-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A1lo7hoNxPZ/rIy7EimaRGqhCA3LGrPf1otX6O+uC9xa44FXPUTgu1sRbJII0rsm 5V51rYjRcxwK3WHiUlABZw== 0001062993-08-000528.txt : 20080213 0001062993-08-000528.hdr.sgml : 20080213 20080213165124 ACCESSION NUMBER: 0001062993-08-000528 CONFORMED SUBMISSION TYPE: 40FR12B PUBLIC DOCUMENT COUNT: 217 FILED AS OF DATE: 20080213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUATERRA RESOURCES INC CENTRAL INDEX KEY: 0001339688 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: 40FR12B SEC ACT: 1934 Act SEC FILE NUMBER: 001-33965 FILM NUMBER: 08605767 BUSINESS ADDRESS: STREET 1: 1185 W GEORGIA ST STREET 2: SUITE 1550 CITY: VANCOUVER B C CAN V6E 4E6 STATE: A1 ZIP: 00000 BUSINESS PHONE: 604-684-9384 MAIL ADDRESS: STREET 1: 1185 W GEORGIA ST STREET 2: SUITE 1550 CITY: VANCOUVER B C CAN V6E 4E6 STATE: A1 ZIP: 00000 40FR12B 1 form40f.htm REGISTRATION STATEMENT Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Form 40-F

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

________________________________

FORM 40-F

[x] Registration statement pursuant to section 12 of the Securities Exchange Act of 1934
or

[  ] Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934

Commission file number _________

________________________________

QUATERRA RESOURCES INC.
(Exact name of registrant as specified in its charter)

British Columbia
(Province or other jurisdiction of incorporation or organization)

1000
(Primary Standard Industrial Classification Number)

1100-1199 West Hastings Street
Vancouver, BC
V6E 3T5 Canada
(604) 681-9059
(Address and telephone of principal executive offices)

________________________________

CT Corporation System Copies to:
818 West Seventh Street David T. Mittelman, Esq.
Los Angeles, CA 90017 Reed Smith LLP
(213) 627-8252 Two Embarcadero Center, Suite 2000
Name, address, and telephone number San Francisco, CA 94111
of agent for service in the United States (415) 543-8700

________________________________

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
Common Shares, no par value            American Stock Exchange

     Securities registered or to be registered pursuant to Section 12(g) of the Act: Not applicable

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

For annual reports, indicate by check mark the information filed with this form:

[  ] Annual Information Form           [  ] Audited Annual Financial Statements

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: Not applicable

1


Indicate by check mark whether the registrant by filing this information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). If “Yes” is marked, indicate the file number assigned to the registrant in connection with such rule.

Yes [  ]  No [x]

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

Yes [  ]  No [x]


DIFFERENCES IN UNITED STATES AND CANADIAN REPORTING PRACTICES

     Quaterra Resources Inc. (the “Registrant”) prepares its financial statements, which are filed with this report on Form 40-F in accordance with Canadian generally accepted accounting practices (“GAAP”), and are subject to Canadian auditing and auditor independence standards. They may not be comparable to financial statements of the United States companies. The Registrant is permitted, under a multi-jurisdictional disclosure system adopted by the United States, to prepare this report in accordance with Canadian disclosure requirements, which are different from those of the United States. Significant differences between Canadian GAAP and United States GAAP are described in Note 12 of the audited consolidated financial statements of the Registrant filed as Exhibit 1 to this Registration Statement.

FORWARD-LOOKING STATEMENTS

     This Registration Statement and the Exhibits incorporated by reference into it contain “forward-looking statements.” Forward-looking statements include, but are not limited to, statements with respect to studies performed on the mineral natural resource properties in which the Registrant has an interest, the future price of metals and minerals, the estimation of mineral resources and reserves, the realization of mineral resource and reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, costs and timing of the development of new deposits, success of exploration activities, permitting time lines, currency fluctuations, requirements for additional capital, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims, limitations on insurance coverage and the timing and possible outcome of pending litigation. Forward-looking statements are frequently, but not always, identified by words such as “expects,” “anticipates,” “believes,” “intends,” “estimates,” “potential,” “possible” and similar expressions, or statements that events, conditions or results “will,” “may,” “could” or “should” occur or be achieved. Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Registrant or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those described in the Annual Information Form of the Registrant filed as Exhibit 2 to this Registration Statement.

     The Registrant’s forward-looking statements contained in the Exhibits incorporated by reference into this Registration Statement are made as of the respective dates set forth in such Exhibits. These forward-looking statements are based on the beliefs, expectations, and opinions of management on the date the statements are made. In preparing this Registration Statement, the Registrant has not updated such forward-looking statements to reflect any change in circumstances or in management’s beliefs, expectations or opinions that may have occurred prior to the date hereof. Nor does the Registrant assume any obligation to update such forward-looking statements in the future. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.


DOCUMENTS FILED PURSUANT TO GENERAL INSTRUCTIONS

     In accordance with General Instruction B.(1) of Form 40-F, the Registrant hereby incorporates by reference Exhibit 2 through Exhibit 38, as set forth in the Exhibit Index attached to this Registration Statement.

     In accordance with General Instruction C.(2) of Form 40-F, the Registrant hereby incorporates by reference Exhibit 1, the Annual Audited Consolidated Financial Statements of the Registrant for the years ended December 31, 2006 and 2005, including a reconciliation of the financial statements to U.S. GAAP as required by Item 17 of Form 20-F.

     In accordance with General Instruction D.(9) of Form 40-F, the Registrant has filed written consents of certain experts named in the foregoing Exhibits as Exhibit 39 through Exhibit 41, as set forth in the Exhibit Index attached to this Registration Statement.

ADDITIONAL INFORMATION

     The Registrant has no off balance sheet arrangements.

     The following table lists as of December 31, 2006 information with respect to the Registrant’s known contractual obligations.

  Payments due by Period
Contractual Obligations Total Less than 1 year 1-3 years 3-5 years More than 5 years
 
Letter of Agreement for lease of claims in Arizona strip district (1) US$170,000 US$30,000 US$140,000 - -
Option to purchase mining claims in Arizona, Utah, and Wyoming (2) US$460,000 US$50,000 US$210,000 US$200,000 -
Agreement to acquire right to earn interest in McArthur copper oxide mine in Lyon County, Nevada (3) US$1,400,000 US$75,000 US$1,325,000 - -
 
TOTAL US$2,030,000 US$155,000 US$1,675,000 US$200,000 -

(1)

On August 10, 2006, the Registrant signed a letter of agreement with Nustar Exploration LLC to lease 18 claims in the Arizona strip district. The terms of the Nustar lease are as follows: (i) an upfront payment of US$20,000; (ii) a first anniversary payment of US$30,000, a second anniversary payment of US$40,000; and (iii) a final third anniversary payment of US$100,000. The claims also are subject to royalty payments.

   
(2)

On June 22, 2005, the Registrant entered into an agreement with North Exploration LLC for an option to purchase mining claims situated in Arizona, Utah and Wyoming. To exercise the option, the Registrant is required to make staged payments totalling US$500,000 over five years and to issue 600,000 common shares over three years, as follows: (i) US$15,000 and issue 200,000 common shares on or before September 6, 2005 (paid and issued); (ii) US$25,000 and issue 200,000 common shares on or before September 6, 2006 (paid and issued); (iii) US$50,000 and issue 200,000 common shares on or before September 6, 2007; (iv) US$75,000 on or before September 6, 2008; (v) US$135,000 on or before September 6, 2009; (vi) US$200,000 on or before September 6, 2010. If the Registrant meets the above terms and conditions and elects to exercise the option, then the property may be purchased with a further payment of US$100. The agreement also contains royalty payment provisions upon commencement of commercial production.




(3)

In an October 2005 agreement with North Exploration LLC, the Registrant acquired the right to earn an interest in 66 unpatented mining claims covering the former MacArthur copper-oxide mine, in the Yerington district of Lyon County, Nevada. To earn a 100% interest, the Registrant is required to make staged payments totalling US $1,785,000 by January 15, 2008 as follows: (i) US$10,000 upon execution (paid); (ii) US$25,000 on or before January 15, 2006 (paid); (iii) US$75,000 on or before January 15, 2007 (paid); (iv) US $1,675,000 on or before January 15, 2008. Alternatively, since the Registrant met its obligation of US$100,000 in stage payments by January 15, 2007, and if the Registrant incurs US$500,000 in exploration expenditures by January 15, 2008, then the Registrant may elect to acquire the property by making additional payments totalling US$2,645,000 as follows: (i) US$100,000 on or before January 15, 2008; (ii) US $125,000 on or before January 15, 2009; (iii) US $2,420,000 on or before January 15, 2010. Under an amendment dated January 17, 2007 to the original agreement made October 2005, US$350,000 will be deducted from either of final payments in the alternatives above.

UNDERTAKINGS

     The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the SEC staff, and to furnish promptly, when requested to do so by the SEC staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or to transactions in said securities.

CONSENT TO SERVICE OF PROCESS

     Together with this Registration Statement on Form 40-F, the Registrant is filing with the SEC a written Irrevocable Consent and Power of Attorney on Form F-X.

     Any change to the name or address of the Registrant’s agent for service shall be communicated promptly to the SEC by amendment to the Form F-X referring the file number of the Registrant.


SIGNATURES

     Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized.

  QUATERRA RESOURCES INC.
   
   
   
Dated: February 13, 2008 By /s/ Scott Hean
  Scott B. Hean
  Chief Financial Officer


EXHIBIT INDEX

Annual Information

1. Audited annual financial statements and notes thereto for the years ended December 31, 2006 and 2005 together with the report of the auditors thereon and US GAAP reconciliation
2. Annual Information Form for the fiscal year ended December 31, 2006
3. Annual Report for the fiscal year ended December 31, 2006
4. Audited annual financial statements under Canadian GAAP for the fiscal year ended December 31, 2006
5. Audited annual financial statements under Canadian GAAP for the fiscal year ended December 31, 2005



6. Management’s Discussion and Analysis for the fiscal year ended December 31, 2006
7. Management’s Discussion and Analysis (amended) for the fiscal year ended December 31, 2005
8. Management’s Discussion and Analysis for the fiscal year ended December 31, 2005
   
Quarterly Information
 
9. Third Quarter Report, including unaudited interim financial statements, for the period ended September 30, 2007
10. Management’s Discussion and Analysis for the period ended September 30, 2007
11. Second Quarter Report, including unaudited interim financial statements, for the period ended June 30, 2007
12. Management’s Discussion and Analysis for the period ended June 30, 2007
13. First Quarter Report, including unaudited interim financial statements, for the period ended March 31, 2007
14. Management’s Discussion and Analysis for the period ended March 31, 2007
   
Shareholder Meeting Materials
 
15. Form of Proxy for July 17, 2007 Annual Meeting of Shareholders
16. Management Information Circular for July 17, 2007 Annual Meeting of Shareholders
17. Notice of Meeting for July 17, 2007 Annual Meeting of Shareholders
18. Notice of Meeting and Record Date related to July 17, 2007 Annual Meeting of Shareholders
   
Material Change Reports
 
19. Material Change Report dated January 31, 2008
20. Material Change Report dated October 23, 2007
21. Material Change Report dated July 10, 2007
22. Material Change Report dated June 5, 2007
23. Material Change Report dated June 5, 2007
24. Material Change Report dated January 4, 2007
   
News Releases
 
25. News Release dated February 5, 2008
26. News Release dated February 4, 2008
27. News Release dated January 31, 2008
28. News Release dated December 18, 2007
29. News Release dated October 9, 2007
30. News Release dated August 22, 2007
31. News Release dated July 26, 2007
32. News Release dated July 10, 2007
33. News Release dated July 20, 2007
34. News Release dated May 29, 2007
35. News Release dated May 1, 2007
36. News Release dated March 5, 2007
   
Technical Reports
 
37. Independent Technical Report for the Nieves Silver Project, Zacates State, Mexico, dated November 15, 2006
38. Summary Report for the Duke Island Cu-Ni-PGE Property, Ketchikan Mining District, Alaska, dated August 25, 2006
   
Consents
 
39. Expert’s Consent of Caracle Creek International Consulting, Inc.
40. Expert’s Consent of Avalon Development Corp.
41. Auditor’s Consent


EX-99.1 2 exhibit99-1.htm AUDITED ANNUAL FINANCIAL STATEMENTS AND NOTES THERETO FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.1

 

1550 – 1185 West Georgia Street,
Vancouver, BC, V6E 4E6
Tel: 604-684-9384 Fax: 604-688-4670
www.quaterraresources.com

Consolidated Audited Financial Statements
December 31, 2006 and 2005

Index Page
   
Management’s Responsibility for Financial Reporting          1
   
Auditors’ Report to the Shareholders          2
   
Consolidated Financial Statements  
   
             Consolidated Balance Sheets          3
   
             Consolidated Statements of Operations and Deficit          4
   
             Consolidated Statements of Cash Flows          5
   
             Notes to the Consolidated Financial Statements          6-33


Management’s Responsibility for Financial Reporting

The accompanying consolidated financial statements of Quaterra Resources Inc. have been prepared by management in accordance with Canadian generally accepted accounting principles. The financial information contained elsewhere in this report has been reviewed to ensure consistency with the financial statements.

Management maintains systems of internal control designed to provide reasonable assurance that the assets are safeguarded. All transactions are authorized and duly recorded, and financial records are properly maintained to facilitate financial statements in a timely manner. The Board of Directors is responsible for ensuring that management fulfils its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the financial statements. The Board carries out this responsibility principally through its Audit Committee.

The Audit Committee of the Board of Directors has reviewed the financial statements with management and the external auditors. Smythe Ratcliffe LLP, an independent firm of chartered accountants, appointed as external auditors by the shareholders, have audited the consolidated financial statements and their report is included herein.

 
/s/ Thomas C. Patton   /s/ Scott Hean
Thomas C. Patton   Scott Hean
President and Chief Executive Officer   Chief Financial Officer
     
     
Vancouver, British Columbia    
March 12, 2007    

Page 1 of 33


Smythe Ratcliffe LLP

7th Floor, Marine Building

355 Burrard Street

Vancouver, BC V6C 2G8

fax: 604.688.4675

telephone: 604.687.1231

Auditor’s Report
To the Shareholders of Quaterra Resources Inc.

We have audited the consolidated balance sheets of Quaterra Resources Inc. as at December 31, 2006 and 2005 and the consolidated statements of operations and deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2006 and 2005 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

“Smythe Ratcliffe LLP” (signed)

Chartered Accountants

Vancouver, British Columbia
March 12, 2007

Page 2 of 33


Quaterra Resource Inc.
Consolidated Balance Sheets as at December 31, 2006 and 2005 (Canadian Dollars)

          2006     2005  
                   
Assets                  
Current                  
Cash and cash equivalents     $ 9,112,732   $  1,786,298  
Receivables         56,592     62,206  
Prepaid and deposits         70,486     -  
Amount due from Joint Venture Partner   Note 5 (a)   113,430     177,799  
                   
          9,353,240     2,026,303  
                   
Equipment   Note 4     51,574     33,600  
Mineral properties   Note 5     7,855,832     3,756,883  
Reclamation bonds         79,898     39,061  
                   
      $ 17,340,544   $  5,855,847  
                   
Liabilities                  
Current                  
Accounts payable and accrued liabilities     $ 251,311   $  315,428  
Due to related parties   Note 6     26,216     13,010  
                   
          277,527     328,438  
                   
Shareholders' Equity                  
Share capital   Note 7 (b)   27,861,058     15,172,975  
Subscriptions receivable         (17,500 )   -  
Contributed surplus   Note 7 (b)   3,709,557     1,013,998  
Deficit         (14,490,098 )   (10,659,564 )
                   
          17,063,017     5,527,409  
                   
      $ 17,340,544   $  5,855,847  

Nature of Operations (Note 1)
Subsequent events (Note 11)

Approved on behalf of the Board of Directors:

/s/ Thomas C. Patton   /s/ Robert Gayton
Thomas Patton   Robert Gayton

 

See notes to consolidated financial statements
Page 3 of 33


Quaterra Resource Inc.
Consolidated Statements of Operations and Deficit for the years ended December 31, 2006 and
2005 (Canadian Dollars)

          2006     2005  
                   
Expenses                  
       Administration     $ 60,000   $  60,000  
       Amortization         9,991     -  
       Consulting   Note 7 (g)   1,581,859     111,586  
       Directors' and officers' fees   Note 7 (g)   755,322     199,555  
       Investor relations         144,858     71,630  
       Office and general         161,940     62,159  
       Professional fees         139,712     89,863  
       Regulatory fees and taxes         16,723     19,490  
       Shareholders' communications         15,522     20,931  
       Transfer agent         15,567     10,014  
       Travel and promotion         71,679     14,850  
       Wages and benefits   Note 7 (g)   880,247     68,269  
       Less cost recovery         (42,975 )   -  
                   
          3,810,445     728,347  
                   
Other Items                  
       Interest income         (85,988 )   (36,135 )
       Foreign exchange (gain) loss         (79,449 )   125,907  
       General exploration         225,855     2,441  
       Option payment received   Note 5 (g)   -     (35,000 )
       Write off of reclamation deposit         -     2,500  
       Expense recovery         (40,329 )   -  
                   
          20,089     59,713  
                   
Net Loss for Year         3,830,534     788,060  
Deficit, Beginning of Year         10,659,564     9,871,504  
                   
Deficit, End of Year     $ 14,490,098   $  10,659,564  
                   
Loss per share - basic and diluted     $ 0.05   $  0.01  
Weighted average number of common shares outstanding     69,964,072     60,318,200  

See notes to consolidated financial statements
Page 4 of 33


Quaterra Resource Inc.
Consolidated Statements of Cash Flows for the years ended December 31, 2006 and 2005.
(Canadian Dollars)

Cash provided by (used for):         2006     2005  
Operating Activities                  
Net loss for the year     $ (3,830,534 ) $  (788,060 )
Items not involving cash:                  
     Amortization         9,991     -  
     Stock-based compensation   Note 7 (g)   3,045,004     330,842  
     Write off of reclamation bond         -     2,500  
Operating Cash Flow         (775,539 )   (454,718 )
Changes in Non-Cash Working Capital                  
     Accounts receivables         5,614     -  
     Prepaid and deposits         (70,486 )   (54,310 )
     Accounts payable and accrued liabilities         (219,639 )   99,775  
     Due to related parties         13,206     (5,925 )
          (271,305 )   39,540  
Cash Used in Operating Activities         (1,046,844 )   (415,178 )
Investing Activities                  
     Expenditures on mineral properties         (3,335,212 )   (1,695,212 )
     Due from Joint Venture partner   Note 5 (a)   64,369     (177,799 )
     Purchase of equipment         (30,180 )   -  
     Purchase of reclamation bonds         (40,837 )   (24,317 )
Cash Used in Investing Activities         (3,341,860 )   (1,897,328 )
Financing Activity                  
     Proceeds from issuance of shares, net of share issue costs     11,715,138     2,416,145  
Increase in Cash During the Year         7,326,434     103,639  
Cash, Beginning of Year         1,786,298     1,682,659  
Cash,End of Year     $ 9,112,732   $  1,786,298  

Supplemental cash flow information (Note 10)

See notes to consolidated financial statements
Page 5 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005 (Canadian Dollars)

1.

Nature of Operations

Quaterra Resources Inc. (the “Company”) is an exploration stage enterprise incorporated under the laws of British Columbia. The Company and its subsidiaries are engaged in the acquisition, exploration and development of precious metal properties and does not have any mineral properties in production. The Company has not determined whether these mineral properties contain ore reserves that are economically recoverable. The ability of the Company to meet its commitments as they become due, including completion of the acquisition, exploration and development of its mineral properties, is dependent on the Company’s ability to obtain the necessary financing.

2.

Summary of Significant Accounting Policies


  (a)

Basis of Presentation and Consolidation

The consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles and include the accounts of the Company and its wholly-owned subsidiaries:

  (i)

Minera Agua Tierra S.A. de C.V., incorporated in Mexico;

  (ii)

Quaterra Alaska, Inc., incorporated in Alaska, USA;

  (iii)

Quaterra International Limited, incorporated in the British Virgin Islands;

  (iv)

QTA International Nieves Limited, incorporated in the British Virgin Islands; and

  (v)

Minera Nieves S.A. de C.V., incorporated in Mexico.


  (b)

Mineral Properties

All intercompany accounts and transactions were eliminated upon consolidation.

All costs related to the acquisition, exploration and development of mineral properties are capitalized until such time as these mineral properties are placed into commercial production, sold or abandoned. If commercial production is achieved from a mineral property, the related capitalized costs will be amortized prospectively on a unit-of-production basis over the estimated life of the ore reserves. If a mineral property is abandoned, the related capitalized costs are written down and expensed. From time to time, the Company may acquire or dispose of all or part of its mineral property interests under the terms of property option agreements. As such options are exercisable entirely at the discretion of the optionee, option payments are recorded as property costs or recoveries when paid or received.

Page 6 of 33



Quaterra Resources Inc.
Notes to the consolidated financial statements
Years ended December 31, 2006 and 2005

2.

Summary of Significant Accounting Policies, continued


  (b)

Mineral Properties, continued

The recoverability of amounts shown for mineral properties is dependent upon the Company’s ability to:

  (i)

Obtain the necessary financing to complete the acquisition, exploration and development of its mineral properties.

  (ii)

Enter into mineral property acquisition, joint venture or option agreements with other entities.

  (iii)

Discover economically recoverable reserves within its mineral properties.

  (iv)

Obtain future profitable production from its mineral properties or sufficient proceeds from the disposition thereof.


 

On an ongoing basis, the Company evaluates each mineral property for potential impairment based on results obtained to date to determine the nature of exploration, other assessment and development work, if any, that is warranted in the future and the potential for recovery of the capitalized costs. If there is little prospect of future work on a property being carried out within a three-year period from completion of previous activities, the deferred costs related to that property are written down to the estimated amount recoverable unless there is persuasive evidence that an impairment allowance is not required. The amounts capitalized for mineral properties represent costs incurred to date less write-downs, and are not intended to reflect present or future values.

     
  (c)

Cash and Cash Equivalents

     
 

Cash and cash equivalents include highly-liquid investments that are readily convertible to cash and generally have maturities of three months or less from the date acquired.

     
  (d)

Foreign Currency

     
 

The consolidated financial statements are presented in Canadian dollars. Accounts of the Company’s foreign operations have been translated into Canadian dollars as follows:


  (i)

Monetary assets and liabilities, at year-end rates.

  (ii)

All other assets and liabilities, at historical rates.

  (iii)

Revenue and expense items, at the average rates of exchange each quarter.

The effects of translation are credited or charged to the statement of operations as foreign exchange gain or loss.

Page 7 of 33



Quaterra Resources Inc.
Notes to the consolidated financial statements
Years ended December 31, 2006 and 2005

2.

Summary of Significant Accounting Policies, continued

     
(e)

Equipment

     

Equipment is carried at cost less accumulated amortization. Amortization is calculated over the estimated useful life of the assets using the declining-balance method at an annual rate of 30% for vehicles and equipment, 45% for computers and 75% for software. One-half of the annual rate is used in the year of acquisition.

     
(f)

Asset Retirement Obligations

     

The Company recognizes an estimate of the liability associated with an asset retirement obligation (“ARO”) at the time the liability is incurred. The estimated fair value of the ARO is recorded as a long-term liability, with a corresponding increase in the carrying amount of the related asset. The capitalized amount is depleted on a unit-of-production basis over the life of the proved reserves. The liability amount is increased each reporting period due to the passage of time and the amount of accretion is charged to earnings in the period. The ARO can also increase or decrease due to changes in the estimates of timing of cash flows or changes in the original estimated undiscounted cost. Actual costs incurred upon settlement of the ARO are charged against the ARO to the extent of the liability recorded.

     
(g)

Share Capital

     

The proceeds from the exercise of stock options and share purchase warrants are recorded as share capital. Common shares issued for non-monetary consideration are recorded at an amount based on fair market value at the time of issuance reduced by estimated transaction costs, if any.

     
(h)

Stock-Based Compensation

     

The Company accounts for stock-based compensation expense using the fair value method with respect to all stock-based payments to directors, employees and non- employees, including awards that are direct awards of stock, call for settlement in cash or other assets, or stock appreciation rights that call for settlement by the issuance of equity instruments. Under this standard stock-based payments are recorded as an expense in the period the stock-based payments are vested or the awards or rights are granted, and a corresponding increase in contributed surplus. When stock options are exercised, the corresponding fair value is transferred from contributed surplus to share capital.

Page 8 of 33



Quaterra Resources Inc.
Notes to the consolidated financial statements
Years ended December 31, 2006 and 2005

2.

Summary of Significant Accounting Policies, continued

     
(i)

Income Taxes

     

The Company follows the asset and liability method of accounting for income taxes. Under this method of tax allocation, future income tax assets and liabilities are determined based on differences between the financial statement carrying values and their respective income tax basis (temporary differences). Future income tax assets and liabilities are measured using the tax rates expected to be in effect when the temporary differences are likely to reverse. The effect on future income tax assets and liabilities of a change in tax rates is included in operations in the period in which the change is enacted or substantially assured. The amount of future income tax assets recognized is limited to the amount of the benefit that is more likely than not to be realized.

     
(j)

Loss per Share

     

Loss per share computations are based on the weighted average number of common shares outstanding during the year. Diluted loss per share has not been presented separately, as the effects of outstanding options and warrants is anti-dilutive.

     
(k)

Use of Estimates and Measurement Uncertainty

     

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosure of assets, liabilities, expenses, other income, and contingent assets and liabilities. Significant areas requiring the use of management estimates relate to amortization of equipment, the determination of the recoverability of mineral property costs, the valuation allowance of future tax assets and the assumptions used in the calculation of stock-based compensation. Management believes the estimates are reasonable, however, actual results could differ from those estimates and would impact on future results of operations and asset flows.

     
(l)

Revenue Recognition

Interest income is recorded on an accrual basis at the stated rate of interest of the term deposit over the term to maturity.

3.

Financial Instruments


  (a)

Fair Value

The carrying values of cash and cash equivalents, receivables, amounts due from joint venture partner, accounts payable and accrued liabilities, and due to related parties approximate their fair values because of the short-term maturity of these financial instruments.

Page 9 of 33



Quaterra Resources Inc.
Notes to the consolidated financial statements
Years ended December 31, 2006 and 2005

3.

Financial Instruments, continued


  (b)

Interest Rate Risk

     
 

The Company is not exposed to significant interest rate risk due to the short-term maturity of its monetary current assets and current liabilities.

     
  (c)

Credit Risk

     
 

The Company is exposed to credit risk with respect to managing its cash position. This risk, from deposit granting institutions and/or commercial paper issuers, is mitigated by risk management policies, which requires the deposits or short-term investments be invested with Canadian chartered banks rated BBB or better or commercial paper issuers R1/A2/P2 or higher. All investments must be less than one year in duration.

     
  (d)

Currency Risk

     
 

The Company is exposed to currency risk to the extent expenditures incurred or funds received by the Company are denominated in currencies other than the Canadian dollar (primarily US dollars and Mexican peso). The Company does not manage the currency risks through hedging or other currency management tools.


4.

Equipment

Equipment is carried at cost less accumulated amortization. Details of equipment are as follows:

      2006   2005
    Costs Accumulated Net Book Net Book
      Amortization Value Value
           
  Vehicles    $38,208              $(9,130)        $29,078        $22,734
  Equipment      23,517              (22,283)              1,234              8,222
  Computer          3,942                  (2,099)              1,843              2,644
  Software      23,900                  (4,481)            19,419                    -
           
       $89,567            $(37,993)        $51,574        $33,600

Page 10 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties

The Company has interests in several mineral properties in Mexico, Alaska, Nevada, Arizona, Utah and Wyoming. The total capitalized deferred exploration and acquisition costs as at December 31, 2006 were as follows:

Mineral Properties   Nieves     Los     Duke     Big     Arizona     MacArthur     Other       Total  
          Crestones     Island     Bar     Uranium           (1)        
                                                 
Acquisition                                                
 Balance, December 31, 2005 $  1,176,381   $  59,303   $  94,205   $  16,714   $  159,171   $  30,484   $  10,977   $  1,547,235  
   Additions during the year   68,083     12,393     18,080     1,747     865,937     139,840     544,271     1,650,351  
                                                 
 Balance, December 31, 2006   1,244,464     71,696     112,285     18,461     1,025,108     170,324     555,248     3,197,586  
                                                 
Exploration                                                
 Balance, December 31, 2005   464,034     20,113     1,599,029     22,652     103,820     -     -     2,209,648  
                                                 
   Advances to contractors   (1,289 )   4,103     -     -     66,344     -     -     69,158  
   Air support   -     -     -     111,795     4,664     -     -     116,459  
   Amortization   2,215     -     -     -     -     -     -     2,215  
   Assays and surveys   7,994     13,959     -     9,636     17,611     -     8,927     58,127  
   Camp costs   4,201     17,811     34     47,567     25,160     -     620     95,393  
   Drilling services   135,855     144,665     -     155,807     277,846     -     -     714,173  
   Equipment rental   165     12,065     561     15,453     3,085     6,732     -     38,061  
   Exploration support   3,297     6,289     1,819     30,919     24,851     441     6,466     74,082  
   Field supplies and wages   18,613     128,929     8,812     107,493     13,135     18,833     1,007     296,822  
   Geological services   14,746     40,434     10,721     141,430     333,861     19,776     19,197     580,165  
   Project management   1,945     46,442     4,571     19,227     178,824     29,093     -     280,102  
   Travel and related costs   2,360     9,762     -     16,789     27,414     5,142     5,076     66,543  
   Vehicle expenses   2,155     18,018     4     33,345     2,634     574     568     57,298  
                                                 
 Net additions during the year   192,257     442,477     26,522     689,461     975,429     80,591     41,861     2,448,598  
                                                 
 Balance, December 31, 2006   656,291     462,590     1,625,551     712,113     1,079,249     80,591     41,861     4,658,246  
                                                 
Total acquisition and                                                
exploration at December 31,                                                
2006 $  1,900,755   $  534,286   $  1,737,836   $  730,574   $  2,104,357   $  250,915   $  597,109   $  7,855,832  

(1) Other properties include Utah Uranium, Wyoming Uranium, Grays Hills, Las Americas, Mirasol, Jaboncillos, Tortilla, SW Tinti Utah and Carbon County.

Page 11 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued

The total capitalized deferred exploration and acquisition costs as at December 31, 2005 were as follows:

Mineral Properties   Nieves     Los     Duke     Big     Arizona     MacArthur     Other     Total  
          Crestones     Island     Bar     Uranium           (1)      
                                                 
Acquisition                                                
 Balance, December 31, 2004 $  1,033,583   $  21,562   $  94,205   $  14,913   $  -   $  -   $  -   $  1,164,263  
   Additions during the year   142,798     37,741     -     1,801     159,171     30,484     10,977     382,972  
                                                 
 Balance, December 31, 2005   1,176,381     59,303     94,205     16,714     159,171     30,484     10,977     1,547,235  
                                                 
Exploration                                                
 Balance, December 31, 2004   (202,215 )   6,280     985,669     18,950     -     -     -     808,684  
                                                 
   Advances to contractor   1,597     -     -     -     -     -     -     1,597  
   Amortization   10,016     -     -     -     -     -     -     10,016  
   Assays and surveys   322     243     7,930     -     -     -     -     8,495  
   Camp costs   7,112     -     -     -     -     -     -     7,112  
   Drilling services   438,011     -     458,107     -     -     -     -     896,118  
   Equipment rental   3,720     -     -     -     -     -     -     3,720  
   Exploration support   38,335     3,393     3,868     3,323     -     -     -     48,919  
   Field supplies and wages   67,582     -     8,238     -     3,519     -     -     79,339  
   Geological services   (18 )   -     106,763     332     69,006     -     -     176,083  
   Project management   79,877     8,816     11,504     -     -     -     -     100,197  
   Travel and related costs   9,186     1,016     16,950     47     31,295     -     -     58,494  
   Vehicle expenses   10,509     365     -     -     -     -     -     10,874  
                                                 
 Net additions during the year   666,249     13,833     613,360     3,702     103,820     -     -     1,400,964  
                                                 
 Balance, December 31, 2005   464,034     20,113     1,599,029     22,652     103,820     -     -     2,209,648  
                                                 
                                                 
Total acquisition and exploration                                                
at December 31, 2005 $  1,640,415   $  79,416   $  1,693,234   $  39,366   $  262,991   $  30,484   $  10,977 $     3,756,883  

(1) Other is Utah Uranium.

Page 12 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued


  (a)

Nieves Concessions, Mexico

The Company holds a 50% interest in 15 mineral concessions located in northern Zacatecas, Mexico, (the Nieves Concessions) and two inlaying fractions within the Nieves Concessions (Delores and Nazarene), collectively called Nieves.

The Company acquired an option on the property pursuant to an Assignment made March 26, 1999 of the Underlying Agreement by Western Silver Corporation (“Western”), a company with common directors and officers, to the Company.

To acquire its interest, the Company issued 1,444,460 common shares to Western valued at $288,892, issued 360,000 common shares to the concessionaires valued at $72,000 and in accordance with the terms of the Underlying Agreement made scheduled option payments to the concession holders, totalling US $70,000 over three years. In addition, to acquire the interest in the claim fractions the Company paid US $40,000 to the concessionaires. Commencing January 26, 2004, an annual advance minimum royalty payment (“AMR”) of US $75,000 is due to the concession holders until the commencement of commercial production.

The Nieves concessions are subject to a maximum 3% net smelter return royalty (“NSR”) to the original concession holders, which the Company may purchase at any time for US $2 million. In addition, Kennecott Exploration Company, the optionor in the initial Underlying Agreement, retains NSR royalties of 2% on certain core claims and 1% on certain peripheral claims.

Funds in the amount of US $1,500,000 (C $1,904,550) were advanced to the Company pursuant to the terms of an agreement made April 10, 2003 with Blackberry Ventures I, LLC (“Blackberry”), a US-based investment partnership, whereby Blackberry could earn a 50% interest in the Nieves silver property in Mexico or the Duke Island property in Alaska by providing advance funding to the Company to fund exploration expenditures.

The agreement with Blackberry stipulated that once all monies received from the advances had been incurred on exploration expenditures, Blackberry effectively exercised its option and earned a 50% interest in the Nieves property. In August 2005, the parties formed a joint venture to proceed with exploration on the property. As at December 31, 2006, Blackberry owed the Company $113,430 (2005: $177,799) for its share of joint venture exploration expenditures that have been made on the property.

Page 13 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued


  (b)

Los Crestones Property, Mexico

The Company holds a 100% interest in a mineral concession located in northern Durango, Mexico. In April 2004, the Company issued 25,000 common shares valued at $15,000, to an individual as a finder’s fee for his role in the identification and acquisition of the property.

   (c) Duke Island Property, Alaska
     
The Company has a 100% interest in 140 mining claims in Alaska (129 federal claims and 11 state claims) on Duke Island, which is near Ketchikan.
     
   (d)  Big Bar Property, Alaska
     
The Company has a 100% interest in Big Bar project, which consists of seven state mining claims on the Seward Peninsula, approximately 45 kilometers (110 miles) northeast of Nome, Alaska.
     
   (e) Uranium Properties, Arizona, Utah and Wyoming
     
In an agreement made effective June 22, 2005 with North Exploration LLC, a Nevada limited partnership, the Company acquired an option to purchase mining claims situated in Arizona, Utah and Wyoming. To exercise the option, the Company is required to make staged payments totalling US $500,000 over five years and to issue 600,000 common shares over three years, as follows: TSX regulatory approval for this agreement was received on September 6, 2005.

  (i)

US $15,000 and issue 200,000 common shares on or before September 6, 2005 (Paid and issued).

  (ii)

US $25,000 and issue 200,000 common shares on or before September 6, 2006 (Paid and issued).

  (iii)

US $50,000 and issue 200,000 common shares on or before September 6, 2007.

  (iv)

US $75,000 on or before September 6, 2008.

  (v)

US $135,000 on or before September 6, 2009.

  (vi)

US $200,000 on or before September 6, 2010.

If the Company meets the above terms and conditions and elects to exercise the option, then the property may be purchased with a further payment of US $100. The agreement is subject to a 2% NSR payable upon commencement of commercial production, which the Company may reduce to 1% by purchase for US $1 million.

In an agreement made effective August 10, 2006 with Nu Star Exploration LLC, the Company acquired 18 claims in the Arizona Uranium project area.

Page 14 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued


  (e)

Uranium Properties, Arizona, Utah and Wyoming, continued

Pursuant to this agreement the Company’s commitments would be as follows:

  (i)

An initial payment of US $20,000 (Paid).

  (ii)

US $30,000 on or before August 10, 2007.

  (iii)

US $40,000 on or before August 10, 2008.

  (iv)

US $100,000 on or before August 10, 2009.

This property is subject to a 4% royalty of which a 2% royalty can be bought back for $500,000.

Deferred costs on the Uranium Utah property are included in other properties in the deferred exploration tables above. The Company incurred $90,562 (2005: $10,977) in acquisition costs and $610 (2005: $Nil) in exploration expenses for a total of $91,172 (2005: $10,977).

Deferred costs on the Uranium Wyoming property are included in other properties in the deferred exploration table for the year ended December 31, 2006. The Company incurred $9,768 (2005: $Nil) in acquisition costs.

  (f)

MacArthur Claim

Pursuant to an agreement made October 2005 with North Exploration LLC, the Company acquired the right to earn an interest in 66 unpatented mining claims covering the former MacArthur copper-oxide mine, in the Yerington district of Lyon County, Nevada. To earn a 100% interest, subject to a 2% NSR, the Company is required to make staged payments totaling US $1,785,000 by January 15, 2008 as follows:

Option 1

  (i)

US $10,000 upon execution (Paid).

  (ii)

US $25,000 on or before January 15, 2006 (Paid).

  (iii)

US $75,000 on or before January 15, 2007 (Paid).

  (iv)

US $1,675,000 on or before January 15, 2008.

Alternatively, since the Company has met its obligation of US $100,000 in stage payments by January 15, 2007, and if the Company incurs US $500,000 in exploration expenditures by January 15, 2008, then the Company may elect to acquire the property by making additional payments totaling US $2,645,000 as follows:

Option 2

  (i)

US $100,000 on or before January 15, 2008.

  (ii)

US $125,000 on or before January 15, 2009.

  (iii)

US $2,420,000 on or before January 15, 2010.

The property is subject to a 2% NSR, 1% of which the Company may purchase for US $1 million.

Under an amendment dated January 17, 2007 to the original agreement made October 2005 between the Company and North Exploration LLC a sum of US $350,000 will be deducted from either of the final payments made under option one (US $1,675,000) or two (US $2,420,000) see Note 11 (d)

Page 15 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued


  (g)

Other Properties

Other properties include Grays Hills, Las Americas, Mirasol, Jaboncillos, Tortilla, SW Tinti Utah and Carbon County properties as well as Utah Uranium and Wyoming Uranium previously mentioned in Note 5 (e).

Pursuant to an agreement made December 2006 with Tom Turner, the Company acquired a 100% interest in three mineral concessions (Jaboncillos, Mirasol and Las Americas) located in Mexico for consideration of 200,000 shares with a deemed value of $1.53 per share for a total of $306,000 (Note 7 (d)).

  Other Mineral Properties   Utah     Wyoming     SW Tinti     Grays     Las     Mirasol     Jaboncillos     Tortilla     Carbon     Total Other  
      Uranium     Uranium     Utah     Hills as     Americ                 Peg Leg     County     properties  
    $    $    $   $   $   $   $   $   $   $  
                                                               
  Acquisition                                                            
       Balance, December 31, 2005   10,977     -     -     -     -     -     -     -     -     10,977  
         Additions during the year   79,585     9,768     33,209     25,032     118,094     112,688     107,098     57,089     1,708     544,271  
                                                               
     Balance, December 31, 2006   90,562     9,768     33,209     25,032     118,094     112,688     107,098     57,089     1,708     555,248  
                                                               
  Exploration                                                            
     Balance, December 31, 2005   -     -     -     -     -     -     -     -     -     -  
                                                               
         Assasys and surveys   -     -     -     1,833     3,409     1,519     2,070     96     -     8,927  
         Camp costs   -     -     -     620     -     -     -     -     -     620  
         Exploration and other   610     -     456     -     17     11     20     4,555     797     6,466  
         Field supplies and wages   -     -     -     48     220     198     541     -     -     1,007  
         Geological services   -     -     -     14,051     411     262     9     4,464     -     19,197  
         Travel and related costs   -     -     -     1,052     1,549     1,224     1,251     -     -     5,076  
         Vehicle expenses   -     -     -     568     -     -     -     -     -     568  
                                                               
     Net additions during the year   610     -     456     18,172     5,606     3,214     3,891     9,115     797     41,861  
                                                               
     Balance, December 31, 2006   610     -     456     18,172     5,606     3,214     3,891     9,115     797     41,861  
                                                               
  Total acquisition and exploration   91,172     9,768     33,665     43,204     123,700     115,902     110,989     66,204     2,505     597,109  

In the year ended December 31, 2005, the Company received option payments totaling $35,000 from two parties for properties known as the “Arc and Brown Claims” (5 claims) held by the Company in the Skeena Mining District of British Columbia. Since no acquisition or exploration costs relating to these claims remain deferred as part of mineral property expenditures, these payments were disclosed as a recovery of operating costs. See Note 11 (f)

Page 16 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued


   (h)  Title to Mineral Properties
     
Title to mineral properties may be affected by unregistered prior agreements or transfers, as well as undetected defects. Although the Company has verified title to its mineral properties in accordance with standard industry practices applicable for the current stage of exploration, these procedures do not guarantee the Company’s interests in its mineral properties.
     
   (i) Environmental Expenditures
     
The operations of the Company may, in the future, be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company's policy is to meet or, if possible, surpass standards set by relevant legislation, by application of technically proven and economically feasible measures.
     
Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. Estimated future removal and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.

6.

Related Party Transactions

As at December 31, 2006, $26,216 (2005: $13,010) was due to directors or senior officers of the Company or to companies controlled by them, for various services rendered.

The following table summarizes the Company’s related party transactions for the years ended December 31, 2006 and 2005.

Page 17 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

6.

Related Party Transactions, continued


          2006     2005  
                   
Services                  
                 Administration fee       $  60,000   $  60,000  
                 Consulting       $  87,029   $  48,568  
                 Directors' and officers' fees       $  5,625   $  -  
                 Investor relations       $  36,943   $  36,167  
                 Professional fees                  
                           Accounting       $  35,391   $  36,263  
                           Legal fees       $  16,267   $  19,286  
                 Share issue costs   (1 ) $  27,698   $  -  
                 Wages and benefits       $  49,746   $  -  
Cost recovery                  
                 Equipment       $  1,690   $  -  
                 General exploration       $  6,412   $  1,420  
                 Office and administration       $  108,691   $  58,674  
                 Regulatory       $  3,510   $  3,144  
                 Shareholders' communications       $  547   $  -  
                 Travel and promotions       $  22,226   $  13,660  
Mineral properties                  
                           Big Bar   (2 ) $  14,603   $  -  
                           Arizona Uranium   (2 ) $  82,758   $  16,178  
                           MacArthur   (2 ) $  50,195   $  -  
                           Nieves   (2 ) $  1,320   $  -  
                           Other properties   (2 ) $  615   $  6,396  

(1)

This amount has been capitalized and is included in share capital on the balance sheet

(2)

These amounts have been capitalized and are included in mineral properties on the balance sheet

These transactions were made in the normal course of operations and measured at the exchange amount, which is the amount of consideration established and agreed to by the Company and related parties. They are considered related party due the following relationships to the Company:

  (a)

A private company controlled by directors or officers of the Company.

  (b)

A director or officer of the Company.

  (c)

An association of lawyers in which an officer of the Company is a member (resigned May 1, 2006).

Page 18 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital


  (a)

Authorized

The Company has unlimited authorized, without par value, common shares.

  (b)

Issued and Outstanding


      Number     Total     Contributed  
      of shares           Surplus  
  Balance as at December 31, 2004   57,347,200   $  12,672,761   $  691,226  
           Issued for cash:                  
                       Private placements   6,500,000     2,275,000     -  
                       Exercised share purchase warrants   1,400,000     210,000     -  
                       Exercised stock options   75,000     9,350     -  
           Total issued for cash   7,975,000     2,494,350     -  
           Issued for mineral property acquisitions   200,000     76,000     -  
           Fair value of stock options exercised   -     8,070     (8,070 )
           Stock based compensation   -     -     330,842  
           Subtotal before share issue costs   8,175,000     2,578,420     322,772  
           Share issue costs   -     (78,206 )   -  
  Balance as at December 31, 2005   65,522,200     15,172,975     1,013,998  
           Issued for cash:                  
                       Private Placement   5,247,855     9,183,746     -  
                       Exercised share purchase warrants   3,814,281     1,907,141     -  
                       Exercised stock options   2,829,000     675,030     -  
           Total issued for cash   11,891,136     11,765,917     -  
           Issued for mineral property acquisitions   400,000     606,000     -  
           Issued for brokerage fees   291,484     510,097     -  
           Fair value of stock options exercised   -     349,445     (349,445 )
           Stock based compensation   -     -     3,045,004  
           Subtotal before share issue costs   12,582,620     13,231,459     2,695,559  
           Share issue costs   -     (543,376 )   -  
  Balance as at December 31, 2006   78,104,820   $  27,861,058   $  3,709,557  

Page 19 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital, continued


  (c)

Private Placements

During the year ended December 31, 2006, the Company issued 5,247,855 units at a price of $1.75 per unit for gross proceeds of $9,183,746. Each unit consisted of one common share and one-half of one share purchase warrant, each whole warrant entitling the holder to purchase an additional common share at a price of $2.25 until expiry on June 21, 2008. The Company incurred net share issuance costs of $502,596, including 291,484 shares were issued for finders’ fees valued at $510,097, resulting in net proceeds of $8,681,150 from the private placement.

During the year ended December 31, 2005, the Company issued 6,500,000 units at a price of $0.35 per unit for gross proceeds of $2,275,000. Each unit consisted of one common share and one-half of one share purchase warrant, each whole warrant entitling the holder to purchase an additional common share at a price of $0.50 until expiry on September 27, 2007. Additional share purchase warrants were issued by the Company as finders’ fees entitling the holder to purchase an aggregate 564,280 common shares at a price of $0.50 per share until expiry on September 27, 2007. The Company incurred net share issuance costs of $78,206.

  (d)

Shares Issued for Mineral Property

During the year ended December 31, 2006, the Company issued 400,000 common shares for value at $606,000.

  (i)

200,000 common shares value at $1.50 per share, $300,000 in total, pursuant to the terms of the uranium properties agreement (Note 5 (e)).

  (ii)

200,000 common shares value at $1.53 per share, $306,000 in total, pursuant to the acquisition of three mineral concessions in Mexico (Note 5 (g)).

During the year ended December 31, 2005, the Company issued 200,000 common shares value at $0.38 per share, $76,000 in total, pursuant to the terms of the uranium properties agreement (Note 5 (e)).

  (e)

Share Purchase Warrants

A summary of the Company’s share purchase warrant transactions for the years ended December 31, 2006 and 2005 is as follows:

Page 20 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital, continued


  (e)

Share Purchase Warrants, continued


  Exercise Expiry Balance Warrants Cancelled Warrants Balance
  Price Date Dec. 31, 2005 Issued or Expired Exercised Dec. 31, 2006
               
       $0.66      January 20, 2006            120,000                  -        120,000                  -                            -
       $0.50 September 27, 2007        3,250,000                      -    3,250,000                            -
       $0.50 September 27, 2007            564,281                      -        564,281                            -
       $2.25              June 21, 2008                      -  2,623,928                    -                  -            2,623,928
               
             3,934,281  2,623,928        120,000    3,814,281            2,623,928
               
  Weighted average exercise price                  $0.50            $2.25              $0.66              $0.50                      $2.25

  Exercise Expiry Balance Warrants Cancelled Warrants Balance
  Price Date Dec. 31, 2004 Issued or Expired Exercised Dec. 31, 2005
               
       $0.15            March 3, 2005        1,400,000                    -                    -  1,400,000                        -
       $0.66      January 20, 2006              120,000                    -                    -                  -            120,000
       $0.50 September 27, 2007                        -      3,250,000                    -                  -        3,250,000
       $0.50 September 27, 2007                        -          564,281                    -                  -            564,281
               
             1,520,000      3,814,281                    -  1,400,000        3,934,281
               
  Weighted average exercise price                    $0.19                $0.50              $0.00              $0.15                  $0.50

  (f)

Stock Options

As at December 31, 2006 and 2005, the Company had a stock option plan (the “Plan”), allowing for the reservation of common shares issuable under the Plan to a maximum 10% of the number of issued and outstanding common shares of the Company at any given time. The term of any stock option granted under the Plan may not exceed five years and the exercise price may not be less than the closing price of the Company’s shares on the last business day immediately preceding the date of grant, less any permitted discount. On an annual basis, the Plan requires approval by the Company’s shareholders and submission for regulatory review and acceptance.

Page 21 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital, continued


  (f)

Stock Options, continued

The purpose of the Plan is to provide directors, officers, key employees and certain other persons who provided services to the Company and its subsidiaries with an increased incentive to contribute to the future success and prosperity of the Company.

As at December 31, 2006, 5,233,250 of the options outstanding were vested and exercisable and all were vested and exercisable as at December 31, 2005. Transactions for the years ended December 31, 2006 and 2005 are as follows:

   Exercise Expiry Balance Options Options Options Balance
  Price Date Dec. 31, 2005 Granted Cancelled/Expired Exercised Dec. 31, 2006
               
     $0.15      February 8, 2006              50,000                -                      -        50,000                  -
     $0.15                  May 7, 2006              55,000                -                      -        55,000                  -
     $0.12                  June 8, 2006          515,000                -                      -    515,000                  -
     $0.19 September 27, 2006          490,000                -                      -    490,000                  -
     $0.12      January 10, 2008      1,591,000                -                      -    654,000        937,000
     $0.25        October 2, 2008              75,000                -                      -        25,000          50,000
     $0.34    December 8, 2008          195,000                -                      -    105,000          90,000
     $0.65            March 2, 2009          100,000                -            100,000                -                  -
     $0.62          March 25, 2009          800,000                -                      -    210,000        590,000
     $0.35          August 9, 2010      1,575,000                -                      -    725,000        850,000
     $0.40          January 9, 2011                      -    200,000                      -                -        200,000
     $1.04          March 27, 2011                      -    125,000                      -                -        125,000
     $1.00              May 19, 2011                      -        75,000                      -                -          75,000
     $1.12              June 12, 2011                      -    100,000                      -                -        100,000
     $1.55                July 28, 2011                      - 2,110,000                      -                -  2,110,000
     $1.55        August 23, 2011                      -    100,000                      -                -        100,000
     $1.50 September 25, 2011                      -    100,000                      -                -        100,000
     $2.05 December 18, 2011                      -    100,000                      -                -        100,000
               
           5,446,000 2,910,000            100,000 2,829,000  5,427,000
               
  Weighted average exercise price                $0.29          $1.44                  $0.65          $0.24            $0.92

Page 22 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital, continued


  (f)

Stock Options, continued


  Exercise Expiry Balance Options Options Options Balance
  Price Date Dec. 31, 2004 Granted Cancelled/Expired Exercised Dec. 31, 2005
               
     $0.15      February 8, 2006              50,000                -                        -                -          50,000
     $0.15                  May 7, 2006              55,000                -                        -                -          55,000
     $0.12                  June 8, 2006          525,000                -                        -        10,000        515,000
     $0.19 September 27, 2006          495,000                -                        -          5,000        490,000
     $0.12      January 10, 2008      1,651,000                -                        -        60,000  1,591,000
     $0.25        October 2, 2008              75,000                -                        -                -          75,000
     $0.34    December 8, 2008          225,000                -                30,000                -        195,000
     $0.65            March 2, 2009          100,000                -                        -                -        100,000
     $0.62          March 25, 2009          815,000                -                15,000                -        800,000
     $0.35          August 9, 2010                      - 1,650,000                75,000                -  1,575,000
               
           3,991,000 1,650,000              120,000        75,000  5,446,000
               
  Weighted average exercise price                $0.26          $0.35                  $0.38          $0.12            $0.29

  (g)

Value Assigned to Stock Options

The fair value of stock options granted using the Black-Scholes option pricing model was calculated with the following weighted average assumptions:

       2006    2005
       
  Risk-free interest rate  4.02%  2.98%
  Expected Share price volatility 121.60% 101.97%
  Expected option life in years 3.5 2.0
  Expected dividend yield 0% 0%

Page 23 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital, continued


  (g)

Value Assigned to Stock Options, continued

The total calculated fair value of options expensed during the year ended December 31, 2006 was $3,045,004 (2005: $330,842) and are included in the statement of operations as follows:

      2006     2005  
      Number     Stock-based     Number     Stock-based  
      of Options     Compensation     of Options     Compensation  
                           
  Consulting   1,315,000   $  1,476,044     300,000   $  63,018  
  Directors' and officers' fees   725,000     749,697     950,000     199,555  
  Wages and benefits   870,000     819,263     325,000     68,269  
                           
  Total   2,910,000   $  3,045,004     1,575,000   $  330,842  

8.

Income Taxes

The Company has approximately $3,620,000 (2005: $2,930,000) of resource deductions that have no expiry dates and are available, subject to certain restrictions, to reduce future taxable income in Canada. The Company also has the following non-capital losses available to reduce future taxable income in Canada, which expire as follows:

      2006  
         
  2007 $  210,000  
  2008   349,000  
  2009   235,000  
  2010   228,000  
  2014   284,000  
  2015   360,000  
  2026   698,000  
         
    $  2,364,000  

Page 24 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

8.

Income Taxes, continued

The future benefits of these losses and deductions have not been recorded in the accounts. A reconciliation of income tax provision computed at statutory rates to the reported income tax provision is provided as follows:

      2006     2005  
               
  Loss before income taxes $  (3,830,534 ) $  (788,060 )
               
  Income tax rate   34.12%     34.12%  
  Income tax benefit computed at Canadian statutory rates $ 1,306,978   $  268,886  
  Foreign tax rates different from statutory rates   (1,946 )   (5,702 )
  Permanent differences   (1,039,788 )   (113,337 )
  Temporary difference   (2,347 )   5,679  
  Unrecognized tax losses   (262,897 )   (155,526 )
               
    $  -   $  -  

Significant components of the Company’s future income tax assets, after applying enacted corporate income tax rates, are as follows:

      2006     2005  
  Future income tax assets            
           Temporary differences on assets $  (410,114 ) $  291,826  
           Non-capital losses carried forward   806,499     625,633  
      396,385     917,459  
           Valuation allowance for future income tax assets   (396,385 )   (917,459 )
  Future income tax assets, net $  -   $  -  

Page 25 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

9.

Segmented Information

The Company‘s non-current assets are distributed by geographic location as follows:

      2006     2005
      Equipment     Mineral     Reclamation     Total     Equipment     Mineral     Reclamation     Total  
            Properties     Bond                 Properties     Bond        
                                                   
  Canada $  24,997   $  -   $  -   $  24,997   $  -   $  -   $  -   $  -  
  Mexico   25,488     2,785,632     -     2,811,120     33,600     1,700,458     -     1,734,058  
  U.S.A.   1,089     5,070,200     79,898     5,151,187     -     2,056,425     39,061     2,095,486  
                                                   
    $  51,574   $ 7,855,832   $  79,898   $ 7,987,304   $  33,600   $ 3,756,883   $  39,061   $ 3,829,544  

10.

Supplemental Cash Flow Information.


      2006     2005  
               
  Cash Items            
         Interest received $  70,999   $  34,470  
         Share issue costs $  61,524   $  -  
  Non-Cash Items            
                   Accrued interest $  14,989   $  -  
         Financing Activities            
                   Non-cash share issue costs $  482,154   $  -  
                   Shares issued for mineral property $  606,000   $  76,000  
                   Shares issued for finders fees $  510,097   $  -  

11.

Subsequent Events

The following occurred subsequent to December 31, 2006:

  (a) 115,000 stock options were exercised for gross proceeds of $78,600 with an average price of $0.68 per share.
     
  (b) 75,000 stock options were issued with an exercise price of $2.65 and an expiry date of January 11, 2012.

Page 26 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

11.

Subsequent Events, continued


  (c)

The Company entered into a sale and purchase agreement dated January 16, 2007, with Charles Gary Clifton and North Exploration LLC, in respect to the purchase of the mining claims known as the Pit Claim in Lyon County, Nevada. Pursuant to this agreement, the Company’s commitments are as follows:


  (i)

US $43,750 on or before January 16, 2007 (Paid).

  (ii)

US $43,750 on or before April 16, 2007.

  (iii)

US $43,750 on or before July 16, 2007.

  (iv)

US $43,750 on or before October 16, 2007.

  (v)

US $43,750 on or before January 16, 2008.

  (vi)

US $43,750 on or before April 16, 2008.

  (vii)

US $43,750 on or before July 16, 2008.

  (viii)

US $43,750 on or before October 16, 2008.


(d)
Under an amendment dated January 17, 2007 to the original agreement made October 2005 between the Company and North Exploration LLC a US $350,000 deduction will be made from the final payments, as the Company has paid this amount to Charles Gary Clifton in advance.
     
(e)
Subject to regulatory approval the Company entered into a service agreement dated January 30, 2007, with a consultant to provide financial and advisory services. Under this agreement, the Company’s commitment is to pay a retainer of $15,000 per month starting February 1, 2007. $7,500 paid by cash and $7,500 by the issuance of common shares in the Company at the market price of the Company’s shares on the date of issuance.
     
(f)
The option agreements for the Arc and Brown Claims, in the Skeena Mining District were terminated in accordance with their terms and the 100% interest reverted back to the Company See Note 5 (g).
     
  (g) The following agreements were implemented as at January 1, 2007:

  (i)

The employment agreement of the VP of Exploration was renewed.

  (ii)

The management agreement with a related party was renewed.

  (iii)

A long term employment agreement for the President and Chief Executive Officer of the Company.

Page 27 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

12.

Differences between Canadian and United States generally accepted accounting principles (GAAP)


  (a)

Differences in accounting principles


  (i)

Exploration expenditures

Under Canadian GAAP, acquisition costs of mineral interests and exploration expenditures are capitalized (Note 5).

Under US GAAP, exploration costs incurred in locating areas of potential mineralization are expensed as incurred. Commercial feasibility is established in compliance with SEC Industry Guide 7, which consists of identifying that part of a mineral deposit that could be economically and legally extracted or produced at the time of the reserve determination. After an area of interest has been assessed as commercially feasible, expenditures specific to the area of interest for further development are capitalized. In deciding when an area of interest is likely to be commercially feasible, management may consider, among other factors, the results of pre-feasibility studies, detailed analysis of drilling results, the supply and cost of required labour and equipment, and whether necessary mining and environmental permits can be obtained. To date no exploration expenses have been capitalized.

The Company has adopted EIFT 04-02 and separately reports the aggregate carrying amount of mineral rights. Mineral rights include an option for the Company to acquire the rights to extract and retain at least a portion of the benefits from the mineral deposits. Acquisition costs include cash and the fair market value of common shares for the mineral rights. These capitalized costs will be amortized over the estimated life of the property following commencement of commercial production or written off if the property is sold, allowed to lapse or abandoned, or when an impairment of value has occurred.

Page 28 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

12.

Differences between Canadian and United States generally accepted accounting principles (GAAP)


  (a)

Differences in accounting principles


  (ii)

Reconciliation of total assets, liabilities and stockholders’ equity:


      December 31, 2006     December 31, 2005    
  Total assets per Canadian GAAP $  17,340,544   $  5,855,847  
  Expenditures on resource properties   (5,196,365 )   (2,550,014 )
  expensed under US GAAP            
  Total assets per US GAAP $  12,144,179   $  3,305,833  
  Total liabilities per Canadian GAAP $  277,527   $  328,438  
  Adjustments to US GAAP   -     -  
  Total liabilities per US GAAP   277,527     328,438  
  Total equity per Canadian GAAP   17,063,017     5,527,409  
  Expenditures on resource properties   (5,196,365 )   (2,550,014 )
  expensed under US GAAP            
  Total equity per US GAAP   11,866,652     2,977,395  
  Total Liabilities and equity per US GAAP $  12,144,179   $  3,305,833  

Page 29 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

12.

Differences between Canadian and United States generally accepted accounting principles (GAAP), continued


  (a)

Differences in accounting principles, continued


  (iii)

Reconciliation of net loss reported in Canadian GAAP and US GAAP:


      Year ended December 31,  
      2006     2005  
  Reconciliation of net loss from Canadian            
  GAAP to US GAAP            
  Loss for year per Canadian GAAP $  3,830,534   $  788,060  
  Expenditures on mineral properties   2,646,351     1,172,538  
  Net loss for year per US GAAP   6,476,885     1,960,598  
  Deficit, Beginning of year per US GAAP   13,209,578     11,248,980  
  Deficit, End of year as per US GAAP $  19,686,463   $  13,209,578  
  Net loss per share for the year in            
  accordance with Canadian GAAP $ 0.05   $ 0.01  
  Total differences $ 0.04   $ 0.02  
  Net loss per share for the year in            
  accordance with US GAAP $ 0.09   $ 0.03  
  Weighted average number of common            
  shares outstanding   69,964,072     60,318,200  

Page 30 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

12.

Differences between Canadian and United States generally accepted accounting principles (GAAP), continued


  (a)

Differences in accounting principles, continued


  (iv)

Reconciliation of cash flows reported in Canadian GAAP and US GAAP:


      Year ended  
      Dec 31, 2006     Dec 31, 2005  
               
  Cash used in operating activities            
  in accordance with Canadian GAAP $  (1,046,844 ) $  (415,178 )
  Adjustments to net loss involving use of cash            
               Write-off of expenditures on mineral interest   (2,646,351 )   (1,172,538 )
               
  Cash used in operating activities            
  in accordance with US GAAP   (3,693,195 )   (1,587,716 )
               
  Cash used in investing activities            
  in accordance with Canadian GAAP   (3,341,860 )   (1,897,328 )
  Reclassification of expenditures on mineral property interest   2,646,351     # 1,172,538  
               
  Cash used in investing activities            
  in accordance with US GAAP   (695,509 )   # (724,790 )
               
  Cash used in Financing Activities            
  in accordance with Candian and US GAAP   11,715,138     2,416,145  
               
  Increase in cash during the period            
  in accordance with Candian and US GAAP   7,326,434     103,639  
  Cash, beginning of period            
  in accordance with Candian and US GAAP   1,786,298     1,682,659  
               
  Cash, end of period            
  in accordance with Candian and US GAAP $  9,112,732   $  1,786,298  

Page 31 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

12. Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

  (b) Recent accounting pronouncements, continued

  (i)
In December 2004, FASB issued Statement No. 123 (revised 2004), Share-Based Payment (“SFAS 123(R)”), which requires the measurement and recognition of compensation expense for all stock-based compensation payments and supersedes the Company’s current accounting under APB 25. SFAS 123(R) is effective for all annual periods beginning after June 15, 2005. In March 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to the adoption of SFAS 123(R). This standard will not have an impact on the Company’s financial statements as it already applies the fair value method of accounting for its stock options.
       
  (ii)
FAS 153, Exchanges of Non-Monetary Assets. The provisions of this statement are effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for non-monetary asset exchanges occurring in fiscal periods beginning after December 16, 2004. The provisions of this statement should be applied prospectively. There is no impact on the Company’s financial statements.
       
  (iii)
FIN 46(R), Consolidation of Variable Interest Entities, applies at different dates to different types of enterprises and entities, and special provisions apply to enterprises that have fully or partially applied Interpretation 46, or Interpretation 46 (R) is required in financial statements of public entities that have interests in variable interest entities or potential variable interest entities commonly referred to as special-purpose entities for periods ending after December 15, 2003. Application by public entities is required in financial statements for periods other than special-purpose entities and by non-public entities to all types of entities is required at various dates in 2004 and 2005. In some instances, enterprises have the option of applying or continuing to apply Interpretation 46 for a short period of time before applying Interpretation 46(R). There is no impact on the Company’s financial statements.
       
  (iv)
SFAS 154, Accounting Changes and Error Corrections. This new standard replaces APB Opinion No. 20, Accounting Changes, and FASB 3, Reporting Accounting Changes in Interim Financial Statements. Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived non- financial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a "restatement." The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005. There is no impact on the Company’s financial statements.

Page 32 of 33



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

12. Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

  (b)

Recent accounting pronouncements, continued


  (vii)

SFAS 157, Fair Value Measurements. The provisions of this standard are to provide guidance for using fair value to measure assets and liabilities. The standard clarifies methods for measuring items not actively traded and the principles that fair value should be based upon when pricing an asset or liability. The provisions of Statement 157 are effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year. There is no impact on the Company’s financial statements.

     
  (viii)

On July 13, 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109. Interpretation 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with Statement 109 and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Additionally, Interpretation 48 provides guidance on de- recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Interpretation 48 is effective for fiscal years beginning after December 15, 2006, with early adoption permitted. The Company is currently evaluating whether the adoption of Interpretation 48 will have a material effect on its consolidated financial position, results of operations or cash flows.

Page 33 of 33


EX-99.2 3 exhibit99-2.htm ANNUAL INFORMATION FORM FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.2

 

1100 – 1199 West Hastings Street,
Vancouver, BC, V6E 3T5
Tel: 604-684-9384 Fax: 604-688-4670
www.quaterraresources.com

Annual Information Form
For the year ended December 31, 2006
Dated June 25, 2007


TABLE OF CONTENTS

PRELIMINARY NOTES  
I. Date of Information 1
II. Financial Statements 1
III. Reporting Currency 1
IV. Disclosure of Mineral Resources 1
V.  Forward Looking Statements and Cautionary Notes  2
VI. Glossary of Terms and Definitions  3
VII. Glossary of Abbreviations  7
VIII. Conversion Tables  8
ITEM 1. CORPORATE STRUCTURE 9
I. Name, address and Incorporation  9
II. Inter-corporate Relations  9
ITEM 2. GENERAL DEVELOPMENT OF BUSINESS 10
ITEM 3. DESCRIPTION OF BUSINESS 11
I. General  11
II. Trends  11
III.  Natural Resource Properties  12
a. The Nieves Concessions – Zacatecas, Mexico  12
  b. Los Crestones Project – Durango, Mexico  17
  c. Uranium Projects – Arizona, Utah and Wyoming USA  22
  d. Duke Island – Alaska, USA  31
  e. Big Bar – Alaska, USA  39
  f. MacArthur – Nevada, USA  42
  g. Other Properties  47
ITEM 4. RISK FACTORS 48
I. Risks and Uncertainties  48
II. Political and Economic Risks of Doing Business  49
III. Funding Requirements  49
IV. Risk Associated with Title  49
V. Competition  49
VI. Management and Dependence on Key Personnel  50
VII. Exploration and Mining Risks  50
VIII. Estimates of Mineral Reserves and Resources and Production Risk  50
IX. Exploration and Development Activities  51
X. Resource Prices  51
XI. Environmental and Other Regulatory Requirements  51
XII. Insurance  52
XIII.  Foreign Subsidiaries  52
XIV. Conflicts of Interest  52
XV. Share Price Volatility  53


TABLE OF CONTENTS, continued


ITEM 5. DIVIDENDS  53
ITEM 6. CAPITAL STRUCTURE  53
I. Authorized Capital  53
II. Stock Options  54
III. Share Purchase Warrants  54
ITEM 7. MARKET FOR SECURITIES 55
ITEM 8. ESCROWED SECURITIES  55
ITEM 9. DIRECTORS AND OFFICERS  56
I. Name, Occupation, and Experience  56
II. Control of Securities  60
III.  Cease Trade Orders, Bankruptcies, Penalties or Sanctions  61
IV. Conflicts of Interest  61
ITEM 10. PROMOTERS  63
ITEM 11. LEGAL PROCEEDINGS AND REGULATORY ACTION  63
ITEM 12. INTEREST OF MAGNEMENT AND OTHERS IN MATERIAL TRANSACTIONS  64
ITEM 13. TRANSFER AGENT AND REGISTRARS  64
ITEM 14. MATERIAL CONTRACTS  64
ITEM 15. INTEREST OF EXPERTS  64
ITEM 16. ADDITIONAL INFORMATION  64
  I. Audit Committee  64
  a.  Purpose  64
  b.  Members and Meetings  65
  c.  Responsibilities and Duties  66
  d.  Composition and Relevant Education and Experience  67
  e.  Pre-approved Policies and Procedures  67
  f.  External Auditor Service Fees  68
II.  General    68

 


PRELIMINARY NOTES

I.

Date of Information

All information in this Annual Information Form (“AIF”) is as of June 25, 2007 unless otherwise indicated.

II.

Financial Statements

All financial information in this AIF is prepared in accordance with accounting principles generally accepted in Canada (“Canadian GAAP”).

This AIF should be read in conjunction with the Company’s consolidated financial statements and notes thereto, as well as with the management’s discussion and analysis (“MD&A”) for the year ended December 31, 2006. The financial statements and MD&A are available at www.quaterraresources.com and under the Company’s profile on the SEDAR website at www.sedar.com.

III.

Reporting Currency

All dollar amounts are express in Canadian dollars unless otherwise indicated. Quaterra’s quarterly and annual financial statements are presented in Canadian dollars and are prepared in accordance with Canadian generally accepted accounting principles.

IV.

Disclosure of Mineral Resources

Disclosure about our exploration properties in this AIF uses the term “Mineral Resources”, “Measured Mineral Resources”, “Indicated Mineral Resources” and “Inferred Mineral Resources”, which are Canadian geological and mining terms as defined in accordance with National Instrument 43-101, standards of disclosure for mineral projects of the Canadian Securities Administrators, set out in the Canadian Institute of Mining (CIM) Standards. None of our properties have mineral reserves. All disclosure about our exploration properties conforms to the standards of U.S. Securities and Exchange Commission Industry Guide 7, description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations, other than disclosure of “Mineral Resources”, “Measured Mineral Resources”, “Indicated Mineral Resources” and “Inferred Mineral Resources” which are discussed below:

  a.

Cautionary Note to U.S. Investors concerning estimates of Measured Mineral Resources and Indicated Mineral Resources.

     
 

This AIF may use the terms “Measured Mineral Resource” and “Indicated Mineral Resource.” We advise U.S. investors that while such terms are recognized and permitted under Canadian regulations, the U.S. Securities and Exchange Commission does not recognize them. U.S. investors are cautioned not to assume that any part of all of the Mineral Resources in these categories will every be converted into Mineral Reserves.

Page 1 of 68



IV.

Disclosure of Mineral Resources, continued


  b.

Cautionary Note to U.S. Investors concerning estimates of Inferred Mineral Resources.

This AIF may use the terms “Inferred Mineral Resource.” We advise U.S. investors that while such terms are recognized and permitted under Canadian regulations, the U.S. Securities and Exchange Commission does not recognize them. “Inferred Mineral Resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules estimates of Inferred Mineral Resources may not form the basis of feasibility or other economic studies. U.S. investors are cautioned not to assume that any part of all of the Inferred Mineral Resources exist, or is economically or legally mineable.

V.

Forward Looking Statements and Cautionary Notes

Some of the statements contained in this AIF are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur.

Forward-looking statements may be identified by such terms as “believes”, “anticipates”, “expects”, “estimates”, “may”, “could”, “would”, “will”, or “plan”. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties.

Actual results relating to, among other things, results of exploration, reclamation, capital costs, and the Company’s financial condition and prospects, could differ materially from those currently anticipated in such statements for many reasons such as; changes in general economic conditions and conditions in the financial markets; changes in demand and prices for the minerals the Company expects to produce; litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; technological and operational difficulties encountered in connection with the Company’s activities; and changing foreign exchange rates and other matters discussed in this AIF.

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on the Company’s forward-looking statements. Further information regarding these and other factors, which may cause results to differ materially from those projected in forward-looking statements, are included in the filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time by the Company or on its behalf, except in accordance with applicable securities laws.

Page 2 of 68



VI.

Glossary of Terms and Definitions


  Anomaly:
A geological feature distinguished by geological, geochemical or geophysical means, which is detectably different than the general surroundings and is sometimes of potential economic value.
   
  Breccia:
Rock consisting of more or less angular fragments in a matrix of finer- grained material or cementing material.
   
  Diamond drill:
A type of drill in which the cutting is done by abrasion using diamonds embedded in a matrix rather than by percussion. The drill cuts a core of rock which is recovered in long cylindrical sections.
   
  Dilution:
Process whereby unwanted gangue or waste rock is mixed with ore during mining.
   
  Epithermal:
A class of ore deposits that form generally less than 1 km from surface. These deposits, which can host economic quantities of gold, silver, copper, lead and zinc are formed as a result of the precipitation of ore minerals from up-welling hydrothermal fluids. There are several classes of epithermal deposits that are defined on the basis of fluid chemistry and resulting alteration and ore mineralogy. Fluid chemistry is largely controlled by the proximity to igneous intrusive rocks and as a result igneous fluid content.
   
  Extrusive Rock:
Igneous rock that has solidified on the earth’s surface from volcanic action.
   
  Fluid inclusion:
A cavity, with or without negative crystal faces, containing one or two fluid phases, and possibly one or more minute crystals, in a host crystal. If two fluid phases are present, the vapor phase (bubble) may show Brownian motion.
   
  Folds:
Flexures in bedded or layered rock formed when forces are applied gradually to rocks over a long period of time.
   
  Fracture:
Breaks in a rock, usually due to intensive folding or faulting.
   
  Gambusino:
An individual miner working without machinery.
   
  Gangue:
Term used to describe worthless minerals or rock waste mixed in with the valuable minerals.
   
  Gouge:
The finely ground rock that result from the abrasion along a fault surface.

Page 3 of 68



VI.

Glossary of Terms and Definitions, continued


Grade:
The concentration of each ore metal in a rock sample, usually given as weight percent. Where extremely low concentrations are involved, the concentration may be given in grams per tonne (g/t) or ounces per ton (oz/t). The grade of an ore deposit is calculated, often using sophisticated statistical procedures, as an average of the grades of a very large number of samples collected from throughout the deposit.
   
  Hectare:
A square of 100 metres on each side.
   
  Indicated Mineral
Resource:
An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as out-crops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.
   
  Inferred Mineral
Resource:
An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
   
  Lithology:
The physical characteristics of a rock or a rock formation.
   
Mafic:
A term used to describe ferromagnesian minerals. Rocks composed mainly of ferromagnesian minerals are correctly termed melanocratic.
   
Massive:
Used to describe sulfide ores containing more than 50% volume of sulphide.

Page 4 of 68



VI.

Glossary of Terms and Definitions, continued


  Measured Mineral  
Resource:
A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.
     
  Mineral Deposit or Mineralized
Material:
A mineralized body which has been intersected by sufficient closely spaced drill holes and or underground sampling to support sufficient tonnage and average grade of metal(s) to warrant further exploration- development work. This deposit does not qualify as a commercially mineable ore body (Reserves), as prescribed under Commission standards, until a final and comprehensive economic, technical, and legal feasibility study based upon the test results is concluded.
     
  Mineral  
Resource:
A Mineral Resource is a concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge.
     
Mineral Reserve:
A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined.
     
  Mineralization: Usually implies minerals of value occurring in rocks.
     
Ore:
A natural aggregate of one or more minerals which may be mined and sold at a profit, or from which some part may be profitably separated.

Page 5 of 68



VI.

Glossary of Terms and Definitions, continued


  Probable Mineral  
Reserve:
A ‘Probable Mineral Reserve’ is the economically mineable part of an Indicated, and in some circumstances a Measured, Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.
     
  Properties as  
prospects:
A property is a claim owned by the Company and a prospect is a claim in which the Company holds an interest.
     
  Proven Mineral  
Reserve:
A 'Proven Mineral Reserve’ is the economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.
     
Reserve(s):
A natural aggregate of one or more minerals which, at a specified time and place, may be mined and sold at a profit, or from which some part may be profitably separated.
     
  Reverse  
circulation drill: A rotary percussion drill in which the drilling mud and cuttings return to the surface through the drill pipe.
     
Tailings: Material rejected from a mill after recoverable valuable minerals have been extracted.

Page 6 of 68



VII. Glossary of Abbreviations

  Ag: Silver
  Ag gm/t: Silver grade measured in grams per metric tonne
    Converts to ounces per ton by dividing by 34.286
  AMR: Advance minimum royalty payments
  Au: Gold
  Au gm/t: Gold grade measured in grams per metric tonne
    Converts to ounces per ton by dividing by 34.286
  Ba: Barium
  CAD: Canadian dollars
  Co: Cobalt
  CSAMT: Controlled source audio-frequency magneto telluric geophysical survey
  Cu: Copper
  EIS: Environmental Impact Statement
  Fe: Iron
  43-101: Canadian National Instrument 43-101
  gpm: gallons per minute
  gpt: grams per tonne
  g/t: grams per tonne
  IP: Induced Polarization geophysical survey
  m.y: Million years
  Ni: Nickel
  NSR: Net smelter return royalty
  Oz: Troy ounce
  oz/t or opt: Ounces per ton.
  Pb: Lead
  Pd: Palladium
  PGE: Platinum Group Element
  PGM: Platinum group minerals
  PPB: Parts per billion
  PPM: Parts per million
  Pt: Platinum
  S: Sulphur
  TD: Total depth of a drill hole.
  tpd: Tonnes per day
  TSX-V Toronto Stock Exchange - Venture Exchange
  US$: U.S. dollars
  U3O8: Uranium oxide known as “yellow cake”.
  VLF: Very low frequency electromagnetic geophysical survey
  VMS: Volcanogenic massive sulphide

Page 7 of 68



VIII. Conversion Tables

Conversion Table
Imperial        Metric
       
1 Acre =  0.404686 Hectares
1 Foot =  0.304800 Metres
1 Mile =  1.609344 Kilometres
1 Ton =  0.907185 Tonnes
1 Ounce (troy)/ton = 34.285700 Grams/Tonne
       
   Information from www.onlineconversion.com

Precious metal units and conversion factors
                   
ppb - Part per billion            1  ppb =    0.0010  ppm = 0.000030 oz/t
ppm - Part per million      100  ppb =    0.1000  ppm = 0.002920 oz/t
oz - Ounce (troy) 10,000  ppb =  10.0000  ppm = 0.291670 oz/t
oz/t - Ounce per ton (avdp.            1  ppm =    1.0000  ug/g = 1.000000 g/tonne
g - Gram                
g/tonne - gram per metric ton            1  oz/t =  34.2857  ppm      
mg - milligram            1  Carat =  41.6660  mg/g      
kg - kilogram            1  ton (avdp.) = 907.1848  kg      
ug - microgram            1  oz (troy) =  31.1035  g      

Page 8 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

ITEM 1. CORPORATE STRUCTURE

  I.

Name, address and Incorporation

Quaterra Resources Inc. (“Quaterra” or the “Company”) was incorporated under the Company Act (British Columbia) on May 11, 1993 originally under the name Acquaterre Mineral Development Ltd.

The Company’s registered and head office is located at 1100 – 1199 West Hastings Street, Vancouver, British Columbia, V6E 3T5. Telephone: (604) 684-9384, Facsimile: (604) 688-4670, website: www.quaterraresources.com

Quaterra is a reporting issuer in British Columbia and Alberta and is a multiple jurisdiction filer with SEDAR. The Company’s common shares are not listed for trading on any securities exchange in the United States. The Company is required to file annual and periodic reports with the Securities and Exchange Commission pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended.

  II.

Inter-corporate Relationships

The flow chart below presents the Company’s legal corporate structure and the jurisdictions of the incorporation.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

ITEM 1. CORPORATE STRUCTURE, continued

  II.

Inter-corporate Relationships, continued

Note to flow chart

  Note 1 Quaterra Resources Inc. holds the Big Bar property.
  Note 2 Quaterra Alaska, Inc. holds Arizona Strip Uranium, Wyoming and Utah Uranium properties,
    MacArthur, Duke Island, Gray Hill, Yerington, and Peg Leg,
  Note 3 Minera Agua Tierra S.A. de C.V. holds Nieves (to July 31, 2005) Los Crestones, Las Americas,
    Mirasol, Jaboncillos and Cerro Blanco.
  Note 4 Minera Nieves S.A. de C.V. holds the joint venture property Nieves from August 1, 2005.

ITEM 2. GENERAL DEVELOPMENT OF BUSINESS

Quaterra Resources Inc. (“Quaterra” or the “Company”) was incorporated under the Company Act (British Columbia) on May 11, 1993 originally under the name Acquaterre Mineral Development Ltd. On November 30, 1993, the Company changed its name to Aquaterre Mineral Development Ltd and ultimately became Quaterra Resources Inc on October 23, 1997. Quaterra’s domicile is British Columbia, Canada and the Company operates under the British Columbia Business Corporations Act SBC 2002 Chapter 57.

On March 4, 1997, the Company increased its authorized capital from 20,000,000 common shares without par value to 100,000,000 common shares without par value.

On October 23, 1997, the Company consolidated its issued and un-issued share capital on the basis of five pre-consolidation shares for one post-consolidation share, and increased our authorized capital to 100,000,000 common shares without par value.

On August 3, 1998, the Company cancelled our previous form of Articles and adopted a new form of Articles.

On April 25, 2005, the Company completed the transition procedures in accordance with the Business Corporations Act (British Columbia), (the “New Act”).

On June 17, 2005, the Company increased the number of common shares which were authorized to issue to an unlimited number of common shares and, on June 13, 2005, cancelled our former Articles and adopted new Articles to take advantage of provisions of the New Act. The New Act was adopted in British Columbia on March 29, 2004 replacing the Company Act (the “Former Act”). The New Act requires the provisions formerly required in the Memorandum to be in our Articles. The New Act eliminates the requirement for a Memorandum.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

ITEM 2. GENERAL DEVELOPMENT OF BUSINESS, continued

The Company’s common shares began trading on the TSX Venture Exchange (“TSX-V”) (formerly the Vancouver Stock Exchange and the Canadian Venture Exchange) under the symbol “QTA” on November 14, 1997.

There have been no public takeover offers by third parties with respect to our shares and we have made no public takeover offers with respect to other company’s shares.

ITEM 3. DESCRIPTION OF THE BUSINESS

  I. General

Quaterra is a mineral exploration company engaged in the business of the acquisition, exploration and when warranted, development of mineral natural resources properties. We currently have interests in mineral natural resources properties located in Canada, the United States and Mexico. The Company does not have any producing properties and consequently has no current operating income or cash flow. We are an exploration stage company and have not generated any revenues. Further exploration will be required before a final evaluation as to the economic and legal feasibility of any of the properties is determined. Commercially viable mineral deposits may not exist on any of the properties.

The Company intends to continue land acquisition and drilling at its uranium pipe targets in Arizona. Phase 1 drilling programs also will be carried out later in the year at the MacArthur copper property in Nevada, the Crestones gold property in Mexico, and the Big Bar massive sulfide target in Alaska.

  II. Trends

Quaterra has not generated operating revenue to date and is currently an exploration stage company.

Other than noted in this AIF, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material affect on the Company’s operations, liquidity or capital resources, or that would cause reported financial information to not necessarily be indicative of the Company’s financial position.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  III. Natural Resource Properties

  a. The Nieves Concessions – Zacatecas, Mexico.

Property Description, Location, Access and Infrastructure

The Company owns a 50% interest in the Nieves silver Property located in northern Zacatecas State, Mexico about 90 kilometers north of Penoles’ world- class Fresnillo silver mine (Figure 1).

The project occurs within a northwest trending mineral belt known as the Faja de Plata, which hosts many of the world’s premier silver deposits including San Martin, Fresnillo, Zacatecas and Real de Angeles. The Company’s land block consists of 15 mineral exploration concessions covering an area of approximately 50 square kilometers (18 square miles).

The small town of Nieves (now re-named Francisco R. Murguia) can be accessed from Highway 49 along a 17 kilometer paved side road. Nieves is the business center for the Company’s exploration activities. From Nieves there are various dirt roads that provide access to the main mine areas on the Property. The nearest major population and services centre to Nieves is the mining town of Fresnillo approximately 90 kilometers to the south.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  a. The Nieves Concessions – Zacatecas, Mexico, continued

History

The Spanish discovered high-grade silver at Nieves in 1560. Sporadic work occurred on the Concordia and Santa Rita veins until 1910, when the Mexican Revolution began. Several small-scale efforts to re-open the mines occurred thereafter but no modern exploration took place until 1994, when a Kennecott/RTZ study of satellite photos noted a color anomaly covering an area approximately 9 kilometers in diameter. Effective January 16, 1995, Kennecott Exploration Company (“Kennecott”) entered into an option agreement with the Mexican concessionaires that allowed Kennecott to explore and acquire the Property by making specified option payments over five years, and advance minimum royalty payments (“AMR”). Kennecott subsequently completed geophysical surveys and drilled eight holes, six of which contained significant silver mineralization.

On March 13, 1998, Kennecott transferred its rights under the Nieves option to Western Silver Corporation (“Western”) in consideration for an uncapped 2% NSR on certain core Claims and a 1% NSR on others. Western completed an additional five holes at the La California vein, all of which hit significant narrow widths of silver with 3 containing at least one narrow intercept of +800 g/t silver.

Western subsequently assigned its rights to the Nieves Project as specified in the “Underlying Agreement” to the Company on March 26, 1999, in consideration for 1,444,460 common shares of the Company at a deemed price of CAD$0.20 per share (CAD$288,892). In addition, the Company issued 360,000 common shares at a deemed price of CAD$0.20 per share (CAD$72,000) to the concessionaires in lieu of the US$50,000 option payment otherwise due under the terms of the Underlying Agreement.

The payment schedule in the Underlying Agreement was amended on November 22, 1999, February 11, 2000 and May 2002, such that US$30,000 was paid in January 2000, US$15,000 in May 2002 and US$25,000 in January 2003, for a total of US$70,000. In addition, to acquire the interest in the claim fractions the Company paid US$40,000 to the concessionaires. AMR payments of US$75,000 are due on or before January 26 each year from 2004 until the commencement of commercial production. The Nieves concessions are subject to a maximum 3% net smelter return royalty (“NSR”) to the original concession holders, which the Company may purchase at any time for US$2 million.

On April 10, 2003, the Company completed a US$1.5 million limited partnership financing with Blackberry Ventures I, LLC (“Blackberry”), whereby Blackberry could earn a 50% interest in the Property by funding two exploration programs of US$750,000 each. The initial payment of US$750,000 received in the 2003 Fiscal Year was expended on a 5,300-metre drill program on the Nieves Property. During the 2004 Fiscal Year, Blackberry elected to continue by advancing a further US$750,000 towards a follow-up drill program completed in May 2005, thereby earning a 50% interest in the Property. The partners are in the process of formalizing a joint venture agreement and jointly contributed to all exploration costs incurred.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  a. The Nieves Concessions – Zacatecas, Mexico, continued

Exploration and Drilling

The Company completed a two-phase 12-hole RC/core program in the Cerro San Gregorio area in 1999-2000 with results generally similar to previous drilling. Subsequently, the Company completed a program of magnetics and CSAMT/IP surveys, which identified a number of prospective anomalies. The survey results suggested that the Nieves Project is a large hydrothermal system with minimal erosion and several features in common with the high-grade Fresnillo silver district.

In August 2004, the Company conducted an initial 5,300 meter, 13-hole diamond drill program to test a number of targets adjacent to and below areas of previously defined mineralization on the Nieves Project and to test seven east-west striking anomalies, interpreted to be veins with associated mineralization, that extend for distances of up to 3.5 kilometers.

A second drill program (5,171 meter, 11-hole) was completed in May 2005 to follow up on the silver mineralization intersected in the 2004 drilling program and to evaluate other targets defined by a combination of mapping, sampling and geophysical surveys.

A third drilling program (5,894 meters, eight holes) began during the fourth quarter of 2005 and was completed during March 2006. Of particular note was hole QTA 37, drilled along the Santa Rita vein 500 meters east of the nearest hole. QTA 37 intersected a quartz breccia vein starting at a downhole depth of 466.1 meters that contains 5.9 meters averaging 104 g/t silver, 0.23% lead and 0.56% zinc. The thickness and strength of the vein are positive features that upgrade the potential of the eastern Santa Rita zone for higher silver grades. Excellent potential remains for narrow high-grade silver veins over a strike length of approximately 1.5 kilometers and a vertical extent of 300 meters on both the Concordia-San Gregorio and Santa Rita vein systems.

Geology and Mineralization

The host rocks at Nieves are a thick sequence of Cretaceous-age dark grey calcareous siltstones and fine-grained sandstones of the Caracol formation. The siltstones and sandstones exhibit strong bleaching not only adjacent to veins but also in large irregularly shaped zones covering several square kilometers.

Mineralization is related to a low temperature silver-gold-copper-lead-zinc epithermal vein system similar to the world-class Fresnillo and Zacatecas Districts in central Zacatecas. There are three west-southwest bearing, steep south-dipping vein systems which, from south to north, are the Santa Rita-El Rosario; Concordia-Delores-San Gregorio; and the La California veins. The Santa Rita and Concordia-Delores-San Gregorio veins have historic production and are marked by numerous shafts, pits, dumps and old buildings. Mining ceased in 1910, with the onset of the Mexican Revolution. Several small-scale efforts to re-open the mines occurred thereafter but no modern exploration took place until 1994. Historic production focused on narrow bonanza veins, and production grades were in excess of 4,000-g/t silver.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  a. The Nieves Concessions – Zacatecas, Mexico, continued

Geology and Mineralization, continued

The mineral occurrences in the Santa Rita and Concordia-Delores-San Gregorio veins are hosted in two to ten meter thick shear zones with reverse offset and secondary fault splays in the footwall. The sheeted < 2 meter wide silver-gold bearing veins were deposited during a period of distention and normal offset in Oligocene time. There are three types of veins: silica breccia, quartz-sulfide and ferroan carbonate. Sulfide content varies from minor to 50% pyrite-stibnite-sphalerite-chalcopyrite-galena; marcasite is present in the silica breccia veins. Identified silver minerals are tetrahedrite-pyrargyrite. A sulfidation alteration halo of 2-5% disseminated pyrite that weathers to an acid leached “bleached” white clay alteration surrounds the mineralized shears. This alteration is geochemically anomalous in gold-arsenic-antimony with erratic silver-copper-lead-zinc. An Eocene-Oligocene paleo-erosion surface in the northwest corner of the district indicates that the historic mines have exploited only the upper third of the epithermal mineral system.

The Concordia-Cerro San Gregorio zone, based on alteration and geophysics, has dimensions of 2.5 kilometers by 1.5 kilometers and generally trends northeasterly. La California zone is about 2.5 kilometers long by 250 meter wide. The Santa Rita zone also trends northeasterly and is approximately 2 kilometers long by 600 meters wide.

Both the Concordia-Delores San Gregorio and the Santa Rita vein systems at Nieves have excellent potential for both narrow zones of +500 g/t silver and a surrounding envelope of stock work mineralization with +50 g/t silver that may represent a bulk tonnage target. The top of the mineralized vein zone is marked by boiling textures observable in drill core at depths of 150-200 meters below surface. The near surface mineralization exposed on San Gregorio Hill and along the Santa Rita vein on Santa Rita Hill is interpreted as manto style (rootless) mineralization trapped in porous sediments at the base of Tertiary volcanic rocks.

Sampling and Analysis

Drill core (NQ diameter) was collected from the drilling rig and brought to the core storage facility on the Nieves Property for logging and sampling, by the project or assistant geologists, on a daily basis. At the core storage/logging facility, the core was measured, core recovery estimated, and the rock types, alteration minerals, textural features, structures, veining, and mineralized zones documented. Sample intervals were measured, marked with permanent marker and given a sample number and sample tag by the geologists. From this point, technicians were given the core to split, using a core saw, into halves where one half of each interval was placed with the sample tag into a sample bag and marked with the sample number. The other half was placed back into the core box in it original position and the core boxes were then stacked and stored in order and by hole number. Where the veins were coherent they were sawed in half perpendicular to the “grain” to get a representative split.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  a. The Nieves Concessions – Zacatecas, Mexico, continued

Sampling and Analysis, continued

The geologists visually selected sample intervals based on the presence of quartz-carbonate veins, silicification or the presence of sulphide minerals. Any significant mineralized zones were also sampled for several meters below and above and generally samples were kept to between 0.05 m and 4.2 m in length to encompass entire vein structures.

Security of Samples

A total of 4,902 drill core samples from all three phases of exploration were marked by supervising and core logging geologists before being split using a diamond saw by Samples were placed into individual plastic bags marked with a unique sample identification number and with a sample tag placed into the bag. Sample ID numbers and meterages were also written onto the core trays. Samples were then packaged into sealed sacks and taken by Quaterra employees to ALS Chemex Laboratories in Guadalajara for analysis.

ALS Chemex is an ISO 9001:2000, ISO 17025:2005 and Standard Council of Canada accredited laboratory with preparation and analytical laboratories operating in over 16 countries. All samples were analyzed using a 41 element ICP method, in addition to analyzing gold and silver by standard fire assay. Lead and zinc values over 10,000 ppm and silver values over 100 ppm were re-assayed by atomic-absorption methods.

Internal quality assurance and quality control procedures were not utilized by Quaterra such as the insertion of blanks and standards into the sample sequences. For NI43-101 compliant resource estimates to be calculated a small check sampling program whereby ~5-10% random samples will be quarter split and sent to another accredited laboratory. Pulps/rejects available from the previous drilling will also be sent for check analyses.

Mineral Resources

There are no resources or reserves on the Company’s Nieves project that comply with the CIM Standards on Mineral Resources and Reserves Definitions and Guidelines as adopted by CIM Council on August 20, 2000.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  a.

The Nieves Concessions – Zacatecas, Mexico, continued

Exploration and Development

An independent technical report completed by Caracle Creek International Consulting Inc. (“Caracle”) on behalf of the Company and Blackberry in November 2006 concluded that excellent potential exists to find additional high-grade silver shoots both within the known vein systems and the abundant untested drill targets remaining on the property. Caracle recommended the following:

  i)

A program including structural analysis, three dimensional modeling and data compilation including satellite image analysis.

     
  ii)

An aggressive 10,000 meter drilling program to infill zones on the Concordia-San Gregorio- Delores vein system and to test other targets on the large land block.

The drilling program is scheduled to begin in the second quarter 2007 following completion of the compilation work and selection of drill targets by the Company and Blackberry.

  b.

Los Crestones Project – Durango, Mexico

Property Description, Location, Access and Infrastructure

The Company’s 100% owned Crestones Project, comprising of exploration concessions, is located on the southwest side of a medium sized granitic pluton on the eastern edge of the Sierra Madre Occidental in northern Durango state of west-central Mexico (Figure 2). The Property is between the latitudes of 25.92° and 25.96° north and 105.09° and 105.13° west longitude. The town of Inde is about 10 kilometers to the southwest of the property while the larger town of Santa Maria del Oro is located about 20 kilometers to the northwest. The city of Durango is a five hour drive to the south.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  b.

Los Crestones Project – Durango, Mexico

Property Description, Location, Access and Infrastructure, continued

Access to the Property is very good with a paved highway from Santa Maria del Oro, through Inde and on to the town of Vetarron, 2km more on dirt road leads to the turn off to El Pajaro, another 7km to the north and on the edge of the property. A local dirt road gives access to most of the property. Electric power lines service all the small towns mentioned above.

History

In 2003, the Company staked a 2,100 hectare claim to cover a hot spring gold-silver prospect at Los Crestones. In 2004 and early 2005, reconnaissance mapping and sampling programs were completed over an area of about 3.5 square miles. The Company staked an additional 3,547 hectare claim in 2006 and completed detailed mapping. The work delineated a hot spring gold-silver target with widespread silicification, flat-lying silica sinter aprons and quartz veining along high-angle, graben faults. Rock chip samples show anomalous Au-Ag values with occasional spikes up to ore grade; and strongly anomalous mercury, arsenic and antimony values which are typical of the upper levels of hot spring-related gold silver mineral systems. The level of exposure is clearly above the boiling zone and the gold numbers are consistent with those found in the top of epithermal gold systems.

Exploration and Drilling

The property has been geologically mapped at 1:5,000 scale and six holes totaling 3,042 meters have been recently completed with assays pending. The drill program was designed to test the outcropping breccia zones and has been complicated by the presence of listric faults. There are zones of silicified limestone beneath the listric faults with weak pyrite-sphalerite mineralization. A grid IP geophysical program is planned to test for blind mineralization beneath the faults. The drill program will be expanded to the alluvial covered fields southwest of Crestones to test for the feeder vents of the Crestones hydrothermal system.

Geology and Mineralization

Los Crestones displays geologic characteristics that are broadly similar to both the Magistral de Oro district, located 20 kilometers northwest and the Inde District that lies 12 km west. Magistral de Oro has a recorded production of greater than 1.0 million ounces gold and the Inde district has produced 0.5 million ounces of gold from one mine as well as significant silver-lead-zinc production from numerous small mines. All three districts have prominent aeromagnetic highs that represent oxidized intermediate to felsic intrusive stocks. The mineralization in all three districts is interpreted to be genetically related to these intrusives. Granodiorite is the host rock at Magistral de Oro. Bufa Inde, a prominent peak in the center of the Inde District, is a quartz porphyry stock. Both granodiorite and quartz porphyry occur at Los Crestones.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  b. Los Crestones Project – Durango, Mexico, continued

Geology and Mineralization, continued

The oldest rock type at Los Crestones is an upper unit of the Mescalera Group limestone. It is a lower Cretaceous in age and can be divided into a thick and thin bedded facies. The more abundant thick bedded facies is composed of 10-25 cm beds of carbonaceous muddy limestone with black shaley partings. The limestone shows abundant soft sediment deformation features. The thin bedded facies consists of 1-4 cm thick inter-beds of clean gray limestone and black chert. It too commonly displays chaotic soft sediment folds.

A 40 m.y. granodiorite cuts the Mescalera limestone at Los Crestones. It is a circular 4 km diameter stock composed of equigranular biotite-hornblende-feldspar with interstitial quartz and accessory magnetite. The stock is rimmed by a band of altered limestone up to a kilometer in width of quartz-diopside hornfels that grades outward into a weak tremolitic marble.

The Los Crestones hydrothermal mineral system is located along the western contact of the granodorite stock and was emplaced in a northwest-striking fault system. The fault formed the east side of the Inde Graben that separates the Inde District and Los Crestones. Three bands of sheeted hydrothermal breccias, small quartz porphyry stocks and felsite dikes compose the Los Crestones system. The breccia has been classified into four breccias types based on clast types and matrix composition; these are: mixed clast breccia, silica matrix breccia, silicified limestone breccia and sinter matrix breccia.

The western band of hydrothermal breccia is informally referred to as the Cerro Pachon zone. It strikes northwest for a known distance of 3.5 kilometers and is about 50-200 meters wide. It is composed of sheeted bands of all four types of hydrothermal siliceous breccia hosted in an envelope of silicifed limestone. A small phyllic-altered quartz-porphyry stock outcrops at the northwest end of the Pachon breccia in close proximity to the largest occurrence mixed clast breccia on the property. The mixed clast breccia is composed of silicified limestone and quartz porphyry clasts set in a silicifed matrix of milled quartz porphyry. The Cerro Pachon breccia is cut off to the northwest by faults and post-breccia alluvial cover. It feathers into small silica breccia and felsite dikes to the southeast which are in turn cut off by a listric fault.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  b. Los Crestones Project – Durango, Mexico, continued

Geology and Mineralization, continued

The Cerro Cahon breccia is the east band of hydrothermal breccia. It parallels the Cerro Pachon breccia with a similar strike length and width. Sheeted silica breccia dikes predominate that vary from 1 to 25 meters in width. The dikes tend to have clasts of silicified limestone along their margins and a core of weak banded translucent gray silica. The southeast half of the breccia cuts through limestone within an envelope of silicified limestone. There are occasional narrow bands of silicified limestone breccia and brecciated felsite dikes. The northwest half of the breccia cuts across the granodiorite where it breaks into a 75 meter wide stock work of sheeted narrow silica veins in the intrusive. There is one prominent splay of silica breccia to the west that follow the granodiorite-hornfels contact. Scattered float of hydrothermal limonitic breccia is common where the silica breccia dikes pass across the limestone-granodiorite contact which indicates the possible presence of a sulfide-bearing hydrothermal breccia. A drill test is planned to test this breccia occurrence.

The two breccia bands are separated by about a kilometer of silicifed and hornfelsed limestone and fresh granodiorite with numerous 5-15 meter thick breccia and felsite dikes. There is a third silica breccia band at the north end of the property that outcrops on Cerro Laguna, and between the between the Cerro Pachon and Cerro Cahon breccias. The Cerro Laguna breccia is composed of sheeted silica breccia dikes. It is about two kilometers in strike length. It is also cut by a low angle listric fault with its north half offset about 250 meters to the northeast.

Mineralization at Los Crestones has been observed in both outcrop and core. All three of the breccia types, the silicified limestone, the quartz porphyry, and the hornfels contain disseminated sulfides. The silica breccia commonly contains minor to 5% disseminated pyrite-marcasite and minor to 5% stibnite. The mixed clast and silicified limestone breccias contain disseminated pyrite-marcasite and minor sphalerite-galena. Disseminated galena-sulfosalts occur in both the porphyry and hornfels. Coarse spahalerite-galena have been observed in fault gouge.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  b. Los Crestones Project – Durango, Mexico, continued

Sampling and Analysis

Drill core (HQ diameter with reduction to NQ below 350 meters) was collected from the drilling rig and brought to the core storage facility on the Crestones property for logging and sampling, by the project or assistant geologists, on a daily basis. At the core storage/logging facility, the core was measured, core recovery estimated, and the rock types, alteration minerals, textural features, structures, veining, and mineralized zones documented. Sample intervals were measured, marked with permanent marker and given a sample number and sample tag by the geologists. From this point, technicians were given the core to split, using a core saw, into halves where one half of each interval was placed with the sample tag into a sample bag and marked with the sample number. The other half was placed back into the core box in it original position and the core boxes were then stacked and stored in order and by hole number. Where the veins were coherent they were sawed in half perpendicular to the “grain” to get a representative split. The core was routinely sampled at 2 meter intervals unless the presence of veins dictated a shorter sample interval.,

Security of Samples

To date, a total of 1,179 drill core samples from holes C-01 to C-06 were marked by supervising and core logging geologists before being split using a diamond saw. Samples were placed into individual plastic bags marked with a unique sample identification number and with a sample tag placed into the bag. Sample ID numbers and meterages were also written onto the core trays. Samples were picked up on site by representatives of Inspectorate Labs, an independent ISO-certified analytical laboratory, and trucked to their sample prep facility in Durango for preparation into pulps and rejects. Sample pulps were analyzed at Sparks, Nevada using fire assay/gravimetrics for gold and silver and a 30 element ICP package for other elements. Lead and zinc values over 10,000 ppm and silver values over 100 ppm were re-assayed by atomic-absorption methods.

Internal quality assurance and quality control procedures were not utilized by Quaterra such as the insertion of blanks and standards into the sample sequences. For NI43-101 compliant resource estimates to be calculated a small check sampling program whereby ~5-10% random samples will be quarter split and sent to another accredited laboratory. Pulps/rejects available from the previous drilling will also be sent for check analyses.

Mineral Resources

There are no resources or reserves on the Company’s Crestones project that comply with the CIM Standards on Mineral Resources and Reserves Definitions and Guidelines as adopted by CIM Council on August 20, 2000.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  c. Uranium Projects – Arizona, USA

Property Description, Location, Access and Infrastructure

The Company’s Arizona Uranium Project, located in the northern Arizona Strip uranium district in Coconino and Mohave Counties, occupies the southwest corner of the Colorado Plateau physiographic province in northwestern Arizona just south of the Utah state line (Figure 3). It is bounded to the west by the Grand Wash Cliffs and to the east by the Echo Cliffs. The area is characterized by a broad and featureless expanse of range land that becomes deeply incised by canyons of four major drainages.

Access to the property is provided by maintained county roads, mine access roads and a network of BLM recognized dirt roads and jeep trails used by ranchers and prospectors as well as State and Federal authorities for land management. Nearly all of the surface and mineral rights with the exception of the Arizona State lands are Federal and managed by the Bureau of Land Management with a field office in St. George, Utah.

Figure 3: Location map of the Arizona Strip Uranium Property

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  c. Uranium Projects – Arizona, USA, continued

History

Uranium mineralization was first discovered on the Arizona strip in a mineralized breccia pipe in 1947. The uranium occurred in association with copper mineralization at the Orphan mine 2 miles west of the visitor’s center on the south rim of the Grand Canyon. The first uranium ore was shipped by the Golden Crown Mining Company in 1956 to a buying station in Tuba City. Before closing in 1969, the Orphan operation produced a reported total of 4.4 million lbs of uranium in material averaging 0.42% U3O8 and 6.7 million lbs of copper. (Baillieul, T.A. and Zollinger, R.C. (1980) NURE Grand Canyon Quadrangle, Arizona PGJ-020, 41p.)

The relationship of uranium to copper mineralization initiated an investigation of several small copper deposits in the region. Uranium was identified in the Hack Canyon copper mine on the northern Arizona strip in the 1950s but it was not until 1974 when Western Nuclear discovered uranium ore bodies in the Hack 1 and Hack 2 breccia pipes that industry began to focus attention on the emerging district. Energy Fuels Nuclear Inc. (“Energy Fuels”) acquired the Hack Canyon ore bodies in 1980 and initiated an intense campaign of land acquisition and exploration that over the next ten years discovered seven ore bodies. With the entrance of Pathfinder Mines and Union Pacific Resources, at least three additional mineralized breccia pipes were added to the district. Several more were in earlier stages of discovery when in the early 1990s the price of uranium dropped below the cost of production.

The Arizona Strip historically represents some of the highest grade mineralization and most profitable per pound uranium production in the United States. Energy Fuels breccia pipe uranium mines were some of last hard rock uranium producers in the US prior to the price decline of the 1990s. Since 1980, the Arizona Strip has produced in excess of 19 million pounds of uranium, averaging 0.65% U3O8 from seven mines. Of these mines, Hack Canyon I, II, and III and Pigeon are mined out and have been reclaimed; Hermit is partially reclaimed; Pinenut, Kanab North, Canyon and Arizona 1 have remaining reserves and have been placed on a standby basis. The total amount of mineable uranium discovered to date in breccia pipes in northern Arizona is estimated to be in the range of 35 million pounds. (1998 International Uranium Corp. US SEC Registration Statement. http://www.sec.gov/Archives/edgar/data/1063259/0001035704-98-000395.txt).

The Company commenced uranium exploration in Arizona in June 2005 with the acquisition of 95 unpatented lode mining claims from North Exploration LLC (“North”) that cover several uranium breccia pipe targets in the Arizona Strip district. The North agreement also included an option to acquire other properties in Utah and Wyoming that are prospective for both uranium and vanadium.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  c.

Uranium Projects – Arizona, USA, continued

History, continued

Under the terms of the North agreement, the Company may acquire a 100% interest in any or all of the North claims by making staged payments over a five-year period totaling US$500,000 and issuing 600,000 common shares. The initial consideration included a US$15,000 cash payment and 200,000 common shares. The North Properties are subject to a 2% production royalty on each Property, 1% of which may be purchased by the Company for US$1 million.

In mid 2006, the Company signed a letter of agreement with Nustar Exploration LLC. (“Nustar”) to lease 18 Claims covering 4 additional breccia pipe targets in the district. The terms of the Nustar lease are an upfront payment of US$20,000, a first anniversary payment of US$30,000, a second anniversary payment of US$40,000 and a final third anniversary payment of US$100,000. The Nustar Claims are subject to a 4 % Yellowcake royalty, 75% of which the Company can buy back for US$500,000 per Claim group (thereby reducing the royalty from 4% to 1%).

The Company staked an additional 550 mining Claims on the Arizona Strip in 2006 and another 1,450 claims were perfected in early 2007 to cover more than 200 high and moderate priority anomalies identified by an airborne VTEM geophysical survey. The Company’s mineral rights now total approximately 68 square miles in the Project area. The properties consist of many individual and scattered claim blocks that have been selectively staked over targets with some surface expression of a possible collapse structure, with favourable VTEM geophysical signatures and within areas of known mineralized occurrences.

Exploration and Drilling

The discovery of new breccia pipes in the Arizona strip district requires an aggressive and persistent program of exploration. Since commencing on the Arizona Strip, Quaterra has drilled 35,000 feet in 87 holes that investigated 16 targets. All but six holes were shallow stratigraphic holes evaluating the near surface structure for the presence of a pipe throat. Ten of the targets tested negative. Four targets have encouraging results and require additional drilling pending the enlargement of the drill permit area. Two of four deep holes in the program encountered mineralization in two targets that are scheduled for deep drilling programs.

One of the targets tested by deep drilling is the Ollie breccia pipe located ten miles southeast of the Hack’s Canyon mines. The Ollie pipe was originally drilled by one of the last drilling programs conducted by Energy Fuels in the early 1990s. The original program was prematurely stopped when Energy Fuels discontinued exploration in the district due to declining uranium prices.

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  c.

Uranium Projects – Arizona, USA, continued

Exploration and Drilling, continued

Quaterra’s first hole at Ollie was drilled to a total depth of 1,430 feet. The best intercepts included:

       Depth (Ft)        
  From    To Thickness (Ft) Grade    
             
   1172 1175.5 3.5 0.13% eU38 - Including 2.0 fee at 0.17%  
   376          
   1178 1180.5 2.5 0.12% eU38 - Including 1.5 fee at 0.16%  

The hole encountered numerous mineralized intercepts averaging 0.03% to 0.08% between the depths of 1,020 feet and 1,242 feet. At a depth of approximately 1,350 feet, the hole is believed to have exited the pipe throat and entered un-mineralized Hermit siltstone along the northeast margin of the pipe. A study of historic data indicates that much of the pipe to the southwest remains untested.

Another deep hole tested the EZ4 target, located seven miles northwest of Hack Canyon. The hole was drilled to 1,340 feet. It intercepted anomalous uranium mineralization between 970 and 1,000 feet near the Coconino sandstone/Hermit shale contact. The Coconino sandstone is considered the conduit for mineralization in the Arizona breccia pipes and the presence of mineralization near the contact strongly suggests the close proximity of a mineralized pipe throat. Drill-hole deviation to the east and south of the collar location defines a possible target to the northwest.

Geology and Mineralization

The canyon walls of northern Arizona expose numerous breccia pipes that are characteristic of the collapse structures that host uranium mineralization in the Arizona strip. Initiated by the roof collapse of caverns in the Mississippian Redwall Limestone, a pipe of breccia forms through the subsequent collapse of overlying sediments through mechanical and chemical processes to form a vertical column of breccia. Breccia pipes in the region average 200 to 400 feet in width and can extend upward over 3,000 feet from the Redwall Limestone to the upper Triassic sequence. (Figure 4).

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Quaterra Resources Inc.
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  c. Uranium Projects – Arizona, USA, continued

Geology and Mineralization, continued

Figure 4: Diagrammatic Stratigraphic Section of the Arizona Strip showing a
characteristic collapse breccia pipe. (After W.J. Breed, 1974)

Many northern Arizona Breccia pipes exhibit several common morphological features that are used to identify the structures at the surface and to position drill holes at depth (Figure 5). The cylindrical area of vertically displaced breccia in the center of the pipe is generally referred to as the “pipe throat.” The amount of vertical displacement in the throat ranges from 50 to several hundred feet and often decreases up section. The internal geometry of the throat can be complicated by the later formation of “pipe in pipe” structures. These internal features are the result of late stage (often post-mineral) collapse due to continued dissolution of carbonates in the lower reaches of the pipe throat. They may result in the dispersal and elimination of economic accumulations of uranium mineralization in the pipe.

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Quaterra Resources Inc.
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  c.

Uranium Projects – Arizona, USA, continued

Geology and Mineralization, continued

Figure 5: Morphology of a typical northern Arizona Strip breccia pipe.

The throat of a breccia pipe is seldom visible at the surface when not exposed in canyon walls. Where covered by the Moenkopi siltstone or recent alluvium, the only evidence of a pipe structure may be a large circular structure of gently inward dipping beds or even more subtle circular anomalies formed by ring fractures and vegetation. These features are caused by the dissolution of evaporites in the Toroweap and Kiabab sections along the margins of the throat during the formation of the pipe. As the evaporites are removed, a pronounced structural depression or “collapse cone” develops in the overlying strata above the Coconino sandstone. Many of the collapse cones are characterized by a thick section of Moenkopi siltstone that fills the cone near the upper Kiabab horizon. Although breccia pipes often have some structural symmetry at different levels, the throat of a pipe is not always in the center of a collapse cone and circular depressions or are not always related to pipes.

Uranium mineralization in breccia pipes of the northern district occurs predominantly within the pipe throat and below the upper Hermit contact. Mineralization is also present in ring fractures along the margins of the throat, and in the underlying Supai Group, but significant accumulations at this level is less common on the north rim than in the southern district. Economic concentrations of mineralization often occur over a vertical distance of more than 600 feet in the pipe throat. Scattered mineralization can extend well below the upper contact of the Esplanade Sandstone.

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Annual Information Form for the year ended December 31, 2006

  c. Uranium Projects – Arizona, USA, continued

Geology and Mineralization, continued

Uranium occurs primarily as pitchblende in voids between sand grains and replacing rock fragments of a reduced sandstone dominant breccia derived from the Coconino Sandstone. Calcite and gypsum are common cementing minerals. Associated trace elements include copper, arsenic, nickel, lead, zinc and silver. The mineralized breccia often contains abundant bitumen that is considered an important reducing agent for the geochemical system. Uranium is generally thought to have been transported to the pipe by oxidizing ground waters in the Coconino Sandstone and deposited in a “trap” of porous sandstone breccia within the non porous pipe walls of Hermit siltstone and above a relatively tight base of siltstone dominant breccia. Finely disseminated pyrite is common in the mineralized zone and may contribute to the reducing environment necessary for the deposition of uranium. Immediately above the mineralization, pyrite becomes massive and forms a “cap” of pyrite after marcasite that can exceed 50 feet in thickness.

The USGS Open File Report (OFR-89-550) shows the mapped locations of 1,296 pipes in the northern and southern Arizona Strip district. The highest density of pipes occurs in outcrops of Carboniferous aged strata in the deeper canyons of the region. The density of pipes decreases dramatically below the cover of successive layers of younger sediments until fewer than 2 pipes are evident over a surface area of 500 square miles in the upper Triassic sequence. Clearly, the upper level of stoping by collapse varies and many pipes may occur at depth and remain hidden with no surface evidence of a pipe throat. If these structures penetrate the Coconino Sandstone in a favourable area of the district, an ore body may exist with no pipe feature at the surface. To date, Hack 2 is only “hidden” pipe ever discovered in the district. The number of mineralized pipes discovered to date may represent only a fraction of the number that lie waiting to be discovered at depth.

Sampling, Analysis and Security of Samples

The Company uses the industry standard gamma logging method for grade determinations of uranium mineralization in drill holes. The process requires systematic calibration of the logging tools for precision and accuracy. Grades are reported as equivalent “U3O8” based on an assumed direct correlation between gamma-ray intensity, as measured by the gamma logging tools, and uranium content.

Down hole logging for the Company’s drill holes is contracted to Geophysical Logging Service of Prescott, Arizona. Mr. Ken Sweet, Geophysical Consultant, of Denver Colorado provides QA/QC and final interpretation of the process. Geophysical Logging Service uses a borehole NaI detector manufactured by Mt. Sopris in Golden, Colorado for initial grade calculations. It is of the type 2PGA1000 which is a standard for uranium logging. It uses a large crystal, 22.22 mm in diameter and 76.2 mm long. As a back up an HLP-2375 tool is used, also manufactured by Mt. Sopris. The HLP tool is a smaller diameter and can be used small drill holes.

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Uranium Projects – Arizona, USA, continued

Sampling, Analysis and Security of Samples, continued

The tools are calibrated in Grand Junction Colorado, nominally every 3-6 months. When ore grade mineralization is encountered the tool will be calibrated more often. In general, variation with this tool is insignificant within a year and requiring less than a 1% calibration change.


There are 4 calibration pits in Grand Junction; 0.231%, 0.452%, 1.22%, and 2.63% U3O8. The calibration pits are constructed of natural uranium ore. Corrections are made for hole diameter, the type of drilling pipe, and fluid in the hole.

Because the grades and thicknesses of the mineralized section are determined by down hole logging tools, the Company uses rotary drilling for exploration on the project. Drill cuttings from the program are often limited to the upper 400 feet of the hole. Circulation of the samples to the surface is often lost in the deeper evaporite dominant sections. Samples of the cuttings are collected in plastic boxes and archived in locked storage facilities.

When mineralization is intersected, spot core is collected when possible to compare to the interpreted gamma response. In some cases corrections need to be made for disequilibrium as established by closed-can analysis or direct neutron activation that compares the chemical values of core vs. the interpreted gamma grades. The gamma response has the advantage of sampling a large volume, on the order of 60 cm. Data is sampled at 0.5 foot or closer spacing. All core from the program is placed in boxes marked for depths, logged by the Company geologist and kept in the Company’s storage facilities in Kanab, Utah.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

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Uranium Projects – Arizona, USA, continued

Sampling, Analysis and Security of Samples, continued

For hole deviation a Mt. Sopris 2DVA-1000 borehole deviation probe is used. It consists of a 3 axis flux gate magnetometer and a 3 axis accelerometer. The tool is calibrated on the surface using a “Jig” to hold it in a known orientation. The data is recorded continually along the hole.

Induction logs are used in conjunction with the gamma probe to provide additional lithologic information. Correlation of the interpreted lithologies between drill holes in a target area can reveal structural deformation related to a possible breccia pipe.

Mineral Resources

There are no resources or reserves on the Company’s Arizona Strip properties that comply with the CIM Standards on Mineral Resources and Reserves Definitions and Guidelines as adopted by CIM Council on August 20, 2000.

Exploration and Development

The Company’s approach to uranium exploration has been proven by years of past experience with Energy Fuels Nuclear. Geologic mapping, aerial photography, and satellite imagery have been and continue to be used extensively to identify breccia pipe targets. When a target was located, surface time domain geophysical surveys had significant success in defining areas of thickened (conductive) siltstone within the surface structure to locate drill holes that define the pipe throat. Most of the obvious targets identified by using these methods have been located and drill tested by companies exploring the northern district in the 1980s. However, extensive areas remain unexplored because of the time and expense required by the surface geophysical surveys.

In early 2007, Quaterra contracted Geotech ltd. to conduct the first extensive test of an airborne time-domain electromagnetic system on the Arizona Strip. The survey covered approximately 420 square miles. The VTEM system not only identified anomalies related to the collapse cones of most of the known breccia pipes but identified more than 200 moderate to high priority targets with similar geophysical signatures. Although a detailed interpretation of the airborne survey data is in progress for prioritization of the targets, Quaterra will begin testing the higher priority VTEM anomalies in the Spring of 2007.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  d. Duke Island – Alaska, USA

Property Description, Location, Access and Infrastructure.

The Duke Island Cu-Ni-PGE prospect is located in the Prince Rupert quadrangle of southeast Alaska about 30 miles south of Ketchikan (Figure 6).

Figure 6: General geology of Duke Island showing location of Raven and Marquis zones (Avalon Development, 2006)

The Duke Island Project consists of 129 unpatented Federal lode mining Claims covering 2,580 acres, and 11 state of Alaska mining claims covering 1,280 acres in the Ketchikan quadrangle in Township 80 South, Range 93 East. Mineral rights in this part of Alaska are administered by the U.S. Forest Service and the Alaska Department of Natural Resources. The Duke Island Project is located within the Tongass National Forest on multiple-use lands open to mineral development.

The Duke Island Project is accessible via boat, small float plane and helicopter. There is tidewater access to the southeast end of the Property at Judd Harbor and the central portion of the Property via Hall Cove. The city of Ketchikan (population 14,000) is located 30 miles to the north and is the regional commercial hub for this part of southeast Alaska. The city hosts an all-season deep water port, international airport, commercial fixed wing and helicopter services, and most of the support industry required for mineral exploration.

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  d. Duke Island – Alaska, USA, continued

History

Early exploration on Duke Island is limited to a drilling program in the late 1950’s by Columbia Iron Mining, a subsidiary of United States Steel. The program tested two areas for potential magnetite mineralization. Nine vertical drill holes are reported to have been drilled to a depth of 500 feet to ascertain the magnetite content of the ultramafic rocks (Irvine, 1974). Six holes were drilled on the southeast side of Hall Cove and three in the Judd Harbor area. Precise locations of these holes are uncertain and no assay data of any kind is available to the Company. The potential for PGE mineralization was not addressed during these efforts.

In 1972, Clark and Greenwood collected 22 rock samples for PGE assays as part of a regional sampling and petrology study. In 1989 Bureau of Mines geologists collected 24 samples for assay. Eleven additional samples were collected by the Bureau of Mines in 1995. None of these efforts led to discovery of significant mineralization at Duke Island.

In early 2001 Avalon Development Corp. identified several geologically promising PGE exploration targets in Alaska which prompted the Company to acquire mining claims at Duke Island. In March and April 2001, Avalon Development conducted reconnaissance scale pan concentrate and grab rock sampling on behalf of the Company Resources and staked 45 federal Claims and 6 state Claims. Follow-up work was conducted in July which resulted in discovery of Cu-Ni-PGE sulfide mineralization hosted in pyroxenites on the north end of the Company’s Claims. Subsequent rock sampling, soil sampling and 11,200 line-feet of dipole-dipole induced polarization geophysics were completed on the project in September and October.

Exploration and Drilling

During November and December 2001, the Company contracted with Layne Drilling to complete 4 diamond drill holes (447 meters, 1,467 feet) in the Marquis zone (Figure 3). The holes were drilled from two drill pads approximately 750 feet apart centered on a coincident rock geochemical and IP geophysical anomaly. The drill targets are associated with a highly conductive IP anomaly flanked by extensive chargeability anomalies to the northeast and southwest. Massive sulfides with highly anomalous copper and lesser nickel and PGE values were encountered in all holes.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  d. Duke Island – Alaska, USA, continued

Exploration and Drilling, continued

Significant drilling results are shown below:

  Hole From  To Tickness Cu Pt Pd
  Number Ft Ft Ft (Wt Avg ppm)  (Wt Avg ppb)  (Wt Avg ppb)
  DK0101 0 298 298 1,270 47 59
  Includes  177 258.3 81.3  2,170 50 64
  DK0102 4 81 77 2,375 64 83
  DK0103 0 252 252 1,328 62 72
  DK0104 0 188 188 1,649 85 130
Includes  165 167 2 12,500 187 386

In January 2002 Perry Remote Sensing was retained to conduct a preliminary Landsat Thematic Mapping analysis of the Duke Island Prospect (Perry, 2002). The spectral image of iron-oxide stained sulfide-bearing rocks at the Marquis zone was used for ground truth to determine if surface outcrops of other potentially mineralized areas exist on Duke Island. The TM imagery identified two other obvious targets to the southwest and southeast of the Marquis zone. A total of 43 rock samples were collected in June 2002 in the southwestern TM anomaly, now known as the Monte zone. Approximately fifty percent of these samples (21 samples) returned values in excess of 1,000 ppm copper. Values for Pt, Pd, Ni and Co were generally lower than seen in the Marquis zone with maximum values of 310 ppb, 468 ppb, 784 ppm and 237 ppm, respectively.

In July 2002 AeroQuest Ltd. (“Aeroquest”) flew combined airborne magnetics and 6-channel electromagnetics over the Duke Island Project. A total of 890.5 line kilometers of survey was completed with most of this total along 200 meter-spaced lines. The survey revealed that areas of known sulfide mineralization generally fall within broad zones of anomalous conductivity that extend well beyond the limits of outcropping sulfides. A total of 459 high priority anomalies were identified by Aeroquest, including 311 Type 1 anomalies with positive in-phase response and a distinct, probable hardrock source and 148 Type 2 anomalies with a negative inphase and positive quadrature response (conductive magnetic anomalies).

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Duke Island – Alaska, USA, continued

Exploration and Drilling, continued

The largest zone of conductive anomalies occurs on the north side of the Marquis Zone and extends for 2.5 kilometers in an east-west direction. Magnetic and EM data also suggest that gabbroic units extending 1-2 miles to the north-northeast from the summit of Mt. Lazaro are underlain by highly conductive and variably magnetic rocks and that sulfide mineralization may underlie the gabbro body, significantly increasing the size potential of the Duke Island system.

Consulting geophysicist, Joe Inman of Salt Lake City, Utah prioritized the airborne EM anomalies and an initial ground follow-up of airborne EM anomalies was begun in September 2003. A total of 45 rock grab samples and 66 shovel soil samples were collected. Sampling was concentrated on the northeast Marquis, Raven and Potato Patch zones. These target areas also exhibit strongly conductive electromagnetic signature that suggest the presence of sulfide mineralization. Anomalous copper values up to 136 ppm were recovered from soils in the northeast Marquis zone however, additional soil sampling due east of the Marquis discovery returned highly anomalous copper (to 359 ppm) with grab rock samples returning values up to 984 ppm copper. No previous sulfide mineralization was known from this area and no surface outcrops of sulfide mineralization have been found to explain these soil and rock anomalies.

In addition, the 2003 field work expanded the size of known sulfide mineralization at the Potato Patch zone and also expanded the size of known sulfide mineralization at the Raven zone. Previous work at the Raven zone returned copper values up to 2.2% from a small area of outcrops surrounded by low, swampy topography. Soil sampling completed in 2003 returned copper values up to 4,320 ppm and Pt + Pd values up to 439 ppb from covered swampy terrain immediately south of outcropping sulfide mineralization. Sulfide mineralization at Raven was extended to over 650 meters south of the original Raven discovery outcrops and remains open to expansion in all directions.

During reconnaissance work completed in 2003 a new zone of disseminated copper sulfide mineralization was discovered at tidewater on Cape Northumberland on the extreme southern tip of Duke Island. While copper values (up to 352 ppm) did not reach percent-levels, the Northumberland zone is unique in that it represents the only sulfide mineralization discovered to date which is not located within the NW-SE trending belt of mineralization extending from the East Judd to Raven prospects. The significance of the sulfide mineralization at Northumberland and its extent are unknown.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  d. Duke Island – Alaska, USA, continued

Exploration and Drilling, continued

In late May and early June 2004 Clark Jorgenson of Big Sky Geophysics was contracted to conduct a ground based HCP-EM (Max-Min), magnetometer, and gravimeter survey of the Marquis and Raven prospects. Big Sky completed 20,000 line-feet (6.1 line km) of survey over the Marquis and Raven prospects. Results from this survey indicated three strong Max-Min conductive anomalies, two moderately conductive anomalies, and three weakly conductive anomalies at the Marquis prospect. The strong conductive anomalies are located coincident with the IP resistivity low and with an interpreted dip to the northeast. The weakly conductive anomalies are located to the northeast of the IP anomaly and dip to the southwest. There is an increase in rock density which starts in the western side of the Marquis prospect and trends east toward Knob Hill. At the Raven prospect Big Sky identified two weak Max-Min conductors on the western survey line. These are coincident with relative rock density highs that form two ellipsoids elongated W-E, one centered on the main Raven prospect and the other to the south separated by a density low. The shape and location of the relative density highs are somewhat coincident with the airborne EM conductivity highs and airborne magnetic highs previously identified at the Raven prospect.

In mid June 2005 the Company contracted Aurora Geosciences to conduct a 48,030 line-feet (14.6 line km) ground based gravimetric survey of the Marquis, Raven, Potato Patch, Scarp, and Lookout prospects along with the Northeast and Far Northeast areas. Results from this survey confirmed the 2004 gravity survey results and the expanded grids revealed local gravity highs in all of the surveyed areas. Local increases in density may reflect significant sulfide accumulation. Gravity field results from each prospect relative to each other show a general increase in the corrected Bouguer anomaly from west to east (-92.4 mgals to -74 mgals) perhaps showing the increasing thickness of the ultramafic package over the modeled feeder for the intrusion at the head of Hall Cove.

During August-September 2005 the Company contracted Connors Drilling to complete 7 NQ2 core drill holes at the Marquis, Potato Patch, and Raven prospects totaling 4,504 feet. Two holes were collared northeast of holes DK0101 through DK0104 and aimed southwest back toward the Marquis IP anomaly and the previous drill holes in the Marquis prospect. Both holes intercepted semi-massive to massive sulfide at depth in the hole indicating that the sulfide horizon is north dipping.

Hole DK0501 (AZ 225,-60, TD 654) intercepted semi-massive to massive sulfides at 238 feet down hole. This hole intercepted clinopyroxenite from surface to TD. Co and Ni values positively correlate with Cu and S values. Cu:Ni ratios for mineralized intervals averaged 2.17. This hole did not exit mineralization.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  d.

Duke Island – Alaska, USA, continued

Exploration and Drilling, continued

Significant results are shown below:

  Hole    From  To Thickness Cu Pt Pd
  Number Ft Ft Ft (Wt Avg ppm) (Wt Avg ppb) (Wt Avg ppb)
  DK0501 326 425.5 99.5 2,320 68 72
    376          
         Includes 376 394 18 4,520 100 111
         Includes 404 424 20 3,625 123 133
  DK0502 No Significant Intercepts      
  DK0503 37.5 186.5 149 2,086  5  1
  DK0504 No Significant Intercepts      
  DK0506 8 395 387 2,035 56 59
         Includes 33 75 42 3,801 331 313
         Includes 8 92 84 2,531 211 219

Note: Holes DK0505 and DK0507 were not visibly mineralized and have not been submitted for geochemical analyses.

Avalon Development Corp completed a technical report on the Duke Island project for the Company in August 2006. The report concluded that mineralization identified at Duke Island had the potential to elevate the Project to one of the most important new discoveries in North America. The report recommended extensive geochemical sampling and geologic mapping of the Monte prospect and other prospective areas. It also recommended a thorough review of all petrological, geochemical and lithologic data to help guide future exploration efforts including a 14,500 foot drilling program includes specific exploration holes to test the Marquis, Raven, Scarp, and Lookout targets.

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Annual Information Form for the year ended December 31, 2006

  d. Duke Island – Alaska, USA, continued

Geology and Mineralization

The Duke Island complex consists of two separate, well-exposed, ultramafic bodies interpreted to be parts of the same intrusive body at depth. Both intrusives are comprised of a dunite and peridotite core surrounded by concentric zones of olivine clinopyroxenite, hornblende-magnetite clinopyroxenite, and gabbro. The presence of dominantly ultramafic cumulates likely resulted from concentration of the mafic minerals by flow, settling, and entrapment from a mafic magma, rather than an origin as an unusual ultramafic magma.

A series of northwest and northeast trending faults appear to post-date emplacement of the Duke Island ultramafic body. The most significant of these structures is the Hall Cove –Grave Point structure which trends northeast along the trace of Hall Cove. Field relationships suggest this structure has an unknown amount of southeast-side down relative displacement. Ultramafic rocks of the Judd Harbor portion of the complex are exposed between the Bite Cove and Judd Harbor faults suggesting the ultramafic blocks occupy a horst block between the two structures. Copper-nickel-PGE mineralization discovered to date appears to be controlled by northwest trending structures although its relationship to the Hall Cove, Bite Cove and Judd Harbor structures is unknown.

Copper and nickel occurs as chalcopyrite and pentlandite in massive to disseminated pyrrhotite. Sulfide mineralization is primarily hosted in clinopyroxenite as interstitial blebs, pods and net-textured masses. There is little correlation between PGE content and sulfide content. PGE enriched intervals occur in sulfide rich intervals, but there are also numerous sulfide rich intervals with no appreciable PGE content.

Geochemical, geological and geophysical data from the project suggests that sulfide mineralization at Duke Island extends for over 14.5 kilometers along strike and up to 3.8 kilometers across strike with the ultimate dimensions of the system remaining open to expansion. Prior to discovery of significant accumulations of massive, semi-massive and disseminated sulfide mineralization, the mafic-ultramafic intrusive was considered to be a classic zoned Ural-Alaska type complex of mid-Cretaceous age.

Many of the zoned ultramafic complexes in the Koryak-Kamchatka and Southeast Alaska belts are described and mapped as plug or pipe-like, concentrically zoned intrusions, that are dome-like bodies originating from diapiric injection of ultramafic magmas-a type notably absent of economic nickel sulfide occurrences. The copper, nickel and iron contents at Duke Island are significantly elevated relative to most Ural–Alaska complexes. The geometry and the abundance of sulfide mineralization present on the property have many characteristics of layered mafic intrusive complex. Similar intrusives host some of the world’s largest copper-nickel systems.

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  d. Duke Island – Alaska, USA, continued

Sampling, Analysis and Security of Samples

All 2001 core samples were crushed at Bondar Clegg’s Fairbanks preparation facility to 80% passing 10 mesh and then pulverized to +95% passing –150 mesh. Sample rejects were retained in Fairbanks and returned to Avalon Development. Sample pulps were to Bondar Clegg’s main analytical facility in North Vancouver, British Colombia and analyzed for Pt + Pd + Au by 30 gram lead collection fire assay techniques with an inductively coupled plasma (ICP) finish. In addition, each sample was analyzed for a multi-element package by ICP analytical methods using two acid digestion procedures. The remaining half of the drill core was shipped to Fairbanks and stored in Avalon’s secure warehouse.

All 2005 core samples were sawn in the field and sent to Vancouver by ALS Chemex for processing at their prep facility. Samples were crushed to 70% passing 2 millimeters (10 mesh) and a 250 gram split was taken and pulverized to +85% passing 75 microns (200 mesh). All samples were analyzed for Pt + Pd + Au by 30 gram lead collection fire assay techniques with an inductively coupled plasma (ICP) finish. In addition, each sample was analyzed for a suite of 27 trace elements using a four acid digestion procedure followed by ICP techniques with an atomic emission spectrographic finish. Fire assay and ICP processes were adjusted by ALS Chemex to account for the high concentrations of iron, magnesium, and chromium associated with ultramafic rocks. Pulps and rejects and remaining half of the core was sent to Avalon Development’s Fairbanks warehouse for permanent storage.

A total of 148 sample blanks were inserted into the sampling sequence for the 2001 through 2005 Duke Island programs. Blanks were inserted on a minimum 1 for 25 basis into all sample sequences. Extensive previous analysis of this same blank rock type has given Avalon a large geochemical database for use on a comparative basis. Analyses performed by Bondar-Clegg and ALS Chemex on the blanks from the Duke Island project indicate no unusual or spurious sample results in the blanks submitted.

No blank of check analyses were completed on Duke Island geochemical samples during the period 2001 through 2004. In 2005, in addition to sample blanks, sulfide rich commercial geologic standards from Analytical Solutions Ltd. were inserted on a 1 to 50 basis in each sample submittal during 2005. Analysis results indicate no unusual or spurious sample results in the standards submitted.

Mineral Resources

There are no resources or reserves on the Company’s Duke Island project that comply with the CIM Standards on Mineral Resources and Reserves Definitions and Guidelines as adopted by CIM Council on August 20, 2000.

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  d.

Duke Island – Alaska, USA, continued

Exploration and Development

A detailed review of the Duke Island data in 2007 suggests that sulfide mineralization may be related to an elongate sill complex, not a Ural Alaska ultramafic intrusive. The Duke Island complex appears favorable for hosting additional areas of mineralization with possibly higher sulfide concentrations and better metal grades in more basal and more dynamically active portions of the ultramafic contact zones. A low-lying area with essentially no outcrop to the north and east of earlier drilling presents an attractive target where numerous moderate to strong airborne EM conductors remain untested. Previously undrilled targets will be evaluated by electromagnetic surveying during summer 2007 in anticipation of a 2008 drilling program.

  e.

Big Bar – Alaska, USA

Property Description, Location, Access and Infrastructure

The Company’s 100% Big Bar Project is a copper-lead-zinc prospect located 110 miles northeast of Nome, Alaska. The property consists of 7 claims controlling 1,120 acres of State of Alaska mineral rights classified as Open-to-Mineral-Entry in Sections 4, 5, and 9, T.1 S., R.17 W., Kateel River Meridian. Access to the prospect is by helicopter and the nearest improved airstrip is 16 miles to the northwest at Independence on the Kugruk River.

History

The Big Bar claims cover one of the most significant anomalies identified by Anaconda Minerals Company in a stream sediment and soil geochemical reconnaissance survey over a large part of the Seward Peninsula during the period of 1982 to 1984. Several stream sediment samples from the southern Kiwalik Mountain area were found to be anomalous in copper, lead, zinc, gold, cadmium, and arsenic. Soil samples were then collected from the drainage basin to follow-up on the stream sediment anomalies.

During the 1983 field season, Anaconda conducted geologic mapping and a detailed geochemical sampling program on a 3,900 by 3,000 foot soil sample grid. Sample spacing along strike was 330 feet and 165 feet along dip. The program defined a copper anomaly greater than 200 ppm that was over 3,900 feet long and 165 to 330 feet wide. Copper values within this anomaly were locally greater than 1,000 ppm. A zinc anomaly greater than 200 ppm in soils overlaps the copper anomaly to the west but is roughly parallel and displaced downslope from it to the east. The lead soil anomaly (greater than 100 ppm) is irregular and more discontinuous than the copper anomaly. Both the east and west limits of the anomaly are on slopes where downslope migration of surficial materials is to be expected but copper values greater than 200 ppm extended to both the northwest and southeast limits of the sample grid. Gossans collected as float from the anomaly contain up to .06 g/t Au, 1.6 opt Ag, 4260 ppm Cu and 3900 ppm Zn.

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  e.

Big Bar – Alaska, USA, continued

History, continued

By this time the project geologists could see the close similarities between the Big Bar prospect and massive sulfide prospects in the Ambler District. During the 1984 field season, Anaconda continued detailed geologic mapping, expanded and tightened the geochemical grid, and completed some reconnaissance geophysical surveys (IP, MAXMIN, EM, gravity, and magnetics). One distinct IP anomaly, coincident with a magnetic high, was identified upslope of the copper anomaly. The Anaconda Minerals Company was dissolved in the spring of 1985 and the mining claims were dropped via non-performance of annual labor.

Exploration and Drilling

Quaterra staked the Big Bar prospect in August, 2000 and initiated field work the following field season with surface reconnaissance, sampling and a gravity geophysical survey conducted by Allan Spector and Associates Ltd. of Toronto, Canada. The survey collected gravity data on 200 foot intervals along four NW-SE oriented lines 400 feet apart and extending across the anomalous area defined by Anaconda. The survey delineated 3 high density zones, including two zones that correlated to higher copper geochem values and anomalous magnetics.

During the second quarter of 2006, the Company conducted a three-hole, 1,470 foot core drilling program to test a strike length of approximately 1000 feet near the center of the geochemical anomaly at Big Bar. The holes intersected uneconomic zones of disseminated pyrite and stringer sulfides but no massive sulfide mineralization.

Geology and Mineralization

Big Bar is a volcanogenic massive sulfide occurrence in an interlayered metavolcanic and metasedimentary sequence that strikes northwest and dips moderately south. The interbedded sequence includes metapelitic schist, white to tan siliceous muscovite schist, and muscovite-quartz-feldspar schist. The felsic schist contains apple green muscovite and up to 50 % feldspar porphyroblasts. The mineralized schists are highly oxidized and limonitic blebs and streaks are common along the foliation. Only a few remnants of pyrite and chalcopyrite are observed at the surface. Exposure is primarily frost-riven rubble although one non-mineralized felsic schist outcrop is present upslope of the defined mineralization.

The metamorphic assemblage that hosts this prospect is peripheral to the Devonian Kiwalik Mountain gneiss. The assemblage appears to contain metatuff and metarhyolite components that resemble lithologies in the Ambler district of the southern Brooks Range. The metavolcanic-bearing assemblage of the Kiwalik Mounatin area has only locally been separately mapped along Independence Creek. This assemblage flanks Kiwalik Mountain to the east, south, west and northwest. The prospect is highly oxidized. Quartz-sericite-pyrite alteration may be present in unoxidized parts of the prospect.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  e.

Big Bar – Alaska, USA, continued

Sampling, Analysis and Security of Samples

All core from the 2006 Big Bar drilling program was logged at the Avalon base camp on Independence Creek by an Avalon geologist. The interval length of diamond core samples was determined by the geologist logging the hole and marked on wooden blocks placed in the sample stream. Core was then digitally photographed and photos stored on CD-rom media. Core was then sawed using a Haley core saw. One half of each sample interval was placed in a sample bag for eventual shipment to Fairbanks. The other half of the core was retained for future use.

Alaska Assay lab or Fairbanks, Alaska completed all of the sample preparation and analyses for the 2006 Big Bar project. All core samples collected from the project remained under direct supervision of Avalon Development from their point of collection in the field until the samples were released to Alaska Airline Air Freight office in Nome Alaska. Samples were then shipped via air to Fairbanks where Avalon personnel took possession of the samples, checked them for integrity and inserted blanks and standards as described below. All core samples were prepared by crushing to more than 10% passing 10 mesh and splitting of 250 grams of reject which was then pulverized to greater than 90% passing 150 mesh.

Following sample preparation, core samples were analyzed for gold by lead collection fire assay techniques with an atomic absorption spectroscopy finish (FA-AA). In addition to gold assay analyses described above, each core sample was analyzed for 34 elements by inductively coupled plasma (ICP) with atomic emission spectroscopy (AES) finish using four acid digestion.

Quality assurance and quality control protocols on the Big Bar drilling project included insertion of blank and standard samples in all core sample submittals. Blank samples were inserted into the sample stream as the first sample in each sample batch and then on a 1 for 25 basis thereafter in a given sample batch. Avalon has utilized this material as a blank for over 5 years due to its hardness (assists in scouring crushers) and its distinctive geochemical fingerprint that is void of gold, base metals and gold-pathfinder elements. Overall blank sample results indicate good quality preparation and analysis at Alaska Assay Labs.

Commercially prepared gold standards were inserted as pulps into the sample stream on a 1 for 50 basis. Four different commercially prepared gold standards were used during the program. All of the Alaska Assay Labs analyses were within 10% of the expected standard value. Pulps for the program are stored in secured, weather proof containers at Avalon Development’s Fairbanks warehouse. Rejects from the project were discarded.

Mineral Resources

There currently are no resources or reserves on the Big Bar project that comply with the CIM Standards on Mineral Resources and Reserves Definitions and Guidelines as adopted by CIM Council on August 20, 2000.

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Big Bar – Alaska, USA, continued

Exploration and Development

The Company’s initial phase of drilling examined only a small portion of the Big Bar anomaly. The geology of the drilled section suggests a good environment for massive sulfide mineralization, but does not give a clear indication of where the sulfides may have accumulated. To evaluate the possibility of massive sulfides at depth or in adjacent areas, the Company contracted Fugro Airborne Surveys Corp. to conduct an 85-line mile airborne EM-magnetometer survey covering an area of 15.5 square miles centered over the geochemical anomaly. The survey was completed in September 2006 and identified a number of anomalies adjacent to the geochemical anomaly that will be field-checked during summer 2007.

  f.

MacArthur – Nevada, USA

Property Description, Location, Access and Infrastructure

The Company’s 100% owned MacArthur copper project is controlled by 294 unpatented mining claims covering approximately 8 square miles in Lyon County, Nevada. The property is located 50 miles southeast of Reno in Sections 23, 24, 25, 35, and 36 in T.14N, R.24E and Sections 19, 20,29,30, and 31 of T.14N, R.25E (figure 6). The deposit lies within the Yerington copper mining district about 5 miles north of the mined out Yerington pit. Access to the project from State Highway 95 one mile then north of the town of Yerington, is provided by 4.5 miles of graded county roads that lead to the MacArthur Copper Property.

Figure 6: Location map of the MacArthur Copper project

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Quaterra Resources Inc.
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MacArthur – Nevada, USA, continued

History

Local prospectors staked unpatented mining Claims on the MacArthur property in the 1930's and made small tonnage shipments of hand sorted, high grade, oxide copper ore during that time. In 1950, the U.S. Bureau of Mines excavated a series of trenches across copper oxide occurrences and drilled 8 diamond drill holes. A total of over 60 holes were drilled on the Property by at least four major mining companies that optioned the Property from 1954 to 1971.

From 1971 to 1972, Anaconda carried out detailed geological mapping, systematic trenching and drilled approximately 56,000 feet in 280 vertical and angle percussion rotary holes to an average depth of 200 feet. The program outlined approximately 13 million tons of + 0.4% copper mineralization (Heatwole, D.A., 1978, Controls of Copper Oxide Mineralization, MacArthur Property, Lyon County, Nevada: Arizona Geological Society Digest, Vol. XI, p. 59-66.)

Arimetco International (“Arimetco”) purchased the Anaconda Yerington district properties and staked unpatented mining Claims over the MacArthur prospect in 1988. The MacArthur Mining and Processing Company, Inc. commissioned Metech Pty. Ltd., of Perth, Australia to prepare an ore reserve and mining planning study of the MacArthur deposit in 1989. Metech digitized the Anaconda data set which consisted of 11,529 assay intervals from 290 drill holes.

The Metech study developed a statistically controlled Kriged ore body model of the MacArthur deposit within defined zones of mineralization. The study reported the definition of a (non 43-101 compliant) overall “geologic reserve” of 63.2 million tons grading 0.26% TCu at a 0.18% TCu cut-off.

Arimetco mined a total of six million tons at an estimated grade of 0.36 % total copper using open pit methods from the MacArthur deposit in the period of 1995 to 1998. The low-grade oxide ore was trucked to heaps at the Yerington site where it was successfully processed with operations to remove copper from the Yerington mine tailings using a solvent extraction electro-winning process. Due to financial difficulties resulting primarily from the low price of copper, Arimetco sought protection under Chapter 11 of the U. S. bankruptcy Code in January 1997 and suspended all operations in 2000.

After Arimetco’s departure, the mining Claims over the deposit were allowed to expire. In January 2004, North Exploration LLC (North) staked 58 unpatented mining Claims over the deposit. In October 2005, the Company acquired the right to earn a 100% interest in the mining Claims covering the former MacArthur copper mine, subject to a 2% NSR, through making staged payments to North totaling US$1,785,000 by January 15, 2008 or staged payments totaling US$2,745,000 by January 15, 2010. The Company’s property position was then extended through staking an additional 236 mining Claims around the deposit.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

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MacArthur – Nevada, USA, continued

Exploration and Drilling

The Company acquired the digitized Anaconda exploration and drilling data package in August 2006 and commenced a review of the deposit geology and mineralization model using Datamine software. The data review is currently assessing the necessary steps to complete a technical report on the MacArthur Project with the objective of preparing a 43-101 compliant resource estimate.

Geology and Mineralization

The MacArthur copper deposit forms part of the Yerington mining district which includes at least three, large, porphyry copper deposits (Yerington, Ann Mason, Bear-Lagomarsino), as well as two large IOCG deposits (Pumpkin Hollow, and Minnesota). Mineralization ranges from disseminated porphyry copper occurrences to skarn, limestone replacement, and vein type deposits.

The principal rock unit in the area is the M. Jurassic Yerington Batholith emplaced into Triassic-Jurassic volcanic and sedimentary-layered sequences. The bulk of the mineralization appears to be associated with quartz monzonite porphyry dikes that are believed to be the final magmatic event associated with the batholith (Dilles, J. H. and Proffett, J. M., 1995, Metallogenesis of the Yerington Batholith, Nevada: Porphyry Copper Deposits of the American Cordillera, v 20, p. 306-315).

Following the emplacement of the batholith, a long hiatus in the stratigraphic record follows until the Oligocene during which time several thousand feet of Upper Oligocene volcanics and associated sedimentary rocks were laid down on an eroded, Mesozoic surface.

Normal, faulting associated with Late Tertiary basin-and-range extension has displaced and tilted all of the above-mentioned rocks. These faults dip east and are curved, concave upward, so that the dip of the fault flattens eastward. Net displacements are in an east-west direction. Fault hanging wall stratification and/or flow banding in Tertiary rocks is tilted west from 30° to near vertical as a result of the rotational displacement movements. The geologic section is completed by post-faulting conglomerates and alluvium section.

Heatwole (1978) described MacArthur as an oxidized low-grade porphyry copper deposit that has been locally enriched by exotic copper. The probable source of the exotic copper was primary sulfide mineralization peripheral to the porphyry center.

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Quaterra Resources Inc.
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MacArthur – Nevada, USA, continued

Geology and Mineralization, continued

Copper mineralization is visible in the open pit excavated by Arimetco. A total of twelve, 7-meter high benches step down toward the northeast following the original topography. The excavation exposes copper mineralization including chrysocolla, copper wad (neotocite), pitch limonite (vitreous, goethite) and minor amounts of malachite and azurite all hosted in medium grained, biotite, quartz monzonite. Although copper wad (neotocite) and chrysocolla are exposed in the pit walls throughout most of the pit area, the copper wad is more abundant near the western end of the pit while chrysocolla is more common near the east end."Pitch" limonite, (goethite) after chalcopyrite occurs sporadically as individual disseminations as well as along hairline veinlets containing biotized hornblende.

At least three, quartz feldspar porphyry dikes up to 4 meters wide, trending N70°W and dipping 40 to 60° northerly, cut the quartz monzonite. The dikes exhibit quartz"eyes", feldspar, and biotite and/or hornblende phenocrysts set in an aphanitic groundmass.

Several post-mineral, andesite porphyry dikes commonly 0.5 to 2 meters thick (one up to 10 meters thick) striking N75°W, and dipping near vertical to 80° northerly, cut the quartz monzonite. Locally strong oxide copper mineralization (copper wad and chrysocolla) occurs along the contact between the dike and the quartz monzonite. The dikes are post primary mineralization and pre-supergene mineralization.

Hydrothermal alteration at MacArthur is influenced by a strong northwest-oriented fracture system that is exposed in most places throughout the pit. The alteration zoning in the area includes a north-western phyllic zone (quartz-clay-pyrite with sericite), a relatively unaltered central zone with exception of minor potassic alteration in the form of local biotization of hornblende, and an eastern albitic zone with albitization becoming more pervasive to the east. Propylitic alteration has been reported at only a few localities south and southwest of the pit.

Nearly all of the mineralization that forms the presently investigated deposit is supergene in origin. Although there remains a question as to what portion of the deposit represents exotic or laterally transported copper oxides as opposed to the percentage of copper oxides formed through enrichment by the vertical migration of ground water, the source of the copper was probably primary (sulfide) copper mineralization related a porphyry system at or near the MacArthur pit.

Three holes drilled 1,000-1,500 feet north of the MacArthur pit by the US Bureau of Mines in 1950 (Report of Investigations 4906) encountered what appears to be a chalcocite blanket between depths ranging from 200 to 300 feet. Although recoveries at the time were not good, drill hole 6 gave an indication of the mineralization with an intercept with 62 feet averaging 0.61% Cu between downhole depths of 241 and 303 feet.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

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MacArthur – Nevada, USA, continued

Sampling, Analysis and Security of Samples

The MacArthur drilling program is routinely supervised in the field by the project geologist for monitoring recovery, proper core handling and accuracy in labeling. Drill core (HQ diameter) is delivered from the drilling rig to the core storage facility in Yerington by the driller at the end of each 12 hour shift for logging and sampling by the project geologists.

At the core storage/logging facility, the core is photographed, measured, core recovery calculated, and the rock types, alteration minerals, textural features, structures, veining, and mineralized zones documented. Sample intervals on the first three holes were fixed at 5 feet. In subsequent drill holes the sample intervals are taken at each of the core runs marked by the driller’s blocks. Exceptions are where full recovery occurs in numerous, short core runs in intervals less than about 6 feet, or where the geologists visually selected sample intervals based on rock type or structure. Sample intervals are measured and marked with permanent marker, orange ribbon and aluminum tag that is stapled to the core tray showing the sample number. Where the core sample is coherent a line is drawn with permanent marker along the stick so that it is sawn in half perpendicular to the “grain” in order to get a representative split. The core is stored on pallets to be picked up by the analytical laboratory.

American Assay Laboratories (AAL) located in Sparks, Nevada prepares and assays samples from the MacArthur drilling program. AAL is ISO/IEC 17025 certified and participates in CANMET, PTP MAL certification analyses twice a year, in GEOSTATS, SMA, and IOAG testing twice a year.

When core from the project arrives at the laboratory, it is split, using a core saw, into halves and one half of each interval is placed into a sample bag that is marked with the sample number. The sample is then dried, crushed to –10 mesh, rotary split to 1,000 grams, pulverized to –150 mesh, and split to 350 gram pulps. The pulps are assayed for total copper using a 2 gram-3 acid volumetric ore grade atomic-absorption (AA) spectroscopy analysis. The solution from the total Cu analysis is assayed by inductively coupled plasma (ICP) spectrometry for 69 elements. Oxide copper (acid soluble) content of the sample is then analyzed by using a weak, sulfuric acid solution leach of a 1 gram pulp followed by AAS copper. Internal quality assurance and quality control procedures include the insertion of standards into the sample sequences. Rejects from the previously analyzed samples will also be sent to another accredited laboratory for check analyses.

The remaining half core is placed back into the core box in its original position and the core boxes are returned to the Yerington core storage/logging facility by the laboratory truck, were it is then stacked and stored in order and by drill hole number. Reject and pulps are also returned with the core to the Yerington facility for archiving.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

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MacArthur – Nevada, USA, continued

Mineral Resources

There are no resources or reserves on the Company’s MacArthur properties that comply with the CIM Standards on Mineral Resources and Reserves Definitions and Guidelines as adopted by CIM Council on August 20, 2000.

Exploration and Development

The lateral zonation of supergene copper minerals visible at the surface, a possible chalcocite blanket to the north of the pit, and a large, pervasive phyllic alteration zone to the north and west of the mine workings, all suggest that the MacArthur deposit may have a significant potential for growth; both in the form of copper oxides and as primary sulfides in a related porphyry system. Although the MacArthur project currently has no NI43-101 compliant resource estimate, the historical data from the Project is substantial. With sufficient new drilling to substantiate the Anaconda data base, a formal resource can be calculated for the project.

In April 2007, the Company commenced a 10,000 foot core drilling program to twin approximately 10% of the shallow holes that defined the previously explored copper oxide mineralization at MacArthur and to identify extensions of copper oxide and chalcocite mineralization in the vicinity of the open pit. The program will also include at least 2 deep (1000-2000 ft holes) to investigate the potential of primary sulfide copper mineralization related to porphyry at depth. Additional mineralization within and peripheral to the deposit may significantly enlarge the area of known mineralization on the project and the value of a possible future producing operation at MacArthur.

  g.

Other Properties

Yerington Porphyry Copper Mine

On May 1, 2007, Quaterra received the approval of the appropriate U.S. court to the acquisition by a subsidiary of Quaterra of all Arimetco assets in the Yerington Mining District. Subject to the approval of the TSX Venture Exchange, the purchase price comprises US$500,000 cash, 250,000 shares of Quaterra common stock and a 2% net smelter return royalty capped at US$7.5 million dollars on production from any claims owned by Quaterra in the Yerington and MacArthur mine areas. Quaterra may terminate the transaction at any time during a 180-day review period if it is dissatisfied with the condition of the property or fails to obtain requested environmental clearances for past mining-related activities. Under certain circumstances, the review period may be extended for additional successive 120 day periods.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  g.

Other Properties

Yerington Porphyry Copper Mine, continued

Quaterra, subject to successful completion of due diligence, plans to explore the property as part of its ongoing exploration drilling program at MacArthur. Significant tonnages of copper oxide and sulfide mineralization remain below and peripheral to the Yerington pit and much of the area between the pit and the MacArthur deposit remains under-explored. The potential acquisition of this property in the center of a prolific copper district provides Quaterra not only with additional exploration targets but increased flexibility when considering production alternatives.

Early Stag Projects

Other properties of the Company include the Gray Hills, Peg Leg, Sinbad, Tidwell, and Shirley Basin properties in the USA, and Las Americas, Mirasol, Jaboncillos, and Cerro Blanco properties in Mexico. Each of these properties are newly acquired and all are in the initial stages of exploration. Data from prior activities is limited or in the process of being acquired and studied. Total expenditures by the Company to date are minimal.

ITEM 4. RISK FACTORS

The principal business of the Company is the exploration and development of mineral properties. Given the nature of the mining business, the limited extent of the Company's assets and the present stage of development, the following risk factors, among others, should be considered. The factors below should be considered in connection with any forward-looking statements in this AIF. The risks described below are considered to be the significant or material ones, but they are not the only risks the Company could encounter. Some risks may not be known to Quaterra and others that are not considered significant may turn out to be material. Investment in the common shares of Quaterra must be considered speculative and risky, since any one or more of the risks could materially impact Quaterra’s business, its ability to raise required capital and market price of its common shares.

  I.

Risks and Uncertainties

Resource exploration and development is a speculative business and involves a high degree of risk. Exploration of the Company’s properties might not result in discoveries of commercial quantities of minerals. The marketability of natural resources which may be acquired or discover by the Company will be affected by numerous factors beyond our control. These factors include market fluctuations, the proximity and capacity of natural resource markets and processing equipment, government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. Individually or in combination, these factors may result in our not receiving any or an adequate return on invested capital.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  II.

Political and Economic Risks of Doing Business

Our investments may be adversely affected by political, economic and social uncertainties which could have a material adverse effect on our results of operations and financial condition. Certain areas in which we may acquire properties have experienced and may continue to experience local political unrest and disruption by the indigenous peoples, which could potentially affect our projects. Changes in leadership, social or political disruption or unforeseen circumstances affecting political, economic and social structure could aversely affect our property interest or restrict its operations. Our mineral exploration and development activities may be affected by changes in government regulations relating to the mining industry and may include regulations on production, price controls, labor, export controls, income taxes expropriation of property, environmental legislation, and safety factors.

  III.

Funding Requirements

Since the Company does not generate any revenues, it may not have sufficient financial resources to undertake by itself all of its planned mineral property acquisition and exploration activities. Operations will continue to be financed primarily through the sale of securities such as common shares. The Company will need to continue its reliance on the sale of such securities for future financing, which may result in dilution to existing shareholders. Furthermore, the amount of additional funds required may not be available under favorable terms, if at all, and will depend largely on the acquisition and exploration activities pursued.

  IV.

Risk Associated with Title

The acquisition of title to resource properties or interest therein is a very detailed and time consuming process. Title to and the area of resource concessions may be disputed. The properties may be subject to prior, and in some cases, not fully ascertainable unregistered agreements or transfers, and title may be affected by undetected defects. Title may be based upon interpretation of a country’s laws, which laws may be ambiguous, inconsistently applied and subject to reinterpretation or change.

The Company has investigated title to all of its mineral properties and, to the best of its knowledge, title to all of its properties are in good standing.

  V.

Competition

The resource industry is intensively competitive in all of its phases, and Quaterra competes with many other companies possessing much greater financial and technical resources. Competition is particularly intense with respect to the acquisition of desirable undeveloped gold and silver properties. The principal competitive factors in the acquisition of prospective properties include the staff and data necessary to identify and investigate such properties, and the financial resources necessary to acquire and develop the projects. Competition could adversely affect the Company’s ability to acquire suitable prospects for exploration.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  VI.

Management and Dependence on Key Personnel

Quaterra currently has a small executive management group, which is sufficient for the Company’s present stage of development. Quaterra has relied, and will continue to rely, upon the services of various consultants and others for operating expertise. Quaterra may need to recruit additional personnel to supplement existing management. Quaterra’s development to date has largely depended, and will continue to depend, on the efforts of the current executive management group and the loss, however unlikely, of a significant number of the members of this group could have a material adverse effect on the Company, its business and its ability to develop its mineral properties.

  VII.

Exploration and Mining Risks

The Company does not hold any known mineral reserves of any kind and does not generate any revenues from production. The Company’s success will depend largely upon its ability to locate commercially productive mineral reserves. Mineral exploration is highly speculative in nature, involves many risks and frequently is non-productive. There is no assurance that our exploration efforts will be successful. Success in establishing reserves is a result of a number of factors, including the quality of management, the level of geological and technical expertise, the quality of land available for exploration as well as various other factors.

Once mineralization is discovered, it may take several years in the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish proven and probable reserves through drilling and bulk sampling, to determine the optimal metallurgical process to extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities. Because of these uncertainties, no assurance can be given that our exploration programs will result in the establishment or expansion of resources or reserves.

  VIII.

Estimates of Mineral Reserves and Resources and Production Risk.

The mineral resource and reserve estimates are estimates only and no assurance can be given that any particular level of recovery of mineral swill in fact be realized or that an identified resource will ever qualify as a commercially mineable (or viable) deposit, which can be legally and economically exploited. In addition, the grade of mineralization ultimately mined may differ from that indicated by drilling results and such differences could be material. Production can be affected by such factors as permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations, among other things. Short term factors, such as the need for orderly development of deposits or the processing of new or different grades, may have an adverse effect on mining operations and on the results of operations.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  IX.

Exploration and Development Activities.

Unusual or unexpected formations, formation pressures, fires, power outages, labor disruptions, flooding, explosions, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labor are other risks involved in extraction operations and the conduct of exploration programs. The Company may become subject to liability for damage to life and property, environmental dames, cave-ins or hazards against which our insurance cannot insure or against which it may elect not to insure. If any of our properties are found to have commercial qualities or ore, the Company would be subject to additional risk respecting any development and production activities. Most exploration projects do not result in the discovery of commercially mineable deposits of ore.

  X.

Resource Prices.

Resource prices have fluctuated widely, particularly in recent years, and are affected by numerous factors beyond the control of the Company. These include international economic and political trends, inflation, currency exchange fluctuations, interest rates, global or regional consumption patterns, speculative activities and increased production due to new and improved extraction and production methods. Such factors may negatively affect the marketability of any ore or minerals discovered at, and extracted from, our properties. If, because of a sustained decline in prices, financing were not available to meet cash operating costs, the feasibility of continuing operations would be evaluated and if warranted, would be discontinued.

  XI.

Environmental and Other Regulatory Requirements.

Our operations will be subject to environmental regulations promulgated by various Canadian, US and Mexican government agencies from time to time. Violation of existing or future environmental rules may result in various fines and penalties.

Claims and current and future operations will be governed by laws and regulations governing mineral concession acquisition, prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies such as ours that engage in exploration activities often experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits. Issuance of permits for our exploration activities is subject to the discretion of government authorities, and we may be unable to obtain or maintain such permits. Permits required for future exploration or development may not be obtainable on reasonable terms or on a timely basis.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  XI.

Environmental and Other Regulatory Requirements, continued.

Failure to comply with applicable laws, regulations and permits may result in enforcement actions thereunder, including the forfeiture of claims, orders issued by regulatory or judicial authorities requiring operations to cease or be curtailed and may include corrective measures requiring capital expenditures, installation of additional equipment or costly remedial actions. We may be required to compensate those suffering loss or damage by reason of its mineral exploration activities and may have civil or criminal fines or penalties imposed for violations of such laws, regulations and permits. We are not currently covered by any for of environmental liability insurance. See “Insurance” below.

Existing and possible future laws, regulations and permits governing operations and activities of exploration companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in capital expenditures or require abandonment or delays in exploration.

  XII.

Insurance.

Our business will be subject to a number of risks and hazards. Insurance to cover the risks to which our activities will be subject may not be available at all or at commercially reasonable premiums. We are not currently covered by any form of political risk insurance or any form of environmental liability insurance. The payment of such liabilities would reduce the funds available to the Company. If we are unable to fully fund the cost of remedying an environmental problem, we might be required to suspend operations or enter into costly interim compliance measures pending completion of a permanent remedy.

  XIII.

Foreign Subsidiaries.

We are a holding company that conducts its business through foreign subsidiaries, joint ventures and Canadian divisions. Substantially all of our assets are held in such entities. Accordingly, any limitation on the transfer of cash or other assets between Quaterra and its subsidiaries, or among its subsidiaries, could restrict our ability to fund operation efficiently. Any such limitations, or the perception that such limitations may exist now or in the future, could have an adverse impact on our valuation and share price.

  XIV.

Conflicts of Interest.

Certain of our directors and officers also serve as directors and/or officers of other companies or other managerial positions involved or related to natural resource exploration and development. Consequently there exists the possibility for such directors and officers to be in a position of conflict.

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Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  XV.

Share Price Volatility.

Securities markets have a high level of price and volume volatility, and the market price of securities of many companies have experience wide fluctuation in price which have not necessarily been related to the operating performance underlying assets values or prospects of such companies. Factors unrelated to the financial performance or prospects of Quaterra include macroeconomic developments in North America and globally, and market perceptions of the attractiveness of particular industries. Our share price, financial condition, and results of operations are all also likely to be significantly affected by short-term changes in uranium, gold, silver and copper prices. Continual fluctuations in metal prices may occur. As a result of any of these factors, the market price of our shares at any given point in time may not accurately reflect our long-term value.

ITEM 5. DIVIDENDS

Quaterra has not paid any dividends on its common shares since incorporation, nor has it any present intention of paying dividends, as it anticipates that all available funds will be used to undertake exploration and development programs on its mineral properties as well as the acquisition of additional mineral properties. However, Quaterra is not limited in any way in its ability to pay dividends on its common shares.

ITEM 6. CAPTIAL STRUCTURE

  I.

Authorized Capital

Quaterra’s has an unlimited number of common shares without nominal value. As at June 25, 2007 there are 79,072,660 common shares outstanding.

Quaterra has only one class of common shares, without any special rights or restrictions. Dividend entitlement of a shareholder of record is fixed at the time of declaration by the board of directors.

Each common share is entitled to one vote on the election of each director. There are no cumulative voting rights, in consequence of which a simple majority of votes at the annual meeting can elect all the directors of the Company. Each common share carries with it a right to share equally with every other common share in dividends declared and in any distribution of surplus assets of the Company after payment to creditors on any winding up, liquidation or dissolution. There are no sinking fund provisions. All common shares must be fully paid prior to issue and are thereafter subject to no further capital calls by the Company. There exists no discriminatory provision affecting any existing or prospective holder of common shares as a result of such shareholder owning a substantial number of shares.

Page 53 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  II.

Stock Options

Quaterra has a stock option plan pursuant to which the directors of the Company are authorized to grant stock options to directors, officers, employees, and consultants of the Company and its subsidiaries.

As at June 25 2007, the following stock options were outstanding under the stock options plan:

   Exercise          Expiry      Balance Options  Cancelled Options Balance
       Price            Date Dec. 31, 2006  Granted  or Expired  Exercised June 25, 2007  
               
     $0.12      January 10, 2008          937,000                -    -          93,000        844,000
     $0.25        October 2, 2008              50,000                -    -          50,000                  -
     $0.34    December 8, 2008              90,000                -    -                  -          90,000
     $0.62          March 25, 2009          590,000                -    -      180,000        410,000
     $0.35          August 9, 2010          850,000                -    -      257,000        593,000
     $0.40          January 9, 2011          200,000                -    -                  -        200,000
     $1.04          March 27, 2011          125,000                -    -                  -        125,000
     $1.00              May 19, 2011              75,000                -    -                  -          75,000
     $1.12              June 12, 2011          100,000                -    -                  -        100,000
     $1.55                July 28, 2011      2,110,000                -    -      365,000  1,745,000
     $1.55        August 23, 2011          100,000                -    -                  -        100,000
     $1.50 September 25, 2011          100,000                -    -                  -        100,000
     $2.05 December 18, 2011          100,000                -    -                  -        100,000
     $2.65      January 11, 2012                      -        75,000    -                  -          75,000
     $2.70  February 21, 2012                      -        25,000              25,000
               
           5,427,000    100,000    -      945,000  4,582,000
               
  Weighted average exercise price                $0.92          $2.66 $0.00            $0.84            $0.98

  III.

Share Purchase Warrants

As at June 25 2007, the Company had the following share purchase warrants outstanding:

     Exercise Expiry      Balance Warrants Cancelled Warrants      Balance
       Price  Date Dec. 31, 2006  Issued or Expired Exercised June 25, 2007
       $2.25  June 21, 2008      2,623,928                -                  -          15,000            2,608,928
  Weighted average exercise price                $2.25            $0.00              $0.00            $2.25                    $2.25

Page 54 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

ITEM 7. MARKET FOR SECURURTIES

The Company’s common shares are listed and posted for trading on the TSX-V under the trading symbol “QTA”. The following table provides information as to the high and low closing prices and the volume of shares trading for each month during the 12 months of the most recently completed financial year being December 31, 2006 and January 1, 2007 to the date of this AIF:

           Month   High     Low     Low     Volume  
                         
June 1 - 25, 2007 $  3.79   $  2.97   $  3.35     74,436  
       May 2007 $  4.16   $  3.38   $  3.66     98,217  
     April 2007 $  3.59   $  2.60   $  2.98     101,214  
     March 2007 $  3.00   $  2.10   $  2.69     58,823  
 February 2007 $  2.94   $  1.98   $  2.75     62,885  
   January 2007 $  2.96   $  2.50   $  2.78     63,694  
December 2006 $  2.75   $  1.85   $  2.33     66,362  
November 2006 $  2.17   $  1.70   $  1.95     56,077  
   October 2006 $  1.82   $  1.33   $  1.59     59,314  
September 2006 $  1.79   $  1.25   $  1.49     56,300  
   August 2006 $  1.75   $  1.38   $  1.50     84,236  
       July 2006 $  1.84   $  1.10   $  1.43     63,675  
       June 2006 $  1.85   $  1.16   $  1.46     109,686  
       May 2006 $  2.31   $  1.16   $  1.67     248,727  
     April 2006 $  2.49   $  1.23   $  1.61     282,347  
     March 2006 $  1.35   $  0.70   $  0.97     292,696  
 February 2006 $  0.85   $  0.52   $  0.63     270,670  
   January 2006 $  0.71   $  0.64   $  0.52     176,795  

ITEM 8. ESCROWED SECURITIES

As at the date of this AIF the Company has no securities held in escrow or similar arrangement.

Page 55 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

ITEM 9. DIRECTORS AND OFFICERS

  I.

Name, Occupation, and Experience

The following table sets forth all current directors and executive officers as of the date of this AIF.

   Name, Country of Residence and Position (1)      Appointed (1) Number of shares (1)(2) % of Class (1)
         
  Dr. Thomas Patton November 10, 1998 863,000 1.09%
  Washington, USA      
  Director, President and Chief Executive Officer      
         
  Eugene Spiering July 13, 2006 30,000 0.04%
  British Columbia, Canada      
  Director, Vice President of Exploration      
         
  Dr. Robert Gayton (3) April 9, 1997 212,998 0.27%
  British Columbia, Canada      
  Director      
         
                                 
  John R Kerr  (3) (4) November 22, 2004 5,000 0.01%
  British Columbia, Canada      
  Director      
         
  Lawrence Page Q.C. (4) September 5, 1995 10,500 0.01%
  British Columbia, Canada      
  Director      
         
                                       
  LeRoy Wilkes  (3) (4) August 23, 2006 10,000 0.01%
  Colorado, USA      
  Director      
         
  Stacey Bligh May 1, 2006 Nil Nil
  British Columbia, Canada      
  Corporate Secretary      
         
  Charles Hawley June 8, 2001 Nil Nil
  Alaska, USA      
  Vice President Exploration - Alaska      
         
  Scott B Hean March 28, 2006 27,500 0.03%
  British Columbia, Canada      
  Chief Financial Officer      
         
  Robert E Swenarchuk March 22, 2000 245,543 0.31%
  British Columbia, Canada      
  Senior Vice President of Corproate Development      

Page 56 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  I.

Name, Occupation, and Experience, continued

Notes to table

  (1)

The information as to country of residence, principal occupation, not being within the knowledge of the Company, has been furnished by the respective individuals.

  (2)

The number of shares held by the director/officer as at June 5, 2007 had been taken from SEDI (Insider reporting regulatory information – www.sedi.ca) and includes all shares held either directly or indirectly

  (3)

Denotes member of Audit Committee

  (4)

Denotes member of Nomination and Compensation Committee

The Company’s directors are elected and hold office until the next annual general meeting of the Company’s shareholders, unless any director resigns, is removed or becomes disqualified earlier than this date.

Dr. Thomas Patton – Director, President and Chief Executive Officer

Dr. Patton graduated from the University of Washington in 1971 (Ph.D.) and has worked with both junior and senior mining companies. His exploration efforts have concentrated on North America and have resulted in several significant discoveries and led to the expansion of mineral reserves at existing operations. He served as the President and Chief Operating Officer for Western Silver Corporation from January 1998 to May 2006. Previously, Dr. Patton held senior positions with Rio Tinto PLC and Kennecott Corporation. Dr. Patton is a member of the Society of Economic Geologists and the American Institute of Mining & Metallurgical Engineers.

Eugene Spiering – Director, and Vice President of Exploration

Mr. Spiering received his Bachelor of Science-Geology degree from the University of Utah and is a member of the Society of Economic Geologists, the Australasian Institute of Mining and Metallurgy and the American Association of Petroleum Geologists. Mr. Spiering joined the Company on January 10, 2006 as Vice President of Exploration. Mr. Spiering has over 28 years of experience in the mining exploration industry. He most recently held the position of Vice President, Exploration at Rio Narcea Mines Ltd., where he managed a team that discovered two gold deposits and completed the final definition of one nickel deposit in Spain. All three of these deposits are currently in production. Prior to his tenure at Rio Narcea, Mr. Spiering held the position of senior geologist with Energy Fuels Nuclear, Inc. where his responsibilities included uranium exploration in northern Arizona and gold exploration in western US and Venezuela.

Page 57 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  I.

Name, Occupation, and Experience, continued

Dr. Robert Gayton – Director

Dr. Gayton graduated from the University of British Columbia in 1962 with a Bachelor of Commerce and in 1964 earned the chartered accountant (C.A.) designation while at Peat Marwick Mitchell. Dr. Gayton joined the Faculty of Business Administration at the University of British Columbia in 1965, beginning 10 years in the academic world, including time at the University of California, Berkeley, earning a Ph.D. in Business. Dr. Gayton rejoined Peat Marwick Mitchell in 1974 and became a partner in 1976, where he provided audit and consulting services to private and public company clients for 11 years. Dr. Gayton has directed the accounting and financial matters of public companies in the resource and non-resource fields since 1987.

John R Kerr – Director

John R. Kerr graduated from the University of British Columbia in 1964 with a Bachelor of Applied Science (B.A.Sc) degree in Geological Engineering. He has participated in the mining industry continuously since graduation as an exploration geologist. Mr. Kerr has gained experience in recognition and identification of mineral potential in a diversified field of geological environments. His expertise is epithermal and sedex-hosted precious metal deposits in the southwest United States, strata controlled gold deposits and porphyry copper/gold/molybdenum deposits of the western Cordillera, and VMS deposits in all areas of North America. Successful ventures include recognition (1972) and discovery (1974) of the Santa Fe gold mine, identification (1979) of the Calvada gold mine and discovery (1981) of the Mindora gold/silver deposit, all located in Nevada. He is also credited with early identification (1967) of two VMS deposits at the Rambler Mine in Newfoundland, and recognition (1979) of the Frasergold strata controlled gold deposit in British Columbia. Mr. Kerr has sat on the boards of numerous public companies. He currently runs a geological consulting practice out of Vancouver, B.C., with projects located in all areas of North America.

Lawrence Page, Q.C. – Director

Lawrence Page, Q.C. obtained his law degree from the University of British Columbia in 1964 and was called to the Bar of British Columbia in 1965. Thereafter, he studied labour law and industrial relations in Sydney, Australia as a Commonwealth Scholar, returning to active practice in Vancouver in 1967. In 1970, he was a founding partner of Worrall and Page, where he practiced until 1995. He currently practices on his own in Vancouver. Mr. Page's preferred areas of practice are commercial litigation, native law, natural resource law and securities law. He has been admitted to the Bar of Ontario for the purpose of acting as counsel in specified litigation. Mr. Page was awarded the distinction of Queen's Counsel in 1988. Through his experience with natural resource companies and, in particular, precious metals development, Mr. Page has established a unique relationship with financiers, geologists and consultants and has been counsel for and a Director of Corona Corporation (now Homestake) and Prime Resources Corporation, which have brought into production and operate Canadian gold mines.

Page 58 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  I.

Name, Occupation, and Experience, continued

LeRoy Wilkes – Director

Mr. Wilkes is a graduate mining engineer from the Montana School of Mines. Mr. Wilkes was the president of Washington Group International’s Mining Business Unit and in this role participated in many developing mining projects throughout the world including Latin America, Canada, Europe and the United States. Mr. Wilkes was also the Chief Operating Officer of Santa Fe Pacific Gold Corporation during the expansion of its Nevada operations. Whilst serving as Senior Vice President of Business Development for Anaconda Mineral Mr. Wilkes was involved in the development of such projects as Greens Creek in Alaska, Stillwater in Montana, and Las Pelameres in Chile

Stacey Bligh – Corporate Secretary

Stacey Bligh is a securities legal assistant and has been Corporate Secretary of the Company since May 1, 2006. Ms. Bligh has been working with various public companies since 1997 and currently holds the position of Corporate Secretary with three other public companies listed on the TSX-V. Prior to joining the Company, Ms. Bligh held the position of Executive Assistant to the President of a TSE listed, and subsequently, AMEX listed merchant bank.

Charles Hawley – Vice President of Exploration – Alaska

Charles Hawley joined the Company on July 6, 2001. Mr. Hawley graduated with a Bachelor of Arts degree from Hanover College, Indiana in 1951 and earned a Ph.D in geology from the University of Colorado in 1963. He worked for the U.S. Geological Survey from 1952-1968. Mr. Hawley has been working within the exploration and mine development field in Alaska’s private sector since 1969.

Scott B Hean – Chief Financial Officer

Scott B. Hean, B.A., M.B.A., ICD.D graduated from Simon Fraser University in 1973 and from the Ivey School of Business, London, Ontario, in 1975. He completed the Institute of Corporate Directors Director Education program in May 2006. Prior to joining the Company in March 2006 as Chief Financial Officer, Mr. Hean was Chair and Chief Financial Officer of Plastics Solutions Canada Inc. which markets biodegradable plastic products in Canada and the United States. He has held senior management and executive positions with Bank of Montreal as Senior Vice President and Managing Director responsible for financing in the natural resources sectors in North America and with J.P. Morgan of New York, where he was primarily involved in financing oil and gas companies. He is a Chair, Bill Reid Trust, a not for profit organization concerning the work of the Haida artist, Bill Reid. Mr. Hean has served on numerous not-for-profit Boards, including Outward Bound and B.C. Children's Hospital.

Page 59 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  I.

Name, Occupation, and Experience, continued

Robert Swenarchuk – Vice President of Corporate Development

Mr. Swenarchuk joined the Company as Senior Vice President Corporate Development on June 9, 2003, bringing with him more than 25 years of successful practice in the corporate and investor relations sectors of the natural resources industry. He is President of Rescom Consultants Ltd., which he founded in 1980 to provide a range of financial and investor relations services to public companies. Over the past 15 years he has been involved in arranging financing for mining exploration and development projects in Canada, the United States, Europe, Mexico, Russia, Kazakhstan and China. He has extensive financial community contacts throughout North America, Europe and Asia.

  II.

Control of Securities

The Company’s directors and senior officers as a group beneficially own, directly or indirectly, or exercise control or direction over, 1.78% of the voting securities of the Company as of June 25, 2007. In addition, the directors and executive officers of the Company as a group held 1,870,000 stock options for the purchase of common shares of the Company. The stock options are exercisable as shown below:

  Number of Exercise Expiry
     Options    Price Date
       
             145,000    $0.12 January 10, 2008
             330,000    $0.35 August 9, 2010
             200,000    $0.41 January 9, 2011
             100,000    $0.62 March 25, 2009
             125,000    $1.04 March 27, 2011
             970,000    $1.55 July 28, 2011
       
         1,870,000    $1.02  

Page 60 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  III.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

Dr. Robert Gayton, Thomas Patton and Lawrence Page were directors or executive officers of Newcoast Silver Mines Ltd. (now Southern Silver Exploration Corp.) at the date of a Cease Trade Order by the British Columbia Securities Commission on September 30, 2003 and by the Alberta Securities Commission on October 31, 2003 for failure to file financial statements. The orders were revoked on October 23, 2003 and March 25, 2004 respectively.

Lawrence Page, a director and President of Saturna Beach Estates Ltd., a private Company formed under the laws of British Columbia, Canada (“SBEL”) which conducts the business of a vineyard and winery. On August 17, 2004, SBEL obtained an Order from the Supreme Court of British Columbia under the provisions of the Companies’ Creditors Arrangement Act (Canada) that allowed SBEL to continue to run its daily business affairs without creditor action during financial reorganization. At the date hereof, the financial reorganization has been completed and the Order terminated

Other than the aforementioned no director and/or executive officer has been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court of competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he is a director and/or executive officer, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he is an officer or director from engaging in or continuing any conduct, practice, or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony.

There are no arrangements or understandings with any major shareholders, customers, suppliers or others pursuant to which any person referred to above was selected as a director or member of senior management.

  IV.

Conflicts of Interest

Certain of the Company’s directors and officers serve or may agree to serve as directors or officers of other reporting companies or have significant shareholders in other reporting companies and, to the extent that such other companies may participate in ventures in which Quaterra may participate, the directors of the Company may have a conflict of interest in negotiation and concluding terms respecting the extent of such participation. In the event that such a conflict of interest arises at a meeting of Quaterra’s directors, a director who has such a conflict will abstain from voting for or against the approval of such a participation or such terms and such director will not participate in negotiating and concluding terms of any proposed transaction.

Page 61 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  IV.

Conflicts of Interest, continued

Below are the other positions held by Director and Officers.

  Name Position with Quaterra Other director or officer roles
       
  Thomas Patton Director, President and Chief Fortune River Resource Corp.
    Executive Officer Southern Silver Exploration Corp
       
  Eugene Spiering Director and Vice President of None
    Exploration  
       
  Robert Gayton Director Amerigo Resources Ltd
      Bravo Venture Group Inc.
      Candian Zinc Corporation
      Doublestar Resources Ltd
      Intrinsyc Software International Inc.
      Nevsun Resources Ltd
      Northern Orioin Resources Inc.
      Palo Duro Energy Inc.
      Fortune River Resource Corp.
      Southern Silver Exploration Corp
      Western Copper Corporation
       
  John Kerr Director Roxgold Inc.
       
  Lawrence Page Director ABC Mining Ventures Inc
      Avalon Ventures Inc.
      Bravo Venture Group Inc
      Fortune River Resource Corp.
      Southern Silver Exploration Corp
      Valterra Resource Corporation
      X-Terra Resources Corporation
       
  LeRoy Wilkes Director Sabina Silver Coporation

Page 62 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  IV.

Conflicts of Interest, continued


  Name Position with Quaterra Other director or officer roles
       
  Stacey Bligh Corporate Secretary Bravo Venture Group Inc.
      Fortune River Resource Corp.
      Southern Silver Exploration Corp
      Valterra Resource Corporation
       
  Charles Hawley Vice President of Exploration - Hawley Resource Group Incorporated
      Mines Trust Co.
      Piper Capital Inc.
       
  Scott Hean Chief Financial Officer ABC Mining Ltd
      Bravo Venture Group Inc.
      Great Quest Metals Ltd
      Fortune River Resource Corp.
      Sabina Silver Corporation
      Southern Silver Exploration Corp
      Valterra Resource Corporation
       
  Robert Swenarchuk Vice President of Corporate Bravo Venture Group Inc.
    Development Derek Oil & Gas Corporation
      Fortune River Resource Corp.
      Southern Silver Exploration Corp
      Valterra Resource Corporation

ITEM 10. PROMOTERS

The Company does not employ any person or company to act or perform as a promoter for the Company.

ITEM 11. LEGAL PROCEEDINGS AND REGULATORY ACTION

Quaterra is not a party to any legal proceedings and is not aware of any such proceedings known to be contemplated.

Page 63 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

ITEM 12. INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

No director, senior officer or principal shareholder of Quaterra, or any associate or affiliate of the foregoing, has had any material interest, direct or indirect, in any transaction within three most recently completed financial years or during the current financial year prior to the date of this AIF that has materially affected or will materially affect Quaterra.

ITEM 13. TRANSFER AGENT AND REGISTRARS

The registrar and transfer agent of the Company is CIBC Mellon Trust Company at its office in Vancouver, British Columbia, at 1600 – 1066 West Hasting Street, Vancouver BC, V6E 3X1.

ITEM 14. MATERIAL CONTRACTS

During the last two years the Company has not entered into any material contract, other than contracts entered into in the ordinary course of business, to which the Company or any of its subsidiaries is a party.

ITEM 15. INTEREST OF EXPERTS

To the best of Quaterra’s knowledge, the authors of the reports listed below do not have any interest in nor hold any securities of the Company:

  a.

Independent Technical Report for the Nieves Silver project, Zacatecas State, Mexico dated November 15, 2006 and prepared in accordance with National Instrument 43-101 by Stephen Wetherup, B.Sc., P. Geo of Caracle Creek International Consulting Inc ..


  b.

Summary Report for the Duke Island Cu-Ni PGE Property Ketchikan Mining District, Alaska dated August 25, 2006 and prepared in accordance with National Instrument 43- 101 by Curtis Freeman of Avalon Development Corp.

The auditors of the Company are Smythe Ratcliffe LLP, Chartered Accountants of Vancouver, British Columbia, and they certified the auditors’ report on the annual financial statements of Quaterra for the years ended December 31, 2006 and 2005.

Smythe Ratcliffe LLP, Chartered Accountants, report that they are independent of the Company in accordance with the Rules of Professional Conduct in British Columbia, Canada.

ITEM 16. ADDITIONAL INFORMATION

  I.

Audit Committee


 a.

Purpose

The Board of Directors of Quaterra has an overall responsibility to oversee the affairs of the Company for the benefit of the shareholders. The Audit Committee (the “Committee”) is appointed by the Board to assist the Board in fulfilling its oversight responsibilities. The Committee’s primary duties and responsibilities are to:

Page 64 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  I.

Audit Committee, continued


  a.

Purpose, continued

     
 

(i)

Ensure the effectiveness of the overall process of identifying and addressing principal business risk and the adequacy of the related disclosure.
   
  (ii)
Monitor the integrity of the Company’s financial reporting process and systems of internal controls regarding finance, accounting and legal compliance.
   
  (iii)
Monitor the independence of and the performance of the Company’s polices, procedures and practices at all levels.
   
  (iv)
Provide an avenue of communications among the independent auditors, management and the Board of Directors
   
  (v)
Encourage adherence to, and continuous improvement of, the Company’s polices, procedures and practices at all levels.

The Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities, and it has direct access to the independent auditors as well as anyone in the organization. The Committee has the ability to retain, at the Company’s expense, special legal, accounting, or other consultants or experts it deems necessary in the performance of its duties.

  b.

Members and Meetings

Committee members shall meet the requirements of the TSX-V. The Committee shall be comprised of three or more directors as determined by the Board, each of whom shall be independent non-executive directors, free from any relationship that would interfere with the exercise of his or her independent judgement. All the members of the Committee shall have a basic understanding of finance and accounting and be able to read and understand fundamental financial statements, and at least one member of the Committee shall have accounting or related financial expertise.

Committee members shall be appointed by the Board. If the Committee Chair is not designated or present, the members of the Committee may designated a Chair by majority vote of the Committee membership.

The Committee shall meet at least four times annually, or more frequently as circumstances dictate. The Committee Chair shall prepare and/or approve an agenda in advance of each meeting. The Committee should meet privately in executive session at least annually with management, the independent auditors and as a committee to discuss any matters that the Committee or each of these groups believes should be discussed. In addition, the Committee, or at least its Chair, should communicate with management quarterly to review the Company’s financial statements and significant finds based upon the auditors’ limited review procedures, if any.

Page 65 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  I.

Audit Committee, continued


  c.

Responsibilities and Duties


Review Procedures

The Committee reviews the Company’s annual audited financial statements and MD&A prior to filing or distribution. The review should include discussion with management and independent auditors of significant issues regarding accounting principles, practices and judgments.

In consultation with management and the independent auditors, the Committee consider the integrity of the Company’s financial reporting processes and controls, discuss significant financial risk exposures and the steps management has taken to monitor, control and report such exposures and review significant finds prepared by the independent auditor together with management’s responses.

The Committee review with financial management the Company’s quarterly financial results and MD&A prior to the release of earnings, discuss any significant changes to the Company’s accounting principles and any items required to be communicated by the independent auditors.

Independent Auditors

The independent auditors are accountable directly to the Committee. The Committee shall review the independence and performance of the auditors and annually recommend to the Board of Directors the appointment of the independent auditors or approve any discharge of the auditors when circumstances warrants.

The Committee approves the fees and other significant compensation to be paid to the independent auditors, and pre-approve any non-audit services that the auditors may provide.

On an annual basis, the Committee should review and discuss with the independent auditors all significant relationships they have with the Company that could impair the auditors’ independence.

The Committee review the independent auditors’ audit plan and engagement letter.

Prior to releasing the year-end earnings, the Committee discuss the results of the audit with the independent auditors.

The Committee consider the independent auditors’ judgments about the quality and appropriateness of the Company’s accounting principles as applied in its financial reporting.

Page 66 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  I.

Audit Committee, continued


  c.

Responsibilities and Duties, continued

Other Audit Committee Responsibilities

On at least an annual basis, the Committee review with the Company’s counsel, any legal matters that could have a significant impact on the Quaterra’s financial statements, the Company’s compliance with applicable laws and regulations, and inquiries received from regulators or governmental agencies.

The Committee annually prepares a report to shareholders to be included in the Company’s annual information circular. The Chairman of the Committee with review all disclosure documents to be issued by the Company relating to financial matters, including news releases, annual information forms and information circulars.

Whistleblower Policy

Effective June 30, 2005, the Committee has adopted resolutions that authorized the establishment of procedures for complaints received regarding accounting, internal controls or auditing matters, and for a confidential, anonymous submission procedure for employees who have concerns regarding questionable accounting or auditing matters. The implementation of the whistleblower policy is in accordance with new requirements pursuant to Multilateral Instrument 52-110 Audit Committees, National Policy 58-201 Corporate Governance Guidelines and National Instrument 58-101 Disclosure of Corporate Governance Practices

  d.

Composition and Relevant Education and Experience

The Committee is comprised of Robert Gayton (Chair), John Kerr and LeRoy Wilkes. All three members are independent and are financially literate, as described in Multilateral Instrument 52-110. See “Director and Officers” section for detailed description of each member’s relevant education and experience.

  e.

 Pre-approved Policies and Procedures

All non-audited services are per-approved by the Committee. Before approval is given, the Committee examines the independence of the external auditors in relation to the services to be provided and assesses the reasonableness of the fees to be charged for such services.

Page 67 of 68



Quaterra Resources Inc.
Annual Information Form for the year ended December 31, 2006

  I.

Audit Committee, continued


  f.

External Auditor Service Fees

The following sets out the aggregate fees billed by the Company’s external auditors for the last three years in respect to the audit of the Company’s year end financial statements as at 31, December.

  Year end Audit Tax All other Total
  December 31 Fee Fees (1) Fees (2)  
  2006 $24,500 $2,750 $1,970 $29,220
  2005 $20,000 - $110 $20,110
  2004 $9,500 - - $9,500

  (1)

Fees changed for tax compliance, tax advice and tax planning services.

  (2)

Fees for services other than disclosed in any other column.


  II.

General

Information relating to Quaterra can be found under the Company’s profile on the SEDAR website at www.sedar.com. The information available at www.sedar.com includes copies of the full text of the technical reports prepared for the Company. Additional financial information including the Company’s financial statements and management discussion and analysis for the year ended December 31, 2006 can also be found on SEDAR.

Additional information relating to Quaterra can also be found on the Company’s web site at www.quaterraresources ..com

Page 68 of 68


EX-99.3 4 exhibit99-3.htm ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.3

QUATERRA RESOURCES INC.

Our commodity is discovery


Quaterra Resources Inc. is a junior exploration company focused on making significant mineral discoveries in North America. The Company uses in-house expertise and its extensive network of consultants, prospectors and industry contacts to identify, acquire and evaluate prospects in mining-friendly jurisdictions with the potential to host large base metal, precious metal or uranium deposits. The Company’s preference is to acquire a 100% interest in properties on reasonable terms and maintain this interest through initial evaluation.

Forward-looking statements

Some of the statements contained in this annual report are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur.

Forward-looking statements may be identified by such terms as “believes”, “anticipates”, “expects”, “estimates”, “may”, “could”, “would”, “will”, or “plan”. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties.

Actual results relating to, among other things, results of exploration, reclamation, capital costs, and the Company’s financial condition and prospects, could differ materially from those currently anticipated in such statements for many reasons such as: changes in general economic conditions and conditions in the financial markets; changes in demand and prices for the minerals the Company expects to produce; litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; technological and operational difficulties encountered in connection with the Company’s activities; and changing foreign exchange rates and other matters discussed in this annual report.

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on the Company’s forward-looking statements. Further information regarding these and other factors, which may cause results to differ materially from those projected in forward-looking statements, are included in the filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time by the Company or on its behalf, except in accordance with applicable securities laws.

Contents

Pursuing new mines        1
President’s letter to shareholders        2
Milestone-driven company        4
Arizona Strip uranium prospects        6
Other uranium properties      13
Yerington-MacArthur copper district, Nevada      14
MacArthur copper oxide mine    16
Yerington copper mine      22
Alaska exploration      26
Los Crestones gold and silver, Mexico      27
Nieves silver project, Mexico    28
Other Mexican properties      28
Directors and management    30
Corporate and shareholder information      32
MD&A and financial statements insert

Annual General Meeting of Shareholders

The annual general meeting of the shareholders of the Company will take place at 10:00 am on Tuesday, July 17, 2007,
in the Company’s offices located at Suite 1100, 1199 West Hastings Street, Vancouver, British Columbia.


Creating value through the pursuit
of new mines in North America

  • Quaterra Resources Inc. is a mineral exploration company focused on making significant discoveries in North America.

  • Its exploration efforts are directed at highly prospective properties with the potential to host large or high grade base metal, precious metal and uranium deposits.

  • It has one of the industry’s most talented and successful exploration teams.

  • The Company emphasizes developing a pipeline of opportunities using in-house expertise, prospectors and an extensive network of industry contacts.

  • It is focused on acquiring a 100% interest in properties on reasonable terms in mining- friendly locations.

  • Metals prices remain buoyant because of declining inventories, long lead times for new production and quality-of-life demand for key resources in the developing world.

 

Strong metals
markets and
a scarcity of
new discoveries
ensure that
exploration
success will be
rewarded.


Quaterra Resources Inc. 1


PRESIDENT’S LETTER TO SHAREHOLDERS

“Junior exploration companies now monopolize grassroots exploration and are primarily responsible for providing development stage projects to the major mining companies through joint ventures, asset sales or corporate takeovers.”

   

Capturing
the resource

I am pleased to report that as we approach mid-year, Quaterra is making demonstrable progress on several projects and the outlook for the remainder of the year is decidedly positive. During 2006, we added key personnel at the exploration, management and board level, and completed a Cdn$ 9.2 million non-brokered private placement in December. In the first half of 2007, we have begun to evaluate our prospects, with drill programs currently in progress at our Arizona uranium, Nevada copper and Mexican gold-silver properties.

I am also excited about two other developments. We completed a 5,000 line-kilometer airborne electromagnetic survey over parts of the Arizona Strip uranium district that identified more than 200 anomalies and provided the impetus for our acquisition of an additional 50 square miles of mining claims. We now have a dominant land position in the most productive part of the district and sufficient targets to support a comprehensive and systematic evaluation program over the next several years.

In May, we announced that we were the successful bidders on the Arimetco copper assets at Yerington, Nevada. This acquisition is subject to a six month due diligence period by Quaterra, but if completed will provide us with a core holding in the prolific Yerington porphyry copper camp and an opportunity to evaluate a major copper asset in a mine-friendly environment with well developed infrastructure.

Many of you have asked me to explain our vision for the company, especially in light of Quaterra’s multiple projects and assorted commodities. A number of factors influence our strategy, beginning with the observations that we are in a period of strong commodity prices; the world is becoming increasingly unpredictable and politically volatile; and the large mining companies tend to focus on development stage projects as opposed to greenfields or grassroots

2 2006 Annual Report



exploration plays. Junior exploration companies now monopolize grassroots exploration and are primarily responsible for providing development stage projects to the major mining companies through joint ventures, asset sales or corporate takeovers. Good prospects and the people to evaluate them are increasingly in short supply.

Against this backdrop, we think it makes sense to “capture the resource” by acquiring and/or staking select North American projects with potential to become large mines. This is where our experience and expertise lie, and where our contacts and company memories give us an edge. In the mining business, major value creation occurs first at the point of discovery and later when production commences. Our goal is to create value by making significant discoveries and to maximize the impact of each one by controlling 100% of the asset. It is worth noting that in a strong commodity cycle, discoveries are “metal neutral” and that a mix of metals actually provides some diversification.

I am confident that our ability to recognize, acquire and evaluate high quality prospects has the potential to create real shareholder value. Many districts have not been systematically explored due to a combination of low metal prices, changing corporate priorities, the inability to acquire key land or the lack of a project champion. Often it takes months, sometimes years to put a project together so that targets may be fully evaluated. I believe this strategy will be successful in the current investment climate.

I would like to thank our staff and consultants for a strong performance this year and express my appreciation to all of our shareholders for their loyalty, support and encouragement.

Tom Patton
President & CEO
June 15, 2007

   

“In the mining business, major value creation occurs first at the point of discovery and later when production commences. Our goal is to create value by making significant discoveries and to maximize the impact of each one by controlling 100% of the asset.”

“It is worth noting that in a strong commodity cycle, discoveries are ‘metal neutral’ and that a mix of metals actually provides some diversification.”


Quaterra Resources Inc. 3


A milestone-driven company

Quaterra believes that significant goals, or milestones, provide the market with a tool with which to track our progress towards our longer-term objectives. Milestones are formulated to show the progress we are making in systematically acquiring and exploring our properties, reducing overall risk and strengthening the Company.

In 2007 Quaterra plans to:

  • Complete 3,000 meters in first phase of drilling for gold and silver at Los Crestones, Mexico.

  • Deep-drill eight uranium pipe targets on the Arizona strip.

  • Complete confirmation drilling at the MacArthur copper property, Nevada.

  • Update and enlarge the resource at MacArthur.

  • Pursue further consolidation of the Yerington- MacArthur district.

  • Evaluate high-value opportunities to acquire further exploration projects.

  • Pursue the possibility of a U.S. stock exchange listing. 

     

Quaterra Resources VP
Exploration Eugene Spiering.

     Right: Driller Cathy Johnson
with Barbie Drilling prepares
to connect another drill rod on
the AO1 breccia pipe target.

4 2006 Annual Report


 


 


URANIUM

Pipeline of Projects

Quaterra is a junior exploration company that combines some of the most talented and experienced explorationists in the business with a portfolio of highly prospective properties in an effort to make significant mineral discoveries. With a North American focus, the company seeks to acquire 100% interest in properties within mining-friendly jurisdictions and maintain this interest through initial evaluation. The Company is currently exploring uranium prospects in Arizona and copper properties in Nevada. It has also initiated aggressive reconnaissance exploration and land acquisition in Durango State, Mexico. These properties, together with gold-silver prospects in Mexico, and copper-nickel-PGE prospects in Alaska, form a solid base for growth.

ARIZONA STRIP URANIUM DISTRICT

The Arizona Strip uranium district historically represents some of the highest grade mineralization and most profitable per pound uranium production in the United States. The breccia pipe uranium mines of the district were some of the last hard rock uranium producers in the United States prior to the decline of the price of uranium in the late 1980s and early 1990s. From 1980 to 1990, the Arizona Strip produced in excess of 19 million pounds of uranium from seven mines, averaging 0.65% U3O8. The total amount of mineable uranium discovered to date in breccia pipes in northern Arizona is estimated to be in the range of 35 million pounds.

Located in the southwest corner of the Colorado Plateau physiographic province, the Arizona Strip district comprises state and federal lands in northwestern Arizona that are bounded to the west by the Grand Wash Clistas and to the east by the Echo Clistas. Rising uranium prices and declining inventories have made the district an attractive destination for more than a dozen exploration companies.


Quaterra Resources Inc. 7



URANIUM

NORTHERN ARIZONA STRIP
URANIUM PROJECT

Quaterra’s uranium initiative has positioned the Company as one of the largest claim holders in the northern Arizona Strip uranium district. Quaterra commenced activity in the area in June 2005 with the acquisition of 95 unpatented lode mining claims from North Exploration that cover several uranium breccia pipe targets. The Company staked an additional 550 mining claims in 2006 and another 1,450 claims were perfected in early 2007 to cover more than 200 high and moderate priority anomalies identified by an airborne VTEM geophysical survey. The Company’s mineral rights now total approximately 68 square miles in the heart of the formerly producing district. The properties consist of many individual and scattered claim blocks that have been selectively staked over targets with either some surface expression of a possible collapse structure, or with favorable VTEM geophysical signatures within areas of known mineralized breccia pipes.

Uranium mineralization was first discovered on the Arizona strip in a mineralized breccia pipe in 1947. The uranium occurred in association with copper mineralization at the Orphan mine two miles west of the visitor’s center on the south rim of the Grand Canyon. Before closing in 1969, the Orphan operation produced a reported total of 4.4 million lbs of uranium in material averaging 0.42% U3O8 and 6.7 million lbs of copper. The relationship of uranium to copper mineralization initiated an investigation of several small copper deposits in the region. Uranium was discovered in the Hack 1 and Hack 2 breccia pipes by Western Nuclear Inc. in 1974. Energy Fuels Nuclear Inc. acquired the Hack Canyon ore bodies in 1980 and initiated an intense campaign of land acquisition and exploration that over the next ten years discovered seven ore bodies. Pathfinder Mines and Union Pacific Resources subsequently discovered at least three additional mineralized breccia pipes. Several more were in earlier stages of discovery when the price of uranium dropped below the cost of production.

The canyon walls of northern Arizona expose numerous breccia pipes, some of which host uranium mineralization. Initiated by the roof collapse of caverns in the Mississippian Red-wall limestone, a vertical column of breccia forms through the subsequent collapse of overlying sediments by mechanical and chemical processes. Breccia pipes in the region average 200 to 400 feet in width and can extend upward over 3,000 feet from the Redwall limestone to the upper Triassic sequence.

Uranium is transported to the breccia pipe by oxidizing ground waters in the Coconino sandstone and deposited in a “trap” of porous sandstone breccia within the non-porous pipe walls of Hermit siltstone above a relatively impermeable  

 

Geophysicist Joe Inman (left) and Quaterra’s uranium exploration manager Pat Hillard examine Geotech’s airborne VTEM geophysical survey unit.

base of siltstone dominant breccia. The mineralization occurs primarily as pitchblende in voids between sand grains and replacing rock fragments of the breccia within the central pipe throat and below the upper Hermit contact.

Finely disseminated pyrite is common in the mineralized zone and may contribute to the reducing environment necessary for the deposition of uranium. Immediately above the mineralization, pyrite becomes massive and forms a “cap” of pyrite after marcasite that can exceed 50 feet in thickness. Uranium mineralization is also present in ring fractures along the margins of the throat, and in the underlying Supai Group, but significant accumulations at this level are less common on the north rim than in the southern district. Economic concentrations of mineralization often occur over a vertical distance of more than 600 feet in the pipe throat. Scattered mineralization can extend well below the upper contact of the Esplanade sandstone.

The discovery of new breccia pipes in the Arizona Strip district requires an aggressive and persistent program of exploration. Since commencing on the Arizona Strip, Quaterra has drilled 35,000 feet in 87 holes that investigated 16 targets. All but six holes were shallow stratigraphic holes evaluating the

8 2006 Annual Report


near surface structure for the presence of a pipe throat. Ten of the targets tested negative. Four targets have encouraging results and require additional drilling pending the enlargement of the drill permit area. Two of four deep holes in the program encountered mineralization in two targets that are scheduled for deep drilling programs.

The Company’s approach to uranium exploration has been proven by years of past experience with Energy Fuels Nuclear. Geologic mapping, aerial photography and satellite imagery have been and continue to be used extensively to identify breccia pipe targets. When a target was located, surface time-domain electromagnetic geophysical surveys had significant

 

success in defining areas of thickened (conductive) siltstone within the surface structure to locate drill holes that define the pipe throat. Most of the obvious targets identified by these methods have been located and drill tested by companies exploring the northern district in the 1980s. However, extensive areas remain unexplored because of the time and expense required by the surface geophysical surveys.

In early 2007, Quaterra contracted Geotech Ltd. to conduct the first extensive test of an airborne time-domain electromagnetic system on the Arizona Strip. The survey covered approximately 420 square miles. The VTEM system not only identified anomalies related to the collapse cones of most of


Quaterra Resources Inc. 9


URANIUM

10 2006 Annual Report


Legacy of best practices:
Reclamation of the former adit
and mine complex at Hack
Canyon Mine has removed all
evidence of past activity.

Quaterra Resources Inc. 11


URANIUM

the known breccia pipes but identified more than 200 moderate to high priority targets with similar geophysical signatures. Although a detailed interpretation of the airborne survey data is in progress for prioritization of the targets, Quaterra is now commencing exploration drilling on the VTEM anomalies.

The VTEM airborne geophysical survey and resulting land acquisition program may have given Quaterra a unique advantage in the discovery of breccia pipes that do not reach the surface. A USGS Open File Report (OFR-89-550) shows the mapped locations of 1,296 pipes in the northern and southern Arizona Strip district. The highest density of pipes occurs in outcrops of Carboniferous age strata in the deeper canyons of the region. The density of pipes decreases dramatically below

 

the cover of successive layers of younger sediments until fewer than two pipes are evident over a surface area of 500 square miles in the upper Triassic sequence. Clearly the upper level of stoping by collapse varies and many pipes may occur at depth and lie hidden with no surface evidence of a pipe throat. If these structures penetrate the Coconino Sandstone in a favorable area of the district, an orebody may exist with no pipe feature evident at the surface. To date, Hack 2 is the only “hidden” pipe ever discovered in the district. The number of mineralized pipes identified to date may represent only a small fraction of the number of hidden pipes that lie waiting to be discovered at depth. With continued exploration, the Arizona Strip may soon become one of the more significant producing uranium districts in the United States.


“Quaterra’s
uranium
initiative has
positioned the
Company as one
of the largest
claim holders
in the northern
Arizona Strip
uranium
district.”
 

Quaterra’s U.S. uranium properties

12 2006 Annual Report


Other uranium projects

Quaterra’s early entry into uranium exploration in the western United States allowed the acquisition of several key land positions over and immediately adjacent to formerly producing uranium mines in Utah and Wyoming. Most of the properties were acquired from North Exploration, which staked claims simply on the basis of high drill-hole densities in close proximity to old mines. Some of the properties represent the drilled out and defined “reserves” for uranium operations that were shut down in the 1980s due to low prices. Although nearly all of the Company’s mineral rights are now surrounded by claims of competing companies, its Wyoming and Utah assets give the Company a portfolio of opportunities, not only for possible future production, but also as bargaining chips to acquire other important uranium assets.

SINBAD
URANIUM MINE
Quaterra’s 100%-owned Sinbad properties include 16 unpatented lode claims and one state lease that control 960 acres of mineral rights over and adjacent to the Sinbad Uranium Mine, the namesake of the Sinbad Uranium District. Located in Emery County, Utah, the project is 20 miles southwest of Green River and less than one mile south of Interstate 70.

The Sinbad Mine was closed in 1982 due to rising costs and declining uranium prices. Uranium ore was mined via a decline to a depth of approximately 220 feet below the surface. An historic resource of approximately 300,000 pounds of U3O8 is thought to remain in the ground. The resource is not NI43-101 compliant, however. The mineralization is hosted by the sandstone and conglomerate of the Triassic Chinle Formation. Much of the probable extension to the mineralization is thought to be controlled by Quaterra’s Swell and QTQ mining claims that cover an area of historic drilling where holes are separated by a distance of less than 50 feet.

TIDWELL
MINING DISTRICT
Quaterra acquired the heart of the of the Tidwell mining district from North Exploration in 2005. Located 10 miles west of Green River in Emery County, Utah, the uranium district is on the east flank of the San Rafael Swell about three miles north of Interstate 70. The Company’s 20 lode mining claims cover 400 acres centered on an extensive area of grid drilling that includes more than 300 old surface holes around and between the Probe and Snow Uranium mines. The Company acquired a nearly complete data set for the Tidwell district in April 2007. The data includes the original gamma ray logs of approximately 630 drill holes and the shutdown reports of the Probe and Snow mines.

Atlas Minerals mined uranium ore from sandstone of the Salt Wash member of the Jurassic Morrison Formation in the Tidwell district until the price decline of the 1980s. During nine years of operation, underground mining operations to an average depth of approximately 800 feet at the Probe and Snow mines produced a total of 950,000 lbs of uranium from 250,000 tons of ore at an average grade of 0.19% U3O8 . The shutdown reports for the two mines report an historic geologic reserve calculated for the next 1.5 years of a possible future operation as totaling approximately 300,000 lbs in 60,000 tons of ore with an average grade of 0.25% U3O8 .

SHIRLEY BASIN
URANIUM MINE

Quaterra’s seven lode mining claims in the Shirley Basin Uranium District of east-central Wyoming control a key part of a grid-drilled area immediately adjacent to the eastern end of the main pit at the now reclaimed Shirley Basin Uranium Mine. Uranium mineralization at Shirley Basin occurs in roll fronts hosted in Tertiary arkosic sandstones and shales of White River Formation at a depth of 200 to 350 feet. From 1968 to 1986, Pathfinder Mines produced 22.7 million pounds of uranium from 6.7 million tons of ore averaging 0.17% U3O8 by open pit mining.  The last ore from the mine was processed in 1992. Old drill holes on Quaterra’s claims are spaced at 100 feet and less and are thought to have defined a key portion the future reserves of the pit before closure due to low uranium prices.

Quaterra Resources Inc. 13


COPPER


 
 

Yerington-
MacArthur
copper district

Yerington is a world-class copper district in western Nevada only 50 miles southeast of Reno. The global geologic resources of the district exceed 2.1 billion tons of 0.4% copper. Three large porphyry copper deposits (Yerington, Ann Mason, Bear-Lagomarsino), two large copper skarn deposits (Pumpkin Hollow and Minnesota) and one copper oxide deposit (MacArthur) represent a total district metal endowment of approximately 16 billion pounds of copper. Four junior exploration companies are now exploring this district which has been all but dormant for almost 30 years. Quaterra is well-positioned to play a major role in future district development, with a large land position at its fully stripped MacArthur copper oxide deposit and an option to acquire the Arimetco assets at the Yerington mine.

Oblique aerial photo of the Yerington pit looking northwest toward the MacArthur deposit.

Photo: J.L. Christman

15



COPPER

MacArthur Copper
Oxide Mine

Quaterra’s 100%-owned MacArthur mine is a fully stripped copper oxide deposit with a historic resource of 29 million tons grading 0.28% copper, including 13 million tons of +0.40% copper. The resource is at present not NI43-101 compliant. The Company acquired the deposit in 2005 from North Exploration and staked 236 additional mining claims that cover an area of approximately eight square miles around the existing open pit. Located only five miles north of the Yerington mine in Lyon County, the property has the infrastructure of a mature mining district.

Quaterra acquired Anaconda Copper Mining’s exploration and drilling database in August 2006 and commenced a review of the deposit geology and mineralization model using Datamine software. In April 2007, the Company commenced a drilling program to validate the historic data of the MacArthur deposit for a NI43-101 compliant resource estimate. The drilling program is also designed to expand the copper oxide resources and explore for a porphyry copper system that is believed to be the source of the MacArthur deposit.

Anaconda discovered copper oxide mineralization at MacArthur in 1971. Detailed geological mapping, systematic trenching, and approximately 56,000 feet of drilling in 280 vertical and angle percussion rotary holes outlined approximately 13 million tons of + 0.4% copper mineralization. Arimetco International Inc. purchased the Anaconda Yerington district properties in 1989 and mined a total of six million tons from the MacArthur deposit at an estimated grade of 0.36 % total copper using open pit methods. The oxide ore was trucked to heaps at the Yerington site where it was successfully processed using

Consulting geologist Fred Zoerner examines core
from Quaterra’s MacArthur drilling program.

Overleaf: Oblique aerial photo of MacArthur pit
and haul road looking south.

Photo: J.L. Christman

 

 

16 2006 Annual Report


 


 


 


COPPER

a solvent extraction electro-winning process. Arimetco suspended operations in 1998 due to financial difficulties resulting primarily from the low price of copper.

Copper oxide mineralization at MacArthur includes chrysocolla, copper wad (neotocite), pitch limonite and minor amounts of malachite and azurite, all hosted in medium-grained, biotite quartz monzonite. The Jurassic-age quartz monzonite has been intruded by a series of northwesterly-trending quartz monzonite porphyry, rhyolite and andesite dikes. The mineralization is zoned, with a chalcopyrite-rich (low iron to copper ratio) eastern area grading into a pyrite halo (high iron to copper ratio) to the north and west. Oxide mineralization overlies the chalcopyrite-rich area. Secondary chalcocite mineralization within the pyrite halo was discovered 1,500 feet north of the present pit by the U.S. Bureau of Mines in 1950. Three of the Bureau’s holes intersected chalcocite, with a best interval of 62 feet that averaged 0.61%

 

copper beginning at a depth of 241 feet. A review of historic drill data in this area indicates that the chalcocite blanket may extend over a distance of 7,000 feet.

The MacArthur deposit has significant potential for expansion, based on the lateral zonation of secondary copper minerals visible at surface, the presence of copper oxide mineralization in outcrops well beyond the present pit outline, a possible chalcocite blanket to the north of the pit, and a large, pervasive phyllic alteration zone to the north and west of the mine workings. Although the MacArthur project currently has no NI43-101 compliant resource estimate, the historical data from the project is substantial. With sufficient new drilling to verify the Anaconda data base, a formal resource can be calculated for the project. Quaterra believes that additional exploration drilling within and peripheral to the deposit may not only expand the oxide resource but also discover a primary copper sulfide deposit.

MacArthur geology and mineralization


20 2006 Annual Report


Above: North
Exploration geologist
Penny Basset examines
malachite staining in
the MacArthur pit.

 

Right: Consulting
geologists David
Heatwole and Larry
McIntosh review
drilling plans and
aerial photography of
the MacArthur pit.
 

 

Quaterra Resources Inc. 21


COPPER

Yerington Copper Mine

On May 1, 2007, Quaterra received the approval of the appropriate U.S. court to the acquisition by a subsidiary of Quaterra of all Arimetco assets in the Yerington Mining District. The purchase price comprises US$500,000 cash, 250,000 shares of Quaterra common stock and a 2% net smelter return royalty capped at US$7.5 million dollars on production from any claims owned by Quaterra in the Yerington and MacArthur mine areas. Quaterra may terminate the transaction at any time during a 180-day review period if it is dissatisfied with the condition of the property or fails to obtain requested environmental clearances for past mining-related activities. Under certain circumstances, the review period may be extended for additional successive 120-day periods.


The Yerington mine is a typical porphyry copper deposit. Anaconda conducted open pit mining from 1953 to 1978, producing 1.75 billion pounds of copper from oxide and sulfide ores. Mineralization occurs in the same Jurassic batholith that hosts the MacArthur deposit. Host rocks include quartz monzonite, granodiorite and quartz monzonite porphyry dikes. Copper mineralization is related to two porphyry intrusions in a sequence of pre- and post-mineral dikes. Chalcopyrite, bornite and chalcocite are the principle copper minerals in the primary sulfide zone; the principal oxide mineral is chrysocolla. Quaternary gravels cover the deposit around the pit, and post-

mineral Tertiary volcanic rocks form the western limit.

Subject to successful completion of due diligence, Quaterra plans to explore the property as part of its ongoing exploration drilling program at MacArthur. Significant tonnages of copper oxide and sulfide mineralization remain below and peripheral to the Yerington pit and much of the area between the pit and the MacArthur deposit remains under-explored. The potential acquisition of this property in the center of a prolific copper district provides Quaterra not only with additional exploration targets but increased flexibility when considering production alternatives.

 

Overleaf: Oblique aerial photo
of Yerington mine complex
looking south.

Photo: J.L. Christman

Below: The Yerington district,
visible in the background, has
a total metal endowment that
is believed to exceed 16 billion
pounds of copper.
 




COPPER-NICKEL SULFIDE/VMS

Alaska exploration

DUKE ISLAND CU-NI-PGE PROJECT, ALASKA

Quaterra’s 100%-owned Duke Island Cu-Ni-PGE prospect is located in southeast Alaska about 30 miles south of Ketchikan. The project consists of 129 unpatented Federal lode mining claims and 11 state of Alaska mining claims that cover an area of six square miles of multiple-use lands open to mineral development within the Tongass National Forest.

A detailed review of the Duke Island data in 2007 suggests that sulfide mineralization may be related to an elongate layered sill complex, not a typical Ural Alaska ultramafic intrusive. Similar layered intrusive complexes host some of the world’s largest copper-nickel systems. The study also identified several previously undrilled targets which will be evaluated by electromagnetic surveying during summer 2007 in anticipation of a 2008 drilling program.

Prior to discovery of significant accumulations of massive, semi-massive and disseminated sulfide mineralization, the Duke Island prospect was considered to be a classic zoned Ural-Alaska type mafic-ultramafic complex of mid-Cretaceous age. Many of the zoned ultramafic complexes in the Koryak-Kamchatka and Southeast Alaska belts are described and mapped as plug or pipe-like, concentrically zoned intrusions that are dome-like bodies originating from diapiric injection of ultramafic magmas, a type notably absent of economic nickel sulfide occurrences. The copper, nickel and iron contents at Duke Island are significantly elevated relative to most Ural-Alaska complexes and suggest that sulfide mineralization may be related to a layered mafic intrusive complex.

The Duke Island complex consists of two separate, well-exposed, ultramafic bodies interpreted to be parts of the same intrusive body at depth. Both intrusives are comprised of a dunite and peridotite core surrounded by concentric zones of olivine clinopyroxenite, hornblende-magnetite clinopyroxenite, and gabbro. The presence of dominantly ultramafic cumulates likely resulted from concentration of the mafic minerals by flow, settling and entrapment from a mafic magma, rather than an origin as an unusual ultramafic magma.

Geochemical, geological and geophysical data suggests that sulfide mineralization extends for over 8.5 miles along strike and up to 2.5 miles across strike with the ultimate dimensions of the system remaining open to expansion. Surface samples

 

have returned up to 2.8% copper, 0.25% nickel and over one gram per tonne combined platinum plus palladium. Initial IP geophysical surveys suggest mineralization is cored by a high conductivity zone surrounded by a disseminated sulfide zone. Subsequent core drilling intercepted up to 295 feet of semi-massive to massive sulfide containing highly anomalous copper, nickel, platinum and palladium.

The Duke Island complex appears favorable for hosting additional areas of mineralization, at possibly higher sulfide concentrations and better metal grades. Future exploration will investigate potentially more basal and more dynamically active portions of the ultramafic contact zones in a low-lying area with essentially no outcrop to the north and east of earlier drilling, where numerous moderate to strong airborne EM conductors remain untested.

BIG BAR VMS PROJECT,
SEWARD PENINSULA, ALASKA

Quaterra’s 100%-owned Big Bar project, located 110 miles northeast of Nome, is a copper-lead-zinc prospect covering a 4,000-foot long soil anomaly delineated by Anaconda in the early 1980s. Soil samples containing up to 1,920 ppm copper occur in felsic schist on the property. Gossans collected as float from the anomaly contain up to .06 g/t Au, 1.6 opt Ag, 4,260 ppm Cu and 3,900 ppm Zn.

During the second quarter of 2006, a three-hole 1,470-foot core-drilling program tested a strike length of approximately 1,000 feet near the center of the geochemical anomaly. The holes intersected uneconomic zones of disseminated pyrite and stringer sulfides but no massive sulfide mineralization.

Quaterra’s initial phase of drilling examined only a small portion of the Big Bar anomaly. The geology of the drilled section is favorable for massive sulfide mineralization, but does not give a clear indication of where the sulfides may have accumulated. To evaluate the possibility of massive sulfides at depth or in adjacent areas, the Company contracted Fugro Airborne Surveys Corp. to conduct an 85 line-mile airborne EM-magnetometer survey covering an area of 15 square miles centered over the geochemical anomaly. The survey was completed in September 2006 and identified a number of anomalies adjacent to the geochemical anomaly that will be field-checked during the summer of 2007.

26 2006 Annual Report


GOLD & SILVER

Mexico

Quaterra’s work in Mexico prior to 2006 focused primarily on the Nieves silver prospect in Zacatecas State and the Crestones gold prospect in Durango State. In 2006, Quaterra began reconnaissance exploration for new gold-silver deposits in Durango State, a program spearheaded by the Company’s Manager of Mexican Exploration Tom Turner. Both the Nieves and Crestones properties will be drilled during 2007. Quaterra plans to drill some of its new prospects described below in 2008, if mapping and sampling in 2007 are successful in defining drill targets.

CRESTONES GOLD AND SILVER PROJECT

The Company’s 100%-owned Crestones project is located in central Durango. In 2003, the Company staked a 2,100 hectare claim to cover a hot spring gold-silver prospect. In 2004 and early 2005, reconnaissance mapping and sampling programs were completed over an area of about 3.5 square miles. The Company staked an additional 3,547 hectare claim in 2006 and completed detailed mapping. The work delineated a hot spring gold-silver target with widespread silicification, flat-lying silica sinter aprons and quartz veining along high-angle, graben faults. Rock chip samples show anomalous Au-Ag values with occasional spikes up to ore grade; and strongly anomalous mercury, arsenic and antimony values which are typical of the upper levels of hot spring-related gold-silver mineral systems. The level of exposure is clearly above the boiling zone and the gold numbers are consistent with those found in the top of epithermal gold systems.

The property was geologically mapped at a 1:5,000 scale and six holes totaling 3,042 meters have been recently completed with assays pending. The drill program is designed to test the outcropping breccia zones and has been complicated by the presence of listric faults. There are zones of silicified limestone beneath the listric faults with weak pyrite-sphalerite mineralization. A grid IP geophysical program is planned to test for blind mineralization beneath the faults. The drill program will be extended to the alluvial covered fields southwest of Crestones to test for the feeder vents of the Crestones hydrothermal system.

 

Quaterra’s Manager of Mexican Exploration Tom Turner (right) and consulting geologist Sergio Razo Nuñez (left) began reconnaissance exploration in 2006 to identify new gold-silver deposits in Durango State.

Crestones is geologically complex. The oldest rock type is the Cretaceous Mescalera Group limestone. A 40 million-year-old granodiorite cuts the limestone forming a circular four kilometers diameter stock. It is rimmed by a band of hornfelsed limestone up to a kilometer in width that grades outward into a weak tremolitic marble.

The Crestones hydrothermal mineral system is located along the western contact of the granodorite stock and was emplaced in a northwest-striking fault system. Two parallel bands of sheeted hydrothermal breccias, small quartz porphyry stocks and felsite dikes compose the Crestones system. The breccia has been classified into four breccias based on clast types and matrix composition: mixed clast breccia, silica matrix breccia, silicified limestone breccia and sinter matrix breccia.


Quaterra Resources Inc. 27


GOLD & SILVER

The two breccia bands are separated by about a kilometer of silicifed and hornfelsed limestone and fresh granodiorite with numerous five to 15 meter thick breccia and felsite dikes. There is a third silica breccia band at the north end of the property that is about two kilometers in strike length. It is also cut by a low angle listric fault with its north half ostaset about 250 meters to the northeast.

NIEVES SILVER PROJECT

The Company owns a 50% interest in the Nieves silver property located in northern Zacatecas State, Mexico, about 90 kilometers north of Penoles’ world-class Fresnillo silver mine. The project occurs within a northwest trending mineral belt known as the Faja de Plata, which hosts many of the world’s premier silver deposits including San Martin, Fresnillo, Zacatecas and Real de Angeles. The Company’s land block consists of 15 mineral concessions covering an area of approximately 50 square kilometers (18 square miles). Mineralization is related to a low temperature silver-gold-lead-zinc epithermal vein system similar to the world-class Fresnillo and Zacatecas Districts in central Zacatecas.

Three phases of exploration drilling (32 holes, 16,367 meters) completed by Quaterra and partner Blackberry Ventures from 2003 to 2006 have demonstrated that the Concordia-Delores-San Gregorio and Santa Rita vein systems have excellent potential for both narrow zones of + 500 g/t silver as well as lower grade stockwork mineralization that may represent a bulk tonnage target.

An Independent Technical Report completed by Caracle Creek International Consulting Inc. on behalf of the Company and Blackberry in November 2006 concluded that excellent potential exists to find additional high-grade silver shoots both within the known vein systems and the abundant untested drill targets remaining on the property. Caracle recommended:

  • A program including structural analysis, 3D modeling and data compilation including satellite image analysis; and,
  • An aggressive 10,000-meter drilling program to infill zones on the Concordia-San Gregorio-Delores vein system and to test other targets on the large land block.

A recently completed satellite image analysis has identified additional targets for field checking. A two-phase 10,000-meter drilling program is scheduled to begin in June or July 2007 following completion of compilation work, field mapping and selection of drill targets by the Company and Blackberry.

 

Other Mexican projects

RECONNAISSANCE PROGRAM

Twelve new concessions covering eight distinct exploration targets have been staked in southern and central Durango. These concessions total 37,335 hectares in area and are 100% owned by Quaterra Resources. Field offices were established in Inde and Isabel Robles, Durango. Most importantly, four experienced exploration geologists have joined the Company. Work programs for each of the staked properties listed below will include mapping and sampling to evaluate overall area prospectivity and to define potential drill targets.

MIRASOL PROJECT

Mirasol was the first prospect identified and staked in 2006. In total, there are now seven concessions at Mirasol that cover an area of 23,414 hectares. The initial Mirasol concession was staked on an approximate 35-square-kilometer area of silicified and brecciated limestone with showings of stibnite-cinnabar. The alteration appears to be an acid sulfate hydrothermal system and extends east under post mineral conglomerate cover. Continued reconnaissance geologic mapping in the Mirasol area discovered a second showing of acid sulfate style alteration at Cerro Blanco, about 10 kilometers east of Mirasol and a 10 square kilometer area of silicified conglomerate to the immediate south of Cerro Blanco which is referred to as the Rio Santa Clara prospect.

Cerro Blanco 3 was the last concession staked in the Mirasol area. The 5,329 hectare concession covers a prominent ridge, Loma La Sierra, located 15 kilometers east of Mirasol. Loma La Sierra strikes southeast parallel to the regional tectonic fabric and is composed of Cretaceous limestone cored by a hydrothermal diatreme breccia that strikes along the crest of the ridge for a distance greater than four kilometers. It varies from 200 to 600 meters in width. The breccia has a milled felsite matrix and has been intruded by a series of late felsite dikes. It appears to be very similar to the Peñasco and Azul breccias at the Peñasquito gold-silver-lead-zinc project now owned by Goldcorp Inc. in Zacatecas state.

Mirasol, Cerro Blanco and Rio Santa Clara are interpreted to be excellent targets for a large tonnage, disseminated to veinlet stockwork gold-silver (lead-zinc) deposits within the advance silicified limestone alteration shell. Loma La Sierra is considered to be a hydrothermal diatreme breccia with potential for the discovery of Peñasquito-style gold-silver-lead-zinc deposit.

28 2006 Annual Report



Exploration drilling on the Crestones property tested breccia zones that are characteristic of the upper levels of hot spring-related gold-silver systems.

LAS AMERICAS PROJECT

The Americas prospect is located 30 kilometers southwest of Mirasol. It is covered by two concessions that total 9,481 hectares that abut Hecla’s San Sebastian Mine to the southwest.

This prospect sits in a relatively flat area underlain by the Caracol Formation. Three northwest-striking bands of hydrothermal silica with a cross-cutting band of silica form prominent outcrops or crestones. The size and extent of the silica crestones is impressive with individual outcrops of sinter extending up to 30 meters above the plain with strike lengths up to 200 meters and widths of 50 meters. In general, the three northwest-trending silica sinter bands form an alteration band about 200 meters wide with a cululative two kilometers strike length.

Americas was a productive mercury mine in the 1950s as attested by the numerous old workings, ruins and large dumps with disseminated cinnabar along the flanks of the silica crestones. The dumps are composed of silica sinter with fine-grained cinnabar as a coating on fractures.

The prospect is interpreted to be favorable for the discovery of large tonnage open-pittable gold-silver deposits as well as high grade vein gold-silver deposits in and adjacent to the silica ribs. The proximity of Hecla’s San Sebastian Mine is indicative of the discovery potential at Las Americas.

JABONCILLO PROJECT

Jaboncillo is composed of a 1,689 hectare concession that centers on a cluster of low hills about 12 kilometers north-northwest of Excellon’s Platosa Mine at the north end of the Mapimi Mining District.

 

The prospect consists of a flat V-shaped hill on the north edge of the Sierra Bermejillo. There is an elongate northwest ring of small knobs about a kilometer in diameter on the east side of the hill. These small hills or knobs are composed of hot spring silica sinter breccia that sits unconformably on tan hematite and argillic-altered limestone cut by felsite dikes. This is the same limestone that hosts the Platosa deposit.

The silica appears to be a massive subsurface sinter deposit. It is characterized by a breccia texture with 40% <6 cm diameter sinter and quartz porphyry intrusive clasts in a vuggy sinter matrix sprinkled with clear quartz eyes. The silica breccia occurs on the junction of a northwest-striking range front normal fault that bounds the east side of the Sierra Bermajillo, and a second fault that strikes northeast across the northern tip of the sierra.

The exploration target is a limestone-hosted Au-Ag-Pb-Zn deposit hosted in the breccia at depth or a skarn deposit along the contact of a buried quartz porphyry stock.

INDE PROJECT

The two Inde concessions total 3,151 hectares and adjoin the Crestones concession to the east.

Inde has two geologically distinct exploration targets. The western target centers on the two-kilometer-wide Inde graben hosted in Cretacesou limestone. It is filled with Tertiary andesite tusta. The graben strikes northwest and curves to the north-northeast as it passes the village of Inde. Along this curve, there are a series of silica-sericite-pyrite altered bands that form a large open stockwork across the graben. The individual altered bands are on the order of 100 to 200 meters in width and up to four kilometers along strike. They are the host for the abandoned Carambolla mine which consists of disseminated and veinlet copper-silver mineralization in altered andesite. Additional showings of galena-sphalerite mineralization have been found elsewhere in the altered bands.

The second target lies to the east of the Inde graben and consists of a four by three kilometer area of hydrothermally-altered limestone. The alteration consists of diopside hornfels to prograde garnet skarn with patches of retrograde skarn. It is cut by abundant narrow dikes of propylitic-altered grano-diorite. Both the altered limestone and granodiorite dikes are cut by a series of one to four meter quartz-carbonate veins with patches of disseminated stibnite-sphalerite-galena-tetrahedrite.


Quaterra Resources Inc. 29


BIOGRAPHIES

One of the industries most
talented and successful teams

BOARD OF DIRECTORS

Thomas C. Patton, B.Sc., M.Sc., Ph.D.
President & CEO, Director

Dr. Patton graduated from the University of Washington in 1971 (Ph.D.) and has worked in the exploration industry for thirty-five years as a field geologist, consultant and executive officer of both junior and senior mining companies. His work has been primarily in North America, where he and his teams have played major roles in several significant discoveries and reserve expansions of existing operations. Before joining Quaterra on a full-time basis, Tom was President and COO of Western Silver Corporation from 1998 to May 2006. The highlights of this period were the discovery and delineation of the world-class Peñasquito silver-gold-lead-zinc deposit in Zacatecas, Mexico, and the subsequent sale of the company to Glamis Gold Ltd.

Eugene Spiering
VP Exploration, Director

Mr. Spiering has over 28 years of experience in the mining exploration industry. He most recently held the position of Vice President, Exploration at Rio Narcea Mines Ltd., where he managed a team that discovered two gold deposits and completed the fi nal definition of one nickel deposit in Spain. All three of these deposits are currently in production. Prior to his tenure at Rio Narcea, Mr. Spiering held the position of senior geologist with Energy Fuels Nuclear, Inc. where his responsibilities included drilling supervision, geologic mapping, and ore reserve calculations related to uranium exploration in northern Arizona and gold exploration in the western U.S. and Venezuela. He received his Bachelor of Science-Geology degree from the University of Utah.

Robert J. Gayton, Ph.D., FCA
Director

Robert J. Gayton graduated from the University of British Columbia in 1962 with a Bachelor of Commerce and in 1964 earned the chartered accountant (CA) designation while at Peat Marwick Mitchell. Mr. Gayton joined the Faculty of Business Administration at the University of British Columbia in 1965, beginning 10 years in the academic world, including time at the University of California, Berkeley, earning a Ph.D. in Business.

 

Mr. Gayton rejoined Peat Marwick Mitchell in 1974 and became a partner in 1976 where he provided audit and consulting services to private and public company clients for 11 years. Mr. Gayton has directed the accounting and financial matters of public companies in the resource and non-resource fields since 1987. He currently serves as a director for fi ve public companies.

John R. Kerr
Director

Mr. Kerr holds bachelor degrees in applied science and geological engineering from the University of British Columbia. Over the course of a career of more than 30 years he has been continuously engaged in mineral exploration and has extensive field experience throughout North America. Mr. Kerr has been a geological consulting engineer since 1970 and has held senior positions with a number of public companies, both as an officer and director. He has been involved with the discovery of a number of significant mineral deposits, including two producing mines and two additional projects currently awaiting production decisions.

Lawrence Page, QC
Director

Lawrence Page obtained his law degree from the University of British Columbia in 1964 and was called to the Bar of British Columbia in 1965. Thereafter he studied labor law and industrial relations in Sydney, Australia, as a Commonwealth Scholar, returning to active practice in Vancouver in 1967. In 1970, he was a founding partner of Worrall and Page where he practiced until 1995. He currently practices on his own in Vancouver. Mr. Page’s preferred areas of practice are commercial litigation, native law, natural resource law and securities law. He has been admitted to the Bar of Ontario for the purpose of acting as counsel in specified litigation. Mr. Page was awarded the distinction of Queen’s Counsel in 1988. Through his experience with natural resource companies and, in particular, precious metals development, Mr. Page has established a unique relationship with financiers, geologists and consultants and has been counsel for and a director of Corona Corporation (now Homestake) and Prime Resources Corporation which have brought into production and operate Canadian gold mines. He currently serves as a director for nine public companies.

 

Roy Wilkes
Director

Mr. Wilkes recently retired as president of Washington Group International’s Mining Business Unit. As leader of this group he participated in many developing mining projects throughout the world, including Latin America, Canada, Europe and the United States. Mr. Wilkes was also the Chief Operating Officer of Santa Fe Pacific Gold Corporation during the expansion of its Nevada operations. He was also involved in the development of such projects as Greens Creek, Alaska; Stillwater, Montana; and Las Pelameres in Chile, while serving as Senior Vice President of Business Development for Anaconda Minerals. Mr. Wilkes is a graduate mining engineer from the Montana School of Mines.

MANAGEMENT & CONSULTANTS

Thomas C. Patton, B.Sc., M.Sc., Ph.D.
President & CEO, Director

Eugene Spiering
VP Exploration, Director

Scott B. Hean, MBA
CFO, Manex Resource Group of Companies

Mr. Hean has held senior management and executive positions with J.P. Morgan of New York, primarily financing junior oil and gas companies and Bank of Montreal as Senior Vice President and Managing Director responsible for financing in the natural resources sectors in North America. Currently he is a director and Chair of the Audit Committee, Sabina Silver Corporation and Chair, Bill Reid Trust. He has also served on numerous not-for-profit Boards, including Outward Bound and B.C. Children’s Hospital. He graduated from Simon Fraser University, British Columbia, in 1973 and from the Ivey School of Business, London, Ontario, in 1975 with an MBA. Recently, Mr. Hean graduated from the Institute of Corporate Directors, Directors Education Program.

Thomas R. Turner, B.Sc., M.Sc.
Manager of Mexican Exploration

Mr. Turner graduated from Michigan Technological University and has worked as an exploration geologist in various techni-

30 2006 Annual Report



cal and managerial capacities for 34 years. His work experience extends from Alaska to Ecuador and includes management of exploration projects for numerous types of precious and base metal mineral systems, both for major mining companies and junior exploration companies. For the last eleven years, he has worked exclusively in Mexico and Central America. He was a consultant to Western Silver Corporation from 1998 to 2006 and managed its Mexican exploration programs including its Peñasquito project, which culminated in the discovery of two world-class gold-silver-lead-zinc deposits and the discovery of economic gold-silver mineralization at the nearby Noche Buena project, and the Company’s sale to Glamis Gold Ltd. in May, 2006. Prior to joining Western Silver, Mr. Turner managed Mar-West Resources Ltd.’s exploration projects in Guatemala which resulted in the discovery of the Cerro Blanco hot spring gold deposit. Cerro Blanco is currently the subject of a feasibility study by Glamis Gold Ltd., which acquired Mar-West in 1998.

Hector J. Fernández, G. B.Sc.
Consulting geologist

Mr. Fernández graduated from the University of San Luis Potosi, Mexico, in 1973 and has worked in exploration for 32 years as a field geologist, consultant and exploration manager for senior mining companies. Before joining Quaterra in 2003, he worked for Minera Cuicuilco (Cyprus) from 1974 to 1986, and was directly responsible for the Cieneguita (Chihuahua, Mexico) gold-silver mine discovery that was sold to Glamis Gold Ltd. From 1990 to 1996, he worked as Mexico’s Exploration Manager for Minera San Bernardo (ASARCO). From 1999 to 2002, he worked for Quebec Iron and Titanium (RTZ) in its Pluma Hidalgo (Oaxaca, Mexico) project. Mr. Fernández has been responsible for Quaterra’s Nieves silver project in Zacatecas, Mexico, since the last quarter of 2003, and he is currently preparing to begin drilling the Company’s Crestones project in Durango, Mexico.

Curtis J. Freeman
President of Avalon Development Corporation, a consulting mineral exploration firm, Fairbanks, Alaska

Curt earned his Bachelor’s degree in Geology in 1978 from the College of Wooster, Ohio, and his Master’s Degrees in Economic Geology in 1980 from the University of Alaska. Curt has been employed in the minerals industry in Alaska, the Yukon, the western United States, Central America, South America, New Zealand and Africa for the past 25 years. Curt is a U.S. Certified

 

Professional Geologist (CPG #6901) and is a licensed geologist in the State of Alaska (Lic. # AA 159). He is a member and past director of the Alaska Miners Association, Society of Economic Geologist, Geological Society of Nevada, British Columbia and Yukon Chamber of Mines and Prospectors and Developers Association of Canada. Curt also serves on the University of Alaska Department of Geology Advisory Board and the State Division of Geological and Geophysical Survey Geologic Mapping Board. Curt has worked for and consulted for numerous major and junior mining companies in addition to consulting for individuals. Curt and his team of professionals have been involved in a number of gold, silver, platinum group and base metal discoveries in Alaska and other parts of the world.

Roman Friedrich III
Financial advisor

Mr. Friedrich has been an investment banker to the mining and metals industries for over twenty years. Immediately prior to establishing Roman Friedrich & Company, he was the Managing Director at TD Securities responsible for its global mining M&A business. Early in his career he spent ten years at the Chase Manhattan Bank where among other positions he was Vice President for Latin America, President of Chase Manhattan Canada Limited, and Managing Director responsible for North American investment banking. From 1979 to April 1991 he was a partner at Burns Fry, a Managing Director at First Chicago and a partner at Wood Gundy. In 1991 he was a founding partner of the New York office of Lancaster Financial Corporation (a firm specializing in mergers and acquisitions). TD Securities, a subsidiary of Toronto Dominion Bank, acquired Lancaster in 1994. Leaving TD in April 1997, he started Roman Friedrich & Company in July the same year. Over his career, he has provided numerous companies with advice on acquisitions, mergers and divestitures, as well as providing valuations and fairness opinions to companies in the mining, metals and other industries. His investment banking activities have included the raising of equity and debt capital to the arranging of project finance. He holds a B.A. from Rutgers University and attended business school at New York University. Mr. Friedrich is on the Board of Directors of StrataGold Corporation, Gateway Gold Corp., GFM Resources Ltd., and is Chairman of Dreman Claymore Dividend and Income Fund. Mr. Friedrich is also President of GFM Resources Ltd. Mr. Friedrich is an independent director of a family of closed end mutual funds and ETFs managed by Claymore Investments Inc.

 

Charles C. Hawley, B.A., Ph.D.
VP Exploration, Alaska

A director and Chairman of Piper Capital, Inc., Dr. Hawley graduated from Hanover College, Indiana, with a B.A. in geology in 1951 and joined the U.S. Geological Survey in 1952 after graduate studies at the University of Wisconsin. He earned a Ph.D. in geology from the University of Colorado in 1963. Dr. Hawley worked for the Geological Survey until 1968. During his Survey years he specialized in uranium, precious metals, and beryllium primarily in the Rocky Mountain states. Since 1969, he has worked in the exploration industry as a field geologist, consultant and executive officer of junior mining companies, mainly in Alaska. Dr. Hawley has been instrumental in developing coal resources in the Wishbone, Beluga, and Nenana fi elds and precious metals and copper in the Alaska Range, Seward Peninsula and Brooks Range. In addition to his field studies, he served as Executive Director of the Alaska Miners Association from 1976 to 1979 and on the National Advisory Committee to the U.S. Bureau of Land Management from 1989 to 1992 where he chaired the Mining Law Task Force. He is a member of SME and Fellow of the Society of Economic Geologists. He is registered as a geologist in the State of Oregon and is a Certified Professional Geologist in the AIPG.

Abelardo Garza Hernández, B.Sc.
Consulting geologist, registered surveyor, landman and environmental consultant, México

Mr. Garza graduated from the University of Texas at Austin in 1975, and has worked in the mining and exploration industry for the last 30 years as a field and mine geologist, consultant, landman, legal representive and administrator of Mexican subsidiaries of both junior and senior mining companies. His work has been in North America, where he has played major support roles in several succesful exploration projects, including the world-class Peñasquito silver-gold-leadzinc deposit in Zacatecas, Mexico, and the subsequent sale of the company to Glamis Gold Ltd. Prior to becoming a consultant, he worked for Exxon, Industrial Minera México, Grupo Frisco up until 1984, and since then he has been an independent consultant, having provided services to many different companies such as Quaterra and Southern Silver, among others. Mr. Garza is a member of the Asociación de Ingenieros de Minas, Metalurgistas y Geólogos de México and the Society for Mining, Metallurgical and Exploration Inc. (SME), and a registered surveyor in México.


Quaterra Resources Inc. 31



Patrick Hillard, B.Sc., M.Sc.
Consulting exploration geologist

Mr. Hillard graduated from the New Mexico School of Mines in 1969, and has worked in mining exploration for 37 years, with a significant portion of this time in supervisory positions. His work has been in North America, South America, Papua New Guinea and Spain. He has participated in the discovery of several uranium orebodies, and was in charge of exploration teams which discovered several breccia pipe orebodies which became profitable mines. He was Vice-President of Exploration for Arequipa Resources and played a significant role in the discovery of the Pierina gold orebody in Peru, after which Arequipa was bought out by Barrick Gold Corporation. Mr. Hillard was Chief Geologist for Western Nuclear, a Phelps-Dodge subsidiary, and Manager of Exploration for Energy Fuels. He is a member of the American Institute of Mining and Metallurgical Engineers.

Joseph R. Inman, B.Sc., M.Sc.
Consulting geophysicist, explorer

Mr. Inman graduated from the University of Utah in 1973 (M.Sc.) and has more than 30 years experience in mineral exploration and environmental studies. He has extensive experience and expertise in nearly all geophysical methods including magnetics, gravity, induced polarization/resistivity (IPR), electromagnetics including both time-domain EM and frequency-domain EM (CSAMT, MaxMin), and radiometrics all in airborne, ground and downhole configurations. Recent experience and areas of interest include the application of seismic methods to mineral exploration as well as data inversion techniques of all geophysical data sets, including integrated earth modeling. Mr. Inman has been involved in all aspects of applying geophysics to exploration including survey design (technical specifications), data acquisition, contractor evaluation and selection, data processing and interpretation. He was a key member of the exploration teams that discovered the Crandon, Wisconsin, VMS deposit; and the A154 and Tli Kwi Cho kimberlite deposits, NWT, Canada. Most recently he provided and managed geophysics programs for the Western Silver team that explored and expanded the Peñasquito, Mexico, discovery into a world-class silver-gold-lead-zinc deposit. Prior to becoming a consulting geophysicist, he was Director of Technical Support and Services at Kennecott Exploration, responsible for ensuring Kennecott’s geologists, geophysicists and data managers had knowledge of, access to and made best use of state-of-the-art exploration methods including geophysics, geochemistry, remote sensing and data/ information management technologies. Mr. Inman is a member of the Society of Exploration Geophysicists and a registered professional geophysicist in the state of California.

Gerald Prosalendis
Corporate advisor

Mr. Prosalendis is a corporate advisor who specializes in markets, corporate development, shareholder relations and the media. He was Vice President Corporate Development of Western Silver Corporation and was involved in the successful sale of the company in 2006 to Glamis Gold Ltd. for $1.6 billion. He was Vice President Corporate Development of Dia Met Minerals Ltd. and was a member of the team that developed the Ekati Diamond Mine. He was involved in initiating the marketing campaign for Ekati diamonds and the sale of Dia Met to BHP Billiton for $687 million in 2001. Mr. Prosalendis has been a consultant to Anderson & Schwab Inc., a mineral and business firm based in New York, a Senior Counselor for James Hoggan & Associates of Vancouver, an advisor to public and private companies and Business Editor of The Vancouver Sun. He also worked as a financial services analyst for a brokerage firm.

   

CORPORATE DIRECTORY

Board of Directors

Thomas C. Patton.
Eugene Spiering
Robert J. Gayton
John R. Kerr
Lawrence Page, QC
Roy Wilkes

Officers

Thomas C. Patton
President and CEO
Eugene Spiering
VP Exploration
Scott B. Hean
CFO

Transfer Agent and Registrar

C.I.B.C. Mellon Trust Company
1177 West Hastings Street
Vancouver, B.C., V6C 3X1
Canada

Auditors

Smythe Ratcliffe
7th Floor, Marine Building
355 Burrard Street
Vancouver, B.C., V6C 2G8
Canada

Corporate Office

Suite 1100, 1199 West Hastings Street
Vancouver, B.C., V6E 3T5
Canada
Tel: 604-681-9059
Fax: 604-688-4670
Toll Free: 1-888-456-1112
Website: www.quaterraresources.com

Cusip No.

747952 109

Shareholder Information

         
  Listing: TSX-V: QTA      
  Shares outstanding     78,104,820
  Options outstanding      5,427,000
  Warrants outstanding      2,623,928
  Fully diluted     86,155,748
  (As at Dec. 31, 2006)      
         
  Share trading information (fiscal 2006)
         
    High Low Shares
  Q1 1.35 0.52 12,145,400
  Q2 2.49 1.16 13,249,700
  Q3 1.84 1.10  4,252,700
  Q4 2.75 1.33  3,684,100
         
  Concept: Gravitas Advisors; Design: Pacific Redwood Marketing

32 2006 Annual Report


1550 – 1185 West Georgia Street,
Vancouver, BC, V6E 4E6
Tel: 604-684-9384 Fax: 604-688-4670
www.quaterraresources.com

Management’s Discussion and Analysis

In respect to the Year ended December 31, 2006

Dated: March 20, 2007

Index Page

A - Introduction 1  
B - Qualified person 1  
C - Exchange information and conversion tables 2  
D - Description of business 3  
E - Description of mineral properties 3 - 10
F - Mineral property expenditure 10 - 11
G - Results of operations 11 - 13
H - Quarterly results 13  
I - Selected annual information 14  
J - Related party information 14  
K - Financial conditions, liquidity and capital resources 14 - 15
L - Outstanding shares, options and share purchase warrants 15 - 16
M - Subsequent events and outlook 16 - 17
N - Off balance sheet 17  
O - Managements responsibility for financial information 18  
P - Risks and uncertainties 18 - 19
Q - Licenses and permits 19  
R - Whistleblower policy 19  
S - Forward looking statements 20  



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

A. Introduction

The following Management Discussion and Analysis (“MD&A”) of the operating results and financial condition of Quaterra Resources Inc. (the “Company”) compares results for the year ended December 31, 2006 (“Q4”) to the same period in the previous year. These statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2006. All notes referenced herein may be found in the consolidated financial statements.

The financial statements were prepared in accordance with Canadian generally accepted accounting principles. This MD&A, dated as of March 20, 2007, was prepared to conform to National Instrument 51-102 F1 and was approved by the Board of Directors prior to release.

The Company is a reporting issuer in British Columbia and Alberta and its shares trade on the Tier 2 Board of the TSX Venture Exchange (“TSX”) under the symbol QTA.

The Company’s reporting currency is the Canadian dollar and all dollar amounts are in Canadian dollars, unless otherwise indicated. Some numbers in this MD&A have been rounded to the nearest thousand for discussion purposes.

Certain forward-looking statements are discussed in the MD&A with respect to the Company’s activities and future financial results. These are subject to significant risks and uncertainties that may cause projected results or events to differ materially from actual results or events.

Additional information relating to the Company, including detailed drill results previously disclosed in news releases, is available on SEDAR at www.sedar.com. Terms of property option agreements are described more fully in the notes to the consolidated financial statements.

B. Qualified Person

Dr. Thomas C. Patton, P. Geo., the President and Chief Executive Officer of the Company, is the qualified person responsible for the preparation of the technical information included in this MD&A. Dr. Patton graduated from the University of Washington in 1971 (Ph.D.) and has worked with both junior and senior mining companies. His exploration efforts have concentrated on North America and have resulted in several significant discoveries and led to the expansion of mineral reserves at existing operations. He served as the President and Chief Operating Officer for Western Silver Corporation from January 1998 to May, 2006. Previously, Dr. Patton held senior positions with Rio Tinto PLC and Kennecott Corporation. Dr. Patton is a member of the Society of Economic Geologists and the American Institute of Mining & Metallurgical Engineers.

Eugene Spiering joined the company on January 10, 2006 as Vice President of Exploration. Mr. Spiering has over 28 years of experience in the mining exploration industry. He most recently held the position of Vice President, Exploration at Rio Narcea Mines Ltd., where he managed a team that discovered two gold deposits and completed the final definition of one nickel deposit in Spain. All three of these deposits are currently in production. Prior to his tenure at Rio Narcea, Mr. Spiering held the position of senior geologist with Energy Fuels Nuclear, Inc. where his responsibilities included uranium exploration in northern Arizona and gold exploration in western US and Venezuela. He received his Bachelor of Science-Geology degree from the University of Utah. Mr. Spiering is a member of the Society of Economic Geologists, the Australasian Institute of Mining and Metallurgy and the American Association of Petroleum Geologists.



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

C. Exchange information and conversion tables.

For ease of reference, the following information is provided:

U.S. Dollars to Canadian Dollars
          December 31,  
          2006     2005  
                   
                   
Rate at end of period     1.16640     1.16600  
Average rate for period     1.13461     1.21173  
High for period         1.17960     1.27320  
Low for period         1.09260     1.14240  
                   
www.oanda.com
   
                   
                   
                   
Conversion Table
             Imperial               Metric  
                   
1 Acre   =     0.404686     Hectares  
1 Foot   =     0.304800     Metres  
1 Mile   =     1.609344     Kilometres  
1 Ton   =     0.907185     Tonnes  
1 Ounce (troy)/ton   =     34.285700     Grams/Tonne  
                   
Information from www.onlineconversion.com
   

 Precious metal units and conversion factors   
                         
ppb - Part per billion 1   ppb = 0.0010   ppm = 0.000030   oz/t
ppm - Part per million 100   ppb = 0.1000   ppm = 0.002920   oz/t
oz - Ounce (troy) 10,000   ppb = 10.0000   ppm = 0.291670   oz/t
oz/t - Ounce per ton (avdp.) 1   ppm = 1.0000   ug/g = 1.000000   g/tonne
g - Gram                      
g/tonne - gram per metric ton 1   oz/t = 34.2857   ppm        
mg - milligram 1   Carat = 41.6660   mg/g        
kg - kilogram 1   ton (avdp.) = 907.1848   kg        
ug - microgram 1   oz (troy) = 31.1035   g        
                         
Information from www.onlineconversion.com



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

D. Description of Business

The Company acquires and explores mineral properties in the Americas. It is currently exploring for base and precious metals in Alaska, uranium in Arizona, copper in Nevada and precious metals in Mexico.

E. Description of Mineral Properties

(i) Nieves Property – Mexico

The Company has a 50% interest in 15 mineral concessions covering an area of approximately 48 square kilometers (18 square miles) located in the State of Zacatecas, Mexico. The Nieves Project lies within a northwest trending mineral belt known as the Silver Belt or Faja de Plata, which is based on the northwest alignment of a narrow band of silver mining districts of San Martin, Fresnillo, Zacatecas and Real de Angeles.

Silver was discovered on the claim block in the mid-1500's and sporadic work occurred thereafter on two vein systems until the start of the Mexican Revolution in 1910. No modern exploration took place until the mid-1990's.

Effective January 16, 1995, the Mexican concessionaires entered into an option agreement with Kennecott Exploration Company (“Kennecott”) that allowed Kennecott to explore and acquire the property by making specified option payments over five years, and advance minimum royalty payments (“AMR”) as defined in the “Underlying Agreement”. On March 13, 1998, Kennecott transferred its rights under the Nieves option to Western Silver Corporation (“Western”) in consideration for a 2% net smelter royalty (“NSR”) on certain core claims and a 1% NSR on others. Western subsequently assigned its rights to Nieves as specified in the “Underlying Agreement” to the Company on March 26, 1999, in consideration for 1,444,460 common shares at $0.20 per share ($288,892). In addition, the Company issued 360,000 common shares at $0.20 per share ($72,000) to the concessionaires in lieu of the US $50,000 option payment otherwise due under the terms of the Underlying Agreement.

The payment schedule in the Underlying Agreement was amended on November 22, 1999, February 11, 2000 and May 2002, such that US $30,000 was paid in January 2000, US $15,000 in May 2002 and US $25,000 in January 2003, for a total of US $70,000. AMR payments of US $75,000 are due on or before January 26 each year from 2004 until the commencement of commercial production.

Drilling conducted over the past years by Kennecott and Western intersected narrow zones of 500g/t silver that were interpreted to be the high level expression of a large, silver-rich mineralized system. Subsequently, the Company completed magnetic and CSAMT/IP geophysical surveys followed by three phases of exploration drilling that tested a number of prospective anomalies. The work delineated a large hydrothermal system with minimal erosion and several features in common with the high-grade Fresnillo silver district 90 kilometers to the south.



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

E. Description of Mineral Properties, continued

(i) Nieves Property – Mexico, continued

Boiling textures observable in drill core at depths of 150-200 meters below surface mark the top of the mineralized vein zone. Both the Concordia-San Gregorio and the Santa Rita vein systems have excellent potential for narrow high-grade silver veins over a strike length of approximately 1.5 kilometers and a vertical extent of 300 meters. The near surface mineralization exposed on San Gregorio Hill and along the Santa Rita vein on Santa Rita Hill is interpreted as manto style (rootless) mineralization trapped in porous sediments at the base of Tertiary volcanic rocks. The last phase of drilling, completed in March of 2006, confirmed the continuity of mineralization within the Concordia vein system and upgraded the high grade silver potential of the eastern Santa Rita zone with an intercept of 5.9 meters averaging 104 g/t silver, 0.23% lead and 0.56% zinc at a downhole depth of 466.1 meters.

Caracle Creek International Consulting completed an Independent Technical Report for the Company and joint venture partner Blackberry Ventures 1, LLC on November 15, 2006. The report concluded that there is excellent potential to find additional high-grade silver shoots within the known vein systems as well as abundant untested drill targets Recommendations for further work include spectral analysis of satellite imagery, 3D modeling and structural interpretation, and 10.000 meters of in-fill and exploration drilling. The Company will initiate a drilling program in late second quarter 2007, with hole locations based on conclusions of the 3D modeling and structural analysis

By December 31, 2006, the Company had incurred $1,244,464 for acquisition costs and $2,560,841 ($656,291 net of recovery) for exploration expenditures giving a total of $3,805,305 in gross costs on the Nieves property, or $1,900,755 net of the recovery of $1,904,550 (US $1.5 million) from Blackberry. As at December 31, 2005, gross costs totaled $3,544,965, less $1,904,550 in recovery, for a net of $1,640,415. (Note 5 in the consolidated financial statements dated December 31, 2006)

(ii) Los Crestones Project – Mexico

In 2003, the Company staked a 2,100 hectare claim to cover a hot spring gold-silver prospect in northern Durango, Mexico. The Crestones Property is located 12 kilometers northeast of the Inde mining district on the western edge of the Mesa Central carbonate platform of Mexico where that carbonate package has begun to be affected by the basin and range faulting of the eastern part of the Sierra Madre Occidental ignimbrite province.

In 2004 and early 2005, reconnaissance mapping and sampling programs were completed over an area of about 3.5 square miles. The Company staked an additional 3,547 hectare claim in 2006 and completed detailed mapping of the project geology. The work delineated a hot spring gold-silver system manifest by widespread silicification, flat-lying silica sinter aprons and quartz veining along high-angle, graben faults. Rock chip samples show anomalous Au-Ag values with occasional spikes up to ore grade; and strongly anomalous mercury, arsenic and antimony values which are typical of the upper levels of hot spring-related gold silver mineral systems. The level of exposure is clearly above the boiling zone and the gold numbers are consistent with those found in the top of epithermal gold systems.



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

E. Description of Mineral Properties, continued

(iii) Los Crestones Project – Mexico, continued.

The Crestones hydrothermal system consists of three elongate siliceous hydrothermal silica breccia bodies that range from 500 to 1,500 meters in strike length and 75 to 150 meters in width. They strike northerly to northwesterly with a steep to vertical dip, and are hosted within an eight square kilometer envelope of silicified limestone that has been brecciated along its contacts with the hydrothermal silica breccia. The breccias and silicification envelope have been intruded by an elongate quartz porphyry stock with weak phyllic alteration.

Mineralization consists of disseminated stibnite-pyrite-marcasite in the siliceous breccia matrix, breccia clasts with disseminated sphalerite-galena and minor disseminated and veinlet galena-sphalerite-tetrahedrite in the quartz porphyry stock. A 3,000 meter drill program began at the end of Q3 2006 to test all three of the hydrothermal breccia bodies.

Acquisition costs incurred to December 31, 2006 were $71,696 and exploration expenditures were $462,590 for a total of $534,286. Acquisition costs incurred to December 31, 2005 were $59,303 and exploration expenditures were $20,113 for a total of $79,416. (Note 5 in the consolidated financial statements dated December 31, 2006)

(iii) Uranium Project – Arizona, Utah and Wyoming

Quaterra’s entry into uranium exploration commenced in June of 2005 with the acquisition of 95 claims in the Arizona Strip uranium district from a Nevada prospecting syndicate. The acquisition included an option to purchase other properties in Utah and Wyoming. These properties were staked to cover extensions of previously mined uranium deposits and are prospective for both uranium and vanadium. Under the terms of the agreement, the Company may acquire a 100% interest in any or all of syndicate claims by making staged payments over a five-year period totaling US $500,000 and issuing 600,000 common shares. The initial consideration included a US $15,000 cash payment and 200,000 common shares. The properties are subject to a 2% production royalty on each property, 1% of which may be purchased for US $1 million.

The solution collapse breccia pipes of the Arizona Strip district remain the focus of the Company’s uranium exploration program. The district is located north of the Grand Canyon where environmental and political pressure is significantly less and where most of the land that is outside of parks, wilderness areas and national monuments is open for staking. The pipes are attractive targets because of their relatively high grades, small footprint, and the speed and efficiency with which they can be explored. Previous exploration in the district has resulted in the discovery of eight breccia pipe ore bodies with production from 1980 to 1990 totaling approximately 19 million pounds of U3O8. The total amount of mineable uranium discovered to date in breccia pipes in northern Arizona is estimated to be in the range of 35 million pounds.

(1998 International Uranium Corp US SEC Registration Statement http://www.sec.gov/Archives/edgar/data/1063259/0001035704-98-000395.txt)



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

E. Description of Mineral Properties, continued

(iii) Uranium Project – Arizona, Utah and Wyoming, continued.

Quaterra initiated the first phase of drilling on the Company’s Arizona Uranium project in early 2006. A total of 30 holes averaging 220 feet deep investigated the near surface stratigraphy of six breccia pipe targets. The program was followed by deep drilling in to evaluate the Ollie, EZ4, EJ and YS targets. Although the results of the drilling at EJ and YS were negative, a deep hole at Ollie encountered 3.5 feet of 0.13% eU308 at a depth of 1,172 ft and 2.5 feet of 0.12% eU308 at a depth of 1,178 feet. The hole also included numerous mineralized intercepts averaging .03% to .08% between 1,020 feet and 1,242 feet. There was no mineralization from 1,242 feet to TD at 1,430 feet where the hole is believed to have exited the pipe throat and entered the Hermit siltstone along the northeast pipe margin. A study of historic data indicates that much of the pipe to the southwest remains untested.

The first hole on the EZ4 target was drilled to 1,340 feet and intercepted anomalous uranium mineralization between 970 and 1,000 feet near the Coconino sandstone/Hermit shale contact. The Coconino sandstone is considered the conduit for mineralization in the Arizona breccia pipes and the presence of mineralization near the contact strongly suggests the close proximity of a mineralized pipe throat. Drill-hole drift to the east and south of the collar location defines a possible target to the northwest.

In Early 2007, Quaterra became the first company to extensively test an airborne time domain EM system in the district. Geotech Ltd. was contracted to fly a 4,900 line-kilometer VTEM survey to identify new targets with geophysical signatures that are similar to previously recognized breccia pipes. Not only did known breccia pipes appear as well delineated anomalies, but the survey identified more than 200 moderate to high priority targets with similar geophysical signatures. The program was coupled with a helicopter-assisted program of claim staking to acquire most of the high priority anomalies in the center of the uranium district. Consulting geophysicist, Joe Inman, and Condor Consulting Ltd, recognized experts in the field of airborne electromagnetics, have been retained to perform a detailed interpretation of the survey results and provide further prioritization of targets.

A second phase of exploration drilling on Quaterra’s breccia pipe targets began in December 2006 by Barbie Drilling Inc. The program is following up the encouraging results of drilling completed during the first quarter 2006 and targeting the newly defined geophysical anomalies to locate the center or throat of potential breccia pipes. Deep drill holes will be systematically completed to evaluate mineralization in the structures as targets become defined and permitted. At least 8 targets are expected to be tested by deep holes in the current program.

Quaterra’s uranium properties in northern Arizona cover approximately 65 square miles over selected areas within the heart of the uranium district. The property includes 4 known breccia pipes and consists of many individual and scattered claim blocks that have been selectively staked over targets with some surface expression of a possible collapse structure and favorable geophysical anomalies within areas of known mineralized occurrences.



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

E. Description of Mineral Properties, continued

(iii) Uranium Project – Arizona, Utah and Wyoming, continued.

For Arizona Uranium the acquisition costs incurred to December 31, 2006 were $1,025,108 and exploration expenditures were $1,079,249 for a total of $2,104,357. Acquisition costs incurred to December 31, 2005 were $159,171 and exploration expenditures were $103,820 for a total of $262,991. (Note 5 in the consolidated financial statements dated December 31, 2006)

For Utah Uranium the acquisition costs incurred to December 31, 2006 were $90,562 and exploration expenditures were $610 for a total of $91,171. Acquisition costs incurred to December 31, 2005 were $10,977. Utah Uranium is included in other properties in the mineral property (Note 5 (g)) in the consolidated financial statements dated December 31, 2006.

For Wyoming Uranium the acquisition costs incurred to December 31, 2006 were $9,768 and there were no exploration expenditures. There were no acquisition costs or exploration expenses as at December 31, 2005. Wyoming Uranium is included in other properties in the mineral property (Note 5 (g)) in the consolidated financial statements dated December 31, 2006.

(iv) Duke Island – Alaska

The Company has a 100% interest in 129 federal and eleven State of Alaska claims located on Duke Island, near Ketchikan, Alaska. The Duke Island complex consists of two separate, well-exposed, zoned ultramafic bodies: the Judd Harbor body is almost two miles in diameter and the Hall Cove Body is about three and a half miles in diameter. The Judd Harbor and Hall Cove complexes have been interpreted to be parts of the same intrusive body at depth. Both bodies are comprised of a dunite and peridotite core surrounded by concentric zones of olivine clinopyroxenite, hornblende-magnetite clinopyroxenite, and gabbro.

The Company discovered copper, nickel and platinum group element (PGE) mineralization at Duke Island in 2001. The mineralization is unlike any known Ural–Alaska complex in southeast Alaska’s Alexander Platinum Belt. Geochemical, geological and geophysical data suggest the system extends for over 14.5 kilometers along strike and up to 3.8 kilometers across strike with the ultimate dimensions of the mineralized system remaining open to expansion. The Company believes that Duke Island has potential to host significant accumulations of copper, nickel and PGE mineralization.

The initial IP geophysical surveys in the area suggested mineralization characterized by a high conductivity zone surrounded by a disseminated sulfide zone. Four core holes drilled in late 2001 intercepted up to 90 meters of semi-massive to massive sulfide containing highly anomalous copper, nickel, platinum and palladium.

A helicopter magnetic and electromagnetic survey conducted in 2002 revealed a number of strong EM highs coincident with both magnetic lows and magnetic highs. Several of the EM anomalies are located in covered terrain where no previous work has been conducted. A detailed review of part of this survey by consulting geophysicist Joseph R. Inman identified nine discrete, multi-anomaly zones with strike lengths ranging from 400 meters to 1,500 meters in a four kilometer by four kilometer area.



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

E. Description of Mineral Properties, continued

(iv) Duke Island – Alaska, continued

In 2003, the Company staked an additional 30 claims to cover high-priority geophysical anomalies that fell outside the original claim boundary. Geochemical sampling of three of the known sulfide-bearing prospects has shown that strong EM conductors are correlative with Cu-Ni-PGE sulfide mineralization.

A drilling program in 2005 identified magmatic sulfide-bearing systems of significant size in both the Marquis and the Raven zones. Structural and stratigraphic controls that could result in higher grades will need additional investigation to target future drilling on the property. The company is currently reviewing its exploration options for 2007 with the goal of identifying one or more high-grade sulfide targets within the areas of previously identified lower grade mineralization.

Acquisition costs incurred to December 31, 2006 were $112,285 and exploration expenditures were $1,625,551 for a total of $1,737,836. Acquisition costs incurred to December 31, 2005 were $94,205 and exploration expenditures were $1,599,029 for a total of $1,693,234. (Note 5 in the consolidated financial statements dated December 31, 2006)

(v) Seward Peninsula – Big Bar, VMS Project – Alaska

The 100% owned Big Bar project, located 110 miles northeast of Nome, Alaska, is a copper-lead-zinc prospect whose claims cover a 4000-foot long soil anomaly delineated by Anaconda in the early 1980’s. The prospect includes one of the most significant anomalies identified by a stream sediment and soil geochemical reconnaissance survey that included a large part of the Seward Peninsula. Soil anomalies containing up to 1920 ppm Cu occur in felsic schist on the property. Gossans collected as float from the anomaly contain up to .06 g/t Au, 1.6 opt Ag, 4260 ppm Cu and 3900 ppm Zn.

The Company completed 1,470 feet of core drilling during July in the first exploration holes to test the Big Bar target. Oriented perpendicular to the northwest strike and southwest dip of the schist unit exposed at the surface, three holes investigated a strike length of approximately 1000 feet near the center of the geochemical anomaly.

The program encountered an upper mineralized section in pervasively sericite-altered schistose volcanic rock of biotite to lower amphibolite metamorphic grade. Sulfide mineralization occurs in long intercepts of 1%-5% disseminated and stringer pyrite and pyrrhotite with possible chalcopyrite in the upper 200 feet of the drilled section. Sulfide content is greatest in the top 100 ft. and generally decreases downhole. No massive sulfide was encountered. Assay results indicate that mineralization in each of the holes is sub-economic and does not extend to depth.

The lithology and mineralization of the drilled section is interpreted as either the eroded remnants or the distal traces of a VMS deposit. The geology suggests a relatively long-lived hydrothermal system, but it does not give a clear indication of where massive sulfides may have accumulated. To evaluate the possibility of massive sulfides occurring in other areas on the property, the Company contracted Fugro Airborne Surveys Corp. to conduct a 138-line kilometer airborne EM-magnetometer survey over an area of 25 square kilometers centered over the geochemical anomaly.



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

E. Description of Mineral Properties, continued

(v) Seward Peninsula – Big Bar, VMS Project – Alaska, continued

The survey identified 6 moderate to strong EM conductors with coincident magnetic anomalies in the vicinity of the geochemical anomaly but outside of the area tested by drilling. The geophysical anomalies will be the subject of surface geological reconnaissance and sampling programs that are scheduled for the 2007 field season.

Acquisition costs incurred to December 31, 2006 were $18,416 and exploration expenditures were $712,113 for a total of $730,574. Acquisition costs incurred to December 31, 2005 were $16,714 and exploration expenditures were $22,652 for a total of $39,366. (Note 5 in the consolidated financial statements dated December 31, 2006)

(vi) MacArthur Property-Nevada

Pursuant to an agreement made October 2005 with North Exploration LLC, the Company acquired the right to earn an interest in sixty-six unpatented mining claims covering the former MacArthur copper-oxide mine, in the Yerington district of Lyon County, Nevada. To earn a 100% interest, the Company is required to make staged payments totaling US $1,785,000 by January 15, 2008 or alternatively should the company have incurred US $500,000 in exploration expenditures by January 15, 2008 it can elect to acquire the property by stage payments totaling US $2,645,000 by January 15, 2010. The property is subject to a 2% NSR royalty, 1% of which may be purchased for US 1 million dollars. For further information see Note 5 (f) of the consolidated financial statements dated December 31, 2006.

A review of historic data suggests the oxide mineralization at MacArthur may be part of a more extensive porphyry copper system. Copper-oxide mineralization is present in outcrop well beyond the current pit outline. Old US Bureau of Mines reports also indicate the presence of copper mineralization in drill holes more than 1,500 feet from the current pit boundaries. Quaterra has staked 230 additional claims to control an area of approximately 8 square miles that are believed to cover the potential extensions of both oxide and possible sulfide mineralization.

Quaterra has acquired an historical exploration and drilling data package for the MacArthur deposit that includes approximately 11,500 assay intervals from 290 drill holes. Mr. David Heatwole, exploration manager of the project, will conduct a review the deposit geology and mineralization to assess the necessary steps to complete a technical report on the MacArthur project with the objective of preparing a 43-101 compliant resource estimate. The Company is preparing for a 2007 drill program to confirm the historic resource and evaluate possible extensions to the mineralization at MacArthur.

Acquisition costs incurred to December 31, 2006 were $170,324 and exploration expenditures were $80,591 for a total of $250,915. Acquisition costs incurred to December 31, 2005 were $30,484 and there were no exploration expenditures. (Note 5 in the consolidated financial statements dated December 31, 2006).

A payment of $350,000 for the purchase of the PIT claims referred to in Note M (e) in this MD&A and Note 5 (f) of the consolidated financial statements dated December 31, 2006, shall be deducted from the final payment due to North Exploration LLC for the McArthur properties.



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

E. Description of Mineral Properties, continued

(vii) Other properties

The Company has also purchased Grays Hills and Peg Leg properties in the USA, and Las Americas, Minarsol, Jabconcillos properties in Mexico. See Note 5 (g) in the consolidated financial statements dated December 31, 2006

F. Mineral Property Expenditures

During the year ended December 31, 2006 incurred mineral property costs of $3,943,427 (excluding exploration AP) compared to $1,783,936 in 2005. Of this expenditure $1,650,351 (2005: $382,972) was spent on acquisition costs and $2,448,598 (2005: $1,400,964) on exploration.

The total mineral properties expenditure of $9,760,382, which excludes $1,904,550 recovered from Blackberry, as at December 31, 2006 was allocated as follows; 38% was spent on Nieves, 22% on Arizona Uranium, 18% on Duke Island, 7% on both Big Bar, 6% on both Los Crestones, and various other properties and 3% on MacArthur. This compares to total mineral properties expenditure of $5,661,433, which excludes $1,904,550 recovered from Blackberry, as at December 31, 2005 was allocated as follows; 63% was spent on Nieves, 30% on Duke Island with 5% spent on the new property Arizona Uranium, the remaining 2% spent on various other properties.

Total deferred mineral property costs for the quarter ended December 31, 2006 were as follows:

                                   
All Mineral Properties     Year End           Additions            Change      Year End    
    Balance                             During     Balance  
    Dec 31, 2005     Q1     Q2     Q3     Q4     2006     Dec 31, 2006  
  $    $    $    $    $    $    $   
                                           
Summary by Expenditure                                          
     Total acquisitions   1,547,235     122,047     119,813     664,638     743,853     1,650,351     3,197,586  
     Total exploration   4,114,198     389,555     566,387     651,262     841,394     2,448,598     6,562,796  
     Less: cost recovery, Nieves   (1,904,550 )   -     -     -     -     -     (1,904,550 )
                                           
Total   3,756,883     511,602     686,200     1,315,900     1,585,247     4,098,949     7,855,832  
                                           
Summary by Property                                          
     Nieves, net of cost recovery   1,640,415     203,847     31,237     6,107     19,149     260,340     1,900,755  
     Los Crestones   79,416     3,703     86,140     89,951     275,076     454,870     534,286  
     Duke Island   1,693,234     12,492     2,958     29,152     -     44,602     1,737,836  
     Big Bar   39,366     1,736     173,185     421,309     94,978     691,208     730,574  
     Arizona Uranium   262,991     274,487     330,409     520,681     715,789     1,841,366     2,104,357  
     MacArthur   30,484     14,727     62,271     110,848     32,585     220,431     250,915  
     Other properties   10,977     610     -     137,852     447,670     586,132     597,109  
                                           
Total   3,756,883     511,602     686,200     1,315,900     1,585,247     4,098,949     7,855,832  



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

F. Mineral Property Expenditures, continued

Total deferred mineral property costs for the quarter ended December 31, 2005 were as follows:

All Mineral Properties   Balance           Additions           Balance     Balance  
    Dec 31, 2004     Q1     Q2     Q3     Q4     Dec 31, 2005     Dec 31, 2005  
   $    $    $    $      $    $  
                                           
Total acquisitions   1,164,263     126,350     109,195     112,669     34,758     382,972     1,547,235  
Total exploration   2,713,234     211,099     360,259     141,040     688,566     1,400,964     4,114,198  
Less: cost recovery, Nieves   (1,904,550 )   -     -     -     -     -     (1,904,550 )
                                           
Total   1,972,947     337,449     469,454     253,709     723,324     1,783,936     3,756,883  
                                           
Summary by Property                                          
     Nieves, net of cost recovery   831,368     269,092     302,853     71,516     165,586     809,047     1,640,415  
     Los Crestones   27,842     46,758     243     4,573     -     51,574     79,416  
     Duke Island   1,079,874     12,751     33,801     70,531     496,277     613,360     1,693,234  
     Big Bar   33,863     -     -     -     5,503     5,503     39,366  
     Arizona Uranium   -     8,848     132,557     81,700     39,886     262,991     262,991  
     Other Properties   -     -     -     25,389     16,072     41,461     41,461  
                                           
Total   1,972,947     337,449     469,454     253,709     723,324     1,783,936     3,756,883  

For further information on mineral properties expenditure see Note 5 of the consolidated financial statements dated December 31, 2006

G. Results of Operations

For the year ended December 31, 2006, (“2006”) the Company had a net loss of $3,830,534 compared to a net loss of $788,060 for the year ended December 31, 2005 (“2005”). Stock based compensation was $3,045,004 for 2006 (2005: $330,842) as stock options were granted and recognized. Removing the stock based compensation results in a net loss of $785,530 for year ended December 31, 2006, and $457,218 for comparable period last year.

The increase of $328,312, in the net loss for 2006, excluding stock based compensation can be explained as follows:

  (a)

With the removal of stock based compensation of $1,476,044 (2005: $63,018) consulting fees increased by $57,247 from $48,568 for 2005 to $105,815 for 2006. This is due to the increased activity in respect to the day to day running of the Company and the commission of consultants for exploration purposes.

     
  (b)

With the removal of stock based compensation of $749,697 (2005: $199,555) director and officer fees were $5,625 for 2006 compared to no fees for 2005. These fees are due to the new company policy of paying directors for meeting attendance.




Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

G. Results of Operations, continued

  (c)

The Company reported a net foreign currency gain of $79,449 compared to a loss for the comparable period in 2005, of $125,907. Since all current assets and liabilities held in US dollars have to be converted to Canadian dollars on consolidation at the exchange rate as at December 31, 2006, being 1.1664, this created an exchange gain due to a strengthening US dollar compared to the Canadian dollar.

     
 

It is important to note that the majority of transactions for the Company are in US dollars and, to a lesser extent, Mexican Pesos, and therefore foreign exchange fluctuations can result in losses or gains.

     
  (d)

General exploration costs were $225,855 for 2006 compared to $2,441 for 2005. This is due to the employment of a VP of exploration and the consideration of potential new properties.

     
  (e)

Investor relation costs increased by $73,228 from $71,630 for 2005 to $144,858 for 2006. This is due to the fees paid to Dynamic Stock Market Analysis to provide investor relations as well as the Company hosting events for mining analysts, newsletter writers and others prominent in the industry to inform them of recent corporate developments. .

     
  (f)

Office and general costs increased by $99,781 from $62,159 for 2005 to $161,940 for 2006. This is due to the increased activity in respect to the day to day running of the Company.

     
  (g)

Professional fees increased by $49,849 from $89,863 for 2005 to $139,712 for 2006. This is due to increased legal and auditing expenses.

     
  (h)

Travel and promotion costs increased by $56,829 from $14,850 for 2005 to $71,679 for 2006. This is due partly to the employment of a VP of exploration as well as an increased travel cost to inspect potential new properties and an increase in travel for meetings with analysts and other prominent industry experts.

     
  (i)

With the removal of stock based compensation of $819,263 (2005: $68,269) wages and benefits costs were $60,984 for 2006 compared to nil for 2005. This is due to the employment of a VP of exploration.

     
  (j)

Interest income increased by $49,853 from $36,135 for 2005 to $85,988 for 2006. This is due to larger amounts being held on fixed term deposits.

     
  (k)

An administration fee of $42,975 being 10% of the 50% Neives exploration charged to Blackberry was charged in 2006.

     
  (l)

An option payment of $35,000 was received during 2005.

     
  (m)

A one off transaction of expenses recovered in the amount of $40,329 occurred in 2006.

For the year ended December 31, 2005, (“2005”) the Company had a net loss of $788,060 compared to a net loss of $685,952 for the year ended December 31, 2004 (“2004”) giving a net loss increase of $102,108. Stock based compensation was $330,842 for 2005 (2004: $386,246) as stock options were granted and recognized. Removing the stock based compensation results in a net loss of $457,218 for 2005, and $299,706 for 2004 resulting in a net loss increase of $157,512 for 2005, which can be explained as follows:



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

G. Results of Operations, continued

  (a)

Consulting fees increased by $37,591 from $10,977 in 2004 to $48,568 in 2005. This is due to the increased activity in respect to the day to day running of the Company.

     
  (b)

The Company reported a net foreign currency loss of $125,907 compared to a net foreign exchange gain in 2004 of $1,640. Since all current assets and liabilities held in US dollars have to be converted to Canadian dollars on consolidation at the exchange rate as at December 31, 2005, being 1.166, this created a large exchange loss due to appreciably weakened US dollar compared to the Canadian dollar.

     
  (c)

Professional fees increased by $72,171 from $17,692 in 2004 to $89,863 in 2005. Due to the affect of regulatory requirements the audit fees for the 2005 audit and the accounting fees in respect of the production of annual and quarterly financial statements has caused part of this increase. There were also increased legal fees due to consultations for potential property purchases and agreements.

     
  (d)

Interest income increased by $26,274 from $9,861 in 2004 to $36,135 in 2005. This is due to larger amounts being held on fixed term deposits throughout the year.

     
  (e)

Option payments were received in 2005 of $35,000. See Note 5 (f) of the consolidated financial statements dated December 31, 2005.

     
  (f)

A reclamation bond of $2,500 was written off in 2005. This bond has been held since the 1990s on a property that the Company no longer has an interest in and it was deemed by management unlikely this amount would be recovered.

H. Quarterly Results

The following financial data was derived from the Company’s consolidated financial statements for the current and eight previous quarters:

    Dec. 31,     Sept. 30,     June 30,     March 31,       Dec. 31,     Sept. 30,     June 30,     March 31,       Dec 31  
    2006     2006     2006     2006     2005     2005     2005     2005     2004  
                   
                                                       
Operating expenses   217,754     285,046     299,512     152,560     218,932     182,209     69,840     54,871     100,227  
Interest earned   (30,060 )   (26,277 )   (19,267 )   (10,384 )   (22,641 )   (3,622 )   (3,236 )   (6,636 )   (2,150 )
Other income   (42,975 )   -     -     -     (25,000 )   -     -     (10,000 )   -  
                                                       
Loss before the undernoted   144,719     258,769     280,245     142,176     171,291     178,587     66,604     38,235     98,077  
                                                       
Stock-based compensation   880,374     1,982,373     114,500     67,707     (129,373 )   460,215     -     -     -  
Write off of reclamation bond   -     -     -     -     2,500     -     -     -     -  
Accrued liabilities written off   6,063     (6,761 )   (23,831 )   (15,800 )   -     -     -     -     -  
                                                       
Net Loss   1,031,156     2,234,381     370,914     194,083     44,418     638,802     66,604     38,235     98,077  
                                                       
Loss per share - basic and diluted   0.03     0.03     0.01     0.00     0.01     0.01     0.00     0.00     0.00  



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

I. Selected Annual Information.

The following financial data is derived from the Company’s consolidated financial statements for each of the three most recently completed fiscal years ending December 31:

    2006     2005     2004  
Total revenues  $ 128,963   $  71,135   $  9,861  
Net loss for the year   (3,830,534 )   (788,060 )   (685,952 )
Basic and fully diluted per share   (0.05 )   (0.01 )   (0.01 )
Total assets   17,340,544     5,855,847     3,727,071  
Total long-term financial liabilties   -     -     -  
Cash dividends declared per common share   -     -     -  

Refer to Note G in this MD&A for a detailed comparison of Year 2006 with 2005 and Year 2005 with 2004.

J. Related Party Information.

As at December 31, 2006, $26,216 (2005: $13,010) was due to directors or senior officers of the Company or to companies controlled by them, for various services rendered.

All related party transactions are made in the normal course of operations for consideration established by the Company and accepted by the Company and related parties.

For further detailed information see Note 6 of the consolidated financial statements dated December 31, 2006.

K. Financial Conditions, Liquidity and Capital Resources

The Company has limited financial resources and finances its operations by raising capital in the equity markets. For the foreseeable future, the Company will need to rely on the sale of such securities and joint venture arrangements with third parties to provide working capital and to finance its mineral property acquisition and exploration activities.

The Company had a working capital balance of $9,075,713 as at December 31, 2006, compared to a working capital balance of $1,697,865 as at December 31, 2005.

During the year ended December 31, 2006, 11,891,136 common shares were issued (2005: 7,975,000) for gross proceeds of $11,765,917 (2005: $2,494,350) from shares issued for a private placement and the exercise of share purchase warrants and stock options.



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

K. Financial Conditions, Liquidity and Capital Resources, continued

A further 400,000 common shares were issued (2005: 200,000) for mineral property acquisitions at a price of $606,000 (2005: $76,000) as well as 291,484 commons shares (2005: Nil) for brokerage fees in respect of the 2006 private placement.

This give a total of 12,582,620 (2005: 8,175,000) common shares issued during the year. For further information on the issuance of shares see note 7 of the consolidated financial statements.

As at March 20, 2007, 5,312,000 stock options are “in the money” (the exercise price is less than the current share trading price) and 5,118,250 are exercisable. If they were exercised, the Company would realize proceeds of $4,618,240. All warrants are also in “in the money” however they are still subject to a regulatory four month hold period and can not be exercised until April 20, 2007.

For 2006 and 2005 expenditures on mineral properties see note E and F in this MD&A or Note 5 of the consolidated financial statements dated December 31, 2006.

L. Outstanding Shares, Options and Share Purchase Warrants

  (i)

Issued and outstanding shares

The Company has unlimited authorized, without par value, common shares.

      Number     Total  
      of Shares        
               
  Balance as at December 31, 2006   78,104,820   $ 27,861,058  
  Issued subsequent to quarter-end            
       Exercise of stock options   115,000   $ 78,600  
               
  Balance as at March 20, 2007   78,219,820   $ 27,939,658  
               

  (ii)

Share Purchase Warrants

As at December 31, 2006, there were 2,623,928 share purchase warrants outstanding with an exercise price of $2.25 per share and an expiry date of June 21, 2008. Subsequent to the year end no share purchase warrants have been exercised.



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

L. Outstanding Shares, Options and Share Purchase Warrants, continued

  (iii)

Stock Options

As at December 31, 2006, there were 5,427,000 stock options outstanding with a weighted average exercise price of $0.92 per share. Options currently outstanding are as follows:

  Exercise   Expiry     Balance     Granted       Cancelled     Exercised      Balance  
  Price   Date     Dec. 31, 2006           or Expired           March 20, 2007  
                                       
  $0.12   January 10, 2008     937,000     -     -     25,000     912,000  
  $0.25   October 2, 2008     50,000     -     -     -     50,000  
  $0.34   December 8, 2008     90,000     -     -     -     90,000  
  $0.62   March 25, 2009     590,000     -     -     30,000     560,000  
  $0.35   August 9, 2010     850,000     -     -     30,000     820,000  
  $0.40   January 9, 2011     200,000     -     -     -     200,000  
  $1.04   March 27, 2011     125,000     -     -     -     125,000  
  $1.00   May 19, 2011     75,000     -     -     -     75,000  
  $1.12   June 12, 2011     100,000     -     -     -     100,000  
  $1.55   July 28, 2011     2,110,000     -     -     30,000     2,080,000  
  $1.55   August 23, 2011     100,000     -     -     -     100,000  
  $1.50   September 25, 2011     100,000     -     -     -     100,000  
  $2.05   December 18, 2011     100,000     -     -     -     100,000  
  $2.65   January 11, 2012     -     75,000     -     -     75,000  
                                       
            5,427,000     75,000     -     115,000     5,387,000  
                                       
  Weighted average exercise price   $ 0.92   $ 2.65   $ 0.00   $ 0.68   $ 0.95  

M. Subsequent Events and Outlook

The following occurred subsequent to the year end December 31, 2006.

  (a)

The Company intends to continue land acquisition and drilling at its uranium pipe targets in Arizona. Phase 1 drilling is in progress at the Crestones gold property in Mexico and will continue into Q1 2007.

     
  (b)

115,000 Stock options were exercised after the period end December 31, 2006. For detailed information see Note L in this MD&A or Note 7 of the consolidated financial statements dated December 31, 2006.

     
  (c)

75,000 stock options were issued with an exercise price of $2.65 and an expire date of January 11, 2012




Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

M. Subsequent Events and Outlook, continued

  (d)

The Company entered into a sale and purchase agreement dated January 16, 2007, with Charles Gary Clifton and North Exploration LLC, in respect to the purchase of the mining claims know as the Pit Claim in Lyon County, Nevada. Pursuant to this agreement the Company’s commitments are as follows:


  (i)

US$43,750 on or before January 16, 2007 (Paid)

  (ii)

US$43,750 on or before April 16, 2007

  (iii)

US$43,750 on or before July 16, 2007

  (iv)

US$43,750 on or before October 16, 2007

  (v)

US$43,750 on or before January 16, 2008

  (vi)

US$43,750 on or before April 16, 2008

  (vii)

US$43,750 on or before July 16, 2008

  (viii)

US$43,750 on or before October 16, 2008

For further information see Note E (vi) of this MD&A and Note 5 (f) of the consolidated financial statements dated December 31, 2006.

  (e)

Under an amendment dated January 17, 2007 to the original agreement made October 2005 between the Company and North Exploration LLC to add a US $350,000 deduction from either of the final payments made under this agreement. For further information see Note E (vi) of this MD&A and Note 5(f) for the consolidated financial statements dated December 31, 2006.

     
  (f)

Subject to regulatory approval, the Company entered into a service agreement dated January 30, 2007, with a consultant to provide financial and advisory services. Under this agreement, the Company’s commitment is to pay a retainer of $15,000 per month starting February 1, 2007. $7,500 paid by cash and $7,500 by the issuance of common shares in the Company at the market price of the Company’s shares on the date of issuance.

     
  (g)

The option agreements for the Arc and Brown Claims, in the Skeena Mining District were terminated in accordance with their terms and the 100% interest reverted back to the Company For further information see Note 5 (g) of the consolidated financial statements dated December 31, 2006.

     
  (h)

The following agreements were implemented as at January 1, 2007:


  (i)

The employment agreement of the VP of Exploration was renewed.

  (ii)

The management agreement with a related party was renewed.

  (iii)

A long term employment agreement for the President and Chief Executive Officer of the Company.

N. Off Balance Sheet

The Company did not enter into any off balance sheet transactions or commitments as defined by National Instrument 51-102.



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

O. Management’s Responsibility for Financial Information

Preparing financial statements requires management to make estimates and assumptions that affect the reported results. The estimates are based on historical experience and other assumptions that are believed to be reasonable under the circumstances. Critical accounting policies were disclosed in the annual audited financial statements.

Consistent with accepted policies of the Canadian junior mining industry, the Company capitalizes exploration expenditures. This decision, and the timing of the possible recognition of impairment in the mineral property value, can materially affect the reported earnings of the Company.

Management has prepared the information and representations in this annual report. The financial statements have been prepared to conform to generally accepted accounting principles in Canada and, where appropriate, reflect management's best estimates and judgment. The financial information presented throughout this report is consistent with the data presented in the financial statements.

The Company maintains adequate systems of internal accounting and administrative controls. These systems were designed to provide reasonable assurance that relevant and reliable financial information is produced. The independent auditors have the responsibility of auditing the annual financial statements and expressing an opinion on them.

The Board of Directors, through its Audit Committee, is responsible for ensuring that management fulfils its responsibilities for financial reporting and internal control. The Audit Committee is composed of three directors, who meet at least quarterly with management and, at least annually with the external auditors to audit and review accounting, internal controls and financial reporting matters.

P. Risks and Uncertainties

The principal business of the Company is the exploration and development of mineral properties. Given the nature of the mining business, the limited extent of the Company's assets and the present stage of development, the following risk factors, among others, should be considered.

The Company does not hold any known mineral reserves of any kind and does not generate any revenues from production. The Company’s success will depend largely upon its ability to locate commercially productive mineral reserves. Mineral exploration is highly speculative in nature, involves many risks and frequently is non-productive. There is no assurance that our exploration efforts will be successful. Success in establishing reserves is a result of a number of factors, including the quality of management, the level of geological and technical expertise, the quality of land available for exploration as well as various other factors.

Once mineralization is discovered, it may take several years in the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish proven and probable reserves through drilling and bulk sampling, to determine the optimal metallurgical process to extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities. Because of these uncertainties, no assurance can be given that our exploration programs will result in the establishment or expansion of resources or reserves.



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

P. Risks and Uncertainties, continued

Since the Company does not generate any revenues, it may not have sufficient financial resources to undertake by itself all of its planned mineral property acquisition and exploration activities. Operations will continue to be financed primarily through the sale of securities such as common shares. The Company will need to continue its reliance on the sale of such securities for future financing, which may result in dilution to existing shareholders. Furthermore, the amount of additional funds required may not be available under favorable terms, if at all, and will depend largely on the acquisition and exploration activities pursued.

The ability to attract capital to the Company is dependent on movements in commodity prices. Commodity prices fluctuate on a daily basis and they are affected by a number of factors beyond the control of the Company. If, because of a sustained decline in prices, financing were not available to meet cash operating costs, the feasibility of continuing operations would be evaluated and if warranted, would be discontinued.

The resource industry is intensively competitive in all of its phases, and the Company competes with many other companies possessing much greater financial and technical resources. Competition is particularly intense with respect to the acquisition of desirable undeveloped gold and silver properties. The principal competitive factors in the acquisition of prospective properties include the staff and data necessary to identify and investigate such properties, and the financial resources necessary to acquire and develop the projects. Competition could adversely affect the Company’s ability to acquire suitable prospects for exploration.

Q. Licenses and Permits

The operations of the Company require licenses and permits from various government authorities. The Company believes that it holds all necessary licenses and permits under applicable laws and regulations for work in progress and believes it is presently complying in all material respects with the terms of such licenses and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that the Company will be able to obtain or maintain all necessary licenses and permits that may be required to explore and develop its properties, commence construction or operation of mining facilities or to maintain continued operations that economically justify the cost.

R. Whistleblower Policy

Effective June 30, 2005, the audit committee adopted resolutions that authorized the establishment of procedures for complaints received regarding accounting, internal controls or auditing matters, and for a confidential, anonymous submission procedure for employees who have concerns regarding questionable accounting or auditing matters. The implementation of the whistleblower policy is in accordance with new requirements pursuant to Multilateral Instrument 52-110 Audit Committees, National Policy 58-201 Corporate Governance Guidelines and National Instrument 58-101 Disclosure of Corporate Governance Practices.



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

S. Forward-Looking Statements

Some of the statements contained in this MD&A are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur.

Forward-looking statements may be identified by such terms as “believes”, “anticipates”, “expects”, “estimates”, “may”, “could”, “would”, “will”, or “plan”. Such forward-looking statements are made pursuant to the safe harbour provisions of the United States Private Securities Litigation Reform Act of 1995. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties.

Actual results relating to, among other things, results of exploration, reclamation, capital costs, and the Company’s financial condition and prospects, could differ materially from those currently anticipated in such statements for many reasons such as; changes in general economic conditions and conditions in the financial markets; changes in demand and prices for the minerals the Company expects to produce;, litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; technological and operational difficulties encountered in connection with the Company’s activities; and changing foreign exchange rates and other matters discussed in this MD&A.

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on the Company’s forward-looking statements. Further information regarding these and other factors, which may cause results to differ materially from those projected in forward-looking statements, are included in the filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time by the Company or on its behalf, except in accordance with applicable securities laws.


1550 – 1185 West Georgia Street,
Vancouver, BC, V6E 4E6
Tel: 604-684-9384 Fax: 604-688-4670
www.quaterraresources.com

Consolidated Audited Financial Statements

December 31, 2006 and 2005



Management’s Responsibility for Financial Reporting

The accompanying consolidated financial statements of Quaterra Resources Inc. have been prepared by management in accordance with Canadian generally accepted accounting principles. The financial information contained elsewhere in this report has been reviewed to ensure consistency with the financial statements.

Management maintains systems of internal control designed to provide reasonable assurance that the assets are safeguarded. All transactions are authorized and duly recorded, and financial records are properly maintained to facilitate financial statements in a timely manner. The Board of Directors is responsible for ensuring that management fulfils its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the financial statements. The Board carries out this responsibility principally through its Audit Committee.

The Audit Committee of the Board of Directors has reviewed the financial statements with management and the external auditors. Smythe Ratcliffe LLP, an independent firm of chartered accountants, appointed as external auditors by the shareholders, have audited the consolidated financial statements and their report is included herein.

/s/ Thomas C. Patton   /s/ Scott Hean
Thomas C. Patton   Scott Hean
President and Chief Executive Officer   Chief Financial Officer
     
     
Vancouver, British Columbia    
March 12, 2007    


Smythe Ratcliffe LLP

7th Floor, Marine Building

355 Burrard Street

Vancouver, BC V6C 2G8

     fax: 604.688.4675

telephone: 604.687.1231

Auditor’s Report

To the Shareholders of Quaterra Resources Inc.

We have audited the consolidated balance sheets of Quaterra Resources Inc. as at December 31, 2006 and 2005 and the consolidated statements of operations and deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2006 and 2005 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

“Smythe Ratcliffe LLP” (signed)


Chartered Accountants

Vancouver, British Columbia
March 12, 2007


Quaterra Resource Inc.
Consolidated Balance Sheets as at December 31, 2006 and 2005 (Canadian Dollars)

                 
        2006     2005  
                 
Assets                
Current                
Cash and cash equivalents      $ 9,112,732   $  1,786,298  
Receivables       56,592     62,206  
Prepaid and deposits       70,486     -  
Amount due from Joint Venture Partner Note 5 (a)   113,430     177,799  
                 
        9,353,240     2,026,303  
                 
Equipment Note 4     51,574     33,600  
Mineral properties Note 5     7,855,832     3,756,883  
Reclamation bonds       79,898     39,061  
                 
       $ 17,340,544   $  5,855,847  
                 
Liabilities                
Current                
Accounts payable and accrued liabilities      $ 251,311   $  315,428  
Due to related parties Note 6     26,216     13,010  
                 
        277,527     328,438  
                 
Shareholders' Equity                
Share capital Note 7 (b)   27,861,058     15,172,975  
Subscriptions receivable       (17,500 )   -  
Contributed surplus Note 7 (b)   3,709,557     1,013,998  
Deficit       (14,490,098 )   (10,659,564 )
                 
        17,063,017     5,527,409  
                 
       $ 17,340,544   $  5,855,847  

Nature of Operations (Note 1)
Subsequent events (Note 11)

Approved on behalf of the Board of Directors:

/s/ Thomas Patton   /s/ Robert Gayton
Thomas Patton   Robert Gayton

See notes to consolidated financial statements


Quaterra Resource Inc.
Consolidated Statements of Operations and Deficit for the years ended December 31, 2006 and 2005 (Canadian Dollars)

                 
        2006     2005  
                 
Expenses                
       Administration      $ 60,000   $  60,000  
       Amortization       9,991     -  
       Consulting Note 7 (g)   1,581,859     111,586  
       Directors' and officers' fees Note 7 (g)   755,322     199,555  
       Investor relations       144,858     71,630  
       Office and general       161,940     62,159  
       Professional fees       139,712     89,863  
       Regulatory fees and taxes       16,723     19,490  
       Shareholders' communications       15,522     20,931  
       Transfer agent       15,567     10,014  
       Travel and promotion       71,679     14,850  
       Wages and benefits Note 7 (g)   880,247     68,269  
       Less cost recovery       (42,975 )   -  
                 
        3,810,445     728,347  
                 
Other Items                
       Interest income       (85,988 )   (36,135 )
       Foreign exchange (gain) loss       (79,449 )   125,907  
       General exploration       225,855     2,441  
       Option payment received Note 5 (g)   -     (35,000 )
       Write off of reclamation deposit       -     2,500  
       Expense recovery       (40,329 )   -  
                 
        20,089     59,713  
                 
Net Loss for Year       3,830,534     788,060  
Deficit, Beginning of Year       10,659,564     9,871,504  
                 
Deficit, End of Year      $ 14,490,098   $  10,659,564  
                 
Loss per share - basic and diluted      $ 0.05   $  0.01  
Weighted average number of common shares outstanding     69,964,072     60,318,200  

See notes to consolidated financial statements


Quaterra Resource Inc.
Consolidated Statements of Cash Flows for the years ended December 31, 2006 and 2005.
(Canadian Dollars)

                 
Cash provided by (used for):       2006     2005  
                 
Operating Activities                
Net loss for the year      $ (3,830,534 ) $  (788,060 )
Items not involving cash:                
     Amortization       9,991     -  
     Stock-based compensation Note 7 (g)   3,045,004     330,842  
     Write off of reclamation bond       -     2,500  
Operating Cash Flow       (775,539 )   (454,718 )
Changes in Non-Cash Working Capital                
     Accounts receivables       5,614     -  
     Prepaid and deposits       (70,486 )   (54,310 )
     Accounts payable and accrued liabilities       (219,639 )   99,775  
     Due to related parties       13,206     (5,925 )
        (271,305 )   39,540  
Cash Used in Operating Activities       (1,046,844 )   (415,178 )
Investing Activities                
     Expenditures on mineral properties       (3,335,212 )   (1,695,212 )
     Due from Joint Venture partner Note 5 (a)   64,369     (177,799 )
     Purchase of equipment       (30,180 )   -  
     Purchase of reclamation bonds       (40,837 )   (24,317 )
Cash Used in Investing Activities       (3,341,860 )   (1,897,328 )
Financing Activity                
     Proceeds from issuance of shares, net of share issue costs     11,715,138     2,416,145  
Increase in Cash During the Year       7,326,434     103,639  
Cash, Beginning of Year       1,786,298     1,682,659  
Cash,End of Year      $ 9,112,732   $  1,786,298  
Supplemental cash flow information (Note 10)                

See notes to consolidated financial statements



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005 (Canadian Dollars)

1.

Nature of Operations

Quaterra Resources Inc. (the “Company”) is an exploration stage enterprise incorporated under the laws of British Columbia. The Company and its subsidiaries are engaged in the acquisition, exploration and development of precious metal properties and does not have any mineral properties in production. The Company has not determined whether these mineral properties contain ore reserves that are economically recoverable. The ability of the Company to meet its commitments as they become due, including completion of the acquisition, exploration and development of its mineral properties, is dependent on the Company’s ability to obtain the necessary financing.

2.

Summary of Significant Accounting Policies


  (a)

Basis of Presentation and Consolidation

The consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles and include the accounts of the Company and its wholly-owned subsidiaries:

  (i)

Minera Agua Tierra S.A. de C.V., incorporated in Mexico;

  (ii)

Quaterra Alaska, Inc., incorporated in Alaska, USA;

  (iii)

Quaterra International Limited, incorporated in the British Virgin Islands;

  (iv)

QTA International Nieves Limited, incorporated in the British Virgin Islands; and

  (v)

Minera Nieves S.A. de C.V., incorporated in Mexico.

All intercompany accounts and transactions were eliminated upon consolidation.

  (b)

Mineral Properties

All costs related to the acquisition, exploration and development of mineral properties are capitalized until such time as these mineral properties are placed into commercial production, sold or abandoned. If commercial production is achieved from a mineral property, the related capitalized costs will be amortized prospectively on a unit-of-production basis over the estimated life of the ore reserves. If a mineral property is abandoned, the related capitalized costs are written down and expensed. From time to time, the Company may acquire or dispose of all or part of its mineral property interests under the terms of property option agreements. As such options are exercisable entirely at the discretion of the optionee, option payments are recorded as property costs or recoveries when paid or received.



Quaterra Resources Inc.
Notes to the consolidated financial statements
Years ended December 31, 2006 and 2005

2.

Summary of Significant Accounting Policies, continued


  (b)

Mineral Properties, continued

The recoverability of amounts shown for mineral properties is dependent upon the Company’s ability to:

  (i)

Obtain the necessary financing to complete the acquisition, exploration and development of its mineral properties.

  (ii)

Enter into mineral property acquisition, joint venture or option agreements with other entities.

  (iii)

Discover economically recoverable reserves within its mineral properties.

  (iv)

Obtain future profitable production from its mineral properties or sufficient proceeds from the disposition thereof.

On an ongoing basis, the Company evaluates each mineral property for potential impairment based on results obtained to date to determine the nature of exploration, other assessment and development work, if any, that is warranted in the future and the potential for recovery of the capitalized costs. If there is little prospect of future work on a property being carried out within a three-year period from completion of previous activities, the deferred costs related to that property are written down to the estimated amount recoverable unless there is persuasive evidence that an impairment allowance is not required. The amounts capitalized for mineral properties represent costs incurred to date less write-downs, and are not intended to reflect present or future values.

  (c)

Cash and Cash Equivalents

Cash and cash equivalents include highly-liquid investments that are readily convertible to cash and generally have maturities of three months or less from the date acquired.

  (d)

Foreign Currency

The consolidated financial statements are presented in Canadian dollars. Accounts of the Company’s foreign operations have been translated into Canadian dollars as follows:

  (i)

Monetary assets and liabilities, at year-end rates.

  (ii)

All other assets and liabilities, at historical rates.

  (iii)

Revenue and expense items, at the average rates of exchange each quarter.

The effects of translation are credited or charged to the statement of operations as foreign exchange gain or loss.



Quaterra Resources Inc.
Notes to the consolidated financial statements
Years ended December 31, 2006 and 2005

2.

Summary of Significant Accounting Policies, continued


  (e)

Equipment

Equipment is carried at cost less accumulated amortization. Amortization is calculated over the estimated useful life of the assets using the declining-balance method at an annual rate of 30% for vehicles and equipment, 45% for computers and 75% for software. One-half of the annual rate is used in the year of acquisition.

  (f)

Asset Retirement Obligations

The Company recognizes an estimate of the liability associated with an asset retirement obligation (“ARO”) at the time the liability is incurred. The estimated fair value of the ARO is recorded as a long-term liability, with a corresponding increase in the carrying amount of the related asset. The capitalized amount is depleted on a unit-of-production basis over the life of the proved reserves. The liability amount is increased each reporting period due to the passage of time and the amount of accretion is charged to earnings in the period. The ARO can also increase or decrease due to changes in the estimates of timing of cash flows or changes in the original estimated undiscounted cost. Actual costs incurred upon settlement of the ARO are charged against the ARO to the extent of the liability recorded.

  (g)

Share Capital

The proceeds from the exercise of stock options and share purchase warrants are recorded as share capital. Common shares issued for non-monetary consideration are recorded at an amount based on fair market value at the time of issuance reduced by estimated transaction costs, if any.

  (h)

Stock-Based Compensation

The Company accounts for stock-based compensation expense using the fair value method with respect to all stock-based payments to directors, employees and non-employees, including awards that are direct awards of stock, call for settlement in cash or other assets, or stock appreciation rights that call for settlement by the issuance of equity instruments. Under this standard stock-based payments are recorded as an expense in the period the stock-based payments are vested or the awards or rights are granted, and a corresponding increase in contributed surplus. When stock options are exercised, the corresponding fair value is transferred from contributed surplus to share capital.



Quaterra Resources Inc.
Notes to the consolidated financial statements
Years ended December 31, 2006 and 2005

2.

Summary of Significant Accounting Policies, continued


  (i)

Income Taxes

The Company follows the asset and liability method of accounting for income taxes. Under this method of tax allocation, future income tax assets and liabilities are determined based on differences between the financial statement carrying values and their respective income tax basis (temporary differences). Future income tax assets and liabilities are measured using the tax rates expected to be in effect when the temporary differences are likely to reverse. The effect on future income tax assets and liabilities of a change in tax rates is included in operations in the period in which the change is enacted or substantially assured. The amount of future income tax assets recognized is limited to the amount of the benefit that is more likely than not to be realized.

  (j)

Loss per Share

Loss per share computations are based on the weighted average number of common shares outstanding during the year. Diluted loss per share has not been presented separately, as the effects of outstanding options and warrants is anti-dilutive.

  (k)

Use of Estimates and Measurement Uncertainty

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosure of assets, liabilities, expenses, other income, and contingent assets and liabilities. Significant areas requiring the use of management estimates relate to amortization of equipment, the determination of the recoverability of mineral property costs, the valuation allowance of future tax assets and the assumptions used in the calculation of stock-based compensation. Management believes the estimates are reasonable, however, actual results could differ from those estimates and would impact on future results of operations and asset flows.

  (l)

Revenue Recognition

Interest income is recorded on an accrual basis at the stated rate of interest of the term deposit over the term to maturity.

3.

Financial Instruments


  (a)

Fair Value

The carrying values of cash and cash equivalents, receivables, amounts due from joint venture partner, accounts payable and accrued liabilities, and due to related parties approximate their fair values because of the short-term maturity of these financial instruments.



Quaterra Resources Inc.
Notes to the consolidated financial statements
Years ended December 31, 2006 and 2005

3.

Financial Instruments, continued


  (b)

Interest Rate Risk

The Company is not exposed to significant interest rate risk due to the short-term maturity of its monetary current assets and current liabilities.

  (c)

Credit Risk

The Company is exposed to credit risk with respect to managing its cash position. This risk, from deposit granting institutions and/or commercial paper issuers, is mitigated by risk management policies, which requires the deposits or short-term investments be invested with Canadian chartered banks rated BBB or better or commercial paper issuers R1/A2/P2 or higher. All investments must be less than one year in duration.

  (d)

Currency Risk

The Company is exposed to currency risk to the extent expenditures incurred or funds received by the Company are denominated in currencies other than the Canadian dollar (primarily US dollars and Mexican peso). The Company does not manage the currency risks through hedging or other currency management tools.

4.

Equipment

Equipment is carried at cost less accumulated amortization. Details of equipment are as follows:

      2006   2005  
    Costs Accumulated Net Book Net Book  
      Amortization Value Value  
             
  Vehicles $38,208 $(9,130) $29,078 $22,734  
  Equipment 23,517 (22,283) 1,234 8,222  
  Computer 3,942 (2,099) 1,843 2,644  
  Software 23,900 (4,481) 19,419 -  
             
    $89,567 $(37,993) $51,574 $33,600  



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5. Mineral Properties

The Company has interests in several mineral properties in Mexico, Alaska, Nevada, Arizona, Utah and Wyoming. The total capitalized deferred exploration and acquisition costs as at December 31, 2006 were as follows:

                                           
Mineral Properties   Nieves     Los     Duke     Big     Arizona     MacArthur      Other     Total  
          Crestones     Island     Bar     Uranium           (1)      
                                                 
Acquisition                                                
 Balance, December 31, 2005 $  1,176,381   $  59,303   $  94,205   $  16,714   $  159,171   $  30,484   $  10,977   $  1,547,235  
   Additions during the year   68,083     12,393     18,080     1,747     865,937     139,840     544,271     1,650,351  
                                                 
 Balance, December 31, 2006   1,244,464     71,696     112,285     18,461     1,025,108     170,324     555,248     3,197,586  
                                                 
Exploration                                                
 Balance, December 31, 2005   464,034     20,113     1,599,029     22,652     103,820     -     -     2,209,648  
                                                 
   Advances to contractors   (1,289 )   4,103     -     -     66,344     -     -     69,158  
   Air support   -     -     -     111,795     4,664     -     -     116,459  
   Amortization   2,215     -     -     -     -     -     -     2,215  
   Assays and surveys   7,994     13,959     -     9,636     17,611     -     8,927     58,127  
   Camp costs   4,201     17,811     34     47,567     25,160     -     620     95,393  
   Drilling services   135,855     144,665     -     155,807     277,846     -     -     714,173  
   Equipment rental   165     12,065     561     15,453     3,085     6,732     -     38,061  
   Exploration support   3,297     6,289     1,819     30,919     24,851     441     6,466     74,082  
   Field supplies and wages   18,613     128,929     8,812     107,493     13,135     18,833     1,007     296,822  
   Geological services   14,746     40,434     10,721     141,430     333,861     19,776     19,197     580,165  
   Project management   1,945     46,442     4,571     19,227     178,824     29,093     -     280,102  
   Travel and related costs   2,360     9,762     -     16,789     27,414     5,142     5,076     66,543  
   Vehicle expenses   2,155     18,018     4     33,345     2,634     574     568     57,298  
                                                 
 Net additions during the year   192,257     442,477     26,522     689,461     975,429     80,591     41,861     2,448,598  
                                                 
 Balance, December 31, 2006   656,291     462,590     1,625,551     712,113     1,079,249     80,591     41,861     4,658,246  
                                                 
Total acquisition and exploration at December 31, 2006 $  1,900,755   $  534,286   $  1,737,836   $  730,574   $  2,104,357   $  250,915   $  597,109   $  7,855,832  

(1)
Other properties include Utah Uranium, Wyoming Uranium, Grays Hills, Las Americas, Mirasol, Jaboncillos, Tortilla, SW Tinti Utah and Carbon County.



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5. Mineral Properties, continued

The total capitalized deferred exploration and acquisition costs as at December 31, 2005 were as follows:

Mineral Properties   Nieves     Los     Duke     Big     Arizona      MacArthur      Other     Total  
          Crestones     Island     Bar     Uranium           (1)        
                                                 
Acquisition                                                
 Balance, December 31, 2004 $  1,033,583   $  21,562   $  94,205   $  14,913   $  -   $  -    $ -    $ 1,164,263  
   Additions during the year   142,798     37,741     -     1,801     159,171     30,484     10,977     382,972  
                                                 
 Balance, December 31, 2005   1,176,381     59,303     94,205     16,714     159,171     30,484     10,977     1,547,235  
                                                 
Exploration                                                
 Balance, December 31, 2004   (202,215 )   6,280     985,669     18,950     -     -     -     808,684  
                                                 
   Advances to contractor   1,597     -     -     -     -     -     -     1,597  
   Amortization   10,016     -     -     -     -     -     -     10,016  
   Assays and surveys   322     243     7,930     -     -     -     -     8,495  
   Camp costs   7,112     -     -     -     -     -     -     7,112  
   Drilling services   438,011     -     458,107     -     -     -     -     896,118  
   Equipment rental   3,720     -     -     -     -     -     -     3,720  
   Exploration support   38,335     3,393     3,868     3,323     -     -     -     48,919  
   Field supplies and wages   67,582     -     8,238     -     3,519     -     -     79,339  
   Geological services   (18 )   -     106,763     332     69,006     -     -     176,083  
   Project management   79,877     8,816     11,504     -     -     -     -     100,197  
   Travel and related costs   9,186     1,016     16,950     47     31,295     -     -     58,494  
   Vehicle expenses   10,509     365     -     -     -     -     -     10,874  
                                                 
 Net additions during the year   666,249     13,833     613,360     3,702     103,820     -     -     1,400,964  
                                                 
 Balance, December 31, 2005   464,034     20,113     1,599,029     22,652     103,820     -     -     2,209,648  
                                                 
                                                 
Total acquisition and exploration                                                
at December 31, 2005 $  1,640,415   $  79,416   $  1,693,234   $  39,366   $  262,991   $  30,484 $     10,977    $ 3,756,883  

(1) Other is Utah Uranium.



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued

(a) Nieves Concessions, Mexico

The Company holds a 50% interest in 15 mineral concessions located in northern Zacatecas, Mexico, (the Nieves Concessions) and two inlaying fractions within the Nieves Concessions (Delores and Nazarene), collectively called Nieves.

The Company acquired an option on the property pursuant to an Assignment made March 26, 1999 of the Underlying Agreement by Western Silver Corporation (“Western”), a company with common directors and officers, to the Company.

To acquire its interest, the Company issued 1,444,460 common shares to Western valued at $288,892, issued 360,000 common shares to the concessionaires valued at $72,000 and in accordance with the terms of the Underlying Agreement made scheduled option payments to the concession holders, totalling US $70,000 over three years. In addition, to acquire the interest in the claim fractions the Company paid US $40,000 to the concessionaires. Commencing January 26, 2004, an annual advance minimum royalty payment (“AMR”) of US $75,000 is due to the concession holders until the commencement of commercial production.

The Nieves concessions are subject to a maximum 3% net smelter return royalty (“NSR”) to the original concession holders, which the Company may purchase at any time for US $2 million. In addition, Kennecott Exploration Company, the optionor in the initial Underlying Agreement, retains NSR royalties of 2% on certain core claims and 1% on certain peripheral claims.

Funds in the amount of US $1,500,000 (C $1,904,550) were advanced to the Company pursuant to the terms of an agreement made April 10, 2003 with Blackberry Ventures I, LLC (“Blackberry”), a US-based investment partnership, whereby Blackberry could earn a 50% interest in the Nieves silver property in Mexico or the Duke Island property in Alaska by providing advance funding to the Company to fund exploration expenditures.

The agreement with Blackberry stipulated that once all monies received from the advances had been incurred on exploration expenditures, Blackberry effectively exercised its option and earned a 50% interest in the Nieves property. In August 2005, the parties formed a joint venture to proceed with exploration on the property. As at December 31, 2006, Blackberry owed the Company $113,430 (2005: $177,799) for its share of joint venture exploration expenditures that have been made on the property.



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued

(b) Los Crestones Property, Mexico

The Company holds a 100% interest in a mineral concession located in northern Durango, Mexico. In April 2004, the Company issued 25,000 common shares valued at $15,000, to an individual as a finder’s fee for his role in the identification and acquisition of the property.

(c) Duke Island Property, Alaska

The Company has a 100% interest in 140 mining claims in Alaska (129 federal claims and 11 state claims) on Duke Island, which is near Ketchikan.

(d) Big Bar Property, Alaska

The Company has a 100% interest in Big Bar project, which consists of seven state mining claims on the Seward Peninsula, approximately 45 kilometers (110 miles) northeast of Nome, Alaska.

(e) Uranium Properties, Arizona, Utah and Wyoming

In an agreement made effective June 22, 2005 with North Exploration LLC, a Nevada limited partnership, the Company acquired an option to purchase mining claims situated in Arizona, Utah and Wyoming. To exercise the option, the Company is required to make staged payments totalling US $500,000 over five years and to issue 600,000 common shares over three years, as follows: TSX regulatory approval for this agreement was received on September 6, 2005.

  (i)

US $15,000 and issue 200,000 common shares on or before September 6, 2005 (Paid and issued).

  (ii)

US $25,000 and issue 200,000 common shares on or before September 6, 2006 (Paid and issued).

  (iii)

US $50,000 and issue 200,000 common shares on or before September 6, 2007.

  (iv)

US $75,000 on or before September 6, 2008.

  (v)

US $135,000 on or before September 6, 2009.

  (vi)

US $200,000 on or before September 6, 2010.

If the Company meets the above terms and conditions and elects to exercise the option, then the property may be purchased with a further payment of US $100. The agreement is subject to a 2% NSR payable upon commencement of commercial production, which the Company may reduce to 1% by purchase for US $1 million.

In an agreement made effective August 10, 2006 with Nu Star Exploration LLC, the Company acquired 18 claims in the Arizona Uranium project area.



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued


  (e)

Uranium Properties, Arizona, Utah and Wyoming, continued

Pursuant to this agreement the Company’s commitments would be as follows:

  (i)

An initial payment of US $20,000 (Paid).

  (ii)

US $30,000 on or before August 10, 2007.

  (iii)

US $40,000 on or before August 10, 2008.

  (iv)

US $100,000 on or before August 10, 2009.

This property is subject to a 4% royalty of which a 2% royalty can be bought back for $500,000.

Deferred costs on the Uranium Utah property are included in other properties in the deferred exploration tables above. The Company incurred $90,562 (2005: $10,977) in acquisition costs and $610 (2005: $Nil) in exploration expenses for a total of $91,172 (2005: $10,977).

Deferred costs on the Uranium Wyoming property are included in other properties in the deferred exploration table for the year ended December 31, 2006. The Company incurred $9,768 (2005: $Nil) in acquisition costs.

  (f)

MacArthur Claim

Pursuant to an agreement made October 2005 with North Exploration LLC, the Company acquired the right to earn an interest in 66 unpatented mining claims covering the former MacArthur copper-oxide mine, in the Yerington district of Lyon County, Nevada. To earn a 100% interest, subject to a 2% NSR, the Company is required to make staged payments totaling US $1,785,000 by January 15, 2008 as follows:

Option 1

  (i)

US $10,000 upon execution (Paid).

  (ii)

US $25,000 on or before January 15, 2006 (Paid).

  (iii)

US $75,000 on or before January 15, 2007 (Paid).

  (iv)

US $1,675,000 on or before January 15, 2008.

Alternatively, since the Company has met its obligation of US $100,000 in stage payments by January 15, 2007, and if the Company incurs US $500,000 in exploration expenditures by January 15, 2008, then the Company may elect to acquire the property by making additional payments totaling US $2,645,000 as follows:

Option 2

  (i)

US $100,000 on or before January 15, 2008.

  (ii)

US $125,000 on or before January 15, 2009.

  (iii)

US $2,420,000 on or before January 15, 2010.

The property is subject to a 2% NSR, 1% of which the Company may purchase for US $1 million.

Under an amendment dated January 17, 2007 to the original agreement made October 2005 between the Company and North Exploration LLC a sum of US $350,000 will be deducted from either of the final payments made under option one (US $1,675,000) or two (US $2,420,000) see Note 11 (d)



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued


  (g)

Other Properties

Other properties include Grays Hills, Las Americas, Mirasol, Jaboncillos, Tortilla, SW Tinti Utah and Carbon County properties as well as Utah Uranium and Wyoming Uranium previously mentioned in Note 5 (e).

Pursuant to an agreement made December 2006 with Tom Turner, the Company acquired a 100% interest in three mineral concessions (Jaboncillos, Mirasol and Las Americas) located in Mexico for consideration of 200,000 shares with a deemed value of $1.53 per share for a total of $306,000 (Note 7 (d)).

                       
  Other Mineral Properties Utah  Wyoming SW Tinti   Grays   Las Mirasol Jaboncillos    Tortilla  Carbon Total Other
    Uranium  Uranium Utah Hills Americas       Peg Leg County   properties
         $ $  $ $  $      $ $      $ $          $
                       
  Acquisition                    
       Balance, December 31, 2005 10,977 -      - - - - - -  - 10,977
         Additions during the year 79,585 9,768 33,209 25,032 118,094 112,688 107,098 57,089 1,708 544,271
                       
     Balance, December 31, 2006 90,562 9,768 33,209 25,032 118,094 112,688 107,098 57,089 1,708 555,248
                       
  Exploration                    
     Balance, December 31, 2005 - -      - - - - - -  - -
                       
         Assasys and surveys - -      - 1,833 3,409 1,519 2,070 96  - 8,927
         Camp costs - -      - 620 - - - -  - 620
         Exploration and other          610 -      456 - 17 11 20 4,555  797 6,466
         Field supplies and wages - -      - 48 220 198 541 -  - 1,007
         Geological services - -      - 14,051 411 262 9 4,464  - 19,197
         Travel and related costs - -      - 1,052 1,549 1,224 1,251 -  - 5,076
         Vehicle expenses - -      - 568 - - - -  - 568
                       
     Net additions during the year          610 -      456 18,172 5,606 3,214 3,891 9,115  797 41,861
                       
     Balance, December 31, 2006          610 -      456 18,172 5,606 3,214 3,891 9,115  797 41,861
                       
  Total acquisition and exploration 91,172 9,768 33,665 43,204 123,700 115,902 110,989 66,204 2,505 597,109

In the year ended December 31, 2005, the Company received option payments totaling $35,000 from two parties for properties known as the “Arc and Brown Claims” (5 claims) held by the Company in the Skeena Mining District of British Columbia. Since no acquisition or exploration costs relating to these claims remain deferred as part of mineral property expenditures, these payments were disclosed as a recovery of operating costs. See Note 11 (f)



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued


  (h) Title to Mineral Properties

Title to mineral properties may be affected by unregistered prior agreements or transfers, as well as undetected defects. Although the Company has verified title to its mineral properties in accordance with standard industry practices applicable for the current stage of exploration, these procedures do not guarantee the Company’s interests in its mineral properties.

(i) Environmental Expenditures

The operations of the Company may, in the future, be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company's policy is to meet or, if possible, surpass standards set by relevant legislation, by application of technically proven and economically feasible measures.

Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. Estimated future removal and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.

6.

Related Party Transactions

As at December 31, 2006, $26,216 (2005: $13,010) was due to directors or senior officers of the Company or to companies controlled by them, for various services rendered.

The following table summarizes the Company’s related party transactions for the years ended December 31, 2006 and 2005.



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

6.

Related Party Transactions, continued


                 
        2006     2005  
                 
Services                
                 Administration fee     $  60,000   $  60,000  
                 Consulting     $  87,029   $  48,568  
                 Directors' and officers' fees     $  5,625   $  -  
                 Investor relations     $  36,943   $  36,167  
                 Professional fees                
                           Accounting     $  35,391   $  36,263  
                           Legal fees     $  16,267   $  19,286  
                 Share issue costs (1 ) $  27,698   $  -  
                 Wages and benefits     $  49,746   $  -  
Cost recovery                
                 Equipment     $  1,690   $  -  
                 General exploration     $  6,412   $  1,420  
                 Office and administration     $  108,691   $  58,674  
                 Regulatory     $  3,510   $  3,144  
                 Shareholders' communications     $  547   $  -  
                 Travel and promotions     $  22,226   $  13,660  
Mineral properties                
                           Big Bar (2 ) $  14,603   $  -  
                           Arizona Uranium (2 ) $  82,758   $  16,178  
                           MacArthur (2 ) $  50,195   $  -  
                           Nieves (2 ) $  1,320   $  -  
                           Other properties (2 ) $  615   $  6,396  

  (1)

This amount has been capitalized and is included in share capital on the balance sheet

     
  (2)

These amounts have been capitalized and are included in mineral properties on the balance sheet

These transactions were made in the normal course of operations and measured at the exchange amount, which is the amount of consideration established and agreed to by the Company and related parties. They are considered related party due the following relationships to the Company:

  (a)

A private company controlled by directors or officers of the Company.

  (b)

A director or officer of the Company.

  (c)

An association of lawyers in which an officer of the Company is a member (resigned May 1, 2006).




Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital


  (a)

Authorized

The Company has unlimited authorized, without par value, common shares.

  (b)

Issued and Outstanding


                     
      Number     Total     Contributed  
      of shares           Surplus  
  Balance as at December 31, 2004   57,347,200   $  12,672,761   $  691,226  
           Issued for cash:                  
                       Private placements   6,500,000     2,275,000     -  
                       Exercised share purchase warrants   1,400,000     210,000     -  
                       Exercised stock options   75,000     9,350     -  
           Total issued for cash   7,975,000     2,494,350     -  
           Issued for mineral property acquisitions   200,000     76,000     -  
           Fair value of stock options exercised   -     8,070     (8,070 )
           Stock based compensation   -     -     330,842  
           Subtotal before share issue costs   8,175,000     2,578,420     322,772  
           Share issue costs   -     (78,206 )   -  
  Balance as at December 31, 2005   65,522,200     15,172,975     1,013,998  
           Issued for cash:                  
                       Private Placement   5,247,855     9,183,746     -  
                       Exercised share purchase warrants   3,814,281     1,907,141     -  
                       Exercised stock options   2,829,000     675,030     -  
           Total issued for cash   11,891,136     11,765,917     -  
           Issued for mineral property acquisitions   400,000     606,000     -  
           Issued for brokerage fees   291,484     510,097     -  
           Fair value of stock options exercised   -     349,445     (349,445 )
           Stock based compensation   -     -     3,045,004  
           Subtotal before share issue costs   12,582,620     13,231,459     2,695,559  
           Share issue costs   -     (543,376 )   -  
  Balance as at December 31, 2006   78,104,820   $  27,861,058   $  3,709,557  



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital, continued


  (c)

Private Placements

During the year ended December 31, 2006, the Company issued 5,247,855 units at a price of $1.75 per unit for gross proceeds of $9,183,746. Each unit consisted of one common share and one-half of one share purchase warrant, each whole warrant entitling the holder to purchase an additional common share at a price of $2.25 until expiry on June 21, 2008. The Company incurred net share issuance costs of $502,596, including 291,484 shares were issued for finders’ fees valued at $510,097, resulting in net proceeds of $8,685,262 from the private placement.

During the year ended December 31, 2005, the Company issued 6,500,000 units at a price of $0.35 per unit for gross proceeds of $2,275,000. Each unit consisted of one common share and one-half of one share purchase warrant, each whole warrant entitling the holder to purchase an additional common share at a price of $0.50 until expiry on September 27, 2007. Additional share purchase warrants were issued by the Company as finders’ fees entitling the holder to purchase an aggregate 564,280 common shares at a price of $0.50 per share until expiry on September 27, 2007. The Company incurred net share issuance costs of $78,206.

  (d)

Shares Issued for Mineral Property

During the year ended December 31, 2006, the Company issued 400,000 common shares for value at $606,000.

  (i)

200,000 common shares value at $1.50 per share, $300,000 in total, pursuant to the terms of the uranium properties agreement (Note 5 (e)).

     
  (ii)

200,000 common shares value at $1.53 per share, $306,000 in total, pursuant to the acquisition of three mineral concessions in Mexico (Note 5 (g)).

During the year ended December 31, 2005, the Company issued 200,000 common shares value at $0.38 per share, $76,000 in total, pursuant to the terms of the uranium properties agreement (Note 5 (e)).

  (e)

Share Purchase Warrants

A summary of the Company’s share purchase warrant transactions for the years ended December 31, 2006 and 2005 is as follows:



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital, continued


  (e)

Share Purchase Warrants, continued


               
  Exercise Expiry Balance Warrants Cancelled Warrants Balance
  Price Date Dec. 31, 2005 Issued or Expired Exercised Dec. 31, 2006
               
       $0.66 January 20, 2006 120,000 - 120,000 - -
       $0.50 September 27, 2007 3,250,000   - 3,250,000 -
       $0.50 September 27, 2007 564,281   - 564,281 -
       $2.25 June 21, 2008 - 2,623,928 - - 2,623,928
               
      3,934,281 2,623,928 120,000 3,814,281 2,623,928
               
  Weighted average exercise price $0.50 $2.25 $0.66 $0.50 $2.25
               
               
               
  Exercise Expiry Balance Warrants Cancelled Warrants Balance
  Price Date Dec. 31, 2004 Issued or Expired Exercised   Dec. 31, 2005  
               
       $0.15 March 3, 2005 1,400,000 - - 1,400,000 -
       $0.66 January 20, 2006 120,000 - - - 120,000
       $0.50 September 27, 2007 - 3,250,000 - - 3,250,000
       $0.50 September 27, 2007 - 564,281 - - 564,281
               
      1,520,000 3,814,281 - 1,400,000 3,934,281
               
  Weighted average exercise price $0.19 $0.50 $0.00 $0.15 $0.50

  (f)

Stock Options

As at December 31, 2006 and 2005, the Company had a stock option plan (the “Plan”), allowing for the reservation of common shares issuable under the Plan to a maximum 10% of the number of issued and outstanding common shares of the Company at any given time. The term of any stock option granted under the Plan may not exceed five years and the exercise price may not be less than the closing price of the Company’s shares on the last business day immediately preceding the date of grant, less any permitted discount. On an annual basis, the Plan requires approval by the Company’s shareholders and submission for regulatory review and acceptance.



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital, continued


  (f)

Stock Options, continued

The purpose of the Plan is to provide directors, officers, key employees and certain other persons who provided services to the Company and its subsidiaries with an increased incentive to contribute to the future success and prosperity of the Company.

As at December 31, 2006, 5,233,250 of the options outstanding were vested and exercisable and all were vested and exercisable as at December 31, 2005. Transactions for the years ended December 31, 2006 and 2005 are as follows:

               
  Exercise Expiry Balance Options Options Options Balance
  Price Date Dec. 31, 2005  Granted Cancelled/Expired   Exercised   Dec. 31, 2006  
               
  $0.15 February 8, 2006 50,000 - - 50,000 -
  $0.15 May 7, 2006 55,000 - - 55,000 -
  $0.12 June 8, 2006 515,000 - - 515,000 -
  $0.19 September 27, 2006 490,000 - - 490,000 -
  $0.12 January 10, 2008 1,591,000 - - 654,000 937,000
  $0.25 October 2, 2008 75,000 - - 25,000 50,000
  $0.34 December 8, 2008 195,000 - - 105,000 90,000
  $0.65 March 2, 2009 100,000 - 100,000 - -
  $0.62 March 25, 2009 800,000 - - 210,000 590,000
  $0.35 August 9, 2010 1,575,000 - - 725,000 850,000
  $0.40 January 9, 2011 - 200,000 - - 200,000
  $1.04 March 27, 2011 - 125,000 - - 125,000
  $1.00 May 19, 2011 - 75,000 - - 75,000
  $1.12 June 12, 2011 - 100,000 - - 100,000
  $1.55 July 28, 2011 - 2,110,000 - - 2,110,000
  $1.55 August 23, 2011 - 100,000 - - 100,000
  $1.50 September 25, 2011 - 100,000 - - 100,000
  $2.05 December 18, 2011 - 100,000 - - 100,000
               
      5,446,000 2,910,000 100,000 2,829,000 5,427,000
               
  Weighted average exercise price $0.29 $1.44 $0.65 $0.24 $0.92



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital, continued


  (f)

Stock Options, continued


               
  Exercise Expiry Balance Options Options Options Balance
  Price Date Dec. 31, 2004  Granted  Cancelled/Expired Exercised   Dec. 31, 2005  
               
  $0.15 February 8, 2006 50,000 - - - 50,000
  $0.15 May 7, 2006 55,000 - - - 55,000
  $0.12 June 8, 2006 525,000 - - 10,000 515,000
  $0.19 September 27, 2006 495,000 - - 5,000 490,000
  $0.12 January 10, 2008 1,651,000 - - 60,000 1,591,000
  $0.25 October 2, 2008 75,000 - - - 75,000
  $0.34 December 8, 2008 225,000 - 30,000 - 195,000
  $0.65 March 2, 2009 100,000 - - - 100,000
  $0.62 March 25, 2009 815,000 - 15,000 - 800,000
  $0.35 August 9, 2010 - 1,650,000 75,000 - 1,575,000
               
      3,991,000 1,650,000 120,000 75,000 5,446,000
               
  Weighted average exercise price $0.26 $0.35 $0.38 $0.12 $0.29

  (g)

Value Assigned to Stock Options

The fair value of stock options granted using the Black-Scholes option pricing model was calculated with the following weighted average assumptions:

       
    2006 2005
       
  Risk-free interest rate 4.02% 2.98%
  Expected Share price volatility 121.60% 101.97%
  Expected option life in years 3.5 2.0
  Expected dividend yield 0% 0%



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital, continued


  (g)

Value Assigned to Stock Options, continued

The total calculated fair value of options expensed during the year ended December 31, 2006 was $3,045,004 (2005: $330,842) and are included in the statement of operations as follows:

         
    2006 2005  
    Number Stock-based Number Stock-based  
    of Options Compensation of Options Compensation  
             
  Consulting 1,315,000 $ 1,476,044 300,000 $ 63,018  
  Directors' and officers' fees 725,000 749,697 950,000 199,555  
  Wages and benefits 870,000 819,263 325,000 68,269  
             
  Total 2,910,000 $ 3,045,004 1,575,000 $ 330,842  

8.

Income Taxes

The Company has approximately $3,620,000 (2005: $2,930,000) of resource deductions that have no expiry dates and are available, subject to certain restrictions, to reduce future taxable income in Canada. The Company also has the following non-capital losses available to reduce future taxable income in Canada, which expire as follows:

             
          2006  
             
    2007   $  210,000  
    2008     349,000  
    2009     235,000  
    2010     228,000  
    2014     284,000  
    2015     360,000  
    2026     698,000  
             
        $  2,364,000  



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

8.

Income Taxes, continued

The future benefits of these losses and deductions have not been recorded in the accounts. A reconciliation of income tax provision computed at statutory rates to the reported income tax provision is provided as follows:

               
      2006     2005  
               
  Loss before income taxes $ (3,830,534 ) $  (788,060 )
               
  Income tax rate   34.12%     34.12%  
  Income tax benefit computed at Canadian statutory rates $ 1,306,978   $  268,886  
  Foreign tax rates different from statutory rates   (1,946 )   (5,702 )
  Permanent differences   (1,039,788 )   (113,337 )
  Temporary difference   (2,347 )   5,679  
  Unrecognized tax losses   (262,897 )   (155,526 )
               
    $ -   $  -  

Significant components of the Company’s future income tax assets, after applying enacted corporate income tax rates, are as follows:

               
      2006     2005  
  Future income tax assets            
           Temporary differences on assets $  (410,114 ) $  291,826  
           Non-capital losses carried forward   806,499     625,633  
      396,385     917,459  
           Valuation allowance for future income tax assets   (396,385 )   (917,459 )
  Future income tax assets, net $  -   $  -  



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

9.

Segmented Information

The Company‘s non-current assets are distributed by geographic location as follows:

                                       
            2006                 2005        
      Equipment     Mineral     Reclamation     Total     Equipment     Mineral     Reclamation     Total  
            Properties     Bond                 Properties     Bond        
                                                   
  Canada $  24,997   $  -   $  -   $  24,997   $  -   $  -   $  -   $  -  
  Mexico   25,488     2,785,632     -     2,811,120     33,600     1,700,458     -     1,734,058  
  U.S.A.   1,089     5,070,200     79,898     5,151,187     -     2,056,425     39,061     2,095,486  
                                                   
    $  51,574   $ 7,855,832   $  79,898   $ 7,987,304   $  33,600   $ 3,756,883   $  39,061   $ 3,829,544  

10.

Supplemental Cash Flow Information.


               
      2006     2005  
               
  Cash Items            
         Interest received $  70,999   $  34,470  
         Share issue costs $  61,524   $  -  
  Non-Cash Items            
                   Accrued interest $  14,989   $  -  
         Financing Activities            
                   Non-cash share issue costs $  482,154   $  -  
                   Shares issued for mineral property $  606,000   $  76,000  
                   Shares issued for finders fees $  510,097   $  -  

11.

Subsequent Events

The following occurred subsequent to December 31, 2006:

  (a)

115,000 stock options were exercised for gross proceeds of $78,600 with an average price of $0.68 per share.

     
  (b)

75,000 stock options were issued with an exercise price of $2.65 and an expiry date of January 11, 2012.




Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

11.

Subsequent Events, continued


  (c)

The Company entered into a sale and purchase agreement dated January 16, 2007, with Charles Gary Clifton and North Exploration LLC, in respect to the purchase of the mining claims known as the Pit Claim in Lyon County, Nevada. Pursuant to this agreement, the Company’s commitments are as follows:


  (i)

US $43,750 on or before January 16, 2007 (Paid).

  (ii)

US $43,750 on or before April 16, 2007.

