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Agave Silver Corp. – ‘20-F’ for 3/31/08 – EX-99.1

On:  Tuesday, 9/30/08, at 4:25pm ET   ·   For:  3/31/08   ·   Accession #:  1137171-8-912   ·   File #:  0-29870

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 4: EX-12.1     Statement re: Computation of Ratios                 HTML     11K 
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CREAM MINERALS LTD

GEOLOGICAL REPORT

ON THE

DOS HORNOS AND ONCE BOCAS

 GOLD SILVER STRUCTURE,

NUEVO MILENIO PROJECT

Municipality of Xalisco

Tepic Area

Nayarit State, Mexico

Latitude: 21^o 21’ 35” North
Longitude: 104^o 46’ 53” West

Prepared

by

F. HOLCAPEK, P.ENG. GEOLOGY

Director General

Cream Minerals De Mexico S.A. De C.V.

Dated

February 16, 2006              

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APPENDIX I

ASSAYS USED FOR

INFERRED MINERAL RESOURCE CALCULATION

DOS HORNOS VEIN 1

APPENDIX II

ASSAYS USED FOR

INFERRED MINERAL RESOURCE CALCULATION

ONCE BOCAS BULK TONNAGE

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GEOLOGICAL REPORT ON THE DOS HORNOS AND ONCE BOCAS GOLD SILVER STRUCTURE, NUEVO MILENIO PROJECT

1.00 SUMMARY

Cream Minerals De Mexico S.A. De C.V., a subsidiary of Cream Minerals Ltd., is the owner of the Nuevo Milenio Gold-Silver property near Tepic in the State of Nayarit, Mexico. The Nuevo Milenio is an epithermal precious metal prospect which has been explored the past 5 years (2000 to 2005).  Four major areas of disseminated gold-silver mineralization have been delineated within a small portion of the property that has a widespread exploration potential for similar mineral occurrences.  

The claim area lies within the Municipality of Xalisco and is situated 7 km east of Highway #200 about 20 km southeast of Tepic.  The property consists of the Nuevo Milenio Fraccion 1, Nuevo Milenio Fraccion 2 and CMM 1 encompassing a total area of 2,664 hectares.  The property is close to local infrastructure and is easily accessible by conventional roads and numerous secondary and drill access roads throughout the claim area.  

This report was prepared at the request of Cream Mineral Ltd as a supportive document in respect to calculated Inferred Mineral Resources as defined and accepted by the CIM December 2005. It is based upon exploration conducted from 2002 to 2005 under supervision of the writer and a review of the comprehensive database of Cream Minerals de Mexico S.A. de C.V. Most of the detailed exploration information is archived at Cream Minerals de Mexico S.A. de C.V. in Durango, Mexico  copies and electronic transfers of reports, maps and sections are available at Cream Minerals Ltd. in Vancouver. Dr A. D. Drummond, P. Eng., acted as geological consultant to Cream Minerals Ltd.  Numerous in house reports, discussion papers, notes etc. were used for the compilation of this report. Other relevant information and reports used are generally available in the public domain.

For information in respect to the Chacuaco Area and Chacuaco West area the reader is referred to the report by Hank Meixner P.Geo.  “Geological Report on the Nuevo Milenio Gold – Silver Project, Municipality of Xalisco, Tepic Area, Nayarit State, Mexico, Latitude: 21^o, 21’35” North, Longitude: 104^o46’53”West, prepared for Cream Minerals Ltd. by Henry M. Meixner dated September 28, 2003”.  

This report discusses the 3,000 m x 150 m Dos Hornos Area, the 1200 m x 100 m Once Bocas Area., two epithermal silver – gold vein and stockwork systems. The precious metal mineralization occurs in ubiquitous north westerly aligned structural zones of silica alteration within a core area of about 200 hectares in the central part of two nested caldera structures. The outer La Curva and the inner Nuevo Milenio Calderas are only two of numerous other caldera rim features within a broader caldera field in which the Nuevo Milenio property is situated.

Regionally, the Nuevo Milenio property is situated within an early Miocene volcanic caldera field of the Sierra Madre Occidental Volcanics which is traversed by the Tepic – Zacoalco rift zone, an En Echelon extensional structural zone forming the boundary zone with the Jalisco block. The Tepic area is overlain by the young volcanics of the Trans Mexican Volcanic Belt.

The north-westerly trending mineralized vein structures and stockwork in the district are thought to be conduits for hydrothermal silica-rich solutions containing gold and silver that formed the mineralized quartz veins in the district.  Further, these structures are interpreted as being related to the extensional structures which are thought to be vestiges of crustal fractures and faults that emitted ash flows to the surface thus forming the host rocks.

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The Nuevo Milenio Gold-Silver Property is a Low Sulphidation, epithermal precious metal prospect containing gold-silver mineralization in quartz veins and in quartz stockwork zones within an area of Miocene volcanics in a collapsed caldera structure.

Orientation drilling at the Dos Hornos and Once Bocas, confirmed the presence of precious metal bearing quartz vein – quartz stockwork zones. Drill hole locations were unfavourably sited due to terrain, access and orientation of structures. The intersection of faults, shears and breccia zones which are part of the mineralized vein zones created drill problems and caused poor core recovery.

 Recent exploration has focused on opening historic mine workings at Dos Hornos and Once Bocas.  Geological mapping and channel sampling has proven grade continuity and down dip continuity. It also explained the poor core recovery as being caused by brecciation and faulting parallel to the veins at Dos Hornos and Once Bocas. Re-evaluation of all data on hand has shown continuity along strike and down dip of grade and vein structures giving an Inferred Mineral Resource of:

Dos Hornos:            

                        1,530,000 Tonnes,      Au: 139,000 oz,       Ag: 8,760,000 oz

Once Bocas

                        11,590,000 Tonnes,     Au:   129,000 oz,     Ag:   21,580,000 oz  

TOTAL INFERRED MINERAL RESOURCE DOS HORNOS AND ONCE BOCAS:     

13,120,000 Tonnes,       Au:  268,000 oz,       Ag:  30,340,000 oz

Exploration should be continued by prospecting, mapping and sampling as well as geochemical and geophysical surveys along the Dos Hornos and Once Bocas structures. Continuation of opening, mapping and sampling of old workings at the Once Bocas and Dos Hornos combined with additional trenching and Diamond Drilling to define continuity of grade past the section of the Inferred Mineral Resources.

The Dos Hornos structure should be diamond drilled across the whole 150 m indicated width of parallel quartz veins. A fence consisting of 5 Drill holes at -45⁰, each 200 m deep is recommended. Once Bocas should be diamond drilled as well to test for the presence and continuity of gold-silver mineralization at depth and to the north and south of the area of inferred mineral resources. A total of 5 holes should be drilled 200 m each.

A total of $ 384,000.00 is allocated for the Phase I. program. A second expanded phase of 12,000 meter of drilling, along with metallurgical testing, is recommended if positive results are obtained from the phase I work program. Geophysical method should be tested and geochemical surveys should be expanded to cover the total known strike length of Dos Hornos and Once Bocas. Expenditure of $ 1,740,000.00 should be allocated for Phase II exploration.

F. Holcapek, P.Eng.

Durango, Durango, Mexico   Feb. 16, 2006

6

2.00 INTRODUCTION AND TERMS OF REFERENCE

The objective of this report is to summarize all information on hand for the Dos Hornos and Once Bocas zones and to report, on areas of inferred minerals resources.

The program of re-evaluation was cut short because of shortage of money. Numerous shafts and other areas of old workings were not opened for that reason, but the results obtained as of December 2005 support a calculated Inferred Mineral Resources according to the definition as adopted by the CIM Council in Dec 2005.

For a more comprehensive description of the geological setting and information on the other known mineralized zones located on the Nuevo Milenio property the reader is referred to:  “Geological Report on the Nuevo Milenio Gold – Silver Project, Municipality of Xalisco, Tepic Area, Nayarit State, Mexico, Latitude: 21^o, 21’35” North, Longitude: 104^o46’53”West, prepared for Cream Minerals Ltd. by Henry M. Meixner dated September 28, 2003”. This report is in compliance with NI 43-101 and NI 43-101F and was used as a supporting document and filed with the British Columbia Security Commission and the TSX Venture Exchange on Oct 23, 2003.

Cream Minerals de Mexico S.A. de C.V., a subsidiary of Cream Minerals Ltd, is the owner of the Nuevo Milenio Gold-Silver Property. It has carried out several staged precious metals exploration programs from May 2000 to December 2005 under the supervision of the writer.  Dr A.D. Drummond, P.Eng was retained as the external consultant for the project and visited the project several times. He gave invaluable assistance in discussions and direction of the project.

