DESCRIPTION OF PROPERTY

Chandalar, AK

The Chandalar gold property is our flagship property. It is an exploration stage property. Goldrich’s management was attracted to the Chandalar district because of its similarities to productive mining districts, its past positive exploration results, and the opportunity to control multiple attractive gold quartz-vein prospects and adjacent unexplored target areas. The gold potential of the Chandalar district is enhanced by similarities to important North American mesothermal gold deposits, a common attribute being a tendency for the mineralization to continue for a mile or more at depth, barring structural offset. Mesothermal gold deposits yield anywhere from less than 100,000 to over 10 million ounces of gold at mining grades 0.1 to over 1 ounce of gold per ton. We believe that our dominant land control eliminates the risk of finding potential gold deposits being located within competitor claims. Summarily, the scale of the Chandalar district gold quartz vein frequency and length, and the number of gold anomalies and exposures compare favorably to similar attributes of productive mining districts.

The Chandalar district has a history of prior production, but there is no current production except for some small-scale placer operations by an independent miner, Mr. Delmer Ackels, on inlier claims to our claim block (See Legal Proceedings).  We may begin gold production on a portion of the property known as the Little Squaw Creek drainage, where a gold deposit has been discovered and partially drilled out during our 2007 exploration work. This deposit is geologically characterized as an aggradational placer gold deposit. It is unusual in the sense that it is the only such known alluvial, or placer, gold deposit in Alaska, although many exist in neighboring Siberia. Our discovery contrasts to others in Alaska that are commonly know as bedrock placer gold deposits. Aggradational alluvial gold deposits contain gold particles disseminated through thick sections of stream gravels in contrast to bedrock placer deposits where thin but rich gold-bearing gravel pay streaks rest directly on bedrock surfaces. Aggradational placer gold deposits are generally more conducive to bulk mining techniques incorporating economies of scale than are bedrock placer gold deposits.

We consider Alaska to be the most favorable jurisdiction in the United States for the development of mining projects. Our Chandalar property lies within politically favorable terrain, all either being on state land or land we own.  Alaska has honored its constitution’s mandate to encourage natural resource development by assisting miners with grants, low-interest loans, road/plant construction, a three-year mining tax moratorium, and a bottom-line tax write-off of the first $20 million in exploration costs for each new mine. The nation’s wealthiest state has no income or sales tax and distributes annual dividends to its citizens from the burgeoning $37 billion Permanent Fund (at December 31, 2007) established for its 604,000 eligible residents. Alaska’s favorable status may become tainted as recent activities by environmental groups have been promoting an agenda which would stop all mining activities within the state.  We believe that this movement will not gain traction, but such activities may point toward possible heightened scrutiny of future mining projects.

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Location, Access & Geography of Chandalar

The Chandalar mining district lies north of the Arctic Circle at a latitude of about 67°30'.  The district is about 190 air miles north of Fairbanks, Alaska and 48 air miles east-northeast of Coldfoot (Map 1).  The center of the district is approximately 70 miles north of the Arctic Circle.  

Access to Chandalar is either by aircraft from Fairbanks, or overland during the winter season only via a 60-mile-long trail from Coldfoot to Chandalar Lake and then by unimproved road to Tobin Creek on our property.  Multiengine cargo aircraft can land at the state-maintained 4,700 foot airfield at Chandalar Lake or at our 4,400 foot Squaw Lake airstrip. Coldfoot is an important road traffic service center on the Dalton Highway.  The Dalton Highway, which parallels the Trans-Alaska Pipeline, is the only road to the Prudhoe Bay oil fields on Alaska’s North Slope, and it is part of the state’s highway network.

It is our assessment that all-weather road access into the Chandalar would dramatically enhance the economics of exploration for and development of gold deposits on our mining claims. The state of Alaska recently obtained a right-of-way access into the Chandalar area. On April 11, 2005 the State of Alaska (the plaintiff) filed a lawsuit against the United States and sixteen companies and individuals (the defendants) to gain quiet title to the state’s rights-of-way for the Coldfoot to Chandalar Lake Trail. This historic trail was originally established by miners working their Chandalar district prospects. The State of Alaska and all defendants agreed to a pre-trial settlement of the action. The settlement was then agreed to by a U.S. District Court Judge on January 9, 2007, making it a binding final judgment. This judgment creates a permanent, sixty-foot wide public highway right-of-way for the Trail. It also gives the State of Alaska until October 1, 2008 to establish the exact location of the route using a survey-grade Global Positioning System.

Map 1 – Location of the Chandalar, Alaska Mining District

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We believe this judgment now opens a door of opportunity for us to promote state-sponsored road construction into our Chandalar gold property, and the two million acres of state land surrounding it.

This lawsuit represented a re-assertion of traditional access rights across federal land gained at the time of statehood, and was intended to set precedence for establishing the state’s unrestricted right-of-way to more than 600 other similarly qualified historic trails within Alaska as established by Revised Federal Statute 2477. However, this settlement without trial avoided the possibility of setting such a precedent. The final judgment does not specify the Coldfoot to Chandalar Trail to be an RS 2477 route, but it does say that it is to be treated as if it were one.

A study was conducted in support of the litigation between the State of Alaska and the U.S. Department of Interior over rights-of-way on historic trails and roads originating from Section RS 2477 of the 1867 Mining Act. A report entitled History of the Caro-Coldfoot Trail (RST 262) and the Coldfoot-Chandalar Trail (RST-9) was prepared by the Alaska Department of Natural Resources (DNR), Division of Parks and Outdoor Recreation, and Office of History and Archaeology Report Number 117, by Rolfe G. Buzzell, Ph.D., Historian. The report is an in-depth history of mining and trail use in the Coldfoot-Caro-Chandalar areas from the 1890s to the present. It is not a copyrighted document, and the interested public can access it on our web site at www.goldrichmining.com.

Geographically, the Chandalar district is situated in rugged terrain just within the south flank of the Brooks Range where elevations range from 1,900 feet in the lower valleys to just over 5,000 feet on the surrounding mountain peaks. The region has undergone glaciation due to multiple ice advances originating from the north and, while no glacial ice remains, the surficial land features of the area reflect abundant evidence of past glaciation.  The district is characterized by deeply incised creek valleys that are actively down-cutting the terrain.  The steep hill slopes are shingled with frost-fractured slabby slide rock, which is the product of arctic climate mass wasting and erosion.  Consequently, bedrock exposure is mostly limited to ridge crests and a few locations in creek bottoms. Vegetation is limited to the peripheral areas at lower elevations where there are relatively continuous spruce forests in the larger river valleys.  The higher elevations are characterized by arctic tundra.

  Map 2 – Chandalar Mining Claim Block

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Snow melt generally occurs toward the end of May, followed by an intensive, though short, 90-day growing season with 24 hours of daylight and daytime temperatures that range from 60-80° Fahrenheit.  Freezing temperatures return in late August and freeze-up typically occurs by early October.  Winter temperatures, particularly in the lower elevations, can drop to -50° F or colder for extended periods.  Annual precipitation is 15 to 20 inches, coming mostly in late summer as rain and during the first half of the winter as snow. Winter snow accumulations are modest. The area is essentially an arctic desert.

Chandalar Mining Claims  

We have a block of contiguous mining claims at Chandalar that cover a net area of about 17,100 acres (26.7 square miles) (Map 2), and which are maintained by us specifically for the exploration and possible exploitation of placer and lode gold deposits. The mining claims were located to cover most of the known gold bearing zones within an area approximately five miles by nine miles. Within the claim block, we own in fee 426.5 acres as twenty-one approximately 20-acre patented federal lode claims, one 15.7-acre patented federal placer claim, and one 5-acre patented federal mill site.  In addition, there are twenty-nine Traditional and MTRSC 40-acre State of Alaska claims lying largely within one-hundred-five 160-acre MTRSC claims, which are also State of Alaska claims.  The federal patented claims cover the most important of the known gold-bearing structures. Both classes of state mining claims, totaling one hundred thirty four Traditional and MTRSC claims, provide exploration and mining rights to both lode and placer mineral deposits. Unlike federal mining claims, State of Alaska mining claims cannot be patented, but the locator has the exclusive right of possession and extraction of the minerals in or on the claim.