  (iii)

US $43,750 on or before July 16, 2007.

  (iv)

US $43,750 on or before October 16, 2007.

  (v)

US $43,750 on or before January 16, 2008.

  (vi)

US $43,750 on or before April 16, 2008.

  (vii)

US $43,750 on or before July 16, 2008.

  (viii)

US $43,750 on or before October 16, 2008.


  (d)

Under an amendment dated January 17, 2007 to the original agreement made October 2005 between the Company and North Exploration LLC a US $350,000 deduction will be made from the final payments, as the Company has paid this amount to Charles Gary Clifton in advance.

     
  (e)

Subject to regulatory approval the Company entered into a service agreement dated January 30, 2007, with a consultant to provide financial and advisory services. Under this agreement, the Company’s commitment is to pay a retainer of $15,000 per month starting February 1, 2007. $7,500 paid by cash and $7,500 by the issuance of common shares in the Company at the market price of the Company’s shares on the date of issuance.

     
  (f)

The option agreements for the Arc and Brown Claims, in the Skeena Mining District were terminated in accordance with their terms and the 100% interest reverted back to the Company See Note 5 (g).

     
  (g)

The following agreements were implemented as at January 1, 2007:


  (i)

The employment agreement of the VP of Exploration was renewed.

  (ii)

The management agreement with a related party was renewed.

  (iii)

A long term employment agreement for the President and Chief Executive Officer of the Company.



 

www.quaterraresources.com

 


EX-99.4 5 exhibit99-4.htm AUDITED ANNUAL FINANCIAL STATEMENTS UNDER CANADIAN GAAP FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.4


1550 – 1185 West Georgia Street,
Vancouver, BC, V6E 4E6
Tel: 604-684-9384 Fax: 604-688-4670
www.quaterraresources.com

Consolidated Audited Financial Statements

December 31, 2006 and 2005



Management’s Responsibility for Financial Reporting

The accompanying consolidated financial statements of Quaterra Resources Inc. have been prepared by management in accordance with Canadian generally accepted accounting principles. The financial information contained elsewhere in this report has been reviewed to ensure consistency with the financial statements.

Management maintains systems of internal control designed to provide reasonable assurance that the assets are safeguarded. All transactions are authorized and duly recorded, and financial records are properly maintained to facilitate financial statements in a timely manner. The Board of Directors is responsible for ensuring that management fulfils its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the financial statements. The Board carries out this responsibility principally through its Audit Committee.

The Audit Committee of the Board of Directors has reviewed the financial statements with management and the external auditors. Smythe Ratcliffe LLP, an independent firm of chartered accountants, appointed as external auditors by the shareholders, have audited the consolidated financial statements and their report is included herein.

/s/ Thomas C. Patton   /s/ Scott Hean
Thomas C. Patton   Scott Hean
President and Chief Executive Officer   Chief Financial Officer
     
     
Vancouver, British Columbia    
March 12, 2007    

Page 1 of 27


Smythe Ratcliffe LLP

7th Floor, Marine Building

355 Burrard Street

Vancouver, BC V6C 2G8

     fax: 604.688.4675

telephone: 604.687.1231

Auditor’s Report

To the Shareholders of Quaterra Resources Inc.

We have audited the consolidated balance sheets of Quaterra Resources Inc. as at December 31, 2006 and 2005 and the consolidated statements of operations and deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2006 and 2005 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

“Smythe Ratcliffe LLP” (signed)


Chartered Accountants

Vancouver, British Columbia
March 12, 2007

Page 2 of 27


Quaterra Resource Inc.
Consolidated Balance Sheets as at December 31, 2006 and 2005 (Canadian Dollars)

                 
        2006     2005  
                 
Assets                
Current                
Cash and cash equivalents      $ 9,112,732   $  1,786,298  
Receivables       56,592     62,206  
Prepaid and deposits       70,486     -  
Amount due from Joint Venture Partner Note 5 (a)   113,430     177,799  
                 
        9,353,240     2,026,303  
                 
Equipment Note 4     51,574     33,600  
Mineral properties Note 5     7,855,832     3,756,883  
Reclamation bonds       79,898     39,061  
                 
       $ 17,340,544   $  5,855,847  
                 
Liabilities                
Current                
Accounts payable and accrued liabilities      $ 251,311   $  315,428  
Due to related parties Note 6     26,216     13,010  
                 
        277,527     328,438  
                 
Shareholders' Equity                
Share capital Note 7 (b)   27,861,058     15,172,975  
Subscriptions receivable       (17,500 )   -  
Contributed surplus Note 7 (b)   3,709,557     1,013,998  
Deficit       (14,490,098 )   (10,659,564 )
                 
        17,063,017     5,527,409  
                 
       $ 17,340,544   $  5,855,847  

Nature of Operations (Note 1)
Subsequent events (Note 11)

Approved on behalf of the Board of Directors:

/s/ Thomas Patton   /s/ Robert Gayton
Thomas Patton   Robert Gayton

See notes to consolidated financial statements
Page 3 of 27


Quaterra Resource Inc.
Consolidated Statements of Operations and Deficit for the years ended December 31, 2006 and 2005 (Canadian Dollars)

                 
        2006     2005  
                 
Expenses                
       Administration      $ 60,000   $  60,000  
       Amortization       9,991     -  
       Consulting Note 7 (g)   1,581,859     111,586  
       Directors' and officers' fees Note 7 (g)   755,322     199,555  
       Investor relations       144,858     71,630  
       Office and general       161,940     62,159  
       Professional fees       139,712     89,863  
       Regulatory fees and taxes       16,723     19,490  
       Shareholders' communications       15,522     20,931  
       Transfer agent       15,567     10,014  
       Travel and promotion       71,679     14,850  
       Wages and benefits Note 7 (g)   880,247     68,269  
       Less cost recovery       (42,975 )   -  
                 
        3,810,445     728,347  
                 
Other Items                
       Interest income       (85,988 )   (36,135 )
       Foreign exchange (gain) loss       (79,449 )   125,907  
       General exploration       225,855     2,441  
       Option payment received Note 5 (g)   -     (35,000 )
       Write off of reclamation deposit       -     2,500  
       Expense recovery       (40,329 )   -  
                 
        20,089     59,713  
                 
Net Loss for Year       3,830,534     788,060  
Deficit, Beginning of Year       10,659,564     9,871,504  
                 
Deficit, End of Year      $ 14,490,098   $  10,659,564  
                 
Loss per share - basic and diluted      $ 0.05   $  0.01  
Weighted average number of common shares outstanding     69,964,072     60,318,200  

See notes to consolidated financial statements
Page 4 of 27


Quaterra Resource Inc.
Consolidated Statements of Cash Flows for the years ended December 31, 2006 and 2005.
(Canadian Dollars)

                 
Cash provided by (used for):       2006     2005  
                 
Operating Activities                
Net loss for the year      $ (3,830,534 ) $  (788,060 )
Items not involving cash:                
     Amortization       9,991     -  
     Stock-based compensation Note 7 (g)   3,045,004     330,842  
     Write off of reclamation bond       -     2,500  
Operating Cash Flow       (775,539 )   (454,718 )
Changes in Non-Cash Working Capital                
     Accounts receivables       5,614     -  
     Prepaid and deposits       (70,486 )   (54,310 )
     Accounts payable and accrued liabilities       (219,639 )   99,775  
     Due to related parties       13,206     (5,925 )
        (271,305 )   39,540  
Cash Used in Operating Activities       (1,046,844 )   (415,178 )
Investing Activities                
     Expenditures on mineral properties       (3,335,212 )   (1,695,212 )
     Due from Joint Venture partner Note 5 (a)   64,369     (177,799 )
     Purchase of equipment       (30,180 )   -  
     Purchase of reclamation bonds       (40,837 )   (24,317 )
Cash Used in Investing Activities       (3,341,860 )   (1,897,328 )
Financing Activity                
     Proceeds from issuance of shares, net of share issue costs     11,715,138     2,416,145  
Increase in Cash During the Year       7,326,434     103,639  
Cash, Beginning of Year       1,786,298     1,682,659  
Cash,End of Year      $ 9,112,732   $  1,786,298  
Supplemental cash flow information (Note 10)                

See notes to consolidated financial statements
Page 5 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005 (Canadian Dollars)

1.

Nature of Operations

Quaterra Resources Inc. (the “Company”) is an exploration stage enterprise incorporated under the laws of British Columbia. The Company and its subsidiaries are engaged in the acquisition, exploration and development of precious metal properties and does not have any mineral properties in production. The Company has not determined whether these mineral properties contain ore reserves that are economically recoverable. The ability of the Company to meet its commitments as they become due, including completion of the acquisition, exploration and development of its mineral properties, is dependent on the Company’s ability to obtain the necessary financing.

2.

Summary of Significant Accounting Policies


  (a)

Basis of Presentation and Consolidation

The consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles and include the accounts of the Company and its wholly-owned subsidiaries:

  (i)

Minera Agua Tierra S.A. de C.V., incorporated in Mexico;

  (ii)

Quaterra Alaska, Inc., incorporated in Alaska, USA;

  (iii)

Quaterra International Limited, incorporated in the British Virgin Islands;

  (iv)

QTA International Nieves Limited, incorporated in the British Virgin Islands; and

  (v)

Minera Nieves S.A. de C.V., incorporated in Mexico.

All intercompany accounts and transactions were eliminated upon consolidation.

  (b)

Mineral Properties

All costs related to the acquisition, exploration and development of mineral properties are capitalized until such time as these mineral properties are placed into commercial production, sold or abandoned. If commercial production is achieved from a mineral property, the related capitalized costs will be amortized prospectively on a unit-of-production basis over the estimated life of the ore reserves. If a mineral property is abandoned, the related capitalized costs are written down and expensed. From time to time, the Company may acquire or dispose of all or part of its mineral property interests under the terms of property option agreements. As such options are exercisable entirely at the discretion of the optionee, option payments are recorded as property costs or recoveries when paid or received.

Page 6 of 27



Quaterra Resources Inc.
Notes to the consolidated financial statements
Years ended December 31, 2006 and 2005

2.

Summary of Significant Accounting Policies, continued


  (b)

Mineral Properties, continued

The recoverability of amounts shown for mineral properties is dependent upon the Company’s ability to:

  (i)

Obtain the necessary financing to complete the acquisition, exploration and development of its mineral properties.

  (ii)

Enter into mineral property acquisition, joint venture or option agreements with other entities.

  (iii)

Discover economically recoverable reserves within its mineral properties.

  (iv)

Obtain future profitable production from its mineral properties or sufficient proceeds from the disposition thereof.

On an ongoing basis, the Company evaluates each mineral property for potential impairment based on results obtained to date to determine the nature of exploration, other assessment and development work, if any, that is warranted in the future and the potential for recovery of the capitalized costs. If there is little prospect of future work on a property being carried out within a three-year period from completion of previous activities, the deferred costs related to that property are written down to the estimated amount recoverable unless there is persuasive evidence that an impairment allowance is not required. The amounts capitalized for mineral properties represent costs incurred to date less write-downs, and are not intended to reflect present or future values.

  (c)

Cash and Cash Equivalents

Cash and cash equivalents include highly-liquid investments that are readily convertible to cash and generally have maturities of three months or less from the date acquired.

  (d)

Foreign Currency

The consolidated financial statements are presented in Canadian dollars. Accounts of the Company’s foreign operations have been translated into Canadian dollars as follows:

  (i)

Monetary assets and liabilities, at year-end rates.

  (ii)

All other assets and liabilities, at historical rates.

  (iii)

Revenue and expense items, at the average rates of exchange each quarter.

The effects of translation are credited or charged to the statement of operations as foreign exchange gain or loss.

Page 7 of 27



Quaterra Resources Inc.
Notes to the consolidated financial statements
Years ended December 31, 2006 and 2005

2.

Summary of Significant Accounting Policies, continued


  (e)

Equipment

Equipment is carried at cost less accumulated amortization. Amortization is calculated over the estimated useful life of the assets using the declining-balance method at an annual rate of 30% for vehicles and equipment, 45% for computers and 75% for software. One-half of the annual rate is used in the year of acquisition.

  (f)

Asset Retirement Obligations

The Company recognizes an estimate of the liability associated with an asset retirement obligation (“ARO”) at the time the liability is incurred. The estimated fair value of the ARO is recorded as a long-term liability, with a corresponding increase in the carrying amount of the related asset. The capitalized amount is depleted on a unit-of-production basis over the life of the proved reserves. The liability amount is increased each reporting period due to the passage of time and the amount of accretion is charged to earnings in the period. The ARO can also increase or decrease due to changes in the estimates of timing of cash flows or changes in the original estimated undiscounted cost. Actual costs incurred upon settlement of the ARO are charged against the ARO to the extent of the liability recorded.

  (g)

Share Capital

The proceeds from the exercise of stock options and share purchase warrants are recorded as share capital. Common shares issued for non-monetary consideration are recorded at an amount based on fair market value at the time of issuance reduced by estimated transaction costs, if any.

  (h)

Stock-Based Compensation

The Company accounts for stock-based compensation expense using the fair value method with respect to all stock-based payments to directors, employees and non-employees, including awards that are direct awards of stock, call for settlement in cash or other assets, or stock appreciation rights that call for settlement by the issuance of equity instruments. Under this standard stock-based payments are recorded as an expense in the period the stock-based payments are vested or the awards or rights are granted, and a corresponding increase in contributed surplus. When stock options are exercised, the corresponding fair value is transferred from contributed surplus to share capital.

Page 8 of 27



Quaterra Resources Inc.
Notes to the consolidated financial statements
Years ended December 31, 2006 and 2005

2.

Summary of Significant Accounting Policies, continued


  (i)

Income Taxes

The Company follows the asset and liability method of accounting for income taxes. Under this method of tax allocation, future income tax assets and liabilities are determined based on differences between the financial statement carrying values and their respective income tax basis (temporary differences). Future income tax assets and liabilities are measured using the tax rates expected to be in effect when the temporary differences are likely to reverse. The effect on future income tax assets and liabilities of a change in tax rates is included in operations in the period in which the change is enacted or substantially assured. The amount of future income tax assets recognized is limited to the amount of the benefit that is more likely than not to be realized.

  (j)

Loss per Share

Loss per share computations are based on the weighted average number of common shares outstanding during the year. Diluted loss per share has not been presented separately, as the effects of outstanding options and warrants is anti-dilutive.

  (k)

Use of Estimates and Measurement Uncertainty

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosure of assets, liabilities, expenses, other income, and contingent assets and liabilities. Significant areas requiring the use of management estimates relate to amortization of equipment, the determination of the recoverability of mineral property costs, the valuation allowance of future tax assets and the assumptions used in the calculation of stock-based compensation. Management believes the estimates are reasonable, however, actual results could differ from those estimates and would impact on future results of operations and asset flows.

  (l)

Revenue Recognition

Interest income is recorded on an accrual basis at the stated rate of interest of the term deposit over the term to maturity.

3.

Financial Instruments


  (a)

Fair Value

The carrying values of cash and cash equivalents, receivables, amounts due from joint venture partner, accounts payable and accrued liabilities, and due to related parties approximate their fair values because of the short-term maturity of these financial instruments.

Page 9 of 27



Quaterra Resources Inc.
Notes to the consolidated financial statements
Years ended December 31, 2006 and 2005

3.

Financial Instruments, continued


  (b)

Interest Rate Risk

The Company is not exposed to significant interest rate risk due to the short-term maturity of its monetary current assets and current liabilities.

  (c)

Credit Risk

The Company is exposed to credit risk with respect to managing its cash position. This risk, from deposit granting institutions and/or commercial paper issuers, is mitigated by risk management policies, which requires the deposits or short-term investments be invested with Canadian chartered banks rated BBB or better or commercial paper issuers R1/A2/P2 or higher. All investments must be less than one year in duration.

  (d)

Currency Risk

The Company is exposed to currency risk to the extent expenditures incurred or funds received by the Company are denominated in currencies other than the Canadian dollar (primarily US dollars and Mexican peso). The Company does not manage the currency risks through hedging or other currency management tools.

4.

Equipment

Equipment is carried at cost less accumulated amortization. Details of equipment are as follows:

      2006   2005  
    Costs Accumulated Net Book Net Book  
      Amortization Value Value  
             
  Vehicles $38,208 $(9,130) $29,078 $22,734  
  Equipment 23,517 (22,283) 1,234 8,222  
  Computer 3,942 (2,099) 1,843 2,644  
  Software 23,900 (4,481) 19,419 -  
             
    $89,567 $(37,993) $51,574 $33,600  

Page 10 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5. Mineral Properties

The Company has interests in several mineral properties in Mexico, Alaska, Nevada, Arizona, Utah and Wyoming. The total capitalized deferred exploration and acquisition costs as at December 31, 2006 were as follows:

                                           
Mineral Properties   Nieves     Los     Duke     Big     Arizona     MacArthur      Other     Total  
          Crestones     Island     Bar     Uranium           (1)      
                                                 
Acquisition                                                
 Balance, December 31, 2005 $  1,176,381   $  59,303   $  94,205   $  16,714   $  159,171   $  30,484   $  10,977   $  1,547,235  
   Additions during the year   68,083     12,393     18,080     1,747     865,937     139,840     544,271     1,650,351  
                                                 
 Balance, December 31, 2006   1,244,464     71,696     112,285     18,461     1,025,108     170,324     555,248     3,197,586  
                                                 
Exploration                                                
 Balance, December 31, 2005   464,034     20,113     1,599,029     22,652     103,820     -     -     2,209,648  
                                                 
   Advances to contractors   (1,289 )   4,103     -     -     66,344     -     -     69,158  
   Air support   -     -     -     111,795     4,664     -     -     116,459  
   Amortization   2,215     -     -     -     -     -     -     2,215  
   Assays and surveys   7,994     13,959     -     9,636     17,611     -     8,927     58,127  
   Camp costs   4,201     17,811     34     47,567     25,160     -     620     95,393  
   Drilling services   135,855     144,665     -     155,807     277,846     -     -     714,173  
   Equipment rental   165     12,065     561     15,453     3,085     6,732     -     38,061  
   Exploration support   3,297     6,289     1,819     30,919     24,851     441     6,466     74,082  
   Field supplies and wages   18,613     128,929     8,812     107,493     13,135     18,833     1,007     296,822  
   Geological services   14,746     40,434     10,721     141,430     333,861     19,776     19,197     580,165  
   Project management   1,945     46,442     4,571     19,227     178,824     29,093     -     280,102  
   Travel and related costs   2,360     9,762     -     16,789     27,414     5,142     5,076     66,543  
   Vehicle expenses   2,155     18,018     4     33,345     2,634     574     568     57,298  
                                                 
 Net additions during the year   192,257     442,477     26,522     689,461     975,429     80,591     41,861     2,448,598  
                                                 
 Balance, December 31, 2006   656,291     462,590     1,625,551     712,113     1,079,249     80,591     41,861     4,658,246  
                                                 
Total acquisition and exploration at December 31, 2006 $  1,900,755   $  534,286   $  1,737,836   $  730,574   $  2,104,357   $  250,915   $  597,109   $  7,855,832  

(1)
Other properties include Utah Uranium, Wyoming Uranium, Grays Hills, Las Americas, Mirasol, Jaboncillos, Tortilla, SW Tinti Utah and Carbon County.

Page 11 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5. Mineral Properties, continued

The total capitalized deferred exploration and acquisition costs as at December 31, 2005 were as follows:

Mineral Properties   Nieves     Los     Duke     Big     Arizona      MacArthur      Other     Total  
          Crestones     Island     Bar     Uranium           (1)        
                                                 
Acquisition                                                
 Balance, December 31, 2004 $  1,033,583   $  21,562   $  94,205   $  14,913   $  -   $  -    $ -    $ 1,164,263  
   Additions during the year   142,798     37,741     -     1,801     159,171     30,484     10,977     382,972  
                                                 
 Balance, December 31, 2005   1,176,381     59,303     94,205     16,714     159,171     30,484     10,977     1,547,235  
                                                 
Exploration                                                
 Balance, December 31, 2004   (202,215 )   6,280     985,669     18,950     -     -     -     808,684  
                                                 
   Advances to contractor   1,597     -     -     -     -     -     -     1,597  
   Amortization   10,016     -     -     -     -     -     -     10,016  
   Assays and surveys   322     243     7,930     -     -     -     -     8,495  
   Camp costs   7,112     -     -     -     -     -     -     7,112  
   Drilling services   438,011     -     458,107     -     -     -     -     896,118  
   Equipment rental   3,720     -     -     -     -     -     -     3,720  
   Exploration support   38,335     3,393     3,868     3,323     -     -     -     48,919  
   Field supplies and wages   67,582     -     8,238     -     3,519     -     -     79,339  
   Geological services   (18 )   -     106,763     332     69,006     -     -     176,083  
   Project management   79,877     8,816     11,504     -     -     -     -     100,197  
   Travel and related costs   9,186     1,016     16,950     47     31,295     -     -     58,494  
   Vehicle expenses   10,509     365     -     -     -     -     -     10,874  
                                                 
 Net additions during the year   666,249     13,833     613,360     3,702     103,820     -     -     1,400,964  
                                                 
 Balance, December 31, 2005   464,034     20,113     1,599,029     22,652     103,820     -     -     2,209,648  
                                                 
                                                 
Total acquisition and exploration                                                
at December 31, 2005 $  1,640,415   $  79,416   $  1,693,234   $  39,366   $  262,991   $  30,484 $     10,977    $ 3,756,883  

(1) Other is Utah Uranium.

Page 12 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued

(a) Nieves Concessions, Mexico

The Company holds a 50% interest in 15 mineral concessions located in northern Zacatecas, Mexico, (the Nieves Concessions) and two inlaying fractions within the Nieves Concessions (Delores and Nazarene), collectively called Nieves.

The Company acquired an option on the property pursuant to an Assignment made March 26, 1999 of the Underlying Agreement by Western Silver Corporation (“Western”), a company with common directors and officers, to the Company.

To acquire its interest, the Company issued 1,444,460 common shares to Western valued at $288,892, issued 360,000 common shares to the concessionaires valued at $72,000 and in accordance with the terms of the Underlying Agreement made scheduled option payments to the concession holders, totalling US $70,000 over three years. In addition, to acquire the interest in the claim fractions the Company paid US $40,000 to the concessionaires. Commencing January 26, 2004, an annual advance minimum royalty payment (“AMR”) of US $75,000 is due to the concession holders until the commencement of commercial production.

The Nieves concessions are subject to a maximum 3% net smelter return royalty (“NSR”) to the original concession holders, which the Company may purchase at any time for US $2 million. In addition, Kennecott Exploration Company, the optionor in the initial Underlying Agreement, retains NSR royalties of 2% on certain core claims and 1% on certain peripheral claims.

Funds in the amount of US $1,500,000 (C $1,904,550) were advanced to the Company pursuant to the terms of an agreement made April 10, 2003 with Blackberry Ventures I, LLC (“Blackberry”), a US-based investment partnership, whereby Blackberry could earn a 50% interest in the Nieves silver property in Mexico or the Duke Island property in Alaska by providing advance funding to the Company to fund exploration expenditures.

The agreement with Blackberry stipulated that once all monies received from the advances had been incurred on exploration expenditures, Blackberry effectively exercised its option and earned a 50% interest in the Nieves property. In August 2005, the parties formed a joint venture to proceed with exploration on the property. As at December 31, 2006, Blackberry owed the Company $113,430 (2005: $177,799) for its share of joint venture exploration expenditures that have been made on the property.

Page 13 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued

(b) Los Crestones Property, Mexico

The Company holds a 100% interest in a mineral concession located in northern Durango, Mexico. In April 2004, the Company issued 25,000 common shares valued at $15,000, to an individual as a finder’s fee for his role in the identification and acquisition of the property.

(c) Duke Island Property, Alaska

The Company has a 100% interest in 140 mining claims in Alaska (129 federal claims and 11 state claims) on Duke Island, which is near Ketchikan.

(d) Big Bar Property, Alaska

The Company has a 100% interest in Big Bar project, which consists of seven state mining claims on the Seward Peninsula, approximately 45 kilometers (110 miles) northeast of Nome, Alaska.

(e) Uranium Properties, Arizona, Utah and Wyoming

In an agreement made effective June 22, 2005 with North Exploration LLC, a Nevada limited partnership, the Company acquired an option to purchase mining claims situated in Arizona, Utah and Wyoming. To exercise the option, the Company is required to make staged payments totalling US $500,000 over five years and to issue 600,000 common shares over three years, as follows: TSX regulatory approval for this agreement was received on September 6, 2005.

  (i)

US $15,000 and issue 200,000 common shares on or before September 6, 2005 (Paid and issued).

  (ii)

US $25,000 and issue 200,000 common shares on or before September 6, 2006 (Paid and issued).

  (iii)

US $50,000 and issue 200,000 common shares on or before September 6, 2007.

  (iv)

US $75,000 on or before September 6, 2008.

  (v)

US $135,000 on or before September 6, 2009.

  (vi)

US $200,000 on or before September 6, 2010.

If the Company meets the above terms and conditions and elects to exercise the option, then the property may be purchased with a further payment of US $100. The agreement is subject to a 2% NSR payable upon commencement of commercial production, which the Company may reduce to 1% by purchase for US $1 million.

In an agreement made effective August 10, 2006 with Nu Star Exploration LLC, the Company acquired 18 claims in the Arizona Uranium project area.

Page 14 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued


  (e)

Uranium Properties, Arizona, Utah and Wyoming, continued

Pursuant to this agreement the Company’s commitments would be as follows:

  (i)

An initial payment of US $20,000 (Paid).

  (ii)

US $30,000 on or before August 10, 2007.

  (iii)

US $40,000 on or before August 10, 2008.

  (iv)

US $100,000 on or before August 10, 2009.

This property is subject to a 4% royalty of which a 2% royalty can be bought back for $500,000.

Deferred costs on the Uranium Utah property are included in other properties in the deferred exploration tables above. The Company incurred $90,562 (2005: $10,977) in acquisition costs and $610 (2005: $Nil) in exploration expenses for a total of $91,172 (2005: $10,977).

Deferred costs on the Uranium Wyoming property are included in other properties in the deferred exploration table for the year ended December 31, 2006. The Company incurred $9,768 (2005: $Nil) in acquisition costs.

  (f)

MacArthur Claim

Pursuant to an agreement made October 2005 with North Exploration LLC, the Company acquired the right to earn an interest in 66 unpatented mining claims covering the former MacArthur copper-oxide mine, in the Yerington district of Lyon County, Nevada. To earn a 100% interest, subject to a 2% NSR, the Company is required to make staged payments totaling US $1,785,000 by January 15, 2008 as follows:

Option 1

  (i)

US $10,000 upon execution (Paid).

  (ii)

US $25,000 on or before January 15, 2006 (Paid).

  (iii)

US $75,000 on or before January 15, 2007 (Paid).

  (iv)

US $1,675,000 on or before January 15, 2008.

Alternatively, since the Company has met its obligation of US $100,000 in stage payments by January 15, 2007, and if the Company incurs US $500,000 in exploration expenditures by January 15, 2008, then the Company may elect to acquire the property by making additional payments totaling US $2,645,000 as follows:

Option 2

  (i)

US $100,000 on or before January 15, 2008.

  (ii)

US $125,000 on or before January 15, 2009.

  (iii)

US $2,420,000 on or before January 15, 2010.

The property is subject to a 2% NSR, 1% of which the Company may purchase for US $1 million.

Under an amendment dated January 17, 2007 to the original agreement made October 2005 between the Company and North Exploration LLC a sum of US $350,000 will be deducted from either of the final payments made under option one (US $1,675,000) or two (US $2,420,000) see Note 11 (d)

Page 15 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued


  (g)

Other Properties

Other properties include Grays Hills, Las Americas, Mirasol, Jaboncillos, Tortilla, SW Tinti Utah and Carbon County properties as well as Utah Uranium and Wyoming Uranium previously mentioned in Note 5 (e).

Pursuant to an agreement made December 2006 with Tom Turner, the Company acquired a 100% interest in three mineral concessions (Jaboncillos, Mirasol and Las Americas) located in Mexico for consideration of 200,000 shares with a deemed value of $1.53 per share for a total of $306,000 (Note 7 (d)).

                       
  Other Mineral Properties Utah  Wyoming SW Tinti   Grays   Las Mirasol Jaboncillos    Tortilla  Carbon Total Other
    Uranium  Uranium Utah Hills Americas       Peg Leg County   properties
         $ $  $ $  $      $ $      $ $          $
                       
  Acquisition                    
       Balance, December 31, 2005 10,977 -      - - - - - -  - 10,977
         Additions during the year 79,585 9,768 33,209 25,032 118,094 112,688 107,098 57,089 1,708 544,271
                       
     Balance, December 31, 2006 90,562 9,768 33,209 25,032 118,094 112,688 107,098 57,089 1,708 555,248
                       
  Exploration                    
     Balance, December 31, 2005 - -      - - - - - -  - -
                       
         Assasys and surveys - -      - 1,833 3,409 1,519 2,070 96  - 8,927
         Camp costs - -      - 620 - - - -  - 620
         Exploration and other          610 -      456 - 17 11 20 4,555  797 6,466
         Field supplies and wages - -      - 48 220 198 541 -  - 1,007
         Geological services - -      - 14,051 411 262 9 4,464  - 19,197
         Travel and related costs - -      - 1,052 1,549 1,224 1,251 -  - 5,076
         Vehicle expenses - -      - 568 - - - -  - 568
                       
     Net additions during the year          610 -      456 18,172 5,606 3,214 3,891 9,115  797 41,861
                       
     Balance, December 31, 2006          610 -      456 18,172 5,606 3,214 3,891 9,115  797 41,861
                       
  Total acquisition and exploration 91,172 9,768 33,665 43,204 123,700 115,902 110,989 66,204 2,505 597,109

In the year ended December 31, 2005, the Company received option payments totaling $35,000 from two parties for properties known as the “Arc and Brown Claims” (5 claims) held by the Company in the Skeena Mining District of British Columbia. Since no acquisition or exploration costs relating to these claims remain deferred as part of mineral property expenditures, these payments were disclosed as a recovery of operating costs. See Note 11 (f)

Page 16 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

5.

Mineral Properties, continued


  (h) Title to Mineral Properties

Title to mineral properties may be affected by unregistered prior agreements or transfers, as well as undetected defects. Although the Company has verified title to its mineral properties in accordance with standard industry practices applicable for the current stage of exploration, these procedures do not guarantee the Company’s interests in its mineral properties.

(i) Environmental Expenditures

The operations of the Company may, in the future, be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company's policy is to meet or, if possible, surpass standards set by relevant legislation, by application of technically proven and economically feasible measures.

Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. Estimated future removal and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.

6.

Related Party Transactions

As at December 31, 2006, $26,216 (2005: $13,010) was due to directors or senior officers of the Company or to companies controlled by them, for various services rendered.

The following table summarizes the Company’s related party transactions for the years ended December 31, 2006 and 2005.

Page 17 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

6.

Related Party Transactions, continued


                 
        2006     2005  
                 
Services                
                 Administration fee     $  60,000   $  60,000  
                 Consulting     $  87,029   $  48,568  
                 Directors' and officers' fees     $  5,625   $  -  
                 Investor relations     $  36,943   $  36,167  
                 Professional fees                
                           Accounting     $  35,391   $  36,263  
                           Legal fees     $  16,267   $  19,286  
                 Share issue costs (1 ) $  27,698   $  -  
                 Wages and benefits     $  49,746   $  -  
Cost recovery                
                 Equipment     $  1,690   $  -  
                 General exploration     $  6,412   $  1,420  
                 Office and administration     $  108,691   $  58,674  
                 Regulatory     $  3,510   $  3,144  
                 Shareholders' communications     $  547   $  -  
                 Travel and promotions     $  22,226   $  13,660  
Mineral properties                
                           Big Bar (2 ) $  14,603   $  -  
                           Arizona Uranium (2 ) $  82,758   $  16,178  
                           MacArthur (2 ) $  50,195   $  -  
                           Nieves (2 ) $  1,320   $  -  
                           Other properties (2 ) $  615   $  6,396  

  (1)

This amount has been capitalized and is included in share capital on the balance sheet

     
  (2)

These amounts have been capitalized and are included in mineral properties on the balance sheet

These transactions were made in the normal course of operations and measured at the exchange amount, which is the amount of consideration established and agreed to by the Company and related parties. They are considered related party due the following relationships to the Company:

  (a)

A private company controlled by directors or officers of the Company.

  (b)

A director or officer of the Company.

  (c)

An association of lawyers in which an officer of the Company is a member (resigned May 1, 2006).

Page 18 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital


  (a)

Authorized

The Company has unlimited authorized, without par value, common shares.

  (b)

Issued and Outstanding


                     
      Number     Total     Contributed  
      of shares           Surplus  
  Balance as at December 31, 2004   57,347,200   $  12,672,761   $  691,226  
           Issued for cash:                  
                       Private placements   6,500,000     2,275,000     -  
                       Exercised share purchase warrants   1,400,000     210,000     -  
                       Exercised stock options   75,000     9,350     -  
           Total issued for cash   7,975,000     2,494,350     -  
           Issued for mineral property acquisitions   200,000     76,000     -  
           Fair value of stock options exercised   -     8,070     (8,070 )
           Stock based compensation   -     -     330,842  
           Subtotal before share issue costs   8,175,000     2,578,420     322,772  
           Share issue costs   -     (78,206 )   -  
  Balance as at December 31, 2005   65,522,200     15,172,975     1,013,998  
           Issued for cash:                  
                       Private Placement   5,247,855     9,183,746     -  
                       Exercised share purchase warrants   3,814,281     1,907,141     -  
                       Exercised stock options   2,829,000     675,030     -  
           Total issued for cash   11,891,136     11,765,917     -  
           Issued for mineral property acquisitions   400,000     606,000     -  
           Issued for brokerage fees   291,484     510,097     -  
           Fair value of stock options exercised   -     349,445     (349,445 )
           Stock based compensation   -     -     3,045,004  
           Subtotal before share issue costs   12,582,620     13,231,459     2,695,559  
           Share issue costs   -     (543,376 )   -  
  Balance as at December 31, 2006   78,104,820   $  27,861,058   $  3,709,557  

Page 19 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital, continued


  (c)

Private Placements

During the year ended December 31, 2006, the Company issued 5,247,855 units at a price of $1.75 per unit for gross proceeds of $9,183,746. Each unit consisted of one common share and one-half of one share purchase warrant, each whole warrant entitling the holder to purchase an additional common share at a price of $2.25 until expiry on June 21, 2008. The Company incurred net share issuance costs of $502,596, including 291,484 shares were issued for finders’ fees valued at $510,097, resulting in net proceeds of $8,685,262 from the private placement.

During the year ended December 31, 2005, the Company issued 6,500,000 units at a price of $0.35 per unit for gross proceeds of $2,275,000. Each unit consisted of one common share and one-half of one share purchase warrant, each whole warrant entitling the holder to purchase an additional common share at a price of $0.50 until expiry on September 27, 2007. Additional share purchase warrants were issued by the Company as finders’ fees entitling the holder to purchase an aggregate 564,280 common shares at a price of $0.50 per share until expiry on September 27, 2007. The Company incurred net share issuance costs of $78,206.

  (d)

Shares Issued for Mineral Property

During the year ended December 31, 2006, the Company issued 400,000 common shares for value at $606,000.

  (i)

200,000 common shares value at $1.50 per share, $300,000 in total, pursuant to the terms of the uranium properties agreement (Note 5 (e)).

     
  (ii)

200,000 common shares value at $1.53 per share, $306,000 in total, pursuant to the acquisition of three mineral concessions in Mexico (Note 5 (g)).

During the year ended December 31, 2005, the Company issued 200,000 common shares value at $0.38 per share, $76,000 in total, pursuant to the terms of the uranium properties agreement (Note 5 (e)).

  (e)

Share Purchase Warrants

A summary of the Company’s share purchase warrant transactions for the years ended December 31, 2006 and 2005 is as follows:

Page 20 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital, continued


  (e)

Share Purchase Warrants, continued


               
  Exercise Expiry Balance Warrants Cancelled Warrants Balance
  Price Date Dec. 31, 2005 Issued or Expired Exercised Dec. 31, 2006
               
       $0.66 January 20, 2006 120,000 - 120,000 - -
       $0.50 September 27, 2007 3,250,000   - 3,250,000 -
       $0.50 September 27, 2007 564,281   - 564,281 -
       $2.25 June 21, 2008 - 2,623,928 - - 2,623,928
               
      3,934,281 2,623,928 120,000 3,814,281 2,623,928
               
  Weighted average exercise price $0.50 $2.25 $0.66 $0.50 $2.25
               
               
               
  Exercise Expiry Balance Warrants Cancelled Warrants Balance
  Price Date Dec. 31, 2004 Issued or Expired Exercised   Dec. 31, 2005  
               
       $0.15 March 3, 2005 1,400,000 - - 1,400,000 -
       $0.66 January 20, 2006 120,000 - - - 120,000
       $0.50 September 27, 2007 - 3,250,000 - - 3,250,000
       $0.50 September 27, 2007 - 564,281 - - 564,281
               
      1,520,000 3,814,281 - 1,400,000 3,934,281
               
  Weighted average exercise price $0.19 $0.50 $0.00 $0.15 $0.50

  (f)

Stock Options

As at December 31, 2006 and 2005, the Company had a stock option plan (the “Plan”), allowing for the reservation of common shares issuable under the Plan to a maximum 10% of the number of issued and outstanding common shares of the Company at any given time. The term of any stock option granted under the Plan may not exceed five years and the exercise price may not be less than the closing price of the Company’s shares on the last business day immediately preceding the date of grant, less any permitted discount. On an annual basis, the Plan requires approval by the Company’s shareholders and submission for regulatory review and acceptance.

Page 21 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital, continued


  (f)

Stock Options, continued

The purpose of the Plan is to provide directors, officers, key employees and certain other persons who provided services to the Company and its subsidiaries with an increased incentive to contribute to the future success and prosperity of the Company.

As at December 31, 2006, 5,233,250 of the options outstanding were vested and exercisable and all were vested and exercisable as at December 31, 2005. Transactions for the years ended December 31, 2006 and 2005 are as follows:

               
  Exercise Expiry Balance Options Options Options Balance
  Price Date Dec. 31, 2005  Granted Cancelled/Expired   Exercised   Dec. 31, 2006  
               
  $0.15 February 8, 2006 50,000 - - 50,000 -
  $0.15 May 7, 2006 55,000 - - 55,000 -
  $0.12 June 8, 2006 515,000 - - 515,000 -
  $0.19 September 27, 2006 490,000 - - 490,000 -
  $0.12 January 10, 2008 1,591,000 - - 654,000 937,000
  $0.25 October 2, 2008 75,000 - - 25,000 50,000
  $0.34 December 8, 2008 195,000 - - 105,000 90,000
  $0.65 March 2, 2009 100,000 - 100,000 - -
  $0.62 March 25, 2009 800,000 - - 210,000 590,000
  $0.35 August 9, 2010 1,575,000 - - 725,000 850,000
  $0.40 January 9, 2011 - 200,000 - - 200,000
  $1.04 March 27, 2011 - 125,000 - - 125,000
  $1.00 May 19, 2011 - 75,000 - - 75,000
  $1.12 June 12, 2011 - 100,000 - - 100,000
  $1.55 July 28, 2011 - 2,110,000 - - 2,110,000
  $1.55 August 23, 2011 - 100,000 - - 100,000
  $1.50 September 25, 2011 - 100,000 - - 100,000
  $2.05 December 18, 2011 - 100,000 - - 100,000
               
      5,446,000 2,910,000 100,000 2,829,000 5,427,000
               
  Weighted average exercise price $0.29 $1.44 $0.65 $0.24 $0.92

Page 22 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital, continued


  (f)

Stock Options, continued


               
  Exercise Expiry Balance Options Options Options Balance
  Price Date Dec. 31, 2004  Granted  Cancelled/Expired Exercised   Dec. 31, 2005  
               
  $0.15 February 8, 2006 50,000 - - - 50,000
  $0.15 May 7, 2006 55,000 - - - 55,000
  $0.12 June 8, 2006 525,000 - - 10,000 515,000
  $0.19 September 27, 2006 495,000 - - 5,000 490,000
  $0.12 January 10, 2008 1,651,000 - - 60,000 1,591,000
  $0.25 October 2, 2008 75,000 - - - 75,000
  $0.34 December 8, 2008 225,000 - 30,000 - 195,000
  $0.65 March 2, 2009 100,000 - - - 100,000
  $0.62 March 25, 2009 815,000 - 15,000 - 800,000
  $0.35 August 9, 2010 - 1,650,000 75,000 - 1,575,000
               
      3,991,000 1,650,000 120,000 75,000 5,446,000
               
  Weighted average exercise price $0.26 $0.35 $0.38 $0.12 $0.29

  (g)

Value Assigned to Stock Options

The fair value of stock options granted using the Black-Scholes option pricing model was calculated with the following weighted average assumptions:

       
    2006 2005
       
  Risk-free interest rate 4.02% 2.98%
  Expected Share price volatility 121.60% 101.97%
  Expected option life in years 3.5 2.0
  Expected dividend yield 0% 0%

Page 23 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

7.

Share Capital, continued


  (g)

Value Assigned to Stock Options, continued

The total calculated fair value of options expensed during the year ended December 31, 2006 was $3,045,004 (2005: $330,842) and are included in the statement of operations as follows:

         
    2006 2005  
    Number Stock-based Number Stock-based  
    of Options Compensation of Options Compensation  
             
  Consulting 1,315,000 $ 1,476,044 300,000 $ 63,018  
  Directors' and officers' fees 725,000 749,697 950,000 199,555  
  Wages and benefits 870,000 819,263 325,000 68,269  
             
  Total 2,910,000 $ 3,045,004 1,575,000 $ 330,842  

8.

Income Taxes

The Company has approximately $3,620,000 (2005: $2,930,000) of resource deductions that have no expiry dates and are available, subject to certain restrictions, to reduce future taxable income in Canada. The Company also has the following non-capital losses available to reduce future taxable income in Canada, which expire as follows:

             
          2006  
             
    2007   $  210,000  
    2008     349,000  
    2009     235,000  
    2010     228,000  
    2014     284,000  
    2015     360,000  
    2026     698,000  
             
        $  2,364,000  

Page 24 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

8.

Income Taxes, continued

The future benefits of these losses and deductions have not been recorded in the accounts. A reconciliation of income tax provision computed at statutory rates to the reported income tax provision is provided as follows:

               
      2006     2005  
               
  Loss before income taxes $ (3,830,534 ) $  (788,060 )
               
  Income tax rate   34.12%     34.12%  
  Income tax benefit computed at Canadian statutory rates $ 1,306,978   $  268,886  
  Foreign tax rates different from statutory rates   (1,946 )   (5,702 )
  Permanent differences   (1,039,788 )   (113,337 )
  Temporary difference   (2,347 )   5,679  
  Unrecognized tax losses   (262,897 )   (155,526 )
               
    $ -   $  -  

Significant components of the Company’s future income tax assets, after applying enacted corporate income tax rates, are as follows:

               
      2006     2005  
  Future income tax assets            
           Temporary differences on assets $  (410,114 ) $  291,826  
           Non-capital losses carried forward   806,499     625,633  
      396,385     917,459  
           Valuation allowance for future income tax assets   (396,385 )   (917,459 )
  Future income tax assets, net $  -   $  -  

Page 25 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

9.

Segmented Information

The Company‘s non-current assets are distributed by geographic location as follows:

                                       
            2006                 2005        
      Equipment     Mineral     Reclamation     Total     Equipment     Mineral     Reclamation     Total  
            Properties     Bond                 Properties     Bond        
                                                   
  Canada $  24,997   $  -   $  -   $  24,997   $  -   $  -   $  -   $  -  
  Mexico   25,488     2,785,632     -     2,811,120     33,600     1,700,458     -     1,734,058  
  U.S.A.   1,089     5,070,200     79,898     5,151,187     -     2,056,425     39,061     2,095,486  
                                                   
    $  51,574   $ 7,855,832   $  79,898   $ 7,987,304   $  33,600   $ 3,756,883   $  39,061   $ 3,829,544  

10.

Supplemental Cash Flow Information.


               
      2006     2005  
               
  Cash Items            
         Interest received $  70,999   $  34,470  
         Share issue costs $  61,524   $  -  
  Non-Cash Items            
                   Accrued interest $  14,989   $  -  
         Financing Activities            
                   Non-cash share issue costs $  482,154   $  -  
                   Shares issued for mineral property $  606,000   $  76,000  
                   Shares issued for finders fees $  510,097   $  -  

11.

Subsequent Events

The following occurred subsequent to December 31, 2006:

  (a)

115,000 stock options were exercised for gross proceeds of $78,600 with an average price of $0.68 per share.

     
  (b)

75,000 stock options were issued with an exercise price of $2.65 and an expiry date of January 11, 2012.

Page 26 of 27



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2006 and 2005

11.

Subsequent Events, continued


  (c)

The Company entered into a sale and purchase agreement dated January 16, 2007, with Charles Gary Clifton and North Exploration LLC, in respect to the purchase of the mining claims known as the Pit Claim in Lyon County, Nevada. Pursuant to this agreement, the Company’s commitments are as follows:


  (i)

US $43,750 on or before January 16, 2007 (Paid).

  (ii)

US $43,750 on or before April 16, 2007.

  (iii)

US $43,750 on or before July 16, 2007.

  (iv)

US $43,750 on or before October 16, 2007.

  (v)

US $43,750 on or before January 16, 2008.

  (vi)

US $43,750 on or before April 16, 2008.

  (vii)

US $43,750 on or before July 16, 2008.

  (viii)

US $43,750 on or before October 16, 2008.


  (d)

Under an amendment dated January 17, 2007 to the original agreement made October 2005 between the Company and North Exploration LLC a US $350,000 deduction will be made from the final payments, as the Company has paid this amount to Charles Gary Clifton in advance.

     
  (e)

Subject to regulatory approval the Company entered into a service agreement dated January 30, 2007, with a consultant to provide financial and advisory services. Under this agreement, the Company’s commitment is to pay a retainer of $15,000 per month starting February 1, 2007. $7,500 paid by cash and $7,500 by the issuance of common shares in the Company at the market price of the Company’s shares on the date of issuance.

     
  (f)

The option agreements for the Arc and Brown Claims, in the Skeena Mining District were terminated in accordance with their terms and the 100% interest reverted back to the Company See Note 5 (g).

     
  (g)

The following agreements were implemented as at January 1, 2007:


  (i)

The employment agreement of the VP of Exploration was renewed.

  (ii)

The management agreement with a related party was renewed.

  (iii)

A long term employment agreement for the President and Chief Executive Officer of the Company.

Page 27 of 27


EX-99.5 6 exhibit99-5.htm AUDITED ANNUAL FINANCIAL STATEMENTS UNDER CANADIAN GAAP FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.5

Consolidated Financial Statements
December 31, 2005 and 2004

Index Page
   
Management’s Responsibility for Financial Reporting        1
   
Auditors’ Report to the Shareholders        2
   
Consolidated Financial Statements  
   
Consolidated Balance Sheets        3
   
Consolidated Statements of Operations and Deficit        4
   
Consolidated Statements of Cash Flows        5
   
Notes to the Consolidated Financial Statements        6-20


MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

The consolidated financial statements of Quaterra Resources Inc. were prepared by and are the responsibility of the Company’s management. These financial statements were prepared in accordance with accounting principles generally accepted in Canada and they reflect management’s best estimates and judgment based on information currently available.

Management has developed and maintains a system of internal controls to obtain reasonable assurance that the Company’s assets are safeguarded, that transactions are authorized and properly recorded and financial information is reliable.

The Board of Directors is responsible for ensuring management fulfills its responsibilities. The Audit Committee reviews the results of the audit and the annual consolidated financial statements prior to their submission to the Board of Directors for approval.

Smythe Ratcliffe has audited the consolidated financial statements and their report outlines the scope of their examination and gives their opinion on the financial statements.

“Thomas C. Patton”
 
……………………………………………
Thomas C. Patton
President
 
April 6, 2006

1


SmytheRatcliffe.com

7th Floor, Marine Building

355 Burrard Street

Vancouver, B.C. V6C 2G8

facsimile: 604.688.4675

telephone: 604.687.1231

AUDITORS’ REPORT

TO THE SHAREHOLDERS OF QUATERRA RESOURCES INC.

We have audited the consolidated balance sheets of Quaterra Resources Inc. as at December 31, 2005 and 2004 and the consolidated statements of operations and deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2005 and 2004 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

“Smythe Ratcliffe” (signed)
 
Chartered Accountants
 
Vancouver, British Columbia
April 6, 2006, except as to note 11,
                   which is as of April 19, 2006

2




QUATERRA RESOURCES INC.
Consolidated Balance Sheets
December 31
 

    2005     2004  
             
Assets            
             
Current            
 Cash and cash equivalents $  1,786,298   $  824,116  
 Restricted cash (note 5(a))   -     858,543  
 Accounts receivable   62,206     7,896  
 Due from Joint Venture Party (note 5(a))   177,799     -  
             
    2,026,303     1,690,555  
Equipment (note 4)   33,600     46,325  
Mineral Properties (note 5)   3,756,883     1,972,947  
Reclamation Deposits   39,061     17,244  
             
  $  5,855,847   $  3,727,071  
             
Liabilities            
             
Current            
 Accounts payable and accrued liabilities $  315,428   $  215,653  
 Due to related parties (note 6)   13,010     18,935  
             
    328,438     234,588  
             
Shareholders’ Equity            
             
Share Capital (note 7(b))   15,172,975     12,672,761  
Contributed Surplus (note 7(j))   1,013,998     691,226  
Deficit   (10,659,564 )   (9,871,504 )
             
    5,527,409     3,492,483  
             
  $  5,855,847   $  3,727,071  

Nature and Continuance of Operations (note 1)
Subsequent Events (note 11)

Approved by the Board:

/s/ Thomas C. Patton   /s/ Robert J. Gayton
Thomas C. Patton, Director   Robert J. Gayton, Director

See notes to consolidated financial statements. 3



QUATERRA RESOURCES INC.
Consolidated Statements of Operations and Deficit
Years Ended December 31
 

    2005     2004  
             
Expenses            
 Administration   60,000     60,000  
 Consulting   48,568     10,977  
 Foreign exchange loss (gain)   125,907     (1,640 )
 General exploration   2,441     1,347  
 Investor relations   71,630     70,010  
 Office and miscellaneous   62,159     84,181  
 Professional fees   89,863     17,692  
 Regulatory fees and taxes   19,490     8,938  
 Shareholder information   20,931     22,822  
 Stock-based compensation (note 7(i))   330,842     386,246  
 Transfer agent   10,014     10,928  
 Travel   14,850     24,312  
             
    856,695     695,813  
Other Items            
   Interest earned   (36,135 )   (9,861 )
   Option payment received (note 5(f))   (35,000 )   -  
   Write-off of reclamation deposit   2,500     -  
             
Net Loss for Year   788,060     685,952  
Deficit, Beginning of Year   9,871,504     9,185,552  
             
Deficit, End of Year   10,659,564     9,871,504  
             
             
Basic and Diluted Loss Per Share $ (0.01 ) $ (0.01 )
             
             
Weighted Average Number of Shares Outstanding   60,318,200     54,749,597  

See notes to consolidated financial statements. 4



QUATERRA RESOURCES INC.
Consolidated Statements of Cash Flows
Years Ended December 31
 

    2005     2004  
             
Operating Activities            
 Net loss for year $  (788,060 ) $  (685,952 )
 Items not involving cash            
   Stock-based compensation (note 7(i))   330,842     386,246  
   Write-off of accrued liabilities   (26,486 )   -  
   Write-off of reclamation deposit   2,500        
             
Operating Cash Flow   (481,204 )   (299,706 )
             
Changes in Non-Cash Working Capital            
 Accounts receivable   (54,310 )   (3,849 )
 Accounts payable and accrued liabilities   126,261     (123,633 )
 Due to related parties   (5,925 )   (7,559 )
             
    66,026     (135,041 )
             
Cash Used in Operating Activities   (415,178 )   (434,747 )
             
Investing Activities            
 Expenditures on mineral properties   (1,695,212 )   (1,353,847 )
 Due from joint venture party (note 5(a))   (177,799 )   -  
 Purchase of equipment   -     (54,500 )
 Purchase of reclamation bonds   (24,317 )   (14,744 )
             
Cash Used in Investing Activities   (1,897,328 )   (1,423,091 )
             
Financing Activities            
 Proceeds from issuance of shares, net of commissions   2,416,145     1,223,008  
 Share subscriptions for cash, net   -     (33,530 )
 Advance proceeds for Nieves Property   -     914,775  
             
Cash Provided by Financing Activities   2,416,145     2,104,253  
             
Increase in Cash During the Year   103,639     246,415  
Cash, Beginning of Year   1,682,659     1,436,244  
             
Cash, End of Year $  1,786,298   $  1,682,659  
             
Cash consists of the following            
 Cash and cash equivalents $  1,786,298   $  824,116  
 Restricted cash   -     858,543  
             
  $  1,786,298   $  1,682,659  

Supplemental Cash Flow Information (note 10)

See notes to consolidated financial statements. 5



QUATERRA RESOURCES INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2005 and 2004
 

1.

NATURE AND CONTINUANCE OF OPERATIONS

Quaterra Resources Inc. (the “Company”) is an exploration stage enterprise incorporated under the laws of British Columbia. The Company is engaged in the acquisition, exploration and development of precious metal properties and does not have any mineral properties in production. The Company has not determined whether these mineral properties contain ore reserves that are economically recoverable. The ability of the Company to meet its commitments as they become due, including completion of the acquisition, exploration and development of its mineral properties, is dependent on the Company’s ability to obtain the necessary financing.

These consolidated financial statements were prepared on a “going-concern” basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. As at December 31, 2005, the Company had working capital of $1,697,865 (2004: $1,455,967). The Company does not currently hold any revenue-generating properties. As a result, the Company continues to incur losses and had an accumulated deficit of $10,659,564 as at December 31, 2005 (2004: $9,871,504).

The Company’s ability to discharge its liabilities and fulfill its commitments as they come due are dependent upon its success in obtaining equity financing and, ultimately, on locating economically recoverable ore reserves and attaining profitable operations. Failure to continue as a going-concern would require the restatement of assets and liabilities on a liquidation basis, which could differ materially from the going-concern assumptions. These financial statements do not reflect adjustments that would be necessary if the going-concern assumptions were not appropriate because management believes that actions taken or planned will mitigate the adverse conditions that raise doubts about the Company’s viability.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


  (a)

Basis of Presentation and Consolidation

The consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles and include the accounts of the Company and its wholly-owned subsidiaries:

  (i)

Minera Agua Tierra S.A. de C.V., incorporated in Mexico;

  (ii)

Quaterra Alaska, Inc., incorporated in Alaska, USA;

  (iii)

Quaterra International Limited, incorporated in the British Virgin Islands;

  (iv)

QTA International Nieves Limited, incorporated in the British Virgin Islands; and

  (v)

Minera Nieves S.A. de C.V., incorporated in Mexico.

All intercompany accounts and transactions were eliminated upon consolidation.

  (b)

Mineral Properties

All costs related to the acquisition, exploration and development of mineral properties are capitalized until such time as these mineral properties are placed into commercial production, sold or abandoned. If commercial production is achieved from a mineral property, the related capitalized costs will be amortized prospectively on a unit-of-production basis over the estimated life of the ore reserves. If a mineral property is abandoned, the related capitalized costs are written down and expensed. From time to time, the Company may acquire or dispose of all or part of its mineral property interests under the terms of property option agreements. As such options are exercisable entirely at the discretion of the optionee, option payments are recorded as property costs or recoveries when paid or received.

6



QUATERRA RESOURCES INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2005 and 2004
 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


  (b)

Mineral Properties (Continued)

The recoverability of amounts shown for mineral properties is dependent upon the Company’s ability to:

  (i)

obtain the necessary financing to complete the acquisition, exploration and development of its mineral properties;

  (ii)

enter into mineral property acquisition, joint venture or option agreements with other entities;

  (iii)

discover economically recoverable reserves within its mineral properties; and

  (iv)

obtain future profitable production from its mineral properties or sufficient proceeds from the disposition thereof.

On an ongoing basis, the Company evaluates each mineral property based on results obtained to date to determine the nature of exploration, other assessment and development work, if any, that is warranted in the future and the potential for recovery of the capitalized costs. If there is little prospect of future work on a property being carried out within a three-year period from completion of previous activities, the deferred costs related to that property are written down to the estimated amount recoverable unless there is persuasive evidence that an impairment allowance is not required. The amounts capitalized for mineral properties represent costs incurred to date less write-downs, and are not intended to reflect present or future values.

  (c)

Cash and Cash Equivalents

Cash and cash equivalents include highly-liquid investments that are readily convertible to cash and generally have maturities of three months or less from the date acquired.

  (d)

Foreign Currency

The consolidated financial statements are presented in Canadian dollars. Accounts of the Company’s foreign operations have been translated into Canadian dollars as follows:

  (i)

Monetary assets and liabilities, at year-end rates;

  (ii)

All other assets and liabilities, at historical rates; and

  (iii)

Revenue and expense items, at the rates approximating those in effect on transaction dates.

The effects of translation are credited or charged to the statement of operations as foreign exchange gain or loss.

  (e)

Equipment

Equipment is carried at cost less accumulated amortization. Amortization is calculated over the estimated useful life of the assets using the declining-balance method at an annual rate of 30% for vehicles and equipment and 45% for computers. One-half of the annual rate used in the year of acquisition, and is charged directly to mineral properties as a deferred cost.

7



QUATERRA RESOURCES INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2005 and 2004
 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


  (f)

Impairment of Long-Lived Assets

Effective January 1, 2004, the Company adopted the Canadian Institute of Chartered Accountants (“CICA”) Handbook Section 3063, “Impairment of Long-Lived Assets”, which establishes standards for the recognition, measurement and disclosure of the impairment of non-monetary long-lived assets, including property, plant and equipment, intangible assets with finite useful lives, deferred pre-operating costs and long-term prepaid assets. The adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

  (g)

Asset Retirement Obligations

Effective January 1, 2004, the Company adopted the CICA Handbook Section 3110, “Asset Retirement Obligations”, which establishes standards for the recognition and measurement of liabilities for obligations associated with the retirement of property, plant and equipment when those obligations result from the acquisition, construction, development and normal operations of the assets. The adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

  (h)

Share Capital

The proceeds from the exercise of stock options and share purchase warrants are recorded as share capital. Common shares issued for non-monetary consideration are recorded at an amount based on fair market value reduced by estimated transaction costs, if any.

  (i)

Stock-Based Compensation

The Company follows the recommendations of the CICA Handbook Section 3870, “Stock-Based Compensation and Other Stock-Based Payments”, for accounting for stock-based compensation expense whereby all stock-based payments to directors, employees and non-employees, including awards that are direct awards of stock, call for settlement in cash or other assets, or stock appreciation rights that call for settlement by the issuance of equity instruments, granted on or after January 1, 2004, are accounted for using the fair value based method, and are recorded as an expense in the period the stock-based payments are vested or the awards or rights are granted, and a corresponding increase in contributed surplus. When stock options are exercised the corresponding fair value is transferred to capital stock.

  (j)

Income Taxes

The Company follows the asset and liability method of accounting for income taxes. Under this method of tax allocation, future income tax assets and liabilities are determined based on differences between the financial statement carrying values and their respective income tax basis (temporary differences). Future income tax assets and liabilities are measured using the tax rates expected to be in effect when the temporary differences are likely to reverse. The effect on future income tax assets and liabilities of a change in tax rates is included in operations in the period in which the change is enacted or substantially assured. The amount of future income tax assets recognized is limited to the amount of the benefit that is more likely than not to be realized.

8



QUATERRA RESOURCES INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2005 and 2004
 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


  (k)

Loss per Share

Loss per share computations are based on the weighted average number of common shares outstanding during the year. Diluted loss per share has not been presented separately, as the effects of outstanding options and warrants is anti-dilutive. There were no securities with potential dilutive effect as at December 31, 2005 other than the outstanding warrants and options described in notes 7(g) and 7(h), respectively.

  (l)

Use of Estimates and Measurement Uncertainty

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures of assets, liabilities, expenses, other income and contingent assets and liabilities. Significant areas requiring the use of management estimates relate to the determination of the recoverability of mineral property costs, the valuation allowance of future tax assets and the calculation of stock-based compensation expense. Actual results could differ from those estimates.

3. FINANCIAL INSTRUMENTS

  (a)

Fair Value

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, due from joint venture party, accounts payable and accrued liabilities, and due to related parties approximate their fair values because of the short maturity of these financial instruments.

  (b)

Interest Rate Risk

The Company is not exposed to significant interest rate risk due to the short-term maturity of its monetary current assets and current liabilities.

  (c)

Credit Risk

The Company is exposed to credit risk with respect to its cash; however, this is minimized as cash is placed with major financial institutions.

  (d)

Currency Risk

The Company is exposed to currency risk to the extent expenditures incurred or funds received by the Company are denominated in currencies, other than the Canadian dollar (primarily $US and Mexican Peso). The Company does not manage the currency risks through hedging or other currency management tools.

9



QUATERRA RESOURCES INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2005 and 2004

4.

EQUIPMENT

Details of equipment located at the Nieves Property in Mexico, are as follows:

            2005           2004  
            Accumulated     Net Book     Net Book  
      Cost     Amortization     Value     Value  
                           
  Vehicles $  38,208   $  (15,474 ) $  22,734   $  32,478  
  Miscellaneous equipment   17,136     (8,914 )   8,222     13,847  
  Computer   3,942     (1,298 )   2,644     -  
                           
    $  59,286   $  (25,686 ) $  33,600   $  46,325  

5.

MINERAL PROPERTIES

The Company has interests in mineral properties in Mexico, Alaska, Nevada, Arizona, Utah and Wyoming; expenditures incurred on those properties are as follows:

            Los     Duke           Arizona     Other        
  Mineral Properties   Nieves     Crestones     Island     Big Bar     Uranium      Properties     Total  
                                             
  Acquisition                                          
  Balance, December 31, 2004 $ 1,033,583   $ 21,562   $  94,205   $ 14,913   $  -   $  -   $ 1,164,263  
  Additions during the year   142,798     37,741     -     1,801     159,171     41,461     382,972  
                                             
  Balance, December 31, 2005   1,176,381     59,303     94,205     16,714     159,171     41,461     1,547,235  
                                             
  Exploration                                          
  Balance, December 31, 2004   (202,215 )   6,280     985,669     18,950     -     -     808,684  
                                             
  Additions during the year                                          
     Assays and analysis   322     243     7,930     -     -     -     8,495  
     Consulting   45,544     8,209     6,156     332     -     -     60,241  
     Camp costs   7,112     -     -     -     -     -     7,112  
     Amortization   12,725     -     -     -     -     -     12,725  
     Drilling contractor   438,011     -     458,107     -     -     -     896,118  
     Equipment rental and                                          
         maintenance   3,720     -     -     -     -     -     3,720  
     Field supplies and rentals   36,154     -     12,106     3,323     3,519     -     55,102  
     Geological services   37     -     98,525     -     69,006     -     167,568  
     Geological exploration   7,810     5,381     8,238     -     -     -     21,429  
     Project management   93,522     -     5,348     -     -     -     98,870  
     Miscellaneous   1,597     -     -     -     -     -     1,597  
     Transportation   19,695     -     16,950     47     31,295     -     67,987  
                                             
  Net additions during the year   666,249     13,833     613,360     3,702     103,820     -     1,400,964  
                                             
  Balance, December 31, 2005   464,034     20,113     1,599,029     22,652     103,820     -     2,209,648  
                                             
  Total Acquisition and                                          
  Exploration                                          
       at December 31, 2005 $ 1,640,415   $ 79,416   $ 1,693,234   $ 39,366   $ 262,991   $ 41,461   $ 3,756,883  

10



QUATERRA RESOURCES INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2005 and 2004
 

5.

MINERAL PROPERTIES (Continued)


            Los     Duke              
  Mineral Properties   Nieves     Crestones     Island     Big Bar     Total  
                                 
  Acquisition                              
  Balance, December 31, 2003 $  851,101   $  4,822   $  72,592   $  4,618   $  933,133  
  Additions during the year   182,482     16,740     21,613     10,295     231,130  
                                 
  Balance, December 31, 2004   1,033,583     21,562     94,205     14,913     1,164,263  
                                 
  Exploration                              
  Balance, December 31, 2003   (309,010 )   -     867,627     18,950     577,567  
                                 
  Additions during the year                              
     Assays and analysis   62,830     3,228     -     -     66,058  
     Amortization   8,175     -     -     -     8,175  
     Drilling contractor   560,110     -     -     -     560,110  
     Field supplies and rentals   30,469     -     34,802     -     65,271  
     Geological services   258,745     3,052     40,392     -     302,189  
     Project management and personnel   76,386     -     26,813     -     103,199  
     Project support   12,977     -     2,864     -     15,841  
     Transportation   11,878     -     13,171     -     25,049  
  Recovery of exploration                              
   expenditures   (914,775 )   -     -     -     (914,775 )
                                 
  Net additions during the year   106,795     6,280     118,042     -     231,117  
                                 
  Balance, December 31, 2004   (202,215 )   6,280     985,669     18,950     808,684  
                                 
  Total Acquisition and Exploration                              
     at December 31, 2004 $  831,368   $  27,842   $ 1,079,874   $  33,863   $  1,972,947  

  (a)

Nieves Concessions, Mexico

The Company holds a 50% interest in 19 mineral concessions covering 13,198 hectares located in northern Zacatecas, Mexico (the Nieves Concessions) and two inlaying fractions within the Nieves Concessions (Delores and Nazarene), collectively called Nieves.

The Company acquired an option on the property pursuant to an Assignment made March 26, 1999 of the Underlying Agreement by Western Silver Corporation (“Western”), a company with common directors and officers to the Company.

To acquire its interest, the Company issued 1,444,460 common shares to Western for $288,892, issued 360,000 common shares to the concessionaires for $72,000 and in accordance with the terms of the Underlying Agreement made scheduled option payments to the concession holders, totalling US $70,000 over three years. In addition, to acquire the interest in the claim fractions, the Company paid US $40,000 to the concessionaires. As at December 31, 2005, option payments totalled US $110,000.

Commencing January 26, 2004, an annual advance minimum royalty payment (“AMR”) of US $75,000 is due to the concession holders until the commencement of commercial production. By December 31, 2005, the Company had made cumulative AMR payments of US $150,000 (C $219,256).

11



QUATERRA RESOURCES INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2005 and 2004
 

5.

MINERAL PROPERTIES (Continued)


  (a)

Nieves Concessions, Mexico (Continued)

The Nieves Concessions are subject to a maximum 3% net smelter return royalty (“NSR”) to the original concession holders, which the Company may purchase at any time for US $2 million. In addition, Kennecott Exploration Company, the optionor in the initial Underlying Agreement, retains NSR royalties of 2% on certain core claims and 1% on certain peripheral claims.

Funds in the amount of US $1,500,000 (C $1,904,550) were advanced to the Company pursuant to the terms of an agreement made April 10, 2003 with Blackberry, a US-based investment partnership, whereby Blackberry could earn a 50% interest in the Nieves silver property in Mexico or the Duke Island property in Alaska by providing advance funding to the Company to fund exploration expenditures.

At December 31, 2004, the cash remaining from the advances provided by Blackberry Ventures I, LLC (“Blackberry”), was $858,543 (US $714,262). These funds were required to be utilized in exploration on the Company’s Nieves silver project in Mexico and, as such, were disclosed as restricted cash.

The agreement with Blackberry stipulated that once all monies received from the advances had been incurred on exploration expenditures, Blackberry effectively exercised its option and earned a 50% interest in the Nieves property. In August 2005, the parties formed a joint venture to proceed with exploration on the property. As at December 31, 2005, Blackberry owed the Company $177,799 for its share of joint venture exploration expenditures that have been made on the property.

At any time within 720 days from the date of exercising its option, Blackberry may elect to convert its undivided interest in the Nieves property into common shares. The number of common shares of the Company that may be issued will be US $1.5 million divided by the ten-day trading average share price, less the discount permitted by the TSX. If Blackberry elected to convert its interest as at December 31, 2005, based on current trading prices and a 25% allowable discount, Blackberry would receive approximately 4.7 million shares of the Company, representing an interest of approximately 8% of the currently issued and outstanding common shares.

  (b)

Los Crestones Property, Mexico

The Company holds a 100% interest in a mineral concession covering 2,100 hectares located in northern Durango, Mexico. In April 2004, the Company issued 25,000 common shares at a price of $0.60 per share for a total of $15,000 to an individual as a finders’ fee for his role in the identification and acquisition of the property.

  (c)

Duke Island Property, Alaska

In 2003, the Company acquired a 100% interest in 140 mining claims in Alaska (129 federal claims and 11 state) that cover 1,563 hectares (3,860 acres) on Duke Island, near Ketchikan, Alaska.

12



QUATERRA RESOURCES INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2005 and 2004
 

5.

MINERAL PROPERTIES (Continued)


  (d)

Big Bar Property, Alaska

In 2000, the Company acquired a 100% interest in the Big Bar project, which consists of seven state mining claims covering 453 hectares (1,120 acres) on the Seward Peninsula, approximately 45 kilometres (110 miles) northeast of Nome, Alaska.

  (e)

Uranium Properties, Arizona, Utah and Wyoming

In an agreement made effective June 22, 2005 with North Exploration LLC, a Nevada limited partnership, the Company acquired an option to purchase mining claims situated in Arizona, Utah and Wyoming. To exercise the option, the Company is required to make staged payments totalling US $500,000 over five years and to issue 600,000 common shares over three years, as follows:

  (i)

US $15,000 on the effective date and issue 200,000 common shares (paid and issued);

  (ii)

US $25,000 and issue 200,000 common shares on or before the first anniversary;

  (iii)

US $50,000 and issue 200,000 common shares on or before the second anniversary;

  (iv)

US $75,000 on or before the third anniversary;

  (v)

US $135,000 on or before the fourth anniversary; and

  (vi)

US $200,000 on or before the fifth anniversary.


  (f)

Other Properties

Pursuant to a second agreement made October 2005 with North Exploration LLC, the Company acquired the right to earn an interest in 66 unpatented mining claims covering the former MacArthur copper-oxide mine in the Yerington district of Lyon County, Nevada. To earn a 100% interest, subject to a 2% NSR, the Company is required to make staged payments totaling US $1,785,000 by January 15, 2008 as follows:

  (i)

US $10,000 upon execution (paid October 2005);

  (ii)

US $25,000 on or before January 15, 2006;

  (iii)

US $75,000 on or before January 15, 2007; and

  (iv)

US $1,675,000 on or before January 15, 2008.

Alternatively, if the Company has paid US $110,000 by January 15, 2007, as scheduled above, and incurred US $500,000 in exploration expenditures by January 15, 2008, then the Company may elect to acquire the property by making additional payments totaling US $1,900,000 as follows:

  (i)

US $100,000 on or before January 15, 2008;

  (ii)

US $125,000 on or before January 15, 2009; and

  (iii)

US $1,675,000 on or before January 15, 2010.

The property is subject to a 2% NSR, 1% of which the Company may purchase for US $1 million.

In the first quarter of 2005, a $10,000 property option payment was received from Praxis Goldfields Inc. (formerly CSS Exploration Inc.) relating to a 2001 option over certain claims located in the Skeena Mining District of British Columbia. Since no acquisition or exploration costs relating to these claims remain deferred as part of mineral property expenditures, this payment was disclosed as a recovery of operating costs.

13



QUATERRA RESOURCES INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2005 and 2004
 

5.

MINERAL PROPERTIES (Continued)


  (f)

Other Properties (Continued)

In December 2005, $25,000 was accrued for a payment due under an Agreement dated December 13, 2005 with Mineral Hill Industries Ltd. in respect to their purchase of properties held by the Company in the Skeena Mining District of British Columbia. Since no acquisition or exploration costs relating to these claims remain deferred as part of mineral property expenditures, this payment was disclosed as a recovery of operating costs.

  (g)

Title to Mineral Properties

Title to mineral properties may be affected by unregistered prior agreements or transfers, as well as undetected defects. Although the Company has verified title to its mineral properties in accordance with standard industry practices applicable for the current stage of exploration, these procedures do not guarantee the Company’s interests in its mineral properties.

  (h)

Environmental Expenditures

The operations of the Company may, in the future, be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company's policy is to meet or, if possible, surpass standards set by relevant legislation, by application of technically proven and economically feasible measures.

Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. Estimated future removal and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.

6.

RELATED PARTY TRANSACTIONS

As at December 31, 2005, $13,010 (2004: $18,935) was due to directors or senior officers of the Company or to companies controlled by them for various services rendered.

For the years ended December 31, 2005 and 2004, the following is a summary of related party transactions not disclosed elsewhere in these financial statements:

  (a)

Corporate development and investor relations fees of $21,320 (2004: $36,000) were billed by a company controlled by a senior officer.

     
  (b)

Professional and consulting fees of $84,831 (2004: $9,163) were charged by two private companies controlled by directors of the Company.

     
  (c)

Legal fees of $19,286 (2004: $6,403) were incurred by an association of lawyers in which an officer of the Company is a member.

     
  (d)

Administration fees of $60,000 (2004: $60,000) to a private company controlled by a director of the Company.

14



QUATERRA RESOURCES INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2005 and 2004
 

6.

RELATED PARTY TRANSACTIONS (Continued)


  (e)

A private company controlled by a director of the Company billed $54,052 (2004: $74,897) on a cost recovery basis for office and administration.

     
  (f)

Geological consulting fees and other exploration costs totaling $17,319 (2004: $15,444) were paid to related parties of the Company and are included in deferred exploration expenditures.

These transactions were made in the normal course of operations for consideration established and accepted by the related parties.

7.

SHARE CAPITAL


  (a)

Authorized: 100,000,000 common shares without par value

     
  (b)

Issued


      Number        
      of        
      Shares     Amount  
               
  Balance at December 31, 2003   50,708,095   $  11,360,703  
               
  Issued for cash            
     Exercise of share purchase warrants   5,445,105     1,070,158  
     Exercise of stock options   1,049,000     152,850  
  Fair value of stock options exercised   -     15,466  
  Issued for Los Crestones Property finders’ fee (note 5(b))   25,000     15,000  
  Issued for settlement of debt, net of share issue cost of $5,016            
     (note 7(e))   120,000     58,584  
               
      6,639,105     1,312,058  
               
  Balance at December 31, 2004   57,347,200     12,672,761  
  Issued for cash            
     Private placements, net of issue costs   6,500,000     2,196,794  
     Exercise of share purchase warrants   1,400,000     210,000  
     Exercise of stock options   75,000     9,350  
  Issued for mineral properties acquisitions   200,000     76,000  
  Fair value of stock options exercised   0     8,070  
      8,175,000     2,500,214  
  Balance at December 31, 2005   65,522,200   $  15,172,975  

15



QUATERRA RESOURCES INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2005 and 2004
 

7.

SHARE CAPITAL (Continued)


  (c)

Private Placements

During the year ended December 31, 2005, the Company issued 6,500,000 units at a price of $0.35 per unit for gross proceeds of $2,275,000. Each unit consisted of one common share and one-half of one share purchase warrant, each whole warrant entitling the holder to purchase an additional common share at a price of $0.50 until expiry on September 27, 2007.

Additional share purchase warrants were issued by the Company as finders’ fees entitling the holder to purchase an aggregate 564,280 common shares at a price of $0.50 per share until expiry on September 27, 2007. The Company incurred share issuance costs of $78,206, including cash payments of $8,399 for finders’ fees and $17,221 for related expenses, resulting in net proceeds of $2,196,794 from the private placement.

There were no private placements in 2004.

  (d)

Finders’ Fee

In April 2004, the Company issued 25,000 shares valued at $15,000 to pay a finders’ fee in association with the acquisition of its Los Crestones Property (note 5(b)).

  (e)

Debt Settlement

In March 2004, the Company issued 120,000 units at a price of $0.53 per unit for a gross value of $63,600 (US $50,000) under a shares-for-debt arrangement with an arm’s length vendor. Each unit consisted of one common share and one share purchase warrant entitling the holder to purchase an additional common share at a price of $0.66 for a two-year period.

  (f)

Shares Issued for Mineral Property

During 2005, the Company issued 200,000 common shares at a deemed value of $0.38 per share, pursuant to the terms of the Uranium Properties agreement (note 5(e)).

  (g)

Share Purchase Warrants

A summary of the Company’s share purchase warrant transactions for December 31, 2005 and 2004 is presented below:

      Balance   Warrants   Balance
  Exercise Expiry Dec 31, Warrants Cancelled or Warrants Dec 31,
  Price Date 2004 Granted Expired Exercised 2005
  $0.15 March 3, 2005 1,400,000 - - 1,400,000 -
  $0.66 January 20, 2006 120,000 - - - 120,000
  $0.50 September 27, 2007 - 3,250,000 - - 3,250,000
  $0.50 September 27, 2007 - 564,280 - - 564,280
      1,520,000 3,814,280 - 1,400,000 3,934,280
               
  Weighted average exercise price $0.19 $0.50 $0.00 $0.15 $0.50

16



QUATERRA RESOURCES INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2005 and 2004
 

7.

SHARE CAPITAL (Continued)


  (g)

Share Purchase Warrants (Continued)


      Balance   Warrants   Balance
  Exercise Expiry Dec 31, Warrants Cancelled or Warrants Dec 31,
  Price Date 2003 Granted Expired Exercised 2004
  $0.30 January 11, 2004 1,792,280 - 103,000 1,689,280 -
  $0.15 April 29, 2004 462,825 - - 462,825 -
  $0.15 October 20, 2004 1,693,000 - - 1,693,000 -
  $0.15 March 3, 2005 3,000,000 - - 1,600,000 1,400,000
  $0.66 January 20, 2006 - 120,000 - - 120,000
      6,948,105 120,000 103,000 5,445,105 1,520,000
               
  Weighted average exercise price $0.19 $0.66 $0.30 $0.20 $0.19

  (h)

Stock Options

As at December 31, 2005 and 2004, the Company had a stock option plan (the “Plan”), allowing for the reservation of common shares issuable under the Plan to a maximum 10% of the number of issued and outstanding common shares of the Company at any given time. The term of any stock option granted under the Plan may not exceed five years and the exercise price may not be less than the closing price of the Company’s shares on the last business day immediately preceding the date of grant, less any permitted discount. On an annual basis, the Plan requires approval by the Company’s shareholders and submission for regulatory review and acceptance.

The purpose of the Plan is to provide directors, officers and key employees of and certain other persons who provided services to the Company and its subsidiaries with an increased incentive to contribute to the future success and prosperity of the Company.

All of the options outstanding as at December 31, 2005 and 2004 were exercisable. Transactions for the years ended December 31, 2005 and 2004 were as follows:

               
      Balance   Options   Balance
  Exercise Expiry Dec 31, Options Cancelled or Options Dec 31,
  Price Date 2004 Granted Expired Exercised  2005
  $0.15 February 8, 2006 50,000 - - - 50,000
  $0.15 May 7, 2006 55,000 - - - 55,000
  $0.12 June 8, 2006 525,000 - - 10,000 515,000
  $0.19 September 27, 2006 495,000 - - 5,000 490,000
  $0.12 January 10, 2008 1,651,000 - - 60,000 1,591,000
  $0.25 October 2, 2008 75,000 - - - 75,000
  $0.34 December 8, 2008 225,000 - 30,000 - 195,000
  $0.65 March 2, 2009 100,000 - - - 100,000
  $0.62 March 25, 2009 815,000 - 15,000 - 800,000
  $0.35 August 9, 2010 - 1,650,000 75,000 - 1,575,000
      3,991,000 1,650,000 120,000 75,000 5,446,000
               
  Weighted average exercise price $0.26 $0.35 $0.38 $0.12 $0.29

17



QUATERRA RESOURCES INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2005 and 2004
 

7.

SHARE CAPITAL (Continued)


  (h)

Stock Options (Continued)


               
      Balance   Options   Balance
  Exercise Expiry Dec 31, Options Cancelled or  Options Dec 31,
  Price Date 2003 Granted Expired Exercised  2004
  $0.15 May 10, 2004 50,000 - - 50,000 -
  $0.15 June 28, 2004 35,000 - - 35,000 -
  $0.15 December 1, 2004 594,000 - - 594,000 -
  $0.15 February 8, 2006 270,000 - - 220,000 50,000
  $0.15 May 7, 2006 55,000 - - - 55,000
  $0.12 June 8, 2006 560,000 - - 35,000 525,000
  $0.19 September 27, 2006 495,000 - - - 495,000
  $0.12 January 10, 2008 1,766,000 - - 115,000 1,651,000
  $0.25 October 2, 2008 75,000 - - - 75,000
  $0.34 December 8, 2008 225,000 - - - 225,000
  $0.65 March 2, 2009 - 100,000 - - 100,000
  $0.62 March 25, 2009 - 815,000 - - 815,000
      4,125,000 915,000 - 1,049,000 3,991,000
               
  Weighted average exercise price $0.15 $0.62 $0.00 $0.15 $0.26

  (i)

Value Assigned to Stock Options

The fair value method of valuing stock options requires that the amount calculated using the Black-Scholes option pricing model be expensed over the applicable vesting periods. It is the value of the premium associated with the call option and it is measured at the grant date. The option pricing model requires the input of highly subjective assumptions and is particularly sensitive to the expected share price volatility. Changes in the subjective input assumptions can affect the fair value estimate, and therefore, the model does not necessarily provide a reliable single measure of the fair value of the Company’s stock options. The fair value of the 1,650,000 stock options granted in the third quarter of 2005 was calculated to be $0.20 per share, or $330,842, and the fair value of the 915,000 stock options granted in fiscal 2004 was calculated to be $0.42 per share, or $386,246 in total.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

               
      2005     2004  
               
  Risk-free interest rate   3.15%     2.98%  
  Expected stock price volatility   103.57%     101.97%  
  Expected option life in years   2.00     3.50  
  Expected dividend yield   -     -  

18



QUATERRA RESOURCES INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2005 and 2004
 

7.

SHARE CAPITAL (Continued)


  (j)

Contributed Surplus


               
      2005     2004  
               
  Balance, beginning of year $  691,226   $  320,446  
               
  Stock-based compensation expense as            
   a result of stock options granted   330,842     386,246  
  Value of stock options assigned to share            
   capital upon exercise of stock options   (8,070 )   (15,466 )
               
  Balance, end of year $  1,013,998   $  691,226  

8.

INCOME TAXES

The Company has approximately $4,740,000 of resource deductions that have no expiry dates and are available, subject to certain restrictions, to reduce future taxable income in Canada. The Company also has the following non-capital losses available to reduce future taxable income in Canada, which expire as follows:

         
      2005  
         
  2006 $  168,000  
  2007   211,000  
  2008   349,000  
  2009   235,000  
  2010   228,000  
  2014   295,000  
  2015   435,000  
    $  1,921,000  

The future benefits of these losses and deductions have not been recorded in the accounts. A reconciliation of income tax provision computed at statutory rates to the reported income tax provision is provided as follows:

               
      2005     2004  
               
  Loss before income taxes $  (788,060 ) $  (685,952 )
               
  Income tax rate   34.12%     35.62%  
  Income tax benefit computed at Canadian statutory rates $  268,886   $  244,335  
  Foreign tax rates different from statutory rates   (5,702 )   (10,193 )
  Unrecognized tax losses   (263,184 )   (234,142 )
               
    $  -   $  -  

19



QUATERRA RESOURCES INC.
Notes to Consolidated Financial Statements
Years Ended December 31, 2005 and 2004
 

8.

INCOME TAXES (Continued)

Significant components of the Company’s future income tax assets, after applying enacted corporate income tax rates, are as follows:

               
      2005     2004  
               
  Future income tax assets            
     Temporary differences on assets $  326,143   $  1,058,125  
     Net tax losses carried forward   655,445     611,585  
               
      981,588     1,669,710  
  Valuation allowance for future income tax assets   (981,588 )   (1,669,710 )
               
  Future income tax assets, net $  -   $  -  

9.

SEGMENTED INFORMATION

The Company’s non-current assets by geographic location are as follows:

               
      2005     2004  
               
  Canada $  -   $  17,244  
  Mexico   1,734,058     905,535  
  USA   2,095,486     1,113,737  
               
    $  3,829,544   $  2,036,516  

10.

SUPPLEMENTAL CASH FLOW INFORMATION


               
      2005     2004  
               
  Cash Items            
       Interest received $  34,470   $  9,861  
               
  Non-Cash Financing Activities            
       Shares issued for debt settlements $  -   $  58,584  
       Shares issued for mineral properties $  76,000   $  15,000  

11.

SUBSEQUENT EVENTS


  (a)

Subsequent to December 31, 2005, 375,609 warrants have been exercised for proceeds of $187,805; of these warrants, 34,280 were broker finders’ fee warrants.

     
  (b)

853,000 stock options were exercised for proceeds of $182,160.

20


EX-99.6 7 exhibit99-6.htm MD&A FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.6

1550 – 1185 West Georgia Street,
Vancouver, BC, V6E 4E6
Tel: 604-684-9384 Fax: 604-688-4670
www.quaterraresources.com

Management’s Discussion and Analysis

In respect to the Year ended December 31, 2006

Dated: March 20, 2007

Index Page

A - Introduction 1  
B - Qualified person 1  
C - Exchange information and conversion tables 2  
D - Description of business 3  
E - Description of mineral properties 3 - 10
F - Mineral property expenditure 10 - 11
G - Results of operations 11 - 13
H - Quarterly results 13  
I - Selected annual information 14  
J - Related party information 14  
K - Financial conditions, liquidity and capital resources 14 - 15
L - Outstanding shares, options and share purchase warrants 15 - 16
M - Subsequent events and outlook 16 - 17
N - Off balance sheet 17  
O - Managements responsibility for financial information 18  
P - Risks and uncertainties 18 - 19
Q - Licenses and permits 19  
R - Whistleblower policy 19  
S - Forward looking statements 20  



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

A. Introduction

The following Management Discussion and Analysis (“MD&A”) of the operating results and financial condition of Quaterra Resources Inc. (the “Company”) compares results for the year ended December 31, 2006 (“Q4”) to the same period in the previous year. These statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2006. All notes referenced herein may be found in the consolidated financial statements.

The financial statements were prepared in accordance with Canadian generally accepted accounting principles. This MD&A, dated as of March 20, 2007, was prepared to conform to National Instrument 51-102 F1 and was approved by the Board of Directors prior to release.

The Company is a reporting issuer in British Columbia and Alberta and its shares trade on the Tier 2 Board of the TSX Venture Exchange (“TSX”) under the symbol QTA.

The Company’s reporting currency is the Canadian dollar and all dollar amounts are in Canadian dollars, unless otherwise indicated. Some numbers in this MD&A have been rounded to the nearest thousand for discussion purposes.

Certain forward-looking statements are discussed in the MD&A with respect to the Company’s activities and future financial results. These are subject to significant risks and uncertainties that may cause projected results or events to differ materially from actual results or events.

Additional information relating to the Company, including detailed drill results previously disclosed in news releases, is available on SEDAR at www.sedar.com. Terms of property option agreements are described more fully in the notes to the consolidated financial statements.

B. Qualified Person

Dr. Thomas C. Patton, P. Geo., the President and Chief Executive Officer of the Company, is the qualified person responsible for the preparation of the technical information included in this MD&A. Dr. Patton graduated from the University of Washington in 1971 (Ph.D.) and has worked with both junior and senior mining companies. His exploration efforts have concentrated on North America and have resulted in several significant discoveries and led to the expansion of mineral reserves at existing operations. He served as the President and Chief Operating Officer for Western Silver Corporation from January 1998 to May, 2006. Previously, Dr. Patton held senior positions with Rio Tinto PLC and Kennecott Corporation. Dr. Patton is a member of the Society of Economic Geologists and the American Institute of Mining & Metallurgical Engineers.

Eugene Spiering joined the company on January 10, 2006 as Vice President of Exploration. Mr. Spiering has over 28 years of experience in the mining exploration industry. He most recently held the position of Vice President, Exploration at Rio Narcea Mines Ltd., where he managed a team that discovered two gold deposits and completed the final definition of one nickel deposit in Spain. All three of these deposits are currently in production. Prior to his tenure at Rio Narcea, Mr. Spiering held the position of senior geologist with Energy Fuels Nuclear, Inc. where his responsibilities included uranium exploration in northern Arizona and gold exploration in western US and Venezuela. He received his Bachelor of Science-Geology degree from the University of Utah. Mr. Spiering is a member of the Society of Economic Geologists, the Australasian Institute of Mining and Metallurgy and the American Association of Petroleum Geologists.

Page 1 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

C. Exchange information and conversion tables.

For ease of reference, the following information is provided:

U.S. Dollars to Canadian Dollars
          December 31,  
          2006     2005  
                   
                   
Rate at end of period     1.16640     1.16600  
Average rate for period     1.13461     1.21173  
High for period         1.17960     1.27320  
Low for period         1.09260     1.14240  
                   
www.oanda.com
   
                   
                   
                   
Conversion Table
             Imperial               Metric  
                   
1 Acre   =     0.404686     Hectares  
1 Foot   =     0.304800     Metres  
1 Mile   =     1.609344     Kilometres  
1 Ton   =     0.907185     Tonnes  
1 Ounce (troy)/ton   =     34.285700     Grams/Tonne  
                   
Information from www.onlineconversion.com
   

 Precious metal units and conversion factors   
                         
ppb - Part per billion 1   ppb = 0.0010   ppm = 0.000030   oz/t
ppm - Part per million 100   ppb = 0.1000   ppm = 0.002920   oz/t
oz - Ounce (troy) 10,000   ppb = 10.0000   ppm = 0.291670   oz/t
oz/t - Ounce per ton (avdp.) 1   ppm = 1.0000   ug/g = 1.000000   g/tonne
g - Gram                      
g/tonne - gram per metric ton 1   oz/t = 34.2857   ppm        
mg - milligram 1   Carat = 41.6660   mg/g        
kg - kilogram 1   ton (avdp.) = 907.1848   kg        
ug - microgram 1   oz (troy) = 31.1035   g        
                         
Information from www.onlineconversion.com

Page 2 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

D. Description of Business

The Company acquires and explores mineral properties in the Americas. It is currently exploring for base and precious metals in Alaska, uranium in Arizona, copper in Nevada and precious metals in Mexico.

E. Description of Mineral Properties

(i) Nieves Property – Mexico

The Company has a 50% interest in 15 mineral concessions covering an area of approximately 48 square kilometers (18 square miles) located in the State of Zacatecas, Mexico. The Nieves Project lies within a northwest trending mineral belt known as the Silver Belt or Faja de Plata, which is based on the northwest alignment of a narrow band of silver mining districts of San Martin, Fresnillo, Zacatecas and Real de Angeles.

Silver was discovered on the claim block in the mid-1500's and sporadic work occurred thereafter on two vein systems until the start of the Mexican Revolution in 1910. No modern exploration took place until the mid-1990's.

Effective January 16, 1995, the Mexican concessionaires entered into an option agreement with Kennecott Exploration Company (“Kennecott”) that allowed Kennecott to explore and acquire the property by making specified option payments over five years, and advance minimum royalty payments (“AMR”) as defined in the “Underlying Agreement”. On March 13, 1998, Kennecott transferred its rights under the Nieves option to Western Silver Corporation (“Western”) in consideration for a 2% net smelter royalty (“NSR”) on certain core claims and a 1% NSR on others. Western subsequently assigned its rights to Nieves as specified in the “Underlying Agreement” to the Company on March 26, 1999, in consideration for 1,444,460 common shares at $0.20 per share ($288,892). In addition, the Company issued 360,000 common shares at $0.20 per share ($72,000) to the concessionaires in lieu of the US $50,000 option payment otherwise due under the terms of the Underlying Agreement.

The payment schedule in the Underlying Agreement was amended on November 22, 1999, February 11, 2000 and May 2002, such that US $30,000 was paid in January 2000, US $15,000 in May 2002 and US $25,000 in January 2003, for a total of US $70,000. AMR payments of US $75,000 are due on or before January 26 each year from 2004 until the commencement of commercial production.

Drilling conducted over the past years by Kennecott and Western intersected narrow zones of 500g/t silver that were interpreted to be the high level expression of a large, silver-rich mineralized system. Subsequently, the Company completed magnetic and CSAMT/IP geophysical surveys followed by three phases of exploration drilling that tested a number of prospective anomalies. The work delineated a large hydrothermal system with minimal erosion and several features in common with the high-grade Fresnillo silver district 90 kilometers to the south.

Page 3 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

E. Description of Mineral Properties, continued

(i) Nieves Property – Mexico, continued

Boiling textures observable in drill core at depths of 150-200 meters below surface mark the top of the mineralized vein zone. Both the Concordia-San Gregorio and the Santa Rita vein systems have excellent potential for narrow high-grade silver veins over a strike length of approximately 1.5 kilometers and a vertical extent of 300 meters. The near surface mineralization exposed on San Gregorio Hill and along the Santa Rita vein on Santa Rita Hill is interpreted as manto style (rootless) mineralization trapped in porous sediments at the base of Tertiary volcanic rocks. The last phase of drilling, completed in March of 2006, confirmed the continuity of mineralization within the Concordia vein system and upgraded the high grade silver potential of the eastern Santa Rita zone with an intercept of 5.9 meters averaging 104 g/t silver, 0.23% lead and 0.56% zinc at a downhole depth of 466.1 meters.

Caracle Creek International Consulting completed an Independent Technical Report for the Company and joint venture partner Blackberry Ventures 1, LLC on November 15, 2006. The report concluded that there is excellent potential to find additional high-grade silver shoots within the known vein systems as well as abundant untested drill targets Recommendations for further work include spectral analysis of satellite imagery, 3D modeling and structural interpretation, and 10.000 meters of in-fill and exploration drilling. The Company will initiate a drilling program in late second quarter 2007, with hole locations based on conclusions of the 3D modeling and structural analysis

By December 31, 2006, the Company had incurred $1,244,464 for acquisition costs and $2,560,841 ($656,291 net of recovery) for exploration expenditures giving a total of $3,805,305 in gross costs on the Nieves property, or $1,900,755 net of the recovery of $1,904,550 (US $1.5 million) from Blackberry. As at December 31, 2005, gross costs totaled $3,544,965, less $1,904,550 in recovery, for a net of $1,640,415. (Note 5 in the consolidated financial statements dated December 31, 2006)

(ii) Los Crestones Project – Mexico

In 2003, the Company staked a 2,100 hectare claim to cover a hot spring gold-silver prospect in northern Durango, Mexico. The Crestones Property is located 12 kilometers northeast of the Inde mining district on the western edge of the Mesa Central carbonate platform of Mexico where that carbonate package has begun to be affected by the basin and range faulting of the eastern part of the Sierra Madre Occidental ignimbrite province.

In 2004 and early 2005, reconnaissance mapping and sampling programs were completed over an area of about 3.5 square miles. The Company staked an additional 3,547 hectare claim in 2006 and completed detailed mapping of the project geology. The work delineated a hot spring gold-silver system manifest by widespread silicification, flat-lying silica sinter aprons and quartz veining along high-angle, graben faults. Rock chip samples show anomalous Au-Ag values with occasional spikes up to ore grade; and strongly anomalous mercury, arsenic and antimony values which are typical of the upper levels of hot spring-related gold silver mineral systems. The level of exposure is clearly above the boiling zone and the gold numbers are consistent with those found in the top of epithermal gold systems.

Page 4 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

E. Description of Mineral Properties, continued

(iii) Los Crestones Project – Mexico, continued.

The Crestones hydrothermal system consists of three elongate siliceous hydrothermal silica breccia bodies that range from 500 to 1,500 meters in strike length and 75 to 150 meters in width. They strike northerly to northwesterly with a steep to vertical dip, and are hosted within an eight square kilometer envelope of silicified limestone that has been brecciated along its contacts with the hydrothermal silica breccia. The breccias and silicification envelope have been intruded by an elongate quartz porphyry stock with weak phyllic alteration.

Mineralization consists of disseminated stibnite-pyrite-marcasite in the siliceous breccia matrix, breccia clasts with disseminated sphalerite-galena and minor disseminated and veinlet galena-sphalerite-tetrahedrite in the quartz porphyry stock. A 3,000 meter drill program began at the end of Q3 2006 to test all three of the hydrothermal breccia bodies.

Acquisition costs incurred to December 31, 2006 were $71,696 and exploration expenditures were $462,590 for a total of $534,286. Acquisition costs incurred to December 31, 2005 were $59,303 and exploration expenditures were $20,113 for a total of $79,416. (Note 5 in the consolidated financial statements dated December 31, 2006)

(iii) Uranium Project – Arizona, Utah and Wyoming

Quaterra’s entry into uranium exploration commenced in June of 2005 with the acquisition of 95 claims in the Arizona Strip uranium district from a Nevada prospecting syndicate. The acquisition included an option to purchase other properties in Utah and Wyoming. These properties were staked to cover extensions of previously mined uranium deposits and are prospective for both uranium and vanadium. Under the terms of the agreement, the Company may acquire a 100% interest in any or all of syndicate claims by making staged payments over a five-year period totaling US $500,000 and issuing 600,000 common shares. The initial consideration included a US $15,000 cash payment and 200,000 common shares. The properties are subject to a 2% production royalty on each property, 1% of which may be purchased for US $1 million.

The solution collapse breccia pipes of the Arizona Strip district remain the focus of the Company’s uranium exploration program. The district is located north of the Grand Canyon where environmental and political pressure is significantly less and where most of the land that is outside of parks, wilderness areas and national monuments is open for staking. The pipes are attractive targets because of their relatively high grades, small footprint, and the speed and efficiency with which they can be explored. Previous exploration in the district has resulted in the discovery of eight breccia pipe ore bodies with production from 1980 to 1990 totaling approximately 19 million pounds of U3O8. The total amount of mineable uranium discovered to date in breccia pipes in northern Arizona is estimated to be in the range of 35 million pounds.

(1998 International Uranium Corp US SEC Registration Statement http://www.sec.gov/Archives/edgar/data/1063259/0001035704-98-000395.txt)

Page 5 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

E. Description of Mineral Properties, continued

(iii) Uranium Project – Arizona, Utah and Wyoming, continued.

Quaterra initiated the first phase of drilling on the Company’s Arizona Uranium project in early 2006. A total of 30 holes averaging 220 feet deep investigated the near surface stratigraphy of six breccia pipe targets. The program was followed by deep drilling in to evaluate the Ollie, EZ4, EJ and YS targets. Although the results of the drilling at EJ and YS were negative, a deep hole at Ollie encountered 3.5 feet of 0.13% eU308 at a depth of 1,172 ft and 2.5 feet of 0.12% eU308 at a depth of 1,178 feet. The hole also included numerous mineralized intercepts averaging .03% to .08% between 1,020 feet and 1,242 feet. There was no mineralization from 1,242 feet to TD at 1,430 feet where the hole is believed to have exited the pipe throat and entered the Hermit siltstone along the northeast pipe margin. A study of historic data indicates that much of the pipe to the southwest remains untested.

The first hole on the EZ4 target was drilled to 1,340 feet and intercepted anomalous uranium mineralization between 970 and 1,000 feet near the Coconino sandstone/Hermit shale contact. The Coconino sandstone is considered the conduit for mineralization in the Arizona breccia pipes and the presence of mineralization near the contact strongly suggests the close proximity of a mineralized pipe throat. Drill-hole drift to the east and south of the collar location defines a possible target to the northwest.

In Early 2007, Quaterra became the first company to extensively test an airborne time domain EM system in the district. Geotech Ltd. was contracted to fly a 4,900 line-kilometer VTEM survey to identify new targets with geophysical signatures that are similar to previously recognized breccia pipes. Not only did known breccia pipes appear as well delineated anomalies, but the survey identified more than 200 moderate to high priority targets with similar geophysical signatures. The program was coupled with a helicopter-assisted program of claim staking to acquire most of the high priority anomalies in the center of the uranium district. Consulting geophysicist, Joe Inman, and Condor Consulting Ltd, recognized experts in the field of airborne electromagnetics, have been retained to perform a detailed interpretation of the survey results and provide further prioritization of targets.

A second phase of exploration drilling on Quaterra’s breccia pipe targets began in December 2006 by Barbie Drilling Inc. The program is following up the encouraging results of drilling completed during the first quarter 2006 and targeting the newly defined geophysical anomalies to locate the center or throat of potential breccia pipes. Deep drill holes will be systematically completed to evaluate mineralization in the structures as targets become defined and permitted. At least 8 targets are expected to be tested by deep holes in the current program.

Quaterra’s uranium properties in northern Arizona cover approximately 65 square miles over selected areas within the heart of the uranium district. The property includes 4 known breccia pipes and consists of many individual and scattered claim blocks that have been selectively staked over targets with some surface expression of a possible collapse structure and favorable geophysical anomalies within areas of known mineralized occurrences.

Page 6 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

E. Description of Mineral Properties, continued

(iii) Uranium Project – Arizona, Utah and Wyoming, continued.

For Arizona Uranium the acquisition costs incurred to December 31, 2006 were $1,025,108 and exploration expenditures were $1,079,249 for a total of $2,104,357. Acquisition costs incurred to December 31, 2005 were $159,171 and exploration expenditures were $103,820 for a total of $262,991. (Note 5 in the consolidated financial statements dated December 31, 2006)

For Utah Uranium the acquisition costs incurred to December 31, 2006 were $90,562 and exploration expenditures were $610 for a total of $91,171. Acquisition costs incurred to December 31, 2005 were $10,977. Utah Uranium is included in other properties in the mineral property (Note 5 (g)) in the consolidated financial statements dated December 31, 2006.

For Wyoming Uranium the acquisition costs incurred to December 31, 2006 were $9,768 and there were no exploration expenditures. There were no acquisition costs or exploration expenses as at December 31, 2005. Wyoming Uranium is included in other properties in the mineral property (Note 5 (g)) in the consolidated financial statements dated December 31, 2006.

(iv) Duke Island – Alaska

The Company has a 100% interest in 129 federal and eleven State of Alaska claims located on Duke Island, near Ketchikan, Alaska. The Duke Island complex consists of two separate, well-exposed, zoned ultramafic bodies: the Judd Harbor body is almost two miles in diameter and the Hall Cove Body is about three and a half miles in diameter. The Judd Harbor and Hall Cove complexes have been interpreted to be parts of the same intrusive body at depth. Both bodies are comprised of a dunite and peridotite core surrounded by concentric zones of olivine clinopyroxenite, hornblende-magnetite clinopyroxenite, and gabbro.

The Company discovered copper, nickel and platinum group element (PGE) mineralization at Duke Island in 2001. The mineralization is unlike any known Ural–Alaska complex in southeast Alaska’s Alexander Platinum Belt. Geochemical, geological and geophysical data suggest the system extends for over 14.5 kilometers along strike and up to 3.8 kilometers across strike with the ultimate dimensions of the mineralized system remaining open to expansion. The Company believes that Duke Island has potential to host significant accumulations of copper, nickel and PGE mineralization.

The initial IP geophysical surveys in the area suggested mineralization characterized by a high conductivity zone surrounded by a disseminated sulfide zone. Four core holes drilled in late 2001 intercepted up to 90 meters of semi-massive to massive sulfide containing highly anomalous copper, nickel, platinum and palladium.

A helicopter magnetic and electromagnetic survey conducted in 2002 revealed a number of strong EM highs coincident with both magnetic lows and magnetic highs. Several of the EM anomalies are located in covered terrain where no previous work has been conducted. A detailed review of part of this survey by consulting geophysicist Joseph R. Inman identified nine discrete, multi-anomaly zones with strike lengths ranging from 400 meters to 1,500 meters in a four kilometer by four kilometer area.

Page 7 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

E. Description of Mineral Properties, continued

(iv) Duke Island – Alaska, continued

In 2003, the Company staked an additional 30 claims to cover high-priority geophysical anomalies that fell outside the original claim boundary. Geochemical sampling of three of the known sulfide-bearing prospects has shown that strong EM conductors are correlative with Cu-Ni-PGE sulfide mineralization.

A drilling program in 2005 identified magmatic sulfide-bearing systems of significant size in both the Marquis and the Raven zones. Structural and stratigraphic controls that could result in higher grades will need additional investigation to target future drilling on the property. The company is currently reviewing its exploration options for 2007 with the goal of identifying one or more high-grade sulfide targets within the areas of previously identified lower grade mineralization.

Acquisition costs incurred to December 31, 2006 were $112,285 and exploration expenditures were $1,625,551 for a total of $1,737,836. Acquisition costs incurred to December 31, 2005 were $94,205 and exploration expenditures were $1,599,029 for a total of $1,693,234. (Note 5 in the consolidated financial statements dated December 31, 2006)

(v) Seward Peninsula – Big Bar, VMS Project – Alaska

The 100% owned Big Bar project, located 110 miles northeast of Nome, Alaska, is a copper-lead-zinc prospect whose claims cover a 4000-foot long soil anomaly delineated by Anaconda in the early 1980’s. The prospect includes one of the most significant anomalies identified by a stream sediment and soil geochemical reconnaissance survey that included a large part of the Seward Peninsula. Soil anomalies containing up to 1920 ppm Cu occur in felsic schist on the property. Gossans collected as float from the anomaly contain up to .06 g/t Au, 1.6 opt Ag, 4260 ppm Cu and 3900 ppm Zn.

The Company completed 1,470 feet of core drilling during July in the first exploration holes to test the Big Bar target. Oriented perpendicular to the northwest strike and southwest dip of the schist unit exposed at the surface, three holes investigated a strike length of approximately 1000 feet near the center of the geochemical anomaly.

The program encountered an upper mineralized section in pervasively sericite-altered schistose volcanic rock of biotite to lower amphibolite metamorphic grade. Sulfide mineralization occurs in long intercepts of 1%-5% disseminated and stringer pyrite and pyrrhotite with possible chalcopyrite in the upper 200 feet of the drilled section. Sulfide content is greatest in the top 100 ft. and generally decreases downhole. No massive sulfide was encountered. Assay results indicate that mineralization in each of the holes is sub-economic and does not extend to depth.

The lithology and mineralization of the drilled section is interpreted as either the eroded remnants or the distal traces of a VMS deposit. The geology suggests a relatively long-lived hydrothermal system, but it does not give a clear indication of where massive sulfides may have accumulated. To evaluate the possibility of massive sulfides occurring in other areas on the property, the Company contracted Fugro Airborne Surveys Corp. to conduct a 138-line kilometer airborne EM-magnetometer survey over an area of 25 square kilometers centered over the geochemical anomaly.

Page 8 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

E. Description of Mineral Properties, continued

(v) Seward Peninsula – Big Bar, VMS Project – Alaska, continued

The survey identified 6 moderate to strong EM conductors with coincident magnetic anomalies in the vicinity of the geochemical anomaly but outside of the area tested by drilling. The geophysical anomalies will be the subject of surface geological reconnaissance and sampling programs that are scheduled for the 2007 field season.

Acquisition costs incurred to December 31, 2006 were $18,416 and exploration expenditures were $712,113 for a total of $730,574. Acquisition costs incurred to December 31, 2005 were $16,714 and exploration expenditures were $22,652 for a total of $39,366. (Note 5 in the consolidated financial statements dated December 31, 2006)

(vi) MacArthur Property-Nevada

Pursuant to an agreement made October 2005 with North Exploration LLC, the Company acquired the right to earn an interest in sixty-six unpatented mining claims covering the former MacArthur copper-oxide mine, in the Yerington district of Lyon County, Nevada. To earn a 100% interest, the Company is required to make staged payments totaling US $1,785,000 by January 15, 2008 or alternatively should the company have incurred US $500,000 in exploration expenditures by January 15, 2008 it can elect to acquire the property by stage payments totaling US $2,645,000 by January 15, 2010. The property is subject to a 2% NSR royalty, 1% of which may be purchased for US 1 million dollars. For further information see Note 5 (f) of the consolidated financial statements dated December 31, 2006.

A review of historic data suggests the oxide mineralization at MacArthur may be part of a more extensive porphyry copper system. Copper-oxide mineralization is present in outcrop well beyond the current pit outline. Old US Bureau of Mines reports also indicate the presence of copper mineralization in drill holes more than 1,500 feet from the current pit boundaries. Quaterra has staked 230 additional claims to control an area of approximately 8 square miles that are believed to cover the potential extensions of both oxide and possible sulfide mineralization.

Quaterra has acquired an historical exploration and drilling data package for the MacArthur deposit that includes approximately 11,500 assay intervals from 290 drill holes. Mr. David Heatwole, exploration manager of the project, will conduct a review the deposit geology and mineralization to assess the necessary steps to complete a technical report on the MacArthur project with the objective of preparing a 43-101 compliant resource estimate. The Company is preparing for a 2007 drill program to confirm the historic resource and evaluate possible extensions to the mineralization at MacArthur.

Acquisition costs incurred to December 31, 2006 were $170,324 and exploration expenditures were $80,591 for a total of $250,915. Acquisition costs incurred to December 31, 2005 were $30,484 and there were no exploration expenditures. (Note 5 in the consolidated financial statements dated December 31, 2006).

A payment of $350,000 for the purchase of the PIT claims referred to in Note M (e) in this MD&A and Note 5 (f) of the consolidated financial statements dated December 31, 2006, shall be deducted from the final payment due to North Exploration LLC for the McArthur properties.

Page 9 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

E. Description of Mineral Properties, continued

(vii) Other properties

The Company has also purchased Grays Hills and Peg Leg properties in the USA, and Las Americas, Minarsol, Jabconcillos properties in Mexico. See Note 5 (g) in the consolidated financial statements dated December 31, 2006

F. Mineral Property Expenditures

During the year ended December 31, 2006 incurred mineral property costs of $3,943,427 (excluding exploration AP) compared to $1,783,936 in 2005. Of this expenditure $1,650,351 (2005: $382,972) was spent on acquisition costs and $2,448,598 (2005: $1,400,964) on exploration.

The total mineral properties expenditure of $9,760,382, which excludes $1,904,550 recovered from Blackberry, as at December 31, 2006 was allocated as follows; 38% was spent on Nieves, 22% on Arizona Uranium, 18% on Duke Island, 7% on both Big Bar, 6% on both Los Crestones, and various other properties and 3% on MacArthur. This compares to total mineral properties expenditure of $5,661,433, which excludes $1,904,550 recovered from Blackberry, as at December 31, 2005 was allocated as follows; 63% was spent on Nieves, 30% on Duke Island with 5% spent on the new property Arizona Uranium, the remaining 2% spent on various other properties.

Total deferred mineral property costs for the quarter ended December 31, 2006 were as follows:

                                   
All Mineral Properties     Year End           Additions            Change      Year End    
    Balance                             During     Balance  
    Dec 31, 2005     Q1     Q2     Q3     Q4     2006     Dec 31, 2006  
  $    $    $    $    $    $    $   
                                           
Summary by Expenditure                                          
     Total acquisitions   1,547,235     122,047     119,813     664,638     743,853     1,650,351     3,197,586  
     Total exploration   4,114,198     389,555     566,387     651,262     841,394     2,448,598     6,562,796  
     Less: cost recovery, Nieves   (1,904,550 )   -     -     -     -     -     (1,904,550 )
                                           
Total   3,756,883     511,602     686,200     1,315,900     1,585,247     4,098,949     7,855,832  
                                           
Summary by Property                                          
     Nieves, net of cost recovery   1,640,415     203,847     31,237     6,107     19,149     260,340     1,900,755  
     Los Crestones   79,416     3,703     86,140     89,951     275,076     454,870     534,286  
     Duke Island   1,693,234     12,492     2,958     29,152     -     44,602     1,737,836  
     Big Bar   39,366     1,736     173,185     421,309     94,978     691,208     730,574  
     Arizona Uranium   262,991     274,487     330,409     520,681     715,789     1,841,366     2,104,357  
     MacArthur   30,484     14,727     62,271     110,848     32,585     220,431     250,915  
     Other properties   10,977     610     -     137,852     447,670     586,132     597,109  
                                           
Total   3,756,883     511,602     686,200     1,315,900     1,585,247     4,098,949     7,855,832  

Page 10 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

F. Mineral Property Expenditures, continued

Total deferred mineral property costs for the quarter ended December 31, 2005 were as follows:

All Mineral Properties   Balance           Additions           Balance     Balance  
    Dec 31, 2004     Q1     Q2     Q3     Q4     Dec 31, 2005     Dec 31, 2005  
   $    $    $    $      $    $  
                                           
Total acquisitions   1,164,263     126,350     109,195     112,669     34,758     382,972     1,547,235  
Total exploration   2,713,234     211,099     360,259     141,040     688,566     1,400,964     4,114,198  
Less: cost recovery, Nieves   (1,904,550 )   -     -     -     -     -     (1,904,550 )
                                           
Total   1,972,947     337,449     469,454     253,709     723,324     1,783,936     3,756,883  
                                           
Summary by Property                                          
     Nieves, net of cost recovery   831,368     269,092     302,853     71,516     165,586     809,047     1,640,415  
     Los Crestones   27,842     46,758     243     4,573     -     51,574     79,416  
     Duke Island   1,079,874     12,751     33,801     70,531     496,277     613,360     1,693,234  
     Big Bar   33,863     -     -     -     5,503     5,503     39,366  
     Arizona Uranium   -     8,848     132,557     81,700     39,886     262,991     262,991  
     Other Properties   -     -     -     25,389     16,072     41,461     41,461  
                                           
Total   1,972,947     337,449     469,454     253,709     723,324     1,783,936     3,756,883  

For further information on mineral properties expenditure see Note 5 of the consolidated financial statements dated December 31, 2006

G. Results of Operations

For the year ended December 31, 2006, (“2006”) the Company had a net loss of $3,830,534 compared to a net loss of $788,060 for the year ended December 31, 2005 (“2005”). Stock based compensation was $3,045,004 for 2006 (2005: $330,842) as stock options were granted and recognized. Removing the stock based compensation results in a net loss of $785,530 for year ended December 31, 2006, and $457,218 for comparable period last year.

The increase of $328,312, in the net loss for 2006, excluding stock based compensation can be explained as follows:

  (a)

With the removal of stock based compensation of $1,476,044 (2005: $63,018) consulting fees increased by $57,247 from $48,568 for 2005 to $105,815 for 2006. This is due to the increased activity in respect to the day to day running of the Company and the commission of consultants for exploration purposes.

     
  (b)

With the removal of stock based compensation of $749,697 (2005: $199,555) director and officer fees were $5,625 for 2006 compared to no fees for 2005. These fees are due to the new company policy of paying directors for meeting attendance.

Page 11 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

G. Results of Operations, continued

  (c)

The Company reported a net foreign currency gain of $79,449 compared to a loss for the comparable period in 2005, of $125,907. Since all current assets and liabilities held in US dollars have to be converted to Canadian dollars on consolidation at the exchange rate as at December 31, 2006, being 1.1664, this created an exchange gain due to a strengthening US dollar compared to the Canadian dollar.

     
 

It is important to note that the majority of transactions for the Company are in US dollars and, to a lesser extent, Mexican Pesos, and therefore foreign exchange fluctuations can result in losses or gains.

     
  (d)

General exploration costs were $225,855 for 2006 compared to $2,441 for 2005. This is due to the employment of a VP of exploration and the consideration of potential new properties.

     
  (e)

Investor relation costs increased by $73,228 from $71,630 for 2005 to $144,858 for 2006. This is due to the fees paid to Dynamic Stock Market Analysis to provide investor relations as well as the Company hosting events for mining analysts, newsletter writers and others prominent in the industry to inform them of recent corporate developments. .

     
  (f)

Office and general costs increased by $99,781 from $62,159 for 2005 to $161,940 for 2006. This is due to the increased activity in respect to the day to day running of the Company.

     
  (g)

Professional fees increased by $49,849 from $89,863 for 2005 to $139,712 for 2006. This is due to increased legal and auditing expenses.

     
  (h)

Travel and promotion costs increased by $56,829 from $14,850 for 2005 to $71,679 for 2006. This is due partly to the employment of a VP of exploration as well as an increased travel cost to inspect potential new properties and an increase in travel for meetings with analysts and other prominent industry experts.

     
  (i)

With the removal of stock based compensation of $819,263 (2005: $68,269) wages and benefits costs were $60,984 for 2006 compared to nil for 2005. This is due to the employment of a VP of exploration.

     
  (j)

Interest income increased by $49,853 from $36,135 for 2005 to $85,988 for 2006. This is due to larger amounts being held on fixed term deposits.

     
  (k)

An administration fee of $42,975 being 10% of the 50% Neives exploration charged to Blackberry was charged in 2006.

     
  (l)

An option payment of $35,000 was received during 2005.

     
  (m)

A one off transaction of expenses recovered in the amount of $40,329 occurred in 2006.

For the year ended December 31, 2005, (“2005”) the Company had a net loss of $788,060 compared to a net loss of $685,952 for the year ended December 31, 2004 (“2004”) giving a net loss increase of $102,108. Stock based compensation was $330,842 for 2005 (2004: $386,246) as stock options were granted and recognized. Removing the stock based compensation results in a net loss of $457,218 for 2005, and $299,706 for 2004 resulting in a net loss increase of $157,512 for 2005, which can be explained as follows:

Page 12 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

G. Results of Operations, continued

  (a)

Consulting fees increased by $37,591 from $10,977 in 2004 to $48,568 in 2005. This is due to the increased activity in respect to the day to day running of the Company.

     
  (b)

The Company reported a net foreign currency loss of $125,907 compared to a net foreign exchange gain in 2004 of $1,640. Since all current assets and liabilities held in US dollars have to be converted to Canadian dollars on consolidation at the exchange rate as at December 31, 2005, being 1.166, this created a large exchange loss due to appreciably weakened US dollar compared to the Canadian dollar.

     
  (c)

Professional fees increased by $72,171 from $17,692 in 2004 to $89,863 in 2005. Due to the affect of regulatory requirements the audit fees for the 2005 audit and the accounting fees in respect of the production of annual and quarterly financial statements has caused part of this increase. There were also increased legal fees due to consultations for potential property purchases and agreements.

     
  (d)

Interest income increased by $26,274 from $9,861 in 2004 to $36,135 in 2005. This is due to larger amounts being held on fixed term deposits throughout the year.

     
  (e)

Option payments were received in 2005 of $35,000. See Note 5 (f) of the consolidated financial statements dated December 31, 2005.

     
  (f)

A reclamation bond of $2,500 was written off in 2005. This bond has been held since the 1990s on a property that the Company no longer has an interest in and it was deemed by management unlikely this amount would be recovered.

H. Quarterly Results

The following financial data was derived from the Company’s consolidated financial statements for the current and eight previous quarters:

    Dec. 31,     Sept. 30,     June 30,     March 31,       Dec. 31,     Sept. 30,     June 30,     March 31,       Dec 31  
    2006     2006     2006     2006     2005     2005     2005     2005     2004  
                   
                                                       
Operating expenses   217,754     285,046     299,512     152,560     218,932     182,209     69,840     54,871     100,227  
Interest earned   (30,060 )   (26,277 )   (19,267 )   (10,384 )   (22,641 )   (3,622 )   (3,236 )   (6,636 )   (2,150 )
Other income   (42,975 )   -     -     -     (25,000 )   -     -     (10,000 )   -  
                                                       
Loss before the undernoted   144,719     258,769     280,245     142,176     171,291     178,587     66,604     38,235     98,077  
                                                       
Stock-based compensation   880,374     1,982,373     114,500     67,707     (129,373 )   460,215     -     -     -  
Write off of reclamation bond   -     -     -     -     2,500     -     -     -     -  
Accrued liabilities written off   6,063     (6,761 )   (23,831 )   (15,800 )   -     -     -     -     -  
                                                       
Net Loss   1,031,156     2,234,381     370,914     194,083     44,418     638,802     66,604     38,235     98,077  
                                                       
Loss per share - basic and diluted   0.03     0.03     0.01     0.00     0.01     0.01     0.00     0.00     0.00  

Page 13 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

I. Selected Annual Information.

The following financial data is derived from the Company’s consolidated financial statements for each of the three most recently completed fiscal years ending December 31:

    2006     2005     2004  
Total revenues  $ 128,963   $  71,135   $  9,861  
Net loss for the year   (3,830,534 )   (788,060 )   (685,952 )
Basic and fully diluted per share   (0.05 )   (0.01 )   (0.01 )
Total assets   17,340,544     5,855,847     3,727,071  
Total long-term financial liabilties   -     -     -  
Cash dividends declared per common share   -     -     -  

Refer to Note G in this MD&A for a detailed comparison of Year 2006 with 2005 and Year 2005 with 2004.

J. Related Party Information.

As at December 31, 2006, $26,216 (2005: $13,010) was due to directors or senior officers of the Company or to companies controlled by them, for various services rendered.

All related party transactions are made in the normal course of operations for consideration established by the Company and accepted by the Company and related parties.

For further detailed information see Note 6 of the consolidated financial statements dated December 31, 2006.

K. Financial Conditions, Liquidity and Capital Resources

The Company has limited financial resources and finances its operations by raising capital in the equity markets. For the foreseeable future, the Company will need to rely on the sale of such securities and joint venture arrangements with third parties to provide working capital and to finance its mineral property acquisition and exploration activities.

The Company had a working capital balance of $9,075,713 as at December 31, 2006, compared to a working capital balance of $1,697,865 as at December 31, 2005.

During the year ended December 31, 2006, 11,891,136 common shares were issued (2005: 7,975,000) for gross proceeds of $11,765,917 (2005: $2,494,350) from shares issued for a private placement and the exercise of share purchase warrants and stock options.

Page 14 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

K. Financial Conditions, Liquidity and Capital Resources, continued

A further 400,000 common shares were issued (2005: 200,000) for mineral property acquisitions at a price of $606,000 (2005: $76,000) as well as 291,484 commons shares (2005: Nil) for brokerage fees in respect of the 2006 private placement.

This give a total of 12,582,620 (2005: 8,175,000) common shares issued during the year. For further information on the issuance of shares see note 7 of the consolidated financial statements.

As at March 20, 2007, 5,312,000 stock options are “in the money” (the exercise price is less than the current share trading price) and 5,118,250 are exercisable. If they were exercised, the Company would realize proceeds of $4,618,240. All warrants are also in “in the money” however they are still subject to a regulatory four month hold period and can not be exercised until April 20, 2007.

For 2006 and 2005 expenditures on mineral properties see note E and F in this MD&A or Note 5 of the consolidated financial statements dated December 31, 2006.

L. Outstanding Shares, Options and Share Purchase Warrants

  (i)

Issued and outstanding shares

The Company has unlimited authorized, without par value, common shares.

      Number     Total  
      of Shares        
               
  Balance as at December 31, 2006   78,104,820   $ 27,861,058  
  Issued subsequent to quarter-end            
       Exercise of stock options   115,000   $ 78,600  
               
  Balance as at March 20, 2007   78,219,820   $ 27,939,658  
               

  (ii)

Share Purchase Warrants

As at December 31, 2006, there were 2,623,928 share purchase warrants outstanding with an exercise price of $2.25 per share and an expiry date of June 21, 2008. Subsequent to the year end no share purchase warrants have been exercised.

Page 15 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

L. Outstanding Shares, Options and Share Purchase Warrants, continued

  (iii)

Stock Options

As at December 31, 2006, there were 5,427,000 stock options outstanding with a weighted average exercise price of $0.92 per share. Options currently outstanding are as follows:

  Exercise   Expiry     Balance     Granted       Cancelled     Exercised      Balance  
  Price   Date     Dec. 31, 2006           or Expired           March 20, 2007  
                                       
  $0.12   January 10, 2008     937,000     -     -     25,000     912,000  
  $0.25   October 2, 2008     50,000     -     -     -     50,000  
  $0.34   December 8, 2008     90,000     -     -     -     90,000  
  $0.62   March 25, 2009     590,000     -     -     30,000     560,000  
  $0.35   August 9, 2010     850,000     -     -     30,000     820,000  
  $0.40   January 9, 2011     200,000     -     -     -     200,000  
  $1.04   March 27, 2011     125,000     -     -     -     125,000  
  $1.00   May 19, 2011     75,000     -     -     -     75,000  
  $1.12   June 12, 2011     100,000     -     -     -     100,000  
  $1.55   July 28, 2011     2,110,000     -     -     30,000     2,080,000  
  $1.55   August 23, 2011     100,000     -     -     -     100,000  
  $1.50   September 25, 2011     100,000     -     -     -     100,000  
  $2.05   December 18, 2011     100,000     -     -     -     100,000  
  $2.65   January 11, 2012     -     75,000     -     -     75,000  
                                       
            5,427,000     75,000     -     115,000     5,387,000  
                                       
  Weighted average exercise price   $ 0.92   $ 2.65   $ 0.00   $ 0.68   $ 0.95  

M. Subsequent Events and Outlook

The following occurred subsequent to the year end December 31, 2006.

  (a)

The Company intends to continue land acquisition and drilling at its uranium pipe targets in Arizona. Phase 1 drilling is in progress at the Crestones gold property in Mexico and will continue into Q1 2007.

     
  (b)

115,000 Stock options were exercised after the period end December 31, 2006. For detailed information see Note L in this MD&A or Note 7 of the consolidated financial statements dated December 31, 2006.

     
  (c)

75,000 stock options were issued with an exercise price of $2.65 and an expire date of January 11, 2012

Page 16 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

M. Subsequent Events and Outlook, continued

  (d)

The Company entered into a sale and purchase agreement dated January 16, 2007, with Charles Gary Clifton and North Exploration LLC, in respect to the purchase of the mining claims know as the Pit Claim in Lyon County, Nevada. Pursuant to this agreement the Company’s commitments are as follows:


  (i)

US$43,750 on or before January 16, 2007 (Paid)

  (ii)

US$43,750 on or before April 16, 2007

  (iii)

US$43,750 on or before July 16, 2007

  (iv)

US$43,750 on or before October 16, 2007

  (v)

US$43,750 on or before January 16, 2008

  (vi)

US$43,750 on or before April 16, 2008

  (vii)

US$43,750 on or before July 16, 2008

  (viii)

US$43,750 on or before October 16, 2008

For further information see Note E (vi) of this MD&A and Note 5 (f) of the consolidated financial statements dated December 31, 2006.

  (e)

Under an amendment dated January 17, 2007 to the original agreement made October 2005 between the Company and North Exploration LLC to add a US $350,000 deduction from either of the final payments made under this agreement. For further information see Note E (vi) of this MD&A and Note 5(f) for the consolidated financial statements dated December 31, 2006.

     
  (f)

Subject to regulatory approval, the Company entered into a service agreement dated January 30, 2007, with a consultant to provide financial and advisory services. Under this agreement, the Company’s commitment is to pay a retainer of $15,000 per month starting February 1, 2007. $7,500 paid by cash and $7,500 by the issuance of common shares in the Company at the market price of the Company’s shares on the date of issuance.

     
  (g)

The option agreements for the Arc and Brown Claims, in the Skeena Mining District were terminated in accordance with their terms and the 100% interest reverted back to the Company For further information see Note 5 (g) of the consolidated financial statements dated December 31, 2006.

     
  (h)

The following agreements were implemented as at January 1, 2007:


  (i)

The employment agreement of the VP of Exploration was renewed.

  (ii)

The management agreement with a related party was renewed.

  (iii)

A long term employment agreement for the President and Chief Executive Officer of the Company.

N. Off Balance Sheet

The Company did not enter into any off balance sheet transactions or commitments as defined by National Instrument 51-102.

Page 17 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

O. Management’s Responsibility for Financial Information

Preparing financial statements requires management to make estimates and assumptions that affect the reported results. The estimates are based on historical experience and other assumptions that are believed to be reasonable under the circumstances. Critical accounting policies were disclosed in the annual audited financial statements.

Consistent with accepted policies of the Canadian junior mining industry, the Company capitalizes exploration expenditures. This decision, and the timing of the possible recognition of impairment in the mineral property value, can materially affect the reported earnings of the Company.

Management has prepared the information and representations in this annual report. The financial statements have been prepared to conform to generally accepted accounting principles in Canada and, where appropriate, reflect management's best estimates and judgment. The financial information presented throughout this report is consistent with the data presented in the financial statements.

The Company maintains adequate systems of internal accounting and administrative controls. These systems were designed to provide reasonable assurance that relevant and reliable financial information is produced. The independent auditors have the responsibility of auditing the annual financial statements and expressing an opinion on them.

The Board of Directors, through its Audit Committee, is responsible for ensuring that management fulfils its responsibilities for financial reporting and internal control. The Audit Committee is composed of three directors, who meet at least quarterly with management and, at least annually with the external auditors to audit and review accounting, internal controls and financial reporting matters.

P. Risks and Uncertainties

The principal business of the Company is the exploration and development of mineral properties. Given the nature of the mining business, the limited extent of the Company's assets and the present stage of development, the following risk factors, among others, should be considered.

The Company does not hold any known mineral reserves of any kind and does not generate any revenues from production. The Company’s success will depend largely upon its ability to locate commercially productive mineral reserves. Mineral exploration is highly speculative in nature, involves many risks and frequently is non-productive. There is no assurance that our exploration efforts will be successful. Success in establishing reserves is a result of a number of factors, including the quality of management, the level of geological and technical expertise, the quality of land available for exploration as well as various other factors.

Once mineralization is discovered, it may take several years in the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish proven and probable reserves through drilling and bulk sampling, to determine the optimal metallurgical process to extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities. Because of these uncertainties, no assurance can be given that our exploration programs will result in the establishment or expansion of resources or reserves.

Page 18 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

P. Risks and Uncertainties, continued

Since the Company does not generate any revenues, it may not have sufficient financial resources to undertake by itself all of its planned mineral property acquisition and exploration activities. Operations will continue to be financed primarily through the sale of securities such as common shares. The Company will need to continue its reliance on the sale of such securities for future financing, which may result in dilution to existing shareholders. Furthermore, the amount of additional funds required may not be available under favorable terms, if at all, and will depend largely on the acquisition and exploration activities pursued.

The ability to attract capital to the Company is dependent on movements in commodity prices. Commodity prices fluctuate on a daily basis and they are affected by a number of factors beyond the control of the Company. If, because of a sustained decline in prices, financing were not available to meet cash operating costs, the feasibility of continuing operations would be evaluated and if warranted, would be discontinued.

The resource industry is intensively competitive in all of its phases, and the Company competes with many other companies possessing much greater financial and technical resources. Competition is particularly intense with respect to the acquisition of desirable undeveloped gold and silver properties. The principal competitive factors in the acquisition of prospective properties include the staff and data necessary to identify and investigate such properties, and the financial resources necessary to acquire and develop the projects. Competition could adversely affect the Company’s ability to acquire suitable prospects for exploration.

Q. Licenses and Permits

The operations of the Company require licenses and permits from various government authorities. The Company believes that it holds all necessary licenses and permits under applicable laws and regulations for work in progress and believes it is presently complying in all material respects with the terms of such licenses and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that the Company will be able to obtain or maintain all necessary licenses and permits that may be required to explore and develop its properties, commence construction or operation of mining facilities or to maintain continued operations that economically justify the cost.

R. Whistleblower Policy

Effective June 30, 2005, the audit committee adopted resolutions that authorized the establishment of procedures for complaints received regarding accounting, internal controls or auditing matters, and for a confidential, anonymous submission procedure for employees who have concerns regarding questionable accounting or auditing matters. The implementation of the whistleblower policy is in accordance with new requirements pursuant to Multilateral Instrument 52-110 Audit Committees, National Policy 58-201 Corporate Governance Guidelines and National Instrument 58-101 Disclosure of Corporate Governance Practices.

Page 19 of 20



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2006

S. Forward-Looking Statements

Some of the statements contained in this MD&A are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur.

Forward-looking statements may be identified by such terms as “believes”, “anticipates”, “expects”, “estimates”, “may”, “could”, “would”, “will”, or “plan”. Such forward-looking statements are made pursuant to the safe harbour provisions of the United States Private Securities Litigation Reform Act of 1995. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties.

Actual results relating to, among other things, results of exploration, reclamation, capital costs, and the Company’s financial condition and prospects, could differ materially from those currently anticipated in such statements for many reasons such as; changes in general economic conditions and conditions in the financial markets; changes in demand and prices for the minerals the Company expects to produce;, litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; technological and operational difficulties encountered in connection with the Company’s activities; and changing foreign exchange rates and other matters discussed in this MD&A.

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on the Company’s forward-looking statements. Further information regarding these and other factors, which may cause results to differ materially from those projected in forward-looking statements, are included in the filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time by the Company or on its behalf, except in accordance with applicable securities laws.

Page 20 of 20


EX-99.7 8 exhibit99-7.htm MD&A (AMENDED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.7

     Management’s Discussion and Analysis

In respect to the year Ended December 31, 2005

Dated: April 19, 2006



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

A. Introduction

The following Management Discussion and Analysis (“MD&A”) of the operating results and financial condition of Quaterra Resources Inc. (the “Company”) compares results for the year ended December 31, 2005 to the same period in the previous year. These statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2005. All notes referenced herein may be found in the consolidated financial statements.

The financial statements were prepared in accordance with Canadian generally accepted accounting principles. This MD&A, dated as of April 19, 2006, was prepared to conform to National Instrument 51-102 F1 and it was approved by the Board of Directors prior to release.

The Company is a reporting issuer in British Columbia and Alberta and its shares trade on the Tier 2 Board of the TSX Venture Exchange (“TSX”) under the symbol QTA.

The Company’s reporting currency is the Canadian dollar and all dollar amounts are in Canadian dollars, unless otherwise indicated. Some numbers in this MD&A have been rounded to the nearest thousand for discussion purposes.

Certain forward-looking statements are discussed in the MD&A with respect to the Company’s activities and future financial results. These are subject to significant risks and uncertainties that may cause projected results or events to differ materially from actual results or events.

Additional information relating to the Company, including detailed drill results previously disclosed in news releases, is available on SEDAR at www.sedar.com. Terms of property option agreements are described more fully in the notes to the consolidated financial statements.

B. Qualified Person

Dr. Thomas C. Patton, P. Geo., the President and Chief Executive Officer of the Company, is the qualified person responsible for the preparation of the technical information included in this MD&A. Dr. Patton graduated from the University of Washington in 1971 (Ph.D.) and has worked with both junior and senior mining companies. His exploration efforts have concentrated on North America and have resulted in several significant discoveries and led to the expansion of mineral reserves at existing operations. He is currently President and the Chief Operating Officer for Western Silver Corporation and previously held senior positions with Rio Tinto PLC and Kennecott Corporation. Dr. Patton is a member of the Society of Economic Geologists and the American Institute of Mining & Metallurgical Engineers.

Eugene Spiering joined the company on January 10, 2006 as Vice President of Exploration. Mr. Spiering has over 28 years of experience in the mining exploration industry. He most recently held the position of vice president, exploration at Rio Narcea Mines Ltd., where he managed a team that discovered two gold deposits and completed the final definition of one nickel deposit in Spain. All three of these deposits are currently in production. Prior to his tenure at Rio Narcea, Mr. Spiering held the position of senior geologist with Energy Fuels Nuclear, Inc. where his responsibilities included drilling supervision, geologic mapping, and ore reserve calculations related to uranium exploration in northern Arizona and gold exploration in western US and Venezuela. He received his Bachelor of Science-Geology degree from the University of Utah.

Page 1 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

C. Description of Business

The Company acquires and explores mineral properties in the Americas. It is currently exploring for uranium in Arizona, copper in Nevada and precious metals in Mexico

D. Description of Mineral Properties

  i)

Nieves Property – Mexico

The Company has a 50% interest in 19 mineral concessions covering an area of approximately 130 square kilometers (50 square miles) located in the State of Zacatecas, Mexico. The Nieves Project lies within a northwest trending mineral belt known as the Silver Belt or Faja de Plata, which is based on the northwest alignment of a narrow band of silver mining districts of San Martin, Fresnillo, Zacatecas and Real de Angeles.

Silver was discovered on the claim block in the mid-1500's and sporadic work occurred thereafter on two vein systems until the start of the Mexican Revolution in 1910. No modern exploration took place until the mid-1990's.

Effective January 16, 1995, the Mexican concessionaires entered into an option agreement with Kennecott Exploration Company (“Kennecott”) that allowed Kennecott to explore and acquire the property by making specified option payments over five years, and advance minimum royalty payments (“AMR”) as defined in the “Underlying Agreement”. On March 13, 1998, Kennecott transferred its rights under the Nieves option to Western Silver Corporation (“Western”) in consideration for a 2% net smelter royalty (“NSR”) on certain core claims and a 1% NSR on others. Western subsequently assigned its rights to Nieves to the Company on March 26, 1999, in consideration for 1,444,460 common shares at $0.20 per share ($288,892). In addition, the Company issued 360,000 common shares at $0.20 per share ($72,000) to the concessionaires in lieu of the US $50,000 option payment otherwise due under the terms of the Underlying Agreement.

The payment schedule in the Underlying Agreement was amended on November 22, 1999, February 11, 2000 and May 2002, such that US $30,000 was paid in January 2000, US $15,000 in May 2002 and US $25,000 in January 2003, for a total of US $70,000. In addition, to acquire the interest in the claim fractions, the Company paid US $40,000 to the concessionaires. As at December 31, 2005, option payments totaled US $110,000. AMR payments of US $75,000 are due on or before January 26 each year from 2004 until the commencement of commercial production.

Drilling conducted over the past years by Kennecott and Western intersected narrow zones of +500g/t silver that were interpreted to be the high level expression of a large, silver-rich mineralized system at depths below 200 meters. Subsequently, the Company completed a program of magnetics and CSAMT/IP surveys, which identified a number of prospective anomalies. The survey results suggested that the Nieves Property is a large hydrothermal system with minimal erosion and several features in common with the high-grade Fresnillo silver district, (90 kilometers south), and Western’s Peñasquito silver project (150 kilometers northeast).

In August 2004, the Company conducted an initial 5,300 meter, 13-hole diamond drill program to test a number of targets adjacent to and below areas of previously defined mineralization and to test seven east-west striking anomalies, interpreted to be veins with associated mineralization, that extend for distances of up to 3.5 kilometers.

Page 2 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

D. Description of Mineral Properties, continued

  i)

Nieves Property – Mexico, continued

A second drill program (5,171 meter, 11-hole) was completed in May 2005 to follow up on the silver mineralization intersected in the 2004 drilling program and to evaluate other targets defined by a combination of mapping, sampling and geophysical surveys.

Drill results, geophysics and petrography indicate that the exposure level at Nieves is extremely high and that the veins exhibit characteristics similar to the historic Fresnillo silver mine. Boiling textures observable in drill core at depths of 150-200 meters below surface mark the top of the mineralized vein zone that appears to extend downward for at least 300 meters. The Concordia-San Gregorio vein is prospective over a strike length of at least 1000 meters. The California and Santa Rita veins have similar orientations, geophysical signatures and size potential. The near surface mineralization exposed on San Gregorio Hill and along the Santa Rita vein on Santa Rita Hill is interpreted as manto style (rootless) mineralization trapped in porous sediments at the base of Tertiary volcanic rocks. These zones may indicate the presence of high-grade mineralization at depth in the adjacent veins.

In 2005, the Company developed a three dimensional drill model to interpret the vein geometry and compiled surface and core geochemistry data in preparation for a fall deep drilling program. An additional 5,000 meters of close-spaced drilling to confirm the continuity, width and grade of mineralization in the Concordia vein system was planned, in consultation with US-based Blackberry Ventures I,LLC, (“Blackberry”) an investment partnership that earned a 50% interest in the property by funding the Company’s two earlier phases of drilling for US $1,500,000.

A Phase III drilling program (5,894 meters, eight holes) began during the fourth quarter of 2005 and was completed during March 2006. The drilling was designed to evaluate the down dip grade and thickness of three silver-bearing veins intersected in prior programs, particularly an intercept of high grade mineralization of 4 kg silver over 1.5 metres on the Concordia vein. Results will be available by the end of April, 2006.

By December 31, 2005, the Company had incurred $3,544,965 in gross acquisition and exploration expenditures on the Nieves property, or $1,640,415 net of the recovery of $1,904,550 (US $1.5 million) from Blackberry. As at December 31, 2004, gross expenditures totaled $2,735,918, less $1,904,550 in recovery, for a net of $831,368.

  ii)

Los Crestones Project – Mexico

In 2003, the Company staked a 2,100 hectare claim to cover a hot spring gold-silver prospect in northern Durango, Mexico. The Crestones Property is located 12 kilometers northeast of the Inde mining district on the western edge of the Mesa Central carbonate platform of Mexico where that carbonate package has begun to be affected by the basin and range faulting of the eastern part of the Sierra Madre Occidental ignimbrite province.

In 2004 and early 2005, mapping and sampling programs were completed over an area of about 3.5 square miles. Results show strongly anomalous mercury, arsenic and antimony values which are typical of the upper levels of hot spring-related gold silver mineral systems. The level of exposure is clearly above the boiling zone and the gold numbers are consistent with those found in the top of epithermal gold systems. The prospect has not been drilled.

Page 3 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

D. Description of Mineral Properties, continued

  ii)

Los Crestones Project – Mexico, continued

These mapping and sampling programs identified several high priority targets on the Crestones property: a mineralized area at the top of Cerro Laguna, with anomalous gold, silver, mercury and barium; a newly discovered zone of acid sulphate alteration located at the north end of the Casita Breccia where it merges into Cerro Laguna; and the Casita breccia with enriched gold, silver, lead, zinc, arsenic, antimony, mercury and barium.

Work plans for the first half of 2006 include additional mapping and sampling in the Cerro Laguna-acid sulphate zone and a 1500 meter drilling program to test the prospective targets.

Acquisition costs incurred to December 31, 2005 were $59,303 and exploration expenditures were $20,113 for a total of $79,416. As at December 31, 2004 expenditure totaled $27,842 of which $21,562 were acquisition costs and $6,280 for exploration.

  iii)

Uranium Project – Arizona, Utah and Wyoming

In June 2005, the Company acquired 95 claims from a Nevada prospecting syndicate covering 36 uranium breccia pipe targets situated in northern Arizona and has an option to acquire other properties in Utah and Wyoming. These properties were staked to cover extensions of previously mined uranium deposits and they are prospective for both uranium and vanadium. The Company subsequently staked 14 claims in Arizona covering four additional breccia pipe targets.

Under the terms of the agreement, the Company may acquire a 100% interest in any or all of these claims by making staged payments over a five-year period totaling US $500,000 and issuing 600,000 common shares over a three-year period. The initial consideration included a US $15,000 cash payment and 200,000 common shares. The properties are subject to a 2% production royalty on each property, 1% of which may be purchased for US $1 million.

Mr. Pat Hillard has been appointed as the company’s consulting geologist with responsibility for the conduct of exploration and development work on all properties in the three state areas. Pat Hillard is considered one of the foremost uranium breccia pipe authorities in the industry and is credited with the discovery of six of eight breccia pipe ore bodies in northern Arizona that became profitable mines operated by Energy Fuels Nuclear.

Quaterra’s initial focus will be on its solution collapse breccia pipe targets on the Arizona Strip. This area is north of the Grand Canyon where environmental and political pressure is significantly less and most of the land outside parks, wilderness areas and national monuments is open for staking.

These pipes represent extremely attractive targets today because of their relatively high grades, small footprint, and the speed and efficiency with which they can be explored. Previous exploration on the Arizona Strip in northern Arizona has resulted in the discovery of eight breccia pipe ore bodies with production in the 1980’s and early 1990’s totaling approximately 19 million pounds of U3O8. Total amount of mineable uranium discovered to date in breccia pipes in northern Arizona is estimated to be in the range of 35 million pounds (1998 International Uranium Corp US SEC Registration Statement; http://www.sec.gov/Archives/edgar/data/1063259/0001035704-98-000395.txt).

Page 4 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

D. Description of Mineral Properties, continued

  iii)

Uranium Project – Arizona, Utah and Wyoming, continued

Low uranium prices, not the lack of exploration success, forced Energy Fuels to terminate its breccia pipe exploration and mining programs. The largest uranium pipe ore body thus far found was the 6 million pound Pigeon Pipe.

A shallow drilling program totaling 2,033 meters in 30 holes averaging 70 meters deep was completed during the first quarter of 2006 to investigate the near surface stratigraphy of six collapse breccia pipe uranium targets in northern Arizona.

A follow-up deep drilling program began early in the second quarter to evaluate at least one of these targets and five others including Ollie, EZ 4, EJ and when permits are received, the Whistler and Rock breccia pipes. Drilling on the Rock target, considered to be one of the most prospective of the group, is not expected to commence until early summer and will probably require a helicopter for mobilization of the rig and personnel.

The deep drilling program is planned to complete a total of approximately 3500 meters in six to eight holes averaging 450 meters deep. The first objective of the program will be the Ollie pipe, located 10 miles southeast of the Hack Canyon mines that produced 9.5 million pounds of uranium (eU3O8). Ollie was the subject of the last deep drilling program conducted by EFN (Energy Fuels Nuclear) before discontinuing operations in 1994 because of low uranium prices. Prematurely halted after completing only six holes, the pipe has remained largely unexplored at the favorable depth for uranium mineralization.

Drilling is also planned to investigate the YS target where 45 meters of vertical structural displacement was defined by shallow drilling. Beeman Drilling Company of Moab, UT has been contracted to implement the drilling program and Geophysical Logging Service of Prescott, Arizona will conduct the down-hole geophysical logging.

Quaterra’s uranium properties in northern Arizona now cover approximately 10 square miles over selected areas within the heart of the uranium district. All of the company’s targets are within a few miles of uraniferous breccia pipes. Additional properties are being evaluated for acquisition as the program continues during 2006.

As at December 31, 2005, the Company had incurred $159,171 in acquisition costs and $103,820 in exploration for a total on the Uranium Prospects of $262,991. There were no exploration or acquisition costs for this property in the year ended December 31, 2004.

  iv)

Duke Island – Alaska

The Company has a 100% interest in 129 federal and eleven State of Alaska claims covering 1,563 hectares (3,860 acres) located on Duke Island, near Ketchikan, Alaska. The Duke Island complex consists of two separate, well-exposed, zoned ultramafic bodies: the Judd Harbor body is almost two miles in diameter and the Hall Cove Body is about three and a half miles in diameter. The Judd Harbor and Hall Cove complexes have been interpreted to be parts of the same intrusive body at depth. Both bodies are comprised of a dunite and peridotite core surrounded by concentric zones of olivine clinopyroxenite, hornblende-magnetite clinopyroxenite, and gabbro.

Page 5 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

D. Description of Mineral Properties, continued

  iv)

Duke Island – Alaska, continued

The Company discovered copper, nickel and platinum group element mineralization at Duke Island in 2001. The mineralization is unlike any known Ural–Alaska complex in southeast Alaska’s Alexander Platinum Belt. Geochemical, geological and geophysical data suggest the system extends for over 14.5 kilometers along strike and up to 3.8 kilometers across strike with the ultimate dimensions of the mineralized system remaining open to expansion. The Company believes that Duke Island has potential to host significant accumulations of copper, nickel and platinum group elements (PGE) mineralization.

Initial IP geophysical surveying suggested mineralization characterized by a high conductivity zone surrounded by a disseminated sulfide zone. Four core holes subsequently drilled in late 2001 intercepted up to 90 meters of semi-massive to massive sulfide containing highly anomalous copper, nickel, platinum and palladium.

A helicopter magnetic and electromagnetic survey conducted in 2002 revealed a number of strong EM highs coincident with both magnetic lows and magnetic highs. A number of these EM anomalies are located in covered terrain where no previous work has been conducted. A detailed review of part of this survey by consulting geophysicist Joseph R. Inman identified nine discrete, multi-anomaly zones with strike lengths ranging from 400 meters to 1,500 meters in a four kilometer by four kilometer area. In a preliminary report, Inman states, “any of these zones could in fact be indicative of massive sulphide mineralization”.

In 2003, the Company staked an additional 30 claims to cover several of the high-priority geophysical anomalies that fell outside the original claim boundary. In the course of staking, new copper occurrences were discovered. Limited follow up reconnaissance geochemical sampling conducted in 2003 expanded three of the known sulfide-bearing prospects and has shown that strong EM conductors are correlative with Cu-Ni-PGE sulfide mineralization.

During the 2004 Fiscal Year, ground geophysics including gravity and EM (Max-Min) were completed over three of the nine airborne targets before deteriorating weather conditions curtailed operations.

Gravity surveying was completed during June-July 2005 (362 stations covering nine conductors). A 4,505 foot drilling program began on August 16th. Seven holes were drilled on the Marquis, Potato Patch and Raven targets identified by the recently completed gravity and EM surveys.

The results shown in Table 1 below suggest that the Marquis and newly discovered Raven zones represent magmatic sulfide-bearing systems of significant size. Hole DK0506 at Raven contains the thickest interval of continuous copper mineralization drilled on the property to date, with the interval from 8 to 395 feet averaging 2,035 ppm copper, 56 ppb Pt and 59 ppb Pd. The 42 foot interval from 33 to 75 feet averages 0.38% copper and 644 ppb platinum plus palladium. However, structural and/or stratigraphic controls that could result in higher grades are poorly understood due to poor bedrock exposures and limited drilling on the property to date (total of 11 holes, 5,972 feet). The company currently is reviewing its exploration options for 2006 with the goal of identifying one or more high-grade sulfide targets within the areas of previously identified lower grade mineralization.

Page 6 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

D. Description of Mineral Properties, continued

  iv)

Duke Island – Alaska, continued

Below is a table of significant geochemical results from 2005 Duke Island drilling:

  Hole # From To Thickness    Cu ppm Pt Pd
    Ft Ft Ft Wt Ave ppm   Wt Ave ppb  Wt Ave ppb 
               
  DK0501 326.0 425.5 99.5                2,320 68 72
   Includes 376.0 394.0 18.0                4,520 100 111
   Includes 404.0 424.0 20.0                3,625 125 133
  DK0502 No Significant Intercepts      
  DK0503 37.5 186.5 149.0                2,086 5 1
  DK0404 No Significant Intercepts      
  DK0506 8.0 395.0 387.0                2,035 56 59
   Includes 33.0 75.0 42.0                3,801 331 313
   Includes 8.0 92.0 84.0                2,531 221 219

Expenditures to December 31, 2005 totaled $1,693,234, of which $94,205 was acquisition costs and $1,599,029 were exploration expenditures. As at December 31, 2004 expenditure totaled $1,079,874 of which $94,205 were acquisition costs and $985,669 were for exploration costs.

  v)

MacArthur Property - Nevada

Pursuant to a second agreement made October 2005 with North Exploration LLC, the Company acquired the right to earn an interest in sixty-six unpatented mining claims covering the former MacArthur copper-oxide mine, in the Yerington district of Lyon County, Nevada. To earn a 100% interest, subject to a 2% NSR, the Company is required to make staged payments totaling US $1,785,000 by January 15, 2008.

A review of historic data suggests the oxide mineralization at MacArthur may be part of a more extensive porphyry copper system. Copper-oxide mineralization has been reported to be present in outcrop well beyond the current pit outline.

The Company is evaluating available data and preparing for a potential drill program in the second half of 2006.

Expenditures to December 31, 2005 totaled $30,484 and were for acquisition costs only. This amount is included in the “Other Properties” category in Note E of this MD&A and Note 5 of the consolidated financial statements dated December 31, 2005.

Page 7 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

E. Mineral Property Expenditures

During the year the mineral property expenditure was $1,783,936 compared to $462,247 in 2004. The expenditure in 2004 however includes recovery of $914,775 from Blackberry in respect of the Nieves property whereas no recovery from Blackberry is included in the year 2005 expenditure. To enable a meaningful comparison, for discussion purposes, we have removed this recovery to show actual expenditure for exploration. This shows expenditure on mineral properties to be $1,783,936 in 2005 and $1,377,022 in 2004. Of this expenditure $382,972 (2004: $231,130) was spent on acquisitions and $1,400,964 (2004: $1,145,892) on exploration.

The total mineral properties expenditure of $5,661,433, which excludes $1,904,550 recovered from Blackberry, as at December 31, 2005 was allocated as follows; 63% was spent on Nieves, 30% on Duke Island with 5% spent on the new property Arizona Uranium, the remaining 2% spent on various other properties. This compares to total mineral properties expenditure of $3,877,497, excluding $1,904,550 recovered from Blackberry, as at December 31, 2004 which was split in the following percentages; 71% on Nieves, 27% Duke Island, and 2% on other properties.

Total deferred mineral property costs for the year ended December 31, 2005 and the changes by quarter, were as follows:

All Mineral Properties   Balance           Additions           Year Ended     Balance  
    Dec 31, 2004     Q1     Q2     Q3     Q4     Dec 31, 2005     Dec 31, 2005  
     $    $    $    $    $    
                                           
Summary by Expenditure                                          
     Total acquisitions   1,164,263     126,350     109,195     112,669     34,758     382,972     1,547,235  
     Total exploration   2,713,234     211,099     360,259     141,040     688,566     1,400,964     4,114,198  
     Less: cost recovery, Nieves   (1,904,550 )   -     -     -     -     -     (1,904,550 )
                                           
Total   1,972,947     337,449     469,454     253,709     723,324     1,783,936     3,756,883  
                                           
Summary by Property                                          
     Nieves, net of cost recovery   831,368     269,092     302,853     71,516     165,586     809,047     1,640,415  
     Los Crestones   27,842     46,758     243     4,573     -     51,574     79,416  
     Duke Island   1,079,874     12,751     33,801     70,531     496,277     613,360     1,693,234  
     Big Bar   33,863     -     -     -     5,503     5,503     39,366  
     Arizona Uranium   -     8,848     132,557     81,700     39,886     262,991     262,991  
     Other properties   -     -     -     25,389     16,072     41,461     41,461  
                                           
Total   1,972,947     337,449     469,454     253,709     723,324     1,783,936     3,756,883  

For further information on Mineral Properties expenditure, see Note 5 of the consolidated financial statements dated December 31, 2005

Page 8 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

F. Results of Operations

For the year ended December 31, 2005, the Company had a net loss of $788,060 compared to a net loss of $685,952 in 2004. Stock based compensation was $330,842 in 2005 (2004: $386,246) as stock options were granted and recognized. Removing the stock based compensation results in a net loss of $457,218 for 2005 and $299,706 for 2004.

The increase of $157,512, in the net loss for 2005, excluding stock based compensation ($102,108 including stock based compensation), can be explained as follows:

  i)

Consulting fees increased by $37,591 from $10,977 in 2004 to $48,568 in 2005. This is due to the increased activity in respect to the day to day running of the Company.

     
  ii)

The Company reported a net foreign currency loss of $125,907 compared to a net foreign exchange gain in 2004 of $1,640. Since all current assets and liabilities held in US dollars have to be converted to Canadian dollars on consolidation at the exchange rate as at December 31, 2005, being 1.166, this created a large exchange loss due to appreciably weakened US dollar compared to the Canadian dollar.

     
 

The weakened US dollar to Canadian dollar rate also resulted in a loss from the depreciation in the value of US $300,000 cash held by the Company pursuant to a private placement with Hochschild completed in August 2004 when the US dollar was worth approximately 1.33 Canadian.

     
 

It is important to note that the majority of transactions for the Company are in US dollars and, to a lesser extent, Mexican Pesos, and therefore foreign exchange fluctuations can result in losses or gains.

     
  iii)

Professional fees increased by $72,171 from $17,692 in 2004 to $89,863 in 2005. Due to the affect of regulatory requirements the audit fees for the 2005 audit and the accounting fees in respect of the production of annual and quarterly financial statements has caused part of this increase. There were also increased legal fees due to consultations for potential property purchases and agreements.

     
  iv)

Interest income increased by $26,274 from $9,861 in 2004 to $36,135 in 2005. This is due to larger amounts being held on fixed term deposits throughout the year.

     
  v)

Option payments were received in 2005 of $35,000. See Note 5 (f) of the consolidated financial statements dated December 31, 2005.

     
  vi)

A reclamation bond of $2,500 was written off in 2005. This bond has been held since the 1990s on a property that the Company no longer has an interest in and it was deemed by management unlikely this amount would be recovered.

Page 9 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

G. Quarterly Results

The following financial data was derived from the Company’s consolidated financial statements for the current and eight previous quarters:

    Dec 31     Sept 30     June 30     March 31     Dec 31     Sept 30     June 30     March 31   Dec 31  
    2005     2005     2005     2005     2004     2004     2004     2004   2003  
     $    $    $      $        
                                                     
Operating expeneses   218,932     182,209     69,840     54,871     100,227     77,205     54,374     77,761   81,499  
Interest earned   (22,641 )   (3,622 )   (3,236 )   (6,636 )   (2,150 )   (2,645 )   (1,573 )   (3,493 ) (1,147 )
Other revenue   (25,000 )   -     -     (10,000 )   -     -     -     -   -  
                                                     
Loss before the undernoted   171,291     178,587     66,604     38,235     98,077     74,560     52,801     74,268   80,352  
                                                     
Stock-based compensation   (129,373 )   460,215     -     -     -     -     -     386,246   318,311  
Mineral Properties write off   -     -     -     -     -     -     -     -   12,423  
Reclamation bond write off   2,500     -     -     -     -     -     -     -   -  
                                                     
Net Loss   44,418     638,802     66,604     38,235     98,077     74,560     52,801     460,514   411,086  
                                                     
Loss per share - basic and diluted   (0.01 )   (0.01 )   0.00     0.00     0.00     0.00     0.00     (0.01 ) (0.01 )

H. Selected Annual Information

The following financial data is derived from the Company’s consolidated financial statements for each of the three most recently completed fiscal years ending December 31:

    2005     2004     2003  
Total revenues  $ 71,135   $  9,861   $  1,821  
Loss before write-off of mineral properties   (788,060 )   (685,952 )   (547,134 )
Basic and fully diluted per share   (0.01 )   (0.01 )   (0.01 )
Net loss for the year   (788,060 )   (685,952 )   (699,082 )
Basic and fully diluted per share   (0.01 )   (0.01 )   (0.01 )
Total assets   5,855,847     3,727,071     2,953,491  
Total long-term financial liabilties   -     -     -  
Cash dividends declared per common share   -     -     -  

Refer to Note F in this MD&A for a detailed comparison of Year 2005 with 2004

Page 10 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

H. Selected Annual Information, continued

The net loss decreased by $13,130 to $685,592 for 2004 compared with $699,082 for 2003. Although general and administrative expenses increased by $146,858 to 695,813 during 2004 compared with $548,955 for 2003 and stock-based compensation expense increased by $67,935 to $386,246 during 2004 compared to $318,311 during 2003, these increases were offset by a decrease of $151,948 in write-down of mineral property to nil in 2004 compared with $151,948 in 2003.

I. Related Party Information

As at December 31, 2005, $13,010 (December 31, 2004: $18,935) was due to directors or senior officers of the Company or to companies controlled by them, for various services rendered.

For the years ended December 31, 2005 and 2004, the following is a summary of related party transactions not disclosed elsewhere in these financial statements:

  i)

Corporate development and Investor relations fees of $21,320 (2004: $36,000) were billed by a company controlled by a senior officer.

     
  ii)

Financial and consulting fees of $84,831 (2004: $9,163) were charged by two private companies controlled by directors of the Company.

     
  iii)

Legal fees of $19,286 (2004: $6,403) were incurred by an association of lawyers in which an officer of the Company is a member.

     
  iv)

Management fee of $60,000 (2004: $60,000) to a private company controlled by a director of the Company.

     
  v)

A private company controlled by a director of the Company billed, $54,052 on a cost recovery basis, for office and administrative (2004: $74,897).

     
  vi)

Geological consulting fees and other exploration costs totaling $17,319 (2004: $15,444) were paid to the President and other related parties of the Company and are included in deferred exploration expenditures.

These transactions were made in the normal course of operations for consideration established and accepted by the related parties.

J. Financial Conditions, Liquidity and Capital Resources

The Company has limited financial resources and finances its operations by raising capital in the equity markets. For the foreseeable future, the Company will need to rely on the sale of such securities and joint venture arrangements with third parties to provide working capital and to finance its mineral property acquisition and exploration activities. The Company intends to complete private placements of shares over the next few months, depending upon equity market conditions.

The Company had a working capital balance of $1,697,865 as at December 31, 2005, compared to a working capital balance of $1,455,967 as at December 31, 2004.

In Quarter 1, 2005, 1,410,000 common shares were issued for gross proceeds of $211,200 from the exercise of share purchase warrants and stock options. 10,000 common shares were issued in Quarter 2, 2005 from the exercise of stock options for gross proceeds of $1,200. In Quarter 3, 2005, 6,500,000 common shares were issued in respect of a private placement for gross proceeds of $2,275,000 and 55,000 common shares were issued in Quarter 4 from the exercise of share purchase warrants and stock options for proceeds of $6,950.

Page 11 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

J. Financial Conditions, Liquidity and Capital Resources, continued

The total number of common shares issued during the year ended December 31, 2005 was 8,175,000 for gross proceeds of $2,570,350. For further information on the issuance of shares see Note 7 of the consolidated financial statements dated December 31, 2005.

All outstanding warrants and stock options are currently “in the money” (the exercise price is less than the trading price of the shares). Using the closing trade price as at April 19, 2006 of $1.60, if all outstanding warrants as at April 19, 2006 were exercised, the Company would realize proceeds of $1,798,536 and if all stock options outstanding as at April 19, 2006 were to be exercised, the Company would realize proceeds of $1,376,710. This provides total potential cash proceeds of $3,175,246.

For 2005 expenditures on mineral properties see Note E in this MD&A or Note 5 of the consolidated financial statements dated December 31, 2005.

In Quarter 1, 2004, funds derived from the exercise of share purchase warrants and stock options resulted in the issuance of 2,545,247 common shares for gross proceeds of $633,979. In Quarter 2, 2004, 1,040,359 common shares were issued for the exercise of share purchase warrants and stock options resulting in proceeds of $154,554. In Quarter 3 1,593,667 commons shares were issued for the exercise of share purchase warrants and stock options resulting in proceeds of $239,050. In Quarter 4, 2004, 1,314,832 commons shares were issued resulting in proceeds of $195,425 for the exercise of share purchase warrants and stock options.

There were no private placements of common shares in 2004

For 2004 expenditures on mineral properties see Note E in this MD&A or Note 5 of the consolidated financial statements dated December 31, 2005.

K. Outstanding Shares, Options and Share Purchase Warrants

  i)

Issued and outstanding shares

The Company has 100 million authorized common shares, issued and outstanding as follows:

    Number      Total
    of Shares  
       
  Balance as at December 31, 2005 65,522,200 $15,172,975
  Issued subsequent to Yearend    
         Exercise of share purchase warrant 375,609 $187,805
         Exercise of stock options 853,000 $182,160
       
  Balance as at April 19, 2005 66,750,809 $15,542,940

Page 12 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

K. Outstanding Shares, Options and Share Purchase Warrants, continued

ii) Share Purchase Warrants

As at December 31, 2005, there were 3,934,280 share purchase warrants outstanding with a weighted average exercise price of $0.50 per share. Subsequent to the year end, 375,609 share purchase warrants were exercised at $0.50 per share for proceeds of $187,805 and 375,609 common shares were issued. No warrants have been issued since the year end. Warrants outstanding at April 19, 2006 are as follows:

  Exercise   Expiry     Balance     Warrants     Cancelled     Warrants     Balance  
  Price   Date     Dec 31, 2005     Granted     or Expired     Exercised     April 19, 2006  
                                       
  $0.66   January 20, 2006     120,000     -     -     -     120,000  
  $0.50   September 27, 2005     3,250,000           -     341,329     2,908,671  
  $0.50   September 27, 2005     564,280           -     34,280     530,000  
                                       
            3,934,280     -     -     375,609     3,558,671  
                                       
  Weighted average exercise price   $ 0.50   $ 0.00   $ 0.00   $ 0.50   $ 0.51  

iii) Stock Options

As at December 31, 2005, there were 5,446,000 stock options outstanding with a weighted average exercise price of $0.29 per share. Subsequent to the year end 853,000 stock options were exercised with a weighed average exercise of $0.21 for proceeds of $182,160. No stock options have been issued since year end. Stock options outstanding as at April 19, 2006 are as follows:

Page 13 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

K. Outstanding Shares, Options and Share Purchase Warrants, continued

iii) Stock Options, continued

  Exercise Expiry      Balance Granted Cancelled Exercised   Balance
  Price Date Dec 31, 2005   or Expired   April 19, 2006
               
  $0.15 February 8, 2006 50,000 - - 50,000 -
  $0.15 May 7, 2006 55,000 - - 55,000 -
  $0.12 June 8, 2006 515,000 - - 100,000 415,000
  $0.19 September 27, 2006 490,000 - - 55,000 435,000
  $0.12 January 10, 2008 1,591,000 - - 333,000 1,258,000
  $0.25 October 2, 2008 75,000 - - - 75,000
  $0.34 December 8, 2008 195,000 - - 50,000 145,000
  $0.65 March 2, 2009 100,000 - - - 100,000
  $0.62 March 25, 2009 800,000 - - 50,000 750,000
  $0.35 August 9, 2010 1,575,000 - - 160,000 1,415,000
               
      5,446,000 - - 853,000 4,593,000
               
  Weighted average exercise price $0.29 $0.00 $0.00 $0.21 $0.30

L. Subsequent Events and Outlook

The Company intends to continue land acquisition and drilling at its uranium pipe targets in Arizona. Phase 1 drilling programs also will be carried out later in the year at the MacArthur copper property in Nevada, the Crestones gold property in Mexico, and the Big Bar massive sulfide target in Alaska.

Stock options and warrants were exercised after the year end December 31, 2005 for detailed information see Note K in this M D&A or Note 7 of the consolidated financial statements.

M. Off Balance Sheet

The Company did not enter into any off balance sheet transactions or commitments as defined by National Instrument 51-102.

Page 14 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

N. Management’s Responsibility for Financial Information

Preparing financial statements requires management to make estimates and assumptions that affect the reported results. The estimates are based on historical experience and other assumptions that are believed to be reasonable under the circumstances. Critical accounting policies were disclosed in the annual audited financial statements.

Consistent with accepted policies of the Canadian junior mining industry, the Company capitalizes exploration expenditures. This decision, and the timing of the possible recognition of impairment in the mineral property value, can materially affect the reported earnings of the Company.

Management has prepared the information and representations in this annual report. The financial statements have been prepared to conform to generally accepted accounting principles in Canada and, where appropriate, reflect management's best estimates and judgment. The financial information presented throughout this report is consistent with the data presented in the financial statements.

The Company maintains adequate systems of internal accounting and administrative controls. These systems were designed to provide reasonable assurance that relevant and reliable financial information is produced. The independent auditors have the responsibility of auditing the financial statements and expressing an opinion on them.

The Board of Directors, through its Audit Committee, is responsible for ensuring that management fulfils its responsibilities for financial reporting and internal control. The Audit Committee is composed of three directors, who meet at least quarterly with management and, at least annually with the external auditors to audit and review accounting, internal controls and financial reporting matters.

O. Risks and Uncertainties

The principal business of the Company is the exploration and development of mineral properties. Given the nature of the mining business, the limited extent of the Company's assets and the present stage of development, the following risk factors, among others, should be considered.

The Company does not hold any known mineral reserves of any kind and therefore does not generate any revenues from production. The Company’s success will depend largely upon its ability to locate commercially productive mineral reserves. Mineral exploration is highly speculative in nature, involves many risks and frequently is non-productive. There is no assurance that our exploration efforts will be successful. Success in establishing reserves is a result of a number of factors, including the quality of management, the level of geological and technical expertise, the quality of land available for exploration as well as various other factors.

Once mineralization is discovered, it may take several years in the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish proven and probable reserves through drilling and bulk sampling, to determine the optimal metallurgical process to extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities. Because of these uncertainties, no assurance can be given that our exploration programs will result in the establishment or expansion of resources or reserves.

Since the Company does not generate any revenues, it may not have sufficient financial resources to undertake by itself all of its planned mineral property acquisition and exploration activities. Operations will continue to be financed primarily through the sale of securities such as common shares. The Company will need to continue its reliance on the sale of such securities for future financing, which may result in dilution to existing shareholders.

Page 15 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

O. Risks and Uncertainties, continued

Furthermore, the amount of additional funds required may not be available under favorable terms, if at all, and will depend largely on the acquisition and exploration activities pursued.

The ability to attract capital to the Company is dependent on movements in commodity prices. Commodity prices fluctuate on a daily basis and they are affected by a number of factors beyond the control of the Company. If, because of a sustained decline in prices, financing were not available to meet cash operating costs, the feasibility of continuing operations would be evaluated and if warranted, would be discontinued.

The resource industry is intensively competitive in all of its phases, and the Company competes with many other companies possessing much greater financial and technical resources. Competition is particularly intense with respect to the acquisition of desirable undeveloped gold and silver properties. The principal competitive factors in the acquisition of prospective properties include the staff and data necessary to identify, investigate and purchase such properties, and the financial resources necessary to acquire and develop the projects. Competition could adversely affect the Company’s ability to acquire suitable prospects for exploration.

P. Licenses and Permits

The operations of the Company require licenses and permits from various government authorities. The Company believes that it holds all necessary licenses and permits under applicable laws and regulations for work in progress and believes it is presently complying in all material respects with the terms of such licenses and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that the Company will be able to obtain or maintain all necessary licenses and permits that may be required to explore and develop its properties, commence construction or operation of mining facilities or to maintain continued operations that economically justify the cost.

Q. Whistleblower Policy

Effective June 30, 2005, the audit committee adopted resolutions that authorized the establishment of procedures for complaints received regarding accounting, internal controls or auditing matters, and for a confidential, anonymous submission procedure for employees who have concerns regarding questionable accounting or auditing matters. The implementation of the whistleblower policy is in accordance with new requirements pursuant to Multilateral Instrument 52-110 Audit Committees, National Policy 58-201 Corporate Governance Guidelines and National Instrument 58-101 Disclosure of Corporate Governance Practices.

R. Forward-Looking Statements

Some of the statements contained in this MD&A are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur.

Forward-looking statements may be identified by such terms as “believes”, “anticipates”, “expects”, “estimates”, “may”, “could”, “would”, “will”, or “plan”. Such forward-looking statements are made pursuant to the safe harbour provisions of the United States Private Securities Litigation Reform Act of 1995. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties.

Page 16 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis (Amended)
In respect to the year ended December 31, 2005

R. Forward-Looking Statements, continued

Actual results relating to, among other things, results of exploration, reclamation, capital costs, and the Company’s financial condition and prospects, could differ materially from those currently anticipated in such statements for many reasons such as; changes in general economic conditions and conditions in the financial markets; changes in demand and prices for the minerals the Company expects to produce;, litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; technological and operational difficulties encountered in connection with the Company’s activities; and changing foreign exchange rates and other matters discussed in this MD&A.

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on the Company’s forward-looking statements. Further information regarding these and other factors, which may cause results to differ materially from those projected in forward-looking statements, are included in the filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time by the Company or on its behalf, except in accordance with applicable securities laws.

Page 17 of 16


EX-99.8 9 exhibit99-8.htm MD&A FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.8

     Management’s Discussion and Analysis

In respect to the year Ended December 31, 2005

Dated: April 19, 2006



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

A. Introduction

The following Management Discussion and Analysis (“MD&A”) of the operating results and financial condition of Quaterra Resources Inc. (the “Company”) compares results for the year ended December 31, 2005 to the same period in the previous year. These statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2005. All notes referenced herein may be found in the consolidated financial statements.

The financial statements were prepared in accordance with Canadian generally accepted accounting principles. This MD&A, dated as of April 19, 2006, was prepared to conform to National Instrument 51-102 F1 and it was approved by the Board of Directors prior to release.

The Company is a reporting issuer in British Columbia and Alberta and its shares trade on the Tier 2 Board of the TSX Venture Exchange (“TSX”) under the symbol QTA.

The Company’s reporting currency is the Canadian dollar and all dollar amounts are in Canadian dollars, unless otherwise indicated. Some numbers in this MD&A have been rounded to the nearest thousand for discussion purposes.

Certain forward-looking statements are discussed in the MD&A with respect to the Company’s activities and future financial results. These are subject to significant risks and uncertainties that may cause projected results or events to differ materially from actual results or events.

Additional information relating to the Company, including detailed drill results previously disclosed in news releases, is available on SEDAR at www.sedar.com. Terms of property option agreements are described more fully in the notes to the consolidated financial statements.

B. Qualified Person

Dr. Thomas C. Patton, P. Geo., the President and Chief Executive Officer of the Company, is the qualified person responsible for the preparation of the technical information included in this MD&A. Dr. Patton graduated from the University of Washington in 1971 (Ph.D.) and has worked with both junior and senior mining companies. His exploration efforts have concentrated on North America and have resulted in several significant discoveries and led to the expansion of mineral reserves at existing operations. He is currently President and the Chief Operating Officer for Western Silver Corporation and previously held senior positions with Rio Tinto PLC and Kennecott Corporation. Dr. Patton is a member of the Society of Economic Geologists and the American Institute of Mining & Metallurgical Engineers.

Eugene Spiering joined the company on January 10, 2006 as Vice President of Exploration. Mr. Spiering has over 28 years of experience in the mining exploration industry. He most recently held the position of vice president, exploration at Rio Narcea Mines Ltd., where he managed a team that discovered two gold deposits and completed the final definition of one nickel deposit in Spain. All three of these deposits are currently in production. Prior to his tenure at Rio Narcea, Mr. Spiering held the position of senior geologist with Energy Fuels Nuclear, Inc. where his responsibilities included drilling supervision, geologic mapping, and ore reserve calculations related to uranium exploration in northern Arizona and gold exploration in western US and Venezuela. He received his Bachelor of Science-Geology degree from the University of Utah.

Page 1 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

C. Description of Business

The Company acquires and explores mineral properties in the Americas. It is currently exploring for uranium in Arizona, copper in Nevada and precious metals in Mexico

D. Description of Mineral Properties

  i)

Nieves Property – Mexico

The Company has a 50% interest in 19 mineral concessions covering an area of approximately 130 square kilometers (50 square miles) located in the State of Zacatecas, Mexico. The Nieves Project lies within a northwest trending mineral belt known as the Silver Belt or Faja de Plata, which is based on the northwest alignment of a narrow band of silver mining districts of San Martin, Fresnillo, Zacatecas and Real de Angeles.

Silver was discovered on the claim block in the mid-1500's and sporadic work occurred thereafter on two vein systems until the start of the Mexican Revolution in 1910. No modern exploration took place until the mid-1990's.

Effective January 16, 1995, the Mexican concessionaires entered into an option agreement with Kennecott Exploration Company (“Kennecott”) that allowed Kennecott to explore and acquire the property by making specified option payments over five years, and advance minimum royalty payments (“AMR”) as defined in the “Underlying Agreement”. On March 13, 1998, Kennecott transferred its rights under the Nieves option to Western Silver Corporation (“Western”) in consideration for a 2% net smelter royalty (“NSR”) on certain core claims and a 1% NSR on others. Western subsequently assigned its rights to Nieves to the Company on March 26, 1999, in consideration for 1,444,460 common shares at $0.20 per share ($288,892). In addition, the Company issued 360,000 common shares at $0.20 per share ($72,000) to the concessionaires in lieu of the US $50,000 option payment otherwise due under the terms of the Underlying Agreement.

The payment schedule in the Underlying Agreement was amended on November 22, 1999, February 11, 2000 and May 2002, such that US $30,000 was paid in January 2000, US $15,000 in May 2002 and US $25,000 in January 2003, for a total of US $70,000. In addition, to acquire the interest in the claim fractions, the Company paid US $40,000 to the concessionaires. As at December 31, 2005, option payments totaled US $110,000. AMR payments of US $75,000 are due on or before January 26 each year from 2004 until the commencement of commercial production.

Drilling conducted over the past years by Kennecott and Western intersected narrow zones of +500g/t silver that were interpreted to be the high level expression of a large, silver-rich mineralized system at depths below 200 meters. Subsequently, the Company completed a program of magnetics and CSAMT/IP surveys, which identified a number of prospective anomalies. The survey results suggested that the Nieves Property is a large hydrothermal system with minimal erosion and several features in common with the high-grade Fresnillo silver district, (90 kilometers south), and Western’s Peñasquito silver project (150 kilometers northeast).

In August 2004, the Company conducted an initial 5,300 meter, 13-hole diamond drill program to test a number of targets adjacent to and below areas of previously defined mineralization and to test seven east-west striking anomalies, interpreted to be veins with associated mineralization, that extend for distances of up to 3.5 kilometers.

Page 2 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

D. Description of Mineral Properties, continued

  i)

Nieves Property – Mexico, continued

A second drill program (5,171 meter, 11-hole) was completed in May 2005 to follow up on the silver mineralization intersected in the 2004 drilling program and to evaluate other targets defined by a combination of mapping, sampling and geophysical surveys.

Drill results, geophysics and petrography indicate that the exposure level at Nieves is extremely high and that the veins exhibit characteristics similar to the historic Fresnillo silver mine. Boiling textures observable in drill core at depths of 150-200 meters below surface mark the top of the mineralized vein zone that appears to extend downward for at least 300 meters. The Concordia-San Gregorio vein is prospective over a strike length of at least 1000 meters. The California and Santa Rita veins have similar orientations, geophysical signatures and size potential. The near surface mineralization exposed on San Gregorio Hill and along the Santa Rita vein on Santa Rita Hill is interpreted as manto style (rootless) mineralization trapped in porous sediments at the base of Tertiary volcanic rocks. These zones may indicate the presence of high-grade mineralization at depth in the adjacent veins.

In 2005, the Company developed a three dimensional drill model to interpret the vein geometry and compiled surface and core geochemistry data in preparation for a fall deep drilling program. An additional 5,000 meters of close-spaced drilling to confirm the continuity, width and grade of mineralization in the Concordia vein system was planned, in consultation with US-based Blackberry Ventures I,LLC, (“Blackberry”) an investment partnership that earned a 50% interest in the property by funding the Company’s two earlier phases of drilling for US $1,500,000.

A Phase III drilling program (5,894 meters, eight holes) began during the fourth quarter of 2005 and was completed during March 2006. The drilling was designed to evaluate the down dip grade and thickness of three silver-bearing veins intersected in prior programs, particularly an intercept of high grade mineralization of 4 kg silver over 1.5 metres on the Concordia vein. Results will be available by the end of April, 2006.

By December 31, 2005, the Company had incurred $3,544,965 in gross acquisition and exploration expenditures on the Nieves property, or $1,640,415 net of the recovery of $1,904,550 (US $1.5 million) from Blackberry. As at December 31, 2004, gross expenditures totaled $2,735,918, less $1,904,550 in recovery, for a net of $831,368.

  ii)

Los Crestones Project – Mexico

In 2003, the Company staked a 2,100 hectare claim to cover a hot spring gold-silver prospect in northern Durango, Mexico. The Crestones Property is located 12 kilometers northeast of the Inde mining district on the western edge of the Mesa Central carbonate platform of Mexico where that carbonate package has begun to be affected by the basin and range faulting of the eastern part of the Sierra Madre Occidental ignimbrite province.

In 2004 and early 2005, mapping and sampling programs were completed over an area of about 3.5 square miles. Results show strongly anomalous mercury, arsenic and antimony values which are typical of the upper levels of hot spring-related gold silver mineral systems. The level of exposure is clearly above the boiling zone and the gold numbers are consistent with those found in the top of epithermal gold systems. The prospect has not been drilled.

Page 3 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

D. Description of Mineral Properties, continued

  ii)

Los Crestones Project – Mexico, continued

These mapping and sampling programs identified several high priority targets on the Crestones property: a mineralized area at the top of Cerro Laguna, with anomalous gold, silver, mercury and barium; a newly discovered zone of acid sulphate alteration located at the north end of the Casita Breccia where it merges into Cerro Laguna; and the Casita breccia with enriched gold, silver, lead, zinc, arsenic, antimony, mercury and barium.

Work plans for the first half of 2006 include additional mapping and sampling in the Cerro Laguna-acid sulphate zone and a 1500 meter drilling program to test the prospective targets.

Acquisition costs incurred to December 31, 2005 were $59,303 and exploration expenditures were $20,113 for a total of $79,416. As at December 31, 2004 expenditure totaled $27,842 of which $21,562 were acquisition costs and $6,280 for exploration.

  iii)

Uranium Project – Arizona, Utah and Wyoming

In June 2005, the Company acquired 95 claims from a Nevada prospecting syndicate covering 36 uranium breccia pipe targets situated in northern Arizona and has an option to acquire other properties in Utah and Wyoming. These properties were staked to cover extensions of previously mined uranium deposits and they are prospective for both uranium and vanadium. The Company subsequently staked 14 claims in Arizona covering four additional breccia pipe targets.

Under the terms of the agreement, the Company may acquire a 100% interest in any or all of these claims by making staged payments over a five-year period totaling US $500,000 and issuing 600,000 common shares over a three-year period. The initial consideration included a US $15,000 cash payment and 200,000 common shares. The properties are subject to a 2% production royalty on each property, 1% of which may be purchased for US $1 million.

Mr. Pat Hillard has been appointed as the company’s consulting geologist with responsibility for the conduct of exploration and development work on all properties in the three state areas. Pat Hillard is considered one of the foremost uranium breccia pipe authorities in the industry and is credited with the discovery of six of eight breccia pipe ore bodies in northern Arizona that became profitable mines operated by Energy Fuels Nuclear.

Quaterra’s initial focus will be on its solution collapse breccia pipe targets on the Arizona Strip. This area is north of the Grand Canyon where environmental and political pressure is significantly less and most of the land outside parks, wilderness areas and national monuments is open for staking.

These pipes represent extremely attractive targets today because of their relatively high grades, small footprint, and the speed and efficiency with which they can be explored. Previous exploration on the Arizona Strip in northern Arizona has resulted in the discovery of eight breccia pipe ore bodies with production in the 1980’s and early 1990’s totaling approximately 19 million pounds of U3O8. Total amount of mineable uranium discovered to date in breccia pipes in northern Arizona is estimated to be in the range of 35 million pounds (1998 International Uranium Corp US SEC Registration Statement; http://www.sec.gov/Archives/edgar/data/1063259/0001035704-98-000395.txt).

Page 4 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

D. Description of Mineral Properties, continued

  iii)

Uranium Project – Arizona, Utah and Wyoming, continued

Low uranium prices, not the lack of exploration success, forced Energy Fuels to terminate its breccia pipe exploration and mining programs. The largest uranium pipe ore body thus far found was the 6 million pound Pigeon Pipe.

A shallow drilling program totaling 2,033 meters in 30 holes averaging 70 meters deep was completed during the first quarter of 2006 to investigate the near surface stratigraphy of six collapse breccia pipe uranium targets in northern Arizona.

A follow-up deep drilling program began early in the second quarter to evaluate at least one of these targets and five others including Ollie, EZ 4, EJ and when permits are received, the Whistler and Rock breccia pipes. Drilling on the Rock target, considered to be one of the most prospective of the group, is not expected to commence until early summer and will probably require a helicopter for mobilization of the rig and personnel.

The deep drilling program is planned to complete a total of approximately 3500 meters in six to eight holes averaging 450 meters deep. The first objective of the program will be the Ollie pipe, located 10 miles southeast of the Hack Canyon mines that produced 9.5 million pounds of uranium (eU3O8). Ollie was the subject of the last deep drilling program conducted by EFN (Energy Fuels Nuclear) before discontinuing operations in 1994 because of low uranium prices. Prematurely halted after completing only six holes, the pipe has remained largely unexplored at the favorable depth for uranium mineralization.

Drilling is also planned to investigate the YS target where 45 meters of vertical structural displacement was defined by shallow drilling. Beeman Drilling Company of Moab, UT has been contracted to implement the drilling program and Geophysical Logging Service of Prescott, Arizona will conduct the down-hole geophysical logging.

Quaterra’s uranium properties in northern Arizona now cover approximately 10 square miles over selected areas within the heart of the uranium district. All of the company’s targets are within a few miles of uraniferous breccia pipes. Additional properties are being evaluated for acquisition as the program continues during 2006.

As at December 31, 2005, the Company had incurred $159,171 in acquisition costs and $103,820 in exploration for a total on the Uranium Prospects of $262,991. There were no exploration or acquisition costs for this property in the year ended December 31, 2004.

  iv)

Duke Island – Alaska

The Company has a 100% interest in 129 federal and eleven State of Alaska claims covering 1,563 hectares (3,860 acres) located on Duke Island, near Ketchikan, Alaska. The Duke Island complex consists of two separate, well-exposed, zoned ultramafic bodies: the Judd Harbor body is almost two miles in diameter and the Hall Cove Body is about three and a half miles in diameter. The Judd Harbor and Hall Cove complexes have been interpreted to be parts of the same intrusive body at depth.

Page 5 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

D. Description of Mineral Properties, continued

  iv)

Duke Island – Alaska, continued

Both bodies are comprised of a dunite and peridotite core surrounded by concentric zones of olivine clinopyroxenite, hornblende-magnetite clinopyroxenite, and gabbro.

The Company discovered copper, nickel and platinum group element mineralization at Duke Island in 2001. The mineralization is unlike any known Ural–Alaska complex in southeast Alaska’s Alexander Platinum Belt. Geochemical, geological and geophysical data suggest the system extends for over 14.5 kilometers along strike and up to 3.8 kilometers across strike with the ultimate dimensions of the mineralized system remaining open to expansion. The Company believes that Duke Island has potential to host significant accumulations of copper, nickel and platinum group elements (PGE) mineralization.

Initial IP geophysical surveying suggested mineralization characterized by a high conductivity zone surrounded by a disseminated sulfide zone. Four core holes subsequently drilled in late 2001 intercepted up to 90 meters of semi-massive to massive sulfide containing highly anomalous copper, nickel, platinum and palladium.

A helicopter magnetic and electromagnetic survey conducted in 2002 revealed a number of strong EM highs coincident with both magnetic lows and magnetic highs. A number of these EM anomalies are located in covered terrain where no previous work has been conducted. A detailed review of part of this survey by consulting geophysicist Joseph R. Inman identified nine discrete, multi-anomaly zones with strike lengths ranging from 400 meters to 1,500 meters in a four kilometer by four kilometer area. In a preliminary report, Inman states, “any of these zones could in fact be indicative of massive sulphide mineralization”.

In 2003, the Company staked an additional 30 claims to cover several of the high-priority geophysical anomalies that fell outside the original claim boundary. In the course of staking, new copper occurrences were discovered. Limited follow up reconnaissance geochemical sampling conducted in 2003 expanded three of the known sulfide-bearing prospects and has shown that strong EM conductors are correlative with Cu-Ni-PGE sulfide mineralization.

During the 2004 Fiscal Year, ground geophysics including gravity and EM (Max-Min) were completed over three of the nine airborne targets before deteriorating weather conditions curtailed operations.

Gravity surveying was completed during June-July 2005 (362 stations covering nine conductors). A 4,505 foot drilling program began on August 16th. Seven holes were drilled on the Marquis, Potato Patch and Raven targets identified by the recently completed gravity and EM surveys.

The results shown in Table 1 below suggest that the Marquis and newly discovered Raven zones represent magmatic sulfide-bearing systems of significant size. Hole DK0506 at Raven contains the thickest interval of continuous copper mineralization drilled on the property to date, with the interval from 8 to 395 feet averaging 2,035 ppm copper, 56 ppb Pt and 59 ppb Pd. The 42 foot interval from 33 to 75 feet averages 0.38% copper and 644 ppb platinum plus palladium. However, structural and/or stratigraphic controls that could result in higher grades are poorly understood due to poor bedrock exposures and limited drilling on the property to date (total of 11 holes, 5,972 feet).

Page 6 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

D. Description of Mineral Properties, continued

  iv)

Duke Island – Alaska, continued

The company currently is reviewing its exploration options for 2006 with the goal of identifying one or more high-grade sulfide targets within the areas of previously identified lower grade mineralization.

Below is a table of significant geochemical results from 2005 Duke Island drilling:

  Hole # From To Thickness    Cu ppm Pt Pd
    Ft Ft Ft Wt Ave ppm Wt Ave ppb   Wt Ave ppb  
               
  DK0501 326.0 425.5 99.5                2,320 68 72
   Includes 376.0 394.0 18.0                4,520 100 111
   Includes 404.0 424.0 20.0                3,625 125 133
  DK0502 No Significant Intercepts      
  DK0503 37.5 186.5 149.0                2,086 5 1
  DK0404 No Significant Intercepts      
  DK0506 8.0 395.0 387.0                2,035 56 59
   Includes 33.0 75.0 42.0                3,801 331 313
   Includes 8.0 92.0 84.0                2,531 221 219

Expenditures to December 31, 2005 totaled $1,693,234, of which $94,205 was acquisition costs and $1,599,029 were exploration expenditures. As at December 31, 2004 expenditure totaled $1,079,874 of which $94,205 were acquisition costs and $985,669 were for exploration costs.

  v)

MacArthur Property - Nevada

Pursuant to a second agreement made October 2005 with North Exploration LLC, the Company acquired the right to earn an interest in sixty-six unpatented mining claims covering the former MacArthur copper-oxide mine, in the Yerington district of Lyon County, Nevada. To earn a 100% interest, subject to a 2% NSR, the Company is required to make staged payments totaling US $1,785,000 by January 15, 2008.

A review of historic data suggests the oxide mineralization at MacArthur may be part of a more extensive porphyry copper system. Copper-oxide mineralization has been reported to be present in outcrop well beyond the current pit outline.

The Company is evaluating available data and preparing for a potential drill program in the second half of 2006.

Expenditures to December 31, 2005 totaled $30,484 and were for acquisition costs only. This amount is included in the “Other Properties” category in Note E of this MD&A and Note 5 of the consolidated financial statements dated December 31, 2005.

Page 7 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

E. Mineral Property Expenditures

During the year the mineral property expenditure was $1,783,936 compared to $462,247 in 2004. The expenditure in 2004 however includes recovery of $914,775 from Blackberry in respect of the Nieves property whereas no recovery from Blackberry is included in the year 2005 expenditure. To enable a meaningful comparison, for discussion purposes, we have removed this recovery to show actual expenditure for exploration. This shows expenditure on mineral properties to be $1,783,936 in 2005 and $1,377,022 in 2004. Of this expenditure $382,972 (2004: $231,130) was spent on acquisitions and $1,400,964 (2004: $1,145,892) on exploration.

The total mineral properties expenditure of $5,661,433, which excludes $1,904,550 recovered from Blackberry, as at December 31, 2005 was allocated as follows; 63% was spent on Nieves, 30% on Duke Island with 5% spent on the new property Arizona Uranium, the remaining 2% spent on various other properties. This compares to total mineral properties expenditure of $3,877,497, excluding $1,904,550 recovered from Blackberry, as at December 31, 2004 which was split in the following percentages; 71% on Nieves, 27% Duke Island, and 2% on other properties.

Total deferred mineral property costs for the year ended December 31, 2005 and the changes by quarter, were as follows:

All Mineral Properties Balance   Additions   Year Ended Balance
  Dec 31, 2004 Q1 Q2 Q3 Q4 Dec 31, 2005 Dec 31, 2005
  $ $ $ $ $ $ $
               
Summary by Expenditure              
     Total acquisitions 1,164,263 126,350 109,195 112,669 34,758 382,972 1,547,235
     Total exploration 2,713,234 211,099 360,259 141,040 688,566 1,400,964 4,114,198
     Less: cost recovery, Nieves (1,904,550) - - - - - (1,904,550)
               
Total 1,972,947 337,449 469,454 253,709 723,324 1,783,936 3,756,883
               
Summary by Property              
     Nieves, net of cost recovery 831,368 269,092 302,853 71,516 165,586 809,047 1,640,415
     Los Crestones 27,842 46,758 243 4,573 - 51,574 79,416
     Duke Island 1,079,874 12,751 33,801 70,531 496,277 613,360 1,693,234
     Big Bar 33,863 - - - 5,503 5,503 39,366
     Arizona Uranium - 8,848 132,557 81,700 39,886 262,991 262,991
     Other properties - - - 25,389 16,072 41,461 41,461
               
Total 1,972,947 337,449 469,454 253,709 723,324 1,783,936 3,756,883

For further information on Mineral Properties expenditure, see Note 5 of the consolidated financial statements dated December 31, 2005

Page 8 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

F. Results of Operations

For the year ended December 31, 2005, the Company had a net loss of $788,060 compared to a net loss of $685,952 in 2004. Stock based compensation was $330,842 in 2005 (2004: $386,246) as stock options were granted and recognized. Removing the stock based compensation results in a net loss of $457,218 for 2005 and $299,706 for 2004.

The increase of $157,512, in the net loss for 2005, excluding stock based compensation ($102,108 including stock based compensation), can be explained as follows:

  i)

Consulting fees increased by $37,591 from $10,977 in 2004 to $48,568 in 2005. This is due to the increased activity in respect to the day to day running of the Company.

     
  ii)

The Company reported a net foreign currency loss of $125,907 compared to a net foreign exchange gain in 2004 of $1,640. Since all current assets and liabilities held in US dollars have to be converted to Canadian dollars on consolidation at the exchange rate as at December 31, 2005, being 1.166, this created a large exchange loss due to appreciably weakened US dollar compared to the Canadian dollar.

     
 

The weakened US dollar to Canadian dollar rate also resulted in a loss from the depreciation in the value of US $300,000 cash held by the Company pursuant to a private placement with Hochschild completed in August 2004 when the US dollar was worth approximately 1.33 Canadian.

     
 

It is important to note that the majority of transactions for the Company are in US dollars and, to a lesser extent, Mexican Pesos, and therefore foreign exchange fluctuations can result in losses or gains.

     
  iii)

Professional fees increased by $72,171 from $17,692 in 2004 to $89,863 in 2005. Due to the affect of regulatory requirements the audit fees for the 2005 audit and the accounting fees in respect of the production of annual and quarterly financial statements has caused part of this increase. There were also increased legal fees due to consultations for potential property purchases and agreements.

     
  iv)

Interest income increased by $26,274 from $9,861 in 2004 to $36,135 in 2005. This is due to larger amounts being held on fixed term deposits throughout the year.

     
  v)

Option payments were received in 2005 of $35,000. See Note 5 (f) of the consolidated financial statements dated December 31, 2005.

     
  vi)

A reclamation bond of $2,500 was written off in 2005. This bond has been held since the 1990s on a property that the Company no longer has an interest in and it was deemed by management unlikely this amount would be recovered.

Page 9 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

G. Quarterly Results

The following financial data was derived from the Company’s consolidated financial statements for the current and eight previous quarters:

  Dec 31 Sept 30 June 30 March 31 Dec 31 Sept 30 June 30 March 31   Dec 31
  2005 2005  2005 2005 2004 2004 2004  2004 2003
  $ $ $ $ $ $ $ $ $
                   
Operating expeneses 218,932 182,209 69,840 54,871 100,227 77,205 54,374 77,761 81,499
Interest earned  (22,641) (3,622) (3,236) (6,636) (2,150) (2,645) (1,573) (3,493) (1,147)
Other revenue  (25,000) - - (10,000) - - - - -
                   
Loss before the undernoted 171,291 178,587 66,604 38,235 98,077 74,560 52,801 74,268 80,352
                   
Stock-based compensation (129,373) 460,215 - - - - - 386,246 318,311
Mineral Properties write off - - - - - - - - 12,423
Reclamation bond write off 2,500 - - - - - - - -
                   
Net Loss 44,418 638,802 66,604 38,235 98,077 74,560 52,801 460,514 411,086
                   
Loss per share - basic and diluted (0.01) (0.01) 0.00 0.00 0.00 0.00 0.00 (0.01) (0.01)

H. Related Party Information

As at December 31, 2005, $13,010 (December 31, 2004: $18,935) was due to directors or senior officers of the Company or to companies controlled by them, for various services rendered.

For the years ended December 31, 2005 and 2004, the following is a summary of related party transactions not disclosed elsewhere in these financial statements:

  i)

Corporate development and Investor relations fees of $21,320 (2004: $36,000) were billed by a company controlled by a senior officer.

     
  ii)

Financial and consulting fees of $84,831 (2004: $9,163) were charged by two private companies controlled by directors of the Company.

     
  iii)

Legal fees of $19,286 (2004: $6,403) were incurred by an association of lawyers in which an officer of the Company is a member.

     
  iv)

Management fee of $60,000 (2004: $60,000) to a private company controlled by a director of the Company.

     
  v)

A private company controlled by a director of the Company billed, $54,052 on a cost recovery basis, for office and administrative (2004: $74,897).

     
  vi)

Geological consulting fees and other exploration costs totaling $17,319 (2004: $15,444) were paid to the President and other related parties of the Company and are included in deferred exploration expenditures.

These transactions were made in the normal course of operations for consideration established and accepted by the related parties.

Page 10 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

I. Financial Conditions, Liquidity and Capital Resources

The Company has limited financial resources and finances its operations by raising capital in the equity markets. For the foreseeable future, the Company will need to rely on the sale of such securities and joint venture arrangements with third parties to provide working capital and to finance its mineral property acquisition and exploration activities. The Company intends to complete private placements of shares over the next few months, depending upon equity market conditions.

The Company had a working capital balance of $1,697,865 as at December 31, 2005, compared to a working capital balance of $1,455,967 as at December 31, 2004.

In Quarter 1, 2005, 1,410,000 common shares were issued for gross proceeds of $211,200 from the exercise of share purchase warrants and stock options. 10,000 common shares were issued in Quarter 2, 2005 from the exercise of stock options for gross proceeds of $1,200. In Quarter 3, 2005, 6,500,000 common shares were issued in respect of a private placement for gross proceeds of $2,275,000 and 55,000 common shares were issued in Quarter 4 from the exercise of share purchase warrants and stock options for proceeds of $6,950.

The total number of common shares issued during the year ended December 31, 2005 was 8,175,000 for gross proceeds of $2,570,350. For further information on the issuance of shares see Note 7 of the consolidated financial statements dated December 31, 2005.

All outstanding warrants and stock options are currently “in the money” (the exercise price is less than the trading price of the shares). Using the closing trade price as at April 19, 2006 of $1.60, if all outstanding warrants as at April 19, 2006 were exercised, the Company would realize proceeds of $1,798,536 and if all stock options outstanding as at April 19, 2006 were to be exercised, the Company would realize proceeds of $1,376,710. This provides total potential cash proceeds of $3,175,246.

For 2005 expenditures on mineral properties see Note E in this MD&A or Note 5 of the consolidated financial statements dated December 31, 2005.

In Quarter 1, 2004, funds derived from the exercise of share purchase warrants and stock options resulted in the issuance of 2,545,247 common shares for gross proceeds of $633,979. In Quarter 2, 2004, 1,040,359 common shares were issued for the exercise of share purchase warrants and stock options resulting in proceeds of $154,554. In Quarter 3 1,593,667 commons shares were issued for the exercise of share purchase warrants and stock options resulting in proceeds of $239,050. In Quarter 4, 2004, 1,314,832 commons shares were issued resulting in proceeds of $195,425 for the exercise of share purchase warrants and stock options.

There were no private placements of common shares in 2004

For 2004 expenditures on mineral properties see Note E in this MD&A or Note 5 of the consolidated financial statements dated December 31, 2005.

Page 11 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

J. Outstanding Shares, Options and Share Purchase Warrants

  i)

Issued and outstanding shares

The Company has 100 million authorized common shares, issued and outstanding as follows:

      Number     Total  
      of Shares        
               
  Balance as at December 31, 2005   65,522,200   $ 15,172,975  
  Issued subsequent to Yearend            
         Exercise of share purchase warrant   375,609   $ 187,805  
         Exercise of stock options   853,000   $ 182,160  
               
  Balance as at April 19, 2005   66,750,809   $ 15,542,940  

  ii)

Share Purchase Warrants

As at December 31, 2005, there were 3,934,280 share purchase warrants outstanding with a weighted average exercise price of $0.50 per share. Subsequent to the year end, 375,609 share purchase warrants were exercised at $0.50 per share for proceeds of $187,805 and 375,609 common shares were issued. No warrants have been issued since the year end. Warrants outstanding at April 19, 2006 are as follows:

  Exercise Expiry Balance Warrants Cancelled Warrants Balance
  Price Date Dec 31, 2005 Granted or Expired Exercised April 19, 2006
               
  $0.66 January 20, 2006 120,000 - - - 120,000
  $0.50 September 27, 2005 3,250,000   - 341,329 2,908,671
  $0.50 September 27, 2005 564,280   - 34,280 530,000
               
      3,934,280 - - 375,609 3,558,671
               
  Weighted average exercise price $0.50 $0.00 $0.00 $0.50 $0.51

Page 12 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

J. Outstanding Shares, Options and Share Purchase Warrants, continued

  iii)

Stock Options

As at December 31, 2005, there were 5,446,000 stock options outstanding with a weighted average exercise price of $0.29 per share. Subsequent to the year end 853,000 stock options were exercised with a weighed average exercise of $0.21 for proceeds of $182,160. No stock options have been issued since year end. Stock options outstanding as at April 19, 2006 are as follows:

  Exercise Expiry      Balance Granted Cancelled Exercised   Balance
  Price Date Dec 31, 2005   or Expired   April 19, 2006
               
  $0.15 February 8, 2006 50,000 - - 50,000 -
  $0.15 May 7, 2006 55,000 - - 55,000 -
  $0.12 June 8, 2006 515,000 - - 100,000 415,000
  $0.19 September 27, 2006 490,000 - - 55,000 435,000
  $0.12 January 10, 2008 1,591,000 - - 333,000 1,258,000
  $0.25 October 2, 2008 75,000 - - - 75,000
  $0.34 December 8, 2008 195,000 - - 50,000 145,000
  $0.65 March 2, 2009 100,000 - - - 100,000
  $0.62 March 25, 2009 800,000 - - 50,000 750,000
  $0.35 August 9, 2010 1,575,000 - - 160,000 1,415,000
               
      5,446,000 - - 853,000 4,593,000
               
  Weighted average exercise price $0.29 $0.00 $0.00 $0.21 $0.30

K. Subsequent Events and Outlook

The Company intends to continue land acquisition and drilling at its uranium pipe targets in Arizona. Phase 1 drilling programs also will be carried out later in the year at the MacArthur copper property in Nevada, the Crestones gold property in Mexico, and the Big Bar massive sulfide target in Alaska.

Stock options and warrants were exercised after the year end December 31, 2005 for detailed information see Note J in this M D&A or Note 7 of the consolidated financial statements.

L. Off Balance Sheet

The Company did not enter into any off balance sheet transactions or commitments as defined by National Instrument 51-102.

Page 13 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

M. Management’s Responsibility for Financial Information

Preparing financial statements requires management to make estimates and assumptions that affect the reported results. The estimates are based on historical experience and other assumptions that are believed to be reasonable under the circumstances. Critical accounting policies were disclosed in the annual audited financial statements.

Consistent with accepted policies of the Canadian junior mining industry, the Company capitalizes exploration expenditures. This decision, and the timing of the possible recognition of impairment in the mineral property value, can materially affect the reported earnings of the Company.

Management has prepared the information and representations in this annual report. The financial statements have been prepared to conform to generally accepted accounting principles in Canada and, where appropriate, reflect management's best estimates and judgment. The financial information presented throughout this report is consistent with the data presented in the financial statements.

The Company maintains adequate systems of internal accounting and administrative controls. These systems were designed to provide reasonable assurance that relevant and reliable financial information is produced. The independent auditors have the responsibility of auditing the financial statements and expressing an opinion on them.

The Board of Directors, through its Audit Committee, is responsible for ensuring that management fulfils its responsibilities for financial reporting and internal control. The Audit Committee is composed of three directors, who meet at least quarterly with management and, at least annually with the external auditors to audit and review accounting, internal controls and financial reporting matters.

N. Risks and Uncertainties

The principal business of the Company is the exploration and development of mineral properties. Given the nature of the mining business, the limited extent of the Company's assets and the present stage of development, the following risk factors, among others, should be considered.

The Company does not hold any known mineral reserves of any kind and therefore does not generate any revenues from production. The Company’s success will depend largely upon its ability to locate commercially productive mineral reserves. Mineral exploration is highly speculative in nature, involves many risks and frequently is non-productive. There is no assurance that our exploration efforts will be successful. Success in establishing reserves is a result of a number of factors, including the quality of management, the level of geological and technical expertise, the quality of land available for exploration as well as various other factors.

Once mineralization is discovered, it may take several years in the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish proven and probable reserves through drilling and bulk sampling, to determine the optimal metallurgical process to extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities. Because of these uncertainties, no assurance can be given that our exploration programs will result in the establishment or expansion of resources or reserves.

Since the Company does not generate any revenues, it may not have sufficient financial resources to undertake by itself all of its planned mineral property acquisition and exploration activities. Operations will continue to be financed primarily through the sale of securities such as common shares. The Company will need to continue its reliance on the sale of such securities for future financing, which may result in dilution to existing shareholders.

Page 14 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

N. Risks and Uncertainties, continued

Furthermore, the amount of additional funds required may not be available under favorable terms, if at all, and will depend largely on the acquisition and exploration activities pursued.

The ability to attract capital to the Company is dependent on movements in commodity prices. Commodity prices fluctuate on a daily basis and they are affected by a number of factors beyond the control of the Company. If, because of a sustained decline in prices, financing were not available to meet cash operating costs, the feasibility of continuing operations would be evaluated and if warranted, would be discontinued.

The resource industry is intensively competitive in all of its phases, and the Company competes with many other companies possessing much greater financial and technical resources. Competition is particularly intense with respect to the acquisition of desirable undeveloped gold and silver properties. The principal competitive factors in the acquisition of prospective properties include the staff and data necessary to identify, investigate and purchase such properties, and the financial resources necessary to acquire and develop the projects. Competition could adversely affect the Company’s ability to acquire suitable prospects for exploration.

O. Licenses and Permits

The operations of the Company require licenses and permits from various government authorities. The Company believes that it holds all necessary licenses and permits under applicable laws and regulations for work in progress and believes it is presently complying in all material respects with the terms of such licenses and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that the Company will be able to obtain or maintain all necessary licenses and permits that may be required to explore and develop its properties, commence construction or operation of mining facilities or to maintain continued operations that economically justify the cost.

P. Whistleblower Policy

Effective June 30, 2005, the audit committee adopted resolutions that authorized the establishment of procedures for complaints received regarding accounting, internal controls or auditing matters, and for a confidential, anonymous submission procedure for employees who have concerns regarding questionable accounting or auditing matters. The implementation of the whistleblower policy is in accordance with new requirements pursuant to Multilateral Instrument 52-110 Audit Committees, National Policy 58-201 Corporate Governance Guidelines and National Instrument 58-101 Disclosure of Corporate Governance Practices.

Q. Forward-Looking Statements

Some of the statements contained in this MD&A are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur.

Forward-looking statements may be identified by such terms as “believes”, “anticipates”, “expects”, “estimates”, “may”, “could”, “would”, “will”, or “plan”. Such forward-looking statements are made pursuant to the safe harbour provisions of the United States Private Securities Litigation Reform Act of 1995. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties.

Page 15 of 16



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the year ended December 31, 2005

Q. Forward-Looking Statements, continued

Actual results relating to, among other things, results of exploration, reclamation, capital costs, and the Company’s financial condition and prospects, could differ materially from those currently anticipated in such statements for many reasons such as; changes in general economic conditions and conditions in the financial markets; changes in demand and prices for the minerals the Company expects to produce;, litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; technological and operational difficulties encountered in connection with the Company’s activities; and changing foreign exchange rates and other matters discussed in this MD&A.

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on the Company’s forward-looking statements. Further information regarding these and other factors, which may cause results to differ materially from those projected in forward-looking statements, are included in the filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time by the Company or on its behalf, except in accordance with applicable securities laws.

Page 16 of 16


EX-99.9 10 exhibit99-9.htm THIRD QUARTER REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.9

1100 – 1199 West Hastings Street,
Vancouver, BC, V6E 3T5
Tel: 604-684-9384 Fax: 604-688-4670
www.quaterraresources.com

Interim Consolidated Financial Statements
For the Nine months ended September 30, 2007 and 2006

Index Page
Consolidated Financial Statements  
             Consolidated Balance Sheets          1
             Consolidated Statements of Operations and Deficit          2
             Consolidated Statements of Cash Flows          3
             Notes to the Consolidated Financial Statements          4-25

Notice of No Auditor Review of Interim Statements

     These interim consolidated financial statements of the Company for the nine months ended September 30, 2007, were prepared by management and have not been reviewed or audited by the Company’s auditors.



Quaterra Resources Inc. (An Exploration Stage Company)
Consolidated Balance Sheets as at September 30, 2007 and December 31, 2006 (Canadian
Dollars)

        Unaudited     Audited  
        September 30, 2007       December 31, 2006  
                 
Assets                
Current                
Cash and cash equivalents     $  6,108,486   $  9,112,732  
Restricted cash   Note 3   99,290     -  
Receivables       165,172     56,592  
Prepaid and deposits       86,592     70,486  
Amount due from Joint Venture Partner   Note 5 (a)   149,230     113,430  
                 
        6,608,770     9,353,240  
Equipment   Note 4   142,306     51,574  
Mineral properties   Note 5   16,182,748     7,855,832  
Reclamation bonds       129,291     79,898  
                 
      $  23,063,115   $  17,340,544  
                 
Liabilities                
Current                
Accounts payable and accrued liabilities     $  344,781   $  251,311  
Due to related parties   Note 6   13,109     26,216  
                 
        357,890     277,527  
                 
Shareholders' Equity                
Share capital   Note 7 (b)   36,170,878     27,861,058  
Subscriptions receivable       -     (17,500 )
Contributed surplus   Note 7 (b)   9,285,911     3,709,557  
Deficit       (22,751,564 )   (14,490,098 )
                 
        22,705,225     17,063,017  
                 
      $  23,063,115   $  17,340,544  

Basis of Presentation (Note 2)
Subsequent events (Note 10)

Approved on behalf of the Board of Directors:

  ”Signed Tom Patton” ”Signed Robert Gayton”
  Thomas Patton Robert Gayton

The interim consolidated financial statements and accompanying notes contained herein have not been reviewed by the Company’s auditors
Page 1 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Consolidated Statement of Operations and Deficit for the nine months ended September 30,
2007 and 2006. (Canadian Dollars)

        Three months ended     Nine months ended  
        Sept 30, 2007     Sept 30, 2006     Sept 30, 2007     Sept 30, 2006  
                             
Expenses                            
     Administration     $  30,000   $  15,000   $  90,000   $  45,000  
     Amortization       13,843     4,854     31,029     5,027  
     Consulting                            
                 Services       109,372     38,400     281,692     83,158  
                 Stock based compensation   Note 7 (h)   2,783,893     789,277     3,047,297     872,733  
     Directors and officers fees                            
                 Services       19,808     -     36,308     -  
                 Stock based compensation   Note 7 (h)   2,386,331     876,524     2,411,637     944,716  
     Investor relations       26,465     14,823     177,050     92,010  
     Office and general       41,794     58,997     138,616     131,431  
     Professional fees       23,361     33,239     195,078     80,685  
     Regulatory fees and taxes       4,378     9,830     53,465     18,566  
     Shareholders communications       38,418     4,047     88,751     12,507  
     Transfer agent       5,888     4,484     19,186     12,726  
     Travel and promotion       35,931     6,809     130,848     41,862  
     Wages and benefits                            
                 Salaries and benefits       56,133     12,360     172,042     30,683  
                 Stock based compensation   Note 7 (h)   664,079     316,572     664,079     347,181  
                             
        6,239,694     2,185,216     7,537,078     2,718,285  
                             
Other (income) expenses                            
     Interest       (54,205 )   (26,277 )   (207,329 )   (55,928 )
     Foreign exchange loss       242,974     29,136     733,832     36,198  
     General exploration       67,843     53,067     197,885     147,215  
     Write off of accrued liabilities       -     (6,761 )   -     (46,392 )
                             
        256,612     49,165     724,388     81,093  
                             
Net loss for the period       6,496,306     2,234,381     8,261,466     2,799,378  
                             
Deficit, beginning of the period       16,255,258     11,224,561     14,490,098     10,659,564  
                             
Deficit, end of period     $  22,751,564   $  13,458,942   $  22,751,564   $  13,458,942  
                             
Loss per share - basic and diluted     $  0.08   $  0.03   $  0.10   $  0.04  
                             
Weighted average number of shares outstanding     79,428,158     71,852,481     78,871,925     68,033,632  

The interim consolidated financial statements and accompanying notes contained herein have not been reviewed by the Company’s auditors
Page 2 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and
2006. (Canadian Dollars)

        Three months ended     Nine months ended  
        Sept 30, 2007     Sept 30, 2006     Sept 30, 2007     Sept 30, 2006  
Operating Activities                            
Net loss for the period     $  (6,496,306 ) $  (2,234,381 ) $  (8,261,466 ) $  (2,799,378 )
Items not involving cash                            
               Amortization       13,843     4,854     31,029     5,027  
               Stock based compensation   Note 7 (h)   5,834,303     1,982,373     6,123,013     2,164,630  
               Write off of accrued liabilities       -     (6,761 )   -     (46,392 )
               Shares issued for services       22,500     -     45,000     -  
Operating Cash Flow       (625,660 )   (253,915 )   (2,062,424 )   (676,113 )
Changes in Non-Cash Working Capital                            
     Accounts receivables       (67,964 )   (3,625 )   (108,580 )   (73,389 )
     Prepaid and deposits       (14,091 )   (3,928 )   (16,106 )   (2,390 )
     Accounts payable and accrued liabilities       (346,298 )   (36,242 )   (153,682 )   (177,173 )
     Due to related parties       (3,600 )   (16,023 )   (13,107 )   (7,519 )
        (431,953 )   (59,818 )   (291,475 )   (260,471 )
Cash Used in Operating Activities       (1,057,613 )   (313,733 )   (2,353,899 )   (936,584 )
Investing Activities                            
     Expenditures on mineral properties       (2,606,251 )   (1,015,900 )   (6,878,763 )   (2,211,487 )
     Due from Joint Venture partner       (79,243 )   (6,105 )   (35,800 )   114,285  
     Purchase of equipment       (62,064 )   (29,083 )   (121,761 )   (30,609 )
     Purchase of relcamation bonds       (3,663 )   (35,000 )   (49,393 )   (35,000 )
Cash used in Investment Activities       (2,751,221 )   (1,086,088 )   (7,085,717 )   (2,162,811 )
Financing Activities                            
     Shares issued for cash, net       5,698,010     115,200     6,534,660     2,515,608  
Increase in Cash During the Period       1,889,176     (1,284,621 )   (2,904,956 )   (583,787 )
Cash, Beginning of Period       4,318,600     2,487,132     9,112,732     1,786,298  
Cash, End of Period     $  6,207,776   $  1,202,511   $  6,207,776   $  1,202,511  
Cash consists of the following                            
     Cash and cash equivalents       6,108,486     1,202,511     6,108,486     1,202,511  
     Restricted cash       99,290     -     99,290     -  
Cash, End of Period     $  6,207,776   $  1,202,511   $  6,207,776   $  1,202,511  

Supplemental cash flow information (Note 9)

The interim consolidated financial statements and accompanying notes contained herein have not been reviewed by the Company’s auditors
Page 3 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

1. Nature of Operations

Quaterra Resources Inc. (the “Company”) is an exploration stage enterprise incorporated under the laws of British Columbia. The Company and its subsidiaries are engaged in the acquisition, exploration and development of precious metal properties and does not have any mineral properties in production. The Company has not determined whether these mineral properties contain ore reserves that are economically recoverable. The ability of the Company to meet its commitments as they become due, including completion of the acquisition, exploration and development of its mineral properties, is dependent on the Company’s ability to obtain the necessary financing. The Company’s shares trade on the Tier 2 Board of the TSX Venture Exchange (“TSX-V”) under the symbol QTA.

2. Basis of Presentation and Consolidation

The consolidated unaudited interim financial statements of the Company were prepared in accordance with Canadian generally accepted accounting principles for interim financial statements. As a result, these unaudited interim financial statements do not contain all of the information required for annual financial statements and they should be read in conjunction with the Company’s annual audited financial statements for the fiscal year ended December 31, 2006. All material adjustments, which, in the opinion of management, are necessary for a fair presentation of the results of the interim periods, have been reflected. The results for the nine months ended September 30, 2007 are stated utilizing the same accounting policies and methods of application as the most recent annual financial statements, but are not necessarily indicative of the results to be expected for the full year. The Company’s reporting currency is the Canadian dollar and all dollar amounts in these statements are in Canadian dollars, unless otherwise indicated. Certain of the prior periods’ comparative figures have been reclassified to conform to the presentation adopted in the current period.

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, as follows:

(i)

Minera Agua Tierra S.A. de C.V., incorporated in Mexico.

(ii)

Quaterra Alaska, Inc., incorporated in Alaska, USA.

(iii)

Quaterra International Limited, incorporated in the British Virgin Islands.

(iv)

QTA International Nieves Limited, incorporated in the British Virgin Islands.

(v)

Minera Nieves S.A. de C.V., incorporated in Mexico.

(vi)

Sigatse Peak Services, LLC’, incorporated in Nevada, USA.

All intercompany accounts and transactions were eliminated upon consolidation.

3. Restricted Cash

Restricted cash of $99,290 (US $100,000) is an amount held in escrow in respect to the Company’s agreement dated June 27, 2007 to, under certain conditions, acquire the assets of Arimetco Inc., a Nevada corporation, in the Yerington Mining District, Lyon County, Nevada (see Note 5 (f) for further details of this agreement).

Page 4 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

4. Equipment

Equipment is carried at cost less accumulated amortization. Details of equipment are as follows:

    September 30, 2007     Dec 31, 2006  
    Costs     Accumulated     Net Book     Net Book  
          Amortization     Value     Value  
                         
Vehicles $ 108,564   $ (31,034 ) $ 77,530   $ 29,078  
Equipment   44,110     (14,076 )   30,034     1,234  
Computer   23,249     (4,650 )   18,599     1,843  
Software   35,829     (19,686 )   16,143     19,419  
                         
  $ 211,752   $ (69,446 ) $ 142,306   $ 51,574  

5. Mineral Properties

The Company has interests in several mineral properties in Mexico, and the US including Alaska, Nevada, Arizona, Utah and Wyoming. The total deferred exploration and acquisition costs as at September 30, 2007 are as follows:

Period ended 'September 30, 2007 Nieves   Los   Uranium   Alaskan     MacArthur    Yerington    Other   Total  
      Crestones   Properties    Properties            Properties      
  $    $    $    $    $    $    $    $   
                                 
Acquisitions 1,308,448   78,097   2,949,254   147,737   482,657   770,454   1,136,449   6,873,096  
Advances 243   -   354   -   -   -   4,818   5,415  
Air support -   -   4,664   111,795   -   -   30,752   147,211  
Amortization 20,406   -   -   -   -   -   -   20,406  
Assays and surveys 74,336   67,919   31,793   27,657   48,778   -   65,200   315,683  
Camp costs 14,829   31,959   89,653   48,108   60,964   22,769   19,002   287,284  
Drilling services 1,429,838   657,812   1,170,162   814,255   721,149   -   -   4,793,216  
Equipment rental and maintenance 3,885   12,289   3,253   53,413   18,938   601   2,472   94,851  
Exploration and other 157,058   17,271   37,897   42,738   15,629   11,135   13,487   295,215  
Field supplies and wages 143,270   231,229   23,706   167,537   43,080   17,851   48,518   675,191  
Geological services 393,295   84,556   1,266,750   908,962   239,503   93,667   146,930   3,133,663  
Project management 314,596   119,883   317,198   106,843   109,635   -   57,324   1,025,479  
Reclamation expenses -   -   1,485   -   -   -   -   1,485  
Travel and related costs 51,080   18,954   64,947   54,643   27,647   3,810   19,456   240,537  
Vehicle expenses 14,181   39,488   44,939   33,710   23,484   13,857   8,907   178,566  
Recovery from Blackberry (1,904,550 ) -   -   -   -   -   -   (1,904,550 )
                                 
Total 2,020,915   1,359,457   6,006,055   2,517,398   1,791,464   934,144   1,553,315   16,182,748  

Note - Alaskan properties are Big Bar and Duke Island

Page 5 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

5. Mineral Properties, continued

The total capitalized deferred exploration and acquisition costs as at December 31, 2006 were as follows:

Period ended December 31, 2006 Nieves   Los   Uranium   Alaskan    MacArthur    Other   Total  
      Crestones     Properties    Properties        Properties      
  $    $    $    $    $    $    $   
                             
Acquisitions 1,244,464   71,696   1,125,438   130,746   170,324   454,918   3,197,586  
Advances 308   4,103   66,344   -   -   -   70,755  
Air support -   -   4,664   111,795   -   -   116,459  
Amortization 20,406   -   -   -   -   -   20,406  
Assays and surveys 71,146   17,430   17,611   17,566   -   8,927   132,680  
Camp costs 11,313   17,811   25,160   47,601   -   620   102,505  
Drilling services 1,429,838   144,665   277,846   763,712   -   -   2,616,061  
Equipment rental and maintenance 3,885   12,065   3,085   53,193   6,732   -   78,960  
Exploration and other 148,103   6,289   28,980   91,519   441   5,856   281,188  
Field supplies and wages 129,641   132,322   13,135   166,320   18,833   1,007   461,258  
Geological services 376,868   43,486   402,867   899,970   19,776   19,197   1,762,164  
Project management 308,347   55,258   178,824   99,182   29,093   -   670,704  
Travel and related costs 48,322   10,778   58,709   53,457   5,142   5,076   181,484  
Vehicle expenses 12,664   18,383   2,634   33,349   574   568   68,172  
Recovery from Blackberry (1,904,550 ) -   -   -   -   -   (1,904,550 )
                             
Total 1,900,755   534,286   2,205,297   2,468,410   250,915   496,169   7,855,832  

Note - Alaskan properties are Big Bar and Duke Island

  (a) Nieves Concessions, Mexico

The Company holds a 50% interest in 15 mineral concessions located in northern Zacatecas, Mexico, (the Nieves Concessions) and two inlaying fractions within the Nieves Concessions (Delores and Nazarene), collectively called Nieves.

The Company acquired an option on the property pursuant to an Assignment made March 26, 1999 of the Underlying Agreement by Western Silver Corporation (“Western”), a company with common directors and officers, to the Company.

To acquire its interest, the Company issued 1,444,460 common shares to Western valued at $288,892, issued 360,000 common shares to the concessionaires valued at $72,000 and in accordance with the terms of the Underlying Agreement made scheduled option payments to the concession holders, totalling US $70,000 over three years. In addition, to acquire the interest in the claim fractions the Company paid US $40,000 to the concessionaires. Commencing January 26, 2004, an annual advance minimum royalty payment (“AMR”) of US $75,000 is due to the concession holders until the commencement of commercial production.

Page 6 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

5. Mineral Properties, continued

  (a) Nieves Concessions, Mexico, continued

The Nieves concessions are subject to a maximum 3% net smelter return royalty (“NSR”) to the original concession holders, which the Company may purchase at any time for US $2 million. In addition, Kennecott Exploration Company, the optionor in the initial Underlying Agreement, retains NSR royalties of 2% on certain core claims and 1% on certain peripheral claims.

Funds in the amount of US $1,500,000 (C $1,904,550) were advanced to the Company pursuant to the terms of an agreement made April 10, 2003 with Blackberry Ventures I, LLC (“Blackberry”), a US-based investment partnership, whereby Blackberry could earn a 50% interest in the Nieves silver property in Mexico or the Duke Island property in Alaska by providing advance funding to the Company to fund exploration expenditures.

The agreement with Blackberry stipulated that once all monies received from the advances had been incurred on exploration expenditures, Blackberry effectively exercised its option and earned a 50% interest in the Nieves property. In August 2005, the parties formed a joint venture to proceed with exploration on the property. As at September 30, 2007, Blackberry owed the Company $149,230 (2006: $113,430) for its share of joint venture exploration expenditures that have been made on the property.

  (b)

Los Crestones Property, Mexico

       
 

The Company holds a 100% interest in a mineral concession located in northern Durango, Mexico. In April 2004, the Company issued 25,000 common shares valued at $15,000, to an individual as a finder’s fee for his role in the identification and acquisition of the property.

       
  (c)

Uranium Properties, Arizona, Utah and Wyoming

       
 

In an agreement made effective June 22, 2005 with North Exploration LLC, a Nevada limited Corporation, the Company acquired an option to purchase mining claims situated in Arizona, Utah and Wyoming. To exercise the option, the Company is required to make staged payments totalling US $500,000 over five years and to issue 600,000 common shares over three years, as follows: TSX.V regulatory approval for this agreement was received on September 6, 2005.

       
  (i)

US $15,000 and issue 200,000 common shares on or before September 6, 2005 (Paid and issued).

  (ii)

US $25,000 and issue 200,000 common shares on or before September 6, 2006 (Paid and issued).

  (iii)

US $50,000 and issue 200,000 common shares on or before September 6, 2007 (Paid and issued).

  (iv)

US $75,000 on or before September 6, 2008.

  (v)

US $135,000 on or before September 6, 2009.

  (vi)

US $200,000 on or before September 6, 2010.

       
 

If the Company meets the above terms and conditions and elects to exercise the option, then the property may be purchased with a further payment of US $100. The agreement is subject to a 2% NSR payable upon commencement of commercial production, which the Company may reduce to 1% by purchase for US $1 million.

Page 7 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

5. Mineral Properties, continued

  (c)

Uranium Properties, Arizona, Utah and Wyoming, continued

       
 

In two separate agreements made effective August 10, 2006 and March 23, 2007 with Nustar Exploration LLC, the Company acquired options to earn 100% interests in unpatented mining claims covering breccia pipe targets located on the Arizona Strip.

       
 

Under the agreement dated August 10, 2006 the Company optioned four blocks of claims with commitments as follows:

       
  (i)

Initial payments of US $20,000 (Paid).

  (ii)

US $30,000 on or before August 10, 2007 (Paid).

  (iii)

US $40,000 on or before August 10, 2008.

  (iv)

US $100,000 on or before August 10, 2009.

       
 

Each of the option blocks is subject to a 4% yellowcake royalty, 3% of which may be bought back by the Company for US $500,000 per claim block.

     
 

Under the agreement dated March 23 2007, the Company purchased a block of unpatented claims for a price of US $25,500 and a US $100,000 minimum advance royalty payment. If production occurs, the claims are subject to a 4% yellowcake royalty, 3% of which may be bought back by the Company for US $1,000,000 per breccia pipe.

       
  (d)

Alaskan Properties

       
 

The Company has a 100% interest in 140 mining claims known as the Duke Island property, in Alaska (129 federal claims and 11 state claims) on Duke Island, which is near Ketchikan.

       
 

The Company has a 100% interest in Big Bar project, which consists of seven state mining claims on the Seward Peninsula, approximately 45 kilometers (110 miles) northeast of Nome, Alaska.

       
  (e)

MacArthur Claim

       
 

Pursuant to an agreement made October 2005 with North Exploration LLC, the Company acquired the right to earn an interest in 66 unpatented mining claims covering the former MacArthur copper- oxide mine, in the Yerington district of Lyon County, Nevada. To earn a 100% interest, subject to a 2% NSR, the Company is required to make staged payments totaling US $1,785,000 by January 15, 2008 as follows:

Option 1

  (i)

US $10,000 upon execution (Paid).

  (ii)

US $25,000 on or before January 15, 2006 (Paid).

  (iii)

US $75,000 on or before January 15, 2007 (Paid).

  (iv)

US $1,675,000 on or before January 15, 2008.

Alternatively, since the Company has met its obligation of US $100,000 in stage payments by January 15, 2007, and if the Company incurs US $500,000 in exploration expenditures by January 15, 2008, then the Company may elect to acquire the property by making additional payments totaling US $2,645,000 as follows:

Page 8 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

5. Mineral Properties, continued

  (e) MacArthur Claim, continued

Option 2

  (i)

US $100,000 on or before January 15, 2008.

  (ii)

US $125,000 on or before January 15, 2009.

  (iii)

US $2,420,000 on or before January 15, 2010.

The property is subject to a 2% NSR, 1% of which the Company may purchase for US $1 million.

Under an amendment dated January 17, 2007 to the original agreement made October 2005 between the Company and North Exploration LLC a US $350,000 deduction will be made from the final payments, (option one originally US $1,675,000 or option two originally US $2,420,000) as the Company has paid this amount to Charles Gary Clifton in advance.

  (f)

Yerington

       
 

The Company has entered into an agreement to acquire all the assets of Arimetco Inc., a Nevada corporation, in the Yerington Mining District, Lyon County, Nevada. This transaction is subject to a 180 day review period (starting July 13, 2007) and the Company may terminate this process if it is dissatisfied with the condition of the property or fails to obtain requested environmental clearances for past mining-related activities. Under certain circumstances, the review period may be extended for a further 120 days (See note 3).

       
 

On receiving regulatory approval and providing that properties pass the review process the Company’s commitments would be as follows:

       
  (ii)

Payment of US $500,000.

  (ii)

250,000 common shares (issued from treasury but not distibuted).

       
 

Under this acquisition, the property is subject to a 2% net smelter return royalty capped at US $7.5 million on production from any claims owned by Quaterra in the Yerington and MacArthur mine areas.

       
  (g)

Other Properties

       
 

Other properties include various properties in USA and Mexico.

       
 

Mexico

       
 

Pursuant to an agreement made December 2006 with Tom Turner, the Company acquired a 100% interest in three mineral concessions located in Mexico for consideration of 200,000 shares with a deemed value of $1.53 per share for a total of $306,000 (Note 5 (d)).

       
 

Canada

       
 

The option agreements for the Arc and Brown Claims, in the Skeena Mining District were terminated in accordance with their terms and the 100% interest reverted back to the Company.

Page 9 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

5. Mineral Properties, continued

  (g) Other Properties, continued

USA

Pursuant to an option agreement made March 27, 2007, the Company may acquire a 100% interest in certain prospect permits. The potential payments for this agreement are as follows:

  (i)

Initial payment of US $50,000. (Paid)

  (ii)

US $50,000 on or before March 28, 2008.

  (iii)

US $60,000 on or before March 28, 2009.

  (iiii)

US $70,000 on or before March 28, 2010.

  (iv)

US $150,000 on or before March 28, 2011.

  (iii)

US $220,000 on or before March 28, 2012.

Pursuant to an agreement made March 2007 with North Exploration, LLC., the Company acquired the right to earn an interest in 27 unpatented mining claims know as the S.W Tintic Claims in Juab County, Utah. To earn a 100% interest the Company is required to make staged payments totaling US $1 million by February 16, 2018 as follows:

 

(i)

Initial payment of US $20,000. (Paid).

 

(ii)

US $20,000 on or before February 15, 2008.

 

(iii)

US $20,000 on or before February 15, 2009.

 

(iv)

US $40,000 on or before February 15, 2010.

 

(v)

US $50,000 on or before February 15, 2011.

 

(vi)

US $50,000 on or before February 15, 2012.

 

(vii)

US $100,000 on or before February 15, 2013.

 

(viii)

US $100,000 on or before February 15, 2014.

 

(ix)

US $100,000 on or before February 15, 2015.

 

(x)

US $250,000 on or before February 15, 2016.

 

(xi)

US $250,000 on or before February 15, 2017.

The property is subject to a 2% NSR, 1% of which the Company may purchase for US $1 million.

Alternatively, Company may acquire the property at any time by paying $1 million, less an previously paid payment, at any time.

  (h) Title to Mineral Properties

Title to mineral properties may be affected by unregistered prior agreements or transfers, as well as undetected defects. Although the Company has verified title to its mineral properties in accordance with standard industry practices applicable for the current stage of exploration, these procedures do not guarantee the Company’s interests in its mineral properties.

Page 10 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

5. Mineral Properties, continued

  (i) Environmental Expenditures

The operations of the Company may, in the future, be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company's policy is to meet or, if possible, surpass standards set by relevant legislation, by application of technically proven and economically feasible measures.

Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. Estimated future removal and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.

6. Related Party Transactions

As at September 30, 2007, $13,109 (December 31, 2006: $26,216) was due to directors or senior officers of the Company or to companies controlled by them, for various services rendered.

These transactions were made in the normal course of operations and measured at the exchange amount, which is the amount of consideration established and agreed to by the Company and related parties. They are considered related party due to the following relationships to the Company:

  (a)

A private company controlled by directors or officers of the Company.

  (b)

A director or officer of the Company.

  (c)

An association of lawyers in which an officer of the Company is a member (resigned May 1, 2006).

The following table summarizes the Company’s related party transactions for the nine months ended September 30, 2007 and 2006.

Page 11 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

6. Related Party Transactions, continued

    Three Months Ended     Nine Months Ended  
    September 30     September 30  
    2007     2006     2007     2006  
                         
Services                        
Administration fee $  30,000   $  30,000   $  90,000   $  45,000  
Consulting $  32,672   $  24,791   $  91,329   $  53,491  
Directors' and officers' fees $  10,859   $  -   $  27,359   $  -  
General exploration $  -   $  -   $  -   $  4,306  
Investor relations $  3,574   $  1,700   $  25,212   $  20,700  
Professional fees                        
Accounting $  11,316   $  7,621   $  45,335   $  20,419  
Legal fees $  2,405   $  (1,446 ) $  9,918   $  12,308  
Wages and benefits $  55,871   $  10,192   $  159,551   $  27,734  
Cost recovery                        
Equipment $  3,567   $  1,690   $  4,177   $  1,690  
General exploration $  -   $  9   $  -   $  9  
Investor relations $  194   $  198   $  1,465   $  1,787  
Office and administration $  14,586   $  22,433   $  67,128   $  75,320  
Regulatory $  -   $  120   $  2,615   $  3,510  
Shareholders' communications $  1,016   $  547   $  1,016   $  547  
Share issue costs (1) $  -   $  4,804   $  1,170   $  12,010  
Travel and promotions $  3,713   $  759   $  11,145   $  8,190  
Mineral properties                        
Los Crestones (2) $  -   $  -   $  1,920   $  -  
Big Bar (2) $  -   $  3,750   $  3,900   $  11,250  
Uranium properites (2) $  7,500   $  18,750   $  46,751   $  51,567  
Duke Island (2) $  1,875   $  -   $  3,762   $  -  
MacArthur (2) $  20,625   $  9,375   $  41,883   $  28,032  

(1)

This amount has been capitalized and is included in share capital on the balance sheet

   
(2)

These amounts have been capitalized and are included in mineral properties on the balance sheet

   
(3)

Stock based compensation is not included in these related party transactions (See Note 7(h))

Page 12 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

7. Share Capital

  (a)

Authorized

     
 

The Company has unlimited authorized, without par value, common shares.

     
  (b)

Issued and Outstanding


      Number     Total     Contributed  
      of shares           Surplus  
  Balance as at December 31, 2005   65,522,200   $  15,172,975   $  1,013,998  
           Issued for cash:                  
                       Private placements   5,247,855     9,183,746     -  
                       Exercised share purchase warrants   3,814,281     1,907,141     -  
                       Exercised stock options   2,829,000     675,030     -  
           Total issued for cash   11,891,136     11,765,917     -  
           Issued for mineral property acquisitions   400,000     606,000     -  
           Issued for brokerage fees   291,484     510,097     -  
           Fair value of stock options exercised   -     349,445     (349,445 )
           Stock based compensation   -     -     3,045,004  
           Subtotal before share issue costs   12,582,620     13,231,459     2,695,559  
           Share issue costs   -     (543,376 )   -  
  Balance as at December 31, 2006   78,104,820     27,861,058     3,709,557  
           Issued for cash:                  
                       Exercised share purchase warrants   2,480,785     5,581,766     -  
                       Exercised stock options   1,080,000     941,710     -  
           Total issued for cash   3,560,785     6,523,476     -  
           Issued for mineral property acquisitions   450,000     1,201,000     -  
           Issued for services   15,847     45,000     -  
           Fair value of stock options exercised   -     546,660     (546,660 )
           Stock based compensation   -     -     6,123,013  
           Subtotal before share issue costs   4,026,632     8,316,136     5,576,353  
           Share issue costs   -     (6,316 )   -  
  Balance as at September 30, 2007   82,131,452   $  36,170,878   $  9,285,910  

Page 13 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

7. Share Capital, continued

  (c)

Private Placements

       
 

There were no private placements during the nine months ended September 30, 2007.

       
 

During the year ended December 31, 2006, the Company issued 5,247,855 units at a price of $1.75 per unit for gross proceeds of $9,183,746. Each unit consisted of one common share and one-half of one share purchase warrant, each whole warrant entitling the holder to purchase an additional common share at a price of $2.25 until expiry on June 21, 2008. The Company incurred net share issuance costs of $502,596, including 291,484 shares were issued for finders’ fees valued at $510,097.

       
  (d)

Shares Issued for Mineral Property

       
 

During the nine months ended September 30, 2007, the Company issued 450,000 common shares for value at $1,201,000.

       
  (i)

200,000 common shares value at $2.93 per share, $586,000 in total, pursuant to the terms of the uranium properties agreement (Note 5 (c)).

       
  (ii)

250,000 common shares value at $2.46 per share, $615,000 in total, pursuant to the acquisition of Yerington property agreement. These shares have been issued from treasury but have not been distributed. They will only be distributed when all terms of the Yerington property agreement have been met. (Note 5 (f)).

       
 

During the year ended December 31, 2006, the Company issued 400,000 common shares for value at $606,000.

       
  (iii)

200,000 common shares value at $1.50 per share, $300,000 in total, pursuant to the terms of the uranium properties agreement (Note 5 (c)).

       
  (iv)

200,000 common shares value at $1.53 per share, $306,000 in total, pursuant to the acquisition of three mineral concessions in Mexico (Note 5 (g)).

       
  (e)

Shares Issued for debt settlement for services

       
 

During the nine months ended September 30, 2007 15,847 shares were issued in settlement of $45,000 debt owed by the Company.

       
  (f)

Share Purchase Warrants

       
 

A summary of the Company’s share purchase warrant transactions for the nine months ended September 30, 2007 are as follows:


  Exercise Expiry   Balance   Warrants   Cancelled   Warrants   Balance  
    Price Date   Dec 31, 2006   Issued   or Expired   Exercised   Sept 30, 2007  
    $2.25 June 21, 2008   2,623,928   -   143,143   2,480,785   -  
  Weighted average exercise price   $2.25   $0.00   $0.00   $2.25   $0.00  

Page 14 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

7. Share Capital, continued

  (f) Share Purchase Warrants, continued

On July 20, 2007 notice was given to holders of the share purchase warrants exercisable at $2.25 with an expiry date of June 21, 2008, of an acceleration of the expiry date from June 21, 2008 to August 20, 2007. These warrants have now either been exercised or have expired.

A summary of the Company’s share purchase warrant transactions for the year ended December 31, 2006 are as follows:

  Exercise Expiry   Balance   Warrants   Cancelled   Warrants   Balance  
    Price Date   Dec. 31, 2005   Issued   or Expired   Exercised   Dec. 31, 2006  
                           
    $0.66 January 20, 2006   120,000   -   120,000   -   -  
    $0.50 September 27, 2007   3,250,000       -   3,250,000   -  
    $0.50 September 27, 2007   564,281       -   564,281   -  
    $2.25 June 21, 2008   -   2,623,928   -   -   2,623,928  
                           
        3,934,281   2,623,928   120,000   3,814,281   2,623,928  
                           
  Weighted average exercise price   $0.50   $2.25   $0.66   $0.50   $2.25  

  (g) Stock Options

As at September 30, 2007 and December 31, 2006, the Company had a stock option plan (the “Plan”), allowing for the reservation of common shares issuable under the Plan to a maximum 10% of the number of issued and outstanding common shares of the Company at any given time. The term of any stock option granted under the Plan may not exceed five years and the exercise price may not be less than the closing price of the Company’s shares on the last business day immediately preceding the date of grant, less any permitted discount. On an annual basis, the Plan requires approval by the Company’s shareholders and submission for regulatory review and acceptance.

The purpose of the Plan is to provide directors, officers, key employees and certain other persons who provided services to the Company and its subsidiaries with an increased incentive to contribute to the future success and prosperity of the Company.

Page 15 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

7. Share Capital, continued

  (g) Stock Options, continued

As at September 30, 2007, all outstanding options were vested and exercisable and 5,233,250 were vested and exercisable as at December 31, 2006.

Transactions for the nine months ended September 30, 2007 are as follows:

  Exercise Expiry   Balance   Options   Options   Options   Balance  
   Price Date   Dec 31, 2006   Granted   Cancelled/Expired   Exercised   Sept 30, 2007  
                           
     $0.12 January 10, 2008   937,000   -   -   93,000   844,000  
     $0.25 October 2, 2008   50,000   -   -   50,000   -  
     $0.34 December 8, 2008   90,000   -   -   -   90,000  
     $0.62 March 25, 2009   590,000   -   -   230,000   360,000  
     $0.35 August 9, 2010   850,000   -   -   267,000   583,000  
     $0.40 January 9, 2011   200,000   -   -   -   200,000  
     $1.04 March 27, 2011   125,000   -   -   -   125,000  
     $1.00 May 19, 2011   75,000   -   -   -   75,000  
     $1.12 June 12, 2011   100,000   -   -   -   100,000  
     $1.55 July 28, 2011   2,110,000   -   -   440,000   1,670,000  
     $1.55 August 23, 2011   100,000   -   -   -   100,000  
     $1.50 September 25, 2011   100,000   -   -   -   100,000  
     $2.05 December 18, 2011   100,000   -   -   -   100,000  
     $2.65 January 11, 2012   -   75,000   -   -   75,000  
     $2.70 February 21, 2012   -   25,000           25,000  
     $3.33 July 10, 2012   -   2,031,000           2,031,000  
     $3.33 August 7, 2012   -   80,000           80,000  
                           
        5,427,000   2,211,000   -   1,080,000   6,558,000  
                           
  Weighted average exercise price   $0.92   $3.30   $0.00   $0.87   $1.73  

Page 16 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

7. Share Capital, continued

  (g) Stock Options, continued

Transactions for the year ended December 31, 2006 are as follows:

  Exercise Expiry   Balance   Options   Options   Options   Balance  
    Price Date   Dec. 31, 2005    Granted    Cancelled/Expired   Exercised    Dec. 31, 2006    
                           
     $0.15 February 8, 2006   50,000   -   -   50,000   -  
     $0.15 May 7, 2006   55,000   -   -   55,000   -  
     $0.12 June 8, 2006   515,000   -   -   515,000   -  
     $0.19 September 27, 2006   490,000   -   -   490,000   -  
     $0.12 January 10, 2008   1,591,000   -   -   654,000   937,000  
     $0.25 October 2, 2008   75,000   -   -   25,000   50,000  
     $0.34 December 8, 2008   195,000   -   -   105,000   90,000  
     $0.65 March 2, 2009   100,000   -   100,000   -   -  
     $0.62 March 25, 2009   800,000   -   -   210,000   590,000  
     $0.35 August 9, 2010   1,575,000   -   -   725,000   850,000  
     $0.40 January 9, 2011   -   200,000   -   -   200,000  
     $1.04 March 27, 2011   -   125,000   -   -   125,000  
     $1.00 May 19, 2011   -   75,000   -   -   75,000  
     $1.12 June 12, 2011   -   100,000   -   -   100,000  
     $1.55 July 28, 2011   -   2,110,000   -   -   2,110,000  
     $1.55 August 23, 2011   -   100,000   -   -   100,000  
     $1.50 September 25, 2011   -   100,000   -   -   100,000  
     $2.05 December 18, 2011   -   100,000   -   -   100,000  
                           
        5,446,000   2,910,000   100,000   2,829,000   5,427,000  
                           
  Weighted average exercise price   $0.29   $1.44   $0.65   $0.24   $0.92  

  (h) Value Assigned to Stock Options

The fair value of stock options granted using the Black-Scholes option pricing model was calculated with the following weighted average assumptions:

    Sept 30, 2007   December 31, 2006     Sept 30, 2006  
               
  Risk-free interest rate 4.57%   4.02%   4.10%  
  Expected Share price volatility 151.79%   121.60%   120.97%  
  Expected option life in years 3.0   3.5   3.5  
  Expected dividend yield 0%   0%   0%  

Page 17 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

7. Share Capital, continued

  (h) Value Assigned to Stock Options

The total calculated fair value of options expensed during the nine months ended September 30, 2007 was $6,123,013 (2006: $2,164,630) and includes amounts calculated from options issued during the year ended December 31, 2006 but vesting during the nine months ended September 30, 2007.

This stock based compensation is included in the statement of operations as follows:

      September 30, 2007     September 30, 2006  
      Number of           Number of        
      Options     Stock-based     Options     Stock-based  
      issued      Compensation      issued     Compensation   
                           
  Consulting   1,115,000   $  3,047,297     1,065,000   $  872,733  
  Directors' and officers' fees   855,000     2,411,637     1,325,000     944,716  
  Wages and benefits   241,000     664,079     420,000     347,181  
                           
  Total   2,211,000   $  6,123,013     2,810,000   $  2,164,630  

8. Segmented Information

The Company‘s non-current assets are distributed by geographic location as follows:

          September 30, 2007                 December 31, 2006        
    Equipment     Mineral     Reclamation     Total     Equipment     Mineral     Reclamation     Total  
          Properties     Bond                 Properties     Bond        
                                                 
Canada $  25,051   $  -   $  -   $  25,051   $  24,997   $  -   $  -   $  24,997  
Mexico   61,598     4,054,509     -     4,116,107     25,488     2,785,632     -     2,811,120  
U.S.A.   55,657     12,128,239     129,291     12,313,187     1,089     5,070,200     79,898     5,151,187  
                                                 
  $  142,306   $ 16,182,748   $  129,291   $ 16,454,345   $  51,574   $ 7,855,832   $  79,898   $ 7,987,304  

Page 18 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

9. Supplemental Cash Flow Information.

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2007     2006     2007     2006  
                         
Cash Items                        
       Interest received $  53,101   $  26,149   $  212,318   $  55,800  
       Share issue costs $  756   $  -   $  6,316   $  45,443  
       Subscriptions receivable $  -   $  17,500   $  17,500   $  17,500  
Non-Cash Items                        
       Accrued interest $  1,104   $  -   $  (4,989 ) $  -  
       Investing Activity                        
               Mineral property costs included in Accounts payable $  247,153   $  -   $  247,153   $  -  
       Financing Activities                        
               Shares issued for services $  22,500   $  -   $  45,000   $  -  
               Shares issued for mineral properties $  1,201,000   $  300,000   $  1,201,000   $  300,000  
               Non-cash share issue costs $  -   $  -   $  -   $  3,072  

10. Subsequent Events

The following events occurred subsequent to period ended September 30, 2007:

  (a)

On October 9, 2007, 50,000 stock options were granted to consultants with an exercise price of $2.93 and an expiry date of October 9, 2012.

     
  (b)

On October 14, 2007, 5,000 stock options were cancelled. These had an exercise price of $3.33 and an expiry date of July 20, 2012.

     
  (c)

258,000 stock options were exercised at an average price of $0.46 per share for total funds of $118,780.

Page 19 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

11. Differences between Canadian and United States generally accepted accounting principles (GAAP)

  (a)

Differences in accounting principles

       
  (i)

Exploration expenditures

       
 

Under Canadian GAAP, acquisition costs of mineral interests and exploration expenditures are capitalized (Note 5).

       
 

Under US GAAP, exploration costs incurred in locating areas of potential mineralization are expensed as incurred. Commercial feasibility is established in compliance with SEC Industry Guide 7, which consists of identifying that part of a mineral deposit that could be economically and legally extracted or produced at the time of the reserve determination. After an area of interest has been assessed as commercially feasible, expenditures specific to the area of interest for further development are capitalized. In deciding when an area of interest is likely to be commercially feasible, management may consider, among other factors, the results of pre-feasibility studies, detailed analysis of drilling results, the supply and cost of required labour and equipment, and whether necessary mining and environmental permits can be obtained. To date no exploration expenses have been capitalized under US GAAP.

       
 

The Company has adopted EIFT 04-02 and separately reports the aggregate carrying amount of mineral rights. Mineral rights include an option for the Company to acquire the rights to extract and retain at least a portion of the benefits from the mineral deposits. Acquisition costs include cash and the fair market value of common shares for the mineral rights. These capitalized costs will be amortized over the estimated life of the property following commencement of commercial production or written off if the property is sold, allowed to lapse or abandoned, or when an impairment of value has occurred.

Page 20 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

11. Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

  (a)

Differences in accounting principles, continued

     
 

(ii)

 Reconciliation of total assets, liabilities and stockholders’ equity:

    September 30, 2007       December 30, 2006    
  Total assets per Canadian GAAP $  23,063,115   $  17,340,544  
  Exploration expenditures on resource properties   (10,630,103 )   (5,196,365 )
  expensed under US GAAP            
  Total assets per US GAAP $  12,433,012   $  12,144,179  
  Total liabilities per Canadian GAAP $  357,890   $  277,527  
  Adjustments to US GAAP   -     -  
  Total liabilities per US GAAP   357,890     277,527  
  Total equity per Canadian GAAP   22,705,225     17,063,017  
  Exploration expenditures on resource properties   (10,630,103 )   (5,196,365 )
  expensed under US GAAP            
  Total equity per US GAAP   12,075,122     11,866,652  
  Total Liabilities and equity per US GAAP $  12,433,012   $  12,144,179  

Page 21 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

11. Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

  (a)

Differences in accounting principles, continued

     
 

(iii)

 Reconciliation of net loss reported in Canadian GAAP and US GAAP:

      Three months ended Sept 30,     Nine months ended Sept 30,  
      2007     2006     2007     2006  
  Reconciliation of net loss from Canadian                        
  GAAP to US GAAP                        
  Loss for year per Canadian GAAP $  6,496,306   $  2,234,381   $  8,261,466   $  2,799,378  
  Exploration expenditures on mineral                        
  properties   2,397,415     835,195     5,433,738     1,795,869  
  Net loss for year per US GAAP   8,893,721     3,069,576     13,695,204     4,595,247  
  Deficit, Beginning of year per US GAAP   24,487,946     14,735,249     19,686,463     13,209,578  
  Deficit, End of year as per US GAAP $  33,381,667   $  17,804,825   $  33,381,667   $  17,804,825  
  Net loss per share for the year in                        
  accordance with Canadian GAAP $ 0.08   $ 0.03   $ 0.10   $ 0.01  
  Total differences $ 0.03   $ 0.01   $ 0.07   $ 0.06  
  Net loss per share for the year in                        
  accordance with US GAAP $ 0.11   $ 0.04   $ 0.17   $ 0.07  
  Weighted average number of common                        
  shares outstanding   79,428,158     71,852,481     78,871,925     68,033,632  

Page 22 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

11. Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

  (a)

Differences in accounting principles, continued

     
 

(iv)

 Reconciliation of cash flows reported in Canadian GAAP and US GAAP:

      Nine months ended  
      Sept 30, 2007     Sept 30, 2006  
               
  Cash used in operating activities            
  in accordance with Canadian GAAP $  (2,353,899 ) $ (936,584 )
  Adjustments to net loss involving use of cash            
               Write-off of expenditures on mineral interest   (5,433,738 )   (1,795,869 )
               
  Cash used in operating activities            
  in accordance with US GAAP   (7,787,637 )   (2,732,453 )
               
  Cash used in investing activities            
  in accordance with Canadian GAAP   (7,085,717 )   (2,162,811 )
  Reclassification of expenditures on mineral property interest   5,433,738     1,795,869  
               
  Cash used in investing activities            
  in accordance with US GAAP   (1,651,979 )   (366,942 )
               
  Cash used in Financing Activities            
  in accordance with Candian and US GAAP   6,534,660     2,515,608  
               
  Increase in cash during the period            
  in accordance with Candian and US GAAP   (2,904,956 )   (583,787 )
  Cash, beginning of period            
  in accordance with Candian and US GAAP   9,112,732     1,786,298  
               
  Cash, end of period            
  in accordance with Candian and US GAAP $  6,207,776   $ 1,202,511  
               
  Cash consists of the following            
             Cash and cash equivalents   6,108,486     1,202,511  
             Restricted cash   99,290     -  
               
  Cash, end of period            
  in accordance with Candian and US GAAP $  6,207,776   $ 1,202,511  

Page 23 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

11. Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

   (b) Recent accounting pronouncements
       

(i)

In December 2004, FASB issued Statement No. 123 (revised 2004), Share-Based Payment (“SFAS 123(R)”), which requires the measurement and recognition of compensation expense for all stock-based compensation payments and supersedes the Company’s current accounting under APB 25. SFAS 123(R) is effective for all annual periods beginning after June 15, 2005. In March 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to the adoption of SFAS 123(R). This standard will not have an impact on the Company’s financial statements as it already applies the fair value method of accounting for its stock options.

   

(ii)

FAS 153, Exchanges of Non-Monetary Assets. The provisions of this statement are effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for non-monetary asset exchanges occurring in fiscal periods beginning after December 16, 2004. The provisions of this statement should be applied prospectively. There is no impact on the Company’s financial statements.

   

(iii)

FIN 46(R), Consolidation of Variable Interest Entities, applies at different dates to different types of enterprises and entities, and special provisions apply to enterprises that have fully or partially applied Interpretation 46, or Interpretation 46 (R) is required in financial statements of public entities that have interests in variable interest entities or potential variable interest entities commonly referred to as special- purpose entities for periods ending after December 15, 2003. Application by public entities is required in financial statements for periods other than special-purpose entities and by non-public entities to all types of entities is required at various dates in 2004 and 2005. In some instances, enterprises have the option of applying or continuing to apply Interpretation 46 for a short period of time before applying Interpretation 46(R). There is no impact on the Company’s financial statements.

   

(iv)

SFAS 154, Accounting Changes and Error Corrections. This new standard replaces APB Opinion No. 20, Accounting Changes, and FASB 3, Reporting Accounting Changes in Interim Financial Statements. Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived non-financial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a "restatement." The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005. There is no impact on the Company’s financial statements.

Page 24 of 25



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2007 and 2006 (Canadian Dollars)

11. Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

  (b)

Recent accounting pronouncements, continued

       
  (vii)

SFAS 157, Fair Value Measurements. The provisions of this standard are to provide guidance for using fair value to measure assets and liabilities. The standard clarifies methods for measuring items not actively traded and the principles that fair value should be based upon when pricing an asset or liability. The provisions of Statement 157 are effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year. There is no impact on the Company’s financial statements.

       
  (viii)

On July 13, 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109. Interpretation 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with Statement 109 and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Additionally, Interpretation 48 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Interpretation 48 is effective for fiscal years beginning after December 15, 2006, with early adoption permitted. The Company is currently evaluating whether the adoption of Interpretation 48 will have a material effect on its consolidated financial position, results of operations or cash flows.

Page 25 of 25


EX-99.10 11 exhibit99-10.htm MD&A FOR THE PERIOD ENDED SEPTEMBER 30, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.10

1100 – 1199 West Hastings Street,
Vancouver, BC, V6E 3T5
Tel: 604-684-9384 Fax: 604-688-4670
www.quaterraresources.com

Management’s Discussion and Analysis

In respect to the Nine months ended September 30, 2007

Dated: November 7, 2007

Index Page  
   
A - Introduction 1
B - Qualified person 1
C - Exchange information and conversion tables 2
D - Description of business 3
E - Description of mineral properties 3 - 7
F - Mineral property expenditure 8 - 9
G - Results of operations 10 - 11
H - Quarterly results 12
I - Related party information 12
J - Financial conditions, liquidity and capital resources 13 - 15
K - Outstanding shares, options and share purchase warrants 15 - 16
L - Subsequent events and outlook 17
M - Off balance sheet 17
N - Managements responsibility for financial information 17 - 18
O - Risks and uncertainties 18 - 19
P - Licenses and permits 19
Q - Whistleblower policy 19
R - Forward looking statements 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

A. Introduction

The following Management Discussion and Analysis (“MD&A”) of the operating results and financial condition of Quaterra Resources Inc. (the “Company”) compares results for the nine months ended September 30, 2007 (“Q3 2007”) to the nine months ended September 30, 2006 (“Q3 2006”). These statements should be read in conjunction with the financial statements for the nine months ended September 30, 2007 and the audited financial statements for the year ended December 31, 2006. All notes referenced herein may be found in the consolidated financial statements dated September 30, 2007.

The financial statements were prepared in accordance with Canadian generally accepted accounting principles. This MD&A, dated as of November 7, 2007, was prepared to conform to National Instrument 51-102 F1 and was approved by the Board of Directors prior to release.

The Company is a reporting issuer in British Columbia and Alberta and its shares trade on the Tier 2 Board of the TSX Venture Exchange (“TSX.V”) under the symbol QTA.

The Company’s reporting currency is the Canadian dollar and all dollar amounts are in Canadian dollars, unless otherwise indicated.

Certain forward-looking statements are discussed in the MD&A with respect to the Company’s activities and future financial results. These are subject to significant risks and uncertainties that may cause projected results or events to differ materially from actual results or events.

Additional information relating to the Company, including detailed drill results previously disclosed in news releases, is available on SEDAR at www.sedar.com. Terms of property option agreements are described more fully in the notes to the consolidated financial statements.

B. Qualified Person

Dr. Thomas C. Patton, P. Geo., the President and Chief Executive Officer of the Company, is the qualified person responsible for the preparation of the technical information included in this MD&A. Dr. Patton graduated from the University of Washington in 1971 (Ph.D.) and has worked with both junior and senior mining companies. His exploration efforts have concentrated on North America and have resulted in several significant discoveries and led to the expansion of mineral reserves at existing operations. He served as the President and Chief Operating Officer for Western Silver Corporation from January 1998 to May, 2006. Previously, Dr. Patton held senior positions with Rio Tinto PLC and Kennecott Corporation. Dr. Patton is a member of the Society of Economic Geologists and the American Institute of Mining & Metallurgical Engineers.

Eugene Spiering joined the company on January 10, 2006 as Vice President of Exploration. Mr. Spiering has over 28 years of experience in the mining exploration industry. He most recently held the position of Vice President, Exploration at Rio Narcea Mines Ltd., where he managed a team that discovered two gold deposits and completed the final definition of one nickel deposit in Spain. All three of these deposits are currently in production. Prior to his tenure at Rio Narcea, Mr. Spiering held the position of senior geologist with Energy Fuels Nuclear, Inc. where his responsibilities included uranium exploration in northern Arizona and gold exploration in western US and Venezuela. He received his Bachelor of Science-Geology degree from the University of Utah. Mr. Spiering is a member of the Society of Economic Geologists, the Australasian Institute of Mining and Metallurgy and the American Association of Petroleum Geologists.

Page 1 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

C. Exchange information and conversion tables.

For ease of reference, the following information is provided:

 Canadian Dollars per U.S. Dollar    
  Quarter 3   Quarter 2   Quarter 1   December 31,  
  Sept 30, 2007   June 30, 2007   March 31, 2007   2006   2005  
                     
Rate at end of period 0.99290   1.05930   1.15590   1.16640   1.16600  
Average rate for period 1.04719   1.10031   1.17207   1.13461   1.21173  
High for period 1.08680   1.15960   1.18730   1.17960   1.27320  
Low for period 0.99140   1.04610   1.14980   1.09260   1.14240  
                     
  www.oanda.com     

Conversion Table  
             Imperial         Metric  
             
1 Acre =   0.404686   Hectares  
1 Foot =   0.304800   Metres  
1 Mile =   1.609344   Kilometres  
1 Ton =   0.907185   Tonnes  
1 Ounce (troy)/ton =   34.285700   Grams/Tonne  
             
Information from www.onlineconversion.com  

 Precious metal units and conversion factors     
                                   
ppb - Part per billion   1   ppb   =   0.0010   ppm   =   0.000030   oz/t  
ppm - Part per million   100   ppb   =   0.1000   ppm   =   0.002920   oz/t  
oz - Ounce (troy)   10,000   ppb   =   10.0000   ppm   =   0.291670   oz/t  
oz/t - Ounce per ton (avdp.)   1   ppm   =   1.0000   ug/g   =   1.000000   g/tonne  
g - Gram                                  
g/tonne - gram per metric ton   1   oz/t   =   34.2857   ppm              
mg - milligram   1   Carat   =   41.6660   mg/g              
kg - kilogram   1   ton (avdp.)   =   907.1848   kg              
ug - microgram   1   oz (troy)   =   31.1035   g              
                                   
Information from www.onlineconversion.com  

Page 2 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

D. Description of Business

The Company acquires and explores mineral properties in the Americas. It is currently exploring for base and precious metals in Mexico and Alaska, uranium in Arizona, and copper in Nevada.

E. Description of Mineral Properties

i) Nieves Property – Mexico

The Company initiated a 5,000-meter drilling program during September to infill mineralized zones on the Concordia-San Gregorio- Delores vein system and to test other targets on the large land block. At the end of September, three holes totaling 762 meters had been completed.

By September 30, 2007, the Company had incurred $1,308,488 for acquisition costs and $2,617,017 ($712,467 net of recovery) for exploration expenditures giving a total of $3,925,465 in gross costs on the Nieves property, or $2,020,915 net of the recovery of $1,904,550 (US $1.5 million) from Blackberry. As at December 31, 2006, the Company had incurred $1,244,464 for acquisition costs and $2,560,841 ($656,291 net of recovery) for exploration expenditures giving a total of $3,805,305 in gross costs on the Nieves property, or $1,900,755 net of the recovery of $1,904,550 (US $1.5 million) from Blackberry. (Note 5 (a) in the consolidated financial statements dated September 30, 2007)

ii) Los Crestones Project – Mexico

The Company completed a six-hole, 3,043-meter core drilling program at its 100%-owned Crestones property in Durango State, Mexico during the second quarter. The first drill-holes of the program did not intersect the targeted breccia feeder vents. Assay results for the first five holes, contain a few low-grade intercepts within the hydrothermal breccia. Weakly disseminated sphalerite-galena-sulfosalts occur in silicified limestone, quartz porphyry, and hornfels. The silica breccia commonly contains minor to 5% disseminated pyrite-marcasite and minor to 5% stibnite. The mixed clast and silicified limestone breccias contain disseminated pyrite-marcasite and minor sphalerite-galena. Coarse sphalerite-galena has been observed in fault gouges.

Alteration and mineralization at Los Crestones appear to intensify to the southwest. Subsequent field mapping has identified a series of flat-dipping detachment faults that have offset the outcropping geology an estimated 500 meters to the northeast. The postulated location for the breccia feeder vent(s), based on mapping and drill sections, is southwest of the outcropping breccias in a flat area covered with a thin layer of post-mineral arroyo sediment.

Seven additional holes totalling 3,120 meters were completed during the period June-September 2007. Assays are pending.

Acquisition costs incurred to September 30, 2007 were $78,097 and exploration expenditures were $1,281,360 for a total of $1,359,457. Acquisition costs incurred to December 31, 2006 were $71,696 and exploration expenditures were $462,590 for a total of $534,286. (Note 5 in the consolidated financial statements dated September 30, 2007)

Page 3 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

E. Description of Mineral Properties, continued

iii) Uranium Project – Arizona, Utah and Wyoming

The Arizona Strip remains the focus of the Company’s uranium exploration program. Quaterra drilled a total 10,400 feet during the quarter in 6 deep holes investigating Target A01 and four of the first stratigraphic holes to examine geophysical Target A51 located approximately 2 miles to the west of A01. Data from the stratigraphic drilling at A51 is as yet inconclusive but the deep holes at Target A01 continue to be encouraging.

The A01 Target is the first of more than 200 moderate to high priority anomalies identified by the airborne VTEM geophysical program completed during the first quarter of the year. The drilling program has defined favorable alteration in the Hermit section, anomalous sulfide mineralization in the Kaibab Formation, dissolution of evaporites, breccia and anomalous mineralization in both the underlying Toroweap and Coconino Formations, and a pronounced structure at Kaibab/Toroweap contact; all indicative of the proximity of a breccia pipe structure.

Although a pipe throat has not yet been encountered in the favorable Hermit siltstone horizon, the last hole, A01-20 encountered anomalous mineralization (more than 3 times background) throughout the brecciated Toroweap section and more than 100 feet of strongly to partially altered Hermit siltstone at a position interpreted to be immediately adjacent to a pipe. At least two additional deep holes will be drilled to test A01 in the next quarter.

Acquisition costs incurred to September 30, 2007 were $2,949,254 and exploration expenditures were $3,056,801 for a total of $6,006,055. Acquisition costs incurred to December 31, 2006 were $1,125,438 and exploration expenditures were $1,079,859 for a total of $2,205,297. (Note 5 in the consolidated financial statements dated September 30, 2007)

iv) Alaskan Properties

Duke Island – Alaska

Quaterra has signed a contract with Fugro Airborne Surveys Inc. to conduct an airborne HeliGEOTEM® (time domain electromagnetic) and magnetic geophysical survey on the Company’s Duke Island Ni sulfide project located 30 kilometers south of Ketchikan, Alaska. Weather permitting, the program is scheduled to commence in mid November. The survey is planned to cover approximately 50 square kilometers with a 388 line kilometer survey using a line spacing of 150 meters. The Fugro system will look for conductors more than four times deeper than earlier frequency domain EM surveys of the project and will focus in an area that has been interpreted as having the potential to contain higher sulfide concentrations and better metal grades than previously identified on the property.

Acquisition costs incurred to September 30, 2007 were $129,276 and exploration expenditures were $1,642,067 for a total of $1,771,343. Acquisition costs incurred to December 31, 2006 were $112,285 and exploration expenditures were $1,625,551 for a total of $1,737,836. (Note 5 in the consolidated financial statements dated September 30, 2007)

Page 4 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

E. Description of Mineral Properties, continued

iv) Alaskan Properties, continued

Seward Peninsula – Big Bar, VMS Project – Alaska

No exploration work has been conducted on the Company’s Big Bar project during the quarter. Acquisition costs incurred to September 30, 2007 were $18,461 and exploration expenditures were $727,594 for a total of $746,055. Acquisition costs incurred to December 31, 2006 were $18,461 and exploration expenditures were $712,113 for a total of $730,574. (Note 5 (e) in the consolidated financial statements dated September 30, 2007)

v) MacArthur Property – Nevada

Exploration drilling is in progress at the Company’s MacArthur copper project near Yerington, Nevada to test the copper oxide mineralization in and around the MacArthur pit, and to systematically explore on a 500 foot grid spacing for acid soluble chalcocite/oxide mineralization north and west of the existing pit boundary. A total of approximately 12,800 feet have been drilled in 22 copper oxide holes and 16 chalcocite exploration holes.

The program has confirmed and expanded an area of shallow, partially oxidized chalcocite mineralization 1,000 feet north and west of the MacArthur copper oxide pit. Assay data from 11 drill holes in the chalcocite zone show mineralization averaging 0.23% total copper (TCu) over an average thickness of 96 feet along a strike length of approximately 3,500 feet and a width of 1,000 feet. These broad intercepts include narrower zones of higher grade mineralization of up to 0.74% TCu (See table 1). The chalcocite zone is open in all directions with the strongest mineralization to the northwest and to the south, where it is expected drilling will fill in the sparsely drilled area just north of the pit. Intrusive rocks above the chalcocite zone locally show oxide copper grades in the 0.2% to 0.3% TCu range. Additionally, twin-drilling in the MacArthur pit has encountered some chalcocite mineralization beneath the oxide mineralization; assays are pending.

MacArthur Copper Project – Chalcocite Zone. Drill Hole intercepts – September 28, 2007 – Table 1

       Drill   Angle     From     To     Thickness     Total  
       Hole   Brg / Dip     Feet     Feet     Feet     Cu %  
                               
QMCC-1   0 0 / -90 0     119.0     149.0     30.0     0.20%  
          179.0     204.0     25.0     0.14%  
          224.0     264.0     40.0     0.54%  
          289.0     303.6     14.6     0.36%  
                               
QMCC-2   0 0 / -90 0     34.0     115.3     81.3     0.21%  
          127.0     222.7     95.7     0.24%  
          320.0     339.0     19.0     0.17%  
          351.2     416.8     65.6     0.18%  

Page 5 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

E. Description of Mineral Properties, continued

v) MacArthur Property – Nevada, continued

MacArthur Copper Project – Chalcocite Zone.
Drill Hole intercepts – September 28, 2007 – Table 1, continued

Drill   Angle     From     To     Thickness     Total  
Hole   Brg / Dip     Feet     Feet     Feet     Cu %  
                               
QMCC-3   0 0 / -90 0     107.0     334.0     227.0     0.22%  
including         286.0     334.0     48.0     0.41%  
          399.1     416.8     17.7     0.21%  
                               
QMCC-4   0 0 / -90 0     42.1     87.0     44.9     0.23%  
including         72.0     87.0     15.0     0.39%  
                               
QMCC-5   0 0 / -90 0     154.0     217.6     63.6     0.17%  
                               
QMCC-6   0 0 / -90 0     88.3     98.3     10.0     0.15%  
                               
QMCC-7   0 0 / -90 0     5.0     23.0     18.0     0.15%  
          89.0     134.0     45.0     0.19%  
          239.0     275.1     36.1     0.42%  
                               
QMCC-8   0 0 / -90 0     304.0     314.0     10.0     0.14%  
                               
QMCC-9   0 0 / -90 0     142.4     152.5     10.1     0.12%  
          254.0     264.0     10.0     0.14%  
                               
QMCC-10   0 0 / -90 0     95.5     144.0     48.5     0.44%  
including         119.0     144.0     25.0     0.74%  
          159.0     199.0     40.0     0.20%  
                               
QMCC-11   0 0 / -90 0     94.0     194.0     100.0     0.16%  
including         145.0     158.7     13.7     0.25%  

Five core holes drilled in the MacArthur pit to twin historical rotary percussion holes and provide RQD and density data all show continuous copper oxide mineralization starting at the surface (See table 2). Grades include 245 feet of 0.29% TCu in hole QMT-2 starting at the surface; 145 feet of 0.22% TCu in hole QMT-1 starting at the surface; and 46.3 feet of 0.50% TCu in hole QMT-4 starting at 37.7 feet. The Company is planning to twin an additional 15 holes with reverse circulation drilling to evaluate and confirm assays from the historical drilling.

Page 6 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

E. Description of Mineral Properties, continued

v) MacArthur Property – Nevada, continued

MacArthur Copper Project – Copper Oxide Zone. Drill Hole intercepts – September 28, 2007 – Table 2

       Drill   Angle     From     To     Thickness      Total   
       Hole   Brg / Dip     Feet     Feet     Feet     Cu %  
                               
QMT-1   0 0 / -90 0     0.0     145.0     145.0     0.22%  
including         50.0     120.0     70.0     0.31%  
          170.0     210.0     40.0     0.15%  
                               
QMT-2   210 0 / -55 0     0.0     245.0     245.0     0.29%  
including         40.0     170.0     130.0     0.38%  
                               
QMT-3   0 0 / -90 0     0.0     120.0     120.0     0.24%  
          220.0     275.0     55.0     0.19%  
                               
QMT-4   0 0 / -90 0     37.7     84.0     46.3     0.50%  
          110.5     174.0     63.5     0.17%  
          186.7     228.7     42.0     0.22%  
          274.0     304.3     30.3     0.31%  
                               
QMT-5   195 0 / -57 0     36.8     112.0     75.2     0.15%  
          182.0     206.0     24.0     0.21%  

Acid soluble copper mineralization at MacArthur occurs as chrysocolla, copper wad (neotocite), pitch limonite, residual chalcocite and minor malachite and azurite, all hosted in medium grained, biotite, quartz monzonite. Quaterra's drilling, mapping and data compilation has shown this mineralization open on all sides.

Acquisition costs incurred to September 30, 2007 were $482,657 and exploration expenditures were $1,308,807 for a total of $1,791,464. Acquisition costs incurred to December 31, 2006 were $170,324 and exploration expenditures were $80,591 for a total of $250,915. (Note 5 in the consolidated financial statements dated September 30, 2007). A payment of $350,000 for the purchase of the PIT claims will be deducted from the final payment due to North Exploration LLC for the McArthur properties. (Note 5 of the consolidated financial statements dated September 30, 2007)

vi) Other properties

Other properties of the Company include various properties in the USA, and Mexico. See Note 5 (g) in the consolidated financial statements dated September 30, 2007.

Page 7 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

F. Mineral Property Expenditures

All mineral property expenditures, detailed by property, can be found in Note 5 of the consolidated financial statements dated September 30, 2007. The deferred mineral property costs as at September 30, 2007, were as follows:

All Mineral Properties Year End       Additions       Change   Balance  
  Balance               During   as at  
  Dec 31, 2006   Q1   Q2   Q3   2007   June 30, 2007  
  $    $    $    $    $    $   
                         
Summary by Expenditure                        
     Total acquisitions 3,197,586   1,041,068   301,971   2,332,471   3,675,510   6,873,096  
     Total exploration 6,562,796   1,043,512   1,885,961   1,721,933   4,651,406   11,214,202  
     Less: cost recovery, Nieves (1,904,550 ) -   -   -   -   (1,904,550 )
                         
Total 7,855,832   2,084,580   2,187,932   4,054,404   8,326,916   16,182,748  
                         
Summary by Property                        
     Nieves, net of cost recovery 1,900,755   17,112   14,846   88,202   120,160   2,020,915  
     Los Crestones 534,286   238,345   238,812   348,014   825,171   1,359,457  
     Uranium properties 2,205,297   1,351,275   976,688   1,472,795   3,800,758   6,006,055  
     Alaskan Properties 2,468,410   3,083   13,877   32,028   48,988   2,517,398  
     MacArthur 250,915   236,526   589,274   714,749   1,540,549   1,791,464  
     Yerington -   12,306   143,512   778,326   934,144   934,144  
     Other properties 496,169   225,933   210,923   620,290   1,057,146   1,553,315  
                         
Total 7,855,832   2,084,580   2,187,932   4,054,404   8,326,916   16,182,748  

The total mineral properties expenditure of $18,087,298, which excludes $1,904,550 recovered from Blackberry, as at September 30, 2007 was allocated as follows; 34% on Uranium properties, 21% on Nieves, 14% on both the Alaskan properties (10% on Duke Island and 4% on Big Bar) and various other properties, 10% MacArthur, and 7% on Los Crestones..

Page 8 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

F. Mineral Property Expenditures, continued

Total deferred mineral property costs for the year ended December 31, 2006 are as follows:

All Mineral Properties Year End       Additions       Change   Year End  
  Balance                   During   Balance  
  Dec 31, 2005   Q1   Q2   Q3   Q4   2006   Dec 31, 2006  
  $    $    $    $    $    $    $   
                             
Summary by Expenditure                            
     Total acquisitions 1,547,235   122,047   119,813   664,638   743,853   1,650,351   3,197,586  
     Total exploration 4,114,198   389,555   566,387   651,262   841,394   2,448,598   6,562,796  
     Less: cost recovery, Nieves (1,904,550 ) -   -   -   -   -   (1,904,550 )
                             
Total 3,756,883   511,602   686,200   1,315,900   1,585,247   4,098,949   7,855,832  
                             
Summary by Property                            
     Nieves, net of cost recovery 1,640,415   203,847   31,237   6,107   19,149   260,340   1,900,755  
     Los Crestones 79,416   3,703   86,140   89,951   275,076   454,870   534,286  
     Uranium properties 273,968   275,097   330,409   610,034   715,789   1,931,329   2,205,297  
     Alsakan Properties 1,732,600   14,228   176,143   450,461   94,978   735,810   2,468,410  
     MacArthur 30,484   14,727   62,271   110,848   32,585   220,431   250,915  
     Other properties -   -   -   48,499   447,670   496,169   496,169  
                             
Total 3,756,883   511,602   686,200   1,315,900   1,585,247   4,098,949   7,855,832  

The total mineral properties expenditure of $9,760,382, which excludes $1,904,550 recovered from Blackberry, as at December 31, 2006 was allocated as follows; 38% was spent on Nieves, 23% on Uranium properties, 25% on the Alaskan properties (8% on Duke Island and 7% on Big Bar), 6% on Los Crestones, 5% on other properties and 3% on MacArthur.

For further information on mineral properties expenditure see Note 5 of the consolidated financial statements dated September 30, 2007

Page 9 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

G. Results of Operations

For the nine months ended September 30, 2007, (“Q3 2007”) the Company had a net loss of $8,261,466 compared to a net loss of $2,799,378 for the nine months ended September 30, 2006 (“Q3 2006”). Stock based compensation was $6,123,013 for Q3 2007 (Q3 2006: $2,164,630) as stock options were granted and recognized. Removing the stock based compensation results in a net loss of $2,138,453 for Q3 2007 and $634,748 for Q3 2006.

The increase of $1,503,705, in the net loss for Q3 2007, excluding stock based compensation can be explained as follows:

  i)

Administration costs increased by $45,000 from $45,000 for Q3 2006 to $90,000 for Q3 2007. This is due to an increase in these fees from $5,000 to $10,000 per month.

     
  ii)

Amortization costs increased by $26,002 from $5,027 for Q3 2006 to $31,029 for Q3 2007. This is due to the purchase of equipment and the depreciation of these assets.

     
  iii)

Consulting services increased by $198,534 from $83,158 for Q3 2006 to $281,692 for Q3 2007. This is due to the increased activity in respect to the day to day running of the Company and the commissioning of consultants for exploration purposes.

     
  iv)

Director and officer fees were $36,308 for Q3 2007 compared to no fees in Q3 2006. These fees are due to the new company policy of providing compensation for independent directors.

     
  v)

Investor relation costs increased by $85,040 from $92,010 for Q3 2006 to $177,050 for Q3 2007. This is due to the fees paid during Q3 2007 to O & M Partners to provide investor relations as well as the attendance by the Company at several trade shows and the upgrade of the promotional booth and literature for these conferences.

     
  vi)

Office and general expenses increased by $7,185 from $131,431 for Q3 2006 to $138,616 for Q3 2007. This is due to the increased activity in respect to the day to day running of the Company.

     
  vii)

Professional fees increased by $114,393 from $80,685 for Q3 2006 to $195,078 for Q3 2007. This is due to increased legal, accounting and auditing expenses due to the increased activity of the Company.

     
  viii)

Regulatory fees increased by $34,899 from $18,566 for Q3 2006 to $53,465 for Q3 2007. This is due to increased in TSX.V filing fees for a publicly listed company, which is based on the issued and outstanding share capital and a timing difference in the payment of these fees.

Page 10 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

G. Results of Operations, continued

  ix)

Shareholders communications expenses increased by $76,244 from $12,507 for Q3 2006 to $88,751 for Q3 2007. This is almost exclusively due to the production and distribution of the Annual General Meeting (“AGM”) brochure in 2007. The AGM material, as per the Company’s regulatory requirements, was distributed and in 2007 the material used was of a higher production quality and distributed to a larger group than in 2006.

     
  x)

Travel and promotion costs increased by $88,986 from $41,862 for Q3 2006 to $130,848 for Q3 2007. This is due to the increased travel of a VP exploration as well as increased travel by other consultants to inspect potential new properties. There was also an increase in travel for trade shows, and meetings with analysts and other prominent industry experts.

     
  xi)

Salaries and benefits costs increased by $141,359 from $30,683 for Q3 2006 compared to $172,042 for Q3 2007. This increase is due to the new salary payments to the President of the Company.

     
  xii)

Interest income increased by $151,401 from $55,928 for Q3 2006 to $207,329 for Q3 2007. This is due to considerably larger cash amounts being held in fixed term deposits.

     
  xiii)

The Company reported a net foreign currency loss of $733,832 for Q3 2007 compared to a loss $36,198 for Q3 2006.

     
 

Since all current assets and liabilities held in US dollars as at September 30, 2007 have to be converted to Canadian dollars on consolidation at the prevailing exchange, being 0.9929, this created an exchange loss due to a weakening US dollar compared to the Canadian dollar. The Company held US dollar cash amounts, on average, of approximately US $5 million during Q3 2007 which was not the case in Q3 2006 when the average cash held was approximately US $1.3 million.

     
 

This foreign exchange loss reflects the Company’s US cash position and that the US dollar has fallen from Cdn$1.12 at June 30, 2006 to Cdn$0.9929 at September 30, 2007.

     
 

It is important to note that the majority of transactions for the Company are in US dollars and, to a lesser extent, Mexican Pesos, and therefore foreign exchange fluctuations can result in increases or decreases in these expenditures when translated to Canadian dollars.

     
  ivx)

General exploration costs increased by $50,670 from $147,215 for Q3 2006 to $197,885 for Q3 2007. This is due to an increase in the consideration of potential new properties.

     
  vx)

A write off of liability of $46,392 occurred during Q3 2006.

Page 11 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

H. Quarterly Results

The following financial data was derived from the Company’s consolidated financial statements for the current and eight previous quarters:

  Sept 30,   June 30,   March 31   Dec 31,   Sept. 30,   June 30,   March 31,   Dec, 31   Sept. 30,  
  2007   2007   2007   2006   2006   2006   2006   2005   2005  
  $    $    $    $    $    $    $    $    $   
                                     
Operating expenses 405,391   549,223   459,451   211,786   202,843   209,825   140,987   134,585   116,018  
Interest earned (54,205 ) (62,770 ) (90,354 ) (30,060 ) (26,277 ) (19,267 ) (10,384 ) (22,641 ) (3,622 )
Other income -   -   -   -   -   -   -   (25,000 ) -  
Foreign exchange (gain) loss 242,974   413,887   76,971   (115,647 ) 29,136   4,450   2,612   81,907   66,191  
General exploration 67,843   57,241   72,801   78,640   53,067   85,237   8,911   2,441   -  
                                     
Loss before the undernoted 662,003   957,581   518,869   144,719   258,769   280,245   142,126   171,292   178,587  
                                     
Stock-based compensation 5,834,303   15,555   273,155   880,374   1,982,373   114,500   67,757   (129,373 ) 460,215  
Write off of reclamation bond -   -   -   -   -   -   -   2,500   -  
Accrued liabilities written off -   -   -   6,063   (6,761 ) (23,831 ) (15,800 ) -   -  
                                     
Net Loss 6,496,306   973,136   792,024   1,031,156   2,234,381   370,914   194,083   44,419   638,802  
                                     
Loss per share - basic and diluted 0.08   0.01   0.01   0.01   0.03   0.01   0.00   0.01   0.01  

I. Related Party Information.

The Company is party to an agreement dated January 1, 2007 with its President, Thomas C Patton., for Mr. Patton to provide services in the capacity of President for $12,500 per month giving an annual remuneration of $150,000.

The Company is party to an agreement dated January 1, 2006 with its Vice-President of Exploration, Eugene Spiering, for Mr. Spiering to provide services in the capacity of Vice-President of Exploration for $12,500 per month giving an annual remuneration of $150,000.

The Company is party to an agreement dated March 27, 2006 with its Chief Financial Officer, Scott Hean, for Mr. Hean to provide services in the capacity of CFO for $2,500 for the first six months of service and $3,250 per month thereafter.

The Company, commencing August 22, 2006, compensates its independent directors with an annual fee of $9,000, $375 per meeting attended and any other reasonable meeting fees. The Company uses the definition of “independent” from MI 52-110 where to be independent the director must not have a direct or indirect material relationship with the Company other than that of director.

Private companies controlled by a director and an officer provided management, administration and corporate development services to the Company. These services were provided in the normal course of operations for consideration established and accepted by the Company and related parties, which management believes was reasonable under the circumstances. For information regarding related party expenditures, refer to Note 6 of the consolidated financial statements dated September 30, 2007.

Page 12 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

J. Financial Conditions, Liquidity and Capital Resources

The Company has limited financial resources and finances its operations by raising capital in the equity markets. For the near future, the Company will need to rely on the sale of such securities and/or enter into joint venture agreements with third parties to provide working capital and to finance its mineral property acquisition and exploration activities. Since the Company does not generate any revenue from operations, its long-term profitability will be directly related to the success of its mineral property acquisition and exploration activities.

The Company had a working capital balance of $6,250,880 as at September 30, 2007, compared to a working capital balance of $9,075,713 as at December 31, 2006 and $1,304,394 as at September 30, 2006.

i) Equity financings

Nine months ended September 30, 2007

There were no equity financings during the nine months ended September 30, 2006

Year ended December 30, 2006

During the year ended December 31, 2006, the Company issued 5,247,855 units at a price of $1.75 per unit for gross proceeds of $9,183,746. Each unit consisted of one common share and one-half of one share purchase warrant, each whole warrant entitling the holder to purchase an additional common share at a price of $2.25 until expiry on June 21, 2008 (accelerated to August 20, 2007 see Note 7 (f) of the consolidated financial statements dated September 30, 2007). The Company incurred net share issuance costs of $502,596, including 291,484 shares were issued for finders’ fees valued at $510,097.

ii) Funds raised by Stock options and share purchase warrants

Nine months ended September 30, 2007

During the three months ended September 30, 2007, 2,600,785 common shares were issued for gross proceeds of $5,698,766 from shares issued for the exercise of stock options and share purchase warrants.

During the three months ended June 30, 2007, 825,000 common shares were issued for gross proceeds of $740,950 from shares issued for the exercise of stock options and share purchase warrants.

During the three months ended March 31, 2007, 135,000 common shares were issued for gross proceeds of $83,760 from shares issued for the exercise of stock options.

Year ended December 31, 2006

During the year ended December 31, 2006 6,643,281 common shares were issued for gross proceeds of $2,582,171 from shares issued for the exercise of stock options and share purchase warrants.

Page 13 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

J. Financial Conditions, Liquidity and Capital Resources, continued

iii) Exploration expenditures

Nine months ended September 30, 2007

During the three months ended September 30, 2007, the Company spent $2,606,251 mineral property costs, (excluding $1,201,000 in respect to shares issued for acquisition costs and $247,153 accrued for exploration accounts payable) of which $1,131,471 was spent on acquisition costs and $1,474,780 on exploration.

During the three months ended June 30, 2007, the Company spent $2,145,815 mineral property costs, (excluding $42,117 accrued for exploration accounts payable) of which $301,971 was spent on acquisition costs and $1,843,844 on exploration.

During the three months ended March 31, 2007, the Company spent $1,845,860 mineral property costs, (excluding $238,720 accrued for exploration accounts payable) of which $1,041,068 was spent on acquisition costs and $804,792 on exploration.

Year ended December 31, 2006

During the year ended December 31, 2006, the Company spent $3,335,212 mineral property costs, (excluding shares issued for acquisition costs and amounts accrued for exploration accounts payable) of which $1,044,352 was spent on acquisition costs and $2,290,860 on exploration.

iv) Commitments

Over the next two years, pursuant to the terms of its option agreements and amendments thereto, the Company has the following expenditure commitments to maintain the properties and earn its interests:

  1.

The Company is required to make payments for the Uranium properties.

  a.

US $40,000 on or before August 10, 2008.

  b.

US $75,000 on or before September 6, 2008.

  c.

US $135,000 on or before September 6, 2009.

       
  2.

The Company is required to make either of the following payment options for MacArthur Claim.

  a.

Options 1

 

US $1,675,000 on or before January 15, 2008.

  b.

Options 2

 

US $100,000 on or before January 15, 2008. US $125,000 on or before January 15, 2009.

Page 14 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

J. Financial Conditions, Liquidity and Capital Resources, continued

iv) Commitments

  3

The Company is required to make the following payments for the Tintic mining claims.

  a.

US $20,000 on or before February 15, 2008.

  b.

US $20,000 on or before February 15, 2009.

  c.

US $275,000 on or before August 29, 2008

  d.

US $275,000 on or before August 29, 2009

       
  4

The Company has the following potential payments for the other properties.

  a.

US $50,000 on or before March 28, 2008.

  b.

US $60,000 on or before March 28, 2009.


v) Outstanding stock options and share purchase warrants

As at November 7, 2007, 6,345,000 stock options are “in the money” (the exercise price is less than the current share trading price) and all are exercisable. If they were exercised, the Company would realize proceeds of $11,363,580.

K. Outstanding Shares, Options and Share Purchase Warrants

i) Issued and outstanding shares

The Company has unlimited authorized, without par value, common shares.

    Number of shares     Total  
             
Balance as at September 30, 2007   82,131,452   $ 36,170,878  
Issued subsequent to quarter-end            
          Exercise of stock options   258,000   $ 118,780  
             
Balance as at November 7, 2007   82,389,452   $ 36,289,658  

ii) Share Purchase Warrants

As at September 30, 2007, there were no share purchase warrants outstanding.

Page 15 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

K. Outstanding Shares, Options and Share Purchase Warrants, continued

iii) Stock Options

As at September 30, 2007, there were 6,558,000 stock options outstanding with a weighted average exercise price of $1.73 per share. Options currently outstanding are as follows:

Exercise Expiry   Balance   Granted   Cancelled   Exercised   Balance  
Price Date   Sept 30, 2007       or Expired       Nov 7, 2007  
                         
$0.12 January 10, 2008   844,000   -   -   69,000   775,000  
$0.34 December 8, 2008   90,000   -   -   20,000   70,000  
$0.62 March 25, 2009   360,000   -   -   165,000   195,000  
$0.35 August 9, 2010   583,000   -   -   4,000   579,000  
$0.40 January 9, 2011   200,000   -   -   -   200,000  
$1.04 March 27, 2011   125,000   -   -   -   125,000  
$1.00 May 19, 2011   75,000   -   -   -   75,000  
$1.12 June 12, 2011   100,000   -   -   -   100,000  
$1.55 July 28, 2011   1,670,000   -   -   -   1,670,000  
$1.55 August 23, 2011   100,000   -   -   -   100,000  
$1.50 September 25, 2011   100,000   -   -   -   100,000  
$2.05 December 18, 2011   100,000   -   -   -   100,000  
$2.65 January 11, 2012   75,000   -   -   -   75,000  
$2.70 February 21, 2012   25,000   -   -   -   25,000  
$3.33 July 20, 2012   2,031,000   -   5,000   -   2,026,000  
$3.33 August 7, 2012   80,000   -   -   -   80,000  
$2.93 October 9, 2012   -   50,000   -   -   50,000  
                         
      6,558,000   50,000   5,000   258,000   6,345,000  
                         
Weighted average exercise price   $1.73   $2.93   $3.33   $0.46   $1.77  

The following events occurred subsequent to the year end September 30, 2007.

(i)

On October 9, 2007, 50,000 stock options were granted to consultants with an exercise price of $2.93 and an expiry date of October 9, 2012.

   
(ii)

On October 14, 2007, 5,000 stock options were cancelled. These had an exercise price of $3.33 and an expiry date of July 20, 2012.

   
(iii)

258,000 stock options were exercised at an average price of $0.46 per share for total funds of $118,780.

Page 16 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

M. Off Balance Sheet

The Company did not enter into any off balance sheet transactions or commitments as defined by National Instrument 51 - 102.

N. Management’s Responsibility for Financial Information

Preparing financial statements requires management to make estimates and assumptions that affect the reported results. The estimates are based on historical experience and other assumptions that are believed to be reasonable under the circumstances. Critical accounting policies were disclosed in the annual audited financial statements.

Consistent with accepted policies of the Canadian junior mining industry, the Company capitalizes exploration expenditures. This decision, and the timing of the possible recognition of impairment in the mineral property value, can materially affect the reported earnings of the Company.

Management has prepared the information and representations in this annual report. The financial statements have been prepared to conform to generally accepted accounting principles in Canada and, where appropriate, reflect management's best estimates and judgment. The financial information presented throughout this report is consistent with the data presented in the financial statements.

The Company maintains adequate systems of internal accounting and administrative controls. These systems were designed to provide reasonable assurance that relevant and reliable financial information is produced. The independent auditors have the responsibility of auditing the annual financial statements and expressing an opinion on them.

The Board of Directors, through its Audit Committee, is responsible for ensuring that management fulfils its responsibilities for financial reporting and internal control. The Audit Committee is composed of four directors, who meet at least quarterly with management and, at least annually with the external auditors to review accounting, internal control, financial reporting, and audit matters.

Certification of Interim Filing

Based on their knowledge, the President and Chief Financial Officer of the Company have reviewed the interim filing and certified that the interim consolidated financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows. The President and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the Company, and they believe:

Page 17 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

N. Management’s Responsibility for Financial Information, continued

  (i)

the disclosure controls and procedures provide reasonable assurance that material information relating to the Company, including its consolidated subsidiary, are made known to them, particularly during the period in which the annual filings are being prepared; and

     
  (ii)

the internal control over financial reporting provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Canadian generally accepted accounting principles.

Due to the small size of the Company, there is a lack of segregation of duties which is an internal control weakness. Management mitigates this risk through direct involvement of senior management in day-to-day operations. It is unlikely that this weakness can be properly addressed until the Company grows to a significant size. During the nine months ended September 30, 2007, there are no changes in the Company’s internal control over financial reporting that occurred that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

O. Risks and Uncertainties

The principal business of the Company is the exploration and development of mineral properties. Given the nature of the mining business, the limited extent of the Company's assets and the present stage of development, the following risk factors, among others, should be considered.

The Company does not hold any known mineral reserves of any kind and does not generate any revenues from production. The Company’s success will depend largely upon its ability to locate commercially productive mineral reserves. Mineral exploration is highly speculative in nature, involves many risks and frequently is non-productive. There is no assurance that our exploration efforts will be successful. Success in establishing reserves is a result of a number of factors, including the quality of management, the level of geological and technical expertise, the quality of land available for exploration as well as various other factors.

Once mineralization is discovered, it may take several years in the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish proven and probable reserves through drilling and bulk sampling, to determine the optimal metallurgical process to extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities. Because of these uncertainties, no assurance can be given that our exploration programs will result in the establishment or expansion of resources or reserves.

Page 18 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

O. Risks and Uncertainties, continued

Since the Company does not generate any revenues, it may not have sufficient financial resources to undertake by itself all of its planned mineral property acquisition and exploration activities. Operations will continue to be financed primarily through the sale of securities such as common shares. The Company will need to continue its reliance on the sale of such securities for future financing, which may result in dilution to existing shareholders. Furthermore, the amount of additional funds required may not be available under favorable terms, if at all, and will depend largely on the acquisition and exploration activities pursued.

The ability to attract capital to the Company is dependent on movements in commodity prices. Commodity prices fluctuate on a daily basis and they are affected by a number of factors beyond the control of the Company. If, because of a sustained decline in prices, financing were not available to meet cash operating costs, the feasibility of continuing operations would be evaluated and if warranted, would be discontinued.

The resource industry is intensively competitive in all of its phases, and the Company competes with many other companies possessing much greater financial and technical resources. Competition is particularly intense with respect to the acquisition of desirable undeveloped properties. The principal competitive factors in the acquisition of prospective properties include the staff and data necessary to identify and investigate such properties, and the financial resources necessary to acquire and develop the projects. Competition could adversely affect the Company’s ability to acquire suitable prospects for exploration.

P. Licenses and Permits

The operations of the Company require licenses and permits from various government authorities. The Company believes that it holds all necessary licenses and permits under applicable laws and regulations for work in progress and believes it is presently complying in all material respects with the terms of such licenses and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that the Company will be able to obtain or maintain all necessary licenses and permits that may be required to explore and develop its properties, commence construction or operation of mining facilities or to maintain continued operations that economically justify the cost.

Q. Whistleblower Policy

Effective June 30, 2005, the audit committee adopted resolutions that authorized the establishment of procedures for complaints received regarding accounting, internal controls or auditing matters, and for a confidential, anonymous submission procedure for employees who have concerns regarding questionable accounting or auditing matters. The implementation of the whistleblower policy is in accordance with new requirements pursuant to Multilateral Instrument 52-110 Audit Committees, National Policy 58-201 Corporate Governance Guidelines and National Instrument 58-101 Disclosure of Corporate Governance Practices

Page 19 of 20



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Nine months ended September 30, 2007

R. Forward-Looking Statements

Some of the statements contained in this MD&A are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur.

Forward-looking statements may be identified by such terms as “believes”, “anticipates”, “expects”, “estimates”, “may”, “could”, “would”, “will”, or “plan”. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties.

Actual results relating to, among other things, results of exploration, reclamation, capital costs, and the Company’s financial condition and prospects, could differ materially from those currently anticipated in such statements for many reasons such as; changes in general economic conditions and conditions in the financial markets; changes in demand and prices for the minerals the Company expects to produce;, litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; technological and operational difficulties encountered in connection with the Company’s activities; and changing foreign exchange rates and other matters discussed in this MD&A. This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on the Company’s forward-looking statements. Further information regarding these and other factors, which may cause results to differ materially from those projected in forward-looking statements, are included in the filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time by the Company or on its behalf, except in accordance with applicable securities.

Page 20 of 20


EX-99.11 12 exhibit99-11.htm SECOND QUARTER REPORT FOR THE PERIOD ENDED JUNE 30, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.11

1100 – 1199 West Hastings Street,
Vancouver, BC, V6E 3T5
Tel: 604-684-9384 Fax: 604-688-4670
www.quaterraresources.com

Interim Consolidated Financial Statements
For the Six months ended June 30, 2007 and 2006

Index Page
Consolidated Financial Statements  
             Consolidated Balance Sheets          1
             Consolidated Statements of Operations and Deficit          2
             Consolidated Statements of Cash Flows          3
             Notes to the Consolidated Financial Statements          4-24

Notice of No Auditor Review of Interim Statements

These interim consolidated financial statements of the Company for the six months ended June 30, 2007, were prepared by management and have not been reviewed or audited by the Company’s auditors.



Quaterra Resources Inc. (An Exploration Stage Company)
Consolidated Balance Sheets as at June 30, 2007 and December 31, 2006 (Canadian Dollars)

        Unaudited     Audited  
        June 30, 2007     December 31, 2006  
                 
Assets                
Current                
Cash and cash equivalents     $  4,211,970   $  9,112,732  
Restricted cash   Note 3   106,630     -  
Receivables       97,208     56,592  
Prepaid and deposits       72,501     70,486  
Amount due from Joint Venture Partner   Note 5 (a)   69,987     113,430  
                 
        4,558,296     9,353,240  
                 
Equipment   Note 4   94,085     51,574  
Mineral properties   Note 5   12,128,344     7,855,832  
Reclamation bonds       125,628     79,898  
                 
      $  16,906,353   $  17,340,544  
                 
Liabilities                
Current                
Accounts payable and accrued liabilities     $  443,927   $  251,311  
Due to related parties   Note 6   16,709     26,216  
                 
        460,636     277,527  
                 
Shareholders' Equity                
Share capital   Note 7 (b)   29,162,216     27,861,058  
Subscriptions receivable       -     (17,500 )
Contributed surplus   Note 7 (b)   3,538,759     3,709,557  
Deficit       (16,255,258 )   (14,490,098 )
                 
        16,445,717     17,063,017  
                 
      $  16,906,353   $  17,340,544  

Basis of Presentation (Note 2)
Subsequent events (Note 10)

Approved on behalf of the Board of Directors:

  Thomas Patton Robert Gayton

The interim consolidated financial statements and accompanying notes contained herein have not been reviewed by the Company’s auditors
Page 1 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Consolidated Statement of Operations and Deficit for the six months ended June 30, 2007 and
2006. (Canadian Dollars)

        Three months ended     Six months ended  
        June 30, 2007     June 30, 2006     June 30, 2007     June 30, 2006  
                             
Expenses                            
     Administration     $  30,000   $  15,000   $  60,000   $  30,000  
     Amortization       9,357     173     17,186     173  
     Consulting                            
               Services       100,495     22,784     172,320     44,758  
               Stock based compensation   Note 7 (h)   15,555     83,456     263,404     83,456  
     Directors and officers fees                            
               Services       5,250     -     16,500     -  
               Stock based compensation   Note 7 (h)   -     485     25,306     68,192  
     Investor relations       86,520     53,561     150,585     77,187  
     Office and general       50,972     35,028     96,822     72,434  
     Professional fees       95,933     29,800     171,717     47,446  
     Regulatory fees and taxes       10,904     8,020     49,087     8,736  
     Shareholders communications       48,259     6,963     50,333     8,460  
     Transfer agent       4,314     6,096     13,298     8,242  
     Travel and promotion       40,947     23,400     94,917     35,053  
     Wages and benefits                            
               Salaries and benefits       66,272     8,950     115,909     18,323  
               Stock based compensation   Note 7 (h)   -     30,609     -     30,609  
                             
        564,778     324,325     1,297,384     533,069  
                             
Other (income) expenses                            
     Interest       (62,770 )   (19,267 )   (153,124 )   (29,651 )
     Foreign exchange loss       413,887     4,450     490,858     7,062  
     General exploration       57,241     85,237     130,042     94,148  
     Write off of accrued liabilities       -     (23,831 )   -     (39,631 )
                             
        408,358     46,589     467,776     31,928  
                             
Net loss for the period       973,136     370,914     1,765,160     564,997  
                             
Deficit, beginning of the period       15,282,122     10,853,647     14,490,098     10,659,564  
                             
Deficit, end of period     $  16,255,258   $  11,224,561   $  16,255,258   $  11,224,561  
                             
Loss per share - basic and diluted     $  0.01   $  0.01   $  0.02   $  0.01  
                             
Weighted average number of shares outstanding       78,489,259     69,031,981     78,262,284     66,439,100  

The interim consolidated financial statements and accompanying notes contained herein have not been reviewed by the Company’s auditors
Page 2 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006.
(Canadian Dollars)

        Three months ended     Six months ended  
        June 30, 2007     June 30, 2006     June 30, 2007     June 30, 2006  
                             
Operating Activities                            
                             
Net loss for the period     $  (973,136 ) $  (370,914 ) $  (1,765,160 ) $  (564,997 )
                             
Items not involving cash                            
               Stock based compensation   Note 7 (h)   15,555     114,550     288,710     182,257  
               Amortization       9,357     173     17,186     173  
               Foreign exchange       -     1,591     -     1,537  
               Write off of accrued liabilities       -     (23,831 )   -     (39,631 )
               Shares issued for services       22,500     -     22,500     -  
                             
Operating Cash Flow       (925,724 )   (278,431 )   (1,436,764 )   (420,661 )
                             
Changes in Non-Cash Working Capital                            
     Accounts receivables       (1,663 )   6,431     (40,616 )   (22,489 )
     Prepaid and deposits       36,033     (47,274 )   (2,015 )   (47,274 )
     Accounts payable and accrued liabilities       64,920     (301,828 )   150,499     (140,931 )
     Due to related parties       (49,862 )   (458 )   (9,507 )   8,504  
                             
        49,428     (343,129 )   98,361     (202,190 )
                             
Cash Used in Operating Activities       (876,296 )   (621,560 )   (1,338,403 )   (622,851 )
                             
Investing Activities                            
     Expenditures on mineral properties       (2,145,815 )   (685,116 )   (4,230,395 )   (1,195,587 )
     Due from Joint Venture partner       59,566     313,755     43,443     120,390  
     Purchase of equipment       (26,926 )   (2,918 )   (59,697 )   (1,526 )
     Purchase of relcamation bonds       (24,096 )   -     (45,730 )   -  
                             
Cash used in Investment Activities       (2,137,271 )   (374,279 )   (4,292,379 )   (1,076,723 )
                             
Financing Activities                            
     Shares issued for cash, net       740,842     2,226,414     836,650     2,400,408  
                             
Increase in Cash During the Period       (2,272,725 )   1,230,575     (4,794,132 )   700,834  
Cash, Beginning of Period       6,591,325     1,256,557     9,112,732     1,786,298  
                             
Cash, End of Period     $  4,318,600   $  2,487,132   $  4,318,600   $  2,487,132  
                             
Cash consists of the following                            
                             
     Cash and cash equivalents       4,211,970     2,487,132     4,211,970     2,487,132  
     Restricted cash       106,630     -     106,630     -  
                             
Cash, End of Period     $  4,318,600   $  2,487,132   $  4,318,600   $  2,487,132  

Supplemental cash flow information (Note 9)

The interim consolidated financial statements and accompanying notes contained herein have not been reviewed by the Company’s auditors
Page 3 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

1. Nature of Operations

Quaterra Resources Inc. (the “Company”) is an exploration stage enterprise incorporated under the laws of British Columbia. The Company and its subsidiaries are engaged in the acquisition, exploration and development of precious metal properties and does not have any mineral properties in production. The Company has not determined whether these mineral properties contain ore reserves that are economically recoverable. The ability of the Company to meet its commitments as they become due, including completion of the acquisition, exploration and development of its mineral properties, is dependent on the Company’s ability to obtain the necessary financing. The Company’s shares trade on the Tier 2 Board of the TSX Venture Exchange (“TSX-V”) under the symbol QTA.

2. Basis of Presentation and Consolidation

The consolidated unaudited interim financial statements of the Company were prepared in accordance with Canadian generally accepted accounting principles for interim financial statements. As a result, these unaudited interim financial statements do not contain all of the information required for annual financial statements and they should be read in conjunction with the Company’s annual audited financial statements for the fiscal year ended December 31, 2006. All material adjustments, which, in the opinion of management, are necessary for a fair presentation of the results of the interim periods, have been reflected. The results for the six months ended June 30, 2007 are stated utilizing the same accounting policies and methods of application as the most recent annual financial statements, but are not necessarily indicative of the results to be expected for the full year. The Company’s reporting currency is the Canadian dollar and all dollar amounts in these statements are in Canadian dollars, unless otherwise indicated. Certain of the prior periods’ comparative figures have been reclassified to conform to the presentation adopted in the current period.

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, as follows:

  (i)

Minera Agua Tierra S.A. de C.V., incorporated in Mexico;

  (ii)

Quaterra Alaska, Inc., incorporated in Alaska, USA;

  (iii)

Quaterra International Limited, incorporated in the British Virgin Islands;

  (iv)

QTA International Nieves Limited, incorporated in the British Virgin Islands; and

  (v)

Minera Nieves S.A. de C.V., incorporated in Mexico.

All intercompany accounts and transactions were eliminated upon consolidation.

3. Restricted Cash

Restricted cash of $106,630 (US $100,000) is an amount held in escrow in respect to the Company’s agreement dated June 27, 2007 to, under certain conditions, acquire the assets of Arimetco Inc., a Nevada corporation, in the Yerington Mining District, Lyon County, Nevada (see Note 5(g) for further details of this agreement).

Page 4 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

4. Equipment

Equipment is carried at cost less accumulated amortization. Details of equipment are as follows:

    June 30, 2007     Dec 31, 2006  
    Costs     Accumulated     Net Book     Net Book  
          Amortization     Value     Value  
                         
Vehicles $ 51,358   $ (25,420 ) $ 25,938   $ 29,078  
Equipment   42,694     (12,219 )   30,475     1,234  
Computer   23,249     (3,705 )   19,544     1,843  
Software   32,262     (14,134 )   18,128     19,419  
                         
  $ 149,563   $ (55,478 ) $ 94,085   $ 51,574  

5. Mineral Properties

The Company has interests in several mineral properties in Mexico, and the US including Alaska, Nevada, Arizona, Utah and Wyoming. The total deferred exploration and acquisition costs as at June 30, 2007 are as follows:

Period ended June 30, 2007 Nieves   Los   Uranium   Duke   Big   MacArthur   Other   Total  
      Crestones    Properties    Island   Bar       Properties      
  $    $    $    $    $    $    $    $   
                                 
Acquisitions 1,258,901   76,673   1,832,004   112,285   18,461   424,565   817,736   4,540,625  
Advances -   4,103   100,302   -   -   (11,003 ) (337 ) 93,065  
Air support -   -   4,664   -   111,795   -   3,255   119,714  
Amortization 20,406   -   -   -   -   -   -   20,406  
Assays and surveys 71,967   30,943   29,578   8,773   9,636   2,675   48,379   201,951  
Camp costs 12,751   27,073   69,920   541   47,567   17,996   16,560   192,408  
Drilling services 1,429,838   416,318   875,825   658,448   155,807   338,071   -   3,874,307  
Equipment rental and maintenance 3,885   12,183   3,085   37,960   15,453   10,957   532   84,055  
Exploration and other 156,561   13,025   36,111   10,120   30,918   9,068   11,821   267,624  
Field supplies and wages 130,861   191,575   22,354   56,485   110,816   38,037   34,927   585,055  
Geological services 381,067   81,428   1,169,989   753,683   153,300   134,542   107,298   2,781,307  
Project management 308,842   102,890   288,146   73,936   31,033   83,984   29,621   918,452  
Reclamation expenses -   -   1,485   -   -   -   -   1,485  
Travel and related costs 49,487   18,200   66,719   37,230   17,413   17,133   11,728   217,910  
Vehicle expenses 12,697   37,032   33,078   365   33,345   10,690   7,323   134,530  
Recovery from Blackberry (1,904,550 ) -   -   -   -   -   -   (1,904,550 )
                                 
Total 1,932,713   1,011,443   4,533,260   1,749,826   735,544   1,076,715   1,088,843   12,128,344  

Page 5 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

5. Mineral Properties, continued

The total capitalized deferred exploration and acquisition costs as at December 31, 2006 were as follows:

Period ended December 31, 2006 Nieves   Los   Uranium   Duke   Big   MacArthur   Other   Total  
      Crestones    Properties    Island   Bar       Properties      
  $    $    $    $    $    $    $    $   
                                 
Acquisitions 1,244,464   71,696   1,125,438   112,285   18,461   170,324   454,918   3,197,586  
Advances 308   4,103   66,344   -   -   -   -   70,755  
Air support -   -   4,664   -   111,795   -   -   116,459  
Amortization 20,406   -   -   -   -   -   -   20,406  
Assays and surveys 71,146   17,430   17,611   7,930   9,636   -   8,927   132,680  
Camp costs 11,313   17,811   25,160   34   47,567   -   620   102,505  
Drilling services 1,429,838   144,665   277,846   658,448   105,264   -   -   2,616,061  
Equipment rental and maintenance 3,885   12,065   3,085   37,740   15,453   6,732   -   78,960  
Exploration and other 148,103   6,289   28,980   10,057   81,462   441   5,856   281,188  
Field supplies and wages 129,641   132,322   13,135   55,504   110,816   18,833   1,007   461,258  
Geological services 376,868   43,486   402,867   747,741   152,229   19,776   19,197   1,762,164  
Project management 308,347   55,258   178,824   72,049   27,133   29,093   -   670,704  
Travel and related costs 48,322   10,778   58,709   36,044   17,413   5,142   5,076   181,484  
Vehicle expenses 12,664   18,383   2,634   4   33,345   574   568   68,172  
Recovery from Blackberry (1,904,550 ) -   -   -   -   -   -   (1,904,550 )
                                 
Total 1,900,755   534,286   2,205,297   1,737,836   730,574   250,915   496,169   7,855,832  

(a)           Nieves Concessions, Mexico

The Company holds a 50% interest in 15 mineral concessions located in northern Zacatecas, Mexico, (the Nieves Concessions) and two inlaying fractions within the Nieves Concessions (Delores and Nazarene), collectively called Nieves.

The Company acquired an option on the property pursuant to an Assignment made March 26, 1999 of the Underlying Agreement by Western Silver Corporation (“Western”), a company with common directors and officers, to the Company.

To acquire its interest, the Company issued 1,444,460 common shares to Western valued at $288,892, issued 360,000 common shares to the concessionaires valued at $72,000 and in accordance with the terms of the Underlying Agreement made scheduled option payments to the concession holders, totalling US $70,000 over three years. In addition, to acquire the interest in the claim fractions the Company paid US $40,000 to the concessionaires. Commencing January 26, 2004, an annual advance minimum royalty payment (“AMR”) of US $75,000 is due to the concession holders until the commencement of commercial production.

Page 6 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

5. Mineral Properties, continued

  (a)

Nieves Concessions, Mexico, continued

       
 

The Nieves concessions are subject to a maximum 3% net smelter return royalty (“NSR”) to the original concession holders, which the Company may purchase at any time for US $2 million. In addition, Kennecott Exploration Company, the optionor in the initial Underlying Agreement, retains NSR royalties of 2% on certain core claims and 1% on certain peripheral claims.

       
 

Funds in the amount of US $1,500,000 (C $1,904,550) were advanced to the Company pursuant to the terms of an agreement made April 10, 2003 with Blackberry Ventures I, LLC (“Blackberry”), a US-based investment partnership, whereby Blackberry could earn a 50% interest in the Nieves silver property in Mexico or the Duke Island property in Alaska by providing advance funding to the Company to fund exploration expenditures.

       
 

The agreement with Blackberry stipulated that once all monies received from the advances had been incurred on exploration expenditures, Blackberry effectively exercised its option and earned a 50% interest in the Nieves property. In August 2005, the parties formed a joint venture to proceed with exploration on the property. As at June 30, 2007, Blackberry owed the Company $69,987 (2006: $113,430) for its share of joint venture exploration expenditures that have been made on the property.

       
  (b)

Los Crestones Property, Mexico

       
 

The Company holds a 100% interest in a mineral concession located in northern Durango, Mexico. In April 2004, the Company issued 25,000 common shares valued at $15,000, to an individual as a finder’s fee for his role in the identification and acquisition of the property.

       
  (c)

Uranium Properties, Arizona, Utah and Wyoming

       
 

In an agreement made effective June 22, 2005 with North Exploration LLC, a Nevada limited Corporation, the Company acquired an option to purchase mining claims situated in Arizona, Utah and Wyoming. To exercise the option, the Company is required to make staged payments totalling US $500,000 over five years and to issue 600,000 common shares over three years, as follows: TSX.V regulatory approval for this agreement was received on September 6, 2005.

       
  (i)

US $15,000 and issue 200,000 common shares on or before September 6, 2005 (Paid and issued).

  (ii)

US $25,000 and issue 200,000 common shares on or before September 6, 2006 (Paid and issued).

  (iii)

US $50,000 and issue 200,000 common shares on or before September 6, 2007.

  (iv)

US $75,000 on or before September 6, 2008.

  (v)

US $135,000 on or before September 6, 2009.

  (vi)

US $200,000 on or before September 6, 2010.

       
 

If the Company meets the above terms and conditions and elects to exercise the option, then the property may be purchased with a further payment of US $100. The agreement is subject to a 2% NSR payable upon commencement of commercial production, which the Company may reduce to 1% by purchase for US $1 million.

Page 7 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

5. Mineral Properties, continued

  (c) Uranium Properties, Arizona, Utah and Wyoming, continued
     

In two separate agreements made effective August 10, 2006 and March 23, 2007 with Nustar Exploration LLC, the Company acquired options to earn 100% interests in unpatented mining claims covering breccia pipe targets located on the Arizona Strip.

   

Under the agreement dated August 10, 2006 the Company optioned four blocks of claims with commitments as follows:

   

 

   

 (i)

Initial payments of US $20,000 (Paid).

   

 (ii)

US $30,000 on or before August 10, 2007 (Paid).

   

 (iii)

US $40,000 on or before August 10, 2008.

   

 (iv)

US $100,000 on or before August 10, 2009.

   

 

 

Each of the option blocks is subject to a 4% yellowcake royalty, 3% of which may be bought back by the Company for US $500,000 per claim block.

Under the agreement dated March 23 2007, the Company purchased a block of unpatented claims for a price of US $25,500 and a US $100,000 minimum advance royalty payment. If production occurs, the claims are subject to a 4% yellowcake royalty, 3% of which may be bought back by the Company for US $1,000,000 per breccia pipe.

   

  (d)

Duke Island Property, Alaska

   

The Company has a 100% interest in 140 mining claims in Alaska (129 federal claims and 11 state claims) on Duke Island, which is near Ketchikan.

   

  (e)

Big Bar Property, Alaska

   

The Company has a 100% interest in Big Bar project, which consists of seven state mining claims on the Seward Peninsula, approximately 45 kilometers (110 miles) northeast of Nome, Alaska.

   

  (f)

MacArthur Claim

   

 

Pursuant to an agreement made October 2005 with North Exploration LLC, the Company acquired the right to earn an interest in 66 unpatented mining claims covering the former MacArthur copper- oxide mine, in the Yerington district of Lyon County, Nevada. To earn a 100% interest, subject to a 2% NSR, the Company is required to make staged payments totaling US $1,785,000 by January 15, 2008 as follows:

     
    Option 1

 

(i)

US $10,000 upon execution (Paid).

 

(ii)

US $25,000 on or before January 15, 2006 (Paid).

 

(iii)

US $75,000 on or before January 15, 2007 (Paid).

 

(iv)

US $1,675,000 on or before January 15, 2008.

   

 

 

Alternatively, since the Company has met its obligation of US $100,000 in stage payments by January 15, 2007, and if the Company incurs US $500,000 in exploration expenditures by January 15, 2008, then the Company may elect to acquire the property by making additional payments totaling US $2,645,000 as follows:

Page 8 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

5. Mineral Properties, continued

  (f)

MacArthur Claim, continued

       
 

Option 2

  (i)

US $100,000 on or before January 15, 2008.

  (ii)

US $125,000 on or before January 15, 2009.

  (iii)

US $2,420,000 on or before January 15, 2010.

       
 

The property is subject to a 2% NSR, 1% of which the Company may purchase for US $1 million.

       
 

Under an amendment dated January 17, 2007 to the original agreement made October 2005 between the Company and North Exploration LLC a US $350,000 deduction will be made from the final payments, (option one originally US $1,675,000 or option two originally US $2,420,000) as the Company has paid this amount to Charles Gary Clifton in advance.

       
  (g)

Other Properties

       
 

Other properties include various properties in USA and Mexico.

       
 

Pursuant to an agreement made December 2006 with Tom Turner, the Company acquired a 100% interest in three mineral concessions located in Mexico for consideration of 200,000 shares with a deemed value of $1.53 per share for a total of $306,000 (Note 5 (d)).

       
 

Pursuant to an option agreement made March 28 2007, the Company may acquire a 100% interest in certain prospect permits. The potential payments for this agreement are as follows:

       
  (i)

Initial payment of US $50,000. (Paid)

  (ii)

US $50,000 on or before March 28, 2008.

  (iii)

US $60,000 on or before March 28, 2009

  (iiii)

US $70,000 on or before March 28, 2010

  (iv)

US $150,000 on or before March 28, 2011

  (iii)

US $220,000 on or before March 28, 2012

       
 

The option agreements for the Arc and Brown Claims, in the Skeena Mining District were terminated in accordance with their terms and the 100% interest reverted back to the Company.

       
 

The Company has agreed to acquire all the assets of Arimetco Inc., a Nevada corporation, in the Yerington Mining District, Lyon County, Nevada. This transaction is subject to a 180 day review period (starting July 13, 2007) and the Company may terminate this process if dissatisfied with the condition of the property or fails to obtain requested environmental clearances for past mining-related activities. Under certain circumstances, the review period may be extended for a further 120 days (See note 3).

Page 9 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

5. Mineral Properties, continued

  (g)

Other Properties, continued

       
 

On receiving regulatory approval and providing that properties pass the review process the Company’s commitments would be as follows:

       
  (ii)

Payment of US $500,000.

  (ii)

250,000 common shares.

       
 

Under this acquisition, the property is subject to a 2% net smelter return royalty capped at US $7.5 million on production from any claims owned by Quaterra in the Yerington and MacArthur mine areas.

       
  (h)

Title to Mineral Properties

       
 

Title to mineral properties may be affected by unregistered prior agreements or transfers, as well as undetected defects. Although the Company has verified title to its mineral properties in accordance with standard industry practices applicable for the current stage of exploration, these procedures do not guarantee the Company’s interests in its mineral properties.

       
  (i)

Environmental Expenditures

       
 

The operations of the Company may, in the future, be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company's policy is to meet or, if possible, surpass standards set by relevant legislation, by application of technically proven and economically feasible measures.

       
 

Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. Estimated future removal and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.


6. Related Party Transactions

As at June 30, 2007, $16,709 (December 31, 2006: $26,216) was due to directors or senior officers of the Company or to companies controlled by them, for various services rendered.

The following table summarizes the Company’s related party transactions for the six months ended June 30, 2007 and 2006.

Page 10 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

6. Related Party Transactions, continued

    Three Months Ended     Six Months Ended  
    June 30     June 30        
    2007     2006     2007     2006  
                         
Services                        
Administration fee $  30,000   $  15,000   $  60,000   $ 30,000  
Consulting $  31,495   $  10,080   $  58,657   $ 28,700  
Directors' and officers' fees $  5,250   $  -   $  16,500   $ -  
General exploration $  -   $  2,282   $  -   $ 4,297  
Investor relations $  7,645   $  6,160   $  21,638   $ 19,000  
Professional fees                        
Accounting $  15,430   $  (6,356 ) $  34,019   $ 12,798  
Legal fees $  3,211   $  9,489   $  7,513   $ 13,754  
Wages and benefits $  60,141   $  8,168   $  103,680   $ 17,542  
Cost recovery                        
Equipment $  -   $  -   $  610   $ -  
Investor relations $  245     1,122   $  1,271   $ 1,589  
Office and administration $  27,220   $  47,148   $  52,542   $ 52,887  
Regulatory $  2,615   $  2,812   $  2,615   $ 3,390  
Share issue costs (1) $  -   $  -   $  1,170   $ 7,206  
Travel and promotions $  7,116   $  8,848   $  16,888   $ 14,702  
Mineral properties                        
Los Crestones (2) $  1,920   $  -   $  1,920   $ -  
Big Bar (2) $  1,887   $  7,500   $  3,900   $ 7,500  
Uranium properites (2) $  15,096   $  7,221   $  39,251   $ 32,817  
Duke Island (2) $  1,887   $  -   $  1,887   $ -  
MacArthur (2) $  11,322   $  6,415   $  21,258   $ 18,657  

(1)

This amount has been capitalized and is included in share capital on the balance sheet

   
(2)

These amounts have been capitalized and are included in mineral properties on the balance sheet

   
(3)

Stock based compensation is not included in these related party transactions (See Note 7(h))

These transactions were made in the normal course of operations and measured at the exchange amount, which is the amount of consideration established and agreed to by the Company and related parties. They are considered related party due to the following relationships to the Company:

  (a)

A private company controlled by directors or officers of the Company.

  (b)

A director or officer of the Company.

  (c)

An association of lawyers in which an officer of the Company is a member (resigned May 1, 2006).

Page 11 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

7. Share Capital

  (a)

Authorized

     
 

The Company has unlimited authorized, without par value, common shares.

     
  (b)

Issued and Outstanding


      Number     Total     Contributed  
      of shares           Surplus  
  Balance as at December 31, 2005   65,522,200   $  15,172,975   $  1,013,998  
           Issued for cash:                  
                       Private placements   5,247,855     9,183,746     -  
                       Exercised share purchase warrants   3,814,281     1,907,141     -  
                       Exercised stock options   2,829,000     675,030     -  
           Total issued for cash   11,891,136     11,765,917     -  
           Issued for mineral property acquisitions   400,000     606,000     -  
           Issued for brokerage fees   291,484     510,097     -  
           Fair value of stock options exercised   -     349,445     (349,445 )
           Stock based compensation   -     -     3,045,004  
           Subtotal before share issue costs   12,582,620     13,231,459     2,695,559  
           Share issue costs   -     (543,376 )   -  
  Balance as at December 31, 2006   78,104,820     27,861,058     3,709,557  
           Issued for cash:                  
                       Exercised share purchase warrants   15,000     33,750     -  
                       Exercised stock options   945,000     790,960     -  
           Total issued for cash   960,000     824,710     -  
           Issued for services   7,840     22,500     -  
           Fair value of stock options exercised   -     459,508     (459,508 )
           Stock based compensation   -     -     288,710  
           Subtotal before share issue costs   967,840     1,306,718     (170,798 )
           Share issue costs   -     (5,560 )   -  
  Balance as at June 30, 2007   79,072,660   $  29,162,216   $  3,538,759  

Page 12 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

7. Share Capital, continued

  (c)

Private Placements

       
 

There were no private placements during the six months ended June 30, 2007.

       
 

During the year ended December 31, 2006, the Company issued 5,247,855 units at a price of $1.75 per unit for gross proceeds of $9,183,746. Each unit consisted of one common share and one-half of one share purchase warrant, each whole warrant entitling the holder to purchase an additional common share at a price of $2.25 until expiry on June 21, 2008. The Company incurred net share issuance costs of $502,596, including 291,484 shares were issued for finders’ fees valued at $510,097.

       
  (d)

Shares Issued for Mineral Property

       
 

There were no shares issued for mineral properties during the six months ended June 30, 2007

       
 

During the year ended December 31, 2006, the Company issued 400,000 common shares for value at $606,000.

       
  (i)

200,000 common shares value at $1.50 per share, $300,000 in total, pursuant to the terms of the uranium properties agreement (Note 3 (c)).

       
  (ii)

200,000 common shares value at $1.53 per share, $306,000 in total, pursuant to the acquisition of three mineral concessions in Mexico (Note 3 (g)).

       
  (e)

Shares Issued for debt settlement

       
 

During the six months ended June 30, 2007 7,840 shares were issued in settlement of $22,500 debt owed by the Company.

       
  (f)

Share Purchase Warrants

       
 

A summary of the Company’s share purchase warrant transactions for the six months ended June 30, 2007 are as follows:


  Exercise   Expiry   Balance   Warrants   Cancelled   Warrants   Balance  
  Price   Date   Dec. 31, 2006   Issued   or Expired   Exercised   June 30, 2007  
  $2.25   June 21, 2008   2,623,928   -   -   15,000   2,608,928  
  Weighted average exercise price   $2.25   $0.00   $0.00   $2.25   $2.25  

On July 20, 2007 notice was given to holders of the share purchase warrants exercisable at $2.25 with an expiry date of June 21, 2008, of an acceleration of the expiry date from June 21, 2008 to August 20, 2007.

Page 13 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

7. Share Capital, continued

  (f)

Share Purchase Warrants, continued

     
 

A summary of the Company’s share purchase warrant transactions for the year ended December 31, 2006 are as follows:


  Exercise   Expiry   Balance   Warrants   Cancelled   Warrants   Balance  
  Price   Date   Dec. 31, 2005   Issued   or Expired   Exercised   Dec. 31, 2006  
                             
  $0.66   January 20, 2006   120,000   -   120,000   -   -  
  $0.50   September 27, 2007   3,250,000       -   3,250,000   -  
  $0.50   September 27, 2007   564,281       -   564,281   -  
  $2.25   June 21, 2008   -   2,623,928   -   -   2,623,928  
                             
          3,934,281   2,623,928   120,000   3,814,281   2,623,928  
                             
  Weighted average exercise price   $0.50   $2.25   $0.66   $0.50   $2.25  

  (g) Stock Options
     
 

As at June 30, 2007 and December 31, 2006, the Company had a stock option plan (the “Plan”), allowing for the reservation of common shares issuable under the Plan to a maximum 10% of the number of issued and outstanding common shares of the Company at any given time. The term of any stock option granted under the Plan may not exceed five years and the exercise price may not be less than the closing price of the Company’s shares on the last business day immediately preceding the date of grant, less any permitted discount. On an annual basis, the Plan requires approval by the Company’s shareholders and submission for regulatory review and acceptance.

   

 

The purpose of the Plan is to provide directors, officers, key employees and certain other persons who provided services to the Company and its subsidiaries with an increased incentive to contribute to the future success and prosperity of the Company.

Page 14 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

7. Share Capital, continued

  (g) Stock Options, continued
     

As at June 30, 2007, 4,544,500 of the options outstanding were vested and exercisable and 5,233,250 were vested and exercisable as at December 31, 2006. Transactions for the six months ended June 30, 2007 are as follows:


  Exercise   Expiry   Balance   Options   Options   Options   Balance  
  Price   Date   Dec. 31, 2006    Granted    Cancelled/Expired      Exercised    June 30, 2007    
                             
     $0.12   January 10, 2008   937,000   -   -   93,000   844,000  
     $0.25   October 2, 2008   50,000   -   -   50,000   -  
     $0.34   December 8, 2008   90,000   -   -   -   90,000  
     $0.62   March 25, 2009   590,000   -   -   180,000   410,000  
     $0.35   August 9, 2010   850,000   -   -   257,000   593,000  
     $0.40   January 9, 2011   200,000   -   -   -   200,000  
     $1.04   March 27, 2011   125,000   -   -   -   125,000  
     $1.00   May 19, 2011   75,000   -   -   -   75,000  
     $1.12   June 12, 2011   100,000   -   -   -   100,000  
     $1.55   July 28, 2011   2,110,000   -   -   365,000   1,745,000  
     $1.55   August 23, 2011   100,000   -   -   -   100,000  
     $1.50   September 25, 2011   100,000   -   -   -   100,000  
     $2.05   December 18, 2011   100,000   -   -   -   100,000  
     $2.65   January 11, 2012   -   75,000   -   -   75,000  
     $2.70   February 21, 2012   -   25,000           25,000  
                             
          5,427,000   100,000   -   945,000   4,582,000  
                             
  Weighted average exercise price   $0.92   $2.66   $0.00   $0.84   $0.98  

Page 15 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

7. Share Capital, continued

  (g)

Stock Options, continued

     
 

Transactions for the year ended December 31, 2006 are as follows:


     Exercise Expiry   Balance   Options   Options   Options   Balance  
       Price Date   Dec. 31, 2005    Granted    Cancelled/Expired      Exercised    Dec. 31, 2006    
                           
     $0.15 February 8, 2006   50,000   -   -   50,000   -  
     $0.15 May 7, 2006   55,000   -   -   55,000   -  
     $0.12 June 8, 2006   515,000   -   -   515,000   -  
     $0.19 September 27, 2006   490,000   -   -   490,000   -  
     $0.12 January 10, 2008   1,591,000   -   -   654,000   937,000  
     $0.25 October 2, 2008   75,000   -   -   25,000   50,000  
     $0.34 December 8, 2008   195,000   -   -   105,000   90,000  
     $0.65 March 2, 2009   100,000   -   100,000   -   -  
     $0.62 March 25, 2009   800,000   -   -   210,000   590,000  
     $0.35 August 9, 2010   1,575,000   -   -   725,000   850,000  
     $0.40 January 9, 2011   -   200,000   -   -   200,000  
     $1.04 March 27, 2011   -   125,000   -   -   125,000  
     $1.00 May 19, 2011   -   75,000   -   -   75,000  
     $1.12 June 12, 2011   -   100,000   -   -   100,000  
     $1.55 July 28, 2011   -   2,110,000   -   -   2,110,000  
     $1.55 August 23, 2011   -   100,000   -   -   100,000  
     $1.50 September 25, 2011   -   100,000   -   -   100,000  
     $2.05 December 18, 2011   -   100,000   -   -   100,000  
                           
        5,446,000   2,910,000   100,000   2,829,000   5,427,000  
                           
  Weighted average exercise price   $0.29   $1.44   $0.65   $0.24   $0.92  

  (h)

Value Assigned to Stock Options

     
 

The fair value of stock options granted using the Black-Scholes option pricing model was calculated with the following weighted average assumptions:


    June 30, 2007   December 31, 2006     June 30, 2006  
               
  Risk-free interest rate 4.03%   4.02%   4.11%  
  Expected Share price volatility 166.47%   121.60%   127.71%  
  Expected option life in years 3.0   3.5   3.5  
  Expected dividend yield 0%   0%   0%  

Page 16 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

7. Share Capital, continued

  (h) Value Assigned to Stock Options
     

The total calculated fair value of options expensed during the six months ended June 30, 2007 was $288,710 (2006: $182,257) and includes amounts calculated from options issued during the year ended December 31, 2006 but vesting during the six months ended June 30, 2007. This stock based compensation is included in the statement of operations as follows:


      June 30, 2007     June 30, 2006  
      Number of     Stock-based     Number of     Stock-based  
      Options issued      Compensation     Options issued     Compensation  
                           
  Consulting   100,000   $  263,404     125,000   $  68,192  
  Directors' and officers' fees   -     25,306     325,000     83,456  
  Wages and benefits   -     -     50,000     30,609  
                           
  Total   100,000   $  288,710     500,000   $  182,257  

8. Segmented Information

The Company‘s non-current assets are distributed by geographic location as follows:

          June 30, 2007                 December 31, 2006        
    Equipment     Mineral     Reclamation     Total     Equipment     Mineral     Reclamation     Total  
          Properties     Bond                 Properties     Bond        
                                                 
Canada $  26,142   $  -   $  -   $  26,142   $  24,997   $  -   $  -   $  24,997  
Mexico   49,200     3,507,710     -     3,556,910     25,488     2,785,632     -     2,811,120  
U.S.A.   18,743     8,620,634     125,628     8,765,005     1,089     5,070,200     79,898     5,151,187  
                                                 
  $  94,085   $ 12,128,344   $  125,628     12,348,057$   $  51,574   $ 7,855,832   $  79,898   $ 7,987,304  

9. Supplemental Cash Flow Information.

    Three Months Ended     Six Months Ended  
    June 30     June 30  
    2007     2006     2007     2006  
                         
Cash Items                        
       Interest received $  61,887   $  18,222   $  159,217   $  28,606  
       Share issue costs $  108   $  8,165   $  5,560   $  15,731  
Non-Cash Items                        
       Accrued interest $  883   $  1,045   $  (6,093 ) $  1,045  
       Mineral property costs included in Accounts payable $  42,117   $  238,720   $  42,117   $  238,720  
       Non-cash share issue costs $  -   $  30,072   $  -   $  30,072  

Page 17 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

10. Subsequent Events

The following events occurred subsequent to period ended June 30, 2007:

  (a)

On July 20, 2007 2,111,000 stock options were granted to directors, officers, consultants and employees with an exercise price of $3.33 and an expiry date of July 20, 2012.

     
  (b)

85,000 stock options were exercised for gross proceeds of $73,250 with an average price of $0.86 per share.

     
  (c)

On July 20, 2007 notice was given to holders of the share purchase warrants exercisable at $2.25 with an expiry date of June 21, 2008, of an acceleration of the expiry date from June 21, 2008 to August 20, 2007. As at August 7, 2007 267,250 of these warrants were exercised for gross proceeds of $601,312.

     
  (d)

On July 26, 2007 the Company entered into an option with a prospecting syndicate to acquire a 100% interest in 27 unpatented mining claims in the Tintic mining district in Utah.

     
 

Pursuant to this agreement the Company’s commitments are as follows:


  (iii) Initial payments of US $20,000 (Paid).
  (ii) US $20,000 on or before February 15, 2008.
  (iii) US $20,000 on or before February 15, 2009.
  (iv) US $20,000 on or before February 15, 2010.
  (v) US $40,000 on or before February 15, 2011.
  (vi) US $50,000 on or before February 15, 2012.
  (vii) US $50,000 on or before February 15, 2013.
  (vii) US $100,000 on or before February 15, 2014.
  (viii) US $100,000 on or before February 15, 2015.
  (ix) US $100,000 on or before February 15, 2016.
  (ix) US $250,000 on or before February 15, 2017.
  (x) US $250,000 on or before February 15, 2018.

A 2% NSR royalty is payable on production from these claims and contiguous claims staked by the Company, one-half of which may be purchased at any time by payment US $1,000,000 to the syndicate.

In a separate transaction, the Company has agreed to purchase a 100% interest in 1,511 acres of patented mining claims in the Tintic district by paying owners US $800,000 over a 24 months period, following receipt of a satisfactory title report. These claims will not carry royalty obligations.

Page 18 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

11. Differences between Canadian and United States generally accepted accounting principles (GAAP)

  (a)

Differences in accounting principles

       
  (i)

Exploration expenditures

       
 

Under Canadian GAAP, acquisition costs of mineral interests and exploration expenditures are capitalized (Note 5).

       
 

Under US GAAP, exploration costs incurred in locating areas of potential mineralization are expensed as incurred. Commercial feasibility is established in compliance with SEC Industry Guide 7, which consists of identifying that part of a mineral deposit that could be economically and legally extracted or produced at the time of the reserve determination. After an area of interest has been assessed as commercially feasible, expenditures specific to the area of interest for further development are capitalized. In deciding when an area of interest is likely to be commercially feasible, management may consider, among other factors, the results of pre-feasibility studies, detailed analysis of drilling results, the supply and cost of required labour and equipment, and whether necessary mining and environmental permits can be obtained. To date no exploration expenses have been capitalized.

       
 

The Company has adopted EIFT 04-02 and separately reports the aggregate carrying amount of mineral rights. Mineral rights include an option for the Company to acquire the rights to extract and retain at least a portion of the benefits from the mineral deposits. Acquisition costs include cash and the fair market value of common shares for the mineral rights. These capitalized costs will be amortized over the estimated life of the property following commencement of commercial production or written off if the property is sold, allowed to lapse or abandoned, or when an impairment of value has occurred.