On August 2003 Hank Meixner, P.Geo was engaged by Cream Minerals Ltd to visit the project to produce a report in compliance with NI 43-101 and NI 43-101F to be used as a supporting document to be filed with the British Columbia Security Commission and the TSX Venture Exchange. This document was filed on Oct 23, 2003 with SEDAR.

Following the 2003 Drill program which gave inconclusive results, the Board of Directors decided to halt all exploration work on the Nuevo Milenio, write down the Nuevo Milenio project to zero value in anticipation of dropping the Lots.

The recent rise of gold and silver prices caused a re-evaluation of all data collected from the Dos Hornos and Once Bocas zones, part of the Nuevo Milenio project.  The objective of this evaluation was to check all data accumulated not only in the office but also in the field. Recently identified sites of adits, x-cuts were cleaned, opened, mapped and channel sampled Topographic section using chain and compass were surveyed to allow construction of x-sections and longitudinal sections. The field work was completed by December of 2006. This report is based on this new data.

Ing. German Francisco R. was transferred with 2 assistants and 2 part time workers from the Fenix project to initiate the program... Work concentrated on Dos Hornos North and Once Bocas since previous exploration returned the best results from these workings. The program was initiated on July15, 2005 and lasted to December 2005.

Numerous old Spanish workings were discovered, cleaned, mapped and sampled on both the Dos Hornos North and Once Bocas structures. The new data obtained justified the re-evaluation of the accumulated data base and to check for areas which may   have an inferred mineral resource.

This report is based on the exploration conducted during the period May 2000 to Dec 2005 by Cream Minerals De Mexico S.A. De C.V.  The program was executed by the writer and others under his

7

direct supervision. To understand the geological characteristics of epithermal gold – silver deposits located in Nayarit the writer visited numerous old mines, prospects or showing. He has directed exploration programs on Mina Miravalle 1987, Bonanza 1987 & 1999, Buena  Suerte 1988, Monterey 1988, San Jose 1988, Estrella 1998, Tajo de Oro 1999, La  Fenix prospect 2004 – 2005, Nuevo Milenio 2000 - 2005,.  All of the above are Epithermal Low Sulphidation gold – silver deposits.

On the Nuevo Milenio Project numerous shafts, adits, x-cuts and old trenches dating back to Colonial times (1810 to1825 pre Spanish revolution) are evident, but no estimate of past production can be made.  Small rock furnaces (Hornos), tahonas (stone mills), dam sites and old building foundations give evidence of prior mining.

 On the Dos Hornos x-cut Adit 4 shows extensive workings, but a minimum of stoping. At shaft 5, 3 sublevels give evidence to exploration work.

At Once Bocas 2 stopes about 40 m long, 1.00 to 1.50 m wide with the lower shaft being water filled suggest production from 2 veins.

At Cero Chacuaco, Mina Perdido 3 has a 20 m shaft full of water which suggests production from the lower levels. Tradition has it that the area of Chacuaco has several old mines which are caved and completely overgrown. In this area an ore pile of 200 tons was found in 1977, reportedly, and shipped to Guadalajara. The writer checked the area and found evidence of houses, small ovens (Hornos) and Tahonas (Stone mills).

Based on the network of old, built up mule trails and location of planillas (ore sorting areas) the writer is certain other Spanish workings exist on the property. It should be noted that nearly all old workings with good silver – gold mineralization or indicated production are located at lower elevations (less than 1150 m – vertical zoning?)

3.00 DISCLAIMER:

The writer has been informed via telephone by the Department of Mines that the reduction of Nuevo Milenio Fr. 1 and the cancellation of CMM 2 have been accepted. Legal documentation will be forwarded in due time to the Durango office of Cream Minerals, but he has not seen the actual legal paper. He is certain that the above is true, but can not take responsibility for the information until the legal copies are received

4.00 PROPERTY DESCRIPTION AND LOCATION

The Nuevo Mineral project encompasses 3 mineral lots. In June 2005 applications were filed with the Mining Department in Mexico City to reduce the Nuevo Milenio Fr 1 from 4,418.183 Ha to 2,500.000 Ha and to abandon CMM II.  The Durango office was informed that applications were accepted and the documentations will be forwarded to the Durango Office. A sketch of the configuration of the lots is shown on Figure 2 and the description of the lots is listed below

8

9

The exploration lots were originally denounced by A. Carrera Gamboa on behalf of Cream Minerals De Mexico S.A. De C.V. In 2003 the title of the lots was transferred to the company. Exploration lots have a life of 6 years and are renewable as exploitation lots which have a 22 year life. Recent Mining Legislation has reclassified all mining lots as Exploration to simplify the administration of the mining law.

The area under discussion is located in the Municipality of Xalisco Nayarit, 20 km as the crow flies southeast of Tepic within the area of Ejido El Refugio. Access from Tepic is by Federal Highway 200 – Tepic to Puerta Vallarta as follows (Figure 1):

Interval                                         Km         Highway #          Type of Road
Tepic – Turn off La Curva           17.00                 200                 Pavement
Entrance La Curva – La Curva       7.00                local                Pavement
La Curva – Dos Hornos                  3.00                local                Dirt road

Total Distance from Tepic            27.00

 Geographic coordinates at a central point on the property are:
                         Geographic Co-Ordinates            UTM Co-Ordinates
                         Latitude North:      21°21’35”      2,361,750.004 N
                         Longitude West:  104°46’53”         522,537.013 E

5.00 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY:

The property is readily accessible by car from Tepic by driving 17 km southwards on Federal Highway #200 to km 17 and then to the village of La Curva located 7 km East via paved secondary road.  From La Curva it is a further 3 km east over gravel road to the main mineralized areas of Dos Hornos, Once Bocas and the Chacuaco. Numerous access roads, tractor trenches and road cuts provide vehicle access to the various mineralized showings and old workings and some trails connect the historic mine sites.

The climate is warm and humid during April to September (18^o to 40^o C). June to October is the rainy season during which frequent afternoon showers render secondary roads difficult to traverse. During October to March the climate is temperate with cool nights.

Tepic is the capital of the State of Nayarit and is a major service and supply center with a population of 300,000 located in an agricultural region.  Rental vehicles and heavy machinery are available for exploration operations as well as the manpower to operate them. Air service, railway and a well developed highway system (Highway 15 to Mazatlan and Guadalajara, Highway 200 to Puerta Vallarta) make the area easily accessible from any part of the world.

The Tepic valley is a well develop farming area with sugar cane, maize and blue agaves being the main crops. Mangos, avocados, bananas and oranges are the main fruit trees. Coffee is cultivated in the mountains.  Lush vegetation is typical for this part of the interior highlands of Mexico with abundant tree and bush cover. Areas covered by flat lying basalt flow and mountainous areas are covered by sparse open stands of oak trees, low bushes and grasses. Valley floors are covered by dense brush, but creek bottoms contain dense jungle like growth requiring clearing with machetes in order to pass.  

Arroyo Chacuaco – Cafetal and Arroyo Refillion have water year around. Electric power is available at La Curva and other population centers.

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6.00 HISTORY:

In 1524, Captain Francisco Cortes de San Buena Ventura, a representative of Conquistador Hernán Cortez, arrived at the population center of Tepic, Nayarit. He was well received by the Tactoani Indians and presented with a gift of honour, a cup of gold nuggets and a cup with silver pieces He returned to Colima without extending his control over the area.

In 1531, Nuño de Guzmán, President of the Audience de México, known for his ruthless conquest and cruelty to the indigenous people, arrived in Tepic He extended the Spanish control over the Indians forming the confederation of Chimalhuacán, which was later named “Reino de Nuevo Galicia”. Numerous Indian villages were enslaved and new villages were settled by the Spanish during this period. Compostela became the seat of the Bishop (Capital).

Nuño de Guzmán demanded not only food and supply from the conquered villages, but also, under the threat of death, gold nuggets and silver pieces.  Lieutenant Peralmindes Chirinos, one of Don Nuño’s officers, visited Jalla, which was located in the mountains to the east. This area was developed into the first “Real de Minas” (Mina Jalla) many years later.

During the early part of the conquest Mina Espiritu Santo, near Compostela was developed into a “Real de Minas”. The exact location of this mine is lost, but tradition suggest it was located NE of Compostela. This is the southern part of the Nuevo Milenio area. Mina Lluvia de Oro lies 4 km to the south and Minas San Francisco 10 km to the south of Nuevo Milenio. Numerous other Spanish mines are known in the area.  The area is presently coered by many small mining lots.

