PROSPECT MOUNTAIN PROJECT

                                          EUREKA MINING DISTRICT

                                              EUREKA COUNTY

                                                  NEVADA



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                                TABLE OF CONTENTS



PREFACE

SUMMARY......................................................................1

INTRODUCTION.................................................................2

     Location And Access.....................................................2
     Physiography And Climate................................................2
     Infrastructure..........................................................2
     Mining and Exploration History..........................................3

GEOLOGY......................................................................4
     Regional Geology........................................................4
     Mine Area Geology And Mineralogy....................................5,6,7
     Economic Geology....................................................7,8,9

CONCLUSIONS AND RECOMMENDATIONS...........................................9,10

LIST OF REFERENCES..........................................................11

CERTIFIER AND DISCLOSURE....................................................12






                                   ATTACHMENTS

                  SCHEDULE "A" - PROPOSED EXPLORATION PROGRAMME
         MAP - 1: PROSPECT MOUNTAIN PROJECT / MINE LOCATIONS AND GEOLOGY



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                                     PREFACE

         The following report is based on the writers personal experience in the
Nevada gold  fields and on the  scrutiny  of an  exhaustive  wealth of data from
geological - mining - and production records on the subject property.

         No  property  visit was  undertaken  as the mine  workings  and surface
exposures  were  inaccessible  due to snow cover at the time of writing  and the
ample documentation of pertinent data permitted a qualifying evaluation.

         The  assistance  of Mssrs.  Einar C.  Erickson  and Steve Ransom and M.
Dickemore of North American Exploration Inc. is gratefully acknowledged.

         EUROPEAN AMERICAN RESOURCES,  INC. commissioned the writer to undertake
this work for the purpose of producing a "Qualifying Report",  which is herewith
respectfully submitted.




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SUMMARY

         The  Eureka  Mining  District  contains  numerous  historic  and recent
gold/silver  mines.  Since its discovery in 1864,  over two million tons of high
grade  precious metal ore were  produced.  Approximately  thirty percent of this
total come from the mines in the Prospect Mountain Project area alone.

         Most of this  production  had been  achieved  before 1906 and was mined
from massive replacement deposits as well as veins, manto- and pipe-like bodies.

         The  principal  ore  host  is  carbonate  rock,   mainly  dolomite  and
limestones of Cambrian and Ordovician age.

         At the  Prospect  Mountain  Project  mineralized  bodies  occur  over a
vertical  range of 1,300 feet (394 m) within an area  measuring  at least  8,000
feet (2.4 km) long by 2,800 feet (0.85 km) wide.

         While it is difficult  to ascribe a total ore  potential to the project
area,  it is a fair  estimate that less than ten percent of all the possible ore
has been  mined.  This  leaves a  realistic  expectation  that  several  tens of
millions  of ore  containing  well in excess of one  million  ounces  gold and a
multiple of this in silver remain in the ground to be explored and developed.

         One has to be mindful of the fact that the Eureka  Mining  District  is
part of a gold mining  province  which is rapidly  approaching  a volume of gold
production comparable to the goldfields in the Witwatersrand of South Africa.

         In the first  exploration  pass,  several  "fences"  of closely  spaced
rotary  air  blast  holes  should  be  drilled  to  test  for  gold  and  silver
mineralisation  that is  amenable  to low cost  open pit  mining  (Tagebau)  and
recovery by heap leaching (Haldenlugung).



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INTRODUCTION

Location and Access

         The Prospect Mountain Project is located in the Eureka Mining District,
Eureka  County,  Central  East Nevada (Fig 1) Range 53 East,  Township 19 North,
Sections 27, 28, 33, 34 and Township 18 North, Sections 2, 3, 4, 10 (Fig 1)

         Access  is by  State  Highways  55  and  278 to  Eureka  and  hence  by
allweather paved and gravel road about 5 miles (8 km) to the Diamond Mine Tunnel
(Fig 1, 2, Foto East Slope).


Physiography And Climate

         The area is hilly to  mountainous  with the valley  floor at 6,800 feet
(2121 m), the Silver  Connor  Tunnel at 7,200 feet (2182 M) and the highest peak
at 9571 feet (2900 m).

         The  region is part of the Basin and Range  physiographic  province  in
Nevada (Fig. 2) with dry, hot summers and dry, cold, winters with below freezing
temperatures  for most of the time.  Spring and Fall are short and pleasant.  As
for all of Nevada, there is high a incidence of sunny days throughout the year.

         The vegetation is  semi-desert  with sparse grass and sage brush in the
valleys and dispersed low-growth conifers at higher elevations.

Infrastructure

         An excellent  network of highways and roads connects the property (Fig.
1.2)

         The towns of Elko (85  miles/137  km north)  and Ely (77  miles/125  km
west) are serviced by commercial,  scheduled aircraft and railroads.  Both towns
are major supply and service centers.

