Unassociated Document


    


    GEOLOGICAL
REPORT OF THE MULUNCAY DEPOSIT

    OF
THE

    PORTOVELO-ZARUMA-AYAPAMBA
AREA

    


    EL
ORO PROVINCE, ECUADOR

    


    Prepared
For Ecuadorgoldcorp S.A

    


    AUTHOR: WIMER CASTRO

    


    FEBRUARY,
2008


    
      
         


      

      
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    TABLE OF CONTENTS

    


    
      
        
          	
                  INTRODUCTION

                	
                  1

                
	
                   
      

                	 
      
	
                  HISTORY

                	
                  1

                
	 
      	 
      
	
                  DESCRIPTION
      AND LOCATION

                	
                  4

                
	 
      	 
      
	
                  ACCESABILITY,
      CLIMATE, VEGETATION AND LOCAL FACILITIES

                	
                  4

                
	 
      	 
      
	
                  LOCAL
      AND REGIONAL GEOLOGICAL SETTING

                	
                  6

                
	 
      	 
      
	
                  DEPOSIT
      TYPES

                	
                  7

                
	 
      	 
      
	
                  LOCAL
      AND REGIONAL MINERALIZATION

                	
                  8

                
	 
      	 
      
	
                  EXPLORATION

                	
                  10

                
	 
      	 
      
	
                  DDH
      DRILLING

                	
                  12

                
	 
      	 
      
	
                  SAMPLING
      METHOD

                	
                  12

                
	 
      	 
      
	
                  SAMPLE
      PREPARATION FOR TESTING

                	
                  12

                
	 
      	 
      
	
                  ADJACENT
      CONCESSIONS

                	
                  12

                
	 	 
	
                  EXPLORATION
      POTENTIAL

                	
                  13

                
	 	 
	
                  CONCLUSIONS
      AND RECOMENDATIONS

                	
                  13

                


        

      

    


    
      
        
        

      

      
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    SUMMARY

    


    This
assessment report has been prepared by Wilmer Castro who has researched the
mining, treatment, economic analysis and further development potential of the
property. The Muluncay District comprises a total area of 343 hectares in a
readily assessable region of southern Ecuador. The gold mineralization found in
the district is associated with an extensive high grade gold and silver
epithermal vein system. This Preliminary Assessment Report was prepared by the
author at the request of Ecuador gold Corp. S A. and is based on:

    


    • a site
visit in January 2008;

    


    •
interviews with Company management and other consultants engaged to
assist

    


    I have
visited the Muluncay District numerous times and am very familiar with the area
and it’s potential.

    


    The
writer has been requested by the Management of Ecuadogold to summarize the
geology and mineral potential of the Muluncay Project within the prospective
gold and silver-bearing vein systems in the Occidental Andean Cordillera
primarily the Gen and Cristina veins.

    


    HISTORY

    


    The hills of Zaruma and Portovelo have been mined for gold and silver for centuries. The Incas were already extracting gold and silver in the area with hydraulic mining of the oxidized parts of veins when Mercadillo, one of Pizzarro ́s force, followed the Rio Amarillo River upstream and encountered the Inca mine and founded the town of Zaruma in 1549 (Billingsley, 1926). Exploitation of the Zaruma and Portovelo districts continued during the time of Spanish colonization until 1870 when an Ecuadorian-Chilean company was established.


    
      
         


      

      
        - 3-


        
          

        

      

      
         


      

    


    In
1880,
Grant
Zaruma
Company,
from
England,
bought
controlling
shares
of
a
newly
formed
Ecuadorian-Chilean
mining
company.
Operational
rights
were
immediately
endorsed
to
Southern American Development Company (SADCO),
an
American
company,
who
operated
the
mine
from
1897
to
1950
by gaining control of the district’s main gold deposits in 1897.
Exploration programs of SADCO commenced in 1896 and brought the mine into
production at 108t/day in 1905. The mine was subsequently deepened to 13 level
located at an elevation of 270m above sea level, 800m below the uppermost
workings (PRODEMINCA, 2000 in Spencer, R.M. et al., 2002). In the 53years that
followed, SADCO recovered some 3.5 million ounces of gold and 12 million ounces
of silver from 7.6 million tones of ore at a cut-off grade of 14.4 g/t Au and
48.9 g/t Ag (Van Thournout et al., 1996).

     

    
      After the
lower levels of the Portovelo mine were flooded in 1944 and facing increasing
costs, taxes and a complicated political situation, SADCO finally withdrew from
the country in 1950 and the Ecuadorian government took over the mine. A state-owned
company,
CIMA,
took
over
the
mining
operations
in
the
area
until
1980
and
it
is
estimated
to
have
produced
a
further
375,000
oz
of
gold
by
1965.
In 1984, thousands
of
poverty-stricken miners invaded the old SADCO pits and small-scale and
artisan mining has been going on in the area ever since. An additional 35,000 to
50,000 oz of gold has been produced each year since then by informal miners,
small-scale operating mining societies and principally from the family-owned
BIRA. In the 1990 ́s statistical information, mining from the Zaruma and Portovelo areas totaled 3 million tons.

    

     

    In the
mid-1990s several overseas companies attempted to consolidate the area and
carried out systematic exploration programs.


