8-K 1 form8d.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(D) of the Securities Exchange Act 0f 1934 Date of Report: September 8, 2006 MOTHER LODE GOLD MINES CONSOLIDATED (Exact name of Company as specified in its charter) CALIFORNIA 0-16468 94-2236016 (State or other jurisdiction of (Commission (I.R.S. Employer incorporation or organization) File Number) Identification Number) 1312 CONCANNON BOULEVARD, LIVERMORE, CA 94550 (Address of principal executive offices) (925) 606-5939 (Registrant's telephone number) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: ? Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ? Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240 14a-12) ? Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ? Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Section 8. Other Events Item 8.01 Pacific FarEast Minerals, Inc. ("PFEM"), an Investee corporation of Mother Lode Gold Mines Consolidated ("MLGM"), conducts geologic operations in the People's Republic of China for the purpose of locating deposits of gold, and other metals, that may have economic potential for mining operations. One such project is located in the County of Weichang, Province of Hebei, People's Republic of China, and is referred to as "The Weichang Project". PFEM has issued a report to shareholders, titled "Corporate Update", dated September 8, 2006, describing the progress of PFEM and The Weichang project in particular. MLGM deems this report to be of importance to the security holders of MLGM. MLGM currently holds a 29.9% interest in PFEM. PFEM's report is submitted herein. In addition to PFEM's corporate update report to shareholders, MLGM received, on September 21, 2006, a copy of the Audit of Accounts for the Chengde Great Wall Minerals Company, Ltd. by the Chengde Zhengyuan Accountant's Office Co., Ltd., Chinese registered accountants, 50 Xinxing Street, Shuanggiao, Chengde, Hebei Province, China. The Chengde Great Wall Minerals Company, Ltd. is owned 100% by PFEM. This report is submitted herein. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Mother Lode Gold Mines Consolidated (Registrant) Date September 21, 2006 o/s Frank M. Orrell Chairman/CEO CORPORATE UPDATE PATHWAY TO CASHFLOW Page 1 Figure 1 Asia map showing location of Weichang County, Hebei Province, in the People's Republic of China PACIFIC FAREAST MINERALS INC. DISCLAIMER The Information contained in this presentation has been prepared using the information available to Pacific FarEast Minerals Inc. (PFEM) at the time of preparation. This presentation contains forward-looking statements that were based on expectations, estimates and projections as of the date of this presentation. Any forward-looking statement is subject to known and unknown factors which may cause actual results and developments to materially differ from those expressed by, or implied by the forward-looking statements in this presentation. External or other factors may have impacted on the business of PFEM and the content of this presentation since its preparation. Pacific FarEast Minerals does not undertake to update any forward-looking statements that are contained in this presentation, except in accordance with applicable securities laws. In addition, this presentation may not include all relevant information regarding PFEM. PFEM has taken all reasonable care in preparation of this presentation, however; the content of this presentation should not be relied upon in relation to any further action including investment in Pacific FarEast Minerals Inc. Any person considering an investment in PFEM is advised to obtain independent financial advice prior to making an investment decision. Page 3 Figure 2 Map of Peoples Republic of China showing location of project in Hebei Province, PRC Page 4 Figure 3 Google Earth photograph of Weichang shear zone development WEICHANG PROJECT GEOLOGICAL MAP Page 5 Figure 4 Weichang Project geological map showing location of dominant rock types PRESENTATION SUMMARY CORPORATE OVERVIEW PROJECT UPDATE PATHWAY TO Operating CASH FLOW CORPORATE UPDATE By: Frank M. Orrell, Chairman PACIFIC FAREAST MINERALS INC. Dated: September 8, 2006 CAPITAL STRUCTURE September 8, 2006 Total Shares Outstanding 6,925,352 Treasury Shares* 2,040,000 Share Price $0.60 Market Capitalization $4,155,211 Options on Issue 60,000 Number of Shareholders 27 *Shares acquired from former Founder and returned to Treasury on Sept.6, 2006. Any shareholder is entitled to see the opinion of Counsel in this regard. The Company recently engaged the Law Firm of De Martini & Walker (Corporate Law) and The Boone Law Group (SEC Law), through the good offices of MLGM. SHAREHOLDER BASE SHARES % No. of Mother Lode Gold Mines Consolidated* 29.96 2,074,591 Havilah Mining Company Inc. * 20.44 1,415,836 Minority Founders as a Group 17.39 1,204,088 Shares issued for Compensation 5.54 384,000 Individual Investors as a Group 26.67 1,846,837 Total Outstanding 100.00% 6,925,352 Holders of Convertible Debt 8% Debenture 351,000 Shares under Option 60,000 Warrant A 352,518 Warrant B 352,518 Fully Diluted Shares (Excludes 2,040,000 Treasury Shares) 8,041,388 * (Founders) MARKET CAPITALIZATION Page 10 Figure 6 Bar Chart showing comparative market capitalization of like companies compared to Pacific FarEast Minerals, Inc. CAPITALIZATION COMPANY SYMBOL (MILLION DOLLARS) China Gold Corp GCDC 1.5 Pacific