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OPTION AGREEMENT

THIS AGREEMENTis dated for reference this 7th day of
July, 2006.

BETWEEN:

Xemplar Energy Corp.having a business office located at 3465 Commercial Street, Vancouver,
British Columbia, V5N 4E8,

(the "Optionor")

OF THE FIRST PART

AND:

Garuda Ventures Canada
Inc. having a business office located at #502  1978 Vine Street,
Vancouver, BC., V6K 4S1,

(Garuda)

OF THE SECOND PART

WHEREAS:

A. The Optionor wishes to grant Garuda an option to earn and
acquire from the Optionor an undivided 70% interest in the Optionors interest
in certain mining claims known collectively as the Corhill Property located on
NTS 86-K-14 and 86-K-15 and straddling the Northwest Territories / Nunavut
Territory border. The property is approximately 312 miles NNW of Yellowknife and
90 miles SW of Kugluktuk (Coppermine) more particularly described in Schedule
"B" attached hereto (including, without limitation, all prospecting, research,
exploration, exploitation, operating and mining permits, licenses and leases
associated therewith), and subject to a 2% net smelter return described in
Schedule A hereto (the Net Smelter Return), (collectively and hereinafter
referred to as the "Property").

NOW THEREFORE THIS AGREEMENT WITNESSETH that in
consideration of the sum of one dollar ($1.00) paid by Garuda to the Optionor
(the receipt and sufficiency of which is acknowledged by the Optionor) and the
mutual agreements and covenants hereinafter set forth, the parties hereto agree
as follows:

INTERPRETATION

|1.  | This Agreement supersedes all prior understandings and
      agreements between the parties hereto, whether verbal or
written.                                                                                                                                                                                                                  
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                 
|1.1 | In this Agreement, the following words, phrases and
      expressions shall have the following meaning, except that if an identical
      word, phrase or expression is defined in this Agreement, the definition of
      that word, phrase or expression shall be restricted to this Agreement, as
      the case may be, in which it appears:
|    |                                                                                                                                                                                                                                                                                                                                                 
|    | (a)                                                                                                                                                                                                                                                                                                                                             

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| |     | corporation, or (iii) 2 or more corporations, each of
      which is controlled by that other corporation, or (iv) it is a subsidiary
      of a subsidiary of that other corporation. A corporation is controlled by
      a person if shares of the corporation carrying more than 50% of the votes
      for the election of directors are held, other than by way of security
      only, by or for the benefit of that person, and the votes carried by the
      shares are sufficient, if exercised, to elect a majority of the directors
      of the corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (b) | "Execution Date"shall mean the date that this
      Agreement is executed by all parties hereto;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (c) | "Expenditures"shall mean all expenses and
      obligations of whatever kind spent or incurred directly or indirectly by
      Garuda from the date hereof, in connection with the exploration and
      development of the Property, including, without limiting the generality of
      the foregoing, moneys expended in maintaining the Property in good
      standing; in applying for and securing all permits and rights with respect
      thereto and with respect to undertaking work thereon; moneys expended
      toward all taxes, fees and rentals; moneys expended in doing and filing
      assessment work; expenses paid for or incurred in connection with any
      program of surface or underground prospecting, exploring, geophysical,
      geochemical and geological surveying, diamond drilling and drifting,
      raising and other underground work, assaying and metallurgical testing and
      engineering, environmental studies, data preparation and analysis,
      submissions to government agencies; in acquiring facilities; in paying the
      fees, wages, salaries, travelling expenses, and fringe benefits (whether
      or not required by law) of all persons engaged in work with respect to the
      Property; in paying for the food, lodging and other reasonable needs of
      such persons; and including a charge in lieu of overhead, management and
      other unallocatable costs equal to fifteen (15%) percent of all such
      expenditures;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (d) | "Interest"shall mean an undivided seventy percent
      (70%) earned interest in the Property;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (e) | Joint Operating Agreementshall mean the Form 5
      of the Rocky Mountain Mineral Law Foundation as amended from time to time,
      except for those provisions set out under the heading 'Formation of Joint
      Venture;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (f) | Joint Venture"shall mean the joint venture to be
      formed upon the Participation Date between Garuda and the Optionor with
      regard to the Property;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (g) | "Net Smelter Return"shall mean a 2% royalty in
      favour of Kalac Holdings Ltd., Trevor Teed and Lane Dewaras
      calculated and paid in accordance with Schedule "A";                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (h) | "Option"shall mean the sole and exclusive right
      and option of Garuda to earn the Interest;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (i) | "Option Price"shall mean the completion of those
      obligations in accordance with the terms hereof in order to exercise the
      Option in respect of the Property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (j) | "Option Period"shall mean the period during which
      the Option may be exercised, and will commence on upon the Execution
      Date;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (k) | "Participant"shall mean each of Garuda and the
      Optionor;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (l) | "Participation Date"shall mean the date of
      exercise of the Option by Garuda in respect of the
  Property;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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| | (m) | "Property"shall mean certain mining claims known
      collectively as the Corhill Property located on NTS 86-K-14 and 86-K-15
      and straddling the Northwest Territories / Nunavut Territory border,
      approximately 312 miles NNW of Yellowknife and 90 miles SW of Kugluktuk
      (Coppermine) more particularly described in Schedule "B" attached
      hereto;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                              
| | (n) | "Shares"shall mean 2,000,000 common shares of
      Garuda Capital Corp., the wholly owning parent corporation of
    Garuda;                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                              
| | (o) | "this Agreement"refers to and collectively
      includes this Agreement, the recitals hereto and every Schedule attached
      to this Agreement;                                                                                                                                                                                                                           

