MINING RESEARCH

Solomon Gold 5.8p BUY Search for the next Pacific giant 20 May 2009 ANALYST Solomon Gold’s definitive venture agreement with Newmont Ventures Limited Kate Ward represents the culmination of an exciting twelve month period for the company. In + 44 (0)20 7601 6140 particular, we believe that the $12 million agreement with Newmont, signed on 5 [email protected] March, underpins strongly the prospectivity of Solomon Gold’s tenements on the island of Guadalcanal in the Solomon Islands. Solomon Gold and Newmont have a SALES & TRADING CONTACTS comprehensive reconnaissance exploration programme planned for the next twelve months, targeting an outstanding group of prospects. Following a site visit to the See reverse Guadalcanal Island project, we initiate detailed coverage of the company with a BUY recommendation. COMPANY DESCRIPTION Exploration and development company Solomon Gold has a robust portfolio of projects in the Solomon Islands. The company has five focused on porphyry copper-gold and tenements on Guadalcanal Island which lie within the definitive venture agreement, each of which epithermal gold systems in the Solomon is highly prospective for the discovery of a porphyry or epithermal style deposit. Islands The Solomon Islands is located on the Pacific Rim of Fire which is well known for its large INVESTMENT DATA porphyry copper-gold orebodies. The southwest Pacific, in particular, hosts a significant number Ticker SOLG of deposits which have in excess of 40 million ounces of gold equivalent including the Lihir and Listing AIM Panguna deposits in Papua New Guinea. The company believes that the Guadalcanal tenements No. of shares 67.0m are situated in a similar geological environment to these giant deposits. Market cap £3.8m On 5 March 2009, Solomon Gold signed a farm-in agreement with Newmont to fund exploration at the Guadalcanal tenements. Under the agreement, Newmont can earn 70% of the project by expending US$12 million over a five year staged earn-in. On completion of the earn-in, Solomon SHAREHOLDERS Holding (%) Gold may elect to accept a funding option which provides for Newmont to earn a further 10% by N. Mather beneficial holdings 20.0 funding the project to production. Tenstar Trading Limited 7.7 Barclayshare Nominees Limited 7.0 The 2009 field campaign commenced in late March this year and the budget for the first year of the definitive venture agreement with Newmont is US$2 million. The exploration programme will initially comprise mapping, bulk leach extractable gold (BLEG) sampling and soil and rock chip sampling. During the first six months, Newmont will be flying a revised airborne electromagnetic 12M SHARE PRICE PERFORMANCE survey. This reconnaissance exploration programme will be followed up with an estimated 2,800m of diamond drilling over the first 12 month period. Drilling is planned to commence in the second half of 2009. It is our opinion that the Solomon Islands have the potential for the discovery of a large deposit, similar to those found throughout the southwest Pacific. We believe that Newmont will bring new exploration techniques to a significantly under-explored country, strongly enhancing the probability of making a discovery. Newmont has seconded two of its principle geologists to the Guadalcanal Island projects. While on a site visit in March 2009, HansonWesthouse met Newmont’s seconded geologists and from our visit, it appears that the Solomon Gold-Newmont team has the process of discovery well in hand. The company also has two projects that it intends to progress which are not part of the agreement with Newmont. These are the Fauro Island volcanic hosted gold project and the Florida Islands nickel-cobalt project. HansonWesthouse acts as broker to We believe that these projects provide good upside potential to the company’s current share Solomon Gold and is paid fees for these price. In addition, we expect to see further upside to Solomon Gold’s share price as exploration services. progresses at the Guadalcanal Island tenements. As such we recommend that investors BUY this For important regulatory disclosures, stock with a view to long term investment. please refer to the information on the page 18 of this report.

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Directors and management

Nicholas Mather - Chief Executive Officer Nicholas Mather graduated in 1979 from the University of Queensland with a BSc (Hon. Geology). He has 25 years experience in exploration and resource company management in a variety of countries. His career has taken him to numerous countries exploring for precious and base metals and fossil fuels. Nicholas Mather has focused his attention on the identification of and investment in large resource exploration projects. He was managing director of BeMaX Resources NL (an ASX-quoted company) from 1997 until 2000 and was instrumental in the discovery of the world class Ginkgo mineral sand deposit in the Murray Basin in 1998. As an executive director of Arrow Energy NL (also ASX- quoted) until his resignation in 2004, Nicholas Mather drove the acquisition and business development of Arrow's large Surat Basin Coal Bed Methane project in southeast Queensland. He was managing director of Auralia Resources NL, a junior gold explorer, before its US$23 million merger with Ross Mining NL in 1995. He was a non-executive director of Ballarat Goldfields NL until 2004, having assisted that company in its recapitalisation and re-quotation on the ASX in 2003. Nicholas Mather was chairman of TSX-V-quoted Waratah Coal Inc before its AUS$130 million takeover by

Mineralogy Pty Ltd. Nicholas Mather is also Chief Executive of D'Aguilar Gold. Cameron Wenck - Non-Executive Chairman Cameron Wenck is a financial adviser and company director with 20 years experience in the financial services industry. Earlier in his career he worked for the London stockbrokers Scrimgeour Vickers and chartered accountants PricewaterhouseCoopers. He has a Bachelor of Commerce, a Diploma of Financial Planning, is a Fellow of the Australian Society of Accountants and a Certified Financial Planner. Mr Wenck is a member of the company’s Audit Committee and Chair of the Remuneration Committee.

