SANDSPIT GOLD PROSPECT

This report summarizes all the previous exploration work on the Sandspit Gold property and recommends a program of further geological mapping, geophysical surveys and contingent diamond drilling to further evaluate the ground. It also documents the results of a short geological mapping, prospecting and trail building program conducted in July 1997.

The Sandspit Gold property has the potential for the discovery of a large, bulk mineable epithermal gold deposit similar to Misty Mountain Gold Ltd.’s “Speconga Deposit” which is 40 km (25 miles) north. Misty Mountain has announced plans to complete a bankable feasibility open pit study in 1998 aimed at putting the ore zone into production. Recent estimates include the ore body contains 7-8 million tons averaging 0.1 ounces gold per ton or 28 million tons 0.061 ounces gold per ton. The Specogna Deposit hosts a geological resource of over three million ounces of gold contained in 59 million tonnes with an average grade of 1.66g/tonne Au. It is still open to the north west and to depth with excellent potential to develop additional reserves.

The Sandspit Gold property is located along the Sandspit Fault, a major crustal structure that is an important ore-control at the Specogna Deposit. Drilling to date at the Sandspit Gold property has encountered grades of 0.096 oz/ton over 9.31 metres with selected samples assaying up to 0.43 oz/ton within a 700 metre by 400 metre target area defined by arsenic soil geochemistry and magnetic anomalies. Gold mineralization appears to be deposited in an epithermal environment and further drilling and trenching is required to determine its’ extent. A rock float sample was discovered in 1988 (Hepp, 1988) along Copper Bay Creek which assayed 0.268 oz/ton Au, 0.34% As, 0.15% Sb and 5.9 ppm Ag, which is located 3 km south of the Baxter zone.

Over $300,000 has been spent to date on the Sandspit Gold Property on detail geochemical, geological, geophysical, trenching and limited diamond drilling.

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LOCATION AND ACCESS

General Location Map

The Sandspit Gold property is located along the east coast of Moresby Island, immediately south of Sandspit. Gold showings on Baxter Creek, near the centre of the claim group, are at 53^o12’N, 131^o47’W (103G/4W).

The property straddles the Sandspit Fault, a crustal structure of regional extent striking approximately 325° Az. A pronounced scarp 75 metres (250 ft) high marks the fault line. East of the fault, topography is flat to the sea and overburden is likely deep (+100m); west of the fault, low rounded hills reach a maximum elevation of 120 metres (400 ft). Second growth hemlock and cedar and dense undergrowth of salal and alder blanket the property.

The claim area is outside of any area currently being considered for preservation as a national or provincial park. The proposed South Moresby Park is 50 km (30 miles) to the south.

A good gravel road from Sandspit along the base of the Sandspit Fault scarp provides ready access onto the claims by driving 6.3 km south of the golf course. The Baxter Creek turnoff is 100m past the Sandspit Rod & Gun Club rifle range. A local bulldozer tote trail leads to the main interest area on Baxter Creek. Overland walking is sometimes difficult due to dense undergrowth of alder and salal and thick second growth hemlock and cedar trees.

Sandspit, with a population of 600, is a distribution centre and staging point for the Queen Charlotte Islands. It has scheduled daily jet service from Vancouver, good hotel/motel accommodations, heavy equipment contractors and adequate service and supply outlets. Water and Hydro supplied electric power are locally available.

Topographic Map

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CLAIMS STATUS

Claim Map

The Sandspit Gold property is held by eight two-post claims as shown in Table 1 and Figure 3.

TABLE I: CLAIM DATA
CLAIM NAME	TENURE NUMBER	UNITS	LOCATION DATE	PRESENT EXPIRY DATE	RECORDED OWNER
Donna-Lynne 1	354541	1	March 27, 1997	March 27, 2002	J.T. Shearer
Donna-Lynne 2	354542	1	March 27, 1997	March 27, 2002	J.T. Shearer
Donna-Lynne 3	354537	1	March 27, 1997	March 27, 2002	S. E. Angus
Donna-Lynne 4	354538	1	March 27, 1997	March 27, 2002	S. E. Angus
Donna-Lynne 5	354539	1	March 27, 1997	March 27, 2002	S. E. Angus
Donna-Lynne 6	354540	1	March 27, 1997	March 27, 2002	S. E. Angus
Donna-Lynne 7	354543	1	March 27, 1997	March 27, 2002	J.T. Shearer
Donna-Lynne 8	354544	1	March 27, 1997	March 27, 2002	J.T. Shearer
	Total	8

Mineral rights are acquired in British Columbia via the Mineral Act and regulations. Assessment work is required each year in the amount of $100 per year per unit for the first three years and $200 per unit over 3 years.

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HISTORY

The area covered by the Sandspit gold property was first staked in 1969 as the Airport and IXL Claim Groups by Falconbridge Nickel Mines Ltd. (Band and McDougall, 1970) and Texas Gulf Sulfur Company (Newell and Delancy, 1970). These properties covered a prominent limonite stain zone extending along the trace of the Sandspit Fault, a small Tertiary quartz diorite plug intruding Jurassic volcanic rocks and high copper/molybdenum sediment values originating in creeks cutting the fault line scarp. The companies were exploring for Cu-Mo deposits and conducted grid sampling which delineated a long, narrow, copper soil anomaly of 70-220 ppm extending intermittently for over 2 miles along the Sandspit Fault trace (Assessments Reports 2343, 2777). The Airport and IXL claims were allowed to lapse with no significant follow-up work being done.

R.E. Mickle staked the area as the SNOW claims in January 1979 and subsequently discovered three separate mineral occurrences including barite veins, a gold bearing outcrop assaying greater than 0.2 ounces/ton, and an area of Cu-Zn-Pb carbonate veinlets in volcanic rocks. The gold was found by trenching on a highly anomalous soil sample (400 ppb Au) in an area of no surface outcrop. (Mickle, 1979)

Falconbridge Nickel optioned the claims and conducted further trenching in the Baxter Creek area followed up by drilling three short holes in 1980. Gold was shown to occur in structural zones within lapilli tuff and tuff breccia of the Yakoun Formation in association with locally intense silicification. At one trench location a braided fault in bedrock also cuts the clay overburden. The fault gouge assayed 9.21 oz/ton gold. These results were interpreted by Burns (1980) to indicate a young, post glacial age for the mineralized fault system at Baxter Creek, probably representing a reactivated splay of the main Sandspit Fault which is 100 metres east.

Grab and selected rock samples from Falconbridge trenches by McDougall showed a direct correlation between gold and arsenic as shown in Table 2.

TABLE II: Au/As ASSAY CORRELATION OF GRAB AND SELECTED SAMPLES BY J.J. McDOUGALL (FALCONBRIDGE) FEB. 1980
NUMBER	GOLD (OZ/TON)	ARSENIC (PPM)
13337	0.003	70
13338	0.002	360
13339	0.003	110
13340	0.042	>1000
13341	0.42	>1000
13344	0.43	>1000
13345	0.002	55
13346	0.005	180
13347	0.003	32
13348	0.072	>1000
13349	0.034	>1000
13350	0.21 (clay)	>1000

The three drill holes were unsuccessful, totaling only 17 metres (54 feet) with core recovery of 4-20 percent in faulted zones and 45-75 percent in the volcanics. No significant gold values were obtained.

