GARNEX GOLD CORPORATION A Nevada Corporation

Confidential Overview

Mine Development and Exploration of the

Garnet District

June 2020

Table of Contents

Section 1.0 Executive Overview

Section 2.0 Background

Section 3.0 Asset Purchase Agreement

Section 4.0 CDM Technical Report

Section 5.0 Behre Dolbear Valuation

Section 6.0 Mine Plan GHC 2011

Section 6.1 Mine Plan GGC 2020

Section 6.2 Ore Storage, Transport, and Milling

Section 6.3 Metallurgical Testing

Section 7.0 Geology

Section 8.0 Access and Facilities

Section 9.0 Permitting and Community Impact

Section 10.0 Exploration Potential

Appendices

1.0 Executive Summary

Garnet Gold Corporation (“GGC”), is incorporated in the state of Nevada, is authorized to do

business in Montana, and its principle office is in Missoula Montana. GGC has acquired and

controls approximately 4,100 acres of patented and un-patented mining properties in the Garnet

District which are located about 35 miles east of Missoula. The acquisition of the properties is

pursuant to an Asset Purchase Agreement between GGC and the previous owner,

Commonwealth Resources, LLC (“CWR”). This Agreement provides for the acquisition of the

mineral and surface rights of the properties, along with all surface improvements, technical

documentation, and intellectual property. Pursuant to the Agreement, GGC is obligated to make

payments to CWR as outlined in Table 3 in Section 3.0

GGC will, subject to capitalization of $6.643 million USD (Table 1), proceed with its 2020

development and mining plan of the Garnet District. The initial targeted gold bearing resource

(Table 4) is 290,000 tons of ore with an average grade of 0.233 OPT, with an expected yield of

67,000 ounces Au. The mine plan in Section 6.0 discusses the following summary in more

detail.

1. Confirmation core drilling program (4 to 6 drill targets to 300’ below surface) designed to enhance interpretation of mineralization, structure, and reserves, which will be utilized

for the final comprehensive mine plan.

2. Construction of an assay lab in an existing building on the property.

3. Fund bond shortfalls carried over from the previous operator with the Montana DEQ and BLM of approximately $190,000. This will allow GGC to commence mining operations

under an existing Small Miner’s Exclusion Statement (SMES). The SMES allows mining

without restrictions provided the total surface disturbance is limited to 5 acres or less.

4. Complete the partially constructed decline using the existing Nancy Hanks portal constructed by a previous operator in 2011, and commence underground mining

operations of the Nancy Hanks vein system. Target is to mine 200 t/d, 335 days per year,

with an average grade of 0.233 ounces gold per ton, yielding 15,600 ounces Au per year.

5. Transport gold ore to a custom mill located 60 miles to the southeast in Phillipsburg Montana. Custom mill has gravity and flotation circuits. The final product or

concentrate will be both a gravity material that will be processed into dore, and sulfide

concentrate that will be marketed to a smelter or refinery

6. Submit application to the Montana DEQ for an operating permit which will allow GGC to explore and develop all properties without any restriction in regards to surface

disturbance.

Table 1– Capital Requirements, Nancy Hanks Accessible Workings

Schedule is to commence drilling activity in July 2020 and advance/complete the decline by

December 2020. Underground mining of the Nancy Hanks accessible resources shown in Table

4 will commence by January 2021. Included in the capitalization estimate is nearly $1.0 million

USD of operating capital to fund mining operations for the first 75 days. Mining will commence

at approximately 100 t/d and will ramp up to 200 t/d by March 2021. Ore will be stockpiled as

needed and first gold ore will be delivered to the mill in April 2021. First revenue from gold

production is expected to be realized in May 2021. The expected annual output is 15,600 ounces

of gold. The expected mine life of the documented Nancy Hanks accessible resource, category 1

and 2, is 4.0 years. There exists many other exploration and development opportunities that are

detailed in Section 10.0 in this report.

