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:

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: 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.

The "Altos de Lipangue" is a relatively flat, northeast elongate plateau covering an area approximately 4 kilometres long and 1 to 2 kilometres wide (see Plate 5.1). The plateau is located on top of the first range of mountains west of Santiago, which are part of the north-south oriented coastal range. The plateau, and its western flanks (which include the Lipangue and Dos Marias Properties), are underlain by a volcanic sequence, intercalated with continental and marine sediments which is intruded by plutonic and hypabyssal rocks of the central batholith (see Figures 6.1 and 6.2). The volcano-sedimentary sequences consist of: the Lower Cretaceous aged Veta Negro Formation, which is primarily composed of andesitic lavas intercalated with continental sediments; and the underlying Lo Prado Formation (also of Lower Cretaceous age), which consists mainly of marine sediments with intercalated volcanics. The sedimentary units in the Lo Prado Formation include: limestone, shales, sandstones, calcareous and fossiliferous sandstones, breccias, and conglomerates; while the volcanics units are primarily andesitic and rhyolitic flows, brecciated flows, and tuffs. The central batholith, in the vicinity of the two properties is mainly Upper Cretaceous aged and chemically is classified as calcalkaline, Type I. It is quite variable in composition, and includes several varieties of amphibole-biotite+/-pyroxene granodiorite, tonalite, and quartz monzodiorite; and minor porphyritic andesite. The granodiorite that hosts the Lipangue property, and outcrops a few kilometres south of the Dos Marias Property has been mapped as an amphibole-biotite granodiorite with granular magnetite and varying intensity of clay-sericite-chlorite-epidote-pyrite alteration (Gana, et. al., 1996) (Note: although Figure 6.2 does not include the area of the Lipangue Property, the report that accompanies the geological map states that the altered granodiorite unit continues to the east and covers the Lipangue plateau).

This area is host to several diverse types of metallic mineralization such as veins, stratiform, stockwork/ breccias, skarns, and shear zone hosted copper/gold/silver mineralization which occur in several geological environments.

(Gana, et. al., 1996)

In addition, in the volcanosedimentary rocks surrounding the batholith, or close to its contact, occur several copper deposits such as the Lo Aguirre (stratabound exhalative) and La Africana (vein) deposits both currently held by Soc. Minera Pudahuel. The locations of some of these prospects and deposits is shown on Figure 2.1. Even though most of the old mines and showings in the area have seen intermittent mining activities over the past hundred years or so, they remain relatively under explored and today are only present as prospects. The Lo Aguirre Mine is currently in production and produces 4,000 tonnes per day from a newly developed underground operation replacing a depleted open pit operation (Compendio de la Mineria Chilena, 1998).

6.1 LIPANGUE PROPERTY GEOLOGY

The western portion of the Lipangue Property is underlain by a generally north striking, east dipping volcano-sedimentary sequence of rocks which corresponds with the Ocoa and Purehue Members of the Veta Negro Formation, and which, to the east, is intruded by granodiorite of the central batholith (see Figure 5.1). In the areas mapped by Medinah, the andesite consists of massive and feldspar porphyritic andesite, with a matix of quartz, amphibole, biotite, and minor hematite and magnetite. Generally they are variably propylitized and silicified and are mineralized with accessory epidote, hematite and magnetite. The contact zone with the granodiorite runs roughly north-south through the central portion the property, between the Lo Amarillo and Cerro Negro knolls. Andesite close to this contact is generally hornfelsed and silicified. The granodiorite which underlies the eastern two thirds of the plateau consists of grey, fine-to-medium grained, hypidiomorphic rock. In most places it is variably propylitized with chlorite, epidote, and carbonate common. In addition, amphiboles within the granodiorite are commonly replaced by biotite and fine magnetite (House, 1999a).

A small gabbro stock, measuring about 100 metres in diameter intrudes the andesite near the peak of the Cerro Negro knoll. Its contacts with the andesite are not exposed and therefore its relationship to the andesite and granodiorite remains unclear (House 1999a).

6.1.1      LIPANGUE PROPERTY MINERALIZATION

6.1.1.1 Lipangue Breccia

The main gold and copper (+/-silver) mineralization at Lipangue is hosted in the Lipangue hydrothermal breccia pipe, which on surface occurs as an east-west elongate, ovoid shaped body that outcrops over an area measuring roughly 150 metres (east-west) and up to 100 metres wide . Float material of the breccia is widely dispersed and covers a much larger area (400 metres by 250 metres). The breccia is hosted within granodiorite of the central batholith, at the contact with massive andesite (see Figures 5.1 and 5.5). On surface the breccia is well exposed in only two trenches where it is heavily oxidized and consists of rounded to subangular clasts of intensely altered granodiorite, cemented by a matix of crystalline quartz and limonite and iron-oxides (see Plate 5.8).

The recent drilling by Medinah was completed over a very restricted area and the 5 holes that intersected the breccia were all roughly aligned on a north-south section (Line E) within 140 metres of each other (see Figures 5.5 and 6.3 to 6.6). Two additional holes (L99-02 and L99-04) that were drilled further to the east in an attempt to trace the breccia along strike in that direction, failed to intersect it. The IP/resistivity survey clearly indicates that a polarized body continues to the east, at least 400 metres past line E, and that it also plunges steeply in this direction (see Section 5.3.2). Modeling also indicates that by Line G, the top of the anomaly occurs at a depth of about 120 metres. The breccia may have a strong east to east northeast structural control, and therefore could evolve into a narrower breccia-dike along strike to the east. This is supported by the narrower shape of the IP anomaly on line G and could explain why both of the two eastern holes failed to intersect the mineralization.

