Mr Donald Stratton reports

Stellar Gold has negotiated an agreement with World INvestments of Mexico (WIM) to acquire a geologically promising gold and silver prospect in western Mexico. Comprising approximately 1,500 hectares of claims, the property has in the past supported small scale production from high grade surface outcrops. Precious metal bearing mineralization is contained in silicified breccias up to 3m wide in volcanic host rock. Surface samples taken from trenches by the company show values from three to five grams of gold and up to 65 grams of silver per ton. The company's inspection team also found a wide zone of highly altered dioritic rock with quartz stockwork containing 2.8 grams of gold per ton over a sampled wide of 6m in one pit area and 2.5 grams per ton about 30m away.

The company plans to undertake geological and geochem sampling at an estimated cost of $100,000 over the next 60 days in order to define optimum drill targets.

The agreement with WIM calls for an immediate cash payment of $30,000 and provides for a net profits interest (NPI) of 10% to be shared between the underlying owners and WIM. This initial payment secures the property for a two year exploration period with an option to renew for up to three more years for $10,000 per additional year. A total of $100,000 is payable as an advance on the NPI, of which $10,000 is payable upon receipt of a title opinion satisfactory to the company, and 60 days thereafter a further $20,000. The remainder is payable as to $20,000 six months later and the balance on the first anniversary of the first advance. The agreement also provides for a cash buy out of the NPI at the company's option. All monetary figures are in US dollars.