OPTION

|2. | Subject to the 2% Net Smelter Return the Optionor grants
      to Garuda the sole and exclusive option (the "Option") free and clear of
      all liens, charges, encumbrances, claims, rights or interest of any person
      to earn an undivided seventy percent (70%) earned interest in the Property
      by making the following payments and incurring exploration expenditures
      (collectively, the Option Price) set out at sub-paragraphs 2(a), 2(b)
      and 2(c) below.                                                                                                                                                                                                                                                                                                                                                                                              
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Option is an option only and nothing in this
      Agreement shall obligate Garuda to pay any amount or incur any
      expenditures except for the payments under sub-paragraphs 2(b) and
      2(c).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3  | The Shares will be restricted shares pursuant to Rule
      144 of the US Securities Act of 1933 (the "US Securities Act"). Garuda
      will make its best efforts to register the shares pursuant to a
      registration statement on or before the first anniversary of the Execution
      Date. If Garuda has failed to register the Shares on or before the first
      anniversary of the Execution Date, the Optionor shall have the option of
      returning the Shares to Garuda for cancellation, in which case Garuda
      shall make a payment of US$200,000.00 to the Optionor within two weeks of
      the delivery of written notice by the Optionor to return the Shares to the
      Optionee for cancellation, failing which this Agreement and the Option
      shall each terminate automatically without further formality and have no
      force or effect.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|4. | Garuda:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

---

| |     | the exploration expenditures that are the Option Price as
      set out and defined in section 2 hereof andincurring the minimum
      amount of Expenditures to maintain the Property in good standing with
      applicable mining authorities;                                        
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                          
| | (b) | may accelerate the Expenditures, and any Expenditures
      made towards the Option Price that are over and above that required to be
      made during the relevant time period shall be carried forward and applied
      against the Option Price payable in the subsequent period(s);
| |     |                                                                                                                                                                                                                                                                                          
| | (c) | at all times during the term of this Agreement, shall
      have the right to abandon the Property. Further:                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                          
| |     | (i)                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                          
| |     | (ii)                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                          
| |     | (iii)                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                          
| |     | (iv)                                                                                                                                                                                                                                                                                     

Obligations of Garuda During the Option Period

|5. | During the currency of the Option:
|-- | ----------------------------------
|   |                                   
|   | (a)                               
|   |                                   
|   | (b)                               

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| | (c) | In order for Garuda to maintain the Option in good
      standing and be able to exercise it, Garuda shall keep the Property in
      good standing, in compliance with all applicable laws and rules thereto,
      including without limitation, incurring the cost of converting such of the
      Property into full exploration licence, payment of surface rights and
      filing the work commitments as provided in the Northwest Territories and
      Nunavut Territory mining laws and rules thereto, comply with environmental
      and use and disposal of water laws and rules thereto, and perform all
      works in such a manner to keep the Property in good standing and to
      maintain their value. Garuda shall conduct exploration and development
      programs on the Property described below;                                                                                                                                                   
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (d) | Garuda will prepare and deliver to the Optionor written
      quarterly progress reports of the work completed in the last calendar
      quarter and presently in progress and results obtained, comprehensive
      annual reports on or before January 31 of each year covering the
      activities hereunder and results obtained during the calendar year ending
      on December 31st immediately preceding, accompanied by copies of all data,
      reports and other information on or with respect to the Property not
      already provided to the Optionor and, during periods of active field work,
      timely current reports and information on any material results obtained,
      accompanied by copies of all relevant data, reports and other information
      concerning such results, including those necessary to permit each of the
      Optionor and Garuda to meet its continuous disclosure obligations under
      applicable securities laws;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (e) | Garuda will pay, when due and payable, all wages or
      salaries for services rendered in connection with the Property and all
      accounts for materials supplied on or in respect of any work or operations
      performed in connection therewith;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (f) | Garuda will conduct all work on or with respect to the
      Property in a careful and workman- like manner, following reasonable and
      prudent geological exploration methods and approaches, and in compliance
      with all applicable laws; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (h) | Except with regard to services provided by the Optionor
      or their affiliates, Garuda will obtain and maintain, and cause any
      contractor or subcontractor engaged hereunder by Garuda to obtain and
      maintain, adequate insurance and will procure that the Optionor is named
      as an additional insured in respect of all such
policies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

TERMINATION OF OPTION

|6. | The Option shall automatically terminate, and no longer
      be capable of exercise, and Garuda shall have lost all right to acquire
      the Interest, upon the occurrence of any of the following
events:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                              
|   | (a)                                                                                                                                                                                                          
|   |                                                                                                                                                                                                              
|   | (b)                                                                                                                                                                                                          
|   |                                                                                                                                                                                                              
|   | (c)                                                                                                                                                                                                          