At about 1650 the Mines of Miravalle along Rio Huicicilla were found and put into production. These legendary Bonanza Mines produced extremely large amounts of silver. The vein structures cut Jurassic slates and lower Tertiary andesites intruded by acidic rocks. The main vein structure was traced for a distant of about 1.5 km with x – cuts, every 100m driven into the vein. Large collapse feature give evidence of stopping. Several shafts, now full of water were found along the toe of the slopes. Along the river ruins of old buildings and “Hacienda Metalurgico” (Ore treatment plant), were found. This area was a major mining center. One of the vein structures is 1 to 3 m wide grading up to 65,000 g/ton Ag (Sampled in 1987, F. Holcapek, W. Strickland).

The main problem in the mines was the shallow water table and the incapability of the early miners to deal with the water.  None of the old mines was worked at depth.

During the 1900 century mining in Nayarit came to a stand still. The Spanish Revolution (1810 to 25) was followed by the French wars, 30 years of Indian wars and finally the Mexican Revolution which ended in 1920. This period of unrest depopulated the country site. The miners headed for the safety of the cities and all mining knowledge was lost.

ASARCO explored the Huicicila district during the 1930^th, Mina Huicicilla and Mina Miravalle located 5 km down stream from the earlier Mina Miravalle. These mines were blasted shut in 1954 by the company when operation ceased due to a labour dispute.

The old high grade mining areas in Nayarit were little investigated. The main reason was absences of geological and mining information, the abundance of small exploration or production lots in the area of reported mining making consolidation very expensive, but mainly the areas reputation for narrow high grade bonanza type veins which are not a priority for international Mining Companies.

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During 1987 to 1999 the writer investigated the area for the Lang Mining Group (Cream Minerals Ltd), but a large lot covered the area of interest. The owners did not conduct exploration on the property.  It was a wait and see situation.

A visit in February 2000 showed that the area was free for denouncement and several of the small lots had also been cancelled. Arnoldo Carrera G. was engaged to denounce the area on behalf of Cream Minerals De Mexico during February 2000.

From June to November 2000, Ing. Marcus Alberto Ruiz was in charge of phase 1 of the field work for Cream Minerals De Mexico S.A. De C.V. The work program consisted of construction of access road, tractor trenching of the Dos Hornos structure, Once Bocas and Mina San Miguel, channel sampling, geochemical soil sampling, prospecting and geological mapping.

In December 2001 Andy Carstensen, Geological Consultant, was engaged to report on the merits of the project. His findings were summarized in the Report” Nuevo Milenio Property Visit, prepared for Cream Minerals De Mexico S.A. De .V. by A. Carstensen”. Based on his recommendation the focus of exploration was shifted to search for areas of possible disseminated gold – silver with bulk tonnage potential.

From December 2001 to July 2002 the writer and 3 helpers, continued regional mapping, prospecting, cleaning of old Spanish workings, followed by rock geochemistry in areas of “silica caps”. Dr. A.D. Drummond PHD, P.Eng. the Companies Consultant visited the project and advised on execution of the program and assisted with the interpretation of data.

In July 2002 a preliminary drill program consisting, of 5 diamond drill holes for a total of 725 m drilling HQ and BQ core was completed at Once Bocas, Cerro Chacuaco and Chacuaco West.

In September 2003 Hank Meixner, P.Geo was engaged by Cream Minerals Ltd to conduct a property examination and to produce a report in compliance with NI 43-101 and NI 43-101 F to be used as a supporting document to be filed with the British Columbia Security Commission and the TSX Venture Exchange. This document was filed on Oct 23, 2003.

The writer made all reports, assays, drill logs and legal papers available for his perusal and acted as field guide during the six day property visit. His report summarized all available data on the Nuevo Milenio Project.

During 2003, additional detail work including cleaning of old workings, shafts and adits, was conducted on Cerro Chacuaco and a summary of all data was compiled. During this period the writer expanded regional mapping and prospecting to Lot CMM 1 and CMM 2 and the northern limits of Nuevo Milenio 1. A second diamond drill program consisting of 19 holes for a total of 3,576 m was initiated in November 2003 and completed by April 2004. Locations are as follows:

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The results of both drill programs were inconclusive. Faulting, shearing and poor drill core recovery did not allow interpretation of drill data. The acquisition of the Casiera Diamond Project in Sierra Leon in February 2,005 refocused the Companies priority and all other projects were put on hold. The Nuevo Milenio property was written down to a zero book value.

Following the rise in gold and silver prices, detailed investigations of the higher grade vein and stock-work zones was initiated in July 2005 with the objective to re-evaluate economic potential of the Dos Hornos North and Once Bocas zones. During the evaluation period numerous old Spanish workings, suspected to exist, were located. The workings were opened, cleaned, mapped and channel sampled on both the Dos Hornos North and Once Bocas.

7.00 GEOLOGICAL SETTING

7.10 REGIONAL SETTING

The Nuevo Milenio project lies within the Sub province of the “Sierras Neovolcánicas” Nayarit, which is part of the Cenozoic Trans –Mexican Volcanic Belt (TMVB). The TMVB is a broad west sloping volcanic plateau formed by polygenetic stratovolcanoes, monogenetic volcanoes and cinder cones, caldera complexes, explosion craters and Maarens with associated volcanic flows and pyroclastic deposits. The average elevation of the plateau is 2,300 m in the eastern part, 1,600 m in the central and 1,000 m in the western part (Nayarit).

The volcanoes in Nayarit represent two distinctive groups. Rhyolitic volcanism initiated during the Upper Cretaceous (70 to 40 million years) related to the Laramide Orogeny and continued intermittently to 23 million years. These volcanic periods deposited felsic tuffs and flows with associated andesitic rocks which are represented by the Lower Volcanic Group. The large regional fault zones and compressive stress developed at this time to the east which was associated with the subduction of the Fallaron Plate under the western part of México.

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Primarily andesitic volcanism continued, but changed from 23 to 12 million years to rhyolitic composition forming, first the Sierra Madre Occidental to 12 million years, and later developing the rift and graben structures and the young faults.

The Trans Mexican Volcanic Belt formed during late Miocene (11 Ma) and consists chiefly of andesitic to dacitic volcanic rocks and active volcanoes, extending across Mexico. It starts at the Pacific in Nayarit and terminates at the Atlantic.  The original orientation was NW, but changed to E – W with the realignment of the East Pacific Plate at about 10 Ma to 5 Ma. The development of the Neovolcanic Belt is continuing to date with the active subduction of the Cocos Plate under Mexico.

Figure 3:      Tectonic Setting of the Compostela – Ceboruco Graben (Ferrari and Rosas-Elguera, (1999)

The Tepic Zacoalco Rift consists of several fault zones of different ages and direction with extensional tectonic still active to day.

Ø

Listric Faults north of Tepic belong to the Gulf Province.

Ø

En Echelon Grabens between Compostela and Guadalajara which reactivated the boundary between the Sierra Madre Occidental and the Jalisco Block (4.5 to 2.3 million years)

Ø

South verging half grabens located inside of the Jalisco Block (11.9 to 9? Million years)

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The Nuevo Milenio project lies within the Tepic Zacoalo rift, north of the Compostela – Ceboruco graben. The Rift is characterized by active alkali volcanism and about 1 mm/year extension. Net extension across the rift has been estimated at 4% to 8% (Barrier and others 1990) since formation. Within the Valley of Tepic several volcanoes and numerous calderas can be recognized on satellite maps.

 The City of Tepic lies in part within Caldera de Valle dated as 40 Ma, which is the oldest caldera in the region. Caldera Santa Maria del Oro and Caldera Sanganguey lie to the north of Caldera la Curva.

Mines located north of the Tepic Zacoalco Rift with distance from the Nuevo Milenio are:

Ø

Cinco Minas 70 km E, quartz vein – silica zone cutting lithic rhyolite tuffs.

Ø

Mina Jalla approx. 45 km East cutting ignimbrites

Ø

Minas of Santa Maria del Oro 30 km NE, cutting rhyolite tuffs.

Mines south of the Rift with distance from the Nuevo Milenio are:

Ø

Mina Espiritu  Santos approx. 15 km SW, in lithic tuffs approx. elevation is 850 m

Ø

Mina Miravalle 20 km SW – Jurassic slates near contact with andesites, lithic tuffs and granitic intrusion (20 ma) at approx. elevation of 400 m

Ø

Minas Huicicilla 22km SW in granitic intrusions (20 ma) cutting andesites and lithic tuffs, approx. elevation of 375m.

Ø

Lluvia Del Oro 4 km south of Nuevo Milenio cutting andesite and rhyolite tuffs.

Ø

Mina California located within the Nuevo Milenio lot along the flank of Volcan Media Luna.