Page 19 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

11. Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

  (a)

Differences in accounting principles, continued

     
 

(ii) Reconciliation of total assets, liabilities and stockholders’ equity:


      June 30, 2007     December 30, 2006  
  Total assets per Canadian GAAP $  16,906,353   $  17,340,544  
  Expenditures on resource properties   (8,232,688 )   (5,196,365 )
  expensed under US GAAP            
  Total assets per US GAAP $  8,673,665   $  12,144,179  
  Total liabilities per Canadian GAAP $  460,636   $  277,527  
  Adjustments to US GAAP   -     -  
  Total liabilities per US GAAP   460,636     277,527  
  Total equity per Canadian GAAP   16,445,717     17,063,017  
  Expenditures on resource properties   (8,232,688 )   (5,196,365 )
  expensed under US GAAP            
  Total equity per US GAAP   8,213,029     11,866,652  
  Total Liabilities and equity per US GAAP $  8,673,665   $  12,144,179  

Page 20 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

11. Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

  (a)

Differences in accounting principles, continued

     
 

(iii) Reconciliation of net loss reported in Canadian GAAP and US GAAP:


      Three months ended June 30,     Six months ended June 30,  
      2007     2006     2007     2006  
  Reconciliation of net loss from Canadian                        
  GAAP to US GAAP                        
  Loss for year per Canadian GAAP $  973,136   $  370,914   $  1,765,160   $  564,997  
  Expenditures on mineral properties   1,556,918     567,636     3,036,323     960,674  
  Net loss for year per US GAAP   2,530,054     938,550     4,801,483     1,525,671  
  Deficit, Beginning of year per US GAAP   21,957,892     13,796,699     19,686,463     13,209,578  
  Deficit, End of year as per US GAAP $  24,487,946   $  14,735,249   $  24,487,946   $  14,735,249  
  Net loss per share for the year in                        
  accordance with Canadian GAAP $ 0.01   $ 0.01   $ 0.02   $ 0.01  
  Total differences $ 0.02   $ 0.00   $ 0.04   $ 0.01  
  Net loss per share for the year in                        
  accordance with US GAAP $ 0.03   $ 0.01   $ 0.06   $ 0.02  
  Weighted average number of common                        
  shares outstanding   78,489,259     65,571,937     78,122,324     66,439,100  

Page 21 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

11. Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

  (a)

Differences in accounting principles, continued

     
 

(iv) Reconciliation of cash flows reported in Canadian GAAP and US GAAP:


      Six months ended  
      June 30, 2007     June 30, 2006  
               
  Cash used in operating activities            
  in accordance with Canadian GAAP $  (1,338,403 ) $ (622,851 )
  Adjustments to net loss involving use of cash            
               Write-off of expenditures on mineral interest   (3,036,323 )   (960,674 )
               
  Cash used in operating activities            
  in accordance with US GAAP   (4,374,726 )   (1,583,525 )
               
  Cash used in investing activities            
  in accordance with Canadian GAAP   (4,292,379 )   (1,076,723 )
  Reclassification of expenditures on mineral property interest   3,036,323     960,674  
               
  Cash used in investing activities            
  in accordance with US GAAP   (1,256,056 )   (116,049 )
               
  Cash used in Financing Activities            
  in accordance with Candian and US GAAP   836,650     2,400,408  
               
  Increase in cash during the period            
  in accordance with Candian and US GAAP   (4,794,132 )   700,834  
  Cash, beginning of period            
  in accordance with Candian and US GAAP   9,112,732     1,786,298  
               
  Cash, end of period            
  in accordance with Candian and US GAAP $  4,318,600   $ 2,487,132  
               
  Cash consists of the following            
             Cash and cash equivalents   4,211,970     2,487,132  
             Restricted cash   106,630     -  
               
  Cash, end of period            
  in accordance with Candian and US GAAP $  4,318,600   $ 2,487,132  

Page 22 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

11. Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

  (b) Recent accounting pronouncements
     
(i)

In December 2004, FASB issued Statement No. 123 (revised 2004), Share-Based Payment (“SFAS 123(R)”), which requires the measurement and recognition of compensation expense for all stock-based compensation payments and supersedes the Company’s current accounting under APB 25. SFAS 123(R) is effective for all annual periods beginning after June 15, 2005. In March 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to the adoption of SFAS 123(R). This standard will not have an impact on the Company’s financial statements as it already applies the fair value method of accounting for its stock options.

   

(ii)

FAS 153, Exchanges of Non-Monetary Assets. The provisions of this statement are effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for non-monetary asset exchanges occurring in fiscal periods beginning after December 16, 2004. The provisions of this statement should be applied prospectively. There is no impact on the Company’s financial statements.

   

(iii)

FIN 46(R), Consolidation of Variable Interest Entities, applies at different dates to different types of enterprises and entities, and special provisions apply to enterprises that have fully or partially applied Interpretation 46, or Interpretation 46 (R) is required in financial statements of public entities that have interests in variable interest entities or potential variable interest entities commonly referred to as special- purpose entities for periods ending after December 15, 2003. Application by public entities is required in financial statements for periods other than special-purpose entities and by non-public entities to all types of entities is required at various dates in 2004 and 2005. In some instances, enterprises have the option of applying or continuing to apply Interpretation 46 for a short period of time before applying Interpretation 46(R). There is no impact on the Company’s financial statements.

   

(iv)

SFAS 154, Accounting Changes and Error Corrections. This new standard replaces APB Opinion No. 20, Accounting Changes, and FASB 3, Reporting Accounting Changes in Interim Financial Statements. Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived non-financial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a "restatement." The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005. There is no impact on the Company’s financial statements.

Page 23 of 24



Quaterra Resources Inc. (An Exploration Stage Company)
Notes to the Consolidated Financial Statements
Six months ended June 30, 2007 and 2006 (Canadian Dollars)

11. Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

  (b)

Recent accounting pronouncements, continued

       
  (vii)

SFAS 157, Fair Value Measurements. The provisions of this standard are to provide guidance for using fair value to measure assets and liabilities. The standard clarifies methods for measuring items not actively traded and the principles that fair value should be based upon when pricing an asset or liability. The provisions of Statement 157 are effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year. There is no impact on the Company’s financial statements.

       
  (viii)

On July 13, 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109. Interpretation 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with Statement 109 and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Additionally, Interpretation 48 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Interpretation 48 is effective for fiscal years beginning after December 15, 2006, with early adoption permitted. The Company is currently evaluating whether the adoption of Interpretation 48 will have a material effect on its consolidated financial position, results of operations or cash flows.

Page 24 of 24


EX-99.12 13 exhibit99-12.htm MD&A FOR THE PERIOD ENDED JUNE 30, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.12

1100 – 1199 West Hastings Street,
Vancouver, BC, V6E 3T5
Tel: 604-684-9384 Fax: 604-688-4670
www.quaterraresources.com

Management’s Discussion and Analysis

In respect to the Six months ended June 30, 2007

Dated: August 7, 2007

Index Page  
   
A - Introduction 1
B - Qualified person 1
C - Exchange information and conversion tables 2
D - Description of business 3
E - Description of mineral properties 3 - 5
F - Mineral property expenditure 6 - 7
G - Results of operations 8 - 9
H - Quarterly results 10
I - Related party information 10
J - Financial conditions, liquidity and capital resources 11 - 13
K - Outstanding shares, options and share purchase warrants 13 - 14
L - Subsequent events and outlook 15
M - Off balance sheet 15
N - Managements responsibility for financial information 16
O - Risks and uncertainties 17
P - Licenses and permits 18
Q - Whistleblower policy 18
R - Forward looking statements 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

A. Introduction

The following Management Discussion and Analysis (“MD&A”) of the operating results and financial condition of Quaterra Resources Inc. (the “Company”) compares results for the six months ended June 30, 2007 (“Q2 2007”) to the six months ended June 30, 2006 (“Q2 2006”). These statements should be read in conjunction with the financial statements for the six months ended June 30, 2007 and the audited financial statements for the year ended December 31, 2006. All notes referenced herein may be found in the consolidated financial statements dated June 30, 2007.

The financial statements were prepared in accordance with Canadian generally accepted accounting principles. This MD&A, dated as of August 7, 2007, was prepared to conform to National Instrument 51-102 F1 and was approved by the Board of Directors prior to release.

The Company is a reporting issuer in British Columbia and Alberta and its shares trade on the Tier 2 Board of the TSX Venture Exchange (“TSX.V”) under the symbol QTA.

The Company’s reporting currency is the Canadian dollar and all dollar amounts are in Canadian dollars, unless otherwise indicated.

Certain forward-looking statements are discussed in the MD&A with respect to the Company’s activities and future financial results. These are subject to significant risks and uncertainties that may cause projected results or events to differ materially from actual results or events.

Additional information relating to the Company, including detailed drill results previously disclosed in news releases, is available on SEDAR at www.sedar.com. Terms of property option agreements are described more fully in the notes to the consolidated financial statements.

B. Qualified Person

Dr. Thomas C. Patton, P. Geo., the President and Chief Executive Officer of the Company, is the qualified person responsible for the preparation of the technical information included in this MD&A. Dr. Patton graduated from the University of Washington in 1971 (Ph.D.) and has worked with both junior and senior mining companies. His exploration efforts have concentrated on North America and have resulted in several significant discoveries and led to the expansion of mineral reserves at existing operations. He served as the President and Chief Operating Officer for Western Silver Corporation from January 1998 to May, 2006. Previously, Dr. Patton held senior positions with Rio Tinto PLC and Kennecott Corporation. Dr. Patton is a member of the Society of Economic Geologists and the American Institute of Mining & Metallurgical Engineers.

Eugene Spiering joined the company on January 10, 2006 as Vice President of Exploration. Mr. Spiering has over 28 years of experience in the mining exploration industry. He most recently held the position of Vice President, Exploration at Rio Narcea Mines Ltd., where he managed a team that discovered two gold deposits and completed the final definition of one nickel deposit in Spain. All three of these deposits are currently in production. Prior to his tenure at Rio Narcea, Mr. Spiering held the position of senior geologist with Energy Fuels Nuclear, Inc. where his responsibilities included uranium exploration in northern Arizona and gold exploration in western US and Venezuela. He received his Bachelor of Science-Geology degree from the University of Utah. Mr. Spiering is a member of the Society of Economic Geologists, the Australasian Institute of Mining and Metallurgy and the American Association of Petroleum Geologists.

Page 1 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

C. Exchange information and conversion tables.

For ease of reference, the following information is provided:

 U.S. Dollars to Canadian Dollars    
    Quarter 2     Quarter 1     December 31,  
    June 30, 2007     March 31, 2007     2006     2005  
                         
Rate at end of period   1.0593     1.1559     1.16640     1.16600  
Average rate for period   1.10031     1.17207     1.13461     1.21173  
High for period   1.1596     1.1873     1.17960     1.27320  
Low for period   1.0461     1.1498     1.09260     1.14240  
                         
 www.oanda.com    

Conversion Table      
             Imperial         Metric  
             
1 Acre =   0.404686   Hectares  
1 Foot =   0.304800   Metres  
1 Mile =   1.609344   Kilometres  
1 Ton =   0.907185   Tonnes  
1 Ounce (troy)/ton =   34.285700   Grams/Tonne  
             
Information from www.onlineconversion.com  

 Precious metal units and conversion factors     
                                 
ppb - Part per billion 1   ppb   =   0.0010   ppm   =   0.000030   oz/t  
ppm - Part per million 100   ppb   =   0.1000   ppm   =   0.002920   oz/t  
oz - Ounce (troy) 10,000   ppb   =   10.0000   ppm   =   0.291670   oz/t  
oz/t - Ounce per ton (avdp.) 1   ppm   =   1.0000   ug/g   =   1.000000   g/tonne  
g - Gram                                
g/tonne - gram per metric ton 1   oz/t   =   34.2857   ppm              
mg - milligram 1   Carat   =   41.6660   mg/g              
kg - kilogram 1   ton (avdp.)   =   907.1848   kg              
ug - microgram 1   oz (troy)   =   31.1035   g              
                                 
Information from www.onlineconversion.com                  

Page 2 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

D. Description of Business

The Company acquires and explores mineral properties in the Americas. It is currently exploring for base and precious metals in Mexico and Alaska, uranium in Arizona, and copper in Nevada.

E. Description of Mineral Properties

i) Nieves Property – Mexico

No exploration work has been conducted on the Nieves property during the quarter.

By June 30, 2007, the Company had incurred $1,258,901 for acquisition costs and $2,578,362 ($673,812 net of recovery) for exploration expenditures giving a total of $3,837,263 in gross costs on the Nieves property, or $1,932,713 net of the recovery of $1,904,550 (US $1.5 million) from Blackberry.

As at December 31, 2006, the Company had incurred $1,244,464 for acquisition costs and $2,560,841 ($656,291 net of recovery) for exploration expenditures giving a total of $3,805,305 in gross costs on the Nieves property, or $1,900,755 net of the recovery of $1,904,550 (US $1.5 million) from Blackberry. (Note 5 (a) in the consolidated financial statements dated June 30, 2007)

ii) Los Crestones Project – Mexico

The Company completed a six-hole, 3,043-meter core drilling program at its 100%-owned Crestones property in Durango State, Mexico during the second quarter. The first drill-holes of the program did not intersect the targeted breccia feeder vents. Assay results for the first five holes, contain a few low-grade intercepts within the hydrothermal breccia. Weakly disseminated sphalerite-galena-sulfosalts occur in silicified limestone, quartz porphyry, and hornfels. The silica breccia commonly contains minor to 5% disseminated pyrite-marcasite and minor to 5% stibnite. The mixed clast and silicified limestone breccias contain disseminated pyrite-marcasite and minor sphalerite-galena. Coarse sphalerite-galena has been observed in fault gouges.

Alteration and mineralization at Los Crestones appear to intensify to the southwest. Subsequent field mapping has identified a series of flat-dipping detachment faults that have offset the outcropping geology an estimated 500 meters to the northeast. The postulated location for the breccia feeder vent(s), based on mapping and drill sections, is southwest of the outcropping breccias in a flat area covered with a thin layer of post-mineral arroyo sediment. An additional 2,000-meter drill program is in progress to test this area.

Acquisition costs incurred to June 30, 2007 were $76,673 and exploration expenditures were $934,770 for a total of $1,011,443. Acquisition costs incurred to December 31, 2006 were $71,696 and exploration expenditures were $462,590 for a total of $534,286. (Note 5 in the consolidated financial statements dated June 30, 2007)

iii)  Uranium Project – Arizona, Utah and Wyoming

The Arizona Strip remains the focus of the Company’s uranium exploration program. Quaterra drilled 8,220 feet in 14 shallow stratigraphic and 2 deep holes investigating Target A01 during the second quarter. This target is the first of more than 200 moderate to high priority anomalies identified by the airborne VTEM geophysical program completed during the first quarter of the year.

Page 3 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

E. Description of Mineral Properties, continued

iii) Uranium Project – Arizona, Utah and Wyoming, continued

The drilling results are encouraging, but the throat of a pipe has not yet been defined below the Hermit/Coconino contact. The program has defined favorable alteration in the Hermit section, anomalous sulfide mineralization in the Kiabab Formation, dissolution of evaporites in the underlying Toroweap and a pronounced structure at Kiabab/ Toroweap contact; all indicative of the proximity of a breccia pipe structure. At least 3 additional deep holes are planned for the target.

In conjunction with the drilling program, computer processing of the airborne geophysical data is continuing to detail and prioritize anomalies. Condor Consulting Ltd, recognized experts in the field of airborne electromagnetics, are leveling the VTEM data and preparing depth slices to analyze the targets at various stratigraphic intervals. The work will be used to guide exploration and acquisition of additional mineral rights in the district.

Work on other uranium properties in Utah includes the acquisition of an extensive data base from historic exploration and production in the Tidwell Uranium district of south-central Utah. The information includes the original gamma logs and locations of more than 1,200 drill holes in the district. Approximately 400 of the holes are thought to be located on the properties. The data base includes mine shutdown reports and historical estimates of mineralization remaining in the Snow and Probe mines located on Quaterra’s claims.

Acquisition costs incurred to June 30, 2007 were $1,832,004 and exploration expenditures were $2,701,256 for a total of $4,533,260. Acquisition costs incurred to December 31, 2006 were $1,125,438 and exploration expenditures were $1,079,859 for a total of $2,205,297. (Note 5 in the consolidated financial statements dated June 30, 2007)

iv) Duke Island – Alaska

The Company contracted consulting geologist, Robert Brozdowski PhD. to conduct a detailed review with Avalon Development of the Duke Island exploration data. The study examined the geologic character of the ultramafic intrusive rocks, assessed the potential of the project for hosting economic mineralization, and made specific recommendations regarding exploration and drilling targets on the property. The review concluded that although the ultramafic complex does have some of the magmatic characteristics consistent with its historical classification as a zoned complex, many of the characteristics have stronger affinities to a layered mafic intrusive complex with the potential of hosting significant economic concentrations of Ni-Cu PGE mineralization. The study utilized a layered intrusive model to identify several undrilled targets with the potential to contain higher sulfide concentrations and better metal grades. An airborne electromagnetic survey was recommended for autumn 2007 in anticipation of a 2008 drilling program.

Acquisition costs incurred to June 30, 2007 were $112,285 and exploration expenditures were $1,637,541 for a total of $1,749,826. Acquisition costs incurred to December 31, 2006 were $112,285 and exploration expenditures were $1,625,551 for a total of $1,737,836. (Note 5 in the consolidated financial statements dated June 30, 2007)

Page 4 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

E. Description of Mineral Properties, continued

v) Seward Peninsula – Big Bar, VMS Project – Alaska

No exploration work has been conducted on the Company’s Big Bar project during the quarter. Acquisition costs incurred to June 30, 2007 were $18,461 and exploration expenditures were $717,083 for a total of $735,544. Acquisition costs incurred to December 31, 2006 were $18,461 and exploration expenditures were $712,113 for a total of $730,574. (Note 5 (e) in the consolidated financial statements dated June 30, 2007)

vi) MacArthur Property - Nevada

The Company initiated a program of confirmatory drilling on the MacArthur copper oxide project during the second quarter. The program has been designed to twin a statistically valid number of existing holes to validate the Company’s database from 290 historical drill holes defining copper mineralization on the project. A total of 5,880 feet have been core drilled in 14 holes within the copper oxide mineralized zone; assays are pending. To support the program, core storage and logging facilities have been established in Yerington, Nevada.

The MacArthur drilling program will be expanded to define possible extensions to both the copper oxide zone and to an area known to host a chalcocite blanket north of the MacArthur pit. Deep holes are planned to explore for primary sulfide mineralization which is thought to be related to the oxide mineralization at MacArthur.

Acquisition costs incurred to June 30, 2007 were $424,565 and exploration expenditures were $652,150 for a total of $1,076,715. Acquisition costs incurred to December 31, 2006 were $170,324 and exploration expenditures were $80,591 for a total of $250,915. (Note 5 in the consolidated financial statements dated June 30, 2007).

A payment of $350,000 for the purchase of the PIT claims will be deducted from the final payment due to North Exploration LLC for the McArthur properties. (Note 5 of the consolidated financial statements dated June 30, 2007)

vii) Acquisition of the Arimetco Yerington Property – Nevada

On May 1, 2007, Quaterra received the approval of the appropriate U.S. court to the acquisition by a subsidiary of Quaterra of all Arimetco assets in the Yerington Mining District. Subject to the approval of the TSX Venture Exchange, the purchase price comprises US$500,000 cash, 250,000 shares of Quaterra common stock and a 2% net smelter return royalty capped at US$7.5 million dollars on production from any claims owned by Quaterra in the Yerington and MacArthur mine areas. Quaterra may terminate the transaction at any time during a 180-day review period (beginning July 13 2007) if it is dissatisfied with the condition of the property or fails to obtain requested environmental clearances for past mining-related activities. Under certain circumstances, the review period may be extended for additional successive 120 day periods.

viii) Other properties

Other properties of the Company include various properties in the USA, and Mexico. See Note 5 (g) in the consolidated financial statements dated June 30, 2007.

Page 5 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

F. Mineral Property Expenditures

All mineral property expenditures, detailed by property, can be found in Note 5 of the consolidated financial statements dated June 30, 2007. The deferred mineral property costs as at June 30, 2007, were as follows:

                     All Mineral Properties Year End   Additions   Change   Balance  
  Balance           During   as at  
  Dec 31, 2006   Q1   Q2   2007   June 30, 2007  
  $    $    $    $    $   
                     
Summary by Expenditure                    
       Total acquisitions 3,197,586   1,041,068   301,971   1,343,039   4,540,625  
       Total exploration 6,562,796   1,043,512   1,885,961   2,929,473   9,492,269  
       Less: cost recovery, Nieves (1,904,550 ) -   -   -   (1,904,550 )
                     
Total 7,855,832   2,084,580   2,187,932   4,272,512   12,128,344  
                     
Summary by Property                    
       Nieves, net of cost recovery 1,900,755   17,112   14,846   31,958   1,932,713  
       Los Crestones 534,286   238,345   238,812   477,157   1,011,443  
       Uranium properties 2,205,297   1,351,275   976,688   2,327,963   4,533,260  
       Duke Island 1,737,836   -   11,990   11,990   1,749,826  
       Big Bar 730,574   3,083   1,887   4,970   735,544  
       MacArthur 250,915   236,526   589,274   825,800   1,076,715  
       Other properties 496,169   238,239   354,435   592,674   1,088,843  
                     
Total 7,855,832   2,084,580   2,187,932   4,272,512   12,128,344  

The total mineral properties expenditure of $14,032,894, which excludes $1,904,550 recovered from Blackberry, as at June 30, 2007 was allocated as follows; 32% on Uranium properties, 26% on Nieves, 13% on Duke Island, 8% on each of Los Crestones, Big Bar and various other properties and 5% on MacArthur.

Page 6 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

F. Mineral Property Expenditures, continued

Total deferred mineral property costs for the year ended December 31, 2006 are as follows:

                 All Mineral Properties Year End       Additions       Change   Year End  
  Balance                   During   Balance  
  Dec 31, 2005   Q1   Q2   Q3   Q4   2006   Dec 31, 2006  
  $    $    $    $    $    $    $   
                             
Summary by Expenditure                            
     Total acquisitions 1,547,235   122,047   119,813   664,638   743,853   1,650,351   3,197,586  
     Total exploration 4,114,198   389,555   566,387   651,262   841,394   2,448,598   6,562,796  
     Less: cost recovery, Nieves (1,904,550 ) -   -   -   -   -   (1,904,550 )
                             
Total 3,756,883   511,602   686,200   1,315,900   1,585,247   4,098,949   7,855,832  
                             
Summary by Property                            
     Nieves, net of cost recovery 1,640,415   203,847   31,237   6,107   19,149   260,340   1,900,755  
     Los Crestones 79,416   3,703   86,140   89,951   275,076   454,870   534,286  
     Uranium properties 273,968   275,097   330,409   610,034   715,789   1,931,329   2,205,297  
     Duke Island 1,693,234   12,492   2,958   29,152   -   44,602   1,737,836  
     Big Bar 39,366   1,736   173,185   421,309   94,978   691,208   730,574  
     MacArthur 30,484   14,727   62,271   110,848   32,585   220,431   250,915  
     Other properties -   -   -   48,499   447,670   496,169   496,169  
                             
Total 3,756,883   511,602   686,200   1,315,900   1,585,247   4,098,949   7,855,832  

The total mineral properties expenditure of $9,760,382, which excludes $1,904,550 recovered from Blackberry, as at December 31, 2006 was allocated as follows; 38% was spent on Nieves, 23% on Uranium properties, 18% on Duke Island, 7% on Big Bar, 6% on Los Crestones, 5% on other properties and 3% on MacArthur.

For further information on mineral properties expenditure see Note 5 of the consolidated financial statements dated June 30, 2007

Page 7 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

G. Results of Operations

For the six months ended June 30, 2007, (“Q2 2007”) the Company had a net loss of $1,765,160 compared to a net loss of $564,997 for the six months ended June 30, 2006 (“Q2 2006”). Stock based compensation was $288,710 for Q2 2007 (Q2 2006: $182,257) as stock options were granted and recognized. Removing the stock based compensation results in a net loss of $1,476,450 for Q2 2007 and $382,740 for Q2 2006.

The increase of $1,093,710, in the net loss for Q2 2007, excluding stock based compensation can be explained as follows:

i)

Administration costs increased by $30,000 from $30,000 for Q2 2006 to $60,000 for Q2 2007. This is due to an increase in these fees from $5,000 to $10,000 per month.

   
ii)

Amortization costs increased by $17,013 from $173 for Q2 2006 to $17,186 for Q2 2007. This is due to the purchase of equipment and therefore the relevant calculation of depreciation of these assets.

   
iii)

Consulting services increased by $127,562 from $44,758 for Q2 2006 to $172,320 for Q2 2007. This is due to the increased activity in respect to the day to day running of the Company and the commissioning of consultants for exploration purposes.

   
iv)

Director and officer fees were $16,500 for Q2 2007 compared to no fees in Q2 2006. These fees are due to the new company policy of providing compensation for independent directors.

   
v)

Investor relation costs increased by $73,398 from $77,187 for Q2 2006 to $150,585 for Q2 2007. This is due to the fees paid in Q2 2007 to O & M Partners to provide investor relations as well as the attendance by the Company at several trade shows and the upgrade of the promotional booth and literature for these conferences.

   
vi)

Office and general expenses increased by $24,388 from $72,434 for Q2 2006 to $96,822 for Q2 2007. This is due to the increased activity in respect to the day to day running of the Company.

   
vii)

Professional fees increased by $124,271 from $47,446 for Q2 2006 to $171,717 for Q2 2007. This is due to increased legal, accounting and auditing expenses due to the increased activity of the Company.

   
viii)

Regulatory fees increased by $40,351 from $8,736 for Q2 2006 to $49,087 for Q2 2007. This is due to increased in TSX.V filing fees for a publicly listed company, which is based on the issued and outstanding share capital and a timing difference in the payment of these fees.

Page 8 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

G. Results of Operations, continued

ix)

Shareholders communications expenses increased by $41,873 from $8,460 for Q2 2006 to $50,333 for Q2 2007. This is almost exclusively due to the production and distribution of the Annual General Meeting (“AGM”) brochure in Q2 2007. The AGM material, as per the Company’s regulatory requirements, was distributed in Q2 2007. The material was of a higher production quality and distributed to a larger group than in Q2 2006.

   
x)

Travel and promotion costs increased by $59,864 from $35,053 for Q2 2006 to $94,917 for Q2 2007. This is due to the increased travel of a VP of exploration as well as an increased travel by other consultants to inspect potential new properties. There was also increase in travel for trade shows, and meetings with analysts and other prominent industry experts.

   
xi)

Salaries and benefits costs increased by $97,586 from $18,323 for Q2 2006 compared to $115,909 for Q2 2007. This increase is due to the new salary payments to the President of the Company.

   
xii)

Interest income increased by $123,473 from $29,651 for Q2 2006 to $153,124 for Q2 2007. This is due to considerably larger cash amounts being held on fixed term deposits.

   
xiii)

The Company reported a net foreign currency loss of $490,858 for Q2 2007 compared to a loss $7,062 for Q2 2006.

   

Since all current assets and liabilities held in US dollars as at June 30, 2007 have to be converted to Canadian dollars on consolidation at the prevailing exchange, being 1.0593, this created an exchange loss due to a weakening US dollar compared to the Canadian dollar. The Company also held cash amounts, on average, of almost US $4 million during Q2 2007 which was not the case in Q2 2006 when the average cash held was approximately US $200,000.

   

This foreign exchange loss reflects the Company’s US cash position and that the US dollar has fallen from $1.12 at June 30, 2006 to $1.0593 at June 30, 2007.

   

It is important to note that the majority of transactions for the Company are in US dollars and, to a lesser extent, Mexican Pesos, and therefore foreign exchange fluctuations can result in losses or gains.

   
ivx)

General exploration costs increased by $35,894 from $94,148 for Q2 2006 to $130,042 for Q2 2007. This is due to an increase in the consideration of potential new properties.

   
vx)

A one off transaction to write off a liability of $39,631 occurred in Q2 2006.

Page 9 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

H. Quarterly Results

The following financial data was derived from the Company’s consolidated financial statements for the current and eight previous quarters:

  June 30   March 31   Dec. 31,   Sept. 30,   June 30,    March 31,    Dec. 31,   Sept. 30,   June 30,  
  2007   2007   2006   2006   2006   2006   2005   2005   2005  
  $    $    $    $    $    $    $    $    $   
                                     
Operating expenses 549,223   459,451   211,786   202,843   209,825   140,987   134,585   116,018   79,258  
Interest earned (62,770 ) (90,354 ) (30,060 ) (26,277 ) (19,267 ) (10,384 ) (22,641 ) (3,622 ) (3,236 )
Other income -   -   -   -   -   -   (25,000 ) -   -  
Foreign exchange (gain) loss 413,887   76,971   (115,647 ) 29,136   4,450   2,612   81,907   66,191   (9,418 )
General exploration 57,241   72,801   78,640   53,067   85,237   8,911   2,441   -   -  
                                     
Loss before the undernoted 957,581   518,869   144,719   258,769   280,245   142,126   171,292   178,587   66,604  
                                     
Stock-based compensation 15,555   273,155   880,374   1,982,373   114,500   67,757   (129,373 ) 460,215   -  
Write off of reclamation bond -   -   -   -   -   -   2,500   -   -  
Accrued liabilities written off -   -   6,063   (6,761 ) (23,831 ) (15,800 ) -   -   -  
                                     
Net Loss 973,136   792,024   1,031,156   2,234,381   370,914   194,083   44,419   638,802   66,604  
                                     
Loss per share - basic and diluted 0.01   0.01   0.01   0.03   0.01   0.00   0.01   0.01   0.00  

I. Related Party Information.

The Company is party to an agreement dated January 1, 2007 with its President, Thomas C Patton., for Mr. Patton to provide services in the capacity of President for $12,500 per month giving an annual remuneration of $150,000.

The Company is party to an agreement dated January 1, 2006 with its Vice-President of Exploration, Eugene Spiering, for Mr. Spiering to provide services in the capacity of Vice-President of Exploration for $12,500 per month giving an annual remuneration of $150,000.

The Company is party to an agreement dated March 27, 2006 with its Chief Financial Officer, Scott Hean, for Mr. Hean to provide services in the capacity of CFO for $2,500 for the first six months of service and $3,250 per month thereafter.

The Company, commencing August 22 2006, compensates its independent directors with an annual fee of $9,000. The Company uses the definition of “independent” from MI 52-110 where to be independent the director must not have a direct or indirect material relationship with the Company other than that of director.

Private companies controlled by directors and an officer provided management, administration and corporate development services to the Company. These services were provided in the normal course of operations for consideration established and accepted by the Company and related parties, which management believes was reasonable under the circumstances. For information regarding related party expenditures, refer to Note 6 of the consolidated financial statements dated June 30, 2007.

Page 10 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

J. Financial Conditions, Liquidity and Capital Resources

The Company has limited financial resources and finances its operations by raising capital in the equity markets. For the near future, the Company will need to rely on the sale of such securities and/or enter into joint venture agreements with third parties to provide working capital and to finance its mineral property acquisition and exploration activities. Since the Company does not generate any revenue from operations, its long-term profitability will be directly related to the success of its mineral property acquisition and exploration activities.

The Company had a working capital balance of $4,097,660 as at June 30, 2007, compared to a working capital balance of $9,075,713 as at December 31, 2006 and $1,697,865 as at June 30, 2006.

i) Equity financings

Six months ended June 30, 2007

There were no equity financings during the six months ended June 30, 2006

Year ended December 30, 2006

During the year ended December 31, 2006, the Company issued 5,247,855 units at a price of $1.75 per unit for gross proceeds of $9,183,746. Each unit consisted of one common share and one-half of one share purchase warrant, each whole warrant entitling the holder to purchase an additional common share at a price of $2.25 until expiry on June 21, 2008 (accelerated to August 20, 2007 see Note 7 (f) of the consolidated financial statements dated June 30, 2007). The Company incurred net share issuance costs of $502,596, including 291,484 shares were issued for finders’ fees valued at $510,097.

ii) Funds raised by Stock options and share purchase warrants

Six months ended June 30, 2007

During the three months ended June 30, 2007, 825,000 common shares were issued for gross proceeds of $740,950 from shares issued for the exercise of stock options and share purchase warrants.

During the three months ended March 31, 2007, 135,000 common shares were issued for gross proceeds of $83,760 from shares issued for the exercise of stock options.

Year ended December 31, 2006

During the year ended December 31, 2006 6,643,281 common shares were issued for gross proceeds of $2,582,171 from shares issued for the exercise of stock options and share purchase warrants.

Page 11 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

J. Financial Conditions, Liquidity and Capital Resources, continued

iii) Exploration expenditures

Six months ended June 30, 2007

During the three months ended June 30, 2007, the Company spent $2,145,815 mineral property costs, (excluding shares issued for acquisition costs and amounts accrued for exploration accounts payable) of which $301,971 was spent on acquisition costs and $1,843,844 on exploration.

During the three months ended March 31, 2007, the Company spent $2,084,580 mineral property costs, (excluding shares issued for acquisition costs and amounts accrued for exploration accounts payable) of which $301,971 was spent on acquisition costs and $1,885,961 on exploration.

Year ended December 31, 2006

During the year ended December 31, 2007, the Company spent $3,335,212 mineral property costs, (excluding shares issued for acquisition costs and amounts accrued for exploration accounts payable) of which $1,044,352 was spent on acquisition costs and $2,290,860 on exploration.

iv) Commitments

Over the next two years, pursuant to the terms of its option agreements and amendments thereto, the Company has the following expenditure commitments to maintain the properties and earn its interests:

  1.

The Company is required to make payments for the Uranium properties.

  a.

US $50,000 and issue 200,000 common shares on or before September 6, 2007.

  b.

US $40,000 on or before August 10, 2008.

  c.

US $75,000 on or before September 6, 2008.

       
  2.

The Company is required to make either of the following payment options for MacArthur Claim.

  a.

Options 1

 

US $1,675,000 on or before January 15, 2008.

  b.

Options 2

 

US $100,000 on or before January 15, 2008.
US $125,000 on or before January 15, 2009.

       
  3

The Company has the following potential payments for the other properties.

  a.

US $50,000 on or before March 28, 2008.

  b.

US $60,000 on or before March 28, 2009.

       
  4

The Company is required to make the following payments for the Tintic mining claims.

  a.

US $20,000 on or before February 15, 2008.

  b.

US $20,000 on or before February 15, 2009.

Page 12 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

J. Financial Conditions, Liquidity and Capital Resources, continued

v) Outstanding stock options and share purchase warrants

As at August 7, 2007, 4,497,000 stock options are “in the money” (the exercise price is less than the current share trading price) and 4,459,500 are exercisable. If they were exercised, the Company would realize proceeds of $4,361,380.

Due to the acceleration of the expiry date from June 21, 2008 to August 20, 2007 of warrants exercisable at $2.25 it is reasonable to expect that the Company will receive, before these warrants expire, proceeds of $5,903,838. Of this total $601,313 has been received as at August 7, 2007. See Note 7 (f) in the consolidated financial statements dated June 30, 2007.

K. Outstanding Shares, Options and Share Purchase Warrants

i) Issued and outstanding shares

The Company has unlimited authorized, without par value, common shares.

                                                                   Number of shares       Total  
             
Balance as at June 30, 2007   79,072,660   $ 29,162,216  
Issued subsequent to quarter-end            
       Exercise of stock options   85,000   $ 73,250  
       Exercise of share purchase warrants   267,250   $ 601,313  
             
Balance as at August 7, 2007   79,424,910   $ 29,836,779  

ii) Share Purchase Warrants

As at June 30, 2007, there were 2,608,928 share purchase warrants outstanding with an exercise price of $2.25 per share and an accelerated expiry date of August 20, 2007. Share purchase warrants currently outstanding are as follows:

Exercise Expiry Balance Warrants Cancelled Warrants Balance
Price Date June 30, 2007 Issued or Expired Exercised August 7, 2007
$2.25 August 20, 2007 2,608,928 - - 267,250 2,341,678
Weighted average exercise price $2.25 $0.00 $0.00 $2.25 $2.25

Page 13 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

K. Outstanding Shares, Options and Share Purchase Warrants, continued

iii) Stock Options

As at June 30, 2007, there were 4,582,000 stock options outstanding with a weighted average exercise price of $0.98 per share. Options currently outstanding are as follows:

Exercise Expiry   Balance   Granted   Cancelled   Exercised   Balance  
Price Date   June 30, 2007       or Expired       August 7, 2007  
          -   -   -      
     $0.12 January 10, 2008   844,000   -   -   -   844,000  
     $0.34 December 8, 2008   90,000   -   -   -   90,000  
     $0.62 March 25, 2009   410,000   -   -   50,000   360,000  
     $0.35 August 9, 2010   593,000   -   -   10,000   583,000  
     $0.40 January 9, 2011   200,000   -   -   -   200,000  
     $1.04 March 27, 2011   125,000   -   -   -   125,000  
     $1.00 May 19, 2011   75,000   -   -   -   75,000  
     $1.12 June 12, 2011   100,000   -   -   -   100,000  
     $1.55 July 28, 2011   1,745,000   -   -   25,000   1,720,000  
     $1.55 August 23, 2011   100,000   -   -   -   100,000  
     $1.50 September 25, 2011   100,000   -   -   -   100,000  
     $2.05 December 18, 2011   100,000   -   -   -   100,000  
     $2.65 January 11, 2012   75,000   -   -   -   75,000  
     $2.70 February 21, 2012   25,000   -   -   -   25,000  
     $3.33 July 20, 2012   -   2,111,000   -   -   2,111,000  
                         
      4,582,000   2,111,000   -   85,000   6,608,000  
                         
Weighted average exercise price   $0.98   $3.33   $0.00   $0.86   $1.73  

Page 14 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

L. Subsequent Events and Outlook

The following events occurred subsequent to the year end June 30, 2007.

  i)

The company announced on July 26, 2007 that it had acquired the Southwest Tintic porphyry copper prospect, located in the prolific Tintic mining district about 60 miles south of Salt Lake City in west-central Utah. The property covers approximately 5 square miles and includes 85 unpatented U.S. lode claims and 1511 acres of patented mining claims.

     
 

The Tintic district is Utah’s second largest metal producing district, with most historic production of silver, gold and lesser amounts of base metals coming from carbonate replacement deposits and mantos hosted by Paleozoic sedimentary rocks. In the early 1970s, Bear Creek Mining Company discovered the deep Southwest Tintic porphyry copper system hidden 1100 feet below surface under three square miles of barren quartz-sericite-pyrite alteration. The system was cut by six widely spaced core holes which intersected thick intervals of low grade copper.

     
 

Quaterra plans an extensive program of mapping and data compilation with drilling planned for 2008. Targets include an additional porphyry copper target in the Treasure Hill area; shallower or higher grade mineralization within the Southwest Tintic deposit; and high-grade high-sulfidation silver-copper veins.

     
 

Quaterra initially acquired 27 unpatented lode mining claims covering the Southwest Tintic deposit from a prospecting syndicate. The Company can earn a 100% interest in the claims by making annual payments totaling US $ 1 million dollars over a 10 year period and paying a 2% NSR royalty on production from these claims and contiguous claims staked by Quaterra. One- half of the royalty may be purchased at any time by paying $1 million dollars to the syndicate. The patented claims will be acquired by paying owners US $800,000 over a 24 month period, following receipt of a satisfactory title report. These claims will not carry royalty obligations.

     
  ii)

On July 20, 2007 2,111,000 stock options were granted to directors, officers, consultants and employees with an exercise price of $3.33 and an expiry date of July 20, 2012.

     
  iii)

85,000 stock options were exercised for gross proceeds of $73,250 with an average price of $0.86 per share.

     
  iv)

On July 20, 2007 notice was given to holders of the share purchase warrants exercisable at $2.25 with an expiry date of June 21, 2008, of an acceleration of the expiry date from June 21, 2008 to August 20, 2007. As at August 7, 2007 267,250 of these warrants were exercised for gross proceeds of $601,312.

M. Off Balance Sheet

The Company did not enter into any off balance sheet transactions or commitments as defined by National Instrument 51 - 102.

Page 15 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

N. Management’s Responsibility for Financial Information

Preparing financial statements requires management to make estimates and assumptions that affect the reported results. The estimates are based on historical experience and other assumptions that are believed to be reasonable under the circumstances. Critical accounting policies were disclosed in the annual audited financial statements.

Consistent with accepted policies of the Canadian junior mining industry, the Company capitalizes exploration expenditures. This decision, and the timing of the possible recognition of impairment in the mineral property value, can materially affect the reported earnings of the Company.

Management has prepared the information and representations in this annual report. The financial statements have been prepared to conform to generally accepted accounting principles in Canada and, where appropriate, reflect management's best estimates and judgment. The financial information presented throughout this report is consistent with the data presented in the financial statements.

The Company maintains adequate systems of internal accounting and administrative controls. These systems were designed to provide reasonable assurance that relevant and reliable financial information is produced. The independent auditors have the responsibility of auditing the annual financial statements and expressing an opinion on them.

The Board of Directors, through its Audit Committee, is responsible for ensuring that management fulfils its responsibilities for financial reporting and internal control. The Audit Committee is composed of four directors, who meet at least quarterly with management and, at least annually with the external auditors to review accounting, internal control, financial reporting, and audit matters.

Certification of Interim Filing

Based on their knowledge, the President and Chief Financial Officer of the Company have reviewed the interim filing and certified that the interim consolidated financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows. The President and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the Company, and they believe:

i)

the disclosure controls and procedures provide reasonable assurance that material information relating to the Company, including its consolidated subsidiary, are made known to them, particularly during the period in which the annual filings are being prepared; and

   
ii)

the internal control over financial reporting provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Canadian generally accepted accounting principles.

Due to the small size of the Company, there is a lack of segregation of duties which is an internal control weakness. Management mitigates this risk through direct involvement of senior management in day-to-day operations. It is unlikely that this weakness can be properly addressed until the Company grows to a significant size. During the six months ended June 30, 2007, there are no changes in the Company’s internal control over financial reporting that occurred that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Page 16 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

O. Risks and Uncertainties

The principal business of the Company is the exploration and development of mineral properties. Given the nature of the mining business, the limited extent of the Company's assets and the present stage of development, the following risk factors, among others, should be considered.

The Company does not hold any known mineral reserves of any kind and does not generate any revenues from production. The Company’s success will depend largely upon its ability to locate commercially productive mineral reserves. Mineral exploration is highly speculative in nature, involves many risks and frequently is non-productive. There is no assurance that our exploration efforts will be successful. Success in establishing reserves is a result of a number of factors, including the quality of management, the level of geological and technical expertise, the quality of land available for exploration as well as various other factors.

Once mineralization is discovered, it may take several years in the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish proven and probable reserves through drilling and bulk sampling, to determine the optimal metallurgical process to extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities. Because of these uncertainties, no assurance can be given that our exploration programs will result in the establishment or expansion of resources or reserves.

Since the Company does not generate any revenues, it may not have sufficient financial resources to undertake by itself all of its planned mineral property acquisition and exploration activities. Operations will continue to be financed primarily through the sale of securities such as common shares. The Company will need to continue its reliance on the sale of such securities for future financing, which may result in dilution to existing shareholders. Furthermore, the amount of additional funds required may not be available under favorable terms, if at all, and will depend largely on the acquisition and exploration activities pursued.

The ability to attract capital to the Company is dependent on movements in commodity prices. Commodity prices fluctuate on a daily basis and they are affected by a number of factors beyond the control of the Company. If, because of a sustained decline in prices, financing were not available to meet cash operating costs, the feasibility of continuing operations would be evaluated and if warranted, would be discontinued.

The resource industry is intensively competitive in all of its phases, and the Company competes with many other companies possessing much greater financial and technical resources. Competition is particularly intense with respect to the acquisition of desirable undeveloped properties. The principal competitive factors in the acquisition of prospective properties include the staff and data necessary to identify and investigate such properties, and the financial resources necessary to acquire and develop the projects. Competition could adversely affect the Company’s ability to acquire suitable prospects for exploration.

Page 17 of 18



Quaterra Resources Inc. (An Exploration Stage Company)
Management’s Discussion and Analysis
In respect to the Six months ended June 30, 2007

P. Licenses and Permits

The operations of the Company require licenses and permits from various government authorities. The Company believes that it holds all necessary licenses and permits under applicable laws and regulations for work in progress and believes it is presently complying in all material respects with the terms of such licenses and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that the Company will be able to obtain or maintain all necessary licenses and permits that may be required to explore and develop its properties, commence construction or operation of mining facilities or to maintain continued operations that economically justify the cost.

Q. Whistleblower Policy

Effective June 30, 2005, the audit committee adopted resolutions that authorized the establishment of procedures for complaints received regarding accounting, internal controls or auditing matters, and for a confidential, anonymous submission procedure for employees who have concerns regarding questionable accounting or auditing matters. The implementation of the whistleblower policy is in accordance with new requirements pursuant to Multilateral Instrument 52-110 Audit Committees, National Policy 58-201 Corporate Governance Guidelines and National Instrument 58-101 Disclosure of Corporate Governance Practices

R. Forward-Looking Statements

Some of the statements contained in this MD&A are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur.

Forward-looking statements may be identified by such terms as “believes”, “anticipates”, “expects”, “estimates”, “may”, “could”, “would”, “will”, or “plan”. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties.

Actual results relating to, among other things, results of exploration, reclamation, capital costs, and the Company’s financial condition and prospects, could differ materially from those currently anticipated in such statements for many reasons such as; changes in general economic conditions and conditions in the financial markets; changes in demand and prices for the minerals the Company expects to produce;, litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; technological and operational difficulties encountered in connection with the Company’s activities; and changing foreign exchange rates and other matters discussed in this MD&A. This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on the Company’s forward-looking statements. Further information regarding these and other factors, which may cause results to differ materially from those projected in forward-looking statements, are included in the filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time by the Company or on its behalf, except in accordance with applicable securities laws.

Page 18 of 18


EX-99.13 14 exhibit99-13.htm FIRST QUARTER REPORT FOR THE PERIOD ENDED MARCH 31, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.13

1550 – 1185 West Georgia Street,
Vancouver, BC, V6E 4E6
Tel: 604-684-9384 Fax: 604-688-4670
www.quaterraresources.com

Interim Consolidated Financial Statements
March 31, 2007 and 2006

Index Page
Consolidated Financial Statements  
             Consolidated Balance Sheets 1
             Consolidated Statements of Operations and Deficit 2
             Consolidated Statements of Cash Flows 3
             Notes to the Consolidated Financial Statements 4 - 24

Notice of No Auditor Review of Interim Statements

These interim consolidated financial statements of the Company for the three months ended March 31, 2007, were prepared by management and have not been reviewed or audited by the Company’s auditors.



Quaterra Resource Inc.
Consolidated Balance Sheets as at March 31, 2007 and December 31, 2006 (Canadian Dollars)

      Unaudited     Audited  
      March 31, 2007     December 31, 2006  
               
Assets              
Current              
Cash and cash equivalents   $  6,591,325   $  9,112,732  
Receivables     95,545     56,592  
Prepaid and deposits     108,534     70,486  
Amount due from Joint Venture Partner Note 3 (a)   129,553     113,430  
               
      6,924,957     9,353,240  
               
Equipment Note 2   76,516     51,574  
Mineral properties Note 3   9,940,412     7,855,832  
Reclamation bonds     101,532     79,898  
               
    $  17,043,417   $  17,340,544  
               
Liabilities              
Current              
Accounts payable and accrued liabilities   $  336,890   $  251,311  
Due to related parties Note 4   66,571     26,216  
               
      403,461     277,527  
               
Shareholders' Equity              
Share capital Note 5 (b)   27,990,479     27,861,058  
Subscriptions receivable     -     (17,500 )
Contributed surplus Note 5 (b)   3,931,599     3,709,557  
Deficit     (15,282,122 )   (14,490,098 )
               
      16,639,956     17,063,017  
               
    $  17,043,417   $  17,340,544  

Basis of Presentation (Note 1)
Subsequent events (Note 8)

Approved on behalf of the Board of Directors:

  Thomas Patton Robert Gayton

The interim consolidated financial statements and accompanying notes contained herein have not been reviewed by the Company’s auditors
Page 1 of 24



Quaterra Resource Inc.
Consolidated Statements of Operations and Deficit for the three months ended March 31, 2007
and 2006 (Canadian Dollars)

      Three months ended  
      March 31, 2007     March 31, 2006  
               
Expenses              
       Administration   $ 30,000   $  15,000  
       Amortization     7,829     -  
       Consulting              
                 Services     71,825     21,974  
                 Stock based compensation Note 5 (g)   247,849     -  
       Directors and officers fees              
                 Services     11,250     -  
                 Stock based compensation Note 5 (g)   25,306     67,707  
       Investor relations     64,065     23,626  
       Office and general     45,850     37,406  
       Professional fees     75,784     17,646  
       Regulatory fees and taxes     38,183     716  
       Shareholders communications     2,074     1,497  
       Transfer agent     8,984     2,146  
       Travel and promotion     53,970     11,653  
       Wages and benefits     49,637     9,373  
       Less costs recovery     -     (15,800 )
               
      732,606     192,944  
               
Other (income) expenses              
       Interest     (90,354 )   (10,384 )
       Foreign exchange loss     76,971     2,612  
       General exploration     72,801     8,911  
               
      59,418     1,139  
               
Net loss for the year     792,024     194,083  
               
Deficit, beginning of the period     14,490,098     10,659,564  
               
Deficit, end of period   $ 15,282,122   $  10,853,647  
               
Loss per share - basic and diluted   $ 0.01   $  0.00  
               
Weighted average number of shares outstanding     78,122,324     65,571,937  

The interim consolidated financial statements and accompanying notes contained herein have not been reviewed by the Company’s auditors
Page 2 of 24



Quaterra Resource Inc.
Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006.
(Canadian Dollars)

      Three Months Ended  
Cash provided by (used for):     March 31, 2007      March 31, 2006  
               
Operating Activities              
Net loss for the year    $ (792,024 ) $  (194,083 )
               
Items not involving cash:              
     Amortization     7,829     -  
     Stock-based compensation Note 5 (g)   273,155     67,707  
     Cost recovery     -     (15,800 )
               
Operating Cash Flow     (511,040 )   (142,176 )
               
Changes in Non-Cash Working Capital              
     Accounts receivables     (38,953 )   (28,920 )
     Prepaid and deposits     (38,048 )   -  
     Accounts payable and accrued liabilities     (153,141 )   160,897  
     Due to related parties     40,355     8,962  
               
      (189,787 )   140,939  
               
Cash Used in Operating Activities     (700,827 )   (1,237 )
               
Investing Activities              
     Expenditures on mineral properties     (1,845,860 )   (509,079 )
     Due from Joint Venture partner Note 3 (a)   (16,123 )   (193,365 )
     Purchase of equipment     (32,771 )   -  
     Purchase of reclamation bonds     (21,634 )   (54 )
               
Cash Used in Investing Activities     (1,916,388 )   (702,498 )
               
Financing Activities              
     Proceeds from issuance of shares, net of share issue costs     78,308     173,994  
     Subscription receivable     17,500     -  
               
Cash Used in Financing Activities     95,808     173,994  
               
Increase in Cash During the Period     (2,521,407 )   (529,741 )
               
Cash, Beginning of Period     9,112,732     1,786,298  
               
Cash,End of Period    $ 6,591,325   $  1,256,557  

Supplemental cash flow information (Note 7)

The interim consolidated financial statements and accompanying notes contained herein have not been reviewed by the Company’s auditors
Page 3 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

1. Basis of Presentation

Quaterra Resources Inc. (the “Company”) is an exploration stage enterprise incorporated under the laws of British Columbia with mineral properties in USA and Mexico. The Company and its subsidiaries are engaged in the acquisition, exploration and development of precious metal properties and does not have any mineral properties in production. The Company has not determined whether these mineral properties contain ore reserves that are economically recoverable. The ability of the Company to meet its commitments as they become due, including completion of the acquisition, exploration and development of its mineral properties, is dependent on the Company’s ability to obtain the necessary financing. The Company’s shares trade on the Tier 2 Board of the TSX Venture Exchange (“TSX.V”) under the symbol QTA.

The consolidated unaudited interim financial statements of the Company were prepared in accordance with Canadian generally accepted accounting principles for interim financial statements. As a result, these unaudited interim financial statements do not contain all of the information required for annual financial statements and they should be read in conjunction with the Company’s annual audited financial statements for the fiscal year ended December 31, 2006. All material adjustments, which, in the opinion of management, are necessary for a fair presentation of the results of the interim periods, have been reflected. The results for the three months ended March 31, 2007 are stated utilizing the same accounting policies and methods of application as the most recent annual financial statements, but are not necessarily indicative of the results to be expected for the full year.

The Company’s reporting currency is the Canadian dollar and all dollar amounts in these statements are in Canadian dollars, unless otherwise indicated. Certain of the prior periods’ comparative figures have been reclassified to conform to the presentation adopted in the current period.

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, as follows:

  (i)

Minera Agua Tierra S.A. de C.V., incorporated in Mexico;

  (ii)

Quaterra Alaska, Inc., incorporated in Alaska, USA;

  (iii)

Quaterra International Limited, incorporated in the British Virgin Islands;

  (iv)

QTA International Nieves Limited, incorporated in the British Virgin Islands; and

  (v)

Minera Nieves S.A. de C.V., incorporated in Mexico.

All intercompany accounts and transactions were eliminated upon consolidation.

Page 4 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

2. Equipment

Equipment is carried at cost less accumulated amortization. Details of equipment are as follows:

    March 31, 2007     Dec 31, 2006  
    Costs     Accumulated     Net Book     Net Book  
          Amortization     Value     Value  
                         
Vehicles $ 51,358   $ (23,852 ) $ 27,506   $ 29,078  
Equipment   28,914     (10,415 )   18,499     1,234  
Computer   18,163     (2,759 )   15,404     1,843  
Software   23,900     (8,793 )   15,107     19,419  
                         
  $ 122,335   $ (45,819 ) $ 76,516   $ 51,574  

3. Mineral Properties

The Company has interests in several mineral properties in Mexico, Alaska, Nevada, Arizona, Utah and Wyoming. The total capitalized deferred exploration and acquisition costs as at March 31, 2007 are as follows:

Period ended March 31, 2007 Nieves   Los   Uranium   Duke   Big   MacArthur   Other   Total  
      Crestones    Properties    Island   Bar       Properties      
  $    $    $    $    $    $    $    $   
                                 
Acquisitions 1,257,762   73,640   1,811,829   112,285   18,461   327,459   637,218   4,238,654  
Advances -   4,103   23,093   -   -   -   10,549   37,745  
Air support -   -   4,664   -   111,795   -   -   116,459  
Amortization 20,406   -   -   -   -   -   -   20,406  
Assays and surveys 71,559   22,337   29,578   7,930   9,636   -   23,883   164,923  
Camp costs 11,963   20,129   58,835   34   47,567   2,121   1,500   142,149  
Drilling services 1,429,838   304,190   662,979   658,448   155,807   -   -   3,211,262  
Equipment rental and maintenance 3,885   12,065   3,085   37,740   15,453   6,732   -   78,960  
Exploration and other 148,303   8,383   33,218   10,057   30,918   1,937   6,230   239,046  
Field supplies and wages 130,710   163,219   17,088   55,504   110,816   19,659   1,728   498,724  
Geological services 378,143   67,410   572,676   747,741   153,300   78,480   43,816   2,041,566  
Project management 308,347   60,584   256,154   72,049   29,146   38,192   -   764,472  
Reclamation expenses -   -   1,485   -   -   -   -   1,485  
Travel and related costs 48,804   12,276   58,709   36,044   17,413   10,144   8,294   191,684  
Vehicle expenses 12,697   24,295   23,179   4   33,345   2,717   1,190   97,427  
Recovery from Blackberry (1,904,550 ) -   -   -   -   -   -   (1,904,550 )
                                 
Total 1,917,867   772,631   3,556,572   1,737,836   733,657   487,441   734,408   9,940,412  

(1)

Other properties include Gray Hills, Peg Leg, SW Tintic Utah, Carbon County, Yerington, Las Americas, Mirasol, Jaboncillos and Cerro Blanco.

Page 5 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

3. Mineral Properties, continued

The total capitalized deferred exploration and acquisition costs as at December 31, 2006 were as follows:

Period ended December 31, 2006 Nieves   Los   Uranium   Duke   Big   MacArthur   Other   Total  
      Crestones    Properties    Island   Bar       Properties      
  $    $    $    $    $    $    $    $   
                                 
Acquisitions 1,244,464   71,696   1,125,438   112,285   18,461   170,324   454,918   3,197,586  
Advances 308   4,103   66,344   -   -   -   -   70,755  
Air support -   -   4,664   -   111,795   -   -   116,459  
Amortization 20,406   -   -   -   -   -   -   20,406  
Assays and surveys 71,146   17,430   17,611   7,930   9,636   -   8,927   132,680  
Camp costs 11,313   17,811   25,160   34   47,567   -   620   102,505  
Drilling services 1,429,838   144,665   277,846   658,448   105,264   -   -   2,616,061  
Equipment rental and maintenance 3,885   312,065   3,085   37,740   15,453   6,732   -   78,960  
Exploration and other 148,103   6,289   28,980   10,057   81,462   441   5,856   281,188  
Field supplies and wages 129,641   132,322   13,135   55,504   110,816   18,833   1,007   461,258  
Geological services 376,868   43,486   402,867   747,741   152,229   19,776   19,197   1,762,164  
Project management 308,347   55,258   178,824   72,049   27,133   29,093   -   670,704  
Travel and related costs 48,322   10,778   58,709   36,044   17,413   5,142   5,076   181,484  
Vehicle expenses 12,664   18,383   2,634   4   33,345   574   568   68,172  
Recovery from Blackberry (1,904,550 ) -   -   -   -   -   -   (1,904,550 )
                                 
Total 1,900,755   534,286   2,205,297   1,737,836   730,574   250,915   496,169   7,855,832  

(1)

Other properties include Gray Hills, Peg Leg, SW Tintic Utah, Carbon County, Las Americas, Mirasol, and Jaboncillos

     
(a)

Nieves Concessions, Mexico

     

The Company holds a 50% interest in 15 mineral concessions located in northern Zacatecas, Mexico, (the Nieves Concessions) and two inlaying fractions within the Nieves Concessions (Delores and Nazarene), collectively called Nieves.

     

The Company acquired an option on the property pursuant to an Assignment made March 26, 1999 of the Underlying Agreement by Western Silver Corporation (“Western”), a company with common directors and officers, to the Company.

     

To acquire its interest, the Company issued 1,444,460 common shares to Western valued at $288,892, issued 360,000 common shares to the concessionaires valued at $72,000 and in accordance with the terms of the Underlying Agreement made scheduled option payments to the concession holders, totalling US $70,000 over three years. In addition, to acquire the interest in the claim fractions the Company paid US $40,000 to the concessionaires. Commencing January 26, 2004, an annual advance minimum royalty payment (“AMR”) of US $75,000 is due to the concession holders until the commencement of commercial production.

Page 6 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

3.

Mineral Properties, continued

       
(a)

Nieves Concessions, Mexico, continued

       

The Nieves concessions are subject to a maximum 3% net smelter return royalty (“NSR”) to the original concession holders, which the Company may purchase at any time for US $2 million. In addition, Kennecott Exploration Company, the optionor in the initial Underlying Agreement, retains NSR royalties of 2% on certain core claims and 1% on certain peripheral claims.

       

Funds in the amount of US $1,500,000 (C $1,904,550) were advanced to the Company pursuant to the terms of an agreement made April 10, 2003 with Blackberry Ventures I, LLC (“Blackberry”), a US-based investment partnership, whereby Blackberry could earn a 50% interest in the Nieves silver property in Mexico or the Duke Island property in Alaska by providing advance funding to the Company to fund exploration expenditures.

       

The agreement with Blackberry stipulated that once all monies received from the advances had been incurred on exploration expenditures, Blackberry effectively exercised its option and earned a 50% interest in the Nieves property. In August 2005, the parties formed a joint venture to proceed with exploration on the property. As at March 31, 2007, Blackberry owed the Company $129,553 (2005: $113,430) for its share of joint venture exploration expenditures that have been made on the property.

       
(b)

Los Crestones Property, Mexico

       

The Company holds a 100% interest in a mineral concession located in northern Durango, Mexico. In April 2004, the Company issued 25,000 common shares valued at $15,000, to an individual as a finder’s fee for his role in the identification and acquisition of the property.

       
(c)

Uranium Properties, Arizona, Utah and Wyoming

       

In an agreement made effective June 22, 2005 with North Exploration LLC, a Nevada limited partnership, the Company acquired an option to purchase mining claims situated in Arizona, Utah and Wyoming. To exercise the option, the Company is required to make staged payments totalling US $500,000 over five years and to issue 600,000 common shares over three years, as follows: TSX.V regulatory approval for this agreement was received on September 6, 2005.

       
(i)

US $15,000 and issue 200,000 common shares on or before September 6, 2005 (Paid and issued).

(ii)

US $25,000 and issue 200,000 common shares on or before September 6, 2006 (Paid and issued).

(iii)

US $50,000 and issue 200,000 common shares on or before September 6, 2007.

(iv)

US $75,000 on or before September 6, 2008.

(v)

US $135,000 on or before September 6, 2009.

(vi)

US $200,000 on or before September 6, 2010.

       

If the Company meets the above terms and conditions and elects to exercise the option, then the property may be purchased with a further payment of US $100. The agreement is subject to a 2% NSR payable upon commencement of commercial production, which the Company may reduce to 1% by purchase for US $1 million.

Page 7 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

3. Mineral Properties, continued

  (c)

Uranium Properties, Arizona, Utah and Wyoming, continued

       
 

In an agreements made effective August 10, 2006 and March 23 2007 with Nustar Exploration LLC, the Company acquired mining claims in the Uranium project areas.

       
 

Pursuant to this agreement the Company’s commitments would be as follows:

       
  (i)

Initial payments of US $20,000 and US $25,500 (Paid).

  (ii)

US $30,000 on or before August 10, 2007.

  (iii)

US $40,000 on or before August 10, 2008.

  (iv)

US $100,000 on or before August 10, 2009.

       
 

Under agreement dated August 10, 2006, the property is subject to a 4% royalty of which a 2% royalty can be bought back for $500,000.

     
 

Under agreement dated March 23 2007 the Company US $100,000 advance payment on the 4% yellowcake royalty on any claims retained by the Company. Upon payment of purchase price, the Company will own the right to buy back all but 1% of the 4% royalty for $1,000,000 per breccia pipe.

       
  (d)

Duke Island Property, Alaska

       
 

The Company has a 100% interest in 140 mining claims in Alaska (129 federal claims and 11 state claims) on Duke Island, which is near Ketchikan.

       
  (e)

Big Bar Property, Alaska

       
 

The Company has a 100% interest in Big Bar project, which consists of seven state mining claims on the Seward Peninsula, approximately 45 kilometers (110 miles) northeast of Nome, Alaska.

       
  (f)

MacArthur Claim

       
 

Pursuant to an agreement made October 2005 with North Exploration LLC, the Company acquired the right to earn an interest in 66 unpatented mining claims covering the former MacArthur copper- oxide mine, in the Yerington district of Lyon County, Nevada. To earn a 100% interest, subject to a 2% NSR, the Company is required to make staged payments totaling US $1,785,000 by January 15, 2008 as follows:

       
    (i) Option 1 US $10,000 upon execution (Paid).
 

(ii)

US $25,000 on or before January 15, 2006 (Paid).
    (iii) US $75,000 on or before January 15, 2007 (Paid).
    (iv) US $1,675,000 on or before January 15, 2008.
       
 

Alternatively, since the Company has met its obligation of US $100,000 in stage payments by January 15, 2007, and if the Company incurs US $500,000 in exploration expenditures by January 15, 2008, then the Company may elect to acquire the property by making additional payments totaling US $2,645,000 as follows:

Page 8 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

3. Mineral Properties, continued

  (f)

MacArthur Claim, continued

       
 

Option 2

       
  (i)

US $100,000 on or before January 15, 2008.

  (ii)

US $125,000 on or before January 15, 2009.

  (iii)

US $2,420,000 on or before January 15, 2010.

       
 

The property is subject to a 2% NSR, 1% of which the Company may purchase for US $1 million.

       
 

Under an amendment dated January 17, 2007 to the original agreement made October 2005 between the Company and North Exploration LLC a US $350,000 deduction will be made from the final payments, (option one originally US $1,675,000 or option two originally US $2,420,000) as the Company has paid this amount to Charles Gary Clifton in advance.

       
  (g)

Other Properties

       
 

Other properties include Gray Hills, Peg Leg, SW Tintic Utah, Yerington, and Carbon County, properties in the USA and Las Americas, Mirasol, Jaboncillos and Cerro Blanco properties in Mexico.

       
 

Pursuant to an agreement made December 2006 with Tom Turner, the Company acquired a 100% interest in three mineral concessions (Jaboncillos, Mirasol and Las Americas) located in Mexico for consideration of 200,000 shares with a deemed value of $1.53 per share for a total of $306,000 (Note 5 (d)).

       
 

Pursuant to an agreement made March 28 2007 with Andryck Patterson and Daniel Soto, the Company acquired a 100% interest in two prospect permits located in Culberson County, Texas. The payments for these prospects are as follows:

       
  (i)

Initial payment of US $50,000. (Paid)

  (ii)

US $50,000 on or before March 28, 2008.

  (iii)

US $60,000 on or before March 28, 2009

  (iiii)

US $70,000 on or before March 28, 2010

  (iv)

US $150,000 on or before March 28, 2011

  (iii)

US $220,000 on or before March 28, 2012

       
 

The option agreements for the Arc and Brown Claims, in the Skeena Mining District were terminated in accordance with their terms and the 100% interest reverted back to the Company.

Page 9 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

3. Mineral Properties, continued

  (h)

Title to Mineral Properties

     
 

Title to mineral properties may be affected by unregistered prior agreements or transfers, as well as undetected defects. Although the Company has verified title to its mineral properties in accordance with standard industry practices applicable for the current stage of exploration, these procedures do not guarantee the Company’s interests in its mineral properties.

     
  (i)

Environmental Expenditures

     
 

The operations of the Company may, in the future, be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company's policy is to meet or, if possible, surpass standards set by relevant legislation, by application of technically proven and economically feasible measures.

     
 

Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. Estimated future removal and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.


4. Related Party Transactions

As at March 31, 2007, $66,571 (December 31, 2006: $26,216) was due to directors or senior officers of the Company or to companies controlled by them, for various services rendered.

The following table summarizes the Company’s related party transactions for the three months ended March 31, 2007 and 2006.

Page 10 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

4. Related Party Transactions, continued

      Three Months Ended March 31,  
      2007     2006  
               
Services              
               Administration fee   $  30,000   $  15,000  
               Consulting   $  27,162   $  18,620  
               Directors' and officers' fees   $  11,250   $  -  
               General exploration   $  -   $  2,015  
               Investor relations   $  13,993   $  12,840  
               Professional fees              
                         Accounting   $  18,589   $  19,154  
                         Legal fees   $  4,302   $  4,265  
               Wages and benefits   $  43,539   $  9,374  
Cost recovery              
               Equipment   $  2,299   $  -  
               Investor relations   $  1,026     467  
               Office and administration   $  25,322   $  5,739  
               Regulatory   $  -   $  578  
               Share issue costs (1 ) $  28,869   $  7,206  
               Travel and promotions   $  9,772   $  5,854  
Mineral properties              
                         Big Bar (2 ) $  16,616   $  -  
                         Uranium properites (2 ) $  24,155   $  25,596  
                         MacArthur (2 ) $  9,936   $  12,242  

(1)

This amount has been capitalized and is included in share capital on the balance sheet

(2)

These amounts have been capitalized and are included in mineral properties on the balance sheet

(3)

Stock based compensation is not included in these related party transactions (Note 5(g))

These transactions were made in the normal course of operations and measured at the exchange amount, which is the amount of consideration established and agreed to by the Company and related parties. They are considered related party due the following relationships to the Company:

  (a)

A private company controlled by directors or officers of the Company.

  (b)

A director or officer of the Company.

  (c)

An association of lawyers in which an officer of the Company is a member (resigned May 1, 2006).

Page 11 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

5. Share Capital

  (a)

Authorized

     
 

The Company has unlimited authorized, without par value, common shares.

     
  (b)

Issued and Outstanding


    Number     Total     Contributed  
    of shares           Surplus  
  Balance as at December 31, 2005 65,522,200   $  15,172,975   $  1,013,998  
           Issued for cash:                
                       Private placements 5,247,855     9,183,746     -  
                       Exercised share purchase warrants 3,814,281     1,907,141     -  
                       Exercised stock options 2,829,000     675,030     -  
           Total issued for cash 11,891,136     11,765,917     -  
           Issued for mineral property acquisitions 400,000     606,000     -  
           Issued for brokerage fees 291,484     510,097     -  
           Fair value of stock options exercised -     349,445     (349,445 )
           Stock based compensation -     -     3,045,004  
           Subtotal before share issue costs 12,582,620     13,231,459     2,695,559  
           Share issue costs -     (543,376 )   -  
  Balance as at December 31, 2006 78,104,820     27,861,058     3,709,557  
           Issued for cash:                
                       Exercised stock options 135,000     83,760     -  
           Total issued for cash 135,000     83,760     -  
           Fair value of stock options exercised -     51,113     (51,113 )
           Stock based compensation -     -     273,155  
           Subtotal before share issue costs 135,000     134,873     222,042  
           Share issue costs -     (5,452 )   -  
  Balance as at March 31, 2007 78,239,820   $  27,990,479   $  3,931,599  

Page 12 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

5. Share Capital, continued

  (c)

Private Placements

       
 

There were no private placements during the three months ended March 31, 2007.

       
 

During the year ended December 31, 2006, the Company issued 5,247,855 units at a price of $1.75 per unit for gross proceeds of $9,183,746. Each unit consisted of one common share and one-half of one share purchase warrant, each whole warrant entitling the holder to purchase an additional common share at a price of $2.25 until expiry on June 21, 2008.

       
 

The Company incurred net share issuance costs of $502,596, including 291,484 shares were issued for finders’ fees valued at $510,097, resulting in net proceeds of $8,681,150 from the private placement.

       
  (d)

Shares Issued for Mineral Property

       
 

There were no shares issued for mineral properties during the three months ended March 31, 2007

       
 

During the year ended December 31, 2006, the Company issued 400,000 common shares for value at $606,000.

       
  (i)

200,000 common shares value at $1.50 per share, $300,000 in total, pursuant to the terms of the uranium properties agreement (Note 3 (c)).

       
  (ii)

200,000 common shares value at $1.53 per share, $306,000 in total, pursuant to the acquisition of three mineral concessions in Mexico (Note 3 (g)).

Page 13 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

5. Share Capital, continued

  (e)

Share Purchase Warrants

     
 

A summary of the Company’s share purchase warrant transactions for the three months ended March 31, 2007 are as follows:


  Exercise   Expiry   Balance   Warrants   Cancelled   Warrants   Balance  
  Price   Date   Dec. 31, 2006   Issued   or Expired   Exercised   March 31, 2007  
  $2.25   June 21, 2008   2,623,928   -   -   -   2,623,928  
  Weighted average exercise price   $2.25   $0.00   $0.00   $0.00   $2.25  

A summary of the Company’s share purchase warrant transactions for the year ended December 31, 2006 are as follows:

  Exercise   Expiry   Balance   Warrants   Cancelled   Warrants   Balance  
  Price   Date   Dec. 31, 2005   Issued   or Expired   Exercised   Dec. 31, 2006  
                             
  $0.66   January 20, 2006   120,000   -   120,000   -   -  
  $0.50   September 27, 2007   3,250,000       -   3,250,000   -  
  $0.50   September 27, 2007   564,281       -   564,281   -  
  $2.25   June 21, 2008   -   2,623,928   -   -   2,623,928  
                             
          3,934,281   2,623,928   120,000   3,814,281   2,623,928  
                             
  Weighted average exercise price   $0.50   $2.25   $0.66   $0.50   $2.25  

  (f)

Stock Options

     
 

As at March 31, 2007 and December 31, 2006, the Company had a stock option plan (the “Plan”), allowing for the reservation of common shares issuable under the Plan to a maximum 10% of the number of issued and outstanding common shares of the Company at any given time. The term of any stock option granted under the Plan may not exceed five years and the exercise price may not be less than the closing price of the Company’s shares on the last business day immediately preceding the date of grant, less any permitted discount. On an annual basis, the Plan requires approval by the Company’s shareholders and submission for regulatory review and acceptance.

Page 14 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

5. Share Capital, continued

  (f)

Stock Options, continued

     
 

The purpose of the Plan is to provide directors, officers, key employees and certain other persons who provided services to the Company and its subsidiaries with an increased incentive to contribute to the future success and prosperity of the Company.

     
 

As at March 31, 2007, 5,317,000 of the options outstanding were vested and exercisable and 5,233,250 were vested and exercisable as at December 31, 2006.

     
 

Transactions for the three months ended March 31, 2007 are as follows:


  Exercise   Expiry   Balance   Options   Options   Options   Balance  
       Price   Date   Dec. 31, 2006     Granted     Cancelled/Expired     Exercised    March 31, 2007   
                             
     $0.12   January 10, 2008   937,000   -   -   33,000   904,000  
     $0.25   October 2, 2008   50,000   -   -   -   50,000  
     $0.34   December 8, 2008   90,000   -   -   -   90,000  
     $0.62   March 25, 2009   590,000   -   -   30,000   560,000  
     $0.35   August 9, 2010   850,000   -   -   42,000   808,000  
     $0.40   January 9, 2011   200,000   -   -   -   200,000  
     $1.04   March 27, 2011   125,000   -   -   -   125,000  
     $1.00   May 19, 2011   75,000   -   -   -   75,000  
     $1.12   June 12, 2011   100,000   -   -   -   100,000  
     $1.55   July 28, 2011   2,110,000   -   -   30,000   2,080,000  
     $1.55   August 23, 2011   100,000   -   -   -   100,000  
     $1.50   September 25, 2011   100,000   -   -   -   100,000  
     $2.05   December 18, 2011   100,000   -   -   -   100,000  
     $2.65   January 11, 2012   -   75,000   -   -   75,000  
     $2.70   February 21, 2012   -   25,000           25,000  
                             
          5,427,000   100,000   -   135,000   5,392,000  
                             
  Weighted average exercise price   $0.92   $2.66   $0.00   $0.62   $0.96  

Page 15 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

5. Share Capital, continued

  (f)

Stock Options, continued

     
 

Transactions for the year ended December 31, 2006 are as follows:


  Exercise   Expiry   Balance   Options   Options   Options   Balance  
       Price   Date   Dec. 31, 2005    Granted    Cancelled/Expired      Exercised    Dec. 31, 2006    
                             
     $0.15   February 8, 2006   50,000   -   -   50,000   -  
     $0.15   May 7, 2006   55,000   -   -   55,000   -  
     $0.12   June 8, 2006   515,000   -   -   515,000   -  
     $0.19   September 27, 2006   490,000   -   -   490,000   -  
     $0.12   January 10, 2008   1,591,000   -   -   654,000   937,000  
     $0.25   October 2, 2008   75,000   -   -   25,000   50,000  
     $0.34   December 8, 2008   195,000   -   -   105,000   90,000  
     $0.65   March 2, 2009   100,000   -   100,000   -   -  
     $0.62   March 25, 2009   800,000   -   -   210,000   590,000  
     $0.35   August 9, 2010   1,575,000   -   -   725,000   850,000  
     $0.40   January 9, 2011   -   200,000   -   -   200,000  
     $1.04   March 27, 2011   -   125,000   -   -   125,000  
     $1.00   May 19, 2011   -   75,000   -   -   75,000  
     $1.12   June 12, 2011   -   100,000   -   -   100,000  
     $1.55   July 28, 2011   -   2,110,000   -   -   2,110,000  
     $1.55   August 23, 2011   -   100,000   -   -   100,000  
     $1.50   September 25, 2011   -   100,000   -   -   100,000  
     $2.05   December 18, 2011   -   100,000   -   -   100,000  
                             
          5,446,000   2,910,000   100,000   2,829,000   5,427,000  
                             
  Weighted average exercise price   $0.29   $1.44   $0.65   $0.24   $0.92  

  (g) Value Assigned to Stock Options

The fair value of stock options granted using the Black-Scholes option pricing model was calculated with the following weighted average assumptions:

    March 31, 2007    December 31, 2006    March 31, 2006  
               
  Risk-free interest rate 4.04%   4.02%   3.90%  
  Expected Share price volatility 167.40%   121.60%   123.76%  
  Expected option life in years 3.0   3.5   3.5  
  Expected dividend yield 0%   0%   0%  

Page 16 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

5. Share Capital, continued

  (g)

Value Assigned to Stock Options

     
 

The total calculated fair value of options expensed during the three months ended March 31, 2007 was $273,155 (2006: $67,707) and includes amounts calculated from options issued during the year ended December 31, 2006 but vesting during the three months ended March 31, 2007.

     
 

This stock based compensation is included in the statement of operations as follows:


    March 31, 2007   March 31, 2006  
    Number of     Stock-based   Number of     Stock-based  
    Options issued     Compensation   Options issued     Compensation  
                       
  Consulting 100,000   $  247,849   -   $  -  
  Directors' and officers' fees -     25,306   325,000     67,707  
  Wages and benefits -     -   -     -  
                       
  Total 100,000   $  273,155   325,000   $  67,707  

6. Segmented Information

The Company‘s non-current assets are distributed by geographic location as follows:

          March 31, 2007                 December 31, 2006        
    Equipment     Mineral     Reclamation     Total     Equipment     Mineral     Reclamation     Total  
          Properties     Bond                 Properties     Bond        
                                                 
Canada $  23,467   $  -   $  -   $  23,467   $  24,997   $  -   $  -   $  24,997  
Mexico   52,042     3,128,185     -     3,180,227     25,488     2,785,632     -     2,811,120  
U.S.A.   1,007     6,812,227     101,532     6,914,766     1,089     5,070,200     79,898     5,151,187  
                                                 
  $  76,516   $ 9,940,412   $  101,532     10,118,460   $  51,574   $ 7,855,832   $  79,898   $ 7,987,304  

Page 17 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

7. Supplemental Cash Flow Information.

      Three Months Ended  
      March 31, 2007     March 31, 2006  
               
  Cash Items            
         Interest received $  83,378   $  10,384  
         Share issue costs $  5,452   $  7,206  
  Non-Cash Items            
         Accrued interest $  6,976   $  -  

8. Subsequent Events

The following events occurred subsequent to period ended March 31, 2007:

  (a)

310,000 stock options were exercised for gross proceeds of $240,700 with an average price of $0.78 per share and 15,000 share purchase warrants were exercised for gross proceeds of $33,750 with an average price of $2.25 per share.

       
  (b)

The Company has agreed to acquire all the assets of Arimetco Inc., a Nevada corporation, in the Yerington Mining District, Lyon County, Nevada. This transaction is subject to a 180 day review period and the Company may terminate this process if dissatisfied with the condition of the property or fails to obtain requested environmental clearances for past mining-related activities. Under certain circumstances, the review period may be extended for a further 120 day.

       
 

On receiving regulatory approval and providing that properties pass the review process the Company’s commitments would be as follows:

       
  (ii)

Payment of US $500,000.

  (ii)

250,000 common shares.

       
 

Under this acquisition, the property is subject to a 2% net smelter return royalty capped at US $7.5 million on production from any claims owned by Quaterra in the Yerington and MacArthur mine areas. See news release NR-02-07 dated May 1, 2007.

       
  (c)

After receiving TSX.V approval on May 2, 2007 the Company has issued 7,840 common shares in settlement of $22,500 debt owed by the Company.

Page 18 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

9.   Differences between Canadian and United States generally accepted accounting principles (GAAP)

  (a) Differences in accounting principles

  (i)

Exploration expenditures

     
 

Under Canadian GAAP, acquisition costs of mineral interests and exploration expenditures are capitalized (Note 3).

     
 

Under US GAAP, exploration costs incurred in locating areas of potential mineralization are expensed as incurred. Commercial feasibility is established in compliance with SEC Industry Guide 7, which consists of identifying that part of a mineral deposit that could be economically and legally extracted or produced at the time of the reserve determination. After an area of interest has been assessed as commercially feasible, expenditures specific to the area of interest for further development are capitalized. In deciding when an area of interest is likely to be commercially feasible, management may consider, among other factors, the results of prefeasibility studies, detailed analysis of drilling results, the supply and cost of required labour and equipment, and whether necessary mining and environmental permits can be obtained. To date no exploration expenses have been capitalized.

     
 

The Company has adopted EIFT 04-02 and separately reports the aggregate carrying amount of mineral rights. Mineral rights include an option for the Company to acquire the rights to extract and retain at least a portion of the benefits from the mineral deposits. Acquisition costs include cash and the fair market value of common shares for the mineral rights. These capitalized costs will be amortized over the estimated life of the property following commencement of commercial production or written off if the property is sold, allowed to lapse or abandoned, or when an impairment of value has occurred.

Page 19 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

9.   Differences between Canadian and United States generally accepted accounting principles (GAAP)

  (a)

Differences in accounting principles

     
 

(ii)

 Reconciliation of total assets, liabilities and stockholders’ equity:

      March 31, 2007     December 30, 2006  
  Total assets per Canadian GAAP $  17,043,417   $  17,340,544  
  Expenditures on resource properties   (6,675,770 )   (5,196,365 )
  expensed under US GAAP            
  Total Liabilities and equity per US GAAP $  10,367,647   $  12,144,179  
  Total liabilities per Canadian GAAP $  403,461   $  277,527  
  Adjustments to US GAAP   -     -  
  Total liabilities per US GAAP   403,461     277,527  
  Total equity per Canadian GAAP   16,639,956     17,063,017  
  Expenditures on resource properties   (6,675,770 )   (5,196,365 )
  expensed under US GAAP            
  Total equity per US GAAP   9,964,186     11,866,652  
  Total Liabilities and equity per US GAAP $  10,367,647   $  12,144,179  

Page 20 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

9. Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

  (a)

Differences in accounting principles, continued

     
 

(iii)

 Reconciliation of net loss reported in Canadian GAAP and US GAAP:

      Three months ended March 31,  
      2007     2006  
  Reconciliation of net loss from Canadian            
  GAAP to US GAAP            
  Loss for year per Canadian GAAP $  792,024   $  194,083  
  Expenditures on mineral properties   1,479,405     393,038  
  Net loss for year per US GAAP   2,271,429     587,121  
  Deficit, Beginning of year per US GAAP   19,686,463     13,209,578  
  Deficit, End of year as per US GAAP $  21,957,892   $  13,796,699  
  Net loss per share for the year in            
  accordance with Canadian GAAP $ 0.02   $ 0.00  
  Total differences $ 0.01   $ 0.01  
  Net loss per share for the year in            
  accordance with US GAAP $ 0.03   $ 0.01  
  Weighted average number of common            
  shares outstanding   78,122,324     65,571,937  

Page 21 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

9.   Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

  (a)

Differences in accounting principles, continued

     
 

(iv)

 Reconciliation of cash flows reported in Canadian GAAP and US GAAP:

      Three months ended  
      March 31, 2007     March 31, 2006  
               
  Cash used in operating activities            
  in accordance with Canadian GAAP $  (657,205 ) $  (1,237 )
  Adjustments to net loss involving use of cash            
               Write-off of expenditures on mineral interest   (1,479,405 )   (393,038 )
               
  Cash used in operating activities            
  in accordance with US GAAP   (2,136,610 )   (394,275 )
               
  Cash used in investing activities            
  in accordance with Canadian GAAP   (1,960,010 )   (702,498 )
  Reclassification of expenditures on mineral property interest   1,479,405     393,038  
               
  Cash used in investing activities            
  in accordance with US GAAP   (480,605 )   (309,460 )
               
  Cash used in Financing Activities            
  in accordance with Candian and US GAAP   95,808     173,994  
               
  Increase in cash during the period            
  in accordance with Candian and US GAAP   (2,521,407 )   (529,741 )
  Cash, beginning of period            
  in accordance with Candian and US GAAP   9,112,732     1,786,298  
               
  Cash, end of period            
  in accordance with Candian and US GAAP $  6,591,325   $  1,256,557  

Page 22 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

9.   Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

  (b)

Recent accounting pronouncements, continued

       
  (i)

In December 2004, FASB issued Statement No. 123 (revised 2004), Share-Based Payment (“SFAS 123(R)”), which requires the measurement and recognition of compensation expense for all stock-based compensation payments and supersedes the Company’s current accounting under APB 25. SFAS 123(R) is effective for all annual periods beginning after June 15, 2005. In March 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to the adoption of SFAS 123(R). This standard will not have an impact on the Company’s financial statements as it already applies the fair value method of accounting for its stock options.

       
  (ii)

FAS 153, Exchanges of Non-Monetary Assets. The provisions of this statement are effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for non-monetary asset exchanges occurring in fiscal periods beginning after December 16, 2004. The provisions of this statement should be applied prospectively. There is no impact on the Company’s financial statements.

       
  (iii)

FIN 46(R), Consolidation of Variable Interest Entities, applies at different dates to different types of enterprises and entities, and special provisions apply to enterprises that have fully or partially applied Interpretation 46, or Interpretation 46 (R) is required in financial statements of public entities that have interests in variable interest entities or potential variable interest entities commonly referred to as special- purpose entities for periods ending after December 15, 2003. Application by public entities is required in financial statements for periods other than special-purpose entities and by non-public entities to all types of entities is required at various dates in 2004 and 2005. In some instances, enterprises have the option of applying or continuing to apply Interpretation 46 for a short period of time before applying Interpretation 46(R). There is no impact on the Company’s financial statements.

       
  (iv)

SFAS 154, Accounting Changes and Error Corrections. This new standard replaces APB Opinion No. 20, Accounting Changes, and FASB 3, Reporting Accounting Changes in Interim Financial Statements. Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived non-financial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a "restatement." The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005. There is no impact on the Company’s financial statements.

Page 23 of 24



Quaterra Resources Inc.
Notes to the Consolidated Financial Statements
Three months ended March 31, 2007 and 2006 (Canadian Dollars)

9.   Differences between Canadian and United States generally accepted accounting principles (GAAP), continued

  (b) Recent accounting pronouncements, continued

(vii)

SFAS 157, Fair Value Measurements. The provisions of this standard are to provide guidance for using fair value to measure assets and liabilities. The standard clarifies methods for measuring items not actively traded and the principles that fair value should be based upon when pricing an asset or liability. The provisions of Statement 157 are effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year. There is no impact on the Company’s financial statements.

   

(viii)

On July 13, 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109. Interpretation 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with Statement 109 and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Additionally, Interpretation 48 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Interpretation 48 is effective for fiscal years beginning after December 15, 2006, with early adoption permitted. The Company is currently evaluating whether the adoption of Interpretation 48 will have a material effect on its consolidated financial position, results of operations or cash flows.

Page 24 of 24


EX-99.14 15 exhibit99-14.htm MD&A FOR THE PERIOD ENDED MARCH 31, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.14

1550 – 1185 West Georgia Street,
Vancouver, BC, V6E 4E6
Tel: 604-684-9384 Fax: 604-688-4670
www.quaterraresources.com

Management’s Discussion and Analysis

In respect to the three months ended March 31, 2007

Dated: May 8, 2007

Index  Page
   
A - Introduction 1
B - Qualified person 1
C - Exchange information and conversion tables 2
D - Description of business 2
E - Description of mineral properties 3 - 29
F - Mineral property expenditure 30 - 31
G - Results of operations 31 - 33
H - Quarterly results 33
I - Related party information 34
J - Financial conditions, liquidity and capital resources 34
K - Outstanding shares, options and share purchase warrants 34 - 35
L - Subsequent events and outlook 35 - 36
M - Off balance sheet 36
N - Managements responsibility for financial information 36
O - Risks and uncertainties 37
P - Licenses and permits 38
Q - Whistleblower policy 38
R - Forward looking statements 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

A. Introduction

The following Management Discussion and Analysis (“MD&A”) of the operating results and financial condition of Quaterra Resources Inc. (the “Company”) compares results for the three months ended March 31, 2007 (“Q1 2007”) to the three months ended March 31, 2006 (“Q1 2006”). These statements should be read in conjunction with the financial statements for the three months ended March 31, 2007 and the audited financial statements for the year ended December 31, 2006. All notes referenced herein may be found in the consolidated financial statements dated March 31, 2007.

The financial statements were prepared in accordance with Canadian generally accepted accounting principles. This MD&A, dated as of May 8, 2007, was prepared to conform to National Instrument 51-102 F1 and was approved by the Board of Directors prior to release.

The Company is a reporting issuer in British Columbia and Alberta and its shares trade on the Tier 2 Board of the TSX Venture Exchange (“TSX.V”) under the symbol QTA.

The Company’s reporting currency is the Canadian dollar and all dollar amounts are in Canadian dollars, unless otherwise indicated.

Certain forward-looking statements are discussed in the MD&A with respect to the Company’s activities and future financial results. These are subject to significant risks and uncertainties that may cause projected results or events to differ materially from actual results or events.

Additional information relating to the Company, including detailed drill results previously disclosed in news releases, is available on SEDAR at www.sedar.com. Terms of property option agreements are described more fully in the notes to the consolidated financial statements.

B. Qualified Person

Dr. Thomas C. Patton, P. Geo., the President and Chief Executive Officer of the Company, is the qualified person responsible for the preparation of the technical information included in this MD&A. Dr. Patton graduated from the University of Washington in 1971 (Ph.D.) and has worked with both junior and senior mining companies. His exploration efforts have concentrated on North America and have resulted in several significant discoveries and led to the expansion of mineral reserves at existing operations. He served as the President and Chief Operating Officer for Western Silver Corporation from January 1998 to May, 2006. Previously, Dr. Patton held senior positions with Rio Tinto PLC and Kennecott Corporation. Dr. Patton is a member of the Society of Economic Geologists and the American Institute of Mining & Metallurgical Engineers.

Eugene Spiering joined the company on January 10, 2006 as Vice President of Exploration. Mr. Spiering has over 28 years of experience in the mining exploration industry. He most recently held the position of Vice President, Exploration at Rio Narcea Mines Ltd., where he managed a team that discovered two gold deposits and completed the final definition of one nickel deposit in Spain. All three of these deposits are currently in production. Prior to his tenure at Rio Narcea, Mr. Spiering held the position of senior geologist with Energy Fuels Nuclear, Inc. where his responsibilities included uranium exploration in northern Arizona and gold exploration in western US and Venezuela. He received his Bachelor of Science-Geology degree from the University of Utah. Mr. Spiering is a member of the Society of Economic Geologists, the Australasian Institute of Mining and Metallurgy and the American Association of Petroleum Geologists.

Page 1 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

C. Exchange information and conversion tables.

For ease of reference, the following information is provided:

U.S. Dollars to Canadian Dollars   
          December 31,  
    March 31, 2007     2006     2005  
                   
Rate at end of period   1.1559     1.16640     1.16600  
Average rate for period   1.17207     1.13461     1.21173  
High for period   1.1873     1.17960     1.27320  
Low for period   1.1498     1.09260     1.14240  
                   
 www.oanda.com    

Conversion Table  
             Imperial         Metric  
             
1 Acre =   0.404686   Hectares  
1 Foot =   0.304800   Metres  
1 Mile =   1.609344   Kilometres  
1 Ton =   0.907185   Tonnes  
1 Ounce (troy)/ton =   34.285700   Grams/Tonne  
             
Information from www.onlineconversion.com  

 Precious metal units and conversion factors     
                                     
ppb - Part per billion     1   ppb   =   0.0010   ppm   =   0.000030   oz/t  
ppm - Part per million     100   ppb   =   0.1000   ppm   =   0.002920   oz/t  
oz - Ounce (troy)     10,000   ppb   =   10.0000   ppm   =   0.291670   oz/t  
oz/t - Ounce per ton (avdp.)     1   ppm   =   1.0000   ug/g   =   1.000000   g/tonne  
g - Gram                                    
g/tonne - gram per metric ton     1   oz/t   =   34.2857   ppm              
mg - milligram     1   Carat   =   41.6660   mg/g              
kg - kilogram     1   ton (avdp.)   =   907.1848   kg              
ug - microgram     1   oz (troy)   =   31.1035   g              
                                     
Information from www.onlineconversion.com  

Page 2 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

D. Description of Business

The Company acquires and explores mineral properties in the Americas. It is currently exploring for base and precious metals in Mexico and Alaska, uranium in Arizona, and copper in Nevada.

E. Description of Mineral Properties

(i) Nieves Property – Mexico

Location and Access

The Company owns a 50% interest in the Nieves silver property located in northern Zacatecas State, Mexico about 90 kilometers north of Penoles’ world-class Fresnillo silver mine (Figure 1).


The project occurs within a northwest trending mineral belt known as the Faja de Plata, which hosts many of the world’s premier silver deposits including San Martin, Fresnillo, Zacatecas and Real de Angeles. The company’s land block consists of 15 mineral concessions covering an area of approximately 50 square kilometers (18 square miles).

 

The small town of Nieves (now re-named Francisco R. Murguia) can be accessed from highway 49 along a 17 kilometer paved side road. Nieves is the business center for the Quaterra exploration activities. From Nieves there are various dirt roads that provide access to the main mine areas on the Property. The nearest major population and services centre to Nieves is the mining town of Fresnillo approximately 90 kilometers to the south.

 

Figure 1: Location map of the Nieves Silver Property (after Caracle, 2004)

Ownership and Project Exploration History

The Spanish discovered high-grade silver at Nieves in 1560. Sporadic work occurred on the Concordia and Santa Rita veins until 1910, when the Mexican Revolution began. Several small-scale efforts to re-open the mines occurred thereafter but no modern exploration took place until 1994, when a Kennecott/RTZ study of satellite photos noted a color anomaly covering an area approximately 9 kilometers in diameter. Effective January 16, 1995, Kennecott Exploration Company (“Kennecott”) entered into an option agreement with the Mexican concessionaires that allowed Kennecott to explore and acquire the property by making specified option payments over five years, and advance minimum royalty payments (“AMR”) as defined in the “Underlying Agreement’. Kennecott subsequently completed geophysical surveys and drilled eight holes, six of which contained significant silver mineralization.

Page 3 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(i) Nieves Property – Mexico, continued

On March 13, 1998, Kennecott transferred its rights under the Nieves option to Western Silver Corporation (“Western”) in consideration for an uncapped 2% net smelter returns royalty (“NSR”) on certain core claims and a 1% NSR on others. Western completed an additional five holes at the La California vein, all of which hit significant narrow widths of silver with 3 containing at least one narrow intercept of +800 g/t silver.

Western subsequently assigned its rights to the Nieves Project as specified in the “Underlying Agreement” to the Company on March 26, 1999, in consideration for 1,444,460 common shares of the Company at a deemed price of CAD$0.20 per share (CAD$288,892). In addition, the Company issued 360,000 common shares at a deemed price of CAD$0.20 per share (CAD$72,000) to the concessionaires in lieu of the US$50,000 option payment otherwise due under the terms of the Underlying Agreement.

The payment schedule in the Underlying Agreement was amended on November 22, 1999, February 11, 2000 and May 2002, such that US$30,000 was paid in January 2000, US$15,000 in May 2002 and US$25,000 in January 2003, for a total of US$70,000. AMR payments of US$75,000 are due on or before January 26 each year from 2004 until the commencement of commercial production.

The Company completed a two-phase 12-hole RC/core program in the Cerro San Gregorio area in 1999-2000 with results generally similar to previous drilling. Subsequently, the Company completed a program of magnetics and CSAMT/IP surveys, which identified a number of prospective anomalies. The survey results suggested that the Nieves Project is a large hydrothermal system with minimal erosion and several features in common with the high-grade Fresnillo silver district.

On April 10, 2003, the Company completed a US$1.5 million limited partnership financing with Blackberry Ventures I, LLC (“Blackberry”), whereby Blackberry could earn a 50% interest in the property by funding two exploration programs of US$750,000 each. The initial payment of US$750,000 received in the 2003 Fiscal Year was expended on a 5,300-metre drill program on the Nieves Property. During the 2004 Fiscal Year, Blackberry elected to continue by advancing a further US$750,000 towards a follow-up drill program completed in May 2005, thereby earning a 50% interest in the property. As of March 2006, the partners were in the process of formalizing a joint venture agreement and had jointly contributed to a third stage drilling program completed in March 2006.

In August 2004, the Company conducted an initial 5,300 meter, 13-hole diamond drill program to test a number of targets adjacent to and below areas of previously defined mineralization on the Nieves Project and to test seven east-west striking anomalies, interpreted to be veins with associated mineralization, that extend for distances of up to 3.5 kilometers.

A second drill program (5,171 meter, 11-hole) was completed in May 2005 to follow up on the silver mineralization intersected in the 2004 drilling program and to evaluate other targets defined by a combination of mapping, sampling and geophysical surveys.

Page 4 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(i) Nieves Property – Mexico, continued

A third drilling program (5,894 meters, eight holes) began during the fourth quarter of 2005 and was completed during March 2006. Of particular note was hole QTA 37, drilled along the Santa Rita vein 500 meters east of the nearest hole. QTA 37 intersected a quartz breccia vein starting at a downhole depth of 466.1 meters that contains 5.9 meters averaging 104 g/t silver, 0.23% lead and 0.56% zinc. The thickness and strength of the vein are positive features that upgrade the potential of the eastern Santa Rita zone for higher silver grades. Excellent potential remains for narrow high-grade silver veins over a strike length of approximately 1.5 kilometers and a vertical extent of 300 meters on both the Concordia-San Gregorio and Santa Rita vein systems.

Geology and Mineralization

The host rocks at Nieves are a thick sequence of Cretaceous-age dark grey calcareous siltstones and fine-grained sandstones of the Caracol formation. The siltstones and sandstones exhibit strong bleaching not only adjacent to veins but also in large irregularly shaped zones covering several square kilometres.

Mineralization is related to a low temperature silver-gold-copper-lead-zinc epithermal vein system similar to the world-class Fresnillo and Zacatecas Districts in central Zacatecas. There are three west-southwest bearing, steep south-dipping vein systems which, from south to north, are the Santa Rita-El Rosario; Concordia-Delores-San Gregorio; and the La California veins. The Santa Rita and Concordia-Delores-San Gregorio veins have historic production and are marked by numerous shafts, pits, dumps and old buildings. Mining ceased in 1910, with the onset of the Mexican Revolution. Several small-scale efforts to re-open the mines occurred thereafter but no modern exploration took place until 1994. Historic production focused on narrow bonanza veins, and production grades were in excess of 4,000-g/t silver.

The mineral deposits are hosted in two to ten meter thick shear zones with reverse offset and secondary fault splays in the footwall. The sheeted < 2 meter wide silver-gold bearing veins were deposited during a period of distention and normal offset in Oligocene time. There are three types of veins: silica breccia, quartz-sulfide and ferroan carbonate. Sulfide content varies from minor to 50% pyrite-stibnite-sphalerite-chalcopyrite-galena; marcasite is present in the silica breccia veins. Identified silver minerals are tetrahedrite-pyrargyrite. A sulfidation alteration halo of 2-5% disseminated pyrite that weathers to an acid leached “bleached” white clay alteration surrounds the mineralized shears. This alteration is geochemically anomalous in gold-arsenic-antimony with erratic silver-copper-lead-zinc. An Eocene-Oligocene paleo-erosion surface in the northwest corner of the district indicates that the historic mines have exploited only the upper third of the epithermal mineral system.

The Concordia- Cerro San Gregorio zone, based on alteration and geophysics, has dimensions of 2.5 kilometers by 1.5 kilometers and generally trends northeasterly. La California zone is about 2.5 kilometers long by 250 meter wide. The Santa Rita zone also trends northeasterly and is approximately 2 kilometers long by 600 meters wide.

Page 5 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(i) Nieves Property – Mexico, continued

Both the Concordia-Delores-San Gregorio and the Santa Rita vein systems at Nieves have excellent potential for both narrow zones of +500 g/t silver and a surrounding envelope of stockwork mineralization with +50 g/t silver that may represent a bulk tonnage target. The top of the mineralized vein zone is marked by boiling textures observable in drill core at depths of 150-200 meters below surface. The near surface mineralization exposed on San Gregorio Hill and along the Santa Rita vein on Santa Rita Hill is interpreted as manto style (rootless) mineralization trapped in porous sediments at the base of Tertiary volcanic rocks.

Exploration Plans

An Independent Technical Report completed by Caracle Creek International Consulting Inc. (“Caracle”) on behalf of the Company and Blackberry in November 2006 concluded that excellent potential exists to find additional high-grade silver shoots both within the known vein systems and the abundant untested drill targets remaining on the property. Caracle recommended 1) a program including structural analysis, 3D modeling and data compilation including satellite image analysis and 2) an aggressive 10,000 meter drilling program to infill zones on the Concordia-San Gregorio-Delores vein system and to test other targets on the large land block. The drilling program is scheduled to begin in Q2 2007 following completion of the compilation work and selection of drill targets by the Company and Blackberry.

By March 31, 2007, the Company had incurred $1,257,762 for acquisition costs and $2,564,655 ($660,105 net of recovery) for exploration expenditures giving a total of $3,822,417 in gross costs on the Nieves property, or $1,917,867 net of the recovery of $1,904,550 (US $1.5 million) from Blackberry.

As at December 31, 2006, the Company had incurred $1,244,464 for acquisition costs and $2,560,841 ($656,291 net of recovery) for exploration expenditures giving a total of $3,805,305 in gross costs on the Nieves property, or $1,900,755 net of the recovery of $1,904,550 (US $1.5 million) from Blackberry. (Note 3 in the consolidated financial statements dated March 31, 2007)

(ii) Los Crestones Project – Mexico

Location and Access

The Company’s 100% owned Crestones Project is located on the southwest side of a medium sized granitic pluton on the eastern edge of the Sierra Madre Occidental in northern Durango state of west-central Mexico (Figure 2). The property is between the latitudes of 25.92° and 25.96° north and 105.09° and 105.13° west longitude. The town of Inde is about 10 kilometers to the southwest of the property while the larger town of Santa Maria del Oro is located about 20 kilometers to the northwest. The city of Durango is a five hour drive to the south.

Page 6 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(ii) Los Crestones Project – Mexico, continued.

Access to the property is very good with a paved highway from Santa Maria del Oro, through Inde and on to the town of Vetarron, 2km more on dirt road leads to the turn off to El Pajaro, another 7km to the north and on the edge of the property. A local dirt road gives access to most of the property. Electric power lines service all the small towns mentioned above.

Figure 2: Location Map of the Los Crestones Project (after C. J. Lloyd, 2004)

Ownership and History

In 2003, the Company staked a 2,100 hectare claim to cover a hot spring gold-silver prospect at Los Crestones. In 2004 and early 2005, reconnaissance mapping and sampling programs were completed over an area of about 3.5 square miles. The Company staked an additional 3,547 hectare claim in 2006 and completed detailed mapping. The work delineated a hot spring gold-silver target with widespread silicification, flat-lying silica sinter aprons and quartz veining along high-angle, graben faults. Rock chip samples show anomalous Au-Ag values with occasional spikes up to ore grade; and strongly anomalous mercury, arsenic and antimony values which are typical of the upper levels of hot spring-related gold silver mineral systems. The level of exposure is clearly above the boiling zone and the gold numbers are consistent with those found in the top of epithermal gold systems.

Geology and Mineralization

Crestones displays geologic characteristics that are broadly similar to both the Magistral de Oro district, located 20 kilometers northwest and the Inde District that lies 12 km west. Magistral de Oro has a recorded production of greater than 1.0 million ounces gold and the Inde district has produced 0.5 million ounces of gold from one mine as well as significant silver-lead-zinc production from numerous small mines. All three districts have prominent aeromagnetic highs that represent oxidized intermediate to felsic intrusive stocks. The mineralization in all three districts is interpreted to be genetically related to these intrusives. Granodiorite is the host rock at Magistral de Oro. Bufa Inde, a prominent peak in the center of the Inde District, is a quartz porphyry stock. Both granodiorite and quartz porphyry occur at Crestones.

Page 7 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(ii) Los Crestones Project – Mexico, continued.

The oldest rock type at Crestones is an upper unit of the Mescalera Group limestone. It is a lower Cretaceous in age and can be divided into a thick and thin bedded facies. The more abundant thick bedded facies is composed of 10-25 cm beds of carbonaceous muddy limestone with black shaley partings. The limestone shows abundant soft sediment deformation features. The thin bedded facies consists of 1-4 cm thick interbeds of clean gray limestone and black chert. It too commonly displays chaotic soft sediment folds.

A 40 m.y. granodiorite cuts the Mescalera limestone at Crestones. It is a circular 4 km diameter stock composed of equigranular biotite-hornblende-feldspar with interstitial quartz and accessory magnetitie. The stock is rimmed by a band of altered limestone up to a kilometer in width of quartz-diopside hornfels that grades outward into a weak tremolitic marble. The Crestones hydrothermal mineral system is located along the western contact of the granodorite stock and was emplaced in a northwest-striking fault system. The fault formed the east side of the Inde Graben that separates the Inde District and Crestones. Three bands of sheeted hydrothermal breccias, small quartz porphyry stocks and felsite dikes compose the Crestones system. The breccia has been classified into four breccias types based on clast types and matrix composition; these are: mixed clast breccia, silica matrix breccia, silicified limestone breccia and sinter matrix breccia.

The western band of hydrothermal breccia is informally referred to as the Cerro Pachon zone. It is strikes northwest for a known distance of 3.5 kilometers and is about 50-200 meters wide. It is composed of sheeted bands of all four types of hydrothermal siliceous breccia hosted in an envelope of silicifed limestone. A small phyllic-altered quartz-porphyry stock outcrops at the northwest end of the Pachon breccia in close proximity to the largest occurrence mixed clast breccia on the property. The mixed clast breccia is composed of silicified limestone and quartz porphyry clasts set in a silicifed matrix of milled quartz porphyry. The Cerro Pachon breccia is cut off to the northwest by faults and post-breccia alluvial cover. It feathers into small silica breccia and felsite dikes to the southeast which are in turn cut off by a listric fault.

The Cerro Cahon breccia is the east band of hydrothermal breccia. It parallels the Cerro Pachon breccia with a similar strike length and width. Sheeted silica breccia dikes predominate that vary from 1 to 25 meters in width. The dikes tend to have clasts of silicified limestone along their margins and a core of weak banded translucent gray silica. The southeast half of the breccia cuts through limestone within an envelope of silicified limestone. There are occasional narrow bands of silicified limestone breccia and brecciated felsite dikes. The northwest half of the breccia cuts across the granodiorite where it breaks into a 75 meter wide stockwork of sheeted narrow silica veins in the intrusive. There is one prominent splay of silica breccia to the west that follow the granodiorite-hornfels contact. Scattered float of hydrothermal limonitic breccia is common where the silica breccia dikes pass across the limestone-granodiorite contact which indicates the possible presence of a sulfide-bearing hydrothermal breccia. A drill test is planned to test this breccia occurrence.

Page 8 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(ii) Los Crestones Project – Mexico, continued.

The two breccia bands are separated by about a kilometer of silicifed and hornfelsed limestone and fresh granodiorite with numerous 5-15 meter thick breccia and felsite dikes. There is a third silica breccia band at the north end of the property that outcrops on Cerro Laguna, and between the between the Cerro Pachon and Cerro Cahon breccias. The Cerro Laguna breccia is composed of sheeted silica breccia dikes. It is about two kilometers in strike length. It is also cut by a low angle listric fault with its north half offset about 250 meters to the northeast.

Mineralization at Crestones has been observed in both outcrop and core. All three of the breccia types, the silicified limestone, the quartz porphyry, and the hornfels contain disseminated sulfides. The silica breccia commonly contains minor to 5% disseminated pyrite-marcasite and minor to 5% stibnite. The mixed clast and silicified limestone breccias contain disseminated pyrite-marcasite and minor sphalerite-galena. Disseminated galena-sulfosalts occur in both the porphyry and hornfels. Coarse spahalerite-galena has been observed in fault gouge.

Recent Activity and Exploration Plans

The Company began a 3,000 meter drilling program at Los Crestones in Q3 2006. The program has been designed to test all three of the hydrothermal breccia bodies. Three holes have been completed and drilling will continue into Q2 2007. Continued geologic mapping will trace the largest breccia body to the southeast where it is in contact with a large area of the silicified limestone Acquisition costs incurred to March 31, 2007 were $73,640 and exploration expenditures were $698,991 for a total of $772,631. Acquisition costs incurred to December 31, 2006 were $71,696 and exploration expenditures were $462,590 for a total of $534,286. (Note 3 in the consolidated financial statements dated March 31, 2007)

(iii) Uranium Project – Arizona, Utah and Wyoming

Location

The Company’s Arizona Uranium Project, located in the northern Arizona Strip uranium district in Coconino and Mohave Counties, occupies the southwest corner of the Colorado Plateau physiographic province between the Utah state line and the northern boundary of the Grand Canyon National Park. It is bounded to the west by the Grand Wash Cliffs and to the east by the Echo Cliffs. The area is characterized by a broad and featureless expanse of range land that becomes deeply incised by canyons of four major drainages. Nearly all of the surface and mineral rights with exception of the Arizona State lands are Federal and managed by the Bureau of Land Management with a field office in St. George, Utah.

Page 9 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(iii) Uranium Project – Arizona, Utah and Wyoming, continued

Acquisition

Quaterra commenced uranium exploration in Arizona in June 2005 with the acquisition of 95 unpatented lode mining claims from North Exploration LLC (North) that cover several uranium breccia pipe targets in the Arizona Strip district. The North agreement also included an option to acquire other properties in Utah and Wyoming that are prospective for both uranium and vanadium.

Under the terms of the North agreement, the Company may acquire a 100% interest in any or all of the North claims by making staged payments over a five-year period totaling US$500,000 and issuing 600,000 common shares. The initial consideration included a US$15,000 cash payment and 200,000 common shares. The properties are subject to a 2% production royalty on each property, 1% of which may be purchased by the Company for US$1 million.

In mid 2006, Quaterra signed a letter of agreement with Nustar Exploration LLC. (Nustar) to lease 18 claims covering 4 additional breccia pipe targets in the district. The terms of the lease are an upfront payment of $20,000, a first anniversary payment of $30,000, a second anniversary payment of $40,000 and a final third anniversary payment of $100,000. The Nustar claims are subject to a 4 % yellowcake royalty, 75% of which Quaterra can for $500,000 per claim block.

Quaterra staked an additional 550 mining claims on the Arizona Strip in 2006 and another 1450 claims were perfected in early 2007 to cover more than 200 high and moderate priority anomalies identified by an airborne VTEM geophysical survey. The Company’s mineral rights now total approximately 68 square miles in the project area. The properties consist of many individual and scattered claim blocks that have been selectively staked over targets with some surface expression of a possible collapse structure, with favourable VTEM geophysical signatures and within areas of known mineralized occurrences.

Exploration and Production History

Uranium mineralization was first discovered on the Arizona strip in a mineralized breccia pipe in 1947. The uranium occurred in association with copper mineralization at the Orphan mine 2 miles west of the visitor’s center on the south rim of the Grand Canyon. The first uranium ore was shipped by the Golden Crown Mining Company in 1956 to a buying station in Tuba City. Before closing in 1969, the Orphan operation produced a reported total of 4.4 million lbs of uranium in material averaging 0.42% U3O8 and 6.7 million lbs of copper. (Baillieul, T.A. and Zollinger, R.C.(1980) NURE Grand Canyon Quadrangle, Arizona PGJ-020, 41p.)

Page 10 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(iii) Uranium Project – Arizona, Utah and Wyoming, continued

The relationship of uranium to copper mineralization initiated an investigation of several small copper deposits in the region. Uranium was identified in the Hack Canyon copper mine on the northern Arizona strip in the 1950s but it was not until 1974 when Western Nuclear discovered uranium ore bodies in the Hack 1 and Hack 2 breccia pipes that industry began to focus attention on the emerging district. Energy Fuels Nuclear Inc.(Energy Fuels) acquired the Hack Canyon ore bodies in 1980 and initiated an intense campaign of land acquisition and exploration that over the next ten years discovered seven ore bodies. With the entrance of Pathfinder Mines and Union Pacific Resources, at least three additional mineralized breccia pipes were added to the district. Several more were in earlier stages of discovery when in the early 1990s the price of uranium dropped below the cost of production.

The Arizona Strip historically represents some of the highest grade mineralization and most profitable per pound uranium production in the United States. Energy Fuels breccia pipe uranium mines were some of last hard rock uranium producers in the US prior to the price decline of the 1990s. Since 1980, the Arizona Strip has produced in excess of 19 million pounds of uranium, averaging 0.65% U3O8 from seven mines. Of these mines, Hack Canyon I, II, and III and Pigeon are mined out and have been reclaimed; Hermit is partially reclaimed; Pinenut, Kanab North, Canyon and Arizona 1 have remaining reserves and have been placed on a standby basis. The total amount of mineable uranium discovered to date in breccia pipes in northern Arizona is estimated to be in the range of 35 million pounds. (1998 International Uranium Corp. US SEC Registration Statement. http://www.sec.gov/Archives/edgar/data/1063259/0001035704-98-000395.txt).

Geology and Mineralization

The canyon walls of northern Arizona expose numerous breccia pipes that are characteristic of the collapse structures that host uranium mineralization in the Arizona strip. Initiated by the roof collapse of caverns in the Mississippian Redwall Limestone, a pipe of breccia forms through the subsequent collapse of overlying sediments through mechanical and chemical processes to form a vertical column of breccia. Breccia pipes in the region average 200 to 400 feet in width and can extend upward over 3,000 feet from the Redwall Limestone to the upper Triassic sequence. (Figure 3).

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In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(iii) Uranium Project – Arizona, Utah and Wyoming, continued

Figure 3: Diagrammatic Stratigraphic Section of the Arizona Strip showing a characteristic collapse breccia pipe. (After W.J. Breed, 1974)

Many northern Arizona Breccia pipes exhibit several common morphological features that are used to identify the structures at the surface and to position drill holes at depth (Figure 4). The cylindrical area of vertically displaced breccia in the center of the pipe is generally referred to as the “pipe throat.” The amount of vertical displacement in the throat ranges from 50 to several hundred feet and often decreases up section. The internal geometry of the throat can be complicated by the later formation of “pipe in pipe” structures. These internal features are the result of late stage (often post-mineral) collapse due to continued dissolution of carbonates in the lower reaches of the pipe throat. They may result in the dispersal and elimination of economic accumulations of uranium mineralization in the pipe.

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E. Description of Mineral Properties, continued

(iii)           Uranium Project – Arizona, Utah and Wyoming, continued

The throat of a breccia pipe is seldom visible at the surface when not exposed in canyon walls. Where covered by the Moenkopi siltstone or recent alluvium, the only evidence of a pipe structure may be a large circular structure of gently inward dipping beds or even more subtle circular anomalies formed by ring fractures and vegetation. These features are caused by the dissolution of evaporites in the Toroweap and Kiabab sections along the margins of the throat during the formation of the pipe. As the evaporites are removed, a pronounced structural depression or “collapse cone” develops in the overlying strata above the Coconino sandstone. Many of the collapse cones are characterized by a thick section of Moenkopi siltstone that fills the cone near the upper Kiabab horizon. Although breccia pipes often have some structural symmetry at different levels, the throat of a pipe is not always in the center of a collapse cone and circular depressions or are not always related to pipes.

Uranium mineralization in breccia pipes of the northern district occurs predominantly within the pipe throat and below the upper Hermit contact. Mineralization is also present in ring fractures along the margins of the throat, and in the underlying Supai Group, but significant accumulations at this level is less common on the north rim than in the southern district. Economic concentrations of mineralization often occur over a vertical distance of more than 600 feet in the pipe throat. Scattered mineralization can extend well below the upper contact of the Esplanade Sandstone.

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Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(iii) Uranium Project – Arizona, Utah and Wyoming, continued

Uranium occurs primarily as pitchblende in voids between sand grains and replacing rock fragments of a reduced sandstone dominant breccia derived from the Coconino Sandstone. Calcite and gypsum are common cementing minerals. Associated trace elements include copper, arsenic, nickel, lead, zinc and silver. The mineralized breccia often contains abundant bitumen that is considered an important reducing agent for the geochemical system. Uranium is generally thought to have been transported to the pipe by oxidizing ground waters in the Coconino Sandstone and deposited in a “trap” of porous sandstone breccia within the non porous pipe walls of Hermit siltstone and above a relatively tight base of siltstone dominant breccia. Finely disseminated pyrite is common in the mineralized zone and may contribute to the reducing environment necessary for the deposition of uranium. Immediately above the mineralization, pyrite becomes massive and forms a “cap” of pyrite after marcasite that can exceed 50 feet in thickness.

Exploration Potential

The USGS Open File Report (OFR-89-550) shows the mapped locations of 1,296 pipes in the northern and southern Arizona Strip district. The highest density of pipes occurs in outcrops of Carboniferous aged strata in the deeper canyons of the region. The density of pipes decreases dramatically with successive layers of younger sediments until fewer than 2 pipes are evident over a surface area of 500 square miles in the upper Triassic sequence. Clearly the upper level of stoping by collapse varies and many pipes may occur at depth in areas covered by younger Permian and Triassic rock where no surface evidence of a pipe throat is apparent. If these structures penetrate the Coconino Sandstone in a favourable area of the district, an orebody may exist in areas with no pipe feature at the surface. The number of mineralized pipes discovered to date may represent a only fraction of the number that lie waiting to be discovered at depth. With continued exploration, the Arizona Strip may soon become one of the more significant producing uranium districts in the United States.

Recent Company Exploration Activity

Since commencing exploration on the Arizona Strip, Quaterra has drilled 23,500 feet in 59 holes that investigated 14 breccia pipe targets. All but four holes were shallow stratigraphic holes evaluating the near surface structure for the presence of a pipe throat. Eight of the targets tested negative. Three targets have encouraging results and require additional drilling pending the enlargement of the drill permit area. Two of four deep holes in the program encountered mineralization in two targets.

One of the targets tested by deep drilling is the Ollie breccia pipe located ten miles southeast of the Hack’s Canyon mines. The Ollie pipe was originally drilled by one of the last drilling programs conducted by Energy Fuels in the early 1990s. The original program was prematurely stopped when EFNI discontinued exploration in the district due to declining uranium prices.

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In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(iii) Uranium Project – Arizona, Utah and Wyoming, continued

Quaterra’s first hole at Ollie was drilled to a total depth of 1,430 feet. The best intercepts included:

       Depth Thickness Grade
1172 - 1175.5 3.5 feet 0.13% eU308, including 2.0 feet at 0.17%
1178 - 1180.5 2.5 feet 0.12% eU308, including 1.5 feet at 0.16%

The hole encountered numerous mineralized intercepts averaging ..03% to .08% between the depths of 1,020 feet and 1,242 feet. At a depth of approximately 1,350 feet, the hole is believed to have exited the pipe throat and entered un-mineralized Hermit siltstone along the northeast margin of the pipe. A study of historic data indicates that much of the pipe to the southwest remains untested.

Another deep hole tested the EZ4 target, located seven miles northwest of Hack Canyon. The hole was drilled to 1,340 feet. It intercepted anomalous uranium mineralization between 970 and 1,000 feet near the Coconino sandstone/Hermit shale contact. The Coconino sandstone is considered the conduit for mineralization in the Arizona breccia pipes and the presence of mineralization near the contact strongly suggests the close proximity of a mineralized pipe throat. Drill-hole deviation to the east and south of the collar location defines a possible target to the northwest.

The Company’s approach to uranium exploration has been proven by years of past experience with Energy Fuels Nuclear. Patrick Hillard, credited with the discovery of six of eight breccia pipe ore bodies in northern Arizona, directs Quaterra’s acquisition and exploration program using methods successfully employed during his tenure with Energy Fuels Nuclear. Geologic mapping, aerial photography, and satellite imagery have been and continue to be used extensively to identify breccia pipe targets. When a target was located, surface time domain geophysical surveys had significant success in defining areas of thickened (conductive) siltstone within the surface structure to locate drill holes that define the pipe throat. Most of the obvious targets identified by using these methods have been located and drill tested by companies exploring the northern district in the 1980s. However, extensive areas remain unexplored because of the time and expense required by the surface geophysical surveys.

In early 2007, Quaterra contracted Geotech Ltd. to conduct the first extensive test of an airborne time-domain electromagnetic system on its properties in the Arizona Strip. The survey covered approximately 420 square miles in the heart of the district. The VTEM system not only identified anomalies related to the collapse cones of most of the known breccia pipes but identified more than 200 moderate to high priority targets with similar geophysical signatures. A detailed interpretation of the airborne survey data by Joe Inman, consulting geophysicist of Salt Lake City, Utah is providing further prioritization of the targets before evaluation of the structural depressions by drilling.

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Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(iii) Uranium Project – Arizona, Utah and Wyoming, continued

Preparation of Scientific and Technical Data

The Company uses the industry standard gamma logging method for grade determinations of uranium mineralization in drill holes. The process requires systematic calibration of the logging tools for precision and accuracy. Grades are reported as equivalent “eU3O8” based on an assumed direct correlation between gamma-ray intensity, as measured by the gamma logging tools, and uranium content.

Down hole logging for the Company’s drill holes is contracted to Geophysical Logging Service of Prescott, Arizona. Mr. Ken Sweet, Geophysical Consultant, of Denver Colorado provides QA/QC and final interpretation of the process. Geophysical Logging Service uses a borehole NaI detector manufactured by Mt. Sopris in Golden, Colorado for initial grade calculations. It is of the type 2PGA1000 which is a standard for uranium logging. It uses a large crystal, 22.22 mm in diameter and 76.2 mm long. As a back up an HLP-2375 tool is used, also manufactured by Mt. Sopris. The HLP tool is a smaller diameter and can be used small drill holes.

The tools are calibrated in Grand Junction Colorado, nominally every 3-6 months. When ore grade mineralization is encountered the tool will be calibrated more often. In general, variation with this tool is insignificant within a year and requiring less than a 1% calibration change.


There are 4 calibration pits in Grand Junction; 0.231%, 0.452%, 1.22%, and 2,63% U3O8. The calibration pits are constructed of natural uranium ore. Corrections are made for hole diameter, the type of drilling pipe, and fluid in the hole.

When mineralization is intersected, core is collected when possible to compare to the interpreted gamma response. In some cases corrections need to be made for disequilibrium as established by closed-can analysis or direct neutron activation that compares the chemical values of core vs. the interpreted gamma grades.

The gamma response has the advantage of sampling a large volume, on the order of 60 cm. Data is sampled at 0.5 foot or closer spacing.

For hole deviation a Mt. Sopris 2DVA-1000 borehole deviation probe is used. It consists of a 3 axis flux gate magnetometer and a 3 axis accelerometer. The tool is calibrated on the surface using a “Jig” to hold it in a known orientation. The data is recorded continually along the hole.

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Quaterra Resources Inc.
Management’s Discussion and Analysis
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E. Description of Mineral Properties, continued

(iii) Uranium Project – Arizona, Utah and Wyoming, continued

Induction logs are used in conjunction with the gamma probe to provide additional lithologic information. Correlation of the interpreted lithologies between drill holes in a target area can reveal structural deformation related to a possible breccia pipe.

Acquisition costs incurred to March 31, 2007 were $1,811,829 and exploration expenditures were $1,744,743 for a total of $3,556,572. Acquisition costs incurred to December 31, 2006 were $1,125,438 and exploration expenditures were $1,079,859 for a total of $2,205,297. (Note 3 in the consolidated financial statements dated March 31, 2007)

(iv) Duke Island – Alaska

Location and Access

The Duke Island Cu-Ni-PGE prospect is located in the Prince Rupert quadrangle of southeast Alaska about 30 miles south of Ketchikan (Figure 5).


Figure 5: General geology of Duke Island showing location of Raven and Marquis zones Island showing location of Raven and Marquis zones (Avalon Development, 2006)

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Quaterra Resources Inc.
Management’s Discussion and Analysis
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E. Description of Mineral Properties, continued

(iv) Duke Island – Alaska, continued

The Duke Island project consists of 129 unpatented Federal lode mining claims covering 2,580 acres, and 11 state of Alaska mining claims covering 1,280 acres in the Ketchikan quadrangle in Township 80 South, Range 93 East. Mineral rights in this part of Alaska are administered by the U.S. Forest Service and the Alaska Department of Natural Resources. The Duke Island project is located within the Tongass National Forest on multiple-use lands open to mineral development.

The Duke Island project is accessible via boat, small float plane and helicopter. There is tidewater access to the southeast end of the property at Judd Harbor and the central portion of the property via Hall Cove. The city of Ketchikan (population 14,000) is located 30 miles to the north and is the regional commercial hub for this part of southeast Alaska. The city hosts an all-season deep water port, international airport, commercial fixed wing and helicopter services, and most of the support industry required for mineral exploration.

Acquisition and Exploration History

Early exploration on Duke Island is limited to a drilling program in the late 1950’s by Columbia Iron Mining, a subsidiary of United States Steel. The program tested two areas for potential magnetite mineralization. Nine vertical drill holes are reported to have been drilled to a depth of 500 feet to ascertain the magnetite content of the ultramafic rocks (Irvine, 1974). Six holes were drilled on the southeast side of Hall Cove and three in the Judd Harbor area. Precise locations of these holes are uncertain and no assay data of any kind are available to the Company. The potential for PGE mineralization was not addressed during these efforts.

In 1972, Clark and Greenwood collected 22 rock samples for PGE assays as part of a regional sampling and petrology study. In 1989 Bureau of Mines geologists collected 24 samples for assay. Eleven additional samples were collected by the Bureau of Mines in 1995. None of these efforts led to discovery of significant mineralization at Duke Island.

In early 2001 Avalon Development Corp. identified several geologically promising PGE exploration targets in Alaska which prompted Quaterra to acquire mining claims at Duke Island. In March and April 2001, Avalon Development conducted reconnaissance scale pan concentrate and grab rock sampling on behalf of Quaterra Resources and staked 45 federal claims and 6 state claims. Follow-up work was conducted in July which resulted in discovery of Cu-Ni-PGE sulfide mineralization hosted in pyroxenites on the north end of Quaterra’s claims. Subsequent rock sampling, soil sampling and 11,200 line-feet of dipole-dipole induced polarization geophysics were completed on the project in September and October.

During November and December 2001, Quaterra contracted with Layne Drilling to complete 4 diamond drill holes (447 meters, 1,467 feet) in the Marquis zone (Figure 3). The holes were drilled from two drill pads approximately 750 feet apart centered on a coincident rock geochemical and IP geophysical anomaly. The drill targets are associated with a highly conductive IP anomaly flanked by extensive chargeability anomalies to the northeast and southwest. Massive sulfides with highly anomalous copper and lesser nickel and PGE values were encountered in all holes.

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E. Description of Mineral Properties, continued

(iv) Duke Island – Alaska, continued

Significant drilling results are shown below:

Hole From To Thickness (ft)  Cu (wt Avg ppm)  PT (wt Avg ppb)  PD (wt Avg ppb)
DK0101 0.0 298.0 298.0 1,270 47 59
Includes 177.0 258.3 81.3 2,170 50 64
DK0102 4.0 81.0 77.0 2,375 64 83
DK0103 0.0 252.0 252.0 1,328 62 72
DK0104 0.0 188.0 188.0 1,649 85 130
Includes 165.0 167.0 2.0 12,500 187 386

In January 2002 Perry Remote Sensing was retained to conduct a preliminary Landsat Thematic Mapping (T M) analysis of the Duke Island prospect (Perry, 2002). The spectral image of iron-oxide stained sulfide-bearing rocks at the Marquis zone was used for ground truth to determine if surface outcrops of other potentially mineralized areas exist on Duke Island. The TM imagery identified two other obvious targets to the southwest and southeast of the Marquis zone. A total of 43 rock samples were collected in June 2002 in the southwestern TM anomaly, now known as the Monte zone. Approximately fifty percent of these samples (21 samples) returned values in excess of 1,000 ppm copper. Values for Pt, Pd, Ni and Co were generally lower than seen in the Marquis zone with maximum values of 310 ppb, 468 ppb, 784 ppm and 237 ppm, respectively.

In July 2002 AeroQuest Ltd. flew combined airborne magnetics and 6-channel electromagnetics over the Duke Island project. A total of 890.5 line kilometers of survey was completed with most of this total along 200 meter-spaced lines. The survey revealed that areas of known sulfide mineralization generally fall within broad zones of anomalous conductivity that extend well beyond the limits of outcropping sulfides. A total of 459 high priority anomalies were identified by Aeroquest, including 311 Type 1 anomalies with positive in-phase response and a distinct, probable hardrock source and 148 Type 2 anomalies with a negative inphase and positive quadrature response (conductive magnetic anomalies). The largest zone of conductive anomalies occurs on the north side of the Marquis Zone and extends for 2.5 kilometers in an east-west direction. Magnetic and EM data also suggest that gabbroic units extending 1-2 miles to the north-northeast from the summit of Mt. Lazaro are underlain by highly conductive and variably magnetic rocks and that sulfide mineralization may underlie the gabbro body, significantly increasing the size potential of the Duke Island system.

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Management’s Discussion and Analysis
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E. Description of Mineral Properties, continued

(iv) Duke Island – Alaska, continued

Consulting geophysicist, Joe Inman of Salt Lake City, Utah prioritized the airborne EM anomalies and an initial ground follow-up of airborne EM anomalies was begun in September 2003. A total of 45 rock grab samples and 66 shovel soil samples were collected. Sampling was concentrated on the northeast Marquis, Raven and Potato Patch zones. These target areas also exhibit strongly conductive electromagnetic signature that suggest the presence of sulfide mineralization. Anomalous copper values up to 136 ppm were recovered from soils in the northeast Marquis zone however, additional soil sampling due east of the Marquis discovery returned highly anomalous copper (to 359 ppm) with grab rock samples returning values up to 984 ppm copper. No previous sulfide mineralization was known from this area and no surface outcrops of sulfide mineralization have been found to explain these soil and rock anomalies.

In addition, the 2003 field work expanded the size of known sulfide mineralization at the Potato Patch zone and also expanded the size of known sulfide mineralization at the Raven zone. Previous work at the Raven zone returned copper values up to 2.2% from a small area of outcrops surrounded by low, swampy topography. Soil sampling completed in 2003 returned copper values up to 4,320 ppm and Pt + Pd values up to 439 ppb from covered swampy terrain immediately south of outcropping sulfide mineralization. Sulfide mineralization at Raven was extended to over 650 meters south of the original Raven discovery outcrops and remains open to expansion in all directions.

During reconnaissance work completed in 2003 a new zone of disseminated copper sulfide mineralization was discovered at tidewater on Cape Northumberland on the extreme southern tip of Duke Island. While copper values (up to 352 ppm) did not reach percent-levels, the Northumberland zone is unique in that it represents the only sulfide mineralization discovered to date which is not located within the NW-SE trending belt of mineralization extending from the East Judd to Raven prospects. The significance of the sulfide mineralization at Northumberland and its extent are unknown.

In late May and early June 2004 Clark Jorgenson of Big Sky Geophysics was contracted to conduct a ground based HCP-EM (Max-Min), magnetometer, and gravimeter survey of the Marquis and Raven prospects. Big Sky completed 20,000 line-feet (6.1 line km) of survey over the Marquis and Raven prospects. Results from this survey indicated three strong Max-Min conductive anomalies, two moderately conductive anomalies, and three weakly conductive anomalies at the Marquis prospect. The strong conductive anomalies are located coincident with the IP resistivity low and with an interpreted dip to the northeast. The weakly conductive anomalies are located to the northeast of the IP anomaly and dip to the southwest. There is an increase in rock density which starts in the western side of the Marquis prospect and trends east toward Knob Hill. At the Raven prospect Big Sky identified two weak Max-Min conductors on the western survey line. These are coincident with relative rock density highs that form two ellipsoids elongated W-E, one centered on the main Raven prospect and the other to the south separated by a density low. The shape and location of the relative density highs are somewhat coincident with the airborne EM conductivity highs and airborne magnetic highs previously identified at the Raven prospect.

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Management’s Discussion and Analysis
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E. Description of Mineral Properties, continued

(iv) Duke Island – Alaska, continued

In mid June 2005 Quaterra contracted Aurora Geosciences to conduct a 48,030 line-feet (14.6 line km) ground based gravimetric survey of the Marquis, Raven, Potato Patch, Scarp, and Lookout prospects along with the Northeast and Far Northeast areas. Results from this survey confirmed the 2004 gravity survey results and the expanded grids revealed local gravity highs in all of the surveyed areas. Local increases in density may reflect significant sulfide accumulation. Gravity field results from each prospect relative to each other show a general increase in the corrected Bouguer anomaly from west to east (-92.4 mgals to -74 mgals) perhaps showing the increasing thickness of the ultramafic package over the modeled feeder for the intrusion at the head of Hall Cove.

During August-September 2005 the Company contracted Connors Drilling to complete 7 NQ2 core drill holes at the Marquis, Potato Patch, and Raven prospects totaling 4,504 feet. Two holes were collared northeast of holes DK0101 through DK0104 and aimed southwest back toward the Marquis IP anomaly and the previous drill holes in the Marquis prospect. Both holes intercepted semi-massive to massive sulfide at depth in the hole indicating that the sulfide horizon is north dipping.

Hole DK0501 (AZ 225, -60, TD 654) intercepted semi-massive to massive sulfides at 238 feet down hole. This hole intercepted clinopyroxenite from surface to TD. Co and Ni values positively correlate with Cu and S values. Cu:Ni ratios for mineralized intervals averaged 2.17. This hole did not exit mineralization. Significant results are shown below:

Hole From To Thickness (ft)  Cu (wt Avg ppm)  PT (wt Avg ppb)  PD (wt Avg ppb)
DK0501 326.0 425.5 99.5 2,320 68 72
Includes 376.0 394.0 18.0 4,520 100 111
Includes 404.0 424.0 20.0 3,625 123 133
DK0502 No Significant Intercepts      
DK0503 37.5 186.5 149.0 2,086 5 1
DK0504 No Significant Intercepts      
DK0506 8.0 395.0 387.0 2,035 56 59
Includes 33.0 75.0 42.0 3,801 331 313
Includes 8.0 92.0 84.0 2,531 211 219

Note: Holes DK0505 and DK0507 were not visibly mineralized and have not been submitted for geochmical analyses

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Management’s Discussion and Analysis
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E. Description of Mineral Properties, continued

(iv) Duke Island – Alaska, continued

Geology and Mineralization

The Duke Island complex consists of two separate areas of well-exposed zoned ultramafics, Judd Harbor on the south and Hall Cove on the north. The Judd Harbor body is about 3 km in diameter while the Hall Cove body is about 3 km by 6 km in size. The Judd Harbor and Hall Cove complexes have been interpreted to be parts of the same zoned Ural Alaska intrusive body at depth. Both bodies are comprised of a dunite and wehrlite core surrounded by concentric zones of olivine clinopyroxenite, hornblende-magnetite clinopyroxenite, and gabbro. The complexes are intruded by late hornblendite and hornblende-plagioclase pegmatite. The exposed complexes at Duke Island show remarkable compositional layering, particularly in the olivine clinopyroxenite. Such layering is believed to be due to changes in magma chemistry and subsequent fractionation and precipitation of mineral crystals settling downward through the lighter melt. Flow textures, graded bedding, and dislodged xenolith fragments are commonly observable in outcrop.

A series of northwest and northeast trending faults at Duke Island appear to post-date emplacement of the Duke Island ultramafic body. The most significant of these structures is the Hall Cove – Grave Point structure which trends northeast along the trace of Hall Cove. Field relationships suggest this structure has an unknown amount of southeast-side down relative displacement. Ultramafic rocks of the Judd Harbor portion of the complex are exposed between the Bite Cove and Judd Harbor faults suggesting the ultramafic blocks occupy a horst block between the two structures. Copper-nickel-PGE mineralization discovered to date appears to be controlled by northwest trending structures although its relationship to the Hall Cove, Bite Cove and Judd Harbor structures is unknown.

A high-level airborne magnetic survey conducted over the Duke Island complex suggests the mafic-ultramafic complex is elongate in a northwest – southeast direction with relatively steep sides on its northeastern and southwestern limits. The gabbro unit extending north from Mt. Lazaro is invisible to magnetics suggesting that the Hall Cove and Judd Harbor segments of the complex probably are connected at depth beneath a thin “skin” of gabbro. Dunite and wehrlite are cut by sulfide-bearing rocks ranging from pyroxenite in the Marquis zone through hornblende pyroxenite in the extreme northwest to hornblendite in the extreme southeast edge of the island.

Sulfide-bearing mineralization at Duke Island has been defined along a strike length of 14.5 kilometers and up to 3.8 kilometers across strike with the ultimate dimensions of the mineralized system remaining open to expansion at surface and at depth. Copper and nickel occurs as chalcopyrite and pentlandite in massive to disseminated pyrrhotite. Sulfide mineralization is primarily hosted in clinopyroxenite as interstitial blebs, pods and net-textured masses. There is little correlation between PGE content and sulfide content. PGE enriched intervals occur in sulfide rich intervals, but there are also numerous sulfide rich intervals with no appreciable PGE content. Surface samples have returned values ranging from <10 ppm to 2.8% copper, <1 ppm to 0.25% nickel and <6 ppb to over 1 gram per tonne combined platinum plus palladium.

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Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(iv) Duke Island – Alaska, continued

Prior to discovery of significant accumulations of massive, semi-massive and disseminated sulfide mineralization in 2001, the Duke Island prospect was considered to be a classic zoned Ural - Alaska type mafic - ultramafic complex. However, copper, nickel and iron contents at Duke Island are significantly elevated relative to most Ural – Alaska complexes and suggest the Duke Island is a hybrid Ural – Alaska complex or that sulfide mineralization at Duke Island was controlled by physical and chemical controls similar to those which affect layered intrusive complexes.

U-Pb age determinations on un-mineralized portions of the Duke Island mafic-ultramafic complex suggest a mid-Cretaceous age for the complex, an age that is in general agreement with ages for other dated Ural Alaska complexes in the Alexander Platinum Belt of SE Alaska but the presence of widespread and significant sulfide mineralization at Duke Island is unlike any of the other Cretaceous Ural Alaska complexes in the region. U-Pb age determinations from gabbro and diorite host rocks surrounding the Duke Island complex returned Triassic ages that are nearly identical to those found in the Cu-Ni-PGE bearing intrusives and flood basalts of the Wrangellia terrane in the central Alaska Range and western Yukon Territory. The Alaska Range occurrences currently are being explored for Noril’sk type sulfide mineralization and the Wellgreen deposit in the western Yukon is a past producing platinum and palladium mine. If the age of mineralization at Duke Island is Triassic, there is potential for Noril’sk type Cu-Ni-PGE mineralization at Duke Island.

An alternative exploration model for Cu-Ni-PGE mineralization at Duke Island is that sulfide mineralization is related to sulfur saturation within and adjacent to the zoned Ural – Alaska complex which hosts it. While this mode of sulfide formation is unique for the Alexander Platinum Belt, Duke Island has long been a unique example of Ural – Alaska complexes due to the complex graded bedding and other features suggestive of episodic magma introduction under quiescent conditions. Regardless of which geological model turns out to be correct, the widespread Cu-Ni-PGE mineralization and the potential for new sulfide discoveries on the project make Duke Island an important focus for the Company’s future exploration in Alaska.

Recent Exploration Activity

Avalon Development Corp, completed a technical report on the Duke Island project for the Company in August 2006. The report concluded that mineralization identified at Duke Island had the potential to elevate the project to one of the most important new discoveries in North America. The report recommended extensive geochemical sampling and geologic mapping of the Monte prospect and other prospective areas. It also recommended a thorough review of all petrological, geochemical and lithologic data to help guide future exploration efforts including a 14,500 foot drilling program includes specific exploration holes to test the Marquis, Raven, Scarp, and Lookout targets.

The Company has retained the services of Robert Brozdowski, consulting exploration geologist of Victoria BC, Canada to complete an evaluation of all relevant geological, geophysical and geochemical data from the Duke Island exploration program. The effort will include relogging of drill core for consistency of lithologies and textures and a petrographic analysis of host rock and sulfide mineralogy and petrogenesis to assess the potential for high grade Cu-Ni-PGE mineralization and establish specific targeting criteria for future exploration on the project.

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Management’s Discussion and Analysis
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E. Description of Mineral Properties, continued

(iv) Duke Island – Alaska, continued

Preparation of Scientific and Technical Data

All 2001 core samples were crushed at Bondar Clegg’s Fairbanks preparation facility to 80% passing 10 mesh and then pulverized to +95% passing –150 mesh. Sample rejects were retained in Fairbanks and returned to Avalon Development. Sample pulps were to Bondar Clegg’s main analytical facility in North Vancouver, British Colombia and analyzed for Pt + Pd + Au by 30 gram lead collection fire assay techniques with an inductively coupled plasma (ICP) finish. In addition, each sample was analyzed for a multi-element package by ICP analytical methods using two acid digestion procedures. The remaining half of the drill core was shipped to Fairbanks and stored in Avalon’s secure warehouse.

All 2005 core samples were sawn in the field and sent to Vancouver by ALS Chemex for processing at their prep facility. Samples were crushed to 70% passing 2 millimeters (10 mesh) and a 250 gram split was taken and pulverized to +85% passing 75 microns (200 mesh). All samples were analyzed for Pt + Pd + Au by 30 gram lead collection fire assay techniques with an inductively coupled plasma (ICP) finish. In addition, each sample was analyzed for a suite of 27 trace elements using a four acid digestion procedure followed by ICP techniques with an atomic emission spectrographic finish. Fire assay and ICP processes were adjusted by ALS Chemex to account for the high concentrations of iron, magnesium, and chromium associated with ultramafic rocks. Pulps and rejects and remaining half of the core was sent to Avalon Development’s Fairbanks warehouse for permanent storage.

A total of 148 sample blanks were inserted into the sampling sequence for the 2001 through 2005 Duke Island programs. Blanks were inserted on a minimum 1 for 25 basis into all sample sequences. Extensive previous analysis of this same blank rock type has given Avalon a large geochemical database for use on a comparative basis. Analyses performed by Bondar-Clegg and ALS Chemex on the blanks from the Duke Island project indicate no unusual or spurious sample results in the blanks submitted.

No blank of check analyses were completed on Duke Island geochemical samples during the period 2001 through 2004. In 2005, in addition to sample blanks, sulfide rich commercial geologic standards from Analytical Solutions Ltd. were inserted on a 1 to 50 basis in each sample submittal during 2005. Analysis results indicate no unusual or spurious sample results in the standards submitted. Acquisition costs incurred to March 31, 2007 were $112,285 and exploration expenditures were $1,625,551 for a total of $1,737,836.

Acquisition costs incurred to December 31, 2006 were $112,285 and exploration expenditures were $1,625,551 for a total of $1,737,836. (Note 3 in the consolidated financial statements dated March 31, 2007)

Page 24 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(v) Seward Peninsula – Big Bar, VMS Project – Alaska

The Company’s 100% owned Big Bar project, located 110 miles northeast of Nome, is a copper-lead-zinc prospect whose claims cover a 4000-foot long soil anomaly delineated by Anaconda in the early 1980’s. The prospect includes one of the most significant anomalies identified by a stream sediment and soil geochemical reconnaissance survey that included a large part of the Seward Peninsula. Soil anomalies containing up to 1920 ppm Cu occur in felsic schist on the property. Gossans collected as float from the anomaly contain up to .06 g/t Au, 1.6 opt Ag, 4260 ppm Cu and 3900 ppm Zn.

During the second quarter of 2006, a three hole 1,470 foot core drilling program tested a strike length of approximately 1000 feet near the center of the geochemical anomaly. The holes intersected uneconomic zones of disseminated pyrite and stringer sulfides but no massive sulfide mineralization.

Quaterra’s initial phase of drilling examined only a small portion of the Big Bar anomaly. The geology of the drilled section suggests a good environment for massive sulfide mineralization, but does not give a clear indication of where the sulfides may have accumulated. To evaluate the possibility of massive sulfides at depth or in adjacent areas, the Company contracted Fugro Airborne Surveys Corp. to conduct a 138-line kilometer airborne EM-magnetometer survey covering an area of 25 square kilometers centered over the geochemical anomaly. The survey was completed in September 2006 and identified a number of anomalies adjacent to the geochemical anomaly that will be field-checked during summer 2007.

Acquisition costs incurred to March 31, 2007 were $18,461 and exploration expenditures were $715,196 for a total of $733,657. Acquisition costs incurred to December 31, 2006 were $18,461 and exploration expenditures were $712,113 for a total of $730,574. (Note 3 in the consolidated financial statements dated March 31, 2007)

(vi) MacArthur Property - Nevada

Location and Access

The Company’s MacArthur copper project is controlled by 294 unpatented mining claims covering approximately 8 square miles in Lyon County, Nevada. The property is located 50 miles southeast of Reno in Sections 23, 24, 25, 35, and 36 in T.14N., R.24E. and Sections 19, 20,29,30, and 31 of T.14N., R.25E (figure . The deposit lies within the Yerington copper mining district about 5 miles north of the mined out Yerington pit. Access to the project from State Highway 95 one mile then north of the town of Yerington, is provided by 4.5 miles of graded county roads that lead to the MacArthur Copper Property.

Page 25 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(vi) MacArthur Property – Nevada, continued


Exploration and Production History

Local prospectors staked unpatented mining claims on the MacArthur property in the 1930's and made small tonnage shipments of hand sorted, high grade, oxide copper ore during that time. In 1950, the U.S. Bureau of Mines excavated a series of trenches across copper oxide occurrences and drilled 8 diamond drill holes. A total of over 60 holes were drilled on the property by least four major mining companies that optioned the property from 1954 to 1971.

From 1971 to 1972, Anaconda carried out detailed geological mapping, systematic trenching and drilled approximately 56,000 feet in 280 vertical and angle percussion rotary holes to an average depth of 200 feet. The program outlined approximately 13 million tons of + 0.4% copper mineralization (Heatwole, D.A., 1978, Controls of Copper Oxide Mineralization, MacArthur Property, Lyon County, Nevada: Arizona Geological Society Digest, Vol. XI, p. 59-66.)

Arimetco International (Arimetco) purchased the Anaconda Yerington district properties and staked unpatented mining claims over the MacArthur prospect in 1988. The MacArthur Mining and Processing Company, Inc. commissioned Metech Pty. Ltd., Perth, Australia to prepare an ore reserve and mining planning study of the MacArthur deposit in 1989. Metech digitized the Anaconda data set which consisted of 11,529 assay intervals from 290 drill holes.

Page 26 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(vi) MacArthur Property – Nevada, continued

The Metech study developed a statistically controlled Kriged orebody model of the MacArthur deposit within defined zones of mineralization. The study reported the definition of a (non 43-101 compliant) overall “geologic reserve” of 63.2 million tons grading 0.26% TCu at a 0.18% TCu cut-off.

Arimetco mined a total of six million tons at an estimated grade of 0.36 % total copper using open pit methods from the MacArthur deposit in the period of 1995 to 1998. The low-grade oxide ore was trucked to heaps at the Yerington site where it was successfully processed with operations to remove copper from the Yerington mine tailings using a solvent extraction electro-winning process. Due to financial difficulties resulting primarily from the low price of copper, Arimetco sought protection under Chapter 11 of the bankruptcy code in January 1997 and suspended all operations in 2000.

Acquisition

After Arimetco’s departure, the mining claims over the deposit were allowed to expire. In January 2004, North Exploration LLC (North) staked 58 unpatented mining claims over the deposit. In October 2005, Quaterra acquired the right to earn a 100% interest in the mining claims covering the former MacArthur copper mine, subject to a 2% NSR, through making staged payments to North totalling US$1,785,000 by January 15, 2008. The Company’s property position was then extended through staking an additional 236 mining claims around the deposit.

Quaterra acquired the digitized Anaconda exploration and drilling data package from Metech in August 2006 and commenced a review the deposit geology and mineralization model using Datamine software. The data review is currently assessing the necessary steps to complete a technical report on the MacArthur project with the objective of preparing a 43-101 compliant resource estimate.

Geology and Mineralization

The MacArthur copper deposit forms part of the Yerington mining district which includes at least three, large, porphyry copper deposits (Yerington, Ann Mason, Bear-Lagomarsino), as well as two large IOCG deposits (Pumpkin Hollow, and Minnesota). Mineralization ranges from disseminated porphyry copper occurrences to skarn, limestone replacement, and vein type deposits.

The principal rock unit in the area is the M. Jurassic Yerington Batholith emplaced into Triassic-Jurassic volcanic and sedimentary-layered sequences. The bulk of the mineralization appears to be associated with granite porphyry dikes that are believed to be the final magmatic event associated with the batholith (Dilles, J. H. and Proffett, J. M., 1995, Metallogenesis of the Yerington Batholith, Nevada: Porphyry Copper Deposits of the American Cordillera, v 20, p. 306-315).

Following the emplacement of the batholith there was a long hiatus in the stratigraphic record until the Oligocene during which time several thousand feet of Upper Oligocene volcanics and associated sedimentary rocks were laid down on an eroded, Mesozoic surface.

Page 27 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(vi) MacArthur Property – Nevada, continued

Normal, faulting associated with Late Tertiary basin-and-range extension has displaced and tilted all of the above-mentioned rocks. These faults dip east and are curved, concave upward, so that the dip of the fault flattens eastward. Net displacements are in an east-west direction. Fault hanging wall stratification and/or flow banding in Tertiary rocks is tilted west from 30° to near vertical as a result of the rotational displacement movements. The geologic section is completed by post-faulting conglomerates and alluvium section.

Heatwole (1978) described MacArthur as an oxidized low-grade porphyry copper deposit that has been locally enriched by exotic copper. The probable source of the exotic copper was primary sulfide mineralization peripheral to the porphyry center.

Copper mineralization is visible in the open pit excavated by Arimetco. A total of twelve, 7-meter high benches step down toward the northeast following the original topography. The excavation exposes copper mineralization including chrysocolla, copper wad (neotocite), pitch limonite (vitreous, goethite) and minor amounts of malachite and azurite all hosted in medium grained, biotite, quartz monzonite. Although copper wad (neotocite) and chrysocolla are exposed in the pit walls throughout most of the pit area, the copper wad is more abundant near the western end of the pit while chrysocolla is more common near the east end. "Pitch" limonite, (goethite) after chalcopyrite occurs sporadically as individual disseminations as well as along hairline veinlets containing K-spar.

At least three, quartz feldspar porphyry dikes up to 4 meters wide, trending N70°W and dipping 40 to 60° northerly, cut the quartz monzonite. The dikes exhibit quartz "eyes", feldspar, and biotite and/or hornblende phenocrysts set in an aphanitic groundmass.

Several post-mineral, Tertiary, andesite porphyry dikes commonly 0.5 to 2 meters thick (one up to 10 meters thick) striking N75°W, and dipping near vertical to 80° northerly, cut the quartz monzonite. Locally strong oxide copper mineralization (copper wad and chrysocolla) occurs along the contact between the dike and the quartz monzonite. The dikes are post primary mineralization and pre supergene mineralization, Hydrothermal alteration at MacArthur is influenced by a strong northwest-oriented fracture system that is exposed in most places throughout the pit. The alteration zoning in the area includes a northwestern phyllic zone (quartz-clay-pyrite with sericite), a relatively unaltered central zone with exception of minor potassic alteration in the form of local biotization of hornblende, and an eastern albitic zone with albitization becoming more pervasive to the east. Propylitic alteration has been reported at a only a few localities south and southwest of the pit.

Nearly all of the mineralization that forms the presently investigated deposit is secondary in origin. Although there remains a question as to what portion of the deposit represents exotic or laterally transported copper oxides as opposed to the percentage of copper oxides formed through enrichment by the vertical migration of ground water, the source of the copper was probably primary (sulfide) copper mineralization related a porphyry system at or near the MacArthur pit.

Page 28 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

E. Description of Mineral Properties, continued

(vi) MacArthur Property – Nevada, continued

Three holes drilled 1,000-1,500 feet north of the MacArthur pit by the US Bureau of Mines in 1950 (Report of Investigations 4906) encountered what appears to be a chalcocite blanket between depths ranging from 200 to 300 feet. Although recoveries at the time were not good, drill hole number 6 gave an indication of the mineralization with an intercept with 62 feet averaging 0.61% Cu between downhole depths of 241 and 303 feet.

Recent Activity and Exploration Plans

The lateral zonation of secondary copper minerals visible at the surface, a possible chalcocite blanket to the north of the pit, and a large, pervasive phyllic alteration zone to the north and west of the mine workings, all suggest that the MacArthur deposit may have a significant potential for growth; both in the form of copper oxides and as primary sulfides in a related porphyry system. Although the MacArthur project currently has no 43-101 compliant resource estimate, the historical data from the project is substantial. With sufficient new drilling to substantiate the Anaconda data base, a formal resource can be calculated for the project.

Quaterra is planning a 10,000 foot core drilling program to commence in April 2007 to twin approximately 10% of the shallow holes that defined the previously explored copper oxide mineralization at MacArthur and to identify extensions of copper oxide and chalcocite mineralization in the vicinity of the open pit. The program will also include at least 2 deep (1000-2000 ft holes) to investigate the potential of primary sulfide copper mineralization related to a porphyry at depth. Additional mineralization within and peripheral to the deposit may significantly enhance the potential resources of the project and the value of a possible future producing operation at MacArthur.

Acquisition costs incurred to March 31, 2007 were $327,459 and exploration expenditures were $159,982 for a total of $487,441. Acquisition costs incurred to December 31, 2006 were $170,324 and exploration expenditures were $80,591 for a total of $250,915. (Note 3 in the consolidated financial statements dated March 31, 2007).

A payment of $350,000 for the purchase of the PIT claims shall be deducted from the final payment due to North Exploration LLC for the McArthur properties. (Note 3 of the consolidated financial statements dated March 31, 2007)

(vii) Other properties

Other properties of the Company include Gray Hills, Peg Leg, SW Tintic Utah, Yerington, and Carbon County properties in the USA, and Las Americas, Mirasol, Jaboncillos, and Cerro Blanco properties in Mexico. See Note 3 (g) in the consolidated financial statements dated March 31, 2007.

Page 29 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

F. Mineral Property Expenditures

During the three months ended March 31, 2007 (“Q1 2007”) the Company incurred mineral property costs, excluding exploration accounts payable of $238,720 (Q1 2006: $2,523) of $1,843,860 compared to $509,079 for the three months ended March 31, 2006 (“Q1 2006”). Of this expenditure $1,041,068 (Q1 2006: $122,047) was spent on acquisition costs and $804,792 (Q1 2006: $387,032) on exploration.

The total mineral properties expenditure of $11,844,962, which excludes $1,904,550 recovered from Blackberry, as at March 31, 2007 was allocated as follows; 32% was spent on Nieves, 30% on Uranium properties, 15% on Duke Island, 7% on Los Crestones, 6% on both Big Bar and various other properties and 4% on MacArthur. The total mineral properties expenditure of $9,760,382, which excludes $1,904,550 recovered from Blackberry, as at December 31, 2006 was allocated as follows; 38% was spent on Nieves, 23% on Uranium properties, 18% on Duke Island, 7% on Big Bar, 6% on Los Crestones, 5% on other properties and 3% on MacArthur.

Total deferred mineral property costs as at March 31, 2007 are as follows:

                     All Mineral Properties   Year End           Balance  
          Additions        
    Balance           as at  
    Dec 31, 2006     Q1     March 31, 2007  
  $    $    $   
                   
Summary by Expenditure                  
       Total acquisitions   3,197,586     1,041,068     4,238,654  
       Total exploration   6,562,796     1,043,512     7,606,308  
       Less: cost recovery, Nieves   (1,904,550 )   -     (1,904,550 )
                   
Total   7,855,832     2,084,580     9,940,412  
                   
Summary by Property                  
       Nieves, net of cost recovery   1,900,755     17,112     1,917,867  
       Los Crestones   534,286     238,345     772,631  
       Uranium properties   2,205,297     1,351,275     3,556,572  
       Duke Island   1,737,836     -     1,737,836  
       Big Bar   730,574     3,083     733,657  
       MacArthur   250,915     236,526     487,441  
       Other properties   496,169     238,239     734,408  
                   
Total   7,855,832     2,084,580     9,940,412  

Page 30 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

F. Mineral Property Expenditures, continued

Total deferred mineral property costs for the year ended December 31, 2006 are as follows:

                 All Mineral Properties Year End       Additions       Change   Year End  
  Balance                   During   Balance  
  Dec 31, 2005   Q1   Q2   Q3   Q4   2006   Dec 31, 2006  
  $    $    $    $    $    $    $   
                             
Summary by Expenditure                            
     Total acquisitions 1,547,235   122,047   119,813   664,638   743,853   1,650,351   3,197,586  
     Total exploration 4,114,198   389,555   566,387   651,262   841,394   2,448,598   6,562,796  
     Less: cost recovery, Nieves (1,904,550 ) -   -   -   -   -   (1,904,550 )
                             
Total 3,756,883   511,602   686,200   1,315,900   1,585,247   4,098,949   7,855,832  
                             
Summary by Property                            
     Nieves, net of cost recovery 1,640,415   203,847   31,237   6,107   19,149   260,340   1,900,755  
     Los Crestones 79,416   3,703   86,140   89,951   275,076   454,870   534,286  
     Uranium properties 273,968   275,097   330,409   610,034   715,789   1,931,329   2,205,297  
     Duke Island 1,693,234   12,492   2,958   29,152   -   44,602   1,737,836  
     Big Bar 39,366   1,736   173,185   421,309   94,978   691,208   730,574  
     MacArthur 30,484   14,727   62,271   110,848   32,585   220,431   250,915  
     Other properties -   -   -   48,499   447,670   496,169   496,169  
                             
Total 3,756,883   511,602   686,200   1,315,900   1,585,247   4,098,949   7,855,832  

For further information on mineral properties expenditure see Note 3 of the consolidated financial statements dated March 31, 2007

G. Results of Operations

For the three months ended March 31, 2007, (“Q1 2007”) the Company had a net loss of $792,024 compared to a net loss of $194,083 for the three months ended March 31, 2006 (“Q1 2006”). Stock based compensation was $273,155 for Q1 2007 (Q1 2006: $67,707) as stock options were granted and recognized. Removing the stock based compensation results in a net loss of $518,869 for Q1 2007 and $126,376 for Q1 2006.

The increase of $392,493, in the net loss for Q1 2007, excluding stock based compensation can be explained as follows:

(a)

Administration costs increased by $15,000 from $15,000 for Q1 2006 to $30,000 for Q1 2007. This is due to an increase in these fees from $5,000 to $10,000 per month.

   
(b)

Amortization costs were $7,829 for Q1 2007 compared no expense in Q1 2006. This is due to the purchase of equipment and therefore the relevant calculation of depreciation of these assets.

Page 31 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

G. Results of Operations, continued

(c)

With the removal of stock based compensation of $247,849 (Q1 2006: Nil) consulting fees increased by $49,851 from $21,974 for Q1 2006 to $71,825 for Q1 2007. This is due to the increased activity in respect to the day to day running of the Company and the commissioning of consultants for exploration purposes.

   
(d)

With the removal of stock based compensation of $25,306 (Q1 2006: $67,707) director and officer fees were $11,250 for Q1 2006 compared to no fees in Q1 2006. These fees are due to the new company policy of providing compensation for independent directors.

   
(e)

Investor relation costs increased by $40,439 from $23,626 for Q1 2006 to $64,065 for Q1 2007. This is due to the fees paid to O & M Partners to provide investor relations as well as the attendance to the Company to three trade shows and the upgrade of the promotional booth and literature for these conferences.

   
(f)

Professional fees increased by $58,138 from $17,646 for Q1 2006 to $75,784 for Q1 2007. This is due to increased legal, accounting and auditing expenses due to the increased activity of the Company.

   
(g)

Regulatory fees increased by $37,467 from $716 for Q1 2006 to $38,183 for Q1 2007. This is due to increased in TSX.V filing fees for a publicly listed company, which is based on the issued and outstanding share capital and a timing difference in the payment of these fees.

   
(h)

Travel and promotion costs increased by $42,317 from $11,653 for Q1 2006 to $53,970 for Q1 2007. This is due to the increased travel of a VP of exploration as well as an increased travel by other consultants to inspect potential new properties. There was also an increase in travel for trade shows, and meetings with analysts and other prominent industry experts.

   
(i)

Wages and benefits costs increased by $40,264 from $9,373 for Q1 2006 compared to $49,637 for Q1 2007. This increase is due to the new salary payments to the President of the Company. No stock compensation was charged to wages and benefits in either Q1 2007 or Q1 2006.

   
(j)

A one off transaction to write off a liability of $15,800 occurred in Q1 2006.

   
(k)

Interest income increased by $79,970 from $10,384 for Q1 2006 to $90,354 for Q1 2007. This is due to considerably larger cash amounts being held on fixed term deposits.

   
(l)

The Company reported a net foreign currency loss of $76,971 for Q1 2007 compared to a loss $2,612 for Q1 2006. Since all current assets and liabilities held in US dollars have to be converted to Canadian dollars on consolidation at the exchange rate as at March 31, 2007, being 1.1559, this created an exchange loss due to a weakening US dollar compared to the Canadian dollar. The Company also has cash amounts held in US dollars as at Q1 2007 which was not the case in Q1 2006.

   

It is important to note that the majority of transactions for the Company are in US dollars and, to a lesser extent, Mexican Pesos, and therefore foreign exchange fluctuations can result in losses or gains.

Page 32 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

G. Results of Operations, continued

(m)

General exploration costs increased by $63,890 from $8,911 for Q1 2006 to $72,801 for Q1 2007. This is due to an increase in the consideration of potential new properties.


H. Quarterly Results

The following financial data was derived from the Company’s consolidated financial statements for the current and eight previous quarters:

  March 31   Dec. 31,   Sept. 30,   June 30, March 31,   Dec. 31,   Sept. 30,   June 30, March 31,  
  2007   2006   2006   2006   2006   2005   2005   2005   2005  
  $    $    $    $    $    $    $    $    $   
                                     
Operating expenses 459,451   211,786   202,843   209,825   140,987   134,585   116,018   79,258   67,644  
Interest earned (90,354 ) (30,060 ) (26,277 ) (19,267 ) (10,384 ) (22,641 ) (3,622 ) (3,236 ) (6,636 )
Other income -   -   -   -   -   (25,000 ) -   -   (10,000 )
Foreign exchange (gain) loss 76,971   (115,647 ) 29,136   4,450   2,612   81,907   66,191   (9,418 ) (12,773 )
General exploration 72,801   78,640   53,067   85,237   8,911   2,441   -   -   -  
                                     
Loss before the undernoted 518,869   144,719   258,769   280,245   142,126   171,292   178,587   66,604   38,235  
                                     
Stock-based compensation 273,155   880,374   1,982,373   114,500   67,757   (129,373 ) 460,215   -   -  
Write off of reclamation bond -   -   -   -   -   2,500   -   -   -  
Accrued liabilities written off -   6,063   (6,761 ) (23,831 ) (15,800 ) -   -   -   -  
                                     
Net Loss 792,024   1,031,156   2,234,381   370,914   194,083   44,419   638,802   66,604   38,235  
                                     
Loss per share - basic and diluted 0.01   0.01   0.03   0.01   0.00   0.01   0.01   0.00   0.00  

I. Related Party Information.

As at March 31, 2007, $66,571 (2006: $26,216) was due to directors or senior officers of the Company or to companies controlled by them, for various services rendered.

All related party transactions are made in the normal course of operations for consideration established by the Company and accepted by the Company and related parties. For further detailed information see Note 4 of the consolidated financial statements dated March 31, 2007.

Page 33 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

J. Financial Conditions, Liquidity and Capital Resources

The Company finances its operations by raising capital in the equity markets. For the foreseeable future, the Company will need to rely on the sale of such securities and joint venture arrangements with third parties to provide working capital and to finance its mineral property acquisition and exploration activities.

The Company had a working capital balance of $6,521,496 as at March 31, 2007, compared to a working capital balance of $9,075,713 as at December 31, 2006 and $1,236,350 as at March 31, 2006.

During Q1 2007, 135,000 common shares were issued (Q1 2006: 638,680) for gross proceeds of $83,760 (Q1 2006: $181,200) from shares issued for the exercise of stock options.

During the year ended December 31, 2006, 11,891,136 common shares were issued (2005: 7,975,000) for gross proceeds of $11,765,917 (2005: $2,494,350) from shares issued for a private placement and the exercise of share purchase warrants and stock options. A further 400,000 common shares were issued (2005: 200,000) for mineral property acquisitions at a price of $606,000 (2005: $76,000) as well as 291,484 commons shares (2005: Nil) for brokerage fees in respect of the 2006 private placement. This give a total of 12,582,620 (2005: 8,175,000) common shares issued during the year ended December 31, 2006.

For further information on the issuance of shares see note 5 of the consolidated financial statements dated March 31, 2007.

As at May 8, 2007, 5,057,000 stock options are “in the money” (the exercise price is less than the current share trading price) and 5,007,000 are exercisable. If they were exercised, the Company would realize proceeds of $4,821,130. All warrants of 2,608,928, are also in “in the money” and if they were exercised the Company would realize proceeds of $5,870,088. This gives potential proceeds from stock options and warrants of $10,691,218.

For information on expenditures on mineral properties see note E and F in this MD&A or Note 3 of the consolidated financial statements dated March 31, 2007.

K. Outstanding Shares, Options and Share Purchase Warrants

(i) Issued and outstanding shares

The Company has unlimited authorized, without par value, common shares.

                                                                                                              Number of shares     Total  
           
Balance as at March 31, 2007 78,239,820   $ 27,990,479  
Issued subsequent to quarter-end          
       Exercise of stock options 310,000   $ 240,700  
       Exercise of share purchase warrants 15,000   $ 33,750  
           
Balance as at May 8, 2007 78,564,820   $ 28,264,929  

Page 34 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

K. Outstanding Shares, Options and Share Purchase Warrants, continued

(ii) Share Purchase Warrants

As at March 31, 2007, there were 2,623,928 share purchase warrants outstanding with an exercise price of $2.25 per share and an expiry date of June 21, 2008. Subsequent to the period end 15,000 share purchase warrants have been exercised leaving a balance as at May 8, 2007 of 2,608,928.

(iii) Stock Options

As at March 31, 2007, there were 5,392,000 stock options outstanding with a weighted average exercise price of $0.96 per share. Options currently outstanding are as follows:

   Exercise Expiry   Balance   Granted   Cancelled   Exercised   Balance  
     Price Date   March 31, 2007       or Expired       May 8, 2007  
          -   -   -      
     $0.12 January 10, 2008   904,000   -   -   10,000   894,000  
     $0.25 October 2, 2008   50,000   -   -   50,000   -  
     $0.34 December 8, 2008   90,000   -   -   -   90,000  
     $0.62 March 25, 2009   560,000   -   -   50,000   510,000  
     $0.35 August 9, 2010   808,000   -   -   95,000   713,000  
     $0.40 January 9, 2011   200,000   -   -   -   200,000  
     $1.04 March 27, 2011   125,000   -   -   -   125,000  
     $1.00 May 19, 2011   75,000   -   -   -   75,000  
     $1.12 June 12, 2011   100,000   -   -   -   100,000  
     $1.55 July 28, 2011   2,080,000   -   -   5,000   2,075,000  
     $1.55 August 23, 2011   100,000   -   -   100,000   -  
     $1.50 September 25, 2011   100,000   -   -   -   100,000  
     $2.05 December 18, 2011   100,000   -   -   -   100,000  
     $2.65 January 11, 2012   75,000   -   -   -   75,000  
     $2.70 February 21, 2012   25,000   -   -   -   25,000  
                         
      5,392,000   -   -   310,000   5,082,000  
                         
Weighted average exercise price   $0.96   $0.00   $0.00   $0.78   $0.97  

L. Subsequent Events and Outlook

The following events occurred subsequent to the year end March 31, 2007.

  (a)

The Company intends to continue land acquisition and drilling at its uranium pipe targets in Arizona. Phase 1 drilling is in progress at the Crestones gold property in Mexico and will continue into Q2 2007.

Page 35 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

L. Subsequent Events and Outlook, continued

  (b)

310,000 Stock options and 15,000 share purchase warrants were exercised after the period end March 31, 2007. For detailed information see Note L in this MD&A or Note 5 of the consolidated financial statements dated March 31, 2007.

       
  (c)

The Company has agreed to acquire all the assets of Arimetco Inc., a Nevada corporation, in the Yerington Mining District, Lyon County, Nevada. This transaction is subject to a 180 day review period and the Company may terminate this process if dissatisfied with the condition of the property or fails to obtain requested environmental clearances for past mining-related activities. Under certain circumstances, the review period may be extended for a further 120 day.

       
 

On receiving regulatory approval and providing that properties pass the review process the Company’s commitments would be as follows:

       
  (i)

Payment of US $500,000.

  (ii)

250,000 common shares.

       
 

Under this acquisitions, the property is subject to a 2% net smelter return royalty capped at US $7.5 million on production from any claims owned by Quaterra in the Yerington and MacArthur mine areas.


M. Off Balance Sheet

The Company did not enter into any off balance sheet transactions or commitments as defined by National Instrument 51 - 102.

N. Management’s Responsibility for Financial Information

Preparing financial statements requires management to make estimates and assumptions that affect the reported results. The estimates are based on historical experience and other assumptions that are believed to be reasonable under the circumstances. Critical accounting policies were disclosed in the annual audited financial statements.

Consistent with accepted policies of the Canadian junior mining industry, the Company capitalizes exploration expenditures. This decision, and the timing of the possible recognition of impairment in the mineral property value, can materially affect the reported earnings of the Company.

Management has prepared the information and representations in this annual report. The financial statements have been prepared to conform to generally accepted accounting principles in Canada and, where appropriate, reflect management's best estimates and judgment. The financial information presented throughout this report is consistent with the data presented in the financial statements.

The Company maintains adequate systems of internal accounting and administrative controls. These systems were designed to provide reasonable assurance that relevant and reliable financial information is produced. The independent auditors have the responsibility of auditing the annual financial statements and expressing an opinion on them.

The Board of Directors, through its Audit Committee, is responsible for ensuring that management fulfils its responsibilities for financial reporting and internal control. The Audit Committee is composed of three directors, who meet at least quarterly with management and, at least annually with the external auditors to audit and review accounting, internal controls and financial reporting matters.

Page 36 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

O. Risks and Uncertainties

The principal business of the Company is the exploration and development of mineral properties. Given the nature of the mining business, the limited extent of the Company's assets and the present stage of development, the following risk factors, among others, should be considered.

The Company does not hold any known mineral reserves of any kind and does not generate any revenues from production. The Company’s success will depend largely upon its ability to locate commercially productive mineral reserves. Mineral exploration is highly speculative in nature, involves many risks and frequently is non-productive. There is no assurance that our exploration efforts will be successful. Success in establishing reserves is a result of a number of factors, including the quality of management, the level of geological and technical expertise, the quality of land available for exploration as well as various other factors.

Once mineralization is discovered, it may take several years in the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish proven and probable reserves through drilling and bulk sampling, to determine the optimal metallurgical process to extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities. Because of these uncertainties, no assurance can be given that our exploration programs will result in the establishment or expansion of resources or reserves.

Since the Company does not generate any revenues, it may not have sufficient financial resources to undertake by itself all of its planned mineral property acquisition and exploration activities. Operations will continue to be financed primarily through the sale of securities such as common shares. The Company will need to continue its reliance on the sale of such securities for future financing, which may result in dilution to existing shareholders. Furthermore, the amount of additional funds required may not be available under favorable terms, if at all, and will depend largely on the acquisition and exploration activities pursued.

The ability to attract capital to the Company is dependent on movements in commodity prices. Commodity prices fluctuate on a daily basis and they are affected by a number of factors beyond the control of the Company. If, because of a sustained decline in prices, financing were not available to meet cash operating costs, the feasibility of continuing operations would be evaluated and if warranted, would be discontinued.

The resource industry is intensively competitive in all of its phases, and the Company competes with many other companies possessing much greater financial and technical resources. Competition is particularly intense with respect to the acquisition of desirable undeveloped gold and silver properties. The principal competitive factors in the acquisition of prospective properties include the staff and data necessary to identify and investigate such properties, and the financial resources necessary to acquire and develop the projects. Competition could adversely affect the Company’s ability to acquire suitable prospects for exploration.

Page 37 of 38



Quaterra Resources Inc.
Management’s Discussion and Analysis
In respect to the three months ended March 31, 2007

P. Licenses and Permits

The operations of the Company require licenses and permits from various government authorities. The Company believes that it holds all necessary licenses and permits under applicable laws and regulations for work in progress and believes it is presently complying in all material respects with the terms of such licenses and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that the Company will be able to obtain or maintain all necessary licenses and permits that may be required to explore and develop its properties, commence construction or operation of mining facilities or to maintain continued operations that economically justify the cost.

Q. Whistleblower Policy

Effective June 30, 2005, the audit committee adopted resolutions that authorized the establishment of procedures for complaints received regarding accounting, internal controls or auditing matters, and for a confidential, anonymous submission procedure for employees who have concerns regarding questionable accounting or auditing matters. The implementation of the whistleblower policy is in accordance with new requirements pursuant to Multilateral Instrument 52-110 Audit Committees, National Policy 58-201 Corporate Governance Guidelines and National Instrument 58-101 Disclosure of Corporate Governance Practices

R. Forward-Looking Statements

Some of the statements contained in this MD&A are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur.

Forward-looking statements may be identified by such terms as “believes”, “anticipates”, “expects”, “estimates”, “may”, “could”, “would”, “will”, or “plan”. Such forward-looking statements are made pursuant to the safe harbour provisions of the United States Private Securities Litigation Reform Act of 1995. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties.

Actual results relating to, among other things, results of exploration, reclamation, capital costs, and the Company’s financial condition and prospects, could differ materially from those currently anticipated in such statements for many reasons such as; changes in general economic conditions and conditions in the financial markets; changes in demand and prices for the minerals the Company expects to produce;, litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; technological and operational difficulties encountered in connection with the Company’s activities; and changing foreign exchange rates and other matters discussed in this MD&A.

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on the Company’s forward-looking statements. Further information regarding these and other factors, which may cause results to differ materially from those projected in forward-looking statements, are included in the filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time by the Company or on its behalf, except in accordance with applicable securities laws.

Page 38 of 38


EX-99.15 16 exhibit99-15.htm FORM OF PROXY FOR JULY 17, 2007 ANNUAL MEETING OF SHAREHOLDERS Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.15

Proxy
(Solicited by Management)

2007 ANNUAL GENERAL MEETING (the “Meeting”) of QUATERRA RESOURCES INC. (the "Company")
 
Resolutions (For full details of each item, please see the Notice of Meeting and Information Circular dated June 5, 2007 ).
             
      For   Against
TO BE HELD AT: 1100 – 1199 West Hastings Street, Vancouver, B.C.   1. To determine the number of directors at seven (7)      
      For   Withhold
ON: July 17, 2007 at 10:00 a.m. (Vancouver time)   2. To appoint Smythe Ratcliffe as auditor of the Company      
    3. To elect as a director, Robert Gayton      

The undersigned registered shareholder (“Registered Shareholder”) of the Company hereby appoints Dr. Thomas C. Patton, President and Chief Executive Officer of the Company, or failing him, Dr. Robert Gayton, Director of the Company or in place of the foregoing, ___________________________________ as proxyholder for and on behalf of the Registered Shareholder with the power of substitution to attend, act and vote for and on behalf of the Registered Shareholder in respect of all matters that may properly come before the Meeting and at every adjournment thereof, to the same extent and with the same powers as if the undersigned Registered Shareholder were present at the Meeting, or any adjournment thereof.

The Registered Shareholder hereby directs the proxyholder to vote or withhold from voting the securities of the Company registered in the name of the Registered Shareholder as specified herein.

  4. To elect as a director, Thomas Patton      
5. To elect as a director, Lawrence Page      
6. To elect as a director, John Kerr      
7. To elect as a director, Eugene Spiering      
8. To elect as a director, Roy Wilkes      
9. To elect as a director, Tracy Stevenson      
   For   Against
10. To approve the proposed 2007 Rolling Incentive Stock      
  Option Plan      

    The undersigned Registered Shareholder hereby revokes any proxy previously given to attend and vote at the Meeting.
       
    SIGN HERE:   _____________________________________
       
    Please Print Name:  _____________________________________
       
    Date:  _____________________________________
       
    Number of Shares  
    Represented by Proxy:  _____________________________________
       
    THIS PROXY FORM IS NOT VALID UNLESS IT IS SIGNED AND DATED.
SEE IMPORTANT INFORMATION AND INSTRUCTIONS ON REVERSE


INSTRUCTIONS FOR COMPLETION OF PROXY

1.

This Proxy is solicited by the Management of the Company.

     
2.

This form of proxy (“Instrument of Proxy”) must be signed by you, the Registered Shareholder, or by your attorney duly authorized by you in writing, or, in the case of a corporation, by a duly authorized officer or representative of the corporation; and if executed by an attorney, officer, or other duly appointed representative, the original or a notarial copy of the instrument so empowering such person, or such other documentation in support as shall be acceptable to the Chairman of the Meeting, must accompany the Instrument of Proxy.

     
3.

If this Instrument of Proxy is not dated in the space provided, authority is hereby given by you, the Registered Shareholder, for the proxyholder to date this proxy seven (7) calendar days after the date on which it was mailed to you, the Registered Shareholder, by or on behalf of the Company.

     
4.

A Registered Shareholder who wishes to attend the Meeting and vote on the resolutions in person, may simply register with the scrutineers before the Meeting begins.

     
5.

A Registered Shareholder who is not able to attend the Meeting in person but wishes to vote on the resolutions, may do the following:

     
(a)

appoint one of the management proxyholders named on the Instrument of Proxy, by leaving the wording appointing a nominee as is (i.e. do not strike out the management proxyholders shown and do not complete the blank space provided for the appointment of an alternate proxyholder). Where no choice is specified by a Registered Shareholder with respect to a resolution set out in the Instrument of Proxy, a management appointee acting as a proxyholder will vote in favour of each matter identified on this Instrument of Proxy other than the election of directors and the appointment of an auditor as identified in this Instrument of Proxy;

OR

  (b)

appoint another proxyholder, who need not be a shareholder of the Company, to vote according to the Registered Shareholder’s instructions, by striking out the management proxyholder names shown and inserting the name of the person or company you wish to represent you at the Meeting in the space provided for an alternate proxyholder. If no choice is specified, the proxyholder has discretionary authority to vote as the proxyholder sees fit.


6.

The securities represented by this Instrument of Proxy will be voted or withheld from voting in accordance with the instructions of the Registered Shareholder on any poll of a resolution that may be called for and, if the Registered Shareholder specifies a choice with respect to any matter to be acted upon, the securities will be voted or withheld from voting accordingly. Further, the securities will be voted by the appointed proxyholder with respect to any amendments or variations of any of the resolutions set out on the Instrument of Proxy or other matters which may properly come before the Meeting as the proxyholder in its sole discretion sees fit.

If a Registered Shareholder has submitted an Instrument of Proxy, the Registered Shareholder may still attend the Meeting and may vote in person. To do so, the Registered Shareholder must record his/her attendance with the scrutineers before the commencement of the Meeting and revoke, in writing, the prior votes.

To be represented at the Meeting, this proxy form must be received at the head office of the Company, Suite 1100 – 1199 West Hastings Street, Vancouver, BC V6E 3T5 (fax number (604-688-4670), or at the office of CIBC Mellon Trust Company, Suite 1600 – 1066 West Hastings Street, Vancouver, British Columbia (fax number (604) 688-4301), by mail or by fax no later than forty eight (48) hours (excluding Saturdays, Sundays and holidays) prior to the time of the Meeting, or any adjournment thereof.


EX-99.16 17 exhibit99-16.htm MANAGEMENT INFORMATION CIRCULAR FOR JULY 17, 2007 ANNUAL MEETING OF SHAREHOLDERS Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.16

QUATERRA RESOURCES INC.
1100 – 1199 West Hastings Street, Vancouver, B.C. V6E 3T5
Telephone: (604) 681-9059 Fax: (604) 688-4670

NOTICE OF MEETING

TO:      The Shareholders of Quaterra Resources Inc.

NOTICE IS HEREBY GIVEN THAT an annual general meeting (the “Meeting”) of the holders of common shares (“Shares”) of Quaterra Resources Inc. (the “Company”) will be held at Suite 1100, 1199 West Hastings Street, Vancouver, British Columbia V6E 3T5 on Tuesday, July 17, 2007 at the hour of 10:00 am, Pacific Daylight Time, for the following purposes:

  1.

To receive and consider the report of the directors and the consolidated financial statements together with the auditor’s report thereon for the financial year ended December 31, 2006;

     
  2.

To determine the number of directors at seven (7);

     
  3.

To elect directors for the ensuing year;

     
  4.

To appoint the auditor for the ensuing year;

     
  5.

To consider and, if thought fit, to approve the Company’s 2007 Rolling Incentive Stock Option Plan described in the Information Circular; and

     
  6.

To transact such further or other business as may properly come before the Meeting and any adjournments thereof.

An Information Circular and a form of Proxy accompany this Notice. The Information Circular provides additional information relating to the matters to be dealt with at the Meeting and forms part of this Notice.

Registered shareholders are entitled to vote at the Meeting in person or by proxy. Registered shareholders who are unable to attend the Meeting, or any adjournment thereof, in person, are requested to read, complete, sign and return the form of Proxy accompanying this Notice in accordance with the instructions set out in the form of Proxy and in the Information Circular accompanying this Notice. Unregistered shareholders who received the form of Proxy accompanying this Notice through an intermediary must deliver the Proxy in accordance with the instructions given by such intermediary.

DATED at Vancouver, British Columbia, this 13th day of June 2007

BY ORDER OF THE BOARD

(signed) Thomas C. Patton
Thomas C. Patton, President and Chief Executive Officer

If you are a non-registered shareholder and receive these materials through your broker or through another intermediary, please complete and return the materials in accordance with the instructions provided to you by your broker or by the other intermediary. Failure to do so may result in your Shares not being eligible to be voted by proxy at the Meeting.

Page 1 of 22


2

QUATERRA RESOURCES INC.
1100 – 1199 West Hastings Street, Vancouver, B.C. V6E 3T5
Telephone: (604) 681-9059 Fax: (604) 688-4670

INFORMATION CIRCULAR

(As at and dated June 5, 2007, except as indicated)

GLOSSARY OF TERMS

Unless the context otherwise requires, the following terms shall have the following respective meanings when used in this Circular.

“Board” means the board of directors of the Company.

“business day” means a day that is not Saturday, Sunday, or statutory holiday in Vancouver, British Columbia

“Circular” or “Information Circular” means, collectively, the Notice of Meeting and this information circular, including all Appendices hereto, sent to Shareholders in connection with the Meeting.

“Company” means Quaterra Resources Inc.

“Meeting” means the annual general meeting of Shareholders to be held on July 17, 2007 and any adjournement(s) thereof.

“Notice of Meeting” means the notice of meeting forming part of this Circular to be mailed to Shareholders in connection with the Meeting.

“Share” means a common share in the capital of the Company.

“Shareholder” means a holder of Shares.

“Plan” means the Company’s Stock Option Plan.

Page 2 of 22


3

QUATERRA RESOURCES INC.
1100 – 1199 West Hastings Street, Vancouver, B.C. V6E 3T5
Telephone: (604) 681-9059 Fax: (604) 688-4670

INFORMATION CIRCULAR
(As at June 5, 2007, except as indicated)

GENERAL PROXY INFORMATION

This Circular is furnished in connection with the solicitation of proxies by the management of the Company for use at the Meeting to be held on July 17, 2007 and at any adjournment thereof. Unless the context otherwise requires, references to the Company include the Company and its subsidiaries. The solicitation will be conducted by mail and may be supplemented by telephone, electronic or other personal contact to be made without special compensation by the directors, officers and employees. The cost of solicitation will be borne by the Company.

Appointment of Proxyholder

The purpose of the proxy is to designate persons who will vote the proxy on a Shareholder’s behalf in accordance with the instructions given by the Shareholder in the proxy. The person whose names are printed in the enclosed form of proxy for the Meeting are officers or directors (the “Management Proxyholders”).

A shareholder has the right to appoint a person (who need not be a shareholder) to attend and act on the shareholder’s behalf at the Meeting other than the Management Appointees. To exercise this right, the shareholder must either insert the name of the desired person in the blank space provided in the form of proxy accompanying this Information Circular and strike out the names of the Management Appointees or submit another proper form of proxy.

Voting by Proxy

Only registered shareholders or duly appointed proxyholders are permitted to vote at the Meeting. Shares represented by properly executed proxies in the accompanying form will be voted or withheld from voting on each respective matter in accordance with the instructions of the Shareholder on any ballot that may be conducted.

If no choice is specified and one of the Management Proxyholders is appointed by a Shareholder as proxyholder, such person will vote in favour of the matters proposed at the Meeting and for all other maters proposed by management at the Meeting.

The enclosed form of proxy also confers discretionary authority upon the person named therein as proxyholder with respect to amendments or variations to matters identified in the notice of the Meeting and with respect to other matters which may properly come before the Meeting. At the date of this Circular, management knows of no such amendments, variations or other matters to come before the Meeting.

Completion and Return of Proxy

Completed forms of proxy must be deposited at the office of the Company’s registrar and transfer agent, CIBC Mellon Trust Company, at Suite 1600 – 1066 West Hastings Street, Vancouver, B.C., V6E 3X1 not less than 48 hours, excluding Saturdays, Sundays and holidays, prior to the time of the holding of the Meeting or any adjournment thereof.

Non-Registered Holders

Only shareholders whose names appear on the records of the Company as the registered holders of shares or duly appointed proxyholders are permitted to vote at the Meeting. Most shareholders of the Company are not registered shareholders because the shares they own are not registered in their names, but instead registered in the name of a nominee such as a brokerage firm through which they purchased the Shares; bank, trust company, trustee or administrator of self-administered RRSP’s, RRIF’s, RESP’s and similar plans; or in the name of a clearing agency (such as The Canadian Depository for Securities Limited (a “Nominee”) If you purchased your shares through a broker, you are likely an unregistered holder.

In accordance with securities regulatory policy, the Company has distributed copies of the Meeting materials, being the Notice of Meeting, this Information Circular and the Proxy, to the Nominees for distribution to non-registered holders.

Nominees are required to forward the meeting materials to non-registered holders to seek their voting instructions in advance of the Meeting. Shares hold by Nominees can only be voted in accordance with the instructions of the non-registered holder.

Page 3 of 22


4

The Nominees often have their own form of proxy, mailing procedures and provide their own return instructions. If you wish to vote by proxy, you should carefully follow the instructions from the Nominee in order that your Shares are voted at the Meeting.

If you, as a non-registered holder, wish to vote at the meeting in person, you should appoint yourself as proxyholder by writing your name in the space provided on the request for voting instructions or proxy provided by the Nominee and return the form to the Nominee in the envelope provided. Do not complete the voting section of the form as your vote will be taken at the Meeting.

In addition, Canadian securities legislation now permits the Company to forward meeting materials directly to “non-objecting beneficial owners”. If the Company or its agent has sent these materials directly to you (instead of through a Nominee), your name and address and information about your holdings of securities have been obtained in accordance with applicable securities regulatory requirements from the Nominee holding on your behalf. By choosing to send these materials to you directly, the Company (and not the Nominee holding on your behalf) has assumed responsibility for (i) delivering these materials to you and (ii) executing your proper voting instructions.

Revocability of Proxy

Any registered Shareholder who has returned a proxy may revoke it at any time before it has been exercised. In addition to revocation in any other manner permitted by law, a proxy may be revoked by instrument in writing, including a proxy bearing a later date, executed by the registered Shareholder or by attorney authorized in writing or, if the registered Shareholder is a corporation, under its corporate seal or by an officer or attorney thereof duly authorized. The instrument revoking the proxy must be deposited at the registered office of the Company, at any time up to and including the last business day preceding the date of the Meeting, or any adjournment thereof, or with the chairman of the Meeting on the day of the Meeting. Only registered Shareholders have the right to revoke a proxy. Non-Registered Holders who wish to change their vote must, at least seven days before the Meeting, arrange for their respective Intermediaries to revoke the proxy on their behalf.

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

The Company is authorized to issue an unlimited number of common shares without par value. There is one class of shares only. There were 79,050,160 common shares issued and outstanding at June 5, 2007. The directors have determined that all shareholders of record as of the 15th day of June, 2007 will be entitled to receive notice of and to vote at the Meeting.

At a General Meeting of the Company, on a show of hands, every registered shareholder present in person and entitled to vote and every proxyholder duly appointed by a registered shareholder who would have been entitled to vote shall have one vote and, on a poll, every registered shareholder present in person or represented by proxy or other proper authority and entitled to vote shall have one vote for each share of which such shareholder is the registered holder. Shares represented by proxy will only be voted if a ballot is called for. A ballot may be requested by a registered shareholder or proxyholder present at the Meeting or required because the number of votes attached to shares represented by proxies that are to be voted against a matter is greater than 5% of the votes that could be cast at the Meeting.

To the knowledge of the directors and executive officers of the Company, no person or Corporation beneficially owns, directly or indirectly, or exercises control or direction over, voting securities carrying more than 10% of the outstanding voting rights of the Company.

ELECTION OF DIRECTORS

Each director of the Company is elected annually and holds office until the next Annual General Meeting of the shareholders unless that person ceases to be a director before then. Unless such authority is withheld, Management Appointees intend to vote the shares represented by proxy for the election of the nominees herein listed on any ballot that may be called for.

MANAGEMENT DOES NOT CONTEMPLATE THAT ANY OF THE NOMINEES WILL BE UNABLE TO SERVE AS A DIRECTOR. IN THE EVENT THAT PRIOR TO THE MEETING ANY VACANCIES OCCUR IN THE SLATE OF NOMINEES HEREIN LISTED, IT IS INTENDED THAT DISCRETIONARY AUTHORITY SHALL BE EXERCISED BY THE PERSON NAMED IN THE PROXY TO VOTE THE SHARES REPRESENTED BY PROXY FOR THE ELECTION OF ANY OTHER PERSON OR PERSONS AS DIRECTORS ON ANY BALLOT THAT MAY BE CALLED FOR.

Management proposes that the number of directors for the Company be determined at seven (7) for the ensuing year, subject to such increases as may be permitted by the Articles of the Company, and to nominate each of the following persons for election as a director. Information concerning these persons, as furnished by the individual nominees, is as follows:

Page 4 of 22


5





Name, Jurisdiction of
Residence and Present
Office Held






Director Since
Number Of Shares
Beneficially Owned,
Directly Or Indirectly,
Or Over Which Control
Or Direction Is
Exercised At
June 5, 2007


Principal Occupation
And If Not At Present An
Elected Director,
Occupation During The
Past Five (5) Years
Dr. Thomas Patton(2) November 6, 1998 863,000 Geologist
Washington, USA      
President, Chief Executive      
Officer, Director      
Lawrence Page, Q.C. September 5, 1995 500 Lawyer, President of Manex Resource
British Columbia, Canada     Group
Director      
John R. Kerr(1) May 12, 1993 5,000 Geological Engineer; President, John R.
British Columbia, Canada     Kerr and Associates Ltd.
Director      
Dr. Robert Gayton(1) April 3, 1997 55,000 Chartered Accountant; Director of a
British Columbia, Canada     number of public companies
Director      
Eugene Spiering  January 9, 2006 30,000 Geologist
British Columbia, Canada      
Vice President, Exploration,      
Director      
Roy Wilkes(1)(3)  August 22, 2006 10,000 Retired mining executive - previously,
Colorado, USA     President of Washington Group
Director     International’s (NYSE: WGII) mining
      business unit.
Tracy Stevenson Nominee Nil Accountant - Rio Tinto PLC, Global
Utah, USA     Head of Business Process
      Improvement- December 2000 to
      January 2006, Global Head of
      Information Systems and Technology-
      January 2006 to May 2007

(1)

Members of the Audit Committee

(2)

Dr. Thomas Patton directly holds 763,000 common shares and indirectly has control over 100,000 common shares.

(3)

Roy Wilkes was appointed Director on August 22, 2006

No proposed director

(a)

is, as at the date of this Information Circular, or has been, within the preceding 10 years, a director or executive officer of any company that, while that person was acting in that capacity,

     
(i)

was the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days, other than Lawrence Page, Dr. Robert Gayton, and Dr. Thomas Patton, who were directors and/or executive officers of Newcoast Silver Mines Ltd. (now Southern Silver Exploration Corp.) when a Cease Trade Order was issued by the British Columbia Securities Commission on September 30, 2003 and the Alberta Securities Commission on October 23, 2003, for failure to file certain financial information, which Cease Trade Orders were revoked by the British Columbia Securities Commission on October 31, 2003, and by the Alberta Securities Commission on March 25, 2004.

     
(ii)

was subject to an event that resulted, after the director or executive officer ceased to be a director or executive officer, in the company being the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; or

     
(iii)

or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, other than Lawrence Page, a director and President of Saturna Beach Estates Ltd., a private Company formed under the laws of British Columbia, Canada (“SBEL”) which conducts the business of a vineyard and winery. On August 17, 2004, SBEL obtained an Order from the Supreme Court of British Columbia under

Page 5 of 22


6

the provisions of the Companies’ Creditors Arrangement Act (Canada) that allowed SBEL to continue to run its daily business affairs without creditor action during financial reorganization. At the date hereof, the financial reorganization has been completed and the Order terminated;

(b)

has, within the 10 years before the date of this Information Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director; or

   
(c)

is to be elected under any arrangement or understanding between the proposed director and any other person or Company, except the directors and executive officers of the Company acting solely in such capacity.

EXECUTIVE COMPENSATION

"CEO" means each individual who served as chief executive officer of the Company or acted in a similar capacity during the most recently completed financial year.

“CFO” means each individual who served as chief financial officer of the Company or acted in a similar capacity during the most recently completed financial year.

“executive officer” means the chair, a vice-chair, the president, a vice-president in charge of a principal business unit, division or function of the Company and an officer of the Company or any of its subsidiaries, and any other individual, who performed a policy-making function in respect of the Company.

"Named Executive Officer" means:

(i)

each CEO and CFO;

   
(ii)

each of the Company’s three most highly compensated executive officers, other than the CEO and CFO, who were serving as executive officers at the end of the most recently completed financial year and whose total salary and bonus exceeded $150,000; and

   
(iii)

any additional individuals who would have been included in (ii) except that the individual was not serving as an officer of the Company at the end of the most recently completed financial year.

The following table sets forth all annual and long term compensation for services to the Company for the three most recently completed financial years as at December 31, 2006 in respect of the Named Executive Officers. At the end of the Company’s most recently completed financial year, the Company had three Named Executive Officers, Dr. Thomas Patton, the Company’s President and CEO; Scott Hean, the Company’s CFO, and Eugene Spiering, Vice-President, Exploration. There were no other executive officers of the Company, or other individuals that served as executive officers, whose total compensation exceeded $150,000 during the financial year ended December 31, 2006.

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SUMMARY COMPENSATION TABLE

Named Executive Officers

   
Annual Compensation
Long-Term Compensation  
    Awards Payouts  
          Securities      
        Other under Restricted    
        Annual Options/ Shares or    
        Compen-    SARs Restricted LTIP All Other
Name and   Salary Bonus sation  Granted Share Payouts Compen-
Principal Position Year(1) ($) ($) ($) (#)(10)  Units ($) ($)  sation
Dr. Thomas Patton 2006 Nil Nil Nil 150,000 Nil Nil Nil
President & CEO 2005 Nil Nil Nil 240,000 Nil Nil 10,343(2)
  2004 Nil Nil Nil 50,000 Nil Nil 15,444(2)
Scott Hean(7) 2006 Nil Nil Nil 225,000 Nil Nil 24,825(8)
CFO                
Eugene Spiering 2006 150,000 Nil Nil 350,000 Nil Nil Nil
Vice President,                
Exploration(9)                
B.J. Gordon 2006 - - - - - - -
CFO(3) 2005 Nil Nil Nil 100,000 Nil Nil Nil
Mark Katsumata 2006 - - - - - - -
Vice President, Finance 2005 Nil Nil Nil Nil Nil Nil Nil
(CFO)4) 2004 Nil Nil Nil 100,000 Nil Nil Nil
                 
Dr. Robert Gayton 2006 - - - - - - -
Vice President, Finance 2005 - - - - - - -
(CFO)(5) 2004 Nil Nil Nil 50,000 Nil Nil 2,125(6)

Notes: (1) Ended December 31;
  (2) Fees for geological services provided to the Company by Dr. Thomas Patton;
  (3) Resigned as CFO on February 10, 2006;
  (4) Resigned as CFO on June 23, 2005;
  (5) Resigned as CFO on June 28, 2004;
  (6) Fees for financial consulting services provided to the Company by Dr. Robert Gayton;
  (7) Appointed CFO on March 27, 2006
  (8) Fees paid to Atherton Enterprises Ltd., a company controlled by Scott Hean, for services as CFO.
  (9) Appointed Vice-President, Exploration on January 9, 2006.
  (10) Incentive Stock Options

Stock Appreciation Rights ("SARs") Grants
During The Most Recently Completed Financial Year

Stock Appreciation Rights ("SARs") means a right, granted by an issuer or any of its subsidiaries as compensation for services rendered or in connection with office or employment, to receive a payment of cash or an issue or transfer of securities based wholly on or in part in changes in the trading price of the Company’s shares. No SARs were granted or exercised during the most recently completed financial year.

Long Term Incentive Plan (“LTIP”) Awards

The Company does not have a LTIP, pursuant to which cash or non-cash compensation intended to serve as an incentive for performance (whereby performance is measured by reference to financial performance or the price of the Company’s securities), was paid or distributed to the Named Executive Officers during the most recently completed financial year.

Incentive Stock Options

The Company has a Rolling Incentive Stock Option Plan (the “Plan”) in place which is on substantially the same terms as the proposed 2007 Rolling Incentive Stock Option Plan described under “Particulars of Matters to be Acted Upon”.

OPTION GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR

No options, share purchase warrants or rights have been granted to the Named Executive Officers by the Company as compensation for employment services or office, and none are outstanding. During the most recently completed financial year of the Company, however, incentive stock options (“Options”) were granted under the Plan to the Named Executive Officers, and to the Non-Named Executive Officer Directors, as follows:

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        Market Value Of  
    % Of Total   Securities  
  Securities Options   Underlying  
  Under Granted To Exercise Or Options On  
  Options Employees In Base Price The Date Of Expiration
Name Granted (#) Financial Year ($/Security) Grant Date
        ($/Security)  
Named Executive          
Officers          
           
Dr. Thomas Patton    150,000 5.15 1.55 1.55  July 28, 2011
Scott Hean    125,000 7.73 1.04 1.04 March 27, 2011
     100,000 7.73 1.55 1.55  July 28, 2011
Eugene Spiering    150,000 5.15 1.55 1.55  July 28, 2011
           
Non-Named          
Executive          
Officer/Directors          
           
Lawrence Page    100,000 3.44 1.55 1.55  July 28, 2011
Dr. Robert Gayton    100,000 3.44 1.55 1.55  July 28, 2011
John Kerr    100,000 3.44 1.55 1.55  July 28, 2011
Roy Wilkes    100,000 3.44 1.55 1.55  Aug 23, 2011

Aggregated Option Exercises

The following table sets forth details of all exercised Options during the most recently completed financial year by the Named Executive Officers, and by the Non-Named Executive Officer Directors, and the financial year end value of unexercised in-the-money Options on an aggregated basis.

AGGREGATE OPTION EXERCISES DURING THE MOST RECENTLY COMPLETED
FINANCIAL YEAR AND FINANCIAL YEAR-END OPTION VALUES

      Unexercised Options Value Of Unexercised In-
  Securities   at Financial Year End The-Money Options
  Acquired On Aggregate (#) At Financial Year End
Name Of Exercise Value Realized Exercisable/ ($)
Executive Officer (#) ($) Unexercisable Exercisable/
        Unexercisable
Named Executive        
Officers        
         
Dr. Thomas Patton 255,000 333,450 585,000 / Nil 1,214,500 / Nil
Scott Hean Nil N/A 156,250 / 68,750 208,375 / 114,125
Eugene Spiering Nil N/A 350,000 / Nil 632,500 / Nil
         
Non-Named        
Executive        
Officer/Directors        
         
         
Dr. Robert Gayton 175,000 252,050 290,000 / Nil 548,000 / Nil
Lawrence Page 190,000 346,000 100,000 / Nil 115,000 / Nil
John Kerr 150,000 128,400 130,000 / Nil 177,400 / Nil
Roy Wilkes Nil N/A 100,000 / Nil 115,000 / Nil

Termination of Employment, Changes in Responsibilities and Employment Contracts

In January 2007, Dr. Thomas Patton (“Patton”) entered into an employment agreement (the “Patton Agreement”) with the Company and the Company’s subsidiary, Quaterra Alaska, Inc. (the “Companies”). Under the Patton Agreement, Patton is entitled to (i) receive an annual base salary of $150,000, effective January 1, 2007; and (ii) receive future incentive stock

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options. The Companies may end the employment of Patton only for breach of the Patton Agreement or for cause. Patton is entitled to two (2) months notice of such discharge. After such notice, the Companies may at their option, discontinue all or any portion of Patton’s duties, but shall continue his salary during the two-month notice period. After the effective date of such discharge, the Companies shall not relieve Patton of his obligations as described in the Patton Agreement, nor prejudice any rights of the Companies. Patton shall have the reciprocal right to give two (2) months’ notice of the termination of the Patton Agreement.

In the event that any person or any person and such person’s associates or affiliates, as such terms are defined in the Securities Act (British Columbia), begins a tender or exchange offer, circulates a proxy to shareholders or takes other steps to effect a takeover of control of one or both of the Companies, whether by way of reverse take-over, formal bid, causing the election or appointment of a majority of new directors of one or both of the Companies, or otherwise in any manner whatsoever (herein a “Change of Control”), Patton agrees that he will not voluntarily leave the employ of the Companies and will continue to render services to the Companies commensurate with his position and in the best interests of the shareholders of the Companies until such person has abandoned or terminated efforts to effect a Change of Control of Companies or until such Change of Control of Companies has occurred.

In the preceding paragraph “Change of Control” means a transaction, whether by takeover bid, plan of arrangement, amalgamation, merger, reorganization or other similar transaction, whereby a majority of new directors of one or both of the Companies or the acquisition by any person or by any person and such person’s affiliates or associates, as such terms are defined in the Securities Act (British Columbia), and whether directly or indirectly, of common shares of one or both of the Companies which, when added to all other common shares of that company at the time held by such person and such person’s affiliates and associates, total for the first time twenty (20%) percent or more of the outstanding common shares of that company.

Following any Change of Control of one or both of the Companies, Patton shall have the right, within thirty (30) days from the effective date of such Change of Control, to terminate the Patton Agreement, other than as described in the preceding paragraphs, whereupon Quaterra Alaska, Inc. shall within ten (10) days from such notice pay to Patton an amount of money equal to one hundred percent (100%) of the compensation which would have been paid to Patton during the unexpired term of the Patton Agreement had Patton not elected to terminate the Patton Agreement.

On March 27, 2006, the Company entered into a services agreement (the “Hean Agreement”) with Atherton Enterprises Ltd. and Scott Hean (together “Hean”). Under the Hean Agreement, Hean is entitled to (i) receive a monthly fee of $2,500 (plus GST) up to and including September 26, 2006, and that fee being increased to $3,250 (plus GST) beginning on September 26, 2006 for the remainder of the term of the agreement; and (ii) receive future incentive stock options. Either the Company or Hean may terminate the Hean Agreement without cause at any time by giving 30 days prior written notice to the other. The Company may terminate the Hean Agreement without prior advance notice on the occurrence of any default of the terms of the Hean Agreement by giving written notice to Hean specifying the nature of default.

On January 1, 2006, Eugene Spiering (“Spiering”) entered into an employment agreement (the “Spiering Agreement”) with the Company, which Spiering Agreement was renewed on January 1, 2007 for one year. Under the Spiering Agreement, Spiering is entitled to an annual salary of $150,000 and to receive future incentive stock options. The Company may terminate the Spiering Agreement at any time for cause at which time the Company shall pay Spiering, within ten (10) days of the termination the full amount of compensation owed to him up to the date of termination. If the Company terminates the Spiering Agreement other than for cause, the Company shall provide written working notice to Spiering as follows: (i) if terminated within first three (3) months of employment, one week; (ii) if terminated after the completion of three (3) months employment but prior to completion of twelve (12) months employment, two (2) weeks; (iii) if terminated after the completion of twelve (12) months employment but prior to the completion of five (5) years employment, one (1) month; and (iv) if terminated after the completion of five (5) years of employment, to an additional week of notice for each additional year of employment; and shall pay to Spiering all compensation owed pursuant to the terms of the agreement within ten (1) days of the last effective day of the Spiering Agreement. In lieu of the Company providing Spiering with written notice, the Company may pay Spiering all compensation owed pursuant to the Spiering Agreement within ten (10) days of the last effective day of the Spiering Agreement; and if terminated a sum equivalent to four (4) weeks of the monthly salary per year of employment or a prorate portion thereof.

Compensation of Directors

The directors of the Company have not been paid fees or other cash compensation in their capacity as directors during the most recently completed financial year other than, Dr. Robert Gayton ($1,875); John Kerr ($1,125); and Lawrence Page ($2,625). The Company’s Board of Directors has implemented a policy whereby independent directors will be compensated as to $375 per Board meeting attended, with the Chairman of said meeting receiving an additional $375. Each independent Board member will receive an annual retainer of $9,000 to be paid quarterly in arrears.

No pension plan or retirement benefit plans have been instituted by the Company and none are proposed at this time.

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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The Company has no equity compensation plans. The following table, however, sets out the number of the Company’s shares to be issued and remaining available for future issuance under the Company’s Incentive Stock Option Plans at the end of the Company’s most recently completed financial year:





Plan Category



Number of Securities to be
issued upon exercise of
outstanding options,
warrants and rights


(a)

Weighted-average
exercise price of
outstanding options,
warrants and rights


(b)
Number of securities
remaining available for
future issuance under
the Company’s Incentive
Stock Option Plan
(excluding securities
reflected in column (a))
(c)
       
Incentive Stock Option Plan      
approved by securityholders 8,035,928 $1.58 2,383,482
       
       
Incentive Stock Option Plan      
approved by securityholders N/A N/A N/A
       
       
Total 8,035,928   2,383,482

INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

None of the directors or executive officers of the Company, no proposed nominee for election as a director of the Company, and no associate of any of them, is or has been indebted to the Company or its subsidiaries at any time since the beginning of the Company’s last completed financial year.

CORPORATE GOVERNANCE

Effective June 30, 2005, National Instrument 58-101 Disclosure of Corporate Governance Practices ("NI 58-101") and National Policy 58-201 Corporate Governance Guidelines ("NP 58-201") were adopted in each of the provinces and territories of Canada. NI 58-101 requires issuers to disclose the corporate governance practices that they have adopted. NP 58-201 provides guidance on corporate governance practices.

The Board is responsible for the supervision of the management of the Company and for approving the overall direction of the Company in a manner that is in the best interests of the Company and its shareholders. The Board will participate fully in assessing and approving strategic plans and material prospective decisions proposed by management. To ensure that the principal business risks that are borne by the Company are appropriate, the Board will receive periodic reports from management on the Company's assessment and management of such risks. The Board will regularly monitor the financial performance of the Company, including receiving and reviewing detailed financial information contained in management reports. The Board will monitor the activities of the senior management through regular meetings and discussions amongst the Board and between the Board and senior management. The Board will hold regular meetings at least four times per year. Additional meetings will be held to address special items of business.

Directors’ Independence

The Board facilitates its exercise of independent supervision over management by ensuring that a majority of its members are independent of the Company. Directors are considered to be independent if they have no direct or indirect material relationship with the Company. A "material relationship" is a relationship which could, in the view of the Company's Board, be reasonably expected to interfere with the exercise of a director's independent judgment. The independent members of the Board of Directors are Dr. Robert Gayton, John Kerr, and Roy Wilkes. The non-independent directors are Dr. Thomas Patton who is the President and CEO, Eugene Spiering who is Vice President, Exploration, and Lawrence Page, Director.

Principles and Guidelines to which the Board aspires include:

i.

the Board determining the status of each director as an “independent” director, based on the meaning of “independence” in National Instrument 58-101 Disclosure of Corporate Governance Practices,

   
ii.

the Board be constituted with a majority of directors who are independent,

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iii.

the Board examining its size with a view to determining the impact of the number of directors upon the effectiveness of the Board,

   
iv.

the Board establishing procedures to enable the Board to function independently of management,

   
v.

the Board implementing a system which enables an individual director to engage an outside advisor at the expense of the Company in appropriate circumstances;

   
vi.

establish committees of the Board generally composed of independent directors,

   
vii.

expressly assume responsibility, or assign to a committee of directors responsibility for the development of the Company’s approach to governance issues,

   
viii.

populate the Audit Committee with a majority of independent directors, and

   
ix.

appoint a Compensation, Nomination and Governance Committee.

Limitation of Management’s Responsibilities and Authority

The mandate of the Chief Executive Officer (“CEO”) is to be responsible for managing the day-to-day operations of the Company, which includes the supervision of the senior management team, the Company’s outside consultants and exploration staff. The CEO is responsible for the implementation of the Company’s corporate objectives and the resolutions of the Board and the appropriate and timely feedback of the results of these efforts.

Participation of Directors in Other Reporting Issuers

Certain of the Company’s current directors are also directors in other reporting issuers (or equivalent), as disclosed in the following table:

Name of Director or Directorship(s) held in other Reporting Issuers
Proposed Director    
     
     
Lawrence Page ABC Mining Ventures Inc. X-Terra Resources Corporation
  Avalon Ventures Ltd. Southern Silver Exploration Corp.
  Bravo Venture Group Inc. Valterra Resource Corporation
  Fortune River Resource Corp.  
     
Dr. Robert Gayton Amerigo Resources Ltd. Nevsun Resources Ltd.
  Bravo Venture Group Inc. Northern Orion Resources Ltd.
  Canadian Zinc Corporation Palo Duro Energy Inc.
  Doublestar Resources Ltd. Western Copper Corp.
  Fortune River Resource Corp. Southern Silver Exploration Corp.
  Intrinsyc Software International, Inc.  
     
     
Dr. Thomas Patton Fortune River Resource Corp. Southern Silver Exploration Corp.
     
     
John Kerr Pacific Coast Nickel Corp.  
     
     
Eugene Spiering Nil  
     
     
Roy Wilkes Sabina Silver Corporation  
     
     
Tracy Stevenson Nil  

Board Mandate

The Board explicitly acknowledges responsibility for the stewardship of the Company, including responsibility for:

(i)

to the extent feasible, satisfying itself as to the integrity of the Chief Executive Officer, (“CEO”) and other executive officers and that the CEO and other executive officers create a culture of integrity throughout the organization;

(ii)

succession planning, including appointing, training, monitoring and, if deemed necessary, firing the CEO;

(iii)

adoption of a strategic planning process and approving on at least an annual basis, a strategic plan which takes into account, among other things, the opportunities and risks of the business;

(iv)

in cooperation with the senior management team, led by the CEO, identification of the principal risks of the Company’s business and ensuring the implementation of appropriate systems to manage these risks;

(v)

assisting the CEO in the appointment, training and monitoring of senior management of the Company;

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(vi)

adopting a communication policy for the Company;

(vii)

the integrity of the Company’s internal control and management information systems; and

(viii)

developing the Company’s approach to corporate governance, including developing a set of corporate governance principles and guidelines that are specifically applicable to the Company.

Orientation and Continuing Education

The Company does not provide formal continuing education to its Board members, but does encourage them to communicate with management, auditors and technical consultants. Board members have access to Company policies, corporate governance documents, technical data and financial information 24 hours a day through an internet-based software support system.

Ethical Business Conduct

The Board has adopted a Code of Business Conduct and Ethics which is attached hereto as Schedule “B”.

Composition of the Nomination and Compensation Committee

The Company has a Nomination and Compensation Committee comprised of Roy Wilkes, Lawrence Page, and John Kerr. Responsibility for the determination of compensation as well as the determination of potential Board members has been delegated to this committee.

Composition of the Audit Committee

A copy of the Audit Committee Charter is attached hereto as Schedule “A”.

The Audit Committee provides review and oversight of the Company’s accounting and financial reporting process, and the audit process, including the selection, oversight and compensation of the Company’s external auditor.

The Audit Committee of the Board of Directors of the Company is comprised of Dr. Robert Gayton, John Kerr, and Roy Wilkes. The education and experience of each member relevant to the performance of such member’s responsibilities as an audit committee member, are as follows:

Robert Gayton, Ph.D.: F.C.A.: Dr. Gayton graduated from the University of British Columbia in 1962 with a Bachelor of Commerce degree and in 1964 earned a chartered accountant (C.A.) designation while at Peat Marwick Mitchel, Chartered Accountants. Dr. Gayton has directed the accounting and financial matters of public companies in the resource and non-resource fields since 1987.

John Kerr, John R. Kerr graduated from the University of British Columbia in 1964 with a BASc degree in Geological Engineering. He has participated in the mining industry since graduation as an exploration geologist, representing Canadian Johns-Manville Co. Ltd. in all areas of Canada during his early career in the 1960s. Mr. Kerr has sat on several public company Boards and in his positions, he would be responsible for receiving financial information relating to his Company and obtaining an understanding of the balance sheet, income statement and statement of cash flows and how these statements are integral in assessing the financial position of the Company and its operating results.

Roy Wilkes, Mr. Wilkes recently retired as president of Washington Group International’s Mining Business Unit. As leader of this group, he participated in many developing mining projects throughout the world. Mr. Wilkes was also the Chief Operating Officer of Santa Fe Pacific Gold Corporation during the expansion of its Nevada operations, and held the position of Senior Vice President of Business Development for Anaconda Minerals.

Pre-Approval Policies and Procedures

The Audit Committee has not adopted specific policies and procedures for the engagement of non-audit services but will review the engagement of all such services.

Audit Fees

For the year ended December 31, 2006, the Company’s auditor’s have charged to the Company $24,500 plus GST. ($20,000 plus GST for the year ended December 31, 2005, and $9,500 plus GST for the year ended December 31, 2004).

Exemption

The Company, as a “venture issuer” is relying on the exemption in section 6.1 of Multilateral Instrument 52-110 Audit Committees.

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APPOINTMENT OF AUDITOR

It has been proposed that Smythe Ratcliffe, Chartered Accountants be appointed as Auditor of the Company for the ensuing year.

INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS

No insider of the Company, no management proposed nominee for election as a director of the Company and no associate or affiliate of any of these persons, has any material interest, direct or indirect, in any transaction since the commencement of the Company’s last financial year or in any proposed transaction, which, in either case, has materially affected or will materially affect the Company or any of its subsidiaries other than as disclosed under the headings "Executive Compensation" and "Particulars of Matters to be Acted Upon".

INTEREST OF CERTAIN PERSONS OR COMPANIES
IN MATTERS TO BE ACTED UPON

None of the directors or executive officers of the Company, no management proposed nominee for election as a director of the Company, none of the persons who have been directors or executive officers of the Company since the commencement of the Company’s last financial year and no associate or affiliate of any of the foregoing has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon at the Meeting other than as disclosed under the headings "Executive Compensation" and "Particulars of Matters to be Acted Upon".

PARTICULARS OF MATTERS TO BE ACTED UPON

2007 Incentive Stock Option Plan

At the Meeting, the shareholders will be asked to approve the Company’s proposed 2007 Rolling Incentive Stock Option Plan (the “2007 Plan”).

The purpose of the proposed 2007 Plan is to provide the directors, officers and key employees of, and certain other persons who provide services to, the Company and its subsidiaries with an opportunity to purchase shares of the Company and benefit from any appreciation in the value of the Company’s shares. This will provide an increased incentive for these individuals to contribute to the future success and prosperity of the Company, thus enhancing the value of the Company’s shares for the benefit of all the shareholders and increasing the ability of the Company and its subsidiaries to attract and retain skilled and motivated individuals in the service of the Company.

The proposed 2007 Plan is a “rolling” plan that provides that the aggregate number of shares reserved for issuance under it, and all of the Company’s other previously established and outstanding stock option plans or grants, is 10% of the Company’s issued common shares at the time of the grant of a stock option under the proposed 2007 Plan.

Under the proposed 2007 Plan, the option exercise price must not be less than the closing price of the Company’s common shares on the TSX Venture Exchange (the “Exchange”) on the day immediately preceding the date of grant, less the applicable discount permitted by the policies of the Exchange. An option granted under the 2007 Plan must be exercised within a period of five years from the date of grant. Within this five-year period, the Board of Directors of the Company may determine the limitation period during which an option may be exercised and, notwithstanding that none may be required by the policies of the Exchange, whether a particular grant will have a minimum vesting period. As a “rolling” plan, any amendment to the proposed 2007 Plan will require the approval of the Exchange and may require shareholder approval.

In accordance with the terms of the proposed 2007 Plan, it is subject to its acceptance for filing by the Exchange and the approval of the Company’s shareholders. Under the policies of the Exchange, if the grants of options under the proposed 2006 Plan to “insiders” of the Company, together with all of the Company’s outstanding stock options, could result at any time in:

a)

the number of shares reserved for issuance pursuant to stock options granted to insiders of the Company exceeding 10% of the issued common shares of the Company; or

   
b)

the grant to insiders of the Company, within a 12-month period, of a number of options exceeding 10% of the issued common shares of the Company;

such shareholder approval must be “disinterested shareholder approval”, but as the proposed 2007 Plan is restrictive as to these results, disinterest shareholder approval of the proposed 2007 Plan is not required.

The policies of the Exchange and the terms of the proposed 2007 Plan also provide that “disinterested shareholder approval” will be required for any agreement to decrease the exercise price of options previously granted to insiders of the Company but no such agreements are being brought before the Meeting.

The term “disinterested shareholder approval” means approval by a majority of the votes cast at the Meeting other than votes attaching to shares of the Company beneficially owned by insiders of the Company to whom options may be granted under

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the proposed 2007 Plan and associates of such persons. The term “insiders” is defined in the Securities Act (British Columbia) and generally includes directors and senior officers of the Company and its subsidiaries, the five highest paid employees and holders of greater than 10% of the voting securities of the Company. The term “associates” is defined in the Securities Act (British Columbia).

If shareholder approval of the proposed 2007 Plan or a modified version thereof is not obtained, the Company will not proceed to implement the proposed 2007 Plan nor grant options under it. Even if approved, the directors may determine not to proceed with the proposed 2007 Plan.

The proposed 2007 Plan will be available for inspection at the Meeting. The directors recommend that the shareholders approve the proposed 2007 Plan.

MANAGEMENT IS NOT AWARE OF ANY OTHER MATTER TO COME BEFORE THE MEETING OTHER THAN AS SET FORTH IN THE NOTICE OF MEETING. IF ANY OTHER MATTER PROPERLY COMES BEFORE THE MEETING, IT IS THE INTENTION OF THE MANAGEMENT APPOINTEES TO VOTE THE SHARES REPRESENTED BY THE FORM OF PROXY ACCOMPANYING THIS INFORMATION CIRCULAR ON A POLL IN ACCORDANCE WITH THEIR BEST JUDGMENT ON SUCH MATTER.

ADDITIONAL INFORMATION

Additional information relating to the Company can be found at www.sedar.com. A copy of the Company’s
audited annual financial statements can be obtained, without charge, upon request to the Company at
Suite 1100 – 1199 West Hastings Street, Vancouver, B.C. V6E 3T5
Telephone: (604) 681-9059 Fax: (604) 688-4670

BY ORDER OF THE BOARD

(signed) Thomas C. Patton
Thomas C. Patton, President and Chief Executive Officer

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Schedule “A”

AUDIT COMMITTEE CHARTER

A.

PURPOSE

An audit committee is a committee of a board of directors to which the board delegates its responsibility for oversight of the financial reporting process. Traditionally, the audit committee has performed a number of roles, including:

(a)

helping directors meet their responsibilities;

(b)

providing better communication between directors and the external auditors;

(c)

enhancing the independence of the external auditor;

(d)

increasing the credibility and objectivity of financial reports; and

(e)

strengthening the role of the directors by facilitating in-depth discussions among directors, management and the external auditor.

Multilateral Instrument 52-110 Audit Committees (“MI 52-110”) requires that the audit committee also be responsible for managing, on behalf of the shareholders, the relationship between the issuer and its external auditors. In particular, it provides that an audit committee must have responsibility for:

(a)

overseeing the work of the external auditors engaged for the purpose of preparing or issuing an auditors’ report or related work; and

(b)

recommending to the board of directors the nomination and compensation of the external auditors.

Although under corporate law, an issuer's external auditors are responsible to the shareholders, in practice, shareholders have often been too dispersed to effectively exercise meaningful oversight of the external auditors. As a result, management has typically assumed this oversight role. However, the auditing process may be compromised if the external auditors view their main responsibility as serving management rather than the shareholders. By assigning these responsibilities to an independent audit committee, MI 52-110 ensures that the external audit will be conducted independently of the issuer’s management.

MI 52-110 provides that an audit committee must be directly responsible for overseeing the work of the external auditors engaged for the purpose of preparing or issuing an auditor's report or performing other audit, review or attest services for the issuer, including the resolution of disagreements between management and the external auditors regarding financial reporting. Notwithstanding this responsibility, the external auditors are retained by, and are ultimately accountable to, the shareholders. As a result, MI 52-110 does not detract from the external auditors' right and responsibility to also provide their views directly to the shareholders if they disagree with an approach being taken by the audit committee.

The Board of Directors (the “Board”) of Quaterra Resources Inc. (the “Company”) is responsible for the management of the business and affairs of the Company. The Audit Committee (the “Committee”) is appointed by the Board as an independent and objective party to assist in fulfilling the Board’s responsibility for oversight of the Company’s financial reporting process.

The Company must comply with the applicable requirements of MI 52-110 which includes having a written charter that sets out the Committee’s mandate and responsibilities. As of the date above, the Company is a Venture Issuer as that term is defined under MI 52-110. Accordingly, it is exempt from the requirements of Part 3: Composition of the Audit Committee and Part 5: Reporting Obligations of MI 52-110. The Board may, at any time, amend or rescind any of the provisions hereof, or cancel them entirely, with or without substitution.

B.

AUTHORITY


1.

The Committee, through its Chair, may directly contact any officer or employee of the Company as it deems necessary or advisable to fulfill its duties and responsibilities, and any officer or employee may bring before the Committee any matter involving questionable, illegal or improper financial practices or transactions;

2.

The external auditors will report directly to the Committee. The external auditors shall have a direct line of communication to the Committee through its Chair and may bypass management if deemed necessary; and

3.

The Committee may engage, at the Company’s expense, outside legal counsel or other advisors as the Committee considers necessary to fulfill its duties and responsibilities and to negotiate compensation arrangements for any such advisors.


C.

COMPOSITION AND MEETINGS


1.

The Board, at its organizational meeting held in conjunction with each annual general meeting of the shareholders, shall appoint the members of the Committee for the ensuing year. The Board may at any time remove or replace any member of the Committee and may fill any vacancy in the Committee;

2.

The Committee shall be composed of three or more members of the Board, a majority of whom are not officers or employees of the Company or of an affiliate of the Company. The members of the Committee shall appoint from among

Page 15 of 22


16

 
themselves a Chair of the Committee. The Chair shall have responsibility for ensuring that the Committee fulfills its principal duties and responsibilities effectively;
3.

A minimum of two and at least 50% of the members of the Committee present either in person or by telephone or other telecommunication device at a Committee meeting shall constitute a quorum;

4.

If and whenever a vacancy shall exist in a Committee meeting, the remaining members of the Committee may exercise all of its powers and responsibilities provided a quorum has been established;

5.

Any matters to be determined by the Committee shall be decided by a majority of votes cast at a Committee meeting called for such purpose. Actions of the Committee may be taken by an instrument or instruments in writing signed by all of the members of the Committee, and such actions shall be effective as though they had been decided by a majority of votes cast at a Committee meeting called for such purpose. All decisions or recommendations of the Committee shall require the approval of the Board prior to implementation;

6.

The time and place at which a Committee meeting shall be held, and procedures at such meetings shall be determined from time to time by the Committee. A Committee meeting may be called by email, telephone, facsimile, letter or other communication means, by giving at least 48 hours notice. Notice of a Committee meeting shall not be necessary if all of the members are present either in person or by telephone or other telecommunication device or if those absent have waived notice or otherwise signified their consent to the holding of such meeting;

7.

The Committee may invite such officers, directors and employees of the Company and its subsidiaries as it may see fit, from time to time, to attend at Committee meetings;

8.

The Committee shall keep minutes of its meetings which shall be submitted to the Board. The Committee may, from time to time, appoint any person who need not be a member, to act as a secretary at Committee meetings;

9.

The Committee shall meet at least quarterly, at the discretion of the Chair or a majority of its members, as circumstances dictate or as may be required. Any member of the Committee or the external auditors may request a meeting of the Committee; and

10.

The external auditors shall receive notice of and have the right to attend all Committee meetings.


D.

PRINCIPAL DUTIES AND RESPONSIBILITIES


1.

The overall duties and responsibilities of the Committee shall be as follows:

(a)

assist the Board in the discharge of its responsibilities relating to the Company's accounting principles and reporting practices including its approval of the Company's annual and quarterly consolidated financial statements and corresponding management’s discussion and analysis (“MD&A”);

(b)

establish and maintain a direct line of communication with the Company's external auditors and assess their performance;

(c)

ensure that the management of the Company has designed, implemented and is maintaining an effective financial reporting system;

(d)

ensure compliance with MI 52-110; and

(e)

report regularly to the Board on the fulfillment of its duties and responsibilities.

     
2.

The duties and responsibilities of the Committee as they relate to the external auditors shall be as follows:

(a)

verify the independence of external auditors and recommend to the Board a firm of external auditors to be nominated for the purpose of preparing or issuing an auditors’ report or performing other audit, review or attest services for the Company;

(b)

monitor the independence of the external auditors and confirm their independence to the Board on an annual basis;

(c)

recommend to the Board the compensation of the external auditor;

(d)

oversee the work of the external auditor, including the resolution of disagreements between management and the external auditor regarding financial reporting;

(e)

pre-approve all non-audit services to be provided to the Company by the external auditors unless otherwise provided for in MI 52-110;

(f)

review the audit plan of the external auditors prior to the commencement of the audit;

(g)

review with the external auditors any changes or proposed changes in accounting policies, the presentation and impact of significant risks and uncertainties and key estimates and judgments of management that may be material to the Company’s financial reporting;

(h)

discuss with the external auditors the quality and appropriateness of the Company’s accounting principles;

(i)

review with the external auditors, upon completion of their audit:

(i)

contents of their report including the scope and quality of the audit work performed;

(ii)

adequacy of the Company's financial and auditing personnel;

(iii)

co-operation received from the Company's personnel during the audit;

(iv)

internal resources used;

(v)

significant transactions outside of the normal business of the Company;

(vi)

significant proposed adjustments and recommendations for improving internal accounting controls, accounting principles or management systems; and

(vii)

the non-audit services provided by the external auditors; and

(j)

periodically review the Company's financial and auditing procedures and the extent to which recommendations made by the external auditors have been implemented.


3.

The Committee shall review and discuss with Management and the Auditors, where appropriate, the following financial documents and reports prior to public disclosure:

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17

  (a)

the annual report, including the audited financial statements and the Auditors’ report to the shareholders of the Company, and quarterly financial statements and corresponding MD&A;

  (b)

all press releases containing financial information extracted or derived from the Company's financial statements or MD&A;

  (c)

all certifications that may be made by Management on the annual or quarterly financial results, disclosure controls and procedures and internal controls over financial reporting;

  (d)

any legal, tax or regulatory matters that may have a material impact on the Company's operations and financial statements; and

  (e)

all financial information contained in any prospectus, information circular or other disclosure documents or regulatory filings containing financial information of the Company.


4.

The Committee shall recommend to the Board the amendment or approval of all annual and interim financial statements and MD&A and any other documents that may be reviewed by the Committee.

   
5.

Other duties and responsibilities of the Committee shall be as follows:

(a)

ensure that procedures are in place for the review of the Company's public disclosure of financial information extracted or derived from the Company's financial statements, such as press releases, and periodically assess the adequacy of the procedures;

(b)

implement procedures for:

(i)

the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and

(ii)

the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters;

(c)

review and approve the Company's hiring policies regarding partners, employees or former partners and employees of the present and former external auditors of the Company; and

(d)

make recommendations to the Board with respect to any changes or improvements to the financial reporting process including this Charter.

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18

SCHEDULE “B”

Code of Business Conduct and Ethics

1.

Introduction

We require high standards of professional and ethical conduct from our employees. Our reputation with our shareholders, business partners, prospective investors and other stakeholders for honesty and integrity is key to the success of our business. No employee will be permitted to achieve results through violations of laws or regulations, or through unscrupulous dealings.

We intend that the Company’s business practices will be compatible with the economic and social priorities of each location in which we operate. Although customs vary by country and standards of ethics may vary in different business environments, honesty and integrity must always characterize our business activity. If a law conflicts with a policy in this Code, you must comply with the law; however, if a local custom or policy conflicts with this Code, you must comply with the Code. If you have any questions about these conflicts, you should ask your supervisor how to handle the situation.

This Code reflects our commitment to a culture of honesty, integrity and accountability and outlines the basic principles and policies with which all employees are expected to comply.

Please read this Code carefully.

In addition to following this Code in all aspects of your business activities, you are expected to seek guidance in any case where there is a question about compliance with both the letter and the spirit of our policies and applicable laws. This Code covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide all employees of the Company. This Code does not supersede the specific policies and procedures that are covered in the Company’s operating manuals or in separate specific policy statements. References in this Code to the “Company” means Quaterra Resources Inc.. or any of its subsidiaries.

Reference to “employees” includes officers and directors.

Those who violate the standards set forth in this Code will be subject to disciplinary action up to and including dismissal.

If you are in a situation that you believe may violate or lead to a violation of this Code, follow the guidelines described in Section 16 below.

Your cooperation is necessary to the continued success of our business and the cultivation and maintenance of our reputation as a good corporate citizen.

2.

Compliance With Laws, Rules And Regulations

   

Compliance with the letter and spirit of all laws, rules and regulations applicable to our business is critical to our reputation and continued success. All employees must respect and obey the laws of the cities, provinces, states and countries in which we operate and avoid even the appearance of impropriety. Not all employees are expected to know the details of these laws, but it is important to know enough to determine when to seek advice from supervisors, managers or other appropriate personnel. The Company may hold information and training sessions to promote compliance with laws, rules and regulations, including insider trading laws.

   
3.

Conflicts Of Interest

   

A conflict of interest occurs when an individual’s private interest interferes, or appears to interfere, in any way with the interests of the Company. A conflict situation can arise when an employee takes actions or has interests that may make it difficult to perform his or her work for the Company objectively and effectively. Conflicts of interest also arise when an employee, or a member of his or her family, receives improper personal benefits as a result of his or her position in the Company. Loans to, or guarantees of obligations of, such persons are likely to pose conflicts of interest, as are transactions of any kind between the Company and any other organization in which you or any member of your family have an interest.

   

Activities that could give rise to conflicts of interest are prohibited unless specifically approved by the Board of Directors or the Audit Committee. It is not always easy to determine whether a conflict of interest exists, so any potential conflicts of interests should be reported immediately to your supervisor or the Company’s general legal counsel.

   
4.

Corporate Opportunities

Employees are prohibited from taking for themselves personally opportunities that arise through the use of corporate property, information or position and from using corporate property, information or position for personal gain. Employees are also prohibited from competing with the Company directly or indirectly. Employees owe a duty to the Company to advance the legitimate interests of the Company when the opportunity to do so arises.

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5.

Confidentiality

   

Employees must maintain the confidentiality of information entrusted to them by the Company or that otherwise comes into their possession in the course of their employment, except when disclosure is authorized or legally mandated. Employees may be required to execute a standard form confidentiality agreement upon starting employment or from time to time during the course of employment. The obligation not to disclose confidential information continues even after you leave the Company.

   

Confidential information includes all non-public information that may be of use to competitors, or harmful to the Company or its customers, if disclosed. It also includes information that suppliers and customers have entrusted to us.

   
6.

Protection And Proper Use Of Company Assets

   

All employees should endeavor to protect the Company’s assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Company’s profitability. Any suspected incidents of fraud or theft should be immediately reported for investigation.

   

Company assets, such as funds, products or computers, may only be used for legitimate business purposes or other purposes approved by management. Company assets may never be used for illegal purposes.

   

The obligation to protect Company assets includes proprietary information.

   

Proprietary information includes any information that is not generally known to the public or would be helpful to our competitors. Examples of proprietary information include intellectual property, such as trade secrets, patents, trademarks and copyrights, as well as business, marketing and service plans, engineering and manufacturing ideas, designs, databases, records, salary information and any unpublished financial data or reports. Unauthorized use or distribution of this information is a violation of Company policy. It may also be illegal and may result in civil and criminal penalties. The obligation not to disclose proprietary information continues even after you leave the Company.

   
7.

Fair Dealing

   

We seek to outperform our competition fairly and honestly. We seek competitive advantages through superior performance, never through unethical or illegal business practices. Stealing proprietary information, possessing trade secret information obtained without the owner’s consent or inducing the disclosures of proprietary information or trade secrets by past or present employees of other companies is prohibited. Each employee should endeavor to deal fairly with the Company’s customers, suppliers, competitors and employees. No employee should take unfair advantage of anyone through illegal conduct, manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other unfair-dealing practice.

   
8.

Discrimination And Harassment

   

We value the diversity of our employees and are committed to providing equal opportunity in all aspects of employment. Abusive, harassing or offensive conduct is unacceptable, whether verbal, physical or visual. Examples include derogatory comments based on racial or ethnic characteristics and unwelcome sexual advances. Employees are encouraged to speak out when a co-worker’s conduct makes them uncomfortable, and to report harassment when it occurs.

   
9.

Safety And Health

   

We are all responsible for maintaining a safe and healthy workplace by following safety and health rules and practices. The Company is committed to keeping its workplaces free from hazards. Please report any accidents, injuries, unsafe equipment, practices or conditions immediately to a supervisor or other designated person. Threats or acts of violence or physical intimidation are prohibited.

   

In order to protect the safety of all employees, employees must report to work in condition to perform their duties and free from the influence of any substance that could prevent them from conducting work activities safely and effectively. The use of illegal drugs in the workplace is prohibited.

   
10.

Financial Statements And Recordkeeping

   

Honest and accurate recording and reporting of information is critical to our financial reporting and our ability to make responsible business decisions. The Company’s accounting records are relied upon to produce reports for the Company’s management, shareholders, creditors, governmental agencies and others. Our financial statements and the books and records on which they are based must truthfully and accurately reflect all corporate transactions and conform to all legal and accounting requirements and our system of internal controls. A separate Code of Ethical Conduct for Financial Managers forms part of this Code as Schedule “A”.

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20

All employees have a responsibility to ensure that the Company’s records, including accounting records, do not contain any false or intentionally misleading entries. We do not permit intentional misclassification of transactions as to accounts, departments or accounting periods. All transactions must be supported by accurate documentation in reasonable detail and recorded in the proper account and in the proper accounting period.

All Company books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect Company transactions and must conform to both applicable legal requirements and the system of internal controls of the Company. Unrecorded or “off the books” funds or assets should not be maintained unless permitted by applicable laws or regulations.

Business records and communications may become public through legal or regulatory investigations or the media. We should avoid exaggeration, derogatory remarks, legal conclusions or inappropriate characterizations of people and companies. This applies to communications of all kinds, including email and informal notes or interoffice memos. Records should be retained and destroyed in accordance with the Company’s records storage and retention policy.

11.

Use Of E-Mail And Internet Services

   

E-Mail systems and Internet services are provided to help us do work. Incidental and occasional personal use is permitted, but never for personal gain or any improper purpose. You may not access, send or download any information that could be insulting or offensive to another person, such as sexually explicit material or jokes, unwelcome propositions, ethnic or racial slurs, or any other message that could be viewed as harassment. Also remember that “flooding” our systems with junk mail and trivia hampers the ability of our systems to handle legitimate Company business and is prohibited.

   

Employees should not download copyrighted materials, should not copy material that is not licensed to the Company and should follow the terms of a license when using material that is licensed to the Company. No changes should be made to licensed materials without the prior consent of the Company. In addition, employees are discouraged from downloading games and screensavers, as these are common sources of viruses.

   

Your messages (including voice mail) and computer information are considered the Company’s property and you should not have any expectation of privacy. Unless prohibited by law, the Company reserves the right to access and disclose this information as necessary for business purposes. Use good judgment, and do not access, send messages or store any information that you would not want to be seen or heard by other individuals.

   
12.

Political Activities And Contributions

   

We respect and support the right of our employees to participate in political activities. However, these activities should not be conducted on Company time or involve the use of any Company resources such as telephones, computers or supplies. Employees will not be reimbursed for personal political contributions.

   

We may occasionally express our views on local and national issues that affect our operations. In such cases, Company funds and resources may be used, but only when permitted by law and by our strict guidelines. The Company may also make limited contributions to political parties or candidates in jurisdictions where it is legal and customary to do so. No employee may make or commit to political contributions on behalf of the Company without the approval of senior management.

   
13.

Gifts And Entertainment

   

Business gifts and entertainment are customary courtesies designed to build goodwill among business partners. These courtesies include such things as meals and beverages, tickets to sporting or cultural events, discounts not available to the general public, travel, accommodation and other merchandise or services. In some cultures they play an important role in business relationships. However, a problem may arise when such courtesies compromise – or appear to compromise – our ability to make objective and fair business decisions.

   

Offering or receiving any gift, gratuity or entertainment that might be perceived to unfairly influence a business relationship should be avoided. These guidelines apply at all times, and do not change during traditional gift-giving seasons. No gift or entertainment should ever be offered, given, provided or accepted by any director or employee of the Company, or by any family member of a director or employee, unless it (1) is not a cash gift, (2) is consistent with customary business practices, (3) is not excessive in value, (4) cannot be construed as a bribe or payoff and (5) does not violate any applicable laws or regulations. Please discuss with your supervisor any gifts or proposed gifts if you are uncertain whether they are appropriate.

   
14.

Waivers Of This Code Of Business Conduct And Ethics

   

Any waiver of this Code with respect to a director or officer of the Company may be made only by the Board of Directors or the Audit Committee. Any such waiver will be promptly disclosed to the extent required by applicable laws or stock exchange regulations.

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15.

Reporting Of Any Illegal Or Unethical Behavior

   

We have a strong commitment to conduct our business in a lawful and ethical manner. Employees are encouraged to talk to supervisors, managers or other appropriate personnel when in doubt about the best course of action in a particular situation and to report violations of laws, rules, regulations or this Code. We prohibit retaliatory action against any employee who, in good faith, reports a possible violation. It is unacceptable to file a report knowing it to be false.

   
16.

Compliance Procedures

   

This Code cannot, and is not intended to, address all of the situations you may encounter. There will be occasions where you are confronted by circumstances not covered by policy or procedure and where you must make a judgment as to the appropriate course of action.

Since we cannot anticipate every situation that may arise, it is important for the Company to set forth a general way to approach a new question or problem. These are the steps to keep in mind:

      • Make sure you have all of the facts. In order to reach the right solutions, you must be as fully informed as possible.
      • Ask yourself what you are specifically being asked to do. This analysis will enable you to focus on the specific issues that are raised and the available alternatives. Use your judgment and common sense. If something seems unethical or improper, it probably is.
      • Clarify your responsibility and role. In most situations, there is shared responsibility. Are your colleagues informed? It may help to get others involved and to discuss the problem.
      • Discuss the problem with your supervisor. This approach is best in most if not all situations. Your supervisor may be more knowledgeable about the issue and will appreciate being brought into the process. It is a supervisor’s responsibility to help you to solve problems.
      • Seek help from Company resources. In the rare instance in which it may not be appropriate to discuss an issue with your supervisor, or in which you feel uncomfortable approaching your supervisor, discuss the problem with the Company’s general legal counsel. If you prefer to write, address your concerns to the Company’s general legal counsel or the Chief Executive Officer.
      • You may report ethical violations in confidence and without fear of retaliation. If your situation requires that your identity be kept secret, the Company will protect your anonymity. The Company does not permit retaliation of any kind against employees for good faith reports of ethical violations. An officer or employee who retaliates against someone who has reported an ethical violation in good faith is subject to discipline up to and including termination of employment. These procedures are intended to encourage and enable employees and others to raise serious concerns within the Company rather than seeking resolution outside the Company.
      • Ask first. If you are unsure of the proper course of action, seek guidance before you act.

Code Of Ethical Conduct For Financial Managers

Introduction

This Code of Ethical Conduct for Financial Managers ("Code") applies to all Financial Managers of Quaterra Resources Inc. (the "Company"). Financial Managers are the Company's principal executive officer, principal financial officer, principal accounting officer (s), controller or person performing similar functions.

This Code covers a wide range of financial and non-financial business practices and procedures. This Code does not cover every issue that may arise, but it sets out basic principles to guide all Financial Managers of the Company. If a law or regulation conflicts with a policy in this Code, the Financial Manager must comply with the law or regulation. If a Financial Manager has any questions about this Code or potential conflicts with a law or regulation, they should contact the Company's Board of Directors, Audit Committee or General Counsel.

Each Financial Manager shall recognize that Financial Managers hold an important and elevated role in corporate governance. They are uniquely capable and empowered to ensure that the Company's, its stockholders' and other stakeholders' interests are appropriately balanced, protected and preserved. Accordingly, this Code provides principles to which Financial Managers are expected to adhere and advocate. The Code embodies rules regarding individual and peer responsibilities, as well as responsibilities to the Company, the stockholders, other stakeholders and the public.

Financial Code Principles And Responsibilities

Financial Managers shall adhere to and advocate to the best of their knowledge and ability the following principles and responsibilities governing their professional and ethical conduct.

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1.                Act with honesty and integrity, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. A "conflict of interest" exists when an individual's private interests interfere or conflict in any way (or even appear to interfere or conflict) with the interests of the Company.

2.                When disclosing information to constituents, provide them with information that is accurate, complete, objective, relevant, timely and understandable. Reports and documents that the Company files with the Securities and Exchange Commission or releases to the public shall contain full, fair, accurate, timely and understandable information. The principal executive officer and principal financial officer shall review the annual and quarterly reports, certify and file them with the Securities and Exchange Commission.

3.                Comply with rules and regulations of federal, state, provincial and local governments, and other appropriate private and public regulatory agencies.

4.                Act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing their independent judgment to be subordinated.

5.                Protect and respect the confidentiality of information acquired in the course of their work except when authorized or otherwise legally obligated to disclose. Confidential information acquired in the course of their work shall not be used for personal advantage.

6.                Achieve responsible use of and control over all assets and resources employed by or entrusted to them.

7.                Promptly report code violations to the Company's Chairman of the Board and Audit Committee Chairman.

Waivers Of The Code

Any waiver of this Code for Financial Managers may be made only by the Audit Committee of the Board of Directors and will be promptly disclosed as required by law or the private regulatory body. Requests for waivers must be made in writing to the Company's Chairman of the Board and Audit Committee Chairman prior to the occurrence of the violation of the Code.

Reporting Of Violations Of The Code, Illegal Or Unethical Behavior

Financial Managers should report observed violations of the Code and illegal or unethical behavior to the Company's Chairman of the Board and Audit Committee Chairman. All reports will be treated in a confidential manner and it is the Company's policy to not allow retaliation for reports made in good faith of misconduct by others. The Company's Audit Committee will lead all investigations of alleged violations or misconduct. Financial Managers are expected to cooperate in internal investigations of misconduct and violations of this Code.

Violations Of The Code

Financial Managers who violate the standards of this Code will be subject to disciplinary action, which may include termination of employment, civil action and/or referral to law enforcement agencies for criminal prosecution.

Page 22 of 22


EX-99.17 18 exhibit99-17.htm NOTICE OF MEETING FOR JULY 17, 2007 ANNUAL MEETING OF SHAREHOLDERS Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.17

QUATERRA RESOURCES INC.

1100 – 1199 West Hastings Street, Vancouver, B.C. V6E 3T5
Telephone: (604) 681-9059 Fax: (604) 688-4670

NOTICE OF MEETING

TO:        The Shareholders of Quaterra Resources Inc.

NOTICE IS HEREBY GIVEN THAT an annual general meeting (the “Meeting”) of the holders of common shares (“Shares”) of Quaterra Resources Inc. (the “Company”) will be held at Suite 1100, 1199 West Hastings Street, Vancouver, British Columbia V6E 3T5 on Tuesday, July 17, 2007 at the hour of 10:00 am, Pacific Daylight Time, for the following purposes:

  1.

To receive and consider the report of the directors and the consolidated financial statements together with the auditor’s report thereon for the financial year ended December 31, 2006;

     
  2.

To determine the number of directors at seven (7);

     
  3.

To elect directors for the ensuing year;

     
  4.

To appoint the auditor for the ensuing year;

     
  5.

To consider and, if thought fit, to approve the Company’s 2007 Rolling Incentive Stock Option Plan described in the Information Circular; and

     
  6.

To transact such further or other business as may properly come before the Meeting and any adjournments thereof.

An Information Circular and a form of Proxy accompany this Notice. The Information Circular provides additional information relating to the matters to be dealt with at the Meeting and forms part of this Notice.

Registered shareholders are entitled to vote at the Meeting in person or by proxy. Registered shareholders who are unable to attend the Meeting, or any adjournment thereof, in person, are requested to read, complete, sign and return the form of Proxy accompanying this Notice in accordance with the instructions set out in the form of Proxy and in the Information Circular accompanying this Notice. Unregistered shareholders who received the form of Proxy accompanying this Notice through an intermediary must deliver the Proxy in accordance with the instructions given by such intermediary.

DATED at Vancouver, British Columbia, this 13th day of June 2007

BY ORDER OF THE BOARD

(signed) Thomas C. Patton
Thomas C. Patton, President and Chief Executive Officer

If you are a non-registered shareholder and receive these materials through your broker or through another intermediary, please complete and return the materials in accordance with the instructions provided to you by your broker or by the other intermediary. Failure to do so may result in your Shares not being eligible to be voted by proxy at the Meeting.

Page 1 of 22


EX-99.18 19 exhibit99-18.htm NOTICE OF MEETING AND RECORD DATE RELATED TO JULY 17, 2007 ANNUAL MEETING OF SHAREHOLDERS Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.18

April 30, 2007

British Columbia Securities Commission

Alberta Securities Commission

TSX Venture Exchange

Dear Sirs:

RE:      QUATERRA RESOURCES INC.

Pursuant to a request from our Principal, we wish to advise you of the following dates in connection with their Annual Meeting of Shareholders:

DATE OF MEETING: July 17, 2007
   
RECORD DATE FOR NOTICE: June 15, 2007
   
RECORD DATE FOR VOTING: June 15, 2007
   
BENEFICIAL OWNERSHIP DETERMINATION DATE: June 15, 2007
   
SECURITIES ENTITLED TO NOTICE: Common Shares
   
SECURITIES ENTITLED TO VOTE: Common Shares

Yours truly,

CIBC MELLON TRUST COMPANY

Trust Central Services

cc: CDS & Co. (Via Fax)


CIBC Mellon Trust Company
The Oceanic Plaza, 1066 West Hastings Street, Vancouver, British Columbia V6E 3X1
Tel: (604) 688-4330 Fax: (604) 688-4301 E-Mail inquiries@cibcmellon.com Website: www.cibcmellon.com
Mailing Address: PO Box 1900, Vancouver, British Columbia V6C 3K9
CIBC Mellon Trust Company is a licensed user of the CIBC and Mellon trademarks.


EX-99.19 20 exhibit99-19.htm MATERIAL CHANGE REPORT DATED JANUARY 31, 2008 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.19

BC FORM 53-901F
Securities Act

MATERIAL CHANGE REPORT

Item 1: Reporting Issuer

QUATERRA RESOURCES INC.
Suite 1100 – 1199 West Hastings Street
Vancouver, BC V6E 3T5

Item 2: Date of Material Change

January 31, 2008

Item 3: Press Release

January 31, 2008 at Vancouver, British Columbia

Item 4: Summary of Material Change

Quaterra Resources Inc. today announced that drilling at its 100%-owned MacArthur project near Yerington, Nevada, has expanded and partially delineated a broad zone of acid-soluble copper mineralization beneath, south and to the north and northwest of the historic MacArthur copper oxide deposit.

Item 5: Full Description of Material Change

See attached press release.

Item 6: Reliance on section 85 (2) of the Act

N/A

Item 7: Omitted Information

N/A

Item 8: Senior Officers

Eugene Spiering, VP Exploration
Telephone: 604-641-2780



1100 - 1199 W. Hastings St.
Vancouver, B.C. V6E 3T5
Tel: 604-681-9059
Fax: 604-688-4670
www.quaterraresources.com
   
January 31, 2008                    QTA-TSX. VENTURE
                                                         NR-01-08

QUATERRA EXPANDS COPPER ZONE AT MACARTHUR

VANCOUVER, B.C. - Quaterra Resources Inc. today announced that drilling at its 100%-owned MacArthur project near Yerington, Nevada, has expanded and partially delineated a broad zone of acid-soluble copper mineralization beneath, south and to the north and northwest of the historic MacArthur copper oxide deposit.

Seventy holes totaling 23,739 feet were drilled between September and December 2007 in 28 core holes and 42 RC holes. Principal conclusions are as follows:

1. The mixed oxide/chalcocite mineralization north of the MacArthur pit has been extended an additional 1,500 feet to the west and now has been traced for nearly 5,000 feet to the west and southwest from hole QMCC-7 to hole QMCC-16.

  • The zone is currently up to 1,500 feet wide and averages over 100 feet thick, based on holes drilled on 500 foot centers. A few historic Anaconda drill-holes suggest that this zone may connect to the south with mineralization in and adjacent to the MacArthur pit but more drilling will be required for this to be confirmed. Three vertical holes are of particular note: QMC-27R, with 115 feet of 0.30% total copper (TCu) beginning at a depth of 195 feet; QMC-23R, with 25 feet of 1.25% TCu beginning at 340 feet; and QMC-4bR, with 95 feet of 0.57% TCu beginning at 305 feet. (See drill-hole table attached to this release).These holes are at the northernmost limit of drilling and mineralization remains open to expansion to the north and northwest. Hole QMC-1bR contains the highest grade interval drilled to date with 180 feet of 0.91% copper beginning at 270 feet but may have been drilled parallel to a high grade structure. Additional drilling will be necessary to determine the geometry and significance of this intercept.

2. Quaterra’s drill results (QME and QMT holes reported in this release) continue to expand the MacArthur pit mineralization delineated by Anaconda in a 1971-1972 shallow drilling campaign that tested to an average depth of 200 feet below surface.

  • Of particular interest is a new zone (not included in the historic resource) of predominately chalcocite mineralization located 20 feet to approximately 70 feet below the existing MacArthur oxide copper deposit that remains open to extension both to the north and west where it may connect with the north zone mineralization detailed above. Hole QMT-10 on the northeast edge of the pit contains 205 feet of 0.42% TCu beginning at 129 feet, including a 78 foot intercept averaging 0.78% TCu from 136 to 214 feet. Holes QME-79R and QME- 80R, drilled 1,200 and 1,700 feet respectively east of the pit along the edge of the waste dump, each intersected 40 to 60 feet of + 0.30 % TCu. These holes and abundant copper oxides exposed in pits and trenches 3,000 feet southwest of the pit provide good opportunities to delineate additional mineralization.

3. A porphyry copper target has been identified in the Gallagher area about one mile west of the MacArthur pit below a large area of iron oxides and phyllic alteration.

  • Several deep holes are planned in 2008 to test this target once detailed mapping and sampling has been completed.

1


“We believe these drilling results will substantially increase the potential resource of the MacArthur project,” says Quaterra’s VP Exploration Eugene Spiering. “Based on what we are seeing in surface mapping and trenching in the area, significant additional upside is possible.”

Quaterra’s drilling to date has been shallow (less than 500 feet) and has identified a relatively continuous zone of copper mineralization that parallels current topography and contains predominately green and black copper oxides grading downward into chalcocite, a secondary copper mineral that is also acid-soluble. Mineralization appears to represent a partially oxidized secondary enrichment blanket. The most likely source of the secondary copper mineralization is the Gallagher area which will be drilled later in the year. Much of the oxide mineralization appears to be localized along high-angle structures, making additional close-spaced drilling (including angle holes) necessary to accurately define tonnages and grades. A number of the Anaconda holes in the MacArthur pit area have been twinned with both core and RC holes to validate historic data and optimize ongoing drilling/sampling procedures. The results will form part of a resource estimate to be released on the property.

The primary objectives of Quaterra’s 2008 program at MacArthur are to complete detailed mapping of the entire property; to delineate the total extent of the acid-soluble copper mineralized zone and produce a NI43-101 compliant resource estimate; and to drill the Gallagher area for a porphyry copper deposit. One RC rig is currently working at the property.

Mr. Eugene Spiering, Quaterra’s VP exploration, is the qualified person responsible for the preparation of this news release.

A hole location map and table of results for all 70 holes drilled, as well as a grade-thickness contour map and cross section are available on the Company’s website at www.quaterraresources.com.

Quaterra Resources Inc. (TSX-V: QTA) is a junior exploration company focused on making significant mineral discoveries in North America. The company uses in-house expertise and its extensive network of consultants, prospectors and industry contacts to identify, acquire and evaluate prospects in mining-friendly jurisdictions with the potential to host large base metal, precious metal or uranium deposits. The company’s preference is to acquire a 100% interest in properties on reasonable terms and maintain this interest through initial evaluation.

On behalf of the Board of Directors,
Thomas Patton”
Thomas Patton, President, Quaterra Resources Inc.

Expanded information on the company’s projects is also described on our website or contact Jay Oness at 1-888-456-1112, 604-681-9059 or email: corpdev@mnxltd.com.

Some statements contained in this news release are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties. Further information regarding risks and uncertainties which may cause results to differ materially from those projected in forward-looking statements, are included in filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time except in accordance with applicable securities laws.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management.

2



QUATERRA RESOURCES INC.
MacArthur Copper Project
Drill hole intercepts: Sept to Dec 2007
(Summary List)

            Total
  Angle Total From To Thickness Cu
Drill Hole Brg / Dip Depth feet feet feet %
             
MacArthur Pit Area          
QMT-6 0°/-90° 394.7 33.0 128.0 95.0 0.25
      173.0 188.0 15.0 0.18
      257.0 322.0 65.0 0.28
             
QMT-7 0°/-90° 424.0 0.0 24.0 24.0 0.28
      48.4 70.3 21.9 0.29
      74.2 116.0 41.8 0.92
      129.6 154.0 24.4 0.18
      184.0 224.0 40.0 0.14
      254.0 284.0 30.0 0.20
      334.0 356.5 22.5 0.30
             
QMT-8 0°/-90° 350.0 10.0 29.0 19.0 0.19
      49.0 84.0 35.0 0.19
      142.2 229.0 86.8 0.20
      258.3 316.0 57.7 0.15
             
QMT-9 0°/-90° 244.0 9.0 81.0 72.0 0.34
      116.3 173.0 56.7 0.16
      193.0 244.0 51.0 0.14
             
QMT-10 0°/-90° 480.0 84.0 109.0 25.0 0.22
      129.0 334.0 205.0 0.42
including     136.0 214.0 78.0 0.78
      349.0 372.0 23.0 0.30
      389.0 399.0 10.0 0.27
             
QMT-11 0°/-90° 284.0 0.0 120.0 120.0 0.18
      147.0 180.0 33.0 0.14
      214.0 284.0 70.0 0.24
             
QMT-12 0°/-90° 325.0 0.0 10.0 10.0 0.16
      55.0 189.0 134.0 0.21
      229.0 317.0 88.0 0.20
             
QMT-13 0°/-90° 300.0 0.0 164.0 164.0 0.21
      180.0 216.0 36.0 0.25
      228.4 241.3 12.9 0.26
      277.4 290.5 13.1 0.24
             
QMT-14 210°/-55° 360.0 5.0 123.0 118.0 0.31
      203.0 263.0 60.0 0.26
      303.0 338.0 35.0 0.29
             
QMT-15 0°/-90° 350.0 12.5 118.0 105.5 0.36
      183.3 288.0 104.7 0.19

3



QMT-16 0°/-90° 455.0 36.5 199.0 162.5 0.18
      214.0 254.0 40.0 0.18
      277.9 339.0 61.1 0.14
      359.0 455.0 96.0 0.24
             
QMT-17 0°/-90° 350.0 54.0 67.3 13.3 0.13
      87.3 208.9 121.6 0.16
      236.0 246.0 10.0 0.14
             
QMT-18 0°/-90° 400.0 64.0 84.0 20.0 0.25
      112.0 189.0 77.0 0.20
             
QMT-19 0°/-90° 200.0 0.0 44.0 44.0 0.51
             
QME-1 0°/-90° 324.0 174.0 250.0 76.0 0.37
including     184.0 234.0 50.0 0.48
             
QME-2 0°/-90° 300.0 159.0 179.0 20.0 0.29
      258.0 300.5 42.5 0.27
             
QME-3 0°/-90° 303.0 63.0 166.5 103.5 0.16
      181.2 303.0 121.8 0.13
             
QME-4aR 0°/-90° 230.0 0.0 20.0 20.0 0.13
      35.0 45.0 10.0 0.17
      70.0 115.0 45.0 0.14
      215.0 230.0 15.0 0.15
             
QME-5 210°/-50° 72.0 0.0 40.0 40.0 0.18
             
             
QME-6R 0°/-90° 190.0 40.0 50.0 10.0 0.11
             
QME-8R 0°/-90° 340.0 0.0 10.0 10.0 0.13
      25.0 35.0 10.0 0.13
      70.0 100.0 30.0 0.18
      120.0 140.0 20.0 0.20
      195.0 265.0 70.0 0.17
             
QME-9R 0°/-90° 200.0 80.0 105.0 25.0 0.22
      130.0 140.0 10.0 0.13
          0.0  
QME-10R 0°/-90° 400.0 0.0 20.0 20.0 0.44
      105.0 120.0 15.0 0.34
             
QME-75R 0°/-90° 350.0 195.0 235.0 40.0 0.09
             
QME-76R 0°/-90° 350.0 300.0 310.0 10.0 0.17
             
QME-77R 0°/-90° 350.0   No assays above cut-off    
             
QME-78R 0°/-90° 350.0 275.0 285.0 10.0 0.15
      315.0 330.0 15.0 0.14
             
QME-79R 0°/-90° 350.0 210.0 250.0 40.0 0.31
      285.0 350.0 65.0 0.23

4



QME-80R 0°/-90° 350.0 85.0 100.0 15.0 0.57
      185.0 245.0 60.0 0.34
including     190.0 205.0 15.0 0.79
             
QME-81R 0°/-90° 350.0   No assays above cut-off    
             
North MacArthur Area          
QMC-1bR 270°/-45° 450.0 90.0 110.0 20.0 0.12
      185.0 255.0 70.0 0.13
      270.0 450.0 180.0 0.91
             
QMC-4aR 0°/-90° 300.0 40.0 60.0 20.0 0.30
             
QMC-4bR 270°/-45° 400.0 40.0 125.0 85.0 0.28
      160.0 275.0 115.0 0.24
      305.0 400.0 95.0 0.57
             
QMC-21R 0°/-90° 400.0 165.0 205.0 40.0 0.26
      340.0 355.0 15.0 0.20
      390.0 400.0 10.0 0.13
             
QMC-22R 0°/-90° 400.0 0.0 40.0 40.0 0.44
      100.0 110.0 10.0 0.23
      345.0 355.0 10.0 0.35
             
QMC-23R 0°/-90° 400.0 280.0 290.0 10.0 0.20
      340.0 365.0 25.0 1.25
             
QMC-24R 0°/-90° 400.0 0.0 15.0 15.0 0.12
      40.0 105.0 65.0 0.17
      120.0 220.0 100.0 0.22
             
QMC-25R 0°/-90° 350.0 70.0 80.0 10.0 0.10
      100.0 155.0 55.0 0.29
      305.0 330.0 25.0 0.12
             
QMC-26R 0°/-90° 390.0 10.0 40.0 30.0 0.20
      65.0 95.0 30.0 0.29
      115.0 160.0 45.0 0.34
      200.0 220.0 20.0 0.14
      240.0 265.0 25.0 0.11
             
QMC-27R 0°/-90° 390.0 30.0 65.0 35.0 0.18
      80.0 170.0 90.0 0.13
      195.0 310.0 115.0 0.30
             
QMCC-12 0°/-90° 474.0 149.0 251.8 102.8 0.19
      281.7 333.0 51.3 0.14
      422.4 454.5 32.1 0.16
             
QMCC-13 0°/-90° 434.0 0.0 114.0 114.0 0.24
             
QMCC-14 0°/-90° 330.0 162.2 172.3 10.1 0.10
      241.5 251.7 10.2 0.15
             
QMCC-15 0°/-90° 375.0 182.8 286.7 103.9 0.16

5



QMCC-16 0°/-90° 325.0 5.0 78.2 73.2 0.14
      96.9 219.3 122.4 0.26
      295.0 325.0 30.0 0.13
             
QMCC-17 0°/-90° 327.0 77.2 103.0 25.8 0.19
      277.0 290.5 13.5 0.12
             
QMCC-18 0°/-90° 370.0 77.0 97.0 20.0 0.13
      155.2 166.8 11.6 0.23
      182.0 212.0 30.0 0.22
             
QMCC-19 0°/-90° 370.0 274.0 287.0 13.0 0.13
             
QMCC-20 0°/-90° 333.0 163.0 183.0 20.0 0.15
      315.8 333.0 17.2 0.16

R= RC Hole
All intervals calculated using 0.1% copper cutoff

REGULATORY NOTE
The samples from the MacArthur drilling program are prepared and assayed by ISO/IEC 17025 certified American Assay Laboratories (AAL) located in Sparks, Nevada and by Skyline Laboratories in Tucson, Arizona which is accredited in international quality standards through ISO/IEC 17025, with CAN-P-1579 for specific registered tests through the Standards Council of Canada.

6


EX-99.20 21 exhibit99-20.htm MATERIAL CHANGE REPORT DATED OCTOBER 23, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.20

BC FORM 53-901F
Securities Act

Item 1: Reporting Issuer  
     
QUATERRA RESOURCES INC.
Suite 1100, 1199 West Hastings Street
Vancouver, BC V6E 3T5  
   
Item 2: Date of Material Change
   
October 9, 2007  
   
Item 3: Press Release  
     
October 9, 2007 at Vancouver, British Columbia
 
Item 4: Summary of Material Change
   
Quaterra confirms and expands shallow chalcocite mineralization at MacArthur.
 
Item 5: Full Description of Material Change
   
See attached press release.  
   
Item 6: Reliance on section 85 (2) of the Act
   
N/A    
     
Item 7: Omitted Information  
     
N/A    
     
Item 8: Senior Officer  
     
Mr. Thomas C. Patton Telephone: 604-681-9059
President & CEO  



1100 - 1199 W. Hastings St.
Vancouver, B.C. V6E 3T5
Tel: 604-681-9059
Fax: 604-688-4670
www.quaterraresources.com
   
October 9, 2007                    QTA-TSX. VENTURE
                                                         NR-08-07

QUATERRA CONFIRMS AND EXPANDS SHALLOW CHALCOCITE MINERALIZATION AT MACARTHUR

Twin drilling shows continuous oxide mineralization, project manager appointed

VANCOUVER, B.C. - Quaterra Resources Inc. today announced that drilling at its 100%-owned MacArthur project near Yerington, Nevada, has confirmed and expanded an area of shallow, partially oxidized chalcocite mineralization 1,000 feet north and west of the MacArthur copper oxide pit.

Assay data from 11 drill holes in the chalcocite zone show mineralization averaging 0.23% total copper (TCu) over an average thickness of 96 feet along a strike length of approximately 3,500 feet and a width of 1,000 feet. These broad intercepts include narrower zones of higher grade mineralization of up to 0.74% TCu (See table 1). The chalcocite zone is open in all directions with the strongest mineralization to the northwest and to the south, where it is expected fill in the sparsely drilled area just north of the pit. Intrusive rocks above the chalcocite zone locally show oxide copper grades in the 0.2% to 0.3% TCu range. Additionally, twin-drilling in the MacArthur pit has encountered some chalcocite mineralization beneath the oxide mineralization; assays are pending.

Five core holes drilled in the MacArthur pit to twin historical rotary percussion holes and provide RQD and density data all show continuous copper oxide mineralization starting at the surface (See table 2). Grades include 245 feet of 0.29% TCu in hole QMT-2 starting at the surface; 145 feet of 0.22% TCu in hole QMT-1 starting at the surface; and 46.3 feet of 0.50% TCu in hole QMT-4 starting at 37.7 feet. Quaterra is currently twinning an additional 15 holes with reverse circulation drilling and will evaluate current versus historical assays on completion of this work.

Acid soluble copper mineralization at MacArthur occurs as chrysocolla, copper wad (neotocite), pitch limonite, residual chalcocite and minor malachite and azurite, all hosted in medium grained, biotite, quartz monzonite. Quaterra’s drilling, mapping and data compilation has shown this mineralization open on all sides.

An expanded drill program is currently underway at MacArthur with two drill rigs to test the copper oxide mineralization in and around the MacArthur pit, and to systematically explore on a 500 foot grid spacing for acid soluble chalcocite/oxide mineralization north and west of the existing pit boundary. A total of approximately 12,800 feet have been drilled in 22 copper oxide holes and 16 chalcocite exploration holes. Today’s release includes assay results from five of the copper oxide holes and 11 of the chalcocite holes. Additional assay results from these holes and from the ongoing drilling program will be released in batches over the next several months.

To assist with the management of the expanding program at MacArthur, Quaterra has signed a consulting agreement with Mr. Robert Akright as manager for the project. Mr. Akright has spent his entire career in minerals exploration, development, and project management including three years with

1


Homestake Mining and 11 years with Occidental Minerals. Mr. Akright will assist District Manager David Heatwole in directing drilling and exploration activities at MacArthur. Mr. Akright has been granted an option to purchase 50,000 shares at a price of $2.93.

Mr. Eugene Spiering – VP exploration is the qualified person responsible for the preparation of this news release.

A map showing locations of drill-holes reported in this release is available on the company’s website at www.quaterraresources.com. Expanded information on the company’s projects is also described on our website or contact Jay Oness at 1-888-456-1112, 604-681-9059 or email: corpdev@mnxltd.com.

Quaterra Resources Inc. (TSX-V: QTA) is a junior exploration company focused on making significant mineral discoveries in North America. The company uses in-house expertise and its extensive network of consultants, prospectors and industry contacts to identify, acquire and evaluate prospects in mining-friendly jurisdictions with the potential to host large base metal, precious metal or uranium deposits. The company’s preference is to acquire a 100% interest in properties on reasonable terms and maintain this interest through initial evaluation.

On behalf of the Board of Directors,

“Thomas Patton”

Thomas Patton, President, Quaterra Resources Inc.

Some statements contained in this news release are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties. Further information regarding risks and uncertainties which may cause results to differ materially from those projected in forward-looking statements, are included in filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time except in accordance with applicable securities laws.

Expanded information on the Company’s projects is described on our website at www.quaterraresources.com or contact Jay Oness at 1-888-456-1112, 604-681-9059 or email: corpdev@mnxltd.com

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management.

2


QUATERRA RESOURCES INC.
MacArthur Copper Project
Chalcocite Zone
Drill Hole intercepts - 28 September 2007
Table 1

   Angle  From        To Thickness Total Cu
Drill Hole Brg / Dip      feet      feet              feet percent
QMCC-1 0º/-90º 119.0 149.0          30.0      0.20
    179.0 204.0          25.0      0.14
    224.0 264.0          40.0      0.54
    289.0 303.6          14.6      0.36
           
QMCC-2 0º/-90º  34.0 115.3          81.3      0.21
    127.0 222.7          95.7      0.24
    320.0 339.0          19.0      0.17
    351.2 416.8          65.6      0.18
           
QMCC-3 0º/-90º 107.0 334.0      227.0      0.22
         including   286.0 334.0          48.0      0.41
    399.1 416.8          17.7      0.21
           
QMCC-4 0º/-90º  42.1  87.0          44.9      0.23
         including    72.0  87.0          15.0      0.39
           
QMCC-5 0º/-90º 154.0 217.6          63.6      0.17
           
QMCC-6 0º/-90º  88.3  98.3          10.0      0.15
           
QMCC-7 0º/-90º      5.0  23.0          18.0      0.15
     89.0 134.0          45.0      0.19
    239.0 275.1          36.1      0.42
           
QMCC-8 0º/-90º 304.0 314.0          10.0      0.14
           
QMCC-9 0º/-90º 142.4 152.5          10.1      0.12
    254.0 264.0          10.0      0.14
           
QMCC-10 0º/-90º  95.5 144.0          48.5      0.44
         including   119.0 144.0          25.0      0.74
    159.0 199.0          40.0      0.20
           
QMCC-11 0º/-90º  94.0 194.0      100.0      0.16
         including   145.0 158.7          13.7      0.25

3


QUATERRA RESOURCES INC.
MacArthur Copper Project
Copper Oxide Zone
Drill Hole intercepts - 28 September 2007
Table 2

     Angle  From        To Thickness Total Cu
Drill Hole  Brg / Dip      feet      feet              feet percent
QMT-1  0º/-90º      0.0 145.0      145.0      0.22
 including    50.0 120.0          70.0      0.31
    170.0 210.0          40.0      0.15
           
QMT-2 210º/-55º      0.0 245.0      245.0      0.29
 including    40.0 170.0      130.0      0.38
           
QMT-3  0º/-90º      0.0 120.0      120.0      0.24
    220.0 275.0          55.0      0.19
           
QMT-4  0º/-90º  37.7  84.0          46.3      0.50
    110.5 174.0          63.5      0.17
    186.7 228.7          42.0      0.22
    274.0 304.3          30.3      0.31
           
QMT-5 195º/-57º  36.8 112.0          75.2      0.15
    182.0 206.0          24.0      0.21

REGULATORY NOTE
The samples from the MacArthur drilling program are prepared and assayed by ISO/IEC 17025 certified American Assay Laboratories (AAL) located in Sparks, Nevada and by Skyline Laboratories in Tucson, Arizona which is accredited in international quality standards through ISO/IEC 17025, with CAN-P-1579 for specific registered tests through the Standards Council of Canada. At both laboratories, total copper is analyzed using atomic absorption (AA) spectroscopy, with acid soluble content determined by leaching with weak sulfuric acid and/or a weak sulfuric acid-ferric sulfate mixture.

4


EX-99.21 22 exhibit99-21.htm MATERIAL CHANGE REPORT DATED JULY 10, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.21

BC FORM 53-901F
Securities Act

MATERIAL CHANGE REPORT

Item 1:  Reporting Issuer

QUATERRA RESOURCES INC.
Suite 1550, 1185 West Georgia Street
Vancouver, BC V6E 4E6

Item 2: Date of Material Change

July 10, 2007

Item 3: Press Release

July 10, 2007 at Vancouver, British Columbia

Item 4: Summary of Material Change

Quaterra Resources Inc. reported today that an initial six-hole, 3,043-meter core drilling program has been completed at its 100%-owned Crestones property in Durango State, Mexico.

Item 5: Item 5: Full Description of Material Change

The first drill-holes did not intersect the targeted breccia feeder vents. Subsequent field mapping has identified a series of flat-dipping detachment faults that have offset the outcropping geology an estimated 500 meters to the northeast. The postulated location for the breccia feeder vent(s), based on mapping and drill sections, is southwest of the outcropping breccias in a flat area covered with a thin layer of post-mineral arroyo sediment. An additional 2,000-meter drill program is in progress to test this area.

Says Tom Turner, Quaterra’s Manager of Mexican exploration: “We believe that Crestones is a good place to look for an ore deposit. Based on the size and strength of the alteration system and the widespread weak mineralization observed in outcrop and drill core the project merits continued exploration.”

Assay results have been received for the first five holes, and contain a few low-grade intercepts as shown in the table below. All three of the hydrothermal breccia types - the silicified limestone, the quartz porphyry, and the hornfels - contain weakly disseminated sphalerite-galena-sulfosalts. The silica breccia commonly contains minor to 5% disseminated pyrite-marcasite and minor to 5% stibnite. The mixed clast and silicified limestone breccias contain disseminated pyrite-marcasite and minor sphalerite-galena. Coarse sphalerite-galena has been observed in fault gouges. Alteration and mineralization appear to intensify to the southwest.



Table 1: Crestones DDH Assay Summary    
               
HOLE          From To Meters  Au ppb Ag g/t Pb % Zn %
C-02-06                      222      224                2 <5          30.1    
                 235.8  240.4            4.6 <5          1.84        0.01        0.48
Includes              237.54 237.76        0.22 <5          11.2        0.01        3.85
                       512  515.6            3.6          119      52.97        0.74        0.61
Includes              514.65  515.6        0.95 <0.05            156        2.57        1.71
               
C-03-06                        56          58                2 <5      252.7        0.41        1.22
               
C-04-06                      418      420                2 <5                  5        0.01            0.5
                       431      435                4          407      13.55        0.07            0.3
Includes                      433      435                2          629          22.8        0.13        0.54
                       492      504            12      78.16            5.8        0.09        0.62
Includes                      492      502            10          91.8          6.36            0.1        0.72
                       362      368                6 <5          5.93        0.13            0.4
Includes                      364      366                2 <5            9.8        0.26        0.66
Includes              
               
C-05-07                      402      408                6          3.33          5.56        0.02        0.19
               
Hole C-01-06 does not contain significant values      
Hole C-06-07, C-07-07 pending assays        

Dr. Thomas Patton is the qualified person responsible for the preparation of this release in accordance with NI-43-101.

Core samples were prepped at Inspectorate’s laboratory in Durango, with the pulps analyzed at its main laboratory in Reno, Nevada. Samples were initially run using a 30 element ICP analysis with an aqua regia digestion process. All samples were also analyzed for gold and silver using a 30 gram fire assay with gravimetric finish.

Quaterra Resources Inc. (TSX-V: QTA) is a junior exploration company focused on making significant mineral discoveries in North America. The company uses in-house expertise and its extensive network of consultants, prospectors and industry contacts to identify, acquire and evaluate prospects in mining-friendly jurisdictions with the potential to host large base metal, precious metal or uranium deposits. The company’s preference is to acquire a 100% interest in properties on reasonable terms and maintain this interest through initial evaluation.

Item 6: Reliance on section 85 (2) of the Act

N/A

Item 7: Omitted Information

N/A

Item 8: Senior Officers

Stacey Bligh
Secretary
Tel: 604-684-9384


EX-99.22 23 exhibit99-22.htm MATERIAL CHANGE REPORT DATED JUNE 5, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.22

BC FORM 53-901F
Securities Act

MATERIAL CHANGE REPORT

Item 1:  Reporting Issuer

QUATERRA RESOURCES INC.
Suite 1550, 1185 West Georgia Street
Vancouver, BC V6E 4E6

Item 2:  Date of Material Change

January 30, 2007

Item 3: Press Release

May 29, 2007 at Vancouver, British Columbia

Item 4: Summary of Material Change

Quaterra Resources Inc. (the “Company”) engages the services of Roman Friedrich & Company Ltd.

Item 5: Full Description of Material Change

The Company has engaged Roman Friedrich & Company Ltd. of Vancouver, BC, (“RFC”) to provide financial and advisory services to the Company for an initial term of 12 months, subject to extension or earlier termination. The Company has agreed to pay RFC a retainer of $15,000 per month, payable as to $7,500 in cash and the balance in common shares of the Company at the discounted market price of such shares (as determined in accordance with the policies of the TSX Venture Exchange) at each quarter end during the term of the engagement, subject to TSX Venture Exchange approval of each share issuance. 7,840 common shares have been issued in respect of the first quarter and are subject to a hold period expiring September 1, 2007. Any subsequent quarterly share issuances will be subject to a hold period expiring 4 months and a day after the date of their issuance.

Pursuant to the engagement, the Company has also agreed, subject to TSX Venture Exchange approval, to pay RFC a success fee if the Company enters into and closes a merger, acquisition, sale, joint venture, asset sale, asset purchase or vend-in transaction otherwise than in the ordinary course of the Company’s business during the term of the engagement. Such success fee is to be based on a sliding scale with reference to the value of such a transaction to a maximum agreed amount. The Company has the option of paying up to 50% of the success fee in shares at the discounted market price of such shares.

Item 6: Reliance on section 85 (2) of the Act

N/A

Item 7: Omitted Information

N/A

Item 8: Senior Officers

Stacey Bligh, Secretary
Telephone: 604-684-9384


EX-99.23 24 exhibit99-23.htm MATERIAL CHANGE REPORT DATED JUNE 5, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.23

BC FORM 53-901F
Securities Act

MATERIAL CHANGE REPORT

Item 1: Reporting Issuer

QUATERRA RESOURCES INC.
Suite 1550, 1185 West Georgia Street
Vancouver, BC V6E 4E6

Item 2:

Date of Material Change

April 26, 2007

Item 3:

Press Release

May 1, 2007 at Vancouver, British Columbia

Item 4:

Summary of Material Change

Quaterra Resources Inc. (the “Company”) has acquired the assets of Arimetco, Inc. a Nevada Corporation.

Item 5:

Full Description of Material Change

The Company has received the approval of the appropriate U.S. court to the acquisition by a subsidiary of Quaterra of all assets of Arimetco, Inc., a Nevada corporation, in the Yerington Mining District, Lyon County, Nevada.

Subject to the approval of the TSX Venture Exchange, the purchase price comprises US$500,000 cash, 250,000 shares of Quaterra common stock and a 2% net smelter return royalty capped at US$7.5 million dollars on production from any claims owned by Quaterra in the Yerington and MacArthur mine areas. Quaterra may terminate the transaction at any time during a 180-day review period if it is dissatisfied with the condition of the property or fails to obtain requested environmental clearances for past mining-related activities. Under certain circumstances, the review period may be extended for additional successive 120 day periods.

The Anaconda Copper Company conducted open pit mining at Yerington from 1953 to 1978, producing 1.75 billion pounds of copper from oxide and sulfide ores. Arimetco subsequently used the site for heap leaching of Yerington dumps and ore from the nearby MacArthur mine from 1989 to 2000. Quaterra plans to use the site as the base for its district-wide activities, and will explore the property as part of its ongoing exploration drilling program at its 100%-owned MacArthur property.

The MacArthur mine is a fully stripped oxide copper deposit five miles north of the Yerington mine. It was formerly operated by Arimetco and has an historic resource of 29 million tons grading 0.28% copper, including 13 million tons of +0.40% copper. Quaterra recently commenced drilling at MacArthur to confirm the historic resource and to evaluate potential for a larger oxide deposit and possible buried sulfide system beyond the current pit boundaries.

Item 6:

Reliance on section 85 (2) of the Act

N/A

Item 7:

Omitted Information

N/A

Item 8:

Senior Officers

Stacey Bligh, Corporate Secretary
Telephone: 604-684-9384


EX-99.24 25 exhibit99-24.htm MATERIAL CHANGE REPORT DATED JANUARY 4, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.24

BC FORM 53-901F
Securities Act

MATERIAL CHANGE REPORT

Item 1: Reporting Issuer

QUATERRA RESOURCES INC.
Suite 1550, 1185 West Georgia Street
Vancouver, BC V6E 4E6

Item 2: Date of Material Change

December 20, 2006

Item 3: Press Release

December 21, 2006 at Vancouver, British Columbia

Item 4:

Summary of Material Change

Quaterra Resources Inc. reported that the company has received TSX Venture Exchange approval of its previously announced private placement.

Item 5:

Full Description of Material Change

The Company has issued a total of 5,539,339 Common shares, which 291,484 shares were issued as Finder’s Fees. The Company also issued 2,623,928 warrants entitling the purchase of 2,623,928 shares at an exercise price of $2.25 per share for a period of 18 months.

Item 6:

Reliance on section 85 (2) of the Act

N/A

Item 7:

Omitted Information

N/A

Item 8:

Senior Officers

Stacey Bligh, Secretary
Telephone: 604-684-9384


EX-99.25 26 exhibit99-25.htm NEWS RELEASE DATED FEBRUARY 5, 2008 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.25

1100 - 1199 W. Hastings St.
Vancouver, B.C. V6E 3T5
Tel: 604-681-9059
Fax: 604-688-4670
www.quaterraresources.com
   
February 5, 2008                    QTA-TSX. VENTURE
                                                         NR-03-08

QUATERRA RESOURCES ANNOUNCES MACARTHUR PROJECT CONFERENCE CALL

VANCOUVER, B.C. – Quaterra Resources Inc. will host a conference call on Wednesday, February 6, 2008 at 1:30 pm Pacific Time (4:30 pm Eastern Time) to discuss the January 31, 2008, drill results from its wholly-owned MacArthur Copper Project. The Company will also talk about its other projects and will answer questions at the end of the formal portion of the call. To listen to the call live, dial 1-888-458-1598. The access code is 73317#. To listen to a playback of this call after it has ended, dial 1-877-653-0545. The access code is 609407#. The playback option will be available for 30 days.

For more information, please contact:

Jay Oness at 1-888-456-1112, 604-681-9059 or
email: corpdev@mnxltd.com

Quaterra Resources Inc. (TSX-V: QTA) is a junior exploration company focused on making significant mineral discoveries in North America. The company uses in-house expertise and its extensive network of consultants, prospectors and industry contacts to identify, acquire and evaluate prospects in mining-friendly jurisdictions with the potential to host large base metal, precious metal or uranium deposits. The company’s preference is to acquire a 100% interest in properties on reasonable terms and maintain this interest through initial evaluation.

-30-

On behalf of the Board of Directors,
Thomas Patton”
Thomas Patton, President, Quaterra Resources Inc.

Expanded information on the Company’s projects is described on our website at www.quaterraresources.com or contact Jay Oness at 1-888-456-1112, 604-681-9059 or email: corpdev@mnxltd.com

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management.

1


EX-99.26 27 exhibit99-26.htm NEWS RELEASE DATED FEBRUARY 4, 2008 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.26

1100 - 1199 W. Hastings St.
Vancouver, B.C. V6E 3T5
Tel: 604-681-9059
Fax: 604-688-4670
www.quaterraresources.com
   
February 4, 2008                    QTA-TSX. VENTURE
                                                         NR-02-08

Quaterra Appoints Tracy Stevenson as Chairman of
the Board of Directors

VANCOUVER, B.C.- Quaterra Resources Inc. today announced that Tracy Stevenson has been appointed Chairman of the Company’s Board of Directors.

Mr. Stevenson is a senior mining industry executive with international experience in finance, mergers and acquisitions, strategic planning, corporate governance, auditing, administration and information systems and technology. He worked for Rio Tinto plc, the world’s second largest mining company, and related companies for 26 years. He held a number of senior leadership positions and was involved with many major exploration, development and financing projects.

During the past five years, Mr. Stevenson was the global head of information systems and shared services for Rio Tinto. He previously served for four years as Executive Vice President, CFO and a director of Comalco Ltd., an Australia-based international aluminum company partially owned by Rio Tinto, and a further four years as CFO and a director of Kennecott Corporation, a $3.5 billion diversified North American mining company owned by Rio Tinto. He also has “Big 5”public accounting experience with Coopers & Lybrand (now PriceWaterhouseCoopers).

Mr. Stevenson was appointed to the Quaterra Board of Directors by shareholder vote in July 2007. He is also a director of Vista Gold Company (VGZ; TSX, AMEX). He has a B.S. Accounting Magna Cum Laude from the University of Utah and is a member of the Advisory Board of the University Of Utah David Eccles School Of Business.

“Mr. Stevenson is a high-calibre individual with senior executive and international mining development and operating experience,” says Quaterra’s President and CEO Dr. Thomas Patton. “He will bring a high level of expertise and experience to the Company’s strategic planning, business development, policy implementation and corporate governance functions.”

Says Mr. Stevenson: “I am really looking forward to working more closely with the Quaterra leadership team which has a strong track record of creating shareholder value through a strategy of targeted acquisitions, systematic exploration and cost-effective development. Quaterra has a high quality portfolio of uranium, base and precious metals properties that should offer opportunities for substantial value creation.”

Quaterra Resources Inc. (TSX-V: QTA) is a junior exploration company focused on making significant mineral discoveries in North America. The company uses in-house expertise and its extensive network of consultants, prospectors and industry contacts to identify, acquire and evaluate prospects in mining-friendly jurisdictions with the potential to host large base metal, precious metal or uranium deposits. The company’s preference is to acquire a 100% interest in properties on reasonable terms and maintain this interest through initial evaluation.

On behalf of the Board of Directors,
Thomas Patton”
Thomas Patton, President, Quaterra Resources Inc.

Expanded information on the Company’s projects is described on our website at www.quaterraresources.com or contact Jay Oness at 1-888-456-1112, 604-681-9059 or email: corpdev@mnxltd.com

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management.

1


EX-99.27 28 exhibit99-27.htm NEWS RELEASE DATED JANUARY 31, 2008 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.27

1100 - 1199 W. Hastings St.
Vancouver, B.C. V6E 3T5
Tel: 604-681-9059
Fax: 604-688-4670
www.quaterraresources.com
   
January 31, 2008                    QTA-TSX. VENTURE
                                                         NR-01-08

QUATERRA EXPANDS COPPER ZONE AT MACARTHUR

VANCOUVER, B.C. - Quaterra Resources Inc. today announced that drilling at its 100%-owned MacArthur project near Yerington, Nevada, has expanded and partially delineated a broad zone of acid-soluble copper mineralization beneath, south and to the north and northwest of the historic MacArthur copper oxide deposit.

Seventy holes totaling 23,739 feet were drilled between September and December 2007 in 28 core holes and 42 RC holes. Principal conclusions are as follows:

1. The mixed oxide/chalcocite mineralization north of the MacArthur pit has been extended an additional 1,500 feet to the west and now has been traced for nearly 5,000 feet to the west and southwest from hole QMCC-7 to hole QMCC-16.

  • The zone is currently up to 1,500 feet wide and averages over 100 feet thick, based on holes drilled on 500 foot centers. A few historic Anaconda drill-holes suggest that this zone may connect to the south with mineralization in and adjacent to the MacArthur pit but more drilling will be required for this to be confirmed. Three vertical holes are of particular note: QMC-27R, with 115 feet of 0.30% total copper (TCu) beginning at a depth of 195 feet; QMC-23R, with 25 feet of 1.25% TCu beginning at 340 feet; and QMC-4bR, with 95 feet of 0.57% TCu beginning at 305 feet. (See drill-hole table attached to this release).These holes are at the northernmost limit of drilling and mineralization remains open to expansion to the north and northwest. Hole QMC-1bR contains the highest grade interval drilled to date with 180 feet of 0.91% copper beginning at 270 feet but may have been drilled parallel to a high grade structure. Additional drilling will be necessary to determine the geometry and significance of this intercept.

2. Quaterra’s drill results (QME and QMT holes reported in this release) continue to expand the MacArthur pit mineralization delineated by Anaconda in a 1971-1972 shallow drilling campaign that tested to an average depth of 200 feet below surface.

  • Of particular interest is a new zone (not included in the historic resource) of predominately chalcocite mineralization located 20 feet to approximately 70 feet below the existing MacArthur oxide copper deposit that remains open to extension both to the north and west where it may connect with the north zone mineralization detailed above. Hole QMT-10 on the northeast edge of the pit contains 205 feet of 0.42% TCu beginning at 129 feet, including a 78 foot intercept averaging 0.78% TCu from 136 to 214 feet. Holes QME-79R and QME- 80R, drilled 1,200 and 1,700 feet respectively east of the pit along the edge of the waste dump, each intersected 40 to 60 feet of + 0.30 % TCu. These holes and abundant copper oxides exposed in pits and trenches 3,000 feet southwest of the pit provide good opportunities to delineate additional mineralization.

3. A porphyry copper target has been identified in the Gallagher area about one mile west of the MacArthur pit below a large area of iron oxides and phyllic alteration.

  • Several deep holes are planned in 2008 to test this target once detailed mapping and sampling has been completed.

1


“We believe these drilling results will substantially increase the potential resource of the MacArthur project,” says Quaterra’s VP Exploration Eugene Spiering. “Based on what we are seeing in surface mapping and trenching in the area, significant additional upside is possible.”

Quaterra’s drilling to date has been shallow (less than 500 feet) and has identified a relatively continuous zone of copper mineralization that parallels current topography and contains predominately green and black copper oxides grading downward into chalcocite, a secondary copper mineral that is also acid-soluble. Mineralization appears to represent a partially oxidized secondary enrichment blanket. The most likely source of the secondary copper mineralization is the Gallagher area which will be drilled later in the year. Much of the oxide mineralization appears to be localized along high-angle structures, making additional close-spaced drilling (including angle holes) necessary to accurately define tonnages and grades. A number of the Anaconda holes in the MacArthur pit area have been twinned with both core and RC holes to validate historic data and optimize ongoing drilling/sampling procedures. The results will form part of a resource estimate to be released on the property.

The primary objectives of Quaterra’s 2008 program at MacArthur are to complete detailed mapping of the entire property; to delineate the total extent of the acid-soluble copper mineralized zone and produce a NI43-101 compliant resource estimate; and to drill the Gallagher area for a porphyry copper deposit. One RC rig is currently working at the property.

Mr. Eugene Spiering, Quaterra’s VP exploration, is the qualified person responsible for the preparation of this news release.

A hole location map and table of results for all 70 holes drilled, as well as a grade-thickness contour map and cross section are available on the Company’s website at www.quaterraresources.com.

Quaterra Resources Inc. (TSX-V: QTA) is a junior exploration company focused on making significant mineral discoveries in North America. The company uses in-house expertise and its extensive network of consultants, prospectors and industry contacts to identify, acquire and evaluate prospects in mining-friendly jurisdictions with the potential to host large base metal, precious metal or uranium deposits. The company’s preference is to acquire a 100% interest in properties on reasonable terms and maintain this interest through initial evaluation.

On behalf of the Board of Directors,
“Thomas Patton”
Thomas Patton, President, Quaterra Resources Inc.

Expanded information on the company’s projects is also described on our website or contact Jay Oness at 1-888-456-1112, 604-681-9059 or email: corpdev@mnxltd.com.

Some statements contained in this news release are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties. Further information regarding risks and uncertainties which may cause results to differ materially from those projected in forward-looking statements, are included in filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time except in accordance with applicable securities laws.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management.

2



QUATERRA RESOURCES INC.
MacArthur Copper Project
Drill hole intercepts: Sept to Dec 2007
(Summary List)

            Total
  Angle Total From To Thickness Cu
Drill Hole Brg / Dip Depth feet feet feet %
             
MacArthur Pit Area          
QMT-6 0°/-90° 394.7 33.0 128.0 95.0 0.25
      173.0 188.0 15.0 0.18
      257.0 322.0 65.0 0.28
             
QMT-7 0°/-90° 424.0 0.0 24.0 24.0 0.28
      48.4 70.3 21.9 0.29
      74.2 116.0 41.8 0.92
      129.6 154.0 24.4 0.18
      184.0 224.0 40.0 0.14
      254.0 284.0 30.0 0.20
      334.0 356.5 22.5 0.30
             
QMT-8 0°/-90° 350.0 10.0 29.0 19.0 0.19
      49.0 84.0 35.0 0.19
      142.2 229.0 86.8 0.20
      258.3 316.0 57.7 0.15
             
QMT-9 0°/-90° 244.0 9.0 81.0 72.0 0.34
      116.3 173.0 56.7 0.16
      193.0 244.0 51.0 0.14
             
QMT-10 0°/-90° 480.0 84.0 109.0 25.0 0.22
      129.0 334.0 205.0 0.42
including     136.0 214.0 78.0 0.78
      349.0 372.0 23.0 0.30
      389.0 399.0 10.0 0.27
             
QMT-11 0°/-90° 284.0 0.0 120.0 120.0 0.18
      147.0 180.0 33.0 0.14
      214.0 284.0 70.0 0.24
             
QMT-12 0°/-90° 325.0 0.0 10.0 10.0 0.16
      55.0 189.0 134.0 0.21
      229.0 317.0 88.0 0.20
             
QMT-13 0°/-90° 300.0 0.0 164.0 164.0 0.21
      180.0 216.0 36.0 0.25
      228.4 241.3 12.9 0.26
      277.4 290.5 13.1 0.24
             
QMT-14 210°/-55° 360.0 5.0 123.0 118.0 0.31
      203.0 263.0 60.0 0.26
      303.0 338.0 35.0 0.29
             
QMT-15 0°/-90° 350.0 12.5 118.0 105.5 0.36
      183.3 288.0 104.7 0.19

3



QMT-16 0°/-90° 455.0 36.5 199.0 162.5 0.18
      214.0 254.0 40.0 0.18
      277.9 339.0 61.1 0.14
      359.0 455.0 96.0 0.24
             
QMT-17 0°/-90° 350.0 54.0 67.3 13.3 0.13
      87.3 208.9 121.6 0.16
      236.0 246.0 10.0 0.14
             
QMT-18 0°/-90° 400.0 64.0 84.0 20.0 0.25
      112.0 189.0 77.0 0.20
             
QMT-19 0°/-90° 200.0 0.0 44.0 44.0 0.51
             
QME-1 0°/-90° 324.0 174.0 250.0 76.0 0.37
including     184.0 234.0 50.0 0.48
             
QME-2 0°/-90° 300.0 159.0 179.0 20.0 0.29
      258.0 300.5 42.5 0.27
             
QME-3 0°/-90° 303.0 63.0 166.5 103.5 0.16
      181.2 303.0 121.8 0.13
             
QME-4aR 0°/-90° 230.0 0.0 20.0 20.0 0.13
      35.0 45.0 10.0 0.17
      70.0 115.0 45.0 0.14
      215.0 230.0 15.0 0.15
             
QME-5 210°/-50° 72.0 0.0 40.0 40.0 0.18
             
             
QME-6R 0°/-90° 190.0 40.0 50.0 10.0 0.11
             
QME-8R 0°/-90° 340.0 0.0 10.0 10.0 0.13
      25.0 35.0 10.0 0.13
      70.0 100.0 30.0 0.18
      120.0 140.0 20.0 0.20
      195.0 265.0 70.0 0.17
             
QME-9R 0°/-90° 200.0 80.0 105.0 25.0 0.22
      130.0 140.0 10.0 0.13
          0.0  
QME-10R 0°/-90° 400.0 0.0 20.0 20.0 0.44
      105.0 120.0 15.0 0.34
             
QME-75R 0°/-90° 350.0 195.0 235.0 40.0 0.09
             
QME-76R 0°/-90° 350.0 300.0 310.0 10.0 0.17
             
QME-77R 0°/-90° 350.0   No assays above cut-off    
             
QME-78R 0°/-90° 350.0 275.0 285.0 10.0 0.15
      315.0 330.0 15.0 0.14
             
QME-79R 0°/-90° 350.0 210.0 250.0 40.0 0.31
      285.0 350.0 65.0 0.23

4



QME-80R 0°/-90° 350.0 85.0 100.0 15.0 0.57
      185.0 245.0 60.0 0.34
including     190.0 205.0 15.0 0.79
             
QME-81R 0°/-90° 350.0   No assays above cut-off    
             
North MacArthur Area          
QMC-1bR 270°/-45° 450.0 90.0 110.0 20.0 0.12
      185.0 255.0 70.0 0.13
      270.0 450.0 180.0 0.91
             
QMC-4aR 0°/-90° 300.0 40.0 60.0 20.0 0.30
             
QMC-4bR 270°/-45° 400.0 40.0 125.0 85.0 0.28
      160.0 275.0 115.0 0.24
      305.0 400.0 95.0 0.57
             
QMC-21R 0°/-90° 400.0 165.0 205.0 40.0 0.26
      340.0 355.0 15.0 0.20
      390.0 400.0 10.0 0.13
             
QMC-22R 0°/-90° 400.0 0.0 40.0 40.0 0.44
      100.0 110.0 10.0 0.23
      345.0 355.0 10.0 0.35
             
QMC-23R 0°/-90° 400.0 280.0 290.0 10.0 0.20
      340.0 365.0 25.0 1.25
             
QMC-24R 0°/-90° 400.0 0.0 15.0 15.0 0.12
      40.0 105.0 65.0 0.17
      120.0 220.0 100.0 0.22
             
QMC-25R 0°/-90° 350.0 70.0 80.0 10.0 0.10
      100.0 155.0 55.0 0.29
      305.0 330.0 25.0 0.12
             
QMC-26R 0°/-90° 390.0 10.0 40.0 30.0 0.20
      65.0 95.0 30.0 0.29
      115.0 160.0 45.0 0.34
      200.0 220.0 20.0 0.14
      240.0 265.0 25.0 0.11
             
QMC-27R 0°/-90° 390.0 30.0 65.0 35.0 0.18
      80.0 170.0 90.0 0.13
      195.0 310.0 115.0 0.30
             
QMCC-12 0°/-90° 474.0 149.0 251.8 102.8 0.19
      281.7 333.0 51.3 0.14
      422.4 454.5 32.1 0.16
             
QMCC-13 0°/-90° 434.0 0.0 114.0 114.0 0.24
             
QMCC-14 0°/-90° 330.0 162.2 172.3 10.1 0.10
      241.5 251.7 10.2 0.15
             
QMCC-15 0°/-90° 375.0 182.8 286.7 103.9 0.16

5



QMCC-16 0°/-90° 325.0 5.0 78.2 73.2 0.14
      96.9 219.3 122.4 0.26
      295.0 325.0 30.0 0.13
             
QMCC-17 0°/-90° 327.0 77.2 103.0 25.8 0.19
      277.0 290.5 13.5 0.12
             
QMCC-18 0°/-90° 370.0 77.0 97.0 20.0 0.13
      155.2 166.8 11.6 0.23
      182.0 212.0 30.0 0.22
             
QMCC-19 0°/-90° 370.0 274.0 287.0 13.0 0.13
             
QMCC-20 0°/-90° 333.0 163.0 183.0 20.0 0.15
      315.8 333.0 17.2 0.16

R= RC Hole
All intervals calculated using 0.1% copper cutoff

REGULATORY NOTE
The samples from the MacArthur drilling program are prepared and assayed by ISO/IEC 17025 certified American Assay Laboratories (AAL) located in Sparks, Nevada and by Skyline Laboratories in Tucson, Arizona which is accredited in international quality standards through ISO/IEC 17025, with CAN-P-1579 for specific registered tests through the Standards Council of Canada.

6


EX-99.28 29 exhibit99-28.htm NEWS RELEASE DATED DECEMBER 18, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.28

1100 - 1199 W. Hastings St.
Vancouver, B.C. V6E 3T5
Tel: 604-681-9059
Fax: 604-688-4670
www.quaterraresources.com
   
December 18, 2007                    QTA-TSX. VENTURE
                                                         NR-09-07

QUATERRA ACQUIRES HERBERT GLACIER GOLD PROJECT IN ALASKA

VANCOUVER, B.C. - Quaterra Resources Inc. today announced the acquisition of the Herbert Glacier gold property 20 miles north of Juneau, Alaska. The 1,735 acre property consists of 84 Federal claims which host four main composite vein-fault structures that contain ribbon structure quartz-sulfide veins. The structures strike east-west and dip steeply, mostly to the north. Only one of the four known vein systems was drilled in 1986 and 1988. Sampling in 2007 shows that all four structures locally have high-grade gold-quartz mineralization and should be drill tested.

The vein systems are strongly enriched in gold (Au): Of 199 rock chip samples collected during a reconnaissance mapping and sampling program in the summer of 2007, almost half (94 samples) contained more than 1g/t Au; 33 samples contained more than 10 g/t; and 12 contained more than one ounce of Au/ton. One 1.5 ft. (about 46 cm) banded quartz vein with visible gold assayed 81.9 g/t (about 2.39 oz/ton) Au. Veins typically pinch and swell, but individual veins are as much as 14 feet thick and composite veins up to more than 20 feet across. The veins are competent, but occur within halos of altered quartz diorite, and are generally marked on surface by deep trenches eroded from the incompetent altered host rocks. Gold is accompanied, in approximate decreasing order by arsenopyrite, pyrite, and galena with lesser amounts of scheelite, chalcopyrite, and sphalerite.

The Herbert Glacier property lies within the 100-mile long Juneau gold belt which has produced nearly seven million ounces of gold through a total depth range of thousands of feet. Trace elements typical of the gold belt and the mesothermal aspect of the ribboned quartz veins suggest that the veins of the Herbert Glacier property could be persistent in both strike and depth.

In October 2007, Quaterra leased 17 core claims from long time Juneau prospectors and miners Dale Henkins and Floyd Branson and their partner Jim Wilson of Coastal Helicopters (the JEDI syndicate). Quaterra staked an additional 67 contiguous claims. Terms between Quaterra and the JEDI group call for an initial payment of $12,000 and annual payments escalating from $12,000 to $30,000 over the first 11 years. Payments are an advance royalty calculated on a sliding scale of 3% to 5% NSR based on the gold price. Quaterra has a work commitment of least $25,000 for the first year and $50,000 for each year thereafter.

The Summit vein, part of the southernmost of the four vein systems, was known in the early days of the Juneau district. Much of the area now known to be mineralized was, however, covered by glacial ice. Veins were exposed as the ice receded and discoveries were made in the 1980s. The next system to the north, called the Herbert Vein, was drilled in 1986 and 1988 respectively by Tenneco Minerals and its successor Echo Bay Mining Co. The structure was explored on approximate 200 foot intervals along a 2,000 foot strike length with 5,272 feet of drilling in 19 core holes. Shallow angle holes established continuity of gold mineralization in the vein system and found intercepts of up to 12.84 oz Au/ton. Highlights of this drilling are shown in the table below:

1


HIGHLIGHTS OF HISTORIC (1986 & 1988) DRILLING AT THE HERBERT GLACIER PROSPECT

Drill holes in order west to east over about 2000 feet strike length.
Only intercepts>1-ft of 0.3 oz/ton Au shown
Data from reports by George A. Moerlein for Tenneco Minerals (1986) and Echo Bay Mining Co (1988)

Hole From (ft) To (ft) Interval oz/ton Au
H-9            88.0    89.2          1.2            0.38
H-6        190.0  191.0          1.0            3.85
H-5        165.5  168.1          2.6            0.93
H-2        147.0  149.0          2.0            0.99
H-1            78.0    84.0          6.0            0.93
H-13        286.5  300.5        14.0            0.98
Includes        296.8  297.8          1.0          12.64
H-12        160.4  162.0          1.6            0.31
H-12        165.5  168.4          2.9            0.31

“All drilling was NQ core with excellent recovery”

A metallurgical study on a 240 pound composite sample by the US Bureau of Mines indicated that 88% of the gold was free milling and could be recovered by gravity methods (Herbert Glacier – No. JU097, ARDF file, Juneau Quadrangle, U.S. Geological Survey).

“We are quite excited about the potential of the Herbert Glacier project,” says Dr. Charles C. Hawley, Quaterra’s VP Exploration-Alaska. “If we can demonstrate similar grades and tonnages at depth and in the other parallel veins, this project could represent a significant gold deposit for the Company.”

Quaterra is planning a 3,000 foot core drilling program to explore the Herbert Glacier project in 2008.

Most of the work described in this release was carried out in August 2007 by contract geologists Carl Hale, Geoff Garcia, and Alexander Pappas with assistance of Dale Henkins and Floyd Branson. Samples were under the direct control of Mr. Pappas until they were sent via Alaska Airlines to ALS Chemex prep laboratory in Fairbanks, Alaska. The crew was under the general supervision of Dr. Charles C. Hawley who is the qualified person responsible for the preparation of this release.

Quaterra Resources Inc. (TSX-V: QTA) is a junior exploration company focused on making significant mineral discoveries in North America. The company uses in-house expertise and its extensive network of consultants, prospectors and industry contacts to identify, acquire and evaluate prospects in mining-friendly jurisdictions with the potential to host large base metal, precious metal or uranium deposits. The company’s preference is to acquire a 100% interest in properties on reasonable terms and maintain this interest through initial evaluation.

On behalf of the Board of Directors,
“Thomas Patton”
Thomas Patton, President, Quaterra Resources Inc.

Some statements contained in this news release are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties. Further information regarding risks and uncertainties which may cause results to differ materially from those projected in forward-looking statements, are included in filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time except in accordance with applicable securities laws.

Expanded information on the Company’s projects is described on our website at www.quaterraresources.com or contact
Jay Oness at 1-888-456-1112, 604-681-9059 or email: corpdev@mnxltd.com

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management.

2


EX-99.29 30 exhibit99-29.htm NEWS RELEASE DATED OCTOBER 9, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.29

1100 - 1199 W. Hastings St.
Vancouver, B.C. V6E 3T5
Tel: 604-681-9059
Fax: 604-688-4670
www.quaterraresources.com
   
October 9, 2007                    QTA-TSX. VENTURE
                                                         NR-08-07

QUATERRA CONFIRMS AND EXPANDS SHALLOW CHALCOCITE MINERALIZATION AT MACARTHUR

Twin drilling shows continuous oxide mineralization, project manager appointed

VANCOUVER, B.C. - Quaterra Resources Inc. today announced that drilling at its 100%-owned MacArthur project near Yerington, Nevada, has confirmed and expanded an area of shallow, partially oxidized chalcocite mineralization 1,000 feet north and west of the MacArthur copper oxide pit.

Assay data from 11 drill holes in the chalcocite zone show mineralization averaging 0.23% total copper (TCu) over an average thickness of 96 feet along a strike length of approximately 3,500 feet and a width of 1,000 feet. These broad intercepts include narrower zones of higher grade mineralization of up to 0.74% TCu (See table 1). The chalcocite zone is open in all directions with the strongest mineralization to the northwest and to the south, where it is expected fill in the sparsely drilled area just north of the pit. Intrusive rocks above the chalcocite zone locally show oxide copper grades in the 0.2% to 0.3% TCu range. Additionally, twin-drilling in the MacArthur pit has encountered some chalcocite mineralization beneath the oxide mineralization; assays are pending.

Five core holes drilled in the MacArthur pit to twin historical rotary percussion holes and provide RQD and density data all show continuous copper oxide mineralization starting at the surface (See table 2). Grades include 245 feet of 0.29% TCu in hole QMT-2 starting at the surface; 145 feet of 0.22% TCu in hole QMT-1 starting at the surface; and 46.3 feet of 0.50% TCu in hole QMT-4 starting at 37.7 feet. Quaterra is currently twinning an additional 15 holes with reverse circulation drilling and will evaluate current versus historical assays on completion of this work.

Acid soluble copper mineralization at MacArthur occurs as chrysocolla, copper wad (neotocite), pitch limonite, residual chalcocite and minor malachite and azurite, all hosted in medium grained, biotite, quartz monzonite. Quaterra’s drilling, mapping and data compilation has shown this mineralization open on all sides.

An expanded drill program is currently underway at MacArthur with two drill rigs to test the copper oxide mineralization in and around the MacArthur pit, and to systematically explore on a 500 foot grid spacing for acid soluble chalcocite/oxide mineralization north and west of the existing pit boundary. A total of approximately 12,800 feet have been drilled in 22 copper oxide holes and 16 chalcocite exploration holes. Today’s release includes assay results from five of the copper oxide holes and 11 of the chalcocite holes. Additional assay results from these holes and from the ongoing drilling program will be released in batches over the next several months.

To assist with the management of the expanding program at MacArthur, Quaterra has signed a consulting agreement with Mr. Robert Akright as manager for the project. Mr. Akright has spent his entire career in minerals exploration, development, and project management including three years with

1


Homestake Mining and 11 years with Occidental Minerals. Mr. Akright will assist District Manager David Heatwole in directing drilling and exploration activities at MacArthur. Mr. Akright has been granted an option to purchase 50,000 shares at a price of $2.93.

Mr. Eugene Spiering – VP exploration is the qualified person responsible for the preparation of this news release.

A map showing locations of drill-holes reported in this release is available on the company’s website at www.quaterraresources.com. Expanded information on the company’s projects is also described on our website or contact Jay Oness at 1-888-456-1112, 604-681-9059 or email: corpdev@mnxltd.com.

Quaterra Resources Inc. (TSX-V: QTA) is a junior exploration company focused on making significant mineral discoveries in North America. The company uses in-house expertise and its extensive network of consultants, prospectors and industry contacts to identify, acquire and evaluate prospects in mining-friendly jurisdictions with the potential to host large base metal, precious metal or uranium deposits. The company’s preference is to acquire a 100% interest in properties on reasonable terms and maintain this interest through initial evaluation.

On behalf of the Board of Directors,

“Thomas Patton”

Thomas Patton, President, Quaterra Resources Inc.

Some statements contained in this news release are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties. Further information regarding risks and uncertainties which may cause results to differ materially from those projected in forward-looking statements, are included in filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time except in accordance with applicable securities laws.

Expanded information on the Company’s projects is described on our website at www.quaterraresources.com or contact Jay Oness at 1-888-456-1112, 604-681-9059 or email: corpdev@mnxltd.com

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management.

2


QUATERRA RESOURCES INC.
MacArthur Copper Project
Chalcocite Zone
Drill Hole intercepts - 28 September 2007
Table 1

   Angle  From        To Thickness Total Cu
Drill Hole Brg / Dip      feet      feet              feet percent
QMCC-1 0º/-90º 119.0 149.0          30.0      0.20
    179.0 204.0          25.0      0.14
    224.0 264.0          40.0      0.54
    289.0 303.6          14.6      0.36
           
QMCC-2 0º/-90º  34.0 115.3          81.3      0.21
    127.0 222.7          95.7      0.24
    320.0 339.0          19.0      0.17
    351.2 416.8          65.6      0.18
           
QMCC-3 0º/-90º 107.0 334.0      227.0      0.22
         including   286.0 334.0          48.0      0.41
    399.1 416.8          17.7      0.21
           
QMCC-4 0º/-90º  42.1  87.0          44.9      0.23
         including    72.0  87.0          15.0      0.39
           
QMCC-5 0º/-90º 154.0 217.6          63.6      0.17
           
QMCC-6 0º/-90º  88.3  98.3          10.0      0.15
           
QMCC-7 0º/-90º      5.0  23.0          18.0      0.15
     89.0 134.0          45.0      0.19
    239.0 275.1          36.1      0.42
           
QMCC-8 0º/-90º 304.0 314.0          10.0      0.14
           
QMCC-9 0º/-90º 142.4 152.5          10.1      0.12
    254.0 264.0          10.0      0.14
           
QMCC-10 0º/-90º  95.5 144.0          48.5      0.44
         including   119.0 144.0          25.0      0.74
    159.0 199.0          40.0      0.20
           
QMCC-11 0º/-90º  94.0 194.0      100.0      0.16
         including   145.0 158.7          13.7      0.25

3


QUATERRA RESOURCES INC.
MacArthur Copper Project
Copper Oxide Zone
Drill Hole intercepts - 28 September 2007
Table 2

     Angle  From        To Thickness Total Cu
Drill Hole  Brg / Dip      feet      feet              feet percent
QMT-1  0º/-90º      0.0 145.0      145.0      0.22
 including    50.0 120.0          70.0      0.31
    170.0 210.0          40.0      0.15
           
QMT-2 210º/-55º      0.0 245.0      245.0      0.29
 including    40.0 170.0      130.0      0.38
           
QMT-3  0º/-90º      0.0 120.0      120.0      0.24
    220.0 275.0          55.0      0.19
           
QMT-4  0º/-90º  37.7  84.0          46.3      0.50
    110.5 174.0          63.5      0.17
    186.7 228.7          42.0      0.22
    274.0 304.3          30.3      0.31
           
QMT-5 195º/-57º  36.8 112.0          75.2      0.15
    182.0 206.0          24.0      0.21

REGULATORY NOTE
The samples from the MacArthur drilling program are prepared and assayed by ISO/IEC 17025 certified American Assay Laboratories (AAL) located in Sparks, Nevada and by Skyline Laboratories in Tucson, Arizona which is accredited in international quality standards through ISO/IEC 17025, with CAN-P-1579 for specific registered tests through the Standards Council of Canada. At both laboratories, total copper is analyzed using atomic absorption (AA) spectroscopy, with acid soluble content determined by leaching with weak sulfuric acid and/or a weak sulfuric acid-ferric sulfate mixture.

4


EX-99.30 31 exhibit99-30.htm NEWS RELEASE DATED AUGUST 22, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.30

1100 - 1199 W. Hastings St.
Vancouver, B.C. V6E 3T5
Tel: 604-681-9059
Fax: 604-688-4670
www.quaterraresources.com
   
August 22, 2007                    QTA-TSX. VENTURE
                                                                                          NR-07-07

Accelerated Warrants Exercised

VANCOUVER, B.C. – Quaterra Resources Inc. today announced that the Company has issued 2,480,785 common shares pursuant to the exercise of share purchase warrants under the acceleration clause of a non-brokered private placement which closed on December 20, 2006. The gross proceeds of the warrants, exercised by 97 of 101 participants, total CDN$5,581,766. Funds will be used to continue drilling uranium and copper prospects on the Arizona Strip and MacArthur, Nevada respectively; and to initiate drilling programs for gold and silver in Mexico at Mirasol and Nieves.

Quaterra Resources Inc. (TSX-V: QTA) is a junior exploration company focused on making significant mineral discoveries in North America. The company uses in-house expertise and its extensive network of consultants, prospectors and industry contacts to identify, acquire and evaluate prospects in mining-friendly jurisdictions with the potential to host large base metal, precious metal or uranium deposits. The company’s preference is to acquire a 100% interest in properties on reasonable terms and maintain this interest through initial evaluation.

“Thomas Patton”

Thomas Patton
President

Expanded information on the Company’s projects is described on our website at www.quaterraresources.com or contact Jay Oness at 1-888-456-1112, 604-681-9059 or email: corpdev@mnxltd.com

     The TSX Venture Exchange has not reviewed and does not accept responsibility
for the adequacy or accuracy of the contents of this news release, which has been prepared by management.

1


EX-99.31 32 exhibit99-31.htm NEWS RELEASE DATED JULY 26, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.31

1100 - 1199 W. Hastings St.
Vancouver, B.C. V6E 3T5
Tel: 604-681-9059
Fax: 604-688-4670
www.quaterraresources.com
   
July 26, 2007                    QTA-TSX. VENTURE
                                                                                          NR-06-07

Quaterra Acquires Southwest Tintic Porphyry Copper Prospect In Utah

VANCOUVER, B.C. - Quaterra Resources Inc. today announced the acquisition of the Southwest Tintic porphyry copper prospect, located in the prolific Tintic mining district about 60 miles south of Salt Lake City in west-central Utah. The Company has acquired approximately five square miles of mineral rights by optioning and staking 85 unpatented U.S. lode claims and purchasing 1,511 acres of patented mining claims.

The Tintic district is Utah’s second largest metal producing district, with historic production of silver, gold and lesser amounts of base metals from carbonate replacement deposits and mantos hosted by Paleozoic sedimentary rocks. In the early 1970s, Bear Creek Mining Company discovered the deep Southwest Tintic porphyry copper system hidden 1,100 feet below surface under three square miles of barren quartz-sericite-pyrite alteration. The system was cut by six widely spaced core holes which form the basis for Krahulec and Briggs’ rough estimate of a global geologic resource – which is not NI43-101 compliant - of more than 400 million tons of 0.33% copper, 0.01% molybdenum and 0.002 opt gold at a 0.3% copper cutoff. *

Quaterra plans an extensive program of mapping and data compilation with drilling planned for 2008. Targets include an additional porphyry copper target in the Treasure Hill area; shallower or higher grade mineralization within the Southwest Tintic deposit; and high-grade high-sulfidation silver-copper veins.

“Acquisition of the Southwest Tintic resource and surrounding claims is consistent with our strategy of targeting properties in mining-friendly locations in North America with the potential to host large mines,” says Quaterra’s Vice President of Exploration Eugene Spiering. “We believe there is a large amount of metal on the property based on earlier drilling of widely spaced holes. We intend to confirm this historic resource and to search for additional deposits through aggressive exploration drilling.”

Quaterra initially acquired 27 unpatented lode mining claims covering the Southwest Tintic deposit from a prospecting syndicate. The Company can earn a 100% interest in the claims by making annual payments totaling US $1 million over a 10-year period and paying a 2% NSR royalty on production from these claims and contiguous claims staked by Quaterra. One-half of the royalty may be purchased at any time by paying $1 million to the syndicate. The patented claims will be acquired by paying owners US $800,000 over a 24 month period, following receipt of a satisfactory title report. These claims will not carry royalty obligations.

Yerington update

Quaterra in its news release of May 1, 2007, reported on the approval by the U.S. courts of the Letter of Intent providing for the acquisition by a U.S. subsidiary of Quaterra of the assets of Arimetco, Inc. Quaterra has now concluded a formal Acquisition Agreement pursuant to such Letter of Intent and the Acquisition Agreement has received the approval of the U.S. Bankruptcy Court of the Acquisition Agreement. In consequence of such approval Quaterra will continue its negotiations with the EPA and other appropriate regulators with a view of resolving any and all outstanding environmental matters relating to the Arimetco properties. Quaterra may terminate the transaction at any time during a 180-day review period if it is dissatisfied with the condition of the property or fails to obtain requested environmental clearances for past mining-related activities.

1


Quaterra Resources Inc. (TSX-V: QTA) is a junior exploration company focused on making significant mineral discoveries in North America. The company uses in-house expertise and its extensive network of consultants, prospectors and industry contacts to identify, acquire and evaluate prospects in mining-friendly jurisdictions with the potential to host large base metal, precious metal or uranium deposits. The company’s preference is to acquire a 100% interest in properties on reasonable terms and maintain this interest through initial evaluation.

* Krahulec, Ken and Briggs, D. F., 2006, History, Geology and Production of the Tintic Mining District, Juab, Utah, and Tooele Counties, Utah, in Bon, R. L., Gloyn, R. W. and Park, G. M. editors, Mining Districts of Utah: Utah Geological Association Publication 32, p. 121-150.

On behalf of the Board of Directors,

“Thomas Patton”

Thomas Patton, President, Quaterra Resources Inc.

Some statements contained in this news release are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties. Further information regarding risks and uncertainties which may cause results to differ materially from those projected in forward-looking statements, are included in filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time except in accordance with applicable securities laws.

Expanded information on the Company’s projects is described on our website at www.quaterraresources.com or contact Jay Oness at
1-888-456-1112, 604-681-9059 or email:
corpdev@mnxltd.com

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management.

2


EX-99.32 33 exhibit99-32.htm NEWS RELEASE DATED JULY 10, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.32

1100 - 1199 W. Hastings St.
Vancouver, B.C. V6E 3T5
Tel: 604-681-9059
Fax: 604-688-4670
www.quaterraresources.com
   
July 10, 2007                    QTA-TSX. VENTURE
                                                                                           NR-04-07

Quaterra Releases Initial Drill Results From Crestones

VANCOUVER, B.C. - Quaterra Resources Inc. reported today that an initial six-hole, 3,043-meter core drilling program has been completed at its 100%-owned Crestones property in Durango State, Mexico.

The first drill-holes did not intersect the targeted breccia feeder vents. Subsequent field mapping has identified a series of flat-dipping detachment faults that have offset the outcropping geology an estimated 500 meters to the northeast. The postulated location for the breccia feeder vent(s), based on mapping and drill sections, is southwest of the outcropping breccias in a flat area covered with a thin layer of post-mineral arroyo sediment. An additional 2,000-meter drill program is in progress to test this area.

Says Tom Turner, Quaterra’s Manager of Mexican exploration: “We believe that Crestones is a good place to look for an ore deposit. Based on the size and strength of the alteration system and the widespread weak mineralization observed in outcrop and drill core the project merits continued exploration.”

Assay results have been received for the first five holes, and contain a few low-grade intercepts as shown in the table below. All three of the hydrothermal breccia types - the silicified limestone, the quartz porphyry, and the hornfels - contain weakly disseminated sphalerite-galena-sulfosalts. The silica breccia commonly contains minor to 5% disseminated pyrite-marcasite and minor to 5% stibnite. The mixed clast and silicified limestone breccias contain disseminated pyrite-marcasite and minor sphalerite-galena. Coarse sphalerite-galena has been observed in fault gouges. Alteration and mineralization appear to intensify to the southwest.

1



Table 1: Crestones DDH Assay Summary    
               
HOLE          From To Meters Au ppb Ag g/t Pb % Zn %
C-02-06                      222      224                2 <5          30.1    
                 235.8  240.4            4.6 <5          1.84        0.01        0.48
Includes              237.54 237.76        0.22 <5          11.2        0.01        3.85
                       512  515.6            3.6
         119
     52.97        0.74        0.61
Includes              514.65  515.6        0.95 <0.05            156        2.57        1.71
               
C-03-06                        56          58                2 <5      252.7        0.41        1.22
               
C-04-06                      418      420                2 <5                  5        0.01            0.5
                       431      435                4
         407
     13.55        0.07            0.3
Includes                      433      435                2
         629
         22.8        0.13        0.54
                       492      504            12
     78.16
           5.8        0.09        0.62
Includes                      492      502            10
         91.8
         6.36            0.1        0.72
                       362      368                6 <5          5.93        0.13            0.4
Includes                      364      366                2 <5            9.8        0.26        0.66
Includes              
               
C-05-07                      402      408                6
         3.33
         5.56        0.02        0.19
               
Hole C-01-06 does not contain significant values      
Hole C-06-07, C-07-07 pending assays        

Dr. Thomas Patton is the qualified person responsible for the preparation of this release in accordance with NI-43-101.

Core samples were prepped at Inspectorate’s laboratory in Durango, with the pulps analyzed at its main laboratory in Reno, Nevada. Samples were initially run using a 30 element ICP analysis with an aqua regia digestion process. All samples were also analyzed for gold and silver using a 30 gram fire assay with gravimetric finish.

Quaterra Resources Inc. (TSX-V: QTA) is a junior exploration company focused on making significant mineral discoveries in North America. The company uses in-house expertise and its extensive network of consultants, prospectors and industry contacts to identify, acquire and evaluate prospects in mining-friendly jurisdictions with the potential to host large base metal, precious metal or uranium deposits. The company’s preference is to acquire a 100% interest in properties on reasonable terms and maintain this interest through initial evaluation.

On behalf of the Board of Directors,

“Thomas Patton”

Thomas Patton, President, Quaterra Resources Inc.

Expanded information on the company’s projects is described on our website at www.quaterraresources.com or contact Jay
Oness at 1-888-456-1112, 604-681-9059 or email: corpdev@mnxltd.com

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management. Statements contained in this news release that are not historical facts are forward-looking statements as the term is defined in the private securities litigation reform act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from estimated results. Quaterra relies upon litigation protection for forward looking statements.
We seek safe harbour.

2


EX-99.33 34 exhibit99-33.htm NEWS RELEASE DATED JULY 20, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.33

1100 - 1199 W. Hastings St.
Vancouver, B.C. V6E 3T5
Tel: 604-681-9059
Fax: 604-688-4670
www.quaterraresources.com
   
July 20, 2007                    QTA-TSX. VENTURE
                                                                                           NR-05-07

QUATERRA ACCELERATES EXPIRY OF WARRANTS
AND PROVIDES CORPORATE UPDATE

VANCOUVER, B.C. - Quaterra Resources Inc. today gave notice to the holders of non-transferable common share purchase warrants of the Company dated December 20, 2006, of the acceleration of the expiry date of the Warrants from June 21, 2008, to August 20, 2007.

Section 2.2 of Schedule “A” of each Holder’s Subscription Agreement pursuant to which the Warrants were acquired provides that:

Each Warrant will be non-transferable and will entitle the Purchaser to acquire one common share in the capital of the Company as constituted on the date hereof (each such common share referred to as a "Warrant Share") at a price of $2.25 per Warrant Share at any time on or before 4:00 p.m. (Vancouver time) on the “Expiry Date”, being the earlier of i) the first business day that is 18 months after the Closing Date (as defined below) and ii) if the Company’s shares trade at a closing price of greater than $3.00 per share for a period of 20 consecutive trading days at any time after six months from the Closing Date and the Company accelerates the date upon which the Warrants will expire by providing notice to the holders thereof, the first business day that is 30 days after the date on which such notice is given by the Company.

The Company’s shares have traded at a closing price of greater than $3.00 per share for a period of 20 consecutive trading days for the period beginning June 21, 2007, and ending July 19, 2007. The first business day that is 30 days after the date on which this Notice is given is August 20, 2007.

Notice is hereby given, therefore, that the Company accelerates the date upon which the Warrants will expire from June 21, 2008, to August 20, 2007, after which time the Warrants will be void and of no value.

Holders of Warrants are advised to attach this Notice to the Certificates representing their Warrants. If a Holder wishes to exercise a Warrant on or before 4:00 p.m. (Vancouver time) on August 20, 2007, such notice should refer to the Certificate representing such Holder’s Warrants and comply with the exercise procedure therein provided for.

Mr. Tracy Stevenson appointed to Board

The Company also announces the appointment by shareholder vote at the Company’s Annual General Meeting on July 17, 2007, of Mr. Tracy Stevenson to Quaterra’s Board of Directors. Mr. Stevenson is a senior mining executive with experience and expertise in the areas of finance; mergers and acquisitions; strategic planning; corporate governance, audit and administration; and, information systems and technology. Most recently, Mr. Stevenson was Global Head of Information Systems and Technology at Rio Tinto PLC, the world’s second largest mining company. Mr. Stevenson took on the role of CIO in 2006 as part of a group strategy to consolidate, standardize and extend the footprint of the mining company’s business services globally. From 2000 to 2006, he was Global Head of Business Process Improvement at Rio Tinto. Mr. Stevenson has also served as Interim CEO of Quadrem International Holdings Ltd., Executive Vice President Financial Services and Strategy of Comalco Ltd, and Senior Vice President Finance and Control of Kennecott Corporation. He has a B.S. Accounting Magna Cum Laude from the University of Utah and is a member of the Advisory Board of the University of Utah David Eccles School of Business. He is a former member of the Westminster College Board of Directors.

1


Stock Option Plan

Also at the Company’s AGM, shareholders voted in favour of the proposed 2007 Rolling Incentive Stock Option Plan which allows for a maximum amount of shares to be issued equal to 10% of the number of issued shares at the date of grant of any option. The Plan is subject to TSX Venture Exchange approval. Under the Plan, and subject to regulatory approval, the Company proposes to issue 2,031,000 stock options to various directors, officers, employees, and consultants at an exercise price of $3.33. All Stock options issued are subject to a four month hold period.

Quaterra Resources Inc. (TSX-V: QTA) is a junior exploration company focused on making significant mineral discoveries in North America. The company uses in-house expertise and its extensive network of consultants, prospectors and industry contacts to identify, acquire and evaluate prospects in mining-friendly jurisdictions with the potential to host large base metal, precious metal or uranium deposits. The company’s preference is to acquire a 100% interest in properties on reasonable terms and maintain this interest through initial evaluation.

ON BEHALF OF THE BOARD,

“Thomas Patton”

Thomas C. Patton,
President

Expanded information on the company’s projects is described on our website at www.quaterraresources.com or contact Jay
Oness at 1-888-456-1112, 604-681-9059 or email: corpdev@mnxltd.com

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management.

2


EX-99.34 35 exhibit99-34.htm NEWS RELEASE DATED MAY 29, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.34

1100 - 1199 W. Hastings St.
Vancouver, B.C. V6E 3T5
Tel: 604-681-9059
Fax: 604-688-4670
www.quaterraresources.com
   
May 29, 2007                    QTA-TSX. VENTURE
                                                                                           NR-03-07

Quaterra engages the services of Roman Friedrich & Company Ltd.

Quaterra Resources Inc. (the “Company”) has engaged Roman Friedrich & Company Ltd. of Vancouver, BC, (“RFC”) to provide financial and advisory services to the Company for an initial term of 12 months, subject to extension or earlier termination. The Company has agreed to pay RFC a retainer of $15,000 per month, payable as to $7,500 in cash and the balance in common shares of the Company at the discounted market price of such shares (as determined in accordance with the policies of the TSX Venture Exchange) at each quarter end during the term of the engagement, subject to TSX Venture Exchange approval of each share issuance. 7,840 common shares have been issued in respect of the first quarter and are subject to a hold period expiring September 1, 2007. Any subsequent quarterly share issuances will be subject to a hold period expiring 4 months and a day after the date of their issuance.

Pursuant to the engagement, the Company has also agreed, subject to TSX Venture Exchange approval, to pay RFC a success fee if the Company enters into and closes a merger, acquisition, sale, joint venture, asset sale, asset purchase or vend-in transaction otherwise than in the ordinary course of the Company’s business during the term of the engagement. Such success fee is to be based on a sliding scale with reference to the value of such a transaction to a maximum agreed amount. The Company has the option of paying up to 50% of the success fee in shares at the discounted market price of such shares.

-30-

On behalf of the Board,

“Thomas Patton”

Dr. Thomas Patton
President, Quaterra Resources Inc.

Expanded information on the company’s projects is described on our website at www.quaterraresources.com or
contact Jay Oness at 1-888-456-1112, 604-681-9059 or email: corpdev@mnxltd.com

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management. Statements contained in this news release that are not historical facts are forward-looking statements as the term is defined in the private securities litigation reform act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from estimated results. Quaterra relies upon litigation protection for forward looking statements.
We seek safe harbour.

1


EX-99.35 36 exhibit99-35.htm NEWS RELEASE DATED MAY 1, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.35

1100 - 1199 W. Hastings St.
Vancouver, B.C. V6E 3T5
Tel: 604-681-9059
Fax: 604-688-4670
www.quaterraresources.com
   
May 1, 2007                    QTA-TSX. VENTURE
                                                                                           NR-02-07

Quaterra Acquires Arimetco Assets At Yerington, Nevada

VANCOUVER, B.C. - Quaterra Resources Inc. reported today that it has received the approval of the appropriate U.S. court to the acquisition by a subsidiary of Quaterra of all assets of Arimetco, Inc., a Nevada corporation, in the Yerington Mining District, Lyon County, Nevada.

Subject to the approval of the TSX Venture Exchange, the purchase price comprises US$500,000 cash, 250,000 shares of Quaterra common stock and a 2% net smelter return royalty capped at US$7.5 million dollars on production from any claims owned by Quaterra in the Yerington and MacArthur mine areas. Quaterra may terminate the transaction at any time during a 180-day review period if it is dissatisfied with the condition of the property or fails to obtain requested environmental clearances for past mining-related activities. Under certain circumstances, the review period may be extended for additional successive 120 day periods.

The Anaconda Copper Company conducted open pit mining at Yerington from 1953 to 1978, producing 1.75 billion pounds of copper from oxide and sulfide ores. Arimetco subsequently used the site for heap leaching of Yerington dumps and ore from the nearby MacArthur mine from 1989 to 2000. Quaterra plans to use the site as the base for its district-wide activities, and will explore the property as part of its ongoing exploration drilling program at its 100%-owned MacArthur property.

“The potential acquisition of this property in the center of a prolific copper district provides us not only with additional exploration targets but also will provide flexibility when considering production alternatives,” says Thomas Patton, Quaterra’s President and CEO.

The MacArthur mine is a fully stripped oxide copper deposit five miles north of the Yerington mine. It was formerly operated by Arimetco and has an historic resource of 29 million tons grading 0.28% copper, including 13 million tons of +0.40% copper. Quaterra recently commenced drilling at MacArthur to confirm the historic resource and to evaluate potential for a larger oxide deposit and possible buried sulfide system beyond the current pit boundaries.

Quaterra is a junior exploration company focused on making significant mineral discoveries in North America. The Company uses in-house expertise and its pipeline of consultants, prospectors and industry contacts to identify, acquire and evaluate prospects in mining friendly jurisdictions with the potential to host large base, precious metal or uranium deposits. The Company's preference is to acquire a 100% interest in properties through initial evaluation.

Dr. Thomas Patton is the qualified person responsible for the preparation of this release.

On behalf of the Board of Directors,
“Thomas Patton”
Thomas Patton, President, Quaterra Resources Inc.

Expanded information on the company’s projects is described on our website at www.quaterraresources.com or contact Jay
Oness at 1-888-456-1112, 604-681-9059 or email: corpdev@mnxltd.com

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management. Statements contained in this news release that are not historical facts are forward-looking statements as the term is defined in the private securities litigation reform act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from estimated results. Quaterra relies upon litigation protection for forward looking statements.
We seek safe harbour.

1


EX-99.36 37 exhibit99-36.htm NEWS RELEASE DATED MARCH 5, 2007 Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.36

1100 - 1199 W. Hastings St.
Vancouver, B.C. V6E 3T5
Tel: 604-681-9059
Fax: 604-688-4670
www.quaterraresources.com
   
March 5th , 2007                    QTA-TSX. VENTURE
                                                                                           NR-01-07

Quaterra Completes Airborne Geophysical Survey and Expands Land Position in the Arizona Strip Uranium District

Quaterra Resources Inc. reported today that Geotech Ltd. has completed 4,900 line-kilometers of airborne time-domain electromagnetics (VTEM) and magnetic surveying over the company’s Arizona Strip uranium properties. The survey was deisnedto identify new targets with geophysical signatures that are similar to previously recognized breccia pips.

Preliminary results of the survey are encouraging. Not only do known breccia pipes appear as well delineated anomalies, but the survey identified more than 200 moderate to high priority targets with similar geophysical signatures. Joe Inman, Quaterra’s consulting geophysicist, and Condor Consulting Inc., recognized experts in the field of airborne electromagnetics, have been retained to perform a detailed interpretation of the survey results and provide further prioritization of the targets.

Quaterra is the first company to extensively test the VTEM system in the district. The Company began the geophysical survey in December 2006. The program was coupled with helicopter-assisted blanket staking of more than 5,000 new claims that have been selectively perfected to cover most of the high priority anomalies in the center of the uranium district.

“The program has added a new dimension to exploration on the Arizon Strip,” said VP Exploration Eugene Spiering.. “The ability to integrate specific geophysical anomalies with favourabgle surface geology will focus our exploration and give Quaterra a commanding presence in the district, both in terms of land and potential for new discovery.”

Rotary drilling on Quaterras breccia pipe targets began in December 2006 by Barbie Drilling Inc. The program will continue for at least the next six months. Initial drilling has been limited to short stratigraphic holes designed to locate the center or throat of potential breccia pipes. Deep drill holes will be systematically completed to evaluate mineralization in the structures as targets become defined and permitted. At least 8 targets are expected to be tested by deep holes in the current program.

The Arizona Strip was one of the most profitable and highest grade uranium districts in the United States during the period from 1980 – 1990. The district produced more than 19 million pounds U3O8 from 7 breccia pipes at an average grade of 0.647% U3O8 and was one of the last hard rock uranium producers in the US during the price decline of the late 1980s.

-30-

Dr. Thomas Patton is the qualified person responsible for the preparation of this release.

On behalf of the Board of Directors,
“Thomas Patton”

Thomas Patton, President, Quaterra Resources Inc.

1


Expanded information on the company’s projects is described on our website at www.quaterraresources.com or
contact Jay Oness at 1-888-456-1112, 604-681-9059 or email: corpdev@mnxltd.com

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management. Statements contained in this news release that are not historical facts are forward-looking statements as the term is defined in the private securities litigation reform act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from estimated results. Quaterra relies upon litigation protection for forward looking statements.
We seek safe harbour.

2


EX-99.37 38 exhibit99-37.htm INDEPENDENT TECHNICAL REPORT FOR THE NIEVES SILVER PROJECT Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.37

INDEPENDENT TECHNICAL REPORT

NIEVES SILVER PROJECT

ZACATECAS STATE, MEXICO

VOLUME I

QUATERRA RESOURCES INC.
 
1185 West Georgia Street, Suite 1550
Vancouver, British Columbia, Canada
V6E 4E6
 
and
 
BLACKBERRY VENTURES 1 LLC.
 
30 Rockefeller Plaza, Suite 4250,
New York, New York 10112
 
November 15th, 2006

Prepared By:
Caracle Creek International Consulting Inc.
Suite 203 - 210 Cedar Street
Sudbury, Ontario, Canada P3B 1M6
+1.705.671.1801

Stephen Wetherup, B.Sc., P.Geo.