The daily tonnage of mined ore, and mining cost per ton, are two elements that are well defined

through GGC’s in house and third party resource and cost modeling efforts. Average ore grade

can be accurately predicted from GGC’s vast library of drill and assay data. Grade control will

be at a premium and is more subject to variation. The other variable outside the control of GGC

is the spot price of gold.

Provided below is Table 2 which is a gross profit matrix. The daily tonnage and costs are fixed,

and the gross profit is predicted at varying ore grades and gold prices.

ACTIVITY COST START END

Bonds - DEQ and BLM 195,000.00$ 6/1/2020

Confirmation Drilling 250,000.00$ 7/1/2020 8/1/2020

Payment to CWR 1,250,000.00$ 6/15/2020

Refurbish Portal 75,000.00$ 7/1/2020 8/1/2020

De-water decline - equip and personnel 125,000.00$ 7/1/2020 9/1/2020

Advance decline 1,950' at $1200/ft 2,340,000.00$ 9/1/2020 12/1/2020

Engineering services 250,000.00$ 8/1/2020 12/1/2020

Mine ventilation design and install 275,000.00$ 9/1/2020 12/1/2020

Employee hiring and training 100,000.00$ 11/1/2020 1/1/2021

Mobile equipment 250,000.00$ 11/1/2020

Infrastructure improvements 145,000.00$ 7/1/2020 9/1/2020

Operating Capital (first 75 days of mining @ 100 t/d) 937,500.00$ 1/1/2021 4/1/2021

OH and Contingencies (8%) 450,000.00$

TOTAL 6,642,500.00$

Table 2 – Projected Gross Profit Matrix

2.0 Background

The Garnet property is located in the historic Garnet Mining District of southwest Montana.

There are 23 patented and 188 unpatented claims held by GGC which constitutes approximately

4,100 acres of land controlled in the Garnet District. Figure 1 and Figure 2 show the general

location of the properties, the claim boundaries, area covered by both patented and

unpatented mining claims, and the access to the property.

The Garnet District has a long mining history which includes gold placer and underground

mining. Production from this district occurred between 1865 and 1941, with an estimated

500,000 ounces of placer gold and 150,000 ounces of gold produced from lode deposits. Figure

3 shows the historic mine locations.

The modern era of exploration began with Pegasus Gold Corporation who from 1989 to 1992

identified 14 separate exploration targets. Pegasus drilled 147 reverse circulation exploration

holes and 6 core holes. Grant Hartford Corporation followed Pegasus and during the period

2007 to 2011 drilled 357 reverse circulation holes and 4 core holes. All of the sub surface data

obtained from the above drilling campaigns has been compiled into a database constructed by

Klepfer Mining Services. This data set has been loaded into MapTek-Vulcan modeling software

which provides the basis for the resource estimates and mine modeling. Figure 4 shows the

historic drill hole collar locations.

Provided in Section 4.0 of this overview are resource and cost estimates compiled by CDM

Smith (“CDM”) in their November 2019 Technical Report. CDM is a highly qualified and

Base Assumptions

Tonnage = 200 t/d X 335 days/yr= 67,000 tons of ore/yr

Yield = 67,000 tons ore/yr X Grade

Mining Cost = $262.00/grade = Cost per Oz Au

67,000

262.00$

Grade Mining Cost Yield 1,200.00$ 1,300.00$ 1,400.00$ 1,500.00$ 1,600.00$ 1,700.00$

$/Oz Oz - Au

0.2 1,310.00$ 13400 (1,474,000.00)$ (134,000.00)$ 1,206,000.00$ 2,546,000.00$ 3,886,000.00$ 5,226,000.00$

0.233 1,124.46$ 15611 1,179,200.00$ 2,740,300.00$ 4,301,400.00$ 5,862,500.00$ 7,423,600.00$ 8,984,700.00$