Ø

Texture and structures of quartz veins, and type of mineralization are similar to the Dos Hornos and Once Bocas zone, but the alteration assemblage’s changes with compositional changes of host rock and changes of elevation (Temperature – Pressure dependent).

Mineral deposits located near Lote Nuevo Milenio were work during Colonial Time and were essentially of Bonanza Grade. The writer has visited the following old mining areas all of which are associated with rifting, grabens or regional fault structures.

7.20 LOCAL SETTING

Cream Minerals Nuevo Milenio Property covers the southern part of Caldera Sanganguey and the elliptical La Curva Caldera which has an estimated NW axis of 6 km and a NE axis of 5 km. The smaller Nuevo Milenio Calder, about 4.5 x3.5 km, is nestled into La Curva Caldera with common boundaries along the SE limits.

To the East several small Calderas are indicated. Caldera Llano Grande and Caldera Dos Amigos (Lot CMM 1) are located east and south of Nuevo Milenio. To the south east several crater lakes give evidence to recent volcanic collapse features.

The Tepic - Zacoalco Rift trends through the property and the Compostela – Ceboruco graben lies to the south. No Government or other geological data is available for this area in general and for the area around Tepic in particular. The compilation of the geology in cross-section is based on regional mapping and prospecting by Ing. Alberto Marcus Ruiz and the writer. It illustrates the regional geological environment of the Nuevo Milenio property.

The volcanic sequences here, as elsewhere throughout the Sierra Madre Occidental are of the Lower Volcanic Supergroup, which are overlain by the Upper Volcanic Supergroup. The rhyolite tuffs designated as Trtn and Trt, Tr on the section are believe to be Upper Volcanic Supergroup.

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Within the Caldera Nuevo Milenio all rocks predating basalt and rhyolites are affected by intense hydrothermal activities. These altered rocks host all known mineralization. Rock units exposed are flat lying. Along the Caldera Rim banded rhyolites form variably dipping outflow sheets with the dip controlled by paleo topography. The same holds for the basaltic outflow sheets. The lower contact is unconformable and is a zone several meter thick showing, regoliths, clay layers, conglomerates and baking of the underlying rocks.

Rock units are cut by WNW, NW and NE trending faults, shears and fracture zones as observed in the old underground workings. WNW faults are parallel to vein structures and produce breccia zones. Quartz veining and vertical silica zones follow these structural trends.

These structures are parallel to the trend of the Tepic - Zacoalco Rift.  NE structures are indicated but are not associated with quartz veining. Nonwelded, intensely argillic tuffs are recessive weathering. and show fewer fractures or joint. Rhyolitic domal intrusions, ring dykes and Mega Breccia were recognized along the rim of the calderas. These intrusions follow fractures and faults produced by caldera collapse. Late volcanic basaltic vents and dykes are located along the caldera rim and are the source for late stage, wide spread basalt flow sheet.

7.30 STRATIGRAPHY:

Basalt Flow (Tb)   – Dark green, massive to blocky flow.  Along contact with flow banded rhyolites, chilling produced obsidian bands and nodules.

Basalt Stocks (Tb) – intrusive basalt in vent areas light green to glassy when intruding rhyolite flow sheet. Devitrification and spherulitic texture is evident along contact.

Upper Lithic Tuff (Trtu) – Rhyolitic Lithic tuffs abundant coarse-grained clear quartz eyes approx. 30 meter thick.  Alteration is present east of the Cafetal area. Here hornblende ghosts are present and the rocks are largely comprised of quartz, clays, sericite and hematite.

Rhyolite Intrusive, Extrusive Devitrified (Tr) – Flow banded, spherulitic in bands, devitrified, opalized rhyolite with quartz eyes. The unit forms domes, dykes, and local flows. The rocks intrude and define the limit of the La Curva Caldera. No devitrification or Opalization was observed in intrusions located along the rim of Caldera Nuevo Milenio.

Fine Volcanic Ash – The unit is greyish in color, steeply dipping in places, silicified showing strong exfoliation roses. It was found at Domo Dragon as isolated outcrops.

Lacustrine Deposits - Thin-bedded sedimentary rocks, graded bedding intensely silicified, and pyritized. It was found at Cerro Chacuaco but is recessive weathering and hence the distribution of the unit is not known.

Rhyolite Lithic Tuff (Trtc) - The tuff contains quartz eyes, lithic fragments are typically a quartz-bearing welded lapilli’s tuff. It is unclear if the unit was vented from the La Curva caldera or predates it. It is the host for mineralization.

Rhyolitic Tuff (Trtn) - Non-welded, intensely clay altered, texturally destroyed, and recessive weathering, possible acid leaching generated by weathering of sulphides. It differs from the lithic tuff unit by its lack of quartz eyes. This unit may host for bulk gold – silver deposits.

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18

19

20

8

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7.40 ERUPTIVE CENTERS AND DOMES WITHIN THE CALDERA:

Lot Nuevo Milenio covers the whole of the La Curva caldera including the smaller internal Nuevo Milenio Caldera. Rhyolitic domes, dykes and associate outflow sheets originate along the caldera rim and define the rim zone. Basaltic flows originate from individual late volcanic eruptive centers.

 BASALTIC CENTERS:

Eruption of basalt lava flows mark the latest volcanic episode within the district. Three individual basaltic centers have been recognized within the area of Lot Nuevo Milenio, CMM 1 and CMM 2.

Volcán Media Luna: A basalt vent, straddles both the rim of Caldera La Curva and the Rim of Caldera Sanganguey. The basalt flows and associated obsidian cover the rhyolite flows and silicified lithic tuff units. At lower elevations, along ridges, the basalt forms erosional outliers.

Basaltic Eruptive Center East Flank of Cerro Bartolo: This Centre is indicated by thick flows overlaying the rhyolite out flow sheet to the east along the access road to Mina Guadalupana. It appears to extent all the way down into Arroyo Cafetal.

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RHYOLITE DOMES AND ERUPTIVE CENTERS:

Rhyolitic domes and/or rhyolitic ring dykes have been identified along caldera rims. All known opal mines are associated with devitrified flow banded rhyolites associated within domes or rhyolitic outflow sheets.

El Dragon Rhyolite Dome lies due north of Mina Zapote across a deep arroyo (Rim of Nuevo Milenio Caldera). The dome rises above the surrounding rim. Strong vertical jointing is exposed along the flank. No devitrification or Opalization was observed.

The Esmeralda Dome is located along the western flank of Volcán Media Luna, a late stage Basalt Vent (Caldera La Curva to the South). Devitrification of rhyolites produces precious opal and chalcedonic bands.

Guadalupana Dome underlies Cerro San Bartolo which is the highest mountain along the Caldera Rim. Three individual opal mines stretching nearly 700 m along the contours are located within the devitrified rhyolites. Rhyolitic outflow sheet cover part of the ridge.

RING DYKES, MOATS AND MEGA BRECCIA:

El Dragon Rhyolite Ring Dyke outcrops along a northwest trending ridge (Elev. 1080 to 1250 m). This represents the north rim of the Nuevo Milenio Caldera. The rhyolite shows flow banding, dipping steeply to the west. No sign of Opalization is evident but kaolinization is strong. In places outliers of basalt cover the rhyolite flow rocks and intrusive.

Ring Dyke north of the El Dragon along the north part of La Curva Caldera. The hill is covered by flow banded rhyolite which has been affected by kaolinization. Outliers of basalt sheet flows cover the higher ridges.

Land Slide Deposits or Mega Breccia outcrops near the El Dragon Rhyolite Dome defining a moat zone. The Rock fragments are up to 2 feet across and are a mixture of all rock types, except basalt fragments. Basalt was found as outliers along the top of the ridge within 50 m of the mega breccia outcrop.

North of Dos Hornos and Once Bocas rhyolitic flow rubble, along the Basalt contact with lithic tuffs, suggest rhyolite dykes or small rhyolite domes being buried under the basalt sheet. At Mina Zapote the NW extension of the quartz stock work zone is covered by flow banded rhyolites.

7.50 ALTERATION AND ZONATION AT NUEVO MILENIO:

Within the confines of Caldera Nuevo Milenio and Caldera La Curva all rocks have been affected by hydrothermal alteration. The alteration characteristics, as observed in the field, suggest a Low Sulphidation Epithermal system. Shallow acid leaching near the paleo - surface affecting rhyolitic lithic tuffs is evident. The alteration has been identified with a hand lens. Zoning from what appears to be low temperature or distal, to higher temperature or proximal alteration, to the hydro thermal centers was observed in the vertical and horizontal planes.

