Exhibit 10.1

                               SECURITY AGREEMENT


      THIS SECURITY  AGREEMENT (this  "Agreement") is made effective October 28,
2005 by and between El Capitan  Precious  Metals,  Inc., a Delaware  corporation
("El Capitan - Delaware"),  and Whitebox Intermarket  Partners,  L.P., a British
Virgin Islands limited partnership ("WIP").

                                    RECITALS

      A. El Capitan -  Delaware  is the wholly  owned  subsidiary  of El Capitan
Precious Metals, Inc., a Nevada corporation ("El Capitan - Nevada").

      B. El Capitan and WIP entered into a Purchase  Agreement dated October 28,
2005 (the  "Purchase  Agreement"),  pursuant  to which WIP  purchased  a secured
convertible  promissory note in the aggregate  principal amount of $750,000 (the
"Note") and a warrant to purchase  shares of El Capitan - Nevada's  Common Stock
(the  "Warrant")  in  consideration  of a  $750,000  loan (the  "Loan").  WIP is
referred to herein as the "Secured Party."

      C. As part of the Purchase  Agreement,  El Capitan - Nevada has granted to
WIP and its affiliates an option to purchase an additional  secured  convertible
promissory note in the aggregate  principal  amount of $550,000 (the "Additional
Note") and an  additional  warrant to  purchase  Common  Stock (the  "Additional
Warrant"). WIP exercised this option on January 11, 2006.

      C. As a condition  to making the Loan and the  purchase of the  Additional
Note and  Additional  Warrant,  El  Capitan -  Delaware  has agreed to pledge to
Secured Party all of its assets, subject to no other security interest.

      NOW, THEREFORE,  in consideration of the agreements herein and in reliance
upon the  representations  and  warranties  set forth  herein and  therein,  the
parties agree as follows:

                                   ARTICLE 1.
                                  DEFINED TERMS

      1.1  DEFINITIONS.  Unless  otherwise  defined herein or unless the context
otherwise  requires,  terms used in this  Agreement,  including its preamble and
recitals, have the meanings provided in the Uniform Commercial Code in effect in
the State of Delaware (the "UCC"). In addition, the following terms when used in
this  Agreement,  including its preamble and recitals,  shall have the following
meanings:

      "Loan  Documents"  means  (a)  this  Agreement,  (b)  the  Notes,  (c) the
Warrants,  (d) a Registration Rights Agreement dated October 28, 2005 between El
Capitan - Nevada  and WIP (the  "Registration  Rights  Agreement"),  and (e) the
Purchase Agreement.

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      "Notes" means each of the Note and the Additional Note.

      "Obligations"  means the payment and other  performance  obligations under
the Loan Documents.

      "Warrants" means each of the Warrant and the Additional Warrant.

                                   ARTICLE 2.
                                SECURITY INTEREST

      2.1  GRANT  OF  SECURITY  INTEREST.  To  secure  the  timely  payment  and
performance  in full of the  Obligations,  El  Capitan -  Delaware  does  hereby
assign,  grant and pledge to Secured Party,  subject to no other secured rights,
all of the estate,  right, title and interest of El Capitan - Delaware in and to
the Collateral as more fully described on Exhibit A hereto, whether now owned or
later acquired or created, and including all proceeds of the Collateral, whether
cash or non-cash (the "Collateral").

      2.2 FINANCING STATEMENTS.

            (a) El Capitan - Delaware  hereby  authorizes  Secured Party to file
all financing statements,  continuation statements,  assignments,  certificates,
and other documents and instruments  with respect to the Collateral  pursuant to
the UCC and  otherwise as may be necessary  or  reasonably  requested by Secured
Party to perfect or from time to time to publish notice of, or continue or renew
the security  interests granted hereby  (including,  such financing  statements,
continuation statements,  certificates,  and other documents as may be necessary
or  reasonably  requested  to  perfect a  security  interest  in any  additional
property  rights  hereafter  acquired  by  El  Capitan  -  Delaware  or  in  any
replacements,  products or proceeds thereof), in each case in form and substance
satisfactory to Secured Party.

            (b) Secured Party will pay the cost of filing the same in all public
offices where filing is necessary or  reasonably  requested by Secured Party and
will pay any and all  recording,  transfer  or filing  taxes  that may be due in
connection with any such filing.  El Capitan - Delaware grants Secured Party the
right,  at any  time  and at  Secured  Party's  option,  to file any or all such
financing statements,  continuation statements,  and other documents pursuant to
the UCC and  otherwise  as  Secured  Party  reasonably  may  deem  necessary  or
desirable.

            (c) El  Capitan  -  Delaware  hereby  authorizes  the  filing of any
financing  statements or  continuation  statements,  and amendments to financing
statements,  or any similar  document in any  jurisdictions  and with any filing
offices as Secured Party may reasonably  determine are necessary or advisable to
perfect  the  security  interests  granted  to  Secured  Party.  Such  financing
statements may describe the Collateral in the same manner as described herein or
may contain an  indication or  description  of collateral  that  describes  such
property  in any other  manner as  Secured  Party may  reasonably  determine  is
necessary,  advisable  or  prudent  to ensure  the  perfection  of the  security
interest in the Collateral granted to Secured Party herein.

      2.3 DEBTOR REMAINS LIABLE.

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            (a) Anything herein  contained to the contrary  notwithstanding,  El
Capitan - Delaware shall remain liable under any contracts, agreements and other
documents  included  in the  Collateral,  to  perform  all  of  the  obligations
undertaken by it  thereunder,  all in accordance  with and pursuant to the terms
and  provisions  thereof,  and  Secured  Party  shall  have  no  obligations  or
liabilities under any such contracts, agreements or other documents by reason of
or  arising  out of this  Agreement,  nor shall  Secured  Party be  required  or
obligated  in any manner to perform or fulfill any  obligations  of El Capitan -
Delaware  thereunder  or to make any  payment,  or to make any inquiry as to the
nature or  sufficiency  of any  payment  received by them or present or file any
claim, or take any action to collect or enforce the payment of any amounts which
may have been  assigned  to them or to which they may be entitled at any time or
times.