Holders of any class of State of Alaska unpatented mining claims are required to complete a minimum amount of annual labor on each claim and to additionally pay an annual rental on them.  In the case of a claim block or group where the claims are adjacent, the total amount of required annual labor is determined by multiplying the number of claims by the amount required for an individual claim, and the excess value of labor expended on any one or more of the claims can be applied to the labor requirements on the other claims within the block or grouping.  The amount of required annual labor work varies with the size and class of mining claim and the amount of annual rental payable varies with the size, type and age of the claim. Labor expenses in excess of the annual requirement can be carried forward as a credit for up to four years.  However, in the case of our Chandalar property, we have chosen to carry forward any excess value credit separately for each of our two classes (Traditional and MTRSC) of state mining claims. Also, the holder of a state mining claim may make a cash payment to the state equal to the value of labor required in lieu of doing the assessment work.

In the 2003/2004 assessment year, which ended on August 31, 2004, we spent $46,970 on work that qualified for annual labor requirements. Our combined excess value credit for the two classes of claims was $54,595, with $14,400 expiring on September 1, 2005, $18,425 expiring on September 1, 2006, and $5,073 expiring on September 1, 2008.

In the 2004/2005 assessment year, which ended on August 31, 2005, we spent $73,072 on work that qualified for annual labor requirements. Our combined excess value credit for the two classes of claims was $88,067, with $18,425 expiring on September 1, 2006, $5,073 expiring on September 1, 2008, and $64,569 expiring on September 1, 2009.

In the 2005/2006 assessment year, which ended on August 31, 2006, we spent $1,156,621 on work that qualified for annual labor requirements. Our combined excess value credit for the two classes of claims is $1,200,663, with $5,073 expiring on September 1, 2007, $38,969 expiring on September 1, 2008, and $1,156,621 expiring on September 1, 2009.

In the 2006/2007 assessment year, which ended on August 31, 2007, we spent $1,742,768 on work that qualified for annual labor requirements. Our combined excess value credit for the two classes of claims is $2,905,536, with $2,373 expiring on September 1, 2008, $8,038 expiring on September 1, 2009, $1,152,357 expiring on September 1, 2010, and $1,742,768 expiring on September 1, 2011.

Our annual holding costs for the entire block of mining claims will vary according to the number, type and age of the state mining claims that we maintain in a particular year. Our claim block and is not subject to any local taxation, including our private property (patented federal mining claims), as it does not lie within any borough or municipality.  

The annual labor requirement for our Chandalar holdings is $100 per each Traditional 40-acre claim and $400 per each MTRSC 160-acre claim. Currently, the combined annual labor requirement for our claims is $44,900.

The current annual rental fee for our state mining claims is $130 for each Traditional 40-acre claim,$25 for each MTRSC 40-acre claim, and $100 for each MTRSC 160-acre claim. The total annual rental obligation for the Chandalar property is currently $13,255, and the rental fees are fully paid through November 30, 2008. The amount of claim rental fee is dependant on an age bracket in which the claim falls. Because of this combined with the claims added in 2008, our claim rental fees for 2009 will increase to $21,715

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The total current annual combined mining claims assessment work and rental holding costs for our Chandalar property is $52,355, which are included in mineral property maintenance expense and professional services expenses on our statement of operation.  The details of our mining claims holding costs are shown in Table 1.

Our former management holds a mineral production royalty reservation on some mining claims within the Chandalar claim block.  It is a 2% royalty defined as a gross product royalty on placer gold mining and as a net smelter return on lode mining production. The royalty on placer gold production is an “in kind” royalty to consist of the coarsest and largest particles of all gold produced. All of the patented federal mining claims are subject to this royalty, as are 19 of the 27 Traditional unpatented state mining claims. The royalty is applicable to about 1,185 acres of the 17,100 acre property.  We have an option agreement to purchase the royalty for a one time cash payment of $250,000.  The option terminates on June 23, 2013, if not exercised on or before that date.

Chandalar Geology

Lode gold occurs at Chandalar as quartz veins within large northwest-trending shear zones in Paleozoic (probably Devonian age) schist.  To date some forty gold-bearing quartz veins or swarms of gold-bearing quartz veins have been identified on the property.  Our geologists classify the Chandalar gold-bearing quartz veins as sediment-hosted, orogenic, low-sulfide mesothermal deposits. The quartz veins are classified as being of mesothermal or metamorphic orogenic origin.  Mesothermal vein systems commonly have great vertical range, and at Chandalar the vertical extent of the gold mineralization is known to be in excess of 1,500 feet.  The gold-bearing quartz veins are typically one to six feet thick, with exceptional thicknesses of up to twelve feet in parts of the Mikado mine.  Portions of some of the veins where they display a ribbon appearance are of particularly good gold grade, often in the multi-ounce per ton range.   Some of the veins are known to be more than a thousand feet long, and occur intermittently along laterally extensive shear zones; the Mikado shear for example, has been identified over a strike length of six miles. The main area of economic concern is demonstration of good continuity of the quartz lodes and of the gold occurrences within those quartz lodes. A thick blanket of frozen soil, rock scree and talus and landslides covers an estimated 80 to 90 percent of the property, largely concealing the gold-quartz veins, making their exploration and discovery challenging..

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Map 3 – Chandalar Mining Prospects Locations

Our patented lode mining claims contain the most important gold-bearing structures in the district, as far as is now known.  Although gold showings in the Chandalar district have long been recognized in published literature, exploration necessary to establish the extent of mineralization has never been accomplished.  The principal evaluation work done in the past on the lode deposits was done on the Mikado, Summit, Little Squaw, and Eneveloe-Bonanza mines by lessees in the late 1970’s early 1980’s.  Each of these mines has been minimally worked by means of several hundred feet of underground workings aggregating almost 2,000 feet in all.  Limited surface work in the past within the district established the existence of gold-bearing zones on other prospects similar to the veins found at these mines.  Sufficient work has never been accomplished on any of the veins and gold-bearing zones to define the presence of ore reserves that meet the criteria of SEC Industry Guide 7.

Drilling of the veins by previous operators is either extremely limited or, in most cases, non-existent.  An aureole of weak gold mineralization may occur around some of the gold-quartz veins where chloritically and sericitically altered rocks contain stockworks and sections of thin sheeted quartz veinlets.  These aureoles, which extend outwards as much as 100 feet at the Mikado mine, have never been evaluated for bulk tonnage mining potential.  The Mikado mine is one site that may host gold-quartz vein deposits within a bulk tonnage type deposit. Substantial drilling and engineering work will be required to determine if such a potential deposit exists in a commercially viable quantity.

Map 3 shows the names and relative locations of gold prospects within the Chandalar claim block that are the subject of the following review

2004 and 2005 Chandalar Field Programs

During the 2004 summer field season we conducted a two-phase reconnaissance surface and underground sampling program on the Chandalar property. A deep soil sampling technique developed by us was employed to identify gold anomalies that may reflect hidden gold-quartz veins.  The highlight of the first phase was the re-discovery of the historic Pioneer prospect.  The Pioneer quartz vein is partially exposed in some old trenches and prospect pits. The Pioneer prospect, which is associated with a major shear zone at least three miles long, contains gold values of unknown extent.  A channel sample across the vein assayed 2.30 ounces of gold per ton over a width of 2.5 feet.

The 2004 summer field program was augmented by a structural geology study of the Chandalar district using existing high altitude aerial photography. The study was done by BlueMap Geomatics Ltd. located in Vancouver, British Columbia. The gold bearing quartz veins on the property occur within large shear zones or faults that form lineaments. Major structural

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intersections may be a controlling factor in the emplacement of the gold mineralization. BlueMap Geomatics identified numerous pronounced linears that they interpreted to represent deep-seated faults. This work was useful in defining sites for follow up exploration in 2005 that resulted in new prospects (Rock Glacier and Prospector East).

Similar surface prospecting work and mineralization site appraisals continued during the summer of 2005, although at a lower level of activity for lack of sufficient funding.  A summary description of the principal mines and prospects examined during the 2004 and 2005 summer field seasons was prepared, and drilling targets were selected from that information which is available in a Prospectus filed on August 28, 2006 with the SEC.