0.25 1,048.00$ 16750 2,546,000.00$ 4,221,000.00$ 5,896,000.00$ 7,571,000.00$ 9,246,000.00$ 10,921,000.00$

0.275 952.73$ 18425 4,556,000.00$ 6,398,500.00$ 8,241,000.00$ 10,083,500.00$ 11,926,000.00$ 13,768,500.00$

0.3 873.33$ 20100 6,566,000.00$ 8,576,000.00$ 10,586,000.00$ 12,596,000.00$ 14,606,000.00$ 16,616,000.00$

0.325 806.15$ 21775 8,576,000.00$ 10,753,500.00$ 12,931,000.00$ 15,108,500.00$ 17,286,000.00$ 19,463,500.00$

0.35 748.57$ 23450 10,586,000.00$ 12,931,000.00$ 15,276,000.00$ 17,621,000.00$ 19,966,000.00$ 22,311,000.00$

0.375 698.67$ 25125 12,596,000.00$ 15,108,500.00$ 17,621,000.00$ 20,133,500.00$ 22,646,000.00$ 25,158,500.00$

0.4 655.00$ 26800 14,606,000.00$ 17,286,000.00$ 19,966,000.00$ 22,646,000.00$ 25,326,000.00$ 28,006,000.00$

independent engineering firm. A property valuation study is cited in Section 5.0, conducted by

Behre Dolbear in September 2019.

3.0 Asset Purchase Agreement

The Asset Purchase Agreement stipulates payments from GGC to CWR over the next 28 months,

or a lump sum payment of $3.75M, before clear property titles are obtained by GGC. The

Agreement allows GGC to explore, develop, and mine the properties as it wishes while title is

held in escrow. The full payment obligations as stipulated in the Agreement are shown in Table

3.

Table 3 – Purchase Agreement Payment Schedule

Amount Due Date Due

$250,000.00 down payment. Paid

$1,250,000.00 June 15, 2020

$500,000.00 January 17, 2021

$1,000,000.00 January 17, 2022

$1,000,000.00 July 31, 2022

Total = $4,000,000.00

4.0 CDM Technical Report (Format 43-101)

A Technical Report (Format 43-101) was completed by CDM, under contract to GGC, in

November 2019. The report uses the SEC classification of mineral resources as inferred,

indicated, and measured mineral resources, in order of increasing confidence based on the level

of underlying geological evidence. For the purposes of this report, the measured resource is

category 1, indicated is category 2, and inferred is category 3.

Table 4: Nancy Hanks Underground Accessible Mineral Resources

AREA CATEGORY TONS OUNCES OZ/TON

Nancy Hanks 1 and 2 178,302 43,509 0.244

Marble 1 and 2 8,667 2,692 0.311

Dewey 1 and 2 12,853 2,042 0.159

Shamrock 1 and 2 34,275 5,704 0.166

Willie 1 and 2 55,874 13,694 0.245

Total 1 and 2 289,971 67,641 0.233

The report further describes the inferred resources (category 3) in all areas shown in Table 4 as

likely resources that would be extracted using underground mining methods. The resources were

generated in Maptek Vulcan using an average grade thickness and contouring mid-point to assess

the various veins encountered in the drilling. This evaluation resulted in an inferred value of

180,000 tons grading at 0.333 ounces per ton. This adds another 60,000 ounces of gold to the

recoverable resource.

The CDM report also includes a detailed underground operating cost model. The model can be

run at different ore grades, tonnage, and gold prices as needed. The base case of operations is

200 t/d @ 0.233 ounces of Au per ton, with a yield of 15,611 ounces of gold annually. The cost

model for the base case of operations as shown in Table 5 predicts the following:

Table 5 – Operating Costs

Mining cost/ton $143.00

Milling cost/ton $68.50

Ore Transport cost/ton $24.50

Cons Transport cost/ton $2.15 per ton of ore milled.

Smelter cost/ton $23.75 per ton of ore milled.