            (b) If  any  default  by El  Capitan  -  Delaware  under  any of the
contracts,  agreements or other documents  shall occur,  Secured Party shall, at
its option, be permitted (but shall not be obligated) to remedy any such default
by giving  written  notice of such  intent to El Capitan -  Delaware  and to the
parties to such contract, agreement or other document. Any cure by Secured Party
of El Capitan - Delaware's  default under any such contract,  agreement or other
document  shall  not be  construed  as an  assumption  by  Secured  Party of any
obligations,  covenants or agreements of El Capitan - Delaware contained in such
contract,  agreement or other  document,  and Secured  Party shall not incur any
liability  to El  Capitan  -  Delaware  or any  other  person as a result of any
actions  undertaken  by Secured  Party in curing or  attempting to cure any such
default.  This Agreement  shall not be deemed to release or to affect in any way
the obligations of El Capitan - Delaware under any of such contracts, agreements
or other documents.

      2.4  DELIVERY OF  CERTIFICATES.  All  certificates  and other  instruments
representing  or  evidencing  El  Capitan -  Delaware's  ownership  of shares of
capital stock of El Capitan,  Ltd., an Arizona  corporation or any other entity,
including any  subsidiary of El Capitan - Delaware  (collectively,  the "Pledged
Equity  Interests")  shall be  delivered  to and held by or on behalf of Secured
Party, or its designee in the manner set forth in Section 4.12 below.

      2.5 INTENTIONALLY OMITTED.

      2.6 VOTING  RIGHTS;  DIVIDENDS.  As long as no Event of Default,  or event
which with the giving of notice or lapse of time  would  constitute  an Event of
Default shall have occurred and be continuing:

            (a) El Capitan - Delaware  shall be entitled to exercise any and all
voting or consensual  rights  relating to the Pledged  Equity  Interests for any
purpose not inconsistent  with the terms of this Agreement;  provided,  however,
that El Capitan - Delaware  shall not  exercise or refrain from  exercising  any
such right if such action would have a material  adverse  effect on the value of
the Collateral; and

            (b) El Capitan - Delaware  shall be  entitled  to receive and retain
any and all ordinary  cash  dividends  payable in respect of the Pledged  Equity
Interests.

                                   ARTICLE 3.
                    REPRESENTATIONS AND WARRANTIES OF DEBTOR

      El Capitan - Delaware makes the following  representations  and warranties
to  and in  favor  of  Secured  Party  as of  January  20,  2006.  All of  these
representations  and warranties shall survive the execution and delivery of this
Agreement:

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<PAGE>

      3.1 ORGANIZATION. El Capitan - Delaware:

            (a) is a corporation  duly  incorporated and validly existing and in
good standing under the laws of the State of Delaware;

            (b) is  duly  qualified,  authorized  to do  business  as a  foreign
corporation  in each U.S. and foreign  jurisdiction  where the  character of its
properties or the nature of its activities makes such  qualification  necessary;
and

            (c) has the  corporate  power  (A) to carry on its  business  as now
being  conducted and as proposed to be conducted by it, (B) to execute,  deliver
and  perform  this  Agreement,  (C) to take all  action as may be  necessary  to
consummate the transactions  contemplated hereunder,  and (D) to grant the liens
and security interests provided for in this Agreement.

      3.2 OFFICES,  LOCATION OF COLLATERAL.  The chief executive office or chief
place of  business  of El  Capitan - Delaware  is  located  at 14301  North 87th
Street, Scottsdale, Arizona, 85260.

      3.3 TITLE AND LIENS. El Capitan - Delaware has good, valid, and marketable
title to the Collateral,  free from all liens and encumbrances of any kind. As a
result of this  Agreement,  Secured  Party will have a first  priority  security
interest in the Collateral, subordinate to no other security interest.

      3.4 AUTHORIZATION; NO CONFLICT. El Capitan - Delaware has duly authorized,
executed and delivered this Agreement, and El Capitan - Delaware's execution and
delivery hereof and its consummation of the transactions contemplated hereby and
the compliance with the terms thereof:

            (a)  does  not  or  will  not  contravene  any  legal   requirements
applicable  to or binding on El Capitan - Delaware  which  could  reasonably  be
expected  to have a  material  adverse  effect  upon the  Collateral  or Secured
Party's rights therein;

            (b) does not or will not  contravene  or result in any  breach of or
constitute  any  default,  or result in or require the creation of any lien upon
any of El Capitan - Delaware's  property,  under any  agreement or instrument to
which El Capitan - Delaware  is a party or by which it or any of its  properties
may be bound or affected; and

            (c) does not or will not  require  the  consent or  approval  of any
third party which has not already been obtained.

      3.5  ENFORCEABILITY.   This  Agreement  is  a  legal,  valid  and  binding
obligation  of Secured  Party,  enforceable  against  El  Capitan - Delaware  in
accordance  with its terms,  except to the  extent  that  enforceability  may be
limited by applicable  bankruptcy,  insolvency,  moratorium,  reorganization  or
other similar laws  affecting  the  enforcement  of creditors'  rights or by the
effect of general equitable principles.

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<PAGE>

      3.6 UCC  ARTICLE 8. All shares of common  stock of El  Capitan,  Ltd.,  an
Arizona  corporation,  owned by the El  Capitan-Delaware,  and shares of capital
stock of any  subsidiary  of the El Capitan - Delaware or of any other entity in
which El Capitan - Delaware owns an interest,  that are part of the  Collateral,
are securities governed by Article 8 of the UCC.

                                   ARTICLE 4.
                               COVENANTS OF DEBTOR

  El Capitan - Delaware covenants to and in favor of Secured Party as follows:

      4.1 COMPLIANCE WITH  OBLIGATIONS.  El Capitan - Delaware shall perform and
comply in all material  respects with all obligations and conditions on its part
to be performed with respect to the Collateral.

      4.2  INFORMATION  CONCERNING  COLLATERAL.  El  Capitan -  Delaware  shall,
promptly upon request,  provide to Secured  Party all  information  and evidence
they it reasonably requests concerning the Collateral to enable Secured Party to
enforce the provisions of this Agreement.

      4.3 DEFENSE OF COLLATERAL. El Capitan - Delaware shall defend its title to
the  Collateral  and the  interests of Secured Party in the  Collateral  pledged
hereunder against the claims and demands of all third parties whomsoever.