    
      
         


      

      
        - 4-


        
          

        

      

      
         


      

    


    Current
exploration by ECUADORGOLDCORP SA involved site visits and samples of vein
material were taken from the Gen and Cristina veins. Gold values from several
samples taken range up to 10.40 g/T. Other samples taken in other workings show
values of up to 58.6 g/T gold, up to 209 g/T silver, up to 4.86% copper and up
to 16.85% zinc. Data provided by the company notes that there are eight (8)
mines on the concession. The two main producing mines, Nueva Esperanza and
Aguacate (in a production stage) contain the three main major veins Cristina,
Gen, and a third vein (name unknown to the author). In these two mines
development work was seen to be carried out. This work includes advancing an
additional 50 m beyond the actively mined veins to a fourth mineralized vein.
The two tunnels are being advanced along this new vein to prepare it for
exploitation. The tunnels are being reconditioned to allow a more efficient
mining equipment transportation, in order to extract ore material with 10
two-tonne ore cars (20 tons) per trip from underground to the ore stockpile or
primary crusher. The processing plant is currently operating and it contains the
primary crusher, secondary crusher, a series of Chilean grinding mills and a
series of Denver floatation cells to concentrate sulphide mineralization to
capture both mineral ore and any gold-silver associated with those sulphides.
There is a 125 hectare property less than one kilometer from the current
processing plant. It is being considered to increase the capacity of the
processing plant in such property. Company engineering and geological staff of
ECUADORGOLDCORP S.A. are planning the additional six additional mines on the
concession be brought to the production level of the two currently operating
mines.

    


    SADCO
operated mines in the Zaruma-Portovelo-Ayapamba district for 46 years. During
this time approximately 3.6 million ounces of gold and 12 million ounces of
silver were produced. Production rates at the Grand Mine, the major producer in
the district, are estimated up to a maximum of 200,000 tonnes per year, and gold
grades were approximately 20-30 g/T. Significant quantities of silver, lead and
zinc were also produced. The old SADCO operations, scattered throughout the
district, generally (with the exception of the Grand Mine) only extended to a
depth of approximately 200m below surface. The Grand Mine contains a
gold-mineralized zone which extended to a depth of at least 660 m below surface.
It was collared at an elevation 700 m below mine workings in the Muluncay
concession area. This indicates that there is significant additional potential
at depth of up to 1500 m within the Muluncay concession. A preliminary estimate
of the resource is made by the author on the Muluncay Concession, from the two
currently active veins (Gen and Cristina) with an estimated strike length of 1
km (the N-S length of the concession), an average width of 1.0 m and an average
depth of 1000 m. Using a grade of 6 g/T as the average grade, this would produce
an estimated tonnage of 400,000 T for each vein. There are presently 4 known
veins, which would give a total current resource of 1,600,000 T, for a total of
9,600,000 g (300,000 oz) gold. Additional veins will be found during ongoing
development and exploration. The tonnage estimate will very likely increase
significantly. Secondary veins, stringers, breccia and disseminated
mineralization in the wall rocks have never been exploited, or even properly
assessed. It is the author’s opinion that with the improved, more economic
mining and milling methods this resource can be taken advantage of, so that it
is probable that this resource can be increase to greater than 2.0 million tons
which would produce 9,600,000 g (375,000 oz) Au. However, this is a relatively
low grade estimate when one considers that the cut-off grade for the SADCO
operations was 14.6 g/ton. Using that value as an average grade 2.0 million tons
of ore would produce 29,200,000 grams (912,500 oz) of gold. No estimate of the
value derived from silver or sulphide concentrate has been made, but it would
add a significant amount to the value of this resource. The history of the
Zaruma mining operations indicates that there is a significant opportunity to
apply modern mining methods to a major resource which has had only limited
exploitation in the past.


    
      
         


      

      
        - 5-


        
          

        

      

      
         


      

    


    DESCRIPTION AND LOCATION

    


    Ecuadorgold
is doing some development works at Muluncay concession, which is located in the
Portovelo-Zaruma mining area, situated in the cantons of Ayapamba and Paccha,
Province of El Oro of southern Ecuador and covers an area of 374 mining hectares
at Latitude 03o 36’ 30” South and Longitude 79o40’ West. The following
co-ordinates are based on a metric UTM grid system referenced to PSAD-56 datum
and geographic zone 17.

    


    Table 1 – Muluncay Boundary Coordinates

    


    
      
        
          
            	
                    Easting - m

                  	 	
                    Northing - m

                  	 
	
                    652000

                  	 	 	9599400	 
	
                    653100

                  	 	 	9599400	 
	
                    653100

                  	 	 	9596800	 
	
                    651600

                  	 	 	9596800	 
	
                    651600

                  	 	 	9599000	 
	
                    652000

                  	 	 	9599000	 
	
                    652000

                  	 	 	9599400	 


          

        

      

    

    


    The
project is situated about 175 kilometres southeast and 60 kilometres east of the
major Pacific port cities of Guayaquil and Machala, and lies on the cordillera
occidental of the Andes, which runs the length of the west coast of North and
South America.

