High Definition

Reservoir GeochemistryA New Direct Hydrocarbon Indicator For the Oil & Gas Industry

Trading Information

• TSX Venture Exchange : DIG

• 52 Week Trading Range: $1.00 - $2.50

• Shares Issued & O/S : 9,349,035

• Options O/S : 1,275,000

• Fully Diluted O/S: 10,624,035

Corporate Information

• Head Office 12 Sierra Morena Way SW, Calgary, AB T3H 3E4

Telephone: 403 290-1913 | Fax: 403 261-7015

E-Mail: www.info@diggerresources.com

Website: www.diggerresources.com

• Transfer Agent: Pacific Corporate Trust Company,Vancouver, B.C.

• Auditors: PricewaterhouseCoopers LLP, Calgary, AB

• Lawyers: Bryan & Company LLP, Calgary, AB

Directors

• Norman Yeo, B.A., LL.B., Calgary, AB

• John Burt Wilson, ACIB, TEP, Jersey, Channel Islands

• Len Burchell, FCMA, Capetown, South Africa

• Graeme Wallace, B.A., M.Sc., Ph.D., Toronto, ON

• Peter Colnett, B.Sc., P.Geol, Calgary, AB

Officers

• Norman Yeo, B.A., LL.B., President & CEO

• Peter Colnett, B.Sc., P.Geol., VP Exploration

• William Aldag, VP Engineering

• David Kinton, B.Ed., P.Land, VP Land

• Desmond DeFreitas, C.A., CFO

• Larry Dewar, VP Field Operations

High Definition Reservoir Geochemistry (HDRG) The Principles

Mobile ions migrate vertically to surface (like mineral deposits) HDRG anomaly derived from two sources:

1. Anomalous elements from hydrocarbon accumulation.

2. Concentration of country rock elements within reducing area of vertical ionic path.

Result is strong multi-element surface anomaly developed over hydrocarbon accumulation.

High Definition Reservoir Geochemistry (HDRG) The Theory

• When mobile ions arrive at surface, they have a limited life as ‘mobile’ ions.

• Mobile ions (blue) do not move from the source due to limited life before becoming bound.

• HDRG measures only the mobile ions.

HDRG Proprietary Leachant

CC

BB

BB

CCCCBB

BB

AAAACC AA

BBCC

AA

HDRG leachant only extracts mobile ions

(single elements)

HDRG leachant only extracts mobile ions

(single elements)

HDRG leachant will not extract bound elements

like conventional techniques

HDRG leachant will not extract bound elements

like conventional techniques

Typical soil sample

CC

BB

AA

AA

Bound elementsMobile ion

HDRG - The Development of a Petroleum Significance Index (PSI)

• Approximately 21 elements / species are analyzed (proprietary).

• All lab results are normalized, creating individual “Response Ratios” for each element.

• Response Ratios for all elements are benchmarked against existing well control.

• Approximately five elements are chosen based on their response over existing productive & non-productive wells in the sample area.

• Response Ratios for each selected element are combined to create the final Petroleum Significance Index (“PSI”) map.

What Digger HDRG can do?

• Direct hydrocarbon indicator.

• Excellent in areas with established production – sample hydrocarbon bearing versus non-hydrocarbon bearing wells for HDRG template.

• Can be very definitive in established areas with complex geology & where seismic results have been questionable.

• Can be used in challenging areas where seismic cannot easily be acquired.

• Once an adequate HDRG data base is established in a project area, HDRG can be used for exploration in undrilled areas.

What Digger HDRG can’t do?

• Unable to define subsurface stratigraphy or structure like seismic.

• Initially unable to distinguish between multiple zone & single zone hydrocarbon potential.

• As with seismic, it cannot predict quality of hydrocarbon reservoir (for example, what initial rate new well will produce at).

• Not recommended to be used as a pure exploration tool without some predefined geological areas of potential & existing well control that can be sampled.

HDRG vs. Conventional Geochemistry

• Glauconite oil channel sand at 1000m depth, SE Alberta.

• A strong, multi-element HDRG anomaly correlated directly to the thickest net oil pay.

• No anomaly was present using the highest resolution conventional geochemical analysis techniques.

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Jumping Pound HDRG Traverse PSI Plot

West East

Morley West Jumping Pound

New Expl.Play T25 R6

2 casedwells

North endJumping Pound

W. Cochrane(undrilled)

Jumping Pound Survey

• Samples collected along 30 kms. of Highway 1A, west of Cochrane, Alberta.

• A major oil company concluded the survey was successful in delineating gas fields in the area. Served as pre-qualification to significant frontier HDRG program.

• The technology proved to be a cost effective exploration tool.

• No special permitting was required & turnaround was about two weeks.

HDRG: Commercial Validation

• A property in SW Saskatchewan was selected by Green Dragon Investments in 2002 based on the results of HDRG surveys at 4-13-14-19W3 location.

• HDRG responses at surface appeared to be reflecting the zones of maximum hydrocarbon accumulation that correspond to stratigraphic & structural traps.

• The well drilled was a successful Roseray oil well (a structural high) with a production capability of 120 BOPD in a mature oil reservoir that, for reasons of reservoir thickness & geological contrast, was beneath the ability of seismic to resolve.

• Nine other wells were drilled since 2002, around the 4-13 well by third parties relying on seismic interpretation & in all cases the wells have been either dry holes, uneconomic to produce or marginal producers.