         The small town of Eureka offers  adequate  accommodations  - food, fuel
supply and medical services.

         Electric  power and  telephone  connects to the  regional  grid.  Water
supply for the exploration phase is sufficient.  Large volume for industrial use
has to be developed by drilling from existing aquifers.

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Mining and Exploration History

1864 - Discovery of mineralized outcrops on the east slope of what later came to
       be called Prospect Ridge on Prospect Mountain.
1868 - 1930 Mine  production  by inter al.  Eureka  Mining  Company  from Silver
       Connor/Wabash and Diamond Mine.
1930 - 1953 Sporadic, minor mining activity.
1953 - Revival of mining and  exploration  by  underground  development  through
       Government Funding (Defense Minerals Exploration Administration).
1981 - Silver Viking Corporation,  Silver  International,  Inc. and Gol-Sil-Inc.
       consolidate the mines on Prospect Mountain conducting limited underground
       work.
1988 - EPAR leases the property  from Silver  Viking/Silver  Intl.  And Gol-Sil,
       with option to buy.
1992 - 1993 EPAR re-organizes into Merlin Mining Company.
1997 - EPAR,  now  European  American  Resources  Inc.  exercises  the option to
       purchase the property and plans extensive exploration programme.




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During the entire period,  production mining and underground development was the
only method of  exploration  applied.  Virtually no exploration by drilling from
surface was ever done.

     Mining concentrated on the removal of high grade ores only. Gold production
before 1902 is difficult to determine  because of the practice in the early days
of combining  production of all metals and reporting it in dollar values. It can
be state, however, that a minimum of 1 million ounces of gold was mined from the
Eureka district alone up to 1883. From 1884 to 1959 gold production is estimated
at  1,230,000  ounces  with the bulk  coming  from  the Ruby  Hill and  Prospect
Mountain area (Fig 5).


GEOLOGY

     Parts of two of the main linear ranges of the Great Basin occupy the region
of the Eureka  district.  They are the Fish Creek range and the  Sulphur  Spring
Range to the North  and  Diamond  Range to the east.  All lie to the east of the
major structural feature of central Nevada,  the Roberts Mountains Thrust.  This
thrust, formed in late Devonian times, overrode by tens of miles of eastern rock
units which are dissimilar from the  overthrusting  rocks. The rocks east of the
thrust  have been  deformed  and cut by thrust  faults.  The  resulting  "thrust
plates" have been folded into a series of north-trending  synforms and antiforms
and involve rocks of Carboniferous  and Permian age. In the northern part of the
Fish Creek Range four  antiforms and four syniforms  have been  recognized.  The
rocks in the Prospect Ridge antiform are  predominantly  of Ordovician  age. The
largest part of the  uppermost  Ordovician,  the Hanson  Creek  Formation on the
southwest flank of Prospect Peak is thoroughly brecciated (Nolan et al).

     Prospect  Mountain  itself is made up of carbonates  and minor  interbedded
quarzites  and  siltstones  which  in  descending  order  reach  from  the  late
Ordovician Upper Hanson Formation to the lowermost  Cambrian  Prospect  Mountain
quartzite (Plate - 1).

     A large intrusive plug of diorite and minor  sill-like  bodies and dikes of
quartz  porphyry  and  rhyolite  of  Cretaceous  and  Tertiary  age  invaded the
Palaeozoic rock suite. Some  mineralisation and alteration types may be ascribed
to this igneous activity.

     The enormously  prolific gold  mineralisation in central and east Nevada is
explained by these thrust tectonics and "plate" formation,  which have been then
principle formative and localizing factors for the gold deposits.


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Mine Area Geology And Mineralogy.

     Prospect  Mountain in the project area comprises a suite of steeply dipping
- predominately  dolomites and limestones with minor  intercalations  of clastic
rocks ie quartzites  and  siltstones.  They range in age from early  Cambrian to
late  Ordovician  (Plate - 1).  Intrusive,  igneous rocks are not exposed in the
area but can be expected to exist at depth.

     Structurally,  Propect  Mountain  is  part of an  antiform  with  all  beds
displaying a generally  north-south  strike with steep westerly dip. The project
area was  never  geologically  mapped  in any  detail.  Underground  mapping  is
sporadic  and  uncomplete.  The  structural  complexity  is reflected in Nolan's
east-west cross-section looking north (below), which traverses just south of the
Diamond Mine Tunnel.

     Being in the tectonic  influence area of the Roberts Mountains thrust,  the
entire rock suite is intensely  folded,  faulted and fractured.  The predominant
lithostratigraphic  units  developed  in the mine area are the  Middle-to  Upper
Cambrian  dolomites  and  limestones  with the 1,000 feet (330m)  thick  Hamburg
Dolomites as the dominating member and chief ore host (EW-Cross Section Map -1).


