|   |   |                                                                                                                                                                                                                                             |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | A.     | The Optionor, through its, Mexican subsidiary, Minera Gavilan SA de CV, is the legal and beneficial owner of those mineral properties (the ‘‘Claims”), which are located in Nayarit State, Mexico and described in Schedule A. |
|   |   |                                                                                                                                                                                                                                             |
|   | B.     | The Optionee is a reporting issuer whose shares are listed for trading on the TSX Venture Exchange under the symbol ‘GXG’.                                                                                                           |

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|   |                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|-------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.01   | The Optionor hereby represents and warrants to the Optionee that: |
|   |                                                              |
|   | (a)                                                               | The Optionor validly exists as a corporation duly incorporated and in good standing under the.laws of British Columbia,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | (b)                                                               | the Optionor is the legal and beneficial owner of a 100% legal and beneficial right, title and interest in and to the Claims (which is comprised of 28 claims that total approximately 22898.2 hectares) free and clear of all liens, charges, encumbrances and adverse claims whatsoever except for the Minera Fumarola S.A. de C.V. royalty agreement as described in Schedule C;                                                                                                                                                                                                                                        |
|   |                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | (c)                                                               | to the best of Optionor’s knowledge at this time the Claims have been validly staked and legally and validly recorded in the name of the Optionor pursuant to all applicable laws, all. exploration and development work required to be performed, recorded and filed upon the Claims has been performed recorded and filed (or fees paid in lieu thereof) through the date of this Agreement, all of which work, recordings and filings have been. completed in accordance with applicable statutes pertaining to such, work and all claim maintenance fees and taxes have been paid thereon until the date hereof; |

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|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (d)    | to the best of Optionor’s knowledge at this time all necessary material information and data (including, without limitation, all geological, geophysical and assay results and maps) concerning the Claims and prior exploration and development work carried out thereon and within Optionors’ knowledge has been made available to Optionee and, will be made. available at any time while Optionee has an interest in the Option, any such information and data of which Optionors may become aware will be be made available to Optionee; |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | (e)    | to the best of Optionor’s knowledge at this time the Optionor has no information or knowledge of any facts pertaining to the Claims, the lands to which the Claims relate or any substances thereon, therein or therefrom not disclosed in wilting to Optionee which if known to Optionee, might reasonably be expected to deter Optionee from completing, the transactions contemplated hereby on the terms and conditions contained herein;                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | (f)    | to the best of Optionor’s knowledge at this time there are no obligations or commitments for reclamation, closure or other environmental corrective, clean-up or remediation action directly or indirectly relating to the mineral properties to which the Claims relate;                                                                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | (g)    | to the best of its knowledge at this time there are no actions, suits, claims, proceedings, litigation or investigations pending or threatened against the Optionor or in respect of the Claims; and                                                                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | (h)    | there is no adverse claim or challenge against or to the ownership of or title to any of the Claims, nor to the knowledge of the Optionor is there any basis therefor, and there are no outstanding agreements or options to acquire or purchase the Optionor’s interest in the Claims or any portion thereof, and no person has any royalty, net profits or other interest whatsoever, absolute or contingent, in production from any of the Claims.                                                                                          |

|   |                                                       |
|--------|------------------------------------------------------------|
| 3.01   | The Optionee represents and warrants to the Optionor that: |

