Technical Brief on the Cinco Minas Mine Property

and

The Gran Cabrera Mine Properties

Municipality of Hostotipaquillo, Jalisco, Mexico

Prepared by:

Richard Munroe, B.Sc., FGAC, P.Geo.

December 11, 2006

 Table of Contents

Summary ................................................................................................................... 1
Introduction .............................................................................................................. 3
Reliance on other experts ........................................................................................... 14
Property Description and Location ............................................................................... 15
Accessibility, Climate, Local Resources, Infrastructure, & Physiography .............................. 24
History .................................................................................................................... 29
Geological Setting..................................................................................................... 45
Deposit Types ........................................................................................................... 49
Mineralization .......................................................................................................... 50
Exploration .............................................................................................................. 52
Drilling.................................................................................................................... 71
Sampling Method & Approach...................................................................................... 71
Sample Preparation, Analysis, and Security.................................................................... 77
Data Verification....................................................................................................... 77
Adjacent Properties ................................................................................................... 78
Mineral Processing and Metallurgical Testing ................................................................. 79
Mineral Resource and Mineral Reserve Estimates ............................................................. 81
Other Relevant Data and Information ........................................................................... 86
Interpretation and Conclusions.................................................................................... 87
Recommendations ..................................................................................................... 87
References ............................................................................................................... 90
Additional Requirements ............................................................................................ 92
Certificate................................................................................................................ 93
Appendix 1 – Tailings Assay Program at Cinco Minas May/ June 2006 ................................ 95
Appendix 2 – Dump Configurations and Tonnages .......................................................... 98
Appendix 3 – Assorted Assay Samples from Munroe........................................................109
Appendix 4 – Assorted Assay Samples from Murphy ........................................................118
Appendix 5 – Phase 1, Part 2 Budget ..........................................................................121

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List of Figures
Maps
Map 1 Old Hostotipaquillo map .......................... 5
Map 2 Old mine map – supplied by MSJ .................. 6
Map 3 General target area location for Cinco Minas ..... 16
Map 4 Area of Influence Map ........................... 17
Map 5 1:250,000 Geology Map with MSJ Concession .... 18
Map 6 Cabrera Concession Area C-1-C3 .................. 19
Map 7 General area of Gran Cabrera properties .......... 22
Map 8 Generalized geological map of the Cinco Minas .. 23
Map 9 Satellite Image of the Cinco Minas area .......... 24
Map 10 General Bandera Project Areas .................. 26
Map 11 From Ausburn 1997 report ...................... 46
Map 12 Regional map view of Gran Cabrera ............. 48
Map 13 Close up of Gran Cabrera geology ............... 49
Map 14 Generalized structure of Cinco Minas area....... 55
Map 15 Coral to San Juan area .......................... 56
Map 16 Close up of the Coral/Scorpion mine areas ...... 58
Map 17 El Abrita/ El Kilo Mine Area ..................... 59
Map 18 Close up of the El Abrita / El Kilo Mine sites .... 61
Map 19 Close up of the area north of El Cohete Mine ... 62
Map 20 Close up of el Cohete to Cerro Colorado Block... 63
Map 21 Area covered by the Cerro Colorado Block ....... 65
Map 22 Close up of the SE flank of Cerro Colorado ...... 66
Map 23 Cinco Minas project property geology ........... 74
Map 24 Cerro Colorado drill hole locations .............. 75
Map 25 El Abra drill hole locations...................... 76
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Tables
Table 1 Concession list Cinco Minas area ............... 20
Table 2 Concession option payments ................... 20
Table 3 Concession list Gran Cabrera area .............. 21
Table 4 Cinco Minas mine production history ........... 29
Table 5 Apron and adit mount samples from JDP mine ..43
Table 6 Assays from vertical adit ....................... 50
Table 7 Chip sample assays El Cohete fracture ...........63
Table 8 Cerro Colorado chip sample assays ............. 64
Table 9 Murphy assays at Cerro Colorado ............... 64
Table 10 El Cohete assays .............................. 65
Table 11 Northeast of el Abra – Minas del Coral slope ...67
Table 12 2005-2006 assay results .......................71
Table 13 Bottle roll tests ................................80
Table 14 March 2006 Cinco Minas resource tables .......82
Table 15 El Cohete block resource tables ................84
Table 16 Cerro Colorado block resource tables ...........85
Table 17 San Juan / Coral area resource tables ..........85
Sections
N1100...................................................73
 Summary

Bandera Gold Ltd. has signed an option agreement with Minera San Jorge, S.A. de C.V. (MSJ)
to acquire a 60% interest in the Cinco Minas and Gran Cabrera Mexican mining properties
located in the Municipality of Hostotipaquillo, Jalisco, Mexico. Complete details of this
agreement have been previously reported in a company news release and are available for
review on SEDAR.

The Cinco Minas site covers roughly 10,750 hectares and is located approximately 100
kilometres northwest of the City of Guadalajara. The Gran Cabrera site covers roughly 4,300
hectares and is located approximately 35 kilometres northwest of Cinco Minas. Both sites are
on strike to a major regional left lateral fault system that hosts many historical areas such as
the old Santo Domingo mine site, currently the subject of extensive exploration drilling by
Stroud Resources Ltd., which is midway between the two historical sites.

Anaconda Mining Company was the previous owner of the Cinco Minas property. Between 1922
and 1928 it mined a reported 1,083,000 tonnes of ore averaging 3.17 g/t gold and 476 g/t
silver. This equates to 97,364 oz. of gold (2,760 kilograms) and 15,095,915 oz. of silver
(427,954 kilograms). It should be noted at the outset that current resource estimates far
exceed the total amount reported removed from the mine. The Cinco Minas and Gran Cabrera
properties both host epithermal systems with adularia-sericite type quartz veins with gold-
silver mineralization. The main zone system at Cinco Minas has an identified strike length of
approximately 5 kilometres with additional parallel to sub-parallel veins. Past mining has
produced several bonanza grade veins with high gold credits. These types of structures have
also been reported in the recent exploration drilling at Cinco Minas.

MSJ is extensively refurbishing the old mill site located just north of the edge of the town of
Cinco Minas. A new 60 tonne/day pilot plant is being constructed on that site. Further work
plans include the installation of a 250 tonne intermediate sized mill and the conducting of
bulk sample operations with test heap leaching. Work was done to prepare the exposure of the
end of the Destajos level at the El Abra mine in Cinco Minas to allow immediate entry into the
old underground adits for extraction and exploration. This entry is planned for the winter of
2006- 2007. Additional work was undertaken to also attempt a side entry to Destajos via the
old San Diego adit. However, heavy rains made the access program too difficult to proceed at
this time. Several descents were made into the El Abra mine using the existing shafts and
tunnels during the summer of 2006. These descents allowed for new samples to be taken and
mapping to be updated to a depth of 120 metres below the mine mouth. During this program a
6.3 metre true width of high grade mineralization was located and mapped in the San Diego
cross portion of the Destajos level. This zone produced assay values of 1.76 to 6.20 g/t Au
with 202.2 to 684.2 g/t Ag, which provides an average value of 4.00 g/t Au and 458 g/t Ag. It
is also important to note that this portion of the old mine works was considered the low grade
portion of the mine structure and the drive was always to seek the higher grade materials at
depth.

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Bulk sampling was completed at the crest of Cerro Colorado during the summer of 2006. This
area had previously only preliminary sampling and exploration work done on it. The 2006
program saw the crest removed and approximately 4000 tonnes of 0.032 oz/st Au (1.10 g/t)
with 1.87 oz/st Ag (64.11 g/t) average grade materials placed into stockpile. Cerro Colorado is
now an operational quarry plateau covering 3,120 square metres with 20 x 45 metres (900
square metres) of vein exposed on the floor. A haul road has also been completed from the
new plateau to the new mill site. In addition, an old mine adit that had been driven into the
southwest slope was exposed and prepared for re-entry. This adit extends further than the 7
metres that remain open. A collapsed zone must be removed and deeper exploration done.

An area of note is the El Cohete mine site located just northwest of Cerro Colorado. This mine
is located deep in the valley 60 metres below the original Cerro Colorado crest. The mine was
originally mapped as a single adit into a 6 metre wide vertical vein. This structure has been
updated to show that the mine is actually situated within a stock work of at least 6 veins with
an apparent width of 100m. Further sampling and structure delineation is ongoing.

The Minas del Coral area (Coral) has been identified as an open end vein structure located
north of the San Juan mine. This area separates and is situated in the offset between San
Juan and the Magdalena vein system. A series of small mines and adits were located in the
dense underbrush and this work has provided new structural information to assist in
determining vein orientation. Several areas of high grade mineralization have been identified
that were previously regarded as barren zones in past reporting. Results as high as 2.35 g/t Au
and 728.4 g/t Ag have been obtained from the recent exploration work.

In addition to the bulk work, primary field exploration including mapping and new assay work
has been conducted along strike. New low level air photography and GPS controlled survey
work has been contracted with a spring 2007 completion date. Due to extensive new road
system development and clear cutting of old adit mouths and stockworks, the
orthophotography was delayed until these new ground controls are in place. New satellite
photography has provided suitable interim mapping requirements. This program will allow the
new and old data sets to be joined in a manner that will allow for proper three dimensional
computer analyses to be completed for ore body modeling.

The exploration work at Gran Cabrera is still being limited to ore body modeling and
topographic surveys until the Cinco Minas operation is underway. The area around Cabrera was
examined during the period to gain further on ground understanding of the geological
character of the region and to refine current and develop new theoretical models for
emplacement. Advances made on the Cinco Minas geological model during this current
exploration phase suggest that similar major additions to highly mineralized rock quantities
are possible as well.

It is also important to note that through interviews with local elders a significant amount of
local history was obtained regarding the ongoing mine development post 1928. Even with the
loss of a foreign corporate structure due to Revolution, the local people were able to expand
the mine operations as a co-operative up to 1945. This activity resulted in the opening of
many new surface adits across the property and expansion of some of the underground levels.

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There are no written records presently available on the expansions and developments in and
around the mine during this period.

This project should be advanced as all foundation reporting has concluded that significant
amounts of highly mineralized rock remain in the old work areas and in near proximity to those
sites. Modeling was originally done at Cinco Minas to demonstrate the feasibility of cut block
open pit removal of the upper levels of the old mine works as well as new quarry activity at
Cerro Colorado which is approximately 1 kilometre southwest of the old Cinco Minas mill site.
Even the current examination of the old mine works suggests the potential of re-starting
underground operations. However, more engineering work is required to make any
determination on what method or methods would suit the future mine development.

The building of the milling facilities is also well underway, with most of the foundation work
complete. Placing of crushing equipment and in place welding of large tank structures are
presently the focus of the design and construction group. The new 60 tonne per day mill is
expected to be complete by mid-February of 2007.

Introduction

The Cinco Minas group is a suite of historical mining properties comprising 12 exploitation
concessions covering 10,750.0690 hectares. The Gran Cabrera group is also a historical suite
comprising 3 exploration and 2 exploitation concessions covering a total of 4,242.0946
hectares. The author has not performed a due diligence on the tenure or ownership status of
the concession groups. All information was provided by MSJ and is assumed to be in good legal
standing. The issuer, Bandera, has conducted due diligence on the legal standing through
appropriate legal counsel.

This author’s original report is best described as a compilation of historical and recent
exploration and mining efforts to assist in quantifying the potential asset to the issuing
company. A significant amount of exploration work had been undertaken by previous operators
who collectively were unable to determine how to take the Cinco Minas property back into a
production mode. While that aspect was examined to determine the factors that drove those
decisions, the writer also engaged in a series of interviews with local elders to learn more
about the post 1928 history of the property. The official government records on the mine
history essentially ended in the early 1930’s after the mill was sold and moved but the mine
continued to operate as a co-operative of the local population until circa 1945. With roughly
1,000 persons directly employed in the mine, the labor pool remained largely in place even
after the mill was sold. The miners continued to expand the mine and the ore was then
shipped directly to an assortment of Mexican mills.

The high grade (3 kg/tonne Ag) ore located at the bottom of the mine was the driving force to
continue mine descent. It was reported that in-fighting, graft and corruption within the co-
operative was the reason for the closure and not the lack of ore. Even after the main mine was
closed, other artisan mines sprang up across the area to continue mine operations. An old ball

3
mill and gravity system with tanks was located in the underbrush overgrowth near the San
Juan mine. That operation was shut down in the 1970’s due to another local flare up. The
history section of this report details more of the circumstances of these historical situations.
However, it is important to note that at no time in the research was the suggestion ever found
that the mine was closed due to a lack of material.

The investing public has to be confident that the operation is viable into the future due to the
quantity and quality of the possible ore potential and not only due to presently high metal
prices. Productive and profitable mining operations only survive when a series of factors are in
place to support all of the issues of sustainable development. In the writer’s opinion the
factors are in place and the long term success of the mine operation is viable. This thought is
further reinforced by the new historical information and the additional ore grade materials
being located all along the strike towards and including Gran Cabrera.

The issuer, Bandera Gold Ltd., with its head office located in Edmonton, Alberta, signed an
agreement with Minera San Jorge S.A. De C.V. (MSJ) to develop two of the historical mining
camps in the Municipality of Hostotipaquillo, Jalisco, Mexico. It is important to note that the
two camps, Cinco Minas and Gran Cabrera are representative of a host of old mining operations
that cluster in the region. Looking at map 2 one can understand the overall significance of the
area in the rich mining history of the region. The map is cluttered with old mine sites that in
many cases supported operations up to the early 1900s. While many had their roots dating
back to the Spanish workings of the 1500s each had an economic reason to expand. The
common factor for all of the properties is that the regional geology supported the development
of the mines. This is a critical element in understanding the significance of the area as being a
strong target for further operations.

4
Map 1 - Old Hostotipaquillo map from internet site by Ramiro Garzon

5
 Map 2 – Old Mine Map - supplied by MSJ

In many mining regions, operations will cluster in a very site specific shear zone or similar
geological feature that supports development. These clusters are generally tight and very
discrete in orientation. However, in the Hostotipaquillo area, the clusters are wide spread and
the entire region has to be considered in determining the significance of the size of the
geological hosts. The historically considered ore bearing structures have been shown to be
structure related, part of a volcanic complex or both. Geographical setting and physical access
to each of the mine sites has played a large part in the magnitude of development of particular
sites. These parameters are still just as important in today’s evaluation criteria and an
examination of historical issues will assist the reader in understanding why they played a large
part in the cessation of operations in the past.

One of the traditional mining axioms suggests that the best place to find a new mine is in the
head frame of an old mine. It is important to understand that the geological features that
brought the original miner to a particular site will not have changed. What has changed are
the mining tools, motorized and power generation equipment, regional physical access,
scientific knowledge on extraction and processing technique and the local socio-political
climate. When the Hostotipaquillo region was first explored and developed it was a rough
outback wherein survival was an issue let alone productive mining. The Spanish scoured the

6
country in the 1500s looking for only the richest areas to establish mines with slave labor.
Stories of 60 kilogram per tonne silver grades and mine cut off grades down to 3 kilogram per
tonne silver abound in certain areas. Simply put, the historical mines only high graded the ore
shoots that were accessible and could be mined by hand. When silicified ore sections were
encountered, the miners were simply not able to effectively extract and process them. As a
result, many areas within the old mines were abandoned in favor of easier targets. This is a
feature of stalled developments that scatter the region. Hundreds of small “starter” adits have
been located and while the mineralized sections appear mostly similar, the access to the sites
varies. Many of these located adits warrant further examination due to the better access and
field conditions in the area.

Later operators in the 1900s were able to begin re-development of some of the historical and
newly discovered shoots taking advantage of new mining techniques and equipment. This
resulted in the development of many new mining operations bringing significant activity and
population growth to the Hostotipaquillo region. Some camps swelled to 20,000 person shanty
towns that existed only due to the mine operations. However, even with this population boom,
many would not venture much farther north of the Gran Cabrera area due to the rough terrain
and dangers posed from the Indian population to the north. Crime was rampant and Federal
soldiers were employed to provide a limited protection level from bandits and to instill a
feeling of governmental structure. All early ore concentrates and bullion were shipped south to
the more developed and civilized areas of Mexico.

Mining for the most part thrived in certain camps under the guidance of new foreign mining
engineers and geologists. Mining companies worked their respective claim areas and in certain
cases, co-operatives developed to share the expensive processing mill operations. Roads for
the most part were nothing more than well traveled horse trails and heavy equipment had to
be brought in piece by piece with burro and man power. Historical documents show the
conditions of the haulage concerns and living conditions in this 1920 technological era.
Indeed, the magnitude of development that occurred during this time is an engineering marvel
and testament to the resilience and bravery of the men that undertook the task before them.

With the development of the mines also came the establishment of small towns and
communities throughout the area and Hostotipaquillo became known as a mining region.
Certainly, the town of Hostotipaquillo became the regional centre for mine activity supply and
governmental structures following silver mine discoveries in 1605. The town of Cinco Minas
developed 10 kilometres to the east and the vast cluster of mines around Monte de El Favor
and Gran Cabrera was centered some 20 kilometres to the northwest. In some operations the
original workings of the Spanish can clearly be seen overprinted by the newer operations from
the foreign interests. With the new tools and technology, workings were now expanded into
the silicified veins and lower grade ore was attainable. Some drilling operations were
undertaken, but all mines were largely expanded by simply following the highest grade
mineralized veins.

A gradual decline in general mine operations occurred at the end of the 1920s due to political
issues and rebellions. In many cases existing operations were closed entirely due to political
interference and closures had nothing to do with the lack of minable ore. This was reportedly

7
the case with the Cinco Minas camp and some of the Gran Cabrera camp operations. The turn of
events in this time period is critical to the history of mining in the region. As the financing
and technological input from the foreign operators diminished, so did the mining. Since the
early 1930s only a limited amount of mining was reported to have occurred in the region and
most operations have simply been lost to history. The region is rich in potential for the re-
development of old workings and the discovery of new sites.

Today’s methods of satellite, air photo and geophysical property evaluation were not invented
at that time and most of these historical regional properties have still never enjoyed this type
of sophisticated examination. This is in part due to the lack of property consolidation which
provides the economic critical mass to develop the area in a modern systematic manner. The
property consolidation of the majority of the old mine operations in the Cinco Minas and Gran
Cabrera area camps by MSJ is possibly the most significant achievement in the potential for
the large scale development of mining activity in the history of the region .

The ability to now run past the traditional small claim borders with regional scale remote
sensing tools without the fear of “paying” for the development of competitor properties is
important in today’s economic model. The Mexican government has not undertaken this
intense work in the region as it has been the responsibility of the local operator to provide
that data and only large scale geological map sheets and atlas variety interpretations have
been generated.

A low level ortho airphoto program has been designed and financed. Once the roadwork and
mine mouth definition programs are complete, and the heavy green over growth has died down
to expose ground features, the program will be flown. This will provide the base data for
further computer modeling as the site develops.

MSJ has also done an excellent job of collecting and cataloging the historical data and
mapping. It has also provided unfettered access to any and all materials required by any
company wishing to establish operations on the vast MSJ property suite. These advances by
MSJ in the sophistication of gathering historical information about the region as a mining
centre have led to fresh exploration, drilling and the preparation of new technical reports by
several companies. Confirmatory assays and mine mapping within the old adits has also shown
the generally rich nature of the properties. However, it is important for readers of this report
to avail themselves of the complete works of information filed with Security Exchanges around
the world in the form of technical briefs and press releases to obtain a full understanding of
the scope of the potential that exists within the MSJ property suite. This technical brief will
also provide the standardized requirements as laid out in the National Instrument 43-101 with
direct references to the assembled works for clarity and continuity.

Where a virtual library of current assessment reports exist, it is important to evaluate the
recommendations of the suite of authors within the context of the properties being evaluated
and for what purpose. One of the curses of property evaluation is being forced to focus solely
on the subject property and not be in a position to place that property within the context of
regional or area play potential. However, due to the broad scope afforded by Bandera due to
its agreement to develop both camps, this writer continues to be able to introduce other

8
regional parameters that are germane to the project. In addition, field work done in 2006 by
the writer in regions surrounding the surrounding the Cinco Minas camp has greatly assisted in
understanding the complexity of the area and the similarities that exist.

Previous technical works provided excellent data sets, mapping and analysis to form a
foundation of understanding of the two camps. The results of the 2006 independent works
were compared to the historical records and found to have many similarities in the general
character of many sites. The overall general structural analysis provided by MSJ suggests that
the regional left lateral fault structure and associated transverse patterns geologically link the
Cinco Minas camp directly to the Gran Cabrera camp. This writer continues to support this
premise fully. Satellite data examination supports this broad postulation and also shows the
linkage of the camps and other old mine sites along structure. Being able to personally
examine several of these regional pattern mine camps has simply added more data sets to
further this model.

The Stroud Resources Ltd. mining camp is located approximately 10 kilometres northwest of
Cinco Minas and falls directly along structure at the Santo Domingo Vein system. In Stroud’s
promotional literature, they also make direct references to the similarity of the two camps with
respect to structure and geological character. They also postulate that since the Cinco Minas
camp generated in the order of 15 million ounces of silver and 97,500 ounces of gold from 1.2
million tonnes in the 1920s then their property should hold value as well. They equate their
property to the same mineralogical character as the historical Cinco Minas structure. The writer
was invited to visit the Stroud camp and examine the core, mine workings and vein structures
in September 2006. While the Stroud information must remain confidential, it was noted that
the general orientation of the major vein systems were at 150 degrees AZ which is the same as
the majority of the Cinco Minas veins.

The Stroud (Santo Domingo) property is clearly visible from the higher sections of the Cinco
Minas camp and visual translations of the suspected major vein systems can be easily made
across the two areas. Stroud advises that like Cinco Minas, they have a series of banded to
breccia style epithermal quartz carbonate veins, minor pyrite, galena, sphalerite, argentite and
native gold referred to as the La Rayas and Guadalupe as well as many old mine workings on
the property. While they advise in their company exploration materials that they expect to
locate significant mineral intersections within their exploration property, the ground position
is still smaller than that of the known main structure area at Cinco Minas. The writer has
reviewed the available data and determined that only 20% of the identified Cinco Minas vein
system has been drill tested to date.

In addition, Stroud’s literature indicated 5 more historical mine properties west of Cinco Minas
laying generally along strike and appearing to be situated near the western flank of the muted
cone structure that Cinco Minas flanks to the south. The mines are identified as Los Pilares,
Mina De Franco, La Desconocida, Las Animas and San Luis De Oro. The writer was originally
unable to locate any current or historical data on these indicated mine sites in the published
works. However, during the 2006 summer field work, all 5 mines along with other unidentified
mines, adits and workings were uncovered within the crater bowl. These mines will be reported
upon further in this report.

9
The identified regional potential is a strong factor in suggesting the value of new airborne
geophysics, air photo and satellite data interpretation to fully detail the structural nature of
the major trend line structures. Ground truthing of the identified targets is also required as
access is permitted by road and trail development. Airborne work can be designed once the
ortho photo program is flown and data sets developed.

The main question as to the viability of Cinco Minas as a stand alone mine property is
addressed and supported in the report by an examination of the known drill results, mapping,
assay collectives and development cost perspectives. This position was further enhanced by
new exploration and resource definition developments on the property.

This second Technical Report is being prepared for Bandera Gold Ltd. to provide a continuing
critical overview of the program while presenting the new geological modeling and assay
results. New drilling is still not recommended as target locations and orientations have not
been optimized as yet. Certainly the new work has posed many questions as well as answers,
but the full body of work is still not complete simply due to the sheer size of the property.

The majority of the reporting was provided by the vendor, MSJ, who has held a large property
position in the region for over 10 years. The land holdings are complex but contiguous and
allow Bandera to operate well within a large zone of influence. The agreement includes 12
concessions in the Cinco Minas area comprising 10,750.0690 hectares and 5 concessions in the
Gran Cabrera area comprising 4,242.0946 hectares.

This is a very large land position in steep terrain that poses many geo-technical problems in
driving new roads to access the large vein structure. Vein exposure is sometimes difficult to
obtain due to vegetation, overburden and landslide potential. While this is a common feature
in slowing many exploration properties, it is not a true detriment for the ongoing resource
definition exercise as the camp is mature and much of the mineralized rock is either exposed
in outcrop, adit, mine and working or in the previous drill program records.

The Cinco Minas area has 5 historical mines and several more workings, adits and pit areas
scattered in the main fault zone area. The historical mines were operated as a cooperative in
the 1920s with the others being apparent individual attempts to produce away from the main
structure but generally on strike. These other workings produced an unknown amount of
historical ore but due to the small size of the sites, the tonnage appears to be minimal. They
did however show that the main vein structure does in fact have a definite extended strike
length with similar mineralized rock types and grades. The individual aspects of each of the ore
zones will be further discussed in other sections of this report.

The Gran Cabrera area is situated approximately 35 kilometres northwest of the Cinco Minas
site on the south bank of the Rio Grande De Santiago. This river traces the main layout of the
regional left lateral fault system joining the two sites. There are numerous parallel and sub
parallel structures flanking the main system that provide pathways to several intrusive and
extrusive features across the region. The Cinco Minas deposit appears to be situated along the
south flank of a collapsed cone, while the Gran Cabrera site is situated along the northern

10
flank of a similar but much larger series of roughly concentric cones. Both sites have
similarities in the vein systems and have provided significant historical ore reserves to major
operations in the past.

The vein systems are classic epithermal precious metal deposits with brecciated ore hosts
flooded with quartz/sulphide pulses. The mineralization is varied along strike but generally is
represented with argentite, miargyrite, native silver, gold, sphalerite, and galena. The
literature and recent drilling supports the assumption that additional sources of very high
grade mineralization should be encountered along strike. The historical reports indicate that
bonanza grades of silver with gold were encountered randomly during the development of both
mine sites. The geology certainly supports that potential as volcanic hosted massive sulphides
are commonly concentrated and enriched when proximal to major fault systems.

The literature indicates that the main theme of the emplacement models for the mineralization
comes from multiple pulsing of the fault systems resulting in brecciated shoot development
along strike and down dip. However, little data in this region has been developed to show any
intrinsic association with the volcanic activity that is proximal to the faults. Tumi Resources
Limited (Nebocat, 2003, 2004),reported that previously mapped fault gouge in the El Troce
adit located in the northwest portion of the Cinco Minas site, was in fact weathered tuff with
weathered pyrite.

This observation supports the writer’s view that volcanic hosted brecciated mineralized vein
materials are an under reported component to the puzzle. This appeared to be borne out by
original literature, field observations and drill data and was confirmed by 2006 field work with
traverses over, around and into the slumped caldera adjacent to the footwall of the main Cinco
Minas vein system. The proximity and dip of volcano-clastic members in both the sites show
that there had been a significant volcanic pile developed pre-pulse and certainly pre-metallic
injection. The mixing of the vein breccia in the fault system with the injected fluids has
obscured the history of the host rock and simplified the generalized descriptions of the
mineralized zones.

In looking at the assorted geological descriptions of points along the main fault zone, it
appears that the character of the high-grade materials changes as you move away from the old
mines. The breccia becomes less volcanic in nature and begins to exhibit a more traditional
breccia gouge appearance and texture. The drill reports indicating more traditional gouge
textures in Cerro Colorado to the southeast of the old mine area are in keeping with field
observations. The petrographic report by Prof. Harris commissioned by the writer in the March
2006 report supports the suggestion that there is a change in mineralized host from primary
volcanics to primary metamorphic as one moved along structure. In the original reporting, this
writer felt that there was a high potential for further significant concentrated mineralization
discoveries in proximity to the main mine within the volcanics away from the fault structure.