Brian Moller - Non-Executive Director Brian Moller is a corporate partner in the Brisbane-based law firm Hopgood Ganim Lawyers, the Australian solicitors to the Company. He was admitted as a solicitor in 1981 and has been a partner at Hopgood Ganim since 1983. He practices almost exclusively in the corporate area with an emphasis on capital raising, mergers and acquisitions. Brian Moller holds an LLB Hons from the University of Queensland and is a member of the Australian Mining and Petroleum Law Association. Brian Moller acts for many publicly-listed resource and industrial companies and brings a wealth of experience and expertise to the board, particularly in the corporate regulatory and governance areas. He is a non-executive director of D'Aguilar Gold Ltd and Platina Resources Ltd, both ASX-listed companies. Mr Moller is a member of the Company’s Audit Committee and Remuneration Committee. He is the Chair of the Audit Committee.

Robert Weinberg - Non-Executive Director Rob Weinberg gained his doctorate in geology from Oxford University in 1973. He has more than 30 years experience of the international mining industry and is an independent mining research analyst and consultant. Prior to his current activities he was Managing Director, Institutional Investment at the World Gold Council, and a Director of Gold Bullion Securities. Previously he was a Director of the investment banking division at Deutsche Bank in London after having been head of the global mining research team at SG Warburg Securities. He has also held senior positions within Société Générale and was head of the mining team at James Capel & Co. He was formerly marketing manager of the gold and uranium division of Anglo American Corporation of South Africa. Dr Weinberg is also a non-executive Director of Falkland Gold and Minerals, Medusa Mining and of Kasbah Resources. He is a Fellow of the Geological Society of London. Dr Weinberg is a member of the Company’s Audit Committee, Remuneration Committee and Health, Safety, Environment and Community Committee.

Jason Ward - Exploration Manager Jason Ward gained a Bachelor of Applied Science (Geology) from the Queensland University of Technology in Brisbane, Australia. Jason first worked in the Solomon Islands in 1996 and has been the exploration manager of Solomon Gold since 2006. Prior to this, Jason was an exploration geologist with Lake Resources, focused on porphyry copper-gold and epithermal gold deposits in Argentina. Jason has also worked as a contract geologist for Newmont at the company’s Pajingo low sulphidation epithermal gold prospect. Various other projects that Jason has worked on include Broken Hill type lead-zinc deposits in Sweden, Cyprus and Kuroko type copper-gold volcanic hosted massive sulphide deposits in the Oman Mountains, low sulphidation epithermal mineralisation in New Caledonia and porphyry copper-gold and epithermal gold deposits in Fiji.

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Company overview Solomon Gold is an exploration and development company focused on gold and base metals in the Solomon Islands. The company is focused largely on the island of Guadalcanal, where it has signed a definitive agreement with Newmont with respect to five highly prospective tenements. Solomon Gold has two other projects in the Solomon Islands; namely the Fauro Island gold project to the northwest of the archipelago and the Ngella nickel project in the Florida group of islands, north of Guadalcanal Island.

Current tenements in the Solomon Islands (Fauro remains under application)

Source: Company

HansonWesthouse visited the company’s Guadalcanal tenements in March this year. It is our view from this site visit that the projects lie in terrain which shows good potential for the discovery of porphyry and epithermal style deposits. We believe that the prospectivity is supported by the regional geological setting which is host to several significant deposits, including the Panguna copper-gold porphyry deposit in Bougainville.

The history of exploration at Sutakiki Solomon Gold was first active in the Solomon Islands in the mid-nineties until a period of intense ethnic tensions saw the company pull out of the country. It was only in 2005 that Solomon Gold recommenced exploration activity in the Solomon Islands. In November 2007, Solomon Gold drilled diamond hole SK11 through the Valehailala structure at Sutakiki. SK11 returned 32 metres grading 9.45g/t gold including 10 metres at 21.1g/t gold. As a result, the company announced the discovery of a high grade gold project at Sutakiki and spent the following year focusing its resources on delineating the Valehailala structure. However, despite a strong exploration effort at Sutakiki, the company found that it could not reproduce the grades returned in drillhole SK11. As a result, nearly a year after drilling SK11, Solomon Gold announced that its exploration strategy for the next twelve months was changing. The company decided on a new approach to exploration at Guadalcanal – to step back to take a look at the bigger picture.

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The decision to change tactics was spurred on by the fact that, by September 2008, the global financial crisis was underway and the gold price had fallen considerably. Solomon Gold considered it timely to strip back its high operating costs (during the height of exploration at Sutakiki, the company had three drill rigs on the property and the necessary helicopter support was crippling the exploration budget). Two of the rigs were removed from the Sutakiki project and some retrenching of staff took place, thereby cutting back overheads considerably. However, Solomon Gold had already conducted enough exploration over the tenement to surmise that Valehailala was probably just a blip on the on the edge of something much larger – or, more technically, that the Valehailala prospect is skarn mineralisation with an epithermal overprint that occurs as a stockwork on the periphery of a potentially large porphyry system. As a result, the company placed its focus back on grassroots exploration, particularly mapping and sampling, with a view to generating new drill targets.

