A COPY OF THIS PRELIMINARY PROSPECTUS HAS BEEN FILED WITH THE SECURITIES REGULATORY

AUTHORITIES IN BRITISH COLUMBIA, ALBERTA AND ONTARIO BUT HAS NOT YET BECOME FINAL FOR
THE PURPOSE OF THE SALE OF SECURITIES. INFORMATION CONTAINED IN THIS PRELIMINARY
PROSPECTUS MAY NOT BE COMPLETE AND MAY HAVE TO BE AMENDED. THE SECURITIES MAY NOT
BE SOLD UNTIL A RECEIPT FOR THE PROSPECTUS IS OBTAINED FROM THE SECURITIES REGULATORY
AUTHORITIES.
No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim
otherwise.
PRELIMINARY PROSPECTUS
INITIAL PUBLIC OFFERING

DATED: October 25, 2005

CONDOR RESOURCES INC. (the "Company")

Suite 910 885 Dunsmuir Street
Vancouver B.C.
V6C 1N5
Offering:

Per Share
Total Offering
(1)
(2)
(3)

5,000,000 Common Shares (the Shares) without par value

Price:
$0.40 per Share

No. of Shares

Price to Public(1)

Agents Commission

n/a
5,000,000

$0.40
$2,000,000

$0.032
$160,000 (3)

Net Proceeds to
Company(2)
$0.368
$1,840,000

The price of the Shares has been determined by the Company in negotiation with the Agent.
Before deduction of expenses of this issue estimated to be $80,000, which together with the Agent's
Commission will be paid by the Company. See item 4 Use of Proceeds.
The agent for the Offering, Bolder Investment Partners, Ltd. (the Agent), will also receive nontransferable Share purchase warrants (the Agents Warrants) equal in number to 10% of the number of
Shares sold. Each Agents Warrant will entitle the Agent to purchase one Share at the price of $0.40 per
Share, for a period of 12 months from the date the Shares are listed and called for trading on the TSX
Venture Exchange. In addition, the Agent has received a non-refundable work fee of $10,000 (plus GST).
The Agent is also to receive 50,000 common shares from the treasury of the Company upon completion of
the Offering as a corporate finance fee (the Corporate Finance Fee). This prospectus qualifies the grant
of the Agents Warrants and the issuance of the Corporate Finance Fee. See item 15 Plan of Distribution.

THERE IS NO MARKET THROUGH WHICH THESE SECURITIES MAY BE SOLD AND

PURCHASERS MAY NOT BE ABLE TO RESELL SECURITIES PURCHASED UNDER THE
PROSPECTUS. THE COMPANY HAS APPLIED TO LIST ITS SHARES OFFERED UNDER THIS
PROSPECTUS ON THE TSX VENTURE EXCHANGE. LISTING IS SUBJECT TO THE COMPANY
FULFILLING ALL OF THE LISTING REQUIREMENTS OF THE TSX VENTURE EXCHANGE. SEE ITEM 15
PLAN OF DISTRIBUTION.
AN INVESTMENT IN A NATURAL RESOURCE ISSUER INVOLVES A SIGNIFICANT DEGREE OF
RISK. THE DEGREE OF RISK INCREASES SUBSTANTIALLY WHERE THE ISSUERS PROPERTIES
ARE IN THE EXPLORATION AS OPPOSED TO THE DEVELOPMENT STAGE, AS IN THE PRESENT
INSTANCE. SEE ITEM 16 "RISK FACTORS".

ii

NO PERSON IS AUTHORIZED BY THE COMPANY TO PROVIDE ANY INFORMATION OR TO MAKE

ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THIS ISSUE AND THE SALE OF THE SECURITIES OFFERED BY THE COMPANY.
THE AGENT CONDITIONALLY OFFERS THE SHARES FOR SALE ON A COMMERCIALLY
REASONABLE BASIS IF, AS AND WHEN ISSUED BY THE COMPANY AND DELIVERED AND
ACCEPTED BY THE AGENT IN ACCORDANCE WITH THE TERMS AND CONDITIONS CONTAINED IN
THE AGENCY AGREEMENT REFERRED TO UNDER ITEM 15 PLAN OF DISTRIBUTION AND SUBJECT
TO APPROVAL OF CERTAIN LEGAL MATTERS ON BEHALF OF THE COMPANY BY VECTOR
CORPORATE FINANCE LAWYERS AND ON BEHALF OF THE AGENT BY McCULLOUGH OCONNOR
IRWIN LLP.
UPON COMPLETION OF THIS OFFERING, 5,000,000 SHARES WITHOUT PAR VALUE WILL BE HELD BY
THE PUBLIC, REPRESENTING 44.50% OF THE 11,235,196 THEN ISSUED AND OUTSTANDING SHARES
AS COMPARED TO 4,511,892 SHARES WITHOUT PAR VALUE THAT WILL THEN BE BENEFICIALLY
OWNED BY PROMOTERS, INSIDERS, HOLDERS OF PERFORMANCE SHARES OR ESCROW
SECURITIES, AS A GROUP, REPRESENTING 40.16% OF THE 11,235,196 THEN ISSUED AND
OUTSTANDING SHARES. SEE ITEM 12 DIRECTORS AND OFFICERS.
Agent
Bolder Investment Partners, Ltd.
800 1450 Creekside Drive
Vancouver, B.C. V6J 5B3
Tel: (604) 714-2300 Fax: (604) 714-2301

TABLE OF CONTENTS
Item

Heading

Page No.

NOTE REGARDING FORWARD LOOKING STATEMENTS...................................................................................i

1.
CORPORATE STRUCTURE .........................................................................................................................1
1.1
Name and Incorporation....................................................................................................................1
1.2
Intercorporate Relationships .............................................................................................................1
2.
GENERAL DEVELOPMENT OF BUSINESS ..............................................................................................1
2.1
Three Year History............................................................................................................................1
2.2
Significant Acquisitions and Significant Dispositions.......................................................................2
3.
NARRATIVE DESCRIPTION OF THE BUSINESS.....................................................................................2
3.1
General..............................................................................................................................................2
3.2
Description of Mineral Properties .....................................................................................................3
4.
USE OF PROCEEDS....................................................................................................................................32
4.1
Proceeds ..........................................................................................................................................32
4.2
Funds Available ..............................................................................................................................32
4.3
Principal Purposes...........................................................................................................................32
5.
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND MANAGEMENT'S
DISCUSSION AND ANALYSIS .................................................................................................................33
5.1
Annual Information .........................................................................................................................33
5.2
Dividends ........................................................................................................................................34
5.3
Managements Discussion and Analysis .........................................................................................34
6.
DESCRIPTION OF THE SECURITIES DISTRIBUTED ...........................................................................44
6.1
Shares..............................................................................................................................................44
6.2
Agents Warrants ............................................................................................................................45
6.3
Modification of Terms ....................................................................................................................45
7.
CONSOLIDATED CAPITALIZATION ......................................................................................................45
8.
OPTIONS TO PURCHASE SECURITIES ..................................................................................................45
9.
PRIOR SALES ..............................................................................................................................................46
10.
ESCROWED SECURITIES .........................................................................................................................47
11.
PRINCIPAL SHAREHOLDERS ..................................................................................................................48
12.
DIRECTORS AND OFFICERS....................................................................................................................48
12.1
Name, Address, Occupation and Security Holding .........................................................................48
12.2
Corporate Cease Trade Orders or Bankruptcies..............................................................................49
12.3
Penalties or Sanctions .....................................................................................................................50
12.4
Individual Bankruptcies ..................................................................................................................50
12.5
Conflicts of Interest.........................................................................................................................50
12.6
Management of the Company..........................................................................................................50
13.
EXECUTIVE COMPENSATION ................................................................................................................51
14.
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS........................................................53
15.
PLAN OF DISTRIBUTION .........................................................................................................................53
15.1
Name of Agent ................................................................................................................................53
15.2
Disclosure of Market Out................................................................................................................53
15.3
Commercially Reasonable Efforts Offering ....................................................................................53
15.4
Listing Application..........................................................................................................................54
15.5
Determination of Price ....................................................................................................................54
16.
RISK FACTORS...........................................................................................................................................54
17.
PROMOTERS...............................................................................................................................................61
18.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS.............................61
19.
AUDITORS, TRANSFER AGENTS AND REGISTRARS .........................................................................62
19.1
Auditors...........................................................................................................................................62
19.2
Transfer Agent and Registrar ..........................................................................................................62
20.
MATERIAL CONTRACTS..........................................................................................................................62
21.
EXPERTS .....................................................................................................................................................63
21.1
Interest of Experts ...........................................................................................................................63

ii

22.
23.
24.

OTHER MATERIAL FACTS.......................................................................................................................63

PURCHASERS STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION ................................63
FINANCIAL STATEMENTS.......................................................................................................................63
AUDITED FINANCIAL STATEMENTS FOR THE PERIOD FROM THE DATE OF
INCORPORATION TO FEBRUARY 29, 2004 AND FOR THE YEAR ENDED FEBRUARY 28,
2005 TOGETHER WITH THE AUDITOR'S REPORT THEREON
UNAUDITED FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED AUGUST 31,
2005
CERTIFICATE OF THE DIRECTORS AND PROMOTERS OF THE COMPANY
CERTIFICATE OF THE AGENT

NOTE REGARDING FORWARD LOOKING STATEMENTS

This Prospectus contains forward-looking statements which reflects managements expectations regarding the
Companys future growth, results of operations, performance and business prospects and opportunities. Wherever
possible, words such as anticipate, believe, plan, expect, intend and similar expressions have been used to
identify these forward-looking statements. These statements reflect managements current beliefs and are based on
information currently available to management. Forward-looking statements involve significant risks and
uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the
forward-looking statements, including those listed in the Risk Factors section of this Prospectus. Although the
forward-looking statements contained in this Prospectus are based upon what management believes to be reasonable
assumptions, the Company cannot assure prospective purchasers that actual results will be consistent with these
forward-looking statements. These forward-looking statements are made as of the date of this Prospectus, and the
Company assumes no obligation to update or revise them to reflect new events or circumstances.

PROSPECTUS SUMMARY
The following is a summary of the principal features of this distribution and should be read together with the more
detailed information and financial data and statements contained elsewhere in this Prospectus. Capitalized terms
used in this summary are defined elsewhere in the Prospectus.
The Company
Condor Resources Inc. was incorporated on November 26, 2003 under the Company Act (British
Columbia). The Company is engaged primarily in the business of evaluating, acquiring and exploring natural
resource properties in Chile. See item 3 Narrative Description of the Business. The natural resources being
targeted are copper and gold.
Principal Properties
Since incorporation, the Company has acquired five properties totalling 164 sq km (16,400 hectares or
40,525 acres). All of the properties were acquired by staking and are 100% owned by the Companys 99% owned
Chilean limited liability partnership, with no underlying royalties.
All of the Companys presently held mineral properties are situated in Chile. However, the Company may
seek to acquire interests in other countries in the Americas.
The Offering
Offering:

5,000,000 Shares.

Price:

$0.40 per Share. See item 15 Plan of Distribution.

This Prospectus also qualifies the grant of the Agent's Warrants and the
Corporate Finance Fee. See item 15 Plan of Distribution.

Gross Proceeds:

$2,000,000

Available Funds:

The estimated net proceeds to be derived from the sale of the securities offered
hereunder, before deduction of the expenses of this issue, will be $1,840,000,
which when added to the Companys working capital deficit as at September
30, 2005 of approximately $20,000, will total $1,820,000.
The Company will apply the available funds as follows:
Amount (1)

Purpose for which funds are raised

1.

2.

3.

Exploration Programs:
Escudo Project IP Surveying
Escudo Project Drilling Program
Corona Project - Mapping, prospecting, sampling

153,375
956,250
57,500

Administration expenses in the amount of

$21,000 per month for the Company over a
period of 12 months

252,000

Estimated expenses of this issue (including

legal, audit, printing and listing fees) (est.)

80,000

ii

6.

To pay agents selling expenses (est.)

7.

Unallocated working capital to fund ongoing

operations

Total:

10,000

310,875
$ 1,820,000

See item 4 Use of Proceeds.

Agents Commission
The Company will, at the closing of the Offering (i) pay to the Agent a commission equal to 8% of the
aggregate gross proceeds of the Offering and (ii) issue to the Agent that number of share purchase warrants (the
Agents Warrants) equal in number to 10% of the aggregate number of Shares issued in connection with the
Offering, each such Agents Warrant entitling the holder to acquire one Common Share at the price of $0.40 per
Common Share for a period of 12 months from the date on which the Companys Shares commence trading on the
TSX Venture Exchange. The Company has paid a non-refundable work fee of $10,000 plus GST to the Agent and
will issue 50,000 common shares from treasury to the Agent upon completion of the Offering as the Corporate
Finance Fee.
Risk Factors
The success of the Company's business is subject to a number of factors, including risks normally
encountered in the mining industry such as operating hazards and risks, exploration risks, increasing environmental
regulation, competition with companies having greater resources, lack of operating cash flow, foreign currency
fluctuations and other factors.
All of the Company's properties are in the exploration phase. If the exploration programs being carried out
do not justify further work, the Company may abandon its entire interest in one or more properties and the
exploration expenses will be written off.
None of the Company's properties contains a known body of commercial ore and the Company's planned
work programs will be exploratory in nature.
The price of base and precious metals has fluctuated widely and therefore the economic viability of any of
the Company's properties cannot be accurately predicted. See item 16 Risk Factors.
Key Personnel
Management:

Patrick J. Burns
President, Chief Executive Officer and Director
Graham H. Scott
Corporate Secretary and Director
Lyle Davis
Director
John E. Robins
Director
Paul Larkin
Chief Financial Officer
Messrs. Burns and Robins are professional geologists. Each of these two
persons has had over 20 years' experience in resource exploration in North or
South America.

iii

See item 12 "Directors and Officers".

Financial Statements
The audited financial statements for the period from the date of incorporation (November 26, 2003) to
February 29, 2004 and for the year ended February 28, 2005, together with the auditors report thereon, and
unaudited financial statements for the six-month period ended August 31, 2005 are attached hereto.
Conversion Rates
The conversion rates used throughout this Prospectus have been calculated on the basis of US$1.00 to
Cdn.$0.80. As of the date of this Prospectus, the conversion rate is US$1.00 to Cdn.$0.8435 [Oct.14/05].
Capitalization
At August 31, 2005, the Company had 6,185,196 Shares issued and outstanding. Upon completion of the
Offering, there will be 11,235,196 Shares issued and outstanding, assuming no exercise of the Agent's Warrants.
The authorized capital of the Company is an unlimited number of Shares without par value. 850,000 Shares are
subject to options in favour of the directors, senior officers, consultants and employees of the Company.
See item 8 Options to Purchase Securities.
Selected Financial Information
Prior to this Offering, the Company had raised $496,299 from the sale of its common shares for cash during its stage
as a private company. The audited balance sheet as at February 28, 2005 shows $306,664 as having been invested in
mineral properties as at that date, all of which was paid in connection with the acquisition and exploration of the
Company's Chilean properties.
From the date of incorporation (November 26, 2003) to February 28, 2005, the Company earned no revenue and
incurred general and administrative expenses in the amount of $84,051 being the net loss for the period
resulting in a basic and diluted loss per common share of $0.05 At February 28, 2005, the Company had
assets recorded at $492,677.
The Companys audited financial statements for the period from the date of incorporation (November 26, 2003) to
February 29, 2004 and for the year ended February 28, 2005, together with the auditor's report thereon and unaudited
financial statements for the six-month period ended August 31, 2005 are attached hereto and form a part hereof. See
item 24 Financial Statements.

CONVERSION TABLE
In this prospectus a combination of Imperial and metric measures are used with respect to mineral
properties located in Chile. Conversion rates from Imperial measure to metric and from metric to Imperial are
provided below:
Imperial Measure

Metric Unit

Metric Measure

Imperial Unit

2.47 acres

1 hectare

0.4047 hectares

1 acre

3.28 feet

1 metre

0.3048 metres

1 foot

0.62 miles

1 kilometre

1.609 kilometres

1 mile

0.032 ounces (troy)

1 gram

31.1 grams

1 ounce (troy)

1.102 tons (short)

1 tonne

0.907 tonnes

1 ton

0.029 ounces (troy)/ton

1 gram/tonne

34.28 grams/tonne

1 ounce (troy/ton)

GLOSSARY
Adularia

A moderate to low-temperature mineral of the alkali feldspar

group, a common accessory mineral found in low sulphidation
quartz veins.

Ag

Silver.

Alteration

Changes in the chemical or mineralogical composition of a

rock caused by hot aqueous solutions.

Alunite

A hydrated aluminum potassium sulphate formed by the action

of sulphuric acid-bearing solutions on potassium-rich volcanic
rocks during the oxidation and leaching of metal sulphide
deposits.

Aphanitic

An igneous rock texture in which the grain or crystalline

structure is too fine to be seen by the unaided eye, generally
caused by rapid cooling of extrusive rock.

Argillic

Pertaining to clay or clay minerals. Argillic alteration occurs

when certain minerals in a rock are converted to minerals of
the clay group.

As

Arsenic.

Assay

An analysis to determine the proportions of metals or other

valuable commodities in a sample.

Au

Gold.

Ba

Barium.

Bedrock

Solid rock exposed at the surface of the earth or overlain by

unconsolidated material, weathered rock or soil.

Breccia

A rock composed of angular fragments.

Chalcocite blanket

A copper-rich horizon or secondary enrichment zone often

overlying primary copper deposits in northern Chile. It
commonly forms from the alteration of primary copper
minerals that are attacked above the water table by oxygen and
a chalcocite blanket corresponds to the present or past water
table level.

Epithermal

A hydrothermal, or fluid-borne mineral deposit and associated

alteration formed within about 1 km below the earths surface
and in the temperature range of 50 to 200 C, occurring
mainly as veins.

Float

Isolated or displaced fragments of rock.

g/t

Grams per tonne, equivalent to parts per million.

ii

GPS

Geographic Positioning System. A relatively accurate method

of calculating position on the earths surface utilizing satellite
signals.

ICP

Inductively Coupled Plasma Method.

A geochemical
analytical method where a sample solution is induced into the
core of an inductively coupled argon plasma.

IOCG

Iron oxide-copper-gold, a type of gold deposit.

Igneous rock

A rock solidified from molten or partly molten material

(magma), one of the three main classes of earth-forming rocks.

IP geophysical survey

Induced Polarization. A type of ground geophysical survey

used to explore for sulphide deposits, that can be effective
with veins.

Low Sulphidation

A classification of hydrothermal mineral deposits or alteration

containing relatively low content of sulphur-rich minerals,
often used to describe mineral deposits of quartz-adularia
association.

Mineralization

The presence of minerals of possible economic value and also

the process by which concentration of economic minerals
occurs.

mt

metric tonne

Ore

A mineral or aggregate of minerals which can be commercially

mined at a profit.

Outcrop

A geological formation or structure that appears at the surface

of the earth; bedrock that is not covered.

Pedimento

A mineral exploration concession or claim, generally of 2years duration.

Porphyry

Igneous rock composed of large crystals, called phenocrysts,

in a fine grained matrix.

Propylitic

A low-pressure-temperature alteration around many orebodies.

Generally consists of epidote, chlorite and magnesium-ironcalcium carbonates, involved in the partial replacement of
wall-rock minerals.

QFP

Quartz-Feldspar porphyry.

Qualified Person

An individual who (a) is an engineer or geoscientist with at

least five years of experience in mineral exploration, mine
development or operation or mineral project assessment, or
any combination of these; (b) has experience relevant to the
subject matter of the mineral project and the technical report;
and (c) is a member in good standing of a professional
association as defined in National Instrument 43-101, s. 1.2.

iii

Quartz

A common earth-forming mineral composed of silica and

oxygen.

REE

Rare earth elements.

Resistivity

Electrical resistivity, one of the readings measured by an IP

geophysical technique.

Rhyolite

A type of igneous rock which commonly contains quartz and

potassium feldspar crystals.

Sb

Antimony.

Sericitic

A fine-grained variety of muscovite mica (aluminumpotassium silicate) often associated as an alteration product
related to porphyry copper deposits.

Sulphides

A class of minerals composed of one or more metals and

sulphur such as pyrite, sphalerite and galena.

Tuff

A general term for all consolidated pyroclastic volcanic rocks.

UTM

Universal Transverse Mercator, a map projection allowing for

the precise location of points by coordinates.

Vein

A mineral deposit formed as hot fluids pass through fractures

in rock. The hot fluid may contain dissolved minerals which
may pass out of solution and are deposited, filling or partly
filling the fractures, forming veins.

Volcanic rock

A finely crystalline or glassy igneous rock resulting from

volcanic action at or near the earths surface, either ejected
explosively, i.e. pyroclastic, or extruded as lava.

1.

CORPORATE STRUCTURE

1.1

Name and Incorporation

Condor Resources Inc. (the Company") was incorporated on November 26, 2003 under the name Scotia
Gold Resources Inc. pursuant to the Company Act (British Columbia). The Company changed its name to Condor
Resources Inc. on March 17, 2004. On November 29, 2004, the Company filed Notice of Articles under the
Business Corporations Act (British Columbia).
The head office of the Company is situated at:
Suite 910 885 Dunsmuir Street
Vancouver, B.C. V6C 1N5
Canada
The Companys field office in Chile is situated at:
Travesia de la Plaza No. 03007
Depto. No. 301, Jardines del Sur
Antofagasta
Chile
and its registered and records office is situated at:
1040-999 West Hastings Street
Vancouver, B.C. V6C 2W2
Canada
1.2

Intercorporate Relationships

The Company formed Minera Condor Limitada (the Chilean Subsidiary), a limited liability partnership
owned as to 99.99% by the Company and as to 0.01% by Patrick J. Burns, to act as its operating arm for interests in
Chile. The Chilean Subsidiarys principal office is located at Miraflores 222, Piso 24, 8320198 Santiago, Chile. All
of the Companys Chilean properties are 100% owned directly by the Chilean Subsidiary.
The interests of the Company and the Chilean Subsidiary are reflected in this Prospectus on a consolidated
basis.
2.

GENERAL DEVELOPMENT OF BUSINESS

2.1

Three Year History

The Company commenced operations in 2003. The principal business of the Company is the acquisition,
exploration and, if warranted, development of natural resource properties of merit, with a focus on Chile. The
Company has interests in five exploration properties situated in Chile.
In late 2003, the founders of the Company began to acquire mineral properties in Chile, with the intention
of transferring the ownership of the properties to a corporate entity. The beneficial interests in the five properties
were transferred to the Companys Chilean Subsidiary in September 2004.
The Company intends to seek and acquire additional properties worthy of exploration and development in
Chile and elsewhere in the Americas.

