Ann: Riqueza Project, Peru - NE Area Drilling Update, page-42

Fellow shareholders I was not planning on doing a post on this ASX release as it is really no more than a market update on progress of an ongoing exploration program, focusing on the first of 14 Tier 1 targets at Riqueza. However, there has been some negativity and incorrect statements (Santos8) about what the ASX release means, so I thought that I had better try and put some context around this release for everyone. I know that I must sound like a "stuck gramophone record" when I continually try and tell everyone that exploration is a long game. In the case of what is essentially greenfields exploration (where there has been none beforehand), that is particularly true. Exploration is a high risk and high reward game and as Sunguy says most aptly, if you don't have conviction ... then maybe you should not invest in exploration stocks but stick to producers with cash flow security but clearly not the same potential for massive capital gains potential.

So let's just carefully look at what has been said and what it all means. In doing this I would also note that today is not a good day generally on the market with stocks generally down and no doubt that general negative sentiment, coupled with some shareholders perception that this ASX release is bad news has magnified the share price decline.

First, every hole drilled to date has pervasive and widespread indications of a mineralised porphyry system with:

1. telltale alteration assemblages (generally reflective of the outer parts of a porphyry where the heat is less intense and where the alteration style reflecting this);
2. apparent zoning of the observed alteration with more intense argillic alteration "inside" (deeper) than the more widespread outer halo of propylitic alteration;
3. widespread brecciation and faulting indicative of the sort of structural "disruption" associated with the emplacement of intrusive bodies and needed to enhance the movement of hydrothermal fluids throughout the system;
4. presence of sulphides, both pyrite (predominantly at this stage) and chalcopyrite as well as other base metals (lead and zinc) and silver
5. potential zonation of metals; and
6. the presence of porphyry dykes/intrusions which could be part of a larger intrusion at depth.

So!! Lots of smoke but no fire yet. It is clear we have a porphyry system here. The question will be how deep is it, what is the likely size and grade of any mineralisation and if it is there is it economic. Too soon to even be able to comment on any of those matters, but given the general characteristics and style of porphyries, you have to at least test it. It is also important to remember that porphyries are generally monsters and can be quite a few kilometres in size. In most cases, it takes multiple holes to even begin to understand the dimensions and geometry of the beast, let alone be able to hone in on the target area.

Now let's logically and carefully think this through. We are now drilling a deeper hole. This is clearly because the holes to date are now suggesting the porphyry source is at depth and not to the east, as initially though. Would we be drilling this hole if we did not have expectations that it would encounter something?? With no change from $US 250,000 for a 1000m hole I can tell you that the answer to that question is an emphatic no. Are we sure that we will find the hoped for potassic and copper mineralised core with this hole? Again, no guarantees but if we did not think that there was something there, we would not waste time and money on this hole. remember we have multiple other stand out drill targets at Riqueza which this money could be spent on and I can assure you that we are acutely mindful of the need to be prudent and frugal with what is shareholders money. Still, there is a need to balance risk and reward and, based on the results to date, to not drill a deeper hole would be a really poor decision.

So we continue exploring and testing the hypothesis that we have a porphyry here and that the zone of interest is deeper. We will know soon enough. regardless of the outcome on this specific drill program, shareholders need to keep in mind that we have another 13 Tier 1 targets here at Riqueza (not to mention the exciting new ground that we recently secured to the south of Alteration Ridge where there are a couple of other targets) as well as the stand out Australian projects where there are also multiple Tier 1 targets and where we will be drilling (in the East Tennant) this year. So I remain both positive and enthusiastic with everything we have and are doing. As always, if you have any questions you can always contact me directly.