Technical Report of the

Azulcocha Mine Underground Exploration

Project
Department of Junin, Peru

Prepared for: Vena Resources Inc.

Prepared by: William R. Henkle, Jr., P. Geol.

Henkle and Associates
February, 2008
 HENKLE AND ASSOCIATES

February 25, 2008

CERTIFICATE OF AUTHOR

I, William R. Henkle Jr., P.Geol., do hereby certify that:

1. I am President of Henkle and Associates, Inc. of Carson City, Nevada

2. I graduated with a B. Sc. degree in Geology from the Ohio State University
(1969) and a M. Sc. degree in Geology from Northern Arizona University
(1974).

3. I am a Registered Geologist and Certified Engineering Geologist in California

and in Oregon as well as a Professional Geologist in Idaho, Arizona, British
Columbia and Alberta. I am also a Certified Environmental Manager in
Nevada.

4. I have worked as a geologist for 37 years since my graduation from university

and have experience as a geological consultant throughout the United States,
Canada, Latin America and parts of the Middle East. In 1994 I consulted to
Barrick Gold on the Cerro Corona project in Peru. Since September 2004 I
have been consulting to Sienna Gold Inc. (the Company) on their projects.

5. I have read the definition of “qualified person” set out in National

Instrument 43-101 (“NI 43-101”) and certify that, by reason of my
education, affiliation with a professional association (as defined by NI 43-101)
and past relevant work experience, I fulfill the requirements to be a “qualified
person” for the purposes of NI 43-101.

6. I am the principal author and am responsible for the preparation of the

technical report titled “Technical Report of the Azulcocha Mine
Underground Exploration Project, Department of Junin, Peru”. I have
visited the Azulcocha Mine property on three occasions in the past year for
periods up to 3 days.

7. I do not own nor control a beneficial interest in the mineral properties that
are the subject of this report nor any adjacent or nearby properties.

8. I am independent of the issuer applying all the tests in section 1.4 of NI 43-
101

230 FINCH WAY – CAROSN CITY, NV 89704

PHONE: 775-849-1683 • FAX: 775-849-9578
 HENKLE AND ASSOCIATES

9. I am not aware of any material fact or material change with respect to the
subject matter of the Technical Report, the omission to disclose which makes
the Technical Report misleading.

10. I have read NI 43-101 and Form 43-101F and the Technical Report has been
prepared in compliance with that instrument and form.

11. I consent to the filing of the Technical Report with any stock exchange and
other regulatory authority and any publication by them for regulatory
purposes, including electronic publication on the Company’s websites
accessible by the public.

Dated this 25th day of February, 2008

William R. Henkle Jr., P.Geol.

230 FINCH WAY – CAROSN CITY, NV 89704

PHONE: 775-849-1683 • FAX: 775-849-9578
HENKLE AND ASSOCIATES

230 FINCH WAY – CAROSN CITY, NV 89704

PHONE: 775-849-1683 • FAX: 775-849-9578
 Technical Report of the Azulcocha Mine Underground Exploration Project
February 2007

Table of Contents

1. Summary ……………………………………………………… 3
2. Introduction and Terms of Reference ……………………… 7
2.1 Purpose of Report ............................................................ 7
2.2 Terminology ...................................................................... 7
2.3 Sources of Information ................................................... 7
2.4 Extent of Field Involvement .......................................... 7
3. Reliance on Other Experts - Disclaimer …………………… 9
4. Property Description and Location ………………………... 10
5. Accessibility, Climate,Infrastructure and Physiography ….. 12
5.1 Accessibility ....................................................................... 12
5.2 Climate ................................................................................ 12
5.3 Physiography ...................................................................... 13
5.4 Infrastructure ...................................................................... 13
5.5 Land Tenure ........................................................................ 14
6. History ……………………………………………………… 15
7. Geology …………………………………………………..…. 18
7.1 Geological Setting ……………………..…………..… 18
8. Deposit Types ..................................................................... 20
8.1 Azulcocha Cuerpo ............................................................ 20
8.2 Tailings Deposits ............................................................ 20
9. Mineralization …………………………………………..….. 21
9.1 Model Development ............................................................ 22
10. Exploration ……...........................…………….……….. 26
10.1 Previous Exploration Work .............................................. 26
10.2 Recent Exploration Campaigns ........................................ 27
11. Drilling and Cross Cut Sampling ……………….……….. 26
11.1 Underground Drilling and Cross Cut Sampling.............. 29
11.3 Surface Drilling Program ....................................... 29
11.3 Drill and Cross Cut Program Interpretation ............. ..... 33

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12. Sampling Method and Approach ……………….……….. 35

12.1 Sampling Method ................................................................... 35
12.2 Adverse Sampling Factors .................................................... 38
12.3 Sample Quality ..................................................................... 38
12.4 Sampling Controls ............................................................ 39
13. Sample Preparation, Analysis and Security …........................ 40
13.1. Details of Sample Preparation and Assaying ..................... 40
13.2. Quality Assurance/ Quality Control ………..….. .. 41
13.3. Adequacy of Sampling and Security ……………… 41
14. Author’s Data Verification .....................................….. 42
14.1 Limitations on Verification ................................ 42
15. Adjacent Properties .....................................…………. 44
16. Mineral Resource Estimate .....………………………… 45
16.1 Resource Estimate ................................................................ 45
17. Mineral Reserve Estimate ................................................... 52
18. Mineral Processing and Metallurgical Testing .................. 53
19. Interpretation and Conclusions .......................................... 54
20. Recommendations ………………………………………. 55
20.1 Recommendations for Future Exploration ...................... 55
21. Other Relevant Data and Information ……………….… 58
21.1. Peruvian Mining Law ………………………….... 58
22. References …………………………………………..….. 61

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Figures

# Description Appendix

1 Azulcocha Project Location 1

2 Regional Topography 1
3 Azulcocha Regional Project 1
4 Regional Geology 1
5 Regional Cross Section 1
6 Location of Other Mines 1
7 Min and Explo Potential 1
8 Vein Thickness Contours 1
9 Grade Times Thickness 1
10 Azulcocha Mine Level 0 1
11 Azulcocha Mine Level – 40 1
12 Resource Estimate Section 0 1
13 Resource Estimate Section 3E 1
14 Resource Estimate Section 6E 1
15 Resource Estimate Section 3W 1
16 Resource Estimate Section 6W 1

Tables

# Description Page

1 Resource Estimate Summation 5

2 Mining Concessions 10
3 Payments & Project Burdens 11
4 Driving Distances 12
5 Drill Pgm. UG Mine 30
6 Cross Cut Pgm. UG Mine 31
7 Surface Drill Program 32
8 Resource Estimate Summation 50
9 Estimated Program Cost 57

APPENDIX 1 Figures and Drawings ……………………

APPENDIX 2 Resource Estimate Calculations …………

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1.0 Summary

The Azulcocha project in the Department of Junin, Peru was optioned by Vena
Resources Inc. (the “Company”) in 2004. At the time of this initial acquisition,
the project area included 9 concessions aggregating 1774 hectares in area.
During 2004 – 2006, the Company undertook a series of tailings pond
exploration and prefeasibility tailings mining development studies. The
Company has since completed these studies and in mid- 2005 the Company
elected to purchase and initiate production at the property.

During the period July – September 2006, the company acquired seven
additional concessions (Azulcocha West area), which brought the aggregate total
of prospective mineral lands under its control in the Azulcocha area to 8,034.41
hectares. During this same period, the Company acquired a 100% interest in the
entire project and initiated permitting of a 500 tonne / day milling and
underground mining operation.

In addition, during this same time period, the company began to re-open the
formerly mothballed Azulcocha underground Zinc mine. The Azulcocha mine
was operated by Compañía Minera Gran Bretaña S.A. between 1975 and 1986.
Gran Bretana’s company records (Salazar, 1983), show that the mine produced a
total of 1,074,582 tonnes averaging 16.14% zinc from a complex structurally
controlled, replacement type sulfide mineral deposit, during that time period.
Previous to Gran Bretana’s operating the mine, it is estimated that the mine
produced no more than 500,000 tonnes (1969 – 1974). These figures indicate
that past production from the mine was approximately 1.5 million tones. Past
production from the mine indicates that the Azulcocha Cuerpo was one of the
more significant concentrations of zinc sulfide in Peru.

The rehabilitation of the mine which was begun in 2006 has resulted in the re-
opening of the +115, +80, +40, 00 and -40 levels of the mine. These levels have
been rehabilitated and made safe for operations. Development operations are
currently underway on all these levels and in 2007, test mining was started from
Block A – 17 on the 00 level. Approximately 11,684 dry tonnes of mineralized
material averaging 8% Zn has been produced to date from the test mine stopes.
An additional 5756 dry tonnes averaging 8% Zn have been produced from
development workings on the 0 and – 40 levels of the mine.

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In addition, as of 2nd quarter 2007, the mine camp has been partially
reconstructed and a pilot scale test mill and an on-site assay lab have been
constructed. The pilot scale mill began operations in August 2007 and processed
7965 dry tones of mineralized material averaging 8% Zn until it was shut down
in January 2008. Company records indicate that the test mill achieved 89%
recovery and produced a flotation concentrate with zinc content of 54%.

The Azulcocha project area is comprised of 24 concessions in good standing and

duly registered with the Peruvian Ministry of Mines and Energy. The project
was evaluated by the writer over a 15 month period and included 7 days of site
visits. This evaluation, based on the site visits and technical documents made
available by the company, is focused on preparation of National Instrument 43 –
101 compliant resource estimate for the remaining mineral resources in the
underground mine area.

When the Company first acquired the mine, its interest was focused on the large
potentially minable tailings deposit. In 2005, drilling, sampling, survey work and
metallurgical testing of the tailings by the Company provided sufficient data to
prepare a positive pre-feasibility study of a tailings re-processing operation. That
investigation resulted in a NI – 43-101compliant resource estimate for the
tailings deposit of 971,900 tonnes Indicated @ 3.27% Zn, 10.04% Mn and 1.13
g/t Au. An Inferred resource of 85,800 tonnes @ 2.75% Zn, 10.84% Mn and
1.13 g/t Au was also delineated ( Lytle and May, 2005).

Extensive metallurgical studies have been undertaken to assess the most

economic way of recovering the values from the tailings.

Since mid-2005, the Company has been evaluating the potential for additional
unmined resources in the mothballed mine as well as in exploration targets
identified in the surrounding region within the concession area of the Company.
During 2005, the Company acquired the complete mining technical records from
the previous mine owner and work (which includes an underground and surface
drilling program) has been underway since that time, to quantify the
mineralization that may be remaining and recoverable.

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In September 2006, the Company acquired neighboring concessions which

included the Waie and El Triunfo prospects (the Azulcocha West area). In
November of 2006, the Company entered a joint venture agreement with
Empresa Las Quenuales S.A. (a member of the Glencore group of companies).
Las Quenuales agreed to invest US$ 2.75 million in the Azulcocha West
exploration project over a two year period. The first year commitment is US$
750,000 followed by a second year commitment of US$ 2 million. Upon receipt
of a positive feasibility study, Las Quenuales has the right to acquire a 51%
interest in the project for payment of an additional US$ 1 million. The
Company will operate the project during the exploration period. The
underground mine area is not included in the joint venture agreement.

The writer was only involved in planning and evaluation of the exploration
program in the underground mine area and not for the rest of the concessions.
Consequently, the conclusions and recommendations presented in this report are
limited to the underground mine.