Hole L99-02 may have been collared north of the breccia structure (see Figure 6.6), and therefore only intersected propylitized and weakly fractured and mineralized granodiorite in the footwall of the breccia, some of which could be related to sheeted veining and stockwork fracturing commonly associated with the contact regions of a breccia. This feature was noted by Howe on surface in Trench #1 in the granodiorite, within 10 or 15 metres southeast of the breccia contact (see Plate 5.9). The diamond drill hole completed by Quijano several years ago apparently intersected some breccia mineralization and was collared in the same general location as L99-02. Its exact location is not shown on any of the Medinah maps, however if it was drilled say, 15 or 20 metres south of L99-02, it could have clipped the top of the breccia, whereas the Medinah hole missed it.

Hole L99-04 may have been collared south of the up-dip projection of the breccia and since the hole was angled south, at -60º, it remained parallel to the dip of the breccia and never intersected it (see Figure 6.5). Similar to hole L99-02, it intersected variably propylitized and weakly fractured and mineralized granodiorite peripheral to the breccia. Had L99-04 been collared vertically, it may have intersected the target.

On surface, to the west, the breccia appears to abut against the contact with the massive andesite. At depth, the breccia likely follows this contact, the orientation of which has yet to be determined. The IP/resistivity survey on Line D, approximately 100 metres west of this contact failed to reveal any anomalies, indicating that the breccia probably does not continue in this direction, or that it plunges steeply to the west, and at Line D the top of the breccia is deeper than the IP/resistivity survey could detect (>200 metres). Numerous quartz-epidote and quartz-tourmaline veinlets were mapped on surface in the andesite on Line D, just west of the breccia outcrop, possibly indicating the surface expression of breccia mineralization at depth (see Figures 5.1 and 5.5).

Along the southern edge of the area mapped by Medinah, two isolated outcrops of breccia were mapped (see Figure 5.1). Although these outcrops are less than a few metres in size, and are spaced almost 600 metres apart, they outcrop in areas which are predominantly covered by rubble and overburden and the actual size could be larger. Both of these outcrops occur beyond the southern extent of the IP/resistivity survey, which only processed data until 1,000 south. Future geophysical programs should be extended to the south to cover these outcrops.

Drill section "Line E" (see Figure 6.3) crosses the breccia at its widest point where it is approximately 75 to 90 metes in true width and dips approximately –60º to the south. Along this section, the breccia has been traced from surface down its dip approximately 200 metres by drill holes L99-07, 6, and 3. Below the oxidation level (which ranges between 20 and 50 metres in depth) the breccia consists of rounded and sub-angular clast and matrix supported fragments of altered granodiorite (chlorite, sericite, silica, +/-pyrophyllite, clay, and alunite?). The fragments are set in a matrix of coarse crystalline vuggy quartz, mineralized mainly with 1 to 15% coarse anhedral blebs of pyrite, chalcopyrite, and in places chalcocite (replacing chalcopyrite), sphalerite, and galena (see Plate 5.10). Fine disseminated pyrite (trace to 5%), and lesser amounts of chalcopyrite are common throughout the granodiorite fragments. Late quartz veinlets, generally less than a centimetre in width, cut the breccia in places, and are mineralized with pyrite, chalcopyrite, and at times chalcocite, sphalerite and galena. Although the breccia is almost continually mineralized across its width, the intensity of both alteration and sulphide mineralization is variable.

Analysis completed by Medinah indicate that the breccia is anomalously mineralized over most of its entire width, with significant weighted averages of gold, silver, and copper as shown below, and on Figures 6.3 and 6.4.

Drill section "Line E+25 metres" is located just 25 metres east of the previous section, however the breccia is significantly thinner at this point, being reduced to approximately 40 metres true width (see Figure 6.4). Hole L99-05, which was drilled on this section approximately 25 metres east of hole L99-03, intersected the top of the "true breccia" over 100 metres deeper than on section E. This indicates the steep east to southeast plunge of the breccia which was also shown by the IP/resistivity results.

In the hanging wall of the breccia intersected in hole L99-05 (between 131 and 206 metres, drilled distance), a 20 metre wide zone (true width) of granodiorite igneous breccia and variably silicified, chloritized, and carbonatized granodiorite with minor fracturing and disseminated magnetite and pyrite was intersected. This may represent "poorly developed breccia" that lacked permeability and porosity therefore reducing the flow of hydrothermal fluids and the deposition of sulphide mineralization. No significant mineralization was intersected in this zone of poorly developed breccia, however above this interval, between 103 and 113 metres, a zone of intensely "chloritized granodiorite" was intersected which yielded 7.92 grams gold/tonne, 23.42 grams silver/tonne and 0.86% copper across 10 metres. The final 3 metres of this zone were logged by Medinah as an intensely altered "granodiorite dike" and yielded 20.02 grams gold/tonne, 56.06 grams silver/tonne and 2.24% copper. A thin section report, which was commissioned by Medinah (no name or company was attached to the report) on a sample of the "dike" at 110.10 metres depth, states that the sample is devoid of silica and is primarily mineralized with 20-25% K-feldspar, 15-20% pyrophyllite, and 7-10% chlorite, along with 10-15% chalcopyrite, 5-7% magnetite, 5-7% pyrite, and minor marcasite, sphalerite, chalcocite, and gold (hosted within the chalcopyrite). The lack of quartz in the sample is curious and reduces the possibility of the feature being related to a felsic intrusion. A quarter core repeat sample by Howe (sample of the same interval covered by Medinah sample 332553 (between 111 and 112 metres) yielded 9.80 grams gold/tonne, 19.3 grams silver/ tonne and 1.20 % copper which roughly corresponds with the results obtained by Medinah (see Table 6.1 and Plate 5.11).