    


    ACCESSIBILITY, CLIMATE, PHYSIOGRAPHY,

    


    LOCAL RESOURCES AND INFRASTRUCTURE

    


    Access to
the district from the coast is by a paved 2-lane road in good condition. It is
approximately a 2 hour drive from the coastal city of Machala to the town of
Portovelo, at the confluence of the Rio Amarillo and Rio Calera. From within the
district access to most of the properties, including the Muluncay concession, is
by secondary 1- to 2-lane paved roads which often continue to specific sites by
tertiary single lane gravel roads, usually in conditions for 4 wheel drive
vehicles. Access to these sites from Portovelo takes approximately 30
minutes.


    
      
         


      

      
        - 6-


        
          

        

      

      
         


      

    

    
       

      The
climate is subtropical and humid with temperatures ranging from 18o to 30o C. Yearly rainfall averages
1,341 mm, with heaviest rainfalls occurring in the months from January to June.
Within the district, topography is moderately steep with elevations ranging from
the 950 to 1650 m above sea level (ASL). The Portovelo-Zaruma-Ayapamba district
is traditionally an underground mining camp. Those areas are not disturbed by
mining activity used for farmlands and livestock raising. Any early stages of
surface exploration work such as sampling and possible DDH drilling carried out
by ECUADORGOLDCORP SA will involve minimal disruption to current surface
activities of the communities.

    

    


    Plate 1 – Typical Topography and Vegetation, area of Muluncay Concession

    


    


    
      
         


      

      
        - 7-


        
          

        

      

      
         


      

    


    The
population within the project area is approximately 50,000. Zaruma, has a
population of 29,000, and Portovelo, with a population of 14,000 make up the
majority, but there are numerous small villages of a few hundred people each
(e.g. Ayapamba, Muluncay). The population has extensive experience in the
recognition and mining of vein high-grade gold deposits, making them a valuable
asset for future exploration, development and production throughout the entire
region. Hotels, communication resources, public security and government
institution representatives are pleased. In Pinãs, approximately 20 km distance
to the west there are high-tension power lines providing electricity and are
connected to both Zaruma and Portovelo. Cell phone use in this area allows
communication with major centres in the country. The Rio Amarillo and Rio Calera
rivers are able to supply adequate water for large scale mining operations
throughout the year.

    


    GEOLOGICAL SETTING

    


    Regional

    


    Regional
geology of the southern part of Ecuador consists of basement rocks of the
Triassic age Tahuin Series. These include San Roque Formation medium- to
high-grade gneisses, schists and amphibolites overlain by a thick sequence of
Capiro Formation low-grade mica schists, phyllites and quartzites, with a minor
component of interfingering volcanic rocks.

    


    This
metamorphic basement is unconformably overlain by a thick sequence of Lower
Cretaceous age Celica Formation massive, homogeneous volcanic lavas and tuffs.
These are of andesite composition and are intercalated with minor sedimentary
layers. The Celica Formation is intruded by small plutons of diorite to
granodiorite composition, also Lower Cretaceous in age. This entire mass has
been interpreted as a continental volcanic arc. All of these units are capped
unconformably by Tertiary (Oligocene age) Saraguro Formation felsic volcanic
lavas and pyroclastics, by later Miocene age Chinchillo Formation (currently
referenced as Pisayambo Formation) rhyolite flows and
pyroclastic.


    
      
         


      

      
        - 8-


        
          

        

      

      
         


      

    


    There are
two major regional faults. These are the Pinãs Fault and the Puente Busa
–Palestina Fault. These faults have produced three tectonic blocks which have
exposed bedrock to different depths. Between these two faults exposure consists
of Celica Formation mafic to intermediate volcanics. Within the Celica Formation
(Figure 4) is a thick series of andesitic lavas termed the Portovelo Series
which occurs along a central N-S trending axis. These lavas act as host rocks to
most of the vein systems in the Portovelo-Zaruma-Ayapamba region. Recent mapping
has shown that the Celica Formation is unconformably overlain by two
hydrothermally altered volcanic series, and is crosscut by a subvolcanic feeder
systems. These volcanics are composed of intermediate pyroclastics and breccias,
crosscut by younger small rhyolite stocks, dykes and sills. These rhyolitic
rocks are concentrated along two NW trends in the central mountain ranges
(Zaruma-Urco and Santa Barbara) and are due to resistant weathering caused by
regional silicification. Most of the district vein-cavity fillings, including
base and precious metals mineralization, are closely associated with this
volcanic activity.


    
      
         


      

      
        - 9-


        
          

        

      

      
         


      

    


    


    
      
         


      

      
        - 10-


        
          

        

      

      
         


      

    


    Significant
structures in the district (Figure 5) include NW, NE and N-S trending high- and
low-angle faults and circular structures. The N-S trending veins, dipping
generally 70o to 90o NE, are the dominant though not
the only structures for hosting gold, silver, lead, zinc and copper
mineralization in the district. They are bound to the SW by the NW-trending
Pinas Fault. The Puente Busa –Palestina Fault lies directly NE of the centre of
the district and does not interfere with the continuity of faults, veins or
mineralization beyond it
to the NE.