Total Costs/ton $261.90

The total cost of $261.90 per ton of ore, based on an average grade of 0.233 ounces of Au per

ton, equates to $1,124.00 per ounce of gold. At 200 t/d, the known resource of the Nancy Hanks

and accessible workings has a 4 year mine life. Gross profit, at a spot price of $1,500 gold, is

estimated at $5.8 million USD annually. (Table 2)

The milling cost/ton of $68.50 is based on contract milling at the nearby Contact Mill in

Phillipsburg Montana. GGC plans, within the next 2-3 years, to construct a mill in close

proximity to the mine site. The estimated cost estimate to build a custom mill is $5.4 million

USD (+20%, -10%). Owning and operating a mill will reduce GGC milling costs by 40% and

transportation costs by 65%. And there is expected to be additional revenue opportunities by

contract milling for others. The decision to build a mill at a future date will be primarily

predicated upon adding more reserves through additional exploration and development work.

5.0 Behre Dolbear Valuation

In September of 2019 the Behre Dolbear group, under contract to GGC, completed a property

valuation study to determine the fair market value of the Garnet properties. The Behre Dolbear

report arrived at a fair market value of $11.5 million USD for the properties. This estimate is

based upon the defined resources having a value of $8.6 million USD, and the mineral potential

of the property’s claims of $2.9 million USD. This valuation assumed a gold price of $1,275 per

ounce, which was the historical 3-year average price at the time of the report.

In Behre Dolbear’s report, they noted that excellent exploration opportunities on bonanza grade

mineralization could be easily reached. They concluded the following for exploration potential:

• Extensions of the known resources down dip and immediately along strike of the Nancy

Hanks vein – short-term potential.

• Discovery of new veins in the hanging wall and footwall of the Nancy Hanks vein system

– long-term potential.

• Strike and down dip extensions of other prominent vein zones such as the Willie, Lead

King, and Grant Hartford – short-term potential.

• Potential for discovery between the Nancy Hanks and Tostman – short-term potential.

• Potential discovery between Tostman and Coloma – long-term potential.

• Deep potential where many district-wide veins would merge down dip – conceptual long-

term potential.

Behre Dolbear “considers all of these as viable targets that could add substantial new resources

to the project in the long term but also could provide high-grade and/or bonanza ores easily

accessible in the short term.”

6.0 Mine Plan - GHC 2011

In 2011, Grant Hartford Corporation (“GHC”), who then held an option from CWR, contracted

with New Millennium Mining to put in a new decline (-15 percent grade) to access drifts, ore

drifts, and stoping of ore to explore and mine the Nancy Hanks and Marble deposits. Both

deposits were to be accessed from the same decline.

An underground mine plan and stope layout was completed by GHC and Small Mine

Development. The mine design was based on the geology block model created by GHC.

There were four phases to the Project that included collaring the portal and developing the main

ramp. The intent was to expand exploration access and to exploit available ore encountered by

the new underground development. The proposed project was estimated to take 18 months to

complete.

The portal was completed and the initial 12’ by 13’ decline was advanced a total of 387 feet. At

that time GHC halted the project due to funding issues and the portal/decline has remained

dormant since that time.

6.1 Mine Plan - Garnex Gold Corporation 2020

The collared portal (adit) constructed by GHC in 2011 was inspected in July 2019 by GGC

personnel and CDM mining engineers. The decline was flooded at that time but the ground in

the upper portion of the back (roof) of the decline that could be seen from the portal appeared to

be holding well.

GGC plans to de-water and re-enter the existing decline, and extend the decline to the bottom of

the known Nancy Hanks resource. The decline will be advanced another 1,400 feet to the top of

the modelled Nancy Hanks and Marble zone deposits where mining will commence. Concurrent

to mining, the decline will be advanced an additional 550 ft to access the underlying ore bodies.