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | (i)  | in the case of a default involving the payment of monies,
      within (5) business days,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | (ii) | in the case of any other default, within thirty (30) days
      after receipt of notice of such default from the Optionor, provided that
      if any such default (other than with respect to the payment of monies) is,
      by its nature, not able to be cured within a thirty (30) day period, and
      Garuda commences reasonable steps to begin to cure such default within the
      thirty (30) day period specified herein, Garuda shall be allowed such
      additional time (not exceeding sixty (60) days) as may be reasonably
      required to cure such default so long as it assiduously proceeds with the
      curing of such default during such period.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|7. | In the event that Garuda makes an assignment for the
      benefit of its creditors or is declared bankrupt or makes an authorized
      assignment or a receiver is appointed under the Bankruptcy and Insolvency
      Act (Canada) or a receiver or receiver-manager of all or any part of the
      property of Garuda is appointed, the Option shall automatically terminate
      unless Garuda provides 30 days written notice of the occurrence of such
      event and unless Garuda has assigned its obligations under this Agreement
      within 120 days of the occurrence of such event to a party on terms and
      conditions no less favourable than those described hereunder acceptable to
      the Optionor, which acceptance shall not be unreasonably
  withheld.

OBLIGATIONS OF GARUDA UPON TERMINATION OF THE OPTION

|8. | Upon the termination of the Option for any reason
      whatsoever other than the exercise thereof by Garuda in accordance with
      the provisions of this Agreement, Garuda will:
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                     
|   | (a)                                                                                                                                                                                 
|   |                                                                                                                                                                                     
|   | (b)                                                                                                                                                                                 
|   |                                                                                                                                                                                     
|   | (c)                                                                                                                                                                                 
|   |                                                                                                                                                                                     
|   | (d)                                                                                                                                                                                 

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REGISTRATION OF INTEREST

|9. | Immediately upon the exercise of the Option of any or all
      of the Property by Garuda, Garuda shall forthwith receive registration
      documentation duly executed for the registration of its interest in the
      Property.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

FORMATION OF JOINT VENTURE

|10. | Upon exercise of the Option, the parties hereto (the
      Participants) shall form a joint venture (the Joint Venture), with
      Garuda as the initial designated operator of the Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|11. | The Joint Operating Agreement will incorporate the terms
      and principles set forth under the heading Formation of Joint Venture.
      In addition, when determining the terms and conditions of the Shareholders
      Agreement, the Participants shall, to the extent reasonably practicable
      and consistent with the terms of this Agreement, take into due
      consideration the Canadian tax, corporate and accounting effects upon the
      Participants with a view to securing the most beneficial structure to the
      Participants as a whole. Each of Garuda and the Optionor will, following
      the second anniversary of the date of execution of this Agreement,
      negotiate in good faith to settle the form of the Joint Operating
      Agreement and, upon agreement being reached on the form thereof, such
      Joint Operating Agreement will be added as a schedule to this Agreement.
      If the parties are unable to agree on the form of the Joint Operating
      Agreement within such time, any outstanding issues will be referred to
      arbitration in accordance with the provisions of this Agreement.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|12. | The Joint Operating Agreement shall provide
  that:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| | (a) | the affairs of the Participants shall be structured and
      governed in a manner consistent with the Joint Operating Agreement, and,
      to the extent practicable under the laws of the Northwest Territories and
      Nunavut Territory, operations will be carried out substantially as set
      forth in the Joint Operating Agreement, as modified by the provisions
      herein and as may be agreed by the
Participants;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | After the formation of the Joint Venture, each
      Participant shall be responsible for its pro rata share (based on its
      percentage interest at the exercise of the Option pursuant to which such
      expenditures are incurred) of all Joint Venture Expenditures (which
      Expenditures shall only be incurred pursuant to budgets and work programs
      proposed by the operator and approved by the Participants) incurred under
      programs in which it has elected to
participate;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c) | If a Participant elects to not to contribute to an
      approved work program and budget, its interest in the Joint Venture will
      be diluted in accordance with this Section 5.1 herein;                                                                                                                                    
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                   
| | d) | If a Participant elects to contribute, but fails to do as
      and when required and does not remedy such failure within thirty (30) days
      of such failure, not only will its interest in the Joint Venture be
      diluted, but it shall have lost the right to contribute to any further
      work programs and budgets;
| |    |                                                                                                                                                                                                                                                                                                                                   
| | e) | Notwithstanding the adoption of a program and budget, a
      Participant may elect to participate in the approved program and budget:                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                   
| |    | i)                                                                                                                                                                                                                                                                                                                                

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| |    | ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | in some lesser amount than its respective interest;
    or
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                           
| |    | iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | not at all;                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                           
| | f) | In the event that a Participant elects to participate in
      some lesser amount than its respective interest or not at all in a program
      and budget, such Participants beneficial interest in the Property shall
      be recalculated as provided in this Section 5.1, with dilution effective
      as of the first day of the subject program and budget;                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                           
| | g) | If a Participant fails to so notify the other Participant
      of the extent to which it elects to participate, such Participant shall be
      deemed to have elected to contribute to such program and budget in
      proportion to its respective interest as of the beginning of the program
      period;                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                           
| | h) | If a Participant elects to contribute, but fails to do so
      as and when required and does not remedy such failure within ninety (90)
      days of such failure, its interest in the Joint Venture shall be
      recalculated as provided in this Section 5.1 and it shall have lost the
      right to contribute to any further work programs and budgets;                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                           
| | i) | If a Participant elects to contribute to a program and
      budget some lesser amount than in proportion to its respective interest,
      or not at all, and the other Participant elects to fund all or any portion
      of the deficiency, the decreased or non-participating Participants
      interest in the Joint Venture shall be diluted, and the interest of the
      other Participant in the Joint Venture will be correspondingly increased,
      so that at any time the interest of a party in the Joint Venture will be
      equal to:

