Mr Donald Stratton reports

The company's phase I exploration program has been completed on its 1,173 hectare western Mexican gold prospect. This program consisted of mapping and soil sampling covering most of the claim area. A total of 1,290 samples was taken including 461 soil samples, 522 trench samples and 307 rock samples. Several gold bearing anomalies were discovered following a northwesterly trending zone about 1.5km long, individual anomalies range from a few metres to 150m long with widths up to 100m.

Trenching in the anomalous areas uncovered two significantly mineralized zones. One quartz-sericite zone was exposed by a trench over an apparent width of about 18m. A series of 1m samples over the whole width showed gold values ranging from 1.7 to 17.5 g/t with an average of 6 g/t. The extent of the zone has not yet been established. The other zone, 150m to the north, was traced over a strike length of 50m east to west, and remains open in both directions. This zone comprises silicified breccia structure within wall rock up to 20m wide. Wall rock assays range from 0.4 to 4.9 g/t of gold with an average of 1.8 g/t. The breccia zone itself showed 4m of width assayed at an average of 4 g/t of gold.

About 550m to 1,000m southeast are outcrops of silicified volcanic breccias with gold values ranging from 0.2 g/t to 39.0 g/t. Trenching in these areas did not reach bedrock.

Geologically, all of the mineralized zones are hosted by shallow bodies of dacitic composition intruding andesitic rocks, displaying features of epithermal gold deposits. Further exploration is planned for early 1997, to consist of trenching, geophysical surveying and a diamond drilling program, at an estimated total cost of $160,000.