FarEast Minerals, Inc. PFEM 4.2 China Resources CAEO 17.0 Golden Tiger Mining GTX 19.0 Central China Goldfields GGG 23.0 Majestic Gold MJS 26.0 Intercitic ICI 38.0 Red Dragon Resources DRA 45.0 Minco Mining Minerals MMM 48.0 PROJECT OVERVIEW Platforms for Growth in Place Weichang, Focus Hebei Province Development Major Shear Zone South GuangDingShan Exploration Major Shear Zone North GuangDingShan Ocean Close ErDaoChuanGouMeng East Shear Zone DongFengShan East Shear Zone Ext. DaYaoGou Xiuyan, Liaoning Province Prospect Large Tailing site DongQianKuang WeiKuangBa BUILDING A MULTI METAL ASSET BASE ON A FOUNDATION OF GOLD OUR PATHWAY TO OPERATING CASH FLOW TARGET 2008/9 DEVELOPMENT South GuangDingShan (Au) EXPLORATION North GuangDingShan (Au, Cu, Zn) ErDaoChuanGouMeng (Au) DongFengShan (Au, Cu) DaYaoGou (Au, Zn) Xiuyan Tailings (Au, Ag) There is good potential to develop a large/huge gold and multi-metal area in Weichang, China Mr. Zhang De-sheng, VP, GM Hebei Prov. Reg. Geo. Min.Exp.Inst. ACHIEVMENTS (Through August 31, 2006) Completed: Identification of major gold bearing geologic structures in China, capable of providing a Pathway To Operating Cash Flow and Growth. Completed: Addition of Prof. Sun Shu, former Chairman of the National Science Foundation of China, to PFEMS Advisory Board, as Chief China Adviser (Prof. Sun is recognized as Chinas leading structural geologist, and holds world wide acclaim in his field of expertise). Completed: Extensive literature review of past Governmental Exploration in the Weichang area and North China Block, pertaining specifically to Weichang and beyond. Completed: Comprehensive Weichang Exploration and Development Plan. Completed: Assessment of Weichang Infrastructure: Water, Power, Roads, Labor, Rail, Living Accommodations, Medical, Banking, Office, Communications facilities and general Environmental conditions. Completed: Establishment of relationship with The Weichang Gold Company of the Manchu Autonomous County of Weichang, Chengde Administrative area, President Ma Yun, Manager. Established relations with City and County Authorities. Completed: Exploration/Mining Agreement covering 6,200 sq km, with option to enter into 77.5 / 22.5% Joint Venture Agreement with the Weichang Gold Co. (subsequently expanded to 9,200 for preliminary exploration activity). Completed: Establishment of the Chengde Great Wall Minerals Co. Ltd, a China Foreign Investment Company, Mrs. Wu Yi-Shan, Managing Director. Completed: Opening of Weichang Field Office in the headquarters of the Weichang Gold Company. Completed: Establishment of relations with new representatives of the Weichang Industrial Bureau. Completed: Regional investigations, preliminary observations and exploration in the Provinces of Liaoning and Hebei, China, during the year 2005. Completed: Business License renewal. Ongoing: Established relationships with the Ministry of Land and Resources, in Beijing, with the aid and assistance of Prof. Sun Shu. Ongoing: Established fund for Deserving Students in Geology and Engineering. Ongoing: Maintenance of relations with the Counsel Generals office in San Francisco, California. Established: Banking, Accounting, Governmental and Local Ministry of Land and Resources Department relationships in the City Administrative area of Chengde, Hebei Province, China. WEICHANG SETTING ATTRIBUTES Infrastructure to Support Mining Operations: Local Field Office of: Chengde Great Wall Minerals Company, Ltd. And Headquarters of: The Weichang Gold Company Roads, Rail, Power, Water, Communications, Large Work Force, Housing, Medical. City, County Government Services Excellent Exploration / Development Potential for upside. Approved Exploration Permits Approved Business License County Gold Company as Partner Mining a Strategic Goal of County Government Coordinated team approach between PFEM and Government Project registered as Strategic Project by: Chengde Administrative Authority Weichang Exploration / Development Program Prepared by; The Chengde Great Wall Minerals Company, LTD; a wholly owned subsidiary of Pacific FarEast Minerals Company, Inc. This document is highly confidential and is to be used only in the evaluation of the Company's progress by shareholders in the County of Weichang, China. The Company's exploration and development efforts, shown on the areas designated in the "Weichang, GuanDingShan Multi-Metal Map", page 22, have been concentrated on strategies developed by western mining companies in search of large scale gold and base metal deposits formed at generally low temperatures, of a disseminated type; associated with major Shear Zones, and Hot Springs in an epithermal setting. Of special importance to the Company are Ocean Close type prospects, created by complex hydrothermal processes, i.e. subduction and accretion during orogeny. Such deposit types may contain several million ounces of fine gold, and/or major base metal deposits, more generally known as; "World Class Deposits", or in some rare cases, "Giant Deposits" These occurrences are deposited by hydrothermal or metasomatic events within large volumes of host rocks of different origin and / or source rocks deep within the earths crust, or mantle. The low grade of many of these types of ore bodies can only be mined economically if the volume of such ore body is large enough to justify the capital expenditure necessary to bring the