Quaterra Resources Inc. & Blackberry Ventures 1, LLC.
Independent Technical Report – Nieves, Mexico

TABLE OF CONTENTS

VOLUME I  
         
SUMMARY 4
1.0 INTRODUCTION AND TERMS OF REFERENCE 8
  1.1  Terminology and Unit Conversion 8
2.0 PROPERTY DESCRIPTION AND LOCATION 9
  2.1  Potential Ecological and Social Liabilities 13
3.0 RELIANCE ON OTHER EXPERTS 13
4.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY 14
5.0 EXPLORATION HISTORY 18
  5.1  1560-1978 Early Work History 18
  5.2  1994-1996 Kennecott Exploration 19
  5.3  1997-1998 Western Copper 20
  5.4  1999-2000 Quaterra 20
6.0 GEOLOGICAL SETTING 21
  6.1  Regional Geology 21
  6.2  Property Geology 22
     6.2.1 Mesozoic Rocks 22
     6.2.2 Tertiary Clastic Rocks 24
     6.2.3 Tertiary Volcanic Rocks 24
     6.2.4 Structural Geology 24
7.0 DEPOSIT TYPES 25
  7.1 Epithermal High-Grade Silver Veins 25
  7.2 Other Deposit types in the District 28
8.0 MINERALIZATION 29
  8.1 Alteration and Styles of Mineralization 29
     8.1.1 Jasperoid Structures 29
     8.1.2 Ferroan carbonate veins 29
     8.1.3 Carbonate-quartz-sulphide veins 30
     8.1.4 Calcite-manganese-oxide breccias and veins 30
  8.2 Mineralized Zones 30
     8.2.1 California Vein System 30
     8.2.2 Concordia-San Gregorio-Dolores Vein System 31
     8.2.3 Santa Rita Vein System 31
     8.2.4 Manganese Mineralization 32
9.0 SITE VISIT 32
10.0 EXPLORATION 34
  10.1 Phase I 34
     10.1.1 Base Map 34
     10.1.2 Lines for geophysical survey 34
     10.1.3 Location of previous drill holes 35
     10.1.4 Geophysical Surveying 35
     10.1.5 Geology 36
     10.1.6 Geochemical sampling 37
  10.2 Phase II 37
  10.3 Phase III 37

Caracle Creek International Consulting Inc.
QTA06-NS
November 15th, 2006

1



Quaterra Resources Inc. & Blackberry Ventures 1, LLC.
Independent Technical Report – Nieves, Mexico

11.0 DIAMOND DRILLING 39
  11.1 Phase I Drilling 39
    11.1.1 California Vein System Results 39
    11.1.2 Concordia-San Gregorio-Dolores Vein System Results 39
    11.1.3 Santa Rita Vein System Results 41
  11.2 Phase II Drilling 41
    11.2.1 California Vein System Results 42
    11.2.2 Concordia-San Gregorio-Dolores Vein System Results 42
    11.2.3 Santa Rita Vein System Results 44
  11.3   Phase III Drilling 45
    11.3.1 Concordia-San Gregorio-Dolores Vein System Results 46
    11.3.2 Santa Rita Vein System Result 48
    11.3.3 Orion Vein 48
12.0 SAMPLING METHOD AND APPROACH 48
13.0 SAMPLE PREPARATION, ANALYSES AND SECURITY 48
14.0 DATA VERIFICATION 49
15.0 ADJACENT PROPERTIES 51
16.0 MINERAL PROCESSING AND METALLURGICAL TESTING 51
17.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATE 51
18.0 INTERPRETATIONS AND CONCLUSIONS 52
19.0 RECOMMENDATIONS 53
20.0 REFERENCES 55
         
         
LIST OF FIGURES
Figure 2-1: Location of the Nieves Property and local infrastructure. 10
Figure 2-2: Concession map of the Nieves Property. 11
Figure 4-1: Major geological and physiographical belts and mining districts within Mexico and the location of the Nieves Property. 16
Figure 4-2: Photo of the Nieves Property as seen from the paved road on the north end of the Property 17
Figure 4-3: Photo of the north-northwest trending ridge underlain by Tertiary felsic volcanic rocks on the east side of the Nieves Property 17
Figure 6-1: Nieves Property geology and drill collar plan. Areas and vein systems referenced in the text are also indicted 23
Figure 7-1: Schematic cross-section of typical rift related low-sulphidation system (after Corbett, 2002) 27
Figure 9-1: Photos of core logging and storage facilities on the Nieves Property 33
Figure 10-1: Plan map of geophysical grid established on the Nieves Property 38
Figure 14-1: Photos of core intervals selected for data verification re-assay. 50
         
         
LIST OF TABLES
Table 2-1: Nieves Property concession summary data 9
Table 2-2: Most recent tax assessment to Minera Agua Tierra on the Nieves concessions 12
Table 5-1: Santa Rita Resources calculated by CRM (Cavey, 1999). 19
Table 5-2: Diamond (DDH) and reverse-circulation (RC) drilling highlights and summary during work programme from 1998-2000 21
Table 7-1: Stratigraphy of the Fresnillo District (modified after Ruvalcaba-Ruiz et al., 1988; Wendt, 2002) 26

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Table 7-2: Major Altiplano Ore Deposits (after Wendt, 2002) 28
Table 10-1: Lengths of geophysical grid established on the Nieves Property 35
Table 10-2: Additional lines surveyed by ground magnetics. 36
Table 10-3: Interpreted length from CSAMT survey and summary of drill testing of structures on the Property (after Inman, 2005). 36
Table 11-1: Summary of diamond drill holes completed during Phase I. 39
Table 11-2: Phase II drill collar summary. 41
Table 11-3: Highlights from Phase II drill programme in the Concordia-San Gregorio-Dolores vein area 43
Table 11-4: Highlights from Phase II drilling in the Santa Rita area 45
Table 11-5: Phase II drill collar summary. 45
Table 11-6: Highlights from the Phase III drill programme. 47
Table 14-1: Comparison of Quaterra reported assays and CCIC check assays of identical intervals 50
Table 19-1: Recommended budget for the next phase of exploration on the Nieves Property (with logistical costs included such as accommodation, board, travel etc…). 54
     
     
APPENDICES
     
Appendix 1: Author Certificate of Qualifications and Certificate of Authorization  
     
Appendix 2: Glossary of Terms  
     
Appendix 3: Exploration Permits and Mexican Mining Law  
     
Appendix 4: Joint Venture Agreement between Quaterra and Blackberry  
     
Appendix 5: Drill Logs, Vertical Sections and Assays  
     
     
VOLUME II
     
Appendix 6: Assay Certificates and Analytical Methods from ALS Chemex Laboratories and Summary of Surface Sampling Programme
     
Appendix 7: Site Visit Summary Sample Descriptions, Assays, Assay Certificates and Analytical Methods.
     
 Appendix 8: Geophysical maps and sections.  

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SUMMARY

Caracle Creek International Consulting Inc. (“CCIC”) was contracted by Quaterra Resources Inc. (“Quaterra”), a Toronto Stock Exchange listed company, and Blackberry Ventures 1 LLC. (“Blackberry”), a privately held company, to conduct a site visit and prepare a NI43-101 compliant Independent Technical Report (the "Report") on their Nieves Property (the “Property”) in Zacatecas State, Mexico. This Report is intended to provide an overview of the results from the work programmes conducted by Quaterra and Blackberry from 2002 to 2006.

The Nieves Property is centred at 23o58’N latitude, 103o03’W longitude within Zacatecas State, Mexico approximately 150 kilometres northwest of the state capital of Zacatecas and 90 kilometres north of the mining community of Fresnillo. The Nieves Property comprises 15 separate exploitation claims/concessions in the State of Zacatecas Mexico. These claims are jointly owned by Blackberry Ventures 1, LLC and Quaterra Resources Inc. Net Smelter Return Royalties (“NSR”) remain outstanding on each of the concessions to Kennecott Exploration and a group consisting of Abelardo Garza Hernandez, Noel McAnulty and Bill Shafer. The 2% NSR owed to Kennecott is uncapped but NSR owed to Garza, McAnulty and Shafer may be purchased in full for US$2,000,000.

The first discovery on the area covered by the Nieves Property was the Santa Rita Vein in 1560 by Spanish explorers. Soon after in 1574 the Concordia Vein was discovered. The Santa Rita and Concordia-San Gregorio-Dolores Veins were the focus of mining by the Spanish and Mexican miners until 1880. Between 1880 and 1910 several foreign mining companies operated mining operations on the two main vein systems with the only documented mine working plans available on the Concordia Vein. Production is thought to have been less than 50,000 tonnes for the entire Nieves District up until 1910. From 1910 to 1978 the only appreciable mining occurred on the Santa Rita Vein where a 100 ton/day mill was built and operated until 1978. There are no records for this mining.

In the early 1990’s, Abelardo Garza Hernandez, Noel McAnulty and Bill Shafer assembled a land position in the area and presented it to Kennecott Exploration who signed the lease in January 1995. Kennecott worked on the Nieves Property from 1994-1996 where they completed geological mapping, satellite image analysis, soil geochemical surveys, rock geochemical sampling, and 1532.5 m of reverse-circulation drilling. Western Copper


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optioned the ground from Kennecott in 1997 and completed a work programme which included 921 m of drilling between 1997 and 1998. Quaterra purchased a 100% interest in the property from Western in 1999 and completed an additional 10 drill holes totalling 3506.57 m. Results form this recent exploration work identified the presence of a large hydrothermal alteration system occurring throughout the Nieves Property and drill testing of the previously mined vein systems showed them to have significant Ag-Au-Pb-Zn grades and extended 100’s of meters beyond where they were mined along strike and to depth.

The Nieves Property lies on the western flank of the Central Altiplano in Mexico, just east of the Sierra Madre Occidental ranges. Basement rocks underlying the western Altiplano are a late Palaeozoic to Mesozoic assemblage of marine sedimentary and submarine volcanic rocks belonging to the Guerrero Terrane that were obducted/overthrust onto older Palaeozoic and Precambrian continental rocks during the early Jurassic. These were then overlapped by a Jura-Cretaceous epi-continental marine and volcanic arc sequence. Mesozoic marine rocks are host to the San Nicolas VMS deposit and Francisco I. Madero Sedex deposit. Unconformably overlying the Mesozoic basement rocks in the western Altiplano are units from the late Cretaceous to Tertiary, Sierra Madre Occidental magmatic arc.

Rocks underlying the Nieves Property are of two distinct ages (1) Mesozoic inter-bedded argillite and greywacke interpreted as belonging to the Caracol Formation overlain by (2) Tertiary rhyolite volcaniclastic rocks separated by a presumably Tertiary age basal conglomerate and conglomeratic sandstone sequence.

Within the Altiplano Region of Mexico, epithermal silver veins are the most dominant deposit type with such world-class examples as Pachuca, Zacatecas, Fresnillo, and Guanajuato to name a few. The nearest of these world class examples is the Fresnillo Deposit owned and operated by Peñoles which lies 90 km to the south of the Nieves Property. Furthermore, the geology of both the Fresnillo and Nieves Districts are similar and silver mineralization in both areas is related to Tertiary epithermal fluids. As such, Fresnillo styles of mineralization are the primary targets for exploration on the Nieves Property.

On the Nieves Property there are three major east to east-northeast striking silver vein systems, the California, Concordia-San Gregorio-Dolores, and Santa Rita veins systems. In addition to these silver mineralized systems is an east-northeast to east-southeast striking manganese breccia system hosted by Tertiary rhyolitic rocks on the east side of the Property

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and numerous other east to east-northeast trending geophysical anomalies and alteration zones that have yet to be explored.

Together, Quaterra and Blackberry have completed three work programmes on the Nieves Property from October, 2003 to June, 2006 and are named Phases I, II, and III. Phase I of the exploration programmes on Nieves began in October 2003 and was completed as of August 2004 and included air photo interpretation and cartography, establishing a property wide grid and brushing out the lines, CSAMT and IP geophysical surveying, surveying of previous drill collars, geochemical sampling and diamond drilling. Phase II exploration work began in September, 2004 and was completed by April, 2005. It consisted of drilling 11 holes totalling 5170.92 m. Phase III exploration work began in June, 2005 and ended in May, 2006. This phase of the work programme consisted of eight drill holes totalling 5894.07 m.

CSAMT surveying contracted by Quaterra has delineated the presence of six high-priority conductor/vein system targets which require drill testing. In addition to the high-priority targets, CSAMT data suggests that over a dozen secondary conductors/vein systems occur throughout the Nieves Property of which few have been tested by drilling. Most of the drilling during Phases I, II and II was conducted in the Concordia-San Gregorio-Dolores vein system, in an effort to better understand and expand the extents of this system. However, there are a plethora of additional targets yet to be drill tested.

Mineralization on the Nieves Property as indicated by the exploration work conducted thus far appears to be of moderate grade for narrow vein type systems (100-200 g/t on average) and these individual veins are generally less than 1 m thick. Generally, these grades and widths would be considered marginally economic however these results are not representative of the high-grade shoots historically mined (4065 g/t Ag reported in the Concorida Vein; section 5.1) mainly because the drilling conducted by Quaterra has focussed on establishing the strike and depth extents of the various vein systems and not toward defining the high-grade shoots. QTA-19 was drilled directly below the historical mine working and returned a similar 4020 g/t Ag over 1.5 m confirming the grades reported by the historical mining records. Even though the Quaterra drilling programmes have been expanding the known strike and depth extents of the documented vein systems, specifically the Concordia-San Gregorio-Dolores vein system, the drilling to date has not fully tested the Concordia-San Gregorio-Dolores vein system nor the other vein systems on the Property (i.e. the Santa Rita, Orion, or California veins are only tested by four, one and three holes respectively). Therefore, in CCIC’s

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opinion there are abundant drill targets remaining on the Nieves Property and excellent potential to find additional high-grade silver shoots within the known veins systems.

Furthermore, there are intriguing low-grade stockwork zones that appear to show that this epithermal system was not channelled along discrete veins but rather along bifurcated and complex vein systems with lower overall grade but significantly greater widths. Quaterra has just begun drill testing these low-grade vein systems subsequently; it is CCIC’s opinion that there is significant potential to identify low to moderate-grade bulk-tonnage silver-lead-zinc zones on the Nieves Property.

CCIC recommends that a structural study, 3-D modelling and data compilation (including satellite image analyses) be conducted to develop an improved model of the style and distribution of the mineralization and alteration on the Nieves Property. Once completed an aggressive drilling programme consisting of approximately 10,000 m is suggested to continue to test drill targets and to infill zones required to enable resource calculations to be made on the Concordia-San Gregorio-Dolores vein system.

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1.0 INTRODUCTION AND TERMS OF REFERENCE

Caracle Creek International Consulting Inc. (“CCIC”) was contracted by Quaterra Resources Inc. (“Quaterra”), a Toronto Stock Exchange listed company, and Blackberry Ventures 1 LLC. (“Blackberry”), a privately held company, to conduct a site visit and prepare a NI43-101 compliant Independent Technical Report (the "Report") on their Nieves Property (the “Property”) in Zacatecas State, Mexico. This Report is intended to provide an overview of the results from the work programmes conducted by Quaterra and Blackberry from 2002 to 2006.

The author, Stephen Wetherup, visited the Property on October 3rd and 4th, 2006 where he was shown most of the drill collar locations, most of the major geological features and units, and toured the core cutting, logging, and storage facilities. Representative check samples were taken from intervals of reported mineralized zones from four different holes and representing the various styles of mineralization and the three different areas of mineralization on the Property.

Most of the information used in the preparation of this Report has been provided by Quaterra, Blackberry and their representatives.

  1.1 TERMINOLOGY AND UNIT CONVERSION

Before ~1980 in Canada the Imperial system was the primary system of measure and length often expressed in feet and tenths of feet, volume is expressed as cubic feet, mass expressed as short tons, and nickel and copper grades are generally expressed as percent. The precious metals grades are generally expressed as ounce per ton but may also be in parts per billion or parts per million. Conversions from the Imperial system to the SI or metric system used in Canada are provided below and quoted where practical. Metals and minerals acronyms in this report conform to mineral industry accepted usage and are listed in Appendix 2. Unless otherwise noted, dollars are expressed in Canadian currency (CAD).

Conversion factors utilized in this report include: 1 troy ounces/ton = 34.29 gram/ton; 0.029 troy ounces/ton = 1 gram/ton; 1 troy ounce/tonne = 31.10 gram/tonne; 0.032 troy ounces/tonne = 1 gram/tonne; 1 gram = 0.0322 troy ounces; 1 troy ounce = 31.104 grams; 1 pound = 0.454 kilograms; 1 foot = 0.3048 metres; 1 mile = 1.609 kilometres; 1 acre = 0.405

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hectares; and, 1 sq mile = 2.59 square kilometres. The term gram/tonne or g/t is expressed as “gram per tonne” where 1 gram/tonne = 1 ppm (part per million) = 1000 ppb (part per billion). Other abbreviations may include ppb = parts per billion; ppm = parts per million; opt = ounce per short ton; g/t=grams per tonne, Moz = million ounces; Mt = million tonne; t = tonne (1000 kilograms); and, st = short ton (2000 pounds). A glossary of geological terms is provided in Appendix 2.

2.0 PROPERTY DESCRIPTION AND LOCATION

The Nieves Property is centred at 23o58’N latitude, 103o03’W longitude within Zacatecas State, Mexico approximately 150 kilometres northwest of the state capital of Zacatecas and 90 kilometres north of the mining community of Fresnillo (Figure 2-1).

The Nieves Property comprises 15 separate exploitation claims/concessions in the State of Zacatecas Mexico (Figure 2-2). These claims are owned by Minera Agua Tierra, S.A. de C.V. (“Minera”), a Mexican company owned by Quaterra Resources Inc. Quaterra and Blackberry Ventures 1, LLC have subsequently entered into an option agreement where by they jointly own the Nieves Property. A summary of the concession information is provided in Table 2-1 including the Net Smelter Return Royalties (“NSR”) that remain outstanding on each of the concessions to Kennecott Exploration and a group consisting of Abelardo Garza Hernandez, Noel McAnulty and Bill Shafer. The 2% NSR owed to Kennecott is uncapped but NSR owed to Garza, McAnulty and Shafer may be purchased in full for US$2,000,000.

Table 2-1: Nieves Property concession summary data.

Claim Title File No. Area (Ha) Date Issued Expiry % NSR % NSR Total
          Date to GSM to MK NSR
San Gregorio I 209552 8/1.3/798 944.4291 03-Aug-99 02-Aug-49 3 2 5
Lalos 210858 8/1.3/799 30.1924 16-Dec-99 15-Dec-49 3 2 5
Lalos II 207131 8/1.3/800 3.9268 29-Apr-98 28-Apr-48 3 2 5
Lalos III 206550 8/1.3/801 0.7370 23-Jan-98 22-Jan-48 3 2 5
Elvita 206549 8/1.3/797 92.7895 23-Jan-98 22-Jan-48 3 2 5
Lalos IV 206727 8/1.3/802 5.6194 12-Mar-98 11-Mar-48 3 2 5
Orion 211168 8/1.3/782 21.8825 11-Apr-00 10-Apr-50 3 2 5
Nieves F. I (Int) 220487 8/1.3/1362 3512.2773 12-Aug-03 11-Aug-53 3 2 5
Nieves F. I (Ext) 220487 8/1.3/1362       1 2 3
Nieves F. II 201695 92/9579 10.0043 11-Oct-95 10-Oct-45 3 2 5
Nieves 2 220519 8/1.3/1366 59.2114 14-Aug-03 13-Aug-53 1 2 3
Nieves F. III 220321 8/1.3/1365 6.3400 11-Jul-03 10-Jul-53 3 2 5
Santa Rita 219398  8/1/1462 24.0000 04-Mar-03 03-Mar-53 1 2 3
Nieves F. IV 223616  8/1/1631 3.7494 21-Jan-05 20-Jan-55 1 2 3
Nazaret 180574 321.1-9/492 7.1302 13-Jul-87 12-Jul-37 3 0 3
Dolores 191776 321.1-9/773 61.0047 19-Dec-91 18-Dec-41 3 0 3
Subtotal     4783.294          

GSM =Garza-Shafer-McAnulty, MK=Minera Kennecott

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Prior to December 2005, under Mexican Mining Law, Mexican companies and individuals may claim mineral exploration concessions in available areas and may hold them for a period of 6 years, provided that they pay the applicable taxes and provide proof of exploration work. Since, December 2005 the Mexican Government has done away with the “exploration” and “exploitation” designations and now all claims are “mining concessions” that are good for 50 years (and renewable for 50 more) provided the work and taxes requirements are kept up to date. Recent tax payments for each of the concessions are listed in Table 2-2 with taxes payable every six months.

 Table 2-2: Most recent tax assessment to Minera Agua Tierra on the Nieves concessions.  
Obligation
Date

Claim
Title
No.

File No.
Area
(Hectares)
Tax Rate
(Pesos)
Cost
(Pesos)
Cost
(US$)
01/01/2007 SAN GREGORIO I 209552 8/1.3/798 944.429 $27.51 $25,982 $2,406
01/01/2007 LALOS 210858 8/1.3/799 30.192 $27.51 $832 $77
01/01/2007 LALOS II 207131 8/1.3/800 3.927 $55.01 $217 $20
01/01/2007 LALOS III 206550 8/1.3/801 0.737 $55.01 $42 $4
01/01/2007 ELVITA 206549 8/1.3/797 92.790 $55.01 $5,105 $473
01/01/2007 LALOS IV 206727 8/1.3/802 5.619 $55.01 $310 $29
01/01/2007 ORION 211168 8/1.3/782 21.883 $27.51 $603 $56
01/01/2007 NIEVES F. II 201695 92/9579 10.004 $96.83 $970 $90
01/01/2007 SANTA RITA 219398 8/1/1462 24.000 $13.68 $329 $30
01/01/2007 NIEVES F. I 220487 8/1.3/1362 3512.277 $6.61 $23,217 $2,150
01/01/2007 NIEVES F. III 220321 8/1.3/1365 6.340 $6.61 $43 $4
01/01/2007 NIEVES 2 220519 8/1.3/1366 59.211 $6.61 $392 $36
01/01/2007 NIEVES F. IV 223616  8/1/1631 3.749 $6.61 $26 $2
01/01/2007 DOLORES 191776 321.1-9/773 61.005 $96.83 $5,908 $547
01/01/2007 NAZARET 180574 321.1-9/492 7.130 $96.83 $691 $64
       Subtotal 4783.294   $64,668 $5,988

Quaterra is now obligated to maintain their concessions by paying the applicable taxes (~$3500.00 CAD every 6 months) and providing proof of work done with statistical, technical and economic data on any mining operations. The amount of work and taxes required by the Mineral Resources Council is updated annually to maintain constant peso amounts. Appendix 3 contains a summary of the Mexican Mining Law as provided by the Mexican Ministry of the Economy web site.

Quaterra and Blackberry are joint venture partners whereby each owns a 50% interest in the Nieves Property pursuant of an option agreement they entered into on April 10, 2003 (the “Option Agreement”). As part of this Option Agreement Quaterra and Blackberry created the limited partnership agreeing to advance funding in two stages of US$750,000 each. After

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expenditure of the initial tranche of US$750,000, Blackberry advanced the second tranche for further Nieves development and earned a 50% interest in the project. As of May 2005, the partners were in the process of formalizing the joint venture.

  2.1 POTENTIAL ECOLOGICAL AND SOCIAL LIABILITIES

The Nieves Property encompasses three silver veins systems (the Concordia-San Gregorio-Delores, the Santa Rita, and California vein systems) that have been the focus of historical mining activity, much of which is poorly documented. These previous mining operations were conducted by private miners. Open shafts and pits are abundant unmarked and in some cases completely hidden and are not fenced off. More importantly, the mining operations on the Santa Rita vein area left abundant stibnite rich tailing open on the surface, where local farming and ranching operations are ~ 500 m from dumps and tailings ponds. As these were pre-existing conditions prior to Quaterra acquiring the Nieves Property it is unlikely that the economic burden to clean up these problems will be placed upon Quaterra. However it is highly recommended that Quaterra document all of the potential ecological liabilities, including ground water testing, preferably by an independent company specializing in environmental assessment and mining reclamation, before conducting further exploration work.

Ecological concerns on the Property with regard to exploration work are minimal as the areas of primary mineral exploration interest are generally flat-lying, sparsely populated with a few cultivated areas and the remaining land area used for the periodic grazing of livestock. Minimal rehabilitation measures such as stabilizing slopes and planting local flora (“Buffell” grass) in areas of disturbance is usually sufficient to satisfy the ecological authorities, the Instituto de Investigaciones Forestales Agricolas y Pecuarias (INIFAP), a government office based in Calera, Zacatecas. There is little to no surface water for exploration or mining activities but an abundance of ground water exists and the ownership of mineral rights generally allows access to ground water as needed.

3.0 RELIANCE ON OTHER EXPERTS

CCIC have conducted this independent technical assessment in accordance with the methodology and format outlined in NI43-101, companion policy NI43-101CP and Form 43-101F1. This Report is directed solely for the development and presentation of data with

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recommendations to allow for Quaterra and Blackberry to reach informed decisions. This Report was prepared by Stephen Wetherup, P.Geo, General Manger of CCIC, Canada. The information, conclusions and recommendations contained herein are based largely on a review of published geological reports, a site visit, company reports and data provided by Quaterra Resources Inc. and Blackberry Ventures 1, LLC. CCIC have assumed that the reports and other data listed in the “References” section of this Report are substantially accurate and complete.

Information on mineral title and ownership and status of claims as outlined in this Report were obtained from Quaterra and its representatives.

All relevant information on the Property presented in this Report is based on data derived from reports written by geologists and/or engineers, whose professional status may or may not be known in relation to the NI43-101 definition of a Qualified Person. CCIC have made every attempt to accurately convey the content of those files, but cannot guarantee either the accuracy or validity of the work contained within those files. However, CCIC believe that these reports were written for internal purposes only, with the objective of presenting the results of the work performed without any promotional or misleading intent. In this sense, the information presented should be considered reliable, unless otherwise stated, and may be used without any prejudice by Quaterra.

CCIC are not responsible for any omissions in, and CCIC do not guarantee, and make no warranty as to the accuracy of, information received from outside sources. CCIC have made all reasonable efforts to outline any land tenure or environmental issues relating to the Property and CCIC disclaim all responsibility for missing or inaccurate Property information.

4.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

Physiographically, the Nieves Property lies within the Mexican Altiplano or “Mesa Central” region. This region is flanked to the west by the Sierra Madre Occidental and to the east by the Sierra Madre Oriental mountain ranges (Figure 4-1). The Altiplano in this region is dominated by broad alluvium filled plains between rolling to rugged mountain ranges and hills reaching up to 3000 m above mean sea level (AMSL) and average elevations in valleys of approximately 1700 m. The climate is continental, warm and arid with temperatures ranging from 0oC to 41oC, averaging ~21oC and <1000 mm of annual precipitation. Due to

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the limited precipitation, vegetation is sparse consisting mainly of grasses, low thorny shrubs and cacti, with scattered oak forests at higher elevations. Surface water is rare but ground water is readily available.

Elevations on the Nieves Property range from 1900 m to 2000 m AMSL. The terrain is generally flat-lying with a prominent north-south trending ridge along the eastern portion of the Property with moderate to vertical slopes (Figures 4-2 and 4-3). On the Property, there is very little human habitation with a few widely scattered farm houses, although the town of Nieves directly borders the Property to the northeast. As there are existing mines in the area and historic mining operations on the Property, the people living around the Nieves Property are knowledgeable about mining and exploration and are generally supportive of possible increased employment opportunities. Road access to the Property is excellent with the main paved highway to Nieves running along the northern portion of the Property and a network of dirt roads and trails for access to the historical mining operations extending southward to all areas of the Property. As most of the Nieves Property is flat-lying with only a few dry arroyos drill and access roads can be easily built.

The small town of Nieves (now re-named Francisco R. Murguia) can be accessed from Highway 49 along a 17 km paved side road. Nieves is the business center for the Quaterra exploration activities. From Nieves there are various dirt roads that provide access to the main mine areas on the Property. The nearest major population and services centre to Nieves is the mining town of Fresnillo approximately 90 kilometres south.

Fresnillo has a population of ~75,000 and services the Fresnillo Mine run by Peñoles. As such, it offers a substantial professional work force experienced in mining and mining related activities in addition to most other supplies and services. Access to Fresnillo and to the nearest international airport in Zacatecas is via paved highway. Zacatecas has a population of >1,000,000, is the capital of Zacatecas State and acts as the mining centre for the area. Fresnillo and Zacatecas are also serviced by rail (Figure 2-1). Other infrastructure in the area includes (1) a power line adequate to support a 100 tons per day mill, (2) an existing mill structure on the Property at the Santa Rita vein area which may be refurbished, (3) a spur of the main Zacatecas rail line that connects Rio Grande city, located 18 km to the south, and (4) reasonably close operating smelters: the San Luis Potosi copper and zinc smelter approximately 350 km’s away and the Industrias Peñoles, S.A. de C.V. (“Peñoles”) Pb-Zn smelter in Torreon, Coahuila approximately 200 km north.

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5.0 EXPLORATION HISTORY

  5.1 1560-1978 EARLY WORK HISTORY

The first discovery on the area covered by the Nieves Property was the Santa Rita Vein in 1560 by Spanish explorers (Turner, 1999; Cavey, 1999). Soon after in 1574 the Concordia vein was discovered. The Santa Rita and Concordia-San Gregorio-Dolores Veins were the focus of mining by the Spanish and Mexican miners until 1880.

Most of the activity in the Nieves District occurred between 1880 and 1910, when an English company, the Mexican Rosario Mining Company, and two Californian companies the Almaden Mining Company and the Concordia M. and M. Company worked in the area. These companies worked on the Concordia Vein primarily while a small independent miner Gonzáles Piñera worked concurrently on the San Gregorio Vein (Turner, 1999; Cavey, 1999).

Four shafts were used to access the San Gregorio and Concordia Veins, the deepest of which reached 133 m depth. Historical reports document that an additional four shafts were sunk to access the Dolores Vein, although to date only two have been located as there are no records or maps available for the workings on the Dolores Vein (Turner, 1999). Six shafts were developed to access the Santa Rita Vein to a maximum depth of 282 m. A smelter was built on site in 1906 but heavy rains and flooding in 1906 prevented coal deliveries which shut down the pumps in the Santa Rita mine, flooding the mine and, ceasing production. Prior to the 1910 revolution, which halted all production in the Nieves District, total production in the District was estimated at 50,000 tons of ore (Turner, 1999). The only production reported are from the Concordia Mine where 5414 tons at a grade of 4065 g/t Ag were produced.

Between 1910 and 1978 several companies (including the Fresnillo Mining, 1936; Scurry-Rainbow, mid-1960’s to 1978) attempted to de-water, sample, and re-open the historical workings in the Concordia and Santa Rita Mine, which were largely unsuccessful. However, underground drilling from this period intersected and confirmed the presence of the Santa Rita Vein 100 m below the 8th level. Included in this time period, is a site visit by D.B. Dill for Peñoles Mining, in 1954, who compiled and preserved much of the historical data for the Nieves District. Dill (1954) reported 21,500 tonnes of probable ore at a width of 0.92 m and a grade of 0.92 g/t Au, 1131 g/t Ag, and 2-4% Sb, still remained in the Concordia Vein and a

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prospective 120,000 additional tonnes. These resource estimates have not been verified, nor are they NI43-101 compliant resource estimates.

The Santa Rita Vein and refurbished mill and flotation plant were purchased by Fomento Minero in 1978 who operated the mine until 1987. Fomento Minero also sank three shafts and deepened a historic shaft along the Concordia-San Gregorio vein system during the 1970’s. The flotation mill was capable of running 100 tonnes/day during this time and was fed 50% tailings and 50% ore with an average head grade of 130 g/t Ag, 2% Pb, 2.4% Zn and 2.5% Sb, according to Consejo Recursos Minerales (“CRM”)(Cavey, 1999). In 1992, CRM estimated the resources remaining in the Santa Rita Vein system (Table 5-1). Today, all that remains on the site are the building foundations, abandoned shafts and power lines.

Table 5-1: Santa Rita Resources calculated by CRM (Cavey, 1999).

  Category Tonnes Ag (g/t) Pb (%) Zn (%) Sb (%)
  Positive 18,600 398 3.0 3.5 3.0
  Probable 76,700 225 3.3 4.3 2.6
  Possible 71,200 n/a n/a n/a n/a
  Tailings 20,000 90 n/a n/a n/a

* These resource estimates have not been verified by CCIC nor are they NI43-101 compliant.

In the early 1990’s, Abelardo Garza Hernandez, Noel McAnulty and Bill Shafer assembled a land position in the area and presented it to Kennecott Exploration who signed the lease in January 1995 (Turner, 1999).

  5.2 1994-1996 KENNECOTT EXPLORATION

Kennecott identified the Nieves area through thematic mapping satellite imagery and determined the area to contain a large epithermal system and had potential to host epithermal silver-lead-zinc mineralization. Between 1994 and 1996 Kennecott

  1)

conducted reconnaissance geologic mapping at a scale of 1:25,000,

     
  2)

collected a total of 535 rock geochemical samples and analyzed them for Au, Ag, As, Sb, Hg, Cu, Pb, Zn, Mo,

     
  3)

collected 131 rock chip samples and assayed them for Au, Ag, As, Sb, Hg, Cu, Pb, Zn, Mo, Sn, W,

     
  4)

conducted three soil surveys,


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  5)

several geophysical surveys including airborne and ground magnetic surveys, a single dipole-dipole induced polarization (IP) line, and seven controlled source audio- frequency magneto-telluric (CSAMT) lines,

     
  6)

four reverse-circulation (RC) holes in 1995 totalling 689.5 m (NV01 to NV04) and four RC holes in 1996 totalling 843 m (NV05 to NV08).

These drill programmes intersected several zones of significant silver mineralization hosted by two distinct styles of mineralization. Hole NV08 in the California area intercepted two separate 2 m intervals of high grade silver vein mineralization that returned assay values of 367 g/t Ag and 795 g/t Ag at depths of 108 m and 116 m, respectively. In contrast, Hole NV03 intersected a large low grade zone of silver mineralization at 180 m depth that averaged 82 g/t Ag over 28 m. Hole NV03 encountered a high grade silver vein at 148 m depth that returned 254 g/t Ag over 2 m and Hole NV06 cut a large zone of low-grade silver mineralization that returned 67 g/t Ag over 68 m.

  5.3 1997-1998 WESTERN COPPER

In 1997 Western Copper entered an agreement with Kennecott giving them the right to acquire up to 100% interest in eight properties in the Faja de Plata area of Zacatecas, one of which was the Nieves Project.

Western Copper drilled five diamond drill holes totalling 921.6 m in the area around hole NV08 drilled by Kennecott in 1996. In addition, Western Copper twinned hole NV08 and reproduced similar assay values for the intercepts reported by Kennecott including 890 g/t Ag over 1.0 m in Hole WCNV-1. Holes drilled beneath hole NV08 returned assay values of 841 g/t Ag over 0.45 m, 109 g/t Ag over 0.8 m, and 1081g/t Ag over 0.35 m in Hole WCNV-4.

  5.4 1999-2000 QUATERRA

Exploration work by Quaterra included:

  1)

Geological mapping at a scale 1:10,000 over an area of 6 x 8 km,

     
  2)

Detailed geological mapping at a scale of 1:2000 over the main Concordia-Dolores- San Gregorio veins, an area of nearly 2 km x 800 m,


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  3)

Sampling (205 rock chip samples) assayed by Chemex Labs for gold, silver, copper, lead , zinc, arsenic and antimony,

     
  4)

Quaterra drilled 10 RC holes and deepened four by core drilling, including Kennecott’s hole NV-5. Table 5-2 summarizes the Quaterra drilling.

Table 5-2: Diamond (DDH) and reverse-circulation (RC) drilling highlights and summary during work programme from 1998-2000.

Hole RC DDH Total Drilled              Intercepts  
  (m) (m) (m) from to Length (m) Ag g/t
        65.53 74.67 9.14 204
QTA-1 173   173 74.67 77.72 3.05 23
        97.53 99.06 1.53 273
        99.06 100.58 1.52 29.8
QTA-2 207   207        
        33 36 3 243
QTA-3 213 337 550 386 420 34 21.26
        426 434 8 23
        446 452 6 26
        80.75 97 16.25 48.25
QTA-4 238   238 116 123 7 17
        195.6 232.10 36.5 98.18
QTA-5 140   140 61.0 68.5 7.5 40.2
QTA-6 213   213        
QTA-7 280 232 512 346 354 8 23.70
QTA-8 364 142.27 506.27        
QTA-9 348   348 276 278 2 115
QTA-10 382   382        
NV5 88 149.3 237.3        
Totals 2646 860.57 3506.57        

6.0 GEOLOGICAL SETTING

  6.1 REGIONAL GEOLOGY

The Nieves Property lies on the western flank of the Central Altiplano in Mexico, just east of the Sierra Madre Occidental ranges (Figure 4-1). Basement rocks underlying the western Altiplano are a late Palaeozoic to Mesozoic assemblage of marine sedimentary and submarine volcanic rocks belonging to the Guerrero Terrane (Simmons, 1991) that were obducted/overthrust onto older Palaeozoic and Precambrian continental rocks during the early Jurassic. These were then overlapped by a Jura-Cretaceous epi-continental marine and volcanic arc sequence (Simmons, 1991). In the Nieves area the boundary between the Guerrero Terrane rocks and the younger Jura-Cretaceous sedimentary sequences (interpreted to be the Caracol Formation on the Property) is unclear.

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The late Cretaceous to early Tertiary Laramide Orogeny folded and thrust faulted the basement rocks throughout area and preceded the emplacement of mid-Tertiary plutons and related dykes and stocks (Ruvalcaba-Ruiz and Thompson, 1988). Mesozoic marine rocks are host to the San Nicolas, VMS deposit and Francisco I. Madero Sedex deposit (Wendt, 2002).

Unconformably overlying the Mesozoic basement rocks in the western Altiplano are units from the late Cretaceous to Tertiary, Sierra Madre Occidental magmatic arc (Figure 4-1). These rocks consist of a lower assemblage of late Cretaceous to Tertiary volcanic, volcaniclastic, conglomerate and locally limestone rocks, the “lower volcanic complex” and a Tertiary (~25-45 Ma) “upper volcanic supergroup” of caldera related, rhyolite ash-flow tuffs and flows. Eocene to Oligocene intrusions occur throughout the Altiplano and are related to the later felsic volcanic event. Locally, these two units are separated by an unconformity (Ruvalcaba-Ruiz and Thompson, 1988).

A late NE-SW extensional tectonic event accompanied by major strike-slip fault movement affected the Altiplano starting ~35 Ma. This extension was most intense during the Miocene and developed much of the basin and range topography currently exhibited in the area. Subsequent erosion of the ranges has covered most of the basins/valleys.

  6.2 PROPERTY GEOLOGY

Rocks underlying the Nieves Property are of two distinct ages (1) Mesozoic inter-bedded argillite and greywacke interpreted as belonging to the Caracol Formation overlain by (2) Tertiary rhyolite volcaniclastic rocks separated by a presumably Tertiary age basal conglomerate and conglomeratic sandstone sequence (Figure 6-1).

  6.2.1 Mesozoic Rocks

The most common rock type underlying the Nieves Property are a thick sequence of fine laminar grey to dark green siltstone and greywacke that host the silver mineralization. These rocks contain 60% to 80% siltstone with lesser amounts (20% to 40%) of fine grained grey to light grey greywacke beds up to 1 m thick and have been assigned to the Caracol formation of the late Cretaceous age. Greywacke beds are more abundant to the south in the Santa Rita area and to the west in the Concordia area.

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Rocks of the Caracol Formation are tightly folded with east-northeast to east striking fold axes and bedding strikes east-west and dips steeply south to near vertical.

  6.2.2 Tertiary Clastic Rocks

On the east side of the Nieves Property the Caracol Formation is overlain unconformably by a 1 to 10 m thick conglomerate composed rounded to sub- rounded limestone boulders 2 to 20 cm in diameter in a grey to brown sandstone groundmass. Above the limestone conglomerate is up 130 m of conglomeratic sandstone with thin bands of calcareous conglomerate which was intersected in hole QTA-18. These units are shallowly dipping.

  6.2.3 Tertiary Volcanic Rocks

In Hole QTA-18, 46 m of rhyodacitic to andesitic welded tuff occur above the conglomerate and conglomeratic sandstone. A thin 1.5 to 2 m unit of grey to dark grey basalt occurs above the tuff and is in turn overlain by at least 56 m of porphyritic rhyolite flows striking north-northwest and dipping northeast. These porphyritic rhyolite flows underlie a prominent north trending ridge on the east side of the Property and are the host rock for manganese-calcite veins and breccia mineralization previously exploited by local miners.

  6.2.4 Structural Geology

The oldest structures on the Nieves Property are the folds that affect only the Mesozoic argillite and greywacke units. These structures are likely related to compression during the Laramide Orogeny in the Cretaceous. Thrust faults are also common features of structures attributed to the Laramide Orogeny and several have been suspected to occur on the Nieves Property.

Post-Laramide structures are in all cases brittle in nature and affect both the Mesozoic Caracol Formation sedimentary rocks and the Tertiary volcanic and sedimentary rocks. These features include (1) faults that strike 330o to 000o and dip moderately northeast to east with east plunging slicken-sides, (2) faults that strike 170o to 180o and dip steeply to the west, and (3) major vein structures that strike 240o to 270o and dip 60o to 90o to the south.

A late vertical fault structure that strikes between 020o to 030o offsets the major mineralized structures and offsets the Concordia vein from the San Gregorio vein.

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7.0 DEPOSIT TYPES

Silver mineralization on the Nieves Property is best classified as low-sulphidation epithermal mineralization and is the primary exploration target. Several other styles of mineralization are found within the ages of rocks observed on the Nieves Property and are potential secondary exploration targets.

  7.1 EPITHERMAL HIGH-GRADE SILVER VEINS

Within the Altiplano Region of Mexico, epithermal silver veins are the most dominant deposit type with such world-class examples as Pachuca, Zacatecas, Fresnillo, and Guanajuato to name a few. The nearest of these world class examples is the Fresnillo Deposit owned and operated by Peñoles which lies 90 km to the south of the Nieves Property. Several styles of silver mineralization occur in the Fresnillo Deposit including (1) mantos and chimneys, (2) stockworks (Cerro Proaño area), (3) disseminated ores in areas of propyllitic alteration, and (4) veins that show vertical mineralogical zonation such as the Santo Niño vein. The veins are currently being mined by Peñoles and they are actively exploring for more of these mineralized structures (Garcia, et al., 1991).

In the Santo Niño Vein the high-grade silver mineralization averaging 769 g/ton Ag, 0.56 g/ton Au, 0.99% Zn, 0.5% Pb, 0.03% Cu; (Gemmel et al, 1988) is hosted in a single fault structure that locally bifurcates or is separated into en-echelon offset structures. It is between 0.5 to 4 m wide, averaging 2.5 m wide, and extends for over 2.5 km. Typically in these veins, the high-grade Ag (Au) zone is constrained in elevation within the vein structure to up to 500 m vertically, or between 180 to 750 m depths (Garcia, et al, 1991), below which the veins becomes dominated by base-metal sulphides and progressively lower in precious metal content (Garcia et al, 1991). A model for the formation of the Fresnillo fissure veins was proposed by authors such as Buchanan (1981) and modified and incorporated into the low-sulphidation epithermal model over the last 20 years (e.g. Corbett, 2002; Corbett and Leach, 1998; Hedenquist, et al, 1996, Simmons et al, 1988; etc…). The low-sulphidation epithermal model predicts that the Fresnillo epithermal veins: (1) formed in rifting or tensional environments; (2) formed along normal or strike-slip fault structures; (3) are mineralogically zoned vertically; (4) have the highest precious metal zones within boiling horizons (likely related to paleo-water tables); and, (5) are in faults that diffuse as they near the surface and are

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accompanied with intense acid-sulphate alteration (advanced argillic and silicification) that cap the systems (Figure 7-1).

Table 7-1: Stratigraphy of the Fresnillo District (modified after Ruvalcaba-Ruiz et al., 1988; Wendt, 2002)


Per.

Age
Group
Name

Fm.
Local
Name

Thickness

Rock Type
Assoc. min/
alt
               
Q
 Holocene     1-250 m Alluvium None
 Pleistocene          









Tertiary








Miocene-
Pliocene


Basalt
100 m
Olivine basalt
None
             

Eocene-
Miocene



Altamira
Volcanics


400 m
Conglomerate,
welded rhyolite
ash-flow tuff, volarenites


None
             

Eocene




Quartz
monzonite

-
Quartz-
monzonite
Ag-Pb-Zn
skarn
             


Paleocene-
Eocene

Fresnillo

Linares
Volcanics



400 m
Conglomerate,
welded rhyolite
ash-flow tuff,
flow domes,
volarenite
Veins,
advanced
argillic alt.,
silicification
               







Cretaceous







Late
 
Cuestra del
Cura
Cerro Gordo
300 m
Limestone
Replacement
and veins

Fortuna

300 m

Limestone
Replacement
and veins
             



Early





Proaño






Plateros


Upper
Greywacke

250 m
Calcareous
greywacke and shale

Veins
Calcareous
shale

50
Calcareous
shale
Veins and
replacement
Valdecañas
Lower
Greywacke
700
Greywacke

Veins
               

Geology in the Fresnillo District (Table 7-1) has been well studied and appears to be very similar to the geology observed on the Nieves Property. Both the Nieves Property and the Fresnillo District are underlain by Jura-Cretaceous argillite and greywacke units that have been overlain by Tertiary volcanic rocks. Tertiary volcanism in this region is attributed to have occurred in conjunction with extensional tectonics associated with major strike-slip motion on north to northwest trending faults. In the Fresnillo District, epithermal fluids ascended along steeply dipping extensional fault structures generally oriented east-west (Simmons et al, 1988). On the Nieves Property, there are several north to north-northwest trending faults mapped as well as the main vein orientations occurring in a roughly east-west orientation, very similar to those veins and structures in the Fresnillo District.

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  7.2 OTHER DEPOSIT TYPES IN THE DISTRICT

The Altiplano Region contains several other deposit types such as Carbonate Replacement Deposits (e.g. San Martin, Charcas), Volcanogenic Massive Sulphide deposits (San Nicolas), Sedex (Francisco I. Madero) and Stockwork deposits (Real de Angeles) (Wendt, 2002; Table 7-2). These other deposit types are generally hosted within the Mesozoic rock units that underlie the Tertiary volcanic rocks and as the Mesozoic rocks are the dominant rock type underlying the Nieves Property, these other deposit types are possible secondary exploration targets.

Table 7-2: Major Altiplano Ore Deposits (after Wendt, 2002)

# District State Deposit Tonnage Tonnage          Average Grade    
      Type Produced Reserves Au ppm Ag ppm   Cu% Zn% Pb%
  San Martin-                  
1   ZAC CRD 40+ M 30 M tr 125 1 3.8 0.5
  Sabinas                  
  Concepcion                  
2   ZAC CRD 40+ M 8 M+ < 1.5 275 0.2-2.3 12.8 5.8
  del Oro                  
3 Charcas SLP CRD 35 M 12M+   67 0.26 4.5 0.32
                0.02-    
4 Fresnillo ZAC E-Vein 50+ M 10+ 3-0.6 685-280   0.5-3.0 0.6-3.0
                0.3    
5 Velardeña DUR CRD 22 M 8 M < 1.5 156 to .4 5.2 3.8
6 Catorce SLP CRD, E-Vein 10+ M .5 M tr 80 tr 6 10
7 La Negra QRO CRD 7 M 2 M   184 0.2 2.3 1.2
8 Zimapan HID CRD 3.5+ M 1 M   173 1.2 4 2
9 Mapimi DUR CRD 6 M none 3.7 475 mod high 15.8
                     
10 Asientos/ AGS CRD, E-Vein 6 M min 2.5 M+ 0.5 150-600 0.2-3.5 5 2.5
  Tepezala                  
  Cerro San                  
11   SLP CRD 5M 56 M (Au) 0.57-30 22-325 4 9 5
  Pedro                  
  La Paz/                  
12   SLP   4 M ? 12 M 0.5 500 0.2-1.4 5 7
  Matehuala                  
13 Chalchihuites ZAC   2 M ? 1.5 M 1 350 < 0.3 3 2.5
                     
  Francisco I                  
A   ZAC Sedex ? minor 20 M+ tr 60 1.5 6 1.5
  Madero                  
  Real de                  
B   ZAC Stockwork 90 M none   80   0.9 1
  Angeles                  
C San Nicolas ZAC VMS minor 72 M 0.5 30 1.35 2.3  

CRD = Carbonate Replacement Deposit
E-Vein = Epithermal Vein
VMS = Volcanogenic Massive Sulphide

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8.0 MINERALIZATION

  8.1 ALTERATION AND STYLES OF MINERALIZATION

Generally, Mesozoic Caracol Formation rocks proximal to mineralized zones exhibit a weak bleaching halo that results from the oxidation of 2% to 5% disseminated pyrite throughout these rocks. Pyrite and thin calcite veinlets occur adjacent to mineralized zones in a pyrite-carbonate alteration assemblage called P-C type (pyrite-carbonate).

A local, more intense alteration assemblage includes weak to moderate sericite replacing thin calcite veinlets and weak to advanced fine-grained quartz replacing calcite, associated with an increase in fine grained pyrite. This alteration type, described as QSPC (quartz-sericite- pyrite-carbonate) is present in close proximity to the mineralized structures in some drill holes. Stibnite rosettes are commonly associated with the sericite veinlets.

Silicification, mainly of sandstone beds, occurs in a few zones on the Nieves Property as in the hill located north of the Santa Rita vein. Weak chlorite alteration of tuffs and conglomeratic sandstone occurs in Hole QTA-18 in the manganese mine area within the Tertiary rhyolitic rocks on the east side of the Property (Figure 6-1).

Four types of mineralization have been identified on the Nieves Property and are described below.

  8.1.1 Jasperoid Structures

Jasperoid structures located to the northwest of the Concordia-Dolores vein system are characterized by advanced silicified tan to black coloured rocks with abundant thin jasper, fine grained quartz micro-breccia and veinlets with up to 5% disseminated pyrite. These jasperoid structures are 1 to 12 m wide, strike northwest and dip southwest. Locally, jasperoid bodies are anomalous in gold, arsenic and antimony with erratic silver, lead and zinc values.

Possibly a related mineralization style to the Jasperoid structures are silica breccia veins that are typically composed of small silicified rock fragments in a saccaroidal quartz groundmass.

  8.1.2 Iron carbonate veins

Iron carbonate veins include mostly calcite and scarce rhodochrosite with hairline to 10 cm wide pyrite veinlets which are abundant up to hundred of meters away from partially to totally

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replaced quartz veins. Some veinlets contain stibnite and silver sulphosalts and are abundant in surface alteration halos as well as above and below ore intercepts in drill core. Low grade silver often is associated with this type of veinlet.

  8.1.3 Carbonate-quartz-sulphide veins

Carbonate-quartz-sulphide veins are the most economically important veins and consist of calcite that is partially to totally replaced by grey to white, chalcedonic, fine-grained quartz veins and veinlets. These veins are from centimetres to 1.5 m wide with up to 50% sulphide minerals. Sulphides include pyrite, stibnite, sphalerite, galena, chalcopyrite and the silver sulphosalts proustite, pyrargyrite, jamesonite and scarce tetrahedrite. The best grades of silver, gold, lead and zinc occur in these veins and past production has come primarily from this vein type.

  8.1.4 Calcite-manganese-oxide breccias and veins

These mineralized structures which may be 5 to 10 m wide and up to 150 m long include breccias formed by sub-angular volcanic fragments in a clay-altered sandy groundmass. Thin veinlets of ferro-manganese oxides form stockwork zones of clay-altered volcanic rocks and occur along the borders of the breccia bodies in the Manganese mine area (Figure 6-1).

  8.2 MINERALIZED ZONES

On the Nieves Property there are three major east to east-northeast striking silver vein systems, the California, Concordia-San Gregorio-Dolores, and Santa Rita veins systems. In addition to these silver mineralized systems is an east-northeast to east-southeast striking manganese breccia system hosted by rhyolitic rocks on the east side of the Property. Local miners have worked on all of these areas, previously.

  8.2.1 California Vein System

The California vein is marked by a shaft and series of small open cuts aligned 250° to 255° over a distance of 300 m. Only thin and discontinuous quartz-oxide veinlets outcrop near the workings. The California vein system shows a large 150-600 m wide alteration zone extending about 2700 m along strike. Local stockwork zones contain thin calcite veinlets in part weakly replaced by quartz-oxide veinlets. The California vein was intercepted in

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Kennecott hole NV-08 in two intervals at depths of 108 m and 116.0 m that returned assays of 367 g/t Ag over 2 m and 795 g/t Ag over 2 m respectively.

  8.2.2 Concordia-San Gregorio-Dolores Vein System

The Concordia-San Gregorio-Dolores vein system has a known strike length, in mine workings of nearly 1.8 km in two system of veins, (1) the 240º-260° striking Concordia-San Gregorio vein and (2) the 260°-270º striking Dolores splay. Both veins dip from 60º southward to near vertical.

The Concordia-San Gregorio-Dolores system is composed of carbonate to quartz-sulphide veins and varies in width from tens of centimetres up to 1.5 m. The Concordia vein can be traced in shafts and mine workings for approximately 600 m to the southwest of the San Gregorio arroyo. The San Gregorio vein appears to be the continuation of the Concordia structure, assuming approximately 50 m of left lateral offset from a north trending fault that presumably follows the San Gregorio arroyo. The San Gregorio vein structure can be traced in some small open cuts for about 500 m to the northeast at an azimuth of 250° to 260°. Surface samples from 10 to 40 cm wide calcite to quartz veins with oxides returned silver assays of up to 954 g/t.

The Dolores vein is interpreted to be a splay of the Concordia vein, strikes at 260º to 270° and is traced for nearly 500 m on surface by numerous small open cuts and at least five shafts. A stockwork zone of thin calcite to quartz and oxides veinlets in the hanging wall extends on surface for up to 250 m across strike from the main vein and along strike for an additional 350 m from the last workings on the vein. Surface samples of some of the thin stockwork veinlets from this zone returned silver assays of up to 553 g/t.

The Concordia and Dolores veins appear to intersect to the west of the Rosario Shaft in an area of abundant calcite and lesser quartz veinlets. This area was evaluated on the surface by two long trenches separated by 85 m, with 2 m wide channel samples collected 10 to 20 cm below the surface.

  8.2.3 Santa Rita Vein System

The Santa Rita vein system, located in southern portion of the Property, strikes 230° to 260° and can be recognized in shafts and in short drifts for over 500 m. Last production during

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1970-1985 came from the lower levels of the mine which was deepening to 9 levels reaching a depth of 282 m. The Santa Rita vein contains a series of veinlets in the footwall that form a wide stockwork zone in an area of 100 x 100 m centered on a small silica altered hill north of the main Santa Rita drift. A sub-parallel vein also occurs about 100 m southwest of the main Santa Rita vein.

Quaterra hole QTA-16 tested the Santa Rita vein at a depth of 350 m and intercepted a 3.1 m interval that averages 71.44 g/t Ag, 0.56% Pb and 0.91% Zn. QTA-37 also appears to have cut the Santa Rita vein system at 416 m depth where it encountered a 5.90 m zone that averaged 104 g/t Ag, 0.23% Pb, and 0.55% Zn.

  8.2.4 Manganese Mineralization

Various small pits and drifts sunk on calcite-manganese-oxides breccias and stockwork veinlets hosted in volcanic rocks occur 1 km east of the Concordia-Dolores-San Gregorio vein system on the eastern side of the Nieves Property.

The stockwork zone is flanked to the north and south by two breccia structures formed by sub-angular volcanic fragments in clay altered sandy groundmass with irregular ferroan calcite and manganese oxides of possible hydrothermal origin. The north breccia structure is 150 m long by 5 to 10 m wide, trends 290 to 300 and dips 75° to south. The southern breccia is 115 m long by 7 m wide, trends 070 and dips 75o to the north.

A second zone of calcite-manganese-oxide breccia occurs 230 m south of those described above. It is 150 m long by 5 m wide, trends 075 and dips 67o north. Surface and underground rock samples from this area were anomalous in silver, arsenic, antimony, tungsten, molybdenum and cobalt. Hole QTA-18 tested the depth extent of these structures but intersected no significant mineralization.

9.0 SITE VISIT

The author and CCIC representative, Stephen Wetherup, was accompanied by Quaterra geologist Hector Fernandez through the Nieves Property and the core logging, sampling and storage compound from October 3rd and 4th, 2006 (Figure 9-1). During this time, the author was taken to the Property and shown most of the drill pads and representative outcrops of the rock types and alteration styles present on the claims. Also, representative sections of

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mineralized drill core from the three vein systems and from the various styles of mineralization present on the Nieves Property were examined and a few intervals were re-sampled. A core saw was not available so generally broken sections of mineralized core were chosen so that fragments could be taken throughout the intervals to simulate a second split of the core. The results from this sampling are presented in section 14.0.

10.0 EXPLORATION

Together, Quaterra and Blackberry have completed three work programmes on the Nieves Property from October, 2003 to June, 2006 and are named Phases I, II, and III. These work programmes are summarized below and the drilling portion of each programme is dealt with in greater detail in the following section “11.0 Diamond Drilling”.

  10.1 PHASE I

Phase I of the exploration programmes on Nieves began in October 2003 and was completed as of August 2004 and included air photo interpretation and cartography, establishing a property wide grid and brushing out the lines, CSAMT and IP geophysical surveying, surveying of previous drill collars, geochemical sampling and diamond drilling.

  10.1.1 Base Map

A set of 24 color 23 x 23 cm format 1:20,000 scale air-photos in 3 lines bearing N-S covering the property area were obtained from a private flight by Eagle Mapping on May 17, 2003. Sistemas de Cartografia Automatizada, a company based in Guadalajara, Jalisco plotted a digitized topographic base map based on 9 photo-negatives of the main area in December 2003. UTM coordinates and elevations for the map were based on 9 high accuracy GPS control points scattered over the area for easy location on the photographs. Two sets of 4 maps at a scale of 1:5000 were generated with contour intervals of 2 and 5 m for North America NAD 27 and WGS 84 ellipsoids. One topographic-controlled photo map at a scale 1:10000 was also printed.

  10.1.2 Lines for geophysical survey

A total of 63,200 m on 11 lines were cleared and staked with stations every 200 m. The lines were 6200 to 6400 m long at 400 m intervals except for lines 9800E and 10800E which were

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spaced 200 m from lines 9600E and 10600E. Line surveying was accomplished by Carrillo Gallegos Consultores, a contractor company based in San Luis Potosi. The survey team included two surveyors with two 5’ precision SokKia Total stations assisted by 4 to 6 local workers each. This work was completed from November 1 to December 18, 2003. The survey was tied to the PC 8213 and LB 8214 high precision positioned points of the Subred Geodesica Minera made by the Instituto Nacional de Estadistica Geografia e Informatica of the Mexican Government. A chart with UTM coordinates in NAD 27 of every station was the final result of the survey.

  10.1.3 Location of previous drill holes

Holes drilled by Kennecott (except NV04 and NV05), Western Copper and Quaterra (QTA-01 to 10) were located and surveyed during the line survey. Distances from nearest surveyed holes to holes NV04 and NV05 were taken from a previous Kennecott GPS survey and correlated to the new survey.

  10.1.4 Geophysical Surveying

Zonge Engineering & Research Organization, Inc based in Tucson, AZ completed a CSAMT survey during the period from November 8 to 23, and December 4 to 19, 2003. Ten lines of CSAMT totalling 57,000 m were completed. Induced polarization measurements were collected as part of the CSAMT survey in sets of five electric field dipoles spaced 100 m apart. Zonge also ran a ground magnetic survey over 12 lines totalling 71,600 m (Table 10-1; Figure 10-1). Equipment included a GDP-32 CSAMT collector, 2 GEM-19 magnetometers, a GGT-30 transmitter and 2 four wheel drive vehicles. Appendix 9 contains selected maps of the geophysical results

Table 10-1: Lengths of geophysical grid established on the Nieves Property.  
LINE STATIONS Total meters
7600 E from station 6400N to 8600N 2200
7600 E from station 11400N to 12 600 N 1200
8000 E from station 6400N to 8600N 2200
8000 E from station 10800N to 12 600 N 1800
8400 E from station 6400N to 12600N 6200
8800 E from station 6400N to 12600N 6200
9200 E from station 6400N to 12600N 6200
9600 E from station 6400N to 12600N 6200
9800 E from station 6400N to 12600N 6200
10200 E from station 6400N to 12600N 6200
10600 E from station 6400N to 12600N 6200
10800 E from station 6400N to 12600N 6200
                                                                                     TOTAL 57000

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Table 10-2: Additional lines surveyed by ground magnetics.  
LINE STATIONS Total meters
7200 E From station 6400N to 12600N 6200
7600 E From station 8600N to 11400 N 2800
8000 E From station 8600N to 10800N 2200
10000N 7200E to 10600E 3400
                                                        TOTAL 14600
                                                    GRAND TOTAL  71600

Ground magnetic survey stations at 10 m intervals were run on all of lines run by CSAMT and IP as well as on 4 additional lines listed in Table 10-2.

Results from the CSAMT survey are encouraging as the data suggests that the known zones of mineralization extend to well beyond, both to depth and along strike, where they have been previously mined or drill tested (Inman, 2005). Six high-priority targets were interpreted (Table 10-3) in the CSAMT survey and more than twelve other conductors/target zones were also delineated.

As veins in the Fresnillo Deposit are economically mineralized from 180-750 m depth it is important to note that the vein systems on the Nieves Property extend to these depths according to the geophysics and they have rarely been tested below 350 m depth (Table 10-3).

Table 10-3: Interpreted length from CSAMT survey and summary of drill testing of structures on the Property (after Inman, 2005).

Vein/Conductor
Holes intersecting vein
below 350 m depth
Total Strike
Length (km)
Untested Length
(km / % of total)
Concordia 1 2.1 0.8 (38%)
Dolores 1 2.0 1.2 (60%)
Nino 0 2.0 1.2 (60%)
Orion 0 3.0 2.0 (67%)
California 0 1.0 0.6 (60%)
Santa Rita 3 1.8 1.4 (78%)

  10.1.5 Geology

Some areas were mapped in detail to understand vein distribution and configuration and include:

  1)

1:5000 Concordia-Dolores to California

     
  2)

1:1000 Jasperoide Grande-Orion

     
  3)

1:1000 Manganese Mine (surface)


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  4) 1:250 Manganese mine underground
     
  5) 1.1000 Concordia-Dolores-Arenisco hill

A final geology map at a scale of 1:5000 was drafted on the topographic base map and integrated with the geologic mapping completed by Tom Turner in 1999-2000. Figure 6-1 is reduced 1:50,000 scale version of this mapping including the positions of all drill collars from Phases I to III. A 1:5000 scale map is included in Appendix 5.

Personnel involved in the geologic mapping included Hector Fernandez (October 2003 to August 2004); two geologists, Jose Luis Motilla Moreno (November to December 2003) and Aurelio Hernandez Anda (January to August 2004), assisted by one to two local helpers.

  10.1.6 Geochemical sampling

A total of 589 samples were collected and sent to Chemex Labs in Guadalajara for analysis using a 41 element ICP method. Gold and silver were analyzed by fire assay. Copper, lead and zinc with values > 10,000 ppm were re-assayed by atomic absorption methods. Sampling was focused to collect thin mineralized veinlets, selecting only the vein or veinlet material. A separate listing of geochemical results is included as Appendix 6.

Twenty-two rock samples returned assay values >100 g/t silver and 32 samples returned greater than 10 g/t silver. All of these anomalous samples came from known areas of mineralization including the Concordia-San Gregorio-Dolores, California, Orion, and Santa Rita vein systems.

  10.2 PHASE II

Phase II exploration work began in September, 2004 and was completed by April, 2005. It consisted of drilling 11 holes totalling 5170.92 m. The results of this phase of drilling are summarized in the following section.

  10.3 PHASE III

Phase III exploration work began in June, 2005 and ended in May, 2006. This phase of the work programme consisted of eight drill holes totalling 5894.07 m. The results of this phase of drilling are summarized below in the following section.

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11.0 DIAMOND DRILLING

  11.1 PHASE I DRILLING

A thirteen-hole, 5301.94 m program of diamond drilling was completed by contractor Major Drilling of Mexico, a Canadian company with offices in Hermosillo Sonora. The holes ranged in depth from 314.44 to 599.54 m. Drilling started on April 13 and ended on July 10 (89 days).

Holes were tested for bearing and inclination deviations every 100 m. Deviations on bearing were on the order of 2º to 3º with only one up to 5.9º . Inclination of holes varied from 2º to 3º with few up to 4.8º, in general down dip.

Drill logs for all phases of drilling are located in Appendix 5 as are selected vertical drill sections.

Table 11-1: Summary of diamond drill holes completed during Phase I.    
Hole E (NAD27) N (NAD27) Elevation Azimuth Inclination Total depth (m)
QTA-11 699,257 2,654,553 1,952 340        -60º 450.19
QTA-12 699,417 2,654,623 1,966 340        -60º 401.42
QTA-13 699,098 2,652,373 1,936 340        -60 385.88
QTA-14 698,728 2,652,442 1,953 340        -60 474.57
QTA-15 699,287 2,652,351 1,950 340        -60 407.52
QTA-16 699,322 2,649,862 1,960 340        -60 599.54
QTA-17 697,337 2,653,221 1,996 20        -60 343.51
QTA-18 701356 2653231 2,000 340        -60 431.90
QTA-19 699,496 2,652,710 1,926 330        -60 456.29
QTA-20 699,582 2652760 1,926 330        -60 345.97
QTA-21 699,536 2,652,641 1,926 330        -60 353.30
QTA-22 699,893 2,653,013 1,920 340        -60 314.44
QTA-23 699,993 2,652,968 1,920 340        -60 337.41

  11.1.1 California Vein System Results

Quaterra Holes QTA-11 and QTA-12 were drilled to test the alteration halo with zones of stockwork veinlets coincident with a geophysical anomaly located south of the California vein. Neither hole intercepted the vein. QTA-12 does contain one narrow 0.1 m interval of 406 g/t Ag at 342.44 m and a 1.16 m interval with 0.14 g/t Au and 40 g/t Ag at a depth of 355.70 m.

  11.1.2 Concordia-San Gregorio-Dolores Vein System Results

Hole QTA-13 tested both the Dolores vein about 200 m below the surface and part of a hanging wall stockwork zone. QTA-13 intersected low-grade mineralization in the stockwork

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zone and one 0.2 m interval starting at 203.10 m that returned assay values of 0.66 g/t Au, 2,590 g/t Ag, 3.02% Pb, and 2.41% Zn. Hole QTA-14 tested the Dolores-Concordia intersection zone but returned only low-grade silver values. Hole QTA-15 tested the eastern portion of the Dolores vein at ~250 m below the surface, but intersected only low grade results.

The Concordia and San Gregorio veins were the most important historic silver producers on the Nieves Property, with shafts reported to extend to 100 m depth at San Gregorio and 160 m depth at Concordia. The Concordia vein was tested with Holes QTA-19, QTA-20 and QTA-21.

Hole QTA-19 was planned to intercept the vein at the 210 m level approximately 50 m below an ore shoot where a historical longitudinal section of the vein showed silver grades up to 10 kg/t. Hole QTA-19 intersected a fine grained quartz vein with up to 40% massive sulphides, mainly pyrite and lesser silver sulphosalts grading 1.39 g/t Au, 4,020 g/t Ag, 3.42 % Pb and 2.80% Zn in a 1.5 m interval beginning at a depth of 207.6 m. A new vein located north of the known Concordia vein also was intersected in Hole QTA-19 at 425.20 m depth down hole. The interval is 0.8 m wide and returned assays of 0.49 g/t Au, 915 g/t Ag, 0.91% Pb and 0.30% Zn. This vein does not outcrop.

Holes QTA-20 and QTA-21, collared 100 m northeast and 80 m southeast of hole QTA-19 respectively, intersected mineralization similar to the main vein in hole QTA-19 but it is brecciated and crosses bedding a low angle. These intercepts returned grades of nearly 500 g/t Ag.

The San Gregorio vein was tested by holes QTA-22 and QTA-23. Hole QTA-22 is located approximately 400 ms northeast of hole QTA-20 and intersected the San Gregorio vein from 129.5 m to 131.65 m (2.15 m) with assay values of 201 g/t Ag and a vein splay in the hanging wall 3.96 m apparent thickness with a grade of 203 g/t Ag. These two veins and the veinlets in between form a wider low grade zone of 49.2 m averaging 51 g/t Ag. This intersection, added to the interval of 12.2 m of 153 g/t Ag intersected in previous Quaterra Hole QTA-1 located 25 m to the northwest, suggests potential for bulk mineable mineralization.

QTA-23 located about 100 m southeast of QTA-22, intercepted several zones of low grade mineralization.

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A broad alteration zone extends up to 2 km to the northwest of the Concordia-Dolores vein system with areas of carbonate-quartz-sulphide mineralization present in the Disquito, Orion West and Orion East and Jasperoid Grande structures and has yet to be drill tested.

  11.1.3 Santa Rita Vein System Results

Quaterra hole QTA-16 tested the Santa Rita vein at a depth of 350 m and intercepted a 3.1 m interval that returned assays that average 71.44 g/t Ag, 0.56% Pb and 0.91% Zn. Another 0.19 cm interval starting at 369.71 m returned an assay of 99 g/t Ag. Various other intervals up to 8 m wide contain a quartz-sericite-pyrite-carbonate alteration assemblage with low assay values.

  11.2 PHASE II DRILLING

Based on Geology maps, Phase I hole location and interceptions, a 5,000 m drilling program was planned to test the extension of ore-grade mineralization intercepted in Phase I holes and also to test several geophysical targets. Most sites were located in the Concordia vein system where Hole QTA-19 intercepted a 1.5 m wide vein that returned >4000 g/t Ag. In total, eleven holes and 5170.92 m were drilled during the Phase II programme. Drill holes ranged in depth from 346.25 to 785.16 m (Table 11-2).

Table 11-2: Phase II drill collar summary.

  Hole E (NAD27)   N (NAD27)  Elevation  Azimuth  Inclination  Total depth (m)
  QTA-24    698408 2654479 1976 337 -60 450.49
  QTA-25    699200 2649752 1970 337 -60 559.31
  QTA-26    699137 2650251 1989 160 -60 519.99
  QTA-27    699757 2652873 1921 340 -60 368.8
  QTA-28    699782 2652797 1919 340 -60 395.33
  QTA-29    699329 2652567 1932 340 -60 501.7
  QTA-30    699703 2652396 1920 340 -60 785.16
  QTA-31    700144 2653346 1938 340 -60 350.22
  QTA-32    700505 2653356 1949 340 -60 346.25
  QTA-33    700282 2652922 1922 340 -60 379.78
  QTA-34    700648 2653175 1967 40 -60 513.89

Holes were tested for bearing and inclination deviations every 50 to 100 m of depth. Deviations were larger than with the Phase I holes (QTA-11 to 23) and varied from -45.4º to 15.6º . Inclination of holes varied from -3.3º to 13º.

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Significant intersections for the Phase II drill programme are summarized in Table 11-3 and Table 11-4.

  11.2.1 California Vein System Results

Hole QTA-24 was focused to test a strong IP geophysical anomaly coincident with a red, oxidized zone with scattered thin calcite and less quartz veinlets and small breccias zone on surface. This area is located to about 700 m southwest of the most western hole in the California vein (WCNV-2 hole), and in the southwest projection of this vein. Hole QTA-24 did not intercept the projection of the California vein, nor significant Ag mineralization.

  11.2.2 Concordia-San Gregorio-Dolores Vein System Results

Hole QTA-27 is located 184 m SSE of San Gregorio shaft and sought to test the Concordia-San Gregorio vein system below the old San Gregorio workings in the portion of this vein between holes QTA-22 and QTA-20. Hole QTA-27 intercepted 17 intervals with silver grades greater to 100 g/t, the most significant of which are listed in Table 11-3.

Hole QTA-28 located 80 m SSE from hole QTA-27, was intended to test the San Concordia-San Gregorio vein 90 m below the QTA-27 interception. QTA-28 intercepted 13 intervals grading greater 100 g/t Ag. This hole intercepted from 255.9 m to 257.08 m, a 1.18 m wide interval considered to be the Concordia vein and returned assay values of 291 g/t Ag, 0.41 g/t Au, 1.49% Pb, and 1.25% Zn and includes an interval that returned 750 g/t Ag, 1.13 g/t Au, 5.65% Pb and 4.46% Zn over 0.28 m.

Hole QTA-29 tested the Concordia vein system on its west known portion and was collared to intercept the vein at about 250 m below the surface where the ore shoot intersected by Hole QTA-19 was interpreted to occur. This hole intercepted 8 sample intervals that returned assay values greater than 100 g/t Ag. QTA-29 intercepted a vein thought to be the Concordia vein from 224 m to 227.10 m which returned an average assay value of 156 g/t Ag over 3.1 m including 888 g/t Ag, 0.17 g/t Au, 0.26% Pb, 0.32% Zn over 0.1 m and 392 g/t Ag, 0.43 g/t Au, 0.25% Pb and 0.21% Zn over 0.5 m.

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Table 11-3: Highlights from Phase II drill programme in the Concordia-San Gregorio-Dolores vein area.

  Hole
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Pb
(%)
Zn
(%)
  QTA-27 124.28 126.00 1.72 <0.05 120 0.0803 0.0984
    161.30 161.50 0.20 0.9 928 1.79 2.58
    172.00 174.00 4.00 0.02 186 0.27 0.28
    182.30 182.60 0.30 0.32 488 1.58 1.72
    189.30 189.87 0.57 1.24 229 1.9 1.49
    191.30 192.50 1.20 0.42 626 0.44 0.39
    197.57 197.77 0.20 0.58 1105 1.17 2.57
    208.00 208.90 0.90 <0.05 260 0.205 0.223
  QTA-28 243.15 243.25 0.10 <0.05 1835 2.11 2.25
    243.80 243.90 0.10 0.07 894 1.45 1.17
    252.60 252.66 0.06 2.47 394 2.66 0.584
    255.90 256.50 0.60 0.26 206 0.29 0.37
    256.80 257.08 0.28 1.13 750 5.65 4.46
    337.45 337.65 0.20 0.2 648 0.696 1.45
  QTA-29 185.80 186.30 0.50 0.07 275 0.387 1.06
    224.00 225.00 1.00 <0.05 130 0.147 0.1245
    226.50 226.60 0.10 0.17 888 0.269 0.328
    226.60 227.10 0.60 0.39 475 0.26 0.23
    427.70 427.85 0.15 0.2 1550 10.75 0.468
  QTA-30 511.24 512.57 1.33 0.05 133 0.111 0.0324
    598.00 598.45 0.45 0.06 251 2.1 2.14
    605.33 606.00 0.67 0.05 129 2.26 1.72
    608.00 608.38 0.38 0.05 107 0.936 0.601
    609.40 610.00 0.60 0.07 196 1.51 0.59
    614.00 615.10 1.20 0.06 201 1.5 1.48
    619.30 619.45 0.15 0.06 773 6.95 5.04
    628.60 629.50 0.90 0.05 176 2.13 1.84
    632.33 632.53 0.20 0.05 202 2.17 1.44
    643.50 644.10 0.60 0.05 256 2.18 1.61
    653.95 654.20 0.25 0.07 677 6.5 3.89
    656.05 656.50 0.45 0.05 137 1.34 1.36
    657.45 658.00 0.55 0.13 216 2.55 2.61
    663.60 664.50 0.90 0.06 160 1.87 1.59
    675.60 676.00 0.40 0.05 127 0.876 0.499
    682.20 682.70 0.50 0.05 168 1.17 1.92
    689.32 689.50 0.18 0.05 131 0.853 3.96
    758.30 758.70 0.40 0.05 326 2.99 2.93
    761.50 761.70 0.20 0.24 313 2.23 1.89
  QTA-31 143.00 144.70 1.70 0.1 136 0.0525 0.0761
    157.38 158.30 0.92 1.01 340 1.07 2.29
    159.90 160.10 0.20 1.53 1105 1.29 2.2
    237.40 237.60 0.20 1.21 556 0.595 1.2
    241.30 241.50 0.20 0.31 575 0.742 0.834
    241.80 242.20 0.40 0.61 1750 2.59 1.96
    307.25 307.75 0.50 0.07 320 0.22 0.21
    324.35 324.45 0.10 0.28 668 2 0.595
  QTA-33 333.30 333.80 0.50 <0.05 1795 1.33 0.442
    351.78 351.88 0.10 0.26 239 0.284 0.384

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Hole QTA-30 sought to test the possible east extension of the Dolores vein, also to test the Concordia vein at ~600 m depth. Hole QTA-30 did not appear to intercept the Dolores vein. However, this hole intercepted 34 intervals greater than 100 g/t Au all below 511 m down hole. QTA-30 intercepted from 653.95 to 655.65 m, a 1.7 m interval that averages 148 g/t Ag, 0.055 g/t Au, 1.33% Pb and 1.05% Zn that is interpreted to be the Concordia vein. This intercept includes a 0.25 m interval that returned assays values of 677 g/t Ag, 0.07 g/t Au, 6.5% Pb and 3.89% Zn.

Notably, hole QTA-30 encountered a 97.35 m interval of stockwork mineralization formed by 0.01 m to 0.20 m wide pyrite, sphalerite, galena, silver sulphosalts and calcite veins from 592.15 to 689.50 m down hole. This zone averaged 40.3 g/t Ag, 0.057 g/t Au, 0.38% Pb and 0.38% Zn over the 97.35 m.

Hole QTA-31 tested the silver mineralization below the Cerro Gregorio area found in previous holes NV-2, NV-3, NV-6, QTA-4, QTA-6 and QTA-7. This hole intercepted 12 intervals assaying more than 100 g/t Ag.

Hole QTA-32 tested the possible east-northeast extension of the mineralized zone below the San Gregorio hill. Only one notable intercept was encountered of 24.17 g/t Ag over 0.6 m.

Hole QTA-33 tested the east extent of the Concordia-San Gregorio vein system. QTA-33 intercepted two intervals assaying more than 100 grams of silver including 1795 g/t Ag, 1.33% Pb and 0.44% Zn over 0.5 m at 333.3 m depth down hole.

Hole QTA-34 sought to test a possible east continuation of the San Gregorio vein system assuming a hypothetic fault offset. Hole QTA-34 cut a wide fault zone, but did not intercept appreciable mineralization.

  11.2.3 Santa Rita Vein System Results

Hole QTA-25 was intended to test the west portion of the Santa Rita vein close to a shaft where historical reports suggest an ore shoot zone occurs and to test a new parallel vein approximately 180 m south of the Santa Rita vein. This hole intercepted 10 scattered intervals varying from 0.10 m to 1.6 m wide that returned assay values greater than 100 g/t Ag.

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Hole QTA-26 tested a silicified greywacke zone at the top of Santa Rita Hill and in the footwall of the Santa Rita vein. It intercepted 4 intervals that returned assay values greater than 100 g/t Ag (Table 11-4).

Table 11-4: Highlights from Phase II drilling in the Santa Rita area.

  Hole
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Pb
(%)
Zn
(%)
  QTA-25 204.70 205.26 0.56 <0.05 317 1.62 1.00
    239.60 239.70 0.10 <0.05 223 1.13 1.22
    284.71 285.00 0.29 0.89 405 3.42 4.54
    351.10 352.90 1.80 0.19 190 2.94 3.94
    361.10 362.30 1.20 <0.05 129 0.26 0.69
    396.30 396.70 0.40 <0.05 299 2.54 1.41
    439.40 439.50 0.10 1.09 360 2.75 3.82
    505.50 505.80 0.30 <0.05 184 0.70 0.66
    507.20 508.00 0.80 <0.05 153 0.46 0.44
    544.10 544.30 0.20 0.26 206 0.19 0.01
  QTA-26 119.80 199.90 0.10 0.13 1415 0.39 2.08
    142.20 142.40 0.20 0.53 479 0.30 0.25
    382.83 383.10 0.27 <0.05 140 0.03 0.22
    505.60 506.00 0.40 <0.05 166 0.19 0.31

  11.3 PHASE III DRILLING

Phase III of the exploration programme consisted of 8 diamond drill holes (NQ) from QTA-35 to QTA-42, totalling 5894.07 m. This phase of the programme began on October 23, 2005 and was completed on March 21, 2006. Table 11-5 summarizes the collar information for the Phase II drill holes.

Table 11-5: Phase III drill collar summary.

  Hole E (NAD27) N (NAD27) Elevation Azimuth Inclination Total depth (m)
  QTA-35 699639 2652529 1919 340 -60 731.52
  QTA-36 699791 2652183 1920 340 -60 1012.00
  QTA-37 699802 2650023 1956 340 -60 803.76
  QTA-38 699102 2652792 1934 340 -60 650.54
  QTA-39 700266 2653635 1940 340 -60 459.03
  QTA-40 699499 2652345 1927 340 -60 724.50
  QTA-41 698911 2652199 1934 340 -55 861.67
  QTA-42 700246 2654060 1960 020 -50 651.05

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  11.3.1 Concordia-San Gregorio-Dolores Vein System Results

Four of these holes tested the Concordia vein (QTA-35, 36, 40, and 41) and two tested a geophysical anomaly and a zone of alteration north of the Gregorio vein (QTA- 39, 42) and are included in this section (Figure 6-1). The results from these holes are summarized in Table 11-6.

Hole QTA-35 was drilled to test a projection of the high-grade silver mineralization intersected in holes QTA-19 and 21 down-plunge and to test the upper extent of stockwork style mineralization intersected by holes QTA-30. This hole intersected what is interpreted to be the Concordia vein between 478.54 m and 479.20 m down hole and returned assay values of 156 g/t Ag over 0.66 m.

The focus of hole QTA-36 was to intersect the projection of stockwork mineralization to depth below hole QTA-30. This hole intersected the Concordia vein between 878.05 and 891.80 m depth and averages 17.9 g/t Ag, 0.14% Pb and 0.13 % Zn over the 13.75 m interval. Two veinlets, 0.15 m and 0.28 m wide, bookend the 13.75 m interval and returned assay values of 160 g/t Ag and 148 g/t Ag, respectively.

QTA-39 tested a geophysical anomaly centred north of the San Gregorio vein in an area called Cerro Gregorio. No appreciable assay values were returned from this drill hole.

Hole QTA-40 was planned to test a stockwork mineralization intersected in hole QTA-30 along strike to the southwest. It successfully encountered stockwork mineralization from 578.0 to 622.0 m depth which averaged 30 g/t Ag, 0.45% Pb and 0.30% Zn over the entire 44.0 m. Below this stockwork zone is the interpreted projection of the Concordia vein which returned 203 g/t Ag, 2.10% Pb and 0.94% Zn over 2.60 m beginning at 667.40 m depth down hole.

The Dolores and Concordia vein systems appear to form a cymoid loop where they intersect and hole QTA-41 was drilled to test the closure of this loop at the southwest terminus of the Concordia vein. This hole interscepted two mineralized veins one of which may or may not represent the extension of the Concordia vein (Table 11-6). Or, they may represent both vein structures in the cymoid loop.

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Table 11-6: Highlights from the Phase III drill programme.


Hole

Area
From
(m)
To
(m)
Interval
(m)
Au
(g/t)
Ag
(g/t)
Pb
(%)
Zn
(%)

Comments
                   
QTA-35 Concordia 508.00 546.00 38.00 0.03 24 0.17 0.26  
    478.00 546.00 68.00 0.01 20 0.13 0.2  
      incl. 0.66 0.06 16 0.86 3.12 Concordia vein
      incl. 0.12 0.33 567 2.36 4.16 Concordia vein
                   
QTA-36 Concordia 413.32 413.41 0.09 0.40 1030 0.34 1.27  
    475.50 478.00 2.50 0.10 83 0.06 0.08  
      incl. 1.30 0.10 126 0.09 0.1  
    851.23 851.70 0.47 <0.05 72 0.92 1.55  
    878.05 891.80 13.75 0.03 18 0.14 0.13 Concordia vein
      incl. 0.15 0.20 160 1.58 1.38  
      incl. 0.28 0.13 148 1.53 0.68  
    920.00 922.00 2.00 0.07 61 0.83 0.32  
    959.10 959.20 0.10 0.26 175 1.62 0.78  
                   
QTA-37 Santa Rita 462.28 462.85 0.57 0.77 90 3.8 0.44  
    466.10 472.00 5.90 <0.05 104 0.23 0.55 Sta. Rita Vein
    719.15 719.30 0.15 0.32 20 0.72 1.19  
                   
QTA-38 Orion 101.40 101.55 0.15 1.02 53 0.03 0.21  
    170.35 170.55 0.20 <0.05 308 0.23 0.27  
    345.95 349.20 3.25 <0.05 116 0.16 0.14  
                   
QTA-40 Concordia 467.00 468.00 1.00 0.17 62 0.01 0.04  
      incl. 0.20 0.44 267 0.05 0.16  
    514.90 515.10 0.20 <0.05 76 0.52 0.02  
    551.90 552.90 1.00 0.07 59 0.08 0.43  
    570.00 572.00 2.00 0.05 56 0.47 0.61  
    578.00 622.00 44.00 <0.05 30 0.45 0.3  
      incl. 22.00 <0.05 44 0.45 0.45  
      incl. 2.00 <0.05 99 0.83 0.89  
    667.40 682.00 14.60 0.03 46 0.45 0.36  
      incl. 2.60 0.06 203 2.1 0.94 Concordia vein
      incl. 0.20 0.19 899 9.64 3.72 Concordia vein
                   
QTA-41 Concordia 237.70 237.90 0.20 0.25 147 0.23 0.15  
    742.00 745.10 3.10 0.06 51 0.19 0.19  
    802.30 804.00 1.70 0.09 43 0.31 0.2  
      incl. 0.35 0.20 97 0.6 0.45  

Hole QTA-42 was drilled in the Cerro Gregorio area north of the San Gregorio vein to test the alteration zone and geophysical anomaly that hole QTA-39 tested but along strike of hole 39. Unfortunately, no significant mineralized zones were encountered.

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  11.3.2 Santa Rita Vein System Result

One hole was drilled in the Santa Rita area, QTA-37, and tested the Santa Rita vein along strike from and northeast of holes QTA-16 and 26. Hole QTA-37 appears to have cut the Santa Rita vein at 466.10 m when it intersected a 5.90 m zone that averaged 104 g/t Ag, 0.23% Pb, and 0.55% Zn (Table 11-6)

  11.3.3 Orion Vein

Scattered outcrops of this vein and IP anomalies occur northwest of the main Concordia-San Gregorio-Dolores vein system and one hole, QTA-38, was drilled to test this poorly known vein system. Two narrow veins were intersected along with a 3.25 m wide zone at 345.95 m depth that averaged 116 g/t Ag, 0.16% Pb, and 0.14% Zn (Table 11-6).

12.0 SAMPLING METHOD AND APPROACH

Drill core (NQ diameter) was collected from the drilling rig and brought to the core storage facility on the Nieves Property for logging and sampling, by the project or assistant geologists, on a daily basis. At the core storage/logging facility, the core was measured, core recovery estimated, and the rock types, alteration minerals, textural features, structures, veining, and mineralized zones documented. Sample intervals were measured, marked with permanent marker and given a sample number and sample tag by the geologists. From this point, technicians were given the core to split, using a core saw, into halves where one half of each interval was placed with the sample tag into a sample bag and marked with the sample number. The other half was placed back into the core box in it original position and the core boxes were then stacked and stored in order and by hole number. Where the veins were coherent they were sawed in half perpendicular to the “grain” to get a representative split.

The geologists visually selected sample intervals based on the presence of quartz-carbonate veins, silicification or the presence of sulphide minerals. Any significant mineralized zones were also sampled for several meters below and above and generally samples were kept to between 0.05 m and 4.2 m in length to encompass entire vein structures.

13.0 SAMPLE PREPARATION, ANALYSES AND SECURITY

A total of 4902 drill core samples from all three phases of exploration were marked by supervising and core logging geologists before being split using a diamond saw by a

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technician. Samples were placed into individual plastic bags marked with a unique sample identification number and with a sample tag placed into the bag. Sample ID numbers and meterages were also written onto the core trays. Samples were then packaged into sealed sacks and taken by Quaterra employees to ALS Chemex Laboratories in Guadalajara for analysis.

ALS Chemex is an ISO 9001:2000, ISO 17025:2005 and Standard Council of Canada accredited laboratory with preparation and analytical laboratories operating in over 16 countries. All samples were analyzed using a 41 element ICP method, in addition to analyzing gold and silver by standard fire assay. Lead and zinc values over 10,000 ppm and silver values over 100 ppm were re-assayed by atomic-absorption methods. These methods are outlined in ALS Chemex Laboratories’ brochure in Appendix 6.

Internal quality assurance and quality control procedures were not utilized by Quaterra such as the insertion of blanks and standards into the sample sequences. For NI43-101 compliant resource estimates to be calculated a small check sampling programme whereby ~5-10% random samples should be quarter split and sent to another accredited laboratory. If pulps/rejects are available from the previous drilling those could also be sent for check analyses.

14.0 DATA VERIFICATION

Five samples were selected by the Author to represent the mineralization from each of the vein systems and mineralization styles tested by Quaterra during its drilling programmes. As mentioned above, a core splitting apparatus was not available during the site visit, so broken sample intervals were preferred so as to leave a quarter of the core material in the core boxes. Hence, these sample intervals are not ideal quarter splits of the material remaining, however the assay results returned from the site visit sampling compared favourably to the original assay results reported by Quaterra. One notable exception is the sample from QTA-19 which Quaterra reported 4020 g/t Ag and the site visit sample returned 2314 g/t Ag. This represents a 42% lower result, but as is common with high-grade samples, assay results are difficult to reproduce as they are statistically anomalous and the metal distribution within the core is rarely homogenous. It is more important that the magnitude of the results in high-grade assays are the same and in this case, the author has established that the interval from 207.6 -209.1 m in hole QTA-19 contains significantly greater than 1000 g/t Ag.

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Table 14-1: Comparison of Quaterra reported assays and CCIC check assays of identical intervals.

 
Hole
From
(m)
To
(m)
Int.
(m)
Sampler Sample
#
Au
(g/t)*
Ag
(g/t)*
Pb
(%)*
Zn
(%)*
                     
                     
                     
          QTA 431721 0.03 62 0.54 0.56
  QTA-30 611.0 6612.1 1.1            
          CCIC 942 0.03 72 0.53 0.60
                     
                     
                     
          QTA 237321 1.39 4020 3.42 2.80
  QTA-19 207.6 209.1 1.5            
          CCIC 943 0.84 2314 >1.0 >1.0
                     
                     
                     
          QTA 236949 0.1 52.4 0.54 >1.0
  QTA-16 459.38 459.80 0.42            
          CCIC 944 0.11 63 0.68 >1.0
                     
                     
                     
          QTA 236950 0.13 42.2 0.08 0.17
  QTA-16 459.80 461.0 1.2            
          CCIC 945 0.05 30 0.06 0.10
                     
                     
                     
          QTA 237614 0.84 471 1.29 0.75
  QTA-21 283.0 283.85 0.85            
          CCIC 946 0.55 319 0.95 0.62

* Original QTA assays reported in ppm for Au, Ag, Pb and Zn.

15.0 ADJACENT PROPERTIES

The Nieves Property is bordered by no other mineral concessions or claims.

16.0 MINERAL PROCESSING AND METALLURGICAL TESTING

As this project is still in the discovery phases of exploration, metallurgical testing has not been completed on rocks from the Nieves Property. However the veins on the Nieves Property have been previously mined and metal recoveries are not anticipated to be problematic and shouldn’t be a factor to hinder a mine development.

17.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATE

At this point, there is insufficient drill density to complete NI43-101 compliant mineral resource or reserve estimates. For vein systems which contain discrete high-grade ore shoots such as on the Nieves Property a drill density of < 50 m between pierce points through the vein would be necessary to begin to quantify the mineral resources. Should the ore shoots within the veins be significantly narrower than 50 m (i.e. < 25 m wide), a tighter drill spacing may be required.

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18.0 INTERPRETATIONS AND CONCLUSIONS

The Nieves Property is underlain by a large paleo-hydrothermal system that was likely active during the Tertiary. Evidence for this hydrothermal system is nearly omnipresent on the Property from (1) the three east-west trending en-echelon major vein systems (i) the Santa Rita at the south end, (ii) the Concordia-San Gregorio-Dolores centrally located and (iii) the California vein system at the north end of the Property, (2) to the west where epithermal veining in the Orion vein system and a large jasperoid body occurs, and (3) to the east where a historical manganese mining operation occurs.

Low-sulphidation epithermal high-grade silver-lead-zinc veins are the primary exploration target. Historical operations on the Property that have exploited three low-sulphidation epithermal veins systems and the geology on the Nieves Property is similar to many other world class low-sulphidation silver vein deposits in this region of Mexico such as Fresnillo, Pachuca, Zacatecas, and Guanajuato. As discussed, in section “7.0 Deposit Types” the geology underlying the Nieves Property has many similarities to the Fresnillo District including the orientation of veins and fault structures, further emphasizing the importance of the low-sulphidation epithermal silver veins as an exploration target on the Nieves Property.

Mineralization on the Nieves Property as indicated by the exploration work conducted thus far appears to be of moderate grade for narrow vein type systems (100-200 g/t on average) and these individual veins are generally less than 1 m thick. Generally, these grades and widths would be considered marginally economic. However these results are not representative of the high-grade shoots historically mined (4065 g/t Ag reported in the Concorida Vein; section 5.1) mainly because the drilling conducted by Quaterra has focussed on establishing the strike and depth extents of the various vein systems and not toward defining the high-grade shoots. QTA-19 was drilled directly below the historical mine working and returned a similar 4020 g/t Ag over 1.5 m confirming the grades reported by the historical mining records. Even though the Quaterra drilling programmes have been expanding the known strike and depth extents of the documented vein systems, specifically the Concordia-San Gregorio-Dolores vein system, the drilling to date has not fully tested the Concordia-San Gregorio-Dolores vein system nor the other vein systems on the Property (i.e. the Santa Rita, Orion, or California veins are only tested by four, one and three holes respectively). Therefore, in CCIC’s opinion there are abundant drill targets remaining on the Nieves Property and excellent potential to find additional high-grade silver shoots within the known veins systems.

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Furthermore, there are intriguing low-grade stockwork zones that appear to show that this epithermal system was not channelled along discrete veins locally but rather along bifurcated and complex vein systems with lower overall grade but significantly greater widths. Quaterra has just begun drill testing these low-grade vein systems subsequently; it is CCIC’s opinion that there is significant potential to identify low to moderate-grade bulk-tonnage silver-lead-zinc zones on the Nieves Property.

Overall, the Nieves Property contains similar geology to the world class silver vein systems within the Altiplano of Mexico and contains evidence throughout the Property for a large hydrothermal system at depth and multiple low-sulphidation veins systems near surface. CSAMT surveying contracted by Quaterra has delineated the presence of six high-priority conductor/vein system targets which require drill testing. In addition to the high-priority targets, CSAMT data suggests that over a dozen secondary conductors/vein systems are occur throughout the Nieves Property of which few have been tested by drilling. Therefore, the Nieves Property has the potential to contain numerous Ag-Au-Pb-Zn mineralized veins systems, beyond the previously mined and explored vein systems, and in CCIC’s opinion the Nieves Property is an excellent exploration property.

19.0 RECOMMENDATIONS

Low-sulphidation vein systems are often structurally controlled and on the Nieves Property where alteration surrounding the mineralized veins is minimal, hence structural traps are the primary control on ore distribution. In light of this, understanding the structural setting of the silver mineralized veins before continuing with additional drilling, is of the utmost importance. CCIC recommends that the next phase of exploration begin with compiling all of the current drill and historical mine workings data and building a three dimensional model of the Concordia-San Gregorio-Dolores system and possibly the Santa Rita system. In addition to this a structural study of the surface outcrops throughout the Property and immediate area surrounding the Nieves Property is highly recommended in order to help interpret the three-dimensional model and develop a structural framework.

The three-dimensional modelling should also be investigated for possible metal zonation within each vein system and between the vein systems to determine if there is a possibility to find higher gold grades in other portions of the epithermal system which will greatly enhance the economics of mining any such veins.

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Spectral analysis of satellite imagery for epithermal alteration mineral assemblages and structural interpretation could also be implemented. Kennecott had obtained satellite imagery prior to Quaterra’s involvement with the project, and this may be sufficient to identify specific alteration mineral species known to be significant indicators of epithermal systems. This may highlight mineral zonation in the hydrothermal system an identify areas with increased fluid flow as well as to help trace major structures not only on the Property but in the region in order to help understand the local structures.

With the satellite image analysis, 3-D modelling and structural interpretation, additional target areas will be generated. Also, this information can be used to guide drilling within previously known areas of mineralization such as on the Concordia-San Gregorio-Dolores vein system.

The amount of drilling in this next phase of exploration will be contingent upon the results of the data compilation and interpretation, but several targets are already likely. Infill drilling on the Concordia-San Gregorio-Dolores veins system will certainly be warranted to delineate the high-grade shoot historically mined to depth and allow for a resource estimate to be calculated. Drill spacings should be brought down to less than 50 m to begin resource estimation. Several more holes on each of the Orion, Santa Rita and California vein systems should be drilled to identify the strike extents of these systems and possible high-grade silver shoots. In all at least 10,000 m of drilling is suggested to properly explore the Nieves Property.

Table 19-1: Recommended budget for the next phase of exploration on the Nieves Property (including logistical costs such as accommodation, board, travel etc…).

Item   Amount     Units     Rate     Per     Cost  
Structural study   20     man days   $ 900     day   $ 18,000.00  
3D modelling and compilation   20     man days   $ 900     day   $ 18,000.00  
Satellite image analysis   1     scene   $ 20,000     scene   $ 20,000.00  
Road construction/pad building   10     km   $ 5,000     km   $ 50,000.00  
Drilling (with analyses)   10,000     m   $ 125     m   $ 1,250,000.00  
Reclamation   6     man days   $ 500     day   $ 3,000.00  
                      Total:   $ 1,359,000.00  

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20.0 REFERENCES

  Buchanan, L.J., 1981: Precious metal deposits associated with volcanic environments in the
                     Southwest; in Dickinson, W.R. and Payne, W.D., eds. Relations of tectonics to ore
                     deposits in the southern Cordillera, Arizona Geological Society Digest, v. 14, p. 237-
                     262.
   
  Cavey, George, 1999: Summary Report on the Nieves Property, Zacatecas, Mexico; Report
                     for Quaterra Resources Inc.
   
  Corbett, G.J., 2002: Epithermal Gold for Explorationists; AIG Presidents Lecture, AIG On
                     Line Journal April 2002, AIG website www.aig.asn.au.
   
  Corbett, G.J., and Leach, T.M., 1998: Southwest Pacific rim gold-copper systems: Structure,
                     alteration and mineralization; Economic Geology, Special Publication 6, 238 p.,
                     Society of Economic Geologists.
   
  Dill, D.B., 1954: Nieves, Valencianna and Miguel Auza Silver Districts of Northwestern
                     Zacatecas; Servicios Industriales Peñoles S.A. de V.V., Archio Oficina, Torreon,
                     Coahila, Mexico.
   
  Garcia, M.E., Querol, S.F. and Lowther, G.K., 1991: Geology of the Fresnillo mining district,
                     Zacatecas; in: Salas, G.P., ed., Economic Geology, Mexico, Geological Society of
                     America, Boulder, CO, DNAG Volume P-3, p. 383-394.
   
  Gemmell, J.B., Simmons, S.F. and Zantop, H., 1988: The Santo Nino silver-lead-zinc vein,
                     Fresnillo District, Zacatecas, Mexico; Part I Structure, vein stratigraphy, and
                     mineralogy; Economic Geology, v. 83, no. 8, p. 1597-1618.
   
  Hedenquist, J.W., Izawa, E, Arribas, A, and White N.C., 1996: Epithermal Gold Deposits:
                     Styles Characteristics and Exploration; Society of Resource Geology, resource
                     Geology Special Publication Number 1, Tokyo, Japan, 24 p.
   
  Inman, J., 2005: Geophysics Summary Report, Nieves Project, Zacatecas, Mexico; Joe Inman
                     Explorer Report for Quaterra Resources Inc.
   
  Lang, B., Steinitz, G., Sawkins, F.J., and Simmons, S.F., 1988: K-Ar age studies in the
                     Fresnillo silver district, Zacatecas; Econ. Geol. 83, 1642-1646.
   
  Megaw, Peter, 2006: Exploration of Low Sulphidation Epithermal Vein Systems; Mag Silver
                     unpublished report, 3 p.
   
  Ruvalcaba-Ruiz, D.C. and Thompson, T.B., 1988: Ore deposits at the Fresnillo Mine,
                     Zacatecas, Mexico; Economic Geology, v. 83, no. 8, p. 1583-1596.
   
  Simmons, S.F., Gemmell, J.B. and Sawkins, F.J., 1988: The Santo Nino silver-lead-zinc vein,
                     Fresnillo District, Zacatecas; Part II, Physical and chemical nature of ore-forming
                     solutions; Economic Geology, v. 83, no. 8, p. 1619-1641.

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  Simmons, S.F., 1991: Hydrologic implications of alteration and fluid inclusion studies in the
                     Fresnillo District, Mexico; evidence for a brine reservoir and a descending water table
                     during the formation of hydrothermal Ag-Pb-Zn orebodies.: Economic Geology, v.
                     86, no. 8, p1579-1601.
   
  Turner, Tom, 1998: The Nieves District, Zacatecas, Mexico, A geologic report; Report for
                     Western Copper Holdings Ltd.
   
  Turner, Tom, 1999: The Nieves District, Zacatecas, Mexico, A geologic report; Report for
                     Western Copper Holdings Ltd.
   
  Wendt, Clancy, J., 2002: The Geology and Exploration Potential of the Juanicipio Property,
                     Fresnillo District, Zacatecas, Mexico; Technical Report for Mega Capital
                     Investments.

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APPENDIX 1

Certificates of Author

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Independent Technical Report – Nieves, Mexico

 

 Caracle Creek International Consulting Inc.

Stephen William Wetherup 
 34176 Cedar Avenue
Abbotsford, British Columbia, Canada, V2S 2W1
T: 604-617-5955
email: swetherup@cciconline.com

CERTIFICATE OF AUTHOR

I, Stephen Wetherup, (P.Geo), do hereby certify that:

1.

I am employed as General Manager with:

   

Caracle Creek International Consulting Inc.
210 Cedar Street, Suite 203
Sudbury, Ontario, Canada, P3B 1M6
T: (705) 671-1801 F: (705) 671-3665

   
2.

I graduated with a B.Sc. Honours degree in Geology from The University of Manitoba in 1995.

   
3.

I am a member of the Association of Professional Geoscientists and Engineers of British Columbia (member # 27770), the Prospectors and Developers Association of Canada, Society of Economic Geologists, Geological Association of Canada and the Vancouver Mining Exploration Group.

   
4.

I have worked as a geologist for 12 years since my graduation from university.

   
5.

I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI43-101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI43-101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI43-101.

   
6.

I am responsible for the preparation of all sections in the Technical Report titled Independent Technical Report: Nieves Silver Property, Zacatecas, Mexico” (the “Technical Report”) and dated November 15th, 2006. I visited the Nieves Property on October 3rd and October 4th, 2006.

   
7.

I have had no prior involvement with the Nieves Property that forms the subject of this Technical Report.

   
8.

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

   
9.

I am independent of the issuer applying all of the tests in Section 1.4 of NI43-101. I am independent of the parties involved in the transaction for which this report is required, other than providing consulting services.


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10.

I have read National Instrument 43-101 and Form 43-101F1, 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 in the public company files on their websites accessible by the public, of the Technical Report.

Dated this 15th Day of November, 2006

signed    
Stephen William Wetherup    
B.Sc., P.Geo.    

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Independent Technical Report – Nieves, Mexico
Caracle Creek International Consulting Inc.

Stephen William Wetherup
34176 Cedar Avenue
Abbotsford, British Columbia
Canada, V2S 2W1
Telephone: 604-617-5955, Email: swetherup@cciconline.com

CONSENT OF AUTHOR

TO: Ontario Securities Commission
  Alberta Securities Commission  
  British Columbia Securities Commission
 Authorité des Marchés Financiers  

I, Stephen Wetherup, do hereby consent to the filing of the written disclosure of the technical report titled “Independent Technical Report: Nieves Silver Property, Zacatecas State, Mexico” and dated November 15th, 2006 (the “Technical Report”) and any extracts from or a summary of the Technical Report in the prospectus of Quaterra Resources Inc, and to the filing of the Technical Report with the regulatory authorities referred to above.

I also certify that I have read the written disclosure being filed and I do not have any reason to believe that there are any misrepresentations in the information derived from the Technical Report.

Dated this 15th Day of November, 2006.

signed    
Stephen William Wetherup,    
(BSc., P.Geo.)    

Caracle Creek International Consulting Inc.
QTA-NS
November 15th, 2006



Quaterra Resources Inc. & Blackberry Ventures 1, LLC.
Independent Technical Report – Nieves, Mexico

APPENDIX 2

Glossary of Terms

Caracle Creek International Consulting Inc.
QTA-NS
November 15th, 2006



Quaterra Resources Inc. & Blackberry Ventures 1, LLC.
Independent Technical Report – Nieves, Mexico

(For more detailed descriptions or for geological, mining and mineral related terms not covered in this glossary, one should consult a reputable dictionary or source of related technical definitions).

  “Ag”

silver

     
  “alteration”

any physical or chemical change in a rock or mineral subsequent to its formation; milder and more localized than metamorphism

     
  “anomaly”

an abnormal find or result

     
  “argillic”

clay or clay minerals; alteration whereby certain minerals are converted to clay

     
  “assay”

the analysis of minerals and mine products to determine the concentration of their components

     
  “Au”

gold

     
  “bedrock”

un-weathered rock below the soil; solid rock

     
  “breccia”

coarse clastic sedimentary rock, the constituent clasts of which are angular

     
  “Cu”

copper

     
  “clast”

particle of broken down rock

     
  “concentrate”

a product in which valuable minerals have been enriched (concentrated) through mineral processing

     
  “copper-porphyry”

or “copper-gold porphyry” is a type of copper (gold) deposit in which the copper (gold) minerals occur in disseminated grains and/or in veinlets through a large volume of rock

     
  “cut-off grade”

the break-even or lowest grade of ore in a deposit that will recover its total mining costs

     
  “decline”

access to underground via a downward incline or sloping roadway

     
  dip

direction or angle that the plane of a rock formation makes with the horizontal

     
  disseminated

in a mineral deposit, whereby the minerals (metals) occur as scattered particles in the rock, but in sufficient quantity to make the deposit a worthwhile ore

     
  dike

a sheet-like body of igneous rock cutting across bedding planes of rock


Caracle Creek International Consulting Inc.
QTA-NS
November 15th, 2006



Quaterra Resources Inc. & Blackberry Ventures 1, LLC.
Independent Technical Report – Nieves, Mexico

“epithermal”

vein deposit formed within about a kilometre of the Earth’s surface by hot ascending solutions; low temperature-low pressure mineralization style

   

“fire assay”

an analytical smelting procedure for determining the precious metal content in rock and mine products

   

  “g/t”

gram per tonne (gram per 1000 kilogram)

   

  “Ga”

a thousand million years (a billion years)

   

“gossan”

rocks in which metal (usually iron)-bearing sulphide minerals have been oxidized by air and water

   

  “grade”

the element or metal content per unit of material

   

“gravity process”

the physical process of separating minerals from waste rock using their natural differences in specific gravity

   

  “ha”

hectare

   

“head frame”

The structure surmounting the mine shaft which supports the hoist rope pulley, and often the hoist itself

   

“heap-leach”

or “heap-leaching”, is a process whereby valuable metals (usually gold-silver) are leached from a heap, or pad (pile), of crushed ore by using leaching solutions that percolate down through the heap, and are collected from a sloping, impermeable liner below the heap or pad

   

“high-sulphidation”

an epithermal system whereby later stage mineralization consists mainly of gold-copper mineralization (generally deeper than low sulphidation)

   

“hoist”

the machine used for raising and lowering the cage or other conveyance in a mine shaft

   

“hydrothermal”

heated or superheated fluid or water from depth in the earth’s crust

   

  “igneous rock”

rock formed by crystallization or solidification of magma

   

“lode”

the occurrence of mineralization or a mineral deposit within solid rock (bedrock)

   

“low sulphidation”

an epithermal system whereby early stage mineralization consists of silica minerals and gold; a shallow to surficial, hot spring environment

   

  “Ma”

a million years


Caracle Creek International Consulting Inc.
QTA-NS
November 15th, 2006



Quaterra Resources Inc. & Blackberry Ventures 1, LLC.
Independent Technical Report – Nieves, Mexico

“mafic”

general term used to describe rocks containing ferromagnesian minerals (see also basic)

     
  “magma”

molten rock material formed within the earth’s crust

     
“metamorphism”

The processes by which changes are brought about in rocks within the Earth’s crust through heat, pressure and chemically active fluids

     
“metasomatism”

a metamorphic change which involves the introduction of material from an external source

     
“mineral”

a naturally occurring inorganic substance typically with a crystalline structure

     
  “Mo”

molybdenum

     
  “mullock”

mine waste rock

     
“olivine”

a rock forming group of magnesium iron silicate minerals forming a complete solid solution series between the forsterite mineral (magnesium silicate) to the fayalite mineral (iron silicate)

     
“ophiolite”

collective name for a group of mafic and ultramafic rocks associated with marine origin; a fossilized piece of oceanic crust

     
  “ore”

a mineral or rock that can be extracted economically

     
  “ore body”

a mass of ore with defined geometry

     
  “outcrop”

rock unit exposure at surface

     
  “Pb”

lead

     
  “polymetallic”

several metals

     
“porphyry”

a medium- to coarse-grained intrusive (generally felsic) igneous rock that contains conspicuous mineral crystals that are coarser- grained than the groundmass

     
  “pressure oxidation”

the thermal oxidation of sulphides at elevated pressure

     
  “pyrite”

iron sulphide mineral

     
“pyroxenite”

an igneous rock comprising generally of pyroxene minerals, of varying calcium, magnesium and iron silicates

     
“refractory”

a term used to describe gold ores which are not amenable to recovery using conventional gravity or cyanide leaching technology

 

Caracle Creek International Consulting Inc.
QTA-NS
November 15th, 2006




Quaterra Resources Inc. & Blackberry Ventures 1, LLC.
Independent Technical Report – Nieves, Mexico

“Reserve”

that part of a Resource which can be mined at a profit under reasonably expected economic conditions as defined by the JORC Code

   

 

“Resource”

mineralised body for which there is sufficient sampling information and geological understanding to outline a deposit of potential economic merit

   

 

“roasting”

the thermal oxidation of sulphides at atmospheric pressure as defined by the JORC Code

   

 

“shaft”

or “mine shaft” is a vertical or inclined excavation in rock or consolidated material for the purpose of providing access to an ore body. Usually equipped with a hoist at the top

   

 

“sill”

a sheet-like body of igneous rock which conforms to bedding planes of rock

   

 

“skarn”

a contact thermally metamorphosed impure limestone or dolomite

   

 

  “stratabound”

contained within a stratum or layer

   

 

  “stratiform”

formed within a stratum or layer during layer deposition

   

 

“strike”

horizontal level direction or bearing of an inclined rock bed, structure, vein or stratum surface. The direction is perpendicular to the direction of dip

   

 

  “strip ratio”

ratio of waste rock to ore mined in open cast (pit) mining

   

 

“sub outcrop”

rock unit exposure below the surface (also referred to as subcrop)

   

 

“sulphidation”

a relative classification of ore forming environments principally hydrothermal fluidisation

   

 

“sulphide”

a mineral in which the element sulphur is in combination with one or more metallic elements

   

 

“tailings”

the waste products resulting from the processing of ore material

   

 

“ultramafic”

partial acronym describing an igneous rock consisting of ferro (iron) magnesian minerals

   

 

“veinlet”

a narrow, fine stringer or filament of mineral (metal) that occurs in a discontinuous pattern in the host rock

   

 

  “Zn”

Zinc

 

Caracle Creek International Consulting Inc.
QTA-NS
November 15th, 2006




Quaterra Resources Inc. & Blackberry Ventures 1, LLC.
Independent Technical Report – Nieves, Mexico

APPENDIX 3

Exploration Permits

Caracle Creek International Consulting Inc.
QTA-NS
November 15th, 2006

 



































































































































Quaterra Resources Inc. & Blackberry Ventures 1, LLC.
Independent Technical Report – Nieves, Mexico

APPENDIX 4

Joint Venture and Option Agreements

Caracle Creek International Consulting Inc.
QTA-NS
November 15th, 2006

 

















































Quaterra Resources Inc. & Blackberry Ventures 1, LLC.
Independent Technical Report – Nieves, Mexico

APPENDIX 5

Drill Log Summaries,

Drill Sections and

Sample Intervals and Geochemical Analyses

Caracle Creek International Consulting Inc.
QTA-NS
November 15th, 2006

 


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: April 22 / 2004
TO: Tom Patton ccp.                                                                                                                                                                       &n bsp;     Tom Turner
FROM: Héctor Fernández
SUBJECT: Drilling at Nieves
PAGES  

Summary of DDH QTA-11-04; 699,257 E; 2,654,553 N, 340°/-60°, California Area

From To Description
0.00 39 62

Casing, No Core

39.62 60.96

Caracol Fm. Dark grey to black siltstone 90% and sandstone 10% 0,1 to 2 cm wide bedding at 70° to 75° of core axis , few s.s. beds up to 8 cm wide; 0.1 to 0.3 cm wide white calcite veinlets (2 to 5 per meter) mainly along bedding (70° c.a. ) few 20° of core axis.

60.96 61.60

Fault zone at 70° of c.a. milled siltstone bleached zone to light grey colour PC alteration, wk dark green (chlorite) stain, white calcite irregular fragments, fine grain anhedral diss Py 1 to 2%; calcite broken vnlts with wk hematite stain.

61.6 63.0

Dark grey Caracol Fm. Irregular and broken calcite vnlts up to 1 cm wide at 20° of c.a.

63.0 64.3

Fault zone at 70° of c.a. milled bleached to light grey colour siltstone PC alteration, fragments of white calcite vnlts; fine grain anhedral diss Py 3 to 5% mainly in footwall;

64.3 67.0

Dark grey siltstone; white calcite vnlts up to 8 mm wide along bedding and few 20° of c.a.

67.0 87.48

Dark grey Caracol Fm siltstone 90% to 95%, bedding 65° to 70° of c.a. hairline to 5 mm wide white calcite vnlts mainly along bedding, few 10° and 40 to 50° of c.a. To 82.03 and 84.30 m 5 cm wide fault zones along bedding with irregular white calcite lenses or rounded fragments wk hematite stain.

87.48 200.25

Caracol Fm . Siltstone (90 to 95%)/sandstone(5% to 10%) fresh to weak PC alteration, thin bedding 0.1 to 1 cm wide beds, at 70° to 80°of c.a. few 0.1 to 0.8 cm wide veinlets mainly along bedding, scarce (1 vnlt every 2 meters) at 20° to 40° of c.a. cross-bedding calcite vnlts with occ. pink carbonates and trz. of metallic hematite.
119.90-112.5 Fault zone along bedding some calcite fragments
114.10-114.3 Fault zone along bedding, Fine grain Py diss in footwall. 2% to 3%
116.75 0.6 cm wide calcite-carbonate vnlt at 30° of c.a.; trz. of metallic hematite
122.45 4 cm wide Fault zone along bedding calcite fragments, FG Py aggregates diss in footwall 2%
130.35 to 130.90 Fault zone 20 to 30° of c.a.; calcite fragments. 142.8 8 cm wide Fault zone 20 to 30° of c.a.
143.70 irregular calcite and pink carbonate vnlts trz. of metallic hematite. Py FG diss 2%
155.8 -157. irregular white and less pink carbonate vnlts up to 8 cm wide; FG Py 8 x 10 mm size aggregates diss. Py total 3 to 4%.

1



160.9 and 161.10 fault zones along bedding
162.0 Fault at 20 to 30° of c.a.
165.6 to 166 Bx by faulting, sub rounded 0.2 to 2 cm size rock fragments in a milled rock groundmass. Fault at 60° of c.a.
167- 167.35 Fault zone scarce calcite fragments trz. of Py and pink carbonates
185.5 4 to 6 cm wide calcite vnlts along bedding
189.85 to 190 Fault Bx
192.5 to 194.76 Fault Bx zone along bedding, few fault planes crossing beds scarce calcite fragments trz. of fine grain diss. Py
196.20 to 198.05 Fault Bx zone Sub rounded 0.2 to 3 cm size fragments of the same siltstone, few white calcite fragments, milled rock as a groundmass. “5 to 3% of FG Py aggregates in footwall of fault. Fault planes 30° of c.a.

200.25 271.05

Caracol Fm fresh to wk PC altered grey to dark grey colour thin (0.1 to 1 cm wide bedding, 90 to 95 % siltstone, scarce sandstone beds up to 12 cm wide.

209.40 211.85

Fault zone calcite and less qtz fragments and bands, with irregular fractured calcite vnlts and FG Py irregular diss 3% to 5%
210.46 5 cm wide calcite-Qtz-Py veinlet at 70 of c.a. calcite with druse texture
211.85 6 cm wide irregular Qtz-calcite-Py vnlt

211.90 219.00

Fine grain anhedral Py diss forming interbedded lenses and bands 0.1 to 1 cm wide.

219.00 233.80

Scarce calcite 0.1 to 0.3 cm wide veinlets mainly along bedding few 20 to 30° of c.a.

233.80 237.35

Irregular 0.2 to 1 cm wide white calcite vnlts along bedding, few 70° of c.a. (average 5 vnlts per meter); FG Py diss forming thin 0.2 to 1cm bands. 235 m to 270 m Bedding 85° to 90° of c.a.,

237.35 270.36

Scarce calcite vnlts

   

256.15 to 256.65 Fault zone 20° of c.a. scarce calcite <Py o.5 cm wide vnlts



264.70 to 265.40 Fault zone 20° of c.a. scarce calcite 0.2 to 0.5 cm wide with druse
texture vnlts

   

267.50 10 cm wide gouge fault zone at 30° of c.a.

268.40 to269.35 Fault zone at 60° of c.a. scarce calcite fragments, rock fragments and milled rock flour

269.50-271.05 Sedimentary Bx subangular sandstone fragments in a siltstone groundmass, clouds of FG Py diss 2%, broken irregular 0.2 to 0.5 cm wide, calcite vnlts crossing sandstone beds or along s.s. borders.

271.05 281.90

Caracol Fm siltstone 90% s.s. 10% PC alteration Py in bands and clouds in general 2 to 3% zones up to 5% Py.

272.1-273.5 Fault zone 70º of c.a. subangular rock fragments up to 10 cm long, broken calcite bands and vnlts, FG anhedral Py in irregular bands in rock fragment borders or in irregular lenses in Bx groundmass. total Py 3% to 4%

273.5-276.5 sandstone up to 15% in 1 to 3 cm wide beds bedding 60º to 70º of c.a. irregular cross-bedding calcite vnlts 0.2 to 0.5 cm wide less calcite lenses up to 1 cm wide with FG Py bands in walls, Py also in irregular 0.1 to 0.5 cm wide bands. Py Total 5%

276.5-280.25 Sedimentary Bx Subangular to surrounded sandstone , fragments up to 9 cm long in fine grain (siltstone) groundmass, irregular broken white calcite fragments, few pebble dikes, FG Py 3% to 5% in thin bands 0.1 to 0.5 cm wide

280.25-281.90 Fault gouge zone, milled rock scarce calcite vnlts or fragments, FG diss Py in groundmass 2%

281.90 307.55

Slts. 85% to 95% s.s.5% to 15% thin 0.1 to 2 cm wide bedding 70º to 85º of c.a. WK

2



PC alteration, few thin 0.1 to 0.3 cm wide calcite vnlts 30º to 40º of c.a. with thin (<1mm) FG Py walls, scarce calcite 0.2 to 0.5 cm wide calcite vnlts with druse features Py 2% mainly in the calcite vnlts.

286.85-295.35 thin bedding, scarce calcite vnlts 30º to 40º of c.a. 0.3 to 3 cm wide with druse textures, thin pebble dikes. Py trz.

295.35-297.75 zone with moderate amount of small , thin and irregular calcite vnlts 0.1 to 0.3 cm wide

   

297.75-307.55 scarce calcite 0.1 to 0.3 cm bands thin (5 cm) pebble dike

307.55 313.05

Increase amount of sandstone beds some up to 25 cm wide Sandstone 50% to 60% of total wk PC alteration

307.55-310 scarce 0.1 to 0.3 cm wide calcite vnlts at 30º to 40º of c.a. few up to 2.5 cm wide. Scarce Py

   

310-312.5 0.8 to 1 cm wide white calcite vnlts 3 to 4 per meter at 60º to 70º of c.a.

   

312.5-312.65 Pebble dike FG Py bands mainly in walls.

312.65-313.05 Irregular sandstone beds up to 10 cm wide at 30º of c.a. with wave features,

313.05 316.07

Siltstone 80% to 90%,0 thin s.s. beds, calcite 0.1 to 0.5 cm wide vnlts at 10º to 20º of c.a. Py in bands in walls of calcite vnlts 2% to 3%

   

313.65 (7 cm) wide calcite-Py veinlet at 30º of c.a. with fault in the hanging wall Py

   

bands up to 1 cm wide in walls

316.07 325.57

Caracol Fm. Slts. 80%, S.S 20% beds up to 10 cm wide, PC alteration calcite vnlts mainly along bedding up to 3 cm wide, few with FG Pyrite, Py also in thin 0.1 to 0.2 cm wide beds,

320.0-320.4 irregular calcite vnlts and small scale 1 cm wide pebble dike. Scarce Py

325.57 330.8

Increase in calcite in irregular vnlts also forming small scale pebble dikes, calcite vnlts cut by movement along bedding, 0.1 to 0.3 FG Py bands, Py 2% to 3%

330.8 335.0

Folding zone some beds along c.a. and few closed fold, broken calcite vnlts Py mainly in 0.1 to 0.5 bands. Py 2% to 4%

335.0 337.9

Fault zone, irregular and small 0.1 to 2 cm long calcite fragments up to 10% of the rock , few up to 2 cm wide calcite vnlts ; FG Py mainly in 0.1 to 0.3 cm wide beds or lenses, also diss. Py total 3% to 4%

337.9 339.0

wall of fault zone with less amount of deformation, bedding 0.5 to 4 cm wide at 35 to 40º of c.a. calcite fragments 1 to 3% scarce Py

339.0 342.0

Shear zone, abundant fault planes along bedding, calcite broken vnlts 5% thin pebble dikes 1 to 2 cm trz. of FG Py in the calcite vnlts

342.0 352.45

Siltstone 95%, S.S. 5% 0.1 to 1 cm wide beds, scarce calcite vnlts along fault planes up to 4 cm wide trz. of FG Py diss.

352.45 353.85

Zone with few calcite vnlts 0.3 to 0.8 cm wide at 10º of c.a. with irregular FG Py spots. Calcite in irregular thin pebble dikes 0.5 to 3 cm wide.

353.85 361.15

Bedding 70º to 80º of c.a. 95 % silts. Scarce calcite vnlts along bedding.

361.56 365.65

Sandstone beds 2 to 5 cm wide S.S. total 5% to 7% calcite irregular vnlts up to 2 cm wide with spots of FG Py, Calcite vnlts 0.1 to 0.5 cm wide with thin 1mm wide FG Py bands. Less Py diss, Py total 1% to 2%

365.65 367.5

Fault Bx at 70º of c.a., subangular rock fragments 0.2 to 2 cm long in a milled rock flour. Scarce calcite.

367.5 369.3

Broken rock in larger fragments 2 to 4 cm long, calcite vnlts 1% FG Py thin bands and less diss Py 1% to 2%

369.3 380.09

Slts. 95% few s.s. beds 0.5 to 2 cm wide, few calcite vnlts 10º to 20º of c.a. and less

3



   

calcite vnlts along bedding

380.09 390.2

Caracol Fm slts 95% thin bedding 0.1 to 2 cm wide, bedding grading from 60º to 30º of c.a. PC alteration; 0.2 to 1 cm wide Calcite-FG Py, and sporadic qtz, and trz of Stibnite? vnlts at 30º to 60º of c.a. (1 to 1.5 vnlts per meter) FG PY diss and few hairline to 0,2 mm wide vnlts, Total Py 2% to 3%

390.2 393.0

Axis of fold bedding from 30º to 0º then to 20º of c.a. PC alteration few 0.1 to 0.3 cm wide calcite vnlts mainly as lenses along bedding

393.0 396.1

Scarce calcite 0-1 to 0.3 mm wide vnlts and lenses, FG Py vnlts at 35º of c.a. Py total 1%

396.1 397.9

0.5 to 2 cm wide calcite –Py-grey clays bands interbedded lenses 1 to 2 per meter

397.9 400.7

Scarce calcite vnlts Trz of Py

400.7 401.4

Py 3% to 4% diss in thin bands and also diss.

401.4 404.3

Scarce 0.1 to 1 cm wide calcite vnlts, most as interbedded lenses.

404.3 404.6

Hangingwall of fault zone FG Py diss and in irregular microvnlts Py 2% to 3%

404,6 404.7

10 cm wide fault-vein 70º of c.a. with calcite-Py less quartz and trz of stibnite? up to 2 cm wide bands, also milled rock bands,

404.7 408.9

Footwall of fault-vein zone, folded and broken rock beds, broken calcite and trz of qtz up to 2 cm wide vnlts and lenses, FG Py irregular vnlts 0.1 to 0.2 cm wide. Also FG Py diss total Py 3%

408.9 410.57

Scarce broken 0.1 to 0.5 cm wide calcite and scarce qtz vnlts 75º to 85º of c.a. also thin <1 mm wide FG Py vnlts Py total 1%

410.57 415.0

Sandstone beds 1 to 5 cm wide few up to 20 cm wide, bedding 80 ºto 85º of c.a. PC alteration with wk white clay (sericite?) in fractures, scarce 0.1 to 0.2 cm wide calcite and trz of Py vnlts; trz of FG black with brown streak mineral Stibnite or Ag? in the calcite vnlts, vnlts 20º and 70º of c.a.

   

411.80 Fault zone Bxed rock

   

412.80 Fault at 30º of c.a.

   

414.80 0.1 to 0.2 cm wide white clay (sericite) vnlts at 20º of c.a.

   

414.8 2 cm wide irregular banded calcite vnlt at 30º of c.a.

415.0 419.5

Thin 0.1 to 1 cm wide bedding siltstone 90% at 80º to 85º of c.a.; scarce irregular 0.1 to 0.5 cm wide calcite vnlts at 10º to 30º of c.a. scarce 0.1 to 0.2 cm wide calcite with thin and irregular rims of FG Py lenses, Py trz in the interval

419.5 421.2

Irregular 0.1 to 1 cm wide calcite with trz of FG Pyrite vnlts at 0º to 20º of c.a. FG Py also in scarce up to 2 cm wide s.s. beds

420.5-421.2 syngenetic deformation of beds irregular bedding, some fractured beds, calcite up to 2 cm wide irregular lenses following deformed bedding

421.2 422.16

Bedding at 75º of c.a.; scarce 0.1 to 0.4 cm wide calcite with scarce thin bands of FG Py lenses , also scarce Calcite and trz of Py vnlts at 50º of c.a.

422.16 423.5

Fold zone , beds 25º of c.a. , few 0.1 to 0.5 cm wide irregular calcite with trz of FG Py lenses

423.5 431.9

0.1 to 1 cm wide beds 60º to 70º of c.a. siltstone 95%, scarce 0.1 to 0.5 cm wide calcite lenses and few irregular 0.2 to 0.7 cm wide calcite vnlts at 35º to 45º of c.a. only trz of Py

431.90 438.0

Bedding 0.1 to 1 cm at 60º to 65º of c.a. weak Pc alteration; scarce calcite up to 1,5 cm wide lenses, scarce 0.1 to 0.5 cm wide calcite vnlts with trz of FG Py in thin bands at 20º of c.a. trz of FG Py micro beds. Total Py 1%

   

435.6 to 436.4 cross and slump bedding features

   

436.65 1 cm wide calcite with trz of Py at 45º of c.a.

438.0 438.8

Irregular calcite-cream light colour clays and less FG Py vnlts at 10º of c.a. 0.2 to 0.4 cm wide irregular calcite vnlts 30º of c.a. scarce 0.2 to 0.8 cm wide calcite-FG

4



   

Py lenses, Py in the interval 1%

438.8 443.5

Bedding at 70º to 75º of c.a. scarce 0.2 to 1 cm wide calcite-clay-trz of FG Py lenses; scarce 0.2 to 0.4 cm wide calcite with trz of Py vnlts at 40º to 50º of c.a. less at 15º to 20º of c.a.

443.5 445.8

Sedimentary Bx, broken and rotated rock beds and calcite-Py vnlts; irregular 0.3 to 1 cm wide calcite-Py - trz of qtz and trz of black mineral Ag? vnlts; < 1 mm wide Py vnlts and fine diss, scarce small size calcite less qtz druses with cubic FG Py, Py in the interval 2% to 3%

445.1 to 445,25 strong brecciated zone subangular rock fragments up to 3 cm long in a rock flour and calcite groundmass

445.7 447.6

Scarce calcite-clays and FG Py irregular 0.1 to 0.2 cm lenses and few same width vnlts at 30º to 50º of c.a. trz of Py

447.6 450.19

Scarce calcite-clays and anhedral FG Py 0.1 to 0.3 cm wide vnlts at 5º to 10º of c.a. few 0.1 to 0.3 cm wide Py lenses, bedding 80º to 85º of c.a.

450.19  

End of Hole

5


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: April 28 / 2004
TO: Tom Patton ccp.                                                                                                                                                                       &n bsp;                  Tom Turner
FROM: Héctor Fernández
SUBJECT: Drilling at Nieves
PAGES 7 pages

Summary of DDH QTA-12-04; 699,417 E; 2,654,623 N, 340°/-60°, California Area (Option site M)

From To Description
0.00 9.14

Casing, No Core

9.14 11.54

Limestone Conglomerate, rounded to surrounded 1.0 to 1.5 cm long limestone clasts some up to 10 cm long in a groundmass formed by smaller 0.1 to 0.5 cm Lms, Slts, and few S.s fragments, some P-C or QSP altered, with wk oxidation to hematite less than 1 %

11.54 12.10

Oxidized to a pale brown colour brecciated Caracol Fm. Trz of black Goethite

12.1 40.8

Oxidized to a brown reddish colour Caracol Fm, Slts 95% in 0.1 to 0,3 cm wide bedding at 75º to 80º of c.a. , Weak PC alteration,

12.1 -13.1 m Scarce 0.1 to 0.3 cm wide calcite trz of hematite vnlts at 30º of c.a. , few 0.1 to 0.3 cm wide calcite lenses

13.1 to 25.3 m Few 0.1 to 1 cm wide calcite- hematite and less brown colour clays vnlts 10º to 30º of c.a. few 0.1 to 0.4 cm wide calcite and trz of hematite lenses between beds.

25.3 – 32.3 m 0.5 to 2.0 cm wide Bx zones subangular rock fragments in rock flour and calcite groundmass,

28.1 m 3 cm wide fault zone, along bedding milled rock 1 cm wide pebble dike perpendicular to fault.

32.3 -40.80 m Gray reddish colour oxidized Caracol Fm. thin bedding 0.1 to 0.5 cm wide wk Pc altered; few calcite < qtz and hematite calcite vnlts up to 3 cm wide 10º to 30º of c.a.

40.80

End of Oxidation Zone

40.8 44.81

Gray to dark grey colour Caracol Fm wk PC alteration; thin 0.1 to 1 cm wide bedding at 80º to 85º of c.a. scarce < 1mm wide calcite and trz of hematite vnlts 10º to 30º of c.a. scarce 0.1 to 0.3 cm wide calcite lenses

   

43.15-44.81 m weak bleached zone light grey colour rock

   

43.43 m fault at 70º of c.a.; 43.76 m 1 cm wide fault at 40º of c.a.

   

44.26 m 0.6 to 1 cm wide calcite-trz of hematite vnlt at 30º of c.a.

44.81 55.35

Thin bedding at 80º of c.a. grey to dark grey slts 90% scarce s.s.; few calcite vnlts 30º to 50º of c.a.

   

45.51-47.31 m wk bleached zone fault at 46.86 m

52.7-53.2 m Wk bleached irregular 0.1 to 0.3 cm wide calcite vnlts few 0.1 to 0.2 cm wide interbedded lenses.

55.35 65.1

FG Py diss and thin < 0.1 cm wide lenses, Py total 2% to 3% scarce 0.1 to 0.3 cm

1



   

wide lenses.

55.35-55.55 m Wk bleached, irregular 0.1 to 0.5 cm wide calcite and trz of hematite vnlts 30º of c.a.

   

56.15 m 5 cm wide fault gouge zone at 50º of c.a.

   

59.85 m Fault zone 5 cm wide at 80º of c.a.

65.1 66.5

Wk bleached zone, 2 cm wide calcite lenses at 75º to 80º of c.a. FG Py diss up to 4% mainly at footwall of calcite lenses

66.5 76.25

Py 2% to 3% diss in very thin (micro < 1mm) interbedded lenses, scarce 0.1 to 0.8 cm wide lenses, scarce pebble dike up to 1 cm wide.

   

73.28 m 10 cm wide bleached zone with trz of sericite by faulting.

   

74.15 m 1 cm wide fault zone at 70º of c.a.

76.25 76.48

Fault gouge zone at 50º of c.a.; some rock fragments up to 5 cm long, fault plans milled Py

76.48 78.63

Bedding at 70º of c.a. few s.s. beds up to 4 cm wide beds with cross bedding features Py 1% in microvnlts.

77.88-78.38 fault at 70º of c.a., broken calcite and scarce pink carbonate vnlts few up to 1 cm wide at 30º of c.a.

78.63 80.64

Fault zone at 10º to 20º of c.a. wk bleached, milled rock intervals up to 10 cm calcite-pink carbonate broken and deformed vnlts up to 1 cm wide. Py up to 5%, broken calcite vnlts

80.64 86.0

Py diss and in thin calcite vnlts at 70º of c.a. Py total 2%

81.3-83.17 m Fault zone gouge and Bx zones up to 15 cm wide with no deformed rock zones up to 60 cm along c.a. fault planes at 70º of c.a. few broken and irregular up to 2 cm wide calcite and less pink carbonate vnlts.

83.17-86.0 m Thin bedding scarce 0.1 to 0.5 cm wide calcite with < 1mm border of FG Py, Py also in thin < 0.1 cm interbedded lenses, in faulted zones Py up to 3%.

86.0 90.2

Scarce Py < 1% diss and in micro-lenses

   

86.7 m 4 cm wide bleached zone

   

89.35-90.2 m Irregular Bxed zone irregular calcite in 1 to 2cm wide pebble dikes

90.2 109.2

Caracol Fm thin bedding at 85º to 90º of c.a. scarce s.s. beds up to 8 cm wide Wk P-C altered, scarce 0.1 to 0.5 cm wide calcite lenses, few 0.2 to 0.8 cm wide calcite vnlts at 30º to 50º of c.a. trz of Py.

106.5 m 2 cm wide Pebble dike subangular 0.1 to 0.6 cm long rock fragments in calcite groundmass.

   

107.65 m 1.5 to 2 cm wide irregular calcite lenses.

109.2 111.34

Thin bedding 85º to 90º of c.a. irregular calcite 0.1 o 0.5 cm vnlts in zones up to 10 cm along core axis, scarce 0.1 to 0.3 cm wide calcite vnlts 20º to 30º of c.a.

111.34 121.0

Siltstone 95% in thin beds <1 cm wide scarce s.s. beds.; scarce calcite 0.1 to 0.3 cm wide interbedded lenses, very scarce < 1mm wide calcite vnlts at 10º to 20º of c.a.

121-0 123.2

Wk bleached with sericite s.s. beds up to 10 cm wide, irregular up to 2 cm wide calcite deformed by faulting vnlts.

   

123.1 m 5 cm wide fault zone at 85 º of c.a. wk sericite in walls of calcite vnlts

123.2 133.2

Thin bedding 80º to 85º of c.a. scarce 0.1 to 0.6 cm wide calcite vnlts at 30º of c.a.

   

130.15 m irregular 1 to 3 cm wide calcite vnlts

   

130.65-130.85 m Fault gouge zone milled and bxed rock scarce calcite < 1%

   

132.90 m 0.1 to 0.5 cm calcite vnlts at 20º of c.a.

   

133.10 m. 1cm wide gouge fault zone Py 2% to 3%

133.2 152.84

Thin bedding wk P-C altered Caracol Fm, bedding 75º to 85º of c.a.; scarce up to 5

2



   

cm wide s.s. beds

   

145.31-145.82 m FG Py diss 2% to 3%

   

149.8 m Fault zone 1 cm wide at 20º of c.a.; scarce calcite fragments

   

151.75-152.25 m irregular up to 1 cm wide calcite vnlts.

152.84 153.44

Py diss 2% to 3%

153.44 161.15

Thin bedding 80º of c.a. wk PC alteration, irregular bedding few up to 2 cm long s.s. lenses in siltstone beds.

   

157.5 m Thin < 1 cm calcite vein inside a fault at 70º of c.a.

 

158.25 m 8 cm wide Bx by faulting zone at 60º of c.a. trz of Py  

At 159.3,-160 and 160.5 m Bx zones by faulting up to 10 cm wide at 50º to 70º of c.a. scarce calcite fragments.

161.15 162.58

FG anhedral Py in thin < 1mm lenses at 70º of c.a. also FG diss Py total 2% to 3%

162.58 164.18

Scarce irregular calcite 0.2 to 0.6 cm wide vnlts, few 0.1 to 0.3 cm wide calcite lenses trz of to 1% Py

164.18 165.58

Fault zone fault planes at 30º of c.a. calcite and scarce pink carbonate irregular vnlts in walls of fault, also as irregular broken fragments in rock milled flour, calcite vnlts with small open spaces Py 2% to 3% mainly in < 1 mm wide lenses or beds.

165.58 168.39

FG anhedral Py in thin < 1mm wide interbedded lenses. 2% to 3%

168.39 169.93

Irregular Bx by faulting zones up to 20 cm wide, calcite irregular vnlts and also in milled groundmass Py 2% to 3%

169.93 173.0

Thin irregular Bx zones 1 t o 5 cm wide with irregular calcite vnlts Py 3% to 5% mainly in thin < 1mm lenses

173.0 177.72

Thin bedding 0.1 to 0.8 cm wide mainly siltstone beds (95%) at 75º to 80º of c.a. scarce calcite vnlts < 0.2 cm wide

   

157.2 m 5 cm wide fault zone scarce calcite.

177.72 181.72

Fault zones 2 to 65 cm wide among no deformed up to 1 m wide rock blocks.

177.72-178.47 m Bx by faulting zone scarce calcite subangular to angular up to 3 cm long rock fragments in a rock flour groundmass.

178.8 m 1 cm wide fault zone, planes at 60º of c.a. scarce calcite fragments Py 1% to 2% in microvnlts

179.35 m irregular 1 to 5 cm wide fault zone at 40º to 50º of c.a. scarce calcite fragments.

180.02 180.32 m 30 cm wide irregular Bx by fault zone at 20º of c.a. scarce calcite bxed fragments.

180.72-181.0 m Bx by fault zone rock fragments up to 5 cm long scarce 0.1 to 0.5 cm wide broken calcite vnlts thin < 1 mm wide FG Py bands in walls of calcite vnlts PY total 2% to 3%

181.12-181.72 m Fault zone at25º of c.a. scarce calcite fragments, trz of sericite in calcite walls.

181.72 183.70

Thin bedding at 75º of c.a. scarce 0.1 to 0.2 calcite –FG Py vnlts at 40º of c.a. FG Py diss 2% to 3% also in < 0.1 cm wide lenses

183.7 185.2

Wk fractured zone few irregular fragments of thin calcite vnlts Py 2% to 3% in irregular thin vnlts and less FG diss

185.2 185.72

Bedding from 50º to 0º then 60º of c.a. FG Py in thin interbedded lenses 1% to 2%

185.72 197.20

Bedding 80º to 90º of c.a. scarce 0.1 to 0.5 cm wide calcite vnlts at 20º to 30º of c.a. scarce < 1 mm wide calcite lenses.

   

193.1 m irregular bedding with 0.1 to 0.2 cm wide calcite lenses Py 1% to 2%

197.2 198.5

Few irregular calcite and less pink carbonate vnlts; FG anhedral Py 3% to 4%, small size pebble dikes 1 to 2 cm wide , with calcite groundmass Py 3%

3



198.5 199.2

Scarce 0.2 cm wide calcite< Py vnlts at 60º of c.a.

199.2 201.05

Fault Bx zones up to 75 cm along c.a. between no faulted block of rock up to 30 cm long; irregular calcite fragments up to 1 cm wide in general 0.1 to 1 cm long, Py 2% to 4%.

201.05 202.4

Irregular bedding s.s. beds from 1 to 3 cm wide at 65º of c.a. irregular 0.3 to 1 cm wide vnlts at bottom of the interval calcite

202.4 203.8

Fold zone bedding 0º to 10º of c.a.; 0.2 to 0.4 cm wide calcite vnlts

203.8 204.3

Bx Fault milled rock , subangular 0.1 to 1 cm long rock fragments fault planes 50º of c.a.

204.3 204.6

Thin bedding at 40º of c.a. scarce Py diss < 1%

204.6 204.95

Bx by fault 0.2 to 1 cm long surrounded rock fragments few up to 3 cm long in a milled rock flour , scarce calcite Py 2% to 3% diss.

204.95 207.25

Wk faulted rock ; irregular calcite-Py lenses and vnlts 0.3 to 1 cm wide with small open holes Py 3% to 4% diss, also FG Py as a thin film in calcite vnlts and lenses ; calcite vnlts mainly at 40º of c.a.

207.25 208.7

Py 1% in calcite vnlts, also FG diss in irregular 0.3 to 1 cm wide s.s. beds.

208.7 210.0

Fault abundant deformed calcite vnlts up to 1 cm wide Py in thin vnlts band diss up to 5%

210.0 214.25

Wk deformed by faulting rock, few thin 1 to 1.5 cm wide fault gouge zones, few calcite< Py vnlts and lenses 0.1 to 0.5 cm wide. Py in the interval 1% to 2%, calcite vnlts 0.2 to 0.6 cm wide at 20º to 30º of c.a.

214.25 233.90

Bedding 70º of c.a. scarce 0.1 to 0.2 cm wide calcite lenses trz of PY

219.25 m 5 cm wide zone with irregular 0.2 to 1 cm wide calcite vnlts at 65º to 70º of c.a.

   

224.8 m 3 cm wide fault zone at 30º of c.a.; 0.3 to 0.6 cm wide calcite vnlts.

    

229.75-230.5 m 0.2 to 0.5 cm wide calcite vnlts 0º to 10º of c.a.  

233.9 243.0

Bedding 40º to 50º of c.a. Py 4% to 5% scarce 0.1 to 0.3 cm wide calcite vnlts at 50º of c.a. ; increase of Py in irregular 0.1 to 0.2 cm wide vnlts also as a thin band in calcite vnlts, and VFG Py diss in interbedded < 0.1 cm lenses Py total 4% to 5%

233.9-234.05 m 0.3 to 0.5 cm wide calcite vnlts; thin VFG Py bands in walls of calcite vnlts Py 3% to 5%

   

235.70 m irregular 0.2 to 1 cm wide calcite with Py walls vnlts at 10º to 30º of c.a.

   

236.46-236.90 m Fault zone milled rock and FG Py scarce calcite vnlts

243.0 245.65

Bedding 40º to 50º of c.a. Py 1% to 2%

   

244.85 m irregular 3 cm wide fault zone calcite-Py broken vnlts.  

245.65 247.0

Bedding 40º to 50º of c.a. FG Py in micro vnlts and thin < 0.1 cm wide lenses Py total 4% to 5%

247.0 249.8

Thin bedding at 30º of c.a.; 0.1 to 0.5 cm wide beds scarce up to 5 cm wide beds, scarce Py lenses and scarce 0.1 to 0.4 cm wide calcite , Py total 1% to 2%

   

249.8 m Fault zone at 60º of c.a.

249.8 253.5

Bedding 30º to 0º of c.a.micro-vnlts of Py, also very thin lenses and FG Diss Py 3% to 4%, scarce 0.1 to 0.3 cm wide calcite vnlts.

253.5 253.8

Bedding 0º to 10º of c.a.

253.8-254.3 m Fault Bx zone at 50º of c.a.; 0.1 to 2 cm long rock fragments in a milled rock flour FG Py diss 3%

253.8 255.12

Bedding 10º to 30º of .c.a. VFG Py lenses 3% to 4%; few 0.6 to 1 cm wide irregular calcite vnlts at 30º of c.a.

255.12 259.15

Bedding 10º to 5º of c.a.

   

258.27 m Fault at 40º of c.a.

4



259.15 260.3

Bedding 0º to 15º of c.a. PC alteration

    

259.7-260.3 m Fault zone , milled rock, scarce calcite; Py trz  

260.3 262.1

Bedding 5º to 10º of c.a.

260.6 m Fault at 20º of c.a.; FG Py and trz of cream colour clays (sericite?) thin vnlts at 30º of c.a.

262.1 263.0

Bedding at 0º to 5º of c.a. scarce 0.1 to 0.3 cm wide calcite-Py lenses

263.0 273.0

Wave bedding, fresh rock, beds grading from 30º to 50º of c.a. scarce calcite vnlts.

273.0 281.94

Wk Pc altered rock bedding 70ºof c.a. Few 0.1 to 0.3 cm wide calcite vnlts at 50º of c.a. scarce white to cream colour clays in calcite vnlts walls.

   

274.9 m Fault at 50º of c.a.

   

276.25 m Fault at 30º of c.a. , irregular 0.1 to 0.3 cm wide broken calcite vnlts

   

281.68 m Fault at 30º of c.a., with a 1 cm wide Calcite-FG Py vnlt in centre of fault.

281.94 287.80

Kuc Fm Siltstone 80%, s.s. beds up to 8 cm wide, bedding in general 0.2 to 0.8 cm wide at 70º of c.a.; Wk P-C alteration, scarce calcite vnlts and less clays in irregular walls, vnlts at 40º of c.a.

   

285.15 m Fault at 55º of c.a. only milled rock

    

285.75 m irregular 0.3 to 0.8 cm wide calcite vnlts at 30º of c.a.  

286.70-287.10 m Fault zone, milled rock and calcite irregular fragments fault planes at 40º of c.a.

287.10-287.80 m irregular 0.1 to 0.6 cm wide calcite and cream colour clays vnlts at 30º of c.a. scarce druse textures in few thin calcite vnlts.

287.80 292.75

Thin bedding siltstone 95% and < 1cm (5%) of sandstone beds at 75º of c.a.

292.75 293.10

Calcite irregular lenses among irregular sedimentary deposition of beds, few calcite 0.5 to 3 cm wide vnlts at 65º to 70º of c.a.

293.10 296.34

Scarce s.s. beds up to 15 cm wide, bedding at 75º of c.a., calcite irregular lenses among beds, also in thin 0.5 to 2 cm wide vnlts at 20º of c.a.

296.34 296.54

Bedding folded in close folds, Interval starts to 55º of c.a. changing to 0º of c.a., micro-chevron folds at 297.50 m; few < 0.1 cm wide irregular calcite vnlts.

296.54 300.84

Thin irregular bedding. 0.1 to 0.8 cm wide irregular s.s. lenses, scarce irregular up to 0.8 cm wide calcite lenses and few 0.1 to 0.3 cm wide calcite vnlts at 20º of c.a.

300.84 303.89

Folded and boxed in time of deposition features, s.s and less siltstone lenses; irregular calcite and scarce pink carbonate lenses, slump features, irregular and broken calcite vnlts up to 3 cm wide, pebble dikes 1 to 3 cm wide

303.89 309.35

Thin bedding at 70º of c.a.; 0.3 to 0.8 irregular sandstone lenses among lightly deformed thin siltstone beds, scarce 0.1 to 0.3 cm wide calcite vnlts; scarce 0.1 to 0.2 cm wide calcite lenses.

309.35 309.75

Irregular closed folded zone, syngenetic deformation features, as on instable base of sedimentation,, irregular 0.1 to 2 cm wide pebble dikes at 20º of c.a.

309.75 312.08

Irregular bedding at 70º to 75º of c.a. forming 0.3 to 1 cm wide s.s. lenses, few s.s beds up to 5 cm wide, few 0.1 to 2 cm wide calcite vnlts at 20º to 30º of c.a. small size pebble dikes; few hairline calcite vnlts at 40º to 50º of c.a

312.08 322.17

Bedding 70º to 80º of c.a.; Sandstone beds 0.5 to 2 cm wide, few up to 10 cm wide, s.s. 155 to 20% of total rock, wave bedding; scarce 0.1 to 0.8 cm wide calcite vnlts at 0º to 5º of c.a.

322.17 331.78

Bedding 60º to 70º of c.a.; siltstone 80º, s.s. 20º, few s.s. beds up to 30 cm wide, with scarce fragments of siltstone up to 1 x 4 mm; scarce 0.1 to 0.2 cm wide calcite vnlts at 30º of c.a.

331.78 335.15

PC alteration, FG Py in irregular thin ( up to 2 mm wide )bands in walls of calcite 0.3

5



to 0.6 cm wide vnlts at 20º to 30º of c.a. also as irregular bands in few 0.2 to 1 cm wide calcite lenses. Py in interval 1%

335.15 337.41

Gray to dark grey siltstone , light grey colour s.s. beds up to 9 cm wide no Py in interval

337.41 339.80

Caracol Fm fresh to wk P-C altered silts 95% scarce 0.1 to 0.6 cm wide s.s. beds, bedding 70º of c.a. scarce 0.1 to 0.2 cm wide calcite vnlts at 35º of c.a.

339.80 342.40

Thin 0.1 to 0.6 cm wide bedding at 65º of c.a. silts 905, scarce 0.1 to 0.2 cm wide calcite vnlts at 30º to 40º of c.a.

   

339.80 m 0.8 to 2 cm wide pebble dike at 30º of c.a.

   

341.90 m Irregular 5 cm wide calcite with pebble dike walls at 20º of c.a.

342.40 345.41

Fault zone, planes at 50º to 60º of c.a. with zones of no broken rock up to 1.2 m wide; 35 cm wide Bx and sheeted rock in footwall, P-C alteration with trz of chlorite, Calcite< Py and trz of Sph? In few vnlts 0.1 to 0.5 cm wide , scarce calcite vnlts up to 6 cm wide in centre of fault; Py diss and irregular vnlts in milled rock zones, Py in the interval 1% to 2%

342.51 m 2 cm wide calcite vnlt at 60º of c.a. formed by parallel 0.1 to 0.5 cm wide bands, Py thin bands and trz of Sph,

345.0 m 6 cm wide calcite vnlt at 70º of c.a. irregular thin 0.1 cm wide Py bands in walls, calcite-Py in milled rock in walls of vnlt

345.41 346.3

Irregular bedding s.s. lenses up to 2 cm wide , scarce 0.1 to 0.3 cm wide calcite vnlts.

346.30 347.51

Bx by Fault zone subangular s.s. up to 5 cm long fragments in irregular beds of silts, broken calcite vnlts. Fault planes at 60º of c.a. to 348.0 m deep.; irregular calcite Pebble dikes up to 2.5 cm wide FG Py diss 1% to 2%

347.51 348.8

Few (3 to 4 per meter) 0.1 to 0.6 cm wide calcite vnlts at 20º of c.a.

348.8 357.00

Fault zone, Rock blocks up to 70 cm long, Bx zone 10 to 30 cm wide , irregular and fractured calcite vnlts; FG Py in calcite walls and also diss in milled rock. Py total 2% to 3%, calcite-Py vnlts 0.1 to 1 cm wide, trz of metallic black color mineral in calcite vnlts.

357.00 362.00

Caracol Fm Thin 0.1 to 1 cm wide siltstone 0% and less s.s. beds at 60º to 70º of c.a.; P-C alteration, irregular FG subhedral Py in 0.1 to 0.5 cm wide bands mainly in s.s, lenses. Py 4% to 5%; few 0.5 to 2 cm wide calcite vnlts at 0º and 30º of c.a., scarce 2 cm wide calcite irregular lenses. Fault planes at 359.6 m; 360.70 m; and 341.5 m.

362.0 366.0

Few s.s. beds up to 8 cm wide , grading from 60º to 45º of c.a.; scarce irregular calcite up to 1 cm wide vnlts at 20º to 30º of c.a., few irregular 0.3 to 1 cm wide calcite lenses, with thin pebble dikes zones, trz of Py diss

366.0 367.90

Fresh Rock wide s.s. beds up to 20 cm at 20º of c.a., few irregular and broken 0.1 to 2 cm wide calcite vnlts.

367.90 387.70

Caracol Fm , thin bedding fresh to wk P-C altered, scarce calcite 0.1 to 0.5 cm wide vnlts at 20º to 40º of c.a.; scarce irregular 0.1 to 0.3 cm wide calcite lenses

   

378.60 m 1 to 1.5 cm wide Pebble dike at 75º of c.a.

387.70 388.60

Fold zone, irregular and small size 2 to 4 cm wide subangular rock fragments in calcite groundmass

388.60 392.88

0.1 to 0.5 cm wide beds of 80% silts and 20% of s.s. Beds at 60º to 70º of c.a., scarce up to 20 cm wide s.s. beds, scarce irregular 0.5 cm wide calcite vnlts at 40º of c.a.

   

391.35 m 1 to 5 cm wide calcite pebble dike at 70 ºof c.a.

392.88 393.18

Zone with irregular up to 10 cm wide pebble dikes

393.18 398.40

Fresh to wk P-C altered Carcacol Fm, thin bedding 95% silts, at 70º of c.a., scarce

6



   

calcite 0.2 to 1 cm wide vnlts at 30º and 60º of c.a.

398.4 401.42

Fresh S.S. ( 20%) beds 1 to 5 cm wide average, silts (80%) thin beds< 1 cm wide at 75º to 80º of c.a. trz of calcite 0.1 to 0.3 cm wide calcite lenses

401.42  

End of Hole

7


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: May 03 / 2004
TO: Tom Patton                                                                                                                                                                        & nbsp;               ccp.    Tom Turner
FROM: Héctor Fernández
SUBJECT: Drilling at Nieves
PAGES  

Summary of DDH QTA-13-04; 699,098 E; 2,652,373 N, 340°/-60°, Dolores Area (Option site New D1)

From To Description
0.00 3.05

Casing, No Core

3.05 11.62

Caracol Fm. Thin bedding 0.1 to 0.6 cm wide beds 98% silts, scarce <1 cm s.s. beds, bedding at 70º to 75º of c.a. wk P-C alteration wk bleached, oxidation to light brown colour; 0.2 to 1.5 cm wide vnlts of calcite-brown Goethite mainly in borders and also red Hematite, trz of MnOx, average 1 vnlt every 2 meters of core, vnlts at 15º to 20º of c.a.; few 0º to 5º and 70º of c.a.; scarce brown Geoth staining walls of vnlts. Few druse textures in calcite vnlts.

11.62 12.61

0.2 to 1 cm wide irregular calcite < Geoth-Hem vnlts about 3 vnlts per meter at 10º 20º and 50º of c.a.

12.61 15.80

Few 0.1 to 0.8 cm wide calcite – brown Geoth vnlts at 20º of c.a. also as thin lenses at 70º of c.a.

15.80 m End of irregular oxidation zone, starts zones among oxidized vnlts with FG Py diss.

15.80 20.12

Mix zone 0.1 to 0.5 cm wide calcite<Geoth-Hem vnlts 2 to 3 per meter at 5º, 20º and 70º of c.a. rock between vnlts with irregular diss of FG Py.

20.12 23.85

Scarce very thin 0.1 to 0.3 cm wide calcite vnlts, trz of Goethite staining walls Trz of FG Py diss.

23.85 m 1.0 cm wide calcite with anhedral Py in irregular borders at 30º of c.a., Py 1% to 2% diss in irregular small clouds. Up to 20 cm away from vnlt in the footwall.

23.85 26.20

Thin bedding silts 95%, at 70º to 75º of c.a. scarce calcite vnlts at 30º and 50º of c.a.

26.20 26.90

0.1 to 0.4 cm wide calcite vnlts with thin irregular Goeth bands , 4 to 5 vnlts per meter at 20º 50º and 70º of c.a.

26.90 28.10

0.3 to 0.8 cm wide calcite with irregular Goethite borders also in few lenses up to 3 cm wide.

28.10 30.33

Few s.s. beds up to 4 cm wide , scarce < 1 mm wide calcite with Goeth borders vnlts at 20º to 30º of c.a.

30.33 32.31

zone of thin (<0,6 cm wide) calcite with Goethite borders vnlts, 5 to 6 per meter scarce 1 cm to 5 cm wide vnlts with few Stibnite or Proustite needles at 30.80 m

32.31 35.50

Scarce 0.1 to 0.5 cm wide calcite, -trz of pink carbonate and trz of stibnite or proustite vnlts. .

35.50 36.76

Scarce calcite vnlts Thin bedding at 80º of c.a. grey to dark grey slts 90% scarce s.s.; few calcite vnlts 30º to 50º of c.a.

36.76 38.40

Stockwork of thin < 0.3 cm wide calcite –brown Geoth vnlts 10 to 12 per meter at 10º -30º and less 70º of c.a.

38.40 41.80

Stockwork with 1 to 4 cm wide vnlts formed by Calcite partially replace by Qtz - Brown Goethite and Hematite and small irregular spots of stibnite or proustite

1



needles, at 30º to 40º of c.a. also thin 0.1 to 0.5 cm wide calcite-Geoth vnlts, FG Py diss 1% to 2%

41.80 42.47

Few (1 or 2 per meter) thin 0.1 to 0.2 cm wide calcite .Geoth in walls vnlts at 40º to 50º of c.a.

42.47 45.88

Stockwork zone of thin 0.3 to 0.6 cm wide calcite with Goethite walls and spots of red to purple Hematite vnlts mainly at 5º to 25º of c.a.

45.88 46.33

Irregular FG Py clouds diss 1% to 2%

46.33 46.43

10 cm wide irregular calcite partially replaced by fine crystal qtz and subangular rock fragments as Pebble dike Py 1% in < 1mm irregular bands.

46.43 48.05

Few irregular < 0.2 cm wide calcite vnlts.

48.05 51.00

Thin and irregular 0.1 to 1 cm wide calcite with less Goeth vnlts at 0º to 10º of c.a. , FG Py in 0.1 to 0.2 cm wide bands.

   

48.55 m Fault zone at 60º of c.a., irregular 0.5 cm wide calcite –Py vnlts.

51.00 52.40

Fault Bx zone , planes at 60º of c.a. ; irregular calcite fragments , Py irregular vnlts 0.1 to 0.3 cm wide also in irregular thin bands in borders of some fragments In centre of the interval 6 cm wide calcite and fine grain crystalline qtz –Py and trz of black mineral Stibnite or Proustite veinlet at 50º of c.a.

52-40 61.57

Few (2 to 3 per meter) and thin (0.1 to 0.3 cm wide calcite and trz of brown mineral Sph? vnlts , in wk P-C altered thin bedded host rock , beds at 60º to 70º of c.a.

61.57 61.62

5 cm wide vein of Stibnite-Proustite or Argentite needles and trz of Sph and calcite vnlt at 60º of c.a.

61.62 62.23

Fault zone irregular milled rock and calcite vnlts fragments FG Py diss 3% to 4%

62.23 63.50

Bedding grading from 60º to 30º of c.a. FG Py in irregular clouds , in 0.1 to 0.2 cm bands and in irregular bands in 0.2 to 0.4 cm wide calcite vnlts

63.50 67.17

Bedding at 30º of c.a. Fractured rock with fault planes along bedding ; few irregular 0.1 to 0.3 cm wide calcite vnlts; Py in thin 0.1 to 0.3 cm wide lenses

67.17 68.40

Thin < 1mm wide “fractures” with white clay (sericite), scarce irregular 0.1 to 0.4 cm wide calcite in parts replaced by fine grain qtz, Py 1% mainly as thin irregular bands.

68.40 71.00

Few 1or 2 per meter , 0.3 to 1 cm wide calcite and trz of stibnite or proustite in very small needles staining to grey colour small irregular spots in the calcite vnlts at 30º to 50º of c.a.

   

70.90 m Fault at 75º of c.a. Milled rock and scarce calcite irregular fragments

70.90 74.00

Scarce 0.1 to 0.5 cm wide calcite vnlts at 40º to 50º of c.a.

74.00 78.03

Bedding at 40º of c.a.; Few 0.1 to 0.3 cm wide calcite lenses with thin bands of FG Py.

76.60 m 1 cm wide calcite with trz of Stibnite or Proustite needles and less Py vnlt at 70º of c.a. in fault plane

78.03 83.75

Kuc Fm thin bedding 95% silts, beds at 30º of c.a. wk P-C alteration, Bxed by faulting zones 5 to 20 cm wide.

Faults at 78 20 m (5 cm wide) at 70º of c.a. ; 78.75 m (5 cm wide) at 60º of c.a. with calcite fragments. 79.70 m (20 cm wide) at 60º of c.a. with few calcite and Py diss.

83,75 84.12

Fault zone with a 0.5 cm wide Calcite with very thin << 1 mm dark grey bands sulfosalts? also Py bands.

84.12 86.43

Broken rock by faults at 85.0 to 85.20 m and 86.13 to 86.30 m at 30º and 70º of c.a. few up to 1 cm wide calcite with thin late quartz microvnlts Py and trz of sulfosalts vnlts at 50 to 60º of c.a. Py in the interval 1%

86.43 90.32

Less broken interval Fault at 86, 82 at 65º of c.a. and fault at 87.50, scarce irregular calcite fragments. 1 cm wide pebble dike, Py in the interval 1%

2



   

89.80-90.32 m Irregular thin 0.1 to 0.2 FG Py vnlts Py total 2%

90.32 92.58

Bedding at 35º of c.a. Py 1% to 2% few thin 0.1 to 0.2 cm wide calcite Py irregular vnlts at 35º and 60º of c.a. few 2 to 7 cm wide calcite < Qtz and trz of ss vnlts .

   

90.78 m 7 cm wide calcite < Qtz and trz of sulfosalts vnlt at 70º of c.a.

   

92.23 m 5 cm wide Bx by fault zone at 65º of c.a.

    

94.48 m 2 cm wide calcite < qtz and trz of ss vnlt at 60º of c.a.  

92.58 95.70

Thin bedding at 30º of c.a. PC alteration; scarce 0.l to 1 cm wide calcite at 30º and 60º of c.a. Py 1% to 2%. In thin lenses

95.78 97.30

Few ( 1 vnlt per meter) 1 to 2 cm wide calcite, less qtz and trz of ss vnlts at 60º and 70º of c.a.

95.78 m Fault at 60º of c.a.; 96.35 Fault with irregular 1 to 2 cm wide calcite-Py and trz of ss vnlt at 60º of c.a.

   

97.30 m Fault with calcite vnlt at 70º of c.a.

97.30 99.96

Zone of faults up to 20 cm wide gouge Bxed zones , scarce fragments of calcite vnlts; fault planes 40º , 60º and 80º of c.a.

   

98.25 m 4 cm wide calcite, broken rock and trz of ss vnlt at 50º of c.a.

99.96 105.80

Thin bedding grading from 30º to 70ºthen to 50º of c.a. s.s. beds up to 3 cm wide usually 0.1 to 1 cm wide , very scarce thin < 0.5 cm wide calcite vnlts no Py

105.80 114.0

Sandstone beds up to 30 cm wide, weak bleached, P-C alteration bedding 50º to 30º of c.a. bxed and milled faulted zones up to 1 m wide Py and calcite fragments, irregular up to 5 cm wide pebble dikes.

106.80-107.15 m Irregular Calcite FG Py in thin bands and trz of ss vnlt with small pebble dike zones at 50º of c.a. perpendicular to bedding Py 3% to 5%

110.41-111.90 m Strong fractured and Bxed zone rotated fragments of rock, Fault planes mainly along bedding, irregular and broken calcite < qtz and trz of ss up to 2 cm wide vnlts , Py 1% trz of micro needles of Py? or AsPy?

111.90-114.00 m Bx by fault zones up to 1 m wide with subhedral FG Py clouds and irregular lenses, Py in interval 35 to 45, broken and irregular calcite-Py vnlts.

114.00 123.40

Fresh to weak P-C altered rock, 98% silts, few 0.1 to 2 cm wide s.s. beds, bedding at 50º of c.a. , scarce (less than 1 per meter) thin 0.1 to 0.6 cm wide calcite< Py vnlts, mainly at 40º to 50º of c.a. very scarce up to 1 cm calcite lenses Py in interval < 1%

   

120.50-121.00 m Py in irregular clouds 1 % to 2% and in thin calcite vnlts

123.40 123.75

0.6 cm wide calcite trz of ss vnlt at 40º of c.a.

123.75 126.60

Faulted zone, calcite and white clay ( sericite) an fault planes, broken and deformed thin 0.1 to 0.6 cm wide calcite vnlts, Fault planes 40º ,60º and 70º of c.a.

126.60 154.10

Kuc 85% to 90% silts, few s.s beds up to 25 cm wide with irregular bedding planes wk P_C alteration, very scarce 0.3 to 1 cm wide calcite trz of ss vnlts.

127.70-128.60 m (2) Irregular 0.3 to 1 cm wide calcite and trz of ss vnlts at 20º and 30º of c.a.

129.30 130.0 m Py 2% to 3% in thin < 2mm wide irregular vnlts also in lenses and in milled rock by fault at 129.40 m planes at 30º to 50º of c.a.

   

129.64 m 0.4 cm wide calcite trz of ss vnlt at 50º of c.a.

131.60-135.74 m FG Py in the < 2 mm irregular lenses, also in thin < 1 cm wide scarce calcite vnlts PY 2%

154.10 155.60

Syngenetic deformed slump zone formed by irregular and surrounded deformed calcite 0.1 to 1 cm wide bands in milled consolidated rock flour.

155.60 162.40

Thin bedding silts 95% , beds 80º to 85º of c.a. scarce and thin 0.1 to 1 cm wide irregular calcite< Py lenses.

162.40 162.70

Py 2% in irregular thin 1 to 2 mm wide calcite vnlts, FG Py folded lenses.

3



162.70 162.90

Calcite-Stibnite-Proustite? Vnlt at 60º of c.a., formed by 5 to 10 cm wide calcite bands in walls and a centre of 1 to 2 cm wide stibnite-proustite? Band, stibnite- proustite FG diss in calcite 5 cm footwall.

162.90 164.35

Irregular and broken calcite-Py and trz of stibnite and ss vnlt up to 4 cm wide Py 1% to 2%, Rock fragments in calcite as an irregular Pebble dike

164.35 166.00

Irregular FG Py clouds diss 1%

166.00 178.61

Thin bedding at 65º to 75º of c.a. 95% silts, fresh to wk P-c altered rock ; very scarce less than 1 per meter 0.1 to 1 cm wide s.s. beds, very scarce and thin < 1 cm wide calcite with scarce Py vnlts at 10º to 30º of c.a. , very scarce less than 1 per 2 meters calcite up to 1 cm wide lenses

178.61 185.90

Kuc Caracol Fm Silts 95% thin bedding at 60º of c.a. Fresh to wk P-C alteration scarce (2 in the interval) 0.1 to 0.5 cm wide calcite-Py and trz of ss? Vnlts at 30º and 60º of c.a.

185.90 187.15

Thin < 1mm wide calcite with white clays (sericite) fractures or vnlts at 10º to 20º of c.a.

187.15 187.35

0.5 to 1 cm wide calcite-sericite, FG Py vnlts at 5º of c.a. very thin fine grain black bands <<1 mm wide of ss? or milled rock?

187.35 187.50

Irregular 10 to 15 cm wide fault –vein zone with small size zones of Bx formed by thin bands of calcite partially replaced by quartz, milled FG Py and trz of very thin black bands of ss?

187.50 189.59

0.1 to 0.6 cm wide calcite –sericite? and small size zones of pebble dike , structure at 10º to 15º of c.a.

189.59 197.45

Kuc thin bedding 70º to 80º of c.a. 0.2 to 1 cm wide s.s. beds; fresh to wk P-C alteration; scarce (1 t o 2 per meter) thin 0.1 to 0.6 cm wide calcite –FG Py vnlts at 10º, 20º and 50º of c.a. Trz of FG Py diss mainly in s.s. beds, scarce VFG Py clouds, sericite in some thin fractures.

192.73-192.88 m Irregular Bx zone formed by calcite partially replaced by qtz, forming “blade calcite” textures FG Py and small size zones of Pebble dike thin irregular very thin black bands sulfosalts?

197.45 199.10

Sericite in very thin up to 1 mm wide calcite vnlts at 10º to 20º of c.a.

199.10 201.00

0.1 to 0.3 cm wide sub-parallel calcite –clays vnlts 20º of c.a. some small size calcite druse textures; FG Py in euhedral cubic Py vnlts 0.1 to 0.4 cm wide lenses at 70º of c.a. Py 1% in bottom of the interval

201.00 202.30

Increase size and amount of 0.3 to 1 cm wide calcite vnlts grading to a Bx zone at bottom of interval, anhedral FG Py 2% to 3% in irregular lenses and less in calcite vnlts

202.30 202.55

Bx zone formed by angular 0.5 to 2 cm long rock fragments, few fragments look like a porphyritic rock? in a milled mix of calcite-FG Py and less qtz groundmass Py up to 7% fault at bottom of interval at 60º of c.a. crossing beds. Sulfosalts in milled groundmass?

202.55 203.09

Irregular and few thin 0.2 cm wide calcite FG Py vnlts at 30º and 60º of c.a.

203.09 203.26

Vein of Calcite-FG Py- less qtz-stibnite-brown sphalerite and trz of chalcopyrite, sulfosalts and possible FG Galena at 70º to 80º of c.a.

203.26 205.45

Irregular up to 1 cm wide calcite with occasional blade textures, less qtz –anhedral FG Py vnlts in Stockwork

   

204.76 m Fault at 30º of c.a.

205.45 207.80

Thin bedding at 65º of c.a. scarce 1 t o 2 per meter 0.1 to 0.3 cm wide calcite-Py lenses FG Py diss 1%

   

207.80 m 3 cm wide calcite replaced by fine grain qtz, less FG Py in walls and trz of

   

ss? vnlt at 70º of c.a.

4



207.80 225.00

Silts 90º few up to 3 cm wide s.s. irregular beds, bedding at 70º to 75º of c.a.; very scarce less than 1 to 2 per meter 0.1 to 1 cm wide calcite , thin bands of fine grain qtz and trz of FG Py vnlts and less lenses Py in interval 1%

225.00 227.00

Increase calcite thin lenses and few vnlts also Py from 2% to 3% in FG clouds and thin lenses, thin and scarce up to 2 cm wide pebble dikes in walls of calcite vnlts.

227.00 230.65

Py 1% in thin and scarce calcite up to 0.5 cm wide lenses

230.65 232.00

Thin 1 to 3 cm wide pebble dikes and small and irregular Bx zones formed by calcite-FG Py, Py in zones up to 5% in clouds and lenses

232.00 239.72

Thin bedding siltstone 90%, few up to 9 cm wide irregular beds of s.s.; bedding 70º to 75º of c.a.; very scarce 2 in the interval 0.4 to 0.8 cm wide calcite-Py and trz of ss vnlts along bedding.

237.30-237.90 m Calcite irregular up to 1 cm wide vnlts as groundmass of consolidated sedimentary Bx, Py up to 4% diss

   

237.45-237.50 m Fault-vein at 70º of c.a. Calcite-FG Py bands , Py 5%

239.72 254.81

Sandstone up to 80% of the rock, thin zones of thin banded siltstone; s.s. beds up to 3 meters along core axis, bedding 70º of c.a. wk QSPC alteration sericite in fractures, increase of Py vnlts, FG Py diss 1% with zones up o 2% mainly in top of the interval.

246.0-246-93 m increase amount of 0.1 to 0.5 cm wide calcite FG Py vnlts at 5º to 10º of c.a.

246.93-248.67 m, Irregular calcite and less qtz -FG Py vnlts, forming Stockwork and pebble dike zones at 5º to 10º of c.a. in the whole core diameter; trz of very fine black mineral staining to dark grey calcite walls ss?

248.67-249.55 m Calcite-less qtz FG Py bands and vnlts 0.1 to 0.6 cm wide at 20º and 60º of c.a.

249.55-250.80 m Few calcite druses in thin 0.1 to 0.5 cm wide vnlts at 10º of c.a. zones up to 15 cm wide of dirty sandstone deposition, siltstone irregular fragments up to 0.5 cm long in a dark grey colour groundmass

250.80-253.17 m Irregular thin 0.1 to 0.8 cm wide calcite, less qtz and white clays (sericite) vnlts forming up to 5 cm wide irregular Bx zones, zones up to 40 cm long with thin and few only calcite irregular vnlts in stockwork.

254.81 256.00

Thick up to 1.9 m wide s.s. beds wk QSPC alteration, sericite in fractures, Stockwork of 0.5 to 1 cm wide irregular and broken calcite and less FG quartz-Py vnlts druse textures Trz of s.s in very FG black spots? Py 1%

256.00 259.50

Only thick (up to 2 m along c.a.) beds of s.s. grey to light grey colour.

    

257.80 m 2 cm wide calcite and milled rock lenses at 50º of c.a.  

259.50 260.65

S.S. up to 1.9 m beds at 50º of c.a. Thin parallel to sub-parallel 0.2 to 2 cm wide irregular calcite with thin zones replaced by quartz and anhedral FG Py vnlts, trz of black mineral sulfosalts?

260.65 266.40

S.S. 60% to 70%, up to 1.8 m along c.a. beds, wk QSPC alteration, sericite in fractures 5º to 10º and 50º to 60º of c.a. few (1 per meter) 0.3 to 1 cm wide irregular calcite less qtz-Py vnlts at 10 to 20º of c.a. and 50º to 60º of c.a. scarce up to 1.5 cm wide calcite forming druse textures vnlts FG Py clouds in dirty zones of s.s. siltstone up to 0.8 cm wide fragments in dark grey groundmass

266.40 277.20

S.S 70% to 80% bedding at 60º of c.a. wk QSPC

273.60-276.15 m Py 1% in thin 0.1 to 0.2 cm wide vnlts also in thin 0.1 to 0.5 cm wide calcite vnlts.

   

276.15 m Fault Bx zone 4 to 6 cm wide at 10º of c.a.

   

276.15-277.20 m Calcite druses in thin 0.2 to 0.4 cm wide vnlts with euhedral Py.

277.20 278.35

Kuc grey to dark grey colour Siltstone 70% to 75%, few with irregular borders 0.5

5



to 3 cm wide s.s. beds deformed by slump features P-C alteration, thin <1 cm wide calcite-Py irregular and vnlts , broken calcite and rock by sedimentary recitation. Py in interval 1% to 2%

278.35 285,00

Thin bedding 0.5 to 1 cm wide, 85% silts bedding at 60º of c.a. wk P-C alteration

278.35-281.90 m FG Py 2% in few calcite vnlts, also as irregular and small clouds or in scarce up to 0.8 cm wide lenses.

281.80 m Py 1% few irregular and broken by slump features 0.3 to 0.8 cm wide calcite vnlts

285.00 285.80

Calcite druses with crystals up to 0.5 cm long in irregular 0.5 to 2 cm wide vnlts at 10º to 20º of c.a.

285.80 288.20

Very FG Py diss 1%, scarce 0.1 to 0.3 irregular calcite vnlts and lenses at 30º and 60º of c.a.

288.20 290.60

Irregular bedding wk P-C alteration few 0.1 to 1 cm wide calcite vnlts, druse textures, vnlts at 50º and 60º of c.a. trz of Py

290.60 291.80

Bedding 0º to 10º of c.a. Wk P-C alteration few 0.1 to 1 cm wide calcite vnlts.

291.80 300.10

S.S. 30% silts 70%, bedding from 50º to 20º of c.a. scarce up to 2 cm wide Pebble dikes at 50º to 70º of c.a. scarce < 1% Py few 0.6 to 1 cm wide calcite vnlts 20º to 30º of c.a.

300.10 301.50

Silts 90%, irregular 0.5 to 4 cm wide calcite vnlts at 30º to 40º of c.a. druse textures

301.50 308.40

Silts 95% bedding 15º to 20º of c.a. Fresh to wk P-C alteration, very scarce calcite 0.1 to 0.4 cm wide calcite vnlts and in irregular lenses (less than 1 per meter)

308.40 310.00

Wk sericite in fault zone and in walls of few calcite vnlts

   

308.40-308.70 m Fault zone, at 50º of c.a.

310.00 311.40

Silts 90%, bedding 20º of c.a. scarce 1 to 2 per meter 0.2 to 0.5 cm wide calcite vnlts at 40º of c.a.

311.40 312.80

Few (4 to 5 per meter) thin 0.5 to 1 cm wide calcite-FG Py vnlts

312.08 m Bx by fault with irregular calcite vnlts fragments and 0.1 to 1 cm long angular rock fragments few with calcite vnlt in borders in rock flour, Calcite. FG Py bands at 60º -70º of c.a. Py in interval 1% to 2%walls of calcite

312.80 316.65

Silts 90%, wk P-C alteration, bedding at 20º of c.a. , few banded calcite vnlts up to 3 cm wide at 0º to 30º of c.a. few thin 0.2 cm wide calcite lenses

316.65 324.50

Siltstone thin beds with irregular bedding planes at 5º to 15º of c.a. , scarce (less than 1 per meter) 0.1 to 0.3 cm wide calcite vnlts, trz of FG Py diss.

324.50 326.80

Bedding 10º to 20º of c.a. silts 95%; Wk Pc alteration scarce 0.1 to 0.2 cm wide calcite vnlts at 40º and 60º of c.a. irregular thin calcite lenses, very scarce FG Py clouds.

326.80 329.00

Bedding 20º to 30º of c.a. Few 0.2 to 1 cm wide calcite vnlts at 15º to 30º of c.a.

329.00 333.00

Siltstone thin beds at 30º to 40º of c.a. scarce 0.1 to 0.3 cm wide calcite vnlts at 55º of c.a. Py < 1% FG diss in thin intervals in walls of calcite vnlts.

333.00 335.50

Increase amount of 0.1 to 0.5 cm wide calcite vnlts at 30º .40º and 60º of c.a. Druse calcite in few vnlts.

335.50 336.80

Wk QSPC alteration increase of sericite in fractures and in walls of thin calcite vnlts and fractures 10º 40º and 60º of c.a. . FG Py in irregular thin vnlts also with calcite very fine Trz of ss? In calcite vnlts, Py < 1%

336.80 343.00

S.S. 30% bedding at 20º to 40º of c.a. few up to 20 cm wide s.s. beds, irregular calcite 0.2 to 0.6 cm wide calcite vnlts 2 to 3 per meter,

343.00 346.25

Silts 90%, irregular bedding plans at 50º of c.a., some irregular and broken calcite vnlts with thin and wk sericite walls, 0.1 to 1 cm wide calcite vnlts, trz of FG Py in calcite.

346.25 352.05

Kuc Fm , Silts 90% thin irregular < 1 cm bedding at 60º to 70º of c.a.; Fresh to Wk

6



P-C altered rock , scarce (1 to 2 per m ), 0.1 to 0.3 cm wide irregular calcite vnlts at 30º of c.a., and lenses, trz of FG Py diss in walls 1 to 2 cm away of calcite vnlts

   

348.05 m 0.3 to 2 cm wide calcite with thin bands of milled rock at 60º of c.a.

352.05 355.10

Increase to 2 or 3 per meter of irregular0.1 to 1 cm wide calcite vnlts.; VFG Py diss in thin lenses Py 1%

   

354.50 m 0.5 to 2.5 cm wide druse calcite< Py vnlt at 15º top 25º of c.a.

355.10 361.95

Kuc Fm Silts 85º to 90º Deformed by sedimentation irregular bedding in places to 0º to 10º of c.a., bedding in general 50º to 70º of c.a.; scarce irregular up to 5 cm wide s.s. beds, VFG Py diss in irregular bands 0.1 to 1 cm or forming small size clouds Py in interval 1% few irregular 0.1 to 0.4 cm wide calcite vnlts and lenses, scarce up to 1.5 cm vnlts with druse textures.

361.95 363.85

Silts 80% to 85%, zones of deformed bedding between regular thin beds at 60º of c.a., scarce up to 15 cm wide s.s. beds, fresh to wk P-C alteration, scarce less 1 per meter, 0.1 to 0.5 cm wide calcite vnlts and lenses trz of VFG Py diss in thin bands.

363.85 365.00

Irregular bedding planes, s.s. beds up to 25 cm wide, few calcite < Py in 0.3 to 0.6 cm wide vnlts and lenses VFG Py diss in thin bands, 1%

   

364.44 m 6 cm wide calcite-Py lens

365.00 370.70

Bedding with a series of nearby small displacements, very scarce 0.1 to 0.3 cm wide calcite vnlts and lenses, scarce thin zones of light green colour clays in walls of deformed calcite lenses, VFG Py diss in small clouds mainly in irregular s.s. lenses. Py 1% to 2%

370.70 373.09

Kuc Fm fresh to wk P-C altered, irregular bedding with small displacements, very scarce 0.1 to 0.4 cm wide calcite < FG Py vnlts at 40º of c.a. or in thin 0.1 to 0.3 cm wide calcite lenses, scarce FG Py diss in small clouds, 1%

373.09 376.50

Few 1 per meter, 0.3 to 1 cm wide calcite FG Py vnlts at 60º and 70º of c.a., irregular folded thin 0.1 to 0.3 cm wide calcite bands, few with up to 4 cm wide walls of light green colour clays, VFG Py diss in thin < 1 cm lenses and small clouds Py 1%

376.50 382.15

Kuc Fm siltstone 95%, very scarce 1 to 2 cm wide irregular s.s. beds, scarce calcite vnlts at 25º to 30º of c.a. trz of FG Py diss in thin bands and clouds mainly in the s.s. beds.

382.15 382.83

Irregular up to 1 cm wide 3 calcite vnlts in the interval, 1 of them with trz of FG stibnite, or s.s?, vnlts at 10º, 30º and 40º of c.a. light green colour clays in few walls of calcite vnlts.

382.83 385.88

Scarce 0.1 to 0.6 cm wide calcite < Py vnlts at 45º of c.a. and lenses at 60º of c.a. FG Py in irregular < 0.5 cm long lenses, and VFG Py diss in thin bands Py total 1%

385.88  

End of Hole

7


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: May 10/ 2004
TO: Tom Patton                                                                                                                                                                        & nbsp;              ccp. Tom Turner
FROM: Héctor Fernández
SUBJECT: Drilling at Nieves
PAGES  

Summary of DDH QTA-14-04; 698,728E, 2,652,442 N, 340°/-60°, Dolores Area (Option site west of D2)

From To Description
0.00 4.27

Drilled with Tricone bit , No Core Casing

4.27 20.00

Kuc Fm. 50% S.S in up to 45 cm wide beds, silts 0.1 to 1 cm wide in zones up to 80 cm wide, bedding at 60º of c.a. Wk bleached. Wk P-C alteration; 0.4 to 1.2 cm wide calcite with thin walls of Goeth<Hem vnlts at 30º , 50º and 60º of c.a. zones of Stockwork up to 2m along c.a.

   

4.27-5.28 m Calcite-Goeth 0.3 to 1 cm wide vnlts in Stockwork  

5.28-6.90 m Wk silicified siltstone, few 0.1 to 0.4 cm wide calcite–Goeth vnlts and lenses, 6.17 m Fault 10 cm of gouge at 70º of c.a. in milled rock and Goeth groundmass.

   

6.90-7.70 m (4) 0.4 to 0.8 cm wide calcite –Goeth vnlts at 40º of c.a.

7.70 10.00

7.70-10.00 m S.S. beds up to 50 cm along c.a.; few 0.1 to 0.2 cm wide calcite vnlts , faults at 8.43 m and 8.75 m and 10.00 m (70º of c.a.); Goethite<calcite in few vnlts 20º and 50º of c.a. in bottom of the interval.

10.00- 12.75 m 0.2 to 1 cm wide Goethite < Hematite < Calcite vnlts ( 5 to 8 per meter ) at 30º, 50º to 60º of c.a.

12.75 - 14.75 m -Scarce 1 to 2 per meter thin 0.1 to 1 cm wide calcite with thin Goeth bands vnlts at 30º and 40º of c.a.

14.75 -16.75 m 1 to 2 per meter, thin 0.1 to 1 cm wide calcite < qtz with Goeth and less Hematite vnlts at 30º and 40º of c.a.

16.75-20.00 m Wk silicification in silts beds to a light grey colour; thin 0.1 to 0.4 cm wide. calcite-Goeth< Hem vnlts at 10 to 20º of c.a. and 60º to 70º of c.a.; zones with anhedral Py diss 1%, also Py in thin bands in calcite vnlts.

20.00 26.05

Kuc Silts 95% scarce s.s. beds, irregular thin bedding at 50º to 70º of c.a., very scarce calcite and trz of Goeth vnlts at 20º to 30º of c.a., oxides only in fractures and vnlts.

26.05 27.32

Silts wk bleached, 0.5 to 3 cm wide calcite< Qtz, Py-Goeth< Hem vnlts every 10 to 20 cm of core, few up to 1.5 cm wide pebble dikes in walls of vnlts.

   

26.40 m Fault vnlt at 50º of c.a.

27.32 33.90

Kuc Fm scarce 0.1 to 0.7 cm wide calcite< Py-Geoth vnlts at 50º of c.a.

33.90 35.34

Silst 90%, 0.5 to 3 cm wide calcite with up to 5 cm wide pebble dike zones, forming a 13 cm wide zone

35.34 36.50

Zone with irregular calcite vnlts up to 2,5 cm wide with druse textures less Hematite –Goethite at 65º of c.a. Goeth in hairline parallel lenses also Goeth diss 1% to 2%




36.50 43.59

Scarce calcite vnlts with thin < 1 mm wide Goeth bands of partially oxidized Py: few 0.1 to 1.5 cm wide calcite-Goeth vnlts at 40º of c.a. FG Py in thin irregular bands mainly in walls of calcite vnlts, also FG Py 0.2 to 0.3 cm wide lenses, Py in interval 2% microvnlts of Goeth.

43.59 45.57

Fault zone with irregular calcite-Goeth Hematite and trz of thin fine grain black oxide? Ss? Vnlts. MnOx trz; irregular 1to 1.5 cm wide Bx zones

45.57 48.60

P-C altered rock: abundant Goethite microvnlts in shear by fault zone, few irregular open spaces with calcite-VFG Py bands, partially oxidized red to black colour Hematite vnlts at 10º of c.a.

48.60 49.80

Zone with (6) 0.5 to 8 cm wide calcite less qtz < Py partially oxidized to Goethite and trz of ss? vnlts at 40º to 60º of c.a.

49.80 50.80

Fault gouge zone at 50º to 60º of c.a. milled rock, scarce calcite –Py vnlts fragments; Py irregular 0.5 to 2 cm long mainly in walls of vnlts, Py in interval 2%

50.80 52.10

Siltstone partially stained to light brown colour by abundant micro to 0.2 cm wide calcite-Goeth vnlts.

52.10 55.20

Fault –vnlts zone, bands 5 to 10 cm wide Calcite and trz of s.s. at 70º of c.a., Zones up to 10 cm wide of gouge and up to 20 cm wide of BX, Py 3% in the interval, Py irregular up to 5 mm wide bands in calcite vnlts , trz of FG black mineral ss?

55.20 57.30

Folded and Fractured zone, thin silts beds from 30º to 0º of c.a. then 20º ; thin 1 to 5 cm wide fault gouge zone ,along bedding, milled rock with FG anhedral Py diss, in irregular bands and clouds 4% to 5%

57.30 57.70

Fault gouge zone, calcite and trz of ss in irregular and broken vnlts, milled rock and FG Py groundmass Py 2% to 3%.

57.70 58.40

Few Py-calcite vnlts at 30º to 40º of c.a. FG Py irregular thin lenses Py 2%

58.40 62.75

Scarce calcite irregular 0.1 to 0.5 cm wide vnlts Py trz, less deformation by faulting than last interval Py < 1%; Fault planes along bedding also 0º to 10º of c.a.

62.75 65.43

Fault zone with irregular 2 to 10 cm wide calcite scarce qtz , Py and trz of ss vnlts, 1 to 5 cm wide pebble dikes zones, Fault and vnlts at 50º to 70º of c.a.

65.43 76.26

Thin < 1 cm wide mainly silts beds at 70º of c.a. , few irregular 0.1 to 1 cm wide s.s. lenses, Wk P-C alteration scarce ( less than 2 to 3 per meter) 0.1 to 0.6 cm wide calcite< Py vnlts and lenses, Py partially oxidized to Goeth, Vnlts at 30º to 40º of c.a.

69.00 m Irregular 1.5 cm wide band formed by 0.1 to 0.3 cm wide calcite bands. Goethite staining up to 40 cm along c.a.

76.26 81.35

Pebble dikes up to 10 cm wide , 0.2 to 2,0 cm wide calcite < sericite in walls and trz of Py vnlts at 0º to 20º of c.a.

79.50-81.35 m Dark brown Goethite oxidation and trz of tan colour Jarosite? Boxworks of Py?

81.35 84.50

Thin Silts beds 0.1 to 1 cm wide at 45º to 50º of c.a. very scarce and thin < 1 mm wide calcite vnlts at 30º and 50º of c.a.

84.50 86.10

Thin silts beds at 50º of c.a. Wk P-C alteration, wk sericite in walls of scarce 0.1 to 0.7 cm wide calcite vnlts at 20º to 30º of c.a. or lenses.

86.10 92.00

Less than 1 per meter 0.2 to 0.4 cm wide calcite vnlts and lenses trz of FG Py in calcite vnlts

    

90.00-90.20 m Shear zone Wk foliation along irregular bedding.  

92.00 94,80

Irregular up to 3 cm wide calcite with thin pebble dikes walls at 5º to 10º and 30º of c.a. irregular hairline black bands in walls of calcite vnlts ss?




94.80 105.77

Silts 95% in irregular <1 cm beds wk P-C alteration; bedding at 70º of c.a., scarce less than 1 per meter irregular 0.1 to 0.6 cm wide calcite vnlts at 40º and 50º of c.a., druse textures. Trz of hairline black bands in calcite vnlts. Ss?

105.77 119.70

Kuc Fm, thin bedding silts 98%, very scarce < 0.5 cm wide s.s. beds, bedding at 50º to 60º of c.a. Fresh to wk P-C alteration,; very scarce less than 1 per meter, very thin 0.1 to 0.3 cm wide calcite and trz of FG Py in walls vnlts at 30º and 60º of c.a.

118.30 m Fault along bedding at 80º of c.a. with irregular 0.1 to 0.5 cm wide calcite lenses.

119.70 120.00

Irregular up to 2 cm wide Pebble dike and sub parallel 0.5 to 0.8 cm wide calcite vnlts at 40º to 60º of c.a.

120.00 124.00

Silst irregular thin beds at 30º to 60º of c.a. Very scarce calcite thin vnlts. At 70º of c.a.

124.00 127.40

Irregular with wave features and folded thin beds of silts , few up to 0.8 cm wide s.s. beds, two folds in interval bedding starts at 60º then 0º-45º again 0º and last 30º of c.a. 2 to 3 cm wide calcite less qtz in the centre vnlt, qtz fine grain forming small druses, also replacing part of the calcite, small pebble dikes zones, structure at 0º to 25º of c.a. in axis of fold few 0.3 to 1 cm wide irregular calcite vnlts at 60º and 70º of c.a. and 30º of c.a.

   

125.50 and 125 .70 m Faults at 30º and 70º of c.a. respectively

   

126.70-127.40 m VFG Py diss in thin < 1 mm bands Py 1%

127.40 136.60

Irregular bedding planes, silts 95%, few up to 2 cm wide s.s. lenses, bedding at 60º of c.a.

   

131.60 m 6 cm wide Fault zone at 60º of c.a., crossing bedding, 2 cm wide

   

gouge, 4 cm of irregular 0.5 to 0.8 cm wide calcite < FG Py lenses, Py 2%

136.60-134.00 m Thin 1 mm wide FG Py bands also in small clouds Py in interval 1%

134.00 m Fault at 15º of c.a. thin 0.1 to 0.3 cm wide calcite and trz of sericite in walls vnlts at 0º to 10º of c.a.

136.60 139.55

S.s. beds up to 43 cm along c.a. bedding at 60º to 80º of c.a. ; 0.2 to 0.6 cm wide calcite with sericite in walls vnlts at 10º to 30º of c.a.

139.55 140.60

0.3 to 0.5 cm wide calcite vnlt at 30º of c.a.

140.60 148.74

S.S. irregular beds up to 1 m along c.a. , scarce 0.1 to 1 cm wide irregular calcite and trz of FG Py vnlts at 25º and 70º of c.a.

148.74 149.74

Fault along beds, 9 cm wide of irregular 0.1 to 1 cm wide calcite bands, 13 cm of Bx with rounded Rock fragments and less irregular calcite bands-FG Py diss in a rock flour groundmass, rest of fault zone of shear with irregular 0.1 to 0.5 cm wide calcite folded vnlts

149.74 151.60

Kuc silts 98%, scarce < 0.5 cm wide s.s. beds, wk P-C alteration, some (6 to 8 per meter) thin 0.1 to 0.3 cm wide irregular calcite-FG Py vnlts and lenses, Py also in irregular up to 1.5 cm wide lenses or as small size clouds. Py 1% to 2% in the interval.

151.60 159.20

Silts 95% fresh to wk P-C alteration trz of sericite in few calcite vnlts walls, very scarce thin 0.1 to 0.2 cm wide calcite-FG Py vnlts and lenses Faults at 154.25 m, 154.53 m, 156.20 m, 157.00 m, 158.45 m

159.20 164.40

Silts 98% bedding at 60º of c.a. trz of very thin < 1 mm wide calcite vnlts 1 calcite lens 0.5 cm wide.

164.40 166.40

Silts 98% to 95% thin beds at 60º of c.a. scarce 1 per meter. 0.3 to 0.4 cm wide calcite vnlts at 15º of c.a.




166.40 169.30

Scarce calcite vnlts on 3 cm wide calcite FG anhedral Py lens with walls of light green colour clays walls.

169.30 171.40

Bedding at 50º of c.a. Broken by faulting zone, fault planes at 30º , 60º and also along bedding, thin sericite film in walls of some fractures, also in walls of few up to 1 cm wide FG Py in irregular and broken calcite vnlts Py 2% to 3%

171.40 176.45

Silts 98%, thin bedding at 55º to 60º of c.a. fresh rock

176.45 177.00

Consolidated old fault zone, irregular and broken calcite lenses and vnlts 0.1 to 0.5 cm wide, thin < 1mm bands of FG Py 2%.

177.00 191.10

Fresh Kuc Fm bedding 55º to 60º of c.a. silst 90% 0.2 to 0.5 cm wide scarce s.s. beds, very scarce and thin < 1mm wide calcite with thin fine grain rock bands. One 32 cm wide calcite thin FG rock bands at 187.43 m

191.10 191.20

1.2 to 1.5 cm wide calcite –Py and trz of sulfosalts vnlt at 40º of c.a.

191.20 196.90

Increase amount and width ness of s.s. beds up to 3 cm wide, bedding at 55º of c.a. silts 85% to 90%, few 0.1 to 0.6 cm wide calcite – Trz of FG Py vnlts at 30º and 60º of c.a.

196.90 197.20

Fault zone Calcite less FG Qtz < sericite –Py irregular and broken vnlts, small druse textures, Trz of black mineral staining vnlts ss?

197.20 199.80

Silts beds 80% to 85%, s.s. up to 8 cm wide beds, usually 0.1 to 2 cm wide, fresh to wk P-C altered rock: bedding at 50º of c.a. very scarce less than 1 per meter 0.2 to 0.4 cm wide calcite vnlts and lenses at 40º of c.a.

199.80 203.40

s.s. beds up to 80 cm along c.a., fresh rock beds at 50º to 70º of c.a.

   

199.80 m 3 cm wide banding calcite FG Rock in thin irregular bands FG Py lens

203.40 204.80

Some irregular calcite up to 3 cm wide vnlts thin pebble dikes, broken calcite vnlts.

204.80 209.00

Silts 80%, s.s. 20%, irregular up to 3 cm wide s.s. beds at 55º to 60º of c.a. few irregular 0.1 to 1 cm wide calcite. FG anhedral Py vnlts at 30º to 40º of c.a.

209.00 209.95

Calcite-sericite thin vnlts at 10º of c.a.; 0.5 to 2 cm wide irregular calcite less FG Quartz replacing calcite FG PY and trz of ss? Vnlt at 10 ºof c.a.

209.95 211.95

Thin bedding at 65º of c.a. silts 90%, thin 0.2 to 0.8 cm wide s.s. lenses, scarce 0.1 to 0.5 cm wide calcite vnlts.

211.95 212.45

Irregular calcite partially replaced by FG quartz-Py sericite and trz of ss? Vnlts with parallel pebble dikes up to 5 cm wide at 20º of c.a.

212.45 215.49

Thin bedding at 60º of c.a., scarce 0.1 to 0.6 cm wide calcite-sericite vnlts at 30º of c.a. few calcite lenses.

215.49 217.28

Kuc Fm wk P-C alteration wk bleaching mainly in s.s. beds, s.s. up to 7 cm wide beds at 50º to 60º of c.a. , few thin < 0.5 cm wide calcite-FG Py vnlts and trz of ss in Stockwork

217.28 219.70

Silts 95%, thin bedding, scarce 0.1 to 0.5 cm wide calcite FG Py lenses.

219.70 219.90

Small size Calcite-FG Py and thin black bands of rock? or ss? in walls vnlts at 50º, sericite in calcite walls.

219.90 228.55

Few up to 30 cm wide s.s. beds, usually 0.5 to 1 cm wide; bedding at 60º of c.a., fresh rock to wk P-C alteration: scarce thin < 0.5 cm wide calcite-FG Py vnlts and lenses.

224.50-224.70 m Calcite < Py pebble dike up to 1,5 cm wide , irregular 0.3 to 0.5 cm wide calcite lenses.

228.55 228.80

Fault gouge zone, scarce fragments of calcite vnlts in milled rock flour, fault planes at 65º and 75º of c.a.

228.80 235.20

Silts 90%, scarce up to 15 cm wide s.s. beds, bedding at 60º of c.a., very scarce < 0.1 cm wide calcite vnlts and lenses




   

229.00 m 0.5 cm wide Pebble dike at 50º of c.a.

235.20 235.90

Irregular Stockwork zone of 0.3 to 1 cm wide calcite partially replaced by fine grain Qtz- Py and ss vnlts , few vnlts up to 2 cm wide

235.90 239.20

Increase width of s.s. beds up to 65 cm wide, PC alteration with some sericite in walls of vnlts, few irregular up to 2 cm wide calcite lenses-anhedral FG Py clouds, and in irregular bands in calcite.

239.20 239.40

Consolidated shear zone, irregular calcite up to 2 cm wide bands, wave shape bands of fine grain rock bands. ( slump zone)

239.40 242.20

S.S. beds 80% to 90%, in thick beds, few 0.1 to 0.4 cm wide calcite-sericite< Py and trz of ss vnlts at 30º and 50º of c.a.

242.20 243.00

Shear zone calcite and fine grain sediment in irregular wave shape Py 1% to 2% in interval

243.00 246.00

S.S. beds up to 2 m wide, wk bleaching, calcite partially replaced by qtz- sericite- FG Py and trz of ss < 0.6 cm wide vnlts at 20º to 40º of c.a.

246.00 248.00

Only s.s thick beds wk QSPC; stockwork of < 0.5 cm wide calcite partially replaced by qtz-sericite in walls trz of Py and trz of ss vnlts, few up to 2 cm wide; vnlts at 20º and 50º of c.a.

248.00 249.30

S.S thick beds; wk QSPC alteration stockwork of irregular calcite-partially replaced by qtz-Sericite< Py and trz of ss vnlts , Py 1%

249.30 253.00

S.S. thick beds , scarce 0.3 to 0.8 cm wide calcite-Py trz of ss vnlts at 55º of c.a.

253.00 253.10

5 cm wide siltstone bed with thin irregular lenses of anhedral very FG massive Py with a dark brown colour, also medium size grain anhedral yellow colour Py. Py in interval 8% to 10%

253.10 253.50

S.S. thick beds scarce 0.1 to 0.3 cm wide calcite-Py vnlts at 30º of c.a.

253.50 254.30

Silicified silts irregular lenses: QSPC alteration 8 cm along core axis of sedimentary? Bx; small qtz –druses. Anhedral very FG massive in thin irregular lenses. ss fine grain diss?

254.30 254.80

20 cm wide zone of silicified silts irregular lenses FG Py lenses and irregular calcite < qtz vnlts, trz of dark grey fine grain mineral ss?

254.80 260.80

S.S. thick beds up to 1.80 m along the core axis, few 1 or 2 per meter thin 0.3 to 1 cm wide calcite < sericite and FG Py bands at 50º of c.a.

260.80 261.30

Fault zone slump features, irregular and wavy form up to 0.8 cm wide calcite lenses with less FG Py bands PY 1% < 1 cm pebble dike along bedding.

261.30 272.00

Wk P-C alteration, Siltstone 85% to 90% thin bedding from 50º t0 20º of c.a.; scarce 0.2 to 0.4 cm wide calcite vnlts at 10º to 15º of c.a. < 1mm wide irregular calcite lenses.

272.00 275.50

Siltstone 70%, s.s. beds up to 20 cm wide; fresh to wk P-C alteration, scarce up to 0.5 cm wide calcite-Trz of FG Py vnlts at 10º to 15º of c.a.

275.50 296.00

S.S. up to 95% of the interval, very scarce thin irregular silts beds 5 to 30 cm wide; at 40º to 45º of c.a. wk QSPC sericite in few 0.1 to 0.6 cm wide calcite vnlts, irregular thin < 1 mm wide calcite and FG Py lenses, scarce up to 1.5 cm wide calcite < Py bands.

296.00 296.45

90% Silts beds at 50º of c.a., few irregular 0.1 to 0.8 cm wide calcite-FG Py lenses Py 2% to 3%

296.45 297.49

S.S. 70%, thick beds at 40º of c.a.

297.49 304.00

S.S. thick beds up to 2.00 m wide; few 0.3 to 0.8 cm wide calcite partially replaced by quartz<white clays sericite? And trz of sulfosalts vnlts at 0ª to 20º of c.a.

304.00 305.10

Siltstone intervals up to 25 cm wide in thick s.s. beds bedding at 50º of c.a. 0.2




to 1 cm wide calcite partially replaced to fine grain and thin vnlts of quartz-white clays sericite? in walls and trz of ss vnlts in Stockwork 0º to 10º and 70º of c.a. also irregular up to 0.6 cm wide lenses.

305.10 307.30

Very scarce and thin < 1 mm wide calcite vnlts at 5º and 40º of c.a. bedding at 50º of c.a.

307.30 308.17

Irregular up to 1 cm wide calcite bands or lenses in fine grain and dark grey colour fine grain groundmass (slump?)

308.17 310.20

Few thin 0.2 to 0.5 cm wide calcite partially replaced to FG quartz, white clays walls and trz of ss vnlts at 50º and 60º of c.a.

310.20 318.00

Scarce < 1 per meter 0.1 to 0.3 cm wide calcite < qtz-sericite’ and trz of very fine needles of ss or stibnite? vnlts.

318.00 319.23

Few 2 to 3 per meter 0.2 to 1 cm wide calcite less qtz-white clays and trz of ss vnlts at 10º to 20º of c.a.

319.23 323.50

Scarce less than 1 per meter 0.5 to 0.7 cm wide calcite vnlts at 50º of c.a.

320.90-321.20 m small 0.2 to 0.8 cm long silts angular fragments in a fine grain mix of milled? silts, ss calcite and FG Py diss grey to dark grey colour groundmass

323.50 329.90

Siltstone 90% in 0.1 to 1 cm wide beds at 25º of c.a. few 0.5 to 6 cm wide irregular calcite bands and few 0.1 to 0.3 cm wide calcite < FG Py anhedral Py vnlts.

329.90 332.00

Silts 90% thin bedding scarce up to 20 cm wide s.s. beds, bedding at 70º of c.a. scarce 1 to 2 cm wide calcite< qtz lenses.

332.00 336.80

Silts 95% in thin irregular bedding at 55º of c.a. , scarce up to 3 cm wide s.s. beds, very scarce irregular 0.1 to 0.4 cm wide calcite bands and vnlts at 30º and 40º of c.a.

336.80 337.80

Very fine grain anhedral Py diss 3% in only siltstone interval

337.80 349.10

Few o.1 to 1 cm wide calcite vnlts at 20º and 40º of c.a. few 0.4 to 0.8 cm wide calcite lenses

349.10 355.20

S.S. 100% in thick beds no bedding planes in the interval, scarce less than 1 every 2 to 3 meters < 0.1 cm wide calcite vnlts

355.20 358.80

Few 0.6 to 3 cm wide calcite- partially replaced by FG microvnlts and spots of Qtz –white clays ( sericite?) and trz of ss? Or stibnite needles vnlts at 20º and 40º of c.a.

358.80 368.25

Only S.S. beds at 50º of c.a. scarce thin 1 to 3 cm wide silts irregular intervals few to scarce 1 to 1,5 per meter thin 0.3 to 0.8 cm wide calcite< qtz-sericite? And trz of ss vnlts at 20º to 30º of c.a.

368.25 368.65

Kuc 90% thick s.s. beds, wk silicified rocks wk QSPC alteration, bedding at 50º of c.a. 30 cm of Fault slump zone , 0.2 to 0.8 cm wide calcite bands FG Py 2%, trz of ss’

368.65 372.57

Few (3) o.4 to 1 cm wide calcite vnlts in the interval, calcite-Trz of qtz-FG Py and trz of ss vnlts at 20º ,50º and 60º of c.a.

372.57 374.30

Few 2 to 30 cm wide silts beds at 65º of c.a. Wk QSPC alteration, few to moderate 5 to 6 in the interval 0.3 to 1 cm wide calcite partially replaced by less qtz –sericite-FG Py vnlts in Stockwork form

374.30 374.84

QSPC alteration Stockwork of 0.6 to 1.2 cm wide calcite-less qtz-sericite Py and weak sulfosalts? diss vnlts, vnlts at 0º, 20º and 50º of c.a.

374.84 381.00

Thick s.s. beds 90% in scarce 9 to 25 cm long sections of thin bedding silts, bedding at 70º of c.a. Wk QSPC alteration scarce and thin 0.1 to 0.2 cm wide calcite with scarce FG Py irregular bands vnlts, calcite FG Py irregular bands.




381.00 381.60

QSPC alteration, 5 cm wide Pebble dike with calcite crystal up to 0.5 cm long, small druses, white clay (sericite?) alteration on walls of vnlt trz of ss? In vnlts

381.60 390.80

QSPC alteration Stockwork of thin 0.1 to 0.5 cm wide calcite vnlts 2 to 3 per meter, vnlts with small and thin quartz patches or micro vnlts-sericite < FG Py and trz of ss? At 10º to 20º and 50º to 60º of c.a.

390.80 391.00

Fault gouge zone thin black selvage plates ( milled ss?) fault planes at 60º and 70º of c.a.

391.00 393.20

Thick S.S. beds with 10 to 45 cm sections of thin bedded silts at 45º of c.a.; wk QSPC alteration; anhedral FG Py in irregular lenses Py 1% to 2%

393.20 397.85

Thick s.s. beds wk QSPC alteration close spaced Stockwork of thin < 0.4 cm wide abundant calcite vnlts, wk qtz and sericite and trz of ss? Vnlts in many directions

397.85 399.34

Stockwork zone with a little more apart and less amount of up to 0.6 cm wide calcite vnlts, trz of qtz; vnlts at 10º to 20º and 40º to 60º of c.a.

399.34 400.50

Scarce 0.2 to 0.3 cm wide calcite wk qtz and sericite and trz of ss vnlts 2 to 3 per meter at 30º and 40º of c.a.

400.50 408.30

S.S. thick beds 50% and 2 to 50 cm sections of thin bedding silts beds at 60º to 70º of c.a. thin intervals up to 50 cm wide of Stockwork of thin < 0.3 cm wide calcite vnlts trz of FG Py

408.30 410.57

Bx by fault? Angular to subangular s.s. and less silts fragments up to 5 cm long in milled rock with calcite groundmass wk Qtz- sericite and trz of ss

410.57 414.25

60% to 70% of S.S. thick beds wk QSPC; sections up to 1 meter along core of Stockwork of thin 0.1 to 0.3 cm wide calcite vnlts among zones of few ( 1 or 2 per meter) thin 0.3 cm wide calcite trz of qtz- sericite and trz of ss vnlts at 20º to 30º and 60º of c.a.

414.25 418.00

Thick beds of s.s. at 40º of c.a. very scarce < 1 per 2 meters, thin < 1 mm wide calcite vnlts at 10º to 30º of c.a.

418.00 419.71

S.S. thick beds QSPC alteration; 5 to 6 per meter thin 0.2 to 0.6 cm wide calcite less qtz , sericite and trz of ss (FG black mineral) vnlts at 10º and 40º of c.a.

419.71 421.60

Thick beds of s.s. QSPC alteration scarce 1 to 2 per meter thin 0.2 to 0.3 cm wide calcite vnlts at 30º and 55º of c.a.

421.60 426.13

Silts thin beds at 50º of c.a. 30% thick s.s. beds 70% wk QSPC alteration, irregular up to 1 cm wide calcite trz of qtz-sericite irregular and broken vnlts, calcite banded vnlts trz of sulfosalts

426.13 427.54

Fault vein at 30º of c.a. Silts in hanging wall, s.s. in footwall, Wk QSPC alteration; 3 to 5 cm wide calcite vnlts, at 10º to 30º of c.a. and 82 cm of Stockwork of 0.1 to 2 cm wide calcite vnlts, druse textures trz VFG black needles of stibnite? or sulfosalts? FG Py diss in s.s. beds < 1% sericite in walls of few calcite vnlts.

427.54 431.18

Kuc s.s. thick beds 80%, irregular 1 to 25 cm wide silts bedding at 80º to 85º of c.a. Wk QSPC alteration few 3 to 4 per meter 0.1 to 0.2 cm wide calcite vnlts at 10º to 30º of c.a. irregular pebble dikes and calcite up to 1 cm wide irregular vnlts with FG Py irregular bands 0.1 to 0.4 cm wide; trz of ss? Or stibnite

431.18 435.00

Thick s.s. beds 98% scarce 1 to 3 cm wide siltstone beds at 85º of c.a. QSPC alteration; white clays (sericite) in walls of calcite vnlts; 0.1 to 0.3 cm wide calcite vnlts at 20º to 30º of c.a. trz of FG black metallic needles in some calcite vnlts stibnite or sulfosalts? Trz of FG Py in irregular bands

435.00 438.20

S.S. thick beds 98% bedding at 85º to 90º of c.a. WK QSPC alteration scarce and thin < 0.2 cm wide calcite vnlts 20º to 30º of c.a. few irregular up to 1 cm wide calcite lenses and irregular vnlts at 30º of c.a. with trz of ss?




438.20 438.45

Consolidated old Bx zone by sedimentary genesis, irregular up to 0.8 cm wide lenses or beds at 85º of c.a. calcite partially replaced by quartz in thin banded vnlts FG Py lenses Py in general 1% to 2%

438.45 446.70

S.S. thick beds 95% to 98% very scarce thin up to 5 cm wide silts beds usually with calcite lenses and FG Py lenses. Few 2 to 4 per meter thin < 0.3 cm wide calcite with walls of sericite and very scarce trz of stibnite or ss? Vnlts at 20º to 30º and 80º to 85º of c.a. FG Py 0.2 cm wide vnlts at 40º of c.a. FG Py diss < 1% in the interval

446.70 450.40

Siltstone 90% thin bedding at 85º to 90º of c.a. PC alteration scarce irregular up to 1 cm wide calcite vnlts and lenses FG anhedral Py in irregular lenses close to calcite lenses

447.10 m Fault 10 cm of consolidated Bx zone angular rock fragments; 0.2 to 1 cm wide calcite bands at 85º of c.a.

449.10 to 450.00 m Fault zone at 60º to 85º of c.a. in four up to 20 cm wide bxed zones, angular to subangular rock fragments in milled rock flour, few calcite irregular fragments and vnlts FG Py bands

   

450.40 m Fault along bedding 85º of c.a.

450.40 452.50

Siltstone 95%, thin bedding, few 1 to 4 cm wide s.s. beds at 85º to 90º of c.a. PC alteration scarce Py and calcite vnlts and bands 0.2 to 0.4 cm wide.

452.50 454.00

Kuc Silts 95% to 98% thin irregular bedding at 85º to 90º of c.a. P_C alteration, very scarce thin < 1mm wide calcite vnlts at 20º and 60º of c.a. VFG Py diss in thin bands and irregular clouds Py 1%

454.00 457.75

Silts 98%, irregular thin bedding in unstable basin, Wk P-C alteration, scarce 1 to 1.5 per meter 0.1 to 0.5 cm wide calcite with thin layers of rock as bands in walls vnlts very scarce up to 1 cm wide calcite lenses, VFG Py diss in irregular bands and clouds 1%

457.75 459.15

Silts 95% in thin beds, few irregular s.s. lenses, unstable basin,: Wk P-C alteration just one 3 calcite vnlt in the interval 1 to 3 cm wide, druse texture at 20º of c.a.

459.15 465.43

Silts 90% to 95% wk P-C alteration; Thin irregular bedding s.s. beds 2 to 5 cm wide in 20 cm interval; bedding at 60º of c.a. few irregular 0.5 to 2 cm wide Surrounded S.S. lenses, very scarce < 2 mm wide calcite vnlts and up to 0.6 cm wide irregular lenses.

465.43 466.30

Scarce 0.3 to 1 cm wide calcite vnlts with thin layers of rock in walls at 20º of c.a. druse texture FG Py in thin irregular bands and clouds Py 1%

446.30 469.20

Kuc Silts 80%; 0.2 to 0.5 cm wide S.S. beds at 70º of c.a. Wk P-C alteration; scarce 0.1 to 0.5 cm wide irregular calcite vnlts with some angular rock fragments, few 0.1 to 1.2 cm wide calcite up to 1.5 cm wide lenses. FG anhedral Py in sections up to 60 cm along core axis also in irregular 0.2 to 0.8 cm wide bands; Py 1% to 2%

469.20 474.57

Kuc Silts 85%; irregular bedding 1 to 25 cm wide s.s. beds, usually 0.2 to 3 cm wide. Bedding 70º to 80º of c.a.; very scarce 0.2 to 1.2 cm wide calcite vnlts at 40º to 60º of c.a. few up to 1.2 cm wide calcite lenses.

474.57  

End of Hole



MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: May 14 / 2004
TO: Tom Patton                                                                                                                                                                        & nbsp;                      ccp. Tom Turner
FROM: Héctor Fernández
SUBJECT: Drilling at Nieves
PAGES  

Summary of DDH QTA-15-04; 699,287 E; 2,652,351 N, 340°/-60°, Dolores Area (Option site C1)

From To Description
0.00 3.66

Drilled with Tricone bit -No core- Casing

3.66 7.50

Kuc Fm Silts 95% few 0.2 to 0.8 cm wide S.S. beds; bedding at 75º to 80º of c.a.; P-C alteration, scarce irregular 0.1 to 0.5 cm wide calcite< brown Goethite vnlts at 10º and 40º to 60º of c.a. hairline Goethite bands

7.50 8.80

Thin silts beds at 50º of c.a. P-C alteration, irregular < 0.6 cm wide dark brown colour Goethite< calcite micro lenses; thin < 0.6 cm wide Goethite < Calcite vnlts in small size Stockwork, fault zones along bedding at 8.27 m and 8.30 m

   

8.70 m 3 to 5 cm wide fault zone at 80º of c.a., milled Goethite-scarce calcite

8.80 12.30

Few 1 to 2 per meter irregular up to 1 cm wide massive dark brown Goethite less calcite vnlts at 30º and 60º to 70º of c.a. abundant hairline irregular Goethite micro- vnlts at 50º to 70º of c.a.

12.30 16.80

Silts 95% irregular thin bedding at 60º to 80º of c.a. P-C alteration, scarce irregular 0.1 to 0.2 cm wide calcite with thin Goethite walls at 0º to 10º of c.a., scarce up to 1 cm wide calcite lenses, abundant hairline brown Goethite, scarce 0.3 to 1 cm wide Goethite with thin calcite irregular vnlts at 20º to 40º of c.a.

16.80 17.00

Fault zone, zones of Bx; Goethite 2% diss and microvnlts, Fault planes at 85º and 20º of c.a.

17.00 17.50

Stockwork of irregular up to 1 cm wide Goethite less calcite irregular vnlts, Bx

17.50 25.10

Partially oxidized zone, Silts 95%; few up to 0.8 cm wide FG S:S: beds, bedding at 75º of c.a.; scarce irregular 0.1 to 1 cm wide Calcite-Goethite vnlts at 0º to 20º of c.a.; Goeth diss and in microvnlts, Goethite in interval 1% to 2%

25.10 26.20

Partially oxidized Silts 95%, few up to 0.8 cm wide s.s. beds at 80º of c.a., P-C alteration, irregular set of calcite-Geoth 0.2 to 1 cm wide vnlts Small zones of Bx by vnlts intercept, small open space and druse texture in calcite, vnlts at 30º to 50º of c.a.

26.20 28.82

Silts 98%, scarce S.S. beds, scarce microvnlts of calcite. FG Py < 1 mm wide lenses Py 1%, zones of fault from 28.20 to 28.50 m thin irregular Bx zones.

28.82 31.10

Silts 98%, thin bedding at 70º to 80º of c.a., few 0.1 to 0.6 cm wide calcite< Py partially oxidized to Goethite vnlts at 5º to º0º of c.a. and less 70º to 75º of c.a. lenses with trz of sulfosalts. FG Py in thin vnlts at 50º of c.a. with scarce calcite.

31.10 32.61

Kuc Silts 95% to 98% thin bedding at 70º to 75º of c.a. P-C alteration, very scarce thin < 0.1 cm wide calcite FG Py vnlts at 55º-60º of c.a. also diss in thin bands 1%

32.61 33.71

Few 4 per meter thin < 0.1 cm wide calcite< white clays ( sericite) FG Py and trz of ss vnlts at 15 ºto 20º of c.a. VFG anhedral Py in irregular bands in walls of some

1



    

calcite vnlts, wk oxidation to yellow green in vnlts ( Ag? Oxides)  

33.71 39.42

Bedding at 75º to 80º of c.a. scarce 0.1 to 0.2 cm wide calcite FG Py vnlts at 20º to 30º and 70º of c.a. FG Py diss < 1%.

38.85 m 1.2 to 1.4 cm wide calcite replaced partially to banded microcrystalline quartz Py vnlts at 70º of c.a.

39.42 41.80

Silts 95% thin bedding at 70º of c.a.; P-C alteration; very scarce calcite-anhedral FG Py lenses.

41.80 45.00

Few 0.1 to 1.2 cm wide calcite vnlts partially replaced to microcrystalline quartz trz of clays (sericite) with traces of thin dark grey to black thin bands ss? vnlts

45.00 46.49

Irregular intervals with Stockwork of thin calcite partially replaced to microcrystalline white quartz-sericite Py vnlts. Also 0.6 to 3 cm wide calcite FG anhedral Py –Sph-ss lenses at 60º of c.a. Py in interval 2% to 3% in irregular vnlts and diss.

46.49 46.99

Fault with zones of Bx, calcite < qtz- sericite Py trz of Sph and ss fragments, also irregular calcite qtz sericite up to 8 cm wide bands, Fault planes at 30º and 55º of c.a.

46.99 48.10

Fault zone zones up to 8 cm wide of broken and Bxed rock fragments, scarce calcite<qtz FG Py diss 1%

48.10 50.50

Silts 95% thin bedding at 80º of c.a. P-C alteration, few 0.1 to 1 cm wide calcite partially replaced by microcrystalline quartz Py and trz of ss vnlts 0º to 5º of c.a. and bands at 80º of c.a. Partial oxidation to brown to tan colour Goethite.

50.50 53.35

Silts 95% thin bedding at 70º of c.a. P-C alteration, few 1 to 2 per meter 0.1 to 0.2 cm wide FG Py < calcite replaced by FG quartz vnlts at 50º to 60º of c.a.

53.35 53.95

Fault Bx zone irregular calcite replaced partially by quartz up to 3 cm wide vnlts, also banded calcite and microcrystalline quartz with trz of ss bands. Fault planes at 70º of c.a. along bedding

53.95 56.90

Scarce < 1 per meter calcite 0.1 to 1.1 cm wide banded calcite and microcrystalline quartz lenses at 70º of c.a.

56.90 57.99

1 cm wide banded calcite-micro quartz trz of sericite –Py and light brown to tan colour oxides vnlts at 0º to 10º of c.a.

57.99 62.02

Scarce < 1 per m irregular up to 0.8 cm wide calcite partially replaced by micro quartz FG Py vnlts at 60º of c.a. trz of FG Py diss in very thin bands

62.02 63.19

Silts 95% thin bedding 1 to 6 mm wide beds at 65º to 70º of c.a. few irregular 0.2 to 1 cm wide calcite-micro quartz FG Py vnlts at 60º and 70º of c.a. also 1% to 2% of FG Py in thin < 1 mm wide bands.

63.19 63.70

Fault Bx fragments of rock and calcite partially replaced by micro –quart wk and thin brown to red Sph and trz of ss bands at 80º to 90º of c.a. also qtz calcite 0.5 cm wide vnlts at 20º of c.a.

63.70 67.37

2 to 3 per meter 0.1 to 0.4 cm wide calcite replaced by milky micro-quartz Py and trz of ss vnlts at 20º to 30º and 70º of c.a.

67.37 68.17

Bx ed zone formed by up to 1.5 cm wide calcite bands, vnlts up to 1 cm wide vnlts and broken up to 4 cm wide calcite fragments. Calcite partially replaced by micro quartz, trz of fine grain ss diss in calcite walls

68.17 69.00

Silts thin beds at 70º of c.a.; few irregular up to 1.5 cm wide calcite druses FG Py vnlts at 60º of c.a.

69.00 73.44

Very scarce calcite –micro quartz –Py 0.1 to 0.3 cm wide vnlts at 30º of c.a.

73.44 73.64

Banded calcite FG lightly pink colour micro quartz, grey bands of milled rock or ss? Vnlts at 60º of c.a. crossing beds.

73.64 75.46

Few 0.1 to 0.5 cm wide calcite vnlts at 30º of c.a.

75.46 78.50

Zones up to 30 cm wide of Stockwork and thin Bx formed by 0.1 to 1 cm wide druse calcite less microcrystalline quartz two types of FG Py in walls Py fine grain as needles and VFG massive Py in bands in walls of vnlts. Py in interval 1%

2



78.50 81.35

Few (2 vnlts in the interval) druse calcite-FG Py-qtz and thin fine grain grey colour bands of ss? Vnlts at 20º to 30º of c.a.

81.35 82.30

Fault along bedding broken calcite< qtz trz of ss vnlts thin sections of Bx FG Py 3% to 5% diss and in irregular bands.

82.30 83.30

Few calcite-Py o,1 cm wide vnlts and up to 0.4 cm wide bands vnlts at 0º to 10º and 30º of c.a. Py in interval 2% to 3%

83.30 83.70

Broken irregular up to 2 cm wide calcite < micro quartz < Py and trz of ss vnlts at 10º to 30º of c.a. FG Py in walls of vnlts

83.70 86.47

Scarce < 0.3 cm wide calcite micro quartz FG Py vnlts at 50º of c.a. and few FG Py bands and vnlts up to 1 mm wide Py in interval 1% to 2%

86.47 87.50

Silts 95% to 98% thin bedding P-C alteration up to 9 cm wide calcite FG Quartz FG Py in walls and trz of ss vnlts, FG Py vnlts and bands 2% to 3%

87.50 90.53

Bedding at 65º of c.a. wk P-C alteration scarce 1 to 2 mm wide FG Py < calcite vnlts at 40º to 50º of c.a.

90.53 91.20

Few 4 to 5 per meter 0.1 to 0.7 cm wide calcite less qtz, Sph and ss vnlts at 40º of c.a.

91.20 92.20

P-C alteration Scarce thin calcite FG Py vnlts at 20º of c.a. scarce Py in < 1 mm bands

92.20 93.50

Fault Bx milled rock zones up to 40 cm wide in hanging wall milled Sph? and ss?

    93.15-93.30 m, 15 cm wide footwall of calcite replaced by white FG quartz-Py Sph and ss or argentite?
93.50 93.80

Few FG Py < calcite 1 to 2 mm wide bands 80º to 85º of c.a.

93.80 96.20

Fault zone Bx formed by subangular to sub-rounded up to 3 cm long rock and about 10% to 15% of calcite < qtz trz of ss fragments, abundant milled rock flour

96.20 100.80

Fault zone < 2 cm long fragments in rock flour 3% to 5% of calcite fragments, 10 to 30 cm wide zones 1 to 2 mm wide of FG Py bands trz of ss? fault planes at 30º to 50º of c.a.

100.80 102.60

Silts 98% thin bedding at 60º of c.a. P-C alteration thin 0.2 to 0.3 cm wide FG Py and less calcite- trz of Sph-ss vnlts at 20º and 40º of c.a. trz of red to brown colour oxides in few vnlts As ox?

102.60 105.90

Fault Bx zone < 2 cm long rock fragments in rock and FG Py flour, calcite fragments < 3% 5 to 10 cm wide zones with up to 10% of FG anhedral massive Py dark green stain Py in interval 8% to 10%

105.90 109.90

Bx and thin Stockwork zones, 0.2 to 1 cm wide FG massive Py < calcite vnlts Py in interval 5% to 8%.

109.90 116.20

Silts 95% thin beds at 40º of c.a. P-C altered, few calcite partially replaced to FG Quartz 0.2 to 1 cm wide irregular FG Py with dark green stain < calcite vnlts at 40º of c.a. Py in interval 3% to 4%

116.20 117.00

Fault zone milled rock and FG Py gouge zones up to 8 cm wide Fault planes at 60º to 70º of c.a. scarce calcite fragments < 1% wk clays in calcite vnlts walls and fractures FG ss? Diss in clays

117.00 117.80

FG Py < calcite and trz of Sph vnlts 0.1 to 0.2 cm wide at 50º of c.a. Py 2 %

117.80 121.25

Bedding at 70º of c.a. irregular Bx zones and 0.2 to 1 cm wide Mostly FG Py dark green stain less calcite < qtz trz of ss in few vnlts Py 2% to 3% in interval

121.25 123.65

Silts thin bedding at 50º of c.a. thin < 2 mm wide FG Py with dark green stain < calcite partially to FG quartz vnlts Py 2% to 3%

123.65 125.90

Thin silts beds at 60º of c.a. scarce 0.1 to 0.2 cm wide calcite FG Py vnlts at 30º of c.a.

125.90 127.75

P-C to wk QSPC alteration, sericite in walls of 0.2 to 0.8 cm wide calcite partially replaced to FG quartz vnlts FG Py –sericite and trz of ss? Vnlts at 10º and 40º of

3



   

c.a.

   

127.75 m 5 cm wide Fault gouge zone at 70º of c.a.

127.75 129.90

Scarce thin < 2mm wide calcite FG Py vnlts at 30º of c.a.

129.90 131.95

Fault zone planes at 20º to 30º and 60º of c.a. Py in thin < 1 m wide vnlts , scarce calcite to qtz and sericite –Py vnlts Py 1% to 2%

131.95 132.80

Fault Bx zone subangular 1 to 2 mm and few up to 4 cm long calcite irregular fragments and vnlts, trz of ss in walls of few calcite vnlts

132.80 143.30

Silts 60% irregular up to 40 cm wide s.s. beds at 45º to 60º of c.a. WK QSPC alteration, few 0.1 to 1 cm wide calcite< qtz-sericite FG Py vnlts at 20º to 30º and 70º to 80º of c.a.

143.30 145.39

Silts 80% thin bedding at 50’º to 60º of c.a. few up to 4 cm wide s.s. beds few calcite sericite FG Py vnlts at 0º to 5º of c.a.

145.39 152.21

Silts 90% irregular thin < 2 cm wide ss beds at 55º to 60º of c.a. Wk QSPC alteration, scarce < o.1 cm wide calcite replaced to FG white quartz-white clays in walls vnlts, very scarce up to 0.3 cm wide microcrystalline quartz lenses, 0.1 to 0.2 cm wide FG Py and scarce calcite replaced to quartz sericite vnlts at 20º to 30º of c.a.

   

149.30 m 1 mm wide calcite to quartz trz of ss vnlts at 60º of c.a.

152.21 153.80

FG Py vnlts up to 2 mm wide at 40º and 70º of c.a. very scarce microcrystalline quartz trz of ss vnlts

153.80 154.20

Fault zones of gouge up to 5 cm wide scarce calcite to quartz and clays fragments Milled rock flour and FG anhedral Py (2%) groundmass.

154.20 156.88

Silts 95%, beds at 40º to 50º of c.a. wk QSPC alteration few 0.1 to 0.2 cm wide FG anhedral massive Py vnlts and lenses also FG cubic Py with wk black “dust” on faces, scarce 0.1 to 0.4 cm wide calcite –microcrystalline quartz < sericite and trz of ss vnlts at 60º to 70º of c.a.

156.88 164.15

Silts thin bedding at 50º to 60º of c.a. wk silicification and bleaching of rock Wk QSPC alteration, very scarce 0.1 to 0.3 cm wide calcite micro-quartz, white clays sericite and trz of ss vnlts at 60º of c.a. VFG anhedral Py in walls of vnlts and also in irregular only Py vnlts and lenses Py 1% in the interval

164.15 164.17

2 cm wide calcite partially replaced to Microcrystalline quartz, medium size grain anhedral Py, black sphalerite (marmathite) and sulfosalts vnlt at 45º of c.a.

164.17 167.70

Very scarce < 1 per meter 0.1 cm wide calcite replaced to quartz FG Py and trz of very fine grain black sphalerite or ss’ vnlts at 60º of c.a.

167.70 173.50

3 to 4 per meter 0.1 to 1 cm wide calcite replaced to quartz sericite in walls FG Py and trz of fine grain marmathite or ss vnlts at 40º to 60º of c.a.; calcite and trz of ss lenses with thin Bx zones up to 4 cm wide at 70º of c.a.

173.50 178.98

1 to 2 per meter, < 3 cm wide calcite Py < qtz vnlts at 50º to 70º of c.a.

    177.60-177.80 m irregular up to 1.5 cm wide calcite bands, zone of old deformation irregular calcite trz of ss bands
178.95 178.96

1 cm wide coarse grain subhedral to euhedral Py, FG needles of sulfosalts. Black sphalerite ( marmathite) vnlt at 50º of c.a. trz of calcite-sericite in walls

178.96 181.00

Scarce < 1 mm wide calcite replaced to quartz- sericite Py and trz of ss-Sph vnlts.

181.00 186.00

2 vnlts , 0.3 to 0.6 cm wide calcite-ss or marmathite FG Py in walls and trz of sericite at 45º and 50º of c.a.

186.00 188.10

Silts 95% thin bedding at 70º of c.a. wk QSPC alteration scarce < 1 mm wide sericite –calcite FG Py vnlts at 40º and 60º to 70º of c.a.

188.10 190.80

Silts thin bedding at 70º of c.a. QSPC alteration( increase of sericite in vnlts) , scarce 0.15 cm wide Py < calcite sericite in walls vnlts at 45º and 70º of c.a.

   

188.22 m Fault 8 cm of gouge milled rock + calcite+ sericite and scarce trz of ss

4



   

Fault planes at 40º and 50º of c.a.

189.60 m Fault moderate to strong sericite in thin vnlts < 1 mm wide Fault planes at 75º of c.a.

190.80 193.50

2 to 3 per meter, < 1 mm wide sericite < qtz-calcite FG Py and ss at 60º and 75º of c.a.

193.50 202.15

Scarce very thin < 1mm wide sericite vnlts at 10º, 30º and 50º of c.a. very scarce sericite calcite quartz FG Py ss and red to brown and black Sph vnlts at 50º of c.a. ( 197.25 m)

202.15 215.00

Faulted zone planes 0º to 10º and 75º of c.a. zones of gouge .broken core in < 5 cm long fragments; calcite- adv sericite fine grain milled ss? in groundmass and in fractures and vnlts 0º to 10º of c.a.

215.00 216.50

Silts thin bedding at 85º of c.a., 4 to 5 per meter sericite-calcite fractures or vnlts at 20º and 40º to 60º of c.a. very scarce calcite replaced to FG Quartz trz of ss vnlts at 45º of c.a.

216.50 218.54

Wk to moderate sericite in < 1 mm wide fractures or vnlts few 0.1 to 0.3 cm wide calcite partially replaced to quartz < sericite FG Py vnlts at 45º of c.a.

218.54 227.30

Kuc Fm Silts 90%, Beds 0.2 to 2 cm wide few S.S. up to 10 cm wide beds at 80º to 85º of c.a. Wk silicification, wk QSPC scarce < 1 mm quartz less sericite and FG Py vnlts, Two types of Py medium size subhedral yellow and VFG with dark brown stain in thin vnlts and lenses. Py 1%, scarce 2 to 3 per meter very thin < 1 mm wide qtz with sericite or white clays walls –Py and very scarce trz of ss? Vnlts at 40º and 85º of c.a.

227.30 227.38

8 cm wide of S.S. bed with Stockwork of < 1 mm wide irregular microcrystalline quartz white clays (sericite?) FG botroydal Py and trz of grey mineral sulfosalts

227.38 229.25

Few S.S. beds 2 to 50 cm wide, wk QSPC, thin vnlts 1 to 4 mm wide of FG quartz white clays FG anhedral in parts botroydal Py and trz of ss lenses, and in few vnlts at 30º and 40º few 10º to 20º of c.a.

229.25 231.15

Mainly Silst, few up to 8 cm wide S.S. beds at 80º to 85º of c.a. , few 0.3 to 1cm wide calcite replaced to FG quartz-white clays Py and trz of ss vnlts at 20º and 50º to 60º of c.a. in some S.S. beds, small Stockwork zones of 0.1 to 0.4 cm wide qtz- clays < calcite and botroydal Py and less ss vnlts FG Py diss 1% Py total 2% to 3%

231.15 251.70

Silts beds 0.1 to 10 cm wide, thin 0.1 to 1 cm wide S.S. beds at 70º of c.a., few thin 0.1 to 0.2 cm wide calcite replaced to FG crystalline quartz less clays. Subhedral to cubic Py lenses, and few vnlts at 430º to 50º of c.a. trz of grey micro diss ss?

251.70 254.50

Increase of clays in vnlts, rock wk to mod silicification, Faults at 253.50 at 60º of c.a. and to 254.40 at 40º of c.a. thin 0.1 to 0.3 cm wide FG crystalline quartz white clays < Py and trz of ss vnlts.

254.50 262.18

Silst 90% wk QSPC few 2 to 3 per meter 0.1 to 1.2 cm wide calcite banded with microcrystalline milky quartz< FG Py and trz of ss vnlts at 40º and 60º to 70º of c.a. Few 0.1 to 0.4 cm wide FG Py bands and less clouds.

262.18 262.22

3 to 4 cm wide Calcite partially replaced to FG Quartz FG Py and less stibnite, and sulfosalts vnlt at 80º of c.a.

262.22 265.55

Silst 90% to 95%, some 0.2 to 1.2 cm wide irregular S.S. beds at 50º of c.a., wk silicification, wk QSPC, scarce 0.1 to 0.2 cm wide calcite < qtz-clays Py vnlts at 50º to 60º of c.a., very scarce up to 0.8 cm wide calcite partially replaced to microcrystalline quartz< Py and trz of ss vnlts at 50º of c.a. thin 1 to 2 mm wide FG Py bands.

265,55 269.93

Few up to 8 cm wide S.S. beds at 55º to 60º of c.a. QSPC alteration, 6 to 8 per meter 0.2 to 1 cm wide calcite partially replaced to FG crystalline quartz, scarce Subhedral to euhedral Cubic Py and trz of ss vnlts and lenses, 30º to 40º and 60º to 70º of c.a. small and irregular cross vnlts.

5



269.93 270.03

10 cm wide Fault related irregular vein and small bands of Bx; FG quartz less clays FG Py thin irregular bands of brown Sph sulfosalts and stibnite.

270.03 272.70

Silts 70% S.S. beds up to 15 cm wide wk silicification wk QSPC alteration, thin < 0.4 cm wide calcite to FG quartz scarce clays and trz of ss vnlts at 30º to 40º of c.a.

272.70 277.50

Thick up to 80 cm wide S.S: beds at 50º to 55º of c.a. wk QSPC; 3 to 5 per meter 0.1 to 0.5 cm wide calcite less clays and quartz < FG Py and some irregular dark grey to black diss in vnlts ss? Scarce cubic Py in vnlts.

277.50 279.00

S.S. up to 80 cm wide beds scarce silts, bedding at 60º of c.a. wk QSPC, irregular small size 5 to 20 cm wide Stockwork zones of 0.1 to 1 cm wide calcite FG to microcrystalline quartz less clays FG anhedral Py and ss vnlts also 2 to 3 cm wide same composition vnlts at 40º to 60º of c.a.

279.00 289.30

90% to 95% of thick s.s. beds bedding at 60º to 70º of c.a. wk QSPC , few 3 to 5 per meter thin 0.1 to 0.7 cm wide calcite < FG quartz few with microcrystalline qtz less clays scarce < 1% FG Py and trz of ss vnlts druse calcite, zones up to 50 cm wide of Stockwork

284.85-285.35 m Stockwork of calcite qtz clays FG Py and trz of ss 0.1 to 0.4 cm wide vnlts.

287.45 m 5 cm wide Pebble dike at 70º of c.a. calcite-clays groundmass, trz of ss in clays.

289.30 294.15

Wider up to 4 cm wide calcite partially to fine grain to microcrystalline quartz FG anhedral Py and trz of Sph irregular vnlts and lenses.

   

290.10 m Fault at 60º of c.a. with 5 cm wide Bx zones FG Py irregular lenses

294.15 296.42

Stockwork of irregular 0.2 to 3 cm wide calcite partially to FG quartz scarce clays FG Py lenses and trz of VFG ss vnlts

296.42 298.15

Less 3 to 5 per meter 0.3 to 1 cm wide calcite < qtz less sericite scarce FG Py and trz of ss? Vnlts at 40º to 50º of c.a. zones up to 5 cm wide of pebble dikes few up to 3 cm wide calcite with thin layers of FG rock bands.

298.15 314.90

98 to 100% of thick S.S. beds wk silicification wk QSPC alteration few 1 to 2 per meter 0.1 to 0.3 cm wide calcite < qtz less clays Py and trz of ss? Vnlts, few 1.5 to 4 cm wide calcite vnlts at 70º to 80º of c.a. small zones up to 20 cm wide of thin calcite vnlts in Stockwork.

310.00-310.90 m Stockwork of 0.2 to 0.8 cm wide vnlts just one 2.5 cm wide vnlt of calcite partially to quartz FG Py scarce clays and trz of ss.

314.90 316.40

Stockwork of deformed by old fault brecciation of 0.2 to 0.5 cm wide with scarce up to 4 cm wide calcite < FG quartz-FG Py scarce clays and trz of ss vnlts

316.40 319.70

Silts 90% beds 1 to 15 cm wide , few 0.2 to 8 cm wide S.S. beds at 50º to 60º of c.a. P-C alteration scarce calcite partially to white FG quartz vnlts at 50º of c.a. FG Py clouds as irregular lenses in some S.S. beds. Py 2%

319.70 320.05

Fault Bx subangular up to 2 cm long fragments 5 cm of white calcite as groundmass at the top Wk silicification FG Py bands and only rock fragments in rock flour at the bottom

320.05 321.90

Silts 905 beds at 50º of c.a. Wk silicification Wk QSPC scarce sericite, zones of Adv fracturing forming open partially filled with irregular calcite < 2 mm vnlts VFG Py with dark brown stain in irregular 0.1 to 1 cm lenses Py 3% to 4%

321.90 323.83

Silts 90% thin up to 2 cm wide S.S. beds at 35º to 40º of c.a. PC alteration few 0.1 to 1.6 cm wide calcite vnlts VFG Py irregular lenses 0.1 to p.6 cm wide and irregular clouds trz of FG Py small needles? In some calcite vnlts Py in interval 1% to 2%

323.83 327.07

Silts 80% irregular beds of S.S. up to 15 cm wide at 40º of c.a. scarce 0.1 to 0.2 cm wide few up to 2 cm wide banded calcite and thin layers of silts. FG Py irregular bands, calcite partially replaced to microcrystalline quartz Py 1%

327.07 327.12

3 to 5 cm wide calcite partially replaced to FG quartz, scarce FG Py and trz of ss

6



   

vnlt at 60º of c.a.

327.12 340.05

Silts 85% to 90% irregular bedding, surrounded S.S. lenses bedding grading from 40º to 5º: very scarce less than 1 per meter 0.1 to 1 cm partially replaced to FG quartz and very scarce trz of ss in few vnlts at 10º and 40º of c.a. very scarce FG Py diss in thin bands.

340.05 342.70

VFG massive Py with brown stain in irregular lenses and clouds, also in very scarce calcite vnlts at 20º of c.a. Py from 1% to 5%

342-70 342.90

Bx formed by adv silicified well consolidated black silts fragments , scarce calcite fragments with druse textures and irregular VFG massive Py lenses some open spaces Py 2% to 3%

342.90 346.35

Silts 90% deformed by unstable basin P-C alteration wk brecciated, scarce calcite partially replaced to FG quartz, VFG massive Py in irregular thin lenses

346.50 346.80

Fault at 60º of c.a. formed by from top to bottom:

346.50-346.53 m 2 to 3 cm wide FG milled rock-<Calcite FG Py less brown Sph and ss lenses vein

5 cm of wk silicified siltstone with 2% to 3% FG Py in irregular lenses 15 to 20 cm of massive white calcite vnlt with 5 cm of Bx by fault of milled rock and irregular calcite bands;

   

5 cm of milled FG Rock +calcite and FG Py 5% to 10%

346.80 348.45

Silts 40%. thick up to 70 cm wide irregular S.S. beds P-C alteration; 5 to 6 per meter thin irregular up to 1 cm wide calcite partially replaced to FG Quartz and trz of FG Py.

348.45 348.55

Irregular folded 1.5 to 3 cm wide zone of Bx at 40º of c.a. formed by calcite partially replaced to F Quartz Cubic Py and few small black Crystals of Sulfosalts inside druse texture, also FG Py irregular small lenses in walls

348.55 350.00

Very scarce < 1 per meter 0.1 to 0.6 cm wide irregular calcite FG Py vnlts at 20º to 40º of c.a.

   

348.85 m Fault at 60º of c.a.

350.00 353.20

Thin irregular silts 60% and S.S. beds in unstable basin at 0º to 10º of c.a.; scarce thin 0.1 to 0.2 cm wide calcite vnlts at 20º to 30º of c.a. Few up to 5 cm wide calcite and subangular small rock fragments Bx

   

352.65 m Fault Bx 5 cm wide at 60º of c.a.

353.20 360.80

Silts 70%, irregular up to 12 cm wide S:S: beds bedding at 50º to 70º of c.a. Wk P- C alteration; scarce irregular up to 3 cm wide calcite lenses, scarce < 2 mm wide irregular calcite vnlts

360.80 364.30

S.S. thick beds wk silicification

362.40 m 5 to 6 cm wide stockwork of thin 0.1 to 1 cm wide calcite vnlts with druse textures and voids

364.30 375.70

Silts 90% irregular bedding at 50º of c.a. few up to 30 cm wide S:S: beds wk P-C alteration, scarce 0.2 to 0.3 cm wide irregular calcite vnlts at 20º to 40º of c.a. and less 0.1 to 1.3 cm wide calcite banded lenses. small up to 5 cm wide Bx zones of calcite partially to FG Quartz-rock fragments and scarce < 1 % FG Py thin lenses.

375.70 379.00

S.S. beds up to 30 cm wide at 55º to 60º of c.a. Wk P-C alteration scarce FG Py in few irregular < 0.6 cm wide calcite vnlts few up to 0.5 cm wide calcite and thin layers of rock bands.

379.00 385.80

Silts thin bedding from 20º to 0º then 50º of c.a. wk white clays in few fractures at 30º of c.a. scarce calcite < FG Py vnlts at 20º to 30º of c.a. crossing beds.

385.00 386.80

Silts 40% S.S. beds up to 25 cm wide at 70º of c.a. P-C alteration Stockwork of irregular < 0.5 cm wide calcite vnlts and lenses.

386.80 389.85

S.S. beds up to 50 cm wide at 50º of c.a. wk P-C alteration, very scarce < 0.3 cm

7



   

wide calcite-trz of FG Py vnlts and lenses.

389.85 390.35

Silts 90% bedding at 75º of c.a. wk P-C alteration, Stockwork of deformed and irregular up to 2 cm wide calcite vnlts, scarce FG Py in few vnlts.

390.35 397.70

Silts 70%, irregular up to 12 cm wide S.S. beds at 50º of c.a., wk P-C alteration to fresh; scarce 0.1 to 0.2 cm wide calcite trz of FG Py vnlts scarce up to 0.7 cm wide calcite bands.

397.70 397.75

4.5 cm wide calcite.-Stibnite less Brown Sph and sulfosalts vnlt at 70º of c.a., calcite partially replaced to FG Quartz.

397.75 402.00

Silts thin bedding at 50º of c.a. grading to 30º of c.a. thin irregular S.S. beds up to 2.5 cm wide with wave features; few < 0.6 cm wide calcite vnlts at 20º and 70º of c.a.; few irregular up to 0.7 cm wide calcite bands, scarce thin up to 2 mm wide FG Py with brown stain lenses and irregular clouds.

402.00 404.20

Folded silts beds 30º to 0º then 20º of c.a.; silts thin beds; Fresh to wk P-C alteration. Scarce up to 0.3 cm wide calcite vnlts at 30º and 60º of c.a.

404.20 407.52

Silts fresh to wk P-C alteration, bedding at 30º to 40º of c.a. irregular 0.3 to 1 cm wide calcite banded lenses, very scarce up to 0.3 cm wide calcite vnlts at 30º and 60º of c.a.

407.52  

End of Hole

8


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: May 25 / 2004
TO: Tom Patton                                                                                                                                                                        & nbsp;                                   ccp. Tom Turner
FROM: Héctor Fernández
SUBJECT: Drilling at Nieves
PAGES  

Summary of DDH QTA-17-04; 697337 E; 2,653,221 N, 20°/-60°, Orion West area

From To Description
0.00 6.10

Drilled with Tricone bit -No core- Casing

6.10 9.11

Kuc Fm S.S. fine grain size 90% thick beds up to 1.25 m wide Silts 10% thin intervals 3 to 4 cm wide bedding at 30º to 40º of c.a. P-C alteration various 8 to 10 per meter,0.2 to 1 cm wide calcite wkly replaced to FG qtz –Goethite vnlts.

   

8.30 m Fault at 50º of c.a.

9.11 11.00

Silts thin bedding at 50º of c.a. 80% S.S. 0.2 to 1.5 cm wide beds at 60º of c.a. P-C alteration few 2 to 3 per meter 0.2 to 0.6 cm wide irregular calcite-Goethite<Hem vnlts at 30º 50º and 70º of c.a. thin 0.2 to1 cm wide bands of Goethite diss in walls Of few calcite vnlts.

11.00 18.70

Silts 90% thin bedding, 0.2 to 2 cm wide S.S. beds, bedding grading from 60º to 20º of c.a. P-C alteration zones of wide apart Stockwork of thin 0.2 to 2 cm wide calcite wk replaced to FG qtz, rock fragments and few layers < Goethite vnlts at 20º to 30º and 50º to 60º of c.a. also in irregular 0.3 to 1 cm wide fragments.

   

18.70 m Bottom of Oxidation Zone

18.70 22.70

Silts 90% thin bedding at 65º top 70º of c.a. 0.2 to 4 cm wide S.S. wavy beds 20%, P-C alteration few 3 to 5 per meter 0.2 to 1 cm wide calcite and trz of FG anhedral Py vnlts at 25º and 70º to 75º of c.a.; trz of ss in thin < 1 mm wide irregular layers in walls of scarce calcite and organic material or black Silts fragments, also trz of ss in very scarce calcite vnlts wk oxidation to Goethite in scarce fractures or walls of vnlts.

22.70 23.57

Silts thin bedding 0.2 to 1.5 cm wide wavy S.S. beds bedding at 60º to 65º of c.a. ; irregular 4 to 9 cm wide pebble dikes, 0.2 to 0.5 cm wide calcite-Goeth and trz of Hematite (after ss?) vnlts at 70º to 75º of c.a.

23.57 24.80

Silts 90% thin bedding at 60º of c.a. 0.3 to 4 cm wide S.S. beds P-C alteration scarce 2 per meter 0.1 to 0.3 cm wide calcite-FG Py lenses.

24.80 25.30

7 to 10 cm wide Bx by old faulting zones, calcite irregular fragments, subangular rock fragments-FG Py bands and vnlts, Py 1% to 2%; 0.4 to 1.5 cm wide calcite partially replaced to FG qtz-FG Py partially oxidized to hematite close to Fault at 25.00 m ; slickenside at 65º of c.a. thin gouge of milled rock and black mineral ss?

25.30 29.27

Silts 90% bedding at 65º to 70º of c.a. few hairline to 1 mm wide calcite trz of FG Py partially oxidized to Goethite vnlts at 25º to 30º of c.a., few irregular 0.4 to 2 cm wide calcite *rock fragments pebble dikes, thin layers of Goethite diss in walls of vnlts at 20º of c.a.

29.27 30.40

Fault zone at 29.57 m slickensides at 50º and 60º of c.a. 3 cm wide gouge zone

1



with Py and black metallic mineral ss? Also anhedral massive Py in up to 3 cm wide lenses.
Fault vein at 30.00 m Bx and gouge zones up to 5 cm wide, strong oxidation to Goeth and few irregular and thin layers of Hematite after ss? Or Sph, fault planes at 45º of c.a. with milled black mineral ss? ; zones of Stock work of thin 0.2 to 0.5 cm wide calcite partially replaced to FG qtz-Goeth vnlts trz of FG Py bands.

30.40 33.00

Silts 95% thin bedding at 70º of c.a. P-C alteration 5 to 6 per meter 0.1 to 0.3 cm wide calcite-Goethite lenses and few 0.3 to 0.4 cm wide calcite-Goethite and trz of Hematite vnlts at 20º of c.a. scarce druse in voids Goethite diss in thin lenses mainly in S.S. beds Goethite 2%

33.00 35.60

Silts 90% to 95% thin bedding at 75º of c.a. 0.3 to 1 cm wide wavy S.S. beds P-C alteration scarce 1 to 2 per meter 0.1 to 0.3 cm wide calcite with less Goethite and trz of Hematite bands and scarce vnlts at 40º of c.a.

35.60 36.00

Irregular 0.2 to 2 cm wide calcite wk replaced to FG qtz, trz of Goethite and Hematite(after ss?) vnlts at 0º to 10º of c.a. and also bands at 70º of c.a.

36.00 38.36

Silts 90% bedding at 60º of c.a. P-C alteration irregular 0.1 to 0.3 cm wide Py to Goethite < calcite vnlts; Goethite staining walls of some vnlts and beds few slickensides along bedding.

38.36 38.39

3 cm wide massive FG Py less brown Sph and sulfosalts lens at 65º to 70º of c.a.

38.39 41.30

Silts thin beds 0.2 to 3 cm wide S.S. wavy beds, bedding at 45º to 50º of c.a. very scarce 0.1 to 0.3 cm wide calcite< FG Py to Goethite lenses very scarce hairline only calcite vnlts at 30º of c.a. 0.1 to 0.3 cm wide VFG Py lenses and vnlts also VFG Py clouds Py in interval 3% to 5%.

41.30 41.60

Fault zone along bedding at 45º of c.a. Goethite in irregular bands and thin vnlts, scarce calcite vnlts. Goethite 2% to 3% in interval

41.60 42.20

Silts 95% wavy thin bedding at 0º to 5º of c.a. foliation? at 55º of c.a. Wk P-C alteration hairline calcite vnlts at 5º and 35º of c.a.

42.20 43.80

Silts thin bedding from 20º to 30º of c.a. P-C alteration few irregular calcite trz of brown Sph and ss partially oxidized to hematite vnlts at 30º and 75º of c.a.

43.80 44.61

Silts 90 to 95% thin bedding at 30º to 40º of c.a. S.S. beds 0.2 to 3 cm wide P-C alteration very scarce < 1 per meter hairline calcite lenses.

44.61 45.70

Silts 95% thin bedding at 40º of c.a. few 4 to 6 per meter 0.8 to 3 cm wide calcite trz of FG anhedral Py and trz of ss wk oxidized to Goethite vnlts at 50º to 60º of c.a.

45.70 46.40

Silts 90% to 95% thin bedding 0.2 to1 cm wide wavy S.S. beds and few surrounded lenses, bedding at 50º of c.a. P-C alteration scarce hairline calcite-trz of FG anhedral Py vnlts at 45º of c.a.

47.86  

Actual depth of Hole

2


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: June 6 / 2004
TO: Tom Patton                                                                                                                                                                        & nbsp;                               ccp. Tom Turner
FROM: Héctor Fernández
SUBJECT: Drilling at Nieves
PAGES  

Summary of DDH QTA-18-04; 701356 E; 2,653,231 N, 340°/-60°, Manganese Mine area

From To Description
0.00 3.05

Drilled with Tricone bit -No core- Casing

3.05 14,02

Tertiary Porphyritic Rhyolite formed by qtz and plagioclase phenocrysts in a pink to light brown colour groundmass, trz of magnetite diss, few small size micas. Irregular 0.2 to 1 cm wide lenses of FG qtz at 40º to 50º of c.a. Feldspars altered to white clays, scarce irregular up to 0.5 cm wide calcite vnlts at 30º of c.a. small voids with Hematite-Goethite < 1%; scarce voids with druse qtz; scarce up to 1 cm wide MnOx vnlts at 10º to 20º of c.a.

14.02 14.70

Fault zone no planes only milled rock.

14.70 22.25

T Porphyritic Rhyolite clay alteration on feldspars trz of Goethite – Hematite diss magnetite diss < 1%, some qtz crystals with blue opalescence.

22.25 40.84

Moderate clay alteration on feldspars, scarce irregular < 0.3 cm wide calcite lenses and vnlts at 30º of c.a.; MnOx < 1 mm wide vnlts at 10º to 20º of c.a. also MnOx as irregular microvnlts, small < 1 cm wide voids with druse qtz, scarce Hematite < MnOx vnlts at 50º to 60º of c.a.

   

31.80 m Fault at 30º of c.a. Broken rock scarce MnOx

40.84 41.90

Zone of few thin < 0.2 cm wide Goethite-Hematite-MnOx vnlts at 30º of c.a.

41.90 47.85

Wk clay alteration on feldspar; 0.1 to 0.4 cm wide irregular FG qtz vnlts at 50º to 60º of c.a. scarce 0.1 to 0.2 cm wide irregular calcite vnlts at 10º of c.a.; irregular 2 to 3 cm wide white and beige colour clays patches, Hematite in few thin vnlts at 10º to 20º of c.a. very scarce and small < 0.1 x 0.3 cm wide sedimentary rock? Fragments.

47.85 54.30

Porphyritic Rhyolite , qtz eyes and plagioclase altered to clays phenocrysts in pink to light brown colour groundmass, scarce calcite-hematite < MnOx thin vnlts

54.30 56.05

Rhyolite flow, adv clay alteration at top of interval in the groundmass and plagioclase crystals, few qtz eyes pink to light beige colour groundmass scarce 0.1 to 0.3 cm wide rock fragments

56.05 56.64

Rhyolitic Tuff sand grain size pyroclastic feldspars altered to white clays, also qtz fragments, few 0.2 to 0.6 cm wide Rhyolite clasts, scarce fine grain magnetite diss, few small micas.

56.54 56.85

Rhyolite flow light pink colour groundmass, small qtz eyes some < 1 mm wide calcite altered to clays vnlts magnetite fine grain diss. At bottom of interval contact with Tuffs at 60º of c.a.

56.85 61.20

Rhyolite Tuff grading Pyroclastic size grading from sand to fine grain to depth,

1



   

clay alteration grading from wk to adv to depth on feldspars and groundmass

61.20 63.05

Rhyolitic banded, fine grain size groundmass, some 0.2 to 0.5 cm wide white colour only groundmass bands, adv clay alteration, light pink colour alternant bands, banding at 40º to 50º of c.a.

63.05 64.65

Rhyolitic Tuff , pink colour , coarse sand size pyroclastic grading to medium size grain to depth; Mod to adv clay alteration on white and pink colour feldspar fragments, rounded qtz and some Rhyolite pyroclasts, trz of light green clays in fractures and diss, wkly banding at 50º of c.a.

64.65 66.88

Thrust? Bx 0.5 to 2 cm long with some up to 7 cm long Subangular to Angular Rhyolitic and tuff fragments in white to light beige colour milled tuff groundmass clay alteration on milled groundmass.

66.88 68.65

Vesicular Basalt, grey to dark grey colour, calcite filling amygdales, some irregular 0.1 to 0.2 cm wide calcite altered to clays < epidote? Vnlts at 25º to 40º of c.a. magnetite diss, few thin irregular < 1 mm MnOx vnlts

68.65 70.00

Vesicular Basalt oxidized to brown colour, calcite in amygdales < 0.2 cm diameter and in < 0.2 cm wide vnlts at 15º of c.a.

70.00 m Contact by Fault at 20º of c.a. milled green to yellow colour (epidote?) in thin gouge zone.

70.00 71.40

Fault zone only small Rhyodacite welded Tuff core fragments, oxidized to Hematite small < 1 mm Rhyolite? or tuff fragments and small 1 to 2 mm long feldspar altered to hornblende? crystals in brown to light red colour welded groundmass, few 0.1 to 2 cm wide banded calcite partially altered to clays – Microcrystalline chalcedonic qtz- hematite-green to yellow colour anhedral mineral Epidote?< Hematite vnlts

71.40 84.43

Rhyodacite welded tuff formed by 1 to 2 mm long plagioclase altered to hornblende? and oxidized to hematite small lytic pyroclastic fragments in brown to light red colour welded groundmass 0.1 to 2 cm wide banded calcite partially altered to clays and to microcrystalline chalcedonic qtz- hematite-green to yellow colour anhedral mineral Epidote?< Hematite vnlts forming a wide apart Stockwork zone, trz of Mn Ox in few vnlts.

84.43 87.70

Rhyodacite? Welded tuff clay alteration 1 to 2.5 cm wide banded calcite partially replaced to microcrystalline chalcedonic qtz-white clays-green to light yellow anhedral mineral Epidote?-Hematite and less Mn Ox vnlts at 0º to 30º and 50º to 70º of c.a.

87.70 92.60

Rhyodacite welded tuff, clay alteration, some banded calcite-hematite and less green yellowish anhedral mineral Epidote? Vnlts at 0º to 10º and 40º to 50º of c.a. Mn Ox in some vnlts.

92.60 100.60

Rhyodacitic welded Tuff, clay alteration, Stockwork of 0.1 to 3 cm wide calcite in parts as druse calcite-Chalcedonic bands in centre< Hematite Trz of Mn Ox vnlts, epidote diss

100.60 104.55

Fault zone, strong fractured Rhyodacitic welded Tuff, clay alteration, irregular 0.1 to 0.5 cm wide calcite vnlts and fragments.

104.55 105,85

Rhyodacitic welded Tuff, adv Epidote and mod clay alteration, various 0.3 to 1.5 cm wide calcite partially replaced to clays-Hematite-MnOx-epidote?-vnlts (jasper look?) vnlts in moderate apart Stockwork.

105.85 107.10

Fault zone, planes at 70º at top and 50º at bottom of c.a. Rhyodacitic welded Tuff broken fragments, adv epidote less clay calcite alteration, epidote replacing feldspar crystals few Hematite vnlts scarce fragments of FG quartz.

107.10 116.45

Rhyodacitic welded Tuff, adv clay calcite less epidote alteration, irregular 0.1 to 2 cm wide calcite-Hematite < MnOx –clays vnlts in Stockwork, some banded vnlts

2



   

109.30 m Fault at 40º of c.a.

   

108.81 m -111.60 m Slickensides every 20 to 50 cm at 60º to 70º of c.a.

   

112.50 m Fault at 40º of c.a. adv epidote

116.45 121.74

Bx or Conglomerate, formed by 0.3 to 6 cm long sub rounded mainly volcanic rock fragments in abundant milled tuffaceous altered to clays groundmass, abundant Hematite diss in groundmass.

121.74 130.65

Hybrid sand grain size Tuff or thick beds of S.S.? few thin zones with 0.3 to 0.5 cm long rounded rock fragments, Adv clay alteration and oxidation to Goethite- Hematite diss. (Soft rock)

   

130.65 m Contact by Fault at 60º of c.a.

130.65 147.85

Medium Size Grain S.S. thick beds 98%, scarce up to 10 cm Silts? Interval, Adv clay and chlorite-silica alteration (completely stained to light green colour), Silts interval silicified. Very soft rock by adv alteration. Scarce < 0.1 cm wide calcite < FG Py vnlts at 20º of c.a. scarce slickensides with green talc (soap stone).

147.85 150.80

Fault milled rock forming talc (soapstone), adv clay and chlorite alteration, FG subhedral Py diss or in clouds up to 4%

150.80 160.63

Bx by Fault, sub rounded up to 2 cm long Silts and S.S. fragments in abundant milled rock groundmass, Adv chlorite-clay alteration, FG Py in irregular clouds Py 3% to 5%, few calcite fragments

160.63 173.05

S.S. Thick beds no bedding planes, scarce irregular silicified Silts lenses at 60º of c.a., Adv clay-chlorite alteration, scarce 1 to 2 mm wide calcite vnlts at 30º of c.a., FG Subhedral Py diss in irregular 2 to 5 cm long clouds Py in general 2%, irregular sub rounded 2 x 2.5 cm calcite fragments with clear qtz “ eyes”

173.05 179.30

Conglomeratic Sandstone, irregular zones 20 to 50 with sub rounded 0.5 to 2 cm long S:S: Silts< limestone, scarce of porphyritic volcanic rock fragments in a medium to coarse grain size sandy groundmass, clay and chlorite alteration staining to light green colour the rock, Trz of Py diss

179.30 181.57

Fine to medium size grain S.S. very scarce 1 to 10 cm wide fine grain sedimentary silicified Silts interval, at 60º of c.a. clay and chlorite alteration, soft rock trz of Py diss.

181.57 188.25

Conglomeratic sandstone, few sub rounded< 2 cm long scarce up to 5 cm long sedimentary rock and scarce volcanic fragments in medium size grain sandy groundmass, fragments with wk chlorite also chlorite staining groundmass to light green colour, wk clay alteration.

188.25 209.40

Unsorted Conglomerate formed by subangular to sub rounded 2 to 3 cm long, few up to 15 cm fragments of sedimentary rocks and scarce e of volcanic, some fragments with silicification, chlorite diss in fragments and in “bands” or zones 1.5 to 2 meters wide of groundmass, also 1 to 1.5 meters wide with wk FeOx- MnOx diss staining to brown to black colour groundmass. Trz of Py diss.

209.40 215.35

Conglomeratic S.S. few < 2 cm long fragments of sedimentary rock fragments in coarse grain size sandy groundmass, wk chlorite in some fragments and also diss in groundmass. wk clay alteration

215.33 230.73

Conglomerate, formed by sub rounded sedimentary and less volcanic fragments in a coarse grain size sandy groundmass, wk clay alteration, moderate chlorite staining the rock and some fragments, FeOx-MnOx diss staining to brown colour groundmass in 1 to 2 meters “bands”. Trz of Py

230.73 239.85

Conglomerate, sub rounded sedimentary fragments some silicified in zones with smaller size fragments < 0.5 cm long, wk clay alteration, moderate chlorite in some fragments and also as diss in groundmass, scarce 0.2 cm wide irregular calcite vnlts at 30º of c.a.

3



239.85 241.35

Conglomerate sedimentary sub rounded fragments 50 to 10 cm long in medium to coarse grain size sandy groundmass, clay and chlorite alteration FeOx< MnOx diss staining to light brown the groundmass, scarce 0.2 to 0.5 cm wide druse calcite irregular vnlts at 0º to 20º of c.a.

241.35 243.85

Conglomeratic sandstone, subangular < 1 cm long sedimentary fragments in abundant coarse grain sandy groundmass, wk clay and chlorite alteration.

243.85 246.40

Conglomerate, 1 to 4 cm long sedimentary and few calcite and volcanic subangular to sub rounded fragments in medium to coarse grain size S.S. groundmass, wk chlorite in some fragments, FeOx-MnOx oxidation staining groundmass to a brown to black colour.

246.40 247.45

Conglomerate, few sub rounded S.S. and Silts less limestone fragments, chlorite in fragments, wk clay and chlorite in groundmass.

247.75 250.15

Conglomerate sandstone, some 0.2 to 0.5 cm long sub rounded sedimentary fragments in medium to coarse grain size sandy groundmass, clay and wk chlorite diss in groundmass, thin zones up to 20 cm long with oxidation of FeOx MnOx, staining to light brown colour groundmass

   

250.15 m Fault at 60º of c.a.

250.15 253.40

Conglomerate, subangular 0.5 to 4 cm long sedimentary rock fragments in medium size grain sandy groundmass, fragments size increasing to depth, scarce limestone fragments up to 10 cm long, wk chlorite alteration in some fragments FeOx-MnOx? Diss in groundmass staining it to a brown colour.

253.40 259.10

Conglomerate subangular to sub rounded sedimentary fragments 0.5 to 4 cm long in coarse size grain sandy groundmass, wk to moderate chlorite alteration in bands up to 1.5 m wide, irregular oxidized zones with brown stain Goethite- MnOx? Diss

   

259.70 m Fault at 55º of c.a.

259.10 261.70

Conglomerate abundant sedimentary fragments 0.2 to 3 cm long in medium size grain sandy groundmass, mod chlorite wk clays alteration.

261.70 268.00

Conglomeratic Sandstone, scarce 1 to 2 cm sub rounded sediments and calcite< qtz fragments, wk clay and chlorite alteration, few 1 to 3 per meter 0.1 to 0.5 cm wide calcite wk goethite stained vnlts at 20º and 50º of c.a., scarce FG Py clouds, Py < 1% in interval.

265.70 m-266.0 m Fault zone with Bx fragments some of calcite-Py< FeOx up to 2 x 3 cm.

268.0 279.25

Conglomerate with zones up to 1 m wide of conglomeratic sandstone, subangular to sub rounded < 3 cm fragments wk clay wk to moderate chlorite alteration.

279.25 279.45

Fault Bx at 50º of c.a. Subangular sedimentary fragments< 2 cm long in milled rock wk clay and chlorite altered groundmass FG Py trz to 1% scarce fragments with thin qtz vnlts.

279.45 282.00

Kuc Caracol Fm Silts 90% thin bedding < 1 cm wide fine grain size S.S, beds at 40º of c.a., moderate bleaching to a light grey colour, wk clay alteration, soft rock, scarce 1 to 2 per meter 0.1 to 0.5 cm wide calcite vnlts and lenses, few < 1 mm wide calcite partially replaced to FG qtz FG Py and trz of ss? Vnlts.

282.00 284.68

Silts 95% thin < 0.5 cm wide S.S. beds at 40º to 60º of c.a. moderate bleaching, clay alteration, soft rock, scarce 1 to 2 per meter 0.5 to 1 cm wide calcite partially to FG qtz trz of FG Py and trz of ss lenses also < 0.2 cm wide irregular FG Py vnlts VFG Py-MnOx? in microvnlts and lenses

284.68 287.43

Silts 95%, bleached wk clay alteration, scarce < per meter calcite stained to brown reddish vnlts at 40º of c.a. fe irregular < 0.2 cm wide calcite trz of Mn Ox vnlts at 80º to 85º of c.a. scarce FG Py- Mn Ox microvnlts

4



286.85 m 1.6 cm wide micro-Bx along bedding formed by small < o.5 cm long subangular to sub rounded bleached silts in calcite stained to light orange colour-FG qtz groundmass, white calcite < FG Py bands in walls.

287.43 289.20

Silts 95% folded and partially Bxed, wk bleached, clay alteration soft rock, irregular calcite in parts stained to pink to light red colour less qtz-FG Py and Mn Ox or ss? Vnlts and lenses.

288.90 m-289.10 m Fault gouge zone at 70º of c.a., calcite less qtz irregular fragments some qtz with light grey colour stain ss?

289.10 289.50

Silts 95% light grey colour, clay alteration, irregular 0.1 to 0.5 cm wide calcite-FG subhedral Py in thin blades, also VFG Py-MnOx or ss? Vnlts at 30º and 60º of c.a.

289.50 292.00

Silts 95% thin < 0.8 cm wide S.S. beds bedding at 30º of c.a. bleached rock to light grey with light green stain colour, bedding at 30º of c.a.

292.00 293.65

Silts 95% wk clay brown to red colour stain as oxidation of Fe or Mn in zones away of fractures, scarce calcite vnlts at 20º to 30º of c.a.

293.65 308.35

Silts 95% thin bedding, fine grain size S.S. thin beds < 0.5 cm wide wavy bedding at 25º to 30º of c.a. wk clay alteration scarce < 1 per meter 0.1 to 0.7 cm wide calcite vnlts at 70º to 75º of c.a. and very scarce thin lenses.

308.35 310.50

Silts 95% thin bedding at 20º to 25º of c.a. grey colour rock soft rock, wk clays in some fractures, irregular 0.1 to 0.3 cm wide calcite-clay FG Py vnlts at 40º to 60º of c.a. Py 1%

310.50 311.60

Silts 95% irregular bedding at 10º to 30º of c.a. scarce S.S. thin beds wk clay alteration

311.60 312.10

Silts wkly bxed wk clays irregular VFG Py vnlts also diss in some fragments as clouds Py 3% to 4%.

312.10 322.17

Silts 98% thin bedding at 30º of c.a. wk clay alteration grey colour rock, scarce 0.2 to 0.7 cm wide calcite vnlts at 45º and 60º of c.a.

    

312.72 m Fault at 20º of c.a. 5 cm of gouge milled Py, wk clays  

322.17 327.85

Silts 95% thin bedding S.S. wavy < 0.5 cm wide beds at 30º of c.a. wk sericite in few fractures, zones up to 5 cm wide of wk bleaching, scarce up to 0.8 cm wide banded calcite lenses, trz of FG Py 0.1 to 0.4 cm wide calcite partially replaced to FG qtz vnlts at 30º and 60º of c.a.

327.85 333.40

Silts 95% thin bedding at 30º to 40º of c.a., wk sericite in scarce fractures, broken zone, irregular 0.1 to 3 cm wide calcite partially replaced to FG qtz trz of ss? vnlts at 20º to 30º of c.a. wk bleaching in walls of calcite to qtz vnlts up to 5 cm wide.

333.40 342.55

Silts 90% wavy up to 3 cm wide S.S. beds bedding at 40º to 50º of c.a. few 3 to 4 per meter 0.1 to 0.8 cm wide banded calcite with thin qtz layers lenses less FG Py lenses, also VFG Py in scarce clouds, scarce < 1 per meter up to 5 cm wide calcite almost totally replaced to FG Qtz-trz of FG Py and ss? Vnlts at 40º to 50º of c.a., scarce FG

342.15 m-342.55 m Fault Bx zone, broken core small < 0.5 cm long calcite fragments.

342.55 369.30

Silts 95% thin bedding at 50º of c.a. wk sericite in scarce fractures, scarce < 1 per meter 0.1 to 1.2 cm wide banded calcite with thin qtz layers, hairline pink to light red oxide layers and trz of FG Py in walls lenses, very scarce < 1 per meter hairline to 0.2 cm wide calcite vnlts at 20º to 60º of c.a.

369.30 370.45

Silts 95% thin bedding at 55º to 60º of c.a. fractured zone.

369.50 m irregular 2 to 3 cm wide calcite partially replaced to FG qtz-light green clays vnlt at 70º of c.a.

5



370.45 381.80

Silts 95% thin bedding at 50º to 60º of c.a. wk clays in few fractures, scarce 1 per meter 0.2 to 1.2 cm wide bended calcite-thin pink to light red layers lenses, scarce hairline to 0.2 cm wide calcite vnlts at 20º to 30º and 60º of c.a.

381.80 382.30

Silts 95% folded zone beds at 60º of c.a. changing to -60º as chevron fold wk bleaching wk oxidation to light brown to red colour Goethite-Hem? Diss, some 0.1 to 0.4 cm wide calcite vnlts forming small scale Stockwork.

382.30 382.80

50 cm wide Fault vein formed by 20 cm wide banded calcite with thin layers and diss of pink to light red oxides at top of the interval, and 30 cm wide zone of Fault Bx with subangular 0.5 to 9 cm wide calcite-less pink oxides fragments in light grey to light brown-reddish milled rock flour.

382.80 383.10

Silts 95% thin bedding at 60º of c.a. scarce calcite calcite–pink to light red colour oxides in 0.1 to 1 cm wide vnlts at 60º to 75º of c.a.

383.10 392.28

Silts 95% thin bedding at 40º to 50º of c.a. wavy irregular S.S. beds up to 3 cm wide S.S. beds, wk clays in some fractures, scarce 0.2 to 1 cm wide calcite < pink to light red colour oxide vnlts and less lenses.

   

385.30 m Fault gouge 5 cm wide zone at 40º of c.a.

386.00- 386.18 m Fault Bx gouge zone subangular up to 1.5 cm long rock fragments in milled rock flour

392.28 399.95

Silts 95% wavy S.S. beds < 1 cm wide, bedding grading from 30º to 50º of c.a. to depth, wk to moderate clay alteration, sericite on various < 1 mm vnlts and in walls of some calcite vnlts, various 4 to 6 per meter hairline to 0.3 cm wide calcite partially replaced to FG qtz- sericite- light green clays and trz of pink to light red carbonates or oxides vnlts and lenses, vnlts at 10º to 30º of c.a. and less 70º to 80º of c.a., scarce up to 1.5 cm wide Pebble dikes along bedding.

   

399.10 m-399.75 m Fault zone broken core slickensides at 40º to 50º of c.a.

399.95 405.25

Silts 85% thin bedding at 50º to 60º of c.a. irregular 0.5 to 1 cm wide scarce up to 6 cm wide S.S. beds, wk clays in microvnlts and in walls of calcite vnlts, few 4 to 5 per meter 0.1 to 0.3 cm wide calcite lenses and scarce vnlts at 20º to 30º of c.a. Scarce 0.2 to 1.5 cm wide irregular pebble dikes along bedding or at 20º of c.a., trz of pink to light red colour carbonates or oxides in pebble dikes, calcite lenses and vnlts.

405.25 410.05

Silts 90% thin bedding scarce up to 3 cm wide irregular S.S. beds bedding at 50º of c.a. wk to moderate clay alteration, zones up to 20 cm wide of consolidated Bx formed by abundant subangular up to 3 cm long sedimentary fragments in scarce calcite-milled rock groundmass, also up to 15 cm wide Bx by faulting zones with 2 % of FG Py in irregular 0.2 to 0.3 cm wide vnlts, also in clouds, few 3 to 5 per meter 0.1 to 0.5 cm wide calcite –light green clays vnlts at 60º to 70º of c.a. Bx zones at 20º top 50º of c.a.

410.05 421.30

Silts 90% thin bedding at 45º to 50º of c.a. S.S. beds 0.1 to 2 cm wide, very scarce sericite in fractures, scarce hairline to 0.5 cm wide calcite lenses and very scarce vnlts at 30º of c.a.

421.30 421.50

Irregular 1 to 3 cm wide calcite light green clays scarce pink to light red carbonate or oxides vnlt and lenses, small Bx in the calcite lens some druse calcite.

421.50 431.90

Silts 90% thin bedding at 50º of c.a. 0.2 to 1.5 cm wide irregular S.S. beds fresh to very wk clay alteration, scarce less than 2 per meter hairline to 0.5 cm wide calcite lenses and less vnlts at 0º to 30º of c.a., very scarce calcite-pink to red carbonate vnlts at 50º of c.a. crossing beds; calcite small crystal in few vnlts at 20º to 30º of c.a.

431.90  

End of Hole

6


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: June 17/ 2004  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES    

             Summary of DDH QTA-19-04; 699,496 E; 2,652,710 N, 330°//-60°/, Concordia area
From To Description
0.00    6.71 Drilled with Tricone bit -No core- Casing
6.71 13.15 Kuc Caracol Fm. Silts 90% thin bedding, 0.2 to 0.8 cm wide fine grain S.S. beds, bedding at 70º to 75º of c.a. P-C alteration, hairline to 0.2 cm wide calcite < Goethite lenses, Goethite diss staining to light brown colour the rock, few 0.1 to 0.2 cm wide Goethite vnlts at 50º of c.a. also Goethite in walls of calcite lenses.
13.15 19.55 Silts 95% thin bedding at 70º of c.a. thin < 1 cm wide S.S. beds, fractured zone core fragments < 8 cm long, some gouge zones along bedding up to 7 cm wide, Bx by fault zones up to 10 cm wide P-C alteration few < 0.2 cm wide calcite- Goethite lenses, Goethite trz of Hematite microvnlts at 10º to 30º of c.a. Fault zone no planes only milled rock.
    19.05 m Bottom of oxidation zone FG Py diss in rock between fractures
19.05-19.55 m Silts 95% bedding at 65º to 70º of c.a. P-C alteration FG anhedral Py in up to 1 cm wide bands, Py 2% to 4% few Goethite vnlts at 10º to 20º of c.a. mix sulfide-oxide zone.
19.55 27.00 Silts 95% thin bedding at 70º of c.a. 0.2 to 0.5 cm wide fine grain S.S. beds, P-C alteration, few 1 to 2 per meter 0.1 to 0.6 cm wide calcite partially replaced to FG qtz, medium size grain cubic Py vnlts at 0º to 10º and 20º to 40º of c.a., scarce calcite-qtz-Py lenses, FG anhedral Py diss in bands up to 1 cm wide, also in 0.1 to 0.2 cm wide lenses Py in interval 4% to 5% Bx zones up to 4 cm wide at 10º to 20º of c.a.
27.00 29.10 Silts 90% few S.S. fragments, Brecciated zone no visible bedding planes, P-C alteration wk sericite in fractures, thin calcite totally replaced to FG qtz irregular vnlts and as groundmass of BX, also irregular 0.1 to 5 cm long sub rounded to subangular rock fragments FG Py in irregular clouds. Close to qtz-calcite irregular vnlts, also FG cubic Py in some vnlts, Py in interval 5% to 7%.
29.10 38.40 Silts 95% < 0.5 cm wide fine grain S.S. beds, bedding grading from 30º to 50º of c.a. P-C alteration wk sericite in fractures, irregular up to 10 cm wide Bxed zones formed by subangular rock fragments in calcite almost completely replaced to FG qtz groundmass, some irregular 0.2 to 0.8 cm wide calcite to FG qtz vnlts and lenses, vnlts at 30º of c.a. VFG Py clouds, also FG anhedral Py in 0.1 to 0.2 cm wide vnlts and lenses Py 3% to 5%, Bxed zones with Py up to 8% trz of ss? In calcite-qtz-Py vnlts.
38.40  40.68 Fractured zone, Bx zones up to 5 cm wide, formed by subangular < 1 cm long

1



rock fragments in milled rock flour, sericite in rock flour, scarce < 1% calcite to FG qtz-Py irregular vnlts, VFG Py with light green stain diss in clouds and thin beds Py 3% to 5%
40.68 46.10 Silts 90%, S.S. beds 0.2 to 2 cm wide, bedding at 50º to 70º of c.a. P-C alteration to wk QSPC wk bleaching, wk sericite, various 5 to 7 per meter 0.1 to 0.5 cm wide calcite almost totally replaced to FG qtz- FG Py vnlts and lenses, vnlts at 10º to 35º of c.a., FG anhedral Py in < 0.2 cm wide lenses and less vnlts at 10º and 50º of c.a.
46.10 48.90 Silts 95% bedding at 70º of c.a. thin irregular 0.5 to 1.5 cm wide S.S. beds, P-C alteration to wk QSPC alteration wk sericite, fractured zones with bxed rock zones up to 25 cm wide at 20º to 40º of c.a., 0.1 to 0.5 cm wide irregular calcite to FG qtz anhedral Py vnlts at 20º to 40º of c.a., in Bx zones trz of ss?, FG Py in irregular clouds and diss in up to 0.8 cm wide bands Py 3% to 4%
48.90 50.90 Silts 90% to 95%, scarce thin < 1.5 cm wide fine grain size S.S. beds, bedding at 75º to 85º of c.a. wk bleaching wk sericite in fractures P-C to wk QSPC alteration, very scarce calcite totally replaced to FG qtz-medium size grain anhedral Py vnlts at 20º to 30º of c.a. and less in 0.1 to 0.3 cm wide lenses Py 2% to 4%
50.90 51.70 Silts 95% bedding at 65º to 70º of c.a. Wkly Bxed zone, wk bleached wk sericite P-C alteration to wk QSPC , calcite totally replaced to FG qtz-FG Py vnlts 0.5 to 2.5 cm wide at 30º to 40º of c.a. VFG anhedral Py in vnlts at 30º of c.a.
51.70 57.70 Silts 95% irregular bedding at 65º to 80º of c.a. some folds, P-C alteration wk sericite scarce < 0.2 cm wide calcite replaced to FG qtz- FG Py lenses and scarce vnlts at 20º and 50º of c.a., few VFG Py clouds and thin 0.1 to 0.5 cm wide lenses, Py 2% to 3%.
57.70 58.55 Silts 80% irregular 0.1 to 0.7 cm wide fine grain size S.S. beds at 60º of c.a., P- C alteration to wk QSPC alteration wk clays, some 2 to 3 per meter 0.2 to 0.8 cm wide calcite totally replaced to FG qtz – FG anhedral Py lenses, less vnlts at 40º to 50º of c.a. VFG PY clouds Py 4% to 6%.
58.55 60.55 Silts 95% bedding at 50º of c.a. scarce 1 per meter 0.2 to 0.3 cm wide calcite top FG qtz < Py vnlts at 50º of c.a. and scarce < 0.2 cm wide lenses, scarce FG subhedral Py vnlts.
60.55 64.00 Silts 90% to 95% wavy up to 3 cm wide S.S. beds at 60º of c.a. wk clays in fractures P-C to wk QSPC alteration irregular fractured < 0.2 cm wide calcite to FG qtz vnlts, some 3 to 5 per meter 0.1 to 0.2 cm wide calcite to FG qtz < Py lenses.
64.00 65.70 S.S. 80% thin < 0.5 cm wide black silts beds at 70º of c.a. QSPC alteration, white to cream colour calcite to FG qtz- adularia? Less FG anhedral Py vnlts at 20º of c.a.
64.55-64.92 m Fault gouge zone only few calcite to FG qtz < FG Py and less rock fragments in abundant milled rock, black colour. VFG Py with dark green stain in few vnlts.
65.70 70.00 Silts 90% wavy up to 0.8 cm wide S.S. lenses 10%, bedding at 40º to 60º of c.a. P-C alteration wk sericite in scarce calcite vnlts, scarce 1 per meter calcite vnlts in top of interval.
68.50 m- m Fractured zone bedding at 45 º to 50º of c.a. P-C alteration various 0.2 to 0.6 cm wide calcite anhedral Py less Py like blades vnlts at 20º to 30º of c.a. and less lenses.
70.00 76.50 Silts 60% irregular fine to medium size grain S.S. lenses and wavy beds, bedding at 65º of c.a. P-C alteration few 2 to 3 per meter, irregular 0.3 to 0.7 cm wide calcite < FG Py trz of ss vnlts and lenses, vnlts at 10º to 30º of c.a.

2



76.50 81.60 Silts 90% irregular 0.2 to 1.5 cm wide S.S. lenses, bedding changing from 70º to 80º then 65º of c.a. P-C alteration few 3 to 4 per meter 0.1 to 1 cm wide calcite trz of FG Py vnlts at 20º and 50º of c.a. also calcite in 0.2 to 1.5 cm wide lenses
81.60 83.50 Medium size grain S.S. beds 70% thin irregular 3 to 6 cm wide Silts lenses, bedding at 50º to 60º of c.a. P-C alteration various 6 to 8 per meter calcite-FG Py trz of stibnite vnlts in small scale Stockwork vnlts 0.2 to 0.8 cm wide, few irregular druse calcite- FG Py vnlts at 70º of c.a.
83.50 85.30 Kuc Fm silts thin bedding 60%, S.S. wavy irregular lenses 0.5 to 5 cm wide, P-C alteration, scarce 1 to 2 per meter 0.1 to 0.3 cm wide calcite less FG Py in walls lenses.
85.30 88.20 S.S. 70% irregular thick beds up to 35 cm wide, Silts in intervals up to 50 cm wide 30%, bedding at 60º of c.a. P-C to wk QSPC alteration some sericite in vnlts. Various 8 to 10 per meter irregular calcite partially replaced to FG qtz < Sericite < Py vnlts and lenses, thin 15 to 20 cm wide Bxed zones, broken vnlts, irregular Py in < 0.1 cm wide vnlts Py 3% to 5% 86.85-87.00 15 cm wide Bx by faulting zone at 60º of c.a. Py 5%
88.20 89.90 Silts 95% scarce < 0.5 cm wide fine grain size S.S. lenses, bedding at 70º of c.a. P-C alteration, few 5 to 6 per meter irregular 0.5 to 2 cm wide calcite partially replaced to FG qtz trz of Py trz of ss vnlts at 20º to 30º and 50º to 70º of c.a.
89.90 98.25 Silts 90% irregular wavy 0.5 to 3 cm wide S.S. beds, bedding changing from 50º to 0º then 60º of c.a. P-C alteration, few 2 to 3 per meter irregular 0.2 to 0.6 cm wide calcite lightly replaced to FG qtz trz of FG Py trz of red Sph in scarce < 0.2 cm wide calcite vnlts at 10º to 20º and few 50º to 70º of c.a. trz of VFG Py clouds.
98.25 105.77 Silts 98% thin bedding S.S. < 0.5 cm wide beds bedding at 65º of c.a. P-C alteration few 1 to 2 per meter 0.1 to 0.3 cm wide calcite trz of FG anhedral Py vnlts at 20º to 30º of c.a. VFG Py diss in scarce S.S. beds Py < 1% in the interval FG Py also in walls of few calcite vnlts.
105.77 106.10 Brown to red Sph FG Py in < 0.2 cm wide calcite vnlt at 20º of c.a.
106.10 112.90 Silts 95% thin bedding at 75º of c.a. P-C alteration scarce less than 1 per meter calcite irregular lenses and very scarce hairline to < 0.1 cm wide vnlts at 30º of c.a.
112.90 113.05 4 cm wide druse calcite vnlt with thin pebble dikes zones at 40º of c.a. FG Py diss in walls of the vnlt.
113.05 121.50 Silts 95 fine grain size S.S. 0.5 to 3 cm wide beds at 60º of c.a. P-C alteration scarce less than 1 per meter 0.1 to 0.5 cm wide calcite lenses and scarce hairline to 0.3 cm wide vnlts at 20º to 40º of c.a.
121.50 124.00 Silts 90% fine grain size S.S. beds up to 5 cm wide. Bedding at 50º of c.a. wk sericite in scarce vnlts. P-C alteration very scarce less than 1 per meter 0.1 to 0.2 cm wide calcite < sericite vnlts at 20º to 40º of c.a.
124.00 127.10 Silts 90% thin bedding at 20º to 30º of c.a.
    124.00-125.00 m Calcite 0.5 to 3 cm wide vnlts in Stockwork at 20º of c.a.
125.00- 127.10 m Druse calcite trz of stibnite rosettes 0.5 to 5 cm wide vnlt at 0º to 10º of c.a.
127.10 128.23 Silts 98% thin bedding at 20º of c.a. P-C alteration scarce 1 to 2 per meter 0.3 to 0.5 cm wide calcite vnlts
128.23 128.82 5 cm wide Calcite FG Py less brown to red Sph vnlt at 10 to 30º of c.a.
128.82 137.00 Silts 95% irregular fine grain size S.S. beds bedding changing from 30º to 0º then 20º of c.a. P-C alteration wk sericite in scarce calcite vnlts; 4 to 6 per meter thin 0.1 to 0.8 cm wide irregular calcite lenses, and few 0.1 to 0.4 cm wide

3



calcite vnlts at 0º to 30º of c.a. small and thin up to 5 cm wide pebble dike with calcite groundmass.
137.00 139.50 Silts 95% wavy bedding at 15 º to 20º of c.a. P-C alteration wk sericite in walls of calcite-qtz vnlts. 0.1 to 0.2 cm wide calcite partially replaced to FG qtz less sericite trz of FG Py vnlts at 15 º to 20º of c.a. crossing bedding.
139.50 151.50 Silts 90% medium size grain S.S. beds up to 15 cm wide bedding at 40º of c.a. P-C alteration few 2 to 4 per meter irregular 0.2 to 0.7 cm wide calcite less and local sericite trz of FG Py vnlts at 20º to 30º of c.a., scarce 0.2 to 0.3 cm wide calcite to qtz lenses
151.50 153.10 Calcite partially replaced to microcrystalline qtz less sericite 0.8 to 1.5 cm wide vnlts at 15º to 20º of c.a.
153.10 160.63 Silts 95% scarce fine grain size S.S. beds wavy 0.2 to 2 cm wide S.S. beds bedding at 20º to 30º of c.a. P-C alteration very wk sericite in scarce calcite vnlts walls. Few 2 to 5 per meter irregular 0.1 to 1.5 cm wide calcite with thin rock or organic material layers vnlts and lenses vnlts at 30 and 60º to 70º of c.a.
160.63 171.90 Silts 95% irregular bedding from 30º to 10º of c.a. P-C alteration scarce 1 to 2 per meter 0.1 to 0.3 cm wide calcite trz of FG subhedral Py vnlts at 30º to 50º of c.a.
171.90 186.15 Silts 85% to 90% fine grain size S.S, irregular beds 0.5 to 3 cm wide at 10º - 0º down to 25º and finally 0º of c.a. at bottom of interval, P-C alteration scarce 0.1 to 0.4 cm wide calcite-scarce FG Py vnlts at 0º to 20º and 60º to 70º of c.a., very scarce irregular 0.5 to 1.5 cm wide calcite vnlts and lenses, scarce druse calcite.
186.15 187.40 Silts 90% irregular bedding at 30º of c.a. S.S. beds < 0.5 cm wide , P-C alteration few 2 to 3 per meter irregular 0.2 to 2 cm wide calcite trz of FG Py lenses and few vnlts at 20º to 30º of c.a.
187.40 197.90 Silts 85% 0.5 to 3 cm wide fine grain size S.S. beds, bedding at 0º to 20º of c.a. P-C alteration scarce irregular 0.2 to 0.8 cm wide calcite lenses and few vnlts at 10º to 30’º of c.a. few at 60º to 70º of c.a. trz of ss in very scarce vnlts.
197.90 200.25 Few 3 to 4 per meter 0.1 to 0.3 cm wide calcite vnlts at 20º to 25º and 50º to 60º of c.a.
200.25 204.80 Silts 90% fine grain size S.S. in 0.2 to 2 cm wide beds, bedding at 20º to 25º of c.a. P-C alteration few 2 to 3 per meter hairline to 0.2 cm wide calcite trz of FG Py lenses and few vnlts at 20º to 30º of c.a. irregular < 0.1 cm wide FG Py< calcite vnlts at 60º to 80º of c.a.
204.80 207.60 Silts 90% FG S.S. beds 0.5 to 1.5 cm wide, bedding at 10º to 15º of c.a. P-C alteration to wk QSPC, calcite partially replaced to FG qtz, some 4 to 6 per meter irregular 0.1 to 0.8 cm wide FG anhedral Py in bands with calcite FG Qtz vnlts at 20º to 30º of c.a. and 70º to 80º of c.a. Py 2% to 3% in the interval.
207.60 209.10 1.5 meters wide vein formed by about 40% of FG anhedral Py, less calcite partially replaced to microcrystalline qtz-Sulfosalts (Proustite and less Pyrargyrite-, jamesonite), brown to red Sph trz of chalcopyrite, top of vein at 80º of c.a. and bottom at 70º of c.a.
209.10 209.40 Bx formed by lightly silicified Silts less subangular to sub rounded S.S. fragments 0.2 to 2x6 cm long fragments in abundant coarse calcite crystals, also fine grain Qtz as replacement of calcite and milled rock groundmass, scarce rock fragments with FG Py and trz of Sph.
209.40 209.70 Fractured Silts, P-C to wk QSPC alteration 0.1 to 0.2 cm wide calcite partially replaced to FG qtz-FG anhedral Py irregular fractured vnlts Py 3% to 5% in interval.
    209.65 m Fault at 60º of c.a.
209.70 214.40 Silts 90% FG S.S. beds 0.5 to 2 cm wide, bedding at 0º to 15º of c.a. P-C

4



alteration irregular 0.2 to 2 cm wide banded calcite thin layers of FG qtz < FG Py in walls lenses at 0º to 10º of c.a. also irregular calcite FG Py vnlts fragments, few 3 to 5 per meter 0.2 to 0.3 cm wide FG anhedral Py < calcite to qtz and trz of Red to brown Sph vnlts at 40º to 50º of c.a.
214.40 219.13 Silts 90% bedding at 10º to 20º of c.a. P-C alteration scarce 0.1 to 0.2 cm wide calcite FG Py trz of Sph vnlts at 60º to 80º of c.a. few irregular up to 8 cm wide lenses of banded calcite with irregular rock or organic material in layers from hairline to 1 cm wide bands at 50º of c.a.
219.13 221.20 Silts 95% irregular bedding at 10º to 25º of c.a. P-C alteration, various 4 to 6 per meter 0.2 to 2 cm wide calcite partially replaced to FG qtz with light pink colour stain- FG anhedral Py less brown to red Sph and ss vnlts at 50º to 60º of c.a.
221.20 231.50 Silts 95% grey colour beds 0.2 to 5 cm wide among 0.1 to 1.5 cm wide black fine grain Silts bands, bedding 10º to 30º of c.a. few 4 to 6 per meter thin 0.2 to 0.9 cm wide calcite partially replaced to FG qtz- anhedral to subhedral Py trz of brown to red Sph and grey to black sulfosalts vnlts at 60º to 70º of c.a. few at 30º of c.a.; few 0.1 to 0.4 cm wide calcite anhedral Py irregular lenses.
231.50 233.95 Silts 95% irregular bedding at 40º to 60º of c.a. wk sericite in calcite vnlts walls P-C to wk QSPC alteration few 2 to 4 per meter < 0.4 cm wide calcite partially replaced to FG qtz trz of ss vnlts at 50º to 60º of c.a. 232.95 to 232.95 m various 5 to 6 per meter < 0.1 cm wide FG Py < calcite to qtz vnlts at 40º to 60º of c.a.
233.95 234.17 Fault gouge zone at 60º of c.a. milled rock-calcite to qtz-FG Py and ss?
234.17 234.75 Silts 95% bedding 45º to 50º of c.a. P-C alteration wk bleaching 6 to 8 per meter < 0.2 cm wide anhedral Py < calcite trz of ss vnlts at 40º to 50º of c.a. few 70º to 80º of c.a. less at 10º of c.a.
234.75 234.81 6 cm wide calcite partially replaced to FG qtz in walls, medium size anhedral Py less brown to red Sph and trz of ss vnlt at 55º of c.a.
234.81 236.37 Silts 90% < 0.5 cm wide irregular fine grain size S.S. beds bedding at 50º of c.a. P-C alteration scarce 1 to 3 per meter 0.1 to 0.2 cm wide calcite-anhedral Py and trz of ss lenses and less vnlts at 25º of c.a.
236.37 236.41 4 cm wide calcite-medium size grain anhedral Py brown to red Sph and less ss vnlt at 65º of c.a.
236.41 239.00 Silts 90% irregular bedding some folds and brecciation at time of deposition unstable basin, various 6 to 8 per meter irregular 0.2 to1 cm wide calcite anhedral Py vnlts and thin pebble dikes, FG Py < calcite 0.1 cm wide vnlts.
239.00 243.56 Silts 95% bedding at 60º to 70º of c.a. P-C alteration 2 to 3 per meter irregular 0.1 to 0.6 cm wide irregular calcite lenses and vnlts trz of ss in very scarce vnlts at 55º of c.a.
243.56 243.58 2.2 cm wide calcite lightly replaced to FG qtz- medium size anhedral Py- thin rock layers and trz of brown to red Sph and ss vnlt at 40º of c.a.
243.58 248.50 Silts 95% grey colour 0.5 to 5 cm wide , among 0.1 to 1 cm wide black colour very small size grain black Silts layers, bedding 0º to 30º of c.a. P-C alteration few 2 to 3 per meter hairline to 0.2 cm wide calcite FG anhedral Py vnlts at 0º to 10º of c.a. and 40º to 50º of c.a. scarce up to 7,5 cm wide calcite and layers of rock vnlt at 60º to 70º of c.a.
248.50 253.00 Silts 80% irregular wavy 0.5 to 2 cm wide fine grain S.S. beds, bedding at 10º to 25º of c.a. few 2 to 4 per meter 0.3 to 1 cm wide calcite FG anhedral Py and occasional ss and Sph vnlts at 20º to 30º and 70º to 80º of c.a. Py < 1%
253.00 260.00 Silts 95% bedding changing from 30º to 80º of c.a. P-C alteration 3 to 5 per meter thin 0.1 to 0.8 cm wide calcite < FG anhedral Py and trz of brown to red Sph and ss vnlts at 20º to 30º and 70º to 90º of c.a.
260.00 263.08 Silts 95% bedding at 75º of c.a. few 2 to 3 per meter 0.2 to 0.7 cm wide calcite

5



    FG anhedral Py trz of black Sph or ss vnlts at 60º to 85º of c.a.
263.08 263.10 2 cm wide calcite FG anhedral Py black Sph or ss vnlt at 70º of c.a.
263.10 266.65 Silts 90% to 95% bedding changing from 50º to 30º of c.a. P-C alteration few 2 to 3 per meter hairline to 0.2 cm wide calcite FG Py trz of brown Sph-ss vnlts; VFG Py diss in thin 0.2 to 0.4 cm wide vnlts at 35º of c.a. and few clouds.
266.55 266.70 5 cm wide calcite FG anhedral Py brown to red Sph, black Sph or ss vnlt at 60º of c.a. Fault at 60º in footwall of vnlt
266.70 267.20 Silts 95% bedding at 25º of c.a.
267.20 267.26 6 cm wide calcite partially replaced to FG qtz-irregular thin rock layers or bands veinlet at 60º of c.a.
267.31 295.10 Silts 95% bedding at 20º to 40º of c.a. wk sericite in vnlts P-C alteration 0.2 to 1 cm wide calcite less Sph and ss < FG anhedral Py vnlts at 60º to 70º of c.a. and scarce 1 mm wide FG anhedral Py < brown to red Sph – ss vnlts at 50º to 60º of c.a. blade calcite in scarce vnlts , white calcite irregular vnlts 0.1 to 1.2 cm wide
295.10 300.05 Silts 95% thin bedding at 25º to 50º of c.a. P-C alteration wk sericite in scarce calcite vnlts walls few 2 to 3 per meter irregular 0.2 to 5 cm wide calcite < FG Py lenses.
297.05-297.10 m 5 cm wide calcite-FG Py –AsPy trz of brown Sph and ss vnlt at 40º of c.a.
300.05 304.30 Silts 90% to 95% bedding at 20º to 40º of c.a. wk sericite in some calcite vnlts walls, P-C alteration, irregular calcite < FG Py- sericite and scarce trz of ss vnlts at 0º to 20º and 60º to 80º of c.a.
304.30 306.93 Silts 95% thin bedding at 40º of c.a. P-C alteration, few 0.1 to 0.4 cm wide calcite trz of FG anhedral Py irregular vnlts at 0º to 10º and 30º to 40º and 60º of c.a.
306.93 312.20 Silts 90% to 95%, bedding at 20º to 35º of c.a. P-C alteration scarce < 1 per meter < 1 mm wide calcite trz of FG Py vnlts at 20º to 30’º of c.a. also FG Py < 1 mm wide vnlts at 40º to 60º of c.a.
312.20 314.10 Same rock silts bedding grading from 10º to 0º then 50º of c.a. (3) three 0.3 to 1.2 cm wide calcite FG anhedral Py less black Sph < ss vnlts at 40 º to 60º of c.a.
314.10 323.40 Silts 95% irregular beds at 0º to 20º of c.a. P-C alteration, less than 1 every 1.5 meters, thin 0.1 to 0.3 cm wide calcite FG Py in thin needles, trz of black Sph and less grey ss vnlts at 60º of c.a.
323.40 334.56 Silts 95% irregular bedding at 20º to 40º of c.a. P-C alteration scarce hairline to 0.3 cm wide calcite vnlts at 10º to 30º and 60º to 70º of c.a. few scarce vnlts with ss trz and FG anhedral Py
334.56 334.57 1 cm wide calcite partially replaced to FG qtz-FG anhedral Py < black Sph and ss vnlt at 60º of c.a.
334.57 335.80 Silts 85% few light grey colour fine grain size S.S. beds 0.5 to 3 cm wide, bedding at 0º to 30º, some slickensides along bedding, few irregular FG Py < calcite partially replaced to FG qtz vnlts at 50º to 60º of c.a. or as lenses along bedding, Py 1% also FG Py in small clouds in S.S. beds.
    335.80 m Fault at 65º of c.a.
335.80 341.65 Silts 80% irregular wavy 0.5 to 2 cm wide fine grain size S.S. beds, bedding grading from 0º to 40º of c.a., wk to moderate sericite only in few vnlts, scarce hairline to 0.5 cm wide calcite< FG Py vnlts.
341.65 342.10 Fault zone, thin gouge and bxed intervals in milled rock.
3421.0 343.06 Silts 80% irregular 0.2 to 1 cm wide S.S. beds, bedding at 50º to 60º of c.a., few 0.1 to 0.2 cm wide calcite-FG Py lenses along bedding

6



    343.00 m Fault along bedding at 50º of c.a.
343.06 343.08 2 cm wide FG Py < calcite less black Sph – ss lenses at 55º of c.a.
343.08 351.40 Silts 80% irregular wavy beds some medium size grain S.S. beds, folded beds, bedding at 0º to 40º of c.a. P-C alteration, few 0.1 to 1 cm wide calcite-FG Py less black Sph trz of ss vnlts and lenses vnlts at 50º to 60º of c.a., FG Py < calcite lenses and vnlts at 50º of c.a.
351.40 360.00 Silts 90% irregular folded beds P-C alteration scarce 1 to 2 per meter 0.1 to 0.3 cm wide calcite < FG Py vnlts at 10º to 20º and 40º to 60º of c.a. also 0.2 to 0.8 cm wide irregular calcite FG Py lenses
360.00 365.65 Silts 90% irregular lightly folded beds at 45º of c.a. P-C alteration few 1 to 2 per meter 0.2 to 1 cm wide calcite –FG anhedral Py less black Sph and trz of ss vnlts at 40º to 60º of c.a. also FG Py <calcite vnlts at 40º to 50º of c.a. Py 1% to 2%
365.65 370.40 Silts 95% beds at 20º to 50º of c.a. wk to moderate sericite in vnlts and in walls of calcite vnlts. P-C alteration few calcite < sericite and less FG anhedral Py vnlts at 30º of c.a. also up to 1 cm wide lenses.
370.40 372.40 Silts 95% P-C alteration few 2 to3 per meter 0.2 to 0.8 cm wide calcite- FG anhedral Py-black Sph< ss vnlts at 40º to 70º of c.a. scarce hairline to 0.2 cm wide calcite FG Py vnlts.
372.40 376.00 Silts 90% to 95% thin bedding at 70º of c.a. P-C alteration few 3 to 4 per meter irregular 0.1 to 0.5 cm wide calcite trz of FG Py lenses and few vnlts at 20º to 30º of c.a.
376.00 377.00 Silts 95% thin bedding at 85º to 90º of c.a. few < 0.5 cm wide fine grain size S.S. beds P-C alteration few 2 to 3 per meter 0.1 to 0.4 cm wide FG Py < calcite less black Sph and trz of ss vnlts at 70º to 90º of c.a.
377.00 380.09 Silts 90% thin bedding at 70º to 90º of c.a. P-C alteration few 0.1 to 0.3 cm wide calcite < FG Py lenses and in few 0.1 to 0.3 cm wide calcite vnlts at 30º to 40º of c.a.
380.09 384.00 Silts 90% thin layers, scarce 0.1 to 0.5 cm wide fine grain size S.S. beds, bedding from 85º to 75º of c.a. P-C alteration hard rock, few 1 every 1.3 meters 0.6 to 1.4 cm wide calcite-FG anhedral Py, black and red Sph and less ss vnlts at 40º to 50º of c.a., FG anhedral Py diss in walls of some S.S. beds, also with calcite in few 0.1 to 0.3 cm wide lenses.
384.00 389.00 Silts 90% S.S. beds 0.5 to 2.5 cm wide, bedding at 75º of c.a. irregular bedding P-C alteration, scarce sericite in vnlts at bottom of the interval, few 3 to 4 per meter 0.1 to 0.3 cm wide FG anhedral Py< calcite vnlts at 20º to 30º of c.a. trz of black and less red Sph in scarce Py-calcite vnlts at 45º of c.a.
389.00 389.12 Fault zone, slickensides at 70º to 80º of c.a. thin < 2 cm wide gouge zones
389.12 390.48 Silts 90% to 95% thin 0.5 to 1.5 cm wide fine grain size S.S, beds at 70º of c.a. P-C alteration wk to moderate sericite in few calcite vnlts walls at 20º to 30º of c.a. just one irregular 0.5 to 0.7 cm wide calcite partially replaced to FG qtz < FG Py and less red to black Sph vnlts at 50º of c.a.
390.48 394.80 Silts 90% scarce < 0.5 cm wide fine grain size S.S. beds at 70º of c.a. P-C alteration, various 6 to 7 per meter hairline to 0.1 cm wide FG anhedral Py< calcite vnlts at 40º to 60º of c.a., scarce less than 1 per meter 0.2 to 0.6 cm wide calcite partially replaced to FG qtz, FG Py and trz of Sph vnlts at 35º to 55º of c.a.
394.80 395.53 Fault zone, fault planes at 40º, 50º and 80º of c.a. Bxed gouge zones up to 45 cm wide with milled calcite-rock, 2 to 3 cm wide bands with milled subhedral Py with calcite to FG qtz.

7



395.53 397.30 Compact Silts 90% wavy 0.5 to 2.5 cm wide fine grain size S.S. beds, bedding at 60º of c.a., wk sericite in few calcite vnlts walls at 30º to 50º of c.a., scarce FG anhedral Py in few vnlts at 50º of c.a.
397.30 398.37 Silts 90% irregular wavy 0.1 to 2 cm wide fine grain size S.S. beds at 60º of c.a. P-C alteration wk to moderate sericite in few calcite vnlts walls at 10º to 15º of c.a., scarce 0.1 to 1 cm wide calcite vnlts and irregular lenses with FG anhedral Py in walls.
    397.30 m 1 cm wide Fault gouge zone at 60º of c.a.
398.37 400.40 Silts 95% bedding at 60º of c.a. P-C alteration, anhedral to subhedral Py in various 0.1 to 0.3 cm wide vnlts also as small clouds diss in some S.S. beds, Py 2% to 3%, scarce calcite < 0.2 cm wide vnlts.
  402.45 Reduction to NX core diameter
400.40 402.85 Bx by Fault , Bxed zones up to 5 cm wide at 70º of c.a. few medium size<e grain S.S. up to 7 cm long fragments bedding at 20º to 30º of c.a. scarce calcite to qtz irregular fragments, scarce FG Py 1% to 2%
402.85 403.00 5 cm wide anhedral to subhedral Py – black and less brown to red Sph- calcite – ss fault vnlt at 30º of c.a. also gouge with Py-Sph 3 cm wide with milled sulfides and calcite
403.00 408.00 Silts 90% thin 0.5 to 2 cm wide S.S. beds at 50º of c.a. P-C to wk QSPC alteration, wide apart Stockwork of thin 0.2 to 2 cm wide calcite totally replaced to FG qtz-anhedral to subhedral Py less black and red brown Sph irregular vnlts, Py in interval 2% to 3%
408.00 411.80 Silts 95% irregular 0.1 to 1 cm wide fine grain S.S. lenses bedding at 70º of c.a. P-C alteration few 2 to 3 per meter, medium size grain anhedral to cubic Py < calcite partially replaced to FG qtz vnlts at 20º and 50º to 70º of c.a., scarce VFG Py clouds and as irregular diss in walls of vnlts, also few < 1 mm wide FG Py vnlts in small Stockwork zones
411.80 412.10 Irregular 0.1 to 2 cm wide brown to red and black Sph-anhedral Py < calcite totally replaced to FG Qtz vnlts at 30º and 50º of c.a.
412.00-412.10 m Fault gouge up to 8 cm wide zone at 60º of c.a. with milled calcite to FG qtz-Py< Sph and also as irregular vnlts in gouge zone Py 5%
412.10 419.00 Silts 70% irregular fine to medium size grain S.S. beds up to 60 cm wide, bedding at 60º of c.a. P-C alteration, few 3 to 4 per meter irregular 0.1 to 1 cm wide calcite partially replaced to FG qtz and less FG Py decreasing in amount to the bottom vnlts at 20º, 40º and 60º of c.a. less qtz replaced from calcite and more amount of 0.1 to 1 cm wide calcite < FG Py vnlts at bottom
419.00 422.00 Silts 60% various 0.1 to 20 cm wide fine grain size S.S. beds, bedding at 70º of c.a. Wk QSPC alteration, moderate sericite in vnlts, scarce thin < 0.2 cm wide calcite wkly replaced to FG qtz less sericite vnlts at 10º to 15º and 50º to 60º of c.a. wkly fractured zone, scarce FG Py with thin layers of calcite lenses.
422.00 422.76 Fault zone Bxed rock, irregular calcite and rock fragments Fault planes at 20º to 30º of c.a. sericite wk to moderate in some fractures.
422.76 423.10 Silts 80% thin bedding at 50º of c.a., irregular0.5 to 2 cm wide fine grain size S.S. beds P-C alteration, 2 to 3 per meter hairline to < 0.4 cm wide calcite partially replaced to FG qtz < FG anhedral Py vnlts at 30º and 70º of c.a., also calcite to FG qtz irregular < 0.2 cm wide lenses.
423.10 423.80 Fault zone 2 cm wide gouge zone at 60º of c.a., broken calcite and rock fragments.
423.80 425.20 Silts 85% thin 0.5 to 1 cm wide S.S. beds at 30º of c.a. P-C alteration fine grain size anhedral Py in scarce thin irregular vnlts and clouds Py 1% to 2% scarce < 1 per meter < 0.1 cm wide calcite to FG qtz vnlts.

8



425.20 426.00 3 cm wide calcite partially replaced to FG qtz-FG anhedral Py and less black and brown to red Sph –sulfosalts vnlt at 10º of c.a.
    426.00 m Fault 5 cm wide gouge zone at 45º of c.a.
426.00 431.00 Silts 90% irregular 0.3 to 13 cm wide S.S. beds, bedding at 45º to 50º of c.a. P-C alteration some 4 to 6 per meter thin hairline to 1.2 cm wide FG Py-calcite wkly replaced to FG qtz lenses and scarce vnlts at 40º of c.a. Py 1%
431.00 433.00 Silts 80% wavy 0.2 to 11 cm wide S.S. beds, bedding at 70º of c.a. P-C alteration few 3 to 4 per meter 0.1 to 0.2 cm wide calcite wkly replaced to FG qtz and scarce FG Py vnlts at 10º to 30º of c.a. few up to 0.8 cm wide irregular calcite < FG Py in walls lenses Py < 1%
433.00 436.00 Silts 60% fine grain size S.S. beds up to 60 cm wide bedding at 60º of c.a. P-C to wk QSPC alteration wk sericite in some 2 to 3 per meter calcite partially replaced to FG qtz 0.2 to 0.8 cm wide vnlts at 5º to 10º and 20º to 30º of c.a. trz of ss in vnlts.
436.00 445.30 Silts 90% fine grain size 0.2 to 2 cm wide scarce up to 9 cm wide S.S. beds, bedding at 55º to 60º of c.a. P-C alteration few 2 to 4 per meter 0.2 to 1.5 cm wide calcite vnlts with FG anhedral to subhedral Py vnlts at 20º to 40º of c.a., scarce FG Py in small dots diss in walls of some S.S. beds, Py < 1% in the interval, scarce calcite vnlts wkly replaced to FG qtz.
445.30 446.40 Silts 98% scarce 0.1 to 3 cm wide S.S. beds, bedding at 70º of c.a. P-C alteration, scarce sericite in few calcite vnlts, few 2 to 3 per meter hairline to 0.2 cm wide calcite wkly replaced to FG qtz vnlts at 5º to 20º of c.a.
446.40 453.10 Silts 95% scarce wavy 0.2 to 0.5 cm wide fine grain size S.S. beds at 55º to 70º of c.a. fresh to wk P-C alteration, very scarce < 1 per meter thin hairline to 0.1 cm wide calcite < FG Py vnlts and lenses, vnlts at 30º to 50º of c.a.
453.10 453.60 Bx by faulting, gouge formed by milled rock and less calcite FG Py , Fault planes at 60º of c.a.
453.60 456.29 Silts 95% thin bedding at 70º of c.a. scarce 0.2 to 1.5 cm wide fine grain size S.S. beds, fresh to wk P-C alteration, few 3 to 5 per meter thin 0.1 to 0.3 cm wide calcite and less FG Py lenses, and very scarce hairline vnlts at 0º to 10º of c.a.
456.29   End of Hole

9


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: June 23/ 2004  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES    

Summary of DDH QTA-20-04; 699,582 E; 2,652,760 N, 330°/-60°, Concordia area
From To Description
0.00 6.40 Drilled with Tricone bit -No core- Casing
6.40 8.05 Kuc Caracol Fm. Fine grain S.S. beds 70% silts intervals 3 to 10 cm wide bedding at 70º to 50º of c.a. P-C alteration, few 2 to 3 per meter 0.2 to 2.5 cm wide calcite with less Goethite in walls vnlts at 10º to 30º of c.a. less vnlts at 70º of c.a. Goethite diss in 0.1 to 0.5 cm wide bands.
8.05 9.30 Fine grain S.S. 70% 10 to 15 cm wide Silts intervals, bedding at 60º of c.a. P-C alteration Stockwork of thin 0.1 to 0.3 cm wide calcite < Goethite vnlts, also few 2 per meter calcite partially replaced to FG qtz< Goethite bands at 0º to 10º of c.a
8.23-8.40 m Bx by Fault zone at 40º of c.a. small subangular silts fragments with bigger S.S. fragments in milled rock groundmass.
9.30 13.27 Silts 70% fine to medium size grain S.S. beds at 70º of c.a. wk bleaching in S.S. beds P-C alteration few 2 to 3 per meter 0.1 to 0.2 cm wide calcite < Goethite vnlts at 0º to 20º of c.a. scarce Goethite diss in walls of calcite vnlts.
13.27 15.45 Fine to medium size grain S.S. 70% thin irregular Silts intervals up to 5 cm wide, bedding at 70º to 50º of c.a., wk bleaching P-C alteration, few 4 to 6 per meter irregular calcite < Goethite in walls vnlts and lenses, vnlts 0.2 to 0.4 cm wide lenses 0.1 to 1 cm wide.
    14.35-14.55 m Fault at 70º of c.a. grey to light brown mud
15.45 16.70 Silts 80% S.S. beds up to 10 cm wide, bedding at 75º of c.a. P-C alteration few 2 to 3 per meter thin < 0.3 cm wide calcite < goethite lenses, less only goethite 0.1 to 0.3 cm wide lenses.
    16.70 m Bottom of oxidation zone
16.70 29.70 Kuc Silts 90% thin bedding, scarce irregular 0.2 to 0.5 cm wide fine grain size S.S. beds, bedding at 70º of c.a. P-C alteration scarce 1 to 2 per meter 0.1 to 0.8 cm wide calcite Trz of FG Py vnlts and lenses, vnlts at 60º of c.a. scarce VFG Py clouds and irregular thin lenses.
29.70 30.10 Fault Bx gouge zone up to 0 cm wide Fault planes at 30º and 70º of c.a. irregular calcite partially replaced to FG qtz< FG Py fragments in milled rock flour, Goethite in irregular thin vnlts in gouge zone.
30.10 33.30 Silts 90% irregular thin bedding at 10º to 30º of c.a. P-C alteration, irregular 0.1 to 0.3 cm wide Goethite bands, few only goethite vnlts at 0º to 10º of c.a. Goethite in interval 3%.

1



33.30 34.76 Silts 95% bedding at 0º to 20º of c.a. P-C alteration, various irregular Py < calcite lenses and less vnlts at 20º to 40º of c.a. few 2 to 3 per meter 0.1 to 0.3 cm wide calcite < FG Py in walls vnlts at 50º to 70º of c.a.
34.76 43.50 Silts 95% irregular thin bedding at 0º to 25º of c.a. P-C alteration few 2 to 3 per meter banded calcite vnlts at 30º to 50º of c.a.
43.50 50.40 Silts 95% scarce irregular 0.2 to 2 cm wide fine grain size S.S. beds, bedding changing from 40º to 80º of c.a. P-C alteration various 6 to 8 per meter, irregular 0.2 to 1 cm wide calcite scarce FG PY vnlts forming local wide apart Stockwork zones 30 to 60 cm wide, trz of Goethite staining these zones, Pebble dikes up to 10 cm wide.
50.40 54.00 Silts 95% thin bedding at 70º of c.a. P-C alteration, various 6 to 8 per meter irregular calcite –brown goethite 0.1 to 1 cm wide vnlts at 0º to 20º and 50º to 70º of c.a.
54.00 57.10 Silts 95% thin irregular wavy 0.1 to 0.4 cm wide fine grain size S.S. beds bedding at 40º to 70º of c.a. P-C alteration few 2 to 3 per meter irregular 0.1 to 1 cm wide calcite lenses, very scarce 0.1 to 0.3 cm wide calcite vnlts at 20º to 40º of c.a.
57.10 59.40 Various 8 to 10 per meter 0.1 to 2 cm wide calcite lenses and vnlts at 20º and 70º of c.a. some calcite fragments.
    58.30-58.40 m 10 cm wide Fault zone only grey mud
59.40 59.55 Fault zone grey mud, fault planes at 70º and 80º of c.a.
59.55 65.47 Silts 95% bedding at 65º to 75º of c.a. P-C alteration various 5 to 7 per meter thin 0.1 to 0.2 cm wide calcite-trz of FG Py lenses, few 1 to 2 per meter hairline to 0.1 cm wide calcite < FG Py vnlts at 25º to 30º of c.a.
65.47 65.90 Fault zone Bxed gouge zones up to 10 cm wide with few small < 0.5 cm wide calcite fragments in sub rounded up to 1 cm wide rock fragments in milled rock flour Fault planes at 70º of c.a.
65.90 68.65 Silts 95% dark grey colour, irregular fine grain size S.S. lenses Wk P-C alteration, scarce less than 1 per meter hairline calcite vnlts at 30º of c.a. thin 2 to 5 cm wide fault gouge zones at 30º to 40º and 70º of c.a.
68.65 71.90 Silts 98% dark grey to black colour, wk P-C alteration, scarce 1 to 2 per meter irregular calcite 0.1 to 0.3 cm wide vnlts at 0º to 20º and 60º of c.a.
71.90 75.40 Silts 95% grey to dark grey colour, bedding at 75º to 80º of c.a. wk P-C alteration, few 3 to 5 per meter 0.1 to 0.5 cm wide banded calcite lenses, few 0.1 to 0.2 cm wide calcite vnlts at 10º to 30º of c.a.
75.40 75.83 Fault zone zones up to 10 cm wide of only dark grey mud, fault planes at 75º of c.a., few up to 1 cm wide calcite partially replaced to FG qtz lenses or vnlts at 70º to 75º of c.a. in bottom of the interval.
75.83 77.80 Silts 90% dark grey colour no bedding planes in top of interval, irregular fine grain size S.S. lenses at 60º of c.a. scarce 0.1 to 0.3 cm wide calcite lenses or vnlts at 20º to 40º of c.a. few at 60º of c.a.
77.80 78.10 S.S. 60% fine to medium size grain, zone of broken core among only mud zones, no visible fault planes, few calcite 0.1 to 0.5 cm wide vnlts in some fragments.
78.10 78.64 Fine grain size light grey colour S.S. beds with thin < 1 mm wide black Silts or organic material layers, bedding at 60º of c.a. P-C alteration few 1 to 2 per meter, irregular 0.1 to 2 cm wide calcite vnlts at 0º to 10º of c.a.
78.64 78.70 6 cm wide Fault zone, only dark grey colour mud, Fault planes at 70º of c.a.
78.70 80.80 S.S. fine grain size and light grey colour 70% in irregular up to 30 cm wide beds with thin 0.1 to 1 cm wide black Silts lenses, P-C alteration few 2 to 3 per meter,

2



    irregular 0.1 to 1 cm wide calcite vnlts at 5º to 20º of c.a.
80.80 83.00 Broken Core medium size grain in beds up to 30 cm wide S.S. 60%, wk sericite in fractures, few 2 to 3 per meter 0.1 to 0.2 cm wide calcite vnlts at 20º to 30º of c.a.
83.00 89.10 Medium size grain S.S. 60% in beds up to 25 cm wide, thin black silts < 1 mm wide lenses in S.S. beds, also as fine grain 5 to 20 cm wide intervals, bedding at 70º of c.a. wk bleaching wk sericite P-C alteration few 3 to 4 per meter irregular 0.1 to 1.5 cm wide calcite wkly replaced to FG qtz vnlts and lenses vnlts at 10º to 20º of c.a.
89.10 91.40 Silts 70% medium size grain S.S. beds 30% bedding at 80º of c.a. few calcite vnlts.
91.40 93.30 S.S. 60% Sedimentary Bx formed during deposition time Sub rounded calcite and rock fragments wk bleaching wk sericite P-c Alteration, calcite trz of subhedral Py up to 3 cm wide vnlts at 30º of c.a.
93.30 94.10 Silts 80% thin bedding 0.1 to 0.5 cm wide irregular S.S. beds at 0º to 20º of c.a. FG anhedral Py in thin 0.1 to 0.2 cm wide lenses along bedding, few 2 to 3 per meter 0.1 to 0.3 cm wide calcite lenses.
94.10 100.51 S.S. 90% medium size grain thick beds up to 80 cm wide thin 0.1 to 0.3 cm wide black layers of organic material or Silts, bedding at 30º of c.a. small 0.1 x 1 cm calcite lenses diss in black bands up to 5 cm wide. P-C alteration wk to moderate sericite diss in S.S. beds scarce 2 to 3 per meter 0.1 to 0.3 cm wide calcite trz of FG Py vnlts at 10º to 20º and 60º to 70º of c.a.
100.51 106.40 S.S. 60% thin irregular wavy beds 0.2 to 15 cm wide, dark grey Silts thin layers 40% bedding at 30º to 35º of c.a. P-C alteration wk bleaching by sericite in S.S. beds, scarce less than 1 per meter 0.1 to 0.3 cm wide calcite trz of Py vnlts at 10º to 30º of c.a. also as lenses.
106.40 115.80 Silts 60% thin bedding at 40º to 50º of c.a. wavy irregular S.S. 0.1 to 1 cm wide medium size grain beds, P-C alteration wk sericite wk bleaching in S.S. beds few hairline to 0.4 cm wide calcite trz of Py vnlts and few lenses , vnlts at 30º to 40º of c.a. and 80º to 90º of c.a.
115.80 121.75 S.S. 60% irregular beds 0.2 to 10 cm wide, sedimentation on unstable basin deformed and moved beds, bedding from 60º at top to 20º in the centre and 0º at bottom of the interval, wk bleaching in S.s: beds wk to trz of sericite, very scarce hairline to 0.5 cm wide irregular calcite vnlts at 30º to 50º of c.a.
121.75 123.30 S.S. 70% in irregular beds, sedimentation on unstable basin, dark grey irregular wavy 0.1 to 5 cm wide Silts beds and as sub rounded lenses P-C alteration wk sericite in few calcite vnlts walls, few 3 to 5 per meter 0.1 to 0.4 cm wide calcite- sericite and trz of stibnite vnlts and lenses vnlts at 0º to 20º of c.a.
123.30 125.80 S.S. 85% irregular wavy beds and lenses P-C alteration wk sericite, scarce irregular 0.1 to 0.5 cm wide calcite vnlts at 30º and 80º of c.a., scarce up to 1.5 cm wide druse calcite vnlts at 40º of c.a.
125.80 138.20 Silts 80%, irregular banded fine grain size S.S. beds 20%, bedding changing from 40º to 0º of c.a. P-C alteration few 2 to 3 per meter hairline to 0.8 cm wide calcite vnlts at 10º to 30º of c.a. scarce at 75º of c.a. trz of FG Py in some calcite vnlts walls at bottom of the interval.
138.20 145.00 Silts 70% irregular beds and lenses, sedimentation on unstable basin, fine grain irregular S.S. beds and lenses 30%. Stockwork of irregular 0.1 to 1.2 cm wide calcite partially replaced to FG qtz less FG Py vnlts.
145.00 147.00 S.S. 85% to 90% irregular bedding at 20º to 40º of c.a. thin dark grey colour layers of Silts or organic material, P-C alteration few 1 to 2 per meter hairline to 0.5 cm wide calcite-FG Py in walls vnlts at 0º to 20º and 70º to 85º of c.a.