The writer used the Cross – Section Area Method to arrive at an in-place
geological resource estimate for the underground mine. It is the writer’s opinion
that the remaining in-place mineralization which is potentially available for
mining is as follows:

Indicated Resource Tonnes % Zinc

Calculated (dry) 882,572 10.0
Less Production (dry) (17,440) 8.0
Remaining (01/2008) 865,132 10.0

Inferred Resource Tonnes % Zinc

Mineralized Material 18,238 13.3

Table 1: Remaining Resource Estimate Summation

It is emphasized that the tonnages and metal values presented in the preceding
tables are an estimate of in-place geological resources and not a reserve.

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Based on the work evaluated for this report, it is the opinion of the writer that
the Azulcocha underground mine project qualifies as an exploration stage project
of merit and that the property warrants further exploration as outlined below.
The report recommends a program estimated at US$ 1,146,750 and involving
3,811 meters of underground drilling and construction of new workings to
complete an exploration and development program in the underground mine
area of the concessions. This estimate includes the cost of developing
underground drill sites as well as the cost of drilling and analyzing the core.

In the 1990’s, the government of Peru made dramatic improvements to the

mining laws of that country and the current rules and regulations are both clear
and fair. The ownership of mineral rights is not in question according to the
current state of law. However, the ownership of surface rights is not so clearly
enshrined in law. The land tenure turmoil resulting from the agricultural
“revolution” of the early 1970’s under the military dictatorship of General
Velasco has not been completed resolved. These concessions are located in an
area that could be used for subsistence agriculture only and there are few signs
of permanent human habitation. The ownership of surface rights is not an issue
for the company at this point in the development program but will become so as
development progresses. The Company recently signed surface use leases with
two indigenous communities that are located in the area of operations to address
this issue.

Remnants of the employee housing and concentrator buildings are available for
rehabilitation should the operations recommence on a larger scale, and the
project is well-sited with respect to the infrastructure needs of a modern mining
operation when the project advances to that stage of development.

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2 .0 Introduction and Terms of Reference

2.1 Purpose of the Report

This report is prepared for the Company to supplement the previously filed
National Instrument 43-101 report “Technical Report of the Azulcocha Tailings
Project, Department of Junin, Peru July 2005”, authored by Lytle and May. This
report is limited to preparation of an in-place resource estimate of potentially
mineable zinc mineralization for the underground mine area of the project.
This report satisfies the requirements of National Instrument 43-101 in the
disclosure of technical information regarding mineral projects owned by publicly
traded Canadian companies.

2.2 Terminology

All technical terms of reference such as “resources”, “reserves” or

“mineralization”, used in this report conform to standards of practice published
by the Canadian Institute of Mining and Metallurgy. All geological terms used
are in standard use within the geological consulting profession in Canada and the
US.

2.3 Sources of Information

The results shown in this report are based on numerous sources of data
provided by the company. These include the logs of both underground and
surface drill holes from the drilling program (completed in mid - 2007), as well as
maps, cross sections, etc. prepared by the Company and the previous operator at
the property, and by the writer. Section 22.0, References, lists the data sources
used in this report that were not generated by Vena Resources. The data
generated by Vena Resources is listed in Section 11.0, Drilling and Cross Cut
sampling.

2.4 Extent of field involvement

The writer has visited the property on three occasions between November , 2006
and November, 2007. The purpose of the field visits were to examine the

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geological and physical features of the concessions and observe the progress of
the underground and surface drilling operations. A total of seven days was spent
at the mine operation. In addition, the author has spent nearly 20 days
examining maps, drill records, etc. which pertain to the mine at the Company’s
offices in Lima, Peru.

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3.0 Reliance on Other Experts – Disclaimer

Henkle and Associates has prepared this report strictly in the role of an
independent qualified person and the author was involved in the design of the
data collection and analysis program and witnessed some of the program
execution. At no time did the author suspect the withholding of information
and is of the opinion that the data is sufficient and reasonable for an assessment
of the project at this stage of exploration. None of the information provided has
been specified as being confidential and not to be disclosed in this report.

This report is based on the information provided by the Company, both verbal
and documented, on evaluation in the field and on the writer’s knowledge of the
mine development industry in Peru. The writer has relied on and assumed the
accuracy and fair representation of all technical information provided by the
company including geological notes, surface maps, geophysical data etc.

Based on the results of the environmental evaluation work required to obtain the
necessary drilling permits, the writer believes there are no significant
environmental liabilities attached to the property at this exploration stage.
Limited acid water drainage from the tailings dyke and the unsealed mine adits
are reportedly (Lytle and May, 2005) neutralized within 50 meters as they pass
over the predominantly limestone bedding.

The author is aware that the Company owns the concessions in good standing
and that the Company has obtained an independent, legal opinion as to the prior
ownership of the concessions and their registration with the Peruvian Ministry
of Energy and Mines (Public Registry).

Based on what has been observed of the drilling and analytical work, the author
is satisfied that the exploration programs conducted in the underground mining
area to-date have followed CIMM best practices for the evaluation of mineral
occurrences.

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4.0 Property Description and Location

The property is located in the country of Peru on the west coast of South
America. Peru is divided into 24 Departments which are each further
subdivided into several provinces. The property under study is located in the
Department of Junín in the province of Concepción as shown on Figure 1. A
more detailed plan of the property is included on Figure 2.

The property is approximately 260 kilometers east from Lima on the two lane
Carretera Centrál highway. Approach to the property can be made to within 40
kilometers via an asphalt, all-weather highway. The final 40 kilometers is on a
rough, single lane dirt road that is passable by 2 wheel drive vehicles.

The property comprises 8,034.41 contiguous hectares of mining concessions as

shown on Figure 3 and listed on Table 2 below. Based on the Universal
Transverse Mercator system using the South American 1956 (SAM56) base, the
property lies within 425,800 and 427,500 East and 8,664,500 and 8,671,000
North. All registration fees for the concessions are current.

Number Name Size Number Name Size

1 Azulcocha XXX 400 13 Azulcocha XXV 24
2 Azulcocha 323 14 Azulcocha XXIV 19
XXVIII
3 Sorpresa 16 500 15 Azulcocha XXIII 140
4 Sorpresota 93-3 300 16 Azulcocha XXII 36
5 Lazaro 15-96 1,000 17 Azulcocha XXI 200
6 Meloncito de Oro 7 18 Teodosio Angel 7- 200
III 8-96
7 San Luis Primero 100 19 Azulcocha XXXI 300
8 Azulcocha XXVII 33 20 Jatunhuasi 1 1,000
9 Azulcocha XXVI 169 21 Jatunhuasi 2 1,000
10 Azulcocha MR 400 22 Azulcocha XXXVI 200
11 Azulcocha MRI 200 23 Azulcocha XXXIV 9.98
12 Azulcocha XXXV 300 24 Azulcocha L 673.43
25 Azulcocha XXXVII 500
8034.41
Table 2: Mining Concessions
Ownership interest in the property was obtained by trading shares in the
Company for two separate individuals’ interest in the property. Sr. Juan Vegarra
and Sr. Elmer Rosales each owned 50% of the property with the exception of

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the San Luis Primero concession. In 2004, Sr. Vegarra vended his 50% interest
in the property to the Company in exchange for shares. Sr. Rosales vended a
30% interest in the property at the same time in exchange for a one-time
payment of US$ 80,000 and 400,000 shares. In 2005, Sr. Rosales vended his
remaining 20% interest in the property to the Company in exchange for a 1.5%
Net Smelter Return royalty on production.

The agreement with the owners of San Luis Primero (tailings area) required a
one-time payment of US$5,000 and ongoing monthly payments of US$1,000 for
the first two years and of US$1,500 for the subsequent 18 years. A summation
of payments and burdens on the project is shown in Table 3.

Many of the Company’s concessions are coincident with the Compania Minera
Gran Bretana concessions which lapsed in late 2003 and were subsequently
taken by the Company. Under Peruvian law, concessions taken from the
government remain in good standing as long as the annual registration payments
($3.00 per hectare) are received by June of each year. One grace year is added
for delinquent payment, concessions are valid as long as payments are made on a
timely basis.

Extensive underground mine maps and other technical mining data were
purchased by the Company from the former owners of Compania Minera Gran
Bretana during mid-2005. The Company’s subsequent survey work with these
maps and data, both on the surface and underground has shown a high degree of
correlation between the old survey data and new survey information.

Designation Bonus Pymt.Yearly Pymt. Royalty

Tailings Area Lease $ 5,000.00 $ 12,000.00 yr 1+2 NA
$ 18,000.00 yr 3 -20 NA
Elmer Rosales $ 80,000 + 400,000 shares NA 1.5% NSR
Tomas Surf. Lease NA $ 24,000.00 NA
Shicuy Surf. Lease NA $ 50,000.00 NA
Gov. Concession Fee NA $ 24,103.23 NA

Table 3: Yearly Payments and Burdens on Project

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5.0 Accessibility, Climate, Infrastructure and Physiography

5.1 Accessibility

The property is accessible by road from Lima by taking the Carretera Central
Highway east to the community of La Oroya and then proceeding south on a
paved highway which follows the Rio Mantaro valley to the community of
Huancayo. Prior to reaching Huancayo, the route leaves the paved highway at
the small agricultural community of Pachacayo and follows a dirt track up into
the mountains to the Azulcocha project site. Access to the area can also be
made by driving to Huancayo and following a better quality dirt track from the
community of Chupaca. In both cases the dirt roads wind 40 kilometers into
the mountains to an elevation of approximately 4400 masl before descending
into the Azulcocha (Blue Lake) valley. It is also possible to fly to Huancayo
from Lima (30 min. flight) and drive for 1.5 hours to the site.

The primary route and approximate distances and driving times are shown on
the table below.

Leg Distance Time (hours)

(km)
Lima – La Oroya 175 3.5
La Oroya – Pachacayo 45 0.5
Pachacayo - Property 40 2.0
Total 260 6.0
Table 4: Driving Distances

5.2 Climate

The climate of the region is typical of the Peruvian altiplano in which the
seasons are split into a wet (December to March) and dry (April to November)
season. Throughout the dry season temperatures can dip below 0o Celsius and
winds can be quite strong. In general temperatures rarely rise above 15o Celcius.
While temperatures are moderate, the sun can be very strong with high
ultraviolet readings being common during the mid-day period. During the rainy

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season significant electrical storm activity is common and moisture falls in the
form of rain, hail and, at times, snow. Rainfalls are often short in duration but
intense in nature with accumulations of up to 1 inch per hour being common.

5.3 Physiography

The terrain on which the concessions are located is characterized by high altitude
pampa or plains surrounded by pronounced hills. There are several small lakes
and ponds in the area and the valley floor is quite marshy. The Azulcocha valley
is oriented east-west with the numerous tailings ponds positioned east and lower
in the valley than the mine operations. The Company reports that the tailings
ponds have sufficient capacity for contemplated operations. The town of
Pachacayo is to the northeast of the concession area and access to the property
is from a dirt road, which winds southwest into the Azulcocha valley.

5.4 Infrastructure

High voltage power (220 KVA) from the national grid passes through the
concession area and water is available from small creeks and numerous ponds
and lakes in the immediate vicinity of the prospect location. A 3 MW electrical
substation was completed at the project in 1st quarter 2008. The project is now
connected to the national electrical grid; consequently, power costs have been
substantially reduced.

Skilled and semi-skilled labour is available in nearby community of La Oroya.

This small city is in the centre of Peru’s most famous mining district and is
known for its mining activities and skilled labour pool. Due to the relative
proximity to Lima, this project will be attractive to technical mining personnel.