2.2

Significant Acquisitions and Significant Dispositions

By agreement dated September 22, 2004 (the Purchase Agreement) made between Patrick J. Burns
(Burns) and Jimmy E. Toler (Toler) (collectively, the Vendor) and the Company, the Company acquired a
100% interest in and to certain mining interests located in Chile in consideration of the payment of US$35,000 in
cash to Toler and the issuance to the Vendor (Burns as to 3,000,000 Shares and Toler as to 1,000,000 Shares) of an
aggregate of 4,000,000 Shares at a deemed price of $0.01 per Share. On January 31, 2005, the Company issued to
Toler an additional 200,000 Shares in full and final payment of the US$35,000 payable to him under the Purchase
Agreement.
The mining interests acquired by the Company pursuant to the Purchase Agreement comprise the Escudo
Property, the Corona Property, the Cristal Property, the Royal Property and the Becker Property. Of these, the
Escudo and the Corona Properties are the most significant. All of the properties were staked by the Vendor. As of
the date of this Prospectus, a 100% interest in each of the five properties is held by the Companys Chilean
Subsidiary.
The Escudo Property is comprised of 33 contiguous claims (Escudo 1 33) covering a total of 98 square
kilometres. It is located in the high Atacama Desert, some 245 kilometres southeast of Antofagasta near the southern
limit of Chiles Second Region. The claims extend from 25 27 to 34 south latitude and from 69 05 to 12 west
longitude.
The Corona Property is comprised of six claims or pedimentos, each measuring one kilometre by three
kilometres for a total of 18 square kilometres. They are named Corona I to Corona VI. Five of the claims are
contiguous, and the sixth lies three kilometres to the south. The property is located approximately 270 kilometres
north of Santiago and 10 kilometres north and west of the town of Combarbala, in Chiles Region IV. It lies between
31 2 and 31 10 south latitude and between 71 4 and 71 7 west longitude.
The Cristal Property comprises 10 contiguous claims, Cristal I to X, totalling 28 square kilometres in
Chiles Region 1, and approximately 70 kilometres NNE of the port city of Arica.
The Royal Property consists of five contiguous claims, Royal I through V, covering 15 square kilometres,
and located approximately 346 kilometres south of Santiago, and northwest of the town of Parral in Chiles Region
VII.
The Becker Property comprises two contiguous claims, Becker I and II, totalling 6 square kilometres and
located west of the city of Talca, also in southern Chiles Region VII, some 258 kilometres south of Santiago.
Standard reporting requirements and holding payments must be completed to maintain the properties in
good standing, as required by the provincial Department of Mines. The aggregate annual costs to maintain the five
Chilean properties in good standing, comprising the holding costs and the rental of the surface rights, is
approximately US$28,000.
The mineral properties located in Chile comprise the only assets held by the Company.
3.

NARRATIVE DESCRIPTION OF THE BUSINESS

3.1

General

The Company is a resource exploration company. Using the net proceeds of the Offering, the Company
intends to carry out grass-roots exploration for gold and copper properties in Chile, and to advance such properties
through further exploration in order to bring the properties to a stage where the Company can attract the participation
of a major resource company which has the expertise and financial capability to take such properties to commercial
production.

Land Ownership Rights

Chile enacted legal provisions in the 1980 constitution to stimulate the development of mining, while at the
same time guaranteeing the property rights of both local and foreign investors. While the state owns all mineral
resources, exploration and exploitation of these resources is allowed via mining concessions, which are granted by
the courts. A Constitutional Organic Law, enacted in 1982, places both rights and obligations on concessions; these
can be mortgaged or transferred and the holder is entitled to the right to explore (pedimentos) as well as to exploit
(mensuras). A concession is obtained by filing a claim and includes all minerals that may occur within its area. The
concession holder also has the right to defend his ownership against the state and third parties.
Mining claims in Chile are acquired in the following manner:

Pedimento: A pedimento is an exploration claim precisely defined by UTM coordinates with

north-south and east-west boundaries. These may range in size from a minimum 100 hectares to a
maximum of 5000 hectares, with a maximum length-to-width ratio of 5:1. A pedimento is valid for
a maximum period of 2 years, following which the claim may be reduced in size by at least 50%,
and renewed for an additional 2 years, provided that no overlying claim has been staked. Claim
taxes are due annually in March; if the taxes on a pedimento are not paid, the claim can be restored
to good standing by paying double the annual claim tax by or before the following year. In Chile,
new pedimentos are permitted to overlap pre-existing claims, however, the previously staked or
underlying claim always takes precedence as long as the claim holder maintains his claim in good
standing and converts the pedimento to a manifestacion within the initial 2-year period.

Manifestacion: During the 2-year life of a pedimento, it may be converted at any time to a
manifestacion. Once this is filed, the claim holder has 220 days to file a Solicitud de Mensura, or
Request for Survey with the court of jurisdiction, and advising surrounding claim holders by
publishing such request in the Official Mining Bulletin. This advises surrounding claim holders,
who may contest the claim if they believe their pre-established rights are being encroached upon.
The option also exists to file a manifestacion directly on open ground, without going through the
pedimento filing process.

Mensura: The claim must be surveyed by a government-licensed surveyor within 9 months of the
approval of the Request for Survey. Once surveyed, during which time any surrounding claim
owners may be present, the survey documents are presented to the court and reviewed by
SERNAGEOMIN, the National Mining Service. Assuming that everything has been done correctly
and is in order, the court adjudicates the application as a permanent property right (a mensura), the
equivalent to a patented claim.

Each of the above stages of claim acquisition in Chile require the completion of several steps (application,
publication, inscription payments, notarization, tax payments, legal fees, patente payments, extract publication,
etc) prior to the application being declared by the court as a new mineral property. Details of the full requirements in
the claim-staking process are documented in Chiles mining code. Most companies working in Chile retain a mining
claim specialist to carry out and review the claim staking process and ensure that their land position is kept secure.
3.2

Description of Mineral Properties

A.

Escudo Property, Region II, Chile

The Company engaged Richard Culbert, Ph.D., P. Eng., of Gibsons, B.C., to undertake a review of the
Escudo Project, which is material to the proposed Offering. Dr. Culbert is at arms length to the Company. The
Company is satisfied that Dr. Culbert is a Qualified Person as required under the terms of National Instrument 43101.

The Company's interest in the Escudo Property is the subject of a report (the Escudo Report), dated October 14,
2004, prepared by Dr. Culbert. Dr. Culbert confirms that the discussions set out herein under the headings Property
Description and Location, Accessibility, Climate, Local Resources, Infrastructure and Physiography, Prospecting
History, Geological Setting, Deposit Types, Exploration, Sampling Method and Approach, Sample
Preparation, Analysis and Security, Adjacent Properties, Interpretations and Conclusions, and
Recommendations are extracted from, or are accurate paraphrasings of, sections of the Escudo Report. The Escudo
Report is available for review under the Corporations profile on the SEDAR database at www.sedar.com. The
exploration activities carried out by the Company were directly supervised by Dr. Culbert.
Summary
The Escudo Property constitutes a contiguous claim block of 98 square kilometres. It is located in the high
Atacama Desert of northern Chile, some 245 kilometres southeast of the city of Antofagasta. The claims cover a
basin marking the intersection between the Culampaja Lineament and a branch of the West Fissure fracture belt,
along which most of the world-class copper porphyry deposits of Chile are situated.
Atacaman porphyry deposits are typically leached to a depth of 200-300 metres, with much of the copper so
mobilized forming a chalcocite blanket at depth, which is a major factor in their economic importance. Because of
this leaching, and of the detrital overburden which covers most of the basin, neither geological nor geochemical
surveys are of much use here. The primary method of searching for this style of mineralization is with deep-probing
induced polarization (IP) geophysics, which can map the approximate distribution of disseminated sulphides at depth
(with some caveats). These surveys cannot differentiate pyrite from copper sulphides, but in the trajectory of the
West Fissure belt, there is a good chance of copper being an important constituent of porphyry style mineralization.
Four lines of IP-resistivity survey were run across the Escudo Property by Quantec Geofisica Ltda. of
Antofagasta. This revealed a classical IP anomaly at an appropriate depth, measuring 4 to 6 kilometres in width and
at least 5.5 kilometres in length. A report by Quantecs chief geophysicist in Chile, comparing this anomaly to those
over the Collahuasi deposits prior to mining, has shown a similarity in size and other important characteristics.
Historically, all large IP anomalies associated with the West Fissure have been drilled, and there is no doubt
that the anomaly on the Escudo Property is a viable drill target. A two phase program is recommended, the first
being further IP geophysics to better define drill targets, and the second a fairly large drill program, as the actual
copper-rich core in porphyry systems tends to entail a relatively small and sometimes elusive part of the huge
geophysical anomalies.
Atacaman copper porphyries are not easy targets, their size and depth resulting in expensive exploration
programs, commensurate with the potential rewards. A program of further geophysical surveys is recommended,
followed by approximately twenty deep, reverse circulation drill holes. The cost of this program is estimated to be
slightly under $US 900,000.

69

70

Figure 1

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AMERICA

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C H I L E

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68

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ARGENTINA
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Copiapo

CONDOR RESOURCES INC.

ESCUDO PROPERTY
CHILE

Kilometres
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LOCATION MAP AND

FEATURES MENTIONED IN TEXT
Date: Aug, 2004

Figure No.

Property Description and Location

The Escudo Property is comprised of 33 contiguous claims (Escudo 1-33) covering a total of 98 square
kilometres. It is located in the high Atacama Desert, some 245 kilometres southeast of Antofagasta near the southern
limit of Chiles Second Region. The claims extend from 25 deg. 27 to 34 south latitude and from 69 deg. 05 to
12 west in longitude. (see Figure 1).
Accessibility, Climate, Local Resources, Infrastructure and Physiography
The Escudo Property is reached via a road which leaves the Pan American Highway 15 kilometres north of
Agua Verde and about 210 kilometres south of Antofagasta. The road is marked Aguas Calientes at the turnoff, and
is unpaved but in moderately good condition. This is followed for about 76 kilometres, at which point jeep tracks
south lead to the northern property boundary in 5 kilometres. All of the central basin and most other parts of the
claim block can be reached by an appropriate four-wheel drive vehicle.
Elevations within the property run from 3,500 metres to over 4,000 metres, so that most people will require
some acclimatization before doing strenuous work. This elevation also ensures that the area is generally cold and
often windy, with temperatures typically falling below freezing at night. It is also very dry, although some light
snowfalls may be expected in winter due to the proximity to high mountains on the east.

Due to the aridity and elevation, vegetation is limited to scattered tufts of poa grass and a few small shrubs
along washes. The vicuna, a cameloid of the high Andes, is the only animal larger than small rodents and foxes that
are likely to be encountered. There is a spring in the North Chaco wash to northwest of the claims, which would
suffice for purposes of camping and perhaps drilling. A major mining operation would need to look eastward for
larger water supplies, but this location is more fortunate than most Atacaman sites in having salars and open lakes
near Campamento Plato de Sopa about 30 kilometres to the east.
Gasoline and diesel (but little else) is available from the above-mentioned Aqua Verde site on the Pan
American Highway. The coastal town of Taltal, 80 kilometres farther to the south, can supply food and some other
services, but Antafogasta would be the natural base for operations, being a fully equipped city based on mining.
Prospecting History
Neither the Company nor Dr. Culbert is aware of any previous exploration on the Escudo Property. There
are no signs of drilling or of a previous induced polarization survey, and it seems unlikely that other methods would
be used to seriously explore for a porphyry deposit in an Atacaman basin.
Geological Setting
The important porphyry deposits of northern Chile lie within a zone of some 30 to 50 kilometres width that
is marked by a mega-fracture which is usually referred to as the West Fissure, although also called the Domeyko
Fault System, especially in Chilean literature. This complex fault zone extends from at least 19 to 28 degrees of
south latitude, although many authors extend it northward into southern Peru as well as farther to the south. Some of
the worlds most important copper deposits lie on this line, including Chuquicamata, Collahuasi, Escondida and El
Salvador.
The origin and history of the West Fissure and its varied movements are still a subject of some debate, but it
has certainly been active since the Eocene, and may possibly date back to the late Paleozoic. Further discussion of
this fracture and its relationship to major copper porphyry deposits maybe found in Camus, 2003; Richards, 2003
and Sillitoe, 1989, among many others.
The West Fissure is not a single fault line, but rather a complex belt of fracturing with several splays. It
also intersects some major northwest trending fractures, and such intersections appear to have played an important
role in localization of some of the larger copper porphyry deposits (for example, Richards et al, 2001). Although
Chuquicamata has been sliced by a strand of the West Fissure itself, other major deposits appear to be more directly
associated with splays or secondary structures.
South of the Escondida Deposit, the West Fissure belt is split by a narrow line of hills known as the
Cordillera Domeyko. The main part of the belt runs to the west of this range, forming a regional depression known
as the Central Valley (Depresion Intermiedia), and most of the exploration carried out in this sector of the West
Fissure has been along that trend. The branch to the east of the Domeyko Range passes southward through the valley
of the Rio Frio and is evident in the Escudo Property as a prominent north-northeast trending fault complex. From
geology maps, satellite photos and previous geophysical surveys in this region, that particular fracture system
appears to be continuous from Escudo southward to the Exploradora Deposit (Jordan, 2004).
The Escudo Property is located where this fault zone meets a major component of the Culampaja
Lineament, which is one of the more important of the northwest trending structures, and seems to extend from the
vicinity of the Baja de Alumbrera copper porphyry deposit in Argentina to the Guanaco gold mining camp to west of
the Cordillera Domeyko (Richards et al, 2001, Richards 2003).
Descriptive interpretation is complicated by the fact that just north of the latitude of the Escudo property,
the Domeyko Range abruptly terminates, and the trace of the West Fissure through the area south of this is not clear.
The Military Geographic Institute, which is responsible for topographic maps and their nomenclature, have further
confused the situation by showing the Cordillera Domeyko as being offset here some 10 km. to the east, to form part

of the main Andes chain. This actually puts it to the east of the Escudo Property. There is no such offset in the
geology, however, and the two Domeyko segments should not be confused.
Structural elements in the area include two principal lineaments. One of these runs almost east-west
along the north fork of Chaco Wash, which lies immediately north of the Escudo Property. The second runs from
this southward through the property itself. Satellite photographs further suggest a prominent east-west lineament
crossing the property, presumably related to the Chaco line to the north (see Figure 2). The three principal structural
orientations are nicely revealed in an outcrop of resistant Paleozoic rhyolites which breaks through the detritus in an
eastern arm of the basin (sample site 5, Figure 2). There are three clear directions of fracturing, with discontinuous
quartz veinlets. One of these is southwest (Culampaja parallel), a second is north-south (The West Fissure trend)
and the third runs at about 80 degrees, sub-parallel to the Chaco and air photo lineaments.

Figure 2

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STRUCTURES
A. Principal trace of the Culampaja Lineament
B. Major NNE Fracture, visible in geophysics and satellite photos.
Regional, likely related to West Fissure
C. Chaco E-W, Lineament
D. Chaco parallel lineament, visible in satellite photos

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ESCUDO PROPERTY, CHILE

La Table Formation rhyolites

8 ESC8 Sample site

5 ESC5 Outcrop sample site
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Kilometres

LIMITED GEOLOGY AND

SAMPLE SITES

Date: Aug, 2004

Figure No.

Figure 3

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ESCUDO PROPERTY, CHILE

INDUCED POLARIZATION SUMMARY

Polarizability at depth
> 2.0
> 3.0

Decoupled Inversion, Plan View

0

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Kilometres

Based on survey by Quantec Geofisica Ltda.

Date: Aug, 2004

Figure No.

10

Figure 4

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LOW RESISTIVITY FEATURES

LEGEND

FROM INVERTED DATA

IP LINES
0

2
Kilometres

Based on survey by Quantec Geofisica Ltda.

Date: Aug, 2004

Figure No.

In conclusion, the Escudo Property covers a basin which appears to be a nexus of structural complexity,
related to an important eastern component of the West Fissure fracture belt. It is generally agreed that complex

11

fracturing is important with regard to structural preparation in the localization of porphyry deposits (Cornejo et al,
1997; Richards et al, 2001).
Most of the rocks surrounding the central basin are members of the Jurassic Profeta Formation comprised of
limestones and limy shales and sandstones, with beds of siliceous tuffs. Those seen in the field were notably fissile,
and aragonite veining was observed. The other important lithology here is the Paleozoic La Table Formation
dominated by rhyolites. This occurs mainly on the eastern side of the property, forming Cerro Amarillo and terrain
to the south thereof. Outcrops in the vicinity of sample sites 8 to 10 (see Figure 2) exhibited sulphide cavities,
brecciation and resilicification, hematite staining and minor quartz veining. The eastern contact of the La Tabla
rhyolites is mapped as a thrust fault.
On the northern edge of the property, a thin layer of platy ignimbrites may be seen to unconformably overly
the Jurassic strata. These were not observed in other marginal outcrops, but may have been preserved in the main
basin. The detritus covering this basin is largely volcanic debris from the Mt. Chaco stratovolcano, which rises to
over 5000 metres to east-northeast of the property. Around the basin margins, however, there is also a surprising
amount and variety of epithermal silica float, some composites of which were sampled for precious metals.
Deposit Types
The porphyry copper deposits of the Atacama Desert are among the most important of the world, and need
little in the way of introduction. In 2001, the Journal Economic Geology devoted Volume 96 to this subject, and an
even more recent source is a book on Chilean copper porphyries published by the Chilean Geology and Mining
Service (Camus, 2003).
Very briefly, the porphyry deposits are thought to result from emanations at the end of a magmatic phase,
and in this area are likely to date from the late Eocene or early Oligocene. In a typical porphyry, alteration zones
occur outward in annular fashion from a potassic core through combinations of argillic, sericitic and propylitic
alterations, which are often modified by structure, by host lithologies or by multiple phases of mineralization. Deep
leaching of the Atacama porphyries has removed virtually all metallic minerals from surface outcrops, focusing
importance on interpretation of alterations and relict mineral castings in a highly weathered environment. In the case
of the Escudo property, however, outcrops over the area of geophysical anomalies are extremely limited in any case.
This deep leaching is one of the more distinctive and economically important characteristics of the copper
porphyry deposits of the Atacama Desert, thought to be the result of climatic conditions around the early Miocene.
While this has made them difficult to detect, and leads to costly initial stripping, it is the resulting secondary
enrichment blankets, dominantly of chalcocite, which have made them such valuable targets. Although variable in
depth, this mineralization typically begins two to three hundred metres below the present surface, and may be deeper
in areas detrital accumulation.
Exploration
In view of the depth of leaching and overburden, an induced polarization survey is the only serious option
for detecting disseminated mineralization at depth. Given the poor conductivity of the surficial layers in the Atacama
Desert, this is not a simple task. The soils must be soaked with water for suitable contacts, and considerable currents
and electrode spacings must be employed for the required deep response patterns.
Four lines of induced polarization and resistivity measurements (totalling 43.2 km.) were run in an east-west
direction across the main body of the Escudo Property by Quantec Geophysica Limitada. The resulting report, by
their senior geophysicist Joe Jordan, was submitted in April, 2004.
The lines were laid out using a combination of chaining and GPS (Provisional South America 1956 Datum).
A Zonge GDP-16 receiver was employed with a 30 kWatt generator and a base 0.25 Hz. frequency domain signal.
A dipole spacing of 300 metres was used, expanded through six separations. Two truckloads (about 16 thousand

12

liters) of water were required to produce appropriate electrical contact in the dry soils, and satisfactory amperages
were achieved.
The instrument used automatically removes electromagnetic coupling effects, using higher harmonic
frequencies. This allows the operator to monitor repeatability of the results while in the field. To pass from the raw,
decoupled data to cross-sections of resistivity and chargeability, a mathematical procedure known as inversion must
be applied. There are, however, no unique solutions, and it should be kept in mind that a great number of possible
chargeabilityconductivity distributions will yield any given set of measurements. The computer program used is
from the University of British Columbia Geophysical Inversion Facility, which seeks a solution with the simplest
structure in two dimensions.
Sampling Method and Approach
Eleven rock chip samples were taken during the property examination. Most of these were of hydrothermal
alteration products, and were taken mainly to test for precious metals. Although vein deposits are often found
peripheral to copper porphyries, this sampling should not be viewed as part of the evaluation of Escudo as a possible
porphyry target.
Sample Preparation, Analysis and Security
All samples were taken by Dr. Culbert and delivered by him to the ALS-Chemex Laboratory in Antofagasta.
Here they were crushed, and following an aqua regia extraction, gold was measured by induction coupled plasma-mass spectrometer (ICPMS) and 30 other elements by conventional ICPAES. The laboratory uses both standards
and blank samples for control. Sample descriptions and pertinent analyses are given in Appendix III to the Escudo
Report.
Adjacent Properties
The Escudo Property lies in the segment of the Chilean Copper Belt between the Escondida and El Salvador
Deposits. Just 50 kilometres south-southwest of the property is the Exploradora copper porphyry, which has been
drilled and is being held by the Chilean Government under CODELCO. Reserves have not been released, but it is
reported to be in excess of 100 million tons. There are also a number of precious metal deposits and prospects in the
area (Boric et al, 1990; Multinational Andean Project, 2001), the most prominent of which is the Vaquillas silver
mine (now closed) to the west northwest.
With respect to immediately adjacent ground, the Chilean subsidiary of Phelps Dodge Corporation holds
the territory on the south, and since the time of staking of Escudo, BHP- Billiton has taken the ground to both east
and north. There is also a large holding of CODELCO to the northeast.
Interpretations and Conclusions
The three-point decoupled inversions profiles (effectively chargeability cross sections) are shown with the
abbreviated geophysical report of Appendix I to the Escudo Report. All four lines show a strong anomaly of roughly
6.5 km width, starting at a depth of 300 to 400 metres. The southernmost line also shows a second anomaly at its
east end, which appears to be smaller (1.5 km.) but may continue beyond the survey line. A summary of the IP
anomalies at depth is shown in Figure 3, and the resistivity features located in Figure 4.
The lines have been run in two pairs, with the northern pair separated by 1.5 km. and the southern by 1.0
km. Between these pairs there is a 3.0 km. space, which makes it difficult to trace structures in plan view with any
certainty. It would appear, however, that the anomaly extends north-south over the full 5.5 km. distance between the
outermost lines. The anomaly does appear to be reduced on its western side in the southernmost line, although this
line itself extends two kilometres less in that direction.