A renewed target: giants of the SW Pacific Solomon Gold’s change in strategy was aimed at placing a strong focus on ‘back to basics’ exploration in the search for a porphyry or epithermal style deposit in line with the some of the giant copper-gold orebodies in the southwest Pacific. The Pacific region is well endowed with copper and gold deposits including the Lihir and Ok Tedi deposits in Papua New Guinea which contain 46.1 million ounces equivalent and 15.5 million ounces equivalent respectively. From our site visit, we have observed that the Guadalcanal tenements share many key ingredients with the some of the southwest Pacific’s giant deposits, including tectonic setting, age of mineralisation, and regional geology. These are features which are common to many of the larger orebodies in the region.

Giant deposits of the SW Pacific – aligned along volcanic arcs

Source: Company

Guadalcanal - the next Panguna? The Guadalcanal tenements are aligned along the same volcanic arc as the giant Panguna deposit. Panguna is a gold- copper porphyry deposit in Bougainville which has a resource of nearly 1 billion tonnes grading 0.33% copper and 0.37g/t gold. When Panguna was first put into production, the core of the deposit returned a grade of 1% copper which was sufficient for the swift repayment of the capital expenditure. Panguna was in production during the 1970s and 1980s during which time the mine produced over 9 million ounces of gold and 3 million tonnes of copper. At this time, Panguna was supplying around 2% of the world’s copper supply.

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The Solomon Islands - background The Solomon Islands is an archipelagic state situated in the southwest Pacific Ocean approximately 2,000km northeast of Australia. The capital is Honiara which is located on Guadalcanal, the largest island in the archipelago. Conflict in the Solomon Islands between 1998 and 2003 was caused by ethnic tensions between the residents of Guadalcanal Island and settlers from the outer islands. The ethnic tensions were exacerbated by extended periods of economic contraction and stagnation. Following a five year period of regional violence, the Regional Assistance Mission to the Solomon Islands (RAMSI) was introduced to stabilise the country. RAMSI is a partnership between the Solomon Islands and fifteen contributing countries within the Pacific region. RAMSI provides support for the Solomon Islands and is focused on security, democracy and economic growth.

Community relations Solomon Gold recognises the importance of strong landowner and community ties to the success of exploration and development projects in the Solomon Islands. The company has worked hard to ensure that its long standing community relations on Guadalcanal Island are secure by providing the community with simple benefits such as employment and access to medical assistance. During our site visit, we observed that community relations are strong and that the local people play an important role in the company.

Highly prospective copper-gold terrane The Solomon Islands is situated along the Pacific Rim of Fire within the Lihir-Bougainville-Solomon Island Arc, an arc which is considered to be highly prospective terrane. The island arc is already host to two giant deposits, Panguna and Lihir, as well as several mid tier deposits including Allied Gold’s Simberi gold deposit. On Guadalcanal Island, the most significant discovery to date has been Australian Solomon Gold’s Gold Ridge. Gold Ridge is a 2 million ounce gold deposit which lies to the north of the Guadalcanal tenements. The deposit is important for the prospectivity of Guadalcanal Island because it demonstrates the island’s potential to host a significant orebody.

The Newmont farm-in and JV agreement In March of this year, Solomon Gold signed a definitive agreement with Newmont Ventures Limited (a wholly owned subsidiary of the Newmont Mining Corporation) with respect to five of Solomon Gold’s Guadalcanal tenements. These are the Koloula, Central, Kuma, Sutakiki and Mbetilonga licences.

Principle terms Under the agreement Newmont can earn a 70% interest in five exploration tenements situated on the island of Guadalcanal (described below). Newmont may earn a 51% interest by expending US$6 million over a 3 year earn-in and further 19% for another US$6 million over a subsequent 2 year earn-in. Solomon Gold may elect, after Newmont has earned 70% within 5 years, to accept a Newmont funding option which provides for Newmont to earn a further 10% (to total 80%) by funding Solomon Gold to mining. If Solomon Gold chooses this option, it will be required to repay its 20% share of the costs incurred from year five until production. Solomon Gold will manage the programme for the first year for which it will be paid a management fee of between 5% and 10% of the exploration costs.

About Newmont Newmont Mining Corporation is the world’s second largest gold producer. The company has substantial experience and expertise in the identification and development of large porphyry copper-gold deposits. Newmont currently holds the giant Batu Hijau porphyry copper-gold mine in Indonesia which had reserves of 1.1Bt grading 0.52% copper and 0.37 g/t gold and a life of mine of approximately 23 years when it first went into production. Newmont targets projects that have the potential to become a 5 million ounce gold resource. This is extremely encouraging for Solomon Gold as it suggests that Newmont considers the Guadalcanal projects to be prospective for the discovery of a significant deposit. Newmont has seconded two of its principle geologists to the Guadalcanal projects. While on a site visit in March 2009, HansonWesthouse met the Newmont’s seconded geologists and from our site visit, it appears that the Solomon Gold- Newmont team has the process of discovery well in hand.

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Guadalcanal – the farm-in tenements Overview Solomon Gold has five tenements on the island of Guadalcanal. These are the Koloula, Central, Kuma, Mbetilonga and Sutakiki prospecting licences. The tenements are prospective for porphyry and epithermal style mineralisation. Exploration of the Guadalcanal prospecting licences over the next year will focus on the Koloula, Central, Kuma and Mbetilonga tenements. No further work is planned for the Sutakiki tenement in the immediate future. Exploration of the company’s projects is undertaken by Solomon Gold’s wholly-owned subsidiary, Australian Resource Management Pty Ltd (ARM).