project into production. Therefore; the size of the potential target area must be extremely large in scale, and inclusive of a unified land position. Due to the extremely large size of the "Weichang Occurrence" envisioned by the Chengde Company, and the large funding necessary to perform an adequate scoping study of the entire subject area, the Company initially made its first application for prospecting permits covering certain known gold occurrences that coincide with the company's geologic perspective. Those permits now cover an area of 251 sq km. The Company has rights to explore over a 6,200 sq km area under terms with The Weichang County Gold Company. The Mayor of the City County Government, in the Spring of 2006, graciously extended these rights to cover the entire county of 9,200 sq km, giving the Company, what it believes, is one of the largest, if not the largest prime prospecting areas in all of China. With the approval of the initial prospecting permits; and the guidance its China Staff, Senior Adviser and Ministry of Land and Resources Officials, the Company was lawfully permitted to embark upon a program to study individual gold occurrences; areas of alteration, rock types etc., perform geochemical studies, trenching, drilling and other necessary work prior to actual mining operations. Success in developing highly prospective targets through our Qualified Work Program allows the company access to world capital markets, providing a pathway, or avenue, for future project financing. The Company estimates the amounts of future investment capital to be employed in the Weichang area to be very substantial. Positive findings during the field season in 2005 and early 2006 by the Company's geologists, and senior personal, are leading the Company to seriously consider a further expansion of the permitted prospect areas, in line with the written Agreement dated; August l6, 2003, between the Company and The Gold Company of Weichang County. The intent of this agreement from the onset of its implementation was the development of large scale industrial type gold and other mineral mining and processing operation. The company has expended in excess of 3,700,000 Yuan to date in advancing the Weichang project into the "development stage". Further investment capital will be supplied to the Chengde Company upon additional positive findings, as exploration and development progresses. The Company began its exploration efforts in a target rich environment at the core of an extremely large regional epithermal occurrence, crossed by major shear zones, rift structure and Ocean Close apparatus. The GuangDingShan area is just one target among others in the heart, or intersection, of these massive geologic structures. Aside from its major goals, as stated above, the Company has discovered what it and the Hebei Regional Geological Institute, Langfang, believes is a large to huge high grade Au vein and multi metal system of major proportions in the North and South GuanDingShan prospect area and beyond (See, page 24 for further details). The Company is in early stages of planning to bring the southern portion of this target into production as its "Pathway to Cash Flow", it also believes SGDS will be augmented by the results of this years work on its North GuanDingShan prospect (This exceptional target exhibits high grade gold prospects, as well as large scale base metal characteristics). The current production target is a multiple deposition quartz vein type of deposit the Company believes has great depth perception and can be mined efficiently over wide widths, using the forces of gravity, local environment and large labor force in order to reduce operating costs. In near proximity to the GDS project area the Company has started early exploration work on what it believes is an exceptional Ocean Close prospect, previously mined for high grade gold values, in line with the work of K. Leahy et al. (2005), Geodynamic Processes that Control the Global Distribution of Giant Gold Deposits. The key point of an exploration effort in such an environment, as Weichang, is based on a widely accepted concept that large shear zone and related low temperature deposits almost always leave profound geochemical evidence of their existence. Therefore, the key exploration technology used by the company will center on gathering existing geochemical data from all sources, as well as using and developing new highly sophisticated geochemical sampling techniques, which are now being employed in the Western World, (such as those being employed in the famous Carlin Trend in Nevada, U.S.A.). The Company has, or has access to, certain inter-nationally recognized professionals to analyze and interpret our highly specialized approach to this type of exploration and subsequent development procedures. The Company has also; (1) Contracted with established Chinese Geological Organizations for certain specialized work, such as the Hebei Regional Geological Exploration Institute, and will; (2) Train Chinese Nationals who will become an integral part of the Chengde Company. In broad terms we see the following multi-phased exploration and development plan to be a generalized approach for the company's work in the Weichang area: Page 18 Figure 7 STAGES AND EXPENDITURES IN A MINERAL EXPLORATION PROGRAM A qualitative graph of expenditures (vertical axis) against the