Geology

Exploration prior to Buryatzoloto's acquisition of the property had identified gold mineralization associated with a plunging, synclinal structure and widespread argillic alteration in siliceous sub-volcanic, intrusive and sedimentary rocks.

Past and Current Exploration Activity

Previous geophysical and geochemical surveys have identified twenty zones containing gold and silver mineralization within the license area. Past exploration activity has been concentrated in one area, which has been exposed by a 120 x 60 metre open pit to a depth of 5 metres and by a number of trenches. From the limited documentation available for the auction process, partial assays from three core holes drilled within a 100 metre spacing on this target indicated structurally-controlled gold mineralization with grades ranging from 3 to 7 g/t over lengths of 15 to 41 metres.

In the latter half of 2005, Buryatzoloto conducted phase 1 of its planned exploration programme. From mid-August to late October 2005, Buryatzoloto completed 13 core holes (2,646 m), 130 short reconnaissance core holes (<10 m) totaling 1,215 m and five trenches (916 m) in target Zones 1,2 and 3 located in the south-eastern part pf the exploration license. Additionally, an area of 25 square kilometres was covered by geological reconnaissance mapping and sampling.

Detailed results of this exploration programme were reported in a news release dated May 31, 2006.

The focus of the programme was Zone 1 where Buryatzoloto drilled 12 core holes (2,485 m) on six sections at 100 m intervals and excavated four trenches (778 m). The best intercept encountered in core hole C-1a was 51.1 m averaging 11.5 g/t gold and 15.8 g/t silver from surface, which was followed by 10.2 m averaging 1.6 g/t gold from 53.7 m. Trench K-1, testing the surface extension of the mineralized zone intersected in hole C-1a, returned two mineralized intervals of 37.0 m grading 15.4 g/t gold and 14.5 g/t silver, and 33.3 m grading 3.6 g/t gold. Two other holes drilled below hole C-1a, along the axis of a plunging syncline, did not intersect any high-grade mineralization. Hole C-3, drilled 80 m southwest of hole C-1a, intersected 1.9 m averaging 15.9 g/t gold and 32.1 g/t silver from 125 m. One of two previous core holes, completed in 2001 by a previous party and drilled towards C-1a along the dip of the mineralized zone, also intersected significant gold mineralization from surface to approximately 38 m; these samples were analysed by an X-ray spectrochemical method and the data available indicates that only a few samples were assayed by fire assay. Gold mineralization in Zone 1 appears to be limited to the nose of the syncline and extends from surface to approximately 85 m. Mineralization is associated with pyrite within argillically altered tuffs of intermediate composition enclosing lens-like bodies of quartzite.

At Zone 2, located 100 m to 500 m north of Zone 1, Buryatzoloto completed 130 short core holes (<10 m) totaling 1,215 m on three lines on a 400 m by 20 m grid. No significant mineralization was encountered in the drilling. In early 2006, an additional 30 holes, averaging 9.6 m for a total of 288 m, were completed and fire assays are pending.

Another 40 short holes (<10 m) spaced at 20 m intervals were completed on one line, traversing Zones 9 and 10 from the southwest to the northeast. Assays are pending.

At Zone 3, located 90 m to 370 m south of Zone 1, Buryatzoloto completed one trench (138 m) and one drill hole (C-46) of 160.9 m. No significant assays were reported. A previous core hole drilled 70 m to the northwest had intersected 5.7 m averaging 2.0 g/t gold from 18.4 m.

Preliminary reconnaissance work has identified five additional areas of interest (Zones 9, 10, 17, 19 and 23) that will be the subject of further exploration work. Rock sampling in these outcrop-poor areas returned values up to 3.0 g/t gold. Several soil anomalies up to 1.5 g/t gold have been identified. The budget for phase 2 exploration in 2006 is approximately US $1.8 million.