The new field work has identified three separate zones of mineralization and emplacement at
Cinco Minas. The basal (primary) structure is the large crater feature between the vein and the
river to the north. The second feature is the intersection area where the vein structure crosses
the cone slope elements. The third main feature is the simple vein structure as it crosses the

11
region. Each of the three features presents individual geochemical signatures, emplacement
and concentration models. Each major feature will have to be presented as separate
mineralogical environment in future reporting due to the complexity of each.

The determination of this new model will also assist in the re-examination of the past drill and
assay work as the assessments were done in a different model expectation. With different
modal variations along strike, the drill results are more easily explained. The field work has
also resulted in the discovery of new offset veins at known constriction points. These offsets
have presented multiple vein systems up to 100 metres wide. Many of the constriction points
were not drilled as they were felt to be barren pinch points along strike. These new findings
allow for many more drill target opportunities as the area is better defined.

The Gran Cabrera, Santo Domingo (Stroud Resources property) and the Cinco Minas systems are
all similar in texture, orientation and proximity to the main fault influence. The Stroud
Resources examination shows that their emplacement areas are fault controlled epithermal vein
complexes along defined strike lines, with steep dips, open at depth and silicified, brecciated
ore. The Santo Domingo deposit is also associated to nested volcanic regional systems, hosted
in early to mid Miocene andesites and rhyolites.

The regional geological similarities of the three deposit areas as well as the snake-ball type of
vein shoot mineralization all serve to show the similarities along the main fault strike. It is
well understood that the injection pulses from the fault zones provided the mineralization and
silicification. With this understanding, it is reasonable to assume that more mineralized zones
will be encountered along strike, with potential concentration pockets in proximity to volcanic
structures and where dilated portions of the fault exist. The vein and near vertical sheet
structures located within the crater also present additional mineralization possibilities.
However, they were left out of the possible resource calculations because the exposures were
only linear and significant advances in possible vein system widths could not be made at this
time due to the steep slopes and overburden.

Nebocat has done an excellent job in describing the property geology, structure and deposit
types in his Tumi reports. This literature should be considered a foundation report to all
persons involved in the assessment of the Cinco Minas property as a mine grade property. He
has captured the essence of the previous work by authors such as Zahoney, Snow, and Feeley.
Nebocat was able to provide recent mapping and well articulated new drilling data along the
main Cinco Minas structure.

However, based on the noted 3 main emplacement models this writer continues to question
the potential of additional resources that have not been fully considered. The areas of interest
are:

 The 3 parallel veins running approximately 500 to 800 metres northeast of the main
Cinco Minas structure. They strike roughly 700 metres and dip concurrently with the
main Cinco Minas fault around 70 southwest. There is an apparent truncation and

12
 offset of the 3 veins to the southeast. Just to the northwest and on strike of the vein
system is the old La Cobriza mine.

 Northwest of the San Juan/ San Pedro areas in what appears to be a continuation of
the main Cinco Minas fault is another large vein. This vein is truncated and offset to
the northeast and in the Tumi mapping has a distinct sinuous nature. This area was
referred to in this report as the Coral/San Juan area.

 Possible distal vein extensions to the far southeast of Cerro Colorado that are on strike
and outcrop against the southern cliff face. The Tumi drilling intersected sections of
mineralization in their drilling at Cerro Colorado and weathered surface exposures are
also mineralized.

These three areas were targeted for exploration in 2006 and remain high potential targets for
additional mineralized zones. The mapping by Rosas Haro for MSJ in 1997 provides information
as to grade and size for the veins located northeast of the old mines. The veins are in the
order of a few metres in width and have lower grades of gold and silver. (Ranging from nil –
3.05 ppm Au and .05 – 403.9 ppm Ag) Also, new field work by the writer southeast of this
area has resulted in the discovery of additional veins, adits, mines, and workings. One newly
identified quartz vein was mapped over 100 metres of length with widths up to 2 metres.

The important feature of the originally reported 3 vein system is that it is situated some 200
metres above the main mine works in what appears to be the more inner portions of the cone
structure and well into the footwall of the system. If the veins have deep roots then they could
represent deeper high-grade materials that would have not been intersected by previous mine
operations as they would have been deep into the footwall of the structure. While some
crosscuts were driven deep into the footwall, most of the exploration work has focused on
attempting to locate new mineralization in the hanging wall strata as the footwall was
suspected to be barren. Much more work will have to be done on this area as well as collecting
and analyzing data from the La Cobriza mine. It is also important to note that one traverse
resulted in the discovery of three old mine adits far to the north of this 3 vein system. The
local elders advise that the original miner has since passed away and the adits were
intentionally collapsed, but the high grade copper taken from these mines was shipped to a
mill for the copper grades. The assay work done by the writer of the apron elements resulted in
grades as high as 0.02 oz/st Au (0.69 g/t) and 6.42 oz/st Ag (220.11 g/t). A significant
copper spike was also noted reaching 34431 ppm. While it is expected that the actual ore
removed from the mine would have better values, these are interesting apron waste dump
values.

The Cerro Colorado area still represents the best area to begin primary excavation operations to
allow for the production of high-grade materials and establish a footprint on the ground. From
this site, material will be won by simple quarry methods while exposing potential vein systems
along the main strike of the fault. Having on end exposures will better define the actual vein
system than random or pattern drilling. Understanding the inter-vein associations are just as
critical as understanding the mineralized shoots. The Cerro Colorado plateau footprint has been

13
established and exploration continues both northwest towards the old workings at El Cohete
and southeast to new exposures on strike. Five new veins have been located in an offset at El
Cohete with a structure width of 100 metres. In addition, the main Cerro Colorado vein has
been traced farther to the southeast and an apparent vein width of 33 metres was exposed.
In addition to the advances around Cerro Colorado, new vein delineation has also been made
between El Abra and El Cohete with the new roadwork exposing previously hidden systems.

It is also important to note that the initial work being carried out by MSJ in opening and
refurbishing the old mill site has made these potential mineralized zones of prime importance
due to the proximity of the zone to power, services, and the mill.

The Gran Cabrera site continues to be a stand-alone exploration program. Due to its remote
nature and lack of services, it will require significant exploration, mapping, and ground
truthing to determine the best course of action in attempting test production. The silver-gold
mineralization is similar in character to the Cinco Minas site and it is expected that many of
the analyses conducted in Cinco Minas will be directly applicable to the Gran Cabrera
exploitation.

The technical material that forms the foundation for this report comes from a combination of
data sources, personal exploration activities, historical bulletins, personal communications
with MSJ personnel and past employees of the Cinco Minas Co-operative until 1945 and
concurrent discussions with Mr. Kevin Murphy, P.Geo. who has been an active consultant for
Bandera on the Cinco Minas site since November 2005.

Reliance on Other Experts

The writer has attempted to avail himself of all possible data from a variety of sources. These
sources include personal exploration activities, written technical reports, published and in
house maps from government and private sources, internet references, personal communication
with MSJ staff and two local Mexican geological consultants, Ing. Juan Morin and Ing. Jose
Luis Motillo Moreno. The majority of the data has come from the historical files of MSJ and the
other sources have provided infill and confirmatory information. All of the subject areas are old
developed mine properties with extensive workings. All efforts have been made to read and
analyze each piece of information to determine clarity on each portion of subject matter.

To obtain the base data for the original report, field examinations were made to randomly
check the data points in areas such as adit existence and location, drill hole placement, and
assay pulp and core existence. The validity of the data sets were determined to be sound and a
new exploration program was developed to expand the knowledge base and continue the
validation of historical data sets. Much of the field work during the summer 2006 program was
conducted by Mr. Kevin Murphy, P.Geo. in collaboration with the writer.

A main purpose of this report is to provide continuing reliability to the investors and
controlling exchanges in moving ahead with a strong and accurate historical record. Due to the

14
long history of the mine operations, in excess of a hundred years in some cases, much of the
old workings have been over printed with newer mine workings. This has resulted in some
confusion with very old records when compared to the newer data sets.

This is expected as much of the older work was done without proper mapping and record
management. However the existing records are sufficient to provide insights on the geology,
mineralization, and general historical mine plans. The writer is not in a position to qualify the
opinions and reporting of others in such fields as law, land titles, politics, and environmental
concerns. This report will detail the information as understood by the writer with a main thrust
on the new geological aspects of the project. In all cases of a distinct special field, the readers
should consult outside experts on those matters where potential concerns may exist.

Property Description and Location

Bandera Gold Ltd. has entered into an agreement with Minera San Jorge, S.A. de C.V. (MSJ) to
acquire a 60% interest in the Cinco Minas and Gran Cabrera Mexican mining properties by
making an initial payment of $50,000 to acquire an option while conducting due diligence on
the property. A final payment of $250,000 is required for Bandera to exercise the option.
Complete details of this agreement are available for review on SEDAR.

The project comprises two distinct mining camps within the Municipality of Hostotipaquillo,
Jalisco, Mexico. One of the camps, Cinco Minas is situated some 100 kilometres northwest of
Guadalajara. The other camp, Gran Cabrera is a further 35 kilometres northwest of Cinco Minas.

15
Map 3 - Generalized Target Area Location for Cinco Minas and Gran Cabrera Projects

Approx. 100 kilometres

16
Map 4

17
 Map 5 – 1:250,000 Geological Map with MSJ Concession Overlay

Gran Cabrera Area

Cinco Minas Area

Approx 10 kilometres

18
 Map 6 – Gran Cabrera Concession Area C-1 to C-3

TRES GRACIAS
1000
SOLEDAD
LA PLATA BANCO

LA CAS ESCONDIDA
LA CASTELLANA TEL
LANA

CONCORDIA
EL BURRO
CARIDAD LA PALOMA
LOS NEGROS
VICTORIA
500 DURA MACHO RUCIO
CHORRILLO BLANCO
GUANAJUATILLO
DESEADA AMERICA
CABRERA
ESPADA
EL HUIZACHE DESCUBRIDORA
SAN JOSE CARRIZAL
ESMERALDA PERALTA

PLOMOSA

ANACONDA GACHUPIN
LOS MEZQUITES

LIMONCILLO

AMAJAC
TRINI
MESA DE TECOMATLAN
PALO QUEMADO

Approx 3.5 kilometres

The areas are defined by 12 concession groups in the Cinco Minas camp and 5 in the Gran
Cabrera camp. The Cinco Minas camp is larger with 10,750.0690 hectares while Gran Cabrera
comprises 4,242.0946 hectares. The town of Cinco Minas is located roughly in the centre of the
concession group with the old mine workings being approximately one kilometre north of the
town. The Gran Cabrera camp is much more remote and is only accessible with a good 4x4
pickup on a very tenuous road carved into the sides of the rugged terrain. Both camps were
mined to some degree by the Spanish in the 1500s and hosted populations of several thousand
people in the 1920s. The present town site of Cinco Minas sits within the original camp and
office buildings. The entire infrastructure from the camp at Gran Cabrera has been lost to
history apart from the mine adits that were re-furbished to access grade by MSJ.

While the two camps are situated on the same regional fault system, the differences in
location and functionality are significant enough to warrant separate discussions. The Cinco
Minas town site is located radially around UTM 13Q 0610977 / 2326232 at 1140 metres
elevation. The old mine workings are visible across the deep valley from many points in the
town. Most of the services and labor pool will originate initially from the town with a slow
switch to more regional supply as the demands for specialized materiel and equipment
increase. This close proximity to the town will require Bandera to ensure all matters
surrounding socio-political issues are very well addressed at the outset.

19
 Table 1 – Concession List Cinco Minas Area

Concession
Concession Type License No. Title Holder 100% Area (Hectares) Title Status*
Name

Exploitation Option to purchase 100%

Consuelo 221756 Pablo Antonio Fitch Parente 45.5642
03/18/54 interest
Exploitation Option to purchase 100%
Lucerito 221757 Pablo Antonio Fitch Parente 26.9210
03/18/54 interest
Exploitation Granted Exploitation Mining
Jamaica II 221866 Minera San Jorge, S.A. de C.V. 509.8630
04/05/54 Concession
Exploitation Granted Exploitation Mining
Jamaica III 221865 Minera San Jorge, S.A. de C.V. 850.2715
04/05/54 Concession
Jamaica IV Exploitation Granted Exploitation Mining
221864 Minera San Jorge, S.A. de C.V. 3,265.6149
Fracc. I 04/05/54 Concession
Exploitation Granted Exploitation Mining
Los Ricos 224599 Minera San Jorge, S.A. de C.V. 62.1528
19/05/55 Concession
Exploitation Granted Exploitation Mining
El Rico 224768 Minera San Jorge, S.A. de C.V. 34.0731
06/06/55 Concession
Exploitation Granted Exploitation Mining
Milagros 224770 Minera San Jorge, S.A. de C.V. 177.2630
06/06/55 Concession
Exploitation Granted Exploitation Mining
San Jorge 221760 Minera San Jorge, S.A. de C.V. 3,291.0202
03/18/54 Concession
Exploitation Granted Exploitation Mining
San Jorge V 221455 Minera San Jorge S.A. de C.V. 100.0000
02/12/54 Concession
Granted Exploitation Mining
San Jorge VI Exploitation 03/18/54 224767 Minera San Jorge, S.A. de C.V. 1,280.3353
Concession
Compañía Minera Cinco Minas Granted Exploration Mining
Cinco Minas Exploration 03/18/10 221732 1,106.9900
S.A. de C.V. Concession
Total 10,750.0690 Hectares

Table 2
Option Payments
Pablo Antonio Fitch Pariente
Lucerito and Consuelo
Amount
Clause Date Description
(USD)

4a) August 2, 2002 $5,000.00 At signature date, Aug. 02, 2002

November 2,
4b) 2002 $5,000.00 At Three (3) months of signature
4c) February 2, 2003 $5,000.00 At Six (6) months of signature
4d) August 2, 2003 $15,000.00 At Twelve (12) months of signature
4e) February 2, 2004 $15,000.00 At Eighteen (18) months of signature
4f) August 2, 2004 $25,000.00 At Twenty- Four (24) months of signature
4g) February 2, 2005 $25,000.00 At Thirty (30) months of signature
4h) August 2, 2005 $30,000.00 At Thirty-Six (36) months of signature
4i) February 2, 2006 $30,000.00 At Forty-Two (42) months of signature
4j) August 2, 2006 $35,000.00 At Forty-Eight (48) months of signature
4k) February 2, 2007 $35,000.00 At Fifty-Four (54) months of signature
4l) August 2, 2007 $120,000.00 At "completion of the purchase"
Note: All taxes and banking fees, etc additional.

20
 Table 3 – Concession List Gran Cabrera Area

Concession
Concession Type License No. Title Holder 100% Area (Hectares) Title Status*
Name
Granted
Exploration Exploration
Gran Cabrera 205578 Minera San Jorge, S.A. de C.V. 3,690.1598
09/18/03 Mining
Concession
Exploration
La Caridad 219941 Minera San Jorge, S.A. de C.V. 100.0000 Purchased
06/05/53
Ampl. La Exploration
219942 Minera San Jorge, S.A. de C.V. 160.0000 Purchased
Caridad 06/05/53
Exploitation
Cabrera II 220964 Minera San Jorge, S.A. de C.V. 193.3745 Purchased
03/11/09
Granted
Exploitation Exploration
Cabrera I 220533 Minera San Jorge, S.A. de C.V. 98.5603
14/08/09 Mining
Concession
Total 4,242.0946 Hectares

The outlines of the actual mine workings and geographical limits of the concession boundaries
are well defined by GPS coordinates established and maintained by the Mexican government.
In deference to the normalized systems used in Canada and the United States, the superior
Mexican system provides an excellent method of reporting exact location to tenure in such
rural conditions. Each concession has notarized watermarked and colorized forms including
hologram inclusions to prevent forgery. Each area requires the document package to include all
aspects of ground identification to exacting standards, including certified photographs
showing the monument placements along with close ups of the brass survey plaque.

21
 Map 7 – General Area of Gran Cabrera Properties

Approx 7 kilometres

22
 Map 8 – Generalized Geological Map of the Cinco Minas Area

Cinco Minas Area

Approx 10 kilometres

There are no known environmental liabilities on the two project areas. While the properties
have been operated to a variety of degrees over the past several centuries, the writer has not
located any previous author that has noted any issues with respect environmental hazards. It
also appears that since the sulfide levels are low in the mineralization and there is no
reporting on accessory metal production in the literature, the expected concentration levels
are low in the waste. No areas of acid rock drainage (ARD) environmental impact were noted
during the field inspection. Virtually all of the Cinco Minas valley systems were walked and
examined by Mr. Kevin Murphy and Mr. Mark Chorm during the summer of 2006 to specifically
look for any signs of ARD leakage and toxicity. No evidence was located that any buried
stockpiles are generating any waste issues.

MSJ originally provided two large binders for review that detail the environmental assessment
work that has been completed on the project. Unfortunately, the work is in Spanish and not all
of the work was understood by the writer, but no inclusions of ARD type issues were noted in
what could be understood. The writer did have the occasion to discuss the project with the
MSJ environmental consultant and he is also confident that no issues exist. It is also
important to note that in Oct 2006, the site was inspected by the Mexican authorities and the
operating permits were maintained in good standing. Bandera is aware of the work and
understands that further assessment will be an included requirement in obtaining full
permitting for bulk exploitation. All of the Cinco Minas properties have existing exploitation

23
permits as do two of the Gran Cabrera concessions. Cabrera I, Cabrera II, and Ampl. La. Caridad
are still noted as having exploration status.

Map 9 – Satellite Image of the Cinco Minas Area

Cinco Minas
Old Mine
Area

Rio Santiago

General Trace of Fault

Accessibility, Climate, Local Resources, Infrastructure, and Physiography

Cinco Minas is located approximately 20 kilometres north of the town of Magdalena. The
Cabrera and Monte Del Favor camps are located approximately 20 kilometres west of Cinco
Minas. All areas are accessible by vehicle but the Cabrera property really requires a strong four
wheel drive truck with a shorter wheel base in good weather. The other areas can be reached
with any type of vehicle in any weather.

24
Cinco Minas is a historical village of some 300 persons that once boasted a population in the
order of 20,000 persons when the five mines were in operation. However, that operation
ceased around 1930 and nothing of note has been done to upgrade the access roads from
Magdalena since that time. The roads for the most part are moderate to good but winding
single lane gravel pathways. There are poor sightlines on most curves and caution must be
taken when rounding the corners. Several tight sections are encountered that may make the
delivery of large machinery difficult, but not impossible.

The roadways are subject to a sporadic and limited road maintenance program overseen by the
local regional and municipal government. While not the responsibility or cost centre of the
miner, some consideration should be given to participating in upgrading the road system to
add to the accessibility of the town to the main highway. Actual pavement ends near the
outskirts of Magdalena and the roadway then degrades to a series of gravel and hand cobbled
roads. Some road upgrades were done this summer, but the results are marginal.

The Hostotipaquillo municipality climate is semi-dry with dry springs and winter. There is a
low thermal swing in the winter and the annual average temperature is 22.4°C. June to mid
September is when the majority of the precipitation falls and the average annual precipitation
is in the order of 775 millimetres. The prevailing winds are to the southwest. There are no
climatic barriers to year round operations.

The terrain is steep with only some 13% of the region being described as semi-flat. The steep
terrain controls drainage in the Municipality. The main river is the Rio Santiago which runs
roughly east – west to the north of both subject properties. Gran Cabrera is flanked directly to
the north by the river.

The steep terrain also affects vegetation in the region resulting in only low trees and shrubs in
most places. The listed vegetation types are espinoza, huizache, sweetwood, and nopal. The
sparse forests consist of pine and Encino. Regional records indicate that the forest cover is
only 20.3 hectares within the Municipality. This presents another opportunity to add to the
forest industry by planting marketable tree types. No stands of good construction grade wood
were noted during the field inspection.

The only wildlife noted during the field season was a few snakes and spiders. The literature
indicates the predominant wildlife consists of deer, tejon or badger, tlacuache or opossum,
rabbit, armadillo, squirrel and coyote. Hostotipaquillo has a rich history in mining and
celebrates it in their Municipal seal. The common resources are listed as gold, silver, lead, iron,
zinc, kaolin, barite, feldspar, fluorite, manganese, plaster, quartz, and opal. This wide array of
minerals is also an indicator of the degree of metal mineralization in the Municipality.

25
 Map 10 – General Bandera Project Areas

Gran Cabrera

Cinco
Minas

Approx 4 kilometres

The Hostotipaquillo regional infrastructure is moderately sophisticated. The town of Magdalena

is roughly 20 kilometres south of Cinco Minas and Tequila is another 20 kilometres southeast
of Magdalena. These will be the two primary sources for material for the project. Tequila has a
population of some 50,000 persons while Magdalena is roughly 25,000. The two towns have a
corresponding ability to provide supplies and manpower to the project both short and long
term. Whatever cannot be obtained in Tequila will have to come from Guadalajara which is a
further 80 kilometres southeast. Guadalajara is the capital of the state of Jalisco, and a custom
steel centre with an estimated population of 6.3 million people in 2004.

All three towns are linked with a good highway system but tolls will add to the cost of freight
forwarding. Once the materials are on transports, the road to Cinco Minas is passable in most
weathers but some tight fence controls, grades, and sharp turns may be an issue for very large
material delivery. It must be noted that the original mill, plant, and power lines were all put in
with 1920’s technology and transportation. Modern trucking systems should be able to deliver
any required bulk materials, steel, and plant equipment. However, Bandera should look at
upgrading the road system between Cinco Minas and Magdalena as a longer term plan.
Undertaking this task would substantially open access to the area to the local population,
provide better cycle times for plant operations to the supply and labor pools, and reduce
insurance costs for issues such as medical evacuation for staff.

26
Cinco Minas and Gran Cabrera will both require a significant amount of material input during
the course of mineral development. As noted earlier, the immediate plan for Gran Cabrera is
simply exploration and data development. This program will only require a modest input for
camp supplies and temporary housing in comparison to Cinco Minas. What might be a better
option is to have the Gran Cabrera supplies to be forwarded from the supply towns to
Hostotipaquillo which is located roughly between Gran Cabrera and Cinco Minas.
Hostotipaquillo is joined to the regional highway system on a much better road. Should
Bandera wish to entertain developing larger mill and processing operations in that town in the
future, this would allow Hostotipaquillo to become a larger centre and reduce potential
conflicts with expansion and development concerns in Cinco Minas.

Work has been undertaken by MSJ to expose old mill workings and greatly improve the local
road access for the mine operations. This work was done by local labor and material supply.
However, once the pre-production work and testing is complete, larger mill components and
greater power requirements will follow. Due to the sheer size of known and anticipated Cinco
Minas mine camp mineralization, the local works will have to be robust. The present work will
allow for primary production as the mine operations develop but a significant investment will
have to be made to further the project. The power system that was installed to service the
original mine is still in place and has been upgraded over time to meet modern requirements.
According to MSJ, power draw from that grid is not an issue and is available immediately.
Water to service mill operations will be drawn from the large resultant reservoir within the old
mine workings. The actual volume is not presently known but is certainly sufficient for
expected operations. Recycling is also planned. There will be no draw on local piped water
apart from potable drinking water needs.

The local population of Cinco Minas is roughly 300 persons. From that group the initial work
force has been established. As the project expands, training in mine related jobs, safety and
other worker skills can be undertaken. However, at the outset, additional workers will be
required to provide technical expertise on site. Housing for those workers will have to be
established by the construction of a camp situation that can be controlled with respect to
services, security, and expansion. Having un-restricted expansion in the area will cause socio-
political issues within the community.

In November 2006, the local council agreed to allow MSJ to continue development of some
community agricultural land to the southeast of the town, just south of Cerro Colorado, for the
installation of heap leach pads. This pad area covers 244,750 square metres on semi flat
terrain that is naturally terraced. The area will hold the initial heap leach to a volume of
500,000 tonnes at a 6 metre height. An additional and slightly larger area is also under study
in a contiguous area to the initial pad site. During the inspection, a grid was laid out, cleared,
and test pitted to determine soil type, profile, and depth to bedrock. Bandera has already
committed to ensuring any pad development is done in the safest and most environmentally
sensitive manner possible. The soil under the proposed pad was also assayed to determine the
original soil chemistry and look for any reactive materials. None were found.

27
Water storage around the pad system and other mill facilities can easily be controlled by well
engineered containment facilities. The 200 metre drop from the old mine to the old mill, town
and proposed leach pad site provides for an excellent material flow for ore and water.
Operational energy costs can be greatly reduced by proper mine planning due to the grade
within the valley system. Additional power can also be generated by the installation of
conveyor systems with restrictive belting. Proper studies will have to be undertaken at a later
date to determine the power from belt input and how it would factor into the plant design.

As noted earlier, MSJ has already undertaken substantial work in road upgrades and exposing
and repairing the old mill site which is next to and below the town. The infrastructure looks
suitable for immediate mill tests on site with the installation of new equipment. This
assessment is based on continuous update reports and photographs from the field detailing the
completed work. Work has begun on many aspects of the new mill development. However, re-
design issues and problems transporting the steel to the site because of weather related issues
have resulted in delays in building the mill.

Attempts were made to expose the exterior of the Destajos level adit from the SE face. The
overburden was largely removed but heavy rains continued to make progress on this front
difficult. A second option of mucking out the San Diego adit below the El Abra main mine
entrance was also attempted. This also encountered rain issues and the effort was postponed
until better upslope road control could be achieved. The original plan of having the adit
exposed to begin immediate underground exploration was altered by accessing the Destajos
and Trinidad levels by traditional mine ladder descents.

The preliminary underground work has resulted in the location of two potential new vein
occurrences that may assist in developing a ready source for high grade ore materials from the
old mine that can be trucked to the mill on the newly upgraded mine roads. The planned
immediate development of the Cerro Colorado site will also provide ore grade materials to the
mill site also by truck along the new roads. These two ore sites will allow for a continuous
stream to the mill in addition to other old rock dumps that were sampled during the current
development period. The dumps will have to continue to be evaluated for average grade but
can be considered as additional resources included in the resource volumes for the purposes of
this report. The full integration of these sites and the incorporation of the material flow into
the mill feed stream will have to be determined by a qualified mine engineer.

28
 History

The Hostotipaquillo region is steeped in a rich mining history. The original mines were small
adit enterprises begun in the 1530s by the conquering Spanish, looking for high grade silver
and gold. Sporadic workings were developed where easily hand-cobbed high grade ore could be
obtained. Where large deposits of ore could be worked, the communities would develop around
them to support the mine. This model of development is not much different in today’s mine
industry.

In many cases old workings were abandoned simply because they were too remote to continue
operations or the ore began to run into silicified materials. In the vicinity of Hostotipaquillo,
ore was discovered in 1605 and several mines were developed. The town soon became the
administrative centre for the region and later the Municipal capital. However in the Gran
Cabrera region, 10-20 kilometres northwest of the town, mining had already begun and many
operations were developed. The rugged terrain made working these properties difficult and
would qualify as models of excellence in mine development in rugged conditions. In examining
the ruins of the Monte de El Favor and Gran Cabrera mine camps, the sheer magnitude of the
regional historical development is simply amazing. While the environment has overtaken many
of the road, rail and cable footprints, the evidence still exists. The degree of adit and shaft
development done in the individual mines is remarkable.