phases of a mineral exploration program (horizontal axis) Phase l (I)* Planning Completed (II)* Literature search and data accumulation (III)* Reconnaissance Completed l. Balance in combination with (l.2) Remote Sensing and Geological profiling Phase II (IV)* Target Appraisal and Identification Completed l. The sheer size of the target area prohibits detailed geochemical work being applied to the whole territory evenly. We therefore have had to identify more favorable areas for exploration and concentrate our major effort at first on such targets. Remote Sensing (RS) The Hebei Institute had access to 1:50000 multi-band satellite data of the designated area and several institutions and specialists, in China. This information has been used in a targeting strategy, on the basis of interpretation of such data. 1.1 Geological Profiling (GP) At the same time, the company has started to develop several lateral cross sections of the identified project area, which is being investigated, sampled and further studied in great detail. Special attention was given to detailed geochemistry, thin-section ore petrography and studies of alteration in contact zones, along areas of high energy tectonic activity, exhibiting evidence of mineralization and zones of low rock density. This work will allow us, without having to undertake a huge and very expensive effort to map the whole territory at the appropriate scale, to understand in detail the scale, nature and particulars of the hydrothermal or metasomatic process, alterations, movements of the chemical fronts and other geochemical relevant events. 1.2 Combining of Remote Sensing and Geological Profiling (RS) (GP) for the purpose of better adjusting RS filtering and processing to the specifics of the Weichang region (Every territory and terrain has certain specifics that have to be taken into consideration while doing RS interpretation). Important feedback information from field geologists was used to analyze anomalies relevant to the needs of the RS interpreter, giving our team a great advantage in adjusting techniques to be used to further delineate interesting potential target areas. Thus, we plan to have a prolonged RS interpretation cycle that we expect to adjust to such extent that success of interpretation will be greatly improved. Phase III 2. Geochemical Survey (GS) of the designated target areas: 2.1 After reviewing the available preliminary RS and GP results, the team delineated promising areas for further investigation. Additional work was then performed on these areas in the form of detailed geochemical surveys. The reliability and value of geochemical work heavily depends on precision and consistency of every step during the process. Such surveys were conducted by the Hebei Regional Exploration and Geological Institute with very experienced survey crews and in combination with very high level analytical work. The geochemical surveys scale and sampling protocols of course were developed with regards to local conditions. Relief, soil chemistry, weathering, vegetation, streams geometry and many other factors were taken into consideration in order to develop sampling and analytical protocols specific to the Weichang area. Special attention was paid to sample preparation, assaying technology and in mapping, with emphasis on alteration and structure, soil and rock geochemistry. Large scale shear zone and related disseminated gold / base metal deposits demand special attention during sample preparation of geochemical surveys, due to the fact that the gold particles in these types of deposits, or prospects, are much smaller than in a quartz vein environment (typically these particles are encapsulated in quartz), much finer milling equipment is needed for adequate sample preparation. This process will be applied to many of the project areas we are exploring in the Weichang epithermal system. Another area where precision and well-developed procedures are vital is between- sample equipment cleaning, and finally, our assaying lab has to have solid quality control (QC) protocols that are absolutely followed. PFEM has used the SGS lab near Beijing and the American Assay Lab in Reno, US, to check sample results to date, in comparison with the Hebei Inst. Lab in Langfang, China. The labs have been inspected by Donald L. Gustafson (Consulting Economic Geologist) and Stanley D. Rhyu (PFEM Metallurgist). 2.2 Geochemical anomalies, their interpretation and selection of first target areas for exploration drilling: After the initial GS information was collected, the process of delineating first tier target areas was begun, assessing their connection to the geology and ore potential. These areas were tested additionally with appropriate geochemical methods, and have been undergoing detailed geological mapping, etc., in preparation of exploration drilling. Undoubtedly some additional Remote Sensing (RS) work will be done on these areas in 1:25000, or even 1:10000 scales. 