      4.4 MAINTENANCE OF COLLATERAL. El Capitan - Delaware shall not (i) fail to
deliver to Secured Party a copy of each demand or notice received or given by it
relating to any  contract or  agreement of El Capitan - Delaware or to any other
Collateral  which could reasonably be expected to have a material adverse effect
upon the  Collateral  or  Secured  Party's  rights  therein,  or (ii)  except as
otherwise permitted herein, sell, contract to sell, assign,  transfer or dispose
of any of the Collateral, except in the ordinary course of business, or with the
consent of Secured Party, which consent will not be unreasonably withheld.

      4.5 EVENTS OF DEFAULT.  El Capitan - Delaware  shall give to Secured Party
prompt notice of any material default with respect to the Collateral of which El
Capitan - Delaware has knowledge or has received notice.

      4.6  PRESERVATION  OF VALUE;  LIMITATION  OF LIENS.  El Capitan - Delaware
shall not take any action in connection  with the Collateral  which would impair
in any material respect the interests or rights of Secured Party therein or with
respect thereto, except as expressly permitted hereby;  provided,  however, that
nothing in this  Agreement  shall  prevent El Capitan -  Delaware,  prior to the
exercise  by Secured  Party of any rights  pursuant  to the terms  hereof,  from
undertaking  El  Capitan  -  Delaware's  operations  in the  ordinary  course of
business.  El Capitan - Delaware shall not directly or indirectly create, incur,
assume or suffer to exist any liens on or with respect to all or any part of the
Collateral  (other  than the lien  created  by this  Agreement).  El  Capitan  -
Delaware  shall at its own cost and expense  promptly take such action as may be
necessary to discharge any such liens.

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<PAGE>

      4.7 NO OTHER FILINGS. El Capitan - Delaware shall not file or authorize to
be filed in any jurisdiction any financing  statements under the UCC or any like
statement relating to the Collateral.

      4.8  MAINTENANCE OF RECORDS.  El Capitan - Delaware  shall,  at all times,
keep  accurate and  complete  records of the  Collateral.  El Capitan - Delaware
shall permit  representatives of Secured Party, upon reasonable prior notice, at
any time during  normal  business  hours of El Capitan - Delaware to inspect and
make abstracts from El Capitan - Delaware's books and records  pertaining to the
Collateral.  Upon the  occurrence  and during the  continuation  of any Event of
Default,  at Secured  Party's  request,  El Capitan -  Delaware  shall  promptly
deliver copies of any and all such records to Secured Party.

      4.9 PAYMENT OF TAXES. El Capitan - Delaware shall pay or cause to be paid,
before  any  fine,  penalty,  interest  or cost  attaches  thereto,  all  taxes,
assessments and other governmental or non-governmental  charges or levies (other
than  those  taxes  that it is  contesting  in  good  faith  and by  appropriate
proceedings,  and in respect of which it has established  adequate  reserves for
such taxes) now or hereafter  assessed or levied against the Collateral  pledged
by them hereunder and shall retain copies of, and, upon request,  permit Secured
Party to examine receipts showing payment of any of the foregoing.

      4.10 NAME; JURISDICTION OF ORGANIZATION.  El Capitan - Delaware shall give
Secured Party at least 30 days prior written notice before El Capitan - Delaware
changes its name,  jurisdiction  of organization or entity type and shall at the
expense  of El Capitan - Delaware  execute  and  deliver  such  instruments  and
documents as may be required by Secured Party or applicable  legal  requirements
to maintain a first perfected security interest in the Collateral.

      4.11 PROCEEDS OF  COLLATERAL.  Except as otherwise  specified  herein,  El
Capitan - Delaware shall,  at all times,  keep pledged to Secured Party pursuant
hereto all Collateral and all dividends, distributions,  interest, principal and
other proceeds  received by El Capitan - Delaware with respect thereto,  and all
other  Collateral and other  securities,  instruments,  proceeds and rights from
time to time received by or distributable to El Capitan - Delaware in respect of
any Collateral,  and shall not permit any issuer of such Collateral to issue any
shares of stock or other equity  interests which shall not have been immediately
duly pledged to Secured Party hereunder.

      4.12 DELIVERY OF PLEDGED  EQUITY  INTERESTS.  Certificates  or instruments
representing  or evidencing the Pledged Equity  Interests  shall be delivered to
and held by or on behalf of Secured Party pursuant hereto. All such certificates
or instruments  shall be in suitable form for transfer by delivery,  or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance  acceptable to Secured Party. Secured Party shall have the
right,  at any time in its  discretion  and without prior notice to El Capitan -
Delaware,  following the occurrence and during the  continuation  of an Event of
Default,  to transfer  to or to register in the name of Secured  Party or any of
its  nominees  any or  all  of the  Pledged  Equity  Interests  and to  exchange
certificates or instruments  representing or evidencing Pledged Equity Interests
for  certificates or instruments of smaller or larger  denominations;  provided,
however,  that once such Event of Default  has been  cured,  Secured  Party will
promptly  transfer to or register in the name or cause its  nominees to transfer
to or to register in the name of El Capitan - Delaware all such  Pledged  Equity
Interests.  In furtherance of the foregoing, El Capitan - Delaware shall further
execute and deliver to Secured Party stock powers in the form attached hereto as
Exhibit B.

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<PAGE>

                                   ARTICLE 5.
                               RIGHTS AND REMEDIES

      5.1 EVENT OF DEFAULT  DEFINED.  Any failure of El Capitan - Delaware or El
Capitan - Nevada to  materially  comply with any  covenant,  agreement,  term or
provision   contained  in  this  Agreement,   the  Purchase   Agreement  or  the
Registration  Rights  Agreement  or any event of default  under any of the Notes
(incorporating any applicable cure periods)  (including events of non-compliance
with this  Agreement as described  in the Notes) shall  constitute  an "Event of
Default"  hereunder.  Without  limiting the  foregoing,  it is intended that any
event of default under the Additional  Note will  constitute an event of default
under the Note.

