South Tally Pond Project

Target: Precious metal-rich Volcanogenic Massive Sulphide (VMS) Deposits (Cu,Pb,Zn,Ag,Au)

Highlights

• Large, 100%-owned land position located southwest of Duck Pond Cu-Zn Mine (Teck)
• Producing, highly prospective volcanic belt with numerous, underexplored base metal targets
• Significant base metal discovery at the Lemarchant Prospect

Property Information

The South Tally Pond VMS Project is located in central Newfoundland, approximately 90 kilometres southwest of Grand Falls-Windsor. The property borders and extends southwest of Teck's Duck Pond Mine. The property area is accessible by well-maintained logging/mining roads originating from paved highway at Millertown. Secondary logging roads and logging trails provide good access to various parts of the property.

The project area consists of 14 mineral licences (856 claims) and covers a total area of 21,400 hectares (261.0 sq km). Paragon can earn a 100% interest in the property area which was acquired through a combination of company staking (100% owned), option agreements with local prospectors (100% earned-in) and Altius Resources Inc (earning-in).  Portions of the property are subject to underlying net smelter royalties of up to 2% from previous owners.

History

The central Newfoundland region has a history of base metal production beginning with the world-class Buchan's Zn-Cu deposits which were mined by Asarco from 1928 to 1984 and at the Duck Pond Cu-Zn mine owned by Teck Resources which began operations in 2006.  The Duck Pond mine is the first producing mine in the Tally Pond volcanic belt of which approximately 60% is covered by Paragon's South Tally Pond VMS Project.

The South Tally Pond project and surrounding area has been intermittently explored since the late 1970's for base metals. The majority of this exploration work was conducted by Noranda, who between 1979 and 1994 discovered several base metal VMS deposits and occurrences including Duck Pond, Boundary, Moose Pond and Lemarchant.  Noranda completed systematic geological, geochemical and geophysical surveys throughout the Tally Pond volcanic belt which resulted in the delineation of several areas having favourable altered volcanic rocks with coincidental geophysical anomalies (e.g. Rogerson Lake, Beaver Lake, Bindon's Pond).  In 2001, Altius Resources Inc. optioned the South Tally Pond property from Noranda and completed diamond drilling at Spencer Pond and Rogerson Lake.  In 2006, Altius Resources optioned the property to Paragon Minerals Corporation.

Regional Geology

The South Tally Pond VMS Project is situated within the Cambrian Tally Pond volcanic belt, a 45 km long by up to 8 km wide northeast-trending volcanic belt that extends from Sandy Lake in the northeast to Victoria Lake in the southwest. The volcanic rocks consist of a bi-modal sequence of felsic and mafic volcanics, associated pyroclastic rocks and related intrusive rocks. The belt has a high proportion of subaqueous rhyolite flow domes which are particularly important hosts for VMS-style mineralization. Thin beds of graphitic argillite and siltstone are often intercalated with the volcanic rocks and represent a local hiatuses in the volcanic activity. The volcanic sequences are capped by younger Ordovician black graphitic argillite, siltstone and greywacke.

The Tally Pond volcanic belt is host to Teck's Duck Pond Mine, a precious metal-rich Cu - Zn - Pb VMS deposit containing 5.48 million tonnes of 3.3% copper, 5.8% zinc, 0.9% lead, 59 g/t silver and 0.86 g/t gold (Duck Pond + Boundary).  The Duck Pond deposit consists of a number of relatively flat-lying massive to semi-massive sulphide lenses composed of pyrite, chalcopyrite, sphalerite and galena at, or near the top of, an altered felsic volcanic horizon located between 200 and 850 m below surface. The Cu-Zn mineralized envelope is tabular with a plan view dimension of about 250 m by 450 m and having a thickness of about 20 m. Lenses of barren massive pyrite occur both peripheral to, and between, the Cu-Zn-Pb mineralized lenses.

