The following are selected excerpts from the Howe Chile Limitada report on the Los Dos Marias and Alto de Lipangue gold/copper properties.
The complete report is available for viewing at the corporate offices of
Medinah Mining, Inc.

           

In hole L99-05, between 103 and 113 metres, a zone of intensely "chloritized and magnetite-rich granodiorite" was intersected hosted within the hanging wall granodiorite, well above the contact with the breccia. This interval yielded 7.92 grams gold/tonne, 23.42 grams silver/tonne and 0.86% copper across 10 metres, including the final 3 metres which returned a weighted average of 20.02 grams gold/tonne, 56.06 grams silver/tonne and 2.24% copper.

The Lipangue breccia remains open in all directions, but could be reduced to a much narrower breccia-dike as it plunges to the east. The western extent as yet remains open, however it could steeply plunge in this direction following the contact with porphyritic volcanics mapped on surface by Medinah. Even though five holes were drilled into the breccia, its geometry and structural control(s) are still poorly understood. Typical of hydrothermal breccias, the down plunge extent could be very deep and possibly overlie a larger porphyry style mineralized system at depth.

Additional isolated small outcrops of breccia occur along the southern edge of the area mapped by Medinah. These exposures are completely surrounded by rubble and overburden and the actual size could be larger. In addition, they occur beyond the southern extent of the recent IP/resistivity survey and as such remain untested targets

In addition to breccia style mineralization, the Lipangue property also hosts several narrow (0.10 to 0.50 metres wide), variably oriented, auriferous quartz veins. Most of these are hosted within the granodiorite in the eastern two thirds of the plateau and were mined or explored by "pirquineiro" style operations over the past century. This style of target has not yet been explored by Medinah at Lipangue, but based on the known mineralization at the nearby Fortuna Property, which occurs just east of Lipangue (on land currently held by Cerro Dorado Inc.), these veins can be very high grade, and often can average above 50 grams gold/tonne. Typically they consist of a gangue, which is primarily quartz and some sericite, mineralized with pyrite-arsenopyrite +/-sphalerite-chalcopyrite-galena-hematite-tetrahedrite and gold.

Las Dos Marias Property

Similar to the Lipangue Property, Dos Marias was first obtained by Medinah in 1998 and after the initial Phase I review by their consulting geologist Gordon House, it was recommended as a potential target for shear zone hosted gold mineralization and stratabound skarn replacement copper mineralization. Medinah’s second phase of exploration, which took place between September 8^th and October 16^th, 1998 consisted of gridding, geological mapping, and an IP/resistivity survey which further outlined the surface extent of the shear zone and defined several geophysical targets.

Phase III occurred between February 8^th and April 18^th, 1999 and consisted of a very small, two hole diamond drilling program which totaled approximately 456 metres of drilling. The two vertical holes were about 156 and 301 metres in depth, respectively and were both collared to test the shear zone style of mineralization several hundred metres south of the old workings.

The Dos Marias Property occurs on the northwest slope of the Altos de Lipangue plateau and is underlain by a generally north striking, east dipping sequence of volcanic and volcanoclastic rocks with intercalated marine and continental sedimentary rocks which correspond with the Lo Prado Formation. The main structural feature on the property is a 350º striking, 70º west dipping, 50 to 100 metre wide auriferous shear zone which trends through the middle of the property. Regional geology maps show an extensive area of hydrothermal alteration, centered on the shear and which extends south from the middle of the property, about 2 kilometres to the granodiorite contact.

The geology in the area mapped by Medinah, consists of a central, north striking, 30º east dipping volcanic sequence which is both overlain and underlain by units of hornblende and feldspar porphyritic to massive andesite. The volcanic sequence consists of ash flow and ash fall deposits and variably skarnified, interbedded limey sedimentary horizons which in the southern parts of the property have been intruded by a 50 to 75 metre wide granodiorite dike. The volcanic unit is host to several disseminated to massive copper skarn replacement lenses which were lightly exploited in the past.

The shear roughly follows the base of Quebrada Durazno, and within the property boundaries can be traced over a strike length of about 700 metres (traced through surface outcrops, diamond drill holes, and extrapolated along strike through IP/resistivity results). The dip of the shear zone cross-cuts the gently east dipping host lithology, which is predominantly siliceous and pyritic ash tuff and tuff of the volcanic sequence, and the underlying porphyritic andesites. Mineralization occurs as fine disseminated pyrite and quartz-sulphide (pyrite+/-arsenopyrite?) +/-carbonate-chlorite-pyrophyllite stringers 2 to 5 centimetres wide, and spaced 15-25 centimetres apart.