In 1981, Falconbridge conducted detailed soil sampling on three small grids (Downing, 1981). Samples were at 25 metre intervals along lines 50 metres apart. On the Baxter Creek Gold Grid 295 samples were analyzed for Au, As, and Hg. Four backhoe trenches were dug in the vicinity of anomalous As and Hg values in soil pits. Chip samples of outcrops and in trenches returned low gold values, the best being 0.072 oz/ton over 3 metres, 0.011 oz/ton over 3 metres and 0.015 oz/ton over 1 metre in Trench 1. Falconbridge concluded that anomalous gold, arsenic and mercury geochemical values in soil samples possibly reflect weakly mineralized fault zones and subsequently dropped their option on the property.

The SNOW property was optioned by Ventures West Minerals Ltd. in the spring of 1981 who conducted a comprehensive grid soil sample program for arsenic as a pathfinder for gold (Christie and Richards, 1982). 568 soil samples were obtained using a 42 inch auger at 50 metre intervals along lines 400 metres apart. In many areas, the ubiquitous organic overburden was too thick to be penetrated by the auger. Arsenic greater than 30 ppm was obtained in 22 samples over an area 700m by 500m encompassing the Falconbridge trenches south of Baxter Creek. The anomaly is considerably stronger and larger than that obtained by Falconbridge in the same area which is probably a result of getting deeper samples by auger methods.

A second smaller arsenic anomaly occurs 3 km to the north of Baxter Creek and is labeled “Lornex H Grid”. The anomaly is not well defined because of widely spaced soil lines.

Marjorem Minerals Inc., a successor company to Ventures West, conducted a small soil and ground magnetic survey over the Baxter Creek soil anomaly in 1983 (Christie and Howell, 1984 and a 145 km airborne magnetic and electromagnetic survey in 1985 (Pezzott and White 1984).

The airborne survey was done at a flight line spacing of 200 metres. According to Pezzott, “The magnetic data contains a very strong, well defined magnetic high which strikes northwest-southeast across the centre of the property. The zone is approximately 1.5 km wide and roughly outlined by the 56,700 gamma contour. The anomaly reaches highs of 57,400 gammas at its’ central core. Background magnetic intensities to the northeast lie below 56,300 gammas whereas to the southwest they are slightly higher, around 56,600”. Pezzott interprets that the magnetic high indicates the regional extent of a Cretaceous pluton, however this interpretation conflict with mapping which shows large areas of Yakoun volcanics within the magnetic high.

The magnetic pattern appears to be effected by structure. the northeastern flank of the main anomaly “is delineated by a very sharp magnetic gradient which directly correlates with the geologically defined Sandspit Fault on the SNOW 3 claim. Discontinuities are observed along the gradient which strongly suggest that the major Sandspit Fault has itself been displaced by more recent cross faulting .... The southwestern flank of this trend does not exhibit the extreme gradients observed to the north but may be fault controlled as well.” (Pezzott, 1984).

The Baxter Creek gold area is within the magnetic high defined by the airborne survey. At Baxter Creek, a cross fault at 070^o, coincident with mineralized fracture systems, offsets the magnetic anomaly right laterally about 200 metres. The soil anomaly is near the intersection of the Baxter Creek cross fault with the Sandspit Fault.

The northern soil anomaly is located at the intersection of a N-S fault interpreted from the magnetic data, with the Sandspit Fault system.

Airborne EM data did not reveal any distinctive anomalies. This would indicate that mineralization is generally disseminated rather than massive and not conducive to forming highly conductive zones.

For the Marjorem ground magnetic survey of the Baxter Creek area, a small grid totaling 3.5 km was installed with lines 500 metres in length at 100 metre spacing. “A local magnetic low area was found adjacent to known mineralization. The low may be part of a zone of lower N-S trending magnetic response suggested by the survey. The limited extent of the survey does not allow this to be conclusively demonstrated” (Christie and Howell, 1984). The north-south magnetic low trend may reflect a fault zone or hydrothermal altered rock.

Auger soil sampling was done along three lines at 25 metre intervals. Gold values in the soils ranged up to 2670 ppb. Soil anomalies in arsenic and gold were obtained on all lines over several consecutive samples. Arsenic values are strongly anomalous and more consistent from sample to sample than gold due to greater mobility in the natural environment. Line to line correlation is impossible because of the wide spacing between lines. The gold/arsenic soil anomaly is 100 metres wide at least 400 metres long, and is open to the south. On line 3+00W, anomalous gold/arsenic soil correlates well with a local magnetic high.

The Marjorem survey demonstrated the utility of detailed magnetic and soil surveys in the Baxter Creek area but the survey itself was not detailed enough to provide definitive interpretations of the major mineral trends. The widespread occurrence of arsenic/gold in the soil encompassing the two areas were gold in shear zones is known to occur is strong evidence of the presence of gold mineralization over a broad area.

Marjorem let their option expire in 1985 in spite of encouraging results and Lornex Mining Corporation Ltd. acquired an option in the same year. Lornex did 379.9 metres of diamond drilling on the Baxter Creek zone and to the north along the Sandspit Fault scarp, plus additional rock and soil sampling in other areas. Five holes were drilled along a 350 metre linear trend in the Baxter Creek area. Holes 1 and 3 intersected significant gold values up to 0.146 oz/ton and 0.112 oz/ton respectively. Hole 1 intersected 0.096 oz/ton gold over 9.31 metres (30.5 ft). Gold mineralization is accompanied by silicification and clay-sericite alteration of feldspar in lapilli tuff with pyrite and pyrrhotite up to 10 percent.

Lornex’s regional work including rock and soil sampling provided no new definitive anomalies elsewhere. Lornex put in a small soil grid (500m x 900m) to cover an area of Marjorem soil and magnetic anomalies (H Grid). The sampling failed to corroborate the anomalous arsenic results reported by Christie and Richards (1982). Soil sampling was done by mattock and may not have been deep enough to yield good samples for arsenic or gold values.

Lornex let their option lapse in 1985. up to the end of Lornex’s involvement, a total of $190,000 was recorded for assessment purposes.

Mondavi Resources Ltd. obtained an option from R.E. Mickle in May, 1987 and conducted a comprehensive program of mapping, geochemistry, induced polarization and 2629.11m of diamond drilling under the direction of B.D. Fairbank, P.Eng. in 1987 and 1988 bring the total exploration expenditures to over $300,000.

Detailed geological mapping, follow up geochemistry and Induced Polarization indicated that the mineralized zone continued to the west. Diamond drilling, in 1988, extended the gold zone 400 feet to the west in holes 11 & 12 as follows:

Hole

Interval

Metres

Gold (oz/ton)

DDH 11

142.5 - 155.0

186.5 - 193.5

257.0 - 263.5

12.5

7.0

6.5

0.047

0.043

0.039

DDH 12

incl.

