Morris Lake (NWT)

OVERVIEW

There are six mineral properties that comprise our “Morris Lake Project”, an 86.21 square kilometre block of contiguous leases and claims situated approximately 73 kilometres north of Yellowknife, Northwest Territories. The Morris Lake Project measures approximately 16.6 kilometres along the northerly trend of mineralized rocks across an average width of 4.3 kilometres.

Historical Setting

The zone of interest is comprised of volcanic and related sedimentary rocks, commonly rusty from the weathering of carbonate alteration and disseminated sulphide minerals.

The northern boundary of the Morris Lake Project lies next to the Tyhee Development property containing the past-producing Discovery Yellowknife Mine. The mine operated from 1950 to 1968 and produced one million ounces of gold from one million tons of ore. The band of mineralized rocks extends 95 kilometres southerly to Yellowknife, where it hosts the past-producing Giant Yellowknife and Con gold mines. Together these two mines have produced approximately 13 million ounces of gold over a period of 65 years ending in 2005.

The southern end of the Yellowknife – Discovery greenstone belt provided a guide to additional exploration – the Giant and Con Mines, which have produced 13 million ounces of gold. As at the Viking property, gold occurs principally in envelopes of altered volcanic rocks. However, as we know from the drilling program of the winter of 2008, there is no assurance that ore can be intersected within the alteration zone; it is just a better place to explore.  Gold was first recognized on the Giant property in 1938 by D. W. Cameron, in a zone, which was eventually mined. However, it was A. S. Dadson who began drilling from 1944 to 1946 and thereby discovered a more continuous gold zone, which contributed greatly to the success of the mine. He completed 199 drill holes during that period to identify the ASD ore zone.

During the last several years, we carried out a number of summer and winter exploration programs on these six properties including drilling and channel sampling, humus sampling, and mag, ip, limnic and other forms of survey.

The Six Properties

Information concerning the six mineral properties (total 9,063.2 ha.) which comprise the Morris Lake Project follows. Please see map #2 in Maps & Geology to view a map of the Morris Lake land holdings.

1. Viking Yellowknife (330.3 ha.)

• acquired in 2003
• 3 underlying mineral leases; 2 expirying in 2022, 1 in 2031
• working interest (legal JV) with 60% held by VGC; 40% by a private company (formerly Tembo Gold Corp/Lakota Resources Inc.)
• major annual exploration programs, 2004 to 2008
• $1,597,819 of exploration was incurred by VGC while property was under option (to Jan. 1, 2008)
• total costs to 12/31/11 - $2,007,029 - acqusition $123,500, exploration $1,883,529
• carrying value as at 12/31/11 - $1 (net of write-down of $2,007,028)

2. Max Lake (745.8 ha.)

• acquired in 2004
• 2 underlying mineral leases expirying in 2018
• VGC has a 100% interest pursuant to arm's length option agreement with Aur Resources
• subject to 2% NSR; 50% of NSR purchasable for $1 Million
• major exploration programs in 2007 and 2006
• total costs to 12/31/11 - $544,212 - acqusition $29,700, exploration $514,512
• carrying value as at 12/31/11 - $1 (net of write-down of $544,211)

3. ML Properties (1,287.0 ha.)

• acquired in 2006
• 100% interest in 5 underlying claims, in good standing
• only major exploration program in 2006
• $3,500 expenditure required in next 3 years
• next govt. assessment due dates in 2012 and 2013
• total costs to 12/31/11 - $113,121 - acqusition $8,359, exploration $104,762
• carrying value as at 12/31/11 - $1 (net of write-down of $113,120)

4. Peregrine (4,771.9 ha.)

• acquired in 2006
• 5 underlying claims, in good standing
• working interest (legal JV) with 60% held by VGC; 40% by Peregrine Diamonds Ltd.; dilution formula present
• major exploration programs in 2010, 2009; smaller programs in 2006 to 2008
• claims expire Nov 7, 2012 and must be brought to lease to continue thereafter
• new lease(s) will require the JV to fund a land survey at an est. cost of $60,000/claim (only 2 claims would be done)
• total costs to 12/31/11 - $951,169 - acqusition $0, exploration $951,168
• carrying value as at 12/31/11 - $1 (net of write-down of $951,168)

5. Maguire Lake (1,797.6 ha.)

• acquired in 2009
• 100% interest in 3 underlying mineral claims
• property lies to north of and adjoins Peregrine property
• part of these claims falls within a one km. area of influence under Peregrine agreement
• govt. assessments credits are expected to be covered by Peregrine excess credits
• total costs to 12/31/11 - $11,687 - acqusition $10,967, exploration $720
• carrying value as at 12/31/11 - $1 (net of write-down of $11,686)

6. LM Claims (130.6 ha.)

• acquired in 2010
• 100% interest in 2 underlying claims staked by VGC
• adjacent to ML Properties
• part of these claims falls within a one km. area of influence under Peregrine agreement
• next assessment dates are in May 2012
• total costs to 12/31/11 - $8,277 - acqusition $8,277, exploration $0
• carrying value as at 12/31/11 - $1 (net of write-down of $8,276)

Continued surface or underground exploration of the six Morris Lake properties requires that the Company apply for and be granted new land use permits by the Mackenzie Valley Land and Water Board (MVLWB), NWT.

Property Write-downs

International Financial Reporting Standards (IFRS), which we transitioned to on January 1, 2011, require that impairment tests on exploration properties be made where one or more of the following facts and circumstances are present:

• the period for which the entity has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed;
• substantive expenditure on further exploration for and evaluation of mineral resources is not planned in the specific area;
• exploration for, and evaluation of, mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area;
• sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

We apply the IFRS impairment tests on a property-by-property basis and then determine what property write-downs may be necessary if an impairment situation is identified.

The accounting write-downs of specific Morris Lake mineral properties (i.e. Max Lake, ML Properties, part of Peregrine) recorded by Viking Gold in 2011 (total - $3,635,489) reflect our Management's view that (for each property written down):

• significant costs may be required to restore or extend the Company's rights and abilities to explore the property;
• the Company has incurred limited exploration expenditures on the property in recent years, and has no current plans for exploration of the property;
• although the Company has achieved some favourable assay results and identified certain mineral anomalies and significant geological trends, it has not identified any commercially viable mineral reserves; and
• the Company is presently unable to establish a higher recoverable amount on the basis of a potential sale or option of the property to third parties including, where applicable, existing working interest partners.

These accounting write-downs do not mean that we have permanently abandoned our mineral exploration rights, and in future, our plans, financial resources and opportunities could change. IFRS accounting rules allow us to reverse previously recorded write-downs under certain circumstances.