The deposit lies on the south coast of Sitkinak Island in the Trinity Island Group about 120 miles southwest of the city of Kodiak, Alaska, and 20 miles from the southern tip of Kodiak Island. The resource area consists of modern and relict beaches of uninhabited Sitkinak Island. The area is easily accessible to small transport aircraft, fishing vessels, and barges. There is a 6,000-foot runway near the center of the island. Aircraft can also land on the beaches in the middle of the prospect area at low tide.

The relatively mild climate of the region makes year-round mining of the beach sands easier. The maritime climate restricts freezing weather to short, infrequent periods during the winter. Average annual precipitation is about 75 inches, with average annual cumulative snowfall of 56 inches. There are frequent periods of windy, chilly weather.

In 2000, based on the results of the sampling and survey programs described above, XXXX decided to go forward with the next phase of its program, the construction, and operation of a pilot processing plant capable of processing 100 tons per hour. The pilot plant is fed by an eight-inch floating dredge, and consists of screens, spirals, and magnetic separators. XXXX processed several thousand tons of sand from surface to a depth of 27 feet, producing 300 tons of spiral concentrates, and 50 tons of magnetic concentrates. Due to a late start and continued slumping of the open-pit walls, the dredge was not able to reach bedrock (35 feet) at the digging site. Tests in October 2005 by an independent “umpire” lab (xxxx, CA) resulted in gold assays of 2.978 oz per ton of magnetic concentrate, and 1.3 oz per tonof non-magnetic spiral concentrate. Preliminary metallurgical tests by Dr. xxx using a Scanning Electron Microscope (SEM) and an Energy Dispersive X-Ray (EDX) spectrometer confirmed scientifically the presence of free platinum and free gold, and indicated that some of the precious metal particles are held within grains of magnetite. Based on all the work done to date, we now know the following: Bedrock is at 25 to 45 feet, Numerous large lenses of black sand exist on the property, Spirals and magnetic separators work extremely well, and Gold and platinum group elements (PGMs) are present. 4. Properties The following table details the six state mining leases held by XXXXX ADL No Issue Date Area (acres) Expiry Date 535752 09/01/93 340 08/31/13 537855 03/01/95 690 02/28/15 672216 05/01/02 700 05/01/12 534667 07/01/92 1,400 07/01/12 539400 09/01/95 85 08/31/15 538830 09/01/95 440 08/31/15 Total: 3,655 In addition to the mining leases, xxxx. own several mining claims in the area. State mining claims can be converted to mining leases when the owner is contemplating commercial production from the claims. These additional claims may also be available for joint venture should there be a requirement for further ground. 5. Potential: The precious metal potential of this property is estimated below. Most of these values are locked inside other minerals, and the challenge was to devise a recovery system to concentrate, release, and recover these metals. XXXX’s research shows that milling and smelting of the magnetic fractions and gravity concentration of the non-magnetic fraction can recover these values economically. Depth to bedrock: 10 yards Weight of 1 cubic yard of sand: 4,000 lbs or 2 tons Percentage heavy minerals fraction: 12% (5% is magnetic, 4% paramagnetic, 3%non-magnetic) Deposit Volume: 124 million cubic yards Deposit Tonnage: 124 million * 2 = 248 million tons Deposit Grade Gold – 0.05 oz/ton PGM – 0.05 oz/ton Contained Precious Metals: 24.8 million ounces With proper plant design and operation, recovery factors should be high and mining costs low. 6. Precious Metal and Rare-Earth Element Assay Results: The following assay results were taken by various workers over the history of the leases. The original documents are available from XXXX. Ten samples taken by xxx (formerly Rio Tinto Zinc) revealed very consistent values of the PGMs and gold over the sampled area. The samples were taken along the beach deposit at random places chosen by xxx who was evaluating the deposit as a consultant on behalf of his client. He took the samples to South Africa and had them analyzed by xxx laboratory (results in the table below) who found platinum values as high as 24.5 grams per ton (average 17.49), gold up to 3.1 grams per ton (average 1.96), and palladium up to 4.2 grams per ton (average 2.52). The first sample is of spiral heavy mineral concentrate and should be representative of the beach deposit They also found exceptionally high values for ruthenium, iridium, and osmium. The sampling indicates that the metals are found from the surface to depth in consistent values throughout and there is no evidence of the “nugget effect”. Assay Results: xxx Ltd. PPM SAMPLE NO DESCRIPTION Au Pt Pd SIT/1 Suntrana spiral concentrate (cone. +middling fraction) 3: 1 concentration - material from area directly south of "AVI" claims (ADL 535752). 