77.0 - 79.3

253.0 - 272.6

266.0 - 272.6

341.0 - 346.0

2.3

19.6

6.6

5.0

0.039

0.031

0.058

0.045

By means of Shiel’s Contracting Ltd. of Sandspit, B.C., approximately 600 m of preexisting access roads have been corduroyed, 525mm of trenches have been back filled and 6 drill pads have been built using a 235 Road Builder excavator. For geochemical sampling purposes, the Baxter Creek Area grid had been extended to the N-W; a 600m long bare line has been cleared and 2775m of cross-lines have been flagged at 25m intervals. Assay results for 102 of the total 138 soil samples taken at the Baxter Creek Grid extension reveal weakly anomalous Au/As values trending south westwardly beyond the grid extension. A total of 5 heavy mineral samples taken within Baxter Creek reveal no significantly anomalous Au/As values.

A nearby gold property along the Sandspit Fault is the Harmony gold project of Misty Mountain Gold Limited. During 1996 Misty Mountain Gold Limited significantly advanced its 100% owned harmony Gold Project towards the goal of having sound environmental stewardship lead to successful permitting of a substantial gold mine development. This was achieved through exploration and pre-development expenditures totaling $5.84 million on a systematic core drilling program of the Specogna Deposit and the advancement of a wide spectrum of scoping study options to define the Harmony Gold Project. Positive program results are indicating that in the months ahead an economically attractive gold mine proposal can be advanced for the Specogna Deposit which will mitigate environmental risks and maximize benefits for communities in the region.

Forestry is the main industry on the islands and the largest operators are MacMillan Bloedel (Graham Island) and TimberWest Products (Moresby Island). Fishing is important to commercial and recreational operators and is a significant traditional activity of the Haida. Government and tourism services account for the other main business activities. Recently, both the forestry and fishing industries on Graham Island have declined. At the same time, the former largest employer on the Islands, the Canadian Department of Defense, has closed down its operations with a loss of 500 jobs.

The Harmony Gold Property encompasses a 440 square kilometer mineral claim holding covering one of the world’s premier epithermal gold systems. The Project includes the Specogna Deposit which is central to the property and contains a geological resource of over three million ounces of gold.

Since the discovery of the Specogna Deposit in 1970 over $40 million has been spent by former operators. Their work included trenching, drilling, underground bulk sampling, pilot mill testing, environmental programs and feasibility studies. This work led to a proposal in 1987 by City Resources (Canada) Limited to the British Columbia government to establish a 5, 800 tonnes per day (2.1 million tonnes per year) processing facility involving pre-treatment of 31 million tonnes of open pit ore by nitric acid leaching (Arseno Process) followed by cyanidation and production of gold bullion.

In 1988, although City Resources (Canada) Limited was in the final stages of project certification, it decided not to continue with its proposal for financial reasons. Permitting proceedings were suspended.

In 1993, Misty Mountain Gold Limited initiated further planning of the Project after examining the extensive Project data base and determining that excellent potential for the development of an economically and environmentally sound gold mine existed. In 1995, Romulus Resources Ltd., an affiliate of British Columbia based Hunter Dickinson Inc., joint ventured the Harmony Gold Project, and then merged with Misty Mountain Gold Limited. The merger brought together a multi-disciplinary team of professionals with an excellent record of environmentally responsible mine development.

In 1995, Misty commenced a comprehensive, staged program to explore and develop the Project. This included a review of voluminous historical, technical and environmental data, and the completion of regionally extensive geochemical and airborne geophysical surveys. Late in 1995, a systematic diamond drilling program of the Specogna Deposit commenced, utilizing large diameter core holes spaced on a 20 metre by 290 metre grid pattern, oriented to the southeast and drilled at an angle of minus 45 degrees. In December 1996 this program was completed with a total of 34,627 metres drilled in 147 holes. The extensive data base generated from this detailed drill program provides a solid foundation for continuing mine development studies.

Current and historical drilling of the Specogna Deposit now totals 79,766 metres in 538 holes with 41,27 gold assays completed. The geological resources of the Specogna Deposit is 59 million tonnes with an average grade of 1.66 grams gold per tonne. It is still open to the northwest and to depth with excellent potential to develop additional reserves in these prime areas.

The Specogna Deposit represents the mid to upper levels of an epithermal hot-spring-type precious metals system. Gold is distributed throughout a hydrothermal breccia unit that parallels the northwest striking Speconga Fault for at least 700 metres and also throughout stockwork quartz veining and pervasively silicified sediments which extend laterally from the hydrothermal breccia for up to 210 metres. The Deposit dips moderately northeast for over 300 metres and forms a mushroom-shaped cross section perpendicular to the Specogna Fault. Approximately three percent sulfides, mainly pyrite and marcasite, are found disseminated throughout the Deposit. In addition to the relatively evenly distributed gold, bonanza gold shoots occur scattered throughout the Deposit. Examples of these high grade shoots include drill intercepts of 42 metres averaging 41 grams gold per tonne and 46 metres averaging 40 grams gold per tonne.

Currently, two exploration targets are being prepared for drill testing. The first target is potential bonanza gold deposits which may have developed at depths of more than 200 metres below the currently known Specogna Deposit. Plans for exploration drilling into this deeper, throttled portion of the epithermal system are being guided by careful structural analysis of the current data base. The second exciting target, located eight kilometers south of the Specogna Deposit, is contained in a topographic high with a gold-in-soil anomaly and an airborne geophysical response of the same magnitude and size as those of the Specogna Deposit. Coincidentally, commercial logging is now underway in the area of this target and will facilitate exploration activities being planned by Misty for the summer season in 1997.

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REGIONAL GEOLOGY AND MINERALIZATION

Regional Geology Map

The major geological feature (Figure 4) within the region is the Sandspit Fault, a dominant crustal structure that cuts diagonally across the Sandspit Gold property at about 325° Az and continues northwest and southeast for many miles. Parallel strands and subparallel splays are apparent on air photos.

The fault marks a distinct break in both physiography and bedrock lithology. Stream beds commonly dogleg when crossing the fault line indicating the locus of most recent movement. To the west, the land rises up and forms low hills and mountains; eastward the topography is flat and swampy.

According to Sutherland-Brown “Rocks exposed in the west block are invariably older than those exposed on the east-Yakoun Formation and Sandspit Plutons in the west, Masset and Skonun Formations in the east. The Sandspit Plutons are apparently aligned along the fault trace but are cut by the faults and seem to have supplied detritus to the Skonun Formation. The east block has dropped many thousands of feet relative to the west; however latest movement appears to have been east block up. This structure was most likely active in the Cretaceous, and although some strands have not been active since the Pleistocene, others most certainly have.”

Several gold deposits and prospects in the region are mineralized along the Sandspit Fault and splay structures occurring as veins, siliceous breccias, and silica placement zones. The fault provided permeability for the circulation of mineralizing fluids.