Supergene Oxidation was super imposed on the hydrothermal alteration assemblage. In several areas, intense argillic alteration with porcellanous lenses or veinlets, suggest the presence of alunite formed by shallow acid leaching indicating sulphides below the water table.

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Opalization - is caused by devitrification of flow banded rhyolite sheets, domes or dykes intruding along the caldera boundary. Opalization occurs preferentially with spherulitic bands, open spaces and along flow boundaries.

Chalcedonic Silicification - forms strata bound silica caps along several northwest trending ridges. Very fine sulphides have been found associated with these rocks. Micro breccia has been observed at Salamandria. It appears to be a lower temperature silica cap, produced by acid leaching. The underlying porous lithic tuffs may host disseminated mineralization. No quartz veining and no Au – Ag values have been found.

Silicification, Chalcedony and quartz veining, both sugary textured and chalcedonic quartz, are present. It is normally exposed as a capping along topographic highs from 40 to 60 m above the quartz veins or quartz stockwork exposures. The underlying partially welded lithic tuffs are well fractured and conducive to produces Quartz veining and quartz stockwork. High Ag – Au values were found within fractures or within quartz veins or brecciation in chalcedony. Indications are that Silicification may be superimposed on the top part of possible quartz vein zones, stockwork zones and disseminated mineralization. Existing precious metal values will not be removed by the superimposition of Silicification or acid leaching.

Argillization - Recessive weathering, non-welded lithic tuffs surrounds the hills capped by chalcedonic – silica. Intense clay alteration destroyed all primary texture, open spaces, quartz druses; limonitic filling along hairline fractures and sulphide boxwork suggests possible mineralization. The rock is white and on fresh breaks powdery.

Kaolinization (Clay alteration) - is the most widespread alteration style within the Nuevo Milenio Caldera affecting the lithic rhyolite tuffs. Rocks are white to tan and in many cases texturally destroyed only the quartz eyes remain of the original lithology. Abundant pyrite is associated with kaolinized rocks as noted on mine dumps. The intensity of kaolinization depends on the spatial position within the hydrothermal system. The zone is in part covered by basalt. Kaolinization may overprint higher temperature alteration assemblages directly related to mineralization due to surface weathering. The wide spread kaolinization observed on the Nuevo Milenio makes differentiation between supergene kaolinization – caused by surface weathering and kaolinization caused by epithermal activities very difficult. This is referred to it as the advanced Argillic problem by Silitoe R.H. 1994.

Advanced Argillic (Clay) alteration can be produced by 3 settings:

1.

Deep hypogene advanced argillic alteration is produced by condensation of acidic magmatic volatiles and dissolution of condensates in meteoric water. It is capable of producing precious metal deposits.

2.

Shallow hypogene acid leaching caused by condensates and adsorption of boiled off volatiles and subsequent oxidation of H₂S in the vadose zone.

3.

Supergene due to oxidation of sulphides above the water table.

Both 1 and 2 may overlie or over print precious metal mineralization. The 3 types of advanced argillic alteration are identical under the microscope and X-Ray diffraction analysis. They have distinct textural differences which may be identified with the hand lens in the field.

Vein and alteration quartz shows sugary quartz as fracture controlled flooding. It occurs normally associated with mineralized vein and stockwork quartz. Banding and quartz pseudomorph after calcite and/or barite was observed.

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Propylitization was observed at La Suerte within the underground workings near the San Francisco structure and in drill core.Iit is evident by the destruction of biotite and/or hornblende to chlorite and pyrite giving a pale greenish-grey colour. It normally forms distal to mineralization. Minor silicification, but intense pyritization was observed. The indicated distance to the mineralized vein structure is estimated as approximately 30 m. Samples collected show elevated gold and silver values.

Sericitization is associated with mineralized areas and spatially associated with vein structures. Sericite is also present in intensely altered tuffs with no known proximity to mineralization, perhaps due to the effects of acid leaching, surface weathering and the oxidation of pyrite noted above. North of Salamandria fine ash tuff has been kaolinized and sericitized. North of Dos Hornos sericite is associated with intense argillic alteration and quartz stock work.

Vein and alteration quartz shows sugary quartz as fracture controlled flooding. It occurs normally associated with mineralized vein and stockwork quartz. Banding and quartz pseudomorph after calcite and/or barite was observed.

7.60 ALTERATION AND ZONATION DOS HORNOS AND ONCE BOCAS:

At Dos Hornos the zone of quartz veining and epithermal alteration has been traced for a distance of 3,000 m. The following changes in alteration were observed, starting at the southern rhyolite flows going to the northwest:

From the Rhyolite flows northward the vein system is indicated by quartz sub outcrop and quartz float. Zones of silica flooding trending parallel to the structure and kaolinization are the main alteration. A veneer of overburden covers the area. Elevation is approximately 1,250 m.

At Santa Gertrudis, 1,180 m elevation, Chalcedonic quartz, silica flooding and kaolinization form an envelope around the structures. The old workings are within the chalcedonic section. The surrounding area is overburden covered. A 100 m wide zone shows quartz float and numerous old trenches and shafts in which quartz veins are exposed.

Mina San Miguel and Cordon Dos Hornos form the central part of Dos Hornos zone. Extensive weathering is evident along the road cuts at Mina San Miguel. Kaolinization, caused by supergene overprinting (?) and linear silica replacement along structural zones, are the only alteration types observed. DDH19-03 was drilled to cut the Mina San Miguel (1,160 m) quartz veining and quartz stockwork zone at depth. The quartz – stockwork zone was intersected. The host rocks are rhyolitic lithic and lapilli tuffs. Alteration consists of sericite – kaolin associated with silica flooding.

Cordon Dos Hornos is at elevation 1,200 m; it is covered by an epithermal, horizontally banded silica cap which is unconformable overlain by banded rhyolite flows. The banding and texture of the silica cap suggest it was deposited from hydrothermal solution interacting with the paleo ground water table. Samples collected from the silica cap showed low Au – Ag content.  It is underlain by kaolinized lithic tuffs cut by quartz veining as exposed in shaft 10.

Dos Hornos North lays at elevation 1,100 m the outcropping parallel quartz vein system is about 100 m lower than the Cordon Dos Hornos Silica cap. Wall rock alteration consists of silica flooding, kaolinization, sericite and pyritization. Euhedral white feldspar (Adularia?) occurs within the quartz veins. All feldspar crystals in the altered tuffs are completely kaolinized. Quartz pseudo morph after calcite and/or barite was observed.

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At Once Bocas South 1,100 to 1150 m elevation, Silicification with minor quartz stockwork is the dominant alteration type. On the flank of the ridge old trenches show finely banded chalcedony with quartz veining within an intensely altered argillic zone.

At Once Bocas Quartz veining and silica flooding of wall rock along structural zones and quartz stockwork is evident. Kaolinization has obliterated all primary texture in the wall rock except occasional quartz eyes. Quartz stockwork zones are localized between 5 quartz veins and as a halo producing a zone up to 100 m wide. Silica flooding is evident

.

 At Once Bocas North exposures are quartz veins carrying up to 30 % specular hematite. Wall rocks are completely oxidized to a mass of gossanous clay. Fresher rock fragments suggest possible sericite.

Both the Dos Hornos and Once Bocas exposures are located high within the mineralizing system. The possibility to encounter “Bonanza Type” Mineralization at depth, or disseminated bulk tonnage within the lower, porous, non welded tuffs has to be considered.

8.00 DEPOSIT TYPE:

Au – Ag mineralization is localized along structural zones associated with volcanic related hydrothermal to geothermal systems as vein deposits or dissemination within the wall rock. The low sulphide content, gangue mineralogy, combined with an alteration zones consisting of vuggy vein quartz,  bladed quartz crystals after calcite and/or barite, silica flooding, chalcedony, kaolinization (argillic), sericite and adularia (white feldspar as euhedral crystals) identifies the Nuevo Milenio as a Low Sulphidation, Epithermal Mineral target for Au – Ag exploration.  Characteristics observed on the Nuevo Milenio Project are typical of Au – Ag Low Sulphidation (sericite–adularia) Epithermal Mineral Deposits; This genetic Model has been described in the literature by numerous authors.

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9.00 MINERALIZATION

Gold – Silver mineralization, as delineated by the exploration program, is centered in the southern part of Caldera Nuevo Milenio. The mineralized zones occur within a 2 km by 3 km area and consist of Dos Hornos 200 m x 3000m, Once Bocas 100 m x 1,500 m, Chacuaco – Cafetal average of 250 m x 1,500m and Chacuaco west. Other known mineralized areas, but not explored, are El Zapote, Astasis 1, Astasis 2 and San Antonio and Mina Tahona. These areas have little exploration.