13

These geophysical anomalies are fully compatible with a large porphyry deposit which has been leached to
depth. In the centre two lines there is even a central core to the anomaly of slightly reduced chargeability, which
might correspond to a central potassic alteration zone, and one line shows a kilometre wide anomaly above this core,
which might be interpreted as secondary enrichment. This pattern has, in fact, been observed in other copper
porphyry deposits. Jordan (2004) has analysed the similarities of this response to those from the 200 line kilometres
of IP surveys over the deposits of the Collahuasi camp, their data having been released. Some of the similarities are
striking. The abstract and summary of that report are given in Appendix II to the Escudo Report.
There are, however, other interpretations which must be kept in mind. There is some possibility that the
polarizability is due to some lithology other than a porphyry. The most likely culprit in this region would be pyritic
black shales, but in that case the zones of chargeability and low conductivity should match, which they do not. Large
zones of epithermal alteration are known to be associated with fractures in this general region, and host some
important precious metal deposits. The 300-400 metre geophysically barren zone above the anomalies may represent
leaching of sulphides for secondary enrichment, or it may be some lithology which prevented leaching. And finally,
even if the geophysical anomaly is the result of porphyry mineralization, it is not necessarily with economic copper
grades.
Some information is also available in the conductivity data. The low resistivity anomaly which occupies
much of the northern two lines is best interpreted as a wide band of multiple faults, running in a north northeast
direction. This apparently locates a regional fault system which has been encountered in other geophysical surveys,
is visible in satellite photos, and was observed by Dr. Culbert in the field in the form of abruptly upturned strata
where exposed by wash gullies. As discussed above, the geophysical report suggests that this corresponds to the
splay of the West Fissure running down the east side of the Domeyko Range. The structures may appear to fade out
at depth in the resistivity profiles, but this is due to rapidly decreasing resolution of structural detail downward. The
other intriguing feature on the resistivity sections, is an isolated, highly conductive channel which appears in all four
lines. It is quite large, being roughly a kilometre wide and half that in vertical extent. On the northern lines, it runs
above the eastern part of the polarization anomaly, and on the southern lines it coincides with the previously
mentioned anomaly above the central core. It might be simply a buried channel carrying saline (conductive) waters.
It might also be connected in some way with secondary enrichment. A third possibility is that it might be one of the
exotic copper channels such as the Turquesa deposit adjacent to El Salvador, in which heap-leachable copper
minerals have been deposited in paleo-channels draining weathering copper porphyries (Munchmeyer, 1996). Field
examinations over this anomaly showed no physical features, but there appeared to be an unusual amount of argillic
alteration in the nearby surface float.
To sum up the results of the geophysical survey, they are exactly what is to be expected over a large, buried
and deeply leached porphyry copper deposit in the Atacama Desert, although as always, there are other possible
interpretations.
The sample composites taken did not yield significant precious metal values, the most prominent anomalies
being in antimony. These are presented in Appendix III to the Escudo Report, but are not relevant to evaluation of
the property as a porphyry copper target.
Recommendations
Historically, all induced polarization anomalies of significant size associated with the West Fissure fracture
belt have been drilled, and there is no doubt that Escudo is a viable drill target. It must be realized, however, that
while the geophysical anomalies associated with porphyry deposits may be large, the zone of economic copper
concentration tends to be relatively small (typically one square kilometre) and often elusive. Hence it will be
necessary to plan for a program of at least 20 drill holes, and to gather as much information in advance as possible in
terms of further geophysical surveys.
A two-phase program of exploration is therefore recommended. The first being to complete testing of the
property with induced polarization, and the second being drilling. While it is customary to specify that the second
phase is dependent on the results of the first, in this case it is difficult to see how drilling would not be

14

recommendable in view of the present data, and the geophysics is viewed more as a method of determining the best
placement of drill holes.
Recommended IP Surveys
It is recommended that induced polarization surveying of the property be completed at a line spacing of
roughly a kilometre. This would include
Line 7185 North
Line 7181
Line 7180
Line 7177
Line 7176
Line 7175
Line 7174
TOTAL

9 km
12 km
12 km
9 km
9 km
6 km
6 km
63 line kilometres.

With some leeway for mobilization, etc., the cost for the Zonge instrument survey is US$900 per kilometre
or US$56,700.
In addition to the Zonge, there is a Titan instrument available. This does 5 km. arrays with 25 electrodes at
each setting, giving greater depth penetration, better detail, and additionally collects magneto-telluric data at night.
At a price (including mobilization) of roughly US$2,500 per line kilometre it is not recommended for the main
survey, but would be very useful in areas of greatest potential as drill targets, based on the Zonge data. Dr. Culbert
has recommended budgeting four sets (i.e. 20 km) of Titan work, estimated at US$50,000.
Estimated cost of Geophysical Phase
With a 15% contingency

US$ 106,700
US$ 122,700

Recommended Drilling
A program of 20 reverse circulation drill holes is envisioned in this phase, the objective being to find a zone
of secondary copper enrichment, and if possible to make an initial evaluation of its thickness, grade and the tenor of
underlying sulphide mineralization.
Given the altitude, even with an auxiliary compressor it will be possible to drill reverse circulation holes to
only roughly 500 metres depth. This will cost about $US 27,000 per hole. That should be sufficient depth to
determine if the oxides above the sulphide zone contain appreciable copper. If so, it may be necessary to continue
down another two hundred metres using NQ diamond drilling to evaluate both the oxide and upper sulphide zones.
This would cost only slightly less then the original hole, so that it would effectively count as two holes for purposes
of budgeting.
BUDGET ESTIMATES FOR DRILLING
Environmental impact study, permitting
Mobilization and demobilization
Drilling contract
Access and drill pads (Grader for 50 hrs.)
Geologist, 2-1/2 months
Geological assistant
Copper assays, transport (150 at $24)
Truck rental and upkeep
Camp and logging supplies, storage
Food, supplies for geological crew
Transportation and report

US$
13,000
15,000
540,000
12,500
30,000
12,500
3,600
7,000
2,000
6,500
7,500

15

B.

BUDGET ESTIMATES FOR DRILLING

Contingency (15%)
SUBTOTAL

US$
97,400
747,000

Phase two total cost estimate

TOTAL ESTIMATE FOR BOTH PHASES

US$765,000
US$887,700

Corona Property, Region IV, Chile

The Company engaged Richard Culbert, Ph.D., P. Eng., of Gibsons, B.C., to undertake a review of the
Corona Project, which is material to the proposed offering. Dr. Culbert is at arms length to the Company. The
Company is satisfied that Dr. Culbert is a Qualified Person as required under the terms of National Instrument 43101.
The Company's interest in the Corona Property is the subject of a report (the Corona Report), dated
October 14, 2004, prepared by Dr. Culbert. Dr. Culbert confirms that the discussions set out herein under the
headings Property Description and Location, Accessibility, Climate, Local Resources, Infrastructure and
Physiography, History, Geological Setting, Deposit Types, Exploration, Sampling Method and
Approach, Sample Preparation, Analysis and Security, Adjacent Properties, Interpretation and Conclusions,
Ranges of Elements Indicative for Epithermal and/or IOCG Styles of Mineralization, and Recommendations are
extracted from, or are accurate paraphrasings of, sections of the Corona Report. The Corona Report is available for
review under the Corporations profile on the SEDAR database at www.sedar.com. The exploration activities
carried out by the Company were directly supervised by Dr. Culbert.
Summary
The Corona Property is comprised of a contiguous block of five claims covering 15 square kilometres, with
a three square kilometre claim situated three kilometres farther south. It is located northwest of the town of
Combarbala, some 270 kilometres north of Santiago.
The property was staked by the Company to cover a major portion of a large epithermal alteration zone.
The north-south elongation of the claim block reflects partial control by faults associated with a regional graben
behind the coastal ranges of north-central Chile. The southern sectors of the alteration exhibit massive, fine silica,
cut by large fracture zones with silica-hematite matrix breccias. The larger and more interesting northern sector of
the property features swaths of similar silica-hematite and major zones of iron oxide kaolin within a regional
alteration of a style known locally as combarbalite. This is a complex mixture of minerals dominated by a sodic
alunite, and is named for the nearby town of Combarbala where it is quarried for its colour and carving properties in
the tourist trade. The alteration zone is surrounded by many small copper oxide and vein gold workings. The
western lobe of the alteration is held by the government department ENAMI for kaolin mining, and the property is
flanked on the east by a reservoir, with alteration extending beyond.
In order to evaluate the Corona Property, Dr. Culbert roughly mapped the area and collected 59 wash
sediment and 56 rock composites, which were analyzed for gold and 41 other elements. Such gold anomalies as
were returned are associated with known vein and copper oxide workings peripheral to the alteration, and the
property is not considered to be a target for epithermal gold exploration.
On the other hand, there are several characteristics of both the site and the geochemistry that suggest that
Corona is a viable target for iron oxide-copper-gold (IOCG) deposits. A modest program to map and evaluate a
central sector of the property is recommended. Its objective is to clarify the IOCG characteristics to the extent that
one of the larger companies exploring for this style of deposit in Chile would find it attractive to option the property
and carry out the geophysical surveys required to develop drill targets for this valuable but compact, and often blind,
style of mineralization. A one month program at an estimated cost of $US 46,000 is recommended.

16

71

Figure 5

La Serena

Ro
ad
to

30

El Indi

SOUTH
PROPERTY

SOUTH

AMERICA

CHILE
CHILE

an H

SANTIAGO

OVALLE

CORONA
PROPERTY

Punitaqui X

SANTIAGO

70

Pan
ame
ric

AMERICA

PROPERTY

Andacollo

ighw
a

31

Combarbala

PACIFIC

ARGENTINA
Illapel

OCEAN

C H I L E
32

El Bronce

X El

25

50

Kilometres

Soldado
Inte
rna
tion
al
Hig
hwa
y

CONDOR RESOURCES INC.

CORONA PROPERTY
CHILE

Valparaiso

LOCATION MAP, WITH

SITES DISCUSSED IN TEXT
Date: Aug, 2004

Figure No.

Property Description and Location

The Corona Property is comprised of six claims or pedimentos, each measuring one kilometre by three
kilometres for a total of 18 square kilometres, and named Corona I to Corona VI. Five of the claims are contiguous,
and the sixth lies three kilometres to the south. (Figure 6).
The property is located approximately 270 kilometres north of Santiago and 10 kilometres north and west of
the town of Combarbala. It lies between 31 deg 2 and 31 deg.10 south latitude and between 71 deg. 4 and 71 deg.
7 west longitude. UTM co-ordinates employed are based on the South American 56 datum, as this is the one used
to defined properties in Chile.

17

La Cienaga

08

07

06

820
815

ada

Reservoir

Qu

OR
AD

La
Coip
a

CO
L

Qu
ebra

da

674

CO
RD
ON

RIDG
E

822
934

758
970

CO
LOR
AD
O

Co.
Colorado

To
Punitaqui

05

04

700

Cogoti

1112

62

800

677

ebr

64

03

02

01

300

99

98

Figure 6

1220

758

Co.
La Peste

La Colorada

742

Co.
El Macho
Co. Botija

972

873

1265
923

00
12

10
00

110
0

6560

1032

Co.
Colorado
80
0

90
0

1176

70
0

Co. Negro

862

Co.
La Campana
1152

1170

58

1073

Cerro
Blanco

Co.
Negro

1095

1346
00
13

00
12

R
IO

1312
0
11
0

00
10

0
90

918

1024

RL

56

WE
PO

904

INE

R I O

Co. Colorado

1230

B A R B A L A

1044

865

54

1118

P A M A

Co.
La Dura

1012

949
LOMA
LA
VARILLUDA
1040

Kilometres

Co.
La Bandera
971

CONDOR RESOURCES INC.

868

CORONA PROPERTY, CHILE

1145

To
Combarbala

PROPERTY TOPOGRAPHY
AND LAYOUT
Date: Aug, 2004

Figure No.

18

Accessibility, Climate, Local Resources, Infrastructure and Physiography.

The town of Combarbala is a four to five hour drive on paved roads from Santiago. An unpaved road
(labeled D-605) connects this town with the village of Punitaqui to the north. This road crosses the southernmost
claim and then runs within a few kilometres to the west of the main claim block. Secondary jeep tracks reach almost
to the edge of the property between Cerros Blanco and La Campana and to the north of Cerro Colorado. There is
also a rough road which skirts the north end of the claims. Horses were found useful in reaching the less accessible
parts of the property.
The main claim block covers a moderately rugged area whose highest point is Cerro Botija at 1220 metres
and whose lowest elevations lie to the east along the Pama River and Cogoti Reservoir at roughly 700 metres. The
climate is semi-arid, with temperatures rising into the 30s on warmer days, and falling below freezing occasionally
on winter nights.
There are few trees on the property, the tallest and most common vegetation being the Quisco Cactus
(Echinopsis chilensis) which can reach to seven metres. There are a variety of shrubs and bushes dispersed over the
area, the most common, and least welcome, being litre (Lithrea caustica) a large bush to which many people have a
reaction similar to the effects of poison oak. Native wildlife other than birds were not encountered, and have likely
been extirpated. A few wild burros, and untended goats were the only mammals of any size evident. In view of the
widespread mining which has taken place in the area, there are not likely to be any environmental concerns with
respect to vegetation or wildlife. On the other hand, the proximity to the Cogoti Reservoir, used for both irrigation
and drinking water, will be of concern in planning any large mining or milling projects within the present property
boundaries.
Two small villages of Soruco and El Sauce lie along the road immediately west of the main claim block,
and two power lines also follow this road, crossing the southernmost claim. Only rudimentary items would be
available at these villages, but most food and hardware supplies may be obtained in Combarbala. In increasing size,
the city of Ovalle is accessible by paved road in two hours to the north, and Santiago itself is about twice that to the
south. Cogoti Reservoir and Pama River near the propertys eastern edge are the obvious sources of water. The area
has a long tradition of mining, and labour with relevant expertise is available.

19

05

04

03

02

01

300

66

naga

98

99

Figure 7

La Cie

Cogoti
Reservoir

FPA

N
65

Cobbles

FPA

Cordon

La C
oipa

K
64

K
FPA

63

o
ad

id
ge

lor
Co

ol
or
ad

kaolin
mine
FPA
K

62

Cerro
Colorado

FPA

To
Punitaqui

FPA

Ri
d

Flats No O.C.

El
Sauce

ge

BAR BALA

61
Cerro
Botija

FPA
K

6560

RIO

M
CO

RL
WE
PO

59

INE

quartzites
15

FS

Cretaceous
Volcanics

58
Cerro
Blanco

Kilometres

Suroco

LEGEND

To
Combarbala

FS

Heterogeneous "combarbalitic" alteration

with many silica, kaolin and hematitic systems

FS

CONDOR RESOURCES INC.

Observed zone of fine silica,

typically with hematitic breccias

CORONA PROPERTY, CHILE

K

PROPERTY GEOLOGY
Date: Aug, 2004

Figure No.

57

Massive,fine silica, with hematitic

fracture and breccia zones

Observed zone of kaolinization,

typically with limonite sericite and shearing

FPA Massive feldspar porphyry andesite.

A San Lorenzo intrusive?

56

20

History
This entire region has been searched by local miners for surface occurrences of copper oxides or gold veins,
and several of their small workings lie within or adjacent to the present property. As far as the Company and Dr.
Culbert are aware, the first staking of this part of the alteration zone by a major company was by the Chilean branch
of Homestake Mining Company. Shortly thereafter, Homestake was taken over by Barrick Gold Corporation, and its
Chilean office closed. Sr. Edmundo Hernandez, the chief geologist for that office, restaked and maintained claims
here for some years thereafter. Representatives of Rio Tinto are also known to have sampled in the region.
Geological Setting
The Corona Property falls on the Illapel 1:250,000 scale mapsheet, whose geology was mapped for the
government by Rivano and Sepulveda (1991). This work shows that the property lies almost entirely over a large
zone of hydrothermal alteration, within lower Cretaceous strata adjacent to a large area of plutonic rocks belonging
to the Cretaceous Calanga Group, which are mainly granodiorites and quartz diorites. On the northwest border of
the altered area there is also a plug assigned to the Cretaceous--Paleocene aged San Lorenzo Group intrusions, which
tend to be porphyries of andesitic composition.
The map defines the regional Cretaceous strata of this area as the Quebrada Marquesa Formation of mixed
marine and continental origin. They are mainly argillites, siltstones and sandstones, often calcareous, but volcanic
and conglomeritic units are also involved. This is underlain by the Arqueros Formation of similar age, dominated by
flows and breccias of andesitic composition. These two Cretaceous units correspond to the Chilcas Formation
farther south in the Santiago area, and that name is used here also by some authors, for example Alvarez and De
Gramont, 1992. One small area of quartzites were the only metasediments observed within the property, and the
Cretaceous elsewhere is volcanic, largely in the southern claim.
The altered zone is large (roughly 50 sq. km.) and complex. It is not likely a result of the Chalanga plutons,
whose relationship to Quebrada Marquesa Formation of similar age does not appear to be intrusive. Field
observations suggest that it is directly related to the San Lorenzo andesitic intrusion, but controlled by structures,
dominantly north--south oriented fractures. Those in turn appear to be related to formation of a regional graben
between the coastal ranges and the Andes proper.
The property is almost entirely underlain by various styles of hydrothermal alteration. The southern part of
the main claim block (under Cerro Blanco) is comprised virtually entirely of a grey to white, aphanitic silica, and
although much of this area is covered by talus from Cerro Blanco, very little else appears in the detritus. Two stage
silicification textures, hematitic shear zones, voids and drusy cavities are common. Some sectors also show relict
sulphide cavities.
This massive silica trend continues south from the property into an area from which gold values were
reported by Hernandez (2004), but which is now held by another party. It enters the north end of the southern claim
but appears to end abruptly. It is likely responsible, however, for the silica sills and stockworks which mark the
volcanic rocks farther south along that trend. It may also be responsible for their silicification, and the distinctive
red-brown weathering which accompanies it. These units of the Marquesa Formation are dark, slightly
metamorphosed and non-porphyritic, and distinct from the porphyry andesite encountered father north.
Northward, the massive silica regime ends near UTM 6559, and the main body of the property is underlain
by a more complex altered terrain. This is dominated by a distinctive white-to-cream coloured alteration with iron
and manganese oxide patterns. Its silica content is variable, and in places there is the greasy sheen of pyrophyllite.
This is known locally as combarbalitic alteration, after examples which are mined near Combarbala and carved for
sale under the name combarbalite. That material is known to be a variable intergrowth of Na-alunite, pyrophyllite,
kaolin and quartz with metal oxide colouration patterns.
Through this altered regime, run large and small bands of the fractured silica, and also shear zones and
other sectors of intense argillic alteration to kaolin, likely with alunite. Both systems are accompanied by surprising

21

amounts of iron oxides, those adjacent to the argillic zones being mainly hematite, limonite (and jarosite) with
sericite, while fractures and breccias in the silica bands typically have a quartz-hematite matrix.
In fact, Rivano (1991) lists an iron deposit by the name of La Colorada within the claim area. Most of the
silica dykes and kaolinized belts are structurally controlled, the major orientation being north-south near vertical.
Slickensides in the fracture zones indicated that movements were also near vertical. A second important orientation
is at about 50 deg., again vertical to steeply dipping.
Descending to either north or east of the mountainous area of alterations, one reaches a massive andesite
porphyry, likely related to the San Lorenzo intrusions. In some marginal localities, the porphyry texture is visible in
sectors least affected by the combarbalitic alteration. The contacts with the massive andesite tend to run up valleys,
suggesting that it underlies the altered area, although later dykes tend to confuse interpretation. In general, however,
the main sector of the property appears to be a regional zone of more or less combarbalitic alteration formed in the
upper parts of a San Lorenzo andesitic intrusive complex, and cut by secondary belts of epithermal alteration, both
siliceous and argillic, along prominent fault structures. Widespread brecciation and iron oxide flooding both
accompanied and followed the main phase of silica emplacement.
Deposit Types
Small to moderate sized copper and gold deposits abound in this region, some having been worked since
prehistoric times. Three of the gold mines in this central belt are considered major (Davidson and Mpodozis,
1991; Sillitoe, 1991), but in examining these for a likely model, each is distinctly different. Andacollo, to the north,
(110 mt Au produced) is considered a metasomatic manto deposit adjacent to a copper-gold porphyry. El Bronce
mining camp to the south (over 24 mt Au) is considered a low-sulphidization system of epithermal veins. Closest in
proximity, and perhaps most relevant, is the Punitaqui mine (approx. 30 mt Au) which lies 48 km. to the northnorthwest. This is a large, pluton-related vein emplaced in a north-south fault zone, and was also mined for copper
and mercury. These and other deposits emphasize the wide variety of mineralization in this region.
Closer to the property, copper, silver and gold has been mined from north-south vein systems and other
structures in this vicinity. Rivano (1991) lists several of these, and other workings were observed by the author.
There is also a Cu-Mo breccia pipe at El Sauce, three kilometres to west of the property, and copper and gold have
been mined from a breccia pipe farther west near Quilitapia.
Copper oxide localities are prevalent in the massive andesites near the alteration zone. Some of these have
been exploited on a small scale, and in some of the cases briefly examined, the copper minerals were accompanied in
some cases by specular hematite and lesser magnetite.
Exploration
A total of eight days were spent examining and sampling the property. During this period, some of the
major structures and alterations were mapped, and a total of 56 rock chip samples and 59 dry wash sediment samples
were taken. The samples are described briefly in Appendices I and II to the Corona Report, and located in Figures 7
and 8. Geological observations are presented in Figure 9, while Figure 10 displays results from the southern claim.
Sampling Method and Approach
As this area lacks a previously defined mineralized structure, sampling was carried out on a reconnaissance
basis. Zones defined by intense alteration or brecciation were chip sampled, directly or from debris. In some cases,
a composite of varied alteration or mineralization styles was taken from dry wash float. Clearly, only a tiny portion
of this huge alteration zone could be tested in this way, however, and for a more regional coverage, silt samples were
employed.

