Dear Shareholder / Optionholder
We last wrote directly to you in November 2010 and while we have been regularly informing shareholders of progress via ASX announcements we nevertheless thought it now appropriate to provide a further update direct to you.
We continue to make very significant progress on our Indonesian projects. The year ended on a high with significant gold discoveries at our Bima Project in East Sumbawa. This year we have continued to build on these successes with further positive results including significant surface trench intercepts of up to 64g/t gold which were announced to ASX on 13 January 2011.
We are also pleased to confirm that our partner, Anglo American, has resumed exploration activity in West Papua as part of our strategic alliance.
The Bima Project -- excellent recent results
So far we have identified three distinct prospects of different types at Bima and announced some extremely promising results from two of these that greatly increase our confidence that we may be in a new gold district.
At the Baku prospect our trenching programme has discovered extensive surface zones of gold mineralisation in quartz stockwork. We recently announced some notably high grade gold bearing veins within this zone of stockworking. The intersections were significant at up to24.8 g/t gold over 12 metres including one section of 64 g/t gold over 3 metres. Results to date indicate that the area could host high-grade as well as large near surface bulk-tonnage gold resources.
At the Kowo prospect our first continuous-channel results were very encouraging and returned gold intersections within a large gold soil anomaly. Kowo is shaping up as a large gold-base metal target that may extend beneath the surrounding cover rocks and point to a mineralised porphyry copper-gold system at depth, similar to the giant Batu Hijau mine that occurs at the other end of the island.
At the third prospect, Soro, gold occurs in limestone also within a large gold soil anomaly indicating potential for a sediment hosted gold deposit, a different mineralisation style to that at Baku and Kowo. We are at the moment concentrating mainly on Baku but will also further investigate Soro, Kowo and undertake a systematic regional program throughout the tenement.
Further trenching and geophysical surveys are currently underway to determine the extent of the gold zones with scout drilling well on track to start, probably at Baku, in this first quarter of 2011.
The Trenggalek Project is progressing well
At Trenggalek, in East Java, a 5000 metre scout diamond drilling program was successfully completed in 2010 and as expected confirmed the potential for high grade gold mineralisation at a number of locations. An excellent strike rate was achieved with surface gold mineralisation being confirmed in drill holes at three of the five prospects tested.
We are currently conducting more surface sampling to identify additional drill targets and also to extend those prospects already identified through scout drilling last year. We aim to be in a position to commence further drilling at Trenggalek within the second quarter of 2011.
Our strategic alliance with Anglo American holds unique appeal
Under the terms of our strategic alliance, global mining major Anglo American is responsible for managing and funding all work on the project up to the point of a decision to mine following which Arc is then required to contribute on a pro-rata basis for its 20% interest.
This allows us to participate in exploration in Papua where Indonesia's largest copper-gold deposit Grasberg occurs. That a global company such as Anglo American has chosen to partner with Arc is, in our opinion, recognition of the skills Arc possesses.
Mineralisation has already been confirmed at the Aisasjur prospect by two phases of scout diamond drilling that have confirmed gold mineralisation extends to 700m from the surface and overlays porphyry copper-gold mineralisation. Anglo American has recently recommenced exploration with the intention of moving towards a drilling program planned to commence in the second half of this year.
The strategic alliance with Anglo American holds unique significance and value for Arc Exploration and gives us huge exploration upside without diverting our funding and management focus away from our other projects in Indonesia.
Exciting times ahead
2011 is shaping up to be a very promising year for our Company. We have so far achieved strong and tangible results in the field. We are looking to build further on these. The next logical step is to undertake drilling campaigns at Bima and Trenggalek with the aim of moving towards resource definition.
Our company has sufficient cash resources to fund much of its planned program for the coming year. This position will be enhanced to the extent the current series of options are exercised.
Based on results to date, if you are an Optionholder we encourage you to support our exploration by exercising your options. The exercise price for these options is 3.6 cents ($0.036). If you wish to exercise your options you must complete the attached Application Form and return this together with your subscription monies in the enclosed reply paid envelope so that they are received no later than close of business on Monday, 31 January 2011 by the Company's Share Registry, Computershare Investor Services Pty Limited (GPO Box 1903 Adelaide SA 5001).
While our exploration results have been strong, it is always important to remind shareholders that exploration inherently contains many uncertainties and by its very nature, nothing can be guaranteed.
Arc has a clear programme of major activity for the coming year with the focus remaining on delivering value to shareholders through exploration success.
We thank you for your continued support and we hope you have found this update useful.
Yours faithfully,
John C. Carlile Bruce J Watson
Managing Director Chairman
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