The 40 kilometers of dirt road access will require widening and grading when the
mine and tailings ponds are put into full production. The grade on the road is
not steeper than the grade of the main highway (Carretera Central) and
upgrading will not be a significant cost.

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5.5 Land Tenure

The issue of land tenure is of increasing significance in Peru particularly as the

national cadastral system for agricultural land ownership is not always accurate.
Peruvian law does not vest surface rights with mineral rights and any proposed
development requires the developer to:

a) purchase the surface rights or

b) make an appropriate agreement with the surface rights owners to have
access to the property.

There is an indication of subsistence agricultural production and animal

husbandry on the concession but no indication of permanent habitation.
Likewise the government maps do not indicate any permanent habitations within
several kilometres of the concessions.

The surface rights to the concession area are held by the community of Tomas.
Because the concessions fall on the boundary of two communities the Company
has entered into annual and automatically renewable lease agreements with both
communities. Besides the payment of lease fees there is an undertaking to hire
locally to the greatest extent possible. The Company has leased surface rights in
its area of operations from the community of Tomas for US$ 24,000/year and
from the community of Shicuy for US$ 50,000/year.

From the cadastral map shown on Figure 3 it can be seen that the property is on
the eastern edge of a natural reserve buffer zone (zona amortiguamiento).
Under Peruvian law no development is allowed within the boundaries of the
reserve area itself. Any development within the reserve buffer zone must be
negotiated with the government and is subject to restrictions. It should be noted
that the mine and tailings development being investigated by the Company will
take place outside of the reserve buffer boundaries.

The Company is very aware of the need to have a well considered social
development plan which addresses issues that may be stall or prevent
development. The writer can attest to the very good working relationship
between the Company and the local communities.

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6.0 History

The Azulcocha concession was mined from 1969 to 1986. The Azulcocha mine
was operated by Compañía Minera Gran Bretaña S.A. between 1975 and 1986.
Gran Bretana’s company records show that the mine produced a total of
1,074,582 tonnes averaging 16.14% zinc during that time period. Previous to
Gran Bretana’s operating the mine, it is estimated that the mine produced no
more than 500,000 tonnes (1969 – 1974). These figures indicate that past
production from the mine was approximately 1.5 million tones. (Salazar, 1983).
Past production from the mine indicates that the Azulcocha Cuerpo was one of
the more significant concentrations of zinc sulfide in Peru.

Most of the equipment and buildings have been removed but the foundations
remain in good condition. The records of Gran Bretaña identified remaining
reserves and it is believed that the mine was closed due to a series of labour
strikes and increasing terrorist activity in the region. It has also come to light
that the previous owner became financially troubled when a separate mine
development did not make the expected return and this had implications for the
operation of the Azulcocha operations.

Past production from the mine was primarily zinc sulphide (sphalerite).
However, manganese carbonates and minor amounts of lead sulphide have also
been produced. Both manganese and lead will probably be important by
products once the mine gets back into production under operation by Vena
Resources.

The previous operating company used a bulk flotation process to concentrate

the zinc and published a recovery approaching 73%. Gran Bretaña developed
the mine on six levels, using an adit entry to access each level. Mining was by
block caving methods due to the width of the mineralized cuerpo. Munoz
(1995) reports that a non 43-101 compliant reserve of 1.94 million tonnes at
4.7% Zn remained in the mine after it was mothballed in 1986. The writer’s
estimate of remaining resources differs significantly from the Munoz estimate.

Peru has an active mining history with exploration and development taking place
from pre-Inca times through to the present. The degree of mining activity
roughly paralleled the development of the general economy which, in turn,

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followed the development of stable, democratic government. The turn of the

19th Century was a particularly active time with a significant increase in silver
mining largely from vein deposits. Mining technology developments in the
1920’s and 30’s were reflected in increased metal and precious metal mining in
Peru. In the early 1970’s the military government of General Velasco
nationalized the entire mining industry (with the exception of Southern Peru
Copper Ltd.) and foreign ownership of mineral claims was not possible until the
return to civilian government in the 1980’s.

In the mid-1990’s the government of President Alberto Fujimori completely

renovated the mining cadastral system and changed the registration requirements
for mineral claims. It is now legal for foreign companies to be the registered
owners of Peruvian mineral claims and the cadastral and registration system is
amongst the most modern in the world. Application for concessions may be
made over the internet by identifying the UTM coordinates of a north-south
oriented claim area and paying the requisite annual fee of US$3.00 per hectare
(payable by June of each year). The application is date-stamped and if there were
prior applications for the area or parts of the area, those applications or
concessions are given priority “ownership”.

In 1998 a mining petition covering the 100 hectares of tailings was taken out in
the name of SMRL San Luis Primero, which was owned by two individuals.
These concessions were optioned by Chariot Resources Ltd. in 2003 and when
the option lapsed they were picked up by the Company. In late 2003 the leases
controlled by Compania Minera Gran Bretana lapsed due to non payment of
fees, and an additional ten concessions were taken by Sr. Vegarra and Sr. Rosales
directly from the government. These gentlemen in turn vended their interests in
the property to the Company as was explained in Section 4.0.

In September 2006, the Company acquired neighboring concessions which

included the Waie and El Triunfo prospects (the Azulcocha West area), from Sr.
Elmer Rosales in exchange for a 1.5% NSR royalty on production. Sr. Rosales
also vended his remaining 20% interest in the underground mine to the
Company as part of this transaction.

In November of 2006, the Company entered a joint venture agreement with

Empressa Las Quenuales S.A. (a member of the Glencore group of companies).

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Las Quenuales agreed to invest US$ 2.75 million in the Azulcocha West
exploration project over a two year period. The first year commitment is
US$ 750,000 followed by a second year commitment of US$ 2 million. Upon
receipt of a positive feasibility study, Las Quenuales has the right to acquire a
51% interest in the project for payment of an additional US$ 1 million. The
Company will operate the project during the exploration period. The
underground mine area is not included in the joint venture agreement.

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7.0 Geology

The purpose of this report is to formulate a resource estimate for the Azulcocha
underground mine area. In order to do this, an understanding of the geology of
the project area is essential. A previous report (Lytle and May, 2005) was
prepared by others for the Company that assigned both a reserve and economic
parameters to the tailings deposit at the property. The reader is referred to that
report for further details on the tailings deposit.

This report focuses on the in-place resources available for potential underground
mining and the exploration expansion potential of the Azulcocha mineralized
cuerpo.

7.1 Geological Setting

The Azulcocha deposit is located in the Central Peruvian Andes and is set in the
Condorisinga Formation (limestones) marine and continental sediments of
Mesozoic and Cenozoic age as shown on the regional geological map Figure 4.
The deposit is controlled by the regional Cochas – Gran Bretaña fault, the alkali
feldspar granitic Chuquipita stock and the rhyolitic Jesus Maria dome to the
west. According to Munoz and Fontbote, “…The orebody is placed at the
major, regional N45oW trending strike-slip Cochas – Gran Bretaña fault which
builds an E – W sygmoidal overthrust structure. The southern block, consisting
of Liassic limestones of the Pucara Group thrusts over the Neocomian
sandstones of the Goyllarisquizga Formation to the north.” A generalized
transverse section through the fault and the Azulcocha Cuerpo is shown on
Figure 5 demonstrating the high degree of tectonic movement and the role of
the permeable fault in creating the cuerpo.

The elliptical shaped cuerpo has measured maximum dimensions of 300 meters
on strike (N 084o E)by 50 meters wide by 160 meters on dip(42o S). Past mine
records of tons produced, plus the writer’s estimate of remaining tonnage in-
place suggests a total original volume of the cuerpo on the order of 830,000
cubic meters. The increased permeability of the fault plane allowed the
formation of karst openings and collapse breccias, which were very favourable
areas for mineralization during emplacement of the cuerpo. The relatively
undeformed nature of the cuerpo indicates ore formation that is primarily post-

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tectonic and certainly later then the Cochas – Gran Bretaña fault which is upper
Miocene age.

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8.0 Deposit Types

8.1 Azulcocha Cuerpo

The Azulcocha cuerpo is a complex structurally controlled – carbonate hosted

replacement type zinc sulphide deposit. The work of Munoz and others
indicates strong correlations with other polymetallic zinc ore deposits related to
Tertiary magmatism in central Peru. The Huaron and Colquijirca mines of the
Central Plateau are specific examples of other structure controlled deposits albeit
at higher precipitation temperatures. Figure 6 shows the location of the
Azulcocha project in relation to other deposits and mines in the region. Munoz
speculates that the Azulcocha cuerpo is a low temperature equivalent of these
nearby deposits.

The 2006 – 2007 exploration program, which is discussed in this report, was
undertaken in order to define the remaining resource base of the Azulcocha
Cuerpo. Positive results would allow for a decision to develop the cuerpo. A
Grade x Thickness model of the Cuerpo was prepared as part of this report to
aid in future exploration. This is discussed in detail in Section 16.0 of the report.

8.2 Tailings Deposits

The Minera Gran Bretana milling operations utilized a coarse grind to float a
zinc concentrate and no attention was paid to the presence of manganese, gold
or lead. As a result, these other minerals were largely rejected and sent to the
tailings ponds. Similarly, the high zinc assay values in the feed material and the
ability of the nearby La Oroya smelter to take a fairly dirty concentrate resulted
in losses of zinc to the tailings pond as well. The relatively high concentration of
arsenic minerals in the mine results in tailings ponds with complicated metallurgy
as discussed in a previous 43 – 101 compliant report (Lytle and May, 2005). The
reader is referred to that report for further details.

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9.0 Mineralization

Work has been done to understand the orogenesis of the Azulcocha Cuerpo
including a PhD thesis by Cesar Munoz at the University of Heidelberg (1994).
He distinguishes four depositional stages each characterized by different fluid
temperature regimes.

Stage 1 (hydrothermal fluids) resulted in the precipitation of iron and zinc

sulfides in the form of pyrite, marcasite and sphalerite (zinc sulphide). Stage 2
(primarily hydrothermal fluids), the most important stage, resulted in the
precipitation of sphalerite (zinc sulphide), barite, rhodochrosite (manganese
carbonate), marcasite and minor amounts of galena (lead sulphide). Stage 3
(hydrothermal fluids) development consisted primarily of marcasite, orpiment,
realgar and a new, unnamed sulphosalt, lead mineral (5PbS.3As2S3). Stage 4
(meteoric fluids) resulted from weathering of the mineralized cuerpo. Carbonate
replacement minerals such as smithsonite (zinc carbonate) were deposited as well
as manganese oxide minerals and limonite (iron oxide).

The deposit does not appear to have been significantly upgraded by supergene
weathering processes however, as most of the zinc mineralization is sphalerite, a
primary sulphide. Significant thicknesses of manganese oxide deposits (+10%
Mn) are found in the upper levels of the mine workings, as well as gold
concentrations in the 1 to 3 ppm range. Drilling in the deeper levels of the mine
has not found significant manganese or gold concentrations. The presence of
these two metals in the mine’s upper level workings is indicative of formation
from weathering processes.

The temperature of the fluids that formed most of the minerals is thought to be
in the range of 80 degrees C to 180 degrees C (Munoz, 1995). This is considered
to be a low temperature genesis for ore deposition. Stage 2 has been subdivided
into three substages. The first substage resulted in deposition of banded
sphalerite and barite. The second substage took place some time after the first,
after the formation of well developed cavern breccias (a weathering event). Low
grade breccia ore was deposited at the end of the second substage. The third
substage resulted in the deposition of additional banded sphalerite enriched with
lead sulfosalts and galena.

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The deposit does not appear to be hydrothermally altered. However, there is

evidence of silicification and dolomitization in the southern regions of the
cuerpo. This generally occurs with secondary faulting in a NE-SW trend.
Although not specifically identified in the cuerpo, analysis has indicated
significant values of gold – up to 70 ppm in arsenic rich concentrates. Recent
assay analysis of the tailings indicates the gold was preferentially rejected during
the concentration process and values of 1 gram per tonne have been recorded.

Lead isotope analysis suggests a homogeneous mineral source transported with

high pH fluids at a relatively low temperature. The increased permeability of the
fault system allowed the fluids to migrate into the limestone formation creating
vugs and allowing deposition of the sulfide mineralization.

A two phase approach was taken to develop the in-place mineral resource
estimate for the Azulcocha mine. The first phase was to develop a Grade x
Thickness model of the Azulcocha Cuerpo to aid in understanding the economic
geologic parameters of the cuerpo, the model is discussed in this section of the
report. The second phase was to formulate a resource estimate for the cuerpo,
the resource estimate is discussed in Section 16.0.
The Grade x Thickness Model of the Cuerpo shows a strike length of ~ 200
meters and a dip length of at least 240 meters of continuous mineralization.
Thickness ranges from 1 meter to as much as 30 meters and zinc grades range
from as low as 5% to as high as + 50%. A cut off grade of 1 meter at 5% Zn
was used in this study. Pucara Group limestones form the hanging wall and
Goyllarisquizga Formation sandstone form the foot wall of the Cuerpo. The
two formations are in fault contact along the Cochas – Gran Bretana Fault.

9.1 Model Development

In order to formulate the mineralization model, it was first necessary to put
together a base map showing all drill hole, cross cut thickness, mining and
elevation data for the entire Cuerpo. A longitudinal section in the plane of the
vein was constructed using historic mine map data (Fig 7). This figure shows
the position of all mine levels and remaining blocks of mineralization, in the
plane of the vein. A plane of the vein projection is a geometric projection that
has the effect of laying the Cuerpo out flat. The actual attitude of the Cuerpo in
the ground is that it dips at 42o to the south (towards the viewer). The resulting

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view is as if the viewer were looking straight down (in plan view) at the Cuerpo.
This allows accurate areas (and resultant volumes) to be calculated on a map of
the vein.

Data from a series of 13 vertical cross sections that were in the company
archives, along with data from mine maps were used to plot elevation and
mining data on the plane of the vein base map The 13 sections from the archives
were drawn by Sociedad Minera Gran Bretana, S.A., the former operating
company at the mine. The cross sections were drawn at right angles to the
generalized strike of the vein, every 20 meters along strike. In order to spatially
register the cross sections, a stationary baseline was drawn with an azimuth of
264o – 084o or 6 degrees to the north of due east – west. The alignment of the
baseline is parallel to the approximate strike of the cuerpo (mineralized body) in
the main portion of the mine.

The upper part of Fig. 7, shows the alignment of the structural grid vs. the
geographic UTM grid. The average dip of the cuerpo is 42o to the south.
The grid formed by the intersection of the cross section lines and the baseline is
a structural grid, which is slightly skewed to the NE, with respect to the mine
survey grid. The mine survey grid is a N-S grid which is based on UTM
geographic coordinates. Geologic and engineering points of interest on the
cross sections are referenced spatially, by elevation and by distance north or
south of the baseline along the cross section line.

Structural interpretations of mineral deposits are commonly referenced in this

way, especially those that are geologically complex. Quite often the strike of
mineralized zones is at an angle to the N-S and E-W lines of the UTM
geographic grid. By cutting vertical cross sections at right angles to the strike of
the mineralized zone, the geologist or engineer is able to get a more accurate
measurement of cross sectional area of the cuerpo than if the section were cut at
either an acute or an obtuse angle to the strike of the cuerpo.

The next step in constructing the base map was to determine grade – thickness
relationships for the cuerpo at the point on each mine level where the vertical
cross sections crossed that mine level. This was done by examining the cross
sections and calculating a weighted average % Zn grade from historic sampling
data. The historic data was from cross cut sampling which crossed the 42o
dipping cuerpo horizontally. Mineralized thicknesses in these cross cuts were
not the true thicknesses for the cuerpo. A pole to the plane of the footwall

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intercept of the cross cut was then scaled from the cross section drawings. The
length of the pole which is within the mineralized envelope is the true thickness
of the cuerpo at that point. This data was then plotted on the base map at the
point of the foot wall intercept of the cross cut or drill hole with the cuerpo.
For example; on Section Line 0, at the + 40 level, the cuerpo is 10M true
thickness with an assigned grade of 22% Zn. This information is plotted on the
base map as 10/22. This was done for every cross section, at every mine level
where data was available, both in mined out areas and un-mined areas of the
cuerpo.

The next data that was plotted on the base map was the historic Gran Bretana
drill hole data and Vena Resources drill hole and cross cut sampling data. Again,
poles to the plane of the footwall of the cuerpo were plotted at the point of the
foot wall intercept of the drill hole or cross cut. Since the drill holes often cut
the cerpo at a high angle to strike and dip, the mineralized thickness of the
projected pole often differs significantly from the mineralized thickness shown
on the log of the drill hole. In this manner, the grade – thickness data for a large
number of cuerpo intercepts was plotted on the base map.

The next data to be plotted on the base map was the extent of the mined out
areas of the mine and the location of the blocks of mineralization that had been
left in-place by Gran Bretana. The positions of the mineralized blocks and the
mined out areas was abstracted from a vertical longtitudinal section of the
cuerpo prepared by Gran Bretana in October 1984, shortly before the mine was
mothballed. The mineralized blocks are labelled A – 1, B – 2, etc. A heavy line
was drawn around the outside perimeter of the mined out portion of the cuerpo.
Anything inside the line that is not an in-place mineralized block is mined out.

The next map constructed for this model analysis is the Mineralized Thickness
Contour Map (Fig. 8). This is essentially an overlay of the base map which
shows the mineralized thickness of the Azulcocha Cuerpo. Data points showing
mineralized thickness was already plotted on the base map.

Contour intervals for this map are 1M, 5M, 10M, 15M, 20M and 25M.
The placement of the contour lines was accomplished by surface trend analysis
techniques. The data points were used as control points, the proportional
distance between control points was scaled to estimate intermediate thicknesses.
In other words, if a data point with a value of 15M is located 20 cm from a data
point with a value of 25M, it is assumed that a value of 25M would be found half

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way between the two known data points. A precision 10 point mechanical
proportional divider was used to scale the distances between data points. This
tool and the writer’s +35 years experience as a professional geologist was used to
hand construct the map.

Next, a Grade x Thickness contour map (in the plane of the vein) was
constructed (Fig 9). Data point values for this map are simply the grade x
thickness. For instance, if the cuerpo is 23M thick and the grade is 24% Zn at
cross cut 4W on the +60 Level, the grade x thickness data for this point would
be 552M%. What this means is that there is an equivalent amount of zinc
present at this location in the cuerpo as if it were 522M thick @ 1%, or 5.52M
thick @ 100% or as is the actual case 23M thick at 24%. This technique is an
effective way of keeping track of variable metal concentrations within the
cuerpo. The technique is also very useful in revealing mineralization trends
within the cuerpo and is an excellent tool to use to guide in-mine exploration.
This technique was developed by Canadian and Australian gold miners in the
1920’s and 30’s and has proved very effective as an exploration guide in vein
type gold and massive sulfide base metal systems.

Inspection of the Grade x Thickness contour map shows contour intervals at

5M%, 10M%, 25M%, 50M%, 100M%, 150M% and 200M%. This map was
constructed using the same hand contouring, surface trend analysis techniques
with the aid of a proportional divider, as the previously discussed map. The map
is color coded to aid in visualizing mineralized trends within the cuerpo. The
lowest contour mapped, 5M% is mathematically equivalent to the cut off value
of 1 M thickness @ 5% Zn. The uppermost contour mapped is 200 M%. Some
M% values within the mined out portions of the cuerpo attained values as high
as 720 M%. These were not mapped since those areas are mined out.

The test mine stopes are located between levels 0 and + 40, along section line
6E, in Resource Block A – 17 (Fig. 9). These stopes produced 11,684 dry tonnes
@ 8.0% Zn during 2007. The Grade x Thickness Model predicts a Cuerpo
thickness of 7.5 to 12.5 m with a zinc grade of 6% to 10% for the test mining
area. This prediction correlates well with actual production figures and inspires
confidence in the mineralization model.

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10.0 Exploration

10.1 Previous Exploration Work

There is only one comprehensive report of previous exploration activity in the

Azulcocha region available to the Company (Suero, 1983). The Suero report is a
compilation report which was prepared shortly before the mine closed. About
half of the report discusses remaining reserves (non – 43-101 compliant) which
remain in the underground workings. The other half of the report discusses
exploration possibilities at several prospects in the vicinity of the mine. Most of
these prospects are located in the Azulcocha West area.

During the period when Compania Minera Gran Bretana operated the mine, 21
diamond drill core holes were completed in order to explore the lower portions
of the mineralized cuerpo. Unfortunately, the geologists’ logs which give details
of the lithology, mineralogy and structures penetrated by each drill hole have
been lost. Likewise, the individual assay reports of the samples collected from
these drill holes have also been lost. Consequently, it is impossible to complete a
detailed audit of the exploration programs undertaken by the previous operator.

What is available for review though are the resource compilation drawings,
longitudinal sections and cross sections which were used to arrive at the
conclusions in the Suero report and for both prior and later company reports.
This data is both concise and complete and has been used by the writer, in
conjunction with modern data generated by the Company, to prepare this report.
The cross section data, in particular, is very detailed. The cross sections show
the assay results of thousands of individual channel samples taken from both
now worked out and as yet un-mined areas of the mine. Extremely detailed
sample data such as this is usually not available to the resource estimate
evaluator.

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10.2 Recent Exploration Campaigns

10.2a Drilling

The Company commenced exploration of the tailings deposits in mid 2005.

The company drilled a total of 59 hollow core auger holes in order to define the
tailings deposit. This work was supervised by the Instituto de Geologia y Minas
y Metalurgia del Peru (INGEMMET). The results of this drilling was used by
Lytle and May to arrive at a 43-101 compliant reserve estimate for the tailings,
which was published in the previous technical report (Lytle and May, 2005).
Lytle and May arrived at an indicated reserve for the tailings at the property of
975,700 tonnes at 3.27% Zinc, 10.04% Manganese and 1.13 gpt Gold. The
reader is referred to their report for further details.

The Company began underground mine rehabilitation work at the property in

2006. The 00 level and the – 40 level of the underground mine workings were
cleaned out and rehabilitated. This work is ongoing, and as of December, 2007,
the + 115, +80, + 40, 00 and – 40 levels of the mine are now accessible.
Additional rehabilitation work is planned for the + 95 level in 2008.

The Company initiated concurrent exploration programs at both the Azulcocha

mine area and at the Azulcocha West area in 1Q 2007. Both the underground
exploration work at the Azulcocha mine and the surface exploration work at the
Azulcocha West prospect are still ongoing. The work at Azulcocha West was
funded by the joint venture with Glencore. The underground exploration work
at the mine was funded by the Company. As of December 31, 2007, the
Company has spent US$ 3,919,770 in exploration and development expenses at
the Azulcocha underground mine.

As of December, 2007, the Company has completed 13 diamond drill core holes
from the underground workings totalling 655.4 M of drilling. The Company has
also completed 13 diamond drill core holes from the surface, above the footprint
of the underground workings, for a total of 750.75 M of drilling. Details of this
program including an interpretation are discussed in the next section of the
report (Section 11.0). Details of the Azulcocha West exploration program will
be discussed in a separate report.

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10.2b Geophysics

Since acquiring the property, the Company has undertaken two geophysical
exploration programs, which were conducted by contractors. These programs
were aimed at determining the geophysical signature of the known
mineralization at the underground mine area and then looking outwards to see if
additional mineralized cuerpos with similar geophysical signatures might be
present nearby.

The first survey was a 40.7 line kilometre magnetic survey conducted by Val
D’Or Geophysica. This survey showed the presence of at least four large
magnetic bodies with signatures similar to known mineralization at the
underground mine. These magnetic anomalies are located in areas with similar
geologic characteristics to the mineralization at the Azulcocha underground
mine. These areas are definite targets for future exploration (several were drilled
during the 2006 - 2007 surface drilling campaign).

The second survey (which covered a smaller area) was a 12.6 line kilometre IP /
Resistivity survey conducted by Geofisica Consultores. This survey showed the
presence of a large resisitivity anomaly that coincides with both the Azulcocha
underground ore body and one of the larger magnetic anomalies found during
the magnetic survey. Several exploration holes were planned for this anomaly
during the final phases of the 2006 – 2007 surface drilling exploration program.

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11.0 Drilling and Cross Cut Sampling

As was discussed in the previous section, the Company undertook both a surface
and underground drilling program at the Azulcocha mine in 2007. In addition,
10 cross cut workings which traverse the width of the mineralized cuerpo were
rehabilitated and channel sampled, as part of this program. A total of 2040
meters of cross cuts were either rehabilitated or newly constructed on the -40, 0,
+40 and the +115 levels of the mine.

11.1 Underground Drilling and Cross Cut Sampling

A total of seven core holes were drilled on the 00 level and an additional six core
holes were drilled on the – 40 level at Azulcocha mine. A total of seven cross
cuts were channel sampled on the 00 level and three were channel sampled on
the – 40 level. Figures 10 and 11 show the locations of the drill holes and
channel samples on the 00 and – 40 levels of the mine.

Tables 5 and 6 show the results of the underground drilling at the mine.

11.2 Surface Drilling Program

A total of 13 core holes were drilled in the outcrop/subcrop area of the

Azulcocha Cuerpo. These holes were drilled in order to determine if a
potentially minable resource might be present above the + 115 level of the mine.
The + 115 level is at elevation 4465m, the topographic surface above the mine
workings varies between elevation 4490m and 4520m (25 to 55m above the
workings).

Compania Minera Gran Bretana mined the Azulcocha Cuerpo by open pit
methods, along its outcrop between UTM grid lines 426600E and 426750E.
The cuerpo may subcrop in the area above the + 115 level and to the east of grid
line 426750E. If the subcropping cuerpo is above cut off grade (1m @ 5%),
significant resources might be present that could be inexpensively mined.

Table 7 shows the results of the surface drilling program in the Azulcocha
Cuerpo subcrop area.

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Table 5: DRILLING PROGRAM FOR UNDERGROUND MINE

Azimuh

Intercept
Angle

Depth

Width
North
DDH

UTM

UTM
Level

% Zn
Mine
Hole

True
Drill
East

(m)
Az-06- 0 8 666 426 209.5 -10o 46.3 18-45 15.5 15.3
1 565 776
Az-06- 0 8 666 426 146.3 -10o 49.0 24-48 13.8 16.3
2 566 779
Az-06- 0 8 666 426 208 -10o 59.0 27-33 3.4 5.3
3 560 713
Az-06- 0 8 666 426 191.5 -20o 57.0 38.5-48 4.2 5.6
3a 560 713
Az-06- 0 8 666 426 164.9 -10o 52.6 26-45 11 5.72
4 559 714
Az-06- 0 8 666 426 225.3 -15o 48.0 24.2-28 2.1 6.6
5b 557 870 34-41 3.4 6.5
Az-06- 0 8 666 426 228.8 -15o 70 Throw Poor Reco
5c 557 870 Out v.
Az-06- 0 8 666 426 165 -20o 25.0 NA < CO <
6 566 871 CO
Az-06- -40 8 666 426 160 -05o 51.6 21.3- 22 5.97
7 525 861 50.3
Az-06- -40 8 666 426 187.8 +20o 28.5 20.4- 8.1 5.1
8 525 861 28.5
Az-06- -40 8 666 426 228.2 +03o 61.7 NA < CO <
9 534 822 CO
Az-06- -40 8 666 426 228.2 +20o 64.9 19.7- 16 9.1
10 534 822 37.5
Az-06- -40 8 666 426 174 +03o 64.5 20.4- 32.5 6.7
11 534 824 64.2
Az-06- -40 8 666 426 174 +20o 47.3 NA < CO <
12 534 824 CO
Total 725.4
Notes: 1. <CO = bellow cut off – 1M thickness @ 5% Zn
2. Thicknesses listed are calculated true thickness

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Table 6: CROSS CUT SAMPLING PROGRAM FOR UNDERGROUND

MINE
Cross

F Wall

F Wall

Width

Width
North
Cut

UTM

UTM
Level

% Zn
Mine

True
East

(m)

(m)
Cut
710 0 8 666 426 698 6.0 6.0 9.2
541
713 S 0 8 666 426 713 13.0 8.7 10.1
546
715 0 8 666 426 760 14.0 8.0 6.7
SE 557
760 0 8 666 426 844 6.0 6.0 < CO
562
826 0 8 666 426 695 13.5 9.0 6.6
SE 540
842 0 8 666 426 875 32.0 19.5 7.8
548
862 0 8 666 426 826 18.0 18.0 5.9
554
823 S -40 8 666 426 785 25.0 15.4 15.0
507
861 S -40 8 666 426 898 9.0 9.0 9.2
504
905 S -40 8 666 426 715 12.0 7.4 7.0
545

Notes: 1. <CO = bellow cut off – 1M thickness @ 5% Zn

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Table 7: SURFACE DRILLING PROGRAM AZULCOCHA CUERPO

Elevatio

Intercpt
Azimuh

Thickn
Angle

% Zn
Depth
North
DDH

UTM

UTM
East

(m)

ess
n

Az-06- 4,516 8 666 426 Vert -90o 19 NA Missed Missed

S3 631 869 ABND Vein Vein
Az-06- 4,513.6 8 666 426 Vert -90o 55.15 NA < CO < CO
S4 644 819 Poor recov Poor
recov
Az-06- 4,513 8 666 426 305.4 -70o 33.2 NA Missed Missed
S5 643 819 Vein Vein
Az-06- 4,507 8 666 426 Vert -90o 66.8 24- 7.5 7.2
S6 667 781 33.5
Az-06- 4,507 8 666 426 136.4 -70o 58.8 NA < CO < CO
S7b 667 783
Az-06- 4,514 8 666 426 172.8 -70o 104.8 24- 2.0 6.6
S8 645 576 26.6
Az-06- 4,514 8 666 426 Vert -90o 66.0 18-19 1.0 6.7
S9 654 600 56-58 1.5 17.6
Az-06- 4,514 8 666 426 172.7 -70o 77.5 NA < CO < CO
S10 647 543
Az-06- 4,495 8 666 426 091.5 -85o 27.5 21.1- 1.5 17.95
S16 673 722 22.6
Az-06- 4,492 8 666 426 193.3 -85o 10.5 NA < CO < CO
S17 668 673
Az-06- 4,496 8 666 426 238.5 -75o 52.5 NA < CO < CO
S18 672 622
Az-06- 4,502 8 666 426 110.8 -60o 104.0 NA < CO < CO
S26 647 673
Az-06- 4,502 8 666 426 150 -60o 75.0 NA Missed Missed
S27 647 672 Vein Vein
Total 750.75

Notes: 1. <CO = bellow cut off – 1M thickness @ 5% Zn

2. Thicknesses listed are calculated true thickness

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11.3 Test Mining

A test mining program was begun in Block A – 17 on the 0 Level of the mine in
2007 (Figs. 7, 8 and 9). The program was undertaken in order to provide bulk
samples of mineralized material for the pilot plant mill, obtain mining
engineering information and to provide some income to help offset exploration
and development expenses.

Test stope Piso 10 was cut into Block A – 17 at ~ elevation 4380m in July.
Mining proceeded in this stope until September, when the upper limit of the
resource block was reached and the stope broke into old workings. Mine
records show that approximately 6900 wet tonnes / 6350 dry tonnes of
mineralized rock averaging 8.0% Zn were produced from this stope. Test stope
Piso 5 was cut into Block A – 17 at ~ elevation 4365m in October; mining
continued in this stope until December. Mine records show that 5800 wet
tonnes / 5340 dry tonnes of mineralized rock averaging 8.0% Zn were produced
from this stope. In addition, mine records show that 6260 wet tonnes / 5756
dry tonnes of mineralized rock averaging 8.0% Zn were produced from
development workings between July and December 2007.

A total of 18,957 tonnes wet / 17,440 tonnes dry of mineralized rock was
produced from the test mine stopes and the development workings in 2007. Of
this total, 10,299 tonnes wet / 9475 tonnes dry was trucked to the Empresa
Minera Los Quenuales – Unidad Yauliyacu (Glencore) mill located in Casapalca
(150 km distant). Casapalca mill records were reviewed by the writer. These
records acknowledge receipt of the above stated tonnage in ten shipments which
had zinc contents between 5.82% and 10.22%. The weighted average of the zinc
content of the mineralized rock shipped to the Casapalca mill is 8.02% Zn. The
Company’s records of the pilot mill show that 8658 wet tonnes / 7965 dry
tonnes of mineralized rock were treated with an average zinc content of 8.0%.

11.4 Drill and Cross Cut Program Interpretation

All but three of the 13 holes drilled for the underground coring program
intercepted grades and thickness of mineralization that were above the cut off
value of 1m thickness at 5% Zn. DDH – Az-07-5c returned very low core
recoveries, in the range of 35%. The results from this drill hole were thrown out

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as it is the writer’s opinion that poor core recovery resulted in bad data from this
drill hole.

All but one of the ten cross cuts that were sampled cut through grades and
thickness of mineralized material that was above cut off. The data generated
from this underground work is a valuable input to help to define the lateral and
down dip extent of the Azulcocha Cuerpo at depth. There is a considerable
amount of like work which will need to be done in the future however. There are
several areas where the cuerpo is still open and and has not been closed off by
either drilling or cross cutting.

Only four of the 13 surface core drill holes encountered mineralized material
from the cuerpo that was above the cut off value. Six of these holes
encountered mineralized material that was below the cut off value. One of these
six (Az-06-S4) had very poor recovery (46%) and may have actually encountered
higher grade material but just not have recovered it. Of the total 13 drilled, three
drill holes missed the Cuerpo entirely.

This was either because the hole was stopped at too shallow a depth to intercept
the Cuerpo or because it was drilled outside the subcrop area of the Cuerpo.
The drill used for this program in this target area encountered adverse
subsurface conditions, resulting in less than optimal data collection.

Interpretation of the results from the surface drilling program are inconclusive.
There is a significant area of potential subcrop of the Cuerpo that was not
properly tested by this drill program. Future drilling in this target area should
profit from the lessons learned from this program with respect to drilling
problems. It would be wise to use a different type of drill rig (perhaps a reverse
circulation air rotary rig) to test this target in the future.