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|   |   |
|--------|--------|
|   | (a)    | the Optionee validity exists as a corporation duly incorporated and in good standing under the laws of British Columbia; and |
|   |   |   |
|   | (b)    | the Optionee’s common shares are listed on and trade through the facilities of the Exchange. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (a)    | On or before the First Anniversary incurring $500,000 Exploration issuing Expenses and issuing 500,000 Shares to the Optionor (this is a firm commitment by the Optionee, subject to the receipt of the acceptance of the transaction contemplated in this Agreement by the Exchange);                                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | (b)    | On or before the Second Anniversary incurring $1,000,000 US additional Exploration Expenses and issuing an additional 500,000 Shares;                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | (c)    | On or before the Third Anniversary inclining $1,000,000 US additional Exploration Expenses and issuing an additional 500,000 Shares;                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | (d)    | On or before the Fourth Anniversary inclining $1,000,000 US additional Exploration Expenses and issuing an additional 5,000,000 Shares; and                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | (e)    | On or before the Fifth Anniversary incurring $2,500,000 US additional Exploration Expanses and issuing an additional 500,000 Shares.                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | Should the Option be exercised and the Secondary Option hereinafter provided be terminated or not exercised the Optionee shall within 30 days of such termination or lapsing by reason  of  non-exercise issue to the Optionor an additional 2,000,000 Common Shares of the Optionee and the Parties shall enter into a Joint Venture on the terms set forth in Schedule “B” and there shall be pro rata sharing of all costs and expenses and revenues relating to the Claims, according to their proportionate interests in the Claims. |

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|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | completing at its sole cost and expense a Bankable Feasibility Study and delivering it to the Optionor on or before the Seventh Anniversary;                                                                                                                                                                                                                                                                                                                                                                               |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | • | after the exercise of the Secondary Option the Parties shall enter into a Joint Venture on the terms set forth in Schedule “B” and there shall be pro rata snaring of ail costs and expenses and revenues relanting to the Claims from and after the fulfillment by Optionee of the Bankable Feasibility procurement expenses commitment (being after such time as a Bankable Feasibility. Study has been delivered by Optionee), according to then proportionate interests in the Claims;                     |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | • | from and after such time any such Bankable Feasibility Study has been delivered by Optionee, Optionee and. Optionor shall each fund their pro rata share of all costs and expenses required in connection with development programs and budgets and all other programs and budgets in connection with mining operations;                                                                                                                                                                                                   |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | • | Optionee shall use its best efforts to obtain project financing to find development in which project financing Optionor shall be entitled to participate on the same terms as is available to Optionee. In the event that Optionor shall be willing to either fully participate in the project financing obtained by Optionee, or to arrange its own financing to provide its full pro rata share of expenditures, its 30% interest in the Property and the Joint Venture shall revert to a 2% net smelter return royalty; |

----

----

|   |   |                                                                                                                                                                                                                                                             |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (a)    | enter thereon;                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                             |
|   | (b)    | have exclusive and quiet possession thereof, subject always to the rights granted pursuant to section 8.01 (b);                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                             |
|   | (c)    | do such prospecting, exploration, development and/or other mining work thereon and thereunder as the Optionee may determine to be necessary, desirable or advisable;                                                                                             |
|   |   |                                                                                                                                                                                                                                                             |
|   | (d)    | bring upon and erect upon the Claims and use in its operations, at any tirne and from time “to time, such buildings, plant, machinery, equipment, vehicles, tools, appliances and supplies as the Optionee may deem necessary, desirable or advisable; and |
|   |   |                                                                                                                                                                                                                                                             |
|   | (e)    | remove therefrom and dispose of reasonable quantities of ores, minerals and metals for the purposes of sampling, obtaining assays or malting other tests.                                                                                                        |

----

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (a)    | maintain the Claims in good standing by filing of assessment work and to performance of other actions as may be necessary in that regard and in order to keep the Claims free and clear of all liens and other charges arising from the Optionee’s activities thereon except those at to time contested in good faith by the Optionee;                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | (b)    | permit the directors, officers, employees and designated consultants of the Optionor and its servants, agents and independent contractors, at their own risk arid expense access to the Claims and to all reports and data developed or acquired by the Optionee with respect to the Claims and the operations conducted thereon at all reasonable times; provided that the Optionor agrees (and the Optionor does hereby so agree) to indemnify the Optionee against and to save it harmless from and against all liens, costs, claims, actions, causes of action, liabilities and expenses that the Optionee may incur or suffer as a result of any injury (including injury causing death) to any director, officer, employee, agent or designated consultant of the Optionor while on the Claims; |