(Actual Contributions of
Participant since Participation Date + Deemed Contributions of such
participant) x 100%

(Sum of Total Actual Contributions
of all Participants since Participation Date + Total Deemed
Contributions of all Participants)

with the percentage rounded to the
nearest 2 decimal places;

| | j) | The Deemed Contributions of the Participants will
    be:                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | k) | If a Participant defaults in making a contribution or
      cash call required by an adopted program and budget, the non-defaulting
      Participant may, but shall not be obligated to, advance some portion or
      all of the amount in default on behalf of the defaulting Participant (a
      "Cover Payment");                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | l) | Each and every Cover Payment shall constitute a demand
      loan bearing interest from the date of the advance at the rate to be
      determined between the parties. If more than one Cover Payment is made,
      the Cover Payments shall be aggregated and the rights and remedies
      described herein pertaining to an individual Cover Payment shall apply to
      the aggregated Cover Payments. The failure to repay such loan upon demand
      shall be a default;

---

| | m) | If the interest of a Participant in the Joint Venture is
      reduced to 10% percent or less, the interest of such Participant in the
      Joint Venture will be transferred to the Joint Venture in exchange for a
      net smelter return of 3% calculated in accordance with Schedule
  "A";
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | n) | Nothing contained in this Agreement shall be deemed to
      constitute either party the partner of the other, or, except as otherwise
      herein expressly provided, to constitute either party the agent of the
      other, or to create any fiduciary relationship between them. The parties
      hereto do not intend to create, and this Agreement shall not be construed
      to create, any mining, commercial or other partnership. Neither party, nor
      any of its agents, shall act for or assume any obligation or
      responsibility on behalf of the other party, except as otherwise expressly
      provided herein. The rights, duties, obligations and liabilities of the
      parties hereto shall be several and not joint or
  collective;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (m) | a Participant's interest is assignable under the terms
      and conditions described below.
| | --- | --------------------------------------------------------------------------------------------

|13. | Further, so long as Garuda holds an interest in the
      Property, Garuda shall have a first right of refusal with regard to the
      purchase of the 30% interest held by the Optionor (the "Interest") as
      follows:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                             
|    | (a)                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                             
|    | (b)                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                             
|    | (c)                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                             
|    | (d)                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                             
|    | (e)                                                                                                                                                                                                                         

NO PARTNERSHIP

|14. | Nothing contained in this Agreement shall be deemed to
      constitute either party the partner of the other, or, except as otherwise
      herein expressly provided, to constitute either party the agent of the
      other, or to create any fiduciary relationship between them. The parties
      hereto do not intend to create, and this Agreement shall not be construed
      to create, any mining, commercial or other partnership. Neither party, nor
      any of its agents, shall act for or assume any obligation or
      responsibility on behalf of the other party, except as otherwise expressly
      provided herein. The rights, duties, obligations and liabilities of the
      parties hereto shall be several and not joint or
  collective.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

REPRESENTATIONS, WARRANTIES AND COVENANTS

|15. | The Optionor represents and warrants to Garuda that, as
      of the date of this Agreement:
|--- | --------------------------------------------------------------------------------------------

| | (a) | the Optionor is the legal and beneficial owner of the
      Property;                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (b) | all of the concessions comprising the Property have been
      acquired in accordance with and are in good standing pursuant to the laws
      of Northwest Territories and the laws of Nunavut Territory;                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (c) | the Optionor has the sole and exclusive right to deal
      with the Property in the manner provided in this Agreement;                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (d) | the Optionor has the full power and authority to execute
      and deliver this Agreement and to fulfil its obligations provided for by
      this Agreement;                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (e) | there are no outstanding agreements or options to acquire
      or purchase any interest in any of the Property, or to explore, develop or
      exploit any part thereof other than the terms of the Property Acquisition
      Agreement between the Optionor (formerly Consolidated Petroquin Resources
      Limited) and Kalac Holdings Ltd, Trevor Teed and Lane Dewar (the  Kalac
      Agreement), granting a 2% net smelter returns and no person has other
      interest whatsoever in the Property or any production therefrom;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (f) | the Optionor has delivered to or made available for
      inspection by Garuda all existing data in its possession or control, and
      true and correct copies of all leases or other contracts, relating to the
      Property;                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (g) | with respect to the Property, to the best of the
      Optionor's information and knowledge, there are no pending or threatened
      actions, suits, claims or proceedings,; and                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (h) | except as to matters otherwise disclosed herein, to the
      best of the Optionor's information and
knowledge,                                                                                                                                                                                                                                                                                                                                                                                                                              

| | (i)   | the conditions existing on or with respect to the
      Property and its ownership and operation of the Property are not in
      violation of any laws (including without limitation any environmental
      laws), nor causing or permitting any damage or impairment to the health,
      safety, or enjoyment of any person at or on the Property or in the general
      vicinity of the Property;                       
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (ii)  | there have been no past violations by it or by any of its
      predecessors in title of any environmental laws or other laws affecting or
      pertaining to the Property, nor any past creation of damage or threatened
      damage to the air, soil, surface waters, groundwater, flora, fauna, or
      other natural resources on, about or in the general vicinity of the
      Property ("Environmental Damage"); and
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (iii) | the Optionor has not received inquiry from or notice of a
      pending investigation from any governmental agency or of any
      administrative or judicial proceeding concerning the violation of any
      laws.                                                                                                                                                                                                          

|16. | Garuda represents and warrants to the Optionor that, as
      of the date of this Agreement:
|--- | --------------------------------------------------------------------------------------------