3



147.00 158.25 Silts 90% scarce thin irregular beds, cross-bedding and small folding features, variable bedding from 40º to 0º then 60º of c.a. P.C alteration scarce 2 to 3 per meter 0.1 to 2 cm wide bended calcite lenses, scarce 0.1 to 0.4 cm wide irregular calcite vnlts at 40º of c.a.
158.25 165.00 Silts 80% irregular fine grain size S.S. 0.2 to 2 cm wide beds, some sub rounded up to 5 cm long lenses P-C alteration few 3 to 5 per meter 0.1 to 0.3 cm wide calcite. trz of FG Py vnlts at 10º to 25º and 40º to 60º of c.a.
165.00 170.80 Silts 70% wavy bedding fine to medium size grain S.S. up to 10 cm wide lenses, with some sub rounded Silts fragments, bedding 0º to 25º of c.a. P-C alteration, few 1 to 2 per meter irregular 0.1 to 1.2 cm wide calcite trz of FG PY vnlts at 30º to 50º of c.a.
170.80 174.15 Fine to medium size grain “dirty” S.S. beds 90% bedding at 0º to 15º of c.a. 0.5 to1 cm wide bands with very small organic material particles diss, P-C alteration few 0.1 to 1 cm wide calcite partially replaced to FG qtz- trz of ss vnlts at 60º to 70º of c.a.
174.15 176.55 Bx formed in sedimentation time, formed by 60% of irregular Silts bands, and 0.3 to 6 cm wide lenses and sub rounded to subangular fragments, few irregular 0.2 to 1 cm wide calcite lenses, scarce sub rounded 4 x 14 cm calcite fragments.
176.55 178.60 Silts 90% irregular bedding, thin 0.1 to 1 cm wide wavy S.S. beds, bedding at 30º to 50º of c.a. P-C alteration scarce 1 to 3 per meter 0.2 to 0.5 cm wide calcite trz of black and brown Sph and less ss vnlts at 50º to 70º of c.a.
178.60 181.25 Silts 90% thin irregular < 1 cm wide fine grain size S.S. beds bedding at 60º of c.a. wk P-C alteration scarce less than 1 per meter 0.1 to 0.2 cm wide calcite vnlts at 55º to 70º of c.a.
181.25 185.03 Silts 90% thin bedding medium size grain S.S. beds 0.1 to 5 cm wide, bedding at 40º to 50º of c.a. P-C alteration, few 3 to 4 per meter 0.1 to 0.3 cm wide calcite trz of FG Py vnlts at 25º to 30º and 50º of c.a. few 2 to 3 per meter thin 0.1 to 0.3 cm wide irregular calcite <Py lenses FG Py diss in small rounded clouds in some S.S. beds Py << 1% in interval
185.03 188.08 Silts 95% thin < 0.5 cm wide S.S. beds bedding at 50º to 60º of c.a. P-C alteration scarce 1 to 3 per meter hairline to 0.2 cm wide calcite trz of FG Py vnlts at 10º to 20º and 60º to 70º of c.a.
188.08 194.00 Silts 95% irregular wavy S.S. beds 0.2 to 1 cm wide 5% bedding at 40º to 30º of c.a. wk P-C alteration, scarce 0.1 to 0.3 cm wide calcite trz of FG Py vnlts at 50º and 70º of c.a.
194.00 195.20 Silts 985 bedding at 30º of c.a. wk P-C alteration 2 per meter 0.2 to 1 cm wide calcite partially replaced to FG qtz-FG PY trz of native silver vnlts at 30º to 40º of c.a.
195.20 197.74 Silts 95% bedding at 50º of c.a. P-C alteration some 6 to 8 per meter 0.1 to 0.3 cm wide FG Py < calcite lenses and clouds less vnlts at 30º of c.a. Py 3% to 4%
197.74 197.80 4 cm wide calcite replaced to FG Qtz Proustite < Pyrargyrite – Stibnite grey colour sulfosalts FG anhedral Py vnlt at 60º and 70º of c.a.
197.80 198.08 Wkly Silicified Silts thin irregular < 0.3 cm wide calcite to FG qtz-FG Py irregular lenses and vnlts Py 5% to 7%
198.08 198.11 2 to 3 cm wide calcite partially replaced to FG qtz-FG Py sulfosalts, Sph vnlt at 50º of c.a.
198.11 198.50 Wkly silicified Silts various thin < 0.1 cm wide calcite partially replaced to FG qtz –FG PY vnlts Py 5%
198.50 199.15 65 cm along core axis calcite replaced to FG qtz –Grey colour sulfosalts Proustite?-Pyrargyrite. Possible native silver FG Py vein with some 5 to 8 cm long sub rounded calcite fragments, Vein planes 40º at top and 60º at bottom

4



199.15 205.80 Silts 95% bedding at 70º of c.a. P-C alteration wk sericite few 4 to 6 per meter 0.1 to 1.2 cm wide calcite partially replaced to FG qtz- FG Py trz of black and brown Sph-ss vnlts at 40º to 70º of c.a., various 6 to 8 per meter 0.1 to 0.2 cm wide FG Py vnlts at 70º to 80º of c.a. Py 4%
205.80 212.85 Silts 98% fine grain size 0.1 to 1.5 cm wide S.S. beds bedding at 50º to 60º of c.a. P-C alteration wk sericite some 4 to 6 per meter 0.1 to 0.5 cm wide calcite < FG Py vnlts at 30º , 50º and 70º of c.a.
212.85 213.71 Silts 98% bedding at 40º of c.a. P-C alteration wk sericite few 0.1 to 0.3 cm wide calcite trz of FG qtz-Py in walls vnlts at 30º and 60º of c.a.
213.71 213.76 5 cm wide calcite-Brown Sph –ss FG Py in walls vnlt at 60º of c.a. m
213.76 216.00 Silts 95% bedding at 60º to 70º of c.a. P-C alteration few 4 to 6 per meter 0.1 to 0.6 cm wide calcite wkly replaced to FG qtz< FG PY vnlts at 55º to 70º of c.a. VFG Py in small clouds, PY 1% to 2%
216.00 219.04 Silts 98% thin bedding at 60º of c.a. P-C alteration, fractured rock, various 4 to 6 per meter 0.1 to 0.3 cm wide calcite< FG Py vnlts at 20º to 30º of c.a., scarce 1 to 2 per meter 0.1 to 0.2 cm wide FG anhedral Py- trz of brown Sph z calcite vnlts at 70º of c.a.
219.04 219.30 26 cm wide calcite partially replaced to FG qtz grey sulfosalts. Native silver? Less brown Sph FG Py 7% to 8% vnlt at 50º at top and at 60º of c.a. at bottom.
219.30 221.20 Silts 98% compact rock, bedding at 20º of c.a. P-C alteration few 4 to 6 per meter 0.1 to 0.3 cm wide FG anhedral Py trz of brown Sph –calcite partially replaced to FG qtz vnlts at 20º to 30º and 60º to 70º of c.a.
221.20 221.50 Various 0.1 to 3 cm wide FG anhedral to subhedral cubic medium size Py< calcite to FG qtz –brown Sph less ss vnlts at 60º to 85º of c.a.
221.50 222.70 Silts 90% fine grain size S.S. beds 0.1 to 1 cm wide bedding folded and changing from 70º to 0º then to 10º of c.a. P-C alteration, scarce 0.1 to 0.2 cm wide FG Py < calcite trz of brown Sph < ss vnlts at 30º and 60º of c.a.
222.70 223.90 Silts 95% bedding at 20º to 40º of c.a. P-C alteration, scarce 1 per meter 0.6 to 1 cm wide calcite< FG anhedral Py in walls vnlts at 50º of c.a.
223.90 224.50 Silts 98% bedding 0º to 10º of c.a. P-C alteration few 4 to 6 per meter 0.2 to 0.5 cm wide FG Py < brown and black Sph vnlts at 50º to 70º of c.a.
224.50 231.30 Silts 98% bedding 40º to 50º of c.a. P-C alteration, few 2 to 4 per meter 0.1 to 0.7 cm wide calcite partially replaced to FG qtz FG anhedral Py, less brown Sph- ss vnlts at 50º to 60º-VFG Py clouds and thin 0.1 to 0.2 cm wide lenses Py 2% to 3%
231.30 234.11 Silts 90% bedding changing from 30º to 70º then 0º of c.a. P-C alteration scarce < 1 per meter 0.1 to 0.2 cm wide calcite < FG Py trz of Brown Sph vnlts at 60º of c.a. few < 0.1 cm wide VFG Py lenses Py 1%
234.11 238.48 Silts 95% irregular bedding from 0º to 40º then 10º of c.a. P-C alteration few 2 to 4 per meter 0.2 to 1.2 cm wide calcite FG Py in small needles , brown Sph trz of ss vnlts at 30º and 60º to 80º of c.a. Trz of VFG Py clouds and thin < 0.1 cm wide lenses, Py trz to 1%
238.48 240.80 Silts 90% compact rock bedding at 40º to 50º of c.a. irregular wavy bedding P-C alteration scarce 1 per meter 0.1 to 0.3 cm wide calcite FG Py brown Sph vnlts at 50º of c.a.
240.80 242.93 Silts 95% thin bedding at 50º to 70º of c.a. P-C alteration various 4 to 6 per meter 0.1 to 3 cm wide calcite-FG anhedral to subhedral Py black and brown Sph < ss vnlts at 30º to 50º of c.a. less to 70º of c.a.
242.93 242.98 5 cm wide gouge fault zone at 80º of c.a. grey mud
242.98 247.20 Silts 95% bedding at 20º at top 70º in the meddle and 60º at bottom of interval P-C alteration scarce 3 to 4 per meter 0.2 to 4 cm wide calcite partially replaced

5



to FG qtz FG anhedral Py < brown Sph < ss and trz of Gn vnlts at 60º to 70º of c.a.
247.20 256.10 Silts 95% bedding at 40º to 50º of c.a. P-C alteration scarce 1 to 2 per meter 0.2 to 0.8 cm wide calcite to FG qtz < FG Py and trz of black and brown Sph and ss vnlts at 50º to 60º of c.a. scarce VFG Py in thin <0.1 c wide lenses.
256.10 264.00 Silts 95% compact rock bedding at 40º to 70º of c.a. P-C alteration scarce 1 to 2 per meter 0.1 to 0.3 cm wide calcite < FG Py vnlts at 30º to 50º of c.a.
264.00 267.33 Silts 95% bedding at 60º to 70º of c.a. P-C alteration few 2 to 3 per meter irregular 0.2 to 0.5 cm wide calcite partially replaced to FG qtz < FG Py less brown and black Sph vnlts at 60º to 80º of c.a.
267.33 269.00 Silts 95% bedding at 50º to 70º of c.a. P-C alteration few 2 to 4 per meter 0.2 to 1.8 cm wide calcite to FG qtz FG anhedral Py – black and brown Sph vnlts at 20º to 30º and 50º to 60º of c.a.
269.00 272.00 Silts 95% bedding at 40º of c.a. scarce < 1 per meter 0.1 to 0.3 cm wide black Sph < FG Py < calcite vnlts at 70º of c.a.
272.00 275.10 Silts 95% irregular wavy bedding at 20º to 10º of c.a. P-C alteration some 2 to 4 per meter 0.2 to 0.6 cm wide FG anhedral Py-calcite to FG qtz- black and brown Sph vnlts at 60º to 80º of c.a.
275.10 276.00 Silts 95% bedding at 10º to 20º of c.a. P-C alteration scarce < 1 per meter 0.2 to 0.4 cm wide calcite < FG Py vnlts at 60º to 70º of c.a., hairline FG Py vnlts at 60º to 70º of c.a.
276.00 278.00 Silts 95% bedding at 10º of c.a. P-C alteration wk to moderate sericite in fractures, few 2 to 3 per meter 0.1 to 0.3 cm wide calcite-sericite vnlts at 10º to 20º and few at 70º of c.a.
278.00 283.70 Silts 95% bedding at 10º to 30º of c.a. P-C alteration wk bleaching wk sericite in few fractures, few 1 to 2 per meter thin 0.1 to 1.2 cm wide calcite partially replaced to FG qtz < FG Py < Brown Sph vnlts at 60º to 70º of c.a.
283.70 285.00 Silts 95% bedding at 30º of c.a. P-C alteration wk sericite in few fractures scarce 1 per meter-calcite FG Py vnlts at 10º to 20º and 70º to 80º of c.a.
285.00 285.63 Silts 95% bedding at 50º of c.a. P-C alteration scarce < 0.1 cm wide calcite < FG Py vnlts at 0º and 60º of c.a.
285.63 288.68 Silts 95% bedding at 30º of c.a. P-C alteration thin 0.1 to 1 cm wide banded calcite lenses and scarce vnlts. Trz of FG Py lenses in irregular thin S.S. beds.
288.68 291.97 Silts 95% bedding at 30º of c.a. wk bleaching P-C alteration few 3 to 4 hairline to 0.3 cm wide calcite trz of FG Py vnlts at 20º to 30º of c.a. less at 60º to 70º of c.a. scarce 0.1 to 0.4 cm wide banded calcite lenses.
291.97 296.07 Silts 98% bedding 30º to 10º then 40º of c.a. bleaching decreasing to depth P-C alteration scarce 1 to 2 per meter 0.1 to 0.4 cm wide calcite-trz of FG Py vnlts at 30º and 50º to 60º of c.a. thin irregular FG Py < calcite < 0.1 cm wide vnlts at 60º to 70º of c.a. in bottom of the interval Py 1%
296.07 296.10 2.5 cm wide calcite partially replaced to FG qtz < FG Py vnlt at 70º of c.a.
296.10 297.73 Silts 98% irregular bedding deformed during sedimentation P-C alteration few irregular 0.1 to 0.3 cm wide calcite < FG Py vnlts at 30º and 75º of c.a. small calcite fragments filling voids in folded and fractured zones.
297.73 306.44 Silts 98% grey colour with thin 0.1 to 0.5 cm wide fine grain dark grey colour bands, bedding at 30º to 40º of c.a. Wk P-C alteration scarce 1 to 2 per meter hairline to 0.2 cm wide calcite vnlts, scarce < 1 mm wide calcite lenses, few irregular < 1 mm wide FG Py < calcite vnlts at 55º to 70º of c.a. at bottom of the interval Py < 1%
306.44 313.87 Broken core, bedding at 30º to 40º of c.a. faulted zone. Wk to moderate sericite in walls of various calcite vnlts 0.1 to 0.2 cm wide at 10º to 30º of c.a. fine grain

6



Py clouds and irregular 0.1 to 0.4 cm wide lenses irregular calcite partially replaced to FG qtz up to 2 cm wide fragments and irregular vnlts FG Py in thin vnlts 2% to 4% in gouge Bxed zones.
    306.44 – 306.74 m Bx gouge zone at 75º to 80º of c.a.
313.55-313.87 m Fault gouge zone, milled rock and less calcite. Fault planes 45º at top and 65º at bottom
313.87 316.00 Silts 90% irregular wavy beds few 0.1 to 0.5 cm wide fine grain size S.S. beds, bedding at 65º to 75º of c.a. P-C alteration, scarce irregular and fractured 0.1 to 1 cm wide calcite vnlts at 40º and 70º of c.a. few irregular 0.1 to 0.2 cm wide FG Py vnlts at 40º and 60º of c.a.
316.00 323.75 Silts 90% thin beds of fine grain size S.S., bedding changing from 65º to 10º then 30º of c.a. scarce 1 to 2 per meter 0.1 to 0.8 cm wide calcite trz of FG Py in vnlts walls at 0º to 10º and 20º to 40º of c.a. trz of small FG Py clouds in few thin S.S. beds.
323.75 325.22 Silts 95% irregular wavy and folded bedding, wk P-C alteration various irregular thin < 0.2 cm wide and shorter than 1 cm long broken calcite vnlts and fragments in rock irregularities, forming small scale Stockwork of calcite vnlts, trz of Py.
325.22 334.22 Silts 95% irregular wavy 0.1 to 1.5 cm wide S.S. lenses and beds, very scarce less than 1 per meter 0.1 to 0.2 cm wide calcite vnlts, trz of VFG Py clouds in bottom of some SS irregular beds Py << 1% scarce up to 2 cm wide calcite vnlts at 65º of c.a.
334.22 334.40 Fault milled rock, irregular calcite 0.1 to 0.5 cm wide fragments, fault planes at 40º and 60º of c.a.
334.40 340.25 Silts 90% irregular 0.2 to 2 cm wide wavy S.S. lenses and beds, bedding at 60º of c.a. few 2 to 3 per meter, irregular and broken 0.1 to 1.2 cm wide calcite vnlts at 20º to 30º and 70º to 80º of c.a.
340.25 343.00 Fault zone, small zones of Bx few irregular calcite fragments, broken core, fault planes at 45º and 60º of c.a. wk sericite in rock flour.
343.00 345.97 Silts 98% grey to dark grey colour cross bedding features, bedding at 40º and 60º to 70º of c.a. fresh to wk P-C alteration, scarce 0.1 to 0.2 cm wide calcite trz of FG Py vnlts at 0º to 20º of c.a. few FG Py clouds and thin < 1 mm wide vnlts at 40º of c.a.
345.97   End of Hole

7


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: June 28/ 2004  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES    

Summary of DDH QTA-21-04; 699,536 E; 2,652,641 N, 330°/-60°, Concordia area

From To Description
0.00 7,62 Drilled with Tricone bit -No core- Casing
7.62 16.87 Kuc Caracol Fm. Silts 70% , irregular 0.5 to 2 cm wide Fine grain S.S. beds scarce medium size grain S.S. beds up to 1 m wide, bedding at 60º of c.a. P-C alteration few 0.2 to 3 cm wide calcite < Goethite vnlts at 0º to 10º and 30º to 50º of c.a. and less at 60º of c.a. thin 0.1 to 0.3 cm wide Goethite lenses and few vnlts at 10º to 20º of c.a. Goethite diss 1% to 2% mainly in S.S. beds.
  16.87 Bottom of Oxidation zone
16.87 34.40 Silts 95% thin bedding at 75º of c.a. bedding from 60º to 85º of c.a. P-C alteration scarce 1 per meter hairline to 0.8 cm wide calcite < FG Py and scarce and local sericite vnlts at 0º to 10º, 30º to 40º and 70º to 80º of c.a. FG PY irregular 0.1 to 0.2 cm wide lenses, few calcite vnlts partially replaced to FG qtz; Py 1% scarce VFG Py clouds.
34.40 36.25 Fault zone, fault planes at 60º and along bedding 85º to 90º of c.a. scarce calcite < sericite vnlts at 0º of c.a. ; 0.1 to 0.2 cm wide medium size grain anhedral to subhedral Py 2%
36.25 39.35 Silts 95% bedding at 60º of c.a. P-C alteration scarce 1 to 2 per meter0.1 to 0.2 cm wide calcite-FG subhedral Py vnlts at 0º to 10º of c.a.
39.35 40.70 Fault zone broken core thin 1 to 5 cm wide gouge zones at 80º to 85º of c.a. along bedding, irregular FG anhedral Py vnlts and lenses, 0.1 to 0.5 cm wide vnlts at 80º of c.a. Py 2% to 3%
40.70 48.30 Silts 85% irregular beds wavy and irregular 0.1 to 3 cm wide S.S. beds bedding at 50º to 70º of c.a. wk bleaching wk P-C alteration, scarce less than 1 per meter hairline to 0.2 cm wide calcite vnlts at 10º to 30º of c.a.
48.30 60.45 Silts 95% thin bedding at 55º to 65º of c.a. o.1 to 2 cm wide S.S. beds, wk bleaching wk P-C alteration scarce less than 1 per meter 0.1 to 0.6 cm wide calcite with trz and local FG anhedral Py vnlts at 10º to 20º of c.a. 0.1 to 1.2 cm wide banded calcite lenses, few thin organic material bands in calcite lenses
60.45 64.40 Silts 98% bedding at 50º to 60º of c.a. 3 to 5 per meter irregular 0.1 to 2 cm wide calcite with small thin organic material or black silts layers vnlts at 0º to 20º of c.a. and 60º to 80º of c.a.
64.40 65.00 Bx zone or pebble dike? Formed by subangular 0.5 to 2 cm long rock fragments in calcite groundmass, fractured zone, zones of milled rock no visible fault planes wk sericite in scarce fractures

1



65.00 66.16 Silts 95% thin bedding at 70º to 75º of c.a. P-C alteration, scarce calcite vnlts with wk sericite hairline to 0.1 cm wide vnlts at 0º to 20º of c.a.
    66.00-66.16 m Fault zone broken core no visible planes
66.16 70.15 Silts 90% medium size grain bleached 0.1 to 8 cm wide S.S. beds, bedding at 70º to 85º of c.a. P-C alteration, 3 to 4 per meter 0.1 to 1.2 cm wide banded calcite and less and local FG Py vnlts at 0º to 10º and 60º to 80º of c.a., scarce VFG Py clouds trz of FG Py in the interval
70.15 72.76 Silts 95% thin bedding at 80º of C.a. P-C alteration scarce less than 1 per meter 0.1 to 0.3 cm wide calcite vnlts at 20º to 30º of c.a.
72.76 79.00 Silts 90% thin irregular 2 to 14 cm wide “dirty” beds with thin and small fragments of organic material or black Silts, scarce 0.1 to 5 cm wide fine grain size S.S. beds, some folds, bedding changing from 30º to 60º to depth; P-C alteration few 1 to 2 per meter 0.1 to 1.5 cm wide calcite vnlts at 0º to 30º of c.a. also in thin 0.1 to 0.3 cm wide bands or in scarce calcite vnlts Py 1% to 2% at bottom of the interval, Py 1% average
79.00 79.60 Wide apart Stockwork of calcite partially replaced to FG qtz in 0.2 to 1.5 cm wide vnlts.
79.60 82.60 Silts 95% irregular wavy bedding at 40º to 60º of c.a. P-C alteration FG Py diss in irregular lenses and less diss Py 2% to 3%
82.00 m 2 cm wide calcite partially replaced to FG qtz trz of Stibnite vnlt at 50º of c.a.
82.60 89.20 Silts 90% thin irregular 0.1 to 5 cm wide fine grain size S.S. lenses wavy bedding at 80º of c.a. P-C alteration few 2 to 4 per meter irregular 0.1 to 0.3 cm wide calcite vnlts at 10º to 30º of c.a. scarce druse calcite 1 to 4 cm wide vnlt at 20º of c.a.
89.20 91.70 Silts 95% few irregular < 0.3 cm wide fine grain size S.S. lenses bedding at 75º to 80º of c.a. P-C alteration wide apart Stockwork of irregular 0.1 to 0.8 cm wide calcite vnlts, small and thin pebble dikes zones, vnlts preference at 10º to 30º and 70º to 80º of c.a.
91.70 98.85 Silts 85% irregular wavy 0.1 to 10 cm wide fine grain size S.S. beds, irregular sedimentation on unstable basin, beds in bottom of interval at 55º of c.a. P-C alteration compact rock scarce 1 per meter 0.1 to 2 cm wide banded calcite with thin organic material or black silts layers and fragments lenses few 1 to 2 per meter hairline to 0.3 cm wide calcite vnlts at 0º to 20º of c.a. scarce VFG PY clouds Py in interval < 1%
98.85 99.00 Calcite trz of rhodochrosite irregular 1 to 3 cm wide vnlts at 40º of c.a.
99.00 105.60 Silts 90% irregular 0.1 to 1 cm wide fine grain size S.S. lenses and sub rounded fragments, rock deposition on unstable basin, bedding at 50º of c.a. P-C alteration few 1 to 2 per meter irregular 0.1 to 0.2 cm wide calcite vnlts at 0º to 30º of c.a.
105.60 107.50 Silts 95% irregular bedding changing from 20º to 60º of c.a. P-C alteration few 2 to 3 per meter 0.5 to 2 cm wide calcite < rhodochrosite vnlts at 40º to 50º of c.a. thin 0.1 to 0.2 cm wide calcite-FG Py vnlts at 30º to 40º of c.a. and 70º to 80º of c.a. Py in interval < 1%
107.50 114.50 Silts 98% compact rock bedding at 40º to 60º of c.a.; P-C alteration few 2 to 3 per meter hairline to 0.3 cm wide calcite trz of FG Py trz of cream colour clays vnlts at 0º to 10 of c.a., and 50º to 60º of c.a. VFG Py few with thin calcite thin < 0.2 cm wide vnlts at 40º to 60º of c.a.
114.50 115.80 Silts 95% bedding at 60º of c.a. P-C alteration few 2 to 4 per meter irregular 0.5 to 3 cm wide calcite partially replaced to FG qtz-FG Py trz of brown Sph and less ss vnlts and thin up to 3 cm wide Bx zones at 10º to 20º of c.a. FG Py 3% to 5%

2



    in interval
115.80 118.00 Silts 98% compact rock bedding changing from 60º to 20º of c.a. P-C alteration few 2 to 3 per meter calcite partially replaced to FG qtz trz of Py vnlts at 10º to 30º of c.a.
118.00 118.80 Silts 98% compact rock no visible bedding wk fractured zone P-C alteration 3 to 5 per meter irregular 0.2 to 3 cm wide calcite partially replaced to FG qtz-FG anhedral Py in thin bands vnlts at 0º to 10º and 40º to 70º of c.a.
118.70-118.80 m Fault zone at 75º of c.a. Gouge formed by sub rounded to subangular < 0.5 cm long rock and less calcite fragments in grey colour rock flour
118.80 119.30 Silts 95% bedding at 40º of c.a. wk sericite scarce <0.1 cm wide calcite lenses.
119.30 120.00 Fault zone broken core and gouge zones up to 5 cm wide Fault planes at 40º and 70º of c.a. VFG PY in thin vnlts and also in milled rock flour Py 3%
120.00 121.00 Silts 95% bedding at 60º of c.a. (2) fault zones at 120.25 m and to 121,00 m fault planes at 40º and 70º of c.a. calcite partially replaced to FG qtz < FG Py in up to 2 cm wide vnlts.
121.00 122.50 Silts 90% thin bedding at 65º to 70º of c.a. P-C alteration 3 to 4 per meter, irregular 0.3 to 1.3 cm wide calcite partially replaced to FG qtz vnlts at 10º to 30º of c.a. and 60º to 80º of c.a.0.2 to 0.4 cm wide FG Py < calcite vnlts at 60º of c.a. Py 1% in the interval
122.50 127.11 Silts 95% thin < 0.5 cm wide fine grain size S.S. lenses, bedding at 85º to 90º of c.a. P-C alteration 0.1 to 0.6 cm wide calcite < FG anhedral Py vnlts at 40º to 50º and 80º to 90º of c.a. Py 1% to 2%
127.11 127.80 Increase in the amount of FG Py < 0.2 cm wide vnlts, some small clouds and less FG Py in calcite vnlts total Py in interval 4% to 5%
127.80 129.30 Silts 90% thin irregular < 0.5 cm wide fine grain size S.S. lenses, faulted zone, banded calcite fragments up to 2.5 cm long, with black organic or silts bands; 0.1 to 0.3 cm wide VFG Py lenses and vnlts Fault planes at 60º of c.a.
129.30 132.65 Silts 95% thin < 0.2 cm wide fine grain size S.S. lenses, bedding at 65º of c.a. 2 to 3 per meter 0.1 to 0.5 cm wide calcite vnlts at 50º to 70º of c.a.
    132.50 m Fault zone at 60º of c.a. with irregular up to 1.5 cm wide calcite vnlts.
132.65 132.75 Fault zone broken core no fault planes
132.75 139.30 Silts 95% thin < 0.3 cm wide fine grain size S.S. lenses, bedding at 40º to 60º of c.a. wkly fractured zone core fragments shorter than 10 cm few 15 to 20 cm long P-C alteration trz of sericite in some fractures; 2 to 3 per meter irregular 0.1 to 2 cm wide calcite partially replaced to FG qtz vnlts at 30º, 60º and 85º of c.a. few 1 to 2 per meter < 0.1 cm wide FG Py < calcite vnlts or lenses PY < 1%
139.30 145.41 Silts 95% compact rock bedding changing from 50º to 30º of c.a. wk bleaching wk P-C alteration, scarce 1 to 2 per meter irregular 0.2 to 0.8 cm wide calcite vnlts at 40º to 60º and less at 80º of c.a.
145.41 150.90 Silts 98% 0.3 to 2.5 cm wide beds at 30º of c.a. P-C alteration 1 to 2 per meter 0.1 to 0.8 cm wide banded calcite lenses and scarce < 1 per meter calcite vnlts at 0º to 30º and less 50ºto 70º of c.a.
150.90 152.50 Increase amount of VFG Py in < 0.2 cm wide vnlts at 40º and 70º of c.a. scarce calcite in Py vnlts.
152.50 152.55 5 cm wide calcite partially replaced to FG qtz-Py and organic material vnlt at 55º of c.a.
152.55 154.90 Silts 98% irregular wavy bedding at 50º of c.a. P-C alteration, various 6 to 8 per meter 0.1 to 0.7 cm wide calcite –FG Py vnlts at 30º to 40º and 60º to 70º of c.a. and just 1 calcite FG Py vnlt of 2 cm wide

3



154.90 155.20 Fault zone at 40º and 50º of c.a. brecciated rock in grey mud groundmass various 0.1 to 0.5 cm wide calcite partially replaced to FG qtz-FG Py and trz of brown Sph vnlts fragments
155.20 159.00 Silts 98% bedding changing from 70º to 40º of c.a. P-C alteration, irregular 10 to 20 cm Stockwork zones formed by thin 0.1 to 1 cm wide calcite partially replaced to FG qtz vnlts, few thin 0.2 to 3 cm wide pebble dikes in calcite groundmass and preferably at 20º to 30’º of c.a. FG Py irregular 0.1 to 0.3 cm wide bands and irregular vnlts Py in interval 1% to 2%
159.00 203.30 Silts 95%, irregular bedding changing from 40º to 0º then 230º of c.a. wk P-C alteration, zones of 2 to 3 meters with scarce < 1 per meter hairline to 0.2 cm wide calcite vnlts at 30º to 40º of c.a. between 2 to 3 meters wide zones with 4 to 6 per meter calcite vnlts at 0º to 30º less at 70º of c.a. very scarce irregular 0.2 to 1 cm wide druse calcite vnlts at 20º to 30º of c.a.
203.30 218.00 Silts 95% scarce 0.1 to 1 cm wide banded S.S. beds, in general the rock is formed by 0.1 to 2 cm wide grey colour Silts beds and 0.1 to 0.3 cm wide black fine grain Silts or organic material beds, bedding changing from 30º to 0º then at 35º of c.a. scarce less than 1 per meter 0.1 to 0.3 cm wide calcite vnlts at 10º to 30º less at 40º of c.a. very scarce 30 cm wide zones with irregular and cross bedding with 0.1 to 1.5 cm wide calcite lenses and small zones of 0.1 to 0.3 cm wide calcite vnlts at 0º to 10º of c.a.
218.00 230.40 Silts 90% 0.2 to 5 cm wide grey colour Silts beds alternating with 0.1 to 0.5 cm wide dark grey colour fine grain size Silts beds, scarce 0.1 to 1 cm wide fine grain size S.S. beds 10%; bedding at 0º to 30º of c.a. wk P-C alteration, scarce less than 1 per meter irregular calcite 0.1 to 2.5 cm wide calcite vnlts at 20º to 30º and less at 60º to 70º of c.a.
230.40 231.00 Various 6 to 8 per meter irregular 0.1 to 1.3 cm wide calcite-trz of Py vnlts at 0º to 20º and 70º to 80º of c.a. small irregular 0.2 to 1 cm wide pebble dikes at 70º to 85º of c.a.
231.00 237.40 Silts 90% scarce 0.1 to 0.8 cm wide fine grain size S.S. beds, bedding from 0º to 20º of c.a. wk P-C alteration, scarce less than 1 per meter irregular 0.1 to 0.5 cm wide calcite vnlts at 10º to 20º of c.a. very scarce 0.1 cm wide calcite trz of brown Sph vnlts at 25º of c.a.
237.40 238.00 Fractured Silts 95% bedding at 30º of c.a. P-C alteration wk sericite 8 to 10 per meter very thin calcite –sericite vnlts at 20º to 30º of c.a. slickensides along bedding and also at 60º of c.a.
238.00 241.20 Silts 95% bedding changing from 20º to 0º then 40º of c.a. P-C alteration very scarce 0.1 to 0.3 cm wide calcite vnlts at 20º to 30º of c.a. irregular 1 to 4 cm wide bended calcite vnlts at 30º to 50º of c.a.
241.20 241.75 Set of 2 to 3 thin 0.1 to 0.8 cm wide calcite wkly replaced to FG qtz medium size grain subhedral Py black and brown Sph. ss vnlts at 5º to 20º of c.a.
241.75 243.60 Silts 95% bedding at 10º of c.a. P-C alteration irregular Pebble dike with FG Py diss at 0º to 10º of c.a. 0.2 to 0.8 cm wide calcite vnlts at 30º of c.a.
243.60 244.00 2.5 cm wide calcite replaced to FG qtz-medium, size grain anhedral Py and less Ag sulfosalts vnlt at 10º to 15º of c.a.
244.00 245.10 Silts 98% bedding at 10º to 20º of c.a. P-C alteration, scarce 0.1 to 0.7 cm wide calcite < FG Py vnlts at 30º and 60º of c.a.; 4 to 5 per meter 0.1 to 0.4 cm wide medium size grain subhedral Py vnlts at 20º to 30º and 60º of c.a. Py 2% to 3%
245.10 261.21 Silts 98% 1 to 5 cm wide beds with thin 0.1 to 0.5 cm wide fine grain size black Silts beds, bedding changing from 30º to 50º then 0º to 70º and again 0º of c.a. P-C alteration few 2 to 3 per meter 0.1 to 2.1 cm wide calcite vnlts and banded lenses.

4



261.21 271.00 Silts 98% bedding at 10º to 30º of c.a. scarce 1 per meter 0.1 to 0.3 cm wide calcite trz of FG subhedral Py vnlts at 10º to 25º of c.a.
271.00 272.98 Silts 98% bedding at 35º of c.a. P-C alteration irregular 0.1 to 0.5 cm wide medium size grain anhedral Py < Calcite vnlts at 30º to 40º of c.a.
272.98 273.00 Fault at 65º and 70º of c.a.
273.00 274.20 Silts 98% bedding at 40º of c.a. P-C alteration various 8 to 10 per meter 0.1 to 0.2 cm wide FG Py < calcite vnlts in Stockwork Py 5%
274.20 274.50 Fault gouge zone, milled rock, calcite to FG qtz fine grain subhedral to cubic Py- sulfosalts and less brown Sph,
274.50 276.15 Silts 98% irregular bedding at 50º of c.a. 3 to 4 per meter irregular 0.5 to 1.5 cm wide calcite partially replaced to FG qtz-FG anhedral Py with less and local ss vnlts at 40º of c.a. various irregular 0.1 to 0.2 cm wide calcite vnlts in Stockwork along up to 20 cm of core
276.15 276.30 5 cm wide gouge fault zone at 60º to 70º of c.a. milled rock less Py and trz of ss
276.30 281.54 Silts 98% bedding 0º to 20º of c.a. P-C alteration wk silici0cation 6 to 8 per meter 0.1 to 0.3 cm wide medium size grain anhedral Py y less Py in calcite vnlts at 10º to 20º of c.a. and 30º to 50º VFG Py in clouds and thin banded lenses
281.54 281.75 Silts beds at 0º to 10º of c.a. wk silicification Irregular Bxed 20 long by 6 cm wide, in only a half of the core diameter, calcite replaced to FG qtz-FG anhedral Py 10% to 20%-black sulfosalts brown Sph and less grey colour Argentite? vnlt at 0º to 10º of c.a.
281.75 283.15 Silts 95% bedding at 0º to 10º of c.a. wk silicification fractured zone some small void along fractures FG anhedral Py 5% in thin vnlts and diss, vnlts at 30º of c.a.
83.15 283.75 60 cm long by 1 to 5 cm wide Bxed zone, scarce calcite to FG qtz-bands of FG anhedral Py- Ag sulfosalts, less brown Sph vnlt at 0º to 10º of c.a.
283.75 284.25 Silts 95% bedding at 20º to 30º of c.a. P-C alteration wk silicification dark grey colour rock, bedding at 20º to 30º of c.a. various 5 to 7 per meter < 0.1 cm wide FG Py < calcite vnlts at 50º to 60º of c.a. scarce just 1 irregular 4 cm wide calcite replaced to FG qtz vnlt at 20º to 40º of c.a.
284.25 286.20 Silts 95% bedding at 10º to 15º of c.a. P-C alteration 2 to 3 per meter irregular 0.1 cm wide calcite vnlts at 50º to 70º of c.a.
286.20 286.30 0.6 cm wide calcite partially replaced to FG qtz-medium size grain subhedral to cubic Py, less grey colour sulfosalts vnlts at 50º of c.a.
286.30 288.15 Silts 98% bedding changing from 10º to 0º of c.a. P-C alteration few 1 to 2 per meter 0.1 to 0.3 cm wide FG Py < calcite to FG qtz vnlts at 60º to 70º of c.a.
288.15 288.17 1 to 1.5 cm wide calcite replaced to FG qtz –medium size grain subhedral Py- light grey colour sulfosalts vnlt at 85º to 90º of c.a.
288.17 290.20 Silts 98% bedding at 30º to 40º of c.a., P-C alteration few 3 to 4 per meter FG anhedral Py < calcite vnlts at 15º to 30º of c.a. also VFG Py clouds and small dots diss in some medium size grain Silts beds Py in interval 2% to 3%
290.20 291.70 3 irregular 0.5 to 1.5 cm wide calcite replaced to FG qtz < FG anhedral Py and trz of black and brown Sph < ss vnlts at 20º to 30º and 60º of c.a.
291.70 294.75 Silts 98% bedding at 10º to 20º of c.a. P-C alteration 2 to 3 per meter hairline to 0.7 cm wide FG Py vnlts at 20º of c.a. and less < 1 mm wide lenses along bedding, few 1 to 2 per meter 0.1 to 2 cm wide calcite and less FG Py plus irregular thin layers of organic material vnlts at 65º to 70º of c.a.
294.75 295.55 Silts 98% bedding at 20º to 30º of c.a. P-C alteration wk silicification irregular 0.6 to 3.5 cm wide calcite replaced to FG qtz, medium size grain Py, black and brown Sph less ss vnlts at 0º to 20º of c.a., also hairline to 0.2 cm wide FG Py

5



    vnlts at 35º and 70º of c.a. Py 3% to 5% in interval
295.55 299.00 Silts 95% irregular bedding changing from 30º to 70º of c.a. P-C alteration wk silicification few 2 per meter irregular 0.3 to 0.7 cm wide FG Py < calcite –brown Sph and ss vnlts at 10º to 20º of c.a. various 0.1 to 0.3 cm wide subhedral Py lenses and vnlts at 70º of c.a.
299.00 301.10 Silts 98% bedding at 50º to 60º of c.a. P-C alteration 3 to 4 per meter 0.1 to 0.2 cm wide FG Py lenses and small clouds, scarce less than 1 per meter 0.1 to 0.3 cm wide calcite partially replaced to FG qtz < subhedral Py-sericite and trz of ss vnlts at 70º of c.a.
301.10 303.90 Silts 90% thin bedding fine grain size < 0.5 cm wide S.S. beds, bedding 50º to 65º of c.a. P-C alteration scarce < 1 per meter 0.2 to 0.3 cm wide calcite partially replaced to FG qtz, less subhedral Py and trz of ss vnlts at 60º of c.a. 3 to 4 per meter 0.1 to 0.2 cm wide FG anhedral Py irregular lenses and less vnlts at 35º of c.a. few 1 to 2 per meter 0.1 cm wide calcite-FG Py vnlts at 75º to 85º of c.a. Py 2% to 3% in interval.
303.90 306.10 Silts 95% bedding at 50º of c.a. P-C alteration scarce less than 1 per meter 0.1 to 1 cm wide calcite partially replaced to FG qtz anhedral Py vnlts at 70º few 3 to 4 per meter thin < 0.2 cm wide only FG Py lenses and few vnlts at 75º of c.a. scarce < 0.5 cm long clouds diss Py 1% in interval
305.87-305.89 m 1.0 to 1.5 cm wide calcite replaced to FG qtz –medium size grain anhedral Py-less brown Sph trz of ss vnlt at 70º of c.a.
306.10 310.05 Silts 95% thin bedding cross bedding features, bedding at 40º to 50º of c.a. P-C alteration wk to moderate sericite in fractures, few 3 to 4 per meter 0.2 to 2 cm wide calcite replaced to FG qtz < FG Py vnlts at 30º to 40º and 75º to 80º of c.a. few with brown Sph and trz of ss.
396.95-397.02 m 0.6 to 0.8 cm wide calcite replaced to FG qtz anhedral Py and less brown Sph vnlts at 30º and 60º of c.a.
308.95-309.10 m Two 0.4 to 0.6 cm wide vnlts, formed by calcite replaced to FG qtz < anhedral Py and less ss at 40º and 60º of c.a.
310.05 310.20 15 cm wide Fault zone, only dark grey mud Fault planes at 60º to 70º of c.a.
310.20 316.90 Silts 70% irregular up to 30 cm wide S.S. beds and irregular lenses or fragments in Silts, bedding changing from 40º to 0º then 50º to 60º of c.a. P-C alteration with moderate sericite in fractures or thin calcite vnlts, various 3 to 4 per meter < 0.1 cm wide calcite-FG Py vnlts at 0º to 20º of c.a. scarce 0.3 to 0.6 cm wide calcite partially replaced to FG qtz –fine to medium size grain subhedral Py and less black and brown Sph and trz of ss vnlts at 60º to 75º of c.a.
316.90 320.00 Silts 90% few 0.3 to 1.5 cm wide S.S. beds bedding at 70º to 75º of c.a. P-C alteration wk sericite very scarce < 1 per meter 0.1 to 0.5 cm wide calcite vnlts at 10º to 20º of c.a. scarce < 1 per meter 0.3 to 0.4 cm wide calcite partially replaced o FG qtz less FG Py and trz of ss vnlts at 60º to 70º of c.a. very scarce < 1 mm wide FG Py lenses Py < 1%
320.00 324.10 Silts 90% few 0.2 to 1 cm wide S.S. beds bedding 75º to 90º of c.a. various 8 to 10 per meter thin 0.1 to 0.2 cm wide calcite lenses few 1 to 2 per meter irregular calcite < FG Py vnlts at 20º and 70º of c.a., very scarce just one in the interval 0.7 cm wide calcite partially replaced to FG qtz less FG Py and trz of ss vnlt at 60º of c.a.
324.10 326.00 Silts 70% few irregular 0.1 to 1 cm wide fine grain to medium size S.S. lenses, bedding at 45º to 65º of c.a. P-C alteration wk sericite in few fractures, 3 to 4 per meter irregular 0.1 to 0.3 cm wide calcite lenses, very scarce < 1 per meter 0.3 cm wide calcite vnlts at 50º of c.a.
    324.87-324.88 m 0.7 cm wide calcite to FG qtz, trz of anhedral Py and less

6



    black Sph and ss vnlt at 60º of c.a.
326.00 330.50 Fine to medium size grain S.S. 80% 0.1 to 5 cm wide Silts beds, wavy bedding changing from 50º to 0º then 10º to 15º of c.a. P-C alteration wk bleaching, scarce less than 1 per meter 0.2 to 0.4 cm wide calcite partially replaced to FG qtz less FG Py and trz of ss vnlts at 60º to 70º of c.a.
328.06-328.08 m 2 cm wide calcite to qtz FG Py black Sph and trz of ss vnlt at 55º of c.a.
329.50-329.52 m 1.5 cm wide medium size grain anhedral to subhedral Py black and less brown Sph –less calcite to FG qtz trz of ss vnlt at 70º of c.a.
330.50 331.49 Light grey colour fine to medium size grain S.S. beds 60% grey colour Silts beds 40% P-C alteration. Scarce just one 0.2 cm wide calcite to FG Qtz FG PY and less brown Sph vnlt at 50º of c.a.
331.49 331,57 4 cm wide medium size subhedral Py less calcite replaced to FG qtz- brown Sph and ss vnlt at 35º to 40º of c.a.
331.57 333.15 Silts 80% wavy irregular 0.1 to 2 cm wide fine grain size S.S. beds, bedding at 30º to 50º of c.a. P-C alteration, scarce < 0.1 cm wide calcite FG Py trz of Sph vnlts at 25º and 40º of c.a. irregular 1.5 to 3 cm wide pebble dikes with scarce FG Py at 30º and 50º of c.a.
333.15 333.40 Fine to medium size grain S.S. beds 70% thin 0.1 to 1 cm wide black Silts beds, bedding at 30º of c.a. P-C alteration two 0.6 to 1.2 cm wide calcite to FG qtz subhedral Py,. black Sph vnlts at 30º and 60º of c.a.
333.40 337.02 Silts 60% irregular wavy 0.1 to 1.5 cm wide fine grain size S.S. beds 40% bedding at 40º to 60º of c.a. P-C alteration various 6 to 8 per meter 0.3 to 1 cm wide irregular calcite partially replaced to FG qtz < subhedral Py vnlts at 20º to 40º and 60º to 70º of c.a. VFG Py in irregular < 0.1 cm wide vnlts at 20º to 30º of c.a. Py 2% in interval
337.02 337.05 2 cm wide medium size grain anhedral to subhedral Py < calcite partially replaced to FG qtz black and less brown Sph vnlt at 60º of c.a.
337.05 338.85 Silts 90% thin irregular bedding at 30º to 60º of c.a. P-C alteration few 4 to 5 per meter 0.1 to 1 cm wide calcite –subhedral Py vnlts and irregular lenses at 45º and 60º of c.a. various 6 to 8 per meter 0.1 to 0.3 cm wide FG Py lenses and thin < 0.1 cm wide vnlts at 30º of c.a. Py in interval 2% to 3%
338.85 348.27 Silts 90% thin bedding fine grain size 0.1 to 0.5 cm wide S.S. beds, bedding at 50º to 60º of c.a. P-C alteration, scarce 1 per meter 0.2 to 0.4 cm wide calcite- FG Py vnlts at 60º of c.a. various 6 to 8 per meter < 0.2 cm wide calcite lenses 0.1 cm wide FG Py lenses Py in interval 1% to 2%
343.19-343.20 m 1.0 to 1.4 cm wide medium size anhedral to subhedral Py- brown Sph and less calcite to FG qtz vnlt at 60º of c.a.
348.27 348.29 1.6 cm wide calcite to FG qtz-anhedral to subhedral Py and less black Sph and ss vnlt at 50º of c.a.
348.29 353.30 Silts 98% thin irregular 0.1 to 0.6 cm wide fine grain size S.S. beds, bedding at 50º to 60º of c.a. P-C alteration few 2 to 4 per meter 0.1 to 0.5 cm wide calcite trz of FG Py vnlts at b50º to 60º of c.a. some 6 to 8 per meter < 0.1 cm wide calcite lenses. scarce VFG Py clouds and small diss in S.S. beds Py < 1% in interval
353.30   End of Hole

7


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: July 5 / 2004  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES    

Summary of DDH QTA-22-04; 699,893 E; 2,653,013 N, 340°/-60°, Gregorio area
From To Description
0.00 3.35 Drilled with Tricone bit -No core- Casing
3.35 13.00 Kuc Caracol Fm. Fine grain size S.S. 80% beds formed by 0.1 to 2 cm wide grey colour fine grain S.S. beds among 0.1 to 1 cm wide black fine grain Silts 20%, bedding at 20º to 30º of c.a. P-C alteration wk oxidation in few fractures, scarce less than 1 per meter, 0.2 to 1 cm wide calcite < Goethite vnlts at 30º to 40º of c.a. FG Py diss 1%at bottom of interval.
13.00 17.00 S.S. fine grain size 85% silts 15% bedding at 10º to 0º of c.a., P-C alteration few 1 to 2 per meter 0.2 to1 cm wide calcite and less light yellow clays and trz of ss and brown Sph vnlts at 50º to 70º of c.a. wk oxidation to Goethite in thin fractures and in very thin bands after Py? Py trz to 1%
17.00 24.00 Fine grain size S.S. beds 70% black silts 30% bedding at 40º to 20º of c.a. P-C alteration wk oxidation to Goethite in some fractures and thin <0.2 cm layers few 3 to 5 per meter hairline to 0.8 cm wide calcite wkly and locally replaced FG qtz trz of ss and less brown Sph in scarce less than 1 per meter vnlts at 40º of c.a. banded calcite with FG Py in scarce vnlts at 40º of c.a. trz of Py diss.
24.00 29.40 Fine grain S.S. 60% 0.1 to 2 cm wide beds among 0.1 to 1 cm wide Silts beds, bedding at 20º to 10º of c.a. P-C alteration, scarce 1 to 2 per meter hairline to 0.2 cm wide calcite < Goethite and trz of hematite vnlts at 10º to 30º of c.a. FG Py diss < 1%
29.40 41.50 Fine grain size S.S. beds 70% beds 0.1 to 2 cm wide wavy bedding from 20º to 0º then 20º of c.a. P-C alteration few 2 to 3 per meter hairline to 0.3 cm wide calcite less FG Py vnlts at 20º and 70º of c.a. trz of FG Py in thin vnlts at 70º and less diss in some S.S. beds.
41.50 44.75 S.S. 90% wavy beds 0.1 to 3 cm wide, thin 0.1 to 0.5 cm wide black Silts beds, bedding at 50º to 40º of c.a. P-C alteration scarce less than 1 per meter 0.1 to 0.2 cm wide calcite FG Py trz of ss vnlts at 60º to 85º of c.a.
44.75 45.00 Fault zone at 85º of c.a. broken rock with few calcite-FG Py vnlts fragments.
45.00 46.60 Irregular Calcite partially replaced to FG qtz <FG Py and trz of ss and organic material vein among 3 (three) 5 to 8 cm wide gouge zones with FG Py and milled rock, vein at top is along bedding at 60º of c.a.
46.60 47.00 Fine grain size S,S. beds at 30º of c.a. scarce hairline to 0.1 cm wide calcite vnlts at 10º to 20º of c.a.
47.00 47.20 Fault zone 20 cm wide milled dark grey colour rock flour, FG Py and trz of ss?

1



47.20 52.25 Fine grain size S.S. 90% bedding at 45º of c.a. P-C alteration 3 to 4 per meter 0.1 to 2.5 cm wide calcite partially replaced to FG qtz trz of ss vnlts at 30º and 60º of c.a. wk Goethite with yellow to light orange stain in thin < 1 mm wide vnlts and lenses.
52.25 54.90 S.S. 90% irregular wavy beds at 0º to 10º of c.a. P-C alteration few 2 to 3 per meter 0.1 to 1.5 cm wide banded calcite-organic material < FG Py vnlts at 40º to 60º of c.a.
54.90 58.40 Fine grain S.S. 50% in 0.1 to 2 cm wide beds, 0.1 to 1 cm wide black Silts beds bedding at 30º of c.a. P-C alteration scarce less than 1 per meter 0.1 to 1 cm wide calcite partially replaced to FG qtz-trz of brown Sph and ss < FG Py vnlts at 40º to 60º of c.a. few 1 to 2 per meter hairline to 0.2 cm wide only calcite vnlts at 10º to 30º of c.a. and 40º to 60º of c.a.
58.40 67.45 S.S. 85% in irregular wavy 0.1 to 4 cm wide beds, bedding changing from 20º to 0º then 10º of c.a. fresh to wk P-C alteration very scarce less than 1 per meter hairline to 0.2 cm wide calcite vnlts at 0º to 20º and 70º to 80º of c.a.
67.45 70.25 S.S. 70% fine grain, 0.1 to 1 cm wide Silts beds 30%, irregular wavy bedding at 50º of c.a. 6 to 8 per meter irregular 0.1 to 0.7 cm wide calcite wkly replaced to FG qtz FG anhedral Py, trz of brown Sph vnlts at 10º to 30º and 60º to 70º of c.a. also small and thin wide apart Stockwork zones, VFG Py in thin < 0.2 cm wide lenses Py 2% to 3%.
70.25 70.33 5 cm wide calcite partially replaced to FG qtz FG Py and trz of brown Sph and less ss vnlt at 70º of c.a.
70.33 72.10 Fine grain S.S. 80% Silts 20% bedding at 60º of c.a. irregular hairline to 0.1 cm wide calcite vnlts at 0º to 20º and 60º to 70º of c.a.
72.10 m 0.7 to 1 cm wide calcite brown garnet? And less brown Sph vnlt at 45º to 50º of c.a.
72.10 73.80 Fine and medium size grain S.S. irregular wavy beds 80% 0.1 to 0.3 cm wide black Silts beds 20% P-C alteration few 2 to 3 per meter irregular 0.1 to 0.2 cm wide calcite vnlts at 50º to 70º of c.a. trz of FG Py irregular clouds, Py in interval < 1%
73.80 76.40 Irregular pebble dikes at 0º to 20º of c.a. druse calcite in some small voids, wk oxidation to Goethite with yellow to light orange stain in some fractures trz to 1% of FG Pty diss in some thin beds.
76.40 78.00 Fine grain S.S. 90% thin < 0.5 cm wide black silts beds at 0º to 20º of c.a. few hairline to 0.3 cm wide calcite lenses, trz of FG Py diss in some beds
78.00 80.00 Silts 40% fine and medium size grain S.S. beds at 20º to 30º of c.a. P-C alteration few 2 to 3 per meter 0.2 to 0.4 cm wide calcite partially replaced to FG qtz-FG Py less brown hard mineral garnet? and trz of brown Sph and ss vnlts at 50º to 60º of c.a.
80.00 83.17 Silts 40% fine and medium size grain S.S. beds at 20º to 30º of c.a. P-C alteration VFG Py microvnlts and less diss 1%, few 1 to 2 per meter 0.1 to 0.3 cm wide calcite trz of FG Py vnlts, very scarce less than 1 per meter 0.2 to 0.3 cm wide calcite-less brown garnet?, trz of brown Sph vnlts at 35º to 40º of c.a.
83.17 85.61 Wavy bedding at 5º to 20º of c.a. calcite wkly replaced to FG qtz FG Py < ss and less brown Sph vnlts at 5º to 20º width increasing to depth from 0.1 to 0.4 cm.
85.61 87.00 Fine grain S.S. beds 90% at 10º to 15º of c.a. P-C alteration the vnlt described in last interval continues to depth increasing width from 0.4 to 5 cm then reducing to 1.5 cm wide, vnlts formed by 3 to 3.5 cm of white calcite and 1.5 to 2 cm of calcite partially replaced to FG qtz black sulfosalts and anhedral Py band in a wall.
87.00 88.70 Continue same vnlt from 1.5 to 1 cm wide with fault bxed wall up to 6 cm wide at

2



0º to 5º of c.a. vnlt with black sulfosalts and less black and brown Sph medium size anhedral Py and less calcite partially t FG qtz, in interval other few irregular calcite vnlts at 50º of c.a.
88.70 89.57 Fine grain S.S. 80% bedding at 0º to 15º of c.a. continue the along c.a. vnlt formed by more amount of anhedral to subhedral Py and less black sulfosalts black and less brown Sph < calcite to FG qtz vnlt at 0º to 15º of c.a. decreasing width from 1 cm to 0.2 cm wide
89.57 91.38 Fine grain S.S. 80% thin < 0.3 cm wide black Silts beds, bedding at 0º to 5º of c.a. P-C alteration scarce less than 1 per meter 0.1 to 0.2 cm wide calcite vnlts at 20º of c.a. and only one 0.4 to 0.6 cm wide medium size anhedral Py < black and brown Sph and ss vnlt at 50º of c.a.
91.38 93.24 Fine grain S.S. beds 60% Silts 40% irregular bedding at 10º to 20º of c.a. P-C alteration few 3 to 4 per meter 0.1 to 0.4 cm wide calcite vnlts at 10º of c.a. scarce less than 1 per meter 0.2 to 0.3 cm wide calcite-anhedral Py and trz of ss vnlts at 60º of c.a.
93.24 98.00 Silts 60% fine to medium size grain S.S. in irregular lenses and beds 40% bedding at 20º to 40º of c.a. P-C alteration, irregular 0.2 to 1 cm wide calcite vnlts at 0º to 10º of c.a. few 2 to 3 per meter 0.3 to 2 cm wide calcite partially replaced to FG qtz-anhedral Py < Sulfosalts and trz of black and brown Sph vnlts at 60º to 70º of c.a. wk sericite in walls of vnlts.
98.00 107.70 Silts 60% thin 0.2 to 1 cm wide fine grain size S.S. beds at 40º of c.a. bedding at 30º to 40º of c.a. P-C alteration few 2 to 3 per meter 0.7 to 4 cm wide calcite partially replaced to FG qtz less cream colour clays, black sulfosalts trz of Sph vnlts at 60º of c.a.
107.70 117.10 Silts 70% wavy irregular fine grain size S.S. beds bedding at 30º to 0º of c.a. P- C alteration, 2 to 3 per meter, 0.2 to 0.7 cm wide decreasing amount of vnlts less amount of ss and thinner calcite-Py –ss vnlts at 60º of c.a. to depth
117.10 118.50 Silts 60% fine grain S.S. irregular wavy beds at 20º to 30º of c.a. P-C alteration few 2 to 3 per meter 0.1 to 0.3 cm wide calcite trz of anhedral Py and less ss vnlts at 55º to 60º , scarce at 10º of c.a.
118.50 119.13 Black Silts 80% irregular thin fine grain size 0.2 to 0.5 cm wide S.S. beds, bedding at 0º of c.a. , irregular hairline to 0.2 cm wide calcite vnlts forming zones up to 10 cm long of Stockwork, fractured zone few slickensides at 10º and 30º of c.a.
119.13 119.20 7 cm wide Fault Bx with calcite-Py and trz of Sph zone at 40º of c.a.
119.20 120.95 Silts 95% irregular bedding at 0º to 20º of c.a. P-C alteration 2 to 3 per meter 0.1 cm wide calcite vnlts at 20º and 60º of c.a.
120.95 121.00 5 cm wide Fault gouge zone, planes at 45º of c.a.
121.00 121.50 Fault with pebble dike and calcite vnlts Fault planes at 70º at top and 30º at bottom zone formed by a 4 cm wide centre of Pebble dike with calcite partially replaced to FG qtz trz of Py at 10º to 20º of c.a. with 5 to 10 cm wide gouge Bxed zones with subangular and milled rock in both walls.
121.50 122.38 Silt 95% irregular bedding at 0º to 10º of c.a. P-C alteration few 3 to 4 per meter irregular 0.5 to 1 cm wide calcite partially replaced to FG qtz vnlts fragments at 20º and 40º of c.a.
122.38 123.25 Fault vein, interval starts with 7 cm wide calcite partially replaced to FG qtz FG anhedral Py trz of brown Sph and less ss vnlt at 50º of c.a. interval continues to depth with 30 cm of Bxed Silts with irregular 0.1 to 0.3 cm wide calcite vnlts at 0º and 60º of c.a. and FG Py microvnlts and clouds 2% , then 5 to 7 cm wide bxed vnlt fragment of calcite to FG qtz anhedral Py less brown Sph and ss at 50º of c.a. at bottom Bx gouge zone, calcite thin irregular fragments in milled rock flour.

3



123.25 127.50 Silts 80% scarce medium size grain 0.1 to 1 cm wide irregular S.S. bands, bedding at 40º to 50º of c.a. P-C alteration few 2 to 4 per meter hairline to 0.2 cm wide calcite trz of FG Py vnlts at 30º to 40º and 60º to 70º of c.a., scarce 1 per meter 0.3 to 1 cm wide irregular calcite partially replaced to FG qtz anhedral Py less brown Sph and ss vnlts at 40º to 50º and 70º of c.a. scarce < 1 mm wide FG Py vnlts at 70º and less diss in few irregular S.S. lenses Py 1%
127.50 129.55 Silts 70% irregular up to 6 cm wide S.S. beds at 45º of c.a. P-C alteration wk sericite in fractures, scarce irregular hairline to 0.3 cm wide calcite lenses and scarce irregular hairline vnlts, FG Py clouds and thin < 0.3 cm wide lenses Py 2% to 3%
129.55 129.60 Irregular 5 cm wide calcite partially replaced to FG qtz, light brown hard vitreous translucid mineral garnet??-FG anhedral to subhedral Py, brown and red Sph and less ss vnlt at 60º of c.a.
129.60 129.98 Fractured Silts 70% irregular fine grain S.S. fragments P-C alteration FG Py diss in microvnlts Py 3% to 5% thin hairline to 0.1 cm wide calcite vnlts at 30º to 40º of c.a.
129.98 130.00 2 cm wide calcite to FG qtz, less brown mineral-anhedral Py and less black ss vnlt at 70º of c.a.
130.00 130.30 Silts 70% irregular bedding at 60º of c.a. FG Py vnlts and diss 5% irregular calcite-Py vnlts at 30º and 60º of c.a.
130.30 131.55 1.25 cm wide along c.a. Bx-vein zone. at 50º of c.a. formed by 10 to 25 cm wide zones of sub rounded to subangular 0.5 to 3 cm long rock fragments in calcite to FG qtz and less FG anhedral Py- less brown Sph and trz of ss Bx. Also zones up to 90º cm long of irregular calcite vnlts forming small Bx among rock fragments less Py and less amount of brown Sph and ss including some jamesonite. Also zones of druse calcite up to 10 cm long at 60º of c.a. with trz of black ss (jamesonite) and less grey colour ss.
131.55 132.06 Black Silts 80% irregular fine grain S.S. lenses, bedding at 30º of c.a. various 8 to 10 per meter 0.1 to 1 cm wide irregular calcite to FG qtz < ss vnlts at 20º to 40º of c.a.
132.06 132.14 6 cm wide calcite to FG qtz-jamesonite-black ss. vnlt at 50º of c.a.
132.14 134.88 Silts 90% thin irregular 0.2 to 1 cm wide S.S. beds, bedding at 70º of c.a. – abundant FG subhedral Py in hairline to 0.2 cm wide irregular vnlts. Py 6% to 8%, scarce hairline to 1.4 cm wide calcite to FG qtz-Py vnlts at 50º to 60º of c.a.
134.88 141.40 Silts 95% thin irregular 0.1 to 1 cm wide fine grain S.S. lenses and irregular beds, bedding at 30º to 60º of c.a. P-C alteration few 2 to 3 per meter irregular 0.1 to 0.6 cm wide calcite vnlts at 30º and 70º of c.a. trz of FG Py in scarce calcite vnlts.
141.40 141.44 4 cm wide calcite partially replaced to FG qtz < FG Py and trz of brown Sph vnlt at 50º of c.a.
141.44 151.00 Silts 80% irregular 0.1 to 2 cm wide banded S.S. beds and lenses, deformed bedding unstable basin, average bedding at 30º to 50º of c.a. wk P-C alteration, scarce less than 1 per meter 0.1 to 1 cm wide calcite < FG Py vnlts at 20º to 40º of c.a. Trz of Py
151.00 158.00 Silts 70% to 80% thin irregular 0.2 to 1 cm wide fine grain size S.S. beds at 40º to 0º of c.a. wk P-C alteration very scarce less than 1 per meter hairline to 0.2 cm wide calcite vnlts at 25º to 30º and 60º to 70º of c.a.
158.00 163.00 Silts 80% irregular black fine grain size Silts lenses irregular bedding from 0º to 10º Wk P-C alteration scarce few 2 to 3 per meter irregular 0.1 to 2 cm wide bended calcite vnlts at 0º to 20º and 50º to 70º of c.a.
163.00 173.00 Fine grain size S.S. in 0.1 to 3 cm wide beds 40% fine grain Silts 60% irregular

4



bedding at 0º to 20º of c.a. P-C alteration FG Py diss 1% in some S.S. beds scarce 0.1 to 0.8 cm wide calcite vnlts at 30º to 50º of c.a. few at 60º to 70º of c.a.
173.00 176.79 Fine to medium size grain S.S. irregular and wavy beds, bedding at 0º to 30º of c.a. sedimentation on unstable basin S.S. grain and amount of beds increasing to depth, thin irregular 0.1 to 2 cm wide black Silts lenses, wk P-C alteration scarce less than 1 per meter 0.1 to 1 cm wide calcite vnlts at 20º to 30º and 70º to 80º of c.a.
176.79 176.82 3 cm wide calcite partially replaced to FG qtz FG anhedral Py and trz of brown Sph vnlt at 65º to 70º of c.a.
176.82 183.00 Fine to medium size grain S.S. in irregular beds 50%, Silts 50% bedding at 40º to 60º of c.a. wk P-C alteration, scarce 0.1 to 0.8 cm wide irregular calcite< FG Py vnlts at 50º to 70º of c.a. irregular calcite FG Py clouds Py < 1% in interval., scarce < 2 cm wide fault zones at 40º and 60º of c.a.
    183.00 m 8 cm wide Fault gouge at 50º of c.a.
183.00 183.80 Silts 90% irregular < 0.2 cm wide medium size grain S.S. lenses bedding at 60º to 70º of c.a. P-C alteration few 0.1 to 0.2 cm wide calcite partially replaced to FG qtz FG Py irregular vnlts at 20º to 30º of c.a. and lenses at 60º of c.a. FG Py small clouds Py 1% to 2%
183.80 183.82 1.5 to 2 cm wide calcite partially replaced to FG qtz FG Py vnlt at 30º of c.a.
183.82 184.25 Fault gouge zone with thin Bx zones, milled rock calcite and less sericite, fault planes at 30º at top and 70º to the bottom.
184.25 185.08 Medium Size grain S.S. irregular beds 80% thin 0.1 to 2 cm wide black Silts beds 20%, bedding changing from 80º to 50º of c.a.
185.08 186.05 Silts 60% irregular beds and sub rounded lenses 0.2 to 4 cm wide of S.S., bedding at 75º to 85º of c.a. P-C alteration various 8 to 10 per meter irregular 0.1 to 2 cm wide calcite almost totally replaced to FG qtz, some druse textures, FG anhedral Py and trz of brown to red Sph vnlts at 70º to 80º few at 30º of c.a. Py < 1%
186.05 191.50 Silts 60% medium size grain banded S.S. beds up to 7 cm wide with very thin black layers of organic material < 0.1 cm wide 40%. Bedding changing from 70º to 0º then 20º of c.a. P-C alteration, few 2 to 3 per meter irregular 0.1 to 0.6 cm wide calcite < FG Py vnlts at 10º to 20º and 60º to 80º of c.a. Py < 1%
191.50 199.40 Medium size grain S.S. beds up to 8 cm wide 60% Silts 40% bedding at 20º to 0º then 30º of c.a. P-C alteration with weak to moderate sericite in the calcite vnlts walls and some fractures, few 3 to 5 per meter irregular hairline to 1.2 cm wide calcite partially replaced to FG qtz vnlts and irregular lenses, vnlts at 10º to 30º and 60º to 70º of c.a.
199.40 201.80 Silts 95% 0.2 to 0.5 cm wide irregular fine grain size S.S. lenses, bedding at 40º of c.a. P-C alteration, few 1 to 2 per meter hairline to 0.4 cm wide calcite vnlts, scarce druse calcite in wider vnlts at 20º to 40º of c.a.
201.80 201.90 6 to 8 cm wide calcite trz of rhodochrosite-small subangular rock fragments< FG anhedral Py vnlt at 40º to 60º of c.a.
201.90 204.80 Silts 80% thin 0.1 to 1.2 cm wide fine grain size S.S. beds at 30º to 40º of c.a. P- C alteration wk sericite in few calcite vnlts walls, few 2 to 4 per meter 0.1 to 0.3 cm wide calcite < sericite vnlts at 30º to 50º and 70º of c.a. few irregular < 0.2 cm wide lenses along bedding
204.80 212.00 Silts 85% thin 0.1 to 1 cm wide fine grain size S.S. beds 15%, bedding at 50º to 60º of c.a. P-C alteration wk to moderate sericite in some vnlts, some 4 to 5 per meter irregular 0.1 to 2 cm wide calcite-sericite vnlts at 30º to 40º and 50º to 60º of c.a.

5



212.00 216.55 Silts 85% fine irregular 0.1 to 0.5 cm wide fine grain size S.S. lenses 15% P-C alteration scarce 1.0 to 1.2 cm wide banded calcite vnlts at 0º to 20º of c.a. wk sericite and trz of ss in very scarce sericite vnlts.
216.55 217.45 Fractured zone Bx ed by faulting along bedding, fault planes at 60º to 70º of c.a. also at 0º to 10º of c.a. calcite and less sericite microvnlts in rock flour > FG Py in milled groundmass trz of ss?
217.45 218.62 Silts 95% thin fine grain size S.S. beds 10% bedding at 20º of c.a. P-C alteration wk sericite, various 4 to 6 per meter thin 0.1 to 0.2 cm wide calcite < sericite vnlts at 0º to 20º of c.a.
218.62 236.95 Silts 80% 0.1 to 2 cm wide fine grain size S.S. beds 20%, bedding changing from 20º to 60º of c.a. then to 10º and 30º at bottom of interval, P.-C alteration wk sericite in fractures, 3 to 4 per meter zones up to 3 meters wide with 6 to 8 per meter 0.1 to 1.3 cm wide calcite< sericite vnlts at 0º to 30º of c.a. and scarce 0.1 to 0.8 cm wide banded calcite trz of FG Py lenses.
236.95 237.00 5 cm wide Fault gouge zone at 70º to 80º of c.a.
237.00 243.50 Silts 85% thin irregular 0.2 to 0.6 cm wide S.S. lenses, bedding at 40º to 50º of c.a. P-C alteration wk sericite, few 3 to 4 per meter irregular 0.1 to 0.6 cm wide calcite vnlts at 5º to 20º of c.a. and less at 60º to 70º of c.a. few irregular 0.4 to 0.6 cm wide banded calcite lenses
243.50 244.50 Fault Bxed zone irregular < 0.1 cm wide calcite-sericite vnlts.
244.50 249.60 Silts 95% scarce < 0.3 cm wide S.S. lenses, bedding at 30º to 40º of c.a. P-C alteration few 3 to 4 per meter irregular 0.1 to 2 cm wide calcite vnlts at 10º to 40º of c.a. few 0.2 to 0.4 cm wide calcite lenses with druse texture, scarce FG euhedral cubic Py in scarce calcite vnlts.
249.60 253.33 Silts 90% irregular 0.6 to 2 cm wide fine grain size S.S. beds, bedding at 40º to 10º then 30º of c.a. Wk P-C alteration, scarce less than 1 per meter 0.1 to 1-5 cm wide banded calcite lenses and scarce < 0.2 cm wide calcite vnlts at 20º to 30º of c.a.
253.33 255.12 Fault zone broken core zones up to 10 cm wide of only grey mud at 70º to 80º of c.a. , various irregular 0.1 to 0.2 cm wide calcite to sericite vnlts in some fragments, P-C alteration with wk to moderate sericite
255.12 256.56 Silts 95% scarce < 0.2 cm wide irregular fine grain size S.S. lenses, various hairline to 0.1 cm wide calcite to sericite vnlts and filling Bx zones up to 5 cm wide at 30º of c.a.
256.56 261.60 Silts 95% few 0.1 to 0.4 cm wide fine grain size S.S. beds, bedding at 30º to 40º of c.a. P-C alteration with wk to moderate sericite vnlts, few 1 to 2 pr meter irregular 0.1 to 0.4 cm wide banded calcite lenses and few 1 per meter 0.2 to 1.2 cm wide calcite with small rock fragments and thin layers vnlts at 0º to 10º and 30º to 40º of c.a.
261.60 264.70 Silts 90% irregular 0.1 to 1 cm wide fine grain size S.S. beds at 30º of c.a. P-C alteration to fresh, few 1 to 2 per meter 0.1 to 0.2 cm wide calcite vnlts and in banded lenses, vnlts at 30º and 60º of c.a.
264.70 265.95 Silts 95% few irregular 0.2 to 0.4 cm wide S.S. lenses, bedding at 25º to 30º of c.a. P-C alteration, moderate sericite in calcite vnlts walls, few 3 to 5 per meter 0.1 to 0.8 cm wide calcite vnlts at 0º to 20º and 60º to 70º of c.a.
265.95 266.30 Fault zone broken core, fragments smaller than 3 cm long, slickensides and mud zones, sericite moderate in fractures, some 0.2 to 0.4 cm wide calcite< sericite vnlts in some rock fragments, P-C alteration with moderate sericite
266.30 268.00 Silts 90% few irregular 0.1 to 0.3 cm wide fine grain size S.S. lenses, bedding at 30º of c.a. P-C alteration wk to moderate sericite in calcite vnlts walls, some 4 to 6 per meter 0.3 to 2 cm wide druse calcite< sericite vnlts at 20º to 30º of c.a. and

6



    less 60º to 80º of c.a. small 1 to 2 cm wide pebble dikes at 20º and 70º of c.a.
268.00 273.00 Silts 95% scarce < 0.2 cm wide fine grain size S.S. beds, bedding at 351 to 40º of c.a. P-C alteration scarce less than 1 per meter hairline to 0.2 cm wide calcite vnlts at 30º to 50º of c.a. and 2 to 3 per meter 0.1 to 3 cm wide banded calcite lenses.
273.00 275.20 Bedding at 60º of c.a., 3 to 4 per meter hairline to 1.5 cm wide calcite vnlts at 20º to 40º of c.a. scarce less than 1 per meter 0.8 cm wide calcite lenses
275.20 278.62 Silts 95% irregular thin < 0.2 cm wide S.S. lenses P-C alteration, various 8 to 10 per meter 0.2 to 0.6 cm wide calcite vnlts at 30º to 40º and 60º of c.a., zones up to 1 meter wide of Stockwork of hairline to 0.3 cm wide calcite vnlts, thin 1 to 2 cm wide Pebble dikes at 5º of c.a. wk sericite in fractures at bottom of the interval
278.62 279.00 Fault Bx gouge zone, calcite and wk sericite vnlts fragments, fault planes at 50º to 70º of c.a.
279.00 280.17 Silts 95% bedding at 30º to 40º of c.a. P-C alteration wk to moderate sericite,, few 3 to 5 per meter < 0.2 cm wide calcite less sericite vnlts at 0º to 20º and 40º of c.a.
280.17 286.65 Silts 95% scarce < 0.2 cm wide S.S. lenses, bedding at 40º to 50º of c.a. P-C alteration wk sericite in some calcite vnlts walls, some 4 to 6 per meter hairline to 0.2 cm wide calcite vnlts at 25º and 60º of c.a. less < 0.1 cm wide calcite lenses, sporadic bxed zones with irregular calcite groundmass in parts forming irregular pebble dikes and Bx zones up to 5 cm wide at 0º to 10º and 30º to 40º of c.a.
285.65 287.70 5 cm wide Fault gouge zone brecciated rock in milled rock groundmass, scarce calcite, fault planes at 60º of c.a.
287.70 291.80 Silts 90% 0.2 to 0.5 cm wide S.S. beds bedding at 30º to 40º of c.a. P-C alteration wk to moderate sericite irregular 1 to 5 cm wide Bx and pebble dikes at 10º to 30º of c.a. few thin 0.1 to 0.2 cm wide calcite vnlts at 30º of c.a.
291.80 292.15 Irregular 3 to 4 per meter 0.2 to 7 cm wide calcite bands, few subangular rock fragments.
292.15 294.08 Fault zone (3) 5 to 30 cm wide Bx gouge zones in milled rock flour among < 5 cm wide rock fragments, P-C alteration with wk to moderate sericite vnlts fault planes at 50º and 70º of c.a.
294.08 298.68 Silts 95% scarce < 0.3 cm wide fine grain size S.S. lenses, bedding at 45º to 50º of c.a. P-C alteration, trz of sericite, scarce less than 1 per meter, irregular 0.1 to 0.8 cm wide calcite partially replaced to FG qtz lenses, various 3 to 4 per meter thin 1 to 5 cm wide bxed and fractured zones at 30º to 50º of c.a.
298.65 300.15 Silts 90% thin 0.1 to 0.5 cm wide fine grain size S.S. beds, bedding at 50º of c.a. wk P-C alteration scarce less than 1 per meter 0.1 cm wide calcite vnlts at 30º of c.a.
300.15 305.15 Silts 90% thin 0.1 to 0.3 cm wide fine grain size S.S. beds, bedding at 50º of c.a. wk P-C alteration, very scarce hairline to 0.2 cm wide calcite vnlts at 25º to 40º of c.a. scarce 0.2 to 1 cm wide calcite to FG qtz lenses, fractured zones with gouge Bx 3 to 25 cm wide at 60º to 80º of c.a. and along bedding 50%
305.15 307.60 Bx zone fault gouge, subangular rock fragments up to 5 cm long in milled rock – FG Py < calcite flour, faults along bedding ( thrust faults) Py diss in some fragments Py 2% to 3% in the interval.
307.60 313.18 Silts 95% irregular bedding at 0º to 30º of c.a. moderate fracturing, Bx zones 5 to 10 cm wide with subangular fragments in milled rock flour, Fresh rock trz very scarce < 0.1 cm wide calcite vnlts.

7



313.18 314.44 Silts 90% 0.1 to 0.8 cm wide fine grain S.S. beds bedding at 50º of c.a. Fresh rock, scarce 1 to 2 per meter hairline to 0.1 cm wide calcite lenses.
314.44   End of Hole

8


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: July 12 / 2004  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES    

Summary of DDH QTA-23-04; 699,993 E; 2,652,968 N, 340°/-60°, Gregorio area
From To Description
0.00 5.79 Drilled with Tricone bit -No core- Casing
5.79 14.33 Kuc Caracol Fm. Fine grain size S.S. 70% bedding at 80º of c.a. wk P-C alteration wk oxidation in few fractures, few 0.1 to 0.3 cm wide Goethite and less calcite lenses and less vnlts at 60º of c.a. zones of Goethite diss in 2 mm wide walls of vnlts.
    14.33 m End of oxidation zone
14.33 32.81 Fine to medium size grain S.S. beds 80% black silts 20% bedding changing from 10º to 60º of c.a. wk P-C alteration scarce 0.1 to 0.2 cm wide calcite wkly and locally replaced FG qtz trz of Py and less Goethite with tan stain vnlts at 20º and 40º of c.a.
32.81 34.00 Fault zone at 40º of c.a. gouge zone with 3% Py
34.00 40.40 Fine grain size S.S. beds 90% bedding at 10º of c.a. wk P-C alteration scarce less than 1 per meter 0.1 cm wide calcite trz of brown calcite trz of Py vnlts at 10º of c.a. various FG Py microvnlts at 20º of c.a.
40.40 57.80 Fine grain S.S. 90% Silts 1’% bedding at 5º to 20º of c.a. wk P-C alteration scarce less than 1 per meter 0.1 to 0.3 cm wide calcite wkly replaced to FG qtz- Trz of Py vnlts at 50º to 80º of c.a.
57.80 59.60 Fine grain size S.S. in irregular bedding, sedimentation on unstable basin, Wk P- C alteration Py diss 2%
59.60 74.24 Fine grain size S.S.90% Silts 10% bedding at 60º to 70º of c.a. wk P-C alteration few 1 to 2 per meter 0.3 to 0.5 cm wide calcite wkly replaced to FG qtz < FG anhedral Py vnlts at 60º of c.a. scarce only two in the interval 0.2 to 0.3 cm wide calcite to qtz trz of FG Py and trz of ss vnlts at 60º of c.a. Py diss 2% to 3% in walls of vnlts with trz of ss.
74.24 75.29 Bxed vein calcite wkly replaced to FG qtz trz of rhodochrosite in some organic material subangular fragments, FG Py diss 3% to 5% at 80º of c.a.
75.29 76.00 Fault Bx zone gouge and dark grey colour mud few calcite to qtz fragments Py 2% to 3% in interval
76.00 84.53 Fine grain size S.S. 90% bedding at 10º to 25º of c.a. wk P-C alteration wk sericite in fractures scarce less than 1 per meter 0.1 calcite FG Py vnlts at 30º to 50º of c.a. just one in the interval 4 cm wide calcite partially replaced to FG qtz FG Anhedral Py mainly in walls of vnlts at 50º of c.a. scarce FG Py clouds, Py 2% to 3% in the interval

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84.53 85.60 Bxed vein zone, subangular rock fragments with thin light green colour clays borders few calcite mod to advanced replaced to FG qtz-FG anhedral Py light green clays trz of rhodochrosite groundmass at 70º to 80º of c.a.
85.60 86.15 Fault with bxed vein fragments up to 10 cm wide, fractured rock at 70º to 80º of c.a.
86.15 90.90 Fine grain S.S- 80% irregular wavy bedding at 20º to 40º of c.a. wk P-C alteration scarce less than 1 per meter 0.2 to 0.3 cm wide calcite FG anhedral Py vnlts at 60º of c.a. Py diss 2% in interval.
90.90 96.80 Fine grain S.S. 90% Silts beds 10%, irregular wavy bedding at 50º to 20º of c.a. wk P-C wk sericite alteration, very scarce < 0.1 cm wide calcite vnlts , few 1 per meter irregular 0.1 to 0.5 cm wide FG Py lenses and in very thin hairline FG Py vnlts Py 3% in interval.
96.80 98.15 Zone of various 1 to 5 cm wide Fault gouge zones with wk sericite zones at 50º of c.a. wk P-C alteration.
98.15 106.30 Fine grain S.S. 50% Silts 50% bedding at 50 to 60º of c.a. wk to moderate P-C alteration scarce 0.3 cm wide calcite partially replaced to FG qtz FG Py and trz of brown Sph vnlts at 40º to 50º of c.a.
106.30 107.20 Silts 80% fine grain size S.S. 20% bedding at 60º of c.a. wk P-C alteration wk sericite in fault zones, some 0.2 to 0.3 cm wide fault gouge zones at 40º to 50º of c.a. scarce just one 0.3 cm wide calcite partially replaced to FG qtz trz of ss vnlt at 50º of c.a.
107.20 113.10 Silts 70% Fine size grain S.S. beds 30% bedding at 50º to 80º of c.a. wk P-C alteration few 1 to 2 per meter 0.2 to 0.3 cm wide and 1 4 cm wide calcite partially replaced to FG qtz FG Py 2% to 5% and trz of ss and less brown Sph vnlts at 50º and 60º of c.a. Py 3% in interval
113.10 116.80 Silts 70%I Silts 30% bedding at 20º to 40º of c.a. wk P-C alteration scarce 0.7 to 1 cm wide calcite almost totally replaced to FG qtz FG anhedral Py 1% to 2% trz of ss and less brown Sph vnlts at 40º and 60º of c.a.
116.80 121.67 Light grey Silts 90% 0.1 to 1 cm wide fine grain S.S. beds, bedding at 20º to 40º of c.a. wk P-C alteration scarce less than 1 per meter 0.7 to 1 cm wide calcite almost totally replaced to FG qtz wk pink colour stain-FG Py trz of ss and less Sph vnlts at 50º of c.a. FG Py diss 3% in the interval
121.67 127.11 Silts 70% irregular wavy 0.1 to 1 cm wide s.s. beds bedding at 5º to 30º of c.a. p- c alteration scarce 0.1 to 1 cm wide calcite vnlts
127.11 136.60 Silts 70% 0.1 to 2 cm wide irregular lightly wavy fine grain size S.S. beds, bedding changing from 30º to 10º then 50º of c.a. P-C alteration few 1 to 3 per meter 0.1 to 0.2 cm wide calcite FG Py vnlts at 20º to 30º and 50º to 60º of c.a. scarce less than 1 per meter 0.6 to 1 cm wide calcite partially replaced to FG qtz FG Py in thin layers mainly in walls and trz of ss vnlts at 50º and 60º of c.a.
136.60 137.20 Druse calcite and less thin layers of organic material vein at 290º to 30º of c.a.
137.20 138.20 Fine grain S.S. beds 60% irregular wavy beds Silts 40% bedding at 30º to 50º of c.a. scarce 0.1 to 1 cm wide calcite vnlts at 40º and 50º of c.a. thin < 0.1 cm wide irregular calcite lenses
138.20 138.50 Calcite vnlt with irregular 4 cm wide pebble dike at top of interval rest calcite with thin FG Py layers vnlt, also Py up to 5% diss in bottom wall walls of lenses t at 30º of c.a. in crossing angle.
138.50 139.31 Irregular wavy Fine to medium size grain S.S. beds at 30º of c.a. irregular hairline to 0.1 cm wide calcite vnlts in Stockwork, just one 0.7 cm wide calcite FG Py and trz of brown Sph-ss vnlt At 50º of c.a.
139.31 139.51 20 cm wide Fault gouge zone few calcite –trz of brown Sph less ss vnlts fragments, in small < 1 cm long sub rounded rock fragments in a milled

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    groundmass
139.51 140.00 Irregular 0.5 to 2.5 cm wide calcite FG Py vnlts forming wide apart zones of Stockwork some other calcite vnlts at 0º to 20º of c.a. Py 3%.
140.00 147.00 Silts 60% irregular wavy 0.1 to 1 cm wide fine size grain S.S. beds, bedding at 30º of c.a. P-C alteration few 4 to 6 per meter hairline to 1 cm wide calcite < FG Py vnlts at 0º to 10º and 50º to 70º of c.a. scarce with trz of brown Sph-ss, FG Py bands in walls of vnlts, few VFG Py clouds Py 1% to 2% in the interval.
147.00 151.10 Fine grain size S.S. irregular beds 0.1 to 2 cm wide 40% Silts 60% bedding at 30º to 0º then 50º of c.a. P-C alteration few 1 per meter irregular 0.2 to 3 cm wide banded calcite partially replaced to FG qtz FG anhedral Py trz of brown Sph and ss vnlts at 40º to 50º of c.a. VFG Py clouds and irregular lenses and vnlts in zones 20 to 30 wide at both walls of vnlts.
151.10 164.50 Silts 70% thin 0.1 to 1 cm wide fine grain size S.S. beds bedding at 40º to 50º changing to 10º then to 20º-30º of c.a. P-C alteration few 1 to 2 per meter 0.5 to 4 cm wide calcite partially replaced to FG qtz < FG anhedral Py trz of Sph and less ss vnlts at 30º and 60º of c.a.
64.50 166.40 Silts 80% irregular fine grain S.S. beds 20% bedding at 35º to 65º of c.a. thin 10 to 15 cm wide brecciated zones with subangular < 1.5 cm long Silts fragments, 3 to 5 irregular 0.2 to 2 cm wide calcite some partially replaced to FG qtz < FG Py trz of brown Sph ss vnlts at 60º to 80º of c.a. thin zones 10 to 20 cm wide with calcite vnlts in Stockwork, scarce up to 7 cm wide calcite pebble dikes with FG Py in walls, Py 2 % to 3% in the interval
166.40 166.73 Irregular up to 5 cm wide calcite-FG Py vnlts Py up to 10%.
166.73 175.00 Silts 80% irregular 0.2 to 2 cm wide S.S. beds and irregular lenses, bedding at 30º to 0º then 20º of c.a. P-C alteration few 0.3 to 2 cm wide calcite partially to qtz< FG Py in walls and trz of Sph and less ss vnlts at 30º to 40º and 60º of c.a. few 0.1 to 0.3 cm wide calcite vnlts at 40º of c.a.
175.00 176.75 Silts 60% irregular wavy 0.1 to 2 cm wide S.S. beds bedding at 10º to 30º of c.a. P-C alteration scarce less than 1 per meter 0.4 to 0.8 cm wide calcite< FG Py trz of ss vnlts at 55º of c.a.
176.75 176.80 5 cm wide Fault vein zone, formed by 2 to 3 cm wide gouge zone-with thin 0.6 to 0.8 cm wide calcite partially to FG Qtz less brown Sph and ss vnlts at 50º of c.a.
176.80 184.20 Silts 60% irregular 0.3 to 1 cm wide S.S. beds bedding at 0º to 30º of c.a. wk P- C alteration wk sericite in fractures, scarce less than 1 per meter hairline top 0.2 cm wide calcite vnlts at 20º to 30º of c.a. and 60º to 70º of c.a. very scarce just two vnlts in the interval 0.6 to 1 cm wide calcite to qtz < FG Py and less brown Sph and ss vnlts at 40º to 50º of c.a.
184.20 186.40 Stockwork zone of irregular 0.1 to 3 cm calcite vnlts and lenses < FG Py zone of deformed beds Silts 60 fine grain S.S. 40% P-C to wk P-C Py in the interval < 1%
186.40 187.95 Silts 80% irregular 0.2 to 2 cm wide fine grain S.S. lenses and beds bedding at 50º of c.a. scarce 0.2 cm wide calcite vnlts
  187.95 Fault zone with 6 cm wide Bx zone at 50º of c.a.
187.95 190.10 Silts 80% irregular 0.2 to 3 cm wide S.S. beds bedding at 20º to 30º of c.a. P-C alteration wk to moderate sericite in calcite vnlts walls, zones up to 9 cm wide of pebble dikes various 8 to 10 per meter hairline top 0.3 cm wide calcite > FG Py vnlts at 10º to 20º of c.a. and 40º to 60º of c.a.
190.10 193.70 Silts 80’% 0.1 to 0.5 cm wide S.S. beds bedding at 30º to 40º of c.a. P-C wk sericite scarce 0.1 to 1 cm wide calcite < FG Py and trz of ss vnlts at 0º to 30º of c.a.

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193.70 202.00 Silts 75% bedding at 0º to 10º of c.a. P-C very scarce sericite, scarce calcite < FG Py vnlts at 10º to 30º and 50º to 60º of c.a. irregular 0.5 to 0.7 cm wide banded calcite scarce FG Py lenses along bedding 10º to 15º of c.a.
202.00 203.00 Silts 80% bedding at 20º of c.a. P-C alteration scarce 1 to 2 per meter 0.1 to 0.3 cm wide irregular banded calcite FG Py in walls and trz of ss lenses at 20º of c.a.
203.00 212.90 Silts 80% thin 0.1 to 2 cm wide fine grain S.S. beds, bedding at 10 ºto 20º of c.a. P-C alteration few 1 to2 per meter hairline to 0.2 cm wide calcite trz of sericite trz of FG Py vnlts at 20º to 30º and 50º to 70º of c.a.
212.90 213.10 Irregular calcite almost totally replaced to FG qtz-FG Py vnlts at 40º of c.a.
213.10 215.04 Silts 90% thin 0.2 to 0.5 cm wide fine grain size S.S. beds, bedding at 30º to 40º of c.a. P-C alteration 3 to 4 per meter irregular 0.3 to 1.5 cm wide calcite almost totally replaced to FG qtz FG Py vnlts at 60º to 80º of c.a.
215.04 217.40 San Gregorio Bx-vein zone at 40º of c.a. at the top, 50º of c.a. in the bottom
215.04 215.30 26 cm wide Bx vein formed by Calcite almost totally replaced to FG qtz-FG Py less brown Sph and trz of ss vnlts 1 to 5 cm wide at 50º of c.a. in brecciated Silts with FG Py bands and diss.
215.30 215,95 Fractured and Bxed Rock various irregular 0.2 to 1 cm wide calcite totally replaced to FG qtz FG anhedral Py and less ss vnlts, FG Py irregular bands and diss 10%
    215.49 m 2 cm wide Fault gouge zone at 60º to 70º of c.a.
215.95 216.60 Bxed Silts scarce calcite to FG qtz FG Py fragments.
216.60 217.00 Bx formed by small < 2 cm long sub rounded rock fragments in abundant milled rock-calcite to qtz Py and less ss groundmass.
217.00 217.40 Bx vein formed by irregular 0.1 to 2 cm wide calcite to FG qtz –FG Py and less brown Sph and ss vnlts in irregular rock fragments. FG Py up to 15% diss
217.40 220.15 Silts 95% thin 0.1 to 0.3 cm wide fine grain S.S. beds bedding at 50º of c.a. P-C alteration various irregular 0.1 to 0.3 cm wide FG Py bands Py 5% scarce 0.1 to 0.3 cm wide calcite bands and vnlts at 20º of c.a.
220.15 229.20 Silts 90% irregular 0.1 to 1 cm wide S.S. beds at 40º of c.a. P-C alteration scarce 0.1 to 0.3 cm wide calcite<FG Py vnlts at 20º to 30º of c.a. few at 80º to 85º of c.a.
229.20 233.80 Bxed zone irregular sub rounded 0.5 to 7 cm long calcite replaced to FG qtz-thin layers of organic material FG Py and trz of brown Sph and less ss fragments in locally Bxed Silts. FG Py bands and irregular vnlts some up to 1.5 cm wide Py in interval 5% among no deformed rock “horses” up to 50 cm wide
233.80 238.75 Silts 95% 0.1 to 0.8 cm wide irregular S.S. lenses, bedding at 60º of c.a. P-C alteration scarce irregular 0.1 to 0.5 cm wide calcite partially replaced to FG qtz vnlts at 20º to 30º of c.a.
238.75 239.78 Bx zones of irregular < 1cm wide calcite to qtz trz of brown Sph and less ss fragments in zones 2 to 5 cm long among wkly bxed rock FG Py diss in up to 3 cm wide zones Py 2% to 3%
239.78 244.61 Silts 90% thin 0.2 to 0.5 cm wide fine grain S.S. beds at 60º of c.a. P-C alteration FG Py in 0.2 to 0.4 cm wide irregular bands and less clouds Py 3% to 5% few 2 to 3 per meter 0.1 to 0.5 cm wide calcite partially to FG qtz vnlts at 0º to 20º of c.a. scarce < 1 per meter 0.1 to 0.5 cm wide calcite lenses
244.61 245.60 Bx by fault, subangular 0.1 to 1.5 cm long rock and less calcite to qtz with trz of ss fragments.
245.60 246.48 Silts 85% 0.1 to 0.4 cm wide fine grain size S.S. beds at 50º of c.a. thin 2 to 5 cm wide Bx zones along bedding and also at 10º of c.a.

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246.48 249.40 Silts 95% scarce S:S: beds at 40º of c.a. P-C alteration zones 5 to 10 cm wide of Bx by fault mainly along bedding very scarce and thin 0.1 to 0.2 cm wide calcite vnlts at 10º to 30º of c.a. scarce calcite in Bx zones
249.40 251.00 Bx by Fault Wk sericite in milled rock 0.2 to 1 cm wide subangular to sub rounded rock fragments in milled rock less calcite and trz of sericite groundmass, Bx zones at 30º to 50º of c.a.
251.00 255.12 Silts 95% to 985 bedding at 40º to 50º of c.a. wk P-C alteration irregular 0.1 to 1.5 cm wide calcite vnlts filling irregular fractures at 0º to 20º of c.a., 2x3 cm wide calcite lightly replaced to FG qtz fragments some druse calcite vnlts up to 1.5 cm wide at 30º to 40º of c.a.
255.12 257.00 Fault Bx at 5º to 10º of c.a. Bedding at 10º to 20º of c.a. sub rounded fragments in general < 1 cm few 2 to 3 cm long calcite sericite fragments.
257.00 259.80 Silts 98% beds at 20º to 0º of c.a. P-C alteration 1 to 2 per meter 0.1 to 0.2 cm wide calcite-sericite vnlts at 0º to 15º of c.a.
259.80 279.00 Silts 95% bedding at 30º to 50º of c.a. P-C alteration wide apart Stockwork of 0.1 to 2 cm wide calcite less sericite vnlts very scarce up to6 cm wide calcite-organic material layers vnlts at 60º of c.a. some 1 to 1.5 cm wide druse calcite vnlts. Just one 5 cm wide Pebble dike at 30º of c.a.
279.00 290.00 Silts 85% few up to 10 cm wide S.S. beds bedding at 40º of c.a. Wk P-C alteration few 2 to 3 per meter 0.2 to 1 cm wide calcite trz of FG Py vnlts at 20º to 40º of c.a.
290.00 294,25 Silts 90% thin < 0.2 cm wide S.S. beds bedding at 0º to 10º of c.a. few 2 to 3 per meter 0.2 to 0.3 cm wide calcite trz of sericite vnlts at 0º to 25º of c.a. few druse calcite
294.25 299.00 Silts 98% irregular bedding, wkly fractured zone, 6 to 8 per meter 0.1 to 1 cm wide calcite in part with druse texture vnlts at 0º to 10º and less 70 ºto 85º of c.a.
299.00 305.60 Silts 98% very thin irregular 0.1 to 0.2 fine grain S.S. beds at 10º to 40º of c.a. very scarce less than 1 per meter 0.1 to 0.2 calcite partially druse texture vnlts at 5º to 20º of c.a.
305.60 310.00 Silts 90% 0.1 to 0.8 cm wide S.S. beds at 40º to 60º of c.a. wk P-C alteration trz of sericite in few calcite vnlts walls few 2 to 3 per meter irregular 0.1 to 1.5 cm wide calcite < sericite vnlts at 20º to 30º of c.a. and 60º to 80º of c.a.
310.00 314.75 Silts 90% thin < 0.5 cm wide S.S. beds at 40º of c.a. scarce less than 1 per meter hairline to 0.6 cm wide calcite vnlts at 30º to 40º of c.a. and 70º of c.a. very scarce banded calcite lenses at 40º and some 0º to 10º of c.a.
314.75 317.00 P-C alteration wavy bedding in unstable basin 6 to 8 per meter irregular 0.1 to 1.2 cm wide calcite trz of FG Py vnlts in a wide apart Stockwork zones
317.00 322.17 Silts 90% wk P-C alteration less than 1 per meter hairline to 0.3 cm wide calcite trz of sericite vnlts.
322.17 323.25 6 to 8 per meter 0.1 to 1.2 cm wide calcite less sericite vnlts in wide apart Stockwork.
323.25 337.41 Silts 90% irregular 0.2 to1 cm wide fine grain S.S. beds bedding at 40º of c.a. few 2 to 3 per meter irregular 0.1 to 1.3 cm wide calcite vnlts at 0º to 10º, 30º to 40º and 70º to 80º of c.a. scarce less than 1 per meter irregular banded 0.5 to 1.3 cm wide calcite thin organic material layers lenses.
337.41   End of Hole

5


QTA-24

MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: Dec 2 / 2004  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES 1 of  


Summary of DDH QTA-24-04; 698,408 E; 2,654,479 N, 337°/-60°, West California area
From To Description
0.00 1.52 Drilled with Tricone bit -No core- Casing
1.52 4.78 Kuc Caracol Fm. Red colour Siltstone 98% in 0.1 to 0.5 cm wide beds, bedding at 80º of c.a., wk bleached, P-C alteration, moderate to pervasive hematite oxidation scarce < 0.3 cm wide calcite< hematite vnlts at 20º to 30º of .c.a.
4.78 8.15 Fault zone, broken core, rock fragments in general < 0.3 cm long, hematite diss in < 2 mm wide lenses and less vnlts.
8.15 10.60 Kuc siltstone 95% in beds 0.1 to 0.8 cm wide at 75º of c.a., wk bleaching, P-C alteration, very wk white clays in some thin intervals, 3% to 4% hematite diss in some thin beds, scarce to null calcite< hematite-clays 0.1 to 0.3 cm wide horizons, < 0.1 cm wide cross-bedding hematite vnlts at 30º of c.a.
10.60 10.70 Fault zone, broken core, moderate hematite in some fragment faces.
10.70 15.80 Kuc Caracol Fm, bedding at 75º to 85º of c.a., P-C alteration wk bleaching, 2 to 3 per meter 0.1 to 0.3 cm wide calcite-trz of hematite vnlts at 0º to 30º of c.a., very scarce 0.1 to 0.2 cm wide calcite lenses, moderate 2% to 3% hematite diss staining the rock
15.80 17.00 Fault zone, broken core, fault planes at 40º to 50º of c.a. moderate hematite, some 5 to 15 cm wide gouge zones
17.00 20.90 Kuc Caracol Fm. Silts 95% in 0.1 to 0.5 cm wide beds at 80º of c.a., wk bleaching P-C alteration, scarce hematite diss in some thin < 0.5 cm wide irregular beds or lenses few 0.1 to 0.2 cm wide calcite-trz of Mn Ox< hematite vnlts at 10 º to 30º of c.a.
20.90 31.15 Fault zone, bleached rock and hematite bands in bed planes, bedding at 70º to 80º of c.a. hematite< Goethite in 0.1 to 0.3 cm wide vnlts at 60º to 80º of c.a. zones up to 30 cm wide of fault breccia, fragments < 0.5 cm in gouge material, hematite 5% Faults from 20.90 to 21.10 m, 22.70 to 23.37m, 24.20 to 26.45 m, 28.10 to 30.12 m. 30.10 to 30.70 m bleached rock
31.15 40.30 Kuc Caracol Fm 98% siltstone in 0.1 to 1 cm wide beds at 80º to 90º of c.a., very wk bleaching, wk P-C alteration, hematite diss in 0.1 to 0.2 cm wide lenses, scarce < 1 per meter 0.1 to 0.8 cm wide calcite < hematite vnlts at 10º to 30º of c.a., scarce at 50º to 70º of c.a., very scarce 0.1 to 0.2 cm wide calcite< hematite lenses
40.30 40.50 10 cm wide Fault zone with irregular 0.1 to 1 cm wide calcite < hematite vnlts at 50º of c.a. less hematite in 0.1 to 0.3 cm wide bands or lenses
40.50 44.05 Kuc Caracol Fm P-C alteration, wk oxidation of hematite in 0.1 to 0.3 cm wide bands, few 2 to 3 per meter 0.1 to 0.3 cm wide irregular calcite vnlts at 0º to 20º

1


QTA-24

of c.a. less amount of irregular 0.1 to 0.5 cm wide calcite lenses, hematite 1% to 2% in micro lenses and minor micro<<1 mm vnlts at 0º to 30º of c.a.
44.05 44.30 Fault zone, planes at 60º of c.a., irregular 0.1 to 1 cm wide calcite<hematite- brown yellowish goethite vnlts
44.30 44.90 Kuc Silts 98% bedding at 65º of c.a. wk bleaching, P-C alteration 0.1 to 0.2 cm wide hematite layers or lenses
44.90 47.00 Fault zone with 10 to 40 cm long brecciated gouge zones in a milled rock with hematite < goethite in rock and calcite fragments.
47.00 49.00 Kuc Caracol Fm, wkly oxidation to hematite, grey colour rock 99% siltstone, P-C alteration, scarce 0.5 to 1.5 cm wide calcite< Goethite-Hematite vnlts at 0º to 30º of c.a.
49.00 49.50 10 cm wide calcite< hematite vnlt with small druse zones, vnlt at 30º of c.a., irregular 5 to 10 cm wide rock-calcite-hematite<goethite Bx zones.
40.50 51.35 Kuc Caracol Fm wkly oxidized to hematite, siltstone 98%, irregular 0.1 to 0.5 cm wide hematite diss bands, scarce < 1 per meter 0.1 to 0.2 cm wide calcite<Goethite-Hematite vnlts at 20º to 30º of c.a.
51.35   End of irregular oxidation zone
51.35 59.60 Kuc Caracol Fm 98% siltstone with 0.1 to 0.2 cm wide sandstone beds 2%, bedding at 65º to 85º of c.a. very scarce hematite diss in 0.1 to 0.2 cm wide layers or lenses. Wk P-C alteration, scarce irregular 0.1 to 0.5 cm wide calcite< Goethite vnlts at 30º to 40º of c.a.
50.60 61.20 2 to 3 per meter 0.2 to 0.7 cm wide calcite wkly replaced to FG quartz < hematite-goethite vnlts at 0º to 30º of c.a.
61.20 65.20 Kuc Caracol Fm, grey colour siltstone bedding at 65º to 85º of c.a. wk P-C alteration, scarce < 1 per meter calcite-trz of FG Pyrite- trz of goethite vnlts at 20º to 30º of c.a. scarce 0.1 to 0.2 cm wide calcite lenses
65.20 65.35 Fault zone only fine grain grey mud with small < 0.5 cm long subangular siltstone and minor calcite partially replaced to FG quartz fragments.
65.35 66.50 Faulted broken zone some irregular up to 3 cm wide calcite replaced to FG white quartz vnlt fragments with a pale yellow stain Ag? < Py vnlts at 40º of c.a. zones up to 50 cm wide of brecciated by fault gouge zones
66.50 71.05 Kuc irregular bedding at 40º to 70º of c.a. partially faulted with small up to 30 cm long brecciated zones, irregular up to 1 cm wide calcite fragments with trz of FG Py diss Py < 1% FG diss, fault planes at 60º to 80º of c.a.
71.05 81.69 Kuc Silts 95% scarce irregular 0.1 to 0.5 cm wide fine grain size S.S. beds bedding changing from 40º to 0º then 60º of c.a. P-C alteration 2 to 3 per meter irregular white calcite vnlts at 40º to 60º f c.a. some brecciated calcite vnlts.
81.69 88.90 Kuc Caracol Fm 0.1 to 0.5 cm wide beds at 70º of c.a. siltstone 80%, S.S. 20% , P-C alteration, some 3 to 5 per meter irregular 0.1 to 0.5 cm wide calcite in parts partially replaced to FG Quartz vnlts at 10º to 30º and less 50º to 70º of c.a. trz of dark brown Goethite in < 0.1 cm wide vnlts at 0º to 20º of c.a.
88.90 92.05 Kuc Caracol Fm siltstone 70% S.S. 30% in 0.1 to 0.6 cm wide beds at 70º of c.a., P-C alteration, calcite-Goethite irregular vnlts 0.1 to 2 cm wide in parts forming Bx zones up to 10 cm wide, trz of FG anhedral Py in some calcite vnlts walls.
92-05 103.80 Kuc Caracol Fm Siltstone 80% S.S. 0.1 to 0.5 cm wide beds from 70º to 60º of c.a. and changing down to 85º of c.a., P-C alteration wk sericite in some fractures, 1 to 2 per meter calcite trz of Fg Py vnlts at 50º to 60º of c.a. Bx zones up to 10 cm wide by faulting, goethite< hematite in voids of fractures or Bx zones as stain.
103.80 112.00 Kuc Caracol siltstone 85%, S.S. 15% bedding at 80º to 85º of c.a. 0.1 to 1 cm

2


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wide beds of FG S.S. as lenses, few 2 to 3 per meter hairline to 0.3 cm wide calcite vnlts at 10º to 30º of c.a. few as 0.1 to 0.2 cm wide lenses at 80º to 85º of c.a.
112.00 118.15 Kuc Caracol Fm Siltstone 85% irregular 0.1 to 0.3 cm wide fine grain S.S. beds bedding changing from 85º to 70º of c.a., various 3 to 5 per meter irregular 0.1 to 1 cm wide calcite in parts partially replaced to FG quartz vnlts at 10º to 30º of c.a. and at 70º to 90º of c.a. calcite vnlts in parts brecciated, FG anhedral Py in some calcite vnlts walls < 1%
118.15 125.00 Kuc fractured zones by faulting 5 to 15 cm wide, fault planes at 60º of c.a., scarce calcite partially replaced to FG quartz up to 1.5 cm wide vnlts at 70º to 90º of c.a., trz of sericite in scarce calcite vnlts walls, trz of pale pink stain in scarce calcite to quartz vnlts rhodochrosite? Trz of FG anhedral Py in calcite vnlts
    .
125.00 130.15 Kuc Caracol Fm thin bedding at 85º to 90º of c.a., P-C alteration, very scarce less than 1 per meter 0.1 to 0.3 cm wide calcite vnlts.
130.15 136.50 Siltstone 86% FG S.S. 15% in irregular 0.2 to 0.5 cm wide beds at 85º to 90º of c.a., P-C alteration, 3 to 4 per meter irregular 0.1 to 2 cm wide calcite trz of anhedral FG Py vnlts at 20º to 40º and 70º to 90º of c.a.
136.50 140.20 Silts 85% thin bedding at 85º of c.a., P-C alteration, scarce less than 1 per meter irregular 0.1 to 0.3 cm wide calcite trz of Py vnlts and less as lenses at 85º of c.a.
140.20 141.50 Kuc Wk silicification P-C alteration, increase of irregular 0.5 to 2 cm wide calcite replaced to FG Qtz-trz of Py vnlts at 10º to 30º of c.a. with druse textures
141.50 151.16 Kuc siltstone 90% irregular 0.1 to 0.2 cm wide fine grain S.S. beds, bedding at 85º to 90º of c.a., P-C alteration, scarce less than 1 per meter 0.1 to 0.3 cm wide calcite vnlts at 20º to 30º of c.a.
151.16 152.35 Calcite wkly replaced to FG qtz in 0.1 to 1.5 cm wide vnlts with trz of Py-goethite forming druse textures at 10º to 20º of c.a.
152.35 161.60 Kuc Caracol Fm Siltstone 75% to 80% fine grain size S.S. beds at 80º to 90º of c.a., P-C alteration, scarce less than 1 per meter 0.1 to 0.3 cm wide calcite lenses and scarce irregular vnlts at 20º of c.a.
161.60 170.48 Kuc Caracol Fm Silst 65% to 70%, fine grain S.S. beds 0.2 to 1 cm wide, scarce up to 7 cm wide S.S. beds, bedding at 85º of c.a., P-C alteration 2 to 3 per meter irregular calcite-trz of FG Py vnlts at 10º to 40º and less as lenses, trz of Goethite in thin 10 to 30 cm wide intervals
170.48 171.50 Kuc Caracol irregular bedding, siltstone 80%, 0.1 to 2 cm wide Fg S.S: beds at 85º of c.a., P-C alteration wk Sericite in walls of calcite vnlts, scarce 0.1 to 0.5 cm wide calcite-trz of Py vnlts at 0º to 30º and less 80º to 90º of c.a.
171.50 171.55 Fault at 40º of c.a.
171.55 191.82 Kuc Caracol Fm Siltstone 60% irregular 0.1 to 10 cm wide medium size S.S. beds, cross bedding features in S.S., bedding in general at 70º to 85º of c.a., P- C alteration, 2 to 3 per meter 0.1 to 1 cm wide calcite-trz of FG Py irregular and broken vnlts at 20º to 40º of c.a. less as lenses 70º to 85º of c.a., trz of Goethite in few calcite vnlts walls
191.82 193.10 Bx zone broken 0.3 to 0.7 cm wide irregular calcite fragments partially replaced to FG qtz, trz of FG Py in calcite vnlts
153.10 218.00 Kuc Caracol Fm, siltstone 50% to 60% medium size grain S.S. beds 0.5 to 18 cm wide, bedding at 80º to 85º of c.a., P-C alteration, scarce less than 2 per meter irregular 0.1 to 1 cm wide calcite trz of Py vnlts at 10º to 30º of c.a., 5 to 20 cm wide zones with broken calcite partially replaced to FG qtz vnlts forming

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    thin Brecciated zones.
218.00 222.05 Caracol Fm Siltstone 60% to 70%, wavy 0.2 to 16 cm wide S.S. beds at 85º to 90º of c.a., P-C alteration, zones up to 1 meter wide with wk sericite in calcite vnlts walls, scarce 2 to 3 per meter 0.1 to 0.5 cm wide white calcite-trz of hematite? FG Py vnlts at 0º to 30º of c.a., scarce at 40º to 60º of c.a. some 0.1 to 0.2 cm wide calcite-FG Py lenses.
222.05 238.55 Kuc Caracol Fm Siltstone 70% to 75%, wavy medium size grain S.S. beds 0.2 to 20 cm wide in general 2 to 3 cm wide, P-C alteration, scarce 1 to 2 per meter 0.1 to 0.3 cm wide calcite-trz of FG Py vnlts at 0º to 20º of c.a. also at 40º of c.a., few calcite-Py 0.1 to 0.2 cm wide bands, Py in general < 1%
238.55 238.60 Fault zone 5 cm wide at 40º of c.a., fragments of calcite vnlts.
238.60 242.60 Kuc siltstone 80%, thin bedding, fine to medium size grain S.S. beds0.1 to 2 cm wide, bedding at 80º to 90º of c.a., P-C alteration, scarce 1 pr meter irrregular0.1 to 1 cm wide calcite-FG Py vnlts at 0º to 20º less to 40º of c.a.
242.60 243.88 Wavy medium to coarse grain size S.S. beds up to 13 cm wide, increase of FG anhedral Py in the calcite vnlts, Py 2% to 3%, 3 to 5 per meter 0.1 to 0.3 cm wide calcite-Py vnlts at 20º to 30º of c.a. few 0.1 to 0.2 cm wide calcite-FG banded Py lenses at 85º to 90º of c.a.
243.88 244.06 Consolidated Bxed zone, rock and calcite partially replaced to FG qtz fragments FG Py diss and thin bands, Py diss 3% to 4%
244.06 244.50 Kuc Caracol Fm Siltstone 60% S.S. beds up to 14 cm wide, bedding at 85º of c.a. P-C alteration, FG Py in thin bands 0.1 to 0.2 cm wide Py in general 2%
244.50 256.45 Kuc Caracol Fm, wavy bedding, Siltstone 60º to 70º, medium to coarse grain size S.S. beds 0.5 to 8 cm wide, bedding at 80º to 90º of c.a., P-C alteration, 1 to 3 per meter 0.1 to 0.4 cm wide calcite-trz of FG Py vnlts at 20º to 30º of c.a., few as lenses at 85º to 90º of c.a.
256.45 258.80 Fault zone, planes at 0º to 10ºof c.a. at 70º of c.a. and at 30º of c.a. wk sericite in calcite vnlts walls, FG “framboydal” Py 3% to 5% in fault planes or filling irregular small voids in fractures, irregular 0.1 to 2 cm wide calcite< Py vnlts at 0º to 30º of c.a.
258.80 261.25 Kuc Caracol Fm Siltstone 70% irregular bands and fragments of S.S., old deformed zone, abundant irregular 0.1 to 2 cm wide calcite vnlts in various directions, Bx appearance, trz of FG Py in thin < 1 mm wide and irregular vnlts, Py in general trz to 1%
261.25 270.10 Kuc Caracol Fm siltstone 70%, thin bedding wavy and cross bedding features in 0.1 to 8 cm wide S.S. beds, bedding at 85º to 90º of c.a., slump features, irregular 0.1 to 0.5 cm wide calcite vnlts with FG anhedral Py in walls, scarce irregular 1 to 2 cm wide calcite totally replaced to FG druse qtz vnlts at 60º to 80º of c.a. FG anhedral Py in thin bands 0.1 to 0.2 cm wide
270.10 288.85 Kuc Siltstone 75% to 80%, wavy fine grain S.S. beds, bedding at 85º to 90º of c.a., P-C alteration, few 1 to 2 per meter hairline to 0.3 cm wide banded calcite- trz of FG Py lenses.
288.85 289.90 Kuc Silst 80% wavy medium size grain S.S. beds 0.5 to 2 cm wide, P-C alteration, wk sericite in some calcite vnlts walls, zone with abundant and broken 0.1 to 0.7 cm wide calcite with trz of FG Py vnlts at 0º to 30º of c.a.
289.90 296.20 Kuc Silst 60%, S.S. beds 1 to 16 cm wide, bedding at 80º of c.a., P-C alteration, 3 to 4 per meter irregular 0.1 to 1 cm wide calcite-trz of FG Py vnlts at 50º of c.a.
291.20 291.60 Fault zone, slickensides at 40º and 80º of c.a. fault walls at 40º and 50º of c.a.
291.60 298.31 Kuc Caracol Fm deposited in unstable basin, slump features, sedimentary Bx zones, irregular medium size grain S.S: beds up to 50 cm wide, bedding at 55º to 60º of c.a., P-C alteration 2 to 3 per meter irregular and brecciated 0.1 to 1 cm

4


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    wide calcite< FG Py vnlts at 35º to 40º of c.a. Py in general 1%
298.31 311.40 Kuc Caracol Fm silst 80%, 0.2 to 5 cm wide S.S. beds, bedding at 75º to 85º of c.a., P-C alteration, 3 to 5 per meter 0.1 to 0.3 cm wide calcite-Fg Py vnlts at 30º to 40º of c.a. and few lenses, Trz of FG Py diss < 1%
311.40 313.05 3 to 4 per meter brown Goethite< calcite irregular vnlts at 10º to 30º of c.a.
313.05 318.90 Kuc Caracol Fm, Silst 60%, 0.5 to 5 cm wide S.s. beds, bedding hanging from 75º to 60º of c.a., zone of old deformation by sedimentary process?, zones up to 5 cm wide of breccia formed by sub rounded rock and calcite fragments, irregular 0.1 to 1 cm wide calcite vnlts and lenses, FG Py 1% in 0.1 to 0.2 cm wide vnlts, some of them with FG Py
318.90 328.57 Kuc Caracol Fm Siltstone 75% wavy irregular 0.2 to 10 cm wide medium size grain S.S. beds, bedding at 85º to 90º of c.a., P-C alteration, scarce 1 to 2 per meter 0.1 to 0.4 cm wide calcite-trz of FG Py vnlts at 90º to 30º of c.a., few 1 per meter 0.2 to 0.4 cm wide banded calcite< FG Py lenses.
328.57 339.47 Kuc Caracol Fm thin bedding silst 80% to 85%, 0.1 to 2 cm wide wavy S.S. beds at 85º to 90º of c.a., Wk P-C alteration, trz of sericite in scarce microvnlts, 2 to 3 per meter 0.1 to 0.2 cm wide calcite vnlts at 30º to 50º of c.a., 2 to 3 per meter irregular and banded 0.1 to 0.2 cm wide calcite-trz of FG Py lenses
339.47 346.86 Kuc Caracol Fm bedding at 80º to 90º of c.a. wk P-C alteration 3 to 4 per meter 0.1 to 0.8 cm wide irregular calcite-Goethite< Hematite vnlts in parts forming irregular 1 to cm wide along 40 cm of core Bx zones at 0º to 30º of c.a.
346.86 349.91 Kuc Siltstone 70% 0.1 to 3 cm wide S.S. beds bedding at 70º of c.a. P-C alteration zone with irregular Goethite< Hematite and trz of yellow limonite< calcite vnlts forming irregular thin Bx zones at 20º to 30º of c.a.
349.91 356.01 Kuc Caracol Fm Siltstone 80% irregular in width 0.1 to 3 cm wide fine grain size S.S. beds, bedding at 80º to 90º of c.a. 3 to 4 per meter 0.1 to 2.5 cm wide calcite-trz of FG Py vnlts at 20º to 40º of c.a. and less 60º to 80º of c.a., scarce 5 to cm wide zones of deformation with irregular 0.1 to 0.3 cm wide calcite vnlts.
356.01 357.58 Kuc Silst 80% to 85% thin bedding at 40º to 60º of c.a. wkly folded beds for sedimentary process on unstable basin, P-C alteration, calcite irregular lenses and vnlts 0.2 to 1 cm wide
357.58 359.71 Kuc Caracol Fm 0.1 to 0.5 cm wide S.S. beds Silts 80% to 95%, bedding at 80º to 85º of c.a., P-C alteration scarce hairline to 0.6 cm wide calcite vnlts at 0º to 30º of c.a., very scarce less than 1 per meter 0.1 to 0.3 cm wide banded calcite with FG Py lenses. Py in general < 1%
359.71 359.90 0.5 cm wide calcite < Hematite vnlt at 30º of c.a.
359.90 370.65 Kuc Caracol Fm 0.1 to 1 cm wide wavy S.S. beds at 70º of c.a. 3 to 5 per meter irregular hairline to 0.5 cm wide broken calcite vnlts art 0º to 30º of c.a. 2 to 3 per meter 0.1 to 0.8 cm wide irregular banded calcite< FG Py lenses
370.65 371.50 Zone of brecciation by old deformation, irregular 0.1 to 1 cm wide calcite partially replaced to FG qtz vnlts at 60º to 90º of c.a. FG anhedral Py in 0.1 to 0.2 cm wide deformed calcite vnlts at 70º of c.a. Py 2% to 3%
371.50 377.47 Kuc Caracol Fm silts 60% to 70%, 0.1 to 3 cm wide fine to medium size grain S.S. beds, bedding at 70º to 90º of c.a. P-C alteration, zones 1 to 50 cm long with various irregular 0.1 to 0.5 cm wide calcite vnlts-trz of FG Py in irregular 0.1 to 0.2 cm wide bands mainly near calcite partially replaced to FG qtz.
377.47 390.67 Kuc Silst 40% to 50% 1 to 20 cm wide medium to coarse grain size S.S. beds with wavy borders, bedding at 70º of c.a., P-C alteration 2 to 3 per meter irregular 0.1 to 0.8 cm wide calcite vnlts at 10º to 30º of c.a., 2 to 4 per meter 0.1 to 0.2 cm wide banded calcite-trz of FG Py lenses

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390.67 395.73 Kuc Caracol Fm 0.1 to 0.5 cm wide S.S. beds, bedding at 70º of c.a., zones up to 40 cm long of brecciated by sedimentary process zones with rounded S.S. lenses in a silst groundmass, some calcite vnlts fragments, trz of sericite, P-C alteration, 5 to 10 cm zones with wk silicification and calcite replaced to FG qtz- FG Py trz to 1% in thin lenses.
395.73 408.95 Kuc Caracol Fm Silst 60% to 70% wavy 1 to 3 cm wide S.S. beds P-C alteration 5 to 7 per meter irregular 0.1 to 0.2 cm wide banded calcite-trz of FG Py lenses, scarce irregular 0.2 to 4 cm wide calcite vnlts at 70º of c.a.
408.95 411.90 Kuc Caracol Fm silst 70%, 0.5 to 5 cm wide irregular S.S. beds, bedding at 65º to 70º of c.a., P-C alteration, irregular zones 30 to 60 cm wide with various irregular 0.1 to 0.8 cm wide folded and broken calcite vnlts in stockwork,
422.90 420.39 Kuc Silst 40% to 60%, medium to coarse grain size 1 to 16 cm wide S.S. beds, bedding at 75º to 85º of c.a. P-C alteration, 7 to 10 per meter irregular 0.1 to 0.3 cm wide calcite vnlts, some parallel at 0.5 to 1 cm apart dipping 20º to 40º of c.a., 2 to 5 per meter irregular 0.1 to 0.7 cm wide banded calcite-trz of FG Py lenses
420.39 421.67 Zone of calcite partially replaced to FG qtz vnlts in wide apart stockwork, zones up to 10 cm wide of Bx as pebble dikes, P-C alteration, wk sericite in some calcite vnlts walls, other 0.1 to 0.3 cm wide calcite-trz of sericite vnlts at 30º of c.a.
421.67 426.11 Kuc Caracol Fm, Silst 60% to 70%, medium size grain S.S. beds 2 to 12 cm wide, bedding at 70º to 85’º of c.a. P-C alteration, wk sericite in scarce calcite vnlts walls, 3 to 5 per meter irregular and deformed 0.1 to 0.3 cm wide calcite-trz of sericite vnlts at 10º to 30º of c.a., 3 to 5 per meter banded 0.1 to 1 cm wide calcite lenses.
426.11 430.80 Kuc Silst 70% cross bedding features, 0.1 to 3 cm wide fine grain S.S. beds at 50º of c.a. P-C alteration zone of various 0.1 to 1 cm wide calcite vnlts in wide apart stockwork, preferably dips of vnlts 0º to 20º of c.a. and 70º to 80º of c.a.
430.80 434.70 Kuc Caracol Fm Silst 75% to 80% thin 0.1 to 1 cm wide S.S. lenses, bedding at 70º of c.a. P-C alteration 2 to 3 per meter 0.1 to 1 cm wide white calcite vnlts, some of the wider vnlts occasionally as pebble dikes.
434.70 438.10 Kuc Silst 85% irregular 0.1 to 0.5 cm wide S.S. beds bedding at 80ºº to 85º of c.a., P-C alteration, irregular 1 to 4 cm wide pebble dikes at 20º of c.a.
438.10 443.00 Kuc coarse grain S.S. beds 0.1 to 2 cm wide few S.S. beds up to 45 cm wide, Silst 50% to 60%, bedding at 80º of c.a., P-C alteration 2 to 3 per meter irregular hairline to 0.2 cm wide calcite vnlts at 0º to 30º of c.a. few at 80º to 90º of c.a.
443.00 444.20 Kuc silst 85%, 0.1 to 0.3 cm wide S.S. beds, scarce S.S. beds up to 7 cm wide medium to coarse grain size, bedding at 85º in general, thin folded zones at 50º of c.a., P-C alteration, some irregular 0.1 to 1 cm wide calcite vnlts in stockwork
444.20 450.49 Kuc Caracol Fm Silst 85% to 90% irregular in width 0.1 to 0.5 cm wide fine grain size S.S. beds at 85º of c.a., P-C alteration 4 to 5 per meter 0.1 to 0.5 cm wide calcite vnlts at 0º to 10º of c.a., 3 to 5 per meter 0.1 to 0.8 cm wide banded calcite-trz of FG Py lenses.
450.49   End of Hole

6


QTA-25

MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: Dec 8 / 2004  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES 1 of  

Summary of DDH QTA-25-04; 699,200 E; 2,649,752 N, 337°/-60°, Santa Rita area
From To Description
0.00 3.05 Drilled with Tricone bit -No core- Casing
3.05 10.37 Kuc Caracol Fm. Light brown medium to coarse grain size 1 to 25 cm wide S.S. 40% to 50% 0.1 to 1 cm wide Siltstone 50% to 60%, bedding at 70º of c.a. wk bleaching wk P-C alteration, Goethite staining rock as dissemination, some thin 0.1 to 0.3 cm wide layers, scarce 2 to 3 per meter 0.1 to 0.7 cm wide Goethite vnlts at 40º to 50º of c.a., very scarce 0.1 to 0.2 cm wide white calcite vnlts at 0º to 30º of c.a. and some 70º to 80º of c.a. Goethite 1%, MnOx trz.
6.80-8.30 m zones of 1 to 10 cm wide of Bx by faulting with subangular rock fragments in goethite groundmass trz of MnOx.
10.37 14.50 Wkly oxidized Kuc Caracol Fm Silst 50% to 60%, 1 to 5 cm wide S.S. beds, wk bleaching P-C alteration , goethite in thin 0.1 to 0.2 cm wide layers
14.50 14.60 Fault at 70º to 90º of c.a., gouge zones, subangular rock fragments in milled rock .trz of Goethite gouge.
14.60 23.43 Bedding at 50º to 60º of c.a. P-C alteration with oxidation to Goethite diss and in a few 0.1 to 0.3 cm wide vnlts and lenses, 3 to 5 per meter 0.1 to 0.2 cm wide calcite trz of brown Goethite, trz of brown to orange Goethite vnlts
23.43 26.00 Kuc S.S. 90% in beds 10 to 50 cm wide, bedding at 70º of c.a. wk P-C alteration 3 per meter 0.1 to 0.7 cm wide calcite< Goethite vnlts at 10º to 30º of c.a.
26.00 32.80 Orange to brown colour oxidized Silst 905, slickensides along bedding at 70º of c.a. brown Goethite in < 0.1 cm wide lenses, 1 to 5 cm wide Bx zones by sedimentary process, Goethite 2 % to 3%
32.80 40.00 Kuc Caracol Fm medium to coarse grain size S.S. beds 5 to 90 cm wide 80% to 90%, bedding at 60º of c.a. wk P-C alteration, trz of Goethite diss and in scarce less than 1 per meter Goethite< calcite 0.1 to 0.2 cm wide lenses, trz of Py in vnlts starting at 36 .00 m depth
  36.00 Top of irregular mixed oxide-sulfide zone.
40.00 52.50 Kuc Caracol Fm S.S. 95% 5% silst, wk P-C alteration, 2 per meter 0.1 to 2 cm wide calcite-trz of Goethite< FG anhedral Py vnlts at 50º to 70º of c.a., 1 to 5 cm wide banded calcite interbedded with organic material and trz of FG Py lenses at 46.80 and 48.70 m depth
 52.50 71.80 S.S. 70% Silst 30%, P-C alteration wk oxidized zone, trz of FG Py
55.00-56.40 m stockwork of 0.1 to 1 cm wide calcite-Goethite vnlts, partially oxidized Diss Py 1% to 2%.
57.00-59.15 m irregular 0.2 to 2 cm wide calcite partially replaced to FG qtz vnlts at 0º to 20º of c.a. and in < 5 cm wide Bx zones, Goethite 2%
    61.60-61.90 m Fine grain size Py diss.

1


QTA-25

61.90-63.00 zones of irregular 1 to 10 cm wide Bx by faulting zone, calcite- Goethite among angular rock fragments
64.90-67.80 m Fault zone with zones of Bx 1 to 10 cm wide at 20º of c.a., trz of sericite, brown to orange Goethite 2% to 3%, oxidized FG Py diss 1% Mn Ox trz
67.80-71.80 m Wkly oxidized Kuc Caracol Fm 50% S.S. bedding at 80º of c.a. Wk P-C alteration, 5 to 7 per meter 0.1 to 1 cm wide irregular calcite-Goethite in walls vnlts at 0º to 30º of c.a. and few as lenses at 60º to 80º of c.a.
71.80 77.20 Kuc Carcacol 85% to 90% medium to coarse grain size 5 to 40 cm wide S.S. beds 1 to 10 cm wide zones of thin bedded silt s, bedding at 60º of c.a., Wk P-C alteration 2 to 6 per meter 0.3 to 1 cm wide calcite-trz of FG Py vnlts at 10º to 40º of c.a. few as lenses at 60º of c.a., Py trz to 1% in general in calcite vnlts.
77.20 79.40 Kuc Caracol Fm coarse grain size S: S beds up to 80 cm wide beds 95% scarce thin 1 to 10 cm wide zones of thin bedded Silst bedding at 60º of c.a., wk to moderate sericite in thin < 0.1 cm wide vnlts at º to 10º of c.a. 3 to 5 per meter 0.1 to 1 cm wide calcite-trz of Py vnlts at 40º to 70º of c.a., Py in interval trz to 1%
79.40 81.25 S.S. 90% thick beds up to 50 cm wide coarse grain size, bedding at 60º of c.a., wk P-C alteration less than 1 per meter hairline to 0.3 cm wide calcite vnlts at 10º to 30º of c.a.
81.25 86.52 Kuc Silst 70% fine to medium size grain S.S. beds up to 10 cm wide, bedding at 75º of c.a., wk P-C alteration, 5 to 7 per meter 0.1 to 0.4 cm wide irregular and broken calcite< brown to orange Goethite vnlts at 0º to 40º of c.a. FG anhedral Py trz to 1%, irregular calcite vnlts at bottom of the interval
86.52 89.40 Kuc Carcacol Fm medium to coarse grain size beds, bedding at 50% of c.a. moderate sericite Wk QSPC alteration, interval includes 1.65 meters of 0.1 to 1 cm wide calcite partially replaced to FG qtz < pale brown oxide and very fine grain Py diss, and 60 to 70 cm wide brecciated with irregular subangular 2 to 3 cm wide calcite totally replaced to FG qtz fragments, FG Py diss 3% to 5% trz of chlorite staining calcite to qtz fragments, interval includes 10 cm wide of fault Bx at bottom of the interval with dark brown to black milled rock.
89.40 91,32 90% S.S. beds up to 15 cm wide, 0.1 to 5 cm zones of thin bedded Silst, Wk QSPC alteration moderate sericite, various 0.1 to 0.3 cm wide calcite partially replaced to FG qtz-Py in irregular vnlts at 0º to 30º, zones up to 5 cm wide of gouge, slickensides at 60º to 80º of c.a. calcite replaced to FG white quartz vnlt fragments with a pale yellow stain Ag? < Py vnlts at 40º of c.a. zones up to 50 cm wide of brecciated by fault gouge zones
91,32 97.90 Kuc S.S. 90% to 95% in up to 40 cm wide beds at 70º of c.a., wk QSPC alteration, 2 to 3 zones in the interval 2 to 5 cm wide Bx by faulting zones, fault planes at 40º to 50º of c.a., few 3 to 5 per meter 0.5 to 8 cm wide irregular calcite partially replaced to FG qtz-FG cubic Py vnlts at 50º to 70º of c.a., Py also as diss 2% to 3%, few hairline to 0.1 cm wide FG Py vnlts at 10º to 20º of c.a. Py in interval 3% to 4%.
97.90 101.50 Kuc Caracol Fm S.S. 70% in up to 30 cm wide beds, Silst 30% , bedding at 65º to 70º of c.a. wk P-C alteration scarce less than 1 per meter 0.1 to 0.2 cm wide cubic Py in thin vnlts at 20º to 30º of c.a.
101.50 103.55 Kuc Caracol Fm S.S. 70% beds up to 30 cm wide, bedding at 75º to 85º of c.a., P-C alteration, irregular 0.2 to 2.5 cm wide calcite wkly replaced to FG qtz, small size grain subhedral to cubic Py vnlts at 0º to 30º of c.a. locally small Bx zones few 2 to 3 in the interval 1 to 2 cm wide gouge zone along bedding at 30º to 40º of c.a. Py in interval 3% to 5% 0.1 to 0.5 cm wide beds at 70º of c.a. siltstone 80%, S.S. 20% , P-C alteration,

2


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some 3 to 5 per meter irregular 0.1 to 0.5 cm wide calcite in parts partially replaced to FG Quartz vnlts at 10º to 30º and less 50º to 70º of c.a. trz of dark brown Goethite in < 0.1 cm wide vnlts at 0º to 20º of c.a.
103.55 109.00 Kuc Caracol Fm S.S. 60% to 70% in beds 2 to 70 cm wide, scarce 0.1 to 1 cm wide of silst, bedding at 70º of c.a., FG Py diss 2% to .5 in 1 to 3 mm wide irregular lenses, mainly in the S.S. beds, scarce less than 1 per meter 0.1 to 0.2 cm wide calcite-trz of Py vnlts at 20º to 30º of c.a. 1 per meter 0.1 to 0.5 cm wide irregular calcite-FG Py lenses.
109.00 112.82 Stockwork of irregular 0.1 to 2 cm wide calcite partially replaced to FG qtz- sericite cubic Py and trz of pale brown oxides vnlts.
112.12 120.00 Kuc Carcacol Fm S.S. beds 70% to 80% slump features, fine to medium size grain S.S., P-C alteration 6 to 8 per meter irregular 0.1 to 3 cm wide calcite-trz of FG anhedral Py vnlts at 30º to 50º of c.a. few 0.1 to 1.2 cm wide calcite-Py lenses.
120.00 132.59 Kuc Caracol Fm fine to medium size grain 1 to 40 cm wide S.S. beds 60% siltstone in beds 0.2 to 1.5 cm wide 40%, bedding at 65º to 70º of c.a., P-C alteration 1 to 2 per meter irregular 0.1 to 1.5 cm wide white calcite vnlts at 0º to 20º of c.a. and few at 60º to 80º of c.a., 1 to 2 per meter irregular 0.1 top 0.3 cm wide calcite-trz of FG anhedral Py lenses. Siltstone 85% irregular 0.1 to 0.3 cm wide fine grain S.S. beds bedding changing from 85º to 70º of c.a., various 3 to 5 per meter irregular 0.1 to 1 cm wide calcite in parts partially replaced to FG quartz vnlts at 10º to 30º of c.a. and at 70º to 90º of c.a. calcite vnlts in parts brecciated, FG anhedral Py in some calcite vnlts walls < 1%
132.59 148.68 Kuc Caracol Fm, Silts 70% to 75% thin bedding at 65º of c.a. irregular 0.1 to 2 cm wide S.S. beds fine to medium size grain, wk P-C alteration less than 1 per meter 0.1 to 0.2 cm wide calcite vnlts at 20º to 30º of c.a. very scarce 0.1 to 0.5 cm wide banded calcite-trz of FG Py lenses at 75º to 90º of c.a. trz of anhedral FG Py in small clouds
148.68 148.95 Zone of medium size grain S.S. bed with stockwork of irregular 0.3 to 0.8 cm wide calcite vnlts
148.95 153.30 Kuc Silts 70% thin bedded , 1 to 6 cm wide medium size grain S.S. beds scarce beds up to 30 cm wide, bedding at 65º of c.a. wk P-C alteration, less than 1 per meter irregular hairline to 0.2 cm wide calcite vnlts at 10º to 25º of c.a.
153.30 167.80 Kuc Caracol Fm 80% to 85%, S.S. medium size grain beds up to 1.5 m wide, bedding at 50º to 60º of c.a. wk P-C alteration, 1 to 2 per meter irregular hairline to 0.6 cm wide white calcite vnlts at 0º to 20º and few at 50º to 70º of c.a., 1 per meter 0.1 to 0.5 cm wide banded calcite < FG anhedral Py lenses Py < 1%
167.80 169.36 Kuc Caracol Fm S.S. 95% to 98% in up to 1 m wide coarse grain size beds, thin intervals of black silts in 0.1 to 1 cm wide beds. Bedding at 60º of c.a., P-C alteration to wk QSPC moderate sericite in some vnlts, anhedral Py diss 2%, 3 to 5 per meter 0.1 to 0.3 cm wide calcite in parts partially replaced to FG qtz- sericite- cubic Py vnlts at 20º to 30º of c.a. and less in bands or lenses at 60º to 85º of c.a.
169.36 173.25 Kuc Caracol Fm S.S. medium to coarse grain size beds, irregular dark grey siltstone 2 to 5 cm long lenses in S.S. groundmass P-C alteration, irregular 0.1 to 2 cm wide calcite-subhedral medium size grain Py vnlts at 20º to 40º of c.a. ,fine to medium size grain anhedral to subhedral Py diss 1% to 2%
173.25 178.64 Kuc Caracol Fm coarse grain size S.S. beds 80 to 100 cm wide at 85º of c.a., less than 1 per meter 0.2 to 1.5 cm wide calcite vnlts at 10º to 20º of c.a., trz to 1% FG subhedral Py diss
178.64 178.84 Fine grain Silts wavy beds 95%, P-C alteration, 6 to 8 in the interval irregular

3


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calcite-FG Py lenses, Fault zone slickenside at 70º to 80º along bedding, fine grain size anhedral Py in lenses 2% to 3%
178.84 185.82 Kuc Caracol, coarse grain size irregular S.S. beds up to 60 cm wide, some irregular 2 to 14 cm wide silts beds with wavy borders, zones of silts lenses inside S.S. beds, bedding at 60º to 70º of c.a., P-C alteration, 5 to 7 per meter irregular 0.1 to 3 cm wide calcite-anhedral Py vnlts at 0º to 40º of c.a., also calcite< Py as lenses at 80º to 85º of c.a., banded with thin organic material beds, zones up to 40 cm wide of calcite< Py vnlts forming wide apart stockwork , FG anhedral Py clouds, Py in interval 1% to 2%
185.82 187.08 Silts 50% thin bedded, irregular 0.1 to 0.5 cm wide fine grain size S.S. beds at 65º of c.a., various parallel to sub-parallel wkly folded hairline to 0.2 cm wide calcite –organic material lenses, 2 to 3 per meter 0.2 to 0.3 cm wide banded calcite< subhedral Py lenses
187.08 187.18 Fault zone 10 cm wide of black gouge, fault planes at 65º to 70º of c.a.
187.18 194.60 Silts 80% , 0.2 to 4 cm wide medium size grain S.S. beds at 65º of c.a., P-C alteration, various 1 to 8 per meter hairline to 1 cm wide calcite-subhedral Py vnlts at 0º to 30º of c.a. and in 0.1 to 0.2 cm wide lenses, Py 3% in 0.1 to 0.2 cm wide lenses, Py in interval 3% to 4%
194.60 203.22 Kuc Silts 60% fine to medium size grain S.S. 0.2 to 8 cm wide beds at 55º to 60º of c.a., irregular brecciated by sedimentary process zones 5 to 55 cm wide formed by sub angular rock fragments bordered by calcite vnlts in parts forming zones of stockwork, calcite trz of subhedral Py lenses, calcite changing to partially replaced to FG qtz to depth
203.22 203.48 Banded Calcite totally replaced to FG ivory colour qtz-medium size grain subhedral Py and less organic material vnlt at 50º of c.a.
203.48 204.72 Coarse grain size S.S. in thick beds up to 30 cm wide 90%, bedding at 65º to 70º of c.a., P-C alteration.
204.72 205.27 Coarse grain size S.S. thick beds QSPC alteration, irregular 0.5 to 2 cm wide calcite replaced to FG qtz- medium size grain subhedral to cubic Py-black Sph- trz of sulfosalts ( jamesonite’) vnlt at 0º to 10º of c.a.
205.27 207.25 Coarse grain size S.S. beds up to 30 cm wide, bedding at 65º to 75º of c.a. wk QSPC alteration, 3 to 5 per meter irregular hairline to 1 cm wide calcite replaced to FG qtz-subhedral to cubic Py < sericite vnlts at 10º to 30º of c.a., FG subhedral Py diss 3% to 4%, wk sericite diss in S.S.
207.25 213.00 Kuc medium to coarse grain size S.S. beds 3 to 30 cm wide, bedding at 50º to 55º of c.a., wk QSPC alteration, sericite in calcite vnlts walls and less as diss in S.S., 3 to 5 per meter irregular 0.1 to 1.5 cm wide calcite partially replaced to FG Qtz –sericite-fine to medium size grain subhedral to botryoidal Py vnlts at 20º to 40º of c.a. and in 0.1 to 1.5 cm wide banded lenses, Py in interval 1%
213.00 215.42 Kuc Silts 60%, 0.5 to 4 cm wide fine to medium size grain S.S. beds, bedding at 60º of c.a., wk QSPC wk to moderate sericite in scarce less than 1 per meter calcite-medium size subhedral Py-trz of black Sph vnlts at 30º to 40º of c.a.
215.42 224.30 Kuc Caracol Fm medium to coarse grain size S.S. beds in 1 to 17 cm wide beds at 60º to 65º of c.a., cross bedding features, P-C alteration, 5 to 7 per meter hairline to 0.3 cm wide calcite-anhedral to subhedral Py, trz of black Sph vnlts at 10º to 30º of c.a. few 0.1 to 0.5 cm wide calcite-Py lenses
224.30 225.37 Kuc Silts 60% thin 0.2 to 2 cm wide S.S. beds at 55º of c.a. P-C alteration, wk sericite in scarce and irregular calcite vnlts walls, FG anhedral Py in thin irregular bands Py 3% to 4%
225.37 227.08 Silts 70% 0.5 to 3.5 cm wide medium size grain S.S. beds 30%, bedding at 60º of c.a., P-C alteration, Fault zone, planes at 50º to 55º of c.a. gouge zones 20 to

4


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30 cm wide, Py 5% to 7% in faulted zones, wk to moderate sericite, Calcite- subhedral to anhedral Py 3% to 5% vnlts.
227.08 237.00 Kuc silts 60%, irregular 0.1 to 5 cm wide fine grain S.S. beds and in irregular 1 by 3 cm lenses, bedding at 55º of c.a., P-C alteration, few less than 1 per meter 0.1 to 0.2 cm wide calcite vnlts at 35º of c.a., FG anhedral Py clouds and lenses in S.S. beds, Py in the interval 2%, scarce 0.2 to 1.5 cm wide banded calcite-FG anhedral Py bands
237.00 239.27 Silts 60%, S.S. 40% Zones of sedimentary Bx up to 15 cm wide formed by subangular to subrounded rock and less calcite-FG Py fragments, irregular and broken calcite-FG anhedral Py vnlts in stockwork, Py 3% in the interval
239.27 239.62 Consolidated Brecciated zone, milled calcite< sericite and rock, irregular FG Py bands at 60º of c.a. Py 3%
239.62 239.90 Brecciated vein zone at 65º of c.a. fragments of calcite partially replaced to FG qtz-sericite-anhedral to subhedral medium size grain Py< dark brown to black Sph-trz of sulfosalts in 1 to 2 cm wide bands,
239.90 241.10 S.S. Wk QSPC wk silicification in zones 10 to 20 cm wide Two fault zones at 240 90 m of 10 cm wide with FG Py 3%, stockwork zone 0.1 to 1 cm wide calcite vnlts.
241.10 245.00 Kuc Silts 90% 1 to 20 cm wide S.S. 10% beds, bedding changing from 60º to 30º of c.a., P-C alteration, FG anhedral Py in clouds 3% also in 0.1 to 0.2 cm wide calcite vnlts at 0º to 30º of c.a.
245.00 255.80 Kuc S.S. 85% medium size grain 1 to 70 cm wide beds at 40º to 60º of c.a., Wk P-C alteration, 6 per meter 0.1 to 1 cm wide calcite< trz to 1% of FG Py vnlts at 30º to 60º of c.a.
255.80 265.80 Kuc 90% S.S. in 5 to 60 cm wide beds at 40º to 60º of c.a., wk sericite wk QSPC 1 to 2 per meter hairline wide Sericite-Stibnite vnlts at 5º to 30º of c.a.
264.80-264.90 m 8 cm wide calcite-replaced to FG qtz-FG anhedral Py 3%-dark brown to black Sph vnlt at 50º of c.a.
265.80 268.80 Kuc S.S. 95% medium to coarse grain size beds 2 to 150 cm wide at 30º to 60º of c.a. Wk QSPC, moderate sericite in calcite vnlts walls, 2 per meter 0.1 to 1 cm wide calcite< sericite-Py vnlts at 60º to 70º of c.a.
268.80 274.00 Kuc S.S. 95% coarse grain size beds up to 1.5 m wide at 60º of c.a., wk QSPC, sericite in calcite vnlts walls, 2 per meter 0.1 to 0.4 cm wide calcite-sericite- stibnite rosettes-trz of FG anhedral Py vnlts at 0º to 10º and 30º to 60º of c.a.
274.00 282.65 Kuc Caracol Fm coarse grain size up to 1.5 cm wide S.S. beds 90%, thin irregular dark grey Silts beds, bedding at 55º to 70º of c.a., wk QSPC alteration, moderate sericite in calcite vnlts walls, 3 to 4 per meter 0.1 to 2 cm wide calcite- wk sericite-Py 1% vnlts at 40º to 50º of c.a.
274.20-275.10 m Stock work of 0.1 to 1.2 cm wide calcite replaced to FG qtz – sericite-Py vnlts
282.65 284.10 Bxed vein zone. 0.2 to 5 cm wide irregular calcite replaced to FG qtz-medium size grain anhedral to subhedral Py 5%-trz of black metallic mineral vnlts at 0º to 10º of c.a., between two faults at 282.65 at 25º of c.a. and at 284.00 m at 30º of c.a.
284.10 284.72 Kuc irregular bedded Silts and coarse grain size S:S. fragments 5 to 20 cm wide, calcite –anhedral Py 5%
284.72 285.00 Bxed vein zone at 70º of c.a., formed by irregular calcite replaced to FG qtz< medium size grain Py –dark brown to black Sph< sulfosalts bands
285.00 285.32 Kuc Caracol coarse grain size S.S. beds at 65º of c.a. scarce 1 cm wide calcite lenses
285.43 286.05 Kuc S.S. 80% , irregular up to 8 cm wide of dark grey silts lenses 20% 3 to 5 per

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meter 0.2 to 0.4 cm wide calcite-trz of FG Py vnlts at 0º to 10º and 50º to 65º of c.a.
286.05 286.07 1.5 cm wide medium size grain anhedral to subhedral Py-dark brown to black Sph < sulfosalts vnlt at 70º of c.a.
286.07 287.97 Kuc medium to coarse grain size S.S. beds 80%, black dark grey silts bands and lenses 20%, bedding at 60º to 65º of c.-a., P-C alteration, 4 to 5 per meter irregular 0.1 to 1.2 cm wide calcite wkly replaced to FG qtz-trz of Py vnlts at 60º to 70º and less 10º to 20º of c.a.-
287,97 288.16 Wkly silicified silts irregular 1 to 1.5 cm wide calcite partially replaced to FG qtz- medium size anhedral Py < dark brown to black Sph vnlt at 60º of c.a.
288.16 289.70 Kuc medium to coarse grain size S.S, beds 60%, Silts 40% irregular bedding at 60º to 65º of c.a. 289.15-289.70 m Fault zone black organic material- dark grey silts fragments, broken core
289.70 294.80 Kuc Silts 60% thin beds, irregular in width 0.1 to 8 cm wide medium size grain S.S. beds, slump features, bedding at 55º to 60º of c.a., subrounded 0.5 to 2 cm wide S.S. lenses, P-C alteration, very scarce less than 1 per meter irregular 0.2 to 0.5 cm wide calcite-FG Py lenses and scarce hairline to 0.2 cm wide calcite vnlts at 30º of c.a., few irregular FG Py clouds Py < 1% in the interval
294.80 298.00 Kuc Silts 60%, bedding changing from 55º to 40º of c.a. wk P-C alteration wk sericite, scarce calcite vnlts walls 2 to 3 per meter calcite FG Py in bands lenses
298.00 298.70 Broken core irregular bedding from 40º to 10º of c.a. scarce 0.2 to 1 cm wide calcite vnlts at 0º to 20º of c.a.
298.70 326.70 Kuc Caracol Fm Silts 70% to 80% irregular and wavy 0.2 to 3 cm wide S.S. beds, few up to 10 cm wide, slump features, P-C alteration bedding changing from 10º to 60º then 0º and down to 60º again, fold at 309 m, 3 to 5 per meter irregular 0.1 to 1 cm wide calcite-FG Py vnlts at 10º to 30º of c.a. and less as banded calcite-Py up to 2.5 cm wide lenses, Py up to 55 as clouds and irregular 0.2 to 0.4 cm wide calcite vnlts near close the folded zone.
326.70 328.00 Kuc Caracol, Silts 50% coarse grain size S.S. beds up to 60 cm wide , bedding at 60º to 70º of c.a. wk to moderate sericite in calcite vnlts walls, P-C, scarce less than 1 per meter irregular 0.2 to 23 cm wide calcite wkly replaced to FG qtz vnlts, some vnlts zones with small voids
328.00 334.10 Kuc S.S. 70% medium size grain in beds up to 40 cm wide, wk sericite, bedding at 65º to 70º of c.a. P-C alteration wk bleaching , scarce less than 1 per meter hairline to 0.7 cm wide calcite < sericite-trz of Py vnlts at 0º to 20º and less in 0.1 to 0.2 cm wide lenses.
334.10 336.90 Kuc Silts 50% S.S. 50% in 2 to 10 cm wide beds at 60º of c.a. wk to moderate sericite P-C alteration 3 to 5 per meter irregular 0.5 to 1.2 cm wide calcite partially replaced to FG qtz-FG anhedral Py vnlts at 0º to 10º of c.a. FG Py clouds and irregular 0.1 to 0.2 cm wide vnlts at 20º of c.a. amount of replacement of calcite to FG qtz increasing to depth
336.90 337.40 Bx formed by subangular rock fragments 70% in 0.5 to 3 cm wide calcite to qtz< trz of subhedral Py
336.90-336.45 m 4 cm wide calcite replaced to FG qtz< organic material medium size grain subhedral Py in a 0.8 cm wide Py-black Sph band in fault plane at 60º of c.a.
337.40 339.80 Stockwork of irregular 0.2 to 3 cm wide calcite partially replaced to FG qtz- anhedral Py vnlts blade calcite
339.80 344.97 Kuc Caracol Fm coarse grain size S.S. in beds up to 1.5 m wide at 40º of c.a. wk QSPC moderate sericite, calcite replaced to FG qtz, scarce irregular vnlts at 20º

6


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    to 30º and 65º to 85º of c.a.
344.97 345.03 6 to 8 cm wide Fault vein at 50º of c.a. of calcite replaced to FG qtz< subhedral Py
345.03 347.40 Medium to coarse grain size S.S. beds up to 1.5 m wide irregular bedding at 60º of c.a. wk QSPC moderate sericite in calcite vnlts walls, 2 to 3 per meter hairline to 0.1 cm wide calcite to FG qtz-trz of FG anhedral Py vnlts at 20º to 30º and 70º to 85º of c.a.
347.40 351.15 Kuc medium to coarse grain size S.S. beds 80% beds up to 1.3 m wide, wavy bedding at 40º of c.a. wk QSPC alteration, sericite moderate in calcite vnlts walls, 5 to 7 per meter 0.2 to 3 cm wide calcite replaced to FG qtz, trz of FG anhedral Py-sericite vnlts at 0º to 30º and less at 6º to 80º of c.a.
351.15 352.90 Kuc Caracol S.S. 80% thin dark grey Silts beds 20% at 40º to 50º of c.a. wk QSPC alteration wk to moderate sericite in scarce calcite to FG qtz vnlts, FG anhedral Py in clouds diss and in thin 0.1 to 0.2 cm wide lenses, Py 5% in the interval, sca5rce 0.1 to 0.3 cm wide calcite to FG qtz vnlts at 20º to 30º and lenses
352.90 352.96 6 cm wide vein at 40º to 50º of c.a. formed by coarse subhedral Py-black Sph < calcite to FG qtz < sericite, sulfosalts (Sta. Rita vein?)
352.96 357.00 6 cm wide open space lost of water circulation, Kuc medium to coarse grain size S.S. beds at 50º to 60º of c.a. S.S. 75% to 80’%, wk QSPC wk sericite in calcite vnlts walls, scarce 2 to 3 per meter 0.1 to 0.3 cm wide calcite-organic material thin bands and scarce FG Py vnlts at 30º and 60º of c.a.
357.00 357.74 Kuc Coarse grain size S.S. beds up to 0.6 m wide at 40º of c.a. wk QSPC 6 to 7 per meter 0.2 to 2 cm wide calcite replaced to FG qtz, medium size subhedral Py trz of black Sph and less stibnite vnlts at 40º to 50º of c.a.
357.74 360.80 Medium to coarse grain size S.S. up to 1.2 m wide at 35º to 45º of c.a. wk QSPC, 1 to 2 per meter 0.1 to 0.3 cm wide calcite to FG qtz < FG Py vnlts at 20º to 30º less to 60º to 70º of c.a.
360.80 364.24 Medium and less coarse grain size S.S. 40% zones of 2 to 10 cm wide of dark grey Silts beds at 30º of c.a., wk QSPC alteration, wide apart zone of stockwork of 0.2 to 1.2 cm wide calcite replaced to FG qtz subhedral to euhedral Py-black Sph and sulfosalts ( jamesonite) vnlts mainly at 10º to 30º of c.a.
    364.24 m Reduction to NQ core diameter
364.24 367.28 Medium to coarse grain size S.S. beds up to 50 cm wide at 60º of c.a. wide apart stockwork zone of 0.1 to 0.5 cm wide calcite to FG qtz-sericite-medium subhedral to cubic Py-black Sph and sulfosalts (jamesonite) and less Stibnite needles vnlts at 10º to 30º and less 60º to 70º of c.a.
367.28 373.20 Silts 50% medium size grain S.S. beds at 50º of c.a. P-C alteration scarce sericite, 5 to 7 per meter 0.1 to 0.3 cm wide calcite partially replaced to FG qtz- medium size grain subhedral and less fine grain anhedral Py in calcite vnlts, also as fine diss in few S:S. thin beds, Py 3% to 4%, trz of black Sph or sulfosalts, trz of jamesonite and less stibnite vnlts at 30º of c.a.
371.13 372.23 Fault zone at 40º of c.a. milled rock-subhedral to cubic Py in a black colour gouge.
373,20 396.48 Silts 60% to 70% beds 0.1 to 5 cm wide fine to medium size grain S.S. beds 30% to 40%, bedding at 40º of c.a.,10 to 30 cm wide of consolidated sedimentary Bx P-C alteration thin zones of wk silicification, trz of sericite in scarce calcite vnlts walls, 3 to 5 per meter 0.1 to 0.4 cm wide calcite partially replaced to FG qtz vnlts at 10º to 30º less 40º to 50º of c.a. also as irregular bands, Py 3% to 5% in the interval
396.48 396.62 Fault vein gouge zone planes at 50º of c.a., medium to coarse grain size

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    subhedral to cubic Py-black Sph and ss, less jamesonite needles
396.62 380.60 Silts 60% beds at 30º of c.a. FG anhedral Py vnlts 4% to 5%, scarce 0.1 to 0.7 cm wide banded calcite-organic material bands < FG Py-trz of black Sph vnlts and lenses at 20º to 40º of c.a.
380.60 410.60 Silts 60% to 70% thin bedding at 50º to 60º of c.a. wk P-C alteration, scarce 1 to 2 per meter irregular 0.2 to 1.2 cm wide calcite < FG Py vnlts at 0º to 20º of c.a. and scarce less than 1 per meter 0.5 to 1.2 cm wide calcite-FG Py lenses, scarce FG Py clouds mainly in bottom of irregular S.S. beds or as diss.
410.60 422.45 Dark grey wkly carbonaceous Silts 80% in thin beds 0.1 to 1.5 cm wide, interbedded with 0.1 to 0.5 cm wide unusually up to 5 cm wide S.S: beds 20%, bedding at 20º to 40º, sedimentation on unstable basin some small scale folds, abundant 10% to 15% folded and broken 0.1 to 1.2 cm wide calcite with scarce and sporadic FG Py lenses vnlts and lenses in zones of stockwork, Py 2%
414.65-415.00 m Fault zone planes at 55º of c.a. milled rock < calcite and Py gouge
422.45 428.00 Silts 90% scarce 0.1 to 0.5 cm wide fine grain S.S. beds at 0º to 10º of c.a. fold axis?, Wk P-C alteration wkly carbonaceous rocks, scarce 0.1 to 0.7 cm wide calcite vnlts and less lenses Py 1% to 2%
428.00 439.35 Dark grey Silts 95%, scarce fine grain size 0.1 to 0.5 cm wide S.S. beds unusual up to 3 cm wide S.S: beds at 40º of c.a., Wk P-C alteration, few 3 to 4 per meter irregular 0.1 to 0.8 cm wide calcite in zones partially replaced to FG qtz< FG anhedral Py vnlts and irregular lenses, Py 1% to 2%
439.35 439.70 Fault vein at 45º of c.a. formed by fragments of calcite replaced to FG qtz-black Sph, organic material, trz of FG Py and sulfosalts in gouge zones
439.70 447.00 Silts 95% irregular 0.1 to 1.5 cm wide fine grain S.S. beds at 45º of c.a. P-C alteration, zones 10 to 20 cm wide of wkly silicified rock, scarce 1 to 2 per meter 0.1 to 1.2 cm wide calcite –FG Py vnlts at 30º of c.a., 0.1 to 0.2 cm wide FG Py vnlts Py 3% to 4% in the interval
447.00 447.95 S.S. beds 20% irregular 2 to 5 cm wide Bx zones along bedding formed by subangular calcite partially replaced to FG qtz in milled rock-calcite FG anhedral Py groundmass Py 5%
447.95 461.15 Kuc coarse grain size S.S. 70% , thin bedded Silts 30%, bedding at 40º of c.a. P-C alteration, 3 to 5 per meter hairline to 0.8 cm wide calcite trz of FG anhedral Py vnlts, Py trz in the interval
461.15 461.97 Fault zone 10 to 13 cm wide with planes at 70º of c centered at 461.40-461.53, wk silicification in both walls of fault, calcite partially replaced to FG qtz 3 in the interval 3 cm wide calcite to FG qtz FG Py lenses
461.97 470.62 Kuc grey to dark grey Silts 80%, fine to medium grain size S.S. beds, bedding at 40º of c.a., P-C alteration, 3 to 5 per meter irregular 0.2 to 3 cm wide calcite-FG anhedral Py vnlts at 10º to 40º of c.a., 4 to 6 per meter irregular banded calcite- organic material in dark grey silts-FG Py lenses, also FG Py clouds and < 0.2 cm wide lenses
470.62 472.97 S.S. medium to coarse grain size up to 1.05 m wide 90%, thin 2 to 4 cm wide dark grey Silts beds at 40º of c.a., P-C alteration 1 to 2 per meter calcite-FG anhedral Py vnlts at 30º to 50º of c.a.
472.97 473.02 0.8 to 1.2 cm wide calcite wkly replaced to FG qtz-FG anhedral Py and less stibnite needles vnlt at 40º of c.a.
473.02 474.87 Silts70% wavy 0.1 to 15 cm wide medium size grain S.S. beds at 40º of c.a., 5 to 8 per meter wk silicified zones, 1 to 2 per meter irregular hairline to 0.2 cm wide calcite < FG Py vnlts at 0º to 20º and 3 to 4 per meter 0.1 to 0.3 cm wide calcite< FG Py in thin bands lenses

8


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474.87 476.18 Zone of irregular 0.2 to 3 cm wide calcite partially replaced to FG qtz vnlts in wide apart stockwork with thin 1 to 2.5 cm wide Bx zones, two types of Py, fine grain anhedral and medium size cubic to Pyritohedric crystals.
476.18 479.91 Dark grey to black Silts 85% to 90% fine to medium size grain wavy 0.2 to 3 cm wide S.S. beds at 40º of c.a., P-C alteration, FG anhedral Py clouds 2% to 3% also Py diss in thin 0.1 to 0.5 cm wide lenses and in 0.1 to 0.2 cm wide calcite vnlts, 4 to 6 per meter 0.1 to 0.8 cm wide calcite-Trz of FG Py vnlts at 30º to 50º of c.a. Py 5% in the interval
479.91 487.95 Kuc dark grey Silts 90% to 95%, 0.2 to 2 cm wide fine grain to medium size grain S.S. 10%, bedding at 40º of c.a., Wk P-C alteration, 1 to 2 per meter irregular 0.2 to 1.2 cm wide calcite< organic material-FG Py vnlts at 30º to 40º and lenses, FG anhedral Py clouds, Py 3% to 4% in the interval
487.95 491.28 Wkly silicified zone Silts 95%, P-C alteration, irregular 0.2 to 7 cm wide calcite partially replaced to FG qtz-organic material and trz of FG Py vnlts art 20º to 30º of c.a., FG anhedral Py vnlts and bands 0.1 to 0.2 cm wide.
490.25-491.28 m Fault zone only gouge milled rock and calcite to FG qtz< FG Py vnlts < 1 cm wide at 70º of c.a.
491.28 491.46 1 to 1.5 cm wide medium size subhedral Py< black Sph-sulfosalts -stibnite vnlt at 20º of c.a.
491.46 496.32 Kuc irregular wavy bedding Silts 40%, medium size grain S.S. beds 10 to 50 cm wide, 5 to 7 per meter irregular calcite< anhedral to subhedral Py 0.1 to 0.5 cm wide vnlts, 3 to 5 per meter 0.1 to 0.6 cm wide banded calcite with organic material< FG anhedral Py lenses-FG Py in scarce clouds in irregular dark grey colour Silts zones, also FG subhedral Py diss in some medium size grain S.S. beds, Py 4% to 6% in the interval
496.32 496.80 Kuc Silts 30% medium size grain S.S. beds at 40º of c.a., wk silicification , P-C alteration, 6 to 8 per meter irregular 0.1 to 0.5 cm wide banded calcite replaced to FG qtz with blade calcite texture-organic material and less black Sph lenses and few vnlts at 10º of c.a.
496.80 503.80 Dark grey Silts 80% scarce irregular S.S. beds 20% bedding changing from 40º to 10º of c.a., P-C alteration silicification increasing to depth, abundant 15 to 20 per meter < 0.1 cm wide FG anhedral Py up to 0.7 cm wide with broken calcite replaced to FG qtz vnlts at 20º to 30º of c.a., few as lenses, Py 5% to 7% in the interval
503.80 504.00 Fault zone broken core, wk sericite planes at 10º to 15º of c.a.
504.00 504.44 Folded Kuc F, Silts 30% medium to coarse grain size S.S. 70%, folded beds at 30º to 50º of c.a. wk QSPC alteration, medium size grain subhedral Py in lenses and diss in S.S. beds, black metallic mineral trz Sulfosalts?
504.44 507.72 Broken vein zone vein in 3 intervals 10.15 and 20 cm long fragments separated by zones of wkly silicified and with wk to moderate sericite rock, mineralization formed by medium to coarse grain size subhedral Py, black to dark brown Sph and less calcite replaced to FG qtz bands-fine needles of sulfosalts or stibnite in lenses along bedding 10º to 15º of c.a.
507.77 508.10 Kuc medium to coarse grain S.S. 40% to 50% in beds 0.1 to 30 cm wide, dark grey thin bedded Silts, wkly folded bedding at 10a to 30º of c.a. P-C alteration wk sericite, 1 to 2 per meter 0.3 to 0.5 cm wide medium size grain subhedral Py- black Sph less sulfosalts needles of jamesonite or stibnite vnlts at 10º to 25º of c.a., also FG subhedral Py and less black Sph and sulfosalts as < 0.2 cm wide lenses in folded beds.
508.10 515.00 Kuc medium size grain S.S. beds up to 1 m wide, S.S 80% thin dark grey Silts in micro folded beds at 10º to 30º of c.a., 2 to 3 per meter hairline calcite vnlts at

9


QTA-25

20º to 30º of c.a., 3 to 5 per meter in the interval 0.3 to 1 cm wide calcite vnlts at 10º to 30º of c.a., Trz to 1% of FG anhedral Py in the interval
515.00 523,54 Kuc Silts 90%, few fine grain S.S. beds 1 to 10 cm wide, micro folds, sedimentation on unstable basin, slump features, bedding at 5º to 20º of c.a., P- C alteration, abundant FG anhedral to subhedral Py vnlts some with calcite or in irregular clouds, Py 5% to 6% in the interval, irregular 0.1 to 0.3 cm wide calcite- FG Py vnlts at 20º to 40º of c.a., scarce 2.5 cm wide calcite-organic material vnlts at 50º of c.a.
523.54 523.70 Massive Py-black Sph less sulfosalts or stibnite needles in 2 to 3 cm wide vnlts at 5º to 10º of c.a. sulphides 20% to 25%
523.70 526.65 Kuc dark grey silts 85% 0.1 to 1 cm wide S.S. beds 15%, bedding at 5º to 20º of c.a., P-C alteration, medium size grain FG anhedral to subhedral Py in micro vnlts and in 0.2 to 0.4 cm wide calcite to FG qtz vnlts at 0º to 20º of c.a., Py 5% to 7% in the interval
526.65 526.75 3 cm wide fine to medium size grain anhedral to subhedral Py less black Sph and sulfosalts< calcite to FG qtz vnlt at 40º of c.a.
526.75 530.84 Kuc Silts 60% fine to medium size grain S.S. beds up to 50 cm wide at 30º to 40º of c.a., P-C alteration, various 0.1 to 1.2 cm wide calcite replaced to FG qtz< subhedral Py vnlts at 0º to 30º and few at 60º of c.a. Py 4% to 6% in the interval
530.84 531.32 Fine to medium size grain S.S. wavy beds 70%, irregular Silts lenses, bedding at 35º of c.a. set of three sub parallel 0.1 to 0.4 cm wide subhedral Py < black Sph vnlts at 15º to 25º of c.a.
531.32 537.15 Kuc medium size grain S.S. in irregular beds 70%, thin micro folded Silts zones, bedding at 10º to 30º of c.a. P-C alteration 3 to 5 per meter irregular 0.1 to 0.7 cm wide calcite partially replaced to FG qtz trz of FG Py vnlts at 10º to 30º of c.a. Py trz to 1% in the interval
537.15 539.00 Silts 60% in irregular folded and broken beds, fine grain S.S. 40%, bedding at 15º to 30º of c.a., P-C alteration, various irregular and folded calcite to FG qtz- anhedral to subhedral Py vnlts in stockwork. Py 3% to 5%
539.00 543.30 Medium to coarse grain size S.S. 50% in beds up to 90 cm wide, bedding at 15º to 25º of c.a., subhedral Py in microvnlts at 30º and 85º of c.a., few 0.1 to 0.3 cm wide calcite FG anhedral Py lenses at 25º of c.a. Py 1% in the interval
543.30 546.40 Medium to coarse grain size S.S. 70%, irregular bedding at 10º to 30º of c.a. P- C alteration 5 to 7 per meter irregular 0.1 to 0.3 cm wide calcite-subhedral Py vnlts at 30º to 40º of c.a., 3 in the interval 0.8 to 2.5 cm wide calcite to FG qtz medium to coarse grain subhedral to euhedral Py< organic material vnlts at 0º to 10º of c.a. and at 80º to 90º of c.a. Py 3% to 4% in the interval
546.40 559.31 Kuc medium to coarse grain size S.S. in irregular wavy beds 60% bedding at 20º to 230º of c.a. thin micro folded grey to black Silts beds and lenses, Wk P-C alteration 2 to 3 per meter 0.1 to 0.4 cm wide calcite partially replaced to FG qtz trz of FG Py vnlts at 10º to 30º of c.a. Py trz in the interval
559.31   End of Hole

10


QTA-26

MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: Jan 19 / 2005  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES 1 of  

Summary of DDH QTA-26-05; 699,137 E; 2,650251 N, 160°/-60°, Santa Rita area
 From To Description
0.00 1.52 Drilled with Tricone bit -No core- Casing
1.52 7.50 Kuc Caracol Fm. Light brown silts 70% medium to coarse grain size S.S. 30% bedding at 25º to 30º of c.a. Wk QSPC wk bleaching. 0.1 to 0.3 cm wide Goethite bands, MnOx < Goethite in some thin vnlts and lenses total oxides 2% to 3%
7.50 9.20 Kuc medium to coarse grain size S.S. 70% 0.5 to 7 cm wide irregular Bx by old faulting zones QSPC alteration wk bleaching brown to black FeOx in irregular 0.2 to 2 cm wide calcite vnlts at 0º to 15º of c.a. and at 65º to 70º of c.a. FeOx (Goethite) 5% to 7% in calcite vnlts walls
9.20 17.07 Kuc Caracol Fm Silts 20% medium to coarse grain size S.S. 80% wavy bedding changing from 25º to 0º0 of c.a. Wk QDPC, scarce oxidized calcite< Goeth vnlts mainly in 0.1 to 0.5 cm wide lenses along bedding Total Oxides 3%
17.07 21.45 Coarse grain size S.S. 70% in beds up to 65 cm wide, wavy and irregular Silts beds 0.5 to 3 cm wide 30%, bedding at 50º of c.a. wk bleaching wk QSPC, 3 to 5 per meter 0.1 to 1 cm wide calcite< Goethite in walls vnlts at 10º to 30º of c.a. and at 50º to 60º of c.a. as lenses, brown Goethite< MnOx, total oxides 2% to 3%
  21.45 Bottom of irregular oxidation zone
21.45 37.50 Kuc Caracol Fm Silts 60% medium to coarse grain size S.S. beds, bedding at 65º to 70º of c.a. P-C alteration, 3 to 5 per meter irregular 0.1 to 0.5 cm wide calcite wkly replaced to sericite < FG anhedral Py vnlts at 30º to 40º of c.a. also as lenses at 60º to 70º of c.a. Py total < 1%
26.70- 28 17 m, Wk to moderate sericite in various irregular 0.2 to 0.6 cm wide calcite < sericite << FG Py vnlts at 5º to 10º and less at 20º to 30º of c.a.
31.60- 32.40 m, bedding at 75º of c.a. irregular up to 30 cm wide sedimentary Bx zones formed by subangular Silts fragments in coarse grain size sandy groundmass, 0.1 to 1.5 cm wide calcite < organic material bands.
37.50 42.15 Kuc Caracol Fm Silts 70% wavy irregular medium to coarse grain size S.S. beds 0.5 to 5 cm wide, zones of small scale folding P-C alteration, increase of irregular broken and folded 0.1 to 2 cm wide calcite wkly replaced to FG qtz- trz of FG Py lenses and less vnlts at 10º to 30º of c.a.
42.15 49.10 Kuc Caracol Fm Silts 60% to 70%; 1 to 35 cm wide medium to coarse grain size S.S. beds at 75º to 80º of c.a. P-C alteration, trz to wk sericite in few calcite vnlts walls at bottom of the interval. Scarce 0.1 to 0.4 cm wide calcite trz of sericite-trz of FG Py vnlts at 0º to 20º and less as lenses at 75º of c.a.
 49.10 54.50 Coarse Grain size S.S. 90% in beds up to 1.30 m wide, Silts 10%, bedding at

1


QTA-26

75º of c.a. Wk QSPC alteration, moderate sericite in some calcite vnlts walls, 3 to 5 per meter 0.1 to 1.5 cm wide calcite wkly replaced to FG qtz-trz of rhodochrosite –sericite and FG anhedral Py in 0.1 to 0.3 cm wide vnlts , Py total 3% to 5%
54.50 62.50 Kuc Caracol Fm S.S. 70% in beds up to 87 cm wide, Silts 30%, bedding at 75º of c.a. wk QSPC, Wk sericite in calcite vnlts walls, 2 to 4 per meter irregular 0.1 to 0.5 cm wide calcite < sericite < FG anhedral Py vnlts at 20º to 30º of c.a. few 0.1 to 0.7 cm wide banded calcite lenses, trz of Goethite in thin vnlts at the bottom of the interval
62.50 67.28 Kuc Caracol Fm medium to coarse grain size S.S. 80% in beds up to 1 m wide, bedding at 80º of c.a. wk QSPC, sericite- Py diss in S.S. beds, 5 to 7 per meter irregular 0.2 to 2 cm wide calcite wkly replaced to FG qtz< sericite-brown Goethite-FG anhedral Py vnlts at 10º to 30º of c.a. and 60º to 75º of c.a. Py total 5% to 7%
67.28 68.10 Fault Zone, zones of gouge up to 9 cm wide with fault planes at 50º and 70º of c.a. few broken calcite < Py vnlts.
68.10 69.50 Medium to coarse grain size S.S. 80% wk QSPC to P-C alteration, 3 to 4 per meter 0.1 to 0.8 cm wide irregular calcite-medium size grain subhedral to cubic Py vnlts at 20º of c.a. Py 2% to 3%
69.50 75.10 Kuc Caracol Fm 0.5 to 10 cm wide medium size grain S.S. beds 60%, grey to dark grey Silts beds 40%, bedding at 75º of c.a. P-C alteration 8 to 10 per meter 0.1 cm wide calcite< FG Py lenses at 75º to 80º of c.a.
75.10 76.30 Irregular folded and broken 0.1 to 0.3 cm wide calcite<FG Py vnlts in a wide apart stockwork, few banded calcite lenses
76.30 84.30 Kuc Caracol Fm Silts 70% medium size grain S.S. 30% in beds up to 30 cm wide, bedding varying from 75º to 30º then 50º of c.a. P-C alteration, 3 to 5 per meter irregular 0.1 to 0.3 cm wide calcite < FG anhedral Py vnlts at 30º to 50º of c.a., few 0.1 to 0.4 cm wide FG anhedral Py bands in walls of few S.S. beds.
84.30 90.00 Silts 70% S.S. 30% beds 1 to 10 cm wide bedding at 50º of c.a. P-C alteration, wide apart zone of stockwork of 0.1 to 0.8 cm wide calcite –Py vnlts, Py trz to 1%
90.00 100.45 90% medium, size grain S.S. beds up to 40 cm wide, 0.3 to 7 cm wide Silts beds 10% bedding at 50º of c.a., P-C alteration, 8 to 10 per meter 0.1 to 0.8 cm wide calcite < FG Py vnlts at 10º to 30º of c.a. some as lenses at 50º of c.a. Py trz
100.45 106.80 Kuc Caracol Fm Silts 60% wavy and deformed bedding, slump features, medium size grain S.S. beds up to 70 cm wide 40%, bedding at 50º of c.a., P-C alteration, 8 to 10 per meter 0.2 to 0.6 cm wide calcite in parts with druse texture < FG Py vnlts at 0º to 30º and 50º to 60º of c.a. some thin zones of wide apart calcite vnlts in stockwork
106.80 117.45 Medium to coarse grain size S.S. 70% in beds up to 1.2 m wide, grey to dark grey irregular Silts lenses and fragments 30% Bx by sedimentary process, bedding at 50º of c.a. slump features, P-C alteration, 6 to 8 per meter irregular 0.2 to 1 cm wide calcite in parts with druse texture trz of FG Py vnlts at 10º to 30º of c.a. less at 50º to 60º of c.a. as lenses.
117.45 119.80 Kuc Caracol Fm thin bedding at 55º to 60º of c.a. Silts 50% medium size grain S.S. beds 50%, 6 to 8 per meter irregular and broken 0.1 to 0.3 cm wide calcite- anhedral Py vnlts at 50º to 60º of c.a., 4 to 6 per meter irregular 0.1 to 0.2 cm wide only FG anhedral Py lenses at 60º of c.a. Py in interval 2%
119.80 119.84 2 cm wide calcite partially replaced to FG qtz< subhedral Py trz of ss vnlt at 55º of c.a.
119.84 131.00 Kuc Caracol Fm thin bedding dark grey Silts 80% fine to medium size grain S.S.

2


QTA-26

beds 0.1 to 6 cm wide 20%, bedding at 40º of c.a., P-C alteration various 0.1 to 0.5 cm wide calcite vnlts at 0º to 20º of c.a. and also like lenses, trz of FG Py in few calcite vnlts also like small and irregular clouds, Py trz to 1%, zones of abundant < 1 mm wide irregular calcite vnlts
131.00 135.94 Kuc Caracol Fm Silts 80%, 0.1 to 2 cm wide fine grain size S.S. beds at 40º to 50º of c.a., P-C alteration, 3 to 5 per meter hairline to 0.1 cm wide calcite vnlts at 0º to 20º of c.a., scarce irregular up to 1 cm wide brecciated calcite vnlts, scarce 1 to 1.5 cm wide calcite-subhedral Py vnlts at 40º of c.a. crossing beds, 3 to 5 per meter 0.1 to 0.5 cm wide calcite trz of FG Py lenses, also FG Py in clouds as lenses in few S.S. beds, Py total 2% to 3%
135.94 136.58 Fault zone Bx zones up to 10 cm wide, fault planes along bedding at 50º of c.a. FG subhedral Pty in Bxed zones
136.58 142.17 Kuc Caracol Fm Silts 70% fine to medium size grain S.S. beds at 50º of c.a. P-C alteration , 4 to 6 per meter irregular 0.1 to 0.3 cm wide calcite < FG Py vnlts at 10º to 20º of c.a., some 0.1 to 0.4 cm wide calcite < Py lenses, 0.1 to 0.3 cm wide subhedral Py bands at the bottom of the interval
142.17 142.22 3 to 5 cm wide calcite partially replaced to FG qtz-subhedral Py-As Py- Sph and less ss vnlt at 50º of c.a.
142.22 147.23 Fine to medium size grain S.S. beds 1 to 15 cm wide 60%, Silts 40%, P-C alteration, 5 to 7 per meter fault planes along bedding, beds at 50º of c.a., fine grain subhedral to cubic Py in thin 0.1 to 0.2 cm wide lenses, less like diss in few medium size grain S.S. beds, Py 2% to 3%, 1 to 2 per meter 0.2 to 0.5 cm wide calcite vnlts at 10º to 30º of c.a.
146.50 2 to 3 cm wide calcite to FG qtz subhedral medium size grain Py-trz of ss vnlts at 45º of c.a.
147.23 148.30 Brecciated vein formed by abundant calcite totally replaced to FG qtz-medium to coarse grain size subhedral to cubic Py < Sph and ss total sulfides 5% to 10%
148.30 154.50 Kuc Caracol Fm medium to coarse grain size S.S. in beds up to 1.3 m wide 70%, wavy Silts beds 30%, bedding at 60º of c.a. wk sericite in few calcite vnlts walls mainly in S.S., P-C to wk QSPC alteration, fine grain anhedral to subhedral Py vnlts at 10º to 20º of c.a. also like 0.1 to 0.2 cm wide lenses, Py 1% to 2%
154.50 157.28 Broken zone P-C alteration wk sericite, 5 to 7 per meter druse calcite partially replaced to FG qtz-anhedral Py 0.1 to 0.5 cm wide vnlts at 20º to 30º of c.a., zones of banded calcite-FG Py in up to 2 cm wide lenses at 75º to 80º of c.a. Py 2% to 3%
157.28 162.60 Silts 70% to 80% thin wavy beds at 50º of c.a., fine grain =.1 to 3 cm wide S.S. beds 20% to 30%, P-C alteration 1 to 2 per meter 0.1 to 0.4 cm wide calcite-trz of Py vnlts at 20º to 30º of c.a. and scarce less than 1 per meter 0.1 to 0.4 cm wide calcite-trz of Py lenses
162.60 167.70 Thick up to 2 meters wide coarse grain size S.S. beds dirty aspect, 90%, scarce irregular 0.5 to 2 cm wide Silts fragments 10%, bedding at 60º to 70º of c.a. P-C to wk QSPC alteration, sericite in some calcite vnlts walls, 5 to 10 per meter irregularly distributed 0.2 to 3.5 cm wide calcite-trz of sericite, trz of chlorite, trz of FG Py vnlts at 60º to 70º of c.a. forming zones up to 60 cm wide of stockwork
167.70 169.75 Kuc Caracol Fm coarse grain size S.S. beds up to 1.3 m wide 90%, QSPC alteration, qtz-sericite in vnlts, 5 to 7 per meter 0.5 to 5 cm wide druse calcite partially replaced to FG qtz-sericite< Py trz of AS Py and less Sph vnlts at 30º and 60º of c.a.
169.75 170.00 Fault zone milled rock with black organic material fault planes at 60º of c.a.
170.00 188.00 Kuc Caracol Fm Silts 70% to 80% in beds 0.1 to 3 cm wide between 0.1 to 5 cm wide fine to medium size grain S.S. beds 20% to 30%, bedding at 60º to 75º of

3


QTA-26

c.a. P-C alteration zones of 0.3 to 1.5 m wide of stockwork of irregular calcite< FG Py 0.2 to 1 cm wide vnlts between zones of 2 to 3 meters with only 3 to 5 per meter calcite< Py vnlts, Py 2% to 3% in stockwork zones
188.00 192.00 Silts 80% wavy irregular 0.2 to 2 cm wide fine grain S.S. beds, bedding at 60º to 70º of c.a. P-C alteration increase of FG anhedral to subhedral Py in irregular 0.3 to 1.5 cm wide calcite vnlts and less lenses, Py in interval 3% to 4%
192.00 197.30 Kuc Silts 40% to 50%, fine to medium size grain S.S. beds up to 50 cm wide %0% to 60%, bedding at 70º of c.a. P-C alteration scarce 2 to 3 per meter 0.1 to 0.3 cm wide calcite-trz of FG anhedral Py vnlts at 20º to 30º of c.a. Py trz to 1%
197.30 199.95 Medium to coarse grain size S.S. beds up to 2 meters wide, Wk sericite P-C to wk QSPC alteration, 3 to 4 per meter 0.1 to 0.8 cm wide calcite replaced to FG qtz in portion with druse textures< FG anhedral Py vnlts at 20º to 30º of c.a. Py 1%
199.95 200.50 Bx formed by subangular calcite and less rock fragments in a milled rock groundmass, Bx is flanked by two calcite vnlts 1 cm wide at 20º of c.a. at top and 2 cm wide at 40º of c.a. at the bottom, FG Py 5% to 7% Fault planes at 40º of c.a.
200.50 202.90 Kuc Caracol Fm medium size grain S.S. beds 30 to 80 cm wide 80%, grey thin bedded Silts 20%, P-C alteration, FG anhedral Py diss and in 0.1 to 0.2 cm wide irregular like bands vnlts Py 7%, 2 to 3 per meter irregular 0.2 to 1.5 cm wide calcite vnlts at 30º to 50º of c.a.
202.90 206.10 Kuc Caracol Fm medium size grain S.S irregular beds 60% to 70% in beds 5 to 20 cm wide, Silts 30% to 40%, bedding at 85º to 90º of c.a., P-C alteration, 3 to 5 per meter 0.3 to 1 cm wide calcite <FG anhedral Py vnlts at 10º to 30º of c.a.
206.10 211.10 Medium size grain S.S. 50% in beds 5 to 30 cm wide, dark grey Silts 50%, bedding at 50º of c.a., P-C to wk QSPC alteration to the bottom of the interval wk sericite, 8 to 10 per meter irregular 0.2 to 1.5 cm wide calcite with blade texture-FG Py trz of ss vnlts at 0º0to 30º of C.A. Py 2% to 3%
  208.34 Fault zone planes at 50º banded calcite-organic material
211.10 218.65 Kuc Caracol Fm light grey S.S. 70% in beds up to 1 m wide, Silts 30%, bedding at 25º to 30º of c.a., wk QSPC, sericite in calcite vnlts walls, 8 to 10 per meter 0.2 to 0.8 cm wide calcite-sericite-trz of FG Py vnlts at 10º to 30º of c.a. and few at 60º to 80º of c.a.
218.65 218.85 Faults at 20º and 50º of c.a. bended calcite-trz of FG Py
218.85 221.00 Medium to coarse grain size S.S. beds up to 70 cm wide, bedding at 20º of c.a. P-C alteration wk sericite in scarce 0.2 to 1.5 cm wide calcite vnlts walls at 30º and 45º of c.a. trz of FG Py in calcite vnlts
220.65-221.00 Stockwork zone of irregular 0.1 to 2 cm wide calcite-trz of FG Py vnlts flanked by faults at 70º of c.a. Py 1% to 2%
221.00 225.30 Silts 70% to 80% wavy 0.2 to 2 cm wide fine grain size S.S. beds 20% to 30%, bedding at 50º of c.a. 4 cm wide Bx by fault zone at 30º to 40º of c.a. P-C alteration 3 to 5 per meter 0.1 to 0.2 cm wide calcite vnlts at 10º to 30º of c.a., 4 to 6 per meter 0.1 to 1 cm wide calcite bands, FG Py clouds in irregular S.S. beds
225.30 241.50 Kuc Caracol Fm medium to coarse grain size S.S. beds 0.1 to 30 cm wide 60% to 70%, thin bedded grey colour wavy Silts beds 30% to 40%, bedding changing from 60º to 0º then 30º of c.a. fold axis from 236.30 to 236.50 m P-C alteration 4 to 6 per meter irregular 0.2 to 4 cm wide calcite vnlts, 0.5 to 1.5 m wide zones with stockwork of 0.1 to 1 cm wide calcite –trz of FG Py vnlts Py 1% in the interval
241.50 243.12 Faulted zone forming Bx and folded interval, fault planes at 60º to 70º of c.a.

4


QTA-26

Bxed zones 20 to 30 cm wide formed by subangular calcite and less rock fragments in a dark grey milled rock groundmass-Py diss and in 0.1 top 0.2 cm wide bands totalling 5% Py bands at 30º to 40º of c.a.
    242,62-243.12 m Bx zone Py 5% to 7% trz of ss
243.12 249.23 Kuc Caracol Fm Silts 70% to 80% in beds 0.1 to 2 cm wide interbedded with fine grain size S.S. beds 0.1 to 1 cm wide, bedding at 40º to 50º of c.a., abundant fractures along bedding every 2 to 5 cm apart, giving the interval an sheeted aspect, wk P-C alteration, scarce 0.1 to 0.3 cm wide calcite-trz of FG Py lenses and less vnlts at 20º and at 80º of c.a. scarce FG Py clouds in some S.S. beds Py 1%
249.23 259.00 Kuc Silts in thin wavy beds 0.1 to 5 cm wide 70%, 0.1 to 4 cm wide fine grain size S.S. beds, bedding at 40º to 0º then 15º of c.a., P-C alteration, 4 to 6 per meter 0.1 to 0.5 cm wide calcite-trz of FG Py lenses and less vnlts at 50º to 70º of c.a. Py in interval trz to 1%
259.00 262.20 Kuc Caracol Fm Silts 80% to 85% thin bedded, fine size grain S.S. 15% to 20% bedding changing from 15º to 0º then 20º of c.a. Wk P-C alteration, scarce less than 1 per meter 0.1 to 0.2 cm wide calcite-trz of FG Py lenses and vnlts at 60º to 80º of c.a.
262.20 273.15 Kuc Silts 70% thin beds 0.2 to 3 cm wide; fine to medium size grain S.S. beds 0.5 to 10 cm wide 30%, bedding at 70º to 75º of c.a. wk P-C alteration, less than 1 per meter 0.1 to 0.3 cm wide calcite lenses and much less vnlts at 20º to 40º of c.a., 4 to 5 in 10 meters of interval 0.1 to 0.3 cm wide subhedral Py < calcite lenses
273.15 274.80 Calcite in parts with druse textures-FG anhedral Py trz of stibnite vnlts in irregular 0.2 to 4 cm wide vnlts in stockwork, Fault at 274.30 at 40º of c.a.
274.80 278.30 Kuc Caracol Fm Silts 0.2 to 2 cm wide beds 80% to 85%, fine grain size S.S. lightly wavy 0.2 to 1 cm wide S.S. beds 15% to 20%, bedding at 50º of c.a. P-C alteration, 1 to 2 per meter 0.1 to 0.2 cm wide calcite lenses and less vnlts
278.30 278.83 Stockwork of irregular 0.1 to 2.5 cm wide calcite vnlts, 6 cm wide zone of pebble dike, subangular rock fragments in calcite groundmass
278.83 290.00 Kuc Caracol Fm Silts 90%, fine grain size 0.1 to 3 cm wide S.S. beds 10%, bedding at 60º of c.a., wk P-C alteration, trz of sericite in calcite vnlts walls, 3 to 5 per meter hairline to 0.2 cm wide calcite vnlts at 10º to 30º of c.a., FG anhedral Py clouds in some S.S. beds, Py in interval < 1%
290.00 304.02 Kuc Caracol Fm medium to coarse grain size S.S. 60% to 70% in beds up to 1.4 m wide, irregular zones 10 to 90 cm wide of thin bedded Silts 30%, bedding at 50º of c.a., P-C alteration, 2 to 3 per meter 0.1 to 0.6 cm wide calcite vnlts in S.S. beds, 8 to 10 per meter 0.1 to 0.5 cm wide irregular banded calcite-FG Py lenses and less vnlts in Silts intervals
304.02 315.25 Medium to coarse grain size S.S. 90% to 95% in beds up to 1.9 m wide, Silts in beds 0.1 to 2 cm wide in zones 80 cm wide, bedding at 55º to 60º of c.a., P-C alteration wk sericite in some calcite vnlts walls in S.S., 1 to 2 per meter 0.1 to 1.2 cm wide calcite trz of FG anhedral Py vnlts in S.S., 6 to 8 per meter 0.1 to 0.4 cm wide calcite vnlts in Silts, Py trz 8in the interval, calcite partially replaced to FG qtz at bottom of the interval
315.25 316.00 Silts 20%, medium size grain S.S. 80% in beds 5 to 20 cm wide, bedding at 50º of c.a., P-C to wk QSPC alteration, scarce sericite diss in S.S., 4 to 6 per meter 0.1 to 2 cm wide calcite totally replaced to FG qtz-FG anhedral Py and trz of ss vnlts at 40º of c.a. also like lenses at 50º of c.a.
    316.00 m Fault at 50º of c.a. banded calcite < FG Py in walls

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316.00 320.40 Kuc Caracol Fm medium size grain S.S. 85% to 90% in beds up to 1.5 m wide, zones of 20 cm wide of Silts 10%, bedding at 50º of c.a. P-C alteration, wk sericite diss in S.S., 3 to 5 per meter hairline to 0.2 cm wide calcite < FG Py vnlts at 10º to 30º of c.a. in S.S., irregular 0.1 to 1 cm wide calcite-FG Py lenses in Silts.
320.40 337.11 Medium to coarse grain size S.S. beds 20 to 100 cm wide, zones of 10 to 50 cm wide of Silts, bedding changing from 50º to 75º of c.a., wk QSPC alteration, 4 to 6 per meter 0.1 to 1 cm wide calcite totally replaced to FG qtz, blade calcite textures-sericite-medium size grain subhedral to cubic Py in parts with brown stain vnlts at 10º to 30º of c.a. in S.S., irregular 0.1 to 2.5 cm wide calcite replaced to qtz< FG anhedral Py vnlts in stockwork in Silts, Py in interval 2% to 3%
337.11 339.90 Kuc Caracol Fm medium to coarse grain size S.S. beds 98%, scarce 1 to 2 mm wide dark grey Silts beds 2%, bedding at 50º of c.a. wk QSPC alteration, 8 to 10 per meter irregular 0.2 to 0.8 cm wide calcite replaced to FG qtz-fine to medium size grain anhedral to subhedral Py vnlts at 20º to 40º of c.a. and at 70º to 80º of c.a., hairline only Py vnlts at 20º to 40º , Total Py 3% to 5%
339.90 342.25 Stockwork of abundant 0.1 to 1.2 cm wide calcite totally replaced to FG qtz- subhedral to cubic Py-trz of Sph and ss vnlts bordering zones of 10 cm wide of Bx formed by subrounded rock fragments, some fragments could be limestone?- FG anhedral Py at 40º of c.a. top of the Bx zone with a 1.5 cm wide calcite to FG qtz blade calcite sericite-and subhedral Py veinlet, sulfides 5% TO 10%,
341.95-342.25 m Bx subrounded to subangular rock fragments in milled calcite to qtz and rock –Py groundmass Py 7% to 10%- stibnite< Sph-ss
342.25 343.70 Wide apart 0.1 to 0.5 cm wide calcite totally replaced to FG qtz-subhedral to cubic Py< Sph-ss vnlts in stockwork, sulfides 3% to 5%
343.70 344.55 Silts 85% wavy beds at 85º to 90º of c.a. P-C alteration, 6 to 8 per meter 0.1 to 1 cm wide calcite replaced to FG qtz anhedral Py vnlts at 0º to 40º of c.a. and like lenses art 85º to 90º of c.a.
344.55 350.00 Medium top coarse grain size S.S. in thick beds > 1 m wide bedding at 60º of c.a. P-C alteration to wk QSPC, 6 to 8 per meter at top varying to 4 to 6 per meter at bottom of the interval 0.1 to 0.6 cm wide calcite replaced to FG qtz- anhedral Py vnlts at 70º to 85º of c.a., Py 3% to 4% in the interval
350.00 355.92 Kuc Silts 85% to 90% thin bedded, fine grain size S.S. 10% to 15% in beds 0.2 to 2 cm wide wavy features, bedding changing from 80º to 70º of c.a., P-C alteration 5 to 7 per meter irregular 0.2 to 1 cm wide calcite totally replaced to FG qtz< anhedral Py vnlts at 10º to 30º of c.a., few at 40º to 60º of c.a., 8 to 10 per meter 0.1 to 0.3 cm wide banded calcite < anhedral Py lenses, 0.1 to 0.6 cm wide FG anhedral Py diss bands and lenses every 2 to 4 cm apart, Py 5% to 7%
355.92 356.43 Pebble dike from 2.5 to 4 cm wide at 0º to 15º of c.a. subangular rock fragments in calcite< FG anhedral Py groundmass
356.43 358.30 Silts 80% irregular wavy 0.2 to 2 cm wide fine grain size S.S. beds at 70º of c.a., P-C alteration, scarce 1 to 2 per meter 0.1 to 0.5 cm wide calcite to FG qtz – anhedral Py lenses and less vnlts at 30º and 60º of c.a. FG anhedral Py diss and forming irregular clouds, Py decreasing to depth from 4% to 2%
358.30 377.00 Silts 70% irregular wavy and turbiditic features fine grain size S.S. beds up to 15 cm wide 30%, bedding at 65º to 70º of c.a. changing to 80º-85º at bottom of the interval, P-C alteration, FG anhedral Py in microvnlts, lenses and less diss in irregular clouds, Py 2% to 3% , zones of 1 to 2 m wide with Py up to 5% in walls zones of Sph mineralization

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370.08-30.28 m Irregular 0.3 to 1 cm calcite totally replaced to FG qtz brown Sph< anhedral Py vnlts at 10º and 20º of c.a.
377.00 382.83 Medium to coarse grain size S.S. 80% in beds 30 to 110 cm wide, Silts 20% thin bedded in zones 5 to 25 cm wide, bedding at 75º to 65º of c.a., P-C alteration wk sericite, 4 to 5 per meter 0.2 to 4 cm wide vnlts. Wider vnlts with blade calcite totally replaced to FG qtz –voids and FG anhedral Py vnlts at 5º to 15º of c.a. in top of the interval decreasing width ness and druse textures to the bottom, few irregular 0.2 to 1.2 cm wide calcite replaced to FG qtz lenses at 65º to 80º of c.a.
382.83 383.13 Silts 95% bedding at 85º of c.a., Faults at 382.83 and at 383.0 m planes at 40º and 50º respectively, 4 vnlts in the interval 0.2 to 1.5 cm wide of calcite totally replaced to FG qtz-medium size grain subhedral to cubic Py < dark brown reddish Sph, vnlts crossing angles at 40º and 50º of c.a.
383.13 392.90 Kuc Caracol Fm Silts 80% thin bedded, fine grain size S.S. wavy beds 0.1 to 8 cm wide, bedding at 70º of c.a., P-C alteration wk sericite in vnlts, hairline to 1 cm wide calcite replaced to FG qtz< FG Py vnlts at 10º to 40º of c.a., abundant FG anhedral Py micro-lenses and some diss as clouds in some S.S. beds Py 3% in the interval
392.90 399.76 Kuc medium to coarse grain size S.S. 80%, Silts in zones 0.2 to 10 cm wide and in few subrounded fragments in S.S. groundmass 20%, bedding changing from 60º to 50º of c.a., wk QSPC alteration, 6 to 8 per meter 0.2 to 0.7 cm wide calcite replaced to FG qtz-sericite< FG anhedral Py vnlts at 5º to 30º in S.S. sections, more abundant < 0.2 cm wide calcite to qtz-subhedral to cubic Py vnlts and lenses and diss in Silts intervals,
398.76-399.76 m 0.1 to 0.6 cm wide calcite replaced to FG qtz subhedral Py < jamesonite and Sph vnlts at 5º to 10º of c.a.
399.76 400.19 Fault zone, gouge of irregular rock-calcite to qtz vnlts fragments in abundant fine grey dark grey milled rock with up to 5% fine grain anhedral Py diss, Fault planes at 55º at top and 70º of c.a. at bottom of the interval
400.19 405.90 Kuc Caracol Fm medium size grain S.S. in beds 2 to 75 cm wide 80%, Silts 20% in thin 3 to 12 cm wide zones, few subangular Silts fragments in S.S., P-C alteration, scarce 1 to 2 per meter < 0.3 cm wide calcite replaced to FG qtz trz of sericite and top types of Py, FG anhedral Py in Silts and subhedral to cubic in S.S. sections, few blade calcite textures in S.S. beds, Py 5% in the 1 meter at top of the interval and trz to 1% in the rest of the interval
405.90 408.05 Faulted zone, irregular zones of Bx by faulting 2 to 4 cm wide rock and calcite to qtz fragments, 0.2 to 2 cm wide of calcite to FG qtz< FG Py-sericite, vnlts at 5º to 15º of c.a., Py in interval 2% fault planes 20º and 30º of c.a.
408.05 413.11 Kuc Caracol Fm Silts 85% fine grain size wavy and irregular S.S. beds 0.2 to 10 cm wide 15%. Bedding changing from 60º to 30º of c.a., P-C alteration, 2 to 4 per meter hairline to 0.2 cm wide calcite vnlts at 30º and 60º of c.a. some FG anhedral Py clouds and in microvnlts and lenses Py 1%
    412.0-413.0 m Wide apart stockwork of 0.1 to 3 cm wide calcite-trz of Py vnlts
413.11 417.65 Fine to medium size grain S.S. in irregular beds 90%, dark grey 2 to 4 cm wide Silts zones, few subrounded Silts fragments in S.S., bedding at 30º to 0º then 40º of c.a., P-C alteration, 4 to 6 per meter irregular hairline to 0.4 cm wide calcite vnlts at 0º to 30º of c.a. and less as banded lenses at 40º in borders of Silts zones
417.65 418.50 4 to 6 in the interval 0.4 to 1.5 cm wide calcite totally replaced to FG qtz-FG subhedral Py-sericite < brown Sph and trz of ss vnlts at 5º to 10º of c.a. and less at 50º of c.a.

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418.50 423.15 Kuc Caracol Fm coarse grain size S.S. beds up to 1.1 m wide 85%, scarce 3 to 15 cm wide zones of dark grey thin bedded Silts 15%, bedding at 55º to 60º of c.a., P-C alteration 4 to 6 per meter hairline to 1 cm wide calcite wkly replaced to FG qtz trz of sericite anhedral Py vnlts at 5º to 15º of c.a. widest vnlts at 40º to 50º of c.a., Py trz to 1% in the interval
423.15 424.00 Dirty medium to coarse grain size S.S. 10%, bedding at 40º of c.a. irregular 0.2 to 0.8 cm wide calcite partially replaced to FG qtz-blade calcite textures some voids vnlts in stockwork
424.00 431.95 Kuc Caracol Fm medium size grain S.S. in beds up to 60 cm wide 75% to 80%, irregular Silts zones 5 to 90 cm wide 20% to 25%, bedding at 50º of c.a., P-C alteration, zones of 2 to 4 meters with 2 to 4 per meter 0.2 to 1.5 cm wide calcite-trz of FG anhedral Py vnlts at 10º to 30º of c.a. and less lenses at 50º of c.a. among zones of 15. 40 and 70 cm wide of 0.1 to 2 cm wide calcite-trz of FG Py vnlts in stockwork
431.95 436.55 Kuc Caracol Fm thin bedded Silts 70% to 80%, fine grain size 0.2 to 9 cm wide S.S. wavy beds 20% to 30%, bedding at 55º to 60º of c.a. P-C alteration, 6 to 8 per meter 0.1 to 0.2 cm wide calcite trz of FG anhedral Py lenses, 3 to 4 per meter irregular vnlts at 10º to 20º of c.a., scarce small size FG Py clouds mainly in S.S. beds, Py in interval < 1%, Silts zones 10 to 15 cm wide with hairline to 0.3 cm wide calcite vnlts in stockwork
436.55 437,82 S.S. 60% to 70% in wavy beds 0.2 to 3 cm wide, deformed by old faulting Silts sections 30% to 40%, bedding changing from 50º to 10º, irregular folded and broken 0.1 to 0.5 cm wide calcite vnlts in stockwork, trz of FG Py
437.82 442.91 Kuc Caracol Fm Silts 75% to 80% scarce 0.2 to 8 cm wide fine grain size S.S. beds 20% to 25%, bedding changing from 65º to 90º, broken core with fracture planes along bedding in zones 20 to 50 cm wide Fault or open space at 442.41 reported lost of water circulation, P-C alteration, 4 to 6 per meter calcite-trz of FG anhedral Py lenses 0.1 to 0.2 cm wide, 3 to 5 per meter hairline to 0.1 cm wide calcite vnlts at 10º to 30º of c.a. from 437.82 to 440.30 m, 1 to 2 per meter 0.1 to 0.3 cm wide calcite trz of sericite FG Py lenses at bottom of the interval
442,91 449.75 Kuc Caracol Fm medium to coarse grain size S.S. in thick beds 60 to 150 cm wide 70% to 75%, thin sections with wavy 0.2 to 2 cm wide S.S. beds, zones 5 to 80 cm wide of thin bedded Silts 20% to 25%, bedding at 85º to 90º of c.a., P- C alteration, 3 to 4 per meter 0.1 to 0.3 cm wide calcite trz of FG Py lenses, 2 to 3 per meter hairline to 0.2 cm wide calcite vnlts at 0º to 20º of c.a. trz of Py in the interval
449.75 459.03 Kuc medium to coarse grain size S.S. in thick beds up to 2 m wide 85% to 90%, scarce 3 to 15 cm wide Silts sections 10% to 15%, bedding at 80º to 85º of c.a., P-C alteration 1 to 2 per meter hairline to 0.6 cm wide calcite vnlts at 10º to 40º of c.a.
459.03 463.45 Kuc Caracol Fm Silts thin bedded 0.2 to 4 cm wide beds 70% to 80%, fine to medium size grain S.S. beds 0.2 to 22 cm wide 20% to 30%, scarce subangular Silts fragments in S.S., bedding at 85º to 80º of c.a., P-C alteration, 1 to 2 per meter 0.1 to 0.3 cm wide calcite vnlts at 10º to 30º of c.a. less at 40º of c.a. Scarce < 1 per meter < 0.1 to 0.8 cm wide banded calcite trz of FG Py lenses.
463.45 469.68 Fine to medium size grain S.S. 80% to 85% in beds up to 1.25 m wide, 1 to 7 cm wide Silts sections 15% to 20% bedding at 85º of c.a. wk P-C alteration, less than 1 per meter hairline to 0.1 cm wide calcite vnlts at 0º to 10º of c.a. and less 0.1 to 0.2 cm wide calcite< FG anhedral Py lenses at top of the interval 467.80-469.68 m 2 to 4 per meter 0.2 to 3 cm wide calcite vnlts at 10º to 20º and less at 50º of c.a.

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469.68 489.83 Kuc Caracol Fm thin bedded Silts 60% to 70%, fine to medium size grain wavy 0.2 to 70 cm wide S.S. beds 30% to 40%, bedding at 80º to 85º of c.a., wk P-C alteration, less than 1 per meter hairline to 1.5 cm wide calcite < FG anhedral Py vnlts at 0º to 20º of c.a. few at 40º of c.a., 1 per meter 0.1 to 1.3 cm wide banded calcite-trz of FG Py lenses at 80º to 85º of c.a., scarce small size FG Py clouds, Py in interval trz
489.83 503.70 Kuc Caracol Fm Silts 90%, scarce 0.2 to 15 cm wide fine to medium size grain S.S. beds, scarce subangular silts fragments in S.S. and scarce subrounded S.S. nodules in Silts. Bedding from 85º to 75º of c.a., P-C alteration, 3 to 5 per meter irregular 0.1 to 1.5 cm wide calcite trz of subhedral to cubic Py vnlts at 5º to 30º of c.a., 3 to 5 per meter 0.1 to 2 cm wide banded calcite-FG anhedral Py lenses, Py 1% , 1 to 1,5 m wide sections with 1% to 2% of Py in vnlts and thin lenses
503.70 504.00 Increase of irregular Py vnlts and diss 2% to 3%
504.00 506.00 Bedding at 50º of c.a., Fault zone, broken core, gouge zones 5 to 15 cm wide among 10 to 30 cm wide QSPC altered S.S. blocks, Py 2% to 3% diss and in irregular 0.1 to 0.2 cm wide vnlts.
505.60-506.00 m 0.5 to 8 cm wide banded calcite < FG Py lenses and vnlts at 50º of c.a.
506.00 511.05 Kuc Caracol Fm medium size grain S.S. in beds 10 to 80 cm wide 50%, bedding at 60º to 70º of c.a. P-C alteration, two zones 1.5 and 1.8 m wide of stockwork of irregular and folded 0.2 to 3 cm wide calcite vnlts, also banded calcite lenses, calcite 10% to 15%, among zones of rock with 1 per meter 0.1 to 0.2 cm wide calcite vnlts, trz of FG Py in the interval
511.05 519.99 Kuc Caracol Fm medium to coarse grain size S.S. in beds 10 cm to .8 m wide with irregular wavy bed planes, Silts sections 20 to 50 cm wide, bedding at 30º to 40º of c.a. few irregular Silts fragments in S.S. beds, bedding at 30º to 40º of c.a., P-C alteration, 2 to 4 per meter 0.1 to 0.8 cm wide calcite < FG anhedral Py vnlts and banded lenses Py in interval < 1%
519.99   End of Hole

9


QTA-27

MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: Jan 29 / 2005  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES 1 of 6  

Summary of DDH QTA-27-05; 699,757 E; 2,652,873 N, 340°/-60°, San Gregorio area
From    To Description
0.00 7.92 No Core interval drilled with tricone bit
7.92 8.95 Soft light brown mud with small rock fragments Alluvium cover
8.95 9.60 Drilled with NQ core diameter
  8.60 HQ diameter
8.95 15.50 Kuc Caracol Fm Silts 90% to 95% thin 0.1 to 0.5 cm wide fine grain size S.S. beds 5% to 10%, bedding at 30º to 40º of c.a. P-C alteration, wkly oxidized in 12 to 40 cm wide zones with 2% to 3% of brown reddish Goethite, 6 per meter irregular hairline to 0.2 cm wide calcite-Goethite vnlts at 50º to 60º of c.a., 1 to 2 per meter < 0.1 cm wide calcite trz of Goethite lenses, scarce < 1 mm wide MnOx in fractures
12.40-12.80 m Stockwork of 0.1 to 0.2 cm wide calcite Goethite vnlts, also Goethite diss Total Oxides 3% to 5%
  15.55 Bottom of oxidation zone
15.55 22.25 Kuc Caracol Fm, thin bedded Silts 90%, 0.1 to 0.4 cm wide fine grain size S.S. beds 10%, bedding changing from 30º to 20º of c.a., P-C alteration, wk to moderate sericite in calcite vnlts walls, 6 to 8 per meter hairline to 1.1 cm wide calcite trz of FG anhedral to subhedral Py vnlts at 30º to 50º of c.a., 1 to 2 per meter at 60º to 80º of c.a.
  22.25 Fault at 55º of c.a.
22.25 26.00 Bedding changing from 20º to 0º of c.a., fractured zone, 10 to 15 per meter fractures and less fault planes mainly along bedding at 10º to 20º of c.a., 0.1 to 0.3 cm wide calcite < sericite and trz of Py vnlts along bedding, irregular 1 to 2 cm wide brecciated calcite vnlts at 60º to 80º of c.a.
26.00 31.17 Kuc Silts 95% 0.1 to 0.2 cm wide fine grain size S.S. beds 5%, bedding at 0º to 15º of c.a., P-C alteration, scarce 1 to 2 per meter hairline to 0.2 cm wide calcite < fine grain subhedral Py, trz of sericite vnlts at 20º to 30º of c.a., Py diss trz in walls of calcite vnlts, Py in the interval trz to 1%
31.17 38.20 Kuc Caracol Fm, Silts 90% to 95%, 0.1 to 0 5 cm wide S.S. beds 10%, bedding 20º to 40º then 0º to 15º of c.a., P-C to wk QSPC alteration, wk to moderate sericite in abundant calcite-Py vnlts, broken zone by faulting, abundant fault planes and fractures along bedding, 10 to 15 per meter irregular deformed and broken by faults 0.1 to 1 cm wide calcite< FG subhedral Py vnlts at 10º to 20º of c.a., FG anhedral Py diss in walls of some calcite vnlts, Py 1% to 2% in the interval
38.20 38.50 Bx by Fault zone, planes at 40º to 60º of c.a.
38.50 40.25 Fractured zone, Silts 95% broken core fragments average size < 5 cm long, P-C

1


QTA-27

to wk QSPC alteration, wk to moderate sericite, 10 to 12 per meter irregular < 1 mm wide calcite-sericite trz of FG Py vnlts at 10º to 20º of c.a. and few at 60º to 80º of c.a., Possible fault zone at bottom of the interval, 5 to 7 cm wide gouge zone.
40.15 42.60 2 to 4 in the interval 0.1 to 0.7 cm wide calcite FG anhedral Py trz of brown Sph and ss vnlts at 0º to 10º of c.a.
42.50 54.20 Kuc Caracol Fm Silts 90%, fine size grain S.S. 10% in beds 0.1 to 0.2 cm wide, bedding at 30º of c.a., 15 to 150 cm wide zones of moderate to abundant fracturing by faulting, faults at 43.40 m, 50.30 m 51.75 m mainly at 40º of c.a., P- C alteration, wk to moderate sericite in calcite vnlts, zones 1.0 to 2.1 m wide with 10 to 15 per meter 0.1 to 0.8 cm wide calcite FG anhedral Py vnlts at 10º to 30º of c.a. and at 60º to 80º of c.a.
50.60-51.00 m 2 to 3 in the interval 0.2 to 0.4 cm wide calcite FG Py trz of ss vnlts at 10º to 20º of c.a.
54.20 79.95 Kuc Caracol Fm Silts 90%, wavy 0.1 to 0.3 cm wide fine grain size S.S. beds 10%, bedding at 0º to 5º then 30º and again 0º to 5º of c.a., P-C alteration, wk sericite in scarce calcite vnlts walls, 2 to 3 per meter irregular hairline to 0.3 cm wide calcite trz of FG Py-sericite vnlts at 5º to 30º of c.a. and less at 40º to 60º of c.a., < 1 per meter irregular 0.2 to 0.3 cm wide banded calcite FG Py lenses at 0º to 15º of c.a.
79.95 81.58 3 to 4 in the interval 0.2 to 0.5 cm wide calcite anhedral to subhedral Py< Sph and ss vnlts at 5º to 10º of c.a.
  81.50 Fault at 50º of c.a.
81.58 83.10 Silts 95% wkly fractured rock, some 0.2 to 1 cm wide irregular calcite < FG subhedral Py vnlts in wide apart stockwork
83.10 84.32 Fault gouge zone rock fragments < 1 cm long in abundant milled dark grey rock and organic material groundmass gouge, scarce calcite vnlts fragments, irregular 5 cm wide calcite< FG Py Bxed zone at top of the interval
84.32 88.85 Kuc Caracol Fm Silts 95% bedding at 10º to 20º of c.a., P-C alteration wk sericite, 5 to 20 cm wide Fault zones some with Bx at 85.00 m 86.65 m 87.17 m and 88.80 m, scarce 0.1 to 1 cm wide calcite vnlts in Bx zones at 5º to 10º of c.a. FG anhedral Py trz to 1% in some Bx zones, Py < 1% in the interval
88.85 92.05 Silts 95% bedding at 50º to 60º of c.a., P-C alteration 3 to 4 in the interval 0.2 to 1.2 cm wide irregular calcite < FG anhedral Py vnlts at 0º to 15º of c.a.
92.05 96.50 Kuc Caracol Fm Silts 95% fine grain size S.S. 5% in 0.2 to 0.5 cm wide beds at 20º of c.a., P-C alteration 1 to 2 per meter irregular 0.1 to 0.4 cm wide calcite < FG Py vnlts at 15 º to 25º of c.a. and less at 50º of c.a. Py trz-
96.50 100.30 Silts 95% bedding at 15º of c.a. P-C alteration wk sericite in some calcite vnlts walls, fractured zone planes along bedding , 3 to 5 per meter 0.1 to 0.2 cm wide calcite trz of FG Py and trz of ss vnlts at 5º to 20º of c.a.
100.30 122.15 Kuc Caracol Fm Silts 90% to 95% fine grain size S.S. 0.1 to 0.5 cm wide beds 5% to 10%, bedding changing from 20º to 40º of c.a. , scarce < 1 per meter hairline to 0.3 cm wide calcite vnlts at 30º to 50º of c.a. except in the next intervals
102.30-105.36 m broken zone, wk to moderate sericite, fault planes at 5º to 15º of c.a. calcite vnlts 0.1 to 1 cm wide at 15º of c.a.
109.50-110.00 m Fault zone, QSPC alteration moderate sericite fault planes at 20º and 50º of c.a.
112.90-114.80 m Broken core, 4 to 6 per meter 0.1 to 0.2 cm wide calcite-FG Py trz of Sph and ss vnlts at 20º and 50º of c.a.
    116.40-117.13 m 2 calcite < rhodochrosite trz of ss vnlts 0.6 to 4 cm wide at 30º

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    and 75º of c.a.
118.70-122.15 m 3 to 4 per meter irregular 0.3 to 2 cm wide calcite wkly replaced to FG qtz trz of FG Py and trz of ss vnlts at 60º to 85º of c.a.
122.15 124.28 Kuc Caracol Fm Silts 80% fine grain size =.1 to 0.3 cm wide S.S. beds 10%, bedding at 40º of c.a., P-C alteration, 3 to 5 per meter 0.1 to 0.3 cm wide calcite trz of FG Py vnlts at 10º to 15º of c.a. and 60º to 75º of c.a.
124.28 126.00 3 to 5 0.2 to 2 cm wide irregular calcite vnlts some of them wkly replaced to FG qtz, trz of FG Py and ss vnlts at 60º to 80º of c.a.
126.00 126.30 6 in the interval 0.2 to 2.5 cm wide calcite wkly replaced to FG qtz-FG PY-ss vnlts at 40º to 60º of c.a.
126.30 130.41 Kuc Caracol Silts 90% fine grain size S.S. in irregular 0.2 to 3 cm wide wavy beds at 50º of c.a., P-C alteration, Fault zone from 126.85 to 127.00 m with planes at 80º to 85º of c.a., 2 to 3 per meter 0.1 to 1.8 cm wide calcite-dark grey ss and trz of FG Py vnlts at 60º to 80º of c.a., 2 to 3 per meter calcite < FG Py hairline to 0.2 cm wide vnlts at 5º to 15º of c.a.
130.41 133.70 QSPC alteration bedding at 55º of c.a. moderate sericite, 6 to 8 per meter irregular 0.2 to 1.5 cm wide calcite-FG Py trz of ss vnlts at 15º to 30º of c.a. and at 70º to 85º of c.a., zones of wide apart stockwork of 0.2 cm wide calcite-FG Py-trz of ss vnlts 30 cm wide.
133.70 135.83 Silts 95% bedding at 40º to 50º of c.a., P-C alteration scarce 1 per meter hairline to 0.3 cm wide calcite< FG Py vnlts at 10º to 40º of c.a. and at 60º to 70º of c.a.
135.83 137.00 6 in the interval 0.2 to 3 cm wide banded calcite-FG Py trz of ss vnlts at 20º to 30º of c.a. and at 40º to 60º of c.a.
137.05 146.29 Kuc Caracol Fm Silts 90%, fine grain size 0.1 to 1 cm wide S.S. wavy beds 10%, bedding at 40º of c.a. P-C alteration, scarce 1 to 2 per meter hairline to 0.7 cm wide calcite FG Py trz of ss vnlts at 10º to 30º , 50º and 60º to 80º of c.a.
146.29 146.54 Fault zone planes along bedding at 40º of c.a.5 cm of gouge with calcite< FG Py vnlts fragments in abundant milled rock groundmass, 0.5 to 1 cm wide calcite anhedral Py-organic material trz of ss lens at top of the fault zone
146.54 148.38 Kuc Caracol Fm Silts 90% bedding at 50º of c.a. P-C alteration 2 to 3 per meter 0.1 to 3 cm wide calcite trz of FG Py and less ss vnlts at 60º to 85º of c.a.
148.38   Reduction from HQ to NQ core diameter
148.38 161.30 Kuc Caracol Fm silts 90%, 0.1 to 1 cm wide beds of fine grain S.S. 10%, bedding at 50º of c.a., 2 to 4 per meter irregular banded calcite-rock fragments lenses 1 to 3 cm wide, 1 to 2 per meter hairline to 0.2 cm wide calcite < FG Py vnlts at 5º to 10º except the next intervals
150.50-150.70 m 5 cm wide calcite replaced to FG qtz anhedral to subhedral Py < brown to red Sph trz of ss vnlt at 60º of c.a.
152.00-153.00 m 3 to 4 in the interval 0.1 to 1 cm wide calcite totally replaced to FG qtz-subhedral Py < Sph vnlts at 50º to 60º of c.a.
156.30-157.30 m 7 in the interval 0.1 to 1.5 cm wide calcite replaced to FG qtz < subhedral Py < brown Sph and trz of ss vnlts at 30º and 65º of c.a., wider vnlts at 65º of c.a.
160.32-160.52 m 2 vnlts 1.5 to 2 cm wide calcite replaced to FG qtz –sericite- anhedral Py< brown Sph at 70º to 80º of c.a.
161.30 161.50 7 cm wide subhedral Py, brown Sph < calcite partially replaced to FG qtz vnlt at 70º of c.a.
161.50 174.73 Kuc Silts 95% bedding changing from 40º to 10º at 171.50 m then at 60º at bottom of the interval, P-C alteration 2 to 3 per meter vnlt at top of the interval and increasing to depth to 6 to 8 per meter 0.1 to 0.4 cm wide calcite replaced to FG qtz FG anhedral to subhedral Py < brown Sph and trz of ss vnlts at 40º to

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    60º of c.a.
165.80-165.90 m 5 cm wide fault vein zone at 60º of c.a. with 3 cm wide of milled rock-Py and <Sph and irregular 0.5 cm to 1 cm wide calcite replaced to FG qtz band.
174.73 175.00 Fault vein, broken core in < 5 cm long in < 5 cm long fragments, gouge of milled rock-FG Py < Sph and ss in some fragments, Fault planes at 50º to 60º of c.a.
175.00 180,60 Kuc Caracol Fm Silts 80% to 86% wavy and irregular fine grain size S.S. beds changing from 60º to 30º of c.a., P-C alteration, wk sericite, 6 to 8 per meter 0.1 to 0.5 cm wide calcite replaced to qtz FG Py<Sph and ss vnlts at 60º to 70º of c.a.
180.60 180.80 8 to 10 cm wide Fault veinlet formed by 0.5 to 2 cm wide calcite totally replaced to FG qtz < FG subhedral Py- brown Sph and ss, 5 cm wide zone of gouge formed by milled rock-FG Py –Sph and ss. Fault planes at 60º of c.a.
180.80 182.30 3 vnlts in the interval 0.7 to 1 cm wide calcite totally replaced to FG qtz anhedral Py and < brown Sph and ss vnlts at 50º to 60º of c.a.
182.30 182.60 Brecciated vein zone, rock and calcite to qtz irregular fragments 0.2 to 3 cm wide lenses and vnlts, FG subhedral Py 15%< brown Sph and ss
182.60 188.20 Kuc Silts 90% to 95% thin bedded fine grain size 5% to 10% in 0.1 to 1 cm wide beds, bedding at 55º to 70º of c.a. , P-C alteration, 3 to 5 per meter 0.1 to 1.5 cm wide calcite replaced to FG qtz < brown Sph and ss vnlts at 20º to 30º and the widest vnlts at 60º to 80º of c.a.
188.20 188.40 Fault vnlts broken core in fragments < 5 cm long of milled rock. FG subhedral Py< Sph and ss
188.40 189.30 5 to 7 0.1 to 0.2 cm wide calcite to qtz FG Py < Sph and ss vnlts a t 0º to 10º and 50º to 70º of c.a.
189.30 189.89 Brecciated vein zone fragments of calcite totally replaced to FG qtz < FG Py, brown Sph and ss, gouge zones up to 10 cm wide formed by milled rock 20% to 30% of sulfides mainly FG subhedral to cubic Py<Sph- ss at 50º to 70º of c.a.
189.89 192.50 Kuc Caracol Silts 90% bedding at 40º of c.a. 8 to 10 per meter irregular hairline to 1.5 cm wide calcite replaced to FG qtz-FG anhedral Py-trz of Sph vnlts at 10º to 20º of c.a. and 60º to 80º of c.a. zones of 5 to 10 cm of fault gouge with Py < Sph at 50º to 70º of c.a., at bottom of the interval 70 cm of Bx formed by subangular 0.5 to 3 cm long rock fragments in calcite to qtz < sericite anhedral- Py groundmass trz of diss brown Sph and ss.
192.50 197.57 Kuc Silts 95% bedding at 50º of c.a., P-C alteration 3 to 5 per meter irregular 0.1 to 1 cm wide calcite replaced to qtz-FG anhedral to subhedral Py trz of brown Sph and ss vnlts at 0º to 10º and 40º to 60º and scarce at 80º of c.a. calcite to qtz replacement decreasing to the depth
197.57 197.77 10 to 15 cm wide banded calcite to FG qtz-FG subhedral Py, brown Sph and less ss vnlt at 60º to 70º of c.a.
197.77 203.00 Kuc Silts 90% irregular wavy 0.1 to 1.5 cm wide fine grain size S.S. beds wavy bedding at 50º to 60º of c.a. changing to 10º then 50º of c.a., P-C alteration 1 to 2 per meter irregular banded 0.1 to 2 cm wide calcite < FG Py lenses, 2 to 3 per meter 0.1 to 0.4 cm wide calcite wkly replaced to FG qtz < FG Py trz of Sph vnlts at 50º to 70º of c.a.
203.00 203.20 3 to 5 cm wide calcite wkly replaced to FG qtz –subhedral to cubic Py < brown Sph and ss brecciated veinlet at 50º of c.a.
203.20 207.45 Silts 90% bedding at 20º to 30º of c.a., P-C alteration 6 to 8 per meter irregular 0.2 to 1.5 cm wide calcite few of them wkly replaced to FG qtz. FG subhedral Py < brown Sph and ss vnlts at 0º to 10º 30º to 50º and few at 90º of c.a.
207.45 210.10 Kuc Caracol Fm Silts 90% fine grain size S.S. 10% in beds 1 to 2 cm wide, wavy

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bedding at 30º to 50º of c.a. P-C alteration decreasing amount of vnlts and amount of Sph and ss in vnlts to the depth, vnlts 0.1 to 0.6 cm wide at 30º to 50º of c.a. and less at 70º of c.a., zones up to 70 cm wide of wide apart 0.1 to 1 cm wide calcite trz of Py and Sph in stockwork.
210.10 213.70 Silts 60% to 70% fine to medium size grain S.S. 30% to 40% in wavy beds 5 to 50 cm wide, bedding changing from 60º to 30º of c.a. P-C alteration 2 to 3 per meter 0.1 to 0.5 cm wide calcite trz of FG anhedral Py vnlts at 60º to 90º of c.a.
213.70 215.19 Wide apart stockwork zones of 0.5 to 2 cm wide calcite vnlts, some druse calcite vnlts at 0º to 15º of c.a. 1 to 2 per meter 0.1 to 2 cm wide calcite wkly replaced to FG qtz subhedral Py trz of Sph vnlts at 60º of c.a.
215.19 222.70 Kuc Caracol Fm Silts 90% to 95% fine grain size 0.1 to 0.5 cm wide S.S. beds 5% to 10%, bedding at 20º to 30º of c.a., P-C alteration 3 to 4 per meter irregular 0.1 to 0.6 cm wide calcite trz of FG anhedral Py vnlts at 60º to 70º less at 5º to 10º of c.a. thinner vnlts at the low angles of the c.a.
222.70 224.25 Kuc Caracol Fm wavy bedding Silts 85% to 90%, fine grain size S.S. in beds 0.5 to 2 cm wide, bedding at 50º of c.a. wk to moderate sericite in some calcite vnlts walls, P-C alteration 3 to 5 per meter hairline to 0.3 cm wide calcite-sericite trz of FG Py vnlts at 0º to 20º of c.a.
224.25 239.67 Kuc Caracol Silts 85% to 90%, fine to medium size grain S.S. in wavy 0.1 to 3 cm wide beds 10% to 15%, bedding changing from 30º to 0º at top then 50º in the middle and 10º at bottom of the interval P-C alteration, 3 to 5 per meter 0.1 to 1 cm wide calcite scarce vnlts wkly replaced to FG qtz < Py vnlts at 0º to 10º of c.a. some vnlts at 20º to 30º and few vnlts with trz of ss at 60º to 70º of c.a.
239.67 242.62 Kuc Silts 90% wkly fractured zone, some irregular 0.1 to 0.7 cm wide calcite with open spaces less sericite and trz of FG Py irregular vnlts at 0º to 10º of c.a. and at 60º to 70º of c.a.
242.62 245.67 Kuc Caracol Fm Silts 95% bedding at 40º of c.a. P-C alteration, 1 per meter hairline to 0.1 cm wide calcite FG Anhedral Py vnlts at 0º to 20º of c.a.
245.67 254.38 Kuc Caracol Fm Silts 90% irregular 0.1 to 0.5 cm wide fine grain size, S.S. beds 10%, wavy bedding at 40º of c.a., P-C alteration 2 to 3 per meter hairline to 0.6 cm wide calcite vnlts at 0º less than 1 per meter 0.3 to 0.7 cm wide calcite partially replaced to FG qtz trz of Py and trz of ss vnlts at 40º to 55º of c.a. in the interval 1.5 cm wide banded calcite. rock and less FG Py vnlt at 70º of c.a. FG Py trz in micro lenses
254.38 255.38 3 in the interval 2 to 5 cm wide pebble dikes zones at 40º to 70º of c.a., druse calcite and voids in on of the dikes, in the interval 0.1 to 0.3 cm wide calcite FG Py trz of ss vnlts at 60º to 70º of c.a.
255.38 271.37 Kuc Silts 80% wavy and irregular fine to medium size grain S.S. beds 20%, folded bedding staring at 60º of c.a. at top then 0º to 20º from 258 to 262 and finally 40º of c.a. at bottom of the interval, slump features, 6 to 8 per meter irregular folded and broken 0.1 to 2.5 cm wide just one of 7 cm wide calcite, trz of FG Py and very scarce trz of ss in few vnlts at 0º to 15º of c.a., also at 40º to 60º of c.a. and very scarce at 70º of c.a., calcite forming few 10 to 70 cm wide zones of wide apart stockwork .
271.37 271.47 7 cm wide zone with pebble dikes and 3 cm wide veinlet of calcite totally replaced to FG qtz, anhedral Py < brown Sph and less black ss at 50º of c.a.
271.47 290.38 Kuc Caracol Fm Silts 90% irregular wavy 0.1 to 2.5 cm wide fine grain size S.S. beds 10%, ample folded bedding changing from 30º to 0º then 65º to 10º 0º and 50º at bottom of the interval, P-C alteration, trz to wk sericite at bottom of the interval, zones of 3 to 4 meters wide with 2 to 4 hairline to 0.3 cm wide calcite vnlts at 20º to 40º of c.a. and 60º to 70º of c.a., among zones of 1 to 5 m wide

5


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with 10 to 12 per meter irregular, folded and broken 0.5 to 3 cm wide calcite trz of FG Py vnlts in wide apart stockwork zones
290.38 299.54 Kuc Silts 90% irregular beds 0.2 to 2 cm wide of fine grain size S.S. 10%, wavy bedding in general at 65º to 75 ºof c.a., wk P-C alteration, scarce less than 1 per meter hairline to 0.3 cm wide, just one 2 cm wide calcite FG anhedral Py in thin bands vnlts, zones of 0.1 to 0.5 cm wide of FG anhedral Py diss at both walls of some vnlts
299.54 306.15 Kuc Caracol Fm Silts 90% to 95% bedding at 65º to 80º of c.a., 3 to 5 per meter irregular 0.1 to 0.5 cm wide calcite lenses and vnlts at 10º to 30º of c.a.
306.15 329.68 Caracol Fm Silts 90% wavy 0.1 to 3 cm wide fine grain size S.S. beds and few as subrounded lenses 10%, bedding at 65º to 85º of c.a., zones of 1 to 3 m wide with less than 1 per meter hairline to 0.5 cm wide calcite lenses and vnlts at 0º to 30º of c.a., among zones of 3 to 6 m wide with 5 to 7 per meter 0.2 to 0.8 cm wide calcite trz of FG Py vnlts at 0º to 20º and less at 70º to 80º of c.a.
329.68 331.60 Zones of 2 to 10 cm wide or irregular medium size grain S.S. 30%, Silts 70%, folded bedding changing from 60º to 0º of c.a., P-C alteration 4 cm wide fault zone at 330.48 m at 65º of c.a., wide apart stockwork zones of 0.1 to 1 cm wide calcite < sericite vnlts
331.60 344.50 Kuc Caracol Fm Silts 95% bedding at 50º to 60º of c.a., P-C alteration. Less than 1 per meter hairline to 0.2 cm wide calcite lenses and vnlts at 0º to 30º of c.a.
351.25 333.50 Bedding at 65º to 85º of c.a., zone of wide apart stockwork of 0.1 to 3 cm wide calcite trz of FG Py vnlts
353.50 360.53 Kuc Caracol Fm Silts 95% scarce 0.1 to 0.5 cm wide fine grain size S.S. 5%, bedding at 40º to 50º of c.a., wk P-C alteration 2 to 3 per meter hairline to 0.2 cm wide calcite trz of sericite trz of FG Py vnlts at 0º to 20º of c.a. and less 0.1 to 0.2 cm wide lenses
360.53 365.27 Silts 85% to 90% fine grain size S.S. 10% to 15% in beds 0.2 to 1 cm wide, bedding at 50º of c.a., 6 to 8 per meter hairline to 0.6 cm wide calcite trz of FG Py trz of sericite vnlts at 10º to 30º of c.a. and less at 50º to 70º of c.a.
365.27 368.81 Kuc Caracol Fm, Silts 90%, bedding at 40º to 50º of c.a., wk P-C alteration, 2 to 3 per meter 0.2 to 0.3 cm wide calcite vnlts at 20º to 40º of c.a.
368.81   End of Hole

6


QTA-28

MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: Feb 3 / 2005  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES 1 of  

Summary of DDH QTA-28-05; 699,784 E; 2,652,797 N, 340°/-60°, San Gregorio area
 From To Description
   0.00  3.05 No Core interval drilled with tricone bit
  10.67 Casing
3.05 15.10 Kuc Caracol Fm thin bedded Silts 90% to 95%, fine grain size S.S. beds 10% 0.1 to 0.5 cm wide, bedding at 60º of c.a., P-C alteration, fractured zone broken core in fragments usually less than 8 cm long, zones 80 to 90 cm long of only brown mud with small rock fragments, 6 to 8 per meter < 0.1 cm wide Goethite lenses, scarce < 1 per meter calcite Goethite vnlts at 0º to 15º of c.a. Goethite 1% in the interval
  15.10 Bottom of oxidation zone
15.10 22.20 Kuc Caracol Fm Silts 90% to 95% bedding at 50º of c.a. P-C alteration broken core fractured zone from 15.10 to 18.20 m, 2 to 3 per meter hairline to 0.1 cm wide calcite lenses and less vnlts at 30º to 40º of c.a. trz of FG anhedral Py in few calcite vnlts
22.20 24.30 8 to 10 per meter 0.1 to 0.8 cm wide irregular calcite< FG Py vnlts in stockwork most vnlts at 0º to 15º of c.a. less at 60º to 70º of c.a.
24.30 25.75 Kuc Caracol Fm silts 90% to 95%, bedding at 50º of c.a. P-C alteration 6 in the interval < 0.1 cm wide calcite lenses
25.75- 34. 60 Kuc Caracol Fm Silts 85% to 90% wavy 0.1 to 1 cm wide fine grain size S.S. beds at 60º of c.a., P-C alteration, 30 to 80 cm wide zones of advanced fracturing and few fault plans most along bedding, 5 to 15 cm wide zones of gouge formed by dark grey mud with < 1 cm long rock fragments, among zones of wk fracturing, irregular 0.2 to 2 cm wide calcite< FG Py broken vnlts at 45º of c.a. and at 60º to 80º of c.a. scarce calcite partially replaced to FG qtz, Pt 1% in the interval
34.60 46.00 Kuc Silts 90% to 95%, bedding changing from 60º to 0º at 38 m then 40º to 50º of c.a., P-C alteration to wk QSPC, moderate sericite in abundant calcite vnlts walls, moderate to advanced fracturing. 2 to 5 cm wide Bx by fault zones at 0º to 15º of c.a. and 40º to 60º of c.a., 8 to 10 per meter irregular hairline to 0.6 cm wide calcite-sericite and trz of FG Py vnlts at 0º to 30º and most along bedding as lenses, 30 to 50 cm wide zones of wide apart stockwork of 0.1 to 0.4 cm wide calcite-sericite< FG Py vnlts.
46.00 50.52 Fault zone, zones of gouge 6 to 30 cm wide, Silts 90%, bedding at 40º to 50º of c.a. wk QSPC alteration, moderate sericite in various < 0.1 cm wide calcite vnlts and milled in gouge zones, Fault planes at 40º and 60º of c.a. along and crossing beds, few at 5º to 15º of c.a.
50.52 53.50 Kuc Caracol Fm Silts 90%, fine grain size S.S. 10% in wavy beds 0.2 to 1 cm wide, bedding at 50º of c.a., Sericite-carbonates-Pyrite alteration, zone of 5 cm wide fault Bx At 30º of c.a., 4 to 6 per meter hairline calcite lenses and in sub

1


QTA-28

parallel to bedding vnlts, trz of FG Py, few 0.1 to 0.8 cm wide calcite vnlts at 10º to 20º and scarce the wider at 70º of c.a.
53.50 54.65 Wavy bedding at 50º to 60º of c.a. wk QSPC alteration, 4 irregular 0.3 to 1 cm wide calcite partially replaced to FG qtz vnlts at 50º to 60º of c.a. crossing bedding, various 6 to 8 per meter irregular 0.1 to 0.3 cm wide FG subhedral to cubic Py vnlts and lenses, Py in the interval 2% to 3%, fault Bx zone 10 cm wide with calcite-sericite< Py at 60º of c.a.
54.65 62.40 Kuc Caracol Fm Silts 90% fine grain size wavy 0.1 to 1 cm wide S.S: beds, bedding at 50º of c.a., P-C alteration wk sericite in calcite vnlts walls, zones of old deformation formed by irregular and broken beds with 0.1 to 1 cm wide irregular and folded calcite-sericite vnlts., zones 3 to 40 cm wide of Bx by faulting formed by calcite-rock fragments and FG Py diss in milled rock groundmass at 20º to 40º of c.a., crossing bedding, Py in interval 2% to 3%
62.40 65.60 Kuc Caracol Fm Silts 90% thin bedded, fine grain size S.S. 10% in beds 0.1 to 2.5 cm wide, bedding at 60º to 75º of c.a., P-C alteration, scarce sericite in scarce 0.1 to 0.2 cm wide calcite vnlts walls at 10º to 50º of c.a. FG Anhedral Py 1% in thin vnlts.
65.60 65.65 1.7 to 3 cm wide calcite totally replaced to FG qtz< FG anhedral Py< brown Sph trz of ss and stibnite vnlt at 60º of c.a.
65.65 68.88 Kuc 5 fault zones 2 to 35 cm wide Bx ed rock and calcite in milled rock gouge zones, fault planes at 60º of c.a.
68,88 116.90 Kuc Caracol Fm Silts 90% to 95%, lightly wavy bedding, fine grain size irregular 0.1 to 1.5 cm wide S.S. beds 5% to 10%. P-C alteration, ample folded bedding changing from 60º to 0º then 50º, most of the interval at 40º to 50º of c.a. zones of º to 10º, P-C alteration, 1 to2 per meter hairline to 0.5 cm wide calcite trz of FG anhedral Py vnlts at 0º to 20º of c.a. and at 60º to 75 º of c.a., very scarce calcite partially replaced to FG qtz vnlts.
116,90 124.23 Kuc Caracol Fm folded wavy bedding , Silts 95%, two main Bx by faulting zones 70 and 170 cm wide along c.a., fault planes at 40º , 60º and 75º to 90º of c.a., 6 in the interval irregular 1.0 to 2.5 cm wide brecciated calcite partially replaced to FG qtz-FG Py trz of Sph and ss vnlts at 40º to 60º of c.a., Fault Bx formed by subangular to subrounded mostly rock and scarce calcite to qtz 0.2 to 2.5 cm long fragments in milled rock dark grey colour groundmass calcite replacement to qtz decreasing from the centre of the interval to the walls, druse calcite at 0º to 20 of c.a. at bottom of the interval, FG anhedral Py in thin < 0.1 cm wide vnlts and in calcite Py 2% to 3%
124.23 132.89 Kuc Caracol Fm, Silts 90%, 0.1 to 1 cm wide fine grain size S.S. beds 10% at 30º to 45º of c.a., 2 to 3 meters wide zones with 8 to 10 < 0.1 cm wide calcite wk sericite vnlts, moderate fractured zones, fractures at 10º to 20º and 40º to 60º of c.a. among 40 cm to 2,2 m wide with scarce 1 to 2 per meter fractures and 2 to 3 per meter 0.2 to 1.2 cm wide calcite vnlts at 30º to 40º of c.a. and less at 60º to 75º of c.a.
132.89 143.60 Caracol Fm Silts 95%, 0.1 to 0.2 cm wide fine grain size S.S. 5%, ample folds, zone, bedding changing from 40º to 0º and again 40º of c.a., some micro folds, P-C alteration, 2 to 3 per meter 0.1 to 0.2 cm wide calcite vnlts at 10º to 30º of c.a. and 40º to 60º of c.a., trz of sericite and FG Py in scarce vnlts.
143.60 144.10 Fractured zone, 10 to 12 fractures in the interval at 5º to 15º and 60º to 75º of c.a., scarce blade calcite textures-trz of sericite in vnlts at 80º of c.a.
144.10 145.13 Trz of fine grain size Stibnite rosettes in scarce < 0.1 cm wide calcite vnlts at 20º to 30º of c.a.
145.13 151.18 4 to 6 per meter 0.1 to 0.3 cm wide calcite trz of FG Py vnlts at 5º to 20º of c.a.

2


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    and 60º to 75º of c.a.
151.18 162.30 Kuc Caracol Fm Silts 95% to 99%, very scarce fine grain size < 0.2 cm wide S.S. beds 1% to 5%,bedding from 40º to 0º and then 20º of c.a. P-C alteration, less than 1 per meter hairline to 0.1 cm wide calcite vnlts at 40º to 60º, less at 70º of c.a.
162.30 163.00 6 vnlts in the interval 0.1 to 0.6 cm wide calcite FG Py trz of Sph < ss vnlts at 40º to 60º of c.a.
163.00 169.50 Kuc Caracol Fm Silts 95% fine grain size S.S. beds 5%, wavy irregular 0.1 to 1 cm wide beds. P-C alteration 1 vnlt every 2 m 0.1 to 0.3 cm wide of calcite trz of Py at 20º to 30º of c.a.
169.50 170,00 6 to 8 in the interval irregular hairline to 0.3 cm wide calcite FG anhedral Py trz of ss vnlts at 40º to 60º of c.a. and 0º to 15º of c.a. of only calcite.
170.00 187.65 Kuc Caracol Fm Silts 95% wavy bedding changing from 0º to 40º0 then 80º of c.a., P-C alteration, zones 2 to 3 m wide with 6 to 8 per meter irregular 0.1 to 0.6 cm wide calcite trz 0of Py vnlts at 0º to 10º in the zones of low angle bedding related to the c.a.,, 3 to 5 vnlts per meter in zones 10 to 12 m wide with bedding at 40º to 80º of c.a., the vnlts mainly of calcite, few of calcite replaced to FG qtz. Scarce with trz of brown Sph and ss
187.65 188.12 4 vnlts in the interval 0.3 to 6 cm wide calcite wkly replaced to FG qtz-subhedral to cubic Py and less thin bands of Sph and trz of ss vnlts at 60º to 80º of c.a.
188.12 190.90 Silts 90% fine grain size irregular S.S. beds 0.3 to 1 cm wide, few subangular 2 to 5 cm long rock fragments in S.S. beds, bedding at 40º to 60º of c.a., P-C alteration, 6 to 8 in the interval usually 0.1 to 0.3 cm wide, just one of them 1.7 cm wide calcite wkly replaced to FG qtz< FG Py vnlts at 40º, 60º and 80º of c.a. Pt trz in the interval
190.90 191.00 3.5 cm wide calcite wkly replaced to FG qtz ss and less subhedral Py vnlt at 60º of c.a.
191.00 193.80 Kuc Silts 95% bedding at 60º to 40º of c.a. P-C alteration, scarce 1 per meter 0.2 to 0.3 cm wide calcite< FG Py trz of ss vnlts at 30º and 50º to 60º of c.a.
193,80 199.10 Kuc Bedding at 40º to 60º of c.a., broken zone abundant fractures with sericite most at 0º to 15º of c.a., also fractures at 40º to 60º of c.a., Wk QSPC alteration, 6 to8 per meter irregular 0.1 to 1 cm wide calcite-sericite > FG Py vnlts at 0º to 10º of c.a. and 40º to 60º of c.a., 2 to 3 cm wide gouge zones with planes at 60º of c.a., just 2 vnlts in the interval 1.5 to 3 cm wide of banded calcite FG subhedral Py and trz of ss at 60º to 70º of c.a.
199.10 212.08 Kuc Caracol Silts 90% at top and decreasing to 80º to the bottom of the interval. Fine grain size irregular and wavy S.S. beds 0.2 to 7 cm wide, bedding 40º to 60º of c.a. then 85º of c.a., few ample small folds,, P-C alteration 6 to 8 per meter 0.1 to 3.5 cm wide bended calcite trz of FG Py vnlts and lenses, 1 every 2 meters 0.3 to 2.2 cm wide calcite wkly replaced to FG qtz. FG subhedral Py trz of ss and Sph vnlts at 50º to 75 ºo f. c.a.
212.08 212.14 Fault with banded calcite< FG Py at 55º of c.a.
212.14 227.38 Kuc Silts 90% wavy and irregular fine grain size 0.2 to 2.5 cm wide S.S. beds 10%. Bedding 50º to 65º of c.a., P-C alteration wk sericite in scarce calcite vnlts walls. Zones 4 to 6 meters wide with 8 to 10 per meter 0.2 to 2 cm wide calcite vnlts in wide apart stockwork, 4 to 6 m in the interval 0.5 to 3 cm wide calcite partially replaced to FG qtz anhedral to subhedral Py and trz of Sph and ss vnlts at 50º to 80º of c.a.
227.38 242.65 Silts 90% irregular 0.1 to 1.5 cm wide fine grain size S.S. beds and few as lenses 10%. Bedding at 40º to 75º of c.a., P-C alteration usually 1 to 2 per meter 0.1 to 0.5 cm wide calcite vnlts at 40º to 60º of c.a., just 2 to 3 in the interval 0.2

3


QTA-28

to 3.5 cm wide calcite partially replaced to FG qtz subhedral Py< As Py trz of Sph and ss vnlts at 70º to 80º of c.a., zones of 60 cm to 1 m wide of 6 0.2 to 2 cm wide banded calcite trz of sericite FG anhedral Py vnlts.

242.65

44.00

Bedding changing from 60º to 0º of c.a. sericite trz in few calcite vnlts walls, 2 vnlts 1 to 1.3 cm wide calcite replaced to FG qtz-brown Sph and less ss FG subhedral Py vnlts at 50º and 60º of c.a., 10 vnlts in the interval 0.1 to 0.2 cm wide calcite brown < FG Py and less ss vnlts at 10º .30º 60º and 75º of c.a.

244.00

247.70

Silts 95% bedding changing from 0º to 35º then 20º of c.a. P-C to wk QSPC alteration. Moderate sericite in some calcite vnlts walls, 4 to 6 per meter 0.1 to 0.3 cm wide FG Py < Sph-ss calcite wkly replaced to FG qtz vnlts at 50º to 70º of c.a. vnlts increasing amount and with ness to the depth
247.70 247.85 Fault at 45º of c.a. 6 cm wide gouge zone. Milled rock-FG Py

247.85

251.76

Kuc Caracol Fm Silts 85% to 90% fine grain size irregular 0.1 to 2.5 cm wide beds 10%, bedding at 40º to 55º of c.a., P-C alteration wk sericite in scarce calcite vnlts, 6 to 8 per meter 0.2 to 1.2 cm wide calcite partially replaced to FG qtz < FG anhedral to subhedral Py < brown Sph and ss vnlts at 40º to 65º of c.a. replacement to qtz on calcite and width ness of vnlts increasing to depth

251.76

256.10

Kuc Silts 90% bedding changing from 50º to 0º then 60º of c.a., P-C alteration wk to moderate sericite in calcite vnlts walls, 10 to 12 per meter 0.1 to 0.5 cm wide calcite partially replaced to FG qtz-sericite FG Py ss and less Sph vnlts at 30º to 50º and 60º to 75 º o f. c.a., 5 vnlts in the interval 1.5 to 6 cm wide calcite almost totally replaced to FG qtz < sericite anhedral to subhedral Py ss and Sph vnlts at 50º to 75º of c.a. some of then in fault zones with some Bx

256.10

256.80

Stockwork of 0.1 to 0.6 cm wide FG Py < calcite to qtz-ss trz of pyrargyrite Sph vnlts 1 vnlt 1 cm wide calcite totally replaced to FG qtz < Sph and ss vnlt at 50º of c.a.

256.80

257.08

27 cm wide vein formed by massive subhedral to cubic Py-black silver ss. Sph < calcite totally replaced to FG qtz at 70º to 85 ºof c.a. total sulfides 40% to 50%

257.08

257.70

Silts 95% wk silicification wk QSPC alteration no bedding visible, stockwork with small some small void spaces of 0.1 to 0.2 cm wide FG anhedral to subhedral Py < ss and Sph < calcite partially replaced to FG qtz –sericite vnlts

257.70

258.81

Kuc Caracol Fm Silts 90% irregular wavy 0.1 to 0.5 cm wide fine grain size SS beds 10%, bedding at 50º to 65º of c.a. P-C alteration, 10 to 12 per meter 0.1 to 0.3 cm wide calcite partially replaced to FG qtz, FG anhedral Py and trz of ss and Sph vnlts at 20º to 40º of c.a. and 75º to 85 ºof c.a.

258.81

261.10

Silts 85% to 90% fine grain size S.S. in irregular and wavy beds 0.1 to 2 cm wide, bedding at 60º of c.a. P-C alteration, 6 to 8 per meter 0.1 to 1.5 cm wide calcite locally replaced to FG qtz subhedral Py and trz of ss vnlts at 50º to 70º of c.a.

261.10

263.96

Silts 95% P-C alteration 1 to 2 per meter irregular calcite wkly replaced to FG qtz Py vnlts at 10º and 60º of c.a.

263,96

266.57

5 in the interval 0.3 to 5 cm wide irregular calcite totally replaced to FG qtz trz of FG anhedral Py lenses at 60º and less vnlts at 30º of c.a.

266.57

268.55

Kuc Caracol Fm Silts 90% to 95% bedding at 70º of c.a. P-C alteration just one 1.5 to 2 cm wide calcite replaced to FG qtz < FG Py trz of Sph vnlt at 60º of c.a.

268.55

268.67

Fault zone broken core Fault planes at 70º of c.a.

268.87

280.80

Silts 90% to 95% bedding changing from 65º to 20º of c.a. P-C alteration wk sericite in zones 0.5 to 1 cm wide with scarce fractures at 0º to 15º of c.a., 1 to 3 per meter 0.1 to 1.3 cm wide calcite replaced to FG qtz with trz of to wk Sph < ss vnlts at 10º to 20º and 60º to 70º of c.a., 1 to 2 per meter calcite-FG Py vnlts at 0º to 10º0 and 60º to 80º of c.a.

4


QTA-28

228.10-229.07 m 6 to 8 per meter 0.1 to 0.3 cm wide just one 1.3 cm wide brown Sph < ss, FG anhedral Py < calcite to FG qtz vnlts at 30º and 60º of c.a.

280.80

281.60

Silts 95% bedding at 10 ºto 25º of c.a. P-C alteration 9 in the interval usually 0.1 to 0.4 cm wide just one 1.2 cm wide calcite to FG qtz FG subhedral Py < Sph and ss vnlts wider vnlts at 20º to 30º of c.a. and thinner vnlts at 60º to 70º of c.a.

281.60

286.70

Kuc Caracol Fm Silts 90% to 95%. Fine grain size 0.2 to 1 cm wide S.S. beds, bedding changing from 0º to 40º then 10º of c.a., P-C alteration wk sericite in < 0.1 cm wide calcite vnlts walls, 1 to 2 per meter 0.2 to 0.4 cm wide calcite to FG qtz < FG subhedral Py trz of ss vnlts at 0º to 30º and 60º of c.a.

286.70

286.72

Banded calcite wkly replaced to FG qtz < Bx of rock fragments druse qtz FG Py and trz of ss vnlt at 50º of c.a.

286.72

298.45

Kuc Caracol Fm Silts 70% to 80%, irregular and wavy 0.2 to 10 cm wide fine grain size S.S. beds, 20% to 30%, bedding changing from 40º to 0º , P-C alteration 4 to 6 per meter 0.1 to 0.3 cm wide calcite FG Py vnlts at 10º to 30º and less at 60º of c.a. 0.5 to 1 per meter 0.1 to 0.6 cm wide calcite partially replaced to FG qtz < FG Py trz of brown Sph vnlts at 30º to 40º and less at 60º to 85º of c.a.

248.95

337.50

Kuc Caracol Fm Silts 85% to 90% of c.a. Wkly irregular 0.2 to 2 cm wide fine grain size S.S. beds 10% to 15%, P-C alteration 2 to 3 m wide zones with 6 to 8 per meter calcite < FG Py vnlts at 10º to 30º and less 60º to 85º of c.a., very scarce 1 every 3 meters 0.2 to 0.8 cm wide calcite to FG qtz FG Py scarce AsPy < ss vnlts at 50º to 70º of c.a.

337.50

337.60

8 cm wide calcite replaced to FG qtz some voids FG anhedral to subhedral Py 5% to 10% < Sph and ss vnlt at 80º to 85º of c.a. FG anhedral Py in 0.1 to 1 cm wide bands at bottom of the interval

337.60

338.40

FG anhedral Py in irregular 0.2 to 0.5 cm wide vnlts and lenses Py 2% to 3%

338.40

344.23

Kuc Caracol Fm Silts 80% to 85% fine grain size 0.2 to 2.3 cm wide S.S. beds 15% to 20%. Bedding at 30º to 0º then 40º of c.a. P-C alteration wk sericite at bottom of the interval, zones of 40 to 60 cm wide of 6 to 8 hairline to 0.4 cm wide calcite vnlts in stockwork among zones of 2 to 3 per meter hairline to 0.6 cm wide calcite < sericite, scarce FG Py vnlts at 20º to 30º of c.a.

344.23

352.90

Kuc Caracol Fm Silts 80% to 85%, fine grain size S.S. beds 0.5 to 2 cm wide in irregular and wavy S.S. beds 15% to 20% bedding changing from 490º to 0º then 50º of c.a., P-C alteration moderate sericite in some calcite vnlts, 3 to 5 per meter irregular hairline to 0.2 cm wide calcite-sericite-trz of FG Py vnlts at 0º to 30º of c.a. less at 40º to 50º of c.a., just one vnlt 2 cm wide with druse calcite at 25º of c.a. to a depth 352.85 m.

352.90

364.38

Kuc Silts 80% irregular wavy 0.1 to 2 cm wide fine grain size S.S. beds and lenses 20%, bedding at 50º to 75º changing to 50º to the depth, P-C alteration, 4 to 6 per meter irregular 0.2 to 1.2 cm wide calcite vnlts at 10º to 30º of c.a. increasing amount to 8 to 10 per meter to the depth of the interval

364.38

364.60

Zone of Bx by old faulting, rock + calcite fragments in milled rock< calcite- sericite groundmass, few calcite vnlts at bottom of the interval

364.60

370.64

Kuc Caracol Fm Silts 85% to 90%, wavy irregular 0.1 to 2 cm wide S.S. beds. Bedding from 10º to 80º of c.a., P-C alteration 4 to 6 per meter 0.1 to 1.5 cm wide calcite trz of FG Py vnlts at 0º to 10º, 30º to 40º and 60º of c.a.

370.64

373.10

Zone of broken core, moderate sericite in abundant calcite hairline to 0.2 cm wide vnlts in stockwork in zones 60 cm to 1 m wide among rock sections up to 40 cm long, fault planes at 10º of c.a. at bottom

373.10

389.90

Kuc Silts 90% broken core consolidated rock fragments in small 5 to 10 cm long zones, irregular bedding changing from 80º to 0º and 50º changing to 0º to 10º

5


QTA-28

at depth, P-C alteration, 6 to 8 per meter irregular 0.1 to 0.5 cm wide calcite vnlts at 30º to 60º of c.a., zones 10 cm to 40 cm long with 0.5 to 3 cm wide druse calcite vnlts in stockwork

389.90

395.33

Silts 95% fine grain size 0.1 to 1 cm wide S.S. beds wavy and slump features, bedding from 0º to 10º , 70º down to 40º and finally 80º to 85º of c.a. at bottom of the interval, P-C alteration 1 to 2 per meter hairline to 0.2 cm wide calcite vnlts at 40º to 70º of c.a. at top of the interval varying to 6 to 8 per meter irregular banded calcite lenses and less 0.2 to 0.3 cm wide calcite vnlts at bottom of the intervalº

395.33

  End of Hole

6


QTA-29


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: Feb 9 / 2005  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES 1 of  

Summary of DDH QTA-29-05; 699,329 E; 2,652,567 N, 340°/-60°, Concordia area

From To Description
0.00

3.66

Broken core fragments < 5 cm long Silts 90% to 95% wk Goethite in fractures, trz of MnOx oxides trz to 1%
3.66

7.82

Kuc Caracol Fm light grey greenish Silts 90% to 95%, fine grain size 0.1 to 2 cm wide S.S. beds, bedding changing from 85º to 60º of c.a. P-C alteration, brown to tan Goethite in thin 0.1 to 0.3 cm wide lenses, Goethite trz to 1%, very scarce less than 1 per meter hairline to 0.1 cm wide calcite-Goethite vnlts at 30º and 60º to 85º of c.a.
7.82

17.40

Kuc Caracol Fm Silts 95%, 0.5 to 7 cm wide S.S. beds 5%, bedding at 70º to 80º of c.a., P-C alteration 4 vnlts in the interval 0.5 to 1 cm wide of calcite at 80º, tan colour Goethite diss 3% to 4% staining the rock.
17.40

25.00

Dark grey Silts 95%, fine grain size 0.5 to 5 cm wide S.S. 5%, bedding 70º to 80º, P-C alteration, 3 calcite vnlts in the interval 0.5 to 1 cm wide, Goethite diss 3% to 5% and in < 0.1 cm wide lenses from 21.70 to 22.20
25.00

36.90

Silts 90%, fine grain size 0.5 to 3 cm wide S.S. beds 10%, bedding at 70º to 80º, P-C alteration, 5 in the interval 0.5 to 1 cm wide calcite vnlts at 30º to 60º of c.a.

22.20

Bottom of oxidation zone
22.30 10 cm wide Bx zone Silts fragments in calcite groundmass
26.30-26.70 m irregular 0.5 to 3 cm wide calcite-FFG Py vnlts in stockwork, Py 2% to 3%
36.90

40.00

Kuc Caracol Fm Silts 95%, fine grain size 0.5 to 3 cm wide S.S. beds 5%, bedding at 70º of c.a., P-C alteration, 2 per meter 0.2 to 0.5 cm wide calcite-trz of FG subhedral to cubic Py vnlts at 30º and 50º of c.a.
40.00

52.00

Kuc Caracol Fm fine grain size S.S. 60% in 0.5 to 1 cm wide beds, thin bedded Silts 40%, bedding 60º to 70º of c.a., wk QSPC alteration, wk sericite in calcite vnlts walls, some calcite vnlts wkly replaced to FG qtz, 8 in the interval 0.5 to 1 cm wide calcite wkly replaced to FG qtz-FG anhedral and cubic Py 1% to 3% vnlts at 50º to 70º of c.a. 49.20-49-45 m Fault Bx formed by Silts fragments in calcite replaced to FG qtz < sericite groundmass

49.20-49-45 m Fault Bx formed by Silts fragments in calcite replaced to FG qtz < sericite groundmass
52.00

70.00

Silts 60% fine grain size S.S. 40% in beds 0.5 to 3 cm wide, bedding 50º to 70º of c.a., wk QSPC, wk sericite 1 per meter 1 to 5 cm wide calcite partially replaced to FG qtz < FG anhedral Py vnlts at 40º to 60º of c.a., 20 cm wide zone of wide apart stockwork formed by 1 to 5 cm wide calcite to qtz < FG anhedral Py vnlts.
70.00

83.85

Kuc Caracol Fm Silts 80% fine grain size wavy 1 to 4 cm wide S.S: beds 20%, bedding at 50º to 70º of c.a., wk QSPC alteration, wk sericite in some calcite

1


QTA-29

vnlts and less as diss, 3 to 5 per meter 1 to 4 cm wide calcite few of them wkly replaced to FG qtz-FG anhedral Py 2% to 5% vnlts at 30º to 50º and 70º of c.a. FG Py clouds 2% P-C alteration wk sericite in calcite vnlts walls, zones of old deformation formed by irregular and broken beds with 0.1 to 1 cm wide irregular and folded calcite-sericite vnlts., zones 3 to 40 cm wide of Bx by faulting formed by calcite-rock fragments and FG Py diss in milled rock groundmass at 20º to 40º of c.a., crossing bedding, Py in interval 2% to 3%

76.66-77.10 m Consolidated Fault Bx zone, 1 to 5 mm qtz fragments, fault planes along bedding.
83.85 98.60 Kuc Caracol Fm Silts 80%, fine grain size 0.5 to 3 cm wide S.S. beds 20%, bedding at 40º to 60º of c.a., P-C alteration wk sericite diss, 1 every 2 m 0.2 to  0.5 cm wide calcite-FG anhedral Py vnlts at 30º to 40º of c.a.
98.60 108.71 Fine grain size S.S. 60% in beds 1 to 8 cm wide, Silts 40%, bedding at 70º of c.a., P-C alteration, 2 in the interval 0.5 cm wide calcite< sericite vnlts at 60º of c.a.
     98.86-99.36 m Bx by fault zone formed by 0.1 to 0.2 cm long S.S. fragments in milled rock, moderate sericite diss in groundmass, fault planes at 40º of c.a.
     104.00-104.20 m Gouge Bx zone by fault, wk sericite in groundmass
108.71 121.85 Silts 80% fine grain size 0.5 to 2 cm wide S.S. beds 20%, bedding at 60º to 70º of c.a., P-C alteration, 2 per meter 0.5 to 1 cm wide calcite trz of FG anhedral Py vnlts at 30º to 40º of c.a.
121.85 135.80 Silts 95% fine grain size S.S. 5%, bedding at 60º to 70º of c.a., P-C alteration 2 vnlts in the interval 1 cm wide of calcite-wkly replaced to FG qtz-FG anhedral Py at 60º to 70º of c.a. 128.50-132.10 m 6 faults in the interval 0.1 to 0.2 cm wide with wk sericite. Fault planes at 40º to 60º of c.a.
135.80 160.20 Kuc Caracol Fm, Silts 90%, fine grain size S.S. in beds 0.5 to 3 cm wide 10%, bedding at 30º to 80º of c.a., just one 3 cm wide calcite to FG qtz vnlt at 151.00 m, 2% of FG Py lenses.
     145.00-146.41 m Stockwork of 2 to 3 cm wide calcite vnlts
     153.00-153.20 m Fault zones dark grey milled rock with 3% to 5% of FG Py diss.
160.20 176.60 Silts 95% fine grain size 0.5 to 3 cm wide S.S. beds 5%, bedding at 70º to 80º of c.a. wk P-C alteration, 2 per meter 0.2 to 0.5 cm wide calcite-2% to 3% of FG anhedral Py vnlts at 30º to 70º of c.a.
176.60 185.60 Kuc Caracol Fm Silts 95%, 0.5 to 2 cm wide fine grain size S.S. beds 5%, bedding 70º to 80º of c.a. wk P-C alteration, 2 in the interval 0.2 to 1 cm wide calcite vnlts at 30º and 70º of c.a.
185.60 191.20 Silts 90% S.S. 10%, bedding at 70º of c.a., wk QSPC alteration moderate sericite in fractures and in calcite vnlts walls, 3 per meter 0.5 to 5 cm wide calcite almost totally replaced to FG qtz, Sph less ss and trz of FG anhedral Py vnlts at 20º to 30º , 50º to 60º and 80º to 85º of c.a.
191.20 206.40 Kuc Caracol Fm Silts 95% fine grain size S.S. 5% in beds 0.5 to 2 cm wide, bedding at 40º to 60º, wk P-C alteration, 4 in the interval 0.2 to 1 cm wide calcite trz to 1% of FG anhedral Py vnlts at 20º 40º to 50º and 60º of c.a.
206.40 212.14 Kuc Caracol Fm Silts 95%, 0.5 to 3 cm wide fine grain size S.S. 5%, bedding changing from 0º to 30º then 50º of c.a. wk QSPC alteration, wk sericite in some calcite vnlts walls. Less as diss, 1 per meter 0.2 to 0.5 cm wide druse calcite wkly replaced to FG qtz with 3% to 5% of FG Py vnlts, 2 irregular 0.6 to 1.5 cm wide 10% of FG Py < Sph and ss vnlts at 0º to 30º of c.a.
212.14 214.63 Silts 95%, fine grain size S.S. 5%, bedding changing from 60º to 40º of c.a., P-C alteration, 8 to 10 per meter irregular 0.2 to 1.5 cm wide calcite wkly replaced to

2


QTA-29

FG qtz < FG anhedral Py vnlts at 20º to 30º and 60º to 85º of c.a. only 1 vnlt with trz of ss.

214.63

218.24

Kuc Caracol Fm Silts 95% in 0.1 to 3 cm wide beds, fine grain size S.S. in beds 0.1 to 0.5 cm wide beds 5%, ample folds, bedding changing from 45º to 50º then 30º of c.a. P-C alteration, stock work zone of 0.1 to 4 cm wide calcite replaced to FG qtz-FG anhedral Py vnlts, 0.2 to 0.6 cm wide only FG anhedral Py in irregular micro-vnlts and lenses and less diss 3% to 5%.

 

   215.73 m 3 cm wide Pebble dike at 30º of c.a.

 

   216.15 m 3 cm wide fault Bx zone at 30º of c.a.

218.24

218.37

Fault zone 5 cm wide gouge formed by subangular rock fragments in rock- calcite-sericite milled groundmass, wk to moderate sericite trz of FG Py, fault planes at 70º of c.a.

218.37

220.00

Silts 95% bedding from 70º to 30º then 80º of c.a., wk QSPC alteration, wk sericite, stockwork of irregular and folded and broken 0.2 to 2 cm wide calcite totally replaced to FG qtz –FG anhedral to subhedral Py, 3 to 4 in the interval 0.2 to 0.3 cm wide FG Py < brown Sph-trz of ss < Calcite to qtz vnlts at 20º to 30º of c.a., irregular 0.1 to 0.4 cm wide only FG Py lenses

220.00

222.10

Silts 95%, fine grain size S.S. in wavy 0.1 to 0.7 cm wide beds 5%, bedding changing from 80º to 30º then 75º of c.a., P-C alteration 4 to 6 per meter irregular hairline to 0.3 cm wide calcite < FG Py trz of Sph vnlts at 60º to 85º of c.a.

222.10

222.72

Fault zone 3 to 5 cm wide of gouge at 50º of c.a. at bottom of the interval, irregular 0.2 to 0.6 cm wide calcite wkly replaced to FG qtz vnlts in wide apart stockwork zone at top of the interval.

222.72

224.90

Bedding changing from 40º to 20º of c.a. wk QSPC alteration, 10 to 12 per meter irregular 0.2 to 0.4 cm wide FG Py < Sph and ss-calcite replaced to FG qtz vnlts at 10º to 30º and 60º to 70º of c.a., scarce 0.2 to 1.2 cm wide calcite to FG qtz- FG Py irregular vnlts at 60º of c.a.

226.55

227.10

Bx zone with irregular 0.5 to 2.5 cm wide of massive anhedral to subhedral Py < brown Sph and ss less calcite to qtz vnlts at top of the interval, 15 to 20 cm wide of Bx by fault zone with subangular to subrounded rock fragments in calcite to FG qtz-3 % to 5% of FG anhedral to subhedral Py-trz of Sph and ss diss groundmass, and 5 cm wide zone of banded calcite-FG anhedral Py trz of Sph vnlt at bottom of the interval at 50º to 60º of c.a.

227.10

228.45

Kuc Caracol Fm Silts 95% fine grain size 0.1 to 0.2 cm wide S.S. beds 5%, bedding at 20º to 10º of c.a. P-C alteration, 4 to 6 per meter 0.1 to 0.4 cm wide subhedral to cubic Py trz of brown Sph< Calcite to FG qtz vnlts at 30º to 40º of c.a., 10 to 15 per meter FG anhedral to medium size grain subhedral Py vnlts at 60º to 80º and less at 20º to 30º of c.a. Py 7% in the interval

228.45

231.12

Silts 90% to 95%, fine grain size S.S. in beds 0.2 to 0.8 cm wide beds 5% to 10%, bedding changing from 20º to 60º of c.a., P-C alteration, 3 to 4 per meter irregular 0.1 to 0.2 cm wide calcite replaced to FG qtz vnlts at 20º to 30º of c.a., 2 to 3 per meter 0.2 to 0.6 cm wide FG Py lenses most in S.S. beds, Py 2% to 3%.

231.12

233.00

Kuc Caracol Fm, bedding changing from 60º to 10º then 20º of c.a. 2 in the interval 0.6 to 1.2 cm wide calcite totally replaced to FG qtz < FG subhedral Py < ss and trz of Sph vnlts at 30º of c.a.

233.00

238.80

Silts 90%, 0.1 to 0.3 cm wide fine grain size S.S. 10%, ample folds, bedding changing from 20º to 0º then 40º of c.a., P-C alteration, 2 to 3 per meter irregular 0.2 to 0.5 cm wide calcite vnlts at 10º to 30º and 70º to 80º of c.a., 6 to 8 per meter FG anhedral Py in 0.1 to 0.2 cm wide lenses or irregular small clouds

3


QTA-29

    most in S.S. beds, Py 2% to 3%.

238.80

239.10

8 to 9 cm wide vnlt formed by 4 to 5 cm wide massive subhedral Py 30% to 40%, less brown Sph and trz of ss vnlt at 70º to 80º of c.a. and 3 to 4 cm wide of calcite to FG qtz band, rest of the interval irregular broken and deformed hairline to 0.4 cm wide calcite vnlts in wide apart stockwork.

239.10

249.00

Kuc Caracol bedding changing from 401 to 501 of c.a. zones of 1.2 to 1.5 m wide of stockwork of 0.2 to 0.4 cm wide calcite trz of FG Py vnlts, usually 4 to 6 per meter irregular 0.1 to 0.3 cm wide calcite occasionally replaced to FG qtz < FG anhedral Py vnlts at 20º to 30º of c.a. and 60º to 80º of c.a. and less as lenses. Silts 95% wk silicification wk QSPC alteration no bedding visible, stockwork with small some small void spaces of 0.1 to 0.2 cm wide FG anhedral to subhedral Py < ss and Sph < calcite partially replaced to FG qtz –sericite vnlts

249.00

249.15

1 cm wide FG anhedral to subhedral Py < ss and Sph lens. In Silts rock

249.15

251.66

Kuc Caracol 95% silts, bedding 40º to 50º of c.a., P-C alteration 6 to 8 per meter 0.2 to 3 cm wide banded calcite partially replaced to FG qtz-FG anhedral Py and less grey ss < Sph lenses, FG anhedral Py clouds and 1 0.3 cm wide vnlt at 30º of c.a. Py 3% to 5%

251.66

251.90

2 to 3 cm wide Bx by Fault, irregular calcite FG anhedral Py trz of ss vnlts at 50º of c.a. fault planes at 50º at top and 30º at the bottom.

251.90

266.10

Kuc Caracol Fm Silts 95% irregular and wavy 0.2 to 0.4 cm wide fine grain size S.S. beds and lenses 5%, bedding at 40º to 50º of c.a., P-C alteration, 2 to 3 per meter hairline to 0.2 cm wide calcite vnlts at 10º to 30º and less at 50º to 60º of c.a., scarce 1 every 2 to 3 meters 0.2 to 1 cm wide calcite wkly replaced to FG qtz subhedral Py, brown to black Sph and less ss vnlts at 50º to 60º of c.a.

266.10

284.10

Kuc Caracol Fm Silts 90% to 95%, 0.1 to 0.3 cm wide S.S. beds 5% to 10%, bedding at 50º to 30º of c.a., P-C alteration 1 to 2 per meter 0.1 to 0.3 cm wide calcite trz of Py vnlts at 10º to 30º and 50º to 60º of c.a. less than 1 per meter 0.2 to 2 cm wide banded calcite trz of FG Py lenses.

284.10

284.30

1 to 2 cm wide anhedral to subhedral Py< calcite to FG qtz < sericite –brown to black Sph or ss vnlts at 20º to 30º of c.a., 2 cm wide banded calcite< FG Py vnlt at bottom of the interval.

284.30

329.60

Kuc Caracol Fm Silts 90% to 95%, S.S. 5% to 10%, bedding at 40º to 55º of c.a., 1every 2 to 3 m increasing to 4 to 6 to the bottom 0.1 to 1 cm wide banded calcite < FG anhedral Py vnlts at 60º to 70º of c.a. scarce at 10º to 20º of c.a. 325.40-328.30 m FG anhedral Py < calcite lenses, Py 1% to 2% also in irregular disseminated clouds in some S.S. beds.

329.60

331.00

Stockwork zone of irregular 0.1 to 2.2 cm wide calcite trz of Py vnlts, replacement to qtz on calcite increasing to the depth.

331.00

335.30

4 to 6 per meter irregular 0.2 to 2.5 cm wide calcite vnlts at 15º to 20º of c.a.

335.30

335.48

2.5 cm wide calcite replaced to FG qtz, brown to black Sph < ss-FG anhedral to subhedral Py lens.

335.48

336.65

Irregular 0.2 to 5 cm wide calcite almost totally replaced to FG qtz, some rock fragments inside the calcite, trz of FG anhedral Py, trz of Sph vnlts at 10º to 30º and 45º of c.a., few at 60º to 70º of c.a.

336.65

350.36

Kuc Caracol Fm thin bedded Silts 90%, fine grain size 0.1 to 2.2 cm wide S.S. beds 10%, bedding at 40º to 50º of c.a., P-C alteration, 2 to 3 per meter 0.2 to 1.2 cm wide banded calcite-FG Py in walls lenses, 1 to 2 per meter hairline to 0.2 cm wide calcite< FG Py vnlts at 20º to 30º and 60º to 70º of c.a.

 

   346.30-346.38 m Two in the interval 0.2 and 0.4 cm wide calcite partially replaced to FG qtz < FG anhedral Py < brown to black Sph and ss vnlts at 60º of c.a.

4


QTA-29

450.36

351.85

6 in the interval 0.1 to 1 cm wide calcite < FG anhedral Py vnlts at 60º to 80º, two of them with trz of brown Sph << ss, FG Py trz to 1% in the interval

351.85

369.00

Silts 90% to 95%, bedding at 60º to 80º of c.a., P-C alteration, 3 to 4 per meter 0.2 to 1.5 cm wide just one 2.2 cm wide calcite< FG anhedral Py vnlts at 50º to 80º of c.a., few at 10º to 20º of c.a., zones 1.5 to 2 m wide with 8 to 10 vnlts per meter, calcite with 2 to 3 cm wide pebble dikes zones, FG anhedral Py diss in small clouds in few S.S. beds and in < 0.1 cm wide lenses, Py 1% to 2% in the interval, zones of up to 3% of Py at both walls of vnlts with Sph-ss, scarce 4 in the interval 0.2 to 1.5 cm wide calcite replaced to FG qtz-FG subhedral Py < brown and black Sph and ss vnlts at 60º to 75º of c.a.

369.00

374.30

Silts 95% bedding changing from 80º to 60º then 80º of c.a., P-C to wk QSPC alteration to the bottom, wk silicification in the interval, 10 to 12 per meter 0.1 to 0.5 cm wide subhedral Py-trz of Sph and ss vnlts at 10º to 20º less at 60º to 70º of c.a., only Py< calcite to qtz lenses, small zones 5 to 15 cm wide of brecciated calcite totally replaced to FG qtz at 10º to 40º of c.a.

374.30

376.00

Increase of silicification to moderate, irregular calcite totally replaced to FG qtz in Bx and stockwork zones, small voids > FG Py lenses, FG Py with wk Sph and trz of ss vnlts, 5 to 8 cm wide pebble dikes.

376.00

376.12

Irregular 0.5 to 2 cm wide FG Py –brown Sph and ss vnlts at 20º to 30º changing to 60º to 70º, total sulfides 5% to 7%

376.12

376.53

Druse calcite in irregular 1’0 to 15 cm wide vnlts at 30º to 40º of c.a.-FG anhedral Py 1%

376.53

377.00

Silicified Silts some voids, calcite to FG qtz < FG Py, trz of Sph in irregular vnlts and small stockwork zones at 30º of c.a., fault plane at 30º at top of the interval, 20 to 30 cm wide pebble dike zone with druse calcite < FG anhedral Py

377.00

380.20

Kuc Caracol Fm Silts 95%, bedding at 60º to 70º of c.a., P-C alteration 10 to 15 per meter irregular 0.1 to 1 cm wide FG anhedral Py in lenses and clouds, Py 5%, 2 to 3 per meter 0.1 to 0.5 cm wide calcite replaced to FG qtz < FG anhedral to subhedral Py trz of ss vnlts at 45º to 60º of c.a.

380.20

390.25

Kuc Caracol Fm Silts 85% to 90%, fine grain size 0.2 to 10 cm wide S.S. beds 10% to 15%, bedding at 60º to 70º of c.a., P-C alteration, 4 to 6 per meter irregular 0.1 to 1.2 cm wide calcite partially to totally replaced to FG qtz < FG anhedral Py vnlts at 20º to 30º and 50º to 60º of c.a. 2 m wide zones with 8 to 10 per meter bended calcite to FG qtz < FG Py trz of ss vnlts at 60º to 85 ºof c.a.

390.25

401.55

Kuc Caracol Fm Silts 80% to 85%, fine and few medium grain size wavy 0.2 to 8 cm wide S.S. beds 15% to 20%, bedding changing from 50º to 60º of c.a., P-C alteration, FG anhedral Py diss in small clouds in some S.S. beds, also in < 0.1 cm wide lenses, 3 to 5 per meter 0.1 to 1 cm wide calcite trz of FG anhedral Py vnlts at 50º to 85º of c.a., 2 in the interval 0.2 to 0.4 cm wide calcite wkly replaced to FG qtz FG Py trz of Sph and ss vnlts at 40º to 50º of c.a.

 

   396.48-396.70 m Pebble dike and stockwork zone of irregular 0.1 to 1.3 cm wide calcite vnlts.

401.55

403.30

Silts 85% to 90% wavy 0.1 to 1 cm wide S.S. beds 10% to 15%, bedding at 50º to 60º of c.a., P-C alteration, 10 to 15 per meter < 0.1 cm wide FG anhedral Py < calcite and trz of Sph lenses

 

   402.28 m 1 vnlt 1.5 cm wide of calcite to FG qtz-FG anhedral Py brown Sph and trz of ss at 50º of c.a.

403.30

404.26

Moderate sericite in fractures and diss, 3 in the interval 0.3 to 0.5 cm wide calcite replaced to FG qtz < FG Py vnlts at 80º to 85º of c.a.

404.26

415.75

Silts in beds 0.1 to 3 cm wide 80% to 85%, irregular wavy 0.1 to 1.5 cm wide fine grain size S.S. beds 15% to 20%, bedding changing from 60º to 35º then 75º to

5


QTA-29

80º of c.a., P-C alteration trz of sericite, 1 per meter 0.1 to 0.4 cm wide FG anhedral Py < calcite wkly replaced to FG qtz< brown to black Sph and less ss vnlts at 50º to 75º of c.a.4 to 6 per meter anhedral Py in 0.1 to 0.2 cm wide lenses, Py total 1% to 2%

415.75

421.50

Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 75% to 80%, wavy 0.1 to 0.5 cm wide fine grain size S.S. beds 20% to 25%, bedding at 60º to 75º of c.a., P-C alteration 1 to 2 per meter 0.1 to 0.2 cm wide calcite-FG Py vnlts at 40º to 50º of c.a. and 0.5 to 1.2 cm wide banded calcite< FG Py lenses

421.50

426.70

Silts 70% to 75%, fine to medium size grain 0.1 to 5 cm wide S.S. beds 20% to 25%, bedding at 65º to 75º of c.a., P-C alteration, 1to 2 per meter irregular 0.2 to 1.5 cm wide calcite wkly replaced to FG qtz, FG subhedral Py-brown to black Sph and grey ss vnlts at 40º to 60º and few at70º to 75º of c.a., FG anhedral Py clouds in some S.S. beds, Py 1% to 1.5%

426.70

427.75

Coarse grain size S.S. in 30 cm wide bed 30%, thin bedded Silts 70%, bedding at 65º of c.a., 8 to 10 per meter 0.1 to 0.3 cm wide FG anhedral Py lenses and few vnlts at 50º of c.a.

427.75

427.85

4 to 5 cm wide massive sulfides vnlt formed by anhedral Py 30% to 40% less brown and black Sph, jamesonite or stibnite-calcite totally replaced to FG qtz vnlt at 50º of c.a.

427.85

431.25

Silts 95%, bedding changing from 65º to 0º of c.a., P-C alteration, 3 to 4 per meter calcite trz of FG Py vnlts at 0º to 20º of c.a., 2 in the interval 0.2 and 0.4 cm wide calcite totally replaced to FG qtz< brown to black Sph and trz of ss vnlts at 70º of c.a.

431.25

431.32

2, 0.2 and 1 cm wide calcite totally replaced to FG qtz-brown to black Sph-ss and less subhedral Py vnlts at 50º and 60º of c.a.

431.32

433.50

Bedding 0º to 20º of c.a., 3 to 4 in the interval, 0.1 cm wide FG anhedral Py <   calcite wkly replaced to qtz vnlts at 20º and 70º to 85º of c.a.

433.50

433.55

2.5 to 3 cm wide massive sulfides vnlt at 60º of c.a. formed by bands of anhedral to subhedral Py 40% less brown to black Sph –ss calcite to FG qtz.

433.55

439.40

Silts 80% fine to medium size grain wavy 0.2 to 10 cm wide S.S. beds 20%, bedding at 20º to 30º of c.a., P-C alteration, 3 to 4 per meter 0.1 to 0.2 cm wide calcite< FG Py vnlts at 40º to 50º of c.a., 2 to 3 in the interval 0.2 to 0.8 cm wide banded calcite< FG anhedral Py lenses

439.40

441.83

3 vnlts in the interval 0.6 to 1.3 cm wide calcite totally replaced to FG qtz, subhedral Py and less brown to black Sph trz of ss at 50º to 60º of c.a., 3 to 5 per meter FG Py < calcite 0.1 to 0.2 cm wide lenses, bedding at 30º to 5º then 20º of c.a., Py 2%

441.83

442.86

Fault zone 15 to 25 cm wide gouge zone with milled calcite & rock, FG Py diss and in microvnlts 3%, Fault planes at 60º at top and 50º at bottom

442.86

447.52

Silts 85% to 90%, fine grain size 0.1 to 1.5 cm wide S.S. beds 10% to 15%, bedding at 20’º to 30º of c.a., P-C alteration, 4 to 6 per meter hairline to 0.2 cm wide calcite trz of Py vnlts at 10º to 30º and 50º to 60º of c.a.

447,92

448.00

1 cm wide calcite totally replaced to FG qtz-subhedral Py-brown Sph vnlt at 45º of c.a.

448.00

455.98

Silts 75% to 80% wavy 0.2 to 2 cm wide fine grain size S.S. beds 20% to 25%, bedding at 30º to 40º of c.a., P-C alteration, 2 vnlts in the interval0.3 to 1.2 cm wide calcite to Qtz < FG Py-brown Sph and ss vnlts at 50º to 60º of c.a., few 1 to 2 per meter 0.1 to 0.3 cm wide irregular banded calcite FG anhedral Py lenses, trz of FG anhedral Py diss in small dots in some S.S. beds, Py trz to 1%

455.98

458.25

Kuc Caracol Fm wavy Silts beds 0.1 to 3 cm wide 50%, fine grain size 0.2 to 5 cm wide S.S. beds 50%, small fold bedding changing from 50º to 20º then 50º

6


QTA-29

and 0º at bottom, P-C alteration, FG anhedral to subhedral Py in irregular 0.1 to 1 cm wide < calcite to qtz vnlts at 60º to 75º and less < 0.2 cm wide lenses, FG anhedral Py diss in irregular small clouds in S.S. beds, Py 2% to 3%Actual depth of hole

458.25

459.10

Bx by old faulting, some voids and small crystals druses of calcite totally replaced to FG qtz-FG subhedral to cubic Py 3% trz of fine grain size organic material or ss?

459.10

474.15

Silts 70% in beds 0.1 to 5 cm wide, fine grain size S.S. in beds 0.2 to 2 cm wide 30%, bedding at 60º to 75º of c.a., P-C alteration, calcite replaced to FG qtz only in 1 m at the top, 3 to 4 per meter irregular 0.1 to 1.2 cm wide calcite< FG Py vnlts, only two with trz of brown Sph, vnlts at 20º to 30º and 60º to 80º , less banded calcite-organic material lenses

474.15

479.00

Thin beds 0.2 to 2 cm wide Silts 70%, small folds, bedding changing from 50º to 0º then 75º of c.a., P-C alteration , 6 to 8 per meter irregular 0.1 to 0.5 cm wide FG Py < calcite vnlts at 50º to 80º of c.a., Diss Py in small clouds, Py in the interval 3% to 5%.

 

   476.00-477.10 m 3 in the interval 0.1 to 0.8 cm wide calcite partially replaced to FG qtz < brown Sph and less ss vnlts at 0º to 10º of c.a.

 

   478.65-478.70 m 2 cm wide subhedral to cubic Py < brown Sph and ss vnlt at 85º of c.a.

479.00

488.70

Thin bedded Caracol Fm Silts 0.2 to 2 cm wide beds 60%, fine grain size 0.1 to 0.5 cm wide S.S. wavy beds 40%, bedding at 40º to 60º then 30º of c.a., P-C alteration, scarce less than 1 per meter 0.1 to 0.6 cm wide calcite trz of FG Py vnlts at 50º to 70º of c.a. few less than 1 every 2 meters 0.1 to 1 cm wide bended calcite trz of FG Py lenses

488.70

501.70

Kuc Caracol Fm Silts in beds 0.5 to 5 cm wide 70%, wavy irregular fine grain size S.S. in beds 0.1 to 3 cm wide 30%, bedding at 50º to 60º of c.a., wk P-C alteration, trz of FG anhedral Py in scarce clouds, 4 to 5 in the interval hairline to 0.3 cm wide calcite vnlts at 10º to 30º of c.a. and 3 to 4 0.1 to 1.2 cm wide lenses, Py trz in the interval

501.70

  End of Hole

7


QTA-30

MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: Feb 20 / 2005  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES 1 of  

Summary of DDH QTA-30-05; 699,703 E; 2,652,396 N, 340°/-60°, East Dolores area

From To Description
0.00 11.58 Poor recovery only 22 cm of core, Mud and Oxidized Silts fragments < 4 cm long, trz of MnOx brown Goethite diss 4%
11.58 15.53 Kuc Caracol Fm Silts 95% to 98(, scarce 0.1 to 0.3 cm wide fine grain S.S. beds 2% to 5%, wavy bedding at 40º to 20º of c.a., 2 to 3 per meter irregular 0.1 to 0.3 cm wide Goethite< calcite vnlts at 60º to 80º of c.a., 6 to 8 per meter < 0.1 cm wide Goethite lenses, also Goethite diss staining the rock, Total Oxides 2%
15.53 17.19 Oxidized Brecciated Silts, 0.5 to 5 cm long subrounded to subangular rock fragments, fault planes along bedding 50º to 60º of c.a., Thrust fault zone, 40 to 60 cm wide of moderate fracturing zones among 5 to 15 cm wide intensive brecciated zones, trz of druse calcite, small voids, Goethite diss and in micro < 0.1 cm wide vnlts 2% to 3%
  17.19 Bottom of the oxidation zone
17.19 25.26 Bxed by faulting zone, subangular to subrounded 0.3 to 2 cm long rock fragments in abundant milled rock, up to 1.4 m wide zones of less deformed rock, fault planes at 0º, 30º and 60º of c.a. some fault planes along bedding, FG to medium size grain anhedral Py diss in irregular 0.2 to 1 cm wide aggregates , also in 0.1 to 0.3 irregular vnlts, Py 5% to 7% total, very scarce Sph in scarce calcite fragments, 2% to 3% of calcite< Py, trz of Sph vnlts fragments
25.26 30,90 Wkly deformed by faulting zone, Silts 95% thin bedded, bedding at 20º to 0º and 30º of c.a. at bottom, Bxed zones with 5 to 10cm long rock fragments, P-C alteration, 4 to 6 usually irregular 0.2 to 1 cm wide calcite, some with FG anhedral Py vnlts at 30º and 75º of c.a., 1 to 2 per meter 0.1 to 0.4 cm wide calcite lenses, wk sericite in few fractures, Py 1%
30.90 36.42 Fault zones 5cm to 1.3 m wide gouge zones, widest gouge zones at bottom, fault planes from top to bottom 30º, 10º, 70º and 30º of c.a., subangular to subrounded 0.4 to 5 cm long rock fragments in milled rock < calcite to qtz trz of sericite groundmass, trz to 1% of FG Py in few calcite to qtz vnlts fragments, calcite to qtz irregular vnlts occasionally forming 0.2 to 6 cm wide pebble dikes zones, some voids and scarce druse textures.
36.42 43.70 Moderately deformed by faulting zone, Bx zones bigger fragments than previous interval, wk deformed rock zones up to 1.2 m wide, Fault planes at 10º to 20º 40º and 60º to 75º of c.a., different bedding in fragments, scarce calcite replaced to FG qtz trz of FFG Py diss less < 0.1 cm wide irregular vnlts Py 4%
43.70 47.05 Kuc Caracol Fm thin bedded Silts 90%, irregular wavy 0.1 to 0.5 cm wide S.S. beds and lenses 10%, P-C alteration bedding at 70º to 85º of c.a., Faults at 43.60m, 60º of c.a.; 44.70 m 50º of c.a.; 46.40 m 30º of c.a.; 1 to 2 per meter irregular 0.1 to 0.4 cm wide calcite replaced to FG qtz < FG Py vnlts at 10º and

1


QTA-30

40º of c.a., 6 to 8 per meter 0.1 to 0.8 calcite to qtz-FG anhedral to subhedral Py lenses, Py 1% to 2%.

47.05

47.90

Faulted zone, 1 to 5 cm wide gouge zones at 70º to 85º of c.a., FG to medium grain size anhedral to subhedral Py lenses and less vnlts with calcite to qtz , Py 3% to 5%

47.90

48.83

Fault zone, intense brecciation, Fault planes 60º at top and 75º of c.a. at bottom, gouge of subangular 0.2 to 2 cm long fragments in milled rock< calcite to qtz-Py groundmass, anhedral to subhedral Py diss in groundmass 5%

48.83

50.30

Kuc Caracol Fm Silts 95%, 10 to 30 cm long wkly deformed by faulting zones, milled calcite to qtz-Py vnlts fragments, fault planes at 40º of c.a., bedding changing from 50º to 20º then 60º of c.a., P-C alteration, irregular 0.1 to 0.2 cm wide by 1 to 3 cm long FG Py lenses and less dissemination, Py 4% to 5% total

50.30

55.50

Kuc Caracol Fm Silts 90% to 95%, bedding at 75º to 85º of c.a., P-C alteration, 2 to 3 per meter 0.1 to 0.7 cm wide calcite totally replaced to FG qtz < FG anhedral Py vnlts at 30º to 40º and less as lenses, two vnlts 3 and 7 cm wide of calcite totally replaced to FG qtz < FG subhedral Py with a light green stain at 50º and 75º of c.a.

55.50

56.18

Fault zone subangular 0.2 to 5 cm long fragments in abundant milled rock <   calcite to qtz and FG Py groundmass, Fault planes at 60º of c.a.

56.18

61.00

Wk to moderate Faulted zone, broken core Silts 90%, fine grain size S.S. in 0.2 to 1 cm wide beds 10%, bedding changing from 50º to 0º and to 30º at the bottom, zones 3 to 15 cm wide of gouge, some fault planes along bedding, calcite < sericite and FG anhedral Py in irregular broken 0.1 to 0.5 cm wide vnlts , Py trz to 1%

61.00

69.60

Broken core zone of moderate faulting, bedding in rock fragments from 30º to 60º and 80º of c.a. at the bottom, P-C alteration. 2 to 5 cm wide fault gouge zones, planes at 65º to 75º of c.a., 6 to 8 per meter irregular hairline to 0.3 cm wide calcite partially replaced to FG qtz < anhedral Py vnlts at 30º to 40º and 60º to 75º of c.a., Py 2% to 3%

 

   67.85-69.60 m Irregular < 0.1 cm wide FG anhedral Py vnlts, Py clouds and lenses 3% to 4%. 6 to 8 irregular 0.1 to 0.3 cm wide calcite totally replaced to FG qtz < FG Py vnlts and lenses

69.60

70.65

Fault zone intense deformation irregular 0.1 to 2 cm wide calcite to Qtz< FG Py bands, also FG anhedral Py less Sph diss in thin bands, 20 cm to 40 cm long Bx zones with rock fragments up to 5 cm long, fault planes from top to bottom 60º, 10º and 60º of c.a.104.00-104.20 m Gouge Bx zone by fault, wk sericite in groundmass

70.65

75.00

Moderately broken core zone, 6 in the interval 2 to 10 cm wide gouge zones at 30º ,60º and 80º of c.a., most fault planes along bedding, bedding from 60º to 50º and 80º of c.a. at the bottom. P-C alteration Faults at 71.70 m, 72.30m,73.28 m, 73.79 m 74.45 and 74.95m, 0.2 to 1 cm wide calcite replaced to FG qtz vnlts at 10 to 30º and 70º to 85º of c.a., subhedral Py trz to 1% in calcite < sericite irregular vnlts

75.00

78.32

Kuc Caracol Fm Silts 90% wkly to moderately fractured zone, bedding from 85º to 40º and 60º of c.a. at the bottom, P-C alteration, 3 zones 40 to 70 cm long with abundant irregular 0.1 to 0.4 cm wide calcite partially replaced to FG qtz trz of FG anhedral Py vnlts in stockwork

76.70

Fault zone 12 cm wide fault planes at 60º to 65º of c.a. along bedding, wk sericite on them

78.32

84.48

Faulted zone. 5 to 15 cm wide Bx zones, gouge zones sub-parallel to bedding, bedding from 10º to 50º then 0º and 60º of c.a. at bottom, P-C alteration wk

2


QTA-30

sericite, 2 m wide zones of irregular beds some rounded S.S. lenses in Silts, deposition on unstable basin, irregular banded 2 to 3 cm wide calcite totally replaced to FG qtz < subhedral to cubic Py vnlts most at 10º to 20º of c.a., 6 to 8 per meter irregular 0.1 to 0.5 cm wide calcite to qtz < FG anhedral Py vnlts at 60º to 75º of c.a.
84.45

90.45

Kuc Caracol Fm Silts 85% to 90% in beds 0.1 to 0.8 cm wide, S.S. beds 10% to 15%, bedding from 75º to 50º then 70º at bottom, small folds, P-C alteration wk sericite, wkly fractured zone, 6 to 8 per meter irregular 0.1 to 1.2 cm wide calcite totally replaced to FG qtz-trz of FG Py vnlts at 60º to 85º of c.a. few 1 to 1.5 cm wide lenses, 2 to 4 in the interval 0.1 to 0.2 cm wide calcite partially replaced to FG qtz < FG Py vnlts at 0º to 15º of c.a., 3 to 4 in the interval 0.2 to 0.5 cm wide FG anhedral Py < calcite to qtz lenses, Py trz to 1%, one 5 cm wide calcite Bxed rock lens at bottom of the interval
90.45

93.00

Kuc Caracol Fm Silts 95% fine grain size 0.5 to 1 cm wide S.S. beds 5%, bedding from 70º to 60º of c.a., P-C alteration, wk to moderate sericite in scarce fractures and in calcite vnlts walls, 2 to 3 per meter hairline to 0.2 cm wide calcite trz of FG Py lenses and in scarce vnlts at 30º of c.a.
93.00

125.98

Silts 95% thin bedded , fine grain size 0.1 to 0.5 cm wide S.S. beds 5%, bedding at 60º to 80º of c.a. P-C alteration scarce 1 to 2 per meter 0.1 to 1.7 cm wide calcite almost totally replaced to FG qtz < FG anhedral Py vnlts at 30º to 50º and 70º to 85º of c.a. scarce hairline to 0.2 cm wide calcite lenses, zones 0.5 to 1 m wide of <0.1 to 1.2 cm wide calcite to qtz vnlts in stockwork, Py trz in the interval
128.98

126.25

Fault zone with a 3.5 cm wide massive sulfides veinlet at top formed by subhedral Py brown to black Sph < ss –calcite to qtz, gouge with FG Py < Sph and ss in the rest of the interval, FG Py in 0.1 to 0.3 cm wide vnlts with calcite partially replaced to FG qtz in 1 m to 1.2 m at both walls of the veinlet zone.
126.25

131.37

Silts 95%, P-c alteration, scarce 0.1 to 0.2 cm wide calcite replaced to FG qtz irregular vnlts
131.37

131.77

Fault zone 13 cm of Bx formed by calcite totally replaced to FG qtz- FG Py < brown to black Sph and ss fragments in milled rock, rest of the interval wkly Bxed Silts with irregular 2 to 5 cm wide Bx zones, FG anhedral Py 3% in microvnlts.
131.77

134.05

Fractured Zone zones of gouge 1 to 4 cm wide –FG anhedral Py with light green stain diss in irregular clouds and in irregular 0.1 to 0.3 cm wide vnlts also in < 0.1 cm wide calcite to qtz vnlts at 0º to 20º, abundant small < 01 cm wide by 1 to 3 cm long calcite to qtz irregular vnlts mainly along bedding Py 3%
134.05

178.42

Silts 85% to 90%, fine grain size wavy 0.1 to 1.5 cm wide S.S. beds, bedding at 75º to 90º of c.a., P-C alteration, 6 to 8 per meter 0.1 to 0.3 cm wide calcite occasionally replaced to FG Qtz vnlts in 2 to 3 m wide zones with FG Py vnlts at 0º to 30º and 60º to 75º of c.a., very scarce 1 to 7 cm wide calcite totally replace to FG qtz trz of FG Py vnlts at 60º to 85º of c.a., Py trz in the interval
178.42

183.10

Fault zone Bx formed by 0.1 to 2 cm long Silts fragments, abundant calcite to qtz in a dark grey groundmass, FG anhedral Py subhedral Py 2% to 3%
183.10

191.90

Silts 90% S.S. 10% wk QSPC alteration, broken core 1 to 20 cm long fragments, thin zones of gouge and Bx with rock and calcite to qtz fragments 0.1 to 3 cm at 187.60-187.65, also at 187.96 to 188.00 and 191.60 to 1919.90 m fault planes at 40º to 50º of c.a. just one 4 cm wide calcite to qtz-subhedral Py 3. vnlt at 80º of c.a.
191.90

210.00

Kuc Caracol Fm dark grey Silts 90%, fine grain size 0.2 to 3 cm wide S.S. beds 10%, wk QSPC alteration trz of sericite, bedding at 50º to 70º of c.a., 2 per

3


QTA-30

meter 0.2 to 1 cm wide calcite wkly replaced to FG qtz vnlts at 70º to 80º and just one at 10º at 206.80 m depth, Fault zone at 198.65 to 198.95 m, 201,70 to 201.90 m, 204.90 to 205.00 m with Bx fragments 0.1 to 1 cm wide poorly consolidated gouge zone with subhedral Py 3%, trz of ss and Sph in vnlts at 204.90 and 206.80 at 60º and 60º of c.a.

210.00

216.50

Kuc Caracol Fm Silts 95% in beds 0.1 to 2 cm wide, fine grain size light grey colour 0.1 to 1 cm wide S.S. beds, bedding at 70º to 60º of c.a., wk QSPC alteration, wk sericite, 2 vnlts per meter 0.5 to 1.5 cm wide calcite almost totally replaced to FG qtz < subhedral Py vnlts at 40º and 80º of c.a., 0.1 to 0.3 cm wide anhedral Py lenses, Py 3% in the interval

216.50

225.50

Kuc Silts 95% bedding 60º to 70º of c.a. wk QSPC alteration 1 per meter 0.5 to 1.5 cm wide calcite replaced to FG qtz < subhedral Py vnlts at 40º to 60º of c.a., subhedral Py in 0.2 cm wide Py lenses

225.50

230.00

Silts 90% in beds 0.1 to 3 cm wide bedding at 50º to 60º wk to moderate QSPC alteration, moderate sericite in calcite vnlts walls and diss, 1 to 2 per meter 0.3 to 3 cm wide calcite to qtz > FG subhedral Py vnlts at 60º to 70º of c.a., FG Py 0.1 to 0.2 cm wide lenses, 2 vnlts 1 to 1.5 cm wide of calcite totally replaced to FG qtz trz of FG Py at 40º and 50º of c.a.

230.00

251.45

Silts 90% to 95%, 0.1 to 1.5 cm wide fine grain size S.S. beds 5% to 10% small fold, folding changing from 60º to 10º at 241m then 20º to 30º at 247m and 60º at bottom of the interval, P-C alteration trz of sericite in scarce calcite vnlts walls, 3 to 4 per meter 0.2 to 1 cm wide calcite wkly replaced to FG qtz-FG anhedral to subhedral Py vnlts at 5º to 20º and less 60º to 75º of c.a. druse calcite, FG Py with light green stain, zones 10 to 20 cm wide with irregular 0.1 to 0.3 cm wide calcite wkly replaced to FG qtz vnlts in stockwork

251.45

251.76 FG massive anhedral Py < organic material bands 2.5 to 3 cm wide at 50ºof c.a.

251.76

258.00

Silts 95% bedding at 60º to 70º of c.a., P-C alteration scarce 1 to 2 per meter 0.1 to 0.6 cm wide calcite to FG qtz< FG Py vnlts at 10º to 30º and less 0.1 to 1 cm wide banded calcite < FG Py lenses

258.00

260.10 Calcite to qtz 0.1 to 0.7 cm wide calcite to qtz vnlts in stockwork

260.10

264.70

Silts 95% 0.1 to 0.3 cm wide wavy fine grain size S.S. beds 5%, bedding at 75º to 85º of c.a., P-C alteration, 6 to 8 per meter 0.1 to 0.2 cm wide FG anhedral Py lenses, also FG Py diss, Py 2% to 3% less than 1 per meter 0.1 to 0.5 cm wide calcite to qtz vnlts at 45º and 20º of c.a.

264.70

265.40

Fault zone Bx fragments of calcite to qtz-FG anhedral to subhedral Py diss 5% trz of ss in gouge zones.

265.40

267.20

Silts 95% bedding at 70º of c.a. 1 per meter 0.1 to 0.2 cm wide calcite wkly replaced < FG anhedral Py vnlts at 30º to 40º of c.a. less 0.1 to 0.2 cm wide calcite < Py lenses Py 1% to 2%

267.20

273.10

Fractured zone Bx by faulting, 2 to 15 cm wide gouge zones formed by subangular rock < calcite to qtz 0.1 to 0.5 cm long fragments in milled rock- FG anhedral Py up to 5% groundmass, zones 60 to 100 cm wide of wide apart 0.2 to 0.5 cm wide calcite partially replaced to FG qtz FG anhedral Py vnlts in stockwork

273.10

278.40

Silts 80% fine grain size 0.1 to 1 cm wide wavy S.S. beds, bedding at 60º to 80º of c.a., P-C to wk QSPC alteration, wk to moderate sericite, 6 to 8 per meter irregular 0.3 to 1 cm wide calcite replaced to FG qtz FG anhedral Py vnlts at 30º to 40º of c.a. FG anhedral Py in abundant irregular clouds in S.S. beds, 4 to 6 per meter 0.1 to 0.2 cm wide calcite < FG Py lenses, Py 2% to 3% in the interval

278.40

278.70

Zone of irregular broken and folded 0.2 to 0.7 cm wide calcite wkly replaced to qtz < FG Py vnlts in stockwork

4


QTA-30

278.70

284.31

Silts 85% to 90% wavy 0.1 to 1 cm wide fine grain size S.S. beds 10% to 15% bedding changing from 25º to 50º of c.a., P-C to wk QSPC alteration, wk sericite wkly fractured zone, 4 to 6 per meter 0.1 to 2 cm wide calcite to qtz < FG Py vnlts at 10º to 30º and 50º to 60º of c.a.

284.31

292.00

Kuc Caracol Fm Silts 90% bedding at 40º to 60º of c.a., P-C to wk QSPC alteration, zones 2 to 3 meters wide of abundant irregular 0.1 to 2 cm wide calcite wkly replaced to FG qtz < FG Py vnlts in stockwork, Bx by faulting zones 2 to 15 cm wide with fault planes at 60º to 70º of c.a.

292.00

301.75

Medium size grain S.S. 90% in beds up to 90 cm wide bedding at 50º to 60º of c.a., wk QSPC alteration wk to moderate sericite in vnlts and diss Faults at 294.70 5 cm wide along bedding, scarce 2 to 3 per meter 0.1 to 0.7 cm wide calcite to FG qtz < FG Py vnlts at 10 to 20 of c.a.

 

   299.16-300.53 m No recovery Fault zone or void

301.75

305.18

Kuc Caracol Fm Silts 65% to 70% fine to medium size grain S.S. beds 1 to 15 cm wide 30% to 35%, bedding at 45º of c.a. P-C to wk QSPC alteration broken core, 6 to 8 per meter druse calcite wkly replaced to FG qtz FG subhedral Py lenses and less vnlts at 75º to 85º of c.a. Py 2% to 3%

305.18

318.20

Kuc Caracol Fm Medium size grain S.S. in beds 5 cm to 1.5 m wide 70%. 5 to 40 cm wide Silts zones 30%, bedding at 40º to 50º of c.a., P-C to wk QSPC alteration wk to moderate sericite in microvnlts at 10º to 30º of c.a. and in some calcite vnlts walls, 5 to 7 per meter irregular 0.1 to 0.8 cm wide calcite partially replaced to FG qtz FG anhedral Py vnlts and lenses, Vnlts at 30º to 50º and 80º to 90º of c.a.

318.70

319.65

Silts 95% wk silicified Silts, FG anhedral Py lenses and clouds 3% to 4%, 4 to 6 per meter 0.1 to 0.2 cm wide calcite to qtz FG anhedral Py lenses
 

319.65

Fault along bedding

319.65

337.70

Silts 90% to 95% bedding 10º to 30º of c.a., P-C alteration, 1 to 2 per meter irregular 0.1 to 1 cm wide calcite wkly replaced to FG qtz trz of FG Py < sericite vnlts at 30º to 40º and less at 60º to 85º of c.a.

337.70

340.16

Silts 85%, 0.1 to 0.7 cm wide S.S. beds bedding at 10º to 20º off c.a., P-C alteration wk sericite, wkly fractured zone fault gouge zones 2 to 4 cm wide at 10º of c.a. 1 in the interval 0.2 to 0.3 cm wide calcite wkly replaced to FG qtz < FG anhedral Py lens

340.16

362.20

Kuc Caracol Fm Silts 85% to 90% wavy fine grain size 0.1 to 4 cm wide S.S. beds bedding at 0º to 20º of c.a., wk P-C alteration, 1 to 2 per meter 0.1 to 0.2 cm wide calcite vnlts at 30º and 60º of c.a., just one 0.6 to 3 cm wide calcite to qtz < FG anhedral Py vnlt at 75º to 80º of c.a.

362.20

367.23

Bedding at 10º to 20º of c.a. moderate sericite in fractures and calcite vnlts walls wk QSPC 4 to 6 per meter 0.1 to 2 cm wide calcite trz of subhedral Py vnlts at 10º to 30º and 50º to 70º of c.a.

367.23

384.65

Silts 60% wavy fine grain size S.S. in beds 0.1 to 55 cm wide, 40%, bedding at 30º to 40º of c.a., wk P-C alteration, scarce less than 1per meter hairline to 0.8 cm wide calcite trz of Py vnlts at 0º to 20º and 70º to 85º of c.a. 1 in the interval banded calcite- thin layers of organic material lens

384.65

387.80

S.S 60% to 70%, Silts 30% to 40% bedding at 40º of c.a. P-C alteration far apart 0.2 to 2.5 cm wide calcite-FG Py vnlts in stockwork, Py 2% in the interval-FG anhedral Py in 0.1 to 0.5 cm lenses and less clouds

387.80

406.95

Silts 90% to 95% thin 0.1 to 0.5 cm wide fine grain size S.S. wavy beds 5% to 10% bedding from 40º to 0º at 398.00m then 40º at bottom of the interval, P-C alteration scarce 1 to 2 per meter 0.1 to 4 cm wide calcite vnlts at 20º to 30º and 60º to 85º of c.a., just one 1 cm wide banded calcite lens

5


QTA-30

406.95

408.00

Consolidated Bx by faulting zone formed by 0.2 to 1 cm long subangular rock fragments in calcite-sericite-FG anhedral Py groundmass, fault planes at 30º and 40º of c.a. along bedding at top and across bedding at bottom Py 2%

408.00

411.90

Thin bedded Kuc Caracol Fm wavy 0.1 to 3 cm wide beds of Silts 70% 0.5 to 1 cm wide S.S. beds 30%, bedding at 50º of c.a. wk to moderate sericite in calcite vnlts walls, moderate sericite in S.S. beds, trz of FG anhedral Py clouds in some S.S. beds, Py trz to 1% scarce 1 to 2 per meter 0.2 to 0.4 cm wide calcite vnlts at 0º to 5º, 30º and 70º of c.a.

411.90

472.26

Silts 85% to 95% zones of 3 to 4 m wide of thin beds 0.1 to 1 cm wide,, most beds 2 to 5 cm wide, wavy irregular 0.1 to 0.4 cm wide fine grain size S.S. lenses and beds 5% to 15%, bedding 40º to 60º of c.a. wk P-C alteration, 1 to 2 per meter 0.1 to 0.5 cm wide calcite vnlts at 30º to 50º and 75º to 90º of c.a. less than 1 per meter 0.5 to 1.5 cm wide banded calcite lenses

472.26

474.25

Irregular 0.2 to 1 cm wide calcite vnlts in stockwork with thin zones of pebble dikes, calcite 5% to 10%

474.25

479.26

Silts 85% to 90%, 0.1 to 4 cm wide beds at 50º to 60º of c.a. changing to 10º at bottom, P-C alteration calcite started to have FG anhedral Py in 0.1 to 0.3 cm wide vnlts at 10 to 30º and in lenses 40º to 60º of c.a., Py amount increasing to depth 2% to 3%

479.26

479.60

Zone of various sub parallel 0.4 to 3 cm wide calcite replaced to FG qtz vnlts at 60º to 90º of c.a., Fault at 490º of c.a. at top of the interval, 3 cm wide calcite to qtz vnlt at bottom, calcite 15% to 20% in the interval

479.67

493.78

Kuc Caracol Fm bedding at 50º to 60º of C.A., P-C alteration zones 5 to 40 cm wide with 8 to 10 per meter 0.2 to 1.8 cm wide calcite wkly replaced to FG qtz, wk to moderate sericite vnlts in stockwork, among zones with 2 to 3 per meter 0.1 to 0.4 cm wide calcite vnlts at 20º to 30º and 60º to 85º of c.a., trz of FG Py clouds, just one 4 cm wide calcite with small voids vnlt at 491.40 and at 50º of c.a.

 

   493.45-493.63m Fault Bx zone milled rock, Fault planes at 60º of c.a. sub parallel to bedding
 

493.78

Reduction to NQ core diameter

493.78

499.40

Silts 80% medium grain size irregular wavy 0.1 to 12 cm wide S.S: beds and as lenses 20%, bedding from 50º to 20º of c.a., P-C alteration, broken core fault planes along bedding also 5 to 15 cm wide Bxed zones at 494.2, 495.3, 496.5 and 498.75 m, 6 to 8 per meter irregular 0.1 to 1 cm wide calcite wkly replaced to FG qtz < sericite – FG anhedral Py vnlts at 40º to 60º of c.a. and less as lenses, FG Py in irregular clouds in S.S. beds Py 2% to 3%

499.40

502.23

Medium size grain 2 cm to 1.4 m wide S.S. beds 90%, bedding at 50º of c.a., P- C to wk QSPC alteration moderate sericite in scarce 0.1 to 0.2 cm wide calcite anhedral to radial Py trz of Sph and ss vnlts at 30º to 40ºof c.a. Py 2% in the interval in

502.23

503.22

Broken core fragments < 5 cm long Silts 40%, fine to medium size grain S.S. beds 60%, P-C to wk QSPC alteration 2 cm gouge zone at 502,60 m at 60º of c.a., 6 to 8 per meter 0.1 to 0.2 cm wide calcite replaced to FG qtz < sericite trz of ss vnlts at 30º to 50º of c.a.-FG anhedral Py diss in S.S. beds trz to 1%

503.22

510.05

Medium size grain S.S. in thick beds, bedding at 60º of c.a., wk QSPC alteration 3 to 4 per meter 0.1 to 0.5 cm wide calcite to qtz –sericite trz of FG anhedral Py vnlts at 20º to 40º of c.a.

510.05

512.57

Fault zone, 5 to 10 cm wide Bx by fault zones formed by subrounded rock fragments in calcite –sericite and rock milled groundmass

510.60-511.23 m Gouge zone fault planes at 60º of c.a.

6


QTA-30

512.57

514.00

S.S. 90% bedding at 60º of c.a., 2 to 5 cm wide Bx zones, abundant 0.1 to 0.8 cm wide calcite to qtz < sericite anhedral Py and trz of Sph and ss vnlts in stockwork

514.00

515.31

Bx by faulting zone, Fault planes at 30º and 50º of c.a., calcite to qtz anhedral Py < sericite and trz of Sph and ss in irregular vnlts fragments in milled rock- calcite<sericite groundmass

515.31

518.05

S.S. 100% no bedding planes, stockwork zone of irregular 0.1 to 2 cm wide calcite and less calcite replaced to FG qtz vnlts sporadic anhedral Py and trz of SPH and ss in just a few calcite to qtz vnlts

518.05

522.60

Medium to coarse grain size S.S. 100% no visible bedding, wk QSPC alteration, 10 to 12 per meter irregular 0.1 to 0.5 cm wide calcite to qtz<FG Py vnlts at 20º to 30º and 60º to 75º of c.a.

 

 

521.72 m Fault at 30º of c.a.

522.60

523.14

Fault zone fragments of rock and calcite to qtz < Py vnlts, 5 to 15 cm wide of dark grey milled gouge zones at 50º to 70º of c.a.

523.14

523.65

Silts 95% irregular 0.1 to 0.5 cm wide fine grain size S.S. lenses, bedding at 50º   of c.a. broken core 2 to 5 cm wide gouge zones at 60º of c.a.

523.65

531.28

Silts in 0.1 to 2 cm wide beds 95%, irregular wavy 0.2 to 1 cm wide fine grain S.S. beds and lenses 5%, bedding changing from 60º to 0º0 then 30º and finally 60º of c.a. at the bottom of the interval P-C alteration, 0.1 to 0.7 cm wide calcite some wkly replaced to FG qtz vnlts at 10º to 15º of c.a. and 60º to 75º of c.a., FG anhedral Py diss and scarce small clouds in scarce S.S. beds Py trz in the interval

531.28

532.55

Zone of pebble dikes 2 to 4 cm wide, trz of FG anhedral Py, druse calcite in 0.2   to 0.5 cm wide vnlt , pebble dike and calcite vnlt at 20º of c.a.

532.55

535.23

Silts 60%, fine grain size S.S. 40% in irregular 0.5 to 5 cm wide beds, bedding at 40º to 20º of c.a., P-C alteration wk sericite in scarce fractures, irregular sedimentary Bx zones 1 to 2.5 cm wide at 10º to 20º of c.a.

535.23

544.37

Kuc Caracol Fm irregular 0.1 to 5 cm wide Silts sections 70% among 0.1 to 10 cm wide wavy and irregular fine grain size S.S. beds and lenses, 30%, bedding at 50º to 70º of c.a. sedimentation on unstable basin, P-C alteration, 2 to 3 per meter irregular 0.1 to 0.3 cm wide calcite vnlts at 10º to 20º of c.a. 1 per meter 0.8 to 2 cm wide calcite lenses

544.37

556.57

Irregular bedded Silts 85% to 90%, wavy 0.1 to 3 cm wide unusually up to 10 cm wide irregular fine grain size S.S. %5 to 10%, bedding at 30º to 60º of c.a., wk P- C alteration, scarce less than 1 per meter hairline to 0.3 cm wide calcite vnlts at 30º to 50º of c.a. trz of FG anhedral Py in scarce calcite vnlts and more scarce clouds in S.S. lenses, Py trz in the interval

556.57

563.55

Silts 80% to 85% wavy irregular 0.2 to 2.5 cm wide fine grain size S.S. beds and lenses 15% to 20% bedding at 50º to 75º of c.a., P-C alteration, 1 to 2 per meter 0.1 to 1.5 cm wide calcite < anhedral Py vnlts at 0º to 15º and 40º to 60º of c.a.

561.60

Fault at 60º of c.a. with 7 cm wide irregular calcite < FG anhedral Py vnlt with borders at 40º at top and 70º to the bottom FG anhedral Py < 0.1 cm wide vnlts and less clouds

563.55

563.67

7 to 8 cm wide anhedral to subhedral massive Py –AsPy < black Sph less calcite to qtz vnlt at 50º to 60º of c.a.

563.67

569.10

Silts 80% to 85% irregular wavy 0.1 to 5 cm wide fine grain size S.S. beds 15% to 20%, bedding at 65º to 90º of c.a. P-C alteration 2 to 3 per meter 0.1 to 0.5 cm wide calcite< FG anhedral Py vnlts only 1 3.5 to 4 cm wide calcite lens

7


QTA-30

565.54-565.65 m Fault Bx zone planes at 70º and 80º of c.a., 0.6 to 0.8 cm wide FG anhedral Py –brown Sph vnlt at 75º of c.a.

569.10

569.12

2 cm wide massive subhedral Py, brown to black Sph-Gn and Pb-Sb acicular crystals < calcite to qtz vnlt at 65º of c.a.

569.12

573.53

Silts 80% to 85%, fine grain size 0.5 to 13 cm wide S.S. beds, wavy bedding at 60º to 70º of c.a., P-C alteration 2 in the interval 2 and 5 cm wide druse calcite < FG anhedral Py vnlts at 35º and 40º of c.a. FG anhedral Py in irregular small clouds, one 0.1 to 0.2 cm wide FG Py trz of Sph vnlt at 65º of c.a.

573.55

574.60

Silts 60% fine to medium size grain S.S. in beds 25 to 30 cm wide, wavy bedding at 80º to 85º of c.a. P-C alteration wk sericite in scarce fractures, 2 vnlts 0.2 and 1 cm wide of druse calcite < sericite at 15 º and 25º of c.a. 5 in the interval 0.2 to 0.3 cm wide FG anhedral Py-brown to black Sph vnlts at 60º to 75º of c.a.

574.60

582.43

Kuc Caracol Fm Silts 50% fine to medium size grain S.S. beds 9 to 50 cm wide 50%, wavy bedding at 85º to 60º of c.a., P-C alteration 4 to 6 per meter irregular 0.2 to 1 cm wide calcite< FG Py vnlts at 10º to 30º of c.a. and 60º to 80º of c.a. , FG anhedral Py clouds in top and bottom of some S.S. beds Py trz to 1% in the interval

582.43

582.47

5 cm wide subhedral Py < black Sph trz of Gn vnlt at 80º to 85º of c.a. with a 1 cm wide fault gouge zone in the centre of the interval

582,47

592.15

Silts 60% to 65%, 0.1 to 70 cm wide fine grain size S.S. beds, wavy and irregular bedding at 85º to 60º of c.a. , P-C alteration trz of sericite in very scarce fractures in S.S. sections, scarce 2 to 3 per meter irregular 0.1 to 1.5 cm wide calcite some of them partially replaced to FG qtz < FG anhedral Py vnlts at 40º and 70º to 85º of c.a., 2 at the bottom 0.1 to 0.2 cm wide FG subhedral Py < Sph-calcite to qtz vnlts at 70º of c.a.

592.15

599.24

Silts 90% ,thin 0.1 to 2 cm wide S.S. beds 10% at top, medium grain size S.S. in beds 5 to 90 cm wide 70% and Silts 30% at bottom of the interval, irregular wavy bedding at 50º to 85º of c.a., P-C alteration wk to moderate sericite in scarce fractures in S.S. sections, 3 to 5 per meter 0.2 to 1 cm wide only 2 of 2 and 4 cm wide, subhedral Py < AsPy black Sph, less Gn and thin calcite to Qtz walls vnlts at 0º to 15º and 60º to 85º of c.a. Fault zones at 598.16 and 594.24 m

 

   592.15-592.20 m 4 cm wide abundant black Sph < Subhedral Py trz of Gn < calcite to FG qtz vnlt at 85º of c.a.

 

   592.60-592.63 m 2 cm wide black Sph subhedral Py < calcite to qtz vnlt at 65º of c.a.

599.24

604.39

Silts 70% irregular 0.2 to 20 cm wide fine to medium size grain S.S. beds 30%, 1 to 2 per meter irregular 0.1 to 0.2 cm wide calcite < FG Py vnlts at 60º to 75º of c.a., FG anhedral Py clouds, Py trz to 1% in the interval

604.39

605.37

One 1.5 to 1.8 cm wide Subhedral Py < black Sph and scarce calcite to qtz vnlt at 60º of c.a.

605.37

606.90

6 in the interval 0.5 to 2.5 cm wide black Sph < Gn subhedral Py and less calcite to qtz vnlts in stockwork at 40º of c.a. and most vnlts at 65º to 75º of c.a. Fault zone 7 cm wide at 605.58 m

606.90

609.30

Zone with 3 to 25 cm wide consolidated sedimentary Bx zones, very deformed bedding, fine to medium size grain S.S. beds 0.2 to 60 cm wide 70%, irregular wavy 0.1 to 4 cm wide Silts beds 30%, P-C to wk QSPC alteration. Moderate sericite in fractures and in some calcite vnlts walls, 4 in the interval 0.2 to 0.4 cm wide anhedral to subhedral Py < brown Sph and less calcite replaced to FG qtz vnlts at 20º to 30º, Fault 5 cm wide at 609 m at 50º of c.a.

 

   608.10-608.33 m Fault Bx zone with 0.5 to 2 cm wide rock fragments in FG Py

8


QTA-30

black Sph and calcite to qtz groundmass, fault planes at 45º and 80º of c.a. Py 2%

609.30

609.37

4 to 5 cm wide abundant Subhedral to cubic Py 20% to 30% < brown Sph, Gn less calcite replaced to FG qtz vnlt at 60º to 65º of c.a.

609.37

615.20

Irregular sedimentation in a very unstable basin, Silts 60%, fine grain size irregular 0.2 to 10 cm wide S.S. beds 40%, wavy bedding at 40º to 0º0 then 50º of c.a., P-C alteration, 6 to 8 per meter irregular 0.1 to 1 cm wide black Sph < FG anhedral to subhedral Py thin calcite to qtz walls vnlts at 30º , 50º and 60º to 85º of c.a.

615.20

615.60

2 in the interval 1 and 6 cm wide black Sph < Gn-FG anhedral to subhedral Py and less calcite to qtz lenses, and one 0.5 cm wide black Sph-FG Py < calcite to qtz vnlt at 50º of c.a.

615.60

621.34

Silts 70% 0.2 to 3 cm wide fine grain size S.S. beds 30%, wavy bedding at 55º to 65º of c.a., P-C alteration wk sericite, two irregular 1.5 and 4 cm wide black Sph abundant subhedral to cubic Py vnlts at 60º and 70º of c.a., 4 to 6 in the interval irregular 0.1 to 0.5 cm wide FG Py black Sph vnlts at 70º of c.a. and less lenses.

621.34

621.44 7 cm wide bleached S.S. bed light grey to light green colour by chlorite alteration

621.44

625.11

Silts 70% 0.1 to 1 cm wide fine grain size irregular S.S. beds 30%, bedding at 70º of c.a., P-C alteration 3 in the interval 0.7 , 1 and 1.5 cm wide brown Sph < FG Py and thin calcite to qtz vnlts at 70º to 85º of c.a.,

625.11

627.13

About 20 in the interval irregular 0.1 to 2 cm wide massive brown to black Sph < Gn-FG anhedral Py and trz of calcite to qtz vnlts at 60º to 90º few at 40º of c.a.

627.13

629.28

10 to 15 in the interval 0.1 to 0.5 cm wide Sph-Gn-FG Py vnlts at 70º to 85º of c.a. sub parallel to bedding

629.28

637.38

Thin bedded Silts 90%, 0.2 to 1.5 cm wide fine grain size S.S. beds and lenses, P-C alteration, 7 to 9 in the interval 0.1 to 0.6 cm wide Sph< Gn –Py vnlts at 70º to 85º of c.a.
    630.67m 1 cm wide black Sph-Gn –FG anhedral Py lens or vnlt at 80º of c.a.
    632.49 m 1 cm wide black Sph-Gn FG anhedral Py lens or vnlt at 85º of c.a.
    635.70 m 2 cm wide FG subhedral Py black Sph< Gn vnlt at 80º of c.a.

637.30

643.25

Medium size grain S.S. 65% to 70% in beds 0.5 to 50 cm wide, thin bedded silts 10 to 30 cm wide sections 30% to 35%, P-C to wk QSPC alteration wk sericite in calcite vnlts, bedding at 75º to 85º5 of c.a., 2 to 3 in the Silts sections 0.1 to 0.3 cm wide FG anhedral Py-black Sph and trz of Gn vnlts at 70º to 85º of c.a., 8 to 10 per meter irregular 0.5 to 2 cm wide calcite totally replaced to FG qtz < Sph and Gn vnlts in far apart stockwork in the S.S. sections

691.37 m 2 cm wide dark brown to black Sph-Gn < Py and calcite to qtz vnlt at 70º of c.a.

643.25

644.11

S.S. 95% bedding at 65° of c.a. wk QSPC alteration, abundant 0.1 to 0.5 cm wide calcite replaced to FG qtz Sph vnlts in stockwork include three 1.5 to 2.5 cm wide massive subhedral Py-brown to black Sph Gn and less calcite to qtz vnlts at 30° and 50° to 60° of c.a.

644.11

653,95

Medium size grain S.S. in thick beds 70 cm to 1.5 m wide 80%., zones 90 cm to 4 m of thin bedded Silts and 0.1 to 0.5 cm wide S.S. beds bedding at 80º to 85º of c.a., P-C alteration, 4 to 6 per meter 0.2 to 0.6 cm wide anhedral Py, black Sph vnlts at 30º to 40º of c.a., 2 to 3 per meter 0.2 to 1.5 cm wide calcite replaced to FG qtz < FG Py and trz of Sph vnlts at 30º of c.a. in S.S. beds, 5 to 6 in the interval 0.8 to 1.2 cm wide massive FG Py-black Sph lenses? In Silts.

653.95

654.20

20 cm wide abundant Subhedral to cubic Py-brown to black Sph< Gn trz of Cpy? Less calcite to FG qtz vnlt at 60º of c.a.

9


QTA-30

654.20

655.45 Silts 70% medium size grain S.S. 30% bedding at 55º of c.a.
     654.50-654.80 m 7.5 cm wide Fault zone at 65º of c.a. FG anhedral Py and less
Sph diss in gouge

655.45

655.65

Irregular Bx zone with 3 cm wide of abundant subhedral Py-black Sph < calcite to qtz band at 60º of c.a., rest of the interval irregular 0.1 to 0.4 cm wide calcite to qtz< FG Py and Sph vnlts in stockwork, sulfides 7% to 10% in the interval

655.65

656.50

Zone of irregular broken silts a 23 cm wide S.S. bed at 70º of c.a. wide apart stockwork zone of 0.1 to 0.4 cm wide calcite to qtz trz of black Sph vnlts

656.50

657.45

Silts 90% thin 0.2 to 1.5 cm wide fine grain size S.S. beds, bedding at 55º to 60º of c.a., P-C alteration, 3 irregular Bxed vnlts 0.4 to 2.5 cm wide calcite to qtz FG subhedral Py –brown Sph < Gn vnlts at 30º,50º and 60º of c.a.

 

   657.30-657.45 m 2.5 cm wide calcite to Qtz FG subhedral Py black Sph < Gn vnlt at 30º of c.a. FG Py and trz of Sph diss in walls

657.45

663.60

Silts 90% thin bedded moderate fracturing along bedding, bedding at 70º to 75º of c.a. P-C alteration 6 to 8 per meter usually 0.1 to 0.4 cm wide FG Py-Sph lenses? Or vnlts injected into bedding, 6 in the interval 0.6 to 1.2 cm wide subhedral Py brown Sph lenses and calcite to qtz trz of Sph vnlts at 30º to 40º of c.a.

663.60

664.50

Broken core various fault planes along bedding and at 60º to 80º of c.a., calcite to qtz < FG subhedral Py trz of Sph –Gn in up to 3 by 10 cm fragments, 6 to 8 in the interval 0.2 to 0.6 cm wide FG Py –black Sph < calcite to qtz vnlts, and one irregular 2.5 cm wide calcite to qtz-subhedral Py black Sph vnlt at 20º of c.a.

664.50

666.90

Fault zone fine milled rock zones 10 to 30 cm of only grey colour mud, fragments of rock and few of calcite to qtz-Py-Sph vnlts, 5 to 10 cm with up to 5% of FG Py trz of Sph diss

666.90

669.10

Medium size grain S.S. 70% Silts 30% irregular bedding at 75º to 90º of c.a., 6 to 8 per meter 0.2 to 2.5 cm wide irregular and broken calcite to qtz < sericite FG anhedral Py less Sph vnlts in wide apart stockwork

669.10

670.05

Two 7 and 10 cm wide Fault zones with abundant medium size grain Py-black Sph at 60º to 75º of c.a. less 0.5 to 1 cm wide abundant Py trz of Sph < calcite to qtz vnlts at 40º and 75º of c.a.

670.05

679.40

Silts 80% wavy bedding at 75º to 85º of c.a. P-C alteration, 2 to 4 per meter 0.4 to 1.5 cm wide subhedral Py-brown to black Sph less calcite lenses? And 1 to 2 per meter 0.1 to 0.5 cm wide calcite to qtz FG Py less Sph vnlts at 0º to 30º of c.a.

679.40

681.09

Fault zone broken core 2 to 20 cm wide zones of gouge with irregular 0.5 to 2 cm wide zones of FG Py less Sph diss also FG Py diss in S.S. total sulfides 4% to 5%

681.09

682.20

Silts 70% to 75% bedding at 80º of c.a. few fault planes along bedding and at 0º to 30º of c.a., scarce 0.1 to 0.2 cm wide calcite to qtz trz of Sph vnlts

682.20

682.70

Bxed zone with two 2 to 4 cm wide massive subhedral to cubic Py-brown to black Sph lenses, also calcite to qtz Py < Sph vnlts in stockwork, sulfides total 5% to 7%

682.70

683.30 Wk QSPC alteration 0.1 to 0.4 cm wide calcite to qtz fig Py less Sph vnlts in stockwork

683.70

686.90

Moderately fractured zone planes along bedding and less at 10º to 30º of c.a., Silts 90% bedding at 75º to 90º of c.a., P-C alteration 5 to 6 in the interval 0.2 to 0.8 cm wide FG Py less Sph trz of calcite to qtz lenses and vnlts at 30º of c.a.

686.90

687.15

Fault zone planes along bedding, Bxed calcite to qtz and rock fragments in milled dark grey groundmass Py and less Sph diss, sulfides 3% to 5%

687.15

689.70

Thin bedded Silts 85%, 0.1 to 0.5 cm wide fine grain size S.S. beds 15%,

10


QTA-30

bedding at 75º of c.a., 3 in the interval 0.6 to 2 cm wide brown Sph subhedral Py < calcite to qtz vnlts and lenses.

689.70

698.70

Silts 90% thin bedded fine grain size S.S. beds 10%, bedding at 75º to 85º of c.a. P-C alteration wk sericite in 1 meter interval at top, scarce 1 to 2 per meter hairline to 0.2 cm wide calcite vnlts at 0º to 30º , just one 0.3 cm wide subhedral Py-brown Sph vnlt at 65º of c.a. FG anhedral Py clouds trz to 1%

698.70

699.77

8 to 10 per meter 0.2 to 1.5 cm wide calcite few replaced to qtz < FG Py trz of Sph vnlts at 0º to 190º and less 45º to 60º of c.a.

699.77

700.00

Fault zone along bedding trz to 2% Py diss

700.00

702.87

Silts 75% 0.1 to 1.5 cm wide fine grain size S.S. beds, bedding from 55º to 85º of c.a., P-C alteration wk sericite in scarce calcite vnlts

 

   701.20-701.25 m 5 cm wide abundant subhedral to cubic Py brown Sph less calcite to qtz vnlt or lens at 80º of c.a.

702.87

709.00

Kuc Caracol Fm Silts 60%, 0.2 to 6 cm wide beds, bedding at 70º to 80º P-C alteration 3 in the interval 0.1 to 0.5 cm wide calcite vnlts 708.00 to 708.30 m 0.1 to 1 cm wide calcite-FG anhedral Py vnlts in stockwork 699.80-701.31 m Faulted zone along bedding with sericite and FG Py 2%

 

   701.20 m 6 cm wide massive subhedral Py-Sph-Gn vnlt at 80º of c.a.

709.00

716.00

Silts 90% in 0.2 to 1 cm wide beds, 0.1 to 0.5 cm, wide fine grain S.S. 10%, bedding at 70º, P-C alteration, 709.50-710.80 m Fault zone along bedding slickensides at 40º to 60º of c.a., mod sericite 712.55-712.93 m Fault gouge zone milled rock –calcite-sericite at 70º of c.a. 714.55-715.10 m Broken core fault zone, slickensides at 30º to 60º of c.a. 3 cm wide calcite vnlts and trz of Py and acicular Py.

716.00

727.00

Silts 90% in beds 0.1 to 2 cm wide, fine grain S.S. in beds 0.1 to 0.5 cm wide 10%, bedding at 70º to 80º of c.a.1 per meter 0.1 to 0.3 cm wide calcite- subhedral Py 2% to 10% vnlts at 20º to 40º of c.a. abundant 0.1 to 0.2 cm wide FG Py lenses

 

   722.35 m 0.3 cm wide massive subhedral Py-less Sph vnlt at 20º of c.a.

727.00

728.00

0.1 to 3 cm wide calcite-FG subhedral Py vnlts in stockwork, Py in interval 2% to 3%

728.00

734.70

Silts 90% fine grain 0.1 to 0.2 cm wide S.S. beds 10%, bedding at 70º of c.a., wk QSPC alteration moderate sericite in fractures and diss, fractured zone 5 slickenside per meter at 30º to 50º of c.a. 728.90-730.82 m 8 in the interval 0.1 to 2 cm wide calcite trz to 1% of FG subhedral Py vnlts at 30º to 60º of c.a. 730.82-733.25 m 3 in the interval 2 to 3 cm wide calcite partially replaced to FG qtz vnlts at 60º of c.a.

733.25-733.42 m 0ne 12 cm wide Subhedral Py < Sph-Gn vnlt at 40º of c.a. moderate

734.70

744.50

Kuc Caracol Fm, Silts 90% in beds 0.1 to 2 cm wide, fine grain size 0.1 to 0.5 cm wide S.S. beds 10%, bedding at 70º of c.a. P-C alteration moderate sericite diss, 3 in the interval 0.1 to 0.3 calcite trz of FG anhedral Py vnlts at 50º to 60º of c.a. 738.50 m one 5 cm wide FG subhedral Py 10%, brown Sph and trz of Gn vnlt at 50º of c.a.

744.50

755.80

Silts 90% S.S. 10% bedding at 70º to 80º of c.a., P-C alteration, wk sericite, 2 per meter 0.1 cm wide fault zones at 10º to 50º of c.a.1 per meter 0.2 to 1 cm wide calcite- subhedral Py 2% vnlts at 30º and 70º to 80º of c.a. 753.00 m 35 cm wide Fault zone formed by 3 to 5 cm long rock fragments,

11


QTA-30

    slickensides with mod sericite at 80º and 90º of c.a.

755.80

761.70

Silts 90% , fine grain size S.S. in beds 0.2 to 0.5 cm wide 10%, bedding at 70º to 80º of c.a., wk QSPC alteration, wk sericite, 2 per meter 0.5 to 3 cm wide calcite totally replaced to FG qtz trz of F subhedral Py vnlts at 50º to 70º of c.a.

 

  758.30-758.70 m 3 of 0.5 cm massive sulfides subhedral Py-Sph vnlts at 60º of c.a. and one 20 cm wide calcite replaced to FG qtz subhedral Py-Sph-Gn vnlt at 60º of c.a.
761.50 m 12 cm wide subhedral Py-AsPy. Sph vnlt at 50º of c.a.

761.70

770.00

Silts 90%, in beds 0.1 to 2 cm wide, fine grain size 0.1 to 0.3 cm wide S.S. beds 10%, bedding at 70º to 80º of c.a., P-C alteration, 2 per meter 0.2 to 0.5 cm wide calcite trz of FG Py vnlts at 20º to 30º of c.a.

770.00

785.16

Kuc Caracol Fm, Silts 70%, in beds 0.1 to 2 cm wide, fine grain size 0.2 to 2 cm wide S.S. beds 30%, bedding at 60º to 70º of c.a., wk P-C alteration, 2 per meter 0.3 to 1 cm wide calcite trz of sericite vnlts at 30º to 80º of c.a. just one 1 cm wide calcite partially replaced to FG qtz<acicular Py vnlt at 80º of c.a. 777.20-778.00 m and from 783.60 to 784.40 m 0.1 to 2 cm wide calcite trz of FG subhedral Py vnlts in stockwork
785.16   End of Hole

12


QTA-31

MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: Feb 24 / 2005  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES 1 of  

Summary of DDH QTA-31-05; 700,144 E; 2,653,346 N, 340°/-60°, San Gregorio hill area

From To Description
0.00 1.22 No core drilled with tricone bit
1.22 3.10 Kuc Caracol Fm thin bedded Silts 95%, 0.1 to 0.5 cm wide fine grain S.S. beds 5%, bedding at 75º to 80º of c.a., P-C alteration 6 to 8 per meter 0.1 cm wide Goethite< hematite lenses, trz of MnOx in scarce fractures along bedding hematite diss staining pink the rock 1 per meter 0.1 to 0.2 cm wide calcite-trz of Goethite vnlts at 30º to 40º of c.a.
3.10 6.82 Silts 90% to 95% thin beds, fine grain size wavy 0.1 to 0.4 cm wide S.S. beds 5% to 10%, bedding 75º to 80º of c.a. P-C alteration 4 in the interval 0.1 to 0.2 cm wide gypsum vnlts at 20º to 40º of c.a., 0.1 to 0.2 cm wide Goethite lenses, Goethite trz diss in thin bands and lenses Oxides 1%
6.82 20.06 Kuc Caracol Fm Silts 90% in 0.1 to 1.5 cm wide beds, fine grain size wavy 0.1 to 0.8 cm wide S.S. beds 10%, bedding at 75º to 80º of c.a., P-C alteration 1 to 2 per meter 0.1 to 0.2 cm wide gypsum vnlts at 40º and 60º of c.a., gypsum bottomed at 8 m depth
    8.00-20.06 1 to 2 per meter 0.1 to 0.3 cm wide calcite trz of Goethite vnlts at 20º to 30º of c.a., Goethite diss in < 0.1 cm wide microvnlts at 30º to 40º of c.a. and lenses, 5 to 15 cm long zones with 0.1 to 0.4 cm wide calcite vnlts in stockwork, Goethite diss in abundant 0.1 to 0.2 cm wide lenses, Goethite < Hematite diss staining rock, total Oxides 1% to 2%

 

20.06 Bottom of oxidation zone
20.06 25.55 Mixed Oxides + Sulfides zone, Kuc Caracol Fm Silts 85% to 90%, fine grain size 0.1 to 1.5 cm wide S.S. beds 10% to 15%, bedding at 70º to 75º of c.a., P-C alteration, 60 cm of wide bleached zone at bottom of the interval, 6 to 8 per meter 0.1 to 0.3 cm wide calcite in the sulfides-less oxides sections, 0.1 to 1 cm wide gypsum lenses and less vnlts at 60º of c.a. in the oxides-less sulfides sections, 0.2 to 3 cm wide Bx by fault zones with 0.1 to 0.2 cm wide Goethite diss lenses every 2 to 3 cm apart, Goethite total 1%

 

25,55 Bottom of the Mix oxides+sulfides zone
25.55 31.44 Silts 85%, fine grain size 0.1 to 0.8 cm wide S.S. beds 15%, bedding at 80º of c.a., fold at 31.20 m, P-C alteration wk bleaching with a 40 cm wide zone of moderate bleaching, 3 to 4 per meter 0.1 cm wide calcite lenses and 2 to 3 per meter hairline to 0.2 cm wide calcite<FG subhedral Py vnlts at 10º to 30º of c.a.
    27.95-28.30 m Consolidated Bxed and bleached zone, milled Silts-S.S.-calcite to qtz and sericite, FG subhedral Py and trz of fine grain black mineral or organic material diss, Py 1% to 2%

1


QTA-31

31.44

38.60

Kuc Caracol Fm thin bedded Silts 80% to 85%, fine grain size wavy and irregular 0.1 to 2 cm wide S.S. beds 15% to 20%, bedding at 75º to 85º of c.a. P-C alteration zones of 5 to 15 cm wide of wk bleaching

 

  31.50 m 3 cm wide gouge and bleached zone, moderate sericite, milled calcite to qtz, FG subhedral Py 2% to 3%, fault planes at 70º of c.a.

 

  31.60 m 5 cm wide Bxed fault zone, planes along bedding 75º of c.a., FG anhedral Py in bands and diss 3%, wk sericite, 15 to 20 cm wide zones of 0.1 to 0.5 cm wide calcite vnlts in stockwork

 

  36.00-38.60 m 7 in the interval irregular 0.2 to 0.6 cm wide calcite wkly replaced to FG qtz-FG anhedral Py vnlts at 30º to 40º and 70º to 85º of c.a. as lenses

38.60

46.00

Thin bedded Silts 90%, fine grain size 0.1 to 0.8 cm wide S.S. beds 10%, lightly wavy bedding at 70º to 80º of c.a., P-C alteration, 3 to 4 per meter 0.1 to 0.4 cm wide calcite scarce rhodochrosite less calcite to qtz –FG anhedral Py lenses, less than 1 per meter hairline to 0.2 cm wide calcite vnlts at 40º of c.a.

46.00

46.25

Bxed and bleached zone, milled light grey greenish Silts, calcite to qtz, trz of rhodochrosite irregular vnlts and fragments, FG anhedral to subhedral Py diss in thin bands Py 1%

46.25

51.20

Silts 90% to 95%, wavy 0.1 to 0.6 cm wide fine grain size S.S. beds 5% to 10%, bedding at 75º of c.a., P-C alteration, 1 to 2 cm pebble dikes with calcite wkly replaced to qtz groundmass, scarce less than 1 per meter 0.1 to 0.2 cm wide calcite-trz of FG Py vnlts at 10º to 30º of c.a.

51.20

51.35

Bleached zone light grey greenish Silts, irregular calcite to qtz vnlts, FG Py trz to 1% diss

51.35

64.20

Kuc Silts 90%, wkly wavy 0.1 to 0.5 cm wide fine grain size S.S. 10%, bedding at 70º to 85º of c.a., abundant micro calcite vnlts in irregular stockwork zones, 3 to 15 cm wide zones with irregular 0.2 to 2 cm wide calcite to qtz –FG anhedral Py vnlts
    55.75 m two in the interval 0.2 to 0.7 cm wide calcite to qtz <FG Py lenses

60.85 m 5 cm wide zone of irregular 0.2 to 1 cm wide calcite to qtz-FG anhedral Py lenses, Py 3% to 5%
    61.00 m 1.5 to 2 cm wide calcite to qtz FG Py trz of ss? Vnlts at 70º of c.a.

62.50-62.75 m Fault Bx zone formed by milled and bleached Silts-calcite to qtz- chlorite? Or epidote staining of light green the rock, FG anhedral Py diss

64.20

65.64

Bxed by fault zone, formed by fragments of Silts and calcite to qtz –sericite FG anhedral and less subhedral Py vnlts, Gouge zones 2 to 5 cm wide, fault planes at 30º and 50º of c.a. Py in interval 3% to 5%

65.64

77.30

Thin bedded Silts 95%, scarce 0.1 to 0.5 cm wide fine grain size S.S. beds 5%, bedding at 80º to 85º of c.a., P-C alteration, 2 to 3 per meter irregular 0.3 to 2.5 cm wide calcite to qtz FG Py lenses and Bxed zones along bedding, Py trz to 1%

77.30

78.10

1 to 2 cm wide banded calcite to qtz FG anhedral Py trz of ss lens at 0º to 20º of c.a.,

78.10

82.19

Silts 75%, wavy 0.3 to 1 cm wide fine grain size S.S. beds 25%, bedding from 10º to 45º of c.a., P-C alteration, wk sericite in scarce calcite vnlts, 3 to 5 per meter irregular 0.1 to 0.5 cm wide calcite to qtz FG subhedral Py lenses and scarce vnlts at 60º of c.a. crossing bedding, 0.5 to 1 cm wide FG Py diss bands

82.19

82.46

Fault Bx zone, planes at 75º and 85º of c.a., Py diss 1% to 2%, scarce calcite to qtz fragments Fault zone 13 cm of Bx formed by calcite totally replaced to FG qtz- FG Py < brown to black Sph and ss fragments in milled rock, rest of the interval wkly Bxed Silts with irregular 2 to 5 cm wide Bx zones, FG anhedral Py 3% in microvnlts.

2


QTA-31

82.46 87.83 Silts 90% wk bleached zone, bedding at 40º to 55º of c.a., P-C alteration, less than 1 per meter 0.1 to 0.2 cm wide calcite to qtz lenses and less vnlts
    83.12 m 7 cm wide Fault Bx zone at 60º of c.a. scarce calcite, Py diss 1%

85.90-86.44 m Two in the interval 0.4 to 0.6 cm wide calcite to qtz FG subhedral Py, trz of Sph and ss lenses
87.83 88.05 Bx by faulting zone, fault planes along bedding, FG to medium size grain anhedral and subhedral Py diss 3% to 5%
88.05 94.65 Kuc Caracol Fm thin bedded Silts 90%, 0.1 to 0.5 cm wide S.S. beds 10%, bedding at 40º of c.a., P-C alteration, wk sericite wkly bleached zone, abundant 0.1 to 0.2 cm wide calcite to qtz -FG subhedral Py lenses every 1 to 2 cm apart, Py 3% in the interval
    88.30 m 0.6 cm wide FG subhedral Py < calcite to qtz-trz of Sph and ss lens
94.65 94.95 Fault Bx zone, milled rock, subangular < 1 cm long rock fragments, trz of calcite to qtz, Py diss trz to 1%
94.95 97.25 Silts 95% in beds 0.1 to 1 cm wide, 0.1 to 0.2 cm wide fine grain size S.S. beds 5%, bedding at 40º to 50º of c.a., P-C alteration, FG subhedral Py diss in < 0.1 cm wide lenses, Py 2%, moderately fractured zones with fractures along bedding, 1 to 3 cm wide Bx zones along bedding
97.25 99.76 Fault gouge zone along bedding, subangular fragments, bedding changing from 45º to 10º and again 40º of c.a. at bottom, banded calcite to qtz-FG subhedral to cubic Py lenses and fragments in Bx, Py 2% to 3% trz of ss? In thin sections of the Bx.
99.76 107.98 Moderate to advanced broken zone, abundant slickensides along bedding at 50º of c.a., P-C alteration, wk sericite zones of 5 to 15 cm wide Bx gouge with FG subhedral Py diss 3% to 4%, scarce 1.2 cm wide calcite to qtz FG subhedral to cubic Py trz of Sph and ss lens at 102.30 m.
107.98 108.90 Fault gouge zone, abundant milled rock and scarce calcite, some 2 to 10 cm long calcite fragments, Py 3% to 5%
108.90 113.48 Wkly bleached Kuc Caracol Fm Silts 80%, fine grain size 0.2 to 2 cm wide S.S. beds, bedding at 50º to 60º of c.a., 2 to 5 cm wide gouge Bx zones along bedding with 4% to 6% of Py diss, FG subhedral Py-calcite to qtz 0.1 to 0.2 cm wide lenses
113.48 116.70 Zones of 5 to 20 cm wide Bx by faulting zones with < 1 cm long rock and less calcite to qtz fragments in abundant milled rock, FG subhedral Py diss 4% to 6% among zones 10 to 50 cm wide of fractured rock with fractures every 2 to 10 cm apart along bedding, Py 3% to 5% in the interval and less calcite to qtz fragments
116.70 120.45 Silts 95% thin bedded, bedding at 30º of c.a., abundant 0.1 to 0.5 cm wide FG Py diss lenses, scarce 0.1 to 0.2 cm wide calcite to qtz FG subhedral Py trz of ss lenses, Py 3%, some fractures along bedding every 10 to 40 cm apart, 1 to 2 per meter 0.1 to 0.2 cm wide calcite-subhedral Py vnlts at 70º of c.a. and some along bedding, Py 2% in the interval
120.45 120.70 Fault Bx zone, milled dark grey rock, scarce calcite FG subhedral Py diss 3%, fault planes at 60º of c.a.
120.70 121.30 Fault gouge zone < 1 cm long rock fragments in dark grey muddy groundmass
121.30 123.95 Kuc Caracol Fm thin bedded Silts 95%, bedding at 10º to 20º of c.a. P-C alteration, FG subhedral Py in < 0.1 cm wide lenses 1 to 2 cm apart, Py 3., 2 in the interval 1 and 1.5 cm wide calcite to qtz < FG Py vnlt at 55º and 60º of c.a.
123.95 124.53 Advanced fractured zone, bedding at 0º to 10º of c.a., 1 in the interval 0.1 cm wide calcite<FG Py vnlt in a rotated fragment, wk sericite

3


QTA-31

124.53

126.25

Silts 95%, bedding at 20º to 10º of c.a., P-C alteration 2 zones 8 and 15 cm long of Bx by faulting with broken 0.5 to 2 cm wide calcite to qtz< Py and trz of ss vnlts, also subangular rock fragments in milled rock-calcite-sericite groundmass, 9 in the interval 0.2 to 1.2 cm wide calcite replaced to FG qtz, FG anhedral to subhedral Py trz of ss vnlts at 60º to 80º of c.a.

126.25

136.35

Silts 80% to 85%, fine grain size 0.3 to 1.5 cm wide S.S. beds 15% to 20%, bedding changing from 20º to 50º of c.a., P-C alteration wk bleached zone trz of sericite diss and in scarce fractures, moderately fractured zone with fractures along bedding 8 to 15 cm apart, abundant 0.1 to 0.4 cm wide calcite to qtz FG subhedral to cubic Py lenses 2 to 5 cm apart Py 3% to 5%

129.24-130.26 m 4 in the interval 0.1 to 0.6 cm wide calcite replaced to FG qtz FG Py trz of ss lenses
    121.98 m 5 cm wide gouge zone along bedding

136.35

136.45

Fault gouge zone, planes along bedding FG Py diss 2% to 3%

136.45

140.76

Moderate to high fractured zone abundant fractures along bedding 1 to 5 cm apart, Silts 90% to 95% thin bedded wavy irregular 0.1 to 0.5 cm wide fine grain size S.S. 5% to 10%, bedding changing from 45º to 10º of c.a., P-C alteration FG Py < calcite to qtz lenses 2 to 10 cm apart, Py 4% to 6% 20 to 50 cm wide gouge zones
    138.79-138.99 m 20 cm gouge zone mod sericite FG subhedral Py 2%

139.28-139.73 m Folded and broken zone, subangular rock fragments 0.5 to 2 cm long in muddy rock flour, Subhedral Py diss 3% to 5%

140.76

144.65

Silts 80% thin bedded, fine grain size 0.1 to 1 cm wide S.S. beds 20%, bedding at 40º of c.a., P-C alteration, wk bleaching, abundant < 0.1 to 0.1 cm wide FG subhedral Py < calcite lenses at 0.5 to 3 cm apart, Py 5%, scarce 1 to 2 in the interval 0.1 to 0.2 cm wide FG Py < calcite to qtz, trz of ss lenses

144.65

146.30

Moderate to strong fractured zone Fault gouge zones 10 to 30 cm wide, fractures changing gradually from moderate to high then a Bx zone to the depth, faults along bedding, increase of FG subhedral to cubic Py 5% to 7%, abundant < 0.1 to 0.2 cm wide calcite to qtz-cubic Py trz of ss lenses 0.5 to 2 cm apart.

146.30

148.65

Silts 95% in 0.2 to 5 cm wide beds, 0.1 to 0.3 cm wide fine grain size S.S. beds 5% to 10%, P-C alteration bedding at 55º of c.a., wk sericite moderately fractured zone with 1Bx zone 30 cm wide at 147 to 147.30 m, 8 to 10 per meter 0.1 to 1 cm wide calcite to qtz FG cubic Py, trz of ss lenses 2 to 8 cm apart

148.65

148.76

6 to 7 cm wide calcite totally replaced to FG qtz vnlt with 2 to 2.5 cm wide FG subhedral Py trz of ss band in the bottom.