The dominant host rocks are rhyolitic lithic rhyolite tuffs and lapilli tuffs. All rock exposures and rocks in drill core show varying degrees of alteration. The rock units are silicified, or affected by argillic alteration obliterating the original mineralogy and textures with only quartz eyes surviving.

Silicification and quartz veining is usually related to structural zones. Brecciation is prominently associated with sulphide mineralization and quartz veining. From the mineralized structures outward, the intensity of alteration decreases from a sericitic – argillic – silica (phyllic) assemblage to epidote – chlorite as indicated in drill core. On surface supergene kaolinization is superimposed on epithermal alteration.

Topographic highs (Cordon Dos Hornos, Once Bocas South, Salamandria, Mina Victoria etc. are covered by a horizontally banded silica cap, typical of epithermal systems reaching the surface. Cordon Dos Hornos and Once Bocas South carry gold and silver value as shown by rock and soil samples.

The steeply dipping zones of structurally controlled silica flooding are interpreted as hydrothermal feeder zones along which solution percolated. These zones may change downwards into quartz veins (blind veins).

Sulphide minerals identified are Silver minerals, pyrite, and occasional galena crystal. Secondary minerals are limonite, hematite, minor malachite and pyrolusite as smears, coating or fracture and cavity filling. Gangue is quartz, quartz pseudo morph after calcite and/or barite. White feldspar (Adularia?), sericite and clay minerals were observed in breccia zone.

Quartz veins show banding, open space filling and are spongy to massive in textures. Multistage brecciation is common within mineralized zones and is related to faults trending parallel to the veins. In hand specimens up to 5 stages of silica introduction were identified.

To clarify the effect of weathering, oxidation of sulphides and leaching of metal values, a suite of specimens were collected from the area of Chacuaco Creek by Dr. A.D. Drummond, P. Eng., the Company consultant and writer. The sample suite was collected from different location with some from areas which are flooded during the rainy season. The following summarizes the results.

Selected Specimen Suite

Sample#      Au (g/t)   (opt)         Ag (g/t) (opt)         Fe (%)         S (%)       As (ppm)

Mineralized, Essentially Unbleached

   “A”

3.42

(0.110)

   235

(7.56)            8.49

8.04

      442

   “B”

6.19

(0.199)

   326

(10.48)

       6.49

0.86

       381

Partially Leached, Minor Pyrite Visible

   “D2”

1.88

(0.060)

   101

(3.25)

       3.85

0.09

        145

   “D1”

0.52

(0.017)  

     48

(1.54)

       3.37

0.06

        153

   “E”

0.70

(0.023)

     32

(1.03)            1.37

0.15

        254

Completely Leached, Limonite Boxwork Remaining

   “C”

0.21

(0.007)

    24

(0.77)

       1.37

0.15

           48

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The iron percentage decreases (oxidation of pyrite) with intensity of leaching as does the percent of sulphur. The arsenic content, which may be associated with the silver minerals, also decreases with increasing intensity of leaching or weathering.  From the above it is clear that weathering, oxidation and leaching are depleting gold and silver value from surface.

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9.10 DOS HORNOS

Dos Hornos is a north-westerly trending zone up to 200 m wide and 3000m long of parallel bifurcating quartz veins and quartz stockwork.  Maximum relief along strike is estimated as 200 m. The strike of the structure varies from N to N35W. Numerous splay veins and cross veins connect the 4 main veins. White feldspar (Adularia?) crystal, sericite and clay minerals were observed in breccia zones. All rock exposures and drill core show varying degrees of alteration intensity and variable amounts of pyrite. Sulphide minerals identified are Silver minerals, pyrite, and occasional galena, chalcopyrite. Secondary minerals identified are hematite, manganese oxides, malachite and covelite. Gangue is quartz, quartz pseudo morph after calcite and/or barite and clay minerals.

Between Arroyo Guadalupana and the basalt flows, a distance of 400 m and an elevation difference of about 50 m is a network of veins and quartz stockwork. It is surrounded by intense sericite – kaolin alteration up to 125 m wide. Quartz veins show banding, minor chalcedony, vuggs with dogtooth crystals, bladed quartz pseudomorph after calcite and barite. Occasional white feldspar (Adularia?) occurs as open space filling. Limonite, hematite as red discoloration and pyrite are present. Bluish quartz suggests silver minerals. Limonite as coating and fracture filling is the main oxide. The area was not sampled as yet. Near Arroyo Guadalupana old caved and overgrown trenches were encountered.

From Arroyo Guadalupana south to Cordon Dos Hornos, a distance of 600 m is the area with most old Spanish workings. Recent trenching, drilling and channel sampling was concentrated in this area. The Inferred Mineral Resource starts 50 m north of the Creek and trends south to Shaft 11. Elevation difference is approximately 150 m. This is also the section of the strongest gold – silver soil anomaly.

The surface expression of this part of the Dos Hornos is a blanket of quartz rubble with the occasional sub outcrops. Shafts 1 to 11, Sub level 1, 2, and 3 accessible via shaft 5, Adit I to 4, Trench 1 to, 4, and drill holes DDH 01, DDH 02, DDH 011, DDH17 and DDH 18 -03 tested grade and continuity of the structure along surface and to a maximum depth of 150 m in DDH 01 and to about 80 m in the internal shaft 1 in x-cut Adit 4.  

Alteration underground is minor sericite, argillic with silica flooding. Limonite and clay as fracture filling is wide spread and associated with brecciation, shearing and faulting. Pyrite as sulphides, hematite staining, possible dark grey silver minerals (very fine) plus minor boxwork after sulphides were seen.  The walls are muck and oxide covered. Before sampling, the walls were cleaned along a 6 inch wide channel to obtain representative samples.

Prominent faulting exposed in Adit 3 trends N72W/75S with indicated horizontal movement of 30 m right lateral, N75E/60S with about 10 m displacement also right lateral. This direction of movement is also confirmed by the indicated displacement within the geochemical survey of anomalies and by the displacement of silica zones. Other faults are parallel to the veins N to N35W/85NE to 80SW.

 The rain exposed Vein 1 in Arroyo Guadalupana. The exposure is about 75 m NW of Adit 1.  It has been traced across the creek by float and sub outcrop. Several very old trenches were encountered in this area.

Shaft 1 located, 30 m from the portal of Adit 1 was opened to a depth of 1 m, but water and heavy clay made it impossible to continue. Quartz float and rubble follow the trend of the vein 1.

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Adit 1 was driven along the FW of Vein1, 6.00 m below Trench 1 the HW part of the zone is not exposed in the drift or in the x-cut. The caved shaft at the end of the drift may be the original entrance to the workings of x-cut Adit 4.

Trench 1 cuts rhyolitic lithic tuffs, intense alteration and Quartz veining with quartz stockwork zone.

Shaft 2, Adit 2  are in trench 1, they were driven south along a shear zone between the FW and HW.

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DDH 17 – 03 was located to test the down ward continuation of Trench 1. It was drilled into the old workings of Adit 4. The mineralized zone was intersected and is comparable in width to Trench 1 butof lower grade because of core loss.

X – Cut Adit 4 is located below Trench 1, Adit 1 and Adit 2.  It was driven NE about 50 m to intersect Vein 1. Drifting and sinking of shafts took place but very little stopping. Samples were taken in pairs across the FW. The workings did not enter the HW of the structure.

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A shallow Trench was cut to provide a turn around for DDH 18 – 03. The vein exposures are intensely weathered and consist of broken rubble. The quartz was sampled and assayed

DDH 18 – 03 cut the structure but, within the mineralized section, core recovery was poor (possible old workings under Shaft 4).

Shaft 3 was not cleaned out except at the collar to allow sampling

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Shaft 4 was cleaned for 3 m it may connect with the levels below Shaft 5.

Shaft 5 was sunk on an outcrop of Vein 1. The vein exposure is strongly weathered. An incline connects with 3 sublevels. Drifts are 1.20 m to 1.80 m wide. The roof was channel sampled.

Trench 2:    Cuts lithic rhyolite tuffs. The exposures are within the C horizon of weathering. The trench should have been at least 1 m deeper.

Shaft 5 - Level 1 the northern part was not opened because of time constrain. Shaft 5 provides access to 3 levels. Samples were collected in the roof.

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Shaft 5 – level 2

Shaft 5 – Level 3

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Vein 1 Exposure in Creek is 150 m south of shaft 5. Vein 1 is only partially exposed  and lays in the FW of  a fault N 75W/ 75S which displaces the vein. DDH 01-03 lies in the FW of Fault but the collar of the drill hole is in the HW of the Fault.

