Shore Gold Inc. - Star Diamond Project

The Star Diamond project is located approximately 60 kilometres east of Prince Albert, Saskatchewan, a major supply centre for Northern Saskatchewan. A paved highway, gravel road grid system, and an extensive network of forestry roads provide excellent year-round access to Shore’s property. The Star Kimberlite is situated in a burned portion of the Fort à la Corne forest, 2 kilometres north of the Saskatchewan River and 21 kilometres to the west of a 230 Kilovolt power line.

The project area consists of 23 contiguous mineral dispositions totaling 9,280 hectares and is 100 percent held by Shore.

The Fort à la Corne area of Saskatchewan hosts one of the most extensive kimberlite fields in the world. Over 70 kimberlites exist in the Fort à la Corne forest and over 70 percent of these have been shown to contain diamonds. The deposition and erosional history at Fort à la Corne is such that the crater portions of the volcanic eruptive events have been preserved by a cap rock of marine mudstone. As a result, the crater portion of the kimberlite has significant geographic extent. The Star Kimberlite averages 88 metres in thickness and covers an area over four square kilometres. The kimberlite is covered by 90 metres of overburden, consisting mostly of sand, mudstone and glacial till. Shore was the first company in the Fort à la Corne district to locate a root zone beneath the kimberlite crater when drill hole Star 20 intersected 539 metres of continuous kimberlite. Subsequently, several feeder vents have been drilled in the Star and Orion Kimberlites.

After acquiring the key claims in late 1995, Shore completed an airborne geophysical survey in the spring of 1996 and followed up several magnetic anomalies with a ground magnetic survey. In the fall of 1996, three NQ (48 millimetre diameter) core holes were drilled in an anomaly now known as the Star Kimberlite. These holes were followed up and confirmed by the results from two PQ (85 millimetre diameter) core holes drilled in 1997. Encouraged by these results, Shore has subsequently drilled an additional 266 PQ holes, one large diameter (24 inch) reverse circulation hole, and 88 (48 inch) large diameter holes.

The several seasons of drilling indicated a deposit that supported a bulk scenario. Interpretation of the results suggested to Shore management that a large parcel of diamonds could be recovered from a bulk sample which would provide a more accurate estimate of the value of the deposit. The ore value in a diamond mine is determined as a combination of carat prices (US$/carat) and grade (carats/tonne). Once the diamond price is known, detailed drilling can be undertaken to evaluate an average diamond grade and thus develop a dollar value per tonne. A study of sampling methods quickly indicated that a large parcel of diamonds could be recovered most efficiently and cost effectively by way of an underground bulk sample.

Prefeasibility Study

The aim of the prefeasibility study is to define a mineral reserve for the Star Kimberlite.

Advanced Evaluation Program and Prefeasiblity Study Highlights
• Completed Underground Bulk Sampling: 70,000 tonnes recovered
• Diamond recovery: 10,582.67 carats
• Recovered: 49.50 & 22 carat stones
• Decommissioned shaft
• Project Proposal submitted to Ministry of Environment November 2008
• Updated Resource Estimate published February 2009
• Star Technical Report and Resource Estimate Update published March 2009
• Technical Report and Preliminary Feasibility Study on the Star Diamond Project published August 2009

Core Drilling
• 271 holes: 63,967 metres

Large Diameter Drilling
• 88 LDD holes completed: 10,263 tonnes processed

Star Section Maps

Star Section Map

Star NS Section A

Star EW Section B

Star NS Section C

Engineering studies

Also included in the advanced evaluation was an airborne laser survey for accurate topographic mapping of the site, kimberlite and country rock test work, three dimensional modeling, grade estimation, block model construction, mine and plant design and the preparation of an Environmental Impact Assessment. The current time line is structured in such a way that Shore will be able to fast track the feasibility study immediately thereafter.