    
      
         


      

      
        - 11-


        
          

        

      

      
         


      

    

     

    


    
      
        
        

      

      
        - 12-


        
          

        

      

      
        
        

      

    

     

    Concentric
district-size zones of propylitic, argillic, silicic and sericitic alteration
cover the region and represent the collapse of a Miocene age volcano and the
formation of a caldera. Supergene enrichment of gold mineralization is
recognized in certain areas by the presence of strong patches of argillic
alteration. Silicification represents the core of this alteration “aureole”.
Silicification formed in two stages. One type, associated with most of the
gold-silver-base metals mineralization, is related to the Portovelo-Zaruma axis.
The second type is found in the Santa Barbara Mountain and is associated with
rhyolite dykes and plugs, and with intense argillic alteration. A third type of
silicification is found as wallrock alteration haloes of
quartz-chlorite-sericite-adularia-calcite-(pyrite).

    


    Concession

    


    Bedrock
underlying the Muluncay concession consists of Lower Cretaceous age Celica
Formation massive volcanic lavas of andesitic composition. To the author’s
knowledge no detailed mapping has been carried out on these host rocks. Within
these host rocks are a series of sub-parallel structures. These local area
structures encompass those veins found within the Muluncay concession, such as
Gen and Cristina. This system of veins is the northern continuation of the large
system of veins (e.g. Abundancia, Portovelo) which have been so vigorously mined
in the Zaruma-Portovelo area for the last 400 years.

    


    DEPOSIT TYPES

    


    Gold
mineralization within the district is considered to be a low- to intermediate
sulphidation stage epithermal (Hedenquist, 2000) to upper mesothermal
gold-silver-lead-zinc-copper system. Typically this type of mineralizing system
includes pyrite-pyrrhotite-arsenopyrite and high-Fe sphalerite. Gangue minerals
vary from vein through stockwork to disseminated forms. Gold is typically
associated with quartz-adularia ± calcite ± sericite. This contrasts with
high-sulphidation types which typically contain
gold-pyrite-enargite-luzonite-covellite hosted by a leached residual core, with
quartz-alunite, kaolin, pyrophyllite or diaspore. A subset of the
low-sulphidation stage assemblage contains
pyrite-tetrahedrite/tennantite-chalcopyrite and low-Fe sphalerite. This subset
is also silver and base metal rich compared to low-sulphidation end members.
Base metals within the Muluncay veins, as well as within much of the district
mineralization may be an indicator for this intermediate assemblage. It could
also indicate (especially the presence of significant galena –(lead) that the
system has reached upper mesothermal depths.


    
      
         


      

      
        - 13-


        
          

        

      

      
         


      

    


    MINERALIZATION

    Regional

    


    The gold
bearing north-south trending sub-parallel systems of quartz veins occurring
within the Portovelo-Zaruma district are found exclusively within the Cretaceous
altered andesitic rocks (Portovelo Series).

    


    Spatially
the mineralization is arranged in three zones. In Zone 1 pyritization with
little gold is seen in stockwork, shattering and brecciation around the Santa
Barbara and Zaruma Mountains. Zone 2 contains gold-bearing quartz and
quartz-adularia veins with abundant sulphides and is found in the
Portovelo-Zaruma axis and NE of the Santa Barbara Mountains. A large aureole of
gold-bearing quartz-calcite and quartz-chlorite, with abundant sulphosalts and
minor sulphides, representing Zone 3, surrounds the core of sulphide
mineralization. Muluncay lies within the NNW
continuation of the Zone 2 type of mineralization. Based on the presence of
adularia-sericite, the vein textures, the abundance of sulphides and calcite,
the mineralization is considered to be part of an adularia-sericite low- to
intermediate sulphidation epithermal gold system.

    


    The
quartz veins are predominately fault and fracture filling structures exhibiting
pinch and swell, branching, composite banding, braided and loop
features.


    
      
         


      

      
        - 14-


        
          

        

      

      
         


      

    


    


    
      
         


      

      
        - 15-


        
          

        

      

      
         


      

    


    Regionally
these mineralized veins extend horizontally for at least 15 km (the
Portovelo-Zaruma-Ayapamba region), and have probable depths of at 1500 m (from
local height of land to known depth of the Casa Negra Concession SADCO Grand
Mine). Past-producing veins in the district range from 60 cm to 8 m, with
an average width of 1.3 m. “Stringers” and narrow veins, as well as silicified
wallrock, are virtually untested for their gold potential. As is typical in a
standard epithermal gold system, there are some zones of “bonanza-type”
high-grade gold mineralization (locally termed “clavos”) in the 30 to 200
g/tonne range. Clavos of this grade were reported by the owner on the Muluncay
concession on one of the major veins (Cristina or Gen).

    


    Most of
the known gold is free-milling. Other mineralization includes silver (as
electrum, sulphosalts and with galena) and copper-lead-zinc sulphides
(chalcopyrite-galena-sphalerite).

    


    The
dominant north-south strike of the gold bearing quartz veins shows local
variations in the proximity of cross faults. To the south of Rio Amarillo, the
veins swing in a south-east direction, sub-parallel to the Pinas-Portovelo
fault.

    


    Three
main types of gold bearing veins are present in the district. These are: 1)
Quartz veins with disseminated pyrite, minor chlorite as streaks, bands and
patches, and 2) Quartz veins with abundant pyrite and subordinate chalcopyrite,
galena and sphalerite occurring as bands, patches and coarse disseminations, and
3) Carbonate veins with coarse calcite and calcite-quartz gangue occasionally
with coarse galena, sphalerite and chlorite beside ubiquitous pyrite. Visible
gold is not a common occurrence within the Portovelo-Zaruma-Ayapamba district.
As a general rule, gold occurs as fine particles, often less than 100 mesh in
size. According to microscopic studies carried out in the past, gold locally
replaces sphalerite. Locally gold mineralization is present in the wall rock
following north-east trending faults and fractures.

