Xinjiang Project

Work during the last few field seasons has focused on the Sahentohai, Dashankou and Chahanusu gold projects with reconnaissance work undertaken over the Halke Shan group of licences.

These licences and other areas became subject to a Joint Venture Agreement which was finalised with the Articles of Association for the Xinjiang Pan Pacific Mining Company Limited Joint Venture (“XPPM”) signed on 14 December 2006. The certificates of approval for the formation of XPPM, a Sino Foreign Joint Venture Business Licence, were issued on 30 April 2007 and following registrations with Urumqi Administration, a formal Business Licence was issued. Consequently, the procedure for the transfer of the exploration licence titles to XPPM has commenced.

While large areas continue to be assessed the main focus over the next two years will be to develop and test drill targets within the Tian Shan Orogenic Belt over the 75+km strike length held by the Company’s licences covering the structure. The two main areas where drill targets have been developed from strong anomalies at surface include the Dashankou-Chahanusu area and Sahentohai.

Dashankou Project

The ductile shear zone which contains the Dashankou and Chahanusu prospects was discovered by the G&MBR approximately 10 years ago through 1:50,000 stream sediment sampling. The Company followed this up and extended that work with mapping, rock chip sampling and trenching, primarily at Dashankou, to identify several zones of extended mineralisation associated with sub-parallel shears within the Tian Shan Orogenic Belt that can be seen linking Dashankou and Chahanusu, 20km to the northwest.

The Dashankou and Chahanusu prospects exhibit characteristics typical of shear zone hosted gold mineralisation, including intense shearing, sericite-silica-pyrite-siderite alteration envelopes, multiple large to small quartz veins and gold mineralisation in alteration selvedges adjacent to the veins.

Shallow high grade workings have been mapped in the area and exploration in 2005 obtained strongly anomalous mineralisation including trench assay results of up to 6m @1.68 g/t Au; 2m @ 1.65 g/t Au; 4m @ 19.7 g/t Au; 3m @ 18.7 g/t Au; 2m @ 3.13 g/t Au and 4m @ 2.36 g/t Au.

A limited diamond drilling programme of three holes in 2005 achieved a best intersection of 10m @ 2.00 g/t of gold confirming the geological model and the potential for ore grade mineralisation over mineable widths. However, these drill holes were not optimally positioned due to available licences at the time.

Subsequently in 2006, an extensive mapping and trenching programme followed up the high grades obtained from earlier programmes, although only a small strike extent of the mineralised structure within the licence area was assessed. Additional strongly anomalous zones (0.40g/t – 0.92g/t Au) up to 9m wide were also identified.

Exploration to date has identified numerous zones of gold mineralisation hosted by sub-parallel shear zones within a regional bounding structure (Figure 7). These mineralized zones are approximately 1km long and several walk up targets have been established for drill testing in the 2007-2008 exploration seasons.

The Company considers that these new, near surface mineralized zones at Dashankou may have the potential to host open pittable gold deposits. Over the next two years the Company plans to follow up these results and test the geological anomalies. The Company plans to drill test several targets this season and geologists are continuing detailed mapping at 1:2000 scale for further trenching and in preparation for additional drilling.

The strategy at Dashankou and eventually Chahanusa is to quickly identify the near surface mineralisation appropriate for drilling and turn over the extensive holding fairly quickly after detailed assessment.

The 2006 field programme confirmed and extended the understanding reached in 2005 of the Sahentohai mineralization. This showed a viable model for a major crustal structure capable of high flows of mineralised fluids into constrained shear zones of up to 15km long within a suitable host rock (see Figure below).

In particular and related to the identification of economic gold mineralisation the results and findings of the programme include:

1. 1. Sahentohai is a very large gold mineralised system; consisting of at least nine separate mineralised shear zones (numerous others are also indicated which require confi rmation and sampling).
2. 2. Mineralised shear zones are trending east-west, over lengths of 5 to 15km, with widths from 10 to 150m.
3. 3. All shears sampled to data contain anomalous gold values with several returning very high grades
4. 4. The shears are intersected (and probably constrained) by pairs of forward and back thrusts which, to date have not been sampled.

The system remains underexplored and undersampled due to the scale of the project, duration of the field season and challenges of access in a remote region. However, the rock chip grades of up to 18g/t gold and style of mineralization mapped to date, in conjunction with the widths of the hosting structures, suggest that this area may be prospective for large scale open pittable near surface gold deposits.

During the 2007 field season an upgraded road was established and mapping and sampling was completed at 10,000 scale over an extended area. The assay results from this programme are awaited. This work was designed to better define and prioritise drill targets which can be accessed by the new road in the next field season.

Halke Shan Project

The Halke Shan Project licences were acquired on the basis that the licences represent a similar geological and structural setting to the Dashankou and Sahentohai licences.

The licences are the least developed in the Company’s portfolio. The only previous exploration along the licences was a regional geochemical survey conducted on a China-wide basis in the 1980’s.

The Company has identified six anomalies at Halke Shan for infill stream sediment sampling, follow-up mapping and trench sampling. With focus on the more advanced development and exploration work at Lixian, Dashankou and Sahentohai, the Halke Shan Project will be advanced in the initial stages through regional geological mapping and reconnaissance soil and rock chip sampling on the best defined soil anomalies.