Adit 3 driven under trench 3 was cleaned, washed and mapped, but not sampled since the walls were covered with a thick layer of muck and dirt. Mapping showed 3 quartz vein zones and extensive faulting. This was confirmed by DDH 01, 02, and 11.  

Trench 3 is an old Spanish cut cleaned by tractor.  Shafts 9 and 10 a in the same area and Trench 4 located 50 m to the south. Rock exposures are lithic tuffs showing strong argillic alteration and vertical zones of silica flooding. Shearing, faulting and fracturing are pronounced. Mineralization is confined to an 18 m wide zone of quartz veining and quartz stockwork. Wall rock near the vein contact shows low Au – Ag values.

Drill hole DDH 01 – 03, DDH 02-02 and DDH 11 -03  were located to test the mineralization under laying trench 3 and the mineralized zone cut in adit 3.

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DDH 01-03 intersected an unknown quartz vein at the collar. The zone from Trench 3 was anticipated to be cut from 20 m to 30 m but a strong fault with quartz fragments was cut. This fault is thought to be the same as mapped in Adit 3.

 At the end of the hole from 188m to 212 m Dos Hornos Vein 1 was intersect as suggest by surface outcrop in a creek, which is cut by the same fault.  This segment of Vein 1 is interpreted to be located on the north site of the fault it was intersected in DDH 01 and mapped in Adit 3.  Rocks cut are lithic and lapilli tuff showing argillic and kaolinitic alteration with associated quartz veinlets.

Core recovery in fault zones was as low as 20% to 30%. The zone exposed in trench 3 gave good assays over a sample width of 18 m including about 12 m of quartz stockwork with silicification, but drill core from similar type of stockwork assayed very low. This may be caused by faulting, brecciation and washing of core.

DDH 01-03

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DDH 02 – 03 intersected the same unknown quartz vein structure at the collar as DDH 01 -03. From 50 to 52 m quartz veining within a fault gave low assays. At 82 to 90 m Vein 1 was intersected but a section was drilled with a Tricone bit (hole caving), hence only small fragments of quartz were recovered.

DDH 11 intersected the zone but it was faulted and consisted of ground quartz and blue gouge.

Trench 4 is located about 50 m south of Trench 3. It is an old Spanish hand trench 4m x 4m which was not cleaned but sampled by Ing. Alberto Ruiz Marcus. Quartz rubble continues to the south as float.

A wide zone of silica flooding and quartz veining is exposed about 100 m south  of  Trench 4 at the base of a cliff. The area was prepared for sampling in 2000 by Ing. A. Ruiz but  never sampled

Cordon Dos Hornos lies about 250 m SE of trench 4 at an elevation of 1250m. This is a high ridge with a silica cap overlaying the vein structures.  Old shafts and cuts were encountered. The crest is covered by silicified lithic tuffs, which in turn are overlain by kaolinized –silicified lithic tuffs. Several old cuts and shafts were located along the edge of the silica cap exposing quartz veining to 4.00 m wide (Shaft 11). The samples below are chip samples:

Mina San Miguel is located at an elevation 1,200 m approx and 1,000 m SE of Arroyo Guadalupana South of  Cordon Do Hornos. A quartz vein 4 m wide is indicated in front and in the floor of the adit. In front of the adit vertical zones of fine silica flooding up to 10 m wide and parallel quartz veins are exposed. The tuffs are completely weathered to a sandy composition in the road cuts.

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LONGITUDINAL SECTION, 550 m APPROX. ALONG STRIKE OF

DOS HORNOS WORKINGS WITH ASSAY LOCATION

DDH 19 - 03 was drilled to test Mina San Miguel at depth. Alteration intersected was mainly silica flooding argillic with kaolinization near the surface. Limonite is abundant but pyrite was observed. Fracturing and faulting is prominent. The area lays high in the epithermal system as indicated by the nearby outcropping silica cap about 50 m above the Mine Portal.

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Mina Santa Gertrudis is located about 250 m SE of Mina San Miguel at 1,200 m.  A large open cut, shafts and sorted ore piles gives evidence of limited past production Intense silica flooding, brecciation and sulphides forms the footwall of a NW trending weakly argillic – silicified zone of lithic tuffs. Several stages of brecciation are indicated. The sample below is a chip sample from the workings.

Open cut              chip sample                                  m    Au g/t    Ag g/t

                      343106   Quartz breccia, sulfides, silicified tuffs     4     1.54     700.00

Mina Perdida is the NE section of the same zone as Mina Santa Gertrudis. The area is overburden covered and only quartz float and sub outcrop give evidence of the quartz vein system. Old trenches show argillic alteration, minor silicification quartz veining and quartz stockwork. The south east extension, about 600 m south is covered by Rhyolite flows.

Quartz vein  600 m SE of  Sta. Gertrudis, below  Rhyolite flow

The area of Mina Perdida and Santa Gertrudes was not investigated in details. Geological mapping confirms that the parallel quartz veins with associated gold – silver values are the SE extension of the Dos Hornos quartz vein system. The most south easterly workings on the Dos Hornos Structure is a 2 m deep shaft about 1km SE from Mina Santa Gertrudis. It is anomalous in gold and silver.

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9.20 ONCE BOCAS:

Once Bocas covers an area of 1,500 m x 100 m and represents a zone of parallel NW trending quartz veins and quartz stockwork. The soil survey outlines sections of Once Bocas as anomalous in gold and silver. The area was soil samples with the 0+00 point in Front of Adit 1..  The NW part shows high gold and silver in soils, but the SE part is high in silver only.

Mineralization of the Once Bocas is very similar to Dos Hornos. The main differences are a wide envelope of quartz vein stockwork,  intense oxidation within the old workings, coating and fracture filling of limonite, hematite, and manganese oxides and splashes of malachite in places.

Sulphide minerals identified are Silver minerals, pyrite, and occasional galena.. Gangue is quartz, quartz pseudo morph after calcite and/or barite. White feldspar (Adularia?), sericite and clay minerals were observed in breccia zones. Quartz veins show banding, open space filling and are spongy to massive in textures. Multi stage brecciation is common within the mineralized zones and is related to faults trending parallel to the veins. Up to 5 stages of quartz veining were identified in hand specimens.

ONCE BOCAS SE shows a well defined Ag anomaly on the statistically enhanced contour maps.  The area is covered by silicified lithic tuffs which follows the top of a ridge. Minor fracturing, some quartz veining, silica flooding and chalcedony are evident. The quartz veins follow fractures showing silica flooding. Between lines 6+00S and 9+00S old trenches are located. The trenches are along the north east flank of the ridge, below the silicification showing chalcedony, banded quartz with open spaces. Bluish discolouration suggests the presence of silver minerals. Disseminated Pyrite and limonite were observed.

ONCE BOCAS NW is an area where weathering is very intense.  Clay layers are exposed along creek cuts. Soils are very limonitic. Quartz float and sub outcrops with up to 30% specular hematite were found close to the basal contact.  The quartz veins strike under the basalt flows. Along the contact rubble of flow banded rhyolite is abundant. Specular hematite, in high concentrations is rare in epithermal veins. The writer has only encountered it on three locations - at the Spanolina Mine in Nicaragua at this locality a network of quartz veins within a 10 m structural zone had 15% hematite, the structure assayed Au 3g/t , Ag 95 g/t. On the Fenix property the upper most part of the El Leon structure had up to 10 % specular Hematite. This structure assayed Au 0.20 g/t, Ag 5 g/t but 60 m lower the grades increased to Au 3 g/t, Ag 250 g/t.

ONCE BOCAS CENTRE is where the old Spanish Mines and recent detailed exploration was concentrated.  This is also the area with an inferred mineral resource, located between Lines 1+00N and 3+00S of the soil grid. It is a mineralized zone up to a 100 m wide of five parallel quartz veins and quartz stockwork associated with intense silica – kaolin alteration. Near vertical zones of silica flooding were exposed in old pits. Faulting is prominent and 3 major sets cut the zone N05W/S75W, N25W/85 SW (parallel to the veins) and N50W/75SW.  The vein and stockwork zone appears to be controlled by NW trending faults and shears.

Within the area 10 shafts, 3 adits, 2 mine areas 40 m x 1.5 m x 50 m (?) and numerous trenches were encountered. Creek cuts, Tractor trenches and road cuts exposed the stockwork zone. A total of 1,308 m of diamond drilling in 8 holes was completed:

Host rock is intensely kaolinized – sericitized, in places silicified, welded to semi - welded lithic rhyolite tuff. All primary textures are destroyed. Only quartz eye are left. In places secondary feldspar is evident. The major quartz veins are greyish to white in color with signs of silica flooding and quartz pseudomorph after calcite and/or barite and feldspar. Open spaces, druses, banding and dogtooth quartz is evident. These veins were the main target of the Spaniards in search for “Bonanza Ore “. The 5 quartz

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veins identified are essentially 2.00 m to 5.00 m wide compound quartz veins, in places brecciated, with quartz stockwork. The quartz stockwork forms a halo around the veins.