22

Sample Preparation, Analysis and Security

All samples were collected by Dr. Culbert and personally delivered to the ALS Chemex laboratory in
Antofagasta. Here the rock chips samples were crushed and split, and the silt samples screened to extract the -80
mesh fraction for analysis. Gold levels in the parts per billion range were tested by aqua regia extraction, followed
by ICP-MS (Induction-Coupled Plasma--Mass Spectrometry) finish. Analyses for a further 30 elements was carried
out with the same extraction followed by ICP-AES. ALS Chemex uses both blanks and standards to maintain quality
in their analyses.

23

(<5,16)
11

36 (6,57)

05

04

03

02

01

300
7 (9,14)

66

Cogoti

La Cienaga

98

99

Figure 8

Reservoir
N
65

Cord

37 (22,90)

on

38 (9,21)

8 (<5,16)

39(<5,69)
40
9 (5,112)

64

La C
o

ipa

(11,82)

(8,60)
10
18 (10,106)
17 (5,163)

(53,29) 28

29 (9,60)

(11,50)

63

16
lor
Co

(<5,111)
15

19 (<5,66)
20 (9,39)

13

21(19,150)

(<5,130)

31 (7,165)
32

(12,55)

(<5,106)

62

6
35 (14,70)
5 (9,68)
33 (<5,49)

52

(<5,106)

(8,46)

34

(11,24)

(<5,23) (5,274)

(34,169)

47

54

2 (5,70)
Cerro
Botija

El
Sauce

61

53

(<5,80)

47

(<5,94)

A
BAR BAL

Cerro
Colorado

To
Punitaqui

30 (10,35)

ol
or
ad
o

14

R
id
ge

(8,205)

o
ad

kaolin
mine

(23,344)
Ri
d

49

(<5,174)

ge

(<5,67)

51

6560

RIO

M
CO
50 (7,39)

RL
WE
PO

59

INE

27

(<5,73)

Cerro
Blanco

(5,29)

26 (5,47)
25 (11,138)

23

22 (21,54)

58
0

24 (10,51)

Kilometres

LEGEND
To
Combarbala

Rock chip sample site

Suroco

57

Wash float composite site

Sample # (Au in ppb, Cu in ppm)
COR Sample Group

CONDOR RESOURCES INC.

CORONA PROPERTY, CHILE

ROCK SAMPLE SITES

with Gold and Copper values
Date: Aug, 2004

Figure No.

56

24

05

04

03

02

01

300

99

98

Figure 9
66

La Cienaga

Cogoti
(-,40) 16
(5,123) 15

N
65

(-,129) 14

(-,50) 38

Reservoir

13 (-,155)

37 (-,85)

(-,89)
(14,96) 3

on
Cord

(-,130) 36

12 (-,109)

4 (6,107)
5 (-,97)

(-,101) 6

64

7 (-,102)

(-,117) 9

8 (-,112)

(10,155)10
(-,100) 11
(9,110) 26

63

La

o
ad

25 (5,77)

18 (-,131)

ol
or
ad
o

lor

id
ge

Coi

Co

kaolin
mine

27 (5,89)

pa

17 (24,184)

(-,104) 28
(-,115) 29

30 (31,138)

19 (-,252)
Cerro (5,190) 35
Colorado

To
Punitaqui

53(6,5.3%)
31 (13,97)

62

(-,65) 52

32 (-,57)

(7,96) 34
(9,129) 33
55

61

54
Cerro
Botija

51 (-,49)

BAR BALA

El
Sauce

(-,130) 45
(-,98) 46
Ri
dg
e

47 (-,48)

(-,59) 50

CO
48 (-,36)

IN E
RL
WE
PO

(7,74) 24

RIO

(17,92) 49

59

(-,75) 23
22 (5,60)
21 (-,44)

0
Cerro
Blanco

To
Combarbala

6560

Kilometres

LEGEND
Silt Sample Number,SCOR Group
(ppb Au, ppm Cu)
(- = <5ppb)

Suroco

58

57

CONDOR RESOURCES INC.

CORONA PROPERTY, CHILE
DRYWASH SEDIMENTS, -80 mesh
Sample sites with Gold
and Copper values
Date: Aug, 2004

Figure No.

56

25

Figure 10

ROCK SAMPLES

O
RI

O
RI

O
RI
54

54

Po
w

er
L

Po
we
rL

ine

ine

52

RI
O

41

ine

53

Cu
46 (57,1.86%)

(162,1140)

(6,71)

53

a
al
ad arb
Ro mb
Co

57

PA
M
A

52

(24,67) 44

(7,103)

65
02

01

LEGEND

Massive fine silica, with hematitic fracture

and breccia zones.

41

(33,101)

65
3 00

51

02

03

65

50

3 00

01

02

LEGEND

LEGEND

Silt samples of the SCOR Group

Outcrop
Wash float composite
(ppb Au, ppm Cu)

50

03

Rock samples of the COR Group

Silicified Cretaceous volcanic rocks,

with fine silica sills and stockworks.
Scattered Cu oxide showings

51

50

03

52

PA
M

(<5,68)

45

01

40

(32,35)
(10,38)

42

(30,72)

(-,416)

42
43
44

RI

43

(10,165)

39

(5,96)

PA
M
A

51

3 00

(10,54)
59

rL

m
fr o

(<5,11)
55 (7,22)

a
al
ad arb
Ro mb
Co

RI
O

Po
we

54

57

58

56

m
fr o

ala
ad arb
Ro mb
Co

m
fr o

NO O.C.

(3,56)

(117,83)

53

55

M
PA

55

M
PA

M
PA

55

SILT SAMPLES
A

GEOLOGY

Silt sample
(ppb Au, ppm Cu)

CONDOR RESOURCES INC.

CORONA PROPERTY, CHILE
0

Kilometres
1

SOUTHERN CLAIM OF THE

CORONA PROPERTY, CHILE
Date: Aug, 2004

Figure No.

Adjacent Properties
The main, northern body of the claims is adjoined on the west by a large property of the government service
ENAMI, covering the northwestern lobe of the regional alteration zone. At one time, kaolin was mined from sectors
of this property, and also some barite, but there is no activity at present. Whether ENAMI found any gold here is not
known, but among the abandoned machinery is the remains of a trapiche, a small mill used to grind ore with mercury
to extract gold. Although not sampled or mapped, this area appears to have a similar geology to the main alteration
zone of the Corona Property.
To the west of the southern leg of the main claim block is a large property of Compania Minero del Pacifico
(CAP), which covers Cerro Blanco and volcanic terrain to west thereof. This is almost exclusively an iron mining
company, and it is not clear whether their claims are to cover an iron-oxide manto, or if they have some interest in
the huge silica exposure capping Cerro Blanco.
In addition, for the southern claim, there are several small holdings adjacent or extending into that property,
covering small copper or copper-gold workings. At the extreme south end, gold was once extracted from veins in the
volcanic rocks in what is known as the Arenilias District. There is no present activity, but some old claims are still
held, and if future work on the southern claim is warranted, these inroads must be delimited.
Finally, the three kilometre section of the siliceous alteration between the main and southern claim group
has been staked by another party. This is known (Hernandez, 2004) to have yielded gold values, but apparently from
structures of limited size.

26

Interpretation and Conclusions

The Corona Property covers much of a large and complex alteration zone, exhibiting sectors of massive to
drusy aphanitic silica, kaolinization (likely with alunite), extensive iron oxide development, and a regional
combarbalitic alteration which has elsewhere been shown to be dominated by a sodium alunite. It appears to be
associated, at least in part, with a large intrusion of porphyry andesite, of the San Lorenzo Intrusions, and is more or
less surrounded by small copper oxide and gold workings. The alterations are structurally controlled, likely by
fractures related to regional graben formation.
In view of these characteristics, the property should be evaluated both for epithermal gold potential, and
also as a possible iron oxide-copper-gold (IOCG) target. To this end, the trace elements characteristic for both types
of deposit have been monitored. The ranges for pertinent elements, for both rock and silt samples, are listed below.
(Values for copper taken directly from old workings are excluded).

Au
Ag
As
Ba
Bi
Ce
Co
Cu
Fe
Hg
La
Mn
Mo
P
Pb
Sb
Sr
Te
Tl
U
Y
Zn

Rock Samples
<5 to 162 ppb
0.04 to 4.61 ppm
2 to 3370 ppm
20 to 1640 ppm
0.3 to 824 ppm
1.3 to 36.7 ppm
0.6 to 46.7 ppm
11 to 1140 ppm
10 samples over 15%
0.1 to 4.61 ppm
<0.2 to 19.2 ppm
23 ppm to >1%
1.1 to 254 ppm
40 to 3510 ppm
1 to 1075 ppm
0.2 to 66.8 ppm
4.4 to 796 ppm
0.06 to 64.4 ppm
<.02 to 6.34 ppm
0.01 to 3.73 ppm
0.3 to 20.7 ppm
<2 to 422 ppm

Silt Samples
<5 to 306 ppb
0.04 to 8.9 ppm
6 to 73 ppm
70 to 1000 ppm
0.03 to 21.3 ppm
9.75 to 37.3 ppm
3 to 37 ppm
40 to 252 ppm
3.9 to 17%
<.01 to 1.77 ppm
3.8 to 17.9 ppm
147 to 3360 ppm
0.4 to 10.4 ppm
240 to 1260 ppm
5 to 62 ppm
0.14 to 3.5 ppm
39 to 463 ppm
0.02 to 1.79 ppm
0.03 to 1.26 ppm
0.2 to 3.27 ppm
2.57 to 13.75 ppm
22 to 213 ppm

Ranges of Elements Indicative for Epithermal and/or IOCG Styles of Mineralization

With respect to the rock samples, the highest gold value was from a composite of vein materials in a small
wash on the southwest margin of the southern property, near a granodiorite intrusion. The quartz had sulphide clasts,
and was not as fine grained as the main silica bodies. It is unlikely that it represents a style of mineralization of
interest to an international company. The second highest gold value is also from the southern claim, and of
marginally more interest. Again it is from a composite of siliceous float in a wash, near the southern end of the
massive quartz terrain. The steam follows a large basalt dyke within the silica. The highest gold value from the main
claim block (53 ppb) was a composite of mixed hematitic silica and kaolinized float from a tributary to lower
Quebrada La Coipa.
Copper values tend to roughly correlate with iron oxide content. This in turn was very high in many cases,
with ten samples returning leachable iron over the 15% limit for the type of analysis employed. Anomalous values in
the other pertinent trace elements are scattered, but the strongest groupings tend to occur either marginal to the
kaolinized zones, or from an unexplored (and partly unstaked) area on upper Colorado Ridge.

27

Turning to the silt geochemistry, the suite of elements showing anomalies proved similar to the rock
samples, although at a more muted level as might be expected. There is again a rough correlation between iron
(which ran up to over 10%) and both copper and molybdenum. Background levels in barium, strontium, cobalt and
lead were strongly elevated, as were the rare earth and epithermal indicator elements.
The highest gold value (306 ppb) was from the dump tailings at one of the small copper oxide workings
around the periphery of the alteration complex. This does little to enhance the property as an epithermal gold
prospect, but supports reports that copper and gold were mined both separately and together at various sites in the
area.
It is concluded that despite widespread epithermal alteration and impressive development of
cryptocrystalline quartz, the gold values returned from sampling do not support further work on the model of an
epithermal gold deposit. The highest gold values returned were from the southern claim block, and were related to
vein and other mineral concentrations of limited size, which may be held by local miners and which are not of
interest to an international company.
The Corona Property, however, has many of the characteristics of a good iron oxide-copper-gold (IOCG)
target. There has been considerable activity looking for these, associated with major fractures in the coastal ranges
of northern Chile. While most of this exploration has been directed farther north, there are indications that the IOCG
belt extends south to perhaps the latitude of Valparaiso, and includes the El Soldado deposit 190 km south of
Combarbala.
IOCG deposits around the world have proved quite variable, and many of their more decisive characteristics
do not extend much beyond the compact ore deposit itself, making field exploration difficult. There follows,
however, an impressive list of characteristics of the Corona locality which suggest an IOCG target:
1.

It involves a large zone of sodic alteration. This is based on published analyses of combarbalite, showing it
to be dominated by a sodium-alunite. (The alkali minerals are not dissolved in aqua regia, so the ICP data
is not relevant here.)

2.

It is associated with major north-south fractures bounding a regional graben. Similarities may be drawn to
the Atacama Fault complex associated with IOCG deposits farther north.

3.

There are small copper and gold workings scattered around the periphery of the alteration zone.

4.

There is a great deal of iron oxides associated with both siliceous fracture zones and argillically altered
shear belts. More than half of the silt samples from the main claim block ran over 7% iron. Three features
within the property are named Colorado for the red-brown colour of the rust.

5.

Geochemical values for copper (and molybdenum) were high, and roughly correlate with iron.

6.

Background values of barium and strontium are high, and barite veinlets have been noted.

7.

In addition to the trace elements common to most epithermal systems (As, Sb, Te, Ti etc.), certain elements
typical of IOCG deposit were also anomalous, namely cobalt, bismuth, manganese and REE. The high
background levels of the rare earth indicator elements (Ce, La and Y) in the silt samples is especially
striking. Uranium, (another IOCG tracer) was not particularly strong, but not all indicators can be expected
at any one target.

Recommendations
A moderate, single phase program of roughly a months duration is recommended, with the objective of
defining IOCG characteristics over a portion of the claim block, to the extent that one of the larger companies

28

searching for these deposits in Chile would be willing to option the property and carry out the necessary geophysical
survey to define drill targets. The following work is suggested:
1.

A major portion of the samples defining IOCG character come from the upper watershed of La Coipa wash
(an abrupt and complex valley), together with Colorado Ridge to the southeast. This sector of the property
should be mapped, prospected and sampled in some detail. Two or three weeks work would be involved for
a geologist and assistant.

2.

In particular, the La Colorada iron oxide prospect (Rivano, 1991), denoted as occurring in the Colorado
Ridge area, should be located and evaluated in view of IOCG characteristics.

3.

A whole-rock assay and petrographic study of the combarbalitic alteration is recommended.

4.

The iron mining group CIA Minero del Pacifico (who hold Cerro Blanco and the territory to west of the
southern part of Coronas main claim block) should be contacted to see if their interest here is really in an
iron deposit. It is known that there has been some drilling in the vicinity of Cerro Negro, and this might be
of importance to IOCG definition.

5.

The government bureau ENAMI should be contacted to see if they have information of interest which they
may have collected in the area northwest of Corona during their mining of kaolin (and barite) there.

6.

The alteration zone, including hematitic concentrations, extends to the east of the Cogoti Reservoir, into
ground which is largely open. This area should be examined and sampled on a reconnaissance level, which
will require somewhat over one week.
BUDGET ESTIMATE
Wages Field Geologist, one month
Wages Field assistant
Food, lodging and supplies
Truck rental, fuel, horses
Transport and analysis of 300 samples
Petrographic study
Claim upkeep for six months
Travel and accommodation
Research and negotiation
Report
Subtotal
Contingency (15%)
TOTAL ESTIMATE

C.

U.S.$
12,000
3,500
4,000
3,000
7,500
1,000
3,500
1,500
1,000
3,000
40,000
6,000
46,000

Other Properties

The Company has a 100% interest in three additional properties in Chile. The following is a summary of
each such property. The location of all of the Companys properties is shown in figure 11. It is not anticipated that
any funds derived from the Offering will be allocated to these properties.

29

Figure 11

CRISTAL

BECKER
ROYAL

Condor Resources
Properties

30

Cristal Property
Like Escudo, the Cristal property is located along the West Fissure, north of the Collahuasi / Ujina porphyry copper
district and near the Peruvian border. The Cristal target is covered by young volcanics (ignimbrites) but two deeply
incised N-S trending valleys, strands of the West Fissure, a few kilometres to the south, expose a classic Chilean
porphyry copper sequence of altered quartz-feldspar porphyry (QFP) intrusive rock exhibiting abundant stockwork
quartz veining, at least three phases of brecciation, and limonites after pyrite and copper minerals. A relict sulphide
study conducted in the early 1990s revealed abundant bornite and chalcopyrite along with pyrite encapsulated
within quartz grains in the QFP. Exposures of propylitic alteration in andesite, and a former Ag-Pb-Zn district are
also evident to the SW of the target. This area is interpreted to be the pyritic halo surrounding an enriched porphyry
copper system, the centre of which is postulated to be located to the north under the ignimbrite cover the focus of
the Cristal claims. This project is contiguous with claims owned by Codelco to the east and Mantos Blancos (Anglo
American) to the south.
Figure 12

Royal Property
The Royal project is located south of Santiago and comprises a large rock geochemical Au-Cu-Mo anomaly in
quartz-sericite altered sediments exposed around the edge of a 2 km wide covered basin. Localized QFP intrusive
and quartz-limonite stockwork veining has been found intruding the sedimentary sequence along the NW side of the
basin. The original sampling was conducted in 1995 and out of some 80 samples, 40 returned copper values in
excess of 100 ppm, with spot highs of 801, 868, 1951 and 2664 ppm (0.27%). The surprise was molybdenum, with
very anomalous values. Considered anomalous in the 10 to 15 ppm range, 35 samples returned values in excess of 50

31

ppm Mo, with a peak value of 1187 ppm (0.12% Mo). The highest gold values returned 1.09 and 3.78 g/t Au.
Apparently controlled by the intersection of N-S and NW-SE linears, the majority of this target is under cover and
open to the south.
Figure 13

Becker Property
Situated south of Santiago, the Becker project is a potential Bonanza-style gold vein system within Cretaceous
andesites proximal to an intrusive granodiorite-diorite contact. Past exploration discovered a zone measuring some
1500 by 1200 metres within which occurs a significant number of quartz fragments and boulders to 4 metres in
diameter. Follow up work encountered six quartz veins with strike lengths up to 350 metres and widths varying from
0.5 to 4 m. Previous sampling returned anomalous gold values along the entire vein lengths, with peak values of
23.5, 37.2, 40.7, 63.5, 70.0 and 79.0 g/t Au. No geophysics or drilling have ever been carried out on this project, nor
has it been mapped in detail; thus the true nature of the prospect, including the total number of veins and the
extension of the system along strike and down-dip, is unknown.

32

Figure 14

4.

USE OF PROCEEDS

4.1

Proceeds

The estimated net proceeds to be derived from the Offering, before deduction of the expenses of the
Offering, will be $1,840,000.
4.2

Funds Available

The Company will receive net proceeds from the Offering of $1,840,000, which will be combined with its
working capital deficit of approximately $20,000 as of September 30, 2005, for a total of $1,820,000 in Funds
Available.
4.3

Principal Purposes
The Funds Available will be allocated as follows:

33

1.

2.
3.
4.
5.

Amount (1)

Purpose for which funds are raised

Exploration Programs:
Escudo Project IP Surveying
Escudo Project Drilling Program
Corona Project Mapping, prospecting, sampling
Administrative expenses in the amount of $21,000 per month for the Company over
a period of 12 months
Estimated expenses of this issue (including legal, audit, printing, and listing fees)
(estimated)
To pay agents selling expenses (estimated)
Unallocated working capital to fund ongoing operations
Total:

$
$
$
$

153,375
956,250
57,500
252,000

80,000

$
$
$

10,000
310,875
1,820,000

The General and Administration expenses for the 12-month period following the completion of the offering
are as follows:
Category
Salaries and Benefits
Legal and accounting
Corporate expenses
Rent, taxes and utilities
Telephone and fax
Travel, lodging, meals
Miscellaneous costs
Bank and finance charges
Insurance
Computer equipment, software, misc.
Recruiting, training, employee relations
TOTAL:

Average Monthly Total

$
10,000
1,500
2,000
1,500
500
2,000
1,000
200
2,000
300
0
$
21,000

12-Month Total
$
120,000
18,000
24,000
18,000
6,000
24,000
12,000
2,400
24,000
3,600
0
$
252,000

The Company will spend the Funds Available on the completion of this Offering to carry out its proposed
exploration and development programs set out in item 3.2A Escudo Property and 3.2B Corona Property. There
may be circumstances where, for sound business reasons, a re-allocation of funds may be necessary. The Company
will only redirect the funds to other properties on the basis of a written recommendation from an independent,
professional geologist or engineer.
The Companys working capital available to fund ongoing operations will be sufficient to meet its
administration costs for at least 12 months.
5.

SELECTED CONSOLIDATED
DISCUSSION AND ANALYSIS

5.1

Annual Information

FINANCIAL

INFORMATION

AND

MANAGEMENT'S

The Company was incorporated on November 26, 2003. Patrick Burns, who has more than 25 years
experience in mineral exploration in South America, took the initiative in founding the Company for the purpose of
acquiring and exploring for copper and gold deposits in Chile. With the assistance of co-founder, Jimmy E. Toler,
five properties were staked during the latter half of 2003 and early 2004. The properties were transferred to the
Company in September 2004, in consideration of 4,000,000 Shares of the Company, and the settlement of out of
pocket costs in the amount of US$35,000 through the issuance of 200,000 common shares.

34

5.2

Dividends

No dividends have been paid on any Shares of the Company since the date of incorporation nor is it
intended to pay a dividend on any of its Shares in the immediate future. Dividends will, in all probability, only be
paid in the event the Company successfully brings one of its properties into production.
5.3

Managements Discussion and Analysis

A.

From Incorporation to February 29, 2004

Overall Performance
Condor Resources Inc. was incorporated on November 26, 2003 under the Company Act (British
Columbia). The Company is engaged primarily in the business of evaluating, acquiring and exploring natural
resource properties in Chile. The natural resources being targeted are copper and gold.
The Company is an exploration stage company and has produced no revenues to date.
During the period ended February 29, 2004, the Company raised $167,299 through share subscriptions
received. At February 29, 2004 no shares had yet been issued.
During the period ended February 29, 2004, the Company expended a total of $31,220 on its mineral
properties. This amount was made up of $12,500 in consulting fees to the Companys President, $10,154 in amounts
paid for personnel and labour, and $8,566 was spent on property related travel and transportation.
Selected Annual Results
The summary historical financial information presented below has been derived from the date of
incorporation to February 29, 2004.
FROM THE DATE OF
INCORPORATION
(NOVEMBER 26, 2003)
TO FEBRUARY 29,
STATEMENT OF
2004
OPERATIONS AND DEFICIT DATA
AUDITED
Revenues
NIL
Total expenses
$
3,004
Net loss
$
(3,004)
Basic and diluted net loss per share
$
Weighted average number of shares outstanding
BALANCE SHEET DATA
Cash and cash equivalents
Working capital
Total assets
Stockholders' equity

$
$
$
$

As at February 29, 2004

166,776
133,075
197,996
164,295

In the period ended February 29, 2004, the Company was in an early acquisition and exploration stage with
regards to its mineral properties. The Company had no revenues and incurred a loss of $3,004. Professional fees of
$2,285 were paid for legal and company start up fees. As the Company was newly incorporated, expenditures during
the period were minimal. The Company incurred office expenses of $344 and regulatory fees of $375.