148.76

153.78

Highly fractured zone (thrust fault) 10 to 30 cm long gouge zones with abundant < 1 cm long fragments in milled rock < calcite to qtz groundmass, bedding and fault planes changing from 50º to 0º and finally 50º at bottom of the interval, 1 to 1.5 m wide zones with abundant 0.8 to 1.5 cm wide banded calcite replaced to FG qtz vnlts in stock work most vnlts at 0º to 10º as lenses and less at 65º to 90º of c.a., FG to medium size grain subhedral to cubic Py 8% to 10% diss in irregular 0.2 to 0.8 cm wide bands at 0º to 10º, trz of ss and Sph

153.78

157.42

Silts 95% in beds 0.1 to 2 cm wide, scarce 0.1 to 0.3 cm wide fine grain size S.S. beds 5%, bedding changing from 50º to 30º to 0º, P-C alteration wk sericite moderately fractured zone with fault planes along bedding, 5 to 20 cm apart, 10 to 15 per meter 0.1 to 0.3 cm wide calcite to qtz-FG cubic Py trz of ss lenses 2 to 20 cm apart Py 5%, irregular 2 to 5 cm wide Bx zones between beds, 8 in 1.5 m interval at the bottom, 0.1 to 1 cm wide calcite to qtz vnlts at 60º to 85º of c.a.

157.42

160.14

Highly fractured and Bxed zone by low angle faulting, bedding and fault planes changing from 0º to 50º of c.a. gouge zones 2 to 5 cm wide between beds with

4


QTA-31

milled rock-calcite to qtz –sericite fragments in same composition fine grain groundmass, bouddinage textures, Subhedral to cubic Py-Sph and ss and brown reddish stain diss in irregular bands and lenses in walls and inside the gouge zones, Py 7% to 10%. Scarce 10 to 15 cm wide banded and Bxed calcite to qtz vnlts at 60º to 75º of c.a.

160.14

162.85

Silts 90% to 95% in 0.1 to 5 cm wide beds, bedding at 45º to 50º of c.a., P-C alteration wk sericite, 0.1 to 0.3 cm wide calcite to qtz sericite-FG cubic Py trz of ss lenses or vnlts along bedding 0.5 to 10 cm apart, Py 2% to 3%

162.85

179.35

Silts 85% to 90% in beds 0.1 to 2 cm wide, wavy 0.1 to 0.2 cm wide fine grain size S.S. beds 10% to 15%, bedding changing from 20º to 40º and again 20º of c.a. P-C alteration, wk bleaching, sericite diss, 15 to 20 per meter 0.1 to 0.2 cm wide calcite to qtz-subhedral to cubic Py lenses, just a few of them with trz of Sph and ss 1 every 2 meters 0.3 to 0.6 cm wide calcite to qtz subhedral to cubic Py, trz of AsPy and ss vnlts at 60º to 75º of c.a.

179.35

179.53

Bx by fault zone, 0.4 to 0.6 cm wide calcite to qtz FG Py As Py vnlts displaced by faulting at 50º of c.a., Fault planes at 60º to 70º of c.a.

179.53

186.50

Silts 90% to 95% wavy 0.1 to 1 cm wide fine grain size S.S. beds 5% to 10%, bedding changing from 20º to 0º then 20º at bottom, P-C alteration wk bleaching wk sericite, 10 to 15 per meter 0.1 to 0.2 cm wide calcite wkly replaced to FG qtz FG subhedral to cubic Py lenses, 1 to 3 cm apart, FG anhedral Py diss in 1 to 2 mm at both walls of the lenses, few lenses with trz of Sph and ss, scarce less than 1 per meter 0.6 to 0.8 cm wide calcite FG subhedral Py vnlts at 70º to 85º of c.a.

186.50

187.46

Broken core zones of Bx by fault, 0.6 to 1 cm wide calcite to qtz subhedral to cubic Py trz of ss broken vnlts in the Bx zones

187.46

189.60

Silts 90% to 95% bedding at 55º to 60º of c.a., 6 to 8 per meter 0.1 to 0.2 cm wide calcite to qtz FG subhedral Py lenses, 3 to 4 in the interval 0.2 to 0.3 cm wide calcite to qtz cubic Py trz of Sph and ss lenses and less vnlts at 60º of c.a. 188.70 7 cm wide gouge zone with irregular up to 1.5 cm wide calcite to qtz vnlts fragments, fault planes at 55º to 70º of c.a.

189.60

193.10

Fault gouge zone with 15% to 20º of calcite to qtz< Py trz of ss small fragments, Py 5% to 7% diss (base fault zone)

193.10

200.85

Silts 95% to 98% no bedding planes, irregular 0.2 to 1 cm by 3 to 5 cm long S.S. lenses, deposition on unstable basin, P-C alteration, 2 to 10 cm wide gouge zones at 20º, and 40º to 60º of c.a., irregular FG anhedral Py clouds, very scarce hairline to 0.2 cm wide calcite trz of FG anhedral Py vnlts

200.85

202.70

Bx by fault zone, 0.5 to 5 cm long fragments in scarce milled rock flour, wk sericite P-C alteration trz of FG anhedral Py diss

202.70

205.72

Silts 85% to 90%, sedimentation on unstable basin, very irregular 0.2 to 3 cm wide S.S. lenses, very irregular and wavy bedding at 50º to 60º of c.a. scarce less than 1 per meter 0.4 cm wide calcite to qtz < FG Py vnlts at 50º of c.a., FG anhedral Py diss in irregular small clouds Py trz to 1%

205.72

206.44

Two faults one at 205.90 m 10 cm wide at 40º to 50º of c.a., and the other at 206.15 m 2 to 5 cm wide gouge zone at 10º to 20º of c.a. with scarce fragments of calcite-adularia? FG Py in irregular 0.4 to 0.6 cm wide vnlts

206.44

214.20

Kuc Caracol Fm irregular Silts with irregular fine grain size S,.S. lenses and fragments, wavy deposition on unstable basin slump features, scarce and irregular bedding planes at 65º to 70º of c.a. P-C alteration wk sericite moderately fractured zone Faults at: 207.20 m 15 cm wide at 50º of c.a.; 208.10 m 2 cm wide at 50º of c.a.; 208.60 m 2 cm wide at 20º of c.a.; 210.50 m 1 cm wide at 60º of c.a.; 210.80 m 2 cm wide at 75º of c.a.; 212.0 to 213.30 1 to 2 cm

5


QTA-31

    wide at 0º to 10º of c.a. 213.60 m 1 cm wide at 60º of c.a.

214.20

231.00

Kuc Caracol Fm very irregular bedding Silts 80%, fine grain size 0.2 to 14 cm wide S.S. lenses or nodules 20%, wavy and irregular poorly bedded Silts, approximately bedding at 60º to 45º of c.a., less than 1 per meter hairline to 0.2 cm wide irregular calcite vnlts at 0º to 20º and 60º to 75 ºof c.a., scarce irregular FG anhedral Py clouds and small lenses

231.00

234.90

Zones 1 to 1.5 m wide of no bedded Silts with irregular 0.1 to 3 cm wide medium size grain S.S lenses between 1 to 1.2 m wide zones of Bedded Silts 60% to 70% and S.S. 30% to 40% in beds 0.5 to 2 cm wide bedding at 40º of c.a., P-C alteration wk sericite FG cubic Py < ss less calcite to qtz lenses or vnlts along bedding, trz of anhedral Py clouds and scarce 0.1 to 0.2 cm wide bands.

231.65 m 1 cm wide FG cubic Py less Sph and ss < calcite to qtz lens or band along bedding

234.90

235.69

Fault zone along bedding Bx with 0.1 to 2 cm long rock fragments in dark grey milled rock trz of calcite to qtz groundmass fault planes at 40º to 45º of c.a.

235.69

237.40

Silts 40% to 50% fine grain size light grey S.S. in beds 0.2 to 3 cm wide 50% to 60%, bedding at 45º to 35º of c.a., P-C alteration 8 to 10 per meter 0.1 to 0.2 cm wide FG cubic Py in few of them trz of ss and Sph < calcite to qtz lenses

237.40

237.60

Fault zone two crossed vnlts of FG cubic Py < ss and Sph one vnlt 1 cm wide along bedding and the other 1 to 1.5 cm wide in fault zone at 20º of c.a.

237.60

234.25

Broken core Silts 50% medium size grain S.S. in 0.5 to 5 cm wide beds, bedding at 30º to 40º of c.a., P-C alteration wk sericite in scarce fractures 3 to 5 per meter FG cubic Py trz of ss < calcite to qtz lenses

238.30-238.64 m Fault zone with 1 cm wide FG cubic Py < ss vnlt in milled rock groundmass

234.25

241.30

Kuc Caracol Fm Silts 75% to 80% fine grain size 0.1 to 0.4 cm wide S.S. beds 20% to 25%, bedding at 30º of c.a., P-C alteration wk sericite 8 to 10 per meter, 0.1 to 0.5 cm wide FG cubic Py trz of ss < calcite to qtz lenses, 3 to 4 per meter calcite to qtz < FG Py vnlts at 70º to 85º of c.a.

241.30

241.50

2 in the interval 2 to 2.5 cm wide FG Cubic Py < ss and Sph lens and a 0.8 to 1 cm wide calcite to qtz < FG Py vnlt at 75 ºof c.a.

241.50

241.80

Broken core fragments of medium size grain S.S., 8 to 10 0.1 to 0.2 cm wide FG cubic Py < calcite to qtz vnlts some with voids

241.80

242.15

10 cm wide massive Subhedral to cubic Py, 20% to 30% Sph and ss in calcite to qtz vnlt at 70º to 75º of c.a.

242.15

244.95

Kuc Caracol Fm fine to medium size grain S.S. in beds up to 50 cm wide 90%, a 10 to 12 cm wide Silts interval 10%, bedding at 30º of c.a. P-C alteration wk to moderate sericite in some calcite vnlts walls and fractures, 8 to 10 in the interval 0.1 to 1.5 cm wide calcite to qtz< FG anhedral and less subhedral Py trz of ss vnlts along bedding

244,95

258.40

Silts 90% to 95%, fine grain size irregular wavy 0.1 1 cm wide S.S. lenses or beds 5% to 10%, bedding at 40º to 50º of c.a., 4 to 6 per meter 0.1 to 0.2 cm wide FG cubic Py, in some with trz of ss-calcite to qtz lenses, 2 irregular 0.3 to 1.5 cm wide calcite to qtz < FG Py –Sph and ss vnlts or lenses at 40º to 50º of c.a. at top of the interval

258.40

259.00

Fault gouge zone with bands of FG cubic Py trz of ss in abundant milled rock groundmass fault planes at 40º of c.a. along bedding, one 1 to 1.5 cm wide calcite to qtz< sericite FG Py < ss vnlt at 20º of c.a.

259.00

268.00

Kuc Caracol Fm Silts 80% fine grain size S.S. 20%, in irregular beds 0.1 to 4 cm wide, P-C alteration. Bedding at 40º to 50º of c.a., 4 to 6 per meter 0.1 to 0.5 cm

6


QTA-31

wide FG cubic Py few with trz of ss< calcite to qtz lenses or vnlts along bedding, 1 to 2m wide zones with 8 to 10 same composition lenses or vnlts along bedding

268.00

272.05

6 to 8 per meter wider 0.4 to 1.5 cm wide just one 4 cm wide calcite to qtz FG subhedral to cubic Py < ss and Sph lenses at 50º of c.a. the wider lens at bottom of the interval

272.05

285.20

Kuc Caracol Fm Silts 70% to 75% fine grain size S.S. 20% to 25%, in lightly wavy 0.2 to 6 cm wide beds bedding at 40º to 50º of c.a. P-C alteration wk sericite in scarce calcite vnlts walls, scarce less than 1 every 2 m 0.1 to 1 cm wide calcite < sericite FG subhedral Py trz of ss lenses and scarce 0.1 to 0.7 cm wide calcite vnlts at 40º to 60º of c.a.

285.20

289.80

Kuc Caracol Fm Silts 70% to 80% fine grain size 0.1 to 2 cm wide wavy S.S. beds 20% to 30%, bedding at 45º of c.a., P-C alteration 2 to 3 per meter FG subhedral Py < Sph –ss less calcite wkly replaced to FG qtz lenses FG anhedral Py trz to 1% diss in some S.S. beds

289.80

297.48

Silts 70% to 75% fine to medium size grain 0.1 to 10 cm wide S.S. beds, bedding at 50º to 60º of c.a. wk P-C alteration less than 1 every 2 meters 0.1 to 0.3 cm wide FG subhedral Py < ss lenses, 4 to 6 per meter 0.1 to 0.2 cm wide FG anhedral to subhedral Py lenses also FG anhedral Py diss in scarce S.S. beds, Py trz to 1% scarce less than 1 every 3 meters 0.3 to 0.5 cm wide calcite vnlts at 30º of c.a.

297.48

297.92

Fractured zone broken core fractures mainly along bedding

297.82

299.95

Silts 80% fine grain size S.S. in beds 0.1 to 1 cm wide 20%, P-C alteration, scarce 2 to 3 per meter 0.1 to 0.2 cm wide FG anhedral Py lenses and just 1 of 0.8 to 1 cm wide calcite wkly replaced to Qtz< sericite trz of FG Py lens, trz of Py diss in very scarce S.S. beds

299.95

305.11

Silts 90% to 95% scarce 0.1 to 0.5 cm wide S.S. beds, bedding at 50º of c.a., P- C alteration 8 to 10 per meter 0.1 to0.2 cm wide FG subhedral Py trz of ss and less Sph < calcite wkly replaced to qtz. Lenses

305.11

307.18

1 to 2 per meter 0.1 cm wide FG Py < Calcite wkly replaced to qtz trz of ss lenses, 8 to 10 per meter 0.1 to 0.2 cm wide FG anhedral Py < calcite lenses Py 1%

307.18

307.40

Fault zone 3 cm wide gouge. Planes along bedding with a 1.5 cm wide calcite wkly replaced to FG qtz-FG subhedral Py< Sph and ss vnlt or lens at 50º of c.a.

307.40

320.30

Silts 80% to 85% fine grain size 0.1 to 7 cm wide S.S. beds 15% to 20%, P-C alteration 3 to 4 per meter 0.3 to 0.6 cm wide calcite < FG anhedral Py lenses and vnlts at 40º to 50º and 60º to 75º of c.a., 1 every 2 meters 0.1 to 0.3 cm wide FG subhedral Py trz of ss and Sph < calcite wkly replaced to FG qtz lenses

320.30

321.30

Stockwork of 0.1 to 1 cm wide irregular calcite vnlts with 1 to 2 cm pebble dikes, 2 in the interval 0.3 to 0.4 cm wide FG subhedral Py trz of ss and Sph < calcite lenses bedding at 50º of c.a.

321.30

Silts 90% fine grain size 0.1 to 0.5 cm wide S.S. beds 10%, bedding at 50º to 60º of c.a., P-C alteration, 1 in the interval 0.2 cm wide FG subhedral Py trz of ss < calcite wkly replaced to FG qtz lens, 6 to 8 per meter calcite <FG anhedral Py lenses, Py trz in the interval

324.39

324.43

1.5 to 2 cm wide FG subhedral to cubic Py < Sph and ss < Calcite wkly replaced to FG qtz lens at 60º of c.a.

324.43

327.25

Silts 90% to 95% bedding at 45º to 60º of c.a., 2 to 3 per meter 0.1 to 0.3 cm wide FG subhedral Py < Sph and ss –calcite wkly replaced to FG qtz lenses

327.25

350.22

Kuc Caracol Fm Silts 70% to 75%, fine grain size irregular 0.1 to 0.4 cm wide wavy S.S. beds 20% to 25%, bedding at 40º to 55º of c.a., wk P-C alteration to fresh at bottom, scarce 1 to 2 per meter 0.1 to 0.4 cm wide calcite < FG Py

7


QTA-31

lenses and less than 1 per meter 0.1 to 0.3 cm wide same composition vnlts at 20º to 30º of c.a.
350.22   End of Hole

8


QTA-32

MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: Feb 28 / 2005  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES 1 of  

Summary of DDH QTA-32-05; 700,505 E; 2,653,356 N, 340°/-60°, Between San Gregorio and Chicharrona hills area

From To Description
0.00 6.53 Advanced Oxidized Tuff, fine grain fragments QSPC alteration, 5% of Hematite diss staining the rock
6.53 14.02 Volcanic Tuffs, fine grain Wk QSPC alteration sericite mod diss, light brown to tan colour Goethite diss and in some vnlts zones with Goethite 3% to 5%, 4 to 6 per meter 0.1 to 0.3 cm wide Goethite< MnOx< calcite vnlts in stockwork

10.00-11.13 m Irregular 0.2 to 2 cm wide calcite < gypsum –Goethite< Mn Ox vnlts in stockwork

11.75-12.45 m irregular 0.1 to 1 cm wide calcite-gypsum-Goethite-MnOx vnlts in stockwork
  14.02 Bottom of oxidation zone
14.02 32.21 Mix oxides+sulfides zone
14.02 14.83 Bx by Fault zone planes at 60º of c.a. QSPC alteration moderate to advanced sericite in groundmass of Bx zones, fragments of light grey silts? In 15 to 25 cm wide gouge zones, Py 2% to 3%
14.83 32.21 Kuc Caracol Fm Silts 95% 0.1 to 0.3 cm wide fine grain size S.S. beds 5%, bedding changing from 0º to 50º and 40º at bottom, P-C alteration, 5 to 6 meter wide zones of oxidized rock among zones 20 cm to 3 m wide zones with Py lenses, 1 to 2 per meter 0.1 to 0.2 cm wide calcite wkly replaced to FG qtz < Py to Goethite lenses, few 0.2 to 0.4 cm wide same composition vnlts at 30º of c.a. Py trz to 1%,
32.21 38.40 Kuc Caracol Fm Silts 95% scarce irregular wavy 0.1 to 1 cm wide S.S. beds bedding at 40º of c.a., P-C alteration less than 1 per meter 0.1 to 0.5 cm wide calcite vnlts at 20º to 30º of c.a., very scarce 1 every 2 meters 0.1 to 1 cm wide calcite-rhodochrosite Fg anhedral Py lenses, Py trz in the interval
38.40 70.00 Dark grey colour Silts 95%, fine grain size 0.2 to 2 cm wide light grey S.S. beds 5%, bedding changing from 30º to 10º then 0º and finally 20º at bottom, wk P-C alteration 2 per meter 0.2 to 2 cm wide calcite partially replaced to FG qtz < rhodochrosite and bands 1 to 2 mm wide of cubic Py vnlts at 20º to 30º of c.a., FG anhedral Py clouds 1%, only calcite in vnlts 0.2 to 2 cm wide at 50º to 80º of c.a.
70.00 97.05 Light grey Silts 95% in beds 0.1 to 3 cm wide, fine grain 0.3 to 0.5 cm wide S.S. beds 5%, bedding changing from 20º to 30º and 60º at bottom, wk P-c alteration, 2 per meter 0.3 to 2 cm wide calcite wkly replaced to FG qtz trz of red hematite trz to 1% of subhedral to cubic Py vnlts at 40º and 70º of c.a., FG anhedral Py diss in 1 to 2 mm wide bands at both walls of vnlts

1


QTA-32

97.05

97.60

Bx formed by 2 to 5 cm long silts fragments in 0.1 to 0.5 cm wide calcite wkly   replaced to FG qtz < red hematite or ss? Vnlts or groundmass
97.60

99.25

Kuc Caracol Fm Light grey colour Silts 98% in beds 0.2 to 6 cm wide bedding at 50º to 60º of c.a., Wk P-C alteration, two in the interval 0.3 to 1 cm wide calcite with red hematite diss vnlts at 70º of c.a.
99.25

124.10

Silts 80% in beds 0.2 to 4 cm wide , fine grain size 0.5 to 3 cm wide S.S. beds 20%, bedding at 60º to 80º of c.a., wk P-C alteration, 2 vnlts per meter from 99.25 to 104 m and 1 per meter at bottom of the interval, 0.5 to 3 cm wide of calcite and thin bands of hematite < Fg anhedral Py 1% to 3% lenses at 60º to 80º of c.a., Fg Py diss in thin bands at both walls of vnlts.
    120.30 m 1 cm wide fault zone with 8% of subhedral Py at 60º of c.a.
124.10

134.20

Kuc Caracol Fm Silts 90%, in beds 0.2 to 5 cm wide, fine grain size 0. 5 to 2 cm wide S.S. beds 10%, bedding at 60º to 70º of c.a., wk P-C alteration, less than 1 per meter 0.1 to 0.5 cm wide calcite vnlts at 80º of c.a.
134.20 136.40 Fault gouge zone Silts fragments 0.1 to 2 cm long Subhedral Py 2%
136.40

140.00

Moderately fractured core zone, 70% of Silts and 30% of S.S. in beds 0.2 to 4 cm wide , wk P-C alteration, bedding at 50º of c.a., only two 0.2 to 0.5 cm wide calcite vnlts at 20º and 30º of c.a., some intervals as fragments with bedding at 20º ,30º and 40º of c.a.
140.00

146.33

Silts 60%, in beds 0.2 to 6 cm wide, fine grain size S.S. in 0.5 to 1 cm wide beds 40%, bedding at 40º to 50º of c.a., wk P-C alteration, five 5 to 30 cm wide faults zones in the interval, 0.1 to 1 cm long rock fragments in abundant fine grain muddy groundmass , Calcite vnlts fragments 3% to 5%, Subhedral to cubic Py 1% to 2%
146.33

152.80

Kuc Caracol, Silts 98% in beds 0.2 to 3 cm wide , bedding at 80º of c.a., wk P-C alteration less than 1 per meter calcite vnlts
152.80

166.52

Fault zone 5 to 10 cm long sections of rock, Silts 95% S.S. 5%, bedding at 70º of c.a., 5 to 20 cm wide Bx by fault zones formed by 0.1 to 2 cm long rock fragments in dark grey colour milled rock gouge, fault planes at 50º to 80º of c.a., 0.1 to 0.3 cm wide calcite vnlts fragments, Fg Py diss 3% to 5%
166.52

173.60

Fine grain size 0.2 to 2 cm wide light grey colour S.S. 80%. Silts 20%, bedding at 5º of c.a., wk P-C alteration, scarce 0.1 to 0.5 cm wide calcite vnlts at 30º of c.a.,
Fault zone from 172.52 to 173.60 m with 0.5 to 3 cm long rock fragments in abundant dark grey muddy groundmass, fault planes at 20º of c.a., Fg Py diss 1%
173.60

187.00

Silts 95%, in beds 0.2 to 3 cm wide light grey 0.1 to 0.5 cm wide S.S. beds 5%, bedding at 0º to 5º of c.a., Wk P-C alteration, only 1 vnlt of calcite 2 cm wide at 60º and at 185.65 m depth, 5 cm wide fault zone at 180.14 m along bedding
187.00

194.10

Fault zone Silts fragments up to 15 cm long with wk P-C alteration, abundant thin fractures along bedding, 0º to 5º of c.a., 187.00 to 189.00 m slickensides at 10º to 20º of c.a., 189.20-190.30 Bx in abundant milled rock groundmass
194.10

201.15

Light grey Silts 90% in beds 0.3 to 2 cm wide, fine grain size 3 to 20 2 cm wide S.S. beds 10%, bedding at 40º of c.a., some irregular and elongated Silts and less S.S. fragments inside the bedded Fm, wk P-C alteration, scarce 0.1 cm wide calcite vnlts
201.15

210.00

Kuc Caracol Fm Silts 80%,in beds 0.1 to 3 cm wide, fine grain size 0.2 to 2 cm wide S.S. beds 20%, bedding at 40º of c.a., scarce 0.2 to 0.5 cm wide calcite wkly replaced to FG qtz ands FG Py subhedral to cubic Py vnlts at 30º to 50º of c.a.6 vnlts per meter from 201.0 to 203.47 m and 2 vnlts per meter from 203.47 to 210.00 m, 0.3 cm wide FG subhedral to cubic Py lenses up to 2%

2


QTA-32

210.0

231.00

Kuc Caracol Fm silts 90% in beds 0.3 to 3 cm wide S.S. 10%, bedding at 40º to 50º of c.a. wk P-C alteration 3 per meter calcite partially replaced to FG qtz, also only calcite-FG subhedral Py vnlts at 40º to 50º as lenses, about 50º of calcite vnlts replaced to Fg qtz rest of only calcite, 2100.0-211.50 m Fault Bx zone silts fragments 01. to 1 cm long in dark grey milled rock groundmass, some qtz fragments with Fg cubic Py 3%, thin bands 0.2 to 0.3 cm wide of FG Py diss at both walls of vnlts
231.00

249.32

Silts 95%, S.S. 5% bedding at 40º of c.a., wk P-C alteration, only 2 in the interval 0.5 cm wide calcite vnlts at 30º to 50º of c.a., Fg Py diss in 1 mm wide bands at both walls of calcite vnlts
249.32

265.30

Kuc Caracol Fm fine grain 0.2 to 3 cm wide beds Silts 90%, fine grain size 0.2 to 0.5 cm wide S.S. beds 10%, bedding at 30º of c.a., wk P-C alteration, 1 per meter 0.5 to 2 cm wide calcite lens at 30º of c.a.
260.60-261.20 m Fault zone along bedding with a 2 cm wide calcite moderately replaced to FG qtz subhedral Py lenses, Subhedral Py vnlts 2% to 5%

261.10 to 261.20 m Dark grey colour gouge zone with a 2 cm wide calcite partially replaced to FG qtz Fg subhedral Py trz of Sph and ss lens at 30º of c.a.
265.30

280.00

Kuc Caracol Fm fine grain 0.1 to 3 cm wide Silts beds 70%, fine grain size 0.2 to 1 cm wide S.S. beds 30%, bedding at 30º of c.a. wk P-C alteration, 1 per meter 0.3 to 0.5 cm wide calcite partially replaced to FG qtz Fg Py trz vnlts at 10º to 30º of c.a.,
267.0- 274.30 m only 3 in the interval calcite to qtz Fg subhedral Py, less Sph and ss vnlts at 10º to 30º of c.a. at 267.0 m, 272.10 m and 274.30 m, FG anhedral Py in clouds 1%, and in 0.1 to 0.2 cm wide FG subhedral Py lenses.
280.00

300.00

Kuc Caracol Fm Silts in beds 0.2 to 3 cm wide 80%m fine grain size 0.2 to 2 cm wide S.S. beds 20%, bedding at 30º to 40º of c.a. wk P-C alteration, 2 per meter 0.2 to 1 cm wide calcite-Fg Py vnlts at 30º to 60º of c.a.
280.70-282.54 m 2 vnlts in the interval, 0.2 and 1 cm wide calcite Fg Py less sulfosalts and trz of Sph vnlt at 30º to 60º of c.a.
300.00

310.30

Silts 95%, light grey fine grain size 0.2 to 0.5 cm wide S.S. 5%, bedding at 30º of c.a. wk P-C alteration, 3 in the interval 0.2 to 0.3 cm wide white calcite vnlts at 10º to 30º of c.a. FG anhedral Py in vnlts 2%
310.30

322.00

Silts 80%, fine grain size 0.2 to 1 cm wide S.S. beds 20%, bedding at 30º of c.a. wk P-C alteration, 3 in the interval 0.2 to 0.3 cm wide calcite wkly replaced to FG qtz Fg Py vnlts at 30º to 50º of c.a., 317.40 0.2 cm wide calcite wkly replaced to FG qtz trz of ss vnlt at 50º of c.a.
322.00

340.00

Silts 70%, light green 0.2 to 3 cm wide S.S: beds 30%, bedding at 30º of c.a. wk P-C alteration, 1 vnlt per meter 0.2 to 1 cm wide calcite < FG Py vnlts at 10º to 30º of c.a.
340.00

346.25

Light green Silts 95%, S.S. in beds 0.2 to 0.5 cm wide 5%, bedding at 20º of c.a. 1 in the interval 1 cm wide calcite wkly replaced to FG qtz Fg subhedral Py less Sph lens
346.25   End of hole

3


QTA-33


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: March 5 / 2005  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES 1 of  

               Summary of DDH QTA-33-05; 700,282 E; 2,652,922 N, 340°/-60°, South of San Gregorio hill

From To Description
0.00 10.97 Poor recovery only rock fragments < 7 cm long Kuc Caracol Fm? S.S. 95%, brown Goethite diss and in 0.1 to 0.2 cm wide vnlts, scarce 0.1 to 0.2 cm wide calcite < sericite –Goethite vnlts, Goethite 2%
10.97 14.02 Kuc Caracol Fm fine grain S.S. 95% in irregular 0.2 to 1.5 cm wide beds, Silts 5%, irregular bedding at 30º to 0º then 10º of c.a., P-C alteration 6 in the interval 0.1 to 0.2 cm wide calcite< Goethite vnlts at 35º to 45º of c.a., two 1.2 and 3 cm wide calcite-Goethite in walls vnlts at 40º and 60º of c.a., trz to 1% light brown Goethite diss in irregular bands
  14.02 Bottom of irregular oxidation zone
14.02 19.65 Fine grain S.S. 95% in very irregular beds with small 0.2 to 1 cm long Silts nodules? 5%, scarce bedding planes ample waves irregular bedding, some thin intervals showing thin beds at 40º to 0º of c.a., P-C alteration, wk bleaching, scarce 4 in the interval hairline to 0.2 cm wide and one 2 cm wide calcite wkly replaced to FG qtz- FG anhedral to subhedral Py vnlts at 30º to 40º of c.a. and less at 80º to 90º of c.a., Py diss in irregular 0.2 to 0.5 cm wide bands at both walls of calcite to qtz vnlts.
19.65 27.50 Kuc Caracol Fm very irregular fine grain S.S. beds 95%, scarce 0.1 to 0.3 cm wide beds and irregular nodules of Silts 5%, wavy bedding with ample folds sedimentation on very unstable basin, intervals with beds at 0º and 10º of c.a., P-C alteration 3 to 4 per meter 0.1 to 0.2 cm wide calcite vnlts at 10º to 30º and less at 70º to 90º of c.a.
27.50 29.20 4 fault zones, 4 to 6 per meter 0.3 to 1.5 cm wide calcite < FG anhedral Py vnlts at 30º to 40º of c.a. and just one the wider at 60º of c.a. in wall of the 28 .90 m fault, FG Py diss < 1% in walls of calcite vnlts, Faults at; 27.50 m 1 to2 cm wide at 45º of c.a.; 28.26 m 1 cm wide at 60º of c.a.; 28.38 m 1.5 cm wide at 40º of c.a. and 28.90 m 1.5 cm wide at 60º of c.a.
29.20 36.30 Fine and less medium size grain S.S. 95% in very irregular and ample folded wavy beds, intervals with beds at 20º and 60º of c.a., P-C alteration, scarce 1 to 2 per meter hairline to 2 cm wide calcite trz of FG anhedral Py vnlts at 60º to 85º and less at 10º to 30º of c.a., Py trz in the interval
36.60 44.80 Wk to moderately fractured zone fine grain size S.S. 85% in irregular beds, 5 to 20 cm wide wkly Bxed by faulting zones among 20 cm to 1.2 m long no Bxed zones, wk sericite in some calcite vnlts walls, 1 to 2 per meter some broken 0.1 to 0.4 cm wide calcite < sericite vnlts at 20º to 30º of c.a., trz of FG Py
44.80 48.60 Bxed by fault zone, subangular to subrounded 0.2 to 5 cm long rock fragments in milled rock trz of sericite groundmass, scarce calcite fragments, trz of FG Py,

1


QTA-33

irregular 0.2 to 2 cm wide calcite vnlts filling cavities in 10 to 15 wide Bx zones, Bx borders at 60º and 85º of c.a.
48.60

52.16

Kuc Caracol Fm Silts 70%, fine grain size 0.2 to 1 cm wide S.S. beds 30%, lightly wavy bedding at 50º of c.a., P-C alteration, trz of sericite diss and in scarce calcite vnlts walls, less in thin fractures, Bx gouge zones 5 to 10 cm wide at 20º to 30º and 60 to 70º of c.a., scarce 0.2 to 0.8 cm wide calcite-sericite irregular vnlts in Bx
52.16

63.30

Kuc Caracol Fm fine grain size light grey 0.2 to 12 cm wide S.S. beds 60%, light grey 0.1 to 2 cm wide Silts beds 40%, wavy bedding at 50º to 60º of c.a., 1 to 2 per meter 0.1 to 0.6 cm wide calcite lenses and less than 1 per meter hairline to 0.1 cm wide calcite trz of FG Py vnlts at 30º to 40º of c.a.
63.30

64.00

Wkly bleached zone, bedding at 60º of c.a., old deformed zone now consolidated, moderate sericite in fractures and diss, 2 to 5 cm wide fault gouge zones at 60º and 85º of c.a.
64.00

84.12

Kuc Caracol Fm 0.1 to 1 cm wide light grey Silts beds 70%, fine grain size 0.2 to 8 cm wide S.S. beds 30%, lightly wavy bedding at 45º to 60º of c.a. P-C alteration wk sericite, scarce less than 1 per meter 0.2 to 1.5 cm wide banded calcite lenses, 2 to 4 per meter irregular hairline to 0.3 cm wide calcite trz of FG Py vnlts at 10º to 30º of c.a.
84.12

88.00

Zones 2 to 10 cm wide of thin bedded fine grain size and “dirty” S.S. with thin irregular calcite lenses interbedded in 2 to 6 cm wide beds, bedding at 60º of c.a.,
88.00

114.60

Kuc Caracol Fm fine grain size 0.1 to 1 cm wide Silts 70%, fine grain irregular 0.2 to 4 cm wide S.S. beds 30%. Lightly wavy bedding at 40º to 65º of c.a., P-C alteration, wk bleaching, 2 to 4 per meter 0.1 to 0.6 cm wide calcite few partially replaced to FG qtz trz of FG Py vnlts at 30º to 50º of c.a., less than 1 per meter 0.1 to 4 cm wide banded calcite lenses, trz of FG Py in very scarce calcite vnlts
114.60

119.00

Kuc Silts 90% in beds 0.2 to 3 cm wide, scarce fine grain size lightly wavy 0.1 to 0.5 cm wide S.S. beds 10%, bedding at 40º to 55º of c.a. P-C alteration, 6 to 8 per meter 0.1 to 0.3 cm wide calcite partially replaced to FG qtz vnlts at 25º to 40º of c.a.,
119.00

124.10

Silts 80% irregular fine grain size 0.1 to 5 cm wide S.S. beds 20%, wavy bedding at 50º of c.a., P-C alteration wk sericite in calcite vnlts walls and fractures and less diss, 1 to2 per meter 0.1 to 1 cm wide calcite some druse textures < sericite trz of FG anhedral Py vnlts in two sets one at 10º to 30º crossing the 50º to 70º of c.a. set of vnlts 123.90-124.10 m Bx zone by faulting abundant irregular 0.1 to 0.3 cm wide calcite vnlts FG anhedral Py diss 1% to 2%
124.10

131.60

Silts 85%, fine grain size 0.1 to 3 cm wide S.S. beds. Wavy bedding with micro folds changing from 60º to 40º and 60º at bottom, P-C alteration, 2 to 3 per meter irregular in portions folded 0.1 to 0.8 cm wide calcite trz of sericite vnlts at 20º to 30º and 40º to 70º of c.a., scarce FG anhedral Py diss in scarce S.S. beds Py trz
131.60

135.36

Broken core Silts 90% wavy 0.1 to 0.3 cm wide S.S. beds 10%, bedding changing from 40º to 20º then 0º at bottom , P-C alteration wk sericite in calcite vnlts and fractures, 8 slickensides at 20º , 40º and 50º to 70º of c.a. in the interval, scarce 1 to2 per meter 0.1 to 1.2 cm wide calcite some druse textures< sericite vnlts at 20º to 40º and 80º of c.a.
135.36

136.17

6 in the interval irregular 0.3 to 2.5 cm wide calcite vnlts and lenses, scarce druse calcite, 6 to 8 per meter 0.1 to 0.2 cm wide calcite vnlts at 0º to 15º of c.a.
136.17 143.22 Silts 80%, zones of irregular and micro folded 0.1 to 1 cm wide fine grain S.S.

2


QTA-33

beds 20%, wavy and micro folded bedding changing from 60º to 0º then 50º of c.a., 2 zones 10 and 20 cm wide of wk bleaching, near to old Bxed zones at 141 m, 1 to 2 per meter 0.1 to 0.3 cm wide calcite vnlts at 20º to 40º of c.a. and less lenses

139.60-143.22 m 8 faults most along bedding and at 60º to 85º of c.a., 6 to 8 per meter 0.2 to 0.5 cm wide folded calcite trz of FG anhedral Py lenses and scarce vnlts at 60º to 85º of c.a.

143.22

143.27

Bx by fault zone, formed by subangular 0.1 to 2 cm wide wkly bleached rock and less calcite fragments in abundant milled rock-sericite-calcite groundmass, planes at 65º at top and 45º at bottom

143.27

148.00

Irregular bedded and partially Bxed by sedimentary process rock, Silts 80%, S.S. 20%, 3 meters wide zone at bottom with wavy bedding at 50º to 60º of c.a., 8 to 10 in the interval fault planes at 0º to 20º and 60º of c.a., 8 to 10 per meter irregular and micro folded calcite vnlts or bands, trz of FG Py in 2 cm wide gouge zone at 50º of c.a. at 147.55 m depth

148.00

152.15

Fault zone 8 in the interval 5 to 30 cm wide Bx gouge zones most along bedding, 60 cm wide zone of sedimentary Bx at bottom with 5% to 7% of irregular and micro folded 0.1 to 0.3 cm wide calcite trz of FG Py vnlts 152.07-152.13 3 cm wide banded calcite FG anhedral Py less rhodochrosite vnlt at 60º of c.a.

152.15

169.30

Irregular sedimentation on unstable basin Silts 60% micro folded and wavy 0.1 to 5 cm wide fine grain size S.S. beds. Very irregular bedding changing from 40º to 10º then 70º to 85º of c.a. slump features, wk P-C alteration wk sericite in calcite and fractures, scarce less than 1 per meter fault zones at 20º to 30º of c.a. one 3 cm wide gouge Bx zone at 30º in the 162.36 m of depth, 1 cm wide gouge zone at 20º at 168.75 m

169.30

180.50

25 to 35 cm long intervals at top with very irregular and folded bedding and less Wavy and irregular bedding at bottom, Silts 80%, fine grain size 0.5 to 2 cm wide S.S. beds 20%, bedding from 20º to 40º then 60º of c.a. at bottom, P-C alteration, trz of sericite, scarce 1 to 2 per meter in general < 0.5 cm wide unusually up to 2 cm wide calcite, rhodochrosite trz of FG Py vnlts at 40º to 60º of c.a. Py trz in the interval

180.50

186.10

Moderately fractured zone, 4 to 6 fault zones most at 5º to 10º of c.a. less along bedding, Silts 80%, 0.1 to2 cm wide S.S. beds 20%, bedding at 30º to 50º of c.a., P-C alteration wk to moderate sericite in some calcite vnlts walls and fractures, scarce 3 to 5 in the interval 0.2 to 1.6 cm wide banded calcite < rhodochrosite lenses

186.10

191.50

Silts 90% lightly wavy 0.1 to 0.5 cm wide S.S. beds 10%, bedding at 20º to 40º of c.a., P-C alteration, less than 1 per meter 0.2 to 0.8 cm wide banded calcite vnlts at 30º to 40º and 60º to 75º of c.a. trz of Py

191.50

195.52

Wkly fractured zone Silts 95%, 0.1 to 0.3 cm wide S.S. beds 1’%, bedding at 50º to 60º of c.a., P-C alteration trz of sericite 8 to 10 per meter 0.1 to 0.2 cm wide FG anhedral Py lenses and less vnlts at 10º of c.a. Py 2%

191.70 m 1 cm wide fault zone at 0º to 10º of c.a.
192.25-193.23 m 2 sub parallel 0.1 to 1 cm wide faults at 0º to 5º of c.a.
194.85-195.05 m Fault gouge zone at 70º of c.a. 0.6 cm wide calcite vnlt in milled rock gouge zone
195.32-195.52 m Fault gouge zone at 30º of c.a. FG Py diss 1% to 2%

195.52

196.10

8 to 10 0.1 to 0.2 cm wide calcite wkly replaced to FG qtz < FG subhedral Py vnlts at 50º and lenses, Py 2% to 3%
196.10 218.24 Kuc Caracol Fm Silts 95%, scarce fine grain size 0.1 to 0.3 cm wide S.S. beds

3


QTA-33

5%, bedding changing from 40º to 20º at 206.5 m, at 35º at 210, 0º at 212m and 20º to 30º of c.a. at bottom of the interval, P-C alteration scarce 1 to 2 per meter including 0.6 to 1.2 m wide zones with 6 to 8 per meter 0.1 to 0.5 cm wide calcite vnlts at 40º and 60º of c.a. most as lenses at 0º to 40º of c.a. FG anhedral Py in very scarce calcite vnlts, Py trz

218.24

221.28

Kuc Caracol Fm Silts 95%, irregular and wavy 0.1 to 0.5 cm wide fine grain size S.S. beds 5%, bedding from 30º to 10º of c.a., P-C alteration wk sericite in calcite vnlts walls and fractures, 3 to 4 per meter hairline to 0.7 cm wide calcite < sericite < FG anhedral Py vnlts at 10º to 30º and 60º to 70º of c.a.

221.28

239.57

Kuc Caracol Fm Silts 80% in beds 0.1 to 6 cm wide fine grain to medium size grain at bottom 0.2 to 15 cm wide S.S. beds 20%, wavy bedding at 45º to 60º of c.a. P-C alteration trz of sericite in fractures, 2 to 3 per meter irregular 0.1 to 0.7 cm wide calcite some banded trz of FG anhedral Py vnlts at 30º to 40º of c.a. and less than 1 per meter 0.4 to 0.7 cm wide banded calcite lenses

239.57

242.20

Silts 85% zone of deformation, wide apart 0.2 to 1 cm wide calcite < sericite trz of rhodochrosite vnlts in stockwork and 5 to 10 cm wide Bx zones formed by 0.5 to 3 cm long subangular rock fragments in calcite groundmass at 20º of c.a., calcite in the interval 10%
240.85 m 4 cm wide Fault gouge zone at 50º of c.a.

242.20

243.75

Silts 95% bedding at 40º of c.a. P-C alteration wk to mod sericite 10 vnlts in the interval 0.1 to 0.5 cm wide calcite-sericite vnlts at 30º of c.a., one irregular 0.5 cm wide banded calcite lens

243.75

245.67

Fault Bx zone, subangular to subrounded 0.5 to 3 cm long rock fragments less calcite < sericite milled rock groundmass, fault planes at 30º at top and 80º at bottom

245.67

250.45

Broken zone, some slickensides at 10º to 30º , 45º and 60º to 75º of c.a., Silts 95% bedding from 25º to 10º of c.a., P-C alteration wk to moderate sericite in fracts, irregular 2 to 8 cm wide pebble dike, with some druse calcite at 20º to 40º of c.a., calcite 15%

250.45

253.00

Kuc Caracol Fm Silts 95% in beds 0.2 to 5 cm wide, fine grain size wavy 0.1 to 1.5 cm wide S.S. beds 5%, P-C alteration trz of sericite. Bedding at 30º to 40º of c.a., scarce 1 to 2 per meter hairline to 0.5 cm wide calcite vnlts at 10º to 30º of c.a.

253.00

254.81

4 irregular 1 to 7 cm wide pebble dikes zones with druse calcite at 40º to 75º of c.a. calcite 5% in the interval

254.81

257.60

Silts 90% bedding from 70º to 40º of c.a. P-C alteration only 3 0.7 to 1.2 cm wide druse calcite vnlts at 30º and 50º of c.a.

257.60

257.80

4 cm wide Fault Bx with FG anhedral Py diss 3%, and 3 cm wide calcite totally replaced to FG qtz , trz of Sph and ss vnlt at 55º of c.a.

257.80

259.68

Silts 80% wavy 0.1 to 2 cm wide fine grain S.S. beds at 70º of c.a. P-C alteration only one irregular 0.3 to 0.7 cm wide calcite wkly replaced to FG qtz trz of Sph and ss vnlt at 60º of c.a., FG anhedral Py and scarce in hairline calcite vnlts Py 2% in the interval

259.68

260.91

Consolidated Bx zone by old faulting cemented with calcite trz of rhodochrosite, trz of hematite at 70º of c.a.

260.91

279.20

Kuc Caracol Fm Silts 95% 0.1 to 2 cm wide beds, fine grain S.S. 5%, bedding changing from 40º to 0º at 271 m and 30º at bottom, P-C alteration trz of sericite, usually less than 1 per meter 0.1 to 0.4 cm wide calcite vnlts at 20º to 30º of c.a. FG Py diss in calcite vnlts.
264.65-265.35 Irregular 2 to 8 cm wide banded calcite vnlts at 10º and 60º to 70º of c.a.

4


QTA-33

269.20-270.70 m 6 to 8 per meter irreg8ular 0.1 to 0.2 cm wide calcite < FG Py vnlts in stockwork
272.00-272.50 m 2 vnlts 0.3 to 1 cm wide calcite replaced to FG qtz trz of ss and less Sph vnlts at 50º and 70º of c.a.

279.20

288.34

4 to 6 per meter irregular hairline to 1.2 cm wide calcite some of them banded, few with druse textures vnlts at 30º to 40º and 45º to 60º of c.a. trz of FG Py in scarce vnlts

288.34

304.00

Kuc Caracol Fm Silts 90% to 95% in beds 0.1 to 3 cm wide S.S. 5% to 10%, bedding changing from 2’º to 10º then 30º at bottom, P-C alteration trz of sericite in very scarce fractures, 1 to 2 per meter 0.1 to 0.5 cm wide calcite scarce with trz of FG anhedral Py vnlts at 10º to 30º of c.a.
291.76 m one 0.2 to 0.5 cm wide calcite wkly replaced to FG qtz trz of ss vnlt at 30º of c.a.

304.00

308.65

Silts 95% bedding changing from 30º to 0º at 306 m and 60º to 70º of c.a. at bottom. P-C alteration 5 to 10 cm wide zones with abundant 0.1 to 1 cm wide calcite less FG anhedral Py vnlts in stockwork, 4 to 6 per meter irregular 0.1 to 0.4 cm wide calcite few FG anhedral Py vnlts at 20º to 30º and less at 60º of c.a.
  308.65 1 cm wide Fault zone calcite fragments in gouge at 60º of c.a.

308.65

313.90

Silts 95% lightly wavy 0.1 to 0.2 cm wide fine grain size S.S. beds at 40º to 10º and 30º of c.a. at bottom, P-C alteration trz of sericite, 4 to 6 per meter irregular hairline to 0.6 cm wide calcite vnlts at 30º and 60º of c.a. and few lenses

313.90

315.10

5 to 15 cm wide stockwork zones with deformed and broken 0.2 to 1 cm wide calcite vnlts
315.00-315.10 m 7 cm wide banded calcite-less thin bands of organic material vnlt at 60º of c.a.

315.10

331.00

Silts 90% to 95%, bedding changing from 10º to 0º and 50º of c.a. at bottom, P- C alteration wk sericite 1 per meter irregular 0.1 to 1.5 cm wide calcite few with FG subhedral Py lenses, 2 to 3 0.1 to 2 cm wide calcite scarce with trz of FG anhedral Py vnlts at 50º to 60º and less at 10º to 20º of c.a., Py trz in the interval

331.00

332.16

Silts 90%, 5% to 7% of FG anhedral to subhedral Py in < 0.1 to 0.3 cm wide Py vnlts some Py in calcite vnlts walls, 4 to 6 irregular 0.1 to 0.5 cm wide calcite almost totally replaced to FG qtz vnlts in stockwork

332.16

333.26

7 cm wide Fault gouge zone at 60º of c.a. with 5% to 7% of FG Py some calcite to qtz 0.1 to 0.3 cm wide vnlts in some rock fragments, rest of the interval irregular 0.1 to 0.3 cm wide calcite to qtz FG anhedral to subhedral Py trz of ss in stockwork

333.26

333.76

Faulted and Bxed veinlet zone, broken core in less than 5 cm long fragments, Veinlet zone formed by irregular and thin 0.2 to 0.7 cm wide calcite totally replaced to FG qtz vnlts with 15% to 20% of subhedral to cubic Py, less dark grey sulfosalts and red to brown oxides from sulfosalts-brown to red Sph

333.76

334.62

Silts 90% irregular 0.2 to 1 cm wide broken calcite to qtz < FG anhedral to subhedral Py trz of ss in stockwork, Py 3% to 5%

334.62

335.89

Silts 95% wk QSPC alteration 8 to 10 per meter 0.1 to 0.2 cm wide calcite wkly replaced to FG qtz< FG anhedral to subhedral Py vnlts at 10º to 30º and 60º to 75º of c.a.

335.89

344.00

Kuc Caracol Fm light grey Silts 95% in beds 0.2 to 2 cm wide, fine grain size 0.2 to 5 cm wide S.S. beds 5%, bedding changing from 30º to 70º of c.a., P-C alteration, 1 to 2 per meter 0.1 to 1 cm wide calcite to qtz< FG subhedral Py vnlts at 50º of c.a., 0.2 to 0.3 cm wide, 3% of FG anhedral to subhedral Py lenses.

5


QTA-33

344.00

350.00

Silts 90%, light grey fine grain size 0.1 to 2 cm wide S.S. beds 10%, bedding at 60º to 70º of c.a., wk P-C alteration, wk sericite 345.00-345.70 m Fault gouge zone with rock and 0.1 to 0.2 cm wide calcite vnlts fragments, in milled rock groundmass fault planes at 5º to 10º of c.a. 346.70-348.70 m Fault gouge zone few calcite < sericite vnlts fragments at 20º of c.a.

350.00

353.85

Silts 90% to 95%, irregular bedding, no bedding planes, P-C alteration, 3 to 5 cm wide Bx by faulting zones at 349.75m, 351.0 m, and 351.50 m 2 cm wide calcite to qtz < ss vnlt at 351.78 m 351.88-353.0 m 0.1 to 0.2 cm wide calcite vnlts in stockwork

353.85

360.65

Silts in beds 0.2 to 3 cm wide 98%, bedding at 10º to 30º of c.a., P-C alteration wk sericite in calcite vnlts walls, 0.5 cm wide calcite-sericite vnlt at 10º of c.a. 358.00-360.00 0.1 to 0.2 cm wide irregular calcite vnlts in stockwork

360.65

369.47

Silts 98% in beds 0.2 to 4 cm wide, bedding changing from 40º to 0º at 367 m then 20º at bottom, wk P-C alteration, 2 per meter 0.1 to 0.5 cm wide calcite vnlts at 10º to 30º of c.a., 363.30-363.40 m Bx zone 0.1 to 0.5 cm long rock fragments in calcite groundmass, only one 0.5 cm wide Fg subhedral Py vnlt at 30º of c.a.

369.47

375.60

Silts 98% in beds 0.1 to 3 cm wide bedding changing from 20º to 5º at 370.80 m and again 20º at bottom, wk P-C alteration only 2 in the interval 0.2 and 0.5 cm wide calcite vnlts at 10º and 30º of c.a.

375.60

379.78

Silts 98% in beds 0.2 to 3 cm wide, bedding at 40º of c.a., wk P-C alteration, 30 cm wide zone with < 0.1 cm wide calcite –subhedral Py vnlts in stockwork Wkly fractured zone with slickensides at 20º and 50º of c.a.
379.78   End of hole

6


QTA-34

MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: March 14 / 2005  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES 1 of  

Summary of DDH QTA-34-05; 700,648 E; 2,653,175 N, 40°/-60°, Chicharrona Fault area

From To Description
0.00 15.40 Wkly consolidated and altered coarse grain size S.S. with subrounded 0.2 to 1 cm long sedimentary fragments. Moderate clay alteration, Hematite diss 2% staining red the rock no visible bedding planes MnOx trz
15.40 21.10 Coarse grain size S.S. wkly consolidated, 2% to 3% of subangular 0.1 to 1 cm long sedimentary rock fragments mainly Silts, wk to moderate clay alteration, 1% to 2% of light brown to tan Goethite diss, less than 1 per meter < 0.1 cm wide Goethite vnlts at 30º to 50º of c.a. Mon Ox trz
  21.10 Bottom of oxidation zone
21.10 24.78 Not bedded coarse grain size wkly consolidated S.S. with 2% to 3% of 0.1 to 0.5 cm long Sedimentary fragments increasing amount and length to the depth, wk to moderate clay alteration, wk chlorite staining to light green colour the rock, FG subhedral to cubic Py diss 1% to 2% scarce just one in the interval 0.2 to 0.3 cm wide Goethite vnlt at 40º of c.a. at 23.27 m depth
24.78 30.38 Conglomeratic sandstone wkly consolidated subangular to subrounded sedimentary fragments mainly Silts and less S.S., size of fragments increasing to the depth and varying from 0.2 to 1 length to 4 to 6 boulders per meter 2 to 8 cm long among a groundmass formed by abundant 0.2 to 0.5 cm fragments in a sandy groundmass, wk chlorite and clay alteration staining the groundmass and a few fragments, FG subhedral to cubic Py 2% to 3%
30.38 40.00 Coarse grain size S.S. with 0.6 to 1.2 m wide zones of conglomeratic S.S., apparent bedding at 30º of c.a. wk to moderate clay and chlorite alteration, irregular 0.1 to 0.2 cm wide FG Py bands at 10º to 20º of c.a., FG subhedral to cubic Py diss 2%
40.00 57.25 Coarse grain size S.S: moderate clay alteration in groundmass and in few fragments, scarce < 0.5 cm long Silts fragments, no bedding planes, trz to wk chlorite very lightly green colour staining groundmass FG subhedral to cubic Py trz to 1%
57.25 60.20 Conglomeratic Sandstone subrounded Silts < SS < 1 cm long fragments, wk chlorite wk to moderate clay alteration, wkly fractured zone with 6 to 8 fractures per meter at 50º to 70º of c.a. slickensides with chlorite at 30º of c.a. bedding plane at 40º of c.a. at bottom of the interval
60.20 65.64 FG subhedral Py !5 to 2% medium to coarse grain size S.S. wk chlorite and clay alteration FG subhedral to cubic Py diss trz to 1% 61.23-62.10 m Fractured zone milled rock by faulting fault planes with slickensides at 30º and 70º of c.a., FG subhedral Py diss 1%
65.64 78.03 Conglomeratic sandstone, usually 0.2 to 1 cm long subangular sedimentary fragments 30% to 50%, in coarse grain S.S. groundmass, increasing size of

1


QTA-34

fragments up to 23 to 10 cm long most of limestone cobbles from 72.75 m to 74.30 m apparent bedding in some wk banding at 45º of c.a., two slickensides at 45º of c.a. at 67.80 m depth
73.75-74.30 m wk oxidation to light red to brown Goethite after Goe6thite-MnOx Oxides trz.
74.90-77.00 m wk to moderate light brown reddish oxidation of Goethite-MnOx staining groundmass and few fragments
78.03

85.53

Soft conglomeratic Sandstone 40% to 50% of 0.5 to 2.5 cm long rock no sorted fragments, few up to 8 cm long, most of Silts less S.S. few of limestone and calcite in 50% to 60’% of coarse grain size S.S. groundmass, no bedding planes, moderate clay (Kaolin?) wk chlorite alteration staining to light grey greenish the groundmass and to few fragments.
85.53

87.17

Wkly oxidized to Goethite-hematite-MnOx staining groundmass to a brown reddish colour, moderate clay and wk chlorite alteration
87.17

95.90

Conglomerate sandstone 20% to 40% of subangular to subrounded 0.5 to 3 cm long sedimentary rock fragments, moderate clay and wk chlorite alteration apparent bedding at 50º of c.a. at bottom
95.90

114.00

Wkly to moderate oxidized to brown-reddish colour conglomerate sandstone, 50% to 60% of 0.5 to 2,.5 long subangular to subrounded sedimentary and few calcite fragments, wk clay and chlorite alteration apparent bedding at 40º to 50º of c.a. scarce slickensides less than 1 every 2 meters at 30º and 70º of c.a.
98.93-100.14 m wk to moderate chlorite not oxidized zone
114.00

124.52

No sorted Conglomerate sandstone formed by 30% to 50% of subrounded and less subangular 0.2 to 2 cm long sedimentary and less calcite fragments, scarce 5 to 10 cm long subrounded limestone fragments in coarse grain size S.S. groundmass. Moderate clay and wk chlorite alteration, scarce 20 to 35 cm wide fractured zones with milled S.S. and scarce rock fragments, slickensides at 10º to 20º and 50º to 70º of c.a., FG cubic Py diss 1%
124.52

130.17

Conglomeratic sandstone 50% to 60% of subrounded 0.5 to 3 cm long , few up to 2 x 8 cm sedimentary fragments in coarse grain size S.S. groundmass scarce 1 per meter slickensides at 10º to 30º and 60º to 70º of c.a., wk oxidation to brown reddish Goethite-MnOx diss apparent bedding at 40º of c.a. wk clay and chlorite alteration
127.90-128.40 m no oxidized zone wk to moderate clay and wk chlorite alteration
130.17

140.40

Wkly oxidized conglomeratic sandstone wk clay and trz of chlorite alteration, no sorted rock and no bedding planes, less than 1 every 2 meters 1 to 5 cm wide gouge zones at 40º to 60º of c.a.
139.00-140.40 m moderately fractured zone 10 to 12 per meter fractures most at 30º to 50º of c.a., 25 cm wide gouge zone at 70º of c.a. at bottom of the interval
140.40

169.42

Conglomeratic sandstone wk to moderate clay and wk chlorite alteration very scarce 5 x 7 cm limestone subangular fragments 140.40-151.90 m 60% to 80% of coarse grain size sandy groundmass, 20% to 40% of 0.5 to 2 cm long sedimentary fragments, wkly fractured zone, slickensides in zones 20 to 60 cm wide every 2 meters with planes at 10º to 30º less at 50º to 70º of c.a.
169.42

178.61

Conglomeratic Sandstone 30% to 40% of subangular less subrounded 0.2 to 2.5 cm long sedimentary and less calcite fragments in abundant coarse grain size sandy groundmass, no bedding planes, wk to moderate clay alteration, wk chlorite diss in groundmass, trz to 1% of FG subhedral PY from 169.50 to bottom of the interval, scarce 10 to 30 cm wide zones every 2 meters with 2 to 3

2


QTA-34

slickensides at 40º to 50º and 70º to 85º of c.a. 178.61-178.71 m 8 cm wide Fault gouge zone, milled S:S., planes at 50º at top and 70º at bottom, FG subhedral to cubic Py diss trz to 1%

178.71

182.45

Coarse grain size S.S. or Tuff?? With irregular 0.5 to 1.5 cm subrounded nodules or aggregates of sand size grains of calcite-chlorite and Silts, wk to moderate clay and chlorite alteration, apparent bedding at 30º of c.a. at bottom, scarce 1 to 2 per meter slickensides at 30º to 40º of c.a., FG subhedral Py diss trz to 1%.

182.45

183.13

Wkly consolidated conglomeratic S.S. with up to 70 cm wide zones of only coarse grain size S.S. in conglomeratic S.S. scarce 3 to 7 cm long Silts or altered limestone fragments, moderate clay wk chlorite alteration, 5 fractures in the interval at 60º to 70º of c.a.

183.13

186.28

Conglomeratic S.S. 60% to 70% of subangular 0.5 to 2 cm long sedimentary rock < calcite fragments in a clay and wk chlorite altered groundmass, appears like Fault gouge zone, FG subhedral Py diss 1%

186.28

188.43

Fault gouge zone, conglomeratic S.S. among 5 to 40 cm long altered Caracol Fm fragments, mod to adv clay alteration, bleached to light grey colour zone, wk sericite, gouge planes at 40º to 60º of c.a., FG subhedral Py diss 1% to 2%

188.43

194.00

Fractured and Bxed by faulting Kuc Caracol Fm, Silts 95% in beds 0.2 to 1 cm wide, most bedding at 0º to 20º of c.a., P-C alteration, scarce and broken irregular 0.2 to 0.5 cm wide calcite vnlts, 6 in the interval 5 to 40 cm wide fault gouge zones at 30º to 50º and less at 70º to 85º of c.a.

194.00

197.50

Fault Bx gouge zone, advanced broken Silts, subangular 0.1 to 1.5 cm long rock fragments in dark grey milled rock trz of sericite and calcite groundmass fault planes at 40º to 50º of c.a.

197.50

202.40

Faulted zone with 20 to 40 cm long no broken Silts fragments among 6 to 7 in the interval 2 to 30 cm wide Bx gouge zones, bedding at 40º to 50º of c.a. fault planes at 40º to 75º of c.a. wk sericite in scarce fractures, scarce calcite vnlts FG subhedral Py trz to 1%

202.40

204.98

Fault Bx gouge zone, 20 cm to 1 m wide gouge zones among 3 to 30 wkly Bxed and fractured Silts intervals, wk sericite at top varying t moderate sericite at bottom, wk bleaching at bottom of the interval, fault Bx planes at 60º to 85º of c.a. FG subhedral Py 1% to 2% diss mainly in the Bxed zones

204.98

218.24

Kuc Caracol Fm irregular and wavy bedded fine grain size S.S. 2 to 5 cm wide beds 60%, wavy 0.1 to 4 cm wide Silts beds. Bedding at 10º to 30º of c.a., 1 to 2 per meter fractures and < 0.5 cm wide faults along bedding, 2 to 3 per meter irregular thin 1 to 5 cm wide Bx gouge zones at 50º to 70º of c.a. wk bleaching P-C alteration wk to moderate sericite in fractures, scarce 1 to 3 per meter 0.1 to 0.5 cm wide calcite-trz of FG anhedral Py vnlts at 20º , 40º to 60º and less at 80º to 90º of c.a.

218.24

222.30

Kuc Caracol Fm Silts 80% in beds 0.1 to 2 cm wide, fine grain size S.S. in beds 0.1 to 0.3 cm wide 20%, bedding at 10º to 25º of c.a. P-C alteration very wk bleaching, scarce FG anhedral Py in thin 0.1 to 02 cm wide lenses or vnlts along bedding and in very scarce vnlts at 60º to 70 º of c.a., irregular 1 to 2 cm wide Bx by faulting zone along bedding at bottom of the interval

222.30

227.90

Fault gouge Bx zone formed by 0.1 to 1 cm long rock and scarce calcite <sericite fragments, trz of rhodochrosite or hematite in calcite fragments, trz of FG anhedral Py in very scarce calcite vnlts fragments, fault planes at 20 º of c.a. along bedding at top and scarce at 70 º in middle of the interval

227.90

232.85

Moderately fractured zone, wk to moderate sericite in fractures and in few calcite vnlts walls, bedding at 0 º to 5 º of c.a., 0.5 to 2 cm wide zones of irregular Bx by

3


QTA-34

faulting along bedding, some fractures and slickensides at 30 º and 75 º to 85 º of c.a.
230.25-232.85 m Moderate sericite in fractures and in calcite vnlts walls, 20 cm wide zone of irregular 0.1 to 2 cm wide calcite vnlts in stockwork in zones of folds at 231.60 to 231.80 m 232.05-232.20 m 15 cm wide Bx by fault zone wkly consolidated fault planes at 70 º to 80 º of c.a.

232.85

233.10

Fault gouge Bx zone formed by 0.2 to 1 cm long rock fragments in abundant dark grey colour milled rock trz of calcite groundmass, fault planes at 80 º of c.a.

233.10

238.00

Kuc Caracol Fm Silts 90%, irregular 0.1 to 0.5 cm wide fine grain size S.S. beds and lenses, bedding at 10 º to 20 º of c.a., P-C alteration wk sericite in fractures, fractured zone most fractures along bedding and at 60 º to 70 º of c.a., 1 to 2 per meter hairline to 0.3 cm wide irregular calcite <sericite vnlts and lenses, and in 10 to 30 cm wide zones of wide apart stockwork

238.40

241.30

Kuc Caracol Fm Silts 85% to 0%, fine grain size S.S. 10% to 15%, bedding at 30 º of c.a. wk sericite 3% to 5% of hairline to 0.8 cm wide calcite < sericite vnlts at 10 º to 30 º and less as lenses, 2 in the interval 6 to 10 cm wide Bx gouge zones at 239.22, 239.67 m with planes at 60 º and 85 º of c.a.

241.30

243.86

Broken core interval, core fragments 1 to 8 cm long, bedding at 0 º to 30 º of c.a., P-C alteration, wk sericite, 5% of irregular 0.1 to 1 cm wide calcite vnlts in small 5 to 10 cm wide apart stockwork zones, 3 in the interval 8, 15 and 23 cm wide Bx by fault zones at 241.30, 241.60 and at 243.56 m fault planes at 60 º to 70 º of c.a.

243.86

248.50

Kuc Caracol Fm Silts 90% irregular 0.1 to 1.5 cm wide fine grain size S.S> beds and lenses, bedding at 40 º to 50 º of c.a., P-C alteration wk sericite in fractures, only 4 irregular 0.5 to 0.8 cm wide banded calcite lenses at top of the interval, usually less than 1 per meter irregular hairline to 0.1 cm wide calcite <sericite vnlts at 35 º and 70 º of c.a. 3 irregular fault Bx zones 5, 10 and 30 cm wide at 245.67 m, 247.33 m, and from 247.90 to 248.20 m with fault planes along bedding

248.50

251.77

Kuc Caracol Fm Silts 80%, irregular 0.2 to 3 cm wide wavy fine grain size S.S. beds 20%, bedding at 30 º to 50 º of c.a. wk P-C alteration trz of sericite in fractures, wkly fractured zone with 2 to 3 fractures per meter most along bedding and few at 60 º to 75 º of c.a., less than 1 per meter 0.8 to 1.2 cm wide banded calcite lenses

251.77

258.50

Kuc Caracol Fm Silts 80% lightly wavy 0.1 to 1 cm wide fine grain size S.S. beds 20%, bedding at 30º of c.a. P-C alteration wk to moderate sericite in fractures, scarce less than 1 per meter hairline to 0.1 cm wide calcite< sericite lenses, also as vnlts at 20º to 40º of c.a.

258.50

271.40

Fault zone Light grey colour Silts 98% bedding seen only in few fragments changing from 30º to 50º then 30º at bottom, abundant fractures and fault planes at 30º to 50º of c.a., 10 to 70 cm wide Fault Bx zones formed by 0.1 to 2 cm long rock fragments in milled rock groundmass at: 260.91-261.10m 263.25 - 263.35;
263.65 -263.85;
258.60 -259.10m Silts fragments 0.2 to 2 cm long with 5% of calcite fragments
260.31-260.91 m moderately fractures zone with trz of FG black mineral ss?
262.80-265.30 Fault zone 5 to 10 cm Bx gouge zones moderate sericite trz of subhedral Py diss 268.90m 4 cm wide calcite FG anhedral Py 2% vnlt at 50º of c.a.
270.60-271.40 m Fault Bx gouge zone Silts fragments 0.5 to 3 cm long, moderate sericite, trz of subhedral Py

4


QTA-34

271.40

280.00

Kuc Caracol Fm light grey Silts 80% no formal bedding, P-C alteration moderate sericite in fractures and slickensides, 2 slickensides per meter at 20º to 40º of c.a. very scarce less than 1 per meter 0.1 cm wide calcite-sericite vnlts at 40º of
c.a.

280.00

284.90

Kuc Caracol Fm very irregular wavy and folded beds Silts 95% few 0.1 to 0.5 cm wide S.S. lenses, no formal bedding deposition on very unstable basin, short interval with bedding at 30º at bottom of the interval, slump features, scarce 0.1 by 2 cm Silts lenses in S.S. P-C alteration wk sericite in scarce fractures, 1 to 2 per meter hairline to 0.1 cm wide calcite < sericite vnlts at 10º to 30º and less at 60º to 75º of c.a.
281.75 m 4 cm wide fault Bx gouge at 70º of c.a. with FG anhedral to subhedral FG Py with light green colour stain diss in walls

284.90

290.00

Moderately fractured zone, irregular wavy and folded beds, bedding in scarce fragments at 30º to 0º then 40º at bottom of the interval, 5 to 10 cm wide Bx gouge zone with subangular Silts fragments in milled rock gouge, at 10º to 40º some along bedding and at 60º to 75º, 6 to 8 per meter irregular hairline to 0.5 cm wide calcite some druse textures < sericite vnlts most at 10º to 20º and less at 60º to 75º of c.a., Trz of FG anhedral Py in < 0.1 cm wide vnlts at bottom of the interval Py trz in the interval

290.00

292.30

Fault zone 5 to 30 cm wide Bx gouge zones fault planes along bedding at 15º to 20º of c.a. and 30º to 40º of c.a. FG anhedral Py with a light green stain in 0.1 cm wide vnlts at 20º to 30º of c.a. Py 1%
  292.30 Reduction to NX core diameter

292.30

296.57

Fault zone 30 cm to 1.30 m wide Bx gouge zones among 5 to 20 cm wide no broken core, S.S. 70%, Silts 30% bedding at 20º to 30º of c.a. 2 main Bx zones with planes at 30º and 50º at: 293.70 to 295.00 m with 0.1 to 3 cm long subangular Silts and 105 of calcite fragments in a wkly consolidated milled rock-calcite-sericite and about 2% to 3% of Fg subhedral Py diss groundmass
296.27-296.57 m 0.1 to 2 cm subangular mostly Silts fragments in milled rock- sericite groundmass,

296.57

320.90

Fault Bx zone with 5 to 20 cm long intervals of moderately fractured rock zones, Silts 90% in beds 0.2 to 3 cm wide at 30º to 50º of c.a. P-C alteration wk sericite in some fractures at 10º,20º and 50º of c.a., 2 main Bx by fault zones at: 307.96-313.00 m Wkly consolidated Bx gouge formed for about 40% of 0.1 to 3 cm long subangular Silts fragments in milled rock groundmass Fg cubic Py 2% diss, wk sericite in groundmass 314.30-320.90 m Bx gouge zone formed by subangular 0.1 to 2 cm long Silts and less calcite fragments in a wkly sericitized milled groundmass Cubic Py 2% diss.
296.57-301.90 Poor recovery with some voids zone

320.90

326.34

Kuc Caracol Fm Silts in 0.1 to 2 cm wide beds 85%, fine grain S.S. in beds 0.2 to 1 cm wide 15%, bedding at 40º to 50º of c.a., P-C alteration wk sericite in some broken zones, 40 to 60 cm wide rock zones with 8 to 10 fractures per meter at 10º to 30º and 60º to 75º of c.a. among 5 to 40 cm wide Fault Bx gouge zones with planes along bedding formed by 0.1 to 3 cm long subangular fragments, < 10% of calcite trz of sericite vnlts fragments, FG subhedral to cubic Py 1% to 3% diss in some of the Bxed zones and also in less than 1 per meter < 0.1 cm wide Py vnlts at 30º of c.a.

326.34

331.41

Silts 80% to 85% S.S. fine grain beds 15% to 20%, bedding at 40º of c.a. P-C alteration 3 to 25 cm wide Bx zones with 0.2 to 2 cm long rock fragments in

5


QTA-34

milled rock trz of calcite groundmass, fault planes at 10º to 30ºp of c.a. very scarce less than 1 per meter 0.1 to 0.2 cm wide calcite trz of Fg anhedral to subhedral Py vnlts at 50º to 60º of c.a. Fg subhedral to cubic Py diss 2% in scarce S.S. beds, Py trz to 1% in the interval

331.41

336.14

Broken fault zone 60% to 70% of the interval of 10 to 70 cm wide Bx gouge zones among 5 to 15 cm long less fractured rock intervals, Silts 70% to 80% fine to medium size grain S.S, 20% to 30%, bedding at 30º to 40º of c.a. 5% to 7% of < 0.1 to 0.3 cm wide calcite vnlts at 10º to 30º and as lenses, also in milled groundmass with wk sericite, trz to 1% of FG Py diss in Bx zones

336.14

337.72

Kuc Caracol Fm Silts 85%, fine grain irregular 0.2 to 2 cm wide S.S. lenses, wavy bedding at 40º to 60º of c.a., P-C alteration 15 cm wide Bx by fault zone at 336.79 m at 75º of c.a., 4 in the interval 2 to 4 cm wide calcite some of them replaced to FG qtz, < Fg subhedral to cubic Py trz of ss? Vnlts at 50º to 70º of c.a.

337.72

343.00

Silts 85% to 90%, lightly wavy bedding at 30º to 40º of c.a. P-C alteration trz of sericite in calcite vnlts, two 3 cm wide gouge zones at 340.55 m and 341.38 m along bedding 1% to 2% of thin irregular 0.1 to 0.2 cm wide calcite trz of sericite vnlts at 10º to 30º of c.a. and as lenses trz to 1% Fg subhedral Py diss in gouge zones

343.00

346.05

Fault zone 905 of the interval of Bx gouge among thin zones of less fractured rock intervals, 3% to 5% of calcite wkly replaced to FG qtz fragments- trz of sericite in gouge, Cubic Py in irregular 0.1 to 0.2 cm wide lenses and less vnlts at 10º to 30º of c.a. Py 2% to 3% in the interval

346.05

347.70

Kuc Caracol Fm Silts 80% to 85% in 0.1 to 1 cm wide beds. Fine grain S.S. 15% to 20%, wavy bedding at 40º of c.a. P-C alteration 5% of 0.1 to 0.3 cm wide subhedral to cubic partially with light green stain Py lenses, scarce and thin calcite in walls of Py lenses and vnlts

347.70

347.78 Fault gouge zone at 80º of c.a.

347.78

352.35

Silts 85% bedding at 30º to 40º of c.a. P_C alteration wk sericite in fractures at bottom, 8 to 10 cm wide Fault gouge zone at 348.80 at 60º of c.a. 1% of Fg subhedral Py in very scarce < 0.1 cm wide lenses, very scarce less than 1 per meter hairline to 0.1 cm wide calcite < sericite vnlts at 60º to 70º of c.a.

352.35

355.32

Irregular 0.5 to 20 cm wide fine grain S.S: beds 50% at top, more Silts and about 10% of S.S. at bottom, P-C alteration wk sericite, 4 to 6 per meter 0.1 to 0.4 cm wide calcite < sericite trz of Fg subhedral Py vnlts at 10º to 30º of c.a. 13 cm wide Bx fault zone at 353.50 m and at 70 and 85º of c.a.

355.32

356.01

Fault Bx zone Fault Bx zone. Subangular 0.2 to 4 cm long rock fragments, some slickensides along bedding, trz of sericite in fractures and in milled rock groundmass

356.01

359.40

Silts 70%, fine to medium size grain wavy 0.2 to 3 cm wide S.S. beds, wavy bedding at 30º to 40º of c.a. P-C alteration wk sericite, 2 to 3 in the interval 0.1 to 0.4 cm wide calcite vnlts at 60º to 75 ºof c.a.
357.73-358.49 m Fault Bx zone most planes along bedding 1% to 2% of calcite- Fg subhedral Py vnlts fragments.
359.05-359.40 m Fault zone at 60º of c.a. crossing bedding 1% of calcite< sericite vnlts fragments

359.40

362.30

Kuc Caracol Fm medium size grain 0.2 to 2 cm wide S.S. beds 40% to 50%, wavy bedding at 40º to 30º of c.a., P-C alteration wk sericite 5% of hairline to 2.5 cm wide calcite < organic material lenses
361.00-361.45 m Bx zone 3% to 5% of calcite < organic material vnlts fragments, Fg subhedral Py trz in scarce calcite lenses

6


QTA-34

362.30

365.40

Fine to Medium size grain S.S. 100%, bedding at 0º to 15º of c.a., 0.1 to 0.4 cm wide bands with organic material diss, 6 to 8 per meter 0.1 to 0.5 cm wide calcite < sericite vnlts at 0º to 30º and 70º to 85º of c.a.

365.40

373.00

Kuc Caracol Fm Silts 75%, irregular 0.2 to 5 cm wide fine grain S.S. beds and very irregular lenses, sedimentation on unstable basin, very irregular bedding from 5º to 30º of c.a., P-C alteration, 6 in the interval 0.5 to 5 cm wide Bx gouge zones at 30º. 60º to 90º of c.a., 2 to 3 per meter irregular 0.2 to 0.6 cm wide calcite< sericite vnlts at 0º to 40º of c.a.

373.00

373.65

Two 5 and 20 cm wide Bx gouge zones at 60º and 75º of c.a., Fg subhedral Py in four 0.2 to 0.6 cm wide calcite vnlts, also Fg subhedral Py diss in Bx zones Py 1% to 2%

373.65

383.95

Kuc Caracol Fm irregular 0.2 cm to 1.1 m wide fine to medium size grain S.S. beds 70% to 80%, 0.1 to 0.2 cm wide Silts beds in sections up to 45 cm wide, irregular and wavy bedding changing from 0º to 30º, bedding in the 45 cm long Silts fragment or section at 60º of c.a., P-C alteration wk to moderate sericite in some calcite vnlts, various 0.1 to 0.2 cm with bands with organic material diss, 5% to 7% of irregular 0.1 to 1 cm wide calcite < sericite lenses and less < 0.1 cm wide vnlts at 60º to 75º of c.a., 3 in the interval 5 to 15 cm wide Bx gouge zones at 60º to 85º of c.a. trz to 1% of Fg subhedral Py diss in thin irregular bands and in scarce calcite vnlts at top of the interval

383.95

389.74

Silts 80%, 0.1 to 30 cm wide fine to medium size grain S.S. beds 20%, wavy bedding at 40º to 20º of c.a. P-C alteration trz of sericite in 0.1 to 0.2 cm wide calcite vnlts at 20º to 30º in S.S. beds, wk to moderate fractured core, 3 in the interval 1 to 5 cm wide Bx gouge zones at 386.70 m; 387.32 m and 338.70 m, usually less than 1 per meter hairline to 0.2 cm wide calcite vnlts at 5º to 20º of c.a
389.00-389.74 m 8 in the interval irregular 0.1 to 0.4 cm wide calcite < sericite vnlts most at 10º to 20º of c.a.

389.74

390.40

Bxed zone formed by 20% to 30% of 0.5 to 1 cm long calcite replaced to FG qtz fragments+5% of FG cubic Py –trz of black mineral ss? In milled rock < calcite trz of sericite groundmass, fault planes at 75º of c.a.

390.40

393.50

Silts 70%, fine to medium size grain S.S. in beds 0.2 to 3 cm wide, bedding at 30º of c.a., P-C alteration, four 2 to 15 cm wide Bx gouge zones at: 390.90 at 80º of c.a.;392,28 m at 60º of c.a.; 392.80 at 30º of c.a. and 392.95 at 30º of c.a., 8 to 10 per meter irregular 0.1 to 0.5 cm wide calcite partially replaced to FG qtz < FG subhedral Py vnlts in wide apart stockwork

393.50

397.60

Moderate to advanced fractured zone, core fragments 1 to 5 cm long, few 8 to 10 cm long, Silts 90% bedding at 30º of c.a., P-C alteration, 9 in the interval 1 to 5 cm wide Bx gouge zones, just one with 5% of calcite fragments at 30º of c.a. along bedding, others at 60º to 80º of c.a. with only rock fragments, less than every 2 meters hairline calcite vnlts at 80º to 85º of c.a.

397.60

405.08

Kuc Caracol Fm Silts 95% in beds 0.2 to 2 cm wide lightly wavy bedding at 30º to 40º of c.a., P-C alteration, only two in a 10 cm wide section at top of the interval 0.1 to 0.2 cm wide calcite wkly replaced to FG qtz < Fg subhedral Py vnlts at 20º of c.a.

405.08

413.61

Silts 95%, bedding changing from 40º to 15º then again 40º of c.a., P-C alteration less than 1 every 3 meters 0.1 to 0.2 cm wide calcite lenses and vnlts at 10º to 15º of c.a.
405.08-405.88 m Wkly Bxed by fault zone wk deformed 0.5 to 5 cm long angular rock fragments in very scarce milled rock filling 0.1 to 0.5 cm wide fractures
407.75-409.00 m 1 to 5 cm wide Bx gouge zone at 0º to 30º of c.a. along

7


QTA-34

    bedding trz of sericite

413.61

414.15

Silts 95% bedding at 40º to 45º of c.a. P-C alteration, 8 to 10 < 0.1 cm wide irregular FG anhedral Py lenses in the interval, irregular 0.1 to 0.5 cm wide calcite to qtz < FG Py vnlts at 75º to 85º of c.a. Py 1% to 2%

414.15

416.81

Bx fault zone irregular and deformed 0.1 to 2 cm wide calcite partially replaced   to Fg qtz, 1% to 2% of Fg subhedral Py vnlts filling voids in Bx

416.81

417.78

Silts 95% 6 to 8 in the interval 0.1 to 0.6 cm wide calcite partially replaced to Fg qtz 1% of FG Py vnlts at 60º to 85º of c.a. and few and < 0.1 cm wide same composition vnlts at 10º to 30º of c.a.

417.78

418.35

Irregular 0.4 to 2.5 cm wide calcite almost totally replaced to FG qtz, FG subhedral Py 10% trz of ss? In 2 to 3 subparalle vnlts jointing in parts forming just wider vnlt at 0º to 5º of c.a.

418.35

420.00

Moderately fractured zone Silts 90% bedding at 50º of c.a. abundant fractures and slickensides along bedding, just one 30 cm wide Bx gouge zone with 5% of calcite to qtz fragments at 419.50 m

420.00

429.46

Moderately fractured zone Silts 80% irregular and wavy 0.3 to 1 cm wide fine grain size S.S. lenses and beds, wavy bedding changing from 40º to 50º of c.a. and 75º to 85º at bottom of the interval, 6 to 8 fractures per meter most along bedding also at 10º to 30º of c.a., scarce at 75º to 90º of c.a., 5 cm wide Bx gouge zone at 423.10 m at 80º of c.a. 2 cm wide Bx gouge zone at 428.40 at 80º of c.a.

429.46

436.25

Silts 90% bedding at 75º to 85º of c.a., P-c alteration, scarce 1 to 2 per meter hairline to 0.1 cm wide calcite vnlts at 20º to 40º of c.a., one 15 cm wide broken core zone at 432.25 m

436.25

438.90

Silts 90% bedding at 75º to 85º of c.a., P-C alteration some 15 to 35 cm wide broken zones at 436.30 to 436.62 with rock fragments up to 5 cm long and fault planes at 20º to 30º of c.a.; 436.85-437.00 Rock fragments < 2 cm long less than 1% of calcite vnlts fragments, fault planes at 10º to 30º of c.a.; 437.69- 438.30 m 2 to 3 cm wide Bx gouge zone among less fractured rock intervals up to 5 cm long, fault planes at 20º to 40º of c.a., less than 1% of calcite fragments; 438.60-438.90 m Bx gouge zone 0.1 to 2 cm long rock and 5% of calcite vnlts fragments Fg Py 1% to 2%, fault planes at 75º to 85º of c.a. along bedding

438.90

443.79

0.1 to 1 cm wide beds of Silts 90%, lightly wavy bedding 65º to 85º of c.a. Wk P- C alteration 1 per meter hairline to 0.3 cm wide calcite < FG anhedral Py vnlts at 30º to 40º of c.a. Py trz in the interval

443.79

473.90

Kuc Caracol Silts 90% in beds 0.2 to 3 cm wide, fine grain S.S. 10% in beds 0.5 to 4 cm wide, bedding at 50º to 70º of c.a. P-C alteration wk to moderate sericite, 20 cm to 1.1 m wide zones of moderate fractured rock, fault gouge zones from 469.39 to 469.69 m and from 470.30 to 470.50 m, few slickensides with cubic Py, usually 2 per meter 0.5 to 1 cm wide calcite partially replaced to FG qtz and 2% to 3% of Fg Py vnlts at 40º to 60º of c.a. From 448.10 to 448.85 and from 464.70 to 465.12 m zones with 0.1 to 0.5 cm wide calcite to qtz < Fg cubic Py vnlts in stockwork and very scarce trz of black mineral in vnlts ss?

473.90

490.00

Silts 98% in beds 0.2 to 3 cm wide bedding changing from 20º to 0º and 20º to 30º at bottom of the interval, P-C alteration wk sericite in few slickensides at 30º to 60º of c.a., wkly fractured zone, usually 2 per meter 0.5 to 1 cm wide calcite few of them partially replaced to Fg qtz-trz of subhedral Py vnlts at 10º to 40º of c.a. scarce up to 0.5 cm wide druse calcite vnlts

490.00

513.89

Silts 90%, in beds 0.2 to 5 cm wide, fine grain size 0.5 to 3 cm wide S.S. beds 10%, bedding 20º to 30º of c.a. changing to 0º at bottom, wk P-C alteration, 6 slickensides with wk sericite at 30º to 50º of c.a. and one 20 cm wide Fault

8


QTA-34

gouge zone at 496.16 to 496.36 m , from 490 to 509 m 1 per meter and from 509 to 511.20 3 per meter 0.5 to 1 cm just one 17 cm wide calcite scarce of them wkly replaced to FG qtz - Fg subhedral and less cubic Py vnlts at 30º to 50º of c.a.

513.89

 

End of hole

9


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

 

DATE: Nov 6 / 2005  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES    

Summary of DDH QTA-35-05; 699,639 E; 2,652,529 N, 1919 ASL 340°/-60°, Concordia area

From To Description
0.00 18.28 Drilled with Tricone bit -No core- Casing
18.28 26.85 Caracol Fm grey to dark grey Silts 90% in beds 0.2 to 2 cm wide beds, 0.1 to 0.5 cm wide gray color fine grain size S.S. beds 10% wkly wavy bedding at 60º to 80º of c.a., P-C to wk QSPC alteration, 2 to 3 per meter 0.1 to 0.7 cm wide calcite wkly replaced to FG qtz trz of FG anhedral Py vnlts at 20º to 30º and 70º to 90º of c.a., scarce irregular 0.1 to 0.2 cm wide FG anhedral Py lenses, Py total 1% to 2% trz of brown to orange Goethite in scarce microvnlts. 26.80
26.85 28.00 4 to 5 in the interval 0.3 to 2 cm wide calcite moderately replaced to FG qtz < FG Py vnlts forming zones up to 7 cm wide along bedding, 0.1 to 0.3 cm wide FG anhedral Py lenses and less vnlts at 90º of c.a.
28.00 41.45 Caracol Fm. grey to dark grey irregular 0.1 to 2 cm wide Silts beds 90% wavy 0.2 to 1 cm wide fine grain size grey color S.S. beds 10%, bedding at 60º to 80º of c.a., P-C to wk QSPC alteration, irregular 1 to 2 per meter 0.1 to 2 cm wide calcite with FG anhedral Py lenses in walls vnlts at 0º to 20º and 80º to 90º of c.a. Py < 1% in the interval
41.45 42.00 Fault gouge zone, irregular calcite partially replaced to FG qtz less FG anhedral Py fragments up to 2 cm wide in a dark grey color milled rock and FG anhedral Py groundmass, Fault planes at 60º to 80º of c.a. along bedding.
42.00 45.50 Irregular 0.2 to 1 cm wide calcite partially replaced to FG qtz trz of FG anhedral to subhedral Py in wide apart vnlts in stockwork, trz of sericite in few vnlts walls, Py trz to 1%, scarce druse textures in calcite-qtz. Vnlts
45.50 53.00 Caracol Fm. grey to dark grey 0.1 to 1 cm wide Silts beds 90% to 95%, 0.1 to 0.5 cm wide fine grain size S.S. beds 5% to 10%, bedding at 70% of c.a., P-C to wk QSPC alteration, 1 to 2 per meter 0.1 to 0.2 cm wide calcite- trz of sericite inn walls vnlts at 50º to 70º of c.a. and scarce lenses, trz of FG anhedral Py.
53.00 60.30 Bedding at 70º of c.a. wk QSPC alteration, wk to moderate sericite in microvnlts at 10º to 30º of c.a., 1 to 2 per meter irregular 0.1 to 0.7 cm wide calcite-trz of FG subhedral Py vnlts at 0º to 10º the thinner vnlts and at 70º to 80º of c.a. the wider calcite vnlts, Py trz in the interval
60.30 76.50 Caracol Fm. thin bedded Silts 90% to 95%, bedding at 70º to 80º of c.a., P-C to wk QSPC alteration, less than 1 per meter irregular hairline to 0.2 cm wide white

1



calcite-trz of sericite and FG anhedral Py vnlts at 10º to 30º of c.a. and scarce at 60º to 70º of c.a., Py trz, scarce druse textures in vnlts

71.30 m -76.50 m anhedral Py in 0.1 to 0.2 cm wide calcite vnlts and irregular lenses, Py 1% to 2% in calcite vnlts and in irregular lenses.
76.50

79.00

Bx by fault zone 2% to 4% of irregular sub rounded 0.2 to 1 cm wide calcite partially replaced to FG qtz fragments, abundant sub angular 0.1 to 2.5 cm long rock fragments in rock flour, trz to 1% of fine grain subhedral to cubic Py diss in groundmass, also Py in some calcite to qtz vnlts fragments, Fault planes along bedding.
79.00

79.50

8 to 10 in the interval irregular 0.2 to 1.5 cm wide calcite partially replaced to FG qtz<FG subhedral Py vnlts at 60º to 80º of c.a. also along bedding Py 2%
79.50

99.35

Caracol Fm. thin bedded grey to dark grey Silts 90% to 95%, 0.1 to 0.3 cm wide fine grain size S.S. beds 5% to 10%, bedding at 70º to 80º of c.a., P-C alteration, trz of sericite in scarce microvnlts at 10º to 30º of c.a., 2 to 3 per meter irregular 0.1 to 0.2 cm wide calcite vnlts.
99.35

101.35

Wide apart stockwork zone formed by irregular 0.2 to 1 cm wide calcite partially replaced to FG qtz trz of FG subhedral to cubic Py vnlts
101.35

108.40

Silts 90% to 95% irregular wavy 0.1 to 0.8 cm wide fine grain size S.S. beds 5% to 10%, bedding at 65º to 75º of c.a., P-C alteration, 5 to 7 per meter irregular 0.1 to 0.2 cm wide calcite vnlts at 30º to 50º and less at 70º to 90º of c.a. some calcite as lenses
108.40

108.60

Broken core, moderate sericite in microvnlts at 10º to 30º of c.a. wk QSPC alteration
108.60

117.20

Silts 75% to 85% in irregular 2 to 30 cm wide beds, wavy 0.2 to 3 cm wide fine grain size S.S. beds, cross-bedding and scarce closed folds features, bedding in general at 70º to 85º of c.a., P-C to wk QSPC alteration, 2 to 4 per meter irregular hairline to 0.5 cm wide calcite vnlts at 10º to 40º of c.a. and lenses, trz of sericite in calcite vnlts walls, trz of FG anhedral Py.
117.20

118.00

Fine to medium size grain wavy 0.2 to 2 cm wide S.S. beds 60%, Silts 40%, irregular bedding at 70º of c.a., 5 to 6 in the interval calcite. trz of FG anhedral Py vnlts at 20º to 30º and 60º to 75º of c.a.
118,00

125.60

Silts 90%, scarce irregular and wavy 0.1 to 2 cm wide fine grain size S.S. beds 10%, P-C alteration, 1 to 3 per meter irregular hairline to 0.2 cm wide calcite vnlts at 30º to 40º of c.a. and scarce lenses
125.6

130.72

Caracol Fm wavy 0.5 to 5 cm wide medium size grain S.S. beds 50%, 0.1 to 2 cm wide Silts beds 50%, bedding at 60º to 70º of c.a., P-C alteration, 2 to 4 per meter 0.1 to 0.7 cm wide calcite vnlts at 30º to 40º and like lenses at 60º to 70º of c.a.
130.72

142.43

Caracol Fm. Irregular bedding on unstable basin wavy features, 0.2 to 60 cm wide medium size grain S.S. beds 60%, some beds with irregular sub rounded 0.1 to 1 cm long siltstone fragments, 0.1 to 5 cm wide silts beds 40%, bedding at 50º of c.a. P-C alteration, 1 to 2 per meter 0.1 to 0.4 cm wide calcite vnlts at 30º and 60º of c.a.

135.0- 136.60 m twelve in the interval 0.1 to 1 cm wide calcite partially replaced to FG qtz trz of FG anhedral Py vnlts at 30º to 50º of c.a., zones up to 15 cm wide of calcite wkly replaced to FG qtz vnlts in stockwork, FG anhedral Py diss in some walls of calcite vnlts.

142.19 m 0.2 to 0.4 cm wide calcite partially replaced to FG qtz trz of ss vnlt at 60º of c.a.
142.43

142.60

Irregular 8 to 10 cm wide calcite trz of Stibnite and ss veinlet at 30º of c.a. druse texture FG subhedral Py 5% (Dolores Vein?)

2



142.60

144.30

Silts in beds 0.1 to 5 cm wide 60%, 0.5 to 60 cm wide medium size grain S.S. beds 40% fold zone some beds at 0º to 10º of c.a. irregular and deformed 0.1 to 1 cm wide calcite partially replaced to FG qtz vnlts in wide apart stockwork.

144.30

149.30

Wavy and sedimentation deformed Silts in beds up to 10 cm wide 60%, medium size grain 0.1 to 50 cm wide “dirty” S.S. beds 40%, wavy bedding at 70º of c.a., scarce 1 to 2 per meter irregular 0.1 to 1 cm wide calcite vnlts and lenses, vnlts at 0º to 10º and 70º to 90º of c.a., scarce FG anhedral Py in small zones in few calcite vnlts walls or like thin bands in calcite lenses, Py < 1%

149.30

163.15

Caracol Fm, Silts 90% to 95%, 0.1 to 0.5 cm wide fine grain size S.S. beds 5% to 10%, lightly wavy bedding at 65º to 80º of c.a., P-C alteration, 1 to 2 per meter 0.1 to 0.5 cm wide calcite vnlts at 30º to 45º of c.a. and like lenses, trz of FG anhedral Py in very scarce calcite vnlts.

163.15

163.45

Sedimentary Bx, sub angular to angular 0.2 to 2 cm long rock fragments in calcite and rock groundmass, FG anhedral Py < 1%

163.45

164.80

Silts 90% to 95%, P-C alteration bedding at 70º of c.a., 9 in the interval hairline to 0.5 cm wide calcite vnlts and lenses, irregular 0.1 to 0.2 cm wide FG anhedral Py lenses, Py 2%

164.80

165.15

Fault Bx zone, fault planes at 45º and 60º of c.a., irregular 0.2 to 2 cm long calcite partially replaced to FG qtz fragments in milled rock and scarce calcite groundmass FG anhedral Py 1% to 2% diss in spots in the groundmass.

165.15

179.00

Caracol Fm, 0.5 to 4 cm wide Silts beds 95%, S.S. 5%, bedding at 60º to 70º of c.a., P-C alteration, 2 to 3 per meter 0.2 to 0.5 cm wide calcite trz of FG anhedral Py vnlts at 10º to 20º of c.a., Py 1% in the interval

179.00

194.47

Caracol Fm 0.5 to 3 cm wide Silts beds at 60º to 70º of c.a. P-C to wk QSPC alteration, 3 per meter 0.3 to 0.5 cm wide calcite partially replaced to FG qtz trz of FG anhedral Py vnlts at 30º to 50º of c.a. FG anhedral Py and trz of ss in few calcite partially replaced to FG qtz vnlts.

194.47

1991.0 Fault zone

194.47 m-195.85 m 5 to 10 cm wide Bx zones with 0.5 to 1 cm long Silts fragments in abundant back color milled silts groundmass, Two 20 cm wide Bx zones with 1 to 2 cm long Silts fragments and FG anhedral Py diss 2% to 3%

195.85 m- 199.10 m Broken zone, 90% of sub angular rock fragments in 10% of milled rock groundmass

199.10

231.00

Caracol Fm, 0.5 to 2 cm wide Silts beds 95% to 100%, bedding at 5º to 40º of c.a. P-C alteration
Fault zones from 205.8 m to 206.8 m and from 207.80 m to 208.95 with fault planes at 10º to 20º of c.a.

199.10 m 210.00 0.1 wide by 4 cm long calcite totally replaced to FG qtz vnlts in wide apart stockwork zone

210.00 m- 231.00 m 2 per meter 0.2 to 0.5 cm wide calcite trz of FG anhedral Py vnlts at 20º to 40º of c.a.

219.40 m- 219.60 m Stock work zone of 0.1 to 1 cm wide calcite partially replaced to FG qtz trz of FG anhedral Py vnlts

231.00

244.00

Caracol Fm 0.5 to 2 cm wide Silts beds 95%, 0.5 to 1 cm wide fine grain size S.S. beds 5%, bedding at 20º to 0º at 235 m depth then 30º to the bottom of the interval, P-C alteration, 3 to 4 per meter 0.1 to 0.5 cm wide and few up to 1 cm wide calcite partially replaced to FG qtz-FG anhedral Py irregular vnlts at 30º to 40º of c.a., 0.1 to 0.2 cm wide FG anhedral Py lenses, Py 5% in the interval

238.60 m -241.80 m 3 fault zones 1 to 20 cm wide with planes at 10º, 40º and 60º of c.a.

244.00

283.26 0.5 to 4 cm wide Silts beds 95%, 0.5 to 1 cm wide fine grain size S.S. beds 5%,

3



bedding at 20º to 40º of c.a., P-C alteration, 2 per meter 0.2 to 0.5 cm wide calcite trz of FG anhedral Py vnlts at 40º to 70º of c.a. and very few vnlts at 20º of c.a.

259.30 m -259.55 m Stockwork of 0.1 to 2 cm wide calcite partially replaced to FG qtz-FG anhedral Py vnlts, also 0.1 to 0.2 cm wide FG anhedral Py lenses

247.80 m- 247.90 m Fault zone at 40º of c.a. sub rounded 1 to 3 cm long rock fragments

248.90 m -249.05 m Fault zone sub rounded 0.5 to 2 cm long rock fragments 90% in 10% of milled rock groundmass, fault planes at 40º of c.a.
    249.30m 249.50 m 10 cm of gouge zone and 10 cm of Fault Bx at 80º of c.a.

283.26

283.46

00.5 cm wide calcite partially replaced to FG qtz-anhedral botryoidal Py vnlt at 30º of c.a.

283.46

301.75

Caracol Fm 0.2 to 2 cm wide Silts beds 90% to 95%, wavy irregular 0.2 to 1 cm wide fine grain size S.S. beds 5% to 10%, wavy bedding changing from 40º at top, 0º to 10º at 290-299 m and 20º at bottom of the interval, P-C alteration, 2 to 3 per meter irregular hairline to 0.3 cm wide calcite vnlts at 0º to 30º of c.a. scarce druse textures in calcite vnlts.

301.75

302.30 Fault zone only dark grey mud recovered

302.30

330.30

Caracol Fm grey compact core, 0.1 to 2 cm wide Silts beds 95%, wavy 0.1 to 1 cm wide fine grain size S.S. beds 5%, bedding from 20º to 0º and 20º at bottom, fold zone, P-C alteration, very scarce 1 to 2 every 2 to 3 meters 0.1 to 1.2 cm wide calcite-trz of FG anhedral Py vnlts at 30º to 40º of c.a. increasing amount of vnlts to 3 to 4 per meter at the bottom of the interval, vnlts at 30º to 50º of c.a. few at 10º of c.a. Py trz in the interval

330.30

331.08

Grey to dark grey 0.1 to 1 cm wide silts beds 95%, fine grain size S.S. beds 5%, organic material? Staining to dark grey the core, bedding at 20º to 30º of c.a., P- C alteration, 10 in the interval hairline to 0.2 cm wide irregular calcite-FG anhedral Py vnlts at 20º to 40º and 60º to 80º of c.a. Py 1% to 2% in the interval

331.08

333.65

Broken core wall of Fault zone wide apart stockwork zone formed by 0.1 to 0.3 cm wide calcite partially replaced to FG qtz-FG anhedral Py vnlts. Py 2% to 3%

331.78 m-332.00 m 15 cm wide Fault zone, dark grey gouge, fault planes at 30º and 40º of c.a. scarce 2% to 3% of calcite vnlts fragments, Py diss 1%

332.00 m – 332.10 m 5 cm wide calcite totally replaced to FG qtz FG subhedral Py vnlt at 30º of c.a. Py 5% to 7%

333.65

334.70

Caracol Fm dark grey colour thin bedded Silts 98%, P-C alteration, 5 in the interval 0.1 to 0.4 cm wide FG subhedral Py and scarce calcite partially replaced to FG qtz vnlts at 40º to 60º of c.a. Py 2% in the interval

334.70

336.60

Silts 98% bedding at 0º to 10º of c.a. P-C alteration, scarce FG anhedral to subhedral Py in irregular 0.1 to 0.2 cm wide lenses Py 1%

336.60

336.80

2 cm wide calcite replaced to FG qtz lens with 0.1 to 0.2 cm wide FG to medium size grain subhedral Py and organic material bands at 15º of c.a.

336.80

338.33

Silts 95% to 98% in beds 0.1 to 2 cm wide bedding at 10º to 30º of c.a. wkly broken core P-C alteration wk sericite in some calcite vnlts walls and in micro fractures at 10º to 30º crossing beds, 2 in the interval 0.1 to 0.3 cm wide calcite replaced to FG qtz with FG subhedral Py lenses and scarce vnlts at 60º to 80º of c.a. Py < 1% in the interval

338.33

352.12

Kuc Caracol Fm grey colour 0.1 to 2 cm wide Silts beds 95% to 98%, scarce irregular 0.1 to 0.5 cm wide wavy fine grain size S.S. beds 2% to 5%, fold zone bedding changing from 20º to 0º then 15º and again 0º at bottom of the interval, P-C alteration, 4 to 5 per meter hairline to 0.2 cm wide scarce up to 1.3 cm wide calcite vnlts at 30º to 50º of c.a., only one 1.5 cm wide calcite replaced to FG qtz

4



–FG anhedral Py vnlt at 85º of c.a. with irregular 0.1 cm wide calcite < FG anhedral Py sub parallel vnlts at 3 cm at top and down to 10 cm away from the last described vnlt , FG anhedral Py in 0.5 to 0.8 cm long aggregates or clouds diss in scarce S.S. lenses at bottom of the interval

352.12

353.80

Fault zone, 8 in the interval 1 to 3 cm wide gouge zones, fault planes at 40º , 60º and 75º of c.a., 5 to 8 per meter irregular and broken 0.3 to 2 cm wide calcite vnlts at 40º to 60º of c.a. and few 0.1 to 1.2 cm wide calcite vnlts at 60º to 70º of c.a., FG anhedral Py in irregular lenses and aggregates, Py 2% to 3% in the interval

353.80

359.82

Silts 95%, fine grain size irregular 0.2 to 0.5 cm wide S.S. beds 5%, bedding at 20º to 50º of c.a., wk fractured zone, 6 to 8 per meter fault planes along bedding and at 70º to 85º of c.a., P-C to wk QSPC alteration, wk sericite in some microvnlts and in some calcite vnlts walls, 8 to 10 per meter 0.2 to 1.5 cm wide calcite at top and gradually replaced to FG qtz to the bottom of the interval lenses and vnlts with up to 2% to 3% of FG anhedral Py in walls and diss in the surrounding rock, vnlts at 70º to 80º of c.a. Py 5% in the interval

359.82

369.30

Kuc Caracol Fm 0.1 to 1cm wide Silts beds 95% to 98%, scarce irregular and wavy 0.1 to 0.8 cm wide fine grain size S.S. beds 2% to 5%, bedding at 40º to 50º of c.a., P-C to wk QSPC alteration, wk sericite in microvnlts and in calcite walls, 2 to 4 per meter 0.1 to 0.2 cm wide calcite and less FG anhedral Py vnlts at 10º to 30º of c.a. and like lenses, FG anhedral Py diss in the wall rock of the thicker vnlts and lenses, Py trz to 1% in the interval

369.30

386.40

Silts 95% in 0.1 to 1 cm wide beds, wavy 0.1 to 1.2 cm wide FG S.S. beds 5%, bedding changing from 40º at top to 0º at 380 m depth and 30º to 40º at bottom of the interval, P-C to wk QSPC alteration, wk sericite in scarce microvnlts, 1 to 2 per meter irregular 0.1 to 1.5 cm wide calcite trz of sericite vnlts at 10º to 20º and 60º to 85º of c.a. and like banded lenses, only trz of FG Py clouds in calcite vnlts.

386.40

392.55

Kuc Caracol Fm. Grey to moderately dark grey colour 0.1 to 1 cm wide Silts beds 98%, irregular and wavy 0.1 to 1.3 cm wide FG size S.S. beds 2%, bedding at 40º to 60º of c.a., P-C to wk QSPC alteration, wk to moderate sericite in calcite vnlts walls and in micro fractures, 3 to 4 per meter 0.1 to 0.4 cm wide calcite trz of FG anhedral Py vnlts at 0º to 30º of c.a. and like lenses, Py 1%

392.55

402.30

Silts 95%, wavy irregular 0.1 to 1 cm wide FG S.S. beds 5%, bedding at 50º to 70º of c.a., P-C to wk QSPC alteration, irregular 1 to 5 cm wide calcite sedimentary Bx zones with post brecciation increase amount of 0.2 to 3 cm wide calcite to qtz vnlts to 8 to 10 per meter , vnlts varying from partially at top to totally replaced to FG qtz at bottom, FG anhedral Py clouds in some S.S. beds, Py 5% in the interval

402.30

405.00

Silts 95% in 0.1 to 1 cm wide beds, bedding at 45º to 50º of c.a., P-C to wk QSPC alteration, interval with irregular 2 to 5 cm wide sedimentary Bx with post brecciation and mineralized with irregular 0.3 to 5 cm wide calcite totally replaced to FG qtz, 5% to 7% of FG anhedral to subhedral Py and 2% to 3% of grey to black colour stibnite needles, among 5 to 10 cm long of no-brecciate rock zones.

405.00

406.35

Fault zone 3 Bx zones 10 cm long from 405.00 m to 40.10 cm with fault planes at 40º of c.a., 20 cm long from 405.53 m to 405.73 m with fault planes at 60º and 70º of c.a. and 22 cm long from 406.12 m to 406.34 m with planes at 30º of c.a. among zones of less fractured Silts 95%,, with beds at 50º to 70º of c.a. , Bx zones formed by sub angular 0.1 to 2 cm long rock and scarce calcite replaced to FG qtz- FG Py fragments in dark grey colour milled rock groundmass, 1% to

5



    2% of subhedral to cubic Py in the groundmass.

406.35

411.53

Kuc Caracol Fm 0.5 to 3 cm wide Silts beds 70% to 80%, wavy 0.2 to 4 cm wide fine grain size S.S. beds 20% to 30%, bedding at 50º to 60º of c.a., P-C to wk QSPC alteration wk sericite in fractures, two generation of vnlts, 4 to 6 per meter irregular hairline to 1 cm wide only calcite lenses and scarce vnlts at 30º to 40º crossing beds and 2 to 3 per meter 0.1 to 0.5 cm wide calcite partially replaced to FG qtz.-FG subhedral Py and trz of dark brown Sph vnlts at 30º to 40º of c.a., FG anhedral Py clouds as lenses on borders of S.S. beds Py 3%

411,53

413.40

Silts 70% in beds 0.1 to 4 cm wide, fine to medium size grain S.S. beds in 0.1 to 8 cm wide 30%, bedding at 50º to 60º of c.a. P-C to wk QSPC alteration, wk sericite in micro fractures at 10º to 30º of c.a., 3 to 4 per meter 0.1 to 0.2 cm wide calcite lenses and scarce hairline to 0.1 cm wide calcite vnlts at 10º to 30º of c.a., 1 per meter 0.1 to 0.2 cm wide calcite partially replaced to FG qtz trz of FG subhedral Py and trz of black to dark brown Sph vnlts at 60º of c.a.

413.40

414.73

Fault zone broken core 3 zones 3 to 5 cm wide of gouge at 60º to 70º of c.a., 10 to 12 per meter fractures along bedding with moderate sericite, 2 to 3 per meter hairline to 0.4 cm wide calcite –sericite FG anhedral Py vnlts at 0º to 10º of c.a. Py 1% to 2%

414.73

421.00

Moderately broken zone, bedding at 60º to 70º of c.a. fractures and fault planes every 5 to 10 cm apart, moderate sericite, 3 to 4 per meter 0.2 to 3 cm wide irregular calcite vnlts in portions 2 to 3 cm wide of pebble dike at 60º to 70º of c.a. 8 to 10 per meter 0.1 to 0.2 cm wide FG anhedral Py lenses, Py 7% in the interval.

418.43 m 3 cm wide calcite replaced to FG qtz-subhedral Py and Sph vnlt at 70º of c.a.

420.92 m Irregular 2 to 3 cm wide calcite replaced to FG qtz-subhedral Py and black to dark brown Sph vnlt at 70º of c.a.

421.00

427.65

Kuc Caracol Fm, 0.1 to 2 cm wide Silts beds 80% to 85%, fine grain size 0.1 to 1 cm wide S.S. beds 15% to 20%, , bedding at 50º to 60º to 0º to 10º of c.a. at bottom of the interval, P-C to wk QSPC alteration, 10 to 15 per meter 0.1 to 0.2 cm wide FG anhedral Py lenses Py 7% in the interval, 2 to 3 per meter irregular 0.1 to 0.2 cm wide calcite replaced to FG qtz < FG subhedral Py vnlts at 30º to 40º of c.a. 0.8 m to 1.2 cm wide zones of wide apart stockwork of 0.1 to 1 cm wide calcite to FG qtz vnlts, one every 1.5 to 2 m apart 0.1 to 1 cm wide irregular calcite to FG qtz FG subhedral Py and trz of dark brown Sph vnlt.

427.65

429.30

Fault Bx zone broken core formed by sub angular 0.2 to 3 cm long rock and scarce calcite to FG qtz and FG subhedral Py fragments 80% in dark grey colour milled rock -, FG subhedral Py groundmass 20%, trz of FG black and dark brown colour Sph in 0.5 cm to 2 cm wide lenses in the groundmass at 75º to 85º of c.a., Py 7% to 10% in the interval.

429.30

442.0

Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 90%, 0.5 to 3 cm wide grey colour fine grey colour S.S. beds 10%,, bedding at 10º to 20º of c.a. P-C alteration, 1 to 2 per meter 0.5 to 3 cm wide calcite- trz of FG anhedral Py vnlts at 10º to 30º of c.a. and few like lenses. Py 1% in the interval Broken zones from 429.30 to 429.77 m; from 430.5 to 431.25 m; from 432.82 to 434.0 m ; from 438.71 to 439.80 m

431.00 m- 438.50 m stockwork of 0.2 to 3 cm wide calcite trz to 2% of anhedral to subhedral Py vnlts.

440.80 m 5 cm wide fine to medium size grain subhedral Py 10%, brown to black Sph 5% to 7% and Gn 3% vnlt at 80º of c.a.
    441.93 m 7 cm wide fine to medium size grain subhedral Py 15%, brown to

6



    black Sph 10% and Gn 3% vnlt at 70º of c.a.
442.0

477.20

0.5 to 3 cm wide Silts beds 80%, 0.5 to 1 cm wide S.S. beds 20%, bedding changing from 30º to 0º, P-C alteration, wk sericite, 2 per meter 0.3 to 1 cm wide and scarce up to 3 cm wide calcite-medium size grain subhedral Py 3% to 5% vnlts along bedding, Py 2% in the interval,
    457.59 m 459.69 m three 5 cm wide broken zones

441.10 m 0.5 cm wide calcite medium size grain subhedral Py 5%, brown Sph
5% and Gn 3% vnlt at 30º of c.a.

446.90 m 0.5 cm wide calcite medium size grain subhedral Py 5%, brown Sph 5% and trz of Gn vnlt at 30º of c.a.

450.00 m 0.3 cm wide calcite medium size subhedral Py 10%, trz of brown Sph at 70º of c.a.

452.60 m 4 cm wide medium size grain subhedral Py 30% –brown Sph 5% and trz pf Gn vnlt at 40º along bedding.

458.60 m 2 cm wide medium size grain subhedral Py 15%- brown Sph 30% and Gn 3% vnlt at 70º of c.a. with 2 cm wide gouge zone at top of the vnlt.

467.05 m 1 cm wide calcite medium size grain subhedral Py 5% brown Sph 3% vnlt at 60º of c.a.

472.15 m 1 cm wide calcite medium size grain subhedral Py 5%, brown Sph 3% vnlt at 50º of c.a.
477.20

480.00

Stockwork zone of 0.3 cm to 3 cm wide calcite totally replaced to FG qtz – medium size grain subhedral Py vnlts
478.54 m to 478.66 m 12 cm wide fault- vein zone medium size grain subhedral Py 5%, brown to black Sph 20%, to 30% Gn 3% and trz of calcite totally replaced to FG qtz at 80º to 90º of c.a.
479.10 m to 479.20 m irregular 1 to 3 cm wide fault vein zone with calcite totally replaced to FG qtz medium size grain subhedral to cubic Py , brown to black Sph 5% and Gn 2% vnlt at 40º of c.a. (these two zones could represent the projection of the Concordia vein)
480.00

490.00

Kuc Caracol Fm, 0.5 to 2 cm wide Silts beds 80%, 0.5 to 1 cm wide fine grey size S.S. beds 20%, bedding 50º to 85º of c.a. 2 per meter 0.5 to 3 cm wide calcite partially replaced to FG qtz- medium size grain subhedral Py vnlts at 50º to 60º of c.a.

479.55 m 0.5 cm wide calcite partially replaced to FG qtz- medium size needles Py % and trz of Gn? vnlt at 50º of c.a.

481.50 m 1 cm wide calcite totally replaced to FG qtz-medium size grain subhedral to cubic Py 20%-brown Sph 20%, trz of Gn vnlt at 60º of c.a.

481.95 m 2.5 to 3 cm wide calcite totally replaced to FG qtz- medium size grain subhedral Py 25% to 30%, dark brown to black Sph 5%, Gn 3% vnlt at 45º of c.a.

488.95 m 1.2 to 1.5 cm wide calcite totally replaced to FG qtz- medium size grain subhedral to cubic Py- brown Sph 5% Gn 3% vnlt at 50º of c.a.
490.00

495.25

Kuc Caracol 0.2 to 3 cm wide Silts beds 70%, 0.5 t o 0 1 cm wide fine grain size S.S. beds 30%, bedding at 75º to 85º of c.a., cross-bedding features P-C to wk QSPC alteration, wk sericite in micro-fractures, 6 to 8 per meter 0.1 to 3 cm wide calcite medium size grain subhedral Py trz to 5% vnlts at 20º to 30º
495.25

497.20

0.1 to 2 cm wide Silts 80% 0 5 to 5 cm wide irregular S.S. beds 20% bedding at 85º to 90º of c.a. P-C to wk QSPC alteration wk sericite in micro fractures and in some calcite vnlts walls, 3 vnlts in the interval 0.5 to 1.2 cm wide Py-Sph vnlts at 40º to 50º of c.a.
495.81 m 1 cm wide calcite replaced to FG qtz medium size grain subhedral to

7



cubic Py 15% dark brown to black Sph 10% vnlt at 45º of c.a.
496.22 m 1.2 cm wide medium size grain subhedral Py 25% to 30%, dark brown to black Sph 3% and less calcite replaced to FG qtz vnlt at 40º of c.a.
497.02 m Irregular 0.6 to 1.2 cm wide medium size grain subhedral to cubic Py 20%, dark brown to black Sph 3% and less calcite replaced to FG qtz vnlt at 50º of c.a.

497.20

502.70

0.1 to 1 cm wide Silts beds 80% fine to medium size grain 0.3 to 7 cm wide S.S. beds 20%, wavy bedding at 85º to 90º of c.a., P-C to wk QSPC alteration wk to moderate sericite in micro fractures or as small clouds diss in S.S. beds, 6 to 8 per meter irregular 0.2 to 2 cm wide calcite replaced to FG qtz vnlts at 10º to 30º of c.a. and irregular lenses, only two 0.6 to 2 cm wide medium size grain subhedral to cubic Py-Sph vnlts in the interval
498.74 m 1.5 to 2 cm wide medium size grain Py 20%- dark brown to black Sph 25% trz of calcite replaced to FG qtz vnlt at 75º of c.a.
501.25 m 0.8 to 1.5 cm wide calcite replaced to FG qtz subhedral to cubic Py - dark brown Sph vnlt at 35º of c.a. 500.00 to 501 m 0.1 to 0.5 cm wide calcite totally replaced to FG qtz vnlts in stockwork

502.70

535.25

Kuc Caracol Fm medium size grain 0.5 to 2.5 m wide S.S. beds 80%, irregular wavy 0.1 to 5 cm wide Silts beds 20%, wavy bedding changing from 85º to 90º at top to 75º at 509 m- 512 m to 45º at 521 m -525 m, 70º at 527 m to 528 m and 85º at bottom of the interval, P-C to QSPC alteration, wk to moderate sericite in calcite vnlts walls and in micro fractures, 3 to 5 per meter irregular 0.2 to 0.4 cm wide calcite with sericite vnlts at 10º to30º of c.a. Three 40 cm to 2.7 m wide stockwork zones formed by 1 to 3 cm wide calcite partially replaced to FG qtz < sericite, trz of FG anhedral to subhedral Py vnlts from 512.0 m to 512.40 m; from 509.90 m to 510.50 m; and from 532.50 m to 535.90 m, scarce vnlts with dark brown Sph
506.60 m 0.7 to 1.0 cm wide dark brown to black Sph-subhedral Py and less calcite replaced to FG qtz vnlt or lens at 90º of c.a.
508.67 m 508.95 m Interval with 5 vnlts with black Sph 506.67 m 2.5 to 3 cm wide dark brown to black Sph-Subhedral Py vnlt or lens at 85º of c.a.
508.72 m Irregular 0.5 to 1 cm wide dark brown to black Sph-Subhedral Py and 5% to 10% of calcite replaced to FG qtz vnlt at 30º of c.a. like a split of the previous described vnlt.
508.90 m to 508. 95 m 3 sub parallel 0.1 to 1.5 cm wide calcite replaced to FG qtz-FG subhedral Py less dark brown Sph vnlts at 85º of c.a.
510.90 m 2 to 4 cm wide dark brown to black Sph- subhedral Py and 2% to 3% of calcite to qtz vnlt at 70º of c.a.
511. 90 m to 511. 25 m 4 irregular 0.2 to 0.4 cm wide calcite replaced to FG qtz < FG subhedral Py and 1% to 2% of brown Sph vnlts at 10º to 20º of c.a.
513.13 m 2.5 to 3 cm wide calcite replaced to FG qtz 40%, dark brown Sph- subhedral to cubic Py vnlt at 60º of c.a.
515.17 m to 515.24 m two sub parallel at 60º of c.a. and one at 10º of c.a. 0.3 to 1.4 cm wide brown Sph subhedral Py and less calcite replaced to FG qtz vnlts
520.86 m irregular 0.5 to 0.7 cm wide subhedral Py < brown Sph and calcite replaced to FG qtz vnlt at 60º of c.a.
520.87 m to 522.00 m 3 in the interval 0.1 to 0.2 cm wide calcite replaced to FG qtz subhedral Py trz of dark brown Sph vnlts at 40º to 60º of c.a.
523.02 m to 524.85 m 6 vnlts in the interval 0.2 to 0.5 cm wide and two 1.2 and

8



1.8 cm wide dark brown Sph subhedral to cubic Py and less calcite to FG qtz vnlts at 40º to 60º of c.a.
526.45 m to 526.85 m 4 in the interval 0.2 to 0.6 cm wide calcite replaced to FG qtz < subhedral Py-dark brown Sph vnlts at 10º to 30º and just one of them at 60º of c.a.
528.60 m to 530.90 m 7 in the interval irregular 0.2 to 0.8 cm wide calcite replaced to FG qtz subhedral Py trz of brown Sph vnlts at 10º to 30º of c.a. and two of them at 60º of c.a.
533.25 m to 533.60 m 3 to 5 in the interval irregular 0.1 to 0.6 cm wide calcite replaced to FG qtz-sericite-dark brown to black Sph vnlts in stockwork 535.23 m 0.7 to 0.9 cm wide dark brown to black Sph-medium size grain Py and trz of calcite replaced to FG qtz vnlt at 40º of c.a.
  534.92 Reduction to NX core diameter

535.25

539.80

Kuc Caracol Fm thin bedded 0.1 to 2 cm wide Silts 90%, wavy 0.1 to 11 cm wide fine grain size S.S. beds 10%, bedding at 70º to 85º of c.a. P-C alteration, 2 to 3 per meter 0.1 to 0.2 cm wide FG anhedral Py with brown stain-FG to medium size grain subhedral Py with yellow stain-FG to medium size grain subhedral to euhedral Sph and trz of calcite replaced to FG qtz vnlts or lenses at 70º to 85º of c.a. , just one in the interval at
536.47 m 0.7 cm wide calcite replaced to FG qtz-FG dendritic Py –trz of dark brown to black Sph vnlt at 50º of c.a., 15 to 20 per meter 0.1 cm wide FG anhedral Py lenses and 4 to 6 per meter hairline vnlts at 30º to 40º of c.a. Py 5% to 7% in the interval

539.80

553.40

0.1 to 2 cm wide Silts beds 90%, irregular wavy 0.1 to 2 cm wide and few up to 17 cm wide fine grain size S.S. beds 10%, bedding at 65º to 85º of c.a. P-C alteration, scarce sericite micro fractures, 8 to 12 per meter 0.1 to 0.8 cm wide FG anhedral brown stained Py-FG top medium size grain subhedral yellowish Py-FG to medium size grain subhedral to euhedral dark brown to black Sph and trz of calcite replaced to FG qtz lenses or vnlts along bedding, Py 7% in the interval

553.40

557.92

0.1 to 2 cm wide Silts beds 90% wavy 0.2 to 3 cm with scarce beds up to 15 cm wide FG to medium size grain S.S. beds 10%, bedding at 70º to 80º of c.a., P-C alteration, 4 to 6 per meter 0.1 to 0.4 cm wide FG anhedral brown stained Py- FG to medium size grain subhedral yellowish Py-FG to medium size grain subhedral to euhedral dark brown to black Sph and trz of calcite replaced to FG qtz lenses or vnlts along bedding. Also trz of FG anhedral Py clouds in some S.S. beds, scarce less than 1 per meter 0.1 to 0.3 cm wide calcite replaced to FG qtz vnlts at 60º to 70º of c.a. crossing beds, Py 5% in the interval

557.92

564.75

Kuc Caracol Fm , 0.1 to 2 cm wide Silts beds 70% to 75%, wavy irregular 0.1 to 3 cm wide with few up to 40’ cm wide of fine grain size S.S. beds 25% to 30%, bedding at 60º to 70º of c.a. P-C alteration, 3 to 4 per meter hairline to 0.2 cm wide calcite-FG anhedral Py vnlts at 10º to 30º of c.a., 4 to 6 per meter 0.1 to 0.2 cm wide calcite replaced to FG qtz-FG anhedral Py lenses. 1 every 1.5 to 2 meters apart calcite replaced to FG qtz-FG anhedral to subhedral Py – trz of dark brown to black Sph vnlt at 60º to 70º of c.a., Py 1% to 2%, 6 to 8 fractures along bedding per meter.

564.75

565.25

Wide apart stockwork zone formed by 0.2 to 2 cm wide calcite replaced to FG qtz-trz of FG anhedral Py vnlts

565.25

568.40

Kuc Caracol Fm 0.1 to 5 cm wide Silts beds 90%, 0.2 to 1.5 cm wide fine grain size S.S. beds 10%, bedding at 70º of c.a., P-C alteration, 2 to 3 per meter hairline to 0.2 cm wide calcite vnlts at 20º to 30º of c.a. and few with trz of FG Py

9



lenses, trz of FG anhedral Py clouds in scarce S.S. beds Py trz to 1% in the interval

568.40

568.74

Fault Bx zone, 8 to 10 cm of gouge zones, scarce sub angular 0.5 to 3 cm long calcite replaced to FG qtz fragments in abundant milled and 0.2 cm long rock fragments, fault planes at 70º of c.a. along bedding

568.74

579.00

Broken core zone, factures along bedding every 0.5 to 5 cm apart, milled rock gouge zones along bedding with scarce calcite replaced to FG qtz fragments at: 569.30 m 2 cm wide; 571.0 m 7 cm wide; 573 0 2 cm wide; 574.65 m 7 cm wide, from 575.03 to 575.35 m 32 cm wide; 876.32 6 cm wide; 576.45 7 cm wide; from 576.50 to 577.60 m with few fragments 0.1 to 0.3 cm long of calcite replaced to FG qtz trz of FG subhedral Py and trz of dark brown Sph in 0.5 to 1 cm wide bands in the groundmass, fault planes along bedding; 577.80 3 cm wide; 578.0 4 cm wide; 578.88 m 7 cm wide.

579.00

588.26

Silts 80% to 85% in beds 0.1 to 5 cm wide, 0.1 to 1 cm wide wavy fine grain S.S. beds 15% to 20%, bedding at 70º to 80º of c.a. P-C alteration, highly fractured zone, core fragments 1 to 5 cm long, fractures along bedding, 4 to 5 per meter irregular 0.1 to 0.2 cm wide calcite replaced to FG qtz < FG subhedral Py lenses and vnlts at 10º to 30º of c.a., scarce FG anhedral Py clouds in S.S. beds Py 1% in the interval

588.26

589.50

Fault zone dark grey colour milled rock with less than 1% of calcite replaced to FG qtz fragments, most fractures along bedding

589.50

595.20

Kuc Caracol Fm 0.1 to 3 cm wide grey colour Silts beds 95%, 0.1 to 5 cm wide fine grain size light grey colour S.S. beds 5%, bedding at 80º of c.a., 2 to 3 per meter 0.1 to 0.2 cm wide calcite replaced to FG qtz-FG anhedral to subhedral Py lenses.

591.70-592.05 m wide apart stockwork zone formed by 0.1 to 0.4 cm wide calcite replaced to FG qtz-FG to medium size grain anhedral Py with partial brown stain vnlts

592.45-592.55 m Fault vein 10 cm wide of abundant medium size grain subhedral to cubic Py-dark brown to black Sph vnlt at 80º of c.a.

595.20

596.15

Fault gouge zone abundant milled rock in groundmass and in 0.1 to 1 cm long sub angular fragments, 3% to 5% of calcite replaced to FG qtz 0.5 to 2 cm long sub angular fragments, fault planes at 80º of c.a. along bedding

596.15

600.46

Kuc Caracol Fm thin bedded 0 1 to 2 cm wide Silts 80%, wavy 0.1 to 1 cm wide fine grain size S.S. beds 20%, bedding at 80º of c.a., P-C alteration, 1 to 2 per meter 0.1 to 1.5 cm wide calcite replaced to FG qtz vnlts at 10º to 30º and less as lenses at 80º of c.a., FG anhedral Py in few calcite to qtz vnlts

597.00

0.5 cm wide dark brown to black Sph< medium size grain subhedral Py vnlt at 30º of c.a.

600.46

601.39

Wide apart stockwork zone of 0.1 to 3 cm wide calcite replaced to FG qtz- subhedral Py vnlts

600.95

0.3 cm wide calcite replaced to FG qtz-FG subhedral Py and less dark brown to black Sph vnlt at 80º of c.a.
  601.36 3 cm wide Fault gouge zone at 80º of c.a.

601.39

610.10

Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 90%, lightly wavy 0.1 to 0.5 cm wide fine grain size S.S. beds 10%, bedding at 80º to 85º of c.a., P-C to wk QSPC alteration, 3 to 5 per meter hairline to 0.1 cm wide calcite replaced to FG qtz- moderate sericite vnlts at 10º to 30º and 70º to 80º of c.a., scarce FG anhedral Py clouds in some S.S. beds, also FG anhedral Py in 0.1 cm wide lenses.

604.90

Irregular 0.5 to 1.5 cm wide calcite replaced to FG qtz-subhedral Py and less brown to black Sph vnlt at 60º of c.a.

10



605.49 m-607.15 m wide apart stockwork zone formed by 0.2 to 1.5 cm wide calcite replaced to FG qtz-moderate sericite-FG to medium size grain anhedral to subhedral Py trz of dark brown to black Sph in very scarce vnlts, Py 3% in the interval

610.10

621.05 Kuc Caracol Fm 0.1 to 5 cm wide Silts 90%, wavy irregular 0.2 to 3 cm wide few up to 20 cm wide fine grain size S.S. beds 10%, wavy bedding at 75º to 85º of c.a., P-C to wk QSPC alteration, wk to moderate sericite in some calcite vnlts walls, 3 to 5 per meter 0.1 to 0.3 cm wide calcite-sericite vnlts at 10º to 30º and few as lenses.

611.55 m 621.05 m 1 to 3 per meter 0.1 to 0.2 cm wide calcite wkly replaced to FG qtz-FG anhedral to subhedral Py and trz of dark brown to black Sph lenses.

621.05

631.60 0.1 to 1 cm wide Silts beds 90% to 95%, 0.1 to 0.5 cm wide fine grain size S.S. beds 5% to 10%, lightly wavy bedding at 85º of c.a. P-C to wk QSPC alteration, wk to moderate sericite in up to 1 m wide intervals, only 2 in the interval 0.1 to 0.4 cm wide calcite wkly replaced to FG qtz-FG anhedral to subhedral Py-trz of dark brown to black Sph lenses at 627.20 m and 631.36 m, scarce anhedral Py 0.1 cm long clouds in scarce S.S. beds. Py < 1% in the interval
    621.0 m – 623.05 m moderate sericite in calcite vnlts walls

621.05 m – 629.15 m 1 to 2 per meter hairline to 0.1 cm wide calcite vnlts at 20º to 30º of c.a.

629.15 m -631.60 m 8 to 10 per meter hairline to 0.1 cm wide calcite vnlts at 10º to 30º of c.a., 5 in the interval 0.4 to 2 cm wide calcite lenses banded with black Silts? Or organic material.

631.60

633.45 Wide apart stockwork zone formed by 0.1 to 1.5 cm wide calcite partially replaced to FG qtz<FG anhedral Py and very scarce just one in the interval at 632.10 m 1.5 cm wide calcite to qtz with trz of Sph vnlts

633.45

634.60 Fault Bx zone, fault planes at 65º to 70º of c.a., 20% to 30% of 0.2 to 2 cm long sub angular calcite replaced to FG qtz fragments, also 0.1 to 0.5 long sub angular dark grey Silts fragments in dark grey colour milled rock groundmass- FG anhedral to subhedral Py 2% to 3% in some calcite to qtz fragments and like diss in the groundmass

634.45 2 cm wide Fault veinlet zone formed by about 50% of FG to medium size grain subhedral to cubic Py-FG to medium size grain subhedral dark brown to black Sph and less than 5% of calcite replaced to FG qtz at 55º of c.a.

634.60

641.18 Kuc Caracol Fm 0.1 to 1.5 cm wide Silts beds 90% to 95%, wavy 0.1 to 1 cm wide fine grain size S.S. beds 5% to 10%, bedding at 75º to 85º of c.a., P-C to wk QSPC alteration, 10 to 12 per meter 0.1 to 0.6 cm wide calcite-less sericite in walls vnlts at 20º to 40º and 60º to 70º of c.a. crossing bedding, scarce 0.1 to 0.2 cm wide FG anhedral Py clouds in scarce S.S. beds Py < 1% in the interval

641.18

661.00 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 95%, wavy 0.1 to 0.5 cm wide FG S.S. beds 5%, wavy bedding at 70º to 90º of c.a., P-C alteration very compact rock, 1 to 2 per meter 0.1 cm wide calcite vnlts at 10º to 30º of c.a., very scarce 0.1 to 0.2 cm wide FG anhedral Py clouds in S.S. beds, Py trz in the interval

643,28 m-643.75 m Wide apart 0.2 to 1 cm wide calcite-sericite trz of FG anhedral Py vnlts in stockwork
    644.05 m 2 cm wide Fault zone along bedding at 70º of c.a.

644.90 m 11 cm wide stockwork zone of 0.4 to 1.5 cm wide calcite vnlts most at 60º to 70º and 10º to 30º of c.a.

647.35 m Irregular 2 to 4 cm wide Fault veinlet zone formed by wkly druse calcite and less than 5% of FG medium size grain Subhedral Py at 60º to 70º of c.a.

11



648.15 m -648.80 m Irregular 0.1 to 1.5 cm wide calcite- trz of FG anhedral Py vnlts in wide apart stockwork

661.00

682.25

Kuc Caracol Fm 0.2 to 2 cm wide Silts beds 70%, 0.1 to 1.5 cm wide FG S.S. beds 30%, wavy bedding at 75º to 85º of c.a. P-C alteration to wk QSPC from 671.0 to 675.80 m, one vnlt and one lens in the interval 0.1 to 0.2 cm wide calcite wkly replaced to FG qtz-FG anhedral Py and trz of dark brown to black Sph vnlt at 50º of c.a. at 679.35 m and lens at 670.42 m, 2 to 3 per meter hairline to 1.5 cm wide calcite vnlts at 10º to 30º of c.a. one 5 cm wide calcite vnlt at 40º of c.a. at 662.50 m; 4 irregular 0.5 to 0.7 cm wide calcite lenses at 668.80 m, Trz of FG anhedral Py 0.1 cm wide lenses and clouds in scarce S.S. beds.

674.90 m -675.55 m irregular 0.3 to 2 cm wide calcite-sericite vnlts in wide apart stockwork

682.25

683.70 Wk QSPC alteration, stockwork of 0.5 to 2 cm wide calcite< sericite vnlts

682.75 m -683.20 m Irregular 30 to 40 cm wide calcite 1% of FG subhedral Py vnlt at 40º of c.a.

683,65 m 0.5 cm wide calcite-3% of FG subhedral Py and trz of black Sph vnlt at 15º of c.a.

683.70

693.00

Kuc Caracol Fm 0.2 to 3 cm wide Silts beds 80% to 85% ; 0.1 to 1 cm wide FG S.S. beds 15% to 20%, wavy bedding at 75º to 80º of c.a.; P-C alteration, 3 to 4 per meter 0.1 to 0.8 cm wide calcite lenses, 8 in the interval hairline to 0.1 cm wide calcite-trz of FG subhedral Py vnlts at 10º to 40º of c.a., very sporadic and only as small < 0.1 cm long diss of brown to black Sph in one calcite-Py vnlt at
689.20 m , trz of FG anhedral Py clouds in scarce S.S. beds, Py trz in the interval

693.00

704.09

Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 80%,lightly wavy 0.2 to 0.5 cm wide few up to 5 cm wide fine grain size S.S. beds 20%, bedding at 75º to 85º of c.a., P-C alteration, 1 every 2 to 3 meters 0.1 cm wide calcite vnlts at 10º of c.a., 1 every 2 meters 1 to 1.5 cm wide banded calcite with thin < 0.1 cm wide organic material layers lenses, trz of FG anhedral Py clouds in very scarce S.S. beds.

704.09

713.00

Kuc Caracol Fm 0.1 to 2.5 cm wide Silts beds 70%, 0.1 to 8 cm wide FG S.S. beds 30%, bedding at 80º to 90º of c.a., 1 to 2 per meter hairline to 0.2 cm wide calcite-trz of FG anhedral Py vnlts at 0º to 30º of c.a., 1 to 2 per meter 0.2 to 3 cm wide banded calcite lenses, FG anhedral Py clouds in scarce S.S. beds, Py trz in the interval

713.00

715.20

Wide apart stockwork zone formed by irregular 0.1 to 1.5 cm wide calcite, few with trz of FG anhedral Py vnlts

715.20

719.82

Silts 70%, FG S.S. in beds 0.5 to 5 cm wide 30%, bedding changing from 90º to 75º of c.a. P-C alteration, 2 to 4 per meter 0.3 to 0.5 cm wide calcite-FG anhedral Py vnlts at 10º to 30º of c.a., 1 per meter 0.1 to 0.4 cm wide banded calcite lenses, trz of FG anhedral Py clouds in S.S. beds

719.82

720.20

Stockwork zone of 0.1 to 2 cm wide calcite wkly replaced to FG qtz-trz of FG anhedral Py vnlts Py 1%

720.20

731.52

0.1 to 3 cm wide Silts beds 60%, 0.2 to 6 cm wide FG S.S. beds 40%, irregular sedimentation on unstable basin, wave and slump features, irregular bedding changing from 75º to 60º of c.a., P-C alteration, 3 to 4 per meter hairline to 0.5 cm wide calcite trz of FG anhedral Py vnlts at 10º to 40º of c.a., 2 to 3 per meter banded and irregular 0.2 to 1 cm wide calcite-trz of FG anhedral Py lenses, Py trz to 1% in the interval

731.52

  END OF HOLE

12


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: Nov 23 / 2005  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES    

             
Summary of DDH QTA-36-05; 699,791 E; 2,652,183 N, 1920 ASL 340°/-60°, Concordia- Dolores area

From To Description
0.00 5.18 Drilled with Tricone bit -No core- Casing
5.18 20.85 Caracol Fm grey to dark grey Silts 90% in beds 0.5 to 2 cm wide beds, 0.2 to 0.5 cm wide gray color fine grain size S.S. beds 10% bedding at 80º of c.a., P-C alteration, 2 to 3 per meter 0.1 to 0.3 cm wide calcite vnlts at 20º to 30º
8.25 m 10 cm wide fault gouge
8.80 m- 9.60 m trz of orange to brown Goethite-Hematite in micro fractures at 10º of c.a.
20.85 23.87 Fault zone wk Goethite-Hematite in fractures 5 to 10 cm wide gouge zones among high fractured and broken core zones 10 to 80 cm wide and 5 to 20 cm wide of no fractured rock zones.
23.87 38.71 Caracol Fm. grey to dark grey irregular 0.1 to 2 cm wide Silts beds 60%, 0.5 to 4 cm with few up to 20 cm wide fine grain size grey color S.S. beds 40%, bedding at 70º to 80º of c.a., P-C to wk QSPC alteration, irregular 3 per meter 0.1 to 0.3 cm wide calcite with trz of brown to orange Goethite-Hematite vnlts at 10º to 30º of c.a.
31.00 m- 34.00 m wavy bedding irregular 0.1 to 0.3 cm wide calcite with moderate sericite vnlts in wide apart stockwork
38.71 47.00 Kuc Caracol Fm 0.1 to 2 cm wide dark grey Silts beds 95%, fine grain size 0.1 to 0.5 cm wide S.S. beds 5%, PC to wk QSPC alteration, irregular and wave bedding 70º to 80º of c.a. 2 per meter 0.2 to 0.5 cm wide calcite with orange to Red Goethite-Hematite vnlts at 5º to 20º of c.a.
47.00 66.60 Kuc Caracol Fm 0.5 to 4 cm wide dark grey Silts 95%, light grey fine grain size 0.2 to 0.3 cm wide S.S. beds 5%, bedding at 70º to 80º of c.a. P-C to wk QSPC alteration 1 per meter 0.2 to 0.3 cm wide calcite vnlts at 30º to 50º of c.a.,
55.70 m to 57.20 m 6 in the interval 0.1 to 0.3 cm wide calcite with Goethite- Hematite vnlts at 50º to 70º of c.a.
57.30 m 0.5 cm wide Fault gouge zone at 30º of c.a.
65.40 m to 65.80 m 0.1 to 0.5 cm wide calcite wkly replaced to FG qtz vnlts.
66.60 72.24 Faulted and highly fractured zone, 68.00 to 68.40 Main Faulted Bx zone in the interval formed by 0.1 to 3 cm long rock fragments and 0.1 to 0.3 cm long calcite wkly replaced to FG qtz fragments 30% in dark grey color gouge zones up to 10 cm wide, fault planes at 60º to 70º

1



of c.a. along bedding; other fault zones from 69.20 m to 69.40 m; from 69.90 m to 70.00 m; from 71.40 to 71.50 m; from 71.70 m to 71.80 m
72.24

84.00

Kuc Caracol Fm 0.5 to 2 cm wide Silts beds 90%, light grey color 0.2 to 0.3 cm wide fine grain size S.S. beds 10%, bedding at 60º of c.a., P-C to wk QSPC alteration, 1 every 2 meters 0.1 to 0.3 cm wide calcite vnlt at 30º to 50º of c.a.

79.30 m -79.81 m Fault Bx zone 0.1 to 5 cm long rock fragments in a dark grey color gouge groundmass 30%
84.00

95.00

Silts beds 0.5 to 2 cm wide 90%. 0.2 to wide light grey color FG S.S. beds 10%, bedding at 60º of c.a., P-C to wk QSPC alteration, 2 per meter 0.2 to 0.3 cm wide calcite vnlts at 50º to 70º of c.a., few 0.3 to 0.5 cm wide calcite lenses

92.00 m – 95.00 m 6 slickenside with moderate sericite in the interval, most along bedding and few at 50º to 60º crossing bedding
95.00

99.67

Highly fractured zone trz of FG anhedral Py diss, moderate sericite in micro fractures, Pebble dikes with 0.5 to 2 cm long sub angular Silts fragments in calcite groundmass at 96.10 to 96.50 m; from 97.70 m to 97.90 m and from 97.80 m to 98.00 m among highly fractured zones formed by 1 to 3 cm long rock and less calcite vnlts fragments.
99.67

105.57

0.5 to 2 cm wide Silts beds 90%, 0.2 to 0.3 cm wide S.S. beds 10%, bedding changing from 60º to 30º and again 60º of c.a. at bottom of the interval, P-C to wk QSPC alteration wk sericite inn calcite vnlts walls and in micro fractures, 3 to 4 per meter 0.5 to 3 cm wide calcite- trz of FG anhedral Py vnlts at 30º to 50º of c.a., very few calcite vnlts 3 to 5 cm wide at 1010.0 m; 103.10 m; 105.09 m
105.57

135.00

Kuc Caracol Fm 0.5 to 4 cm wide Silts beds 90%, light grey color FG 0.2 to 0.4 cm wide S.S. beds few up to 13 cm wide S.S. beds 10%, bedding changing from 60º at top to 5º of c.a. at 107.0 m, then to 50º at 110 m; 10º at 117.0 m and 50º to 40º of c.a. at bottom of the interval, scarce 1 to 2 per meter hairline to 0.2 cm wide calcite-trz of sericite and scarce with trz of FG anhedral Py vnlts at 50º to 80º of c.a.

116.0 m 124.00 m 3 to 5 per meter 0.2 to 0.7 cm wide calcite vnlts at 10º to 20º of c.a. and 60º to 80º of c.a., 3 to 4 per meter 0.5 to 1.2 cm wide calcite irregular lenses

119.90 m 2 to 3 cm wide Fault gouge zone at 75º to 85º of c.a. dark grey color gouge formed mainly by milled rock and about 5% of calcite vnlts fragments

123.70 m to 123.95 m Fault zone planes at 10º to 20º and few at 60º of c.a.; moderate sericite in some irregular broken calcite vnlts at 10º to 30º of c.a.

124.00 m – 127.80 m 3 to 5 per meter 0.1 to 1 cm wide calcite vnlts at 60 ºto 80º of c.a.
135.00

142.20

Kuc Caracol Fm very irregular bedding zone sedimentary brecciation when sediments were deposited slump features, 0.1 to 2 cm wide Silts beds 70%, 0.5 to 5 cm wide few up to 15 cm wide FG to medium size grain S.S. beds 30%, wavy irregular and deformed bedding at 50º to 60º of c.a., P-C to wk QSPC alteration, 5 to 7 per meter 0.1 to 2 cm wide calcite vnlts at 30º to 50º of c.a., 1 per meter 0.1 to 0.2 cm wide calcite lenses

136.45 m -136.75 m Pebble dike formed by sub angular 0.5 to 1.5 cm long rock fragments in calcite groundmass
142.20

147.15

Kuc Caracol Fm, thin bedded 0.1 to 1 cm wide Silts beds 60% to 70%, wavy irregular 0.1 t0 20 cm wide FG to medium size grain S.S. beds 30% to 40%, P-C to wk QSPC alteration, .wavy and irregular bedding at 50º to 30º of c.a., irregular broken 0.3 to 1 cm wide calcite some of them wkly replaced to FG qtz vnlts at 10º to 30º , 45º and 70º to 80º of c.a.
    142.70 m -142.90 m Fault zone, broken core Rock fragments 2 to 4 cm long,

2



less than 15% of calcite wkly replaced to FG qtz vnlts fragments, fault planes at 60º to 80º of c.a.

145.50 m -147.15 m Kuc Caracol Fm Silts 40%, medium size grain 1 to 30 cm wide S.S. beds 60%, P-c to wk QSPC alteration, stockwork zone formed by irregular 0.1 to 2 cm wide calcite wkly replaced to FG qtz vnlts
    146.90 m -147.15 m trz of FG anhedral Py diss

147.15

150.40

Fault Bx zone, fault planes at 60º of c.a. at top and 80º of c.a. at bottom, dark grey to black color gouge, sub angular 0.5 to 2 cm long rock 95% and 5% of calcite wkly replaced to FG qtz fragments, wk sericite in micro fractures and in calcite vnlts, trz to 1% of FG anhedral Py diss.

150.40

151.90

Moderate broken core, 5 to 15 cm wide Bx zones formed by sub rounded to sub angular dark grey color Silts and S.S. fragments 85% to 90%, 10% to 15% of calcite wkly replaced to FG qtz groundmass , 3 to 4 per meter irregular 0.2 to 0.8 cm wide calcite wkly replaced to FG qtz vnlts at 30º to 50º of c.a., trz of FG anhedral Py diss

151.90

175.20

Kuc Caracol Fm Silts 80% to 90% in beds 0.5 to 4 cm wide, wavy irregular 0.1 to 2 cm wide FG S.S. beds 10% to 20%, bedding at 75º to 80º of c.a., P-C alteration, 1 per meter 0.1 to 0.5 cm wide calcite vnlts at 20º to 40º of c.a., less than 1 per meter 0.1 to 0.2 cm wide banded calcite lenses

175.20

179.50

Silts 90%, 0.1 to 0.5 cm wide FG S.S. beds 10%, wavy bedding at 75º of c.a. wk QSPC alteration, wk to moderate sericite in calcite vnlts walls, 3 to 5 per meter irregular 0.1 to 0.2 cm wide calcite < sericite vnlts at 10º to 30º of c.a.

179.50

187.90

Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 80% to 85%, wavy irregular 0.2 to 3 cm wide few 7 to 9 cm wide in the bottom FG to medium size grain S.S. beds 15% to 20%, wavy bedding at 65º to 70º of c.a., P-C to wk QSPC alteration, 3 to 5 per meter hairline to 0.2 cm wide calcite vnlts at 10º to 30º of c.a., 1 to 2 per meter 0.1 to 0.2 cm wide calcite< sericite-trz of FG anhedral Py lenses, Py trz in the interval

187.90

201.10

Irregular 0.1 to 5 cm wide Silts beds 75% to 80%, 0.2 to 2 cm wide few 5 to 10 cm wide FG to Medium size grain S.S. beds 20% to 25%, wavy and deformed bedding deposition on unstable basin beds changing from 65º to 85º of c.a. at 195 .0 m, 70º of c.a. at bottom of the interval, P-C to wk QSPC wk to moderate sericite in some calcite vnlts walls and in some micro fractures, 8 to 10 per meter hairline to 1.5 cm wide irregular calcite just a few with local wk replacement to FG qtz vnlts at 10º to 30º of c.a. and 65º to 85º of c.a., 20% to 25% of the calcite as lenses, 3% to 5% of FG anhedral Py diss in thin walls in some calcite vnlts and lenses in selected 10 cm to 1.5 m wide intervals, Py in general 1% 188.20 m -189.00 m Fractured zone, calcite wkly replaced to FG qtz, FG anhedral Py 3% to 5% in calcite vnlts and in 0.1 to 0.2 irregular lenses
    188.45 m 0.5 cm wide Fault gouge at 70º of c.a.

197.40 m 6 cm wide Fault gouge zone, milled rock and less than 5% of calcite vnlts, fault planes at 80º of c.a. along bedding

198.55 m Irregular 4 to 5 cm wide zone formed by irregular 0.6 to 1.2 cm wide FG qtz with 0.2 to 0.3 cm wide calcite core vnlt at70º of c.a.- FG anhedral Py and irregular hairline calcite replaced to FG qtz vnlts at both walls of the main vnlt, Py 5% to 7% in the interval

199.0 m -201.10 m Wide apart stockwork zone of irregular 0.1 to 1.5 cm wide deformed and folded calcite vnlts

201.10

221.40

Kuc Caracol Fm 0.1 to 5 cm wide Silts beds 90% to 95%, 0.1 to 0.3 cm wide FG S.S. beds 5% to 10%, wavy and slump features mainly at bottom of the interval, bedding at 70º to 50º of c.a. at top changing to 10º to 20º of c.a. at 209 m, to 60º

3



at 215 m and 40º to 50º of c.a. at bottom of the interval, P_C alteration, wk to moderate sericite in some calcite vnlts walls, 3 to 5 per meter hairline to 0.2 cm wide calcite wk to mod sericite vnlts at 10º to 30º of c.a. at top, also calcite< sericite in 0.1 to 0.2 cm wide lenses, only trz of FG anhedral Py in the interval

202.25 m-202.68 m Fractured and broken core zone, 5% to 10% of broken hairline to 0.1 cm wide calcite< sericite vnlts in stockwork

202.35 m 3 to 5 cm wide Fault Bx zone 0.1 to 1 cm long sub rounded to sub angular rock fragments in 20% to 30% of milled rock and less calcite groundmass, fault planes at 70º of c.a. along bedding

212.70 m-213.90 m 12 slickenside at 60º to 70º of c.a. in the interval, 4 to 6 per meter irregular and broken 0.1 cm wide calcite-sericite, trz of FG anhedral Py vnlts at 50º to 70º of c.a. mainly along bedding, 3 in the interval 0.2 cm wide banded calcite < sericite< FG anhedral Py lenses

217.60 m-217.70 m Broken core, slickenside at 70º of c.a. along bedding, 0.1 to 0.3 cm wide calcite partially replaced to FG qtz vnlts at 10º and 60º to 70º of c.a.

221.40

228.70

Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 95%, wavy 0.1 to 1 cm wide FG S.S. beds 5%, micro-folds, wavy and slump features, bedding from 40º to 70º at top changing to 30º to 223.5 m then 0º at 224.90 m and 70º at bottom, P-c to wk QSPC alteration wk sericite in some calcite vnlts and in micro fractures, wide apart stockwork zone with irregular folded and broken 0.1 to 1 cm wide calcite vnlts 15% to 20% of calcite vnlts, only about 10% of the calcite vnlts with trz of FG anhedral Py, also calcite in hairline to 2.2 cm wide lenses with irregular < 0.1 cm wide FG anhedral Py and some rock layers.

228.40 m-228.70 m Consolidated old fault zone, irregular and broken 0.1 to 0.4 cm wide calcite wkly replaced to FG qtz-5% to 10% of FG anhedral Py in 2 to 8 cm wide lenses? at 70º of c.a. Py 5% to 7% in the interval

228.70

232.40

Silts 90% to 95% in beds 0.1 to 5 cm wide, wavy and irregular bedded 0.2 to 1 cm wide FG S.S. beds and in ovoid lenses 5% to 10%, wavy bedding at 75º to 85º of c.a., P-C alteration, scarce 2 to 3 per meter hairline to 0.1 cm wide calcite vnlts at 20º to 40º of c.a., just one 0.6 to 1 cm wide calcite vnlt at 10º to 25º of c.a. at 230.50 m

232.40

233.78

Silts 95%, wavy 0.1 to 0.3 cm wide FG S.S. beds 5%, bedding at 70º of c.a., moderately fractured and broken core zone, 8 to 10 calcite with moderate sericite micro-vnlts at 10º to 20º and 60º to 70º of c.a. in the interval
    232.95 m – 233.00 m Fault zone slickenside at 55º of c.a.   
    233.78 m 1 cm wide Fault zone with planes at 80º to 85º of c.a.

233.78

238.82

Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 90%, irregular 0.1 to 1 cm wide FG S.S. beds and also S.S. as 0.1 to 1 cm ovoid lenses, wavy bedding at 60º to 70º of c.a.; P-C to wk QSPC alteration moderate sericite in calcite vnlts and micro fractures , 2 to 3 per meter hairline to 0.2 cm wide calcite almost totally altered to sericite vnlts at 10º to 30º of c.a., 1 every 2 meters 0.1 to 0.2 cm wide calcite< trz of very FG anhedral Py in micro-layers lenses. 5 to 10 cm wide zones with 6 to 8 irregular hairline to 0.1 cm wide calcite-sericite vnlts in stockwork at 233.80 m; 234.70 m; 234.80 m 236.70 m and 237.80 m

238.82

239.25

Fault gouge zone, fault planes at 60º to 80º of c.a., abundant dark grey 0.1 to 5 cm long Sub rounded Silts fragments, 20% to 30% of calcite-sericite in the 15 cm interval at bottom of the interval

239.25

260.40

Silts in 0.1 to 3 cm wide irregular beds 85% to 90%, wavy irregular and displaced by small faulting 0.1 to 1 cm wide FG S.S. beds, wave and slump features, bedding changing from 70º at top to 0º at 245 m 55º to 40º of ca. from 246 m to 251 m, 0º to 10º between 252 m to 253 m changing gradually to 70º to

4



80º of c.a. at bottom of the interval, P-C to wk QSPC alteration, wk to moderate sericite in some calcite vnlts, 2 to 4 per meter hairline to 0.3 cm wide vnlts wk sericite in few of them at 10º to 30º of c.a., 1 every 3 meters 0.3 to 1.2 cm wide bended calcite with thin layers of grey Silts lenses, also calcite in micro-lenses < 0.1 cm wide, 5 to 20 cm wide zones with 4 to 6 irregular slickenside and sericite in micro-fractures at 30º to 50º of c.a.

233.80 m 4 cm wide calcite totally replaced to FG qtz with blade textures vnlt at 60º of c.a., some irregular 0.3 to 0.8 cm long angular rock fragments inside the vnlt-FG anhedral Py in 0.1 to 0.3 cm wide layers in the top wall,

253.0 m -253.50 m wide apart stockwork zone with irregular 0.3 to 0.6 cm wide calcite vnlts, few of them partially replaced to FG qtz late calcite crossing qtz vnlts –trz of FG anhedral Py in very scarce vnlts , slickenside at 30º to 40º of c.a.

 

  254.00 m 260.40 m abundant 0.5 to 2 cm apart < 0.1 cm wide calcite lenses or   micro vnlts at 60º to 85º of c.a. few with trz of FG anhedral Py

259.40 m – 259.50 m 10 cm wide Fault Bx zone at 80º of c.a., one irregular 0.5 to 1 cm wide calcite altered to sericite vnlt at bottom of the interval

260.40

269.60

Kuc Caracol Fm 0.1 to 5 cm wide dark grey color Silts beds 70% to 75%, wavy medium to coarse grain size S.S. in beds changing in width from 0.5 to 5 cm at top to 10 to 30 cm wide at bottom, wavy and slump features, bedding at 80º to 65º of c.a., scarce 0.5 to 1 cm wide elongated Silts lenses in S.S. groundmass, P-c alteration wk sericite in calcite vnlts, scarce 1 to 2 per meter 0.3 to 1 cm wide calcite lenses inter-bedded with 0.05 to 0.1 cm wide rock layers, trz of FG anhedral Py in few calcite lenses

266.95 m -267.30 m S.S, irregular bed with 7 irregular 0.2 to 1.2 cm wide calcite wkly replaced to FG qtz vnlts in wide apart stockwork

268.60 m -269.10 m Fault zone 8 slickenside in the interval at 60º to 70º of c.a. along bedding, small 3 to 10 cm wide S.S. beds with stockwork zones of 0.3 to 0.8 cm wide folded and broken calcite vnlts

269.25 m -269.45 m 20 cm wide S.S. irregular beds with stockwork of 0.3 to 1 cm wide calcite vnlts

269.60

280.33

Silts 90% to 95% in 0.2 to 2 cm wide beds few irregular and wavy 0.1 to 0.5 cm wide FG S.S. beds and lenses 5% to 10%, wave and few slump features, bedding at 60º to 50º of c.a., P-C alteration wk sericite in scarce calcite vnlts walls, 1 to 2 per meter 0.1 to 0.3 cm wide calcite vnlts at 5º to 30º few at 60º of c.a. crossing beds

277.70 m -280.33 m 8 to 10 per meter irregular 0.1 to 1.5 cm wide calcite vnlts at 30º to 45º and 60º to 70º of c.a.

280,33

285.07

Silts 90% to 95% in beds 0.1 to 3 cm wide, wavy 0.1 to 0.5 cm wide FG S.S. beds 5% to 10%, bedding from 50º at top to 65º at bottom, P-C to wk QSPC alteration, dark grey colour rock, moderate sericite in calcite vnlts, moderate broken core zone 20 to 70 cm wide intervals with 5 to 10 cm long rock separated by moderate sericite micro-fractures and slickenside at 45º to 60º of c.a., 10 to 12 per meter irregular hairline to 0.5 cm wide calcite partially altered to sericite vnlts at 0º to 20º of c.a., 1 to 3 per meter 0.5 to 3 cm wide calcite vnlts at 65º to 85º of c.a.

285.02 m -285.07 m 5 cm wide Fault zone at 80º of c.a., moderate calcite- sericite vnlts in stockwork

285.07

295.90

Silts 90% to 95% at top to 80% to 85% at bottom, Silts beds 0.1 to 3 cm wide, irregular wavy 0.1 to 1 cm wide FG S.S. beds, bedding at 65º to 40º of c.a., P-C alteration light grey colour rock at bottom of the interval, wk sericite, 6 to 8 per meter irregular hairline to 0.3 cm wide calcite vnlts at 20º to 45º of c.a., scarce 1

5



to 2 every 3 m 0.5 to 0.7 cm wide calcite-FG to medium size grain anhedral Py lenses, slickenside every 20 to 30 cm apart at bottom of the interval

295.90

299.50

Fault zone, 2 to 30 cm wide gouge zones, fault planes at 60º to 85 ºof c.a.

crossing bedding, less than 10% of calcite wkly rand locally replace to FG qtz in 0.2 to 1 cm wide vnlts fragments in the Bx gouge zones

299.50

304.95

0.1 to 1 cm wide Silts beds 90%, FG S.S. in beds 0.1 to 1 cm wide 10%, bedding at 60º to 70º of c.a., P-C alteration, scarce 1 per meter 0.1 to 0.3 cm wide calcite vnlts at 30º to 40º and 70º to 85º of c.a., 3 to 4 per meter 0.3 to 1 cm wide calcite wkly to moderate replaced to FG qtz vnlts at 65º to 85º at bottom of the interval in the faulted zone to be described below

303.40 m to 304.95 m Fault zone, broken core, 5 to7 cm wide Fault Bx zones formed by 0.5 to 2 cm long sub angular rock fragments, fault planes at 45º and 60º to 70º of c.a.

304.90 m -304.95 m 5 cm wide Fault vein zone formed by a 3 to 4 gouge zone at top and a 0.5 to 1.5 cm wide irregular calcite moderately replaced to FG qtz vnlt at bottom, fault planes at 70º of c.a.

304.95

314.90

0.1 to 5 cm wide Silts beds 95%, very thin 0.1 to 0.2 cm wide irregular FG S.S. beds 5%, bedding at 40º to 60º of c.a., P-C alteration, medium to light grey colour rock, wk sericite in calcite, 2 to 3 irregular hairline to 0.3 cm wide calcite vnlts most at 0º to 20º and less at 50º to 70º of c.a. crossing bedding

314.90

317.35

Broken core zone, 8 to 10 per meter fractures with moderate sericite at 10º to 30º and 75º to 85º of c.a.

317.25 m -317.35 m Fault vein zone formed by a zone 7 cm wide at top with 4 irregular 0.8 to 1.5 cm wide calcite moderately replaced to FG qtz vnlt at 80º of c.a., small voids with druse crystals in calcite to qtz vnlts, irregular 0.2 to 0.3 cm wide FG to medium size grain anhedral Py layers, and a 3 cm fault Bx zone at bottom, fault planes at 75º to 85 ºof c.a.

317.35

328.00

Kuc Caracol Fm 0.1 to 1 cm wide Silts 95% to 98%, 0.1 cm wide FG S:S: beds 2% to 5%, P-C alteration grey to light grey colour rock, wk sericite in few calcite vnlts, 3 to 4 per meter 0.1 to 0.3 cm wide calcite vnlts at 10º to 20º of c.a. and at 45º to 50º as lenses, scarce vnlts with trz of FG anhedral Py diss in walls, partial replacement to FG qtz of scarce and wider 0.3 to 0.5 cm wide calcite vnlts located mainly near fault zones.

 

  Fault zones in 322.14 m at 65º of c.a. and in 324.30 m at 70º of c.a.

328.00

339.50

Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 90%, wavy 0.1 to 1 cm wide FG S.S. beds 10%, lightly wavy bedding changing from 60º at top to 40º at 324 m 60º from 337 m to the bottom of the interval, P-C alteration, 1 to 2 per meter hairline to 0.2 cm wide calcite vnlts at 60º to 80º of c.a. less than 1 per meter < 0.1 cm wide calcite lenses, calcite changing from wk to moderate replacement to FG qtz to the depth, FG anhedral to subhedral Py changing from trz to 2% to 3% to the bottom of the interval, , 1 to 2 cm wide Fault gouge zones at 330.65 m at 70º of c.a.; at 331.05 m at 80º of c.a., 0.1 to 0.2 cm wide FG to medium size grain subhedral to cubic Py vnlts at 60º to 80º of c.a. at bottom of the interval

 

 

329.10 m-329.25 m 10 in the interval 0.1 to 1.8 cm wide calcite lenses

330.40 m 5 cm wide Fault zone broken core , wk to moderate calcite-sericite in microvnlts at 60º to 75 ºof c.a.

333.05 m-333.50 m Fault zone broken core 3% to 5% of 0.1 to 0.2 cm wide calcite wkly replaced to FG qtz vnlts at 70º of c.a.-FG botryoidal Py in < 0.1 cm wide vnlts at 10º to 30º of c.a., Py 2% in the interval, no visible fault planes

334.37 m – 334.59 m Broken core zone fragments < 4 cm long, trz of calcite to FG qtz vnlts, FG anhedral Py, trz of VF brown to brass colour mineral in

6



    slickenside Sph? Fault planes at 70º and 80º of c.a. crossing bedding
    335.80 m 2.5 to 3 cm wide Fault gouge zone at 70º of c.a. crossing bedding

336.37 m -336.56 m Fault zone, broken core, 1 to 2 cm wide gouge zones at 60º to 70º of c.a. crossing beds

336.56 m – 337.00 7 in the interval hairline to 0.2 cm wide calcite moderately replaced to FG qtz-FG anhedral Py vnlts at 40º to 60º of c.a. crossing beds

339.50

341.00

Silts 98%,micro-folded and deformed by faulting beds, P-C alteration, 6 to 8 per meter irregular 0.1 to 2 cm wide calcite almost totally replaced to FG qtz in parts brecciated-3% to 5% of medium size grain subhedral to cubic Py vnlts at 50º to 70º of c.a., 8 in the interval irregular and deformed by faulting 0.1 to 0.5 cm wide medium size grain subhedral to cubic Py lenses or vnlts at 60º to 85º of c.a. Py 5% to 7% in the interval

341.00

341.20

Silts beds at 85º of c.a., 10 in the interval irregular 0.1 to 1 cm wide calcite totally replaced to FG qtz-FG anhedral Py-trz of brown Sph vnlts at 40º of c.a. and at 85º of c.a. as lenses, irregular < 0.1 cm wide calcite replaced to Qtz < Py vnlts in stockwork in 2 to 3 cm wide zones, 3 to 5 cm wide-calcite replaced to FG qtz- FG anhedral Py vnlt at 70º of c.a. at bottom of the interval

341.20

341.80

Fault Bxed vein zone, with 7 cm wide at top and 5 cm wide at bottom gouge zones with subhedral to cubic Py in milled rock and less calcite partially replaced to FG qtz, trz of FG brown to red Sph groundmass, fault planes at 75º to 80º of c.a. Bxed vein zone formed by 1 to 10 cm wide Bx zones of sub angular to sub rounded 0.1 to 3 cm long rock fragments in irregular calcite replaced to FG qtz and less milled rock groundmass, FG anhedral Py diss 3%, also subhedral to cubic Py and trz of brown to red Sph and ss? diss in irregular calcite to qtz vnlts. 5 to 7 cm wide Stockwork zones with irregular 0.1 to 0.2 cm wide calcite replaced to FG qtz –subhedral to cubic Py and trz of brown to red Sph vnlts.

341.80

342.86

Silts 95%, deformed by old faulting bedding at 40º to 65º of c.a., irregular 3 to 5 cm wide zones of Bxed zones formed by sub angular 0.5 to 2 cm long rock fragments in calcite replaced to FG qtz irregular vnlts filling voids, small druse textures, 3% to 5% of FG anhedral y less medium size grain subhedral to cubic Py – trz of brown Sph diss in diss Bxed zones or as irregular 0.1 to 0.2 cm wide lenses and vnlts, most Bxed zones along bedding, few crossing beds

342.86

344.30

Silts 98% beds 0.1 to 1.5 cm wide at 80º to 85º of c.a. wkly fractured zone, scarce < 1 per meter 0.1 cm wide calcite replaced to FG qtz lenses 344.08 m-344.30 m 10% to 20% of irregular 0.1 to 1.5 cm wide calcite replaced to FG qtz lenses with irregular and micro folded < 0.1 cm wide rock layers

344.30

373.15

=.1 to 1 cm wide Silts beds 98%, scarce 0.1 to 0.2 cm wide and only one 2 cm wide FG S.S. beds 2%, bedding at 75º to 85º of c.a. P-C alteration, less than 1 per meter irregular hairline to 0.2 cm wide calcite lenses

345.95 m 3 cm wide calcite with sub angular 0.1 to 1 cm long rock fragments lens

350.60 m 2.5 to 3 cm wide banded calcite with < 0.1 cm wide rock bands lens at 75 ºof c.a.

354.0 m -356.05 m Broken core zone, 0.1 to 0.5 cm wide calcite wkly replaced to FG qtz and partially altered to sericite vnlts at 0º to 20º of c.a., also sericite in micro-fractures at 0º to 20º of c.a., 6 to 8 per meter 0.1 to 0.3 cm wide calcite wkly replaced to FG qtz < sericite lenses

356.05 m-356.62 m Fault gouge zone 0.1 to 2 cm long sub angular rock fragments in 30% to 40% of FG milled rock groundmass, no visible fault planes
    356.62 m- 359.08 m Broken core zone 2 to 5 cm long core fragments, 3 to 5 cm

7



wide gouge zones at 50º of c.a. at 358.45 m and at bottom of the interval, scarce < 0.1 cm wide FG to medium size grain subhedral Py vnlts at 20º of c.a.

359.08 m -369.00 m Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 95% wavy irregular 0.1 to 0.3 cm wide FG S.S. lenses 5%, bedding at 30º to 40º of c.a., P- C alteration, 3 gouge zones in the interval at 360.30 - 360.65 m; 361.82 - 361.89 m and 363.33 -363.35 m along bedding, 1 to 2 per meter irregular hairline to 0.2 cm wide calcite wkly replaced to FG qtz-trz of FG anhedral Py vnlts at 20º to 40º of c.a. crossing beds, also at 30º to 40º like lenses and scarce at 80º to 90º of c.a.

363.85 m Irregular 1.5 to 2 cm wide calcite replaced to FG qtz < FG anhedral Py lens

 

  369.00 m- 373.15 m Broken core zone 6 irregular 2 to 15 cm wide gouge zones at 369.10 m, 369.65 m, 370.60 m; 371.10 m;

 

  372.30 m and 373.0 to 373.15 m along bedding, wk to moderate sericite in calcite vnlts walls and in micro fractures, 10% of calcite replaced to qtz < FG anhedral Py vnlts and lens fragments

373.15

393.63

372.30 m 3 to 4cm wide irregular calcite replaced to FG qtz < FG anhedral Py fragments Kuc Caracol Fm 0.1 to 2 cm Wide Silos beds 90%, irregular wavy 0.1 to 0.5 cm wide scarce up to 2 cm wide FG S.S. beds 10%, bedding at 40º to 30º from top to 390 m ; 0º to 20º from 390º to bottom, P-C to wk QSPC alteration, light grey colour rock. Wk sericite in scarce calcite vnlts walls, 2 to 4 per meter hairline to 0.3 cm wide calcite vnlts at 10º to 30º of c.a.

378.05 m -380.09 m broken core zone, 3 to 12 cm long fragments , sericite in micro-fractures at 0º to 20º of c.a., 4 in the interval 0.1 cm wide calcite-sericite vnlts at 0º to 15º of c.a.

380.12 m 2 to 3 cm wide gouge zone with moderate to strong sericite in calcite- FG subhedral Py 5% fragments Fault plans at 70º of c.a. along bedding

 

 

384.43 m irregular 2.0 to 2.5 cm wide calcite vnlt at 60º of c.a. crossing beds

389.60 m – 390.20 m 5 in the interval irregular and folded 0.3 to 0.8 cm wide calcite wkly replaced to FG qtz-FG anhedral to subhedral Py vnlts at 30º and folded up to 70º of c.a. Py 1% to 2%

393.63

394.50

Bedding changing from 20º to 0º at 394 then 10º at bottom, 5 in the interval 0.3 to 2 cm wide irregular calcite in parts with druse texture-FG subhedral to cubic Py and trz of Sph? in VFG red to brass mineral vnlts at 0º to 10º of c.a. and in irregular 6 by 3 cm sub angular nodule or vnlt crossing beds

394.50

404.00

Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 95%, wavy and folded 0.1 to 0.3 cm wide FG S.S. beds 5%. Folded bedding from 20º to 0º of c.a. forming small ample folds. P-C to wk QSPC alteration, light grey colour rock, 2 to 3 per meter irregular, folded and broken 0.1 to 0.3 cm wide calcite-FG subhedral Py vnlts at 10º to 20º and at 60º to 85º of c.a.

395.55 m -396.00 m 5 in the interval Irregular and folded hairline to 3 cm wide calcite-FG subhedral Py vnlts at 10º to 40º of c.a.
400.50 m -402.20 m 6 in the interval 0.1 to 0.2 cm wide FG anhedral Py lenses in some S.S. beds also in vnlts at 85º of c.a.
402.10 m 2 cm wide calcite totally replaced to FG qtz -10% of FG subhedral Py plus Fine to medium size grain cubic Py vnlt at 85º of c.a.

402.08 m 402.22 m Fault zone planes at 75º to 80º of c.a. 3 irregular 0.1 to 2 cm wide calcite replaced to FG qtz < FG anhedral and cubic Py vnlts at 75º to 85º of c.a.

404.00

411.30

Kuc Caracol Fm Silts 90% to 95% in beds 0.1 to 1 cm wide , irregular and wavy

8



0.1 to 0.2 cm wide FG S.S. beds 5% to 10%, micro-folded and broken by slump features bedding changing from 20º to 30º from top to 0º at 406 m, 10º to 30º of c.a. at bottom of the interval, fault brecciation in intervals 15 to 30 cm long at 30º to 50º of c.a. along bedding, Bxed zones formed by 0.2 to 2 cm long sub rounded rock fragments and about 5% of calcite replaced to FG qtz from 404.10 m to 404.25 m; 405.60 m to 405 .80 m; 406.15 m to 406 .35 m and 408.70 m to 408.85 m; 10% to 15% of hairline to 1 cm wide by 0.5 to 2 cm long irregular and folded calcite replaced to FG qtz-FG subhedral to cubic Py vnlts like diss spots, Py 5%

404.08 m 0.7 to 1.0 cm wide calcite replaced to FG qtz < FG subhedral Py and trz of ss? Vnlt at 40º to 50º of c.a.

402.55 m 406.40 m 2 to 3 cm wide irregular Fault gouge zones at 30º to 40º of c.a. along bedding with milled FG subhedral to cubic Py-trz of Brown to black Sph and ss and 5% of calcite replaced to FG qtz vnlts fragments at 405.55 m, 406.17 m and 406.33 m

 

  409.75 m Irregular 2 to 4 cm wide Fault gouge zone at 40º of c.a.

411.30

413.50

Fault Bx zone, sub rounded to sub angular < 0.1 to 3 cm long rock and 5% to 10% of calcite replaced to FG qtz vnlt fragments in about 40% to 50% of milled rock < sericite and FG Py groundmass, also FG subhedral to cubic Py in irregular and broken 0.2 to 2 cm wide vnlts, Fault planes at 40º of c.a. at top and 60º of c.a. at bottom of the interval, Very FG subhedral to cubic Py < FG grey colour ss? and Brown Sph in calcite to FG qtz bands up to 5 cm wide at bottom of the interval, Py 5% to 7% in the interval

413.25

413.50

Irregular Bx vein zone formed by irregular 0.5 to 2 cm wide calcite totally replaced to FG qtz- FG anhedral to subhedral Py vnlts in Bxed and milled rock- sericite and VFG subhedral to cubic Py- VFG grey colour ss? And trz of brown Sph groundmass, 5 cm wide bands formed by up to 40% of FG cubic Py less Grey colour ss and brown Sph at bottom of the interval

413.50

419.79

Silts 90% to 95% consolidated Bx zones at top of the interval with sub rounded to sub angular 0.5 to 2 cm wide by 3 to 8 cm long rock fragments in FG milled rock < sericite groundmass, abundant fractures at 0º to 20º of c.a. and at 70º to 90º of c.a., 2 to 17 cm wide Fault zones. FG subhedral to cubic Py diss in irregular 0.1 to 0.5 cm wide aggregates diss 5%, also in irregular and broken calcite replaced to FG qtz vnlts

415.03 m – 415.20 m 15 cm wide Fault gouge zone at 60º of c.a., 2% to 4% of Py and trz of calcite

 

  415.70 m 8 cm wide Fault gouge zone at 70º of c.a. trz of Py

 

  415.84 m – 416.09 m Irregular 2 to 5 cm wide Fault gouge zone with 5% of   calcite replaced to FG qtz-FG subhedral Py at 30º to 40º of c.a.

416.40 m -417.10 m Highly broken core zone, rock fragments < 3 cm long, 3% of FG subhedral Py, no visible fault planes

 

  417.35 m and 417 .55 m 2 cm wide Fault gouge zones, no visible fault planes

418.80 m – 419.55 m F to Medium size grain subhedral to cubic Py 7% in irregular 0.2 to 2 cm wide lenses or vnlts

419.79

425.17

Fault Bx zone most sub angular and few sub rounded 0.1 to 3 cm long and scarce 10 to 15 cm long rock and about 10% to 1% of calcite replaced to FG qtz fragments, in milled rock < calcite-sericite FG Py groundmass Fault planes at 60º at 419.79 m: at 90º at 420.10 m; 60º at 420 .60 m 70º at 420.70 ; 50º at 421.11 m; 30º at 422.30 m; 60º and 70º at 422.81 m; 60º at 423.45 m; 30º to 40º at 424.07 m; 55º at 424.57 m and 85º at bottom with 20% to 30% of calcite

9



424.07 m Irregular 1.5 to 3 cm wide Fault Bx Vnlt at 55º of c.a., formed by 20% to 25% of calcite wkly replaced to FG qtz-FG subhedral to cubic Py-FG dark brown to black Sph-trz of ss.

425.17

428.65

Medium size S.S. 90% in beds 5 cm to 1 m wide, irregular 0.5 to 5 cm wide Silts lenses or fragments in S.S. beds, no visible bedding planes wk QSPC alteration, 15% to 20% of irregular folded and broken hairline to 0.3 cm wide calcite replaced to FG qtz vnlts in 10 to 30 cm wide stockwork zones Fine to medium size grain subhedral to cubic Py in calcite to Qtz vnlts, Py 2% to 3% in the interval

428.65

429.10

Faulted Bx zone, planes at 70º at top and 80º at bottom of the interval, 20% to 30% of very thin < 0.1 cm wide broken calcite vnlts in micro-stockwork zones FG subhedral Py in irregular 0.2 to 0.5 cm wide bands 428.83 m 1.0 cm wide calcite-5% of F to medium size grain brown to red Sph and 5% of FG to medium size grain subhedral to cubic Py vnlt at 70º of c.a.

429.10

443.75

Kuc Caracol Fm 0.1 to 0.5 cm wide Silts 85% to 90%, wavy 0.2 to 5 cm wide FG to medium size grain at bottom S.S. beds 15% to 20%, wavy and broken by faulting at sedimentation time beds at 70º to 50º of c.a. from top to 430.5 m; 70º to 85º from 431 m to 434 m and 60º to 80º at bottom, small closed fold, P-C alteration, 15% to 20% of irregular folded and broken hairline to 3 cm wide calcite trz of FG anhedral Py vnlts in stockwork most vnlts as lenses, Py trz to 1% in the interval, 2 to 20 cm wide Fault gouge zones at 429.15 m;430.58 to 430.65 m, 430.80m 431.20 to 431.25 m; 433.55 to 433.65 m, 434.15 m to 434.18 m; 435.15 m:; 436.53 m, 437.70 m, 441.30 m; 441.55 to 441.75 m at 30º of c.a.; 442.64 to 442.83 m at 40º of c.a. at top and 70º at bottom, 443.09 to 443.50 m at 45º of c.a
443.50 m 1.5 to 2 cm wide calcite –FG to medium size grain subhedral Py 5%, 2% to 3% of FG brown to red Sph and trz of ss? Vnlt at 85º of c.a.

443.75

452.70

Kuc Caracol Fm Silts 60% in beds 0.1 to 2 cm wide, Medium size grain S.S. 40% in beds up to 2 m wide at top of the interval, and lightly wavy 0.2 to 2.5 cm wide FG S.S. beds at bottom, wavy bedding at 75º to 85º of c.a., P-c alteration, wk sericite in calcite vnlts walls and diss in S.S. beds, 6 to 8 per meter irregular 0.1 to 2.5 cm wide calcite < sericite and trz of FG anhedral Py vnlts at 10º to 30º and 60º of c.a., calcite partially replaced to FG qtz in few irregular 0.2 to 2.5 cm wide vnlts at 449 m to 450 m interval FG subhedral Py in very few 0.2 to 0.5 cm wide vnlts at bottom of the interval and also in irregular 0.1 to 0.2 cm wide bands in S.S. beds, Py trz to 1% in the interval
452.50 m Fault zone at 45º of c.a. moderate sericite

452.70

453.29

Fault Bx zone, 30% to 40% of irregular 0.1 to 2.5 cm wide calcite wkly replaced to FG qtz vnlts fragments, irregular 2.5 cm wide Fault vnlt at 452.75 m with druse texture at 30º of c.a. 452.90 m 2 to 3 cm wide Fault gouge zone at 60º of c.a.
453.05 m 1 to 1.5 cm wide calcite-F to medium size grain subhedral to cubic Py- trz of brown Sph vnlt at 80º of c.a.
453.16 m 2.5 cm wide calcite-F to medium size grain subhedral to cubic Py < brown to red Sph trz of ss vnlt at 85º of c.a.

453.29

457.81

Very irregular and folded beds F to medium size grain S.S. beds 70%, 0.2 to 1 cm wide wavy and folded Silts beds 30% mainly at top of the interval, irregular bedding changing from 85º at top to 0º to 10º in the middle and 40º at bottom of the interval, 20% to 30% of irregular and micro-folded hairline to 2.5 cm wide calcite vnlts in stockwork
456.00 m irregular 0.5 to 1.5 cm wide calcite-FG anhedral Py vnlt at 80º of c.a.

10



457.81 467.25 Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 70%, wavy 0.5 to 5 cm wide and FG at top changing to medium size grain 5 to 50 cm wide S.S. beds 30%, bedding at 30º to 50º of c.a.; P-C to wk QSPC alteration, wk to moderate sericite in calcite vnlts walls, 3 to 5 per meter irregular 0.1 to 2 cm wide calcite< sericite few with FG subhedral Py vnlts at 10º to 30º of c.a.
459.40 m -459.90 m 2 in the interval 2.5 to 4 cm wide calcite with sub angular rock fragments and FG subhedral Py lenses
467.25 468.00 Faulted zone, 5 to 20 cm wide Bx zones with irregular 1 to 3 cm wide calcite moderately replaced to FG qtz vnlts fragments, fault planes at 75º to 85º of c.a.
468.00 475.55 Kuc Caracol Fm 3 meter wide zones of irregular 0.1 to 1 cm wide Silts 70% to 80% from top of the interval to 471.70 m, Irregular folded F to medium size grain S.S. in beds 10 cm to 30 cm wide 60% and 0.5 to 3 cm wide Irregular Silts beds and fragments 40%, from 471.70 m to 474.45 m, displaced by faulting at times of deposition wavy bedding at 20º to 50º of c.a., few Silts fragments? At 75º to 90º of c.a., P-C to wk QSPC alteration, wk sericite in calcite vnlts walls in S.S. beds, moderately broken core zones mainly in Silts intervals
2 fault zones at 40º of c.a. one at 469.75 m located in wall of a 5 cm wide brecciaed now consolidated at 40º of c.a. and at 475.20 m at 30º of c.a. Wide apart stockwork zones of irregular folded and broken 0.1 to 1 cm wide calcite partially replaced to FG qtz-FG subhedral Py very scarce trz of ss in scarce vnlts.
475.55 476.80 Fault zone broken core fragments usually 0.5 to 3 cm long, just few 4 and 12 cm long, most fragments of Medium size grain S.S., moderate sericite in groundmass, FG to medium size grain subhedral to cubic Py 2% to 3% trz of ss in the lower wall fault plane at 60º of c.a.
476.80 486.40 Inter-bedded 1 to 3 cm wide F to medium size grain S.S. beds 100% with 0.5 m to 2 m wide zones of thin bedded 0.1 to 2 cm wide Silts beds 80% and 0.1 to 3 cm wide FG S.S. beds 20’%, bedding at 20º to 30º of c.a., P-C to wk QSPC alteration, 1 to 2 per meter 0.2 to 1.5 cm wide calcite-2% to 3% of FG subhedral Py vnlts at 45º to 70º of c.a., less than 1 per meter irregular 0.2 to 1 cm wide calcite replaced to FG qtz < 1% of FG subhedral Py and trz of ss? Vnlts at 20º to 40º of c.a. preferably on Silts intervals, 6 to 8 per meter 0.1 to 2 cm wide calcite replaced to FG qtz < sericite –FG subhedral to cubic Py and trz of minute needles of stibnite? Vnlts at 40º to 50º of c.a.; some irregular 10 cm to 40 cm wide intervals with 0.1 to 0.5 cm wide calcite trz of FG anhedral Py in walls vnlts at 30º to 40º of c.a. in S.S. intervals
486.40 489.45 Irregular bedded 0.1 to 5 cm wide Silts beds 70% -wavy medium size grain S.S. in beds 0.2 to 25 cm wide 30%, bedding at 50º to 70º of c.a., P-C alteration, stockwork of 0.1 to 0.5 cm wide calcite vnlts 489.0 m 1 cm wide Fault gouge zone at 50º of c.a.
489.27 m 2 to 3 cm wide Fault vein zone. 20% to 30% of sub angular 0.5 to 0.8 cm long calcite replaced to FG qtz fragments- trz of FG subhedral Py and trz of black Sph
489.45 517.25 Medium size grain S.S. in massive beds, no bedding planes except one 2 cm wide Silts bed at 515 m at 20º of c.a., P-C to wk QSPC alteration from top to 493.0 m, moderate sericite diss and in some calcite vnlts walls, P-C alteration from 493 m to the bottom of the interval, 3 to 4 per meter usually from hairline to 0.2 cm wide calcite vnlts most at 45º to 60º of c.a. few at 0º to 20º of c.a. trz of FG anhedral Py diss in few calcite vnlts walls
501.40 m -502.90 m 10 to 12 per meter irregular hairline to 5 cm wide calcite-trz of FG anhedral Py vnlts most at 60º to 80º of c.a. scarce at 40º of c.a. crossing

11



the 60º set; 2% of 0.1 to 0.2 cm wide FG anhedral to subhedral Py vnlts at 40º to 60º of c.a.
510.70 m -516.70 m 0.5 to 1% of irregular hairline FG anhedral Py vnlts at 50º to 70º of c.a.
514.30 m – 515.40 m 20 in the interval irregular 0.2 to 1.5 cm wide calcite in parts moderately replaced to FG qtz –trz of FG anhedral Py vnlts in wide apart stockwork, 2% to 3% of Py-trz of black Sph in few vnlts replaced to FG qtz at 80º to 90º of c.a. in a 5 cm wide zone at bottom of the interval.
516.70 m -517.25 m 3 in the interval 0.2 to 1.2 cm wide calcite vnlts at 0º to 10º and at 75º of c.a.
517.25 525.50 Medium size grain S.S. 100% in massive beds, no visible bedding planes, P-C to wk QSPC alteration, moderate sericite in calcite vnlts walls, 6 to 8 per meter irregular 0.2 to 0.5 cm wide calcite vnlts at 20º to 40º and 60º to 75 ºof c.a., less than 1 per meter < 0.1 cm wide FG anhedral Py vnlts at 50º to 60º of c.a. 517.80 m -518.60 m Stockwork zones of irregular 0.2 to 1.5 cm wide calcite < 1% of FG anhedral Py vnlts with a 2 cm wide FG to medium size grain subhedral to cubic Py and less than 10% of calcite replaced to FG qtz vnlt at 40º of c.a. 520.17 m – 521.27 m wide apart stockwork zone of irregular 0.1 to 5 cm wide calcite partially replaced to FG qtz vnlts few with < 0.5 cm wide FG subhedral Py bands – Py 1% to 2% in the interval
520.37 m 5 cm wide vnlt formed by 70% of calcite partially replaced to FG qtz, 5% to 7% of FG subhedral Py in 0.5 cm wide bands in walls and < 1% of Py diss –trz of black Sph and ss vnlt at 50º of c.a.
525.50 528.95 Wavy 0.1 to 5 cm wide Silts beds 40%, medium size grain S.S. in beds 0.5 to 15 cm wide 60%, very irregular and folded Silts beds deposited on unstable basin, consolidated old faulted zones, wavy bedding at 40º of c.a. Faulting at 40º of c.a. 40 cm to 50 cm long intervals of 0.1 to 0.5 cm wide calcite partially replaced to FG qtz vnlts in stockwork in S.S. beds 527.40 m -527.75 m 12 to 15 cm wide Fault vein zone formed by a 4 to 6 cm wide calcite vnlt in the bottom and 6 cm wide Fault Bx at the top formed by 10% of calcite , 2% to 3% of FG subhedral Py in milled rock groundmass at 40º of c.a. along bedding
525.55 m 3 cm wide 80% of calcite- < 0.2 cm wide rock lenses, 5% of FG subhedral Py in irregular bands in walls and less than 1% of brown to black Sph vnlt at 40º of c.a.
528.95 534.90 Medium to coarse grain size S.S. in beds up to 2 m wide 80% to 90% , irregular 2 to 10 cm long lenses or sub rounded fragments in the S.S. beds, bedding at 20º of c.a., P-C to wk QSPC alteration, 2 to 3 per meter 0.2 to 3 cm wide calcite trz of FG subhedral Py vnlts at 30º to 60º and few at 85º to 90º of c.a.
534.90 536.45 Fault at 535.85 m at 30º along bedding, wide apart stockwork zone with irregular 0.1 to 2 cm wide calcite-trz of FG subhedral Py vnlts, wk to moderate sericite in vnlts
536.45   Reduction to NQ core diameter
536.45 548.30 Medium size grain S.S. 90% in massive beds, 0.1 to 1 0 cm wide light grey colour Silts 10% in 2.5 m at bottom of the interval, 2 to 6 cm long irregular Silts fragments in S.S. beds in the upper 60 cm of the interval, bedding at 40º of c.a., P-c to wk QSPC alteration moderate sericite in calcite vnlts and diss in S.S. beds, 3 to 5 per meter irregular hairline to 0.4 cm wide calcite< sericite trz of FG anhedral Py vnlts at 10º to 30º of c.a. few at 60º to 70º of c.a.
548.30 554.10 0.1 to 2 cm wide Silts beds 50%, fine to medium size grain S.S. in beds 5 to 80 cm wide, bedding at 30º to 40º of c.a., P-C alteration, 2 to 5 cm wide old now

12



consolidated Bx zones along bedding and re-moved by post faulting, micro and broken calcite –FG anhedral Py vnlts aligned parallel to the old faulting, also irregular 0.2 to 1 cm wide calcite vnlts in stockwork zones in 2 to 15 cm wide zones between Faulted zones and in some S.S. beds Faults at 548.64 m; 549.38 m; 549.60 m with 3% to 4% of FG brown stained anhedral Py in 0.2 to 0.5 cm long aggregates; 551 m; 552.05 m and 553.20 m to 553.40 m with a 8 cm wide gouge zone and a 2 cm wide Calcite-Py < Sph vnlt at bottom
553.30 m
2.0 to 2.5 cm wide calcite-FG anhedral to subhedral Py and 2% of dark brown to red Sph vnlt at 30º of c.a. below an 8 cm wide fault gouge zone and above an irregular 5 cm wide brecciaed rock with scarce calcite zone, these structures looks aligned along bedding.
554.10 578.00 0.1 to 3 cm wide Silts beds 75%, medium to fine size grain S.S. in beds 2 to 15 cm wide 25%, cross-bedding, wave and slump features, bedding at 50º to 30º at top, then 10º to 0º from 569 to the bottom of the interval, P-c alteration, wk sericite in few calcite vnlts, 2 to 3 per meter irregular 0.1 to 0.5 cm wide, scarce up to 1.5 cm wide calcite wkly and locally replaced to FG qtz some calcite altered to sericite and < 1% FG medium size grain subhedral Py vnlts at 10º to 30º crossing beds and few like lenses, druse textures in few vnlts, Py trz to 1% in the interval 577.95 m 5 cm wide Fault gouge zone at 50º of c.a. 3% to 5% of calcite replaced to FG qtz vnlts 0.5 to 1 cm long fragments in milled rock trz of calcite to qtz groundmass at 45º of c.a.
578.21 588.00 Kuc Caracol Fm 0.2 to 2 cm wide dark grey colour Silts 90% Fine grain size S.S. 10% in the 5 meters at bottom of the interval, bedding at 20º to 10º at 580 m and then 30º at bottom, P-C to wk QSPC alteration, moderate sericite in calcite vnlts walls, 5 to 6 per meter 0.1 to 1 cm wide calcite < sericite and trz to 1% of Fg anhedral Py vnlts at 10º to 40º of c.a. 583.40 m -586.00 m 0.1 to 0.5 cm wide calcite vnlts in stockwork
385.10 m 6 cm wide calcite FG subhedral Py 10%, and 2% to 3% of brown Sph vnlt at 40º of c.a.
588.00 599.00 Fine grain to medium size grain S.S. 99% in massive beds only dark grey Silts beds from 588.40 m to 588.80 m, bedding at 20º to 30º of c.a. wk QSPC alteration, 4 to 5 per meter 0.1 to 1 cm wide calcite – moderate sericite-trz to 5% of FG subhedral to cubic Py vnlts at 10º to 40º and few at 70º of c.a. FG anhedral Py diss 1%
599.00 610.0 Inter-bedded 2 to 3 m wide zones of FG S.S. beds 100% with 0.2 to 3 cm wide Silts beds 60% and FG S:S. beds 40%, bedding at 20º to 30º of c.a. Wk QSPC alteration, 7 to 8 per meter 0.1 to 0.5 cm wide calcite- FG anhedral Py from 1% to 10%, about 5% of 0.2 cm wide FG anhedral Py lenses, also FG anhedral Py in 0.3 to 0.5 cm wide aggregates diss Py total 7% to 8%.
603.45 m 3 cm wide calcite wkly replaced to FG qtz –FG subhedral Py 5% and trz of brown Sph vnlt at 30º of c.a.
606.90 m 2 cm wide calcite-FG subhedral Py and trz of brown Sph vnlt at 20º of c.a.
607.80 m 1 cm wide calcite partially replaced to FG qtz- FG subhedral Py 5% and trz of brown Sph vnlt at 30º
610.00 620.10 Kuc Caracol Fm, 0.2 to 2 cm wide Silts beds 60%, 0.1 to 1 cm wide FG S.S. beds 40%, wavy bedding at 30º of c.a., P-C alteration wkly fractured zone 1 to 2 fractures per meter, 2 per meter 0.2 to 0.5 cm wide scarce up to 2 cm wide calcite-FG anhedral Py from 1% to 10% vnlts at 10º to 40º of c.a. few at 60º to

13



70º of c.a. 2 to 3 per meter 0.1 to 0.3 cm wide FG anhedral Py lenses, few 0.1 to 0.2 cm wide FG anhedral Py vnlts at 60º to 70º of c.a. Py 5% in the interval 617.40 m 1 cm wide fault gouge zone at 40º of c.a.
620.10 630.00 Silts 90% in beds 0.2 to 2 cm wide, inter-bedded with FG light grey colour S.S. beds 10%, wavy bedding at 30º of c.a. wk QSPC alteration, 6 to 7 per meter 0.1 to 1 cm wide few 2 to 3 cm wide calcite –trz to 2% of FG subhedral Py vnlts at 10º to 30º and 70º to 80º of c.a. ; 627.0 m – 627.30 m 7 in the interval 0.1 to 0.5 cm wide calcite totally replaced to FG qtz- trz of FG subhedral Py vnlts at 50º of c.a.
621.0 m 2 cm wide calcite -5% of FG subhedral Py and trz of brown Sph vnlt at 60º of c.a.
630.00 639.90 Kuc Caracol Fm, Fine to medium size grain light grey colour S.S. beds 100%, Bedding at 80º of c.a. Wk QSPC alteration, 5 to 6 per meter 0.2 to 0.5 cm wide, few 3 to 4 cm wide calcite-moderate sericite in walls-FG anhedral Py trz to 2% vnlts at 10º to 30º and less at 70º to 80º of c.a. 638.60 m – 639.90 m 8 in the interval 1 to 3 cm wide fault gouge zones at 40º to 70º of c.a.
639.90 651.36 Inter-bedded 2 to 5 m wide intervals of Silts 80% in beds 0.2 to 5 cm wide-0.1 to 1 cm wide FG S.S. beds 20% with intervals of FG to medium size grain 0.8 to 40 cm wide S,.S. beds 100%, bedding at 25º to 40º of c.a. P-C to wk QSPC alteration, 8 to 10 per meter hairline to 1 cm wide few 2 to 4 cm wide calcite locally wkly replaced to FG qtz – trz to 3% of FG subhedral Py vnlts at 10º to 30º the thinner vnlts and at 50º to 60º of c.a. the wider vnlts. 646.54 m -651.36 m 0.1 to 1 cm long sub rounded FG anhedral Py aggregates diss. 1% to 2%
644.57 m 1 to 1.5 cm wide calcite partially replaced to FG qtz 2% of FG subhedral to cubic Py and 1% of brown to black Sph lens at 25º to 30º of c.a. 646.49 m- 646.54 m 5 cm wide Fault gouge zone at 65º of c.a.
651.36 657.45 Kuc Caracol Fm 0.1 to 1 cm wide Silts 99%, very scarce 0.1 to 0.3 cm wide FG S.S. beds 1%, wavy bedding changing from 40º to 60º at 652-653 m, and from 40º to 0º at bottom of the interval, P-C alteration, 651.36 m – 654.10 m 2 to 3 per meter 0.4 to 2 cm wide calcite partially replaced TO FG qtz < FG subhedral Py vnlts at 30º to 40º and few at 65º to 85 ºof c.a., 6 to 8 per meter hairline to 0.2 cm wide calcite 1% to 2% FG anhedral Py vnlts at 300 and 60º to 75º of c.a., irregular 0.1 to 0.3 cm wide FG anhedral Py aggregates diss 2% to 3% 654.10 m – 657.45 m 3 to 4 per meter hairline to 0.5 cm wide calcite vnlts at 20º to 30º and 60º to 75º of c.a., 2 in the interval 0.3 to 0.5 cm wide calcite wkly replaced to FG qtz, 2% to 3% FG subhedral Py vnlts at 60º to 75 ºof c.a.
657.45 671.30 Silts in irregular 0.1 to 1 cm wide beds 98%, FG irregular 0.1 to 0.5 cm wide S.S. lenses 2%, wavy bedding deposited on unstable basin at 0º of c.a. at top changing to 60º -70º from 661 to 668 m and 40º at bottom of the interval, P-C to wk QSPC alteration moderate sericite in calcite vnlts walls and in micro- fractures, 2 to 3 per meter hairline to 0.2 cm wide calcite-sericite vnlts at 10º to 30º and at 70º to 85º of c.a. except in the stockwork zones described below: Trz to 1% of FG anhedral Py in 0.2 to 0.3 cm long Py clouds diss in some FG S.S. lenses at bottom of the interval 658.70 m – 664.0 wide apart stockwork zone formed by irregular hairline to 1 cm wide calcite some with druse texture, moderate sericite and trz to 1% of FG anhedral Py vnlts, moderately fractured zone with 3 to 5 fractures per meter most at 10º to 30º and few at 75º to 90º of c.a. 1 to 2 cm wide Fault gouge zones

14



at 60º to 75º of c.a. in 661.50 m; 661.83 m and 663.25 m
666.10 m -671.30 m 6 in the interval irregular 2 to 4 cm wide pebble dikes and Bx zones formed by 0.1 to 1 cm long sub angular to sub rounded Silts fragments in calcite groundmass, dikes at 10º to 30º of c.a.
669.55 m 10 cm wide Fault vein zone at 45º of c.a. formed by calcite and 2% to 3% of FG anhedral Py at bottom of the interval and 0.5 cm wide fault gouge zone at top
671.30 673.35 Old brecciaed by sedimentary process now consolidated zones of 95% of Silts beds, wavy and faulted 0.1 to 0.5 cm wide FG S.S. beds 5%, irregular bedding at 50º to 60º of c.a.
627.75 m 7 cm wide Fault gouge zone at 60º to 75º of c.a., irregular 0.2 to 3 cm wide druse calcite-moderate sericite in vnlts walls, trz to 1% of FG anhedral Py
673.35 677.30 Silts 95% in beds 0.1 to 1 cm wide, irregular wavy 0.1 to 0.5 cm wide FG S.S. beds 5%, wavy bedding at 50º to 60º of c.a., P-C alteration 1 to 2 per meter irregular hairline to 0.3 cm wide calcite wk sericite trz to 2% of FG anhedral to subhedral Py vnlts at 20º to 30º and 60º to 75º of c.a.
677.30 678.79 Fault zone black colour 10 to 80 cm wide gouge zones at 60º to 85º of c.a. formed by 0.1 to 1 cm long Silts fragments and < 1% of FG qtz fragments in black milled rock as groundmass
678.79 678.86 7 cm wide calcite almost totally replaced to FG qtz, 10% to 15% of FG to medium size grain subhedral to cubic Py and less than 1% of brown to black Sph vnlt at 75º of c.a.
678.86 679.35 25 cm wide zone of black Silts wkly brecciaed-3% to 5% of 0.1 to 0.2 cm wide FG subhedral Py vnlts at 60º to 75º of c.a. and in 0.3 to 0.5 cm long FG anhedral Py aggregates diss at top of the interval
24 cm wide Fault gouge Bx zone 2% to 3% of calcite to FG qtz 0.2 to 0.5 cm long fragments and abundant milled rock < sericite as groundmass
679.35 679.46 11 cm wide Fault Bx vein zone formed by 70% to 80% of calcite almost totally replaced to FG qtz 10% of milled rock fragments, 5% to 10% of FG to medium size grain subhedral to cubic Py and 1% of brown to black Sph From 678.79 m to 679.46 m possible Dolores vein
679.46 686.90 Kuc Caracol Fm Silts 98% in no defined massive beds, irregular 0.1 to 0.2 cm wide FG S.S. lenses 2%, bedding changing fro 10 of c.a. at top to 50º at bottom, P-C alteration, 2 per meter hairline to 1.5 cm wide calcite vnlts at 10º to 40º of c.a.
686.90 689.10 Broken core zone fragments < 5 cm long 4 gouge zones in the interval at 687.20 m 8 cm wide at 60º of c.a. along bedding: 687.50 m 5 cm wide Bx with of 0.1 cm wide calcite vnlts as groundmass at 40º of c.a.; 688.05 m 2 cm wide at 75º of c.a.; 689.05 m 1.5 cm wide at 20º of c.a. moderate sericite, 5% to 10& of irregular calcite-sericite vnlts in stockwork, 3 cm wide pebble dike zones at 70º of c.a.
689.10 700.13 Kuc Caracol Fm Silts 95% in beds 0.1 to 5 cm wide, wavy irregular 0.1 to 0.5 cm wide FG S.S. lenses and beds 5%, wavy bedding changing from 10º to 40º of c.a., P-c alteration, 2 to 3 per meter irregular hairline to 0.5 cm wide calcite < 1% of FG subhedral Py vnlts at 20º to 40º of c.a. 693.30 m – 693.40 m 7 in the interval irregular 0.5 to 1.5 cm wide calcite-1% to 2% of FG subhedral Py vnlts at 40º and 80º of c.a.
700.13 704.45 Silts 90% in irregular and wavy 0.1 to 2 cm wide beds, FG 0.1 to 1 cm wide S.S. lenses and beds 10%, wavy bedding deposition on unstable basin, bedding at 40º of c.a. at top, then 50º to 60º at bottom, P-C alteration, 6 to 8 per meter irregular 0.2 to 1 cm wide calcite –trz to 2% FG anhedral Py vnlts at 30º and 70º

15



of c.a. and in 2 to 5 cm wide pebble dike zones at 20º to 40º of c.a. 702.25 m – 704.45 m 10 in the interval irregular 0.1 to 2.5 cm wide calcite replaced to FG qtz < 1% FG subhedral Py vnlts at 30º to 45º and 70º to 85º of c.a., 0.1 to 0.2 cm wide FG anhedral Py lenses or aggregates in some S.S. beds Py 1% to 2% in the interval
704.45 710.44 Silts 95% scarce irregular and wavy 0.2 to 0.8 cm wide FG S.S. lenses 5%, bedding at 40º to 50º of c.a. and 10º to 20º at bottom of the interval, P-C alteration, 1 to 2 per meter irregular 0.3 to 0.5 cm wide calcite-trz of FG anhedral Py vnlts at 70º and few at 45º to 50º of c.a.; 1% of FG anhedral Py in 0.1 to 0.3 cm long aggregates or clouds diss in scarce S.S. lenses, Py trz in the interval
710.44 713.78 Silts 98% wavy 0.1 to 0.2 cm wide FG S.S. lenses and beds 2%, wavy bedding at 10º to 20º of c.a., P-C alteration, 5 cm wide at 711.20 m and 20 cm wide at 711.30 m old Bx fault zones with 60% to 80% of 0.1 to 2 cm long rock fragments in calcite wkly replaced to FG qtz , 1% to 2% FG anhedral Py groundmass at 60º to 75º of c.a., 2 to 3 per meter 0.2 to 2 cm wide calcite wkly to moderately replaced to FG qtz < FG subhedral Py vnlts at 40º to 50º of c.a., 2% of irregular 0.1 to 0.2 cm wide FG anhedral Py lenses at bottom of the interval
710.45 m 2.0 to 2.5 cm wide calcite replaced to FG qtz-5% to 7% FG to medium size grain subhedral Py, 2% to 3% of VFG anhedral Py and trz of black ss? Vnlt at 70º of c.a.
713.78 715.10 Stockwork zone of irregular 0.1 to 0.5 cm wide calcite wkly replaced to Fg qtz- trz of FG anhedral to subhedral Py vnlts 714.0 m Fault at 80º of c.a.
715.10 723.23 Kuc Caracol Fm Silts 90% in irregular 0.1 to 1 cm wide beds, 0.1 to 1.5 cm wide sub rounded FG S.,S. lenses and wavy beds 10%, bedding from 60º at top to 85º at bottom, P-C alteration, 1 per meter hairline to 0.3 cm wide calcite trz to 1% Fg subhedral Py vnlts at 75º to 90º of c.a.
723.23 730.00 Irregular and wavy Silts 95% in beds 0.1 to 1 cm wide, 0.2 to 0.4 cm wide irregular FG S.S. beds 5%, deposition on unstable basin bedding at 60º of c.a., 2 to 3 per meter 0.1 to 0.5 cm wide calcite changing from wkly to moderately replaced to FG qtz to the bottom-trz to 2% of Fg subhedral Py vnlts at 45º to 60º of c.a., trz at top to 1% at bottom of irregular 0.1 to 0.2 cm wide FG anhedral Py lenses in some S.S. beds
730.00 731.00 2 in the interval 2.5 cm and 4 cm wide calcite totally replaced to FG qtz-trz of black Sph vnlts at 30º and 45º of c.a. at 730.10 m and 730.40 m 730.51 m-730.61 m 10 cm wide stockwork zone of 0.1 to 0.5 cm wide calcite totally replaced to FG qtz vnlts
731.00 733.80 Bedding changing from 10º at top to 80º of c.a. at bottom fold zone, 5 in the interval irregular 0.5 to 3 cm wide calcite replaced to FG qtz some with sub angular 0.1 to 1 cm long rock fragments forming thin Bx zones at 70º to 85º of c.a., also scarce 0.3 cm wide calcite replaced to FG qtz-FG subhedral Py lenses at 0º to 10º at 732.0 m to 732.60 m
733.80 752.38 Kuc Caracol Fm 0.1 to 0.5 cm wide Silts beds 90% to 95%, lightly wavy 0.1 to 1 cm wide FG S.S. beds and lenses 5% to 10%, bedding at 75º to 85º of c.a., P-C alteration, 1 to 2 per meter irregular 0.1 to 3 cm wide calcite replaced to FG qtz lenses and scarce < 1 every 2 meter vnlts at 10º to 30º of c.a., FG anhedral Py in 0.1 to 0.3 cm wide lenses and 1% of 0.2 cm long clouds in S.S. beds Py 1% to 2% 2 to 3 fractures along bedding per meter
742.83 m Irregular 0.5 cm wide Fault vnlt of calcite replaced to FG qtz trz of black Sph at 60º of c.a.

16



   
751.70 m 1 cm wide calcite replaced to FG qtz trz of black Sph vnlt at 40º of c.a.
752.38 754.10 Silts 95% FG S:S. beds 5%, bedding at 85º to 90º of c.a., 4 to 6 per meter irregular hairline to 0.3 cm wide calcite replaced to FG qtz 10% of FG subhedral Py vnlts at 10º to 30º and few at 80º to 90º of c.a. as lenses 752.35 m 4 cm wide calcite replaced to FG qtz with 0.5 to 0.8 cm wide FG to medium size grain subhedral to cubic Py fault veinlet at 60 60º of c.a.
754.18 764.30 50 cm to 80 cm wide intervals of thin bedded Silts 80% and S.S. 20% among 1.2 to 2 m wide intervals of only FG to medium size grain S.S. beds, average in the interval Silts 40% S.S. 60%, bedding at 80º to 90º of c.a., wk QSPC alteration, 6 to 8 per meter irregular 0.1 to 1 cm wide calcite wkly to moderately replaced to FG qtz < sericite-FG to medium size grain subhedral Py vnlts, few of them up to 10 cm wide with trz of brown to black Sph diss at 75º to 90º of c.a. and scarce at 10º to 30º of c.a., 3 to 4 per meter 0.1 to 0.2 cm wide FG anhedral Py lenses or vnlts at 80º to 90º of c.a., 10 cm to 20 cm wide Stockwork of hairline to 0.3 cm wide calcite to qtz vnlts in some S.S. intervals
755.55 m 5 to 6 cm wide Fault gouge zone with milled rock-FG subhedral Py-trz of Sph zone at 85º of c.a.
756.00 m – 756.10 m 10 cm wide calcite moderately replaced to FG qtz 3% of Fine to medium size grain subhedral to cubic Py and 1% of brown to black Sph vnlt at 80º of c.a.
756.65 m 2.5 to 3 cm wide calcite wkly replaced to FG qtz-5% of FG to medium size grain subhedral to cubic Py and 1% of brown and black Sph vnlt at 75º to 85º of c.a.
757.0 m 757.60 m 2 in the interval 0.7 and 1 cm wide calcite moderately replaced to FG qtz trz to 1% of FG subhedral Py and trz of brown Sph vnlts at 20º of c.a. 761.17 m 1 cm wide Fault gouge zone at 85º of c.a. 761.70 m 764.13 m Moderately fractured zone 7 in the interval 2 to 30 cm wide fault gouge zones at 85º to 90º of c.a., some with 5% to 10% of FG to medium size grain subhedral Py and trz of black and brown Sph
762.20 m 762.27 m 7 cm wide Fault gouge zone 5% of Fine to medium size grain subhedral to cubic Py trz of black Sph at 85º of c.a.
763.54 m – 763.70 m 2 vnlts 3 cm and 5 cm wide calcite wkly replaced to FG qtz 2% of FG subhedral Py and < 1% of brown and black Sph vnlts at 80º and 85º of c.a.
764.00 m – 764.30 m 30 cm wide Fault gouge zone at 60º of c.a. with a 7 cm wide interval with 10% to 15% of FG to medium size grain subhedral Py and trz of black Sph
764.30 775.93 Silts 90% to 95% wavy and micro faulted in zigzag texture 0.2 to 0.5 cm wide FG S.S. beds and lenses 5% to 10%, bedding from 30º at top to 20º at 765.50 m then 45º to 65º at 770 m and 85º to 90º of c.a. at bottom of the interval, P-C to wk QSPC alteration scarce 1 to 2 per meter hairline to 0.3 cm wide calcite locally wk to moderately replaced to FG qtz- trz of FG subhedral Py vnlts at 10º to 30º and at 60º to 85º of c.a.
765.95 m -767.00 m Fault zone broken core, FG anhedral to subhedral Py 5% to 7% in irregular 0.1 to 0.2 cm wide lenses and clouds diss in S.S. beds- 3% of calcite replaced to FG qtz vnlts at 10º to30º of c.a., 2 to 5 cm wide gouge zones with 5% to 10% of calcite replaced to FG qtz < FG subhedral Py ands < 1% of black Sph at 85º of c.a.
764.44 m 2 cm wide massive medium size grain subhedral Py, 3% to 5% of black and less brown Sph vnlt at 60º of c.a.

17



775.93 787.30 Fractured zone broken core fragments 1 to 10 cm long few 15 to 20 cm long, thin bedded Silts 60%, F to medium size grain S.S. 40% in beds 3 to 20 cm wide, bedding at 85º to 90º of c.a., P-C to wk QSPC alteration, 25 in the interval Fault Bx zones 2 to 64 cm wide the wider from 781.23 m to 781.87 m with 15% to 20% of 0.1 to 1 cm wide calcite partially replaced to FG qtz –FG anhedral to subhedral Py trz of black Sph vnlts fragments resembling a stockwork zone, 20% to 25% of irregular 0.2 to 5 cm wide calcite moderately to totally replaced to FG qtz < sericite 1% to 2% of FG subhedral Py and trz of black and less brown Sph vnlts in 30 cm to 1 m wide apart stockwork zones from top to 784.70 m
775.93 m -777 65 m 1 to 8 cm wide calcite totally replaced to FG qtz trz to 1% of FG subhedral Py and trz to 1% of black < brown Sph vnlts in stockwork
787.30 791.00 20 cm to 1.5 m wide zones of thin bedded Silts 90% and wavy 0.1 to 2 cm wide FG S.S. beds 10% among 25 cm to 1 m wide intervals of only FG to medium size grain S.S., bedding at 70º of c.a., P-C to wk QSPC alteration 5 in the interval 15 cm to 80 cm wide stockwork zones formed by irregular 0.1 to 4 cm wide calcite wkly replaced to FG qtz vnlts, 5 to 10 cm wide vnlts zones with trz of black Sph from 787.70 m – 787.80’ m; from 790.40 m to 790.45 m and from 790.74 m to 790.84 m
791.00 795.70 Kuc Caracol Fm S.S. beds 1 to 5 cm wide 60% to 70% thin bedded 0.1 to 2 cm wide Silts 30% to 40%, wavy bedding at 85º to 90º of c.a. P-C alteration 10 in the interval irregular 0.3 to 3 cm wide calcite vnlts at 20º to 40º of c.a.
785.70 801.45 Silts 85% to 90% in beds 0.1 to 1.5 cm wide, wavy 0.1 to 5 cm wide FG and some medium size grain S.S. beds 10% to 15%, wavy bedding at 80º to 85º of c.a., P-C alteration moderately broken core zone, 9 in the interval 1 to 5 cm wide Fault gouge zones at 20º ,60º and most at 85º of c.a. along bedding, 10% to 15% of irregular 0.1 to 1 cm wide calcite 3% to 5% of the vnlts moderately replaced to FG qtz at 10º to 40º and like lenses at 85º of c.a.
901.45 813.00 0.1 to 1 cm wide Silts beds 85% to 90% wavy 0.1 to 2 cm wide just one 20 cm wide FG the thinner and medium size grain the wider S.S. beds 10% to 15%, bedding at 85º at top changing to 0º at 807.15 m centre of a fold, and 65º to 75º at bottom, P-C alteration, trz of FG anhedral Py in 0.1 to 0.2 cm long clouds in some S.S. beds trz of FG subhedral Py in very scarce calcite vnlts, 1 per meter hairline to 0.4 cm wide calcite< 1% of FG subhedral Py vnlts at 10º to 30º and most like lenses
813.00 818.20 Medium size grain S.S. 85% in beds 20 cm to 1.5 m wide, 0.5 to 2 cm wide Silts beds 15%, bedding at 60º to 70º of c.a. at top to 40º at bottom, P-C to wk QSPC alteration, 6 to 8 per meter 0.2 to 1 cm wide calcite partially replaced to FG qtz 2% to 5% of FG to medium size grain Py, 2% to 5% of black and less brown Sph trz of ss? vnlts at 45º to 65º of c.a. and like lenses
816.60 m -818.20 m wide apart stockwork of 0.1 to 0.5 cm wide calcite wkly replaced to FG qtz trz to 1% of FG subhedral Py and 1% to 2% of black and less brown Sph vnlts

818.20

824.70
FG to medium size grain S.S. in beds 5 to 60 cm wide 80%, thin bedded 0.1 to 1 cm wide Silts beds 20% in 1 to 10 cm wide intervals, bedding at 40º at top changing gradually to 85º to 90º at 812.50 m then 70º at the bottom of the interval, P-C to wk QSPC alteration, 8 to 12 per meter irregular hairline to 2 cm wide calcite very few with wk replacement to FG qtz < 1% of FG anhedral to subhedral Py –AsPy and trz of black Sph and ss? Vnlts at 10º to 30º and like lenses at 60º to 75º of c.a.
824.70 833.00 Medium size grain S.S. in beds 40 cm to 1.2 m wide 90% few 5 to 30 cm wide Silts intervals 10% of 0.1 to 1 cm wide Silts 80% and 0.2 to 2 cm wide FG S.S.

18



beds 20%, wavy and irregular bedding at 50º to 75º of c.a., P-C to wk QSPC alteration wk sericite in vnlts walls, 10 to 12 per meter 0.1 to 1 cm wide calcite moderately replaced to FG qtz with small voids- trz of FG subhedral Py vnlts. 10 cm wide apart stockwork zones 831.0 m -831.19 m Fault vein zone with irregular 0.2 to 1 cm wide folded calcite replaced to FG qtz bands at 50º of c.a., Fault planes at 50º and 60º of c.a.
833,00 833.60 S.S. 80% irregular Silts beds 20%, fractured and Bxed zone with 30% of calcite partially replaced to FG qtz in irregular vnlts in stockwork
833.60 840.00 Thin bedded 0.1 to 1 cm wide Silts beds 85%, 0.2 to 10 cm wide FG S.S beds 15%, bedding from 65 to 30º at 836-837 m then 50º at bottom, moderately fractured zone 10 to 20 fractures along bedding per meter, 3 cm wide Fault gouge zone at 837.13 m along bedding, 5 cm wide Fault gouge zone at 833.50 m along bedding, P.-C to wk QSPC alteration, 6 to 8 per meter 0.1 to 0.3 cm wide calcite moderately to totally replaced to FG qtz-2% to 4% of FG anhedral to subhedral Py lenses and less vnlts at 0º to 20º of c.a. 835.10 m -835.70 m zone of old fractures and filled with irregular hairline to 1 cm wide calcite wkly replaced to FG qtz vnlts at 0º to 10º of c.a.
840.00 846.30 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 80%, 0.1 to 0.5 cm wide FG S.S. beds 20%, Bedding at 50º of c.a., 5 to 25 cm wide of sedimentary Bx P-C to wk QSPC alteration6 to 7 per meter slickenside most along bedding , 846.33 m – 848.00 m highly fractured zone , FG anhedral Py in lenses 1%, 3 in the interval 0.3 to 0.5 cm wide calcite vnlts at 70º of c.a.
846.30 850.40 Moderately to highly fractured zone 10 to 12 per meter slickenside per meter bedding at 70º of c.a. wk QSPC alteration, wk sericite in fractures 3% of FG anhedral Py lenses
848.00 m – 849.50 m 12 vnlts in the interval 0.1 to 0.3 cm wide calcite totally replaced to FG qtz 3% to 5% of FG subhedral Py < brown to black Sph and ss. At 50º of c.a.
850.40 855.40 Fault zone in zones 10 to 20 cm wide with slickenside along bedding Wk QSPC alteration FG anhedral Py in lenses and in vnlts 5% to 7%,
851.15 m – 851.70 m 2 Fault veins 10 cm wide FG subhedral Py 10%, brown Sph 5% to 10%, less ss at 40º of c.a.
854.20 m 1 cm wide calcite replaced to FG qtz FG subhedral Py 5%, ss 5% Brown Sph 5% at 70º off c.a.
855.40 873.00 Kuc Caracol Fm 0.2 to 2 cm wide Silts beds 70%, 0.2 to 1.5 cm wide FG S.S. beds 30%, bedding at 80º of c.a., QSPC alteration, moderate sericite in micro- fractures12 slickenside in the interval along bedding, 1 to 5 cm wide Fault gouge zones along bedding, 1 per meter 0.1 to 0.2 cm wide calcite lenses, FG anhedral Py diss in some S.S. beds 1%, 864.05 m 5 cm wide Fault gouge zone 5% of FG Py diss at 80º of c.a. along bedding
873.00 885.30 Kuc Caracol fm 0.2 to 2 cm wide Silts beds 70%, 0.2 to 0.5 cm wide FG S.S. beds 30%, bedding at 70º to 80º of c.a. wk QSPC alteration, 6 to 8 per meter slickenside along bedding 2 to 4 per meter 0.2 to 0.5 cm wide calcite lenses, FG anhedral 0.1 to 0.2 cm wide Py lenses 5%
873.20 m – 873.60 m 0.1 to 0.2 cm wide FG Py with trz of brown Sph and less ss lenses 874.40 m 2 fault zones 2 cm wide at 20º of c.a.
884.10 m 4 cm wide fault gouge zone along bedding
876.60 m – 878.20 m Moderately broken interval 2 fault veinlets at 878.05 to 878.20 m and from
879.75 m to 879.95 m formed by FG subhedral Py 5% to

19



    10%, black Sph 5% trz of AsPy and ss 5% along bedding
855.30 892.80 Kuc Caracol Fm 0.2 to 1 cm wide Silts 90%, 0.2 to 0.3 cm wide wavy FG S.S. beds 10%, bedding changing from 70 º to 80º at top to 20º to 50º from 887.60 to 888.40 m Highly fractured zone Fault gouge zones 5 to 30 cm wide
886.40 m 2 cm wide calcite replaced to FG qtz -black Sph 10%, ss 10%, Gn 3% FG subhedral Py 5% vnlt along bedding
886.05 m 5 cm wide Fault gouge zone at 80º of c.a.
886.42 m 886.62 m 3 in the interval 2 mm wide calcite replaced to FG qtz-Brown Sph 5% and ss 2% vnlts at 10º to 20º of c.a.
887.40 m 10 cm wide Fault gouge zone at 70º of c.a.
890.50 m -891.50 m Stockwork zone of calcite totally replaced to FG qtz- FG subhedral Py 3%-ss 2%, Gn 2% and trz of brown Sph vnlts
891.90 m 0.5 cm wide calcite totally replaced to FG qtz trz of brown Sph lens
892.80 904.34 0.1 to 1 cm wide Silts beds 90%, 0.2 to 0.3 cm wide FG S.S. beds 10%, bedding at 30º to 50º of c.a. wk QSPC alteration 898.0 to 904.34 3 to 4 slickenside per meter, 3 per meter 0.2 to 0.5 cm wide trz of FG anhedral to subhedral Py vnlts at 30º to 50º of c.a. 1 to 2 per meter 0.3 to 0.6 cm wide calcite trz of FG anhedral Py lenses 903.80 m – 903 .90 m 2 vnlts 0.2 and 1 cm wide AsPy 3% to 15%, FG cubic Py 5%-brown Sph 5%, ss 2%, Gn trz at 60º of c.a. 904.09 m 2 to 3 cm wide subhedral AsPy with 1% to 2% of brown Sph lens at 60º of c.a. 904.17 m irregular 0.5 to 2 cm wide medium size grain subhedral to cubic Py 20%, AsPy 5%, brown Sph 1% to 2%, trz of calcite replaced to FG qtz lens at 55º of c.a.
904.34 916.85 Kuc Caracol Fm thin bedded 0.1 to 1.5 cm wide Silts beds 90%, wavy 0.1 to 2 cm wide FG S.S. beds 10%, wavy bedding with few slump features at 50º to 60º of c.a. P-C alteration, 1 per meter irregular hairline to 0.2 cm wide calcite vnlts at 0º to 10º of c.a. 1 to 2 per meter usually 0.1 to 0.3 cm wide just one 6 cm wide calcite lenses, < 1% of FG anhedral Py clouds in S.S. beds and in <0.1 cm wide irregular lenses, Py trz to 1% in the interval
905.21 m – 0.2 to 0.3 cm wide medium size grain subhedral to cubic Py 40’%- AsPy 20%, brown Sph 5% trz of Gn and less calcite replaced to FG qtz lens at 55º of c.a.
916.85 922.63 Kuc Caracol Fm 0.5 to 1 cm wide Silts beds 90%, 0.1 to 0.5 cm wide S.S. beds 10%, wavy with scarce slump features bedding at 60º to 70º of c.a., scarce < 1 per meter 0.1 to 0.3 cm wide calcite-trz of sericite few of them with trz of FG anhedral Py lenses < !5 of FG anhedral Py in small 0.1 to 1 cm long clouds in some S.S. beds
916.85 m Irregular 2 to 3 cm wide lens of Bxed now consolidated calcite wkly replaced to FG qtz 50% acting as groundmass with 0.1 to 1 cm long FG subhedral Py 30%-10% of brown Sph-5% AsPy; 5% Gn as fragments in the Bxed lens at 60º of c.a.
920.80 m – 920.92 m Irregular 1 to 2 cm wide Gn –brown and black Sph 20%, FG anhedral Py 15%, calcite partially replaced to FG qtz 10% to 15% vnlt at 20º to 40º of c.a.
922.63 930.55 Kuc Caracol Fm bedding at 60º of c.a. P-C alteration trz of sericite in scarce calcite vnlts walls, 2 to 3 per meter hairline to 0.3 cm wide calcite < sericite with wk replacement to FG qtz at bottom of the interval trz to 1% of FG anhedral Py vnlts at 5º to 30º of c.a., 1 per meter irregular 1 to 2.5 cm wide calcite lenses
926.05 m – 926.13 m 8 cm wide zone with four 0.1 to 0.2 cm wide calcite wkly

20



replaced to FG qtz-FG subhedral Py 10% to 15% < 1% of brown Sph vnlts at 50º to 60º of c.a.
930.55 939.90 Kuc Caracol Fm 0.2 to 2 cm wide Silts 90%, wave irregular 0.1 to 0.5 cm wide FG S.S. beds 10%, bedding at 50º to 60º of c.a. P-C alteration 3 to 4 per meter 0.1 to 0.3 cm wide just one 2.5 cm wide calcite trz to 2% of FG anhedral Py lenses, 2% to 3% of hairline to 0.2 cm wide FG anhedral Py lenses. Scarce less than 1 per meter hairline to 0.3 cm wide calcite trz of FG anhedral Py vnlts at 20º to 30º of c.a. and 70º to 85º of c.a.
935.82 m 2 to 3 cm wide brown Sph < FG subhedral Py trz of Gn ss and AsPy < calcite wkly replaced to FG qtz lens and 4 hairline same composition lenses and just 1 vnlt in the 3 cm wide footwall of the main vnlt.
939.90 945.00 Irregular and cross-bedded Silts 85% to 90% in beds 0.1 to 1 cm wide wavy and lightly micro-folded 0.2 to 0.5 cm wide FG S.S. beds 10% to 15%, small folded areas with bedding from 45º to 0º then 45º, P-C to wk QSPC alteration wk sericite in calcite vnlts walls, 10 to 12 per meter irregular hairline to 3 cm wide calcite wkly replaced to FG qtz mainly at bottom of the interval-trz to 10% of FG to medium size grain subhedral Py and in very scarce vnlts trz of brown Sph lenses and less vnlts at 20º to 30º of c.a.
942.50 m -1.0 to 1.5 cm wide medium size grain euhedral AsPy 40%-Py 20%, Gn 10%, black Sph 10% lens at 60º of c.a.
946.0   Actual depth of hole

21


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: Dec 13 / 2005  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES    

Summary of DDH QTA-37-05; 699,802 E; 2,650,023 N, 1956 m ASL 340°/-60°, Sta. Rita area
From    To                                                                                                      Description
0.00 15.24 No recovery drilled with tricone bit- Casing
15.24 23.80 Kuc Caracol Fm 0.5 to 7 cm wide Silts beds 70%, lightly wavy 0.2 to 15 cm wide S.S. beds 30%, bedding changing from 30º at top to 60º of c.a. at bottom, P-C alteration, 4 to 6 fractures per meter most along bedding and at 70º to 85º of c.a., 2 to 8 cm wide Fault gouge zones with trz to 1% of Goethite diss at.
18.28 m – 18.42 m 5 cm wide at 30º of c.a. along bedding
18.56 m 2 to 3 cm wide at 60º to 70º of c.a. crossing beds
20.32 m – 1.5 cm wide at 50º of c.a. along bedding
23.05 m – 23.25 m 8 cm wide at 40º of c.a. crossing beds
23.47 m – 23.57 m 6 cm wide at 20º to 30º of c.a. crossing beds
6 to 8 per meter 0.1 to 1 cm wide calcite trz to 1% of brown to orange Goethite vnlts at 10º to 30º of c.a. and as lenses, also calcite in irregular 0.1 to 3 cm wide fault Bx zones
23.80   Bottom of irregular oxidation zone
23.80 27.80 Medium size grain irregular 2 to 15 cm wide S.S. beds and FG 0.1 to 1 cm wide S.S. beds 60%, 0.1 to 3 cm wide Silts beds 40%, micro-folded and wavy bedding from 60º to 40º of c.a., P-C alteration, wkly fractured zone 1 to 2 fxs per meter, 1 cm wide Fault gouge zone at 25.25 m at 50º of c.a. along bedding, 5% of 0.1 to 0.8 cm wide calcite vnlts, few with thin Bx zones, most vnlts at 40º to 60º of c.a. along bedding, few at 10º to 30º of c.a., trz to 1% of FG anhedral Py in few calcite lenses.
27.80 28.80 Fault zone with 4 main 6 cm to 15 cm wide Bx gouge zones at 60º to 85º of c.a., with trz to 5% of FG subhedral to cubic Py and organic material, 3% to 5% of irregular calcite wkly and locally replaced to FG qtz vnlts fragments in Bx zones
28.80 33.18 0.5 to 2.5 cm wide Silts beds 80%, wavy irregular 0.1 to 3 cm wide FG S.S. beds 20%, irregular and micro-folded wavy bedding from 30º to 60º of c.a., P-C alteration trz of sericite in some calcite vnlts walls, 6 to 8 per meter irregular hairline to 0.3 cm wide calcite vnlts at 10º to 40º and at 40º to 60º of c.a. as lenses, 5 cm wide micro-Bx zones at 60º to 75º of c.a. with 10% to 20% of calcite filled voids.
33.18 33.23 4 cm wide Fault gouge zone at 55º of c.a. crossing beds
33.23 40.83 Silts 80% in beds 0.1 to 1 cm wide, lightly wavy 0.1 to 1.5 cm wide FG S.S. beds

1



at top and 12 cm to 35 cm wide Medium size grain S.S. beds at bottom 20%, slump features irregular 0.5 to 4 cm long FG S.S. lenses in Slits beds, bedding at 50º to 60º of c.a., P-C alteration 5% to 7% or irregular hairline to 2 cm wide calcite vnlts at 10º to 40º of c.a. and like lenses with trz to 2% of FG anhedral Py at 50º to 60º of c.a.
40.83 40.88 5 cm wide fault gouge zone trz of sericite at 80º to 85º of c.a.
40.88 63.30 1.5 m wide intervals of medium size grain S.S. in beds 60 cm to 1 m wide alternating with 80 cm to 2.5 m wide intervals of thin bedded Silts 90% and S.S. 10%, lightly wavy with slump features bedding at 60º to 75º of c.a.30 to 70 cm wide intervals with bedding at 0º to 10º of c.a. QSPC alteration wk to moderate sericite in calcite vnlts mainly in S.S. beds, Silts intervals with 4 to 6 per meter hairline to 0.2 cm wide calcite vnlts at 10º to 30º of c.a. scarce vnlts with trz of FG anhedral Py, 6 to 8 per meter 0.1 to 1 cm wide banded calcite trz to 2% of FG anhedral Py lenses, S.S. intervals with 8 to 10 per meter 0.2 to 3 cm wide calcite locally altered to sericite vnlts at 30º to 50º of c.a. and at 70º to 90º of c.a. like lenses.
40.88 m 42.70 m Wide apart stockwork zone of 0.2 to 2.5 cm wide calcite < sericite and trz of to 5% of FG anhedral Py in walls vnlts
52.55 m – 52.95 m Fault zone at 75º to 85 ºof. .c.a. stockwork of irregular 0.5 to 1 cm wide calcite < sericite trz of FG anhedral Py vnlts
52.90 m – 56.00 m Wide apart stockwork zone of 90.1 to 1.5 cm wide calcite vnlts with trz to 5% of FG anhedral Py in few.
63.30 74.66 Thin bedded 0.1 to 2 cm wide Silts beds 95%, lightly wavy 0.1 to 3 cm wide FG S.S. beds 5% bedding at 60º to 75º of c.a. P-C alteration 10 to 12 per meter 0.1 to 0.2 cm wide calcite trz of FG anhedral Py lenses, 3 to 4 per meter 0.1 to 0.2 cm wide calcite trz of sericite vnlts at 10º to 30º of c.a.
70.90 m – 74.66 m wide apart stockwork zone of irregular hairline to 0.8 cm wide calcite vnlts trz of FG anhedral Py in fault zones
73.60 m Fault zone with FG anhedral Py at 40º of c.a.
74.66 98.26 Medium size grain S.S. in beds 10 to 60 cm wide 50%, alternating with 30 cm to 1.5 m wide intervals of 0.1 to 5 cm wide Silts beds with wavy 0.2 to 0.6 cm wide FG S.S. beds 50%, wavy and slump features few Silts lenses in S.S. beds bedding at 50º at top to 80º from 78 to 83 m, 50º to 60º of c.a. at bottom of the interval, wk QSPC alteration wk to moderate sericite and trz of cream color clays in some calcite vnlts, wide apart stockwork vnlts of hairline to 4 cm wide calcite <sericite-clays-trz of FG subhedral Py in few vnlts, 20% to 30% of calcite in the interval
81.92 m – 83.15 m 30% to 40% of irregular 0.5 to 2 cm wide calcite vnlts in stockwork, old fault zone with post movement
82.65 m – 82.75 m 10 cm wide Fault gouge zone 10% to 15% of FG to medium size grain subhedral to cubic Py Fault planes at 40º to 50º of c.a.
87.64 m – 84.15 m Fault zone planes at 80º of c.a. along bedding, 7 cm wide calcite vnlt at 80º of c.a., 2.5 cm wide Bx formed by sub angular 0.5 to 1 cm long
Silts fragments in calcite groundmass, FG to medium size grain anhedral to subhedral Py lenses Py 5%
97.54 m – 98.26 m Fault zone at 30º to 40º of c.a. crossing bedding, 30% of calcite vnlts and filling voids-trz to moderate sericite-trz of FG anhedral Py
98.26 110.70 0.1 to 2 cm wide Silts beds 90%, lightly wavy 0.1 to 1 cm wide FG S.S. beds 10%, bedding at 60º to 70º of c.a., P-C alteration 8 to 10 per meter 0.1 to 0.4 cm wide calcite lenses, 3 to 5 per meter 0.1 to 1.5 cm wide calcite vnlts at 10º to 30º of c.a. only two zones 3 cm and 6 cm wide of stockwork 0.2 to 2 cm wide calcite

2



    vnlts from 100.35 m to 100.50 m
110.70 115.70 Thin bedded Silts 60% FG to medium size grain S.S. in irregular 10 to 30 cm wide beds 40%, wavy bedding slump features Silts fragments in S.S. beds, bedding at 70º to 80’º of c.a., P-C alteration broken zone fractures along bedding every 2 to 5 cm apart in Silts intervals, Fault zones at 110.80 m 2 cm wide gouge zone at 70º of c.a. along bedding; 111.30 m to 11.40 m 1 cm wide at 50º of c.a.; 115.45 m to 116.68 m 20 cm wide Fault gouge zone 10% of calcite< sericite vnlts, fault planes 60º of c.a. at top and 70º of c.a. at bottom along bedding
115.70 131.13 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 95%, 0.1 to 0.5 cm wide FG S.S. beds 5%, in 2 to 4 m wide intervals alternating with 1 m to 4 m wide intervals of FG to medium size grain S.S. in beds 5 cm to 30 cm wide some with small Silts fragments 50% and thin bedded Silts 50%, bedding at 60º to 75º of c.a., P-C alteration, Silts intervals with 12 to 15 per meter 0.1 to 0.2 cm wide calcite lenses and 4 to 6 per meter 0.1 to 0.3 cm wide calcite vnlts at 20º to 40º of c.a., S.S-Silts intervals with 2 to 3 per meter hairline to 0.5 cm wide calcite trz of sericite vnlts at 10º to 40º of c.a., trz of FG anhedral Py clouds in some S.S. lenses
131.13 134.75 Medium size grain S.S. in beds up to 1 m wide 40%, 0.1 to 5 cm wide Silts beds 60%, bedding at 40º to 60º of c.a., P-C to wk QSPC alteration, irregular 0.2 to 2 cm wide calcite vnlts in wide apart stockwork zones, trz of medium size grain subhedral Py in thin faulted intervals 133.20 m 5 cm wide Fault gouge zone subhedral Py 2% at 30º to 50º of c.a.
134.75 149.50 10 cm to 1 m wide medium size grain S.S. beds 60% alternating with 10 cm to 50 cm wide intervals of 0.1 to 2 cm wide Silts and 0.1 to 1 cm wide FG S.S. beds 40%, bedding at 75º to 80º of c.a., P-C alteration wk sericite in some calcite vnlts walls, 3 to 5 per meter irregular 0.2 to 0.8 cm wide calcite trz of sericite vnlts at 10 ºto 40 of c.a. and small 5 to 20 cm wide zones of stockwork mainly in the S.S. intervals, 4 to 6 per meter hairline to 0.2 cm wide calcite vnlts at 10º to 30º of c.a. in Silts-S.S. intervals
149.50 151.49 FG to medium size grain S.S. in beds 30 cm to 90 cm wide bedding at 85º of c.a., P-C alteration, broken core zone faults at
149.50 m 2 cm wide at 90º of c.a.; also at 149.92 m with slickenside at 30º and at 85º of c.a., 151.00 m -151.33 m 0 2 to 1 cm wide calcite vnlts at 0º to 20º of c.a. some druse textures, fault planes at 85º of c.a. along bedding, 10 in the interval 0.5 to 5 cm wide 149.50 m 150.00 0.5 to 4 cm wide Bx zones formed by 50% OF 0.2 TO 4 CM LONG ANGULAR Silts fragments in calcite groundmass at 0º to 10º of c.a. crossing beds
151.49 156.80 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 90%, wavy 0.2 to 2 cm wide FG S:S: beds 10’%, bedding at 80º to 85º of c.a., P-C alteration, 1 to 2 per meter 0.1 to 0.2 cm wide calcite lenses 2 to 4 per meter 0.2 to 1 cm wide calcite vnlts at 20º to 30º of c.a. and at 65º to 80º of c.a.
156.80 157.13 Fault gouge Bx zone planes at 70º of c.a. at top and 50º of c.a. at bottom.10% to 15% of calcite vnlts fragments, some micro-druse textures-moderate sericite

3



157.13 163.50 Kuc Caracol Fm 2 to 10 cm wide FG S.S. beds 50%, 0.1 to 2 cm wide Silts beds 50%, bedding at 70º to 85º of c.a., wk QSPC alteration moderate sericite in calcite vnlts walls, wide apart stockwork zone formed by 0.1 to 1.5 cm wide irregular and folded calcite < sericite vnlts 162.10 m – 163.50 m close calcite-sericite vnlts in stockwork
163.50 169.77 Silts 70% in beds 0.1 to 2 cm wide FG S.S. 30% in beds 1 to 15 cm wide, bedding at 60º to 70º of c.a., P-C to wk QSPC alteration wk sericite in calcite vnlts walls, wide apart 0.1 to 0.5 cm wide calcite scarce FG anhedral Py vnlts stockwork in the Silts intervals, close and more abundant 0.5 to 1.5 cm wide calcite-sericite vnlts in stockwork in the S.S.
169.77 177.00 FG to medium size grain S.S. in beds 2 cm to 1 m wide 80%, 0.1 to 3 cm wide Silts beds 20%, bedding at 60º to 80º of c.a., wk QSPC alteration wk to moderate sericite in calcite, wide apart stockwork of 0.5 to 7 cm wide calcite < sericite vnlts, more amount of vnlts in the S.S. intervals 170.54 m – 177.00 Broken core zone 8 in the interval 5 to 22 cm wide Fault Bx zones at 50º to 80º of c.a., 20% to 30% of irregular 0.2 to 1 cm wide calcite locally and wkly replaced to FG qtz <sericite < FG to medium size grain subhedral to cubic Py vnlts in wide apart stockwork, scarce FG anhedral Py in 0.1 to 0.2 cm wide vnlts at 20º to 30º of c.a. and like lenses
177.00 186.85 Medium size grain S.S. 99% in beds 10 cm to 2 m wide, scarce 5 cm wide Silts intervals 1%, bedding at 50º to 60º of c.a., wk QSPC alteration, moderate sericite in calcite vnlts walls in micro fractures and diss, 2 to 3 per meter irregular hairline to 0.8 cm wide calcite wkly to moderately replaced to FG qtz with trz to 2% of FG subhedral to cubic Py vnlts, also 1% of FG anhedral Py in 0.1 to 0.5 cm wide long clouds.
186.85 188.45 Fault zone broken core Bx zones , fault planes at 70º to 85º of c.a. 20% of irregular broken and folded 0.2 to 2 cm wide calcite replaced to FG qtz vnlts fragments, 5% to 7% of FG to medium size grain subhedral to euhedral Py
188.45 203.10 Thin bedded 0.1 to 3 cm wide Silts 95%, lightly wavy 0.1 to 0.5 cm wide FG S.S. beds 5% 20 cm to 30 cm wide FG to medium size grain S.S. beds at top of the interval, bedding changing from 85º at top down to 195 m, 40º to 60º of c.a. at bottom, P-C to wk QSPC alteration wk sericite in few calcite vnlts, calcite locally and moderately replaced to FG qtz from top down to 196 m 188.45 m – 195.70 m 8 to 12 per meter irregular 0.1 to 0.3 cm wide calcite locally replaced to FG qtz-FG to medium size grain subhedral to euhedral Py lenses and less vnlts at 10º to 30º of c.a., FG anhedral Py clouds Py 1% to 2% in the interval
203.10 204.20 Stockwork zone with about 40% of irregular 0.1 to 3 cm wide calcite wk sericite- trz of FG anhedral Py vnlts and lenses, Py trz to 1%
204.20 209.00 0.1 to 3 cm wide Silts beds 80% wavy 0.1 to 1.5 cm wide FG S.S: beds 20%, scarce FG to medium size grain S.S. beds up to 12 cm wide, bedding at 40º to 60º of c.a., P-C alteration wk sericite, 4 to 6 per meter hairline to 1 cm wide calcite few with trz of to 2% of FG anhedral Py lenses and vnlts at 10º to 40º of c.a., 1 to 5 cm wide irregular pebble dikes zones

4



209.00 223.00 Kuc Caracol Fm irregularly bedded zone 0.5 to 40 cm wide sub rounded Silts lenses or fragments 10% to 15% in medium to coarse grain size S.S. beds 30 cm to 3 m wide 85% to 90%, bedding from 60º at top to 85º at 22.30 m and 40º to 50º at the bottom, P-C to wk QSPC alteration, 3 to 4 per meter irregular hairline to 1 cm wide scarce up to 3 cm wide calcite vnlts at 20º to 40º of c.a. and like lenses
223.00 229.00 Medium size grain S.S. 90%, thin 2 to 20 cm wide Silts intervals 10% wavy bedding at 50º to 60º of c.a., P-C to wk QSPC alteration, wide apart stockwork zones of irregular broken and folded 0.5 to 2 cm wide calcite-trz of sericite vnlts 226.00 m 226.95 40% to 50% of calcite vnlts in stockwork
229.00 240.90 Kuc Caracol Fm Silts 80% in 0.1 to 4 cm wide beds, FG S.S. in lightly wavy beds 0.1 to 5 cm wide beds 20%, bedding at 80º to 85º of c.a., P-C alteration scarce 1 to 2 per meter irregular hairline to 0.3 cm wide calcite vnlts at 20º to 30º of c.a. and lenses
240.90 249.30 Kuc Caracol Fm medium size grain S.S. 100%, no bedding planes, apparent bedding at 85º to 90º of c.a., P-C to wk QSPC alteration, light grey color rock, 3 to 4 per meter 0.2 to 0.5 cm wide calcite vnlts at 30º to 45º of c.a. and at 85º of c.a. like lenses
249.30 252.07 Stockwork zone of irregular 0.1 to 2 cm wide calcite trz of FG to medium size grain subhedral to cubic Py vnlts 249.50 m – 250.00 Old sedimentary Bx zone now consolidated
252.07 256.00 Fine to medium size grain S.S. in beds 1 cm to 1 m wide 60%, 0.1 to 3 cm wide Silts beds 40%, lightly wavy bedding with scarce and small slump zones at 60º to 70º of c.a. wk QSPC alteration, 6 to 8 per meter irregular 0.1 to 0.7 cm wide calcite vnlts at 10º to 30º of c.a., 4 in the interval 0.2 to 1.5 cm wide banded calcite lenses
256.00 269.10 Medium to coarse grain size S.S. in irregular 2 to 4 cm wide beds 60%, 40% of 5 to 40 cm wide intervals of thin bedded 0.1 to 2 cm wide Silts 90% and FG S.S. 10%, very irregular deposition sudden changes in S.S. grain size, some Silts lenses or fragments in S.S. beds, bedding at 70º to 85º of c.a., wk QSPC alteration, 8 to 10 per meter 0.2 to 2 cm wide calcite scarce with trz of FG subhedral Py vnlts at 10º to 30º and at 70º to 85 ºof c.a.
3 zones 10 cm to 30 cm wide with 0.5 to 5 cm wide calcite trz of light green clays (chlorite?) vnlts in stockwork
266.70 , - 267.90 m Fault gouge zone at 65º of c.a. with 10% of calcite < sericite
267.80 m -267.85 m 5 cm wide Fault gouge zone at 85º of c.a. moderate sericite
269.10 289.05 Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 90%, lightly wavy 0.1 to 1 cm wide FG S.S. 10%, bedding from 60º at top to 35º at the bottom of the interval, P-C alteration 3 to 4 per meter hairline to 0.6 cm wide calcite vnlts 282.26 m 3 cm wide calcite replaced to FG qtz –trz of FG subhedral Py vnlt at 70º of c.a.
289.05 289.40 Fault zone at 65º to 70º of c.a. 2% to 3% of very thin < 0.2 cm wide calcite vnlts fragments
289.40 297.25 Kuc Caracol Fm irregular 0.1 to 3 cm wide Silts beds 80%, wavy 0.1 to 5 cm wide FG S.S. beds 20%, irregular deposition slump features mini folded beds bedding changing from 50º at top to 0º at 293 m, 50º to 60º at bottom of the interval, P-C alteration 10 to 12 per meter irregular 0.2 to 1.5 cm wide calcite folded and broken vnlts at 20º to 30º of c.a. also like lenses forming zones up to 1 m wide of wide apart stockwork

5



297.25 299.20 Kuc Caracol Fm Silts 80%, 0.1 to 0.5 cm wide FG S.S. beds 20%, bedding at 60º to 75º of c.a., 0.1 to 1.3 cm wide calcite wkly to moderately replaced to FG qtz, trz to 2% of FG anhedral to subhedral Py vnlts filling voids in Bx zones and in wide apart stockwork zones
299.20 317.75 Medium to coarse grain size S.S. in irregular 30 cm to 2 m wide beds 85%, 15% of 5 cm to 1 m wide intervals with thin bedded Silts 80% and FG 0.1 to 1 cm wide S.S. beds 20%, P-C to wk QSPC alteration wk to moderate sericite in calcite vnlts in micro fractures and diss, 3 to 4 per meter irregular 0.1 to 1 cm wide calcite partially replaced to FG qtz, trz of FG subhedral Py vnlts and lenses, FG botryoidal Py in few vnlts
310.75 m – 311.45 m Stockwork zone of 0.1 to 1.5 cm wide calcite wkly replaced to FG qtz < sericite vnlts
317.75 328.70 Medium size grain S.S. in beds 2 cm to 2 m wide, with some irregular sub rounded 0.5 to 2 cm wide Silts fragments 70%, 30% of 20 cm to 60 cm wide intervals of thin bedded 0.1 to 2 cm wide Silts beds 80% and 0.1 to 2 cm wide FG S.S. beds 20%,, bedding at 40º to 50º of c.a., P-C alteration wk sericite in calcite vnlts walls, 3 to 4 per meter hairline to 0.3 cm wide calcite vnlts at 70º to 85º of c.a. and less at 30º to 40º of c.a. trz of stibnite in scarce calcite vnlts
322.80 m – 323.90 m stockwork of irregular 0.1 to 4 cm wide calcite-trz of sericite vnlts
328.70 333.10 Kuc Caracol Fm wavy 0.1 to 2 cm wide Silts beds 60%, 0.1 to 10 cm wide FG S.S. beds 40%, lightly wavy bedding at 50º to 70º of c.a., P-C alteration, scarce 2 to 3 per meter hairline to 0.5 cm wide calcite vnlts at 10º to 30º of c.a. and some hairline to 1.8 cm wide calcite lenses
333.10 340.46 Medium size grain S.S. in beds 0.5 cm to 1.2 m wide 90%, sub angular to sub rounded 0.5 to 10 cm wide Silts fragments 10%, bedding at 40º to 60º of c.a., P- C alteration
333.50 m – 335.25 m 30% to 40% of 0.2 to 5 cm wide calcite-trz of green clays vnlts in wide apart stockwork
337.95 m – 338.65 m stockwork of irregular 0.2 to 6 cm wide calcite vnlts, some voids, FG subhedral to cubic Py 1% to 2%
340.46 346.25 Medium to coarse grain size S.S. 100% no bedding planes apparent bedding at 50º of c.a. wk QSPC alteration wk sericite diss in S.S. and in some calcite vnlts walls, scarce less than 1 per meter 0.1 to 0.7 cm wide calcite trz of to 1% of FG subhedral Py vnlts at 5º to 20º of c.a. and at 70º of c.a.
346.25 354.70 Kuc Caracol Fm wavy 0.1 to 1 cm wide Silts 70%, 0.5 to 5 cm wide FG S.S. wavy beds 30%, bedding at 60º to 70º of c.a., P-C alteration, two zones 30 cm and 50 cm wide of irregular 0.2 to 0.8 cm wide calcite-wk sericite vnlts in stockwork from 346.30 m to 346.60 m and from 347.45 m to 347.95 m usually 3 to 5 per meter 0.2 to 0.5 cm wide just one 2.5 cm wide calcite wk sericite vnlts at 10º to 20º , 40º to 60º of c.a. and scarce like lenses at 70º of c.a.
354.70 356.32 2 stockwork zones with 0.7 to 2.5 cm wide calcite vnlts- few with micro Bx formed by 0.1 to 1 cm long sub angular Silts fragments in calcite groundmass from 354.70 to 355.35 m and from 355.90 m to 356.32 m
356.32 369.50 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 90%, lightly wavy 0.1 to 0.5 cm wide few 2 to 4 cm wide FG S.S: beds 10%, bedding changing from 85º at top to 0º from 362.70 m to 363.60 m center of fold, gradually changing to 90º at bottom, 1 every 2 meters 0.2 to 0.8 cm wide calcite vnlts at 30º and 70º to 85º of c.a.
369.50 373.25 Fault zone 5 to 30 cm wide Bx gouge zones at 40º to 50º and 85º to 90º of c.a. 369.50 m – 371.20 m Moderately fractured zone irregular 2 to 5 cm wide gouge Bx at 10º to 40º of c.a., 10% to 15% of irregular 0.1 to 0.5 cm wide calcite

6



altered to sericite vnlts fragments 371.20 m – 373.25 m highly fractured zone 20% to 40% of irregular 0.1 to 1 cm wide calcite locally replaced to FG qtz < sericite vnlts fragments, FG subhedral Py 2% to 3%
373.25 377.80 Medium to coarse grain size S.S. beds 95%, 0.1 to 1 cm wide Silts beds in 7 to 10 cm wide intervals 5%, apparent bedding at 85º to 90º of c.a., QSPC alteration moderate qtz-sericite diss in microvnlts and in calcite vnlts walls some irregular voids, FG anhedral Py diss 3% to 4%, 3 to 5 per meter 0.1 to 0.3 cm wide calcite replaced to FG qtz trz to 2% of FG anhedral Py vnlts at 20º to 40º and 60º to 75º of c.a.
377.00 m 0.8 to 1 cm wide calcite totally replaced to FG qtz-stibnite-FG anhedral Py, ss and trz of brown Sph vnlt at 30º of c.a.
377.80 383.85 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 80%, 0.1 to 4 cm wide FG S:S. beds 20%, bedding at 60º to 75º of c.a., P-C to wk QSPC alteration, wk to moderate sericite, moderately fractured zone 8 to 12 fractures per meter, 4 in the interval < 1 cm wide Fault gouge zones along bedding, 10% of irregular broken 0.1 to 1 cm wide calcite wkly altered to sericite few with 1% to 3% of FG subhedral to cubic Py vnlts at 10º to 30º of c.a. and at 60º to 85º of c.a., trz of FG anhedral Py clouds, Py 1% to 2% in the interval
383.85 388.05 Medium size grain S.S. in beds 1 cm to 1 m wide 60%, irregular 2 to 15 cm wide Silts intervals 40%, irregular sub angular 0.5 to 1.5 cm wide Silts lenses or fragments in S.S. beds, apparent bedding at 75º to 80º of c.a., wk QSPC alteration moderate sericite in calcite vnlts and diss in S.S. beds, wide apart stockwork of 0.1 to 1 cm wide calcite-sericite trz of VFG stibnite needles vnlts FG subhedral Py diss 1% to 2% in S.S. beds
388.05 402.00 Wavy 0.1 to 2 cm wide Silts 65%, FG S.S. in wavy irregular folded 0.1 to 25 cm wide S.S. beds 35%, slump features bedding at 60º to 75º of c.a., P-C alteration 1 to 2 per meter hairline to 0.5 cm wide calcite some with trz of FG anhedral Py vnlts at 20º to 40º and most at 70º to 85º of c.a. 395.20 m – 396.60 m Irregular 0.1 to 1.5 cm wide calcite-1% of FG anhedral Py vnlts in stockwork
402.00 409.43 Kuc Caracol Fm FG to medium size grain S.S. beds 70%, 3’% of 10 cm to 30 cm intervals of 0.1 to 3 cm wide Silts beds and wavy 0.5 to 2 cm wide FG S.S. beds, wavy bedding at 60º to 80º of c.a., P-C to wk QSPC alteration, wk to moderate sericite in micro fractures and less as diss, 2 to 4 per meter hairline to 0.3 cm wide calcite partially altered to sericite-FG subhedral Py vnlts at 30º to 40º and at 60º to 75º of c.a., FG anhedral Py diss 1% in some S.S. beds
409.43 409.65 QSPC alteration moderate Qtz-sericite in vnlts and diss some voids, 3 vnlts in the interval 0.5 to 2 cm wide calcite totally replaced to FG qtz < sericite – ss-trz of brown Sph-FG botryoidal Py at 30º to 50º of c.a.
409.65 415.55 Wavy 0.1 to 3 cm wide Silts beds 60%, 0.1 to 0.5 cm wide FG S.S. beds 20%- FG to medium size grain S.S. in beds 10 cm to 40 cm wide 20%, wavy bedding at 70º to 85º of c.a. P-C to wk QSPC alteration, 3 to 4 per meter hairline to 1.2 cm wide calcite vnlts at 10º to 30º of c.a. and most like lenses, few with trz to 10% of FG anhedral Py
415.55 426.12 Medium to coarse grain size S.S. beds 10 cm to 1 m wide 70%, 30% of 6 cm to 40 cm wide intervals of 0.1 to 2 cm wide Silts beds 80% and 0.5 to 2.5 cm wide FG to medium size grain S.S. beds 20%, QSPC alteration, moderate sericite diss and in vnlts, 7 to 10 cm wide moderate to strong qtz –ser alteration, small voids, 6 to 8 per meter hairline to 1 cm wide calcite totally replaced to FG qtz moderate to high sericite few with FG anhedral Py and very scarce with stibnite

7



vnlts at 10º to 20º of c.a. few at 75º to 90º of c.a.
419.17 m – 419.27 m 7 cm wide Silts bed with irregular 0.2 to 0.5 cm wide lenses of FG anhedral to subhedral Py trz of ss trz of Sph at 70º of c.a.
426.12 441.10 Kuc Caracol Fm 0.1 to 5 cm wide Silts beds 50%, FG to medium size grain wavy 0.1 to 35 cm wide S.S. beds 50%, wavy bedding at 50º to 60º of c.a., P-C to wk QSPC alteration moderate to strong sericite in scarce calcite vnlts, 1 to 2 per meter hairline to 0.3 cm wide calcite-sericite trz to 5% of FG subhedral Py vnlts at 40º to 50º of c.a.
432.40 m 0.3 to 0.5 cm wide calcite wkly replaced to FG qtz FG to medium size grain subhedral Py < AsPy and Gn trz of ss vnlt at 50º of c.a.
441.10 450.19 5 cm to 1 m wide intervals of thin bedded 0.1 to 2 cm wide Silts beds 60%, FG S.S. 10%, among 20 cm to 1 m wide FG to medium size grain S.S. beds 30%, wavy bedding at 70º to 85º of c.a. at top 10º at 446 m and 50º at bottom of the interval, P-C to wk QSPC alteration wk to moderate sericite in fractures and calcite vnlts walls, 3 to 5 per meter 0.1 to 0.5 cm wide calcite < sericite few with FG subhedral Py vnlts at 10º to 30º of c.a. and less at 60º to 75º like lenses, 2 to 5 cm wide sedimentary Bx zones at 40º of c.a. at 449.55 m 446.0 m 446.80 m Wide apart stockwork of irregular 0.2 to 1 cm wide calcite locally replaced to FG qtz –moderate alteration to sericite, FG to medium size grain subhedral to cubic Py scarce with trz of ss vnlts. Py 3% to 4% in the interval
450.19 460.45 Kuc Caracol Fm 0.1 to 5 cm wide Silts beds 60%, FG to medium size grain S.S. in beds 0.1 to 30 cm wide 40%, lightly wavy bedding at 50º of c.a. P-C to wk QSPC alteration wk to moderate sericite in calcite vnlts, FG anhedral Py in 0.1 to 0.3 cm wide lenses and diss in 0.1 to 0.2 cm diameter dots 4% to 5% 451.60 m – 455.00 m 3 to 4 per meter 0.1 to 0.5 cm wide calcite partially replaced to FG qtz-sericite medium size grain subhedral to cubic Py vnlts at 0º to 25º of c.a., also FG to medium size grain subhedral Py diss in 0.1 to 0.3 cm wide S.S. lenses
435.60 m 0.8 to 1.2 cm wide FG to medium size grain subhedral Py and 1% of ss less calcite totally replaced to FG qtz-sericite vnlt at 50º of c.a.
460.45 461.50 Fine grain Dacitic dike cutting the sediments beds, wk chlorite-sericite alteration FG anhedral to subhedral Py diss 2% to 3% mainly at 10 to 20 cm from walls, FG black Stibnite? Diss 1% to 2%
461.50 462.28 Wavy 0.1 to 2 cm wide Silts 70%, 0.2 to 4 cm wide FG to medium size grain S.S. beds 30%, bedding at 60º to 70º of c.a., wk QSPC alteration, 5% to 7% of FG anhedral to subhedral Py diss and in 0.1 to 0.2 cm wide lenses with trz of VFG black mineral Stibnite or ss?
462.28 462.85 Bxed and highly fractured Vein zone, 3 to 5 cm wide bands with 40% to 50% of medium to coarse grain size subhedral to cubic Py, 10% to 15% of FG to medium size grain AsPy? Or Jamesonite needles , 2% to 5% of dark brown to black Sph dark red color streak in slickenside and 5% to 10% of calcite totally replaced to FG qtz at 60º of c.a.
462.85 463.90 Old Bxed Silts zone now consolidated moderate qtz wk sericite alteration, 5% of calcite totally replaced to FG qtz in hairline to 0.2 cm wide vnlts in Bx, 15% of FG to medium size grain subhedral to cubic Py, 2% to 3% of dark brown to black Sph < ss filling Bx voids
463.90 465.33 Bx zone 20% to 30% of calcite totally replaced to FG qtz in irregular hairline to 0.2 cm wide vnlts and filling voids, 5% to 10% of FG to medium size grain subhedral Py trz of ss?
456.33 465.53 Fault zone milled rock-sericite FG Py and black mineral ss? at 60º to70º of c.a.

8



465.53 466.10 Dark grey color silicified and Bxed Silts QSP alteration 3% to 5% of FG to medium size grain cubic Py diss some voids trz of ss
466.10 468.10 Wavy bedded 0.1 to 1 cm wide Silts 40%. FG to medium size grain S.S. in beds 0.2 to 15 cm wide 60%, bedding at 50º to 65º of c.a., QSPC alteration 3 in the interval irregular 0.5 to 3 cm wide calcite totally replaced to FG qtz 5% to 10% of FG anhedral to subhedral Py, 2% of dark brown to black Sph vnlts at 10º to 30º of c.a., also irregular hairline to 0.5 cm wide FG anhedral to subhedral Py < brown Sph lenses and less vnlts at 40º to 60ºof c.a. FG anhedral Py in 0.1 to 0.2 cm wide lenses Py 5% in the interval
468.10 470.00 0.1 to 2 cm wide Silts 20%, FG to medium size grain S.S. in irregular wavy 0.1 to 20 cm wide beds 80%, bedding at 70º of c.a., QSPC alteration, 7 in the interval irregular 0.2 to 1 cm wide calcite replaced to qtz-FG subhedral Py black and dark brown Sph < ss vnlts at 10º to 30º of c.a.
470.00 470.30 Crossing of three 0.2 to 1 cm wide calcite replaced to FG qtz-FG subhedral to cubic Py-black and dark brown Sph < ss vnlts at 20º ,50º and 40º of c.a. with 10% to 15%of Py diss in up to 10 cm wide walls, Sulfides 20% to 30% in the interval
470.30 478.00 Medium size grain S.S. in beds 0.5 to 1 m wide 80’%, 10 cm to 50 cm wide intervals of thin bedded Silts-FG S.S. beds 20%, bedding at 50º to 60º of c.a. QSPC alteration 1 cm to 10 cm wide zones with voids product of the alteration, 2 to 4 per meter irregular 0.1 to 4 cm wide calcite totally replaced to FG qtz< FG subhedral Py trz of brown Sph vnlts at 20º to 50º and at 75º to 80º of c.a., FG anhedral Py clouds in some calcite lenses also diss 3% to 5% in 5 to 15 cm wide S.S. intervals
478.00 485.22 No bedded Medium Size grain S.S. 90%, 5 cm to 15 cm wide Silts intervals or fragments 10%, apparent bedding at 60º to 70º of c.a. wk QSPC alteration wk sericite in scarce < 0.1 cm wide calcite to qtz vnlts, 1 to 2 per meter hairline to 0.2 cm wide calcite replaced to FG qtz< sericite few with FG anhedral to subhedral Py vnlts at 10º to 30º of c.a. and at 60º to 75º of c.a. 3 zones 5 cm to 15 cm wide with voids product of alteration FG anhedral Py diss in S.S. 1% to 2%
485.22 489.81 FG to medium size grain S.S. in beds 2 to 10 cm wide 60%, irregular 0.1 to 3 cm wide Silts beds and lenses 40%, bedding at 50º to 65º of c.a., wk QSPC alteration 1 per meter hairline to 0.5 cm wide calcite replaced to FG qtz –FG anhedral to subhedral Py vnlts also Py in 0.1 to 0.2 cm wide lenses and vnlts at 10º to 30º of c.a. Py diss in thin 5 to 10 cm wide S.S. intervals, Py 3% to 5% in the interval
489.81 490.50 4 in the interval 0.3 to 2.5 cm wide calcite replaced to FG qtz with up to 20% of irregular 0.5 to 3 cm long FG subhedral Py aggregates trz of brown Sph and ss vnlts at 15º to 25º of c.a. Py 7%
490.50 495.55 FG to medium size grain S.S. in beds 10 cm to 60 cm wide 60%, wavy 0.1 to 1.5 cm wide Silts 40%, bedding at 50º of c.a., wk QSPC alteration- FG anhedral Py diss and in vnlts 5%, 14 in the interval 0.2 to 2.5 cm wide calcite totally replaced to FG qtz moderate sericite –FG subhedral Py trz of FG AsPy trz of Sph and ss? Vnlts at 30º to 50º of c.a. and at 50º crossing the previous set, some small voids in the wider vnlts.
495.55 500.95 Thin bedded 0.1 to 1 cm wide Silts 90% , FG S.S. beds 10%, bedding at 70º to 80º of c.a. wk QSPC alteration, 3 zones 5 to 90 cm wide of old sedimentary Bx zones with irregular 0.2 to 0.8 cm wide calcite totally replaced to FG qtz- subhedral Py trz of FG AsPy-black Sph and ss vnlts in stockwork FG anhedral Py in 0.1 to 0.3 cm diameter aggregates diss also FG Py in 0.1 to 0.2 cm wide

9



    lenses and in bands in the stockwork zones Py 5% to 7%
500.95 509.20 Kuc Caracol Fm FG S.S. in beds 10 cm to 50 cm wide 80%, 2 to 10 cm wide thin bedded Silts-FG S.S. intervals 20%, bedding at 60º of c.a., P-C to wk QSPC alteration, amount and width of calcite totally replaced to FG qtz vnlts and amount of FG anhedral Py in vnlts and diss decreasing from 3% to 4 per meter and 0.5 to 1 cm wide and 5% of Py at top to 1 to 2 vnlts per meter 0.1 to 0.5 cm wide and 3% of Py at bottom, sericite in few calcite vnlts increasing from wk at top to moderate at bottom
509.20 515.11 0.1 to 2 cm wide Silts beds 85%, wavy FG 0.1 to 0.5 cm wide S.S. beds 15%, scarce 10 cm to 20 cm wide FG to medium size grain S.S. beds at top, bedding at 55º to 65º of c.a. P-C to wk QSPC alteration wk to moderate sericite in calcite vnlts, wk to moderately broken interval, five 2 cm to 10 cm wide fault gouge zones at 45º to 70º of c.a., most along bedding, 5% of irregular broken hairline to 0.2 cm wide calcite totally replaced to FG qtz sericite scarce with FG anhedral Py vnlts at 10º to 20º ,and 40º to 60 of c.a. FG anhedral Py in 0.1 to 0.2 cm wide lenses and diss in small 0.1 to 0.2 cm diameter dots, Py 3% to 4% in the interval
515.11   Reduction to NQ core diameter
515.11 516.35 FG S.S. in beds 10 cm to 60 cm wide 80%, thin bedded Silts 20%, bedding at 50º of c.a. P-C to wk QSPC alteration, 2 fault zones 5 cm and 10 cm wide at 515.11 m and 515.80 m with fragments of 0.1 to 0.5 cm wide calcite totally replaced to FG qtz –FG subhedral to cubic Py, 1% to 2% of black Sph vnlts, also in scarce calcite replaced to FG qtz -FG subhedral Py < black Sph in 0.1 to 0.5 cm wide vnlts at 10º to 30º and 60º like lenses ,
516.35 521.00 Kuc Caracol Fm FG S.S. 90% in beds 20 cm to 50 cm wide, 5 cm to 30 cm wide intervals of 0.1 to 1 cm wide Silts and 0.1 to 0.2 cm wide FG S.S. 10%, bedding at 50º to 70º of c.a., 5 to 10 cm wide sedimentary Bx zones- P-C to wk QSPC alteration, wk to moderate sericite in some calcite vnlts, 4 to 6 per meter hairline to 0.2 cm wide calcite-sericite FG anhedral to subhedral Py vnlts at 10º to 40º of c.a. and in few lenses, trz of black Sph in very scarce vnlts 519.45 m – 520.29 m 5 to 10 cm wide Bx zones-FG anhedral Py 5% in irregular 0.1 to 0.3 cm wide calcite< sericite vnlts and less lenses Py 5%
521.00 525.00 5 cm to 60 cm wide interval of thin bedded 0.1 to 2.5 cm wide Silts and FG S.S. beds 60%, FG to medium size grain S.S. in beds 10 cm to 40 cm wide 40%, bedding at 55º of c.a., wk QSPC alteration, wk sericite, 2 to 4 per meter 0.1 to 0.3 cm wide just one 4 cm wide calcite FG subhedral Py trz to 2% of black Sph with 1% to 2% AsPy vnlts at 10º to 40º of c.a. few FG anhedral Py lenses
525.00 549.00 FG to medium size grain S.S. in beds 10 cm to 2 m wide 70%, 5 cm to 1.5 m wide intervals of thin bedded 0.1 to 2 cm wide Silts-FG S.S. beds 30%, lightly wavy bedding at 50º to 70º of c.a., wk QSPC alteration wk sericite trz of chlorite, 2 to 4 per meter hairline to 1.2 cm wide calcite < sericite-FG anhedral Py very scarce trz of black Sph vnlts at 20º to 40º of c.a. and at 60º to 75º of c.a.
532.40 m – 534.25 m Irregular 0.5 to 3 cm wide calcite some with small Silts fragments-FG subhedral Py trz of black Sph vnlts in 5 to 30 cm wide stockwork zones scarce 0.1 cm wide black Sph < FG Py vnlts at 40º of c.a. at 534.19 m
549.00 566.05 Medium size grain S.S. in beds 10 cm to 1.5 m wide 60%, 10 cm to 3 m wide intervals of 0.2 to 3 cm wide Silts and FG S.S. beds 40%, few irregular 2 to 5 cm wide Silts fragments in S.S. beds, bedding at 50º to 60º of c.a., wk QSPC alteration, moderate sericite in some fractures and calcite vnlts, 5 to 7 per meter hairline to 0.2 cm wide calcite partially replaced to FG qtz altered to sericite FG to medium size grain subhedral Py vnlts at 30º to 60º of c.a. few at 75º of c.a.,

10



less than 1 per meter with trz of black Sph blade calcite textures in few vnlts.
555.45 m – 556.25 m Fault zone planes at 60º to 75º of c.a. along bedding, 5% of irregular 0.1 to 1 cm wide calcite totally replaced to FG qtz-sericite FG to medium size grain subhedral Py-black Sph vnlts in wide apart stockwork Py 5% to 7%
559.60 m -563.30 m 4 to 6 per meter irregular 0.2 to 1 cm wide subhedral Py- black Sph < calcite replaced to qtz vnlts at 10º to 20º and 70º to 85º of c.a., 10 cm wide Fault Bx zone at 70º to 80º of c.a., with 40% to 50% of calcite totally replaced to FG qtz –trz of black Sph
565.80 m – 566.05 m 3 in the interval old sedimentary Bx zones 1 cm to 7 cm wide formed by calcite replaced to FG qtz < sericite FG subhedral Py and trz to 2% of black Sph vnlts and filling voids in Bx, at 70º of c.a. along bedding
566.05 580.35 FG S.S. beds with irregular micro Silts lenses in beds 15 cm to 1.5 cm wide60%, some Silts fragments in S.S. beds, 10 cm to 1 m wide intervals of 0.2 to 4 cm wide Silts-FG S.S. beds 40%, wavy bedding at 70º at top to 40º at bottom, P-C to wk QSPC alteration wk at top to moderate sericite at bottom of the interval, 1 to 2 per meter hairline to 0.3 cm wide calcite locally and partially replaced to FG qtz< FG anhedral Py vnlts at 10º to 30º and at 60º to 75º of c.a. like lenses
569.30 m – 569.50 m some voids with 5% to 7% of subhedral Py trz of black Sph vnlts in wide apart stockwork
580.35 59.65 Fine to medium size grain S.S. in beds 5 cm to 1.5 m wide 50%, irregular 10 cm to 40 cm wide intervals of 0.2 to 4 cm wide Silts-FG S.S. beds 50%, bedding at 40º to 60º of c.a., wk QSPC alteration, moderate sericite in calcite vnlts and lenses, also in micro fractures, 6 to 8 per meter irregular hairline to 0.4 cm wide calcite locally replaced to FG qtz-sericite-FG anhedral to subhedral Py- very scarce trz of black Sph vnlts at 0º to 30º of c.a. and like lenses at 40º to 60º of c.a., 1% of FG anhedral Py clouds, small voids with druse calcite to qtz trz of black Sph or ss in 2 cm to 5 c wide zones
591.65 596.30 Medium size grain S.S. in beds 15 cm to 90 cm wide 90%, 0.1 to 1 cm wide Silts and 0.1 to 0.2 cm wide FG S.S. intervals 10% at top of the interval, bedding at 50º to 60º of c.a., QSPC alteration moderate sericite in micro-vnlts filling voids and diss in S.S. beds, 10 to 12 per meter 0.1 to 0.3 cm wide calcite totally replaced to FG qtz altered to sericite-FG to medium size grain subhedral Py vnlts at 40º to 60º of c.a., some in crossed angles, FG anhedral Py diss in S.S. , Py in the interval 2% to 3%
592.07 m – 592.50 m Bx zone voids partially filled with sericite FG anhedral to subhedral Py and FG to medium size grain subhedral Py 5% to 8%
592.07 Fault zone lost water
596.30 610.00 0.1 to 2 cm wide Silts-FG S.S. 98%, 2% of medium size grain S.S. beds 10 cm to 30 cm wide 2%, wavy and irregular bedding at 40º to 50º of c.a. and at 30º from 608 m to 610 m depth, moderately broken zone 2 cm to 15 cm wide fractured zones, 1 to 3 per meter irregular 2 cm to 15 cm wide silicified intervals with small voids, some of them along bedding and at 30º and 70º of c.a. filled with 5% to 10% of VFG anhedral to botryoidal Py-FG to medium size grain subhedral Py , blade, less calcite totally replaced to FG qtz-sericite in irregular hairline to 1 cm wide very scarce 1.5 cm to 4 cm wide vnlts, some druse and blade textures, trz of VFG black mineral staining some qtz vnlts ss?, trz of black Sph, 1% to 2% of FG anhedral Py forming 0.1 cm long cubic aggregates diss and forming 0.1 cm wide lenses, Py 4& to 6% in the interval
605.64 m – 605.74 m Fault zone only dark grey mud recovered

11



610.00 612.20 Kuc Caracol Fm wavy 0.1 to 0.5 cm wide Silts-FGS.S. beds, 100%, wavy irregular bedding at 20º to 30º of c.a., QSPC alteration wk to moderate sericite, 2 to 3 per meter 0.1 to 2.5 cm wide FG subhedral Py < calcite replaced to FG qtz- sericite vnlts at 20º to 30º and at 60º to 70º of c.a., FG anhedral Py diss 2% to 3%
612.20 612.40 Fault veinlet zone planes at 30º to 50º of c.a., 2.5 cm wide calcite totally replaced to FG qtz-sericite wkly altered to chlorite-FG subhedral to cubic Py. Trz of AsPy and ss vnlt
612.40 620.00 Thin bedded 0.1 to 1 cm wide Silts 98%, 20 cm wide FG to medium size grain S.S. beds 5%, lightly wavy bedding at 30º to 40º of c.a., P-C to wk QSPC alteration wk sericite in scarce < 0.1 cm wide vnlts-FG anhedral Py diss 2% in S.S. beds, 2 to 4 per meter < 0.1 cm wide FG anhedral Py trz of calcite replaced to FG qtz-sericite vnlts at 10º to 30º of c.a.
617.12 m 3 cm wide Fault gouge zone at 85º of c.a.
616.00 m – 620.00 m 4% to 5% of FG anhedral Py in < 0.1 cm wide calcite to sericite vnlts at 10º to 30º of c.a.
620.00 631.20 Kuc Caracol Fm 0.1 to 5 cm wide Silts beds 70%, 0.1 to 12 cm wide FG S.S. beds 30%, bedding at 50º to 60º of c.a., P-C to wk QSPC alteration in the interval, light grey color rock QSPC alteration from 627.54 m to 628.80 m, 1 to 2 per meter hairline to 0.3 cm wide calcite < FG anhedral Py trz of AsPy vnlts at 10º to 20º of c.a. and less at 50º to 60º like lenses, FG anhedral Py in 0.1 to 0.2 long cubic aggregates diss 2% mainly in S.S. beds
631.20 634.00 0.1 to 1 cm wide Silts 70%, FG S.S. 30% lightly wavy bedding at 60º of c.a., FG subhedral to cubic Py < AsPy trz of dark brown Sph diss in 0.1 to 0.2 cm wide lenses, 3% of irregular hairline to 1 cm wide calcite partially replaced to FG qtz lenses and vnlts at 10º to 30º of c.a. Total sulfides in the interval 3% to 4%
634.00 656.95 FG to medium size grain S.S. in beds 5 cm to 1.10 m wide 70%, 5cm to 30 cm wide intervals of 0.1 to 3 cm wide Silts-FG S.S. beds 30%, lightly wavy bedding at 50º to 65º of c.a., P-C to wk QSPC alteration FG anhedral Py diss in S.S. also in 0.1 to 0.3 cm wide aggregates or clouds, 1 to 2 per meter hairline to 0.2 cm wide FG subhedral Py-trz of AsPy lenses, less than 1 per meter hairline to 0.8 cm wide calcite-trz of FG anhedral Py and very scarce dark brown Sph vnlts at 10º to 30º of c.a.
652.00 m – 654.41 m 12 in the interval 0.2 to 1.8 cm wide calcite locally and partially replaced to FG qtz < FG to medium size grain subhedral Py some blade crystals of Py, trz of AsPy and scarce dark brown Sph vnlts at 20º to 30º of c.a. and at 60º to 75º of c.a. like lenses
656.95 664.05 Silts –FG S.S. in beds 0.1 to 2 cm wide intervals 40%, FG to medium size grain S.S. in beds 5 cm to 35 cm wide 40%, wavy bedding at 60º to 85º of c.a., P-C to wk QSPC alteration, 3 to 5 per meter irregular hairline to 2 cm wide calcite replaced to FG qtz-subhedral Py trz of AsPy vnlts just one 2 cm wide with 1% of black Sph, vnlts at 10º to 30º of c.a. and at 60º to 85º like lenses, FG anhedral Py trz to 1% diss and in clouds, Py 2% to 3% in the interval 661.37 m 2.0 cm wide calcite-FG subhedral to cubic Py 1% of dark brown to black Sph vnlt at 65º of c.a.
664.05 666.60 FG to medium size grain S.S. in beds 6 cm to 45 cm wide 98%, 1 to 12 cm Silts intervals 2%, bedding at 60º to 80º of c.a. P-C to wk QSPC alteration FG anhedral Py diss 1% in S.S. beds, 2 to 3 per meter hairline to 0.4 cm wide calcite locally replaced to FG qtz-FG anhedral Py vnlts and lenses
666.60 666.90 1.0 to 1.2 cm wide subhedral to cubic Py 30%, AsPy 10%, ss and dark brown Sph 2% in calcite replaced to FG qtz vnlt at 10º to 20º of c.a.

12



666.90 669.00 Irregular 5 to 50 cm wide old sedimentary Bx zones with stockwork of 0.2 to 1.5 cm wide calcite totally replaced to FG qtz-FG anhedral to subhedral Py trz of brown Sph in very scarce vnlts among wk QSPC altered Silts-FG S.S. 0.1 to 5 cm wide beds at 60º of c.a. some small voids in Bx zones
669.00 677.52 Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 70%-FG S.S. in beds 0.2 to 1 cm wide 20%, FG to medium size grain S.S. beds 2 to 5 cm wide 10%, bedding at 60º to 70º of c.a., P-C alteration, one 35 cm wide interval with QSPC alteration from 676.40 m to 676. 75 m moderately fractured interval 6 to 8 fractures per meter most along bedding, 2 to 3 per meter 2 cm to 25 cm wide intervals with voids and wk WQSPC alteration at 20º to 30º of c.a. with calcite replaced to FG qtz<sericite-FG anhedral and less blade Py diss irregular vnlts and filling voids- FG anhedral Py diss in small clouds 2%, Py in the interval 3% to 4%
677.52 686.90 Kuc Caracol Fm 0.1 to 1 cm wide Silts 85%, 0.1 to 5 cm wide FG S.S. beds 15% lightly wavy bedding changing from 0º to 10º of c.a. at top to 50º at bottom, P-C to wk QSPC alteration moderate to advanced QSPC alteration from 681.30 m to 681.50 m FG anhedral PY diss trz to 1%also FG Py in irregular 0.1 to 0.2 cm wide lenses and clouds
679.80 m – 679.95 m Fault Bx zone 5% of calcite replaced to FG qtz altered to sericite 3% to 5% FG anhedral Py
681.30 m – 681.50 m light grey to green color rock old fault zone? Soap appearance FG anhedral Py 2% to 3% in irregular 0.1 to 0.3 cm wide lenses, 0.5 to 0.8 cm wide calcite replaced to FG qtz < 1% of FG Py vnlt at 50º of c.a. at top of the interval
686.90 692.82 Silts in beds 0.1 to 2 cm wide 90%, FG S.S. in beds 0.1 to 1 cm wide 10%, bedding at 50º of c.a., P-C to wk QSPC alteration wk sericite at bottom of the interval, two 5 cm wide sedimentary Bx intervals with small voids and irregular calcite replaced to FG qtz < sericite FG anhedral Py vnlts and filling Bx voids FG anhedral to subhedral Py in 0.1 to 0.2 cm wide lenses and less 0.1 to 0.2 cm wide calcite to qtz vnlts at 0º to 20º of c.a. Py 3% to 4%
692.82 714.40 FG to medium size grain S.S. in beds 2 cm to 1.5 m wide 60%, 0.1 to 3 cm wide beds Silts-FGS.S. beds in 5 cm to 90 cm intervals 40%, bedding at 50º to 65º of c.a., P-C to wk QSPC alteration moderate sericite in calcite vnlts in micro fractures and wk diss in S.S. beds, 4 to 6 per meter 0.1 to 5 cm wide calcite locally moderately replaced to FG qtz partial alteration to sericite vnlts at 10º to 40º of c.a. and like lenses few of them with trz to 2% of FG anhedral Py, trz to 1% of FG anhedral Py diss, scarce 5 cm to 15 cm wide old sedimentary Bx intervals along bedding
714.40 718.48 Kuc Caracol Fm 0.5 to 2 cm wide Silts beds 70% FG to medium size grain 0.5 to 40 cm wide S.S. beds 30% some irregular 0.2 to 2 cm wide Silts fragments in S.S. beds, QSPC alteration trz of FG anhedral Py in < 0.1 cm long clouds, irregular 0.1 to 1 cm wide beds with 2% to 4% of FG anhedral Py diss at bottom of the interval, 1 to 2 per meter hairline to 1.2 cm wide calcite vnlts at 10º to 30º of c.a. , scarce 2 to 5 cm wide stockwork zones of thin calcite vnlts.
718.48 718.90 Fault vein zone planes at 70º of c.a. two irregular 5 cm and 15 cm wide BX intervals with 10% to 20% of irregular 0.1 to 1 cm wide calcite moderately to totally replaced to FG qtz vnlts and fragments –FG to medium size grain subhedral to cubic Py 5% and 10% of dark grey color mud trz of milled ss?
718.90 719.15 wk QSPC altered Silts 5% of irregular 0.1 to 0.2 cm wide calcite replaced to FG qtz trz to 5% of FG anhedral Py vnlts at 10º to 30º of c.a. and at 60º to 75º of c.a.
719.15 719.40 Irregular Bxed veinlet interval at 60º of c.a. formed by 30º to 40º of calcite

13



locally replaced to FG qtz-10% of FG to medium size grain subhedral Py 2% of dark brown Sph, 1% of ss vnlts fragments.
719.40 726.15 Kuc Caracol Fm Silts 90% FG S.S. in irregular wavy 0.2 to 3 cm wide beds and lense4s 10%, bedding changing from 0º to 20º of c.a. at top to 50º-60º at bottom, P-C alteration 1% of FG anhedral Py clouds and in 0.1 cm wide lenses, 1 every 2 meters 0.1 to 0.2 cm wide calcite z FG to medium size grain subhedral Py vnlts at 10º to 30º scarce calcite banded lenses up to 1 cm wide
726.15 730.50 Medium size grain S.S. in beds 10 cm to 1.5 m wide 80%, 2.5 cm to 17 cm wide intervals of wavy 0.1 to 3 cm wide Silts and 0.1 to 1 cm wide FG S.S. beds 20%, wavy bedding at 50º to 60º of c.a., P-C to wk QSPC alteration wk to moderate sericite in calcite vnlts walls trz of sericite diss in some S.S: beds, 2 to 3 per meter hairline to 0.1 cm wide calcite locally replaced to FG qtz-sericite FG anhedral Py vnlts at 0º to 20º of c.a. and lenses at 60º of c.a.
729.14 m – 729.50 m 7 in the interval irregular 0.2 to 2 cm wide calcite most replaced to FG qtz-FG medium size grain subhedral Py-< As Py and dark brown Sph vnlts at 60º to 70º of c.a. one 2 cm wide vnlt with irregular 0.2 to 0.5 cm wide sub angular Silts fragments in calcite groundmass
730.50 734.90 0.1 to 2 cm wide Silts beds 50% FG to medium size grain S.S. in beds 3 cm to 65 cm wide, wavy bedding at 60º of c.a., P-C alteration, 3 to 5 per meter hairline to 2 cm wide calcite wk sericite vnlts at 30º to 60º of c.a.
734.90 736.25 Irregular 0.2 to 1 cm wide calcite few partially replaced to FG qtz -1% to 2% FG anhedral Py vnlts in stockwork trz of chlorite in some calcite vnlts.
736.25 748.25 Thin bedded 0.1 to 1 cm wide Silts beds 80%, irregular 0.1 to 1 cm wide few 2 cm to 5 cm wide FG S.S. beds and irregular lenses 10%, FG to medium size FG grain S.S. in beds 15 cm to 35 cm wide 10%, wavy bedding at 50º to 70º of c.a., P-C to wk QSPC alteration, two 30 cm and 65 cm wide intervals of light grey color wk QSPC altered rock at top and bottom of the interval, 1 to 2 per meter hairline to 2 cm wide calcite vnlts at 0º to 10º of c.a. and at 60º to 85º of c.a. trz to 1% FG anhedral Py diss in irregular clouds and lenses in some S.S. beds
748.25 756.33 Kuc Caracol Fm 0.1 to 6 cm wide Silts beds 80%, wavy 0.1 to 4 cm wide FG S.S. beds 20%, wavy bedding at 60º to 70º of c.a., P-C alteration wk sericite in some micro fractures at bottom of the interval, 1 to2 per meter hairline to 1.5 cm wide calcite trz of Fg anhedral Py vnlts at 0º to 30º and less at 60º to 70º of c.a. FG anhedral Py clouds trz
756.33 759.70 FG S.S. in beds 10 cm to 30 cm wide 90% two 5 cm wide intervals of thin bedded 0.1 to 2 cm wide Silts-FG S.S. beds 10%, wavy bedding at 50º to 70º of c.a. P-C to wk QSPC alteration moderate sericite in some calcite vnlts walls and trz diss in S.S. beds, 3 to 4 per meter 0.2 to 7 cm wide calcite-sericite trz of FG anhedral Py vnlts at 20º to 50º of c.a.
759.70 765.60 Kuc Caracol Fm 0.1 to 2 cm wide Silts 80%, wavy 0.1 to 3 cm wide FG S.S. beds 20%, wavy bedding at 60º to 75º of c.a., P-C alteration 1 every 2 meters hairline to 0.2 cm wide calcite vnlts just one 0.8 cm to 1 cm wide bended calcite lens in the interval, trz of FG anhedral Py clouds
765.60 767.60 Old Sedimentary Bx QSPC alteration stockwork of irregular 0.2 to 3 cm wide calcite wkly replaced to FG qtz trz of FG anhedral Py vnlts
767.60 780.55 FG S.S. in beds 1 to 2 m wide 95%, four 3 to 30 cm wide intervals of thin bedded Silts-FG S.S. beds 5%, wavy bedding at 60º to 70º of c.a., P-C to wk QSPC alteration wk to moderate sericite in fractures, in calcite vnlts walls and trz diss in S.S. beds, 2 to 4 per meter 0.1 to 0.2 cm wide calcite < sericite trz of Fg subhedral Py vnlts at 20º to 30º of c.a. few at 60º of c.a.

14



780.55 784.10 Irregular 0.5 to 5 cm wide sub angular Silts fragments or lenses 50% in FG S.S. irregular 0.2 to 20 cm wide beds 50%, slump features very irregular bedding at 60º to 80º of c.a., P-C alteration 1 per meter irregular 0.5 to 1.8 cm wide calcite lenses, less than 1 per meter < 0.1 cm wide calcite vnlts at 30º of c.a. and at 60º to 80º of c.a. lenses, trz to1% FG anhedral Py clouds and in small < 0.1 cm diameter diss dots in some S.S. beds
784.10 787.90 FG to medium size grain S.S. in beds 5 cm to 25 cm wide 85%, 2 to 10 cm wide thin bedded Silts beds 15%, lightly wavy bedding at 60º to 75 ºof c.a. PC to wk QSPC alteration wk to moderate sericite in calcite vnlts walls, 3 to 4 per meter 0.1 to 1 cm wide calcite partially and locally replaced to FG qtz FG anhedral to subhedral Py, trz of dark brown Sph in just one vnlts at 30º to 40º of c.a. and at 60º to 70º of c.a. lenses, FG anhedral Py diss 1% to 2% in S.S beds also in irregular 0.1 to 0.3 cm wide vnlts at 10º of c.a. and lenses at 60º of c.a., Py 2% to 3% in the interval.
787.64 m 2 cm wide Fault gouge zone at 60º of c.a. along bedding
787.90 m – 788.20 m Stockwork of irregular folded 0.1 to 1.5 cm wide calcite replaced to FG qtz-trz to 1% of FG anhedral Py vnlts
787.90 803.76 Kuc Caracol Fm 0.1 to 5 cm wide Silts beds 70%, 0.1 to 3 cm wide FG S.S. beds 15%, medium size grain S.S. in beds 5 cm to 30 cm wide 15% lightly wavy bedding at 70º to 90º of c.a. wk P-C alteration, 1 to 2 per meter hairline to 1.2 cm wide calcite vnlts at 10º to 30º of c.a. few at 60º to 85º of c.a., trz of FG anhedral Py in 0.1 to 1 cm long clouds
803.76   End of hole

15


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: January 28 / 2006  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES 11  

Summary of DDH QTA-38-06; 699,102 E; 2,652,792 N, 1934 m ASL 340°/-60°, Orion area
From    To                                                                                                      Description
0.00 12.80 No recovery drilled with tricone bit- Casing
12.80 32.10 Kuc Caracol Fm 0.1 to 3 cm wide grey color Silts beds 80%, 0.1 to 1 cm wide wavy S.S. beds 20%, increase to 40% of wavy beds and some sub rounded FG S.S. lenses at bottom of the interval, bedding at 50º to 70º of c.a. P-C alteration wk bleaching light grey to grey color rock, wk oxidation to brown Goethite in < 0.1 cm wide vnlts walls, 2 to 3 per meter 0.1 to 0.3 cm wide scarce up to 1 cm wide calcite trz of Goethite vnlts at 20º to 40º of c.a., 1 every 2 meters same width lenses
32.10 32.50 Irregular sedimentary Bx FG S.S. 40% to 50% in irregular beds up to 5 cm wide, 6 in the interval 0.1 to 0.3 cm wide calcite wkly and irregularly replaced to FG qtz-trz to 3 % FG anhedral Py
32.50 32.80 Bx zone at 50º of c.a. 0.1 to 0.3 cm wide Silts and S.S. fragments in Qtz groundmass in light grey color Silts/S.S. irregular beds P-C to wk QSPC alteration moderate sericite, 10% of irregular calcite totally replaced to FG qtz filling voids and also in few 0.5 to 1 cm wide 7% to 10% of FG anhedral Py yellow clays, less FG galena and trz of ss vnlts.
32.80 34.72 Kuc Caracol Fm 0.2 to 4 cm wide Silts 80%, irregular and wavy 0.1 to 1 cm wide FG S.S. beds irregular, wavy bedding with some slump features at 20º to 50º of c.a. wk P-C to wk QSPC alteration, 3 to 5 per meter irregular 0.1 to 0.7 cm wide calcite replaced to FG qtz trz to 3% of FG Py vnlts at 50º to 85º of c.a.
34.72 35.80 5 irregular 0.5 to 3 cm wide calcite partially replaced to FG qtz black calcite, trz to 1% of FG anhedral Py trz of FG Gn and ss vnlts small Bxed zones in some vnlts walls.
35.80 43.35 Kuc Caracol Fm 0.1 to 2 cm wide Silts 80% to 95%, 0.1 to 0.5 cm wide FG S.S. beds 5% to 10%, folded zone bedding changing from 60º to 70º of c.a. at top to 10º to 30º at bottom wk P-C to wk QSPC alteration moderate sericite 10 cm wide Fault at 42.20 m at 40º of c.a., 2 to 3 per meter 0.1 to 0.3 cm wide calcite sericite- trz to 1% of FG anhedral Py vnlts at 50º to 60º of c.a., FG anhedral Py aggregates clouds and irregular 0.1 to 0.3 cm wide lenses Total Py 2%
43.35 50.00 Kuc Caracol Fm Silts 60% in beds 0.5 to 3 cm wide FG to medium size grain light grey color irregular S.S. beds 40%, some sedimentary Bx sections formed by sub angular 0.5 to 4 cm long Silts fragments in wavy 0.2 to 3 cm wide

1



medium size grain S.S. lenses, Wk QDPC alteration moderate sericite alteration, 1 to 2 per meter 0.2 to 1.5 cm wide calcite vnlts local sericite in few 0.1 to 0.3 cm wide vnlts with trz to 1% of black Sph lenses
50.00 64.00 Kuc Caracol Fm 0.1 to 3 cm wide Silts 80%, 0.2 to 2 cm wide irregular wavy S.S. beds 20%, sandstone beds changing from FG and medium size grain in wavy beds at top to FG and wkly wavy beds at bottom, bedding changing from 0º to 10º at top to 60º at 53-54 ; 0º at 58 m and 40º to 50º of c.a. at bottom, P-C alteration 2 to 3 per meter irregular 0.1 to 0.3 cm wide calcite trz of sericite vnlts at 10º to 30º of c.a.
58.60 m 58.85 m Irregular 1.0 to 2 cm wide calcite totally replaced to FG qtz-FG anhedral Py 5% trz of Sph, stibnite vnlt or lens at 30º of c.a.
60.80 m-61.00 m 4 in the interval 0.3 to 1.7 cm wide calcite totally replaced top FG qtz trz of sericite FG anhedral Py 2%, trz of Sph and ss vnlts at 50º to 60º of c.a.
63.00 m -63.20 m 2 cm wide calcite totally replaced to FG qtz FG anhedral Py 5% trz of Gn-Sph and ss lens at 40º of c.a.
64.00 76.30 Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 80% to 85%, light grey 0.1 to 0.5 cm wide FG S.S. beds 10% to 15%, P-C alteration wk sericite in few calcite vnlts walls, bedding at 40º to 50º of c.a., 4 to 6 per meter 0.1 to 0.3 cm wide few up to 1 cm wide calcite few with trz of FG anhedral Py vnlts at 10º to 30º and like lenses at 40º to 50º of c.a.
76.30 78.33 3 in the interval irregular 0.5 to 2 cm wide banded and re-crystallized calcite-light yellow color clays-trz of FG Gn and black Sph vnlts at 25º to 30º of c.a.
78.33 99.00 Kuc Caracol Fm 0.5 to 2 cm wide Silts beds 80%, 0.1 to 0.5 cm wide FG S.S. beds 20% bedding at 70º to 80º of c.a. except from 76 m to 86 m at 30º to 60º of c.a. P-C to wk QSPC alteration 3 per meter 0.3 to 0.5 cm wide calcite wkly and locally replaced to FG qtz with 3% to 5% of FG anhedral Py vnlts at 20º to 40º of c.a.
76.40 m 1 cm wide calcite replaced to FG qtz trz of black Sph vnlt
78.00 m 1.5 cm wide calcite replaced to FG qtz trz of Zn oxides 2% pf FG anhedral Py at 10º of c.a.
99.00 107.80 0.5 to 2 cm wide Silts beds 80%, light grey color lightly bleached FG S.S. in beds 0.2 to 0.5 cm wide 20%, bedding from 80º at top to 50º of c.a. at bottom, P- C to wk QSPC alteration, 3 to 4 per meter 0.1 t 0.5 cm wide calcite vnlts 4 vnlts in the interval partially replaced to FG qtz- at
101.40 m to 101.50 m 15 cm wide at 70º of c.a., 3% to 5% of FG anhedral Py-trz of Sph-FG- Gn
104.20 m 2 cm wide at 10º of c.a.; FG anhedral Py 3% and trz of brown Sph
106.15 m 3 cm wide 5% of Sph-Gn in needles filling voids along bedding
106 .8 m 1 cm wide 10% FG anhedral Py trz of brown Sph
107.80 117.60 Kuc Caracol Fm 0.5 to 2 cm wide Silts beds 80%, light grey color FG grain 0.2 to 0.5 cm wide S.S. beds 20%, bedding at 30º to 50º of c.a. P-C to wk QSPC alteration, 1 to 2 per meter 0.2 to 1 cm wide calcite trz to 3% of FG anhedral Py at 30º to 40º of c.a. few at 70º of c.a.
117.60 119.80 Faulted zone 0.1 to 1 cm long rock fragments in 5 to 10 cm gouge zones with moderate sericite , main fault zone from 117.80 m to 118.80 m at 30º of c.a. Bx gouge zone from 118.80 to 119.0 m

2



119.80 140.0 Kuc Caracol Fm 0.2 to 2 cm wide Silts beds 90%, 0.2 to 0.5 cm wide FG S.S. beds 10%, folded zone bedding changing from 90º to 20º from top to 137.0 m 40º to 137.60 m 90º at 139 m and 60º at bottom, P-C to wk QSPC alteration, from 125.60 m to 126.80 m slickensides at 10º to 60º of c.a. with trz of Zn oxides, 1 per meter 0.2 cm wide calcite few partially replaced to FG qtz-2% to 3% of FG anhedral Py vnlts at:
128.90 m 1 cm wide trz to 3% of brown Sph brown Zn oxides FG Py 4% at 40º of c.a.
134.10 m 1 cm wide 3% of brown Sph 10% of FG anhedral Py vnlt at 80º of c.a.
137.30 m to 137.40 m 3 vnlts 0.2 cm wide of calcite-5% of FG anhedral Py 3% of black Sph at 40º of c.a.
138.50 m 1 cm wide calcite trz of Zn-Ox vnlt at 60º of c.a.
140.0 157.60 Kuc Caracol Fm 0.5 to 5 cm wide Silts beds 80%, 0.1 to 0.5 cm wide FG S.S. beds 20%, bedding at 60º at top to 40º of c.a. at bottom, P-C to wk QSPC alteration, Fault zones at 147.70 m to 147.80 m and at 150.80 m to 151.19 m at 40º of c.a. 3 to 4 per meter 0.2 to 1 cm wide few up to 6 cm wide calcite- FG anhedral to subhedral Py trz to 5% vnlts at 30º to 50º of c.a. 140.10 m to 141.54 m wide apart stockwork zone of 0.1 to 6 cm wide calcite- FG subhedral Py 2% to 5% vnlts few vnlts partially replaced to FG qtz with 5% to 10% of VFG anhedral to subhedral Py and 3% to 7% of black Sph at
141.60 m 1 cm wide calcite partially replaced to FG qtz 5% of FG black Sph and 10% of FG subhedral Py
143.30 m -143.40 m 0.3 cm wide 7% of black Sph and FG subhedral Py 5% at 50º of c.a.
147.0 m 2 cm qtz-black Sph 5% at 50º of c.a. 147.70 m 7 cm wide Fault gouge zone at 30º of c.a.
148.30 m 0.5 cm wide qtz- 5% of black Sph vnlt at 60º of c.a. 151.48 m -151.90 m 42 cm wide calcite partially replaced to FG qtz FG anhedral to subhedral Py 5% at 60º of c.a.
157.60 182.80 Kuc Caracol Fm 0.2 to 5 cm wide Silts beds 85%, 0.2 to 0.4 cm wide FG S.S. beds 15%, bedding at 20º at top to 90º in the middle and at 15º of c.a. at bottom, P-C alteration, 1 per meter 0.2 to 0.3 cm wide calcite –trz to 3% of FG subhedral Py vnlts at 10º to 30º of c.a.
182.80 205.40 0.5 to 4 cm wide Silts beds 90%, 0.2 to 0.5 cm wide FG S.S. beds 10%, bedding at 60º at top 70º in the middle and at 40º at bottom of the interval, 4 per meter 0.2 to 1 cm wide few 2 to 5 cm wide calcite-trz to 3% of FG Py-vnlts at 70º to 80º of c.a.
184.60 m to 185.40 m 4 in the interval 0.5 to 4 cm wide calcite trz of yellow clays and brown Goethite vnlts at 50º of c.a.
205.40 210.00 Kuc Caracol Fm 0.5 to 3 cm wide Silts beds 80%, 0.2 to 0.4 cm wide FG S.S. beds 20%, bedding at 40º of c.a.3 in the interval 0.2 cm wide calcite-trz of FG Py vnlts at 30º and just one vnlt at 80º of c.a.
210.00 238.90 Caracol Fm 0.5 to 3 cm wide Silts beds 80%, 0.2 to 1 cm wide FG S.S. beds 20%, bedding changing from 40º to 60º of c.a. at top to 30º at bottom, P-C alteration, 1 per meter 0.2 to 1 cm wide few 2 to 4 cm wide calcite trz to 2% of FG anhedral Py vnlts at 50º to 70º of c.a. few at 30º of c.a., few 1 to 30 cm wide faulted broken gouge zones
212.45 m 2 cm wide calcite-3% of FG anhedral Py vnlt at 50º of c.a.

3



    216.30 m 1 cm wide calcite-trz of FG anhedral Py vnlt at 60º of c.a.
217.15 m 30 cm wide broken zone
222.20 m 5 cm wide calcite-FG anhedral Py trz vnlt at 70º of c.a.
227.50 1 cm wide calcite FG Anhedral Py trz vnlt at 60º of c.a.
234.30 m 0.5 cm wide calcite-FG anhedral Py trz vnlt at 30º of c.a.
238.90 m 2 cm wide calcite-3% of FG Py vnlt at 50º of c.a.
239.20 m 1 cm wide Fault gouge zone at 50º of c.a.
238.90 267.10 Kuc Caracol Fm 0.5 to 5 cm wide Silts beds 70%, 0.2 to 1 cm wide few 3 to 6 cm
wide FG S.S. beds 30% bedding changing from 30º of c.a. at top to 5º at 250 m
and 40º of c.a. at bottom of the interval, P-C alteration, 2 to 3 per meter 0.3 to
0.5 cm wide few up to 2 cm wide calcite-trz to 2% of FG anhedral Py vnlts at
50º to 70º of c.a. from 242.0 to 245 m; from 249 to 255; from 262 to 267.10 m
242.30 m 0.5 cm wide calcite-trz of FG Py vnlt at 70º of c.a.
245.0 m 0.5 cm wide banded calcite with 0.1 to 0.2 cm wide FG Py lenses at 30º
of c.a.
253.80 m 2 cm wide calcite vnlt and 5 cm wide sedimentary Bx at 70º of c.a.
258.85 m 1 cm wide calcite vnlt at 50º of c.a.
264.20 m 2 cm wide calcite with thin Bx zones formed by 0.5 cm long Silts
Fragments with VFG Py diss up to 3% at 20º of c.a.
266.30 m 1 cm wide calcite vnlt at 85º of c.a.
267.10 280.00 Kuc Caracol 0.5 to 3 cm wide Silts beds 80%, 0.5 to 3 cm wide FG S.S. beds
20%, bedding at 20º of c.a. P-C alteration 1 per meter 0.5 cm wide few up to 3
cm wide calcite few with FG subhedral Py vnlts at 30º to 50º of c.a. few at 80º of
c.a.
272.80 m to 273.0 m stockwork of 0.1 to 1 cm wide calcite-FG subhedral Py
vnlts
270.30 m 3 cm wide calcite-trz of FG subhedral Py vnlt at 80º of c.a.
273.90 m 0.5 cm wide calcite vnlt-trz of FG Py vnlt at 80º of c.a.
276.45 m 0.5 cm wide calcite vnlt at 40º of c.a.
280.00 296.00 Kuc Caracol Fm 0.5 to 7 cm wide Silts beds 95%, irregular 0.2 to 2 cm wide FG
S.S. beds and lenses 5%, bedding at 40º to 50º of c.a. except from 282.30 m to
283.0 m where bedding is at 90º of c.a.3 to 5 per meter, P-C alteration, 3 to 5
per meter irregular 0.1 to 0.8 cm wide calcite few with trz of FG anhedral Py
vnlts at 20º to 40º and less at 60º to 80º of c.a.
281.80 m to 282.10 m stockwork zone of 0.1 to 0.5 cm wide calcite trz of FG
anhedral to subhedral Py vnlts
296.00 297.30 0.1 to 3 cm wide Silts beds 70%, FG S.S. 30% Folded zone wavy irregular beds changing from 60º to 0º and at 70º of c.a. at the bottom, 0.1 to 1 cm wide calcite trz of FG anhedral Py vnlts in wide apart stockwork
297.30 306.14 Kuc Caracol Fm irregular 0.1 to 2 cm wide Silts beds 80%, 0.1 to 1 cm wide FG S.S. beds 20%, wavy bedding at 50º to 70º of c.a. P-C alteration, 4 to 6 per meter irregular 0.1 to 1.5 cm wide calcite few with trz of FG anhedral Py vnlts at 20º to 40º and less at 60º to 80º of c.a.
306.14 306.45 $0% of irregular 0.1 to 3 cm wide banded calcite with thin 0.1 to 0.5 cm wide dark Silts or organic material layers FG subhedral Py diss 2% to 3%
306.45 318.65 Caracol Fm 0.1 to 2 cm wide Silts beds 90%, 0.1 to 1 cm wide FG S.S. beds
10%, bedding changing from 85º at top to 0º at 312 m and 70º-80º at bottom, PC
alteration
311.22 2.5 cm wide calcite partially replaced to FG qtz and about 20% of FG
anhedral Py vnlt at 60º of c.a.

4



318.65 319.00 30 cm of 20% of irregular 0.1 to 0.5 cm wide calcite banded vnlts 318.95 5 cm wide Fault gouge zone at 80º of c.a.
319.00 327.40 Kuc Caracol Fm 0.2 to 2 cm wide Silts beds 90%, 0.2 to 0.3 cm wide FG S.S. beds 10%, bedding at 70º of c.a. P-C alteration, broken intervals from 321.50 m to 321.60 m; 322.0 m to 322.10 m; 323.80 m 324.00; 324.70 m to 324.90 m, 2 to 3 per meter 0.3 to 1 cm wide few 3 to 10 cm wide calcite few with trz to 5% of FG subhedral to cubic Py vnlts at 50º to 70º of c.a. few at 90º of c.a.
327.40 332.50 Fault zone 0.1 to 2 cm long rock fragments in milled rock groundmass FG subhedral Py diss 1%, 327.40 m to 327.50 m 3% of 0.1 to 0.3 cm long Qtz fragments, fault planes at 70º of c.a.
332.50 338.70 Kuc Caracol Fm 0.5 to 2 cm wide Silts beds 80%, 0.2 to 0.5 cm wide FG S.S. beds 20%, bedding at 60º of c.a. P-C alteration 2 fault zones one from 333.26 m to 333.37 m at 70º of c.a. and from 338.30 m to 338.70 m with broken calcite partially replaced to FG qtz –trz of brown Sph and 5% of FG Py vnlts fragments at 40º of c.a. 2 per meter 0.1 to 0.5 cm wide few up to 2 cm wide calcite partially replaced To FG qtz-FG to medium size grain subhedral Py 5% to 10% vnlts at 30º to 60º of c.a. few at 80º of c.a. 0.5 cm wide FG anhedral Py irregular lenses 1% to 2%
338.70 349.20 Kuc Caracol Fm 0.5 to 3 cm wide Silts beds 80%, 0.2 to 0.5 cm few up to 3 cm wide FG S.S. beds 20%, bedding at 60º of c.a. P-C alteration 345.0 m to 345.20 m Sedimentary Bx Silts fragments in calcite groundmass and 5% of FG Py diss., broken core from 342.50 m to 342.70 m from 343.51 m to 343.61 m, from 348.50 m to 348.70 m 2 per meter 0.1 to 2 cm wide calcite- 3% to 5% of medium size grain Py vnlts at 20º to 40º of c.a.
349.05 m 2 cm wide Fault zone with trz of black Sph diss- 5% of FG subhedral Py
349.20 352.05 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 70%, wavy 0.2 to 3 cm wide FG S.S: beds 30%, slump features and irregular wavy bedding changing from 50º to 40º of c.a. at top to 60º-80º of c.a. at bottom, P-C alteration wk sericite, 2 in the interval irregular 0.1 to 0.5 cm wide calcite replaced to FG qtz < FG anhedral Py vnlts at 60º to 80º of c.a. like lenses, FG anhedral Py clouds and in 0.1 to 0.2 cm wide lenses 3%
351.76 m 0.6 cm wide calcite totally replaced to FG qtz-FG subhedral Py 1% of dark brown reddish Sph lens at 80º of c.a.
352.05 352.12 7 cm wide consolidated Fault gouge zone along bedding at 80º of c.a. with 0.2 to 0.5 cm wide calcite layers
352.12 387.90 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 85% to 90%, 0.1 to 05 cm wide FG S.S. beds 10% to 15%, P-C alteration wk sericite in 1 to 3 m wide intervals, 3 to 4 per meter irregular 0.1 to 1.5 cm wide calcite very partially replaced to FG qtz < sericite scarce with 1% to 2% of FG Py vnlts at 0º to 20º and less at 60º to 85º of c.a.
387.90 389.23 Wide apart stockwork formed by 0.2 to 2 cm wide calcite-2% to 4% of FG anhedral Py vnlts
389.23 411.30 Kuc Caracol Fm 0.1 to 1 cm wide FG Silts beds 60%, wavy 0.1 to 0.5 cm wide FG S.S. beds 40%, wavy bedding at 50º to 70º of c.a., P-C alteration wk bleached rock, 1 every 2 meters 0.1 to 0.2 cm wide calcite few with trz of VFG anhedral Py vnlts at 20º to 40º and scarce lenses
404.00 m -411.30 m Increase to 1 to 2 per meter 0.1 to 1 cm wide calcite-3% to 4% FG anhedral Py lenses and less vnlts at 10º of c.a. and at 30º to 40º of c.a.,

5



very scarce 0.1 to 0.2 cm wide calcite-FG Py trz of dark brown Sph and Gn lenses, FG anhedral Py clouds diss in some S.S. beds Py 2% in the interval
411.30 422.25 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 60%, 0.1 to 2 cm wide FG to medium size grain wavy irregular S.S. beds 40%, bedding at 30º to 60º of c.a. P- C alteration, 1 to 3 per meter irregular 0.1 to 1.5 cm wide calcite wkly and locally replaced to FG qtz-5% to 15% of FG to medium size grain subhedral Py-trz to 3% of dark brown and black Sph < Gn and ss lenses and less vnlts at 10º to 30º of c.a., FG anhedral Py diss at bottom of some S.S. beds also FG Py in clouds, Total Py 3% to 4% in the interval
422.25 422.55 Folded and faulted Bx interval Fault planes at 80º of c.a. 3% of 0.1 to 0.3 cm wide calcite replaced to FG qtz-FG to medium size grain subhedral Py vnlts fragments, Py 3% in the interval
422.55 425.35 Kuc Caracol Fm 0.2 to 2 cm wide Silts beds 70%, 0.1 to 2 cm wide FG S.S. beds 30%, bedding at 60º to 80º of c.a., P-C alteration wk to moderately fractured zone 6 to 8 slickensides per meter, 2 to 3 per meter 0.5 to 3 cm wide Fault gouge zones at 60º to 85º of c.a., 2 to 3 per meter irregular 0.2 to 2 cm wide calcite partially replaced to FG qtz 1% to 3% of FG to medium size grain subhedral Py vnlts at 60º to 85º of c.a., FG anhedral Py clouds and diss in S,.S. beds, Py 2% to 3% in the interval
425.35 438.14 0.1 to 1 cm wide Silts beds 80%, 0.2 to 1.5 cm wide FG S.S: wavy beds 20%, bedding at 70º to 80º of c.a., P-C alteration, 4 to 6 per meter irregular 0.2 to 0.6 cm wide calcite with thin walls replaced to FG qtz-trz of FG anhedral Py vnlts at 5º to 30º of c.a. and at 60º to 85º of c.a. less like 0.1 to 0.3 cm wide lenses, trz of FG anhedral Py clouds, Py trz to 1% in the interval
438.14 457.55 Kuc Caracol Fm 0.1 to 0.5 cm wide Silts beds 70%, lightly wavy 0.1 to 1 cm wide FG S.S. beds 30%, bedding at 70º to 85º of c.a., P-C alteration, 1 per meter irregular 0.1 to 0.5 cm wide calcite-2% to 3% of FG anhedral Py vnlts at 10º to 30º and less like lenses at 70º to 85º of c.a. trz to 1% FG anhedral Py clouds in S.S. beds Py 1% to 2% total
457.55 458.70 Stockwork of 0.1 to 3 cm wide calcite replaced to FG qtz-trz to 2% of dark brown and black Sph, 5% of FG to medium size grain subhedral Py vnlts, Py 2% in the interval
458.70 463.00 Caracol Fm 0.1 to 1 cm wide Silts beds 60%, 0.1 to 3 cm wide FG S.S. beds 40%, bedding at 70º to 85º of c.a., P-c alteration, FG anhedral to subhedral Py diss also in 0.1 to 0.3 cm wide lenses and irregular vnlts with trz to 5% of calcite partially replaced to FG qtz vnlts at 70º crossing beds, Py 5% in the interval
463.00 465.10 Moderately to highly fractured interval, fractures every 1 to 5 cm apart, 1to 2 cm wide Fault gouge zones along bedding, 2 vnlts in the interval 0.2 to 1 cm wide of calcite replaced to FG qtz-5% of FG to medium size grain Py vnlts at 10º of c.a. Py 1%
465.10 466.60 2 Fault zones 15 and 20 cm wide at top and bottom of the interval, fault planes at 80º of c.a., gouge with 2% to 3% of milled black Sph-FG to medium size grain subhedral Py 2% to 3%
466.60 466.80 Bxed rock interval QSPC alteration, 3% of calcite replaced to FG qtz-3% to 5% of medium size grain subhedral Py-trz to 1% of black Sph filling voids in Bx
466.80 471.30 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 80% wavy irregular 0.1 to 0.5 cm wide FG S.S. beds 20%, bedding at 60º to 70º of c.a., P-C to wk QSPC alteration, 6 to 8 per meter irregular 0.1 to 0.4 cm wide FG subhedral Py few with trz to 1% of black Sph< calcite replaced to FG qtz lenses and less than 1 per meter same composition and width vnlts at 20º of c.a.

6



471.30 474.75 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 90%, wavy irregular 0.1 to 0.3 cm wide FG S.S. beds 10%, wavy bedding at 60º to 80º of c.a., wk QSPC alteration, 2 to 3 per meter 0.5 to 2 cm wide calcite totally replaced to FG qtz-10% to 20% of medium size grain subhedral Py-5% of black and brown Sph, 1% to 2% of sulfosalts or stibnite needles lenses, also FG anhedral Py in irregular 0.1 to 0.3 cm wide lenses and irregular clouds total sulfides 5% to 7/ in the interval
471.53 m – 471.59 m 6 cm wide Fault vein Bx zone, 30% of calcite replaced to FG qtz fragments, 10% to 15% of FG to medium size grain subhedral Py, 2% of black Sph in groundmass, fault planes at 80º of c.a.
472.24 m 2 cm wide calcite totally replaced to FG qtz 20% of FG to medium size grain subhedral Py-3% to 5% of black Sph and trz of ss needles- 1% of calcite replaced to FG qtz lens at 60º of c.a.
473.70 m 2.5 cm wide of 40% of medium size grain subhedral Py-5% of black Sph-5% of stibnite or ss needles-1% of calcite replaced to FG qtz lens at 60º of c.a.
474.57 m Irregular 2.5 to 3 cm wide druse qtz-10% of FG to Medium size grain subhedral Py 1% of sulfosalts needles and trz of black Sph lens at 70º of c.a.
474.75 481.00 Kuc Caracol Fm Silts in irregular 0.5 to 3 cm wide beds 80%, 0.2 to 1 cm wide irregular FG S.S. lenses 20%, wavy and deformed by deposition on unstable basin bedding at 60º to 80º of c.a., P-C to wk QSPC alteration, 2 to 3 per meter 0.5 to 1 cm wide calcite totally replaced to FG qtz 5% of FG subhedral Py < black Sph and trz of to 1% of ss lenses at 60º to 80º of c.a., 3 in the interval 0.5 to 2 cm wide calcite replaced to FG qtz with druse texture-2% of black Sph and 1% of ss needles vnlts at 0º to 10º of c.a.
481.00 484.20 Very irregular bedding deposition on unstable basin Silts 70% in irregular 0.1 to 2 cm wide beds, 0.1 to 1 cm wide irregular FG S.S. lenses 30%, bedding at 80º of c.a. at top to 60º of c.a. at bottom, P-C to wk QSPC alteration moderate sericite, 5 in the interval 0.1 to 2 cm wide calcite totally replaced to qtz some druse textures-FG to medium size grain subhedral Py 5% trz to 2% of ss or stibnite needles lenses and one irregular 0.1 to 0.3 cm wide same composition vnlt at 20º of the interval
484.20 488.10 Irregular bedding Silts 70%, 0.1 to 2 cm wide FG S.S. irregular sub rounded lenses, bedding at 70º of c.a., P-C alteration wk sericite in scarce micro fractures-FG anhedral Py in 0.1 cm wide lenses at bottom, total sulfides 1% in the interval
486.66 m irregular 0.2 to 0.4 cm wide FG to medium size grain subhedral Py 10%-5% of black Sph trz of Gn lens at 75º of c.a.
488.10 489.10 Kuc Caracol Fm Silts 70% FG S.S. in sub rounded lenses 0.1 to 1 cm wide, irregular bedding at 70º to 85º of c.a., P-C alteration, less than 1 per meter 0.2 to 0.3 cm wide calcite replaced to FG qtz 5% of FG subhedral Py trz to 1% of ss needles lenses at 70º to 80º of c.a.
488.60 m 2 cm wide Fault gouge zone with 10% of medium size grain subhedral Py-3% of black Sph-trz to 1% of ss and 1% of calcite replaced to FG qtz fault planes at 70º of c.a.
489.10 497.0 Kuc Caracol Fm 0.2 to 3 cm wide Silts 70%, 0.1 to 13 cm wide irregular FG S.S. beds and sub rounded lenses 30%, irregular deposition on unstable basin sedimentary Bx zones and slump features, bedding at 50º to 70º of c.a., P-C alteration, less than 1 per meter hairline to 0.2 cm wide calcite vnlts at 20º to 40º of c.a., scarce hairline to 0.1 cm wide FG anhedral Py vnlts at 80º to 85º of c.a.
Py trz in the interval 495.30 m – 497.0 m wkly to moderately fractured zone 6 to 8 per meter hairline

7



to 0.3 cm wide calcite-sericite trz to 1% of FG anhedral Py vnlts at 10º to 40º of c.a.
497.0 497.88 Moderately fractured interval at top of the main fault with moderate to advanced sericite in fractures
497.88 499.50 Main Fault zone with irregular 2 to 7 cm wide Bx gouge zones at 20º to 50º of c.a. formed by 0.1 to 2 cm long sub angular Silts fragments in milled rock- moderate sericite and scarce calcite groundmass
499.50 507.50 Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 90%, irregular 0.1 to 2 cm wide FG S.S. lenses, bedding at 0º to 25º of c.a., P-C alteration 499.50 m – 501.50 m 8 to 10 per meter irregular 0.1 to 0.8 cm wide calcite with druse textures vnlts at 10º to 30º and at 60º to 70º of c.a. 504.05 m 8 cm wide pebble dike at 30º to 40º of c.a. formed by 0.1 to 5 cm wide Silts fragments in coarse grain calcite groundmass with druse texture
507.50 509.25 Fault zone two 5 cm and 10 cm wide gouge zones at top of the interval at 70º to 85º of c.a., 2 cm wide gouge zone at 509.03 m at 60º of c.a., bedding changing from 85º at top to 60º of c.a. at bottom, P-C to wk QSPC alteration moderate sericite in fractures, 8 to 10 per meter irregular 0.1 to 0.2 cm wide calcite altered to sericite vnlts at 0º to 20º of c.a.
509.25 533.40 Kuc Caracol Fm irregular and wavy 0.1 to 3 cm wide Silts beds 70% broken and micro folded turbiditic 0.1 to 4 cm wide FG S.S. lenses and wavy beds 30% deposition on unstable basin, bedding changing from 40º-50º of c.a. at top to 70º at 518.50 m, 30º at 530.60 m and 60º of c.a. at bottom of the interval, P-C alteration, 2 to 3 per meter irregular some of the banded 0.3 to 2.5 cm wide calcite few with trz of FG subhedral Py vnlts at 10º to 30º of c.a. scarce at 50º of c.a.
533.40 533.60 3 cm wide Fault zone along bedding with 6 irregular 0.1 to 0.8 cm wide calcite wkly replaced to FG qtz lenses, one irregular 0.3 to 0.8 cm wide massive Stibnite or sulfosalts < Gn lens at 553.52 m
533.60 535.85 Wkly to moderately fractured interval slickensides at 5 to 20 cm apart at 30º to 50º of c.a. few with trz of Stibnite needles-wk to moderate sericite in micro fractures and in some calcite vnlts walls 535.70 m -535.78 m 8 cm wide Fault gouge zone at 70º of c.a., 3% to 5% of 0.1 to 0.7 cm wide calcite vnlts.
535.85 537.06 Kuc Caracol Fm irregular bedding deposition on unstable basin turbiditic features, Silts 70%, irregular 0.5 to 2 cm wide FG S.S. lenses and wavy beds 30%, bedding at 60º to 85º of c.a. P-C alteration, 3 in the interval 0.1 cm wide calcite vnlts at 30º to 40º of c.a., and 1 at 85º of c.a. lens
537.06   Reduction to NQ core diameter
537.06 550.10 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 60%, 0.1 to 5 cm few 7 to 40 cm wide FG to medium size grain S.S. beds 40%, turbiditic features 0.5 to 1 cm wide FG S.S. lenses, wavy bedding at 60º to 85º of c.a., P-C alteration, usually 1 per meter calcite vnlts, 0.5 to 2 m wide intervals with 6 t 8 per meter 0.2 to 0.8 cm wide calcite few partially replaced to FG qtz trz to 2% of FG subhedral Py vnlts at 10º to 30º and lenses at 60º to 85º of c.a., 1% of FG anhedral Py diss in irregular 0.1 to 0.2 cm wide lenses also in small clouds, Py trz to 1% in the interval
550.10 552.10 Fault zone broken core rock fragments < 5 cm long 5% of organic material in gouge, 30% of medium size grain S.S. fragments at bottom of the interval, Fault planes and slickensides at 45º of c.a., alteration changing from P-C at top to wk QSPC at bottom moderate sericite in micro fractures 5% of 0.3 to 1 cm wide calcite wkly replaced to FG qtz-trz to 1% of subhedral to cubic Py vnlts

8



552.10 553.35 Kuc Caracol Fm FG S.S. in beds 2 to 8 cm wide 95%, 0.1 to 1 cm wide Silts 5%, bedding at 60º of c.a. wk QSPC alteration fractured zone 6 in the interval 0.1 to 1 cm wide Fault gouge zones at 50º to 70º of c.a., 10 to 12 per meter 0.3 to 2 cm wide calcite wkly replaced to FG qtz-trz to 3% FG subhedral Py vnlts at 30º to 50º and at 70º to 85º of c.a.
553.35 554.70 Stockwork and Bxed interval, FG to medium size grain S.S. fragments in 20% to 30% of irregular 0.1 to 2 cm wide calcite totally replaced to FG qtz 2% of sericite and light yellow color clays-2% to 5% of FG to medium size grain subhedral to cubic Py, 2% to 4% of Stibnite or ss needles trz of black Sph and Gn vnlts and filling voids in Bx
554.70 555.85 Wkly Bxed interval with 10 cm to 30 cm long S.S. fragments also wide apart stockwork zones formed by 0.1 to 1 cm wide calcite totally replaced to FG qtz- sericite and light grey clays1%, FG to medium size grain subhedral Py 3% to 5%, trz to 2% of ss or stibnite needles trz of black Sph vnlts and filling voids 555.85 m 2 cm wide Fault zone at 70º of c.a.
555.85 558.60 Kuc Caracol Fm FG to medium size grain S.S. in beds 2 to 60 cm wide 95%, 0.1 to 1 cm wide Silts beds 5%, bedding at 75º of c.a. wk QSPC alteration, 4 to 6 per meter irregular 0.2 to 0.5 cm wide calcite-trz to 1% of FG anhedral few with very scarce trz of ss or stibnite needles vnlts at 10º to 30º and 75º to 90º of c.a.
558.40 m – 558.60 m Fault zone at 65º of c.a., 11 cm wide of irregular Bxed calcite vnlts-with yellow clays-5% of organic material trz to 1% of FG anhedral to subhedral Py , vnlt at 50º of c.a.
558.60 562.80 Kuc Caracol Fm FG to medium size grain S.S. in wavy beds 0.5 to 50 cm wide 80%, 0.1 to 2 cm wide Silts beds 15% to 20%, bedding at 60º to 85º of c.a., wk QSPC to P-C alteration, faulted interval from 560.50 m to 561.35 m Bxed by faulting in 0.1 to 2 cm long rock fragments in milled rock gouge zones at 40º to 50º of c.a., 6 to 8 per meter slickenside at 70º to 85º of c.a., usually 4 to 6 per meter hairline to 0.3 cm wide calcite-trz of FG anhedral Py vnlts at 5º to 35º of c.a.
560.0 m – 560.80 m wide apart stockwork formed by 0.1 to 2 cm wide calcite-trz to 1% of FG anhedral Py and few with trz of black Sph vnlts
562.80 566.25 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 90%, 0.1 to 3 cm wide FG S.S. beds 10%, bedding at 85º to 90º of c.a. P-C alteration, 2 to 3 per meter hairline to 0.2 cm wide calcite vnlts at 10º to 20º of c.a. and less 0.1 to 0.2 cm wide lenses
566.25 566.55 Fault gouge zone at 60º of c.a., 10% of calcite-trz to 2% of FG subhedral Py vnlts fragments
566.55 567.40 Consolidated old faulted Bx zone formed by 60% of sub angular 0.1 to 10 cm long thin bedded rock fragments in irregular 0.5 to 3 cm wide calcite vnlts or groundmass trz to 1% of black Sph-1% FG anhedral Py diss
567.40 576.80 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 85%, 0.1 to 0.5 cm wide FG S.S. beds lightly wavy bedding at 60º to 75º of c.a. P-C alteration wk to moderate sericite-less light yellow color clays, highly fractured interval slickenside along bedding every 1 to 5 cm apart sheeted rock, 6 to 8 per meter irregular to 0.8 cm wide calcite vnlts at 10º to 30º of c.a. and less 0.1 to 0.5 cm wide lenses 567.40 m – 568.50 m Irregular 2 to 4 cm wide pebble dike at 20º to 40º of c.a. trz to 3% FG anhedral to subhedral Py in few calcite vnlts, Py 1% in the interval 576.35 m – 576.50 m Fault gouge zone at 80º to 85º of c.a. 5% of 0.1 to 0.3 cm wide calcite vnlts fragments
576.80 579.89 Two 35 cm and 40 cm wide Fault Bx intervals at top and at bottom of the interval at 80º to 85º of c.a. rock in between highly fractured slickensides every 1

9



to 2 cm apart along bedding sheeted rock Shale appearance Bedding at 80º to 85º of c.a. with two 10 cm and 15 cm intervals with bedding at 30º of c.a., 15% to 20% of irregular 0.2 to 1.5 cm wide calcite wkly replaced to FG qtz, 2% to 3% of FG subhedral to cubic Py vnlts fragments in Bxed intervals, Py 1% in the interval
579.89 586.80 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 85%, wavy 0.1 to 0.5 cm wide FG S.S. beds 15%, bedding at 75º to 90º of c.a., two 5 cm and 15 cm long intervals with bedding at 30º and 60º of c.a., P-C alteration wk sericite, highly fractured interval with slickenside every 0.5 to 2 cm apart, sheeted rock, shale appearance
584.00 m 584.35 m Fault gouge interval 25 cm of no recovery, 1 to 2 per meter irregular 0.2 to 1 cm wide calcite-trz to 1% of FG anhedral to subhedral Py vnlts at 0º to 10º and at 80º to 90º of c.a. like lenses
586.80 587.05 Fault Bx gouge zone at 40º to 50º of c.a., 20% to 30% of irregular 0.1 to 0.7 cm wide calcite partially replaced to FG qtz-trz to 2% of FG anhedral Py vnlts fragments in fine grain milled dark grey color muddy groundmass
587.05 593.80 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 70% to 80% 0.1 to 3 cm wide FG S.S. beds 20% to 30% bedding changing from 75º to 85º at top to 40º to 50º from 589.50 m to 590.0 m; 65º to 85º from 590 m to 592.50 m and at 40º to 60º of c.a. at bottom, moderately to highly fractured interval slickensides along bedding every 0.5 to 5 cm apart moderately sheeted rock, 6 to 8 per meter 0.1 to 2 cm wide calcite< sericite vnlts at 10º to 30º of c.a. and less at 60º to 85º of c.a. 589.12 m 589.42 m Fault at 25º of c.a. with 0.2 to 2 cm wide calcite vnlts in stockwork
590.0 m -590.10 m Irregular 0.2 to 3 cm wide calcite vnlts in stockwork
592.73 m Irregular 2 to 5 cm wide Pebble dike zone at 40º of c.a.
593.80 594.70 Fault Bx gouge zone planes at 20º of c.a. at top and at 40º of c.a. at bottom, 5% to 10% of irregular 0.2 to 1 cm wide calcite vnlts fragments in FG dark grey color muddy groundmass
594.70 598.00 Kuc Caracol Fm 0.1 to 1.5 cm wide Silts beds 80%, 0.1 to 0.5 cm wide FG S.S. beds 20%, bedding changing from 70º to 85º of c.a. at top to 20º of c.a. at bottom, moderately fractured interval with slickensides every 5 to 7 cm apart from 595.90 to 597.30 m, highly fractured and deformed by faulting interval with slickenside every 0.2 to 2 cm apart at top and bottom of the interval, P-C alteration wk sericite in some micro fractures
595.90 m 596.10 m 30% of irregular 0.2 to 2 cm wide calcite partially replaced to FG qtz vnlts in stockwork
598.00 605.62 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 75%, 0.1 to 2 cm wide few 5 cm to 7 cm wide FG S.S. beds 25%, bedding at 30º to 50º of c.a., P-C alteration wkly to moderately fractured interval with slickenside along bedding every 5 to 20 cm apart, 3 to 5 per meter irregular 0.2 to 3 cm wide calcite wk sericite and light yellow color clays vnlts at 50º to 85º of c.a.
605.62 607.10 Bxed by old faulting interval, moderately fractured interval irregular slickenside and fractures every 1 to 5 cm apart, irregular 0.2 to 4 cm wide calcite moderate light yellow clays-trz to 1% of FG anhedral Py vnlts in stockwork
607.10 629.90 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 70%, wavy 0.1 to 3 cm wide FG S.S. beds 30%, wavy and lightly irregular bedding at 60º to 75 ºof c.a. scarce slickenside and fractures along bedding 1 to 2 per meter, P-C alteration, less than 1 per meter 0.1 to 0.8 cm wide calcite vnlts at 0º to 10º and less same width lenses
629.90 632.30 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 70%, 0.1 to 4 cm wide FG S.S.

