The Model

The Philippines is located in the Pacific Ring of Fire, the circum-Pacific belt of volcanic activity that contains much of the world's copper-gold resources. Philippine gold-copper systems are especially attractive targets because they are characterized by the telescoping of high-level epithermal gold deposits into the top of porphyry copper-gold systems. The model illustrates a typical Philippine copper-gold system.

Epithermal gold-silver mineralization, with varying amounts of base metals such as copper, lead and zinc, occurs at shallow levels in the earth's crust. As shown in our model, epithermal deposits may occur as flat-lying bodies in volcanics, such as Mindoro's Kay Tanda prospect, or as more steeply-dipping tabular zones, similar to Mindoro's SW Breccia gold resource, and the abundant gold occurrences on many of Mindoro's projects. High grades of more than five grams per tonne (g/t) gold are common, making epithermal deposits particularly attractive targets for a junior company. Some of the larger Philippine epithermal gold deposits have produced several million ounces of gold (e.g., Antamok Mine, Baguio, produced ten million ounces). Epithermal deposits are usually derived from, and related to, intrusive rocks 2-3 kilometers below which may be associated with porphyry copper-gold mineralization. High-sulphidation epithermal mineralization and associated advanced argillic alteration are especially good indicators of a near-by porphyry copper-gold system.

Porphyry copper-gold deposits are generally low-grade, but large-tonnage - often over 100 million tonnes and up to a billion tonnes or more - and contain very large amounts of copper and gold that are potentially bulk mineable. They provide over 50% of the world's copper production. Porphyry systems have zoned alteration systems which are an important exploration guide to the best copper-gold mineralization within them (see model). Worldwide, productive porphyry systems average about 0.5% copper and 0.30 g/t gold. In the case of the Philippines, gold content can be much higher, as much as 1.0 g/t or more, which makes Philippine porphyry deposits especially attractive exploration targets. Porphyry deposits often occur in clusters, such as the Anglo-Philex Boyongan and Bayugo porphyry deposits, situated just a few hundred meters away from each other in the Surigao Gold District of the Philippines.

In the Philippines, uniquely, the shallower level epithermal deposits often relate to a younger epithermal event telescoped into the upper parts of the porphyry system. The original epithermal mineralization of the copper-gold system has been long since eroded away, and the deeper porphyry has been eroded down to levels that bring the economically interesting parts of the porphyry system to shallower levels. The younger epithermal mineralization is either formed very late in the development of the copper-gold system, or it relates to a younger copper-gold system that has occupied the same structural (fault) conduits.

The significance of this is that we may be exploring epithermal gold prospects, Mindoro's original exploration target, yet know we have a good chance of having a porphyry copper-gold system not far below, and in many cases on our projects, within just a few hundred meters. In fact, most of the gold prospects being explored by Mindoro have evidence of nearby porphyry systems, including porphyry-related hydrothermal alteration. Frequently, phyllic or SCC (sericite-clay-chlorite) alteration, is identified very close to our epithermal showings.

This realization explains the rapid transition we have made from exploring early-stage epithermal gold prospects to an extraordinarily large portfolio of porphyry copper-gold targets, at, or very near the drill stage. High-grade epithermal deposits are attractive exploration targets, but the porphyry copper-gold deposits below are the real "elephants" we seek.

Recognizing and Defining Porphyry Copper-Gold Targets

Since porphyry copper-gold systems are primarily concentrations of metal sulphides; iron sulphides (pyrite) and copper-iron sulphides (chalcopyrite and bornite), often with accompanying magnetite and silica (quartz) alteration, they are highly amenable to geophysical exploration. The metal sulphides and silica are detected by electrical methods; i.e., induced polarization (IP) surveys, with high chargeability readings defining sulphides, and high resistivity readings, areas of silica alteration. Magnetic surveys can be used to define hydrothermal magnetite associated with porphyry systems. IP is a powerful tool in defining porphyry targets. In the past few years, Mindoro has carried out over 500 line kilometers of IP surveys, and defined many promising anomalies to be drill tested.

As shown in the model, porphyry systems are accompanied by zoned hydrothermal alteration systems which can be mapped and allow the system to be defined, and help vector drilling into the best-mineralized parts of the system (which are normally in the potassic zone, and in over-printing SCC alteration).

Stream sediment and soil geochemical surveys may be useful in defining the location and extent of copper-gold systems. As noted above, epithermal mineral showings are an important exploration guide and, especially, high-sulphidation epithermal copper-gold-silver mineralization and associated advanced argillic alteration, which often indicate proximity to a porphyry copper-gold system.

The porphyry copper-gold targets referred to in this report have been defined by IP surveys, and porphyry-related alteration, as well as associated epithermal mineral showings.