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     Previous  mining   concentrated  on  extraordinarily   rich  "ore  shoots";
therefore the miners  conventional  wisdom  dictated to search for and mine only
these  particular  ores.  All  other  types  and  grade of  mineralisation  were
disregarded  and  therefore not recorded.  Technologically  speaking,  the axiom
"yesterday's  waste is todays ore" also holds true in the context of the mineral
potential for Prospect Mountain.

     In the  past,  the  following  types  and  forms of ore  bodies  have  been
described from the Eureka district:

         1.  Irregular replacement deposits
         2.  Bedded replacement deposits
         3.  Fault-zone replacement deposits
         4.  Disseminated deposits
         5.  Contact-metasomatic deposits

     However,  the geometry and configuration of ore shoots mined as it shows in
mine plans of the Silver  Connor  mine  (Plate 2)  suggest,  that other types of
deposits may also exist,  requiring a change in the entire  exploration and mine
development approach.

     The "disseminated" mineralisation,  for instance, has now gained importance
and may yet prove the main economic  target for the entire  project.  Too low in
grade in the past,  through the  development of open pit/heap leach  technology,
this type of  mineralisation  has become the  favorite in gold  exploration.  In
fact, the largest proportion of todays gold mines,  especially in Nevada, are in
this category. A point in case is Homestake's nearby Ruby Hill project (Fig -2).
With 750,000 ounces recoverable gold in reserves,  this project is an indication
for the potential for the area.

     With regard to the ore  mineralogy of the Prospect  Mountain gold deposits,
it is recorded that apart from the gold recovered,  the principal  minerals were
lead and silver, the latter presumably in form of specific silver minerals,  but
most likely, for the major part, reporting to the lead mineral(s).

     A host of secondary oxides and hydroxides,  derived from primary  sulphides
is also reported, yet the gold occurs as free gold, sometimes together with, but
not  occluded,  in the  arsenopyrite.  In the  disseminated  deposits,  gold  is
reported to occur as the only metallic mineral besides iron-oxides.  This latter
feature is especially important as discussed later.


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     Alteration  type and patterns are difficult to establish as there is little
reference in the sources studied. It appears that the most widespread alteration
is supergene  oxidation which extends from surface to the deepest levels of mine
workings,  well over 1,300 feet (349 m). The  supergene  oxidation  most  likely
overprints  the primary  alteration and was therefore not very  recognizable  to
most  workers who  concentrated  on the  reddish  staining  by  iron-oxides  and
iron-hydroxides  as a lead to sulphides and hence to gold.  The  widespread  and
pervasive  oxide  staining  that is visible in the  attached  foto panels of the
Prospect  Mountain area on both sides of the ridge,  underscores the potentially
extensive mineralisation.

     A ratio of gold to silver could not be established as silver content varies
too  widely  from mine to mine and stope to stope.  It  appears,  however,  that
silver, with the exception in "disseminated deposits" almost always exceeds gold
content by more than 20 times if associated  with base metals.  It is noteworthy
that the nearby  Homestake-  Ruby Hill operation  relies  entirely on the carbon
adsorption  method for gold recover,  which indicated a low gold:silver ratio in
their ore.

     As for the  formation of the gold  deposits,  there is too varied a mode of
gold  mineralisation  in  the  district  to  simplistically   categorize  it  as
hydrothermal  -  epigenetic  and invoke an  unobserved,  deep-seated  intrusive.
Mineralisation in a cabonate dominated  geological  environment has never been a
simple process.  Recent research on similarily hosted  mineralisation  has shown
that a multitude of processes at different times,  from  penecontemporaneous  to
the depostition of the host rocks, to almost recent,  supergene  processes,  are
responsible  for  ore  formation.  Emplacement  of  mineralisation  is as much a
consequence of structural and fabric  preparation as of  geochemically  reactive
components of the host rocks.

     For all practical purposes only empirically  established and extrapolatable
aspects  of ore  localization  shall  here be  applied  to attach a value to the
property  as it  exists  and  to  design  an  exploration  programme  to  locate
additional, and in all likelihood, significantly greater resources.


Economic Geology.

     As already  pointed  out, the gold in the  Prospect  Mountain  Project area
occurs  in  several  different   geological   modes.   Judging  by  its  spatial
distribution,  a primary  structural  preparation  together with  synsedimentary
porous facies  development in the host carbonate rock,  which is also chemically
very reactive,  would provide the most obvious  plumbing system for invading and
circulating mineralizing fluids.