----

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (c)    | do all work on the Claims in a good and workmanlike fashion and in accordance with all applicable laws, regulations, orders and ordinances of any governmental authority;                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | (d)    | provide to the Optionor copies of all news releases and other continuous disclosure documents filed or disseminated by the Optionee under securities laws of Canada and such other jurisdictions to which the Optionee may be subject which releases or documents shall comply with appropriate disclosure standards including, without limitation, NI 43-101; and                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | (e)    | all reports of Exploration Expenses shall be in detail sufficient to meet good industry standards as to the work conducted on the Claims to meet the .requirements of the exercise of the Option. Should such reports not be provided or should. such reports not show expenditures in detail sufficient to meet good industry standards) sufficient (together with any excess expenditures in accordance with section. 4.05 hereof) to meet the required expenditures for the period covered by such report the Optionor may, on notice in accordance with Section 9.01, terminate the Option. |

----

|   |   |                                                                                                                                                                                                                                                                                                     |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (a)    | a covenant by such transferee to perform all the obligations of the Optionee to be performed under ibis Agreement in respect of the interest to be acquired by it from the Optionee to the same extent as if this Agreement bad been, originally executed by such transferee as principal obligarit; and |
|   | (b)    | a provision subjecting any further sale, transfer or other disposition of such interest in the Claims and/or this Agreement or any portion thereof to the restrictions contained in this section;                                                                                                        |

----

----

----

|   |   |                                                                                                                                                                                                                                                                                                         |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (a)    | it has first given to the Optionee written notice of default containing particulars of the default; and                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                         |
|   | (b)    | the Optionee has not, within 30 days following receipt of such notice of default, cured such default or, if such default, is caused by actions of a person who is not a party to this agreement and cannot be cured within .30 days, taken action to cure such default and is diligently pursuing such cure. |