2.3 Preparation of a set of maps and sections with geological, structural, alteration, fluid inclusion and geophysical data, combined with skillful interpretation to define target potential. PFEM in conjunction with the Hebei Regional Exploration Institute is working to establish a model of such data geochemically and mathematically. Phase IV (V)* Target Testing Underway 1. Trenching, tunneling Underway 2. Drilling, logging, plotting and analysis Planning 3. Computerization of data in order to create a three- dimensional framework. Early Stage 4. Data plotted on several scales of maps and sections Completed or Underway (VI)* Ore Body Development Mining Engineering Underway (VII)* Mine Development Mining Engineering Early Stage Planning (VIII)* Mining Mining Engineering Early stage Planning Summary There is no quick and easy way to find and develop a major ore body containing millions of ounces of gold and/or other metals in the Weichang area. A well conceived serious, and skillfully executed staged exploration and development program, is much more likely to have success than shoddy one, both in terms of ore found and the ratio of the value of the ore found to the cost of finding it. Exploration planning should divide the program into stages that are very sequential and consequential. The exploration program model we are using is flexible and will be responsive to the data generated on a daily basis by the program. Target concepts evolve from time to time as our team works with the existing data and/or new data. Relevance, rank, and collection sequence will be critical in the data gathering process. The goals of our program are intensely practical. There will be consideration of economic parameters along with geological parameters at each stage, as well as a deep concern for the Environment and People from the earliest stage through the final stages of exploration, development, and operations. The Chengde Great Wall Minerals Company and its Manager are developing an environment where imagination, innovation and initiative are encouraged as well as stimulated (all a part of Western Mining Company Strategy). The Manager and the Gold Company of Weichang County, with the assistance of local and regional officials, will lead this effort towards our fundamental objectives:(1) The discovery of major (World Class) type gold, silver and/or base metal deposits. (2) The development of a profitable, as well as responsible mining enterprise, providing mutual benefits for all parties, including the People of Weichang County. (3) Advancing the Science of Geology and Mining Engineering in China. Weichang Exploration 2005 Page 22 Figure 8 Photographs showing exploration work at the Weichang site (2005) Page 23 Figure 9 Geologic map showing Weichang, Guang Ding Shan gold, silver and multi-metal locations DEVELOPMENT South GuanDingShan, Weichang, Hebei Province, China Completed: Exploration Permits Issued by Ministry of Land and Resources. Completed: Preliminary exploration and literature review in 2004 on 100 sq km area outsideSouth GuanDingShan area; due to snow cover, Gustafson and Robert S. (Steve) Friberg (Certified Professional Geologist), were physically unable to inspect the South Guan Ding Shan Prospect. In their report of January 2005, Gustafson and Friberg suggested that PFEM should direct its efforts toward the major identified shear zones, containing geophysical and geochemical anomalies over significant areas that might outline important targets, which the Company needed to explore for major deposits. Gustafson suggested these anomalies may be indicating large disseminated ore bodies at depth. Established: Relationship with Hebei Regional Exploration and Geologic Institute,Langfang, China. Completed: Pre-Exploration plan and budget by Hebei Geological Exploration Institute, focused on Major Shear Zone recommended by D. L. Gustafson, and Freiberg, above. Completed: Extensive geo-chemical sampling, 18 trench program (rock type and lab analysis). Identified 11 gold ore bodies within the working areas from 91 channel samples in 18 trenches. Ore Body Scale and Grade OreBody No. Length?m? Grade?g?t? Trench Sample & Grade Sample No. Grade?g?t? I 160 3.02 TC1 1-2 3.61 1-3 1.32 TC2 2-2 4.12 II 160 3.45 TC1 1-5 5.11 TC2 2-4 1.78 III 200 7.0 TC15 15-4 8.86 TC16 16-6 5.83 16-7 6.31 IV 160 11.8 TC14 14-2 11.8 V 160 6.43 TC14 14-5 5.75 14-6 7.10 VI 335 6.77 TC9 9-2 2.22 9-3 18.00 9-4 4.82 TC10 10-1 4.03 10-3 6.02 10-4 6.58 TC12 12-2 7.32 12-5 6.97 TC13 13-2 4.97 VII 120 1.92 TC8 8-2 1.92 VIII 120 1.51 TC8 8-5 1.51 IX 120 5.03 TC6 6-1 5.03 X 120 10.0 TC6 6-4 10.0 XI 120 4.38 TC6 6-6 4.38 Completed: Identification of large high grade vein system, as potential bulk mineable resource with world class potential; associated with major regional shear zone target area in epithermal environment; adjacent to highly prospective huge Au and base metal prospect (NGDS) . Completed: Survey of potential Mill Site and Environmental conditions. Completed: Check Sampling by SGS lab, 43-101 certified: I nspection of Langfang and SGS labs by Donald L. Gustafson, Robert S. (Steve) Friberg and Stanley D. Rhyu to inspect procedures, on separate occasions. Completed: Safety Inspections and established procedures according to Chinese law. Completed: Data analysis, extensive geo-chem survey, trenching, sampling and l by 2500 mapping. Completed: Topographic map 1:2500. Initiated: Exploration for extensions of new ore zones within the confines of South GuanDingShan project area, as a basis for estimation of size and scope of Project. Initiated: Adit on Au 5 with Cross Cut from 5-1 to obtain composite sample for analysis of bulk sample, run of mine ore. Established: Outline of Due Diligence Study and Data base of all work as early stage (Pre-Feasibility). Postponed: Further work