35

As at February 29, 2004, the Company had total assets of $197,996. The assets were made up of cash of
$166,776 and an amount for mineral properties of $31,220.
Results of Operations
The Company incurred a net loss of $3,004 for the date of incorporation to February 29, 2004. During this
period, there were no revenues as the Company was still in an acquisition and exploration stage. Whereas these
results are for the initial year of operations for the Company, no comparison to prior years can be made.
The current focus for the Company is the acquisition and exploration of mineral properties located in Chile.
The Company does not currently have the required financial resources to complete an exploration and
development program on its properties; accordingly, there is uncertainty whether or not it will be able to procure the
required financial resources. Management believes that it will be able to raise the necessary capital to fund its
exploration and development program through the issuance of seed stock and an Initial Public Offering for gross
proceeds of approximately $2,000,000.
Liquidity
At February 29, 2004, the Company had a deficit of $3,004. The Company expects to incur losses for at
least the next 24 months. There can be no assurance that the Company will ever make a profit. To achieve
profitability, the Company must advance one or more of its properties through further exploration in order to bring
the properties to a stage where the Company can attract the participation of a major resource company, which has the
expertise and financial capability to take such properties to commercial production.
At February 29, 2004, the cash position of the Company was $166,776. Additional financing will be
required to fund the cost of continued acquisitions, and exploration development of the Companys mineral
properties located in Chile.
There are currently no long-term debts, capital lease obligations, operating leases or purchase obligations.
Capital Resources
The Company has no major commitments for capital expenditures. Except as otherwise disclosed in this
MD&A, there are currently no other identified sources of new capital. Additionally, the Company currently has no
established credit lines with chartered banks or other financial institutions.
Off Balance Sheet Transactions
There are currently no off balance sheet arrangements which could have a material effect on current or
future results of operations, or the financial condition of the Company.
Related Party Transactions
As at February 29, 2004, an amount of $22,748 was due to directors and a law firm in which a director of
the Company is a partner.
During the period, the Company incurred the following transactions with directors, officers and a firm in
which a director is a partner:

Paid or accrued consulting fees capitalized to deferred exploration costs of $12,500 to an officer and
director of the Company.

Paid or accrued deferred legal costs of $2,285 to a law firm in which a director is a partner.

36

Proposed Transactions
The Company intends to initially raise approximately $500,000 through the issuance of seed stock and an
additional $2,000,000 through an Initial Public Offering. As at February 29, 2004, the Company had seed stock
subscriptions receivable of $167,299. The authorized capital of the Company consists of an unlimited number of
shares without par value.
The Company intends to file a preliminary prospectus within the next 12 months.
Confidentiality agreements may be entered into from time to time, with independent entities to allow for
discussions of the potential acquisition and or development of certain properties.
Critical Accounting Estimates
The preparation of financial statements in accordance with Canadian generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amount of assets and
liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the period. Actual results could differ from these estimates.
Financial Instruments
The Company's financial instruments consist of cash, receivables, and accounts payable and accrued
liabilities. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial instruments. The fair value of these financial
instruments approximates their carrying values, unless otherwise noted.
Other MD&A Requirements
The Company is primarily engaged in the business of evaluating, acquiring and developing natural resource
properties in Chile. As at February 29, 2004, the Company had Mineral properties with a carrying value of $31,220
on its balance sheet. The following table illustrates the breakdown of this amount:
2004
Acquisition costs incurred
Deferred exploration costs
Consulting
Personnel and labour
Travel and transportation
Total mineral properties
B.

12,500
10,154
8,566
31,220

Year-ended February 28, 2005

Overall Performance
The Company was organized to take advantage of the property acquisition opportunities that have become
available in Chile following a long period of depressed metal prices.
Patrick Burns, the president of the Company, has over 25 years of mining experience in Latin America,
including 17 years in Chile. Mr. Burns recognized that many prospective properties were becoming available, and
with the financial backing of Jimmy E. Toler, embarked on a property research and acquisition program.

37

The Company explores for minerals with a strong emphasis on copper and gold, and has no operating
property. The Company has no earnings and therefore finances these exploration activities by the sale of shares.
The key determinants of the Company's operating results are the following:
(a)

the state of capital markets, which affects the ability of the Company to finance its exploration activities;

(b)

the write-down and abandonment of mineral properties as exploration results provide further information
relating to the underlying value of such properties; and

(c)

market prices for copper and gold.

Condor Resources Inc. was incorporated on November 26, 2003 under the Company Act (British
Columbia). The Company is engaged primarily in the business of evaluating, acquiring and developing natural
resource properties in Chile.
Since incorporation, the Company has acquired five properties totalling 164 sq km (16,400 hectares or
40,525 acres). All of the properties were acquired by staking and are 100% owned by the Company, with no
underlying royalties. All of the Companys presently held mineral properties are situated in Chile; however, the
Company may seek to acquire interests in other countries in the Americas.
The Company is currently seeking to have its shares of common stock listed on the TSX Venture Exchange.
The Company is an exploration stage company and has produced no revenues to date.
During the period ended February 28, 2005, the Company raised $329,000 through the issuance of seed
stock and converted subscriptions received during the prior year into share capital. At February 28, 2005, there were
6,185,196 shares issued and outstanding.
During the period ended February 28, 2005, the Company expended a total of $230,333 on its mineral
properties. This amount was made up of acquisition costs of $45,111, consulting fees of $40,009, $9,006 for drafting
services, $81,388 in amounts paid for personnel and labour, $67,779 was spent on samples, and $32,151 was spent
on property related travel and transportation.
Selected Annual Results
The summary historical financial information presented below has been derived from the date of
incorporation to February 29, 2004 and the year ended February 28, 2005.

YEAR ENDED
FEBRUARY 28, 2005
AUDITED

STATEMENT OF
OPERATIONS AND DEFICIT DATA
Revenues
Total expenses
Net loss
Basic and diluted net loss per share
Weighted average number of shares outstanding

$
$
$

NIL
81,247 $
(81,247) $
(0.05) $
1,774,247

FROM THE DATE OF

INCORPORATION
(NOVEMBER 26, 2003)
TO FEBRUARY 29,
2004
AUDITED
NIL
3,004
(3,004)
-

38

BALANCE SHEET DATA

Cash and cash equivalents
Working capital
Total assets
Stockholders' equity

As at February 28, 2005

$
$
$
$

154,095
129,795
492,677
457,159

As at February 29, 2004

$
$
$
$

166,776
133,075
197,996
164,295

In the period ended February 28, 2005, the Company was in an early acquisition and exploration stage with
regards to its mineral properties. The Company had no revenues and incurred a loss of $81,247. Administrative
services in the amount of $8,025 were incurred during the year as the Company initiated a new administrative
services contract ($2,500 per month). Management fees of $12,509 were paid to the CEO in connection with a new
employment contract, which began January 1, 2005. The Company incurred office and supplies expenses in the
amount of $4,435. Professional fees amounted to $31,878 and were related to legal costs incurred by the Company.
The Company spent $5,000 to initiate a corporate website and expended $19,400 on company related travel and
entertainment.
As at February 29, 2005, the Company had total assets of $492,677. The assets were made up of cash of
$154,095 and an amount for mineral properties of $306,664.
Results of Operations
For the period from incorporation on November 26, 2003, to February 28, 2005, the Company experienced
a net loss of $84,251. Included in these expenses are costs paid to consultants and contractors for the review of
various properties, costs associated with travel to the project, and costs associated with due diligence of the property
including the cost of maintaining an exploration office in Chile. Other expenses in the period related to costs
associated with the set-up of a company, and travel to and from Chile.
The Company incurred a net loss of $81,247 during the year ended February 28, 2005. During this period,
there were no revenues as the Company was still in an acquisition and exploration stage. Whereas these results are
for the first completed year of operations for the Company, no comparison to prior years can be made.
The current focus for the Company is the acquisition and exploration of mineral properties located in Chile.
The Company does not currently have the required financial resources to complete an exploration and
development program on its properties; accordingly, there is uncertainty whether or not it will be able to procure the
required financial resources. Management believes that it will be able to raise the necessary capital to fund its
exploration and development program in the next 18 months through the issuance of seed stock and an Initial Public
Offering (I.P.O.) for gross proceeds of approximately $2,000,000.
Liquidity
During the period ended February 28, 2005 the Company incurred costs associated with resource property
exploration of $230,333.
At February 28, 2005, the Company had a deficit of $84,251. The Company expects to incur losses for at
least the next 24 months. There can be no assurance that the Company will ever make a profit. To achieve
profitability, the Company must advance one or more of its properties through further exploration in order to bring
the properties to a stage where the Company can attract the participation of a major resource company, which has the
expertise and financial capability to take such properties to commercial production.
At February 28, 2005, the cash position of the Company was $154,095. Additional financing will be
required to fund the cost of continued acquisitions, and exploration development of the Companys mineral
properties located in Chile. The Company has retained Bolder Investment Partners Ltd. to act as Agent in the

39

Companys I.P.O. of 5,000,000 shares at $0.40 per share. The Company is currently in the process of filing a
preliminary prospectus in connection with its I.P.O..
There are currently no long-term debts, capital lease obligations, operating leases or purchase obligations.
The Company expects that the net proceeds from the I.P.O. will be sufficient to pay for the continued
exploration of the Companys properties and working capital for at least the next 18 months.
Capital Resources
The Company has no major commitments for capital expenditures. Except as otherwise disclosed in this
MD&A, there are currently no other identified sources of new capital. Additionally, the Company currently has no
established credit lines with chartered banks or other financial institutions.
Off Balance Sheet Transactions
There are currently no off balance sheet arrangements which could have a material effect on current or
future results of operations, or the financial condition of the Company.
Related Party Transactions
Included in cash at February 28, 2005 is $5,554 held in trust by a law firm in which a partner is a director of
the Company.
As at February 28, 2005, an amount of $14,693 was due to directors and a firm in which a director is a
partner.
During the year ended February 28, 2005, the Company entered into the following transactions with related
parties:

Paid or accrued consulting fees capitalized to deferred exploration costs of $40,000 to an officer and
director of the Company.

Paid or accrued management fees of $12,509 to an officer and director of the Company.

Paid or accrued deferred legal costs of $19,878 to a law firm in which a director is a partner.

Acquired mineral properties from directors of the Company, issuing 4,000,000 common shares valued at
$400 and issuing 200,000 common shares valued at $44,711 (US$35,000) as the settlement of out-ofpocket costs to the Vendor.

Proposed Transactions
There are currently no proposed transactions, except as otherwise disclosed in this MD&A. Confidentiality
agreements may be entered into from time to time, with independent entities to allow for discussions of the potential
acquisition and or development of certain properties.
Critical Accounting Estimates
The preparation of financial statements in accordance with Canadian generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amount of assets and
liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the period. Actual results could differ from these estimates.

40

Financial Instruments
The Company's financial instruments consist of cash, receivables, and accounts payable and accrued
liabilities. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial instruments. The fair value of these financial
instruments approximates their carrying values, unless otherwise noted.
Other MD&A Requirements
The Company is primarily engaged in the business of evaluating, acquiring and developing natural resource
properties in Chile. As at February 28, 2005, the Company had mineral properties with a carrying value of $306,664
on its balance sheet. The following table illustrates the breakdown of this amount:

Acquisition costs incurred

Deferred exploration costs
Balance, beginning of period
Consulting
Drafting, surveying and permits

FEBRUARY 28, 2005

45,111

FROM THE DATE OF

INCORPORATION
(NOVEMBER 26, 2003) TO
FEBRUARY 29, 2004
$
-

31,220
40,008
29,208

12,500
-

67,779
93,338
230,333

18,720
31,220

Sampling
Travel and field costs

Balance, end of period

Total mineral properties
C.

261,553
306,664

31,220
31,220

Interim Period Ended August 31, 2005

Overall Performance
The Company is currently seeking to have its shares of common stock listed on the TSX Venture Exchange.
The Company is an exploration stage company and has produced no revenues to date. At August 31, 2005, there
were 6,185,196 shares issued and outstanding.
During the six month period ended August 31, 2005, the Company expended a total of $47,121 on its
mineral properties as detailed below.
August 31, February 28,
Acquisition costs incurred

2005
45,111 $

2005
45,111

Deferred exploration costs

Balance, beginning of period
Consulting
Drafting, surveying and permits

261,553

31,220

40,008
29,208

41

August 31, February 28,

Sampling
Travel and field costs

2005
47,121
47,121

2005
67,779
93,338
230,333

Balance, end of period

308,674 $

261,553

Total mineral properties

353,785 $

306,664

Results of Operations
The summary historical financial information presented below has been derived from the date of
incorporation to February 29, 2004, the year ended February 28, 2005, and the six months ended August 31, 2005.

STATEMENT OF
OPERATIONS AND DEFICIT DATA
Revenues
Total expenses
Net loss
Basic and diluted net loss per share

SIX MONTHS ENDED

AUGUST 31, 2005

$
$
$

Weighted average number of shares outstanding

BALANCE SHEET DATA
Cash and cash equivalents
Working capital
Total assets
Shareholders' equity (deficit)

NIL
70,925 $
-70,925 $
0.01 $
6,185,196

$
$
$
$

FROM THE DATE OF

INCORPORATION
(NOVEMBER 26, 2003)
YEAR ENDED
FEBRUARY 28, 2005 TO FEBRUARY 29, 2004
AUDITED
AUDITED
NIL
NIL
81,247 $
3,004
-81,247 $
-3,004
-0.05 $
1,774,247

As at August 31, 2005 As at February 28, 2005

24,083 $
154,095
-17,389 $
129,795
427,706 $
492,677
386,234 $
457,159

$
$
$
$

As at February 29, 2004

166,776
133,075
197,996
164,295

During the six months ended August 31, 2005 the Company continued its efforts with respect to its
properties in Chile. The Company expended $47,121 in travel and field costs on its properties. Management fees
were $37,500 (contract payment of $5,000 USD per month) and the Company incurred administrative expenses in
the amount of $16,050 (contracted payment of $2,500 plus GST per month). In the period ended February 28, 2005,
the Company was in an early acquisition and exploration stage with regards to its mineral properties. The Company
had no revenues and incurred a loss of $81,247. Administrative services in the amount of $8,025 were incurred
during the year as the Company initiated a new administrative services contract ($2,500 per month). Management
fees of $12,509 were paid to the CEO in connection with a new employment contract, which began January 1, 2005.
The Company incurred office and supplies expenses in the amount of $4,435. Professional fees amounted to $31,878
and were related to legal costs incurred by the Company. The Company spent $5,000 to initiate a corporate website
and expended $19,400 on company related travel and entertainment.
As at August 31, 2005, the Company had total assets of $427,706. The assets were made up of cash of
$24,083, deferred financing costs of $49,838 and an amount for mineral properties of $353,785.

42

Summary of Quarterly Results

Period

Revenues

Basic
income
Income (loss) (loss) per
for the period share

31/05/2005

nil

$ (51,153)

$ (0.01)

31/08/2005

Nil

$ (19,772

$ (0.00)

Quarterly results have not been prepared prior to the year ended February 28, 2005, as a result, the results
discussed here are for the years ended February 29, 2004 and February 28, 2005; and the first two quarters ended
May 31, 2005 and August 31, 2005. For the period from incorporation on November 26, 2003, to February 28, 2005,
the Company experienced a net loss of $84,251. Included in these expenses are costs paid to consultants and
contractors for the review of various properties, costs associated with travel to the project, and costs associated with
due diligence of the property including the cost of maintaining an exploration office in Chile. Other expenses in the
period related to costs associated with the set-up of the Company, and travel to and from Chile.
The Company incurred a net loss of $81,247 during the year ended February 28, 2005. During this period,
there were no revenues as the Company was still in an acquisition and exploration stage. The current focus for the
Company is the acquisition and exploration of mineral properties located in Chile.
The Company does not currently have the required financial resources to complete an exploration and
development program on its properties; accordingly, there is uncertainty whether or not it will be able to procure the
required financial resources. Management believes that it will be able to raise the necessary capital to fund its
exploration and development program in the next 18 months through the issuance of seed stock and an Initial Public
Offering (I.P.O.) for gross proceeds of approximately $2,000,000.
Liquidity
During the period ended August 31, 2005 the Company incurred costs associated with resource property
exploration of $47,121.
At August 31, 2005, the Company had a deficit of $155,176. The Company expects to incur losses for at
least the next 24 months. There can be no assurance that the Company will ever make a profit. To achieve
profitability, the Company must advance one or more of its properties through further exploration in order to bring
the properties to a stage where the Company can attract the participation of a major resource company, which has the
expertise and financial capability to take such properties to commercial production.
At August 31, 2005, the cash position of the Company was $24,083. Additional financing will be required
to fund the cost of continued acquisitions, and exploration development of the Companys mineral properties located
in Chile.
There are currently no long-term debts, capital lease obligations, operating leases or purchase obligations.
The Company expects that the net proceeds from the I.P.O. will be sufficient to pay for the continued
exploration of the Companys properties and working capital for at least the next 18 months.

43

Capital Resources
The Company has no major commitments for capital expenditures. Except as otherwise disclosed in this
MD&A, there are currently no other identified sources of new capital. Additionally, the Company currently has no
established credit lines with chartered banks or other financial institutions.
Off-Balance Sheet Transactions
There are currently no off balance sheet arrangements which could have a material effect on current or
future results of operations, or the financial condition of the Company.
Transactions with Related Parties
Included in accounts payable at August 31, 2005 is $35,030 due to directors and a firm in which a director
is a partner.
During the six month period ended August 31, 2005, the Company entered into the following transactions
with related parties:

Paid or accrued consulting fees of $37,500 to an officer and director of the Company.

Paid or accrued deferred legal costs of $29,138 to a law firm in which a director is partner.

Paid or accrued administrative services of $16,050 to an officer and CFO of the Company.

Proposed Transactions
There are currently no proposed transactions, except as otherwise disclosed in this MD&A. Confidentiality
agreements may be entered into from time to time, with independent entities to allow for discussions of the potential
acquisition and or development of certain properties.
Critical Accounting Estimates
The preparation of financial statements in accordance with Canadian generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amount of assets and
liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the period. Actual results could differ from these estimates.
Financial Instruments
The Company's financial instruments consist of cash, receivables, and accounts payable and accrued
liabilities. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial instruments. The fair value of these financial
instruments approximates their carrying values, unless otherwise noted.
Other Information
The Company is primarily engaged in the business of evaluating, acquiring and developing natural resource
properties in Chile. As at August 31, 2005, the Company had mineral properties with a carrying value of $353,785
on its balance sheet (See 1.2 for a breakdown of these amounts).
The following illustrates the details of the Companys Capital Stock as at August 31, 2005.

44

On September 22, 2004, the Company issued 4,000,000 shares valued at $400 pursuant to the acquisition of
mineral properties (Note 3).

On January 1, 2005, the Company issued 200,000 common shares valued at $44,711 for payment of debt
incurred on the property acquisition (Note 3).

On February 15, 2005, the Company issued 1,985,195 common shares for proceeds of $496,299, $167,299
of which were received in the 2004 fiscal period.

Number
of Shares

Amount

Authorized
Unlimited common shares without par value
Issued
Balance as at inception, November 26, 2003 and February 29, 2004
For property acquisition
For debt
For cash
Balance as at February 28, 2005

1
4,000,000
200,000
1,985,195

1
400
44,711
496,299

6,185,196

541,411

There have been no changes to the Capital Stock of the Company since February 28, 2005.
At August 31, 2005, the Company had the following stock options outstanding enabling holders to acquire
the following:

Type
Directors/Officers options

Number
of Shares
850,000

Exercise
Price
$ 0.40

6.

DESCRIPTION OF THE SECURITIES DISTRIBUTED

6.1

Shares

Expiry Date
5 years from listing date

The authorized capital of the Company consists of an unlimited number of Shares without par value of
which 6,185,196 Shares were outstanding as of September 30, 2005. The Offering consists of 5,000,000 Shares at a
price of $0.40 per Share. Pursuant to the Agency Agreement, the Agent is also to receive 50,000 Shares from the
treasury of the Company upon completion of the Offering as a corporate finance fee (the Corporate Finance Fee).
This prospectus qualifies the issuance of the Corporate Finance Fee. See item 15 Plan of Distribution.
The holders of Shares are entitled to vote at all meetings of shareholders of the Company, to receive dividends
if, as and when declared by the directors and, subject to the rights of holders of any shares ranking in priority to or on a
parity with the Shares, to participate rateably in any distribution of property or assets upon the liquidation, winding-up or
other dissolution of the Company.
The Shares are not subject to any future call or assessments and do not have any pre-emptive rights or
redemption rights.

45

6.2

Agents Warrants

Pursuant to the Agency Agreement, the Agent will receive non-transferable Share purchase warrants (the
Agents Warrants) equal in number to 10% of the number of Shares sold. Each Agents Warrant will entitle the
Agent to purchase one Share at the price of $0.40 per Share, for a period of 12 months from the date the Shares are
listed and called for trading on the Exchange. The Agents Warrants are non-transferable. Holders of Agents
Warrants do not have any voting right or other right attached to Common Shares until the Agents Warrants are
properly exercised as provided for in the warrant certificate. The warrant certificate contains provisions designed to
protect the holders of Agents Warrants against dilution upon the occurrence of certain events. An adjustment in the
number of Common Shares issuable upon exercise of the Agents Warrants and/or the exercise price per Common
Share will be made in the event of the subdivision or consolidation of the Common Shares or a stock dividend or
other distribution of Common Shares or securities convertible or exchangeable into Common Shares, is made to
holders of all or substantially all of the Common Shares. In addition, the warrant certificate also provides for an
adjustment in the class and/or number of securities issuable upon exercise of the Agents Warrants and/or
subscription price in the event of: a reclassification or other change in the Common Shares; a capital reorganization
of the Company; or a consolidation, merger or amalgamation of the Company with another corporation or entity; or
the transfer of all or substantially all of the assets and undertaking of the Company.
6.3

Modification of Terms

The rights attached to the Shares of the Company may only be modified according to the Business
Corporations Act (British Columbia).
7.

CONSOLIDATED CAPITALIZATION
The Company has sold securities for cash in its non-reporting stage as set out below.

In February 2005, the Company accepted subscriptions for 1,985,195 Shares at $0.25 per Share. The
Shares were issued on February 15, 2005.
Stock Options
In January 2005, the Company adopted a Stock Option Plan, and granted options to purchase an aggregate
of 850,000 Shares of the Company at a price of $0.40 per Share for a period expiring on the fifth anniversary of the
Listing Date. See item 8 Options to Purchase Securities.
8.

OPTIONS TO PURCHASE SECURITIES

Options
In January 2005, the Company adopted a Stock Option Plan and granted options to purchase an aggregate
of 850,000 Shares of the Company at a price of $0.40 per Share for a period expiring on the fifth anniversary of the
date on which the Shares of the Company are first listed and called for trading on the TSX Venture Exchange (the
Listing Date).
The stock options were granted as follows:
Name of Optionee
Patrick Burns
Lyle Davis
John Robins
Graham H. Scott
Patrick Gorman

Position Held
Director
Director
Director
Director
Consultant

Number of Shares under Option

200,000
150,000
150,000
100,000
50,000

46

Name of Optionee
Art Soregaroli
Paul Larkin
John Paul Larkin
Carlos Rojas Pizarro
TOTAL:

Position Held
Consultant
Officer
Consultant
Employee

Number of Shares under Option

50,000
100,000
25,000
25,000
850,000

The aforesaid options are non-assignable and have been granted as incentives and not in lieu of any
compensation for services.
There was no market for the Company's securities at the time the options were granted and the market value
as of that date has been determined at $0.40 per Share based upon the proposed offering price.
In addition to the options granted by the Company, Mr. Burns has granted an option to each of Messrs.
Davis, Scott and Larkin, entitling each of them to purchase up to 250,000 shares, as and when such shares are
released from escrow, at a price of $0.05 per share.
A.

Fully Diluted Share Capital

In respect of all of the stock options and the Agents Warrants, the Stock Option Plan or warrant certificates
contains, or will contain, provisions providing for an adjustment of the number of Shares available for purchase in
the event of any alteration in the capital stock of the Company such that the stock option or warrant shall, following
such alteration, entitle its holder to acquire the same number of Shares at any equivalent exercise price as it did
before the alteration.
The following table discloses the Companys fully diluted share capital, after giving effect to the Offering
hereunder:
Shares Issued or Allotted
Issued as of the date of this Prospectus
Founders Stock (4,000,000)
Property Acquisition Costs (200,000)
Seed Stock (1,985,196)
Stock Options
Offering
Agents Warrants
Agents Corporate Finance Fee
Total:
9.

Number of Shares
6,185,196

850,000
5,000,000
500,000
50,000
12,585,196

Percentage of Total
49.15%

6.75%
39.73%
3.97%
0.40%
100.00%

PRIOR SALES

The following is a summary of the Shares sold for cash by the Company during the 12-month period prior
to the date of this Prospectus:
Number of Shares
1,985,195

Price per Share

$0.25

Total Commissions Paid

Nil (1)

Net Cash Received

$496,298

With respect to stock options granted to insiders and their associates, see item 8 "Options to Purchase
Securities" and item 15 "Plan of Distribution".

47

10.

ESCROWED SECURITIES

In accordance with National Policy 46-201, Escrow for Initial Public Offerings, (the Policy) all Shares of
an issuer owned or controlled by the issuers principals, as defined in the Policy, will be escrowed at the time of
the issuers initial public offering (the IPO), except where such Shares represent less than 1% of the issuers total
issued and outstanding Shares after giving effect to the IPO. Pursuant to the Policy, and pursuant to an agreement
(the Escrow Agreement) entered into among Patrick J. Burns, Jimmy E. Toler, Graham H. Scott, John E. Robins
and Krista Scott (the Principals), the Company and Pacific Corporate Trust Company (the Trustee), a total of
4,511,892 Shares (the Escrowed Shares) will be deposited in escrow with the Trustee as escrow agent on the
closing of the IPO. The Escrowed Shares will represent approximately 40.16% of the issued Shares after giving
effect to the Offering.
The Company is classified as an emerging issuer under the Policy, and the Escrowed Securities will be
released to the Principals under the following schedule:

10% of each Principals holdings will be released on the Listing Date;

15% six months following the Listing Date;
15% twelve months following the Listing Date;
15% eighteen months following the Listing Date;
15% twenty-four months following the Listing Date;
15% thirty months following the Listing Date; and
15% thirty-six months following the Listing Date.

The Policy provides that if the Company becomes an established issuer during the currency of the escrow
agreement, the release of Shares from escrow will be accelerated such that all of the escrowed Shares will be
released at prescribed intervals over a period of 18 months.
As of the date of this Prospectus, set forth below are details of the number of Shares held in escrow:

Name of Principal
Patrick J. Burns

Jimmy E. Toler

Graham H. Scott
John E. Robins

Krista Scott
TOTAL
(1)

No. of Shares held in Escrow and

deemed issue price per Share
2,750,000 (1) at $0.01
40,000 at $0.25
2,790,000
1,000,000 at $0.01
200,000 at $0.25
51,892 at $0.25
1,251,892
60,000 at $0.25
250,000 at $0.01
100,000 at $0.25
350,000
60,000 at $0.25
4,511,892

Percentage of
Issued Shares
prior to the
distribution
45.11%

Percentage of
Issued Shares
after the
distribution
24.83%

20.24%

11.14%

0.97%
5.66%

0.53%
3.12%

0.97%
72.95%

0.53%
40.15%

Mr. Burns has granted an option to each of Messrs. Davis, Scott and Larkin, entitling each of them to
purchase up to 250,000 shares, as and when such shares are released from escrow, at a price of $0.05 per
share. Each of Messrs. Davis, Scott and Larkin is a principal of the Company.

The escrow restrictions provide that the Escrowed Securities may be transferred within escrow to an
individual who is a director or senior officer of the Company, subject to the approval of the directors of the
Company, or to a person or company that before the proposed transfer holds more than 20% of the voting rights

48

attached to the Companys outstanding securities, or to a person that after the proposed transfer will hold more than
10% of the voting rights attached to the Companys outstanding securities and that has the right to elect or appoint
one or more directors or senior officers of the Company.
The complete text of the escrow agreement is available for inspection at the registered and records office of
the Company.
11.

PRINCIPAL SHAREHOLDERS

As at the date of this Prospectus, the number of Shares of the Company owned by each person or company
who has or is known by the Company to have (a) direct or indirect beneficial ownership of, (b) control or direction
over, or (c) a combination of direct or indirect beneficial ownership of and control or direction over, voting securities
that will constitute more than 10% of the issued Share capital of the Company prior to and after the distribution is as
follows:

Name
Patrick J. Burns

Designation
of Class
Common

Jimmy E. Toler

Common

Type of
Ownership
Direct and
beneficial
Direct and
beneficial

No. of
Securities
Owned
2,790,000 (1)

Percent of
Issued
Securities of
Class prior to
the
distribution
45.11%

Percent of
Issued
Securities of
Class after
the
distribution
24.83% (2)

1,251,892 (1)

20.24%

11.14% (2)

(1)
(2)

The securities are owned both of record and beneficially.

On a fully diluted basis, Patrick J. Burns would hold 22.17% after the distribution and Jimmy E. Toler
would hold 9.95%. See item 8 Options to Purchase Securities.

12.

DIRECTORS AND OFFICERS

12.1

Name, Address, Occupation and Security Holding

The following are the full names, municipality of residence, positions with the Company and principal
occupations within the preceding five years, the dates of their appointment or election and their holdings of common
shares (including those over which they exercise control) of all of the directors and executive officers of the
Company:
Name and Municipality
of Residence
Patrick J. Burns (1)
Salta, Argentina
Graham H. Scott
Vancouver, B.C.

Current Position with

Company
President, Chief Executive
Officer and director, from
Feb. 2, 2004 to present
Director and Corporate
Secretary, from Dec. 1,
2003 to present

Principal Occupation for the

Preceding Five Years
President of the Company. Prior to
February 2, 2004, an independent
geological consultant
Lawyer; Principal, Vector Corporate
Finance Lawyers from July 1, 2001 to
date

No. of
Common
Shares
2,790,000

60,000

49

Current Position with

Company

Principal Occupation for the

Preceding Five Years

Lyle Davis (1)

North Vancouver, B.C.

Director, from Feb. 2, 2004

to present

John E. Robins (1)

Lions Bay, B.C.

Director, from April 5, 2004

to present

Paul Larkin
Vancouver, B.C.

Chief Financial Officer,

from Nov. 1, 2004 to
present

Principal of Elardee Group Capital

Inc., a business consulting practice
which provides corporate finance,
project management, and general
advisory services for public and
private companies
Principal of Hunter Exploration
Group, a private exploration and
venture capital group, 1990 present;
self-employed professional geologist
and entrepreneur, 1990 present;
Chairman, Committee Bay Resources
Ltd., 2004 present; President,
Northern Empire Minerals Ltd. (now
Storn, 1999 2003
President of New Dawn Group, a
private administrative and financial
services company, and a director of
several public companies

Name and Municipality

of Residence

(1)

No. of
Common
Shares
Nil

350,000

Nil

Member of Audit Committee

The directors are elected at each annual general meeting to hold office until the next annual general meeting
or until their successors are duly elected or appointed, unless such office is earlier vacated in accordance with the
Articles of the Company or a director becomes disqualified to act as a director.
Upon completion of the offering, 3,200,000 Shares of the Company will be beneficially owned, directly or
indirectly, by all the directors and executive officers, as a group, representing 28.48% of the then issued and
outstanding voting securities (11,235,196 Shares).
12.2

Corporate Cease Trade Orders or Bankruptcies

Other than as described below, none of the directors, officers or promoters of the Company is, or within the
past ten years prior to the date hereof has been, a director, officer, or promoter of any other issuer that, while that
person was acting in that capacity:
(a)

was subject to a cease trade or similar order or an order that denied the issuer access to any statutory
exemptions for a period of more than 30 consecutive days; or

(b)

was declared bankrupt or made a voluntary assignment in bankruptcy, made a proposal under any
legislation relating to bankruptcy or insolvency or been subject to or instituted any proceedings,
arrangements or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold
the assets of the person.

Paul Larkin was the President and a director of Setanta Ventures Inc., which was subject to a cease-trade
order for failure to file acceptable financials and was subsequently delisted when no reactivation asset was acquired.
Lyle Davis was a director of Sitec Ventures Corp. from October 1999 until November 5, 2003. Sitec was
cease traded on June 3, 2003 for failure to file its December 31, 2002 audited financials statements. Sitec
subsequently filed it December 31, 2002 audited financial statements, as well as its March, June and September 2003
interim statements. Mr. Davis was a director of Consolidated Epix Technologies Limited from June 1999 until its

50

merger with Saxon Energy Services in November 2004. Consolidated Epix was suspended on October 29, 2001 for
failure to maintain Tier Maintenance requirements and was reinstated for trading August 18, 2003.
12.3

Penalties or Sanctions

None of the directors, officers or promoters of the Company has, within the ten years prior to the date hereof, been
subject to any penalties or sanctions imposed by a court or securities regulatory authority relating to the trading in
securities, promotion or management of a publicly traded issuer, or theft or fraud.
12.4

Individual Bankruptcies

None of the directors, officers or promoters of the Company has, within the ten years prior to the date hereof, been
declared bankrupt or made a voluntary assignment into bankruptcy, made a proposal under any legislation relating to
bankruptcy or insolvency or been subject to or instituted any proceedings, arrangements, or compromise with
creditors or had a receiver, receiver manager or trustee appointed to hold the assets of that individual.
12.5

Conflicts of Interest

Certain directors and officers of the Company are and may continue to be involved in the mining and
mineral exploration industry through their direct and indirect participation in corporations, partnerships or joint
ventures which are potential competitors. Situations may arise in connection with potential acquisitions and
investments where the other interests of these directors and officers may conflict with the interests of the Company.
As required by law, each of the directors of the Company is required to act honestly, in good faith and in the best
interests of the Company. Any conflicts which arise shall be disclosed by the directors and officers in accordance
with the Business Corporations Act (British Columbia) and they will govern themselves in respect thereof to the best
of their ability with the obligations imposed on them by law.
12.6

Management of the Company

The following sets out additional biographical information for each member of management of the
Company:
Patrick J. Burns, Age 56, President, Chief Executive Officer and Director
Mr. Burns is an exploration geologist with more than 25 years experience in Latin America, including 17 years in
Chile. Mr. Burns has enjoyed a successful track record highlighted by his direct involvement in the discoveries of the
Escondida, Escondida Norte and Zaldivar porphyry copper deposits (and was the first Project Manager of all three)
and discovery of the San Cristobal gold deposit. He was also a part of the Sustut deposit discovery team while with
Falconbridge in northern B.C. Mr. Burns has significant experience in managing junior resource companies in Latin
America and an extensive South American contact base.
Graham H. Scott, Age 58, Corporate Secretary and Director
Mr. Scott is the principal of VECTOR Corporate Finance Lawyers and practices corporate and commercial law, with
emphasis on securities law and mining law. He represents many Canadian public companies which are listed on the
TSX and TSX Venture Exchanges, in addition to clients in the corporate finance business. Called to the bar in 1981,
Mr. Scott is listed as consistently recommended in the area of Mining in LEXPERT.CA, a directory of Canadian
lawyers based on a survey of the legal community. In addition, he is listed in The International Whos Who of
Mining Lawyers published by London-based Law Business Research Ltd.
Lyle Davis, P.Eng. (Alberta), MBA, Age 50, Director
Mr. Davis is an independent director of the Company and devotes approximately 10% of his time to the Company.
Mr. Davis is a principal of Ellardee Group Capital Inc., a firm he founded in 1999 to provide corporate finance,

51

advisory, and management services of public companies, and which now has a number of private company clients as
well. He previously worked in the corporate finance divisions of Ernst & Young and C.M. Oliver and Company,
both in Vancouver. Mr. Davis spent approximately ten years with the Vancouver Stock Exchange, in their corporate
finance division, and their trading operations department. He is a member of the Association of Professional
Engineers, Geologists and Geophysicists of Alberta, and has been a guest lecturer at UBC on the application of
option pricing theory to business valuation.
John E. Robins, P.Geo., Age 46 Director
Mr. Robins is an independent director of the Company and devotes approximately 10% of his time to the Company.
Mr. Robins has 20 years experience in mineral exploration in Canada, the U.S. and Latin America. He is a member
of the Association of Professional Engineers and Geoscientists of B.C., Prospectors and Developers Association of
Canada, Northwest Mining Association and the B.C. and Yukon Chamber of mines. A director of several public
companies, Mr. Robins is also a principal of the Hunter Exploration Group, a private exploration and venture capital
entity that has staked over 20 million acres of mineral claims in Canada since 1988.
Paul Larkin, Age 55, Chief Financial Officer
Mr. Larkin will devote 20% of his time to the company. Mr. Larkin is President of the New Dawn Group, an
investment and financial consulting firm located in Vancouver, British Columbia. New Dawn is primarily involved
in corporate finance, merchant banking and administrative management of public companies. Mr. Larkin held
various accounting and banking positions for over a decade before founding New Dawn in 1983. He is currently
President of Tyner Resources Ltd. (TSX-V) and serves on the boards of a number of public and private companies.
13.

EXECUTIVE COMPENSATION

A.

Executive Compensation

During the period from incorporation (November 26, 2003) to February 28, 2005, the Company had one
Named Executive Officer (for the purposes of applicable securities legislation), namely Patrick J. Burns, the
President and Chief Executive Officer.
The following table sets forth, for the period indicated, the compensation of the Named Executive Officer:
Annual Compensation

Name and
Principal
Position
Patrick J. Burns,
President and
Chief Executive
Officer
Notes: (1)
(2)
(3)
(4)

Year(1)
2004
2005

Salary ($)
12,500
52,509

Bonus
($)(2)
N/A
N/A

Other
Annual
Compensation ($)
N/A
N/A

Long Term Compensation

Awards
Payouts
Securities Restricted
Shares or
Under
Restricted
Options/
LTIP(4)
Share
SARs(3)
Units
granted
payouts
($)
($)
($)
Nil
Nil
Nil
200,000
Nil
Nil

All Other
Compensation ($)
Nil
Nil

For the period from incorporation (November 26, 2003) to February 29, 2004 and for the year
ended February 28, 2005.
Bonus amounts are paid in cash in the year following the fiscal year in which they were earned.
Stock appreciation rights.
Long-term incentive plan.

52

B.

Options and Stock Appreciation Rights ("SARs")

No incentive stock options were granted to the Named Executive Officer from incorporation (November 26,
2003) to February 29, 2004.
During the financial year ended February 28, 2005 (the Financial Period), the following incentive stock
options were granted to the Named Executive Officer:

Name
Patrick J. Burns
(1)

(2)
(3)
(4)

Securities
under
Options/SARs
granted (#)(1)
200,000

Percentage of
Total
Options/SARs
granted to
Employees in
Financial
Period(2)
27.59%

Exercise or
Base Price
($/Security)
$0.40

Market Value
of Securities
underlying
Options/SARs
on the Date of
Grant
($/Security)
$0.40 (3)

Expiration
Date
(4)

On January 28, 2005, a total of 850,000 options to purchase Shares were granted to directors (as to
600,000), officers (as to 100,000), consultants (as to 125,000) and employees (as to 25,000) of the
Company. The options granted to the Named Executive Officer (as to 200,000) were granted to such
person in his capacity as a director and officer of the Company.
Reflected as a percentage of 725,000 options granted to directors, officers, employees and the Named
Executive Officer.
There was no market value for the Companys securities at the time the options were granted and the market
value as of that date has been determined at $0.40 per Share based upon the proposed offering price.
Fifth anniversary of the Companys Listing Date.
There are no assurances that the incentive stock options described above will be exercised in whole or in

part.
C.

Pension Plan
The Named Executive Officer does not participate in any defined benefit or actuarial plan.

D.

Termination of Employment, Change in Responsibilities and Employment Contracts

There are no employment contracts between the Company and any of its subsidiaries and the Named
Executive Officer save and except as set forth below:
Pursuant to a consulting agreement (the Burns Consulting Agreement), dated January 1, 2005, between
the Company and Patrick J. Burns (Burns), Burns agreed to provide geological consulting services to the Company
and to act as President and Chief Executive Officer of the Company for a two-year term commencing on January 1,
2005. The fee payable to Burns is US$5,000 per month, exclusive of Canadian GST. If there is a change in control
of the Company, Burns may terminate the Burns Consulting Agreement and has the right to receive 200% of the
amount due to him for the remainder of the term of his agreement.
There is no compensatory plan or arrangement, including payments to be received from the Company or
any of its subsidiaries, with respect to the Named Executive Officer.
E.

Compensation of Directors

During the Financial Period, no compensation was paid or is payable by the Company to the directors of the
Company, other than the Chief Executive Officer (the Other Directors), or the Companys subsidiary, for their
services:

53

(a)

in their capacity as directors, including any amounts payable for committee participation or special
assignments pursuant to any standard or other arrangements; or

(b)

as consultants or experts,

except as consultants or experts as set forth below and as otherwise herein disclosed.
The Company has no pension plan or other arrangement for non-cash compensation to the Other Directors,
except incentive stock options. During the Financial Period the Other Directors were granted incentive stock options
to purchase up to 400,000 Shares of the Company exercisable for a term of five years following the Listing Date.
14.

INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

During the most recently completed financial year, none of the directors and executive officers of the
Company or each of their respective associates or affiliates is or has been indebted to the Company (other than
routine indebtedness) in excess of $25,000 at any time for any reason whatsoever, including the purchase of
securities of the Company or any of its subsidiaries.
15.

PLAN OF DISTRIBUTION

15.1

Name of Agent

Offering
The Company, through its agent, Bolder Investment Partners, Ltd. (the Agent), of 800 1450 Creekside Drive,
Vancouver, B.C., V6J 5B3, hereby offers to the public 5,000,000 Shares at a price of $0.40 per Share. The closing
of the Offering (the Closing) will take place on a day, determined by the Agent in consultation with the Company,
which will be no later than 90 days from the date (the Effective Date) on which a receipt is issued by the British
Columbia Securities Commission (the Commission) for the final prospectus of the Company, or such later date as
may be agreed to by the Agent, the Company and the Commission.
15.2

Disclosure of Market Out

The obligations of the Agent under the Agency Agreement may be terminated at any time prior to the sale
of any of the Shares at the Agent's discretion on the basis of its assessment of the state of the financial markets and
may also be terminated at any time upon the occurrence of certain stated events.
15.3

Commercially Reasonable Efforts Offering

Offering and Appointment of Agent

The Company by an agreement, dated October , 2005 (the "Agency Agreement") appointed the Agent as
its agent to offer, on a commercially reasonable efforts basis, the 5,000,000 Shares in the provinces of British
Columbia, Alberta and Ontario. Following the Effective Date, the Company and the Agent will set the date for the
Closing.
The Company will, at the closing of the Offering (i) pay to the Agent a commission equal to 8% of the
aggregate gross proceeds of the Offering and (ii) issue to the Agent that number of share purchase warrants (the
Agents Warrants) equal in number to 10% of the aggregate number of Shares issued in connection with the
Offering, each such Agents Warrant entitling the holder to acquire one Common Share at the price of $0.40 per
Common Share for a period of 12 months from the date on which the Companys Shares commence trading on the
TSX Venture Exchange. The Company has paid a non-refundable work fee of $10,000 plus GST to the Agent and

54

will issue 50,000 common shares from treasury to the Agent upon completion of the Offering as the Corporate
Finance Fee.
Selling Group Participation
The Agent reserves the right to offer selling group participation in the normal course of the brokerage
business to selling groups of other licensed broker-dealers, brokers and investment dealers, who may or who may not
be offered part of the commissions or bonuses derived from this Offering.
Right of First Refusal and Right of Participation
The Company has granted the Agent a right of first refusal to provide all future equity financing to the
Company for a period of 12 months from the date on which the Companys Shares commence trading on the TSX
Venture Exchange. Upon receipt from the Company of notice of any proposed equity financing, the Agent shall
have 10 days to exercise its right of first refusal. In the event that the Agent declines to exercise the right of first
refusal with respect to any proposed equity financing, it will retain a right of participation for up to 15% of such
financing.
Miscellaneous
There are no payments in cash, securities or other consideration being made, or to be made, to a promoter,
finder or any other person or company in connection with the Offering.
The directors, officers and other insiders of the Company may purchase Shares from the Offering.
Other
The Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the
"U.S. Securities Act"), and such securities may not be offered or sold to a person in the United States unless an
exemption from the registration requirements of the U.S. Securities Act is available.
15.4

Listing Application

The Company has applied to list the Shares being sold under the Offering on the TSX Venture Exchange.
Listing will be subject to the Company fulfilling all the listing requirements of the TSX Venture Exchange.
15.5

Determination of Price

The price of the Shares offered under this Prospectus was determined by the Company in consultation with
the Agent.
16.

RISK FACTORS

AN INVESTMENT IN A NATURAL RESOURCE ISSUER INVOLVES A SIGNIFICANT

DEGREE OF RISK. THE DEGREE OF RISK INCREASES SUBSTANTIALLY WHERE THE ISSUERS
PROPERTIES ARE IN THE EXPLORATION AS OPPOSED TO THE DEVELOPMENT STAGE. The
Companys exploration activities are subject to the risks normally encountered by companies which develop and
mine base and precious metals. All of the Companys properties are in the exploration stage. A number of factors,
including metal prices, the further discovery of ore reserves and the grade of newly discovered ore are beyond the
Companys control.
These securities are suitable only for those purchasers who are willing to rely upon the ability,
judgement and integrity of the management and directors of the Company and who can afford a total loss of
their investment. The securities offered hereby are considered speculative due to the nature of the Company's

55

business and the present stage of its development. A prospective investor should consider carefully the following
factors:
Country Risk
Activities in Chile are subject to currency (foreign exchange) fluctuations which may adversely affect the
value of the Companys exploration funds, notwithstanding that the Chile Peso exchange rate has remained relatively
stable for two years.
Chile has a long history of mining, is foreign investor friendly, and boasts as Latin Americas longeststanding democracy. In fact, the 7th Annual (2004) Survey of Mining Companies, released by the Fraser Institute,
places Chile with the highest rank on the Overall Investment Attractiveness Index.
The majority of Chiles foreign investment comes from the United States, Canada and Spain, most of it
going into the mining sector as well as the electrical and service industries. The country has benefited from
exceptionally sound management over more than two decades and has enjoyed growth rates well above the rest of
Latin America over that period, while maintaining low and stable inflation.
Chiles credit rating remains the best in Latin America. Under President Ricardo Lagos, the Chilean
government has placed sovereign bonds in international markets four times, with country risk premiums amongst the
lowest in the developing world.
The following summary on Chiles economy is quoted directly from the CIA factbook (CIA, 2004):
Chile has a market-oriented economy characterized by a high level of foreign trade. During the early
1990s, Chiles reputation as a role model for economic reform was strengthened when the democratic government
of Patricio Aylwin, which took over from the military in 1990, deepened the economic reform initiated by the
military government. Growth in real GDP averaged 8% during 1991-97, but fell to half that level in 1998 because
of tight monetary policies implemented to keep the current account deficit in check and because of lower export
earnings the latter a product of the global financial crisis. A severe drought exacerbated the recession in 1999,
reducing crop yields and causing hydroelectric shortfalls and electricity rationing, and Chile experienced negative
economic growth for the first time in more than 15 years. Despite the effects of the recession, Chile maintained its
reputation for strong financial institutions and sound policy that have given it the strongest sovereign bond rating in
South America. By the end of 1999, exports and economic activity had begun to recover, and growth rebounded to
4.2% in 2000. Growth fell back to 3.1% in 2001 and 2.1% in 2002, largely due to lackluster global growth and the
devaluation of the Argentina peso, but recovered to 3.2% in 2003. Unemployment, although declining over the past
year, remains stubbornly high, putting pressure on President Lagos to improve living standards. One bright spot
was the signing of a free trade agreement with the US, which took effect on 1 January 2004. In 2004, GDP growth
is set to accelerate to more than 4% as copper prices rise, export earnings grow, and foreign direct investment picks
up.
Political Regulatory Risks
Any changes in government policy may result in changes to laws affecting ownership of assets, mining
policies, monetary policies, taxation, rates of exchange, environmental regulations, labour relations, repatriation of
income and return of capital. This may affect both the Companys ability to undertake exploration and development
activities in respect of present and future properties in the manner currently contemplated, as well as its ability to
continue to explore, develop and operate those properties in which it has an interest or in respect of which it has
obtained exploration and development rights to date. The possibility that future governments may adopt
substantially different policies, which might extend to expropriation of assets, cannot be ruled out.
As an example, in 2004 there was a move by the Chilean government to introduce a 5 percent Royalty tax
on operating income derived from the sale of mineral products from producing mines in the country. The
government hopes to pass this proposal into law this year, President Ricardo Lagos last year in office. The initial

56

proposal was voted down by the Congress, and has been revamped as the Royalty 2 Bill. The new proposal
represents the first real consensus achieved by central government officials and regional politicians on the issue. The
new agreement calls for a 4% tax on profits that will remain the fixed tax rate for 12 years, rather than 15.
There is also consideration for a lower, stair-stepped tax rate for companies whose profit margin falls below
eight percent.
Nature of Mineral Exploration and Mining
There is no known mineral resource on any of the Companys properties. Development of a property will
occur only if satisfactory exploration results are obtained. Mineral exploration and development involves a high
degree of risk and few properties which are explored are ultimately developed into producing mines. There is,
therefore, no assurance that the Companys mineral exploration and development activities will result in any
discoveries of bodies of commercial ore. The long-term profitability of the Companys operations will be in part
directly related to the cost and success of its exploration programs, which may be affected by a number of factors out
of the Companys control.
Substantial expenditures are required to establish reserves through drilling and, if warranted, to develop the
mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may
be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be
discovered in sufficient quantities to justify commercial operations, or at all, or that the funds required for
development can be obtained on a timely basis. Mineral exploration is subject to a high degree of risk, which even a
combination of experience, knowledge, and careful evaluation may not be able to overcome.
Exploration and Development Risks
Mineral exploration and mining involve considerable financial and technical risk. Substantial expenditures
are usually required to establish ore reserves, to evaluate metallurgical processes and to construct mining and
processing facilities at a particular site. It is impossible to assure that the current exploration programs planned by
the Company will result in profitable commercial mining operations, as few properties that are explored are
ultimately developed into producing mines. Unusual or unexpected geological formations, unstable ground
conditions that could result in cave-ins or land slides, floods, environmental pollution, power outages or fuel
shortages, labour disruptions, fires, explosions, personal injuries and the inability to obtain suitable or adequate
machinery, equipment or labour are risks associated with the conduct of exploration programs and the operation of
mines.
Mineral Deposits and Production Costs; Metal Prices
The economics of developing mineral deposits are affected by many factors including variations in the
grade of ore mined, the cost of operations, and fluctuations in the sales price of products. The value of the
Companys mineral properties is heavily influenced by metal prices. Metal prices can and do change by substantial
amounts over short periods of time, and are affected by numerous factors beyond the control of the Company,
including changes in the level of supply and demand, international economic and political trends, expectations of
inflation, currency exchange fluctuations, interest rates and global or regional consumption patterns, speculative
activities and increased production arising from improved mining and production methods and new discoveries.
There can be no assurance that the prices of mineral products will be sufficient to ensure that the Companys
properties can be mined profitably. Depending on the price received for minerals produced, the Company may
determine that it is impractical to commence or continue commercial production.
The grade of any ore ultimately mined from a mineral deposit may differ from that predicted from drilling
results. Production volumes and costs can be affected by such factors as the proximity and capacity of processing
facilities, permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties,
unusual or unexpected geological formations and work interruptions. Short-term factors relating to ore reserves,
such as the need for orderly development of ore bodies or the processing of new or different grades, may also have

57

an adverse effect on the results of operations. Moreover, there can be no assurance that any gold or other minerals
recovered in small-scale laboratory tests will be achieved under production scale conditions. Although precautions
to minimize risks will be taken, processing operations are subject to hazards such as equipment failure or failure of
tailings impoundment facilities, which may result in environmental pollution and consequent liability.
Additional Financing
The Company has no source of operating cash flow to fund all of its exploration and development projects
and will require additional financing to continue its operations. There can be no assurance that such financing will be
available at all or on favourable terms. Failure to obtain such additional financing could result in delay or indefinite
postponement of the Companys exploration and development programs, resulting in the possible dilution or loss of
mineral property interests. Any such financing will dilute the ownership interest of the Companys shareholders at
the time of the financing, and may dilute the value of their shareholdings.
Limited Business History
The Company has only recently commenced operations and has no history of operating earnings. The
likelihood of success of the Company must be considered in light of the problems, expenses, difficulties,
complications and delays frequently encountered in connection with the establishment of any business. The
Company has limited financial resources and there is no assurance that additional funding will be available to it for
further operations or to fulfil its obligations under applicable agreements. There is no assurance that the Company
can generate revenues, operate profitably, or provide a return on investment, or that it will successfully implement its
plans.
Permits and Licenses
The operations of the Company will require licenses and permits from various governmental and nongovernmental authorities. The Company has obtained, or will obtain, all necessary licenses and permits required to
carry on with activities that it is currently conducting or which it proposes to conduct under applicable laws and
regulations. However, such licenses and permits are subject to change in regulations and in various operating
circumstances. There can be no assurance that the Company will be able to obtain all necessary licenses and permits
required to carry out exploration, development and mining operations at its proposed projects.
Other Regulatory Requirements
The operations of the Company are subject to laws and regulations governing prospecting, development,
mining, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, land use,
environmental protection, mine safety and other matters. The Company believes it is in substantial compliance with
all material laws and regulations that currently apply to its activities. There can be no assurance, however, that all
permits which the Company may require for construction of mining facilities and conduct of mining operations,
particularly environmental permits, will be obtainable on reasonable terms or that compliance with such laws and
regulations would not have an adverse effect on the profitability of any mining project that the Company might
undertake.
Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement
actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be
curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment,
or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or
damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of
applicable laws or regulations and, in particular, environmental laws.
Amendments to current laws, regulations and permits governing operations and activities of mining
companies, or more stringent implementation thereof, could have a material adverse impact on the Company and

58

cause increases in capital expenditures or production costs or reduction in levels of production at producing
properties or require abandonment or delays in development of new mining properties.
Environmental Factors
All phases of the Companys operations are subject to environmental regulation in the various jurisdictions
in which it operates. Environmental legislation is evolving in a manner which will require stricter standards and
enforcement, increased fines ad penalties for non-compliance, more stringent environmental assessments of proposed
projects and a heightened degree of responsibility for companies and their officers, directors and employees. There
is no assurance that future changes in environmental regulation, if any, will not adversely affect the Companys
operations. Environmental hazards may exist on the Companys properties which are unknown to the Company at
present which have been caused by previous or existing owners or operators of the properties.
Unknown Environmental Risks for Past Activities
Exploration and mining operations involve a potential risk of releases to soil, surface water and
groundwater of metals, chemicals, fuels, liquids having acidic properties and other contaminants. In recent years,
regulatory requirements and improved technology have significantly reduced those risks. However, those risks have
not been eliminated, and the risk of environmental contamination from present and past exploration or mining
activities exists for mining companies. Companies may be liable for environmental contamination and natural
resource damages relating to properties that they currently own or operate or at which environmental contamination
occurred while or before they owned or operated the properties. However, no assurance can be given that potential
liabilities for such contamination or damages caused by past activities at these properties do not exist.
Competition
The mineral exploration and mining business is competitive in all of its phases. The Company competes
with numerous other companies and individuals, including competitors with greater financial, technical and other
resources than the Company, in the search for and the acquisition of attractive mineral properties. The ability of the
Company to acquire properties in the future will depend not only on its ability to develop its present properties, but
also on its ability to select and acquire suitable properties or prospects for mineral exploration. There is no
assurance that the Company will continue to be able to compete successfully with its competition in acquiring such
properties or prospects.
As the price of gold increases the amount of new exploration activity is increasing as well as the number of
new exploration companies. This will lead to more competition and will make it more difficult for the Company to
acquire good quality projects.
No Assurance of Title to Property
The Company has not conducted surveys of the claims in which it holds interests and therefore, the precise
area and location of such claims may be in doubt. There is no assurance that the interests of the Company in any of
its properties may not be challenged or impugned.
However, Chile enacted legal provisions in the 1980 constitution to stimulate the development of mining,
while at the same time guaranteeing the property rights of both local and foreign investors. While the state owns all
mineral resources, exploration and exploitation of these resources is allowed via mining concessions, which are
granted by the courts. A Constitutional Organic Law, enacted in 1982, places both rights and obligations on
concessions; these can be mortgaged or transferred and the holder is entitled to the right to explore (pedimentos) as
well as to exploit (mensuras). A concession is obtained by filing a claim and includes all minerals that may occur
within its area. The concession holder also has the right to defend his ownership against the state and third parties.
Mining claims in Chile are acquired in the following manner:

59

Pedimento: A pedimento is an exploration claim precisely defined by UTM coordinates with

north-south and east-west boundaries. These may range in size from a minimum 100 hectares to a
maximum of 5000 hectares, with a maximum length-to-width ratio of 5:1. A pedimento is valid for
a maximum period of 2 years, following which the claim may be reduced in size by at least 50%,
and renewed for an additional 2 years, provided that no overlying claim has been staked. Claim
taxes are due annually in March; if the taxes on a pedimento are not paid, the claim can be restored
to good standing by paying double the annual claim tax by or before the following year. In Chile,
new pedimentos are permitted to overlap pre-existing claims, however, the previously staked or
underlying claim always takes precedence as long as the claim holder maintains his claim in good
standing and converts the pedimento to a manifestacion within the initial 2-year period.

Manifestacion: During the 2-year life of a pedimento, it may be converted at any time to a
manifestacion. Once this is filed, the claim holder has 220 days to file a Solicitud de Mensura, or
Request for Survey with the court of jurisdiction, and advising surrounding claim holders by
publishing such request in the Official Mining Bulletin. This advises surrounding claim holders,
who may contest the claim if they believe their pre-established rights are being encroached upon.
The option also exists to file a manifestacion directly on open ground, without going through the
pedimento filing process.

Mensura: The claim must be surveyed by a government-licensed surveyor within 9 months of the
approval of the Request for Survey. Once surveyed, during which time any surrounding claim
owners may be present, the survey documents are presented to the court and reviewed by
SERNAGEOMIN, the National Mining Service. Assuming that everything has been done correctly
and is in order, the court adjudicates the application as a permanent property right (a mensura), the
equivalent to a patented claim.

Each of the above stages of claim acquisition in Chile requires the completion of several steps (application,
publication, inscription payments, notarization, tax payments, legal fees, patente payments, extract publication,
etc) prior to the application being declared by the court as a new mineral property. Details of the full requirements in
the claim-staking process are documented in Chiles mining code. Most companies working in Chile retain a mining
claim specialist to carry out and review the claim staking process and ensure that their land position is kept secure.
Dependence on Key Individuals
The Company is dependent on a relatively small number of key personnel, particularly Patrick Burns, its
President, the loss of any one of whom could have an adverse effect on the Company. The Company does not
maintain key-person insurance on the life of Mr. Burns. In addition, while certain of the Companys officers and
directors have experience in the exploration of mineral producing properties, the Company will remain highly
dependent upon contractors and third parties in the performance of its exploration and development activities. There
can be no guarantee that such contractors and third parties will be available to carry out such activities on behalf of
the Company or be available upon commercially acceptable terms.
Management
The Company is a relatively new company and has no proven history of performance or earnings and its
ability to develop into a viable business enterprise is largely dependent upon its management. Although the
Companys management has considerable experience in the mining exploration business in South America, the
Company represents the first time that management has operated a junior resource company.
Enforceability of Claims
The Company is organized under the laws of British Columbia. However, its principal office is located in
Chile. The Companys assets are in Chile. It may not be possible for purchasers of Offered Shares in this offering to
effect service of process within Canada upon the directors and officers who reside outside of British Columbia. It

60

may also not be possible to enforce against the Company or its directors and officers who reside outside of British
Columbia judgments obtained in Canadian courts predicated upon the civil liability provisions of the securities laws
of British Columbia, Alberta or Ontario.
Conflicts of Interest
Some of the directors and officers of the Company are directors and officers of other companies, some of
which are in the same business as the Company. Some of the Companys directors and officers will continue to pursue
the acquisition, exploration and, if warranted, the development of mineral resource properties on their own behalf
and on behalf of other companies, and situations may arise where they will be in direct competition with the
Company. The Companys directors and officers are required by law to act in the best interests of the Company. They
may have the same obligations to the other companies in respect of which they act as directors and officers. Discharge of
their obligations to the Company may result in a breach of their obligations to the other companies, and in certain
circumstances this could expose the Company to liability to those companies. Similarly, discharge by the directors and
officers of their obligations to the other companies could result in a breach of their obligation to act in the best interests
of the Company. Such conflicting legal obligations may expose the Company to liability to others and impair its ability
to achieve its business objectives.
Insurance
The Company does not have comprehensive general liability insurance to adequately protect itself against
certain risks commonly associated with mineral exploration. Even with insurance, the Company will remain at risk
and will be potentially subject to liability for hazards which it cannot insure against or which it may elect not to
insure against because of premium costs or other reasons.
Influence of Third Party Stakeholders
The lands in which the Company holds an interest, or the exploration equipment and road or other means of
access which the Company intends to utilize in carrying out its work programs or general business mandates, may be
subject to interests or claims by third party individuals, groups or companies. In the event that such third parties
assert any claims, the Companys work programs may be delayed even if such claims are not meritorious. Such
delays may result in significant financial loss and loss of opportunity for the Company.
Fluctuation in Market Value of the Companys Common Shares
There is currently no market for the Companys common shares and there can be no assurance that an active
market will develop or be sustained after this offering. The lack of an active public market could have a material
adverse effect on the price of the Companys common shares. This offering should be considered highly speculative
due to the fact that the Company was only recently incorporated. The price of these securities to the public and the
commission to the Agent was established by negotiation between the Company and the Agent, and may not be
indicative of fair market value or future market prices.
The market price of a publicly-traded stock is affected by many variables not directly related to the
corporate performance of the Company, including the market in which it is traded, the strength of the economy
generally, the availability and attractiveness of alternative investments, and the breadth of the public market for the
stock. The effect of these and other factors on the market price of the Companys common shares on the Exchange
in the future cannot be predicted.
Substantial number of authorized but unissued shares
The Company has an unlimited number of common shares which may be issued by the Board of Directors
without further action or approval of the Companys shareholders. While the Board of Directors is required to fulfil
its fiduciary obligations in connection with the issuance of such shares, the shares may be issued in transactions with

61

which not all shareholders agree, and the issuance of such shares will cause dilution to the ownership interests of the
Companys shareholders.
Dividends
The Company has not, since the date of its incorporation, declared or paid any dividends on its Shares and
does not currently intend to pay dividends. Earnings, if any, will be retained to finance further growth and
development of the business of the Company.
Resale of Shares
The continued operation of the Company will be dependent upon its ability to generate operating revenues
and to procure additional financing. There can be no assurance that any such revenues will be generated or that other
financing can be obtained. If the Company is unable to generate such revenues or obtain such additional financing,
any investment in the Company may be lost. In such event, the probability of resale of the Shares purchased would
be diminished.
17.

PROMOTERS

Under the definition of "promoter" contained in Section 1 of the Securities Act (British Columbia), Patrick
J. Burns (Burns) is the promoter of the Company in that he took the initiative in founding and organizing the
Company and by virtue of having received more than 10% of the common stock of the Company.
The promoter has received nothing of value from the Company or any of its subsidiaries, and has no
entitlement to receive any such value except as set forth elsewhere in this prospectus, specifically:

Burns acquired 3,000,000 Shares of the Company at a deemed price of $0.01 per Share in
consideration for the transfer to the Company of the Properties. All of these Shares are held in escrow.
See item 10 Escrowed Securities and item 2.2 Significant Acquisitions.

The Company granted to Burns in his capacity as a director of the Company, incentive stock options to
purchase up to an aggregate of 200,000 Shares in the capital stock of the Company. See item 8 "Options to Purchase
Securities" for further details with respect thereto.
See item 13 "Executive Compensation", with respect to the Consulting Agreement entered into with Burns.
18.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Within the three years prior to the date hereof, none of the following persons have had any interest in any
material transactions in which the Company is involved, except as otherwise disclosed herein:
(a)

any director or senior officer of the Company;

(b)

any security holder named in the section captioned "Principal Holders of Securities"; and

(c)

any associate or affiliate of any of the foregoing persons.

See item 2.2 Significant Acquisitions, item 3.2 A "Escudo Property", item 3.2 B Corona Property), item
8 "Options to Purchase Securities", item 10 "Escrowed Securities", item 13 " Executive Compensation", and item 20
"Material Contracts".

62

19.

AUDITORS, TRANSFER AGENTS AND REGISTRARS

19.1

Auditors
The auditor of the Company is:
Davidson & Company
1200, 609 Granville Street
Vancouver, B.C. V7Y 1G6

19.2

Transfer Agent and Registrar

The Registrar and Transfer Agent for the Company is:
Pacific Corporate Trust Company
10th Floor, 625 Howe Street
Vancouver, B.C. V6C 3B8

20.

MATERIAL CONTRACTS

Except for contracts made in the ordinary course of the Company's business, the only material contracts
entered into by the Company or any of its subsidiaries since its incorporation are as follows:
1.

Agency Agreement, dated , 2005, between the Company and Bolder Investment Partners, Ltd.
pertaining to the distribution of 5,000,000 Shares at a price of $0.40 per Share. See item 14 "Plan
of Distribution".

2.

Escrow Agreement, dated , 2005, between the Company, Pacific Corporate Trust Company (the
"Transfer Agent") and certain shareholders of the Company referred to in item 10 "Escrowed
Securities" whereunder the Transfer Agent agreed to hold 4,611,892 common shares in escrow.

3.

Chilean Properties Sale and Purchase Agreement, dated September 22, 2004, between the
Company and Patrick J. Burns and Jimmy E. Toler whereunder the Company acquired a 100%
interest in the Chilean Properties. See item 2.2 "Significant Acquisitions".

4.

Stock Option Agreements, dated January 28, 2005, between the Company and each of the
following persons (collectively the "Optionees") whereunder the Company granted to the
Optionees the option to purchase up to a total of 850,000 Shares at $0.40 per Share for nominal
consideration:
Name of Optionee
Patrick Burns
Lyle Davis
John Robins
Graham H. Scott
Patrick Gorman
Art Soregaroli
Paul Larkin
John Paul Larkin
Carlos Rojas
See item 8 "Options to Purchase Securities".

Capacity
Director
Director
Director
Director
Consultant
Consultant
Officer
Consultant
Employee

No. of Optioned Shares

200,000
150,000
150,000
100,000
50,000
50,000
100,000
25,000
25,000

63

5.

Consulting Agreement, dated January 1, 2005, with Patrick J. Burns. See item 13 Executive
Compensation.

6.

Administrative Services Contract, dated December 1, 2004, between the Company and Montpelier
Holdings Ltd. (Montpelier) whereunder Montpelier agreed to provide administrative and
corporate services to the Company for an initial term of one year, and thereafter annually, in
consideration of payment by the Company of $2,500 per month. The contract may be terminated
by either party on the giving of one months written notice.

Copies of the foregoing contracts may be inspected at 1040 - 999 West Hastings Street, Vancouver, British
Columbia, during normal business hours while primary distribution of the Shares offered hereunder is in progress.
21.

EXPERTS

21.1

Interest of Experts

Richard Culbert prepared Technical Reports on each of the Escudo and Corona Properties, the contents of
which are referred to under Issuers with Mineral Projects. Dr. Culbert has no direct or indirect interest in the
property of the Company, nor does he hold any direct or indirect interest in the Company or its associates or
affiliates, and he is not entitled to receive any such interest.
Certain legal matters relating to this offering will be passed upon on behalf of the Company by Vector
Corporate Finance Lawyers and on behalf of the Agent by McCullough OConnor Irwin LLP.
Income tax consequences to purchasers are not viewed as a material aspect of the offering of the Shares
hereunder. Purchasers should consult their own tax and legal advisors for advice with respect to the income tax and
other consequences associated with their acquisition of securities under this prospectus.
22.

OTHER MATERIAL FACTS

A.

Other

There are no other material facts relating to the securities offered by this Prospectus which are not
previously disclosed under the foregoing captions.
23.

PURCHASERS STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION

Securities legislation in certain of the provinces of Canada provides purchasers with the right to withdraw
from an agreement to purchase securities. This right may be exercised within two business days after receipt or
deemed receipt of a prospectus and any amendment. The securities legislation in several of the provinces further
provides a purchaser with remedies for rescission in some jurisdictions, or damages, if the prospectus and any
amendment contains a misrepresentation or is not delivered to the purchaser, provided that the remedies for
rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of
the purchaser's province. The purchaser should refer to any applicable provisions of the purchasers province for
particulars of these rights or consult with a legal adviser.
24.

FINANCIAL STATEMENTS
Attached to and forming a part of this Prospectus are:

64

(a)

the audited financial statements of the Company presenting the financial position of the Company for the
period commencing November 26, 2003 and ending February 29, 2004 and for the year ended February 28,
2005, together with the auditor's report thereon; and

(b)

unaudited financial statements of the Company for the six-month period ended August 31, 2005.

AUDITORS' CONSENT

We have read the prospectus of Condor Resources Inc. (the "Company") dated _____________ relating to the sale
and issue of 5,000,000 common shares of the Company at a price of $0.40 per share to raise $2,000,000. We have
complied with Canadian generally accepted standards for an auditor's involvement with offering documents.
We consent to the use in the above mentioned prospectus of our report to the directors of the Company on the
consolidated balance sheets of the Company as at February 28, 2005 and February 29, 2004 and the consolidated
statements of operations and deficit and cash flows for the year ended February 28, 2005 and the period from
incorporation on November 26, 2003 to February 29, 2004. Our report is dated April 1, 2005 (except as to Note 11
which is as of _____________________).

Vancouver, Canada
DATE

Chartered Accountants

CONDOR RESOURCES INC.

CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2005

AUDITORS' REPORT

To the Directors of
Condor Resources Inc.

We have audited the consolidated balance sheets of Condor Resources Inc. as at February 28, 2005 and February 29, 2004
and the consolidated statements of operations and deficit and cash flows for the year ended February 28, 2005 and the period
from incorporation on November 26, 2003 to February 29, 2004. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we
plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the
Company as at February 28, 2005 and February 29, 2004 and the results of its operations and its cash flows for the year ended
February 28, 2005 and the period from incorporation on November 26, 2003 to February 29, 2004 in accordance with
Canadian generally accepted accounting principles.

Vancouver, Canada
April 1, 2005
(except as to Note 11, which
is as of _____________________, 2005)

Chartered Accountants

CONDOR RESOURCES INC.

CONSOLIDATED BALANCE SHEETS

August 31,
2005
(Unaudited)

February 28,
2005

February 29,
2004

ASSETS
Current
Cash
Receivables

Deferred financing costs (Note 11)

Mineral properties (Note 3)

24,083
-

154,095
11,218

24,083

165,313

49,838

20,700

353,785

306,664

166,776
166,776
31,220

427,706

492,677

197,996

41,471

35,517

33,700

LIABILITIES AND SHAREHOLDERS EQUITY

Current
Accounts payable and accrued liabilities
Shareholders equity
Capital stock (Note 4)
Share subscriptions received (Note 4)
Deficit

541,411
(155,176)

541,411
(84,251)

1
167,299
(3,004)

386,235

457,160

164,296

427,706

492,677

Nature and continuance of operations (Note 1)

Commitment (Note 10)
Subsequent events (Note 11)
On behalf of the Board:

Director

Director

The accompanying notes are an integral part of these consolidated financial statements.

197,996

CONDOR RESOURCES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

Six Month
Period Ended
August 31,
2004
(Unaudited)

Six Month
Period Ended
August 31,
2005
(Unaudited)

EXPENSES
Administrative services
Management fees
Office and supplies
Professional fees
Regulatory fees
Travel and entertainment

16,050
37,500
1,056
5,120
11,199

11,250
1,281
2,815
8,715

Year Ended
February 28,
2005

8,025
12,509
9,435
31,878
19,400

From the
Date of
Incorporation
(November 26,
2003) to
February 29,
2004

344
2,285
375
-

Loss for the period

(70,925)

(24,061)

(81,247)

(3,004)

Deficit, beginning of period

(84,251)

(3,004)

(3,004)

Deficit, end of period

(155,176) $

(27,065) $

(84,251) $

(3,004)

Basic and diluted loss per common share

(0.01) $

(24,061) $

(0.05) $

(3,004)

Weighted average number of common shares

outstanding

6,185,196

1,774,247

The accompanying notes are an integral part of these consolidated financial statements.

CONDOR RESOURCES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Month
Period Ended
August 31,
2004
(Unaudited)

Six Month
Period Ended
August 31,
2005
(Unaudited)

CASH FLOWS FROM

OPERATING ACTIVITIES
Loss for the period

(70,925) $

Year Ended
February 28,
2005

(24,061) $

From the
Date of
Incorporation
(November 26,
2003) to
February 29,
2004

(81,247) $

(3,004)

Changes in non-cash working capital items:

(Increase) decrease in receivables
Increase (decrease) in accounts payable and
accrued liabilities

(23,184)

(18,110)

(18,883)

33,700

Net cash provided by (used in)

operating activities

(82,891)

(42,171)

(111,348)

30,696

(47,121)

(138,757)

(230,333)

(31,220)

(47,121)

(138,757)

(230,333)

(31,220)

44,000
-

329,000
-

1
167,299

44,000

329,000

167,300

(130,012)

(136,928)

(12,681)

166,776

154,095

166,776

166,776

11,218

CASH FLOWS FROM

INVESTING ACTIVITIES
Mineral property costs
Net cash used in investing activities
CASH FLOWS FROM
FINANCING ACTIVITIES
Capital stock issued
Share subscriptions received
Net cash provided by
financing activities
Change in cash for the period
Cash, beginning of period

24,083

29,848

(11,218)

154,095

Cash, end of period

Cash paid for income taxes

Cash paid for interest

Supplemental disclosure with respect to cash flows (Note 6)

The accompanying notes are an integral part of these consolidated financial statements.

166,776

CONDOR RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2005

1.

NATURE AND CONTINUANCE OF OPERATIONS

Condor Resources Inc. (the Company) was incorporated in British Columbia on November 26, 2003. The
Company is currently in the process of preparing a prospectus for an upcoming Initial Public Offering (IPO) in
which the Company proposes to list its common shares on the TSX Venture Exchange (TSX-V). The Companys
primary business is the acquisition and exploration of mineral property interests. The Company has not yet
determined whether its properties contain mineral resources that may be economically recoverable. The Company is
considered to be an exploration stage company.
These financial statements have been prepared in accordance with Canadian generally accepted accounting
principles with the assumption that the Company will be able to realize its assets and discharge its liabilities in the
normal course of business rather than through a process of forced liquidation.
The financial statements do not included any adjustments relating to the recoverability and classification of recorded
asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in
existence.
The Companys continuing operations, as intended, are dependent upon its ability to complete the IPO financing and
to generate profitable operations in the future.

August 31,
2005
(Unaudited)
Working capital (deficiency)
Deficit

2.

(17,389) $
(155,176)

February 28,
2005

129,795 $
(84,251)

February 29,
2004

133,076
(3,004)

SIGNIFICANT ACCOUNTING POLICIES

Consolidation
These financial statements include the accounts of the Company and its 99.99% owned subsidiary, Minera Condor
Limitada.
All significant inter-company transactions and balances have been eliminated on consolidation.
Use of estimates
The preparation of financial statements in accordance with Canadian generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, and
the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of
revenues and expenses during the period. Actual results could differ from these estimates.

CONDOR RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2005

2.

SIGNIFICANT ACCOUNTING POLICIES (contd)

Foreign currency translation

The monetary assets and liabilities of the Company that are denominated in foreign currencies are translated at the
rate of exchange at the balance sheet date and non-monetary items are translated at historical rates. Revenues and
expenses are translated at the average exchange rate for the year. Exchange gains and losses arising on translation
are included in the statement of operations.
Deferred financing costs
Costs directly identifiable with the raising of capital will be charged against the related capital stock. Costs related
to shares not yet issued are recorded as deferred financing costs. These costs will be deferred until the issuance of
the shares to which the costs relate, at which time the costs will be charged against the related capital stock or
charged to operations if the shares are not issued. Deferred financing costs consist primarily of corporate finance
fees, legal fees and sponsorship fees.
Mineral properties
All costs related to the acquisition, exploration and development of mineral properties are capitalized by property. If
economically recoverable ore reserves are developed, capitalized costs of the related property are reclassified as
mining assets and amortized using the unit of production method. When a property is abandoned, all related costs
are written off to operations. If, after management review, it is determined that the carrying amount of a mineral
property is impaired, that property is written down to its estimated net realizable value. A mineral property is
reviewed for impairment whenever events or changes in circumstances indicate that its carrying amount may not be
recoverable.
The amounts shown for mineral properties do not necessarily represent present or future values. Their recoverability
is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain the
necessary financing to complete the development, and future profitable production or proceeds from the disposition
thereof.
Asset retirement obligations
The CICA Handbook, section 3110, Asset retirement obligations, focuses on the recognition and measurement of
liabilities related to legal obligations associated with the retirement of property, plant and equipment. Under this
standard, these obligations are initially measured at fair value and subsequently adjusted for the accretion of discount
and any changes in the underlying cash flows. The asset retirement cost is to be capitalized to the related asset and
amortized into earnings over time. Adoption of this standard has not affected the Companys financial statements.
Stock-based compensation
The Company accounts for the granting of stock options to employees and non-employees using the fair value
method whereby all awards to employees and non-employees will be recorded at fair value on the date of grant. The
Company estimates the fair value of each stock option at the date of grant using the Black-Scholes option pricing
model. Any consideration paid by the option holders to purchase shares is credited to capital stock.

CONDOR RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2005

2.

SIGNIFICANT ACCOUNTING POLICIES (contd)

Future income taxes
Future income taxes are recorded using the asset and liability method whereby future tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured
using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability
settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period
that substantive enactment or enactment occurs. To the extent that the Company does not consider it more likely
than not that a future tax asset will be recovered, it provides a valuation allowance against the excess.
Loss per share
The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar
instruments. Under this method the dilutive effect on loss per share is recognized on the use of the proceeds that
could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be
used to purchase common shares at the average market price during the period. For the periods presented, this
calculation proved to be anti-dilutive.
Loss per share is calculated using the weighted average number of common shares outstanding during the period.

3.

MINERAL PROPERTIES
Title to mineral properties involves certain inherent risks due to the difficulties of determining the validity of certain
claims as well as the potential for problems arising from the frequently ambiguous conveyancing history
characteristic of many mineral properties. The Company has investigated title to all of its mineral properties and, to
the best of its knowledge, title to all of its properties are in good standing.

Chilean
Properties
August 31,
2005
(Unaudited)
Acquisition costs incurred

Deferred exploration costs

Balance, beginning of period
Consulting
Drafting, surveying and permits
Sampling
Travel and field costs

Balance, end of period

Total mineral properties

45,111

Chilean
Properties
February 28,
2005

45,111

Chilean
Properties
February 29,
2004

261,553

31,220

47,121

40,008
29,208
67,779
93,338

12,500
18,720

47,121

230,333

31,220

308,674

261,553

31,220

353,785

306,664

31,220

CONDOR RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2005

3.

MINERAL PROPERTIES (contd)

Chilean Properties
The Company entered into an agreement dated September 22, 2004, with two directors of the Company (collectively
the Vendor) to acquire a 100% working interest in certain mineral claims located in Chile known as the Escudo
property, the Corona property, the Cristal property, the Royal property, and the Becker property. Under the terms of
the agreement, the Company issued 4,000,000 common shares valued at $400 and issued 200,000 common shares
valued at $44,711 (US$35,000) for the property and for the settlement of costs incurred, respectively, to the Vendor
during the year ended February 29, 2005.

4.

CAPITAL STOCK

Number
of Shares

Amount

Authorized
Unlimited common shares without par value
Issued
Balance as at inception, November 26, 2003 and February 29, 2004
For property acquisition
For debt
For cash
Balance as at February 28, 2005 and August 31, 2005 (Unaudited)

1
4,000,000
200,000
1,985,195

1
400
44,711
496,299

6,185,196

541,411

On September 22, 2004, the Company issued 4,000,000 shares valued at $400 pursuant to the acquisition of mineral
properties (Note 3).
On January 1, 2005, the Company issued 200,000 common shares valued at $44,711 for payment of debt incurred on
the property acquisition (Note 3).
On February 15, 2005, the Company issued 1,985,195 common shares for proceeds of $496,299, $167,299 of which
were received in the period ended February 29, 2004.
Stock options
At the Companys special Meeting of Shareholders held on January 18, 2005, shareholders approved an incentive
stock option plan (the Plan) whereby the Company may grant stock options to eligible employees, officers,
directors and consultants at an exercise price to be determined by the board of directors, provided the exercise price
is not lower than the market value at time of issue. The Plan provides for the issuance of up to 10% of the
Companys issued common shares as at the date of grant with each stock option having a minimum term of five
years. The board of directors has the exclusive power over the granting of options and their vesting shall occur upon
the date of grant.

CONDOR RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2005

4.

CAPITAL STOCK (contd)

Stock options (contd)
During the year ended February 28, 2005, 850,000 stock options were granted which will have an effective grant
date of the IPO completion date, exercisable at $0.40 per share for a period of five years following the completion of
the IPO. Additionally, 750,000 stock options were granted on shares held by a principal shareholder to directors of
the Company, which will have an effective grant date of the IPO completion date, exercisable at $0.05 per share for a
period of five years following the completion of the IPO, subject to release of such shares from escrow. Since the
options have been granted by the principal shareholder as compensation, they will be valued using the Black-Scholes
option pricing model.

5.

RELATED PARTY TRANSACTIONS

Included in cash as at August 31, 2005 is $Nil (unaudited) (February 28, 2005 - $5,554; February 29, 2004 - $Nil)
held in trust by a law firm in which a partner is a director of the Company.
Included in accounts payable at August 31, 2005 is $35,030 (unaudited) (February 28, 2005 - $14,693; February 29,
2004 - $22,748) due to directors and a firm in which a director is a partner.
During the six month period ended August 31, 2005, the Company entered into the following transactions with
related parties:
a)

Paid or accrued consulting fees capitalized to deferred exploration costs of $Nil (unaudited) (February 28, 2005
- $40,000; February 29, 2004 - $12,500) to an officer and director of the Company.

b) Paid or accrued management fees of $37,500 (unaudited) (February 28, 2005 - $12,509; August 31, 2004 - $Nil
(unaudited); February 29, 2004 - $Nil) to an officer and director of the Company.
c)

Paid or accrued deferred legal costs of $29,138 (unaudited) (February 28, 2005 - $Nil; February 29, 2004 $Nil) and legal fees of $Nil (unaudited) (February 28, 2005 - $19,878; August 31, 2004 - $2,815 (unaudited)
February 29, 2004 - $2,285) to a law firm in which a director is partner.

d) Paid or accrued administrative services of $16,050 (unaudited) (February 28, 2005 - $8,025; August 31, 2004 $Nil (unaudited); February 29, 2005 - $Nil) to an officer and CFO of the Company.
e)

Acquired mineral properties of $Nil (February 29, 2004 - $45,111; February 28, 2003 - $Nil) from directors of
the Company (Note 3).

These transactions were in the normal course of operations and were measured at the exchange amount, which is the
amount of consideration established and agreed to by the related parties

6.

SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

The significant non-cash transaction of the Company for the six month period ended August 31, 2005 (unaudited)
consisted of the accrual of deferred financing costs of $29,138.

CONDOR RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2005

6.

SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (contd)

The significant non-cash transactions of the Company for the year ended February 28, 2005 included:
a) issuance of 200,000 common shares valued at $44,711 for amounts owing for the acquisition of mineral
properties;
b) issuance of 4,000,000 common shares valued at $400 for acquisition of mineral properties; and
c) the accrual of deferred financing costs of $20,700.
There were no significant non-cash transactions for the six month period ended August 31, 2004 (unaudited).
There were no significant non-cash transactions for the period from incorporation on November 26, 2003 to
February 29, 2004.

7.

INCOME TAXES
A reconciliation of income taxes at statutory rates with the reported taxes is as follows:

February 29,
2004

February 28,
2005

August 31,
2004
(Unaudited)

August 31,
2005
(Unaudited)
Loss for the period

(70,925) $

(24,061) $

(81,247) $

(3,004)

Expected income tax recovery

Non-deductible items
Other items
Unrecognized benefit of non-capital losses

(25,250) $
21,858
(737)
4,129

(8,566) $
7,436
1,130

(28,924) $
16,664
(1,474)
13,734

(1,069)
198
871

Income tax recovery

The significant components of the Company's future income taxes assets are as follows:

Future income tax assets:

Non-capital loss carryforwards
Undeducted share issue costs
Resource deductions

71,100
(71,100)

Valuation allowance
Net future income tax assets

18,700
5,100
47,300

February 29,
2004

February 28,
2005

August 31,
2005
(Unaudited)

13,100
5,900
25,400

44,400
(44,400)
$

871
871
(871)

CONDOR RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2005

7.

INCOME TAXES (contd)

The Company has available for deduction against future taxable income non-capital losses of approximately $52,000
(unaudited). These losses, if not utilized, will expire through to 2015. In addition, the Company has resource
expenditures of approximately $486,000 (unaudited) available to reduce taxable income in future years. Future tax
benefits which may arise as a result of these non-capital losses and resource expenditures have not been recognized
in these financial statements and have been offset by a valuation allowance.

8.

FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, receivables, and accounts payable and accrued liabilities.
Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, or credit
risks arising from these financial instruments. The fair value of these financial instruments approximates their
carrying values, unless otherwise noted.
Currency risk
The Companys largest non-monetary assets are its mineral interest in Chile. The Company could accordingly be at
risk for foreign currency fluctuations and developing legal and political environments.
The Company does not maintain significant cash or other monetary assets or liabilities in Chile.

9.

SEGMENTED INFORMATION
The Companys primary business is the acquisition and exploration of mineral properties. All capital assets are
located in Chile.

10.

COMMITMENT
The Company entered into an agreement with an officer and director to provide geological consulting and executive
services to the Company for US$5,000 per month for two years, commencing January 1, 2005. If terminated as a
result of new management, the director has the right to receive 200% of the balance due to him for the remainder of
the term.

11.

SUBSEQUENT EVENTS
The Company is in the process of filing a prospectus for its IPO to raise up to $2,000,000 through the issuance of
5,000,000 common shares at a price of $0.40 per share and is seeking a listing on the TSX-V.
Upon the close of the IPO, the Company will pay to an Agent a commission equal to 8% of the aggregate gross
proceeds and issue Agents Warrants for up to 10% of the shares issued through the IPO. Each Agents Warrant will
entitle the Agent to acquire one common share at a price of $0.40 exercisable for a period of twelve months from the
date the Companys shares commence trading on the TSX-V. The Company will also issue 50,000 common shares
as a corporate finance fee. To date, the Company has incurred $49,838 for costs associated with the financing.

CERTIFICATE OF THE DIRECTORS AND PROMOTERS OF THE ISSUER

The foregoing constitutes full, true and plain disclosure of all material facts relating to the securities offered
by this prospectus as required by Part 9 of the Securities Act (British Columbia), Part 9 of the Securities Act
(Alberta) and Part XV of the Securities Act (Ontario), and the regulations thereunder.

DATED: October 25, 2005

Condor Resources Inc.

"Patrick J. Burns
Patrick J. Burns
President and Chief Executive Officer

Paul Larkin
Paul Larkin
Chief Financial Officer

On behalf of the Board of Directors

"Lyle Davis
Lyle Davis
Director

Graham H. Scott
Graham H. Scott
Director

Promoter

"Patrick J. Burns
Patrick J. Burns

CERTIFICATE OF THE AGENT

To the best of our knowledge, information and belief, the foregoing constitutes full, true and plain
disclosure of all material facts relating to the securities offered by this prospectus as required by Part 9 of the
Securities Act (British Columbia), Part 9 of the Securities Act (Alberta) and Part XV of the Securities Act (Ontario),
and the regulations thereunder.

DATED: October 25, 2005

Bolder Investment Partners, Ltd.

By:
Paul Woodward
Authorized signatory