    


    Post
mineralization faulting along north-west striking cross faults has locally
caused displacements of up to 40 metres in several gold bearing structures.
Local detailed mapping and drilling is required to trace the continuity of this
mineralization.

    


    
      
        
        

      

      
        - 16-


        
          

        

      

      
        
        

      

    

     

    Concession

    


    The two
best-known and most continuously worked veins within the southern side of the
Muluncay concession include Gen and Cristina. Other veins exist parallel to
these two main structures but are not presently developed. Both the major and
secondary veins are being mined on the north half of the concession but they
have not been traced the entire length of the concession. The mineralization in
the concession area ranges from a gold:silver ratio of 1:10 near surface to 1:15
at depth. Veins range up to 1500 m in strike length, and mines in the immediate
area range from 1650 m ASL to 950 m ASL, giving a known depth of
mineralization of at least 700 m. Vein widths range from 0.40 m to 1.40 m and
are steeply dipping (70° to 90°) to the NE.

    


    Typical Mine-Mill Complex, Muluncay Concession

    


    FOTO
1: MOLINO TRAPICHE CHILENO

    


    


    
      
         


      

      
        - 17-


        
          

        

      

      
         


      

    


    FOTO
2. MOLINO DE BOLAS

    


    

    


    FOTO
3: PLANTA DE CIANURACION

    


    


    
      
         


      

      
        - 18-


        
          

        

      

      
         


      

    

     

    
      The Gen
and Cristina veins consist of milky quartz, being hard but brittle, and contain
chalcopyrite (copper), sphalerite (zinc) and galena (lead) sulphide minerals.
This mineralization is similar to that found in the Portovelo-Zaruma area mines,
where it is quite common. The principal mineral accompanying the gold is pyrite
(FeS2), but
other minerals include safflorite (CoAs2),
proustite (Ag3AsS3),
tetrahedrite (Cu3SbS3-4),
freibergite ((CuAg2ZnFe)3Sb2S6) and minor
Au-Pb telluride minerals. These are indicative of a low-temperature near-surface
environment.

       

      EXPLORATION

    

     

    Historical

     

    Systematic
exploration activity closely related to mining advance was carried out by SADCO
from 1897 to 1950.
However, only limited information is available from that period. Detailed
underground maps and 103,657
assay result records have been recovered from local miners and from local
archives by TVX Gold Corp. and
IAMGOLD. Much of the SADCO data can be acquired from certain parties in
Machala.

    


    Modern
exploration activity within the Zaruma – Portovelo Mining District begun in 1995
when a one-year property area consolidation and district-scale exploration was
made by TVX Gold Corporation, a Canadian-based company. During this period, over
40 km of underground workings were surveyed and mapped on a 1:500 scale. Total
amount of underground samples collected by TVX is estimated to be over
4,000.
IAMGOLD reported 733 samples although many of these were from older maps and
reports. Following TVX ́s withdrawal from Ecuador in 1998, all information was
acquired by IAMGOLD who continued exploration. This work including surface
trenching, surface and underground sampling, surveying and diamond drilling and
geological modelling. IAMGOLD databases contained the following:

    


    680
surface rocks channel and chip samples

    


    2,126
underground channel samples

    


    5,415
soil samples

    


    37
diamond drill hole results including sample assay results

    


    1,114
DDH core samples

    


    2,591
topographical control points survey

    


    39
stream sediments samples

    


    369
channel samples form surface trenching


    
      
         


      

      
        - 19-


        
          

        

      

      
         


      

    

     

    

     

    
      
        
        

      

      
        - 20-


        
          

        

      

      
        
        

      

    

    
      Current

      


      Current
exploration by ECUADORGOLDCORP SA involved a numerous visits to the Muluncay
concession visiting three separate mines within the concession. These included
Fatima, Nueva Esperanza 1 and Aguacate (see Figure 6). Numerous other workings
are present within the concession but were not investigated at these times.
Several samples of vein material were taken by the author from the various
workings, including samples from Gen, Cristina and a third vein. Assay results
are shown in Table 2 below:

      


      Table 2 – Assays from Independent Sampling, Mina Aguacate, Sept/06

      


      
        
          
            	
                    Sample

                  	 	
                    Au

                    g/T

                  	 	 	
                    Ag

                    g/T

                  	 	 	
                    Cu

                    %

                  	 	 	
                    Pb

                    %

                  	 	 	
                    Zn

                    %

                  	 
	
                    483051

                  	 	 	0.013	 	 	 	0.70	 	 	 	0.053	 	 	 	0.001	 	 	 	0.02	 
	
                    483052

                  	 	 	0.015	 	 	 	7.0	 	 	 	0.089	 	 	 	0.02	 	 	 	0.02	 
	
                    483053

                  	 	 	0.361	 	 	 	16.5	 	 	 	0.26	 	 	 	0.009	 	 	 	0.06	 
	
                    483054

                  	 	 	2.76	 	 	 	37.1	 	 	 	0.85	 	 	 	0.03	 	 	 	0.19	 
	
                    483055

                  	 	 	6.64	 	 	 	36.4	 	 	 	0.82	 	 	 	0.06	 	 	 	0.15	 
	
                    483056

                  	 	 	3.25	 	 	 	23.8	 	 	 	0.69	 	 	 	0.03	 	 	 	0.21	 
	
                    483057

                  	 	 	10.40	 	 	 	27.4	 	 	 	0.30	 	 	 	0.07	 	 	 	0.09	 


          

        

      

       

      Gold
values from these samples range between 0.13 and 10.40 g/T. Numerous samples
taken by the author from other workings within the concession (# 483029 to
438050) show values of up to 58.6 g/T gold, up to 209 g/T
silver, up to 4.86% copper and up to 16.85% zinc.