Hole L99-01 was collared in the breccia and continued in oxidized breccia for about 34 metres, before entering into massive andesite in the footwall. No significant analytical results were returned from this hole, which corresponds with previous observations made by House and recent Howe samples taken from surface exposures in the trenches. It appears that a significant amount of surface leaching has occurred in the breccia and that the oxidized portions only contain very weakly anomalous values of gold and copper. Two separate samples were collected on surface by Howe (sample number 51872, which was a 1 metre square panel sample, and 51873 which was a grab sample) which yielded 0.19 grams gold/tonne, 0.05% copper and 0.08 grams gold/tonne, 0.03% copper, respectively (see Figure 5.5, Plate 5.8, and Table 6.1).

During Howe’s visit to the core storage facility in Santiago (see Plate 5.6), several representative intervals of core through both mineralized breccia, and the host granodiorite and volcanics, were quickly reviewed by Howe and 6 separate confirmation type samples collected (see Table 6.1). These samples were quarter core samples, taken from the previously split, half core sample. The gold results obtained from the Howe sampling were in the same general range of values as those reported by Medinah, but often upwards of several grams higher or lower. Similarly, silver and copper values were generally in the same range, but at times several grams, or tenths of a percent, higher or lower, respectively. Although this difference can be attributed to a nuggety effect for the gold, the blebby and inconsistent nature of 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 campaign over the Lipangue breccia give a general representation of the values that can be expected from this prospect. It is highly recommended that Medinah complete early stage mineralogical testing prior to their next drilling phase to determine the general characteristics of the gold grains in the mineralized breccia. By combining these characteristics with several other parameters, a sampling constant can be estimated and nomograph constructed which should 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. The quality assurance program should be designed to verify the validity of sample collection, security (contamination), sample preparation, analytical method, and accuracy and precision.

6.1.1.2 Quartz Vein Mineralization

In addition to breccia style mineralization, the Lipangue property also hosts several narrow (0.10 to 0.50 metres), 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. Although surface outcrops displaying the veins are rare on the property, exposures can be seen in numerous trenches, pits, and shafts which have been excavated as part of these previous mining activities. Based on the known mineralization at the nearby Fortuna Mine, these veins typically consist of a gangue, which is primarily quartz and some sericite, mineralized with pyrite-arsenopyrite +/-sphalerite-chalcopyrite-galena-hematite-tetrahedrite. On surface, and down to a depth of about 10 to 20 metres the veins are well oxidized, and mainly composed of vuggy quartz, limonite, iron oxides, clay, and sericite along with minor hematite and jarosite. Even though the veins can be very high grade (>50 grams gold/tonne), coarse native gold is not that common in the area.

The Fortuna Vein, which occurs just east of the Medinah Property boundary (on land currently held by Cerro Dorado Inc.), can be traced on surface, south from the old workings for over 800 metres. The vein strikes about 340º and dips 40º to 50º to the northeast. Old reports state that the vein was narrow (10 to 20 centimetres wide), but very high grade (averaging about 60 grams gold/tonne) in the northern half of the mine and wider (30 to 50 centimetres wide), but slightly lower grade (17 to 20 grams gold/tonne) in the southern half of the mine (Waisberg, 1955). To the north of the underground workings the vein does not outcrop, and if projected, would cross Cerro Dorado’s property boundary onto Medinah’s Lo Amarillo claim just west of the Fortuna workings (see Figure 2.2). Old reports from the Fortuna Mine state that the vein is cut off to the northwest by a "mafic unit", however Howe believes that this may actually be an andesitic dike and although it was not confirmed by Howe, the Fortuna vein may continue to the northwest onto Medinah’s ground, on the other side of the dike. Several old pits and diggings occur on Medinah’s ground, several hundred metres northwest of the old workings, but time did not permit Howe to visit these.

During the recent property visit, two other quartz veins were reviewed by Howe. The first is named Veta Rica and occurs as a 50 centimetre wide, subvertical, fault hosted vein which trends 350º (see Figure 2.2, Plate 5.12, and Table 6.1). The vein is exposed in several east-west oriented bulldozer trenches, and a south oriented inclined adit (although the depth of the adit is unknown, the small dumps indicate that it has limited extent) which trace the vein for at least 100 metres to the north northwest (Note: this area was not included in the area mapped by Medinah in 1998). It is believed that the previous owner of the property, Quijano, excavated these about 10 years ago. Additional areas of trenching and workings were noted several hundred metres further north northwest, however time did not permit Howe to continue tracing the vein in this direction. The vein consists of a 50 centimetre wide zone of clay gouge, limonite, and quartz veinlets mixed within intensely altered granodiorite (sericite, limonite, Fe-oxides, clay). The altered granodiorite continues as a 50 centimetre wide halo of alteration surrounding the fault hosted vein. A channel chip sample by Howe (sample 51874) across the vein and altered granodiorite yielded 0.78 grams gold/ tonne across 1.0 metres.