On surface the shear zone is best exposed in the area of old workings (the Las Dos Marias Mine) in the central portion of the claim, however also in several drill road cuts, and in outcrops in the creek bed, west of the drill holes. The surface mineralization consists of strongly sheared (north northwest striking and steeply west dipping), and silicified tuff and porphyritic andesite with 1 to 20 % disseminated pyrite which is cut by several quartz-pyrite veinlets up to 2 centimetres wide and oriented subparallel to the shearing direction. Two independent surface channel chip samples, recently collected by Howe across select surface exposures of the vein at the old workings and near the collar location of DM99-01 yielded:

Although the shear zone reportedly has a width of 50 to 100 metres, it is not continually mineralized across this entire width and varies from intensely sheared and pyritized sections, to very lightly fractured and weakly altered portions with minor sulphide mineralization. The strongest, and best mineralized portions of the shear zone appear to be hosted in the eastern, or hanging wall portions, and the intensity and gold grades appear to drop in the footwall sections. Since only 2 drill holes have been drilled into the zone, the structural and/or lithological controls and the geometry of the mineralized zones within the shear have yet to be determined. Results of Medinah’s recent two hole drill program yielded several anomalous weighted averaged values including:

DM99-01

DM99-02

Both of these holes were drilled vertically to intersect the southern extension of the shear zone in the vicinity of a granodiorite dike, however once drilled, the location of these holes was found to be collared in the shear zone, therefore missing the hanging wall and possibly the strongest mineralized portion of the auriferous structure.

A narrow, but very high grade auriferous fault/breccia gouge zone hosted within the main shear zone, consisting of clay-carbonate-sericite alteration and 1 to 5 % disseminated pyrite and traces of molybdenum and chalcocite, was intersected in hole DM99-02 between approximately 66 and 73 metres. Although core in this interval was extremely broken and recovery was well below normal levels, the analytical results of two consecutive, one metre samples taken by Medinah, between 68 and 70 metres, yielded 61.77 and 122.2 grams gold/tonne. A quarter core repeat sample by Howe of the second sample, between 69 and 70 metres, returned a spectacular value of 455.02 grams gold/tonne across one metre. The extremely high grade and varying results yielded from the Medinah and Howe analyses reflects the probable nuggety nature of the gold mineralization in this fault zone and perhaps in other portions of the shear zone.

The other main mineralized target at Dos Marias is stratabound or "manto" replacement skarn copper mineralization which is hosted in a series of north striking, east dipping limey tuff and sedimentary horizons ("mantos") on the east side of the creek. Very little follow up work has been completed over this target however recent mapping by Medinah in an adit ("the manto adit") on the east side of the creek, has revealed that the individual mantos are not more than a few metres in thickness, but are vertically "stacked" throughout the stratigraphic sequence, the true thickness of which has yet to be determined. Mineralization consists of disseminated and semi-massive to massive pyrite and chalcopyrite lenses, however many of the exposures are well oxidized and consist of various copper oxides, limonite, and iron oxides, mixed with pyrite and chalcopyrite. It is uncertain if low grade copper values occur in the lightly skarnified units between the mantos.

A 1.5 metre channel chip sample taken by Howe in the manto adit across an interbedded sequence of partially oxidized skarnified limey sediments and siliceous volcanics with minor amounts of copper oxide mineralization and traces of fine disseminated pyrite and chalcocite, yielded 1.96% copper. Based on this analytical result and the occurrence of additional subparallel manto horizons, Howe recommends that portions of this tunnel be systematically sampled to test the grade of the other manto horizons and the surrounding weakly skarnified sediments/volcanics to see if a wide, potentially bulk mineable copper resource exists here.

Surface mapping several hundred metres along strike to the south of this adit has located rubble of epidote-diopside skarnified limey sediments mineralized with irregular shaped blebs of pyrite and/or chalcopyrite and it is thought that this rubble is similar to the manto style copper skarn mineralization which is exposed in the adit suggesting that additional pods of this mineralization will occur both along strike and stacked vertically throughout the volcanic/sedimentary sequence.

During Howe’s recent visit to the Lipangue and Dos Marias Properties, time was spent reviewing the surface geology, the style and extent of mineralization, drill hole locations, and the extent of previous workings. Independent samples were taken from both surface and underground exposures of the mineralized zones and later, visits were made by Howe to the core storage facility in Santiago where several representative intervals of core from both properties, through both mineralized and barren sections, were quickly reviewed by Howe. Several quarter core samples were collected by Howe which repeat intervals that were previously split and analysed by Medinah. In total, 19 confirmation type samples were collected from the two properties (10 from Lipangue and 9 from Dos Marias). The gold analytical results obtained from the Howe sampling at both properties were in the same general range of values of those reported by Medinah, but often upwards of several grams higher or lower. Similarly, silver and copper values at Lipangue were generally in the same range, but at times several grams, or tenths of a percent, higher or lower, respectively. Silver and copper results at Dos Marias were generally low and considered insignificant. Although this difference can be attributed to a nuggety effect for the gold, the blebby and inconsistent nature of the breccia style mineralization could in effect give quite variable assay results for all of the elements, even from two halves of a split core. During future drill programs, Medinah should consider using a larger diameter core to get a more representative sample.