The largest gold deposit in the region is the Harmony Deposit of Misty Mountain Gold Ltd. containing over 3 million ounces of gold reserves located 40 km northwest of the Sandspit Gold property. Structure and lithologies are important ore controls. The Sandspit Fault is adjacent to the deposit on the east side. A secondary splay structure known as the Specogna Fault was a major control or channel for the movement of mineralizing fluids. The Specogna Fault runs immediately west of the deposit dipping 45-50^oE. Mineralization occurs in quartz veins, siliceous breccia and replacement zones within silicified conglomerate of the Skonun Formation. Haida shales form the footwall of the Specogna Fault and may have been a secondary control on the localization of mineralization by creating an impermeable boundary on the west side of the deposit. The gold is very fine and occurs in association with widespread disseminated sulfides. Previously announced open pit ore reserves are 7-9 million tons of 0.1 ounces per ton gold, contained within an area 300 by 700 metres (City Resources, News Release, June 19, 1987, Vancouver Stockwatch). Recently Misty Mountain announced that metallurgical tests yielded greater than 90 percent gold recovery enabling the cut off grade to be lowered to 0.035 oz gold per ton and thereby increasing the mining reserve to 28 million tons averaging 0.061 oz gold per ton (Northern Miner, July 6, 1987). Other lesser gold showings in somewhat similar geological environments are known (Southeaster, STO, Bella and Marino).

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LOCAL GEOLOGY

Outcrop on the Sandspit Gold property is sparse except along the Sandspit Fault escarpment, along the coastline, and in local creeks. Rocks are Yakoun Formation tuffs and agglomerates of Jurassic age and quartz diorite and diorite of Cretaceous age.

Yakoun Formation volcanics are widespread and occur from the western boundary of the claims to the scarp adjacent to the Sandspit Fault. Along the cliffs, hornfelsic and pyritized Yakoun agglomerates are cut by a large number of subparallel subsidiary faults that mostly strike 330 to 320° Az west and dip 60 to 80 degrees northeast (Sutherland-Brown, 1968)

Honna Formation conglomerate of Cretaceous age occurs west of Copper Bay and the property in fault contact with the Yakoun volcanics (Christie and Howell, 1984). Honna is more common in this area than shown on Figure 7.

Quartz diorite intrusions cut the Yakoun volcanics forming a narrow belt elongated subparallel to the Sandspit Fault system. Their emplacement was apparently controlled in part by the Sandspit Fault and the intrusions were themselves faulted by later movement.

Rhyolite dikes are known locally. An intensely altered dike with up to 20 percent sulfide replacement mineralization occurs west of Copper Bay (Christie and Richards, 1982).

Hydrothermal alteration and sulfide mineralization are widespread. The area with the highest gold values at Baxter Creek corresponds to an area of locally intense shearing and silicification with up to 5 percent disseminated arsenopyrite in rhyolite tuffs. The Baxter Creek mineralization is 100 metres west of the Sandspit Fault system. On a local scale, other secondary structures are mineralized, (figure 11). Work in 1997 showed saussuritized plagioclase phenocrysts in most outcrops of the diorite intrusives (figure 11)

It is envisioned that the gold zones were deposited from a shallow epithermal system. The overall size of the systems or deposits is potentially large (similar to Misty Mountain). Epithermal deposits typically display variable grades and complex local configurations due to steep temperature and pressure gradients in the near surface environment. They may form a series of sheeted veins and breccia zones rather than a single discreet vein. Fault structures and variation is permeability with the stratigraphy are major controls for the localization of deposits.

Three types of mineralization were found during reconnaissance work on the SNOW Property; 1) clay sericite, disseminated pyrite and quartz-carbonate vein mineralization; 2) very fine grained semi-massive to massive sulfide mineralization in volcanic tuff and; 3) massive siliceous mineralization.

The clay-sericite, disseminated pyrite and quartz-arsenopyrite vein mineralization is found on the Baxter Creek Grid along the Sandspit Fault to the north and south and as a float boulder in Copper Bay Creek (figure 2). It is more common in the diorite intrusive rocks, but it is also found in the volcanics at Baxter Creek. this mineralization is controlled by the Sandspit Fault trend and northwest trending orthogonal splays off of it. it is characterized by gold-arsenic mineralization.

Semi-massive sulfide mineralization, possibly syngenetic in origin, was found in the Yakoun tuff sequences along Copper Bay Creek near the centre of the SNOW 6 Claim, on the south fork of Baxter Creek at the southwest end of the Baxter Creek Grid and in the H-Grid area near the north end of the SNOW 4 Claim (figure 2). No economic mineralization has been found in the massive sulfides to date, but the zones discovered may represent barren pyritic cores with good gold potential around them. The mineralization on the south fork of Baxter Creek was discovered while prospecting upstream from a highly anomalous (12,000 ppb Au) heavy mineral sediment sample.

Massive siliceous (50% silica) mineralization with up to 5% disseminated pyrite was found on the cliff face 500 metres northeast of DDH-85-1. This zone was found to contain only weak (to 25 ppb) gold mineralization. This zone could represent a leached zone with better gold potential at depth. Samples, descriptions and assay results from the mineralized areas can be found in the 1987 assessment work on the SNOW Property (Fairbank, 1988).

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BAXTER CREEK TARGET AREA

Baxter Creek Target Area Map

At Baxter Creek (Figure 8) gold intersected in trenches and in drill holes 85-1 and 85-3 are a direct indication of gold occurring over a large area. In the drill holes reported by Lornex, grades are as follows:

Hole

Interval

Metres

Gold (oz/ton)

DDH 1

19.75 - 21.95

21.95 - 23.33

23.33 - 29.06

(total interval)

32.27 - 32.92

2.20

1.38

5.73

9.31

0.65

0.134

0.016

0.100

0.096

0.146

DDH 3

5.45 - 7.45

7.45 - 8.45

8.45 - 13.25

13.25 - 15.05

15.05 - 17.25

17.25 - 19.23

2.00

1.00

0.50

1.80

0.60

1.98

0.112

0.024

0.068

0.012

0.072

0.056

DDH 11

142.5 - 155.0

186.5 - 193.5

257.0 - 263.5

12.5

7.0

6.5

0.047

0.043

0.039

DDH 12

incl.

77.0 - 79.3

253.0 - 272.6

266.0 - 272.6

341.0 - 346.0

2.3

19.6

6.6

5.0

0.039

0.031

0.058

0.045

(DDH 2, 4, 5 are less than 0.002 oz/ton)

Holes 85-1 and 85-3 are 175 metres (575 ft.) apart aligned along the projection of a structure that appears to control alteration and mineralization at Hole 85-1. Drill hole intercepts are correlated with trench assays in Figure 9 and indicate that the zone is steeply dipping and persists to at least 25 metres (82 ft) in depth. The mineralized interval is 10 to 20 metres true width. The mineralized zone is open to the northeast/southwest along strike. At hole 85-3, the mineralization is open to the northwest.