A second, 20 centimetre wide, east trending, subvertical quartz vein was uncovered by Medinah during the drilling phase, when they had excavated a water sump in the central portion of the Lo Amarillo claim (see Figure 6.1). The "sump" vein was recently sampled by Howe (sample number 51875) yielding 0.39 grams gold across 0.20 metres.

A north northwest trending vein was mapped by Medinah near the north-central boundary of the mapped area (see Figure 5.1). The main orientation of this vein (north northwest) appears to be roughly parallel to that of the Fortuna vein, which occurs more than a kilometre to the east. Mapping indicates that the vein is exposed in two closely spaced pits, or shafts and that it remains open to the north and south. The width of the vein was not noted on the map. Howe did not visit this vein and it is unknown if Medinah completed any sampling in the area.

6.2 LAS DOS MARIAS PROPERTY GEOLOGY

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 (see Figure 5.6). The regional geology map shows a north northwest oriented zone of hydrothermal alteration which extends south from the area of the old mine workings about 2 kilometres, terminating at an east-west oriented contact with altered amphibole-biotite granodiorite (this intrusive has disseminated granular magnetite and varying intensities of clay-sericite-chlorite-epidote-pyrite alteration). The location of the hydrothermal alteration trend in the Dos Marias Property is centered on the "shear zone" mapped by Medinah (see below). Approximately 4 kilometres west of the property occurs a 3 kilometre long, north northwest oriented plug of intrusive porphyritic andesite. It is uncertain if units of porphyritic andesite mapped by Medinah on the Dos Marias Property are related to this intrusion.

The geology in the area mapped by Medinah, consists of a basal unit of hornblende and feldspar porphyritic to massive andesite, which outcrops along the western third of the mapped area. This is overlain by a north striking, 30º east dipping volcanic sequence consisting of ash flow and ash fall deposits and interbedded sedimentary horizons, which outcrop in the central portion of the mapped area, just east of the creek. This in turn is overlain by another unit of porphyritic to massive andesite, which covers the eastern third of the mapped area (House, 1999b). This upper contact remains hidden below a talus and rubble covered slope and it is not known if it is a conformable contact (House 1998c).

The andesite sequences are mainly lava flows and epiclastic deposits with very little evidence of bedding and it is presumed that they have a similar orientation to the volcanic sequence. The rocks in the volcanic sequence are mainly volcaniclastic ash tuffs, pyritic siliceous tuffs, and intercalated limestones, calcareous tuffs, and shale. Many of the limey horizons have been variably skarnified and occur as epidote skarn and crystalline limestones or marble. All of the units within this sequence are poddy, and cannot be traced long distances along strike (House, 1998c).

A fine grained granodiorite dike intrudes the volcanic sequence in the southern portion of the mapped area. The dike is roughly 50 to 75 metres wide and can be traced approximately 600 metres along strike, however continues south off the mapped area. The dike has a narrow contact alteration halo, whereby the host volcanic and limey units have been altered to epidote or diopside skarn and hornfels. This dike is probably related to the intrusion of the granodiorite batholith that occurs a few kilometres to the south

A major shear zone roughly parallels the base of the Quebrada Durazno, striking 350º and dipping about 70º to the west. On surface the zone occurs across a width of about 50 to 100 metres and occurs as sheared, and silicified tuffs, and porphyritic andesite with 1 to 10% fine disseminated pyrite and narrow quartz-carbonate-pyrite fractures and veinlets oriented parallel to the shearing direction. The intensity of the shearing is variable across its width, and it is not continually mineralized.

6.2.1      LAS DOS MARIAS PROPERTY MINERALIZATION

6.2.1.1 Shear Zone Hosted Gold Mineralization

The main target at Dos Marias is gold mineralization which is hosted in a 340º to 350º striking, 65º to 75º west dipping, 50 to 100 metre wide shear zone. The shear roughly follows the base of Quebrada Durazno, and 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 are 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?) stringers 2 to 5 centimetres wide, and spaced 15-25 centimetres apart. The shear, which remains open both to the north and south 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 (House, 1998c). The regional geology map indicates that strong hydrothermal alteration, presumably associated with the shear zone, and perhaps genetically related to the granodiorite batholith, continues for several kilometres south, beyond Medinah’s property boundary.

Only a very small drilling program was recently completed by Medinah consisting of 2 vertical holes which attempted to test the shear zone in the central portion of the property. The first hole DM99-01, was collared approximately 220 metres south of the old workings (see Figure 5.6 and 6.7), and after passing through 6.5 metres of overburden the hole crossed a thick sequence of variably silicified and pyritized tuff and porphyritic andesite with quartz-carbonate-pyrite fractures and veinlets, which persisted until a depth of about 117 metres (true width of 60 to 70 metres). Although this interval was not continually strongly sheared and mineralized, anomalous gold values were returned from several intervals from this section (see below), and it may represent the footwall portion of the wide shear zone mapped on surface.

