THE HOMASE & AKROKERRI LICENCES - GHANA

The Homase and Akrokerri permit areas (Figure 1) borders on the eastern and northern boundaries of Anglo Gold Ashanti's Obuasi permit. Although the permit areas are dealt with by the Company as a geological unit, the ownership structures of the Homase and Akrokerri permits differ. In respect of Homase GoldStone currently owns a 51% interest in the permit and may earn up to a maximum of 85% interest in the permit subject to GoldStone spending exploration expenditure on the project and/or reaching certain exploration targets (see below). In respect of Akrokerri GoldStone currently owns 95.1% of the licence through its wholly owned subsidiary GoldStone Akrokerri(Ghana) Ltd.

Figure 1: The Homase/Akrokerri project area covers rocks of the Birimian Formation and lies within the prospective Ashanti Gold Belt where more than seventy million ounces of gold were discovered. This belt also includes AngloGold Ashanti’s Obuasi Mine and Golden Star’s Prestea Mine.

Location, Exploration History and Regional Prospectivity
The area of interest falls in the Bekwai District of the Ashanti Region in Ghana close to the town of Obuasi. Together the Akrokerri and Homase permits cover an area of approximately 143 square kilometres and lieonly 15km north-east of Anglo-Gold Ashanti's fifty million ounce Obuasi Mine. The Homase/Akrokerri project is located within the well mineralised Ashanti Gold Belt where more than seventy million ounces of gold have been discovered. Geologically the area lies within the same geological environment as the massive Obuasi gold deposit which has been exploited at surface and underground over the last 100 years. Shea Gold Limited (“Shea”), a subsidiary of Dominion Mining Limited, a previous explorer in the area, targeted the Homase mineralised trend and drilled more than 200 boreholes during 1998, 1999 and 2000 to quantify the continuous gold mineralisation along more than three kilometres strike length (Figure 2).

Figure 2: A simplified map of the Homase/Akrokerri project area shows that the area of interest lies in the same geological environment as the fifty million ounce Obuasi Gold Mine. AngloGold Ashanti’s processing plant is within trucking distance of the permit area (15 km from Homase and 10 km from Akrokerri). The map also shows the area under which a gold resource of 405,600 ounces was estimated from historical drill data. Various gold prospects are also shown.

Some of the most significant intersects drilled by Shea along the Homase mineralised trend are listed below.

HOMASE/AKROKERRI PROJECT BEST INTERSECTS

HOLE	FROM (m)	TO (m)	WIDTH (m)	AU GRADE (g/t)
98HMRC010	20	46	26	2.9
98HMRC011	0	24	24	1.8
98HMRC035	0	22	22	3.8
98HMRC050	1	13	12	4.2
98HMRC051	16	23	7	7.3
99HMRC071	40	54	14	7.3
99HMRC075	20	46	26	4.0
99HM RD072	76	82	6	19.7
99HMRD165	100	123	23	6.2
99AKRC058	9	24	15	2.27
99AKRC044	11	41	30	2.09
99AKRC003	24	34	10	2.14
99AKRC078	36	47	11	4.76
99AKRC052	39	49	10	2.47

Mining by Ashanti Goldfields

Ashanti Goldfields (“AG”) acquired the Homase License from Shea Limited during 2001 for a production based consideration of approximately US$550,000 and mined ore from two pits (“Homase Pits”) during 2002 and 2003 (Figures 3 and 4). The mining was limited to a strike length of 800 metres of the four kilometre mineralised zone. The ore was trucked to AG's nearby Obuasi oxide processing plant and approximately 40,000 ounces of goldwere recovered at a reported recoverable grade varying between 2.6 and 2.7 g/t. AG stopped mining operations in the Homase License area during 2003 at a time when the gold price was between US$320 and US$380 per ounce at a reported operating cost per ounce of US$220 and $280. The close proximity of the Homase/Akrokerri project area to the modern mining town of Obuasi will simplify the sourcing of the required exploration and mining skills as well as the equipment needed to advance this exploration property.

Figure 3: A photograph of the Homase Pit, taken during 2002 when the pit was still mined by Ashanti Goldfields.

Figure 4: A photograph of the Homase Pit (also shown in Figure 3), looking north, taken during 2009. The long axis of the pit measures approximately700 metres. GoldStone presently drills inclined boreholes to test if higher grade mineralisation extends down dip below the pit and if it would be suitable to deeper open pit or underground mining.