While mining was growing in the Cabrera area, it was also advancing to the east towards and
into Cinco Minas. In the early 1900s, a series of independent mine operations became the
critical mass for the development of the town of Cinco Minas. Power was brought into the area
and extensive mill operations were established. It became the local mine centre for the area
and the reported 10,000 person camp resulted. The Cinco Minas deposit was developed to its
peak by Marcus Daly with the Cinco Minas Mining Company. He transformed the random mining
operation into a 500 tonne per day producer by 1922. The following table from the Mexican
geological Bulletin #58 written in 1963 shows the volumes and grades removed from the
deposit between 1922 and 1928.

Table 4

Cinco Minas Mine Production History from 1922 to 1928

Tonnes Grade Metal Content Recovery (%) Production

Year Milled Au (g/t) Ag (g/t) Au (OZ) Ag (OZ) Au Ag Au (OZ) Ag (OZ)
1922 170,000 3.00 420 16,397 2,295,562 88.40 89.90 14,495 2,063,710
1923 150,000 2.50 400 12,057 1,929,043 89.80 90.00 10,827 1,736,139
1924 161,000 3.50 604 18,117 3,126,465 89.70 94.70 16,251 2,960,762
1925 151,040 3.84 519 18,647 2,520,287 75.00 92.10 13,985 2,321,185
1926 129,467 2.93 470 12,184 1,956,355 81.50 81.10 9,930 1,586,604
1927 163,782 3.10 464 16,324 2,443,289 94.70 92.90 15,459 2,269,816
1928 158,601 3.32 455 16,909 2,320,107 97.10 93.00 16,418 2,157,700
TOTAL 1,083,890 3.17 476 110,633 16,591,109 88.32 90.79 97,364 15,095,915

29
While not a complete estimation of the total volumes removed during the life of the property,
the recorded 1,083,890 tonnes of gold/silver ore grading 3.17 g/t Au and 476 g/t Ag is
significant. Most of the ore is reported to have come from the El Abra mine area which
represents only a small portion of the known fault strike length. Nebocat (August 2004 Tumi
report) completed a back calculation on production records and determined that volume of
material mined was actually “in the order of 2.1 million tonnes of 0.13 oz/t Au (4.46 g/t) and
18.6 oz/t Ag (637 g/t)”.

In a 1981 margin note by Zahoney in Wisser’s report from circa 1930 data, he reaches the same
values but pegs the noted values as head grades. Zahoney noted the removal grade as 0.12
oz/st Au (4.11 g/t) and 16.7 oz/st Ag (572.57 g/t).

In a 1916 report on the region, Villafana reports that mine workings in the upper part of Cinco
Minas are very old. While a writer today would consider 1916 to be very old for a mine camp,
he refers to work started in the 1500’s by the Spanish. At that time, adits were hand cobbed
into the vein to win the very high grade ore. In 1916, 3 kg/t silver was considered very high
grade ore, but there are still several references to bonanza zones that obviously superseded
those grades. It becomes a matter of perspective to the writer based on current knowledge and
experience. It is also possible that the Spanish considered the Cinco Minas area a marginal
property as the quartz cemented breccia made artisan or hand cobbed operations difficult to
mine. It was also reported in areas such as Los Alamos, Sonora that grades approaching 60
kg/t were encountered from time to time. As a result, depending on the perception at the
time, the grades in Cinco Minas may have been considered average.

Historical reporting details the nature of the vein exposures and how the adits were simply
followed to only take the central high grade ore. The high grade ores were located in the
centre of the vein in an almost symmetrical or concentric manner. The early reporting suggests
that mine cut off grades were in the order of 750 g/t silver and lower grades were simply left
behind as the chase for the core materials continued. The irregular adit and stope patterns
produced by the Spanish led workers are still visible at Cinco Minas today in the upper reaches
of the mine. They certainly did not have the benefit of drill testing to follow ore grades and it
is expected that in certain cases, high grade vein cores will still be encountered.

This is established by some of the Tumi drill intersections encountered during the recent drill
programs between 2003 and 2004. When a significant drill intersection was encountered, press
releases were issued announcing the hit. It should be noted that records of bonanza zones
being located date back to 1824 at Cinco Minas and they are still being found today. These are
indicators that the area is certainly not mined out and determining average grade and volume
estimates is difficult. Many people have tried to provide those estimates over time and the
picture continues to change with time. It is also important to note that Villafana also related
that;

“The 2nd and 3rd [La Trinidad] levels are opened in very low-grade ores and it is not possible
to define with great precision the form of the rich ore shoots or the bonanza-grade parts
within the body of the vein.”

30
This is a critical observation as even in 1916 the upper levels were considered low grade zones.
Deeper levels and exploration cross cuts were used to locate new high grade materials. What is
of the greatest importance is that subsequent to the 1916 report, the company went on to
extract in the order of one to two million tonnes of rock and ore in developing the mine. As
development became more standardized and sophisticated, the older adits would have been
widened and remnant ore removed. What is left in the upper levels is the essentially fully
picked over mine surfaces and that is exactly where most of the recent assessment and
exploration work has been concentrated since 1930.

While the foregoing historical information is replicated from the writer’s previous report, it was
important to re-state these facts to provide continuity to this report. The essence of the
historical factors provides a strong foundation for today’s work. Considering the mine workings
and general area were under full scale operation around 1930 it was important to understand
where people looked for ore once the mill operations ended. Approximately 1,000 people were
employed at the mine at the time the mill closed and it was felt by this author that mine work
must have continued in some fashion.

After interviewing several of the elders from Cinco Minas, it was determined that in fact, the
mine did remain active. Once the company left the site, the people formed a co-operative and
kept the mine running until 1943. Miners also continued to descend to the lower levels until
after 1947 to hand cob the high grade 3 kg/t veins being worked at the very bottom of the
mine. At the peak of mine production around 1928, trains were being used to haul seventy 2.5
tonne cars from the Cinco Minas level. This equated to 500 tonnes per day of mill feed running
24 hours a day. Within the levels, 16 car electric trains serviced 10-12 man teams advancing
the faces roughly 5metres per day. Of special note was the comment during the interviews that
in 1927, the company did not consider mineralized rock under 1 kg/t as ore. This lower grade
material was simply sent to the waste piles.

Every 15 days, 35 kg bars of gold and silver were being shipped via the rail at Magdalena to
the USA. This 24 hour a day operation paid the miners 2-3 pesos per day in gold and silver
coins. There were also at least 4 large lime kilns in operation producing 10 mule loads a day
for building cement and mill flux. Three of the kilns were at Cerro Colorado and a fourth
located on the main Cinco Minas River separating the mine and the town. The area around
Cerro Colorado was considered the “bad” side of town and relegated to malcontents and the
highly persecuted local natives. This was also a reason why that portion of the property suite
was not actively mined and only had artisan work done on its flanks. The thrust was only in
and around the main mine and little exploration and development outside that area was even
considered at the time.

These statements go a long way in explaining the lack of lateral development in the region as
no one wanted to push onto lower grade waste materials under 1 kg/t. This adds to the clarity
of why 300-500 g/t Ag adits were simply left. Many old adits and workings dot the landscape
but unless plus 1 kg/t grade materials were located at the outset, the site was abandoned and
new locations scouted.

31
The co-operative began to dissolve around 1945 when costs rose too high as contract miners
were now needed to work the lower stopes. The mine was not being run as a business and re-
investment into infrastructure was not being made. Ore was originally being direct shipped to
Zacatecas and paid for with silver coins at a high loss ratio for the mine. When the mill began
to demand too much for the ore, it became too costly to ship frequently and ore was stockpiled
for yearly shipments. This resulted in poor cash flow and interruption of payment to the
contract miners who simply left the job. The stories of skimming off the gold to line the
pockets of the mine managers and cooperative leaders cannot be substantiated, but it is
plausible that this indeed did happen as there were no reporting controls in place to stop any
fraud or theft.

Once the mill finally closed in 1947 and the power was turned off, some long time local miners
continued to work the mine as artisans until the lower sections began to flood from
groundwater seepage. Hunt and peck mining continued for a few decades and the entire
community finally fell into disrepair and in fighting until the mining operation simply stopped.

In this period of civil unrest and suffering, the loss of an economic engine in the region,
depleted mining, and the loss of mine focus caused the area to begin to drift into marginal
subsistence agriculture. At the present time the regional manpower is involved roughly in 65%
agricultural operations and only 2% mining. Over the past several decades outside industrial
and investment interests began to re-visit the region to establish new footholds in mining. The
key to successful mining in all regions is extensive ground control with good title. This has
been difficult to establish in many cases locally due to the complex mining past. However, MSJ
was able to develop an extensive footprint over the past decade while establishing a solid
reputation with the local population on many fronts. This type of integration into the
community and attention to detail has allowed MSJ to become a premier player in the region.
All companies wishing to undertake operations within the region would be well served to
follow the MSJ model of long term committed and meaningful involvement in the local
community. Only after a demonstrated concern and commitment to the best interests of the
population will mine operations be allowed by the local community. Simple mine title does not
automatically ensure acceptance and success in this region.

In 1968 Mr. P.S. Friesen, from Trans-Pacific Engineering and Management Ltd., visited the
Cinco Minas area to undertake an examination of the deposit for an unknown group. He took a
series of samples for assay but the writer has not seen the results. In his brief report he
detailed the ownership of the mine area relating to 11 parcels. The actual property
descriptions are brief and do not provide any accurate data to pin point the actual title
locations apart from general terms.

He advised that the 11 parcels were split between 6 held by Senor Thomas Moore of El Aguila
who apparently held the Cinco Minas mine. The El Aguila property consisted of 5 parcels owned
by Lic Fernando Ysita. The two packages represented an area covering 1500 feet by 4500 feet
trending northwest on the log axis. This is roughly the centre line of the present Cinco Minas
land position held by MSJ. In addition to the listed parcels, he advised that an additional area
both northwest and southeast of the block should be acquired for at least 6000 feet in both

32
directions. It is not known by the writer as to how the negotiations proceeded, but the entire
area including the buffer is now presently held by MSJ.

The present property ownership and mine right title is detailed in the Property and Location
section. All historical work effectively ended in 1947 and only began again in 2002 with the
previous joint venture agreements between MSJ and Tumi Resources Ltd. However, there is a
reference in Friesen’s report that Thomas Moore was operating a small 20 ton per day mill with
ore from the Cinco Minas Mine in 1968. The past or present location and history of that mill
was not known by the writer at the time of the first reporting but was subsequently located in
the brush near the San Juan mine. The ball mill remains on concrete foundations and some of
the water tank and other foundation structures remain. However the mill would take a
significant amount of work to re-use as railway tracks were welded to the interior of the mill
housing to replace pad liners.

It is always difficult to fully detail historical aspects of old mine property. Some records exist
and others are lost to time. However MSJ has done an excellent job of obtaining whatever
historical data that was available and a synopsis is presented by this writer to attempt to
follow the intellectual development stream of the property. A series of authors have presented
written works detailing their thoughts on what they felt the deposit was telling them at the
time. The older reports are certainly germane as they were done in a period when first-hand
observations of the workings at depth in the operating mine was available. The portions that
were paraphrased for continuity are italicized. This writer has attempted to capture the full
essence of the reporting.

The first report was done by Mr. Ed Wisser in a file report indicating he was assessing work
done by Mr. S.C. Feeley. References to the 1930s are made but the actual age of the document
can only be stated as older. Following a review of this and the other reports, the reader should
be able to develop a comfort level with how the mine was developed in a scientific manner and
will bring the reader to the present day knowledge base. This information, while reported on in
the March 2006 report as well, is important in discussing the proposed exploration plan and
the importance of each aspect. The 43-101 standard reports require complete presentation of
pertinent fact in each issuance of new material. This results in some repetition but the
information is critical to understanding the intellectual development process of the property.

Wisser

The main feature is a regional fault line striking N45W and dipping 50-65 SW with an overall
displacement of 600-900 metres distributed over several planes. The main fault plane forms the
immediate hanging wall of the Cinco Minas fracture but it is usually some distance away. The
main fault zone is displaced by cross faults with strikes ENE to WNW in the NW segment of the
main fault at Aguila (Eagle). Displacements are normal to the main fault.

The cross faults appear to be post mineral, intra-mineral cross faulting and have helped to
localize the ore shoots. Wall rock of the Cinco minas vein is andesite in the upper levels and
possibly to the bottom of the mine, some 700 metres below the outcrop levels. The Cinco

33
Minas Vein is not a simple filled fissure as it seldom shows clean cut walls. The vein is a
mineralized fracture zone, irregular in width and in intensity of fracturing. Fracturing varies
from mere sheeting with displacement to intense shattering and crushing.

Vein matter may consist of thin irregular stringers or be present in amounts of cemented
jumbled andesite fragments. In some areas a solid vein several metres wide occurs. The
footwall appears generally the least shattered with closely spaced stringers or good thicknesses
of massive quartz with or without calcite. Shattering increases towards the hanging wall and
the vein consists of andesite and quartz fragments cemented by quartz and calcite. Calcite is
usually more abundant next to the hanging wall.

Note: This is a potentially important observation as it assists in present day field mapping in
trying to locate the actual main vein parameters. It should be noted that a significant spike in
calcite grades were noted above background assays on two locations on the southwest dip
slope of Cerro Colorado. The writer’s original report sample #15 (IPL #18) was taken from adit
number 3 which is at the far south edge of Cerro Colorado. This grade was 4.36% Ca. Sample
#24 (IPL#24) was taken from the wall rock of a mined out surface pit some 50 metres
northwest of sample #15. This grade was 7.62% Ca. This could suggest that the hanging wall
to the main vein runs along the southwest edge of Cerro Colorado. The literature indicates that
old lime kilns were observed in the area to the southeast of Cerro Colorado on the flanks of the
outcrop extension. This would be on strike with the fault line and suggests that a significant
amount of calcite must be present in that area to support kiln activity. As an example of that
potential grade assay samples were taken from the area surrounding the old lime kilns located
on the SW slope at the SE end of Cerro Colorado. One assay of what appeared to be kiln feed
stock (KA-03) returned an assay of 41.74% CaO.

It is also important to note that additional lime kilns were situated roughly 1.5 kilometres NE
of these kilns in the valley, running parallel with the main shear zone. These kilns was not
located during the summer work, but reported upon by locals. This presents a model of
replicated calcite rich zones covering a zone in excess of 2 kilometres wide. This calcite
signature suggests the actual main shear zone is actually very wide and complex with many
features muted under the talus and assorted flow materials. This is a significant development
in the understanding of the geological character of the system as it provides a framework for a
much larger system than originally considered. This larger system also has the potential to
host much more metalliferous zones within the assorted fractures.

Silicification is varied and complex. It appears from coarse to fine grain approaching
chalcedonic, sulfides consist of pyrite (the earliest sulphide) and blend into more
contemporaneous galena and chalcopyrite. The silver which occurs mostly as argentite appears
to come later than the base sulfides. The sulfides in the upper levels are erratic and do not
have an apparent association with the silver ore. They occur northwest and southeast of the
main Cinco Minas ore body and doubtless occurred within the ore body. However, the upper
portions of the Cinco Minas Vein are largely free of sulfides, but the information suggests that
sulfides increase at depth.

34
Barrera

In 1931 in a Mexican geological bulletin (#51), Tomas Barrera advised that pre-mineral rhyolite
dykes cross the main vein in several places.

Stages of Formation:

 Shattering along the Cinco Minas fracture zone caused by movement along the fracture
itself probably aided by movement along the zone of faults in the hanging wall.
 Silicification of walls and rock fragments of the fracture zone. Filling of open spaces
with considerable replacement of included rock fragments by quartz of varying texture.
Some calcite deposited. Persistent shattering through this stage.
 Continued shattering and beginning of sulfide introduction with continued deposition
of quartz.
 Similar conditions as noted above, but an increase of base sulfides. Start of important
silver deposition.
 Shattering continues. Deposition of base sulfides rapidly declines and silver continues.
Silver deposition decreases and then ceases. Most of the hanging wall calcite is
probably deposited at this stage.
 Slight shattering continues. Oxidation and leaching. There are no gaps in the stages as
each graded into the one succeeding.

Copper is sporadic and silver does not seem to go with the chalcopyrite. The Cinco Minas
ore body was 450 metres long and 750 metres deep which results in a ratio of length to
depth of at least 1:2, which is similar to Bolanos and this ratio may be characteristic of ore
deposits on major fault zones. The shape of the Cinco Minas ore shoot suggests rather
strongly the influences of ground water deposition of epithermal ore.

The variable composition and structure of the vein is explained by its complex mode of
origin. Solutions were constantly changing in composition. Shattering occurred at irregular
time intervals and different places along the vein. When a particular type of solution was
at hand certain portions of the vein were permeable and permitted deposition.

The next report on file is done by P.S. Friesen in October 1968. In his report he concluded
that:

There is an untouched vein approximately 1000 feet long at the northwest end of the old
mine workings that would represent 6,750,000 tons of ore. Plus the 2000 feet of mined
area at Cinco Minas could still represent additional tonnage of 12 million tons even though
the high grade has been mined out. He also notes the potential of additional ore in the
direction of Cerro Colorado. It must be noted that all references to ore, ore volumes,
reserves, or resources are historical estimates only based on the required criteria at the
time of reporting.

35
In summary, he feels that in the order of 20 million tons of ore are possible for extraction
with an average grade of $4 to $5 / ton for the 6,750,000 tons and $1 / ton for the
remaining 12 million. No estimate was given for the Cerro Colorado portion. He then
concludes with:

“The development of this property on a large scale, low grade, open pit operation is not a
question of ore reserves as much as it is a metallurgical problem, If the economic minerals
can be extracted at less than $2/ ton an extensive exploration program is warranted.“

It is important to note that even as far back as 1968, it was understood that extraction
costs and metallurgical concerns were taken into consideration during property
evaluations. The current 43-101 F1 process revolves around such issues in a more modern
style but a similar result is achieved. Historical notations such as Friesen’s impart an
implied credibility to the past reporting practices when valuation concerns are raised.
However, the current resource estimates prepared under the 43-101 F1 format should be
considered the present benchmarks to current valuations.

The next author on file is Mr. Craig Byington, an independent consulting geologist hired by
MSJ, who examined the Cinco Minas property in June 1997. In his report he relates to his
field visit and subsequent analysis of the exploration techniques of a company identified as
Minera Las Cuevas who performed work on the property in around 1981. Byington provides
some important insight into the structural aspects of the faulting and tips on field
observations with respect to mine targets and exploration.

He points out that some located veins running east of and parallel to the main Cinco minas
vein near the old mine dip to the northwest at about 60 degrees where as the main Cinco
Minas vein dips in the opposite direction at about the same angle. Mr. Rosas of MSJ
advised that the veins are virtually identical to the main vein in every respect including
gangue mineralogy, sulfide content and brecciation. The geometry and similarity of the two
vein sets strongly suggest that they are conjugate shear systems. As such they would have
been open to the same mineralizing fluids. The geometry indicates normal movement
during the deposition of quartz. It is important to recognize that this was the movement
direction only during quartz deposition time.

“Normal movement is also confirmed by the geometry of the quartz veins as shown from
both the current and earlier mapping. Both maps confirm that the veins are quite extensive
along strike but pinch out along the dip in a fraction of the strike length. This is the type
of geometry that is only possible with dip slip movement such as would be the case with
normal movement. In the surrounding outcrops there are a number of quartz veinlets which
are found in a normal- movement extension fracture orientation. These are found adjacent
to the main Cinco Minas vein and in more distal outcrops.

From the observations it is very apparent that the ore-metal containing shear and quartz-
vein fracture are different fractures. In fact only coincidentally do both of the fractures
coincide directly. The ore metal fracture is later than the quartz vein and often diverges
from the quartz vein. Within the workings it is readily apparent that the stopes completely

36
ignore the wide and very obvious quartz vein to preferentially follow the limonite stained
but subtle shear in the footwall. Obviously, this shear contained the precious metal values
as can be seen from the amount of stoping found along it. There is virtually no stoping
along the main quartz vein.

The later metalliferous shear is the one which should be followed by the current
exploration effort. Following the quartz vein will be unsuccessful as was the 1981 Minera
Las Cuevas program. That program confirmed that in the 300 metres of vein directly
adjacent to the known workings, additional ore shoots did not occur. Current sampling has
focused on the quartz vein to the exclusion of the metal carrying shear. It is unlikely that
any of the earlier workers in the district recognized this relationship and therefore it is
unlikely that the true ore controlling fracture(s) have been sampled. It is important that
workers understand this basic ore control to allow for a predictive capability.

The second point references the earlier vintage Las Cuevas surface geology map spoken of
previously. In addition to the surface geology, it also contains a composite plan of the
underground workings. In a longitudinal section view these workings could be described as
extending to a considerable depth but being very limited along strike. In fact the
dimensions referenced in the Las Cuevas report describes the vein as being approximately
180 metres along strike and 460 along the dip of the ore shoot. This is the opposite type
of geometry that was described for the quartz vein and reflects strike- slip movement. The
quartz and the ore metals came into the rock at different times and entered different
openings with different geometry.

Wrench faulting then was responsible for generating the openings during the time when
the ore metals were emplaced in the rock. As such, the ore shoots will occur where the
fault inflects into the correct strike orientation. By identifying the more favorable and less
favorable strike orientations in the field, the explorationist can predict where the ore
shoots will occur. Identifying the correct areas and confirming the prediction with surface
sampling will certainly identify drill targets that the previous workers would not have
recognized.

The correctness of the above statements was easily tested by making observations at
different outcrops along the strike of the vein. For example the outcrop where the eagle
(La Aguila) outline occurs was visited. While the quartz vein is so obvious that it is
responsible for making the La Aguila outline, there was no mining along the quartz vein.

However in the footwall again there is a notable fracture similar to the one that was mined
in the main workings nearly a kilometre to the southeast. The fact that it is the main
metal conduit was immediately obvious from the abundance of malachite staining. The
trace of the fracture was as obvious as if the dark maroon volcanic rock had been painted
green.

Reportedly the better values of precious metals are often associated with manganese
oxides. This is a correlation that is very common throughout the world with this type of

37
 geochemical system. Most often the manganese comes from minerals such as
rhodochrosite or rhodenite which are often directly associated with the bonanza
mineralization. Recognizing that relationship can provide the explorationist with a useful
visual tool. The occurrence of manganese oxides should prompt sampling as should the
occurrence of malachite or other secondary ore minerals. This is not necessarily being
done at the present time.”

Note: The relationship with the manganese is an important factor in light of the current assay
work done on the Chino outcrop noted earlier in this report. The original Munroe report (March
2006) sample #16 (IPL #20) was taken near the old mill site next to the town at a new road
cut. The 131,017 ppm or 13% manganese assay value, certainly suggests further exploration at
this site is warranted. However, due the presence of residential structures above the outcrop
area and the critical nature of the area for transportation, it will have to be a future drill
target only at this time.

Significant exposures of manganese mineralization were also encountered during the

examination of the Minas del Coral slope in the summer 2006 program. This area is separated
from El Aguila by two structural valley systems with a similar joining aspect that intersect at
the main fault. The most southern valley was called El Scorpion after the concrete sealed mine
of the same name located at the base of the valley above the main fault. This valley was
mapped and found to be generally barren but up to 20metreswide. It certainly follows the
wrench faulting scenario noted above. The other valley will have to be examined once the
vegetation is off the hills. The steep incline and heavy cover made summer examination of
limited value.

“Only by recognizing the major ore controls and utilizing the predictive capability that such
knowledge brings will it be possible to define new ore zones like these. However, if for
whatever reason this group employs the same techniques and concepts that their predecessors
used, it would only be logical to expect the same results.

What I am trying to illustrate here is that the necessity for an entirely different exploration
model is obvious. Recognition of the model will afford the exploration team a powerful
predictive tool. Admittedly the concept requires that a more sophisticated effort be applied
than to simply map and sample the bull quartz vein as has been done in the past, but there are
a number of mineralogical clues and structural techniques which can greatly assist with the
effort. Confirmation sampling will define the location for series of follow up drill holes.”

From this report it becomes clear that as the sophistication in mining increases, so does the
opportunity to re-evaluate old sites. While a great deal of fundamental work was done in the
past, new tools and methods are certainly required to properly evaluate old workings. Appendix
2 details the results of the most current examination of the mine dumps for tonnage and grade
estimates. However, as the dumps were not able to be opened during the summer program, the
reported tonnages were not included in the resource estimates at this time.

After Byington, the next authors are from the Tumi Resources Ltd. group. The main author is
John Nebocat, who conducted a series of drill programs, assay work and other exploration

38
programs between 2002 and 2005. His work is well reported and covers many of the current
issues surrounding modern mine development. He created three major reports on the
exploration work at Cinco Minas. His reporting and other public documents such as the press
releases from Tumi during the joint venture program with MSJ provide a very modern overview
of current understanding of the area. However, due to the restrictions contained within the
strict 43-101 reporting format, direct quotations of post 2001 reporting is not allowed. To
comply with the reporting guidelines, the writer undertook the auditing review and verification
of all the estimate numbers stated in the quoted Tumi reporting and found them to be
verifiable in the March 2006 report. Due the requirement of the 43-101 reporting structure, the
March 2006 estimates are included in this report. Additional work done by MSJ was also
verified, but since the original author of that work is not considered a qualified person under
the current 43-101 reporting guidelines, none of the resources figures used or reported in that
work had been expressed in the original report. However some of the work by Morin was
verified and accepted by the writer in the Coral, El Kilo and Cerro Colorado areas. The new
resource estimates are discussed in the Resources section of this report.

In 2004 Tumi prepared a resource estimate on the Cinco Minas property that was based on
work by Nebocat and the independent consulting firm of Behre Dolbear de Mexico. This
estimate was based on the drilling, trenching and field exploration since 2003. Based on their
examinations and calculations they reported the following:

 an indicated resource of 2.27 million tonnes of 171.9 gram silver containing 12.5
million oz. of silver and 1.22 gram gold containing 89,100 oz. of gold
 an inferred resource of 400,000 tonnes of 137.9 gram silver containing 1.8 million oz.
of silver and 1.07 gram gold containing 13,800 oz. of gold

The writer has reviewed all of the available Tumi reports that detail the drill records, assay
results and mapping. After a thorough review of all the data sets, the writer concurs with the
above noted estimate. It should be noted that in the summer 2006 exploration work several
trips underground were made into the main El Abra mines. These explorations allowed the
writer to confirm and carry out further check samples of the Tumi work. The mapping by
Nebocat was found to be complete and the reported results were verified.

Later work done on the property by MSJ has become partially relevant to this estimate as while
it was not completed by a Qualified Person as set out in the NI-43-101, this work has been
thoroughly examined and discussed with the MSJ author. This writer concurs with the work as
set out in the MSJ documents. These observations have been discussed in the resources
section.

Tumi press releases also indicated the presence of bonanza grade ore at various intersections
in the drill program. In a Nov. 19, 2003 press release from the Frankfurt exchange, TUMI
reported that bore hole CMRC30 encountered bonanza quality values of a 20 metre intersection
with average values of 3.2g/t gold and 845g/t silver including a 6 metre intersection with 9
g/t gold and 2608g/t silver.

39
In a Nov. 25, 2003 press release, TUMI announced additional bonanza intersections as follows:

CMRC34 – 22.5m with average values of 1.5g/t gold and 289g/t silver including 5.1m
on the average 3.9g/t gold and 732g/t silver. Another interesting hole that was
reported in the Nov. 19 release was CMRC-20 that resulted in a 24 metre intercept with
grades averaging 1.56 g/t Au and 248 g/t Ag, including a 4 metre intercept producing
7.01 g/t Au and 1,099 g/t Ag. The company also reported that they were very
encouraged by the drill results as these bonanza shoots appear to be separate bodies
that were intercepted over a strike length of 190 metres.