The Nancy Hanks and Marble deposits are narrow vein and flat dipping at less than the angle of

repose of the broken ore. The mining method to be implemented is adit entry traditional cut and

fill. Mechanized cut and fill was a consideration but the narrow veins will not allow for

mechanized mining as the dilution rate would be prohibitive. Consequently, the mining method

will include scraping the ore from the footwall and dragging it down to an access level from

which it can be picked up and hauled to the surface using compressed air operated “slushers”.

This mining method was used successfully for many years in the Rio Algom Quirke Mines in the

Elliot Lake area of Ontario, Canada.

Concurrent to the above activities GGC will commence a core drilling program to drill 4-6 holes

into the Nancy Hanks structure for the purpose of confirmation of the structure, resource, and

location of vein extensions. There will also be concurrent work done to build an assay lab and to

make modifications and enhancements to the infrastructure.

6.2 Ore Storage, Transport, and Milling

The broken ore will be brought to the surface and stockpiled on a pad that has already been

constructed and is immediately adjacent to the portal. Ore will then be loaded into haul trucks

for the 3 mile trip down the First Chance Gulch road where it is off-loaded in a staging area.

From this staging area, the ore is loaded into over-the-road haul trucks for the 50 mile journey to

the Contact Mill located in Phillipsburg Montana.

The Contact Mill has a gravity circuit and flotation circuit with optimal operations at 1,000 t/d.

The mill has been used multiple times in previous years by GHC to process Garnet ore.

Historical the combined gravity/flotation mill recoveries were in the 85% to 90% range.

GGC is negotiating a contract to lease the entire Contact Mill and thereby have full control of the

operations. The GGC feed stock of 200 t/d is well below the optimal mill feed. Therefore, it is

GGC’s intent to stockpile ore at the mill site and run production campaigns through the mill at

periodic intervals. Alternatively, GGC, working with owners of the mill, will agree to perform

toll milling for other mine owners in need of milling capacity. The intent is to structure a time

share arrangement whereby feed stock from other mine owners can be run through the mill when

GGC is building mill feed inventory. GGC will still maintain control of all mill operations while

toll milling for others. This arrangement will reduce GGC milling costs significantly and will

result in more efficient use of personnel and equipment.

6.3 Metallurgical Testing

In 2011, Dawson Metallurgical Labs (“DML”) in Salt Lake City were retained by GHC to

perform metallurgical testing on individual samples from the Garnet properties. The goal of the

testing was to provide information to CDM in which to develop a process flowsheet of the

production of gold concentrates.

The testing conducted by DML was exhaustive and too broad to cover in detail in this overview.

The scope of the testing included, but not limited to, the following:

Gravity recoverable gold (“GRG”) tests using a Knelson centrifugal concentrator.

A series of kinetic bulk sulfide flotation tests at seven different grind sizes.

ICP scan on head samples.

Acid-base accounting on head and flotation tailings samples.

Thickening and filtration tests by Dorr Oliver EIMCO.

Bond work index test at a closing size P80=150 microns.

The results of the testing is summarized by the following statements from the DML report:

All Knelson gravity concentrates contained visible free gold in varying amounts and

sizes, along with pyrite and magnetite. Typically, the free gold averaged 50 microns in

size with a top size of 300 microns. In general, the gold was nugget shaped and appeared

to be of high purity.

Recoveries from the combined Knelson gravity/bulk sulfide flotation were 96.6% and

94.7%.

Approximately 40% of the total Au reported to the Knelson concentrate.

Confirming tests on each composite sample using the Knelson gravity/bulk sulfide

flotation scheme show that greater than 94% of the Au was recovered with concentrate

assays on average of 8.5 opt Au.

7.0 Geologic

Historically mined gold deposits in the Garnet District are typically veins that in part have filled

open spaces along fractures or bedding planes. There are five principal veins or vein systems,

identified so far, spaced 150-1250 feet apart. The northernmost vein system is a composite zone

of veins in the granodiorite and comprises a large portion of the Project. From east to west the

historic Shamrock, Dewey, Nancy Hanks, and Cascade mines exploited portions of this zone.