      5.2 REMEDIES UPON EVENT OF DEFAULT.

            (a) During any period  during  which an Event of Default  shall have
occurred and be continuing,  Secured Party may (but shall be under no obligation
to), directly or by using an agent or broker:

                  (i) proceed to protect and enforce the rights  vested in it by
this Agreement and under the UCC;

                  (ii) cause all moneys and other  property  pledged as security
to be paid and/or  delivered  directly to it, and demand,  sue for,  collect and
receive any such moneys and property;

                  (iii)  cause  any  action  at law or suit in  equity  or other
proceeding to be instituted and prosecuted to collect or enforce any Obligations
of El Capitan - Delaware or rights included in the  Collateral,  or for specific
enforcement  of any covenant or  agreement  contained  herein,  or in aid of the
exercise  of any  power  therein  or  herein  granted,  or for  any  foreclosure
hereunder and sale under a judgment or decree in any judicial proceeding,  or to
enforce any other legal or equitable  right vested in it by this Agreement or by
law;

                  (iv)  foreclose  or  enforce  any  other  agreement  or  other
instrument  by or under or  pursuant  to which the  Obligations  of El Capitan -
Delaware are issued or secured;

                  (v)  subject  to  Section  5.2(b),  sell,  lease or  otherwise
dispose of any or all of the Collateral,  in one or more  transactions,  at such
prices as Secured  Party may deem best,  and for cash or on credit or for future
delivery,  without  assumption of any credit risk,  at any broker's  board or at
public or private sale,  without demand of performance or notice of intention to
sell, lease or otherwise dispose of, or of time or place of disposition  (except
such notice as is required by applicable statute and cannot be waived), it being
agreed that Secured  Party may be  purchasers  or lessees on their own behalf at
any such sale and that  Secured  Party or anyone else who may be the  purchaser,
lessee or  recipient  for value of any or all of the  Collateral  so disposed of
shall,  upon such  disposition,  acquire all of El Capitan -  Delaware's  rights
therein.  Secured Party may adjourn any public or private sale or cause the same
to be adjourned  from time to time by  announcement  at the time and place fixed
for the same, and such sale may, without further notice or publication,  be made
at any time or place to which the same may be so  adjourned.  If  Secured  Party
sells any of the  Collateral  upon credit,  after  reasonable  inquiry as to the
credit worthiness of the purchaser,  El Capitan - Delaware will be credited only
with  payments  actually  made by the  purchaser,  received by Secured Party and
applied to the  indebtedness of the purchaser.  In the event the purchaser fails
to pay for the  Collateral,  Secured  Party may  resell  the  Collateral  and El
Capitan - Delaware shall be credited with the proceeds of the sale;

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                  (vi) incur expenses,  including  reasonable  attorneys'  fees,
consultants'  fees, and other costs  appropriate to the exercise of any right or
power under this Agreement;

                  (vii)  perform  any   obligation  of  El  Capitan  -  Delaware
hereunder and make payments,  purchase,  contest or compromise any  encumbrance,
charge, or lien, and pay taxes and expenses;

                  (viii) make any  reasonable  compromise or  settlement  deemed
desirable  with respect to any or all of the  Collateral  and extend the time of
payment, arrange for payment installments, or otherwise modify the terms of, any
or all of the Collateral;

                  (ix) secure the appointment of a receiver of any or all of the
Collateral;

                  (x)  exercise  any  other or  additional  rights  or  remedies
granted  to  Secured  Party  under  any other  provision  of this  Agreement  or
exercisable by a secured party under the UCC,  whether or not the UCC applies to
the affected  Collateral,  or under any other  applicable law and take any other
action  which  Secured  Party deem  necessary or desirable to protect or realize
upon their security interests in the Collateral or any part thereof; and/or

                  (xi) appoint a third party (who may be an employee, officer or
other  representative of Secured Party) to do any of the foregoing,  or take any
other action permitted hereunder, on behalf of Secured Party.

            (b) If, pursuant to any law, prior notice of any action described in
Section  5.2(a) is required  to be given to El Capitan - Delaware,  El Capitan -
Delaware hereby  acknowledges  that the minimum time required by such law, or if
no minimum is specified, ten days, shall be deemed a reasonable notice period.

            (c) Any action or proceeding to enforce this  Agreement may be taken
by Secured  Party either in El Capitan - Delaware's  name or in Secured  Party's
name, as Secured Party may deem necessary.

            (d) All rights of  marshalling  of assets of El Capitan -  Delaware,
including any such right with respect to the Collateral, are hereby waived by El
Capitan - Delaware.

            (e) Secured  Party shall incur no  liability as a result of the sale
of any or all of the  Collateral at any private sale pursuant to Section  5.2(a)
conducted in a  commercially  reasonable  manner.  El Capitan - Delaware  hereby
waives any claims  against  Secured Party arising by reason of the fact that the
price at which any or all of the Collateral may have been sold at such a private
sale was less than the price that might have been  obtained  at a public sale or
was less than the  aggregate  amount of the  Obligations,  even if Secured Party
accepts the first offer  received and does not offer the Collateral to more than
one offeree.

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      5.3  ATTORNEY-IN-FACT.  Upon the occurrence and during the continuation of
an Event of Default,  El Capitan - Delaware hereby  irrevocably  constitutes and
appoints  Secured Party as its true and lawful  attorney-in-fact  to enforce all
rights of El Capitan - Delaware  with respect to the  Collateral,  including the
right to give appropriate receipts, releases and satisfactions for and on behalf
of and in the name of El Capitan - Delaware or, at the option of Secured  Party,
in the name of  Secured  Party,  with the same  force and effect as El Capitan -
Delaware could do if this Agreement had not been made. If Secured Party shall so
elect after the  occurrence and during the  continuation  of an Event of Default
hereunder,  Secured  Party  shall  have  the  right  at  all  times  to  settle,
compromise, adjust, or liquidate all claims or disputes directly with El Capitan
-  Delaware  or any  obligor  of El  Capitan  -  Delaware  upon  such  terms and
conditions as Secured Party may determine in its sole discretion,  and to charge
all  costs  and  expenses  thereof  (including  reasonable  attorneys'  fees and
charges) to El Capitan - Delaware's  account and to add them to the  Obligations
whereupon such costs and expenses  shall be and become part of the  Obligations.
This  power  of  attorney  is a power  coupled  with an  interest  and  shall be
irrevocable.