Howe feels confident that the analytical values reported by Medinah from their recent drilling campaigns over both the Lipangue and Dos Marias Properties give a general representation of the values that can be expected from these prospects. Future drill programs should be preceded by early stage mineralogical testing to determine the general characteristics of the gold grains in the mineralized domains which will assist in determining the optimum sampling scheme for future exploration programs. In addition, a full quality assurance program should be adapted by Medinah for all future exploration programs to minimize unavoidable sample assay errors which are introduced by the acts of sample collection, sample preparation and assaying

Medinah’s land position is secure, in that it covers the strike and down dip extent of all of their defined mineralized zones and leaves sufficient ground to define new targets along strike or on other parts of the property.

Howe recommends that a two phase program be conducted in order to assess the gold and/or copper-silver potential over both the Lipangue and Dos Marias Properties. Phase I would consist of a program of surface gridding, geological mapping and sampling, magnetic and/or resistivity/IP surveys, and approximately 3,400 metres of diamond drilling on Lipangue and 2,700 metres on Dos Marias. By the end of this phase new target zones will be generated which will then be further evaluated during Phase II.

Phase II would consist of approximately 5,500 metres of fill-in diamond drilling at Lipangue and 5,000 metres at Dos Marias over the respective target mineralized zones with the objective being to outline a measured and indicated resource.

The approximate budgets required to carry out the recommended two phase, results driven exploration programs at Lipangue and Dos Marias is approximately US$1,370,000 and US$1,160,000, respectively.

2.1 LOCATION AND ACCESS

The Lipangue and Las Dos Marias Properties are located approximately 30 kilometres northwest of Santiago in the coastal range mountains (see Figures 1.1 and 2.1). The approximate UTM coordinates of the center of the Lipangue Property is 315500 E, 6314000N and the Dos Marias Property is 312000E, 6313500N.

The project area is best accessed from Santiago, the capital city of Chile. From here one drives northwest about 25 kilometres to the town of Lampa. One must then travel north approximately 6 kilometres along a well maintained gravel road (route G-16) which parallels the base of the coast mountains until the Hacienda Mercedes at Chicauma. After entering through a steel gate, with a guard house, on the west side of the road, one drives an additional 6 kilometres along a 4 wheel drive road which rapidly gains elevation up a bumpy gravel and boulder filled open valley to an elevation of approximately 550 metres. At this point the valley abruptly ends and the road continues up a "cuesta" (a series of about 19 switch backs) which climb up a steep slope for approximately 7 kilometres. At the top of the cuesta, the northeast corner of the rolling Alto de Lipangue plateau is reached at an elevation of about 1,950 metres. The eastern edge of the Lipangue property is crossed just a few hundred metres west of the crest of the mountain and the La Fortuna de Lampa Mine (see Figure 2.2).

To reach the Dos Marias property one must continue west southwest across the Altos de Lipangue plateau and the Lipangue property and then drop in elevation about 500 metres down the west slope of the plateau. The drive from Lampa to the Lipangue Property takes approximately 1 hour to complete, while the drive to Dos Marias takes an additional 15 minutes to complete. The road passes through the central portions of both properties and other parts must be reached by travelling off-road in a 4 wheel drive truck or by foot.

A second, more southerly access road leaves the "Hacienda Lipangue" south of Lampa on route G-16 and reaches the plateau near the south and west boundaries of the Lipangue Property and the eastern edge of the Dos Marias property however this road needs upgrading and for the moment all travel must be done along the more northerly route.

A 400 metre long, E-W oriented dirt air strip straddles the eastern boundary of the Lo Amarillo claim of the Lipangue Property (see Figure 2.2). Although it is not maintained, it appears to be in relatively good shape and with minimal care small planes could easily land there now.

The small town of Lampa is able to supply only the most basic needs (food, fuel, hardware, etc.) for very early stages of exploration, and more advanced projects must be serviced from Santiago. Electrical power, sufficient only for local town use currently exists in the village of Lampa, however a major power grid runs just west of the town. Telephone service in Chile is excellent, most of it being connected to a fibre optic network while the cellular network covers most major cities and has reception from most parts of the Lipangue Property and higher elevations on the Dos Marias Property.

Deep water ports exists at Valparaiso and San Antonio on the Pacific coast, approximately 65 kilometres northwest and 70 kilometres southeast of the property, respectively (see Figure 2.1).