However, even in light of these and other press releases touting the positive results during the
program, the project was dropped by Tumi in a press release of May 18, 2005. It advised that a
high strip ratio and too long a time frame to achieve an advanced project status were the main
factors in its decision. They determined that they could not establish a viable open pit or
underground mining operation in the old workings in the time frames set forth in Tumi’s
agreement with MSJ. These observations were part of the underlying reason for the exploration
effort to be expanded to other areas of the property that did not have the same overburden
issues. The targets were Coral, the El Cohete razorback and Cerro Colorado. Development of
these areas will provide mineralized materials for test mill feed and expand the surficial
knowledge of the property significantly.

Details of the Tumi decision pathway events were contained in the Nebocat report of July 4,
2003 wherein issues relating to the exploration program thoughts were reported. Nebocat
noted that MSJ had recognized the potential for bulk mining in the near surface portion of the
main vein. They had performed a channel sample program of accessible underground workings
from certain zones of the main vein. The MSJ sample program that has been reviewed and
verified by the author during the summer 2006 program, resulted in composite averages that
reached or exceeded 1.0 g/t Au and 100 g/t Ag. The composite widths could also be tens of
metres in width depending on the location along strike.

Tumi did check work of the MSJ program and obtained results that supported and often
exceeded the MSJ results in the upper levels. The main targets were the Destajos and La
Trinidad levels and assorted sub levels between them. In April 1999 reporting from G. Cuellar,
one of the sub level assays produced an average grade over 2 metres of 13.5 g/t Au and 1,840
g/t Ag. This author had occasion to conduct channel sampling opposite the Destajos level in
the area referred to as the San Diego Cross.

The samples (RMT 1012, 1013, 1014) produced an average grade across 6.3m of 4.0 g/t Au and
458 g/t Ag. Further sampling on the San Diego cross was not possible due to a collapse zone
in the adit to the south. It is also important to note that this high grade mineralized section
opens into the existing stope and can be easily liberated in a modernized underground
operation. The strike length of the zone could not be determined as the void space next to the
zone did not permit examination.

40
Murphy has postulated that the Destajos level may not have been extended to surface for
security reasons as the ore from his sample from the adit extension face on the roadway
(original report sample 17 – IPL#21) was certainly ore grade. (3.97 g/t Au and 255.0 g/t Ag) It
will be interesting to note the grades obtained and geological character of the rock when the
level is exposed and extended into the mine. The underground program for Tumi and MSJ was
terminated as they encountered difficulty in working in the haulage ways due to overburden
filling old workings and haulage ways from open ore passes above. The writer concurs that
these open workings do present a logistical issue but should not be an overbearing concern to
restarting underground operations. It was possible for this writer to descend in the workings
for approximately 122 vertical metres to approximately 20m above the Cinco Minas level. It
should also be noted that the Cinco Minas level appeared to be dry during inspection. A
significant bat population lives in these lower regions of the mine which also stalled further
sample work in the deeper levels. Proper breathing apparatus will be required to safely expand
the exploration work in these lower portions until the bat population and resultant fecal
matter is removed.

Tumi concentrated on new surface drilling with 50 metre spacing. A combination of twenty
nine reverse circulation and diamond drill holes were drilled to a combined length of 1,941
metres. From the drilling it was determined that the true average width of the main vein is
17.3 metres and ranged from 7.3 to 28.1 metres. In addition to the holes noted previously,
CMDD-15 produced results yielding 19.4 metres with an average grade of 0.76 g/t Au and 118
g/t Ag. These values are significantly lower than the portions of the vein that were high
graded during the 1920s where production grades were in the range of 3 g/t Au and 400-600
g/t Ag. New infill drill holes with 25 metre spacing will be required to provide data to bring
these results up to a drill measured category. The drilling should be done with RC equipment to
obtain the best depth and production results in this rock type. RC drilling can reduce ore
grades due to the water circulation flushing action, but the past diamond drill work was much
slower, expensive and produced poor core return. A drill program has been discussed but not
planned at this time.

Tumi drilling also encountered lower grades in two holes placed in the San Pedro mine area
(CMRC-12,13) and further drilling there was suspended. It is interesting to note that this area
of the vein appears to be truncated or constricted based on available surface mapping and
lower grades may well be expected. The San Juan mine is due west and on strike of the San
Pedro adit. The surface mapping indicates a podding of the vein materials that is truncated to
the west by a normal fault and main vein offset to the north of roughly 100 metres. The new
Coral surface exploration work attempted to get above the San Juan area to better understand
the structure elements.

San Juan was also subject to a series of drill holes in the 2003 program (CMRC-11,44,45,46,47)
and higher values were obtained in proximity to the old workings. The quartz veined andesite
intersected in the hanging wall during the drilling produced trace to low metal assays while
the portions in proximity to the brecciated quartz vein workings averaged 51 to 316 g/t Ag
and traces of Au. Nebocat states that holes 44 to 46 were designed to locate mineralization in
the hanging wall stock work as this zone overlaid the Magdalena vein within the San Juan
mine. If one considers the cautions raised by Byington, the low results would be expected.

41
The original examination of the San Juan mine by the writer and Murphy resulted in the
observations that a significant amount of new malachite and azurite staining had occurred on
the walls of the adits in several locations since the mine had closed. Staining was noted on
the walls, ceilings and within the water flows in the mine. Murphy’s original sample #14 (IPL #
16) was taken from an area of intense staining 10 metres in from the adit opening. The assay
results of 0.31 g/t Au and 112.2 g/t Ag with 6788 ppm Cu were interesting as no visible
sulphides were noted from the adit wall sample. The writer submitted this sample to Dr. Harris
for petrographic examination for the March 2006 report to try and determine any potential
flow characterization within the wall rock and what the ore host may be.

In his report he noted that Harris Sample E, was a quartz – cemented breccia with sharply
defined vari-sized, angular clasts of chloritized trachybasalt set in a texturally heterogeneous
matrix of quartz. The field noted azurite was not visible on thin section and the only traces of
mineralization were partially oxidized pyrite. Harris continued in his description to relate that
the potassic xenoliths (breccia fragments) may have originated as a loose breccia and were
then cemented by vein- type quartz.

This observation further suggests that the geological character of the hosting flank of the
proposed caldera on the footwall may have some yet to be determined participation in
mineralization dynamics. The malachite staining observed in several areas of the old workings
and on field exposures appears to have in at least some instances a mineralized source of
copper sulfide that has not been properly assessed.

The Murphy sample from the Gran Cabrera Chorrillo Blanco adit (original sample #8 – IPL #9)
bears witness to the volcanic association hypothesis as similar materials were assayed and a
result of 0.84g/t Au, 484.4g/t Ag, 18041 ppm Cu, 14083 ppm Pb, 11016 ppm Zn was obtained.
This sample was taken from deep within the adit at a highly malachite stained exposure. Gran
Cabrera is similar to Cinco Minas as both display a low amount of materials that could be
described as true fault gouge. The contribution of the volcanic hosts to preferential fault
failure from the regional dynamics was studied further in the expeditions into and along the
crater rim to the northwest and northeast.

Roughly a kilometre to the north of the Coral area a series of old mine adits were located on
July 31, 2006. They were referred to by the locals as the el Jaguex de don Pancho mine (JDP).
These adits are situated some 185 metres below the crater rim and drive roughly horizontally
into the steep face. Two main adit entrances were uncovered but more may be in the area.
Both adits were collapsed in a similar manner right at the mouth and it appeared to be an
intentional act. These adits reportedly produced high grade copper ore that was shipped to
Monterey in the 1980’s. The following table details the assay results from the mouth and
aprons of the adits. The adits would have to be opened to locate the working faces and
examine and verify the presence of high grade materials. It is interesting to note that the
apron samples from this area are significantly higher than the heavy azurite staining found in
the San Juan mine (IPL#16- 6788 ppm Cu).

42
 Table 5 - Apron and Adit Mouth Samples from JPD Mine
Assay Au Au Au Ag ppm Ag Ag Cu Pb Zn
Sample ppb oz/st g/mt oz/st g/mt ppm ppm ppm
JDP01 0.020 177.4 5.15 983 504 1177
JDP02 <0.005 183.2 5.81 12022 4293 9274
JDP03 <0.005 215.4 6.42 34431 7449 17534
JDP04 <0.005 10.2 0.44 1464 1491 4208

Several field days were committed to the more regional examination of the caldera and vein
relationships. These fieldtrips provided significant background information to the writer and
Murphy to further understand the structural aspects of the deposit. Large near vertical quartz
vein systems were encountered along with five old mine sites inside the caldera to the north-
northeast of the main El Abra mine working. These additional mines appear to be in a strictly
volcanic host and bare no obvious relationships to the main mineralized Cinco Minas vein apart
from a sub parallel orientation. The structural mapping that was completed on the property
has detailed several interesting relationships between the faulted blocks. These relationships
will be detailed in the Geological Setting section.

In 2005, MSJ re-calculated the mineralized zones in the San Juan and San Pedro areas and
reported tonnage with grades at 0.56 g/t Au and 97.93 g/t Ag. Further work has been
suggested on the NW vein extension as far back as Wisser but no reporting has been located
apart from the TUMI work near the San Juan mine. Byington also discussed the importance of
understanding the significance of the observed main vein pinching and wrenching with respect
to the variability of grade content. His observations may answer in part why the Tumi results
were low in this and other areas of the hanging wall drilling.

The writer also supported the need for better structural control over the region. High level
satellite photographs were examined and it appears that the offset fault near the San Juan
mine is buried under the erosional debris to the southwest. This portion of the area should
also be considered as a primary target for geophysical study. A significant amount of
groundwork has been completed during the summer 2006 field program in the area to the
north and northwest of the San Juan mine by this writer and Murphy. The results are
encouraging and provide the basis for further ongoing testing.

The decision to move exploration development opportunities away from the main el Abra mine
during the primary stages of the program was championed by Bandera who re-evaluated Tumi’s
withdrawal decision. Bandera has explored other options such as beginning quarry operations
at Cerro Colorado where bonanza values were found in the Tumi drilling and better defining the
El Cohete razor back. This approach allowed immediate production with limited stripping
concerns and the ability to gain an operational foothold on the main vein to establish
meaningful bulk grades for the test leaching. The newly constructed footprint will allow the
company to gain on end views of main vein and exploration faces to extend the property both
southeast and northwest from the main quarry site.

The close proximity of the newly refurbished mill site done by MSJ since November 2005 to
Cerro Colorado and the new exposures around the old mine will allow for an economic flow of

43
high-grade mineralized rock. This will be further aided by the new mine road construction done
by MSJ to link all the target sites. In addition to the test face areas, old mine waste dumps
have also been sampled and it has been determined that material is present that can add to
values and tonnage calculations once the dumps are opened and properly sampled.

Cabrera Property

The Gran Cabrera property contains extensive underground workings that are largely
underreported due to the present inaccessibility of the property. Historical information from a
July 1923 report by Mr. E. Thompson stated that ore from the Cabrera-Animas mines could
obtain assays in the order of 9 kilograms (290 oz) silver and about 10.3 grams (0.3 oz) gold in
bulk operations. These would be high-end bonanza grade values and could not be sustained.
The expected grades from this area should be in the order of 200-500 gram silver and 0.3 gram
gold based on average assays from chip and channel samples conducted by MSJ.

For the March 2006 assessment, a sample was obtained from the Chorrillo Blanco mine which
provided 484.4g/t silver and 0.84g/t gold in the original report sample (original sample #8 -
IPL#9). As a side note, during a field trip in May 2006 to the area the writer had an
opportunity to sample a piece of waste from the area of the neighboring El Favor mine. This
sample produced a value of 0.25 oz/st gold (8.57 g/t) and 1468.7 g/t silver.

Based on the examination of available historical literature, it is possible that the Gran Cabrera
deposit could easily provide a sizable quantity of bulk grade ore. An original sample (#7-IPL
#8) that was obtained during the first evaluation upslope from Chorrillo Blanco along a fresh
bulldozer cut-line displayed extensive dendritic manganese gossan interspersed with the host
rock. This sample assayed out at 2.6 g/t silver and 0.01 g/t gold but spiked at 3740 ppm
manganese concentration. This is typical of an oxidizing surface and, in keeping with
Byington’s postulation; the manganese spike suggests greater mineralization value at depth.
The literature also indicates that multiple parallel veins exist that are sub parallel to the Rio
Santiago River. As reported earlier, the river is suspected to follow the major fault lines for the
regional fracture displacement and subsequent pulsed emplacement of highly mineralized grade
materials. This postulation was further confirmed by the writer’s examination of the Stroud
Resources property at Santo Domingo in September 2006 which is on the river system strike.

In addition to the Chorrillo Blanco adits, there are four more mines indicated that are south of
this adit system and also sub parallel to the river. The other mines are La Cobriza, El Huizache,
Los Negros, and La Peralta. These mines all run towards the core of the volcanic dome and
constitute the rough northern flank of the cone.

44
 Geological Setting

The regional setting of Hostotipaquillo is between a series of volcanic provinces to the north
and a neo-volcanic belt to the south. The northern Sierra Madre Occidental volcanic province is
older than the southern Trans-Mexican volcanic arc. The assorted volcanic ranges are dated
from between 100 million years (Cretaceous) to 18 million years (Tertiary). The region is highly
fractured and faulted with numerous large and small volcanic calderas, pyroclastic flows, and
ignimbrites. A series of regional main sheer faulting events have been identified as well as
horst and graben block faulting. The Rio Santiago River follows the trace of one of the main
east-west left lateral fault systems. This fault line is offset in several localities and joins the
Cinco Minas, Santo Domingo, and Gran Cabrera areas lithologically.

The following map details the orientation of the main veins and main geological systems
existing in the subject properties. The orientation between Cinco Minas through to Gran
Cabrera is obvious. The writer also examined the Santo Domingo mine site to take
measurements and gain a better understanding of the regional geology. After this visit, the
direct correlation between the Santa Domingo and Cinco Minas site is obvious.

The Cinco Minas area displays a classic epithermal environment with at least three phases of
quartz/sulfide emplacement along a vein that has been traced to at least 3.5 kilometres in the
central part of the mining camp. There was an additional 1.5 kilometre length of vein
remaining open for exploration in the El Aguila sector and at least 800 metres of unexplored
ground southeast of the limits of Cerro Colorado. Both of these areas were examined, sampled,
and mapped during the 2006 field season. The vein has been deformed several times by dip
slip and wrench faulting. These fault systems have been identified and mapped and greatly
assist in understating the structural setting of the Cinco Minas camp. The variable
emplacement pulses resulted in selective mineralization in receptive locations along the vein.
Offsetting and normal cross-cut veins have also contributed to the complexity of the geological
model. Most of the pulsing has emplaced relatively barren quartz into brecciated zones within
the vein. Subsequent pulsing injected metalliferous fluids that resulted in a variety of
mineralization grades and vein thicknesses.

Both the Cabrera and Cinco Minas areas display mineralization that includes pyrite,
chalcopyrite, galena, sphalerite, argentite, native silver, miargyrite, and other silver
sulphosalts. Copper sulphides, lead, zinc and gold are also present in the primary minerals
suite along with a wide range of accessory minerals.

45
Map 11 – From Ausburn 1997 Report

46
While most of the auriferous materials are hosted in proximity to the main vein system,
additional minerals have been located in related vein structures and volcanic host rocks. The
historical mining has been entirely within the main vein fault structure. The intensive mining
operation ceased in 1930 when the mill was removed but mining continued as a cooperative
until the mid 1940s. Artisan and small scale mining has taken place on an intermittent basis
since that time.

The interviews with area elders who had worked in the mines since the 1920’s provided more
data that is expanded upon in the history section of this report. However it is important to
note that by all accounts, the deeper mine levels host the richer ore values. The contract
miners were focused on only obtaining highly mineralized materials from the deep levels. The
mining technique was simple as it was noted that rocks that could not be split by a miner’s
hammer were generally metal nuggets. In addition, the surface materials that were prospected
were of no interest unless they could sustain at least 1 kg/t of silver.

This posed a very high expectation and value threshold that was artificially high using today’s
standards. But the perception that surface leaching is evident in the structure is clear. This
can be seen by the numerous mid value workings and adit systems that dot the strike length of
this property. Surface assay work has provided some significant values in places but more
importantly shown that the higher grade materials will be found below the present surface.
Certainly materials suitable for heap leach operations are present throughout the area, but mill
feed sources will have to come from newly exposed portions of the area such as quarry sites
and newly opened underground workings.

This thinking should be translated to the Cabrera camp as well. Deep weathering patterns are a
fundamental aspect in this region. This has been seen on both subject areas and in other
regional camps examined by the writer during the year. Dozens of old mines and adits have
been checked and the situation is similar in all. Existing adits and mine levels are for the
most part mined out and lower to nil assay values are expected on these faces. To properly
assess the geological setting of potential new mine sites, drilling and blasting operations are
suggested to reach newer and deeper areas. Standard surficial assay work will provide
mineralization indicators but meaningful results that can be used to greatly expand the
geological knowledge and establish a higher resource base will require the new exposures.

The exposures can be obtained in new blast faces underground and through exploration drilling
in the deeper structures.

47
 Map 12 – Regional map view of Gran Cabrera volcanic host by MSJ

Approximate Map Scale (1 kilometre)

48
 Map 13 – Close up map view of Gran Cabrera geological characteristics

Approx 2 kilometres

Deposit Types

The Cinco Minas and Gran Cabrera deposits are apparently co-related Tertiary epithermal
systems that follow a main regional left lateral shear fracture. The main fracture does not
support mineralization on a continuous basis but rather allowed for a series of intermittent
pulses of hydrothermal fluids to populate dilated areas of the system. Depending on the age of
the pulse, the fluids may or may not have been auriferous. Three distinct phases have been
identified historically in the Cinco Minas area while the Gran Cabrera area is more complex and
is part of a massive caldera halo. The Cinco Minas mine is directly on a parallel fault zone
south of the main system and appears to be on the south flank of an old caldera that splits the
two zones.

The Cabrera mine is upslope from the main system, which is traced by the Rio Santiago River,
on the north slope of a large caldera system. Both sites have been noted as classic epithermal
systems, the classic gold, silver, lead, zinc, and copper components with the full range of
commonly associated minerals. The silver is the main component for identified historical ore
grade minerals and all mining in the region has been primarily centered on silver production.

49
Only associated gold has been reported in the production histories of the numerous mines in
the region.

The historically mined ore grade veins in Cinco Minas have been noted up to 30 metres in
width but the mined areas were generally 5-7 metres in width. The veins are not clean shear
systems but complex highly shattered zones with several pulses of cementing quartz.
Alteration, breccia and calcitic cementing are also features of the system and the zones are
random in their character and grade. Bonanza grade mineralization has been reported in recent
work, historically, and was observed in the Tumi drilling. However, the actual characterization
and location of the remaining ore zones still requires field investigation.

The exploration model includes, new air photo and satellite imaging controls to assist the new
field mapping program. Mapping is underway and the baseline cutting is complete. Selected
areas will be subjected to geo-physical investigation on a future date as part of a larger
program covering the entire region. Bulk samples have been taken in the area southeast of the
old main Cinco Minas mine at Cerro Colorado. This will now allow the company to open a quarry
on top of a known main vein extension and go to depth in an open pit style. As the pit
descends it will also coincidentally expose the vein on end to allow for northwest and
southeast extensions of the pit and/or begin underground examinations on strike. An old adit
was located on the southwest flank of Cerro Colorado and extended deeper than 7m but an old
collapsed zone has blocked exploration of this adit at this time. A vertical adit was also
located in the area of the current quarry plateau.

Assays taken from this adit are shown in the following table. They indicate the type of results
typical of other stalled adits on the property as only moderate to low results were obtained
from the highly weathered surface elements of the structure.

Table 6 – Assays from Vertical Adit on top of Cerro Colorado

Assay Au Au Au Ag ppm Ag Ag Cu Pb Zn
Sample ppb oz/st g/mt oz/st g/mt ppm Ppm ppm
CC01 0.034 230.6 9.43 404 101 305
CC02 0.070 243.4 8.10 449 177 238
CC03 0.033 97.0 2.50 623 102 119
CC04 0.007 44.1 1.29 278 102 258

Mineralization

The vein types located at Cinco Minas and Gran Cabrera are similar in nature and
mineralization. Both are classic epithermal deposits with complex hosting environments. Due
to the volcanic host rocks, intense shattering of the vein breccia and final consolidation by
pulsed quartz, the mineralization is complex. A series of pulses were generated by the fault
system that contained varying degrees of mineralization. Some pulse events were barren but
were important in cementing the shear breccia and providing lubrication for future pulse
events. The quartz ranges from white to chalcedonic and amethystine.

50
The mineralization is full suite, with gold, silver, copper, lead, zinc and a wide range of
accessory minerals. Pyrite and chalcopyrite are also included constituents in the pulsing but
the sulphides do not appear to be associated with the gold and silver. Even the copper
presents as a separate component from the chalcopyrite. Gossan development occurs with
manganese and silver sulphosalts and minor gold at both locations to varying degrees.
Oxidation is present in all areas of the mines examined as well as on the exterior faces near El
Abra, El Cohete, Cerro Colorado and on the exposures of the Minas del Coral slope above San
Juan.

The main Cinco Minas mine extended from the San Juan adits, southeast to El Abra. The known
strike length of the vein just in this area is 750m and is developed down dip to a minimum of
900 m. Average vein width is 15metres and the historically mined zones flare out to 30 metres
in places with banded interior grade values on occasion. High grade bonanza zones are also
well reported historically and have been identified on recent drilling. It should also be noted
that terminology also plays a part in the determination of rock with value. In pure terms,
barren indicates that no mineralization occurs, however, in this system, which is typical of
large epithermal deposits, metals will be injected into the host or border rock to varying
degrees. In a report noted by Nebocat, there is a reference from 1926 (Skewes-Saunders), that
relates the barren veins were identified as those varying from 30 to 150 g/t Ag and carrying an
average of less than 100 Ag g/t.

This distinction is important when examining the potential for locating additional high grade
or bonanza areas along strike. With the presence of numerous cross cutting structures running
normal to the main strike, any one of them could have been a recipient of a mineralized grade
pulse if they were dilated at the time of the pulse. In addition, being blinded by simply only
following the central mineralized vein path and not exploring laterally could result in missing a
new mineralized zone that could have been muted or covered by a “barren” zone. This also
highlights Byington’s suggestions that better structural control is required along the full strike
of the system. It is also important to highlight that to date, only 20 percent of the main Cinco
Minas vein has been drilled.

Many questions still exist as to the full geological character of the system. Work has begun
based on this premise in the normal fault areas northwest of the El Abrita mine. The presence
of a series of large cross cutting faults is obvious from the valley formations and steep cliff
faces bordering the cuts. However, this has proven to be a difficult area to prospect. Attempts
to scale the cliff and also to do geological assessment while crawling down ropes from above
have not produced any solid results. Further attempts will be made once the heavy vegetative
cover dies off. Heavy equipment will be required to expose the buried mineralization zones
here and along strike southeast past Cerro Colorado.

In the Gran Cabrera case, the adits drive directly into the face and footwall elements. Ore
grade materials were won and still exist in the main mine adit that is normal to the strike of
the main regional fault down slope and under the river to the north. The adits examined do
not display a strong parallelism to the regional strike and support the suggestion that high-
grade materials could be encountered normal to the main structure.

51
However, with this being said, there are other adits and identified veins in the area that are
parallel to the structure. In a historical reference translated from Spanish by George Barnett,
this issue is addressed as follows;

“….mineralization and the fact that multiple parallel veins exist which are sub parallel to
canyon walls allowing for easier exploration, development and mining. Mr. E. Thomson’s report
of July 9, 1923 states that during the development of the Cabrera-Animas mines about 75 tons
of ore averaging 9 kg (290 oz) Ag and about, 10.3 grams (0.3 oz) Au were accumulated. (Copy
attached). This area has an impressive potential to contain either several millions of tons of
high grade ores or tens of millions of tons of bulk tonnage, open pittable Ag-Au ores.”

In other portions of this report, references are made to the requirement of heavy equipment,
drilling and blasting to un-cover mineralized areas to assist in defining the potential working
zones. This will be an on going requirement for further exploration work and for defining
mineralization.

Exploration

The field examination process began on November 5, 2005. Since that time the writer and Mr.
Kevin Murphy have continued undertaking a series of field trips to the property. Each trip
resulted in the development of data sets on areas of the property that had not been explored
during the original visit to the property. The onset of the summer rainy season certainly
hampered the exploration process due to heavy rains, road wash outs, and the very heavy
vegetative cover. It has been described by the vendor, Mr. Barnett as a sea of green which is a
very apt statement. The foliage is on par with the cover seen in areas such as Colombia and
Panama.

The main Cinco Minas vein around Cerro Colorado has been the primary focus for immediate
development to produce bulk sample materials for test milling and heap leach tests.
Approximately 4,000 tonnes of vein materials have been ripped and pushed from the top of the
mount and stockpiled for mill and leach testing. In addition the vein development has been
determined to be a multiple system with an apparent total width of 100 metres. One vein alone
has an apparent width of 33 metres. Multiple vein systems have also been located with parallel
and sub parallel orientation in proximity to the main Cinco Minas vein near the El Abra mine
area both above and underground. This information has greatly increased the potential for
locating further mineralized rock in proximity to the main vein structure.

However, the extensive road work done by MSJ crews opened many new fresh exposures. This
work was augmented by heavy cutting programs by machete crews to install a survey base line
picket system and a series of perpendicular cut lines in the area between El Abra and Cerro
Colorado. Further cutting was undertaken in the area north of the San Juan mine to brush out
the steep slopes between that portion of the main vein and El Aguila.

52
At this location, there is an off setting major fault referred to as El Trouce. This is an area of
high calcite. It commonly referred to as the calcite line. This type of mineralization is
common in Mexico as it delineates the difference between the gold and silver areas. Areas of
adularia alteration were encountered during the field work. These are generally regarded as
guides to bonanza zones at depth but silver tends to move away from the heating aspects of
such zones. It is not uncommon to see a reduced silver content in close proximity to fault
zones. The field exploration indicates that this area has conjugate shear systems resulting
from the rotation and rising and falling of blocks. In addition to the main block movements,
wrench faulting and off-set shearing has been noted. The faults were in-filled with quartz and
calcite rich fluids that display varying degrees of mineralization potential. While the main
breccia zones near El Abra contain the majority of the historical silver mineralization other
areas such as El Kilo, to El Cohete also present mineralization potential. This was borne out by
the assorted field assays taken during the summer program.

It is apparent that even with the movement of silver away from the main heat sources near the
main shear zones, it could not move far in the perpendicular vein systems. In areas bounded
by two shear zones such as El Cohete, and Cerro Colorado, the resultant up lifted blocks were
injected with mineralization from both sides. This results in the postulation of an irregular
emplacement model where certain areas have higher mineralization zones that are structure
controlled. The mineralized solutions would have impregnated receptive host materials and
flowed past the more impermeable formations such as the denser andesites. Both areas may
have relic mineralization but the hosting would appear differently and the extraction methods
would vary. Taking mineralization from quartz hosted veins requires different mining methods
than from softer highly brecciated host rocks.