Our Chandalar mining claims cover all or major portions of four main drainages and lesser parts of a fifth drainage that radiate from the areas in which the gold-bearing quartz veins and associated shear zones are located. They include most of the areas where placer gold mining operations occurred in the past, as well as substantial portions of these drainages that have never been mined.  The placer gold deposits in the Chandalar district are characterized by concentrations of native gold that occur in multiple horizons in second and third order streams in the vicinity of auriferous quartz lodes.  At least 76,700 ounces of gold are known to have been produced from four placer deposits at Chandalar, with recovery of some nuggets, the largest of which was 10.6 ounces, according to records in our possession.  The placer gold deposits were exploited by both open-cut and underground drift mining methods limited to unconsolidated but frozen gravels.  Limited drilling by previous operators indicates that certain areas on the property, especially along Little Squaw Creek and Big Squaw Creek have potential for the discovery of significant quantities of placer gold.  Substantial drilling and engineering work will be required to determine if such potential deposits exist in commercially viable quantities.

Progress was made during the 2004 and 2005 Chandalar project summer field seasons in defining geological features helpful in planning future drilling campaigns. The primary focus of the 2005 geological field program was to technically assess a suite of the prospects defined by the 2004 program. These programs methodically built a suite of substantive drilling targets through prospect scale geologic mapping and intensive prospect site sampling at some 35 sites.  We believe that this work was successful in effectively advancing ten quartz lode gold prospects to the drilling stage for initial drilling in 2006. Drill targets include both quartz vein underground deposits and targets for deposits of disseminated gold within hydrothermally altered wall rocks of quartz veins, which may be amenable to surface bulk mining methods.  The Project Manager at the time, Mr. Barker, advanced a proposal to make an initial test of the ten targets with 10,000 feet of drilling in 2006, which, following appraisal of the results, was to have lead to an intensified drilling proposal on selected hardrock sites in 2007.  The aim of the 2007 drilling would be to begin establishing a mineral resource on some sites where good drill intercepts were obtained. Unfortunately, we were unable to obtain a diamond core drill in 2007 to test those sites.

2006 Chandalar Program Overview

The planned 2006 technical program was based on geological field work completed during 2004 and 2005, and the recommendations of our Chandalar Project Manager and registered professional geologist, James C. Barker. Mr. Barker’s recommendations are contained in a report dated January 2, 2006, which is available on our website at www.goldrichmining.com.

The main goals of the 2006 Chandalar field season were:

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Renovation and expansion of the Chandalar infrastructure, including roads, airstrip and camp facilities.

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A district geologic map at 1:20,000 scale.

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Geologic examination (mapping, sampling, trenching) of the as many of the 35 gold prospects as possible.

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Thirty or more reverse circulation drill holes for 10,000 feet on ten targets.

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An initial examination of the major placer gold deposit on Little Squaw Creek to produce a forward going evaluation plan.

All of the 2006 geological field and drilling data, together with assay results tables, has been compiled and the Project Manager, Mr. Barker, completed a written report detailing the findings that the program. His report, Annual Report of Findings for 2006, dated March 15, 2007, is available on our website at www.goldrichmining.com.

We began our 2006 Chandalar exploration program late in the first quarter of 2006 by mobilizing heavy machinery, camp construction materials and supplies by “cat train” over the Coldfoot to Chandalar winter haulage trail to a site within our Chandalar mining claim block. The field program was supported throughout the summer by aircraft, and the program was also

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demobilized by aircraft late in the third quarter. A 20-man exploration and drilling camp was set up. We reconditioned and upgraded the Squaw Lake airfield to accommodate multi-engine aircraft and established an adjacent bulk fuel offloading and temporary storage depot.  

An Anchorage, Alaska based drilling service company was contracted to perform the drilling at Chandalar using a reverse circulation (RC) drilling unit. RC drilling produces chips of rock called cuttings. Ultimately, at 7,763 feet, the drilling fell short of its 10,000-foot goal because of a combination of difficult factors.

Mr. Barker directed the drilling as well as the Company’s survey crews, which conducted detailed geological mapping and sampling of many gold-quartz vein prospects occurring across the Chandalar property. Approximately 950 soil and rock samples were collected during the field season and submitted for assay. In conjunction with this, four excavator trenches totaling 300 feet in length were dug for bedrock sampling.  All of this work focused on proving-up the continuity of quartz veins. It also found that many of the 35 individual gold-quartz vein prospects are linked, forming sets comprising ten separate and very long quartz vein/shear zone systems.

In the spring of 2006, we entered into a geological mapping service contact with Pacific Rim Geological Consultants of Fairbanks, Alaska. By October, their geological team had completed a 1:20,000 scale geological map of the Chandalar mining district, encompassing about fifty square miles. This work has resulted in a technical report to us dated January 23, 2007 and titled “Geology of the Chandalar Mining District, East Central Brooks Range, Northern Alaska”. One objective of this work has been to identify any linkage between gold mineralization and specific geological features that may be helpful in further exploring the gold deposits of the district. The report contains twelve enumerated observations and recommendations that bear on the mineral endowment of our property, and the Chandalar district as a whole. The report singles out calcium carbonate stratigraphic units within turbidite stratigraphic units as being an important mineralization control where the fault feeder zones cross cut them.

2006 Chandalar Sampling and Assaying Parameters

In 2006, we took about 2,100 various types of samples for assay, including 1,128 drill samples. All of the 2006 assay results for rock, soil, stream sediment and drill samples reported in this document were collected by us or independent contractors working for us.  All of these samples are preliminary and strictly of a reconnaissance nature.  In many cases the samples were not taken across the full width of the quartz veins, and therefore the samples do not represent a quantitative measurement of the gold content of the veins, nor should they be interpreted to indicate that mineralization is present in a quantity and grade that would represent an economically viable gold deposit. The soil samples are also strictly of a reconnaissance nature, taken to define zones of gold mineralization concealed by soil and vegetation cover.  Geochemical analysis using atomic adsorption methods were applied to the soil and stream sediment samples.  Our drilling was done using a reverse circulation percussion drill. We collected a continuous progression of five-foot sample intervals of the drill cuttings for the entire length of each hole.

All of our rock and drill chip samples were assayed by ALS Chemex USA Inc. in Sparks, Nevada using fire assays with a gravimetric or Atomic Adsorption finish for gold.  (ALS Chemex operates under ISO certification and is a global provider of assays to mineral exploration and mining companies.)  Of the 1,128 samples of drill cuttings, metallic screen assaying procedures were applied to 130 of the samples. Metallic screen assaying is an industry accepted assaying procedure that is used to mitigate possible gold nugget effects on the assay results.

Approximately eight percent (8%) of the drill cuttings samples and two and one-half percent (2.5%) of the surface rock and soil samples were involved in a check assay program we conducted. A series of coarse rejects and pulps from samples assayed by our primary assayer, ALS Chemex, were submitted to Alaska Assay Laboratory in Fairbanks, Alaska for re-assay and statistical comparisons to the original assay received from Chemex, and previously publicly reported by us. A scatter gram showed most of the re-assays to be slightly higher, a factor we have attributed to employment of slightly different sample preparation techniques. We are satisfied the check assay program confirms the quality of the original assays.

None of the assays we report in this document are to be interpreted to imply the presence of ore reserves, including those of the drill cuttings. Substantial additional sampling, drilling and geological and engineering work would have to be completed to confirm the presence of proven and probable reserves that meet SEC Industry Guide 7 criteria, and no assurance can be given that any such reserves will eventually be defined on our Chandalar property.

On July 22, 2006 we initiated a drilling program intended to provide an initial, or reconnaissance, test of some ten of thirty targets developed by previous geological field work.  In all, 7,763 feet of RC drilling was accomplished in thirty-nine drill holes on nine separate prospects. Ten of those holes were abandoned or lost prior to reaching their targets due to poor ground conditions, and the planned drilling of the Pallasgeen prospect was not accomplished. All of the drill holes were drilled at angles designed to intercept their targeted quartz veins or mineralized structures at right angles in order to obtain their approximate true widths. The prospect sites and the targeted mineralized structures where the 2006 drilling took place and

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detailed drilling data are presented in Mr. Barker’s report titled “Chandalar Mining District, Annual Report of Findings for 2006”, March 15, 2007 report which is available on our website at www.goldrichming.com.