----

----

| Claim Name          |   | Type     |   | Title#  |   | File #     |   | Hectares   |   | Initial Date |   | Expiry Date |
|---------------------|--------|----------|--------|---------|--------|------------|--------|------------|--------|--------------|--------|-------------|
| LA SARDA            |   | EXPLOIT, |   | 162577  |   | 59/3743    |   | 9.000      |   | 07-Jul-78    |   | 06-Jul-28   |
| SAGITARIO           |   | EXPLOIT. |   | 219840  |   | 3/1.3/494  |   | 96,772     |   | 22-Apr-03    |   | 21-Apr-53   |
| LA GUADALUPE        |   | EXPLOIT. |   | 180099  |   | 321.1/3-42 |   | 18.000     |   | 23-Mar-87    |   | 22-Mar-37   |
| LA CUCARACHA        |   | EXPLOIT. |   | 194422  |   | 3/1.3/221  |   | 84.000     |   | 30-Dec-91    |   | 29-Dec-41   |
| YAGO I              |   | exploit. |   | 200955  |   | 3/1,3/254  |   | 465.767    |   | 17-Oct-94    |   | 16-Oct-44   |
| AMPLIACI6N LASARDA  |   | EXPLOIT. |   | 226221  |   | 3/1.3-0380 |   | 9.000      |   | 02-Dec-OS    |   | 0l-Dec-55   |
| NUEVOSAN JUAN       |   | EXPtOIT. |   | 218233  |   | 3/1.3/543  |   | 35.599     |   | 17-Oct-D2    |   | 16-0ct-52   |
| LA NUEVA MAGNOLIA   |   | EXPLOIT, |   | 218232  |   | 3/1.3/542  |   | 9.000      |   | 17-Oct-D2    |   | 16-0ct-52   |
| AMfMA NUEVAMAGNOLIA |   | EXPLOIT. |   | 218227  |   | 3/1.3/541  |   | 16.000     |   | 17-Oct-02    |   | 16-0ct-52   |
| AMP, NUEVO SAN JUAN |   | EXPLOIT. |   | 218254  |   | 3/1.3/544  |   | 6.417      |   | 17-Oct-02    |   | 16-Oct-52   |
| DON ALNSO           |   | EXPLOR.  |   | 213559  |   | 59/06540   |   | 21.757     |   | 18-May-01    |   | l7-May-51   |
| TEP1C4              |   | EXPLOR.  |   | 219437  |   | 59/6722    |   | .14,915    |   | 06-Mar-03    |   | 05-Mar-53   |
| TEPIC3FRACCCION I   |   | EXPLOR.  |   | 220036  |   | 59/06715   |   | 34.951     |   | 27-May-03    |   | 26-May-53   |
| TEPIC3.FRACCion II  |   | EXPLOR.  |   | 220037  |   | 59/05715   |   | 27,050     |   | 27-May-03    |   | 26-May-53   |
| TEP1C5              |   | EXPLOR,  |   | 220289  |   | 59/06728   |   | 13.088     |   | 03-Jul-03    |   | 02-Jul-53   |
| TEPIC7              |   | MINING   |   | 228596  |   | 59/07001   |   | 1,869.978  |   | 12-Dec-06    |   | 11-Dec-56   |
| YAGOF. l            |   | MINING   |   | 234677  |   | 59/0753?   |   | 11,142.817 |   | 29-Jul-09    |   | 28-Jul-59   |
| YAGOF. 2            |   | MINING   |   | 234678  |   | 59/07337   |   | 842.933    |   | 29-Jul-09    |   | 28-Jul-59   |
| YAGOF. 3            |   | MINING   |   | 234679  |   | 53/07537   |   | 116.535    |   | 29-Jul-09    |   | 28-Jul-59   |
| YAGO SUR            |   | MINING   |   | 234681  |   | 59/07538   |   | 5,858.389  |   | 29-Jul-C9    |   | 28-Jul-59   |
| GALLO               |   | MINING   |   | 227010  |   | 59/H6S09   |   | 889.928    |   | l l-Apr-06   |   | 10-Apr-56   |
| AS DEORO            |   | EXPLOR.  |   | 22028B  |   | 059/6718   |   | 75.608     |   | 03-JUI-03    |   | 02-Jul-53   |
| GALLO 2 FRACCION I  |   | MINING   |   | 227086  |   | $9/06850   |   | 22.000     |   | 04-May-06    |   | 03-May-56   |
| GALLO 2 FRACCION II |   | MINING   |   | 1227087 |   | 59/06850   |   | 17,454     |   | 04-May-05    |   | 03-May-56   |
| GALLO 3             |   | MINING   |   | 227139  |   | 59/06861   |   | .23.449    |   | 17-May-06    |   | 16-May-56   |
| EL GALLO DEORO      |   | MINING   |   | 228416  |   | 3/1/610    |   | 11.326     |   | 22-NOV-06    |   | 21-Nov-56   |
| GALLO 4             |   | MINING   |   | 236662  |   | 59/07604   |   | 1,075.748  |   | 06-Aug-10    |   | 05-Aug-60   |
| MINA MARIA          |   | EXPLOR,  |   | 213537  |   | 59/6524    |   | 90.660.    |   | 18-May-01    |   | 17-May-51   |