6.94 47.79 8.16 SIT/2 Channel sample in burrow hole from sea facing dune/ ridge (1.5 m northern side of dune) 1.62 16.61 2.06 SIT/3 Channel sample of bottom half (1 to 1.5 m) of sea facing dune. 1.64 15.91 2.07 SIT/4 Channel sample of top half (1 to 1.5 m) of dune as referred to under sample SIT 13 1.80 17.32 2.51 SIT/5 Present day beach sample at SIT/3+4 3.10 24.57 4.29 SIT/6 1 m sample collected by pipe northern side of dune at sample site SIT/3+4 1.88 16.52 2.87 SIT/7 "AVI" claims (near central stream) taken by pipe, 1.2 m sample 1.65 15.38 2.30 SIT/8 "AVI" claims, northern boundary. Channel sample of 2.5 m of dune and burrow hole. 1.58 15.62 2.45 SIT/9 Southeastern corner"AVI" claims. 1m pipe sample. 1.69 15.68 2.42 SIT/10 Suntrana sample site from where material was collected for spiral treatment - sample SIT/11 Present-day black, heavy mineral beach sand (gold panned at this site). 2.81 21.75 3.85 Assays from xxx Labs of two samples report platinum at 26 and 11 ppm, palladium at less than 5 ppm, and gold at less than 5 ppm. Their assays of rare-earth metals are reported as up to 26 ppm yttrium, 24 ppm niobium, 14 ppm gallium, and 170 ppm cerium. They also found up to 610 ppm chromium, 1,400 ppm manganese, 150 ppm hafnium, and zircon and iron are reported as a "major" constituents. These materials have ever-increasing uses and applications in a number of high-tech industries and could provide extra income to the mining venture. xxx, Inc. conducted oxide analyses on five samples and found the following: Sample Fe2O3 % SiO2 % TiO2 % Cr2O3 % B-00 62.67 13.50 12.15 0.68 B-2A 35.71 29.89 10.30 2.09 B-2B 15.76 43.08 2.78 1.36 B-22 38.29 23.41 16.13 1.43 B-33 2.10 48.38 4.41 0.06 Sample Hf ppm La ppm Rb ppm Sr ppm Y ppm Zr ppm B-00 56 112 1 80 72 2,950 B-2A 4 312 4 100 160 216 B-2B 128 1,815 12 860 256 5,260 B-22 52 280 12 124 116 2,790 B-33 5,000 125 10 190 430 18,500 xxx Research Labs analyzed two samples and reported the following: Sample Fe % Calculated Fe2O3 % Ti % Calculated TiO2 % B-0 56.9 81.5 4.9 8.2 B-1 61.9 88.5 4.2 7.0 xxx (USA) Mineral Sands analyzed two samples, one each of the non-magnetic and the magnetic fractions of the heavy mineral concentrate. They found: Sample TiO2% ZrO2% SiO2% Fe2O3% U3O8% ThO2% HfO2% Non-Mag 7.72 37.00 35.73 1.85 0.0256 0.0192 .77 Magnetic 16.67 0.18 23.13 43.14 0.0035 0.0065 0.03 xxx conducted tests of two samples from the southwest portion of the adjacent Tugidak Island. The first, a natural heavy mineral concentrate taken from the beach, he divided into non-magnetic and magnetic fractions (all less than 20 mesh size). For the non- magnetic fraction, he used pan amalgamation to recover the free gold and found values of 0.289 ounces per ton. For the magnetic fraction, ground the sample to -120# (mesh) and roasted the sample under oxidizing conditions to destroy the magnetite. He then used pan amalgamation to recover the gold and found 0.508 ounces per ton. Sample number two is a ten-pound split taken from the original 50-pound sample that was cored from the beach over a five-foot interval from surface to bedrock. It was screened into several size fractions that were individually split into magnetic and non-magnetic samples, and again given the same treatment as the first sample. The results are: Fraction Weight lbs Percent Wt mag Au Oz/t Wt nonmag Au Oz/t +1/4” 1.25 12.4 0 0 0 0 -1/4 to+20# 1.93 19.2 1 0.399 3 0 -20# 6.87 68.4 14 0.437 13 0.488 xxx calculated an overall grade for this core sample of 0.334 ounces per ton, some of which was free gold, and some that needed milling and roasting to be liberated. The above assays reveal high values of gold and PGMs in the beach sands, however further sampling on a regular grid is needed to better define the deposit limits and grade. Gravity separations, microscope analysis, and amalgamation tests have shown that a portion of the gold is free. All of the investigators noted the need for further evaluation of the treatment processes since the economic exploitation of this resource can be maximized by the development and refinement of metallurgical processes. 7. Mine Plan The initial plan would be to mine 500 tons (250 cu yds) per hour or 5,000 tons per 10-hour day by hydraulic excavator and recovering gold, PGMs, zircon, and possibly rare-earth metals using gravity, magnetic, and wet chemical leaching methods. A grinding and leaching process is needed to recover the portion of the gold and PGMs which are locked in the magnetite. The grinding and leaching could be done on-site, or at a different location depending on the economics and preference of the operator. The material at Sitkinak is medium to fine sand in the minus 16 mesh (1.1 mm) size with no mineral clays present. The hydraulic excavator will feed a hopper bin which will mix the sand with water and the resulting slurry will be transported via