Kodiak’s Hercules gold discovery is located approximately 120 kilometres northeast of Thunder Bay, in Ontario’s historic Beardmore-Geraldton Gold Camp (4.1 million ounces production to date). The property is road accessible and close to infrastructure. Past producers in the area include the Leitch Mine, 30 kilometres to the southwest, which produced 1 million tons of ore at an average grade of 31.54 grams per tonne gold (0.92 opt) from similar Archean rocks and shear zones.

At Hercules, Kodiak has discovered and verified high-grade gold in a series of quartzcarbonate shear zones that cut through granodiorite and metavolcanic rocks. Surface stripping during 2006 and 2007 has exposed several massive gold-bearing structures consisting of quartz vein and stockwork systems with a combined strike length of more than 5 kilometres. Individual veins are up to 9 metres wide and 1000 metres long, and are enclosed within a wide envelope of intensely sheared sericite, chlorite, quartz, and hematite alteration. The gold-mineralized structures remain open in all directions, and display many of the characteristics of significant shear-hosted gold deposits in the Archean throughout Canada and other countries around the world.

Shallow reconnaissance drilling along the Hercules shear zone in 2006 focused on three main areas: the WL, Penelton and Yellow Brick Road gold zones. Drilling in the WL zone intersected high-grade gold over significant widths in three holes. Hole HR-06-03 intersected 15.59 g/t Au over a true width of 9.7 metres, including 51.65 g/t Au over 2.83 metres, and holes HR-06-02 and HR-06-05 also returned gold values greater than 10 g/t Au over multi-metre intervals. These drill results were confirmed by surface channel samples WL-01, WL-04 and WL-05, which assayed 9.76 g/t Au over 9.22 metres, 16.59 g/t Au over 4.60 metres and 11.87 g/t Au over 5.20 metres respectively. The drill and channel intersections outline a high-grade gold-mineralized shoot, plunging west to northwest within the steeply south-dipping shear zone. The high-grade shoot remains open down plunge, and is enclosed within a broad mineralized halo of lower grade material up to 75 metres wide.

Holes HR06-01 to HR06-16 tested the WL gold zone over a strike length of 250 metres. Surface stripping and reconnaissance holes HR06-17 to HR06-20, drilled along strike to the northwest in the Penelton and Yellow Brick Road zones, confirmed the continuity of gold mineralization, veining, alteration and shearing over a total strike length of 1.2 kilometres. The metamorphosed porphyry and felsic volcanic wall rocks are intensely altered, indicating that large volumes of hydrothermal fluid have passed through the Hercules shear, which is steeply dipping to vertical, and up to 40 metres wide. Both the veins and intensely sheared wall rocks are gold-bearing.

Mineralographic and microprobe analysis has confirmed the presence of electrum (a gold-silver alloy) in several samples from the WL zones, and a strong correlation between gold and silver values in the shear suggests it is widespread. Metallics assays were performed to mitigate any sampling errors which could be caused by uneven distribution of gold in the veins, and the results indicate that both fine and coarse gold are present in the system. The electrum identified in microprobe samples contains up to 57 weight per cent silver, and appears to be contemporaneous with gold grains containing 5 to 7 weight per cent silver. It is intergrown with fine grained native bismuth and bismuthinite, and along with chalcopyrite, forms late stage rims on pyrite grains. Gold and electrum also occur as inclusions in quartz and pyrite, and veinlets of electrum have been observed cross-cutting pyrite grains. The widely varying silver content of gold within the same sample is inferred to mean that the gold and electrum were deposited from boiling hydrothermal fluids. The mineral paragenesis suggests gold was introduced during more than hydrothermal event.

Infill drilling in the WL zone in 2007 intersected multiple zones of gold mineralization, including 5.8 g/t Au over 2.6 metres and 62.89 g/t Au over 0.4 metres in hole HR-07-04.