       

      Personal
communication with one of the representatives of the Company notes that as of
the date of this report there are eight (8) mines on the concession. The two
main producing mines, Nueva Esperanza and Aguacate (Lopez) contain the three
main major veins Cristina and Gen, and a third vein. These two mines have had
development work carried out. This work includes advancing an additional 50 m
beyond the actively mined veins to a fourth mineralized vein. Tunnels are being
advanced along this new vein in order to remove ore. Slashing is also being
carried out, to give a 3 m high by 2.5 m wide haulage tunnel in each of the two
active mines. Steel track has been installed. This now allows the use of an
electric locomotive capable of hauling 10 two-tonne ore cars (20 tons) per trip
from underground to the ore stockpile or primary crusher.


      
        
           


        

        
          - 21-


          
            

          

        

        
           


        

      


      The
primary crusher is located at the one currently operating processing plant. This
processing plant contains the primary crusher, secondary crusher, a series of
Chilean grinding mils being modified by the Company, and a series of Denver
floatation cells to concentrate sulphide mineralization to capture both base
metals and any gold-silver associated with those sulphides.

      


      A
temporary tailings pond is present on site to satisfy government environmental
requirements for the current low tonnage production rate. There is a 125 hectare
property less than one kilometer from the current processing plant, which is
being studied by an independent consultant to conduct a required Environmental
Impact Study in the area. This report will determine the viability of the sites
use as along-term tailings pond and processing plant. Company engineering and
geological staff are reviewing and planning which of the additional six
additional mines on the concession should be considered to bring to the
production level of the two currently operating mines.

      


      DRILLING

      


      Although
modern diamond drilling has been carried out on the IAMGOLD claims, the author
does not currently have access to the positions or logs of those holes.
Therefore he has no knowledge of drilling done within the Muluncay
concession.

      


      SAMPLING METHODS AND APPROACH

       

      As this
was a preliminary investigation of the entire district, with no specific focus
at the time of the visits on the Muluncay concession, the only intent of these
assay results was to confirm assay values presented by other groups. The width
of the vein (as well as could be seen) at each of these sample points was
measured and recorded. The average width of these veins is 1.0 m, although the
width can range up to 4 m.

      


      The
samples were bagged and sealed on the property. They, along with several other
samples from the district, were delivered to the office of ECUADORGOLDCORP SA,
based in Machala. From that office they were transported to the ALS-Chemex lab
in Quito, Ecuador for sample preparation and analysis which weighed
approximately 1 to 2 kg each. No blanks and standards were submitted by the
author with the sample for Quality Control purposes.


      
        
           


        

        
          - 22-


          
            

          

        

        
           


        

      

       

      SAMPLE PREPARATION, ANALYSES

      


      General

       

      For the
multi-element analysis of 35 elements, Induced Coupled Plasma Mass Spectrometry
(ICP-MS) was used. Au and Ag content was determined by Fire Assay-Atomic
Absorption method from 30 g pulps. Pulps and rejects will be stored by the lab
for a minimum of 90 days.

      


      ADJACENT PROPERTIES

       

      
        The Muluncay Project lies
surrounded by the Dynasty concessions (Figure 3). Current activities by Dynasty can be
found on their website.

         

      

      EXPLORATION POTENTIAL

      


      Measured and Indicated Resources

       

      I visited
3 known operating mines Fatima, Nueva Esperanza and Aguacate, now known as the
Jaceth Ethan and Mary Jane respectively within the Muluncay concession. Figure 6
shows numerous mine workings.


      
        
           


        

        
          - 23-


          
            

          

        

        
           


        

      


      Exploration Potential

       