      5.4  EXPENSES;  INTEREST.  All costs and  expenses  (including  reasonable
attorneys'  fees and  expenses)  incurred by Secured  Party in  connection  with
exercising any actions taken under Article 5, together with interest thereon (to
the extent  permitted  by law)  computed at a rate of 10% per annum (or if less,
the maximum rate permitted by law) from the date on which such costs or expenses
are  invoiced  to and become  payable by El Capitan -  Delaware,  to the date of
payment  thereof,  shall  constitute  part of the  Obligations  secured  by this
Agreement  and shall be paid by El Capitan - Delaware to Secured Party within 10
days after written demand.

      5.5 NO  IMPAIRMENT OF REMEDIES.  If under  applicable  law,  Secured Party
proceeds by either judicial  foreclosure or by non-judicial sale or enforcement,
Secured Party may, at its sole option, determine which of its remedies or rights
to pursue without affecting any of its rights and remedies under this Agreement.
If, by exercising any right and remedy,  Secured Party forfeits any of its other
rights or remedies,  including any right to enter a deficiency  judgment against
El Capitan - Delaware or any third party (whether  because of any applicable law
pertaining  to  "election  of  remedies"  or the  like),  El  Capitan - Delaware
nevertheless  hereby  consents  to such action by Secured  Party.  To the extent
permitted by  applicable  law, El Capitan - Delaware also waives any claim based
upon such  action,  even if such  action by Secured  Party  results in a full or
partial  loss of any rights of  subrogation,  indemnification  or  reimbursement
which El  Capitan - Delaware  might  otherwise  have had but for such  action by
Secured Party or the terms herein. Any election of remedies which results in the
denial or impairment of the right of Secured Party to seek a deficiency judgment
against any third party shall not, to the extent  permitted by  applicable  law,
impair El Capitan - Delaware's obligations  hereunder.  If Secured Party bids at
any  foreclosure  or trustee's  sale or at any private sale  permitted by law or
this  Agreement,  Secured  Party  may bid all or less  than  the  amount  of the
Obligations.  To the  extent  permitted  by  applicable  law,  the amount of the
successful bid at any such sale, whether Secured Party or any other party is the
successful bidder,  shall be conclusively  deemed to be the fair market value of
the  Collateral  and the  difference  between such bid amount and the  remaining
balance of the Obligations shall be conclusively  deemed to be the amount of the
Obligations.

                                       9
<PAGE>

                                   ARTICLE 6.
                                 CERTAIN WAIVERS

      6.1  MODIFICATION  OF  OBLIGATIONS.  El  Capitan  -  Delaware's  liability
hereunder shall not be reduced, limited,  impaired,  discharged or terminated if
Secured  Party at any time with El  Capitan -  Delaware  s consent  (or,  to the
extent permissible by the terms of the Loan Documents and law, without notice to
or demand of El Capitan - Delaware):

            (a) renews, extends, accelerates, increases the rate of interest on,
or otherwise changes the time, place, manner or terms, or otherwise modifies any
of the Obligations (including any payment terms);

            (b)  extends  or  waives  the  time  for  El  Capitan  -  Delaware's
performance of, or compliance with, any term,  covenant or agreement on its part
to be performed or observed under the Loan Documents, or waives such performance
or compliance or consents to a failure of, or departure from,  such  performance
or compliance;

            (c)  settles,  compromises,  releases or  discharges,  or accepts or
refuses any offer of performance with respect to, or  substitutions  for, any of
the  Obligations  or any agreement  relating  thereto  and/or  subordinates  the
payment of the same to the payment of any other  obligations;  (d)  requests and
accepts other  guaranties of any of the Obligations and takes and holds security
for the payment hereof or any of the Obligations;

            (e)  releases,  surrenders,  exchanges,  substitutes,   compromises,
settles,  rescinds,  waives, alters,  subordinates or modifies,  with or without
consideration,  any  security for payment of any of the  Obligations,  any other
guaranties of any of the Obligations, or any other obligation of any third party
with respect to any of the Obligations;

            (f) to the  extent  permitted  by  law,  enforces  and  applies  any
security,  if any, now or hereafter  held by or for the benefit of Secured Party
in respect hereof or any of the  Obligations  and directs the order or manner of
sale thereof, or exercises any other right or remedy that Secured Party may have
against any such  security,  in each case as Secured Party in its discretion may
determine,  including  foreclosure  on any  collateral  pursuant  to one or more
judicial or nonjudicial  sales,  whether or not every aspect of any such sale is
commercially reasonable; or

            (g) exercises any other rights available to it under any of the Loan
Documents, at law or in equity.

      6.2  SECURITY  INTERESTS  ABSOLUTE.  All rights of  Secured  Party and the
security  interests  hereunder,  and all  obligations  of El  Capitan - Delaware
hereunder, shall be absolute and unconditional irrespective of:

                                       10
<PAGE>

            (a) any  failure or omission  to assert or enforce or  agreement  or
election not to assert or enforce, or the stay or enjoining,  by order of court,
by operation of law or otherwise,  of the exercise or enforcement  of, any claim
or  demand  or any  right,  power or  remedy  (whether  arising  under  any Loan
Document, at law, in equity or otherwise) with respect to any of the Obligations
or any agreement  relating thereto,  or with respect to any other guaranty of or
security for the payment of any of the Obligations;

            (b) any rescission,  waiver,  amendment or  modification  of, or any
consent to departure from, any of the terms or provisions  (including provisions
relating  to events  of  default)  hereof,  in any other  Loan  Document  or any
agreement or instrument  executed pursuant thereto,  or of any other guaranty or
security for any of the Obligations,  in each case, whether or not in accordance
with the terms hereof or any other Loan  Document or any  agreement  relating to
such other guaranty or security;

            (c) the application of payments received from any source (other than
payments  received from the proceeds of any security for any of the Obligations,
except to the extent such security also serves as  collateral  for  indebtedness
other  than the  Obligations)  to the  payment of  indebtedness  of El Capitan -
Delaware to Secured Party other than the Obligations,  even though Secured Party
might have elected to apply such payment to any part or all of the Obligations;

            (d)  Secured  Party's  consent  to  the  change,  reorganization  or
termination of the corporate structure or existence of El Capitan - Delaware and
to any corresponding restructuring of any of the Obligations;

            (e) any other act or thing or omission, or delay to do any other act
or thing,  which may or might in any manner or to any extent vary the risk of El
Capitan - Delaware as an obligor in respect of any of the Obligations;

            (f) any Obligations or any agreement  relating thereto,  at any time
being found to be illegal, invalid or unenforceable in any respect

            (g) any  defenses,  set-offs  or  counterclaims  which El  Capitan -
Delaware  may  allege  or  assert  against  Secured  Party  in  respect  of  the
Obligations; and

            (h) whether  Secured Party makes,  or does not or fails to make, any
additional loan to El Capitan - Delaware subsequent to the date hereof.