2006 Chandalar Prospects Drilling Conclusions

The 2006 drilling program was basically successful in meeting its objective. It was a scout program using percussion RC drilling to make initial tests on as many prospects as possible in order to determine which of them may be worthy of continued, more detailed drilling.  Diamond core drilling is now necessary to define shoots of mineralization. An analysis of the drilling sample assay results for each of the nine prospects concludes that follow-up diamond core drilling should be accomplished on four of them as soon as sufficient financing is obtained and an appropriate drill rig can be contracted. These are the Little Squaw, Summit, Eneveloe and Ratchet Ridge. Extensive trenching (using our excavator) with attendant geologic mapping and rock chip sampling is warranted on the Jupiter and the Kiska. No further work was planned on the Crystal or Uranus, and those drill sites have been reclaimed.  Complete reports of the 2006 drilling and trenching results are included in our 2006 SEC Form 10-KSB.

Due to the demand for core drilling machines for 2007, we were unable in securing a suitable rig to complete the planned diamond core drilling on the four prospects listed above.  Our tentative exploration plan for 2008 called for drilling these prospects. Unfortunately, we were not able to obtain sufficient funding for drilling in 2008. Any drill tests of these targets is contingent on obtaining funding in future years.

Little Squaw Prospect

First explored in 1909, a small shoot of mineralization grading 53.08 ppm gold (1.55 oz Au/t) was found in an auriferous vein quartz containing visible gold .  Our records indicate at least 625 ounces of gold have been produced.  Old exploratory mine workings include two adit levels, each about 300 ft long, connected by a winze, and a 76-foot raise to the discovery outcrop. In 2006 we drilled seven reverse-circulation holes totaling 1,608 feet to explore the known and suspected auxiliary, or side veins.

Quartz vein mineralization is localized along a south-dipping fault, and on the 100 Level, gold is confined to the footwall zone of a composite vein.  A 9 to 12 inch banded ribbon gold-quartz zone contains disseminated and thin seams of arsenopyrite, mica, scorodite, pyrite, and trace galena.  The vein can be traced westerly about 1,800 feet from the 100 Level, and is open to extension beyond that.  Aerial imagery and float mapping tentatively extends the Little Squaw shear zones along a 110° strike eastward to the Crystal prospect, about one mile east.  

Two, and possibly three or more veins, are present at the Little Squaw mine; the principal veins are the 100 Level vein on the north, and a south vein about 125 feet south of the 100 Level vein.

We drilled seven holes from four sites spaced at 150-foot intervals for 600 feet along the Little Squaw structure to test the known quartz vein system at depth. Drill hole LS 2 cut the best intercept: 20 feet of 4.21 ppm gold (0.123 oz Au/t), including 5 feet of 10.75 ppm gold (0.314 oz Au/t). A re-assay of the sample pulp by the check laboratory found 16.15 ppm gold (0.472 oz Au/t).  Hole LS 4 cut the vein but reported only a single 5-foot interval of 0.64 ppm gold (0.019 oz Au/t); water and lost circulation were encountered in the vein and gold loss is suspected.  The 1982 hole LS3 reportedly cut the south vein with 6.16 ppm gold (0.18 oz Au/t) over 70 feet. Hole LS 5 also cut the south vein with a 5-foot interval of 3.38 ppm gold (0.099 oz Au/t); hole LS 35 only entered the vein with the last few feet of the available drill rod, unable to return a reliable sample.  Hole LS 36 was targeted on the vein but also failed to reach it. It is apparent from the combined 1982 and 2006 drill data that the vein on the 100 Level may be mineralized over a longer strike length and depth than previously known.  

Summit Prospect

Exploration of the Summit mine area was first reported prior to 1913 and by 1982 a shaft, multiple trenches, several drill holes, and three adits had been driven during several episodes of prospecting. There are Company reports that 1,400 tons were produced at a grade of 44.14 ppm gold (1.289 oz Au/t) and 142 tons at a grade of 165.07 ppm gold (4.820 oz Au/t).  A previously reported shoot of mineralization on the 100 Level was re-opened in 2006 and it is estimated that about 800 tons had been mined from a stope into this shoot, which remains open to depth.

Summit prospect is a large fault or shear zone 100 or more feet wide that contains multiple veins and lenses of gold-bearing quartz. In 2006, we drilled seven reverse-circulation holes totaling 1,555 feet along a 1,200-foot segment of the mineralized system. Drilling near the old mine workings indicates very good discovery potential.  There, good exploration potential is indicated by results in SUM 7, 8, 9, and 10 as shown by the length times grade weighted averages in the table below.

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Definition and step out drilling are required to delineate the continuity of the better grade drill intercepts. SUM 12 is an intriguing hole that bottomed in a 95-foot section of weak gold mineralization with a weighted average of 0.28 ppm gold (0.008 oz Au/t), the last 35 feet of which is 0.44 ppm gold (0.013 oz Au/t); the hole bottomed in mineralized rock. The 2006 drilling did show that lower grade gold values are present in wider zones within the carbonaceous schist, as in hole SUM 12, and not associated with large quartz veins.  

The results of the 2006 drilling, trenching, and soil samples indicate potential for discovery of a large tonnage, bulk-mineable type of deposit on the Summit prospect. The multi-veined, sheared and hydrothermally altered structure has been traced for 4,500 feet of strike length, and is open in both directions and to depth. Widely spaced orientation drill holes have probed less than a quarter of its identified strike length.

Kiska Prospect

A 1945 Company report mentions a stibnite-quartz showing referred to as the Little Kiska on a hillside between the Mikado and the Star claim groups, but no specific location is given. In 2006 we found that gold could be readily panned from soil along a projected strike of a buried quartz structure in the general vicinity of the old reports.  We accomplished a soil sample grid that was successful in outlining a geochemical anomaly averaging 1.03 ppm gold (0.030 oz Au/t) over at least 75 feet by more than 1,700 feet. We cut one trench, where rock chip sample assays ranged from 1.25 to 422.00 ppm gold (0.037 to 12.322 oz Au/t) over scattered narrow intervals. It indicates the gold in soil anomaly is caused by of a wide zone of many small irregular and intermittent quartz veins and lenses and zones of fault gouge with gold.

Seven scout drill holes were drilled from five sites totaling 1,435 feet were subsequently drilled along the length of the Kiska soil geochemical anomaly, including five holes that ended in gold mineralization.  Of the seven holes, four did not reach their intended depth. Anomalous gold values were present in most of the drill holes, but assays were quite low.  The two best drill hole intervals are 10 feet in KIS 17 with 1.10 ppm gold (0.032 oz Au/t) and 20 feet in KIS 18 with 0.70 ppm gold (0.021 oz Au/t).

We believe the Kiska prospect deserves continued examination by an extensive trenching program with emphasize on identifying bulk tonnage potential in future programs.

Eneveloe Prospect

Eneveloe is a large gold-bearing quartz vein that has been traced for several thousand feet by geological mapping. We are in possession of reports dating back to 1911 showing rock chip samples of unspecified length assaying 1.30 ppm gold (0.330 oz Au/t) to 29.80 ppm gold (0.870 oz Au/t) gold taken from the 15 to 20-foot wide quartz vein outcrop that is the present site of an old tunnel. In 1981 a former lessee of the property drilled several diamond drill core holes into this quartz vein showing generally encouraging results. In 2006, we drilled five reverse circulation (RC) holes totaling 910 feet from two sites about 300 feet apart on the same mineralized structure.

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In our drill hole ENV 20 the interval between 60 feet to 85 feet averages 5.85 ppm gold (0.171 oz Au/t) within which the interval 60 to 65 feet assayed 25.41 ppm gold (0.742 oz Au/t).  Hole ENV 21, angled to the east of the others, also reported the quartz vein zone, albeit thinner and lower grade, which averaged 2.60 ppm gold (0.076 oz Au/t) over 15 feet.  Hole ENV 22 had a weak intercept of 5 feet of 0.78 ppm gold (0.023 oz Au/t), but the hole was stopped short of its target.  Based on the combined data, mineralization on the vein system appears to extend west farther than previously thought.  A stream sediment from Robbins Gulch, 1,800 feet west of the drill site, assayed a very high 0.60 ppm gold.