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12.0 Sampling Method and Approach

The estimate of potential in-place resources remaining at the Azulcocha mine

formulated for this report relies heavily on grade/thickness data collected by the
former operator. A total of 117 individual calculations were used to formulate
the estimate. Of this total, 74 grade - thickness control points were taken from
historic Gran Bretana data while 43 grade - thickness sample control points were
taken from data generated by Vena Resources, the present operator.

The writer used both sets of data to generate the resource estimate.
Consequently, this section of the report will discuss sampling methods and
approach used by both the past and present operator of the project.

12.1 Sampling Method

12.1a – Vena Resources Sampling

The drill used to collect the core samples for the surface drilling program was a
Longyear model 44, truck-mounted coring rig. The standard core size cut was
NX (2.125 in/ 5.398 cm diameter) although some BX (1.625 in / 4.128 cm
diameter) core was cut also. The rig used the smaller size coring equipment
when attempting to advance through strata which presented difficult drilling
conditions.

The drill used to collect the core samples for the underground drilling program
was a VAG model JV, skid-mounted in-mine, compressed air driven coring rig.
The standard core size cut was NX (2.125 in/ 5.398 cm diameter) although some
BX (1.625 in / 4.128 cm diameter) core was cut also. The rig used the smaller
size coring equipment when attempting to advance through strata which
presented difficult drilling conditions.

Once the core was extracted from the core barrel and placed in the core tray, the
rig side geologist measured the length of core retrieved and compared it with the
length of the core run, to determine % of core recovered. The core was then
field logged, placed in the core box and marked as to beginning and end of each
run, lost core zones, etc. The core was then taken to the geology office, where it
was washed and re-logged in detail. After detail logging, the core was marked

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for sample intervals (usually 2 m) and transported to the prep lab for further
processing, which included core cutting. During all this time period, the core
never left the project property, as the prep lab is at the mine site.

The channel samples from the cross cuts and other mine workings were taken by
first spreading a tarp along the floor of the working in the area where the sample
would be cut, in order to collect all rock fragments cut from the outcrop during
sampling. Then a chisel like moil and hammer were used to expose fresh rock in
a 15 centimetre wide by 2 centimetre deep channel across the full width of the
cuerpo on both walls (if accessible) of the tunnels. Samples were consecutively
located every 2 meters of length along the cuerpo on the cross cut wall.
Continuous samples within specific lithologies were then cut from the full width
of the channel and collected for analysis. Where the rock was too hard for a full
width sample, a narrower sample was taken from within the prepared channel
zone ensuring that samples from the full with of the channel were obtained. The
samples were collected by teams of two workers and a supervisor, to ensure that
all rock chipped from the channel was collected for assay.

Drill samples for assay were taken by cutting the drill core longitudinally with a
diamond saw in a secured location. Mud from the cutting operation was placed
in the appropriate sample bags. Half the cut core was placed back in the core
box and resealed and the other half was separated into 2 meter intervals and
placed in appropriately tagged sealed plastic bags. In areas of low core recovery
care was taken to appropriately represent the correct length from which the core
was sampled.

All the samples returned from the assay laboratory including rejects and pulps
are stored in a secured location with the remainder of the drill cores. The half of
the core not sent for assay is also kept at the mine in a locked facility.

12.1b – Compania Minera Gran Bretana Sampling

Diamond drill data from 21 drill holes and channel sample data from 53 sample
locations were abstracted from historic data to formulate the resource estimate.
This data was generated between 1975 and 1986, prior to the modern day
concerns of the stock exchange with respect to either the non-representative
nature or salting of sample data.

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Compania Minera Gran Bretana operated the Azulcocha mine profitably for 11
years, producing 1,074,582 tonnes of ore at 16.14% Zn (Suero, 1983). During
this period, tens of thousands of channel samples were taken from the workings
and were analysed at the mine laboratory for % Zn. Each sample was carefully
plotted on level plans of all the working faces in the mine. A series of 13 vertical
cross sections (every 20 M along strike) was prepared which cut at right angles to
the Azulcocha Cuerpo. Geologic observations and individual channel sample
results were posted on each cross section. The sampling data from the level
plans and the cross sections was used to prepare detailed mining plans for each
working station. The mine manager depended on accurate sample data in order
to run a profitable operation.

The map and cross section data indicates that channel samples were cut in
individual segments of from 1M to 4M long at all working and development
faces across the full width of the Azulcocha Cuerpo. In some areas that were
sampled, the cuerpo was up to 30M wide, so this was not a minor task. A grove
of even proportions was cut across the wall of the working where it was in
mineralized rock. A tarp was placed on the floor of the working in order to
collect all the material that was cut from the sampling process. Individual
samples were then bagged and tagged and taken to the mine assay laboratory for
analysis. Standard assay procedures were then used to assay the sample for zinc,
arsenic and manganese.

The Gran Bretana geologists mining engineers and assayers who worked with
the drill and channel sample data had probably never heard of QA/QC
procedures. This does not mean though, that unprofessional sample and assay
procedures were used by the mine staff to generate this data base. Speaking
globally, nearly all economic geology and mining engineering text books printed
since at least the early 1900’s or before, discuss proper sampling procedures in
detail. Proper sampling procedures, assay procedures and sample security have
been taught to mining professionals worldwide for at least 100 years.

The writer has worked in Peru now for several years, and has been favourably
impressed by the knowledge and professionalism of Peruvian mining personnel.
The writer believes that the core drill samples and channel samples taken by the
Gran Bretana geologists and mining engineers were representative of the tenor
of the rock sampled and there does not appear to be any sampling bias.

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12.2 Adverse Sampling Factors

To the best of the author’s knowledge there are is only one instance of sampling
and core recovery factors that could materially affect the accuracy and reliability
of assay results of samples taken by the Company.

Specifically, the assay results from DDH-Az-06-5c, drilled on level 00 of the

underground mine are considerably lower than the results from DDH-Az-06-5b
which was a twin hole for 5c. Inspection of the logs of drill hole 05c show, that
overall core recovery was very poor at 61.03 %. Core recovery within the
projected mineralized zone was even lower at 34.1 %. This is shown in Table 5,
in the previous section of the report. DDH – 05b was drilled from the same
station as 05c, but the azimuth of the hole was 3.5 degrees further towards the
south than the azimuth of 05c. The azimuth of DDH – 05b was 225.3 degrees;
the azimuth of 05c was 228.8 degrees.

It is the writer’s opinion, that poor core recoveries in the mineralized zone are
responsible for the lower overall assay results from drill hole DDH-Az-06-5c.
Consequently, the writer threw out the results from DDH – Az-06-5c, they were
not used in the resource calculation.

12.3 Sample Quality

The writer believes that the core drill samples and channel samples taken by
both the former operator and Vena Resources personnel, during the drilling and
sampling program were representative of the tenor of the rock sampled and
there does not appear to be any sampling bias.

As a check on sample quality, the writer compared the mine’s mineralized

material shipping records to actual mill reconciliation records. Between July of
2007 and November of 2007, the mine shipped 10,299 wet tonnes / 9444 dry
tonnes of mineralized material to the Glencore mill located in Casapalca The
mineralized material was mined from both development and production test
headings and had a weighted average zinc content of 8.02%. The Company’s
mine production estimates tallied closely with the mill’s reconciliation records.

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The writer considers this to be positive independent verification of the mine’s

sampling and assaying techniques.

12.4 Sampling Controls

The Company geologists took all of the drill core and channel samples in a
representative manner. All samples were carefully logged in order to note
lithologic, mineralogic and structural characteristics of the sample. Each sample
was placed in either a sample bag or a core box and was carefully labelled. The
geologist or mining engineer who supervised the sampling or drilling operation
was responsible for sample security and integrity, until the samples were
transported to the sample preparation facility located at the mine site.

A summary of all the samples taken during the 2006 – 2007 exploration
campaign is shown in Tables 5, 6, and 7, in Section 11.0 of the report.

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13.0 Sample Preparation, Analyses and Security

13.1 Details of Sample Preparation and Assaying

A sample preparation lab has been operated by Minlab on a contract basis at the
mine site, since early 2006. Consequently, none of the sample prep activities
were conducted by employees, officers, directors or associates of the Company.

All drill core and channel samples were prepped for assay at the mine site. The
samples were then transported to either the CIMMPeru , Minlab, SGS or
Inspectorate laboratories in Lima for analysis. Prepped samples were kept in a
locked room at the facility until they were transported to Lima for assay.

After crushing and splitting, a 250 gram split from each sample was assayed for
multi-element analysis by inductively coupled plasma atomic emission
spectroscopy ("ICP-AES") analysis for zinc and 33 other elements. Samples
which exceeded the gold detection limits were re-assayed using a gravimetric fire
assay technique. All of these labs laboratories are ISO 9002 accredited and are
part of world-wide laboratory chains.

As previously discussed the drill core samples were split in two and the sample
for analysis was weighed and sealed in a plastic bag for transportation to the
laboratory in Lima. The laboratory sample preparation protocol is described as
follows;

o Sample dried at 110 degrees C.

o Sample crushed to 90 percent passing 2 millimeters
o Sample split (riffle) to obtain a 2.5 kilogram representative sample
o Representative sample ground to 85 percent passing 85 microns
o Representative sample split to obtain analysis sample of 250 to 300 grams
o All samples analyzed for 34 element ICP determination

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13.2 Quality Assurance/Quality Control

The QA/QC procedures used by both the Minlab prep lab and the CIMMPeru,
SGS, Minlab and Inspectorate laboratories in Lima are accepted as adequate by
the principal author. Repeat and blank assays are part of their internal controls.
Based on positive laboratory correlation studies conducted in 2006 no additional
quality assurance checks were made.

13.3 Adequacy of Sampling and Security

Early in the drill program, the writer reviewed the sampling and security
protocols used by the Company at the Azulcocha mine. The core boxes were
properly sealed and kept in a secure, locked location when not being logged,
transported or cut. Only personnel authorized to handle the core were allowed
to do so. The core cutting operation was carried out in secure facilities and
access to the core boxes was tightly controlled. When core samples and channel
samples had been prepped and were ready for assaying, the laboratory picked up
the sealed samples at the preparation facility and custody was passed to them at
this point. It is the principal author’s opinion that the sampling and security
protocols used by the Company are adequate.

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14.0 Author’s Data Verification

The writer has visited the site on a number of occasions and was involved
throughout the data collection phase of the project on an ad-hoc basis to check
interim data results, do quality control checks on the data gathering procedures
and ensure that the assay laboratory was sufficient to generate acceptable data.

The writer reviewed the data accumulated by the Company as well as that
collected during the site visits. During the field visits, structural and lithologic
features at the prospect were reviewed both in outcrop and in the various mine
workings. The writer also verified the locations of the cross cut workings
accessing the Azulcocha Cuerpo, as well as the locations of select diamond drill
holes. The writer reviewed the lithologic descriptions of the core with the
geologist who logged the core and was satisfied that the descriptions were
accurate. The writer also reviewed the sample selection and security procedures
with the field geologists and mine management and was satisfied as to their
adequacy.

On the basis of the work I have witnessed and the results I have observed the
writer is satisfied that the data collected during this exploration program
accurately represent the chemical and size characteristics of the remaining in-
place mineralized body and are thus suitable for the estimation of a resource
quantity and quality.

14.1 Limitations on Verification

The precision with which a resource can be estimated is highly dependent upon
the consistency of the material being sampled and the spacing of the samples
taken. A given resource estimate has a statistically higher probability of accuracy
when the material is very consistent and the sample volume is a higher
percentage of the total volume. While the author is satisfied with the quality of
the sample data, any subsequent quantification based on that data must bear in
mind that the data is only a statistical representation of the total volume of
material.