on XingJiaGou tunnel in preference to development work on existing SGD structures, May 2006. Planning: Early stage Pre-Feasibility, Environmental assessment for mine/mill development and mining methods. Ongoing: Development of Community Relations with City, County and Village Representatives in Weichang County. Completion of 2006 development and exploration plan for GuanDingShan. Next stage of deposit development, planning and budget for the 2007 field season. WEICHANG SHINING STAR PROJECT PROJECT SUMMARY BAR CHART Page 27 Figure 10 This project flow chart is PFEM's first time estimate of the progression through commissioning of the "Shining Star" operating facility, located in the County of Weichang, Hebei Province, China. The schedule will be adjusted for continuing developments ie; Permitting, Environmental, Land Acquisition, People Considerations and other factors Weichang Project tasks to be accomplished showing the projected start of, and duration of, individual tasks. Years 2006 and 2007. Development Current through September 2008 Pre-Feasibility June 2007 through July 2008 WEICHANG SHINING STAR PROJECT PROJECT SUMMARY BAR CHART Page 28 Figure 10 (Continued) Weichang Project tasks to be accomplished and projected start of, and duration of, individual tasks. Years 2008 and 2009. Development Continue through September 2008 Pre-Feasibility Completed Feasibility January through July 2008 Engineering August 2008 through March 2009 Site Preparation January 2009 through April 2009 Incoming Power January 2009 through September 2009 Water Supply March 2009 through September 2009 Roads March 2009 through May 2009 Dam/Tailing Pond March 2009 through September 2009 Foundation March 2009 through April 2009 Administration Building March 2009 through July 2009 Assay Laboratory Building March 2009 through July 2009 Security/First Aid Building March 2009 through July 2009 Pit & Service Building March 2009 through September 2009 Crushing Structure April 2009 through October 2009 Field Tank May 2009 Conveyors July 2009 through October 2009 Process Plant May 2009 through November 2009 Process Plant/Electric & Instrument August 2009 through November 2009 Process Plant/ Mechanical & Piping September 2009 through November 2009 Commissioning December 2009 North GuangDingShan Completed: Exploration Permits being issued by Ministry of Land and Resources, Chengde Brigade. Completed: Soil Sample survey over 20 sq km: 1:15000: line to line: 500m; point to point: 50m; soil samples taken 896. Observation of geology, structure and mineralization along survey lines and their perimeters. Soil Survey results show; three Au anomalous zones, TAu1-4, with Au1 showing potential width and length mining dimensions, up to 280 times background values. Completed: Geology Survey 1: 2500 mapping of extensive Multi Metal prospect area and data analysis. Completed: (a.) Soil Survey Au, Ag, As, Sb, and Hg contour map 1:10000 (b.) Soil Survey Cu, Pb, Zn, and Sb contour map 1:10000 (c.) Soil Survey Mo, W, and Bi contour map 1:10000 (d.) Soil Survey Au contour map 1:10000 Initiated: Trenching, sampling on high grade Au zones indicated by sampling, up to 250 times background. Cu and Zn mineralization open in all directions. Ongoing: Planning next stage development. ErDaoChuanGouMeng (Ocean Close) Completed: Exploration Permits Being Issued by Ministry of Land and Resources. Completed: Preliminary field investigation and lab assays. Completed: Geologic mapping 1:2500, data analysis and preliminary geo-chem survey and attendant map. Completed: Topographic map 1:2500. Completed: oil Survey 1:20000 Completed: Opening of tunnel, formerly worked by the Weichang Gold Company on high grade vein structure. Ongoing: First phase trenching in Ocean Close granitic rock type previously sampled by Stanley D. Rhyu; assayed at Langfang lab. Planned: Inpection of all work to date; by Stanley D. Rhyu, spring of 2007. DongFengShan (2.5 sq km) Completed: Exploration Permits Issued by Ministry of Land and Resources. Completed: Recommended by Donald L. Gustafson and Friberg as potential low temperature deposit possibility within shear zone, at depth, January 2005. Completed: Area and Path maps (preliminary sampling) Completed: Preliminary field investigation by Hebei Province Exploration and Geological Institute; found and identified this prospect to be the Eastern extension of the mineralized belt, an extension of the ChaoYang Wan mine. Completed: Samples from limited exposures sent to Langfang lab. Ongoing: Plan of attack as to how next stage exploration will be conducted. Da YaoGou (Placer area) Completed: Applications being prepared for submission to Ministry of Land and Resources. Completed: Soil Survey 1: 20000 Completed: Stream sediment sampling; 305 samples. Ongoing: Trenching and additional work upon evaluation of geo-chem results and issuance of permit. Xiuyan Tailings Deposits Completed: Title check: Owner supplied legal documents. Completed: Initial inspection of 3.5 million ton tailings dump of former large lead and zinc producer. Completed: Additional testing of various sample areas as follow up to original inspection and sampling. Underway: Agreement of Intent with Owners. Planned: Three drill hole and sampling program to give further evidence of substantial resource potential, prior to more extensive testing; Spring of 2007. PFEM'S WEICHANG VISION The Vision