---

|    | (a)                                                                                                                                                                                                                                                                                                                  | the common shares of its parent company, Garuda Capital Corp. are listed and posted for trading on the OTC.BB Exchange and it is in good standing with the Securities Exchange Commission and the laws of the United States and
British Columbia;                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|17. | Garuda and the Optionor each warrant and represent to the other that, as of the date of this Agreement:                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                  
|    | (a)                                                                                                                                                                                                                                                                                                                  | it is a corporation duly organized and in good standing in its jurisdiction of incorporation and is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this
Agreement;                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                  
|    | (b)                                                                                                                                                                                                                                                                                                                  | it has the capacity to enter into and perform this Agreement and all transactions contemplated herein, including the Option, and it has obtained all required consents, approvals and authorizations required from its directors and
from any surface and mineral rights owner, and all other actions required to authorize it to enter into and perform this Agreement have been properly taken;
|    |                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                  
|    | (c)                                                                                                                                                                                                                                                                                                                  | it will not breach any other agreement or arrangement by entering into or performing this Agreement or by the exercise of the Option;                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                  
|    | (d)                                                                                                                                                                                                                                                                                                                  | it is not subject to any governmental order, judgment, decree, debarment, sanction or laws that would preclude the permitting or implementation of mining operations under this Agreement; and                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                  
|    | (e)                                                                                                                                                                                                                                                                                                                  | this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms, subject to laws of general application with respect to creditor rights and the discretionary nature of
equitable remedies.                                                                                                                                              
|18. | Each of the parties hereto represents and warrants that it is unaware of any material facts or circumstances that have not been disclosed in this Agreement, which should be disclosed to the other party in order to prevent the
representations and warranties in this Agreement from being materially misleading.
|    |                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                  
|19. | Each of the parties acknowledges that the other has relied and will rely upon the accuracy of its respective representations and warranties contained in sections 16, 17 and 18, which representations and warranties shall constitute
fundamental terms of this Agreement.                                         
|    |                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                  
|20. | The Optionor covenants with Garuda that, during the Option Period: it shall:                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                  
|    | (a)                                                                                                                                                                                                                                                                                                                  | not take any action whereby the Property will become subject to:                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                      | (i)                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                      | (ii)                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                      | (iii)                                                                                                                                                                                                                                                                                                                                                                                            
|    | (b)                                                                                                                                                                                                                                                                                                                  | deliver to Garuda, upon receipt by the Optionor thereof, all notices, documentation and other materials with respect to the Property received from any governmental agencies or third parties;                                                                                                                                                                                                   

---

|    | (c)                                                                                | maintain its corporate existence and good standing under
      applicable corporate laws;                                                                                                                                                                                                                                                                                                                                                                 
|--- | ---------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | (d)                                                                                | so long as Garuda is not in default hereunder, not take
      any action which would adversely affect the rights of Garuda
    hereunder;                                                                                                                                                                                                                                                                                                                 
|    |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|20. | Garuda covenants with the Optionor that, during the
      Option Period, it shall:
|    |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | (a)                                                                                | not take any action whereby the Property will become
      subject to:                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                    | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                    | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                    | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                    | (iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | (b)                                                                                | deliver to the Optionor, upon receipt by Garuda thereof,
      all notices, documentation and other materials with respect to the
      Property received from any governmental agencies or third
  parties;                                                                                                                                                                                                                                              
|    |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | (c)                                                                                | maintain its corporate existence and good standing under
      applicable corporate laws;                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | (d)                                                                                | so long as the Optionor is not in default hereunder, not
      take any action which would adversely affect the rights of the Optionor
      hereunder; and                                                                                                                                                                                                                                                                                               
|    |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | (e)                                                                                | use its commercially reasonable efforts to ensure that
      its regulatory filings with the Securities and Exchange Commission are
      kept current and to ensure that all shares issued to the Optionor shall be
      issued as fully paid and non-assessable shares in the capital of Garuda,
      free and clear of all encumbrances except with regard to any applicable
      resale restrictions under the Securities Act (British
  Columbia).

