (MMI) geochemical anomalies
  c) 2,000 m of extensional drilling on the Kerrs Gold Deposit trend projected on to the Adjacent Property

Mineral Resource Estimate

Kirkham Geosystems Ltd. (“KGL”) have completed a NI 43-101 mineral resource estimate on the Kerrs Gold Deposit based on the phase 1 to phase 5 drilling programs completed from 2005 to 2010. Using a cut-off grade of 0.5 g/t Au, KGL estimates that the inferred mineral resources of the Kerrs Gold Deposit total 7,041,460 tonnes at an average grade of 1.71 g/t Au containing 386,467 troy oz.’s of Au.

The Kerrs Gold Deposit resource estimate is supported by 34 drill holes arrayed on a grid layout on eight drill fence sections with zone correlations involving 37 composite zones. A 3D cross-sectional model was generated from the cross-sections with interpreted mineral outlines which served as the basis to perform geometric polygonal and geostatistical calculations. The resource estimation process employed three methods to estimate the gold resources of the Kerrs quartz, green carbonate breccia zone (“KBX zone”) contained within the Kerrs Gold Deposit. In addition, the polygonal cross-sectional method was utilized which served as a comparison and to validate the geostatistical methods.

The 3D geological solid model defined by 41 holes including three historical holes, illustrates that the Kerrs Gold Deposit is stratabound occurring at the contact of a thick mafic pillow flow sequence overlying an ultramafic, magnetic-rich flow sequence. Also, quartz feldspar porphyry sills are spatially located above and below the breccia zones. This stratigraphy is draped on a shallow dipping synclinal fold structure varying from 350 m to 425 m below surface. The drill hole density has been systematic in all five drilling campaigns maintaining a 100 m drill fence spacing arrayed along nine sections with hole spacing ranging from 50 to 100 m between pierce points along the cross-section plane. Seven holes were oriented orthogonal to the northeasterly strike direction of the deposit trend in order to define the boundaries of the mineral resource below Bell Lake.

Gold mineralization occurs as pyritized quartz vein breccias enveloped by quartz fuchsite carbonate vein breccias and alteration envelopes varying to up to 40 m in thickness. Gold tenure is proportional to the pyrite content ranging up to 10% which is commonly disseminated and crystal aggregates in the sheeted, quartz vein replacement breccias. These breccias, averaging 31% quartz, exhibit reasonable correlation conforming to volcano-stratigraphic contacts as well as moderate to good continuity in grade correlations at the lower and upper boundaries of the vein breccia and alteration envelope assemblages. Anomalous concentrations of trace elements such as molybdenum, lead and barium are found within the replacement breccias and to a lesser extent in the green carbonate breccias which envelope the quartz-pyritic vein breccias.

Block modeling was performed using ordinary kriging which employed a database of 2,117 assays, with 517 intersecting the mineralized zone. The KBX zone was interpreted on 25 to 100 m spaced sections. The sectional interpretations were then wireframed to create a 3D solid with which to constrain the block interpolation process. The solid model was manually adjusted to precisely intersect the zone composites. The grade estimation process included modeling the mineralized structures, statistical analysis, drill holes and composite data, variography, cut grade analysis, along with block estimation using ordinary kriging. In addition, inverse distance to the second power, nearest neighbor and manual polygonal estimation methods were performed for validation and verification purposes.

It is important to note that within the estimation process for all methodologies, that a technique specific to the MineSight^TM Modeling System called Relative Elevation Modeling was employed. This methodology is particularly important in the case of the KBX zone, in so far as it is extremely effective in addressing the issue of folded structures. This method allows the practitioner to precisely follow the trend of mineralization and structure on a body that has major deviations on strike and dip.

The mineral resource estimate on the Kerrs Gold Deposit is set out in the table below.

Inferred Mineral Resources (Kerrs Gold Deposit – KBX Zone)
CUT-OFF GRADE	TONNES	GOLD (g/t)	METAL (Oz.)
0.5	7,041,460	1.71	386,467
1	5,237,213	2.04	342,856
1.5	3,375,361	2.47	268,468
2	1,936,189	3.04	188,972
2.5	1,165,664	3.57	133,778
3	818,171	3.94	103,622

Estimation Methodology and Parameters

 The following are the resource estimation methods and parameters for the Kerrs Gold Deposit:

• 41 drill holes were utilized to interpolate the KBX zone
• Composite length was chosen to be 2 m and composites were weighted by length
• Sectional interpretations were wireframed to create 3D solids of the zones
• Zones were coded to the composites and the block model to constrain the modeling process
• Composites for the mineralized zone was used to interpolate into the blocks for that zone
• Ordinary kriging was utilized as the interpolator
• Relative elevation modeling was used to guide the ellipse orientation accounting for the variation in dip due to the synclinal structure
• A minimum of two composites were used for each block and a maximum of two composites were used per drill hole, a maximum of 12 composites were used per hole
• A cutting factor was applied for gold with outlier composites limited to 10 g/t Au based on cumulative frequency plots. A zero cut-off grade was used for the manual polygonal method
• Minesight™ Software was used to perform the block modeling and estimations
• Tonnage comparisons with the polygonal cross-section calculation check within a variance of -9%. Grade comparisons show an average variance of +20% for gold
• Tonnage and grade variations between methods are very much within reasonable limits as shown below:

CUT-OFF	TONNES	ORDINARY KRIGING	INVERSE DISTANCE	%DIFF	NEAREST NEIGHBOR	%DIFF
0.5	7,041,460	1.71	1.67	2.0%	1.61	6.4%

Cross Sectional Methodology and Parameters

The following are the methods and parameters utilized for the manual cross-sectional method:

• Mineral outlines constrained by minimum true thickness equals 3.0 m
• Composite grade modeling of KBX zone used internal dilution thickness up to of 4 m at a cut-off grade of 0.5 g/t Au
• Average drill hole pierce point spacing equals 92 m
• Average true thickness of KBX zone equals 9.9 m
• Average Specific Gravity of 2.81 was used to calculate sectional block tonnages for the KBX zone

 

KBX Zone