Lemarchant Discovery

Since acquiring the South Tally Pond property in 2006, Paragon has focused much of its effort on the Lemarchant Prospect.  In 2007, Paragon  followed-up on anomalous base and precious metal results from drilling by Noranda (4.5% Cu, 5.7% Zn, 273 g/t Ag, 1.06 g/t Au over 0.30 m in hole LM92-07), and intersected semi-massive to massive sulphides grading 0.77% Cu, 7.49% Zn, 2.13% Pb, 40 g/t Ag, 0.21 g/t Au over 5.05 metres in the first drillhole LM07-13.  The sulphide zone is 165 metres down dip of the mineralization intersected in LM92-07 and at a vertical depth of 160 metres below surface.

Since the discovery, Paragon has completed 13,500 metres of diamond drilling in 38 holes at Lemarchant and has outlined a zone of significant sulphide mineralization over a 500 m strike length based on widely spaced drilling (> 100 m centres). Significant results are tabulated below.

The Lemarchant mineralization is semi-massive to massive and occurs at, or near the top of, a subaqueous rhyolite dome that is hydrothermally altered and fractured. The altered and mineralized rhyolites are overlain by discontinuous thin beds of pyrite-rich graphitic argillite which in turn are ovelain to the east by pillowed to massive mafic volcanics. Sulphides are medium grained and consist of various proportions of sphalerite, pyrite, chalcopyrite and galena. Barite is often present and can locally be massive and intensely fractured by the sulphides.

A surface alteration zone associated with the mineralization has been outlined over a strike length of at least 2 kilometres and has strong similarities to the alteration signature at Duck Pond.  Both areas display intense feldspar-destruction and aluminum-enrichment with concomitant magnesium-enrichment peripheral to the mineralization.

Additional VMS Target Areas

Numerous, underexplored VMS target areas occur in the South Tally Pond project area.  Several of these target areas are highlighted below.

Beaver Lake Area

• Significant VMS-style alteration zone that extends over a 3 kilometers strike length and widths up to 1000 metres.  NO DRILLING
• Intensely silica-sericite-pyrite altered proximal rhyolite breccias/flows.
• Semi-massive to massive pyrite float observed on surface.
• Coincident short strike length Airborne EM conductor (1.2 km) with coincident ground gravity anomalies and ground EM conductors..  Anomalous till geochemistry of up to 200 pm Cu, 88 ppm Pb, 1200 ppm Zn and 1.9 g/t Ag.

Bindon's Pond Area

• Significant VMS-style alteration zone measuring approximately 900 by 200 metres along a mafic-felsic volcanic contact.  NO DRILLING
• Alteration signature is similar very similar to Duck Pond and Lemarchant Prospect and may represent the easterly extension to the Lemarchant system.
• Disseminated and stringer pyrite and minor base metals

Rogerson Lake Area

• Significant VMS-style alteration zone that extends over a 2 kilometers strike length and widths up to 700 metres.
• Intensely chlorite-altered felsic volcanic rocks (rhyolite) with locally strong silica and carbonate alteration and ubiquitous disseminated sulphide (pyrite) mineralization.
• Abundant massive pyrite float seen on surface.
• Previous, shallow drilling (13 holes, 1510.6 metres) intersected stringer to semi-massive sulphides (pyrite) over 5.0 metres.

Spencer's Pond Area

• Significant VMS-style alteration zone that has been traced over 4 kilometers strike length and widths up to 600 metres.
• Intensely altered mixture of rhyolite, basalt and tuffaceous sediments with widespread disseminated and stringer sulfide mineralization.
• Untested TDEM conductor with a strike extent greater than 2 kilometres.
• Previous drilling (9 holes, 1658.3 metres) intersected stringer base metal mineralization.

Duck Pond West Area

• 2 kilometre long poorly exposed VMS-style alteration zone with widths up to 400 metres.
• 2.5 kilometres from the Duck Pond Mine.
• Mineralized zinc bearing float up to 1.3% Zn.
• Strong conductor underlain by felsic volcanic rocks.
• A single drill hole (HP90-01) intersected the interpreted west projection of the Duck Pond Thrust and alteration zone.

Gills Pond Area

• Similar stratigraphic setting to Duck Pond and Lemarchant.
• 4 kilometres SW of the Duck Pond Mine.
• Intense and proximal alteration signature of host rocks.
• 29 wide spaced diamond drillholes completed in 1988 and 1989 over a 3 by 3 kilometre area, stringer mineralized felsic volcanics intersected.

Results

Lemarchant - Drill Assay Results