Star 3D Model

Mineral Resource Estimate

NI 43-101 compliant Mineral Resource estimate for the explored portion of the Star Kimberlite prepared by a qualified person from P&E Mining Consultants Inc.:

• Indicated tonnes: 151.7 million. Grade: 14 cpht (carats per hundred tonnes). Total indicated carats 20.5 million
• Inferred tonnes: 26.2 million. Grade: 12 cpht (carats per hundred tonnes). Total inferred carats 3.1 million

Qualifed Person: Mr. Fred Brown CPG, PrSciNat, of P&E is the independent Qualified Person who supervised the preparation of the updated Mineral Resource estimate for the Star Kimberlite. Mr. Brown, a Certified Professional Geologist (#11015) with the American Institute of Professional Geologists and a registered Professional Natural Scientist with the South African Council for Natural Scientific Professions (#400008/04), has over 21 years of worldwide experience in mining resource and reserve assessments and related work and has worked on diamond mines in southern Africa for De Beers.

Star Diamond Project Positive Pre-Feasibility Study Highlights

Probable Mineral Reserves of 171 million tonnes at a weighted average grade of 12 carats per hundred tonnes (“cpht”) containing 20 million carats at a weighted average price of $265 per carat (US$225);
Total diamond production of 20 million carats over a 12 year total mine life;

Robust project economics over a 12 year mine life due to proximity to infrastructure (hydroelectric power, paved highways, water and labour);

A pre-tax base case Net Present Value (“NPV”) of $474 million (using a 7 percent discount rate) for an Internal Rate of Return (“IRR”) of 12 percent and an after-tax NPV of $291 million with an IRR of 10 percent;

Pre-production capital cost of $1,487 million with a total capital cost of $1,646 million (including direct and indirect costs) over the life of the mine and an initial capital payback period of 5.2 years;

P&E recommendation that Shore advance the Star Diamond Project to a Feasibility Study based on the positive PFS.

Qualified Persons:

Mr. Fred Brown CPG, PrSciNat, of P&E is the independent Qualified Person who was responsible for the Star Kimberlite resource estimate upon which the reserves were developed. Mr. Brown, a Certified Professional Geologist (#11015) with the American Institute of Professional Geologists and a registered Professional Natural Scientist with the South African Council for Natural Scientific Professions (#400008/04), has over 21 years of worldwide experience in mining resource and reserve assessments and related work and has worked on diamond mines in southern Africa for De Beers. His specialties include resource estimation, ore deposit modeling, due diligence reviews, project evaluation, mining geology, geostatistical studies and preparation of NI 43-101 reports. He is regarded as one of the leading authorities in diamond resource evaluation and diamond geostatistics. P&E Mining Consultants Inc. is an established and internationally recognized geological and mine engineering consulting firm specializing in resource estimates, scoping, pre-feasibility studies and participation with other consulting firms on feasibility studies, with over 70 projects undertaken in the last 5 years. P&E has Certificates of Authorization from the Association of Professional Geoscientists of Ontario and Professional Engineers Ontario and the Association of Professional Engineers and Geoscientists of Saskatchewan. Mr. Eugene Puritch, P.Eng. (Haileybury School of Mines, Queen’s University), a principal of P&E Mining Consultants Inc., who supervised the preparation of the Mineral Reserve estimate for the Star Kimberlite, has more than 30 years experience in mine evaluation and resource estimating for some of Canada’s largest mining companies. He has undertaken more than 120 resource estimates and mine designs in his career, many of which formed the basis for feasibility studies and subsequent production decisions. Prior to co-founding P&E, Mr. Puritch was regularly under contract to provide his services to Micon International Ltd., Aker Solutions Canada Inc., A.C.A. Howe International Ltd. and Strathcona Mineral Services. Dr. Wayne Ewert, P.Geo. (PhD, Geology, Carleton University, Ottawa, Canada and B.Sc. University of Waterloo, Canada) a principal of P&E, has over 40 years of worldwide experience in diversified exploration, project evaluation and resource based geological modeling. He has over 18 years of international consulting experience in support of project acquisitions and related financing activities. His experience includes involvement with the evaluation and assessment of diamond projects in Lesotho and South Africa on behalf of A.C.A. Howe International. P&E consents to the statement of Probable mineral reserves contained herein.