      6.3 CERTAIN  WAIVERS.  Except as provided  in Section  7.16,  El Capitan -
Delaware  hereby  waives any and all  defenses  afforded to a surety,  including
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Obligations and this Agreement and any requirement that Secured Party
protect,  secure,  perfect  or insure  any  security  interest  or lien,  or any
property  subject  thereto,  or exhaust any right or take any action  against El
Capitan - Delaware or any other third party or entity or any collateral securing
any of the Obligations, as the case may be.

                                       11
<PAGE>

      6.4 POSTPONEMENT OF SUBROGATION. El Capitan - Delaware agrees that it will
not  exercise  any rights  which it may acquire by way of rights of  subrogation
under this  Agreement,  by any payment made  hereunder or otherwise,  while this
Agreement  is in effect,  unless  such action is required to stay or prevent the
running of any applicable statute of limitations.  Any amount paid to El Capitan
- Delaware on account of any such subrogation rights prior to such time shall be
held in trust for Secured Party and shall  immediately  be paid to Secured Party
and credited and applied against the Obligations.  Any time after this Agreement
has terminated and if El Capitan - Delaware has made payment to Secured Party of
all of the  Obligations,  or if an action is  required  to stay or  prevent  the
running  of any  applicable  statute  of  limitations,  then,  at El  Capitan  -
Delaware's  request,  Secured  Party will  execute  and  deliver to El Capitan -
Delaware appropriate  documents (without recourse and without  representation or
warranty)  necessary  to evidence the  transfer by  subrogation  to El Capitan -
Delaware of an interest in the  Obligations  resulting  from such  payment by El
Capitan - Delaware .

                                   ARTICLE 7.
                                  MISCELLANEOUS

      7.1  NOTICES.  Any  communications,  including  notices and  instructions,
between the parties hereto or notices  provided  herein to be given may be given
to the following addresses:

            (a)   if to El Capitan - Delaware, at:

                  El Capitan Precious Metals, Inc.
                  14301 North 87th Street, Suite 216
                  Scottsdale, Arizona 85260
                  Attention: Charles C. Mottley, President and
                  Chief Executive Officer
                  Facsimile: (480) 607-7193

                  with a copy to:

                  Maslon Edelman Borman & Brand, LLP
                  90 South Seventh Street, Suite 3300
                  Minneapolis, Minnesota  55402
                  Attention: William M. Mower, Esq.
                  Facsimile: (612) 642-8358

            (b)   if to the Secured Party, in care of:

                  Whitebox Advisors, LLC
                  3033 Excelsior Boulevard, Suite 300
                  Minneapolis, Minnesota  55416
                  Attention: Jonathan Wood, Chief Financial Officer
                  Facsimile: (612) 253-6151

                  with a copy to:

                  Messerli & Kramer P.A.
                  150 South Fifth Street, Suite 1800
                  Minneapolis, Minnesota  55402
                  Attention: Jeffrey C. Robbins, Esq.
                  Facsimile: (612) 672-3777.

                                       12
<PAGE>

      All  notices or other  communications  required or  permitted  to be given
hereunder  shall be made in writing and shall be considered  given (a) when made
if made by hand  delivery,  (b) one business day after being  deposited  with an
overnight courier if made by a courier guaranteeing  overnight delivery,  (c) on
the date indicated on the notice of receipt if made by first-class United States
mail,  with  return  receipt  requested,  and (d) upon  confirmation  if made by
telecopier.  Any party  shall  have the right to change its  address  for notice
hereunder to any other location within the  continental  United States by giving
of notice to the other parties in the manner set forth hereinabove.

      7.2 DELAY AND WAIVER; REMEDIES CUMULATIVE.  No failure or delay by Secured
Party in  exercising  any right or power  hereunder  shall  operate  as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any  abandonment  or  discontinuance  of steps to enforce such a right or power,
preclude  any other or further  exercise  thereof or the  exercise  of any other
right or power. Any waiver, permit, consent or approval of any kind or character
on the part of Secured Party of any breach or default under the Agreement or any
waiver  on the part of  Secured  Party of any  provision  or  condition  of this
Agreement  must be in writing and shall be effective  only to the extent in such
writing  specifically set forth. No right, power or remedy herein conferred upon
or reserved to Secured Party  hereunder is intended to be exclusive of any other
right,  power or remedy,  and every such right,  power and remedy shall,  to the
extent  permitted  by law, be  cumulative  and in addition to every other right,
power and remedy  given  hereunder  or now or  hereafter  existing  at law or in
equity  or  otherwise.  The  assertion  or  employment  of any  right or  remedy
hereunder,  or  otherwise,   shall  not  prevent  the  concurrent  assertion  or
employment  of any  other  appropriate  right or  remedy.  Resort  to any or all
security now or hereafter  held by Secured  Party may be taken  concurrently  or
successively and in one or several  consolidated or independent judicial actions
or lawfully taken nonjudicial proceedings, or both.

      7.3 ENTIRE  AGREEMENT.  This  Agreement  and any  agreement,  document  or
instrument  referred to herein integrate all the terms and conditions  mentioned
herein or  incidental  hereto  and  supersede  all oral  negotiations  and prior
writings in respect of the subject matter hereof.

      7.4 GOVERNING  LAW. This  Agreement  shall be governed by and construed in
accordance with the laws of the State of Delaware,  exclusive of its conflict of
laws rules.

      7.5 SEVERABILITY.  In case any one or more of the provisions  contained in
this Agreement should be invalid,  illegal or unenforceable in any respect,  the
validity,  legality and enforceability of the remaining  provisions shall not in
any way be affected or impaired thereby.