SURVIVAL OF REPRESENTATIONS AND WARRANTIES

|21. | All representations, warranties and covenants granted or
      assented to in this Agreement, shall survive the completion of the
      transactions contemplated herein and each such representation, warranty,
      and covenant is a condition of this Agreement, any or all of which
      conditions may be waived in whole or in part by the party for whose
      benefit the representation is made. The representations and warranties of
      the parties contained in this Agreement shall not be discharged, dissolved
      or terminated by the exercise of the Option.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

INDEMNITIES

|22. | (a) | Neither the Optionor nor its affiliated companies and
      their shareholders, principals, Board members, representatives, agents,
      employees and lawyers shall have any responsibility whatsoever for or
      derived from the actions, omissions, operation and in general the
      management of Garuda or any of its affiliated companies nor in the
      Property.
|--- | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |     |                                                                                                                                                                                                                                                                                                                                                                                 
|    | (b) | Garuda hereby releases the Optionor and its
      affiliated companies and their shareholders,                                                                                                                                                                                                                                                                                  

---

| |     | principals, Board members, representatives, agents,
      employees and lawyers for whatever act or omission of Garuda or its
      affiliated companies and their shareholders, principals, Board members,
      representatives, agents, employees and lawyers thereto. Garuda binds
      itself to indemnify and hold the Optionor and its affiliated companies and
      their shareholders, principals, Board members, representatives, agents,
      employees and lawyers harmless from and against any claim or proceeding of
      any nature against them derived from the actions, omissions or
      transactions that Garuda or its affiliated companies and their
      shareholders, principals, Board members, representatives, agents,
      employees and lawyers are part of.                                                                                                             
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (c) | Neither Garuda nor its affiliated companies and their
      shareholders, principals, Board members, representatives, agents,
      employees and lawyers shall have any responsibility whatsoever for or
      derived from the actions, omissions, operation and in general the
      management of the Optionor or any of its affiliated companies nor in the
      Property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (d) | The Optionor hereby releases Garuda and its affiliated
      companies and their shareholders, principals, Board members,
      representatives, agents, employees and lawyers for whatever act or
      omission of the Optionor or its affiliated companies and their
      shareholders, principals, Board members, representatives, agents,
      employees and lawyers thereto. The Optionor binds itself to indemnify and
      hold Garuda and its affiliated companies and their shareholders,
      principals, Board members, representatives, agents, employees and lawyers
      harmless from and against any claim or proceeding of any nature against
      them derived from the actions, omissions or transactions that the Optionor
      or its affiliated companies and their shareholders, principals, Board
      members, representatives, agents, employees and lawyers are part
  of.

ASSIGNMENT OF INTEREST

|23. | The Optionor may assign its interest in the Property and
      this Agreement without the consent of Garuda, which assignment may occur,
      without limitation, by way of a statutory arrangement, dividend-in-kind,
      return of capital transaction, merger or such other reorganizational
      transaction in which the Optionor's interest in the Property and this
      Agreement may be transferred to another entity.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|25. | Garuda may at any time sell, transfer or otherwise
      dispose of all or any portion of its interest to the property, this letter
      of intent and the Formal Agreement, except that its obligations hereunder
      shall continue unless released in writing by the Optionor.                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|26. | Any purchaser, assignee or transferee of the interests
      of Garuda must first deliver to the other party to this Agreement, its
      agreement binding itself to this agreement and containing:                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                 

FORCE MAJEURE

|27. | Except for the obligation to make payments when due
      hereunder, the obligations of a party shall be suspended to the extent and
      for the period that performance is prevented by any cause,
  whether
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

foreseeable or unforeseeable, beyond
its reasonable control, including, without limitation, labour disputes (however
arising and whether or not employee demands are reasonable or within the power
of the party to grant); acts of God; laws, instructions or requests of any
government or governmental entity; judgments or orders of any court;; acts of
war or conditions arising out of or attributable to war, whether declared or
undeclared; riot, civil strife, insurrection or rebellion; fire, explosion,
earthquake, storm, flood, sink holes, drought or other adverse weather
condition; actions by native rights groups, environmental groups, or other
similar special interest groups; or any other cause whether similar or
dissimilar to the foregoing provided that Garuda has used reasonable efforts to
comply with the terms of this Agreement. The affected party shall promptly give
notice to the other party of the suspension of performance, stating therein the
nature of the suspension, the reasons therefor, and the expected duration
thereof. The affected party shall resume performance as soon as reasonably
possible. During the period of suspension the obligations of both parties to
advance funds pursuant to this Agreement shall be reduced to levels consistent
with the current operations.

JURISDICTION

|28 | The Participants attorn the jurisdiction of British
      Columbia regarding any dispute, controversy or claim arising out of or
      relating to this Agreement.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

CURRENCY

|29. | Unless otherwise provided, all sums of money to be paid
      or calculated pursuant to this Agreement will be calculated and paid in
      Canadian currency.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTICE

|30. | All notices, demands and requests required or permitted
      to be given under this Agreement shall be in writing and may be delivered
      personally, sent by electronic mail or by facsimile or may be forwarded by
      first class prepaid registered mail. Any notice delivered personally or
      sent by electronic mail or by facsimile shall be deemed to have been given
      and received on the same business day as sent, subject, in the case of
      notice given by facsimile, to written acknowledgment of receipt from the
      original recipient. Any notice mailed as aforesaid shall be deemed to have
      been given and received on the seventh calendar day following the date it
      is posted. Notices shall be addressed as
follows:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | if to Garuda:
| | --- | -------------

| | #502  1978 Vine Street             
| | ------------------------------------
| | Vancouver, British Columbia V6K 4S1 
| | Facsimile No.:                      
| | Attention:                          
| | if to the Optionor:                 
| | 3465 Commercial Street,             
| | Vancouver, British Columbia, V5N 4E8
| | Facsimile No.:                      
| | Attention:                          

---

or to such other address or addresses
as either party may, from time to time, specify by notice to the other;
provided, however, that if there shall be a mail strike, slowdown or other
labour dispute, which might affect delivery of the notice by mail, then the
notice shall be effective only if actually delivered.