      Like so
many veins in the district which have been exploited for centuries, the
near-surface easily accessible high-grade gold mineralization is being
exhausted. Most of the mines in the district are currently extracting ore in the
range of 3-7 g/T gold. It is the author’s opinion that new investment and
detailed exploration will show that there is continuity of historical high-grade
mineralization both along strike and at depth. The fact that ECUADORGOLDCORP SA
has 5 currently undeveloped mines and has just opened a new mineralized vein
indicates that there is excellent potential for finding new exploitable
mineralized zones within the concession. Like most of the old SADCO operations
(with the exception of the Grand Mine) workings only extended to a depth of
approximately 200 m below surface. This is not because mineralization stops at
that depth. The Grand Mine contains a gold-mineralized zone which extended to a
depth of at least 660 m below surface. It was collared at an elevation 700 m
below mine workings in the Muluncay concession area. This indicates that there
is significant additional potential at depth of up to 1500 m for the Muluncay
concession. A preliminary estimate of the resource is made by the author on the
Muluncay Concession, from the two currently active veins (Gen and Cristina) with
an estimated strike length of 1 km (the N-S length of the concession), an
average width of 1.0 m and an average depth of 1000 m. Using a grade of 6 g/T as
the average grade, this would produce an estimated tonnage of 400,000 T for each
vein. There are presently 4 known veins, which would give a total current resource of
1,600,000 T, for a total of 9,600,000 g (300,000 oz) gold. Additional veins will
be found during ongoing ECUADORGOLDCORP development and exploration. Although
the grade and tonnage reserve of these new workings is not yet known the tonnage
estimate will very likely increase significantly. Secondary veins, stringers,
breccia and disseminated mineralization in the wallrocks have never been
exploited, or even properly assessed. Slashing of haulage tunnels will assist in
the examination of these zones. It is the author’s opinion that with the
improved, more economic mining and milling methods this resource can be taken
advantage of, so that it is probable that this resource can be increase to
greater than 2.7
million tons which would produce 12,960,000 g (405,000 oz) Au. However, this is
a relatively low grade estimate when one considers that the cut-off grade for
the SADCO operations was 14.6 g/ton. Using that value as an average grade 2.7
million tons of ore would produce 39,552,000 grams (1 ́236,000 oz) of gold. No
estimate of the value derived from silver or sulphide concentrate has been made,
but it would add a significant amount to the value of this resource. The history
of the Zaruma mining operations indicates that there is a significant
opportunity to apply modern mining methods to a major resource which has had
only limited exploitation in the past.

      


      CONCLUSIONS

       

      Descriptions
of gangue and ore minerals, as well as the style of structures and their
continuity along strike and to significant depth, indicates that the
Portovelo-Zaruma-Ayapamba gold camp represents a low/intermediate sulphidation
epithermal to upper mesothermal gold-silver base metals system associated with
the structures related to a Miocene age collapse caldera.

      


      The
history of the Zaruma mining operations indicates that there is a significant
opportunity to apply modern mining methods to a major resource which has had
only limited exploitation in the past. It is the author’s opinion, based on site
visits to various mines and mills in the district, and having reviewed reports
on the district produced by other mining and exploration personnel, that there
is significant additional mineral potential at depth of up to 1500 m for most of
the concessions in the district. This includes those veins, both developed and
known but undeveloped, contained within the Muluncay
concession.


      
        
           


        

        
          - 24-


          
            

          

        

        
           


        

      


      This data
has been prepared at the request of ECUADORGOLDCORP SA and is intended to inform
about the potential of the Muluncay concession for hosting one or more
gold-silver-lead-zinc-copper deposits of sufficient grade and tonnage to be
economically viable.

      


      This
report is a true and accurate representation of the assessment of the mineral
potential of the Muluncay Project.

       

      
        
          
          

        

        
          - 25-


          
            

          

        

        
          
          

        

      

       

      RESUME

       

      
        
          
            
              
                	
                        PERSONAL DATA

                      	 
      	
	 
      	 
      
	
                        Names:

                      	
                        Wilmer
      Guillermo

                      
	
                        Last
      names:

                      	
                        Castro
      Vaca

                      
	
                        City:

                      	
                        Machala

                      
	
                        Address:

                      	
                        Décima
      Sur y Av. Las

                      
	
                        Palmeras

                      	 
      	 
      
	
                        Telephone
      Number:

                      	
                        085
      502703

                      
	
                        Marital
      Status:

                      	
                        Married

                      
	
                        Nationality:

                      	
                        Ecuadorian

                      
	
                        ID.
      card:

                      	
                        0701649998

                      
	
                        Date
      of Birth:

                      	
                        Febrero
      10, 1962

                      
	
                        Place
      of Birth:

                      	
                        El
      Guabo

                      
	 
      	 
      
	
                        ACADEMICAL
      BACKGROUND

                      	 
      
	 
      	 
      
	 
      	 
      
	
                        SECONDARY
      SCHOOL

                      	
                        Colegio
      Fiscal 9 de Octubre

                        Majoring:
      Physics – Mathematics

                        Machala
      – El Oro

                      
	 
      	 
      
	
                        SUPERIOR
      STUDIES

                      	
                        Universidad
      Estatal de Guayaquil

                        Faculty
      de Natural Sciences

                        School
      of Geology

                      
	 
      	 
      
	
                        ACADEMIC
      DEGREE

                      	
                        Geologist

                      
	 
      	
                        Geology
      Engineer

                      
	 
      	 
      
	
                        WORK
      EXPERIENCE

                      	
                        Teaching
      assistant of the
      subject of

                      
	 
      	
                        MINERALOGY
      II of the School of Geology, Faculty of

                      
	 
      	
                        Natural
      Sciences, from June 1983 to February 87.

                      
	 
      	 
      
	 
      	
                        Geologic
      exploration - Underground Miner for BIRA S.A. Company located in Canton
      Zaruma, El Oro province, from February to August 1987.

                      
	 
      	 
      
	
                         

                      	
                        Geological
      exploration - Underground Miner in BARBASCO 1 in Canton Portovelo, El
      Oro Province, from June to Augusto 1988.

                      
	 
      	 
      
	 
      	
                        Geological
      exploration – Alluvial Miner in KOLLA S.A. Company located in Canton Santa
      Rosa, province of El Oro, from October/88 to
  September/89.

