CHATTEL SECURITY AGREEMENT

DEBTOR:                         AZCO MINING, INC., a Delaware corporation

SECURED PARTY:                  PATTY J. RYAN

DATE:                           August 27, 2001


     AGREEMENT made and entered into the date  hereinafter  given by and between
AZCO MINING, INC., a Delaware corporation,  with its principal place of business
located at 7239 N. El Mirage Road,  Glendale,  Arizona 85307 (herein referred to
as the "Debtor");  and PATTY J. RYAN, residing at 5415 N. 40th Street,  Phoenix,
Arizona 85018 (herein referred to as the "Secured Party").

                                    RECITALS:

     WHEREAS,  the  Debtor  is  indebted  to the  Secured  Party by  reason of a
promissory note dated August 27, 2001, in the original  principal  amount of Two
Hundred Thousand Dollars ($200,000.00), (herein referred to as the "Note"); and

     WHEREAS, that the indebtedness  represented by the Note is to be secured by
this Chattel Security Agreement.

     NOW,  THEREFORE,  in  consideration  of the  Note and the  mutual  promises
contained herein, the parties agree as follows:

          1. SECURITY INTEREST.  As and for security for the payment of the Note
     and any other loan or extension  of credit now  existing or made  hereafter
     between the Debtor and the Secured  party,  the Debtor hereby grants to the
     Secured  Party a  continuing  security  interest in and to all the Debtor's
     right,  title and interest in the following  described  property located at
     7239 North El Mirage Road, Glendale,  Arizona 85307 both presently existing
     and hereafter acquired or arising in the following property.

     All plant equipment,  fixtures, inventory, raw materials, inventory of work
in progress,  inventory of finished goods, located at 7239 North El Mirage Road,
Glendale, Arizona 85307.

          2. WARRANTIES.

               A. Title.  The Debtor warrants that as of August 27, 2001, at the
          time this security  interest is created,  the Debtor was the owner of,
          the plant equipment,  fixtures, inventory, raw materials, inventory of
          work in progress,  inventory of finished goods,  located at 7239 North
          El Mirage Road, Glendale, Arizona 85307 and that Debtor has full power
          and authority to convey,  transfer and pledge the security interest in
          the equipment to the Secured Party.

               B. Perfection.  The Secured Party will cause financing statements
          to be filed and recorded, and amended and continued when necessary, to
          insure that the Secured Party's security interest in the Collateral is
          perfected at all times.

               C.  Sale of  Collateral.  Other  than in the  ordinary  course of
          business,  the  Collateral  will  not be  sold  or  transferred  or be
          subjected  to any  subsequent  interest  of a third  party  created or
          suffered by the Debtor,  whether voluntarily or involuntarily,  unless
          the Secured  Party  consents in writing in advance to such transfer or
          subsequent interest,  such consent will not be unreasonably  withheld.
          Secured  Party's  consent  will be based upon the fair market value of
          remaining  amount of  Collateral  which  Secured  Party  would hold to
          secure the then unpaid balance of indebtedness.  In no event shall the
          fair market value of the  Collateral  fall below the balance due under
          the  obligation.  Notwithstanding  the above,  the Debtor may sell the
          property which is the subject of the security  interest  providing the
          Debtor  receives fair market value for the  collateral and remits said
          proceeds to the Secured Party.

               D. Further  Assurances.  The Debtor will sign and execute any and
          all documents,  including financing statements,  and pay all connected
          costs necessary to protect the security  interest under this Agreement
          against the rights or interests of third parties.

          3.  COVENANTS.  The Debtor  covenants and agrees that until payment in
     full and satisfaction of the Note:

               A. The Debtor  shall not,  without  prior  written  notice to and
          consent of the Secured  Party,  change the nature and character of the
          Debtor's  business  or enter  into any  agreement  for the  merger  or
          consolidation of the Debtor.

               B. The Debtor shall  comply with all  statutes  and  governmental
          regulations  the  failure to comply  with which  would have a material
          adverse effect upon the Debtor,  its business or its  properties.  The
          Debtor shall pay promptly when due all taxes, assessments,  government
          charges, claims for labor, supplies, rent and other obligations which,
          if unpaid,  will become a lien against the Debtor's  property,  except
          for liabilities which are contested in good faith.

               C. The Debtor  acknowledges  that the Secured Party, in extending
          credit to the Debtor, is relying on the unique  management  ability of
          current  management and  acknowledges  that current  management of the
          Debtor are a material  consideration  to the Secured Party in agreeing
          to extend this credit to the Debtor.  The Debtor  covenants and agrees
          that  without  the prior  written  consent of the Secured  Party,  the
          Debtor shall not change management.

               D. The Debtor shall not enter into any merger or consolidation or
          acquire all or  substantially  all of the assets of any person,  firm,
          joint venture or corporation, without the prior written consent of the
          Secured Party.

               E. The Debtor shall not, without the prior written consent of the
          Secured Party, sell, lease,  assign,  transfer or otherwise dispose of
          any assets  (other  than  obsolete or  worn-out  property  not used or
          usable  in the  business)  whether  now owned or  hereafter  acquired,
          except in the ordinary  course of its business as presently  conducted
          and for a full and adequate consideration.

     4.  AUTHORITY OF SECURED  PARTY.  If the Debtor fails to act as required by
this  Agreement  or  any  of  the  other  documents  in  connection  with  their
acquisition of the  Collateral,  the Secured Party is  authorized,  after giving
five (5) days written notice to Debtor,  to take any and all action necessary on
behalf of the Debtor to protect the Secured Party's  interest in the Collateral.
Debtor may  participate  with  Secured  Party in taking such  action,  providing
Debtor makes such request to Secured Party in writing.

     5. DEFAULT.  The  occurrence  of one or more of the following  events shall
constitute an event of default:

          A. Breach of  Warranty.  Any  representation  or warranty  made by the
     Debtor in writing to the Secured  Party shall prove to have been  incorrect
     in any material respect; or

          B. Default in Payment.  The Debtor shall default in the payment,  when
     due of any  principal  or  interest on the Note or any other sum payable by
     the Debtor to the Secured Party under the Note; or

          C. Default in  Performance.  The Debtor shall  default for thirty (30)
     days in the performance of any other obligation to the Secured Party; or

          D.  Failure  to Pay Other  Indebtedness.  Any  indebtedness  for money
     borrowed, for which the Debtor is liable, as principal obligors, guarantors
     or otherwise, is not paid at its stated maturity, subject to Debtor's right
     to cure said obligation upon the terms of said  obligation;  or is declared
     or otherwise become due and payable prior to its stated maturity; or

          E.  Insolvency.  The  Debtor  shall (1) apply  for or  consent  to the
     appointment  of a receiver,  trustee or liquidator of itself or of all or a
     substantial  part of its  assets,  (2) be unable or admits in  writing  its
     inability to pay its debts as they fall due, (3) make a general  assignment
     for  the  benefit  of its  creditors,  (4) be  adjudicated  a  bankrupt  or
     insolvent,  or (5) file a voluntary petition in bankruptcy or a petition or
     an answer seeking  reorganization  or an  arrangement  with creditors or to
     take advantage of any  insolvency  law or an answer  admitting the material
     allegations   of  a  petition   filed   against   it  in  any   bankruptcy,
     reorganization or insolvency  proceeding,  or any corporate action shall be
     taken by it for the purpose of effecting any of the foregoing; or

          F.  Receivership.  An  order,  judgment  or decree  shall be  entered,
     without  the  application,  approval or consent of the Debtor or any of its
     subsidiaries by any court of competent  jurisdiction,  approving a petition
     seeking reorganization of the Debtor or any such subsidiary or appointing a
     receiver,  trustee or liquidator of the Debtor or any such subsidiary or of
     all or a substantial part of any of their respective assets and such order,
     judgment or decree shall continue  unstayed and in effect for any period of
     more than thirty (30) consecutive days.

     6.  REMEDIES.  Upon  the  Debtor's  failure  to cure any  event of  default
hereunder or any event of default  under the Note within  thirty (30) days after
mailing or written  notice of default  by the  Secured  Party,  at the option of
Secured Party and without any notice or demand, the Secured Party shall have all
the  following  rights and remedies in addition to those rights and remedies for
default  provided by the Arizona Uniform  Commercial  Code, as well as any other
applicable law:

          A. Power of Attorney. The Debtor hereby grants the Secured Party power
     of  attorney  to endorse  checks,  notes,  drafts,  money  orders and other
     negotiable instruments constituting payment with respect to the Collateral.