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DIAMOND DRILLING

Trench 2 Cross-Section Map

TABLE III: DIAMOND DRILLHOLE SUMMARY

HOLE NUMBER	GRID LOCATION (BAXTER CREEK GRID)	DIRECTION	DIP		LENGTH metres (feet)	ELEV. (M)
85-1	0+05S+0+10W	140^o	-60		48.15 (158)	12.19
85-2	1+10S+0+40W	140^o	-45		48.46 (159)	42.67
85-3	2+00S+0+60W	140^o	-45		46.33 (152)	54.86
85-4	2+50S+0+60W	147^o	-60		46.85(153.7)	67.06
85.5	4+40S+0+05E	140^o	-45		44.72 (146.7	76.20
85-6	off grid 485m NE of 000+00	000^o	-45		52.43 (172)	59.44
85-7	off grid 675m NNE of 00+00	320^o	-45		46.94 (154)	73.15
85-8	off grid 1323m NNE of 000+00	320^o	-45		46.02 (151)	73.15
88-9	1+08N+1+49E	315^o	-45		106.07(348)	9.14
88-10	0+28N+0+06E	315^o	-45		105.16(345)	10.67
88-11	1+99S+1+04W	135^o	-45		99.06(325)	53.34
88-12	2+96S+0+91W	346°	-45		(385)	67.06
88-14	2+99S+0+25E	315^o	-45		106.07 (348)	68.58
88-15	2+04S+1+22E	135^o	-45		105.98 (347.7)	65.53

	TOTAL DRILLING				1,009.01M (3,310.4 FT)
				379.9m in 1985 629.11 m in 1988

Chip samples taken by B.C. Fairbank, P.Eng. of bedrock exposures in the trench at 85-1 assayed 0.088 oz/ton gold over 1.8m (6 ft) and 0.205 oz/ton gold over 0.8m (2.6 ft.). Both samples are perpendicular to the structure. They are brecciated and silicified (vuggy) light gray, fine grained rhyolite(?) with visible disseminated pyrite and arsenopyrite. A composite chip sample of broken drill core between 19.75m and 22.3m in Drill Hole 85-1 assayed 0.048 oz/ton gold. These results are within the limits of variation expected when compared with those reported by Lornex.

Drill holes in the area of gold mineralization (85-1,2,3 and 4) intersected variably altered Yakoun lapilli tuff and agglomerate (Figure 7). Drill Hole 85-5, 200 metres southwest of 85-4, intersected quartz diorite.

Structure is an important ore control. Mineralization in the drill holes is associated with a structure striking 55^o and dipping 80^oN. Shearing, brecciation and silicification have occurred along this particular structure. Other structural orientations may also be important. For example, the Sandspit Fault striking north-northwest is 100 metres northeast of the known mineralization. A N-S fault between holes 85-4 and 85-5 is interpreted from magnetic data. The north-south structural trend intersects the mineralized 055^o trend at a prominent magnetic low, the significance of which is unknown.

A total of 339 samples were split and analyzed with average sample length of 6.2 feet (1.9m) although samples in mineralized areas were shorter. Analysis was for fire assay-geochemical gold with fire assay checks on all samples above 1.0 gram per tonne (1000 ppb) plus I.C.P. for trace elements silver, copper, lead, zinc, arsenic and antimony.

DDH-88-9

DDH-88-9 was drilled to a depth of 348 feet to test the north end of an I.P./Resistivity anomaly. It intersected weakly silicified andesitic wacke or agglomerate with up to five percent stockwork fracture and disseminated pyrite. The pyrite and silicification explain the I.P. resistivity anomaly that was the target of this hole. High values of 14 ppb gold and 31 ppb arsenic indicate that the Baxter Creek zone was not intersected in this hole, however, the highest zinc (568 ppm) and copper (892 ppm) values in the 1988 drill program were intersected. The base metal mineralization is likely pre-Sandspit Fault in origin and not a target for further work.

DDH-88-10

DDH-88-10 was drilled to test northern extension of Baxter Creek Zone mineralization intersected in DDH-85-1. It intersected andesitic wacke and agglomerate with scattered calcite and quartz veins, and weak clay-carbonate alteration with locally up to 5 percent disseminated pyrite. The highest gold (0.102 oz/t) and silver (33.5 ppm) values returned from the 1988 drilling were intersected from 36.29-37.33m (119 to 122.5 ft). These high values were represented by 1.1 feet of medium grey brecciated quartz stringers, in a broad clay-carbonate altered zone.

DDH-88-11

DDH-88-11 was drilled to cut at depth the gold intersects in DDH-85-3 and Trench 3. it was drilled through porpyllitically altered, medium grained diorite cut by carbonate veins and containing local andesite inclusions. Three zoned of gold mineralization were intersected: 43.4-47.2m (142.5-155’) 0.047 oz Au/ton; 56.8-59m (186.5-193.5’) 0.043 oz Au/ton; and 78.3-80.3m (257-263.5’) 0.039 oz Au/ton. These zoned were characterized by up to 10 percent fine grained disseminated pyrite and arsenopyrite with local grey quartz veins and shearing. Good correlation can be seen between Trench 2 (1987), DDH-85-3 and DDH-88-11 (figure 8).

DDH-88-12

DDH-88012 was drilled to test a southern extension of the Baxter Creek mineralization as evidenced by arsenic soil geochemistry anomalies and gold-arsenic mineralized zones in the west end of Trench 3 (1987). It cut carbonate veined, propyllitically altered, medium grained diorite with local andesite inclusions. three zoned of gold mineralization were intersected: 12.4-24.2m (77-79.3’) 0.039 oz Au/ton; 77.1-83.1m (253-272.6’) 0.031 oz Au/ton and 103.9-105.5m (341-346’) 0.045 oz Au/ton. The mineralized zones were characterized by fine grained disseminated pyrite and arsenopyrite with local grey quartz veins.

DDH-88-13

This hole number was assigned to a hole not drilled. DDH-88-13 was proposed to test the southern extension of Baxter Creek mineralization in the vicinity of Trench 4 (1987) but was not drilled because of the poor results in DDH-88-14.

DDH-88-14

DDH-88-14 was drilled to test arsenic soil geochemistry anomalies and altered, weakly mineralized zones in Trench 3. I cut carbonate veined, propyllitically altered, medium grained diorite with local andesite inclusions, but was only weakly mineralized with scattered quartz veins and disseminated pyrite and very low (high 48 ppb Au) analysis results.

DDH-88-15

DDH-88-15 was drilled to test a coincident I.P./Resistivity high and arsenic soil geochemistry anomaly. It cut minor carbonate veins and propyllitically altered andesite wacke and agglomerate with 4-5 percent disseminated pyrite. The hole returned very low gold values (6 ppb) but elevated copper to 247 ppm and zinc to 96 ppm.

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TRENCHING

575 metres of trenches plus seven prospect pits totaling 48 metres in length were constructed in the Baxter Grid area from October 2 - 5, 1987. Trenches were oriented along grid lines to evaluate soil geochemistry and magnetic anomalies.

The two lithologies intersected on the grid are medium grained quartz diorite to diorite and andesitic agglomerate and lapilli tuff. The intrusive is mapped by Sutherland-Brown (1968) as being Cretaceous to Tertiary in age. Its’ contact with Trenches 2 and 3 and in some of the drill holes. in general, the intrusive contact is mixed zone which strikes 020° through the centre of the grid with andesite in the east and diorite in the west.

Superimposed on these lithologies is a broad area of propyllitic alteration characterized by 5-25% chlorite, 0-5% epidote, 0-3% disseminated pyrite and 0-5% disseminated magnetite. Narrow (10 cm) mineralized zones consisting of quartz veins (5-10%), pyrite/arsenopyrite (0-10%), and calcite (10-25%) occur in a wider 50m quartz (10-25%), clay (25%) pyrite (0-5%) and calcite altered zone. Mineralized zones and individual veins generally strike 020° on the east in the andesite and turn to 070° in the quartz diorite in the west.