JORC Compliant Gold Resource
GoldStone published JORC compliant resources based on historical drill datafor the Homase (April 2010) and Akrokerri (June 2011) permits. The estimates were compiled by SEMS Exploration Services Limited, an independent West African based consulting firm. Geologically the two resources are located along the same structure and form part of the same gold deposit. The Akrokerri resource is the direct southern extension of the Homase resource. The combined Homase/Akrokerri gold resource is 8.87 million tonnes of ore at an average grade of 1.42 g/t, containing 405,600 ounces of gold (Figures 5 and 6). The gold resource extends from surface to a depth ranging from 130m to 200m. The details of the combined resource, for which a 0.5 g/t gold cut off was applied, are given in the below:

COMBINED HOMASE/AKROKERRI RESOURCE

	Tonnage	Grade	Contained Gold
		(g/t)	(ozs)
Measured	3,032,617	1.61	157,298
Indicated	2,694,102	1.42	122,755
Measured &Indicated	5,726,719	1.52	280,053
Inferred	3,145,282	1.24	125,503
TOTAL	8,872,001	1.42	405,556

Figure 5: A three dimensional model of the Homase open pit and the gold resource. The highest grade ore blocks are shown in red, while lower grade ore blocks are shown in “cooler” colours. Boreholes planned to test the down-dip extent of the high grade ore shoots are shown in yellow.

Figure 6: A three dimensional model of the Homase open pit and the gold resource. The ore blocks that could be estimated with the highest confidence (measured category) are shown in pink.

GoldStone’s Exploration Programme
Exploration data acquired by the company and the results of the VTEM airborne survey demonstrated that the gold mineralisation may extend beyond the presently known strike and depth extent of the gold resource. Mining of the Obuasi gold deposit in the same geological environment, fifteen kilometres to the south-west of Homase/Akrokerri, extends presently to a depth just short of 2000 metres. GoldStone ’s 4500m drill programme commenced during June 2011.

On 11 August 2011 GoldStone announced results for the first five drill holes under the Homase open pit.  All five drill holes intersected significant gold mineralisation and confirmed that the targeted high-grade gold shoot under the northern part of the previously mined Homase open pit extends to a depth of at least 140 metres below the bottom of the dormant pit (Figures 7 & 8).  A summary of the drill results is tabled below.

Drill hole	From (m)	To (m)	Width (m)*	Gold Grade (g/t)
11HMRD001 including	159	172.6	13.6 8.3	5.9 7.2
11HMRD002 including	158	171	13.0 10.0	6.4 8.2
11HMRD003	181	189.5	8.5	9.5
11HMRD004 including	142	150	8.0 6.0	4.9 6.5
11HMRD005 including	177	190	13.0 6.5	4.7 8.9

* The widths given in the table are down-hole widths.

Figure 7:  Longitudinal section showing the positions of the high-grade gold intersections achieved with the first five boreholes under the previously mined Homase open pit.  It can be seen that the drilling significantly extended the known extent of the high-grade shoot under the pit.

Figure 8: Cross section through the Homase open pit, from which AngloGold Ashanti mined approximately 40,000 ounces of gold during 2002 and 2003, and the underlying gold mineralisation.  GoldStone’s drill programme (e.g. drill hole 11HMRD003) clearly confirmed that the high-grade mineralisation under the pit extends to depth.  Upcoming drilling will be aimed at increasing GoldStone’s 405,600 ounce gold resource on this permit.

The gold mineralisation is hosted by greywacke which occurs within a succession of sheared phyllites.  Importantly, the ore zone is easily identifiable by graphitic marker horizons at the base and top of the mineralised unit. 

To date seven drill holes totalling 1,578 metres, being the first phase of a 4,500 metre drill programme, have been completed.  All holes intersected the targeted mineralised unit.  A second phase drill programme for another 4,500 metres will commence after the first phase results have been reviewed.  This work, if positive results can be achieved, will allow us to upgrade the present resource closer towards the “critical mass”.

