Exploration

Chile

The Cerro Bayo District covers about 27,800 hectares (68,708 acres) of contiguous concessions located south of Coyhaique, the capital of Region XI in southern Chile, and due west of the town of Chile Chico. In addition, we control about 25,400 hectares (62.763 acres) of other concessions in Region XI.

During 2007, the Company continued its exploration and development program in the district with its efforts concentrated in the Cerro Bayo and Laguna Verde zones in the east and west sections of the Company’s land holdings. In 2007, we spent approximately $2.9 million on exploration and $2.2 million on reserve development for new gold and silver mineralization and completed nearly 62,200 meters (204,000 feet) of core drilling

In the second half of 2007, five new silver-and gold-bearing veins were discovered approximately one kilometer east of the ore processing facilities. These veins are named Dagny, Fabiola, Coyita, Yasna and Dalila. Drilling commenced on the new discoveries late in the second quarter and reached a total of 14,800 meters (48,536 feet) by the end of the year.

The Company plans to continue its extensive exploration and mine development programs in the district in 2008 with a budget of $4.9 million for this work.

Silver and gold mineralization is hosted at Cerro Bayo in epithermal quartz veins and veinlets and lesser amounts of stockworks and breccias within generally sub-horizontal volcanic rocks of the Jurassic-aged Ibanez Formation. Veins and veinlets occur in sub-parallel clusters largely trending north-northwest and dipping steeply to the west and east. The main ore minerals of silver and gold are silver sulfosalt minerals, argentite and electrum (a naturally-occurring gold and silver alloy). Numerous epithermal veins, located within the Cerro Bayo district, offer exploration and development opportunities. To date, we have discovered over 100 veins in the district.

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