Green Dragon’s SW Sask. Oil Property 4-13-14-19W3M

4-13 well drilled with Digger’s

HDRG Sept. 2002, potential of +120

BOPD with wtr cut of 92%

4-13 well drilled with Digger’s

HDRG Sept. 2002, potential of +120

BOPD with wtr cut of 92%

3-13 well drilled with 2-D seismic Jan. 2002, initial production 25 BOPD at +97% wtr cut & now shut in

3-13 well drilled with 2-D seismic Jan. 2002, initial production 25 BOPD at +97% wtr cut & now shut in

2-13 original well drilled 1957, +800,000 BO to date, +97% wtr cut

2-13 original well drilled 1957, +800,000 BO to date, +97% wtr cut

3-D PSI MapExploration lead

Exploration lead

Subsequent Drilling Near4-13-14-19W3M Well

Nine other wells have been drilled since 2002, by third parties relying on seismic interpretation & in all cases the wells have been either dry holes, uneconomic to produce or marginal producers.

HDRG: 15-36 Sask. Oil Property

HDRG: 15-36-13-19W3M Well

• The 15-36 wildcat well was directionally drilled under a slough by Green Dragon & has recently been put on pump.

• HDRG responses at surface appeared to be reflecting the zones of maximum hydrocarbon accumulation that correspond to stratigraphic & structural traps.

• Drilling intersected a potential pay zone associated with the Lower Shaunavon limestone at a depth of 1162m that was difficult for seismic to resolve & actually shoot because of wet surface conditions.

• The Lower Shaunavon Formation has not been a primary exploration target for oil pay in this area.

Frontier ApplicationsGORE-SORBER Survey

• With $20-35 Million wells & 3D seismic costing more than $45,000/km2 Devon Canada investigated cheaper alternative exploration technologies to assist in its ongoing evaluations of its Mackenzie Delta & Beaufort Sea Exploration Licenses.

• Devon’s initial survey in the area of the Tuk oilfield was with GORE-SORBER in 2001. The goal was to template several oil & gas accumulations in the area to see if there was significant geochemical signal at surface, differentiate Paleozoic, Cretaceous & Tertiary-aged pools on the basis of hydrocarbon type & to delineate the pool boundaries.

• A templating survey of 221 stations in a grid & traverse arrangement was undertaken. The survey ultimately yielded inconclusive results.

Frontier ApplicationsMackenzie Delta & Parsons Lake

2003• Completed benchmarking surveys in

Mackenzie Delta: Unipkat SDL (oil) and Parsons Lake SDL (gas)

• Samples subjected to a strict Chain of Custody thus ensuring voracity of survey results

• Clearly identified both fields including details such as oil vs gas, fault boundaries and upside potential

• Carried out extensive QA / QC checks to ensure both accuracy & repeatability of HDRG process

2004

• Completed Hydrocarbon Prospectivity surveys of potential exploration drilling targets.

• Completed follow-up surveys in & around Unipkat SDL.

• Results again were positive and in keeping with results obtained during 2003 survey program.

Frontier ApplicationsMackenzie Delta

• Based on the 2003 / 04 program results, coupled with the successful application of this technology in the mineral industry in lake bed sediment sampling, discussions on the application of HDRG surveys in the offshore Canadian Beaufort were held.

• Initial discussions revolved around the shallow water (2-3m water depth) Adgo SDL which could be easily & cost effectively accessed from the landfast ice.

• There was further interest from both industry and government with regard to a potential benchmarking program over the Amauligak field (30m water depth)

Frontier ApplicationsOffshore Beaufort Sea

• An HDRG Hydrocarbon Potential survey was conducted in the Kotaneelee gas field prior to the drilling of a in-fill development well.

• HDRG predicted a dry hole over the proposed bottom-hole location of the proposed well.

• The well was drilled and encountered NO RESERVOIR at the proposed bottom-hole location.

• The well was then plugged back and the well drilled at a steeper intersect angle and hydrocarbons were then intersected.

Frontier ApplicationsYukon

Frontier ApplicationsYukon – Kotaneelee Gas Field

Frontier ApplicationsScientific Validation

• Digger’s HDRG was featured at the May 2006 CSPG – CSEG – CWLS Convention held in Calgary, Alberta.

• The paper entitled "New Technology, New Thinking in the BMB" was co-authored by Devon geologists.

• The thrust of the paper presented was that due to the very high cost of drilling & 3D seismic, in the Mackenzie Delta & elsewhere in northern Canada, oil & gas operators are looking for new cost effective exploration tools, such as HDRG, to assist with exploration for new hydrocarbon reserves in support of the developing Mackenzie Valley gas pipeline system.

The paper confirmed that Digger completed sizeable HDRG sampling programs in the Mackenzie Delta, Yukon, & northern British Columbia for Devon to template oil & gas accumulations in the area to see if there was a significant geochemical signal at surface.

Devon was successful in proving up HDRG surface geochemistry, with limitations, as a useful exploration tool for the Canadian Frontiers.

Frontier ApplicationsScientific Validation

Concluding Remarks

• The proprietary HDRG process has been derived from a proven geochemistry technique utilized extensively in the mineral industry in the search for precious & base metals as well as diamonds.

• Digger has invested ~8 years in transitioning this technology to the oil & gas industry via numerous field studies through to the drilling of both successful development & exploration wells – based solely on HDRG.

• HDRG’s record in the frontier is excellent for both oil & gas.

• This new form of Direct Hydrocarbon Indicator (DHI) is an excellent adjunct to seismic & provides an important additional tool for reducing both the risk & cost associated with frontier exploration & development.