Exploration strategy The field campaign for the stage one earn-in of the definitive agreement with Newmont commenced in late March of this year. The budget for the first twelve month period is US$2 million and the exploration strategy will initially comprise mapping and BLEG, soil and rock chip sampling. Newmont will be flying a revised airborne electromagnetic survey during the first six months of the exploration programme. Newmont has proven this exploration strategy to be very effective in defining new porphyry prospects, including the Batu Hijau copper-gold porphyry deposit. During the first twelve month period of the stage one earn-in, Solomon Gold and Newmont intend on completing at least 2,800 metres of diamond drilling. Solomon Gold expects that drilling will commence during the second half of the 2009 calendar year.

Location, accessibility and climate Guadalcanal is a densely forested mountainous island. The tenements lie in rugged terrain where steep volcanic peaks of the Kavo Mountains are cut through by narrow river valleys. The highest peak on Guadalcanal Island is Mount Makarakomburu at 2,447 metres above sea level. The climate is tropical maritime with a mean annual temperature of 27°C. The islands experience rain year round, with an annual rainfall of 1,905mm. The wet season from November to April brings monsoonal rainfall. The Koloula and Kuma, tenements are situated on the southern coast of Guadalcanal (the Weather Coast) while the Central, Sutakiki and Mbetilonga tenements lie to the north of the island. The projects on the Weather Coast lie in terrain which is largely more rugged than those on the northern coast. The projects are largely accessed by helicopter or by boat although it is possible to enter the Mbetilonga tenement by foot. Access agreements have been negotiated between the company and the local tribes. These tribes have been paid access fees and goodwill payments where appropriate.

The geology of Guadalcanal Island Guadalcanal Island lies in an arc-compression tectonic setting similar to that of Papua New Guinea. The arc is formed by subduction of the Indo-Australian plate moving beneath the Pacific plate along the San Cristobal trench. The Guadalcanal Island basement geology comprises oceanic basalt with chert and limestone. The basement has been intruded by a multi phase diorite complex which is overlain by the calc-alkaline Suta volcanics. At Guadalcanal, the known porphyry copper and gold mineralisation is associated with the diorite porphyry intrusions. The Suta volcanics are considered to be the eruptive phase of these intrusions. The volcanics are, in turn, overlain by a volcaniclastic package comprising turbidites, greywacke and limestone. The mineralised porphyry bodies are Miocene to Pleistocene (Cenozoic) in age. This is a significant timeframe in the region as many of the giant deposits in the southwest Pacific, including the Panguna orebody, are hosted in Cenozoic intrusives and volcanics. The dominant fault structures on the island are northeast trending. These are cut through by later stage east-west structures. The company suggests that there is a series of deep seated crustal transform faults which run across the breadth of Guadalcanal Island which may control the emplacement of the mineralised porphyries and volcanics.

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Koloula The Koloula tenement encompasses many prospects, including the Vurakara copper-molybdenum, Chikora copper and Mbina copper-gold prospects. Solomon Gold also has a number of other prospects in the Koloula tenement to follow up. Recent traverses across the tenement have identified strong zones of porphyry copper gold material, including strong bornite mineralisation to the north east of the Chikora prospect, and the company believes that these are a testimony to the abundance of untouched targets within the Koloula tenement. The porphyry prospects, and indeed the Koloula River, are controlled along a north-northeast trend by a corridor of faulting related to deep transform features. These crustal scale structures are evidenced by the topography, and are seen in the geophysical surveys and in the geology of the tenement. ARM first explored the tenement in the 1990s until ethnic tensions forced it to halt exploration in the Solomon Islands. It wasn’t until early 2007 that ARM re-commenced its exploration activities at Koloula with a drill programme over the North Mbina and Chikora prospects. Solomon Gold and Newmont believe that there is substantial data to support the prospectivity of the tenement and as such, exploration at Koloula currently ranks very highly. Significantly, none of the prospects within the Koloula tenement have been adequately drill tested and to date, no drilling has been done at either the Central or Kuma tenements.

Vurakara Vurakara was initially explored by Solomon Gold after a large piece of native copper was uncovered during flooding related to a cyclone in 1983. The Vurakara prospect is a 600 metre by 200 metre copper-gold-molybdenum zone of interest that is cut through by copper and molybdenum rich sheeted quartz veins. Highlights of exploration at Vurakara include rock chip samples which have returned up to 0.17% molybdenum. Notably, free molybdenite (molybdenum sulphide) is visible within the sheeted veins. Airborne geophysical surveying has defined two circular magnetic highs at Vurakara, each with coincident potassium radiometric lows features (below image). This is significant because it is indicative of a porphyry body at depth. The copper anomaly remains open to the north and south and is yet to be drill tested.

Chikora and Vurakara – geophysical targets

Source: Company

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Chikora The Chikora prospect is situated 2 kilometres to the southwest of Mbina. The prospect is a porphyry style target which is cut through by outcropping sub-vertical sheeted quartz-copper-molybdenum veins. Chikora is a 2.5 kilometre by 1.5 kilometre copper and molybdenum rich zone from which soil samples have returned grades of up to 0.3% copper. Chikora displays a strong magnetic low associated with a copper-molybdenum anomaly and an untested magnetic high to the north of the copper-molybdenum anomaly (above image). Utah Minerals drilled 13 short drill holes at Chikora in the 1970s.The highlight of the drill programme was CH08 which returned 115 metres grading 0.34% copper and 142ppm molybdenum. Significantly, it was noted that the intensity of the mineralisation increased down hole and one drill hole returned its highest grades of 0.76% copper toward the end of the hole. This suggests that mineralisation remains open at depth. Critically, Utah’s drill programme comprised only vertical holes and therefore the sub-vertical sheeted copper-molybdenum veins were not intersected. ARM followed up Utah’s historical drilling with two diamond drill holes. Both drill holes intersected strong background copper values including 325 metres grading 0.13% copper from 38 metres and 251 metres grading 0.17% copper from 90 metres down hole. Further drilling is required at Chikora to test both the central copper anomaly and the molybdenum bearing veins.