Hole DM99-01 was basically collared in the lower portion of the siliceous volcanic unit, and remained in it for 16 metres. The rock across this interval consisted of fine grained variably sheared, siliceous tuff, mineralized by 1-10% fine disseminated pyrite+/-arsenopyrite-chalcopyrite, and narrow pyrite rich veinlets oriented subparallel to the shearing direction. At about 23 metres the hole entered into the porphyritic andesite unit which remained mineralized with disseminated pyrite and numerous subparallel quartz-carbonate-pyrite +/-pyrophyllite-arsenopyrite veinlets at about 30º to the core axis. This unit continued until 117 metres where a fine grained weakly mineralized chloritic andesite unit was intersected, which persisted until the end of the hole.

Medinah logged the most intense part of the shear as occurring between approximately 11 and 13 metres depth which consisted of contorted and broken fragments of sheared (at 30º to the core axis) laminated siliceous tuff with some local epidote-diopside skarnification and 5-10% fine disseminated pyrite+/-chalcopyrite, and narrow pyrite rich veinlets. Only two, one metre samples were taken by Medinah across the 16 metre siliceous volcanic sequence, which were located in the most intensely sheared portion (between 11 and 13 metres), and which yielded a weighted average of 6.48 grams gold/tonne across 2 metres.

A second interval was sampled by Medinah at the top of the porphyritic andesite sequence between 22.5 and 29.5 metres, the last 6 metres of which yielded a weighted average of 0.64 grams gold/tonne. Another gap in the sampling occurs between 29.5 metres and 50 metres depth, which although logged as being "normal" andesite still hosts several quartz-carbonate-pyrite veins, veinlets and fractures.

Medinah then systematically sampled and analysed the remaining portion of the porphyritic andesite sequence which consisted of variably sheared, and silicified porphyritic andesite with variable amounts of fine disseminated pyrite, and quartz-carbonate-pyrite+/-arsenopyrite-chalcopyrite-pyrophyllite veinlets. The gold analytical results yielded continually anomalous values between 50 metres and 103 metres with individual gold assays generally ranging between 0.10 and 1.0 grams gold/tonne. A weighted average across this interval returned 0.50 grams gold/tonne across 53 metres. Below this depth, the alteration and sulphide mineralization decreases.

Howe recommends that Medinah take additional samples from the core across the previously unsampled intervals covering 6 to 11 metres, 13 to 22.5 metres, and 29.5 to 49.0 to test the gold potential of the entire sheared zone, within both the siliceous and pyritic volcanic sequence and underlying porphyritic andesite unit. Quarter core repeat samples were taken by Howe (sample 51876 and 51877), which repeated the same intervals covered by Medinah samples 346368 (between 11 and 12 metres), and 346390 (between 62 and 63 metres), respectively (see Table 6.2 and Plate 5.13). The Howe samples yielded 5.07 and 1.51 grams gold/tonne, which although are several grams gold lower than the respective Medinah samples, are considered to be in the same general range of values.

Drill Hole DM99-02 was collared about 80 metres south of hole DM99-01 (see Figures 5.6 and 6.8), and intersected a very similar sequence, passing through the same variably sheared and quartz-carbonate-pyrite veined pyritic siliceous volcanic unit (until 40 metres) and porphyritic andesite unit (until about 200 metres), and ending in interbedded weakly mineralized porphyritic andesite, and fine-grained andesite. This hole was logged as having a 20 metre thick sequence of mixed overburden, regolith, and boulders, overlying the true outcrop, and therefore this portion of the hole was not sampled by Medinah. The first sampled interval occurs at a depth of 37 metres, however Howe feels that much of the rock above this (from a depth of about 10 metres, onwards) is actually variably oxidized, and broken subcrop which is more or less insitu and representative of the bedrock. A one metre channel chip sample was taken by Howe (sample number 51878), between 10 and 11 metres, across a previously unsplit and unsampled interval, and consisting of variably oxidized siliceous tuff with areas of 10-20% limonite, 20% disseminated pyrite and strong epidote alteration. Analytical results of this sample yielded 1.70 grams gold/tonne indicating gold mineralization occurs above the previous Medinah sampling intervals and that the upper portions of the shear zone were probably not cut by the drill hole.

The beginning of the Medinah sampling, at 37 metres depth, corresponds with an increase in the disseminated pyrite content in the volcanic unit (approximately 10 to 15%), along with strong epidote-diopside-chlorite alteration. Several quartz-carbonate-pyrite veinlets and stringers were noted as well. This alteration occurs in the hanging wall of a 2 metre wide fault zone (between 40 and 42 metres) which consists of intensely carbonate altered tuff, with abundant disseminated pyrite and numerous quartz-carbonate-pyrite fractures and veinlets. Analytical results from a five metre interval which included the hanging wall alteration and the fault zone yielded a weighted average of 2.44 grams gold/tonne. A quarter core repeat sample by Howe (sample number 51879) of a portion of the fault zone interval between 41 and 42 metres (repeating Medinah sample 347154) returned a value of 9.19 grams gold/tonne, which is in the same general range of values as the Medinah sample which yielded 7.24 grams gold/tonne (see Table 6.2). The core in this interval was extremely fractured and broken and although core recovery logs were not included, Howe feels that the recovery in this interval may have been below average and the resulting analytical results should be interpreted with care.