Holes ENV 26 and 27 were drilled to search for an eastward extension of the aforementioned shoot of gold mineralization.  Neither hole showed any significant intercepts, suggesting either it dissipates to the east, or the zone of quartz veining has been offset to the north, as suggested by the geochemically anomalous gold in the many soil values in that area.

Continued drilling of the Eneveloe prospect is warranted in the future, particularly to chase the down dip extension of the mineralization in hole ENV 20, and to scout the vein to the west of the drilled area.  

Jupiter Prospect

Jupiter is another large gold-bearing quartz vein close to and sub-parallel to the Eneveloe vein. Rock chip sampling shows it contains about 3 ppm gold (0.088 oz Au/t). Three holes were drilled in 2006 to target a talus-covered projection of the vein. Only drill hole JUP 25 was successfully completed. The Jupiter vein remains open to exploration to the east and west, where geological mapping indicates it extends for hundreds of feet. Continued exploration by trenching is warranted.

Ratchet Ridge Prospect

The 2006 drilling found the first occurrence of hydrothermally altered greenstone intrusive rock that has been recorded on the Chandalar property. Drill hole RR 33 encountered what appears to be a geochemically gold enriched rock suspected to be listwanite. Listwanite is named after the mafic rock in the Mother Lode gold mining districts of northern California where its silicate minerals have been replaced by carbonate minerals during gold mineralizing episodes. There, it usually occurs near shoots of gold mineralization within quartz veins where they approach mafic intrusives. Although this drilling discovered only geochemically anomalous gold mineralization, Ratchet Ridge remains an intriguing prospect deserving of additional drilling.

Crystal Prospect

Early day prospectors discovered the Crystal prospect, and by 1908 a four-ton bulk sample had been mined from quartz veins and packed to an improvised stamp mill at nearby Spring Creek.  According to reports in the Company’s records, the shipped mineralized rock mill recovery averaged 1,464.19 ppm (42.574 oz Au/t) gold, with total production of 188.32 ounces of gold.  A 2004 chip sample from a 0.67 ft-wide banded zone at the Crystal assayed 113.20 ppm gold (3.305 oz Au/t). There are several quartz veins present at the Crystal, however, bedrock of gray micaceous schist and black carbonaceous phyllite to schist is complexly faulted and individual veins cannot be traced more than a few tens of feet.  In 2006, we attempted two reverse-circulation drill holes; hole CRY 30 was to undercut the old workings and hole CRY 31 was targeted to undercut a quartz vein we exposed by trenching about 200 feet to the east of CRY 30.  Neither drill hole intercepted their intended targets, probably because they are off set by faults. The last 35 feet of drill hole CRY 30 intersected geochemically gold anomalous altered carbonaceous schist with minor mixed quartz and hematitic alteration. This rock is similar to what was drilled in Summit drill hole SUM 12, and could have touched on a large zone of disseminated gold mineralization. Additional trenching and structural mapping and sampling of the veins to the west are planned.

East Little Squaw Prospect

Five holes were drilled in search of the eastern extension of the Little Squaw vein system. The first, LS 35, was positioned to intersect the projection of the main vein about 100 feet east of, and 120 feet deeper than the hit in LS 2, which intersected 70 feet of 1.30 ppm gold (0.038 oz Au/t) including 5 feet of 10.75 ppm gold (0.314 oz Au/t).  The last 5 feet of LS 35 started into the quartz vein zone, but it did not penetrate the vein as the limits of the drill tooling had been reached. LS 36 was drilled from the same drill pad, but at a much different azimuth to test for outlying (hanging wall) veins. None were found. The last three holes were drilled about 700 feet east of LS 2 along the projection of the vein system within an area covered by landslide debris. Two of the holes were lost to difficult drilling conditions in the landslide debris, and a third was completed to depth without hitting any gold veins. The 2006 does not adequately test the prospective zone. Additional drilling is recommended for the East Little Squaw prospect on a low priority basis.

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Uranus Prospect

The two holes drilled on the Uranus were designed to probe for downward extensions of two sub-parallel gold-bearing quartz veins exposed in old prospecting pits. The holes did not show gold values of interest and no further drilling is justified on this prospect.

Un-drilled Chandalar Prospects

In addition to the 2006 field season drilling, field examination work continued on a suite of more than 27 other gold showings scatter over the Chandalar claim block. Detailed geological prospecting and evaluation was accomplished on some 18 of those having the following names: Pallasgreen-Drumlummon, Aurora Gulch, Big Creek Bowl, Big Squaw Creek, Bonanza, Boulder Creek, Chandalar, Indicate-Tonapah, Kelty-Caribou, Mellow Bench, Mikado-Big Tobin, Mikado Pedro, Northern Lights, Pioneer, Prospector East, Rock Glacier, St. Mary’s, and Woodchuck. Our examination work determined that no further work should be done on five of these prospects, which are the St. Mary’s, Mikado-Pedro, Boulder Creek, Big Squaw and Woodchuck. Evaluation work, including some geophysics, will continue on thirteen of the prospects in the future. The Pallasgreen-Drumlummon and Aurora Gulch show exceptional merit at this time, and are worthy of expanded comments as follows:

Pallasgreen-Drumlummon

The Pallasgreen-Drumlummon was on the docket to be drilled in 2006. However exceptionally muddy access roads prevented access to its drill sites. The Pallasgreen site shows a prominent outcrop of iron-stained quartz, first prospected in the early 1900s by a couple of small pits; the nearby Drumlummon does not outcrop. The two prospects are geologically similar and in close proximity, apparently displaced by a fault zone, and traceable for about one mile.

Typical of other district gold-quartz veins, the Pallasgreen-Drumlummon prospects are controlled by, and are aligned to, northwesterly altered shear zones striking 105° to 115°.  Quartz veins follow hydrothermal alteration zones 75 to 100 feet wide that exhibit magnetic low fields also striking northwest. Sampling of the Drumlummon included a soil grid in 2006, but only a few sporadic gold-arsenic anomalies were found.  Samples of vein material found in float contained 0.03 to 1.16 ppm gold (0.001 to 0.034 oz Au/t).

The principal quartz vein at the Pallasgreen is about 25 feet-wide and strikes 100° to 105º with a steep south dip.  The best assay of the vein is 3.93 ppm gold (0.126 oz Au/t) from a 1.0 foot-channel sample of the vein’s footwall. A close-by, parallel, 6 foot-thick vein contains clots of galena and arsenopyrite.  This vein strikes east to an exposure where a random chip assay reported 10.87 ppm gold (0.317 oz Au/t).  Water in Nugget Creek draining the prospect area is highly discolored from mineral content; two water samples contain anomalous zinc.

Aurora Gulch

We first identified this unique prospect in the 2006. There is no record or evidence of previous work having been done. The Aurora Gulch prospect represents a type of gold-arsenic mineralization that differs from the classical mesothermal quartz veins typical of the Chandalar district.  At the Aurora, geochemical gold-arsenic values with a distil antimony halo are concentrated in carbonaceous schist and dolomite below an altered structural contact with overlying gently folded greenstone sills.  The underlying metasediments are cut by one, probably two deep-seated west-northwesterly shear zones that are intersected by both northwest and northeast prominent faults. Geochemically anomalous gold values have been found in soil, stream sediment, and rock samples.  An area approximately 1,200 feet square of geochemically anomalous gold and arsenic is enveloped by a zone of variable sericite-silicic-hematite-carbonate hydrothermally altered schist, mostly underlying the lowermost greenstone sill. Highly geochemically anomalous antimony occurs on the perimeter of the gold geochemical anomaly. Gold mineralization observed to date occurs as pods and lenses of sulfide quartz distributed within sheared and isoclinally folded black schist.  A sample of several pieces of quartz veinlet stockwork in unfoliated dolomite seen only in float and collectively weighing about ten pounds assayed 38.80 ppm gold (1.248 oz Au/t).   

Aurora Gulch shows good potential for developing a target for a large disseminated type gold deposit that is not controlled by quartz veins, as is currently seen to be typical of the Chandalar district. Very little bedrock is exposed for examination. Most of the map area is talus or tundra covered; consequently, extensive trenching is the next logical step.