is to create In Weichang, China, A long life "Mineral Processing industry" Operating in the lowest cost Quartile to profitablity Producing a variety of metals And Mineral products Gold Will be the foundation, upon which This vision of future growth is built (REGISTRANT'S NOTE: END OF PFEM "CORPORATE UPDATE") Auditing Report Chengde Zhengyuan Office Foreign Auditing Mark (2006) No. 8 Chengde Great Wall Minerals Company, Ltd., We have audited the appendixes: the balance sheet and the profit sheet of Chengde Great Wall Minerals Company, Ltd. as of December 31, 2005. The management team of Chengde Great Wall Minerals Company, Ltd. is responsible for editing the accounting report forms, so we only take the responsibilities of making suggestions on these forms on the basis of the auditing execution. We have planned and implemented the auditing project depending on the independent auditing guideline of Chinese registered accountants, in order to reliably ensure whether the accounting forms see a considerable wrong report or not. This auditing project covers the following: On the basis of spot check, the amount which supports the report form is checked with any of exposed evidences, an accounting policy that the management team had used to edit the form is appraised with an important accounting estimation made by this team, and the complete influence of report form is evaluated. We believe that our auditing project is able to provide our suggestions with a reasonable basis. Therefore, the auditing report forms are given as follows: Your company was established on January 6, 2004. The registered number of the enterprise legal-person business license is: Enterprise Independent Hebei Chengde Zongfu Mark No.130800100283. The legal person is Frank Orrell. The registered capital is: USD750,000 (the paid-up capital is USD150,000). And the operating scope is: the survey and development of mineral resource. 1. By December 31, 2005, the total capital of your company had been RMB184,681.43 all of which was the floating capital; and the rights and interests of the proprietor had been RMB184,681.43, including the paid-up capital of RMB1,719,939.94 and the unallocated profit of RMB-1,535,258.51. 2. For the fiscal year of 2005, your company saw the null earnings, the operating cost of RMB998,678.00 and the total profit of RMB998,678.00. We believe that the abovementioned accounting report forms are in conformity with the regulations of Enterprise Accounting Guideline and Enterprise Accounting System, both of which were published by the Chinese government. In all key areas, the forms fairly reflect the financial status of Chengde Great Wall Minerals Company, Ltd. as of December 31, 2005, as well as its financial status and operations achievements of the fiscal year of 2005. by Chengde Zhengyuan Accountant's Office Co., Ltd. (Official Seal: Chengde Zhengyuan Accountant's Office Co., Ltd.) Place: Hebei, China Date: June 21, 2006 Chinese registered accountant: (personal seal) Chinese registered accountant: (personal seal) Address: No.50, Xinxing Street, Shuangqiao District, Chengde Balance Sheet Edited by: Chengde Great Wall Mining Industry Co., Ltd. Date: December 31, 2005 Unit: RMB Item Line Amount at beginning of term Amount at end of term Monetary capital 1 Short-term investment 2 Receivable bill 3 Receivable dividend 4 Receivable interest 5 Account receivable 6 Other receivables 7 Account paid in advance 8 Future deposit 9 Receivable allowances 10 Receivable withdrawn tax for export 11 Stock in trade 12 Including: Raw material 13 Finished products (commercial goods in stock) 14 Deferred and prepaid expenses 15 Net loss of floating assets to be handled 16 Investment of long-term liabilities to be expired in one year 17 Other Floating assets 18 Total of floating assets 19 620,439.49 184,681.43 Long-term investment: 20 Including: Long-term investment in shareholding rights 21 ? Long-term investment in creditor's rights 22 * Price difference for merge 23 ? Total of long-term investment 24 Original value of fixed assets 25 Minus: Accumulated depreciation 26 Net amount of fixed assets 27 Minus: Preparation for reducing value of fixed assets 28 Net amount of fixed assets 29 Liquidation for fixed assets 30 Project materials 31 Project under construction 32 Net loss of fixed assets to be handled 33 Total of fixed assets 34 Immaterial assets 35 Including: Land use right 36 Deferred assets (Long-term deferred and prepaid expenses) 37 Including: Repair of fixed assets 38 Cost on improvement of fixed assets 39 Other long-term assets 40 Including: Physical assets reserve specifically authorized 41 Total of immaterial and other assets 42 Debit items of deferred and prepaid tax 43 Total of assets 44 620,439.49 184,681.43 Short-term loan 45 Payable bill 46 Non-payments 47 Prepaid accounts 48 Payable wage 49 Payable welfarism 50 Unpaid profit (dividend) 51 Unpaid tax 52 Other payables 53 Other non-payments 54 Accrued expenses 55 Accrued loan 56 Investment of long-term liabilities to be expired in one year 57 Other floating liabilities 58 Total of floating liabilities 59 Long-term loan 60 Payable bond 61 Long-term payables 62 Payables specifically authorized 63 Other long-term liabilities 64 Including: Physical assets reserve specifically authorized 65 Total of long-term liabilities 66 Credit items of deferred and prepaid tax 67 Total of liabilities 