Within the creek, along the access road and along the south side of the creek quartz stock work is exposed. Veinlets are from 1 to 5 mm wide, less than 30 cm long and at random orientations. Adjoining this zone are parallel quartz veinlets up to 2 cm wide. Vein spacing is variable from 20 cm to 30 cm apart.  The objective of the sampling was not only to establish grade of the vein structures but also within the wall rock, stockwork and silica zones.

Outcrops are not continuous across the indicated 100 m width of the mineralized zone, but DDH12-03 which cut across the zone intersected 70 m of veins and quartz stockwork and stopped in quartz stockwork..

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Off the above drill holes DDH 07 – 03 was abandoned, stuck rods, and re-drilled as DDH 08 – 03 which had the same problems. DDH 06 – 03 and DDH 10 – 03 both intersected the same major fault zone and caved. They were finished with great difficulties. DDH 12-03 caved and was stuck in the same fault zone. It was wedged and re-drilled.

The Once Bocas zone has 2 types of exploration targets: Low grade “Bulk Tonnage” for possible open pit mining or high grade quartz breccia veins (5 veins) for underground mining. The following are samples collected from surface and underground. Drill core samples are intersected width, since the orientation of quartz veins are highly variable.

Surface Once Bocas side hill above Creek

Mina Once Bocas 1 weathered and oxidized very limonitic, shearing

Mina Once Bocas 2 very weathered and oxidized, shearing and faulting

Adit 3, Portal x–cut to vein

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Stope Samples along veins,  average of all samples (see figure  22)

Point 9 - 12 along  Creek Road south of Point 5

Point 16 – 18 along South of Creek

Trench South of Creek

DDH 09-03

DDH 03-02

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DDH 03 -02  near shaft 4 at Once Bocas

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DDH 04-02 was located in an inopportune place because of topography. Side creek.

DDH 06-03  At Trench 3

DDH 12-03  50 m SE of DDH 06-03

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10.00 EXPLORATION:

This report is based on the field work conducted from May 2000 to Dec 20005 by Ing Alberto Marquez Ruiz, Ing German Francisco Romeo and a crew of 8 men under the supervision of the writer. Investigations consisted of:

Exploration of the Nuevo Milenio property by Cream Minerals de Mexico has been carried out intermittently during the period of May 2000 to December 2005. The initial mapping and sampling were done by Ruiz, geologist, and later work was done by Ing German Francisco Romeo and the writer. This information is presented in progress reports, and summary reports together with illustrations. They are all cited in the References.

The initial exploration consisted of examination of old mine workings within the general district which included Mina California (La Suerte), Mina Lluvia del Oro 4 km to the south and exploration lots along the southern limits of Nuevo Milenio. This work was followed by prospecting to located areas of historic workings. These areas were investigated and if warranted were enlarged and made accessible by constructing new roads and repairing existing roads using a D-7 bulldozer.

The network of roads is shown on Figures 6, 7. Mapping was carried out by plotting information on 1:50,000 scale topographic sheets using a Garmin 12 XL GPS instrument with external antenna for control.  A D-7 bulldozer was used for trenching at Dos Hornos, Once Bocas and at Mina  San Miguel. Hand trenches were completed at Astasis I, Astasis II, Arroyo Chacuaco, Mina Perdida and Mina Chacuaco.  Below is a list of samples taken from 2000 - 2005:

The total number of samples taken is as follows:

A geochemical soil survey consisting of 631 samples was completed over a 15.75 km grid. It was centered on Dos Hornos, Once Bocas and included part of Cerro Chacuaco. Lines at N45E were spaced at 100 m intervals and the baseline was at N45 W following the general trend of the structures. The 0+00N, 0+00 W point was located at Once Bocas in the Creek in front of Adit 1.  Soil samples were taken at 25 m intervals along the lines.  The B soil horizon was sampled at depths of 20 cm to 40 cm typically.  Soil samples were analyzed for 32 elements by ICP.  The outlines of the geochemical survey grid and sample results are shown on Figure 30.

The initially contoured metal values for gold and silver indicated low concentrations of these elements in the soils overlying the previously sampled rock outcrops. A comparison between rock and soil samples showed that higher concentrations of gold and silver, such as at Once Bocas and Dos Hornos, were not reflected within the soils. The comparison utilized chip sample assays of rock in the trenched areas and the geochemical analyses of soil samples directly above them.  The results indicated that concentrations of 1 g/t Ag and 30 ppb Au in soils occur above concentrations of 30 g/t to 100 g/t Ag and + 0.5 g/t Au in

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the rock directly underneath.  This discrepancy of representative metal values in rock and soil is attributed to the following factors:

1.

Flushing of metal values during the rainy season from the soils may produce low soil assays. Best time for soil sampling is the period of May – June at the end of the dry season.

2.

Clay content in the weathered soil profile is thought to impede the upward migration of metal ions.

3.

The acid leaching effects of sulphide enriched meteoric rainwater on the precious metals. This appears to be a minor factor since insufficient sulfide concentrations were observed to produce acid leaching.

4.

Concentration of metal in soils overlaying the clay barrier may be derived from residual quartz produced by weathering and down slope creep. Quartz fragment along slope of Once Bocas assayed up to 0.5 g/t Au and 60 g/t Ag.

The above suggests that an overburden-covered area of well-mineralized rock may produce a geochemical anomaly of low amplitude. Conversely, an area of well-mineralized rock outcrop occurring beneath relatively metal-depleted soil may be larger than indicated by the geochemical soil anomaly

The geochemical data was statistically treated by Dr. Lovell of BSI Inspectorate American Corporation, and values of 1ppm Ag and 30 ppb Au were designated as representing geochemical anomalous condition and therefore are indicative of underlying mineralization.  The data were re-contoured using these parameters and the results are presented in Figure 9 and Figure 10 showing the gold and silver geochemical soil anomalies.  

The Au and Ag anomalies outline shape and limits of mineralization at Dos Hornos, Once Bocas and Cerro Chacuaco and show displacement of  200 to 300 m  long segment, along  strike by WNW structures. Similar trending structures are indicated on surface with a possible right lateral displacement in order of 30 m, and were mapped within the old Spanish workings on Once Bocas and Dos Hornos.

Diamond drilling in 2002 and 2003 consisted of a total of 4,301 m HQ and NQ core on the Dos Hornos 6 holes, Once Bocas 8 holes, Cerro Chacuaco 5 holes, Chacuaco West 1, Cafetal 4.for a total of 24 holes Dos Hornos North and Once Bocas. The results were inconclusive since insufficient detailed structural information did not allow interpretation of mineralized zones intersected.

The exploration to date has very effectively outlined zones of near-surface gold-silver mineralization. Diamond Drilling and underground workings have added a third dimension. Surface mapping and sampling has traced the structures and confirmed continuity of the mineralized structure over at least a vertical relief of 200 m.

Assays obtained from diamond drilling, old workings, surface trenches and road cuts confirm the presence of a large epithermal system which is known for a 1.5 km strike length and a 100 m width. The Centre 300 m has been sampled in detail and shows size and grade for a possible bulk tonnage resource.

Additional detailed exploration is required to expand the inferred mineral resources and to convert them to an indicated and/or proven resource.

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FIGURE: 30 Gold and Silver soil anomaly with indicated Faulting

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11.00 DRILLING

Discussion of all Drill sections and assays has been included under the section 9.00 Mineralization Dos Hornos and Once Bocas.

A total of 725 m HQ and NQ in 6 diamond drill holes were completed in 2002. The drill sites are listed with Co-ordinates, inclination azimuth and depth:

The core from the 2002 diamond drilling was stored on the Ranchito of Don Antonio who died in spring 2004. Is family moved the core and destroyed the boxes by exposing them to the elements. When Ing. Francisco German went to move the core the boxes were partially destroyed and the core was lost.

The Drill core of the 2003 diamond drilling was stored in La Curve in a private house. The company fixed the roof and doors to safe guard the core. The core boxes were in good condition in Dec 2005.  The drill core was put into the core boxes at the drill site. Each core was marked according to the drill hole number and depth of hole. Care was taken to preserve the original core sequence and that footage marked corresponded to the actual depth. Individual runs were marked by wooden blocks with the length of the distance. When the box was full it was closed and hauled to the camp.

A total of 3,576 m of  Diamond Drilling in 19 holes was completed in 2003 -2004  as listed below: