EXHIBIT 99.1

GAMMON LAKE RESOURCES
INC.
ANNUAL INFORMATION FORM

For the Year-Ended July 31, 2005

October 17, 2005

---

# GAMMON LAKE RESOURCES
INC. 
(the Corporation)

# ANNUAL INFORMATION FORM

# TABLE OF CONTENTS

|Item 1: | Corporate Structure | 1
|------- | ------------------- | -

| | 1.1 | Name, Address and Incorporation | 1
| | --- | ------------------------------- | -

| | 1.2 | Inter-corporate Relationships | 1
| | --- | ----------------------------- | -

|Item 2: | General Developments of the Business | 1
|------- | ------------------------------------ | -

| | 2.1 | Three Year History | 1
| | --- | ------------------ | -

| | 2.2 | Significant Acquisitions | 2
| | --- | ------------------------ | -

|Item 3: | Description of the Business | 2
|------- | --------------------------- | -

| | 3.1 | General | 2
| | --- | ------- | -

| | 3.2 | Mineral Properties | 2
| | --- | ------------------ | -

| |  | 3.2.1 | Ocampo Project | 2
| |  | ----- | -------------- | -

| |  |  | Location and Description | 3
| |  |  | ------------------------ | -

| |  |  |  |  | Figure 1:   Location of Project | 3
| |  |  |  |  | ------------------------------- | -

| |  |  |  |  | Table 3-1:        Description of Mining Titles | 4
| |  |  |  |  | ---------------------------------------------- | -

| |  |  |  | Soyopa Agreement | 5
| |  |  |  | ---------------- | -

| |  |  |  | Minera Fuerte Agreement | 5
| |  |  |  | ----------------------- | -

| |  |  |  | Minimum Investment (assessment work) | 6
| |  |  |  | ------------------------------------ | -

| |  |  |  | Exploitation Concessions | 7
| |  |  |  | ------------------------ | -

| |  |  |  | Mining Duty (tax) | 7
| |  |  |  | ----------------- | -

| |  |  |  |  | Table 3-2:         Mining Duties | 7
| |  |  |  |  | -------------------------------- | -

| |  |  | Access | 8
| |  |  | ------ | -

| |  |  | Climate | 8
| |  |  | ------- | -

| |  |  | Local Resources | 8
| |  |  | --------------- | -

| |  |  | Infrastructure | 8
| |  |  | -------------- | -

| |  |  | Physiographic Description | 9
| |  |  | ------------------------- | -

| |  |  | Historical Activity and Exploration | 9
| |  |  | ----------------------------------- | -

| |  |  | Regional Geology | 11
| |  |  | ---------------- | --

| |  |  | Ocampo District Geology | 11
| |  |  | ----------------------- | --

| |  |  | Deposit Types | 12
| |  |  | ------------- | --

| |  |  | Mineralization | 12
| |  |  | -------------- | --

| |  |  | Drilling | 13
| |  |  | -------- | --

| |  |  | Mineral Resources and Reserve Estimates | 14
| |  |  | --------------------------------------- | --

| |  |  |  | General | 14
| |  |  |  | ------- | --

| |  |  |  | Geographical Area Model Division | 14
| |  |  |  | -------------------------------- | --

| |  |  |  | Data Analysis | 15
| |  |  |  | ------------- | --

| |  |  |  | Northeast Area | 15
| |  |  |  | -------------- | --

| |  |  |  | The Open-Pit PGR Trend | 16
| |  |  |  | ---------------------- | --

| |  |  |  | Grade Estimation | 17
| |  |  |  | ---------------- | --

| |  |  |  | Validation | 17
| |  |  |  | ---------- | --

| |  |  |  | Mineral Resources | 17
| |  |  |  | ----------------- | --

---

| |  |  |  | Mineral Resources  contd | 17
| |  |  |  | -------------------------- | --

| |  |  |  |  | Table 3-3:    Ocampo Total District Measured and Indicated 
Mineral Resource Summary | 18
| |  |  |  |  | ------------------------------------------------------------------------------------ | --

| |  |  |  |  | Table 3-4:    Ocampo Total District Inferred Mineral Resource
Summary | 18
| |  |  |  |  | --------------------------------------------------------------------- | --

| |  |  |  |  | Table 3-5:     Ocampo Detailed Northeast Ocampo 
Mineral Resource Summary | 18
| |  |  |  |  | ------------------------------------------------------------------------- | --

| |  |  |  |  | Table 3-6:    Ocampo Detailed Measured and Indicated 
Mineral Resource Summary | 19
| |  |  |  |  | ------------------------------------------------------------------------------ | --

| |  |  |  |  | Table 3-7:    Ocampo Detailed Inferred Mineral Resource Summary | 19
| |  |  |  |  | --------------------------------------------------------------- | --

| |  |  |  |  | Table 3-8:    Ocampo Proven and Probable Reserves | 20
| |  |  |  |  | ------------------------------------------------- | --

| |  |  |  | Open-Pit Mineral Reserves | 20
| |  |  |  | ------------------------- | --

| |  |  |  |  | Table 3-9:    Ultimate Pit Reserve Summary | 21
| |  |  |  |  | ------------------------------------------ | --

| |  |  |  |  | Table 3-10:    Annual Mining Summary | 22
| |  |  |  |  | ------------------------------------ | --

| |  |  |  |  | Table 3-11:    Cumulative Open-Pit Mine Production | 22
| |  |  |  |  | -------------------------------------------------- | --

| |  |  |  |  | Table 3-12:     Ocampo Mineral Reserve and Remaining Resource | 23
| |  |  |  |  | ------------------------------------------------------------- | --

| |  |  |  | Underground Mine Plan and Reserves | 23
| |  |  |  | ---------------------------------- | --

| |  |  |  |  | Table 3-13:    Proven and Probable Reserves by Level | 24
| |  |  |  |  | ---------------------------------------------------- | --

| |  |  |  |  | Table 3-14:    Proven and Probable Reserves by Mine Year | 24
| |  |  |  |  | -------------------------------------------------------- | --

| |  |  | Mineral Processing and Metallurgical Testing | 25
| |  |  | -------------------------------------------- | --

| |  |  |  | Underground Mine with Conventional Merrill Crowe Mill | 25
| |  |  |  | ----------------------------------------------------- | --

| |  |  |  |  | Table 3-15:    Master Underground Composite  Description | 25
| |  |  |  |  | --------------------------------------------------------- | --

| |  |  |  |  | Table 3-16:    Test Program for Underground Ocampo Ores | 25
| |  |  |  |  | ------------------------------------------------------- | --

| |  |  |  |  | Table 3-17:    Bottle Roll Leach Test/ Recovery vs. Grind Size  
96 Hour leach tests | 26
| |  |  |  |  | ------------------------------------------------------------------------------------- | --

| |  |  |  | Open-Pit Mine with Crushing and Heap Leach | 26
| |  |  |  | ------------------------------------------ | --

| |  |  |  |  | Table 3-18:    Test Programs for Open Pit/Heap Leach Ores | 27
| |  |  |  |  | --------------------------------------------------------- | --

| |  |  |  |  | Table 3-19:    Column Leach Tests on Crushed Core Material | 28
| |  |  |  |  | ---------------------------------------------------------- | --

| |  |  |  |  | Table 3-20:    Ultimate, End of Mine Life Recoveries | 29
| |  |  |  |  | ---------------------------------------------------- | --

| |  |  |  | Underground Mine with Heap Leach | 29
| |  |  |  | -------------------------------- | --

| |  |  |  |  | Table 3-21:    Column Test on Aventurero Vein Material | 30
| |  |  |  |  | ------------------------------------------------------ | --

| |  |  | Mining Methods, Capital and Operating Costs | 30
| |  |  | ------------------------------------------- | --

| |  |  |  | General | 30
| |  |  |  | ------- | --

| |  |  |  | Underground Mine Operating Cost | 31
| |  |  |  | ------------------------------- | --

| |  |  |  |  | Table 3-22:    Underground Mine Operating Cost Summary | 31
| |  |  |  |  | ------------------------------------------------------ | --

| |  |  |  | Open-Pit Mining Methods, Capital and Operating Costs | 31
| |  |  |  | ---------------------------------------------------- | --

| |  |  |  |  | Table 3-23:    Mine Operating Cost Summary ($/tonne of Material Mined) | 31
| |  |  |  |  | ---------------------------------------------------------------------- | --

| |  |  |  | Mill, Heap Leach and General Capital Costs | 33
| |  |  |  | ------------------------------------------ | --

| |  |  |  |  | Table 3-24:     Capital Costs Summary | 34
| |  |  |  |  | ------------------------------------- | --

| |  |  | Mill, Heap Leach and General Operating Costs | 34
| |  |  | -------------------------------------------- | --

| |  |  |  | Milling | 34
| |  |  |  | ------- | --

| |  |  |  |  | Table 3-25:    Average Unit Operating Costs for the Milling Operations | 35
| |  |  |  |  | ---------------------------------------------------------------------- | --

| |  |  |  | Crushing and Heap Leaching Operations | 35
| |  |  |  | ------------------------------------- | --

| |  |  |  |  | Table 3-26:    Average Unit Operating Costs for the Heap 
Leach Operations | 36
| |  |  |  |  | -------------------------------------------------------------------------- | --

---

| |  |  | Environmental, Social and Permitting | 36
| |  |  | ------------------------------------ | --

| |  |  |  | Air Quality | 36
| |  |  |  | ----------- | --

| |  |  |  | Vegetation and Wildlife | 36
| |  |  |  | ----------------------- | --

| |  |  |  | Water Resources | 36
| |  |  |  | --------------- | --

| |  |  |  | Cultural and Historical | 36
| |  |  |  | ----------------------- | --

| |  |  |  | Socioeconomic | 37
| |  |  |  | ------------- | --

| |  |  |  | Soils, Geology and Geochemistry | 37
| |  |  |  | ------------------------------- | --

| |  |  |  | Permitting | 37
| |  |  |  | ---------- | --

| |  |  |  | Heuristica Amiental Report | 37
| |  |  |  | -------------------------- | --

| |  |  | Utilities, Services and Infrastructure | 37
| |  |  | -------------------------------------- | --

| |  |  |  | Water Supply | 37
| |  |  |  | ------------ | --

| |  |  |  | Power Supply | 38
| |  |  |  | ------------ | --

| |  |  |  | Access to Site | 38
| |  |  |  | -------------- | --

| |  |  |  | Accommodations | 39
| |  |  |  | -------------- | --

| |  |  |  | Administration Building | 39
| |  |  |  | ----------------------- | --

| |  |  |  | Mill and Mine Maintenance Shop and Warehouse | 39
| |  |  |  | -------------------------------------------- | --

| |  |  |  | Laboratory | 40
| |  |  |  | ---------- | --

| |  |  |  |  | Table 3-27:    Daily Samples Analyzed by Fire Assay Procedure | 40
| |  |  |  |  | ------------------------------------------------------------- | --

| |  |  |  | Transportation | 40
| |  |  |  | -------------- | --

| |  |  | Economics | 41
| |  |  | --------- | --

| |  |  |  | Summary | 41
| |  |  |  | ------- | --

| |  |  |  | Base Camp | 41
| |  |  |  | --------- | --

| |  |  |  |  | Table 3-28:       Project Economic Indicators | 41
| |  |  |  |  | --------------------------------------------- | --

| |  |  |  | Sensitivity Analysis | 41
| |  |  |  | -------------------- | --

| |  |  |  |  | Table 3-29:       Sensitivity Analysis | 41
| |  |  |  |  | -------------------------------------- | --

| |  |  |  | Revenue | 42
| |  |  |  | ------- | --

| |  |  |  | Operating Costs | 42
| |  |  |  | --------------- | --

| |  |  |  | Profit Sharing | 42
| |  |  |  | -------------- | --

| |  |  |  | Reclamation Costs | 42
| |  |  |  | ----------------- | --

| |  |  |  | Royalties | 42
| |  |  |  | --------- | --

| |  |  |  | Capital Development, Acquisition Costs and Capital Cost Depreciation | 42
| |  |  |  | -------------------------------------------------------------------- | --

| |  |  |  | Exploration and Pre-Operational Development Expenses | 43
| |  |  |  | ---------------------------------------------------- | --

| |  |  |  | Working Capital Requirement, Sustaining Capital and Exploration | 43
| |  |  |  | --------------------------------------------------------------- | --

| |  |  | Recent Drilling Results and Developments | 43
| |  |  | ---------------------------------------- | --

| |  |  |  |  | Table 3-30:        Ocampo Underground Drill Hole Intercept Summary | 44
| |  |  |  |  | ------------------------------------------------------------------ | --

| |  |  |  |  | Table 3-31:       Ocampo Open-Pit Drill Hole Intercept Summary | 48
| |  |  |  |  | -------------------------------------------------------------- | --

| |  |  |  |  | Table 3-32:       Newly Reported Drill Results from Northeast 
Underground Project Area | 49
| |  |  |  |  | --------------------------------------------------------------------------------------- | --

| |  |  |  |  | Table 3-33:       Newly Reported Drill Results from the Open-Pit Project
                                          Area | 51
| |  |  |  |  | ----------------------------------------------------------------------------------------------------------------------- | --

| |  |  |  |  | Table 3-34:       Newly Reported Drill Results from Northeast 
Underground Project Area | 53
| |  |  |  |  | --------------------------------------------------------------------------------------- | --

| |  |  |  |  | Table 3-35:       Newly Reported Drill Results from the Open-Pit Project
                                          Area | 55
| |  |  |  |  | ----------------------------------------------------------------------------------------------------------------------- | --

| |  | 3.2.2 | Investment in Mexgold Resources Inc. | 56
| |  | ----- | ------------------------------------ | --

---

| | 3.3 | Risk Factors | 57
| | --- | ------------ | --

| |  | 3.3.1 | No History of Profitability | 57
| |  | ----- | --------------------------- | --

| |  | 3.3.2 | Exploration and Development Stage Corporation | 57
| |  | ----- | --------------------------------------------- | --

| |  | 3.3.3 | Foreign Operations | 58
| |  | ----- | ------------------ | --

| |  | 3.3.4 | Government Regulations | 58
| |  | ----- | ---------------------- | --

| |  | 3.3.5 | Market Fluctuation and Commercial Quantities | 58
| |  | ----- | -------------------------------------------- | --

| |  | 3.3.6 | Mining Risks and Insurance | 59
| |  | ----- | -------------------------- | --

| |  | 3.3.7 | Environmental Protection | 59
| |  | ----- | ------------------------ | --

| |  | 3.3.8 | Capital Investment | 59
| |  | ----- | ------------------ | --

| |  | 3.3.9 | Conflicts of Interest | 59
| |  | ----- | --------------------- | --

| |  | 3.3.10 | Dependence on Key Personnel | 60
| |  | ------ | --------------------------- | --

| |  | 3.3.11 | Lack of Active Market | 60
| |  | ------ | --------------------- | --

| |  | 3.3.12 | Currency | 60
| |  | ------ | -------- | --

| |  | 3.3.13 | Dividends | 60
| |  | ------ | --------- | --

| |  | 3.3.14 | Competition | 60
| |  | ------ | ----------- | --

| |  | 3.3.15 | Possible PFIC Status | 60
| |  | ------ | -------------------- | --

|Item 4: | Dividends | 61
|------- | --------- | --

|Item 5: | Description of Capital Structure | 61
|------- | -------------------------------- | --

| | 5.1 | General | 61
| | --- | ------- | --

| | 5.2 | Common Shares | 61
| | --- | ------------- | --

| | 5.3 | Class A and Class B Preferred Shares | 61
| | --- | ------------------------------------ | --

|Item 6: | Market for Securities | 62
|------- | --------------------- | --

| | 6.1 | Trading Price and Volume | 62
| | --- | ------------------------ | --

| | 6.2 | Prior Sales | 62
| | --- | ----------- | --

|Item 7: | Escrowed Securities | 62
|------- | ------------------- | --

|Item 8: | Directors and Officers | 62
|------- | ---------------------- | --

|Item 9: | Promoters | 64
|------- | --------- | --

|Item 10: | Legal Proceedings | 64
|-------- | ----------------- | --

|Item 11: | Interest of Management & Others in Material Transactions | 64
|-------- | -------------------------------------------------------- | --

|Item 12: | Transfer Agent and Registrar | 65
|-------- | ---------------------------- | --

|Item 13: | Material Contracts | 65
|-------- | ------------------ | --

|Item 14: | Interests of Experts | 65
|-------- | -------------------- | --

|Item 15: | Audit Committee Information | 65
|-------- | --------------------------- | --

| |  |  | Overview | 65
| |  |  | -------- | --

| |  |  | The Audit Committees Charter | 66
| |  |  | ----------------------------- | --

| |  |  | Composition of the Audit Committee | 66
| |  |  | ---------------------------------- | --

| |  |  | Audit Committee Oversight | 67
| |  |  | ------------------------- | --

| |  |  | Reliance on Certain Exemptions | 67
| |  |  | ------------------------------ | --

---

|Item 15: | Audit Committee Information - cont'd | 
|-------- | ------------------------------------ | 

| |  |  | Pre-Approval Policies and Procedures | 67
| |  |  | ------------------------------------ | --

| |  |  | External Auditor Service Fees (By Category) | 67
| |  |  | ------------------------------------------- | --

|Item 16: | Additional Information | 68
|-------- | ---------------------- | --

|Schedule A  Audit Committee Charter | A-1  A-5
|-------------------------------------- | ---------

---

Certain statements included or
incorporated by reference in this Annual Information Form, including information as to the
future financial or operating performance of the Corporation, its subsidiaries and its
projects, constitute forward-looking statements. The words believe,
expect, anticipate, contemplate, target,
plan, intends, continue, budget,
estimate, may, will, schedule and similar
expressions identify forward-looking statements. Forward-looking statements include, among
other things, statements regarding targets, estimates and assumptions in respect of gold
production and prices, operating costs, results and capital expenditures, mineral reserves
and mineral resources and anticipated grades and recovery rates. Forward-looking
statements are necessarily based upon a number of estimates and assumptions that, while
considered reasonable by the Corporation, are inherently subject to significant business,
economic, competitive, political and social uncertainties and contingencies. Many factors
could cause the Corporations actual results to differ materially from those
expressed or implied in any forward-looking statements made by, or on behalf of, the
Corporation. Such factors include, among others, risks relating to additional funding
requirements, reserve and resource estimates, gold prices, hedging activities,
exploration, development and operating risks, illegal miners, political and foreign risk,
uninsurable risks, competition, limited mining operations, production risks, environmental
regulation and liability, government regulation, currency fluctuations, recent losses and
write-downs, restrictions in the Corporations loan facility and dependence on key
employees. Investors are cautioned that forward-looking statements are not guarantees of
future performance and, accordingly, investors are cautioned not to put undue reliance on
forward-looking statements due to the inherent uncertainty therein. Forward-looking
statements are made as of the date of this Annual Information Form, or in the case of
documents incorporated by reference herein, as of the date of such document, and the
Corporation disclaims any intent or obligation to update publicly such forward-looking
statements, whether as a result of new information, future events or results or otherwise.

---

# ANNUAL INFORMATION FORM

# For the twelve months
ended July 31, 2005 
Containing information as at October 17, 2005

ITEM 1: CORPORATE
STRUCTURE

|1.1 | Name, Address and Incorporation
|--- | -------------------------------

Gammon Lake Resources Inc. (the
Corporation) has a head office located at 202 Brownlow Avenue, Cambridge 2,
Suite 306, Dartmouth, Nova Scotia, B3B 1T5. The registered office of the Corporation is
located at 1, Place Ville-Marie, Suite 3900, Montreal, Quebec, H3B 4M7.

The Corporation was incorporated
under Part 1A of the Companies Act (Quebec) on February 25, 1986, under the name
Golden Rock Explorations Inc.. By Articles of Amendment dated April 17, 1998,
the Corporation changed its name to its current form of name, Gammon Lake Resources
Inc., and consolidated its common shares on a 15:1 basis.

|1.2 | Inter-corporate Relationships
|--- | -----------------------------

The table below provides details with
respect to the Corporations direct and indirect wholly-owned subsidiaries.

|                             
|-----------------------------
|
|                             
|Gammon Lake Resources        
|(Barbados) Inc.(2)           
|                             
|Gammon Lake de Mexico S.A. de
|C.V.(3)                      
|                             
|                             
|Gammon Lake (USA) Inc.(4)    
|                             
|                             
|                             

Notes:

|(1) |  | All
of the subsidiaries are sometimes referred to collectively in this document as the
"Corporation".
|--- |  | -----------------------------------------------------------------------------------------------------

|(2) |  | Referred
to in this document as "Gammon Lake Barbados".
|--- |  | -------------------------------------------------------

|(3) |  | Referred
to in this document as "Gammon Lake Mexico".
|--- |  | -----------------------------------------------------

|(4) |  | Referred
to in this document as "Gammon Lake USA".
|--- |  | --------------------------------------------------

ITEM 2: GENERAL DEVELOPMENT OF THE
BUSINESS

|2.1 | Three Year History
|--- | ------------------

During the past three years,  the
Corporation has focused on the  exploration  and development of its mineral  interests
 (comprising a total of 44 mining  concessions  encompassing  approximately  3,500
hectares) in the municipality of Ocampo, in the State of Chihuahua, Mexico  (collectively
 referred to herein as the Ocampo  Project).  The Ocampo  Project is described in this
 document  under Item 3: Description of the Business.

1

---

|2.2 | Significant Acquisitions
|--- | ------------------------

The  Corporation  has not completed
 any  significant  acquisitions  during the twelve  months ended July 31, 2005.  The
 Corporations primary focus at this time is on the exploration and development of the
Ocampo Project.

The Corporation  has made strategic
 investments in Mexgold  Resources Inc., as described under Item 3: Description
of the Business  3.2. Mineral Projects  3.2.2. Investment
in Mexgold Resources Inc.

ITEM 3: DESCRIPTION OF THE BUSINESS

|3.1 | General
|--- | -------

The  Corporation is a mineral
 exploration  and  development  company engaged in the exploration for and development of
gold and silver deposits in the State of Chihuahua,  Mexico. The Corporation owns a total
of 44 mining  concessions  encompassing  approximately  3,500 hectares  located in the
 municipality  of Ocampo  (referred  to herein as the  Ocampo  Project).  The
 Corporation  has a total of over 900 employees and contract workers.  A bankable  feasibility
 study for the Ocampo Project was completed by Kappes,  Cassiday & Associates, Consulting
 Engineers,  on November 29, 2004, which estimated an annual average production on the
project of 170,000 ounces of gold and 6.2 million  ounces of silver,  at an average  cash
cost of US $151.74 per  gold-equivalent  ounce,  and an internal  rate of return of 65%.
In February 2005, the Corporation  assembled a mine  development and operations  team to
place the project into  production,  with Kappes,  Cassiday  &  Associates,  Consulting
 Engineers  appointed  for mill and heap leach  construction  and  commissioning.  Ground
breaking for the  construction of the underground and open-pit mines and two surface
 processing  facilities began in early March 2005, with all underground and open-pit
mining  equipment  procured and production on the project  scheduled to commence in the
first quarter of 2006.  Exploration and development work is ongoing to expand known
mineral resources and identify new mineral resources.

|3.2 | Mineral Properties
|--- | ------------------

|3.2.1 | Ocampo Project
|----- | --------------

Certain portions of this section,
 particularly as they relate to the descriptions of the geology,  mineralization,
 resource audit and feasibility  study plans of the  Corporation's  exploration  projects
are derived from a report  dated  November 29, 2004,  prepared by Kappes,  Cassiday & Associates
entitled Ocampo,  Chihuahua,  Underground and Surface Mines Mill and Heap Leach -
Bankable  Feasibility Study  (the KCA  Report),  as well as from  subsequent
 exploration  work  completed  by the  Corporation  after the date of the KCA Report.
 The author of the KCA Report,  Daniel W. Kappes,  P.Eng.,  has made a site visit to
examine the geology and  exploration  work carried out on the exploration  properties of
the Corporation.  The KCA Report also includes updates of results,  as well as geological
information  detailed in earlier  technical  reports.  The full text of the KCA Report,
as well as detailed results and descriptions of exploration  work completed by the
Corporation  subsequent to the date of the KCA Report,  as announced in press releases
are available on the System for Electronic Document Analysis and Retrieval (SEDAR) at
www.sedar.com.

The KCA Report presents an analysis
of capital and operating  costs,  and financial  performance,  for the Ocampo Project.
 The project will  consist  of an  underground  mine  with a 1,500  tonne/day  agitated
 cyanide  leach  plant,  and an open pit mine with an 11,400 tonne/day  heap leach.  Gold
 accounts for about 60% of the  recovered  value,  and silver  accounts  for the balance.
 Project life is estimated at seven years

2

---

based on existing reserves, but
development of known resources is expected to significantly extend the life of the
project.

Location and Description

The Ocampo Project is 100% owned by
the  Corporation and is located  approximately  235 kilometers west southwest of the
state capital, Chihuahua,  within the Ocampo  Municipio,  in the State of Chihuahua,
 Mexico.  The Ocampo Project  encompasses  the development of the entire Ocampo mining
district,  which consists of nearly vertical  gold-and  silver-bearing  quartz veins
typically two to three meters wide,  intruded into a rhyolite host rock.  The
 Corporation  controls a large amount of property in the Ocampo mining  district,  with
its total holding  consisting of 44 mining  titles,  encompassing  3,524.54 net hectares.
 The following  table  provides  details with respect to each mining title.



Figure 1:  Location of
Project

3

Table 3-1: Description of Mining
Titles

|   | Concession | Number                   | Hectares | Expiry
|-- | ---------- | ------------------------ | -------- | ------
|1  |            | El Penol                 |          | 214321
|2  |            | El Rayo                  |          | 160307
|3  |            | Santo Nino               |          | 189284
|4  |            | La Resureccion           |          | 185243
|5  |            | La Escalera              |          | 218971
|6  |            | Maria                    |          | 195211
|7  |            | La Gloria                |          | 168685
|8  |            | San Amado                |          | 147733
|9  |            | El Mastuerzo             |          | 150528
|10 |            | Nuevo Jesus Maria y Jose |          | 151997
|11 |            | Cubiro                   |          | 153207
|12 |            | San Martin               |          | 155698
|13 |            | El Rayo                  |          | 155697
|14 |            | Balvanera                |          | 192789
|15 |            | Mirasol                  |          | 161866
|16 |            | La Fe                    |          | 212201
|17 |            | La Estrella              |          | 147793
|18 |            | Santa Ana                |          | 165663
|19 |            | El Porvenir              |          | 212992
|20 |            | Alejandra                |          | 213422
|21 |            | Alejandra Uno            |          | 213423
|22 |            | Alma II                  |          | 214374
|22 |            | Alma III                 |          | 214375
|23 |            | El Hueco                 |          | 189226
|24 |            | Santa Juiliana           |          | 170141
|25 |            | Rosario de Oro           |          | 170142
|26 |            | Belen                    |          | 170143
|27 |            | Lluvia de Oro            |          | 170144
|28 |            | San Ramon                |          | 170145
|29 |            | Estanislao               |          | 170146
|30 |            | Candelaria               |          | 170147
|31 |            | Altagracia               |          | 170148
|32 |            | San Jose del Picacho     |          | 170149
|33 |            | Matulera                 |          | 170150
|34 |            | San Jose y San Juan      |          | 170151
|35 |            | Belgrado                 |          | 170152
|36 |            | Ampliacion de Altagracia |          | 170153
|37 |            | Krystal                  |          | 204194
|38 |            | San Juan                 |          | 191736
|39 |            | La Olvidada              |          | 192048
|40 |            | Buenos Aires             |          | 212551
|41 |            | Diez de Mayo             |          | 213571
|42 |            | El Faro                  |          | 217082
|42 |            | Alejandra II             |          | 213424
|   |            | Total Net Hectares       |          |       

4

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The concessions are held by Gammon
Lake de Mexico, S.A. de C.V., a wholly owned subsidiary of the Corporation (Gammon
Mexico). The records show that Gammon Mexico has a 100% interest in the claims.
Twenty-seven of the claims are filed free of any liens or encumbrances while the other 17
claims are subject to fulfilling the Soyopa Agreement (as defined below).
Seven claims that are filed free of encumbrances are subject to further payment terms
under the Minera Fuerte Agreement (as defined below).

SOYOPA AGREEMENT

The Soyopa Agreement outlines the
terms for the Corporation to purchase the concessions from Minerales de Soyopa, S.A. de
C.V. This agreement was entered into on March 1, 2000 with amendments, August 17, 2000,
April 24, 2001 and November 24, 2001 (collectively, the Soyopa Amending
Agreements).

To date all of the terms of these
agreements have been met and the only the following terms are outstanding.

The Corporation is required to make
an additional payment of U.S. $7,000,000. This payment can be made in two separate
installment with U.S. $3,5000,000 to be paid on or before November 23, 2006 and the
remaining U.S. $3,500,000 to be paid on or before November 23, 2007 except if the property
is placed into production prior to November 23, 2006, in which case an annual advance
payment of U.S. $1,000,000 shall be made to Soyopa which will be credited against the U.S.
$7,000,000 obligation and, if the property is sold to a third party, the balance of U.S.
$7,000,000 shall be due and owing immediately. The obligation to complete the payment of
U.S. $7,000,000 is secured by a charge registered on the mining concessions. In a related
arms length agreement with Compania Minera Global S.A. de C.V. (Minera
Global) dated July 17, 2000, pursuant to which consulting services were provided
with respect to the Soyopa Amending Agreements, a balance of U.S. $1,000,000 is due to
Minera Global upon the sale of the Ocampo Project.

The concessions subject to the Soyopa
Agreement are numbered 170141-170153, 191736, 192048, 204194, 212551.

MINERA FUERTE AGREEMENT

In January 6, 1999 the Corporation
entered into a joint venture agreement with Minera Fuerte Mayo, S.A. de C.V. (the
Minera Fuerte Agreement) covering 17 concessionsMinera Fuerte Joint
Venture.This agreement was amended December 2, 1999 and March 5, 2001, and includes a
related agreement with Compania Minera Brenda, S.A. de C.V. dated February 21, 2003
(collectively, the Minera Fuerte Amending Agreements). Ten of the concessions
were bought outright and 7 concessions are subject to the terms of the February 21, 2003
Minera Fuerte Amending Agreements which provides for a purchase (the Minera Fuerte
Buy-Out Agreement). With the Minera FuerteBuy-Out Agreement, Gammon Mexico acquired
a 100% interest in the Minera Fuerte Agreement in consideration for the grant of an 8% net
profits royalty up to the maximum of U.S. $2,000,000. An additional U.S. $250,000 is due
if, as a result of exploration of the property, a minimum mining reserve of two million
ounces of equivalent gold is obtained, as determined by an independent third party
consulting firm of international repute which is mutually acceptable to the parties
thereto. In the event that the Corporation were to sell the property, the full U.S.
$2,000,000 becomes dues and payable at that time.

The concessions subject to this
agreement are numbered 147733, 150528, 151997, 153207, 155697, 155698 and 192789.

5

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Exploitation concessions have a 50-year
life and can be renewed for as long as the mine is active. The elevation of a mining
concession from exploration to exploitation can be a lengthy process but all rights
concerning exploration and exploitation remain in force during the conversion period.

The concessions are for mineral
rights only and the Corporation has secured the surface rights in the current areas of
interest. On March 20, 2002, Gammon Mexico and Minerales de Soyopa, S.A. de C.V.
(Soyopa) entered into a surface rights lease with the Common Land (Ejido)
Commissariat covering the mining concessions of Gammon Mexico and Soyopa. This agreement
covers approximately 2000 hectares. The agreement is for 30 years for the initial and only
payment of U.S. $20,000. The agreement has been registered with the National Agrarian
Registry.

All concessions have an annual
minimum investment to complete and an annual mining tax must be paid to keep the
concessions in good standing.

It should be noted that some small
concessions, held by others, exist within the Corporations concession blocks. These
concessions are not in areas of significant mineralization and are not considered a
problem to the Ocampo Project.

MINIMUM INVESTMENT
(assessment work)

To keep the concessions in good
standing a minimum investment or assessment work (MI) must be made each year and the work
filed. The amount of the MI varies based on the size, age and type of the concession. The
MI required changes each year with the Department of Mines publishing a new list at the
first of the year and it varies with the consumer price index.

It is possible to group concessions
together and carry forward the excess work from previous years. The current work programs
coupled with the past work by the Corporation should satisfy the minimum requirements for
many years.

For exploitation concessions the
annual amount of MI only varies with the size of the concessions. The smallest concessions
up to 30 ha only have a requirement of 45.14 pesos/ha or approximately Cdn. $5.40/ha.
Twenty-eight of the concessions are in that category. As the concessions get larger the MI
increases. For 30 to 100 ha the annual MI is 90.27 pesos or approximately Cdn. $10.80 Cha.
Five of the concessions fall into that category. The concessions that are greater than 100
ha have a fixed fee per concession plus an amount per ha. Gammon has 2 concessions just
over 100 ha and the average MI is 187.71 pesos/ha for the 105 ha concession and 187.52
pesos/ha for the 108 ha concession or approximately Cdn. $22.50/ha. The largest concession
1657.92 ha has an MI of 724.90 pesos/ha or approximately Cdn. $87/ha.

The average MI on the
Corporations 3,524.54 ha of exploitation concessions is currently 518.45 pesos or
approximately Cdn. $62.21/ha totaling Cdn. $219,262.

6

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|(assessment work)

EXPLOITATION CONCESSIONS
|-------------------------------------------
|                                           
|
|                                           
|Up to 3                                    
|                                           
|>30 up to                                  
|                                           
|>100 up to                                 
|                                           
|>500 up to                                 
|                                           
|>1,000 up to                               
|                                           
|More than                                  
|                                           

MINING DUTY (tax)

The rate of the mining duty (MD)
depends on the concession type and the age of the concession. The rate changes each
semester with the Mexico Department of Mines publishing the new rates in January and July.
The MD is due in both January and July.

Table 3-2: Mining Duties

Rate per hectare for the first
semester of 2004
(in Mexican Pesos): 
EXPLORATION CONCESSIONS

|                             | 
|---------------------------- | 
|During the first year        | 
|From the 2nd to the 4th year | 
|From the 5th year            | 

EXPLOITATION CONCESSIONS

|                               | 
|------------------------------ | 
|During the first and 2nd years | 
|From the 3rd and 4th year      | 
|From the 5th year              | 

The rates are effective if you pay
during January, but if the payment is delayed, every month you have to add some penalties
and actualizations that are also published in the Official Newspaper of the
Mexico Department of Mines.

7

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The Ocampo Project exploitation
concessions are all at the high rate of 88.29 pesos/ha except for 3 concessions totaling
77.7 ha are at the rate of 50.34 pesos/ha. The average rate of MD for the exploitation
concessions is 87.10 pesos/ha.

The exploration concessions are all
at the rate of 6.01 pesos/ha.

The total MD for the Ocampo Project concessions
is approximately Cdn. $26,600 for the first quarter of 2004.

Access

The
property is accessed via Federal Highway 16, a major transportation route across the
northern Sierra Madre Mountains. The last 27 kilometers of road to Ocampo is a government
maintained gravel road from Cahuisori. The property is 302 kilometers by road from the
city of Chihuahua. Alternatively, the property can be reached from Highway 16 by a
government maintained gravel road from Mycoba to Morris, then east 25 kilometers to
Ocampo. The State of Chihuahua has two international airports located at the cities of
Ciudad Juarez and Chihuahua. Within the State of Chihuahua, there are over 4,000
kilometers of paved highway and 7,000 kilometers of improved road. A railhead is present
at La Junta. The State of Chihuahua contains 2,100 kilometers of railway with connections
to the rail lines in the United States.

Climate

Cool
winters and mild summers are typical of the temperate climate in the Ocampo area. The
rainfall occurs mainly during the summer monsoon season from July to September. Snow and
rain occur sporadically during the winter months. The average annual precipitation is
approximately 800 mm.

Local Resources

Vegetation
in the area consists of pine and mixed pine and deciduous stands of trees. There is
sufficient forestation in the area to support a number of sawmills although the government
has recently imposed tree harvest restrictions. Mining is and has been the primary
industry in the pueblo of Ocampo and the surrounding area for two centuries.

Infrastructure

The
pueblo of Ocampo is in the eastern portion of the project area. It has an estimated
population of 500 people and is the seat of the municipal government. Mining and forestry
are the major industries in the area. An adequate workforce that is familiar with both
underground and open pit mining methods are present in the area. Ocampo has recently been
connected to the national electrical grid via a 33kV power line. Telephone communications
were brought on line in September 2004. The proposed power supply for the mining
operations will be generated by company-owned generators due to capital and operating
costs considerations.

8

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Physiographic Description

The Ocampo Project is within the
Sierra Madre Occidental physiographic province, an incised plateau exhibiting
characteristics of a youthful topography. The project area ranges in elevation from 1,600
meters to 2,200 meters in elevation and is located near the eastern edge of the Barranca
(canyon) country. There is adequate space on the Corporations mining concessions for
the plant, tailings, pond and other necessary facilities.

Historical Activity and
Exploration

Exploration of Northern Mexico by the
Spanish started in 1554, and in the immediate area of Ocampo with the first significant
mineral discovery in Chihuahua in the Santa Barbara district in 1567. Ocampo was
discovered in 1804. The initial exploration and exploitation of the area was curtailed
because of the Mexican War for Independence during the early part of the 1800s.
After the war, English interests made significant investments in the Refugio and Plaza de
Gallos mines in the western part of the district. Veins in the northeast Ocampo project
area were discovered shortly after in the 1840s. In the mid 1800, mining
experienced a slow down due to the political unrest associated with the French
Intervention.

In the late 1800s, the
government of Porfiro Diaz actively encouraged foreign investment and the development of
the Ocampo mines was accelerated. From the 1880s until 1912, Ocampo had its greatest
period of historical development. By the early 1900s, the Green Gold-Silver Company
had effectively consolidated the district. In 1912, shortly before the Mexican Revolution,
the chief engineer of Sierra Consolidated, Robert Linton, estimated that up until that
time, the total production of gold and silver from Ocampo had exceeded 100 million U.S.
dollars. The Mexican Revolution halted mining in the Ocampo district and much of Mexico.
In the 1930s, with the rise in the official price of gold, activity in the area
increased. In the period between 1939 and 1941, the predecessor company of Minerales de
Soyopa produced over 3.8 tonnes of gold and 59 tonnes of silver from one high grade ore
shoot at the Plaza de Gallos mine. Small scale operators and gambosinos continued to
operate in the area from the 1940s through the 1990s.

In the 1980s the Consejo de
Resources Minerales (CRM), an agency of the Mexican federal Government, financed the
construction of a mill equipped with a flotation circuit that can process about 100 tonnes
per day. In 1994, the Mexican mining laws were changed to allow 100 percent foreign
ownership of mining properties. This change in the Mexican mining laws accelerated
exploration investment throughout Mexico. In 1997, Mogul Mining NL (Mogul) entered into a
joint venture with Soyopa. Mogul conducted a district scale mapping and sampling program
focusing on the western portion of the district. A total of 59 reverse circulation drill
holes for a total of 6,288 meters of drilling were completed. In 1999, Augusta Resources
Corporation (Augusta) entered into an agreement to acquire Moguls
interest in the project. Augusta drilled 11 reverse circulation holes and deepened one
existing hole for a total of approximately 1,677 meters drilled. Mogul and Augusta did not
meet the work commitments in the agreement and the property reverted to Soyopa.

In 1999, the Corporation obtained an
option to purchase 17 mining concessions in the area from Minera Fuerta Mayo, S.A de C.V.
(Minera Fuerta). During 1999, the Corporation had an active exploration
program consisting of mapping, sampling, underground test mining and core drilling. 50
shallow holes were drilled in the Northeast Ocampo project area totaling approximately
3,729 meters. The results of this work were detailed in a Pincock Allen Holt report dated
December 9, 1999. In 2000, the Corporation entered into a joint venture agreement with
Soyopa. The joint venture agreement was replaced with a purchase agreement dated November
24, 2001. With the Soyopa Agreement, the Corporation effectively consolidated the entire
Ocampo mining camp for the first time since the Mexican Revolution of 1912.

9

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In 2000, the Corporation continued
exploring the properties with delineation drilling on the shallow PGR deposits. At this
time drilling to explore the deeper potential of the Northeast Ocampo vein structures was
also carried out. A total of 31,046 meters of reverse circulation and core drilling was
completed during the course of this program. As part of this program, Millennium Mining
Associates completed a detailed structural/geochemical analysis of the mineralization in
the district. Dr. Derrick McBride performed additional structural work at this time.
Metallurgical testing was carried out by KCA in 1998, 1999, 2000, 2001, 2002, 2003 and
2004. A preliminary design and a cost estimate for a heap leach pad and ponds was made by
KCA in March 2001. At the same time, Seegmiller completed a geotechnical evaluation on the
stability of potential open pits for the Picacho, Plaza de Gallos and Refugio deposits.

During 2001, the Corporation
completed an independently audited resource study. In April of 2002, Pincock Allen Holt
completed a scoping study examining the economics of a combined open pit/underground
mining operation utilizing heap leach recovery techniques. In March 2002, Bolnisi Mining
N.L. (Australia) entered into an agreement with the Corporation to earn a 60% interest in
the PGR portion of the property. They were to complete a feasibility study and bring the
property to production within a two-year period.

Beginning in 2002, a large scale
drilling program was undertaken by the Corporation to test the potential at depth of the
high grade veins in the Northeast Ocampo project area. In the spring of 2003, the
Corporation decided to proceed with an underground exploration and development program via
a 4 x 5 meter decline ramp to further explore the veins within the Northeast Ocampo
project area. KCA completed a scoping study at this time examining economics of an
underground mining operation with conventional mill processing. In November 2003, the
Bolnisi earn-in agreement was terminated and all technical data generated by Bolnisi was
made available to the Corporation.

In early 2004 a feasibility study was
begun to examine the economics of a combined open pit and underground mining operation
utilizing heap leach recovery techniques for the PGR open pit ores and conventional
milling for the higher grade underground Northeast Ocampo project vein deposits. As of
June 10, 2004, the data cut-off for resource and reserve estimates, over 130,000 meters of
drilling in over 800 drill holes had been completed. The Corporation currently has a
continuing program of exploration and development drilling both in the Northeast and PGR
project areas (Northeast is the designation of the high grade
underground-target vein areas, and PGR is the designation of the open pit
area). Efforts in the Northeast underground have been focused on reserve definition and
delineation of a new type of vein mineralization.

The newly discovered sulphide veins
are mineralogically different from the previously discovered and historically exploited
quartz vein breccias. The sulfide veins are composed primarily of semi- to
massive-sulphide veinlets with only minor quartz as opposed to the historically exploited
quartz rich vein breccia. The mineralogical make-up of the sulphide veins is such that in
the surface weathering environment these veins rapidly deteriorate, resulting in the
absence of an outcrop. This type of weathering would explain the absence of this vein type
in the historical production records and vein descriptions of the Ocampo district. To
date, two veins of the sulphide type have been discovered. Esperanza hosts a currently
modest resource grading 10.8 g/t eAu. Limited drilling and sampling on Chica Rica has
returned up to 103 g/t Au and 1300 g/t Ag. Both veins are open in all directions. Bottle
roll tests to date indicate gold and silver contained in the sulphide veins is amenable to
cyanide recovery methods.

Exploration in the Ocampo Open Pit
area is currently focused on the Lukes LuckSan Ramon structure in the area
between the Picacho and Plaza de Gallos deposits, and the westward extension of the La
Estrella deposit. Both the Estrella extension and Lukes Luck are immediately
adjacent to known reserves. Neither of these targets have a resource estimate attributed
to them.

10

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Regional Geology

The Sierra Madre Occidental (SMO) is
an extensive physiographic province that is composed largely of volcanic rocks which
overlie a Precambrian through Jurassic basement. This is one of the largest
unmetamorphosed andesite and dacite accumulations in the world. Erosion and uplift have
created deep incised canyons. The basement rocks are rarely exposed and poorly known. This
province extends from the south of Mexico to the border of the United States.

The oldest rocks exposed in the
Ocampo area are the Triassic to Cretaceous aged Témoris Unit. These sediments are
found in isolated erosional windows and are composed of conglomerates, sandstones,
limestone lenses and intercalated andesites. Beginning with the Laramide Orogeny in late
Cretaceous and continuing throughout the Cenozoic, the area was the site of intense
volcanic activity. This volcanism produced a thick sequence of volcanic flows, tuffs, and
agglomerates of andesitic to rhyolitic composition and related intrusives.

Volcanic stratigraphy in the Sierra
Madre Occidental has been broken into two main groups consisting of the Lower Volcanic
Group (LVG) and the Upper Volcanic Group (UVG). LVG rocks dominate the project area and
consist of massive andesitic to rhyolitic flows and tuffs. Localized beds of
volcaniclastic sediments are also present. This group of rocks is host to the majority of
the Au-Ag deposits exploited thus far in the SMO. UVG rocks are comprised of felsic
ignimbrites, tuffs, flows and volcaniclastics. Textural and sorting characteristics
indicate some of the units were deposed under basal surge conditions. This intense and
prolonged volcanic activity probably produced the hydrothermal mineralization responsible
for the numerous gold and silver mines in the area.

On a regional scale the SMO is a
relatively undeformed high plateau (Henry and Aranda-Gomez, 1992). Overall, there is a
northwest trending structural fabric best evidenced by the alignment of the numerous
mining districts found in the SMO. The shear volume of volcanic rocks and the numerous
semi-circular features that can be identified in high altitude air photos and satellite
imagery indicate the formation of large volcanic calderas. From the satellite work it
appears that Ocampo lies near the center of a major caldera and is surrounded by at least
two others. Henry and Aranda-Gomez suggest that the reason that the SMO is relatively
undeformed is due to the presence of a large batholith that underlies it. This inferred
batholith is believed to be source of the very large volume of volcanic sediments.

Ocampo District Geology

The two geologic units that are
exposed within the Ocampo District are the LVG and the UVG. These rocks are composed of
andesites, rhyolite flows and agglomerates which are overlain Oligocene tuffs of the UVG.
An age date of 28 Ma is recorded for the upper most volcanic unit making the major part of
the mineralization older than that date.

The stratigraphic column at Ocampo is
composed entirely of volcanic and intrusive rocks of the LVG and UVG. The oldest
recognized unit exposed at surface is a rhyolitic sequence within the LVG. Flow and
pyroclastic textures have been recognized in both outcrop and core. Pyrroclastic breccias
from this unit contain andesite to dacite fragments indicating an older andesite unit is
potentially present beneath this unit.

11

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Overlying the rhyolite unit is a
thick sequence of andesite to dacite agglomerate flows and tuffs. These rocks are also
units within the LVG. Agglomerates are the dominant rock type within this unit.
Interbedded within these are occasional lenses of volcaniclastic sediments. Overlying the
andesitic unit, UVG rocks are comprised of felsic ignimbrites, tuffs, flows and
volcaniclastics. Textural and sorting characteristics indicate some of the units were
deposited under basal surge conditions. All the above rock types have been intruded by
andesite to dacite dikes and sills.

In general, Ocampo can be broken into
two major structural areas, the NE area and the PGR trend that extends from Alta Gracia in
the southeast to beyond La Estrella in the west. This structural fabric is the result of
movement along a series of northwest trending structures, indicating six major periods of
deformation. The driving force behind these events is believed to be a combination of the
emplacement of a postulated intrusive beneath the district and extensional regional
tectonics.

Stereonet analysis shows that both
dip slip and strike slip movement accompanied each phase of structural deformation.
Orientation and geometry of the higher grade mineralized zones intersected in drilling,
further supports both strike slip and dip slip movement. The PGR area consists of a series
of NW trending faults that jog across WNW trending structures. Timing, geometric and
kinematics support the hypothesis that the WNW fault zone is an oblique transfer zone that
developed in order to accommodate movement along the NW faults and that the NW trending
structures are part of a district scale cymoid loop. The NE area consists of a large
northerly trending structure, the Belen-San Jose, which is intersected by the NW trending
Aventurero and Rosario structures. Numerous NNE fault segments bounded by NW faults are
also present. The large north trending Belen-San Jose structure intersects the PGR trend
in the La Pared area.

Deposit Types

Ocampo is a classic gold-silver
epithermal mining district. The mineralogy and alteration present in both the PGR and the
Northeast Ocampo project area are indicative of low sulphidation, quartz-adularia type
epithermal systems. The low sulphidation systems contain quartz veins, stockworks and
quartz breccias with gold, silver, electrum, argentite and pyrite with minor and variable
amounts of base metal sulphides. These minerals probably were deposited in a high level
(epizonal) to near surface environment.

In the northwest portion of the
property, historic mines such as La Fe and other prospects are considered to be of the
high sulphidation, quartz enargite type deposits. This type of system has veins, vuggy
breccias, and sulphide replacements ranging from pods to massive lenses associated with
high level hydrothermal systems. The mineralization in the La Fe area is hosted by
rhyolite and dacite rocks. These rocks and mineralization may be stratigraphically lower
than the mineralization in the PGR Trend and the Northeast area. This suggests that this
type of mineralization may be found at depth under the PGR Trend and the Northeast
deposits.

Mineralization

The gold-silver mineralization in the
project area is structurally controlled. Structures that strike N, WNW, NW, NE and E-W all
host mineralization that is potentially of economic grade. While the majority of
potentially economic mineralization discovered to date is hosted in andesite flows and
agglomerates, all rock types contain mineralization and no single rock type has been shown
to be more receptive to gold and silver mineralization.

Quartz occurs in a number of forms
such as banded creamy white chalcedony, clear crystalline white quartz and drusy amethyst.
Prior technical work indicates that the majority of quartz deposition took place during
structural event 3, while the gold-silver deposition only took place in the last two
periods of deformation. The gold-silver mineralization is seldom found in discreet fissure
veins at Ocampo. The

12

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majority of host structures consist
of a core of quartz breccia surrounded by varying degrees of quartz stockworks and
silicification. The true thickness of the mineralization exceeds 50 meters in some areas
such as Plaza de Gallos and Refugio. An argillized halo is often present surrounding the
silicified structures. A second type of gold and silver bearing vein has recently been
discovered in the Northeast Ocampo project area. Two of these veins have been found to
date, Esperanza and Chica Rica. These veins consist of semi to massive sulfides filing
fractures, and as disseminations in the wall rock sulfide. Relatively minor quartz
accompanies the sulfide mineralization indicating a relatively late formation.

The precious metals consist of
electrum, native silver and a variety of silver sulphides. The base metals sphalerite,
galena and chalcopyrite occur in minor varying amounts and have no economic importance in
these veins and there does not appear to be an increase in concentration at depth. A prior
technical study suggests that Cu, Pb and Zn along with gold and silver can be indicators
for precious metal deposition. The same study found that depletions of Li, Ba, Na, K and
Ti can also be an indication of precious metal deposition. Argillic or clay caps may be an
expression of the very tops of the precious metal depositional horizons.

The gold-silver mineralization is
known to occur in this area over a vertical distance of 750 meters. This vertical distance
is not known from one deposit. It is based on the fact that the lowest productive levels
at the Santa Juliana mine were at an elevation of approximately 1,400 meters and the vein
outcrop at the Plaza de Gallos, the highest point, is at an elevation of approximately
2,150 meters.

Drilling

Since 1997, this large project area
has been the subject of a number of drilling campaigns by the Corporation and other
operators. The Corporation has maintained the results of all the drilling completed since
1997. The drilling has been done using reverse circulation (RC) sample collection or by
diamond core drilling. As of June 10, 2004, over 130,000 meters of drilling in over 800
drill holes had been completed. The drilling on the Open Pit PGR trend had been mainly by
reverse circulation prior to the current program. During the current program, and since
2004, core drilling has predominated over reverse circulation methods.

In the Northeast area the drilling
has been predominantly by diamond core drilling. The first 20 holes of the 2002 drilling
program were collared using RC methods and completed through the mineralized zone by core
drilling. All holes drilled since 2002 in the Northeast Ocampo project area have been
diamond core holes.

Underground drilling in 2000 and 2001
was done from drill stations prepared in old workings. Drilling from the new ramp
commenced in 2003 and has focused primarily on the Aventurero, San Juan and Esperanza
veins. Reliable operators have been used through the modern project history and the
drilling has been of good quality throughout this active period.

Current drilling is focused on strike
extensions of deposits in the Open Pit area and reserve drilling on the NE underground
veins. As of November 11, 2004 approximately 980 holes totaling 166,000 meters had been
completed in the Ocampo Gold Silver Project.

13

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Mineral Resources and
Reserve Estimates

General

The mineral resource and mineral
reserve estimates for the Ocampo project were calculated under the direction of John
Thornton of Mintec, Inc. The estimates were made from 3-dimentional block models utilizing
commercial mine planning software developed by Mintec, Inc. called
MineSight®. Mintec and the Corporation developed the original resource
model of the PGR trend deposits and separately the Northeast deposit. The resources have
been reported by Mintec under a previously submitted report. The text of this section is
derived from that report. The project limits are based on a local mine grid of 17500 to
21200 Easting, and 9600 to 11200 Northing. This area represents a 5.92 square kilometer
area. The elevation bounds are 1,300 meters by 2,200 meters. The block cell size measures
10 meters east by 4 meters north by 3 meters high. The ore block size was chosen to
minimize dilution of the dipping ore zones, and for tight geological control for the
high-grade veins.

The mineral reserve and resource
estimates found herein have been prepared in accordance with the standards of the Canadian
Institute of Mining, Metallurgy and Petroleum and National Instrument 43-101 of the
Canadian Securities Administrators (NI 43-101) and, as set out in the notes
below, are based on technical reports prepared by independent experts, or have been
prepared by the Corporation under the direction of, and verified by a Qualified Person (as
such term is defined in NI 43-101). Mineral resources are not mineral reserves and do not
have demonstrated economic viability, but do have reasonable prospects for economic
extraction. Measured and indicated mineral resources are sufficiently well defined to
allow geological and grade continuity to be reasonably assumed and permit the application
of technical and economic parameters in assessing the economic viability of the resource.
Inferred resources are estimated on limited information not sufficient to verify
geological and grade continuity and to allow technical and economic parameters to be
applied. Inferred resources are too speculative geologically to have economic
considerations applied to them to enable them to be categorized as mineral reserves. There
is no certainty that mineral resources will be upgraded to mineral reserves through
continued exploration.

The criteria set forth in NI 43-101
are similar to the reserve definitions and guidelines for classification of mineral
resources used by the U.S. Geological Survey. However, the definitions in NI 43-101 differ
in certain respects from the definitions set forth in the United States Securities and
Exchange Commissions Industry Guide 7 concerning mining operations.

Geographical Area Model
Division

Gold and silver mineralization is
largely structurally controlled. Based on the large base of drill hole information and
geological mapping, the deposit has been subdivided into a number of areas based on
historical mining names, or new geographical areas or domains, each containing predominant
structures of differing orientation. The naming convention for these areas has previously
been summarized, but major domains for resource reporting are as follows: most easterly
deposit La Estrella on the PGR Trend including Conico, Refugio, Plaza de Gallos, Picacho
and the Northeast Zone.

14

---

There have been a total of 627 drill
holes, trenches and underground channel samples comprising a total of 24,057 meters of
exploration information completed within the PGR Trend area that have been loaded into the
Mintec database. A number of these holes were drilled outside of the productive deposit
areas for geo-technical purposes or for condemnation drilling and were not used to define
ore zones. Mintec filtered the data to be used for grade extension by assigning an ore
code for low-grade equivalent gold (less than 0.50 g/t), mid-grade equivalent gold
(greater than 0.50 g/t but less than 3.0 g/t), void or barren areas, and high-grade
equivalent gold (greater than 3.0 g/t) to identify drill holes and their interval ranges
which contributed to the development of ore zones. Identified continuous mineralized zones
have been drilled on 50-60 meter grids, with many infill section spacing done on 25-meter
grids. There were a total of 64 sections used to describe resource areas whose combined
strike length spans 2,500 meters. The 3g/t high-grade resource vein sets were designed
using a total of 60 interpreted sections.

Data Analysis

The geostatistical analysis of Ocampo
deposit included the statistical analysis of assays and composite grade items, the
correlation analysis of the composites and the spatial continuity analysis of the
mineralization using the variograms

The current Ocampo deposit database
contains a total of 1,434 records of drill holes of various lengths and orientations,
including the trenches and underground samples. The majority of the holes are drilled at
dips between 30 to 75 degrees. They are oriented towards the trend plane of the deposit
that has a strike of about N120E. The holes were typically drilled on sections that are
25-50 meters apart depending on the location. The depths of the holes are mostly within
100-250 meter range. The total drilling is over 62,500 meters with about 33,000 assays,
including the unassayed intervals. The assayed intervals for gold and silver consist about
80% of the total assays. However, in some cases they were not always assayed in the same
interval. The nominal assay interval length is 1.5 meters although there are some at 3
meters. Therefore, the average assay interval length is 1.898 meters.

There are areas in the deposit that
are identified by a specific name. Only four areas in this deposit were included in the
study. These are: Conico, Plaza de Gallos, Refugio and Picacho. Assays in these areas were
given an AREA code of 1-4. About 15% of the assays are outside these areas and therefore
do not have codes. The mineralization intensity codes were based on gold and silver grade
polygons interpreted on benches. These polygons became the basis of the solids
representing the three grade mineralization categories as follows: Low-grade,
Medium-grade, Internal waste and High-grade. Assays within these solids were given a ZONE
code of 1-4. Only about 31% of the assays in the studied areas were assigned codes. The
assays outside the solids therefore were not coded, and are considered waste.

Northeast Area

The Northeast Ocampo underground area
comprises an aerial extent of 1.7 kilometers by 2.8 kilometers. A total of 342 drill holes
and channel samples were used to define the San Juan, Aventurero, Rosario, Las Animas-San
Amado and Esperanza veins which were modeled in the Mintec study.

There were a total of 1,093 assay
intervals ranging from 0.2 meters to 6 meters in length to model the underground veins.
Based on statistical analyses, assays were cut to 45 g/t gold and 1800 g/t silver in the
San Juan and Esperanza veins, 32 g/t gold and 1,200 g/t silver in the Rosario vein, 25 g/t
gold and 1200 g/t silver in the Las Animas-San Amado veins and 32 g/t gold and 1600 g/t
silver in the Aventurero vein.

15

---

An economic cutoff of 3 g/t gold
equivalent was employed with allowances for internal waste resulting in 264 composite
assay intervals calculated from the cut assay data. These composited intervals averaged
6.07 g/t gold and 246 g/t silver, or 9.85 g/t equivalent gold, and comprised a total
length of 867.8 meters. These intervals were then used to define vein geometry.

The methodology employed to determine
the resource volumes utilized geologic interpretation combined with a process developed by
Mintec to establish basic vein surfaces using the composites. The resulting hanging wall
and footwall surfaces were then horizontally sliced in four-meter elevations. These
four-meter vein boundaries were then used to define vein geometry and block model. The
grade calculations employed Inverse Distance 3 methodology. Measured category is defined
as up to 25 meters from the closest composite and indicated 75 meters from the closest
composite. Up to five composites were used for the block grade extensions. The vein
boundaries are intersected with the block model and the percentage of the block that is
above the 3 g/t cutoff is determined.

The Open-Pit PGR Trend

In the PGR trend there are a total of
1,206 meters of assay that are greater than 3.0 g/t gold equivalent. The average gold
grade is 5.2 g/t and the average silver is 184 g/t. This converts to 8.03 g/t gold
equivalent at the gold to silver ratio of 65 parts silver equal one part gold. When
composited, the number of high-grade composites found within the PGR ZONE 4 is 1,255
meters grading 7.51 g/t gold equivalent. There are an additional 58 meters of high grade
composites found within the Low and Mid-grade zones, but these are severely reduced when
averaged with 11 other lower grade composites during interpolation.

Within the PGR trend, the sections
for each area have been prepared as separate units within the area. These veins on section
have been linked with their east and west neighbor or maximally extruded to a distance of
75 meters when they are on the outside of a specific vein, and they are closed off. These
volume shapes are basically the same foot and hanging wall boundaries that were used to
bound the veins in the Northeast area, except that what may be the same vein across the
Conico-Refugio-Plaza de Gallos trend, is artificially broken up at the edges of each
geographical area for tighter control of volume shapes. The lower grade outlines for all
areas were prepared first from section, and then sliced in plan at 3-meter intervals.
These plan outlines were displayed with the associated assay information existent within
30 meters above and below that plane, and the boundary adjusted accordingly with the
evident local pierce points of the economic drilling data.

The bench outlines for the Low and
Mid-grade zones were first loaded into the Block model by area. The solids produced during
the development of the High-grade veins were next loaded over the Low and Mid-grade zones
being majority wise inside of those shapes. Finally the internal waste/voids shapes were
loaded into the block model to take precedence above other material. Each block received
the prevalent ZONE code, and the percent of that ore zone for tonnage determination inside
that block.

All composites receive a specific
ZONE code so that during interpolation, only same ZONE code data within the ellipsoid are
used to gather the closest same ZONE code composite data for grade extension. This simply
means that high-grade data may only be used in high-grade zones and low-grade data can
only be used in low-grade zones. This prohibits high-grade data bleeding into low-grade
zones and uplifting grade expectations, and by the same restriction insuring that adjacent
low grade values do not artificially overwhelm thin grade zones and severely dilute the
high-grade vein material.

16

---

Grade Estimation

The grade values for silver and gold
employed Inverse Distance 3 methodology. Nearest neighbor grades (polygonal) were also
calculated for validation purposes. Measured category is defined as up to 25 meters from
the closest composite and Indicated 75 meters from the closest composite. The Inferred
category, when appropriate to describe the underground resources over a very wide area,
are those tonnages where the distance to the closest composite is greater than 75 meters.

Up to five closest composites were
used for the block grade extensions for the Northeast Area, and up to 12 closest
composites were used for the block grade extensions for the PRG trend areas. Outlier
restriction methodology was imposed to limit the effect of extremely high grades of gold
and silver as discussed in previous chapters of this instrument, Gold and silver were
computed individually within each area of the models. Distance to the nearest composite
and number of composites used were stored for each block in the models. The resulting
calculated resource model is the summarized at the economic cutoff for the open pit areas
and separately for the underground resources. The implementation of the interpolation plan
was checked for all zones within areas for all metals and found to have executed properly.

Validation

Mintec reviewed model IDW3 silver and
gold values in section and plan view. The values were inspected with respect to
surrounding drill hole data composites values and overall distribution. All restricted
outlier cases were examined. Mintec found that the overall model grades for both the
Northeast and PGR trend honored the drill hole composite data and that the resulting
distribution was reasonable. The restricted outliers handled the extreme values properly.

Inspection of the model and drill
hole data in plan and in sections, together with the spatial statistical work showed
reasonable geologic and grade continuity within the main areas of mineralization of all
deposits. It can be said that even though the geological interpretation plan has segmented
the PGR trend into four areas, there is substantial evidence that especially in the
roughly two kilometer strike length on which the Conico, Refugio and Plaza de Gallos
deposits are found, these deposits probably represent continuation of the same vein
structure. The existing grid over the PGR Trend is about a nominal 40 to 50 meters on and
between sections. The area covered by these data spacing demonstrates sufficient
confidence to be classified as Indicated Mineral Resource. Within the nominal 40-50 meter
drill grid, additional local areas demonstrate good geologic and grade continuity where
the sample spacing was about 20 to 30 meters. Blocks in these regions can be considered to
demonstrate confidence to allow classification to Measured mineral resource.

Mineral Resources

Table 3-3 provides information on the
resources summarized as Measured and by Indicated classifications by Area at a 3 g/t
cutoff for the Northeast area, and at a 0.30 g/t cutoff for the Open Pit areas on the PGR
trend. The description of the PGR trend as the open pit area has been provisionally
confirmed as amenable to open pit exploitation using Kappes, Cassidy and Associates
suggested heap leach process costs, and estimated Mexican mining costs.

17

---

The Inferred resource classification
for the Northeast Area, and deep vein potential at greater than 3.0 g/t gold equivalent on
the PGR trend is summarized in table 3-4. The new resource calculation, as illustrated in
the tables below, contains 1.85-million gold ounces and 76.7-million silver ounces in the
measured and indicated categories and a further 2.55-million gold ounces and 127.8-million
silver ounces in the inferred category. On a gold-equivalent basis, the expanded, newly
outlined resource at the Ocampo Project contains approximately 3.03-million ounces in the
measured and indicated categories and 4.53-million ounces in the inferred category.

|                                                                                
|--------------------------------------------------------------------------------
|Table 3-3: Ocampo Total District
Measured and Indicated Mineral Resource Summary
|                                                                                
|
|                                                                                
|Northeast                                                                       
|Area                                                                            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|PGR                                                                             
|Open-Pit                                                                        
|Area                                                                            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                

|                                                                  
|------------------------------------------------------------------
|Table 3-4: Ocampo Total District
Inferred Mineral Resource Summary
|                                                                  
|
|                                                                  
|Total Northeast Area - Inferred                                   
|                                                                  
|Total Open-Pit Area - Inferred                                    
|                                                                  
|Total Ocampo -Inferred                                            
|                                                                  

Numbers in the above tables were
calculated using gold-equivalent cutoff grades of 3.0 g/t for Northeast underground and
high-grade below open-pit area, 0.4 g/t for northeast surface, and 0.3 g/t for open-pit
area. Gold-equivalent values are based on 65 grams of silver = 1 gram of gold, calculated
on a gold price of US $375 and a silver price of US $5.77. The following tables detail the
resources by class and area.

|                                                                    
|--------------------------------------------------------------------
|Table 3-5: Ocampo
Detailed Northeast Ocampo Mineral Resource Summary
|                                                                    
|
|                                                                    
|Aventurero                                                          
|                                                                    
|San Juan                                                            
|                                                                    
|Las Animas - San Amado                                              
|                                                                    
|Rosario                                                             
|                                                                    
|Esperanza                                                           
|                                                                    
|Total Northeast                                                     
|Underground Measured                                                
|                                                                    

18

---

|                                                                    
|--------------------------------------------------------------------
|Table 3-5: Ocampo
Detailed Northeast Ocampo Mineral Resource Summary
|                                                                    
|
|                                                                    
|Aventurero                                                          
|                                                                    
|San Juan                                                            
|                                                                    
|Las Animas - San Amado                                              
|                                                                    
|Esperanza                                                           
|                                                                    
|Rosario                                                             
|                                                                    
|Maria*                                                              
|                                                                    
|La Cruz*                                                            
|                                                                    
|Total Northeast                                                     
|Underground Indicated                                               
|                                                                    
|Total Northeast                                                     
|Underground Measured &                                              
|Indicated 3 g/t Cutoff                                              
|                                                                    
|                                                                    
|                                                                    

|Northeast Ocampo Surface Resource at 0.4 g/t eAu Cutoff (Previously Released)*
|------------------------------------------------------------------------------
|                                                                              
|
|                                                                              
|Brenda Surface Measured                                                       
|                                                                              
|Surface Measured                                                              
|                                                                              
|Brenda Surface Indicated                                                      
|                                                                              
|San Juan Indicated                                                            
|                                                                              

|                       
|-----------------------
|
|                       
|Total Surface Indicated
|                       
|Total Northeast Surface
|Measured & Indicated   
|                       
|Total Northeast Ocampo 
|Project Measured &     
|Indicated Resources    
|                       

| | *from
previous studies
| | ----------------------

|                                                                    
|--------------------------------------------------------------------
|Table 3-6: Ocampo Detailed Northeast Ocampo Mineral Resource Summary
|                                                                    
|
|                                                                    
|Aventurero                                                          
|Measured                                                            
|                                                                    
|Indicated                                                           
|                                                                    
|Measured & Indicated                                                
|                                                                    
|High Grade Below Open Pit                                           
|                                                                    
|Measured                                                            
|                                                                    
|Indicated                                                           
|                                                                    
|Measured & Indicated                                                
|                                                                    

|                                                            
|------------------------------------------------------------
|Table 3-7: Ocampo Detailed Inferred Mineral Resource Summary
|                                                            
|
|                                                            
|Aventurero                                                  
|                                                            
|San Juan                                                    
|                                                            
|Las Animas                                                  
|                                                            
|Rosario                                                     
|                                                            
|Esperanza                                                   
|                                                            
|Total Northeast                                             
|Underground                                                 
|                                                            
|Brenda Surface                                              
|0.4 g/t cutoff                                              
|                                                            

19

---

|                                                                     
|---------------------------------------------------------------------
|Table 3-6: Ocampo Detailed Inferred Mineral Resource Summary (contd)
|                                                                     
|
|                                                                     
|Total Northeast                                                      
|Ocampo Inferred                                                      
|                                                                     
|PGR Open-Pit Area                                                    
|0.3 g/t cutoff                                                       
|                                                                     
|High Grade Below Open Pit                                            
|Area Resource                                                        
|3.0 g/t cutoff                                                       
|                                                                     
|Total PGR Inferred                                                   
|                                                                     
|Total Ocampo                                                         
|Inferred                                                             
|                                                                     

The following table details proven
and probable reserves as detailed in an independent report prepared by Mintec Inc. as part
of the feasibility study. Based on detailed mine planning, Mintec Inc. calculated proven
and probable mineral reserves in the Open Pit Area amounting to 1.43 million ounces
gold-equivalent, with a further 833,000 ounces of gold-equivalent reserves contained in
the Northeast Underground Area.

|                                              
|----------------------------------------------
|Table 3-8: Ocampo Proven and Probable Reserves
|                                              
|
|                                              
|Northeast Area                                
|                                              
|Open Pit Area                                 
|                                              
|                                              
|                                              
|Total Ocampo
Proven & Probable                
|                                              

| | Note: |  | Gold-equivalent
cut off grades utilized: 3.0 g/t for Underground, 0.6 g/t for High-Grade Open Pit, and
0.2 g/t for Low-Grade Open Pit. Gold-equivalent values are based on 61.54 grams of silver
= 1 gram of gold, calculated on a gold price of US $400 and a silver price of US $6.50.
Proven and probable reserves are a subset of measured and indicated resources.
| | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Open-Pit Mineral Reserves

|a) |  | Profitable
Resource Tonnage within the PGR Trend/ Cost and Metal Price Mine           Design
Parameters
|-- |  | -------------------------------------------------------------------------------------------------------

The determination of profitable
resources within the open pit portion of the PGR trend is made by applying the expected
recoveries advised by KCA to material within specific grade ranges, and also applying
values to the specific gold and silver grades and the process costs for those tonnes. KCA
advised that there would be two crushing routes for mined ore grade material. For material
containing less than 0.60 g/t Au equivalent, this route would be a primary, followed by
secondary crush, leaving the material at  1.0 inch material size. The material
containing greater than 0.60 g/t Au equivalent would also undergo a tertiary crush,
rendering this material to 3/8 inch in size. Gold and silver recovery in the minus
0.60 g/t gold equivalent process route was modeled at 77% recovery for gold and 48% for
silver. Gold and silver recovery for the greater than 0.60 g/t gold equivalent ore
material was modeled with an 87% recovery for gold and a 72% recovery for silver.

The price used for determining
profitability was gold at US$375 dollars per ounce, and US$5.90 dollars per ounce for
silver. The process cost used for the lower grade material was US$1.94/tonne, and US$2.25

19

---

per tonne for the high-grade
material. These values were used to compute the net value per tonne prior to applying a
mining cost for each block.

The final feasibility profitability
metal valuation is US$400 per oz for gold and US$6.50 per oz for silver, and final process
costs were US$1.72/t for the lower grade material, and US$1.94/t for the high-grade
material. A separate mining cost study was prepared for the Final Feasibility by Roberts
and Associates that advised the use of $0.66 per tonne of material.

|b) |  | Mine
Design Process Capacity Objectives
|-- |  | ---------------------------------------

The establishment of two process
paths for crushing has suggested a primary objective of supplying the high grade to a
5,800 tpd crushing system through tertiary crush and sending this material to a stockpile
area to be mixed with run of mine secondary crush lower grade material. This low-grade
process has a daily capacity of 7,000 tonnes. Thus the high-grade design capacity is
2,030,000 tonnes per annum based on a 350-day operating year. This capacity is consistent
with the KCA process design criteria of 95% availability. The low-grade capacity is
designed to handle 2,450,000 TPA, also based on a 350-day operating ore year. The strategy
currently planned is to adhere to a 0.60% g/t gold equivalent cutoff, which would be
varied in operational practice to maximize the metal recovery in each planning period. If,
for example there was more low-grade material available in a period, it could be more
efficient to increase the cutoff to capitalize on the ability to process more high-grade
material through the tertiary crusher facilities.

There also exists the situation when
a significant amount of Mill grade material is exposed in the pit, which with high silver
would be better off sent to the mill. This would then give the opportunity to send
material just below the 0.60 g/t gold equivalent cutoff through the tertiary facilities to
get a better gold and silver recovery due to the finer crush.

For the Final Feasibility production
schedule, the primary objective has been to process the maximum amount of material through
the tertiary facilities, and allow to low-grade facilities to process all the low-grade
material that is made available by optimizing the high grade feed mining, up to the
maximum capacity of 2,450,000 tpy.

|c) |  | Pit
Mining Reserves
|-- |  | -------------------

The LG ultimate mining reserves
developed individual pit phase geometry that were used to locate selected pit bottoms from
which single lane and double lane roads were developed with careful attention that they
remain predominantly in the foot wall of all the deposits except for Picacho. Picacho is
totally exposed on the mountainside, and requires a switch back road scenario to remove
ore and waste to the ore crushing and waste dump levels. Table 3-9, on the following page,
contains the
individual Pit phase data for gold silver, gold equivalent, ore and waste tonnages that
include roads.

|                                       
|---------------------------------------
|Table 3-9: Ultimate Pit Reserve Summary
|                                       
|
|                                       
|1                                      
|                                       
|2                                      
|                                       
|3                                      
|                                       
|4                                      
|                                       
|5                                      
|                                       
|TOTAL                                  
|                                       

21

---

The total in situ gold content of the
current designed open pit is 901,711 oz, and the silver content is 31,951,948 oz. This
reduces to 1,421,176 ounces of gold equivalent.

|d) |  | Annual
Ore Schedule by High Grade and Low Grade Crush Feed to Heap Leach
|-- |  | ------------------------------------------------------------------------

The following table 3-10: Annual
Mining Summary, presents the split ore feed from the crushing facilities to the heap leach
pads. The low-grade 0.20  0.60 g/t AuEQ Primary crushed ore is fed at 7,000 tpd to a
secondary crushing facility which takes the material to  1.0 inch size. This crushed
material is conveyed to a stockpile to be mixed with the 3/8ths inch feed before
being sent directly to the heap leach pad. The secondary/tertiary crushing facility will
handle 5,800 tpd. This facility receives high-grade greater than 0.60 g/t AuEQ that is
primary crushed before being sent to this facility. The ore is crushed down to 3/8
inch size. This material is sent to a stockpile and mixed with the low-grade material, and
sent directly to the heap pad when mixed. Table 3-11 details the cumulative open-pit mine
production.

|                                 
|---------------------------------
|Table 3-10: Annual Mining Summary
|                                 
|
|                                 
|
|                                 
|0                                
|                                 
|1                                
|                                 
|2                                
|                                 
|3                                
|                                 
|4                                
|                                 
|5                                
|                                 
|6                                
|                                 
|7                                
|                                 

|                                               
|-----------------------------------------------
|Table 3-11: Cumulative Open-Pit Mine Production
|                                               
|
|                                               
|
|                                               
|0                                              
|                                               
|1                                              
|                                               
|2                                              
|                                               
|3                                              
|                                               
|4                                              
|                                               
|5                                              
|                                               
|6                                              
|                                               
|7                                              
|                                               

|e) |  | Dilution
and Projected Ore Losses
|-- |  | ---------------------------------

The dilution effects at the edges of
the productive heap leach zone are all in the lowest portions of the low-grade zone. If
there is any dilution during operations, the effect on grade to the heap will not affect
the metals content of the crushed ore so that it could effect production. No dilution was
included in the production schedule.

22

---

|f) |  | Mineral
Reserve Classification
|-- |  | ------------------------------

The only blocks that may be
classified as proven and probable mineral reserves are those blocks within the ultimate
pits that are able to generate a profit when costs and recoveries are applied to these
blocks using planning metal prices, and those tonnages can be sent to specific
ore-processing facilities/destinations. Only measured resource blocks can be converted
into proven reserves, and only indicated blocks can be converted into probable reserves.

|g) |  | Mineral
Resource and Mineral Reserve Summary
|-- |  | --------------------------------------------

The
profitable mineralization of the Ocampo PGR resource area as of November 2004 is
classified as measured and indicated resources, and proven and probable mineral reserves.
The summary shown in Table 3-12 reports tonnages and average gold and silver grades that
will be mined and the remaining measured and indicated resource. The selected pit bottoms
for the phase designs presented in the final feasibility were done so based on a judgment
to achieve a design stripping ratio for capacity planning purposes. With further drilling
below the current open pit limits, it is evident that an increase in measured and
indicated ore from the current inferred material will occur. These additions will most
certainly cause the measured and indicated ore material below the current pit to become
profitable to mine, and add substantially to the proven and probable reserves.

The portion of the PGR trend that
would be reasonably mined by open pit methods is 1720-meter elevation. All proven and
probable material in the 30,481,767 open pit reserves are extracted from the resource
summarized to that elevation, and the remaining tonnage are the measured and indicated
resources. The profitability for the current design was based on US$370/oz gold and
US$6.50/oz silver.

|                                                         
|---------------------------------------------------------
|Table 3-12: Ocampo Mineral Reserve and Remaining Resource
|                                                         
|Tonnes                                                   
|                                                         
|Proven/Probable                                          
|                                                         
|Remaining Resources                                      
|                                                         
|Measured/Indicated                                       
|                                                         
|                                                         
|                                                         

The purpose of Table 3-12 is to give
a perspective on the remaining measured and indicated material left in the resource after
deducting the mining reserve indicated within the study parameters.

Underground Mine Plan and
Reserves

|a) |  | General
|-- |  | -------

AST mining Canada of Sudbury, Ontario
was contracted to develop a mine plan encompassing the measured and indicated mineral
resource in the Aventurero, San Juan, Las Animas and Rosario veins in the Northeast Ocampo
under ground mine.

|b) |  | Parameters
Used in the Mine Design
|-- |  | ----------------------------------

Parameters used in the mine design
were as follows: 96% gold recovery; 93% silver recovery; 3 g/t eAu block resource grade
cut off for stope design; trackless mining equipment; decline-ramp personnel and equipment
access; Shaft hoisting of ore; mining method, shrinkage stoping; preferred stope length of
60 linear meters; and a two meter pillar left between stopes. The recoveries are based on
test work by KCA. The 3 g/t was based on a preliminary underground mining and processing
cost estimate of $27/t with additional allowances for dilution of the in-situ resource
grade.

23

---

AST was supplied with the Mintec
resource block model for each of the veins. Utilizing ASTs Mine-2-4D software, a
stope layout and mine design for the four veins was completed. Stope design utilizes
computer modeling techniques similar to those used to create the resource block model.
Three-dimensional solids are created around those portions of the block model above the 3
g/t eAu cut off. A calculation of the tonnes and grade of the block model tonnes
encompassed by the stope solids was then made by AST. Any waste tonnes contained within
the stope solids carry a zero grade value resulting in a fully diluted reserve.

|c) |  | Mineral
Reserve Classification
|-- |  | ------------------------------

The only blocks that may be
classified as proven and probable mineral reserves are those blocks within the stopes that
are able to generate a profit when costs and recoveries are applied to these blocks using
planning metal prices, and those tonnages can be sent to specific ore-processing
facilities/destinations. Only measured resource blocks can be converted into proven
reserves, and only indicated blocks can be converted into probable reserves. Table 3-13
presents the AST mine plan by level.

|                                                 
|-------------------------------------------------
|Table 3-13: Proven and Probable Reserves by Level
|                                                 
|
|                                                 
|1736                                             
|                                                 
|1676                                             
|                                                 
|1616                                             
|                                                 
|1556                                             
|                                                 
|1496                                             
|                                                 
|1436                                             
|                                                 
|                                                 
|                                                 

Mine development is proceeding level
by level at the current time. A production schedule was developed in accordance with the
current development plan. Table 3-14 details the schedule used in the economic analysis.

|                                                     
|-----------------------------------------------------
|Table 3-14: Proven and Probable Reserves by Mine Year
|                                                     
|
|                                                     
|1                                                    
|                                                     
|2                                                    
|                                                     
|3                                                    
|                                                     
|4                                                    
|                                                     
|5                                                    
|                                                     
|6                                                    
|                                                     

|d) |  | Dilution
and Projected Ore Losses
|-- |  | ---------------------------------

Dilution is fully accounted for in
the AST mine plan and stope layout design work. Dilution in individual stopes ranges
between 7% and 20% depending on the geometry of the ore body and the amount of edge and
internal waste present within an individual stopes design.

24

---

Mineral Processing and
Metallurgical Testing

Underground Mine with
Conventional Merrill Crowe Mill

|a) |  | General
|-- |  | -------

The various veins which make up the
Ocampo underground ore reserve consist of coarse-grained quartz-filled fractures in a
dacite/rhyolite wallrock. Silver sulfides and native gold were deposited in the late
stages of mineralization, along with minor iron sulfides and trace copper sulfides. Gold
is very fine, usually not visible. Wire native silver and gray silver sulfides are often
visible. Visually, nearly all veins appear to be mineralogically and metallurgically
identical. All samples which have been tested appear to exhibit the same metallurgical
behavior, which is characterized by excellent rates and levels of gold recovery, and
slower silver recovery which is dependent on both rock size and cyanide level in solution.
Analyses are consistent and reproducible, a result of the fine, disseminated nature of the
gold and silver minerals.

|b) |  | Master
Underground Composite Sample
|-- |  | -----------------------------------

For the critical mill design tests
for the Ocampo underground ores (for the Merrill Crowe mill), a Master Composite Sample
was prepared by site geologists, from selected core intervals that widely sampled the
underground veins. A total of 147 vein intervals were sampled from five individual veins.
A small portion of the Maria vein was included in the sample, although Maria is not
included in the mining plan. This Master Composite sample (KCA Sample No 31974) is
described in Table 3-15 below.

|                                                      
|------------------------------------------------------
|Table 3-15: Master Underground Composite - Description
|                                                      
|
|                                                      
|Aventurero                                            
|                                                      
|Las Animas                                            
|                                                      
|Rosario                                               
|                                                      
|San Juan                                              
|                                                      
|Maria                                                 
|                                                      
|Master Composite                                      
|                                                      

|                                                     
|-----------------------------------------------------
|Table 3-16: Test Programs for Underground Ocampo Ores
|                                                     
|
|                                                     
|July 15, 2003                                        
|                                                     
|                                                     
|September 9, 2004                                    
|                                                     
|                                                     
|September 29, 2004                                   
|                                                     
|September 30, 2004                                   
|                                                     
|October 29, 2004                                     
|                                                     

25

---

|c) |  | Determination
of Leach Criteria
|-- |  | -------------------------------

The most important data for
determination of grind size and residence time is the set of bottle roll leach tests
reported in table 3-16. The data show that the ore should be ground to 90% passing 75
microns (200 mesh), and leached in a five gram per liter sodium cyanide solution for 48
hours. Under these conditions, gold recovery exceeds 96% and silver recovery is 93%.

|                                                                                  
|----------------------------------------------------------------------------------
|Table 3-17: Bottle Roll Leach Test / Recovery vs. Grind Size - 96 hour leach tests
|                                                                                  
|Gold                                                                              
|                                                                                  
|
|                                                                                  
|31977 A                                                                           
|                                                                                  
|31978 A                                                                           
|                                                                                  
|31977 B                                                                           
|                                                                                  
|31978 B                                                                           
|                                                                                  
|31977 C                                                                           
|                                                                                  
|31978 C                                                                           
|                                                                                  

|       
|-------
|Silver 
|       
|
|       
|31977 A
|       
|31977 A
|       
|31978 A
|       
|31977 B
|       
|31978 B
|       
|31977 C
|       
|31978 C
|       

Evaluation of the data indicate that
most of the recovery is achieved in 48 hours, and that the same recovery shown above for
96 hours, can be achieved in 48 hours with a slightly finer grind size, 90% passing 75
microns. Sodium cyanide levels must be maintained at or near 5 grams per liter for the
entire leach time. Dissolved oxygen levels remained at an acceptably high level of 5.5 ppm
or more throughout all the tests, without the need for oxygen or air addition. Copper
level in solution is acceptably low (65 ppm). No other detrimental chemical components
were noted.

Based on this testwork, the Plant
Design specification is for 48 hours of leaching at a sodium cyanide concentration of 5.0
gpl maintained throughout the leach period. This is substantially higher cyanide
concentration than is used in most leach operations, and is dictated by the high silver
content of the ore and the importance of achieving high silver recovery. In order to
maintain this high cyanide level, it is necessary to effectively wash and filter and
tailings. The plant flowsheet is designed for a four-stage counter-current decantation
wash, followed by belt filtration. This will result in recovery and recycling of over 98%
of the contained cyanide. Because the tailings will be filtered for cyanide recovery
purposes, it becomes logical to transport and dispose of the tailings as a nearly dry
solid.

Open-Pit Mine with
Crushing and Heap Leach

|a) |  | General
|-- |  | -------

The open pit reserve area, or PGR area,
outcrops along a ridge parallel to the main Northwest structures which also occur in the
underground ore reserve areas, and approximately 1,500 meters to the southwest of the
underground reserve. Structurally and mineralogically, the open pit ore is similar to the
under-

26

---

ground ore. The most significant
difference between underground and open pit ores, for metallurgical purposes, is that in
the underground area the mineralized zone is narrow and high grade with few fractures
extending into the walls; whereas in the open pit, the mineralized zone is wider, lower
grade, and mineralized fractures extend for a large distance into the hangingwall and
footwall. The open pit ore reserve is almost fully oxidized, whereas the under-ground ore
is mostly unoxidized. Both oxidized and un-oxidized ores appear to show similar leach
characteristics.

A substantial amount of testwork has
been done on the open pit ores by both the Corporation and its predecessors, and by
Bolnisi Gold N.L., who prepared a bankable feasibility study for the open pit in 2003.
This previous testwork is not referenced in this study, since the present testwork is
sufficient for design, but these two bodies of testwork support and do not contradict each
other. The major test programs which apply to the current plan for open pit mining and
heap leaching are tabulated in Table 3-18.

|                                                        
|--------------------------------------------------------
|Table 3-18: Test Programs for Open Pit / Heap Leach Ores
|                                                        
|
|                                                        
|January 29, 1998                                        
|                                                        
|                                                        
|January 11, 1999                                        
|                                                        
|November 1999                                           
|                                                        
|                                                        
|June 25, 2001                                           
|                                                        
|                                                        
|                                                        
|                                                        
|August 2002                                             
|                                                        
|                                                        
|                                                        
|                                                        
|                                                        
|December 2, 2004                                        
|                                                        
|                                                        
|                                                        
|November 28, 2004                                       
|                                                        
|                                                        

|b) |  | Determination
of Leach Recovery and Crush Size
|-- |  | ----------------------------------------------

A total of 27 bottle roll tests are
cited in the lab work summarized above, but in fact, over 200 bottle roll tests have been
run on ore samples from the open pit area. While bottle roll tests do not predict heap
leach recovery, they are an excellent tool to map the orebody for variations
that could affect recovery. The tests showed that the open pit ore is uniform in regards
to cyanide solubility and chemical consumption. No significant areas of low recovery or
unusual metallurgy were noted (there was some individual sample variation: occasional low
recoveries were noted in individual tests, but tests on nearby samples showed average
recovery). However, subsequent column leach testwork has indicated there is a variability
in heap leach performance, as a function of crush size.

The most important data for
determination of heap leach operating parameters is the set of column leach tests
reported in the 25 June 2001 report. Six (6) flooded column leach tests were conducted on
the composite material from Ocampo. Results of the column leach tests are summarized in
table 3-19. A second report, dated 15 August 2002, also presents important data. In this
report, data are presented on four

27

---

column leach tests from the four
main open pit zones at a crush size of P80 4.75mm. This data is also included
in table 3-18.

|                                                       
|-------------------------------------------------------
|Table 3-19: Column Leach Tests on Crushed Core Material
|                                                       
|Gold                                                   
|                                                       
|
|                                                       
|Plaza de Gallos                                        
|                                                       
|Plaza de Gallos                                        
|                                                       
|Plaza de Gallos                                        
|                                                       
|Refugio                                                
|                                                       
|Refugio                                                
|                                                       
|Refugio                                                
|                                                       
|Refugio                                                
|                                                       
|Conico                                                 
|                                                       
|Picacho                                                
|                                                       
|Alvarez (Plaza de Gallos)                              
|                                                       

|                         
|-------------------------
|Silver                   
|                         
|
|                         
|Plaza de Gallos          
|Plaza de Gallos          
|                         
|Plaza de Gallos          
|                         
|Plaza de Gallos          
|                         
|Refugio                  
|                         
|Refugio                  
|                         
|Refugio                  
|                         
|Refugio                  
|                         
|Conico                   
|                         
|Picacho                  
|                         
|Alvarez (Plaza de Gallos)
|                         

|c) |  | Recovery
from High Grade, Fine Crushed Heap Leach Ore
|-- |  | -----------------------------------------------------

The ore samples crushed to a
P80 of 4.75 mm contained 20% by weight in the size range minus 6.3 mm plus 4.75
mm. This size distribution is consistent with the product that will be obtained in the
production 3rd-stage crushers at Ocampo (close-circuit crushed to 7 mm). To
arrive at projected field leach silver recovery for the high-grade (fine crushed) ore
requires evaluation of the data, with the following considerations:

| |  |  | The
Picacho sample, which shows 37% recovery at 4.75 mm, appears to be anomalous. Visually,
it appears the same as the other samples, and the overall Picacho ore body is identical
to the other ores. Therefore, for purposes of recovery analysis, it appears justified to
raise the nominal recovery from this sample to 55%.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Analysis
of tailings size distribution indicates that the recovery of the two tests at 6.3 mm
crush size would increase 8% if these same samples were crushed to P80 4.75
mm. Therefore, after making the recovery adjustment for the Picacho sample, the average
recovery from all six samples tested, at a crush size of P80 4.75 mm, is 68%.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

28

---

| |  |  | The
leach data indicate that silver in all columns was continuing to leach at the end of the
140 day leach period, at the rate of 3.4 percent per month in the columns crushed to 6.3
mm, and 2.8 percent per month in the columns crushed to 4.75 mm. This type of long term
continued leaching is consistent with ore behaviour at other silver heap leach operations.
The average ore stacked at Ocampo will remain under leach for 36 months (1,100 days).
Plotting a recovery decay curve indicates that another 6% silver will be recovered,
raising the overall silver recovery to 74%. A recovery of 72% has been used for the
financial projections.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Gold
recovery is faster, and more consistent, than silver recovery in all samples tested.
Based on the column leach tests adjusted to P80 of 4.75 mm, the average gold
recovery will be 92% in 140 days. No adjustment for extra leach time in the heaps is
included for gold, and gold leaching was mostly complete at the end of the 140 day leach
period. A recovery of 87% has been used for the financial projections.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|d) |  | Recovery
from Low Grade, Coarse Crushed Heap Leach Ore
|-- |  | ------------------------------------------------------

The low grade ore will be
close-circuit crushed to 100% passing 25 mm (P80 18 mm). Analysis of the data
indicates that the silver recovery at this size will be17% higher than at P80
of 37.5 mm, or to 40% in 140 days of leaching. Additional leach time will raise the silver
recovery to 46%. As with the finer crushed material, gold recovery is not as sensitive to
crush size as silver recovery. The data indicates that 8% additional gold recovery will be
achieved at P80 18 mm, raising overall gold recovery to 77%.

|e) |  | Summary
of Projected Heap Leach Recovery
|-- |  | ----------------------------------------

The ultimate end of mine life
recoveries are presented in Table 3-19 below.

|                                                 
|-------------------------------------------------
|Table 3-20: Ultimate, End of Mine Life Recoveries
|                                                 
|
|                                                 
|Low Grade                                        
|                                                 
|High Grade                                       
|                                                 

Underground Mine with
Heap Leach

The underground vein systems are in
the process of being actively developed, and as of November 2004, there was approximately
15,000 tonnes of ore stockpiled on surface. This ore is produced from sill drifts driven
along the veins (sill drifts follow the vein on each level, and become the base of the
production stopes). By the time the mill is ready to process ore, in January 2006, the
surface stockpile is expected to expand with the production of 18,000 additional tonnes of
sill development ore plus 59,000 tonnes of expansion ore from the development of six
shrinkage stopes. The stockpile should contain 92,000 tonnes or ore at that point, with a
gross value of $100 per tonne.

Since the mill and mine are in
balance, the processing of this stockpiled ore through the mill would not occur for
several years. Heap leaching is a logical way to realize early cash flow from this ore.
The grade of ore is not unusual for small heap leaches, and KCA has installed several heap
leaches for high grade ores (Sterling, Nevada underground mine with 12 g/t gold; Ity,
Ivory Coast, open pit mine with 15 g/t gold). For this reason, the surface stockpile of
Aventurero ore was sampled in September, 2004, by taking a random 220 kg hand-dug pit
sample from several locations. The sample represents typical unoxidized vein material,
medium gray in color. A portion of this sample was crushed to 3/8 inches and used for a
column leach test on 40 kg of ore. Analyses and recoveries are shown in table 3-21. A
separate sample was split out at 3/8, and then pulverized, for bottle roll tests.

29

---

|                                                   
|---------------------------------------------------
|Table 3-21: Column Test on Aventurero Vein Material
|                                                   
|
|                                                   
|Site Fire Assay (a)                                
|                                                   
|                                                   
|                                                   
|KCA Bottle Roll                                    
|pulverized (b)                                     
|                                                   
|KCA Column leach test 3/8"                         
|(44 days) (#31980)                                 
|                                                   

| | Note:
       (a) and (B) signifiy the percent recoveries
based on the corresponding assay values.
| | -------------------------------------------------------------------------------------------------

The column test was still in progress
at the time of the report. After 44 days of leaching, extraction and leach recovery are
continuing at the rate of about 10% per month for both gold and silver. Because of the
uncertainty of head assays at this point, the year one projected recovery from this
material in a heap leach is 75-85% Au, 45-60% silver. For cash flow purposes, we have
assumed that we can process 61,000 tonnes of ore in year one with a recovery of 3.74 g/t
Au, 166 g/t silver; this is based on a percentage recovery of 85% Au, 60% Ag from material
of average ore grade. Although this recovery projection is on the high side, only 2/3 of
the expected tonnage is scheduled to be processed. Therefore, cash flow projections based
on this auxiliary heap leach of underground stockpiled ore are considered to
be realistic. The values obtained from this heap leach equal 4.2% of the total gold
equivalent value recovered in year 1. No additional ore will be stacked after year one,
and no recovery is projected for subsequent years.

The ore will be stacked early in year
one, on an auxiliary leach pad (adjacent to the main pad) so that it can be reclaimed as
mill feed at a later date. Costs of $20.00 per tonne for mining and processing have been
assigned to this ore, and the tonnage has been subtracted from the quantity of underground
reserves available for milling.

Mining Methods, Capital
and Operating Costs

General

The Northeast Ocampo mine is
currently under construction and is developing a series of intersecting veins. The mine
will be operated using standard trackless underground mining equipment, and is designed to produce
1,500 tonnes of ore per day. Ore will be hoisted to surface via a shaft. The collar of the
shaft is adjacent to the milling facility thus reducing haulage costs. Waste rock from the
development haulages and ramps will be used as stope backfill wherever possible to
minimize haulage costs.

Initially the mine will exploit ore
from the Aventurero, Las Animas, San Juan and Rosario veins. The Northeast underground
project area is know to have at least 24 veins which have either a historic mine or
prospect on them. Construction of the Northeast Ocampo underground mine was initiated in
March of 2003, with excavation of the collar of the underground production decline. The
collar was located in an accessible location near the town of Ocampo, and at a central
point of the currently defined mining reserve. As of November 2004, over 3150 meters of
development has been completed. Monthly progress in November 2004 was in excess of 550
meters.

30

---

Underground Mine
Operating Cost

The underground mine has been under
construction since March of 2003. Between this time and November 2004, over 4,000 meters
of ramp, decline, footwall access drives, sill drives and Alimak raises had been
completed. Current mine development is in excess of 550 meters per month. The Corporation
also owns a significant interest in the EL Cubo Mine, Guanajuato, Mexico, and the mine
manager there has participated in the development of operating costs for Ocampo. Costs for
the production operation at Ocampo have been developed using the following methodology:
(i) estimated manpower requirements, based on the operating history at Ocampo in 2004,
have been tabulated and costed; (ii) direct consumables costs per foot of development
heading have been calculated based on calculated quantities and current costs; (iii)
general mine consumables and miscellaneous expenditures, not directly identifiable as
per-footage consumables, have been tabulated for the past 12 months of actual Ocampo
operation. These costs have been escalated based on the ratio of tonnage moved in the
future versus tonnage moved historically. The operating costs are summarized below in
Table 3-21.

|                                                   
|---------------------------------------------------
|Table 3-22: Underground Mine Operating Cost Summary
|                                                   
|
|                                                   
|Labour                                             
|                                                   
|Consumables                                        
|                                                   
|Grade Control                                      
|                                                   
|Reserve Drilling                                   
|                                                   
|Total                                              
|                                                   

Open-Pit Mining Methods,
Capital and Operating Costs

Open Pit Mining will be conducted
using standard equipment. Haul truck capacity is 90t and the rest of the equipment spread
has been sized accordingly. Mining will utilize multiple benching (6-meter or 9-meter
bench heights) at least for the drilling and blasting of waste. The sequence of activities
is as follows: clear and grub existing surface; drill and blast; load the 90t haul trucks
using a front end loader working in combination with a bulldozer; haul waste to waste
dump, haul ore to the primary crusher; dump ore directly into the primary crusher, or into
the stockpile if the crusher is down. A detailed summary of the mining costs is shown in
Table 3-23.

|                                                                   
|-------------------------------------------------------------------
|Table 3-23: Mine Operating Cost Summary ($/tonne of Material Mined)
|                                                                   
|
|
|                                                                   
|Total ktonnes Mined                                                
|                                                                   
|Drilling                                                           
|                                                                   
|Operating Labor                                                    
|                                                                   
|Maintenance Labor                                                  
|                                                                   
|Repair Parts                                                       
|                                                                   
|Diesel Fuel                                                        
|                                                                   
|Lube                                                               
|                                                                   
|GEC                                                                
|                                                                   
|Bits & Steel                                                       
|                                                                   
|Subtotal                                                           
|                                                                   
|Blasting                                                           
|                                                                   
|Operating Labor                                                    
|                                                                   
|Explosives & Supplies                                              
|                                                                   
|Subtotal                                                           
|                                                                   

31

---

|                                                                   
|-------------------------------------------------------------------
|Table 3-23: Mine Operating Cost Summary ($/tonne of Material Mined)
|                                                                   
|
|
|                                                                   
|Loading                                                            
|                                                                   
|Operating Labor                                                    
|                                                                   
|Maintenance Labor                                                  
|                                                                   
|Repair Parts                                                       
|                                                                   
|Diesel Fuel                                                        
|                                                                   
|Lube                                                               
|                                                                   
|Tires                                                              
|                                                                   
|GEC                                                                
|                                                                   
|Subtotal                                                           
|                                                                   

|                                                                   
|-------------------------------------------------------------------
|Table 3-23: Mine Operating Cost Summary ($/tonne of Material Mined)
|                                                                   
|
|
|                                                                   
|Hauling                                                            
|                                                                   
|Operating Labor                                                    
|                                                                   
|Maintenance Labor                                                  
|                                                                   
|Repair Parts                                                       
|                                                                   
|Diesel Fuel                                                        
|                                                                   
|Lube                                                               
|                                                                   
|Tires                                                              
|                                                                   
|GEC                                                                
|                                                                   
|Subtotal                                                           
|                                                                   
|Roads and Dumps                                                    
|                                                                   
|Operating Labor                                                    
|                                                                   
|Maintenance Labor                                                  
|                                                                   
|Repair Parts                                                       
|                                                                   
|Diesel Fuel                                                        
|                                                                   
|Lube                                                               
|                                                                   
|Tires                                                              
|                                                                   
|GEC                                                                
|                                                                   
|Subtotal                                                           
|                                                                   
|General Mine                                                       
|                                                                   
|Operating Labor                                                    
|                                                                   
|Miscellaneous                                                      
|                                                                   
|Subtotal                                                           
|                                                                   

32

---

|                                                                   
|-------------------------------------------------------------------
|Table 3-23: Mine Operating Cost Summary ($/tonne of Material Mined)
|                                                                   
|
|
|                                                                   
|Total ktonnes Mined                                                
|General Maintenance                                                
|                                                                   
|Maintenance Labor                                                  
|                                                                   
|Miscellaneous                                                      
|                                                                   
|Subtotal                                                           
|                                                                   
|Mine Administration                                                
|                                                                   
|Salaried Labor                                                     
|                                                                   
|Miscellaneous                                                      
|                                                                   
|Subtotal                                                           
|                                                                   
|TOTAL                                                              
|                                                                   
|                                                                   
|                                                                   
|SUMMARY                                                            
|                                                                   
|Operating Labor                                                    
|                                                                   
|Maintenance Labor                                                  
|                                                                   
|Salaried Labor                                                     
|                                                                   
|Total Labor                                                        
|                                                                   
|Repair Parts                                                       
|                                                                   
|Diesel Fuel                                                        
|                                                                   
|Lube                                                               
|                                                                   
|Tires                                                              
|                                                                   
|GEC                                                                
|                                                                   
|Bits & Steel                                                       
|                                                                   
|Explosives/Supplies                                                
|                                                                   
|Miscellaneous                                                      
|                                                                   
|Total Consumables                                                  
|                                                                   
|                                                                   
|                                                                   
|TOTAL                                                              
|                                                                   

Costs shown in the above tables fall
within the range of the expected costs for a North American project of this size. Wage
rates have a positive impact due to the relatively low $5.36 per-hour wage rate for
operators and mechanics as compared to U.S. wage rates for similar functions.

Mill, Heap Leach and
General Capital Costs

The capital expenditures required for
the project are summarized in Table 3-23. The costs are considered to have an accuracy of
+/-15%. The Corporation has acquired a used crushing plant out of Battle Mountain, Nevada.
The plant consists an apron feeder, 50 x 60 Telsmith jaw, two screens, a
68 Telsmith standard cone, a 68 Telsmith shorthead cone, lime silo, baghouse
dust collector and conveyors. The heap leach capital cost has been adjusted to reflect
this. For all else, capital cost estimates are based on the purchase of new equipment
throughout. Once the project is underway, used equipment could then be sourced and
acquired.

KCA estimated the costs presented in
this section. Equipment and material requirements are based on the design information
described in the KCA feasibility report. Pricing for major equipment is from vendor

33

---

budgetary quotes, however, single
source supply has been used as time constraints did not permit multiple bids. Earthworks
costs are estimated from volumes excavated and backfilled with unit costs provided by a
Hermosillo-based contractor varying with the type of excavation required (machine
diggable vs drill and blast) and degree of compaction for backfill. Concrete costs are
estimated using a unit cost per cubic meter in place provided by Hermosillo- based
constructors along with volumes estimated from layout  drawings.
Structural steel is also estimated using unit costs per ton in place provided by
          Hermosillo-based constructors and estimated weight in place from layout
          drawings. Estimates for items such as piping and instrumentation are based on
          percentages of mechanical equipment costs. Electrical items are estimated based
          on a percentage of equipment and civil costs, or on a price per unit area for
          buildings.

|                                                              
|--------------------------------------------------------------
|Table 3-24: Capital Costs Summary                             
|                                                              
|
|                                                              
|Underground Mine                                              
|                                                              
|Merrill Crowe Mine                                            
|                                                              
|Open Pit Mine                                                 
|                                                              
|Crushing and Heap Leach                                       
|                                                              
|Administration Building (includes equipment)                  
|                                                              
|Camp and Mess Hall                                            
|                                                              
|Laboratory (includes equipment)                               
|                                                              
|Mill Maintenance Shop                                         
|                                                              
|Mine Maintenance Shop                                         
|                                                              
|Warehouse                                                     
|                                                              
|Mobile Equipment                                              
|                                                              
|Overall (fencing, potable water and sewage)                   
|                                                              
|Power Supply and Distribution (diesel powered gensets)        
|                                                              
|Site Preparation (remove two knobs and fill valley)           
|                                                              
|Water Supply (dam and reservoir for water capture and storage)
|                                                              
|Direct Capital Costs                                          
|                                                              
|EPCM                                                          
|                                                              
|Owners Costs                                                  
|                                                              
|Tax                                                           
|                                                              
|Total Capital Cost                                            
|                                                              
|Preproduction Operating Costs                                 
|                                                              
|Total Project Development                                     
|                                                              
|First Fills                                                   
|                                                              
|Working Capital                                               
|                                                              
|TOTAL CAPITAL COST, US$                                       
|                                                              

Mill, Heap Leach and
General Operating Costs

Milling

|a) |  | Production
|-- |  | ----------

The Ocampo underground mine and mill
project is expected to produce 426,711 troy ounces of gold at an average gold recovery of
96 % and 20.8 million troy ounces of silver at an average silver recovery of approximately
93 % over the life of the project. Based upon an ore reserve of 3,080,497 metric tons, at
average grades of gold and silver of 4.49 g/t and 236 g/t, respectively, the ore
processing rate was set at a nominal 550,000 metric tons per year, resulting in a project
life of about 5.6 years. Average gold and silver production per year is about 78,376 and
4.1 million troy ounces, respectively.

|b) |  | Operating
Costs
|-- |  | ---------------

Operating costs for the Ocampo mill
have been estimated using, where possible, project specific staffing, salary, wage, and
benefit requirements; unit consumption of materials, supplies, power, and water; and

34

---

delivered supply costs. The
operating costs have been estimated and presented without added contingency allowances.
The processing, support and general and administrative operating costs are considered to
have an accuracy range of +/-15 %. Operating costs have been based upon information
obtained from the following sources: project metallurgical test work and process
engineering; budgetary quotations from potential suppliers of project operating and
maintenance supplies and materials; operating experience from other area mines of a
similar nature; recent KCA project file data; experience of KCA staff with other, similar
operations. Where specific data do not exist, cost allowances have been based upon
consumption and operating requirements at other similar properties for which reliable data
exist. All costs are presented in United States dollars.

|c) |  | Summary
|-- |  | -------

The average operating cost for
processing gold and silver ore from the underground mine at the Ocampo Project is USD
$15.08 per metric ton of ore. Unit operating costs by area are presented in Table 3-25.

|                                                                   
|-------------------------------------------------------------------
|Table 3-25: Average Unit Operating Costs For the Milling Operations
|                                                                   
|
|                                                                   
|Crushing                                                           
|                                                                   
|Grinding and Thickening                                            
|                                                                   
|Leaching                                                           
|                                                                   
|CCD Washing                                                        
|                                                                   
|Merrill Crowe Recovery                                             
|                                                                   
|Refinery                                                           
|                                                                   
|Tailings, Treatment and Disposal                                   
|                                                                   
|Regents Handling                                                   
|                                                                   
|Maintenance Shop                                                   
|                                                                   
|General (Includes Power)                                           
|                                                                   
|Metallurgical                                                      
|                                                                   
|Total                                                              
|                                                                   

These costs are based upon ownership
of all project production equipment and site facilities. The estimate is based upon the
owner employing and directing all operating, maintenance, and support personnel. The IVA,
paid for imports and domestic services, will be refunded because the project produces a
product that is exported. There is, for all intents and purposes, no value added tax for
the project.

Crushing and Heap Leaching

|a) |  | Production
|-- |  | ----------

The Ocampo open pit mine and heap
leach project is expected to produce 769,372 troy ounces of gold at an average gold
recovery of 85 % and 21.9 million troy ounces of silver at an average silver recovery of
approximately 69 % over the life of the project. Based upon an ore reserve of 30,474,000
metric tons, at average grades of gold and silver of 0.92 g/t and 33 g/t, respectively,
the ore processing rate was set at a nominal 4,161,000 metric tons per year, resulting in
a project life of about 7.3 years. Average gold and silver production per year is about
113,000 and 3.2 million troy ounces, respectively.

|b) |  | OperatingCosts
|-- |  | --------------

The average operating cost for
processing gold and silver ore from the open pit mine at the Ocampo Project is USD $1.82
per metric ton of ore. Unit operating costs by area are presented in Table 3-26.

35

---

|                                                                     
|---------------------------------------------------------------------
|Table 3-26: Average Unit Operating Costs for the Heap Leach Operation
|                                                                     
|
|                                                                     
|Primary Crushing                                                     
|                                                                     
|Overland Conveyor                                                    
|                                                                     
|Secondary Crushing                                                   
|                                                                     
|Tertiary Crushing and Screening                                      
|                                                                     
|Transport to Leach Pads and Stacking                                 
|                                                                     
|Leaching                                                             
|                                                                     
|Merrill Crowe Recovery                                               
|                                                                     
|Refinery                                                             
|                                                                     
|Regents Handling                                                     
|                                                                     
|Maintenance Shop                                                     
|                                                                     
|General (Includes Power)                                             
|                                                                     
|Metallurgical                                                        
|                                                                     
|Total                                                                
|                                                                     

Environmental, Social and
Permitting

Air Quality

The air quality at the site is good.
In order to avoid unnecessary impact on air quality, haul roads will be watered, dust
suppression will be employed at the crushing facility, and gasoline and diesel fueled
equipment operating efficiency will be maintained. Air quality will be monitored.

Vegetation and Wildlife

To
avoid adverse impact, security guards will patrol the project area, the mine, the leach
pad and process ponds will be fenced, and active mine areas will have restricted access.
During initial construction a greenhouse will be built that will be used to preserve,
germinate and produce native plants that will be used in reforestation and restoration
activities during operation and the reclamation and closure period of the project. Gammon
Lake will collect seeds of the surrounding area on an annual basis and they will be used
to produce plants in the greenhouse.

The Corporation has identified the
local wildlife, which consists mainly of reptiles, mammals and birds. During operation of
the mine, the Corporation will monitor the impact to the wildlife and will rescue any
wildlife, if needed, and relocate it to a place that has similar conditions.

Water Resources

Water resources will be protected
from potential adverse impact by diverting storm water around operational areas, recycling
process solutions, accumulation and use of captured precipitation in the leach systems,
and construction and sedimentation structures. Surface and groundwater quality in the
operational area will be monitored.

Cultural and Historical

The Ocampo area is a historical
mining area in the state of Chihuahua with old workings and buildings located throughout
the area. Therefore the start of a new mine will not negatively impact the area. Two
cemeteries have been identified within the area and both will be protected and will not be
disturbed during mine operation.

36

---

Socioeconomic

The opportunity for employment,
improved wages, an increased tax base, and better access to services will result from the
project. These are all potentially positive impacts to the Ocampo area. The Ocampo
community has responded positively to the mine operation and the Corporation will provide
employment to any community member that wishes to be employed at the mine. However, the
population in Ocampo is not sufficient to meet the needs of the labor force required for
the project. Therefore, the Corporation will recruit workers from other areas and build a
housing facility on-site to accommodate the non-Ocampo citizens.

Soils, Geology and Geochemistry

Testwork performed to date on the
ores and waste rock to be produced by the project indicates that there is no potential to
generate acid. The majority of the waste rock has a net neutralization potential so that
mixing of the waste rock during mining should prevent the formation of acid drainage from
any stockpiles that may contain sulfide material.

Permitting

The Ocampo Project has been designed
to comply with all Mexican environmental standards and with World Bank environmental
standards. There are no known environmental factors that would prevent the Corporation
from obtaining any of the necessary permits to allow construction and operation. The
Corporation has been diligently assembling the documentation required to apply for the
necessary permits and has met with key government officials who have indicated that they
see no obstacles in the permitting of the Ocampo project. The following key
permits/agreements are required for the Ocampo project: (i) environmental permit; (ii)
agreements with the Ocampo community; (iii) mining titles; (iv) explosives permit; (v)
water exploitation permit; (vi) toxic substance handling plan; (vii) complementary
environmental permits; and (viii) hazardous waste disposal and accident prevention plans.
In summary, it is expected that the permits can be obtained in a timely manner to allow
project development to proceed as outlined in the project development schedule.

Heuristica Ambiental
Report

Heuristica Ambiental, a
Hermosillo-based environmental consulting firm has prepared a two volume report for
submission to SEMARNAT (Secretaria del Medio Ambiente y Recursos Naturales) the Mexican
environmental and natural resources regulatory agency. The volumes are titled
Manifestacion de Impacto Ambiental (MIA)  Modalidad Particular and
Estudio Riesgo Ambiental Modalidad Analisis Detallado de Riesgo and are
included as Appendices XXIII and XXIV of the KCA Report, a full version of which is
available on the System for Electronic Document Analysis and Retrieval (SEDAR) at
www.sedar.com.

Utilities, Services and
Infrastructure

Water Supply

Primary water supply is provided by
surface catchment and storage. A dam is in place with its approximate center at local
coordinates 17630 E and 11750 N. The dam base is at elevation 1,618 meters and the control
spillway inlet is at elevation 1,650 meters. Several potential groundwater sources have
been identified, two of which are adjacent to the proposed fresh water storage reservoir
and one is inside the reservoir perimeter. The capital cost for the reservoir and storage
dam is $67,000, and is based on the design by The Mines Group. An allowance of $300,000
has been included in year 1, for development of fresh water wells, in the event that
groundwater supplement is required.

37

---

Power Supply

Power is provided by diesel powered
generators located adjacent to the mill site. Connected power demand is 9,765 kW. Seven,
Cummins DQKC continuous service generator sets are installed. Each unit can provide 1,825
kW continuously. At peak demand six units at full output and one unit at 35 % output meet
the requirement. This allows one unit on standby. At average demand, three units at full
output and one unit at 58 % output are adequate. The output voltage is 12.5 kV to allow
for the 3,000 meters longest transmission to the heap leach secondary and tertiary
crushing plant.

For the mill primary distribution,
12.5 kV is routed to the individual unit operations substations in underground cable
vaults. At the individual unit operations, 12.5 kV is transformed to 4,160 and 440 V then
routed to the busses in the motor control centers. Individual motor starters then pick up
power from the busses and distribute it to the individual motors. High horsepower motors
require 4,160 V in order to keep cable sizes down. For the heap leach, 12.5 kV is
transmitted via an overhead power line to, first, the primary crusher, then continues
along the overland conveyor to the stockpile and fine crushing plant area. A substation at
the primary crusher transforms the 12.5 kV to 4,160 and 440 V, routes it to the busses in
the motor control center there. The individual motor starters then pick up power from the
busses and distribute it to the individual motors. At the stockpile and fine crushing
area, a substation and motor control center there transforms and distributes power in a
similar manner.

The average cost of diesel generated
power was estimated using USD $0.35/L for tax free off road diesel in Mexico then applied
against the burn rate data provided by Cummins. The Cummins DQKC units are most fuel
efficient at maximum out put. The maximum anticipated peak configuration was used which
was four units at full output and one unit at 77 %. The cost of lubricants was also
factored in at 465 L of oil per unit and a change out frequency estimated at 2,000 hours.

The capital cost of the power plant
is estimated to be $2,900,000. Cost includes the generators, primary power line for site
distribution from the central generator plant near the mill, and secondary distribution.
The cost of diesel generated power at Ocampo is USD $0.0890/kWh.

Access to Site

The property is accessed via Federal
Highway 16 which is a major transportation route across the northern Sierra Madre
Mountains. Ocampo is then accessed by a government maintained gravel road that exits
Highway 16 at two intersections. Cahuisori is 277 road kilometers west of Ciudad Chihuahua
on Highway 16. The government maintained gravel road to Ocampo is then 25 road kilometers
from Cahuisori. This route has one choke point that would limit the size of transport that
could access the mine site. Above the town of Ocampo there is a tunnel with a very tight
right hand turn on the exit side when leaving Ocampo. On both ends of the tunnel, there
are sheer vertical drops. Secondly, transport traffic to the mine site has to go through
the town of Ocampo. Heavy truck traffic through the narrow main street of Ocampo would
have negative social impact. Maycoba is 250 road kilometers east of Ciudad Hermosillo on
Highway 16. The government maintained road to, first Moris, then Ocampo, is an additional
100 road kilometers from Maycoba to Ocampo. It is longer than the Cahuisori to Ocampo
route, but there are no choke points and heavy transport trucks do not have to travel
through the town of Ocampo. The Manhattan mine, an open pit/heap leach operation, now
closed, was supplied via this route with equipment and supplies.

Some improvements are required. On
the stretch from Maycoba to Moris, there is one stream crossing which will require a
culvert installation and compacted fill over it. On the stretch from Moris to Ocampo,
there is a near to 270 degree looping turn around a bluff. A cut through the bluff will
straighten the loop out. The road will be run over with a grader to smooth out the rough
spots. Kilometer posts will be put in place so transport drivers can identify their
position and communicate this to other transport drivers by radio so every operator knows
their relative positions to other operators. In the event of two transports traveling in
opposite directions, the first unit to reach a pullout, pulls over and stops there and
remains there until the other, oncoming, unit passes. The improvements will allow at
least ISO 6 meters (20 foot)

38

---

containers on flatbed transports to
access the site. Larger units, such as ISO 12 meters (40 foot) containers, may also be
able to navigate the road. If further improvements are required to enable travel by 12
meter containers and/or equally long semi-trailer units, such improvements could be
effected after start up and achievement of a positive cash flow. An allowance of USD
$160,000 has been made for the above-described upgrades.

Accommodations

The working schedules for project
personnel vary depending on the commuting distance. About 60 % of the workforce is
anticipated to be local and will live at their existing homes. Site accommodation is not
required. Approximately 40% of the workforce will face long distance commutes from cities
like Hermosillo and Chihuahua. For these personnel, two schedules have been allowed for.
For continuous operations that require four crews, a two weeks on/two weeks off schedule
has been selected. For technical personnel, a 22 days on/10 days off schedule has been
selected. Single status accommodation is required for these personnel. During the time
when the KCA feasibility study was being conducted the Corporation had a facility capable
of housing 75 persons. These accommodations include living quarters and a kitchen. The
feasibility study included capital costs to provide similar accommodations for 125
additional personnel. Capital cost is estimated by Ocampo personnel, based on their recent
experience, to be $1.25 million. Operating costs (based on current site experience) are
included in the operating cost tables.

Administration Building

The general and administrative
personnel utilize a 30 meter by 10 meter office building. This facility accommodates the
General Manager, Mine and Process Manager, accounting, geology and engineering, safety and
training. Training, basic health and safety provisions are included in this building. An
ambulance bay is also attached. Capital cost of this building including furnishings is
$332,000.

Mill and Mine Maintenance
Shop and Warehouse

The mill shop includes a light
vehicles bay, tool room, toilets, an electrical/instrumentation shop all on the main
floor. A mezzanine provides offices for a maintenance manager, planner, clerk and foreman
plus a training room. Capital cost of this shop is estimated to be $120,000, based on the
actual recent cost to construct the underground mine maintenance shop. The warehouse is
located southwest of the mill shop. It is a 20 meter by 20 meter building with adjoining
20 meter by 10 meter fenced storage yard that will be used to store large items or bulk
materials which can withstand exposure to the elements. All project supplies, with the
exception of process plant reagents, will be received, stored and dispersed from this
facility. The facility includes inside storage for parts and supplies, an office for
purchasing personnel, a restroom and a receiving/dispatch office. The outside storage
areas consist of compacted, graveled areas. Capital cost is estimated to be $273,000, and
is based on the recent cost to construct the underground mine warehouse.

The mine shop is housed in a metal
building that is approximately 55 meters by 25 meters. The shop consists of a reinforced
concrete floor with used rail embedded in the concrete in at least one bay to allow
working on tracked equipment. Four truck bays, an overhead crane, compressed air piping,
welding equipment outlets are included. Maintenance on all heavy vehicles and on some
light vehicles will be conducted in this shop. Diesel fuel and bulk lubricants for the
heavy equipment fleet will be stored on a @@@105 m2 pad located adjacent to the shop
area. Pumps and dispensers will be provided for fueling. A drive-through dispensing system
will be provided for vehicle lubrication and for filling the fuel/lube truck. All fuel and
lubricant storage areas will be constructed with containment to prevent hydrocarbon
contamination of the surrounding area. These storage areas will drain to a central
collection sump where all spills will be collected.

A 9 meter by 15 meter wash bay will
be included in the mine shop facility for washing heavy and light vehicles. Pressure
washers and associated hoses/tanks will be provided. This area will be sloped to the
central collection area to prevent any contaminated solution from being discharged. The
lower level also

39

---

has storage for motors and general
supplies, an electrical shop, hydraulic shop, preventative maintenance equipment shop,
machine shop and supervisors office. A mezzanine has offices for the maintenance
manager and planners plus a training room and restrooms. Capital cost is estimated to be
$707,000, which is based on an estimate prepared by the same people who recently
constructed the underground mine buildings.

Laboratory

The total number of samples to be
analyzed by fire assay procedure each day is summarized in Table 3-26 on the following
page:

|                                                          
|----------------------------------------------------------
|Table 3-27: Daily Samples Analyzed by Fire Assay Procedure
|                                                          
|
|                                                          
|Underground Mine Control                                  
|                                                          
|Underground Mine Development                              
|                                                          
|Open Pit Control                                          
|                                                          
|Surface Exploration Drilling                              
|                                                          
|Mill Operations (1)                                       
|                                                          
|Heap Leach Operations (1)                                 
|                                                          
|TOTAL                                                     
|                                                          

| | Note:
| | -----

| |  | (1) |  | Includes
metallurgical test work and doré bar analyses
| |  | --- |  | ------------------------------------------------------

A new laboratory  will be located
near the mill  processing  plant. A small  laboratory  currently  exists at the historic
mill located near the town of Ocampo,  which can currently  process about 20% of the
sample  requirements  of the project.  Much of the equipment in this  laboratory  will be
moved  to the new  laboratory.  The new  laboratory  is  capable  of doing  all  analyses
 necessary  for the operations,   including  sample  preparation,   particle  size
 distribution  analyses,  solid  sample  digestion,  fire  assaying,  AA spectroscopy,
 and  metallurgical  testing,  including  bottle roll and column  tests.  The  laboratory
is housed in a 27.5 meter by 14 meter  building  and is modeled  after a  laboratory
 recently  designed  by KCA and built at another  mine for similar  purposes.  The
capital cost of the  laboratory  including a minor amount of new  equipment is estimated
to be $128,000,  which is based on  comparison with costs of a recent similar support
 laboratory  known to KCA. Waste products from the laboratory are generally  compatible
with the ore that is placed on the heaps or solutions handled from the solution ponds and
will be disposed of in these facilities.

Transportation

On site  accommodations  are
 available  for the  employees  that are long  distance  commuters.  The  company has two
buses on site to transport  employees  from the  living  quarters  to the  areas  around
 the  site.  Half-ton  pickups  are used for  general  and site transportation
 requirements  for supervisors,  geology and  engineering,  maintenance and certain
 operations  personnel.  Two flatbed trucks,  one equipped with a hydraulic jib crane and
the other  equipped with welding  equipment are used for mobile site  maintenance. Other
mobile support  equipment  consists of a mobile crane, a small  front-end  loader
 (Bobcat),  a mid-sized  front-end  loader with bucket,  forks and pick stick (Cat 966)
and a rough terrain  forklift.  In addition to the  ambulance,  a fire  fighting
 pumper/tanker truck is permanently on site. The General Manager is assigned a large,
four wheel drive sport utility vehicle.

40

---

Economics

Summary

The capital and operating costs
generated for the development,  operation,  and closure of the Ocampo Project have been
evaluated using cash flow analysis as a means of determining  the financial  aspects and
economic  indicators  for the project.  The cash flow analyses have been based upon data
developed by KCA, the Corporation, Mintec, AST Mining, and Deloitte Touche Tohmatsu.

For the purposes of the cash flow
analysis,  all of  pre-production  costs occur in Year 0 (which is taken to be 2005).
Open pit mining and underground  mine  development  begin in Year 0 (mostly mine
 preparation  and stripping,  although some ore will be stacked on the heap leach pad and
heap leaching  initiated),  with full scale heap  leaching,  underground  mining,
 milling  operations  and gold and silver  production  beginning in Year 1.  Underground
 mining and mill ore  processing  operations  continue  into Year 6 with open pit mining
continuing into Year 7.  Heap leaching and gold/silver production is completed in Year 8,
as is site reclamation.

Base Case

The base case for economic  analysis
of the project uses a $400 gold and $6.50  silver  (USD),  the same base prices that were
used for the determination of the project mineral resources.  Table 3-28 presents the
economic indicators for the project.

|                                            
|--------------------------------------------
|Table 3-28: Project Economic Indicators     
|                                            
|
|                                            
|Internal Rate of Return                     
|                                            
|Project Payback, after start-up             
|                                            
|Cash Operating Costs, per Oz Gold Equivalent
|                                            
|Total Cash Flow, undiscounted, USD $000's   
|                                            
|Project NPV, 5% discount (1), USD $000's    
|                                            
|Break-even Gold/Silver Price                
|                                            

| | Notes:
| | ------

| | (1) |  | Net
present value is at the start of Year 0 and assumes that all cash flow amounts occur at
the end of each year of the          project.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------

| | (2) |  | Because
silver is a significant contributor to the economics of the project (approximately 37% of
the revenue) there is no          single break-even price.  A number of combinations of
gold and silver prices entered into the analysis will produce a          cumulative cash
flow of $0.  It may be noteworthy, however, to see that a $260 gold price and a $3.25
silver price (the          lowest prices in recent memory) may still produce an IRR of
about 8%.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Sensitivity Analysis

In order to estimate the relative
strength of the project, a base case sensitivity analysis was completed by analyzing the
effect on project economic indicators of variations in revenue generated by the project
(changes in gold/silver price, gold/silver recovery, and/or ore grade), the capital cost
of the project (not including working capital), and operating costs, including working
capital. The sensitivity analysis indicates that the project is, as most projects are,
most sensitive to revenue. It also indicates that the project is likely to stand up well
to significant variation in development and operating costs. Table 3-29 provides
the results of the analysis for the first phase of mining at Ocampo.

|                                 
|---------------------------------
|Table 3-29: Sensitivity Analysis 
|                                 
|
|                                 
|Payback                          
|                                 
|Pre Tax Net Annual Cash Inflow   
|                                 
|Internal Rate of Return (pre tax)
|                                 
|NPV 0% Discount Rate (pre tax)   
|                                 
|NPV 5% Discount Rate (pre tax)   
|                                 

41

---

Revenue

Project revenue is based upon the
gold production schedule presented earlier in this report. The base case gold and silver
revenue has assumed an average realized gold and silver prices of $400 and $6.50 per
ounce, respectively, over the life of the project.

Operating Costs

Operating costs used for this
analysis are those developed in the study on a year-by-year basis and detailed in this
report.

Profit Sharing

A mandatory profit sharing program
exists in Mexico that requires the payment of 10% of profits to the personnel working at
the project. The amount of profit upon which the profit sharing is calculated is the
corporate income upon which taxes are computed, except that any losses carried forward
cannot be used. However, prior year profit sharing can be deducted for current year profit
calculation purposes. For this study, it is expected that salaried and hourly personnel
will be obtained through a personnel service company, which will pay all wages and
benefits to project personnel. As a result, the Ocampo project will incur no profit
sharing obligation. The salary, wage and benefit costs used in the development of the
project operating costs are those expected to be paid to the service company.

Reclamation Costs

Reclamation costs have been estimated
in this report and the total dollar amount required has been shown as an annual
reclamation cost accrual during project operations. At the end of the project, Years 7 and
8, reclamation will be completed and the accrued money expended. For the cash flow
analysis, reclamation costs have been deducted from the operating costs on a per ton of
ore mined basis and inserted as outgoing cash flow in the last two years of the project,
Years 7 and 8.

Royalties

According to the Corporation, there
are no royalty obligations on the project. There is a payment due amounting to 8% of the
net profits until a total of $2,000,000 US has been paid. In the feasibility study the
payment is made in Year 2.

Capital Development,
Acquisition Costs and Capital Cost Depreciation

Project capital costs are detailed in
the cash flow model by year and by type in order that the proper methods of tax and
depreciation can be applied. Current Mexican tax regulations provide for the following
three different types of depreciation to be taken for this project: (i) the capital costs
of mine development, the tailings impoundment, the leach pad, process ponds, site
preparation, and the water reservoir system were depreciated based upon the tonnes of ore
mined, since the value of these installations diminish in direct proportion to the tonnage
of ore mined and will become worthless at closure; (ii) new regulations provide that,
beginning in 2005, mining equipment can be depreciated by 77% in the first year, with no
further depreciation allowed. This approach was used for this evaluation; and (iii) the
remainder of the capital assets was depreciated at 10% per year, with the remaining
depreciation claimed in the final operating year of the project.

42

---

Project non-depreciable expenses
include the initial operating supply inventory, the initial maintenance supply inventory,
and working capital. The initial operating and maintenance supply inventories are consumed
during the final year of the projects operating life. Working capital will be
recouped within the first year of project operations.

Exploration and
Pre-Operational Development Expenses

Exploration and development expenses
and the cost of mining claims incurred prior to the onset of operations (generally
expenses subject to depletion) are treated as pre-operating expenses in Mexico. These can
be amortized at a rate of 10% per year or, at the election of the taxpayer, deducted in
the year in which they are incurred. The Ocampo Project has identified a total of
$26,797,655 (US) of pre-production project expenditures and losses that can be applied to
the project. This amount has been taken as a deduction in Year 0 and carried forward as a
loss.

Working Capital
Requirement, Sustaining Capital and Exploration

Working capital is that money used to
cover project operating costs after start-up until a positive cash flow is reached, after
which project expenses can be paid by the project. The amount of working capital used in
this study is based upon one month of the operating and maintenance supplies required for
the mining, milling and administrative operation at the site. Since costs for these
supplies are included within the operating costs for the project, the working capital is
expected to be recouped in Year 1 from operating cash flow. Thus the money is provided for
operations until profits from operations can repay it a few months later.

Sustaining capital is that money
which will be spent primarily for the replacement of equipment and for other non-capital
improvement projects. Money that will likely be spent for project improvement has not been
included within this category because, by definition, the expenditures should produce a
positive payback, which then must be included in the project economics. The same concept
is applied to exploration drilling at the project. Money spent should produce results in
extended or higher grade reserves, which should then be recognized in the study. This
would tend to lead the study into an undue amount of speculation not consistent with an
analysis of this nature. For this project, sustaining capital has been planned for
continuing underground mine development work and for open pit mining equipment needed as
ore production and stripping increase.

Recent Drilling Results
and Developments

Following completion of the KCA
Report, the Corporation continued an aggressive drilling program focused on upgrading
inferred resources as well as expanding project reserves and resources. Since the June 10,
2004 cut-off date for data included in the Corporations last resource calculation,
completed in September 2004, the Corporation drilled a total of 331 new holes on the
project, encompassing over 40,000 meters of drilling.

Details of the results from the sixth
and seventh round of surface and underground drilling from ramp development at the
Northeast Underground Project Area are provided in Tables 3-30 and 3-31.

The first 30 holes reported,
comprising the sixth round of drilling, produced 48 intercepts above an underground
cut-off grade of 3 g/t gold-equivalent, and include hole OU-124 grading 17.09 grams per
tonne gold and 1,424 grams per tonne silver, over an intercept of 9 meters at the
intersection of the high-grade La Esperanza and San Juan structures. This intercept
includes 1 meter grading 43.0 grams per tonne gold and 3,860 grams per tonne silver, for a
gold-equivalent grade of 102.4 grams per tonne.

43

---

The seventh round of drilling, for a
total of 97 holes, was comprised of 34 holes reported from the Open-Pit Project Area, and
63 holes reported from the Northeast Underground Project Area. The 34 holes reported from
the Open Pit Project Area were the focus of exploration efforts targeting San Ramon, a
previously undrilled structure that is located between the Picacho and Plaza de Gallos
pits. Drilling on San Ramon returned grades of 18.73 grams per tonne gold and 1,026 grams
per tonne silver, for a gold-equivalent grade of 34.5 grams per tonne, over an intercept
of 10 meters in hole OG-212. This occurred in a much larger intercept of 37.5 meters
grading 5.26 grams per tonne gold and 293 grams per tonne silver. East of this hole and at
a similar elevation, OG-210 encountered 2.0 meters grading 6.21 grams per tonne gold and
341 grams per tonne silver, for a gold-equivalent grade of 11.4 grams per tonne. This also
occurred within a much larger intercept of 23 meters grading 1.14 grams per tonne gold and
53 grams per tonne silver. The 63 holes reported from the Northeast Underground Project
Area produced 79 intercepts above an underground cut off grade of 3 g/t gold-equivalent.
Hole OU-193 encountered a silver grade of 7,052 grams per tonne silver and 14.0 grams per
tonne gold, for a gold-equivalent grade of 122.5 grams per tonne, over 1.8 meters.
Drilling in this area has also encountered a new high-grade structure, as demonstrated by
hole OU-169 grading 13.87 grams per tonne gold and 1,024 grams per tonne silver, over an
intercept of 7 meters. This intercept includes 2 meters grading 36.45 grams per tonne gold
and 2,350 grams per tonne silver, for a gold-equivalent grade of 72.6 grams per tonne.
Other significant results from drilling on this structure include hole OU-168 grading
45.00 grams per tonne gold and 4,590 grams per tonne silver, for a gold-equivalent grade
of 115.6 grams per tonne, over an intercept of 1 meter.

|                                                            
|------------------------------------------------------------
|Table 3-30:- Ocampo Underground Drill Hole Intercept Summary
|                                                            
|3.0g/t Gold-Equivalent Cut Off Grade                        
|                                                            
|
|                                                            
|Aventurero                                                  
|                                                            
|                                                            
|Aventurero                                                  
|                                                            
|                                                            
|Aventurero                                                  
|                                                            
|Chica Rica                                                  
|                                                            
|                                                            
|Aventurero                                                  
|                                                            
|Chica Rica                                                  
|                                                            
|Aventurero                                                  
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|Aventurero                                                  
|                                                            
|Chica Rica                                                  
|                                                            
|Balvanera                                                   
|                                                            
|Balvanera                                                   
|                                                            
|Las Animas                                                  
|                                                            
|Aventurero                                                  
|                                                            
|                                                            
|Aventurero                                                  
|                                                            
|Aventurero                                                  
|                                                            
|Chica Rica                                                  
|                                                            

44

---

|                                                            
|------------------------------------------------------------
|Table 3-30:- Ocampo Underground Drill Hole Intercept Summary
|                                                            
|3.0g/t Gold-Equivalent Cut Off Grade                        
|                                                            
|
|                                                            
|                                                            
|New Vein                                                    
|                                                            
|New Vein                                                    
|                                                            
|La  Esperanza                                               
|                                                            
|La  Esperanza                                               
|                                                            
|San Juan                                                    
|                                                            
|San Juan                                                    
|                                                            
|                                                            
|La  Esperanza                                               
|                                                            
|                                                            
|San Juan                                                    
|                                                            
|La  Esperanza                                               
|                                                            
|                                                            
|La Esperanza                                                
|                                                            
|Aventurero                                                  
|                                                            
|Aventurero                                                  
|                                                            
|Aventurero                                                  
|                                                            
|San Juan                                                    
|                                                            
|San Juan                                                    
|                                                            
|Aventurero                                                  
|                                                            
|La Esperanza                                                
|                                                            
|                                                            
|La  Esperanza                                               
|                                                            
|La  Esperanza                                               
|                                                            
|San Juan                                                    
|                                                            
|                                                            
|La Esperanza                                                
|                                                            
|Chica Rica                                                  
|                                                            
|New Structure                                               
|                                                            
|New Structure                                               
|                                                            
|New Structure                                               
|                                                            
|New Structure                                               
|                                                            
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|San Juan                                                    
|                                                            
|La  Esperanza                                               
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|San Juan                                                    
|                                                            
|New Structure                                               
|                                                            

45

---

|                                                            
|------------------------------------------------------------
|Table 3-30:- Ocampo Underground Drill Hole Intercept Summary
|                                                            
|3.0g/t Gold-Equivalent Cut Off Grade                        
|                                                            
|
|                                                            
|                                                            
|Las Animas                                                  
|                                                            
|                                                            
|San Juan                                                    
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|                                                            
|New Structure                                               
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|San Juan                                                    
|                                                            
|                                                            
|San Juan                                                    
|                                                            
|New Structure                                               
|                                                            
|New Structure                                               
|                                                            
|Las Animas System                                           
|                                                            
|                                                            
|Las Animas                                                  
|                                                            
|                                                            
|Las Animas                                                  
|                                                            
|San Juan                                                    
|                                                            
|San Juan                                                    
|                                                            
|No Name                                                     
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|                                                            
|New Structure                                               
|                                                            
|                                                            
|Las Animas                                                  
|                                                            
|                                                            
|New Structure                                               
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|                                                            
|San Juan                                                    
|                                                            
|Aventurero                                                  
|                                                            
|San Juan                                                    
|                                                            
|San Juan                                                    
|                                                            
|New Structure                                               
|                                                            
|New Structure                                               
|                                                            
|Las Animas                                                  
|                                                            

46

---

|                                                            
|------------------------------------------------------------
|Table 3-30:- Ocampo Underground Drill Hole Intercept Summary
|                                                            
|3.0g/t Gold-Equivalent Cut Off Grade                        
|                                                            
|
|                                                            
|                                                            
|Las Animas                                                  
|                                                            
|San Juan                                                    
|                                                            
|New Structure                                               
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|San Juan                                                    
|                                                            
|San Juan                                                    
|                                                            
|New Structure                                               
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|New Structure                                               
|                                                            
|                                                            
|Las Animas                                                  
|                                                            
|San Juan                                                    
|                                                            
|Las Animas                                                  
|                                                            
|Aventurero                                                  
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|Las Animas                                                  
|                                                            
|La Esperanza                                                
|                                                            
|La Esperanza                                                
|                                                            
|San Juan                                                    
|                                                            
|Aventurero                                                  
|                                                            
|Aventurero                                                  
|                                                            
|Chica Rica                                                  
|                                                            
|Aventurero                                                  
|                                                            
|                                                            
|San Juan South                                              
|                                                            
|San Juan South                                              
|                                                            
|Chica Rica                                                  
|                                                            
|Chica Rica                                                  
|                                                            
|San Juan South                                              
|                                                            
|Chica Rica                                                  
|                                                            
|San Juan South                                              
|                                                            
|                                                            
|San Juan South                                              
|                                                            
|                                                            
|                                                            

|Note: |  | Gold-Equivalent
values are based on 65 grams of silver = 1 gram of gold, calculated on a gold price of US
$400 and a silver price of US $6.15.  The widths above are drill intercepts and not true
widths.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

47

---

|                                                        
|--------------------------------------------------------
|Table 3-31: Ocampo Open Pit Drill Hole Intercept Summary
|                                                        
|3.0g/t Gold-Equivalent Cut Off Grade                    
|                                                        
|
|                                                        
|Picacho                                                 
|                                                        
|San Ramon                                               
|                                                        
|                                                        
|San Ramon                                               
|                                                        
|                                                        
|San Ramon                                               
|                                                        
|                                                        
|Between Picacho & SR                                    
|                                                        
|San Ramon                                               
|                                                        
|                                                        
|                                                        
|San Ramon                                               
|                                                        
|                                                        
|San Ramon                                               
|                                                        
|                                                        
|                                                        
|La Cueva (Picacho N)                                    
|                                                        
|Between Picacho & SR                                    
|                                                        
|                                                        
|San Ramon                                               
|                                                        
|San Ramon                                               
|                                                        
|                                                        
|San Ramon                                               
|                                                        
|                                                        
|                                                        
|San Ramon                                               
|                                                        
|San Ramon                                               
|                                                        
|                                                        
|San Ramon                                               
|                                                        
|                                                        
|                                                        
|San Ramon                                               
|                                                        
|San Ramon                                               
|                                                        
|                                                        
|                                                        
|                                                        
|                                                        
|San Ramon                                               
|                                                        
|                                                        
|                                                        
|                                                        

48

---

|                                                                 
|-----------------------------------------------------------------
|Table 3-31: Ocampo Open Pit Drill Hole Intercept Summary (cont'd)
|                                                                 
|3.0g/t Gold-Equivalent Cut Off Grade                             
|                                                                 
|
|                                                                 
|                                                                 
|San Ramon                                                        
|                                                                 
|                                                                 
|San Ramon                                                        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|San Ramon                                                        
|                                                                 

|Note: |  | Gold-Equivalent
values are based on 65 grams of silver = 1 gram of gold, calculated on a gold price of US
$400 and a silver price of US $6.15.  The widths above are drill intercepts and not true
widths.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Details of the results from the
eighth round of surface and underground drilling from ramp development at the Ocampo
Project area are provided in the Tables 3-32 and 3-33 below.

Drilling in the Northeast Underground
Area of the project returned 37 intercepts above a 3.0 gram per tonne cut off grade, in 47
holes. Significant results include hole OU-235 grading 26.2 grams per tonne
gold-equivalent (21.70 grams per tonne gold and 292 grams per tonne silver), over 1 meter.
This was contained in a larger interval grading 4.58 grams per tonne gold and 99 grams per
tonne silver, for a gold-equivalent grade of 6.1 grams per tonne, over 11 meters. Hole
OU-243 returned grades of 29.80 grams per tonne gold and 686 grams per tonne silver, or
40.4 grams per tonne gold-equivalent, over 1 meter. The results these 47 holes in this
area of the project are summarized in Table 3-32 below:

|                                                                                
|--------------------------------------------------------------------------------
|Table 3-32: Newly Reported Drill Results from Northeast Underground Project Area
|                                                                                
|3.0g/t Gold-Equivalent Cut Off Grade                                            
|                                                                                
|
|                                                                                
|                                                                                
|San Juan South                                                                  
|                                                                                
|Aventurero                                                                      
|                                                                                
|Chica Rica                                                                      
|                                                                                
|San Juan South                                                                  
|                                                                                
|                                                                                
|                                                                                
|Aventurero                                                                      
|                                                                                
|Chica Rica                                                                      
|                                                                                
|Aventurero                                                                      
|                                                                                
|Aventurero                                                                      
|                                                                                
|Aventurero                                                                      
|                                                                                
|Chica Rica                                                                      
|                                                                                
|Chica Rica                                                                      
|                                                                                
|Aventurero                                                                      
|                                                                                
|Aventurero                                                                      
|                                                                                

49

---

|                                                                                         
|-----------------------------------------------------------------------------------------
|Table 3-32: Newly Reported Drill Results from Northeast Underground Project Area (cont'd)
|                                                                                         
|3.0g/t Gold-Equivalent Cut Off Grade                                                     
|                                                                                         
|
|                                                                                         
|                                                                                         
|Aventurero                                                                               
|                                                                                         
|                                                                                         
|                                                                                         
|Aventurero                                                                               
|                                                                                         
|Aventurero                                                                               
|                                                                                         
|Aventurero                                                                               
|                                                                                         
|Aventurero                                                                               
|                                                                                         
|Aventurero                                                                               
|                                                                                         
|                                                                                         
|                                                                                         
|Aventurero                                                                               
|                                                                                         
|Aventurero                                                                               
|                                                                                         
|Aventurero                                                                               
|                                                                                         
|Maria                                                                                    
|                                                                                         
|                                                                                         
|San Juan South                                                                           
|                                                                                         
|                                                                                         
|San Juan                                                                                 
|                                                                                         
|Aventurero                                                                               
|                                                                                         
|San Juan                                                                                 
|                                                                                         
|San Juan South                                                                           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|San Juan                                                                                 
|                                                                                         
|New Structure                                                                            
|                                                                                         
|Maria                                                                                    
|                                                                                         
|                                                                                         
|San Juan                                                                                 
|                                                                                         
|San Juan                                                                                 
|                                                                                         

|Note: |  | Gold-Equivalent
values are based on 65 grams of silver = 1 gram of gold, calculated on a gold price of US
$400 and a silver price of US $6.15.  The widths above are drill intercepts and not true
widths. Holes OU-195, 197, 210, 215, 217, 220, 222, 227, 229, 234,
237-238 & 242 encountered low grade.  Holes OU-205, 208, 218, 221, 228, 233
& 236 were abandoned.  Hole OU-199 is a mine service hole.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The 72 new holes reported from the
Open Pit Project Area produced 57 intercepts above an open pit cut off grade of 0.3 grams
per tonne. Further testing of the newly drilled San Ramon Structure continues to yield
high-grade intercepts, over significant widths. These include hole OG-296 grading 7.93
grams per tonne gold and 668 grams per tonne silver, for a gold-equivalent grade of 18.2
grams per tonne, over 2 meters. This was included in a much larger intercept grading 1.11
grams per tonne gold and 63 grams per tonne silver, or 2.1 grams per tonne
gold-equivalent, over 48 meters, and starting at a depth of 27 meters. Other significant
results from this round of drilling include OG-192 grading 1,000 grams per tonne silver,
or 15.4 grams per tonne gold-equivalent, over 1.5 meters, and hole OG-265 grading 14.04
grams per tonne gold and 47 grams per tonne silver, for a gold-equivalent grade of 14.8
grams per tonne, over 2 meters. The results of these 72 holes are summarized in Table
3-33 on the following page:

50

---

|                                                                       
|-----------------------------------------------------------------------
|Table 3-33: Newly Reported Drill Results from the Open Pit Project Area
|                                                                       
|3.0g/t Gold-Equivalent Cut Off Grade                                   
|                                                                       
|
|                                                                       
|                                                                       
|La Estrella                                                            
|                                                                       
|Refugio                                                                
|                                                                       
|                                                                       
|                                                                       
|Shaft-Geotech                                                          
|                                                                       
|Conico Hanging wall Structure                                          
|                                                                       
|Refugio Hanging wall                                                   
|Structure                                                              
|                                                                       
|Refugio                                                                
|                                                                       
|Adularia Ridge                                                         
|                                                                       
|Refugio                                                                
|                                                                       
|Resureccion                                                            
|                                                                       
|PdG Hanging wall Structure                                             
|                                                                       
|PdG Hanging wall Structure                                             
|                                                                       
|PdG Hanging wall Structure                                             
|                                                                       
|San Amado                                                              
|                                                                       
|PdG Hanging wall Structure                                             
|                                                                       
|Santa Juliana Extension                                                
|                                                                       
|PdG Hanging wall Structure                                             
|                                                                       
|Refugio Hanging wall                                                   
|Structure                                                              
|                                                                       
|PdG Hanging wall Structure                                             
|                                                                       
|PdG Hanging wall Structure                                             
|                                                                       
|Rosario                                                                
|                                                                       
|Rosario                                                                
|                                                                       
|La Gloria                                                              
|                                                                       
|Refugio                                                                
|                                                                       
|Refugio                                                                
|                                                                       
|Refugio                                                                
|                                                                       
|Santa Juliana Extension                                                
|                                                                       
|Santa Teodora                                                          
|                                                                       
|Santa Teodora                                                          
|                                                                       
|Santa Teodora                                                          
|                                                                       
|Santa Teodora                                                          
|                                                                       
|Refugio Hanging wall                                                   
|Structure                                                              
|                                                                       
|                                                                       
|La Estrella                                                            
|                                                                       
|La Estrella                                                            
|                                                                       
|Santa Teodora                                                          
|                                                                       
|La Estrella                                                            
|                                                                       
|Refugio                                                                
|                                                                       
|                                                                       
|                                                                       

51

---

|                                                                       
|-----------------------------------------------------------------------
|Table 3-33: Newly Reported Drill Results from the Open Pit Project Area
|                                                                       
|3.0g/t Gold-Equivalent Cut Off Grade                                   
|                                                                       
|
|                                                                       
|                                                                       
|Santa Teodora                                                          
|                                                                       
|                                                                       
|                                                                       
|Santa Teodora                                                          
|                                                                       
|                                                                       
|La Gloria                                                              
|                                                                       
|                                                                       
|                                                                       
|San Ramon                                                              
|                                                                       
|San Ramon                                                              
|                                                                       
|                                                                       
|Sta Teodora System                                                     
|                                                                       
|Sta Teodora System                                                     
|                                                                       
|San Ramon                                                              
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|San Ramon                                                              
|                                                                       
|San Ramon                                                              
|                                                                       
|                                                                       
|La Estrella                                                            
|                                                                       
|San Ramon                                                              
|                                                                       
|                                                                       
|                                                                       
|San Ramon                                                              
|                                                                       
|                                                                       
|                                                                       
|                                                                       

|Note: |  | Gold-Equivalent
values are based on 65 grams of silver = 1 gram of gold, calculated on a gold price of US
$400 and a silver price of US $6.15.  The widths above are drill intercepts and not true
widths. Holes OG-143, 153-154, 203, 207, 218-219, 225, 230, 232, 241, 245,
253-254, 259, 274, 278, 279-281, 283 & 292-293 encountered low grade.  Holes
OG 141, 149, 166-167 & 187 were abandoned.  Holes OG-145-148, 151-152,
155-156, 158-159, 162, 168-169, 171-174, 177, 179-180, 183, 188, 196, 198-199,
201-202, 204-206, 208-209, 213-214, 217, 234-238, 240, 243-244, 246, 248,
251-252, 255-256, 260, 264, 288-289 & 291 are geotechnical and
condemnation holes drilled for site planning purposes.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Details of the results from a total
of 54 exploration holes from step-out and in-fill drilling completed in both the Northeast
Underground Area and the Open Pit Area of the Ocampo Project are provided in Tables 3-34
and 3-35 below.

A total of 39 new holes drilled in
the Northeast Underground Area of the project produced 42 intercepts above a 3.0 gram per
tonne underground cut off grade. Highlights include hole OU-280 intersecting 2.3 meters
grading 58.98 grams per tonne gold and 1,999 grams per tonne silver, for a
gold-equivalent grade of 89.7 grams per tonne. Included in this interval is 0.8 meters
grading 165.50 grams per tonne gold and 5,630 grams per tonne silver. This equates to a
gold-equivalent grade of 252.2 grams per tonne, or 8.1 ounces per tonne. Hole OU-273
encountered 1 meter grading 65.00 grams per tonne gold and 2,590 grams per tonne silver,
for a gold-equivalent grade of 104.8 grams per tonne, or 3.4 ounces per tonne.