2.4 ACQUISITION AND MAINTENANCE OF MINERAL RIGHTS IN CHILE

Chile’s current mining policy is based on legal provisions that were enacted as part of the 1980 constitution. These were established to stimulate the development of mining and to guarantee the property rights of both local and foreign investors. According to the law, the state owns all mining resources, but exploration and exploitation of these resources by private parties is permitted through mining concessions, which are granted by the courts. The concessions have both rights and obligations as defined by a Constitutional Organic Law (enacted in 1982). Concessions can be mortgaged or transferred and the holder has full ownership rights and is entitled to confiscate the rights of way for exploration and exploitation. In addition, the concession holder has the right to defend his ownership against state and third parties. An exploration concession is obtained by a claims filing and includes all minerals that may exist in its area. Exploration mining rights in Chile are acquired in the following stages:

1. Pedimento: A pedimento is an initial exploration claim whose position is well defined by NS-EW UTM coordinates. The minimum size of a pedimento is 100 hectares and the maximum is 5,000 hectares with a maximum length-to-width ratio of 5:1. The duration is for a maximum period of 2 years, however at the end of this period it can be reduced in size by 50% and renewed for an additional 2 years. If the yearly claim taxes are not paid on a pedimento, then the claim can remain in good standing by paying double the annual claim tax the following year. Pedimentos are allowed to overlap with pre-existing ones, however the underlying one always takes precedent, providing the claim holder doesn’t let the claim lapse due to lack of payments, filing errors, etc.
2. Manifestacion: Before a Pedimento expires, or at any stage during its two year life, it is converted to a Manifestacion which lasts for 220 days.
3. Mensura: Prior to the expiration of a manifestacion, the claim is surveyed by a government licensed surveyor. Once surveyed and the application is accepted by the government, the claim becomes a mensura ("patented claim")

At each of the 3 main stages of the claim acquisition process, several steps are required (inscription payments, notarization, tax payments, "patente" payment, lawyers fees, publication of the extract, etc) before the application is finally accepted by the court. A full description of the process is documented in Chile’s mining code.

If accepted by the court the claim is published in the official mining bulletin (published weekly). At the manifestacion and mensura stages a process for opposition from conflicting claims is allowed. Most companies in Chile retain a "land man" to review the weekly mining bulletins and ensure that their land position in Chile is kept secure.

In 1997, an environmental law was introduced in Chile (Decree No. 30) which states that any exploration or mining project must present an Environmental Impact Study or an Environmental Impact Declaration to the CONAMA, the environmental authority for approval. This application process must be initiated prior to starting the project and can take up to several months for approval.

5.0 PREVIOUS WORK

The area surrounding the Lipangue and Dos Marias properties has been exploited since Spanish conquistador times both for the alluvial gold and the oxidized portions of the high grade quartz veins. Evidence of hand cobbed placer activity can be seen in many locations over both properties.

5.1      LIPANGUE PROPERTY - PREVIOUS EXPLORATION WORK

It is believed that portions of the Lipangue breccia may have actually been worked by the early indigenous people and Spanish colonialists as several "lavaderos" or crushing and washing areas can be found near the outcrops and trenches. In addition, an extensive area of breccia float and quartz crystals in the same area could be interpreted as old tailings piles from the processing areas (House 1999a). Although several "pirquineiro style" mining operations started in the area about the turn of the century, the first well documented mining activities were in the Fortuna de Lampa mine, just east of the Lipangue property boundary (see Figure 2.2). This mine was active over an approximately 30 year period between the early 1940’s and the late 1960’s, during which time the property saw intermittent, small scale, mining activity on a narrow vein style gold deposit. The Fortuna Mine reportedly produced almost 2,000 tonnes of vein style mineralization grading 63.9 grams gold/tonne, 51.2 grams silver/tonne, and 0.2% copper.

The first documented exploration program over the Lipangue Property, that Howe is aware of, was completed by Shell (La Division Metales de Shell Chile S.A.) in 1985 as part of a regional exploration program over the Altos de Lipangue plateau. Shell’s project covered a northeast elongate area of about 7 to 8 kilometres by 2 kilometres wide and included ground presently covered by Medinah’s Lipangue and Dos Marias Properties, as well as the nearby Fortuna Property (now held by Cerro Dorado Inc.), and the Fenix, San Manuel, and Juan Jose claims. Shell had optioned all of the ground from Quijano, the owner at that time.