2006 Chandalar Placer Gold Deposit Evaluation

In conjunction with the end of our first seasonal lode gold exploratory drilling program on our Chandalar property, we retained the services of Mr. Jeffrey O. Keener to conduct a preliminary field examination of the placer (or alluvial) gold deposits on Little Squaw Creek and Big Squaw Creek. Mr. Keener is a well recognized consulting geologist and placer mining specialist in Alaska who has evaluated 38 Alaskan and western U.S. placer gold deposits, of which ten have been brought into production

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on his advice. Mr. Keener’s report to us comes under the letterhead of NordWand Enterprize, his private mineral exploration company, and is titled “Little Squaw Creek Placer Gold Deposit Preliminary Evaluation”, October 1, 2006.

Placers are secondary gold deposits derived by erosion of weathered outcrops of large lodes (gold-quartz veins) located up-stream. Placer gold consists of gold particles found as dust, flakes and nuggets in the gravel deposits of stream channels and creek beds. A number of placer gold deposits have been previously identified around the Chandalar property, where four creeks have seen historic placer gold production, mainly by “old timers” using hand mining methods. The recorded placer gold mining production at Chandalar exceeds 76,700 ounces, of which 29,000 ounces is documented to have come from small open-cut and underground (drift or tunnel) mining on Little Squaw Creek. Placer mining gold grades are measured in ounces per cubic yard (opy) of gravel, with results usually in the hundredths (0.01’s) of an ounce range being of potential economic range at current gold prices. The historic underground mining on Little Squaw Creek averaged 0.96 opy. In the last decade, independent miners, who had leased creeks on the Chandalar property and used mechanized placer mining equipment, reported their “break-even” gold grade was between 0.02 and 0.03 opy.

During his field examination, Mr. Keener mapped and sampled old miners’ workings, and excavated sampling pits on Little Squaw Creek to depths of 20 feet. He used an analytical gold panning technique to sample and measure the gold contents of various sites, finding gold grades of between 0.017 opy and 0.157 opy in various strata within the gravel beds.  His immediate aim was to investigate the recovery of gold from a reconnaissance drilling program performed in 1997 by a former lessee, Daglow Exploration, Inc. (now a defunct Australian public company). A November 11, 1997 report authored by Mr. Gary Fitch, Economic Geologist, and titled “Placer Gold Drilling and Evaluation, Little Squaw Creek and Big Squaw Creek, Chandalar Mining District, Alaska”, provides the Daglow drilling results. Daglow supplied the report to us under terms of their mining lease. It remains as an internal Company document. Mr. Fitch estimated that a possible deposit (i.e. mineralized material) of 2.3 million cubic yards of placer gravel at an average grade of 0.084 opy may remain unmined in Little Squaw Creek. (We note that this reference is not an SEC Industry Guide 7 compliant reserve.)

Mr. Keener reported that a mine model is a pre-requisite in weighing economic criteria against the any potentially drilled resource. He noted that in 2002, the U.S. Bureau of Land Management conducted a pre-feasibility study of mining in the Koyukuk Mining District, just west of the Chandalar region (Coldwell, J.R., BLM Tech. Rpt. 38). They estimated that for a large placer mine supported by a 100-mile long winter trail, a paygrade of  $3.26 per loose cubic yard for all material moved would be required to break-even. Applying the average gold price of $310 per ounce for 2002, the cut-off grade is 0.011 ounces per cubic yard. We estimate that average grades of 0.010 opy might be profitable at Chandalar given current gold prices and using bulk mining methods.

The basic conclusion of Mr. Keener’s report is summed up in the following quotes taken from his report: “The presence of placer gold deposits on Little Squaw Creek is well-established and clearly has the potential to provide a significant gold resource for the Company ...... If proven, these deposits can be brought into production within a relatively short time. Furthermore, additional placer resources that may occur on nearby gold-bearing creeks controlled by the Company will substantially enhance the value of the Chandalar mineral properties.”

Mr. Keener recommended in his report that a drilling program be conducted in 2007 to define our placer gold resources with the goal of developing probable and proven reserves on the Little Squaw Creek stream. He also advised reconnaissance drilling should commence on Big Squaw Creek to explore for “pay streaks” in the deeper gravels downstream of the old workings. He noted that additional placer exploration targets on the Company’s properties have also been identified and should be drilled in the future.

Completion of the 2007 Exploration Program

Mr. Barker, Project Technical Manager, has provided us with a series of short geologic prospect evaluation reports from which much of the information below is drawn.

Prior to the 2007 exploration season, despite our best efforts, we were unable to secure a diamond core drill contract to execute the previously identified drill plan on the hard rock prospects. In order to advance the hardrock exploration in both a time and cost effective manner, management revised the 2007 hardrock exploration plan to focus on other activities which could be concluded with the equipment available to us by ownership or by contract. That work has enhanced the hard-rock exploration targets, and diamond core drilling will be accomplished in the future, provided funds are available and a drilling service company can be retained.

We were able to execute the placer gold drilling program as intended using a contracted reverse circulation rotary drill, as reported below.

Our 2007 accomplishments fall into three key categories: 1) discovery and drilling delineation of a large placer gold deposit in Little Squaw Creek, 2) development of hard-rock gold prospects by excavator trenching at a number of promising sites along

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major geologic faults crossing the property, and 3) completion of a geophysical program related to enhancing the hard-rock gold exploration program.

Additionally, we completed considerable upgrading of the local infrastructure, including new roads, an upgraded 25-man exploration base camp and extension of the Squaw Lake airfield to over 4,200 feet in length (now 4,400 feet).  The Squaw Lake airstrip can now accommodate large, multiengine aircraft, which will allow for air transportation of larger pieces and volumes of cargo, substantially reducing our air freighting costs and dependency on transportation of supplies and equipment over the winter ice road, which is available generally only from December 1 to April 15 of each year, depending on spring ice breakup.

2007 Hard-Rock Exploration

Historical workings and records clearly indicate that gold deposits of economic significance have been mined in the past on the Chandalar property. These workings were limited to exposed surface veins of quartz. The veins sporadically occur within large deep-seated fault structures often miles in length that cut across the property. Over the last four field seasons we have undertaken exhaustive geological mapping and rock and soils geochemical surveys involving taking some 3,285 surface samples for assay to establish where these interesting veins may be reflecting a substantial gold deposit, perhaps with large associated zones of disseminated gold mineralization either in their enclosing rock formation or in underlying metasedimentary formations.

During the 2007 exploration season, we executed on our planned trenching program on sixteen of the now forty (five more were discovered in 2007) hard-rock gold prospects on the Company's then 23-square-mile claim block (now 26.7 square miles). All forty prospect areas were mapped in detail and 1,342 samples of rock (including trench and placer drill hole bedrock) and soil were collected and analyzed. Forty-five trenches were dug using our excavator. Frozen soil (permafrost) prevented penetration to bedrock in seven trenches that are being allowed to stand open for a year until they thaw and can be sampled in a follow-up program. Three other trenches did not encounter bedrock because the soil cover was too thick. In all, 5,927 feet were accomplished, of which 4,954 feet cut into bedrock and were sampled. A total of 534 trench samples were taken continuously along the lengths of all bedrock trenches. Ten of those trenches were subsequently reclaimed. Trenching was largely designed to explore for disseminated, bulk-tonnage-style mineralization that may be associated with the big fault structures. Indeed, the assay results from the hardrock trenching showed significant widespread gold mineralization within multiple geologic structures. These findings confirm that we are dealing with a large, strong and substantially underexplored system of gold mineralization at Chandalar.

Additionally, ground magnetic surveys on fifteen of the prospects were conducted with survey lines totaling 28 miles. The major mineralized structures all show distinct magnetic lows. We have been successful in tracing mineralized structures under covered areas applying this simple geophysical technique.

Several of the hardrock prospects are the source of the gold in the promising placer gold deposit we drilled on Little Squaw Creek.

A summary of some of the main hardrock prospects follows:

Pallasgreen Prospect

We exposed important gold mineralization during an excavator trenching program on the Pallasgreen prospect. The trench cut a 30-foot-wide structure that assays 11.43 ppm gold (0.333 oz Au/t).