Mineralization type is dependent on host rock type with stronger silicification, brecciation and gold mineralization where the host rocks are siliceous andesite tuff such as near DDH-1 and with more clay-carbonate alteration in the quartz diorite host near DDH-88-14 and further west.

A Komatso PC400 LC-3 tracked excavator from O’Brien Fuerst Logging Ltd. was used because of its ability to traverse swampy areas and to dig one metre wide pits up to six metres deep. Trenches were dug continuously into bedrock wherever possible. Local thickness of till to bedrock in several areas. In these cases, deep pits within the trenches were dug in an attempt to cut bedrock. Six pits were dug in subsequently filled in for safety reasons in the Trench 1 area. The remainder of the trenches remain open, although a number are filled with water.

Trenches were surveyed with compass and tape and geologically mapped at a scale of 1:100 and 1:500. Rock sampling generally as five metre chip samples from the bottom of trenches, with shorter samples in mineralized zones was done. A Wajax pump was required to pump out the trenches for inspection. Samples of the backhoe dump material were taken where access could not be had due to water or unstable banks.

Gold/arsenic mineralization was intersected in Trenches 2, 3 and 4. Of these, the best mineralized zone was from the southeastern end of Trench 2 which was 9.0 metres wide and averaged 854 ppb gold (0.025 oz/t.). This zone was also encountered in drill hole DDH 85-3 open to the west where water and mud covered bedrock. Similar weaker mineralized zones were intersected near the center (100 ppb) and at the west-end (208 ppb) of Trench 3 and (47 ppb) in Trench 4 (Figure 6). All of the gold zones show highly anomalous arsenic up to 800 ppm. The zone at the west end of Trench 3 was sampled from backhoe dump material and is open to the west.

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GEOCHEMISTRY

Arsenic has been shown to be associated with gold mineralization on the Sandspit Gold property (Figure 9). Arsenic concentrations of greater than 25 ppm in soil are considered to be anomalous. Regional soil arsenic anomalies indicate a large target area for potential mineralization measuring 500 by 500 metres (Christie and Richards, 1982). Arsenic values up to 79 ppm along with spotty gold values in soil on the cat trail to the west of 85-1 indicate excellent potential for the occurrence of gold veins or other forms of more extensive mineralization between Anomaly A and the known gold zone in drill holes.

Soil anomaly B corresponds to a magnetic high (Figure 8). The relationship of Anomaly B to known mineralization is unclear. The highest values (2250 ppm As, 80 ppb Au, and 198 ppm As, 5 ppb Au) are in an area of extensive overburden cover. Regional soil results show arsenic to be present in soils between Anomaly B and drill hole 85-1, however, results cannot be plotted accurately relative to the detailed grid. Fill-in sampling will be required to enable an accurate interpretation of the soil data.

Eighteen soil samples were taken at the bedrock/soil (till) interface in Trenches 3 and 4 to evaluate the property soil sampling results and optimum depth of sampling. Analytical results of the “normal” auger sampling and deeper trench sampling compare well in arsenic, but anomalous gold values found above bedrock in the trenches were missed in shallower soil samples.

Trench 4

Normal Au (ppb)	5	5	5	10	5	5
Trench Au	3	4	3	123	4	6

Normal Soil As (ppm)	15	11	600	800	25	14
Trench As	8	155	20	3863	61	38

Trench 3

Normal Soil Au (ppb)	5	5	10	10	20	5	10	5	5	10	5	10
Trench Au	168	4	8	16	4	3	10	3	4	4	3	4

Normal Soil As (ppm)	42	27	64	500	2150	32	14	14	10	11	3	17
Trench As	471	111	3	323	701	41	20	57	5	13	1	10

The results show that lack of anomalous gold soil geochemistry on the grid is not indicative of the potential for gold mineralization in bedrock. Arsenic appears to be a good tracer element for masked gold zones.

Reconnaissance Rock Geochemistry

Two rock samples were taken during the 1988 drilling program. MAH 101 is a sample of quartz vein with arsenopyrite similar to Baxter Creek mineralization. it was 40 cm float boulder found along Copper Bay Creek. MAH 102 was a sample of argillic altered diorite from a 3 metre deep water sump dug at B.L. - =00S on the Baxter Creek Grid. These samples returned the following values.

(Values in PPM)	Ag	As	Cu	Pb	Sb	Zn	Au-PPB
MAH101	5.9	3471	6	39	1522	517	9200
MAH102	0.3	90	54	6	51	163	44

Sample MAH 101 is a significant discovery. Values of 9200 ppb (0.268 oz/t) gold, 0.34% arsenic, 0.15% antimony and 5.9 ppm silver are similar to those from the Baxter Creek Zone, but this sample was found 3 kilometres south of the Baxter zone. A concerted effort should be made to fine the source of this boulder.

The gold and arsenic values from sample MAH 102 confirm the presence of low-grade Baxter Creek Zone type mineralization under thick till cover east of mineralization previously intersected in Trench 4. Further trenching is recommended to determine the extent of and grade of the mineralization.

Glacial till comprising the entire depth of a soil pit at 2+50SW, 0+50NW is composed primarily of diorite boulders which probably have not been transported very far. Analytical results of a soil profile taken of the pit wall are as follows:

	Au ppb	As ppm
Surface - 10 cm	4	71
10 - 20	18	100
20 - 30	4	192
30 - 40	5	130
40 - 50	200	370
50 - 60	265	377
60 - 70	500	542
70 - 80	280	785
80 - 90	150	415
90 - 100	98	335
100 - 110	37	192
110 - 120	60	323
120 - 130	103	618
130 - 140	43	453
Composite	18	134

These results show higher values near the center of the profile which probably reflects a local change in origin of the till.

An additional vertical set of samples was taken from Trench 3 (160 metres - 3+00SW; 0+00NW) over a mineralized area

	Au (ppb)	As (ppm)
Surface - 10cm	3	22
10 - 20	3	52
20 - 30	4	289
30 - 40	6	1013
40 - 50	215	2665
oxidized rock
50 - 70	385	2152
sulfide bearing rock

These results show that soil samples should be taken as near to bedrock as possible and that arsenic is the best soil indicator for gold zones in the Baxter grid area.

From August 1 - 6, and September 12, 14, 1985 and arsenic/gold soil auger sampling program was completed with 50 metre line spacing and 25 metre sampling over the Baxter Grid. Additional lines of samples were taken along main access road and the bank of Baxter Creek. A few scattered anomalous gold values (>20 ppb) were obtained but arsenic values up to 2150 ppm showed a strong trend along and to the northwest of the grid baseline (Figure 9). Weaker arsenic values in this trend between line 1+00S and 0+00S are probably a result of thicker till in this area. This soil sampling program lead to follow-up trenching and was successful in locating covered mineralized zones.

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LORNEX “H” GRID AREA

The Lornex “H” grid area is at the intersection of the Sandspit Fault System with a N-S break in the airborne magnetic data interpreted to be a major cross fault. The area of intersection of the two faults is a good geological environment for the formation of epithermal deposits.

An arsenic soil anomaly was reported on the west side of the H grid area by Marjorem (Christie and Richards, 1982), however, Lornex’s soil results were consistently low in gold and other pathfinder elements including arsenic (Serak, 1985). The disparity may be due to different sampling techniques. Marjorem obtained deeper samples using an auger.