Further down the hole a significant fault/breccia gouge zone was intersected between approximately 66 and 73 metres. Core in this interval was extremely broken and sections of zero recovery were reported on the log (however percent recovery logs were not attached). Analytical results of two, one metre samples taken by Medinah across the interval between 68 and 70 metres yielded 61.77 and 122.2 grams gold/tonne, respectively and together created a weighted average of 91.99 grams gold/tonne across 2 metres. A quarter core repeat sample by Howe (sample number 51880) of the interval between 69 and 70 metres (repeating Medinah sample 347182) returned a spectacular 455.02 grams gold/tonne (see Table 6.2 and Plate 5.14). This interval consisted of a strongly brecciated fault zone with intense clay-carbonate-sericite alteration and 1 to 5 % disseminated pyrite and traces of molybdenum and chalcocite. No visible gold was seen in the core, however based on the extremely high gold values in this interval, it would not be unexpected. The extreme variability between the two samples indicates the inconsistent, and probably nuggety nature of the gold mineralization in this fault zone. Similar to the interval between 41 and 42 metres, the core in this interval was extremely fractured and broken and although core recovery logs were not included, Howe feels that the recovery in this interval may have been below average and the resulting analytical results should be interpreted with care.

Below the fault zone, between 70 and 80 metres, the hole remained in bleached breccia and andesite with numerous quartz-carbonate-pyrite-chalcopyrite veinlets and fractures. Analytical results across this interval remained anomalous and returned an weighted average of 0.48 grams gold/across 10 metres. Similar to the first drill hole, this hole crossed a thick sequence of porphyritic andesite with varying amounts of silicification and fine disseminated pyrite along with quartz-carbonate-pyrite+/-arsenopyrite-chalcopyrite veinlets which persisted until almost 190 metres. Only one anomalous weighted averaged interval was returned from this interval (between 150 and 173 metres), which yielded 0.36 grams gold/tonne across 23 metres. Below this interval the hole crossed several fine grained andesite, porphyritic andesite, and volcaniclastic units, but with no significant analytical results.

During Howe’s recent property visit, several hours were spent reviewing the geology in the vicinity of the drill holes and the old workings. Approximately 10 metres south of the collar location of DM99-01 a 10 metre wide (east-west) outcrop of variably silicified and sheared pyritic tuff was mapped. Although the outcrop was moderately oxidized and mineralized with limonite and iron oxides, areas with 1 to 10% fine disseminated pyrite were noted. The shearing is oriented at 160º and dips 60º to the west which corresponds with the orientation of the main shear mapped by Medinah. A 2.5 metre channel chip sample (sample 51868) was collected by Howe along the easternmost portion of this outcrop which yielded 1.39 grams gold/tonne (see Table 6.2). Based on the location of this chip sample and the projected dip of the shear zone, drill hole DM99-01 would have been collared too far west to intersect this portion of the mineralized shear zone. This indicates that DM99-01 was probably collared west of the hanging wall contact of the auriferous shear zone and that a portion of it still remains to be tested by diamond drilling. The upper (eastern) contact of the shear zone has yet to be defined.

In the area of the old workings on the west side of the creek, a large, partially collapsed declined shaft was noted. This is located in heavily oxidized and altered (limonite-clay) porphyritic andesite with numerous subparallel quartz veinlets up to 2 centimetres wide and oriented parallel to the main shearing direction. About 50 metres east of this shaft, close to the creek, a second, flooded declined shaft was visited. This shaft is located in strongly sheared (shearing oriented at 150º dipping 50º west), and silicified tuff with 1 to 20 % disseminated pyrite and cut by several quartz-pyrite veinlets up to 2 centimetres wide. A 1.5 metre channel chip sample (sample 51870) was collected by Howe along the portion of this outcrop directly above the adit which yielded 3.82 grams gold/tonne (see Figure 5.8 and Plates 5.3 and 5.15).

Surrounding the above shafts are several dumps and tailings piles consisting of a finely ground mixture of silica-clay-pyrite. This is the processed material from the old mining operations that were exploiting the auriferous, pyritic veins hosted within the shear zone. Even though the workings are no longer accessible, the dumps and tailings indicate that a significant amount of underground development likely took place at Dos Marias. A composite grab sample was collected by Howe (sample 51869) over an approximately 3 square metre area of a small tailings pile just north of the flooded shaft (see Plate 5.3 and Figure 5.8). Analytical results of the sample returned 3.34 grams gold/tonne indicating that the old milling methods were not very efficient and that a significant quantity of gold still remains in the tailings. The value returned by the Howe sample, roughly corresponds with a tailings sample collected by Medinah in 1998.

As discussed above, during Howe’s visit to the core storage facility in Santiago (see Plate 5.6), several representative intervals of core through the sheared and mineralized sections of the two Dos Marias drill holes were quickly reviewed by Howe and five separate confirmation type samples collected (see Table 6.2). These samples were quarter core samples, taken from the previously split, half core sample, except for one which was taken from an area of previously unsampled core. The gold results obtained from the Howe sampling were in the same general range of values of those reported by Medinah, but often upwards of several grams higher or lower. Although this difference can be attributed to a gold nugget effect, 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 campaign over the Dos Marias auriferous shear zone give a general representation of the values that can be expected from this prospect. It is highly recommended that Medinah complete early stage mineralogical testing prior to their next drilling phase to determine the general characteristics of the gold grains in the mineralized shear zone. By combining these characteristics with several other parameters, a sampling constant can be estimated and nomograph constructed which should 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. The quality assurance program should be designed to verify the validity of sample collection, security (contamination), sample preparation, analytical method, and accuracy and precision.