Other Exploration Potential

The project area also contains additional highly prospective exploration targets that will be targeted with further exploration:

• The Akrokerri granite (Figure 8) in the western part of the Akrokerri permit is marked by a very promising gold in soil anomaly. In this area artisanal gold mining sites are located along a north-west trending line of activity, probably indicating that the exploited gold mineralisation is controlled by underlying structures trending in this direction. Detailed mapping and trenching in this area may result in the generation of drill targets.
• The location of the dormant Akrokerri underground mine, shown as “Akrokerri High Grade” in Figure 8, is close to the Akrokerri granite. Mining to a depth of 114 metres between 1900 and 1909 resulted in the recovery of 75,000 ounces of gold at an average grade of 24 grammes per tonne. More recently, Birim Goldfields Ltd (1996 - 1997) and PAF (2008), previous operators of the permit, drilled a total of 16 boreholes to test for potential extensions of the mineralisation at the mine site. A preliminary review of the exploration data indicated that this exploration was inconclusive and that more work is justified to explore for potential extensions of the mineralisation.
• The results of the VTEM airborne survey as well as the regional soil geochemistry suggested that structures parallel to the Homase shear zone may exist and may be mineralised. A good example is the Adubrim prospect. Infill soil sampling and possibly trenching will be carried out over these areas and may result in the definition of further drill targets.
  

Figure 9: A prospectivity map of the Homase/Akrokerri project area showing the mineralised Akrokerri granite, the dormant Akrokerri mine and possible extensions of the gold resource along strike. The location of the Adubrim prospect can also be seen.

Homase: Joint Venture Agreement
GoldStone has the right to earn a 85% interest in the Homase License subject to it financing exploration expenditure and making payments of participation monies to Cherry Hill in pre-agreed phases, which may be summarized as follows:

• A tenement due diligence phase of up to 30 days to receive confirmation from the Minerals Commission of Ghana that the Homase License is in good standing and that it may be the subject of the Agreement. Once confirmation is received by GoldStone payment of a participation fee of US$15,000 will be made to Cherry Hill.
• A geological and further legal due diligence phase of up to five months primarily in order to allow GoldStone to obtain, collate, interpret and assess available historical data. No exploration expenditure is committed to and no participation fees will be paid at commencement of this phase.
• Exploration Expenditure will commence with a geological target generation phase which has to be conducted within a period of 12 months. Participation fees of US$16,000 are payable to Cherry Hill at commencement of this phase and the Company has to spend no less than US$200,000 in order to acquire a provisional 10% interest in the Homase License, which interest will become permanent as soon as GoldStone acquires a 51% interest.
• A further exploration phase potentially comprising of initial target drilling and regional exploration is to be conducted over a maximum period of 12 months with the right to earn a total provisional interest of 25% after having spent an additional amount of US$500,000. Participation fees of US$20,000 are payable to Cherry Hill at commencement of this phase.
• After expending of a further amount of no less than US$800,000 over a maximum period of 12 months or upon defining a code compliant inferred resource of any magnitude (whichever occurs the earliest), the Company will earn a permanent interest of 51% in the Homase License. Participation fees of US$24,000 will be payable to Cherry Hill at commencement of this phase.
• A minimum of US$ 1 million has to be expended during the next phase or a pre-feasibility study conducted over any defined resources (whichever comes earliest) in order to earn a permanent 65% interest in the Homase license. Participation fees of US$30,000 will be payable at commencement of this phase.
• If a successful Feasibility study is conducted over the area the Company will have earned an interest of 85% in the Homase license. Participation fees of US$60,000 are payable to Cherry Hill at commencement of this phase.
  

The Agreement also determines that if exploration expenditure in any phase exceeds the minimum amount of expenditure, the Company is obliged to expend the excess which will be credited towards subsequent phases. In addition GoldStone has the right to withdraw from the Joint Venture agreement at any time without penalty provided that it will retain no interest in the Homase license if it withdraws before acquiring a permanent interest of 51% and provided further that all technical reports generated by GoldStone on the Homase License are disclosed to Cherry Hill. The Agreement envisions the creation of a Joint Venture Company upon commencement of a development programme, to whom the Homase License and/or any ensuing mining licenses will be transferred in proportion to the respective interests held by GoldStone and Cherry Hill.

Ghana
Ghana, formerly the Gold Coast, is Africa's second largest gold producing country after South Africa with over 55 million ounces of gold having been mined over the last century. Gold mining contributes approximately 45% of the country's gross export earnings and mining generally enjoys a preferred status with a regulatory system that encourages further investment. Ghana has a stable and well established democratic system and has attracted most of the world's major gold producers including AngloGold Ashanti, Newmont, Golden Star and Goldfields.

Regulatory Environment
In terms of Ghanaian law the Government of Ghana is entitled to a 10% free carried interest in any mining ventures and Ghana's Minerals Act stipulates a mining royalty of not more than 6% and not less than 3% of the total revenue obtained from mining operations. The Corporate tax rate for Ghanaian Companies and for income derived from Ghana is 25% and dividends attract a withholding tax of 8%.