The Shell property review was completed by Alejandro Faunes ("Faunes") over a 5 day period using 1:25,000 topography maps and 1:10,000 air photos as a mapping base. During the study a total of 56 rock chip and/or grab samples and 5 soil samples were collected from various parts of the project area. Soil samples were collected from pits dug to a depth of 30-50 centimetres. All samples were sent to Geolab, presumably in Santiago, were they were analysed for gold by 100 gram fire assay and for copper, silver, lead, zinc, molybdenum, arsenic, and antimony by atomic absorption (Note: only the locations of the 10 samples collected from the Lipangue Property were documented on a sketch style map and no analytical certificates documenting preparation techniques or sample descriptions were included in the report reviewed by Howe).

In the area of the Lipangue Property Faunes identified a topographical depression which was covered with limonitic and silica rich regolith soil. Initial soil and/or rock sampling (10 samples) yielded anomalous values of gold (trace to 2.61 ppm), copper (9 to 376 ppm), silver (trace to 5.9 ppm), molybdenum (2 to 17 ppm), along with minor zinc and lead anomalies over an area covering about 300 metres (east-west) by 70 metres. Further investigation uncovered a roughly east northeast elongate area with subcrops and boulder rubble of intensely oxidized hydrothermal breccia consisting of fragments of heavily altered granodiorite, cemented with quartz and limonitized sulphides. Faunes suggested that even though this breccia remained for all intent and purpose, unexplored and had unknown strike and depth potential, it represented an excellent precious and base metal target that could host a significant resource. Based on its elongated shape, Faunes suggested that it has a strong northeast trending structural control. Additional sampling south of the breccia along the southeast edge of the plateau yielded additional anomalies of gold, copper and silver, but the values and locations of these samples were not documented in the report reviewed by Howe.

At the end of his report Faunes concluded that the area surrounding the Altos de Lipangue Plateau was host to a several under explored vein, manto, breccia, and disseminated style targets that are predominantly mineralized with gold-silver-copper. Many of these targets are structurally controlled by a series of northeast, northwest, and east-west faults and/or shear zones. Faunes recommended that following work program be initiated:

(Faunes, 1986)

It is not known if Shell completed any further exploration on any of these targets.

Shortly after Shell presumably dropped the option on the Lipangue property, the previous owner, Quijano completed a program of bulldozer trenches in an attempt to trace the surface extent of the breccia and search for new high grade "La Fortuna" style auriferous quartz veins. At least 15 trenches ranging in length between approximately 20 and 100 metres were completed over the plateau and extending northeast towards the La Fortuna Mine (a small portion of those completed over the Lipangue Property were later mapped by Medinah and are shown on Figures 5.1 and 5.5 in section 5.3.2 and on Plate 5.2). It is unknown if these trenches were ever detail mapped or systematically sampled by Quijano. About the same time, Quijano attempted to drill a small diameter diamond drill hole close to the present location of Trench #3 (see Figure 5.5). Recent mapping by Medinah in this trench indicates that the hole was collared in hydrothermally altered granodiorite. Quijano experienced difficulties with the drilling and was only able to complete the hole to a depth of 37 metres, however a piece of core from this hole reviewed by House showed altered, sub-rounded granodiorite fragments up to 20 centimetres across surrounded by quartz crystals in a matrix of pyrite and chalcopyrite (House, 1998d). It is unknown if any logging or analysis was completed on the core.

Evidence of a second, reverse circulation drill hole exists, near the northwest end of Trench #1 (see Figure 5.5). Piles of the drill chips among small shards of the long decomposed plastic sample bags can be seen on surface close to the collar of the large diameter reverse circulation hole. It is uncertain who completed this drilling, or when, and whether any drill logs or analytical data documenting the results are still in existence.

5.2 LAS DOS MARIAS PROPERTY - PREVIOUS EXPLORATION WORK

Numerous old adits, shafts, and pits are located along the Quebrada Durazno and surrounding hillsides in the vicinity of the old Dos Marias Mine (see Figure 5.6 in Section 5.3.4 and Plate 5.3). The workings on the west side of the creek are the oldest and most extensive and appear to have had their own mill site and tailings disposal site. The timing of this work is unknown, but early diggings and gold placer operations further north down the creek, may date back hundreds of years, possibly to Spanish colonial times. No data regarding these mining activities were made available to Medinah and it is unknown as to the amount of gold (+/-copper?) mined and processed, the average grade, or the extent of the workings. More recent adits have been excavated into the hillside on the east side of the creek following several copper +/-gold mineralized manto horizons (see Plate 5.4). Based on the limited amount of dumps, it appears that this material may have been hand cobbed and hauled to a plant for milling. Similar to the other workings, no data documenting this previous mining activity was forwarded to Medinah.