This example of host variation can be seen between samples KA-06 and MCGPS 44. KA-06 is
located on the southwestern slope of Cerro Colorado at the mouth of an old collapsed adit. The
host rocks are highly brecciated black rhyolites cemented with gypsum and calcite. The host
supported an assay value of 0.016 oz/st Au (0.55 g/t) and 193.7 ppm Ag with no obvious
mineralization. MCGPS 44 is located on the SW slope of the razor back north of the El Cohete
mine in a 3 metre wide quartz vein ridge outside of an old adit. The quartz appears mineralized
and carries an assay value of 0.061 oz/st Au (2.09 g/t) and 246.4 ppm Ag. Both assay sites are
on the same main shear zone but host the mineralization differently. This type of variation is
common in this area and forces the exploration efforts to include all rock host types as
potential mineralized zones.

Classic forms of emplacement seen as primary models in other camps are not relevant here.
Essentially, mineralization can and does occur in a variety of situations and significant
variations can occur even in close proximity. This is even more evident as one moves down
strike and moves off the cone/fault zone described earlier in this report and into main fault
elements.

This variation was also observed underground where large (plus 1 metre wide) quartz veins will
assay as barren while the adjoining muted host volcanic will carry mineralization. The multiple
hydrothermal pulsing noted by earlier authors supports the contention that not all pulses
carried metals. Differential pulse events will only serve to make the mineralization picture

53
more complex. Mineralization emplacement does occur over a large area and no host rock type
is immune.

The following map shows the generalized structure related shear patterns observed in the
project area. The shears are evidenced from field observation of fault materials and from
overlaying geomorphologic signatures. There are many more muted structure related patterns
in the area but three main orientations have been identified. They are noted as roughly 4, 80
and 140 degree AZ lineation patterns. Offsets do occur in some locations and line translation
may be slightly off in some areas. However, these three main structural controls provide
critical intersections for possible future drill targets as potential mineralization concentration
areas.

54
Map 14 – Generalized structure of Cinco Minas area

55
 Map 15 – Coral to San Juan Area

Map 15 shows the placement of the Coral Mine slope north of the San Juan mine area in
relation to the mine placements inside the crater rim to the northeast. The San Juan mine is a
deep historical mine on strike with the main El Abra mine and primary fault zone. On the right
(east side) of the map the irregular red line details the footpath taken during one of the
exploration forays along the rim and into the crater bowl. Not all of the route paths were
included in the mapping. Only a few were noted across the area to help define the trails and
paths used to define the targets. The small scale of the maps have resulted in the GPS
waypoint reference numbers to appear only as black dots on the mapping.

The Los Animas mine and several other crater controlled mineralized zones were encountered
such as the adit at the lower right corner of the map. While the orientation of the red line is
roughly parallel to the 140 AZ fault strike, it has no relation to the fault. All of the elements
noted on and inside the rim were entirely deposited due to volcanism. Near vertical vein like
structures were noted with strikes ranging from 110 to 170 AZ but on closer inspection
appeared to be more on end exposures of slope dip elements deposited on the main cone flank.

The newer structure work presented in this report highlights only 3 of the main structural
controls identified during the 2006 field season. They are noted as 4, 80 and 140 degree AZ
and are shown as orange lines in this series of maps. The parallelism of the structural controls
is a significant observation as it provides a framework for future field examinations for
structural intersections and offsets.

56
These controls were described by Byington in his remarks on wrench faulting. He went on to
relate that the exploration geologist would be prudent to pay attention to the structural
controls as their orientation will assist in defining the placement of favorable and less
favorable zones for emplacement. The three zones noted are certainly not all of the ones
identified and there is a range of dip orientations to the strikes but they are presented as a
generalized baseline format to expand exploration efforts on a defined fracture grid. Many
structures were noted as roughly 150 AZ in the field, but the two main grid lines were plotted
as 140 AZ to conform with the general strike of the main Cinco Minas fault.

It is not uncommon for in field variations of up to 10 degree to be noted on such large

structures. These variations can be explained by a series of reasons which include chatter
tension during offset, block rotation and compression of certain rock elements bordering a
fault. When added to the issues of indistinct surface exposures due to overburden and
vegetative cover, these slight variations are understandable. The main purpose of this
mapping exercise within the exploration parameter is to provide the baseline grid for future
work.

It is expected that as the field mapping matures, more structural orientation variations will be
noted. Dozens of variations already exist in the fieldwork done by this writer and Murphy but
the presented grid was thought to provide the best average orientations to begin the work.

57
 Map 16 – Close up of the Coral/Scorpion mine areas

The intersection of the 80 and 140 AZ structure elements corresponds well to the orientation
of the El Scorpion mine adit. The mouth is at the intersection and the main adit tends roughly
140 AZ. The Scorpion valley also runs directly along the 80 AZ element. Noted directly south
of the 80 AZ line is a small jog in the road drawn in blue. At the sharp turn, another adit was
located below the roadway on the steep cliff face. It also trends at 140 AZ. At the end of the
marked roadway a large rock fall area was located. The rock fall comes from debris moving
down the steep valley in line with the cliff face. Moving northwest from the rock fall site a cut
was made across the valley and another adit was located on the north side. It also displays the
same orientation but only runs for a few metres. The adit is noted by the two black dots to the
right of the contour line, north of the orange line.

Directly southeast of this point across the valley is the Coral mine. It is located above the
letter “C” in Coral. This adit runs for 25 metres roughly 140 AZ where it makes a sharp turn to
both the northeast and southwest at again roughly 80 AZ. Fronting the adit mouth is the
continuation of the sheer cliff face forming the southern edge of this valley system. The
placements and orientations of the noted elements in this area are certainly significant
observations. While cursory examination of the slope does not reveal the replication of the
structural elements due to overburden, talus, and vegetation, mapping the features results in a
much clearer picture.

The further mapping and exploration conducted along the 140 AZ strike line in this area also
resulted in several more consistent structural expressions. In addition, a host of stalled adits

58
and workings on the Coral slope also suggest that other on end orientation features exist in
this area. They will have to be further explored once the vegetative cover dies off.

Map 17 – El Abrita/El Kilo Mine area

This area hosts a variety of structural elements centered around two small mines. The El Abrita
is the larger of the two mine works. El Kilo could not be explored due to the high bat
population and El Abrita has some very steep passage ways to navigate. A large mine waste
dump apron lays directly below the two mines. Appendix 2 provides the details of this large
apron. The municipal road system follows the steep inclines to the NE of the mine sites and is
shown as the sharply curved light blue lines at the right side of the map. The topography also
generally follows the structural elements however, the highly complex fracture system in this
area requires much more work mapping to define target zones.

The extensions of the structural controls should define the orientations of hidden vein
elements in this area, but as noted SE of El Kilo, some offsets are obvious. Heavy equipment
will be required to expose the new vein exposures. This should be done when the dump aprons
are being opened as well. It is interesting to note that the twin fracture lines (purple) on
either side of the El Abrita adit are at 40 AZ, while the offset fracture SE of El Kilo is at 60 AZ.
Both of these orientations were also recorded at several locations while trying to trace faults
up the sharp turns in the steep valleys.

The apparent radial radiation of the fracture orientations from a point centered on the front of
the plant site is also of interest as the valley wall at that point on the SW side is also the
centre of a natural curve. The apex of the radial vectors from that point provides a static point

59
in showing the left lateral movement of the main shear. This movement would result in the
dilation of the fractures and could have allowed for the concentration of mineralized materials
in those fractures zones. Another 60 AZ fracture element was noted running down the valley
system at the sharp east-west to north-south curve located at the top central area of the map.
Tracing this fracture line to the southwest would result in another 3 line intersection point
directly north of the blue road shown with 3 small hash marks depicting vein extensions.

This intersection would be the northwest corner of a natural parallelogram running from the
point east to the curve in the road, then SE at 140 AZ to the left of the word El Abrita and
then southwest for 100 metres to the fourth triple intersection. This type of block is repeated
to the southeast overprinting the El Cohete area and again over the Cerro Colorado area. The El
Abrita block is dropped while the two other blocks are elevated to varying degrees. The area to
the northwest of the El Abrita block is also dropped and the adjoining block to the northwest
at el Abra rises sharply along the road cut with the same 80 AZ orientation.

The intersection points of the replications of these structural elements provide strong targets
for further exploration activity and possibly drilling. More stripping, excavation and assay work
is warranted at these points prior to any decision to drill. Murphy obtained an assay value
(KGM-0096) from a sample directly above the El Abrita mine on the flank of an old trench work
of 4.49 g/t Au and 240.0 g/t Ag. These random high grade locations within a vein are typical
of the area as noted earlier in this report. This results in the need for long channel samples to
be taken where high grade values are found to assist in the continuing development of
tonnage and grade estimates over the property.

60
Map 18 – Close up of the El Abrita/El Kilo mine sites

61
 Map 19 – Close up of area north of El Cohete mine

This area is referred to as the razorback due to it steeply inclined walls, jagged topography and
irregular texture. The dark blue lines falling within the two 140 AZ elements depict the general
location of the vein outcrops. The jagged red lines show the path of a traverse route made
with a GPS. The lines were included to demonstrate the difficulty in doing cross line
examinations in this area. The black dots show the recorded GPS points and sample locations
compiled over several exploration attempts of the area. In the area just south of the 60AZ
purple fracture line, Murphy conducted several traverses. He located numerous old workings
and trenches across the roughly 100 metres wide block in addition to excavation evidence
along the top and flanks moving toward the southeast. These workings have provided assay
values as high as 0.92 g/t Au with 393.8 g/t Ag (KGM -0055) but fluctuations do occur as
noted earlier.

While much more work is required in this area, it is suggested that the razorback structure
should simply be leveled much like the crest of Cerro Colorado. This would allow for better
future exploration access and the ability to develop high grade portions of the razorback for
mill feed stock. The 80 AZ line running just below the word El Cohete follows the thalweg of
the central valley stream. It too is considered to be a fracture system related water course due
to its sharp cuts and turns along the valley bottom. The 80 AZ offset fracture also presented an
interesting halo of gold concentration along 200 metres of strike in an area equidistant east
and west from the el Cohete mine.

Assay values from chip samples from west to east down the fracture are shown in the following
table. The spikes in the gold values and sharp drop in silver are consistent with the

62
geochemical aspects of area enrichment discussed earlier. It should also be noted that this
fracture is in a heavily weathered zone with a constant stream flow above it. Obtaining deeper
samples across the fracture would represent a better estimate of insitu gold associated with
the fracture.

Table 7 - Chip Sample Assays El Cohete fracture

Sample Name Au Ag Ag Cu Pb Zn
g/mt g/mt ppm ppm ppm ppm
KGM-0038 0.76 111.6 110.0 74 80 247
KGM-0039 0.73 -- 68.0 20 119 112
KGM-0040 0.64 125.1 128.0 12 60 76
KGM-0041 0.92 -- 5.8 14 21 53
KGM-0042 0.11 -- 7.6 11 28 89
KGM-0043 0.16 -- 15.8 9 22 34
KGM-0065 0.65 -- 74.0 183 851 439

Map 20 – Close up of El Cohete to Cerro Colorado area

Map 20 details the association between the El Cohete and Cerro Colorado blocks. The structural
parallelism is an obvious feature in the map but the degree of elevation of both blocks relative
to the surrounding valley floor is not. Both of these blocks appear to have been thrust up as a
result of the structural forces associated with the main faulting. Both blocks appear to be
erosional remnants protected by the quartz capping on the hanging wall of the vein, but it is
probable that they are also vertical thrust blocks as well. Further examination of the flanks of
the blocks will be required to determine the elevation genesis once the talus slopes are
removed during future excavation work.

63
Assay work done by the writer on the upper weathered northwest flank of Cerro Colorado
resulted in the black chain of dots seen on Map 20 to the left (west) of the words quarry
plateau. Chip samples were taken at 5 metre intervals of the highly weathered talus running off
the slope. The results indicate that a significant amount of metal has been removed from the
surface by weathering when these results are compared to table 9.

Table 8 – Cerro Colorado Chip Sample Assays

Assay Au Au Au Ag ppm Ag Ag Cu Pb Zn
Sample ppb oz/st g/mt oz/st g/mt ppm ppm ppm
CC34 <0.005 0.42
CC35 0.022 1.30
CC36 0.012 1.36
CC37 0.028 1.58
CC38 0.023 2.85
CC39 0.141 10.68
CC40 0.105 9.97
CC41 0.007 0.79
CC42 0.018 3.64
CC43 0.044 0.90
CC44 0.006 0.82
CC45 <0.005 0.32
CC46 <0.005 0.90
CC47 <0.005 0.17

Table 9 refers to samples taken by Murphy working up and across the lower portion of the
northwest flank of Cerro Colorado. The grade differences are striking when the one moves from
the highly weathered portions of the same outcrop vein. Murphy was not able to fully sample
the entire face due to high levels of bee infestations in some of the old workings and adits
encountered on the slope. This will have to be done after proper clearing operations are
undertaken to make the program safe. Entering adits with active hives in excess of 1 metre
wide is not prudent. The assay sample locations are noted with the cluster of black dots on
Map 20 running northwest to southeast along the western 140 AZ line.

Table 9 – Murphy Assays at Cerro Colorado

Sample Name Au Ag Ag Cu Pb Zn
g/mt g/mt ppm Ppm Ppm ppm
KGM-0066 0.04 -- 7.3 87 166 427
KGM-0067 6.72 117.1 123.0 49 137 132
KGM-0068 0.74 -- 40.0 43 61 106
KGM-0069 2.18 154.5 153.0 544 1600 1349
KGM-0077 0.69 135.3 114.0 269 1273 1205
KGM-0078 2.35 108.9 106.0 922 225 335

The bulk sample work from the 4,000 tonnes of stockpiled materials taken off the crest of Cerro
Colorado is discussed in the resource section of this report. However, final average value of the
stockpiled weathered crest form materials is germane at this point to be included in this
discussion. The average resultant grade for these materials was determined to be 1.09 g/t Au
and 64.1 g/t Ag. This is also in keeping with the results noted on table 8. It is expected that

64
once operations expose the interior portions and move away from the weathering profiles of
Cerro Colorado the average grades will increase.

Map 21 – Area covered by the Cerro Colorado block form

Attempts were made to delineate the subtle shear and displacement features in this valley as
they relate to each other. All of the blocks appear to be positioned relative to the main fault
movement and associated rotations. The Cerro Colorado block appears to follow this pattern as
well. At the far SE flank of the block a steep drop off was encountered with the common 80 AZ
strike. It is noted with the word scarp which also refers to the 33metres wide quartz rich vein
that was located at the flank crest. Exposure was poor, but a number of samples were obtained
and as noted in Table 10. The materials are again highly weathered but some gold values begin
to show in a similar manner to the ones noted along the el Cohete fracture in Table 7. Much
more field work will be required to properly complete this structure related gold emplacement
theory.

Table 10 – El Cohete Assays

Assay Sample Au Au Au Ag ppm Ag Ag Cu Pb Zn
ppb oz/st g/mt oz/st g/mt ppm ppm ppm
RMGPS228 0.40 19.8 12 7 16
RMGPS229 0.76 15.9 20 31 17
RMGPS230 0.98 29.0 13 12 10
RMGPS231 0.60 14.5 8 2 5
RMGPS232 1.26 6.7 10 <2 53

65
In addition significant calcite values were obtained from the west flank of the block (KA03-
26.91%Ca or 41.74% CaO). This area also supported at least two large lime kiln operations in
the 1920’s. The kilns provided up to 10 mule loads per day for satisfy the plant flux and
building supply needs for the mine. It should be noted that in the San Juan area, the current
thought process is that the sliver was driven from the calcite line of the El Trouce fault and
this may also be occurring at this location. The flank of the main Cinco Minas fault runs past
this location and significant geochemical processes may have resulted during its formation.
This will only be borne out from further exploration work in this and other areas.

Map 22 – Close up of the southeast flank of Cerro Colorado

The complete picture of block rotation is still not completely resolved but significant steps
were made during the current exploration program towards detailing the multiple failure
points. During the field examination in the northern portions around the Coral area, a series
of outcrop samples were taken and multiple old small mine adits and workings were uncovered.
Looking at the full extent of the slope it appears that the miners were actively searching for
high grade zones and abandoned the attempt when the assay results did not exceed the 150
g/t Ag general count and 0.5 to 2.0 g/t Au. This is understandable when mine grade cut off
was a kg/t and ore reaching 3kg/t was being extracted from the heart of the mine. It should
be noted that during this field examination grades as high as 2.35 g/t Au and 728.4 g/t Ag
were recovered during assay of chip samples from outcrops on the slope.

The following table lists the assay sample results from the Coral slope examination.

66
 Table 11- Northwest of El Abra - Minas Del Coral Slope

Assay Au Au Au Ag ppm Ag Ag Cu Pb Zn
Sample ppb oz/st g/mt oz/st g/mt ppm ppm ppm
GPS 17 Trail 0.023 0.79 247.5 6.34 745 1651 1959
Trail 1 0.028 0.96 208.2 5.61 185 784 857
Trail 2 0.007 0.24 65.7 2.00 88 524 91
Trail 3 0.023 0.79 279.5 7.42 194 1237 111
Trail 4 0.007 0.24 132.9 3.75 827 1134 530
Trail 5 0.008 0.27 157.7 4.80 275 588 92
Del Coral 6 0.62 230.0 211.0 184 1238 787
Del Coral 7 0.05 2.4 3.1 81 119 141
Del Coral 8 0.22 43.0 44.2 11 91 80
Del Coral 9 0.03 6.5 9.0 30 72 40
Del Coral 10 1.11 169.0 165.7 298 612 86
Del Coral 11 0.53 121.0 124.7 171 599 56
Del Coral 12 0.06 55.0 54.5 556 889 206
Del Coral 13 2.35 153.0 142.6 103 481 61
Del Coral 14 0.14 54.0 46.6 266 1449 203
Del Coral 15 0.61 41.0 25.0 83 340 216
Del Coral 16 0.63 133.0 132.9 188 610 404
Del Coral 17 0.04 520.0 728.4 62 367 75
Del Coral 18 0.22 55.0 65.2 872 3369 548
Del Coral 19 0.40 6.6 10.1 270 1557 162
Del Coral 21 0.22 106.0 100.3 685 1537 777
Del Coral 22 1.26 220.0 196.5 66 259 177
Del Coral 23 0.01 1.1 1.1 32 330 1208
Del Coral 24 0.02 19.5 19.9 138 215 113
Del Coral 25 0.13 24.0 21.4 1149 4830 1428
Del Coral 26 0.15 44.0 43.6 128 1158 218
Del Coral 27 0.01 9.8 11.6 66 481 631
Del Coral 28 0.12 58.0 56.6 337 1081 698
Del Coral 29 0.39 93.0 90.5 164 609 195
Del Coral 30 0.04 27.0 23.8 136 690 180
Del Coral 31 0.25 114.0 108.9 273 870 151
Del Coral 32 0.05 59.0 55.8 71 896 166
4M Right 0.02 2.6 68 111 938
21.5M <0.01 2.4 432 247 9467
15metres 0.01 4.0 131 1259 1988
6metres 0.02 3.5 41 84 402
5metres 0.62 181.0 264 727 102
39 A 0.16 33.5 79 327 84
3533A 1.10 34.5 24 98 27
Coral 100 0.20 21.5 16 391 28
Coral 101 0.05 9.1 37 135 30
Coral 102 0.14 3.4 15 27 30
Scorpion 1 0.32 54.5 328 786 465
Scorpion 2 0.15 15.6 18 56 91

One adit was followed in for 21.5 metres and several variations in the wall rock were noted.
While most samples were found to have minimal grades one area produced an assay of 0.62 g/t
Au with 181.0 ppm Ag over approximately one metre in width. The zonation in this adit was

67
not clearly defined due to age and weathering effects. To properly delineate the zoning in this
underground working the walls will have to be scaled to obtain fresh faces. It is important to
note that at this location there were three additional adits, two of which had collapsed
vertical raises which truncated the working. The third adit leads to a decline which was
blocked by a rock fall. This mine had no apparent orientation that was being followed and the
miners appeared to simply follow high grade mineralization where it was encountered.

This type of apparent random mining indicates that this area is generally shocked with
widespread but indiscriminate mineralization zones and adularia. The general strike of the
mine is to the southeast heading in the general direction of the main El Abra workings a
kilometre to the southeast. It is also important to note that these workings are several
hundred metres above the traditional mine areas such as El Trouce, San Juan, and San Pedro.
The mine maps indicate that the adit systems and levels from these mines underlie these upper
workings but are offset to the southwest. Additional three dimensional modeling will be
required to link these upper workings to the lower old mines. These upper workings also
appear to be similar to the “snake ball” mineralization observed in the Monte Del Favor system
to the west.

Further exploration activities will include moving an air track drill to the top of the El Abra
clamshell to drill off test trenches and determine geotechnical stability of the high wall. The
trenches will have to be blasted and due to the lack of knowledge on the rock mechanics in
the area this will have to be a well engineered program to be done safely. In addition, the
nose or end of Destajos level will be entered once a blasting crew and drills are on site to allow
the end on end entry into this level. This will be a significant exploration advance as it will
also allow exploration fan drilling to be done from inside the mine at the Destajos level. This
type of drilling does not appear to have been done in the past and will provide new insights in
respects to new locations such as bonanza zones. It will also assist in establishing infill
drilling to augment the Tumi work. With 25 metres infill drilling the underground area at El
Abra will be able to be moved to drill measured reserve status.

Work is already underway for planning of the opening and deep assay testing of the many mine
dumps on the property. Some surface mapping and assaying of these dumps has already been
completed. A report on the dump configurations with tonnages and grade is attached to
Appendix 2.

During the original November 2005 program we obtained a series of chip samples to compare
assay data from the existing records, took confirmatory overall, midrange, and close up
photographs, measurements, GPS treks, and spots. Existing drill hole locations were noted and
checked against the records. In addition, spot inspections were made of the core shed
materials to examine the drill core and RC samples. It was noted that at no time was there any
discrepancies found between the paper records and what was observed in the field. This
observation has been reconfirmed on an ongoing basis since that time. In the writer’s opinion,
the MSJ data base is an accurate and honest representation of known fact. This was further
enforced by the observations during the underground examination of the mine works. The
Tumi reporting is very accurate and Nebocat’s report should always be used as a foundation
document to any persons working in exploration on the property.

68
An area southeast of the town of Cinco Minas was also examined as a potential heap leach
area. A grid was laid out in the high weed cover with machete. A rubber tired backhoe with a
front bucket was used to mow down the grid area and dig a series of trenches and holes to
determine the depth to bedrock. Further geotechnical evaluations will be required on this site
to determine its suitability for a pad. Issues such as ground stability, drainage, potential liner
damage from under laying strata and drainage grade will need to be considered. Soil samples
were taken and will be subjected to assay testing to insure the pad was not placed on
mineralized ground. The assay results showed the soil was essentially inert and no metals of
significance were found across the property. The list of assay results is attached in the
Appendix 3 along with the other assay result charts. Initial general assessment suggests that
the cleared site will be more than adequate for the leach pad program; however, a qualified
geotechnical engineer will be required to engineer the pad.

The exploration program was developed as a work in progress mostly due to the new nature of
the program for Bandera. Until it was understood what existed in the records, what was
accurate and what could be improved upon, some planning decisions could not be made. As
both sites are major historical production areas, there are many facets to consider in planning
a go ahead program. However, the main focus is to determine the geological character of the
main regions around Cinco Minas to understand how to develop the area for new mining.
Bandera will be arranging to have new air photos flown of the area to allow for detailed
mapping with GPS survey targets situated through the area in the spring of 2007. A deposit
has already been placed with a local air photo company and flights will occur once the green
foliage has subsided. This will allow for new three dimensional mapping to be conducted, to
prepare a thorough block model of the fault structure and related cross structures.

Once the new field mapping and geochemical assay program is complete, the assessment for
undertaking a geophysical study will be made. In determining the true structural character of
the system, this type of study would be targeted to outline potential mineralized high-grade
zones on and normal to the main fault system. A significant amount of structural analysis has
been undertaken based on the 2006 field exploration program. The structural orientations and
associations provide a fundamental snapshot to the potential placement of high grade
mineralized structures. These fault systems will be better defined during the winter of 2006
once the heavy greenery has died off and the ground can actually be seen for more than
several metres in any direction.

In keeping with Byington’s recommendations, geophysics is a fundamental aspect to the

evaluation program. There are a host of geophysical tools that exist today that can detail
subsurface mineral concentrations and structural features. The common methods are induced
polarization (IP) and magnetometer arrays. One of the newer methods is controlled source
audio magnetotellurics (CSAMT) which has certainly gained popularity in recent years.
However, prior to deciding which method should be used to locate site specific targets as well
as more regional structural features, discussions are required with qualified geophysicists to
ensure the proper methods are employed.

Airborne systems can delineate the regional structural picture between and over Cinco Minas
and Gran Cabrera, but on ground methods may provide a more articulated view of tight

69
structures. In the end, both approaches will probably be required to ensure the proper
megascopic examination is undertaken at the outset. Many of the potential target faults have
been hidden by overburden or vegetation regionally. As a result, the classical airborne methods
should be considered as the primary toolset.

Another exploration front has been prepared below the El Abra mine site. The extension for the
Destajos adit was calculated to intersect the main road below the mine at the nose of the main
bend in the road at 220 W. The debris and overburden covering the actual rock outcrop was
uncovered with the back hoe and the site prepared for future drill and blast operations. The
calculations indicate that only some 20 metres of rock must be drifted to reach the end of the
old adit. Making this connection will allow for immediate underground evaluations to obtain
mineralized high-grade materials for testing. Original report sample #17- IPL # 21 was taken by
Murphy in November 2005 at this rock face and suitable ore grade testing materials were
identified (3.97 g/t Au and 255.0 g/t Ag). MSJ has already constructed a haul road down from
this rock face to the old mill site and haul operations can begin immediately.

Twenty random chip samples were taken from the Cinco Minas and Cabrera properties during
the 2005 review process. They were selected primarily to allow for comparative assay results to
existing records and to be used for further petrographic examination where warranted. The
results of the assay work were discussed throughout in the initial report and remain in the
body of this current report for continuity purposes. The 2006 field program resulted in the
submission of 364 samples for assay to date. Additional samples are still being brought in
from the field by new work being conducted by Murphy. These samples cover the entire area
between the far northwestern reaches of the Cinco Minas property at El Aguila right through to
the stream crossing at the far southeastern edge of Cerro Colorado. These assays when taken
in conjunction with MSJ and Nebocat reports provide a strong geological picture that supports
further exploration and development of the entire property.

70
 Drilling

No drilling was conducted by the author or Murphy at this stage of the investigation. Only
historical and recent drilling done by other parties was considered in this report. Tumi reported
three drill programs at Cinco Minas. The three campaigns were completed between March 2003
and July 2004. Phase one represented 1,941 metres that included 253 metres of diamond
drilling (DD) and 1,688 metres of reverse circulation (RC) drilling. Four hundred and fifty chip
and drill core samples were analyzed. Phase two comprised of 14 RC holes with 1,411 metres of
chip sampling. Two hundred and thirteen drill chip samples were submitted for assay.

Phase three totaled 1,604.8 metres in 22 holes and 404 chip samples were submitted for
analysis. They also examined 12 underground workings in their resource estimate. The workings
examined extended 115.05 metres with 835 samples taken. They also reported that the manual
excavation underground program using hand tools was stopped due to blocked passages and
falling rock from upper stopes. Bandera plans to overcome this problem by opening the
Destajos level and utilizing proper machinery to mine the ore with modern technology.

Sampling Method and Approach

The materials taken for assay were selected at random as comparative chip samples. Previous
operators have undertaken extensive channel sample programs and reported them in a very
detailed and thorough manner. In most cases the sample and assay work has been done in
generally the same areas as previous works. The samples taken during this evaluation were
intended to act as correlation samples from past examinations. The following table details the
sample locations from the original 2005 program and identification numbers. The 2006 assay
results are contained in Appendix 3.