10



beds 30%, bedding at 65º to 75º of c.a., P-C to wk P-C alteration, 6 to 8 per meter 0.1 to 4 cm wide calcite scarce wkly replaced to FG qtz vnlts at 10º top 30º of c.a. and less at 70º of c.a. like lenses
632.30 650.00 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 70%, wavy irregular 0.2 to 0.5 few up to 7 cm wide FG S.S. beds 30%, wavy bedding changing from 65º to 75º of c.a. at top to 0º at 635 m; to 50º at 641 m and at 60º to 70º of c.a. at bottom, wk P-C alteration, less than 1 per meter 0.2 to 1 cm wide few 2 to 5 cm wide banded calcite lenses, 1 to 2 per meter 0.1 to 0.3 cm wide calcite vnlts at 30º to 50º of c.a.
647.55 m – 647.70 m Irregular 0.5 to 3 cm wide Sedimentary Bx formed by 0.2 to 2 cm wide sub angular Rock fragments in calcite groundmass.
650.00   End of hole

11


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: February 2/ 2006  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES    

Summary of DDH QTA-39-06; 700,266 E; 2,653,635 N, 1940 m ASL 340°/-60°, Geophysics manto 4 north of Cerro Gregorio area

From    To Description
0.00 17.37 No recovery drilled with tricone bit- Casing
17.37 24.28 Kuc Caracol Fm 0.2 to 3 cm wide Silts beds 80%, wavy irregular 0.1 to 1 cm wide scarce 2 to 3 cm wide FG S:S. beds 20%, wavy bedding changing from 15º to 25º of c.a. at top, 50º at 22.60 m and 30º-40º of c.a. at bottom, P-C to wk QSPC alteration, wk bleaching to light grey color rock, 1 to 2 per meter irregular hairline to 0.3 cm wide calcite-trz to 1% of brown Goethite lenses. 18.90 m – 19.10 m irregular 2 to 5 cm wide sedimentary Bx zone along bedding at 15º of c.a. with 30% of irregular 0.2 to 2 cm wide calcite vnlts like groundmass
22.16 m- 3 cm wide calcite-5% of brown to tan color Goethite in 0.1 to 0.5 cm wide bands vnlt at 55º of c.a.
22.45 m – 22.80 m Wide apart stockwork of 0.1 to 0.4 cm wide calcite-1% to 3% of brown Goethite vnlts
24.28   Bottom of the oxidation zone
24.28 29.30 Kuc Caracol Fm bedding changing from 70º at top to 0º-10º at bottom, 1 to 2 per
meter 0.1 to 0.2 cm wide calcite vnlts at 50º to 80º of c.a. Fault ed interval
formed by two main faults:
24.28 m – 25.70 m Fault gouge zone at 75º to 80º of c.a.
27.85 m – 28.70 m Fault gouge zone at 65º to 75º of c.a.
27.30 m Irregular 2 to 3 cm wide interval with 4 irregular hairline to 0.6 cm wide
sub-parallel calcite with 5% to 7% of FG anhedral Py vnlts at 60º of c.a.
29.30 71.20 Kuc Caracol Fm, 0.3 to 3 cm wide few up to 5 cm wide Silts beds 80%, 0.2 to
0.5 cm wide FG S.S. beds 20%, bedding changing from 5º to 30º of c.a. at top to
40º-60º at bottom, wk P-C to wk QSPC alteration wkly bleached rock, 2 to 3 per
meter 0.1 to 0.3 cm wide scarce 1 to 4 cm wide-trz to 2% of FG Py vnlts at 60º
to 90º of c.a. less than 1 per meter hairline to 0.2 cm wide calcite few with trz of
FG anhedral Py lenses
37.30 m – 38.80 m Broken core fragments 1 to 10 cm long, fractures at 70º to
85º of c.a., scarce at 10º to 30º of c.c. along bedding
42.24 m 6 cm wide Fault gouge with planes at 45º and at 80º of c.a.
47.55 m- 47.90 m Broken core interval 2 cm to 5 cm long fragments fault planes
at 40º of c.a. along bedding
51.50 m- 51.80 m Fault gouge interval with 5% of irregular 0.1 to 4 cm wide
calcite vnlts fragments, fault planes at 190º to 30º along bedding
54.60 m – 55.50 m wk to moderately sericite in some 20º to 40º of c.a. microfractures
along bedding
60.60 m – 60.75 m 7 sub-parallel 0.2 to 1 cm wide calcite wkly replaced to FG

1



qtz and wkly altered to light grey color clays lenses at 40º of c.a. 65.30 m – 65.84 m Fault gouge zone broken core in fragments 0.2 to3 cm long,, no visible faulting planes 67.05 m – 71.20 m Moderately fractured interval, 0.1 to 2 cm wide gouge zones most along bedding less at 10º to 30º of c.a.
71.20 77.00 Irregular Fault zone, 5 cm to 60 cm wide gouge Bx intervals some with 5% to 10% of deformed banded calcite wkly replaced to FG qtz-3% to 5% of FG to medium size grain subhedral Py vnlts fragments
77.00 84.00 Kuc Caracol Fm 0.2 to 2 cm wide Silts beds 70%, wavy 0.5 to 3 cm wide FG S.S. beds, wavy lightly micro-folded bedding at 10º to 30º of c.a. at top to 30º to 50º of c.a. at bottom, wk P-C to wk QSPC alteration, wk sericite, wkly fractured interval 3 fractures per meter along bedding also at 60º to 85º of c.a., 3 in the interval 2 cm to 15 cm wide fault gouge zones with planes at 60º to 85º of c.a., 2 to 4 per meter hairline to 0.56 cm wide calcite scarce with 1% to 2% of FG anhedral Py vnlts at 0º to 20º also at 60º to 85º of c.a., less than 1 per meter 0.1 to 0.2 cm wide calcite lenses
84.00 102.50 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 70% to 75%, wavy irregular 0.1 to 1 cm wide scarce 4 cm to 10 cm wide FG S.S. beds 25% to 30%, irregular and micro folded beds, deposition on wkly to moderately stable basin bedding at 30º to 50º of c.a., wk P-C to wk QSPC alteration wkly bleached rock, 1 per meter hairline to 0.3 cm wide calcite lenses and less vnlts at 20º to 40º of c.a.
102.50 110.50 Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 90%, wavy 0.1 to 0.5 cm wide FG S.S. beds 10%, lightly wavy bedding gradually changing from 30º of c.a. at top to 70º to 75º of c.a. at bottom, P-C alteration moderately fractured interval broken core in 2 cm to 30 cm long fragments, some fault gouge zones at 60º to 90º of c.a., 1 to 3 per meter irregular hairline to 0.2 cm wide just one 0.6 cm wide calcite lenses and less vnlts at 10º to 40º of c.a.
102.50 m 102.65 m Fault gouge Bx zone at 60º to 70º of c.a., 0.2 to 2 cm long sub angular rock fragments in a dark grey color milled rock groundmass
104.98 m 2 to 3 cm wide Fault gouge at 85º of c.a.
105.20 m irregular 1 to 4 cm wide Fault gouge interval at 60º of c.a.
105.75 m -105.77 m Fault gouge at 85º of c.a.
107.00 m – 107.20 Fault Bx gouge abundant milled rock groundmass, fault planes at 80º to 85º of c.a.
107.60 m Irregular 2 to 4 cm wide Fault gouge zone with no visible planes
110.50 112.17 Fault zone most planes at 60º to 85º of c.a. along bedding, 5 to 40 cm long wkly fractured intervals among 5 cm to 50 cm wide Bx gouge intervals, 15% to 25% of irregular 0.2 to 2 cm wide calcite locally and wkly replaced to FG qtz few with 2% to 3% of FG anhedral to subhedral Py vnlts fragments, Py 1% in the interval
112.17 117.87 Kuc Caracol Fm 0.2 to 2 cm wide Silts beds 80%, wavy 0.1 to 0.8 cm wide FG S.S. beds 20% lightly wavy bedding at 60º to 75º of c.a., P-C alteration wkly to moderately fractured interval, 4 in the interval 10 cm to 50 cm wide Fault gouge zones most with planes at 70º to 90º of c.a., 4 to 6 per meter irregular 0.1 to 0.6 cm wide calcite vnlts at 10º to 30º also at 60º to 75º of c.a. like lenses
114.76 m – 114.86 m Fault gouge zone 10% of 0.1 to 1 cm wide calcite vnlts fragments in a dark grey color milled rock groundmass
115.40 m – 115.90 m Fault gouge at 60º of c.a. along bedding, 0.2 to 7 cm long core fragments, 5% to 7% of irregular 0.1 to 0.5 cm wide calcite vnlts fragments
116.80 m – 117.05 m Fault at 70º of c.a. along bedding
117.22 m – 117.35 m Fault with no visible planes
117.87 123.90 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 80%, lightly wavy 0.1 to 2 cm wide FG S.S. beds 20%, wavy bedding at 65º to 85º of c.a., wkly fractured interval,

2



two 5 cm and 35 cm wide Fault gouge intervals at 123.70 m – 123.75 m and from 112.01 m – 122.36 m, 8 to 12 per meter irregular 0.1 to 1.2 cm wide calcite vnlts at 70º to 85º and less at 10º to 30º of c.a.
123.90 168.00 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 80%, lightly wavy 0.1 to 1 cm wide scarce 3 to 10 cm wide FG S.S. beds 20%, lightly wavy bedding changing from 70º to 85º of c.a. at top to 50º -60º of c.a. from 127.40 m to 132.0 m, at 30º to 40º of c.a. from 132.0 m to 138.0 m, at 0º to 20º from 138.0 m to 142.50 m, at 30º to 50º of c.a. from 142.5 m to the bottom of the interval, P-C alteration, scarce fractures.
123.90 m – 148.60 m 1 to 3 per meter hairline to 0.5 cm wide calcite vnlts at 0º to 10º of c.a. and at 40º to 60º of c.a., 4 in the interval 2 to 4 cm wide calcite lenses less calcite vnlts with 2% to 3% of FG anhedral Py at 10º to 20º of c.a.
148.60 m – 157.0 m 6 to 10 per meter irregular some banded 0.1 to 0.8 cm wide calcite-trz to 1% of FG anhedral Py lenses and 0.1 to 0.7 cm wide calcite-.3% to 4% of FG anhedral Py vnlts at 20º to 30º of c.a.
168.00 186.70 Kuc Caracol Fm 0.1 to 1.5 cm wide Silts beds 75% to 85%, wavy 0.1 to 1 cm wide scarce 2 cm to 3 cm wide FG S.S. beds 20% to 25%, P-C to wk QSPC alteration wkly bleached rock, wavy bedding at 30º to 50º of c.a., 1 to 2 slickensides along bedding per meter, 4 to 6 per meter 0.1 to 0.2 cm wide calcite lenses less than 1 per meter 0.1 to 0.3 cm wide calcite vnlts at 60º to 85º of c.a. very scarce calcite vnlts with trz to 2% of FG anhedral Py 171.75 m – 172.00 m irregular stockwork zone of 0.1 to 0.3 cm wide calcite vnlts
186.70 197.80 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 80%, wavy 0.1 to 0.5 cm wide FG S.S. beds 20%, wavy bedding at 30º to 50º of c.a. except from 184.20 m to 104.50 m where bedding is at 85º of c.a. also from 194.50 m to 197.80 m where bedding is 20º to 40º of c.a., some small folds from 191.30 m to 194.50 m, wk QSPC alteration wk to moderate sericite in micro-fractures along bedding and at 10º to 30º of c.a., three 22 cm45 cm and 55 cm wide Fault Bx gouge intervals from 186.70 m 186.92 m at 80º of c.a.; from 101.30 m to 191.75 m at 40º-60’º of c.a.; from 197.25 m to 197.80 m at 30º and 60º of c.a., moderately to highly fractured interval 10 to 15 slickensides along bedding per meter, sheeted rock shale appearance, 1 to 2 per meter 0.1 to 0.2 cm wide calcite vnlts at 20º to 40º and at 70º to 85º of c.a. along bedding like lenses, trz to 1% of FG subhedral Py only in the faulted intervals
191.30 m - 192.20 m Folded zone and broken core interval irregular and broken 0.1 to 1.2 cm wide calcite-trz to 2% of FG anhedral Py vnlts in stockwork
197.80 204.00 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 70% to 80%, lightly wavy 0.1 to 0.5 cm wide FG S.S. beds and lenses 20% o 30%, wavy bedding at 50º to 60º of c.a., wk P-C to wk QSPC alteration wk sericite in some calcite vnlts walls and in some micro-fractures, moderately to highly fractured interval, 6 to 8 fractures along bedding per meter sheeted rock shale appearance, 2 to 4 per meter 0.1 to 0.8 cm wide calcite vnlts at 10º to 20º and at 50º to 70º of c.a. like lenses
202.85 m – 203.75 m 3 in the interval 0.5 to 1.5 cm wide calcite-5% to 7% of FG anhedral Py vnlts at 5º to 10º of c.a.
204.00 210.00 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 70%, wavy 0.1 to 3 cm wide FG S.S. beds 30%, wavy bedding at 55º to 60º of c.a., wk P-C to wk QSPC alteration wk sericite in micro-fractures along bedding moderately fractured interval 6 to 8 fractures along bedding per meter except from 208.0 m to 210.0 m where there are 15 to 20 fractures per meter, less than 1 per meter 0.1 to 0.5 cm wide calcite vnlts at 10º to 20º also at 70º to 85º of c.a. lenses
210.00 215.90 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 70% to 80% lightly wavy 0.1 to 2 cm wide FG S.S. b3eds and lenses 20% to 30%, lightly wavy bedding at 50º to 60º

3



of c.a., P-C alteration trz to wk sericite in some slickensides at 10º to 30º of c.a. and along bedding, moderately fractured interval, 4 to 8 fractures some with slickenside along bedding per meter, also slickensides at 10º to 30º of c.a., 1 to 3 per meter irregular hairline to 0.1 cm wide calcite vnlts at 10º to 30º of c.a. and at 70º to 85º of c.a. 215.80 m 215.90 m Irregular 0.1 to 0.3 cm wide calcite vnlts in stockwork
215.90 221.00 0.1 to 1.5 cm wide Silts beds 80%, 0.1 to 3 cm wide FG S.S. beds 20%, lightly wavy bedding at 45º to 60º of c.a., P-C alteration, 2 to 5 fractures along bedding per meter, 1 to 2 per meter hairline to 0.2 cm wide calcite vnlts at 30º and at 70º -80º of c.a., some calcite lenses at 45º to 60º of c.a.
220.05 m 2 cm wide Fault gouge zone at 50º of c.a. along bedding
221.0 236.0 Kuc Caracol Fm 0.1 to 15 cm wide irregular wavy and deformed Silts beds 70% to 75%, 0.2 to 50 cm wide wavy FG S.S. beds 25 % to 30%, slump features, irregular micro-folded and deformed bedding in general at 40º to 50º of c.a., P-C alteration, 1 to 2 fractures along bedding per meter, 1 to 3 per meter hairline to 0.5 cm wide calcite vnlts at 10º-20º; 60º-85º of c.a. and less at 40º -50ºof c.a. lenses scarce 2 cm to 5 cm wide intervals with 2% to 3% of FG anhedral Py in irregular 0.1 to 0.2 cm wide lenses
234.95 m – 236.00 m 2% to 3% of 0.1 to 0.2 cm wide FG anhedral Py irregular lenses
236.0 236.30 Irregular 0.5 to 2.5 cm wide blade calcite-3% to 5% of FG anhedral to subhedral Py vnlts and vnlts fragments at 10º to 20º of c.a., Py 2% to 3% in the interval
236.30 247.05 Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 90%, lightly wavy 0.1 to 1 cm wide few 3 cm to 4 cm wide FG S.S. beds 10%, lightly wavy bedding at 50º to 60º of c.a., 1 to 3 fractures along bedding per meter, less than 1 per meter 0.1 to 0.6 cm wide calcite vnlts at 10º-20º of c.a. and at 70º to 85º of c.a., 2% of irregular 0.1 to 0.2 cm wide FG anhedral Py lenses
247.05 254.0 Moderately fractured interval 8 to 12 fractures some with slickensides along bedding per meter, except from 250.60 m to 251.76 m where abundant slickensides every 0.5 to 5 cm apart exist, 4 to 6 per meter irregular 0.1 to 3 cm wide calcite vnlts at 10º to 30º and few at 40º to 60º of c.a. like lenses, 2% to 3% of FG anhedral Py diss in irregular 0.1 to 1 cm lenses, except from 253.0 m to 253.70 m where FG Py lenses reach 5% to 7%
254.0 282.74 Kuc Caracol Fm 0.1 to 1.5 cm wide Silts beds 70% to 75%, 0.1 to 0.5 cm wide few 2 cm to 4 cm wide FG S.S. beds 25% to 30%, lightly wavy bedding at 40º to 50º of c.a., P-C alteration less than 1 fractures along bedding per meter, 1 per meter 0.1 to 0.7 cm wide calcite vnlts at 10º to 30’ of c.a., also at 50º to 60º of c.a., less than 1 per meter 0.1 to 1 cm wide banded calcite lenses
254.00 m – 256.0 m 3% to 4% of FG anhedral Py diss in 0.1 to 0.2 cm wide lenses
282.74 295.25 Kuc Caracol Fm 0.1 to 1.5 cm wide Silts beds 80% to 85%, wavy 0.1 to 0.8 cm wide FG S.S. beds 15% to 20%, wavy bedding changing from 40º-60º of c.a. at top to 10º at 289.50 m; to 50º at 291 m and to 70º to 80º at the bottom of the interval, P-C alteration, 5% to 7% of irregular hairline to 1.5 cm wide calcite vnlts most at 20º-40º of c.a. also at 60º-75º and like lenses, trz of FG Py diss in very scarce S.S. beds
282.74 m – 283.80 m 5 cm to 10 cm wide consolidated old sedimentary Bx zones, wide apart stockwork of irregular hairline to 1.2 cm wide calcite vnlts
288.70 m – 289.15 m wk replacement to FG qtz of 0.1 to 0.5 cm wide calcite vnlts-FG anhedral Py in 0.1 cm wide lenses
295.25 297.07 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 75%, irregular wavy 0.2 to 1 cm wide S.S. beds 25%, wavy and micro folded bedding at 60º-70º of c.a., wk

4



QSPC alteration, 8 to 12 per meter irregular broken 0.1 to 0.2 cm wide calcite totally replaced to FG qtz vnlts at 10º-30º of c.a., 3% to 5% of FG subhedral to cubic Py in irregular 0.1 to 0.2 cm wide lenses also FG anhedral Py diss in some S.S. beds
296.70 m – 297.07 m Irregular Bxed and banded calcite totally replaced to FG qtz-2% of FG anhedral to subhedral Py lens at 60º of c.a.
297.07 298.50 3 to 5 per meter irregular 0.1 to 0.3 cm wide blade textured calcite replaced to FG qtz-trz of FG subhedral Py vnlts at 10º to 20º and at 40º to 60º of c.a.
298.50 317.50 Kuc Caracol Fm 0.1 to 1.5 cm wide Silts beds 70%, wavy irregular 0.2 to 3.5 cm wide FG few medium size grain S.S. beds 30%, wavy bedding at 60º-70º of c.a., P-C alteration, 3 to 5 per meter 0.1 to 2 cm wide calcite vnlts at 30º-50º, 75º-90º of c.a. and like lenses
317.50 319.30 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 90%, 0.1 to 0.7 cm wide FG S.S. beds 10%, wavy bedding at 70º-85º of c.a., wk QSPC alteration, 7 in the interval 0.2 to 3 cm wide calcite replaced to FG qtz-5% to 10% of FG anhedral to subhedral Py lenses and less 0º to 10º of c.a. vnlts, some voids, FG anhedral Py diss 3% to 5% in small clouds and in irregular 0.1 to 0.2 cm wide lenses
319.30 325.00 Caracol Fm 0.1 to 1.5 cm wide Silts beds 80%, wavy 0.1 to 1.5 cm wide FG to medium size grain at bottom of the interval S.S. beds 20%, wavy bedding at 60º- 70º of c.a., P-C alteration trz of sericite in few micro-fractures
322.70 m – 323.85 m 5% of FG anhedral to subhedral Py in irregular 0.1 to 0.3 cm wide lenses
325.00 332.00 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 80%, wavy irregular 0.1 to 1 cm wide FG few medium size grain S.S. beds 20%, bedding at 40º-50º of c.a., wk QSPC alteration, 5 cm to 2.0 m wide intervals with QSPC alteration by addition of silica, 5 cm to 2 m wide of sedimentary Bx, among 30 cm to 1.5 m wide no Bxed intervals 3% to 5% of irregular 0.1 to 1.2 cm wide broken calcite totally replaced to FG qtz vnlts fragments. FG botryoidal Py also FG subhedral to cubic Py diss and filling voids, FG anhedral Py in 0.1 to 1 cm wide massive lenses, Py 5% to 7% in the interval
323.20 m 1 cm wide Fault vein with 20% of massive Py lens at 50º of c.a.
329.05 m – 329.22 m Fault at 60º-80º of c.a. Py 3%
330.05 m – 330.65 m Fault gouge interval at 50º of c.a.
332.00 391.97 Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 80%, lightly wavy 0.1 to 1 cm wide FG S.S. beds 20%, bedding at 40º of c.a. from top to 352 m, changing from 30º to 5º at 361 m; 0º from 361.50 to 366 m, 10º to 30º of c.a. from 366 m to 376 m and at 30º -40º of c.a. at bottom of the interval, P-C alteration, wk sericite in scarce calcite vnlts walls, 3% to 5% of irregular hairline to 1 cm wide calcite vnlts and lenses, vnlts at 30º-50º of c.a., few at 75º-90º of c.a. and at 0º to 10º of c.a. , less than 1% of the calcite vnlts with trz to 2% of subhedral to cubic Py, Py trz to 1% in the interval
391.97 395,00 Kuc Caracol Fm 0.1 to 2 cm wide Silts 70%, wavy 0.1 to 3 cm wide FG S.S. beds 30%, bedding at 30º of c.a., P-C alteration, 1 to 2 per meter hairline to 0.1 cm wide calcite vnlts at 10º-20º, 60º-70º and banded lenses
395.00 405.00 Kuc Caracol Fm 0.2 to 2.5 cm wide Silts 80%, wavy irregular 0.2 to 2 cm wide FG S.S. beds 20%, bedding changing from 30º to 10º from top to 397.0 m to 70º-85º of c.a. at bottom of the interval, P-C alteration wk to moderate sericite in micro-fractures and in calcite vnlts walls in a 1.70 m wide interval at top and in 1.88 m wide interval at bottom, 8 to 10 per meter irregular 0.1 to 2 cm wide calcite vnlts at 5º to 20º of c.a. and at 60º to 85º of c.a. also in 0.1 to 0.2 cm wide banded lenses
395.30 m 396.20 m Faults zone slickensides at 80º of c.a., irregular 0.1 to 0.3

5



    cm wide calcite-moderate sericite vnlts in stockwork
405.00 417.00 Kuc Caracol Fm 0.1 to 1 cm wide scarce 2 cm to 3 cm wide Silts beds 80%, 0.1 to 5 cm wide FG S.S. beds 20%, lightly wavy bedding at 80º to 85º of c.a., P-C alteration, 2 to 3 per meter irregular hairline to 0.8 cm wide calcite vnlts at 20º- 40º and at 80º to 85º of c.a.
417.00 423.30 Kuc Caracol Fm 0.1 to 1 cm Silts 60%, 0.2 to 4 cm wide few 10 cm to 15 cm wide FG S.S. beds 40%, bedding at 80º-85º of c.a. from top to 420 m; 0º to 20º to 442 m and at 40º to 50º of c.a. at bottom, P-C alteration wk sericite diss in some FG S.S. beds, 15% of wide apart stockwork of 0.2 to 5 cm wide calcite vnlts, some banded 0.1 to 0.5 cm wide banded calcite lenses
417.00 m – 417.20 m Fault gouge zone planes at 80º -85º of c.a.
421.30 m – 422.45 m Fault gouge 2 to 5 cm wide Fault gouge zones at 30º to 40º of c.a. among moderately fractured 1 cm to 15 cm long rock fragments, irregular 2 cm to 10 cm wide of sedimentary Bx intervals with 15% to 20% of 0.2 to 2 cm wide calcite vnlts like groundmass
423.30 427.00 Kuc Caracol Fm 0.2 to 2.5 cm wide silts beds 60%, 0.1 to 4 cm wide FG to medium size grain S.S. beds 40%, bedding at 30º-50º of c.a., P-C alteration, 20% of irregular 0.2 to 5 cm wide calcite vnlts in wide apart stockwork Fault gouge zones at
427.00 459.03 Kuc Caracol Fm 0.1 to 1.5 cm wide Silts beds 75% to 80%, 0.1 to 2 cm wide few 3 to 5 cm wide FG S.S. beds 20% to 25%, bedding at 30º-50º of c.a., P-C alteration, less than 1 per meter hairline to 0.2 cm wide calcite vnlts at 20º to 30º and at 60º-80º of c.a., scarce 0.1 to 0.8 cm wide banded calcite lenses
448.90 m – 450.60 m 10 to 12 per meter irregular 0.1 to 1 cm wide calcite vnlts at 60º to 85º of c.a.
455.50 m – 457.48 m 8 to 10 per meter 0.1 to 0.3 cm wide irregular calcite lenses and less hairline to 0.1 cm wide vnlts at 50º-60º of c.a.
459.03   End of hole

6


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: February 8/ 2006  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES    

Summary of DDH QTA-40-06; 699.499 E; 2,652,197 N, 1927 m ASL 340°//60°, Concordia area 200 m S70W of hole QTA-30
From    To                                                                                                      Description
0.00 18.80 No recovery drilled with tricone bit- Casing
18.80 38.10 Kuc Caracol Fm 0.2 to 5 cm wide Silts beds 60%, 0.2 to 1 cm wide FG S:S. beds 40%, very irregular wavy bedding at 70º-90ºof c.a., slump features, wk QSPC alteration, wk bleaching to light grey color rock, 2 per meter irregular 0.2 to 0.5 cm few 1 cm wide calcite few with tan color Goethite at 10º to 30º of c.a. some druse textures in calcite vnlts at 5º to 15º of c.a.
29.00   Bottom of the oxidation zone
38.10 40.70 Broken interval Fault from 39.69 to 39.90 m at 50º of c.a. wide apart stockwork of irregular 0.3 to 2.5 cm wide calcite partially replaced to FG qtz trz to 3% of FG anhedral Py vnlts
40.70 49.60 Kuc Caracol Fm, 0.1 to 1 cm wide Silts beds 70%, 0.1 to 0.5 cm wide WAVY FG S.S. beds 30%, wavy bedding at 70º-85º of c.a. wk QSPC alteration wkly bleached rock, 1 to 2 per meter hairline to 0.2 few 1 cm wide calcite locally replaced to FG qtz vnlts at 70º to 85º the wider and at 10º to 30º of c.a. the thinner vnlts.
45.70 m – 46.20 m Two 3 cm and 5 cm wide of irregular sedimentary Bx intervals with 10% to 15% of 0.1 to 0.5 cm wide calcite replaced to FG qtz-3% to 5% of FG anhedral Py vnlts filling voids. Irregular 0.1 to 0.3 cm wide FG anhedral Py lenses 3% to 5% of Py
49.00 m – 49.50 m wk to moderate sericite Fault from 49.05 m to 49.10 m at 70º of c.a.
49.45 m 5 cm wide bended calcite replaced to FG qtz-5% of FG anhedral Py at 70º of c.a.
49.55 m 0.1 to 0.3 cm wide calcite-3% to 5% of FG anhedral Py vnlt at 50º of c.a.
49.60 60.05 Kuc Caracol Fm 0.2 to 2 cm wide Silts beds 60%, 0.2 to 1 cm wide FG S.S. beds 40%, lightly wavy bedding changing from 85º at top to 60º of c.a. at bottom, wk QSPC alteration wk sericite in few calcite vnlts walls, 2 to 5 per meter irregular 0.1 to 2 cm wide calcite vnlts at 10º to 40º of c.a. and 70º to 85º of c.a. lenses, few calcite vnlts partially replaced to FG qtz with trz to 3% of FG subhedral Py .
52.80 m 53.20 m Fault Bx gouge zone at 30º of c.a., 20% of calcite filling voids
56.0 m to 58.33 m Broken core interval Fault planes at 30º and at 70º of c.a.
60.05 69.60 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 70%, lightly wavy 0.2 to 0.5 cm wide FG S.S. beds, 30% wavy bedding at 60º to 75º of c.a. broken interval, 1 to 3 per meter irregular 0.2 to 1 cm wide calcite few partially replaced To FG qtz vnlts at

1



30º-50º of c.a. trz of FG Py in very scarce calcite-qtz vnlts Three fault gouge intervals from 60.05 m to 62.90 m with planes at 60º-85º of c.a. 2% to 5% of irregular 0.1 to 3 cm wide calcite partially replaced to FG qtz vnlts fragments 62.40 m -65.00 m wk fractured interval 5 cm to 20 cm long core fragments, fractures at 20º-40º of c.a. some with wk sericite 66.50 m 66.55 m Fault gouge interval planes at 30º of c.a. 68.60 m – 69.60 m Fault gouge interval planes at 5º to 15º of c.a. 5% of irregular 0.2 to 0.8 cm wide calcite vnlts fragments and filling voids
69.60 78.05 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 70% to 75%, wavy irregular 0.3 to 3 cm wide FG S.S. beds 30%, bedding at 50º to 75º of c.a., wk QSPC alteration wkly bleached rock, 6 to 8 per meter irregular 0.2 to 0.5 cm wide few 1 to 3 cm wide calcite s0ome locally replaced to FG qtz trz of FG anhedral Py vnlts at 10º- 25º of c.a. and at 50º-75º of c.a.
74.45 m – 75.60 m Irregular 0.2 to 1 cm wide calcite replaced to FG qtz trz to 2% of FG anhedral Py trz of black Sph and ss vnlts in stockwork
78.05 96.59 Faulted interval 5 cm to 1 m wide fault gouge intervals among 20 cm to 80 cm wide wkly fractured intervals, moderate sericite, less than 1 per meter 0.1 to 0.3 cm wide calcite vnlts in wkly broken intervals
78.08 m – 79.20 m Fault Bx planes at 70º of c.a. along bedding mod sericite trz to 3% of FG anhedral Py diss in milled groundmass trz of calcite replaced to FG qtz vnlts fragments
79.90 m 80.70 m Fault Bx with planes at 60º-85º of c.a. mod sericite 1% to 2% of FG subhedral Py diss in gouge
80.90 m – 81.40 m Fault Bx gouge interval at 70º of c.a.
83.70 m – 86.40 m 5 cm to 1 m wide fault gouge intervals with planes at 70º to 85º of c.a., 3% of irregular 0.5 to 1.2 cm wide calcite replaced to FG qtz vnlts fragments
87.70 m – 88.00 m Fault gouge planes at 70º of c.a. along bedding
88.50 m 88.80 m Fault Bx planes at 60º-70º of c.a. along bedding mod sericite 3% of FG subhedral Py in milled groundmass
90.40 m -90.70 m Fault Bx along bedding 15% of calcite replaced to FG qtz-5% to 10% of FG anhedral Py vnlts fragments also FG anhedral Py diss 2% in groundmass
91.30 m – 92.80 m 2 cm to 3 cm wide Fault Bx gouge intervals along bedding with 5% to 10% of irregular 0.5 to 2 cm wide calcite replaced TO FG qtz-5% of FG Py vnlts fragments among moderately fractured core intervals, 6 to 8 per meter 0.2 to 1 cm wide calcite replaced to FG qtz-3% to 5% of FG anhedral to subhedral Py in walls lenses and less vnlts at 10º to 30º of c.a., Py 3% to 5% in the interval
93.40 m – 93.95 m Fault Bx gouge at 60º-80º of c.a. moderate sericite 5% of irregular calcite wkly replaced to FG qtz vnlts fragments 2% of FG anhedral Py diss in Bx groundmass
96-59 101.30 Kuc Caracol Fm 0.1 to 1 cm wide Silts beds 80%, 0.1 to 0.3 cm wide lightly wavy FG S.S. beds 20%, bedding at 70º-80º of c.a., wk P-C to wk QSPC alteration, moderately fractured interval most fault planes at 70º-80º of c.a. along bedding, 10 cm to 40 cm wide wkly broken intervals with 1 c, to 3 cm long core fragments, 5% of 0.5 to 1 cm wide calcite vnlts fragments
98.30 m 99.60 m 5 to 7 per meter irregular 0.2 to 1.5 cm wide blade calcite replaced to FG qtz trz of FG anhedral Py vnlts at 0º to 30º of c.a.
101.30 106.90 Faulted zone with planes at 60º-85 º of c.a. along bedding few at 30º-50º of c.a. less than 7 cm long core fragments, 5 cm to 1.20 m wide Fault Bx gouge

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intervals with moderate sericite 3% of irregular 0.1 to 0.3 cm wide calcite vnlts fragments trz to 1% of FG anhedral Py diss in few Bxed intervals.
106.90 110.70 Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 80%. Lightly wavy 0.1 to 0.3 cm wide FG S.S. beds 20%, bedding at 70º-80º of c.a., wk QSPC alteration wkly to moderately fractured interval two zones 5 cm and 30 cm wide of Fault Bx gouge, 10 to 12 per meter 0.1 to 0.3 cm wide calcite lenses and less vnlts at 10º to 30º of c.a.
110.70 115.28 Moderately fractured interval 6 in the interval 2 cm to 30 cm wide Fault Bx gouge intervals most along bedding at 70º-80º of c.a. few at 40º-60º of c.a., P-C alteration, 2 to 3 per meter 0.2 to 4 cm wide calcite totally replaced to FG qtz some with 1% to 2% of FG anhedral Py lenses and less vnlts at 10º-20º of c.a. 110.70 m 4 cm wide Bx gouge at 70º of c.a. with 10% to 15% of calcite replaced to FG qtz vnlts fragments and 5% to 7% of FG subhedral Py in vnlts and diss in groundmass
114.95 m – 115.00 m 5 cm wide irregular banded calcite totally replaced to FG qtz-5% to 7% of Fg subhedral Py trz of ss vnlt at 70º of c.a.
115.28 116.20 3% of irregular 0.2 to 0.4 cm wide FG to medium size grain subhedral to cubic Py lenses and vnlts at 10º to 30º of c.a. Py 3% in the interval
116.20 121.00 Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 60%, wavy irregular 0.2 to 15 cm wide FG to medium size grain S.S. beds 40%, lightly wavy bedding at 70º-85º of c.a., wk P-C to wk QSPC alteration 1% to 2% of irregular 0.1 to 3 cm wide calcite partially replaced to FG qtz vnlts and lenses few with trz to 2% of FG to medium size grain anhedral Py, 2% of FG to medium size grain anhedral to subhedral Py vnlts in 0.1 to 0.2 cm wide lenses and vnlts at 10º to 30º of c.a.
121.00 128.55 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 80%, lightly wavy 0.1 to 0.3 cm wide FG S.S. beds 20%, bedding at 70º-80º of c.a., wk P-C to wk QSPC alteration, 1 to 2 per meter irregular hairline to 0.5 cm wide calcite replaced to FG qtz trz to 2% of FG subhedral Py vnlts at 10º-30º of c.a. and at 70º-80º of c.a. lenses 123.76- 126.10 m 10% of irregular 0.2 to 1.5 cm wide calcite replaced to FG qtz- 3% to 5% of FG to medium size grain subhedral Py vnlts at 10º-20º of c.a. and in irregular lenses and filling old sedimentary Bx intervals voids.
128.55 129.85 Broken interval Fault planes at 60º-80º of c.a. wide apart stockwork of 0.2 to 5 cm wide calcite replaced to FG qtz-3% to 5% of FG to Medium size grain subhedral Py-trz to 1% of Sph vnlts
129.85 132.65 Kuc Caracol Fm 0.1 to 4 cm wide Silts beds 80%, 0.1 to 1 cm wide FG S.S. beds 20%, bedding at 60º of c.a., wk P-C to wk QSPC alteration, 3 to 5 per meter irregular 0.2 to 0.5 cm wide calcite totally replaced to FG qtz-5% of FG to medium size grain subhedral Py and FG anhedral Py diss in walls trz to 1% of black Sph vnlts at 10º-20º of c.a. and at 60º of c.a. lenses
132.65 144.65 Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 85% lightly wavy 0.1 to 0.3 cm wide FG S.S. beds 15%, bedding at 60º-80º of c.a., wk P-C to wk QSPC alteration, wkly fractured interval 1 to 3 fractures per meter at 30º-50º and at 70º-85 of c.a. 1 to 3 per meter 0.2 to 1 cm wide calcite wkly replaced to FG qtz 1% to 3% of FG subhedral Py vnlts at 60º-85º of c.a., FG anhedral to subhedral Py in irregular 0.1 to 0.2 cm wide vnlts and lenses at 60º-80º of c.a., Py 1% to 2% in the interval
144.65 145.00 Fault zone planes at 50º of c.a. stockwork of irregular 0.2 to 2 cm wide banded calcite-organic material lenses-FG anhedral Py and medium size grain subhedral Py-trz of ss vnlts, 3% to 5% of sulfides in the interval
145.00 146.70 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 85%, 0.1 to 0.7 cm wide FG S.S. beds 15%, bedding at 70º-80º of c.a., wk P-C to wk QSPC alteration, 3% to 4% of FG anhedral Py to subhedral Py in 0.1 to 0.2 cm wide lenses with less calcite,

3



    scarce same composition 0.1 to 0.2 cm wide vnlts at 10º-20º of c.a.
146.70 148.20 Two 23 cm and 33 cm wide Fault gouge intervals at top and bottom of the interval respectively with moderately fractured core interval in the centre, moderate sericite fault planes at 50º-70º of c.a. crossing beds
148.20 153.45 Kuc Caracol Fm 0.2 to 1 cm wide Silts beds 75%, irregular wavy 0.2 to 2 cm wide FG S.S. beds 25%, wavy bedding at 60º-70º of c.a., wk P-C to wk QSPC alteration, faults at 149.9 m to 150.11 m at 60º-80º of c.a.; from 150.92 m to 150.97 m at 60º of c.a., from 152.35 m to 153.00 m at 60º of c.a. along bedding, 10 to 12 per meter irregular 0.1 to 0.6 cm wide calcite some of them replaced to FG qtz trz to 5% of subhedral to cubic Py vnlts in wide apart stockwork, also 1% to 2% of FG anhedral Py diss in 0.1 to 0.2 cm wide lenses Total Py 2% to 3% in the interval
153.45 155.59 Fault Bx gouge interval irregular planes at 60º-80º of c.a. usually 0.5 to 2 cm long sub rounded rock fragments in grey to dark grey color milled rock 2% to 3% of subhedral to cubic Py diss, moderate sericite and organic material groundmass, 3% of irregular 0.2 to 1 cm wide calcite replaced to FG qtz some with blade texture-2% to 4% of subhedral to cubic Py vnlts fragments
155.59 164.43 Kuc Caracol Fm irregular 0.1 to 2.5 cm wide Silts beds 80%, wavy 0.1 to 2 cm wide scarce up to 10 cm wide FG to medium size grain S.S. beds 20%, irregular wavy bedding changing from 50º-60º of c.a. at top to 30º-50º of c.a. at bottom, few slump features, wk P-C to wk QSPC alteration, 8 to 10 per meter 0.1 to 0.3 cm wide few 1 cm wide calcite replaced to FG qtz-2% to 10% of FG anhedral and subhedral to cubic Py vnlts at 10º-20º, 50º-70º of c.a. and lenses, 1% of FG anhedral Py clouds and diss in 0.1 to 0.3 cm wide lenses with scarce calcite to qtz, Py 1% to 2% in the interval
164.43 164.48 3 cm wide calcite replaced to FG qtz some voids 10% to 20% of FG anhedral and Medium size subhedral to cubic also in small needles Py, 5% of black Sph- 1% of ss vnlt at 70º of c.a.
164.48
Dashed
175.45
Green
Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 80%, wavy 0.1 to 0.5 cm wide few 5 to 7 cm wide FG to medium size grain S.S. beds 20%, bedding at 50º-60º at top to 75º-90 of c.a. at bottom, P-C to wk QSPC alteration, wk to moderate sericite in some calcite to qtz vnlts walls and less micro-fractures, 6 to 10 per meter irregular hairline to 1 cm wide calcite totally replaced to FG qtz and partially altered to sericite in walls-FG to medium size grain subhedral to cubic Py, scarce with trz to 1% of black Sph vnlts at 20º-40º and 60º-80º of c.a. like lenses
175.45 215.97 Kuc Caracol Fm 0.2 to 3 cm wide Silts beds 80%, wavy 0.1 to 2 cm wide few 2 cm to 4 cm wide FG to medium size grain S.S. beds 20%, bedding at 70º-85º of c.a. except from 184.20 m to 186.10 m where bedding is at 50º-60º of c.a., P-C to wk QSPC alteration wk sericite, 8 to 15 per meter 0.2 to 0.5 cm wide few 0.8 to 2 cm wide calcite replaced to FG qtz-FG to medium size subhedral to cubic Py some with trz to 3% of black Sph vnlts at 40º-70º of c.a. few 10º-30º of c.a. also like lenses, FG anhedral Py diss and in hairline to 0.1 cm wide lenses, Sulfides 5% to 7% in the interval
215.97
Dashed
234.90
Green
Kuc Caracol Fm 0.5 to 2 cm wide Silts beds varying from 80% at top to 75% at bottom, wavy 0.1 to 0.5 cm wide few 1 cm to 2 cm wide at bottom-FG at top to FG-medium size grain at bottom S.S. beds 20% at top to 25% at bottom, lightly wavy bedding at 60º-75º of c.a., P-C to wk QSPC alteration, trz to wk sericite, 6 to 10 per meter 0.1 to 0.3 cm wide few 0.5 to 1.2 cm wide calcite few partially replaced to FG qtz-5% to 10% of FG to medium size grain subhedral Py few of them with trz to 3% of black Sph –trz to 1% of AsPy at bottom vnlts at 10º-25º and at 60º-85º of c.a. vnlts and lenses, trz to 1% of FG anhedral Py diss in some

4



    S.S. beds or in irregular clouds, total sulfides 2% to 3% in the interval
234.90 239.85 Kuc Caracol Fm 0.2 to 3 cm wide Silts beds 70%, lightly wavy 0.5 to 5 cm wide FG to medium size grain S.S. beds 30%, lightly wavy bedding at 50º-70º of c.a., P-C to wk QSPC alteration trz to wk sericite, 4 to 6 per meter 0.1 to 0.4 cm wide calcite replaced to FG qtz-trz to 5% of FG to medium size grain subhedral Py vnlts at 40º-60º of c.a. few at 10º-20º of c.a., 5% to 7% of irregular 0.1 to 0.3 cm wide subhedral Py lenses and less vnlts at 20º-40º of c.a., 2% of FG anhedral Py diss and in small clouds in some S.S. beds, total sulfides 4% to 5% in the interval
239.85 248.41 Kuc Caracol Fm 0.1 to 4 cm wide Silts beds 75%, wavy 0.1 to 0.5 cm wide few up to 30 cm wide FG to medium size grain S.S. beds 25%, wavy bedding at 60º- 70º of c.a., P-C to wk QSPC alteration, 2 to 4 per meter 0.1 to 0.3 cm wide few up to 1.2 cm wide calcite replaced to FG qtz -2% to 3% of FG to medium size grain anhedral Py lenses and less vnlts at 10º-40º of c.a., 7 in the interval 2 to 6 cm wide irregular banded calcite wkly replaced to FG qtz-thin layers of rock and of organic material, 1% to 5% of subhedral Py lenses in sedimentary Bx zones, Py 1% to 2% in the interval
248.41 274.40 Kuc Caracol Fm very irregular wavy 0.1 to 3 cm wide Silts beds 75%, 0.1 to 3 cm wide FG S.S. beds 25%, slump features wavy bedding changing from 0º-10º at top to 60º-90 of c.a. at bottom, 8 of the interval, P-C to wk QSPC alteration moderate sericite with trz to 2% of subhedral to cubic Py in 0.1 to 0.3 cm wide calcite to qtz vnlts at 10º to 30º of c.a. in 1 m to 3 m wide intervals 263.65 m -264.07 m 2 cm to 3 cm wide Fault gouge zones at 0º to 20º of c.a.
274.10 294.55 Kuc Caracol Fm 0.1 to 4 cm wide Silts beds 70%, wavy 0.2 to 5 cm wide FG some beds medium size grain S.S. beds 30%, irregular wavy bedding at 70º-85º of c.a., P-C alteration, 5 to 7 per meter hairline to 0.2 cm wide calcite vnlts few with trz of FG anhedral Py at 40º-60º of c.a. and like lenses, FG anhedral Py in scarce < 0.1 cm wide lenses, Py trz to 1% in the interval
294.55 312.10 Medium size grain S.S. in beds 20 m to 60 cm wide 80% and 20% of 5 cm to 80 cm wide intervals of 0.1 to 1 cm wide Silts 80% and FG S.S. 20% bedding at 75º-85º of c.a. QSPC alteration
298.22 m – 298.88 m 4 in the interval irregular 0.2 to 2 cm wide calcite replaced to FG qtz-2% to 4% of FG to medium size grain subhedral to cubic Py 1% of black Sph vnlts and lenses at 75º.85º of c.a., FG anhedral Py in clouds and in 0.1 to 0.2 cm wide calcite to qtz vnlts at 30º of c.a.
301 m _ 306.17 m 4 to 6 per meter 0.1 to 2 cm wide calcite replaced to FG qtz. blade textures 5% to 10% of subhedral to cubic Py-1% to 3% of brown and black Sph few with trz to 1% of ss vnlts at 30º-50º of c.a. and at 75º -85º like lenses
312.10 319.75 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 70%, 0.1 to 2 cm wide few 20 cm to 70 cm wide medium size grain S.S. beds 30%, bedding at 70º-85º of c.a., P-C to wk QSPC alteration, trz to 1% of FG anhedral Py clouds also FG to medium size grain subhedral Py in < 0.1 cm wide calcite replaced to FG qtz vnlts at 10º-20º and at 60º-85º of c.a. 317.50 m – 319.50 m wide apart 0.1 to 0.5 cm wide calcite-trz to 1% of FG subhedral Py vnlts in stockwork
319.75 336.30 Kuc Caracol Fm very irregular 0.1 to 4 cm wide Silts beds 50%, micro-folded 0.1 to 3 cm wide few 10 cm to 80 cm wide FG to medium size grain S.S. beds 50%, slump features wavy bedding at 60º -70º of c.a., P-C alteration 2 to 4 per meter 0.1 to 0.3 cm wide calcite vnlts at 30º-60º of c.a. few at 80º-90º of c.a. few with 1% to 2% of FG anhedral Py, FG anhedral Py diss in wide S.S. beds, Py 1% to 2% in the interval

5



336.30 366.30 Very irregular 0.1 to 2 cm wide Silts beds 75% to 80%, 0.2 to 3 cm wide few up to 2.5 cm wide FG to medium size grain S.S. beds 20% to 25%, bedding changing from 50º-70º at top to 20º-30º of c.a. at 341 m; 75º-85º of c.a. from 344 m to 348 m; 0º to 30º of c.a. from 348 m to 352 m; 20º-50º to 358 m; 10º to 30º to 361 m 20º-50º from 361 m to 365 m; 5º -20º of c.a. from 365 m to 366.30 m, 1 to 2 every 3 to 4 m apart 0.1 to 1 cm wide calcite few with 1% to 5% of FG anhedral Py vnlts at 10º-30º and at 60º-75º of c.a., trz to 1% of FG anhedral Py diss in S.S. beds, Py 1% in the interval
366.30 388.62 Kuc Caracol Fm 5 cm to 3 m wide intervals of FG to medium size grain S.S. beds 50% among 50% of intervals of 0.1 to 2 cm wide Silts 80%-FG S.S. beds 20%, bedding at 50º-70º of c.a. from top to 372 m; 5º-20º of c.a. from 372 m to the bottom of the interval, wk QSPC alteration wk sericite diss in S.S. beds and in some calcite vnlts walls, 4 to 6 per meter hairline to 0.5 cm wide calcite few with 1% to 3% of FG subhedral Py vnlts at 60º-85º of c.a. few at 10º-20º of c.a., FG anhedral Py diss in S.S. beds 1% to 2%
388.62   Actual depth of hole

6


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: March 17, 2006  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES    

Summary of DDH QTA-41-06; 698911 E; 2,652,199 N, 1934 m ASL, 340°/-55°, West Concordia area
From To Description
0.00 6.71 Drilled with tri-cone bit, no recovered core, casing
6.71 16.30 Kuc Caracol Fm, 0.2 to 3 cm wide Silts beds 95%, 1 to 3 cm wide FG S.S. beds 5%, bedding changing from 5º at top to 30º in the middle and at 60º at bottom of the interval, wk QSPC alteration wk bleached rock, moderately fractured zone from 8.8 m to 9.8 m, 1 per meter 0.3 to 1 cm wide scarce up to 2 cm wide calcite- moderate amount of Goethite in walls vnlts at 40º to 50º of c.a.
  16.30 Bottom of the oxidation zone
16.30 38.75 Kuc Caracol Fm 0.3 to 5 cm wide Silts beds 95%, 0.2 to 0.5 cm wide FG S.S. beds 5%, bedding changing from 60º of c.a. at top to 30º from 21 m to 23 m, 5º from 23 m to 24 m, changing from 40º to 70º of c.a. from 24 to 32 m; 20º to 0º from 32 to 35 m and 20º to 40º at bottom of the interval, wk QSPC alteration 1 to 2 per meter 0.3 cm few 1 to 2 cm wide calcite- trz to 3% OF Fg subhedral Py vnlts at 40º to 50º of c.a. few vnlts at 60º to 80º of c.a.
38.75 55.0 Kuc Caracol 0.2 to 3 cm wide Silts beds 90%, 0.3 to 1 cm wide FG S.S. beds 10%, bedding changing from 40º at top to 30º and again 40º at bottom, wk QSPC alteration moderately broken interval Fault zones 0.20 cm to 1.2 m wide, some with up to 3% Py diss, fault planes at 40º to 60º of c.a.; 2 per meter 0.5 to 2 cm wide calcite few with trz to 3% of Fg subhedral Py vnlts at 60º-70º of c.a. few at 30º-40º of c.a.
55.00 62.40 0.2 to 4 cm wide Silts beds 90%, 0.2 to 0.5 cm wide FG S.S. beds 10%, bedding at 70º of c.a., wk QSPC alteration
62.40 75.90 Kuc Caracol Fm 0.2 to 3 cm wide Silts beds 80%, 0.2 to 2 cm wide FG S.S. beds 20%, wavy irregular bedding changing from 5º of c.a. at top to 40º of c.a. at bottom, wk QSPC alteration, few 5 cm wide Fault intervals with light grey colour gouge and planes at 80º of c.a., 1 every 2 meters to 1 per meter 0.5 to 1 cm wide calcite-trz to 3% of FG subhedral to cubic Py vnlts at 40º to 70º of c.a.
75.90 106.20 Kuc Caracol Silts 80%/ S.S. 20% in 0.2 to 2 cm wide beds, bedding changing from 60º to 10º at top then 0º of c.a. at 96 m and changing from 0º to 20º at bottom of the interval, wk QSPC alteration, 2 per meter 0.3 to 1 cm wide few 3 cm to 6 cm wide calcite with trz to 3% of FG subhedral and cubic Py vnlts at 60º to 85º of c.a. few at 5º to 10º of c.a.

1



106.20 120.20 Kuc Caracol Fm 0.2 to 3 cm wide Silts 70% and FG S.S. 30% beds, very irregular wavy bedding changing from 40º of c.a. at top to 20º .50º in the middle and 10º at bottom of the interval, wk QSPC alteration, scarce 0.5 to 10 cm wide fault gouge intervals, 3 per meter 0.3 to 0.5 cm wide scarce 1 cm to 3 cm wide calcite trz to 5% of FG subhedral to cubic Py vnlts at 20º to 40º of c.a.
120.20 135.00 Kuc Caracol Fm Silts 80% FG S.S. 20% in beds 0.2 to 3 cm few S.S. up to 4 cm wide, bedding changing from 10º of c.a. at top to 40º-60º of c.a. at bottom, 1 to 2 per meter 0.3 to 0.5 cm scarce 1 cm to 3 cm wide calcite trz to 3% of Fg subhedral Py , vnlts at 50º to 70º of c.a. scarce 80º of c.a.
135.00 182.00 Kuc Caracol Fm 0.2 to 2 cm wide Silts beds 70% to 80%, 0.1 to 1 cm wide FG S.S. beds 20’% to 30%, bedding changing from 50º -60º at top to 30º-40º in the middle and again 50º to 60º of c.a. at bottom of the interval, P-C to wk QSPC alteration, 2 to 3 per meter 0.5 to 1 cm few 3 to 5 cm wide calcite scarce partially replaced to FG qtz trz to 5% of Fg to medium size grain subhedral to cubic Py very scarce with trz of red to brown Sph and ss vnlts at 60º to 80º and less at 20º to 30º of c.a.
182.00 198.70 Kuc Caracol Fm 0.2 to 2 cm wide Silts beds 80%, 0.2 to 1 cm wide FG S.S. beds 20%, bedding from 60º of c.a. at top to 40º of c.a. at bottom, wk sericite in micro fractures P-C to wk QSPC alteration, moderately broken interval , 4 per meter 0.5 to 1 cm few 2 cm to 4 cm wide calcite trz to 3% of Fg subhedral to cubic Py vnlts at 20º to 50º of c.a. few at 60º to 80º of c.a. and along bedding
198.70 202.65 Fault zone highly fractured interval 0.5 to 4 cm long scarce 10 cm to 40 cm long rock fragments with moderate sericite in 20% of light grey colour gouge like groundmass, scarce 0.3 and one 7 cm wide calcite -2% of FG subhedral Py trz of black Sph vnlts along bedding
202.65 209.90 Kuc Caracol Fm 0.2 to 2 cm wide Silts beds 90%, 0.2 to 0.5 cm wide FG S.S. beds 10%, bedding at 50º of c.a., P-C to wk QSPC alteration, 3 per meter 0.2 to 0.5 cm calcite wk sericite-trz to 2% of FG subhedral Py scarce with trz of Sph vnlts at 40º to 70º of c.a. 206.5 m to 207 .0 m wide apart stockwork of 0.2 to 0.5 cm wide calcite les sericite and trz of FG subhedral Py vnlts
207.80 m 1 cm wide calcite replaced to FG qtz -3% of FG Py 3% of Sph and ss vnlt at 70º of c.a. 207 .0 m- 209.0 m moderately broken interval 4 faults in the interval at 20º of c.a.
209.90 240.30 Kuc Caracol Fm 0.2 to 3 cm wide Silts beds 80%, 0.2 to 1 cm wide FG S.S. beds 20%, bedding at 50º of c.a., P-C to wk QSPC alteration, 2 fault intervals from 209.90 m to 215.30 m and from 221.75 m to 224.20 m, 2 to 3 per meter 0.5 to 2 cm wide calcite partially replaced to FG qtz- some with trz to 5% of subhedral Py few with trz to 1% of black Sph and less ss vnlts at 40º to 60º of c.a. few at 10º to 20º
240.30 261.80 Kuc Caracol Fm FG S.S. beds 100%, bedding at 60º of c.a. QSPC alteration 1 per meter 0.5 to 2 cm wide calcite replaced to FG qtz -2% of FG subhedral Py some with trz to 3% of Sph and less ss vnlts at 40º to 60º of c.a. 10 to 50 cm wide stockwork intervals of 0.1 to 0.3 cm wide calcite -2% of Fg subhedral Py and trz of Sph vnlts 244.90 m – 245.20 m Fault zone
261.80 280.00 Kuc Caracol Fm 0.2 to 3 cm wide Silts beds 70% to 80%, 0.2 to 1 cm few up to 5 cm wide FG S.S. beds 20% to 30%, bedding at 60º to 70º of c.a., P-C alteration, three 5 to 25 cm wide fault zones in bottom of the interval with planes at 60º to 70º

2



280.00 314.60 Kuc Caracol Fm 0.2 to 3 cm wide Silts beds 80%, 0.2 to 1 cm scarce up to 20 cm wide FG S.S. beds 20%, bedding at 60º of c.a., P-C alteration 1 to 2 per meter 0.2 to 0.5 cm, scarce 1 to 2 cm wide calcite few with trz to 1% of FG cubic Py and just one partially replaced to FG qtz vnlts at 40º to 60º few at 10º-30º of c.a. 283.20 m -290.30 m two 5 and 60 cm wide Fault gouge zones at 60º and 70º of c.a.
314.60 331.32 Kuc Caracol Fm 5 cm to 2 m wide S.S. intervals 80%, 0.2 to 2 cm wide Silts beds 20%, bedding at 70º-80ºof c.a. wk QSPC alteration, 2 per meter 0.2 to 0.5 cm few 1 to 2 cm wide calcite very scarce partially replaced to FG qtz scarce with trz of FG subhedral Py vnlts at 30º to 60º of c.a. few at 70º-80º of c.a. 315.00 m – 316.0 m wide apart stockwork of 0.1 to 0.3 cm wide calcite vnlts 329.0 m – 329.20 m Fault gouge zone 3 to 5 cm long rock fragments, fault planes at 60º of c.a.
331.32 342.20 Kuc Caracol Fm massive S.S. intervals 90% with 5 cm to 10 cm Silts intervals 10%, bedding changing from 80º at top to 40º at bottom of the interval, wk QSPC alteration, 4 per meter 0.2 to 1 cm scarce up to 3 cm wide calcite scarce with 1% to 2% of subhedral to cubic Py vnlts at 40º to 60º of c.a. few at 20º to 30º of c.a. 339.55 m – 341.70 moderately fractured interval at 20º of c.a.
342.20 350.00 Kuc Caracol Fm 5 to 20’ cm wide Silts intervals 70% to 95% FG S.S. beds 5% to 30%, bedding at 50º of c.a. wk QSPC alteration, 3 per meter 0.2 to 1 cm few up to 3 cm wide calcite vnlts at 40º to 60º few at 70º of c.a. 342.40 m -345.00 m wide apart stockwork of 0.2 2 cm wide calcite trz of Fg cubic Py vnlts
350.00 368.40 Kuc Caracol Fm, FG S.S. intervals 80%, 2 to 15 cm wide Silts intervals 20%, bedding at 60º-70º of c.a., wk QSPC alteration, 2 per meter 0.2 to 1 cm wide calcite some with trz to 2% of FG subhedral Py vnlts at 10 ºto 20º of c.a. scarce 60º to 70º of c.a., just one in the interval calcite partially replaced to FG qtz
360.50 m 0.5 cm wide calcite-2% of Fg cubic Py and trz of Sph vnlt at 20º of c.a.
368.40 397.00 Kuc Caracol Fm 0.2 to 2 cm wide Silts beds 90%, 0.2 to 5 cm wide FG S.S. beds 10%, wavy bedding changing from 60º of c.a. at top to 30º and fast changing to 5º of c.a. at bottom of the interval, P-C alteration 2 per meter 0.2 to 0.5 cm wide calcite vnlts 20º to 40º of c.a. few at 60º to 70º of c.a.
397.00 420.00 Kuc Caracol 0.2 to 2 cm wide Silts beds 95%, FG S.S. beds 5%, bedding changing from 10º at top to 30º of c.a. at bottom of the interval, P-C alteration, 1 to 2 per meter 0.1 to 0.3 cm few up to 5 cm wide calcite few with trz of Fg subhedral Py vnlts at 20º to 40º of c.a. few at 60º of c.a. 398.37 m – 398.67 m 20 cm wide Bx firmed by Silts fragment in a calcite groundmass at 50º of c.a.
420.00 490.00 Kuc Caracol Fm 0.2 to 5 cm wide Silts beds 95%, 0.1 to 1 cm FG S.S. beds 5%, wavy bedding at 20º to 30º of c.a., P-C alteration, 2 to 3 per meter 0.2 to 0.5 cm scarce 2 to 4 cm wide calcite scarce wkly replaced to FG qtz and with trz of FG Py vnlts at 20º to 40º of c.a. few 60º to 70º of c.a.
451.60 m 0.5 cm wide calcite-Fg subhedral Py 2% and trz to 1% of Sph vnlt at 40º of c.a. FG anhedral Py 1% to 2% diss
490.00 516.10 Kuc Caracol Fm 0.2 to 4 cm wide Silts beds 80%, 0.1 to 1 cm FG S.S. beds 20%, bedding changing from 50º of c.a. at top to 30º-40º of c.a. at bottom of the interval, P-C alteration, 1 per meter 0.3 to 1 cm wide calcite vnlts at 50º to 70º of

3



    c.a. few at 10º to 30º of c.a. FG anhedral Py diss 1%
516.10 534.60 Kuc Caracol Fm 0.5cm to 2 m wide FG S.S. beds80%, 2 to 4 cm Silts intervals 20%, bedding changing from 30º of c.a. at top to 60º of c.a. at bottom, wk QSPC alteration wk sericite in micro-vnlts, moderately fractured interval, 3 to 4 per meter 0.3 to 0.5 cm wide calcite few with trz of Fg subhedral Py vnlts at 40º to 60º of c.a. few at 20º to 30º of c.a. scarce 0.1 to 0.3 cm wide calcite lenses, FG anhedral Py diss 1%
518.50 m – 518.70 m Bxed zone with irregular 0.1 to 1 cm wide calcite vnlts one 1 cm wide calcite vnlt with 5% of ss.
534.60 540.25 Kuc Caracol Fm 0.2 to 3 cm wide Silts beds 80%, 0.5 to 1 cm wide FG S.S. beds 20%, bedding at 50º to 60º of c.a., P-C alteration, 1 per meter 0.1 to 0.3 cm wide calcite lenses few 0.1 to 0.3 cm wide calcite -trz to 1% of FG Py vnlts at 40º of c.a., Fg anhedral Py diss 1%
540.25 567.50 Kuc Caracol Fm 5 cm to 2 m wide FG to medium size grain S.S. beds 70%, with 1 cm to 5 cm intervals of 0.1 to 1 cm wide Silts beds 30%, bedding changing from 50°/ of c.a. from top to 550 m and 80°/ from 550 m to the bottom of the interval, P-C alteration, FG anhedral Py diss 1%, also 1 to 2 per meter 0.1 to 0.3 cm wide lenses, moderate to abundant 0.1 to 1 cm wide calcite few partially replaced to FG qtz with trz to 1% of cubic Py and few with trz to 1% of ss needles.
546.05 m – 556.00 m 5 per meter 0.1 to 1 cm wide calcite some partially replaced to FG qtz- 1% of cubic Py and trz to 1% of ss needles,, 2 to 3 per meter 0.1 to 0.3 cm wide calcite-FG anhedral Py lenses
567.50 599.00 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 80%, 0.1 to 1 cm wide FG S.S. beds 20%, bedding at 80°/ of c.a. P-C alteration, 1 per meter 0.1 to 1 cm wide calcite scarce locally replaced to FG qtz with trz to 1% of FG anhedral Py, also less than 1 per meter 0.1 to 0.2 cm wide FG anhedral Py lenses.
579.00 m 0.3 cm wide calcite partially replaced to FG qtz-2% to 3% of FG subhedral Py and trz to 0.5 % of ss needles.
599.00 630.00 Kuc Caracol Fm Silts beds 70%, S.S. 30%, P-c alteration mod fractures 1 to 2 per meter calcite wkly replaced to FG qtz vnlts
603.00 m -609.90 m 2 per meter 0.1 to 1 cm wide calcite wkly replaced to FG qtz- 1% to 2% of FG Py and trz of ss.
630.00 668.79 Kuc Caracol Fm Silts beds 80%, S.S. 20% wk amount of calcite wkly replaced to FG qtz vnlts 632.60 m – 650.25 m 1 every 2 meters 0.3 cm wide calcite wkly replaced to FG qtz – trz of Sph and ss vnlts.
668.79 681.40 Caracol Fm Silts 80%, S.S.,20% P-C alteration, wk 0.1 to 0.5 cm wide calcite wkly replaced to FG qtz vnlts, 1% of FG anhedral Py diss scarce cubic Py
681.40 690.10 Caracol Fm coarse grain size at top grading to medium size grain at bottom S.S. beds 95%, Silts 5%, P-C alteration, fractured interval with abundant 3 cm wide fault gouge zones at 20°/ to 40°/ of c.a. moderate amount of 0.2 to 0.5 cm wide calcite wkly replaced to FG qtz, FG anhedral Py 1% diss trz of cubic Py.
690.10 709.00 Kuc Caracol Fm Silts beds 70%, S.S. 30%, P-C alteration, fractured interval moderate amount of 0.1 to 0.3 cm wide calcite wkly replaced to FG qtz vnlts, FG anhedral Py diss < 1% trz of cubic Py
709.00 715.80 Caracol Fm Silts beds 70%, S.S. 30%, P-C alteration highly fractured interval, scarce calcite wkly replaced to FG qtz vnlts
715.80 738.80 Silts 80%, S.S. 20% P-C alteration moderate to highly fractured interval scarce calcite wkly replaced to FG qtz vnlts, trz of FG Py diss.
738.80 745.10 Upper and lower Influence interval of a Bxed veinlet zone formed by medium

4

































size grain S.S. and calcite partially to totally replaced to FG qtz fragments and less Sph-Gn-ss vnlts forming thin stockwork zones. 738.30 m – 738.80 m Silts beds with stockwork of calcite partially replaced to FG qtz-FG subhedral Py diss 1%
      738.80 m – 740.75 m Bxed veinlet interval at 70° to 75° of c.a. 
      738.80 m 1 cm wide massive Sph-8% of Py 2% of Gn-ss trz of AsPy vnlt at 70°/ of c.a. 
      738.31 m – 739.03 m Bxed vnlt scarce S.S. fragments in abundant calcite almost totally replaced to FG qtz 2% of FG to medium size grain subhedral to cubic Py and 1% of Sph-ss 
      739.03 m – 739.06 m Gouge interval at 60° of c.a. 15% of medium size grain Py and trz of Sph 
      739.06 m – 740.05 m Bx interval scarce S.S. fragments in abundant calcite almost totally replaced to FG qtz groundmass trz of Sph-ss Gn AsPy includes a 1 cm wide massive Sph < FG Py and 1% to 2% of Gn-ss vnlt at 740.00 m at 60°/ of c.a. 
      740.25 m 2 cm wide calcite partially to totally replaced to FG qtz with trz of Sph and ss vnlt at 40° of c.a. 
      740.45 m 10 cm wide massive qtz trz of Sph and possible trz of Gn vnlt at 30°/ of c.a. 
      740.60 m 1 cm wide calcite totally replaced to FG qtz 8% to 10% of Py and trz of Sph and ss vnlt at 30° of c.a. 
      740.60 m – 740.75 m massive calcite totally replaced to FG qtz with 3% to 5% of FG Py and VFG diss of possible ss-Sph-Gn? 
      740.75 m – 743.60 m Stockwork of calcite almost totally replaced to FG qtz 2% of Py and trz of Sph-ss vnlts 
     743.60 m -745.10 m Caracol Fm S.S. beds 60%, Silts 40% with some massive sulfides and less calcite replaced to FG qtz vnlts and lenses 
      743.65 m 1 cm wide massive Py with 15% to 20% of Sph and 1% to 2% of Gn-ss vnlt at 30°/ of c.a. 
      743.80 m – 744.15 m irregular calcite totally replaced to FG qtz-1% of Sph- ss vnlts 
      744.20 m Two 5 mm wide massive Py 35% of calcite totally replaced to FG qtz and 5% of Sph < Gn-ss vnlts at 30°/ of c.a. 
      744.65 m 2 cm wide massive Sph 15% of Py 5% of Gn- ss lens at 50° of c.a.
745.10 752.60 Kuc Caracol Fm S.S. beds 95% Silts 95%, P-C alteration Moderate fractures, moderate 2 per meter 0.1 to 0.3 cm wide calcite almost totally replaced to FG qtz 2% of Fine to medium size grain Py- 1% to 2% of Sph-Gn and 1% of ss vnlts
752.60 765.10 Kuc Caracol Fm Silts beds 90% S.S. 10% wk fractures
752.60 m – 753.80 m Stockwork and Bx interval formed by irregular calcite partially replaced to FG qtz, 5% of FG to medium size grain Py, 5% to 7% of Sph with less Gn and 2% of ss vnlts and fragments among Silts fragments 758.00 m – 765.00 m irregular 1 cm to 2 cm wide fragments of 85% FG qtz and 15% of FG to medium size grain Py , wk < 0.1 cm wide Py micro vnlts
765.10 801.00 Kuc Caracol Fm, 2 to 10 cm wide intervals of silts beds 60%, 0.5 to 2 cm wide few up to 10 cm wide S.S. beds 40%, P-C alteration, highly fractured interval, moderate to abundant amount of 0.1 to 1 cm wide calcite almost totally replaced to FG qtz with 1% to 2% of FG to medium size grain Py diss, few with trz of Sph ss vnlts, few 10 cm to 15 cm wide calcite almost totally replaced to FG qtz trz of FG Py vnlts.

5



















765.10 m – 776.50 m 10% of FG Py diss and less cubic Py in vnlts includes FG Py in 0.1 cm wide lenses
776.50 m – 794.00 m 5% of medium size grain cubic Py in vnlts and in 0.1 cm wide lenses
769.50 m 1 cm wide calcite almost totally replaced to FG qtz trz of Sph-ss vnlt at 30° of c.a.
794.00 m – 801.00 m !% to 2% of FG Py diss
773.00 m – 773.30 m Bxed veinlet 50% of rock fragments in 25% of calcite totally replaced to FG qtz-20% of medium size grain cubic Py 4% to 5% of ss 1% to 2% of Sph
781.60 m – 781.90 m Fault gouge interval along bedding with 5% of calcite totally replaced to FG qtz fragments
785.75 m 786.70 m Bxed veinlet interval formed by 50% of Silts-S.S. fragments 40% of calcite almost totally replaced to FG qtz 5% of medium size grain Py 3% to 5% of ss 1% to 2% of Sph.
790.05 m – 790.80 m 80% of calcite totally replaced to FG qtz -15% of medium size grain Py- 3% of Sph -2% of ss veinlet with a 15 cm wide Silts fragment
796.40 m 797.15 m three 15 cm wide Bx intervals formed by < 1 cm long silts fragments in 80% of calcite totally replaced to FG qtz 20% of medium size grain Py groundmass.
801.00
803.25
Kuc Caracol Fm 0.2 to 4 cm wide Silts beds 60%, 0.5 to 1 cm wide S.S. beds 40%, P-C alteration , highly fractured interval, scarce 0.1 to 0.5 cm wide calcite wkly replaced to FG qtz vnlts, FG anhedral Py diss 1%
802.30 m – 2 cm wide calcite partially replaced to FG qtz -10% of Py, 15% Sph - 5% of ss lens
803.25
827.30
Kuc Caracol Fm 2 cm to 4 cm wide Silts beds 70%, 0.1 to 0.5 cm wide FG S.S. beds 30%. Wk fractured interval, scarce 0.1 to 0.5 cm wide calcite wkly replaced to FG qtz vnlts
816.30 m – 818.90 m two 5 cm wide calcite wkly to moderately replaced to FG qtz-5% of medium size grain Py, 5% of Sph and ss lens
827.30 861.67 Kuc Caracol Fm 2 cm to 4 cm wide Silts beds 80%, 0.5 to 1 cm wide FG S.S. beds 20%, P-C alteration , very scarce 0.1 to 0.3 cm wide calcite vnlts, FG anhedral Py diss in some S.S. beds < 1%
861.67   End of hole

6


MINERA AGUA TIERRA S.A. DE C.V.
DARIO AVALOS 38
NIEVES, ZAC.
MEXICO
TEL Y FAX: (498)-935-56-86

DATE: March 21, / 20065  
TO: Tom Patton ccp. Tom Turner
FROM: Héctor Fernández  
SUBJECT: Drilling at Nieves  
PAGES    

Summary of DDH QTA-42-06; 700,246 E; 2,654,060 N, 1960 ASL 20°/-50°, East California area
From To                                                                                                      Description
 0.00 35.36 Drilled with Tricone bit -No core- Casing
35.36 45.20 Kuc Caracol Fm 2 cm to 4 cm wide Silts intervals 70% among 0.3 to 0.5 cm wide S.S. beds 30%, bedding at 60º of c.a., grey to light grey color rock wk bleaching P-C alteration, wk 0.2 to 1 cm few up to 3 cm wide calcite vnlts, few with trz to 1% of Goethite and trz of hematite , few 0.1 to 0.2 cm wide hematite lenses
  45.20 Bottom of the oxidation zone
45.20 114.00 Kuc Caracol Fm 1 cm to 4 cm wide Silts intervals 70%, 0.3 to 1 cm wide FG S.S. beds 30% bedding at 50º to 70º of c.a., P-C alteration, wkly to moderately fractured interval, most fractures along bedding or at 20º to 30º of c.a. wk to moderate amount of 0.2 to 1 cm wide calcite scarce with wk replacement to FG qtz vnlts, trz of FG Py diss, few vnlts with trz to 1% of FG anhedral Py
114.00 140.00 Kuc Caracol Fm 0.5 to 2 cm wide Silts beds 70%, 0.2 to 1 cm wide FG S.S. beds 30%, bedding at 70º -80º of c.a., P-C alteration, wk clays in fractures, moderately to highly fractured interval fault planes at 20º to 40º of c.a. less along bedding, moderate amount of 0.3 to 1 cm wide few 1 cm to 4 cm wide calcite few wkly replaced to FG qtz and scarce with trz to 1% of FG anhedral Py vnlts along bedding and at 30º of c.a.
140.00 210.00 Kuc Caracol Fm 1 to 4 cm wide Silts intervals 80%, 0.3 to 1 cm wide FG S.S. beds 20%, bedding changing from 60º-80º of c.a. from top to 190 m to 30º -40º of c.a. at bottom of the interval, P-C alteration, wkly to moderately fractured interval, moderate amount of 0.3 to 1 cm wide calcite scarce wkly replaced to FG qtz some with trz to 1% of FG anhedral Py vnlts at 10º to 30º of c.a. few at 40º to 60º of c.a. 1 to 2 per meter 0.1 to 0.3 cm wide calcite lenses
184.40 m – 185.30 m Fault gouge at 30º of c.a. with calcite fragments and 1% to 2% of FG Py.
201.40 m – 202.80 m Fault gouge zone milled rock and less calcite fault planes along bedding
210.00 230.30 Kuc Caracol Fm 0.2 to 3 cm wide Silts beds 70%, 0.2 to 2 cm wide FG S.S. beds 30%, bedding at 30º to 40º of c.a., wk to moderate bleaching mainly on S.S. beds to a light grey color rock, wk QSPC alteration, 2 to 3 per meter 0.2 to 1 cm few up to 2 cm wide calcite few with trz to 5% of medium size grain subhedral Py vnlts, 20% of 0.1 to 0.3 cm wide calcite lenses.
230.30 237.90 Moderately fractured interval 5 cm to 10 cm fault gouge intervals formed by 20%

1



of milled material and 80% of 0.5 to 2 cm long rock fragments, 1 to 2 per meter 0.2 to 0.5 cm wide calcite few with trz to 3% of subhedral Py vnlts at 40º to 50º of c.a.
237.90 267.70 Kuc Caracol Fm 0.2 to 2 cm wide Silts beds 70%, 0.2 to 1 cm wide FG S.S. beds 30%, bedding changing from 50º at top to 80º at bottom of the interval, wk bleached interval P-C to wk QSPC alteration, Fault from 248.35 m to 248.70 m, 2 to 3 per meter 0.2 to 0.5 cm wide few 2 to 3 cm wide calcite scarce with trz to 5% of FG to medium size grain subhedral Py vnlts at 30º to 50º of c.a.
267.70 274.65 Highly fractured interval 2 per meter 10 cm to 20 cm wide fault zones, and three 30 cm, 1.25 m and 1.45 m wide Fault zones in the interval, bedding changing from 80º at top to 60º of c.a. at bottom, 1 to 2 per meter 0.2 to 2 cm wide calcite scarce wkly replaced to FG qtz vnlts at5º to 20º of c.a., few at 50º to 60º of c.a.
274.65 280.00 Kuc Caracol Fm 0.2 to 2 cm wide Silts beds 60%, FG S.S. beds 40%, bedding at 60º of c.a. wk to moderately bleached rock, wk QSPC alteration, 3 per meter 0.2 to 2 cm wide calcite vnlts at 40º to 60º of c.a.
280.00
301.30
Kuc Caracol Fm 0.2 to 2 cm wide Silts 60% and FG S.S. beds 40%, bedding changing from 60º of c.a. at top to 40º of c.a. in the middle and 10º to 20º of c.a. at bottom of the interval, wk bleached rock P-C to wk QSPC alteration, 3 per meter 0.2 to 1 cm wide few 3 cm and 7 cm wide calcite vnlts at 20º to 40º of c.a., 10% of 0.1 to 0.3 cm wide calcite lenses,
286.20 m -287.00 m wide apart stockwork zone formed by irregular 0.1 to 3 cm wide calcite vnlts
301.30 303.60 Moderately fractured interval wk QSPC alteration three 20 cm, 40 cm and 50 cm wide fault zones with apparent planes at 30º of c.a.
303.60 310.40 Kuc Caracol Fm 0.2 to 2 cm wide Silts 60% and FG S.S. 40% beds, bedding at 10º of c.a., wk bleached interval wk QSPC alteration, 2 per meter 0.2 to 0.5 cm wide calcite vnlts at 30º to 50º of c.a.
310.40 314.20 Moderately to highly fractured interval, 20 cm to 30 cm wide Fault zones with 50% of gouge and 50% of 0.3 to 1 cm long rock fragments among moderately fractured rock intervals wk calcite vnlts fragments.
314.20 323.15 Moderately bleached rock interval, bedding at 70º of c.a. with sudden changes to 5º to 10º of c.a. from 320.20 m to 321.40 m forming thin sedimentary Bx along bedding zones formed by 0.3 to 1 cm long S.S fragments , wk QSPC alteration, moderate sericite in micro-fractures, 1 to 2 per meter 5 cm to 10 cm wide broken intervals, 1 per meter 0.2 to 0.5 cm wide few 1 to 3 cm wide calcite vnlts at 30º of c.a. and just one at 80º of c.a. scarce calcite vnlts with rock fragments like pebble dike.
323.15

329.00

Kuc Caracol Fm 0.2 to 2 cm wide Silts 70% and FG S.S. beds 30%, bedding at 70º of c.a., moderate bleached rock wk QSPC alteration, 4 in the interval 0.5 to 2 cm wide calcite vnlts at 20º to 40º of c.a.
325.30 m 325.50 m stockwork of 0.1 to 0.5 cm wide calcite vnlts
326.0 m to 326.20 m stockwork of 0.1 to 0.5 cm wide calcite vnlts
329.00 341.30 Kuc Caracol Fm 0.2 to 3 cm wide Silts beds 80%, 0.2 to 1 cm few up to 10 cm wide FG S.S. beds 20%, bedding at 70º of c.a. P-C to wk QSPC alteration, 2 per meter 0.2 to 0.5 cm wide calcite vnlts at 50º to 70º of c.a. few at 20º to 30º of c.a.
341.30

350.00

Kuc Caracol Fm 0.2 to 4 cm wide Silts beds 80%, 0.2 to 1 cm few up to 10 cm wide FG S.S. beds 20%, bedding at 60º of c.a. P-C to wk QSPC alteration, 1 to 2 per meter 0.2 to 0.5 cm wide calcite vnlts at 50º to 70º of c.a.
342.60 m to 344.60 m moderately broken interval
342.80 m – 343.50 m stock work of 0.1 to 1 cm wide calcite and 2% of FG Py

2



    vnlts.
350.00
403.40
Kuc Caracol Fm 0.2 to 2 cm wide Silts beds 80%, 0.2 to 1 cm wide FG S.S. beds 20%, bedding changing from 60º of c.a. at top to 30º of c.a. at bottom, wk bleaching P-C to wk QSPC alteration 1 to 2 per meter 0.2 to 0.5 cm wide calcite scarce with 1% to 2% of medium size grain subhedral Py vnlts at 30º to 60º of c.a.
352.60 m – 353.45 m wide apart stockwork of 0.1 to 0.5 cm wide calcite vnlts, 5 slickensides at 60º -70º of c.a. along bedding in the interval
403.40 406.70 Fault zone at 20º to 30º of c.a. with intervals 10 cm to 30 cm long of no broken rock wk QSPC alteration wk sericite
406.70 419.60 Kuc Caracol Fm 0.2 to 3 cm wide Silts beds 80%, 0.2 to 1 cm few up to 3 cm wide FG S.S. beds 20%, bedding changing from 50º of c.a. at top to 20º of c.a. at bottom, 2 per meter 0.2 to 0.5 cm calcite vnlts at 40º to 60º of c.a. few at 20º to 30º of c.a., scarce slickensides with red to tan oxides.
419.60 425.25 Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 70%, 0.1 to 1 cm wide FG S.S. beds 30%, wavy bedding chang9ing from 30º to 40º of c.a. at top to 10º-20º of c.a. at bottom of the interval, wk bleaching on S.S. beds P-C to wk QSPC alteration, 2 to 3 per meter irregular 0.1 to 1 cm wide calcite-2% to 3% of tan- red-brown color Goethite-Hematite lenses and scarce vnlts at 10º to 20º of c.a. and at 70º to 85ºof c.a.
425.25 434.00 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 50%, wavy 0.1 to 3 cm wide FG to medium size grain S.S. beds 50%, wavy irregular bedding at 0º to 10º of c.a., P- C to wk QSPC alteration, wk sericite in some calcite vnlts walls and in micro- fracture, 2 to 3 per meter 0.1 to 1 cm wide calcite < sericite scarce with up to 5% of FG anhedral Py vnlts at 5º to 30º of c.a. trz of brown Goethite from Py
434.00 447.50 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 80%, wavy 0.1 to 2 cm wide FG to medium size grain S.S. beds 20%, wavy and irregular bedding changing from 10º to 15º of c.a. at top to 30º-40º of c.a. at bottom, P-C alteration, wk sericite, less than 1 per meter irregular hairline to 0.2 cm wide calcite vnlts at 20º-30º of c.a. few at 70º-85º of c.a.
447.50
449.37
Kuc Caracol Fm Silts 80% to 90%, wavy 0.1 to 0.8 cm wide FG S.S. beds 10% to 20%, bedding at 30º-50º of c.a., P-C to wk QSPC alteration, 3% to 5% of irregular 0.1 to 2 cm wide calcite-brown Goethite vnlts at 20º -40º of c.a., 4 to 6 per meter 0.1 to 0.3 cm wide lenses with Goethite diss, Goethite 1% to 3% in the interval
448.80 m 2 cm wide calcite-5% of botroiydal Goethite vnlt at 20º of c.a.
449.37 451.76 Kuc Caracol Fm 0.1 to 4 cm wide Silts beds 80% to 85%, 0.1 to 1 cm wide FG S.S. wavy beds 15% to 20%, irregular bedding with turbiditic and slump features at 40º of c.a., 1 to 2 per meter hairline to 0.2 cm wide calcite lenses some with trz of Goethite, less than 1 per meter 0.1 to 0.2 cm wide calcite vnlts at 35º to 40º of c.a.
451.76 453.91 Thin bedded 0.1 to 1 cm wide Silts 60% to 70% and FG to medium size grain S.S. 30% to 40% beds, lightly wavy bedding at 40º to 50º of c.a., P-C to wk QSPC alteration 3% to 5% of 0.1 to 0.2 cm wide lenses with Goethite diss, less 0.1 to 0.2 cm wide Goethite vnlts at 0º to 20º of c.a. 452.20 m Irregular 0.1 to 1.5 cm wide calcite-brown yellowish goethite vnlt at 40º of c.a.
453.91 458.40 Thin Bedded Caracol Fm 0.1 to 1 cm wide beds Silts 70%-80%, S.S. 20%-30%, lightly wavy bedding at 50º of c.a., P-C alteration, 2 to 3 per meter irregular 0.1 to 1 cm wide calcite lenses and less vnlts at 70º -85º of c.a. 457.90 m -458.40 m 10% of irregular and broken 0.1 to 0.3 cm wide calcite

3



    lenses and vnlts
458,40
476.60
Kuc Caracol Fm 0.2 to 15 cm wide Silts beds 70%-80%, wavy irregular 0.5 to 10 cm wide FG to medium size grain S.S. beds 20% to 30%, slump and turbiditic wavy bedding at 30º to 55º of c.a., P-C to wk QSPC alteration, wk bleaching in S.S. beds, 3 to 5 irregular hairline to 2 cm wide calcite lenses and less vnlts at 10º to 30º of c.a. few at 70’º to 85º of c.a., irregular 0.5 to 3 cm wide pebble dikes at 60º to 80º of c.a.
466.00 m -469.50 m 6 to 8 per meter 0.1 to 2 cm wide calcite lenses and less vnlts at 30º-50º and at 70º-85º of c.a.
477.32 490.00 Kuc Caracol Fm 0.2 to 3 cm wide Silts beds 70%, 0.1 to 1 cm few up to 3 cm wide FG S.S. beds 30%, bedding at 40º of c.a., P-C to wk QSPC alteration, wk bleached rock, 3 per meter0.2 to 1 cm few up to 2 cm wide calcite few with trz to 3% of FG subhedral Py vnlts at 40º-60º of c.a. less vnlts at 20º -30º of c.a.
490.00


510.00


Kuc Caracol Fm, 0.2 to 2 cm wide Silts beds 70’%, 0.2 to 1 cm wide FG S.S. beds 30%, bedding changing from 70º of c.a. at top to 30º of c.a. at bottom, less than 1 per meter 0.1 to 0.3 cm wide few up to 1 cm wide calcite vnlts at 20-30º of c.a. some along bedding.
506.00 m – 509.0 m 0.2 to 2 cm wide irregular calcite vnlts in stockwork
498.55 m – 499.75 m moderately broken interval
506.40 m – 506.45 m Fault gouge zone 1 cm long rock fragments in 30% of gouge
510.00 518.00 Kuc Caracol Fm 0.5 to 3 cm wide FG to medium size grain S.S. beds 80%, 0.2 to 1 cm wide Silts beds 20%, bedding changing f5rom 30º of c.a. at top to 90º of c.a. in the middle and 70º of c.a. at bottom of the interval, moderately to highly fractured interval with 2 per meter 5 cm to 10’ cm wide fault zones at 40º to 60º of c.a., and few at 5º of c.a., 1 per meter 0.1 to 1 cm few up to 2 cm wide calcite vnlts at 20º -30º of c.a.
518.00
541.00
Kuc Caracol Fm, 0.2 to 3 cm wide Silts beds 70%, 0.2 to 0.5 cm wide FG S.S. beds 30%, bedding changing from 70º of c.a. at top to 70º-90 down to 528.0 m, bedding at 30º at 530 m and at 20º of c.a. at bottom of the interval, 1 to 2 per meter 0.2 to 1 cm wide calcite vnlts at 5º to 30º of c.a. few at 60º-70º of c.a. 533.0 m – 535.10 m Moderately fractured interval 2 per meter 3 cm to 30 cm wide broken intervals.
533.20 m – 533.40 m Fault gouge zone formed by 2 cm to 3 cm long rock fragments in a light grey color gouge like groundmass.
541.00   Reduction to NQ core diameter
541.00 557.00 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 70%, 0.1 to 0.5 cm wide FG to medium size grain S.S. beds 30%, wavy bedding at 30º-40º of c.a. P-C to wk QSPC alteration wk sericite in some calcite vnlts walls, 1 to 2 per meter irregular 0.1 to 0.8 cm wide calcite lenses, 1 per meter irregular hairline to 0.5 cm wide calcite vnlts at 10º-30º of c.a. less at 40º-50º of c.a.
557.00 572.00 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 60%, 0.2 to 6 cm wide medium size grain S.S. beds 40%, lightly wavy bedding changing from 30º of c.a. at top to 50º of c.a. at bottom of the interval, P-C alteration, 2 to 3 per meter 0.1 to 0.5 cm wide calcite lenses, less than 1 per meter hairline to 1 cm wide calcite scarce with trz to 2% of FG subhedral Py vnlts at 70º-80º of c.a. and less at 10º-30º of c.a.
572.00 602.00 Kuc Caracol Fm, 0.1 to 1.5 cm wide Silts beds 80%, 0.1 to 0.5 cm wide FG S.S. beds 20%, lightly wavy bedding at 40º of c.a., wk P-C alteration, 1 to 2 per meter 0.2 to 1 cm wide banded calcite lenses, less than 1 per meter hairline to 0.3 cm wide calcite very scarce with trz of FG subhedral Py vnlts at 20º-40º of c.a. less

4





at 70º-80º of c.a.
600.00 m- 600.50 m 0.3 to 1 cm wide calcite vnlts in wide apart stockwork
602.00 622.53 Kuc Caracol Fm 0.1 to 4 cm wide Silts beds 70% to 80%, 0.2 to 1 cm wide scarce 5 to 20 cm wide FG to medium size grain S.S. beds 20% to 30%, wavy bedding at 40º-50º of c.a. except from 611 to 611.50 where bedding is at 15º 25º of c.a., wk P-C alteration, 2 to 3 per meter 0.2 to 1 cm wide calcite lenses, less than 1 per meter hairline to 0.5 cm wide calcite very scarce with trz to 2% of FG anhedral Py vnlts at 10º-30º of c.a. and at 70º-85º of c.a.
622.53

633.40

0.1 to 3 cm wide Silts beds 80%, 0.1 to 1 cm wide scarce 2 cm wide FG S.S. beds 20%, bedding changing 40º-50º from top down to 631.60 m to 0º-20º at bottom of the interval, P-C alteration, 4 to 6 per meter 0.2 to 3 cm wide calcite vnlts at 30º-50º of c.a.
626.70 m – 626.85 m irregular 0.1 to 2 cm wide calcite vnlts in stockwork
631.55 m – 633.40 m Irregular hairline to 1 cm scarce up to 3 cm wide calcite vnlts in wide apart stockwork
633.40
642.35
Kuc Caracol Fm 0.1 to 3 cm wide Silts beds 80%, 0.1 to 1 cm wide FG S.S. beds 20%, wavy and micro-folded bedding changing 10º-30º from top down to 641.20 m depth, then 30º-50º of c.a. to the bottom of the interval, P-C alteration, 4 to 6 per meter 0.1 to 1 cm wide banded calcite lenses, 2 to 3 per meter hairline to 1 cm wide calcite few at the bottom of the interval with FG anhedral Py vnlts at 0º -20º of c.a. and at 70º-85º of c.a.
641.20 m – 642.35 m 4 in the interval 0.5 to 1 cm wide 40% of FG anhedral Py- calcite vnlts at 0º-10º of c.a. and at 55º of c.a., Py 5% in the interval
642.35 651.05 Kuc Caracol Fm 0.1 to 2 cm wide Silts beds 80% to 85%, 0.1 to 0.5 cm wide FG S.S. beds 15% to 20%, wavy bedding at 30º-50º of c.a., wk P-C alteration, less than 1 per meter 0.1 to 1.2 cm wide calcite lenses, less than 1 per meter hairline to 0.5 cm wide calcite-scarce with 2% to 5% of FG anhedral Py vnlts at 0º-30º of c.a. less at 70º-80º of c.a.
651.05   End of hole

5


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-11 236001 60.25 61.25 1.00 <0.05  <5  0.4    18 114    15      3  310
QTA-11 236002 61.25 62.34 1.09 <0.05  <5  0.2    23 130      3      3  321
QTA-11 236003 62.34 63.29 0.95 <0.05  <5 <0.2    13 102      5    <2  269
QTA-11 236004 63.29 64.82 1.53 <0.05  <5 <0.2    16 170    22      3  248
QTA-11 236005 64.82 65.82 1.00 <0.05  <5  0.3    21    92    21      7  227
QTA-11 236006 81.90 82.00 0.20 <0.05  <5  0.2    15 149      7    <2  384
QTA-11 236007 112.36 112.56 0.31 <0.05  <5  0.2    15 125    11      2  231
QTA-11 236008 114.00 114.31 0.20 <0.05  <5  0.2    10    72    15      3  456
QTA-11 236009 116.70 116.90 0.80 <0.05  <5  0.3    26 136    19      4  353
QTA-11 236010 130.30 131.10 0.80 <0.05  <5  0.5    11    78      9      2  487
QTA-11 236011 142.29 143.74 1.45 <0.05  <5  0.2    15    99    15      5  318
QTA-11 236012 147.65 147.75 0.10 <0.05  <5  0.3    23 152    32      6  337
QTA-11 236013 152.65 154.00 1.35 <0.05  <5 <0.2    19    96    12      4  370
QTA-11 236014 154.00 156.07 2.07 <0.05  <5 <0.2    14    98    14      3  394
QTA-11 236015 156.07 156.87 0.80 <0.05  <5  0.2    13 134      9      8  416
QTA-11 236016 165.53 166.13 0.60 <0.05  <5  0.3    13    98    56      6  385
QTA-11 236017 166.73 167.53 0.80 <0.05  <5  0.3    14    99    22      2  343
QTA-11 236018 189.86 190.01 0.15 <0.05  <5  0.2    15 114    26      8  394
QTA-11 236019 190.01 192.38 2.37 <0.05  <5  0.2    16 112    29      6  306
QTA-11 236020 192.38 194.86 2.48 <0.05  <5  0.3    17    98    50    11  544
QTA-11 236021 194.86 196.06 1.20 <0.05  <5  0.2    14 106    27      9  411
QTA-11 236022 196.06 198.00 1.94 <0.05  <5  0.2    16 108    41    11  487
QTA-11 236023 209.40 210.00 0.60 <0.05  <5  0.4    14    76  163    17 1320
QTA-11 236024 210.00 210.30 0.30 <0.05  <5  0.4    28    79  474    25 2210
QTA-11 236025 210.30 211.60 1.30 <0.05  <5  0.4    16 122  136    21  928
QTA-11 236026 211.60 211.80 0.20 <0.05  <5  0.3      9    66  192      8 1590
QTA-11 236027 211.80 212.00 0.20 <0.05  <5  0.4    15 108    63    18  612
QTA-11 236028 212.00 213.00 1.00 <0.05  <5  0.3    18 104    94    18  689
QTA-11 236029 213.00 214.00 1.00 <0.05  <5  0.4    16 106    22      9  392
QTA-11 236030 214.00 214.20 0.20 <0.05  <5 <0.2    15    79    36      8  518
QTA-11 236031 214.20 214.90 0.70 <0.05  <5  0.3    17 120    22      7  256
QTA-11 236032 214.90 215.30 0.40 <0.05  <5  0.3    17    69    38    17  497
QTA-11 236033 217.89 219.04 1.15 <0.05  <5  0.2    12    98    21      4  447
QTA-11 236034 234.48 234.68 0.20 <0.05  <5  0.2    13    76    21      5  500
QTA-11 236035 234.68 235.58 0.90 <0.05  <5  0.4    16 104    25      4  404
QTA-11 236036 256.12 256.82 0.70 <0.05  <5  0.3    17    86  114    24  671
QTA-11 236037 267.50 267.80 0.30 <0.05  <5  0.3    19 102    18    13  393
QTA-11 236038 268.36 269.05 0.69 <0.05  <5  0.4    15 108    24      5  398
QTA-11 236039 269.05 269.65 0.60 <0.05  <5  0.3    12 110    19      4  380
QTA-11 236040 269.65 271.40 1.75 <0.05  <5  0.3    15    91    25      8  519
QTA-11 236041 271.40 272.00 0.60 <0.05  <5  0.3    12 107    23    26  421
QTA-11 236042 272.00 272.60 0.60 <0.05  <5  0.3    14 101    58    22  804
QTA-11 236043 272.60 273.20 0.60 <0.05  <5  0.4    14    89    96    31 1305
QTA-11 236044 273.20 274.31 1.11 <0.05  <5  1.8    14    83  160    31 1240
QTA-11 236045 274.31 275.30 0.99 <0.05  <5  0.3    13 101    74    20  588
QTA-11 236046 275.30 276.45 1.15 <0.05  <5  0.3    22 100    55    16  388
QTA-11 236047 276.45 276.95 0.50 <0.05  <5  0.3    15    96    30      8  435
QTA-11 236048 276.95 277.35 0.40 <0.05  <5  0.3    11    73    18      8  622
QTA-11 236049 277.35 277.46 0.11 <0.05  <5  0.3    11    95    21      5  428
QTA-11 236050 277.46 278.68 1.22 <0.05  <5  0.3    13 100    30      8  353
QTA-11 236051 278.68 278.78 0.10 <0.05  <5  0.2    13    90    35    10  412
QTA-11 236052 278.78 280.60 1.82 <0.05  <5  0.4    10    81    29      8  364
QTA-11 236053 280.80 281.90 1.10 <0.05  <5  0.3    15    92    23    10  415
QTA-11 236054 295.00 296.00 1.00 <0.05  <5  0.3    13 108    12      5  322
QTA-11 236055 296.00 297.79 1.79 <0.05  <5  0.4    14 102    19      4  355
QTA-11 236056 311.45 311.71 0.26 <0.05  <5  1.4    18    81  124    12 1325
QTA-11 236057 313.33 313.53 0.20 <0.05  <5  0.4    24 105    14      7  648
QTA-11 236058 313.53 313.83 0.30 <0.05  <5  0.3    20    49    20    13 1355
QTA-11 236059 313.83 314.47 0.64 <0.05  <5  0.6    21 112    21      8  289
QTA-11 236060 320.43 320.48 0.05 <0.05  <5  0.2    17    88    16      7  637
QTA-11 236061 321.48 322.08 0.60 <0.05  <5 <0.2    16    93    15      5  674
QTA-11 236062 325.65 326.22 0.57  0.07  <5  2.9    32 144 1295    27 1285
QTA-11 236063 326.22 326.92 0.70 <0.05  <5  5.1    15    97  776    38 1675

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 1 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-11 236064 326.92 327.27 0.35 <0.05  <5  0.9    13 110    42    20 1650
QTA-11 236065 327.27 327.57 0.30 <0.05  <5 <0.2    15    86    14    12  778
QTA-11 236066 329.12 329.72 0.60 <0.05  <5  0.5    12    97    73    24 1315
QTA-11 236067 329.72 330.03 0.31 <0.05  <5 <0.2    16 102    20    11  573
QTA-11 236068 330.03 331.32 1.29 <0.05  <5  0.4    14 102    60    26  692
QTA-11 236069 331.32 331.72 0.40 <0.05  <5  6.4    37 153 2880    53 2080
QTA-11 236070 331.72 332.62 0.90 <0.05  <5  0.9    14 114  197    37  634
QTA-11 236071 332.62 333.12 0.50 <0.05  <5  0.2    15    99    36    19 1055
QTA-11 236072 333.12 333.82 0.70 <0.05  <5 <0.2    12 114    28    14  438
QTA-11 236073 333.82 334.02 0.20 <0.05  <5 <0.2    15 107    44    19  600
QTA-11 236074 334.02 334.97 0.95 <0.05  <5  4.1    18 125  506    33  988
QTA-11 236075 334.97 335.72 0.75 <0.05  <5  2.3    15    86  109    20 1775
QTA-11 236076 335.72 336.12 0.40 <0.05      7  7.2    31 136  254    23  630
QTA-11 236077 336.12 336.92 0.80 <0.05  <5  0.3    15 102    40    21  586
QTA-11 236078 336.92 338.42 1.50 <0.05  <5  0.4    13    83  105    18  859
QTA-11 236079 338.42 339.42 1.00 <0.05  <5 <0.2    10    91    12    28  360
QTA-11 236080 339.42 340.46 1.04 <0.05  <5  0.2    13    97  165    31  426
QTA-11 236081 353.55 353.80 0.25  0.07  <5 <0.2    18    93    17    18  336
QTA-11 236082 353.80 358.75 4.95 <0.05  <5  0.2    10    89    41      8  539
QTA-11 236083 358.75 359.75 1.00 <0.05  <5  0.2    14 100    15      4  366
QTA-11 236084 359.75 360.75 1.00 <0.05  <5  0.3    15 100    16      3  391
QTA-11 236085 360.75 361.10 0.35 <0.05  <5  0.2    16 100    28      7  388
QTA-11 236086 361.10 361.20 0.10 <0.05  <5  0.2    15 107    16      4  448
QTA-11 236087 361.20 362.20 1.00 <0.05  <5  0.4    15    97    27    10  508
QTA-11 236088 362.20 362.70 0.50 <0.05  <5  0.6    20    92    38    13  538
QTA-11 236089 362.70 363.55 0.85 <0.05  <5  0.5    16    93    24      9  580
QTA-11 236090 363.55 364.35 0.80 <0.05  <5  0.2    15    92    18      6  403
QTA-11 236091 364.35 364.85 0.50 <0.05  <5  0.4    13    94    31    10  554
QTA-11 236092 364.85 365.53 0.68 <0.05  <5  3.6    17 132  642    27  832
QTA-11 236093 365.53 366.53 1.00 <0.05  <5  0.9    13    92    45    25  664
QTA-11 236094 366.53 367.59 1.06 <0.05  <5  0.8    18 117    44    11  596
QTA-11 236095 367.59 368.79 1.20 <0.05  <5  4.6    36 112  100    19  983
QTA-11 236096 368.79 369.19 0.40 <0.05  <5  0.7    15    99    58    23  827
QTA-11 236097 380.32 381.32 1.00 <0.05  <5  8.2    26 118  272    54  987
QTA-11 236098 381.32 381.77 0.45 <0.05      8  6.9 114 518  583    85 2120
QTA-11 236099 381.77 383.12 1.35 <0.05  <5  1.7    14 102    78    24  776
QTA-11 236100 386.28 388.43 2.15 <0.05  16 17.6    91 186  127    52  998
QTA-11 236101 388.43 390.13 1.70 <0.05  <5  1.7    15 111    75    29  690
QTA-11 236102 390.13 391.13 1.00 <0.05  <5  3.2    23 121  395    20 1295
QTA-11 236103 391.13 391.73 0.60 <0.05  <5  0.9    13 102    17    10  478
QTA-11 236104 391.73 392.68 0.95 <0.05  <5  2.2    10    97    21    10  612
QTA-11 236105 404.60 404.70 0.10 <0.05  29 26.5 148 296 1285 105 2890
QTA-11 236106 404.70 405.70 1.00 <0.05  11 12.6    32 118  249    38  829
QTA-11 236107 405.70 406.70 1.00 <0.05      5  3.6    15    80  264    22 1350
QTA-11 236108 406.70 407.32 0.62 <0.05  <5      2    34 134  149    21 1390
QTA-11 236109 407.32 408.87 1.55 <0.05  <5  0.9    30 103    42    10  792
QTA-11 236110 410.52 411.62 1.10 <0.05  <5  1.1    14    86    41      9  540
QTA-11 236111 411.62 412.37 0.75 <0.05  <5  0.3    13    93    29      5  636
QTA-11 236112 412.37 413.37 1.00 <0.05  <5  0.5    16 104    42      7  386
QTA-11 236113 413.37 414.31 0.94 <0.05  <5  0.3    15 108    26      7  261
QTA-11 236114 414.31 415.00 0.69 <0.05  <5  0.3    14 101    20      4  477
QTA-11 236115 443.40 443.55 0.15 <0.05  10  4.8 190 116  219    91 1815
QTA-11 236116 443.55 444.89 1.34 <0.05      6  10 154 166    72    90  722
QTA-11 236117 444.89 445.89 1.00 <0.05  <5  4.2    15    76    55    18  640
QTA-11 236118 445.89 447.19 1.30 <0.05      8  8.7    30 150    21    21  546
QTA-12 236119 11.85 12.58 0.73 <0.05  <5 <0.2    25    71    32      5  205
QTA-12 236120 12.58 13.18 0.60 <0.05  <5 <0.2    22 106    30      7  259
QTA-12 236121 13.18 14.28 1.10 <0.05  <5 <0.2      9    71      4      3  156
QTA-12 236122 14.28 15.28 1.00 <0.05  <5 <0.2    11    75      3      3  152
QTA-12 236123 37.28 38.81 1.53 <0.05  <5 <0.2    15    83      6    10  724
QTA-12 236124 38.81 39.81 1.17 <0.05  <5 <0.2    13    61      9      7  186
QTA-12 236125 39.81 40.98 2.00 <0.05  <5 <0.2    24 132    25      5  290
QTA-12 236126 15.28 17.28 2.00 <0.05  <5 <0.2    12    90      8      7  192

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 2 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-12 236127 17.28 19.28 2.00 <0.05  <5 <0.2    16    80      8      3  166
QTA-12 236128 19.28 21.28 2.00 <0.05  <5 <0.2    15    91    10      7  219
QTA-12 236129 21.28 23.28 2.00 <0.05  <5 <0.2    19    92      6      4  273
QTA-12 236130 23.28 25.28 2.00 <0.05  <5 <0.2    15    77      5      2  237
QTA-12 236131 29.37 30.00 0.63 <0.05  <5 <0.2    18 125    13      3  204
QTA-12 236132 43.46 44.81 1.35 <0.05  <5 <0.2    16 105      7      5  354
QTA-12 236133 44.81 45.51 0.70 <0.05  <5 <0.2    12 122      7      3  216
QTA-12 236134 45.51 46.31 0.80 <0.05  <5 <0.2    17 127    11      3  219
QTA-12 236135 46.31 47.31 1.00 <0.05  <5 <0.2    21    95    10      4  307
QTA-12 236136 47.31 47.85 0.54 <0.05  <5  0.2    16 134    11      3  226
QTA-12 236137 52.70 54.00 1.30 <0.05  <5 <0.2    16 100      7    <2  246
QTA-12 236138 55.35 55.55 0.20 <0.05  <5 <0.2    16 130      9    <2  226
QTA-12 236139 55.55 57.57 2.02 <0.05  <5  0.4    16    97    16    <2  241
QTA-12 236140 57.57 59.55 1.98 <0.05  <5  0.2    17 103    14    <2  249
QTA-12 236141 59.55 61.55 2.00 <0.05  <5  0.2    15    89    16      2  269
QTA-12 236142 61.55 63.55 2.00 <0.05  <5 <0.2    14    76    11    <2  226
QTA-12 236143 63.55 65.10 1.55 <0.05  <5 <0.2    10    72    17    <2  245
QTA-12 236144 65.10 65.90 0.80 <0.05  <5  0.3    16 182    23    <2  462
QTA-12 236145 65.90 66.20 0.30 <0.05  <5 <0.2    17 119    19    <2  346
QTA-12 236146 66.20 66.50 0.30 <0.05  <5 <0.2    23 154    19      3  341
QTA-12 236147 66.50 68.50 2.00 <0.05  <5  0.2    17    87    13    <2  417
QTA-12 236148 68.50 70.30 1.80 <0.05  <5 <0.2    18    98    12    <2  402
QTA-12 236149 70.30 71.80 1.50 <0.05  <5 <0.2    16    68    14    <2  450
QTA-12 236150 73.00 73.23 0.23 <0.05  <5 <0.2    15 112    16    <2  421
QTA-12 236151 73.23 73.33 0.10 <0.05  <5 <0.2    16 148      4    <2  427
QTA-12 236152 73.33 75.33 2.00 <0.05  <5 <0.2    23 190      9      2  372
QTA-12 236153 75.33 76.48 1.15 <0.05  <5 <0.2    15    88      9      3  379
QTA-12 236154 76.48 77.88 1.40 <0.05  <5  0.3    17    85      6      3  335
QTA-12 236155 77.88 78.33 0.45 <0.05  <5  0.2    18    89    19      5  281
QTA-12 236156 78.33 78.63 0.30 <0.05  <5  0.3    15    71    10      2  312
QTA-12 236157 78.63 78.68 0.05 <0.05  <5 <0.2    11 114      7      2  313
QTA-12 236158 78.68 79.43 0.75 <0.05  <5 <0.2    10 116    10    <2  241
QTA-12 236159 79.43 79.91 0.48 <0.05  <5  0.2    14 138    15      2  431
QTA-12 236160 79.91 80.64 0.73 <0.05  <5 <0.2    10    96      6      3  264
QTA-12 236161 80.64 81.38 0.74 <0.05  <5 <0.2    11    33    12      3  126
QTA-12 236162 81.38 82.77 1.39 <0.05  <5 <0.2    16    63    16      2  640
QTA-12 236163 82.77 83.17 0.40 <0.05  <5  0.2    13    54    20      4  238
QTA-12 236164 130.65 130.85 0.20 <0.05  <5 <0.2    14    85      7    <2  325
QTA-12 236165 145.39 145.88 0.49 <0.05  <5  0.2    16 128    15      3  320
QTA-12 236166 145.39 145.88 0.49 <0.05  <5  0.3    18 113    83      6  607
QTA-12 236167 152.84 153.14 0.30 <0.05  <5  0.4    25 110    46      2  417
QTA-12 236168 153.14 153.44 0.30 <0.05  <5 <0.2    17 124    15    <2  327
QTA-12 236169 161.13 162.58 1.45 <0.05  <5  0.2    16 102    23      5  322
QTA-12 236170 162.58 164.18 1.60 <0.05  <5 <0.2    17 119    16      2  651
QTA-12 236171 164.18 164.48 0.30 <0.05  <5  0.3    16 125    31      5 1325
QTA-12 236172 164.48 165.58 1.10 <0.05  <5 <0.2    16 102    31      5  491
QTA-12 236173 165.58 167.58 2.00 <0.05  <5 <0.2    16 110    10      2  354
QTA-12 236174 167.58 168.33 0.75 <0.05  <5  0.2    15    99    18      5  604
QTA-12 236175 168.33 168.93 0.60 <0.05  <5  0.3    16 119    28      7  211
QTA-12 236176 168.93 169.53 0.60 <0.05  <5  0.3    30 161    35      5  254
QTA-12 236177 169.53 169.93 0.40 <0.05  <5  0.2    24 200    12      2  293
QTA-12 236178 169.93 170.32 0.39 <0.05  <5  0.2    23 126    14      3  305
QTA-12 236179 170.32 170.62 0.30 <0.05  <5  0.2    18 130    16      3  380
QTA-12 236180 170.62 172.49 1.87 <0.05  <5  0.2    15    96    21      2  358
QTA-12 236181 177.17 177.72 0.55 <0.05  <5 <0.2    17 104    26      2  321
QTA-12 236182 177.72 178.47 0.75 <0.05  <5 <0.2    19    90 247    23  508
QTA-12 236183 178.47 180.32 1.85 <0.05  <5  0.2    14    77    67      4  324
QTA-12 236184 180.32 180.72 0.40 <0.05  <5 <0.2    15 102    53      4  377
QTA-12 236185 180.72 181.12 0.40 <0.05  <5  0.2    14    79    37      5  426
QTA-12 236186 181.12 181.32 0.20 <0.05  <5 <0.2    20    64    27      2  352
QTA-12 236187 181.32 181.72 0.40 <0.05  <5 <0.2    16 131    15      3  242
QTA-12 236188 181.72 183.72 2.00 <0.05  <5 <0.2    19 114    15      2  335
QTA-12 236189 183.72 184.32 0.60 <0.05  <5 <0.2    17 126    20    <2  377

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 3 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-12 236190 184.32 185.72 1.40 <0.05  <5 <0.2    17  108    16      2  272
QTA-12 236191 197.21 197.36 0.15 <0.05  <5 <0.2    16  107      4      2  353
QTA-12 236192 197.36 197.76 0.40 <0.05  <5  0.2    15  104    12      2  290
QTA-12 236193 197.76 198.50 0.74 <0.05  <5 <0.2    15    89    76      8  279
QTA-12 236194 198.50 199.05 0.55 <0.05  <5  0.3    19    70    27    11  322
QTA-12 236195 199.05 200.00 0.95 <0.05  <5  0.2    20  106    33      4  544
QTA-12 236196 200.00 200.65 0.65 <0.05  <5  0.2    18  106    12      3  273
QTA-12 236197 200.65 202.27 1.62 <0.05  <5  0.2    18  102    18      2  313
QTA-12 236198 202.27 202.47 0.20 <0.05  <5 <0.2    15    97    15    <2  402
QTA-12 236199 202.47 203.80 1.33 <0.05  <5  0.2    21  136    23      2  303
QTA-12 236200 203.80 204.30 0.50 <0.05  <5  0.3    33  173    30      7  435
QTA-12 236201 204.30 204.60 0.30 <0.05  <5  0.3    42  150    13      6  299
QTA-12 236202 204.60 205.00 0.40 <0.05  <5 <0.2    18  107    20      9  339
QTA-12 236203 205.00 207.00 2.00 <0.05  <5  0.2    15  106    20    11  366
QTA-12 236204 207.00 207.24 0.24 <0.05  <5  0.3    21    42    23      8  987
QTA-12 236205 207.24 208.70 1.46 <0.05  <5  0.2    18  100    24      7  350
QTA-12 236206 208.70 210.14 1.44 <0.05  <5  0.2    14  104    50      9  573
QTA-12 236207 210.14 212.00 1.86 <0.05  <5 <0.2    18  113    41    11  405
QTA-12 236208 212.00 214.00 2.00 <0.05  <5  0.2    16  104    16      5  361
QTA-12 236209 214.00 214.25 0.25 <0.05  <5  0.2    14  106    43      7  846
QTA-12 236210 234.40 235.80 1.40 <0.05  <5  0.3    19  112    97    15  453
QTA-12 236211 235.80 236.43 0.63 <0.05  <5  1.7    18  129 105    27  574
QTA-12 236212 236.43 236.93 0.50 <0.05  <5  0.3    21    84 126    26  671
QTA-12 236213 236.93 237.93 1.00 <0.05  <5 <0.2    21  111    24    16  385
QTA-12 236214 237.93 238.93 1.00 <0.05  <5  0.2    17  114    40    13  362
QTA-12 236215 238.93 239.78 0.85 <0.05  <5 <0.2    16  112    34      7  312
QTA-12 236216 239.78 239.88 0.10 <0.05  <5  0.2    19    78    59    17  636
QTA-12 236217 239.88 240.93 1.05 <0.05  <5 <0.2    17  108    45    18  366
QTA-12 236218 249.62 250.05 0.43 <0.05  <5 <0.2    14  124    21      6  236
QTA-12 236219 250.05 251.05 1.00 <0.05  <5  0.2    18  112    32      9  306
QTA-12 236220 251.05 252.07 1.02 <0.05  <5  0.2    19  108    46    16  384
QTA-12 236221 253.77 254.07 0.30  0.07  <5  0.6    17  114 122    18  621
QTA-12 236222 258.47 258.67 0.20 <0.05  <5  0.2    21  118    23      5  369
QTA-12 236223 258.67 259.66 0.99 <0.05  <5  0.3    17  106    19      6  337
QTA-12 236224 259.66 260.30 0.64 <0.05  <5  0.3    19  116    49    13  347
QTA-12 236225 286.70 287.30 0.60  0.07  <5  0.2    14    89    25      8  458
QTA-12 236226 300.84 302.14 1.30 <0.05  <5 <0.2    15  100    17      3  366
QTA-12 236227 302.14 303.89 1.75 <0.05  <5 <0.2    14    89    22    <2  543
QTA-12 236228 342.44 342.54 0.10 <0.05 406 >100 2640 2390 307 632 2430
QTA-12 236229 345.00 345.11 0.11 <0.05  24 33.1  219  209 136 104 2140
QTA-12 236230 345.11 345.31 0.20 <0.05  <5  5.5    32    96    73    14  755
QTA-12 236231 345.31 345.91 0.60 <0.05  <5  1.2    36  114 156    11  926
QTA-12 236232 345.91 346.56 0.65 <0.05  <5  0.3    15    93    30    13  455
QTA-12 236233 346.56 347.56 1.00 <0.05  <5  0.3    15    72    29      6  592
QTA-12 236234 347.56 348.80 1.24 <0.05  <5  0.9    16  104    35    16  506
QTA-12 236235 348.80 349.61 0.81 <0.05  <5  7.7    46  142 308    29 2400
QTA-12 236236 349.61 350.61 1.00  0.06  <5  0.5    15    77    72    15  785
QTA-12 236237 350.61 351.41 0.80 <0.05  <5  1.7    16    76 110      9  766
QTA-12 236238 351.41 352.00 0.59 <0.05  <5  0.9    12    96 132    15 1045
QTA-12 236239 352.00 352.90 0.90 <0.05  <5  0.7    18  102    90    14 1040
QTA-12 236240 352.90 353.65 0.75 <0.05  <5  0.2    14    95    16      8  413
QTA-12 236241 353.65 354.70 1.05 <0.05  <5  0.3    13    92    54    16  544
QTA-12 236242 354.70 355.70 1.00 <0.05  <5  2.6    13    95    66    22  856
QTA-12 236243 355.70 356.86 1.16  0.14  39 39.7    79  417 434    52 2240
QTA-12 236244 356.86 358.86 2.00 <0.05  <5  1.4    18  108 138    28 1005
QTA-12 236245 358.86 360.20 1.34 <0.05  <5  2.4    17  106 474    24 1515
QTA-12 236246 360.20 360.80 0.60 <0.05  <5  1.2    13  106 320    20 1830
QTA-12 236247 360.80 361.20 0.40 <0.05  <5  3.5    14    95 352    25 1225
QTA-12 236248 361.20 361.70 0.50 <0.05  <5  4.6    15    77 436    20 2170
QTA-12 236249 388.33 388.43 0.10 <0.05  <5  0.3    12    91    24      9  617
QTA-12 236250 391.53 391.73 0.20 <0.05  <5  0.3    15    91    32      7  543
QTA-12 236251 392.88 393.18 0.30 <0.05  <5 <0.2    12    70    26      3  638
QTA-13 236252  4.68  5.10 0.42 <0.05  <5 <0.2    20  150 468    68  392

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 4 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-13 236253  5.10  6.10 1.00 <0.05  <5 <0.2    20  119    30            9  339
QTA-13 236254  6.10  7.62 1.52 <0.05  <5  0.2    16  106  104          25  342
QTA-13 236255  7.62  9.38 1.76 <0.05  <5  0.5    17  158  598      116  437
QTA-13 236256  9.38  9.98 0.60 <0.05  <5  1.6    30  254 1425      533 1880
QTA-13 236257  9.98 10.97 1.80 <0.05      6  2.1    17  216  909      239  708
QTA-13 236258 10.97 12.77 2.00 <0.05  26    24    81  174 1410      348  643
QTA-13 236259 12.77 14.77 2.00 <0.05  17 17.6    39  108  860          97  668
QTA-13 236260 14.77 16.77 2.15 <0.05  <5      1    16    94  114          24  506
QTA-13 236261 16.77 18.92 2.15 <0.05      9  7.8    44  110  927          96  634
QTA-13 236262 18.92 20.00 1.08 <0.05  <5  1.7    17  134  152          33  530
QTA-13 236263 23.76 24.16 0.40  0.07  13 13.7    44  130 2540          60 1000
QTA-13 236264 26.20 26.90 0.70 <0.05  <5  4.1    30  132  481      168  788
QTA-13 236265 27.71 28.01 0.30 <0.05  <5  0.4    12    83  122          47  812
QTA-13 236266 30.73 32.31 1.58 <0.05      5  4.6    22  124 1090      139  766
QTA-13 236267 32.31 34.15 1.84 <0.05  <5  3.1    20  172 1305          52  737
QTA-13 236268 36.76 38.40 1.64 <0.05  <5  1.1    19    79  164          45  562
QTA-13 236269 38.40 39.80 1.40 <0.05  <5  1.3    21    77  266          46  641
QTA-13 236270 39.80 41.25 1.45  0.23  43 49.1  126  136 4190      129  768
QTA-13 236271 41.25 41.80 0.55  0.37  16 13.7    42  189 5800      388 1875
QTA-13 236272 41.80 42.47 0.67 <0.05  <5  1.1    12    87  429          45  567
QTA-13 236273 42.47 44.57 2.10 <0.05  <5  0.6    24  106  355          99  716
QTA-13 236274 44.57 45.88 1.31 <0.05  <5  2.8    25    64 1245          43 1230
QTA-13 236275 45.88 46.33 0.45 <0.05  <5  0.5      8  106    63          17  740
QTA-13 236276 46.33 46.43 0.10 <0.05  <5  0.2    12    65    66          10 1420
QTA-13 236277 46.43 48.05 1.62 <0.05  <5  2.7    17  106  290          28  886
QTA-13 236278 48.05 48.65 0.60 <0.05  <5  2.5    19    91 1605          42 1080
QTA-13 236279 48.65 50.00 1.35 <0.05  <5  1.1    13    83  190          22  834
QTA-13 236280 50.00 51.70 1.70 <0.05  <5      3    22    87  468          32 1295
QTA-13 236281 51.70 52.40 0.70 <0.05      9      8    26  133 1060          34 1020
QTA-13 236282 52.40 53.53 1.13 <0.05  <5  0.6    12    90  230          18  786
QTA-13 236283 61.57 61.72 0.15 <0.05  16 15.5  466 1120 2500 >10000 2210
QTA-13 236284 61.72 62.23 0.51 <0.05  41 44.9  231  430 4420      732 2190
QTA-13 236285 66.97 67.17 0.20 <0.05  <5  1.8    25  117  269          42  703
QTA-13 236286 68.00 68.25 0.25 <0.05  <5  0.7    19  114  154          35  675
QTA-13 236287 68.25 69.58 1.33 <0.05  <5  0.5    18  118    42          15  460
QTA-13 236288 69.58 71.16 1.58 <0.05  <5  0.8    20  114  128          23  632
QTA-13 236289 75.68 76.48 0.80 <0.05      5  2.4    12  118  207          17  654
QTA-13 236290 76.48 76.63 0.15  0.06 155 >100 1835 1710  740    1260 1970
QTA-13 236291 76.63 77.38 0.75 <0.05  <5  2.1    20  107  228          23  543
QTA-13 236292 77.38 78.53 1.15 <0.05  <5  0.6    16  112    42          17  426
QTA-13 236293 78.53 79.33 0.80 <0.05  <5  0.7    11  100    46          16  534
QTA-13 236294 79.33 79.63 0.30 <0.05  <5      1    12  109  124          24  499
QTA-13 236295 79.63 82.23 2.60 <0.05  <5  0.5    11  102    69          17  547
QTA-13 236296 82.23 83.00 0.77 <0.05  <5      1      5  102    76          15  566
QTA-13 236297 83.00 84.12 1.12 <0.05      7  9.9    11    94 2250          25 1230
QTA-13 236298 84.12 84.86 0.74 <0.05      7  6.1    10    88  182          16  699
QTA-13 236299 84.86 85.40 0.54 <0.05      5  3.2    25    88  389          17 1485
QTA-13 236300 85.40 86.43 1.03 <0.05  <5  0.9    16  122    89          17  522
QTA-13 236301 86.43 87.67 1.24 <0.05  <5  0.8    12  108    66          14  544
QTA-13 236302 88.86 90.32 1.46 <0.05  <5  1.1    11  106    64          14  498
QTA-13 236303 90.32 91.58 1.26 <0.05  18 21.4  209  521  908      126  977
QTA-13 236304 95.15 96.00 0.85 <0.05  <5  0.6    20  113  128          25  542
QTA-13 236305 96.00 97.28 1.28 <0.05  <5  4.1    15  104  226          21  702
QTA-13 236306 97.28 98.76 1.48 <0.05  <5  1.2    20  102  218          24  648
QTA-13 236307 98.76 99.96 1.20 <0.05  <5  0.4    13  118  359          17  570
QTA-13 236308 106.00 107.15 1.15 <0.05  <5  4.8    14  114  731          22  713
QTA-13 236309 107.15 107.80 0.65 <0.05  <5  5.2    15    96  827          39  981
QTA-13 236310 107.80 108.66 0.86 <0.05  <5  0.9    18  112  141          21  663
QTA-13 236311 108.66 110.41 1.75 <0.05  <5  0.6    10    78    89          13  629
QTA-13 236312 110.41 111.90 1.49 <0.05  <5  1.1      8    77    90          13  768
QTA-13 236313 111.90 114.00 2.10  0.07  17 20.3  316  283  692      214 1345
QTA-13 236314 123.75 124.38 0.63 <0.05  <5  1.1    15  114    77          17  504
QTA-13 236315 124.38 125.45 1.07 <0.05  <5      1      9  108    41          15  491

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 5 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-13 236316 125.45 126.42 0.97 <0.05    <5  1.2      25    122  435          45  424
QTA-13 236317 127.70 127.90 0.20 <0.05    <5  2.2      57    116    39          34  562
QTA-13 236318 127.90 128.00 0.10 <0.05    <5      2      67    128    63          45  575
QTA-13 236319 128.00 128.30 0.30 <0.05      5      3    148    231    54          82  678
QTA-13 236320 128.30 128.40 0.10 <0.05    <5  1.3      17    110    36          12  474
QTA-13 236321 128.40 129.40 1.00 <0.05    <5      3    106    227  615          60  533
QTA-13 236322 140.00 140.70 0.70 <0.05    <5  0.5      17    100    65          12  561
QTA-13 236323 140.70 140.80 0.10 <0.05    <5  1.9      30      61  552          24 1055
QTA-13 236324 140.80 141.45 0.65 <0.05    <5  0.6      19    120    63          16  497
QTA-13 236325 154.00 155.53 1.53 <0.05      9  4.5      94    237  467          56  769
QTA-13 236326 162.00 162.70 0.70 <0.05    <5  0.9      11      98  174          23  524
QTA-13 236327 162.70 162.90 0.20 <0.05    14    15    228  1620 1890    6480 3960
QTA-13 236328 162.90 163.10 0.20 <0.05      6  3.7      36      95  559      137  998
QTA-13 236329 163.10 164.00 0.90 <0.05    <5  0.9      19    112  285          43  510
QTA-13 236330 186.00 187.00 1.00 <0.05    <5  0.6      17    122  167          33  614
QTA-13 236331 187.00 187.43 0.43 <0.05    <5  0.8      14    105 1110          44  702
QTA-13 236332 187.43 187.53 0.10 <0.05    <5  0.5      15    108  237          11 1315
QTA-13 236333 187.53 188.53 1.00 <0.05    <5  0.5      18    123  144          13  428
QTA-13 236334 188.53 189.59 1.06 <0.05    <5  0.5      15    122  196          20  466
QTA-13 236335 192.70 193.00 0.30 <0.05    <5  0.6      13      87    55          18 1070
QTA-13 236336 197.40 198.34 0.94 <0.05    <5  0.3      17    121    54          14  441
QTA-13 236337 198.34 199.10 0.76 <0.05    <5  0.3      18    122    64          11  617
QTA-13 236338 199.10 200.04 0.94 <0.05    <5  0.2      15    103    83            9  657
QTA-13 236339 200.04 201.00 0.96 <0.05    <5  0.8      18    102  156          14  684
QTA-13 236340 201.00 202.30 1.30 <0.05    <5  0.6          8      84  428          22  841
QTA-13 236341 202.30 202.60 0.30  0.22    49 55.1    234    416 5980      895 2580
QTA-13 236342 202.60 203.10 0.50  0.16    21    20      82    100 1415          89 2050
QTA-13 236343 203.10 203.30 0.20  0.66 2590 >100 30200 24100 7440 >10000 4300
QTA-13 236344 203.30 204.00 0.70 <0.05    12 12.6      68    130 1585      110 1470
QTA-13 236345 204.00 204.56 0.56 <0.05    <5  3.7      43    114  700          59  950
QTA-13 236346 204.56 204.96 0.40 <0.05    <5  0.7      18      89  468          23 1065
QTA-13 236347 204.96 205.70 0.74 <0.05    <5  0.9      19      85  666          34  743
QTA-13 236348 205.70 206.57 0.87 <0.05    <5  0.7      13      95  160          12  572
QTA-13 236349 206.57 206.90 0.33 <0.05    <5  0.4      18    104    95          26  397
QTA-13 236350 206.90 207.60 0.70 <0.05    <5  0.4      16      98    79          19  429
QTA-13 236351 207.60 207.80 0.20 <0.05    <5  0.3      30    131  211          26 1385
QTA-13 236352 207.80 208.50 0.70 <0.05    <5  0.4      21    121    83          18  389
QTA-13 236353 231.00 232.20 1.20 <0.05    <5  5.9      26    121  397          23  787
QTA-13 236354 236.10 237.10 1.00 <0.05    <5  0.6      14      95  627          28  623
QTA-13 236355 237.10 238.10 1.00 <0.05    <5  7.1      21      74 1450      168  843
QTA-13 236356 238.10 240.10 2.00 <0.05    <5  4.1      15      93  935          49  772
QTA-13 236357 240.10 241.00 0.90 <0.05    <5  2.8      11      92 1310          42  492
QTA-13 236358 241.00 242.00 1.00 <0.05    <5  2.8      31      77  705          34 1060
QTA-13 236359 242.00 243.00 1.00 <0.05    <5  0.3          8      50  192          10  703
QTA-13 236360 245.67 246.93 1.26 <0.05    <5  1.1      13      61  210          11  561
QTA-13 236361 246.93 248.72 1.79 <0.05    <5  3.6      53      79  456          39  875
QTA-13 236362 248.72 250.30 1.58 <0.05    <5      1      13      59  811          13  766
QTA-13 236363 250.30 250.60 0.30 <0.05    <5  1.2      18      65  150          12  505
QTA-13 236364 250.60 251.30 0.70 <0.05    <5  0.4      11      72    46            7  260
QTA-13 236365 251.30 253.07 1.77 <0.05    <5  0.5          7      67  190            7  662
QTA-13 236366 253.07 254.61 1.54 <0.05    <5  0.4      10      59    45            6  256
QTA-13 236367 254.61 256.00 1.39 <0.05    <5  0.4      10      84  100          10  865
QTA-13 236368 256.00 257.20 1.20 <0.05    <5  0.5      10      67  170            9  394
QTA-13 236369 260.11 260.71 0.60 <0.05    <5  4.9      60    130  569          40 1830
QTA-13 236370 260.71 262.71 2.00 <0.05    <5  0.8      11      69  733          19  667
QTA-13 236371 262.71 264.67 1.96 <0.05    <5  0.5          9      64  550          15  688
QTA-13 236372 264.67 264.97 0.30 <0.05    <5  1.3      15      59  577          25  439
QTA-13 236373 264.97 266.56 1.59 <0.05    <5  0.6          8      73  672          18  607
QTA-13 236374 266.56 268.00 1.44 <0.05    <5  1.1      10      70 1355          22  622
QTA-13 236375 268.00 268.40 0.40 <0.05    <5  0.6      12      73  480          14  696
QTA-13 236376 268.40 271.40 3.00 <0.05    <5  0.4      11      66  343          12  405
QTA-13 236377 271.40 272.48 1.08 <0.05    <5  0.3      12      58  313          12  597
QTA-13 236378 292.10 292.20 0.10 <0.05    <5 11.6      40    250 2680    7320 1650

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 6 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-13 236379 300.30 301.60 1.30 <0.05  <5  0.2    16    76    37    13  625
QTA-13 236380 308.30 308.79 0.49 <0.05  <5  0.3    15 101  104    18  265
QTA-13 236381 311.90 312.72 0.82 <0.05  <5  0.6    20 119    70    28  409
QTA-13 236382 326.80 327.90 1.10 <0.05  <5  0.3    20 116    47    58  423
QTA-13 236383 327.90 328.43 0.53 <0.05  <5  0.2    17 110    20    45  350
QTA-13 236384 328.43 329.00 0.57 <0.05  <5  0.3    20 114    27    80  382
QTA-13 236385 333.00 334.10 1.10 <0.05  <5  0.5    16 113    37    13  415
QTA-13 236386 334.10 335.74 1.64 <0.05  <5  0.2    16 111    34    11  362
QTA-13 236387 335.74 336.74 1.00 <0.05  <5  0.5    20 117  192    22  254
QTA-13 236388 336.74 337.70 0.96 <0.05  <5  0.4    17 117  431    14  309
QTA-13 236389 337.70 338.80 1.10 <0.05  <5  0.3    11    58    31      6  502
QTA-13 236390 373.09 373.49 0.40 <0.05  <5  0.5    19    87  137    44  533
QTA-13 236391 382.68 382.83 0.15 <0.05  <5  0.3    16    92    25    31  522
QTA-13 236392 382.83 384.00 1.17 <0.05  <5  0.6    18 104  210    28  417
QTA-13 236393 384.00 385.88 1.88  0.06  <5  2.3    19 112 1770  217  850
QTA-14 236394  4.27  6.27 2.00 <0.05  <5  0.9    17    72  170    15  703
QTA-14 236395  6.27  8.75 2.48 <0.05  <5  1.8    28    95  285    27  706
QTA-14 236396  8.75 10.75 2.00  0.11      9  9.7 281 130 1310  230  854
QTA-14 236397 10.75 12.75 2.00  0.11      5  6.7    69 326 2100 4880 1095
QTA-14 236398 12.75 14.75 2.00 <0.05  <5  0.6    13    81  494  158  896
QTA-14 236399 14.75 16.75 2.00 <0.05  <5      1    21    97  584  152  814
QTA-14 236400 16.75 18.75 2.00 <0.05  <5  0.4      8    74  328    48  841
QTA-14 236401 18.75 19.00 0.25  0.07  <5  0.7      9    43 1160    29  993
QTA-14 236402 19.00 20.00 1.00 <0.05  <5  1.3    24 115 4640    81 1050
QTA-14 236403 24.20 26.05 1.85 <0.05  <5  0.3    11    88  177    31  417
QTA-14 236404 26.05 26.62 0.57 <0.05  <5  1.5    22    45 2470    72 1320
QTA-14 236405 26.62 27.32 0.70 <0.05  <5      1      8    44 1325    98 1145
QTA-14 236406 27.32 27.90 0.58 <0.05  <5  0.3    14    63  448    48  402
QTA-14 236407 27.90 29.90 2.00 <0.05  <5 <0.2    10    96  110    13  520
QTA-14 236408 29.90 31.90 2.00 <0.05  <5 <0.2    12    97    83    12  486
QTA-14 236409 31.90 33.90 2.00 <0.05  <5  0.2    13 101  128    13  456
QTA-14 236410 33.90 35.34 1.44 <0.05  <5  0.3      9    96  375    22  714
QTA-14 236411 35.34 36.50 1.16    0.1  <5  1.3    27 106 1740  150 1250
QTA-14 236412 36.50 37.03 0.53 <0.05  <5  1.5    15 110  522    26 1150
QTA-14 236413 37.03 39.00 1.97 <0.05  <5  1.4    20    51  365    43  384
QTA-14 236414 39.00 39.89 0.89 <0.05  <5  0.3    11 118 1140  266  333
QTA-14 236415 39.89 41.45 1.56 <0.05  <5  0.4      9    80  407    21  447
QTA-14 236416 41.45 43.54 2.09 <0.05  <5  0.5    15 114  259    18  264
QTA-14 236417 43.54 44.61 1.07 <0.05  <5  0.2    12 136 1870  506 1140
QTA-14 236418 44.61 45.51 0.90 <0.05      5  0.4      7 108 1545  315 2080
QTA-14 236419 45.51 47.51 2.00 <0.05  <5  0.4      8 102 1155  203 1300
QTA-14 236420 47.51 48.10 0.59 <0.05  <5  0.4    10 123 1170  166 1235
QTA-14 236421 48.10 48.60 0.50 <0.05  <5  0.8    11    78 1015    61  600
QTA-14 236422 48.60 49.80 1.20 <0.05  <5  1.2    16    26  695    79  745
QTA-14 236423 49.80 52.10 2.30 <0.05  <5  1.4    10    81  864    83  473
QTA-14 236424 52.10 52.82 0.72 <0.05  10  9.2    65    66 2830    66 1310
QTA-14 236425 52.82 53.70 0.88  0.36  11 13.8    36 130 3220  231  953
QTA-14 236426 54.20 55.00 0.80  0.56  41 41.7 112 317 5720  574 2370
QTA-14 236427 55.00 57.00 2.00  0.21  <5  2.5    12    93 1555    57  867
QTA-14 236428 57.00 57.70 0.70 <0.05  <5      3    15 134 1700    28 1035
QTA-14 236429 57.70 59.70 2.00 <0.05  <5      1    10    75  299    17  718
QTA-14 236430 59.70 60.60 0.90 <0.05  <5  0.4    15    75    56    12  701
QTA-14 236431 60.60 62.70 2.10 <0.05  <5  0.4    10    74    65    50  613
QTA-14 236432 62.70 65.63 2.93 <0.05  <5  1.2    14    83  626    29  852
QTA-14 236433 68.70 69.00 0.30 <0.05  <5  0.2    15    86  452  144  492
QTA-14 236434 73.34 75.17 1.83 <0.05  <5  0.2    18 162    36      7  421
QTA-14 236435 75.17 77.00 1.83 <0.05  <5  0.2    15 120    21    15  633
QTA-14 236436 77.00 77.50 0.50 <0.05  <5  0.2    12    87    16  502  947
QTA-14 236437 77.50 79.10 1.60 <0.05  <5 <0.2    17 132    16    12  438
QTA-14 236438 79.10 79.70 0.60 <0.05  <5 <0.2    14    67    19    11  333
QTA-14 236439 79.70 81.50 1.80 <0.05  <5 <0.2    13    95  211  279  449
QTA-14 236440 92.00 94.80 2.80 <0.05  <5 <0.2    15    96    14      9  472
QTA-14 236441 133.40 135.00 1.60 <0.05  <5  0.2    15 106    22    16  242

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 7 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-14 236442 137.50 140.00 2.50 <0.05  <5  0.2    14    95    24    12  269
QTA-14 236443 148.74 148.84 0.10 <0.05  <5 <0.2    10    60    28      8 1110
QTA-14 236444 148.84 149.54 0.70 <0.05  <5  0.4    18    95    51    10  391
QTA-14 236445 149.54 150.70 1.16 <0.05  <5  0.3    19 110    57    11  367
QTA-14 236446 154.53 154.73 0.20 <0.05  <5  0.2    13 110    51      8  378
QTA-14 236447 158.06 159.00 0.94 <0.05  <5  0.3    19 124    61    13  338
QTA-14 236448 168.30 170.30 2.00 <0.05  <5  0.3    14 114  158    15  435
QTA-14 236449 170.30 170.70 0.40  0.07  <5      2    17 116 1995    85 1635
QTA-14 236450 170.70 171.36 0.66 <0.05  <5  0.5    19 114  166    33  681
QTA-14 236451 176.60 177.00 0.40 <0.05  <5  0.2    15 106    34      4  504
QTA-14 236452 196.80 197.10 0.30 <0.05  <5  0.3    17 125    51    14  251
QTA-14 236453 203.50 205.00 1.50 <0.05  <5 <0.2    13    99    33      3  432
QTA-14 236454 205.00 206.00 1.00 <0.05  <5 <0.2    15 106    40      6  386
QTA-14 236455 209.00 209.70 0.70 <0.05  <5 <0.2    16    68 2580 240  431
QTA-14 236456 211.89 212.35 0.46 <0.05  <5  1.2    18    85 1775    73 1115
QTA-14 236457 214.02 214.30 0.28 <0.05  <5 <0.2    17    88 2520 118  399
QTA-14 236458 216.00 217.25 1.25 <0.05  <5  0.2    15 106    95    18  433
QTA-14 236459 217.25 219.70 2.45 <0.05  <5  0.4    13 111    69    13  402
QTA-14 236460 219.70 219.90 0.20 <0.05  <5  0.2    12    88  645    25  598
QTA-14 236461 235.20 235.90 0.70  0.11  <5  1.1      9    56 1615    85 1170
QTA-14 236462 235.90 237.40 1.50 <0.05  <5  0.3    13    96    82    26  503
QTA-14 236463 237.40 239.20 1.80 <0.05  <5 <0.2    14    83    83    19  410
QTA-14 236464 239.20 239.40 0.20 <0.05  <5 <0.2    10    49    42    14 1185
QTA-14 236465 239.40 240.40 1.00 <0.05  <5  0.2      8    62  127    13  412
QTA-14 236466 240.40 242.20 1.80 <0.05  <5 <0.2      8    61  101    12  372
QTA-14 236467 242.20 243.00 0.80 <0.05  <5  0.2    18 104    98    18  398
QTA-14 236468 243.00 244.30 1.30 <0.05  <5 <0.2    11    58    58      7  347
QTA-14 236469 244.30 246.00 1.70 <0.05  <5 <0.2      9    52    45      8  502
QTA-14 236470 246.00 246.40 0.40 <0.05  <5  0.3    10    65    84      9  338
QTA-14 236471 246.40 248.00 1.60 <0.05  <5  0.2      9    65 1025    24  450
QTA-14 236472 248.00 249.30 1.30 <0.05  <5  0.2      8    54  290    11  758
QTA-14 236473 249.30 250.60 1.30 <0.05  <5 <0.2    12    66  349    14  340
QTA-14 236474 250.60 251.40 0.80 <0.05  <5  0.2      7    38 1130    30  481
QTA-14 236475 251.40 252.90 1.50 <0.05  <5 <0.2      8    57  962    27  253
QTA-14 236476 252.90 253.10 0.20 <0.05  <5 <0.2    19    32 3590 143  359
QTA-14 236477 253.10 253.70 0.60 <0.05  <5  0.2      8    60  936    43  366
QTA-14 236478 253.70 254.10 0.40  0.07  <5  1.4    17    70 3650 475  889
QTA-14 236479 254.10 254.80 0.70 <0.05  <5  0.4    12    88 1060    80  686
QTA-14 236480 254.80 255.22 0.42 <0.05  <5 <0.2      8    73  330    11  336
QTA-14 236481 255.22 257.22 2.00 <0.05  <5 <0.2      9    58  108    12  416
QTA-14 236482 257.22 259.22 2.00 <0.05  <5 <0.2      9    62  171    11  482
QTA-14 236483 259.22 260.80 1.58 <0.05  <5 <0.2    10    59  115      9  385
QTA-14 236484 260.80 261.31 0.51 <0.05  <5 <0.2    14    98    86    10  419
QTA-14 236485 287.00 288.00 1.00 <0.05  <5 <0.2      9    53      8      7  340
QTA-14 236486 297.49 300.70 3.21 <0.05  <5 <0.2      9    62    32      9  445
QTA-14 236487 300.70 302.00 1.30 <0.05  <5 <0.2      6    53    41      8  356
QTA-14 236488 302.00 304.00 2.00 <0.05  <5  0.3      9    66  100    23  516
QTA-14 236489 304.00 305.10 1.10 <0.05  <5 <0.2    13    74    15    10  405
QTA-14 236490 308.17 310.20 2.03 <0.05  <5 <0.2      9    59    81    12  418
QTA-14 236491 318.00 319.23 1.23 <0.05  <5  0.2      8    51    76    10  410
QTA-14 236492 336.79 337.82 1.03 <0.05  <5  0.2    16 105    39      6  451
QTA-14 236493 355.00 357.00 2.00 <0.05  <5 <0.2      8    48    10      9  774
QTA-14 236494 357.00 359.00 2.00 <0.05  <5 <0.2      7    52    15      5  427
QTA-14 236495 359.00 361.00 2.00 <0.05  <5 <0.2    10    52    14      6  383
QTA-14 236496 361.00 363.00 2.00 <0.05  <5  0.2      9    59    15      4  317
QTA-14 236497 363.00 365.00 2.00 <0.05  <5 <0.2      8    49    12      5 1285
QTA-14 236498 365.00 367.00 2.00 <0.05  <5 <0.2    10    57    12    11  435
QTA-14 236499 367.00 368.35 1.35 <0.05  <5 <0.2      9    58    17      9  368
QTA-14 236500 368.35 368.65 0.30 <0.05  <5  0.4    14    89    91    15  843
QTA-14 236501 368.65 370.57 1.92 <0.05  <5 <0.2    10    59    16      6  415
QTA-14 236502 370.57 372.57 2.00 <0.05  <5 <0.2      9    58    20      3  361
QTA-14 236503 372.57 374.30 1.73 <0.05  <5  0.3    10    65    32      7  388
QTA-14 236504 374.30 374.84 0.54 <0.05  <5  0.2      9    55    34      5  467

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 8 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-14 236505 374.84 377.47 2.63 <0.05  <5 <0.2      8    55    39      5  689
QTA-14 236506 377.47 377.77 0.30 <0.05  <5  0.2    21 100 128    12  604
QTA-14 236507 377.77 379.77 2.00 <0.05  <5 <0.2      9    59    58      6  343
QTA-14 236508 379.77 381.00 1.23 <0.05  <5 <0.2      8    57    17      5  389
QTA-14 236509 381.00 381.60 0.60 <0.05  <5 <0.2    11    50    87      7  596
QTA-14 236510 381.60 383.60 2.00 <0.05  <5  0.2    10    58    39      7  302
QTA-14 236511 383.60 385.60 2.00 <0.05  <5 <0.2      9    52 126      5  372
QTA-14 236512 385.60 387.60 2.00 <0.05  <5  0.3    15    60 248      8  469
QTA-14 236513 387.60 389.60 2.00 <0.05  <5  0.3      8    57 365    11  479
QTA-14 236514 389.60 390.80 1.20 <0.05  <5  0.2      7    55 302    11  470
QTA-14 236515 390.80 391.00 0.20 <0.05  <5 <0.2    10    79 375    13 1050
QTA-14 236516 391.00 393.20 2.20 <0.05  <5 <0.2    13    96    69      9  463
QTA-14 236517 393.20 394.83 1.63 <0.05  <5 <0.2      8    49    31    10  386
QTA-14 236518 394.83 396.00 1.17 <0.05  <5 <0.2      8    48    19      7  638
QTA-14 236519 396.00 398.00 2.00 <0.05  <5 <0.2      7    49    38      5  386
QTA-14 236520 398.00 399.34 1.34 <0.05  <5 <0.2    12    57    36      5  329
QTA-14 236521 399.34 400.70 1.36 <0.05  <5  0.2      8    56    30      6  327
QTA-14 236522 400.70 402.00 1.30 <0.05  <5 <0.2      8    54    79      6  393
QTA-14 236523 402.00 403.91 1.91 <0.05  <5 <0.2    12    61    63      7  324
QTA-14 236524 403.91 406.00 2.09 <0.05  <5  0.2    16 106    46      9  424
QTA-14 236525 406.00 407.52 1.52 <0.05  <5 <0.2    10    61 108      8  414
QTA-14 236526 407.52 408.35 0.83 <0.05  <5 <0.2    14    87    60      8  385
QTA-14 236527 408.35 409.40 1.05 <0.05  <5 <0.2      8    63    51      7  541
QTA-14 236528 409.40 410.57 1.17 <0.05  <5 <0.2      7    31    60      6  601
QTA-14 236529 410.57 412.60 2.03 <0.05  <5  0.3      8    61 277    14  348
QTA-14 236530 412.60 414.20 1.60 <0.05  <5 <0.2    11    63    39    10  328
QTA-14 236531 414.20 417.30 3.10 <0.05  <5 <0.2    10    68    38    10  391
QTA-14 236532 417.30 420.00 2.70 <0.05  <5 <0.2    10    54    53    14  383
QTA-14 236533 420.00 421.61 1.61 <0.05      6  0.5      9    60 828    26  569
QTA-14 236534 421.61 422.30 0.69 <0.05  <5  2.3    12 120 270    40 1060
QTA-14 236535 422.30 423.72 1.42 <0.05  <5 <0.2    11    69    76    11  426
QTA-14 236536 423.72 425.10 1.38 <0.05  <5  0.3    14    66    71    10  462
QTA-14 236537 425.10 426.00 0.90 <0.05  <5 <0.2    11    73    90    10  468
QTA-14 236538 426.00 427.50 1.50 <0.05  <5  0.6      8    48 565    14  921
QTA-14 236539 427.50 428.00 0.50 <0.05  <5  0.2      9    51 186    10  470
QTA-14 236540 428.00 430.00 2.00 <0.05  <5 <0.2      9    58    42      8  391
QTA-14 236541 430.00 432.00 2.00 <0.05  <5  0.3    12    63    61    10  439
QTA-14 236542 432.00 433.00 1.00 <0.05  <5 <0.2      8    53    20      6  316
QTA-14 236543 433.00 434.13 1.13 <0.05  <5 <0.2    10    60    18      5  357
QTA-14 236544 434.13 434.73 0.60 <0.05  <5  0.2    18    66    26      8  378
QTA-14 236545 434.73 436.00 1.27 <0.05  <5 <0.2    12    58    26      5  359
QTA-14 236546 436.00 438.00 2.00 <0.05  <5 <0.2      9    53    73      7  262
QTA-14 236547 438.00 441.00 3.00 <0.05  <5 <0.2      7    51    88      7  446
QTA-14 236548 441.00 443.00 2.00 <0.05  <5 <0.2      8    51 143      8  391
QTA-14 236549 443.00 444.09 1.09 <0.05  <5 <0.2      9    55 217      7  523
QTA-14 236550 444.09 445.00 0.91 <0.05  <5  0.2      9    59 505    10  335
QTA-14 236551 445.00 446.70 1.70 <0.05  <5 <0.2      7    51    57      9  412
QTA-14 236552 449.10 450.19 1.09 <0.05  <5  0.3    15 100 161    11  548
QTA-14 236553 457.64 458.36 0.72 <0.05  <5 <0.2    13    85    29      9  471
QTA-14 236554 462.38 464.00 1.62 <0.05  <5 <0.2    14    99    38    14  441
QTA-14 236555 464.00 465.40 1.40 <0.05  <5 <0.2    15    99    48    16  478
QTA-14 236556 465.40 466.30 0.90 <0.05  <5  0.2    17    95    84    12  575
QTA-14 236557 466.30 467.50 1.20 <0.05  <5  0.2    14 106    84    12  435
QTA-14 236558 467.50 467.71 0.21 <0.05  <5 <0.2    16    95    61    14  483
QTA-14 236559 467.71 469.00 1.29 <0.05  <5 <0.2    12    96    52      9  391
QTA-16 236756 13.00 14.00 1.00 <0.05      5  2.4    52    89 359    67  200
QTA-16 236757 14.00 15.00 1.00 <0.05      7  1.6    21 108 240    29  389
QTA-16 236758 15.00 17.00 2.00 <0.05  11  0.6    18 108 282      8  230
QTA-16 236759 17.00 18.15 1.15 <0.05  <5 <0.2    16 104    51      5  853
QTA-16 236760 22.20 24.50 2.30 <0.05  <5  2.5    23    94 202      8  470
QTA-16 236761 24.50 25.80 1.30 <0.05      6      5    28    54 597      7 1045
QTA-16 236762 25.80 27.00 1.20 <0.05  <5      2    39    99 314    11  332
QTA-16 236763 27.00 28.00 1.00 <0.05  <5  0.3    10 126    51      7  443

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 9 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-16 236764 28.00 30.00 2.00 <0.05  <5  0.2    12    95    37      6  408
QTA-16 236765 30.00 32.00 2.00 <0.05  <5 <0.2      9    64    52      4  444
QTA-16 236766 32.00 33.42 1.42 <0.05  <5 <0.2      8    67    33      2  325
QTA-16 236767 60.20 61.60 1.40 <0.05  <5 <0.2      8    56    24      3  317
QTA-16 236768 73.74 74.64 0.90 <0.05  <5  0.2    18    85  354    10  532
QTA-16 236769 83.92 86.00 2.08 <0.05  <5  0.9    29  122  643    31  418
QTA-16 236770 86.00 88.20 2.20 <0.05      5  2.8    20  167  365    10  450
QTA-16 236771 88.20 90.20 2.00 <0.05  <5  0.3    12    90    71    11  362
QTA-16 236772 90.20 92.20 2.00 <0.05  <5 <0.2    12    66    23      3  591
QTA-16 236773 92.20 94.65 2.45 <0.05  <5  0.2    10    66    49      3  421
QTA-16 236774 94.65 96.00 1.35 <0.05  <5  0.2      8    83    36      2  376
QTA-16 236775 96.00 97.60 1.60 <0.05  <5  0.3      6    55  142      5  379
QTA-16 236776 97.60 99.60 2.00 <0.05  <5  0.2    14    67    51      4  363
QTA-16 236777 99.60 101.60 2.00 <0.05  <5 <0.2      6    48  102      4  478
QTA-16 236778 101.60 103.60 2.00 <0.05  <5  0.2    11    46    76    10  495
QTA-16 236779 103.60 104.50 0.90 <0.05  <5 <0.2      9    60    35    12  366
QTA-16 236780 104.50 105.00 0.50 <0.05  <5 <0.2      7    48    24    23  289
QTA-16 236781 105.00 106.90 1.90 <0.05  <5 <0.2      8    58    47      6  553
QTA-16 236782 114.60 114.80 0.20 <0.05  <5 <0.2    12  126  119    26  438
QTA-16 236783 118.20 119.00 0.80 <0.05  <5  0.6    12    91    68      8  561
QTA-16 236784 119.00 121.00 2.00 <0.05  <5  0.9    14    92  121    29  435
QTA-16 236785 121.00 123.00 2.00 <0.05  <5 <0.2    12    80    79      5  343
QTA-16 236786 123.00 125.00 2.00 <0.05  <5  0.2    12    79    80      3  387
QTA-16 236787 125.00 127.10 2.10 <0.05  <5  0.4    12    74  110      6  400
QTA-16 236788 127.10 127.70 0.60 <0.05  <5  0.8    13    23  143    13  399
QTA-16 236789 131.38 133.80 2.42 <0.05  <5  0.5      9    40  192    38  391
QTA-16 236790 133.80 135.00 1.20 <0.05  <5  1.6    11    51  160    16  424
QTA-16 236791 135.00 137.00 2.00 <0.05  <5  1.2    11    46  116    29  442
QTA-16 236792 137.00 139.00 2.00 <0.05  <5  0.6      8  114  171    24  393
QTA-16 236793 139.00 141.00 2.00 <0.05  <5  0.3      7    64  118    18  480
QTA-16 236794 141.00 143.00 2.00 <0.05  <5  0.6      9    55  182    28  423
QTA-16 236795 143.00 145.00 2.00 <0.05  <5  0.5      6    40  122    22  397
QTA-16 236796 145.00 145.60 0.60 <0.05  <5  1.7  100    58  110    33  780
QTA-16 236797 145.60 145.95 0.35 <0.05  10    11  679 2340  319    49  373
QTA-16 236798 145.95 147.00 1.05 <0.05  <5  1.2    32    78  239    25  590
QTA-16 236799 147.00 149.00 2.00 <0.05  <5  0.5      7    83  144    20  484
QTA-16 236800 149.00 151.00 2.00 <0.05  <5  0.8    21    85  152    26  480
QTA-16 236801 151.00 153.20 2.20 <0.05  <5  1.4    12    60  294    32  588
QTA-16 236802 153.20 155.50 2.30 <0.05  <5  4.7  112  108  908    34  612
QTA-16 236803 155.50 157.00 1.50 <0.05  <5  0.4      5    20    84    16  475
QTA-16 236804 157.00 159.00 2.00 <0.05  <5  0.6    10    55  128    19  604
QTA-16 236805 159.00 160.90 1.90 <0.05  <5  0.6    12    45  419    25  712
QTA-16 236806 160.90 162.07 1.17 <0.05  <5      1    18    54  196    30  593
QTA-16 236807 162.07 162.64 0.57 <0.05      6  0.5      7    16  151    14  397
QTA-16 236808 162.64 163.40 0.76 <0.05  <5      1    21    29  862    25  629
QTA-16 236809 163.40 164.70 1.30 <0.05  <5  1.8    23    94  776    18  840
QTA-16 236810 164.70 165.20 0.50 <0.05 110 >100 6240 8890 1095 648 1420
QTA-16 236811 165.20 166.40 1.20 <0.05  <5  6.2  241  646  787    76  953
QTA-16 236812 166.40 167.20 0.80 <0.05  <5  1.8    42  142  378    42  864
QTA-16 236813 167.20 168.30 1.10 <0.05  <5  0.7    14  132  408    35  749
QTA-16 236814 168.30 168.63 0.33 <0.05  <5  0.6    11    48  546    74  544
QTA-16 236815 168.63 169.50 0.87 <0.05  <5  0.5    10    33  277    37  534
QTA-16 236816 169.50 170.79 1.29 <0.05  <5      1    19    60  168    41  679
QTA-16 236817 170.79 172.50 1.71 <0.05  <5  0.9    20    97  302    36  654
QTA-16 236818 172.50 173.50 1.00 <0.05  <5  0.6    15  105  230    29  565
QTA-16 236819 173.50 175.00 1.50 <0.05  <5  0.6    10    54  192 112  501
QTA-16 236820 175.00 175.50 0.50 <0.05  <5  0.4    23  100  221    26  440
QTA-16 236821 182.00 184.30 2.30 <0.05  <5  0.3    13    74    82    13  451
QTA-16 236822 186.00 186.41 0.41 <0.05  <5  0.3    16    96    39      9  444
QTA-16 236823 202.70 203.25 0.55 <0.05  <5  0.6    15  105  284    18  488
QTA-16 236824 203.25 204.00 0.75 <0.05  <5  0.4    10  102  144    22  390
QTA-16 236825 204.00 205.00 1.00 <0.05  <5  0.3      7    61    83    24  204
QTA-16 236826 205.00 205.40 0.40 <0.05  <5  0.6      9    92    71 101 1955

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 10 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-16 236827 205.40 205.80 0.40 <0.05  <5  0.4      9    60  134  163  255
QTA-16 236828 205.80 207.00 1.20 <0.05  <5  0.9    51    59  162    14  282
QTA-16 236829 207.00 208.20 1.20 <0.05  <5  0.4      8    64  101      8  478
QTA-16 236830 208.20 208.75 0.55 <0.05  <5  0.8    56 108  126    22  424
QTA-16 236831 208.75 210.00 1.25 <0.05  <5  0.3    11    94    69    14  402
QTA-16 236832 210.00 212.00 2.00 <0.05  <5 <0.2    10    72    65    27  304
QTA-16 236833 212.00 214.00 2.00 <0.05  <5 <0.2    10    67  229    16  281
QTA-16 236834 214.00 214.90 0.90 <0.05  <5  0.2    14    69    34    35  181
QTA-16 236835 214.90 216.90 2.00 <0.05  <5 <0.2    12    75    51    17  360
QTA-16 236836 216.90 218.20 1.30 <0.05  <5 <0.2    17    95    84    35  607
QTA-16 236837 218.20 220.00 1.80 <0.05  <5  1.1      6    44 1010    94  215
QTA-16 236838 220.00 220.50 0.50 <0.05  <5  0.7    27 225  281    21  418
QTA-16 236839 220.50 222.00 1.50 <0.05  <5  0.3      8    69  859    85    44
QTA-16 236840 222.00 223.30 1.30 <0.05  <5  0.7    13    73  987  152      9
QTA-16 236841 223.30 223.70 0.40 <0.05  <5  0.9      8    39  231    18  212
QTA-16 236842 223.70 225.70 2.00 <0.05  <5  0.2      4    40    94    18  378
QTA-16 236843 225.70 227.00 1.30 <0.05  <5  0.7    10    36  201    15  497
QTA-16 236844 227.00 229.00 2.00 <0.05  <5      1    14    65  718    30  466
QTA-16 236845 229.00 231.00 2.00 <0.05  <5  0.7    11    71 1175    41  719
QTA-16 236846 231.00 232.30 1.30 <0.05  <5  0.5      6    62  244    18  534
QTA-16 236847 232.30 234.00 1.70 <0.05  <5  0.5    11    46  714    38    90
QTA-16 236848 234.00 235.18 1.18 <0.05  <5  0.2    14    79  270    26  478
QTA-16 236849 235.18 237.00 1.82 <0.05  <5  0.3    14    99  137    24  637
QTA-16 236850 237.00 239.00 2.00 <0.05  <5 <0.2    15    82  150    30  228
QTA-16 236851 239.00 241.00 2.00  0.09  <5      1 304 421 1665    48  325
QTA-16 236852 241.00 243.00 2.00 <0.05  <5 <0.2    11    75    97    23  275
QTA-16 236853 243.00 244.30 1.30 <0.05  <5  0.3      6    62  101    19  299
QTA-16 236854 244.30 245.40 1.10 <0.05  <5 <0.2      2    33    35    19  417
QTA-16 236855 245.40 247.60 2.20 <0.05  <5  1.3    53 136  175    20  547
QTA-16 236856 250.40 252.00 1.60 <0.05  <5  0.3    15 102    73    25  527
QTA-16 236857 252.00 254.00 2.00 <0.05  <5 <0.2      3    70    51    25  565
QTA-16 236858 254.00 255.12 1.12 <0.05  <5 <0.2    <2    73    95    17  494
QTA-16 236859 255.12 256.90 1.78 <0.05  <5  0.2    <2    38    88    19  531
QTA-16 236860 256.90 257.10 0.20 <0.05  <5  0.3      6    30  136    21  539
QTA-16 236861 257.10 258.84 1.74 <0.05  <5  0.6    10 140  315    14  478
QTA-16 236862 258.84 260.00 1.16 <0.05  <5  1.1    11 115  481    17  554
QTA-16 236863 260.00 261.84 1.84 <0.05  <5      1      8    53  404    16  550
QTA-16 236864 261.84 264.00 2.16 <0.05  <5  3.5    23 339  343    26  444
QTA-16 236865 264.00 265.00 1.00 <0.05  <5  0.2      4    57  302    28  580
QTA-16 236866 265.00 267.00 2.00 <0.05  <5  0.6      4    27  818    39  600
QTA-16 236867 267.00 267.51 0.51 <0.05  <5  2.7    72 463 2980 1150 1755
QTA-16 236868 267.51 268.10 0.59 <0.05      5  2.8 132 317 2490  416 1685
QTA-16 236869 268.10 269.50 1.40 <0.05  <5  1.2    10    37  134    29  831
QTA-16 236870 269.50 271.30 1.80 <0.05  <5  1.1    19    92  140    26  906
QTA-16 236871 271.30 271.80 0.50 <0.05  <5  1.3    52 469  456    21 1245
QTA-16 236872 274.00 274.58 0.58 <0.05  <5  6.1 209 234  350    28  483
QTA-16 236873 278.00 279.16 1.16 <0.05  <5  0.2    16    68    19    12  353
QTA-16 236874 287.40 289.00 1.60 <0.05  <5  0.9    18 103  198      9  447
QTA-16 236875 292.00 292.40 0.40 <0.05      5      4 122 234  144    13  539
QTA-16 236876 294.50 294.74 0.24 <0.05  <5  1.6    20 106  364    31  822
QTA-16 236877 300.54 302.00 1.46 <0.05  <5  0.5      8    44  136    19  409
QTA-16 236878 302.00 302.50 0.50 <0.05  <5  0.6    15    47  247    15  535
QTA-16 236879 302.50 303.00 0.50 <0.05  <5  0.5      3    34    89    18  571
QTA-16 236880 303.00 304.34 1.34 <0.05  <5  2.5 102 711 1125    18  659
QTA-16 236881 304.34 305.50 1.16 <0.05  <5  0.8    17 112  367    13  481
QTA-16 236882 305.50 306.93 1.43 <0.05  <5  0.3      2    53    41    10  357
QTA-16 236883 306.93 307.60 0.67 <0.05  <5  0.6      2    90    62    15  403
QTA-16 236884 307.60 309.00 1.40 <0.05  <5  0.3    <2    95    80    15  345
QTA-16 236885 309.00 311.00 2.00 <0.05  <5  0.3      2    50  581    56  210
QTA-16 236886 311.00 312.80 1.80 <0.05  <5  0.4      4    71  487    32  225
QTA-16 236887 312.80 313.38 0.58    0.1      9      6 200 380 5850    83  254
QTA-16 236888 313.38 314.10 0.72 <0.05  <5  2.3    11    54  494    20  219
QTA-16 236889 314.10 314.30 0.20 <0.05  <5  1.1    16    58  148    19  327

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 11 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-16 236890 314.30 315.00 0.70 <0.05  <5  2.2    47      198  589    38 295
QTA-16 236891 325.70 327.70 2.00 <0.05  <5  0.4      4          34  182    20 377
QTA-16 236892 327.70 328.52 0.82 <0.05  <5  4.4    33          82 1130    22 269
QTA-16 236893 328.52 330.25 1.73 <0.05  <5  2.3    79          97  854    35 376
QTA-16 236894 330.50 331.22 0.72 <0.05  <5  0.9      7          41  441    38 420
QTA-16 236895 331.22 332.20 0.98 <0.05  <5  1.5    16          41  539    33 536
QTA-16 236896 332.20 333.76 1.56 <0.05  <5  1.4    25          85  372    45 351
QTA-16 236897 333.76 334.37 0.61 <0.05  <5  0.3      3          19  140  160 329
QTA-16 236898 334.37 335.40 1.03 <0.05  <5  1.6    10          75  566    28 600
QTA-16 236899 335.40 336.40 1.00 <0.05      6  4.9  515      285 1450  188 474
QTA-16 236900 336.40 338.40 2.00 <0.05  <5  0.5      6          28  504    37 720
QTA-16 236901 338.40 340.90 2.50 <0.05  <5  0.5    12          20  262    25 552
QTA-16 236902 340.90 341.40 0.50 <0.05  <5  1.2    11          28  424    18 372
QTA-16 236903 342.65 345.00 2.35 <0.05  <5  1.4      9      356  466    29 296
QTA-16 236904 345.00 347.00 2.00 <0.05  <5  1.4    33      142 1055    20 301
QTA-16 236905 347.00 349.00 2.00 <0.05  <5  0.4      6          82  164    32 235
QTA-16 236906 349.00 350.20 1.20 <0.05  <5  0.3      2          41    64    13 214
QTA-16 236907 350.20 352.20 2.00 <0.05  <5  0.3      5          31  351    40 267
QTA-16 236908 352.20 353.55 1.35 <0.05  <5  0.3      3          21  106    20 234
QTA-16 236909 361.50 364.00 2.50 <0.05  <5  1.1    16      263  594    43 414
QTA-16 236910 364.00 366.20 2.20 <0.05  <5  0.4      4          70  471    24 538
QTA-16 236911 366.20 367.00 0.80 <0.05  <5      5    26      327 1085    38 454
QTA-16 236912 368.10 369.71 1.61 <0.05  <5  8.1  201      886  550    70 383
QTA-16 236913 369.71 369.90 0.19 <0.05  98 99.1 3510    6880  398 1305 390
QTA-16 236914 369.90 371.70 1.80 <0.05  <5  2.3    20          60  341    21 286
QTA-16 236915 371.70 372.70 1.00 <0.05  <5  1.2    16          35  331    21 311
QTA-16 236916 372.70 373.80 1.10 <0.05  <5  3.1    12      142  531    19 389
QTA-16 236917 373.80 375.37 1.57 <0.05  12  7.1  332    1225 1125  160 442
QTA-16 236918 375.37 377.00 1.63 <0.05  <5  7.2  211    1280 1110  119 200
QTA-16 236919 377.00 379.50 2.50 <0.05  <5  6.4    59      206  780    34 414
QTA-16 236920 379.50 379.70 0.20 <0.05  10  8.3  192      207  826    70 197
QTA-16 236921 379.70 381.00 1.30 <0.05  49 46.5 8070    7300 1025 4420 288
QTA-16 236922 381.00 383.70 2.70 <0.05  <5  0.9    22          90  254    20 581
QTA-16 236923 383.70 385.00 1.30 <0.05  <5  0.4      9          32  162      9 513
QTA-16 236924 385.00 386.50 1.50 <0.05  <5  0.2      4          19    61      8 424
QTA-16 236925 386.50 388.30 1.80 <0.05  <5  0.4      5          34  533    14 547
QTA-16 236926 390.60 391.60 1.00 <0.05  <5  0.4      4          17  142    13 590
QTA-16 236927 395.33 396.60 1.27 <0.05  <5  0.3      2          27  216    18    55
QTA-16 236928 396.60 397.78 1.18 <0.05  <5  0.3    <2          34    63      7 687
QTA-16 236929 397.78 399.30 1.52 <0.05  <5  0.3      2          22  644    83 196
QTA-16 236930 401.12 402.20 1.08 <0.05      7  3.6    36      105 1400    17 529
QTA-16 236931 402.20 404.00 1.80 <0.05  <5  1.9    29          81  456    17 333
QTA-16 236932 404.00 405.80 1.80 <0.05  <5  0.5      3          18  180    14 520
QTA-16 236933 405.80 407.70 1.90 <0.05      5  3.8    26      200  474    19 391
QTA-16 236934 407.70 409.10 1.40  0.47  28 26.9 3960    7520 3950 1425 419
QTA-16 236935 409.10 411.80 2.70 <0.05      9  6.7  903      233 1430  308 166
QTA-16 236936 418.30 419.00 0.70 <0.05  <5  0.5    12          34    47    12 336
QTA-16 236937 419.00 420.08 1.08 <0.05  <5  0.6      6          37  363    18 315
QTA-16 236938 436.80 438.00 1.20 <0.05  <5  1.1      7      118  675    20 347
QTA-16 236939 438.00 439.50 1.50 <0.05  <5  3.7      8          51  870    71 238
QTA-16 236940 439.50 440.00 0.50 <0.05  18 17.3    26    7100 2930    60 356
QTA-16 236941 442.00 444.00 2.00 <0.05  <5  0.4      4          26  164    15 491
QTA-16 236942 444.00 446.56 2.56 <0.05  <5  0.5      3          18  142    31 491
QTA-16 236943 446.56 448.00 1.44 <0.05  <5  1.1      8          15  124    12 426
QTA-16 236944 448.00 451.30 3.30 <0.05  <5 12.5  237      512  594    93 539
QTA-16 236945 451.30 453.70 2.40 <0.05  <5  1.1      7          18  126    22 428
QTA-16 236946 453.70 456.40 2.70 <0.05      5  2.7    12          36  504    37 393
QTA-16 236947 456.40 458.00 1.60 <0.05 107 >100 8100 >10000 1530 4950 530
QTA-16 236948 458.00 459.38 1.38 <0.05  32 29.3 2830    2720  819 1705 496
QTA-16 236949 459.38 459.50 0.12    0.1  51 52.4 5480 >10000 2050 2980 757
QTA-16 236950 459.50 461.00 1.50  0.13  33 42.2  779    1720  786  502 654
QTA-16 236951 461.00 463.30 2.30 <0.05  <5  3.6    23          75  738    20 550
QTA-16 236952 463.30 465.00 1.70 <0.05  <5  0.9      8          10  362    10 472

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 12 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-16 236953 465.00 466.90 1.90 <0.05  <5  1.9      8    15  333    14  621
QTA-16 236954 466.90 468.50 1.60 <0.05  <5  6.8  353  548  365  200  834
QTA-16 236955 468.50 469.80 1.30 <0.05  51 57.5 1680    69  815 2570  684
QTA-16 236956 469.80 471.00 1.20    0.1      5  7.9    55  212 1620    50  744
QTA-16 236957 471.00 471.73 0.73 <0.05  35  38 1725 6820 1840 1470 1265
QTA-16 236958 471.73 473.00 1.27 <0.05      5  6.2    17    52  979    20  607
QTA-16 236959 473.00 474.20 1.20 <0.05  <5  5.4    11    40 1150    21  647
QTA-16 236960 474.20 476.00 1.80 <0.05  <5  5.6    21  160 1040    24  817
QTA-16 236961 476.00 478.00 2.00 <0.05      9  6.6      7    30 2590    23  644
QTA-16 236962 486.00 487.80 1.80 <0.05      9  5.9      9    55  756    18  524
QTA-16 236963 487.80 489.00 1.20 <0.05  <5  3.9      9    35  424    16  439
QTA-16 236964 489.00 490.00 1.00 <0.05  <5  2.4    12  102  822    13  383
QTA-16 236965 490.00 491.00 1.00  0.07  <5  6.6  710  598  671  410  499
QTA-16 236966 491.00 491.80 0.80  0.13  <5  3.2    74  140  599    38  371
QTA-16 236967 491.80 492.86 1.06 <0.05  <5  7.7  731  359 2160  392  625
QTA-16 236968 492.86 494.00 1.14  0.07  <5  3.2    10    26  980    15  441
QTA-16 236969 494.00 495.10 1.10 <0.05  <5  5.4    12    20  486    18  417
QTA-16 236970 495.10 495.70 0.60 <0.05  28 32.1 1525    34  685  965  460
QTA-16 236971 495.70 497.61 1.91 <0.05  <5  6.7    21    72  813    20  554
QTA-16 236972 497.61 498.00 0.39 <0.05      8 13.3    43    63 1300    37  959
QTA-16 236973 498.00 499.40 1.40 <0.05  14 11.6    42    80  724    33  502
QTA-16 236974 499.40 501.00 1.60 <0.05      8  4.3    14    20  424    18  474
QTA-16 236975 501.00 502.70 1.70 <0.05      5  2.9    10    19  835    19  383
QTA-16 236976 502.70 504.13 1.43 <0.05  <5  0.7      4    25 1030    18  469
QTA-16 236977 504.13 504.90 0.77 <0.05  <5  7.3    60  136 1955    26  681
QTA-16 236978 504.90 507.60 2.70 <0.05  <5      2      8    54  882    14  517
QTA-16 236979 507.60 509.45 1.85 <0.05  <5  3.6      8    56  808    17  451
QTA-16 236980 509.45 512.72 3.27 <0.05  <5      1      7    33  497    11  672
QTA-16 236981 512.72 515.20 2.48 <0.05  <5  2.9      4    18  591    11  400
QTA-16 236982 515.20 517.50 2.30 <0.05  <5  0.5      8    26  309    11  466
QTA-16 236983 517.50 518.68 1.18 <0.05  <5  0.5      7  147  137    14  419
QTA-16 236984 518.68 519.60 0.92 <0.05  <5  0.4      6    65    93      8  473
QTA-16 236985 519.60 521.40 1.80 <0.05  <5  0.3      4    31    72      8  534
QTA-16 236986 521.40 522.00 0.60 <0.05  <5  0.9    11    55  140    15  510
QTA-16 236987 522.00 522.70 0.70 <0.05  <5  0.7    28  263  528      9  503
QTA-16 236988 533.01 535.53 2.52 <0.05  <5  0.5    17  114    38      7  442
QTA-16 236989 539.40 542.00 2.60 <0.05  <5  0.6    19  128    30    13  414
QTA-16 236990 545.80 546.30 0.50 <0.05  <5  2.5  295  869  447    72  352
QTA-16 236991 569.40 570.40 1.00 <0.05  <5  2.9    18  398 1105    14  545
QTA-16 236992 570.40 572.70 2.30 <0.05  <5  0.6      5    22  351    15  501
QTA-16 236993 572.70 575.16 2.46 <0.05  <5  2.5      7    32  877    28  838
QTA-16 236994 575.16 577.00 1.84 <0.05  <5  3.4    61    79 2200    25  740
QTA-16 236995 577.00 579.15 2.15 <0.05  <5  0.3      5    21  351    14  532
QTA-16 236996 580.50 580.80 0.30 <0.05  <5  0.2      3    24    68      9  427
QTA-16 236997 582.00 583.00 1.00 <0.05  <5  0.2      3    29    43      6  646
QTA-16 236998 583.00 584.20 1.20 <0.05  <5  0.3      3    27    49      7  765
QTA-16 236999 584.20 584.40 0.20 <0.05  <5  0.2      3    26  102      9  719
QTA-16 237000 586.30 586.50 0.20 <0.05  <5  2.6    59 1445 3480    36  603
QTA-17 237001  6.10  8.00 1.90 <0.05      7 <0.2    11    70  153    53  514
QTA-17 237002  8.00 10.00 2.00 <0.05      8 <0.2      9    60  105    34  407
QTA-17 237003 10.00 12.00 2.00 <0.05      7 <0.2    12    98  112    20  348
QTA-17 237004 12.00 14.00 2.00 <0.05      8 <0.2    17  121  107    83  522
QTA-17 237005 14.00 16.00 2.00 <0.05  <5 <0.2    19  124    81    48  411
QTA-17 237006 16.00 18.00 2.00 <0.05  <5 <0.2    16    98    74    37  437
QTA-17 237007 18.00 18.70 0.70 <0.05  <5  0.2    14  100    72    30  602
QTA-17 237008 18.70 20.80 2.10 <0.05  <5  0.3    15    97    55    32  570
QTA-17 237009 20.80 23.54 2.74 <0.05  <5 <0.2    21  110    66    26  415
QTA-17 237010 24.80 25.30 0.50 <0.05  <5 <0.2    12    84    96    17  417
QTA-17 237011 25.30 25.70 0.40 <0.05  <5  0.2    14    85  110    11  513
QTA-17 237012 25.70 27.00 1.30 <0.05  <5  0.4    16  103    76    23  504
QTA-17 237013 27.00 27.90 0.90 <0.05  <5  0.2    19  145    56    32  628
QTA-17 237014 27.90 29.27 1.37 <0.05  <5      4    32  338  140    22  635
QTA-17 237015 29.27 29.87 0.60  0.07      9  9.2  313  510  778    45  969

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 13 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID Sample From    To Width    Au  Ag (FA)    Ag    Pb    Zn    As    Sb  Mn
  Number  (m)  (m)  (m)  (g/t) (g/t) (g/t) ppm ppm ppm ppm ppm
QTA-17 237016 29.87 30.40 0.53    0.1  29    32    73  865  498    40 1335
QTA-17 237017 30.40 31.50 1.10 <0.05      5      7  355 1165    77    25  844
QTA-17 237018 31.50 33.00 1.50 <0.05  17 14.2    47  593    99    20  705
QTA-17 237019 33.00 34.40 1.40 <0.05      9  6.5  156  258    69    30  608
QTA-17 237020 35.66 38.30 2.64 <0.05  <5  1.8  166  306    53    22  505
QTA-17 237021 38.30 38.31 0.01  0.27 233 >100 3740 2010 1390  431 1415
QTA-17 237022 41.30 41.60 0.30 <0.05  <5  1.3    18  120    31    19  443
QTA-17 237023 41.60 42.70 1.10 <0.05  <5  1.2    24  143    51    18  519
QTA-17 237024 42.70 43.40 0.70 <0.05  <5  1.3    15  101    36    14  645
QTA-17 237025 44.60 46.60 2.00 <0.05  <5  0.9    17  125    66    27  696
QTA-17 237026 46.60 48.00 1.40 <0.05  <5  2.5    21  102  207    13  765
QTA-17 237027 48.00 50.00 2.00 <0.05  <5  0.6    16  112    62    23  452
QTA-17 237028 50.00 52.00 2.00 <0.05  <5  0.5    24  126    64    18  540
QTA-17 237029 52.00 53.30 1.30 <0.05  <5  0.3    17    94    45    13  443
QTA-17 237030 54.30 56.50 2.20 <0.05  <5 <0.2    16    92    58    64  481
QTA-17 237031 56.50 57.20 0.70 <0.05  <5 <0.2    15    98    59    19  565
QTA-17 237032 57.20 58.60 1.40 <0.05  <5 <0.2    14    99  118    16  370
QTA-17 237033 58.60 59.13 0.53 <0.05  <5  0.3    11    85  160    10  648
QTA-17 237034 59.13 60.38 1.25 <0.05  <5 <0.2    13  104  243    14  300
QTA-17 237035 60.38 61.38 1.00 <0.05  <5  0.2    16  110  108    13  549
QTA-17 237036 61.38 61.77 0.39 <0.05  <5  0.2    12  109  118    10  332
QTA-17 237037 65.70 67.00 1.30 <0.05  <5 <0.2    17    78    79    17  594
QTA-17 237038 67.00 69.00 2.00 <0.05  <5 <0.2    13    71    55    10  480
QTA-17 237039 69.00 71.00 2.00 <0.05  <5 <0.2    16    97  156    23  512
QTA-17 237040 71.00 73.40 2.40 <0.05  <5 <0.2    16    89  137    22  509
QTA-17 237041 73.40 73.80 0.40 <0.05  <5  0.2    16  116  272    16  460
QTA-17 237042 73.80 75.00 1.20 <0.05  <5  0.2    14    98  252    21  528
QTA-17 237043 75.00 77.00 2.00 <0.05  <5 <0.2    16  108  259    22  490
QTA-17 237044 77.00 78.64 1.64 <0.05      7 <0.2    16  104  175    19  597
QTA-17 237045 78.64 79.30 0.66 <0.05  <5  3.6    13    93 1380    49  831
QTA-17 237046 79.30 82.30 3.00 <0.05  10  9.8    62  143 1150    51 2970
QTA-17 237047 91.00 91.40 0.40 <0.05  <5  0.4      8    91  148    13  671
QTA-17 237048 102.00 104.00 2.00 <0.05      5 <0.2    12    92  362    19  649
QTA-17 237049 104.00 104.40 0.40 <0.05  <5  0.2    16    89  113    17  911
QTA-17 237050 104.40 105.00 0.60 <0.05      5  0.5    12    89  533    25  839
QTA-17 237051 105.00 105.47 0.47  0.07  <5  1.6    10    81 2730    59  731
QTA-17 237052 105.47 107.00 1.53  0.07  <5  1.3    17    51 2440    60 1615
QTA-17 237053 107.00 109.00 2.00 <0.05  <5      1    12    91 1010    36 1200
QTA-17 237054 109.00 111.00 2.00 <0.05  <5  0.8    15  116 2510    51 1390
QTA-17 237055 111.00 112.20 1.20 <0.05  <5  0.4    11    97  341    17 1245
QTA-17 237056 112.20 113.10 0.90 <0.05  <5  0.7    12    90  302    22 1170
QTA-17 237057 113.10 113.60 0.50 <0.05  <5  0.9    28    92  918    31 3090
QTA-17 237058 113.60 114.86 1.26 <0.05  <5  1.8    14    88 1190    22 1555
QTA-17 237059 114.86 116.00 1.14 <0.05  <5  0.6    13  114  373    18 1385
QTA-17 237060 116.00 117.00 1.00 <0.05      5      3    21  106 1610    38 2930
QTA-17 237061 117.00 119.16 2.16  0.07  28 13.8    58  237 1540    64 3860
QTA-17 237062 119.16 121.00 1.84  0.13  19 18.1  115  173 1715    88 4140
QTA-17 237063 121.00 123.00 2.00    0.1  10  9.2    45  189 2080    49 4770
QTA-17 237064 123.00 125.00 2.00 <0.05  <5  0.6    15  104  811    37 1165
QTA-17 237065 125.00 127.00 2.00 <0.05  <5 <0.2    16  100  262    28  612
QTA-17 237066 127.00 129.00 2.00 <0.05  <5  0.3    16    99  550    24 1270
QTA-17 237067 129.00 131.00 2.00 <0.05      5 <0.2    18  110    73    25  680
QTA-17 237068 131.00 132.80 1.80 <0.05  <5  0.3    15  102  385    26 1240
QTA-17 237069 132.80 134.37 1.57 <0.05  <5 <0.2    21  120    62    27  582
QTA-17 237070 134.37 135.00 0.63 <0.05  <5 <0.2    19  110    59    21  451
QTA-17 237071 148.00 148.24 0.24 <0.05  <5 <0.2    18  113    23    12  404
QTA-17 237072 150.45 152.50 2.05 <0.05  <5  0.3    17  114  138    20  629
QTA-17 237073 152.50 155.90 3.40 <0.05  <5  0.2    17  114    47    15  318
QTA-17 237074 155.90 159.00 3.10 <0.05  <5 <0.2    17  102    83    16  481
QTA-17 237075 159.00 160.00 1.00 <0.05  <5 <0.2    30  134    50    25  508
QTA-17 237076 160.00 161.40 1.40  0.07      6  2.6    18    96 1690 2120 2080
QTA-17 237077 161.40 163.30 1.90 <0.05  <5  0.2    20  108    99  346  874
QTA-17 237078 167.00 168.70 1.70 <0.05  <5 <0.2    20  112    23    18  432

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 14 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)

Au
(/t)

Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-17 237079 168.70 170.00 1.30 <0.05  <5 <0.2    16 108    16    12  428
QTA-17 237080 170.00 172.00 2.00 <0.05  <5 <0.2    16 101    22    19  470
QTA-17 237081 172.00 174.00 2.00 <0.05  <5 <0.2    21 113    36    17  483
QTA-17 237082 174.00 176.00 2.00 <0.05  <5 <0.2    15 104    49      9  444
QTA-17 237083 176.00 177.72 1.72 <0.05  <5 <0.2    15    99 101    10  428
QTA-17 237084 177.72 178.00 0.28 <0.05  <5  0.2    17 108 320    27  582
QTA-17 237085 179.00 181.00 2.00 <0.05  <5  0.2    19 108    71    28  501
QTA-17 237086 181.00 183.00 2.00 <0.05  <5  0.2    16 104    84    20  487
QTA-17 237087 183.00 185.00 2.00 <0.05  <5  0.2    16 104 143    20  469
QTA-17 237088 185.00 188.00 3.00 <0.05  <5 <0.2    23 100    85    20  414
QTA-17 237089 195.70 195.90 0.20 <0.05  <5  0.2    19 104 527    64  621
QTA-17 237090 195.90 196.60 0.70 <0.05  <5 <0.2    17 101    69    12  271
QTA-17 237091 196.60 197.10 0.50 <0.05  <5 <0.2    12    62    59    19  538
QTA-17 237092 197.10 197.70 0.60 <0.05  <5 <0.2    11    86    69    13  265
QTA-17 237093 197.70 199.00 1.30 <0.05  <5  0.3    21 118    66    18  368
QTA-17 237094 199.00 201.00 2.00  0.17  <5 <0.2    18 110    57    17  416
QTA-17 237095 201.00 203.00 2.00 <0.05  <5  0.2    17 120 116    15  397
QTA-17 237096 203.00 205.00 2.00 <0.05  <5 <0.2      9    42    82      9  422
QTA-17 237097 205.00 207.00 2.00 <0.05  <5 <0.2    14    88 142    26  235
QTA-17 237098 218.84 220.00 1.16 <0.05  <5 <0.2    11    83    35      4  533
QTA-17 237099 220.00 221.00 1.00 <0.05  <5 <0.2    17 102    50      8  430
QTA-17 237100 221.00 222.00 1.00 <0.05  <5  0.2    20    77 329 268 1210
QTA-17 237101 227.40 229.30 1.90 <0.05  <5  0.2    16    92    20    16  444
QTA-17 237102 229.30 231.50 2.20 <0.05  <5  0.2    16 105    21    12  415
QTA-17 237103 231.50 232.00 0.50 <0.05  <5 <0.2    13    91    17      9  389
QTA-17 237104 234.45 235.00 0.55 <0.05  <5 <0.2    16 106    50      9  408
QTA-17 237105 250.60 252.00 1.40 <0.05      5 <0.2    16    97    25      9  387
QTA-17 237106 252.00 254.00 2.00 <0.05  <5 <0.2    14    91    32    14  471
QTA-17 237107 254.00 254.60 0.60 <0.05  <5 <0.2    15    95    31    19  408
QTA-17 237108 254.60 257.43 2.83 <0.05  <5 <0.2    15    94    37    13  369
QTA-17 237109 257.43 259.00 1.57 <0.05  <5 <0.2    10    42    36    58  378
QTA-17 237110 259.00 261.00 2.00 <0.05  <5 <0.2      8    50    32 555  157
QTA-17 237111 261.00 263.30 2.30 <0.05  <5 <0.2    13    73    54    71  395
QTA-17 237112 273.41 275.00 1.59 <0.05  <5  0.2    14    95    28    22  450
QTA-17 237113 275.00 277.00 2.00 <0.05  <5  0.2    14    93    29    18  404
QTA-17 237114 277.00 279.00 2.00 <0.05  <5  0.8    21    91 101    16  794
QTA-17 237115 279.00 280.00 1.00 <0.05  <5  0.6    18    61    96      9 1090
QTA-17 237116 280.00 282.00 2.00 <0.05  <5 <0.2    10    46    42      8  427
QTA-17 237117 282.00 282.55 0.55 <0.05  <5  0.6    14    26 302 104 1905
QTA-17 237118 282.55 284.00 1.45 <0.05  <5  0.3    13    80    68      8  790
QTA-17 237119 284.00 285.00 1.00 <0.05  <5  0.8    47 130 112    10  814
QTA-17 237120 288.05 288.65 0.60 <0.05  <5  0.2    17 110    44 120  375
QTA-17 237121 291.00 293.00 2.00 <0.05  <5 <0.2    10    81    57      8  422
QTA-17 237122 293.00 294.74 1.74  0.13  <5  0.2    13    64 102    54  438
QTA-17 237123 294.74 296.00 1.26 <0.05  <5  0.4    14 122    55    11  398
QTA-17 237124 299.90 300.38 0.48 <0.05  <5  0.2    11    66    49    78  415
QTA-17 237125 306.00 308.00 2.00 <0.05  <5  0.3    12    97    25    15  380
QTA-17 237126 308.00 311.34 3.34 <0.05  <5 <0.2    11    84    61    60  387
QTA-17 237127 314.20 316.38 2.18 <0.05  <5  0.3    15    85 253 400  338
QTA-17 237128 316.38 318.00 1.62 <0.05  <5  0.3      7    85    51    58  194
QTA-17 237129 323.70 323.80 0.10 <0.05  <5  0.2    15    89 120    34  636
QTA-17 237130 327.27 327.67 0.40 <0.05  <5  0.3    16 126    25    10  382
QTA-18 237131 12.00 12.30 0.30 <0.05  <5  0.2      8    39    76    38 3340
QTA-18 237132 12.30 14.00 1.70 <0.05  <5 <0.2      3    30    58    19  263
QTA-18 237133 14.00 14.80 0.80 <0.05  <5 <0.2      6    48 114    38  543
QTA-18 237134 14.80 16.80 2.00 <0.05  <5 <0.2      2    26    42    13  408
QTA-18 237135 16.80 18.80 2.00 <0.05  <5 <0.2      3    26    59    17  311
QTA-18 237136 18.80 20.80 2.00 <0.05  <5 <0.2      3    31    75    22  290
QTA-18 237137 20.80 22.80 2.00 <0.05  <5 <0.2      4    38    97    21  384
QTA-18 237138 22.80 25.40 2.60 <0.05  <5 <0.2      3    38    89    12  474
QTA-18 237139 54.25 55.75 1.50 <0.05  <5  1.4    47    64    53      7  255
QTA-18 237140 64.60 66.00 1.40 <0.05  <5  0.6    22    47      7    <2  633
QTA-18 237141 66.00 66.90 0.90 <0.05  <5  0.2    17    47    13      2 1105

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 15 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-18 237142 66.90 68.65 1.75 <0.05  <5  0.6      6 112    15    <2  744
QTA-18 237143 68.65 70.00 1.35 <0.05  <5  0.3    <2 167    38    <2 1375
QTA-18 237144 70.00 70.60 0.60 <0.05  <5  0.2      7 100    31      5 1180
QTA-18 237145 70.60 71.00 0.40 <0.05  <5 <0.2    11    63    37      7  756
QTA-18 237146 71.00 71.60 0.60 <0.05  <5  0.2      7    63    36      7  531
QTA-18 237147 71.60 73.00 1.40 <0.05  <5 <0.2      4    91    35      3  676
QTA-18 237148 73.00 75.00 2.00 <0.05  <5 <0.2      3    81    26    <2  345
QTA-18 237149 75.00 77.00 2.00 <0.05  <5 <0.2      2    79    22      3  408
QTA-18 237150 77.00 79.00 2.00 <0.05  <5 <0.2      3    78    14    <2  231
QTA-18 237151 79.00 81.00 2.00 <0.05  <5 <0.2      6    78      9    <2  252
QTA-18 237152 81.00 83.00 2.00 <0.05  <5 <0.2      4    78    13    <2  282
QTA-18 237153 83.00 85.00 2.00 <0.05  <5  0.2    <2    83    14    <2  331
QTA-18 237154 85.00 87.00 2.00 <0.05  <5 <0.2      3    78    16    <2  357
QTA-18 237155 87.00 89.00 2.00 <0.05  <5 <0.2      5    74    15    <2  337
QTA-18 237156 89.00 91.00 2.00 <0.05  <5 <0.2      3    68      7    <2  214
QTA-18 237157 91.00 93.00 2.00 <0.05  <5 <0.2      5    77    29    <2  561
QTA-18 237158 93.00 95.00 2.00 <0.05  <5 <0.2      2    55    84      2  525
QTA-18 237159 95.00 97.00 2.00 <0.05  <5 <0.2      4    81    24      2  505
QTA-18 237160 97.00 99.00 2.00 <0.05  <5 <0.2      3    73    31    <2 1000
QTA-18 237161 99.00 100.40 1.40 <0.05  <5 <0.2      2    68    33      2 1895
QTA-18 237162 100.40 101.14 0.74 <0.05  <5 <0.2      3    74    28    <2  752
QTA-18 237163 101.14 103.00 1.86 <0.05  <5 <0.2      4    70    45      2  454
QTA-18 237164 103.00 104.55 1.55 <0.05  <5 <0.2      4    67    44      2  508
QTA-18 237165 104.55 105.80 1.25 <0.05  <5 <0.2      3    63    41      2  646
QTA-18 237166 105.80 107.20 1.40 <0.05  <5 <0.2      3    66    40    <2  336
QTA-18 237167 107.20 108.81 1.61 <0.05  <5 <0.2      4    61    46    <2  469
QTA-18 237168 108.81 110.00 1.19 <0.05  <5 <0.2      2    74    48      2  506
QTA-18 237169 110.00 112.00 2.00 <0.05  <5 <0.2      4    64    71    <2  548
QTA-18 237170 112.00 114.00 2.00 <0.05  <5 <0.2      4    68    78    <2  691
QTA-18 237171 114.00 116.00 2.00 <0.05  <5 <0.2      4    56 104    <2  543
QTA-18 237172 116.00 118.00 2.00 <0.05  <5 <0.2    12    63 247    16  400
QTA-18 237173 118.00 120.00 2.00 <0.05  <5  0.2    12    45 191      6  392
QTA-18 237174 120.00 120.50 0.50 <0.05  <5 <0.2      9    42 198      6  295
QTA-18 237175 120.50 120.90 0.40 <0.05  15 <0.2      8    43 177      4  330
QTA-18 237176 120.90 121.60 0.70 <0.05  <5 <0.2    10    44 294    13  652
QTA-18 237177 121.60 122.80 1.20 <0.05  <5 <0.2    10    42 208      3  643
QTA-18 237178 122.80 124.00 1.20 <0.05  <5 <0.2    11    43 324    <2  415
QTA-18 237179 124.00 125.70 1.70 <0.05  <5 <0.2      9    60 355    <2  471
QTA-18 237180 125.70 128.00 2.30 <0.05  <5 <0.2    14    41 326      2  520
QTA-18 237181 128.00 130.00 2.00 <0.05  <5  0.2    10    47 208    <2  600
QTA-18 237182 130.00 130.60 0.60 <0.05  <5  0.2      8    47 212    <2  464
QTA-18 237183 130.60 132.00 1.40 <0.05  <5  0.4    11    38 178    <2  780
QTA-18 237184 145.00 146.80 1.80 <0.05  <5  0.2      9    62    22    <2  556
QTA-18 237185 146.80 148.00 1.20 <0.05  <5 <0.2    10    43 160    <2  476
QTA-18 237186 148.00 150.00 2.00 <0.05  <5 <0.2      8    25    20    <2  257
QTA-18 237187 150.00 152.00 2.00 <0.05  <5 <0.2      8    28    18    <2  312
QTA-18 237188 152.00 154.00 2.00 <0.05  <5 <0.2      7    45    10    <2  259
QTA-18 237189 154.00 156.00 2.00 <0.05  <5  0.2      8    45    22    <2  259
QTA-18 237190 156.00 158.00 2.00 <0.05      9 <0.2      9    44    25    <2  290
QTA-18 237191 158.00 160.00 2.00 <0.05  <5 <0.2      8    33    11    <2  323
QTA-18 237192 186.50 188.00 1.50 <0.05  <5 <0.2      5    25      8    <2  334
QTA-18 237193 188.00 190.00 2.00 <0.05  <5  0.2    12    36      5    <2  383
QTA-18 237194 190.00 192.00 2.00 <0.05  <5  0.2      8    42      5    <2  404
QTA-18 237195 192.00 194.00 2.00 <0.05  <5 <0.2    12    59      4    <2  475
QTA-18 237196 194.00 196.00 2.00 <0.05  <5  0.2      8    52      4    <2  520
QTA-18 237197 196.00 198.00 2.00 <0.05  <5  0.2    10    55      2    <2  411
QTA-18 237198 198.00 200.00 2.00 <0.05  <5  0.2    14    64      8    <2  390
QTA-18 237199 200.00 200.25 0.25 <0.05  <5  0.2      8    54      7    <2  475
QTA-18 237200 200.25 202.00 1.75 <0.05  <5 <0.2      6    56      6    <2  470
QTA-18 237201 202.00 204.00 2.00 <0.05  <5 <0.2      9    47    17    <2  387
QTA-18 237202 204.00 204.90 0.90 <0.05  <5  0.2      9    52      8    <2  397
QTA-18 237203 204.90 206.00 1.10 <0.05  <5 <0.2      7    63      6    <2  455
QTA-18 237204 206.00 206.55 0.55 <0.05  <5  0.2      6    61      9    <2  373

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 16 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-18 237205 206.55 208.00 1.45 <0.05      7  0.2      5    45      6    <2 285
QTA-18 237206 208.00 209.00 1.00 <0.05      6 <0.2      8    51      5    <2 409
QTA-18 237207 215.00 217.00 2.00 <0.05      7  0.2    10    55      4    <2 408
QTA-18 237208 217.00 219.20 2.20 <0.05      7 <0.2      9    50      3    <2 301
QTA-18 237209 219.20 221.39 2.19 <0.05  <5 <0.2    10    49      7    <2 362
QTA-18 237210 221.39 223.00 1.61 <0.05  <5 <0.2    11    44      7    <2 420
QTA-18 237211 223.00 224.10 1.10 <0.05      5 <0.2      8    47    <2    <2 380
QTA-18 237212 224.10 226.00 1.90 <0.05  <5 <0.2    12    52    11    <2 417
QTA-18 237213 226.00 228.00 2.00    0.1  12 <0.2      7    59    10    <2 352
QTA-18 237214 228.00 230.00 2.00 <0.05      6 <0.2      8    63      7    <2 379
QTA-18 237215 230.00 230.73 0.73 <0.05  <5 <0.2    10    53    13    <2 306
QTA-18 237216 236.00 238.00 2.00 <0.05  <5 <0.2      5    35      4    <2 359
QTA-18 237217 238.00 240.00 2.00 <0.05      6  0.2      5    38      2    <2 298
QTA-18 237218 240.00 241.30 1.30 <0.05      9 <0.2      3    23      2    <2 272
QTA-18 237219 243.80 246.32 2.52 <0.05      6 <0.2      7    49      5    <2 337
QTA-18 237220 250.20 252.00 1.80 <0.05  12 <0.2      7    36      6    <2 285
QTA-18 237221 252.00 253.40 1.40 <0.05  <5 <0.2      8    45      8    <2 353
QTA-18 237222 253.40 254.80 1.40 <0.05  <5 <0.2    12    68      6    <2 384
QTA-18 237223 254.80 256.00 1.20 <0.05      6  0.2      8    45      6    <2 345
QTA-18 237224 256.00 258.60 2.60 <0.05  <5 <0.2      8    41      8    <2 396
QTA-18 237225 258.60 259.10 0.50 <0.05      5 <0.2      9    26      3    <2 350
QTA-18 237226 261.70 264.00 2.30 <0.05  <5 <0.2      9    30    10    <2 325
QTA-18 237227 264.00 265.70 1.70 <0.05  <5 <0.2    10    44    19    <2 397
QTA-18 237228 265.70 268.00 2.30 <0.05  <5 <0.2      8    53    10    <2 328
QTA-18 237229 268.00 271.00 3.00 <0.05  <5 <0.2    24    42      8    <2 381
QTA-18 237230 271.00 271.40 0.40 <0.05  <5 <0.2      7    41    10    <2 334
QTA-18 237231 271.40 273.41 2.01 <0.05      5 <0.2      9    36    10    <2 334
QTA-18 237232 278.00 279.20 1.20 <0.05      6 <0.2    12    98    29      3 405
QTA-18 237233 279.20 279.50 0.30 <0.05  <5  0.3      9    44    40      4 288
QTA-18 237234 279.50 281.00 1.50 <0.05  <5  8.1    43 134    22    11 487
QTA-18 237235 281.00 283.30 2.30 <0.05  <5  0.2    13    96    16      5 412
QTA-18 237236 283.30 284.68 1.38 <0.05  <5  2.3    22    98    60    14 545
QTA-18 237237 284.68 286.00 1.32 <0.05  <5 <0.2    14    97    13      7 425
QTA-18 237238 286.00 287.43 1.43 <0.05  <5  0.2    20 100 156    14 350
QTA-18 237239 287.43 289.20 1.77  0.07  <5      1    20 118 536    21 914
QTA-18 237240 289.20 292.00 2.80 <0.05  <5 <0.2    18    87    18      6 372
QTA-18 237241 292.00 293.70 1.70  0.84  18 <0.2    14    72      6      7 372
QTA-18 237242 293.70 296.40 2.70 <0.05  <5 <0.2    20 132    25      4 413
QTA-18 237243 296.40 299.57 3.17 <0.05  <5 <0.2    17    77      7      9 353
QTA-18 237244 306.10 308.43 2.33 <0.05  <5  0.2    15 126    71      6 296
QTA-18 237245 308.43 310.50 2.07 <0.05      5  0.2    16 117    73    17 227
QTA-18 237246 310.50 311.50 1.00 <0.05  <5  0.3    15    85    22      3 333
QTA-18 237247 311.50 312.60 1.10 <0.05  <5  0.2    17 126    47    12 254
QTA-18 237248 312.60 313.80 1.20 <0.05  <5 <0.2    18 112    21      4 323
QTA-18 237249 331.30 332.58 1.28 <0.05  <5  0.2    15    74    20      3 287
QTA-18 237250 332.58 332.90 0.32 <0.05  13  0.3    20 178 168    14 541
QTA-18 237251 332.90 333.40 0.50 <0.05      6  0.2    15 132    30      7 312
QTA-18 237252 336.40 338.50 2.10 <0.05  <5 <0.2    16    66 129    10 413
QTA-18 237253 338.50 340.00 1.50 <0.05  <5 <0.2    21 118    76      8 360
QTA-18 237254 340.00 342.15 2.15 <0.05  <5  0.2    18 102    25      5 406
QTA-18 237255 342.15 342.55 0.40 <0.05  <5 <0.2    16    99    28      3 501
QTA-18 237256 369.30 370.94 1.64 <0.05  <5 <0.2    18 120    17      3 402
QTA-18 237257 370.94 372.40 1.46 <0.05  <5 <0.2    14 100    19      3 395
QTA-18 237258 381.90 382.20 0.30 <0.05  <5 <0.2    10    41      8      5 224
QTA-18 237259 382.20 382.50 0.30 <0.05  <5 <0.2    17    80    21      4 758
QTA-18 237260 382.50 383.00 0.50 <0.05  <5 <0.2    12    77      4      5 533
QTA-18 237261 385.30 386.20 0.90 <0.05  <5 <0.2    12    68    17      2 422
QTA-18 237262 393.00 395.00 2.00 <0.05  <5 <0.2    17 119    18      2 366
QTA-18 237263 395.00 397.90 2.90 <0.05  <5 <0.2    17 117    14      2 370
QTA-18 237264 397.90 399.10 1.20 <0.05  <5 <0.2    12    61    10    <2 426
QTA-18 237265 399.10 399.80 0.70 <0.05  <5 <0.2    16    87    10    <2 364
QTA-18 237266 405.35 407.00 1.65 <0.05  <5 <0.2    12    94    13      4 433
QTA-18 237267 407.00 408.20 1.20 <0.05  <5 <0.2    16    76    17      3 419

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 17 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-18 237268 408.20 408.60 0.40 <0.05    <5 <0.2      16      96          23            4  470
QTA-18 237269 408.60 410.00 1.40 <0.05    <5 <0.2          9      87          25            4  481
QTA-19 237270 13.20 15.00 1.80 <0.05    <5  1.1      14      93      227          13  594
QTA-19 237271 15.00 17.00 2.00 <0.05    <5  1.9      13      61      203          12  611
QTA-19 237272 17.00 19.00 2.00 <0.05      5  1.2      13      66      214          15  626
QTA-19 237273 19.00 20.80 1.80 <0.05    <5  0.3      15      86      498          27  498
QTA-19 237274 20.80 21.60 0.80 <0.05    <5 <0.2      12    104      128          14  614
QTA-19 237275 21.60 22.47 0.87 <0.05    <5  0.2      17    117      239          18  738
QTA-19 237276 22.47 25.00 2.53 <0.05    <5  0.2      14    120      353          18  533
QTA-19 237277 25.00 26.62 1.62 <0.05    <5  0.5      12    105      296          23  688
QTA-19 237278 26.62 28.00 1.38 <0.05    <5      1      11      61    1005          32 2570
QTA-19 237279 28.00 28.56 0.56 <0.05    <5  1.1      11      56    1105          32 2060
QTA-19 237280 28.56 30.00 1.44 <0.05    <5  1.1      14      58      765          43  949
QTA-19 237281 30.00 31.00 1.00 <0.05    <5  0.5      18      83      547          33  582
QTA-19 237282 31.00 33.00 2.00 <0.05    <5  0.6      13      83      232          19  714
QTA-19 237283 33.00 35.00 2.00 <0.05    <5  0.6      17      70      211          21  505
QTA-19 237284 35.00 37.00 2.00 <0.05    <5  0.7      12    102      160          16  534
QTA-19 237285 37.00 38.41 1.41 <0.05    <5  0.4      18      73      224          19  618
QTA-19 237286 38.41 39.30 0.89 <0.05      5  1.4      15      41    1585          47 1570
QTA-19 237287 39.30 40.40 1.10 <0.05      5  1.9      13      60    3440      156 4300
QTA-19 237288 40.40 42.00 1.60 <0.05    14  4.4      18      83      785          61 1020
QTA-19 237289 42.00 43.00 1.00 <0.05    12  4.1      13      79      682          46  506
QTA-19 237290 43.00 45.00 2.00 <0.05    <5  1.9      19    120      583          28  689
QTA-19 237291 45.00 46.10 1.10 <0.05    <5  2.1      12      58      412          37  971
QTA-19 237292 46.10 47.30 1.20 <0.05      9  1.8      12      88      424          38 1755
QTA-19 237293 47.30 48.80 1.50 <0.05    <5  1.5      13      78      295          37  778
QTA-19 237294 48.80 50.45 1.65 <0.05    <5      1      12    119      189          22  439
QTA-19 237295 50.45 51.60 1.15 <0.05      5  0.2      13    108      295          27  708
QTA-19 237296 64.50 65.00 0.50 <0.05    <5  0.2      18      99      576          23  589
QTA-19 237297 65.00 65.21 0.21 <0.05    <5  0.3      16      46    1165          62  699
QTA-19 237298 68.50 70.00 1.50 <0.05      7 <0.2      12      94          72            4  430
QTA-19 237299 70.00 72.00 2.00 <0.05      5  0.4      16      89      101            7  486
QTA-19 237300 72.00 74.59 2.59 <0.05    <5  0.4      23    104          76            8  450
QTA-19 237301 74.59 74.90 0.31 <0.05      5  0.2      20      72          97            7  532
QTA-19 237302 81.60 83.00 1.40 <0.05    <5  0.2          9      51          40            7  467
QTA-19 237303 83.00 83.65 0.65 <0.05    <5 <0.2      12      60          58            5  494
QTA-19 237304 85.50 87.50 2.00 <0.05    <5  1.1      40    174      366          14  905
QTA-19 237305 87.50 88.50 1.00 <0.05    <5  0.2      10      72      334          13  558
QTA-19 237306 88.50 88.70 0.20 <0.05    <5 <0.2      12      96          55            3  629
QTA-19 237307 124.00 125.20 1.20 <0.05    <5 <0.2      13    100          19            5  582
QTA-19 237308 125.20 126.30 1.10 <0.05      6 <0.2          5      18          17            7 1300
QTA-19 237309 126.30 126.80 0.50 <0.05    <5 <0.2      10      74          12          13  791
QTA-19 237310 126.80 128.30 1.50 <0.05    <5  0.2      14    117          21            6  336
QTA-19 237311 128.30 128.90 0.60 <0.05    <5  1.5      35      89      112            9  901
QTA-19 237312 128.90 129.50 0.60 <0.05    <5  0.4      15    118      104            6  565
QTA-19 237313 136.80 139.62 2.82 <0.05    <5 <0.2      18    117      107          10  396
QTA-19 237314 151.59 154.00 2.41 <0.05    <5  0.3      14    110          46            6  419
QTA-19 237315 197.00 199.00 2.00 <0.05    <5  0.2      13    114          29            2  419
QTA-19 237316 199.00 201.00 2.00 <0.05    <5  0.2      15    113          41            5  430
QTA-19 237317 201.00 203.00 2.00 <0.05    <5  0.3      16    112          47            5  447
QTA-19 237318 203.00 204.80 1.80 <0.05    <5  0.3      15    120          77            3  422
QTA-19 237319 204.80 206.00 1.20 <0.05    <5  0.3      14    104      138            6  466
QTA-19 237320 206.00 207.60 1.60 <0.05    <5  4.7      16    119      459          13 1010
QTA-19 237321 207.60 209.10 1.50  1.39 4020 >100 34200 28000 >10000 >10000 3640
QTA-19 237322 209.10 209.40 0.30  0.07    56 58.5    283    554    1290      278 1830
QTA-19 237323 209.40 209.70 0.30 0.025    14 13.4      21      98    1205          15 4270
QTA-19 237324 209.70 210.82 1.12 0.025      7  2.3      11      98      896          15 2770
QTA-19 237325 210.82 212.00 1.18 0.025      6  1.4      19    115      344          11 1070
QTA-19 237326 212.00 214.30 2.30 0.025    11 10.1      28    186      372          12 1010
QTA-19 237327 214.30 216.00 1.70 0.025      5  4.5      28    138          77            5  652
QTA-19 237328 216.00 219.00 3.00 0.025  2.5  3.2      25    134          85            8  650
QTA-19 237329 219.00 221.00 2.00 0.025    53 52.3    360    584    1080      128 1270
QTA-19 237330 221.00 223.00 2.00 0.025      8  6.8      64    174          75          20  801

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 18 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-19 237331 223.00 224.25 1.25 0.025      7  5.1    28  137  207    10  820
QTA-19 237332 224.25 226.50 2.25 0.025      8  6.7    62  175  277    22  884
QTA-19 237333 226.50 227.85 1.35 0.025  33 25.8  156  295 2330    64 1130
QTA-19 237334 227.85 230.00 2.15 0.025      8  3.7    35  135  225      9  776
QTA-19 237335 230.00 232.00 2.00 0.025  2.5  3.2    39  137    65    10  753
QTA-19 237336 232.00 233.80 1.80 0.025  2.5  2.3    19  124 2540    13  890
QTA-19 237337 233.80 234.40 0.60  0.07      8  5.5    17  144 1825 126 1475
QTA-19 237338 234.40 235.00 0.60 0.025  20 19.1  432 1420 7420 210 1365
QTA-19 237339 235.00 237.00 2.00 <0.05  <5  5.9  245  233  544 100  810
QTA-19 237340 237.00 239.00 2.00 <0.05  <5      1    13  113  123      8  634
QTA-19 237341 239.00 241.00 2.00 <0.05  <5      1    25  119    54      9  595
QTA-19 237342 241.00 242.93 1.93 <0.05  <5  1.5    46  111    53    13  695
QTA-19 237343 242.93 243.94 1.01 <0.05      5  3.5  730  214  548 214  946
QTA-19 237344 243.94 245.00 1.06 <0.05  <5  4.3    98  297  229    14  909
QTA-19 237345 245.00 247.00 2.00 <0.05  <5  2.9    39  187    77      6  738
QTA-19 237346 247.00 249.00 2.00 <0.05  <5  2.7  106  170  317    14  780
QTA-19 237347 249.00 251.00 2.00 <0.05  <5  1.4    28  125    24      6  660
QTA-19 237348 251.00 253.00 2.00 <0.05  <5  2.8  146  304    32    22  757
QTA-19 237349 253.00 255.00 2.00 <0.05  <5  1.3    49  144    35      9  576
QTA-19 237350 255.00 257.72 2.72 <0.05      6  1.3    22  125    33      6  540
QTA-19 237351 257.72 259.00 1.28 <0.05  <5  1.4  150  387    26    46  655
QTA-19 237352 259.00 261.00 2.00 <0.05  <5  1.5  104  135    34    24  772
QTA-19 237353 261.00 263.00 2.00 <0.05  <5  1.3    23  135    28    16  659
QTA-19 237354 263.00 265.00 2.00 <0.05  <5  2.6  134  245    45    40  822
QTA-19 237355 265.00 266.30 1.30 <0.05      5      5  223  553    80    33  831
QTA-19 237356 266.30 267.70 1.40 <0.05  53 53.4 4000  625  267 660 1065
QTA-19 237357 267.70 268.30 0.60 <0.05  55 54.9 3230 2720  881 268  965
QTA-19 237358 268.30 270.00 1.70 <0.05      5  2.9  127  289    44      9  856
QTA-19 237359 270.00 272.00 2.00 <0.05      8  3.6  133  312  466    13  856
QTA-19 237360 272.00 274.00 2.00 <0.05      9      4  192  257    37    12  783
QTA-19 237361 274.00 276.00 2.00 <0.05  <5  1.6    91  243    26    13  677
QTA-19 237362 276.00 277.60 1.60 <0.05      8  4.5  267  266    16      8  753
QTA-19 237363 277.60 279.00 1.40 <0.05  20 19.3 1765 1650  120 214  964
QTA-19 237364 279.00 282.00 3.00 <0.05  <5  1.6  112  136    32      9  595
QTA-19 237365 282.00 284.00 2.00 <0.05  <5  1.6  116  149    27    10  720
QTA-19 237366 284.00 285.00 1.00 <0.05      5  8.8  686  321    87    71  883
QTA-19 237367 285.00 287.00 2.00 <0.05  <5  1.6  106  151    24    23  803
QTA-19 237368 287.00 289.70 2.70 <0.05  <5  1.1    35  155    61    10  692
QTA-19 237369 289.70 290.60 0.90 <0.05  46 44.8 3080  682  215 781  918
QTA-19 237370 290.60 292.00 1.40 <0.05  <5  2.5    93  221    47    12  823
QTA-19 237371 295.40 297.20 1.80 <0.05  <5  3.5  294  238  602    53  828
QTA-19 237372 300.10 302.00 1.90 <0.05  <5      1    14  106    43      6  657
QTA-19 237373 302.00 304.00 2.00 <0.05  <5  1.9    82  121    47    13  750
QTA-19 237374 304.00 306.00 2.00 <0.05  <5  0.9      8  105    29      5  610
QTA-19 237375 306.00 307.00 1.00 <0.05  <5  0.9    18  104    20      5  638
QTA-19 237376 312.30 314.20 1.90 <0.05      6      6  375  838    62    16  714
QTA-19 237377 314.20 315.10 0.90 <0.05  <5  2.1    56  196    31      5  651
QTA-19 237378 315.10 316.00 0.90 <0.05  <5  2.7    84  280    33      6  598
QTA-19 237379 316.00 317.10 1.10  0.07  <5  1.2    13  123    29      6  526
QTA-19 237380 317.10 318.00 0.90 <0.05  <5  1.6    31  181    24      5  524
QTA-19 237381 318.00 319.40 1.40 <0.05  <5  2.7  146  141    33    11  605
QTA-19 237382 319.40 321.00 1.60 <0.05  <5  1.2    21  122    32      7  519
QTA-19 237383 321.00 321.20 0.20 <0.05  <5  0.8    12  116    35      8  502
QTA-19 237384 321.20 323.00 1.80 <0.05  <5  0.8    19  122    38      8  500
QTA-19 237385 323.00 325.00 2.00 <0.05  <5  1.1    28  133    23      6  540
QTA-19 237386 325.00 326.60 1.60 <0.05  <5  0.7    11  105    41      6  542
QTA-19 237387 326.60 331.70 5.10 <0.05  <5  1.1    43  114    45      8  589
QTA-19 237388 331.70 334.57 2.87 <0.05      9  5.9  286  345    61    18  572
QTA-19 237389 334.57 335.00 0.43 <0.05  <5  1.3    12    90    46      8  696
QTA-19 237390 335.00 337.00 2.00 <0.05  <5  0.6    10  100    41      9  563
QTA-19 237391 337.00 339.00 2.00 <0.05  <5  0.6    11  124    39      7  479
QTA-19 237392 339.00 340.00 1.00 <0.05  <5  0.5    33  134    37      4  545
QTA-19 237393 340.00 341.66 1.66 <0.05  <5      1      9  106    49      4  478

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 19 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-19 237394 341.66 342.00 0.34 <0.05  <5  0.9      5  100    86      3  492
QTA-19 237395 342.00 342.70 0.70 <0.05  <5  0.5      5    78    96      4  683
QTA-19 237396 342.70 343.41 0.71  0.11  66 69.8 3180 4900 2230 1840  780
QTA-19 237397 343.41 344.23 0.82 <0.05  <5  1.9    33  138  124    12  720
QTA-19 237398 344.23 346.00 1.77 <0.05      5  1.2    19  123    56      8  528
QTA-19 237399 346.00 346.30 0.30 <0.05  <5  1.5    39  146    46    10  476
QTA-19 237400 346.30 347.00 0.70 <0.05  <5  1.9  207  180    33    29  717
QTA-19 237401 347.00 349.00 2.00 <0.05  <5  3.2  172  363    32    14  653
QTA-19 237402 349.00 351.00 2.00 <0.05  <5  2.6  171  230    30      7  680
QTA-19 237403 351.00 353.00 2.00 <0.05  <5      1    16  106    31      5  540
QTA-19 237404 353.00 355.00 2.00 <0.05  <5      2    99  157    37      7  555
QTA-19 237405 355.00 357.00 2.00 <0.05  <5  1.4    45  316    38      5  604
QTA-19 237406 357.00 358.50 1.50 <0.05  <5      1    19  111    33      6  542
QTA-19 237407 358.50 360.00 1.50 <0.05      5  4.9  343  375    44    19  598
QTA-19 237408 360.00 362.00 2.00 <0.05      5  4.1  395  355    31    44  666
QTA-19 237409 362.00 363.00 1.00 <0.05  16 15.1 1235  942    23  114  697
QTA-19 237410 363.00 364.00 1.00 <0.05      9  4.5  288  413    28      9  666
QTA-19 237411 364.00 366.47 2.47 <0.05  <5  2.9  184  317    35      8  527
QTA-19 237412 366.47 368.00 1.53 <0.05  <5  1.1    45  158    30      5  452
QTA-19 237413 368.00 369.00 1.00 <0.05      6  4.3  223  293    39    10  507
QTA-19 237414 369.00 370.80 1.80 <0.05  14 10.7  652  827    32    13  565
QTA-19 237415 370.80 372.10 1.30 <0.05  19 12.2  715  517    41      8  619
QTA-19 237416 375.80 376.60 0.80 <0.05  31 33.7 2070 2450    32    35  626
QTA-19 237417 380.00 381.00 1.00 <0.05  <5      1    22  124    35      3  546
QTA-19 237418 381.00 382.37 1.37 <0.05  <5  1.7    79  189    28      7  670
QTA-19 237419 382.37 384.20 1.83 <0.05  <5  1.1    61    91    34      5  702
QTA-19 237420 384.20 386.00 1.80 <0.05  <5  1.7    29  114    34      7  640
QTA-19 237421 386.00 387.30 1.30 <0.05  <5  1.6    44    83    40      5  699
QTA-19 237422 387.30 389.00 1.70 <0.05  11  6.1    97  279    89    15  982
QTA-19 237423 389.00 389.20 0.20 <0.05      9  2.9    57  170    33      4  706
QTA-19 237424 389.20 389.30 0.10 0.025 108 >100  601 1110  118  106  823
QTA-19 237425 389.30 390.00 0.70 0.025  12 11.7  532 5140    60    37  844
QTA-19 237426 390.00 391.00 1.00 0.025      5  2.8    42  158    35      9  676
QTA-19 237427 391.00 392.70 1.70 0.025      5  3.9    48  159    46      6  737
QTA-19 237428 392.70 394.80 2.10 0.025  14 13.7  220  303    66    39  793
QTA-19 237429 394.80 395.48 0.68  0.07  52 55.2  650  896  201    93  618
QTA-19 237430 395.48 397.70 2.22 0.025  2.5  1.7    52  160    37      9  529
QTA-19 237431 397.70 398.20 0.50 0.025  2.5  1.7  104  200    38      7  585
QTA-19 237432 398.20 401.80 3.60 0.025  2.5  1.3    10    92    40      4  628
QTA-19 237433 401.80 402.80 1.00 0.025      7  5.8  226  467 1255    44  832
QTA-19 237434 402.80 403.20 0.40  0.39  73 75.8 3760 8730 4320 1540 2180
QTA-19 237435 403.20 403.90 0.70 0.025      9  8.7  154  359  393    39 1435
QTA-19 237436 403.90 405.00 1.10 0.025      7  5.4  485  599  830  158 1150
QTA-19 237437 405.00 406.00 1.00 0.025  48 50.3  534  668  133  128 1165
QTA-19 237438 406.00 407.20 1.20 0.025      8  9.8  881  650 1245  314 1180
QTA-19 237439 407.20 409.00 1.80 0.025  2.5  2.4  243  263  184    50 1005
QTA-19 237440 409.00 409.70 0.70 0.025  2.5  4.6  397  384  148  102  777
QTA-19 237441 409.70 411.83 2.13 0.025      8 11.4  263  586  296    84  630
QTA-19 237442 411.83 412.10 0.27    0.2  36 38.5 3590 6350 4990  672 1805
QTA-19 237443 412.10 414.00 1.90 0.025      5      3    18    77  416    10  843
QTA-19 237444 414.00 416.00 2.00 0.025  2.5  0.7    17    97  142      7  571
QTA-19 237445 416.00 418.00 2.00 0.025  2.5  0.7    18    78    93      3  578
QTA-19 237446 418.00 419.00 1.00 0.025  2.5  0.6      2    80    81      3  581
QTA-19 237447 419.00 420.00 1.00 0.025  2.5  0.7      3    85    78      3  463
QTA-19 237448 420.00 421.50 1.50 0.025  2.5  0.7      4    69    99      3  758
QTA-19 237449 421.50 423.40 1.90 0.025  2.5      1    13    77  351      3  639
QTA-19 237450 423.40 425.20 1.80 0.025  2.5  1.5    41  106  343      8  803
QTA-19 237451 425.20 426.00 0.80  0.49 915 >100 9170 3050 4190 5410 1575
QTA-19 237452 426.00 428.00 2.00 <0.05  <5      2    12    81  112      8  564
QTA-19 237453 428.00 430.10 2.10 <0.05  42 54.6  518  244  253  113  796
QTA-19 237454 430.10 432.00 1.90 <0.05  <5  3.4    37    85    75    10  713
QTA-19 237455 432.00 433.00 1.00 <0.05  <5  1.3    15    98    64      5  555
QTA-19 237456 433.00 434.00 1.00 <0.05  <5  1.4    35  108  477      8 1070

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 20 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-19 237457 434.00 434.80 0.80 <0.05  <5  2.6    108    208    43          12  518
QTA-19 237458 434.80 435.50 0.70 <0.05  10 11.8    546    552  164          87  463
QTA-19 237459 439.40 440.50 1.10 <0.05  <5  0.8      40    130    54            6  524
QTA-19 237460 445.30 446.40 1.10 <0.05  <5  0.2      20    120    54            8  432
QTA-19 237461 453.10 453.60 0.50    0.3  13 18.9  2330  1705 4400      878  656
QTA-20 237462  6.40  8.00 1.60 <0.05  <5  0.9          9      76    21            4  378
QTA-20 237463  8.00  9.30 1.30 <0.05  <5  0.2      22      69    45          10  700
QTA-20 237464 14.33 14.70 0.37 <0.05  <5  0.9      12      83    36            7  355
QTA-20 237465 14.70 15.60 0.90 <0.05  <5 <0.2          8      65    27            8  493
QTA-20 237466 28.80 29.70 0.90 <0.05  <5  0.3      10    106    48            5  400
QTA-20 237467 29.70 30.30 0.60 <0.05  <5 <0.2      18    123  218      125  779
QTA-20 237468 30.30 31.51 1.21 <0.05  <5 <0.2      14    130  124          86  232
QTA-20 237469 31.51 33.50 1.99 <0.05  <5  0.2      13    116  206          39  557
QTA-20 237470 51.40 53.60 2.20 <0.05  <5  0.3      20      97  192          34  487
QTA-20 237471 57.00 58.66 1.66 <0.05  <5  0.3      15    116    16            3  487
QTA-20 237472 59.40 59.70 0.30 <0.05  <5  0.8      19    106    28            4  384
QTA-20 237473 65.48 66.34 0.86  0.06  <5  1.3      15      69  681          36  894
QTA-20 237474 75.50 75.70 0.20 <0.05  <5  2.3      16    118 1425          95  228
QTA-20 237475 75.70 75.90 0.20 <0.05  <5  0.2      11      63  610          32 1360
QTA-20 237476 77.70 78.20 0.50 <0.05  <5 <0.2      11      84    99            4  269
QTA-20 237477 80.95 81.39 0.44 <0.05  <5  0.9      16    110    29            8  350
QTA-20 237478 81.39 81.90 0.51 <0.05  <5  1.2          6      93    63            4  338
QTA-20 237479 81.90 82.43 0.53 <0.05  <5 <0.2      14      70    36          <2  443
QTA-20 237480 82.43 82.83 0.40 <0.05      7  3.2      17      89  419          13  416
QTA-20 237481 85.20 86.40 1.20 <0.05  <5  0.3      31      70    65            6  537
QTA-20 237482 91.40 93.30 1.90 <0.05  <5  0.3      12      91    31            5  393
QTA-20 237483 102.00 104.00 2.00 <0.05  <5  0.3      11      88    23            6  442
QTA-20 237484 109.30 109.50 0.20 <0.05      7  3.6      61    160  160          14  804
QTA-20 237485 121.75 122.50 0.75 <0.05  <5 <0.2      14      85    18            4  372
QTA-20 237486 122.50 123.00 0.50 <0.05  <5 <0.2      11      92    14            2  414
QTA-20 237487 138.20 140.00 1.80 <0.05  <5  0.3      19      72    46            3  726
QTA-20 237488 140.00 141.59 1.59 <0.05  <5  0.4      12      83    19            5  700
QTA-20 237489 142.70 144.00 1.30 <0.05      6  5.3      20      82    60            7  904
QTA-20 237490 144.00 145.00 1.00 <0.05  <5  0.2      11      65    31          11  590
QTA-20 237491 171.00 171.30 0.30 <0.05  <5  0.6      12      64    30            4  525
QTA-20 237492 171.30 173.00 1.70 <0.05  <5  0.4      29      56    74            8  526
QTA-20 237493 173.00 173.80 0.80 <0.05  <5  0.4      12      57    38            2  473
QTA-20 237494 173.80 174.20 0.40 <0.05  <5  0.3      15      62    14            3  618
QTA-20 237495 194.60 195.20 0.60 0.025  69  0.7          8      48    63            4  754
QTA-20 237496 195.20 197.00 1.80 0.025  2.5  0.7          8      86  365            9  714
QTA-20 237497 197.00 197.70 0.70 0.025  2.5  4.1      13    104  821          16 1460
QTA-20 237498 197.70 197.90 0.20  0.69      6  6.9      34    202 3510    1335 1895
QTA-20 237499 197.90 198.02 0.12  0.13  17    19      49    154 2120          50  609
QTA-20 237500 198.02 198.20 0.18 0.025  2.5  9.1    175    281 1140      197  878
QTA-20 237501 198.20 198.50 0.30  0.25 159  159  1735    426 3220    2980 1125
QTA-20 237502 198.50 199.20 0.70  0.51 593  593  4410  4060 4000    6740 1240
QTA-20 237503 199.20 200.00 0.80 0.025  2.5  6.1      28      90 1660          35 1970
QTA-20 237504 200.00 201.90 1.90 0.025  25 12.2    196    213 1380          91 1425
QTA-20 237505 201.90 204.00 2.10 0.025  2.5  2.2      18    101  178            7  664
QTA-20 237506 204.00 205.00 1.00 0.025  2.5      1      12      99  140            5  791
QTA-20 237507 205.00 205.80 0.80 0.025  2.5  1.2      20    199  559          14  933
QTA-20 237508 205.80 208.00 2.20 0.025  2.5  0.8      11      98    77            4  571
QTA-20 237509 212.85 213.77 0.92 0.025  2.5  3.5    255    569  361          80 1095
QTA-20 237510 216.00 217.00 1.00 0.025  26    32  1475    483  110          22  807
QTA-20 237511 217.00 219.00 2.00  0.07  2.5  2.2      16      99  607          16  858
QTA-20 237512 219.00 219.30 0.30    0.2  99 95.6 24800 21000 1955 >10000 3560
QTA-20 237513 219.30 221.20 1.90 0.025  23 29.8  4010  3530  397    1995 1120
QTA-20 237514 221.20 221.50 0.30 0.025 203 >100  9010 12500  575      164  999
QTA-20 237515 221.50 222.70 1.20 0.025  16 18.4    856  1080    95          39  704
QTA-20 237516 223.90 224.50 0.60 0.025  44 48.1  2510  1965    70          35  733
QTA-20 237517 225.40 227.00 1.60 0.025  94 92.3  2080  2720  110      296  778
QTA-20 237518 227.00 229.00 2.00 0.025  2.5  4.8    172    236    71          27  728
QTA-20 237519 229.00 230.00 1.00 0.025      5  6.3    555    325    84      182  839

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 21 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-20 237520 230.00 231.30 1.30 0.025      9  8.8  221  482    51    55  654
QTA-20 237521 234.00 234.31 0.31 0.025  2.5  1.4    25  101    34      7  525
QTA-20 237522 234.31 235.30 0.99 0.025      5  1.8  110  297    43    12  562
QTA-20 237523 235.30 236.34 1.04 0.025  19 14.2  758  546    83    18  731
QTA-20 237524 238.20 238.49 0.29 0.025  67 88.3 5510 2760 333    67  836
QTA-20 237525 238.49 240.80 2.31 0.025  2.5  2.8  136  268    25      5  690
QTA-20 237526 240.80 241.80 1.00 0.025  12 12.6  751 1385    56      8 1105
QTA-20 237527 241.80 242.30 0.50 0.025  2.5  4.7  201  277    72      5  875
QTA-20 237528 242.30 242.93 0.63 0.025  22 39.4 2200 1850 124    26 1160
QTA-20 237529 242.93 244.00 1.07 0.025  22 17.7 1250 1265 103    62 1010
QTA-20 237530 244.00 244.50 0.50 0.025  27 26.8 2060 2300 120 208 1375
QTA-20 237531 244.50 246.00 1.50 0.025      9  9.7  586  741    51    12  807
QTA-20 237532 246.00 246.90 0.90 0.025  2.5  1.2    27  106    88      8  693
QTA-20 237533 246.90 247.20 0.30 0.025  71 74.9 4680 6630 306    40  882
QTA-20 237534 247.20 249.00 1.80 0.025      5  5.3  330  614    49    10  920
QTA-20 237535 249.00 249.64 0.64 0.025      6  7.9  619  838    32    10  859
QTA-20 237536 250.80 251.00 0.20 0.025  32 29.5 2340 1035    85    16  909
QTA-20 237537 254.40 255.00 0.60 <0.05  <5  2.2    75  162    35      6  793
QTA-20 237538 255.00 255.90 0.90 <0.05      6  5.6  274 1605 217    11  733
QTA-20 237539 255.90 256.10 0.20 <0.05  <5  1.5    48  130 154      4  802
QTA-20 237540 256.10 257.00 0.90 <0.05  <5  1.5    53  140    32      3  798
QTA-20 237541 257.00 257.40 0.40 <0.05  <5  1.2    34  117 156      7  804
QTA-20 237542 264.00 266.00 2.00 <0.05  <5  5.3  267  449 179      9  990
QTA-20 237543 266.00 268.00 2.00 <0.05  21 21.7  701 1315 166    48  964
QTA-20 237544 268.00 269.00 1.00 <0.05      7 10.2  429  247    66    74  902
QTA-20 237545 269.00 271.00 2.00 <0.05  17 19.1  326  438    38    13  778
QTA-20 237546 271.00 273.00 2.00 <0.05  26  26  977  778    31    16  789
QTA-20 237547 273.00 275.00 2.00 <0.05  25 25.3 1175 1030    89    16  875
QTA-20 237548 275.00 276.00 1.00 <0.05  <5  2.2    30  151    34      2  623
QTA-20 237549 276.00 278.00 2.00 <0.05  <5  2.2    59  156    27      4  706
QTA-20 237550 278.00 280.00 2.00 <0.05  <5  3.1  107  156    39      2  818
QTA-20 237551 280.00 282.00 2.00 <0.05      5  4.8  154 1085 178      2  741
QTA-20 237552 282.00 283.70 1.70 <0.05  <5      2    14  138    37      3  712
QTA-20 237553 283.70 285.00 1.30 <0.05  <5      3    25  126    29      2  644
QTA-20 237554 285.00 285.63 0.63 <0.05  <5  3.1    29  135    35      2  628
QTA-20 237555 285.63 285.93 0.30 <0.05  <5  2.5    23  117    29    <2  553
QTA-20 237556 289.90 291.00 1.10 <0.05  <5  1.2    23  122    38      4  510
QTA-20 237557 291.00 292.00 1.00 <0.05  <5  1.4    27  186    44    <2  553
QTA-20 237558 295.90 296.20 0.30 <0.05      6  4.8  230  474 231    23 1075
QTA-20 237559 306.48 306.83 0.35 <0.05  <5  3.7    40  108 746    23  984
QTA-20 237560 306.83 308.10 1.27 <0.05  <5  0.7    13  102 105      3  694
QTA-20 237561 308.10 309.98 1.88 <0.05  <5  0.4    16  113    48      7  445
QTA-20 237562 309.98 311.00 1.02 <0.05  <5  0.7    15  126    34      7  587
QTA-20 237563 311.00 313.00 2.00 <0.05  <5  0.2    23  119    33      8  492
QTA-20 237564 313.00 313.63 0.63 <0.05  <5  0.4    24  112    26      9  606
QTA-20 237565 313.63 313.90 0.27 <0.05  <5  0.6    17  118    40      7  678
QTA-20 237566 323.70 325.00 1.30 <0.05  <5  0.7    21  122    28    17  547
QTA-20 237567 325.00 326.00 1.00 <0.05  <5  0.8      9  110    36    11  607
QTA-20 237568 326.00 328.00 2.00 <0.05  <5      1    23  125    66    16  597
QTA-20 237569 333.90 334.20 0.30 <0.05  <5  1.2    63  147    31    14  933
QTA-20 237570 334.20 334.40 0.20 <0.05  <5  4.5  273  175    91    19  811
QTA-20 237571 334.40 335.20 0.80 <0.05  <5  1.2    39  265 251      7  737
QTA-20 237572 336.50 336.70 0.20 <0.05  <5  0.6    20  128    37    11  486
QTA-20 237573 340.20 342.00 1.80 <0.05  <5      1      7    86    75      5  771
QTA-20 237574 342.00 343.00 1.00 <0.05      5  3.2    30  108 117    10  861
QTA-20 237575 343.00 343.70 0.70 <0.05      5  2.7    24  108    61      9  923
QTA-21 237576 34.38 35.30 0.92 <0.05  <5  0.9    14  108 442    29  594
QTA-21 237577 35.30 35.50 0.20 <0.05  <5  0.5    13    91 357    20  803
QTA-21 237578 35.50 36.60 1.10 <0.05  <5 <0.2    13  112 190    15  612
QTA-21 237579 39.19 40.10 0.91 <0.05  <5 <0.2    13  108 146    18  518
QTA-21 237580 40.10 40.90 0.80 <0.05  <5  0.3    14  107 528    43  594
QTA-21 237581 59.00 61.00 2.00 <0.05  <5 <0.2    20  126    36    12  407
QTA-21 237582 61.00 61.45 0.45 <0.05  <5  0.3    18  122    10      5  288

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 22 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-21 237583 61.45 62.60 1.15 <0.05  <5 <0.2      16  108          40          13    591
QTA-21 237584 62.60 63.00 0.40 <0.05  <5 <0.2      16  130          39          15    529
QTA-21 237585 63.00 64.50 1.50 <0.05  <5 <0.2      16    97          31          11    577
QTA-21 237586 64.50 65.00 0.50 <0.05  <5 <0.2          7    68          27            6    512
QTA-21 237587 65.00 66.61 1.61 <0.05  <5 <0.2      18  114          46          11    375
QTA-21 237588 81.90 82.10 0.20 <0.05  <5  1.8      16    92      688      123  1060
QTA-21 237589 89.30 91.70 2.40 <0.05  <5 <0.2      14  112          14          20    456
QTA-21 237590 94.80 95.10 0.30 <0.05  <5 <0.2      17  113          27          20    405
QTA-21 237591 97.70 98.40 0.70 <0.05  <5 <0.2      21  108          12          17    349
QTA-21 237592 117.60 117.90 0.30 <0.05  <5 <0.2      21  115          89          33    941
QTA-21 237593 118.80 119.30 0.50 <0.05  <5 <0.2      14  115      243          35    473
QTA-21 237594 120.00 121.00 1.00  0.14  <5  0.7      17  114      577          36    826
QTA-21 237595 127.80 129.24 1.44 <0.05  <5  0.3      14  104      243          25    644
QTA-21 237596 151.00 153.00 2.00 <0.05  <5  1.6      14  108      684          41    734
QTA-21 237597 153.00 154.90 1.90 <0.05  <5  0.5      13  100      308          23    834
QTA-21 237598 154.90 155.20 0.30  0.17  <5    10      85  690      924          41  3630
QTA-21 237599 157.00 159.00 2.00 <0.05  <5  0.2      14  108          97          10    602
QTA-21 237600 241.00 241.74 0.74 <0.05  49 53.1    799 5480      219      465    893
QTA-21 237601 242.85 243.30 0.45 <0.05  38 35.7    117  672      879      110    944
QTA-21 237602 243.30 243.70 0.40 <0.05  14    20      13    91      505          59    590
QTA-21 237603 243.70 244.00 0.30  0.87 261 >100  2850 3270    1865    2630 10150
QTA-21 237604 244.00 244.90 0.90 <0.05  13 12.4      10  108      248          34    648
QTA-21 237605 272.40 274.20 1.80  0.39  <5    23      91  213      938          69  1435
QTA-21 237606 274.20 274.50 0.30  1.17 237 >100  4750 4790 >10000    4660  4520
QTA-21 237607 274.50 276.15 1.65  0.18  11 15.8    163  601      744      100  1825
QTA-21 237608 276.15 276.30 0.15  0.14      5 15.2    838  360    2400      589  1190
QTA-21 237609 276.30 278.00 1.70    0.2  17  3.9      15    97    1160          33    807
QTA-21 237610 278.00 280.00 2.00    0.1  2.5  3.6      44  128    1470          65    919
QTA-21 237611 280.00 280.80 0.80 0.025      7  7.2          5  104      267          26    849
QTA-21 237612 280.80 281.41 0.61  0.16  18 20.9      72  172      723          95    944
QTA-21 237613 281.41 283.00 1.59  0.27  92 94.6  1525 1280    1285    1165    752
QTA-21 237614 283.00 283.85 0.85  0.84 471 >100 12900 7450    2940 >10000  1460
QTA-21 237615 283.85 284.30 0.45 0.025      9 12.6      56  116      628          69  1830
QTA-21 237616 284.30 286.00 1.70 0.025  2.5  4.2      43  112      507          36    789
QTA-21 237617 286.00 286.40 0.40 0.025  2.5  3.5      63  198      170          44    687
QTA-21 237618 286.40 287.80 1.40 0.025  2.5  0.8      16    98      204          16    786
QTA-21 237619 287.80 288.50 0.70 0.025  12 15.2  1025 2280    1105      656  1820
QTA-21 237620 288.50 290.20 1.70 0.025  2.5      1      15    97      323          19    732
QTA-21 237621 290.20 291.70 1.50 0.025  2.5  3.7      70  132      296          50  1060
QTA-21 237622 291.70 294.00 2.30 0.025  2.5  1.2      16    98      392          20    800
QTA-21 237623 294.00 295.20 1.20  0.11  42 52.5    649 2130      614      347  1060
QTA-21 237624 295.20 295.60 0.40  0.17  55 66.8  1805 1965      639      951    409
QTA-21 237625 295.60 296.20 0.60  0.13  53 65.8    398  148    1010      286    551
QTA-21 237626 296.20 297.00 0.80 0.025  54    62    276  663      394      175    922
QTA-21 237627 297.00 298.54 1.54 0.025  33 38.4    911 1985      714      491    635
QTA-21 237628 299.70 301.12 1.42 <0.05  <5  1.5      33  126      218          22    784
QTA-21 237629 302.00 302.80 0.80 <0.05  <5  1.1      18  133      201          16    635
QTA-21 237630 304.80 305.79 0.99 <0.05  <5      4    254  347      407      105  1060
QTA-21 237631 306.75 307.70 0.95 <0.05  23 27.2    973 1300      317      438  1080
QTA-21 237632 307.70 308.80 1.10 <0.05  <5  1.3      13  115      180          11    739
QTA-21 237633 308.80 309.20 0.40 <0.05      6      8      73  154      168          37  1075
QTA-21 237634 309.20 310.00 0.80 <0.05      8  7.5    209  479      300          85    991
QTA-21 237635 310.00 310.30 0.30 <0.05  <5  3.2      16  190      229          15    861
QTA-21 237636 310.30 312.00 1.70 <0.05  <5  2.1      33  124      361          22    567
QTA-21 237637 312.00 313.90 1.90 <0.05  <5  1.7    112  136      405          71    760
QTA-21 237638 313.90 314.80 0.90 <0.05  <5  1.2      25  120      131          12    539
QTA-21 237639 314.80 315.10 0.30 <0.05  10    13  2270  472      763    1045    896
QTA-21 237640 315.10 316.00 0.90 <0.05  <5      1      40  124      385          25    597
QTA-21 237641 316.00 316.91 0.91 <0.05  <5  1.7    741  361      188      391    786
QTA-21 237642 318.00 319.00 1.00 <0.05  <5  0.9      24  112      366          23    556
QTA-21 237643 320.00 321.31 1.31 <0.05  <5  1.4      88  214      242          25    629
QTA-21 237644 326.60 327.80 1.20 <0.05  <5  4.5    334  342      155          26    674
QTA-21 237645 327.80 328.27 0.47 <0.05  58    66  4040 3370      228      815  1060

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 23 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-21 237646 329.40 329.90 0.50 <0.05  19 29.3 1290 3190  118    87  929
QTA-21 237647 330.71 331.80 1.09 <0.05  40 37.5 2120 1835  317  689 1070
QTA-21 237648 331.80 332.84 1.04 <0.05  <5  0.5    12    79    89      8  898
QTA-21 237649 332.84 333.60 0.76 <0.05  17 18.7  528 1155  194  215  888
QTA-21 237650 333.60 336.00 2.40 <0.05  <5  0.6      9  104    29      8  622
QTA-21 237651 336.00 336.80 0.80 <0.05  <5      1    14    81    95      9  817
QTA-21 237652 336.80 337.91 1.11 <0.05  52 50.5 2530 3950  184  774  969
QTA-21 237653 342.00 343.00 1.00 <0.05  <5  2.3  131  107    55      8  758
QTA-21 237654 343.00 343.40 0.40 <0.05  52 60.7 1110 2500  138  332  858
QTA-21 237655 343.40 344.60 1.20 <0.05  <5      2    65  250  112      7  720
QTA-21 237656 344.60 344.80 0.20 <0.05      7 11.8  985 1215  126    15  705
QTA-21 237657 344.80 346.56 1.76 <0.05  <5  1.7    72  118    90      8  577
QTA-21 237658 346.56 348.10 1.54 <0.05  <5  3.3  205  263  140    20  722
QTA-21 237659 348.10 348.50 0.40 <0.05  37 48.9  826  305  168  292  998
QTA-22 237660 45.00 46.60 1.60  0.19  <5  2.6    14    81 1220    35 3600
QTA-22 237661 46.60 47.00 0.40 <0.05  <5  2.6    11    15  570    24  294
QTA-22 237662 47.00 47.40 0.40    0.1  <5  2.8    19    56 1125    39  846
QTA-22 237663 47.40 48.05 0.65 <0.05  <5  0.6    10    68  722    24 1130
QTA-22 237664 70.10 70.50 0.40  0.25  43 42.6  258  761  721  120 2310
QTA-22 237665 72.00 72.20 0.20 <0.05 387 >100 1240  348 1075 1145 1165
QTA-22 237666 73.80 76.00 2.20 <0.05      7  6.8    44  258  938    60  975
QTA-22 237667 76.00 76.80 0.80 <0.05  <5  1.2      9  150  237    20 1160
QTA-22 237668 78.00 79.30 1.30 <0.05  <5  4.2    19  114  692    30 1170
QTA-22 237669 79.30 80.00 0.70 <0.05      6      7    29  154  557    31 1305
QTA-22 237670 80.00 80.66 0.66 <0.05  17 17.2  130  279  503    87 1570
QTA-22 237671 80.66 83.00 2.34 <0.05  <5  3.3    30  160  265    26 1065
QTA-22 237672 83.00 84.10 1.10 0.025  31 37.7  225  430  478  131 1535
QTA-22 237673 84.10 85.00 0.90 0.025  37 43.5  232  463  524  131 1865
QTA-22 237674 85.00 85.61 0.61 0.025  26 29.9  138  291 1055    87 1155
QTA-22 237675 85.61 87.00 1.39  0.05 158 >100 2250 2040 2050  504 2950
QTA-22 237676 87.00 87.34 0.34  0.05  96 >100  740 1035 1775  352 3720
QTA-22 237677 87.34 88.70 1.36  0.05 282 >100 3370 4310 1995  466 2380
QTA-22 237678 88.70 89.57 0.87  0.05 195 >100 2410 2860 1740  280 2530
QTA-22 237679 90.60 91.38 0.78 0.025  33 35.5  513  769  573    73 1265
QTA-22 237680 91.38 93.80 2.42 0.025  16 17.1  248  538  923    72 1135
QTA-22 237681 93.80 94.20 0.40 0.025 103 >100 1310 2230 2120  686 3630
QTA-22 237682 94.20 95.70 1.50 0.025  27 30.9  217  473  956  150 1725
QTA-22 237683 95.70 96.62 0.92 0.025  68 76.3  586  730  457  279 1250
QTA-22 237684 96.62 97.90 1.28 0.025      7  4.8    37  149  291    36 1005
QTA-22 237685 97.90 98.70 0.80 0.025  52 54.6 1280  664  933  787 1610
QTA-22 237686 98.70 99.90 1.20 0.025  24 15.4    64  176  551    58 1465
QTA-22 237687 99.90 100.50 0.60 0.025  10 11.6  104  201  160    54 1240
QTA-22 237688 100.50 101.50 1.00 0.025  72 91.1 2760 2450  411 1565 2200
QTA-22 237689 101.50 102.57 1.07 0.025  2.5  1.8    12  108  114    24  975
QTA-22 237690 102.57 103.40 0.83 0.025  73 80.5 1780 1735 3250 1140 2320
QTA-22 237691 103.40 105.00 1.60 0.025  35 35.1  498  986 1580  216 1205
QTA-22 237692 105.00 107.00 2.00 0.025  35 35.6  547  706  797  259 1325
QTA-22 237693 107.00 109.00 2.00 0.025  53 51.5  994  580  595  271 1200
QTA-22 237694 109.00 111.00 2.00 0.025  39 41.2  645  715  241  184 1160
QTA-22 237695 111.00 111.72 0.72 0.025      8  7.5    28  210  174    27 1210
QTA-22 237696 111.72 111.92 0.20 0.025  32 36.2  505 1175  402    54 1600
QTA-22 237697 111.92 113.00 1.08 0.025  65 66.6  986 1650 1025  396 1350
QTA-22 237698 113.00 113.80 0.80 0.025  37 40.8  398  663  692  143  959
QTA-22 237699 113.80 114.20 0.40 0.025  17 16.8  194  524  300    51 1660
QTA-22 237700 114.20 116.80 2.60 0.025  24 21.6  152  402  203    51 1255
QTA-22 237701 116.80 117.96 1.16 0.025  17 16.3  144  264  174    45 1305
QTA-22 237702 117.96 118.30 0.34 0.025  15 17.2  172  345  188    51 1445
QTA-22 237703 118.30 119.20 0.90 0.025  14    14    61  182  560    31 1135
QTA-22 237704 119.20 119.50 0.30 0.025 106 >100  720 1430 3730  257 2530
QTA-22 237705 119.50 120.95 1.45 0.025      5      6    59  186  191    24  717
QTA-22 237706 120.95 121.70 0.75 0.025      6  4.1    46  151 1435    83 1220
QTA-22 237707 121.70 122.40 0.70 0.025  10    10    51  139  860    42 1140
QTA-22 237708 122.40 123.18 0.78  0.16 132 >100  780 1395 1295  182 2570

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 24 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-22 237709 123.18 125.00 1.82 0.025  13 10.5    22  244  203    25  980
QTA-22 237710 125.00 127.00 2.00 0.025      5  3.3    25  114  102    22  817
QTA-22 237711 127.00 129.00 2.00 0.025      8    11    30  114  232    29 1030
QTA-22 237712 129.00 129.50 0.50 0.025  2.5  1.8    16    71  533    36 2230
QTA-22 237713 129.50 130.30 0.80  0.13 236 >100 815 1775  821 1080 3450
QTA-22 237714 130.30 131.65 1.35  0.07 180 >100 686 1425  658 1055 6490
QTA-22 237715 131.65 132.20 0.55  0.07  58 73.4 419  949  673  500 5990
QTA-22 237716 132.20 134.40 2.20 <0.05  <5  1.5    13  110  307    32 1790
QTA-22 237717 134.40 134.79 0.39 <0.05  <5  1.7    23  118  372    19 3640
QTA-22 237718 176.72 176.82 0.10 <0.05  10  7.3    14    68  276    15 1145
QTA-22 237719 176.82 178.00 1.18 <0.05  <5  2.1    14    85  320    16 1055
QTA-22 237720 182.99 183.15 0.16 <0.05  17 16.6    10  124  133    18 1220
QTA-22 237721 183.15 183.80 0.65  0.07      7  4.7      7    79  355    12 1030
QTA-22 237722 183.80 184.30 0.50  0.06  <5 12.2    78  135  417    20 1475
QTA-22 237723 184.30 185.38 1.08  0.13  15 12.4    85  133  565    44 1220
QTA-22 237724 185.38 185.80 0.42    0.1  10  7.1      8    64 1315    13 1410
QTA-22 237725 191.56 193.00 1.44 <0.05  <5 <0.2    14    96    32      3  562
QTA-22 237726 193.00 195.00 2.00 <0.05  <5 <0.2    14  108    30      3  492
QTA-22 237727 195.00 197.00 2.00 <0.05  <5 <0.2    15    99    22      6  434
QTA-22 237728 197.00 199.00 2.00 <0.05  <5 <0.2    16  119    28      4  424
QTA-22 237729 201.20 202.00 0.80 <0.05  <5  0.2    15  106  128      5  655
QTA-22 237730 204.90 207.00 2.10 <0.05  <5 <0.2    19  119  277    15  420
QTA-22 237731 207.00 209.00 2.00 <0.05  <5 <0.2    19  120    30      3  434
QTA-22 237732 209.00 210.00 1.00 <0.05  <5 <0.2    65  156    27      3  913
QTA-22 237733 216.92 217.60 0.68 <0.05      5 <0.2    22  138  162    11  347
QTA-22 237734 217.60 218.02 0.42 <0.05  <5 <0.2    20  132    27      2  412
QTA-22 237735 236.90 237.10 0.20  0.07  <5  2.4    13    67  232      6 1165
QTA-22 237736 237.10 239.00 1.90 <0.05  <5  0.3    15  112    21      2  511
QTA-22 237737 239.00 241.00 2.00 <0.05  <5  0.4    18  122    23    <2  471
QTA-22 237738 241.00 242.00 1.00 <0.05  <5  0.2    19  118    28      2  403
QTA-22 237739 242.00 243.48 1.48 <0.05  <5  0.3    19  114    73      3  417
QTA-22 237740 243.48 244.10 0.62 <0.05  <5  0.5    22  110    43      5  360
QTA-22 237741 250.60 250.80 0.20 <0.05  <5  0.3    21  110    22      3  388
QTA-22 237742 253.40 253.70 0.30 <0.05  <5  0.2    21  124    15    <2  359
QTA-22 237743 253.70 254.30 0.60 <0.05  <5  0.2    16  114    16      2  401
QTA-22 237744 254.30 254.70 0.40 <0.05  <5  0.2    18  104    24      3  464
QTA-22 237745 254.70 255.12 0.42 <0.05  <5  0.2    23  117    17    <2  381
QTA-22 237746 255.12 256.56 1.44 <0.05  <5  0.2    17  124    15      2  405
QTA-22 237747 266.00 266.50 0.50 <0.05  <5  0.2    19  112    20      3  495
QTA-22 237748 278.70 279.00 0.30 <0.05  <5 <0.2    20  104    14    <2  387
QTA-22 237749 286.70 289.00 2.30 <0.05  <5  0.4    21  110    21      4  385
QTA-22 237750 289.00 291.00 2.00 <0.05  <5  0.3    21  118    28      4  333
QTA-22 237751 291.00 291.80 0.80 <0.05  <5  0.3    19  112    49    <2  314
QTA-22 237752 291.80 292.08 0.28 <0.05  <5  0.2    18    74    19    <2  923
QTA-22 237753 292.08 294.38 2.30 <0.05  <5  0.2    20  126    29      4  417
QTA-22 237754 294.38 296.00 1.62 <0.05  <5  0.4    19  106    23      3  422
QTA-22 237755 296.00 298.00 2.00 <0.05  <5 <0.2    22  112    40      4  444
QTA-22 237756 300.00 300.20 0.20 <0.05  <5 <0.2    19  110    68      4  429
QTA-22 237757 302.40 303.50 1.10 <0.05  <5 <0.2    20  114    66      3  369
QTA-22 237758 304.82 307.60 2.78 <0.05  <5  1.6    42  126  205    11  708
QTA-22 237759 312.58 313.90 1.32 <0.05  <5  0.6    15  110    61      5  376
QTA-23 237760 31.90 32.80 0.90 <0.05  <5  0.9    13    91  152      8  814
QTA-23 237761 32.80 32.90 0.10 <0.05  <5  0.4    15  203  194      7  649
QTA-23 237762 32.90 33.60 0.70 <0.05  <5  0.3    14  106    36      7  564
QTA-23 237763 33.60 34.00 0.40 <0.05  <5  0.2    14  104  674    10  707
QTA-23 237764 74.24 75.29 1.05 <0.05  <5  1.6    10    99  174    10 1360
QTA-23 237765 75.29 76.00 0.71 <0.05  <5  1.5    16  136  239    15  772
QTA-23 237766 80.80 81.00 0.20 <0.05  <5  0.5    20  162  217      8  968
QTA-23 237767 83.00 83.20 0.20 <0.05  <5  0.3      6    81    36      5  742
QTA-23 237768 84.53 85.60 1.07 <0.05  <5  0.6      8    93  245      7 1065
QTA-23 237769 85.60 86.10 0.50 <0.05  <5  0.4      9    80  330    11  782
QTA-23 237770 86.10 86.15 0.05 <0.05  <5  0.8    12  100  253    12 1815
QTA-23 237771 96.80 98.15 1.35 <0.05  <5  0.8    17  130  120      9  534

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 25 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-23 237772 104.63 106.00 1.37 <0.05  <5  1.9    18  126  186    12  687
QTA-23 237773 106.00 107.20 1.20 <0.05  <5  0.7    16  116  150      9  483
QTA-23 237774 107.20 109.70 2.50 <0.05  <5  2.6    29  136    56    12  836
QTA-23 237775 116.05 116.80 0.75 <0.05  <5  4.2    15    98  257    16 3030
QTA-23 237776 128.38 129.30 0.92 <0.05  13 13.2    49  158  373    30 1430
QTA-23 435351 129.30 131.30 2.00 <0.05  <5  1.1    35  138  208    17  988
QTA-23 435352 131.30 132.68 1.38  0.06  <5  2.9    35  118  442    26  927
QTA-23 237777 132.68 133.70 1.02 <0.05      9  9.5 103  202  345    40 1070
QTA-23 435353 133.70 135.80 2.10 <0.05  <5  1.2    12  112  155    15  930
QTA-23 237778 135.80 136.60 0.80 <0.05  11  8.1    38  200  646    29 1320
QTA-23 237779 136.60 137.20 0.60 <0.05  <5  0.4      7    34  363    28 1330
QTA-23 435354 137.20 138.20 1.00 <0.05  <5  0.3    14  113    42    10  558
QTA-23 237780 138.20 138.50 0.30 <0.05  <5  1.4      9    31 1250    57 1070
QTA-23 435355 138.50 139.33 0.83 <0.05  <5  0.3    13  104  276    14  630
QTA-23 237781 139.33 139.68 0.35  0.07      9 11.5    70  322 2680 107 1520
QTA-23 237782 139.68 140.00 0.32  0.14      6  7.1    28    74 2500    90 1325
QTA-23 435356 140.00 142.00 2.00 <0.05  10  7.4    40  136  316    31 1135
QTA-23 435357 142.00 144.42 2.42 <0.05  <5  1.6    16  105  158    18 1065
QTA-23 237783 144.42 145.60 1.18  0.07  <5  3.5    20  114  362    12 1220
QTA-23 435358 145.60 147.20 1.60 <0.05  <5  1.3    16    98  424    14 1150
QTA-23 237784 147.20 148.54 1.34  0.57      9  8.7    69  142 6120    61 1430
QTA-23 435359 148.54 149.70 1.16 <0.05  13  15    30  157  515    24 1330
QTA-23 237785 149.70 151.30 1.60  0.07      9  7.3    52  152  521    25 1350
QTA-23 435360 151.30 152.60 1.30 <0.05  2.5  2.6    23  126  215    18 1255
QTA-23 435361 152.60 153.50 0.90 <0.05      9 10.8    62  144  148    47 1310
QTA-23 237786 153.50 154.43 0.93 0.025  69 76.9 434 1080  446 228 2240
QTA-23 435362 154.43 155.34 0.91 0.025      9  7.5    37  186  188    22 1280
QTA-23 237787 155.34 157.00 1.66  0.07  14 12.2    50  180  292    25 1690
QTA-23 237788 157.00 158.00 1.00  0.07  18 13.5    59  145  486    31 1920
QTA-23 435363 158.00 159.00 1.00 0.025  18 17.5 107  248  198    59 1435
QTA-23 237789 159.00 160.00 1.00 0.025  11 14.1    55  180  270    29 1680
QTA-23 237790 160.00 161.00 1.00    0.1  11 12.8    60  170  827    35 1675
QTA-23 237791 161.00 162.00 1.00 0.025  20  24 177  302  450    89 1790
QTA-23 435364 162.00 162.70 0.70 0.025  2.5  3.4    21  120  190    15 1350
QTA-23 237792 162.70 164.00 1.30 0.025  11 13.8    71  210  212    35 1415
QTA-23 237793 164.00 165.20 1.20  0.07  26 30.2 126  303 1055    84 1865
QTA-23 237794 165.20 165.60 0.40 0.025  31 37.1 434  406  730 324 1950
QTA-23 237795 165.60 167.00 1.40 0.025      6  10    20  115 1235    59 1440
QTA-23 237796 167.00 168.50 1.50 0.025  2.5  6.3    22  122  298    12 1220
QTA-23 237797 168.50 170.00 1.50  0.07  33 37.4 172  384  845    89 2140
QTA-23 237798 170.00 171.10 1.10 0.025  18  21    77  206  568    30 1990
QTA-23 435365 171.10 173.10 2.00 0.025  2.5  4.3    32  134  198    15 1290
QTA-23 435366 173.10 174.47 1.37 0.025  2.5  0.9    14  102  180    12 1140
QTA-23 237799 174.47 174.77 0.30  0.14  35 33.9    90  398  687    42 2110
QTA-23 435367 174.77 176.70 1.93 <0.05  <5      3    18  119  180    15 1025
QTA-23 237800 176.70 176.90 0.20  0.14  14  17 114 1260  967    67 2470
QTA-23 435368 176.90 178.90 2.00    0.1  15 14.5 174  460  144    40 1065
QTA-23 435369 178.90 180.90 2.00 <0.05  <5  1.7    26  122  212    15  919
QTA-23 435370 180.90 182.90 2.00 <0.05  <5  0.9    14    96    54    10  897
QTA-23 435371 182.90 184.20 1.30  0.14  12 12.9 291  420  254 120 1370
QTA-23 237801 184.20 186.00 1.80 <0.05  <5  2.2    15  102  547    13 1080
QTA-23 435372 186.00 187.94 1.94 <0.05  <5  2.3    15  109  249      9  926
QTA-23 237802 187.94 189.00 1.06 <0.05  <5  2.8    23  132    73    10 1170
QTA-23 237803 189.00 190.42 1.42 <0.05      5  8.1    42  178  170    18 1075
QTA-23 435373 190.42 192.42 2.00 <0.05      5  3.6    18  128    85    10  804
QTA-23 435374 192.42 194.42 2.00 <0.05  <5  2.1    18  117  189    17  687
QTA-23 435375 194.42 196.42 2.00 <0.05  <5  1.3    17  121    54    11  756
QTA-23 435376 196.42 198.42 2.00 <0.05  <5      1    14  111  228      9  737
QTA-23 435377 198.42 200.42 2.00 <0.05      5  6.3    45  122  187    18  780
QTA-23 435378 200.42 202.42 2.00 <0.05  <5  0.7    15  114  306      9  761
QTA-23 435379 202.42 204.42 2.00 <0.05  45 50.3 354  662  329 192 1190
QTA-23 435380 204.42 206.42 2.00 <0.05  <5      1    19  114    60      7  753
QTA-23 435381 206.42 208.22 1.80 <0.05  <5  0.5    13  109  212    14  705

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 26 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-23 435382 208.22 210.00 1.78 <0.05  <5  0.5    13 103    77      5  847
QTA-23 435383 210.00 212.00 2.00    0.1      9 10.1    21 127  236    14 1750
QTA-23 435384 212.00 212.90 0.90  0.17      7  8.2      9    92      51 1690
QTA-23 237804 212.90 213.20 0.30 <0.05  <5  3.2    17    52 1160    47 3120
QTA-23 435385 213.20 214.58 1.38  0.07      5  4.9    11    79  725    26 1405
QTA-23 237805 214.58 215.15 0.57  0.14  22 23.7 244 270  987    51 2820
QTA-23 237806 215.15 215.50 0.35  0.11  15  25 173 167 1475    41 3550
QTA-23 237807 215.50 216.00 0.50  0.07  11 11.6    33    97 1155    23 2840
QTA-23 237808 216.00 217.00 1.00  0.18      9 13.2    19    95 1600    31 2500
QTA-23 237809 217.00 217.50 0.50  0.31  58 59.6 769 378 3090    88 5230
QTA-23 435386 217.50 219.50 2.00  0.34  <5  2.1    15 126  524    14 1310
QTA-23 435387 219.50 221.50 2.00 <0.05  <5  0.5      9 100    70      4  661
QTA-23 435388 221.50 223.50 2.00 <0.05  <5  0.4    17 100    54      8  609
QTA-23 237810 229.33 229.70 0.37  0.07      7      7    38 106  549    19 1200
QTA-23 237811 229.70 230.80 1.10  0.07      7  1.7    18    71  183      8  533
QTA-23 237812 230.80 232.00 1.20 <0.05  <5  2.1    19 130  365      9  926
QTA-23 237813 232.70 233.40 0.70  0.11  <5      1    15    82  389      6  831
QTA-23 237814 233.40 233.78 0.38 <0.05  <5  0.6    12 154    67      4  801
QTA-23 237815 238.90 239.78 0.88  0.07  <5  3.7    15 123 1250    13 1420
QTA-23 237816 244.16 245.60 1.44 <0.05  <5  0.7    10 108  162      7  951
QTA-23 237817 246.48 247.00 0.52 <0.05  <5  0.5    12 110    50      5  607
QTA-23 237818 248.00 248.20 0.20 <0.05  22 28.5 211 331  528    48 2470
QTA-23 237819 249.40 251.00 1.60 <0.05  <5  0.5    14 116    54      6  477
QTA-23 237820 274.30 274.72 0.42 <0.05  <5  0.4    32 127  636    28  569
QTA-23 237821 294.50 296.00 1.50  0.07  20 <0.2    18 122    31      4  397
QTA-23 237822 296.00 298.00 2.00 <0.05  <5  0.2    17 125    30      3  399
QTA-23 237823 298.00 299.00 1.00 <0.05  <5  0.2    15 116    17    <2  395
QTA-23 237824 329.00 329.30 0.30 <0.05  <5  0.8    12 111  180    10  551
QTA-24 237851  4.73  6.73 2.00 <0.05  <5 <0.2    21 101    77      8  370
QTA-24 237852  6.73  8.13 1.40 <0.05  <5  0.3    14    96    66      9  537
QTA-24 237853 10.60 10.75 0.15 <0.05  <5 <0.2    12    74  255    24  935
QTA-24 237854 15.40 17.20 1.80 <0.05  <5  0.2    12    77    50      9  438
QTA-24 237855 18.73 19.00 0.27 <0.05  <5 <0.2    12    86    60      4  521
QTA-24 237856 20.90 21.80 0.90 <0.05  <5 <0.2    13 102    45      2  427
QTA-24 237857 21.80 22.20 0.40 <0.05  <5  0.2    12    73    33      4  278
QTA-24 237858 22.20 22.70 0.50 <0.05  <5 <0.2    15 130    59      5  614
QTA-24 237859 22.70 23.77 1.07 <0.05  <5  0.2    11    83    48      7  555
QTA-24 237860 23.77 24.20 0.43 <0.05  <5  0.2    16    82    98    15  238
QTA-24 237861 24.20 26.20 2.00 <0.05  <5 <0.2    14    92  116    20  407
QTA-24 237862 26.82 27.80 0.98 <0.05  <5 <0.2    15    99  103    12  407
QTA-24 237863 27.80 29.80 2.00 <0.05  <5 <0.2    13    73  116    31  340
QTA-24 237864 29.80 30.40 0.60 <0.05  <5 <0.2    12    76  208    93  319
QTA-24 237865 30.40 31.00 0.60 <0.05  <5 <0.2    12    62  149 106  383
QTA-24 237866 43.20 44.00 0.80 <0.05  <5  0.3    14    66    85    15  369
QTA-24 237867 44.00 44.30 0.30 <0.05  <5 <0.2    22    82  104    23  486
QTA-24 237868 44.90 46.40 1.50 <0.05  <5 <0.2    16    93  113    18  399
QTA-24 237869 46.40 47.26 0.86 <0.05  <5  0.2    10    82    52      3  460
QTA-24 237870 49.00 49.87 0.87 <0.05  <5 <0.2    12    77  112    21  491
QTA-24 237871 63.00 63.26 0.26 <0.05  <5  0.2    13    44    63    18  495
QTA-24 237872 64.90 65.70 0.80 <0.05  <5 <0.2    13    46    76    19  605
QTA-24 237873 65.70 66.00 0.30 <0.05  <5  0.2    11    69  112    17  540
QTA-24 237874 66.00 66.50 0.50 <0.05  <5  0.2    14    69  889    44  607
QTA-24 237875 66.50 67.60 1.10 <0.05  <5  0.3    12 118    38    18  450
QTA-24 237876 67.60 68.30 0.70 <0.05  <5  0.2    15 132  124    40  266
QTA-24 237877 68.30 69.40 1.10 <0.05  <5  0.2    13 118    25    14  449
QTA-24 237878 69.90 71.20 1.30 <0.05  <5 <0.2    13    70    24      4  506
QTA-24 237879 80.70 80.90 0.20 <0.05  <5  0.3    10    77    16      3  553
QTA-24 237880 88.90 89.20 0.30 <0.05  <5 <0.2    13 140  214    22  778
QTA-24 237881 91.90 92.05 0.15 <0.05  <5  0.3      8    32    98    11 1455
QTA-24 237882 92.37 92.57 0.20 <0.05  <5  0.3    15 142    75      3  410
QTA-24 237883 93.30 93.60 0.30 <0.05  <5 <0.2    13 134    38      3  296
QTA-24 237884 95.60 95.75 0.15 <0.05  <5  0.2    16 138    20    <2  247
QTA-24 237885 95.75 96.30 0.55 <0.05  <5  0.3    16 126    16    <2  356

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 27 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-24 237886 96.30 96.60 0.30 <0.05  <5  0.2    15 134          69      9  126
QTA-24 237887 96.60 97.60 1.00 <0.05  <5  0.2    11    94          49      7  234
QTA-24 237888 97.60 99.26 1.66 <0.05  <5 <0.2    18 118          10    <2  215
QTA-24 237889 99.26 100.60 1.34 <0.05  <5  0.3    23 124      302    32  130
QTA-24 237890 100.60 101.82 1.22 <0.05  <5  0.2    13 102      179    12  189
QTA-24 237891 118.10 118.56 0.46 <0.05  <5  0.8    14 105      156    20  473
QTA-24 237892 118.56 120.09 1.53 <0.05  <5 <0.2    13 108          60    14  393
QTA-24 237893 120.09 120.49 0.40 <0.05  <5 <0.2    22    99          94    25  668
QTA-24 237894 120.49 120.80 0.31 <0.05  <5 <0.2    15    92          39    13  473
QTA-24 237895 121.94 123.40 1.46 <0.05  <5  0.2    17    98          96    21  415
QTA-24 237896 123.40 123.70 0.30 <0.05  <5  1.4    18    82    1165    38 5140
QTA-24 237897 123.70 124.50 0.80 <0.05  <5  0.3    13    95      126    17 1180
QTA-24 237898 140.00 141.78 1.78 <0.05  <5  0.2    12    95          35      9  449
QTA-24 237899 147.80 148.20 0.40 <0.05  <5 <0.2    12    95          15      8  403
QTA-24 237900 149.00 149.40 0.40 <0.05  <5 <0.2    16 175          67    17  236
QTA-24 237901 151.00 152.30 1.30 <0.05  <5  0.3    15 100          19    13  329
QTA-24 237902 152.30 153.00 0.70 <0.05  <5  0.2    20 106          59    14  136
QTA-24 237903 165.85 166.15 0.30 <0.05  <5  0.2    23 102      102    95 1015
QTA-24 237904 171.50 171.70 0.20 <0.05  <5  0.3    15 108          68    13  353
QTA-24 237905 181.50 181.70 0.20  0.52  <5  3.1    26 120    1775 674 2060
QTA-24 237906 183.40 183.60 0.20 <0.05  <5  0.3    14    57      138    77  251
QTA-24 237907 192.00 193.00 1.00  0.17      7  4.3    27    62    1160 106 3110
QTA-24 237908 244.00 244.15 0.15  0.13  <5  1.2    14 106      710 191 2340
QTA-24 237909 256.30 257.20 0.90 <0.05  <5  0.2    14    54      287    36  258
QTA-24 237910 257.20 257.80 0.60 <0.05  <5  0.2    15 120          41    10  271
QTA-24 237911 257.80 258.10 0.30 <0.05  <5  0.2    15    93          38      8  257
QTA-24 237912 277.30 277.90 0.60 <0.05  <5  0.2    16    56    2130    52  149
QTA-24 237913 288.83 289.70 0.87 <0.05  <5  0.2    14    96          56    12  389
QTA-24 237914 291.20 291.70 0.50 <0.05  <5 <0.2    23    91          25      9  444
QTA-24 237915 292.70 292.90 0.20 <0.05  <5 <0.2    21    88          44      9  738
QTA-24 237916 297.30 297.50 0.20 <0.05  <5  0.2    32    86          37    10 1115
QTA-24 237917 298.20 298.40 0.20 <0.05  <5 <0.2    17 109          10      5  279
QTA-24 237918 311.50 312.50 1.00 <0.05  <5  0.2    15 104          44    18  324
QTA-24 237919 313.15 313.90 0.75 <0.05  <5  0.6    14    58      431    30 1345
QTA-24 237920 313.90 315.00 1.10 <0.05  <5  0.2    14    79      527    22  409
QTA-24 237921 315.00 315.65 0.65 <0.05  <5  0.2    14    99          27      6  350
QTA-24 237922 318.25 318.90 0.65 <0.05  <5  0.3    14    85      305    22  593
QTA-24 237923 340.40 340.60 0.20 <0.05  <5  0.2    11 108          52    22  309
QTA-24 237924 341.31 341.61 0.30 <0.05  <5  0.2    14 106          60    29  356
QTA-24 237925 343.58 344.00 0.42 <0.05  <5 <0.2    25 110      269 162  561
QTA-24 237926 344.10 344.30 0.20 <0.05  <5  0.3    23 112      240 134  346
QTA-24 237927 346.40 346.60 0.20 <0.05  <5  0.3    16    95          75    45  338
QTA-24 237928 346.90 347.40 0.50 <0.05  <5  0.3    16 108      225    80  335
QTA-24 237929 347.80 347.90 0.10 <0.05  <5 <0.2    26 105      483 111  329
QTA-24 237930 349.65 350.00 0.35 <0.05  <5  0.2    20 106      170    75  323
QTA-24 237931 356.40 356.60 0.20 <0.05      5  0.2    12 100          15      4  456
QTA-24 237932 359.60 359.80 0.20 <0.05  <5  0.2    12    71          71    49  360
QTA-24 237933 370.70 371.60 0.90 <0.05  <5  0.4    16    48          62    20  526
QTA-24 237934 394.00 394.40 0.40 <0.05  <5  0.4    14    82      271    40  690
QTA-24 237935 420.15 421.30 1.15 <0.05  <5  0.2    17    87      163    11  460
QTA-24 237936 423.10 423.50 0.40 <0.05  <5  0.8    24    61 >10000 332  288
QTA-24 237937 434.90 435.20 0.30 <0.05  <5  0.2    16 110          66    10  269
QTA-25 237938  6.80  7.62 0.82 <0.05  <5  0.3    92 202      395    58  895
QTA-25 237939  7.62  9.10 1.48 <0.05  <5  0.2    15 229      315    43  689
QTA-25 237940 27.60 28.20 0.60 <0.05  <5 <0.2    18 311          95    46  439
QTA-25 237941 55.15 56.10 0.95 <0.05  <5  0.4    20 152      146    19  367
QTA-25 237942 56.10 57.00 0.90 <0.05  <5  0.7    77 232      134    18  432
QTA-25 237943 57.00 59.15 2.15 <0.05  <5  0.3    14 121      137    17  707
QTA-25 237944 61.90 63.00 1.10 <0.05  <5  1.4    34 158      928    54  952
QTA-25 237945 63.00 64.00 1.00 <0.05  <5  2.1    37 191      511    41  727
QTA-25 237946 64.00 64.80 0.80 <0.05  <5  1.7    67 182      252    20  715
QTA-25 237947 64.80 65.73 0.93 <0.05  <5  0.6    38 106      187    14  388
QTA-25 237948 65.73 67.80 2.07 <0.05  <5  0.7    16 131      385    19  578

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 28 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-25 237949 67.80 69.00 1.20 <0.05  <5  0.7          14          65  406    23  390
QTA-25 237950 69.00 70.00 1.00 <0.05  <5  1.2          33      216  638  104    88
QTA-25 237951 70.00 71.80 1.80 <0.05  <5  0.2          12      198    97    35  495
QTA-25 237952 77.20 78.00 0.80 <0.05  <5 <0.2            8          75  112    18  319
QTA-25 237953 78.00 78.30 0.30 <0.05  <5 <0.2          13          95    29    16  428
QTA-25 237954 78.80 78.90 0.10 <0.05  <5 <0.2          10      100    23    13  230
QTA-25 237955 79.00 79.40 0.40 <0.05  <5 <0.2            9          90    69    13  190
QTA-25 237956 86.52 88.40 1.88 <0.05  <5  0.9          38      219  395  104  403
QTA-25 237957 88.40 89.40 1.00 <0.05  <5  0.2          10      699  452  162  119
QTA-25 237958 89.40 90.50 1.10 <0.05  <5  0.4          11      202  320    88  135
QTA-25 237959 90.50 91.15 0.65 <0.05  <5  0.3            9      134  385  102  135
QTA-25 237960 91.15 91.32 0.17 <0.05  <5  0.2            7      126  184    78  123
QTA-25 237961 91.32 92.20 0.88 <0.05  <5  0.2            5          90  126    34  136
QTA-25 237962 92.20 92.60 0.40 <0.05  <5  0.3            4          97  124    40  152
QTA-25 237963 92.60 94.40 1.80 <0.05  <5  2.4          93      172  414  106  136
QTA-25 237964 94.40 94.90 0.50 <0.05  <5  3.3          16          98  231    28    59
QTA-25 237965 94.90 96.50 1.60 <0.05  <5  1.1          26      132  248    26  269
QTA-25 237966 96.50 96.80 0.30 <0.05  <5  0.5          37          61  182    13  295
QTA-25 237967 96.80 97.50 0.70 <0.05  <5  0.8          24      112  216    14  255
QTA-25 237968 97.50 97.90 0.40 <0.05  <5  0.5          38      156  200    19  354
QTA-25 237969 97.90 98.50 0.60 <0.05  <5  0.3            8          82    75    16  207
QTA-25 237970 101.50 102.10 0.60 <0.05  <5  0.3          46      138  120    27  361
QTA-25 237971 102.10 102.20 0.10 <0.05  <5  0.3          26      167    46    30  516
QTA-25 237972 102.70 103.10 0.40 <0.05  <5  0.6          44      206    59    30  977
QTA-25 237973 103.10 103.55 0.45 <0.05  <5  0.3          31          79    99    32  546
QTA-25 237974 109.00 109.90 0.90 <0.05      5  5.1      631    1365  289    98  986
QTA-25 237975 109.90 111.25 1.35 <0.05      6  3.3      308      528  152  102  556
QTA-25 237976 111.25 112.20 0.95 <0.05  <5  0.3            9          40    51    30  245
QTA-25 237977 112.20 112.82 0.62 <0.05  <5 <0.2            5          67    82    43  315
QTA-25 237978 167.80 169.36 1.56 <0.05  <5  0.4            7          43  244    51  426
QTA-25 237979 199.00 201.00 2.00 <0.05  <5  0.5            7          38  106    21  376
QTA-25 237980 201.00 202.00 1.00 <0.05  <5  1.1          14          25  195    27  384
QTA-25 237981 202.00 202.49 0.49 <0.05  <5  0.9            8          18  128    25  522
QTA-25 237982 203.20 203.60 0.40 <0.05      5  4.2          24          35  305    45  186
QTA-25 237983 203.60 204.70 1.10 <0.05  <5  3.2          54          46  350    67  169
QTA-25 237984 204.70 205.26 0.56 <0.05 317 >100 >10000 >10000  747 1275  485
QTA-25 237985 205.26 205.74 0.48 <0.05  47 53.8    2280    9540  393  235  274
QTA-25 237986 205.74 206.00 0.26 <0.05  <5  4.8      159      196  312    52  323
QTA-25 237987 206.00 207.27 1.27 <0.05  <5  1.7          19      156  407    41  128
QTA-25 237988 207.27 208.00 0.73 <0.05  <5  1.3          17      128  572    54  123
QTA-25 237989 208.00 210.00 2.00 <0.05  <5  0.6            9      106  483    48  324
QTA-25 237990 210.00 211.00 1.00 <0.05  <5  0.6            8      126  354    40  513
QTA-25 237991 211.00 212.00 1.00 <0.05  <5  0.4            5          30  198    47  598
QTA-25 237992 212.00 212.70 0.70 <0.05  <5  0.2            4          33  203    40  611
QTA-25 237993 212.70 214.00 1.30 <0.05  <5  0.5            5          31  239    61  606
QTA-25 237994 214.00 216.00 2.00 <0.05  <5  0.3            4          42  181    41  530
QTA-25 237995 216.00 216.80 0.80 <0.05  <5  0.3            3          41  138    77  530
QTA-25 237996 216.80 217.10 0.30 <0.05  <5  0.3            4          33    77    49  681
QTA-25 237997 218.90 219.20 0.30 <0.05  <5  0.5          17      418    94    49  499
QTA-25 237998 224.00 225.35 1.35  0.06  <5  0.6            9          72  407    45  440
QTA-25 237999 225.35 227.08 1.73 <0.05  <5      5          46      188  449    87  273
QTA-25 238000 227.08 229.00 1.92 <0.05  <5  2.1          14      157  485    47  523
QTA-25 431001 237.10 237.20 0.10 <0.05  <5  2.7          27      319  714    32 1510
QTA-25 431002 237.20 237.70 0.50 <0.05  <5  1.3          29          59  564    30  607
QTA-25 431003 237.70 238.55 0.85 <0.05  <5  6.8      387      425  558  140  734
QTA-25 431004 238.55 239.22 0.67 <0.05  <5  2.6          58      103  204    47  808
QTA-25 431005 239.22 239.60 0.38 <0.05  37 41.9    2760    2340  876 1210 1495
QTA-25 431006 239.60 239.70 0.10 <0.05 223 >100 >10000 >10000 1340 3030 1675
QTA-25 431007 239.70 239.90 0.20 <0.05  23 23.8      844      715 1720  405 1360
QTA-25 431008 239.90 240.60 0.70 <0.05      8 10.8      131      153 1020    88 1030
QTA-25 431009 240.60 241.10 0.50 <0.05  <5  4.2          95      127  837    66  524
QTA-25 431010 241.10 242.00 0.90 <0.05  <5  3.5          79      181 1020    88  531
QTA-25 431011 242.00 242.62 0.62 <0.05  <5  0.5            5          34  253    57  545

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 29 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-25 431012 242.62 243.00 0.38 <0.05  <5  0.7            8          42      577      121  521
QTA-25 431013 244.00 244.20 0.20 <0.05  <5  0.4            5          58      211          56  623
QTA-25 431014 255.00 255.80 0.80 <0.05  <5  0.4          25      108          52          31  567
QTA-25 431015 257.70 258.00 0.30 <0.05  <5  0.3            9          45          90          74  550
QTA-25 431016 264.80 264.90 0.10 <0.05  51 59.9    6130 >10000      714    1115 1435
QTA-25 431017 268.80 269.10 0.30 <0.05  <5  0.4          25      165          22          64  387
QTA-25 431018 271.00 271.80 0.80 <0.05  <5  0.5          13          62          27    1045  293
QTA-25 431019 274.20 275.20 1.00 <0.05  <5  1.4          67      144          33      502  309
QTA-25 431020 280.20 282.65 2.45 <0.05  <5  2.2          61          42      362          70  442
QTA-25 431021 282.65 284.10 1.45 <0.05  19 16.5      756    1190      570      120  439
QTA-25 431022 284.10 284.71 0.61  0.16  86 94.5    5610    8170    4230    1560  374
QTA-25 431023 284.71 285.00 0.29  0.89 405 >100 >10000 >10000 >10000    9110 1020
QTA-25 431024 285.00 285.30 0.30 <0.05  42 41.1    1350    1265      434      155  375
QTA-25 431025 285.30 285.40 0.10 <0.05  81 >100    4020    3000    1120      312  463
QTA-25 431026 285.40 286.00 0.60 <0.05  34 42.7    1540      595    1075      114  409
QTA-25 431027 286.00 286.20 0.20  0.14  55 59.8    2680    2510    2160      182  389
QTA-25 431028 286.20 288.10 1.90 <0.05  <5      2          36      130      335          38  450
QTA-25 431029 288.10 288.30 0.20 <0.05  37 44.6    1845    3640    1495      323  689
QTA-25 431030 289.10 289.70 0.60 <0.05      6  3.6          38          80      717      166  456
QTA-25 431031 298.00 298.70 0.70 <0.05  <5      1          24      114      626      349  940
QTA-25 431032 298.70 299.00 0.30 <0.05  <5  1.1          24          94      223      346 1035
QTA-25 431033 307.40 309.90 2.50 <0.05  <5  0.9          14          70      322      100 1125
QTA-25 431034 315.47 315.57 0.10 <0.05  <5      1          10          41          73          40  841
QTA-25 431035 328.50 328.80 0.30 <0.05  <5  0.3            9          56          76          29  519
QTA-25 431036 334.10 336.80 2.70 <0.05  <5      1          18          93      382          57  994
QTA-25 431037 336.80 337.40 0.60 <0.05  <5      3      247      209      136      170  596
QTA-25 431038 337.80 339.40 1.60 <0.05  <5  0.6          38      125      280          22  536
QTA-25 431039 339.40 340.73 1.33 <0.05  <5  0.4          10          37      236          36  626
QTA-25 431040 340.73 342.58 1.85 <0.05  <5  0.5            3          54      105          34  684
QTA-25 431041 342.58 344.00 1.42 <0.05  <5  0.4            5          48          96      558  825
QTA-25 431042 344.00 346.00 2.00 <0.05  <5  0.3            6          32      156          29  656
QTA-25 431043 346.00 347.40 1.40 <0.05  <5  0.5            8          29          79          27  489
QTA-25 431044 347.40 349.00 1.60 <0.05  <5  0.7          10          68      257          19  856
QTA-25 431045 349.00 351.10 2.10 <0.05  <5  0.9            9          19      479          66  961
QTA-25 431046 351.10 352.90 1.80  0.19 190 >100 >10000 >10000    2390 >10000 3350
QTA-25 431047 352.90 353.00 0.10 <0.05  <5  0.9          48      112      391          45  630
QTA-25 431048 353.00 355.00 2.00 <0.05  <5  0.6          14          42      508          38  516
QTA-25 431049 355.00 357.00 2.00 <0.05  <5  0.5            6          22      339          22  600
QTA-25 431050 357.00 357.74 0.74 <0.05  <5  3.1      138          69    1100          76  875
QTA-25 431051 357.74 359.00 1.26 <0.05  <5  1.7            8          15      474          36  479
QTA-25 431052 359.00 361.10 2.10 <0.05  <5  3.4          73      184      643          70  460
QTA-25 431053 361.10 362.30 1.20 <0.05 129 >100    2560    6850    1400    2040 1135
QTA-25 431054 362.30 362.60 0.30 <0.05  <5  2.6          32      370    1215          50  863
QTA-25 431055 362.60 364.24 1.64  0.07  <5  2.7          13          59      703          42  856
QTA-25 431056 364.24 364.34 0.10  0.25  12 15.3      645 >10000    4250      121  652
QTA-25 431057 364.34 365.10 0.76  0.07  <5  2.8      164      327      598      134  606
QTA-25 431058 365.10 365.20 0.10  0.07      8 21.6    4030    8680    1475    2990  638
QTA-25 431059 365.20 365.60 0.40  0.07  17 21.3    1910    4780      857    1390  629
QTA-25 431060 365.60 367.00 1.40  0.07  37 40.5    2800 >10000      795    2080  798
QTA-25 431061 367.00 367.60 0.60  0.07  24 27.8      595      720    1445      512 1260
QTA-25 431062 367.60 369.70 2.10  0.07      5  8.5          28          33      706          49  635
QTA-25 431063 369.70 370.30 0.60  0.07  <5  3.3      114    2200    1250          97  919
QTA-25 431064 370.30 371.00 0.70    0.1  19 26.8      565 >10000    2320      437 1345
QTA-25 431065 371.00 371.90 0.90  0.06  19 19.2    3330    5590      666    2430  666
QTA-25 431066 371.90 372.30 0.40  0.17  63 75.4    9640 >10000    1420    7460 1450
QTA-25 431067 372.30 374.75 2.45 <0.05  <5  7.1      387    5990      476      288  489
QTA-25 431068 374.75 376.34 1.59  0.07  <5  4.1      303      179    1110      198  816
QTA-25 431069 376.34 377.30 0.96    0.1  46 60.5    3960 >10000    2160    2760  757
QTA-25 431070 377.30 379.30 2.00  0.13  <5      2          12          72    1035          46  427
QTA-25 431071 379.80 381.30 1.50  0.07  <5  0.6            9          18      655          30  522
QTA-25 431072 381.30 383.30 2.00 <0.05  <5  0.7          11          18      486          38  648
QTA-25 431073 383.30 385.00 1.70 <0.05  <5  1.1            4          17      641          37  577
QTA-25 431074 385.00 387.00 2.00 <0.05  <5  0.5            5          17      453          42  687

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 30 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-25 431075 387.00 388.30 1.30  0.18  <5  1.8            8          17  649    37  690
QTA-25 431076 388.30 390.00 1.70    0.1  <5      2          11          18  568    38  544
QTA-25 431077 390.00 390.80 0.80  0.16  <5  1.2            9            9  420    37  500
QTA-25 431078 390.80 392.00 1.20  0.07      6  1.4            8            9  528    39  502
QTA-25 431079 392.00 393.53 1.53  0.09      5  1.7            7          24  565    36  883
QTA-25 431080 393.53 394.20 0.67    0.1      5  5.1      410    1335  685  330 1365
QTA-25 431081 394.20 396.30 2.10    0.1  <5  4.5          51          79  704    52  426
QTA-25 431082 396.30 396.70 0.40 <0.05 299 >100 >10000 >10000 2240 5720 1700
QTA-25 431083 396.70 398.70 2.00  0.13  <5  4.5          45      177  955    76  613
QTA-25 431084 403.40 403.76 0.36  0.13  <5  2.1          25          26  343  102  519
QTA-25 431085 403.76 404.70 0.94 <0.05  <5  4.2          18          53  429    34  303
QTA-25 431086 404.70 405.00 0.30  0.21  23 30.1 >10000      797  843 7520  361
QTA-25 431087 410.50 410.80 0.30 <0.05  <5  0.8      186          53  417  202 1255
QTA-25 431088 410.80 411.00 0.20 <0.05  <5  0.4          13          31  178    39  413
QTA-25 431089 411.00 411.30 0.30 <0.05  <5  0.3            8          23  254    42 1040
QTA-25 431090 411.30 411.90 0.60 <0.05  <5  3.1          15          24 1055    48  419
QTA-25 431091 411.90 413.20 1.30  0.07  <5  1.7          11          33 1605  123  760
QTA-25 431092 413.20 413.80 0.60 <0.05  <5  1.1          20          21  371    48  448
QTA-25 431093 413.80 414.43 0.63  0.13      9  8.5      400      155  693  117  486
QTA-25 431094 414.43 415.10 0.67 <0.05  19 24.5      859      695  675  403  789
QTA-25 431095 415.10 417.10 2.00 <0.05  <5  1.4          21          63  164    64  842
QTA-25 431096 439.40 439.50 0.10  1.09 360 >100 >10000 >10000 1370 8490 5220
QTA-25 431097 461.40 461.57 0.17 <0.05  <5  1.1          60          95  135    41  283
QTA-25 431098 475.00 476.00 1.00 <0.05  <5  2.2          75      275  660    44 1125
QTA-25 431099 487.95 488.10 0.15 <0.05  16 15.4    1695      636 1965  774 3440
QTA-25 431100 489.60 490.20 0.60 <0.05  <5  4.2          18          45  655    26  509
QTA-25 431101 490.20 490.42 0.22  0.09  <5      8          75      166  894    80  718
QTA-25 431102 490.42 491.34 0.92  0.17  <5  2.9      106      212  483    62  682
QTA-25 431103 491.34 492.00 0.66  0.07  22 24.6    2420      407  742 1625  389
QTA-25 431104 496.30 496.70 0.40  0.06  11  4.4      275      927  919  110 1105
QTA-25 431105 499.00 500.00 1.00  0.07  <5  2.3          54      240  972    46  695
QTA-25 431106 500.00 501.40 1.40  0.07  <5  3.4      166      401  606    69 1080
QTA-25 431107 501.40 501.70 0.30  0.07      8 12.2      210    1520  688  143 1105
QTA-25 431108 501.70 502.50 0.80 <0.05  <5  6.1          30          88  655    78 1075
QTA-25 431109 502.50 502.70 0.20 <0.05  <5  3.2          24          90  265    47 1125
QTA-25 431110 502.70 503.80 1.10 <0.05      6  5.2          53      117  547    75 1235
QTA-25 431111 503.80 504.18 0.38  0.13  15 24.4    1305    4460 2820  565  242
QTA-25 431112 504.18 504.54 0.36  0.13  81    98    2400 >10000 2400  436  588
QTA-25 431113 504.54 504.90 0.36  0.06  92 >100    3040    5410  947  336  827
QTA-25 431114 504.90 505.30 0.40  0.19  64 76.1    4760 >10000 5520 1720  821
QTA-25 431115 505.30 505.50 0.20 <0.05  13  7.8      325      118  694    70  511
QTA-25 431116 505.50 505.80 0.30 <0.05 184 >100    6970    6640 8850 3730  752
QTA-25 431117 505.80 506.65 0.85 <0.05  <5  5.4          46      267  561    46  254
QTA-25 431118 506.65 506.75 0.10 <0.05      8  7.1      106      340 1150    50  335
QTA-25 431119 506.75 507.00 0.25 <0.05      6 10.2      157      347 1060    79  456
QTA-25 431120 507.00 507.10 0.10  0.14  20 26.3      408      311 1010  223  704
QTA-25 431121 507.10 507.20 0.10 <0.05  <5  4.7          29      105  880    33 1250
QTA-25 431122 507.20 508.00 0.80 <0.05 153 >100    4640    4400  783 2130  461
QTA-25 431123 508.00 508.30 0.30 <0.05  <5  4.8          47      144  342    43  445
QTA-25 431124 508.30 510.00 1.70 <0.05  <5  3.8          25          74  656    29  433
QTA-25 431125 510.00 512.00 2.00 <0.05  <5  7.1          53      171  515  106  555
QTA-25 431126 512.00 514.00 2.00 <0.05  <5  5.2          79          62  449    57  469
QTA-25 431127 514.00 515.00 1.00 <0.05  <5  5.2          15          15  471    25  464
QTA-25 431128 515.00 516.40 1.40 <0.05  <5  3.8          16          78  706    24  672
QTA-25 431129 516.40 516.60 0.20  0.82  <5  3.1      119      236 9370    65 1780
QTA-25 431130 521.25 520.60    0.07  <5  1.6          10          34 1340    25  762
QTA-25 431131 520.60 523.10 2.50 <0.05  <5  3.7          13      192  757    22  855
QTA-25 431132 523.10 523.40 0.30 <0.05  <5  4.3          20      309  986    27 1160
QTA-25 431133 523.40 523.80 0.40 <0.05  90 85.2    9530 >10000 3420 4300 1245
QTA-25 431134 523.80 525.00 1.20 <0.05  <5  6.5          28          63  530    35  421
QTA-25 431135 525.00 526.60 1.60 <0.05  <5  4.8      164      127 1110  115  422
QTA-25 431136 526.60 526.80 0.20 <0.05  <5  9.7    4370      394 6030 1835  261
QTA-25 431137 526.80 528.00 1.20 <0.05  <5  2.9          22          33  877    24  310

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 31 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-25 431138 528.00 529.20 1.20 <0.05    <5  3.1    28          31    1050    25  451
QTA-25 431139 529.20 531.00 1.80 <0.05    <5  0.9      9          22      346    29  513
QTA-25 431140 531.00 531.30 0.30 <0.05      5  6.9 1590    1820    1400  599  419
QTA-25 431141 531.30 531.90 0.60 <0.05    <5  2.6  622    1000      464  291  441
QTA-25 431142 531.90 534.00 2.10 <0.05    <5  0.4    20      101      201    41  567
QTA-25 431143 534.00 536.00 2.00 <0.05    <5  0.4      8          32      272    60  544
QTA-25 431144 536.00 537.20 1.20 <0.05    <5  1.4      6          19      473    32  528
QTA-25 431145 537.20 540.70 3.50 <0.05    <5  4.8    15          72      654    27  476
QTA-25 431146 540.70 543.00 2.30 <0.05    <5      2    13          58      648    15  656
QTA-25 431147 543.00 544.10 1.10  0.21    23 21.6  928    2540    1555  823  624
QTA-25 431148 544.10 544.30 0.20  0.26  206 >100 1870      107    1610 2520 3550
QTA-25 431149 544.30 545.80 1.50 <0.05      6  9.9  250      156    1230  164  392
QTA-25 431150 545.80 546.00 0.20 <0.05    39 43.2  256          96    1335  249 1670
QTA-25 431151 546.00 546.70 0.70  0.13    14 13.6    91          20      852    98 1065
QTA-25 431152 546.70 548.00 1.30 <0.05    <5  3.9      6          23      475    31  656
QTA-25 431153 548.00 550.00 2.00 <0.05    <5  2.1      4          18      484    45  612
QTA-25 431154 550.00 552.00 2.00 <0.05      6  7.2      6          62      701    28  608
QTA-25 431155 552.00 552.30 0.30    0.1    30 27.8    34    2950    2200    82 1880
QTA-25 431156 552.30 556.50 4.20 <0.05    33 47.3  504      487      946  471  636
QTA-25 431157 556.50 557.00 0.50 <0.05    28    31  833    1280      514  703 1310
QTA-25 431158 557.00 558.20 1.20 <0.05    13 15.2    16          50      624    48  490
QTA-25 431159 558.20 558.70 0.50    0.1    14    14    19          34      733    39  540
QTA-26 431160  6.30  7.50 1.20 <0.05    <5      1    55      130      215    10  493
QTA-26 431161  7.50  8.20 0.70 <0.05      6      4  292      288      960  124  716
QTA-26 431162  8.20  9.00 0.80 <0.05    <5  3.3    86      238      752  240  743
QTA-26 431163  9.00 10.70 1.70 <0.05    <5  0.8    20      101      352    38  532
QTA-26 431164 26.80 28.20 1.40 <0.05    <5  0.2    22          85          83    14  463
QTA-26 431165 31.60 31.80 0.20 <0.05    <5  0.7    50      134          42    13  908
QTA-26 431166 49.10 51.00 1.90 <0.05    <5 <0.2      6          47          50    12  572
QTA-26 431167 51.00 53.00 2.00 <0.05    <5  0.2    10          71      111    12  513
QTA-26 431168 53.00 54.50 1.50 <0.05    <5  0.3      9      119          60    11  748
QTA-26 431169 62.50 62.79 0.29 <0.05    <5  0.4    27    1115      660  785  378
QTA-26 431170 64.50 64.70 0.20 <0.05    <5  0.8    47      638      561  582  785
QTA-26 431171 65.45 65.88 0.43 <0.05    <5  3.5    44      735    1315  921  557
QTA-26 431172 65.88 67.00 1.12 <0.05    <5  4.1    47      243      510  134  602
QTA-26 431173 67.00 67.78 0.78 <0.05    43 53.7  675    1115    2190  205  717
QTA-26 431174 67.78 68.10 0.32  0.37    79 78.8 1190    1790    3410    52  447
QTA-26 431175 68.10 69.50 1.40 <0.05    <5  1.6    41      338    2020    44  729
QTA-26 431176 72.00 72.20 0.20 <0.05    <5  7.3  435      706      253  392  801
QTA-26 431177 74.50 76.30 1.80 <0.05    <5  0.6    33      198      162    65  575
QTA-26 431178 87.67 87.77 0.10 <0.05    <5  0.7    37      201      316    26  844
QTA-26 431179 119.80 119.90 0.10  0.13 1415 >100 3940 >10000    9480 2690  985
QTA-26 435287 119.90 121.80 1.90 <0.05      5  2.3    27      112    1110    28  575
QTA-26 435288 121.80 122.75 0.95 <0.05    <5  0.5      6          96          43    10  592
QTA-26 431180 136.30 137.60 1.30    0.2      5 20.8    84      269    3930  108  586
QTA-26 435289 137.68 139.68 2.00 <0.05    <5  0.5      6          92          74    16  488
QTA-26 435290 139.68 141.68 2.00 <0.05    <5  0.5      6          79      172    21  552
QTA-26 435291 141.68 142.20 0.52 <0.05    10 11.9    16          78    2340    46  654
QTA-26 431181 142.20 142.40 0.20  0.53  479 >100 2980    2450 >10000 3610 1480
QTA-26 435292 142.40 144.40 2.00 <0.05    <5  6.6      9          46    1360    32  744
QTA-26 435293 144.40 146.60 2.20 <0.05      8      5      7          24      877    33  695
QTA-26 431182 146.60 146.90 0.30  0.39    13 17.8    60      566    6580    96  935
QTA-26 431183 146.90 147.20 0.30 <0.05      7  6.7    24          67      730    35  583
QTA-26 431184 147.20 148.40 1.20  0.07    40 41.3 1160    1580    2070  817  764
QTA-26 431185 148.40 149.00 0.60 <0.05      5 10.7    58      137      636    68  430
QTA-26 431186 155.75 156.00 0.25  0.35    41 51.2  709    2300    4820  536  979
QTA-26 431187 156.00 157.28 1.28 <0.05    11 10.1  146      551      713  121  594
QTA-26 431188 165.70 167.00 1.30 <0.05    <5  0.4      8          48      133    24  377
QTA-26 431189 167.00 168.00 1.00 <0.05    <5  1.1      7          47      740    20  466
QTA-26 431190 168.00 169.90 1.90 <0.05    <5  1.8      7      120      256    19  307
QTA-26 431191 169.90 171.00 1.10 <0.05    <5  0.2      5          44      133    28  581
QTA-26 431192 171.00 172.52 1.52 <0.05    <5  0.4      5          36      108    41  564
QTA-26 431193 199.95 200.60 0.65 <0.05      9  4.3    19      150    1705    57 2550

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 32 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-26 431194 207.75 207.95 0.20 <0.05  <5  1.9    15    19    2450    33  776
QTA-26 431195 209.70 210.00 0.30 <0.05  <5  0.3      2  124          67    51  534
QTA-26 431196 230.90 231.00 0.10 <0.05  <5  0.8    25  270      120    33 1130
QTA-26 431197 241.60 242.62 1.02 <0.05  <5  0.8    27  208      416    67 1035
QTA-26 431198 242.62 243.20 0.58 <0.05  34    29 354 1165    2960  956 1970
QTA-26 431199 273.50 274.60 1.10 <0.05      9 10.4    51    64    3090 2840  935
QTA-26 431200 308.00 310.00 2.00 <0.05  <5  0.5      9    42      751    78  490
QTA-26 431201 310.00 312.00 2.00 <0.05  <5  1.3    13    80      339    99  482
QTA-26 431202 312.00 314.00 2.00 <0.05  <5  0.2      3    31      109    36  600
QTA-26 431203 314.00 316.00 2.00 <0.05  <5  0.5      4    48      162    32  495
QTA-26 431204 316.00 318.00 2.00 <0.05  <5  0.3      3    26          61    20  557
QTA-26 431205 318.00 320.00 2.00 <0.05  <5 <0.2      2    24      161    25  636
QTA-26 431206 320.00 322.00 2.00 <0.05  <5  1.2      6    64      655  176  511
QTA-26 431207 322.00 324.00 2.00 <0.05  <5  0.3      2    25      264    25  493
QTA-26 431208 324.00 326.00 2.00 <0.05  <5 <0.2      2    38          66    26  638
QTA-26 431209 326.00 327.40 1.40 <0.05  <5  0.6      5    38      132    32  601
QTA-26 431210 327.40 328.10 0.70 <0.05  <5  0.2      3    25      790    66  708
QTA-26 431211 328.10 329.20 1.10 <0.05  <5  0.2      3    19      146    33  617
QTA-26 431212 329.20 331.00 1.80 <0.05  <5  0.2      5    20      158    31  562
QTA-26 431213 331.00 331.40 0.40 <0.05  <5 <0.2      4    37    2750    28  582
QTA-26 431214 331.40 332.00 0.60 <0.05  <5  0.2      7    26    2210    22  336
QTA-26 431215 332.00 333.00 1.00 <0.05  <5  0.8      6    19    1720    28  530
QTA-26 431216 333.00 334.90 1.90 <0.05  <5  0.3      5    24      108    29  645
QTA-26 431217 334.90 335.15 0.25 <0.05  <5  0.5      8    21      280    38  926
QTA-26 431218 335.15 337.00 1.85 <0.05  <5      2      7    17      454    23  434
QTA-26 431219 337.00 339.00 2.00 <0.05  <5  1.8      6    26      485    22  492
QTA-26 431220 339.00 339.90 0.90 <0.05  <5  2.6    10    64      458  227  662
QTA-26 431221 339.90 341.42 1.52 <0.05      8 11.9    24  928      802    79 1210
QTA-26 431222 341.42 342.70 1.28  0.61  77 86.9 206 3370 >10000  180  852
QTA-26 431223 342.70 343.62 0.92  0.06      7  5.5    54  130    2110  647  478
QTA-26 431224 343.62 344.50 0.88  0.06      7  4.9    11    28    1140    35  377
QTA-26 431225 344.50 346.00 1.50  0.06      7  3.8      9    18    2820    71  627
QTA-26 431226 346.00 348.00 2.00 <0.05  <5  3.1      8    68    1100    20  469
QTA-26 431227 348.00 350.00 2.00 <0.05      7  7.5    36  250      439    66  476
QTA-26 431228 350.00 352.00 2.00 <0.05      5  6.2    13    34      617    49  641
QTA-26 431229 352.00 354.00 2.00 <0.05      8  3.8    16    46      623    37  867
QTA-26 431230 354.00 355.90 1.90 <0.05      5  1.9    18    94    1490    41  515
QTA-26 431231 355.90 356.90 1.00 <0.05  <5  3.4    33  367    4750    64 1215
QTA-26 431232 356.90 358.30 1.40 <0.05  <5  0.6      9    58      492    52  667
QTA-26 431233 376.40 377.40 1.00 <0.05  <5 <0.2      3    37      112    22  655
QTA-26 431234 377.40 378.00 0.60 <0.05  <5  1.9      9    72    1060  104  731
QTA-26 431235 378.00 379.30 1.30 <0.05      7  5.1      8    21    1420    46  478
QTA-26 435294 379.30 381.30 2.00 <0.05  <5  1.5      4    23      716    23  610
QTA-26 435295 381.30 382.83 1.53  0.07  15 10.9      9    31    1115    39  821
QTA-26 431236 382.83 383.10 0.27 <0.05 140 >100 278 2220    3310  355  908
QTA-26 435296 383.10 385.10 2.00 <0.05  <5  1.1      5    44      291    20  578
QTA-26 435297 385.10 387.10 2.00 <0.05  <5  0.5    <2    75      543    27  811
QTA-26 435298 387.10 389.10 2.00 <0.05  <5  0.4    <2    60      242    28  661
QTA-26 435299 389.10 391.10 2.00 <0.05  <5  0.3    <2    39      117    17  648
QTA-26 435300 391.10 393.60 2.50 <0.05  <5  0.3      4    21      280    31  606
QTA-26 431237 393.60 396.00 2.40 <0.05  <5  1.5      3    47      524    22  540
QTA-26 435301 396.00 398.00 2.00 <0.05  <5  2.7      7    13      650    20  489
QTA-26 435302 398.00 399.30 1.30  0.37  <5  2.1      8    12      657    13  329
QTA-26 431238 399.30 399.60 0.30 <0.05  47 55.6 286    88    2280  205  298
QTA-26 431239 399.60 399.80 0.20 <0.05  23 24.9    68    64    1540    79 1575
QTA-26 431240 399.80 400.20 0.40 <0.05  <5      4    38  196    1975  395  483
QTA-26 431241 400.20 401.50 1.30 <0.05  <5  2.1    19    78      610  124  594
QTA-26 431242 401.50 402.00 0.50 <0.05  <5  0.2      4    14      317    29  552
QTA-26 431243 402.00 404.00 2.00 <0.05  <5  0.5      3    14      402    29  694
QTA-26 431244 404.00 405.90 1.90 <0.05  33 40.2 135  764    1670  149  414
QTA-26 431245 405.90 406.64 0.74 <0.05  11 14.7 136  230    6560  326 1800
QTA-26 431246 406.64 408.10 1.46 <0.05  <5  1.1    10    36    2140    36  632
QTA-26 431247 423.20 423.80 0.60 <0.05  <5  0.7      7    51      243    15  375

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 33 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-26 431248 429.70 431.00 1.30 <0.05  <5  0.3      4    36          54      6  481
QTA-26 435327 502.00 504.00 2.00 <0.05  <5  0.2      6    27      190    22  595
QTA-26 431249 504.00 504.30 0.30 <0.05  <5      1      9    84      583    30  404
QTA-26 431250 504.30 504.85 0.55 <0.05  <5  1.4      8  105      654    32  610
QTA-26 431251 504.85 505.30 0.45 <0.05  <5  3.6    35    79    2460    59  177
QTA-26 431252 505.30 505.60 0.30 <0.05  <5  1.9    25    86    1775    26  306
QTA-26 431253 505.60 506.00 0.40 <0.05 166 >100 1850 3140    3480 1505 2650
QTA-26 435328 506.00 508.00 2.00 <0.05  <5  0.3      2    27      163    45  509
QTA-26 435329 508.00 510.00 2.00 <0.05  <5  1.6    11    63      817    22  666
QTA-26 453330 510.00 512.00 2.00 <0.05  <5  0.2      3    31          40    18  537
QTA-26 435331 512.00 514.00 2.00 <0.05  <5  0.2    <2    66          33    10  455
QTA-26 435332 514.00 516.00 2.00 <0.05  <5  0.2      5    85          70      7  403
QTA-26 435333 516.00 518.00 2.00 <0.05  <5  0.2      6    51          15      4  642
QTA-26 435334 518.00 519.99 1.99 <0.05  <5  0.4    17    75          19      9  352
QTA-27 431254  7.92  9.00 1.08 0.025  <5  0.5    18    90      242    28  460
QTA-27 431255 10.77 10.97 0.20 0.025  <5  0.3    18    88      220    19  347
QTA-27 431256 12.40 12.80 0.40 0.025  <5  0.5    15    74      280    26 1150
QTA-27 431257 12.80 13.10 0.30 0.025  <5 <0.2    13  106          95    15  297
QTA-27 431258 13.60 13.80 0.20 0.025  <5 <0.2    17  110      426    44  300
QTA-27 431259 14.26 15.60 1.34 0.025  <5  0.2    24    99    1345    79  476
QTA-27 431260 17.07 17.37 0.30 0.025  <5  0.2    18  101          78    11  504
QTA-27 431261 23.00 25.00 2.00 0.025  <5 <0.2    17  108          50      4  413
QTA-27 431262 25.00 26.21 1.21 0.025  <5 <0.2    18  110      196    12  396
QTA-27 431263 31.17 32.00 0.83 0.025  <5 <0.2    17  108          48      7  419
QTA-27 431264 32.00 32.70 0.70 0.025  <5 <0.2    17  114          23      5  396
QTA-27 431265 32.70 34.20 1.50 0.025  <5  0.9    18  116      216    16  422
QTA-27 431266 34.20 36.00 1.80 0.025  <5  0.5    17  111          97    11  408
QTA-27 431267 36.00 38.20 2.20 0.025  <5  0.2    11  107          77    10  373
QTA-27 431268 38.20 38.50 0.30 0.025  <5 <0.2    21  114    1460  102  351
QTA-27 431269 38.50 39.70 1.20 0.025  <5  0.4    20  122          42      5  417
QTA-27 431270 39.70 40.60 0.90 0.025  <5  6.4    97  343    1215    36  679
QTA-27 431271 40.60 41.45 0.85 0.025      6  8.5    48  144      365    28  664
QTA-27 431272 41.45 42.50 1.05  0.07  15 17.2    45  178    1045    55  813
QTA-27 431273 42.50 42.80 0.30 0.025  <5  0.8    10  124      136      8  469
QTA-27 431274 42.80 44.60 1.80 0.025  <5  0.6    14  112          61      8  412
QTA-27 431275 44.60 45.80 1.20 0.025  <5  0.3    16  104      142    14  411
QTA-27 431276 45.80 46.46 0.66 0.025      5  0.3    16  103          44      7  395
QTA-27 431277 49.10 50.00 0.90 0.025  <5  0.8    17  104      191    12  576
QTA-27 431278 50.00 50.60 0.60  0.11  32 39.6  415  563    1015  111  801
QTA-27 431279 50.60 51.50 0.90  0.14  29 34.8  856  684    2720  259  923
QTA-27 431280 51.50 52.28 0.78    0.1      9  7.5  419  645    1400    99  937
QTA-27 431281 52.28 54.20 1.92 0.025      5  2.9    45  156      706    44  606
QTA-27 431282 80.00 81.60 1.60  0.07  36 40.3  550  868      832  326  966
QTA-27 431283 81.60 83.16 1.56 0.025      5  7.5    40  215      142    30 1030
QTA-27 431284 83.16 84.32 1.16 0.025      6      2    30  118      124    25  916
QTA-27 431285 84.90 85.10 0.20 0.025  43 47.1  182  831      142  108 1765
QTA-27 431286 86.60 86.70 0.10 0.025      6  4.8    47  170          56    20  564
QTA-27 431287 87.17 87.57 0.40 0.025  15 12.7    32  138      185    36  639
QTA-27 431288 87.57 88.42 0.85 0.025      9  5.3    51    98    1840  259 1355
QTA-27 431289 88.42 88.82 0.40 0.025      5  3.2    39    89      917  128  978
QTA-27 431290 104.70 105.16 0.46 0.025      6  0.6    11  110          86    12  622
QTA-27 431291 109.50 110.00 0.50 0.025  <5  0.4    19  118          73    16  525
QTA-27 431292 124.28 126.00 1.72 0.025 120 >100  803  984    1320  662 1190
QTA-27 431293 126.85 127.00 0.15    0.1  26    26  254  193    2480  212 1275
QTA-27 431294 131.30 131.80 0.50 0.025      9  7.9  109  311      287    37  991
QTA-27 431295 146.30 146.50 0.20  0.14  89 96.1 1405 1040    6270 1315 2410
QTA-27 431296 148.40 150.50 2.10 0.025  <5  2.2    23    98      272    29  918
QTA-27 431297 150.50 150.70 0.20  4.24  44 51.1 3760 6880 >10000 7070 4230
QTA-27 431298 150.70 152.00 1.30 0.025  <5  1.9    35  132      906    45  853
QTA-27 431299 152.00 153.00 1.00 0.025  <5  1.5    28  108      139    20  822
QTA-27 431300 153.00 155.00 2.00 0.025      6  2.8    80  159      141    12  798
QTA-27 431301 155.00 156.30 1.30 0.025      9  2.6  580  227          23  396  803
QTA-27 431302 156.30 157.30 1.00 0.025  12 12.3  201  221          69  117 1115

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 34 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-27 431303 157.30 159.00 1.70 0.025      9 12.6    115    166          92          24  994
QTA-27 431304 159.00 160.32 1.32 0.025    24 25.9    593  1835      669      369 1125
QTA-27 431305 160.32 160.52 0.20  0.24    12  8.4    407      92    2720      334 1275
QTA-27 431306 160.52 161.30 0.78  0.18    25 28.2  1520  1390    1360      594 1340
QTA-27 431307 161.30 161.50 0.20    0.9  928  928 17900 25800    4410 >10000 3220
QTA-27 431308 161.50 162.00 0.50 0.025      7  4.5      51    130      280          42  772
QTA-27 431309 162.00 164.00 2.00 0.025      5  9.6    166    321      108          63  697
QTA-27 431310 164.00 164.80 0.80 0.025  2.5  3.9      72    262          63          18  842
QTA-27 431311 164.80 165.80 1.00 0.025    25 25.7  1285  2410      220          46 1040
QTA-27 431312 165.80 165.90 0.10  0.52  145  145  9090 11900    5380    1955 2660
QTA-27 431313 165.90 168.00 2.10 0.025    34 37.4  1750  2540      381      167 1155
QTA-27 431314 168.00 170.00 2.00 0.025    39 43.5    634    779      166          49 1080
QTA-27 431315 170.00 172.00 2.00 0.025    40 50.6    860  1080      172          50 1015
QTA-27 431316 172.00 174.00 2.00 0.025  173  173  2700  3340      175      182 1020
QTA-27 431317 174.00 174.73 0.73  0.07  337  337  3710  3340      276      449 1060
QTA-27 431318 174.73 175.00 0.27  0.13  183  183  5630  4330      435    2770 2050
QTA-27 431319 175.00 176.00 1.00 0.025  103  103  1125  1070          96      110  926
QTA-27 431320 176.00 178.00 2.00 0.025    49 51.7    869    963      381          60  967
QTA-27 431321 178.00 180.00 2.00 0.025    18 19.6    316    423          90          26  929
QTA-27 431322 180.00 180.60 0.60 0.025  2.5  3.3      30    139      164          16  948
QTA-27 431323 180.60 180.80 0.20  0.24  126  126  2040  5500 >10000    1275 3920
QTA-27 431324 180.80 182.30 1.50 0.025    17 15.2    783    488    1105          37 1015
QTA-27 431325 182.30 182.60 0.30  0.32  488  488 15800 17200 >10000      591  981
QTA-27 431326 182.60 184.00 1.40 0.025    29    30    580    621      860          37  858
QTA-27 431327 184.00 186.00 2.00 0.025      7 12.8    162    201      440          19  774
QTA-27 431328 186.00 186.50 0.50 0.025      6  7.2      93      92      122          51  848
QTA-27 431329 186.50 186.70 0.20  0.34  111  111  4910  7250    4960    3460 1195
QTA-27 431330 186.70 188.10 1.40 0.025    12 11.4    260    426      472          95  979
QTA-27 431331 188.10 188.20 0.10 0.025    59 58.6  1295    923    1200      293 1230
QTA-27 431332 188.20 188.40 0.20  0.11    58 63.9  5950  7670    4620    4410 1180
QTA-27 431333 188.40 189.30 0.90  0.13    66    68    891  1340    1730      434 1195
QTA-27 431334 189.30 189.87 0.57  1.24  229  229 19000 14900 >10000 >10000 6770
QTA-27 431335 189.87 190.40 0.53  0.07    81 82.4    842    807    1195      458 1375
QTA-27 431336 190.40 191.30 0.90  0.07    26 30.4    247    337    1470      142  898
QTA-27 431337 191.30 191.50 0.20  0.14  108  108  1110  1090      655      433 2940
QTA-27 431338 191.50 191.79 0.29  0.15  236  236  1835  1275      421      705 1800
QTA-27 431339 191.79 192.50 0.71  0.61  932  932  6410  5690    1800    2550 2500
QTA-27 431340 192.50 193.00 0.50 0.025    73 81.8    653    103      593      289  993
QTA-27 435241 193.00 195.37 2.37 0.025  2.5  4.6      45    141      530          14 1155
QTA-27 435242 195.37 197.37 2.00 0.025    51 58.3    451    378      617      113 1095
QTA-27 431341 197.37 197.57 0.20 0.025    36 33.6    200    587      427      104 1475
QTA-27 431342 197.57 197.77 0.20  0.58 1105 1105 11700 25700    2880    4140 1555
QTA-27 435243 197.77 199.77 2.00 0.025    41 51.1    361    575      151          46 1115
QTA-27 435244 199.77 201.77 2.00 0.025      6  6.1      54    128          63          12  797
QTA-27 435245 201.77 203.00 1.23 0.025  2.5  1.6      21    110          46            9  836
QTA-27 431343 203.00 203.20 0.20 0.025    52 59.8 10900  5550      396    7100 1390
QTA-27 435246 203.20 205.20 2.00 0.025    56 63.1    363    438          88      140 1305
QTA-27 435247 205.20 207.20 2.00 0.025    32 36.4    781    784      165      347 1135
QTA-27 435248 207.20 208.00 0.80 0.025    61 75.3    678    790      191      110 1230
QTA-27 431344 208.00 208.90 0.90 0.025  260  260  2050  2230      130      240 1065
QTA-27 435249 208.90 210.90 2.00 0.025    40 47.4    430    542      274          99  941
QTA-27 435250 210.90 212.90 2.00 0.025      5      6      56    126      223          13  923
QTA-27 435251 212.90 214.50 1.60 0.025    <5  7.5      37    136      124          13  988
QTA-27 431345 214.50 215.19 0.69 0.025    78 76.9    844    475      860      389 1470
QTA-27 435252 215.19 217.19 2.00 0.025      7 10.2      44    186      122          16  846
QTA-27 435253 217.19 219.19 2.00 0.025    17    18    117    256      190          38 1045
QTA-27 435254 219.19 221.19 2.00 0.025    <5  5.2      52    194          91          11  858
QTA-27 435255 221.19 222.00 0.81 0.025      9      9    118    254          74          45  950
QTA-27 431346 222.70 223.60 0.90 0.025    <5      3      30    115          29          10  642
QTA-27 431347 254.81 255.44 0.63 0.025    <5  3.6    117    241          44          33  847
QTA-27 431348 271.37 271.57 0.20  0.18  311 >100  4440  1835    3970    2490 2670
QTA-27 435256 271.57 273.57 2.00 0.025    <5  0.9          9      99          55          11  845
QTA-28 431349 13.10 14.02 0.92 0.025    <5      1      30    119      104          35  513

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 35 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-28 431350 14.50 15.50 1.00 0.025  <5  0.3      24    77    2480      204  352
QTA-28 431351 16.90 17.20 0.30 0.025  <5  0.3      22  109          60          16  467
QTA-28 431352 17.50 17.70 0.20 0.025  <5  0.5      21  108      419          41  394
QTA-28 431353 22.60 22.90 0.30 0.025  <5 <0.2      19  112          78          19  522
QTA-28 431354 22.90 24.30 1.40 0.025  <5  0.2      16  102          70          19  358
QTA-28 431355 26.21 27.10 0.89 0.025  <5  0.2      21    99          30          21  420
QTA-28 431356 35.00 36.80 1.80 0.025  <5 <0.2      17  106      139          22  380
QTA-28 431357 36.80 38.00 1.20 0.025  <5 <0.2      18  114          49          15  359
QTA-28 431358 38.00 39.05 1.05 0.025  <5  0.2      18  108      186          20  389
QTA-28 431359 39.05 39.15 0.10 0.025  <5  0.2      23  108          31            9  444
QTA-28 431360 39.15 41.00 1.85 0.025  <5 <0.2      19  111          58          11  355
QTA-28 431361 41.00 42.00 1.00 0.025  <5 <0.2      19  104      449          50  346
QTA-28 431362 42.00 42.30 0.30 0.025  <5 <0.2      22  116          17            5  355
QTA-28 431363 42.30 44.30 2.00 0.025  <5 <0.2      21  113          70          11  408
QTA-28 431364 44.30 46.20 1.90 0.025  <5 <0.2      18  118      222          17  398
QTA-28 431365 46.20 47.00 0.80 0.025  <5  0.2      19  120          22            7  391
QTA-28 431366 47.00 49.00 2.00 0.025  <5  0.2      18  114      285          24  400
QTA-28 431367 49.00 50.60 1.60 0.025  <5 <0.2      18  112          38            9  510
QTA-28 431368 50.60 51.27 0.67 0.025  <5  0.2      18  101          79          16  547
QTA-28 431369 51.27 51.42 0.15 0.025  <5  0.2      22    99      815          77  532
QTA-28 431370 51.42 53.10 1.68 0.025  <5  0.3      17  106      334          39  634
QTA-28 431371 53.10 54.70 1.60  0.17  <5  0.8      17    97      909          89 1430
QTA-28 431372 54.70 54.90 0.20  1.03  41 48.3      20  789    6410      233 1990
QTA-28 431373 54.90 56.10 1.20 0.025  <5  0.6      18    98      348          44  998
QTA-28 431374 56.10 56.69 0.59 0.025  <5  0.4      25    78    9780      693  411
QTA-28 431375 60.10 60.40 0.30 0.025      6  4.8      16  123      311          77  835
QTA-28 431376 60.40 61.68 1.28 0.025  <5  2.8      17  118      281          38  640
QTA-28 431377 61.68 62.40 0.72 0.025  <5  0.4      22  110    1425      118  545
QTA-28 431378 62.40 63.20 0.80 0.025  <5  0.4      17  109      206          32  566
QTA-28 431379 65.60 65.70 0.10 0.025  <5  3.2      47  229      773    1145 2940
QTA-28 431380 66.53 67.00 0.47 0.025  <5  0.3      22  112      392          63  241
QTA-28 431381 67.00 67.30 0.30 0.025  <5  0.7      16  128      535          39  382
QTA-28 431382 67.30 68.10 0.80 0.025  <5  0.2      21  122      118          21  379
QTA-28 431383 68.10 68.88 0.78 0.025  <5 <0.2      22  119          46          13  399
QTA-28 431384 117.00 117.75 0.75 0.025  <5  0.4      16    94          52          12  726
QTA-28 431385 117.75 118.10 0.35 0.025  <5  0.4      17    90          53          10  515
QTA-28 431386 118.10 118.71 0.61 0.025  <5  0.7      13  124          91          17  653
QTA-28 431387 118.71 120.00 1.29 0.025  <5  0.8      13    93      288          16 1055
QTA-28 431388 120.00 120.71 0.71 0.025  <5  0.9      11    94      173          19 1190
QTA-28 431389 120.71 122.00 1.29 0.025  <5  0.6      19  122      196          21 1050
QTA-28 431390 122.00 123.60 1.60 0.025  75 86.9    207  276      249      177  918
QTA-28 431391 123.60 123.75 0.15 0.025  <5  7.3      48  180    1195          46 1530
QTA-28 431392 187.65 187.76 0.11    0.1 420 420  9880 6830 >10000    8890 3960
QTA-28 431393 187.76 188.00 0.24 0.025  16 17.6      52  300    1440          91 1630
QTA-28 431394 188.00 188.12 0.12 0.025  64 72.9    511  326    1470      352 1700
QTA-28 431395 190.90 191.00 0.10    0.1 238 238 21400 6010    7480 >10000 3040
QTA-28 431396 194.15 194.25 0.10  0.07 171 171  9800 4390      204    7940 1495
QTA-28 431397 194.25 195.36 1.11 0.025  10 11.8    561  380      421      445  933
QTA-28 431398 195.36 196.00 0.64 0.025  <5  2.2      95  119      200      120  647
QTA-28 431399 196.00 197.00 1.00 0.025  <5  1.1      24  106          72          46  549
QTA-28 431400 197.00 197.80 0.80 0.025  <5  1.3      16  112          44          28  652
QTA-28 431401 197.80 198.35 0.55 0.025  <5  1.5      16  107          44          27  650
QTA-28 431402 198.35 198.75 0.40 0.025  10 12.3      36  104    1250          36 1045
QTA-28 431403 198.75 198.85 0.10 0.025  <5  7.3      26  196      789          48 1670
QTA-28 431404 212.05 212.14 0.09 0.025  <5      2      18  158      367          33 1205
QTA-28 431405 216.80 217.50 0.70  0.17  17 16.4    501  204    3890      368 1525
QTA-28 435315 217.50 219.50 2.00 0.025  <5  1.5      33  103          77          16  869
QTA-28 435316 219.50 221.50 2.00 0.025  12 12.9    472  588          76          40  940
QTA-28 435317 221.50 223.50 2.00 0.025  14 20.6    292  351      183          42  976
QTA-28 435318 223.50 225.50 2.00 0.025  11 10.8    196  277      970    1730 1165
QTA-28 435319 225.50 227.50 2.00 0.025  14 12.8    347  320      672          77 1010
QTA-28 435320 227.50 229.50 2.00 0.025  14 13.9    221  313      103          30  837
QTA-28 435321 229.50 231.50 2.00 0.025  15 13.3    220  346      549          44 1130

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 36 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm

ppm
QTA-28 435322 231.50 233.50 2.00 0.025    32 30.5    457      507      141      87  995
QTA-28 435323 233.50 235.50 2.00 0.025    37 33.5    641    1055    1685    228  767
QTA-28 435324 235.50 237.50 2.00 0.025  2.5  2.8      75      188          40      10  543
QTA-28 435325 237.50 239.50 2.00 0.025    16 14.1    104      279          38      20  619
QTA-28 435326 239.50 241.15 1.65 0.025      5  6.5    105      179          22      12  541
QTA-28 435257 241.15 243.15 2.00 0.025    19 15.9    279      321          66      26  684
QTA-28 431406 243.15 243.25 0.10 0.025 1835 1835 21100  22500      594  1595  928
QTA-28 435258 243.25 243.80 0.55 0.025    86 89.6    697      926          52      91  827
QTA-28 431407 243.80 243.90 0.10  0.07  894  894 14500  11700      258    817  960
QTA-28 435259 243.90 245.90 2.00 0.025    16 20.1    297      443          52      32  747
QTA-28 435260 245.90 247.70 1.80 0.025      7  8.6    272      272      111      25  647
QTA-28 431408 247.70 247.85 0.15 0.025    49 58.6  1890    1775      296    140 1240
QTA-28 435261 247.85 249.85 2.00 0.025    84 93.6  1770    1820      183    110  970
QTA-28 435262 249.85 251.76 1.91 0.025    12 11.5    401      435      136      21  912
QTA-28 431409 251.76 252.00 0.24 0.025    29 28.9  1585    2280      148      78 1765
QTA-28 431410 252.00 252.60 0.60 0.025    10 10.2    297      216      688      86  744
QTA-28 431411 252.60 252.66 0.06  2.47  394  394 26600    5840 >10000  3950 3000
QTA-28 431412 252.66 253.60 0.94  0.38    14 17.6    592    1550    4460    278 1465
QTA-28 431413 253.60 254.81 1.21 0.025  2.5  4.1    106      162      741      47 1150
QTA-28 431414 254.81 254.95 0.14  1.39  110  110  4340    2390 >10000  1785  934
QTA-28 431415 254.95 255.90 0.95  0.13    17 12.8    220      276    2410    124 1200
QTA-28 431416 255.90 256.10 0.20  0.21  362  362  5100    6370    1780  1195 1240
QTA-28 431417 256.10 256.50 0.40  0.29  128  128  1775    2410    5340    500 1385
QTA-28 431418 256.50 256.80 0.30  0.05    34 35.1    315      426      614    182 1185
QTA-28 431419 256.80 257.08 0.28  1.13  750  750 56500  44600    3260 10001 1185
QTA-28 431420 257.08 257.70 0.62    0.1    46 51.6  1960    1030    1990    946  805
QTA-28 431421 257.70 258.81 1.11 0.025      9  6.4    150      277      884    108 1470
QTA-28 431422 258.81 260.00 1.19 0.025  2.5  1.7      29      153      235      26 1120
QTA-28 435263 260.00 261.00 1.00 0.025  2.5  1.3      27      108      257      20 1420
QTA-28 435264 266.00 268.00 2.00 0.025    11  8.5      81      188      158      32  876
QTA-28 435265 268.00 268.55 0.55 0.025      8  7.1      97      195      155      46 1080
QTA-28 431423 268.55 268.70 0.15  0.17  138 >100  2290    2800    1160    891 2200
QTA-28 435266 268.70 270.70 2.00 0.025      8  5.7      84      155      105      43  848
QTA-28 435267 270.70 272.00 1.30 0.025      6  6.1      46      291          87      29  954
QTA-28 431424 277.80 278.80 1.00 0.025    23 28.4  1500      573      221  1035 1210
QTA-28 431425 280.87 281.70 0.83 0.025    29 35.2  1025      810      802    727 1270
QTA-28 431426 282.28 282.48 0.20 0.025  127 >100  1315    2440    1160    431 1040
QTA-28 431427 286.04 286.85 0.81 0.025    16 15.3      99      200      254      79 1060
QTA-28 431428 290.30 291.59 1.29 0.025    12    13    344      293          92    227  987
QTA-28 431429 291.59 294.00 2.41 0.025    16 18.3    263      414      117    130  943
QTA-28 431430 294.00 296.00 2.00 0.025      5 10.8    104      188          50      62  773
QTA-28 431431 296.00 297.00 1.00 0.025    24 23.1    195      390          64    124  758
QTA-28 431432 297.00 298.44 1.44 0.025    42    53    483      535          92    327  817
QTA-28 431433 303.30 303.50 0.20 0.025    <5  5.8      31      116      139      37 1400
QTA-28 431434 305.86 306.30 0.44 0.025      7  3.6      51      168          68      20  904
QTA-28 431435 306.30 306.53 0.23 0.025      8 10.6      97      231          45      25  733
QTA-28 435268 333.00 335.00 2.00 0.025    <5  1.6      14      217          55      12  723
QTA-28 435269 335.00 337.00 2.00 0.025    <5  1.1      10      103          42      12  807
QTA-28 435270 337.00 337.45 0.45 0.025    <5  2.4      16      116          99      30 1195
QTA-28 431436 337.45 337.65 0.20    0.2  648 >100  6960 >10000    3510  4920 2410
QTA-28 431437 337.65 338.30 0.65 0.025    <5  6.5      89      134      273      86 1060
QTA-28 435271 338.30 339.00 0.70 0.025    <5  1.1          8          76          50      14  800
QTA-28 431438 345.80 346.00 0.20 0.025    <5  5.2      71      209          45      43  349
QTA-28 431439 349.00 350.10 1.10 0.025    <5  0.9      14      117          49      13  337
QTA-28 431440 364.30 364.54 0.24 0.025    <5      1      15      106          32          7  502
QTA-28 431441 370.64 371.14 0.50 0.025    <5  0.6      18          92      192      48  283
QTA-28 431442 371.14 371.40 0.26 0.025    <5  0.5      16      104          31      10  252
QTA-28 431443 371.40 372.60 1.20 0.025    <5      1      40      143      292      82  347
QTA-28 431444 372.60 373.10 0.50 0.025    <5  0.3      14      105          31          5  444
QTA-29 431445 30.80 30.90 0.10 <0.05    19 24.4    331      287    4840    120 2190
QTA-29 431446 33.35 33.88 0.53 <0.05    <5  1.3      21          73      832    191  685
QTA-29 431447 34.60 36.10 1.50 <0.05    <5  0.4      15          96      175      24  709
QTA-29 431448 49.20 49.45 0.25 <0.05    <5  4.9      23          34 >10000    237 1805

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 37 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-29 431449 54.05 54.51 0.46 <0.05  <5  0.8      13      88    1830  107  397
QTA-29 431450 54.51 55.10 0.59 <0.05  <5      1      11      68      231    15 1600
QTA-29 431451 58.00 58.40 0.40 <0.05  <5      1      11      47          76    15  915
QTA-29 431452 60.50 60.65 0.15 <0.05  <5  0.6      10      22      520    45 1270
QTA-29 431453 73.10 73.50 0.40 <0.05  <5  1.1      13      84      121    25  882
QTA-29 431454 76.66 77.10 0.44 <0.05  <5  0.5      14      74      545    80  489
QTA-29 431455 98.86 99.36 0.50 <0.05  <5      2      21      74      707  153  777
QTA-29 431456 104.00 104.20 0.20 <0.05  <5  0.7      30    112      919  136  382
QTA-29 431457 153.00 153.20 0.20 <0.05  <5  1.9      16      93    1485  112  928
QTA-29 431458 155.40 155.60 0.20 <0.05  <5  1.5      15      57      380    36 1670
QTA-29 431459 185.80 186.30 0.50  0.07 275  275  3870 10600      297 3270 1360
QTA-29 431460 186.30 187.30 1.00 0.025  56    56    601    590      267  584  884
QTA-29 431461 187.30 188.00 0.70 0.025  17 17.8      20    124      516    65 1010
QTA-29 431462 188.00 188.30 0.30  0.18 117  117    743  1050    2210  897 5560
QTA-29 431463 188.30 188.38 0.08  0.23  18 17.6    376    285    4130  322 4400
QTA-29 431464 214.60 215.68 1.08 <0.05  <5  4.2      13    118      298    33  736
QTA-29 431465 215.68 217.00 1.32 <0.05  16 15.6      41    328      879  116  884
QTA-29 431466 217.00 218.00 1.00 <0.05  <5  1.4      10      99    2020  108  635
QTA-29 431467 218.00 219.00 1.00 <0.05  37 36.9    342    912      591  357 1110
QTA-29 431468 219.00 220.00 1.00 <0.05      5  6.8      99    394    1850  190  511
QTA-29 431469 220.00 222.00 2.00 <0.05  <5  1.2          9    102      490    40  769
QTA-29 431470 222.00 222.62 0.62 <0.05  <5  4.8      18    136      526    63 1070
QTA-29 431471 222.62 222.72 0.10 <0.05  12 14.2      79    120    4180  186 1745
QTA-29 431472 222.72 224.00 1.28 <0.05  <5  4.1      11      93      790    65  905
QTA-29 431473 224.00 225.00 1.00 0.025 130  130  1470  1245    1085 1315  921
QTA-29 431474 225.00 226.00 1.00 0.025  30 34.8    392    625      859  404 1115
QTA-29 431475 226.00 226.50 0.50 0.025  79 83.2    256    838    4420  435 1975
QTA-29 431476 226.50 226.60 0.10  0.17 888  888  2690  3280 >10000 3580  168
QTA-29 431477 226.60 227.10 0.50  0.43 392  392  2580  2130    9270 2900  121
QTA-29 431478 227.10 228.00 0.90 0.025  11 11.8      21    100      916  164    35
QTA-29 431479 228.00 230.00 2.00 0.025  2.5  1.6      22    109    1020    98  598
QTA-29 431480 230.00 232.00 2.00 0.025  2.5  6.5      47    130      461    71  781
QTA-29 431481 232.00 234.00 2.00 0.025      6  7.4      36    348      421    58  818
QTA-29 431482 234.00 236.00 2.00 0.025  2.5  0.5      15    105      152    20  570
QTA-29 431483 236.00 238.00 2.00 0.025  2.5  0.5      11    104      249    19  742
QTA-29 431484 238.00 238.80 0.80 0.025      8      8      11    103    1395    73  836
QTA-29 431485 238.80 239.10 0.30  0.93 799 >100 10500 26900 >10000 9940  690
QTA-29 431486 239.10 240.00 0.90 <0.05  <5  4.5      49    152    1155  172 1115
QTA-29 431487 240.00 241.40 1.40 <0.05  <5  2.7      33    160      393    79 1010
QTA-29 431488 248.90 250.25 1.35 <0.05  14 15.6    470  1435    2290  348  981
QTA-29 431489 250.25 250.50 0.25 <0.05      9  6.7      54    168      319    58 1585
QTA-29 431490 250.50 250.70 0.20 <0.05      9  7.5      33      81      661  114 4000
QTA-29 431491 250.70 251.66 0.96 <0.05      5  4.9    175    191      695  142  762
QTA-29 431492 251.66 251.90 0.24 <0.05  <5  1.1      15      99    2020  254  576
QTA-29 431493 284.10 284.30 0.20  0.06 108 >100  5500  5490 >10000 2150 1530
QTA-29 431494 284.50 284.70 0.20 <0.05  <5  5.6      75    176 >10000  649  428
QTA-29 431495 335.38 335.48 0.10 <0.05  12 16.3  8030  3700    6540 4140 1055
QTA-29 431496 335.48 336.10 0.62 <0.05  <5  3.6      34    113      180    41 1205
QTA-29 431497 336.10 336.65 0.55 <0.05  <5  2.7      71    271          67    34 1095
QTA-29 431498 369.00 371.00 2.00 <0.05      7  6.2    102    129      672  112  426
QTA-29 431499 371.00 372.40 1.40 <0.05  <5  2.4      31    137    2140  106      9
QTA-29 431500 372.40 372.70 0.30 <0.05  <5  3.1          7      65    2130  120    43
QTA-29 431501 372.70 374.30 1.60 <0.05  <5  2.2      58    116    2020  130      9
QTA-29 431502 374.30 375.40 1.10 <0.05      6  5.3      59    163    4840  215    14
QTA-29 431503 375.40 376.00 0.60 <0.05      5  4.8      22      72    3240  141  199
QTA-29 431504 376.00 376.12 0.12  0.07      7  9.2  4100  4590    3140 2550    83
QTA-29 431505 376.12 376.53 0.41 <0.05  <5  3.5    136    300    1915  195  509
QTA-29 431506 376.53 376.73 0.20 <0.05      7  7.9    536    300      633  186  237
QTA-29 431507 376.73 377.00 0.27 <0.05      5      5      36      72      456    42  359
QTA-29 431508 377.00 379.00 2.00 <0.05      8  7.1      80    125      503    62  723
QTA-29 431509 379.00 380.00 1.00 <0.05  <5  3.6    241    323    1040  194  947
QTA-29 431510 380.00 380.90 0.90 <0.05  <5      1      15      96      345    28  714
QTA-29 431511 380.90 381.10 0.20 <0.05  <5  2.7  1170    887      176  721  719

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 38 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-29 431512 381.10 383.00 1.90 <0.05    <5  1.1      21      93  215          23  725
QTA-29 431513 383.00 385.00 2.00 <0.05    <5  1.8      62    141  123          32  609
QTA-29 431514 385.00 386.00 1.00 <0.05    <5  1.3      56    106  792          44  758
QTA-29 431515 386.00 388.00 2.00 <0.05    <5  1.6    112    213  230          59  739
QTA-29 431516 414.30 415.62 1.32 <0.05    <5  1.6      84    340    31          24  459
QTA-29 431517 415.62 415.80 0.18 <0.05    15 11.8  2060  2380    18      599  513
QTA-29 431518 424.95 426.10 1.15 <0.05      5  1.1      16      90  209          16  594
QTA-29 431519 426.10 427.30 1.20 <0.05    <5      1      12      49  429          41  576
QTA-29 431520 427.30 427.70 0.40 <0.05    <5  6.6      85    108  591          73  929
QTA-29 431521 427.70 427.85 0.15    0.2 1550 >100 10750  4680  806 >10000  909
QTA-29 431522 427.85 428.30 0.45 0.025  2.5 13.4    746    620  493      355  686
QTA-29 431523 428.30 429.40 1.10 0.025  2.5  3.4    209    158  168          93  574
QTA-29 431524 429.40 431.27 1.87 0.025  2.5  1.3      22      90    92          20  519
QTA-29 431525 431.27 431.47 0.20 0.025  2.5      4  4520  7740    98    3300  712
QTA-29 431526 431.47 433.00 1.53 0.025  2.5      1      15      66  218          23  557
QTA-29 431527 433.00 433.50 0.50 0.025      9  6.1      17    130  267          50  861
QTA-29 431528 433.50 433.60 0.10  0.26    62 48.8  4680 22500 6850    3710  471
QTA-29 431529 433.60 434.00 0.40 0.025  2.5  2.2      23    111  156          37  988
QTA-29 431530 439.40 439.66 0.26 0.025  2.5  4.2    184    168  132      134  872
QTA-29 431531 439.66 440.94 1.28 0.025  2.5  1.5      38    345  337          40  613
QTA-29 431532 440.94 441.80 0.86 0.025  2.5  7.6  1160    624  196      862  912
QTA-29 431533 441.80 442.18 0.38    0.1    11 13.6    538  1785 3560      432 1180
QTA-29 431534 442.18 442.68 0.50 0.025  2.5  2.4      18      75  455          60 1580
QTA-29 431535 442.68 442.90 0.22 0.025  2.5  0.8      10      85  213          29  876
QTA-29 431536 454.25 455.35 1.10 0.025  2.5  3.4      16    415  118          47  567
QTA-29 431537 455.35 455.55 0.20  0.13  2.5  7.1 11900  3270 4060    9500 1440
QTA-29 431538 455.55 455.92 0.37 0.025  2.5  1.5      37      75  122          59  953
QTA-29 431539 455.92 456.05 0.13 0.025      6 10.3      24    154  132          49  665
QTA-29 431540 456.05 456.15 0.10  0.26    18    24  6660  1530  636    5080 1320
QTA-29 431541 456.15 457.00 0.85 0.025  2.5  3.1      24    110  217          47  765
QTA-29 431542 457.00 458.53 1.53 0.025  2.5  2.4      23      92  138          34  719
QTA-29 431543 458.53 459.08 0.55  0.06    20 24.1      73    275  208      136 2170
QTA-29 431544 476.59 477.15 0.56 0.025    14 17.5  2440  6040  200      259  746
QTA-29 431545 478.20 478.65 0.45 0.025  2.5  1.7      27    145  229          37  701
QTA-29 431546 478.65 478.75 0.10  0.07    24    26 13300  6130  930 >10000 1205
QTA-29 431547 478.75 479.20 0.45 <0.05    <5  1.5      32    101  249          51  659
QTA-30 431548 15.60 16.45 0.85 0.025    <5  0.3      22    109  129          43  651
QTA-30 431549 16.45 16.80 0.35 0.025    <5  0.3      19    106  112          18  433
QTA-30 431550 16.90 19.00 2.10 0.025    <5  0.3      16    107  838          44  775
QTA-30 431551 19.00 19.90 0.90  0.18    <5  2.9      16      95  989          59 1430
QTA-30 431552 19.90 20.42 0.52  0.24    <5  0.6      15    115 1870          63 1245
QTA-30 431553 20.42 22.25 1.83 0.025    <5  0.6      12      96  655          89 1090
QTA-30 431554 22.25 23.70 1.45 0.025    <5  0.2      22    103  545          59  673
QTA-30 431555 23.70 24.30 0.60  0.07    <5  1.3      18    102  593          49  428
QTA-30 431556 24.30 25.30 1.00  0.07      6  2.9      22    150 2550          95 1130
QTA-30 431557 25.30 27.10 1.80 0.025    <5  0.6      15      96  318          38  708
QTA-30 431558 30.90 31.50 0.60 0.025    <5 <0.2      19    118    51          21  558
QTA-30 431559 31.50 33.00 1.50 0.025    <5 <0.2      16    115    26          14  424
QTA-30 431560 33.00 34.20 1.20 0.025    <5 <0.2      10    104    30            9  469
QTA-30 431561 34.20 34.46 0.26 0.025    <5 <0.2      65      65    68          81 1915
QTA-30 431562 34.46 35.00 0.54 0.025    <5 <0.2      20      99    20          20  571
QTA-30 431563 35.00 36.35 1.35 0.025    <5  0.3      21    169 1700          41  832
QTA-30 431564 36.35 37.70 1.35 0.025    <5 <0.2      11      97    40          24  767
QTA-30 431565 37.70 38.82 1.12 0.025    <5 <0.2      14      99    34          13  642
QTA-30 431566 38.82 40.60 1.78 0.025    <5 <0.2      15      98    28          12  480
QTA-30 431567 40.60 40.83 0.23 0.025    <5 <0.2      15      97    28          13  314
QTA-30 431568 40.83 42.10 1.27 0.025    <5 <0.2      13      98    29            9  452
QTA-30 431569 42.10 43.20 1.10 0.025    <5 <0.2      17    100    28          13  524
QTA-30 431570 43.20 43.60 0.40 0.025    <5 <0.2      14      98    36          14  442
QTA-30 431571 43.60 43.75 0.15 0.025    <5 <0.2      12    101    38          12  637
QTA-30 431572 43.75 44.70 0.95 0.025    <5 <0.2      10    103    33          11  364
QTA-30 431573 44.70 44.85 0.15 0.025    <5 <0.2      17      95    28          14  511
QTA-30 431574 47.23 49.15 1.92 0.025    <5  3.4      33    170  906          84 1185