----

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.     | Participating Interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | Initial interests and initial investments will be as set forth in the Option Agreement to which this is attached.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 2.     | Management Committee                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | The joint venture will be under the management of a management committee consisting of one representative of each participant and at least one alternate representative. A quorum for any Management Committee meeting shall be present if the representatives of all parties are present. The representative of the Operator shall be the chairman of Management Committee meetings. The Management Committee shall decide every question submitted to it by a vote with each representative being entitled to cast that number of votes which is equal to its party’s interest percentage. The Management committee shall make decisions by simple majority. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 3.     | Operator                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (a)    | G4G will be the first operator and remain so unless its interest is reduced below 50% or it resigns or is removed for default. Upon G4G ceasing as operator, the Management Committee shall thereupon select another party to become Operator.                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | (b)    | The non-perator may refer a question of operator default to arbitration if it is outvoted on a management committee motion to remove, the operator for default.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | (c)    | The operator must keep the property in good standing and free of encumbrances, comply with laws, and maintain proper books and accounts and adequate insurance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | (d)    | The operator must conduct joint venture activities according to approved programs and budgets, with sole responsibility for non-approved overruns exceeding 20% on exploration programs and 10% on development and. other programs, and otherwise in accordance with good mining practices.                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | (e)    | The operator will have the right to cash call in advance to cover anticipated approved program expenditures, including a reasonable amount of working capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | (f)    | The operator’s charges for management will be; 10% of exploration costs, reduced to 5% on any single third parry contract exceeding $50,000; 1% of construction costs; and 2% of mine operating costs. This charge is intended as a reimbursement of the costs of the time incurred by head office management and support functions in respect of approved programs on the Claims, which is not otherwise billed as a cost. The charge has been established as an estimate of anticipated management and administrative costs and on the basis that the party acting as Operator shall not profit nor suffer loss by virtue of acting in its capacity as Operator providing these services, |

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|   |   |                                                                                                                                                                                                                                                                                                                                                              |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (g)    | After commencement of commercial production the operator will have alien on the non operator’s interest to secure the non operator’s cost-share of expenditures and the right to advance the cost share of a party in default, any such advances’ to be accounted for in dilution formulae outlined in Sections 5(c) and 5(d) of this Schedule. |
|   |   |                                                                                                                                                                                                                                                                                                                                                              |
|   | (h)    | Prior to a production decision, the operator will submit annual exploration programs for management committee approval, and will report on results on a quarterly basis,                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                              |
|   | (i)    | Unless a feasibility study was delivered prior to the formation of the joint venture, the Management Committee may approve a program which contemplates the preparation of a feasibility report at such time, if any, as it deems fit.                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                              |
|   | (j)    | A development program will be prepared by operator based on a feasibility study approved by the Management Committee.                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                              |
|   | (k)    | Each party must finance its own cost share of development costs, with the right to pledge its interest for such purpose.                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                              |
|   | (j)    | After commencement of commercial production, operator will submit annual operating programs for management committee approval.                                                                                                                                                                                                                                    |

|   |                                   |                                                                                                                                                                                                                        |
|--------|----------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4      | Participation in Programs and Dilution |
|   |                                   |                                                                                                                                                                                                                        |
|   | (a)                                    | Parties will have an election as to whether to participate in any approved exploration program or approved development program up to the amount of its interest at such time.                                               |
|   |                                   |                                                                                                                                                                                                                        |
|   | (b)                                    | Electing to participate in an approved program will make a participant liable for its agreed cost share of all expenditures for that program.                                                                               |
|   |                                   |                                                                                                                                                                                                                        |
|   | (c)                                    | Electing not to participate in an approved program will result in dilution of interest, i.e. each party’s interest will be calculated as follows:                                                                     |
|   |                                   |                                                                                                                                                                                                                        |
|   |                                   |                                                                                                                                                                                                                             |
|   |                                   | (Where:                                                                                                                                                                                                                     |
|   |                                   |                                                                                                                                                                                                                        |
|   |                                   | A = the interest of the party being diluted prior to the start of the Relevant Program as defined below;                                                                                                                    |
|   |                                   |                                                                                                                                                                                                                        |
|   |                                   | B = the sum of all deemed and prior contributions of all parties prior to the start of the Relevant Program;                                                                                                                |
|   |                                   |                                                                                                                                                                                                                        |
|   |                                   | Y = the actual contributions (if any) of the diluting party to the Relevant Program; and                                                                                                                                    |
|   |                                   |                                                                                                                                                                                                                        |
|   |                                   | C = the total amount actually contributed by all parties to the Relevant Program; and                                                                                                                                       |
|   |                                   |                                                                                                                                                                                                                        |
|   |                                   | “Relevant Program” means a program to which the diluting party elected not to contribute and the Program is subsequently funded by the other party increasing its contribution by the amount of the shortfall.) |
|   |                                   |                                                                                                                                                                                                                        |
|   |                                   | and the contributing party’s interest will be correspondingly increased.                                                                                                                                              |