Table 12 – 2005-2006 Assay Results

International International
Plasma Labs Plasma Labs Sample Name or
Sample Location Description
IPL# IPL# Number
05L2710 05L2715
Most western working of Cerro Colorado
1 1 1
13Q0611873E / 2326223N
3 2 2 Drill Site CMDD 52 & 53
4 3 3 Drill Site CMDD 57
5 4 4 Side wall of El Abra adit (At #8399 marking)
6 5 5 Roof of El Abra adit by 8399
7 6 6 Cross cut vein at Cinco Minas (0611317E – 2329178N)
8 7 7 Gossan zone by Cabrera – New road cut above Chorrillo Blanco
9 8 8 Chorrillo Blanco, 100m into adit at raise
10 9 9 At Solomon mine end of adit by Kennecott sample
12 10 10 Road cut at gate on road entering Monte Del Favor
13 11 11 Pillar in Monte Del Favor adit

71
 Talus at excavation site on road to Destajos Adit extension
14 12 12
26.2metres east / 37.5metres north of CMRC 43
15 13 13 Talc rich sample from talus at sample site 12
14 Adit wall from 10metres into San Juan mine stained with
16 14
Azurite
18 15 15 #3 Adit entrance at Cerro Colorado far east face
20 16 16 High Manganese Gossan just east of old mill site
21 17 17 Bedrock sample at nose of Destajos extension
Purple Argillite, south flank of Cinco Minas valley below mill
22 22 GPS 28
13Q0611238 / 2326555
23 23 Mouth of El Kilo Above El Kilo mine entrance in old trench
24 24 Adit #3 Wall of old workings at Adit #3 Cerro Colorado

The following section has been taken from MSJ-Juan Morin report and shows the offsetting and
drop down blocks that occur in the San Juan area. Historical information exists on the San
Juan mine workings but no information was available at the top portion of the exposed vein
noted at the far upper right corner of this section. Two other sections N1150 and N1200 also
detail this vein exposure. The sampling work that was conducted on the Coral slope coincides
with this vein exposure. The assay results can be seen in Appendix 3. The significance of the
exposure is detailed in the section on reserves.

72
 Section N1100 from Ing. Juan Morin

The following map comes from the Nebocat/Tumi and highlights the generalized geological
mapping with exposed veins and mine site locations. The map shows the La Cobriza mine;
however, the writer did not have the opportunity to visit this particular mine but several
others were examined during the 2006 field season. Sampling was done across the major vein
structures located in the central portion of this map. The far northwestern vein system
outcropping is the El Aguila deposit. This was examined briefly by Murphy but was not part of
the main program. It will have to be more thoroughly examined at a future date.

73
Map 23 – From Nebocat

74
The following map details the locations of the Tumi drilling and also comes from the Nebocat
report. This map was included as a reference for discussion purposes pertaining to reserves.

Map 24 – From Nebocat

75
The following map also comes from the Nebocat/Tumi report and details the drill hole locations
and general vein systems in El Abra. In the upper right hand corner, a large vein is showing
striking Northwest. This is the area of current intensive examination by Murphy.

Map 25 – From Nebocat

76
Sample Preparation, Analysis, and Security

All samples were personally taken by the writer or Murphy, bagged, sealed, tagged, and
submitted by MSJ staff to GM Lacme Labs in Guadalajara for processing. The samples only
contained limited data as to location to ensure the security of the information. Only the
author and Murphy knew the actual sample locations. The samples were split and two sets of
pulped material were prepared in Mexico. One of the pulp sets from the original report
(05L2710) was sent to the writer who submitted it directly to International Plasma Labs (IPL)
in Vancouver. The second pulp set (05L2715) was submitted directly to IPL through Acme.
Since this time, all assay work has been done through the general process described above.

The pulp samples have been analyzed for 32 elements by ICP method. For gold, the process was
fire assay-atomic absorption finish and for silver, by using atomic absorption technique. The
initial 20 samples were batch assayed with repeat check samples done on the first and last
pulps including a blank IPL reference sample and two standard IPL reference samples. This is
the common method of the majority of the assay work completed to date. The pulps submitted
by the writer had no reference location and IPL had no way of knowing that the two analyses
were related. This provided an internal double-blind process. Only after the analyses were
complete was the lab notified of the commonality of the sample. The two analyses were then
checked line by line and item by item to ensure there were no discrepancies in the assay
results apart from normal standard deviations. In addition, in most cases the writer collected
small representative hand samples culled from the main bag and shipped them to Vancouver
for record confirmation and future petrographic examination if required. They remain in safe
locked storage.

IPL is an ISO 9001:2000 certified company and the certificate of analyses for both samples are
attached as an appendix to this report. The entire analytical summary and sample prep details
can also be located on the certificate. In the writer’s opinion, the assay work was completed
properly and there is no concern regarding the validity of the results. The chain of custody for
the samples and pulps is secure and as the original chip samples were split and stored, the
process can be replicated if ever required.

Data Verification

The assay results from International Plasma Labs Ltd. (IPL) for the samples taken during this
most recent program were compared in detail to other reported assay results from previous
authors in past programs. As these check samples were taken at random in the general
proximity to the standardized channel samples, they were expected to fall within acceptable
parameters that would approximate the averages obtained by others. This was found to be the
case in all sample locations and the writer and Murphy agree that the body of recorded work
held by MSJ is accurate and complete. This allows researchers to utilize the MSJ database with
confidence of accuracy.

77
 Adjacent Properties

This Cinco Minas mine site has no other operations in close proximity apart from the Stroud
Resources operation at Santo Domingo roughly 10 kilometres northwest of the mine site. All of
the historical mines at Cinco Minas are the subject of this report and the writer has to rely
upon the historical record to obtain average production values that were obtained during
active mining. There are other companies in the region that are presently involved in
development and production. While they are not in close proximity, their data set will provide
some comparative discussion points for Cinco Minas and Gran Cabrera operations.

The details of the Stroud Resources operation were provided earlier in this report. Their
analysis of the Santo Domingo vein system uses the Cinco Minas system as a direct
comparative. This writer examined the Stroud property during the summer of 2006 and has
verified the information in the Stroud reporting. Both sites are on the Zacoalco Structural
Lineament which provides the similarity in placement pulsing. The Gran Cabrera vein system is
offset from Zacoalco and is parallel to the Deseada and Los Tajos vein systems. The Monte de El
Favor mine is located just south of Gran Cabrera and both are within the Western Caldera
complex. Similarities were noted between these two mine sites as well. While Monte de El
Favor is not subject to this report, Admiral Bay Resources Inc. reported in April 2003 that it
would be working in the Monte de El Favor area through an agreement with MSJ. This
apparently has not taken place for reasons unknown to the writer.

Monte de El Favor was the site of an active mine around 1912 and contained a flotation plant.
Development included three levels that extended 140 metres in depth. The underground
workings totaled 2743 metres of mine works and production was estimated to be in the order
of 500,000 tonnes of high-grade silver ore with a significant gold credit. The gold was reported
at 2-3 g/t and the silver in the area of 1 kg/t. The strike length was noted at a minimum of
900 metres with up to 200 metres of zone width. This was a significant high grade deposit that
can be used as a direct comparative in a general sense as to what can be expected with further
development at Cinco Minas and Gran Cabrera. Actual stopes were reported to have measured
up to 12 metres in width and had variable gold values up to 8 g/t. As a side note, during a
field trip to the site in May 2006 the writer collected a piece of waste along one of the mine
dump trails at Favor and had it submitted to GM Assaying Services of Surrey, BC as a quick
check sample. The piece returned results of 8.74 Au ppm with 1468.7 g/t Ag. It has not been
included in the main tables of this report as it cannot be properly referenced as to location
apart from being just a piece of waste dump material.

Rough estimates of several million ounces of gold and silver equivalent were reported in that
camp. However, much more additional work will be required to use the Monte de El Favor data
in a true comparative sense for analysis consistent with NI 43-101 standards. This information
was presented only to advise the reader that other significant ore bodies are in the general
area and have been worked historically in the same manner as Cinco Minas and Gran Cabrera.

Stroud Resources also related in their literature that a series of old mines exist northwest of
Cinco Minas and roughly between there and Santo Domingo. The mines are noted as Los

78
Pilares, La Desconocida, Las Animas, San Luís de Oro, and Mina De Franco. All of these mines
were located, mapped, and sampled during the 2006 field program.

A literature search for comparable target operational types was conducted for the region. The
Cinco Minas site is essentially nearing a preparation stage where small test production could
be considered. The writer felt it was important to compare what is a representative scale of
production in other sites in Jalisco State. One large silver mine that was noted in production
in the literature is the La Castellana Silver Mine, which is located in proximity to Monte Del
Favor. La Castellana was also examined by the writer and many similarities to Cinco Minas in
structure and mineralization were noted.

First Majestic Resource Corp., notes in its literature that it holds 1,384 hectares of ground and
operates a 100 tonne per day (tpd) mill on site. Their properties include the El Orito and La
Fortuna mine sites. They advise that their deposit has a very large and prolific network of veins
and brecciated ore bodies within the controlled ground. Production is continuing from an open
pit operation and average ore grades reaching the mill are 2 g/t Au and 350 g/t Ag. The mill
rates were roughly 50 tpd initially, and were expected to increase to 100 tpd during the spring
of 2006.

Information was also located on a second producer, San Martin Silver Mine. They are owned by
First Silver Reserve Inc. and the mine is located some 250 kilometres north of Cinco Minas. It
has been in continuous production since 1983 and produced 2.1 million ounces of silver in
2004. The mine uses a cut off grade of 6.91 oz/tonne or 215 g/t Ag. They report a measured
and indicated resource of 37,584,600 oz. Ag with an average grade of 263 g/t. With additional
gold/lead credits the grade rises to 297 g/t Ag.

These examples are informative as they provide an information base to Bandera as to what is
an achieved rate and grade in the local region. The Cinco Minas site will provide grade and
production numbers yet to be determined once the mill is established. While others can be
productive in the 250 to 350 g/t Ag grade range, each operation is dependent on production
overall costs. This still has to be determined for Cinco Minas once their mill is in operation.

Mineral Processing and Metallurgical Testing

This current site analysis program did not undertake primary mineral processing or
metallurgical testing. However, some work was carried out in 1998 by MSJ and additional
testing was done in 2003 by Tumi. Nebocat related that the MSJ program involved column
leach tests by Dr. Alejandro Valdiviezo at the University of San Luis Potosi. The bulk composite
samples were collected by Mr. Rosas Haro from channel sample rejects in the El Abra zone. The
sample sizes were small ranging from 41.69 kilograms in Sample I to 9.65 kilograms in Sample
III. The materials were crushed to a ½ inch grain size and tested in six inch columns for up to
48 days in 500 ppm NaCN solution. The samples had the following grades:

79
 Table 13

Sample g/t g/t

Number Gold Silver
1 2.05 180.0

2 0.50 47.0

3 1.40 244.0

Sample I was 48 days and produced yields of roughly 90% recovery for gold, but only 20% for
the silver. Samples II and III were processed for 38 days and equally varied results. Sample II
only recovered 65% gold and 27% silver with Sample III producing 80% gold and 15% silver.
Poor recoveries were attributed to small sample size and weak solutions. The samples should
have been larger with the NaCN up to 1500 ppm to produce proper results.

In the Tumi testing a different approach was used. Materials were taken from the La Trinidad
level and from the El Abra vein at the 384 adit. The testing included both bottle roll and
column leach tests. The testing was conducted at the sample facility and by the same
professor. They were sorted into sub-samples from the 300 kilograms bulk samples with high,
low and average grades. The materials were crushed to -200 mesh size and subjected to bottle
roll tests. The La Trinidad sample averaged 5.4 g/t gold and 188 g/t silver. The El Abra
materials averaged 1.1 g/t gold and 68 g/t silver. The 72 hour bottle roll testing range
produced recoveries of 88.2% for gold and 89% for silver from the El Abra samples. La Trinidad
materials produced results of 99% gold and 97.5% silver.

The column tests used 30 kilograms samples crushed to ½ inch particle sizes and 40 kilograms
samples crushed to a ¼ inch. The ½ inch La Trinidad sample recovered 60.87% of the gold and
28.31% of the silver, with an accessory of 9.70% copper after 43 days. The El Abra ½ inch
results were on par after 36 days with recoveries of 53.91% gold, 32.17% silver and 19.83%
copper. The ¼ inch El Abra tests resulted in 81.83% gold, 41.12% silver and 26.95% copper
after only 22 days. The limited testing suggests that finer grain sizes would result in higher
recovery grades. This is logical as a greater surface area is exposed with finer mesh materials.

In a 1916 report by Andres Villafana, M.S.A., for the Mexican Ministry of Development, he
related that ore from the Monte de El Favor mine also experienced beneficiation problems in
the NaCN process due to high levels of manganese oxide in the very rich average grade ore
(800 g/t Ag). The 3 kg/t ore was not included in the mill process and was shipped directly to
the smelter at Aguascalientes. Before any test production advances, further metallurgical
studies will be conducted on the average bulk grade ore by MSJ consultants that will be used
in the process. Understanding that variations in the grain size, packing arrangements, and
deleterious accessory minerals can affect leach results will assist in long term assessments.

80
 Mineral Resource and Mineral Reserve Estimates

The reporting format for the 43-101 technical brief is very structured and concise. Item 19
stipulates clearly what information is allowed to be contained within it and the format of that
information release. The function of this section is to define clearly what the estimated
mineral resources are within the project area. A mineral resource value can be materially
affected by a host of issues. The main topics contained in Item 19 are, environmental
permitting, legal title, and taxation, socio-economic, marketing, and political issues. The other
sections of this report detail the status of all of the main topics. As a form of summary for this
section, it can be stated that based on all of the available information, none of the listed
common impediments would limit the extraction of the stated mineral resource.

In addition to the above noted common potential resource restrictions, the volume of
resources and percentage of recovery could also be limited by mining, metallurgical, and
general infrastructure condition. To this end, the pre-development work being undertaken by
MSJ on site is greatly increasing the mining and infrastructure situation daily. Work done at
the El Abra mine to begin the process of exposing the Destajos Level adit is now complete. The
overburden covering the bedrock face has been removed and the face is now ready for the
expected 10-20 metre excavation to reach the end of the adit. Once the adit is reached, the
mineralized sections contained within that portion of the mine can easily be examined,
mapped, sampled and tested.

Being able to access this section of the Cinco Minas vein system will allow Bandera to begin
the process of completing three dimensional sections of the El Abra mine. Since the material
will then be seen from the top, south face and underneath, in addition to the recent Tumi drill
information, portions of the mine can be upgraded to measured status. Another added
potential feed stock is the highly mineralized zone encountered at the Destajos level by the
San Diego cross (RMT 1012, 1013, and 1014) Opening the level will provide end on recovery of
this zone with time.

Lower flooded portions of the old mine do not have to be accessed at the outset. However, the
large volumes of water contained in these portions are intended for use as process water in the
preliminary test mill operation.

High grade materials in several areas of the old mine area have been identified as source rocks
for initial production test milling. These areas include the El Abra mine proper, the Minas del
Coral slope north of the San Juan mine, and Cerro Colorado which is 2 kilometres down strike
from the mine. To date, references have only been found to indicate that only 20% of the
known main Cinco Minas vein structure has been tested. The field work begun in 2006 is
presently continuing and more sources of mineralized sections are expected to be located and
tested between the El Abrita, El Kilo, and El Cohete zones.

The MSJ work has also resulted in the construction of new and upgrading of old haul roads for
the ease of future material delivery to the new mill site. The recovery of the old plant footprint

81
from the surrounding vegetation and some backfilling is complete. A metallurgical test mill is
on site and currently being assembled. A variety of mineralized sections can be processed
through the mill to determine the liberation and recovery dynamics of the assorted materials
from surface, underground and waste dump sources. There are no anticipated impediments to
utilizing any of the identified mineralized portions of the vein system in mill testing.

The most recent work was done on the property by Tumi Resources Ltd. in 2003-2005. John
Nebocat, P.Geo, produced three detailed technical briefs as the qualified person for that
company. His reporting and assessment work is certainly the most complete reporting that
exists in the Cinco Minas area. Tumi Resources also hired the firm of Behre Dolbear de Mexico
to assist Nebocat in the final determinations of resource grade estimates for their November
2004 reporting. This author has reviewed and verified the resource estimates contained in the
Tumi reporting. Tumi Resources, Behre Dolbear de Mexico and Nebocat have no affiliation with
Bandera Gold Ltd., which now holds the current option agreement with MSJ.

The following table details the inferred and indicated resource estimates for the main area of
the identified and tested Cinco Minas vein system in proximity to the old mine site. The values
include the area from El Abra to Cerro Colorado. They were included in the original Munroe
report from March 2006 and are still current resource numbers; however, additional work
conducted on the property has added to the overall resources. This additional work is reported
on individually per zone in this section. The total resources have been kept separate for
reporting purposes as the property has only been segmented geologically into definable mine
units. Readers should examine all of the resource tables in this section to obtain an accurate
picture of the updated resource figures.

Table 14
Resource Ag cut off Tonnes Avg. Grade Avg. Grade Ounces Ag Ounces Au
Category (g/t) (millions) Ag (g/t) Au (g/t) (millions) (thousands)
Indicated 30 2.27 171.9 1.22 12.5 89.1
Inferred 30 0.4 137.9 1.07 1.8 13.8

The values were obtained as a result of a cut block analysis for a proposed open pit operation
across the noted area. A 30 g/t Ag stand alone cut off grade was used and the sectioned
polygonal resources blocks did not exceed 25 metres in size.

The noted indicated resource blocks were obtained by setting definition limits of not
exceeding 25 metres from either side of a mineralized intercept along a section line and not
exceeding 25 metres perpendicularly from either side of that line. Where the adjacent
mineralized drill intercepts in a given section did not exceed 55 metres, the extra 5 metres
were included in the indicated resource estimates.

The inferred resource blocks are those that occur between the 25 and 50 metre limits on a
section line from the same mineralized intercept. The indicated and inferred resource blocks
are contiguous and the inferred block will not exceed the 50 metre limit range.

82
The review and re-estimation of the Tumi work was done utilizing the examination of the
method of sections techniques. In that work polygonal resource blocks were extrapolated
midway between adjacent sections with an outside limit of 25 metres from the section. Two
density types were used in the evaluation. The density of 2.6 grams per cubic centimetre was
used for the tonnages of insitu vein and/or rock material. The liberated mineralized rock fill
required the density value of 2.2 grams per cubic centimetre.

The area examination was done by Tumi with 43 drill holes totaling 4,956 metres in 3 drill
programs over 2 years. They also reported on 115.05 metres of examination from 12
underground workings with 835 samples averaging 2 metres in width. In addition to reviewing
and re-estimating the Tumi work, the writer also conducted 20 check assays and conducted an
extensive field examination. This examination involved entering most of the accessible adits in
the San Juan, San Pedro, and El Abra mines as well as all available adits and workings between
El Abra and the southeast flank of Cerro Colorado. It is this complete examination of the
historical and current written work, plus the personal examination of the site that provides the
basis for the March 2006 re-estimation and concurrence with the Nebocat resource estimates
done for Tumi.

The current work performed on the property only serves to add to the resource definition of the
entire Cinco Minas camp. The following tables detail additional resources that have been
identified on the property over and above the estimates noted in table 9.

The current field work done on the property suite has provided surface assays and mapping
detail that has greatly enhanced the knowledge of the geological character of the main shear
elements. Some of the assay results are not yet known but sufficient mapping detail has been
accomplished to provide strong structural indications of depth and grade to the vein systems.
As noted earlier in the report, a series of offset blocks controlled by structural trends have
allowed stock work systems to work their way into some portions of the main vein system.
This is particularly evident at the El Cohete zone which extends from the foot of the El Abrita
Mine to the El Cohete mine. The original drilling by Nebocat intersected upper portions of the
exposed vein and these values are included in the original estimates.

New ground work by Murphy has exposed a much more extensive stock work system in excess
of a 100m in width. Six individual veins were noted in the 80 degree AZ offset shear between
El Cohete and Cerro Colorado. These mineralized veins represent a much larger deposit
potential than was originally noted in the previous mapping activities.

The size of this extended stock work is uniform throughout the pronounced razorback ridge
right up until it is intersected by the El Kilo mine. This ridge development extends for 680
metres in a sub-parallel orientation to the main Cinco Minas vein. Extensive trenches and adit
works were located in the upper reaches along the razor back that confirm the new widths
displayed in the valley bottom.

The overall presence of the stock work and the pervasive nature of the workings with
consistent widths in excess of 20m have resulted in ability to add a significant tonnage to the
backside of the razorback in this zone that was previously not well defined in the drilling done

83
to date. The mineralogy of the exposed vein areas is consistent with that seen in the Cerro
Colorado plateau to the immediate southeast. The grade average developed from the bulk
testing at the plateau provides a suitable foundation for extrapolation into the Cohete zone.
As a result, the bulk testing averages have been applied to an inferred status of mineralized
rock exposed in this better defined vein system. The table below presents the data with
respect to tonnage and grade from the El Cohete zone.

Table 15
Resource Ag cut off Tonnes Avg. Grade Avg. Grade Ounces Ag Ounces Au
Category (g/t) (millions) Ag (g/t) Au (g/t) (millions) (thousands)
Inferred 30 2.5 64.1 1.09 4.63 79.2

The Cerro Colorado block extends from the El Cohete mine offset shear southeast along the
elevated Cerro Colorado ridge in the slight dogleg to the south-southeast that extends 800m in
strike. This area was intensely examined by Eng. Juan Morin for MSJ in June 2005. A series of
sections were drawn that incorporate the RC and DDH drilling and surface channel sampling to
produce a foundation study for an open pit design extending the length of the Cerro Colorado
ridge. The writer has had the opportunity to thoroughly examine and undertake comparative
check samples along the vein system and discuss this with Morin personally. This has allowed
the writer to concur with the Morin estimates. This report provides strip ratios which are
immediately appropriate for the activities on the Cerro Colorado plateau. However, this writer
has chosen to error on the side of caution and reduced the grade values of the gold and silver
to the bulk testing average that was obtained during the plateau construction.

The Morin report provides average grades of 1.32 g/t Au and 100 g/t Ag. These values were
obtained by strict articulation of the numbers from the assorted programs and certainly
provide a reasonable average. During the construction of the Cerro Colorado plateau and the
initial exposing 20 metres of vein a bulldozer was used to both drop the profile and push up
the stockpile materials. Four individual sampling regimes were undertaken during the stockpile
development to provide a good average of the stockpile grade. There were 114 assay samples
were taken from the stockpile as it was developed and the average grades obtained were 1.09
g/t Au with 64.1 g/t Ag. This average is significantly lower than the Morin estimate and is
more likely due to the inclusion of waste rock from the north side of the plateau area that had
to be pushed in with the mineralized vein material to develop the initial profile. As the Cerro
Colorado quarry is further developed higher average grades in keeping with the Morin estimate
are expected.

For the purposes of this report, the lower grade averages are the assign values for the proposed
tonnage in the Marin report. This position is taken to account for any unforeseen issues with
a sudden grade drop or a break in the system that has not been considered. Further work in
this area once the quarry is in operation should be done to further update these grade values.
The following table illustrates the inferred resources from the Cerro Colorado zone.

84
 Table 16
Resource Ag cut off Tonnes Avg. Grade Avg. Grade Ounces Ag Ounces Au
Category (g/t) (millions) Ag (g/t) Au (g/t) (millions) (thousands)
Inferred 30 1.3 64.1 1.09 2.5 42.8

The area to the north of San Juan mine is referred to in this report as the Minas del Coral
slope. It has been referred to earlier in this report as an area of extensive workings and adits
that have been hidden by dense underbrush for decades. The actual date of excavation of
these workings is not known and they are not referenced in the Las Cuevas mapping from 1980
that details the underground workings of the San Juan, San Pedro, and El Troce mines. It is
suspected that these workings were completed in the period after the mine became a co-op in
1930. The workings were developed for only a few metres in most cases as the grades
encountered were only in the average range of 0.2 g/t Au and 150 g/t Ag. While current work
resulted in assays as high as 2.35 g/t Au and 728 g/t Ag. They were considered low grade for
that time and not extended deeper.

In Morin’s June 2005 report he also provided tonnages for the areas northwest of the main El
Abra mine. These estimates included projections down to the San Juan level. The sampling
done on the Coral slope appears to be upper sections of the vein depicted in Morin’s sections
N1100 to N1200 looking N50ºW. These sections drop to the Cinco Minas Level, and show the
offsetting faults that writer also observed during the underground examinations at El Abra.
The surface assays from the Coral slope and the new structural mapping are in basic agreement
with the Morin sections noted above. This allows the writer to accept this portion of the Morin
report and add the block estimates from the Coral slope down to the Cinco Minas level as
shown in the report. These three sections are also linked to the Nebocat drilling and confirm
the MSJ position as to expected tonnage of mineralized rock in this zone. The following table
details the inferred tonnage values for the San Juan/ Coral area.

Table 17
Resource Ag cut off Tonnes Avg. Grade Avg. Grade Ounces Ag Ounces Au
Category (g/t) (millions) Ag (g/t) Au (g/t) (millions) (thousands)
Inferred 30 0.6 97.9 0.56 1.9 10.8

These values meet the required standards for the 43-101 reporting format and represent the
present supportable valuation for the project.

The volumes and grades for the Gran Cabrera area are expected to be substantial based on the
size and significant mining history within the holdings. However, since the past work was done
by authors who cannot be recognized by the 43-101 format as qualified persons; actual
numbers cannot be ascribed to the past work at this time. The work will have to be updated as
exploration continues to ensure the required reporting parameters are followed.

85
 Other Relevant Data and Information

The developments that are underway on site under MSJ direction represent a significant
cultural shift in the perception and maturation of the community of Cinco Minas. The town was
built only to service the old mine sites but that purpose essentially ended around 1930. Since
that time, an entire generation or two has evolved in the community that has only heard the
stories of the “mining days” by their elders. While Cinco Minas is a classic mining town, it
cannot fully appreciate exactly what is about to happen to its population. Some cultural
friction has developed sporadically, but it is insignificant to impede the community acceptance
of the project.

The local residents have a subsistence agricultural group with limited job opportunity and hope
for the future at this time. Since the mine operations have begun, many changes have occurred
that will continue to fundamentally affect every member of the community. At the present
time, it presents itself as a struggling group with the full spectrum of satisfaction and despair
in living conditions and prospects for the future. While no actual obstacles to progressing with
the development are known, these are still very trying times for all due to the paradigm shift
in the economic and social situation of all members.

Bandera management should be very vigilant about properly addressing all aspects of
community issues as the town and surrounding community morphs into a new entity. With the
suggestion of hope and prosperity, come new evils that can seriously impact negatively on the
resident base. As Bandera and MSJ will be seen as the root cause to any change in the region
with the development, they both share the burden of success. Social problems always occur in
“boom town” situations unless strong control measures are instituted at the outset. The
companies will have to take a very active role in all aspects of nurturing the community into
its “new clothes”.

It is an odd but very well documented issue, that mankind cannot accept change quickly. Even
once jobs and financial ability becomes available, the transition must be orderly to ensure long
term success. The economic model of the entire region will now change and outsiders will
begin to appear to attempt to join in the rising tide. This may result in conflict issues and the
companies must ensure that law and order prevails at all times. This includes ensuring an
orderly development of surrounding lands and services. Models of development from the
Canadian wild west are not unfamiliar in this situation.