52

---

Significant results from drilling in
the Northeast Underground Project area are summarized in Table 3-34 below.

|                                                                                    
|------------------------------------------------------------------------------------
|Table 3-33: Newly Reported Drill Results from the Northeast Underground Project Area
|                                                                                    
|3.0g/t Gold-Equivalent Cut Off Grade                                                
|                                                                                    
|
|                                                                                    
|Maria                                                                               
|                                                                                    
|San Juan                                                                            
|                                                                                    
|Maria                                                                               
|                                                                                    
|San Juan                                                                            
|                                                                                    
|New Vein                                                                            
|                                                                                    
|San Juan                                                                            
|                                                                                    
|Maria                                                                               
|                                                                                    
|San Juan                                                                            
|                                                                                    
|San Juan                                                                            
|                                                                                    
|                                                                                    
|San Juan                                                                            
|                                                                                    
|Maria                                                                               
|                                                                                    
|Maria                                                                               
|                                                                                    
|Maria                                                                               
|                                                                                    
|Maria                                                                               
|                                                                                    
|                                                                                    
|Chica Rica                                                                          
|                                                                                    
|Chica Rica                                                                          
|                                                                                    
|Aventurero                                                                          
|                                                                                    
|Chica Rica                                                                          
|System                                                                              
|                                                                                    
|Aventurero                                                                          
|                                                                                    
|New Vein                                                                            
|                                                                                    
|Balvanera                                                                           
|                                                                                    
|Balvanera                                                                           
|System HW                                                                           
|                                                                                    
|Las Animas                                                                          
|                                                                                    
|                                                                                    
|La Esperanza                                                                        
|                                                                                    
|San Juan                                                                            
|                                                                                    
|                                                                                    
|Chica Rica                                                                          
|System                                                                              
|                                                                                    
|Chica Rica                                                                          
|                                                                                    
|Chica Rica                                                                          
|System                                                                              
|                                                                                    
|Balvanera                                                                           
|                                                                                    
|Las Animas                                                                          
|System                                                                              
|                                                                                    
|Las Animas                                                                          
|                                                                                    
|                                                                                    

53

---

|                                                                                    
|------------------------------------------------------------------------------------
|Table 3-33: Newly Reported Drill Results from the Northeast Underground Project Area
|                                                                                    
|3.0g/t Gold-Equivalent Cut Off Grade                                                
|                                                                                    
|
|                                                                                    
|                                                                                    
|La Esperanza                                                                        
|System                                                                              
|                                                                                    
|La Esperanza                                                                        
|                                                                                    
|San Juan                                                                            
|                                                                                    
|La Esperanza                                                                        
|                                                                                    
|San Juan                                                                            
|                                                                                    
|La Esperanza                                                                        
|                                                                                    
|San Juan System                                                                     
|                                                                                    
|San Juan                                                                            
|                                                                                    
|                                                                                    
|Los Muertos                                                                         
|                                                                                    
|Las Animas                                                                          
|                                                                                    
|                                                                                    

|Note: |  | Gold-Equivalent
values are based on 65 grams of silver = 1 gram of gold, calculated on a gold price of US
$400 and a silver price of US $6.15.  The widths above are drill intercepts and not true
widths. Holes OG-247, 249, 254, 256, 259, 261-262, 266, 268, 270, 274 & 279
encountered low grades.  Hole OU-251 was abandoned.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Drilling conducted in the Open Pit
Area of the project returned 18 intercepts above an open pit cut off grade of 0.3 grams
per tonne, in 15 holes. Drilling in this area of the project has encountered a number of
high grade intervals significantly above the 0.3 gram per tonne cut off. Examples include
hole OG-312 grading 6.1 grams per tonne gold-equivalent (3.22 g/t gold and 188 g/t
silver), over 3 meters, and hole OG-311 grading 2.6 grams per tonne gold-equivalent (1.05
g/t gold and 98 g/t silver), also over a 3 meter interval. Results from drilling in the
open pit area also continue to demonstrate shallowly emplaced mineralization over
significant interval widths. Highlights include hole OG-310 grading 0.73 grams per tonne
gold and 44 grams per tonne silver, for a gold-equivalent grade of 1.4 grams per tonne,
from surface, to a depth of 29 meters. Included within this interval is 1 meters grading
11.85 grams per tonne gold and 641 grams per tonne silver, or 21.7 grams per tonne
gold-equivalent. Significant results from this round of drilling in the Open Pit Project
area are summarized in Table 3-35 on the following page:

54

|                                                                       
|-----------------------------------------------------------------------
|Table 3-35: Newly Reported Drill Results from the Open Pit Project Area
|                                                                       
|3.0g/t Gold-Equivalent Cut Off Grade                                   
|                                                                       
|
|                                                                       
|                                                                       
|San Ramon                                                              
|                                                                       
|                                                                       
|                                                                       
|San Ramon                                                              
|                                                                       
|San Ramon                                                              
|                                                                       
|Picacho Pit Wall                                                       
|                                                                       
|Refugio Pit Wall                                                       
|                                                                       
|Refugio Pit Wall                                                       
|                                                                       
|Refugio Footwall                                                       
|                                                                       
|Refugio Pit Wall                                                       
|                                                                       
|Refugio Footwall                                                       
|                                                                       
|Plaza de Gallos Pit                                                    
|Wall                                                                   
|                                                                       
|Refugio Pit Wall                                                       
|                                                                       
|                                                                       
|Refugio Pit Wall                                                       
|includes                                                               
|                                                                       
|Plaza de Gallos Pit                                                    
|Wall                                                                   
|                                                                       
|Plaza de Gallos                                                        
|Footwall                                                               
|                                                                       
|Refugio Pit Wall                                                       
|                                                                       
|                                                                       

|Note: |  | Gold-Equivalent
values are based on 65 grams of silver = 1 gram of gold, calculated on a gold price of US
$400 and a silver price of US $6.15.  The widths above are drill intercepts and not true
widths. Holes OG-299 & 302 encountered low grades.
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Early in 2005, the Corporation
appointed KCA for mill and heap leach construction and commissioning and assembled a
senior mine development and operations management team to put the Ocampo Project into
production. Groundbreaking for the construction of the Ocampo underground and open-pit
mines and two surface processing facilities began in early March 2005. All underground and
open pit mining equipment has been procured. Mine construction and development at the
Ocampo Project remains on budget and on schedule for gold-silver production to commence
within the first quarter of the 2006 calendar year. All major earthworks have been
completed. Site clearing in the start-up open pit area, encompassing 200 hectares, is
complete, and all major components for the heap leach crusher area have been delivered to
site. Staff housing is on the verge of being completed and more than 7 kilometers of
underground development in ramps and tunnels has been completed in the underground mine
area. Initial extraction of ore from the development portions of the upper level of the
underground mine began in early July 2005 and is being stockpiled for the completed mill
facilities, scheduled for the first quarter of 2006.

Mr.           Jim McGlasson, P.Geo., Chief Geologist of the Corporation, is the qualified
          person responsible for all technical data reported herein since completion of
          the KCA Report.

55

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|3.2.2. | Investment in Mexgold Resources Inc.
|------ | ------------------------------------

In December 2002, the Corporation
made a strategic investment by acquiring 5.0 million shares of Mexgold Resources Inc.
(Mexgold) for a purchase price of $500,000 ($0.10 per share). Mexgold is a
junior gold and silver mining company engaged in acquiring, exploring and developing
precious metals projects in Mexico. Subsequent to making this investment, Mexgold
completed a reverse take-over transaction whereupon its common shares were listed for
trading on the TSX Venture Exchange under the trading symbol, MGR. Pursuant to
an agreement with Mexgold, these shares must be held until August 20, 2009, and there will
be no sale, transfer, assignment, pledge, encumbrance, grant of a security interest in or
other form of conveyance of these shares, directly, indirectly or beneficially, prior to
that time unless Mexgold so consents in writing thereto.

Mexgold holds a 100% ownership of
five mining concessions encompassing the Guadalupe y Calvo gold/silver property. The
Guadalupe y Calvo gold/silver project is located in the Sierra Madres in the state of
Chihuahua, Mexico, approximately 300 kilometers southwest of the city of Chihuahua and 200
kilometers west of the city of Hidalgo de Parral.

On February 26, 2004, the Corporation
invested a further $11.8 million into Mexgold Resources Inc. to maintain its 25% interest
in Mexgold. This investment was part of a Mexgold private placement financing consisting
of the sale of 22.5 million subscription receipts (the Subscription Receipts)
at a price of $2.00 per Subscription Receipt for gross proceeds of $45,000,000. Each
Subscription Receipt represented the right to receive one Unit upon completion of the
acquisition of the El Cubo Gold-Silver Mine. Each Unit consists of one common share of
Mexgold and one-half of one common share purchase warrant. Each whole warrant entitles the
holder to acquire one common share at a price of $2.50 per share until February 26, 2006.
The Corporation acquired 5.9 million Subscription Receipts out of the total financing for
a total purchase price of $11.8 million on the same basis as all the other investors in
the financing.

On March 5, 2004, Mexgold acquired
the El Cubo Gold-Silver Mine in Guanajuato State, Mexico. The El Cubo Gold-Silver Mine is
located in the Guanajuato gold-silver district in the Republic of Mexico, near the City of
Guanajuato in Guanajuato State. Pursuant to the terms of the Subscription Receipts, the
Subscription Receipts were deemed to have been exercised as at 5:00 p.m. (Toronto time) on
March 15, 2004, and the common shares and warrants of Mexgold underlying the Subscription
Receipts were issued to the holders of the Subscription Receipts.

On October 12, 2004, Mexgold entered
into a lease agreement with a subsidiary of Industrias Peñoles, S.A. de C.V., for
the Las Torres Mine, immediately adjacent to the El Cubo Mine. The Las Torres Mine
comprises a group of four working mines, consisting of the Cedros, Peregrina, Apolo and
Sirena mines. Each of these mines has been maintained on a care and maintenance basis, and
no special measures are required to resume operations. Pursuant to the Las Torres lease,
Mexgold has the right to explore, develop and mine the Las Torres property for a period of
5 years, with the right to renew for a further five year period. Annual lease payments
total US $480,000 in the first year, and US $720,000 each year thereafter. In addition,
Mexgold is required to pay a 3.5% net smelter return on all gold and silver sales equal to
or above US $350 per ounce gold and US $5.50 per ounce silver. The Peñoles
agreement also includes use of the Las Torres mill complex, a modern, fully functional
2,200 tpd hoisting, grinding and flotation processing facility, with an estimated
replacement cost of US $17-million.

In February 2005, Mexgold reported
significant results from exploration work at the companys El Cubo Gold-Silver Mine
in Guanajuato, Mexico. Channel sampling in a new area of exploration in the mine has
resulted in the discovery of a new gold-silver zone. Sampling conducted along a length of
38 meters returned average grades of 70.9 grams per tonne gold and 505 grams per tonne
silver, over average widths of

56

---

4.3 meters. This translates to an
average gold equivalent grade of 78.7 grams per tonne. Furthermore, these grades occurred
within a 76 meter length with average grades of 45.1 grams per tonne gold and 311 grams
per tonne silver, for a gold equivalent grade of 49.9 grams per tonne, over average
widths of 4.0 meters. Gold equivalent grades are based on 65 grams of silver = 1 gram of
gold, calculated on a gold price of US$400 and a silver price of US $6.15.

In August 2005, Mexgold reported the
results from 54 new exploration drill holes completed at the El Cubo  Las Torres
Mine complex and the Guadalupe y Calvo Project. A total of 46 new holes were drilled at
the El Cubo  Las Torres Mine complex producing 41 intercepts above an underground
cut off grade of 3 grams per tonne gold equivalent, and a 0.25 gram per tonne gold
equivalent cut off grade for potential bulk tonnage targets. Significant results include
hole C-287, drilled on the Anabel structure, intersecting 99.43 grams per tonne gold and
942 grams per tonne silver, for a gold equivalent grade of 113.9 grams per tonne, over 1.8
meters. This was included in a larger interval of 10 meters grading 15.84 grams per tonne
gold and 280 grams per tonne silver. Hole C-302, drilled on the Marmajas structure,
encountered mineralization from surface to a depth of 3.3 meters grading 59.20 grams per
tonne gold and 1,345 grams per tonne silver, for a gold equivalent grade of 79.9 grams per
tonne.

Mexgold and the Corporation have
certain common directors and officers. Mr. Jim McGlasson, P.Geo., Chief Geologist of the
Corporation, is the qualified person responsible for all technical data reported herein
regarding Mexgold Resources Inc.

|3.3 | Risk Factors
|--- | ------------

An investment in the securities of
the Corporation is speculative and involves numerous and significant risks and should be
undertaken only by purchasers whose financial resources are sufficient to enable them to
assume such risks and who have no need for immediate liquidity in their investment.
Prospective investors should carefully consider the risk factors described below.

|3.3.1 | No History of Profitability
|----- | ---------------------------

The Corporation is a development
stage company with no history of profitability. There can be no assurance that the
operations of the Corporation will be profitable in the future. The Corporation has
limited financial resources and will require additional financing to further explore,
develop, acquire, retain and engage in commercial production on its property interests
and, if financing is unavailable for any reason, the Corporation may become unable to
acquire and retain its mineral concessions and carry out its business plan.

|3.3.2 | Exploration and Development Stage Corporation
|----- | ---------------------------------------------

The Corporation is engaged in the
business of exploration and development of the Ocampo Project in the hope of locating
economic deposits of minerals. The property interests of the Corporation are in the
exploration and development stage only. Although a commercial body of ore has been
identified on the Ocampo Project, there is no assurance that it can be mined profitably.
Accordingly, it is not assured that the Corporation will realize any profits in the short
to medium term. Any profitability in the future from the business of the Corporation will
be dependent upon developing and commercially mining an economic deposit of minerals,
which itself is subject to numerous risk factors. The exploration and development of
mineral deposits involve a high degree of financial risk over a significant period of
time of which even a combination of careful evaluation, experience and knowledge of
management may not eliminate. While discovery of additional ore-bearing structures may
result in substantial rewards, few properties which are explored are ultimately developed
into producing mines. Major expenses may be required to establish reserves by drilling
and to construct mining and processing facilities at a particular site. It is impossible
to

57

---

ensure that the current exploration
and development programs of the Corporation will result in profitable commercial mining
operations. The profitability of the Corporations operations will be, in part,
directly related to the cost and success of its exploration and development programs
which may be affected by a number of factors. Substantial expenditures are required to
establish reserves which are sufficient to commercially mine some of the Corporations
properties and to construct, complete and install mining and processing facilities in
those properties that are actually mined and developed.

|3.3.3 | Foreign Operations
|----- | ------------------

All of the Corporations
property interests are located in the State of Chihuahua, Mexico, and are subject to that
jurisdictions laws and regulations. The Corporation believes the present attitude of
Mexico and the State of Chihuahua to foreign investment and mining to be favourable but
investors should assess the political risks of investing in a foreign country. Any
variation from the current regulatory, economic and political climate could have an
adverse effect on the affairs of the Corporation.

|3.3.4 | Government Regulations
|----- | ----------------------

The Corporations exploration
operations are subject to government legislation, policies and controls relating to
prospecting, development, production, environmental protection, mining taxes and labour
standards. In order for the Corporation to carry out its mining activities, the
Corporations exploitation licences must be kept current. There is no guarantee that
the Corporations exploitation licences will be extended or that new exploitation
licences will be granted. In addition, such exploitation licences could be changed and
there can be no assurances that any application to renew any existing licences will be
approved. The Corporation may be required to contribute to the cost of providing the
required infrastructure to facilitate the development of its properties. The Corporation
will also have to obtain and comply with permits and licences which may contain specific
conditions concerning operating procedures, water use, waste disposal, spills,
environmental studies, abandonment and restoration plans and financial assurances. There
can be no assurance that the Corporation will be able to comply with any such conditions.

|3.3.5 | Market Fluctuation and Commercial Quantities
|----- | --------------------------------------------

The market for minerals is influenced
by many factors beyond the control of the Corporation such as changing production costs,
the supply and demand for minerals, the rate of inflation, the inventory of mineral
producing corporations, the international economic and political environment, changes in
international investment patterns, global or regional consumption patterns, costs of
substitutes, currency availability and exchange rates, interest rates, speculative
activities in connection with minerals, and increased production due to improved mining
and production methods. The metals industry in general is intensely competitive and there
is no assurance that, even if commercial quantities and qualities of metals are
discovered, a market will exist for the profitable sale of such metals. Commercial
viability of precious and base metals and other mineral deposits may be affected by other
factors that are beyond the Corporations control including particular attributes of
the deposit such as its size, quantity and quality, the cost of mining and processing,
proximity to infrastructure and the availability of transportation and sources of energy,
financing, government legislation and regulations including those relating to prices,
taxes, royalties, land tenure, land use, import and export restrictions, exchange
controls, restrictions on production, as well as environmental protection. It is
impossible to assess with certainty the impact of various factors which may affect
commercial viability so that any adverse combination of such factors may result in the
Corporation not receiving an adequate return on invested capital.

58

---

|3.3.6 | Mining Risks and Insurance
|----- | --------------------------

The Corporation is subject to risks
normally encountered in the mining industry, such as unusual or unexpected geological
formations, cave-ins or flooding. The Corporation may become subject to liability for
pollution, damage to life or property and other hazards of mineral exploration against
which it or the operator if its exploration programs cannot insure or against which it or
such operator may elect not to insure because of high premium costs or other reasons.
Payment of such liabilities would reduce funds available for acquisition of mineral
prospects or exploration and development and would have a material adverse affect on the
financial position of the Corporation.

|3.3.7 | Environmental Protection
|----- | ------------------------

The mining and mineral processing
industries are subject to extensive governmental regulations for the protection of the
environment, including regulations relating to air and water quality, mine reclamation,
solid and hazardous waste handling and disposal and the promotion of occupational health
and safety which may adversely affect the Corporation or require it to expend significant
funds.

|3.3.8 | Capital Investment
|----- | ------------------

The ability of the Corporation to
continue exploration and development of its property interests will be dependent upon its
ability to raise significant additional financing hereafter. There is no assurance that
adequate financing will be available to the Corporation or that the terms of such
financing will be favourable. Should the Corporation not be able to obtain such financing,
its properties may be lost entirely. A summary of the Corporations financial
commitments under the Corporations option and joint venture agreements is provided
in the following table. Also refer to Item 3: Description of Business  3.2
Mineral Projects  3.2.1. Ocampo Project.

|                                     
|-------------------------------------
|
|                                     
|Minera Fuerte Joint Venture Agreement
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|Soyopa Joint Venture Agreement       
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     

|3.3.9 | Conflicts of Interest
|----- | ---------------------

Certain of the directors and officers
of the Corporation also serve as directors of Mexgold Resources Inc. and other companies
involved in natural resource exploration and development and consequently, the possibility
of conflict exists. The Corporations investment in Mexgold Resources Inc. is
described in, Item 3: Description of the Business  3.2 Mineral Projects 
3.2.2. Investment in Mexgold Resources Inc.. Any decisions made by such directors
involving the Corporation will be made in accordance with the duties and obligations of
directors to deal fairly and in good faith with the Corporation and such other companies.
In addition, such directors declare, and refrain from voting on any matters in which such
directors may have a conflict of interest.

59

---

|3.3.10 | Dependence on Key Personnel
|------ | ---------------------------

The success of the Corporation is
heavily dependent on its key personnel and on its ability to motivate, retain and attract
highly skilled persons. The competition for qualified personnel is strong. The Corporation
considers Messrs. Fred George and Bradley H. Langille to be key employees and maintains
life insurance in the amount of $1,000,000 on the lives of each of these officers. In
order to attract and retain its key personnel, the Corporation has sought to provide its
personnel with challenging work and a variety of opportunities for advancement through
growth and expansion of the Corporations business, and through equity participation.

|3.3.11 | Lack of Active Market
|------ | ---------------------

There can be no assurance that an
active market for the common shares of the Corporation will continue and any increased
demand to buy or sell the common shares of the Corporation can create volatility in price
and volume.

|3.3.12 | Currency
|------ | --------

The Corporation carries on its
exploration activity outside of Canada. Accordingly, it is subject to the risks associated
with the fluctuation of the rate of exchange of the Canadian dollar and foreign
currencies, in particular the Mexican peso, the currency of Mexico, and the United States
dollar. Such fluctuations may materially affect the Corporations financial position
and results.

|3.3.13 | Dividends
|------ | ---------

To date, the Corporation has paid no
dividends on its Common Shares and does not intend to pay dividends on its Common Shares
in the foreseeable future. See Item 4: Dividends.

|3.3.14 | Competition
|------ | -----------

The international mining industry is
subject to government controls and regulations which may vary from time to time. The
industry is highly competitive in all phases. The Corporation competes with numerous other
companies and individuals in the search for and the acquisition of attractive mineral
properties. The Corporations ability to acquire properties and potential reserves in
the future will depend not only on its ability to develop its present properties, but also
on its ability to select and acquire suitable producing properties or prospects for
mineral exploration. The Corporation will also be required to compete in the future
directly with other companies that may have greater resources.

|3.3.15 | Possible PFIC Status
|------ | --------------------

Shareholders who are U.S. taxpayers
should be aware that the Corporation may be a passive foreign investment company (PFIC)
for the current fiscal year; and may have been a PFIC in prior years or may become a PFIC
in the future. If the Corporation is a PFIC for any year during a U.S. taxpayers
holding period, then such U.S. taxpayer, generally, will be required to treat any so
called excess distribution received on its common shares, or any gain
realized upon a disposition of common shares, as ordinary income and to pay an interest
charge on a portion of such distribution or gain, unless the taxpayer makes a qualified
electing fund (QEF) election or a mark-to-market election with respect to the
shares of the Corporation. In certain circumstances, the sum of the tax and the interest
charge may exceed the amount of the excess distribution received, or the amount of
proceeds of disposition realized, by the taxpayer. There can be no assurance that the
Corporation will satisfy such information reporting requirements or the related record
keeping requirements. A U.S. taxpayer who makes a QEF election generally must report on a
current basis its share of the Corporations net capital gain and ordinary earnings
for any year in

60

---

which the Corporation is a PFIC,
whether or not the Corporation distributes any amounts to its shareholders. A U.S.
taxpayer who makes the mark-to-market election, generally, must include as ordinary
income in each year, the excess of the fair market value of the common shares over the
taxpayers tax basis therein.

ITEM 4:   DIVIDENDS

The Corporation has not declared or
paid any dividends on its Common Shares since the date of its incorporation. The
Corporation intends to retain its earnings, if any, to finance the growth and development
of its business and does not expect to pay dividends or make any other distributions in
the near future. The Corporations board of directors will review this policy from
time to time having regard to the Corporations financing requirements, financial
condition and other factors considered to be relevant.

ITEM 5:   DESCRIPTION OF
CAPITAL STRUCTURE

|5.1 | General
|--- | -------

The Corporations authorized
capital consists of an unlimited number of common shares without nominal or par value, an
unlimited number of Class A preferred shares and an unlimited number of Class B preferred
shares. A total of 73,536,524 common shares are issued and outstanding as at the date of
this annual information form. There are no Class A or Class B preferred shares currently
outstanding.

|5.2 | Common Shares
|--- | -------------

Each common share ranks equally with
all other common shares with respect to dissolution, liquidation or winding-up of the
Corporation and payment of dividends. The holders of common shares are entitled to one
vote for each share of record on all matters to be voted on by such holders and are
entitled to receive pro rata such dividends as may be declared by the board of directors
of the Corporation out of funds legally available therefor and to receive pro rata the
remaining property of the Corporation on dissolution. The holders of common shares have no
pre-emptive or conversion rights. The rights attaching to the common shares can only be
modified by the affirmative vote of at least two-thirds of the votes cast at a meeting of
shareholders called for that purpose.

|5.3 | Class A and Class B Preferred Shares
|--- | ------------------------------------

The Class A and Class B preferred
shares are non-cumulative, non-participating, non-voting and redeemable at their paid-in
value. Dividends on the Class A and Class B preferred shares are determined by the board
of directors and are not to exceed 12% in the case of the Class A preferred shares and 13%
in the case of the Class B preferred shares. The Class A and Class B preferred shares are
entitled to preference over the Common Shares and any other shares of the Corporation
ranking junior to the Class A and Class B preferred shares with respect to the payment of
dividends and the distribution of assets in the event of liquidation, dissolution or
winding-up of the Corporation. Any amendment to the articles of the Corporation to vary
any rights, privileges, restrictions or conditions attaching to the Class A or Class B
preferred shares must, in addition to authorization by special resolution, be authorized
by at least two-thirds of the votes cast at a meeting of holders of Class A or Class B
preferred shares duly called for such purpose, each holder being entitled to one vote for
each preferred share held.

61

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ITEM 6:   MARKET FOR
SECURITIES

|6.1 | Trading Price and Volume
|--- | ------------------------

The Common Shares of the Corporation
have been listed and posted for trading on the Toronto Stock Exchange (the
TSX) since February 18, 2000, under the trading symbol GAM. The
Common Shares of the Corporation have been listed and posted for trading on the American
Stock Exchange since September 4, 2003, under the trading symbol GRS. The
following table sets forth the high and low trading prices and trading volume of the
Common Shares as reported by the TSX for the periods indicated:

|                    
|--------------------
|
|                    
|October 1 - 17, 2005
|                    
|September 2005      
|                    
|August 2005         
|                    
|July 2005           
|                    
|June 2005           
|                    
|May 2005            
|                    
|April 2005          
|                    
|March 2005          
|                    
|February 2005       
|                    
|January 2005        
|                    
|December 2004       
|                    
|November 2004       
|                    
|October 2004        
|                    
|September 2004      
|                    
|August 2004         
|                    

|6.2 | Prior Sales
|--- | -----------

The following table contains details
of the prior sales of securities of the Corporation during the twelve months ended July
31, 2005 and to the date of this Annual Information Form:

|                 
|-----------------
|
|                 
|December 16, 2004
|                 

| | Note:
| | -----

| |  | (1) |  | Pursuant
to a private placement of 15,715,000 Special Warrants at a price of $7.00 per Special
Warrant for gross proceeds of      $110,005,000.
| |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------

ITEM 7:   ESCROWEDSECURITIES

To the knowledge of the Corporation,
there are no securities of the Corporation which are held in escrow.