Along the base of the scarp slope reflecting the Sandspit Fault, intensely fractured and clay altered volcanics with 5 percent disseminated pyrite and arsenopyrite occur in a road out outcrop. Samples by the author at two locations 200 metres apart returned negative gold, arsenic and antimony assays.

Exploration in the H grid area has not shown direct evidence of gold mineralization, however, it has shown that hydrothermal alteration associated with the Sandspit Fault system is of regional extent.

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GEOPHYSICS

Induced polarization, resistivity, and magnetic surveys were conducted at 100 metre line spacing on lines numbered by hundreds over the Baxter Grid Area. Bulk mineable epithermal gold deposits would be expected to produce an IP anomaly (Percent Frequency Effect) due to disseminated sulfides and a resistivity high due to pervasive silicification. Primary targets would be overlapping or coincident IP/resistivity anomalies that extend to depth.

Two Phoenix Model IPV-1 Induced Polarization and Resistivity receiver units were used, together with a Phoenix Model IPT-1 IP and Resistivity transmitter powered by a 1 kW motor-generator. IP effects were recorded as Percent Frequency Effects (P.F.E.) at operating frequencies of 4.0 Hz and 0.25 Hz, while apparent resistivity values were normalized in units of ohm-meters. Dipole-dipole array was utilized to make all of the measurements using interelectrode distances of 25 metres. Four dipole separations were recorded in every case.

“Since the Induced Polarization measurement is essentially an averaging process, as are all the potential methods, it is frequently difficult to exactly pinpoint the source of an anomaly. Certainly, no anomaly can be located with more accuracy than the electrode interval length; i.e., when using a 25 metre electrode interval, the position of a narrow sulfide body can only be determined to lie between two stations 25 metres apart. In order to locate sources at some depth, larger electrode intervals must be used, with a corresponding increase in the uncertainties of location. Therefore, while the centre of the indicated anomaly probably corresponds fairly well with the source, the length of the indicated anomaly along the line should not be taken to represent the exact edges of the anomalous material.” (Cartwright, P., Pacific Geophysical Ltd., 1987)

Results are shown graphically in selected psuedosections in Figures 12, 13, 14 and 15.

In general the Baxter gold mineralization shows up as a discontinuous IP effect anomaly. Results appear to extend known mineralization north and west of gold intercepted in drill holes DDH 85-1 and DDH 85-3 respectively and also are corroborating evidence for potential parallel mineralized zones to the northwest along the Baxter Trend. A distinct linear magnetic low, broadly coincident with Baxter Trend mineralization may be due to removal of magnetite by circulating hydrothermal solutions along a fault structure.

Two electrical anomalies outside of the Baxter Trend area are apparent from the survey.

A large area underlain by resistive rock with an overlapping PFE anomaly indicating disseminated sulfides occurs in an area of no outcrop in the southeast quadrant of the grid. Trench 3 exposes volcanic stratigraphy with no gold values of interest. A gold-arsenic soil anomaly was detected in an earlier soil sample program on line 3+00S between 0+25E and 1+50E within this zone.

To the north along the access road, a strong PFE anomaly crosses Lines 0+00N and 1+00N centered at 1+00E. The anomaly occurs across a narrow width of 100 metres and increases in intensity with depth.

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CONCLUSIONS AND RECOMMENDATIONS

Gold mineralization at Baxter Creek, assaying up to 0.096 oz/ton over 9.31 metres, occurs in an environment suitable for the formation of large-scale bulk mineable gold deposits. A gold zone 300 metres long, 10 - 20 metres wide and at least 25 metres deep is intercepted in four drill holes and several surface trenches. Good exploration potential exists to develop reserves along strike and to depth in the known structure. Other areas with anomalous geochemistry within the target area also should be tested by drilling.

It is anticipated that potential ore zones would be picked up within an IP/resistivity survey. Disseminated sulfide mineralization would give a good chargeability anomaly and pervasive silica alteration would yield a resistive signature relative to unaltered rock. The IP survey should be expanded to guide a follow-up drilling and trenching program necessary to explore and develop the property further.

The following program is recommended for the Baxter Creek Target Area, Figure 16:

1. Geological mapping: creeks, other outcrops and trenches with a view to interpreting

structural controls of mineralization.

2. Backhoe trenching: trenches will be access routes for subsequent drilling.

In the H-Grid area soil sampling with an auger should be done to detail the arsenic anomaly and analyze for gold. The grid should be extended to the west to ensure that the Marjorem arsenic anomaly is covered completely. Geological mapping is recommended to confirm and locate the interpreted north-south fault and the Sandspit Fault zone should be thoroughly prospected.

Drilling indicated widespread gold in the Baxter Creek Grid area, however, gold grades intersected to date are too low to be of economic interest.

There are a number of altered and mineralized areas on the Snow Property that have only had scattered exploration efforts while work has emphasized the Baxter Creek Zone mineralization. It is recommended that a concentrated rock sampling program be undertaken to determine if there is significant precious metal values in these areas. Continuous sampling of altered or mineralized outcrops, plus sampling of mineralized boulders on the beach and in streams is required.

Other specific targets for further work can be seen of figure 4. These include the Copper Bay Creek boulder (MAH 101) and sulfide showing (A), the south fork of Baxter Creek sulfide showing (B), the H grid sulfide showing (C) and the Cliff showings (D) plus the Mickle Barite showing (1500 metres northwest of C) and sulfide bearing boulders on the beach from Copper Bay north. The program objective would be to determine the presence of economic grades of mineralization elsewhere on the property and would require further target definition work.

Respectfully submitted,

J.T. (Jo) Shearer, M.Sc., P.Geo.

February 15, 1998

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COST ESTIMATE

Phase I: mapping, soil sampling, IP/Resistivity, trenching, drilling.

H Grid Target Area

1) Soil sampling, 10 md @ $175/md. $ 1,750.00 250 samples (Au, As) @ $12.00/sample 3,000.00

2) Grid preparation, surveying & cutting

8 line-km, 32 md @ $175/md. 5,600.00

3) IP/Resistivity, 8 line-km, @ $1350/line-km 10,800.00

4) Geological mapping, 12 md @ $300/md 3,600.00

5) Trenching (525m) 42 hr @ $85/hr 3,570.00

Mob/Demob 500.00

6) Drilling 1000 m @ $120/m 120,000.00

Mob/Demob 6,000.00

7) Site supervision, geology, sampling/

drilling and trenching program

Geologist, 40 md @ $300/md. 12,000.00

Assistant, 40 md @ $175/md. 7,000.00

1000 assays @ $1650/sample (Au,As,Sb) 16,500.00

8) Support Costs

- room and board, 170 md @ $50/md 8,500.00

- vehicle, 1.5 months @ $1,500/mo 2,500.00

- fuel 1,000.00

- airfares, 5 x $400 2,000.00

- consumables & equipment rental 2,000.00

- communications & freight 1,000.00

9) Engineering, drafting, reporting $ 10,000.00

$217,320.00

Contingencies @ 10% $ 22,000.00

Total $239,320.00

North Baxter Area

1) Grid preparation, survey

5 line-km, 10 md @ $175/md $ 1,750.00

2) Soil sampling, 10 md @ $175/md 1,750.00

250 samples (Au,As) @ $12.00/sample 3,000.00

3) Geology, 5 md @ $300/md 1,500.00

Prospecting, 5md @ $175/md 875.00

Assays, 100 (Au,As,Sb) @ $16.50/sample 1,650.00

4) Support Costs

- room and board, 30 md @ $50/md 1,500.00

- vehicle, 10 md @ $70/d 700.00

- consumables & equipment rental 200.00

- communications & freight 100.00

5) Engineering, drafting, reporting $ 1,500.00

$ 14,525.00

Contingencies @ 10% $ 1,400.00

Total Area $ 15,925.00

TOTAL PHASE I $ 255,000.00

Respectfully submitted

J. T. (Jo) Shearer, M.Sc., P.Geo.

February 15, 1998

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REFERENCES

Band, R.B. and McDougall, J.J. 1970:

Geochemical Report on the Airport Group Mineral Claims, Prince Rupert M.D., Falconbridge Nickel Mines Limited, BCDMPR AR 2343.