The whole zone, which Pardee (1917) referred to as the Nancy Hanks zone of veins, is over

7,500 feet long. It is also up to 400 feet wide in surface expression at the Cascade portion of the

zone.

Four additional vein zones are present approximately 9,500 feet northwest of Garnet. The

central part of this area is called Coloma. Pegasus drilled approximately a dozen holes into three

of these vein zones all of which occur within the granodiorite body.

In reference to the composite Nancy Hanks zone Pardee states that: ‘As a rule the individual

veins that compose the zone do not persist in length or depth more than a few hundred feet. Each

one either ends at a fault or splits into “stringers” to be succeeded by another vein a few feet to

one side or the other.’ This likely represents the second phase of gold mineralization forming

sets of en-echelon gold bearing quartz veins within zones of weakness initiated by shrinkage of

the intrusive body and subsequently formed by continued brittle faulting at moderate depths.

These are veins that would fall into the mesothermal pressure temperature range. Also, even

though as Pardee suggested individual veins do not exhibit significant strikes and dips, overall

these types of systems often persist for significant distances, especially along their dip.

Quartz generally forms 50-90 percent of the vein material. Ankerite is found in many of the

veins, particularly those in quartzite and schist. Calcite occurs in subordinate amounts associated

with the ankerite. Principal ore minerals are pyrite, tetrahedrite, chalcopyrite, and galena. Pyrite

is the most dominate sulfide mineral and is found widely in all the veins. Oxidation or actual

weathering can commonly occur to 75 feet below the surface near natural drainages. Some

locations exhibit weathering as deep as 300 feet below the surface, this is likely due to structural

influence.

The initial mineralizing event was the skarnification of carbonate rocks adjacent to and a result

of the emplacement of the granodiorite stock. This type of mineralization occurs at much higher

temperatures than the en-echelon vein sets from which most of the gold was produced.

Likely because of the discovery and exploitation of the vein systems, the skarn potential has

largely been ignored throughout the history of the district. There has been little to no attention

directed toward discovery or exploitation of a potential gold skarn deposit. Although many

indicators have been noted, at present it remains unknown if an economic gold skarn exists

within the Project area. Figure 5 shows the geology map of the Garnet properties.

8.0 Access and Facilities

Access to the Garnet properties can be achieved via two routes. One can be accessed from the

Interstate 90 frontage road starting in Drummond, MT. Head west to Bear Creek road then north

approximately 9 miles to the ghost town of Garnet, MT.

The alternative route is via U.S. Highway 200 to Garnet Ridge Road which is located

approximately 9 miles west of the intersection of Montana Highway 83 and U.S. Highway 200.

The route is similar in length from Highway 200 as it is from Interstate 90.

There is no power presently to the site but power and other utilities are available along the

Highway 200 corridor. Generators and solar panels provide power for the mine site.

There are several buildings at the site that hold core and include 4 completed cabins and a 5th

cabin which is 50 percent completed, a bath house, generator house, and fully enclosed shop

building. The mine dry is partially completed and a second partially completed shop building.

There is an office, which was used as a mine safety office, which can be used as a cabin as well.

There are senior water rights associated with the properties to provide water. There are three

dewatering wells also present to assist in dewatering the underground workings (Nancy Hank),

and a water infiltration system to dispose of mine water.

9.0 Permitting and Community Impact

The Department of Environmental Quality (“DEQ”) via the Metal Mine Reclamation Act

(“MMRA”) regulates mining activity and mine reclamation under three possible authorities.

The Small Miners Exclusion Statement (“SMES”) allows a miner to exclude himself

from the permitting requirements of the MMRA by certifying that he will disturb not

more than 5 acres at each of two allowable sites, which must be separated by a least one

mile. The DEQ is obliged to regulate and bond the operation, construction, and

reclamation of tailing impoundments associated with small mines.