Thirty feet represents the approximate true width of the Pallasgreen structure. Continuous five-foot-long rock-chip samples were taken across the structure at a depth of about ten feet by an independent professional geologist. The 11.43 ppm gold represents the weighted average of the sample results, which is skewed by one five-foot sample assaying 59.2 ppm gold (1.727 oz Au/t). The structure is composed of a strong fault zone in schist containing clay fault gouge, several sulfide-bearing quartz veins, and breccia composed of quartz shards embayed in limonite, or iron oxide cement.

Geologic mapping with magnetic and soil sample surveys show the mineralization to be at least 400 feet long within a structure potentially a mile or more in length. This discovery lies within a large grassy meadow underlain by permafrost. Two additional trenches were attempted to cut strike extensions of the structure, which we anticipate will be completed in the 2008 field once the permafrost in the open trenches thaws. Subsequent diamond core drilling is planned to explore the mineralized zones within the Pallasgreen structure provided funding is available and we can secure a drill contractor for the project.

Pioneer Prospect

Excavator trenching on the Pioneer prospect cut a 25-foot-wide structure that assays 10.33 ppm gold, (0.302 oz Au/t).

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The Pioneer structure is a west-trending fault zone traced for six miles across the northern sector of the Company’s mining claims. Gold mineralization occurs intermittently along the structure. The erosion of this mineralization feeds gold particles into the Little Squaw Creek placer gold deposit. Trenching targeted a 2,000-foot-long gold-in-soil geochemical anomaly. A series of four trenches have tested the geochemical anomaly over 540 feet of strike length, exposing gold mineralization over 320 feet. Gold values are hosted in irregular pinching and swelling quartz lenses and stringers that impregnate a thick fault zone, or shear zone, cutting schist bedrock.

In trench PN-31, two sets of samples that crosscut the shear zone show a weighted average of 25 feet true thickness at 6.49 ppm gold (0.190 oz Au/t). One set runs 10.33 ppm gold (0.302 oz Au/t), as reported above. The second set across the same shear zone assays 25 feet at 2.62 ppm gold (0.077 oz Au/t). This variability reflects the presence of free gold particles irregularly dispersed in the sheared and crushed rock.

Samples of quartz veins exposed in a shallow trench 45 feet and 90 feet to the west of trench PN-31 assay 25.50 ppm gold (0.745 oz Au/t) over a width of 3 feet, and 71.40 ppm gold (2.085 oz Au/t) over a width of 2.5 feet, respectively. Trench PN-30 is 230 feet east of PN-31 and again cuts the shear zone-hosted vein system, showing a true thickness of 7 feet at 5.58 ppm gold (0.163 oz Au/t). Adjacent rocks in the footwall of this intercept show strongly anomalous gold at 0.20 ppm over 45 feet true thickness. Trench PN-29 cut the shear zone 540 feet to the east of trench PN-31, but only traces of gold were detected. This trench also exposed a greenstone (or diorite) intrusion that invades the schist, which may have some bearing on the presence (or lack) of gold mineralization.

The strong gold mineralization found thus far in the Pioneer shear zone extends for at least 320 feet and is open-ended to the west. We believe that, with these dimensions and its proximity to our Pallasgreen discovery, the Pioneer prospect is an excellent drilling target where we could potentially discover a significant deposit of gold in the coming year. We plan to drill a series diamond drill core holes in the gold-bearing Pioneer shear zone during the 2008 field season provided funds are available and a drilling contractor can be secured to do the job.

Summit Prospect

Excavator trenching on the Summit prospect cut a 20-foot-wide structure that assays 10.58 ppm gold (0.309 oz Au/t). (This equates to 10.58 grams per metric ton or 0.340 ounces gold per metric ton, ie tonne.)

The Summit structure is a west-trending shear zone traced for over a mile across the central sector of the Company's Chandalar mining claims, where prospecting has identified gold mineralization occurring over at least 1,800 feet of its strike length. Gold values are hosted in irregular pinching and swelling quartz lenses and stringers that impregnate a thick fault zone, or shear zone, cutting schist bedrock. Company records show that former mining lessees extracted 2,043 tons averaging 1.54 oz Au/t from two short tunnels driven into the structure.

Trench SUM-10 cut the Summit structure about 300 feet beyond the western limits of old tunnels and revealed 20 feet (true thickness) at 10.58 ppm gold (0.309 oz Au/t). This is a sample length to grade-weighted average and includes a five-foot zone that assays 41.80 ppm gold (1.221 oz Au/t). A small exposure 45 feet east of the trench (towards the tunnels) assays 16.25 ppm gold (0.475 oz Au/t) over one foot. Additionally, an exposure about 100 feet west of Trench SUM-10 assays 1.94 ppm gold (0.057 oz/Au/t) over 4.5 feet. Trench SUM-10 is the only trench that cut the main Summit structure during the recent exploration campaign. Trench SUM-8 was dug in the footwall of the Summit structure near the old tunnels and was not extended to cross the main structure. It intersected 40 feet of 0.58 ppm gold (0.017 oz Au/t) associated with a zone of thin, sheeted, quartz veins.

Trench SUM-10 was dug to follow up on and check the results of drill hole SUM-10, a reconnaissance reverse-circulation percussion (or hammer) hole drilled in 2006. Hole SUM-10 hit 45 feet of 0.69 ppm gold (0.020 oz Au/t), including 5 feet of 3.24 ppm gold (0.095 oz Au/t), at a point approximately 50 feet below where the trench was later dug. This hole also intersected a parallel hanging wall zone of 10 feet of 0.97 ppm gold (0.028 oz Au/t), which Trench SUM-10 did not extend to. The variability between trench and drill hole sample assay results likely reflects a nugget effect caused by the presence of free gold particles irregularly dispersed in the sheared and crushed rock. It may also show that the reconnaissance percussion drilling was not an effective tool in gaining quantitative information.

To summarize for the Summit, combined reconnaissance-level drill and excavator trenching data, together with historic mill recovery records, indicate auriferous quartz veins occur within wider aureoles of lower-grade, sheeted veins and disseminated gold values. Exploration results thus far indicate mineralized widths of 10 to 60 feet containing average grades of 0.5 to 10 ppm gold (0.015 to 0.292 oz Au/t). The 1,800-foot-long Summit mineralized system, controlled by the Summit structure, is open in both directions. Soil sampling and ground magnetic surveys indicate that gold mineralization extends another 1,500 feet to the east, where further trenching is planned. We intend to commence diamond core drilling of the Summit structure in the summer of 2008 provided funds are available and a drilling contractor can be secured to do the job.

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We believe that there is a reasonable expectation that a large, bulk-tonnage, type of gold deposit may exist at the Summit prospect.

Mikado Prospect

Trenching at the Mikado prospect yielded the most interesting results. A small mine on this prospect is known to have produced about 6,800 tons of mineralized rock averaging about 1.5 oz Au/t from an open-ended ore shoot. The controlling structure is a major, 8-mile-long fault that contains quartz veins. An extensive vein system that is largely enveloped in, or marginal to, wider zones of much lower value gold values was traced for 4,000 feet by a series of seven new and eight old trenches, soil sampling, and a ground magnetic survey. The system occurs over an elevation rise of about 800 feet and is composed of several sub-parallel zones. Three hundred seventeen of the 534 trench samples taken in 2007 came from the Mikado. The average mineralized trench intercept is 24 feet at 0.023 oz Au/t.

Rock alteration within the Mikado vein system is mostly argillic, with common clay-filled seams and cavities in punky schist bedrock.  Minor secondary white mica was also noted.  Intense shear zones  10 feet thick or more are generally present and bleached, foliated wall rock is variably argillized to either side of the shears.  Farther outboard of the shear zones epidote and pervasive hematite on foliation is seen in the schist host rock.  The more intense shear zones also contain small lenses of pulverized quartz and clay, and are commonly associated with iron- and arsenic- oxide staining.  Mineralized stockwork, sheeted veining, and fracture-controlled dissemination zones are typically outboard of the more intense shear zones.  