          B. Expenses and  Application of Proceeds.  The Debtor shall  reimburse
     the  Secured  Party  for any  expenses  incurred  by the  Secured  Party in
     protecting or enforcing its rights under this Agreement,  including without
     limitation,  reasonable attorneys' fees and legal expenses and all expenses
     of taking possession,  holding,  preparing for disposition and disposing of
     the  Collateral.  After  deduction of such expenses,  the Secured Party may
     apply the  proceeds of  disposition  to the  obligations  in such order and
     amounts as it elects.

          C.  Waiver.  The  Secured  Party may  permit  the Debtor to remedy any
     default without waiving the default so remedied,  and the Secured Party may
     waive any default without waiving any other  subsequent or prior default by
     the Debtor.

          D. Non  Exclusivity  of Remedies.  No remedy herein  conferred upon or
     reserved to the Secured  Party is intended to exclusive of any other remedy
     or remedies,  including those of any obligation owed to Secured Party,  and
     each and every  remedy shall be  cumulative  and in addition to every other
     remedy given hereunder, or now or hereafter existing at law or in equity.

     7. NO LIABILITY OF SECURED PARTY.  The Secured Party has no duty to protect
or insure the Collateral.

     8. MISCELLANEOUS PROVISIONS.

     A.  Amendment.  This  Agreement  may be amended  only by an  instrument  in
writing  executed by the party  against  whom  enforcement  of the  amendment is
sought.

     B.  Notice.  All  notices,  requests,  demands,  and  other  communications
hereunder must be in writing and shall be  hand-delivered  or sent by registered
or certified  mail,  postage  prepaid,  return receipt  requested,  addressed as
follows:

<TABLE>
<CAPTION>

<S>                                                <C>
If to Debtor:                                      AZCO Mining, Inc.
                                                   c/o Lawrence G. Olson
                                                   7239 N. El Mirage Road
                                                   Glendale, Arizona 85307

                                                   P. J. Ryan
If to Secured Party                                5415 North 40th Street
                                                   Phoenix, Arizona 85018


With a copy to:                                    James Benham, Esq.
                                                   MOORE & BENHAM, P.L.C.
                                                   1144 E. Jefferson St.
                                                   Phoenix, Arizona 85034
</TABLE>

     Unless  otherwise  provided  in this  Agreement,  notice  by mail  shall be
effective on the earlier of the fifth  business day after mailing or the date of
receipt by either the party to be notified or its counsel  designated above. Any
party may change its address for notices by giving  written  notice to the other
party in accordance with this subsection.

     C.  Governing  Law. This  Agreement  shall be governed by and construed and
enforced in accordance with the laws of the State of Arizona.

     D.  Captions.  The  captions  in  this  Agreement  are for  convenience  of
reference  only and  shall  not limit or  otherwise  affect  any of the terms or
provisions hereof.

     E.   Counterparts.   This   Agreement  may  be  executed  in  one  or  more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

     F.  Severability.  The provisions of this Agreement are  independent of and
severable  from each  other,  and no  provision  shall be  affected  or rendered
invalid or  unenforceable  by virtue of the fact that for any  reasons any other
provision may be invalid or unenforceable either in whole or in part. If a court
of competent  jurisdiction  determined  that any provision of this  Agreement is
invalid or unenforceable as written, such court may interpret, construe, rewrite
or revise such  provision to the fullest extent allowed by law, so as to make it
enforceable and consistent with the intent of the parties.

     G. Binding Effect.  This Agreement shall be binding upon the parties hereto
and their respective successors and assigns.

     H.  Assignability.  No  party  my  assign  nor  delegate  their  rights  or
obligations  under  this  Agreement  without  the  written  consent of the other
parties.

     I.  Attorneys'  Fees.  In the event of any action or  proceeding  to compel
compliance with, or for a breach of, the provisions of this Agreement, the court
or body before  which the action or  proceeding  is held or tried shall award to
the prevailing party all damages, costs, and expenses of such action, including,
but not limited to, reasonable attorneys' fees.

     J. Specific Performance.  The Debtor acknowledges that the refusal by it to
consummate the transactions  contemplated  hereby will cause irrevocable harm to
the  Secured  Party,  for which  there may not be  adequate  remedy at law.  The
Secured Party shall be entitled,  in addition to all other  remedies it may have
at law or in equity, to specific performance of this Agreement by the Debtor.

     DATED this _____ day of August, 2001.


SECURED PARTY:                                     DEBTOR:
PATTY J. RYAN                                      AZCO MINING, INC.


                                                   By:
Patty J. Ryan                                      Lawrence G. Olson, President