Argillic altered porphyry rock chip sample – displaying strong copper mineralisation: chalcopyrite, bornite (peacock blue/purple colour) and malachite (green colour)

Source: Company

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Mbina ARM completed a reconnaissance exploration programme at Mbina comprising regional mapping, rock chip sampling and stream sediment sampling from which it has defined a gold anomalous zone at Mbina North and a copper anomalous zone at Mbina Central. The reconnaissance exploration programme yielded some significant results. Rock chip samples taken from a 1.5 metre wide epithermal style vein returned 9.34g/t gold and 0.94% copper with strong zinc. Subsequent channel sampling returned 125 metres grading 0.5g/t gold and 0.23% copper. The mapping and sampling was followed up with a drill programme comprising four diamond holes over the Mbina North prospect. The aim of the drill programme was to test a 1.5 kilometre by 300 metre alteration zone. The first drill hole, KL001, was the most prospective returning 5 metres grading 1.98g/t gold from 29 metres and several narrow high grade intervals. Drill hole KL002 returned a highlight of 7 metres grading 2.2g/t gold including 1 metre at 5.73g/t gold from 120 metres. The Mbina Central anomaly remains untested by drilling. ARM and Newmont have re-processed data from an airborne magnetics survey previously run over the Koloula tenement by ARM. The re-processed data reveals that both the Mbina North and Mbina Central prospects have a moderately magnetised core with a highly magnetised rim (below image). This is important because this type of geophysical signature indicates a copper-rich core to a mineralised porphyry at depth, as evidenced by the Grasberg copper-gold orebody in Indonesia. Significantly, the new interpretation of the airborne magnetics suggests that none of the four diamond holes drilled by ARM at Mbina have penetrated the magnetic high anomalies.

Mbina – geophysical anomalies and diamond drill holes

Source: Company

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Central The Central tenement is highly prospective for a large tonnage low grade porphyry deposit. The Solex-Freeport joint venture first identified Chupukama Ridge, reporting rock chip samples of 3.8g/t gold and pan concentrates of 10.93g/t gold. Solex-Freeport completed trenching programmes by sampling fresh landslide scarps across Chupukama Ridge. The trenches returned wide, low grade intersections including 90 metres at 0.2g/t gold and 148 metres at 0.4g/t gold. ARM first explored Chupukama in 1996 and 1997 using an exploration programme comprised of rock chip sampling, landslide scarp trenching and airborne geophysics. The campaign returned positive results including trenches yielding 50 metres at 1.63g/t gold and 55 metres at 2.39g/t gold including 5 metres at 11.05g/t gold. ARM re-gained access to the Central tenement in late 2008 enabling the company to carry out a comprehensive mapping and sampling programme over the Chupukama Ridge. The exploration programme identified a 10ppb gold-in- soil anomaly which is coincident with both magnetic and potassium radiometric low features. The programme also defined a 500ppm copper anomaly over a 300 metre strike length along Chupukama Ridge that is coincident with a circular magnetic high feature rimmed by a potassium radiometric high. This is significant because it suggests that the mineralised system occurs as a copper rich core with a gold rich halo.

Chupukama copper-gold prospect – a geophysical target

Source: Company

Chupukama – highly rated target Solomon Gold now recognises Chupukama to be a masked porphyry copper prospect which is rimmed by epithermal gold veins and argillic clay alteration. ARM and Newmont recently reinterpreted the Central tenement geophysical data. Coupled with the upcoming BLEG sampling and mapping programme, the reinterpreted geophysics will be used to identify new drill targets with a view to drill testing the tenement later this year. The Chupukama prospect is highly rated within the Solomon Gold-Newmont farm-in. We are of the opinion that the Chupukama prospect demonstrates both the scale and the features characteristic of a potentially large porphyry system.

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Kuma Exploration at Kuma commenced in March 2007. ARM conducted a reconnaissance exploration programme over the tenement comprised of mapping, rock chip and stream sediment sampling, ground magnetics and airborne magnetics. Kuma ranks highly amongst the five tenements in Guadalcanal Island and the prospectivity of the project is evidenced by the significant mineralised boulder float train which appears along the Kuma River, indicating a significant clay pyrite alteration zone upstream. Solomon Gold and Newmont intend on progressing the prospect to drill testing through a reconnaissance programme which will include detailed mapping and geochemical surveys.

