Continental Nickel Limited TSXV:CNI

Location | Option Agreement from Abitex Resources Inc. | Geological Setting | History | Exploration Program

Location

The St. Stephen project is located in south western New Brunswick, immediately north of the town of St. Stephen and 120kms west by road of the port city of Saint John. The project area consists of 159 contiguous mining claims totalling 2,544 hectares (approximately 28 sq. kilometres) and is exceptionally well positioned with respect to infrastructure such as power and road transportation links with the bulk shipping port facilities at Saint John.

Location Map of St. Stephen Nickel Project, NB

Location Map of the St. Stephen Nickel Project, New Brunswick

Option Agreement with Abitex Resources Inc.

The project is under option from Abitex Resources Inc. of Val d’Or, Quebec. Under the terms of the option agreement, Continental Nickel Limited (Continental Nickel) can earn up to a 60% interest in the project by completing exploration expenditures totalling C$2.0 million, completing staged cash payments totalling C$210,000, and issuing a total of 280,000 shares in Continental Nickel, all by April 3, 2014. Upon vesting its 60%, Continental Nickel can elect to complete a feasibility study within five years, after which its interest will increase to 65%. Should the study be positive and Continental Nickel give notice within 2 years that it intends to implement the recommendations of the study, Continental Nickel’s interest will increase to 75%. Once vested, both parties fund their pro rata share of expenditures or dilute. Should either party dilute to <15% it will revert to a 3% net smelter royalty (NSR) of which 2% can be purchased by the other party for C$2.0 million.

Geological Setting

The St. Stephen property is underlain by interbedded quartzites and sulphidic argillites of the Ordovician age Cookson Formation which were intruded in the Devonian by mafic to ultramafic intrusions of the St. Stephen Igneous Complex. The intrusive rocks are comprised of gabbro, norite, troctolite and peridotite.

St. Stephen Ni-Cu Property Geology
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History

The mafic to ultramafic rocks host some 17 historical sub-cropping, nickel-copper sulphide occurrences with original discoveries dating back to the 1880’s. Extensive exploration was conducted from 1928 to 1972 by a variety of companies including Anaconda, Inco, St. Stephen Nickel, Atlantic Nickel, Hanna Mining and Boliden. Work included geological mapping, prospecting, various shallow penetrating ground geophysical surveys and the completion of 24,384 metres of surface diamond drilling. In addition, limited development work was completed at the Rogers Farm zone in 1969-60 including sinking a shaft to a depth of 88 metres, 638 metres of lateral development on two levels (-45 and -76 metres), 1,615 metres of underground drilling and extraction of a 4,000 to 6,000 ton bulk ore sample which still sits at surface today.

This previous work resulted in the delineation of three deposits, Roger´s Farm, Hall-Carroll and C Zones for which mineral resources were estimated. The Mineral Resource estimates pre-date and are not compliant with current NI 43-101 reporting standards. However, the estimates suggest an exploration resource target potential of approximately 0.5 to 1.0 million tonnes grading 0.5-1% nickel and ~0.5% copper to a depth of 100 to 150 metres from the three zones (Note: There has been insufficient exploration to define a mineral resource under the current reporting requirements of NI 43-101. The potential tonnage and grade of the deposits are considered conceptual and it is uncertain if further exploration will result in the discovery and delineation of a mineral resource).

Rogers Farm-Hall Carroll Area Geology
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Several other mineralized zones are also known on the property which have returned significant historical drill intersections including 1.0% nickel and 0.5% copper over 10.1m at the E-zone and 1.3% nickel and 0.25% copper over 5.0 metres from the D-zone.

In 2003-2004, Abitex acquired the property (holding a 100% interest) and completed a 450 line kilometre airborne magnetic and EM (VTEM) survey which outlined numerous conductive targets. In 2005, Abitex drilled seven shallow drill holes totalling 683 metres to confirm near surface mineralization at the Rogers Farm zone and the nearby E-zone and submitted samples for preliminary metallurgical testing with bio-leaching technology.

Rogers Farm Zone Cross Section
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Exploration Program

The mineralization observed on the St. Stephen property is comparable to other known nickel-copper deposits; such as the past producing deposits of Lynn Lake in Manitoba and Montcalm in Ontario and the currently producing deposits of Aguablanca in Spain and Voiseys Bay in Labrador.

Continental Nickel considers the St. Stephen project to have favourable exploration and development potential for the following reasons:

The property hosts multiple zones of nickel-copper sulphide mineralization which can be favourably compared geologically to a number of similar, larger deposits globally which are either currently in production or are past producers
Many of the historic near-surface zones have yet to be tested to any significant depth
The project has been largely idle with respect to significant exploration for almost 40 years and has not been evaluated with current deep penetrating EM geophysical techniques which may be able to define extensions to known zones and / or identify new zones of mineralization
The historic zones are near surface and may potentially be extractable with low cost open pit mining in addition to the potential cost advantages due to established local infrastructural such as power and transportation links to ports
Sustained high metal prices currently well above historic long term metal prices favourably impact any potential development scenario

In 2008 – 2009, Continental Nickel commissioned a compilation of historical exploration data and construction of a digital drill hole data base leading to the completion of an independent NI 43-101 technical report for the property. The Company also reviewed the data from the airborne magnetic and VTEM survey completed by Abitex. Selected targets were identified and surveyed with a large, fixed loop, ground TDEM geophysical survey. This survey detected several high conductance anomalies associated with known mineralization as well as several new anomalies not tested by previous drilling.

Drill Highlights and TDEM Anomalies on vertical gradient Magnetics, St. Stephen Nickel Project, New Brunswick
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In 2010, the Company completed a diamond drill program (10 drill holes totalling 1,356 metres) which discovered several new zones of nickel-copper sulphide mineralization while drill testing the various TDEM targets outlined. Highlights included the G Zone where drill hole SSD10-003 intersected 1.0% nickel and 0.29% copper over 9.3 metres, including a massive sulphide interval grading 2.00% nickel and 0.56% copper over 3.3 metres; and the Triple J Zone where drill hole SSD10-004 intersected a 21.4 metre interval of sulphide mineralization grading 0.63% nickel and 0.22% copper.

Based on the discovery success of the 2010 program, the Company has approved a $350,000 exploration program in 2011 which will include the completion of a new airborne magnetic and EM survey to better delineate a number of prospective EM targets identified from a previous survey as well as a 1,000 - 1,500 metre drill program to further test the sulphide zones discovered at G and Triple J and test targets prioritized from the new airborne survey.

The Company would like to acknowledge that it has received a support grants totalling $75,000 under the New Brunswick Junior Mining Assistance Program in support of its 2009 and 2010 exploration programs.