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 39 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-30 431575 54.90 55.10 0.20 0.025  <5  0.2    14    57          42    22 2010
QTA-30 431576 55.10 55.39 0.29 0.025  <5 <0.2    29  109      101      8  474
QTA-30 431577 55.39 56.20 0.81 0.025  <5  1.4    15  100      108    32  850
QTA-30 431578 56.20 57.55 1.35 0.025  <5  0.2    12  101          82    15  573
QTA-30 431579 57.55 59.00 1.45 0.025  <5 <0.2    17  118          59      8  364
QTA-30 431580 59.00 59.60 0.60 0.025  <5  0.2    15  110          35      5  393
QTA-30 431581 61.90 62.20 0.30 0.025  <5  0.3    15    90          35      7  553
QTA-30 431582 63.80 63.95 0.15 0.025  <5 <0.2    11  100          65    13  531
QTA-30 431583 64.50 64.60 0.10 0.025  <5  0.2      7  106      152    15  390
QTA-30 431584 67.70 68.10 0.40 0.025  <5  0.5    13  108          97    23  689
QTA-30 431585 69.61 70.70 1.09    0.6  83 84.5  190  472    7780  148 3510
QTA-30 431586 70.70 71.60 0.90 0.025  <5  0.6    17  107      307    29  998
QTA-30 431587 71.60 71.87 0.27 0.025  <5  0.5    12  100      102    33 1275
QTA-30 431588 71.87 73.10 1.23 0.025  <5  0.4    15  109      438    32 1165
QTA-30 431589 73.10 73.30 0.20 0.025  <5  0.3    14  110      126    20  923
QTA-30 431590 73.30 74.45 1.15 0.025  <5  0.4    12  105      236    42  916
QTA-30 431591 74.45 75.00 0.55  0.14  <5  1.4    44  142    6080    52 1070
QTA-30 431592 75.00 76.60 1.60 0.025  <5  0.2    11    96      156    11  528
QTA-30 431593 76.60 76.80 0.20 0.025  <5  0.2    11  124      408    18  340
QTA-30 431594 76.80 78.20 1.40 0.025  <5 <0.2    13  106      187    19  457
QTA-30 431595 78.20 78.46 0.26 0.025  <5  0.2    41  107      234    35  632
QTA-30 431596 78.46 79.40 0.94 0.025  <5  0.2    14  104      178    24  378
QTA-30 431597 79.40 80.82 1.42 0.025  <5 <0.2    25  108      109    27  632
QTA-30 431598 80.82 81.08 0.26 0.025  <5 <0.2    17  112          49    13  441
QTA-30 431599 81.08 82.40 1.32 0.025  <5 <0.2    14  108          56    20  373
QTA-30 431600 82.40 82.90 0.50 0.025  <5  0.2    78  105      126    44 1090
QTA-30 431601 82.90 84.32 1.42 0.025  <5 <0.2    22  100          60    13  524
QTA-30 431602 84.32 86.00 1.68 0.025  <5 <0.2    18  104      108    11  467
QTA-30 431603 86.00 87.00 1.00 0.025  <5 <0.2    13  104      142    14  426
QTA-30 431604 87.00 89.00 2.00 0.025  <5 <0.2    13  102      301    24  390
QTA-30 431605 89.00 90.40 1.40 0.025  <5 <0.2    20  106      146    12  405
QTA-30 431606 90.40 90.55 0.15 0.025  <5  0.2    19    74      357    28  616
QTA-30 431607 90.55 90.80 0.25 0.025  <5 <0.2    18    96          84    14  441
QTA-30 431608 125.17 125.93 0.76 0.025  <5  1.5    17  120    1705    36 1505
QTA-30 431609 125.93 126.05 0.12  2.01  82 99.2 1380 5130 >10000 1715 6580
QTA-30 431610 131.34 131.54 0.20 0.025  49 60.3  297 1335    2190  280 3140
QTA-30 431611 131.54 131.74 0.20 0.025  <5  5.6    23    92      595    69 1075
QTA-30 431612 133.00 134.00 1.00 0.025  <5  0.3    14    99      132    19  563
QTA-30 431613 178.60 180.00 1.40 0.025  <5  2.8    24  138      938  191 1040
QTA-30 431614 180.00 182.00 2.00 0.025      9 10.3    21  141    1625    70  978
QTA-30 431615 182.00 183.10 1.10 0.025  15 14.3    67  131    1090    41 1280
QTA-30 431616 183.10 185.00 1.90 0.025  <5  1.1    12  103      447    38  529
QTA-30 431617 185.00 187.00 2.00 0.025  <5  3.1    78  223      397    36  807
QTA-30 431618 187.00 189.00 2.00 0.025  <5  2.6    18    93      267    18  698
QTA-30 431619 189.00 190.50 1.50 0.025  <5  0.4      9  110      184    22  466
QTA-30 431620 190.50 191.60 1.10 0.025  <5  1.2      5    95      232    26  690
QTA-30 431621 191.60 191.90 0.30 0.025      6  7.8    76  228      433    42  954
QTA-30 431622 198.65 198.95 0.30 0.025      8  4.2    21    65      392    70  622
QTA-30 431623 204.60 205.00 0.40 0.025      6  5.6    22    87      576    45  996
QTA-30 431624 225.20 225.50 0.30 0.025  <5  2.9    23  108      239    24  979
QTA-30 431625 258.05 259.00 0.95 0.025  <5  0.3    16  106      127    22  569
QTA-30 431626 259.56 260.10 0.54 0.025  <5  0.5    20  109      135    20  542
QTA-30 431627 264.70 264.90 0.20 0.025      5      2  243    47      182  110  738
QTA-30 431628 264.90 265.10 0.20 0.025  <5  2.7    29    17      551    29 1150
QTA-30 431629 267.20 268.40 1.20 0.025  <5  1.7    20  125      378    18  581
QTA-30 431630 268.40 268.65 0.25 0.025  <5  7.9    55  163    1270    47 1965
QTA-30 431631 268.65 270.00 1.35 0.025  <5  1.9    19  118      653    39  726
QTA-30 431632 270.00 270.50 0.50 0.025  <5  0.8    14  106      442    24  684
QTA-30 431633 270.50 272.40 1.90 0.025  <5      3    21  106      534    47 1055
QTA-30 431634 272.40 272.50 0.10 0.025  <5  0.5    14  118      349    17  602
QTA-30 431635 272.50 273.10 0.60 0.025  <5  0.7      9    86      399    22  540
QTA-30 431636 278.40 278.70 0.30 0.025  <5  0.4    13    96      211    16  649
QTA-30 431637 285.80 287.00 1.20 0.025  <5  1.3    15    96      241    35  695

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 40 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID Sample From    To Width    Au  Ag (FA)    Ag      Pb      Zn        As    Sb  Mn
  Number  (m)  (m)  (m)  (g/t) (g/t) (g/t)  ppm  ppm    ppm ppm ppm
QTA-30 431638 287.00 287.53 0.53 0.025  <5  1.9      15      85      397    34  738
QTA-30 431639 287.53 288.55 1.02 0.025  <5  1.4      41    158      227    20  665
QTA-30 431640 291.39 292.00 0.61 0.025  <5  0.2      17    110      109    10  486
QTA-30 431641 292.00 293.00 1.00 0.025  <5  0.2      15    110      104      9  402
QTA-30 431642 293.00 293.55 0.55 0.025  <5 <0.2      14      96      114    13  452
QTA-30 431643 293.55 294.44 0.89 0.025  <5 <0.2      11      71      186    13  579
QTA-30 431644 294.44 294.70 0.26 0.025  <5 <0.2          8      70      159    13  480
QTA-30 431645 294.70 296.00 1.30 0.025  <5  1.1      14      83      168    20  538
QTA-30 431646 296.00 297.48 1.48 0.025  <5 <0.2          7      74      146    16  325
QTA-30 431647 297.48 298.60 1.12 0.025  <5  0.2          9      58      202    35  517
QTA-30 431648 298.60 298.70 0.10 0.025  <5  1.5      17      80      480    75  196
QTA-30 431649 298.70 300.00 1.30 0.025  <5  0.4      12      61      321    49  192
QTA-30 431650 300.00 301.75 1.75 0.025  <5  0.6      11      82      309    47  435
QTA-30 431651 301.75 303.00 1.25 0.025  <5  0.2      16      77    1310  126      8
QTA-30 431652 303.00 304.00 1.00 0.025  <5 <0.2      15    122      397    48      8
QTA-30 431653 304.00 305.41 1.41 0.025      5  0.7      13      83      461    73      8
QTA-30 431654 305.41 307.00 1.59 0.025  <5  0.8      10      41      226    28  292
QTA-30 431655 307.00 309.00 2.00 0.025  <5  0.5      16    101      427    33  604
QTA-30 431656 309.00 311.00 2.00 0.025  <5  0.4      14      77      188    14  488
QTA-30 431657 311.00 312.00 1.00 0.025  <5  0.2          6      75      115      9  360
QTA-30 431658 312.00 314.00 2.00 0.025  <5  0.4      11      43      408    47  291
QTA-30 431659 314.00 316.00 2.00 0.025  <5  0.2          7      76      154    19  437
QTA-30 431660 316.00 316.80 0.80 0.025  <5  0.3      10      66      178    18  469
QTA-30 431661 316.80 318.40 1.60 0.025  <5  2.1      19      80      341    41  621
QTA-30 431662 318.40 318.70 0.30 0.025  16  9.9      76    121    1025  154  260
QTA-30 431663 407.00 408.00 1.00 0.025      5  5.1      63    128      420    68  714
QTA-30 431664 411.00 411.90 0.90 0.025  <5  0.4      13    102      106    17  284
QTA-30 431665 479.30 479.70 0.40 0.025  81    97  2550  1970    1965 1045 3370
QTA-30 431666 483.41 483.61 0.20 0.025  <5  6.5    116      50    1525  134 1660
QTA-30 431667 493.48 493.68 0.20 0.025  <5  0.7      27    107      128    12  353
QTA-30 431668 508.20 510.05 1.85 0.025  <5  1.5      13      32      173    16  571
QTA-30 431669 510.05 510.25 0.20 0.025  <5  2.1      70      93      265    26  412
QTA-30 431670 510.25 510.60 0.35 0.025  <5      6      20      54      345    44  566
QTA-30 431671 510.60 511.24 0.64 0.025  97    97  1330    193      419  122  412
QTA-30 431672 511.24 512.57 1.33 0.025 133  133  1110    324      584  224  339
QTA-30 431673 512.57 514.00 1.43 0.025  15 20.1      38      75      436    33  602
QTA-30 431674 514.00 515.31 1.31 0.025  <5    14    201    257      166    59  434
QTA-30 431675 515.31 517.00 1.69 0.025  <5  4.2    226      74      287    26  673
QTA-30 431676 517.00 519.00 2.00 0.025      7  9.7    154    120      484    80  506
QTA-30 431677 519.00 521.00 2.00 0.025  <5  2.3      40    108      126    18  491
QTA-30 431678 521.00 522.60 1.60 0.025  <5      5      38    120      401    26  809
QTA-30 431679 522.60 523.65 1.05 0.025  <5  3.3      38      77      418    30  812
QTA-30 431680 531.80 532.55 0.75 0.025  <5  2.1    115    319      252    12  778
QTA-30 431681 532.55 534.00 1.45 0.025  <5  0.8      54    156          76      5  510
QTA-30 431682 534.00 534.90 0.90 0.025  <5  0.3          7      44          60      4  576
QTA-30 431855 561.96 563.10 1.14 0.025  <5      2      67      74      207    36  549
QTA-30 431683 563.10 563.60 0.50 0.025  <5  1.6      45      90      178    13  556
QTA-30 431684 563.60 563.75 0.15  1.74 224 >100  9430  5320 >10000 3890 1395
QTA-30 431685 563.75 564.10 0.35 0.025      7  6.8    130    202    1150    39  599
QTA-30 431686 564.10 565.60 1.50 0.025  <5  2.6      48      60      164    14  558
QTA-30 431687 565.60 565.65 0.05 0.025      6  6.2    240  5310      690    25  634
QTA-30 431856 565.65 567.71 2.06 0.025  <5  1.7      46      93      234    23  527
QTA-30 431857 567.71 568.76 1.05 0.025  <5  1.1      21      58          95    12  438
QTA-30 431688 568.76 569.10 0.34 0.025  <5  1.6      28    188          71      7  483
QTA-30 431689 569.10 569.20 0.10  0.14  51 56.2 10001 10001    1575 9320  586
QTA-30 431858 569.20 571.20 2.00 0.025  <5  0.9      18      82      116    15  428
QTA-30 431859 571.20 572.00 0.80 0.025  <5  0.9      13      76      384    26  470
QTA-30 431690 572.00 573.70 1.70 0.025  <5  0.6      25      99          55    10  421
QTA-30 431691 573.70 574.00 0.30 0.025  <5  6.2  1560  6680          28  489  442
QTA-30 431860 574.00 576.00 2.00 0.025  <5  1.4      63    112          33    14  488
QTA-30 431861 576.00 578.00 2.00 0.025  <5  4.7    191    476          23    14  440
QTA-30 431862 578.00 580.00 2.00 0.025  <5  1.9      64    235          39    19  386
QTA-30 431863 580.00 580.95 0.95 0.025  <5  0.8      15      78      133    10  425

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 41 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-30 431692 580.95 581.60 0.65 0.025  <5  1.8      49      152    97      13 460
QTA-30 431693 581.60 582.00 0.40 0.025  <5  7.4  2460    2140    63    843 465
QTA-30 431694 582.00 582.40 0.40 0.025      6  6.4    132      197    98      42 593
QTA-30 431695 582.40 582.50 0.10 0.025 136 >100 10001  10001 1175 10001 448
QTA-30 431696 582.50 583.00 0.50 0.025  <5  3.4    263      239  102      85 494
QTA-30 431864 583.00 585.00 2.00 0.025  <5  1.1      16          72    98      11 480
QTA-30 431865 585.00 585.80 0.80 0.025  <5      1      20          59    46      10 453
QTA-30 431697 585.80 586.00 0.20 0.025      7  7.3    669      444    49      32 668
QTA-30 431698 586.00 586.70 0.70 0.025      5  0.9      44          52    45      14 514
QTA-30 431699 586.70 587.04 0.34 0.025  <5  0.6      38          54    56      12 385
QTA-30 431866 587.04 589.04 2.00 0.025  <5      1      53      110    75          9 443
QTA-30 431867 589.04 591.04 2.00 0.025  <5  2.3      61          63    98      11 484
QTA-30 431868 591.04 592.15 1.11 0.025  <5  4.2    224      253  130      19 635
QTA-30 431700 592.15 592.20 0.05  0.13 199  199 42400 103000  637 10001 965
QTA-30 431701 592.20 592.40 0.20 0.025  14 16.4    761    1690    88      99 384
QTA-30 431702 592.40 592.60 0.20 0.025      5  7.5    273      300    73      28 715
QTA-30 431703 592.60 592.65 0.05  0.07 267  267 21900  23400  487    515 497
QTA-30 431704 592.65 593.50 0.85 0.025  10 10.4    432      328  111      23 508
QTA-30 431705 593.50 595.00 1.50 0.025  21 27.1  2100    1255  134      34 547
QTA-30 431706 595.00 596.00 1.00 0.025      5  1.3      31          45  150          9 538
QTA-30 431707 596.00 597.10 1.10 0.025  13    15  1700    1965  148    273 485
QTA-30 431708 597.10 598.00 0.90 0.025  12 13.9  1175    1210    88    151 375
QTA-30 431709 598.00 598.45 0.45  0.06 251  251 21000  21400  663  1160 519
QTA-30 431869 598.45 600.45 2.00 0.025      5  1.8      60      134  100      11 354
QTA-30 431870 600.45 602.45 2.00 0.025      5  1.5      62          84  112      10 539
QTA-30 431871 602.45 604.30 1.85 0.025      5  2.4      94      287    73          9 576
QTA-30 431710 604.30 604.45 0.15 0.025 237  237 24800  13500  628  1325 274
QTA-30 431711 604.45 605.33 0.88 0.025      6      6    337      324  335      15 531
QTA-30 431712 605.33 606.00 0.67 0.025 129  129 22600  17200  934  4680 468
QTA-30 431713 606.00 608.00 2.00 0.025      8  7.7    500      539 1020      23 437
QTA-30 431714 608.00 608.38 0.38 0.025 107  107  9360    6010  734    109 489
QTA-30 431715 608.38 609.00 0.62 0.025  10 10.5    623      224  966      25 472
QTA-30 431716 609.00 609.40 0.40 0.025      5      9    431      479  811      83 461
QTA-30 431717 609.40 609.50 0.10  0.19 584  584 55200  20800 2930  6810 504
QTA-30 431718 609.50 610.00 0.50 0.025 118  118  7090    2860  774    150 374
QTA-30 431719 610.00 610.40 0.40 0.025      5  4.1    247      140 1200      37 414
QTA-30 431720 610.40 611.00 0.60 0.025      5  2.8    141      156  950      35 573
QTA-30 431721 611.00 612.10 1.10 0.025  62 63.8  5390    5560  360      67 447
QTA-30 431722 612.10 614.00 1.90 0.025  22 31.4  2930    2520  206    161 347
QTA-30 431723 614.00 615.10 1.10 0.025 131 97.8  8030    7230  212    330 351
QTA-30 431724 615.10 615.20 0.10  0.13 971  971 91200  98400  317  2710 757
QTA-30 431725 615.20 615.85 0.65 0.025  71 73.2  6630    6190  183      98 425
QTA-30 431726 615.85 616.20 0.35 0.025  26 30.3  2140    1845    56      40 493
QTA-30 431872 616.20 618.20 2.00 0.025  26 26.2  2120    2170    72      64 397
QTA-30 431727 618.20 618.40 0.20 0.025 185  185 15800  13000  276    181 436
QTA-30 431728 618.40 619.00 0.60 0.025      9  1.6      80          71    64          7 422
QTA-30 431729 619.00 619.30 0.30 0.025      5      4    228      240    64      11 427
QTA-30 431730 619.30 619.45 0.15  0.06 773  773 69500  50400 2640  1075 546
QTA-30 431731 619.45 619.80 0.35 0.025  13    12    779      494    66      21 481
QTA-30 431873 619.80 621.80 2.00 0.025      5  2.3    116      140    39      12 474
QTA-30 431874 621.80 623.50 1.70 0.025      5  1.3    111      249    60          6 449
QTA-30 431732 623.50 624.52 1.02 0.025  24 27.2  2070    5880  112      39 499
QTA-30 431733 624.52 625.00 0.48 0.025  37 41.3  2580    3200    79    112 453
QTA-30 431734 625.00 626.00 1.00  0.07  89  100 12400  15500  126  3550 502
QTA-30 431735 626.00 626.80 0.80 0.025  47 50.9  7140    6830    30  2600 495
QTA-30 431736 626.80 626.90 0.10  0.32 121  121 43500  45900  156 10001 423
QTA-30 431737 626.90 628.60 1.70 0.025  35 42.1  5460    5990    63  1520 463
QTA-30 431738 628.60 629.50 0.90 0.025 176  176 21300  18400  909  1890 340
QTA-30 431739 629.50 630.75 1.25 0.025  32 34.8  3170    3310    68      77 454
QTA-30 431740 630.75 631.78 1.03 0.025  65 78.3  7520    6180  128      93 492
QTA-30 431741 631.78 632.33 0.55 0.025  16 21.7  1460    1500    69      34 503
QTA-30 431742 632.33 632.53 0.20 0.025 202  202 21700  14400 1180    245 362
QTA-30 431743 632.53 633.10 0.57 0.025  19 17.4  1530    1300  219      65 445

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 42 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-30 431744 633.10 635.00 1.90 0.025  16 18.1  1335  1525  180    28  471
QTA-30 431745 635.00 635.54 0.54 0.025  20 24.2  2040  1205  156    32  454
QTA-30 431746 635.54 637.40 1.86 0.025  21 27.5  2140  2650  332    38  516
QTA-30 431747 637.40 638.22 0.82 0.025      5  1.2      39      45    66      5  365
QTA-30 431748 638.22 639.20 0.98 0.025  25 29.7  2430  2640    86    48  454
QTA-30 431749 639.20 640.20 1.00 0.025  52 63.6  6850  6360    70 1150  396
QTA-30 431750 640.20 641.70 1.50 0.025  90 96.4  8960 10400    38  737  293
QTA-30 431751 641.70 643.05 1.35 0.025  22 25.5  1880  2110    44    81  297
QTA-30 431752 643.05 643.50 0.45 0.025  25 31.6  2010  1455    74  104  430
QTA-30 431753 643.50 643.60 0.10  0.06 782 782 73700 41000 2820 2190  440
QTA-30 431754 643.60 644.10 0.50 0.025 151 151 11400 11100  278  190  357
QTA-30 431755 644.10 644.96 0.86 0.025  33 39.8  2630  1235  124    45  378
QTA-30 431756 644.96 646.00 1.04 0.025      5  4.6    223    520    52      8  360
QTA-30 431757 646.00 648.00 2.00 0.025      5  2.7    203    162    27    19  457
QTA-30 431758 648.00 648.80 0.80 0.025  13 26.6  2080  2030    13    44  296
QTA-30 431759 648.80 649.20 0.40 0.025  41 54.8  4710  6910    45    49  325
QTA-30 431760 649.20 650.80 1.60 0.025  18 20.7  1805  2380    32    31  475
QTA-30 431761 650.80 652.00 1.20 0.025  18 23.5  2120  2690    24    31  543
QTA-30 431762 652.00 653.95 1.95 0.025  29 27.3  2310  1685    55    34  546
QTA-30 431763 653.95 654.20 0.25  0.07 677 677 65000 38900 1195  808  388
QTA-30 431764 654.20 654.60 0.40 0.025  57 57.8  2510  2250    94    60  603
QTA-30 431765 654.60 654.80 0.20 0.025  26 20.6  2420    531  524    38  309
QTA-30 431766 654.80 655.45 0.65 0.025  26 27.1  1980  1660  398    57  407
QTA-30 431767 655.45 655.65 0.20  0.07 186 186 18300 30900  977  699  411
QTA-30 431768 655.65 656.05 0.40 0.025  10      8    568    365    54    26  411
QTA-30 431769 656.05 656.50 0.45 0.025 137 137 13400 13600  564  130  770
QTA-30 431770 656.50 657.30 0.80 0.025  39 39.6  2920  2870  253    47  334
QTA-30 431771 657.30 657.45 0.15 0.025  42 45.4  4740  4100    55    45  364
QTA-30 431772 657.45 658.00 0.55  0.13 216 216 25500 26100 5520  215  368
QTA-30 431773 658.00 660.00 2.00 0.025  42 38.9  4550  3350  102    47  510
QTA-30 431774 660.00 662.00 2.00 0.025  47 41.9  3670  3620  150    42  429
QTA-30 431775 662.00 663.60 1.60 0.025  42 36.8  3120  2680  424    43  347
QTA-30 431776 663.60 664.50 0.90  0.06 160 160 18700 15900  983  406  396
QTA-30 431777 664.50 665.20 0.70 0.025  70  71  5850  2460  535 1360  387
QTA-30 431778 665.20 666.40 1.20 0.025      5  7.9  1255  1045  238  455  419
QTA-30 431779 666.40 666.65 0.25  0.07  18 21.8  1435  3480  451  464  358
QTA-30 431780 666.65 666.90 0.25 0.025  12 11.8  1310  2810  160    80  265
QTA-30 431781 666.90 668.00 1.10 0.025      5      3    109    152  278    26  201
QTA-30 431782 668.00 669.15 1.15  0.51      7 12.4    734    724  232    44  363
QTA-30 431783 669.15 669.60 0.45 0.025      5  3.6    247    232  324    27  330
QTA-30 431784 669.60 669.95 0.35 0.025      5  1.7      96    145  212    15  438
QTA-30 431785 669.95 670.40 0.45 0.025  22 22.4  1790  1365  261  133  367
QTA-30 431786 670.40 670.54 0.14  0.13 270 270 21200 28100  440 1290  593
QTA-30 431787 670.54 671.20 0.66 0.025  21 24.1    983    823  271    38  355
QTA-30 431788 671.20 673.00 1.80 0.025      9 12.8  1150  1085  157    24  402
QTA-30 431789 673.00 675.00 2.00 0.025      5  3.9    240    198  160    13  333
QTA-30 431790 675.00 675.60 0.60 0.025      5  5.1    369    527  346    23  388
QTA-30 431791 675.60 676.00 0.40 0.025 127 127  8760  4990  395  485  552
QTA-30 431792 676.00 678.00 2.00 0.025  12 13.9    543    923  808    58 1225
QTA-30 431793 678.00 678.80 0.80 0.025  41 41.8  2540  2420 1040  290 1300
QTA-30 431794 678.80 679.40 0.60 0.025  77 77.4  6830 13200  778  133  442
QTA-30 431795 679.40 679.75 0.35 0.025  17 35.7  2540  2960 1145    80  377
QTA-30 431796 679.75 680.60 0.85 0.025  16 16.1    702    788 1255  208 1475
QTA-30 431797 680.60 681.09 0.49 0.025  30 30.4    966  1070 3000  261  903
QTA-30 431798 681.09 682.20 1.11 0.025  10      9    472    475  519    52  619
QTA-30 431799 682.20 682.70 0.50 0.025 168 168 11700 19200  681 1010  498
QTA-30 431800 682.70 683.30 0.60 0.025  86 87.2  5630  5750  390  266  326
QTA-30 431801 683.30 685.00 1.70 0.025  18 20.1  1465  2220  312  132  482
QTA-30 431802 685.00 686.90 1.90 0.025  10  9.8    655    928  259    52  533
QTA-30 431803 686.90 687.15 0.25 0.025  14 11.4  1715  7760  135  435  447
QTA-30 431804 687.15 687.63 0.48 0.025  54 47.4  3410 13700  776  531  459
QTA-30 431805 687.63 689.32 1.69 0.025  14 19.6  1545  3410  221    54  426
QTA-30 431806 689.32 689.50 0.18 0.025 131 131  8530 39600  518  503  675

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 43 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-30 431807 689.50 691.00 1.50 0.025  <5  1.7      42      134      86          12  470
QTA-30 431808 691.00 693.00 2.00 0.025  <5  1.4      62      400    385          20  408
QTA-30 431809 693.00 693.50 0.50 0.025  <5  0.7          9          44      65          12  491
QTA-30 431810 693.50 694.00 0.50 0.025  <5  0.6      10          48      72          18  485
QTA-30 431811 694.00 696.00 2.00 0.025  <5  0.4      10          53    116          10  417
QTA-30 431812 696.00 698.00 2.00 0.025      5  3.2    312      272      48          13  363
QTA-30 431813 698.00 699.70 1.70 0.025  <5  2.3    126      146    226          37  397
QTA-30 431814 699.70 700.00 0.30 0.025  16 16.6    879    1350    283      123  502
QTA-30 431815 700.00 701.20 1.20 0.025  21 19.8  1255      773    279      168  504
QTA-30 431816 701.20 701.30 0.10  0.26  31 42.7 24200  22800    891 >10000  907
QTA-30 431817 701.30 701.60 0.30 0.025  <5  4.1    242      568    271          91  542
QTA-30 431818 701.60 703.00 1.40 0.025  <5  2.4    120      162    100          30  370
QTA-30 431819 703.00 705.00 2.00 0.025  <5  0.8      32          54      42          17  360
QTA-30 431820 705.00 707.00 2.00 0.025  <5  5.6    345      502      80          38  336
QTA-30 431821 707.00 709.00 2.00 0.025  <5  1.2      40      195      70          28  363
QTA-30 431822 709.00 709.80 0.80 0.025  <5  1.5      53          40      77          20  365
QTA-30 431823 709.80 710.80 1.00 0.025  12 13.8    837    6980    285      290  438
QTA-30 431824 710.80 712.55 1.75 0.025  <5  0.7      14          47      96          23  359
QTA-30 431825 712.55 712.93 0.38 0.025  <5  0.8      14          43      36          12  389
QTA-30 431826 712.93 714.50 1.57 0.025  <5  0.9      21          42      38          12  376
QTA-30 431827 714.50 714.90 0.40 0.025  41 38.1  4110  35300    116      968  589
QTA-30 431828 714.90 716.00 1.10 0.025      7  3.2    165      182      53          56  519
QTA-30 431829 716.00 717.00 1.00 0.025  <5  1.6      39          71      33          32  358
QTA-30 431830 717.00 719.00 2.00 0.025  <5  0.8      14          86      30          12  330
QTA-30 431831 719.00 721.00 2.00  0.07  <5  0.6      12          48      31            9  335
QTA-30 431832 721.00 723.00 2.00    0.1  <5  3.9    768    1140      98      191  444
QTA-30 431833 723.00 725.00 2.00 0.025  <5  1.7      47      205      63          17  321
QTA-30 431834 725.00 727.00 2.00 0.025  <5  1.4      34      200      44          18  315
QTA-30 431835 727.00 728.00 1.00  0.99  <5  3.2      90    2050    150          34  500
QTA-30 431836 728.00 728.90 0.90 0.025  <5  1.5      38          52      23          15  398
QTA-30 431837 728.90 730.82 1.92 0.025  21 23.4  1225    1625    191          96  427
QTA-30 431838 730.82 732.00 1.18 0.025  55 64.9  4120    5250    373      609  472
QTA-30 431839 732.00 732.25 0.25 0.025 134 134  8600  15900    313      489  512
QTA-30 431840 732.25 733.25 1.00 0.025      5  4.3    182      232    190          62  438
QTA-30 431841 733.25 733.40 0.15  0.26  93  93 29600  53400  9520  10001  915
QTA-30 431842 733.40 733.58 0.18 0.025  64 78.2  4570    5150    110      397  691
QTA-30 431843 733.58 735.00 1.42 0.025  17 22.9  1960    1690      80      323  367
QTA-30 431844 735.00 737.00 2.00 0.025      5  1.1      40          70      24          24  414
QTA-30 431845 737.00 738.50 1.50 0.025      7 11.8  1240    1230      31      213  437
QTA-30 431846 738.50 738.60 0.10  0.32 295 295 42400 135000    196  10001  824
QTA-30 431847 756.00 757.30 1.30 0.025      5      2      98      282    369          52  456
QTA-30 431848 757.30 758.30 1.00 0.025      5  1.8      95      181      65          33  363
QTA-30 431849 758.30 758.50 0.20 0.025 208 208 16200    9900    166      232  347
QTA-30 431850 758.50 758.70 0.20 0.025 443 443 43500  48700    260    2850  664
QTA-30 431851 758.70 759.00 0.30 0.025      5  7.5  1055      215      12      122  379
QTA-30 431852 759.00 761.00 2.00 0.025      5  1.6    103      123    120          27  492
QTA-30 431853 761.00 761.50 0.50 0.025  19  25    582    1100  5860      347  666
QTA-30 431854 761.50 761.70 0.20  0.24 313 313 22300  18900 10001    7440 1695
QTA-31 431875 25.00 25.15 0.15 0.025  <5  0.2      60      146      35          11  949
QTA-31 431876 25.15 25.40 0.25 0.025  <5  0.3      18      186      46          17  605
QTA-31 431877 27.81 28.41 0.60 0.025      5      1      11      127    271          16  830
QTA-31 431878 31.50 31.70 0.20  0.14      8  1.8      15      113    848          28  646
QTA-31 431879 32.50 33.00 0.50 0.025  <5  0.6      20      176      51          15  471
QTA-31 431880 46.10 46.30 0.20 0.025  13 10.8    159      168    799          41 1180
QTA-31 431881 51.25 51.40 0.15 0.025  <5  0.2      16      100      77          12  593
QTA-31 431882 60.80 61.00 0.20 0.025      5  2.2      19          84    378          72 1110
QTA-31 431883 61.00 61.40 0.40 0.025      9  9.5      58      126    399          59 1910
QTA-31 431884 62.30 62.79 0.49 0.025  20 18.7      84      271    252          70  605
QTA-31 431885 64.20 65.60 1.40 0.025  10 10.1      34      164    788      131 1085
QTA-31 431886 76.80 77.00 0.20 0.025      7  2.3      10          69    140          39  550
QTA-31 431887 77.00 77.30 0.30 0.025  11  5.8      41      122    734          94 2090
QTA-31 431888 77.30 78.13 0.83  0.07  53  61    428      150    620      152 2480
QTA-31 431889 78.13 80.00 1.87  0.24  10  7.3      38      206    382          29 1180

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QTA06-NS, November 15th, 2006 Page 44 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-31 431890 80.00 82.20 2.20 0.025      7  1.6    12  126  255    26 1285
QTA-31 431891 82.20 82.50 0.30  0.31      6  2.5    18  132  557    31  897
QTA-31 431892 82.50 83.00 0.50 0.025      5  2.7    17    99  327    39 1255
QTA-31 431893 83.00 83.15 0.15    0.1      5  2.3    19    96  348    41 1705
QTA-31 431894 83.15 84.00 0.85  0.16  11  7.3    25    67  469    66 1550
QTA-31 431895 84.00 86.00 2.00 0.025  40 34.5  226 1150  193    92 1295
QTA-31 431896 86.00 87.80 1.80    0.1  41 35.5  404 1980  261  164 1305
QTA-31 431897 87.80 88.10 0.30  0.14  26 20.3  203  719  314    76 1680
QTA-31 431898 88.10 90.00 1.90 0.025  19 17.9  126  440  273    57 1375
QTA-31 431899 90.00 92.00 2.00 0.025  2.5  1.5    17  118  190    18 1260
QTA-31 431900 92.00 93.00 1.00 0.025      6  4.9  180  399  208    78 1680
QTA-31 431901 93.00 94.60 1.60 0.025  12  4.9    21  124  271    26 1555
QTA-31 431902 94.60 94.90 0.30 0.025  16 11.3    23  136  146    39 1180
QTA-31 431903 94.90 96.00 1.10  0.38  22 17.7    28  142  621    57 1180
QTA-31 431904 96.00 97.20 1.20 0.025  21 19.5    36  138  455    54 1550
QTA-31 431905 97.20 99.00 1.80 0.025  26 25.9    55  198  353    57 1315
QTA-31 431906 99.00 99.50 0.50  0.17  80 79.9  464 1710  561  256 1900
QTA-31 431907 99.50 102.00 2.50    0.1  23 20.2    60  256  466    57 1190
QTA-31 431908 102.00 102.21 0.21  0.28 151 151 3270 3130  717 1500 2300
QTA-31 431909 102.21 103.30 1.09    0.2  26  24    45  522  674    62 1195
QTA-31 431910 103.30 105.00 1.70  0.21  21 17.6    29  173  769    46 1390
QTA-31 431911 105.00 105.65 0.65    0.1  13 14.9    14  146  517    30 1215
QTA-31 431912 105.65 107.00 1.35  0.16  25 22.3    33  194  554    42 1045
QTA-31 431913 107.00 108.10 1.10    0.1  14  12    64  148  242    55 1350
QTA-31 431914 108.00 108.90 0.90  0.17  35 33.7  154  182  533  105 1340
QTA-31 431915 108.90 110.20 1.30  0.18  18 18.2    29  120  450    40 1445
QTA-31 431916 110.20 110.63 0.43    0.1  16 35.9  137  130  534    87 1200
QTA-31 431917 110.63 112.00 1.37 0.025      7      3    10    99  365    18 1010
QTA-31 431918 112.00 113.60 1.60 0.025  2.5  2.2    12  102  574    30 1135
QTA-31 431919 113.60 113.90 0.30  0.17      9  6.8    19    80 1180    36 1125
QTA-31 431920 113.90 114.71 0.81  0.24  15 16.5    21  119 1025    45 1700
QTA-31 431921 114.71 115.50 0.79  0.39  20 18.8    74  172 1465    55 1285
QTA-31 431922 115.50 116.70 1.20  0.07  15 13.5    34  124  232    42 1130
QTA-31 431923 116.70 118.00 1.30    0.2      8  8.4    17    80  612    40 1345
QTA-31 431924 118.00 120.40 2.40  0.23  16 15.3    27  250  368    43 1240
QTA-31 431925 120.40 121.30 0.90  0.18  40 51.1  304  378  582  130 1465
QTA-31 431926 121.30 123.00 1.70 0.025  13 12.2    79  174  456    54 1385
QTA-31 431927 123.00 124.05 1.05    0.1  14 11.6    19    86  500    35 1195
QTA-31 431928 124.05 124.52 0.47  0.17  25 23.4    88  207  478    63 1425
QTA-31 431929 124.52 126.00 1.48  0.16  15  16    29  210  645    38 1525
QTA-31 431930 126.00 128.00 2.00 0.025  <5  1.6    13    92  102    19 1120
QTA-31 431931 128.00 130.00 2.00 0.025      5      3    16  135  128    16 1135
QTA-31 431932 130.00 132.00 2.00 0.025  <5  2.1    59  165  188    38 1235
QTA-31 431933 132.00 134.00 2.00    0.2  <5  5.5    29  114  751    23 1290
QTA-31 431934 134.00 134.20 0.20  0.35  14 13.5    35  203  628    29 1160
QTA-31 431935 134.20 135.30 1.10  0.17  11  11    39  174  394    36 1415
QTA-31 431936 135.30 136.50 1.20  0.07  14 15.6    22  152  248    44 1095
QTA-31 431937 136.50 137.75 1.25  0.13  15 16.8    31  116  439    42 1270
QTA-31 431938 137.75 138.99 1.24  0.07  39 38.5  285  545  409  202 1375
QTA-31 431939 138.99 139.50 0.51  0.14  14 14.8    65    81  709  111 1220
QTA-31 431940 139.50 139.90 0.40    0.1  15 14.1    20  127  290    46  979
QTA-31 431941 139.90 140.90 1.00  0.07  95  95  226  959  436  236 1540
QTA-31 431942 140.90 143.00 2.10  0.17  12 14.1    26  154  539    44 1275
QTA-31 431943 143.00 144.70 1.70    0.1 136 136  525  761  645  383 1460
QTA-31 431944 144.70 145.30 0.60  0.05  54 60.4  117  234  504  122 1240
QTA-31 431945 145.30 146.30 1.00  0.05  17 17.6    29  120  447    55 1080
QTA-31 431946 146.30 146.73 0.43  0.05  19  23    27  157  455    59 1245
QTA-31 431947 146.73 147.37 0.64  0.05  17 18.6    76    95  614    62 1390
QTA-31 431948 147.37 148.50 1.13  0.05  28 26.6  145  134  498    84 1315
QTA-31 431949 148.50 148.70 0.20  0.07  33 35.3  555  482  373  215 1310
QTA-31 431950 148.70 150.00 1.30  0.07  13 18.4    90  207  341    52 1430
QTA-31 431951 150.00 151.00 1.00  0.13  14  18  100  272  513    63 1170
QTA-31 431952 151.00 153.20 2.20  0.14  19 22.4    69  140  728    57 2050

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 45 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-31 431953 153.20 153.33 0.13  0.45  121  121  2030    637 1270    852 4000
QTA-31 431954 153.33 153.73 0.40    0.2    13    13      76      70  551      33 1125
QTA-31 431955 153.73 155.00 1.27  0.07    13 15.1      29    128  474      36 1320
QTA-31 431956 155.00 156.60 1.60  0.05    14 16.3      10      91  495      29 1375
QTA-31 431957 156.60 157.38 0.78    0.3    37 39.9    270    234  886    121 1065
QTA-31 431958 157.38 158.10 0.72  1.06  262  262  8960 24700 2010  2140 1340
QTA-31 431959 158.10 158.30 0.20  0.85  620  620 17000 16300 2000  4950 2970
QTA-31 431960 158.30 159.90 1.60    0.2    96 89.4  1555  4270  688    545 1145
QTA-31 431961 159.90 160.10 0.20  1.53 1105 1105 12900 22000 2650  3350 2390
QTA-31 431962 160.10 161.40 1.30  0.17    93 94.2  1185    470  506    219  952
QTA-31 431963 161.40 162.30 0.90  0.07    13 14.8      50    180  248      36 1070
QTA-31 431964 162.30 164.00 1.70 0.025    <5  2.6      19    104  140      17 1100
QTA-31 431965 164.00 166.00 2.00 0.025    <5  1.2      10      87    40          7  798
QTA-31 431966 166.00 168.00 2.00 0.025    <5      1      14      80    30          7  921
QTA-31 431967 168.00 170.00 2.00 0.025    <5  0.7      12      87    26          6  758
QTA-31 431968 170.00 172.00 2.00 0.025    <5  0.6      11      94    41          7  724
QTA-31 431969 172.00 174.00 2.00 0.025    <5  0.9      14    103    85          8 1100
QTA-31 431970 174.00 176.00 2.00 0.025    <5  1.1      18      82    81          9 1010
QTA-31 431971 176.00 178.00 2.00    0.1    <5  1.5      47    230  398      11 1025
QTA-31 431972 178.00 180.00 2.00    0.1    <5      1      11      83  372      10  982
QTA-31 431973 180.00 182.00 2.00 0.025    <5  0.4          6      93    31          6  672
QTA-31 431974 182.00 184.00 2.00 0.025    <5  0.5          8      94    37          9  726
QTA-31 431975 184.00 186.00 2.00 0.025    <5  1.8      12    118  232      15  784
QTA-31 431976 186.00 187.15 1.15 0.025    65 68.3    395    468  180    140  861
QTA-31 431977 187.15 189.70 2.55 0.025    27 26.8    142    378  181      62 1120
QTA-31 431978 189.70 191.00 1.30  0.07    22 16.3    102    257  359      62 1110
QTA-31 431979 191.00 192.80 1.80  0.07    22 21.3    288    268  409    183 1230
QTA-31 431980 192.80 194.92 2.12    0.1      8      7      11      97  447      22  789
QTA-31 431981 194.92 197.00 2.08 0.025    <5  0.7          4      93    60      11  637
QTA-31 431982 197.00 199.00 2.00 0.025    <5  0.6          4      89    33          9  558
QTA-31 431983 199.00 200.80 1.80 0.025    <5  0.4      14    102    74      12  537
QTA-31 431984 200.80 202.00 1.20 0.025    <5  0.4          9      88    32      10  487
QTA-31 431985 202.00 202.50 0.50 0.025    <5  0.5      15    114    39      12  375
QTA-31 431986 202.50 204.00 1.50 0.025    <5  0.4          8    105    38      10  506
QTA-31 431987 204.00 205.00 1.00 0.025    <5  0.3          6      88    33          7  615
QTA-31 431988 205.00 206.30 1.30 0.025    <5  0.4          6      94    47      10  615
QTA-31 431989 206.30 208.00 1.70 0.025    <5  0.2          5      85    36          8  511
QTA-31 431990 208.00 208.70 0.70 0.025    <5  0.2          7      82    37          8  391
QTA-31 431991 208.70 209.00 0.30 0.025    <5  0.2      12      85    76      17  360
QTA-31 431992 209.00 211.00 2.00 0.025    <5  0.2      13      79    26          6  585
QTA-31 431993 211.00 211.90 0.90 0.025    <5  0.3      11      77    35      10  476
QTA-31 431994 211.90 213.30 1.40 0.025    <5  0.4      13      84    51      10  443
QTA-31 431995 213.30 215.00 1.70 0.025    <5  0.4      10    114    49          9  456
QTA-31 431996 215.00 217.00 2.00 0.025    <5  0.4      12      86    30      15  483
QTA-31 431997 217.00 219.00 2.00 0.025    <5  0.3      12      87    32          9  470
QTA-31 431998 219.00 221.00 2.00 0.025    <5  0.2      13      95    35      17  451
QTA-31 431999 221.00 223.00 2.00 0.025    <5  0.6      14    118    41          9  473
QTA-31 432000 223.00 225.00 2.00 0.025    <5  0.5      14      91    27      14  521
QTA-31 435001 225.00 227.00 2.00 0.025    <5  0.4      12      96    25      13  521
QTA-31 435002 227.00 229.00 2.00 0.025    <5  0.3      14      95    36      11  503
QTA-31 435003 229.00 231.00 2.00 0.025    <5  0.5      11    103    56      10  530
QTA-31 435004 231.00 233.00 2.00 0.025    23 23.9    158    274  203      85  751
QTA-31 435005 233.00 234.90 1.90  0.07      8  7.8      32    153  322      36  877
QTA-31 435006 234.90 235.69 0.79 0.025  2.5  1.2      17    188  255      20 1155
QTA-31 435007 235.69 237.40 1.71  0.07      9  7.2      36    244  355      36  954
QTA-31 435008 237.40 237.60 0.20  1.21  556  556  5950 11200 2520  3070 1635
QTA-31 435009 237.60 238.30 0.70 0.025    16 18.2      89    145  449      81  957
QTA-31 435010 238.30 238.69 0.39    0.1    80 86.6    681  1265  650    305  918
QTA-31 435011 238.69 240.00 1.31  0.19    48 50.1    313    534  607    181 1050
QTA-31 435012 240.00 241.30 1.30 0.025    29 35.4    446    231  576    222 1310
QTA-31 435013 241.30 241.50 0.20  0.31  575  575  7420  8340 1220  3350 1560
QTA-31 435014 241.50 241.80 0.30 0.025      6  6.9      40      49  290      46  507
QTA-31 435015 241.80 242.20 0.40  0.61 1750 1750 25900 19600 2050 10001 3570

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 46 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-31 435016 242.20 243.00 0.80 0.025  <5  6.9      77    96  522          64  442
QTA-31 435017 243.00 245.00 2.00 0.025  <5  6.6      87  133  394          56  751
QTA-31 435018 245.00 247.00 2.00    0.1  10 12.6    124  182  299          61 1115
QTA-31 435019 247.00 249.00 2.00 0.025  <5  1.6      16  156    57          13  937
QTA-31 435020 249.00 251.00 2.00 0.025  <5  2.9      25  125  399          43  953
QTA-31 435021 251.00 253.00 2.00 0.025      6 13.6      62  143    76          48  914
QTA-31 435022 253.00 255.00 2.00 0.025  <5  3.5      50  175  116          34  943
QTA-31 435023 255.00 257.00 2.00 0.025      6  5.4      33  109  485          48  930
QTA-31 435024 257.00 258.60 1.60 0.025  <5  2.6      31  150  333          32  891
QTA-31 435025 258.60 258.95 0.35  0.44  65    71  1450 2030 3770      624 1720
QTA-31 435026 258.95 260.00 1.05  0.07  23 24.6    107  234  515          92 1035
QTA-31 435027 260.00 262.00 2.00 0.025  21 21.6    186  188  338      107 1175
QTA-31 435028 262.00 264.00 2.00 0.025  17 17.1    156  169  247          83 1115
QTA-31 435029 264.00 266.00 2.00 0.025  15 17.5    185  204  198      110 1020
QTA-31 435030 266.00 268.00 2.00 0.025  11  8.4      98  164  156          73  996
QTA-31 435031 268.00 270.00 2.00  0.07  62    67    907  511  301      572 1085
QTA-31 435032 270.00 272.00 2.00 0.025  95    95    841  760  362      501 1275
QTA-31 435033 299.95 302.00 2.05 0.025      5  2.9      50  147    46          26  675
QTA-31 435034 302.00 304.00 2.00 0.025      8  2.8      45  124    30          23  742
QTA-31 435035 304.00 305.12 1.12 0.025  <5  2.3      13    96    86          14  693
QTA-31 435272 305.12 307.25 2.13 <0.05  <5  2.5      20  114    60          10  662
QTA-31 435036 307.25 307.45 0.20  0.07 492  492  3030 3720  533    1910 1135
QTA-31 435037 307.45 307.75 0.30  0.07 206  206  1625 1000  429      971 1130
QTA-31 435273 307.75 310.75 3.00 <0.05  <5  2.2      35  134    40          20  679
QTA-31 435038 324.20 324.35 0.15 0.025  <5  2.6      23  134    22          39  605
QTA-31 435039 324.35 324.45 0.10  0.28 668 >100 20000 5950 1210 >10000 1065
QTA-31 435040 324.45 324.74 0.29 0.025  <5  2.6      56  105    25          63  621
QTA-32 435041  8.80  9.80 1.00 <0.05  <5  0.2      27  130  231          14  664
QTA-32 435042  9.80 11.74 1.94 <0.05  <5 <0.2      16  105    67          19  616
QTA-32 435043 11.74 12.50 0.76 <0.05  <5  0.2      17  223  223          58  875
QTA-32 435044 12.50 13.70 1.20 <0.05  <5 <0.2      14    23    95          40  115
QTA-32 435045 13.70 13.90 0.20 <0.05  <5  0.3      15    52  293          82 2170
QTA-32 435046 13.90 14.00 0.10 <0.05  <5 <0.2      11    38    81          42  272
QTA-32 435047 14.00 14.85 0.85 <0.05  <5  0.2      19    14  157          42  558
QTA-32 435048 19.60 19.85 0.25 <0.05  <5 <0.2      30  239  276          56 1400
QTA-32 435049 33.69 34.00 0.31 <0.05  <5 <0.2      12    45  196          75  210
QTA-32 435050 60.64 60.84 0.20 <0.05  <5  0.2      17  110  116          22  671
QTA-32 435051 65.00 66.54 1.54 <0.05  <5  0.3      19  105    36          12  368
QTA-32 435052 87.70 88.30 0.60 <0.05  <5 <0.2      10  155    <2          <2  259
QTA-32 435053 97.05 97.60 0.55 <0.05  <5 <0.2      14  134    26            3  523
QTA-32 435054 99.00 99.25 0.25 <0.05  <5 <0.2          8  216    <2            2  303
QTA-32 435055 121.50 121.80 0.30 <0.05  <5 <0.2          5  105    17            4  459
QTA-32 435056 134.20 136.00 1.80 <0.05  <5 <0.2          8    92    32          17  576
QTA-32 435057 136.00 136.40 0.40 <0.05  <5 <0.2      13  116    22            7  371
QTA-32 435058 136.40 138.00 1.60 <0.05  <5 <0.2      12  105  136          26  349
QTA-32 435059 138.00 140.00 2.00 <0.05  <5 <0.2      14    98  183          26  394
QTA-32 435060 140.00 141.70 1.70 <0.05  <5 <0.2      13  105    16            6  318
QTA-32 435061 141.70 142.00 0.30 <0.05  <5 <0.2      13  111    33          10  397
QTA-32 435062 145.90 146.20 0.30 <0.05  <5  0.6      13  120    15            6  329
QTA-32 435063 152.80 154.50 1.70 <0.05  <5 <0.2      12  110    19            7  455
QTA-32 435064 154.50 154.90 0.40 <0.05  <5 <0.2      10    87    18          11  640
QTA-32 435065 154.90 156.00 1.10 <0.05  <5 <0.2      13    92    25          15  494
QTA-32 435066 156.00 156.90 0.90 <0.05  <5 <0.2      12  114    34          15  586
QTA-32 435067 156.90 158.00 1.10 <0.05  <5  0.4      12    89  102          22  722
QTA-32 435068 158.00 158.80 0.80 <0.05  <5  0.2      13  105    24          16  573
QTA-32 435069 158.80 160.00 1.20 <0.05  <5  0.3      14    96    20          16  502
QTA-32 435070 160.00 162.00 2.00 <0.05  <5 <0.2      12    98    21          16  540
QTA-32 435071 162.00 163.27 1.27 <0.05  <5 <0.2      13  107    16          12  452
QTA-32 435072 163.27 164.00 0.73  0.17  <5  1.4      19  143 1510          41  707
QTA-32 435073 164.00 166.50 2.50 <0.05  <5  0.2      11  102    64          19  619
QTA-32 435074 172.80 173.60 0.80 <0.05  <5 <0.2      12    86    42            5  454
QTA-32 435075 185.82 187.00 1.18 <0.05  <5 <0.2      13  124    31            7  457
QTA-32 435076 187.00 187.56 0.56 <0.05  <5 <0.2      14  110    24            6  391

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 47 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID Sample From    To Width    Au  Ag (FA)    Ag      Pb    Zn    As      Sb  Mn
  Number  (m)  (m)  (m)  (g/t) (g/t) (g/t)  ppm ppm ppm  ppm ppm
QTA-32 435077 187.56 187.76 0.20 <0.05    <5  0.2      15  116    25          7  422
QTA-32 435078 187.76 189.20 1.44 <0.05    <5 <0.2      16  109    17          6  392
QTA-32 435079 189.20 190.30 1.10 <0.05    <5  0.2      14  104    59      24  649
QTA-32 435080 190.30 191.45 1.15 <0.05    <5 <0.2      13  106    32      12  372
QTA-32 435081 211.00 211.50 0.50 <0.05    <5  2.7      18  182  460      31 1450
QTA-32 435082 216.50 216.80 0.30 <0.05    <5 <0.2      41    78    71      22  674
QTA-32 435083 249.80 250.60 0.80 <0.05      6  3.8      13  110  344      20  907
QTA-32 435084 260.60 261.10 0.50 <0.05    20 15.9      23  182  570      46 1140
QTA-32 435085 261.10 261.20 0.10 <0.05    45 53.9    514 1545 1195    592 3750
QTA-33 435086 36.70 36.90 0.20 <0.05    <5  0.3      12  105    30          8  271
QTA-33 435087 44.90 47.00 2.10 <0.05    <5 <0.2      12  100    54      13  295
QTA-33 435088 47.00 48.00 1.00 <0.05    <5  0.6      24    83  371      49  616
QTA-33 435089 48.00 49.20 1.20 <0.05    <5 <0.2      15  100    21          6  427
QTA-33 435090 50.30 52.20 1.90 <0.05    <5  0.2      14  103    23          5  470
QTA-33 435091 63.70 64.05 0.35 <0.05    <5 <0.2      17  102    28          7  490
QTA-33 435092 143.20 143.60 0.40 <0.05    <5 <0.2      22  102    62      19  662
QTA-33 435093 147.90 149.00 1.10 <0.05    <5 <0.2      22  121    19          9  400
QTA-33 435094 149.00 149.75 0.75 <0.05    <5 <0.2      17  105    17          8  540
QTA-33 435095 149.75 152.20 2.45 <0.05    <5 <0.2      12  101    29          9  418
QTA-33 435096 162.30 162.50 0.20 <0.05    <5 <0.2      12    91    17          5  365
QTA-33 435097 194.80 195.10 0.30  0.52    40 43.6    104 1150 2360    233 2500
QTA-33 435098 240.80 242.20 1.40 <0.05    <5  0.3      13    67  400      53  636
QTA-33 435099 242.20 243.70 1.50 <0.05    <5  0.3      16  112    52      11  506
QTA-33 435100 243.70 245.71 2.01 <0.05    <5  0.2      12  107  142      22  548
QTA-33 435101 245.71 247.00 1.29 <0.05      6  0.2      20  122    28          6  523
QTA-33 435102 247.00 249.00 2.00 <0.05    <5  0.4      23  118    48          9  607
QTA-33 435103 249.00 250.35 1.35 <0.05    <5  1.7      36  118  196      22 1165
QTA-33 435104 257.65 257.86 0.21 <0.05    11 13.3    175  258  894    175 3430
QTA-33 435105 260.60 260.80 0.20 <0.05    <5  2.8      33  210  431      20 1945
QTA-33 435106 264.80 264.90 0.10 <0.05    <5  0.3      20  105    30      14  672
QTA-33 435107 328.00 330.00 2.00 <0.05      7  0.4      12    98    54      18  571
QTA-33 435108 330.00 332.00 2.00 <0.05    <5  0.7      21  136  205      22  919
QTA-33 435109 332.00 332.85 0.85 <0.05    <5  1.6      12    84  561      45 1805
QTA-33 435110 332.85 333.00 0.15  0.14    78 70.4    458  909 2360    459 3290
QTA-33 435111 333.00 333.30 0.30  0.05    27 27.5      67  130 1010    112 4360
QTA-33 435112 333.30 333.80 0.50  0.05 1795 1795 13300 4420 1915 10001 4400
QTA-33 435113 333.80 334.75 0.95  0.07    69 72.9    365  195 1465    328 1810
QTA-33 435114 334.75 336.00 1.25 0.025      8  6.9      51  144  188      39 1395
QTA-33 435115 336.00 338.00 2.00 0.025  2.5  2.4      24  116  120      16 1255
QTA-33 435116 350.00 351.78 1.78 0.025  2.5  3.3      14    99  132      12  936
QTA-33 435117 351.78 351.88 0.10  0.26  239 >100  2840 3840 1760  2080 3860
QTA-33 435118 351.88 353.30 1.42 <0.05    22 24.4      47  284  735      54 1785
QTA-33 435119 377.40 377.70 0.30 <0.05      5  4.6      42  108  280      22 1695
QTA-34 435120 73.74 76.00 2.26 <0.05    <5  0.5      11    43      6          2  350
QTA-34 435121 76.00 77.00 1.00 <0.05    <5  0.6      13    47      2          2  449
QTA-34 435122 103.00 105.00 2.00 <0.05    <5  0.2      14    54      3      <2  520
QTA-34 435123 169.47 171.00 1.53 <0.05    <5  0.2      17    61    40          9  333
QTA-34 435124 171.00 173.00 2.00 <0.05    <5 <0.2      14    72  132          7  366
QTA-34 435125 173.00 175.00 2.00 <0.05    <5 <0.2      14    56    28      12  394
QTA-34 435126 175.00 177.00 2.00 <0.05    <5  0.2      15    41    13          8  389
QTA-34 435127 177.00 179.00 2.00 <0.05    <5 <0.2      13    62    45      12  500
QTA-34 435128 179.00 181.00 2.00 <0.05    <5  0.2          8    45    18          5  404
QTA-34 435129 181.00 183.00 2.00 <0.05    <5 <0.2          9    40    46      11  478
QTA-34 435130 183.00 185.00 2.00 <0.05    <5 <0.2      15    50    93          9  360
QTA-34 435131 185.00 187.00 2.00 <0.05    <5  0.2      15    90  174      35  904
QTA-34 435132 187.00 189.00 2.00 <0.05    <5  0.2      21    89    86      28  299
QTA-34 435133 189.00 191.00 2.00 <0.05    <5 <0.2      18  114    20          4  410
QTA-34 435134 191.00 193.00 2.00 <0.05    <5  0.2      21  118    21          2  380
QTA-34 435135 193.00 195.00 2.00 <0.05    <5  0.2      23  121    13          2  322
QTA-34 435136 195.00 197.00 2.00 <0.05    <5 <0.2      21  115    18      <2  349
QTA-34 435137 197.00 199.00 2.00 <0.05    <5 <0.2      18  112      9          3  340
QTA-34 435138 199.00 201.00 2.00 <0.05    <5 <0.2      19    84    22          3  246
QTA-34 435139 201.00 203.00 2.00 <0.05    <5 <0.2      18    95    20          4  398

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 48 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-34 435140 203.00 205.00 2.00 <0.05  <5 <0.2    10 108    13      5 176
QTA-34 435141 221.70 222.00 0.30 <0.05  <5 <0.2    10 116    13      4 414
QTA-34 435142 222.00 224.00 2.00 <0.05  <5 <0.2    14    96    11      3 470
QTA-34 435143 224.00 226.00 2.00 <0.05  <5 <0.2    13 104    22      9 360
QTA-34 435144 226.00 228.00 2.00 <0.05  <5 <0.2    13    89    11      3 438
QTA-34 435145 228.00 230.00 2.00 <0.05  <5 <0.2    16 112    12      4 402
QTA-34 435146 230.00 232.00 2.00 <0.05  <5 <0.2    12 106      9      5 415
QTA-34 435147 232.00 234.00 2.00 <0.05  <5 <0.2    15 112    11      2 369
QTA-34 435148 234.00 236.00 2.00 <0.05  <5 <0.2    15 106    15      2 382
QTA-34 435149 236.00 238.00 2.00 <0.05  <5 <0.2    15 112      9      3 399
QTA-34 435150 238.00 240.00 2.00 <0.05  <5 <0.2    12 109    11    <2 412
QTA-34 435151 240.00 242.00 2.00 <0.05  <5 <0.2    15 108    16      5 427
QTA-34 435152 242.00 244.00 2.00 <0.05  <5 <0.2    14 100    11      2 475
QTA-34 435153 244.00 246.00 2.00 <0.05  <5 <0.2    14 104    15    <2 455
QTA-34 435154 246.00 247.30 1.30 <0.05  <5 <0.2    10 112    17    <2 427
QTA-34 435155 247.70 249.00 1.30 <0.05  <5 <0.2    13 108    26      4 384
QTA-34 435156 249.00 251.00 2.00 <0.05  <5 <0.2    12    98    19      2 406
QTA-34 435157 251.00 253.00 2.00 <0.05  <5 <0.2    11    91    15      2 400
QTA-34 435158 253.00 255.00 2.00 <0.05  <5 <0.2    12 102    13      3 365
QTA-34 435159 255.00 257.00 2.00 <0.05  <5 <0.2    13    92    18      2 383
QTA-34 435160 257.00 259.00 2.00 <0.05  <5 <0.2    11    90    17      3 463
QTA-34 435161 259.00 260.31 1.31 <0.05  <5 <0.2    13 107    40      8 474
QTA-34 435162 260.31 260.91 0.60 <0.05  <5 <0.2      7    44    30      5 241
QTA-34 435163 260.91 263.00 2.09 <0.05  <5  0.2    11 101    22      9 426
QTA-34 435164 263.00 265.00 2.00 <0.05  <5 <0.2    10    95    19      6 489
QTA-34 435165 265.00 267.00 2.00 <0.05  <5  0.2    13 100    51    11 438
QTA-34 435166 267.00 269.00 2.00 <0.05  <5 <0.2    11    99    51      5 457
QTA-34 435167 269.00 271.00 2.00 <0.05  <5 <0.2    10    99    22      3 427
QTA-34 435168 271.00 271.40 0.40 <0.05  <5 <0.2    11 114    20      4 426
QTA-34 435169 271.40 273.00 1.60 <0.05  <5 <0.2      7    71      9      4 563
QTA-34 435170 273.00 275.00 2.00 <0.05  <5 <0.2    10    86      9      6 451
QTA-34 435171 275.00 277.00 2.00 <0.05  <5 <0.2    14 108    16      3 389
QTA-34 435172 277.00 279.00 2.00 <0.05  <5 <0.2    13    99    10      3 412
QTA-34 435173 279.00 281.00 2.00 <0.05  <5 <0.2    11 106    11      3 400
QTA-34 435174 281.00 283.00 2.00 <0.05  <5 <0.2    19    98    86      8 412
QTA-34 435175 283.00 285.00 2.00 <0.05  <5 <0.2    15 106    12      3 378
QTA-34 435176 285.00 287.00 2.00 <0.05  <5  0.2    12 102    13      4 446
QTA-34 435177 287.00 289.00 2.00 <0.05  <5 <0.2    10    95    11      4 442
QTA-34 435178 289.00 291.00 2.00 <0.05  <5 <0.2    14 106    12      4 487
QTA-34 435179 291.00 293.00 2.00 <0.05  <5 <0.2    14 104    10      4 466
QTA-34 435180 293.00 295.00 2.00 <0.05  <5 <0.2    11    95    11      4 485
QTA-34 435181 295.00 297.00 2.00 <0.05  <5 <0.2    11 102    12      4 539
QTA-34 435182 297.00 299.00 2.00 <0.05  <5 <0.2    11 106    89    28 450
QTA-34 435183 299.00 301.00 2.00 <0.05  <5 <0.2    17    99    44    13 425
QTA-34 435184 301.00 303.00 2.00 <0.05  <5 <0.2    17 110    24      3 313
QTA-34 435185 303.00 305.00 2.00 <0.05  <5 <0.2    13 102    12      4 414
QTA-34 435186 305.00 307.00 2.00 <0.05  <5  0.5    18 122      4    <2 436
QTA-34 435187 307.00 309.00 2.00 <0.05  <5 <0.2    15 121    15      6 460
QTA-34 435188 309.00 311.00 2.00 <0.05  <5 <0.2    17    94    33      7 511
QTA-34 435189 311.00 313.00 2.00 <0.05  <5 <0.2    15 124    15      4 421
QTA-34 435190 313.00 315.00 2.00 <0.05  <5 <0.2    14 103    23      7 443
QTA-34 435191 315.00 317.00 2.00 <0.05  <5 <0.2    13 119    29      7 423
QTA-34 435192 317.00 319.00 2.00 <0.05  <5 <0.2    17 114    16      8 364
QTA-34 435193 319.00 321.00 2.00 <0.05  <5 <0.2    14    98    50    12 438
QTA-34 435194 321.00 323.00 2.00 <0.05  <5 <0.2    13 168    32      6 399
QTA-34 435195 323.00 325.00 2.00 <0.05  <5 <0.2    13 106    22      9 388
QTA-34 435196 325.00 327.00 2.00 <0.05  <5  0.5    12 101      9      6 593
QTA-34 435197 327.00 329.00 2.00 <0.05  <5  0.3    13 104    15      5 332
QTA-34 435198 329.00 331.00 2.00 <0.05  <5 <0.2    15 109    28      3 297
QTA-34 435199 331.00 333.00 2.00 <0.05  <5 <0.2    15 127    63      3 237
QTA-34 435200 333.00 335.00 2.00  0.06  <5  0.2    13    96    16      5 442
QTA-34 435201 335.00 337.00 2.00 <0.05  <5 <0.2    12    99    14      5 402
QTA-34 435202 337.00 339.00 2.00 <0.05  <5 <0.2    16 108    15      6 566

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 49 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-34 435203 339.00 341.00 2.00  <0.05  <5 <0.2      9    86      7      8  507
QTA-34 435204 341.00 343.00 2.00  <0.05  <5  0.2    14  106    12      9  470
QTA-34 435205 343.00 345.00 2.00  <0.05  <5 <0.2    15    88    58    26  543
QTA-34 435206 345.00 347.00 2.00  <0.05  <5 <0.2    13    96    99    36  749
QTA-34 435207 347.00 349.00 2.00  <0.05  <5 <0.2    12  110    50    14  519
QTA-34 435208 349.00 351.00 2.00  <0.05      6 <0.2    12    91    20      5  474
QTA-34 435209 351.00 353.00 2.00  <0.05  <5 <0.2    13    82    31      7  495
QTA-34 435210 353.00 355.00 2.00  <0.05  <5 <0.2    11    80    17      5  477
QTA-34 435211 355.00 357.00 2.00  <0.05  <5 <0.2    10    84      8      6  411
QTA-34 435212 357.00 359.00 2.00  <0.05  <5  0.2    14    92    13      6  378
QTA-34 435213 359.00 361.00 2.00  <0.05  <5  0.2    12    90    14    10  448
QTA-34 435214 361.00 363.00 2.00  <0.05  <5  0.2    12    68    16      7  369
QTA-34 435215 363.00 365.00 2.00  <0.05  <5  0.2      9    42    12      7  423
QTA-34 435216 365.00 367.00 2.00  <0.05  <5  0.2      9    89    10    11  302
QTA-34 435217 367.00 369.00 2.00  <0.05  <5  0.2    13    83    11      9  384
QTA-34 435218 369.00 371.00 2.00  <0.05  <5  0.2    12    85    34    13  418
QTA-34 435219 371.00 373.00 2.00  <0.05  <5  0.2    14    88    32    16  477
QTA-34 435220 373.00 375.00 2.00  <0.05  <5  0.3    13    90    65    36  380
QTA-34 435221 375.00 377.00 2.00  <0.05  <5  0.2      7    75    79    33  345
QTA-34 435222 377.00 377.40 0.40  <0.05  <5 <0.2      8  101    35    26  822
QTA-34 435223 377.40 379.00 1.60  <0.05  <5  0.2    12    55    30    16  452
QTA-34 435224 379.00 381.00 2.00  <0.05  <5  0.2      8    46    35    12  486
QTA-34 435225 381.00 383.00 2.00  <0.05  <5  0.3    12    58    23      8  385
QTA-34 435226 383.00 383.74 0.74  <0.05  <5  0.2    13    49    25      9  340
QTA-34 435227 383.74 385.00 1.26  <0.05  <5 <0.2    16    94    43      8  280
QTA-34 435228 385.00 387.00 2.00  <0.05  <5  0.3    15  111    39      9  374
QTA-34 435229 387.00 389.00 2.00  <0.05  <5  0.2    13    94    75    15  377
QTA-34 435230 389.00 389.74 0.74  <0.05  <5  0.2      8    80    33    26  399
QTA-34 435231 389.74 390.40 0.66  <0.05  <5  0.4    11    36  192    40  790
QTA-34 435232 390.40 391.00 0.60  <0.05  <5  0.2    11    74    40    13  601
QTA-34 435233 391.00 392.00 1.00  <0.05  <5  0.2      9    78    48    18  742
QTA-34 435234 392.00 394.00 2.00  <0.05  <5  0.2    11    89    88    23  494
QTA-34 435235 394.00 396.00 2.00  <0.05  <5 <0.2    12  102    24    11  476
QTA-34 435236 396.00 397.60 1.60  <0.05  <5  0.2    13  101    24    13  386
QTA-34 435237 414.15 416.81 2.66  <0.05  <5  0.2    12    75  134    27  710
QTA-34 435238 416.81 417.80 0.99  <0.05  <5  0.2    17    88    82    40  578
QTA-34 435239 417.80 418.40 0.60  <0.05  <5  0.2    14    77  165    48  623
QTA-34 435240 418.40 420.00 1.60  <0.05  <5 <0.2    11    82    50    20  449
QTA-35 435389 20.25 20.90 0.65    0.14      5      4    34    25 3130  250 1825
QTA-35 435390 40.20 41.45 1.25 0.0025  2.5  0.7    12  110  310    29  638
QTA-35 435391 41.45 41.65 0.20    0.35  32  33 306 1110 8670  207 1550
QTA-35 435392 41.65 43.25 1.60 0.0025  2.5  0.7    11  111  296    36  707
QTA-35 435393 43.25 45.00 1.75 0.0025  2.5  0.2    14    91  226    24  638
QTA-35 435394 76.50 78.00 1.50 0.0025  2.5  0.8    13  105  373    52  752
QTA-35 435395 78.00 78.95 0.95      0.1      8  9.9    41  184 2280    88 1175
QTA-35 435396 99.35 101.10 1.75 0.0025  2.5  3.2    31  127  754    60  803
QTA-35 435397 101.10 101.35 0.25 0.0025  2.5  0.5    17  106    50    18  590
QTA-35 435398 141.00 142.45 1.45 0.0025  2.5  1.3    10    89  272    98  724
QTA-35 435399 142.45 142.59 0.14    0.26  19 17.3    72  174 5450 1005 2430
QTA-35 435400 142.59 145.25 2.66    0.07  2.5  1.9    14    78  625    36  722
QTA-35 435401 164.80 165.15 0.35    0.41      6  4.3    32  218 6260  176 2180
QTA-35 435402 194.47 198.00 3.53 0.0025  2.5  1.3    12    91  720    50 1255
QTA-35 435403 198.00 199.10 1.10 0.0025  2.5  0.2    15  104  156    26  487
QTA-35 435404 231.00 232.00 1.00 0.0025  2.5  0.3    16    99    49    21  476
QTA-35 435405 232.00 234.00 2.00 0.0025  2.5  0.2    19  119    82    24  443
QTA-35 435406 234.00 236.00 2.00 0.0025  2.5  0.6    17  103  145    26  560
QTA-35 435407 236.00 238.00 2.00 0.0025  2.5  0.8    17  101  202    36  635
QTA-35 435408 238.00 240.00 2.00 0.0025      5  0.6    22  120  250    45  680
QTA-35 435409 240.00 242.00 2.00    0.21  10  7.7    41  166 3750    74  846
QTA-35 435410 242.00 244.00 2.00 0.0025  2.5  0.6    21  114  349    29  568
QTA-35 435411 259.30 259.55 0.25 0.0025  17  1.5    18    67  358    34 1350
QTA-35 435412 301.75 302.40 0.65 0.0025      8  5.4    25  304  899    38 1030
QTA-35 435413 331.10 333.00 1.90 0.0025      5  0.9    15  113  549  166  959

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 50 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-35 435414 392.55 394.00 1.45 0.0025  2.5  0.7      17    116    87    19  465
QTA-35 435415 394.00 396.00 2.00 0.0025  25 33.4      94    234  338    40  916
QTA-35 435416 396.00 398.00 2.00 0.0025      7  3.4      23      85  939    49 1005
QTA-35 435417 398.00 400.00 2.00 0.0025  2.5  0.6          6      99  162    20  647
QTA-35 435418 400.00 402.00 2.00 0.0025  2.5  0.6          8      98  245    20  859
QTA-35 435419 402.00 404.00 2.00    0.13  52 52.8    208    136 2150 4190 1455
QTA-35 435631 404.00 404.72 0.72    0.17  15 15.2    126  1440 2220  686 1565
QTA-35 435632 404.72 405.20 0.48    0.42  30 32.5    144  2810 6120  113 3010
QTA-35 435633 405.20 406.36 1.16  <0.05      5  3.1    947    565  329  276  688
QTA-35 435634 406.36 408.00 1.64  <0.05  <5  0.5      46    108    75    15  525
QTA-35 435635 408.00 410.00 2.00  <0.05      6      2      87    166    60    10  676
QTA-35 435636 410.00 412.00 2.00  <0.05      9  4.6    431    491  100    56  678
QTA-35 435637 416.00 418.00 2.00  <0.05  <5  2.7    190    255  117    12  513
QTA-35 435638 418.00 418.40 0.40  <0.05  14 17.6    938  1365  136  139  813
QTA-35 435639 418.40 418.53 0.13  <0.05  <5  5.3    387    515  134    51 1075
QTA-35 435640 418.53 420.00 1.47  <0.05  17 16.9    847  1495  136  116  674
QTA-35 435641 420.00 422.00 2.00  <0.05      6  6.3    314    282    99    12  566
QTA-35 435420 427.00 429.00 2.00 0.0025  24 20.4    671  1055  708  148  735
QTA-35 435421 429.00 430.00 1.00 0.0025      8  2.2      90      95  483    44  991
QTA-35 435422 430.00 432.00 2.00 0.0025  2.5  0.6          9      53  126    13  655
QTA-35 435423 432.00 434.00 2.00 0.0025  2.5  0.4          7    118    59    16  632
QTA-35 435424 434.00 436.00 2.00 0.0025  2.5  0.4      11    101    36    14  498
QTA-35 435425 436.00 438.00 2.00 0.0025  2.5  0.4      11    109    33    16  431
QTA-35 435426 438.00 440.00 2.00 0.0025  2.5  0.6      24    105    34    10  475
QTA-35 435427 440.00 442.00 2.00 0.0025  23  23  1175  1505  410    36  682
QTA-35 435428 442.00 444.00 2.00 0.0025  75 81.4  4440  2490  207    92  650
QTA-35 435429 444.00 446.00 2.00 0.0025  2.5  1.5      41    406    36      9  578
QTA-35 435430 446.00 448.00 2.00 0.0025      8  4.8    388    275    28    51  560
QTA-35 435431 448.00 450.00 2.00 0.0025  2.5  0.4      10    100    31      7  499
QTA-35 435432 450.00 452.00 2.00 0.0025  2.5  0.7      13      87    33      7  520
QTA-35 435433 452.00 454.00 2.00 0.0025  11      8    666  2010  164    52  680
QTA-35 435434 454.00 456.00 2.00 0.0025  2.5  0.8      14      74    61      7  558
QTA-35 435435 456.00 458.00 2.00 0.0025      6  3.4    281    236    59    13  589
QTA-35 435436 458.00 460.00 2.00 0.0025  22 20.6  1275  2110    85    32  581
QTA-35 435437 460.00 462.00 2.00 0.0025  2.5  0.2          8      95    21      6  447
QTA-35 435438 462.00 464.00 2.00 0.0025      8  3.4    100    297    39    26  619
QTA-35 435439 464.00 466.00 2.00 0.0025      5  0.3          2      94    36      5  498
QTA-35 435440 466.00 468.00 2.00 0.0025      8  4.3    266    339    30    13  701
QTA-35 435441 468.00 470.00 2.00 0.0025      5  0.9      17      94    14      9  654
QTA-35 435442 470.00 472.00 2.00 0.0025      8      5    480      75    43    27  609
QTA-35 435443 472.00 474.00 2.00 0.0025  12  8.6    527    339    66    23  630
QTA-35 435444 474.00 476.00 2.00 0.0025  2.5  0.2          6      76    61      7  572
QTA-35 435445 476.00 478.00 2.00 0.0025  2.5  0.4      22    100    38    14  667
QTA-35 435446 478.00 478.54 0.54 0.0025  17 15.5  1340  1800    66    49 1295
QTA-35 435447 478.54 478.66 0.12    0.33 567 567 23600 41600 1250 5070 1260
QTA-35 435448 478.66 479.08 0.42 0.0025  31 31.5  1990  9750    37  134 1260
QTA-35 435449 479.08 479.20 0.12 0.0025 184 184 17100 95900  570  266 1810
QTA-35 435450 479.20 480.00 0.80 0.0025      7  8.6    535    453    24    17  732
QTA-35 435451 480.00 482.00 2.00 0.0025  23 24.6    954  1320    97    42  721
QTA-35 435452 482.00 484.00 2.00 0.0025  2.5  1.7      19    118    36      5  581
QTA-35 435453 484.00 486.00 2.00 0.0025  2.5  0.8      25    153    21      1  417
QTA-35 435454 486.00 488.00 2.00 0.0025  2.5      1          7      96    21      1  450
QTA-35 435455 488.00 490.00 2.00 0.0025  17 17.5  1080  1700    71    22  602
QTA-35 435456 490.00 492.00 2.00 0.0025  2.5  0.6          9      93    47      4  583
QTA-35 435457 492.00 494.00 2.00 0.0025  2.5  0.6          6      86    56      3  505
QTA-35 435458 494.00 496.00 2.00 0.0025  10  9.8    622  1275  217    17  646
QTA-35 435459 496.00 498.00 2.00 0.0025  20 19.9  1440  1575  704    59  775
QTA-35 435460 498.00 500.00 2.00 0.0025  29  29  2800  2680  495  130  779
QTA-35 435461 500.00 502.00 2.00 0.0025  10  8.9    594    718  160    14  652
QTA-35 435462 502.00 504.00 2.00 0.0025  2.5  2.2      96    233  217      7  634
QTA-35 435463 504.00 506.00 2.00 0.0025  2.5  1.5      98      68  110      5  568
QTA-35 435464 506.00 508.00 2.00 0.0025  15 15.6  1045    324  137    30  653
QTA-35 435465 508.00 510.00 2.00 0.0025  38 39.4  2540 18900  186  617  734

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 51 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-35 435466 510.00 512.00 2.00 0.0025  65 71.7  5930  4210    97      187  569
QTA-35 435467 512.00 514.00 2.00 0.0025  27 26.2  1805    506  233      359  829
QTA-35 435468 514.00 516.00 2.00 0.0025  19 18.4    423    783    96      153  577
QTA-35 435469 516.00 518.00 2.00 0.0025  2.5  0.4          8      53    86            6  494
QTA-35 435470 518.00 520.00 2.00 0.0025  2.5  0.4          5      50  164          18  424
QTA-35 435471 520.00 522.00 2.00 0.0025      9  7.8    441    152    84          32  536
QTA-35 435472 522.00 524.00 2.00    0.13  51    48  3300  1175  226      439  473
QTA-35 435473 524.00 526.00 2.00 0.0025      7  5.8    377    828    28          20  438
QTA-35 435474 526.00 528.00 2.00 0.0025  18 18.2  1100  1210    21          54  740
QTA-35 435475 528.00 530.00 2.00 0.0025  14 13.4    904  2560    36          34  584
QTA-35 435476 530.00 532.00 2.00 0.0025  20 18.9  1565    931    27      429  495
QTA-35 435477 532.00 534.00 2.00 0.0025  17 17.9    996  2980    16      221  480
QTA-35 435478 534.00 536.00 2.00 0.0025      7  4.2    216    874    18          22  461
QTA-35 435479 536.00 538.00 2.00 0.0025      8  6.1    285    293    18          23  528
QTA-35 435480 538.00 540.00 2.00 0.0025  20 19.3  1540  2280    27          79  540
QTA-35 435481 540.00 542.00 2.00 0.0025  75 77.1  6620  6740    29      329  441
QTA-35 435482 542.00 544.00 2.00 0.0025  33 26.5  2020  2500    18      146  484
QTA-35 435483 544.00 546.00 2.00 0.0025  28 26.1  2180  1440    22      132  636
QTA-35 435484 546.00 548.00 2.00 0.0025  14 10.4    732    736    34          55  557
QTA-35 435485 548.00 550.00 2.00 0.0025      6  7.7    482    559    17          14  554
QTA-35 435486 550.00 552.00 2.00 0.0025  2.5  4.9    547    671    80      149  599
QTA-35 435487 552.00 554.00 2.00 0.0025  14 12.7  1095    671  497      141  607
QTA-35 435488 554.00 556.00 2.00 0.0025  11    11    789    966    74          17  487
QTA-35 435489 556.00 558.00 2.00 0.0025  2.5  0.5          8      73    53            9  470
QTA-35 435490 558.00 560.00 2.00 0.0025  2.5  1.1      26      91    41            5  420
QTA-35 435491 560.00 562.00 2.00 0.0025  2.5  0.4      11      73    43            7  509
QTA-35 435492 562.00 564.00 2.00 0.0025  2.5  1.5    130    303    54          10  541
QTA-35 435493 564.00 566.00 2.00 0.0025  2.5  0.4      15      72    59            7  428
QTA-35 435494 566.00 568.35 2.35 0.0025  2.5  0.9      24      96  134          15  499
QTA-35 435495 568.35 568.75 0.40 0.0025  31 27.1    842    183  305      235  666
QTA-35 435496 568.75 570.00 1.25 0.0025  2.5  1.1      28      52  941          24  474
QTA-35 435497 570.00 572.00 2.00 0.0025      9  4.1    504    413  846      183  482
QTA-35 435498 572.00 574.00 2.00 0.0025  2.5  2.7    111      48  483          15  513
QTA-35 435499 574.00 575.05 1.05 0.0025      6  3.6    120      86  410          17  564
QTA-35 435500 575.05 575.35 0.30 0.0025  2.5  1.3      25      94  212          18  598
QTA-35 435501 575.35 576.50 1.15 0.0025  2.5  1.6      58    196  229          13  541
QTA-35 435502 576.50 578.00 1.50 0.0025  29 25.5  1885  1830  930      713  851
QTA-35 435503 578.00 579.00 1.00 0.0025  2.5  1.6      42      43  417          14  486
QTA-35 435504 579.00 580.00 1.00 0.0025  2.5      2      67      99  377          17  438
QTA-35 435505 580.00 582.00 2.00 0.0025      5  2.3      94      83  422          17  448
QTA-35 435506 582.00 584.00 2.00 0.0025  2.5      1      12      44  250            9  483
QTA-35 435507 584.00 586.00 2.00 0.0025  2.5  0.7      15      40  143            5  456
QTA-35 435508 586.00 588.26 2.26 0.0025  2.5  0.8      21      44  159            8  528
QTA-35 435509 588.26 590.00 1.74 0.0025  2.5  0.7      11      46  159            9  543
QTA-35 435510 590.00 592.00 2.00 0.0025  2.5  0.8      22      36  162            9  463
QTA-35 435511 592.00 592.45 0.45 0.0025  2.5  0.9      17      55  243          17  459
QTA-35 435512 592.45 592.55 0.10    0.65 585 >100 42200 91400 2400 >10000 1070
QTA-35 435513 592.55 594.00 1.45 0.0025  2.5  1.5      35    128  654          32  744
QTA-35 435514 594.00 595.25 1.25 0.0025  32 30.7  1030    485 1635      516 4420
QTA-35 435515 595.25 596.15 0.90 0.0025      9  8.5  2510  1485  310      948  550
QTA-35 435516 596.15 598.00 1.85 0.0025  16 14.7    988  2770  154          56  442
QTA-35 435517 598.00 600.00 2.00 0.0025  2.5  2.4      83    427    85          15  454
QTA-35 435518 600.00 602.00 2.00 0.0025  13    12    888    158    94          54  427
QTA-35 435519 602.00 604.00 2.00 0.0025  2.5  1.1      20      37    96          11  430
QTA-35 435520 604.00 606.00 2.00 0.0025  2.5  2.4    119    335  138          33  453
QTA-35 435521 606.00 608.00 2.00 0.0025  2.5  0.9      20      37    84            8  427
QTA-35 435522 608.00 610.00 2.00 0.0025  2.5      3    288    108    65          11  496
QTA-35 435523 610.00 612.00 2.00 0.0025  2.5  1.6    148    249    53          13  497
QTA-35 435524 612.00 614.00 2.00 0.0025  10  8.3    827  1075    67          23  481
QTA-35 435525 614.00 616.00 2.00 0.0025  2.5  0.8      10    101    46          12  452
QTA-35 435526 616.00 618.00 2.00 0.0025  2.5  0.7      32      65    99          19  476
QTA-35 435527 618.00 620.00 2.00 0.0025  2.5  2.8    323    100    58          12  471
QTA-35 435528 620.00 622.00 2.00 0.0025  2.5  3.2    388    327    62          13  454

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 52 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-35 435529 622.00 624.00 2.00 0.0025  2.5  0.8    32    122          54      9  403
QTA-35 435530 624.00 626.00 2.00 0.0025  2.5  0.7    13    106          54    12  412
QTA-35 435531 626.00 628.00 2.00 0.0025  2.5  1.6  124    313          87    25  435
QTA-35 435532 628.00 630.00 2.00 0.0025  2.5  0.5    27    141          60    17  449
QTA-35 435533 630.00 632.00 2.00 0.0025  2.5  0.6      6      81          58    11  466
QTA-35 435534 632.00 633.60 1.60 0.0025  2.5  0.8    15    232    1260    32  493
QTA-35 435535 633.60 634.30 0.70 0.0025  2.5  1.5    73      70      544    29  427
QTA-35 435536 634.30 634.60 0.30 0.0025    19 18.2  672  1070    2330    80  798
QTA-35 435537 634.60 636.00 1.40 0.0025  2.5  1.1    14      65      249    18  480
QTA-35 435538 636.00 638.00 2.00 0.0025  2.5  0.5      4    106          36    13  450
QTA-35 435539 638.00 640.00 2.00 0.0025  2.5  0.5      9    155          63      9  424
QTA-35 435540 640.00 642.00 2.00 0.0025  2.5  0.6    13      73          80      8  483
QTA-35 435541 642.00 644.00 2.00 0.0025  2.5  0.4      8      83          99      8  428
QTA-35 435542 644.00 646.00 2.00 0.0025  2.5  0.3      6      70          43      7  486
QTA-35 435543 680.00 682.25 2.25 0.0025  2.5  0.4    38      71          65    18  426
QTA-35 435544 682.25 683.70 1.45 0.0025  2.5  2.9    81    229      262    41  730
QTA-35 435545 683.70 684.00 0.30 0.0025  2.5  0.6      7    218          71    10  459
QTA-35 435546 684.00 686.00 2.00 0.0025  2.5  0.6      8      87          44      7  468
QTA-36 435547 66.60 68.00 1.40  <0.05    <5  0.2    14      88          36      5  484
QTA-36 435548 68.00 69.00 1.00  <0.05    <5  5.1    18    106          58      6  386
QTA-36 435549 69.00 70.00 1.00  <0.05    <5  0.3    14      95          44      5  464
QTA-36 435550 144.00 146.00 2.00  <0.05    <5  0.3    16    108          32      3  332
QTA-36 435551 146.00 147.15 1.15  <0.05    <5  0.2    12      69          46      5  580
QTA-36 435552 147.15 148.40 1.25  <0.05    <5  0.3    17      31      224    16  703
QTA-36 435553 148.40 150.40 2.00  <0.05    <5  0.3    16      54          98      9  184
QTA-36 435554 150.40 152.00 1.60  <0.05    <5 <0.2    11    104          48      5  236
QTA-36 435555 152.00 154.00 2.00  <0.05    <5  0.2    15    104          52      4  259
QTA-36 435556 177.70 179.10 1.40  <0.05      5  0.2    22    134          24      3  273
QTA-36 435557 228.35 228.58 0.23  <0.05    <5  0.2    12      22    2700  878  641
QTA-36 435558 282.00 284.00 2.00  <0.05    10  0.4    17    103          24      4  411
QTA-36 435559 294.00 296.00 2.00  <0.05    <5  0.2    16    118          62    11  358
QTA-36 435560 296.00 298.00 2.00  <0.05    <5  0.2    18    115      373    31  484
QTA-36 435561 298.00 300.00 2.00  <0.05    <5  0.5    16    110      148    11  367
QTA-36 435562 302.70 303.89 1.19  <0.05    <5  0.3    16    116          53      7  325
QTA-36 435563 303.89 305.00 1.11  <0.05    <5  0.4    13      99          88      5  443
QTA-36 435564 315.60 317.30 1.70  <0.05    <5  0.2    19    118      128    20  366
QTA-36 435565 339.50 341.00 1.50  <0.05    <5  0.3    13    103      378    19  419
QTA-36 435566 341.00 341.20 0.20  <0.05    <5  0.6    20      71      214    19 1190
QTA-36 435567 341.20 341.80 0.60      0.4    30 28.7  970    977    6360  138 2840
QTA-36 435568 341.80 343.00 1.20  <0.05    <5  2.3    21    135    1180    27  605
QTA-36 435569 343.00 344.10 1.10  <0.05    <5  0.2    16    119          80      3  359
QTA-36 435570 344.10 344.30 0.20  <0.05    <5  0.3    25      80          80      8  585
QTA-36 435571 354.00 356.00 2.00  <0.05    <5  0.4    16    118          55      6  494
QTA-36 435572 356.00 357.00 1.00  <0.05    <5  0.3    15    133      123    15  288
QTA-36 435573 357.00 357.60 0.60  <0.05      5 <0.2    20    133      571  104  340
QTA-36 435574 357.60 360.30 2.70  <0.05      5  1.1    17    138          95      7  343
QTA-36 435575 360.30 360.65 0.35  <0.05    <5  0.3    17    129      110    20  299
QTA-36 435576 360.65 361.80 1.15  <0.05    <5  0.3    12    134      112    17  305
QTA-36 435577 361.80 362.10 0.30  <0.05    <5  0.4    22    132          70    16  338
QTA-36 435578 369.00 371.00 2.00  <0.05    <5  0.3    28    126          83    14  315
QTA-36 435579 371.00 373.00 2.00  <0.05    <5  0.2    31    139          56      6  355
QTA-36 435580 373.00 373.20 0.20  <0.05    <5  0.4    20    122      166    12  450
QTA-36 435581 393.62 394.10 0.48  <0.05    <5  0.2    20    128          68      6  357
QTA-36 435582 411.40 413.32 1.92  <0.05      5  8.8    34      88    1370    58 1170
QTA-36 435583 413.32 413.41 0.09      0.4 1030 >100 3480 12700 >10000 3360 2340
QTA-36 435584 413.41 415.00 1.59  <0.05    <5 11.5    47    174    1345    38 1045
QTA-36 435585 415.00 415.60 0.60  <0.05    <5  1.6    12    112      209    13  543
QTA-36 435586 415.60 417.62 2.02  <0.05    <5  0.5      5      93      128    10  587
QTA-36 435587 417.62 418.82 1.20  <0.05    <5  3.2    14    144      659    14  690
QTA-36 435588 418.82 419.74 0.92  <0.05    <5  0.7    14      93      453    12  841
QTA-36 435589 419.74 420.00 0.26  <0.05    <5  2.2    67      81    1415    58 1180
QTA-36 435590 420.00 422.00 2.00  <0.05    <5  4.6    15    108      397    26  796
QTA-36 435591 422.00 424.00 2.00      0.1    17 13.4    40    131    1480    35 1130

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 53 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-36 435592 424.00 425.20 1.20 <0.05  69    72 1010  643  377 453  751
QTA-36 435593 425.20 426.00 0.80 <0.05  <5  7.1    44    87  252    24  784
QTA-36 435594 426.00 428.00 2.00 <0.05  <5  3.9    15    68  505    12  624
QTA-36 435595 428.00 428.60 0.60 <0.05  <5  2.2      7    47  664    10  344
QTA-36 435596 428.60 430.00 1.40 <0.05      7  7.7    31    88  787    21  706
QTA-36 435597 430.00 432.00 2.00 <0.05  <5  4.9    18  112  366    19  534
QTA-36 435598 432.00 434.00 2.00 <0.05  <5  0.7    12  123  116    13  548
QTA-36 435599 434.00 436.00 2.00 <0.05      7  0.5    13  113    74    13  446
QTA-36 435600 436.00 438.00 2.00 <0.05  <5  0.4    10    76    80    12  525
QTA-36 435601 438.00 440.00 2.00 <0.05  <5  0.6    12    98    80    12  494
QTA-36 435602 440.00 442.00 2.00 <0.05  <5  0.7    14  105  142    10  565
QTA-36 435603 442.00 444.00 2.00 <0.05  50 55.1  300  442 1425 139  844
QTA-36 435604 444.00 446.00 2.00 <0.05  <5  4.1    23    62  499    16  560
QTA-36 435605 446.00 448.00 2.00 <0.05  <5  2.1      9    63  395      7  652
QTA-36 435606 448.00 450.00 2.00 <0.05  <5  0.3      6    75  154      8  754
QTA-36 435607 450.00 452.00 2.00 <0.05  <5  0.4      7    89  508    10  580
QTA-36 435608 452.00 454.00 2.00 <0.05  23 20.9  517  370 1850 189  749
QTA-36 435609 454.00 456.00 2.00 <0.05  <5  0.3      9    56    75      6  695
QTA-36 435610 456.00 458.00 2.00 <0.05  <5  0.4      5    56    54      5  496
QTA-36 435611 458.00 460.00 2.00 <0.05  <5  0.6    25    95  743    25  534
QTA-36 435612 460.00 462.00 2.00 <0.05  <5  0.8    18  105    97      9  496
QTA-36 435613 462.00 464.00 2.00 <0.05      5  0.3    15    97    96      6  585
QTA-36 435614 464.00 466.00 2.00 <0.05  <5  0.3      7    79    74      6  418
QTA-36 435615 466.00 467.70 1.70 <0.05  <5  0.5    21    88  107      6  605
QTA-36 435616 467.70 467.90 0.20 <0.05      5  0.6    12    74    87      6  702
QTA-36 435617 467.90 470.00 2.10 <0.05  <5  0.4      8    73    54      3  464
QTA-36 435618 470.00 472.00 2.00 <0.05  <5  0.8    15    87  116      9  567
QTA-36 435619 472.00 474.00 2.00 <0.05  <5  0.7    15    73    89      6  547
QTA-36 435620 474.00 475.50 1.50 <0.05  <5  8.6  104  148  369    29  538
QTA-36 435621 475.50 476.80 1.30    0.1 126 >100  929 1025 3840 141 1510
QTA-36 435622 476.80 478.00 1.20    0.1  36 38.3  290  563 2160    39 1040
QTA-36 435623 478.00 480.00 2.00 <0.05  <5  1.2    12  104  295      9  631
QTA-36 435624 480.00 482.00 2.00 <0.05  <5      1    86    94  168      8  675
QTA-36 435625 482.00 484.00 2.00 <0.05      5  0.7    12    67    95      5  553
QTA-36 435626 484.00 486.00 2.00 <0.05  <5  0.4      5    41    60      5  883
QTA-36 435627 486.00 488.00 2.00 <0.05  <5  0.3      7    61  106      8  523
QTA-36 435628 488.00 490.00 2.00 <0.05  <5  2.2    28  121  371      9  600
QTA-36 435629 490.00 492.00 2.00 <0.05  <5  0.3    13    55    54      8  364
QTA-36 435630 492.00 494.00 2.00 <0.05  <5  0.3    11    57  102      4  375
QTA-36 435642 516.00 518.00 2.00 <0.05  <5  0.5    12    58  105      7  505
QTA-36 435643 518.00 520.00 2.00 <0.05  <5  3.1  420  158  200 109  435
QTA-36 435644 520.00 522.00 2.00 <0.05  <5  2.5    55    85  173    20  592
QTA-36 435645 522.00 523.80 1.80 <0.05  <5  2.2    48    45  164    20  434
QTA-36 435646 523.80 526.00 2.20 <0.05  13    16  617  215  853 253  562
QTA-36 435647 526.00 528.00 2.00 <0.05  <5  2.6    16    47  341    18  702
QTA-36 435648 528.00 530.00 2.00 <0.05  <5  2.7    15    75  280    12  443
QTA-36 435649 530.00 532.00 2.00 <0.05  <5  0.2      6    43    58      6  378
QTA-36 435650 532.00 534.00 2.00 <0.05  <5  0.2    13    54    56    24  362
QTA-36 435651 534.00 536.00 2.00 <0.05  <5  0.2      9    60    69      7  329
QTA-36 435652 536.00 538.00 2.00 <0.05  <5  1.1  129  195    84      5  425
QTA-36 435653 538.00 540.00 2.00 <0.05  <5  0.2    31    73    63      5  404
QTA-36 435654 540.00 542.00 2.00 <0.05  <5 <0.2    10    43    23      3  668
QTA-36 435655 542.00 544.00 2.00 <0.05  <5  0.2    10    51    39      5  501
QTA-36 435656 544.00 546.00 2.00 <0.05  <5  0.3    13    42    87      6  821
QTA-36 435657 546.00 548.00 2.00 <0.05  <5  0.3      6    49    75      9  439
QTA-36 435658 548.00 550.00 2.00  0.07  <5  2.1    22  313  334    12  603
QTA-36 435659 550.00 552.00 2.00 <0.05  <5  3.2    14    60  385    12  550
QTA-36 435660 552.00 553.20 1.20 <0.05  <5  1.4    10    27  260    10  680
QTA-36 435661 553.20 553.55 0.35  0.07  68 66.8  695  786  605 287  792
QTA-36 435662 553.55 556.00 2.45  0.07  <5  1.8    18    59  413    17  430
QTA-36 435663 556.00 558.00 2.00 <0.05  <5  0.4    11    68  196    12  514
QTA-36 435664 558.00 560.00 2.00 <0.05  <5  0.4      7    84    60      5  486
QTA-36 435665 560.00 562.00 2.00 <0.05  <5  0.8  104  151    59      4  494

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 54 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-36 435666 562.00 564.00 2.00 <0.05  <5  0.3    13    87    64      5  447
QTA-36 435667 564.00 566.00 2.00 <0.05  <5 <0.2    13    80    68      5  453
QTA-36 435668 580.00 582.00 2.00 <0.05  <5 <0.2      9    92    57      6  478
QTA-36 435669 582.00 584.00 2.00 <0.05      8  3.1    10    97  219    17  533
QTA-36 435670 584.00 586.00 2.00 <0.05      7  4.4    37  177  735    22 1050
QTA-36 435671 586.00 588.00 2.00 <0.05  <5  0.4    13    62  251    11  482
QTA-36 435672 598.00 600.00 2.00  0.18  <5 <0.2      8    39    55      7  565
QTA-36 435673 600.00 602.00 2.00 <0.05  <5  0.9      7    68  280      9  385
QTA-36 435674 602.00 604.00 2.00  0.11  13 14.4    46  111  548    27  766
QTA-36 435675 604.00 606.00 2.00 <0.05  <5  1.8    14    45  147    12  924
QTA-36 435676 606.00 608.00 2.00 <0.05  <5  6.8    24    81  166    21  636
QTA-36 435677 608.00 610.00 2.00 <0.05  <5  5.6    16    83  255    17  443
QTA-36 435678 620.00 621.00 1.00 <0.05  <5 <0.2      8    54    57      7  633
QTA-36 435679 621.00 622.00 1.00 <0.05  <5 <0.2    14    67    49      7  439
QTA-36 435680 643.00 644.00 1.00  0.07  <5  4.3    18  114  400    24  613
QTA-36 435681 644.00 645.00 1.00 <0.05  17 20.3    68  195  687    37  875
QTA-36 435682 645.00 646.00 1.00 <0.05  <5  5.9    10    45  278    12  395
QTA-36 435683 656.00 658.00 2.00 <0.05  <5  0.2    15  100    50    14  391
QTA-36 435684 658.00 660.00 2.00 <0.05  <5 <0.2    16  102    44      8  361
QTA-36 435685 660.00 662.00 2.00 <0.05  <5  0.2    17  120    57    10  428
QTA-36 435686 662.00 664.00 2.00 <0.05  <5  0.2    55  135  241    13  477
QTA-36 435687 664.00 666.00 2.00 <0.05  <5  0.3    18  105    40    12  348
QTA-36 435688 666.00 668.00 2.00 <0.05  <5 <0.2    14    95    70      9  402
QTA-36 435689 668.00 670.30 2.30  0.07  <5 <0.2    16  108    70    12  382
QTA-36 435690 670.30 672.75 2.45 <0.05  <5  0.2    24    83    74    15  399
QTA-36 435691 672.75 674.00 1.25 <0.05  <5  0.6    14    94    38    10  443
QTA-36 435692 674.00 676.00 2.00 <0.05  <5  0.2      9    88    65    11  335
QTA-36 435693 676.00 677.25 1.25 <0.05  <5  0.2      4    90    53    10  348
QTA-36 435694 677.25 678.79 1.54 <0.05  <5  0.7      9    88  169    10  442
QTA-36 435695 678.79 678.86 0.07  0.13  48 41.4  789 1895 1065  405 3530
QTA-36 435696 678.86 679.35 0.49  0.07  19 15.8    55  146 1145    65  740
QTA-36 435697 679.35 679.47 0.12    0.2  52    46  183  574 2040  121 2900
QTA-36 435698 679.47 681.00 1.53 <0.05  <5  0.4      8  119  459    14  433
QTA-36 435699 710.00 711.00 1.00 <0.05  <5      1    20  120  203    16  622
QTA-36 435700 711.00 712.00 1.00 <0.05  <5  4.6    57  267  450    55  764
QTA-36 435701 712.00 713.00 1.00 <0.05  <5  0.6      9    90  203    10  452
QTA-36 435702 729.00 730.00 1.00 <0.05  <5  0.3    11    67  332    15  419
QTA-36 435703 730.00 731.00 1.00 <0.05  <5  0.6    12  122  110    11  407
QTA-36 435704 742.00 743.00 1.00 <0.05  <5  1.5    16    84  426    16  521
QTA-36 435705 756.03 756.13 0.10 <0.05 174 >100 2000  964 1360 2820 3290
QTA-36 435706 756.13 758.00 1.87 <0.05      7  5.8  388  454  636  138  577
QTA-36 435707 758.00 760.00 2.00 <0.05  <5  0.6    11    39  391    13  690
QTA-36 435708 760.00 762.00 2.00 <0.05  <5  1.5      4    80  261    13  505
QTA-36 435709 762.00 763.00 1.00  0.07  29 34.1  133  124  531  131  967
QTA-36 435710 763.00 764.33 1.33  0.14  19 21.5  323  829 1565  428 2530
QTA-36 435711 764.33 766.00 1.67 <0.05  <5  0.5    15  110  105    12  508
QTA-36 435712 766.00 768.00 2.00  0.19      5    12 1715 2520 2300  853  897
QTA-36 435713 768.00 770.00 2.00 <0.05  <5  0.6    19  126    64    23  344
QTA-36 435714 770.00 772.00 2.00 <0.05  <5  0.3    13    94    56    40  308
QTA-36 435715 772.00 774.00 2.00 <0.05  <5  0.3    14  112    69    15  389
QTA-36 435716 776.30 778.00 1.70  0.07  <5  0.6    22  120  555    19  815
QTA-36 435717 778.00 778.35 0.35 <0.05  <5  0.9    21    97  254    16  653
QTA-36 435718 778.35 780.00 1.65 <0.05  <5  0.5      6    72  139    10  506
QTA-36 435719 780.00 781.20 1.20 <0.05  <5  0.3      3    24    76      5  481
QTA-36 435720 781.20 781.95 0.75 <0.05  <5  0.5      9    77  158    11  608
QTA-36 435721 781.95 784.00 2.05 <0.05  <5  0.7      8  276  321      8  501
QTA-36 435722 784.00 784.50 0.50 <0.05  <5  0.4      7    40  345    19  651
QTA-36 435723 784.50 784.70 0.20 <0.05  <5 <0.2    <2    52    96      6  425
QTA-36 435724 784.70 786.00 1.30 <0.05  <5  0.3      5    71  138      8  472
QTA-36 435725 786.00 786.60 0.60 <0.05  <5  0.7    11    77  304    23  561
QTA-36 435726 786.60 787.30 0.70 <0.05  <5  1.4    10  121  463    27  765
QTA-36 435727 787.30 788.00 0.70 <0.05  <5  3.2    13  466  371    37 1420
QTA-36 435728 788.00 790.00 2.00 <0.05  <5  1.7    10    76  183    20  569

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 55 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-36 435729 790.00 791.00 1.00 <0.05  <5  0.2          4      54          43    13 416
QTA-36 435730 812.50 814.00 1.50 <0.05  12 16.3    263    152      913  395 648
QTA-36 435731 814.00 816.00 2.00 <0.05  <5  2.8    144      82      611    54 771
QTA-36 435732 816.00 818.00 2.00 <0.05  <5  4.4    106    148    2210    49 621
QTA-36 435733 818.00 820.00 2.00 <0.05  <5      5      12      61    6040    72 317
QTA-36 435734 820.00 822.00 2.00 <0.05  <5  0.3          6      46      237    10 501
QTA-36 435735 822.00 824.00 2.00 <0.05  <5  0.6          3      48          90      7 450
QTA-36 435736 824.00 826.00 2.00 <0.05  <5  4.9      45    130    1395    32 525
QTA-36 435737 826.00 828.00 2.00 <0.05  <5  1.9          6      49    4000    46 426
QTA-36 435738 830.00 832.00 2.00 <0.05      9  6.1      71      75      327    36 482
QTA-36 435739 832.00 834.00 2.00 <0.05  <5 <0.2          5      43      101      6 549
QTA-36 435740 834.00 836.00 2.00 <0.05  <5  0.5          5      98      143      8 526
QTA-36 435741 836.00 838.00 2.00 <0.05      7  2.8      16    180      343    14 646
QTA-36 435742 838.00 840.00 2.00 <0.05  <5  0.4          7    110      206    10 465
QTA-36 435743 840.00 842.00 2.00 <0.05  <5  0.3      13      97      119    18 421
QTA-36 435744 842.00 844.00 2.00 <0.05  <5 <0.2      11    103          81    42 394
QTA-36 435745 844.00 846.00 2.00 <0.05  <5 <0.2      13    100          87    19 421
QTA-36 435746 846.00 848.00 2.00 <0.05      5  1.2      77    116      279    16 535
QTA-36 435747 848.00 850.00 2.00 <0.05      6  0.6          7    116      329    11 502
QTA-36 435748 850.00 850.46 0.46 <0.05      5  0.4          4      41      309    43 590
QTA-36 435749 850.46 851.15 0.69 <0.05      5  5.7      69    126      816    26 549
QTA-36 435750 851.15 851.23 0.08 <0.05  31 30.4  6990  2460    1270 2550 667
QTA-36 435751 851.23 851.70 0.47 <0.05  72 71.6  9240 15500    2070 3140 830
QTA-36 435752 851.70 851.90 0.20 <0.05  12      8    974    310    1605  116 659
QTA-36 435753 854.00 855.40 1.40 <0.05  <5  0.8      44    104      262    19 480
QTA-36 435754 855.40 856.00 0.60 <0.05  <5  0.3      21      74      164    13 459
QTA-36 435755 856.00 858.00 2.00 <0.05      6  0.8      45    121      234    17 543
QTA-36 435756 858.00 860.00 2.00 <0.05  <5  0.5      13    126      205    11 532
QTA-36 435757 860.00 862.00 2.00 <0.05  <5  0.4          9      95      149    10 512
QTA-36 435758 862.00 864.00 2.00 <0.05  <5  1.5    186    180    1140    16 480
QTA-36 435759 864.00 866.00 2.00 <0.05      5  0.8    108    159      410    13 489
QTA-36 435760 866.00 868.00 2.00 <0.05      5  1.1      88    157      242      9 475
QTA-36 435761 868.00 870.00 2.00 <0.05      6  1.7    198    283      198      9 467
QTA-36 435762 870.00 872.00 2.00 <0.05      5  3.3    365    379      457    12 460
QTA-36 435763 872.00 874.00 2.00 <0.05      6  3.3    411    195      368    12 469
QTA-36 435764 874.00 876.00 2.00 <0.05  <5  0.6      37      96      127      8 410
QTA-36 435765 876.00 878.05 2.05 <0.05      6  0.7      12      83      215      7 428
QTA-36 435766 878.05 878.20 0.15    0.2 160 >100 15800 13800    6720 1235 654
QTA-36 435767 878.20 878.75 0.55 0.025      5  3.8    233    207      144    15 491
QTA-36 435768 878.75 878.95 0.20 0.025  2.5  3.3    261    369      311    16 533
QTA-36 435769 878.95 882.00 3.05 0.025  2.5  1.2    117    189      136      8 415
QTA-36 435770 882.00 884.00 2.00 0.025  2.5  0.8      31      82      112      7 286
QTA-36 435771 884.00 885.30 1.30 0.025      5  0.9      12    112      190      9 590
QTA-36 435772 885.30 886.24 0.94 0.025  16 13.8    670  1065    2230    36 480
QTA-36 435773 886.24 886.52 0.28  0.13 148 >100 15300  6890 >10000  433 722
QTA-36 435774 886.52 888.00 1.48 0.025      6  2.4      58      70      463    22 519
QTA-36 435775 888.00 890.10 2.10 0.025      7  2.6      40      54      692    17 459
QTA-36 435776 890.10 890.40 0.30 0.025      8      5    232    325      287    30 497
QTA-36 435777 890.40 891.80 1.40 0.025  84 81.1  8030  8200    3400  221 512
QTA-36 435778 891.80 894.00 2.20 <0.05      7  3.8    237    160      172    11 421
QTA-36 435779 894.00 896.00 2.00 <0.05  <5  0.9      19    102      774    10 441
QTA-36 435780 896.00 898.00 2.00 <0.05  <5  0.6          9      91          52    12 438
QTA-36 435781 898.00 900.00 2.00 <0.05  <5  0.6      19    120          57      9 385
QTA-36 435782 900.00 902.00 2.00 <0.05  <5  0.7      18    114          53      3 433
QTA-36 435783 902.00 904.00 2.00 <0.05  <5  0.7      17    112          89      5 451
QTA-36 435784 904.00 906.00 2.00 <0.05  16    14  1335  1615    2630    18 456
QTA-36 435785 906.00 908.00 2.00 <0.05  <5  0.9      18    114          43      4 426
QTA-36 435786 908.00 910.00 2.00 <0.05  <5  0.6      10      91          57      2 412
QTA-36 435787 910.00 912.00 2.00 <0.05  <5  0.8      45    142      218      4 386
QTA-36 435788 912.00 914.00 2.00 <0.05  <5  0.6      10    106          34      7 368
QTA-36 435789 914.00 916.00 2.00 <0.05  <5  0.6      19      68      100      6 461
QTA-36 435790 916.00 918.00 2.00 <0.05  <5  1.2    139    269      469      6 357
QTA-36 435791 918.00 920.00 2.00 <0.05  <5      1      53    283      891      7 375

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 56 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-36 435792 920.00 922.00 2.00  0.07  61 55.2  8350 3270    2510    59  359
QTA-36 435793 922.00 924.00 2.00 <0.05  <5  0.3      21  118          20      6  403
QTA-36 435794 924.00 926.00 2.00 <0.05  <5  0.5      23  112          27      6  378
QTA-36 435795 926.00 928.00 2.00 <0.05  <5  0.6      28  140      188      9  420
QTA-36 435796 928.00 930.00 2.00 <0.05  <5  0.8      29  126      152      8  426
QTA-36 435797 930.00 932.00 2.00 <0.05  <5  1.5      65  118      667    28  429
QTA-36 435798 932.00 934.00 2.00 <0.05  <5  0.7          7  118          55      8  419
QTA-36 435799 934.00 936.00 2.00 <0.05      5  6.2    656  589      223    21  444
QTA-36 435800 936.00 938.00 2.00 <0.05  <5  0.7      29    74      184      8  455
QTA-36 435801 938.00 940.00 2.00 <0.05  <5  0.7          9  112          34      6  441
QTA-36 435802 940.00 942.00 2.00 <0.05  <5      1          9    99    1300    11  478
QTA-36 435803 942.00 944.00 2.00  0.07  22    25  3000 2270 >10000  118  517
QTA-36 435804 944.00 946.00 2.00 <0.05  <5      1      53  157      511    24  535
QTA-36 435805 946.00 948.00 2.00 <0.05  <5  1.8    102  104      144      9  456
QTA-36 435806 948.00 950.00 2.00 <0.05  <5  0.9      27    89      526    13  466
QTA-36 435807 950.00 952.00 2.00 <0.05  <5  1.1      40  128      302    23  437
QTA-36 435808 952.00 954.15 2.15 <0.05  <5  1.1      19  114      227    15  487
QTA-36 435809 954.15 956.00 1.85 <0.05      7  7.2      35  156      207    26  356
QTA-36 435810 956.00 958.00 2.00 <0.05  <5  1.7    157  154      413    25  384
QTA-36 435811 958.00 959.10 1.10 <0.05  <5  1.4    122  108      321    32  416
QTA-36 435812 959.10 959.20 0.10  0.26 175 >100 16200 7850 >10000 4940 1100
QTA-36 435813 959.20 960.00 0.80 <0.05  14 14.2      99  113    2890    75  484
QTA-36 435814 960.00 962.00 2.00 <0.05      6  2.6      38  110      650    29  490
QTA-36 435815 962.00 964.00 2.00 <0.05  13 16.2      41  146    2950    44  430
QTA-36 435816 964.00 966.00 2.00 <0.05      7 12.1    221  162    1305  111  431
QTA-36 435817 966.00 968.00 2.00 <0.05  <5  1.3      18  118      590    13  403
QTA-36 435818 968.00 970.00 2.00 <0.05  <5  1.8      34  128      522    20  419
QTA-36 435819 970.00 972.00 2.00 <0.05  <5  0.9      27  126      536    12  412
QTA-36 435820 972.00 974.00 2.00  2.86  <5  0.7      20  122          83      7  406
QTA-36 435821 974.00 976.00 2.00 <0.05  <5  0.7      10  114      147    14  407
QTA-36 435822 976.00 978.00 2.00 <0.05      6  1.7      21  128      218    21  477
QTA-37 435824 23.00 24.00 1.00 <0.05  <5 <0.2      17    84          19    <2  458
QTA-37 435825 24.00 26.00 2.00 <0.05  <5  0.2      14    89          30    <2  346
QTA-37 435826 26.00 27.70 1.70 <0.05  <5  0.3      18  117          33    <2  382
QTA-37 435827 27.70 29.00 1.30 <0.05  <5  0.5      21    86      342      6  745
QTA-37 435828 29.00 30.00 1.00 <0.05  <5  0.3      18  102          22    <2  377
QTA-37 435835 30.00 31.21 1.21 <0.05  <5 <0.2      20  115          20    <2  314
QTA-37 435836 38.04 40.00 1.96 <0.05  <5  0.2      15    91          59    <2  419
QTA-37 435829 40.00 40.75 0.75 <0.05  <5  0.3      19  103      178      4  417
QTA-37 435830 40.75 42.00 1.25 <0.05  <5  0.5      18    83    1140    15  912
QTA-37 435831 42.00 43.00 1.00 <0.05  <5  0.5      19    97      373      2  577
QTA-37 435837 43.00 44.98 1.98 <0.05  <5  0.2      18  124          25    <2  331
QTA-37 435838 49.54 51.00 1.46 <0.05  <5  0.2      20  112          16    <2  343
QTA-37 435832 51.00 52.00 1.00 <0.05  <5 <0.2      21  124          18    <2  311
QTA-37 435833 52.00 53.00 1.00 <0.05  <5 <0.2      13    81          12    <2  448
QTA-37 435834 53.00 54.00 1.00 <0.05  <5  0.2              26    <2  433
QTA-37 435839 78.00 80.00 2.00 <0.05  <5  0.2      15    87          37    <2  360
QTA-37 435840 80.00 81.40 1.40 <0.05  <5  0.2      12    72      124      5  437
QTA-37 435841 81.40 82.50 1.10 <0.05  <5  0.5      18  116          75      2  427
QTA-37 435842 82.50 83.00 0.50 <0.05  <5  0.5      20    78      207      2  538
QTA-37 435843 83.00 84.85 1.85 <0.05  <5  0.2      16    77          47      2  602
QTA-37 435844 84.85 87.70 2.85 <0.05  <5  0.6      18    97      136      4  474
QTA-37 435845 87.70 88.70 1.00 <0.05  <5  1.6    538  149    1245      8 1270
QTA-37 435846 88.70 90.00 1.30 <0.05  <5 <0.2      12    69          37    <2  694
QTA-37 435847 90.00 92.00 2.00 <0.05  <5  0.2      15    95          26      3  356
QTA-37 435848 92.00 94.00 2.00 <0.05  <5  0.3      15  103          23      2  391
QTA-37 435849 94.00 96.00 2.00 <0.05  <5  0.2      16    97          35      6  400
QTA-37 435850 96.00 97.50 1.50 <0.05  <5 <0.2      12    86          41      5  528
QTA-37 435851 97.50 98.20 0.70 <0.05  <5 <0.2      15    83          24    <2  699
QTA-37 435852 98.20 99.85 1.65 <0.05  <5  0.2      19  126          26    <2  322
QTA-37 435853 156.80 157.20 0.40 <0.05  <5 <0.2      15    98          38      2  565
QTA-37 435854 168.00 170.00 2.00 <0.05  <5  0.2      17    81          38      2  697
QTA-37 435855 170.00 172.00 2.00 <0.05  <5 <0.2          8    58          40      3  424

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 57 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-37 435856 172.00 174.00 2.00 <0.05  <5  0.2    15    80    74      3  442
QTA-37 435857 174.00 176.60 2.60 <0.05  <5  0.3    17    58  118      6  509
QTA-37 435858 176.60 177.00 0.40 <0.05  <5  1.6    16    56  261      7  554
QTA-37 435859 177.00 178.00 1.00 <0.05  <5  2.1    15    56  271      8  342
QTA-37 435860 178.00 180.00 2.00 <0.05  <5  1.2    15    64  181      8  450
QTA-37 435861 180.00 182.00 2.00 <0.05  <5  0.5    12    57  203    10  456
QTA-37 435862 182.00 184.00 2.00 <0.05  <5  1.5    14    55  532    43  435
QTA-37 435863 184.00 186.25 2.25 <0.05      7  8.7    87 199  275    15  581
QTA-37 435864 186.25 188.45 2.20 <0.05      6 10.4 168 148  477    23  789
QTA-37 435865 188.45 190.50 2.05 <0.05      6      5    22 102  431    12  418
QTA-37 435866 203.60 204.20 0.60 <0.05  <5 <0.2    14    64    44    <2  573
QTA-37 435867 223.00 225.00 2.00 <0.05  <5 <0.2    10    50    20    <2  449
QTA-37 435868 225.00 227.00 2.00 <0.05  <5  0.2      8    54    24    <2  444
QTA-37 435869 227.00 229.00 2.00 <0.05  <5 <0.2    10    72    15    <2  369
QTA-37 435870 249.30 252.07 2.77 <0.05  <5 <0.2    10    62    42    <2  646
QTA-37 435871 262.00 264.40 2.40 <0.05  <5 <0.2    11    54    22      2  551
QTA-37 435872 264.40 266.70 2.30 <0.05  <5  0.3    17    96    70      4  334
QTA-37 435873 266.70 266.95 0.25 <0.05  <5 <0.2    23    80  129      6  440
QTA-37 435874 266.95 268.00 1.05 <0.05  <5 <0.2      9    68    26      3  629
QTA-37 435875 289.25 289.40 0.15 <0.05  <5 <0.2    15 106  182      6  523
QTA-37 435876 297.50 299.20 1.70 <0.05  <5  0.8    26 100  287      9 1065
QTA-37 435877 299.20 300.00 0.80 <0.05  <5  0.8    15    64  285    18  454
QTA-37 435878 300.00 302.00 2.00 <0.05  <5  0.2    12    67  268    20  764
QTA-37 435879 302.00 304.00 2.00 <0.05  <5  0.2    12    87  103      9  605
QTA-37 435880 304.00 306.00 2.00 <0.05  <5  0.2    11    60  148    10  516
QTA-37 435881 306.00 308.00 2.00 <0.05      7  0.5    15    81  273      8  751
QTA-37 435882 308.00 310.00 2.00 <0.05  <5  0.6    14    74  267    10  954
QTA-37 435883 310.00 312.00 2.00 <0.05  <5  0.7    11    69  206      7  576
QTA-37 435884 312.00 314.00 2.00 <0.05  <5  0.6    10    58  101      8  501
QTA-37 435885 314.00 316.00 2.00 <0.05  <5  0.4    10    58    63      8  488
QTA-37 435886 316.00 318.00 2.00 <0.05  <5 <0.2      9    49  125    34  298
QTA-37 435887 318.00 320.00 2.00 <0.05  <5 <0.2      9    53  147    22  381
QTA-37 435888 320.00 322.00 2.00 <0.05  <5 <0.2    11    60    23      7  312
QTA-37 435889 322.00 324.00 2.00 <0.05  <5  0.2    12    73    53    23  421
QTA-37 435890 333.70 335.50 1.80 <0.05  <5  0.2    17    59    34    14  507
QTA-37 435891 335.50 336.00 0.50 <0.05  <5 <0.2      6    50    41      3  374
QTA-37 435892 336.00 338.00 2.00 <0.05  <5 <0.2    11    67    65      6  436
QTA-37 435893 338.00 338.50 0.50 <0.05  <5 <0.2    14    53  188      7  793
QTA-37 435894 347.00 348.00 1.00 <0.05  <5  0.6    14    77  180      9  642
QTA-37 435895 354.70 356.30 1.60 <0.05  <5  0.3    16 104  232    17  395
QTA-37 435896 368.50 371.20 2.70 <0.05  <5  0.4    20 120  112    16  405
QTA-37 435897 371.20 373.00 1.80 <0.05  <5  5.4    30 132  231    24  618
QTA-37 435898 373.00 374.00 1.00 <0.05  <5  1.9    15    74  210    12  512
QTA-37 435899 374.00 376.00 2.00 <0.05  <5  0.7      8    61  241      6  671
QTA-37 435900 376.00 377.85 1.85 <0.05      5      8 546    70  423 102  665
QTA-37 435901 414.00 416.00 2.00 <0.05  <5  0.3    13    67    80    11  417
QTA-37 435902 416.00 418.00 2.00 <0.05  <5 <0.2    10    67    88    37  434
QTA-37 435903 418.00 420.00 2.00 <0.05  <5  0.6    10    74  128    54  495
QTA-37 435904 420.00 422.00 2.00 <0.05  <5  0.3    11    89  122    13  493
QTA-37 435905 422.00 424.00 2.00 <0.05  <5  0.2      8    66    81      5  398
QTA-37 435906 424.00 426.00 2.00 <0.05  <5  0.2    11    60    32      6  376
QTA-37 435907 440.00 442.00 2.00 <0.05  <5  0.2      6    68    50    13  262
QTA-37 435908 442.00 444.00 2.00 <0.05  <5      1    32 122  198    28  416
QTA-37 435909 444.00 446.00 2.00 <0.05  <5  0.2      9    69  116    14  380
QTA-37 435910 446.00 448.00 2.00 <0.05  <5  0.4    13    39  170    19  278
QTA-37 435911 448.00 450.00 2.00 <0.05  <5  0.6    20    52 1250    37  234
QTA-37 435912 450.00 452.00 2.00 <0.05  <5  0.4      9    34    58    34  213
QTA-37 435913 452.00 454.00 2.00 <0.05  <5  2.7    35 100  465    36  145
QTA-37 435914 454.00 456.00 2.00 <0.05  <5  0.8      9    43  343    29  178
QTA-37 435915 456.00 458.00 2.00 <0.05  <5  0.6    34 149  121    29  271
QTA-37 435916 458.00 460.45 2.45 <0.05  <5  0.3    17    29  118    22  210
QTA-37 435917 460.45 461.50 1.05 <0.05  <5  1.8 511 855 1345 465  286
QTA-37 435918 461.50 462.28 0.78 <0.05  <5  3.6 553 186 2920 501  425

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 58 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-37 435919 462.28 462.85 0.57  0.77  90 83.9 >10000  4410 >10000 >10000 808
QTA-37 435920 462.85 463.90 1.05 <0.05  <5  5.5    1145    663    4220    1080 641
QTA-37 435921 463.90 465.33 1.43 <0.05  <5  5.2      211      91    3930      294 278
QTA-37 435922 465.33 465.83 0.50 <0.05  10 14.7      787    901    4510      882 303
QTA-37 435923 465.83 466.10 0.27 <0.05      7  4.4          85      54    2540      184 174
QTA-37 435924 466.10 467.80 1.70 <0.05  97 >100    1765  3110    1470    1490 168
QTA-37 435925 467.80 468.10 0.30 <0.05  89 >100    8550 39400    7800    7620 273
QTA-37 435926 468.10 470.00 1.90 <0.05 115 >100    2610  3680    1110    2330 166
QTA-37 435927 470.00 470.30 0.30 <0.05 151 >100    3660  4890    1325    3260 141
QTA-37 435928 470.30 472.00 1.70 <0.05  94 99.6    1025  4310    1225      902 166
QTA-37 435929 472.00 474.00 2.00 <0.05  <5  2.9      184      95      850      175 201
QTA-37 435930 474.00 476.00 2.00 <0.05  10 10.7      230    620    1350      281 255
QTA-37 435931 476.00 478.00 2.00 <0.05  <5  0.4          13      56      156          46 355
QTA-37 435932 478.00 480.00 2.00 <0.05  <5  0.4            7      31      327          26 398
QTA-37 435933 480.00 482.00 2.00 <0.05  <5  0.2            6      29      174          27 465
QTA-37 435934 482.00 484.00 2.00 <0.05  <5  2.3          24      88      361          48 432
QTA-37 435935 484.00 486.00 2.00 <0.05  <5  0.3          71    363      297          94 337
QTA-37 435936 486.00 488.00 2.00 <0.05  <5  0.2          17      69      212          21 275
QTA-37 435937 488.00 490.00 2.00 <0.05  <5  0.8          39      22      657          63 268
QTA-37 435938 490.00 492.00 2.00 <0.05  10      9      142    239    1860      221 250
QTA-37 435939 492.00 494.00 2.00 <0.05  <5      2      467    538    1010      338 156
QTA-37 435940 494.00 495.55 1.55 <0.05  <5  2.6          55    108      707          84 104
QTA-37 435941 495.55 495.95 0.40 <0.05  12    11          40      52    2590      180    90
QTA-37 435942 495.95 497.50 1.55 <0.05  <5  0.4          13      16    1115          75 228
QTA-37 435943 497.50 498.00 0.50 <0.05  <5  0.4            8      16    1310          87 255
QTA-37 435944 498.00 500.00 2.00 <0.05  <5  0.3          19      54      421          48 271
QTA-37 435945 500.00 502.00 2.00 <0.05  <5  0.3            5      11      327          38 127
QTA-37 435946 502.00 504.00 2.00 <0.05  <5  0.4          54      47      272          67 118
QTA-37 435947 504.00 506.00 2.00 <0.05  <5 <0.2            4      13      110          33 118
QTA-37 435948 506.00 508.00 2.00 <0.05  <5 <0.2            6      10      260          37 245
QTA-37 435949 508.00 510.00 2.00 <0.05  <5  0.2            5      17      694          22 192
QTA-37 435950 510.00 512.00 2.00 <0.05  <5  0.9          15      32    1110          38 103
QTA-37 435951 512.00 514.00 2.00 <0.05  <5  0.4          11      23      157          24 112
QTA-37 435952 514.00 515.11 1.11 <0.05  <5  0.4          11      23      230          33 111
QTA-37 435953 515.11 515.23 0.12 <0.05      5  6.4    1935    855    4030    2020 535
QTA-37 435954 515.23 515.50 0.27 <0.05  <5  1.8      554      83      589      497 146
QTA-37 435955 515.50 515.60 0.10 <0.05  <5  1.8          21      41      955      130    99
QTA-37 435956 515.60 516.00 0.40 <0.05  <5  0.2            7  3430      894          35 148
QTA-37 435957 516.00 518.00 2.00 <0.05  <5  0.7      608    407      669      114 187
QTA-37 435958 518.00 520.00 2.00 <0.05  <5  0.7          69    190      588          59 171
QTA-37 435959 520.00 522.00 2.00 <0.05  <5  0.6          60    106      547          50 114
QTA-37 435960 522.00 524.00 2.00 <0.05  <5  1.1      185  1790      536      113 136
QTA-37 435961 524.00 526.00 2.00 <0.05  <5  0.5          18    964      322          40 332
QTA-37 435962 526.00 528.00 2.00 <0.05  <5  0.2          10      62      112          19 176
QTA-37 435963 528.00 530.00 2.00 <0.05  <5  0.3          16    148          58          15 194
QTA-37 435964 530.00 532.00 2.00 <0.05  <5  0.3          13    123      132          14 311
QTA-37 435965 532.00 534.00 2.00 <0.05  <5  0.3          14    228      160          30 262
QTA-37 435966 534.00 536.00 2.00 <0.05  <5 <0.2          13    126          67          14 217
QTA-37 435967 536.00 538.00 2.00 <0.05  <5  0.2            9      28          17          16 190
QTA-37 435968 538.00 540.00 2.00 <0.05  <5  0.2            6      38          18          12 305
QTA-37 435969 540.00 542.00 2.00 <0.05  <5  0.2            9      45          44          14 216
QTA-37 435970 542.00 544.00 2.00 <0.05  <5  0.2          14      18          30          13 127
QTA-37 435971 544.00 546.00 2.00 <0.05  <5  0.3          12      29          51          16 209
QTA-37 435972 546.00 548.00 2.00 <0.05  <5  0.2          11      35          96          24 170
QTA-37 435973 548.00 550.00 2.00 <0.05  <5  0.5          10      29      233          40 159
QTA-37 435974 550.00 552.00 2.00 <0.05  <5  0.2            6      14          68          24 217
QTA-37 435975 552.00 554.00 2.00 <0.05  <5 <0.2            9      22          90          27 156
QTA-37 435976 554.00 556.00 2.00 <0.05  <5  0.4          10      18      200          48 162
QTA-37 435977 556.00 558.00 2.00 <0.05  <5  0.3            8      28      317          41 162
QTA-37 435978 558.00 560.00 2.00 <0.05  <5  0.3          28      76      555          68 108
QTA-37 435979 560.00 562.00 2.00 <0.05      7  9.6    3650      57    1355    2630 140
QTA-37 435980 562.00 562.60 0.60 <0.05  <5  0.4          19          8    1165          80 151
QTA-37 435981 562.60 562.70 0.10 <0.05  16 21.1 >10000  6600    2780    3460 465

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 59 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-37 435982 562.70 564.00 1.30 <0.05  <5  0.3    43    59      801  115 267
QTA-37 435983 564.00 566.00 2.00 <0.05  <5  0.4    50  114    1655    90 243
QTA-37 435984 566.00 568.00 2.00 <0.05  <5  1.6    14  295    1835    48 156
QTA-37 435985 568.00 569.20 1.20 <0.05  <5  0.5    30    22      304    76 158
QTA-37 435986 569.20 569.40 0.20 <0.05  <5  0.5    23    66    1510  331    39
QTA-37 435987 569.40 570.00 0.60 <0.05  <5  0.2    10    29      122    39    88
QTA-37 435988 570.00 572.00 2.00 <0.05  <5  0.3    11    21      163    46 188
QTA-37 435989 572.00 574.00 2.00 <0.05      5 <0.2      2    29          46    22 604
QTA-37 435990 574.00 576.00 2.00 <0.05  <5 <0.2      5    32          99    58 310
QTA-37 435991 576.00 578.00 2.00 <0.05  <5  0.2      8    42      210    32 164
QTA-37 435992 578.00 580.00 2.00 <0.05  <5  0.4      7    28      280    23 148
QTA-37 435993 580.00 580.70 0.70 <0.05  <5  0.2      6    26      184    25 339
QTA-37 435994 580.70 582.00 1.30 <0.05  <5 <0.2      4    19      352    36 223
QTA-37 435995 582.00 584.00 2.00 <0.05  <5 <0.2      7    15      621    99    89
QTA-37 435996 584.00 586.00 2.00 <0.05      5  0.2      6    25      279    62 106
QTA-37 435997 586.00 588.00 2.00 <0.05  <5  0.2      8    23          78    18 276
QTA-37 435998 588.00 588.30 0.30 <0.05  <5 <0.2      3    25      198    23 223
QTA-37 435999 588.30 590.00 1.70 <0.05  <5  0.2      8    28      219    31 140
QTA-37 436000 590.00 592.10 2.10 <0.05      7  0.2    11    54      142    33 166
QTA-37 601501 592.10 592.25 0.15 <0.05  12  0.5      9  102    9120 1145    22
QTA-37 601502 592.25 592.35 0.10 <0.05  <5  0.5      7    17    9510 1200    14
QTA-37 601503 592.35 594.00 1.65 <0.05  <5  0.2      4    15    1775  209    36
QTA-37 601504 594.00 596.00 2.00 <0.05  <5  0.2      5    14      419    79    98
QTA-37 601505 596.00 598.00 2.00 <0.05  <5  0.2      4    23      267    30 144
QTA-37 601506 598.00 600.00 2.00 <0.05  <5  0.2      6    20      937  148    97
QTA-37 601507 600.00 602.00 2.00 <0.05  <5  0.3      8    58    1145    95 109
QTA-37 601508 602.00 604.00 2.00 <0.05  <5  0.2      6    90      426    78 156
QTA-37 601509 604.00 606.00 2.00 <0.05  <5  1.2    13    48      917  178    88
QTA-37 601510 606.00 608.00 2.00 <0.05  <5  0.3    10    12      882  173 153
QTA-37 601511 608.00 610.00 2.00 <0.05  <5  0.6      9    19    1130  146 103
QTA-37 601512 610.00 612.00 2.00 <0.05  <5  0.2      2    16      251    16    74
QTA-37 601513 612.00 612.20 0.20 <0.05  <5  0.7      4    34      392    18    59
QTA-37 601514 612.20 612.40 0.20 <0.05  <5  0.5 251  257 >10000  213 509
QTA-37 601515 612.40 614.00 1.60 <0.05  <5  0.3    14    15      570    44 210
QTA-37 601516 614.00 616.00 2.00 <0.05  <5  0.4      9    13      349    47 124
QTA-37 601517 616.00 618.00 2.00 <0.05  <5  0.4    12    34      649    48    80
QTA-37 601518 618.00 620.00 2.00 <0.05  <5  0.3      8    15      156    42    85
QTA-37 601519 620.00 622.00 2.00 <0.05  <5  0.3      9    16      114    19 181
QTA-37 601520 622.00 624.00 2.00 <0.05  <5  0.4    10    19          70    16 170
QTA-37 601521 624.00 626.00 2.00 <0.05  <5  0.3      8    29          43    13 202
QTA-37 601522 626.00 628.00 2.00 <0.05  <5  0.4    12    52      188    23 242
QTA-37 601523 628.00 630.00 2.00 <0.05  <5  0.3    13    12      184    19 102
QTA-37 601524 630.00 632.00 2.00 <0.05  <5  0.9 172 5940    4740    88 214
QTA-37 601525 632.00 634.00 2.00 <0.05  <5  2.9    18  274      995    24 161
QTA-37 601526 634.00 636.00 2.00 <0.05  <5 <0.2 187    29          96  152 353
QTA-37 601527 636.00 638.00 2.00 <0.05  <5  0.2      6    27          59    27 189
QTA-37 601528 638.00 640.00 2.00 <0.05  <5 <0.2      9    95          74    14 261
QTA-37 601529 640.00 642.00 2.00 <0.05  <5 <0.2      4    35          25      6 295
QTA-37 601530 642.00 644.00 2.00 <0.05  <5  0.2      9    28          14    14 221
QTA-37 601531 644.00 646.00 2.00 <0.05  <5 <0.2      3    20          19      7 344
QTA-37 601532 646.00 648.00 2.00 <0.05  <5  0.2      9    32          18      6 271
QTA-37 601533 648.00 650.00 2.00 <0.05  <5  0.2      7    16          61    12 195
QTA-37 601534 650.00 652.00 2.00 <0.05  <5 <0.2      2    21          16    10 384
QTA-37 601535 652.00 654.00 2.00 <0.05  <5 <0.2    39    17          69    24 230
QTA-37 601536 654.00 656.00 2.00 <0.05  <5 <0.2    10    19          56      7 170
QTA-37 601537 656.00 658.00 2.00 <0.05  <5  0.2    10    30          86    13 183
QTA-37 601538 658.00 660.00 2.00 <0.05  <5 <0.2    13    14      177    19 158
QTA-37 601539 660.00 662.00 2.00 <0.05  <5      1    29  138      700    41 154
QTA-37 601540 662.00 664.00 2.00 <0.05  <5  0.4      6    12      186    21 208
QTA-37 601541 664.00 666.00 2.00 <0.05  <5  0.2      5    13      292    65 251
QTA-37 601542 666.00 666.60 0.60 <0.05  <5  0.6      8    24    1320    30 183
QTA-37 601543 666.60 666.90 0.30  0.14  <5      1 433    22 >10000  284 239
QTA-37 601544 666.90 669.00 2.10  0.11  <5  1.2    16    37    1650    62 207

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 60 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-37 601545 669.00 670.00 1.00 <0.05  <5  0.3      9          21      427    37  247
QTA-37 601546 670.00 672.00 2.00 <0.05  <5  0.3      9          43      112    23  264
QTA-37 601547 672.00 674.00 2.00 <0.05  <5  0.3    21      160    1100    54  302
QTA-37 601548 674.00 676.00 2.00 <0.05  <5  0.4    11          65      110    21  182
QTA-37 601549 676.00 678.00 2.00 <0.05  <5 <0.2      9          56      217    32  224
QTA-37 601550 678.00 679.80 1.80 <0.05  <5 <0.2      4          47      192    36  329
QTA-37 601551 679.80 679.97 0.17 <0.05  <5 <0.2      4          56      458    86  334
QTA-37 601552 679.97 681.30 1.33 <0.05  <5  0.2      5          51          97    15  340
QTA-37 601553 681.30 681.50 0.20 <0.05  <5  0.2      3          27          15      3  269
QTA-37 601554 681.50 682.00 0.50 <0.05  <5 <0.2      3          10      312      6    66
QTA-37 601555 682.00 684.00 2.00 <0.05  <5  0.2      6          16          54      8  148
QTA-37 601556 684.00 686.00 2.00 <0.05  <5  0.5    14          37      186    20  262
QTA-37 601557 686.00 686.90 0.90 <0.05  <5  0.9    23          81      657    29  335
QTA-37 601558 686.90 687.46 0.56  0.18      5  1.5    33          76    2730    85  684
QTA-37 601559 687.46 688.00 0.54 <0.05  <5  0.9    18          89      227    18  468
QTA-37 601560 688.00 690.00 2.00 <0.05  <5  0.9    15          27      354    24  382
QTA-37 601561 690.00 692.00 2.00 <0.05  <5  1.4    32      102    2580    54  529
QTA-37 601562 692.00 694.00 2.00 <0.05  <5 <0.2      5          50          36    13  386
QTA-37 601563 694.00 696.00 2.00 <0.05  <5  0.2      4          64          39    11  341
QTA-37 601564 696.00 698.00 2.00 <0.05  <5 <0.2      7          80          35    17  373
QTA-37 601565 698.00 700.00 2.00 <0.05  <5 <0.2      9          60          32    13  289
QTA-37 601566 700.00 702.00 2.00  0.07  <5  0.2      9          81          73    18  301
QTA-37 601567 702.00 704.00 2.00 <0.05  <5 <0.2      5          53          28      8  222
QTA-37 601568 704.00 706.00 2.00 <0.05  <5  0.2      4      101          36    14  336
QTA-37 601569 706.00 708.00 2.00 <0.05  <5  0.2      3          74          51      9  386
QTA-37 601570 708.00 710.00 2.00 <0.05  <5  0.2      6          50      542    17  347
QTA-37 601571 710.00 712.00 2.00 <0.05  <5 <0.2      4          59          36      6  348
QTA-37 601572 712.00 714.00 2.00 <0.05  <5  0.3    14          34      108    25  247
QTA-37 601573 714.00 714.40 0.40 <0.05  <5  0.2      6          90          64      8  343
QTA-37 601574 714.40 715.25 0.85 <0.05  <5 <0.2      5          53          39      4  342
QTA-37 601575 715.25 716.00 0.75 <0.05  <5 <0.2      5          54          39      5  360
QTA-37 601576 716.00 718.00 2.00 <0.05  <5  0.2      4          60          46    10  426
QTA-37 601577 718.00 718.48 0.48  0.31  <5  1.1      6          50    2320    40  440
QTA-37 601578 718.48 719.15 0.67 <0.05      6  3.8  702      129    2100    96  481
QTA-37 601579 719.15 719.30 0.15  0.32  20 21.5 7230 >10000 >10000  790  883
QTA-37 601580 719.30 719.40 0.10  0.07      5  4.7 2550    5830    2610  451  344
QTA-37 601581 719.40 720.00 0.60 <0.05  <5  0.8    40          68      930    21  447
QTA-37 601582 720.00 722.00 2.00 <0.05  <5  0.9    22          30      111    13  441
QTA-37 601583 722.00 724.00 2.00 <0.05  <5  0.6  164      281      331    31  408
QTA-37 601584 724.00 726.00 2.00 <0.05  <5  0.2    38      135          58    15  388
QTA-37 601585 726.00 728.00 2.00 <0.05  <5 <0.2      7          64          42      8  476
QTA-37 601586 728.00 730.44 2.44 <0.05  <5  0.2      6          48      224    26  607
QTA-37 601591 733.34 734.90 1.56 <0.05      6  0.2      8          31          68    10  357
QTA-37 601587 734.90 736.25 1.35 <0.05  <5 <0.2    12          38      110      9  265
QTA-37 601588 765.91 767.05 1.14  0.15  <5 <0.2      5          44          38      3  492
QTA-37 601589 769.05 769.20 0.15 <0.05  <5 <0.2      3          28          44      2  473
QTA-37 601590 788.00 788.20 0.20 <0.05      8  0.4      7          33    1040    27  561
QTA-38 601592 32.10 32.50 0.40 <0.05  <5  0.3      5          27      751  154  689
QTA-38 601593 32.50 32.70 0.20    0.1  <5  0.7      7          68    1380  240 1300
QTA-38 601594 32.70 32.95 0.25  0.63  <5  4.5    10      111    7440 1750 2900
QTA-38 601595 32.95 34.70 1.75 <0.05  <5  0.5    13          89      695    54  821
QTA-38 601596 34.70 35.80 1.10 <0.05  <5 <0.2    11          83          63    21  567
QTA-38 601597 35.80 38.00 2.20 <0.05  <5  0.2    18      116      162    18  476
QTA-38 601598 38.00 40.00 2.00 <0.05  <5  0.2    24      118      132    17  410
QTA-38 601599 40.00 42.00 2.00 <0.05  <5  0.2    19      119          52    19  417
QTA-38 601600 42.00 44.00 2.00 <0.05  <5  0.2    18      124      141    26  344
QTA-38 601601 44.00 46.00 2.00 <0.05  <5 <0.2    13      112          44    25  349
QTA-38 601602 46.00 48.00 2.00 <0.05  <5  0.2    10          92          35    15  340
QTA-38 601603 48.00 50.00 2.00 <0.05  <5  0.3    11          83          34    18  451
QTA-38 601604 50.00 52.00 2.00 <0.05  <5 <0.2    15      111          23    25  415
QTA-38 601605 52.00 54.00 2.00 <0.05  <5  0.2    15      110          15    26  486
QTA-38 601606 54.00 56.00 2.00 <0.05  <5 <0.2    17      109          20    29  496
QTA-38 601607 56.00 58.00 2.00 <0.05  <5  0.2    12      108      130    35  474

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 61 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-38 601608 58.00 58.60 0.60 <0.05  <5  0.4    10          92      136          19 1110
QTA-38 601609 58.60 58.85 0.25  0.31  15 13.8    94      184    3050      112 2180
QTA-38 601610 58.85 60.80 1.95 <0.05  <5  0.3    14      116      445          36  662
QTA-38 601611 60.80 61.00 0.20  0.42  <5  7.7    26      124 >10000      152 1735
QTA-38 601612 61.00 63.00 2.00 <0.05  <5  0.6    15      106      137          20  660
QTA-38 601613 63.00 63.20 0.20  0.07  <5  0.7    14      124      721          78 1420
QTA-38 601614 63.20 64.00 0.80  0.13  <5  1.3    16      118    1555          36  933
QTA-38 601615 101.40 101.55 0.15  1.02  53 51.1  372    2140    4300      973 6670
QTA-38 601616 101.55 101.65 0.10    0.1  16 17.6    14      173    3540          72  793
QTA-38 601617 101.65 101.80 0.15  0.09      9  3.5    16          56      667          43 2550
QTA-38 601618 101.80 103.00 1.20 <0.05  <5  0.2    11      144          58          21  634
QTA-38 601619 103.00 104.20 1.20 <0.05      5  0.2    14      120          45          19  613
QTA-38 601620 104.20 104.25 0.05 <0.05      5  0.2      9          63          25          15  977
QTA-38 601621 104.25 106.00 1.75    0.1  <5  0.8    18      101          66          20  750
QTA-38 601622 106.00 106.15 0.15  0.07      5  6.9      9          89      203          22  892
QTA-38 601623 106.15 106.20 0.05  0.39  48 43.4  196 >10000      277 >10000 2390
QTA-38 601624 106.20 108.00 1.80  0.07      6  2.3    19      162      640      198 1045
QTA-38 601625 108.00 110.00 2.00 <0.05  <5  0.2    14      130          99          66  564
QTA-38 601626 110.00 112.00 2.00 <0.05  <5 <0.2    12      105          34          25  476
QTA-38 601627 112.00 114.00 2.00 <0.05  <5  0.2    14      107          29          24  484
QTA-38 601628 114.00 116.00 2.00 <0.05  <5  0.3    12      107          37          19  502
QTA-38 601629 116.00 117.60 1.60 <0.05      9 <0.2    14      120          34          19  391
QTA-38 601630 117.60 118.20 0.60 <0.05  <5  0.6    12      110      185          21  497
QTA-38 601631 118.20 118.80 0.60 <0.05      5  0.6      9      112          38          12  538
QTA-38 601632 118.80 119.00 0.20 <0.05  <5  6.3    14      129          75          20  617
QTA-38 601633 119.00 119.25 0.25  0.07  10  6.7    14          78      451          30 2130
QTA-38 601634 119.25 120.00 0.75 <0.05  <5  1.6    21      141          75          22  796
QTA-38 601635 120.00 122.00 2.00 <0.05  <5  1.3    14      104          28          13  529
QTA-38 601636 122.00 124.00 2.00 <0.05  <5  0.3    16      116          16          10  468
QTA-38 601637 124.00 125.60 1.60 <0.05  <5      2    19      133          26          16  489
QTA-38 601638 125.60 126.80 1.20 <0.05  <5  2.8    45      187      202      135  539
QTA-38 601639 126.80 128.00 1.20 <0.05  <5  0.4    14      111          33          17  533
QTA-38 601640 128.00 128.90 0.90 <0.05  <5  0.5    19      152          20          15  578
QTA-38 601641 128.90 129.00 0.10  0.14  12    11  170      290      412      105 1385
QTA-38 601642 129.00 130.00 1.00 <0.05  <5  0.3    13      150          30          17  566
QTA-38 601643 130.00 132.00 2.00 <0.05  <5  0.5    18      117          35          23  507
QTA-38 601644 132.00 134.28 2.28 <0.05  13 14.8  174      522          40      115  583
QTA-38 601645 134.28 136.00 1.72 <0.05  <5  1.1    20      122          35          19  581
QTA-38 601646 136.00 137.20 1.20 <0.05      5  2.4    32      144          27          33  596
QTA-38 601647 137.20 137.48 0.28 <0.05  11 12.1    63      223          50          60 1005
QTA-38 601648 137.48 138.00 0.52 <0.05  <5  0.5    13      108          21          12  562
QTA-38 601649 138.00 140.10 2.10 <0.05  <5  4.9    71      154          47          32  700
QTA-38 601650 140.10 142.00 1.90 <0.05  13 16.6    92      220      210          84 1000
QTA-38 601651 142.00 144.00 2.00 <0.05  <5  3.4    31      127          87          33  810
QTA-38 601652 144.00 146.00 2.00 <0.05      6  6.7    75      197          64          72  738
QTA-38 601653 146.00 148.00 2.00 <0.05  <5      7    33      135      206          36 1085
QTA-38 601654 148.00 150.00 2.00 <0.05      5  6.3    48      195      191          55  831
QTA-38 601655 150.00 150.80 0.80 <0.05      6  4.7    60      286          82          54  759
QTA-38 601656 150.80 151.48 0.68 <0.05  15 12.8  116      147          80          88 1385
QTA-38 601657 151.48 151.90 0.42 <0.05  49 52.9  189      145          70      184  977
QTA-38 601658 151.90 152.50 0.60  0.07  69    69  589      373      147      345  908
QTA-38 601659 152.50 154.00 1.50 <0.05      5  5.1    87      236          90          72  632
QTA-38 601660 170.35 170.55 0.20 <0.05 308 >100 2390    2710      253    1295  800
QTA-38 601661 184.60 184.80 0.20 <0.05  <5  2.2    32      181      199      119  626
QTA-38 601662 184.80 185.20 0.40 <0.05  <5  0.8    10          58          35            9  412
QTA-38 601663 185.20 185.45 0.25 <0.05  <5  0.4    17      151      193      164  337
QTA-38 601664 327.40 328.00 0.60 <0.05      9  7.6    24      148      236          38  861
QTA-38 601665 328.00 330.00 2.00 <0.05  <5  0.4    17      121      126          21  429
QTA-38 601666 330.00 332.50 2.50 <0.05      8  7.5    33      144      714          47  839
QTA-38 601667 332.50 334.00 1.50 <0.05  <5  3.9    17      124      217          36  693
QTA-38 601668 334.00 336.00 2.00 <0.05      5  2.9    16      106      142          22  782
QTA-38 601669 336.00 338.30 2.30 <0.05  <5  3.2    54      195      137          48  583
QTA-38 601670 338.30 338.70 0.40 <0.05  <5  1.5    36          97      155          38  566

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 62 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-38 601671 345.95 349.20 3.25 <0.05 116 >100    1615 1470      396    1055 1155
QTA-38 601672 404.00 406.00 2.00 <0.05  <5  0.9          64  105          20          51  422
QTA-38 601673 406.00 408.00 2.00 <0.05  <5  0.3          53  161          13          39  446
QTA-38 601674 408.00 410.00 2.00 <0.05  <5  0.6          71  145          13          14  408
QTA-38 601675 410.00 411.30 1.30 <0.05  <5  0.6      181  612          24          71  489
QTA-38 601676 411.30 411.50 0.20 <0.05  13  5.1    7500 9890      193    5260  507
QTA-38 601677 411.50 413.51 2.01 <0.05  <5  0.4          19    75          13          27  507
QTA-38 601678 413.51 413.66 0.15    0.1  <5  1.9      120 2970      176          39  448
QTA-38 601679 413.66 414.00 0.34 <0.05  <5  0.7          25    92          25          35  502
QTA-38 601680 414.00 414.36 0.36 <0.05  <5  1.9      911 2320      160      279  541
QTA-38 601681 414.36 416.00 1.64 <0.05  <5  0.4          20    61            9          34  529
QTA-38 601682 416.00 416.90 0.90 <0.05  <5  0.7          24  136          16          37  534
QTA-38 601683 416.90 417.05 0.15 <0.05  <5  2.1    1145 1830          47      690  480
QTA-38 601684 417.05 418.00 0.95 <0.05  <5  0.9          39  126          13          52  536
QTA-38 601685 418.00 420.00 2.00 <0.05  <5  0.9      234  526          20      137  561
QTA-38 601686 420.00 422.25 2.25 <0.05      5  1.9      247  640      231      184  572
QTA-38 601687 422.25 422.85 0.60 <0.05  <5  0.7          26  118    1075          35  666
QTA-38 601688 422.85 424.00 1.15 <0.05  <5  0.2          16    91          85          10  493
QTA-38 601689 424.00 425.35 1.35 <0.05  <5 <0.2          11    91          49            9  444
QTA-38 601690 425.35 426.00 0.65 <0.05  <5 <0.2          21  132      118          20  401
QTA-38 601691 426.00 428.00 2.00 <0.05  <5 <0.2          23  112      141          24  482
QTA-38 601692 428.00 430.00 2.00 <0.05  <5  0.2          21  109      148          24  479
QTA-38 601693 454.00 456.00 2.00 <0.05  <5  0.5          22  102          32          12  407
QTA-38 601694 456.00 457.55 1.55 <0.05  <5  0.4          23    72          25          14  440
QTA-38 601695 457.55 458.70 1.15 <0.05      5      2    1195  771      100      729  847
QTA-38 601696 458.70 460.00 1.30 <0.05  <5  0.8          28    57          34          22  444
QTA-38 601697 460.00 462.00 2.00 <0.05  <5  0.3            9    37          27            8  450
QTA-38 601698 462.00 464.00 2.00 <0.05  <5  1.2          54  119      339          43  418
QTA-38 601699 464.00 465.00 1.00 <0.05  <5  1.7      815 1145          74      569  723
QTA-38 601700 465.00 465.20 0.20 <0.05  <5  1.9      784  874      174      493  612
QTA-38 601701 465.20 466.40 1.20 <0.05  <5  2.1      227  254      295      166  556
QTA-38 601702 466.40 466.60 0.20  0.26  17    20 >10000 4760 >10000 >10000  927
QTA-38 601703 466.60 466.80 0.20    0.1  10  9.6      497  603      973      378  493
QTA-38 601704 466.80 468.00 1.20 <0.05  <5  0.9          44    64    1480          81  562
QTA-38 601705 468.00 470.00 2.00 <0.05  <5  0.6          18    50      667          42  522
QTA-38 601706 470.00 472.00 2.00 <0.05      9  1.1      256  359      942      192  638
QTA-38 601707 472.00 474.00 2.00  0.34  14  6.3    1490 2190    4640    1120  604
QTA-38 601708 474.00 476.00 2.00 <0.05  <5  1.6      107  120    1020      178  569
QTA-38 601709 476.00 478.30 2.30 <0.05  <5  0.6          18    52    1255      108  497
QTA-38 601710 478.30 478.80 0.50  0.07  <5  1.2          37  171    1090    2010  644
QTA-38 601711 478.80 481.00 2.20 <0.05  <5  1.4          24    85      564          55  600
QTA-38 601712 481.00 482.00 1.00  0.46  11 10.8      210  183    2570    1800  494
QTA-38 601713 482.00 484.00 2.00 <0.05      5  0.7            9    92    1265          50  436
QTA-38 601714 484.00 486.00 2.00 <0.05  <5 <0.2            7    91          66          21  463
QTA-38 601715 486.00 488.10 2.10 <0.05  <5  0.6          52  128      297          45  495
QTA-38 601716 488.10 488.20 0.10 <0.05  <5  0.7          11  143      157          17  365
QTA-38 601717 488.20 488.40 0.20 <0.05  <5      3      234  231      188      166  296
QTA-38 601718 488.40 489.10 0.70 <0.05  <5 <0.2          21  111          63          25  355
QTA-38 601719 497.00 497.88 0.88 <0.05  <5  0.2          13    96          57          16  413
QTA-38 601720 497.88 499.50 1.62 <0.05  <5  0.2          20  104      185          20  415
QTA-38 601721 507.50 509.25 1.75 <0.05      5  1.4          16    78    1020          57  441
QTA-38 601722 522.60 522.80 0.20 <0.05  <5 <0.2          23    95          25          19  496
QTA-38 601723 533.40 533.60 0.20  0.41  10    10      103  234    5130 >10000  612
QTA-38 601724 533.60 534.25 0.65 <0.05  <5  0.2          16    90      217      136  421
QTA-38 601725 534.25 535.85 1.60 <0.05  <5 <0.2          11    73          29          46  437
QTA-38 601726 535.85 538.00 2.15 <0.05  <5 <0.2          15    87          53          25  429
QTA-38 601727 538.00 540.00 2.00    0.1      9 <0.2          10    62          34          21  399
QTA-38 601728 540.00 542.00 2.00 <0.05  <5  0.6          13    87    1030          55  527
QTA-38 601729 542.00 544.00 2.00  0.14  <5 <0.2          16  119      137          51  487
QTA-38 601730 544.00 548.00 4.00 <0.05  <5 <0.2          16    95          44          22  446
QTA-38 601731 548.00 550.10 2.10 <0.05  <5 <0.2          15    97          69          36  391
QTA-38 601732 550.10 552.10 2.00 <0.05  <5 <0.2          11    74      198          30  432
QTA-38 601733 552.10 553.25 1.15 <0.05  <5 <0.2          14    69      210          18  464

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 63 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-38 601734 553.25 554.70 1.45 <0.05  <5  0.2    12    44  207 1550 306
QTA-38 601735 554.70 555.85 1.15 <0.05  <5  0.3      9    49 1290  996 681
QTA-38 601736 555.85 558.40 2.55 <0.05  <5  0.2      4    38  363    24 305
QTA-38 601737 558.40 558.60 0.20 <0.05      5  0.3      3    57  117    14 324
QTA-38 601738 558.60 560.00 1.40 <0.05  <5 <0.2      7    68  209    18 362
QTA-38 601739 560.00 561.35 1.35 <0.05  <5  0.2    19    70  683    29 503
QTA-38 601740 561.35 562.00 0.65 <0.05  <5 <0.2      9    55  112    17 365
QTA-38 601741 562.00 564.00 2.00 <0.05  <5 <0.2    16    83  111    32 419
QTA-38 601742 564.00 566.35 2.35 <0.05  <5  0.2    18 111  140    23 460
QTA-38 601743 566.35 567.40 1.05 <0.05  <5  0.2    14    86  176    18 741
QTA-38 601744 567.40 569.70 2.30 <0.05  <5 <0.2    17 109    62    42 338
QTA-38 601745 569.70 572.61 2.91 <0.05  <5 <0.2    17 107    30    16 401
QTA-38 601746 572.61 574.54 1.93 <0.05  <5  0.4    20 107    29    12 368
QTA-38 601747 574.54 576.80 2.26 <0.05  <5 <0.2    18 113    45    15 397
QTA-38 601748 576.80 577.30 0.50 <0.05  <5  0.2    20 106  111    16 740
QTA-38 601749 577.30 579.15 1.85 <0.05  <5  0.6    17    98  173    22 429
QTA-38 601750 579.15 579.80 0.65 <0.05  <5  0.8    85 114  356    27 490
QTA-38 601751 579.80 582.61 2.81 <0.05  <5  0.3    16 100    78    13 406
QTA-38 601752 582.61 584.95 2.34 <0.05  <5  0.2    18    98    68    14 405
QTA-38 601753 584.95 586.80 1.85 <0.05  <5 <0.2    17 115    48    12 436
QTA-38 601754 586.80 588.95 2.15 <0.05  <5 <0.2    17    82    61      8 382
QTA-38 601755 588.95 591.04 2.09 <0.05  <5 <0.2    21 101    92    12 396
QTA-38 601756 591.04 592.73 1.69 <0.05  <5 <0.2    15    98    45    12 374
QTA-38 601757 592.73 593.80 1.07 <0.05  <5 <0.2    20 107    36    13 363
QTA-38 601758 593.80 595.90 2.10 <0.05  <5  1.5    17    94  530    61 555
QTA-38 601759 595.90 597.35 1.45 <0.05      5  0.6    15    98  183    27 482
QTA-38 601760 597.35 598.00 0.65 <0.05  <5  0.7    14 109  168    15 389
QTA-38 601761 598.00 600.00 2.00 <0.05  <5 <0.2    20 101    54    12 417
QTA-38 601762 600.00 602.00 2.00 <0.05  <5 <0.2    20 114    43    18 397
QTA-38 601763 602.00 604.00 2.00 <0.05  <5 <0.2    14    90    56    12 349
QTA-38 601764 604.00 605.62 1.62 <0.05  <5 <0.2    13    94  141    12 398
QTA-38 601765 605.62 607.10 1.48 <0.05  <5 <0.2    21 119    74      7 471
QTA-39 601766 24.16 25.67 1.51 <0.05      7  0.3    14 103    34      6 269
QTA-39 601767 25.67 27.52 1.85 <0.05      5  0.2    15 107    84    10 404
QTA-39 601768 27.52 29.30 1.78 <0.05  <5  0.3    12    98    65      8 497
QTA-39 601769 65.33 65.84 0.51 <0.05  <5  0.2    15    85    20      5 411
QTA-39 601770 65.84 67.00 1.16 <0.05      6  0.3    15    99    19      5 357
QTA-39 601771 67.00 69.00 2.00 <0.05      8  0.2    16    93    23      5 318
QTA-39 601772 69.00 70.88 1.88 <0.05      9 <0.2    17    82    27    20 322
QTA-39 601773 70.88 72.00 1.12 <0.05      5  0.4    16    94    11      6 342
QTA-39 601774 72.00 73.76 1.76 <0.05  <5 <0.2    14    89    16      6 328
QTA-39 601775 73.76 75.20 1.44 <0.05  <5  0.3    14 107    13      9 325
QTA-39 601776 75.20 76.00 0.80 <0.05  <5 <0.2    41 122    16    13 390
QTA-39 601777 76.00 77.00 1.00 <0.05      5  0.3    18 113    24    15 373
QTA-39 601778 77.00 78.00 1.00 <0.05  <5  0.2    12    92    14      6 380
QTA-39 601779 78.00 80.00 2.00 <0.05      6 <0.2    12    86    26    12 356
QTA-39 601780 80.00 82.00 2.00 <0.05  <5  0.2    14    91    19      5 573
QTA-39 601781 82.00 83.84 1.84 <0.05  <5 <0.2    18    85    73    14 788
QTA-39 601782 83.84 84.00 0.16 <0.05  <5 <0.2    13    98    20      8 551
QTA-39 601783 102.51 102.71 0.20 <0.05  <5  0.2    17 114    18      9 468
QTA-39 601784 102.71 104.00 1.29 <0.05  <5  0.2    13 112    29    15 539
QTA-39 601785 104.00 106.00 2.00 <0.05  <5  0.2    16    83    56    23 626
QTA-39 601786 106.00 107.00 1.00 <0.05  <5  0.4    13 105    48    11 519
QTA-39 601787 107.00 107.70 0.70 <0.05  <5  0.2    13    89    22      7 503
QTA-39 601788 107.70 108.00 0.30 <0.05  <5  0.4      8    71    14      6 438
QTA-39 601789 101.40 110.00 8.60 <0.05  <5  0.3    11    71    28      8 380
QTA-39 601790 110.00 110.45 0.45 <0.05  <5  0.2      9 100    28      9 371
QTA-39 601791 110.45 110.95 0.50 <0.05  <5 <0.2    11    84    17      5 337
QTA-39 601792 110.95 111.66 0.71 <0.05  <5 <0.2    11 103    41    22 440
QTA-39 601793 111.66 112.10 0.44  0.06  <5  0.6    15    84  136    41 968
QTA-39 601794 112.10 114.00 1.90 <0.05  <5  0.2    12 109    67    11 631
QTA-39 601795 114.00 115.40 1.40 <0.05  <5  0.2    14 103    35    20 462
QTA-39 601796 115.40 115.90 0.50 <0.05  <5 <0.2    14    90    24    10 380

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 64 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-39 601797 115.90 118.00 2.10 <0.05  <5  0.2    16 106    19      3 298
QTA-39 601798 118.00 120.00 2.00 <0.05  <5 <0.2    15 100    12      4 295
QTA-39 601799 120.00 121.70 1.70 <0.05  <5  0.2    13    98    16      5 324
QTA-39 601800 121.70 122.40 0.70 <0.05  <5 <0.2    15    91    26      5 391
QTA-39 601801 186.70 187.00 0.30 <0.05  <5  0.3    15    97    67      9 551
QTA-39 601802 187.00 189.00 2.00 <0.05      5  0.3    19 100    14      4 413
QTA-39 601803 189.00 191.30 2.30 <0.05  <5  0.3    14    99    13      3 395
QTA-39 601804 191.30 191.75 0.45 <0.05  <5  0.3    13    83    17      4 594
QTA-39 601805 191.75 193.00 1.25 <0.05  <5  0.2    14    87    22      6 463
QTA-39 601806 193.00 195.00 2.00 <0.05  <5 <0.2    15    91    14      4 397
QTA-39 601807 195.00 197.25 2.25 <0.05  <5  0.2    16    92    17      7 340
QTA-39 601808 197.25 197.80 0.55 <0.05  <5 <0.2    13    93    24      4 340
QTA-39 601809 197.80 199.00 1.20 <0.05  <5  0.2    12    95    18      6 373
QTA-39 601810 199.00 201.00 2.00 <0.05  <5 <0.2    13    94    12    <2 330
QTA-39 601811 201.00 203.00 2.00 <0.05  <5  0.2    13    93    19      3 383
QTA-39 601812 203.00 204.00 1.00 <0.05  <5 <0.2    15    77  205    26 394
QTA-39 601813 247.20 248.00 0.80 <0.05  <5  0.2    15    95    21      5 315
QTA-39 601814 248.00 250.00 2.00 <0.05  <5  0.3    14    98    27      4 323
QTA-39 601815 250.00 252.00 2.00 <0.05  <5  0.2    12    99    44      3 331
QTA-39 601816 252.00 254.00 2.00 <0.05  <5 <0.2    13    91    40      5 363
QTA-39 601828 295.00 296.70 1.70 <0.05  <5  0.2    15    89    59    21 437
QTA-39 601829 296.70 297.00 0.30 <0.05  <5  0.2    10    63  106    21 548
QTA-39 601830 297.00 299.00 2.00 <0.05  <5 <0.2    14    90    40    15 329
QTA-39 601817 317.00 319.00 2.00 <0.05  <5  0.2    14    85  459    56 483
QTA-39 601818 319.00 321.00 2.00 <0.05  <5 <0.2    16 100    73    11 352
QTA-39 601819 321.00 323.00 2.00    0.1  <5  0.2    16 106  177    16 350
QTA-39 601820 323.00 325.00 2.00 <0.05  <5  0.2    16    99  139    24 382
QTA-39 601821 325.00 325.53 0.53 <0.05  <5  0.4    13    70  491    76 557
QTA-39 601822 325.53 326.20 0.67  0.65      8  5.4    16 303 4250 188    71
QTA-39 601823 326.20 327.00 0.80  0.43  <5  4.3    12 229 2820 130      6
QTA-39 601824 327.00 328.20 1.20  0.15  <5  1.2    11 149 1160    81 455
QTA-39 601825 328.20 330.00 1.80 <0.05  <5 <0.2    18    94  186    35 351
QTA-39 601826 330.00 330.70 0.70 <0.05  <5  0.2    14    85  221    49 428
QTA-39 601827 330.70 332.00 1.30 <0.05  <5  0.2    17    92  154    32 482
QTA-39 601831 395.00 397.00 2.00 <0.05  <5  0.2    16 103  214    24 311
QTA-39 601832 397.00 399.00 2.00 <0.05  <5 <0.2    12    98    21      2 375
QTA-39 601833 399.00 401.00 2.00 <0.05  <5  0.3    14 102    19      4 329
QTA-39 601834 401.00 403.12 2.12 <0.05  <5 <0.2    14 102    21      4 295
QTA-39 601835 403.12 405.00 1.88 <0.05  <5 <0.2    15 108    24      3 252
QTA-39 601836 417.00 419.00 2.00 <0.05  <5 <0.2    13    84  114    13 337
QTA-39 601837 419.00 420.00 1.00 <0.05  <5  0.2    15 105    26    12 336
QTA-39 601838 420.00 421.50 1.50 <0.05  <5 <0.2    12    85    24      7 374
QTA-39 601839 421.50 422.35 0.85 <0.05  <5 <0.2    14    82    84      4 427
QTA-39 601840 422.35 423.30 0.95 <0.05  <5 <0.2    12    90    85      8 341
QTA-40 601841 38.40 38.85 0.45 <0.05  <5 <0.2    25    58    66    11 948
QTA-40 601842 38.85 40.70 1.85 <0.05  <5 <0.2    18    87 1060    56 741
QTA-40 601843 40.70 43.00 2.30 <0.05  <5 <0.2    16 113    96    10 470
QTA-40 601844 43.00 45.00 2.00 <0.05  <5  0.2    38 116  287    21 530
QTA-40 601845 45.00 46.00 1.00 <0.05      7  0.2    15 113  213    18 416
QTA-40 601846 46.00 46.20 0.20 <0.05  <5  0.3    15    86  169    19 919
QTA-40 601847 46.20 48.00 1.80 <0.05  <5  0.3    15 110    79    15 462
QTA-40 601848 48.00 49.00 1.00 <0.05  <5  0.2    18 112    94    10 454
QTA-40 601849 49.00 49.50 0.50 <0.05  <5 <0.2    16 102  249    21 648
QTA-40 601850 60.05 61.90 1.85 <0.05  <5  0.3    19    88  367    31 655
QTA-40 601851 61.90 64.00 2.10 <0.05  <5  0.4    16 100    94      9 464
QTA-40 601852 64.00 66.00 2.00 <0.05  <5 <0.2    15 106    87      7 476
QTA-40 601853 66.00 68.00 2.00 <0.05  <5 <0.2    15 102    72      7 498
QTA-40 601854 68.00 68.60 0.60 <0.05  <5 <0.2    17 100  114    14 399
QTA-40 601855 68.60 69.00 0.40 <0.05  <5 <0.2    14    86    64      8 597
QTA-40 601856 69.00 71.00 2.00 <0.05  <5 <0.2    15    97    71      9 453
QTA-40 601857 71.00 71.63 0.63 <0.05  <5 <0.2    13 106    65    10 431
QTA-40 601858 71.63 73.70 2.07 <0.05  <5 <0.2    13 100    89      9 350
QTA-40 601859 73.70 74.45 0.75 <0.05  <5 <0.2    20 100  260    24 692

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 65 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-40 601860 74.45 75.30 0.85 <0.05  <5 <0.2    28    86    49    13  804
QTA-40 601861 75.30 75.60 0.30 <0.05  <5 <0.2    16    82    45      7  614
QTA-40 601862 75.60 77.00 1.40 <0.05  <5 <0.2    22  107  178    17  573
QTA-40 601863 77.00 78.28 1.28 <0.05  <5 <0.2    16  120  130    11  524
QTA-40 601864 78.28 79.20 0.92 <0.05  <5  0.2    17  114  183    24  436
QTA-40 601865 79.20 82.00 2.80 <0.05  20 20.9  128  241 1100    86  757
QTA-40 601867 82.00 83.70 1.70 <0.05  <5  0.2    15  103  255    17  568
QTA-40 601868 83.70 86.00 2.30 <0.05  <5  0.3    13    95  134    12  621
QTA-40 601869 86.00 88.00 2.00 <0.05      6  0.3    12    96  134    15  482
QTA-40 601870 88.00 90.00 2.00 <0.05  <5  0.7    12  106  141    14  447
QTA-40 601871 90.00 90.40 0.40 <0.05  <5  0.3      9  108    66      7  316
QTA-40 601872 90.40 90.70 0.30 <0.05  <5  0.7    13    92    92      9  666
QTA-40 601873 90.70 92.00 1.30 <0.05  <5  2.2    23  104  194    22  646
QTA-40 601874 92.00 93.40 1.40 <0.05  42 45.2  156  176 1230    93  914
QTA-40 601875 93.40 95.00 1.60 <0.05  <5  0.5    15    98    64    11  479
QTA-40 601876 95.00 97.00 2.00 <0.05  <5  0.4    16    97    58    10  405
QTA-40 601877 97.00 98.30 1.30 <0.05  <5  0.4    13  100    59    10  419
QTA-40 601878 98.30 99.60 1.30 <0.05  <5  0.3    15    93    53    10  510
QTA-40 601879 99.60 101.30 1.70 <0.05  <5  0.4    14    98    60    13  424
QTA-40 601880 101.30 103.00 1.70 <0.05  <5  0.7    10    93  105    21  632
QTA-40 601881 103.00 105.00 2.00 <0.05      7  4.4    19  110  911    37 1310
QTA-40 601882 105.00 107.00 2.00 <0.05      7  6.5  133  144  958    59 1525
QTA-40 601883 107.00 109.00 2.00 <0.05  13 21.2  564  357 1970    98 1410
QTA-40 601884 109.00 110.70 1.70 <0.05  53 63.8  389  591  444  130 1345
QTA-40 601885 110.70 112.00 1.30 <0.05      5      6  226  178  707    53  985
QTA-40 601886 112.00 114.00 2.00 <0.05  <5  1.1    16  107  110    13  669
QTA-40 601887 114.00 114.80 0.80 <0.05  <5      1      9  108    77    10  609
QTA-40 601888 114.80 115.10 0.30 <0.05  15 17.6    34    88  219    34  776
QTA-40 601889 115.10 116.00 0.90 <0.05  <5  1.1    13  107  169    13  703
QTA-40 601890 116.00 118.00 2.00 <0.05  <5  0.6    13    94    98    10  467
QTA-40 601891 118.00 120.00 2.00 <0.05  <5      1  128  231  127    85  605
QTA-40 601892 120.00 122.00 2.00 <0.05  <5  3.1  107  447  240    63  693
QTA-40 601893 122.00 124.00 2.00 <0.05  <5  0.8    12    98  106    11  451
QTA-40 601894 124.00 126.00 2.00 <0.05  <5  0.9    11  105  115      9  545
QTA-40 601895 126.00 128.00 2.00 <0.05  <5  0.7    13  104    69    11  505
QTA-40 601896 128.00 128.55 0.55 <0.05  <5  0.9    11  112  100    14  406
QTA-40 601897 128.55 129.85 1.30  0.13  17 19.2    24  112 1340    54 1165
QTA-40 601898 129.85 131.00 1.15  0.07  14 16.3    60  162 1020    37  627
QTA-40 601899 131.00 133.00 2.00 <0.05  <5  2.6    14    92  354    18  679
QTA-40 601900 133.00 135.00 2.00 <0.05  <5  0.6    10    99    65    11  516
QTA-40 601901 135.00 136.00 1.00 <0.05  <5  0.7    16  112    83      9  553
QTA-40 601902 136.00 138.00 2.00 <0.05  <5  0.4    22  113    47      8  414
QTA-40 601903 138.00 140.00 2.00 <0.05  <5  0.4    18  113    42    13  388
QTA-40 601904 140.00 142.00 2.00 <0.05  <5  0.6    10  102    47      9  453
QTA-40 601905 142.00 144.00 2.00 <0.05  <5  0.6    10  112    23    10  407
QTA-40 601906 144.00 144.68 0.68 <0.05  <5  0.6      9  109    28      6  371
QTA-40 601907 144.68 145.00 0.32 <0.05  <5  0.5    12    70  121    11  663
QTA-40 601908 145.00 146.20 1.20 <0.05  <5  0.6    10    95    32      7  441
QTA-40 601909 146.20 148.25 2.05 <0.05  <5  0.4    15  107    42    10  445
QTA-40 601910 148.25 149.90 1.65 <0.05  <5  0.4    11    95    44      9  488
QTA-40 601911 149.90 151.00 1.10 <0.05  <5  0.6    11  109    77    10  507
QTA-40 601912 151.00 152.00 1.00 <0.05  <5  0.7    11    98    70    10  632
QTA-40 601913 152.00 153.45 1.45 <0.05  <5  1.9      7    87  307    15  714
QTA-40 601914 153.45 155.70 2.25 <0.05      9 10.3    31  127 1955    56 1110
QTA-40 601915 155.70 158.00 2.30 <0.05  <5  1.1    11    91  728    37  597
QTA-40 601916 158.00 160.00 2.00 <0.05  <5  0.7    11    96  249    26  673
QTA-40 601917 160.00 162.00 2.00 <0.05  <5  0.6      9  122  137    14  626
QTA-40 601918 162.00 163.70 1.70 <0.05  <5  0.9      9    91  187    19  543
QTA-40 601919 163.70 164.55 0.85 <0.05      5  5.2 3210 1745  460 2140  918
QTA-40 601920 164.55 166.00 1.45 <0.05  <5  1.3    13    99  186    20  644
QTA-40 601921 166.00 168.00 2.00 <0.05  <5  0.6      9    90    74    13  630
QTA-40 601922 168.00 170.00 2.00 <0.05  <5  0.8    10  105    93    17  554
QTA-40 601923 170.00 172.00 2.00 <0.05  <5  0.9    44  147    78    17  557

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 66 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-40 601924 172.00 174.00 2.00 <0.05  <5  0.9      8    91    87    15  590
QTA-40 601925 174.00 175.45 1.45 <0.05  <5  0.7    12 105    94    14  739
QTA-40 601926 175.45 176.30 0.85 <0.05  <5      1    14    92  219    24  729
QTA-40 601927 176.30 178.00 1.70 <0.05  <5  1.5    39 102  105    22  586
QTA-40 601928 178.00 180.00 2.00 <0.05  <5  1.4    31 214  346    31  601
QTA-40 601929 180.00 182.00 2.00 <0.05  <5  1.2    12    90  404    45  809
QTA-40 601930 182.00 184.00 2.00 <0.05  <5  4.2 200 423  721    97  979
QTA-40 601931 184.00 186.00 2.00 <0.05  <5  2.5    17    97  381    26  675
QTA-40 601932 186.00 188.00 2.00 <0.05  <5  0.6    11    88  308    20  721
QTA-40 601933 188.00 190.00 2.00 <0.05  <5      1    13 185    77    14  694
QTA-40 601934 190.00 192.00 2.00 <0.05  <5      1      8    98    90    10  634
QTA-40 601935 192.00 194.00 2.00 <0.05  <5  0.9    11    94  232    28  692
QTA-40 601936 194.00 196.00 2.00 <0.05  <5  0.9    12 124  184    21  794
QTA-40 601937 196.00 198.00 2.00 <0.05  <5      1      9    99  367    18  675
QTA-40 601938 198.00 200.00 2.00 <0.05  <5  1.4    36 125  100    23  613
QTA-40 601939 200.00 202.00 2.00 <0.05  <5  1.2    17 119    83    15  612
QTA-40 601940 202.00 204.00 2.00 <0.05  <5  1.8    54 178    96    30  591
QTA-40 601941 204.00 206.00 2.00 <0.05  <5  1.1    16 208  291    20  667
QTA-40 601942 206.00 208.00 2.00 <0.05  <5  0.9    26 118    98    15  570
QTA-40 601943 208.00 210.00 2.00 <0.05      6  0.9    12 102  174    16  491
QTA-40 601944 210.00 212.00 2.00 <0.05  <5  0.9    19 124  112    19  520
QTA-40 601945 212.00 214.00 2.00 <0.05  <5  1.1    17 116    91    19  607
QTA-40 601946 214.00 216.00 2.00 <0.05  <5  2.7    26 120  281    39  765
QTA-40 601947 216.00 216.70 0.70 <0.05  <5  0.9    14    97    83    21  701
QTA-40 601948 216.70 218.00 1.30 <0.05  <5  0.9    12 107    81    14  604
QTA-40 601949 218.00 220.00 2.00 <0.05  <5  1.2    16 115  140    18  617
QTA-40 601950 220.00 222.00 2.00 <0.05  <5  1.1    15 109  156    20  794
QTA-40 601951 222.00 224.00 2.00 <0.05  <5  1.2    21 110  385    20  577
QTA-40 601952 224.00 226.00 2.00 <0.05  <5  2.4    19 142  633 600  652
QTA-40 601953 226.00 228.00 2.00 <0.05  <5  2.5    14 122  192    27  634
QTA-40 601954 228.00 230.00 2.00 <0.05  <5  0.6    20 112    32    18  499
QTA-40 601955 230.00 232.00 2.00 <0.05  <5  2.7    27 138 1315 532  737
QTA-40 601956 232.00 234.00 2.00 <0.05  <5  0.9    12 104  667    31  594
QTA-40 601957 234.00 236.00 2.00 <0.05      8      7    30 150 1310    96  762
QTA-40 601958 236.00 238.00 2.00 <0.05  <5  3.6    12    86 1590    37  752
QTA-40 601959 238.00 238.75 0.75 <0.05  <5  2.3    14    99 2250    36  926
QTA-40 601960 238.75 238.95 0.20 <0.05  <5  0.5      9    88  483    48  909
QTA-40 601961 238.95 240.00 1.05 <0.05  <5  0.5      8    97  162    13  621
QTA-40 601962 294.00 296.00 2.00 <0.05  <5  0.3    14    73  108    14  570
QTA-40 601963 296.00 298.00 2.00 <0.05  <5  0.2      8    58    77    11  445
QTA-40 601964 298.00 300.00 2.00 <0.05  <5  3.8    19 101 1015    60  728
QTA-40 601965 300.00 302.00 2.00 <0.05  <5  2.2      9    66  325    31  910
QTA-40 601966 302.00 304.00 2.00 <0.05      7 11.3    24 194 1925 480  914
QTA-40 601967 304.00 306.00 2.00 <0.05  <5  8.8    31 125  588    99 1390
QTA-40 601968 306.00 308.00 2.00 <0.05      8  7.5    13    42 1005 138 1275
QTA-40 601969 308.00 310.35 2.35 <0.05  20 20.6    34 113  710    77 1450
QTA-40 601970 310.35 310.50 0.15 <0.05      7  5.9    22    13 1090 159 5700
QTA-40 601971 310.50 311.15 0.65 <0.05  <5      5    12    33  956    56 2170
QTA-40 601972 311.15 312.00 0.85 <0.05      8  9.5    39    97 1505    42 1955
QTA-40 601973 312.00 314.00 2.00 <0.05  <5  0.4    10    84  229    19  681
QTA-40 601974 314.00 315.00 1.00 <0.05  <5  0.3      6    58    84      8  437
QTA-40 601975 408.00 410.00 2.00 <0.05  <5  0.3    11    88    65    25  428
QTA-40 601976 410.00 412.00 2.00 <0.05  <5  1.4      9    98  232    21  470
QTA-40 601977 412.00 414.00 2.00 <0.05  <5  0.4      7    61    86    11  550
QTA-40 601978 414.00 416.00 2.00 <0.05  <5  0.5      9    71    63    10  456
QTA-40 601979 416.00 418.00 2.00 <0.05  <5  0.4      6 101  148    12  414
QTA-40 601980 418.00 420.00 2.00 <0.05  <5  0.9      8    81  311    32  670
QTA-40 601981 420.00 422.00 2.00 <0.05  <5  4.9    13    78  570    32  978
QTA-40 601982 422.00 424.00 2.00 <0.05  10  11    39 156 1110    61  866
QTA-40 601983 424.00 426.00 2.00 <0.05  <5  0.4    10    93    98    15  453
QTA-40 601984 426.00 428.00 2.00 <0.05  <5  0.7    14    95    75    19  408
QTA-40 601985 428.00 430.00 2.00 <0.05      5  7.8    78 139  256    72  667
QTA-40 601986 430.00 431.40 1.40  0.14  10 14.7 248    63  535 210 1880

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 67 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-40 601987 431.40 433.00 1.60 <0.05      9 12.3    14    86      508    44  829
QTA-40 601988 433.00 435.00 2.00 <0.05  <5  3.6      8    47      405    23  588
QTA-40 601989 435.00 435.60 0.60 <0.05  10  7.1    13  106      162    24  314
QTA-40 601990 435.60 437.00 1.40 <0.05  <5  1.7    14    97      253    21  904
QTA-40 601991 437.00 438.00 1.00 <0.05  <5  1.4    15  119      142    10  608
QTA-40 601992 438.00 440.30 2.30 <0.05  <5  3.7    36  173      520    40 1085
QTA-40 601993 440.30 442.00 1.70 <0.05  <5      4    22    82      419    30  672
QTA-40 601994 442.00 444.00 2.00 <0.05  <5  1.2    14    73      102    25  628
QTA-40 601995 444.00 445.00 1.00 <0.05  <5  1.2    17  101    1225    56  481
QTA-40 601996 445.00 447.00 2.00 <0.05  <5  1.6    21    92    1475    63  952
QTA-40 601997 447.00 449.00 2.00 <0.05  26 22.7    53  449      589    74  703
QTA-40 601998 449.00 450.50 1.50  0.09      8      9    36    65      405    42  874
QTA-40 601999 450.50 451.40 0.90  0.07  33 37.7    77    91      753 226 1325
QTA-40 602000 451.40 453.00 1.60  0.06  <5  2.4    12    82      931    51 1100
QTA-40 603001 453.00 454.00 1.00 <0.05  <5  0.7    10    93      329    21  451
QTA-40 603002 454.00 456.00 2.00 <0.05  <5  0.4    12  103          92    14  449
QTA-40 603003 456.00 458.00 2.00 <0.05  <5  0.5    17  119      449    33  468
QTA-40 603004 458.00 460.00 2.00 <0.05  <5  0.7      9  106      182    17  565
QTA-40 603005 460.00 461.00 1.00 <0.05  <5  0.5      7    65      777    56  783
QTA-40 603006 461.00 462.00 1.00 <0.05  <5  1.5      5    35      870    31  478
QTA-40 603007 462.00 463.30 1.30 <0.05  <5  0.7      3    32      242    13  570
QTA-40 603008 463.30 465.00 1.70 <0.05  14 12.1  236  364    1955 234 1285
QTA-40 603009 465.00 467.00 2.00  0.06  <5  4.3    23    74    1320    47  634
QTA-40 603010 467.00 467.50 0.50  0.13  11 13.7    39    65    2940 108 2250
QTA-40 603011 467.50 467.70 0.20  0.44 267 >100  473 1615 >10000 789 1430
QTA-40 603012 467.70 468.00 0.30  0.07  10 11.6    29  143      313    70  912
QTA-40 603013 468.00 470.00 2.00 <0.05  <5  0.9      6    56      314    23  488
QTA-40 603014 470.00 472.00 2.00 <0.05  <5  0.4      7    59      124    10  570
QTA-40 603015 472.00 474.00 2.00 <0.05  <5  1.5    11    59      112    11  357
QTA-40 603016 474.00 476.00 2.00 <0.05  <5  0.2      8    57          33      5  352
QTA-40 603017 476.00 478.00 2.00 <0.05  <5  0.5      8    54          57      6  390
QTA-40 603018 478.00 480.00 2.00 <0.05  <5  0.2      8    59          22      5  352
QTA-40 603019 480.00 482.00 2.00 <0.05  <5  0.2      8    51          14      4  357
QTA-40 603020 482.00 484.00 2.00 <0.05  <5  0.3      7    50          13      4  324
QTA-40 603021 484.00 486.00 2.00 <0.05  <5  0.2      8    50            9      5  722
QTA-40 603022 486.00 488.00 2.00 <0.05  <5 <0.2      8    55          12      5  331
QTA-40 603023 488.00 490.00 2.00 <0.05  <5  0.4      9    68          36    11  370
QTA-40 603024 490.00 492.00 2.00 <0.05  <5  0.3      7    55          24    10  665
QTA-40 603025 492.00 494.00 2.00 <0.05  <5  0.2      8    61          22    11  378
QTA-40 603026 494.00 496.00 2.00 <0.05  <5  0.8    11    97          45    15  360
QTA-40 603027 496.00 498.00 2.00 <0.05  <5  0.3      5    57          48      7  549
QTA-40 603028 498.00 500.00 2.00 <0.05  <5  0.4      7    41      174    13  553
QTA-40 603029 500.00 502.00 2.00 <0.05      6  2.4  296  271      259 210  667
QTA-40 603030 502.00 504.00 2.00 <0.05  <5  0.4      6    50      337    18  490
QTA-40 603031 504.00 506.00 2.00 <0.05  <5  1.3      6    35      456    25  907
QTA-40 603032 506.00 508.00 2.00  0.13      7  5.3    17    41    1550    30  693
QTA-40 603033 508.00 510.00 2.00 <0.05  <5  0.6      5    42      548    21  406
QTA-40 603034 510.00 512.00 2.00 <0.05  <5  0.3    14    54      112    10  523
QTA-40 603035 512.00 514.00 2.00 <0.05  <5  0.4      8    42      174    13  583
QTA-40 603036 514.00 514.90 0.90 <0.05  <5  0.7      8    38      443    17  479
QTA-40 603037 514.90 515.10 0.20 <0.05  78 78.5 5260  168      264 180  736
QTA-40 603038 515.10 515.16 0.06 <0.05  <5  0.7    15    56          91      7  573
QTA-40 603039 515.16 518.00 2.84 <0.05  <5  0.8    17    99      170    10  462
QTA-40 603040 518.00 520.00 2.00 <0.05  <5  0.9    15  110      364    15  446
QTA-40 603041 520.00 522.00 2.00 <0.05  <5  0.7    21    82      567    30  484
QTA-40 603042 522.00 524.00 2.00 <0.05  <5  0.4    12    90    1030    30  413
QTA-40 603043 524.00 526.00 2.00 <0.05  <5  0.3    13    90      291    17  348
QTA-40 603044 526.00 528.00 2.00 <0.05  <5  0.3      9    93      206    16  363
QTA-40 603045 528.00 530.00 2.00 <0.05  <5  1.6      9  108      509    36  362
QTA-40 603046 530.00 532.00 2.00 <0.05  <5      2    13  114      469    14  375
QTA-40 603047 532.00 534.00 2.00 <0.05      5  0.8    11  100          76      9  387
QTA-40 603048 534.00 536.00 2.00 <0.05  <5  0.3    11    88          99      8  347
QTA-40 603049 536.00 538.00 2.00 <0.05  <5  0.4      7  100      144      9  387

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 68 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-40 603050 538.00 539.90 1.90 <0.05  <5  0.5            7      58      128      9  380
QTA-40 603051 539.90 540.10 0.20 <0.05  14 18.9      667  1375      949  342  649
QTA-40 603052 540.10 542.00 1.90 <0.05  <5  0.5          10      95      115      8  411
QTA-40 603053 542.00 544.00 2.00 <0.05  <5  0.4            8      60          85      6  370
QTA-40 603054 544.00 544.80 0.80 <0.05  <5  4.3            8      61      636    22  418
QTA-40 603055 544.80 546.00 1.20  0.07  <5  2.5            5      28      877    13  519
QTA-40 603056 546.00 548.00 2.00 <0.05  <5  0.3            4      29    1040    43  410
QTA-40 603057 548.00 550.00 2.00 <0.05  <5  0.5            6      52      278    11  454
QTA-40 603058 550.00 551.90 1.90 <0.05  <5  1.1          32    143      187    31  418
QTA-40 603059 551.90 551.98 0.08    0.1 150 >100    2930  3910 >10000 2490 2420
QTA-40 603060 551.98 552.90 0.92  0.07  51 48.7      622  4340    2860  323  930
QTA-40 603061 552.90 553.40 0.50    0.1  <5      7          99    533    5900  101 1385
QTA-40 603062 553.40 554.00 0.60 <0.05  10  8.6          62    103      365    50  648
QTA-40 603063 554.00 556.00 2.00 <0.05  <5  3.3          71    122      497    52  576
QTA-40 603064 556.00 558.00 2.00 <0.05  <5      1          46      44          46    15  592
QTA-40 603065 558.00 560.00 2.00 <0.05  <5  0.5            5      35          32      4  544
QTA-40 603066 560.00 562.00 2.00 <0.05  <5  0.7          12      71          18      5  546
QTA-40 603067 562.00 564.00 2.00 <0.05      5  8.9      272  1660      849  118  506
QTA-40 603068 564.00 565.00 1.00 <0.05  <5  0.6          16    331          16      8  463
QTA-40 603069 565.00 568.00 3.00 <0.05  <5  2.2      138    219          94    48  473
QTA-40 603070 568.00 570.00 2.00 <0.05  22 21.5    1410  1380          12    84  518
QTA-40 603071 570.00 572.00 2.00 <0.05  56 64.7    4650  6050          28  151  588
QTA-40 603072 572.00 574.00 2.00 <0.05  30 30.7    1950  2930          25  250  514
QTA-40 603073 574.00 576.00 2.00 <0.05  <5  8.1      370    402          23    65  522
QTA-40 603074 576.00 578.00 2.00 <0.05      9 13.8    1055  1490          30  138  481
QTA-40 603075 578.00 580.00 2.00 0.025  54 62.6    3920  2230          10  165  557
QTA-40 603076 580.00 582.00 2.00 0.025  11 16.3    1010  1155          73  182  510
QTA-40 603077 582.00 584.00 2.00 0.025  20 19.8    1285  1015    1750  320  569
QTA-40 603078 584.00 586.00 2.00 0.025  2.5  6.6      365    777      309    57  611
QTA-40 603079 586.00 588.00 2.00 0.025  2.5  9.8      597    833          93    56  491
QTA-40 603080 588.00 590.00 2.00 0.025  44 54.7    5090  4170      176 1430  400
QTA-40 603081 590.00 592.00 2.00 0.025  21 26.4    2210  2510          27  174  405
QTA-40 603082 592.00 594.00 2.00 0.025  2.5  9.2      542    614          25    56  468
QTA-40 603083 594.00 596.00 2.00 0.025      7 16.3    1315  1160      140  174  440
QTA-40 603084 596.00 598.00 2.00 0.025  2.5  9.7      829    630          26    95  458
QTA-40 603085 598.00 600.00 2.00 0.025      8 14.2      762  1635          24    38  453
QTA-40 603086 600.00 602.00 2.00 0.025  99 >100    8320  8910      200  113  478
QTA-40 603087 602.00 604.00 2.00 0.025  30 34.8    2740  2890          78  131  434
QTA-40 603088 604.00 606.00 2.00 0.025  58 66.6    4980  6140          61    96  430
QTA-40 603089 606.00 608.00 2.00 0.025  33 30.1    3120  1845      158  378  460
QTA-40 603090 608.00 610.00 2.00 0.025      6  9.4      723    836          54    35  428
QTA-40 603091 610.00 612.00 2.00 0.025  2.5  2.9      199    219          35      9  607
QTA-40 603092 612.00 614.00 2.00 0.025  35 47.1    4270  1890          47    83  508
QTA-40 603093 614.00 614.20 0.20 0.025  2.5 <0.2            7      41            9      3  441
QTA-40 603094 614.20 616.00 1.80 0.025  17 21.1    1985  1230          26    18  383
QTA-40 603095 616.00 618.00 2.00 0.025  37    43    4060  3800          23    39  345
QTA-40 603096 618.00 620.00 2.00 0.025  97 >100    9960 17000      575  142  408
QTA-40 603097 620.00 622.00 2.00 0.025  68 86.7    9920  5310          26    76  464
QTA-40 603098 622.00 624.00 2.00 0.025  10 13.4    1170  1385          20    30  501
QTA-40 603099 624.00 626.00 2.00 <0.05  <5  2.2      246    341          28    12  416
QTA-40 603100 626.00 628.00 2.00 <0.05  <5  1.2          60    159          24      6  454
QTA-40 603101 628.00 630.00 2.00 <0.05  <5  1.9          88    271          24      9  462
QTA-40 603102 630.00 632.00 2.00 <0.05  <5  2.4      138    115          20      7  435
QTA-40 603103 632.00 634.00 2.00 <0.05  <5  5.6      401    379          15    12  443
QTA-40 603104 634.00 636.00 2.00 <0.05  <5      1          27      79          43      7  427
QTA-40 603105 636.00 638.00 2.00 <0.05  <5  0.5          10      52          51    14  386
QTA-40 603106 638.00 640.00 2.00 <0.05  <5  2.2      150      63          28      4  318
QTA-40 603107 640.00 642.00 2.00 <0.05  <5  0.6          13      87          47      4  440
QTA-40 603108 642.00 644.00 2.00 <0.05  <5  0.9          44    188          88      3  417
QTA-40 603109 644.00 644.30 0.30 <0.05  11    14    1155  1025          97    25  301
QTA-40 603110 644.30 644.50 0.20 <0.05 137 >100 >10000  6980      354  392  524
QTA-40 603111 644.50 646.00 1.50 <0.05  <5  1.9          33      52      357      9  502
QTA-40 603112 646.00 648.00 2.00 <0.05  <5  0.7          21      47      114      4  399

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 69 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-40 603113 648.00 649.00 1.00 <0.05  19    18    649    394    1090    43  709
QTA-40 603114 649.00 650.00 1.00 <0.05  28 30.3  1855  2810      474  250  668
QTA-40 603115 650.00 652.00 2.00 <0.05  17 16.1    832    785      751    74  483
QTA-40 603116 652.00 654.00 2.00 <0.05  <5  1.5      29      30      296    13  447
QTA-40 603117 654.00 656.10 2.10 <0.05  29 22.2  1755  1660      292    29  587
QTA-40 603118 656.10 658.00 1.90 <0.05  45 44.9  3300  3130      881  602  620
QTA-40 603119 658.00 659.00 1.00 <0.05  <5  1.3    105    130      157    10  504
QTA-40 603120 659.00 660.00 1.00 <0.05  <5  0.4      17      25          37      2  504
QTA-40 603121 660.00 662.00 2.00 <0.05      7  2.7    186    252          39      5  350
QTA-40 603122 662.00 663.20 1.20 <0.05  <5  0.5      21      22          64      6  394
QTA-40 603123 663.20 665.00 1.80 <0.05      8  8.6    856    863      932    74  445
QTA-40 603124 665.00 666.20 1.20 <0.05  <5  4.5    238    225      494    31  534
QTA-40 603125 666.20 667.40 1.20 <0.05      9      7    229    306      384    66  381
QTA-40 603126 667.40 667.60 0.20  0.19 899 >100 96400 37200    4710 1515  406
QTA-40 603127 667.60 670.00 2.40 0.025  25 24.5  1895  2180      225    36  303
QTA-40 603128 670.00 672.00 2.00 0.025  2.5      4    353    553          59      9  275
QTA-40 603129 672.00 674.00 2.00 0.025  49 60.7  5320  6040      167    59  334
QTA-40 603130 674.00 676.00 2.00 0.025  10 16.7  1445  2080          97    21  649
QTA-40 603131 676.00 678.00 2.00 0.025  19 23.1  1720  1370      113    40  340
QTA-40 603132 678.00 680.00 2.00 0.025  57 62.1  4030  3910      138  343  372
QTA-40 603133 680.00 682.00 2.00 0.025  82 90.7  8700  6030      291  939  347
QTA-40 603134 682.00 684.00 2.00 <0.05      5      3    182    709      767    35  283
QTA-40 603135 684.00 686.00 2.00 <0.05  <5  0.9      42      47      277      9  364
QTA-40 603136 686.00 688.00 2.00 <0.05      5  1.3      74    134      200      9  341
QTA-40 603137 688.00 690.00 2.00 <0.05  <5  0.9      35      46          79      4  446
QTA-40 603138 690.00 692.00 2.00 <0.05      6  8.7    490    672          68    14  333
QTA-40 603139 692.00 694.00 2.00 <0.05  <5  1.5      70      75          64      5  309
QTA-40 603140 694.00 695.90 1.90 <0.05  <5      1      55    126          80      5  391
QTA-40 603141 695.90 698.00 2.10 0.025  22 22.2  1910  1875      795  103  392
QTA-40 603142 698.00 698.90 0.90 0.025  11      9    113    145      294    83  686
QTA-40 603143 698.90 699.10 0.20 0.025  27 31.7  2700    411    4480 1405 1300
QTA-40 603144 699.10 699.70 0.60 0.025  22 33.5    506    754      664  235  707
QTA-40 603145 699.70 700.60 0.90 0.025 112 >100  1670  2040      785 1190  948
QTA-40 603146 700.60 700.75 0.15    1.1 178 >100  1890  2310 >10000 2050 1775
QTA-40 603147 700.75 700.90 0.15  0.75  52 62.2  3250  1315 >10000 3640 1490
QTA-40 603148 700.90 701.05 0.15  0.83 101 >100  4310  1665 >10000 3730 3400
QTA-40 603149 701.05 701.70 0.65 0.025  20 21.2    362    174      720  253  553
QTA-40 603150 701.70 702.00 0.30 0.025  36 34.3    921    489      885  664  356
QTA-40 603151 702.00 702.80 0.80 0.025  43 49.9  1390    890    1095  703  740
QTA-40 603152 702.80 703.15 0.35 0.025  19 23.2  1040  3530      548  528  772
QTA-40 603153 703.15 704.00 0.85 0.025  14 13.5  1035  1510      338  353  493
QTA-40 603154 704.00 705.60 1.60 0.025  15 10.3    758  3610      242  131  450
QTA-40 603155 705.60 706.00 0.40 <0.05  <5  1.9      79      84          65    10  311
QTA-40 603156 706.00 707.15 1.15 <0.05  <5  3.1    220    171      130    59  473
QTA-40 603157 707.15 707.70 0.55 <0.05  38 31.7  3830  1100    1270 1345  488
QTA-40 603158 707.70 708.00 0.30  0.12  29 33.5    308    437    1920  233  513
QTA-40 603159 708.00 710.00 2.00 <0.05      7  1.6      63      65      232    26  419
QTA-40 603160 710.00 712.00 2.00 <0.05  <5      4    221    119      276    74  520
QTA-40 603161 712.00 714.00 2.00 <0.05  <5  4.8    249    122          84    26  427
QTA-40 603162 714.00 716.00 2.00 <0.05      9  6.4    590    176    2090  175  452
QTA-40 603163 716.00 718.00 2.00 <0.05  <5  3.8    184    190      279    57  377
QTA-40 603164 718.00 720.00 2.00 <0.05      6  5.4    186    311      275    55  457
QTA-40 603165 720.00 722.00 2.00 <0.05      5  2.1      89      94      366    36  446
QTA-40 603166 722.00 724.00 2.00 <0.05  <5  1.5      55      66      136    20  376
QTA-40 603167 724.00 724.50 0.50 <0.05  <5  1.9      34      50          42      8  348
QTA-41 603168 38.20 38.70 0.50 <0.05  <5 <0.2      16      91          47      7  588
QTA-41 603169 38.70 40.00 1.30 <0.05  <5 <0.2      14    106          44      9  382
QTA-41 603170 40.00 41.89 1.89 <0.05  <5 <0.2      14      99          37      5  427
QTA-41 603171 41.89 42.20 0.31 <0.05  <5  0.2      12    112          61      6  401
QTA-41 603172 42.20 44.00 1.80 <0.05  <5 <0.2      12    112          52      9  429
QTA-41 603173 44.00 46.00 2.00 <0.05  <5 <0.2      13      86          45    12  349
QTA-41 603174 46.00 46.73 0.73 <0.05  <5  0.2          8    106      158    19  369
QTA-41 603175 46.73 47.33 0.60 <0.05  <5  1.1      10    118    1430    31 1150

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 70 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-41 603176 47.33 49.00 1.67 <0.05  <5 <0.2    13  104    77    13  507
QTA-41 603177 49.00 50.00 1.00 <0.05  <5  1.5    13  106 1085    27  839
QTA-41 603178 50.00 52.00 2.00 <0.05  <5 <0.2    14  102    59    12  577
QTA-41 603179 52.00 53.75 1.75 <0.05  <5 <0.2    11    93    47    11  544
QTA-41 603180 53.75 55.00 1.25  0.07  <5  1.6    13  111 2020    35 1210
QTA-41 603181 55.00 56.00 1.00 <0.05  <5  0.4    16  112  562    20  731
QTA-41 603182 56.00 58.00 2.00 <0.05  <5 <0.2    16  103    68      6  499
QTA-41 603183 58.00 60.00 2.00 <0.05  <5 <0.2    14  102    70      5  463
QTA-41 603184 60.00 62.00 2.00 <0.05  <5 <0.2    16  105    48      7  429
QTA-41 603185 62.00 64.00 2.00 <0.05  <5  0.2    17    94    67      8  450
QTA-41 603186 64.00 66.00 2.00 <0.05  <5 <0.2    17  103    45      4  413
QTA-41 603187 105.15 105.30 0.15 <0.05  <5 <0.2    10  118    74    32  267
QTA-41 603188 140.00 140.40 0.40 <0.05  <5  0.7    15  121    33    15  464
QTA-41 603189 140.40 142.00 1.60 <0.05  <5  0.2    16  110    25      6  478
QTA-41 603190 142.00 142.60 0.60 <0.05  <5 <0.2    17  112    22      4  484
QTA-41 603191 142.60 142.90 0.30 <0.05  <5 <0.2    17  158  368  165  389
QTA-41 603192 165.20 167.00 1.80 <0.05  <5  0.8    13    83  255      9  454
QTA-41 603193 167.00 168.30 1.30 <0.05      8  5.2    29    86    92    21  444
QTA-41 603194 198.70 200.45 1.75 <0.05  <5  0.5    18  124  106    15  591
QTA-41 603195 200.45 202.00 1.55 <0.05  <5  0.7    12    98    92    17  576
QTA-41 603196 202.00 202.65 0.65 <0.05  <5  2.2    30  122  414    22  831
QTA-41 603197 202.65 204.00 1.35 <0.05  <5  0.6    12  101  148    14  517
QTA-41 603198 204.00 206.00 2.00 <0.05  <5  0.5    13  105  124      9  496
QTA-41 603199 206.00 208.00 2.00 <0.05  <5  0.8    20    97  319    19  627
QTA-41 603200 208.00 209.90 1.90 <0.05  <5  1.1    60  132    80    17  529
QTA-41 603201 209.90 211.40 1.50 <0.05  <5  3.3    78  216  191    34  724
QTA-41 603202 211.40 212.20 0.80 <0.05  32 36.3  260  501 1605  153 1275
QTA-41 603203 212.20 214.00 1.80 <0.05  <5      1    15  104  192    12  657
QTA-41 603204 214.00 215.30 1.30 <0.05  <5  0.4    15    85    75      8  618
QTA-41 603205 215.30 216.00 0.70 <0.05  <5  0.5      8  102    68    10  533
QTA-41 603206 216.00 218.00 2.00 <0.05  <5  1.1    12    97  192    16  682
QTA-41 603207 218.00 220.00 2.00 <0.05  <5  0.6    10    91    93    12  584
QTA-41 603208 220.00 221.75 1.75 <0.05      5  3.2    11  115  668    30  736
QTA-41 603209 221.75 224.20 2.45  0.14  <5  3.5    18  111  676    39  461
QTA-41 603210 224.20 226.00 1.80  0.13  <5  2.6    16    98 1065    28  916
QTA-41 603211 226.00 228.00 2.00 <0.05  <5  0.7      6    85  458    23  772
QTA-41 603212 228.00 230.00 2.00  0.13      5  4.4    42  249 1530  100  570
QTA-41 603213 230.00 232.00 2.00 <0.05  <5  1.2    13    78 1065    50  805
QTA-41 603214 232.00 234.00 2.00 <0.05  <5  0.6    14  100  973    43  763
QTA-41 603215 234.00 236.00 2.00 <0.05  <5  0.7    14    99 1145    54  541
QTA-41 603216 236.00 237.70 1.70 <0.05  <5  2.4    11    83 1490    66  895
QTA-41 603217 237.70 237.90 0.20  0.25 147 >100 2380 1540 6050 2080 1085
QTA-41 603218 237.90 240.30 2.40 <0.05  <5  1.7    15  106 1960    85  562
QTA-41 603219 240.30 242.00 1.70 <0.05  <5  1.9    22    98 1815    78  819
QTA-41 603220 242.00 243.00 1.00 <0.05      6  5.8    80  181 1120    56  875
QTA-41 603221 243.00 244.70 1.70 <0.05  <5  0.8      8    57 1335    69  483
QTA-41 603222 244.70 245.20 0.50 <0.05      6  4.6    23  111  926    37  566
QTA-41 603223 245.20 246.00 0.80 <0.05  <5  0.8      8    53 1075    45  575
QTA-41 603224 246.00 248.00 2.00 <0.05  <5  0.4      5    60  297    14  446
QTA-41 603225 248.00 250.00 2.00  0.15  17 20.6  204    64 5380  129  994
QTA-41 603226 250.00 252.00 2.00 <0.05  <5      1    11    61 1120    20  440
QTA-41 603227 252.00 254.00 2.00 <0.05  10  8.6  116  221 1335    51  591
QTA-41 603228 254.00 256.00 2.00  0.07  <5  1.1    15    64  923    23  331
QTA-41 603229 256.00 258.00 2.00  0.13  <5  2.2    27    81 1600    18 1020
QTA-41 603230 258.00 260.00 2.00 <0.05  <5  0.3      5    51  220    18  482
QTA-41 603231 260.00 262.00 2.00 <0.05  <5  1.1    13    40  539    30  806
QTA-41 603232 268.00 270.00 2.00 <0.05  <5 <0.2    12    87  108  197  456
QTA-41 603233 270.00 272.00 2.00 <0.05  <5 <0.2    13    86    56    32  353
QTA-41 603234 272.00 274.00 2.00 <0.05  <5 <0.2    14    99  108    30  372
QTA-41 603235 274.00 276.00 2.00 <0.05  <5  0.2    14    68    66    16  386
QTA-41 603236 276.00 278.00 2.00 <0.05  <5  2.7    26  125  414    42  704
QTA-41 603237 278.00 280.00 2.00 <0.05  <5  1.2    12  105  385    24  681
QTA-41 603238 280.00 282.00 2.00 <0.05      5  0.2    16  108    63    15  299

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 71 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-41 603239 282.00 284.00 2.00 <0.05  <5 <0.2    13 110    24      9 316
QTA-41 603240 289.78 290.30 0.52 <0.05  <5  0.2    11    84    37      5 347
QTA-41 603241 290.30 292.00 1.70 <0.05  <5  0.2    11    87    56      7 387
QTA-41 603242 292.00 294.00 2.00 <0.05  <5  0.4    12    77 164    17 380
QTA-41 603243 294.00 296.00 2.00 <0.05  <5 <0.2    15    98    57    12 397
QTA-41 603244 296.00 298.00 2.00 <0.05  <5 <0.2    13 100 130    13 356
QTA-41 603245 298.00 300.00 2.00 <0.05  <5  0.2    14    99    62    10 399
QTA-41 603246 300.00 302.00 2.00 <0.05  <5 <0.2    13 100    52      7 406
QTA-41 603247 302.00 304.00 2.00 <0.05  <5 <0.2    16 102    71    12 466
QTA-41 603248 304.00 306.00 2.00 <0.05  <5 <0.2    16 110    44      9 311
QTA-41 603249 306.00 308.00 2.00 <0.05  <5  1.6    23 141    70    23 420
QTA-41 603250 308.00 310.00 2.00 <0.05  <5  0.2    11    71    37    18 362
QTA-41 603251 310.00 312.00 2.00 <0.05  <5  0.2    12    79    41    10 369
QTA-41 603252 312.00 314.00 2.00 <0.05  <5  0.2    20 110    64    15 434
QTA-41 603253 314.00 316.00 2.00 <0.05  <5 <0.2    15    86    65    14 363
QTA-41 603254 316.00 318.00 2.00 <0.05  <5  0.2      9    56    54      9 394
QTA-41 603255 324.00 326.00 2.00 <0.05  <5  0.3    16    90 126    12 412
QTA-41 603256 326.00 328.00 2.00 <0.05  <5  0.3      9    49 382    11 520
QTA-41 603257 328.00 330.00 2.00 <0.05  <5  0.4    11    58 716    53 404
QTA-41 603258 330.00 332.00 2.00 <0.05  <5  0.2      9    58 107    11 475
QTA-41 603259 332.00 334.00 2.00 <0.05  <5  0.2    12    77 111    12 396
QTA-41 603260 334.00 336.00 2.00 <0.05  <5  0.6    16    81 304    21 564
QTA-41 603261 336.00 338.00 2.00 <0.05  <5  0.3    12    59    80      9 437
QTA-41 603262 338.00 340.00 2.00 <0.05  <5  0.4    11    70    69      9 279
QTA-41 603263 340.00 342.00 2.00 <0.05  <5  0.3      6    40    69      7 611
QTA-41 603264 342.00 344.00 2.00 <0.05  <5  0.5    14    76    58    22 511
QTA-41 603265 344.00 346.00 2.00 <0.05  <5  0.4    15    87    71    13 466
QTA-41 603266 346.00 348.00 2.00 <0.05  <5 <0.2    10    62    58    19 407
QTA-41 603267 348.00 350.00 2.00 <0.05  <5  0.3    10    55 463    24 639
QTA-41 603268 350.00 352.00 2.00 <0.05  <5  0.8    12    66 600    38 485
QTA-41 603269 352.00 354.00 2.00 <0.05  <5  0.2    10    62 195    30 423
QTA-41 603270 354.00 356.00 2.00 <0.05  <5  0.2    11    67    62    22 378
QTA-41 603271 356.00 358.00 2.00 <0.05  <5  0.2      7    47 107    14 378
QTA-41 603272 358.00 360.00 2.00 <0.05  <5  0.2    10    51 267    21 394
QTA-41 603273 360.00 362.00 2.00 <0.05  <5 <0.2      9    46    87    20 376
QTA-41 603274 362.00 364.00 2.00 <0.05  <5 <0.2    13    90    98    25 397
QTA-41 603275 364.00 366.00 2.00 <0.05  <5  0.6      9    60 449    33 487
QTA-41 603276 366.00 368.00 2.00 <0.05  <5  0.2      8    49 115    18 328
QTA-41 603277 368.00 370.00 2.00 <0.05  <5  0.4    13    92 432    29 489
QTA-41 603278 370.00 372.00 2.00 <0.05  <5 <0.2    16 100    19    15 416
QTA-41 603279 372.00 374.00 2.00 <0.05  <5 <0.2    17 112    26    12 364
QTA-41 603280 374.00 376.00 2.00 <0.05  <5 <0.2    16 104 111    13 421
QTA-41 603281 376.00 378.00 2.00 <0.05  <5 <0.2    18 108 115    12 370
QTA-41 603282 378.00 380.00 2.00 <0.05  <5 <0.2    14    82    43    10 393
QTA-41 603283 380.00 382.00 2.00 <0.05  <5  0.2    17 102    56    13 332
QTA-41 603284 382.00 384.00 2.00 <0.05  <5  0.3    16 111    24    10 394
QTA-41 603285 384.00 386.00 2.00 <0.05  <5  0.2    16 109    24    11 391
QTA-41 603286 386.00 388.00 2.00 <0.05  <5  0.2    16 103    23      8 449
QTA-41 603287 388.00 390.00 2.00 <0.05  <5 <0.2    16 102    14      9 387
QTA-41 603288 390.00 392.00 2.00 <0.05  <5 <0.2    14 105    18      9 399
QTA-41 603289 392.00 394.00 2.00 <0.05  <5  0.4    17 115    48      4 384
QTA-41 603290 394.00 396.00 2.00 <0.05  <5  0.2    19 112    27      6 323
QTA-41 603291 396.00 398.00 2.00 <0.05  <5 <0.2    11    77    10      4 451
QTA-41 603292 398.00 400.00 2.00 <0.05  <5 <0.2    14    91    18      5 419
QTA-41 603293 400.00 402.00 2.00 <0.05  <5 <0.2    18 111    23    13 333
QTA-41 603294 402.00 404.00 2.00 <0.05  <5  0.2    16 105    45    13 338
QTA-41 603295 404.00 406.00 2.00 <0.05  <5  0.2    15    90    31      9 369
QTA-41 603296 406.00 408.00 2.00 <0.05  <5 <0.2    17 102    20      5 347
QTA-41 603297 408.00 410.00 2.00 <0.05  <5  0.2    16 102    27      3 349
QTA-41 603298 410.00 412.00 2.00 <0.05  <5  0.7    17 106    32      9 407
QTA-41 603299 412.00 414.00 2.00 <0.05  <5  0.3    17 106    33      9 570
QTA-41 603300 414.00 416.00 2.00 <0.05  <5  0.2    14    98    18    10 378
QTA-41 603301 416.00 417.15 1.15 <0.05  <5  0.2    15    98 126    13 382

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 72 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-41 603302 417.15 417.45 0.30 <0.05  <5  0.2    15    52  156    13  730
QTA-41 603303 417.45 418.00 0.55 <0.05  <5  0.4    16    97    27    14  332
QTA-41 603304 418.00 420.00 2.00 <0.05  <5  0.5    14    98    30    11  421
QTA-41 603305 420.00 422.00 2.00 <0.05  <5  1.1    23 106  255    24  469
QTA-41 603306 422.00 424.00 2.00 <0.05  <5  0.4    16 104    55    32  495
QTA-41 603307 424.00 426.00 2.00 <0.05  <5  0.2    18 102    21    11  372
QTA-41 603308 426.00 428.00 2.00 <0.05  <5  0.4    20 106    65    15  363
QTA-41 603309 428.00 430.00 2.00 <0.05  <5 <0.2    17 102    81    22  389
QTA-41 603310 430.00 432.00 2.00 <0.05  <5  0.8    15 116  354  341  306
QTA-41 603311 432.00 434.00 2.00 <0.05  <5  1.8    28 208  195    38  338
QTA-41 603312 434.00 436.00 2.00 <0.05  <5 <0.2    17 104    46    30  370
QTA-41 603313 436.00 438.00 2.00 <0.05  <5  0.2    16 100    49    15  404
QTA-41 603314 438.00 440.00 2.00 <0.05  <5  0.2    19 100    95    20  407
QTA-41 603315 440.00 442.00 2.00 <0.05  <5  0.2    20 100    69    18  379
QTA-41 603316 450.00 452.00 2.00 <0.05  <5  0.9    35 140    94    28  451
QTA-41 603317 452.00 454.00 2.00 <0.05  <5  1.7    17 127  147    16  394
QTA-41 603318 454.00 456.00 2.00 <0.05  <5  0.3    16 104    97    15  410
QTA-41 603319 456.00 458.00 2.00 <0.05  <5  0.6    21 104  490    23  402
QTA-41 603320 458.00 460.00 2.00 <0.05  <5  0.2    14    87  121    34  423
QTA-41 603321 460.00 462.00 2.00 <0.05  <5 <0.2    16 102    55    13  307
QTA-41 603322 462.00 464.00 2.00 <0.05  <5 <0.2    18    94  159    12  492
QTA-41 603323 464.00 466.00 2.00 <0.05  <5 <0.2    27 102    21      6  441
QTA-41 603324 478.00 480.00 2.00 <0.05  <5  0.3    17 104    35    14  398
QTA-41 603325 480.00 482.00 2.00 <0.05  <5  0.3    14 107    41    18  373
QTA-41 603326 482.00 484.00 2.00 <0.05  <5  0.2    18    96    35    25  530
QTA-41 603327 484.00 486.00 2.00 <0.05  <5  0.9    17    95  134    50  543
QTA-41 603328 486.00 488.00 2.00 <0.05  <5  2.8    42    99  280    28  561
QTA-41 603329 488.00 490.00 2.00 <0.05  <5  0.2    18 100    19    12  445
QTA-41 603330 490.00 492.00 2.00 <0.05  <5  0.2    16 102    12      7  374
QTA-41 603331 492.00 494.00 2.00 <0.05  <5  0.3    18 102      9    10  353
QTA-41 603332 494.00 496.00 2.00 <0.05  <5 <0.2    15    97    12      8  396
QTA-41 603333 500.00 502.00 2.00 <0.05  <5 <0.2    17    96    18      8  369
QTA-41 603334 502.00 504.00 2.00 <0.05  <5  0.2    17 103      9    13  334
QTA-41 603335 514.00 516.00 2.00 <0.05  <5  0.3    13 101    23    21  382
QTA-41 603336 516.00 518.50 2.50 <0.05  <5      1    61    92  109    57  652
QTA-41 603337 518.50 518.70 0.20  0.07  <5  2.5    29    70 1175 4820 1720
QTA-41 603338 518.70 520.00 1.30 <0.05  <5  0.3      8    49    68  120  408
QTA-41 603339 520.00 522.00 2.00 <0.05  <5  3.4    14 108  434    44  646
QTA-41 603340 529.15 532.00 2.85 <0.05  <5  1.5    20 102  269    42  430
QTA-41 603341 532.00 534.00 2.00 <0.05  <5  0.4      9    54    19    13  716
QTA-41 603342 540.00 542.00 2.00 <0.05  <5  0.4    15    81      9      7  434
QTA-41 603343 542.00 544.00 2.00 <0.05  <5  0.6    16    97    13    10  374
QTA-41 603344 544.00 546.00 2.00 <0.05  <5  0.3    10    68    19    10  488
QTA-41 603345 546.00 548.00 2.00 <0.05      7  8.7 128 170  290  103  454
QTA-41 603346 548.00 550.00 2.00 <0.05  25 27.8 506 196  524  398  596
QTA-41 603347 550.00 552.00 2.00 <0.05      8  7.7    76 121  100    69  505
QTA-41 603348 552.00 554.00 2.00 <0.05      5  7.4 181 108  211  138  462
QTA-41 603349 554.00 556.00 2.00 <0.05  11 12.5    81 156  132    78  681
QTA-41 603350 556.00 558.00 2.00 <0.05      5  4.9    29 108  558    40  615
QTA-41 603351 558.00 560.00 2.00  0.07  <5  3.3    21 123  778    26  495
QTA-41 603352 560.00 562.00 2.00 <0.05  <5  3.7    82 133    37    61  453
QTA-41 603353 562.00 564.00 2.00 <0.05  <5  1.1    10    60    10    14  409
QTA-41 603354 564.00 566.00 2.00 <0.05  <5  4.9    74 128  253    58  915
QTA-41 603355 574.00 576.00 2.00 <0.05  <5  0.4    16    97    15      6  419
QTA-41 603356 576.00 578.00 2.00 <0.05  <5      1    17 102    29      6  372
QTA-41 603357 578.00 580.00 2.00 <0.05  <5  3.6    46 162    51    30  409
QTA-41 603358 580.00 582.00 2.00 <0.05  <5  3.1 359 186    32  152  429
QTA-41 603359 590.45 593.45 3.00 <0.05  17 19.7 224 280  206  158  488
QTA-41 603360 593.45 595.00 1.55 <0.05  15 17.9    99 105  551    94  715
QTA-41 603361 595.00 596.00 1.00 <0.05  <5  0.5    14 100    43    31  375
QTA-41 603362 596.00 598.00 2.00 <0.05  <5  0.4    18    95    15    13  393
QTA-41 603363 598.00 600.00 2.00 <0.05      7  0.4    21 102      7      9  358
QTA-41 603364 600.00 602.60 2.60 <0.05  <5  0.3    14    85    11      8  398

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 73 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-41 603365 602.60 604.05 1.45 <0.05  <5      1    95  328  523  115  553
QTA-41 603366 604.05 606.00 1.95 <0.05  <5  0.7    17    90    37    16  414
QTA-41 603367 606.00 608.00 2.00 <0.05      7  0.2    17    95    14      8  374
QTA-41 603368 608.00 609.15 1.15 <0.05  <5  0.6    14    80    16      3  415
QTA-41 603369 609.15 609.90 0.75 <0.05  <5  1.8    25  164    63    10  516
QTA-41 603370 609.90 612.00 2.10 <0.05  <5  0.4    19  100    13      8  391
QTA-41 603371 612.00 614.00 2.00 <0.05  <5  0.3    20  106    18      6  362
QTA-41 603372 614.00 616.00 2.00 <0.05  <5 <0.2    17  100    18      5  369
QTA-41 603373 616.00 618.00 2.00 <0.05  <5  0.2    16  110      3      3  333
QTA-41 603374 618.00 620.00 2.00 <0.05  <5  0.4    20  108    <2      4  376
QTA-41 603375 620.00 622.00 2.00 <0.05  <5  0.3    18  110    14      3  345
QTA-41 603376 622.00 624.00 2.00 <0.05  <5  0.2    11  104    11      2  354
QTA-41 603377 624.00 626.00 2.00 <0.05  <5  0.6    16  114    23      7  351
QTA-41 603378 626.00 628.00 2.00 <0.05  <5 <0.2    18  104    41    15  345
QTA-41 603379 628.00 630.00 2.00 <0.05  <5  0.2    18  109    14    14  332
QTA-41 603380 630.00 632.00 2.00 <0.05  <5  0.5    17  109    24      8  363
QTA-41 603381 632.00 634.20 2.20 <0.05  <5  0.2    17  102    23      7  333
QTA-41 603382 634.20 636.00 1.80 <0.05  <5 <0.2    18  104    20      3  336
QTA-41 603383 650.00 652.00 2.00 <0.05  <5  0.6    20  181    27      5  412
QTA-41 603384 652.00 654.00 2.00 <0.05  <5 <0.2    17  112    20    <2  285
QTA-41 603385 654.00 656.00 2.00 <0.05  <5 <0.2    23  118    11      2  281
QTA-41 603386 656.00 658.35 2.35 <0.05  <5  0.2    22  116    16      3  330
QTA-41 603387 678.00 680.20 2.20 <0.05  <5  0.2    17    98    21      4  317
QTA-41 603388 680.20 681.10 0.90 <0.05  <5 <0.2    19  102    48    36  374
QTA-41 603389 681.10 681.30 0.20 <0.05  <5  0.2    21  112  144    22  251
QTA-41 603390 681.30 683.00 1.70 <0.05  <5  0.2      9    52    16    10  480
QTA-41 603391 683.00 684.89 1.89 <0.05  <5  3.5    35  174  220    21  402
QTA-41 603392 684.89 688.00 3.11 <0.05  <5  0.2    10    53    23      6  381
QTA-41 603393 688.00 690.10 2.10 <0.05  <5  0.2    11    52    13      6  343
QTA-41 603394 690.10 692.00 1.90 <0.05  <5  0.2    16    82    28    14  411
QTA-41 603395 692.00 694.00 2.00 <0.05  <5  0.2    17    90    20      9  381
QTA-41 603396 694.00 696.00 2.00 <0.05  <5 <0.2    17    82    27      9  354
QTA-41 603397 696.00 697.80 1.80 <0.05  <5  0.2    11    58    42      5  370
QTA-41 603398 697.80 698.40 0.60 <0.05  <5  0.2    56  176    26      5  915
QTA-41 603399 698.40 700.00 1.60 <0.05  <5  0.2    17  100    76    12  360
QTA-41 603400 700.00 702.00 2.00 <0.05  <5  0.3    18    92    64    13  401
QTA-41 603401 702.00 704.00 2.00 <0.05  <5  1.7    15    87    76    20  443
QTA-41 603402 704.00 706.00 2.00 <0.05  <5  1.7    12    65  138    13  448
QTA-41 603403 706.00 708.00 2.00 <0.05  <5  0.3    15    84    48    14  330
QTA-41 603404 708.00 710.00 2.00 <0.05  <5  0.3    16    85  119    16  349
QTA-41 603405 710.00 712.00 2.00 <0.05  <5  0.2    18    91  167    19  348
QTA-41 603406 712.00 714.00 2.00 <0.05  <5  0.2    15    99    47    16  325
QTA-41 603407 714.00 716.00 2.00 <0.05  <5  0.5    12    80    57    14  388
QTA-41 603408 716.00 718.00 2.00 <0.05  <5  1.4    24  110  245    38  687
QTA-41 603409 718.00 720.00 2.00 <0.05  <5  1.7    14    69  328    28  509
QTA-41 603410 720.00 722.00 2.00 <0.05  <5  0.5    12    59    93    17  420
QTA-41 603411 722.00 724.00 2.00 <0.05  <5  0.5    12    90  122    23  455
QTA-41 603412 724.00 726.00 2.00 <0.05  <5  0.4    11  145    84    17  445
QTA-41 603413 726.00 728.00 2.00 <0.05  <5  0.4    23    95    40    26  404
QTA-41 603414 728.00 730.00 2.00 <0.05  <5  0.6    17  102    74    18  412
QTA-41 603415 730.00 732.10 2.10 <0.05  <5  0.5    20    75    69    25  446
QTA-41 603416 732.10 734.00 1.90 <0.05  <5  0.8    72  108    79    39  508
QTA-41 603417 734.00 736.00 2.00 <0.05  <5  2.1    45    93  106    58  639
QTA-41 603418 736.00 738.30 2.30 <0.05  <5  1.4  198  248  759  169  600
QTA-41 603419 738.30 739.10 0.80 <0.05  18 16.6 2430 1930 2310 1875  823
QTA-41 603420 739.10 740.05 0.95 <0.05  <5  5.8 2710 1745  439 1965  819
QTA-41 603421 740.05 740.75 0.70 <0.05  <5  4.1  531  335  267  388 1065
QTA-41 603422 740.75 742.00 1.25 <0.05  <5  1.1    31    44  148    41  680
QTA-41 603423 742.00 744.00 2.00 0.025  55 57.8 1690  877  299  772  737
QTA-41 603424 744.00 745.10 1.10  0.13  43 45.6 2420 3810 8780 1010 1915
QTA-41 603425 745.10 746.00 0.90 <0.05  <5      1    25    62  162    26  636
QTA-41 603426 746.00 748.00 2.00 <0.05  <5  1.4    57    53  225    42  558
QTA-41 603427 748.00 750.00 2.00 <0.05  <5  2.9    90  134  441    41  601

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 74 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-41 603428 750.00 751.30 1.30 <0.05  <5  0.6    11    24      171    19  477
QTA-41 603429 751.30 752.60 1.30 <0.05  <5  5.9  132  150      231    66  684
QTA-41 603430 752.60 753.80 1.20 <0.05  <5      6  235  456      714  110  794
QTA-41 603431 753.80 756.00 2.20 <0.05  <5  1.1    25    76    1145    68  500
QTA-41 603432 756.00 758.00 2.00  0.07  <5  4.7 1490 1115    1865  600  698
QTA-41 603433 758.00 760.00 2.00 <0.05      9  7.8  270  243      425  109  672
QTA-41 603434 760.00 761.10 1.10  0.13  <5  3.3  184  138    1935  163  885
QTA-41 603435 761.10 761.40 0.30 <0.05  <5  0.9  142  149      498  116  877
QTA-41 603436 761.40 764.00 2.60 <0.05  <5  0.9    12    64      233    18  450
QTA-41 603437 764.00 765.10 1.10 <0.05  <5  1.2    21  107      329    25  653
QTA-41 603438 765.10 766.40 1.30 <0.05  <5  0.9    10    56      348    25  579
QTA-41 603439 766.40 768.10 1.70  0.07  <5  3.4  229    80      995  203  872
QTA-41 603440 768.10 770.00 1.90  0.07  <5  1.8  255  240      243  211  824
QTA-41 603441 770.00 772.00 2.00 <0.05  <5  0.6    17    73      270    29  526
QTA-41 603442 772.00 773.02 1.02  0.14  44 43.7 5820 4710 >10000 1900  588
QTA-41 603443 773.02 776.00 2.98  0.19      8    11  500  627    8570  372 1240
QTA-41 603444 776.00 778.00 2.00 <0.05  <5  0.7    26    67      378    28  522
QTA-41 603445 778.00 780.00 2.00 <0.05  <5  0.9    26    47      292    32  558
QTA-41 603446 780.00 782.00 2.00 <0.05  <5  3.8  452  132          88    65  423
QTA-41 603447 782.00 784.00 2.00 <0.05  <5  0.4      6  112          47    14  409
QTA-41 603448 784.00 785.75 1.75 <0.05  <5  0.7    56  133          40    21  442
QTA-41 603449 785.75 786.70 0.95  0.06      6  6.5 1055  712    2130  197  639
QTA-41 603450 786.70 788.00 1.30 <0.05  <5  0.6      8    61          60    12  435
QTA-41 603451 788.00 789.40 1.40 <0.05  <5  0.6      6    42      184    11  452
QTA-41 603452 789.40 790.05 0.65 <0.05  <5  3.6  382  156      307  111  669
QTA-41 603453 790.05 790.80 0.75  0.06      9  8.5 1390  730      432  470  706
QTA-41 603454 790.80 792.00 1.20    0.1  <5  0.6    29    70      753    38  501
QTA-41 603455 792.00 794.00 2.00 <0.05  <5  0.6    17    41          65    16  442
QTA-41 603456 794.00 796.00 2.00 <0.05  <5  0.2    12    46          63    14  376
QTA-41 603457 796.00 797.20 1.20 <0.05  <5  0.8    28  201      154    33  791
QTA-41 603458 797.20 800.00 2.80 <0.05  <5  0.4      7    45          57    12  420
QTA-41 603459 800.00 802.30 2.30 <0.05  <5  3.3    43  101      112    41  743
QTA-41 603460 802.30 802.65 0.35    0.2  97 >100 6020 4590    1645 4320 1045
QTA-41 603461 802.65 804.00 1.35 0.025  11 15.5 1330  529      209  892  621
QTA-41 603462 804.00 806.00 2.00 <0.05  <5  0.8    27  168          78    51  696
QTA-41 603463 806.00 808.00 2.00 <0.05  <5  0.3    31  118          40    22  415
QTA-41 603464 808.00 810.00 2.00 <0.05  <5  0.5    28  118          38    16  452
QTA-41 603465 810.00 812.00 2.00 <0.05  <5  0.5    16  148          85    26  638
QTA-41 603466 812.00 814.00 2.00 <0.05  <5  0.3    14    99          44    23  426
QTA-41 603467 814.00 816.00 2.00 <0.05  <5  1.3    17    97      214    26  597
QTA-41 603468 816.00 816.50 0.50  0.07  20 19.8  437  346    3400  395 1385
QTA-41 603469 816.50 818.00 1.50 <0.05  <5  0.6    11    97      277    26  517
QTA-41 603470 818.00 820.00 2.00 <0.05  <5 <0.2    10  103      316    15  380
QTA-41 603471 820.00 822.00 2.00 <0.05  <5  0.5    16  104      158    16  418
QTA-41 603472 822.00 824.00 2.00 <0.05  <5  0.4    19  110          81    16  363
QTA-41 603473 824.00 826.00 2.00 <0.05  <5 <0.2    14    95          51    10  438
QTA-41 603474 826.00 828.00 2.00 <0.05  <5  0.2    20  107          54    12  566
QTA-41 603475 828.00 830.00 2.00 <0.05  <5  0.2    14  110          55    10  478
QTA-41 603476 830.00 832.00 2.00 <0.05  <5  0.2    14    91      164    14  548
QTA-41 603477 832.00 834.00 2.00 <0.05  <5  0.6    16  114          69    13  484
QTA-41 603478 834.00 836.00 2.00 <0.05  <5  0.2    12    97      106    11  450
QTA-41 603479 836.00 838.00 2.00 <0.05  <5  0.4    14  106      115    12  462
QTA-41 603480 838.00 840.00 2.00 <0.05  <5  0.4    13    95      225    17  498
QTA-41 603481 840.00 842.00 2.00 <0.05  <5  0.4    24  117      128    12  488
QTA-42 603482 54.00 56.00 2.00 <0.05      6 <0.2    17    95          59      2  294
QTA-42 603483 56.00 58.00 2.00 <0.05  <5  0.2    17  110          20    <2  297
QTA-42 603484 58.00 60.00 2.00 <0.05  <5 <0.2    16    80          12    <2  330
QTA-42 603485 60.00 62.00 2.00 <0.05  <5 <0.2    13    70            9    <2  237
QTA-42 603486 62.00 64.00 2.00 <0.05  <5  0.3    21  109          21      3  389
QTA-42 603487 64.00 66.00 2.00 <0.05  <5 <0.2    15    98          18    <2  415
QTA-42 603488 66.00 68.00 2.00 <0.05  <5  0.2    16  114          35    <2  337
QTA-42 603489 68.00 70.00 2.00 <0.05  <5 <0.2    15    95          60      2  405
QTA-42 603490 70.00 72.00 2.00 <0.05  <5 <0.2    12    80          20      3  344

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 75 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-42 603491 82.00 84.00 2.00 <0.05  <5 <0.2    14    82    13    <2 274
QTA-42 603492 90.00 92.00 2.00 <0.05  <5 <0.2    15 102    18    <2 301
QTA-42 603493 92.00 94.00 2.00 <0.05  <5 <0.2    13 103    22    <2 317
QTA-42 603494 94.00 96.00 2.00 <0.05  <5 <0.2    14 109    22    <2 293
QTA-42 603495 96.00 98.00 2.00 <0.05  <5 <0.2    16 120    18      2 313
QTA-42 603496 98.00 100.00 2.00 <0.05  <5  0.2    16 121    12      3 247
QTA-42 603497 100.00 102.00 2.00 <0.05  <5 <0.2    15 110    26    <2 282
QTA-42 603498 102.00 104.00 2.00 <0.05  <5 <0.2    16 101    39      2 280
QTA-42 603499 114.00 116.00 2.00 <0.05      5 <0.2    14 103    77      2 428
QTA-42 603500 116.00 118.00 2.00 <0.05  <5 <0.2    12    85    61      3 643
QTA-42 603501 118.00 120.00 2.00 <0.05  <5 <0.2    15 116    37      5 247
QTA-42 603502 120.00 122.00 2.00 <0.05  <5  0.2    16 119    42      6 291
QTA-42 603503 122.00 124.00 2.00 <0.05  <5 <0.2    14    83 164    15 394
QTA-42 603504 124.00 126.00 2.00 <0.05  <5 <0.2    14    88    14      2 251
QTA-42 603505 126.00 128.00 2.00 <0.05  <5 <0.2    17    98    17      3 408
QTA-42 603506 128.00 130.00 2.00 <0.05  <5 <0.2    14    96    11      2 381
QTA-42 603507 130.00 132.00 2.00 <0.05  <5 <0.2    17 106    12      5 301
QTA-42 603508 132.00 132.90 0.90 <0.05  <5 <0.2    17 100 150    20 361
QTA-42 603509 132.90 134.00 1.10 <0.05  <5 <0.2    16 102    54    10 304
QTA-42 603510 134.00 136.00 2.00 <0.05  <5  0.2    16 106    17      9 309
QTA-42 603511 136.00 138.00 2.00 <0.05  <5  0.3    17 102    19      5 320
QTA-42 603512 138.00 140.00 2.00 <0.05  <5  0.2    18    97    15      6 325
QTA-42 603513 140.00 142.00 2.00 <0.05  <5 <0.2    21    99    17      8 319
QTA-42 603514 142.00 144.00 2.00 <0.05  <5  0.2    17    92    37      7 337
QTA-42 603515 144.00 146.00 2.00 <0.05  <5 <0.2    15    99    22      7 260
QTA-42 603516 168.00 170.00 2.00 <0.05  <5 <0.2    15    98    25      6 296
QTA-42 603517 170.00 172.00 2.00 <0.05  <5 <0.2    13 105    21      4 329
QTA-42 603518 172.00 174.00 2.00 <0.05  <5  0.2    15 100    14      3 313
QTA-42 603519 174.00 176.00 2.00 <0.05  <5 <0.2    16 106    10      3 304
QTA-42 603520 176.00 178.00 2.00 <0.05  <5 <0.2    15 101    19      3 327
QTA-42 603521 178.00 180.00 2.00 <0.05  <5 <0.2    17 108    22      4 302
QTA-42 603522 180.00 182.00 2.00 <0.05  <5 <0.2    17 108    16      3 325
QTA-42 603523 182.00 183.00 1.00 <0.05  <5 <0.2    16 119    23      5 277
QTA-42 603524 183.00 184.30 1.30 <0.05  <5  0.2    14 102    23      4 300
QTA-42 603525 184.30 185.60 1.30 <0.05  <5 <0.2    13    76    38      6 382
QTA-42 603526 185.60 188.00 2.40 <0.05  <5 <0.2    15    82    34    10 316
QTA-42 603527 188.00 190.00 2.00 <0.05  <5 <0.2    14    92    22      4 291
QTA-42 603528 198.00 200.00 2.00 <0.05  <5  0.2    15    96    21      5 278
QTA-42 603529 200.00 201.40 1.40 <0.05  <5  0.2    14    98    25      6 253
QTA-42 603530 201.40 202.80 1.40 <0.05  <5 <0.2    12    90    22      4 318
QTA-42 603531 202.80 204.00 1.20 <0.05  <5 <0.2    17    95    13      4 309
QTA-42 603532 204.00 206.00 2.00 <0.05  <5  0.2    16 100    23      5 309
QTA-42 603533 206.00 208.00 2.00 <0.05  <5  0.3    16 101    27      6 268
QTA-42 603534 208.00 210.00 2.00 <0.05  <5 <0.2    14    98    22      3 293
QTA-42 603535 230.30 232.00 1.70 <0.05  <5 <0.2    15 102    24      2 260
QTA-42 603536 232.00 234.00 2.00 <0.05      5  0.2    15 102    39      4 298
QTA-42 603537 234.00 236.00 2.00 <0.05  <5 <0.2    12    96    32      5 326
QTA-42 603538 236.00 237.90 1.90 <0.05  <5 <0.2    17    93    24      4 346
QTA-42 603539 246.84 248.35 1.51 <0.05  <5  0.2    22    63 191      6 354
QTA-42 603540 248.35 249.40 1.05 <0.05  <5 <0.2    14    93    33      4 292
QTA-42 603541 267.30 268.00 0.70 <0.05  <5 <0.2    16    86    45      4 493
QTA-42 603542 268.00 270.00 2.00 <0.05  <5 <0.2    15 102    43      4 383
QTA-42 603543 270.00 272.00 2.00 <0.05  <5 <0.2    14 100    42      4 439
QTA-42 603544 272.00 273.20 1.20 <0.05  <5  0.2    16 104    27      4 314
QTA-42 603545 273.20 274.80 1.60 <0.05  <5 <0.2    14    87    27      4 336
QTA-42 603546 301.30 303.60 2.30 <0.05  <5  0.2    14    89 108    10 397
QTA-42 603547 310.40 312.00 1.60 <0.05  <5  0.3    16 108    33      2 344
QTA-42 603548 312.00 314.20 2.20 <0.05  <5  0.2    17 110    36    <2 344
QTA-42 603549 314.20 316.00 1.80 <0.05  <5  0.2    16 113    37    <2 374
QTA-42 603550 316.00 318.00 2.00 <0.05  <5  0.2    17 105    28      2 364
QTA-42 603551 318.00 320.00 2.00 <0.05  <5  0.2    17    95    16    <2 345
QTA-42 603552 320.00 322.00 2.00 <0.05  <5  0.2    14    91    10      4 292
QTA-42 603553 322.00 323.15 1.15 <0.05  <5 <0.2    16    93    17      2 256

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 76 of 77


Appendix 5 - Summary of QTA-11 to 42 Drill Intervals and Assays

Hole ID
Sample
Number
From
(m)
To
(m)
Width
(m)
Au
(g/t)
Ag (FA)
(g/t)
Ag
(g/t)
Pb
ppm
Zn
ppm
As
ppm
Sb
ppm
Mn
ppm
QTA-42 603554 323.15 325.00 1.85 <0.05  <5 <0.2    17 106    20      3 277
QTA-42 603555 325.00 327.00 2.00 <0.05  <5  0.3    16 107    25    <2 338
QTA-42 603556 327.00 329.00 2.00 <0.05  <5  0.2    18 128  211    16 312
QTA-42 603557 342.80 344.60 1.80 <0.05  <5  0.2    11    86    43      2 415
QTA-42 603558 403.40 405.00 1.60 <0.05  <5  0.2    25 110    20      3 375
QTA-42 603559 405.00 406.70 1.70 <0.05  <5  0.2    16 103    66    <2 372
QTA-42 603560 411.30 411.50 0.20 <0.05  <5 <0.2    20    54 1370    21 234
QTA-42 603561 411.50 412.30 0.80 <0.05  <5 <0.2    16 112    26    <2 330
QTA-42 603562 412.30 412.50 0.20 <0.05  <5 <0.2    17    97  171      3 248
QTA-42 603563 419.60 421.00 1.40 <0.05  <5  0.2    21    70    20      6 345
QTA-42 603564 421.00 423.00 2.00 <0.05  <5  0.2    14    84    17      5 373
QTA-42 603565 423.00 425.00 2.00 <0.05  <5  0.2    13    92    24      6 341
QTA-42 603566 425.00 426.50 1.50 <0.05  <5  0.2    19 104  273      8 329
QTA-42 603567 426.50 428.00 1.50 <0.05  <5 <0.2    18 122    55      7 346
QTA-42 603568 428.00 430.00 2.00 <0.05  <5  0.2    18    88    37      5 415
QTA-42 603569 430.00 432.00 2.00 <0.05  <5  0.2    18    85  331      6 413
QTA-42 603570 447.50 449.37 1.87 <0.05  <5  0.2    15    86    42    <2 313
QTA-42 603571 449.37 451.76 2.39 <0.05  <5 <0.2    16 108  128      4 309
QTA-42 603572 451.76 454.00 2.24 <0.05  <5  0.2    16    70    62      4 313
QTA-42 603573 512.22 514.00 1.78 <0.05  <5  0.2    18 102    40      2 315
QTA-42 603574 514.00 516.00 2.00 <0.05  <5  0.2    15 102    19    <2 330
QTA-42 603575 516.00 518.00 2.00 <0.05  <5  0.2    18 116    49      3 310
QTA-42 603576 518.00 519.00 1.00 <0.05  <5 <0.2    16 101    27    <2 374
QTA-42 603577 641.25 642.30 1.05 <0.05  <5  0.2    27    91 5250 232 204

Caracle Creek International Consulting Inc.  
QTA06-NS, November 15th, 2006 Page 77 of 77


 







EX-99.38 39 exhibit99-38.htm SUMMARY REPORT FOR THE DUKE ISLAND CU-NI-PGE PROPERTY Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.38

Avalon Development Corp.
P.O. Box 80268
Fairbanks, Alaska 99708
Phone: 907-457-5159
Fax: 907-455-8069
Email: avalon@alaska.net
Web site: www.avalonalaska.com

CONSENT OF AUTHOR

To: BC Securities Commission
  Alberta Securities Commission
  Ontario Securities Commission

I, Curtis Freeman, do hereby consent to the filing, with the regulatory authorities referred to above, of the technical report dated August 25, 2006 and titled “SUMMARY REPORT FOR THE FOR THE DUKE ISLAND CU-NI- PGE PROPERTY, KETCHIKAN MINING DISTRICT, ALASKA” and to the written disclosures of the Technical Report and of extracts from or a summary of the Technical Report in the written disclosure to be filed by Quaterra Resources Inc..

Dated this 25th day of August 2006

Signature of Qualified Person
Curtis J. Freeman, CPG #6901


i

GEOLOGIC REPORT DK06EXE-1

 

SUMMARY REPORT
FOR THE DUKE ISLAND CU-NI- PGE PROPERTY,
KETCHIKAN MINING DISTRICT,
ALASKA

 

prepared for

 

Quaterra Resources Inc.
Quaterra Alaska Inc.
1550 – 1185 West Georgia St.
Vancouver, B.C. V6E 4E6

 

prepared by

 

Avalon Development Corp.
P.O. Box 80268
Fairbanks, AK 99708

 

August 25, 2006

 

 

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


ii

TABLE OF CONTENTS

Cover Sheet i
Table of Contents ii
List of Figures iii
List of Tables iii
Summary 1
Introduction and Terms of Reference 1
Disclaimer 1
Property Description and Location 1
Access and Infrastructure 2
History 3
Geologic Setting 4
Deposit Types 5
Mineralization 7
Exploration 7
Drilling 12
Sample Method and Approach 15
Sample Preparation, Analysis and Security 16
Data Verification 18
Adjacent Properties 18
Mineral Processing and Metallurgical Testing 18
Mineral Resource and Mineral Reserve Estimates 19
Other Relevant Data and Information 19
Conclusions and Interpretations 19
Recommendations 20
References Cited 27
Statement of Qualifications 29

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


iii

LIST OF FIGURES

Figure 1: Location map for the Duke Island project
Figure 2: Land status map for the Duke Island project
Figure 3: Tectonic terranes map of southern Southeast Alaska
Figure 4: General geology of Duke Island
Figure 5: Location of Cu-Ni-PGE prospects on the Duke Island prospect
Figure 6: Location of proposed drill holes on copper geochemistry thematic values
Figure 7: Location of proposed drill holes on HEM contour image
Figure 8: Location of proposed drill holes on airborne magnetics image
Figure 9: Location of proposed drill holes on corrected Bouguer gravity image

LIST OF TABLES

Table 1: Significant rock geochemistry from the 2001 Duke Island field program
Table 2: Significant drill geochemistry from the 2001 Duke Island field program
Table 3: Significant drill geochemistry from the 2005 Duke Island field program
Table 4: Summary of samples collected at Duke Island, 2001 – 2005
Table 5: Summary of proposed 2006 drill holes at Duke Island
Table 6: Summary of recommended work programs and budgets at Duke Island

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


iv

SUMMARY

     Recently discovered copper, nickel and platinum group element mineralization at Duke Island is unlike that present in any known Ural – Alaska mafic-ultramafic complex in Alaska’s Alexander Platinum Belt. Geochemical, geological and geophysical data suggest that sulfide-bearing mineralization extends for over 14.5 kilometers along strike and up to 3.8 kilometers across strike with the ultimate dimensions of the mineralized system remaining open to expansion at surface and at depth. Surface samples have returned values ranging from <10 ppm to 2.8% copper, <1 ppm to 0.25% nickel and <6 ppb to over 1 gram per tonne combined platinum plus palladium. Copper – nickel – PGE mineralization is preferentially hosted in coarse grained clinopyroxenite and to a lesser degree in wehrlite and hornblende pyroxenite. Sulfide mineralization occurs in disseminated, net textured, semi-massive and massive forms as pyrrhotite > chalcopyrite >> pentlandite. The mineralogy of PGE-bearing minerals is unknown.

     Several phases of airborne and ground geophysical surveys have been applied at Duke Island since 2001, including airborne magnetics and 6-channel electromagnet and ground-based Max-Min, gravity and IP. Electromagnetic methods have proven most useful in delineating sulfide-bearing zones and in conjunction with rock geochemistry and the other ground and airborne methods, provided targeting data for diamond drilling.

     Limited diamond drilling has been conducted at the Marquis, Potato Patch and Raven zones in 2001 and 2005. Results included significant intervals of massive, semi-massive and disseminated sulfides containing copper values ranging from below detection to multiple meter intervals in the 0.2 to 0.3% range. Platinum and palladium values were variable but highly anomalous (+200 ppb) in some copper mineralized intervals. Mineralization at all three zones remains open to expansion.

     U-Pb age determinations on unmineralized portions of the Duke Island mafic-ultramafic complex suggest a mid-Cretaceous age for the complex, an age that is in general agreement with ages for other dated Ural Alaska complexes in the Alexander Platinum Belt of SE Alaska. However, the presence of widespread and significant sulfide mineralization at Duke Island is unlike any of the other Cretaceous Ural Alaska complexes in the region. U-Pb age determinations from gabbro and diorite(?) host rocks surrounding the Duke Island complex returned Triassic ages that are nearly identical to those found in the Cu-Ni-PGE bearing intrusives and flood basalts of the Wrangellia terrane in the central Alaska Range and western Yukon Territory. The Alaska Range occurrences currently are being explored for Noril’sk type sulfide mineralization and the Wellgreen deposit in the western Yukon is a past producing platinum and palladium mine. If the age of mineralization at Duke Island is Triassic, there is potential for Noril’sk type Cu-Ni-PGE mineralization at Duke Island.

     An alternative exploration model for Cu-Ni-PGE mineralization at Duke Island is that sulfide mineralization is related to sulfur saturation within and adjacent to the zoned Ural – Alaska complex which hosts it. While this mode of sulfide formation is unique for the Alexander

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


v

     Platinum Belt, Duke Island has long been a unique example of Ural – Alaska complexes due to the complex graded bedding and other features suggestive of episodic magma introduction under quiescent conditions.

     Regardless of which geological model turns out to be correct, the widespread Cu-Ni-PGE mineralization at Duke Island and the potential for new sulfide discoveries at surface and at depth elevate the project to one of the most important new Cu-Ni-PGE discoveries in North America.

     Based on preliminary field, laboratory and literature studies completed to date, additional work at the Duke Island project is. With the exception of item 1 below, which should be implemented and completed prior to commencement of additional drilling, none of the recommended programs are dependent on the successor failure of each other. Recommended programs include:

  1.

Extensive geochemical sampling and geologic mapping of the Monte prospect and other prospective areas should be conducted. In addition, a thorough review of all petrological, geochemical and lithologic data should be instituted to help guide future exploration efforts. The approximate cost of this program would be $106,500.

  2.

A drill program at Marquis, consisting of approximately 6,950 feet in 10 holes. The approximate cost of this program would be $869,000

  3.

A drill program at Raven, consisting of approximately 5,200 feet in 7 holes. The approximate cost of this program would be $650,000.

  4.

A drill program at Scarp, consisting of approximately 1,800 feet in 3 holes. The approximate cost of this program would be $225,000.

  5.

A drill program at Lookout, consisting of approximately 600 feet in 1 hole. The approximate cost of this program would be $75,000.

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


1

INTRODUCTION AND TERMS OF REFERENCE

     The following report was commissioned by Quaterra Resources Inc. (Quaterra) to summarize in Canadian National Instrument 43-101 format, the geology and mineralization of the Duke Island copper – nickel - platinum group element (PGE) prospect in southeast Alaska. In early 2001 Avalon Development Corp. identified several geologically promising PGE exploration targets in Alaska which prompted Quaterra to acquire mining claims at Duke Island. Avalon conducted initial fieldwork on the property in March-April and August-November 2001. Avalon conducted further fieldwork on the property in July 2002, September 2003 and summarized the results of these programs in Freeman (2003). Additional exploration was conducted in May-June 2004 and June-September 2005. Avalon was retained to complete this summary report for Quaterra. Recommended work programs are included at the end of this report.

     Unless otherwise noted, all costs contained in this report are denominated in United States dollars (US$1.00 = CDN$1.15) . For purposes of this report, the acronym “PGE” (platinum group element) will be used when referring to a specific group of elements, namely platinum (Pt), palladium (Pd), iridium (Ir), osmium (Os), rhodium (Rh) and ruthenium (Ru). The acronym “PGM” (platinum group minerals) will be used when referring to mineralogical species containing one or more of the platinum group elements. For purposes of this report, the term “massive sulfide” will refer to any rock with a total sulfide content in excess of 35% by volume.

DISCLAIMER

     The attached report has been prepared by Avalon using public documents acquired by the author and private documents given to the authors for this purpose. While reasonable care has been taken in preparing this report, Avalon cannot guarantee the accuracy or completeness of all supporting documentation. In particular, Avalon did not attempt to determine the veracity of geochemical data reported by third parties, nor did Avalon attempt to conduct duplicate sampling for comparison with the geochemical results provided by other parties. The interpretive views expressed herein are those of the authors and may or may not reflect the views of Quaterra.

PROPERTY DESCRIPTION AND LOCATION

     The Duke Island Cu-Ni-PGE prospect is located in the Prince Rupert quadrangle of southeast Alaska about 30 miles south of Ketchikan (Figure 1). The Duke Island project consists of 129 unpatented Federal lode mining claims covering 2,580 acres, and 11 state of Alaska mining claims covering 1,280 acres in the Ketchikan quadrangle in Township 80 South, Range 93 East (Figure 2). The federal claims are registered as QTDKL1 through QTDKL45, QTDKL46 through QTDKL95, QTDKL96 through QTDKL99 and QTDKL140 through QTDKL169 with U.S. Bureau of Land Management case file numbers AA83179-83223, AA83431-83480, 83665-83668 and 85184 through 85213, respectively. The state claims are registered as QTDKST1 through QTDKST11 with Alaska Division Mining, Land and Water Management case file

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


2

numbers 604422 through 604427 and 604722 through 604726. The state claims are on land that has been selected for Patent to the State of Alaska but such patents have not been issued and there is no guarantee that such patents will be issued in the future. In the event the State of Alaska gains patented rights to the land on which the claims are located, the existing state claims held by Quaterra will become valid state of Alaska mining claims with all rights attendant, including the right to explore, develop and mine. In the event the state relinquishes its rights to patent the land on which the claims are located, the existing state claims held by Quaterra will become invalid and the land will revert to the U.S. Forest Service.

     Mineral rights in this part of Alaska are administered by the U.S. Forest Service and the Alaska Department of Natural Resources. The Duke Island project is located within the Tongass National Forest on multiple-use lands open to mineral development. Annual rental payments are due on or before each August 31 and total $125 per claim per year. Annual rentals are paid in lieu of work on Federal ground. Annual rents are $25 per 40 acre claim for State claims and work on the properties in the amount of $100 per claim per year is required. All claims currently are in good standing. Quaterra Alaska Inc., a subsidiary of Quaterra, owns 100% of the State and federal claims subject only to a 3% Net Proceeds Interest on production from state lands. Neither the federal nor the state mining claims have been surveyed by a registered land surveyor and there is no State or federal law or regulation requiring such surveying. There are no known environmental liabilities attached to the property and permits for future work will be acquired from the U.S. Forest Service and other State and federal regulatory agencies on an as-needed basis.

     In early 2005 Quaterra was notified by the U.S. Forest Service that three local native Alaskan Indian tribal organizations had notified the Forest Service that parts of Duke Island had been used by ancestral peoples for various reasons and that mineral exploration and development in these areas could destroy or damage archeological resources if not properly managed for mitigation or avoidance. Subsequent meetings between Quaterra, the USFS and the affected Indian organizations lead to an agreement whereby the Forest Service would conduct archeological surveys of known and suspected sites on Duke Island and notify Quaterra of any sites where mineral exploration and development would be prohibited. Following agreement by all parties to this plan, the Forest Service conducted botanical and archeological surveys of Quaterra’s proposed drill areas mid-2005 and found no cultural resources in the proposed drill areas and found no botanical species in these areas that would prohibit drilling of the proposed holes. By agreement among the parties, the Forest Service has not released the findings of any of their cultural resource surveys to the public domain. This course of action was chosen to eliminate or reduce the chance that members of the general public would desecrate or otherwise damage cultural sites identified by the Forest Service at Duke Island.

ACCESS AND INFRASTRUCTURE

     The Duke Island project is accessible via boat, small float plane and helicopter. There is tidewater access to the southeast end of the property at Judd Harbor and the central portion of the property via Hall Cove (Figure 2). Numerous areas of the property are accessible with a helicopter. Elevations on the property range from sea level to 1,700 feet at the peak of Mt. Lazaro on the south end of Duke Island. Other than the peak at Mt. Lazaro, topography at Duke Island is subdued with irregular small hills (100 – 300 feet elevation) surrounded by low areas

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


3

covered by marshes and small ponds. Temperate wet and often windy weather conditions prevail in this part of Alaska and allow a snow-free working season in most years from April through November.

     The city of Ketchikan (population 14,000) is located 30 miles to the north and is the regional commercial hub for this part of southeast Alaska. The city hosts an all-season deep water port, international airport, commercial fixed wing and helicopter services, and most of the support industry required for mineral exploration.

HISTORY

     Very little mineral exploration work has been performed on Duke Island. Prior to 2001, the only drilling conducted on the property was conducted by in the late 1950’s by Columbia Iron Mining, a subsidiary of United States Steel. The drilling tested two areas for potential magnetite mineralization. Nine vertical drill holes are reported to have been drilled to a depth of 500 feet to ascertain the magnetite content of the ultramafic rocks (Irvine, 1974). Six holes were drilled on the southeast side of Hall Cove and three in the Judd Harbor area. Precise locations of these holes are uncertain and no assay data of any kind are available to the authors from Columbia Iron drilling program at Duke Island. Although Irvine’s published works at Duke Island (Irvine, 1959; 1974) are considered critical to the genetic understanding of Ural – Alaska mafic-ultramafic complexes, the potential for PGE mineralization was not addressed during these efforts. In 1972, Clark and Greenwood collected 22 rock samples for PGE assays as part of a regional sampling and petrology study. In 1989 Bureau of Mines geologists collected 24 samples for assay (Foley, 1997). Eleven additional samples were collected by the Bureau of Mines in 1995 (Maas and others, 1995). None of these efforts led to discovery of significant mineralization at Duke Island.

     In March and April 2001, Avalon Development conducted reconnaissance scale pan concentrate and grab rock sampling on behalf of Quaterra Resources and staked 45 federal claims and 6 state claims. Follow-up work was conducted in July which resulted in discovery of Cu-Ni-PGE sulfide mineralization hosted in pyroxenites on the north end of Quaterra’s claims. Subsequent rock sampling, soil sampling and 11,200 line-feet of dipole-dipole induced polarization geophysics were completed on the project in September and October. In November and December Avalon collected additional rock samples from the project and completed 4 diamond drill holes totaling 1,467 feet from two drill stations in the Marquis zone. Total expenditures for 2001 at Duke island were approximately $289,000.

     In July 2002 AeroQuest Ltd. flew combined airborne magnetics and 6-channel electromagnetics over the Duke Island project. A total of 890.5 line kilometers of survey was completed with most of this total along 200 meter-spaced lines. A small area (168 line kilometers) covering the Marquis (Discovery) zone was flown at 100 meter spacing. Following delivery of the digital and hard copy data from this survey, consulting geophysicist Joseph Inman reviewed the data and prioritized magnetic and electromagnetic targets for subsequent field follow-up. During and prior to the airborne geophysical surveys, limited field reconnaissance work was conducted to ground truth several Landsat TM anomalies identified by Perry Remote Sensing. The most promising of these anomalies was field checked and revealed outcropping disseminated sulfide mineralization outside areas previously known to contain such

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


4

mineralization. A total of 43 grab rock samples were collected at this time. No further fieldwork was conducted in 2002. Total expenditures for 2002 at Duke island were approximately $303,000.

     In September 2003 the diamond drill rig and all support equipment on Duke Island were demobilized to Ketchikan. Following this work a series of high priority EM conductors were field checked and limited soil and rock sampling completed. A total of 45 rock grab samples and 66 shovel soil samples were collected. Reconnaissance work elsewhere on the island revealed the presence of disseminated sulfide mineralization at Cape Northumberland on the extreme southern end of Duke Island. Total expenditures for 2003 at Duke island were approximately $110,000.

     In late May and early June 2004 Clark Jorgenson of Big Sky Geophysics was contracted to conduct a ground based HCP-EM (Max-Min), magnetometer, and gravimeter survey of the Marquis and Raven prospects. Avalon Development provided permitting and field support. Big Sky completed 20,000 line-feet (6.1 line km) of survey over the Marquis and Raven prospects. Total expenditures for 2004 at Duke Island were approximately $75,000.

     In Mid June 2005 Mike Powers of Aurora Geosciences completed 48,030 line-feet (14.6 line km) of ground based gravimeter survey, expanding on the 2004 program. On August 15th Connors Drilling LLC. mobilized their Longyear 38 drill to Duke Island with drill setup commencing on the 16th. A total of 4,504 feet (1,373 m) of NQ2 core (1.995 inch diameter) in 7 holes was drilled at the Marquis, Potato Patch, and Raven prospects. On September 9th all drilling equipment was demobilized to Ketchikan. Only wooden tent floors remain onsite at the Marquis zone. Total expenditures for 2005 at Duke Island were approximately $395,000.

GEOLOGIC SETTING

     The Duke Island project is situated within a tectonic belt of variable age and composition rocks known as the Alexander Terrane (Figure 3, Plafker and Berg, 1994). Rocks of the Alexander Terrane are composed of island arc and ocean floor volcanic rocks with thick assemblages of overlying oceanic sedimentary rocks that range in age from Devonian through lower Triassic (400 to 220 Ma, Gehrels and Berg, 1994). Deformation of the previously accreted Wrangellia and Alexander Terranes occurred in mid-Cretaceous and was caused by westward migration and accretion of the Wrangellia-Alexander superterrane with the Gravina Belt/Taku Terrane along the western margin of the North American craton. Regional greenschist to amphibolite facies metamorphism and subduction related intrusive activity accompanied accretion of the Wrangellia - Alexander superterrane. Uranium – lead age dates from zircons at the Duke Island ultramafic complex range from 106 to 107 Ma (Saleeby, 1992). Ultramafic bodies such as the Duke Island complex are common on either side of the Alexander Terrane – Gravina Belt/Taku Terrane suture zone and are believed to be temporally if not genetically related to accretion of the Chugach Terrane to the previously accreted Alexander and Wrangellia superterranes (Foley and others, 1997).

     The Duke Island complex consists of two separate areas of well-exposed zoned ultramafics, Judd Harbor on the south and Hall Cove on the north. The Judd Harbor body is about 3 km in diameter while the Hall Cove body is about 3 km by 6 km in size. The Judd

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Harbor and Hall Cove complexes have been interpreted to be parts of the same zoned Ural Alaska intrusive body at depth (Irvine, 1974). Both bodies are comprised of a dunite and wehrlite core surrounded by concentric zones of olivine clinopyroxenite, hornblende-magnetite clinopyroxenite, and gabbro (Figure 4). The complexes are intruded by late hornblendite and hornblende-plagioclase pegmatite. The exposed complexes at Duke Island show remarkable compositional layering, particularly in the olivine clinopyroxenite. Irvine (1974) postulated that such layering is due to changes in magma chemistry and subsequent fractionation and precipitation of mineral crystals settling downward through the lighter melt. Flow textures, graded bedding, and dislodged xenolith fragments are commonly observable in outcrop.

     A series of northwest and northeast trending faults have been mapped at Duke Island (Irvine, 1974; Saleeby, 1992). These structures appear to post-date emplacement of the Duke Island ultramafic body. Field mapping and airborne magnetic data support this conclusion. The most significant of these structures is the Hall Cove – Grave Point structure which trends northeast along the trace of Hall Cove. This feature is believed to be contiguous with the Grave Point shear zone mapped by Saleeby (1992). Field relationships suggest this structure has an unknown amount of southeast-side down relative displacement. Ultramafic rocks of the Judd Harbor portion of the complex are exposed between the Bite Cove and Judd Harbor faults suggesting the ultramafic blocks occupy a horst block between the two structures. Copper-nickel-PGE mineralization discovered to date appears to be controlled by northwest trending structures although its relationship to the Hall Cove, Bite Cove and Judd Harbor structures is unknown.

     High-level airborne magnetics conducted over the Duke Island complex suggests the mafic-ultramafic complex is elongate in a northwest – southeast direction with relatively steep sides on its northeastern and southwestern limits (Irvine, 1974). The gabbro unit extending north from Mt. Lazaro is invisible to magnetics suggesting that the Hall Cove and Judd Harbor segments of the complex probably are connected at depth beneath a thin “skin” of gabbro. Dunite and wehrlite which were thought by Irvine (1974) and Saleeby (1992) to be the youngest rocks in the complex are in fact cut by sulfide-bearing rocks ranging from pyroxenite in the Marquis zone through hornblende pyroxenite in the extreme northwest to hornblendite in the extreme southeast edge of the island.

DEPOSIT TYPES

     Prior to discovery of significant accumulations of massive, semi-massive and disseminated sulfide mineralization in 2001, the Duke Island prospect was considered to be a classic zoned Ural - Alaska type mafic - ultramafic complex (Irvine, 1959, 1974, Figures 4). It is unique on a worldwide basis for its remarkable graded igneous bedding features. Ural - Alaska type zoned complexes are found in Russia, Ethiopia, Columbia, and Canada as well as several places in Alaska (Himmelberg and Loney, 1995; Irvine, 1974, Ruckmick and Noble, 1959; Taylor, 1979; Moegessie and others, 1999; Tistl, 1994; Nixon and others, 1990).

     On a worldwide basis, each of the ultramafic rock types within an individual complex and within a given belt is chemically and mineralogically uniform. More deeply eroded Ural – Alaska belts and complexes often are associated with alluvial PtFe alloy accumulations and are hosted in large volumes of more regionally extensive gabbroic rocks which coincide with the

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orientation of the host Ural – Alaska belt (Taylor, 1979; Tolstykh and others, 2000). Debate continues as to whether or not these gabbroic rocks are related in any way to the Ural – Alaska complexes which intrude them.

     Mineralogically, Ural-Alaska type complexes have a distinctive chemistry common to virtually all known complexes, regardless of their metal content. Pyroxenes are almost exclusively clinopyroxenes (diopsidic augite) with orthopyroxenes being extremely rare. Plagioclase is nearly absent in most Ural – Alaska complexes, olivine is highly magnesian and magnetite (often titaniferous) contents average 15-20% by volume (Taylor, 1979; Himmelberg and Loney, 1995). Chromite is a common trace mineral in Ural – Alaska complexes but its statistical and paragenetic relationship to the PGEs is inconsistent within an individual belt as well as within an individual complex (Foley and others, 1997). With the exception of Duke Island and the Turnagain complex in British Columbia (Simpson, 2006), copper and nickel contents in most Ural - Alaska complexes are lower than in most other PGE-bearing complexes and neither element is strongly correlated with PGEs. Platinum is the primary PGE recovered from Ural – Alaska deposits and forms coarse placer occurrences in the deeply weathered Ural Mountains, in Columbia, in the Goodnews Bay area of southwestern Alaska and in the Tulameen complex of southern British Columbia (Mertie, 1969). Lode accumulations of platinum have been identified in several locations in Russia, including the Nishniy – Tagil District and at Galmeonsky on the Kamchatka Peninsula (T.K. Bundtzen, oral comm., 2001).

     There are 11 known PGE-bearing Ural – Alaska type occurrences in Alexander Platinum Belt of southeast Alaska. The Duke Island complex constitutes the southern-most member of this belt which stretches over 350 miles north – south by 20 to 30 miles east-west. A number of these complexes were explored in the 1950s to the 1970s for their iron ore potential due to their high magnetite and ilmenite contents. The Ural – Alaska complexes of the Alexander Platinum Belt are thought to be genetically related to eastward convergence of the Chugach Terrane with the previously emplaced Wrangellia and Alexander superterranes between 90 and 110 Ma (Foley and others, 1997). The zoned complexes were emplaced above the subduction zone and within rocks of the Wrangellia, Alexander and Taku terranes and the overlying Gravina terrane. The linear nature of the Alexander Platinum Belt and the striking similarity between the individual complexes which make up the belt suggest their emplacement may be related to the same tectonic event, in this case the change from strongly compressional tectonics to oblique transpressional tectonics about 110 to 115 Ma. This event, caused by subduction of the Farallon plate beneath the North American plate, may have allowed the rapid rise of deep-seated plutonic bodies into the upper crust along major terrane sutures or inter-terrane structures.

     The genetic and paragenetic relationships between various metals and minerals in Ural – Alaska complexes of the Alexander Platinum Belt are poorly known at best. Most of the data on PGEs and the minerals that contain them are a result of exploration programs designed to locate and quantify other metals, primarily chromite, uranium or iron/titanium oxide. Prior to Quaterra’s work on Duke Island in 2001, none of the Ural – Alaska complexes in the Alexander Platinum Belt were known to host significant quantities of copper, nickel or PGE-bearing sulfides. As a consequence, there is little historical data on copper, nickel and PGEs in the Alexander Platinum Belt and what data there is may have little bearing on the true potential of a given Ural – Alaska complex to host economic concentrations of these metals. Host rocks that currently are thought to be permissive for Cu-Ni-PGE mineralization at Duke Island cover an

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area approximately 72 square miles in size. Reconnaissance-scale field examinations to date have covered less than 10% of this prospective terrain.

     Recent petrologic studies have suggested that sulfide mineralization at Duke Island is the results of mixing of magmatic and crustal sulfur sources (σ 34S range between -7 and +4‰), a common feature of most Cu-Ni sulfide deposits (Evans-Lamswood and others, 2000). Thakutra and others (2005) indicated that 187Re/ 188Os ratios in clinopyroxenites show a wide range between 7 and 460. 187Os/188Os ratios are also elevated (2.7 to 4.8) with γOs values computed for 110 Ma (U-Pb zircon age) of 2000 to 5000. The supra-chondritic Os isotopic values also are suggestive of assimilation of crustal materials. The σ 18O values of clinopyroxene in the clinopyroxenite and olivine clinopyroxenite samples range between 5 and 6‰, whereas those for olivine range between 4.4 and 5.7‰ . The σ 18O and σ D values of the hydrothermal fluid calculated from the σ 18O and σ D values of serpentine, using appropriate fractionation factors and a temperature of 300oC are about 3 and -73‰ respectively. The oxygen and hydrogen isotopic values calculated for the hydrothermal fluid indicate mixing of magmatic sources with meteoric and/or sea-water. Periodic magma introduction followed by more quiescent crystal fractionation and settling are conducive for base metals and PGE sulfide accumulation at Duke Island.

MINERALIZATION

     Copper and nickel mineralization at Duke Island occurs as chalcopyrite and pentlandite in massive to disseminated pyrrhotite. Sulfide mineralization is primarily hosted in clinopyroxenite as interstitial blebs, pods and net-textured masses. There is little correlation between PGE content and sulfide content. PGE enriched intervals occur in sulfide rich intervals, but there are also numerous sulfide rich intervals with no appreciable PGE content. PGE assays from 46 rock samples collected by Clark and Greenwood (1972) returned values up to 200 ppb Pt and 184 ppb Pd. Eleven additional samples collected by the US Bureau of Mines in 1995 revealed Pt values up to 31 ppb, Pd values up to 264 ppb, Cu values up to 2,223 ppm and Ni values up to 1,240 ppm (Maas and others, 1995). Irvine (1974) conducted limited trace element analyses at Duke Island and reported values up to 3,200 ppm Cr and 2,700 ppm Ni from the Duke Island complex (no PGE analyses were conducted). Similar Cr and Ni values have been found in other Ural – Alaska type complexes in southeastern Alaska and are usually associated with dunite bodies where these metals occur as chromite pods and as inclusions in the olivine lattice, respectively. Copper, nickel and iron contents at Duke Island are significantly elevated relative to most Ural – Alaska complexes and suggest the Duke Island complex is a hybrid Ural – Alaska complex or that sulfide mineralization at Duke Island was controlled by physical and chemical controls similar to those which affect layered intrusive complexes. Details relating to mineralization from more recent exploration programs at Duke Island are presented in “Exploration”.

EXPLORATION

     In March and April 2001, Quaterra Resources funded a reconnaissance pan concentrate and rock sampling program on Duke Island. A total of 85 pan concentrate samples and 112 rock samples were collected from Duke and Kelp Islands and analyzed for Pt, Pd and Au. The best rock samples, with highs of 134 ppb Pt and 225 ppb Pd are located in or adjacent to the dunite

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core in the Hall Cove area and in the pyroxenite units on the north coast of Kelp Island. The small body of pyroxenite on the south side of Hall Cove proper contains anomalous Pt (to 134 ppb) and Pd (to 114 ppb) The two streams draining hill 470 on the western side of the Judd Harbor pyroxenite body show steady increases in Pt values as you proceed down stream. The highest Pt pan concentrate value (81 ppb) came from the sample collected at the lowest elevation on the northern of these two streams. Palladium values also increase downstream on these two streams as well but at a lower and less obvious level. These values suggest potential for lode mineralization on hill 470. Streams draining the western extreme of the Duke Island complex where it intrudes older diorite and granodiorite did not return significant Au, Pt or Pd values in pan concentrate samples.

     The pan concentrate samples from the Judd Harbor portion of the Duke Island complex indicate that the zone of transport for magnetite extends to sea level. The stream gradients on the two streams in this area which showed increasing Pt-Pd grades down stream are both in the range of 300 to over 400 feet per mile. Based on our experience elsewhere in southeast Alaska most of the PGE anomalies in pan concentrates come from portions of streams where the gradient is somewhere between 300 and 100 feet per mile. The upper ends of streams (+300 ft/mi) are in the zone of transport for magnetite, chromite and other PGE-bearing minerals, including ferroplatinum alloys that form nuggets in some Ural – Alaska complexes. There are no anomalous PGE values on portions of streams where the gradient is less than 100 feet per mile because PGE-bearing minerals have dropped out of the sediment load before reaching this point in a stream. The streams on Duke Island suggest transportation of PGEs and pathfinder elements throughout their length, particularly in the Bite Cove and Judd Harbor areas on the eastern side of the complex.

     Net-textured chalcopyrite was discovered in rubble crop at the Marquis zone in August 2001 followed by addition discoveries in September of massive pyrrhotite with chalcopyrite in outcrop and rubble crop at Marquis. Subsequent grab rock sampling returned values of up to 1.95% copper, 0.25% nickel and 1 grams per tonne combined platinum and palladium (Table 1). The samples were collected from a recessive-weathering zone of orange-red iron oxide stained coarse-grained pyroxenite that contained from 5% to 30% residual fine-grained sulfides (pyrite, pyrrhotite and chalcopyrite), some in net-texture form. Much of the outcrop and subcrop occur in low boggy areas with heavy red-brown clay suggestive of acid weathering of sulfides. The net textured mineralization suggests that sulfides may have accumulated by gravity separation from an ultramafic magma.

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Table 1: Significant grab rock geochemistry, 2001 Duke Island project

Sample # Cu_ppm Ni_ppm Co_ppm Pt_ppb Pd_ppb Pt+Pd Cr_ppm Rock Unit
466011 28,400 732 245 24 145 169 518 Pyroxenite
466013 25,200 912 348 24 157 181 416 Pyroxenite
466035 22,000 328 85 14 23 37 115 Pyroxenite
466030 21,800 2,231 476 66 268 334 38 Pyroxenite
466012 19,800 955 367 55 162 217 450 Pyroxenite
468504 19,500 893 346 75 221 296 434 Pyroxenite
492109 15,900 2,539 650 177 288 465 178 Pyroxenite
468357 13,100 696 145 117 214 331 99 Pyroxenite
468505 7,648 1,478 612 77 90 167 223 Pyroxenite
466022 7,206 668 257 163 224 387 137 Pyroxenite
466032 6,827 803 306 37 49 86 108 Pyroxenite
110570 6,324 513 213 100 125 225 87 Pyroxenite
468352 6,277 1,211 138 153 235 388 341 Pyroxenite
110553 5,712 655 76 23 41 64 255 Pyroxenite
466019 5,302 790 133 35 105 140 195 Pyroxenite
463428 5,227 242 48 98 225 323 187 Pyroxenite
466029 5,057 905 308 17 20 37 96 Pyroxenite
110559 4,938 2,322 540 112 238 350 298 Pyroxenite
110562 4,845 339 95 141 250 391 204 Pyroxenite
466031 4,755 163 29 110 113 223 103 Pyroxenite
466016 4,657 839 280 117 244 361 77 Pyroxenite
110587 4,239 548 207 27 91 118 255 Pyroxenite
468509 4,205 341 160 55 98 153 164 Pyroxenite
468510 4,133 359 174 60 90 150 150 Pyroxenite
468506 4,025 193 107 16 46 62 205 Pyroxenite
468354 2,484 644 106 384 631 1,015 838 Pyroxenite

     In early October 2001 Zonge Engineering completed 11,200 line-feet (3,414 line-meters) of dipole – dipole induced polarization geophysics over a portion of the Marquis zone. The IP survey outlined a zone of potential mineralization that extends 1,600 feet in length (NW-SE), at least 400 feet in depth from surface and up to 400 feet in width. The zone is open to the northwest where it appears to plunge or become faulted below surface. The survey also indicated that rocks adjacent to the core high conductivity zone contained significant IP chargeability responses which could be related to disseminate sulfides zoned around a central core or trough where more massive accumulations occur. These high chargeability zones extend for over 1,200 feet on either side of the high conductivity core anomaly. Subsequent surface prospecting extended the known length of sulfide mineralization to 1600 meters in a northwest – southeast direction and up to580 meters in a northeast – southwest direction.

     By the end of November 2001, nine distinct areas of Cu-Ni-PGE mineralization had been discovered on the Duke Island prospect (Figure 5). Mineralization had been extended over approximately 750 meters within the Marquis zone and had been identified in outcrop over a discontinuous distance of 14 kilometers northwest-southeast across Duke Island. Surface outcrops of sulfide mineralization discovered in mid-2002 further extended the maximum width of mineralization to 3.2 kilometers northeast-southwest. Of the 245 rock samples collected,

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approximately forty percent of the samples (99 samples) returned Cu values in excess of 1,000 ppm and over sixty percent of the samples (158 samples) returned Cu values in excess of 100 ppm (Figure 6). Over thirty percent of the samples (78 samples) also returned Pt + Pd values in excess of 100 ppb. Over sixty percent of the samples (155 samples) also returned Ni values in excess of 100 ppm.

     During November and December 2001, Quaterra contracted with Layne Drilling to complete 4 diamond drill holes (447 meters, 1,467 feet) in the Marquis zone. The holes were drilled from two drill pads approximately 225 meters apart centered on coincident rock geochemical and IP geophysical anomalies. The drill targets are associated with a highly conductive IP anomaly flanked by extensive chargeability anomalies to the northeast and southwest. Drilling conducted in 2001 tested surface rock anomalies and the extent and reliability of IP anomalies. Massive sulfides with highly anomalous copper and lesser nickel and PGE values were encountered in all holes. Results are discussed under “Drilling”.

     In January 2002 Perry Remote Sensing was retained to conduct a preliminary Landsat Thematic Mapping (T M) analysis of the Duke Island prospect (Perry, 2002). The spectral image of iron-oxide stained sulfide-bearing rocks at the Marquis zone was used for ground truth to determine if surface outcrops of other potentially mineralized areas exist on Duke Island. The TM imagery identified two other obvious targets to the southwest and southeast of the Marquis zone. A total of 43 rock samples were collected in June 2002 in the southwestern TM anomaly, now known as the Monte zone (Figure 5). Approximately fifty percent of these samples (21 samples) returned values in excess of 1,000 ppm copper. Values for Pt, Pd, Ni and Co were generally lower than seen in the Marquis zone with maximum values of 310 ppb, 468 ppb, 784 ppm and 237 ppm, respectively.

     In July 2002 Aeroquest Limited completed helicopter-borne airborne magnetic and 6-channel multifrequency electromagnetic surveys of the Duke Island project area (Fiset, 2002). A total of 890.5 line-kilometers of combined survey was completed at a 200 meter line spacing (722 line kilometers) with 169 line kilometers of in-fill lines at 100 meter spacing in selected areas. The nominal EM bird terrain clearance was 30+ meters. The survey revealed that areas of known sulfide mineralization generally fall within broad zones of anomalous conductivity that extend well beyond the limits of outcropping sulfides (Figure 7). A total of 459 high priority anomalies were identified by Aeroquest, including 311 Type 1 anomalies with positive in-phase response and a distinct, probable hardrock source and 148 Type 2 anomalies with a negative inphase and positive quadrature response (conductive magnetic anomalies). The largest zone of conductive anomalies occurs on the north side of the Marquis Zone and extends for 2.5 kilometers in an east-west direction (Inman, 2002). This zone is well north of the area drilled by Quaterra in 2001 and is located in an area where no sampling or mapping had been conducted prior to the airborne program. This area is mapped as gabbro and has a low magnetic signature typical of gabbroic rocks elsewhere on the island. Magnetic and EM data also suggest that gabbroic units extending 1-2 miles to the north-northeast from the summit of Mt. Lazaro are underlain by highly conductive and variably magnetic rocks similar to those exposed on surface to the east and west of the gabbro body (Figures 7 and 8). This observation suggests that sulfide mineralization may underlie the gabbro body, significantly increasing the size potential of the Duke Island system. A similar conclusion regarding gabbro overlying ultramafic rocks was drawn from field work completed by Irvine (1974).

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     Inman (2002) prioritized the airborne EM anomalies and initial ground follow-up of airborne EM anomalies was begun in September 2003. A total of 45 rock grab samples and 66 shovel soil samples were collected. Sampling was concentrated on the northeast Marquis, Raven and Potato Patch zones (Figures 5 and 6). These target areas also exhibit strongly conductive electromagnetic signature that suggest the presence of sulfide mineralization. Anomalous copper values up to 136 ppm were recovered from soils in the northeast Marquis zone however, additional soil sampling due east of the Marquis discovery returned highly anomalous copper (to 359 ppm) with grab rock samples returning values up to 984 ppm copper (Figure 6). No previous sulfide mineralization was known from this area and no surface outcrops of sulfide mineralization have been found to explain these soil and rock anomalies.

     In addition, 2003 field work expanded the size of known sulfide mineralization at the Potato Patch zone and also expanded the size of known sulfide mineralization at the Raven zone. Previous work at the Raven zone returned copper values up to 2.2% from a small area of outcrops surrounded by low, swampy topography. Soil sampling completed in 2003 returned copper values up to 4,320 ppm and Pt + Pd values up to 439 ppb from covered swampy terrain immediately south of outcropping sulfide mineralization. Sulfide mineralization at Raven was extended to over 650 meters south of the original Raven discovery outcrops and remains open to expansion in all directions (Figure 6).

During reconnaissance work completed in 2003 a new zone of disseminated copper sulfide mineralization was discovered at tidewater on Cape Northumberland on the extreme southern tip of Duke Island (Figure 5). While copper values (up to 352 ppm) did not reach percent-levels, the Northumberland zone is unique in that it represents the only sulfide mineralization discovered to date which is not located within the NW-SE trending belt of mineralization extending from the East Judd to Raven prospects. The significance of the sulfide mineralization at Northumberland and its extent are unknown.

     In late May and early June 2004 Clark Jorgenson of Big Sky Geophysics was contracted to conduct a ground based HCP-EM (Max-Min), magnetometer, and gravimeter survey of the Marquis and Raven prospects (Inman, 2004). Big Sky completed 20,000 line-feet (6.1 line km) of survey over the Marquis and Raven prospects. Results from this survey indicated three strong Max-Min conductive anomalies, two moderately conductive anomalies, and three weakly conductive anomalies at the Marquis prospect. The strong conductive anomalies are located coincident with the IP resistivity low and with an interpreted dip to the northeast. The weakly conductive anomalies are located to the northeast of the IP anomaly and dip to the southwest. There is an increase in rock density which starts in the western side of the Marquis prospect and trends east toward Knob Hill. At the Raven prospect Big Sky identified two weak Max-Min conductors on the western survey line. These are coincident with relative rock density highs that form two ellipsoids elongated W-E, one centered on the main Raven prospect and the other to the south separated by a density low. The shape and location of the relative density highs are somewhat coincident with the airborne EM conductivity highs and airborne magnetic highs previously identified at the Raven prospect.

     In mid June 2005 Aurora Geosciences completed a 48,030 line-feet (14.6 line km) ground based gravimetric survey which was interpreted for Quaterra by Joseph Inman (Figure 8). The Marquis, Raven, Potato Patch, Scarp, and Lookout prospects along with the Northeast and Far Northeast areas were surveyed. Results from this survey confirm the 2004 gravity survey

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results and the expanded grids revealed local gravity highs in all of the surveyed areas. Local increases in density may reflect significant sulfide accumulation. Gravity field results from each prospect relative to each other show a general increase in the corrected Bouguer anomaly from west to east (-92.4 mgals to -74 mgals) perhaps showing the increasing thickness of the ultramafic package over the modeled feeder for the intrusion at the head of Hall Cove.

     In mid-August 2005 Connors Drilling mobilized a Longyear 38 drill to Duke Island. A total of 4504 feet (1373 m) of NQ2 core in 7 holes was drilled at the Marquis, Potato Patch, and Raven prospects (Figure 5). Results will be discussed in the Drilling section.

     During the drilling program a limited amount of outcrop grab rock sampling (12 samples) was conducted on the Monte and Potato Patch prospects. Of the four grab rock samples collected in the southern portion of the Potato Patch prospect, three returned values of over 1,000 ppm Cu, with one sample returning 2,440 ppm Cu. Copper in the 8 grab rock samples collected on the Monte prospect ranged from 1,235-8,340 ppm, with 6 over 2,000 ppm Cu, and three over 5,000 ppm Cu. Pt + Pd values at Monte are generally low (<50 ppb combined). Mineralization at Monte is hosted in coarse grained pyroxenite with the largest EM conductivity anomaly on Duke Island. Coincident copper in grab rock samples and EM conductivity highs cover and area measuring at least 1,800 meters N-S by 1,800 meters E-W. The extent of sulfide mineralization at Monte remains open to expansion to the north and south.

DRILLING

     Prior to the 2001 diamond drilling completed by Quaterra, the only other drilling completed on Duke Island were six diamond core holes completed by Columbia Iron in the late 1950’s. Data pertaining to the Columbia Iron drilling are not available to the authors however this work was conducted in search of magnetite deposits located outside of known sulfide-bearing areas.

     During November and December 2001, Layne Drilling completed 4 NQ (1.875 inch diameter) diamond drill holes (1,467 feet) in the Marquis zone. The drilling was contracted to Layne Drilling who provided a fly-capable LF70 diamond drill rig equipped with HQ and NQ drilling rods. All core was logged at the drilling site and then split by diamond core saw. All drill holes were plugged from termination depth to surface using commercial hole sealant.

     The holes were drilled from two drill pads approximately 750 feet apart centered on a coincident rock geochemical and IP geophysical anomaly (Figure 5). The drill targets are associated with a highly conductive IP anomaly flanked by extensive chargeability anomalies to the northeast and southwest. Significant drilling results are shown in Table 2.

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Table 2: Significant geochemical results from the 2001 drilling at Duke Island.


Hole #
From
Ft
To
Ft
Thickness
ft
Cu
(wt Avg ppm)
Pt
(wt Avg ppb)
Pd
(wt Avg ppb)
DK0101 0 298 298 1270 47 59
Includes 177 258.3 81.3 2170 50 64
DK0102 4 81 77 2375 64 83
DK0103 0 252 252 1328 62 72
DK0104 0 188 188 1649 85 130
includes 165 167 2 12500 187 386

     Holes DK0101 (vertical) and DK0102 (Azimuth 353 at –60 degrees) were collared in outcrops containing massive to semi-massive pyrrhotite plus chalcopyrite in the central portion of the IP anomaly. Both holes intercepted disseminated, semi-massive and massive sulfides from the collar to termination depth and neither hole exited the mineralized envelope. Host rocks are predominantly olivine pyroxenite to pyroxenite with variable amounts of serpentinization. Copper and nickel values are strongly correlative with each other and with sulfur. Cu:Ni ratios average 2.9.

     Holes DK0103 (vertical) and DK0104 (Azimuth 045 at –50 degrees) were collared 750 feet southeast of holes 1 and 2 in the original discovery area of the property. Hole DK0103 intercepted disseminated, semi-massive and massive sulfides hosted in pyroxenite from the collar to termination depth (252 ft) and did not exit the mineralized envelope. Host rocks are predominantly olivine pyroxenite to pyroxenite with variable amounts of serpentinization. Cu:Ni ratios average 2.9 for the entire hole. Hole DK0104 intercepted mineralization and host rocks similar to those in DK0103 to a depth of 188 feet at which point the hole entered olivine rich wehrlite and dunite. Copper and nickel grades decrease below 188 feet as do Cu:Ni ratios which average 2.7 above 188 feet and 0.8 below 188 feet. Sporadic copper mineralization below 188 feet is correlative with moderate chargeability anomalies outlined by the IP survey.

     Based on the grades exhibited in holes DK0101 through DK0104, the width of sulfide mineralization in the Discovery zone is at least 40 meters and remains open in all directions. The depth extent of mineralization remains open below approximately 90 meters and open along strike to the southeast for at least 2.2 kilometers and to the northwest for at least 1.9 kilometers. Sulfides are hosted in clinopyroxenite and olivine pyroxenite that is stratigraphically below the bedded dunite-wehrlite cumulate rocks. Cu:Ni ratios in mineralized intervals averages 2.5 to 3.0 but drops to parity in unmineralized or weakly mineralized rocks.

     No drilling was conducted at Duke Island during 2002 through 2004. During August-September 2005 Connors Drilling completed 7 NQ2 diamond drill holes totaling 4,504 feet (Figure 5). The drilling was a follow-up to previously conducted rock and soil geochemical sampling that revealed copper values ranging from trace to +2%, airborne EM anomalies that revealed extensive zones of high conductivity and ground geophysics (Max-Min and gravity) surveys conducted in 2004 and 2005 that revealed coincident gravity highs and/or Max-Min conductivity anomalies (Inman, 2004).

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     During 2005 two holes were collared northeast of holes DK0101 through DK0104 and aimed southwest back toward the Marquis IP anomaly and the previous drill holes in the Marquis prospect. Both holes intercepted semi-massive to massive sulfide at depth in the hole indicating that the sulfide horizon is north dipping.

     Hole DK0501 (AZ 225, -60, TD 654) intercepted semi-massive to massive sulfides at 238 feet down hole. Significant results are given in Table 3. This hole intercepted clinopyroxenite from surface to TD. Co and Ni values positively correlate with Cu and S values. Cu:Ni ratios for mineralized intervals averaged 2.17. This hole did not exit mineralization.

Table 3: Significant geochemical results from 2005 Duke Island drilling


Hole #

From Ft

To Ft
Thickness
Ft
Cu ppm
(wt Avg ppm)
Pt
(wt Avg ppb)
Pd
(wt Avg ppb)
DK0501 326 425.5 99.5 2320 68 72
including 376 394 18 4520 100 111
and 404 424 20 3625 123 133
DK0502 No Significant Intercepts      
DK0503 37.5 186.5 149 2086 5 1
DK0404 No Significant Intercepts      
DK0506 8 395 387 2035 56 59
including 33 75 42 3801 331 313
including 8 92 84 2531 211 219

Note: Holes DK0505 and DK0507 were not visibly mineralized and have not been submitted for geochemical analyses.

     Hole DK0502 (AZ 225, -60, TD 654) intercepted significant thicknesses of semi-massive to massive sulfides at 246 feet downhole. This hole intercepted a mix of clinopyroxenite, olivine pyroxenite, and serpentinite. DK0502 intercepted numerous small scale shears and faults, serpentinite intercepts, and while there was a significant amount of sulfide present Cu values were not as high as DK0501. Co and Ni values positively correlate with Cu and S values. Cu:Ni ratios for mineralized intervals averaged 2.41. This hole did not exit mineralization.

     The 2005 diamond drilling at the Potato Patch prospect, located 1.1 kilometers west of the Marquis prospect, consisted of three holes (DK0503, 04 and 05). Disseminated pyrrhotite and chalcopyrite hosted by coarse-grained pyroxenite was discovered in surface outcrops at Potato Patch in 2001. Drilling at Potato Patch was targeted using a combination of anomalous copper in rock geochemistry (trace to 915 ppm), anomalous high gravity responses and combined airborne electromagnetic conductivity and magnetic field anomalies (Figure 6 through 9).

     Hole DK0503 (AZ 215, -75, TD 804) intercepted 149 feet grading 2,086 ppm copper in pyroxenite before passing into hornblende pyroxenite and then into diorite that contains significantly lower copper values. Unlike the Marquis and Raven zones, copper mineralization in the Potato Patch does not appear to be associated with significant Pt or Pd values and Cu:Ni ratios for the entire hole averaged 8.18 reflecting the low nickel content on the olivine poor rocks of the Potato patch prospect. Drill holes DK0504 and DK0505 were targeted on gravity highs but did not intercept significant sulfide mineralization and hole DK0505 was not submitted for analysis.

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     Drill holes DK0506 and DK0507 were collared in the Raven prospect, located 3.4 kilometers northwest of the Marquis prospect. Previous surface rock sampling in this area returned copper values ranging from trace to 2.2% and were associated with elevated platinum and palladium values (trace to 573 ppb Pt+Pd). Subsequent soil sampling, max-min and gravity surveys indicated the Raven prospect was open to the south under soil cover. The 2005 drilling targeted the north and south ends of the surface geochemical and geophysical anomalies at Raven.

     Hole DK0506 (AZ 190, -60, TD 653) returned the thickest interval of continuous copper mineralization seen on the property to date. The interval from 8 to 395 feet returning 2,035 ppm copper, 56 ppb Pt and 59 ppb Pd with the interval from 8 to 92 feet grading 2,531 ppm copper, 211 ppb Pt and 219 ppb Pd (Table 1). Unlike mineralization at the Marquis prospect, neither cobalt nor nickel values are correlative with copper or PGE values at the Raven prospect. In addition, Cu:Ni ratios for the entire hole average 10.36, in large measure du to the low olivine (an Ni) content of the host pyroxenite and hornblende pyroxenites at Raven. Platinum and palladium correlate well with each other in the upper Cu rich portions of the hole, but are poorly correlative after approximately 100 foot downhole. As at the Marquis and Potato Patch prospects, copper and PGE mineralization at Raven is dominantly in disseminated to net-textured form and is preferentially hosted in coarse grained pyroxenite. The bottom 225 feet of hole 6 is hosted in hornblende pyroxenite and shows a marked decrease in copper values while Pt and Pd values fall below detection limits. Hole DK0507, drilled over 500 meters south of hole 6, did not intercept significant sulfide mineralization and was not submitted for analysis.

SAMPLING METHOD AND APPROACH

     The 2001 Duke Island project field program was conducted in four stages. Initial staking followed reconnaissance pan concentrate and rock sampling, both of which were conducted in March and April, 2001. Confirmation rock sampling was conducted in early September followed by additional geochemical sampling, staking and IP surveys in October. Diamond drilling was completed in November and December. The Phase one field crew consisted of 3 Avalon Development geologists: Brian Flanigan, Bruce Cox, and Garth Graham. Phase two sampling was conducted by Curt Freeman and Pete Nyren. Phase three work was completed by Curt Freeman, Garth Graham, Chris Van Treeck and Pete Nyren. Phase four core logging and sampling were completed by Curt Freeman, Garth Graham and Pete Nyren. Fieldwork was supported via helicopter from Ketchikan and from spike camps on the property.

     Phase one fieldwork for 2002 was conducted by Chris Van Treeck and Pete Nyren. Phase one fieldwork in 2003 consisted of soil and rock grab sampling and was conducted by Chris Van Treeck, Pete Nyren and Jesse Hanson. Outcrop sampling in 2005 was conducted by Curt Freeman and Chris Van Treeck. Core logging and sampling in 2005 as conducted by Chris Van Treeck, Pete Nyren, and Nathan Williamson. Fieldwork was supported via helicopter from Ketchikan and from spike camps on the property. A summary of samples collected from 2001 through 2005 is presented in Table 4.

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Table 4: 2001 - 2005 Duke Island geochemical sample summary

Sample Type Phase Number
Pan Conc. Samples (2001) One 80
Grab rock Samples (2001) One 107
Soil samples (2001) Two 43
Grab Rock samples (2001) Two 39
Grab Rock samples (2001) Three 99
Core samples (2001) Four 358
Grab Rock samples (2002) One 43
Grab Rock samples (2003) One 45
Shovel Soil samples (2003) One 66
Grab Rock Samples (2004) One 12
Core Samples (2005) One 805
         Totals 1,697

     All rock samples collected during the 2001 to 2005 field programs were marked in the field using hand-held GPS units. Each sample collected for geochemical analysis was accompanied by a separate hand sample retained by Avalon for reference purposes. Sample descriptions were recorded in the field and scanned to digital form following the field season. Sample results were compiled in spreadsheet formats for inclusion in the project’s GIS database. Samples collected in the field in 2001 and 2002 were placed in double nylon shipping sacks and sent via Alaska Airlines airfreight to Fairbanks. Avalon Development’s expediter collected the samples at Alaska Airlines and once Avalon Development inspected the sample shipping containers and the samples within the containers, all samples were picked up at Avalon’s secured warehouse by representatives of ALS Chemex or Bondar –Clegg Ltd. of Fairbanks. Samples submitted for analysis in 2003 through 2005 were shipped from Ketchikan directly to ALS Chemex’s laboratory in North Vancouver, British Columbia (ISO Certification 9002).

SAMPLE PREPARATION, ANALYSES AND SECURITY

     Samples submitted in 2001 were crushed at Bondar Clegg’s Fairbanks preparation facility to 80% passing 10 mesh and then pulverized to +95% passing –150 mesh. Sample rejects were retained in Fairbanks and returned to Avalon Development. Sample pulps were shipped by Bondar Clegg via airfreight to Bondar Clegg’s main analytical facility in North Vancouver, British Colombia. All samples were analyzed for Pt + Pd + Au by 30 gram lead collection fire assay techniques with an inductively coupled plasma (ICP) finish. In addition, each sample was analyzed for a multi-element package by ICP analytical methods using two acid digestion procedures.

     All 2001 core samples were sawed in the field, placed in double nylon shipping sacks and sent via Alaska Airlines airfreight to Fairbanks. Avalon Development’s expediter collected the samples at Alaska Airlines and once Avalon Development inspected the sample shipping containers and the samples within the containers, all samples were picked up at Avalon’s secured warehouse by representatives of Bondar –Clegg Ltd. of Fairbanks. Samples were then crushed at Bondar Clegg’s Fairbanks preparation facility to 80% passing 10 mesh and then pulverized to

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17 +95% passing –150 mesh. Sample rejects were retained in Fairbanks and returned to Avalon Development. Sample pulps were shipped by Bondar Clegg via airfreight to Bondar Clegg’s main analytical facility in North Vancouver, British Colombia. All samples were analyzed for Pt + Pd + Au by 30 gram lead collection fire assay techniques with an inductively coupled plasma (ICP) finish. In addition, each sample was analyzed for a multi-element package by ICP analytical methods using two acid digestion procedures. The remaining half of the drill core was shipped to Fairbanks via Alaska Airline airfreight and stored in Avalon’s secure warehouse.

     The entirety of each rock sample collected in 2002 was crushed at ALS Chemex’s Fairbanks prep facility to 70% passing 2 millimeters (10 mesh) and a 250 gram split was taken and pulverized to +85% passing 75 microns (200 mesh). All samples were analyzed for Pt + Pd + Au by 30 gram lead collection fire assay techniques with an inductively coupled plasma (ICP) finish. In addition, each sample was analyzed for a suite of trace elements using a two acid digestion procedure followed by ICP techniques with an atomic emission spectrographic finish. Pulps and rejects were returned for storage at Avalon Development’s warehouse in Fairbanks.

     The entirety of each rock sample collected in 2003 was crushed at ALS Chemex’s Vancouver prep facility to 70% passing 2 millimeters (10 mesh) and a 250 gram split was taken and pulverized to +85% passing 75 microns (200 mesh). All samples were analyzed for Pt + Pd + Au by 30 gram lead collection fire assay techniques with an inductively coupled plasma (ICP) finish. In addition, each sample was analyzed for a suite of 27 trace elements using a four acid digestion procedure followed by ICP techniques with an atomic emission spectrographic finish. Fire assay and ICP processes were adjusted by ALS Chemex to account for the high concentrations of iron, magnesium, and chromium associated with ultramafic rocks. Pulps and rejects were retained in Vancouver during the field season and were returned to Avalon Development’s Fairbanks warehouse for permanent storage at the end of the year.

     The entirety of each soil sample collected in 2003 was dried, sieved through a 180 micron (80 mesh) screen and pulverized to +85% passing 75 microns (200 mesh). All samples were analyzed for Pt + Pd + Au by 30 gram lead collection fire assay techniques with an inductively coupled plasma (ICP) finish. In addition each sample was analyzed for a suite of 27 trace elements using a four acid digestion procedure followed by ICP techniques with an atomic emission spectrographic finish. Pulps and +180 micron fraction were retained in Vancouver and were returned to Avalon Development’s Fairbanks warehouse for permanent storage at the end of the year.

     The entirety of each rock sample collected in 2005 were sent via Alaska Airlines airfreight to Bellingham, WA where they were transferred to ALS Chemex’s Vancouver prep facility (ISO Certification 9002). The samples were then crushed to 70% passing 2 millimeters (10 mesh) and a 250 gram split was taken and pulverized to +85% passing 75 microns (200 mesh). All samples were analyzed for Pt + Pd + Au by 30 gram lead collection fire assay techniques with an inductively coupled plasma (ICP) finish. In addition, each sample was analyzed for a suite of 27 trace elements using a four acid digestion procedure followed by ICP techniques with an atomic emission spectrographic finish. Fire assay and ICP processes were adjusted by ALS Chemex to account for the high concentrations of iron, magnesium, and chromium associated with ultramafic rocks. Pulps and rejects were retained in Vancouver during the field season and were returned to Avalon Development’s Fairbanks warehouse for permanent storage at the end of the year.

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     All 2005 core samples were sawed in the field, placed in double nylon shipping sacks and sent via Alaska Airlines airfreight to Bellingham, WA where they were transferred to Vancouver by ALS Chemex for processing at their prep facility. Samples were crushed to 70% passing 2 millimeters (10 mesh) and a 250 gram split was taken and pulverized to +85% passing 75 microns (200 mesh). All samples were analyzed for Pt + Pd + Au by 30 gram lead collection fire assay techniques with an inductively coupled plasma (ICP) finish. In addition, each sample was analyzed for a suite of 27 trace elements using a four acid digestion procedure followed by ICP techniques with an atomic emission spectrographic finish. Fire assay and ICP processes were adjusted by ALS Chemex to account for the high concentrations of iron, magnesium, and chromium associated with ultramafic rocks. Pulps and rejects were retained in Vancouver during the field season and were returned to Avalon Development’s Fairbanks warehouse for permanent storage at the end of the year. The remaining half of the core was transported via Boyer Barge Lines and Northland Trucking to Avalon Development’s Fairbanks warehouse for permanent storage.

DATA VERIFICATION

     Sample blanks composed of Browns Hill Quarry basalt from the Fairbanks Mining District, Alaska were inserted on a minimum 1 for 25 basis into all sample sequences. A total of 148 sample blanks were inserted into the sampling sequence for the 2001 through 2005 Duke Island programs. Extensive previous analysis of this same blank rock type has given Avalon a large geochemical database for use on a comparative basis. Analyses performed by Bondar-Clegg and ALS Chemex on the blanks from the Duke Island project indicate no unusual or spurious sample results in the blanks submitted.

     No blank of check analyses were completed on Duke Island geochemical samples during the period 2001 through 2004. In 2005, in addition to sample blanks, sulfide rich commercial geologic standards from Analytical Solutions Ltd. were inserted on a 1 to 50 basis in each sample submittal during 2005. Analysis results indicate no unusual or spurious sample results in the standards submitted.

ADJACENT PROPERTIES

     Other than the mining claims owned by Quaterra, there are no other mining claims or private lands on Duke Island as of the date of this report.

MINERAL PROCESSING AND METALLURGICAL TESTING

     There has been no mineral processing or metallurgical testing on the Duke Island complex.

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MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES

     There currently are no resources or reserves on the Duke Island project that comply with the CIM Standards on Mineral Resources and Reserves Definitions and Guidelines as adopted by CIM Council on August 20, 2000.

OTHER RELEVANT DATA AND INFORMATION

     To the best of the authors’ knowledge there are no other data available or that bear directly on the potential of the Duke Island project.

CONCLUSIONS AND INTERPRETATION

     Recently discovered copper, nickel and platinum group element mineralization at Duke Island is unlike that present in any known Ural – Alaska mafic-ultramafic complex in Alaska’s Alexander Platinum Belt. Geochemical, geological and geophysical data suggest that sulfide-bearing mineralization extends for over 14.5 kilometers along strike and up to 3.8 kilometers across strike with the ultimate dimensions of the mineralized system remaining open to expansion at surface and at depth. Surface samples have returned values ranging from <10 ppm to 2.8% copper, <1 ppm to 0.25% nickel and <6 ppb to over 1 gram per tonne combined platinum plus palladium. Copper – nickel – PGE mineralization is preferentially hosted in coarse grained clinopyroxenite and to a lesser degree in wehrlite and hornblende pyroxenite. Sulfide mineralization occurs in disseminated, net textured, semi-massive and massive forms as pyrrhotite > chalcopyrite >> pentlandite. The mineralogy of PGE-bearing minerals is unknown.

     Several phases of airborne and ground geophysical surveys have been applied at Duke Island since 2001, including airborne magnetics and 6-channel electromagnet and ground-based Max-Min, gravity and IP. Electromagnetic methods have proven most useful in delineating sulfide-bearing zones and in conjunction with rock geochemistry and the other ground and airborne methods, provided targeting data for diamond drilling.

     Limited diamond drilling has been conducted at the Marquis, Potato Patch and Raven zones in 2001 and 2005. Results included significant intervals of massive, semi-massive and disseminated sulfides containing copper values ranging from below detection to multiple meter intervals in the 0.2 to 0.3% range. Platinum and palladium values were variable but highly anomalous (+200 ppb) in some copper mineralized intervals. Mineralization at all three zones remains open to expansion.

     U-Pb age determinations on unmineralized portions of the Duke Island mafic-ultramafic complex suggest a mid-Cretaceous age for the complex, an age that is in general agreement with ages for other dated Ural Alaska complexes in the Alexander Platinum Belt of SE Alaska. However, the presence of widespread and significant sulfide mineralization at Duke Island is unlike any of the other Cretaceous Ural Alaska complexes in the region. U-Pb age determinations from gabbro and diorite(?) host rocks surrounding the Duke Island complex returned Triassic ages that are nearly identical to those found in the Cu-Ni-PGE bearing

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intrusives and flood basalts of the Wrangellia terrane in the central Alaska Range and western Yukon Territory. The Alaska Range occurrences currently are being explored for Noril’sk type sulfide mineralization and the Wellgreen deposit in the western Yukon is a past producing platinum and palladium mine. If the age of mineralization at Duke Island is Triassic, there is potential for Noril’sk type Cu-Ni-PGE mineralization at Duke Island.

     An alternative exploration model for Cu-Ni-PGE mineralization at Duke Island is that sulfide mineralization is related to sulfur saturation within and adjacent to the zoned Ural – Alaska complex which hosts it. While this mode of sulfide formation is unique for the Alexander Platinum Belt, Duke Island has long been a unique example of Ural – Alaska complexes due to the complex graded bedding and other features suggestive of episodic magma introduction under quiescent conditions.

     Regardless of which geological model turns out to be correct, the widespread Cu-Ni-PGE mineralization at Duke Island and the potential for new sulfide discoveries at surface and at depth elevate the project to one of the most important new Cu-Ni-PGE discoveries in North America.

RECOMMENDATIONS:

     Based on preliminary field, laboratory and literature studies completed to date, additional work at the Duke Island project is. With the exception of “Pre-Drilling Exploration”, which should be implemented and completed prior to commencement of additional drilling, none of the recommended programs are dependent on the successor failure of each other. Recommended programs include:

Pre-Drilling Exploration

     Several other smaller exploration expenditures are recommended to enable a more complete evaluation of the Duke Island project. These recommendations include:

  1.

Project-wide reconnaissance scale geologic mapping and geochemical sampling should be conducted over portions of Duke Island that have not already been explored. Previously generated airborne magnetic and EM data along with thematic imagery can be used to help focus these efforts however, past exploration discoveries on Duke Island efforts have shown that on-ground mapping and sampling are the only effective way to explore at Duke Island. A three person crew of geologists and technicians should be used to conduct prospecting and rock and soil sampling of these targets. This program should be run concurrently with the above-recommended drill programs to reduced costs. The approximate cost of this program is $25,000 (Table 6).

  2.

Extensive geochemical sampling and geologic mapping of the Monte prospect and other prospective areas should be conducted. A three person crew of geologists and technicians should be used to conduct prospecting and rock and soil sampling of these targets. This program should be run concurrently with the above-recommended drill programs to reduced costs. The approximate cost of this program is $50,000 (Table 6).

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  3.

Prior to proposed drilling the pulps from the drilling conducted in 2001 should be reanalyzed using a four acid multi-element ICP package so that previous data can be compared with 2005 drill data and the proposed 2006 drilling to correctly correlate rock units between holes. In addition, multivariate statistical analysis can be applied to all drill sample data. The cost of the reanalysis will be approximately $4,000 (Table 6).

  4.

Prior to proposed drilling holes DK0101-DK0104 should be relogged for consistency of lithologies and textures. Hole DK0507 should also be logged and limited geochemical sampling should be conducted on this hole. The cost of relogging and analyses on these holes will be approximately $2,500 (Table 6).

  5.

Prior to additional drilling but following completion of the four previously listed exploration programs, an acknowledged geoscience expert in the field of Cu-Ni-PGE sulfide deposits should be retained to complete evaluation of all relevant geological, geophysical and geochemical data. These efforts should include petrographic analysis of host rock and sulfide mineralogy and petrogenesis, whole rock chemical analyses and petrological evaluations of host and sulfide minerals, petrogenetic evaluations of whole-rock and trace element geochemistry and host rock/sulfide density determinations geophysical applications. The cost of relogging and analyses on these holes will be approximately $25,000 (Table 6).

Marquis Zone

     Vertical drill holes at the Marquis prospect in 2001 intercepted significant thicknesses of massive to semi-massive pyrrhotite with lesser chalcopyrite hosted in clinopyroxenite from surface to 300 feet below surface (Freeman, 2003). Northeast oriented angle hole DK0104 intersected massive to semi-massive sulfides to a down hole depth of 200 feet. Southwest oriented angle holes drilled in 2005 did not intersect massive to semi-massive sulfide until a down hole depth of approximately 250 feet. Based on these drill hole geometries, the sulfide horizon has an apparent northerly dip at the Marquis prospect.

     Proposed holes for 2006 will test remaining geophysical targets, test the northern dipping sulfide horizon theory and complement previous drill results from holes located in similar cross-section planes (Figures 6, 7, 8 and 9).

     Centered between holes DK0501 and DK0502, hole DK0608 will test the continuity of sulfide mineralization intersected in the 2005 holes (Table 5, Figures 6, 7, 8 and 9). The large EM anomaly that underlies the Marquis prospect is supported by massive sulfide outcrops immediately north of this proposed hole. The proposed drilling on this prospect will focus on testing the extent, both vertical and horizontal, and controlling factor of the conductivity high. This vertical hole should delineate the extent of sulfides at depth. The hole is collared further south to intersect mineralization higher in the hole. The TD of this hole is dependent on mineralization. If significant sulfides continue below 600 feet then the hole should continue. Interpretation of airborne magnetics indicates this hole should encounter hornblende pyroxenite at depth, which based on past drilling has significantly less sulfide than the clinopyroxenite. Intersection with the hornblende pyroxenite could indicate the base of the ultramafic package, and this hole should continue into and hopefully past this rock type to test favorable host rocks at this prospect. The hole is collared on the edge of the Marquis gravity anomaly that extends to the E-SE toward Knob Hill, a prominent intrusive plug forming a circular highland to the

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southeast of the Marquis zone. The increase in density to the E-SE could be related to sulfide content of the rock, or indicate an increase in the thickness of the ultramafic package at depth.

     Hole DK0609 is a southwest directed angle hole from the same pad as DK0608. This hole will start in the magnetic anomaly (Figure 8) and then intercept the 2001 IP anomaly at depth (Freeman, 2003). The hole will TD 600 feet below surface, well below the search depth of the IP conducted in 2001. The southwest orientation will parallel the 2005 drilling and sulfides intercepted in this hole can be correlated with intercepts in DK0608. A better estimate to the dip of the sulfides will be apparent in results from DK0608 and DK0609.

     DK0610 is a vertical hole collared in the IP anomaly within the same plane as DK0608 and DK0609. It also is collared above a Max-Min anomaly that is interpreted to be 100 feet below surface and have a NE dip. The hole is planned to TD at 600 feet near the projected trace of DK0609. Hole DK0610 will test the depth extent of the semi-massive to massive sulfides intercepted in DK0101 from surface to TD at 300 feet. If significant sulfides are intercepted up to TD then the hole should continue until mineralization ceases to be intercepted.

     DK0611 is a southwest directed angle hole collared at the same pad as DK0610. The hole will extend through the magnetic low to the edge of the southwestern magnetic high (Figure 8) and to the edge of the major gravity anomaly (Figure 9). This hole will increase the cross-section horizontal trace to 1000 feet (from the DK0608 collar to the projected extent of DK0611) when combined with the previous three holes. There is no surface mineralization above the projected trace of this hole (Figure 6). The lack of surface mineralization to the southwest of the DK0611 collar is due to one of three possibilities this hole will explore: there never were any sulfides in that area, the sulfides that were there are now eroded based on the northern dip of the sulfide mineralization plane, or the sulfides are covered by the rising topography.

     Hole DK0612 is a northwest directed angle hole from the same pad as DK0610. The hole will pass down the trace of the IP anomaly and cross several Max-Min anomalies. This hole also will pass through the main gravity anomaly. It will be the first hole drilled in this direction and combined with DK0610 will provide much needed information on the geometry and structure of this portion of the prospect. The trace of this hole is near DK0101 and DK0102 and cross-sections will be able to incorporate the results from all three holes.

     Drilled from the same pad as DK0610, the DK0613 southeast directed angle hole will continue along the trace of the IP anomaly into the meat of the gravity anomaly while crossing Max-Min anomalies (Figure 9). The results of this hole combined with DK0610 and DK0612 will create a northwest-southeast cross-section horizontal trace covering 1,100 feet along the IP anomaly. Combined with the previous holes (DK0608-DK0612) there will be robust cross-sectional data both along and perpendicular to the inferred strike of sulfide mineralization.

     Hole DK0614 will be collared in the IP anomaly and a Max-Min anomaly. This vertical hole is projected to TD in the area that DK0612 terminates. The IP pseudosection reveals a blind resistivity low in this area that extends under a small pond to the northwest and this hole should reach the southeastern side of the anomaly. Hole DK0614 is outside of the main gravity anomaly so this hole will test whether or not gravity highs are always associated with sulfide mineralization (Figure 9).

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     DK0615 is a northwest directed angle hole collared from the same pad as DK0614. This hole will test the IP anomaly below the lake, and test the northern extent of the EM conductivity high (Figure 7). Combined with holes DK0610, and DK0612-DK0614, the total length of the cross-section trace will be 1,400 feet.

     DK0616 will twin DK0103 on a vertical hole collared in the IP anomaly and a strong, shallow, Max-Min anomaly. It will also test the high density portion of the Marquis gravity anomaly (Figure 9).

     DK0617 is a southeast directed angle hole collared at the same pad as DK0616. It will extend through the magnetic anomaly (Figure 8), down the strike of the IP anomaly, across two Max-Min anomalies, and through the gravity anomaly survey area. When this hole’s results are combined with the rest of the northwest southeast oriented holes there will be a total cross-section trace of 2,000 feet across the perceived sulfide zone.

     This proposed drilling program for the Marquis prospect will be conducted from 4 drill pads. The proposed order of the holes allows the geologist on the ground sufficient information to make field calls as to hole termination depths. By moving from vertical holes to angle holes from northeast to southwest and then from southeast to northwest, each hole will build upon the subsurface knowledge of the other. If this program is implemented there will be very few unknowns as to the subsurface character of sulfide mineralization in this prospect as it is currently understood.

     The small number of drill pads will simplify permitting, especially since all pads are in the area that has been approved in the past. The centralized location of drilling will also simplify logistics, and decrease move charges. One central water line from a robust water source can be used with only the end of the line needing to be moved from pad to pad. The past locations for the fuel containment and core shack are located between these pads also simplifying logistics and permitting.

     The drill program at Marquis consists of approximately 6,950 feet in 10 holes. The approximate cost of this program would be $869,000 (Table 6).

Raven Zone

     The two holes previously drilled at the Raven prospect, DK0506 and DK0507, were initially targeted on coincident magnetic, EM, and gravity anomalies with weak Max-Min conductors (Figures 7, 8 and 9). DK0506 was moved from the blind Max-Min anomaly and collared to undercut Cu-Fe oxide and Cu-Fe sulfide surface mineralization at the main Raven prospect (Figure 6). DK0506 hit a significant Cu sulfide intercept from surface to 395 feet, where Cu grades dropped as the hole intercepted hornblende pyroxenite. Hole DK0507 was targeted on the weak Max-Min conductor, visual inspection of the hole revealed that it is clinopyroxenite with minimal disseminated sulfides. Due to time and budget constraints, the hole was not submitted for assay. The hornblende pyroxenite unit was not intercepted in this hole, indicating that this area has a thicker package of clinopyroxenite which agrees with the larger spread of the magnetic and EM anomalies in this area (Figures 7 and 8). The hole is at the edge of the main EM anomaly and in a broader less extreme gravity anomaly (Figure 9).

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


24

Table 5: Proposed 2006 diamond drill holes, Duke Island prospect. UTM coordinates are NAD27 Alaska. Note: the term “TBD” means to be determined in the field.

Proposed
Hole#

Prospect
UTM
East
UTM
North

Azimuth

Angle
Intended
TD (feet)
DK0608 Marquis 347741 6090494 000 -90 600
DK0609 Marquis 347741 6090494 225 -50 800
DK0610 Marquis 347643 6090403 000 -90 600
DK0611 Marquis 347643 6090403 225 -50 800
DK0612 Marquis 347643 6090403 315 -50 950
DK0613 Marquis 347643 6090403 135 -50 800
DK0614 Marquis 347519 6090537 000 -90 500
DK0615 Marquis 347519 6090537 315 -50 500
DK0616 Marquis 347793 6090293 000 -90 600
DK0617 Marquis 347793 6090293 135 -50 800
DK0618 Scarp TBD TBD TBD TBD 600
DK0619 Scarp TBD TBD TBD TBD 600
DK0620 Scarp TBD TBD TBD TBD 600
DK0621 Lookout TBD TBD TBD TBD 600
DK0622 Raven 344518 6091923 000 -90 800
DK0623 Raven 344518 6091923 000 -90 800
DK0624 Raven 344500 6091852 000 -90 600
DK0625 Raven 344500 6091852 190 -50 800
DK0626 Raven 344461 6091500 000 -90 600
DK0627 Raven 344461 6091500 000 -50 800
DK0628 Raven 344461 6091500 180 -50 800

     DK0622 is collared within the main EM and gravity anomalies (Table 5, Figures 7and 9). This vertical hole will be collared from the same pad as DK0506 in order to gain structural knowledge (dip direction, lateral continuity). It is also projected to a deeper termination in order to test the thickness of the hornblende pyroxenite layer or possibly intersect a sulfide rich interval within the disseminated sulfides intercepted in DK0506.

     DK0623 will be collared at the same pad as DK0622. This north directed angle hole is projected to exit the magnetic and gravity anomalies.

     DK0624 is projected to intersect the area where DK0506 terminated and go beyond. Depending on the depth of the hornblende pyroxenite lower contact and sulfide content from hole DK0622, this vertical hole may be extended past 600 feet.

     Collared from the same pad as DK0624, DK0625 will test the southern extent of sulfide mineralization at the main Raven prospect. It is projected to exit the magnetic anomaly and terminate in between the two EM anomalies (Figures 7 and 8). When holes DK0506 and DK0622-25 are combined the cross-section trace will be nearly 1,300 feet across the area of known mineralization at Raven.

     Holes DK0626, 27 and 28 will be collared in the southern portion of the Raven prospect, north of DK0507 in an area with no outcrop. Soil sampling in the area returned values up to 134

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


25

ppm Cu (Figure 6). This area has a stronger EM anomaly than the northern Raven prospect and the holes have been collared to test this anomaly. The coincident EM, magnetic and gravity anomaly is still a viable and largely untested target. DK0507 was collared based on a weak Max-Min conductor, at the periphery of the EM anomaly in a density low.

     Hole DK0626 is a vertical hole proposed to test the center of the EM anomaly (Figure 7). If significant sulfides are not intercepted, then the next two holes would not be warranted.

     Hole DK0627 will be a north directed angle hole designed to terminate between the main EM anomalies and pass through the southern gravity high through a gravity low and into the northern gravity high (Figures 7 and 9).

     Hole DK0628 will be a south directed angle hole near the edge of the southern EM anomaly and a coincident gravity anomaly. When combined with DK0626 & 27 the cross-section trace across the southern Raven prospect will be 1,000 feet. Combined with the other Raven holes the cross section trace will be 2,400 feet.

     The drill program at Raven consists of approximately 5,200 feet in 7 holes. The approximate cost of this program would be $650,000 (Table 6).

Scarp Zone

     These holes are proposed solely on geophysical anomalies. Drill pads have been proposed based on geochemistry, EM, gravity, and magnetic anomalies (Table 5, Figures 6, 7, 8 and 9). Little field work has been completed in this area, and mapping and outcrop sampling should be completed prior to final drill pad placement and determination of azimuth, angle and proposed TD. This work should be completed early in the field season so that Forest Service personnel in charge of permitting can visit the sites, which will be necessary for permit approval.

     The drill program at Scarp consists of approximately 1,800 feet in 3 holes. The approximate cost of this program would be $225,000 (Table 6).

Lookout Zone

     These holes are proposed solely on geophysical anomalies. Drill pads have been proposed based on geochemistry, EM, gravity, and magnetic anomalies (Table 5, Figures 6, 7, 8 and 9). Little field work has been completed in this area, and mapping and outcrop sampling should be completed prior to final drill pad placement and determination of azimuth, angle and proposed TD. This work should be completed early in the field season so that Forest Service personnel in charge of permitting can visit the sites, which will be necessary for permit approval.

     The drill program at Lookout consists of approximately 600 feet in 1 hole. The approximate cost of this program would be $75,000 (Table 6).

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


26

Table 6: Summary of recommended work programs and budgets for the Duke Island project.

Prospect Work Recommended Budget (US$)
Pre-Drilling Expl. Geol. mapping, geochem sampling, petrog. 106,500
Marquis 6,950‘ diamond drilling 869,000
Raven 5,200’ diamond drilling 650,000
Scarp 1,800’ diamond drilling 225,000
Lookout 600’ diamond drilling 75,000
  TOTAL: 1,925,500

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


27

REFERENCES CITED

Clark, A.L., and W.R. Greenwood, 1972, Geochemistry and distribution of platinum-group metals in mafic to ultramafic complexes of southern and southeastern Alaska. U.S. Geol.  Surv. Prof. Paper 800-C, pp. C157-C160.

Evans-Lamswood, D.M., Butt, D.P., Jackson, R.S., Lee. D.V., Muggridge, M.G., Wheeler. R.I. and Wilton. D.H.C., 2000, Physical controls associated with the distribution of sulfides in the Voisey’s Bay Ni-Cu-Co deposit, Labrador: Econ Geol., Vol. 95, pp. 749-769.

Fiset, N., 2002, Report on helicopter-borne magnetic and electromagnetic survey, Duke Island prospect, Ketchikan area, Alaska: AeroQuest Limited, Internal Rept. For Quaterra Resources, 10 pp., 8 plates, digital data.

Foley, J.Y., Light, T.D., Nelson, S.W. and Harris, R.A., 1997, Mineral occurrences associated with mafic-ultramafic and related alkaline complexes in Alaska: Econ. Geol. Monograph 9, pp. 396-449.

Freeman, C.J., 2003, Summary report for the Duke Island Cu-Ni-PGE property, Ketchikan Mining District, Alaska: NI 43-101 report for Quaterra Resources, 21 p.

Freeman, C.J., 2004, Executive summary report for the MAN project, Delta River Mining District, Alaska: NI 43-101 report for Nevada Star Resources, 40 p.

Gehrels, G.E. and Berg, H.C., 1994, Geology of southeastern Alaska in Plafker, G and Berg, H.C., 1994, Geology of North America, Vol. G-1, the Geology of Alaska: Geol. Soc. Amer., pp. 451-467.

Himmelberg, G.R. and Loney, R.A., 1995, Characteristics and petrogenesis of Alaskan-type ultramafic – mafic intrusions, southeastern, Alaska: U.S. Geol. Surv. Prof. Paper 1564, 47p.

Inman, J, 2002, Preliminary Review of a Portion of an Airborne Survey, Duke Island, Alaska, Internal Rept. To Quaterra Resources, October 2, 2002, 8p.

Inman, J, 2004, Duke Island, Alaska, report of ground geophysics: Internal Rept. To Quaterra Resources, September 7, 2004, 9p.

Irvine, T.N., 1959, The ultramafic complex and related rocks of Duke Island, southeast Alaska. PhD thesis, CA Institute of Technology, Pasadena, CA, 320 pp.

Irvine, T.N., 1974, Petrology of the Duke Island ultramafic complex, southeastern Alaska: Geol. Soc. Amer., Memoir 138, 240 p.

AVALON DEVELOPMENT CORPORATION
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28

Maas, Kenneth M., Bittenbender, Peter E., Still, Jan C., 1995, Mineral Investigations in the Ketchikan mining District Southeastern Alaska. U.S. Bureau Mines Open File Report 11-95, pp. 175-182.

Mogessie, A., Belette, K., Hoinkes, G. and Ettinger, K., 1999, Platinum mineralization in the Yubdo ultramafic rocks, western Ethiopia.

Nixon, G.T., Cabris, L.J., and Laflamme, J.H.G., 1990, Platinum-group element mineralization in lode and placer deposits associated with the Tulameen Alaska-type complex, British Columbia; Can. Mineral, Vol. 28, pp. 503-535.

Perry, S.L., 2002, Landsat TM analysis, Duke Island area, southeastern Alaska: Perry Remote Sensing, Internal Rept. For Quaterra Resources, 12 pp.

Plafker, G. and Berg, H.C., 1994, Overview of geology and tectonic evolution of Alaska, in Plafker, G. and Berg, H.C., eds., Geology of Alaska: Geol. Soc. America, Geology of North America, V. G-1, pp. 989-1021

Ruckmick, J.C., and Noble, J.A., 1959, Origin of the ultramafic complex at Duke Island, southeastern Alaska. Geol. Soc. Am. Bull., V 70, No. 8, pp. 981-1018.

Saleeby, J.B., 1992, Age and Tectonic setting of the Duke Island ultramafic intrusion, southeast Alaska. Can. J. Earth Sci. V. 29 No. 3, pp. 506-522.

Simpson, R. G., 2006, Technical report and mineral resource estimate, Turnagain nickel project, Turnagain River area, Liard Mining District, British Columbia: NI 43-101 Report for Hard Creek Nickel Corp., 73 p.

Taylor, H.P., Jr., 1979, Zoned ultramafic complexes of Southern Alaska: in Ultramafic and related rocks, P.J. Wyllie, editor, pp. 97-118.

Tistl, M., 1994, Geochemistry of platinum group elements of the zoned ultramafic Alto Condoto

Thakutra, J.; Ripley, E.M. and Chusi, L., 2005, Isotopic and geochemical studies of host rock pyroxenites associated with Cu-Ni-PGE mineralization in the Duke Island complex, Alaska: Geol. Soc. Amer., Abstracts with Programs, Vol. 37, No. 7, p. 451,

Tolstyhk, N.D., Siderov, E.G., Laajoki, K.V.O., Krivenko, A.P. and Podlipskiy, M., 2000, Association of platinum-group minerals in placers of the Pustaya River, Kamchatka, Russia: Canadian Mineral., Vol. 38, pp. 1251-1264.

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


29

STATEMENT OF QUALIFICATIONS

CURTIS J. FREEMAN
Avalon Development Corporation
P.O. Box 80268, Fairbanks, Alaska 99708
Phone 907-457-5159, Fax 907-455-8069, Email Avalon@alaska.net

     I, CURTIS J. FREEMAN, Certified Professional Geologist #6901, HEREBY CERTIFY THAT:

I am currently employed as President of Avalon Development Corporation, P.O. Box 80268, Fairbanks, Alaska, 99708, USA.

2. I am a graduate of the College of Wooster, Ohio, with a B.A. degree in Geology (1978). I am also a graduate of the University of Alaska with an M.S. degree in Economic Geology (1980).

3. I am a member of the American Institute of Professional Geologists, the Society of Economic Geologists, the Geological Society of Nevada, the Alaska Miners Assoc. and the Prospectors and Developers Assoc. of Canada.

4. From 1980 to the present I have been actively employed in various capacities in the mining industry in numerous locations in North America, Central America, South America, New Zealand and Africa.

5. I have read the definition of “Qualified Person” set out in National Instrument 43-101 (NI43-101) and certify that by reason of my education, affiliation with a professional organization (as defined by NI43-101) and past relevant work experience, I fulfill the requirements to be a “Qualified Person” for the purposes of NI43-101.

6. I am responsible for preparations of all sections of the report entitled Geologic Report DK06EXE-1, Summary Report for the Duke Island Cu-Ni-PGE Property, Ketchikan Mining District, Alaska and dated August 25, 2006 (the “Technical Report”) relating to the Duke Island property. I visited this property numerous times in 2001, 2002, 2003, and 2005 and employees of Avalon Development conducted field work on this property during that period.

7. I have not had prior involvement with the property that is the subject of the Technical Report.

8. I am not aware of any material fact or material change with respect to the subject matter of this Technical Report that is not reflected in the Technical Report, the omission to disclose which would make the Technical Report misleading.

9. I am not independent of the issuer apply all of the tests in section 1.5 of NI43-101. I own controlling interest in Avalon Development Corporation which owns 66,000 shares of the common stock of Quaterra Resources Inc., which were issued as a finder’s fee for recommending the Duke Island property and the Union Bay property to Quaterra, and own

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


30

options to purchase an additional 120,000 shares of common stock of Quaterra. I own no other interest in any company or entity that owns or controls an interest in the properties which comprise the Duke Island project.

10. I have read NI43-101 and Form 43-101F1 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 the publication by them, including publication of the Technical Report in the public company files on their websites accessible by the public.

DATED in Fairbanks, Alaska this 25th day of August 2006.

Curtis J. Freeman, BA, MS, CPG#6901, AA#159  

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


31

STATEMENT OF QUALIFICATIONS

CHRISTOPHER J. VAN TREECK
Avalon Development Corporation
P.O. Box 80268, Fairbanks, Alaska 99708
Phone 907-457-5159, Fax 907-455-8069, Email avalongeo1@alaska.net

I, CHRISTOPHER J. VAN TREECK HEREBY CERTIFY THAT:

1. I am currently employed as Senior Geologist at Avalon Development Corporation, P.O. Box 80268, Fairbanks, Alaska, 99708, USA.

2. I am a graduate of the University of Wisconsin-Oshkosh with a B.S. degree in Geology (2000). I am also a M.S. Candidate at the University of Alaska Fairbanks, expected graduation date August 2006.

3. I am a member of the American Institute of Professional Geologists, the Society of Economic Geologists, the Society for Geology Applied to Mineral Deposits, the Geological Society of America, and the Alaska Miners Association.

4. From 2001 to the present I have been actively employed in various capacities in the mining industry in Alaska.

5. I have read the definition of “Qualified Person” set out in National Instrument 43-101 (NI43-101) and certify that by reason of my education, affiliation with a professional organization (as defined by NI43-101) and past relevant work experience, I fulfill the requirements to be a “Qualified Person” for the purposes of NI43-101.

6. I am responsible for preparations of some sections of the report entitled Geologic Report DK06EXE-1, Summary Report for the Duke Island Cu-Ni-PGE Property, Ketchikan Mining District, Alaska and dated August 25, 2006 (the “Technical Report”) relating to the Duke Island Project. I have worked on this property on numerous occasions between September 2001 – September 2005 for durations ranging from 5 to 25 days.

7. I have not had prior involvement with the property that is the subject of the Technical Report.

8. I am not aware of any material fact or material change with respect to the subject matter of this Technical Report that is not reflected in the Technical Report, the omission to disclose which would make the Technical Report misleading.

9. I am independent of the issuer applying all of the tests in section 1.5 of NI43-101.

10. I have read NI43-101 and Form 43-101F1 and the Technical Report has been prepared in compliance with that instrument and form.

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net


32

11. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and the publication by them, including publication of the Technical Report in the public company files on their websites accessible by the public.

DATED in Fairbanks, Alaska this 25th day of August 2006.


Christopher J. Van Treeck, BS

 

 

Filename: DK06EXE1-Form43.doc

 

 

AVALON DEVELOPMENT CORPORATION
P.O. Box 80268, Fairbanks AK 99708
907-457-5159 Fax: 907-455-8069 avalon@alaska.net











EX-99.39 40 exhibit99-39.htm EXPERT'S CONSENT OF CARACLE CREEK INTERNATIONAL CONSULTING, INC. Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.39

 


EX-99.40 41 exhibit99-40.htm EXPERT'S CONSENT OF AVALON DEVELOPMENT CORP. Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.40

 


EX-99.41 42 exhibit99-41.htm AUDITOR'S CONSENT Filed by Automated Filing Services Inc. (604) 609-0244 - Quaterra Resources Inc. - Exhibit 99.41

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in Form 40-F dated February 13, 2008 of Quaterra Resource Inc. (the “Company”) of our report dated March 12, 2007, relating to the Company’s consolidated balance sheets as of December 31, 2006 and 2005 and the related consolidated statements of operations and cash flows for each of the years ended December 31, 2006 and 2005.

“Smythe Ratcliffe LLP” (signed)

Chartered Accountants
Vancouver, British Columbia, Canada

February 13, 2008


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