Oxidised boulders in the river – suggestive of a significant mineralised system upstream

Source: Company

High sulphidation potential Kuma displays many features supportive of a high sulphidation lithocap masking a porphyry system at depth. The lithocap occurs as an extensive argillic alteration zone associated with anomalous gold, silver, arsenic, mercury and tellurium, which are characteristic pathfinder elements for high sulphidation systems. The lithocap alteration zone is also coincident with a 4 kilometre by 3 kilometre de-vegetation anomaly. This is due to the acid conditions of the soil and is a common feature of high sulphidation epithermal style systems. Lithocaps are an important feature of porphyry prospects because they are commonly considered to overlie or ‘cap’ a porphyry system at depth. At Kuma, an elliptical magnetic feature underlying the cap rock is supportive of a porphyry body at depth. International epithermal expert, Dr. Richard Sillitoe notes that it is “widely accepted that advanced argillic lithocaps may overlie and conceal porphyry deposits”. The scale of the argillic lithocap at surface is highly indicative of the scale of a porphyry system at depth and at Kuma the mineralised cap rock covers an area of 3 kilometres by 1.5 kilometres, potentially signifying a major mineralised system. Significantly, the company also believes that the argillic alteration extends west into the Koloula tenement. The company believes that Kuma has the potential to host an orebody in line with Newmont’s Batu Hijau copper-gold deposit in Indonesia or the Lepanto copper-gold deposit in the Philippines. The Batu Hijau deposit is buried beneath a wide spread argillic lithocap while the Lepanto deposit hosts high sulphidation epithermal style copper-gold mineralisation within the argillic lithocap itself.

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Mbetilonga The Mbetilonga tenement encompasses the Hambusimaloso, Vatuchichi and Vuralangomma copper prospects which lie within the trapezoidal Mbetilonga basin. Previous exploration within the tenement recognised the prospectivity of the Mbetilonga tenement for the discovery of a large porphyry style deposit. Copper occurrences are widespread across the Mbetilonga basin and significantly, supergene enriched copper occurs commonly along the rivers and streams. ARM first conducted exploration at Mbetilonga in the mid-1990s and returned to the project in late 2005. The company’s first pass exploration programme comprised an airborne geophysical survey which was followed up by a reconnaissance programme of mapping and rock chip sampling. ARM has since completed further exploration consisting of mapping, trenching and rock chip sampling.

Multiple prospects The Hambusimaloso prospect is a 1 kilometre by 0.8 kilometre copper-in-soil anomaly which is particularly prospective because of its extensive supergene enriched copper zones. Hambusimaloso is a magnetic low anomaly which is coincident with a potassium radiometric low. The radiometric low is rimmed by a potassium radiometric high. This is a classic porphyry style signature because the magnetic and potassium radiometric lows represent the mineralised core of the porphyry system while the potassium radiometric high represents the potassic alteration which typically surrounds the mineralised core. The Vatuchichi prospect has many of the key features associated with a porphyry system including a possible leach cap and strong supergene copper mineralisation. The prospect also hosts both skarn and epithermal style mineralisation and strong anomalous tellurium. The occurrence of the tellurium is important because it is typically seen as a pathfinder element for high sulphidation epithermal systems. The Vuralangomma prospect also hosts three styles of mineralisation including low sulphidation epithermal style mineralisation and high level dykes hosting economic copper grades. Mineralisation at Vuralangomma is associated with linear structures within the Mbetilonga basin. The company expects that Vuralangomma will be amongst those targets which are drill tested this year. The company has drilled five diamond holes at Mbetilonga. The first three were drilled at Hambusimaloso and the second two were drilled at the Hahala diorite porphyry. The diamond holes drilled at Hambusimaloso aimed to test a 2.5 kilometre by 1 kilometre copper anomaly. However, the drill holes did not break through the thick volcanic cover and as such, the target was not reached. Therefore, the Hambusimaloso is considered to be untested by drilling. An airborne magnetic survey has been flown over the Mbetilonga tenement and the company believes that this will aid significantly in providing new targets for the upcoming exploration campaign.

Copper oxide and sulphide along drainage demonstrate the prospectivity of the Mbetilonga tenement

Source: Company

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Sutakiki ARM first commenced exploration at Sutakiki in mid-2006. Initial exploration focused on high order gold anomalies first discovered by Newmont in the late 1980s. The company completed a reconnaissance programme comprising mapping and rock chip sampling which returned grades of up to 1090g/t gold. This was followed up with a drill campaign comprising a total of 24 diamond drill holes.

Highlights of drilling at Sutakiki Drill hole SK001 was drilled into the Tabarora stockwork gold-copper porphyry prospect and returned an intersection grading 147 metres at 0.79g/t gold and 0.21% copper including 2 metres at 12.43g/t gold. The mineralisation at SK001 occurs within sheeted quartz-magnetite-chalcopyrite veins. The Tabarora prospect demonstrates a subdued circular magnetic high feature which is inferred to be a porphyry buried at depth. Drill hole SK011 was drilled into the Valehailala prospect and returned highly encouraging results of 50 metres grading 6.39g/t including 32 metres at 9.45g/t gold which, in turn, includes 10 metres at 21.1g/t gold. The style of mineralisation is a skarn (shown in the image below) which is typically found on the margin of porphyry systems and is hosted by carbonate rocks. The skarn gold mineralisation has been overprinted by low sulphidation epithermal style mineralisation and the combination of the two mineralised styles has caused the increase in gold grade.

