SAN ROQUE GOLD PROJECT RIO NEGRO PROVINCE, ARGENTINA Notes and recommendations following an introductory field review.

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1 CONSULTING EXPLORATION GEOLOGIST Calle Las Tres Marias Monterrico, Surco, LIMA, PERU SAN ROQUE GOLD PROJECT RIO NEGRO PROVINCE, ARGENTINA Notes and recommendations following an introductory field review. Tel: (511) Fax: (511) S. J Meldrum October 27 th Introduction Exploration at San Roque in the Rio Negro province of Southern Argentina has identified scattered gold in rock anomalies over a 4 x 4 km area. Better in rock gold values both in outcrop and subcrop samples suggest a strong quartz vein-gold association, but the geological controls are poorly understood due to extensive young volcanic ash and wind blown sedimentary cover. The grass roots discoveries at San Roque, the result of a reconnaissance study of white spot (Sandra Perry) anomalies, are unique, in that no gold anomalies have previously been identified in what was considered to be a base metal Pb-Ag province. Since the time of the discoveries MIM has consolidated their land position in the district and conducted a first pass program of geological mapping and outcrop, subrop and rock float sampling. In addition IP chargability and resistivity surveys have been completed across the area of known gold mineralisation. The work completed to date has defined the locations of the strongest outcropping gold anomalies, and these appear in most instances to be related to quartz veined zones and breccia structures that include a variety quartz styles. Most of the mineralised structures trend SW-NE. Alteration in many instances appears to be subtle, though sericitisation and propylitisation is evident. No clear relationships have been identified between the geophysical patterns, geochemical anomalies, alteration facies or lithologies. It is notable that at the current stage of the investigation no clear concept of the mineralisation controls have been defined and no framework has been developed to utilise the geophysical data as an effective gold targeting tool. The principal objective of the current review is to determine whether field investigations have advanced to the point where scout drilling is warranted and justified.

2 Delineated Gold Targets Six potential drill targets have been identified (see above) based principally on the gold in rock values and the occurrence of quartz veining, silicification and brittle fracturing with quartz-limonite veins. Four of these targets were reviewed in the field, including targets 1, 2, 3 & 4. In target area 1 a 270 trending low sulphidation style, deep epithermal to mesothermal style quarts vein with marginal quartz stockworking cut brittle fractured, weakly altered fine grained rhyolites. The principal vein comprised of white saccharoidal quartz, with only a trace former sulphides, measures approximately 1-2m wide and dips steeply. The principal vein outcrops over a strike length of less than 100m with stockwork veined rhyolite float & subcrop up to 35m from the vein margins. Rock assays in the target area include six samples (of 43) grading better than 0.5g/t Au, two of which grade better than 4.0g/t with multi-ounce silver credits. The Bulk of the samples in this area returned <0.1g/t Au values with low Mo and Cu and base metal values. Pb values though low are typically greater than Zn. The target is essentially a Au-Ag anomaly. The principal feature at target 2 (inset photo and below), is a silicified and pyritised 270 trending breccia vein structure with sericitised and argillised meta-sedimentary wall rocks. Foliation within the basement trends N-S and is subvertical. At its widest the breccia structure measures approximately 3m across, with strong jarosite staining and abundant limonite filling cavities. The structure subcrops over a strike length of approximately 100m but possible extends under shallow cover. Of the 32 samples within the core of the target area, their are several structures that shed +1.0g/t Au values. To the north stronger base metal values are noted. 11 samples, possibly from the principal structure (none of the samples in the data base actually coincide with the principal structure at E, N), include gold assays of 3.58g/t and 6.64g/t with plus 200ppm Ag and elevated Mo and slightly elevated Pb and Ba. The remaining samples grade less than 0.1g/t Au but carry elevated Mo values in many instances. Target area 3 is quite large (1.7km x 0.65km) and includes a number +1.0g/t Au samples with a maximum of 27g/t Au. The majority of the better gold grading samples occur within the southern half of the target area where strong manganese oxide stained vein structures are exposed in small pits. Again individual veins appear to trend WSW-ENE. The target area has a strong polymetallic character with appreciable Pb-Cu and Zn. Though intrusives and basement metasediments are exposed in the target area the strongest Au grading and polymetallic samples coincide with the rhyolite volcanics. 2

3 At target area 4, mineralised structures, also hosted by fractured rhyolitic volcanics, shed Au-Ag-Cu-Pb values including a 5.03g/t Au value. The area was visited primarily because of the occurrence of visible gold. Where outcropping, the rhyolite is auto brecciated with siliceous veinletts (inset photo looking for gold!). Geology & Mineralisation Summary Gold mineralisation identified at San Roque is hosted by each of the three principal mapped lithologies. These include auriferous quartz-flourite veins in a potassium feldspar rich adamellite(? or syenite) stock, auriferous milky quartz veins and quartz manganese veins in weakly brecciated rhyolitic volcanics (or high level domes?) and auriferous gossanous breccia structures where gold occurs in silicified arenitic basement sediments within an argillic envelope. Little is known about the extent of the mineralisation or the relationships between the variety of mineralisation styles. WSW-ENE structural controls appear to be paramount and a model could be envisaged where the differing styles of mineralisation are a principally a manifestation of host rock characteristics. The rhyolite volcanic / basement sediment interface may be conducive to the development of better grading zones. District, project and outcrop scale geological maps for San Roque were supplied in Mapinfo format. Unfortunately I am not a gifted operator of Mapinfo and had very little exposure to the geology in the field. These two factors combined mean that it is not possible to assess in any detail mapping that has been conducted. As far as I can gauge the geological data set includes four principal lithological groups including trachyte, rhyolite and basement meta-sediments and tertiary basalts. Representative outcrops of the first three lithologies were reviewed in the field and the classifications appear sound with the exception of using the term trachyte to describe a medium grained intrusive rock at E, N. Perhaps differences in nomenclature are merely a problem of translation, in which case depending on the modal percent quartz, this rock type might be better termed either syenite or adamellite (in english). Alteration facies and intensities are undoubtedly as important at San Roque as in any other mineralised district. Though strong silicification and argillisation is found associated with structures cutting the metasediments, alteration in the overlying rhyolitic volcanics appears to be subtle in most instances. An extensive PIMA study has been initiated, with some 600 samples scanned but the interpretation of the readings remains to be completed. Apparently the interpretation of the results is a time consuming task and given the number of samples involved this might take several weeks to months to complete so it will be necessary to shorten the process by focussing on a few critical samples, i.e. analysing those samples that are better mineralised. The principal apparent weakness of the mapping conducted at San Roque relates to detail. Very little appears to be known about contact relationships or the attitudes of units, and though surface sampling has demonstrated widespread anomalous gold values, the data fails to give any indicate regarding the scope of the mineralisation. The inference gained from the field review is that the gold mineralisation is related primarily to structures and yet the role of structure in the mineralising system(s) appear to be poorly understood. The investigating team clearly needs to step back and reassess what steps could be taken to improve the under standing of the mineralisation and gather evidence that defines the width and strike length of the mineralisation in each of the drill target areas. Part of the justification for scout drilling at an early stage was to avoid trenching, but given the unfocussed nature of the mineralisation it is difficult to envisage how the drilling of a limited number of holes could be an effective alternative to trenching at San Roque. 3

4 Geochemical Data A clean up of the geochemical data base has only been partially completed. At this point 1018 samples have been located in the data base for San Roque District of which co-ordinates are known for approximately 90% of the samples, and assays have been merged for approximately 97% of the samples. In the core of the district (inset map below), their are 672 rock assay records, including 139 samples with ICP analyses. The data base is comprised of three principal components, including 464 rock samples in the original reconnaissance sample register, 600 rock samples in the subsequent project sample register, and 133 soil samples in the trail soil sampling programs. The distribution of the sample points within the core of the project area is shown below. The more recent sampling program has provided a better spread of data points but no attempt appears to have been made to build on the original data set and gain an indication of the significance of the original better grading zones. The samples in the compiled data set are clustered within localised areas of outcrop or subcrop, with broad zones between anomalies without any geochemical data. Soil sampling is the logical approach to rectify this problem and identify possible extensions of mapped mineralised structures under shallow cover. Orientation soil sample studies have determined that the coarse soil fraction provides a more reliable sample, but the collection of this style of sample from large pits is not practical of feasible for a large scale grid survey. It is suggested that MIM resort to the tried and true method of fine fraction samples form shallow (1-2m deep) hand auger holes and a first pass program of 389 broad spaced samples is suggested with infill sampling on 25m spacings over selected areas % of the broad spaced samples may be discarded due to deep young ash or sedimentary cover. 4

5 Several broad geochemical patterns are readily apparent in the existing rock sample geochemical database and these include strengthening base metal and copper values towards the east and much simpler Au-Ag ±Mo along the western side of the project. In detail however the geochemical patterns appear to be quite incoherent, and lack evidence of recognisable metallogenic zonations that could be used to vector into the centre of individual hydrothermal cells. This may be merely a factor of the sample pattern dictated by outcrop and subcrop distribution or alternatively the project area may cover just a portion of a much larger system. Of the 698 rock sample sin the core area of the project eleven samples grade better than 5.0g/t Au, 52 samples >1.0g/t Au and 197 samples (28% of the database) grade better than 0.1g/t Au. The gold and silver in rock plots (below) illustrates the widespread pattern of the better grading samples interspersed with a large population of low grade samples. Difficulties arise in the interpretation of the data, due to the sample distribution. A high proportion of the values are grab float / subcrop assays and only a small proportion representative of outcropping structures. The silver assays range up to 515ppm with 29 assay records grading better than 30ppm and 104 records grading better 5

6 than 5.0ppm. Though many of the better grading Au-Ag values fall within the designated targets areas, adjustments could be made to the shapes of individual targets to include all the better grading values. The cluster of +500ppm Pb values across the eastern half of the targeted area is illustrated on the inset plot. But the principal aspect of the plots of the lack of coherency of the geochemical patterns. The remainder of the prepared plots depict a similar pattern of widespread values interspersed with a high proportion of weakly mineralised samples. Geophysical Data The IP/Resistivity data sets compiled for the property indicate the presence of a large scale +1.5km2 chargability anomaly in the centre of the lease area with values in the range of 6-20 m/seconds. In rock gold values coincide with both the strong and weakly chargeable zones. The sectional IP plans suggest that in some instances the chargability anomalies are near surface features and it is inferred that the chargeable material equates to rhyolitic volcanics with disseminated pyrite overlying basement metasediments. The m/second chargability values recorded could equate to the weak pyritisation noted in outcrop. It is notable that the recorded m/second values at San Roque are relatively low when compared with the Las Pampitas data where values in the range of highlight the relatively weakly developed pyrite halo. I.e. the inference of an anomaly at San Roque could be questioned. The resistivity patterns which appear to less coherent than the IP contours highlights a predominance of weakly developed NNW trending resistive zones. No clear relationship between surface precious metal grades and the chargeability and resistivity patterns is evident, with the 6

7 exception of a positive correlation between stronger resistive zones and gold at the SE margin of the central IP chargeability anomaly. A broad correlation is vaguely evident between the chargability and resistivity patterns and outcrop/subcrop distribution. Clearly work remains to be done to understand the significance of the IP/Resistivity data sets and to determine how the data can be used to assist in the targeting of drill holes. A ground magnetics survey recommended in these notes may provide clues as to the mineralisation controls, but will undoubtedly assist in the delineation of the specific lithological units (i.e. the granitic intrusions which carry magnetite as a rock and alteration component), and assist in the delineation of the distribution and depth of the covering volcanic ash. It is hoped that in a similar fashion to the ground magnetic data at Cerro Negro, the distribution and thickness of the younger magnetic ash deposits can be mapped out and that this could in turn aid in the development of a structural interpretation of the project. Summary and Conclusions Though an extensive geochemical data base has been generated for San Roque, only limited advances have been made in under standing the significance of the mineralisation. At this point it is not known whether the mineralised structures highlighted by the sampling are isolated features or whether they represent parts of a lager partially exposed mineralising system. A scout drill test of outcropping gold anomalies, currently under consideration, is fraught with dangers given that the poor under standing of the mineralisation controls may result in the testing of inferior targets and worse still drilling form inappropriate directions. Though the number of widespread gold anomalies within the project area is very real, it is unlikely that management s enthusiasm for the project could be maintained if scout drilling failed to intersect significant grades over appreciable widths. Clearly the investigating team needs to stand back at this point and consider the use alternative exploration methods to adequately demonstrate that the mineralisation is related to a larger scale system. Looked at from a negative perspective the evidence that has been collated suggests that the mineralisation may be restricted to a series of narrow structures that are spatially and genetically related to the granitic intrusive complex emplaced at the margin of a basement high. Though none of the identified targets exhibit features that suggest clear scope for potential ore bodies, scope for the identification of better targets very real if additional groundwork is conducted prior to scout drilling. With three to four months of excellent weather conditions ahead in the coming field season, it is strongly recommended that MIM step back to re-evaluate the anomalies and reschedule scout drilling towards the end of the field season. A field program with five principal components is suggested, including: A large scale ground magnetics survey Broad spaced soil auger grid across the project area Infill close spaced soil sampling across individual target areas Shallow trenching using a tractor mounted backhoe to gain better under standing of potential drill targets, contact relationships and structures. Re map the project area with an emphasis on structure and alteration. 1:10,000 scale project scale maps with additional mapping at 1:1,000 scale over specific target zones. 7