      7.6 HEADINGS. Paragraph headings have been inserted in this Agreement as a
matter of  convenience  for reference  only and it is agreed that such paragraph
headings  are  not a part  of  this  Agreement  and  shall  not be  used  in the
interpretation of any provision of this Agreement.

                                       13
<PAGE>

      7.7  WAIVER  OF JURY  TRIAL.  EL  CAPITAN  -  DELAWARE  HEREBY  KNOWINGLY,
VOLUNTARILY,  AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY  LITIGATION  BASED  HEREON,  OR ARISING OUT OF,  UNDER,  OR IN
CONNECTION  WITH,  THIS  AGREEMENT OR ANY COURSE OR CONDUCT,  COURSE OF DEALING,
STATEMENTS  (WHETHER  VERBAL OR  WRITTEN),  OR ACTIONS OF  SECURED  PARTY.  THIS
PROVISION IS A MATERIAL INDUCEMENT FOR SECURED PARTY TO MAKE THE LOAN.

      7.8  CONSENT TO  JURISDICTION.  Each party  hereto  agrees  that any legal
action or  proceeding  with respect to or arising out of this  Agreement  may be
brought in or removed to the federal or state courts located in Hennepin County,
Minnesota,  as Secured  Party may  elect.  By  execution  and  delivery  of this
Agreement,  each party hereto  accepts,  for  themselves and in respect of their
property,  generally  and  unconditionally,  the  jurisdiction  of the aforesaid
courts.  Each of the  parties  hereto  irrevocably  consents  to the  service of
process out of any of the aforementioned  courts in any manner permitted by law.
Nothing  herein shall affect the right of Secured Party to bring legal action or
proceedings in any other competent jurisdiction. Each party hereto hereby waives
any right to stay or dismiss  any action or  proceeding  under or in  connection
with this Agreement  brought  before the foregoing  courts on the basis of forum
non-conveniens.

      7.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the  benefit  of the  parties  hereto  and their  respective  successors  and
permitted assigns.

      7.10 COUNTERPARTS. This Agreement may be executed in one or more duplicate
counterparts  and  when  signed  by all  of  the  parties  listed  below,  shall
constitute a single binding agreement. Delivery of an executed signature page of
this Agreement by facsimile  transmission shall be as effective as delivery of a
manually executed counterpart thereof.

      7.11 BENEFIT OF AGREEMENT.  Nothing in this Agreement, express or implied,
shall give or be construed to give, any person other than the parties hereto and
their  respective  permitted  successors,  transferees  and assigns any legal or
equitable  right,  remedy or claim under this Agreement,  or under any covenants
and provisions of this Agreement, each such covenant and provision being for the
sole benefit of the parties hereto and their  respective  permitted  successors,
transferees and assigns.

      7.12 AMENDMENTS AND WAIVERS.  No amendment,  modification,  termination or
waiver of any provision of this Agreement or consent to any departure  therefrom
shall be effective unless the same shall be in writing and signed by each of the
parties  hereto.  Each amendment,  modification,  termination or waiver shall be
effective only in the specific  instance and for the specific  purpose for which
it was given.

      7.13  SURVIVAL OF  AGREEMENTS.  The  provisions  regarding  the payment of
expenses and indemnification  obligations shall survive and remain in full force
and effect  regardless of the termination of this Agreement  pursuant to Section
7.14.

                                       14
<PAGE>

      7.14 RELEASE AND SATISFACTION.  Upon the indefeasible  payment (whether in
cash and/or other  consideration which is satisfactory to Secured Party in their
sole discretion) and performance in full of the Obligations,  (i) this Agreement
and the security interests created hereby shall terminate and Secured Party will
return the Collateral,  including all documentation  evidencing or affecting the
Collateral,  and (ii) upon  written  request of El Capitan -  Delaware,  Secured
Party  shall  execute  and  deliver  to El Capitan -  Delaware,  at El Capitan -
Delaware  's expense and  without  representation  or warranty by or recourse to
Secured  Party,   releases  and  satisfactions  of  all  financing   statements,
mortgages, notices of assignment and other registrations of security.

      7.15  REINSTATEMENT.  This Agreement  shall continue to be effective or be
automatically  reinstated,  as the  case  may be,  if at any  time  any  payment
pursuant  to this  Agreement  is  rescinded  or must  otherwise  be  restored or
returned upon the  insolvency,  bankruptcy,  reorganization,  liquidation  of El
Capitan - Delaware or upon the  dissolution of, or appointment of any intervenor
or conservator of, or trustee or similar  official for, El Capitan - Delaware or
any substantial  part of El Capitan - Delaware's  assets,  or otherwise,  all as
though such payments had not been made.

      7.16  LIMITATION ON DUTY OF SECURED PARTY WITH RESPECT TO THE  COLLATERAL.
The  powers  conferred  on Secured  Party  hereunder  are solely to protect  its
interest in the Collateral and shall not impose any duty on Secured Party or any
of its  designated  agents to  exercise  any such  powers.  Except  for the safe
custody  of any  Collateral  in its  possession  and the  accounting  for monies
actually received by it hereunder, Secured Party shall have no duty with respect
to any Collateral  and no implied duties or obligations  shall be read into this
Agreement against Secured Party. Secured Party shall be deemed to have exercised
reasonable  care  in the  custody  and  preservation  of the  Collateral  in its
possession  if the  Collateral  is  accorded  treatment  that  is  substantially
equivalent  to that which  Secured  Party  accords  its own  property,  it being
expressly  agreed,  to the maximum  extent  permitted by  applicable  law,  that
Secured Party shall have no responsibility for (a) taking any necessary steps to
preserve rights against any parties with respect to any Collateral or (b) taking
any action to protect against any diminution in value of the Collateral, but, in
each case,  Secured  Party may do so and all  expenses  reasonably  incurred  in
connection therewith shall be part of the Obligations.

                                       15
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be executed and delivered as of the date first written above.