SK011 – significant gold grades from skarn mineralisation with an epithermal overprint

Source: Company

A porphyry target On completion of the 24 drill hole diamond programme, ARM recognised that Valehailala was not prospective for an economic skarn style deposit despite some very interesting results. This is largely because the carbonate rocks, which host the skarn style mineralisation, occur as discontinuous lenses and therefore do not possess the scale to host a significant sized deposit. The company has changed its genetic model for the mineral occurrences at Valehailala and now believes that the Sutakiki tenement is prospective for a porphyry style deposit. This is evident by the background metal values in both the drilling and the surface geochemistry which is indicative of mineralisation that typically occurs on the margins of porphyry system. The existence of a porphyry system is further evidenced by a series of coincident potassium radiometric and magnetic anomalies. A number of structural lineaments have also been identified across the Sutakiki tenements and these are considered to control the porphyry style mineralisation. Solomon Gold and Newmont recently completed an airborne electromagnetic geophysical survey over the Sutakiki tenement. Solomon Gold expects that the results of this survey will provide new targets to follow up with a programmed encompassing mapping, sampling and eventually diamond drilling.

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Solomon Gold’s project pipeline Fauro Island The Fauro Island gold project is a volcanic hosted epithermal style prospect. The company believes that the Fauro Island gold project shares many key features that are characteristic of the plus 40 million ounce Lihir gold mine in Papua New Guinea. The Fauro Island tenement is currently under application and remains subject to negotiating a suitable access and compensation agreement with the local people.

Location and accessibility Fauro Island is part of the Shortland Islands group in the Western Province of the Solomon Islands. The island is situated along the southeast trending volcanic arc that extends from Papua New Guinea through the Solomon Islands. Fauro Island lies to the south of Bougainville Island and is aligned along the same trend as the giant Panguna copper-gold orebody. Fauro Island is a collapsed volcanic caldera structure. Much of the caldera is now submerged beneath the sea and only the remnant eruptive cone remains visible above the water line. The project is accessed by motorised boat or helicopter.

Fauro Island project location

Source: Company

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Exploration at Fauro BHP, CRA, Western Pacific Mining and Utah Minerals have each explored Fauro Island. Previous exploration has focused on mapping, gridding, stream sediment and soil sampling, trenching and ground magnetometry. The results indicate that there are many zones of anomalous surface gold. The three of the more advanced prospects on Fauro Island are Kiovakase, Hornbill and Mergiuna. The Kiovakase prospect is a 400 metre by 150 metre gold-in-soil anomaly with gold up to 2g/t. Channel sampling has returned highlights of 18 metres grading 1.42g/t gold and the most significant rock chip sample has yielded 317g/t gold. The Hornbill prospect is a 480 metre by 400 metre gold-in-soil anomaly which has at least seven sub-parallel zones of gold enrichment. The highest gold-in-soil values are 22.6g/t gold and channel sampling has returned 30 metres at 1.42g/t gold including 2.5 metres at 24.6g/t gold. The most significant rock chip sample returned 5.04g/t gold. The Meriguna prospect is a 500 metre by 300 metre gold-in-soil anomaly with gold values of up to 1.45g/t. Channel sampling has returned 30 metres grading 1.6g/t gold, 10 metres at 5g/t gold and 6 metres at 4.9g/t gold. Mineralisation occurs in andesite-hosted quartz (and chalcedony) veins and is associated with pyrite and base metal sulphides. The andesites are closely associated with porphyry intrusions and/or intrusive breccias.

Historical drilling highlights Historical drilling (completed by BHP and Western Pacific Mining during the late 1980s and late 1990s) on Fauro Island has returned anomalous and potentially economic gold grades. Four drill holes were completed at the Kiovakase prospect. Drill hole KD1 returned 1 metre grading 0.61g/t gold from 16 metres and drill hole KD4 returned 1 metre grading 0.54g/t gold from 66 metres. Two drill holes have been completed at the Hornbill prospect. Highlights of the drilling return gold grades of 8g/t over 0.5 metres and 0.32g/t gold over 5 metres. Five holes have been drilled at the Meriguna prospect. Drill hole LD1 retuned highlights including 13 metres at 0.95g/t gold, 2 metres at 3g/t gold, 4 metres at 2.52g/t gold and 14 metres at 1.06g/t gold.

Highlights of historical drilling at Fauro Prospect Drill hole Depth Thickness Gold grade Kiovakase KD1 16m 1.0m 0.66g/t Kiovakase KD2 66m 1.0m 0.58g/t Hornbill - - 0.5m 8g/t Hornbill - - 5.0m 0.32g/t Meriguna LD1 57m 1.0m 0.66g/t Meriguna LD2 3m 13.0m 0.95g/t Meriguna LD3 49m 4.0m 0.55g/t Meriguna LD4 16m 2.0m 1.43g/t Meriguna LD4 28m 4.0m 2.52gt Meriguna LD4 54m 3.0m 0.79g/t Meriguna LD5 18m 6.0m 0.85g/t Meriguna LD5 30m 14.0m 1.06g/t Source: Company

“Gold in every creek” Solomon Gold intends to commence a reconnaissance exploration programme on Fauro Island this year. The company is currently processing and interpreting geophysical data at Fauro and intends on commencing a reconnaissance exploration programme comprising mapping and sampling with a view to drill testing as soon as possible. Solomon Gold suggests that regionally, the Fauro Island gold project has “all the criteria favourable for hosting epithermal gold mineralisation” and it has been reported that alluvial gold occurs in every creek within the rim of the volcanic caldera. We believe that the results of historical exploration make the Fauro gold project an exciting one to watch.

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Ngella nickel-cobalt project The Ngella project is a nickel-cobalt laterite prospect. The project is situated on Big Ngella Island in the Florida group of islands approximately 50 kilometres northeast of Honiara. Ngella is accessed by motorised boat or helicopter. The Ngella prospecting licence (PL 57/07) is valid for an initial period of three years and the next renewal date will be 9 September 2010.