The community has shown its acceptance of the mining concept to be re-born in its lands. The
companies must ensure that they are able to fill the role of a leader by supplying necessary
community facets such as a proper mine rescue program, regular company medical services
with a traveling doctor and a local resident nurse. They must also show leadership to assist
the community to develop infrastructure as needed and to plan orderly expansion as the
community grows. This type of thinking is also critical for local and regional environmental
controls.

86
MSJ has completed environmental assessment work, and this is regularly updated and assessed.
The companies will have to demonstrate its concern for the environment through actions as
well as words. When the program is in place at the outset, all parties involved in the work can
understand and appreciate what the goals and objectives are for the success of the project.
Many years of strong growth and development can be envisioned for this project and the
company will be judged by what is instituted internally at the outset.

Interpretation and Conclusions

The writer feels that the project met its objectives in determining the validity of the existing
reporting and the assumptions of grade and tonnage as originally reported by Tumi and
confirmed in the 2006 field season. The data is reliable and has been validated to the extent it
can be. There is no uncertainty with respect to drill hole locations or dips due to the excellent
capping methods used in the program. The laboratories used in the assay work are highly
regarded by the industry and are ISO certified. The processes used to check assay results and
cross reference the results of others were acceptable.

Recommendations

The writer recommends that close attention is made to the issues surrounding site
development and social issues to ensure a long term operation is possible without problems.
This is a key element for the continued success of the project. With respect to the mining and
engineering aspects of a recommended program, more time is required from the engineering
side of the operation to bring the project into production. This will allow the determination of
the rate of and location of development for the assorted mineralized zones. The zones include
the old waste dumps and newly exposed mineralized areas.

Key aspects to developing the potential ore area include:

 Beginning the process of open pitting the razor back area block between El Abrita and
el Cohete.
 Continuing the process of open pitting the Cerro Colorado block to the exposed
truncation at the extreme SE flank.
 Expanding and re-developing the major adit systems on the Coral flank
 Opening the Destajos level to allow for underground exploration and development
 Opening the waste dumps and hand culling materials with higher assay value for direct
feed to the test mill. The lower grade materials should be transported to the heap leach
areas.

The original Phase I budget was designed to address the major factors relating to developing a
bulk test facility, opening new exposures in and around the mine, and beginning the
geological studies required to advance the spatial information component of the project. While
ground clearing activities are largely complete, the high and low level color air photo program

87
will not be completed until the spring of 2007 due to foliage cover. The prior placement of
highly sensitive GPS targets on well marked target X’s in key location was imperative. The X’s
were laid out and whitewashed. However, they should be cleared of all vegetation and re-
painted prior to the spring flight. These targets will provide the range line and elevation
survey data for future digital orthographic mapping with 2 metre contours. The resulting air
photo controls will greatly assist in field mapping programs and subsequent GIS computer
modeling efforts. This program will also allow the work to be accurately tied to the existing
government GPS control points and thereby delineating the concession boundaries.

The GIS program will be contracted out to eventually develop a highly detailed 3D block model
of the entire target area. However, the immediate work will concentrate on the Cinco Minas
portion of the project. The 3D models will allow for the plotting of structural data, open pit
mineralization features, and drill data. A highly detailed model will assist in attempting to
predict the expected mineralization characteristics and possible grades as the project
advances. Geophysical testing would then be undertaken once ground control is established.
An airborne magnetic survey is being considered prior to a ground based IP program across
identified and mapped structural targets. The geophysical programs are best suited at the later
stages of Phase I or in Phase II.

Bandera is seeking to define parameters for possibly mining and producing from a large bulk
minable, open pit, precious metal deposit at Cinco Minas and later explore the Gran Cabrera
deposits. At the present time, both the El Abra and Cerro Colorado zones at Cinco Minas
appear to have the best potential to host at least one such readily minable precious metal
deposit.

An open pit deposit on the Cinco Minas vein system at El Abra is projected to be feasibly
minable to at least 100 metres depth. This would be in proximity to the historic Cinco Minas
Main Haulage Level which is also the location of the present water table. There are at least
several hundred thousand tonnes of apparently economically minable zones with high gold and
silver mineralization in sight at El Abra, tested by drilling and underground sampling on all
four sides.

A two-phase mining exploration/development program was originally proposed. The first phase
would have three parts including the following:

(1) Mining Testing: test pits for mining characteristics, geotechnical studies, and taking bulk
samples from existing, outcropping ore grade mineralization at Cerro Colorado, El Abra, and
other areas mapped and sampled by previous operators including Las Cuevas, (then Noranda’s
major mining affiliate in Mexico) and most recently Tumi Resources; and
(2) Pilot Metallurgical Testing Facility: establishing a pilot testing plant and processing ore
grade mineralization in a batch processing plant to further determine leaching characteristics
of the different types of silver and gold mineralization found in each area; and
(3) Verification of Mineral Resources and Testing new ores: Comparison of the characteristics
and grades of mineralization encountered in the new, small test open pits or underground
faces opened for bulk testing by the Phase I program with drill hole results reported by Tumi
Resources is a primary focus.

88
Pilot Bulk Testing Facility:

The sampling program done by Las Cuevas was largely repeated by Tumi and drilling has
identified both bonanza grade and more average grades which are almost certainly economic
to mine, particularly at today’s precious metals prices.

The production results reported by the Federal Government of Mexico from 1922 to 1928
indicate a clean ore with little or no cyanicides. Therefore, it has always been important to
bulk test different areas of lower grade mineralization to determine the optimum crushing size,
leaching characteristics such as cyanide consumption and leaching times in order to project
these metallurgical characteristics to any larger heap leaching and mill operations.

Further work involves taking samples from all new mine faces and waste dump materials at the
old mill site that are to be used for pilot test purposes. Crushing will be done using a small
jaw crusher and may include a cone crusher to reduce the size of the quartz-silver-gold vein
material in order to test leach times and recoveries at different crush sizes.

All samples should be analyzed by fire-assay with an atomic absorption finish with highly
anomalous samples rerun using gravimetric techniques. A quality control program consisting
of blanks and standards along with repetition of selected samples on a random basis will be in
place for all assays done.

Contingent upon the results from the first phase program, a second phase can be budgeted
taking into consideration the metallurgical characteristics of silver and gold mineralization
exhibiting different stages of oxidation and different types or styles of mineralization in order
to program and stage mining cycles to further test and process near surface or outcropping
mineralization. Later work will allow estimates of recovery rates and leaching times for new
ore grade mineralization defined in the future either by expansion of the test pits or by
starting new pits in areas already identified by Tumi’s drilling program.

The same site will be used in the future for testing of new zones mined from different areas of
the planned open pit operation, prior to adding them to the feed for either a heap leach any
other process identified by the testing to have merit in advancing the project. This project
allows for continuous evaluation of ore types as the property is developed.

With approximately 2 to 3 million tonnes of mineralization outcropping, it is considered

important to determine as early as possible the rock stability for the footwall of the Cinco
Minas vein and the general structure of the vein system both on strike and at depth. Small
test pits will allow visual inspection, mapping and sampling of the vein both horizontally and
vertically. This is the intention of the drill blast program above the El Abra clamshell with a
track drill.

The verification of drill holes results directly from the opening of the small open pits dug to
test and demonstrates the general nature and the continuity or discontinuity of ore grade
mineralization. Bulk sampling will also allow correction of drill indicated grades in areas that

89
have only had drill hole data and that must be integrated in the future into a more complete
mine and mill design program.

Gran Cabrera will be held on a care and maintenance basis until the Phase I pilot testing is
finished and a Phase II budget is prepared for full scale production at Cinco Minas. Even at
that stage, it is probable that Gran Cabrera will have to wait for a year to two before receiving
the attention it merits. A Phase 1 Part 2 budget is attached in Appendix 5

References

Au and Ag Heap and dump Leaching Practice with Panel discussion, Water Chemistry of Heap
Leaching Operations, Solution Mining Committee, Mining and Exploration Division, Society of
Mining Engineers of AIME, Edited by J. Brent Hiskey, October 1983

Ausburn, Kent. Summary Report on the Geology and Exploration Programs Gran Cabrera Silver-
Gold Project, July, 1997

Bandera Gold Ltd. News Releases

Bear Creek Mining Company, Data Collection by G. Barnett, March 1981

Cinco Minas, Jalisco, by Ed Wisser, 1930

Economics and Practice of Heap Leaching in Gold Mining, Far North Queensland Branch, The
Australian Institute of Mining and Metallurgy, August 1988

Geological Summary Report on the Veta Norte- El Nayar Property, Nayarit, Mexico, for Hilton
Resources Limited, by Victor A. Jaramillo, P.Geo, March 27, 2005

Hilton Petroleum Limited, Report on the Geology and Mineral Deposits of the El Nayar Project,
Ixtlan del Rio, Nayarit, Mexico, by John Nebocat, P.Eng., December 18, 2003

Hostotipaquillo, Preliminary Recommendations, by A. Swarthout, July, 1981

Introduction to Evaluation, Design and Operation of Precious Metal Heap Leach Projects,
Society of Mining Engineers, Colorado, Edited by Dirk J.A. van Zyl, Ian P.G. Hutchison and Jean
E. Kiel, 1988

Mexgold Resources Ltd., report on Geosermin S.A., Cabrera Project and Berlin Rosario Project,
by G.S. Barnett, May 29, 1998

Mineral Resource Estimates, Cinco Minas Mining Exploration Project, El Abra Area, by: Eng.
Juan Morin, Feb., 2005

90
Minino Review of the Central and Southeast Region of the State of Jalisco by Andres Villafana,
M.S.A., Department of Graphic Arts Shops of the Ministry of Development, 1916

Monte Del Favor Mine by Humberto Martos, 1964

Preliminary Report of the El Favor and Molola Mines by Hollander, 1920

Preliminary Ore Reserve Calculations for Cerro Colorado, Prof. Guillermo Cuellar for MSJ, 2000

Property Description of the Cinco Minas Area in the Hostotipaquillo Mining District, Jalisco,
Mexico, by Graig Byington, June 1997

Progress Report on the Cinco Minas Property, Jalisco, Mexico, by S.G. Zahony, April 26, 1982

Preliminary Report on the Eagle – Cinco Mina Property, La Aguila, Jalisco, Mexico, by P.S.
Friesen, October 4, 1968

Reconocimiento Geologico- Minero del Area de Cinco Minas, Jalisco;

by: Consejo De Recursos Naturales No Renovables, Boletin 58, Table 1

Rosas Haro, for MSJ, 1997, etal

Silver-Gold Project- Hostotipaquillo, “Hosto”, Jalisco, Mexico, by Ing. Anejandro Briones and
Garcia e Ing. Aarón Hernández Muñoz, 2005

Stroud Resources PowerPoint Presentation, 2004

The Molola Mines, Miscellaneous document, Journal Articles, 1911-1912

Tumi Resources Ltd, news releases

Tumi Resources Limited, Progress Report on the Exploration Program at the Cinco Minas Silver-
Gold Project, Hostotipaquillo, Jalisco, Mexico, By John Nebocat, P.Eng,, July 4, 2003

Tumi Resources Limited, Summary Report on the Geology and Exploration Programs, Cinco
Minas Silver-Gold Project, Hostotipaquillo, Jalisco, Mexico, By John Nebocat, P.Eng., August
18, 2004

Tumi Resources Limited, Mineral Resource Estimate Report, Cinco Minas Silver-Gold Project,
Hostotipaquillo, Jalisco, Mexico, by John Nebocat, P.Eng., October 29, 2004
exploration

91
Additional Requirements for Technical Reports on Development Properties and Production
Properties

The exploration program being considered by Bandera Gold and MSJ is aggressive but focused.
MSJ has completed the clearing and refit operations on site to fast track the development of
the test mill and leach operations. This work is well underway and significant progress has
been made to date. Several steel tanks have been installed and the coarse aggregate, grizzly
shoot and jaw mill crusher have been installed. The old mill site is next to the town and easily
serviced.

Highly mineralized grade materials are readily available for mining in the area of Cerro
Colorado, El Abra and any located dumps and waste piles on the property. Once the Destajos
adit is opened underground exploration can also begin. The concept is to develop a solid
working knowledge on how best to process the materials by working on small tonnages on site
from a variety of locations. This will allow for proper mineralogical assessments to be made
with respect to recovery from assorted rock types and grade values. The mined materials will be
test processed while an aggressive exploration program is being done at the same time. This
will ensure real time data is obtained and a workable plan for milling and leaching can be
developed to handle any grade situation.

Initial mining will be open pit but some material may be taken from underground in the
Destajos level and area depending on encountered grades and working conditions. The writer is
not aware of any existing plans to market the materials or if any contracts are in place other
than the agreement between Bandera and MSJ. MSJ has an environmental permit covering the
exploitation process. However, continual upgrades to the environmental aspect will be
undertaken.

There are no long range time frames for actual production to be fully developed. Delays in
assembling the plant were reported to be the result of weather issues at the original mine site.
Road washouts and other conditions made delivery of the parts impossible; however, much of
the plant is now on the Cinco Minas site and in the process of being assembled.

After the initial data and results of the pilot testing program are available, senior mining
engineers and metallurgists must review the data and draw up plans for any larger operations.
The exploration potential is very open. There is a significant amount of ground within the
concessions that still require primary exploration and geophysics to be understood. There is no
known impediment to beginning a long term viable mining operation starting at Cinco Minas
and moving cautiously towards the Gran Cabrera concessions overtime.

92
 Certificate

I, Richard G.R. Munroe, residing at 1408 Madrona Place, Coquitlam, British Columbia, declare
that:

1. I am a geologist and have been employed in mineral exploration and earth science
studies with industry and government since 1977. I have held the position of President
of Sutherland Minerals Ltd., which is a private mining development corporation in
Manitoba since 1995. I am a director of Wind River Resources Ltd., which is a publicly
traded corporation in British Columbia. In addition, I am the President of Munroe
Geological Services Ltd., a private company registered in BC. I am also the Chief
Executive Officer of Augustus Mining Corp, a private company registered in BC. There is
no linkage in any manner between the affairs of Bandera Gold Ltd., Sutherland Minerals
Ltd., Wind River Resources Ltd., or Augustus Mining Corp.

2. I obtained a Bachelors degree in Earth Science from the University of Manitoba in

1977. I was installed as a Fellow of the Geological Association of Canada in 1984.

3. I am actively registered as a Professional Geoscientist with both the Association of

Professional Engineers and Geosciences of British Columbia and Manitoba. (2000)

4. I visited the Cinco Minas, Cabrera and Monte Del Favor mine areas between November 5,
2005 and October 1, 2006 on many occasions.

5. I am not an employee or insider of the issuer.

6. I have read the definition of “qualified person” set out in National Instrument 43-101
(“NI 43-101”) and certify that by reason of my education, affiliation with a professional
association (as defined in NI 43-101) and past relevant work experience, I fulfill the
requirements to be a "qualified person” for the purposes of NI 43-101. As a Qualified
Person, I have read the Instrument and the Technical Report has been prepared in
compliance with the instrument.

7. I am responsible for the preparation of the technical report titled Technical Brief on the
Cinco Minas Mine Property and the Gran Cabrera Mine Properties of October 31st, 2006.

93
 Appendix 1

Tailings Assay Program at Cinco Minas

May/June 2006

During May and June 2006 a program was undertaken by Kevin Murphy P.Geo, to perform 43-
101 compliant sampling of the large tailings debris piles located in and around the old mill
site at Cinco Minas. The program of sampling was begun once the old tailings materials were
moved off of the old foundation portions of the original mill. When the mill closed around
1930, several thousand tonnes of tailings and crushed feedstock material that ended up
covering the old foundations once the mill was sold and moved. Lower grade ores were being
processed normally and this material was left or abandoned in the wooden tanks which either
fell apart after weathering or were taken apart. This resulted in irregular mounds of material
that were subsequently covered by the Mexican vegetative growth.

The refurbishing of the old mill site to provide the working envelope for the new mill complex
required that the tailings were loaded by backhoe and trucked off site to a staging area
nearby. The piles of material were essential described as a fine grained buff brown semi-
lithified powder. However, during the piling and subsequent restacking process some
contamination made its way into the powders. The contamination consists mostly of gravel
sized particles of local mineral types with some cobble and semi- boulder size pieces of tuff,
old concrete, andesitic and rhyolitic particles. The contaminant can easily be screened off
when the tailings are ready for re-processing either in the new test mill facility presently under
construction or in a future larger mill facility.

The tailings were collected and piled from a rather large area in excess of an acre and were
mixed in the process during the excavation, transportation and stockpiling process. Any
opportunity to understand the quasi-lithological characteristics of the tailings in situ was not
available due to the dense overgrowth of vegetation and the irregular foundation outlines.
However, it is obvious that due to the size of the tailings remains, married with the old
production records, a significant amount of material was put through the old mill during its
production life. The historical records indicate that 1,083,890 tonnes of ore was milled
between 1922 and 1928. The average grade was 3.17 g/t Au and 476 g/t Ag, with spikes up to
3.84 g/t Au and 604 g/t Ag depending on the year of production and the level of the mine
being excavated. The years 1924 to 1925 appear to have produced the highest average head
grades which would suggest that these were mid mine (Cinco Minas level) and lower level
production cycles.

Even with the 1920’s era technology, the mill was able to produce recoveries of the gold and
silver that are reported as averaging 88.32% of the gold and 90.79% of the silver for the
period from 1922 to 1928.. Fluctuations in the mill feed would result in variations in the plant
capacity to recover the metals and in some instances the recovery process would dip to the low
80 percent range. With the 205 samples done to date, the average tailings assay results are
contained in table 1.

95
 Table 1
Sample Au Ag Cu Pb Zn
unit g/mt ppm ppm ppm ppm
Average 0.98 87.4 507 1,532 1,842

The samples were taken using controlled standardized methods with a 2 metre spacing along
the crests of the newly placed piles. All samples were taken by Murphy and his work crew,
sealed and sent to IPL labs in Vancouver for assay. IPL is an ISO 9001:2000 Certified Company
with a solid reputation within the mining community.

It is also interesting to note that there is a large fluctuation of assay grades per sample with
the ranges listed in table 2.

Table 2
Sample Au Ag Cu Pb Zn
Unit g/mt ppm ppm ppm ppm
High value 2.40 402.6 4,705 3156 4653
Low Value 0.50 34.0 176 770 843

These fluctuations are understandable due to the changes in the historical production figures
and the mixing of the tailings material during the stockpile process. The reader must also
understand that these are samples of materials that have been mixed in the agitation tanks
and in the leaching circuit of the mill as well as the thickeners and conditioning tanks. Re-
processing of these materials will only require screening and introduction to the new mill
process.

Another interesting aspect to the historical nature of these tailings was the discovery of a
pocket of feedstock materials found between the concrete base and tailings cover. This small
pocket was identified by one of the workers as important and was collected as a sample in
February 2006. The sample was turned over to the writer by the worker as an interesting
artifact of the historical process and part of the sample was submitted to IPL for assay. The
sample was noted as RM-06-CM5 and the results are important to this discussion. The
remaining portion of the sample will be submitted for petrographic study, evaluation and
comparison to the samples that will be recovered in the pending underground program.

The results shown in table 3, potentially details a sample of grade of some feedstock from that
time period. The actual year of production of the feedstock sample cannot be determined.

Table 3
Sample Au Ag Cu Pb Zn
Unit g/mt ppm ppm ppm ppm
result 2.94 172.6 362 2303 3496

96
Further examination and evaluation of the new mill test feedstock was undertaken from the
waste piles fronting the old adits in July. Preliminary work done on the assay values of these
mine dumps also suggest a good source of materials exists in these areas. The results of the
sampling program waste program are reported in Appendix 1.

It is important for the reader to understand the significance of the continuity of the assay
results for the tailings when put into the historical perspective. The mill liberation mechanisms
of the assorted rock host mineralogy are presently under examination. This work will greatly
assist in understanding relative amenability of mineralized rock feed sources in the future and
how they may perform in the new mill systems. This will allow for a more uniform production
grade feed for the mill and optimize the recovery flow streams of all metal by-products if these
are determined to be economically recoverable.

All historical reporting has only been done for gold and silver values and there is no
information with respect to valuations placed on the copper, lead or zinc produced in the old
mill. The assay values certainly indicate the presence of a significant mineralization of these
metals and historically, the values were simply lost to the tailings ponds. These metals may
now become part of the valuation consideration as the company moves forward. No value has
been placed on these additional metal types in the previous reporting models. However, the
presence of potentially significant high grade mineralization such as copper was evident in the
late 2005/early 2006 work after new encrustations of malachite and azurite was noted forming
on the walls of the San Juan adit. It is these types of observations that allow the company to
consider a wider mineralogical suite in the go forward plans. Certainly the old mill feed sample
(RM-06-CM5) shows that these metals were present in the original workings and the tailings
assay averages show that much of it was simply put out at the end of the circuit.

97
Appendix 2

98
 CINCO MINAS - DUMPS
NAME AREA m2 APPROX. SP. GR. TONNES TONNES - 10% AVERAGE AVERAGE
HEIGHT DILUTION GRADE GRADE
(MTS.) GOLD (g/t) SILVER (g/t)
EL AGUILA 1 (Dump) 978.50 2.00 1.60 1,566 1,723 0.26 52.30
El AGUILA 2 (Dump) 1,179.00 1.50 1.60 1,415 1,557 0.01 8.07
EL TROCE (Dump) 11,027.00 2.00 1.60 17,643 19,407 0.51 118.74
SAN PEDRO (Dump) 1,109.50 2.00 1.60 1,775 1,953 3.37 383.13
EL ABRA (Dump) 378.00 1.50 1.60 454 499 4.36 186.12
EL ABRA (Backfill) 90.00 3.00 1.60 216 238 6.19 247.37
DESTAJOS (Dump) 956.60 5.00 1.60 3,826 4,209 3.01 313.24
EL ABRITA(El Kilo) 2,058.00 3.00 1.60 4,939 5,433 0.77 120.22
TOTAL 31,834 35,019

NOTE: Dilution of 10% was added for recovery and losses or spillage

Group of Dumps Picked for Selective Mining:

SAN PEDRO (Dump) 1,109.50 2.00 1.60 1,775 1,953 3.37 383.13
EL ABRA (Dump) 378.00 1.50 1.60 454 499 4.36 186.12
EL ABRA (Backfill) 90.00 3.00 1.60 216 238 6.19 247.37
DESTAJOS (Dump) 956.60 5.00 1.60 3,826 4,209 3.01 313.24

NAME TONNES Au g/t Ag g/t Grade Au X Grade Ag X

Tonnes Tonnes
SAN PEDRO (Dump) 1,775 3.37 383.13 5,981.75 680,055.75
EL ABRA (Dump) 454 4.36 186.12 1,979.44 84,498.48
EL ABRA (Backfill) 216 6.19 247.37 1,337.04 53,431.92
DESTAJOS (Dump) 3,826 3.01 313.24 11,516.26 1,198,456.24
Total Est´d tonnes: 6,055 Average Grades: 3.22 324.20
Estimated Average Grades Troy Oz´s: 0.104 10.42
Estimated total ounces recovered 566.75 56,783.79
Value of Metal Recovered at $ 540 gold & $ 9.90 silver: $306,045 $562,160
Grand Total: $868,205
 SAMPLES RESULT OF DUPMS
CINCO MINAS PROJECT

Dump Name Sample Name Au Ag Au Ag

g/mt ppm g/mt ppm

El Aguila 1 MA071205-01 0.10 38.0

MA071205-02 0.48 76.1
MA071205-03 0.19 42.8
Averaging 0.26 52.30
El Troce MT081205-01 0.21 34.6
MT081205-02 0.43 82.3
MT081205-03 0.54 177.9
MT081205-04 0.51 95.8
MT081205-05 0.84 203.1
Averaging 0.51 118.74
El Aguila 2 TA 161205-01 0.01 10.8
TA 161205-02 0.01 6.6
TA 161205-03 0.01 6.8
Averaging 0.01 8.07
La Abrita TAB141205-01 0.38 45.2
TAB141205-02 1.08 128.2
TAB141205-03 0.34 93.3
TAB141205-04 0.30 1.1
TAB141205-05 0.61 154.0
TAB141205-06 1.02 126.8
TAB141205-07 0.54 123.5
TAB141205-07A 1.08 197.7
TAB141205-08 1.20 128.0
TAB141205-09 0.99 123.5
TAB141205-10 0.44 86.7
TAB141205-11 0.42 69.7
TAB141205-11A 0.40 76.8
TAB141205-12 0.77 93.3
TAB141205-13 1.04 114.0
TAB141205-14 0.76 146.7
TAB141205-15 0.48 110.1
TAB141205-16 0.77 127.8
TAB141205-17 0.15 43.5
TAB141205-18 1.40 327.1
TAB141205-19 0.45 125.6
TAB161205-20 1.16 170.0
TAB161205-21 0.66 128.0
TAB161205-22 0.69 64.0
TAB161205-23 0.91 134.0
TAB161205-24 0.69 118.0
TAB161205-25 0.86 58.0
TAB161205-26 1.23 202.0
TAB161205-27 1.52 196.0
TAB161205-28 0.86 94.0
Averaging 0.77 120.22
Destajos TD091205-01 1.75 274.3
TD091205-02 2.60 389.4
TD091205-03 15.80 591.5
TD091205-04 1.44 209.3
TD0912050-5 2.10 201.2
TD091205-06 2.68 283.8
TD091205-07 3.00 420.7
TD091205-08 2.10 263.1
TD111205-09 1.15 182.8
TD111205-10 2.01 313.5
TD111205-11 2.86 281.7
TD111205-12 2.25 251.9
TD111205-13 5.75 694.4
TD121205-14 1.35 235.3
TD121205-15 2.08 203.7
TD121205-16 1.42 184.4
TD121205-17 2.85 523.8
TD121205-18 2.03 207.5
TD121205-19 2.05 239.3
Averaging 3.01 313.24
El Abra TEA081205-01 13.40 409.8
TEA081205-02 1.07 142.2
TEA081205-03 5.85 216.0
TEA081205-04 1.24 109.1
TEA081205-05 0.24 53.5
Averaging 4.36 186.12
El Abra (Backfill) REA151205-06 2.80 206.1
REA151205-07 9.57 288.6
Averaging 6.19 247.35
San Pedro TSP081205-01 3.95 360.5
TSP081205-02 4.04 479.9
TSP081205-03 2.12 309.0
Averaging 3.37 383.13
 Appendix 3

Heap Leach Pad Soil Assay Samples

Assay Au Au Au Ag ppm Ag Ag Cu Pb Zn
Sample ppb oz/st g/mt oz/st g/mt ppm ppm ppm
1 <0.01 0.5
2 <0.01 0.5
3 <0.01 0.5
4 <0.01 0.5
5 <0.01 0.5
6 <0.01 0.5
7 <0.01 0.5
8 <0.01 0.5
9 <0.01 0.5
10 <0.01 0.5
11 <0.01 0.5
12 <0.01 0.5
13 <0.01 0.5
14 <0.01 0.5
15 <0.01 0.5
16 <0.01 0.5
17 <0.01 0.5
19 <0.01 0.5
20 <0.01 0.5
21 <0.01 0.5