6.2.1.2 Manto Style Copper Mineralization

The second main target on the Dos Marias property occurs as 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 (see Plate 5.16). 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 varying copper oxides, limonite, and iron oxides (House, 1998c). It is suspected that granodiorite that outcrops south of the property, or a late stage intrusive phase at depth could be the driving force of the mineralizing system, however it has also been suggested by Medinah that the breccia at the Lipangue Property could somehow be genetically related to mineralization at Dos Marias (House, 1998b). A great deal more work will have to be competed, before these can be validated

Very little follow up work has been completed over this target since the second phase of exploration when several IP/resistivity targets were revealed over the area of known manto style mineralization and the main adit accessing the mineralization was mapped by Medinah. During the recent property review by Howe a few hours were spent walking over the surface exposure of the host manto lithology and in the "manto adit".

The "manto adit" (see Plate 5.4) was quickly reviewed by Howe and followed to the northeast for approximately 100 metres until a southeast oriented cross cut was reached (see Figure 5.6 and 5.7). The portal to the adit is in relatively unaltered coarse porphyritic andesite (intrusive?), which persists for the first 60 or 70 metres of the adit (Note: this unit is not shown on the surface geology map completed by Medinah). At this point the contact with overlying, gently east dipping, interbedded and variably skarnified, silicified, and pyritized limestone, sandstone, (+/-calcsilicates?) and volcanics is reached. It is presumed that this unit correlates with the volcanic unit mapped on surface by Medinah. This unit continues to the northeast for the rest of the portion of the tunnel reviewed by Howe and it is expected that it continues even further to the northeast, however time did not permit Howe to trace it further in this direction. The intensity of the skarnification was variable throughout the volcanic unit and several 0.5 to 2.0 metre wide gently northeast dipping, skarnified manto horizons were noted. These horizons are followed by raises from the main tunnel and were likely exploited to some degree by the previous miners (see Figure 5.7). The mantos are heavily oxidized where exposed in the tunnel and mineralized with limonite, clay, Fe oxides along with some fresh pyrite and minor chalcopyrite.

At about 100 metres into the tunnel a southeast oriented cross cut was reached. This cross cut appears to be following a north striking, shallow east dipping interbedded sequence of partially oxidized skarnified limey sediments (sandstone, limestone, calcsilicates?) and siliceous volcanics. Time did not permit Howe to continue to the end of the cross cut where Medinah took two samples in 1998 (see Section 5.3.4). Minor amounts of copper oxides were noted throughout the skarnified units along with limonite, and various manganese and iron oxides. Traces of fine disseminated pyrite and chalcocite were also noted. A vertical channel chip sample (sample 51871) was taken across this unit by Howe at the intersection point of the main tunnel and the cross cut. Analytical results of the sample yielded 1.96% copper across 1.5 metres, and insignificant quantities of gold and silver. Based on this analytical result and the occurrence of additional subparallel manto horizons in the footwall, Howe recommends that portions of this tunnel be systematically sampled to see if the other manto horizons are similarly mineralized. In addition, if the weakly skarnified rock between the richer mantos carries low grade copper values, a potentially significant copper resource could exist here.

Mapping by Howe on surface, approximately 300 to 400 metres further to the south of the manto adit, located rubble of epidote-diopside skarnified limey sediments mineralized with irregular shaped blebs of pyrite and/or chalcopyrite. This rubble is located on the hillside just east of drill holes DM99-01 and 2 and although time did not permit to search for outcrops, it is thought that this rubble is similar to the manto style copper skarn mineralization which is exposed in the adit (see above), suggesting that additional pods of this mineralization will occur both along strike and stacked vertically throughout the volcanic sequence.

During the recent trip to the Dos Marias Property Howe gathered a total of 9 samples from various surface outcrops, pits, shafts, dumps, underground workings, and diamond drill core where the typical styles of mineralization were studied and representative samples gathered (see Table 6.2). The samples were all submitted to Intertek Testing Services - Bondar Clegg ("ITS") in La Serena, Chile, where they were analysed for gold by 50 gram fire assay, copper by AAS, and 34 elements by ICP method. The samples were prepared in the ITS La Serena office by a standard rock preparation (dry, crush to –10 mesh, split 250 grams, pulverize to –150 mesh. The gold analysis was completed in Chile and the pulps were shipped directly by ITS to their associated Canadian laboratory, in Vancouver, where the ICP analysis was completed.

Only scattered weak anomalous values were returned from the other analysed elements. Silver ranged between 0.3 and 39.3 ppm, but generally in the range of 0.3 to 1.0 ppm; copper mineralization in the shear zone was generally insignificant with all samples returning values in the range of about 150 to 3,000 ppm, however the one sample taken from the copper skarn manto horizon returned 1.96% copper ; scattered anomalous lead values were returned yielding results in the general range of 3 to 1,900 ppm; all zinc values were insignificant returning weakly anomalous values in the range of about 20 to 200 ppm; arsenic values were consistently weakly anomalous with values ranging between approximately 50 and 250 ppm.

7.0 CONCLUSIONS AND RECOMMENDATIONS

7.1 CONCLUSIONS

Medinah’s Lipangue and Dos Marias Properties are both located in the Coastal range mountains of Chile on the Altos de Lipangue plateau and its western slopes. Even though the property and surrounding areas have been producing gold, silver, and copper through many small scale mines and placer operations for centuries, the area still remains under explored and has seen very little in terms of modern exploration.