El Capitan - Delaware:                        Secured Party:

El Capitan Precious Metals, Inc.,   Whitebox Intermarket Partners, L.P.,
a Delaware corporation              a British Virgin Islands Limited Partnership

By       /s/ Stephen J. Antol       By       /s/ Jonathon Wood
  ----------------------------        ------------------------------------------
Its       CFO/ Treasurer            Its      CFO/ Director
   ---------------------------         -----------------------------------------


                                       16
<PAGE>

                                    EXHIBIT A
                 DESCRIPTION OF EL CAPITAN - DELAWARE COLLATERAL


      All assets of El Capitan  Precious  Metals,  Inc., a Delaware  corporation
(the "Company"), including without limitation, the following:

      Inventory:  All  inventory  of the  Company as that term is defined in the
Uniform Commercial Code, whether now owned or hereafter acquired or in which the
Company  obtains  rights,  whether  consisting  of whole  goods,  spare parts or
components,  supplies or materials whether acquired, held or furnished for sale,
for lease, for participation,  revenue-sharing or other similar arrangements, or
under  contracts or for  manufacture or  processing,  and wherever  located,  to
include,  without  limitation,  all gold,  silver and other precious  metals and
minerals, as extracted, now owned or hereafter acquired by the Company;

      Equipment:  All  equipment of the Company,  whether now owned or hereafter
acquired,  including  all present  and future  machinery,  vehicles,  furniture,
fixtures,  office and recordkeeping  equipment,  parts, tools,  supplies and all
other  goods  (except  inventory)  used or bought for use by the Company for any
business or  enterprise  and including  specifically  (without  limitation)  all
accessions thereto, all substitutions and replacements  thereof, and all like or
similar  property  now owned or hereafter  acquired by the  Company,  and all of
which is owned by the Company, and all deposits made on any such equipment;

      Deposit  Accounts and Other Cash:  All deposits and deposit  accounts with
any bank, savings and loan association,  credit union or like organization,  and
all funds and amounts  therein,  and whether or not held in trust, or in custody
or safekeeping,  or otherwise restricted or designated for a particular purpose,
and all other cash or marketable  securities  on hand,  whether held in-vault or
otherwise;

      Receivables:  Each and every right of the Company to the payment of money,
whether such right to payment now exists or hereafter arises, whether such right
to payment  arises out of a sale,  lease or other  disposition of goods or other
property,  out of a rendering of services,  or of a loan, out of the overpayment
of taxes or other liabilities,  or any other transaction or event,  whether such
right to payment is created, generated or earned by the Company or by some other
person who  subsequently  transfers  his,  her or its  interest to the  Company,
whether such right to payment is or is not already  earned by  performance,  and
howsoever such right to payment may be evidenced, together with all other rights
and  interests  (including  all liens and other  security  interests)  which the
Company may at any time have by law or agreement  against any account  debtor or
other  person  obligated  to make such  payment or against any  property of such
account debtor or other persons  including,  but not limited to, all present and
future accounts,  contract rights,  chattel paper,  bonds,  notes and other debt
instruments, and rights to payment in the nature of general intangibles;

      General  Intangibles:  All general  intangibles of the Company whether now
owned or hereafter  acquired,  including  (without  limitation)  all present and
future patents, patent applications,  copyrights, trademarks, trade names, trade
secrets,   customer  or  supplier  lists  and  contracts,   manuals,   operating
instructions,  permits,  franchises,  the right to use the Company's  name,  the
Company's  internet  domain names and address and the goodwill of the  Company's
business; and

<PAGE>

      Securities:  All  securities,  joint  venture and other  equity  interests
(including mining claims and mineral  exploration rights) now owned or hereafter
acquired by the Company, including (a) the Company's ownership interest, if any,
in the (i) El Capitan mine, located in Lincoln County, New Mexico (near Capitan,
New Mexico), (ii) COD mine located in Mohave County,  Arizona, (iii) Weaver mine
located in Maricopa  County,  Arizona (near Congress,  Arizona) and (iv) Rainbow
Valley mine located in Maricopa County, Arizona (near Mobile,  Arizona); (b) all
shares of common stock of El Capitan, Ltd., an Arizona corporation, owned by the
Company  and  (c)  any  shares  of  capital   stock  of  any   wholly-owned   or
partially-owned  subsidiary  of the  Company  or any  other  entity in which the
Company  owns an interest;  all  certificates,  receipts  and other  instruments
evidencing  any of interests or securities  described in the  foregoing  clauses
(a),  (b), and (c), and all  dividends,  cash,  earnings,  securities  and other
property received or otherwise  distributed in respect of or in exchange for any
or all of  such  interests  or  securities;  and  all  additional  interests  or
securities  described  above in  clauses  (a),  (b),  and (c) from  time to time
acquired  by the  Company in any  manner,  and all  dividends,  cash,  earnings,
securities and other property received or otherwise distributed in respect of or
in exchange for any or all of such interests or securities.

      The Collateral  shall include (i) all substitutes and replacements for and
proceeds  of any  and  all of the  foregoing  property,  and in the  case of all
tangible Collateral, all accessions, accessories,  attachments, parts, equipment
and repairs now or hereafter  attached or affixed to or use in  connection  with
any such  goods  and (ii) all  warehouse  receipts,  bills of  lading  and other
documents of title now or hereafter covering such goods.

<PAGE>

                                    EXHIBIT B

                                   STOCK POWER



      For value received,  the undersigned has bargained,  sold,  assigned,  and
transferred,  and by these presents does bargain, sell, assign and transfer unto
Whitebox   Intermarket   Partners,   L.P.,  a  British  Virgin  Islands  limited
partnership,  4,000  shares of Common  Stock of El  Capitan,  Ltd.,  an  Arizona
corporation (the  "Company"),  standing in its name on the books of the Company,
represented  by  share  Certificate  No.  3 of the  Company  herewith  and  does
constitute  and  appoint  the  Company  its  true and  lawful  attorney-in-fact,
IRREVOCABLY,  and in its name and stead, to sell, assign, transfer and set over,
all or any part of the said stock,  and for that purpose to make and execute all
necessary acts of assignment and transfer, and one or more persons to substitute
with like full power, hereby ratifying and confirming all that any said attorney
or its substitute or substitutes shall lawfully do by virtue hereof.

      Date: ___________________

                                 El Capitan Precious Metals, Inc.,
                                 a Delaware corporation


                                 By: ___________________________________________
                                 Its:  _________________________________________