Burns, P.J. 1980:

Report on Trenching and Drilling Results, SNOW #2 Claim, Sandspit, B.C. Falconbridge Nickel Mines Limited, BCDMPR AR 8958.

Burns, P.J. and Elliott, I.L. 1980:

Geochemical Report on the SNOW #5 Claim, Sandspit Area, Q.C.I. Skeena Mining Division BCDMPR AR 7890.

Christie, J.S. and Howell, W.A. 1984:

Magnetometer and Geochemical Survey SNOW 1-5 Mineral Claims, Moresby Island, Queen Charlotte Islands, B.C. for Marjorem Minerals Ltd., BCDMPR AR 12369.

Christie, J.S. and Richards, G.G. 1982:

Geology and Geochemistry of the SNOW 1-5 Mineral Claims, Moresby Island, Queen Charlotte Islands, B.C. for Ventures West Minerals Ltd., BCDMPR AR 10140.

Downing, D.W. 1981:

Geochemical Report, SNOW Group, Skeena Mining Division, B.C. Falconbridge Nickel Mines Ltd.

Fairbank, B.C. 1987:

Report on the SNOW Property, Sandspit Area. Private Report for Mondavi Resources Ltd. July 14, 1987 32pp (Mondavi Prospectus dated Dec. 17, 1987)

Fairbank, B.C. 1987:

Phase I Progress Report, SNOW Property, Sandspit Area. Private Report for Mondavi Resources Ltd., Nov. 6, 1987 16pp

Fairbank, B.C. 1988:

Geological, Geochemical, Geophysical and Trenching Assessment Report on the SNOW Group, Sandspit Area, QCI; Private Report for Mondavi Resources Ltd. March 15, 1988, 75pp (Filed as Assess Rpt 17410)

Hepp, M.A. 1988:

Geochemical and Diamond Drill Assessment Report on the SNOW Group, Sandspit Area, Queen Charlotte Islands. Private Report for Mondavi Resources Ltd. June 1, 1988 (Apparently not filed for assessment credit)

Mickle, R.E. 1979:

Prospecting Report on the QCBM Claim Group, Skeena Mining Division, B.C.

Newell, J.M. and Delancy, P.R. 1970:

Geochemical Report IXL Claim Group, Skeena Mining Division, Texas Gulf Sulphur Company, BCDMPR AR 2777.

Northern Miner

July 6, 1987 p24., City Resources.

Pezzott, E.T. and White, S. E. 1984:

Geophysical Report on an Airborne VLF Electromagnetic and Magnetometer Survey, SNOW 1-5 Claims, Skeena, M.D., B.C. for Marjorem Minerals Ltd. BCDMPR AR 13535.

Serak, M.L. 1985:

Diamond Drill Report, SNOW 1-4 Mar 1 Claims, Skeena Mining Division, B.C. for Lornex Mining Corporation Ltd., BCDMPR AR 14695.

Shearer, J. T., 1997:

Summary Report on the Sandspit Gold Property, Private Report for the Shearer-Angus Joint Venture, 24 pp., September 1, 1997

Smith, C.L. 1985:

Interpretation and Integration of the Results of a Geochemical Survey and an Airborne VLF Electromagnetic and Magnetometer Survey for Marjorem Minerals Ltd.

Sutherland-Brown, A. 1968:

Geology of the Queen Charlotte Islands, British Columbia, BCDMPR Bull. No. 54.

Vancouver Stockwatch

June 10, 1987, p5, City Resources.

Zastavnikovich, S. 1980:

Geochemical Report on the QCSZ Claims group (SNOW 3 & 4 Claims), BCDMPR AR 7805.

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APPENDIX I

STATEMENT OF QUALIFICATIONS

I, JOHAN T. SHEARER, of 1817 Greenmount Avenue, in the City of Port Coquitlam, in the Province of British Columbia, do hearby certify:

1. I am a graduate of the University of British Columbia (B.Sc., 1973) in Honours Geology, and the University of London, Imperial College (M.Sc., 1977).

2. I have over 25 years of experience in exploration for base and precious metals and industrial mineral commodities in the Cordillera of Western North America with such companies as McIntyre Mines Ltd., J. C. Stephen Explorations Ltd., Carolin Mines Ltd. and TRM Engineering Ltd.

3. I am a fellow in good standing of the Geological Association of Canada (Fellow No. F439) and I am a member in good standing with the Association of Professional Engineers and Geoscientists of British Columbia (Member No. 19,279).

4. I am an independent consulting geologist employed since December 1986 by Homegold Resources Ltd. Unit #5-2330 Tyner Street, Port Coquitlam, British Columbia.

5. I am the author of this report entitled “Geological and Prospecting Assessment Report on the Sandspit Gold Property” dated February 15, 1998.

6. I have visited the property in August 1979, May 1980, March 1997 and July 9, 10, 11 & 12, 1997 and carried out geological mapping, sample collection and trail cutting. I am familiar with the regional geology and geology of nearby properties. I have become familiar with the previous work conducted on the Sandspit Gold property by examining in detail the available reports, plans and sections, and have discussed previous work with persons knowledgeable of the area.

7. I own a part interest in the property described herein.

Dated at Port Coquitlam, British Columbia, the 15th day of February, 1998.

____________________________________

J. T. Shearer, M.Sc., F.G.A.C., P.Geo.

APPENDIX II

STATEMENT OF COSTS - 1997

Sandspit Gold

Donna-Lynne 1 to 8

Prospecting, Geology, Trail Cutting

Personnel

J. T. Shearer, M.Sc., P.Geo., Geologist

July 9, 10, 11, 12, 1997. 4 days @ $325/day $ 1,300.00

Transportation

Truck Rental, 4 days @ $75/day $ 214.00

Airfare, Vancouver - Sandspit $ 444.00

Hotel Accommodation, 4 days @ $105/day $ 420.00

Food/Meals, 4 man days @ $75/day $ 300.00

Drafting & Supplies $ 350.00

Report Preparation $ 975.00

Word Processing and Reproduction $ 285.00

TOTAL $ 4,379.00

Divided as follows:

1/3 Trail cutting ($1,459.77)

1/3 Geology ($1,459.66)

1/3 Prospecting ($1,459.66)

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