                      
	 
      	 
      


              

            

          

        

      

      


      
        
          
             


          

          
            - 26-


            
              

            

          

          
             


          

        

      

      


      
        
          	 
      	
                  Geological
      exploration - Underground Mining in BOCA GRANDE Mining Company located in
      Canton Pasaje, El Oro province, from January 1990 to September
      1993.

                
	 
      	 
      
	 
      	
                  Geological
      exploration - Underground miner for A . GRANDA C. Mining Company in the
      area of Molleturo, Azuay province, from January to April
    1998.

                
	 
      	 
      
	 
      	
                  Audit
      of the Information of Mining production of LEON 1 area, code No. 2364,
      corresponding to 2001 and 2002 years in February 2003.

                
	 
      	 
      
	 
      	
                  Audit
      of the Report of Mining Production of LA VIÑA area, code No. 310,
      corresponding to 2002 year, in March 2003 ; in March 2004;, in March 2005;
      and in March 2006.

                
	 
      	 
      
	 
      	
                  Audit
      of the Report of Commercial Mining Production of the ASSOCIACIÓN MINEROS
      INDEPENDIENTE AUTÓNOMOS SOCIEDADES MULUNCAY area, Code No. 338,
      corresponding to the years of 2002 - 2003, in March 2004 and in 2004, in
      March 2005.

                
	 
      	 
      
	 
      	
                  Audit
      of the Report of Mining Production of ANDREIMA area, Code No. 700114,
      corresponding to 2003, in March 2004, and in March
2005.

                
	 
      	 
      
	 
      	
                  Audit
      of the Report of Mining Production of LORRAINE area, Code No. 318,
      corresponding to 2004, March 2005; March 2006, and March
    2007.

                
	 
      	 
      
	 
      	
                  Audit
      of the Report of Mining Production of NUEVA ESPERANZA area, Code 152,
      corresponding to 2004 year, and March 2005.

                
	 
      	
                  Audit
      of the Report of Mining Production of LIMONCITO area, Code No. 2017,
      corresponding to 2003, March 2004, and March 2005.

                
	 
      	
                   
      

                
	 
      	
                  Audit
      of the Report of Mining Production of CAROLINA J-A area, Code No. 300148,
      corresponding to 2005, March 2006, and March 2007.

                
	 
      	 
      
	 
      	
                  Audit
      of the Report of Commercial Mining Production of SAN FERNANDO 1 area, code
      No. 6231.1, corresponding to 2005 - March 2006.

                
	 
      	 
      
	 
      	
                  Audit
      of the Report of Commercial Mining Production of AMAYA and AMAYA II areas,
      codes No. 300385 and 300659, respectively corresponding to March
      2006.

                


        

      


      
        
           


        

        
          - 27-


          
            

          

        

        
           


        

      

      


      
        
          
            
              
                
                  	 
      	
                          Audit of the Report of Commercial Mining Production of PINGLIO 1 area, Code
      No. 6, corresponding to 2005- March 2006, and 2006 - June
      2007.

                        
	 
      	 
      
	 
      	
                          Geologic
      exploration - Underground Miner at Asociación de Producción, Beneficio,
      Fundición, Refinación, Comercialización de Oro y Otros Minerales “PLAYAS
      DE DAUCAY” in Canton Chilla, El Oro province, from January 2006 to
      date.

                        
	 
      	 
      
	
                          SEMINARIES

                        	
                          Economy
      and Policy of Hydrocarbons at the University of Guayaquil
      from February 21 to 25, 1983.

                        
	 
      	 
      
	 
      	
                          Civil
      Work Blast with Explosives at Escuela Politécnica del Litoral
      (University), from July 27 to 29, 1983.

                        
	 
      	 
      
	 
      	
                          Seminary
      and Workshop on Opaque Mineral Identification, at the University of
      Guayaquil, from June 11 to 23, 1984.

                        
	 
      	 
      
	 
      	
                          Evaluation
      of
      Hidrocarbon
      Deposits, at
      the
      University of Guayaquil,
      from November 12 to 16, 1984.

                        
	 	 
	
                          CONGRESS

                        	
                          III
      Geologic International Congress of Mining in the city of Guayaquil,
      from October 8 to 11, 1991.

                        
	 	 
	
                          COURSE

                        	
                          Training
      course on Mining Audit at the University of Guayaquil from October to
      Noviember 2001.

                        
	 
      	 
      
	
                          POSTGRADUATE

                        	
                          Degree
      in Business Management, Post graduate diploma equivalent to 15 credits, at
      the center of Superior Studies of Business Management of the University of
      Guayaquil from May 6 to July 16, 2000.

                        
	 
      	 
      
	
                          CERTIFICATE

                        	
                          Certificate
      of Registry of the Undersecretary’s office of Mines of the Ministry of
      Energy and Mines of the Republic of Ecuador as
      MINING CONSULTANT-AUDITOR, Registry No. 046, January 11,
      2003.

                        


                

              

            

          

        

      

      

      Ing.
Góel. WILMER
CASTRO VACA

      Consultor
– Auditor Minero

      Registro
046 SUBSECRETARIA DE MINAS

      Machala, 13 de febrero del 2008


      
        
           


        

        
          - 28-