The enveloping auriferous zones occur over widths 20 to 80 feet, and locally up to 150 feet wide generally with an average grade of 0.2 to 1.2 ppm gold.  Within these zones disseminated gold values and auriferous planar or sheeted veinlets can contain 0.15 to 2.0 ppm gold over individual sampling intervals. In addition to the lower grade mineralization, they will host one or several larger quartz veins that can average an ounce of gold across several feet. The larger veins are mostly pulverized quartz variably stained with iron and arsenic oxides and crudely banded seams of gouge and clay. Arsenic values of 500 to >10,000 ppm and elevated antimony of 6 to 30 ppm are generally present in these zones.

The persistent gold mineralization with association of hydrothermal alteration of the rock and the magnitude of its controlling structure make the Mikado prospect a prime target for drill testing. In summary, the Mikado vein system was found in 2007 to be a large body of continuous and pronounced rock alteration containing weak but continuous gold mineralization.  A large tonnage potential exists given the sheer size and likelihood that the system continues along strike and extends to depth.

2007 Summary of Trenching Results

We believe we have identified promising gold showings within a favorable geologic setting at Chandalar. Continued systematic exploration of this system of gold mineralization could result in the discovery of a commercial gold deposit.

Summary assay results for the 2007 trenches dug on various Chandalar prospects are shown in Table 2. These represent continuous rock-chip channel samples taken along the walls of the trenches cut into bedrock.

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2007 Exploration of the Little Squaw Creek Alluvial Deposit

During 2006, independent placer mining consultant Mr. Keener identified three targets in the vicinity of our exploration camp that may contain significant resources of placer gold: Little Squaw Bench, Spring Creek, and Big Squaw Creek. The most significant is the Little Squaw Creek, where early day drift-miners produced 29,237 ounces of gold, according to our records. A reconnaissance drilling program by a former lessee in 1997 outlined what they called an inferred resource of 194,000 ounces of placer gold. (We note that this reference is not an SEC Industry Guide 7 compliant reserve.) This drilling basically found that the mineralization mined in the Bench extends from the Bench for a long distance down Little Squaw Creek. To the west of the Bench lies Spring Creek on which no previous prospecting is known to have occurred, but appears to be an old channel of Big Squaw Creek. The third target is the Big Squaw Creek drainage where early day placer gold hand-mining occurred on its upper parts, but is not known to have been productive on its downstream reaches.

Mr. Keener proposed to make seven lines of rotary reverse circulation drill holes at 500-foot intervals across Little Squaw Creek starting on the Little Squaw Bench and extending almost a mile downstream. The proposed drill holes were spaced about 50 feet apart along each line, for a total of 70 holes. The gravel, or alluvial, depth to bedrock is known to be 46 to 164 feet. The drill program goal for Little Squaw Creek was proposed at 10,000 feet. Mr. Keener considered the magnitude of this proposed program with its density of drill holes to be sufficient for discovery of any significant placer, or alluvial, gold deposit that may exist in the drainage.

Mr. Keener also proposed scout drilling for placer gold deposits on Spring Creek and Big Squaw Creek. He recommended making two widely spaced drill lines of five holes each on each of these targets. This scout drilling is intended to expose the subsurface characteristics of the stream channels, investigate their glacial gravels and silt/clay strata for placer gold, and the presence of any gold potential resource for more detailed exploration. The drill lines on both target areas would be spaced 2,000 to 4,000 feet apart and each line’s drill holes are placed 100 to 200 feet apart. The depth to bedrock on both drainages was not known.  The scout drilling program on Spring Creek and Big Squaw Creek was to be for 3,000 feet of drilling in 20 holes.

We are unaware of any independently certified laboratory that performs the type artesian service required of placer gold assaying. We contracted Metallogeny, Inc., Mr. Keener’s privately owned company, to independently perform the drill site sample collection and analyses of the 2007 placer gold drilling program. Security of samples and quality control of the assaying work were addressed in the contract and strictly maintained.

Drill hole sampling and assaying of placer (alluvial) drill cuttings of gravels requires a meticulous procedure that differs substantially from normal fire and chemical assaying procedures used for rock and drill core samples. In our case, all of the drill cuttings for each five feet drilled are collected in five gallon buckets. It takes about three of these buckets (partially filled) to contain one five foot sample, which amounts to 0.97 cubic foot for a five and seven eights inc (5 7/8”) diameter drill hole. The samples are then transported to a location where their volumes and mass are carefully measured, after which they are concentrated with a small, hydraulic screening/sluicing plant. The volume of oversize tails off the screen is measured in a graduated bucket and discarded. The reduced samples amount to less than two gallons, which are then carefully hand panned to a concentrate when colors of gold can be counted and their mass estimated. The pan concentrates, approximately one to two hundred grams, are then transferred into a labeled ziplock bag for further detailed analysis in a laboratory. In the analysis, measured sample volumes are compared to theoretical volumes based on the drill tooling specifications. A correction factor is then derived for each sample. The recovery factor is used to adjust the gold grade for excessive or deficient amounts of sample material. This factor is also used to judge the integrity of the hole (i.e. collapse or blow-out) and overall recovery performance of the drilling system. The pan concentrates are then double-panned in a controlled environment or laboratory. All visible colors of gold are extracted, dried, counted, and weighed to the nearest milligram. A digital image of the sample is collected and labeled. The sample of gold is then placed in individual sample vials or combined with other samples for the same drill hole. Reject pan concentrates are saved for later mercury amalgamation to test for lost values and to analyze for the heavy mineral suite. Empirical data are entered onto a spreadsheet, where formulas are created to calculate volume recovery, correction for swell and recovery, oregrade, and paygrade. Stratigraphic notes and other data about the drill hole are also entered onto the spreadsheet to create a complete log of the hole.

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For our 2007 exploration season, because we were unable to secure a core drill to advance our drilling program of hard rock prospects, we refocused our efforts on moving forward with the placer drilling plan for the Little Squaw Creek alluvial gold deposit.  We implemented a rotary reverse circulation placer drilling program with the objective, to complete the proposed 90-hole 13,000 foot program according to recommendations of independent placer mining consultant Mr. Keener.  

The rotary drill was mobilized to Chandalar over the winter trail in March 2007. Drilling started on June 18th on the Spring Creek site after being delayed by some mechanical problems with the drill. The Spring Creek site quickly thawed and became too muddy to operate in. Four holes were attempted in Spring Creek, but all flooded out. The drill was then moved to Little

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Squaw Creek were 107 holes were drilled throughout the summer. The drill was moved to the lower reaches of Big Squaw Creek on September 14 ^th and drilled two scout holes. The drilling season ended on September 16th, and the drill was de-mobilized to Fairbanks on September 23 ^rd using a Hercules C-130 cargo aircraft.

Due to generally favorable seasonal drill conditions, we exceeded our goal of 90 drilled holes and a total of 13,000 feet. We drilled 113 holes for a total of 15,535 feet of drill samples on the property during the 2007 summer field season (see table 3 below).

Twenty-five drill holes did not reach bedrock and were abandoned due to caving or ground swelling or were terminated at the full extent (210 feet) of the available drill rod. None of the four Spring Creek holes that were attempted penetrated sufficiently to test the exploration target. A few traces of gold were found in the drill samples. The two scout holes drilled on Big Squaw Creek found non-economic levels of gold scattered through the fluvial gravel, and it appears to be concentrated in greater amounts at depth. The Big Squaw Creek drill holes did not reached bedrock, and it is questionable whether any in Spring Creek did either.

On Little Squaw Creek, seventy-three drill holes intersected the “Pay Horizon” (the mineralized stratum of gravel from which significant or potentially economic quantities of gold can be recovered). Some of those holes did not completely penetrate it. The Pay Horizon thickness-weighted average recoverable gold grade for the 73 drill holes is 0.0247 ounces per bank cubic yard. This equates to $22.27 per cubic yard (yd3) over a thickness of 83 feet (28 yards) using the current gold price of about $900/oz (see table 4  and Maps 4, 5 and 6 below). We believe the order of magnitude of drilled mineralized material is in the many millions of cubic yards, and that the drill sample results confirm our opinion that we have discovered an industrial-scale (capable of producing +25,000 oz gold per year) placer gold deposit of potential commercial significance. Spatial limits and overall grade of the gold-bearing gravels containing the potentially economic Pay Horizon have not yet been determined. The placer gold deposit remains open for expansion in three directions.

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