pipeline to the nearby processing plant for heavy mineral separation. Material flow within the processing plant may occur as follows: (i) The process will start with screening of oversize + 20 mesh (0.864 mm) material that will go to tailings. Sand passing the primary screen will then go to the low- intensity magnetic separator. (ii) The low-intensity magnetic separator produces a magnetic concentrate (to be treated in step (v) below). (iii) Materials passing the low intensity magnetic separator will then go to a high- intensity magnetic separator, where the weakly magnetic and paramagnetic materials will be separated (to be treated in step (vii) below). (iv) The non-magnetic materials passing both magnetic separators (including the free gold and platinum) will go to a set of screens for classification into three size fractions (20 to 60 mesh, 60 to 100 mesh, and less than 100 mesh). Then each fraction will go to one of three high-gravity centrifugal xxx separators (see xxxxx )where the native gold and platinum is saved. Material passing the xxx separators will go to tailings. (v) The magnetic concentrate produced in step (ii) above will be milled to 10 to 15 micron size, and native gold and platinum liberated by milling will be separated in a high-gravity Falcon centrifugal separator (see xxxx(vi) Material passing the xxx separator will be leached in a wet-chemical process designed to recover remaining gold and platinum from this mineralogy. Tailings from this separator could be marketable as an iron ore, since they will be nearly100 percent pure ground magnetite. (vii) High-intensity magnetic concentrates recovered in step (iii) will be milled to 10 to 15 microns. Native gold and platinum liberated by milling will be separated in a high-gravity Falcon centrifugal separator. (viii) Material passing the Falcon separator will be leached by wet-chemical means designed to recover remaining gold, platinum, and other valuable metals from this particular paramagnetic mineralogy. (ix) Tailings from the wet-chemical leaching process will be neutralized to an inert state and combined with benign tailings from the above gravity and magnetic separation processes. All tailings will be replaced into the open pit for disposal and re-contoured according to the mining reclamation plan. 8. Operating Costs: In spite of the remoteness of the site, mining, recovery, and reclamation costs will be modest. The ease of excavating sand will yield one of the lowest cost mines in Alaska. Most of the free gold will be recovered using standard gravity separation techniques. Since the mining and recovery processes are all wet, material handling is simplified since all material is conveyed by pump and piping. Few operators are needed for the mining and recovery plant. We are also confident that processing costs of the magnetic and paramagnetic fractions will be reasonable given new high-tech mineral processing methods. The availability of water transport to and from the island means that bulk products like magnetite can be shipped to customers worldwide at reasonable costs. Reclamation of mined lands will be a low-cost operation. Except for the customized wet-chemical process, all capital equipment items are standard, off-the-shelf components that require no site-specific modifications. We estimate the milling and wet chemical process costs (applied to only the heavies or about 12% of the deposit) to be no more than $100 per ton. This modest cost will yield up to three ounces of gold from the magnetic concentrates valued at $1,650, and platinum also). Sand-mining methods are well known and the mining and plant operations are expected to be routine. 9. Environmental Impact: This project is environmentally benign. Reclamation of the beach is easy and inexpensive, consisting of re-grading the mined areas to their natural contours. High-tech processing and zero discharge from mineral processing means no pollution of beach, streams, or ocean. Sitkinak Island, AK Summary AERI – January 2006 Page 9 of 12 Wet-chemical recovery operations could be conducted elsewhere if permitting is problematic. 10. Summary: We believe that these Sitkinak Island properties represent a unique opportunity to develop a large-tonnage bulk-mining project for a variety of valuable minerals. The gold values alone justify a concerted exploration and development effort, and the platinum contents represent far more economic value. The magnetite (iron ore) content of the sands may represent an economic opportunity for byproduct sales. The project represents a low-risk development opportunity, since exploration and development costs are very low, and the mining operation can be “scaled up” from a modest beginning as it proves itself economic. The reserve potential on the 3,655 acres is extremely large and mining operations can be conducted by several excavators and processing plants simultaneously, yielding as much product as required.

Gold has been known to occur on Sitkinak Island for many years. At the turn of the century, Japanese or Chinese miners reportedly mined the sands with primitive equipment. Until recently, there were no large-scale economical methods to recover minus 200-mesh gold. For this reason, there was no serious consideration given to large-scale mining of this significant resource. With the development of efficient classifiers and high-gravity centrifugal and magnetic methods to separate the heavy mineral fraction, there is now potential for the economic exploitation of these resources. Several reconnaissance programs in the past several years have produced results indicating economic quantities of gold in the beach sands.

In 1984,xxx of Anchorage, Alaska, collected eight samples from the southwestern corner of the island. The samples, collected from auger holes bored to a depth of five feet, weighed 30 pounds each. Assays and leach tests run on four-pound splits of the original samples indicated the presence of significant free gold values.

In 1985,xxx, previously one of the principals of XXXX, together with Mr. xxx of Anchorage, collected 25 beach samples from depths of several feet. GSP Metals of Los Angeles analyzed these samples. Again, the results were encouraging.

There was little exploratory activity between 1986 and 1991. During this period, Mr. xxx the current principal of XXXX, was engaged in the acquisition of leases, mining rights, and the necessary permits to exploit claims located on the southern end of the island.

XXXX conducted a concerted testing program in 1992. In 1994, XXXX initiated a new bulk- sampling program. XXXX processed some 2,000 tons of sand using a hydraulic excavator, loaders, screens, and a recovery plant consisting of eight Humphries spirals, with favorable results. Seismic surveys conducted at this time indicated very encouraging underground channels, while a magnetometer study showed numerous highly anomalous areas.

In 1996,XXXX drilled a limited number of holes to determine the extent of the black sand deposits and to establish the depth to bedrock. The results of this work indicated a large tonnage of black sands, and bedrock at depths between 22 to 44 feet. Assays of the samples collected since the start of modern exploration in the area indicate average values of 0.1 ounce of gold per ton of head ore (beach run sand). Many of the samples assayed at much higher values.