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     Because  of their  relative  high  solubility  in a  chemically  conductive
environment,  carbonates are predisposed to form solution cavities, usually in a
system of  communicating  caves and tubes, a phenomenon known as karsting (Plate
2).

     Whether  the  mineralizing,  aurifous  solutions  originated  in a magmatic
source or contain  remobilized gold and reconcentrated it; whether the solutions
that created the karst are of supergene or hypogene, or even of mixed origin, is
academic at this point.

     The fact remains that over  horizontal  dimensions  of 8,000 ft (2.4 km) by
2,080 ft (0.85  km) and a  vertical  distance  of at least  1,300 ft (0.39 km) a
series of  interconnected  mines testify to the potential  volume of mineralized
rock (Map 1, Plate 2).

     By current industry standards  regarding the economics of disseminated gold
mineralisation,  gold  contents  in the range from as low as 0.03 to 0.09 ounces
per ton, given favourable mineralogy, are of interest for heap leach recovery.

     At this point at the Prospect  Mountain  project a large proportion of rock
enveloping the high grade ore shoots and  intervening  rock volumes  between the
individual  mine workings by be  mineralized  and therefore must be targeted for
exploration (Map 1, Plate 2).

     Considering  the  haphazard   underground   exploration  in  the  past  and
serendipitous success in finding high grade ore shoots, the ratio of explored to
unexplored  ground in the project area is in the order of 1:5.  This would be in
keeping with the estimates of precious  workers  (Nolan et al).,  that the total
past production of the Eureka District amounts to about 20% of its potential.

     To arrive at a concept of ore grades to be expected  at Prospect  Mountain,
documentation on production from county assessors records, smelter receipts, ore
car assays and  underground  sampling were examined.  It showed that ore shipped
from mines on Prospect  Mountain in the period from 1875 to 1883  averaged  1.58
ounces/ton gold and 38.73 ounces/ton silver. Ore shipments from the Diamond mine
in the period of 1873 to 1939 for 85,000 tons averaged  0.751 opt.gold and 39.70
opt.silver.  Sampling of faces in E Cave  returned  0.19 opt.  Gold and 3.90 opt
..silver.

     Fourth of July  workings  samples  returned 0.45 opt.gold and 21 opt.silver
and 0.20  opt.gold and 22./0  opt.silver  respectively.  Ore car assays from the
Diamond  mine in 1981  assayed an average  of 0.509  opt.gold  and more than 110
opt.silver for 36 cars.


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     The gradual decline of grade form 1.5 opt.gold and about 30.0 opt.silver to
0.75 opt.gold and 20.0 opt.silver  during the period 1870 to 1907 and further to
30.0 opt.gold and about 5.0  opt.silver by the early  eighties,  is a historical
gradient  in  keeping  with  the  evolution  of more  sophisticated  mining  and
extractive  metallurgy  technology.  With todays low cost bulk mining/heap leach
technology,  gold  grades  in the  range of 0.03 to 0.09 are  making  profitable
mines. The undoubtedly  still existing high grade blocks of ore serve as welcome
"sweeteners".

     On this premise,  grade blocks are tentatively defined,  which should serve
as targets for the initial exploratory phase.



Conclusions and Recommendations


     At first glance,  the Prospect Mountain property is largely  unexplored and
definitely  underdrilled  considering the extensive indications of economic gold
mineralisation.

     While it is surprising  that an area of the size and potential of more than
one million ounce gold  production  should still be available and  unexplored in
one of the most  prolific  gold  belts in the  world,  it can  probably  only be
explained by the fact that it has a history of silver and base metal  production
with gold credits.  It is possible that the bulk minin/heap leas aspect has been
overlooked until recently. On the basis of existing data and geological setting,
the Prospect  Mountain is an advanced  exploration  project with a high level of
probability for the development of major gold deposits.

     Because of the lower water levels, the entire mining area is apparently dry
to the  deepest  level  developed.  This will  allow low cost  pneumatic  rotary
drilling technology to be applied to explore for and delineate mineralisation.

     The developed four miles of underground  workings can readily be mapped and
sampled to reach a better understanding for ore controls and grade distribution.

     There appear to exist  significant  volumes of partially  developed  ore of
sufficient  grade to extract  by  underground  mining.  In the  alternative,  on
proving lower grade ore blocks enveloping the higher grade,  these blocks can be
extracted concurrently with open pit mining.


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It is recommended that:

-    An initial  drilling  programme  consisting  of seven  fences of rotary air
     blast (RAB) holes be  drilled,  using a track  mounted rig to test for bulk
     mineable gold mineralisation.

-    The permitting  processes for drill road and site construction is initiated
     before operations commence.

-    Concurrent sampling of all accessible  underground  workings be carried our
     to better define gold grade distribution.



Dr. Bernard Free
Denver, February 1997


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