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|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|---------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (d)                       | Notwithstanding (c) above, in the case of a development program which involves construction of mining facilities and bringing a mine to commercial production based on a feasibility study, a party electing to participate in such program in an amount less than its interest at the time (including not to participate at all) will result in dilution of such party’s interest to that percentage of budgeted expenditures which it has agreed to contribute, subject to (f) below. |
|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | (e)                       | Until commencement of commercial production, a participant’s failure to pay its cost share of an approved program, after electing to participate will constitute default and result in double dilution of interest, i.e, the defaulting party’s interest will be:                                                                                                                                                                                                                 |
|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                      | (A, B, Y and C having the meanings given above.)                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                      | and the-non-defaulting party’s interest will be correspondingly increased,                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                      | After commencement of commercial production, a participant’s failure to pay its cost share of an. approved program after electing to participate will constitute default and result in dilution of interest, such that the defaulting party’s interest will be:                                                                                                                                                                                                                   |
|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                      | (A, B, Y and G having the meanings given above.)                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                      | and the non-defaulting party’s interest will be correspondingly increased.                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | (f)                       | Dilution to 10% will effect a deemed surrender of an interest in the joint venture, and conversion of such interest to a 2.0% net smelter royalty, which will be. in a form to he agreed by the parties.                                                                                                                                                                                                                                                                                      |
|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | (g)                       | There will be no election, as to participation in an approved operating program.                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 5.     | Disposition of Production |
|   |                      |
|   | (a)                       | Each participant shall have the right to take its share of production in kind.                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | (b)                       | The operator will be free to sell the share of production of any participant who fails to take its share in kind or make arrangements for sale, deducting its costs and expenses from the proceeds.                                                                                                                                                                                                                                                                                           |
|   |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 6.     | Transfers of Interests    |
|   |                      |
|   | (a)                       | Any transfer of interest in the property and the joint venture agreement will be subject to a right of first offer of tie other participant substantially in the form set forth in the Option Agreement under the heading “Right of First Offer” Such a transfer cannot be made without the consent of the other party, which consent cannot be unreasonably withheld, and is subject to the transferee agreeing to be bound by the terms of the Joint Venture Agreement,         |

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|   |                                                                                                                                                                         |                                                                                                                                   |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------|
|   | (b)                                                                                                                                                                          | No encumbrances of any interest will be permitted except for financing of development and then subject to the joint venture agreement. |
|   |                                                                                                                                                                         |                                                                                                                                   |
| 7.     | Withdrawal and Winding Up                                                                                                                                                    |
|   |                                                                                                                                                                         |
|   | No withdrawal by a party or winding up of the joint venture will be permitted without adequate payment of or security for reclamation and closure costs.                     |
|   |                                                                                                                                                                         |
| 8.     | Dispute Resolution                                                                                                                                                           |
|   |                                                                                                                                                                         |
|   | Arbitration administered by the British Columbia International Commercial Arbitration Centre.                                                                                |
|   |                                                                                                                                                                         |
| 9.     | Other                                                                                                                                                                        |
|   |                                                                                                                                                                         |
|   | (a)                                                                                                                                                                          | Area of interest on the same terms as the Option Agreement                                                                             |
|   |                                                                                                                                                                         |                                                                                                                                   |
|   | (b)                                                                                                                                                                          | Force majeure                                                                                                                          |
|   |                                                                                                                                                                         |                                                                                                                                   |
|   | (c)                                                                                                                                                                          | Confidentiality                                                                                                                        |
|   |                                                                                                                                                                         |                                                                                                                                   |
|   | (d)                                                                                                                                                                          | Subject to British Columbia law.                                                                                                       |
|   |                                                                                                                                                                         |                                                                                                                                   |
| 10.    | In the case of any conflicts in the terms of this Joint Venture Agreement and the Option Agreement to which it is appended, the terms of the Option Agreement shall prevail. |

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