In August, 2007 Kodiak prospectors discovered the Golden Mile, a major new goldmineralized structure 2 kilometres west of and parallel to the WL-Penelton-Yellow Brick trend. Surface trenching has exposed the Golden Mile over more than 2 kilometres, with a geophysically-indicated strike of more than 4 kilometres. Continuous gold mineralization has been traced for more than 365 metres along the Golden Mile structure, and visible gold is frequent and conspicuous within this interval. Forty one per cent of grab samples taken along this zone to date exceed 10 g/t Au, and channel samples taken every 20 metres along this zone averaged 20.2 g/t Au over an average width of 3.8 metres, including one that assayed 32 g/t Au over a width of 11.6 metres. Two drill holes beneath this sample also intersected good gold mineralization, including 6.89 g/t Au over 4.0 metres in Hole HR07-09. Every drill hole to date has intersected gold mineralization accompanied by strong hydrothermal alteration, including two wide stepouts 1340 metres apart along the Golden Mile structure: Hole HR-07-29, which graded 54.1 g/t Au over 2.0 m, including 134.4 g/t Au over 0.8 m and Hole HR07-31 intersected 12.64 g/t Au over 1.4 m. Normally in Archean gold systems, a hit ratio of one drill hole in four is considered outstanding and justifies further drilling, or in the case of operating mines, underground development. Hitting significant mineralization in virtually every drill hole shows the strength of the Golden Mile and Hercules gold systems, and suggests that a large resource could be present.

Many new veins continue to be uncovered in this area of strong gold potential measuring some 30 square kilometers, but most of the property remains unexplored. Several other parallel or ladder veins have already yielded strong gold values across significant widths, including the Marino vein where hole HR07-16 intersected 38.5 g/t Au over 1.6 metres, including 93.18 g/t Au over 0.6 metres, and the 7 of 9 zone, where all five drill holes to date returned gold values between 1.21 and 3.70 g/t Au over sample intervals of 0.35 to 1.20 metres.

Prospecting has identified several additional gold bearing vein outcrops in the one kilometre interval between the Golden Mile and the Yellow Brick Road-Marino-Penelton area, confirming the potential to discover additional gold mineralized veins. The widespread distribution of gold-bearing grab samples, confirms the tremendous untapped potential of the entire area, both along strike and to depth.

Subsequent Events

Channel sampling along the Golden Mile on 20 metre spacing has already documented continuous high grade mineralization over a strike length of more than 400 metres. Infill channel samples have now been taken on 10 metre spacing. Like the earlier channel samples, they all contain visible gold or sulphides, and have been rushed for gold analysis. A large amount of drilling will be needed to establish a resource, and Kodiak has commissioned three additional drill rigs to speed up the work. One of these is already active, a second drill rig has been ordered and is expected before the end of the year, and the third will arrive early in the New Year. With a recent bought-deal equity offering that raised $55 million, Kodiak has locked in the funding necessary to fast-track its exploration, and has commenced a 60,000 metre diamond drill program to test the economic potential of the Golden Mile, Yellow Brick Road and other gold-mineralized structures in this intensely mineralized area.

Beardmore-Geraldton Land Acquisition and Reconnaissance

Kodiak has embarked upon an aggressive strategy to control as much of the Beardmore-Geraldton gold belt as possible, and as a result of staking, joint ventures and options with private landowners, Kodiak is now the dominant landholder in the region, with a property that covers approximately 1400 square kilometers of favourable stratigraphy and structure in an area measuring approximately 150 kilometres long and up to 40 kilometres wide. Kodiak geologists believe this prolific gold belt, which has hosted 14 producing mines in the past, is under-explored during modern times, and therefore offers an exciting potential for the discovery of new economic gold deposits in an Archean terrain that is similar to gold camps such as Timmins, Val d Or, and Kirkland Lake.

During the next year Kodiak geologists will carry out a detailed and systematic exploration program along the belt that will consist of line cutting, geophysics, stripping, trenching, geologic mapping, and geochemical sampling. Positive results from this initial reconnaissance will be quickly followed with core drilling.