ENTIRE AGREEMENT

|31. | This Agreement supersedes and invalidates all other
      commitments, representations and warranties, including without limitation
      a certain letter agreement among the parties dated June 26, 2006 relating
      to the subject matter hereof which may have been made by the parties
      hereto either orally or in writing prior to the date hereof, and all of
      which shall become null and void from the date this Agreement is signed.
      The recitals and schedules are incorporated by reference into and form a
      part of this Agreement.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

FURTHER ASSURANCES

|32. | Each of the parties hereto shall from time to time and at
      all times do all such further acts and execute and deliver all further
      deeds and documents as shall be reasonably required in order fully to
      perform and carry out the terms of this Agreement.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

HEADINGS

|33. | The subject headings herein are included for purposes of
      convenience only, and shall not affect the construction or interpretation
      of any of its provisions.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

WAIVER

|34. | No party will be deemed to have waived the exercise of
      any right that it holds under this Agreement unless such waiver is made in
      writing. No waiver made with respect to any instance involving the
      exercise of any such right will be deemed to be a waiver with respect to
      any other instance involving the exercise of the right or with respect to
      any other such right.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

REMEDIES

|35. | Failure by either party to exercise any of its rights,
      powers or remedies hereunder or its delay to do so shall not constitute a
      waiver of those rights, powers or remedies. The single or partial exercise
      of a right, power or remedy shall not prevent its subsequent exercise or
      the exercise of any other right, power or remedy.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

AMENDMENTS

|36. | If at any time during the continuance of this Agreement
      the parties shall deem it necessary or expedient to make any alteration or
      addition to this Agreement they may do so by means of a written agreement
      between them which shall be supplemental and form part of this
      Agreement.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

COUNTERPARTS

|37. | This Agreement may be executed in any number of
      counterparts and each counterpart shall be deemed an original, but all
      counterparts together shall constitute one and the same instrument. Any
      facsimile signature shall be taken as an
original.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

GOVERNING LAW

|38. | This Agreement will be governed by and be construed in
      accordance with the laws of British Columbia and the laws of Canada
      applicable therein.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

TIME

|39. | Time is of the essence hereof.
|--- | ------------------------------

SEVERABILITY

|40. | If any provision of this Agreement is determined to be
      invalid or unenforceable in whole or in part, such invalidity or
      unenforceability shall attach only to such provision and everything else
      in this Agreement shall continue in full force and
  effect.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

TERMS REGARDING SHARES

|41. | The Shares and any interest in the Shares granted by this
      agreement shall hereinafter be referred to as the Securities. Optionor
      acknowledges and understands that the Securities have not been registered
      under the US Securities Act or any other securities laws, are not
      qualified for resale in the US until registered under the US Securities
      Act or an exemption from such registration is available.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|42. | Optionor acknowledges that Garuda Capital Corp. shall
      refuse to register any transfer of the Securities not made in accordance
      with the provisions of Regulation S of the US Securities Act pursuant to
      registration under the US Securities Act, or pursuant to an available
      exemption from registration.                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|43. | Optionor also acknowledges and understands that the
      certificates representing the Shares will be stamped with the following
      legend (or substantially equivalent language) restricting transfer in the
      following manner:                                                                                                                                                                                                  

The transfer of the securities
represented by this certificate is prohibited except in accordance with the
provisions of Regulation S promulgated under the United States Securities Act of
1933, as amended (the Act), pursuant to registration under the Act or pursuant
to an available exemption from registration. In addition, hedging transactions
involving such securities may not be conducted unless in compliance with the
Act.

Optionor hereby consents to Garuda
making a notation on its records or giving instructions to any transfer agent of
the Securities in order to implement the restrictions on transfer described in
this Agreement.

|44. | Optionor certifies that:                                                                                                                        
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                 
|    | (a)                                                                                                                                             
|    |                                                                                                                                                 
|    | (b)                                                                                                                                             
|    |                                                                                                                                                 
|45. | Optionor agrees not to engage in hedging transactions
      with regard to the Securities unless in compliance with the US Securities
      Act.

---

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SCHEDULE "A"

NET SMELTER RETURN

1. For the purposes of this Schedule A and of calculating the
amount of royalty payable hereunder:

(a) "net smelter return" - means
the amount of money actually received from the sale of the ores mined from the
Property or from the sale of the concentrates or other products derived
therefrom, less all taxes, costs or expenses incurred with respect to freight,
trucking or handling of ores, concentrates or other products ex headframe in the
case of ores and ex mill or other treatment facility in the case of concentrates
or other products;

(b) "Operator" - means the party
responsible for the carrying on of the operations relating to the Property;

(c) "Owner" - means the person or
persons that own an interest in The Claims as at the relevant time including,
without limitation, the Operator if the Operator has such an interest;

(d) "Property" - means The Claims
as defined in the annexed agreement;

(e) "Recipient" - means the party
or parties that are from time to time entitled to be paid the royalty hereunder;

(f) "year" - means the calendar
year and a reference to a subdivision of a year means a reference to the
relevant subdivision of a calendar year;

(g) those terms defined in the
agreement of which this Schedule B is part shall have the same meanings as so
defined (save as otherwise provided in this Schedule B).