The first documented exploration program over the Dos Marias Property, that Howe is aware of, was completed by Shell (La Division Metales de Shell Chile S.A.) in 1985 as part of a regional exploration program over the Altos de Lipangue plateau (see Section 5.1). Although Shell’s project covered a large regional area and concentrated mainly on the area of the Lipangue and Fortuna Gold Properties, a short visit was made to the Dos Marias Property by their geologist, Faunes, during which time he completed a very early stage reconnaissance review of the property. Several copper-silver +/- gold mineralized massive, and disseminated sulphide manto horizons, each about 1 or 2 metres in thickness were mapped and sampled, however the results of the analysis were not included in the report reviewed by Howe. Faunes noted that the several separate mineralized horizons occurred hosted in interbedded volcanic, sandstone, and limestone horizons of the Prado Formation. On the steep slopes west of the Quebrada Durazno and in front of the Dos Marias Mine main shaft, Faunes mapped an area of intensely argillized and limonitized rock, which probably corresponds with the area of workings on the west side of the creek. Previous sampling by Quijano in the shafts around this zone had reportedly yielded values of 30 and 4.2 grams gold/tonne. (Note: no maps or analytical certificates documenting the locations of these samples, or sampling and analytical methods were attached to the report reviewed by Howe).

It is unknown if Shell completed any further work on this property, however several reverse circulation drill holes were located by Medinah at the Dos Marias property during their recent mapping program. These holes may have been drilled at the same time, and by the same company, that drilled the reverse circulation hole found at Lipangue (see section 5.1). Collars from 5 large diameter, vertical holes were located by Medinah at the following locations:

Similar to the drill hole at Lipangue, Medinah has no data documenting the results of these holes (final depths, analytical results, geological logs, etc).

5.3.1 PHASE I – Lipangue and Dos Marias

The first phase of exploration over the Lipangue and Dos Marias Properties by Medinah took place in July 1998 during which time they had optioned a total of 1178 mining claims throughout Chile from Quijano. The majority of these claims were located within a 75 kilometre radius of Santiago and collectively, were part of Medinah’s "Santiago Project". The claims were grouped into 10 individual hard rock mining properties (463 claims) and 2 placer properties (437 claims) and included the Lipangue and Dos Marias Properties. Medinah retained the services of Gordon House ("House"), a consulting geologist from Vancouver, to complete a preliminary review and prioritize the properties for further exploration.

House’s field review took place over a 12 day period during which time each of the 10 properties were reconnaissance mapped and sampled. The visit to the Lipangue Property confirmed the existence of a what House mapped as a hydrothermal diatreme breccia consisting of rounded and altered clasts of volcanic tuff and granodiorite cemented by a matix of crystalline quartz and sulphide minerals. House noted abundant Cu-oxide mineralization in the breccia rubble and estimated that the breccia could extend over an area of 450 metres by 150 metres, but this could not be confirmed due to poor outcrop exposure, and many of the previously excavated trenches being covered by slumped material. (House, 1998a).

House took two grab samples at Lipangue; one of the breccia, and a second of the volcanic wall rock. Both samples were submitted for analytical analysis at ITS- Bondar Clegg Laboratories in La Serena, Chile where they were analysed for gold by 30 gram fire assay and silver, copper, lead, zinc, and molybdenum by ICP, and mercury by cold vapour AA. The assay results for the breccia and the wall rock yielded weakly anomalous values of 58 and 61 ppb gold/tonne, and 170 and 127 ppm copper/tonne, respectively; and insignificant or weakly anomalous values for the other elements analysed.

House recommended that the Lipangue breccia be further evaluated by geological mapping and geochemical soil sampling to outline its surface dimensions, followed by an I.P. geophysical survey to determine the depth and extent of mineralization. Any resulting anomalies should then be tested by approximately 2,000 metres of diamond drilling. House also recommended that the access road be upgraded so that drills and support vehicles could easily reach the summit of the plateau. The approximate cost for this next phase of exploration was estimated to be US$287,500.

The visit to the Dos Marias Property by House outlined a series of east dipping, stratiform copper +/- gold mineralized horizons on the east side of north trending Quebrada Durazno, which had been intermittently mined in the past at several different stratigraphic horizons. Based on the limited extent of the workings House suggested that these may be purely exploration tunnels and that the majority of the previous mining activity actually took place on the west side of the creek. These "western" workings appeared to be much older and were reportedly mined by the Spanish for gold several hundred years ago. A declined shaft which follows a 48 degree, west dipping, pyritic mineralized horizon, was apparently the main access point for the mining operations. Significant sized dumps and tailings piles were noted by House in the vicinity of this shaft, however no maps or production records exist which document the extent of the workings, or the amount or grades of the material mined (see Plate 5.3 and 5.4). According to House, an attempt by the property vendor (Quijano) to dewater the shaft about 10 years prior to House’s visit was abandoned after the water level was only lowered by 35 meters. Two samples gathered by Quijano in the shaft during the dewatering program reportedly yielded 2.8 and 34 grams gold per tonne (Note: the sampling and analytical method was not documented).