68 * Minority of shareholders' rights and interests 69 Paid-up capital (capital stock) 70 1,157,020.00 1,719,939.94 State's capital 71 Collection's capital 72 Legal person's capital 73 Including: State-owned legal-person capital 74 Collection-owned legal-person capital 75 Personal capital 76 Foreign businessmen's capital 77 Accumulated capital 78 Accumulated surplus 79 Including: Legally accumulated capital 80 Public welfare funds 81 Added floating assets 82 Unconfirmed loss of investment (filled in with "-") 83 Unallocated profit 84 -536,580.51 -1,535,258.51 Foreign-currency conversion difference 85 Total of owner's equity 86 620,439.49 184,681.43 87 Total of liabilities and owner's equity 88 620,439.49 184,681.43 Table of Status on Income and Expenses of Foreign Exchange Edited by: Chengde Great Wall Mining Industry Co., Ltd. Date: December 31, 2005 Code of Organization:75751553?2 Code of Foreign Exchange License:130800040107 Unit: USD10,000 Assets Amount at begging of period Amount at end of period Debts and balances of checking accounts Amount at begging of period Amount at end of period I. Monetary fund of foreign exchange 8 2 XI. Accounts of foreign exchange payable 0 0 1.1 Cash Where: Domestic accounts payable 1.2 Deposit of capital accounts 8 2 11.1 Goods trade 1.3 Deposit of checking accounts Where: Expiry is one year or longer. 1.4 Deposit of loan accounts Financial leasehold 1.5 Deposit of other accounts 11.2 Service trade II. Accounts of foreign exchange receivable 0 0 Where: Expiry is one year or longer. Where: Domestic accounts receivable 11.3 Other accounts payable 2.1 Goods trade Where: Expiry is one year or longer. 2.2 Service trade XII. Accounts of foreign exchange received 2.3 Other accounts receivable ? ? Where: Expiry is one year or longer. III. Accounts of foreign exchange prepaid ? ? XIII. Wages payable to foreign employees IV. Dividends of foreign exchange receivable ? ? XIV. Dividends of foreign exchang payable Where: Domestic dividends receivable ? ? Where: Expiry is one year or longer. V. Overseas investment ? ? XV. Overseas loans 0 0 Where: Fixed assets ? ? 15.1 Loans from financial organizations Immaterial assets ? ? 15.2 Loans from affiliated enterprises VI. Domestic foreign exchange investments ? 15.3 Other loans VII. Non-foreign-exchange assets 0 0 15.4 Publishing of bonds 7.1 RMB ? XVI. Overseas loans of foreign exchange 7.2 Fixed assets ? Where: Loans from financial organizations in home and abroad 7.3 Immaterial assets ? XVII. Dividends of foreign exchange payable 7.4 Capital obligation shift ? Where: It is the domestic dividends. 7.5 Single-side capital shift ? XVIII. Overseas capital received 14? 23 7.6 Others ? 18.1 Foreign direct investment 14? 23 VIII. Structural difference in foreign rate 14? 23 18.2 Foreign investment in securities IX. Coversion difference in foreign exchange ? XIX. Domestic capital of foreign exchange received X. Other assets ? XX. Difference of checking accounts 8 2 Total 22 25 Total difference of debts and checking accounts 22 25 Appendix: 1.The newly added amount of warranty that is made for the foreign party this year hits USD0. The reduced amount of warranty this year is USD0 and the balance at end of year is USD0. 2.According to the stock rights or agreed ratio, all of the foreign party's undistributed profit balance at end of year is counted as USD0. 3.The "other assets" hits 0% of the "total of asset." Date:2006-06-21 Edited by: Wu Yi Shan Chief Accountant: Wu Yi Shan Legal Representative: Frank Orrell Audited by: Beijing Runchent Accountant's Office Registered Accountant: Shi Liandong Profit Sheet Edited by: Chengde Great Wall Minerals Company, Ltd. For the fiscal year of 2005 Unit: RMB Item Amount of this fiscal year I. Income of main business Including: Income from sales of imported products (commercial goods) Income from sales of exported products (commercial goods) Minus: discounts and allowances II. Net income of main business Minus: (I) Cost of business operation Including: Income from sales of imported products (commercial goods) (II) Tax and add-ons of business operation (III) Operation expenses 998,678.00 (IV) Others Add: (I) Deferred income (II) income of check-off and commission (III) Others III. Profit of main business Add: Profit of other business (filled in with "-") Minus: (I) Operation expenses (III) Management cost (III) Financial cost (IV) Others IV. Operation profit (filled in with "-") Add: (I) Income of investment (filled in with "-") (II) income of futures (III) income of allowance Including: Income of allowance for deficit enterprise before allowance is given (IV) income beyond operation Including: Income of disposal of fixed assets Non-cash deal income Income of sales of immaterial assets Net income of penalty (IV) others Including: Balance of content of wages of previous years used to make up the profit Minus: (I) Expenditure beyond business Including: Net loss of disposal of fixed assets Loss of regrouped liabilities Expenditure of penalty Expenditure of donation (II) Other expenditure Including: Transferred content of wages responsible for balance Add: Adjustment of profit and loss of previous years V. Total amount of profit (filled in with "-") -998,678.00 Minus: Income tax * Minority of shareholders' rights and interests Add: * Unconfirmed loss of investment (filled in with "+") V. Net profit (filled in with "-") 9