2. All calculations and computations relating to the royalty
shall be carried out in accordance with generally accepted accounting principles
and good mining practice.

3. Subject to the provisions hereof, the amount of royalty
payable to the Recipient hereunder shall be calculated by the operator as at the
end of each quarter and shall be payable to the Recipient on or before the 15th
day of the next following quarter; provided, however, that the Operator shall
deduct from royalty otherwise payable the amount of any advance royalty paid
pursuant to the annexed agreement until such time as the aggregate amount of the
advance royalty so paid has been so deducted.

4. With each payment of royalty, the Operator shall deliver to
the Recipient a statement indicating the nature of the payment being made, if
any, the manner in which it was determined and, as at the date of such
calculation, the aggregate amount of advance royalty (if any) paid and not
deducted hereunder. If no royalty is payable in any quarter, the Operator shall
deliver a statement accordingly. Within 90 days after the end of each year in
which royalty is payable, or save for deduction of advance royalty previously
paid would be payable, the Operator shall deliver to the Recipient a certificate
confirming the determination of the amount of royalty paid or otherwise payable
during the said year.

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5. The Operator shall keep separate accounts relating to its
operations hereunder and, upon the prior written request of the Recipient, duly
authorized representatives of the Recipient may have access to such accounts for
the purpose of confirming any information contained in a statement delivered to
the Recipient pursuant to the provisions of paragraph 4 hereof; provided,
always, that such access shall not interfere with the affairs of the Operator.
The Recipient shall have the right to make copies of or take extracts from such
accounts (but only for his own use).

6. (a) For the purpose of calculating the amount of royalty
payable to the Recipient hereunder only, if any ore or product derived from ore
mined from the property is retained by the Operator or Owner or sold to a
company associated with the Operator or Owner, and if the sale price of such
product is not negotiated on an arm's length basis, the Operator shall, for the
purposes of calculating net smelter return available to pay the royalty
hereunder only and notwithstanding the actual amount of such sale price, add to
any moneys actually received with respect to such sale an amount which the
Operator considers sufficient to make the same represent a reasonable sale price
for such product as if negotiated at arm's length.

(b) The Operator shall by notice
inform the Recipient of the quantum of such reasonable sale price and, if the
Recipient does not object thereto within 45 days after receipt of such notice,
said quantum shall be final and binding for the purposes of this paragraph 6.

(c) If the Recipient objects to
such quantum by notice delivered to the Operator within the said 45 days, then
the quantum of such reasonable sale price shall be decided by arbitration as
follows: the Recipient shall nominee one arbitrator and shall notify the
Operator of such nomination and the Operator shall, within 45 days after
receiving such notice, nominate an arbitrator and the two arbitrators shall
select an umpire to act jointly with them. If the said arbitrators shall be
unable to agree in the selection of such umpire, the umpire shall be a person
designated by the President or any Vice-President of the Canadian Institute of
Mining and Metallurgy, provided that such person is not an employee of the Owner
or any company affiliated with the Owner. The umpire shall fix the time and
place for the purpose of hearing such evidence and representations as either or
the parties hereto may present and, subject to the provisions hereof, the
decision of the arbitrators and umpire, or any two of them, in writing shall be
binding upon the parties hereto. The said arbitrators and umpire shall, after
hearing any evidence and representations that the parties may submit, make their
award, reduce the same to writing and deliver one copy thereof to each of the
parties hereto. The majority of the umpire and arbitrators may determine any
matters of procedure for the arbitration not specified herein. If the Operator
fails within the said 45 days to nominate an arbitrator, then the arbitrator
nominated by the Recipient may proceed alone to determine the dispute in such
manner and at such time as he shall think fit and his decision shall, subject to
the provisions hereof, be binding upon the parties hereto.

(d) The expense of the arbitration shall be paid by the
Recipient if the decision reached hereunder does not increase such quantum by
more than 1% of the quantum set forth in the notice hereinbefore referred to and
otherwise by the Operator. Insofar as they do not conflict with the provisions
hereof, the Rules for the Conduct of Arbitrations of the Arbitrators Institute
of Canada Inc., as amended or replaced from time to time, shall be applicable.
Appeal from the decision of the arbitrators shall be in accordance with the
provisions of the said Rules.

19

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SCHEDULE "B"

PROPERTY DESCRIPTION

The Property is located approximately 312 miles NNW of
Yellowknife and 90 miles SW of Kugluktuk (Coppermine, straddling the Northwest
Territories / Nunavut Territory border. The property is approximately 312 miles
NNW of Yellowknife and 90 miles SW of Kugluktuk (Coppermine).

Mineral Claim
    Tag #
    AcreageRAH 1
    F53535
    206.6RAH 2
    F53536
    206.6WET
    F53534
    206.6COR 1
    F92341
    1033COR 2
    F92342
    2582.5COR 3
    F92343
    1291.25COR 4
    F92344
    1394.55COR 5
    F92345
    2479.2COR 6
    F92346
    2582.5COR 7
    F92355
    2582.5COR 8
    F92348
    2582.5COR 9
    F92356
    1549.5COR 10
    F92350
    2582.5COR 11
    F92351
    1549.5COR 12
    F92352
    1549.5COR 13
    F92353
    2582.5COR 14
    F92354
    1084.65COR 15
    F92328
    2582.5TOTAL
    
    30628.45


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