ITEM 8:   DIRECTORS AND
OFFICERS

The management of the Corporation
consists of four (4) executive officers and eight (8) directors. The table presented below
provides the names of and related information concerning each executive officer and
director. Each director holds office until the close of the next annual meeting of
shareholders or until his successor is duly elected or appointed.

62

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|                                   
|-----------------------------------
|
|                                   
|Fred George                        
|Bedford, Nova Scotia               
|Chairman and President             
|                                   
|                                   
|Bradley H. Langille (4)            
|Halifax, Nova Scotia               
|                                   
|                                   
|                                   
|Colin P. Sutherland, C.A., C.F.P   
|Hammonds Plains, Nova Scotia       
|Chief Financial Officer            
|                                   
|John C. Thornton                   
|Tucson, Arizona                    
|Chief Operating Officer            
|                                   
|Gregory K. Liller                  
|Tucson, Arizona                    
|Vice-President, Exploration        
|                                   
|Alejandro Caraveo(4)               
|Chihuahua City, Mexico             
|President, Compania Tecnica Minera,
|S.A. de C.V                        
|                                   
|Dale M. Hendrick(1)(2)(4)          
|Toronto, Ontario                   
|President, Dale M. Hendrick &      
|Associates Inc.                    
|                                   
|Kent L. Noseworthy(1)(2)(3)        
|Halifax, Nova Scotia               
|Barrister & Solicitor              
|                                   
|Frank Conte(1)(2)(3)               
|Eastern Passage, Nova Scotia       
|Retired Executive                  
|                                   
|Canek Rangel(1)(3)                 
|Mexico City, Mexico                
|Mining Engineer                    
|                                   

| | Notes:
| | ------

| |  | (1) |  | Member
of the Audit Committee.  See "Item 15: Audit Committee Information".
| |  | --- |  | ---------------------------------------------------------------------------

| |  | (2) |  | Member
of the Nominating and Corporate Governance Committee.
| |  | --- |  | ------------------------------------------------------------

| |  | (3) |  | Member
of the Compensation Committee.
| |  | --- |  | -------------------------------------

| |  | (4) |  | Member
of the Occupational Health and Safety Committee
| |  | --- |  | ------------------------------------------------------

| |  | (5) |  | Represents
approximately 1% of the outstanding Common Shares of the Corporation.
| |  | --- |  | --------------------------------------------------------------------------------

| |  | (6) |  | A
portion of the  above-noted  options held by directors and senior  officers are subject
to shareholder  approval:  Fred          George            (500,000), Bradley H. Langille
(300,000) and Colin P. Sutherland (75,000).
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Each of the directors and officers
has had the principal occupation listed under his name above for the last five years.

As at the date of this annual
information circular, the directors and senior officers of the Corporation, as a group,
beneficially own, directly or indirectly, or exercise control or direction over an
aggregate of 1,562,250 Common Shares (9,725,750 Common Shares if all options held by them
are exercised), representing 2.1% of the currently outstanding Common Shares (11.9% of the
Common Shares on a fully diluted basis)

63

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ITEM 9:   PROMOTERS

Messrs. Fred George, the President, Chairman and a director of the Corporation, and
          Bradley H. Langille, the Chief Executive Officer and a director of the
          Corporation, are the promoters of the Corporation by virtue of the initiative
          they have taken in founding the business of the Corporation. Messrs. George and
          Langille hold the shares and options as indicated under Item 8: Directors
          and Officers. Messrs. George and Langille have received salary payments as
          described under, Item 11: Interest of Management and Others in Material
          Transactions.

ITEM 10:   LEGAL PROCEEDINGS

There are no legal proceedings
involving the Corporation or its property as at the date of this annual information form
and, to the best knowledge of management, no such proceedings are contemplated.

ITEM 11:   INTEREST OF
MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

No director, senior officer,
principal holder of securities or any associate or affiliate thereof of the Corporation
has any interest, directly or indirectly, in material transactions with the Corporation or
any of its direct or indirect wholly-owned subsidiaries, other than the following
transactions, which were in the normal course of operations:

During the year ended July 31, 2005,
the Corporation paid a total of $4,670,871 (2004- $2,628,516) to companies controlled by
directors of the Corporation for management fees, mineral property exploration
expenditures, promotional fees and professional fees, as follows:

|                                         
|-----------------------------------------
|
|                                         
|Management Fees                          
|                                         
|Mineral Property Exploration Expenditures
|                                         
|Professional Fees                        
|                                         
|Total                                    
|                                         

Management believes that related
party transactions for management, professional fees and mineral property exploration are
recorded at fair market value.

Commencing in the 2004 period, the
Corporation has retained mineral exploration and mining contracting services through a
company owned by a related party of a director of the Corporation. As at July 31, 2005
these non-arms length mineral exploration expenditures totalled $4,392,431 (2004
 $2,186,478), as noted above. These expenditures are recorded at fair value
calculated at cost plus 10%. The Corporation believes that this arrangement gives the
Corporation better quality and control for mineral exploration and mining contracting
services than it could otherwise receive through third party independent contractors.

As at July 31, 2005, the Corporation
had bonuses payable to directors in the amount of $225,000 (2004  $225,000) which
amounts are included in the management fees noted above;

Directors and officers of the
Corporation are entitled to hold management incentive stock options. For this purpose, the
Corporation has adopted a Stock Option Plan for directors, officers, employees and
consultants of the Corporation and its subsidiaries. The purpose of the Stock Option Plan
is to encourage ownership of the Corporations common shares by the persons who are
primarily responsible for the management and profitable growth of the Corporations
business, as well as provide additional incentive for superior performance by such persons
and attract and retain valued personnel. The plan provides that eligible persons
thereunder include any director, senior officer, consultant or employee of the
Corporation.

64

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A consultant is defined as an
individual that is engaged by the Corporation, under a written contract, to provide
services on an ongoing basis and spends a significant amount of time on the
Corporations business and affairs. The definition of consultant also includes an
individual whose services are engaged through a personal holding corporation.

In general, see "Item 3:
 Description of the Business - 3.3 Risk Factors - 3.3.9.  Conflicts of Interest".

ITEM 12:   TRANSFER AGENT
AND REGISTRAR

The Corporations transfer agent
and registrar is Computershare Trust Company of Canada (Computershare).
Computershares register of transfers for the Corporations Common Shares is
located at 1500 University Street, Suite 700, Montreal, Quebec, H3A 3S8.

ITEM 13:   MATERIAL
CONTRACTS

Except as disclosed in this annual
information form, and for contracts entered into in the ordinary course of business, the
Corporation has not entered into any material contracts for the twelve months ended July
31, 2005, and to the date of this annual information form.

ITEM 14:   INTERESTS OF
EXPERTS

The following persons and companies
have prepared or certified a statement, report or valuation on behalf of the Corporation
as follows during the twelve months ended July 31, 2005, and to the date of this Annual
Information Form: (i) Grant Thornton, LLP, Chartered Accountants, prepared an audit report
as auditors of the Corporation; (ii) Kappes, Cassiday & Associates, Consulting
Geologists, prepared a report dated November 29, 2004, entitled Ocampo, Chihuahua,
Underground and Surface Mines Mill and Heap Leach  Bankable Feasibility Study
(the KCA Report).

None of the above-noted persons or
companies hold a registered or beneficial interest, direct or indirect, in any securities
or other property of the Corporation and its associates and affiliates.

ITEM 15:   AUDIT COMMITTEE
INFORMATION

Overview

The Audit Committee of the
Corporations Board of Directors is principally responsible for:

| | a) |  | recommending
to the Corporations Board of Directors the external auditor                to be
nominated for election by the Corporations shareholders at each
               Annual Meeting and negotiating the compensation of such external auditor;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) |  | overseeing
the work of the external auditor;
| | -- |  | --------------------------------------------

| | c) |  | reviewing
the Corporations annual and interim financial statements,                Managements
Discussion and Analysis and press releases regarding earnings                before they
are reviewed and approved by the Board of Directors and publicly
               disseminated by the Corporation; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

65

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| | d) |  | reviewing
the Corporations financial reporting procedures to ensure                adequate
procedures are in place for the Corporations public disclosure of
               financial information extracted or derived from its financial statements,
other                than disclosure described in the previous paragraph.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During fiscal 2005, the Audit
Committee met four (4) times.

The purposes of the Audit Committee
are to assist the Board of Directors oversight of:

| |  |  | the
integrity of Gammon's financial statements;
| | - |  | -----------------------------------------------

| |  |  | Gammon's
compliance with legal and regulatory requirements;
| | - |  | -----------------------------------------------------------

| |  |  | the
risk management policies of management;
| | - |  | -------------------------------------------

| |  |  | the
qualifications and independence of Gammon's independent auditors; and
| | - |  | -------------------------------------------------------------------------

| |  |  | the
performance of the independent auditors and Gammon's internal audit function.
| | - |  | ---------------------------------------------------------------------------------

In accordance with National
Instrument 52-110, Audit Committees (MI 52-110), disclosure of audit fees and
other matters related to the composition and operation of the Corporations Audit
Committee is found in this Information Circular and the 2005 Annual Information Form of
the Corporation filed on www.sedar.com.

The Audit
Committees Charter

The Corporations Board of
Directors has adopted a Charter for the Audit Committee, which sets out the
Committees mandate, organization, powers and responsibilities. The complete Charter
is attached as Schedule A to this Annual Information Form.

Composition of the Audit
Committee

The members of the Audit Committee
are Dale Hendrick (Chair), Frank Conte, Kent L. Noseworthy, Canek Rangel. All of the
members of the Board of Directors are independent and financially literate, as required by
SEC Rule 10A-3, the AMEX and the TSX.

|                     
|---------------------
|
|                     
|Dale Hendrick (Chair)
|                     
|Kent L. Noseworthy   
|                     
|Frank Conte          
|                     
|Canek Rangel         
|                     

| | Notes:
| | ------

| |  |  | (1) |  | To
be considered independent, a member of the Audit Committee must not have any
               direct or indirect material relationship with the Corporation.
A                material relationship is a relationship which could, in the
view of                the Board of Directors of the Corporation, be reasonably expected
to interfere                with the exercise of a members independent judgment. In
addition, in order                to be considered independent a member of the Board of
Directors must meet the                AMEX definition of independence, which is
comparable to the foregoing                definition.
| |  |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | (2) |  | To
be considered financially literate, a member of the Committee must have the
               ability to read and understand a set of financial statements that present
a                breadth and level of complexity of accounting issues that are generally
               comparable to the breadth and complexity of the issues that can reasonably
be                expected to be raised by the Corporations financial statements.
| |  |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

66

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Each member of the Audit Committee of
the Corporation has sufficient experience to provide (i) an understanding of the
accounting principles used by the Corporation to prepare its financial statements, (ii) an
ability to assess the general application of such accounting principles in connection with
the accounting for estimates, accruals and reserves, (iii) experience in analyzing and
evaluating financial statements of the breadth and complexity of issues reasonably
expected to be raised by the Corporations financial statements, and (iv) an
understanding of internal controls and procedures for financial reporting.

| |  |  | Dale
M.  Hendrick is a  professional  engineer with over 40 years of mining  experience.  In
addition,  Mr.  Hendrick has               served as a senior officer of a public company.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Kent
L. Noseworthy is a practicing corporate/commercial lawyers with over twenty years of
experience in advising corporate clients on business law and governance issues.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Frank
Conte has retired as a senior manage of Saputo Inc. with extensive budgeting, financial
reporting and internal control responsibilities.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Canek
Rangel is a professional engineer experienced in business issues related to mining and
the conduct of mining activities in Mexico.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------

Audit Committee Oversight

Since the commencement of the
Corporations most recently completed financial year, there has not been a
recommendation of the Audit Committee to nominate or compensate an external auditor which
was not adopted by the Corporations Board of Directors.

Reliance on Certain
Exemptions

Since the commencement of the
Corporations most recently completed financial year, the Corporation has not relied
on the exemption in Section 2.4 (De Minimus Non-Audit Services) of MI 52-110, or an
exemption from MI 52-110, in whole or in part, granted under Part 8 (Exemptions) of
MI 52-110.

Pre-Approval Policies and
Procedures

The Audit Committee has adopted
specific policies and procedures for the engagement of non-audit services as described in
Specific Duties  Oversight of the Independent Auditor of the Charter.

External Auditor Service
Fees (By Category)

The following table discloses the
fees billed to the Corporation by its external auditor during the last two financial
years.

|             
|-------------
|
|             
|July 31, 2005
|             
|July 31, 2004
|             

| | Notes:
| | ------

| |  | (1) |  | The
aggregate fees billed for audit services.
| |  | --- |  | ---------------------------------------------

| |  | (2) |  | The
aggregate fees billed for assurance and related  services that are reasonably  related to
the  performance of the audit or                   review of the Corporation's financial
statements and are not disclosed in the "Audit Fees" column.
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (3) |  | The
aggregate fees billed for tax compliance, tax advice, and tax planning services.
| |  | --- |  | ------------------------------------------------------------------------------------

67

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ITEM 16:   ADDITIONAL INFORMATION

Additional  information  relating to
the  Corporation  filed under its  continuous  disclosure  obligations is available on
SEDAR (the System for Electronic  Document  Analysis and Retrieval,  which has been
 established by the Canadian  Securities  Administrators)  at www.sedar.com.

Upon request to the Corporation, the
Corporation will provide to any person or company

| | (a) |  | when
the securities of the Corporation are in the course of a distribution under a preliminary
short form                  prospectus or a short form prospectus,
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (i) |  | one
copy of the annual information form of the Corporation, together with one copy of any
document, or the                          pertinent pages of any document, incorporated
by reference in the annual information form;
| |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (ii) |  | one
copy of the comparative financial statements of the Corporation for its most recently
completed                          financial year for which financial statements have
been filed together with the accompanying report of the                          auditor
and one copy of the most recent interim financial statements of the Corporation that have
been                          filed, if any, for any period after the end of its most
recently completed financial year;
| |  | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (iii) |  | one
copy of the information circular of the Corporation in respect of its most recent annual
meeting of shareholders that                          involved the election of directors
or one copy of any annual filing prepared instead of that information
                         circular, as appropriate, and
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (iv) |  | one
copy of any other documents that are  incorporated  by reference into the  preliminary
 short form prospectus to the short                          form prospectus and are not
required to be provided under clauses (i), (ii) or (iii); or
| |  | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) |  | at
any other time, one copy of any documents referred to in clauses (a)(i), (ii) and (iii),
provided that the                 Corporation may require the payment of a reasonable
charge if the request is made by a person or company who is                 not a
shareholder of the Corporation.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Additional  information,  including
 directors' and officers'  remuneration and  indebtedness,  principal holders of the
Corporation's securities,  options to purchase securities and interests of insiders in
material transactions,  where applicable, is contained in the Corporation's  management
 information  circular for its most recent  annual  meeting of  shareholders  that
 involved the election of directors,  and additional financial  information is provided
in the Corporation's  financial  statements and management's  discussion and analysis
contained in the Corporation's Annual Report for its most recently completed financial
year.

68

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A copy of such  documents  may be
 obtained,  upon  request,  from the  Corporation.  The  Corporation  may  require  the
payment of a reasonable charge from a person or Corporation who is not a holder of
securities of the Corporation.

For additional copies of this annual
information form please contact:

Gammon Lake Resources Inc.
 Suite 306, Cambridge 2 
202 Brownlow Avenue 
Dartmouth, Nova Scotia 
B3B 1T5 
Tel:  902-468-0614
Fax:  902-468-0631
 Email:  info@gammonlake.com

69

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SCHEDULE A GAMMON LAKE RESOURCES INC. 
AUDIT COMMITTEE CHARTER

AUDIT COMMITTEE

The Audit Committee (hereinafter
referred to as the Committee) shall i) assist the Board of Directors in its
oversight role with respect to the quality and integrity of the financial information; ii)
assess the effectiveness of the Companys risk management and compliance practices;
iii) the independent auditors performance, qualifications and independence; iv) the
performance of the Companys internal audit function; v) the Companys
compliance with legal and regulatory requirements, and vi) prepare such reports of the
Audit Committee required to be included in Management Information Circular in accordance
with applicable laws or the rules of applicable securities regulatory authorities.

STRUCTURE AND OPERATIONS

The committee shall be composed of
not less than three directors. All members of the Committee shall not be an officer or
employee of the Company. All members shall satisfy the applicable independence and
experience requirements of the laws governing the Company, the applicable stock exchanges
on which the Companys securities are listed and applicable securities regulatory
authorities.

Each member of the Audit Committee
shall be financially literate, as such qualification is interpreted by the Board of
Directors in its business judgment and in compliance with the AMEX and TSX rules.

Members of the committee shall be
appointed or reappointed at the annual meeting of the Company and in the normal course of
business will serve a minimum of three years. Each member shall continue to be a member of
the Committee until a successor is appointed, unless the member resigns, is removed or
ceases to be a director. The Board of Directors may fill a vacancy that occurs in the
Committee at any time.

The Board of Directors or, in the
event of its failure to do so, the members of the Committee, shall appoint or reappoint,
the annual meeting of the Company a Chairman among their number. The Chairman shall not be
a former officer of the Company. Such Chairman shall serve as a liaison between members
and senior management. The time and place of meetings of the Committee and the procedure
at such meetings shall be determined from time to time by the members therefore provided
that:

| | a) |  | a
quorum for meetings shall be at least three members;
| | -- |  | ------------------------------------------------------

| | b) |  | the
Committee shall meet at least quarterly;
| | -- |  | --------------------------------------------

| | c) |  | notice
of the time and place of every meeting shall be given in writing or by
               telephone, facsimile, email or other electronic communication to each
member of                the Committee at least 24 hours in advance of such meeting;
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

1

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| | d) |  | a
resolution in writing signed by all directors entitled to vote on that
               resolution at a meeting of the Committee is valid as if it had been passed
at a                meeting of the Committee.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Committee shall report to the
Board of Directors on its activities after each of its meetings. The Committee shall
review and assess the adequacy of this Charter annually and, where necessary, will
recommend changes to the Board of Directors for its approval. The Committee shall
undertake and review with the Board of Directors an annual performance evaluation of the
Committee, which shall compare the performance of the Committee with the requirements of
this Charter and set forth the goals and objectives of the Committee for the upcoming
year. The performance evaluation by the Committee shall be conducted in such manner as the
Committee deems appropriate. The report to the Board of Directors may take the form of an
oral report by the chairperson of the Committee of any other designated member of the
Committee.

SPECIFIC DUTIES:

Oversight of the
Independent Auditor

| |  |  | Sole
authority to appoint or replace the independent auditor (subject to shareholder
ratification) and responsibility for the compensation and oversight of the work of the
independent auditor (including resolution of disagreements between management and the
independent auditor regarding financial reporting) for the purpose of preparing or
issuing an audit report or related work. The independent auditor shall report directly to
the Audit Committee.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Sole
authority to pre-approve all audit services as well as non-audit services (including the
fees, terms and conditions for the performance of such services) to be performed by the
independent auditor.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Evaluate
the qualifications, performance and independence of the independent auditor, including
(i) reviewing and evaluating the lead partner on the independent auditors
engagement with the Company, and (ii) considering whether the auditors quality
controls are adequate and the provision of permitted non-audit services is compatible
with maintaining the auditors independence.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Obtain
and review a report from the independent auditor at least annually regarding: the
independent auditors internal quality-control procedures; any material issues
raised by the most recent internal quality-control review, or peer review, of the firm,
or by any inquiry or investigation by governmental or professional authorities within the
preceding five years respecting one or more independent audits carried out by the firm;
any steps taken to deal with any such issues; and all relationships between the
independent auditor and the Company.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Review
and discuss with management and the independent auditor prior to the annual audit the
scope, planning and staffing of the annual audit.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Ensure
the rotation of the lead (or coordinating) audit partner having primary responsibility
for the audit and the audit partner responsible for reviewing the audit as required by
law.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2

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| |  |  | Review
as necessary policies for the Companys hiring of employees or former employees of
the independent auditor.
| | - |  | ------------------------------------------------------------------------------------------------------------------

Financial Reporting

| |  |  | Review
and discuss with management and the independent auditor the annual audited financial
statements prior to the publication of earnings.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Review
and discuss with management and the independent auditor the Companys annual and
quarterly disclosures made in managements discussion and analysis. The Audit
Committee shall approve any reports for inclusion in the Companys Annual Report or
Form 40F, as applicable, as required by applicable legislation.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Review
and discuss with management and the independent auditor managements report on its
assessment of internal controls over financial reporting and the independent auditors attestation
report on managements assessment.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Review
and discuss with management and the independent auditor the Companys quarterly
financial statements prior to the publication of earnings, including the results of the
independent auditors review of the quarterly financial statements and any matters
required to be communicated by the independent auditor under applicable review standards.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Review
and discuss with management and the independent auditor at least annually significant
financial reporting issues and judgments made in connection with the preparation of the
Companys financial statements, including any significant changes in the Companys
selection or application of accounting principles, any major issues as to the adequacy of
the Companys internal controls and any special steps adopted in light of material
control deficiencies.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Review
and discuss with management and the independent auditor at least annually reports from
the independent auditors on: critical accounting policies and practices to be used;
significant financial reporting issues, estimates and judgments made in connection with
the preparation of the financial statements; alternative treatments of financial
information within generally accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures and treatments, and
the treatment preferred by the independent auditor; and other material written
communications between the independent auditor and management, such as any management
letter or schedule of unadjusted differences.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Discuss
with the independent auditor at least annually any management or internal
control letters issued or proposed to be issued by the independent auditor to the
Company.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Review
and discuss with management and the independent auditor at least annually any significant
changes to the Companys accounting principles and practices suggested by the
independent auditor, internal audit personnel or management.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3

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| |  |  | Discuss
with management the Companys earnings press releases, including the use of pro
forma or adjusted non-GAAP information, as well as financial
information and earnings guidance (if any) provided to analysts and rating agencies.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Review
and discuss with management and the independent auditor at least annually the effect of
regulatory and accounting initiatives as well as off-balance sheet structures on the
Companys financial statements.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Discuss
with the independent auditor matters required to be discussed by American Institute of
Certified Public Accountants Statement on Auditing Standards No. 61 relating to the
conduct of the audit, including any difficulties encountered in the course of the audit
work, any restrictions on the scope of activities or access to requested information and
any significant disagreements with management.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Review
and discuss with the Chief Executive Officer and the Chief Financial Officer the
procedures undertaken in connection with the Chief Executive Officer and Chief Financial
Officer certifications for the annual filings with applicable securities regulatory
authorities.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Review
disclosures made by the Companys Chief Executive Officer and Chief Financial
Officer during their certification process for the annual filing with applicable
securities regulatory authorities about any significant deficiencies in the design or
operation of internal controls which could adversely affect the Companys ability to
record, process, summarize and report financial data or any material weaknesses in the
internal controls, and any fraud involving management or other employees who have a
significant role in the Companys internal controls.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Discuss
with the Companys General Counsel at least annually any legal matters that may have
a material impact on the financial statements, operations, assets or compliance policies
and any material reports or inquiries received by the Company or any of its subsidiaries
from regulators or governmental agencies.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Oversight of Risk
Management

| |  |  | Review
and approve periodically managements risk philosophy and risk management policies.
| | - |  | ------------------------------------------------------------------------------------------

| |  |  | Review
with management at least annually reports demonstrating compliance with risk management
policies.
| | - |  | --------------------------------------------------------------------------------------------------------

| |  |  | Review
with management the quality and competence of management appointed to administer risk
management policies.
| | - |  | -----------------------------------------------------------------------------------------------------------------

| |  |  | Review
reports from the independent auditor and the internal auditor at least annually relating
to the adequacy of the Companys risk management practices together with managements
responses.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4

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| |  |  | Discuss
with management at least annually the Companys major financial risk exposures and
the steps management has taken to monitor and control such exposures, including the
Companys risk assessment and risk management policies.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Oversight of Regulatory
Compliance

| |  |  | Establish
procedures for the receipt, retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing matters, and the
confidential, anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Discuss
with management and the independent auditor at least annually any correspondence with
regulators or governmental agencies and any published reports which raise material issues
regarding the Companys financial statements or accounting.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Meet
with the Companys regulators, according to applicable law.
| | - |  | ----------------------------------------------------------------

| |  |  | Exercise
such other powers and perform such other duties and responsibilities as are incidental to
the purposes, duties and responsibilities specified herein and as may from time to time
be delegated to the Audit Committee by the Board of Directors.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

FUNDING FOR THE
INDEPENDENT AUDITOR AND RETENTION OF OTHER INDEPENDENT ADVISORS:

The Company shall provide for
appropriate funding, as determined by the Audit Committee, for payment of compensation to
the independent auditor for the purpose of issuing an audit report and to any advisors
retained by the Audit Committee. The Audit Committee shall also have the authority to
retain such other independent advisors as it may from time to time deem necessary or
advisable for its purposes and the payment of compensation therefor shall also be funded
by the Company.

Committee Members:

Dale Hendrick (Chair)
Kent L. Noseworthy
Frank Conte
Canek Rangel

5

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