Munroe Field Exploration Samples

Assay Au Au Au Ag ppm Ag Ag Cu Pb Zn
Sample ppb oz/st g/mt oz/st g/mt ppm ppm ppm
CC01 0.034 230.6 9.43 404 101 305
CC02 0.070 243.4 8.10 449 177 238
CC03 0.033 97.0 2.50 623 102 119
CC04 0.007 44.1 1.29 278 102 258
CC05 0.043 146.1 3.60 293 106 74
CC06 0.032 34.3 1.15 93 81 45
CC07 0.041 186.0 5.00 1355 164 153
CC08 0.026 97.4 2.48 325 117 337
CC09 0.038 178.8 4.84 97 100 121
CC10 <0.005 3.5 0.20 104 238 97
CC11 <0.005 4.6 0.21 33 27 55
CC12 <0.005 5.0 0.20 10 16 20
CC13 0.008 29.1 0.89 17 20 19
CC14 <0.005 22.6 0.84 18 31 18
CC15 0.011 42.1 1.15 37 84 46
CC16 <0.005 17.5 0.56 24 43 80
CC17 <0.005 28.5 0.74 15 40 84
CC18 <0.005 12.4 0.44 29 122 105
CC19 <0.005 0.8 0.03 5 7 11
CC20 <0.005 2.9 0.09 10 25 23
CC21 0.011 13.7 0.40 13 25 26
CC22 0.007 20.1 0.57 15 31 41
CC23 0.006 10.5 0.40 27 65 89
CC24 0.006 4.8 0.17 134 207 687

109
 CC25 0.015 57.4 1.37 29 44 145
CC26 0.106 99.8 2.79 58 62 214
CC27 0.005 2.4 0.07 94 79 34
CC28 0.008 3.4 0.12 143 88 42
CC29 <0.005 3.5 0.12 136 94 78
CC30 <0.005 0.03
CC31 <0.005 0.11
CC32 <0.005 0.11
CC33 <0.005 0.03
CC34 <0.005 0.42
CC35 0.022 1.30
CC36 0.012 1.36
CC37 0.028 1.58
CC38 0.023 2.85
CC39 0.141 10.68
CC40 0.105 9.97
CC41 0.007 0.79
CC42 0.018 3.64
CC43 0.044 0.90
CC44 0.006 0.82
CC45 <0.005 0.32
CC46 <0.005 0.90
CC47 <0.005 0.17
CC48 0.028 0.49
CC49 0.021 0.33
CC50 0.043 0.14
CC51 <0.005 0.25
CC52 <0.005 0.02
CC53 <0.005 0.05

Cerro Colorado Plateau Assay Samples

Assay Au Au Au Ag ppm Ag Ag Cu Pb Zn
Sample ppb oz/st g/mt oz/st g/mt ppm ppm ppm
0001 0.032 115.6 2.77 158 110 110
0002 0.029 118.9 2.86 130 109 45
0003 0.012 65.0 1.78 40 49 69
0004 0.043 116.4 2.82 72 63 62
0005 0.046 127.6 3.19 54 94 74
0006 0.018 76.8 2.14 39 62 45
0007 0.035 128.2 3.45 139 64 69
0008 0.052 162.9 4.14 80 91 82
0009 0.029 85.0 2.29 61 101 105
0010 0.007 37.4 0.97 57 53 109
0011 0.009 44.7 1.10 53 50 121
0012 <0.005 4.3 0.10 76 96 94
0013 0.020 56.5 1.32 88 66 115
0014 0.021 55.5 1.29 107 82 142
0015 0.027 115.7 2.45 96 69 95
0016 0.011 47.2 1.32 135 119 447
0017 0.012 77.5 2.03 136 101 255
0018 0.020 48.2 1.39 87 60 84
0019 0.005 20.8 0.47 119 72 134
0020 0.008 22.8 0.54 97 52 61
0021 0.020 55.0 1.33 121 80 76

110
 0022 0.008 33.1 0.91 40 47 41
0023 0.005 16.3 0.52 27 30 34
0024 0.008 38.2 1.08 43 54 67
0025 0.016 67.3 1.67 38 51 46
0026 0.014 69.3 1.95 44 66 67
0027 0.021 79.0 2.04 31 67 32
0028 0.098 174.8 5.04 179 11 98
0029 0.030 86.0 2.45 45 74 80
0030 0.059 90.3 2.52 49 86 74
0031 0.014 36.6 1.20 31 50 68
0032 0.133 115.9 3.45 60 98 106
0033 0.554 121.5 3.70 147 67 114
0034 0.164 89.1 5.07 53 67 80
0035 0.134 173.0 4.87 264 118 125
0036 0.027 98.0 2.99 86 74 92
0037 0.013 76.8 2.37 139 103 391
0038 <0.005 28.5 0.75 90 77 311
0039 0.013 41.7 0.95 50 51 105
0040 0.834 230.0 6.54 81 74 72
0041 0.013 23.0 0.79 138 85 523
0042 0.060 163.5 4.78 210 162 171
0043 0.009 59.3 1.65 86 57 66
0044 0.027 85.9 2.60 135 98 134
0045 0.008 56.0 1.64 192 101 205
0046 0.005 30.4 0.93 288 113 240
0047 0.022 96.7 2.79 285 144 147
0048 0.035 129.5 3.48 342 150 94
0049 0.005 16.8 0.53 171 71 105
0050 0.073 153.6 3.98 144 142 91
0051 0.008 28.1 0.82 66 46 27
0052 0.011 55.7 1.62 56 93 103
0053 0.019 52.8 1.49 139 61 146
0054 0.016 88.4 2.31 170 81 57
CCfeed600 0.024 2.13
CCfeed601 0.025 5.99
CCfeed602 0.005 1.43
CCfeed603 0.022 3.00
CCfeed604 0.017 3.55
CCfeed605 0.021 3.30
CCfeed606 0.029 3.00
CCfeed607 0.006 0.92
CCfeed608 0.008 1.56
CCfeed609 0.006 0.69
CCfeed610 0.017 1.83
CCfeed611 0.007 1.16
CCfeed612 0.022 2.92
CCfeed613 0.033 6.81
CCfeed614 0.031 2.06
CCfeed615 <0.005 0.40
CCfeed616 <0.005 0.54
CCfeed617 0.015 2.08
CCfeed618 0.033 2.25
CCfeed619 0.058 2.95
CCfeed620 0.006 0.38
CCfeed621 <0.005 0.21
CCfeed622 0.005 0.41

111
CCfeed623 0.012 1.68
CCfeed624 0.011 1.11
CCfeed625 <0.005 0.27
CCfeed626 0.007 0.85
CCfeed627 0.005 0.30
CCfeed628 <0.005 0.49
CCfeed629 0.015 0.93
CCfeed630 0.005 0.91
CCfeed631 0.032 1.77
CCfeed632 0.024 1.82
CCfeed633 0.008 0.49
CCfeed634 0.008 1.74
CCfeed635 0.031 3.27
CCfeed636 0.011 1.42
CCfeed637 0.022 2.21
CCfeed638 0.011 1.21
CCfeed639 0.010 2.95
CCfeed640 <0.005 0.58
CCfeed641 0.015 4.34
CCfeed642 0.025 2.38
CCfeed643 0.006 1.16
CCfeed644 0.011 1.26
CCfeed645 0.008 0.67
CCfeed646 <0.005 0.67
CCfeed647 0.010 2.11
CCfeed648 <0.005 0.59
CCfeed649 0.006 2.45
CCfeed650 0.010 0.77
CCfeed651 <0.005 0.53
CCfeed652 0.010 0.78
CCfeed653 0.005 0.22
CCfeed654 0.008 0.38
CCfeed655 0.013 1.15
CCfeed656 0.012 0.47
CCfeed657 0.007 0.41
CCfeed658 0.019 1.29
CCfeed659 0.006 0.22
CCfeed660 <0.005 0.89
Average 0.0323 79.390 1.8742 108.59 79.851 120.48
2 7 6 3 9 2

112
 Cinco Minas Mine Dump Assay Samples
El Kilo, El Abrita, El Trouce, Destajos, San Pedro, El Abra

Assay Au Au Au Ag ppm Ag Ag Cu Pb Zn
Sample ppb oz/st g/mt oz/st g/mt ppm ppm ppm
ElKiloGPS142 3.10 325.0 300.9 45 161 112
ElKiloApron 3.00 350.0 367.0 210 1065 787
Ek1 0.012 1.95
Ek2 0.023 4.75
Ek3 0.016 1.79
Ek4 0.023 3.93
ElAbrita1A 0.53 46.0 67.6 403 578 952
ElAbrita1B 1.48 152.0 165.5 478 405 690
ElAbrita1C 1.24 72.0 76.5 215 229 692
LA1 0.011 1.17
LA2 0.030 1.13
LA3 0.006 1.01
LA4 0.018 2.99
LA5 0.027 8.49
LA6 0.008 4.43
EA1 0.050 2.30
EA2 0.019 4.57
EA3 0.700 11.57
EA4 0.006 0.92
EA5 0.009 1.51
ET01 0.010 1.38
ET02 <0.005 <0.01
ET03 0.015 3.61
ET04 0.011 3.51
ET05 0.021 7.14
D1 0.058 7.41
D2 0.027 5.13
D3 0.073 10.00
D4 0.202 8.21
D5 0.070 8.96
D6 0.068 4.98
D7 0.054 7.06
D8 0.054 6.07
D9 0.181 31.77
D10 0.041 5.77
D11 0.082 8.20
D12 0.105 5.31
D13 0.031 2.88
D14 0.039 4.27
D15 0.032 4.35
D16 0.082 8.62
D17 0.058 4.26
D18 0.040 5.87
D19 0.121 11.66
SP01 0.036 6.33
SP02 0.056 9.18
SP03 0.038 7.91

113
 Top of El Abra plus in Crater Assay Samples

Assay Au Au Au Ag ppm Ag Ag Cu Pb Zn
Sample ppb oz/st g/mt oz/st g/mt ppm ppm ppm
JDP01 0.020 177.4 5.15 983 504 1177
JDP02 <0.005 183.2 5.81 12022 4293 9274
JDP03 <0.005 215.4 6.42 34431 7449 17534
JDP04 <0.005 10.2 0.44 1464 1491 4208
LL01 <0.005 4.6 0.14 425 139 481
LL02 <0.005 2.4 0.07 65 64 236
LL03 <0.005 2.0 0.06 53 45 190
GPS 52 Trail <0.005 7.0 0.23 769 187 935
GPS 60 Trail <0.005 2.2 0.05 7 37 42
GPS 62 Trail 0.027 30.0 0.87 193 412 617
GPS 63 Trail 0.069 30.0 0.87 678 265 317
GPS 64 Trail 0.006 194.8 5.22 733 4247 508
GPS 89 Breecia <0.005 0.4 0.01 8 30 215
RM06 P1 <0.005 15.4 0.45 57 86 34
RM06 P2 0.044 340.3 10.07 135 326 92
RM06 P3 <0.005 2.0 0.06 59 65 212
RM06 P4 0.010 19.2 0.59 12 145 12
RM06 P5 <0.005 1.2 0.05 5 10 4
GPS 26 <0.005 34.5 1.00 11 101 5
GPS 46 0.005 28.9 0.93 7 63 6
Franco 1 <0.005 4.6 0.20 22 18 43
San Luis 1 0.008 8.0 0.31 78 144 12
LA 01 0.066 400.0 11.91 1185 77 129
LA 02 0.046 192.0 4.84 44 105 23

El Abra Underground Assay Samples

Assay Au Au Au Ag ppm Ag Ag Cu Pb Zn
Sample ppb oz/st g/mt oz/st g/mt ppm ppm ppm
RM 1000 0.29 44.0 66 94 189
RM 1001 0.01 2.6 14 28 159
RM 1002 0.01 2.3 1 4 169
RM 1003 <0.01 0.4 1 8 355
RM 1004 0.01 0.4 <1 8 164
RM 1005 0.01 0.4 1 15 180
RM 1006 <0.01 1.2 23 42 290
RM 1007 0.01 2.2 5 22 110
RM 1008 0.12 12.2 96 62 101
RM 1009 0.03 7.6 52 74 190
RM 1010 0.14 11.8 181 139 398
RM 1011 0.01 1.5 10 44 464
RMT 1012 6.20 295.0 684.2 118 431 379
RMT 1013 1.76 176.0 204.2 82 414 287
RMT 1014 4.04 320.0 485.6 177 457 669
RMT 1020 0.07 5.1 11.5 59 80 191

114
 El Abra Southwest Slope Assay Samples

Assay Au Au Au Ag ppm Ag Ag Cu Pb Zn
Sample ppb oz/st g/mt oz/st g/mt ppm ppm ppm
RM06GPS166 0.58 128.0 12 29 26
RM06GPS168 0.24 12.0 21 69 25
RM06GPS169 0.41 0.8 25 73 131
RM06GPS170 0.95 31.0 9 77 13
RM06GPS172 0.06 8.2 11 97 75
RM06GPS194 0.02 8.4 39 8 6
RM06GPS196 0.01 5.1 3 6 3
RM06GPS197 <0.01 3.0 4 556 4
RM06GPS198 <0.01 1.6 3 23 24
RM06GPS200 0.11 29.0 6 79 5
RM06GPS202 1.65 176.0 16 39 12

Cerro Colorado Southeast Area

Assay Au Au Au Ag ppm Ag Ag Cu Pb Zn
Sample ppb oz/st g/mt oz/st g/mt ppm ppm ppm
RMGPS223 0.05 4.3 14 <2 26
RMGPS225 0.92 11.2 162 46 31
RMGPS228 0.40 19.8 12 7 16
RMGPS229 0.76 15.9 20 31 17
RMGPS230 0.98 29.0 13 12 10
RMGPS231 0.60 14.5 8 2 5
RMGPS232 1.26 6.7 10 <2 53
Side stream 0.01 0.9 86 19 102
River sand 0.04 2.0 28 29 83
RB01 0.09 2.0 17 23 7
RB02 0.07 4.4 21 14 75
RB03 <0.01 0.2 10 12 74
RB04 <0.01 0.2 19 5 79
RB05 <0.01 0.6 2 7 8
RB06 0.03 3.2 14 19 41
RB07 0.02 2.5 28 34 5
RB gouge 0.02 1.0 10 115 7
KA01 <0.005 0.9 0.02 14 5 26
KA02 <0.005 1.4 0.04 21 6 16
KA03 <0.005 1.0 0.04 2 <2 3
KA04 <0.005 0.5 0.02 6 <2 14
KA05 <0.005 1.0 0.01 5 <2 4
KA06 0.016 193.7 4.57 227 1205 279
*KA03 also produced 41.74% CaO (26.91% Ca)

115
 El Abra Underground Assay Samples (Trinidad Level)

Assay Au Au Au Ag ppm Ag Ag Cu Pb Zn
Sample ppb oz/st g/mt oz/st g/mt ppm ppm ppm
RMT001 0.05 13.5 15.4 1333 107 545
RMT002 0.25 16.5 17.8 217 596 1773
RMT003 0.01 0.7 <1 6 132
RMT004 0.32 38.0 302 745 2317
RMT005 0.03 12.5 52 115 74
RMT006 0.59 325.0 346.6 1334 530 760
RMT007 1.30 89.0 67 202 440

Northwest of El Abra - Minas Del Coral Slope

Assay Au Au Au Ag ppm Ag Ag Cu Pb Zn
Sample ppb oz/st g/mt oz/st g/mt ppm ppm ppm
GPS 17 Trail 0.023 0.79 247.5 6.34 745 1651 1959
Trail 1 0.028 0.96 208.2 5.61 185 784 857
Trail 2 0.007 0.24 65.7 2.00 88 524 91
Trail 3 0.023 0.79 279.5 7.42 194 1237 111
Trail 4 0.007 0.24 132.9 3.75 827 1134 530
Trail 5 0.008 0.27 157.7 4.80 275 588 92
Del Coral 6 0.62 230.0 211.0 184 1238 787
Del Coral 7 0.05 2.4 3.1 81 119 141
Del Coral 8 0.22 43.0 44.2 11 91 80
Del Coral 9 0.03 6.5 9.0 30 72 40
Del Coral 10 1.11 169.0 165.7 298 612 86
Del Coral 11 0.53 121.0 124.7 171 599 56
Del Coral 12 0.06 55.0 54.5 556 889 206
Del Coral 13 2.35 153.0 142.6 103 481 61
Del Coral 14 0.14 54.0 46.6 266 1449 203
Del Coral 15 0.61 41.0 25.0 83 340 216
Del Coral 16 0.63 133.0 132.9 188 610 404
Del Coral 17 0.04 520.0 728.4 62 367 75
Del Coral 18 0.22 55.0 65.2 872 3369 548
Del Coral 19 0.40 6.6 10.1 270 1557 162
Del Coral 21 0.22 106.0 100.3 685 1537 777
Del Coral 22 1.26 220.0 196.5 66 259 177
Del Coral 23 0.01 1.1 1.1 32 330 1208
Del Coral 24 0.02 19.5 19.9 138 215 113
Del Coral 25 0.13 24.0 21.4 1149 4830 1428
Del Coral 26 0.15 44.0 43.6 128 1158 218
Del Coral 27 0.01 9.8 11.6 66 481 631
Del Coral 28 0.12 58.0 56.6 337 1081 698
Del Coral 29 0.39 93.0 90.5 164 609 195
Del Coral 30 0.04 27.0 23.8 136 690 180
Del Coral 31 0.25 114.0 108.9 273 870 151
Del Coral 32 0.05 59.0 55.8 71 896 166
4M Right 0.02 2.6 68 111 938
21.5M <0.01 2.4 432 247 9467
15metres 0.01 4.0 131 1259 1988
6metres 0.02 3.5 41 84 402
5metres 0.62 181.0 264 727 102
39 A 0.16 33.5 79 327 84
3533A 1.10 34.5 24 98 27

116
 Coral 100 0.20 21.5 16 391 28
Coral 101 0.05 9.1 37 135 30
Coral 102 0.14 3.4 15 27 30
Scorpion 1 0.32 54.5 328 786 465
Scorpion 2 0.15 15.6 18 56 91

117
 Appendix 4

Murphy Field Exploration Samples

Sample Name Au Ag Ag Cu Pb Zn
g/mt g/mt ppm ppm ppm ppm
KGM-0001 <0.01 0.6 <1 <2 16
KGM-0002 <0.01 0.6 1 <2 11
KGM-0003 <0.01 0.7 <1 <2 10
KGM-0004 <0.01 0.6 <1 <2 17
KGM-0005 <0.01 0.7 <1 <2 15
KGM-0006 1.16 17.5 11 26 25
KGM-0007 0.16 52.5 15 91 113
KGM-0008 0.04 4.7 21 77 254
KGM-0009 0.01 2.3 17 207 152
KGM-0010 0.09 24.0 7 29 57
KGM-0011 0.06 4.9 22 142 81
KGM-0012 0.38 20.4 18 84 117
KGM-0013 0.10 11.3 37 134 137
KGM-0014 0.11 3.6 24 53 111
KGM-0015 0.12 10.7 87 88 123
KGM-0016 0.20 11.9 14 14 49
KGM-0017 0.37 10.8 3 16 13
KGM-0018 0.06 5.3 6 99 40
KGM-0019 0.21 -- 84.0 184 412 315
KGM-0020 0.47 119.2 118.0 209 827 248
KGM-0021 0.14 -- 77.0 83 697 157
KGM-0022 0.13 -- 19.6 176 328 266
KGM-0023 0.01 -- 5.3 371 125 200
KGM-0024 0.44 184.4 160.0 31 40 194
KGM-0025 0.05 -- 13.0 32 101 220
KGM-0026 0.21 -- 84.0 56 101 170
KGM-0027 0.03 -- 25.0 54 154 275
KGM-0028 0.16 140.2 152.0 89 231 484
KGM-0029 0.23 115.7 107.0 86 317 209
KGM-0030 1.91 677.9 325.0 62 123 163
KGM-0031 0.05 -- 73.0 51 121 188
KGM-0032 0.06 110.3 102.0 100 200 154
KGM-0033 0.31 -- 62.0 104 896 61
KGM-0034 0.46 -- 79.0 105 189 269
KGM-0035 2.30 285.0 265.0 55 195 264
KGM-0036 2.12 162.7 195.0 115 457 780
KGM-0037 0.32 -- 52.0 23 191 71
KGM-0038 0.76 111.6 110.0 74 80 247
KGM-0039 0.73 -- 68.0 20 119 112
KGM-0040 0.64 125.1 128.0 12 60 76
KGM-0041 0.92 -- 5.8 14 21 53
KGM-0042 0.11 -- 7.6 11 28 89
KGM-0043 0.16 -- 15.8 9 22 34
KGM-0044 0.49 -- 42.0 98 227 420

118
KGM-0045 0.53 368.8 225.0 176 598 467
KGM-0046 0.03 -- 12.2 24 116 52
KGM-0047 0.16 -- 31.0 166 320 635
KGM-0048 0.20 -- 10.2 103 191 406
KGM-0049 0.49 -- 28.0 64 183 227
KGM-0050 0.13 -- 20.9 91 269 441
KGM-0051 0.13 -- 33.0 75 226 411
KGM-0052 0.42 -- 38.0 86 317 465
KGM-0053 0.52 -- 89.0 86 605 179
KGM-0054 0.04 -- 4.0 2 56 648
KGM-0055 0.92 393.8 310.0 130 459 409
KGM-0056 0.02 -- 28.0 4 93 31
KGM-0057 0.06 -- 16.0 116 270 688
KGM-0058 0.03 -- 36.0 67 453 600
KGM-0059 0.85 327.5 275.0 121 814 1001
KGM-0060 0.08 -- 10.5 85 630 487
KGM-0061 0.26 -- 44.0 72 274 256
KGM-0062 0.12 -- 8.7 106 76 247
KGM-0063 0.05 -- 4.9 7 11 58
KGM-0064 0.01 -- 1.6 10 26 15
KGM-0065 0.65 -- 74.0 183 851 439
KGM-0066 0.04 -- 7.3 87 166 427
KGM-0067 6.72 117.1 123.0 49 137 132
KGM-0068 0.74 -- 40.0 43 61 106
KGM-0069 2.18 154.5 153.0 544 1600 1349
KGM-0070 0.87 -- 64.0 170 109 176
KGM-0071 1.94 -- 70.0 42 131 150
KGM-0072 1.15 -- 37.0 42 74 42
KGM-0073 0.80 -- 54.0 38 222 69
KGM-0074 0.77 -- 83.0 37 105 155
KGM-0075 0.16 -- 11.0 19 30 8
KGM-0076 0.05 -- 9.6 68 114 192
KGM-0077 0.69 135.3 114.0 269 1273 1205
KGM-0078 2.35 108.9 106.0 922 225 335
KGM-0079 0.06 13.2 15 61 617
KGM-0080 0.07 11.4 26 191 122
KGM-0081 0.13 12.6 171 276 205
KGM-0082 0.05 8.2 40 189 137
KGM-0083 0.10 12.6 36 154 104
KGM-0084 0.23 19.5 648 909 693
KGM-0085 0.04 6.6 15 76 32
KGM-0086 0.02 0.9 14 46 110
KGM-0087 0.22 44.0 23 182 60
KGM-0088 0.01 0.6 21 22 155
KGM-0089 0.43 39.0 179 470 608
KGM-0090 0.50 144.0 151 787 2071
KGM-0091 0.81 114.0 96 202 225
KGM-0092 0.03 1.0 22 32 306
KGM-0093 0.02 3.7 188 72 218
KGM-0094 0.39 94.2 190 154 605

119
KGM-0095 0.22 0.22 37.0 292 341 706
KGM-0096 4.49 4.49 240.0 153 197 115
KGM-0097 0.43 0.43 72.0 58 144 159
KGM-0098 0.59 0.59 116.0 110 270 272
KGM-0099 0.53 0.53 45.0 92 135 189
KGM-0100 0.30 0.30 29.0 11 105 75
KGM-101 0.09 13.6 26 189 130
KGM-102 0.47 78.0 23 108 58
KGM-103 0.29 28.0 13 66 84
KGM-104 0.22 79.0 67 159 192
KGM-105 0.22 31.0 82 174 205
KGM-106 0.14 7.4 33 241 126
KGM-107 0.75 69.0 220 590 636
KGM-108 0.41 26.0 49 221 272
KGM-109 0.65 55.0 210 524 517
KGM-110 0.41 53.0 160 524 254
KGM-111 0.17 33.0 195 1064 190
KGM-112 0.17 76.0 349 1284 881
KGM-113 0.14 50.0 463 1935 1033
KGM-114 0.44 32.0 102 364 331
KGM-115 0.08 23.0 721 2005 1601
KGM-116 1.05 115.0 93 902 175
KGM-117 0.99 74.0 138 1347 266
KGM-117A 0.27 14.3 402 5212 1018
KGM-118 0.16 15.5 43 1859 40
KGM-119 0.25 3.0 12 296 16
KGM-120 0.08 30.0 371 897 519
KGM-121 0.09 38.0 40 124 216
KGM-122 0.01 4.1 32 83 151
KGM-123 0.02 2.4 35 72 287
KGM-124 0.06 0.6 3 31 165
KGM-126 0.01 0.8 4 51 139
KGM-127 0.01 0.4 3 <2 5
KGM-128 0.01 0.7 5 16 141
KGM-129 0.14 4.8 44 291 146
KGM-130 0.34 18.8 26 61 64
KGM-131 0.02 1.9 17 64 11
KGM-132 0.01 1.0 3 15 5
KGM-133 0.01 1.0 <1 35 8
KGM-134 0.01 2.1 2 32 3
KGM-135 0.01 2.4 1 18 4
KGM-136 0.01 1.1 <1 5 2
KGM-137 0.01 1.7 1 60 1
KGM-138 1.33 48.0 77 314 19
KGM-139 0.20 14.2 23 543 11
KGM-140 0.13 295.0 182 308 29
KGM-141 0.09 120.0 879 1314 63
KGM-142 0.23 26.0 111 401 14
KGM-143 1.40 31.0 58 132 13
KGM-144 0.21 11.6 41 65 12

120
 Appendix 5

Phase I, Part 2 Budget to Develop Bulk Test Facility & Conduct Geological Studies

Unit Unit Price (C$) Quantity Total

Environmental Studies
Report & Permitting Study 79,600 1 79,600

Geotechnical Studies
Aerial Photography Contract 30,700 1 30,700
GPS Mapping Contract 22,800 1 22,800
GIS Plotting & Modeling Contract 28,500 1 28,500

Camp Costs
Camp Room (Monthly) 1,370 6 8,220
Food & Consumables Man (Monthly) 200 180 36,000
Tools & Safety Items Unit 17,000 1 17,000

Mining Professional Services

Mine Engineer Per Month 5,000 6 30,000
Senior Geologist Per Diem 200 150 30,000
Junior Geologist Per Diem 145 150 21,750

Labour
Crew Chief Per Diem 100 150 15,000
Miners Man (Monthly) 570 180 102,600

Precipitation Plant and Test Heap Leach Facility

Test Plant Construction Unit 575,000 1 575,000

Underground Mine Exploration Work Unit (mts) 225 340 76,500

Machinery
Jaw or Cone Crusher (H.L.) Unit 85,300 1 85,300

Road and Pad Construction

Bulldozer Month 19,500 6 117,000
Excavator (Wheeled Backhoe) Month 4,000 6 24,000
Drilling & Blasting Contract 60,000 1 60,000

Transportation & Shipping

4X4 Pickup (3) Purchased Month 2,400 6 14,400
Gas & Oil Month 1,370 6 8,220

Travel & Lodging

Airline Trip 5,700 2 11,400
Hotel & Meals Trip 5,700 2 11,400

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Engineering and Geological Studies
Conduct study and issue report Contract 47,700 1 47,700

Sub Total (C$) 1,453,090

Contingencies 10% 145,309

Total (C$) $1,598,399

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