As discussed above, the principal author was closely involved in the Company’s
exploration program at the Azulcocha mine. Based on this close working

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relationship the writer is confident of the professionalism of the Company

geologists and confirms that the data received from the sampling and drill
programs has been adequately and appropriately prepared and assayed.

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15.0 Adjacent Properties

No data from adjacent properties was used in this report.

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16.0 Mineral Resource Estimate

As was explained in Section 9.0, a two phase approach was taken to develop the
in-place mineral resource estimate for the Azulcocha mine. The first phase was
to develop a Grade x Thickness model of the Azulcocha Cuerpo to aid in
understanding the economic geologic parameters of the cuerpo. The second
phase was to formulate a resource estimate for the cuerpo.
16.1 – Resource Estimate

The Cross Section – Area method was used in this analysis to formulate an in-
place resource estimate for the Azulcocha Cuerpo. The study utilized a series of
13 cross sections that were in the company archives, plus an additional 6 sections
drawn by the writer. Cross sections are drawn at right angles to the strike of the
vein, every 20 meters along strike (see discussion in Section 9.0). The historic
data posted on the cross sections shows the grade/thickness and structural
relationships of the cuerpo in both mined out and virgin areas of the mine. They
include detailed mine channel sample and drill hole sample data collected by
Gran Bretana when that company operated the mine between 1975 and 1986.
In mine channel sample data and drill hole data collected by Vena Resources was
also projected onto the 13 archive sections drawn by Gran Bretana and on to the
6 new cross sections drawn by the writer (Fig. 12 through 16).

Society of Economic Geologists Special Publication #3 – Ore Reserve Estimates in

the Real World, states the following concerning Resource Estimates for vein type
deposits: “Estimation on cross-section has several advantages. The most important of these
is that it should force the geologist or engineer to pay attention to both the geologic and
engineering constraints that limit the estimate” (p – 45). Another advantage of this
method is that it limits the along strike projection distance for grade control
points of individual resource blocks. These points (either drill hole intercepts or
channel sample locations) are spatially located within 10 meters either east or
west of the plane of the vertical cross section. This feature of the method
usually fosters a more conservative estimate.

All resource estimation methods have both strengths and weaknesses. When
using the Cross Section – Area Method, one projects data up and down the dip
of the cuerpo, and does not consider adjacent data more than 10 meters away
from the plane of the section on strike. One weakness of this method is that
data on either side of the cross section being analysed is ignored. For example,
Cross sections 5W, 6W, 7W, 8W and 9W have a total lack of drill hole or mine

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working data below the +95 level. The writer was unable to project
mineralization very far down the dip on these cross sections. However, the
Grade x Thickness Model (Fig.9), projects a corridor of mineralization about 50
M wide with M% values between 5M% and 150M%, to the west of the mined
out area between the 00 level and the +95 level. This highly prospective ground
is not included in the resource estimate. In all likelihood, additional resources
will be discovered in this area by future exploration campaigns.

The estimate relies heavily on grade/thickness data collected by the former

operator. A total of 117 individual calculations were used to formulate the
estimate. Of this total, 74 grade - thickness control points were taken from
historic Gran Bretana data while 43 grade - thickness sample control points were
taken from data generated by Vena Resources, the present operator.

The Vena Resources grade – thickness data (generated by drilling and in-mine
sampling) was geometrically projected onto both the archive cross sections and
on to the new cross sections drafted by the writer. Individual grade – thickness
sample control data (weighted average of drill hole intercepts, cross cut sample
results, etc.) was then projected both up and down the dip of the cuerpo to the
nearest data point.

16.1a Density Determination

Historic reports prepared for Gran Bretana (Suero, 1983), include 66 separate
tonnage calculations for blocks of mineralization with variable grades ranging
from as low as 4% Zn to as high as 45% Zn. A scatter plot of this data is
presented below:

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This data shows a clear trend between zinc content and specific gravity. Since
most of the zinc at Azulcocha is sulphide zinc (sphalerite), a linear trend like this
is to be expected. The following density values are used in this report for
various grades of mineralized material:

DENSITY - GRADE ASSIGNMENT - 43-101 REPORT

% ZN Sp Gr
5 2.9
5 to 10 3.0
10 to 15 3.1
15 to 20 3.2
20 to 25 3.3
25 to 30 3.4
30 plus 3.5

16.1b Estimation Methodology

This is best explained by a graphical example. Only five of the 19 cross sections
used in the analysis are published in this report. These are Sections 0, 3E, 6E,
3W and 6W (Fig. 12 through Fig 16). It is the writer’s belief that an examination
of these five sections should give the reader an understanding of how the
resource estimate was formulated. All 19 sections, as well as the mathematical
calculations which were used to arrive at the estimate are available in both the

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writer’s and the Company’s files for future review by persons involved in due
diligence investigations, etc.

The reader is referred to Section 0 (Fig 12), which is located in the center
portion of the cuerpo. At Level 0 (4350 M), Section 0 shows Gran Bretana in
mine cross cut data of 5M @ 13.2% Zn. This control point is located 3 M to the
east of where the section cuts the 0 Level. At 10 M to the west of this same
point, Vena’s channel sampling in XC – 760 shows 6M @ 2.5% Zn. These two
bits of data were averaged, and 5.5M @ 7.4% Zn was used as the sample control
for this point.

Slightly below the 0 Level, Vena’s DDH 07-01 intercepted 27M @ 15.32% Zn.
The trajectory of the drill hole passes through the plane of the section. The foot
wall intercept was projected west onto the section from 12M to the east, the
hanging wall intercept was projected east onto the section from 2M to the west.
Further down the dip, at Level -40, Gran Bretana’s DDH – 108 (2.5M @ 28.9%
Zn) cuts the cuerpo 6.5M to the east of where the plane of the section intercepts
this mine level, this data was also projected onto the section. Further down the
dip, at elevation 4275M (5M above the -80 Level), Gran Bretana’s DDH – 125
shows a No Ore intercept.

At Level 0, Gran Bretana’s engineering data shows that Pillar A – 19 is still un-
mined. The cross sectional area of the pillar was measured at 48.39M2, using a
mechanical planimeter. This area was projected 10M east and 0M west (based
on mine map data) to arrive at a volume of 483.9M3 for the remaining
mineralization in the pillar. Historic data from Gran Bretana reports shows that
a specific gravity of 3.0 is a reasonable estimate for density of material with this
grade. Application of the density factor yields an estimate of 1452 tonnes
Indicated for the pillar; the averaged estimate of 7.4% Zn was used to assign a
grade for the tonnage in Pillar A – 19.

The reader’s attention is called to Fig 7, which shows the mined out areas of the
cuerpo. The reader should note that there is considerable tonnage within the
Mineralized Blocks (A – 1, B – 2, etc.) which are located within the mined out
portions of the cuerpo. Since the purpose of this study is to arrive at a
geological resource estimate as opposed to a reserve estimate for the
underground mine, tonnage was calculated for all the known remaining pillars
and blocks in the mine. The writer has no opinion as to how much of the
tonnage which resides in the pillars and blocks within the previously mined area

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is recoverable. An engineering feasibility study would be required to answer that

question.

Just below Pillar A – 19, the DDH 07-01 mineralized intercept of 27M was
projected up dip to Level 0 where geometric relations suggest a 10M thickness.
It was also projected down dip to DDH – 108 where the thickness decreases to
2.5M. The half way point on the polygon constructed from these projections
was used to assign grade; 15.32% for the upper sub polygon and 28.9% for the
lower. The cross sectional area of the DDH – 07-01 polygon was then measured
at 354.86M2, this was projected 10M east and 10M west to arrive at a volume of
7097.2M3. Application of a 3.2 density factor yielded an estimate of 22,711
tonnes @ 15.3% for this block of mineralization. This process was repeated for
all the 18 cross sections used in formulating the estimate. The tonnage – grade
data from all 117 individual mineralized blocks in the model was then summed
to arrive at a total.

The in-place resource estimate for the Azulcocha Cuerpo is presented below:

Indicated Resource Tonnes % Zinc

Calculated (dry) 882,572 10.0
Less Production (dry) (17,440) 8.0
Remaining (01/2008) 865,132 10.0

Inferred Resource Tonnes % Zinc

Mineralized Material 18,238 13.3

Table 8: Remaining Resource Estimate Summation

Since the above estimate is an in-place geological resource estimate and not a
reserve estimate, it should not be materially affected by any mining, metallurgical,
infrastructure or other factors. Likewise, the estimate should also be unaffected
by any known environmental, permitting, legal, title, taxation, socioeconomic,
marketing or political issues. The writer knows of no such adverse factors that
might affect the future of the Azulcocha Mine project.

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16.1c Measured – Indicated – Inferred –

Categories

The writer’s confidence in the projectability of each individual tonnage

cell was the basic criteria used to distinguish between these three resource
categories. A cursory inspection of the color coded Grade – Thickness
Contour Map (Fig 9) shows the viewer right off, that the mineralized
cuerpo at Azulcocha is quite variable and nearly erratic in places. As an
example, a want area with Grade – Thickness values of less than 15M%
can be found on Level 0 between Section lines 1E and 0. This want area
is within 10M of a very large area of + 200M% which is between the 0
and -40 Levels. This extreme variability is the reason why no Measured
Resource category is assigned to this estimate.

Grade – Thickness relationships seem to be more projectable in the up

and down dip direction than they do on strike. However, this may be
more a function of the fact that data points are more concentrated along
mine levels than between mine levels than anything else. In general, if
data was projected more than 30M either up or down dip, the resource
block was classified as Inferred. If it was projected more than 30M either
up or down dip the resource block was classified as Hypothetical, which is
not included in the resource base calculation. Mostly though, the writer’s
instinctual feel as to confidence in the projection determined the resource
classification.

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17.0 Mineral Reserve Estimate

Since an engineering feasibility study has yet to be formulated for the Azulcocha
project, no reserve estimate can be made. An in-place geological resource
estimate is the best that the Company can present at this time.

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18.0 Mineral Processing and Metallurgical Testing

The purpose of this report is to formulate an in-place geological resource
estimate for the Azulcocha underground mine. The writer is not a metallurgist
and has only a rudimentary knowledge of milling practices used for base metal
ores.
Consequently, the writer is unable to and will not attempt to render an opinion
on projected metallurgical recoveries and economics of milling mineralized
material from the Azulcocha Cuerpo. Such an opinion will require a future
update to this report and will require the input of a qualified metallurgist.
That being said, it is worth noting that in 3Q 2007, the Company constructed a
50 tpd pilot mill at the project. Company records show that between August
2007 and January 2008, a total of 8,658.28 tonnes wet / 7965 tonnes dry of
mineralized material from the test mining stopes and development headings was
processed through the pilot mill. This material had an average head grade of
8.0% Zn. The writer believes that this tonnage was representative of the
projected grades of the Cuerpo in the stopes where the test mining took place.
The Company reports that the pilot mill obtained 89% recovery and produced a
flotation concentrate with a zinc content of 54%. The writer is unable to verify
this.
The company has reportedly purchased a flotation mill for the project, and is
having key components of the mill tested in Lima during 1Q 2008.

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19.0 Interpretation and Conclusions

As of December 31, 2007, the Company has expended more than US$ 3.9
million, re-opening, developing and exploring the Azulcocha underground zinc
mine. The work has included detailed geological mapping, 875M of
underground and surface drilling, sampling in the underground workings,
geophysical surveys, pilot mill construction, laboratory construction and man
camp construction.