Geology of the Florida Islands The geology of the Florida Islands is dominated by mafic pillow lavas intruded by dolerite dyke swarms. Ultramafic ophiolites occur as thrusts which form a rim around the north of the Big Ngella and Small Ngella islands. The ultramafic suites are serpentinised harzburgites and associated gabbro and pyroxenite dykes and veins. These ultramafics are the proposed provenance of the nickeliferous laterites on Big Ngella Island. The Ngella project comprises the Hay Hill and Tanuli Hill prospects which are nickeliferous laterites that lie over the serpentinised harzburgites.

The Ngella Islands Hay Hill and Tanuli Hill prospects (circled in red)

Source: Company

Exploration at the Ngella project ARM commenced exploration at the Ngella project late 2007. The exploration campaign comprised a rudimentary programme of digging pits along outcropping laterites. A total of 8 pits were dug to around 5 metres depth. The results of the pit programme defined a 2 kilometre by 1 kilometre area of anomalous nickel which remains open to the south. Some significant results were returned including 2.0% nickel in the Hay Hill area. Many of the pits ended in mineralisation averaging 0.5% nickel. The pit programme was followed up by an auger campaign with holes drilled to a depth of 10 metres. A total of 110 auger holes were completed. The company believes that mineralisation remains open at depth. Further pitting will test the southeast extension of the nickel mineralisation. Solomon Gold has defined an in-house (non-code compliant) resource of 1.695 million tonnes grading 0.6% nickel and 0.06% cobalt. However, as the depth of the mineralisation hasn’t yet been defined, the company suggests that the Ngella project has the potential to host a resource closer to 5.4 million tonnes grading 1.0% nickel and 0.1% cobalt.

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Share price drivers The first twelve months of the Newmont farm-in exploration campaign on Guadalcanal Island commenced in March 2009. The programme encompasses mapping, sampling, trenching, BLEG sampling, airborne geophysics and drilling. The company believes that drilling will commence in June or July of this year. We expect that the assay results of the drill programme will start coming in around six weeks after drilling commences and will be continually released over the period of the drill programme. Under the definitive agreement with Newmont, the farm-in team intends on completing 2,800 metres of drilling. However, we expect that the results of the drilling will warrant further metres to be added to the budget. It should be noted that these dates are approximate and that as exploration continues, the programme may be revised. We expect that any positive results to arise from the current sampling and trenching programme will lead to the JV team intensifying activity at Guadalcanal.

Exploration programme for the first twelve months of the farm-in agreement Event Timeframe Date of expected results BLEG/soil/rock chip sampling and mapping March to November June onwards Trenching May to July June onwards Airborne geophysics June July Drilling 2,800 metres July to March August to March Commencement of 2010 exploration campaign March 2010 2010 Commencement of 2011 exploration campaign March 2011 2011 Commencement of Stage two earn-in March 2012 2012 Source: Company/HW

We believe that Solomon Gold is currently undervalued with substantial upside potential and we expect to see a significant re-rating of the company’s share price as exploration progresses at the Guadalcanal Island tenements. As such, we strongly recommend that investors BUY this stock with a view to long term investment. Risk assessment Financing We believe that Solomon Gold will need to secure adequate financing over the next year. As of 31 December 2008, the company had cash in the bank of £146,907. Also, the company will receive 5% to 10% of the exploration costs (probably around 7% on average) incurred by the joint venture as a management fee. However, while the exploration expenditure for the Guadalcanal Island tenements is carried by the farm-in with Newmont, we believe that further funds will be required for working capital and for exploration at the company’s Fauro Island and Ngella projects. Further ethnic disaffection Solomon Gold and indeed many of the locals, believes that while the Regional Assistance Mission Solomon Islands (RAMSI) has a stronghold in the country, the probability of further ethnic tensions is minimal. Australian Government’s Minister for Home Affairs Mr Bob Debus MP, recently visited RAMSI’s headquarters in the Solomon Island and said that his meetings “re-emphasised the vital commitment we have made through RAMSI to securing the ongoing stability and development of the Solomon Islands”. Terrain and landslides Reconnaissance exploration in the Solomon Islands covers rugged inhospitable terrain. Helicopter support is a necessary expense and drilling can be extremely challenging in such conditions. We believe that this risk is somewhat mitigated by Solomon Gold and Newmont’s significant experience and expertise of operating under these conditions. Landslides are a significant risk on the island of Guadalcanal and particularly on the Weather Coast. Mitigation of the damage caused by landslides is extremely important and requires good local knowledge of the area. Solomon Gold employs the local people who play a vital role in advising the company of the risks and likelihood of landslides across the tenements. Fauro Island tenement risk We also note that the Fauro Island tenement is still under application and as such it cannot be guaranteed that the company will be awarded the licence.

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CONTACTS

SALES: Sanjiv Pandya +44 (0)20 7601 6130 [email protected]

Simon Hodges +44 (0)20 7601 6136 [email protected]

Malcolm Graham-Wood +44 (0)20 7601 6138 [email protected]

Raj Karia +44 (0)20 7601 6128 [email protected]

Deborah Kimbell +44 (0)20 7601 6127 [email protected]

SALES TRADING: Martin Dobson +44 (0)20 7601 6135 [email protected]

Helen Brown +44 (0)20 7601 6126 [email protected]

Ilona Samu +44 (0)20 7601 6137 [email protected]