Early stage exploration by Medinah over the Lipangue Property survey has uncovered a significant gold-copper (+/-silver) mineralized hydrothermal breccia pipe that outcrops on surface over an area of about 150 by 100 metres and has been traced by diamond drilling on one section approximately 200 metres down its dip. An IP/resistivity survey indicates that the breccia continues as an east plunging body at least another 400 metres to the east, however it could also become a much narrower breccia dike in this direction. The drilling results determined that the breccia is anomalous in gold, copper, and silver throughout most of its extent below the oxidation level, and an approximately 10 to 20 metre thick, higher grade zone of mineralization was also outlined near the upper contact of the breccia with the host granodiorite. Even though a great deal of the copper mineralization appears to be primary, associated with chalcopyrite, significant quantities of chalcocite were noted indicating that secondary enrichment has occurred.

The Lipangue Property also hosts auriferous quartz veins, which have not been explored in the past by Medinah. Typically in other parts of the Lipangue plateau these veins are very narrow (0.10 to 1.0 metres wide), but are often very high grade, and sections of the veins reportedly can grade as high as 50 or 100 grams gold/tonne. Although this type of vein mineralization could make an interesting exploration target for Medinah, the average grade of the mineralization returned from the initial sampling phases would have to remain consistently above 20 or 30 grams gold/tonne across vein widths of no less than say, 0.5 to 1.0 metres for Medinah to justify continuing to explore for this type of mineralization. Areas of closely spaced or intersecting vein trends would be prime areas to target initially.

The first three phases of exploration at Dos Marias have uncovered a north northwest trending, 50 to 100 metre wide, auriferous shear zone which can be traced approximately 700 metres within the property boundaries, and remains open in all directions. This target remains weakly defined and has only been explored on a very preliminary basis by Medinah which included two widely spaced diamond drill holes. Both holes yielded several anomalous gold intercepts over the length of the hole, however they were collared too far west and may have missed the hanging wall portions of the shear.

The Dos Marias property also hosts "manto" replacement skarn copper mineralization which occurs as a series of 1 to 2 metre thick vertically "stacked" copper rich horizons which are hosted in an interbedded volcanic and sedimentary sequence. The potential of this type of mineralization has not yet been tested by Mendinah and therefore the true thickness and typical copper grades of the mineralized sequence has yet to be determined.

Medinah believes that both the Lipangue and Dos Marias Properties could host a significant gold and/or copper (+/-silver) resource, and that these targets have only been tested on an preliminary basis. All defined zones remain open along strike and at depth and Medinah believes that with a minimal exploration program the potential size of these prospects can be substantially increased. Medinah’s land position at both properties is secure, in that it covers the strike extent of the mineralized zones and leaves sufficient ground to define new targets. Other parts of their land position have only been reviewed on a preliminary basis, or not at all, and should be further explored, since the potential exists for additional mineralized zones. Howe concurs with this target objective.

7.2      RECOMMENDATIONS

7.2.1    LIPANGUE

The Lipangue Property area should be evaluated for large tonnage, bulk mineable, breccia hosted gold-copper+/-silver mineralization, according to the suggested two phase, results driven exploration program outlined below and as shown on Figure 7.1. The total cost for Phases I and II is approximately US$1,370,000 as outlined in Section 8.1

IP/resistivity should be completed over lines B+100 to G+100, between stations 200 to 1700, to ensure that the isolated breccia outcrops near the south edge of the previously mapped area are covered (approximately 9 line kilometres –see Figure 7.1); the new survey will cover the area of the drilled breccia and should more accurately determine its geometry which will assist in future drill hole planning; several line kilometres should be set aside to test anomalies resulting from the magnetic survey or structurally complex zones interpreted from the air photo/landsat study.

As part of the diamond drill program and all of the sampling programs it is highly recommended that Medinah initiate a full quality assurance program to ensure that the highest level of confidence is maintained for all of their exploration results and that all standards set by various regulatory bodies are met. It is also recommended that all drill holes be back filled with bentonite pellets or heavy bentonite abandonment fluid to prevent water inflow. The surface location of all drill holes should be permanently marked and surveyed and down hole deviation tests completed at regular intervals during the drilling process.

Phase II

Based on favourable results generated from Phase I, targets generated by the above regional exploration program should be drill tested by diamond drilling in a second phase of exploration. In addition, sufficient fill-in drilling should be completed over the strike and down plunge extent of the Lipangue breccia to outline blocks of measured, indicated, and inferred resources. A total of approximately 2,000 metres of drilling should be budgeted initially for the newly defined targets and an additional 3,500 metres for the Lipangue breccia

7.2.2     DOS MARIAS

The Dos Marias Property area should be evaluated for large tonnage, bulk mineable, shear zone hosted gold mineralization and copper skarn replacement mineralization, according to the suggested two phase, results driven exploration program outlined below and as shown on Figure 7.2. The total cost for Phases I and II is approximately US$1,160,000 as outlined in Section 8.2

Respectfully Submitted,

Robert Cinits, P.Geo.
August 2, 1999

Certificate of Qualification - Robert Cinits

8.0     PROPOSED BUDGETS

8.1     LIPANGUE PROPOSED BUDGET

8.2      DOS MARIAS PROPOSED BUDGET