House concluded that the mineralization in the eastern portion of Dos Marias, is related to stratiform replacement horizons that may be related to the intrusion of the Lipangue Breccia zone, 2,000 metres to the east. Copper and minor gold mineralization occurred along favourable, gently east dipping, volcanic and/or sedimentary host lithologies. The mineralization along the western part of the claim, in comparison, is west dipping, and may be structurally related to a north trending fault/shear zone which roughly follows the orientation of the creek (House 1998a).

House recommended that the Dos Marias properties be further explored by geological mapping and rock and/or soil sampling with the main objective being to outline the mineralized horizons on both sides of the creek and to determine any structural controls. House also suggested that during the mapping an emphasis should be placed on determining the relationship, if any exists, between the replacement manto style mineralization at Dos Marias and the intrusive hydrothermal breccia at Lipangue. Based on the results of this work, House recommended that additional ground should be acquired between the two properties. In addition, gridding and an IP/resistivity survey should be completed over both sides of the creek covering any geochemical soil anomalies obtained from the soil survey. Finally, approximately 1,600 metres of diamond drilling was recommended to test any resulting geophysical anomalies. The approximate cost for this next phase of exploration was estimated to be US$234,000 (House, 1998a).

House also recommended that some of the other properties that were under option as part of the Santiago Project be further explored, however Howe is not aware of the results of these other exploration programs, nor whether they remain part of Medinah’s Chilean property position.

In August of 1998, House submitted another report to Medinah which detailed the possible relationship between the Lipangue Breccia and the Dos Marias mineralization. House suggests that the Lipangue breccia could represent the top of a late stage, mineralized intrusive event with a larger, copper-molybdenum-gold porphyry system occurring at depth. This presumed porphyry, or the lower parts of the breccia could have been the driving force that supplied the mineralized hydrothermal fluids that percolated through selective favourable volcanic and sedimentary horizons and deposited copper and gold mineralization at Dos Marias (House, 1998b). House hoped to further substantiate this concept during the next phase of exploration.

5.3.2 LIPANGUE - PHASE II

The second phase of exploration at Lipangue was completed by Medinah between September 13, and October 8, 1998. The program was coordinated by House and during this time Howe Chile was retained to have a geologist on site to assist in the completion of the program. The exploration program consisted of the following:

The results of the 1998 mapping program indicated that the breccia occurs at the north-south oriented contact zone between propylitically altered massive lavas of the Veta Negro Formation and granodiorite of the central batholith. The breccia outcrops in a topographic depression on the plateau which is covered by a thin (approximately 1 metre) layer of regolith, composed of limonitic soil and oxidized breccia fragments. The surface extent of breccia float material was originally thought to roughly represent the outline of the underlying breccia (covering an area of approximately 600 metres (east-west) by 300 metres), however based on the recent mapping the true surface extent of the breccia is actually much smaller, extending over an area of about 200 metres (east-west) by 150 metres.

In February 1999, the IP/resistivity data collected and processed by Geodatos was reviewed by a second geophysical consulting firm in Santiago (PGW S.A.). The results of their review corresponded with those obtained from Geodatos. The results of the geophysical survey indicated three main areas of anomalies:

(Ugade, 1998)

At the conclusion of his report, House states that based on the results of the IP/resistivity survey, a polarized body (which likely corresponds with the subsurface east extension of the Lipangue breccia) can be traced over a strike length of more than 400 metres (between Lines E and G), and across a width of at least 200 metres. Geological mapping in the trenches above the east to southeast plunging breccia have uncovered phyllic altered granodiorite with relict pyrite clasts, which may be representative of wall rock alteration on the margins of the breccia. House recommended that a program of diamond drilling be initiated, testing the full 400 metre strike extension of the breccia with 6 drill holes, each to a minimum depth of 250 meters, and at least one to be drilled to a depth of about 400 metres. In addition, House recommended that at least one hole be drilled on Line A at station 700S to determine if the IP anomaly is a result of silicification and magnetite, or sulphide mineralization. Similarly, the anomaly on Line I at station 500S should also be drill tested. The approximate cost for this program was estimated to be US$440,000

5.3.3 LIPANGUE – PHASE III

The third phase of exploration at Lipangue took place between February 8 and April 18, 1999 and consisted of a diamond drill program to test the anomalies outlined by the IP/resistivity survey completed during Phase II. The drill program consisted of the following:

Note: According to new guidelines set out by the TSE Mining Standards Task Force Final Report, January 1999, a stringent quality control program is essential for compiling reliable exploration data, especially during drilling programs. Sample preparation and quality control procedures should be well organized to monitor the accuracy and precision of analytical results, to detect possible sample contamination, and to add confidence to future resource estimates. In addition to the laboratories’ in-house quality assurance program, each sample batch sent to a laboratory should include: sample duplicates (1 in 20 samples), assay duplicates (at least 1 per batch), multi-element standards (at least 1 per batch), and blank standards (at least 1 per batch). In addition inter-laboratory preparation and analytical checks should be completed through the sampling phase of the drill program. Also, during the core logging process all core should be photographed prior to cutting and the geological logging should be preceded by geotechnical logging (percent recovery, RQD, fractures, etc.). In addition, to assist in future resource estimates, specific gravity measurements should be taken at representative intervals along the length of the hole.