In mid 2007, test mining began from two working stopes on the 00 level.
Shipment records of mineralized material mined from these stopes and from
development headings has shown that the Company’s projected grades and
tonnages generally closely agree with an independent mill’s reconciliation
calculations. In other words, the tonnage of recoverable zinc that the mill pays
the Company for is fairly close to what the Company calculated would be in the
material prior to mining. This inspires confidence in the representative nature of
the sampling (both the previous operator’s and the Company’s) of the
Azulcocha Cuerpo. The number of tonnes and grade mined tend to agree with
the number tonnes and grade projected to be mined.

Based on the writer’s work on this project over the past 15 months, a remaining
Indicated tonnage estimate of 865,132 dry tonnes at 10.0% Zn has been
formulated. It is concluded that the Azulcocha underground mine exploration
project met its initial objectives. It is further concluded that the project is a
project of merit and that it warrants further exploration to increase the size of
the resource base. It is further concluded that there is potential to expand this
tonnage by additional in-mine drifting, cross cutting and drilling and by surface
drilling as recommended in Section 20.0.

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20.0 Recommendations

It is recommended that the Company take this project to the next stage of
development by undertaking the work program shown below in Table 9. The
following recommendations are focused on expanding the zinc resource at the
property. However, it should be noted that in some areas of the Cuerpo,
significant lead mineralization occurs along with the zinc mineralization. The
Company should investigate this phenomenon further as it is possible that lead
might also be recovered during milling as either a by-product or a co-product
along with the zinc.

20.1 Recommendations for Future Exploration

Above 115 Level – The area between section lines 2E and 6E is poorly
explored. This area is shown on the G-T Model as between 10 – 25M%
(17.5M%). The Mineralized Thickness (M-T) Model shows the vein to be
between 1 and 5M in this area. This area of the cuerpo is called Alto E by the
writer.

The area of the cuerpo called Alto W is found between section lines 8W and 5W.
This area is shown on the G-T Model as having between 25 and 200M%. Both
Alto W and Alto E are poorly explored and are worthy additional exploration
targets. The writer speculates that there is a target with a size of ~ 64,000 tonnes
of potential mineralization that might be added to the resource base of the
Cuerpo in these two areas. This area is yet to be defined by drilling. – The vein
is split in these two areas, so make sure the new holes are deep enough to test
both splits.

0 - +40 Levels West – The area between section lines 3W and 9W on both
these levels is unexplored. Along line 4W, GB data shows 4M @ 17% on +40
Level and 4M @ 6.5% on 0 Level. The G-T Model shows mineralization
between 5 – 100M% in this area portion of the Cuerpo. The writer speculates
that there is a target with a size of ~ 35,000 tonnes of potential mineralization
that might be added to the resource base of the Cuerpo in this area. This area
should be further explored by drifting to the west and drilling from the footwall.

+40 - + 95 Levels West – This area of the cuerpo is an upwards continuation of

the above mentioned area. The area between section lines 5W and 9W shows 5
– 150M% on the G-T Model. The writer speculates that there is a target with a

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size of ~ 63,000 tonnes of potential mineralization that might be added to the

resource base of the Cuerpo in this area. This area should be further explored
by drifting to the west and drilling from the footwall.

00 - +95 Levels East – As with these areas to the west, this zone to the east of
section line 7E is very poorly defined. The G-T Model predicts 5 – 50M% for
this area of the cuerpo. The writer speculates that there is a target with a size of
~ 63,000 tonnes of potential mineralization that might be added to the resource
base of the Cuerpo in this area. This area should be further explored by drifting
to the east on Levels 0 and + 40 and drilling from the footwall.

Below Level 0 – This area of the cuerpo is very poorly defined at present. This
is especially true for the zone between section lines 4E and 8E between elevation
4200M and 4300M. There are no drill hole penetrations at all in this area. The
G-T model predicts that there should be mineralization between 5 – 50M%
trending diagonally down to the west in this zone. This rather tenuous
projection is open to the east – actually totally unexplored. This area is probably
best explored by driving a long cross cut into the hanging wall along section line
7E and constructing a drill station.

The large want area between section lines 3W and 3E between elevation 4250M
and 4300M should be tested by Vena drilling. At present it is defined solely by
GB data. It is possible that the 200M% zone shown on the G-T Model along
line 1E could sneak down in between DDH 124 and 120B along or adjacent to
this line and connect up with DDH 131 (4M @ 11.96%) – if so, this would be a
long narrow pipe-like structure but probably high grade.

An additional area worthy of exploration is the area of the cuerpo west of

section line 1E, between elevation 4200M and 4250M. The G-T Model predicts
5 – 50M% between lines 3E and 1E at these elevations. This zone is completely
open ended to the west at these elevations.

A cost estimate for exploring those areas of the Cuerpo mentioned above is
shown in Table 9.

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US $

Activity 2008 2009 2010 2011 2012 TOTAL

Drilling
Core / DDH
Nv. +115 10,000 0 0 0 0 10,000
Nv. +80 25,000 0 0 0 0 25,000
Nv. -40 25,000 0 0 0 0 25,000
Nv. -80 0 60,000 60,000 60,000 0 180,000
Underground working
Horizontal workings
Nv. +115 136,000 0 0 0 0 136,000
Nv. +80 195,000 195,000 0 0 0 390,000
Nv. -40 62,500 62,500 0 0 0 125,000
Nv. -80 49,500 49,500 0 0 0 99,000
Vertical workings
Nv. +115 20,000 0 0 0 0 20,000
Nv. +80 11,250 0 0 0 0 11,250
Nv. -40 10,000 0 0 0 0 10,000
Nv. -80 3,750 7,500 0 0 0 11,250
Investment 548,000 374,500 60,000 60,000 0 1,042,500
Contingency (10%) 54800 37450 6000 6000 0 104,250
Total Investment 602,800 411,950 66,000 66,000 0 1,146,750

metros

Activity 2008 2009 2010 2011 2012 TOTAL

Drilling
Core / DDH
Nv. +115 100.00 0.00 0.00 0.00 0.00 100.00
Nv. +80 250.00 0.00 0.00 0.00 0.00 250.00
Nv. -40 250.00 0.00 0.00 0.00 0.00 250.00
Nv. -80 0.00 600.00 600.00 600.00 0.00 1,800.00
Underground working
Horizontal workings
Nv. +115 290.00 0.00 0.00 0.00 0.00 290.00
Nv. +80 450.00 0.00 0.00 0.00 0.00 450.00
Nv. -40 125.00 0.00 0.00 0.00 0.00 125.00
Nv. -80 90.00 246.00 0.00 0.00 0.00 336.00
Vertical workings
Nv. +115 80.00 0.00 0.00 0.00 0.00 80.00
Nv. +80 45.00 0.00 0.00 0.00 0.00 45.00
Nv. -40 40.00 0.00 0.00 0.00 0.00 40.00
Nv. -80 15.00 30.00 0.00 0.00 0.00 45.00
Total meters 1,735.00 876.00 600.00 600.00 0.00 3,811.00

Table 9: Estimated Program Cost

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21.0 Other Relevant Information

21.1 Peruvian Mining Law

21.1a Property and Title in Perú

The General Mining Law of Perú was changed in the mid 1990’s to foster the
development of the country’s considerable mineral resources. The law defines
and regulates different categories of mining activities according to stage of
development (prospecting, exploitation, processing, marketing). The ownership
of mineral claims is controlled by mining concessions which are established
using UTM coordinates to define areas of interest measured in hectares. New
concessions are to be oriented in a north-south direction but the pre-existent
concessions based on the “punto de partido” system are at any orientation.
Mining titles remain in effect for so long as the annual fees (derecho vigencia)
are paid to the government. These fees replace royalties or other non-income
based resource taxes and are scaled according to the anticipated rate of
production from the concession. The annual maintenance fee is US$3/ha for
each concession actually acquired or for a pending application (petitorio) by 30
June of each year. The concession holder must sustain a minimum level of
annual commercial production of greater than US$100/ha in gross sales within
eight years of the grant of the concession; or, if the concession has not been put
into production within that period, the annual rental increases to US$4.00/ha for
the 9th through 14th years of the grant of the concession, and to US$10.00/ha
thereafter. The concession will terminate if the annual rental is not paid for three
years in total or for two consecutive years.

While the holder of a mining concession is protected under the Peruvian

Constitution and the Civil Code, it does not confer ownership of land and the
owner of a mining concession must deal with the registered land owner to obtain
the right of access to fulfill the production obligations inherent in the concession
grant. It is important to recognize that all transactions and contracts pertaining
to a mining concession must be duly registered with the Public Mining Registry
in the event of subsequent disputes at law.

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21.1b Environmental Regulations

The General Mining Law, administered by the Ministry of Energy and Mines
(MEM). may require a mining company to prepare an Environmental Evaluation
(EA), an Environmental Impact Assessment (EIA), a Program for
Environmental Management and Adjustment (PAMA), and a Closure Plan prior
to mining construction and operation.

The environmental requirements for mining exploration programs are divided

into classifications A, B, and C. Classification A, for general exploration
activities, requires no prior authorization. Classification B requires an
application with the payment of US$50 prior to drilling up to 20 drill holes
within a 10 ha area. Classification C pertains to mining exploration programs
with more than 20 boreholes, exploration areas greater than 10 ha, or
construction of more than 50 m of tunnels. This requires the submission of an
acceptable EA (Evaluación Ambiental) which will be approved or disapproved
with within of 20 days of submission. The EA is considered approved if the
MEM does not respond within that period.

When applying for a new mining or processing concession, to increase the size
of its existing processing operations by more than 50%, or to execute any other
mining project an EIA (Estudio de Impacto Ambiental) must be submitted. The
EIA must indicate the applying company’s intention to spend at least 1% of
annual sales on environmental expenditures. Similar to the EA, the MEM must
review and approve/disapprove the EIA within 45 days of submission. The
EIA is automatically approved if the MEM has not responded within that time.

The PAMA (Programa de Adecuación y Manejo Ambiental) establishes the

company’s environmental compliance plan. Included are;

• mining disturbance,
• capital investments in environmental control
• monitoring systems
• waste management control
• site restoration

The MEM has 60 days in which to review and approve the PAMA and it is
considered approved if the MEM does not respond during this 60-day period. If

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the MEM or an “interested party” can show just cause, the PAMA may be
modified during the first year.

A mining company must also prepare and submit a Closure Plan (Plan de Cierre)
which defines the steps to be taken to protect the environment from solids,
liquids, and gases generated by the mining work.

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22.0 References

Report Name Author Date

Informe - Mina Azulcocha – Sociedad Suero, Luis Salazar & Assoc. Aug. 1983
Minera Gran Bretana, S.A.

Calculo de Reservas de Mineral Suero, Luis Salazar & Assoc. Mar., 1984
Seccion Longitudinal Mirando al Norte

Seccions Vertical de Geologia y Ing. Lucas Hidalgo Q Oct., 1984

Muestro # 6E - # 6W

El Yacimiento de Zn-As-(Au) Cesar Muñoz and Lluis Oct. 1995

Azulcocha Asociado a a Falla de Fontboté
Desgarre Cochas – Gran Bretaña (Perú
Central); Sociedad Geológica del Perú

Ore Reserve Estimates in the Real

World, Society of Economic Geologists Stone, J.G. and Dunn, P. 1996
Special Publication No. 3, Second
Edition

Technical Report of the Azulcocha Lytle, Murray and May, Richard July, 2005
Tailings Project, Department of Junin,
Peru

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