The exploration license (“EL”) permits an operator to conduct surface and underground

mineral exploration. All activities related to mineral exploration that disturb the surface

are regulated and bonded for reclamation under an EL. The EL allows for a 10,000 ton

bulk sample to be mined without the need to file for an SMES or obtain an Operating

Permit.

An Operating Permit (“OP”) authorizes the mining and milling of minerals without

acreage or tonnage restrictions. Smelting and refining are not regulated. All activities

must be permitted and bonded for reclamation.

There exist reclamation bond shortfalls with the DEQ and the BLM related to activities

conducted by the previous operator. The previous operator was conducting mining activities

under two separate SMES(s). GGC will make up the bond shortfall of approximately 190,000

USD. Once the bond shortfall is satisfied, both of the SMES(s) in place will be “reinstated” and

transferred to GGC.

GGC will also apply for an EL in which to conduct exploratory and developmental drilling.

An application for an OP will be submitted at the earliest possible date. Although not crucial to

GGC’s short term mine plans, the OP can take as long as 18 months for approval. It is therefore

prudent to begin that process now.

Granite County Montana is a pro-business and pro-mining county, with a low population density.

A source of new employment, new taxes, and new spending will be welcomed. There are no

known issues with local communities or indigenous peoples. Granite County has a long

exploration and mining history that began in the 1860s. The population and work force of

Granite County and surrounding area would benefit from the potential exploitation of the

resources of the Garnet District.

The proximity of the Garnet Ghost Town is considered a positive to future mining activity.

Experience to date indicates a very high level of cooperation between the BLM (operators of the

ghost town) and Garnex Gold Corporation and their predecessors.

10.0 Exploration Potential

The two distinct types of mineralization exhibit the potential for the further discovery and

exploitation of substantial gold resources. The first part of that potential lies within structural

extensions to the known vein zones. The drilling efforts to date have focused mainly on the

Cascade to Shamrock vein zone. Within the Project area there are at least 8 other vein zones that

hold potential for discovering exploitable gold resources. Some of these zones do have drill

holes within them but by no means are they drilled to their full extents. Most of the zones have

seen historic gold production.

Skarn mineralization is the second type of gold deposit potentially present at the Project.

Characteristics indicating skarn mineralization include hedenburgite and garnet skarn alteration

of the carbonate rocks adjacent to the granodiorite body. Also, the sanded dolomite adjacent to

the intrusive and the presence of tremolite within the carbonates distal to the intrusive are

indicative of skarn. Hornfelsing of the shales is also an indicator. This is expressed as

porphryblasts of cordierite, garnet, epidote and sometimes mica clots formed as “eyes” within the

shaly units.

Many open drill targets still exist on the properties. Most of the drilling to date has been reverse

circulation drilling which has obscured the interpretation of the vein systems. As reported in the

Behre Dolbear report, the reverse circulation data may have provided limited details on veins,

structural controls, contacts, lithology and other important geologic information. It may have

been for this reason that GHC only used grade values from drilling to establish their resource

model and mine plan.

Future programs should mostly, if not entirely, utilize diamond core drilling. This will allow for

better, more concise interpretation of the mineralization as well as better structural interpretations

which in turn will aid in the definition of potential ore shoots. In addition to the known vein

zones geochemical soil sampling by Pegasus contains numerous anomalous areas yet to be

tested. This indicates good potential for discovery of additional zones.

The “blue sky” opportunities consist of the further definition of historically mined vein zones,

the future potential discovery of additional vein zones, and the potential discovery of significant

gold skarn mineralization.

While the direction for exploration of the high-grade vein zones for near-term production is

appropriate, it is, important to incorporate a broader exploration vision on the larger picture of

exploration targets where increases in resources could be significant, especially if gold skarn

mineralization is discovered.