Table 5.1: Lipangue Diamond Drill Holes - 1999

Table 5.2: Lipangue Property – General Range of Gold, Silver, and Copper Values Returned from the Diamond Drilling Program:

Table 5.3: Lipangue Property - Significant Diamond Drilling Analytical Results

5.3.4 PHASE II - LAS DOS MARIAS

The second phase of exploration at Dos Marias was completed by Medinah between September 8 and October 16, 1998. The program was coordinated by House and Howe Chile was retained to have a geologist on site during this period to assist in the completion of the program. The exploration program consisted of the following:

(House, 1998c)

The results of the 1998 mapping program indicated that the property is much more structurally and mineralogically complicated than originally thought. Two distinct styles of gold and/or copper mineralization have been identified by Medinah at Dos Marias:

1. Shear zone hosted gold: this type of mineralization occurs in a 340º to 350º striking, 65º to 75º west dipping, 50 to 100 metre wide shear zone which can be traced over a strike length of about 700 metres (traced through surface outcrops and extrapolated along strike through IP/resistivity results). The strike of the shear roughly follows the base of the Quebrada Durazno (see Figure 5.6). The dip of the shear zone cross-cuts the host lithology, which dip gently east. Mineralization occurs as fine disseminated pyrite and quartz-sulphide (pyrite-arsenopyrite) stringers, 2 to 5 centimetres wide, and spaced 15-25 centimetres apart, which is mainly hosted in siliceous and pyritic ash tuff and tuff, but also in the underlying porphyritic andesite flows. The shear has been intruded by a granodiorite dike at the southern end of the property which may have introduced, or re-mobilized and enriched some of the gold mineralization. The shear zone remains open both to the north and south (House, 1998c).
   
2. Manto style copper mineralization: this type of mineralization consists of a series of stratrabound, generally north striking, east dipping manto horizons, hosted within the tuff horizons on the east side of the creek. The individual mantos are not more than a few metres in thickness, but are vertically "stacked" throughout the stratigraphic sequence. Mineralization consists of semi-massive to massive pyrite and chalcopyrite, however many of the exposures are well oxidized and consist of varying copper oxides, limonite, and iron oxides (House, 1998c).

In February 1999, the IP/resistivity data collected and processed by Geodatos was reviewed by a second geophysical consulting firm in Santiago (PGW S.A.). The results of their review roughly corresponded with the conclusions obtained from Geodatos. The results of the geophysical survey indicated that the units on the west side of the survey area are highly resistive and likely correlate with the porphyritic andesite unit mapped by Medinah. The volcanic sequence in the middle of the survey area had a medium to low resistive response. Several anomalous areas were uncovered during the survey:

(Ugalde, 1998)

At the conclusion of his report, House states that the granodiorite dike may be related to both the manto style and shear zone hosted mineralization, however the this relationship was not yet clearly defined. In addition, uncertainty remained concerning the relationship between the three main stratigraphic sequences mapped on the property (House,1998c).

House recommended that a program of diamond drilling be initiated, testing the IP/resistivity anomalies obtained over the manto style, and shear zone hosted gold mineralization. House suggested that 3 drill holes, located near Station 600 on lines 4 and 5, should be drilled to depths of at least 200 metres to intersect the full sequence of manto mineralization. In addition, House recommended that at least two drill holes be collared to intersect the shear zone and possibly the granodiorite dike at depth, on Line 4 about station 300. These holes should be drilled to a depth of at least 150 metres. Finally, the intersection of the granodiorite dike and the shear zone between Lines 5 and 6, at stations 400 to 500, should be tested with at least 3 drill holes, each to a minimum depth of about 200 metres. The approximate cost for this program, which included road upgrading was estimated to be US$278,000

5.3.5 LAS DOS MARIAS - PHASE III

The third phase of exploration at Dos Marias took place between March 30 and April 11, 1999 and consisted of a diamond drill program to test the anomalies outlined by the IP/resistivity survey completed during Phase II (even though House recommended that Medinah complete a drill program with at least 8 diamond drill holes, a much smaller program was completed, presumably for budget reasons). The drill program consisted of the following: