Maco Gold Mine - Philipines

The Company’s principal gold asset in the Philippines is the Masara Gold Mine in south-eastern Mindanao Island, which ceased production in March 2000.  The Company acquired its interest in Masara through its acquisition, with its associated Philippine partner, of approximately 72.87% of Apex Mining Company Limited (“Apex”), which owns Masara.

Apex is listed on the Philippine Stock Exchange. Masara is a gold and copper mineral property located in the Maco municipality of the Compostela Valley Province in Eastern Mindanao, Philippines. Workings on the site date from before the Second World War. Apex followed several other operators on the site and, following extensive working in the 1980s and 1990s, maintained limited operations till 2000, when it ceased regular production, and leased out various parts of its property to sub-contractors in exchange for royalty and rental payments. These contractors operated on a small-scale basis on different parts of the property. The Company inherited a processing plant with its acquisition of Masara and set about its refurbishment. This process has been completed and the 500 t/d plant is now operational.

The final design phase of the new 2,400 tpd plant is now being reviewed with construction expected to begin in Q2, 2008. As Phase 1 represents only 17% of the total capacity of the project, revenue from the gold and silver produced will be offset against the costs of the total project until commercial production of the complete 2,900 tonne per day plant is achieved.

Once construction and commissioning of the Phase 2 processing plant and ramp up of the underground operations are completed, Masara should have a total capacity of in excess of 2,900 t/d. Management expects this to be achieved by late 2008 or earlier and is confident that Masara will reach its annual production rate target of 85,000 to 180,000 oz of gold and 500,000 to 600,000 oz of silver at the end of 2008.

Geology

The Masara property lies immediately west of the Philippine Fault System, which has been active from the Miocene to recent. The fault system and its many splays pass from south-southeast to north-northwest through an island arc assemblage of Cretaceous to Pliocene pelagic sediments, volcanic and volcaniclastic rocks, and hypabyssal intrusives. Numerous porphyry-copper-gold deposits and epithermal gold vein systems are associated with the Philippine Fault System throughout most of the archipelago.

A simplified stratigraphy of the Masara property area consists of a Cretaceous to Lower Miocene sequence of pelagic sediments and volcanic and volcaniclastic rocks (Masara Formation) intruded or overlain by Middle Miocene dioritic and quartz-dioritic plutonic rocks, Upper Miocene to Lower Pliocene dioritic and andesitic plugs and dykes with numerous associated porphyry-copper systems. Pliocene to Pleistocene andesitic to dacitic flows, flow domes, plugs and pyroclastic rocks appear to be associated with the most intense period of gold mineralization.

The two principal types of mineralization found are porphyry-copper-gold and NW-SE trending, meso- to epithermal gold-silver quartz-carbonate veins. Porphyry-copper-gold quartz-sulphide veinlet network-style mineralization is associated with the Middle Miocene dioritic intrusions located in the western part of the Masara property. That they predate the epithermal gold-silver veins is shown by examples of gold-silver veins that have cut and hydrothermally altered the porphyry-type mineralization. The mineralized veins are NW-SE to WNW-ESE striking, moderately to steeply dipping tension gashes developed in a left-lateral shear stress field associated with the Philippine Fault System.

The central vein system at Masara comprises the following sub-systems: 1) Masara (Masara-Lumanggang-Hitch-Manganese-Jessie-Sandy veins); 2) Masarita (Masarita-Wagas-Don Calixto; 3) Don Alberto; 4) Don Fernando (Don Fernando- Don Mario- Don Joaquin-Maria Inez; and 5) St Francis (St Francis-St George-St Vincent-St Rafael).

The vein deposits are empirically classified as ‘clean ore’ or ‘complex ore’. Clean ore is characterized by low sulphide content and occurs in generally clean-walled tensional structures. Clean ore is characteristic of the veins Don Fernando, Don Joaquin, Don Mario, St. Vincent, Don Calixto and St. Benedict. Complex ore has higher sulphide content and often occurs in wider and deeper shear structures. Complex ore characterizes the veins along the main Masara trend and include Maria Inez, Sandy, Masara, Manganese and St. Francis Veins. Pyrite, chalcopyrite, sphalerite and galena are the predominant sulphides minerals and the mineralization is often associated with appreciable amounts of manganese both occurring as oxide- and carbonate-facies.

Resources and Mine Development

On 25 June, the second Mineral Production Sharing Agreement (MPSA) covering 1558.5 hectares was awarded to Apex. This completes the re-licensing of the Apex historic claims. The new license covers the west side of the property in which there are several known porphyry deposits and the extensions of the known vein systems.

On the basis of diamond drilling and underground development, the indicated resource for Masara has increased by 15% to 304,000 oz (1.46 million tonnes @ 6.5 g/t Au) compared with 263,000 oz (1.26 million tonnes @ 6.5 g/t Au) reported previously in August 2006. Inferred resources have increased by over 60% to 1.847 million oz (9.60 million tonnes @ 6.0 g/t Au) compared with 1.145 million oz (5.74 million tonnes @ 6.3 g/t Au) in previous estimates. There are also indications of increased grade in plunging ore shoots.

Inferred resources – Masara operations

Development of the mine infrastructure to open up existing and new ramp systems continues with new portals established to access ramps on the Sandy Vein and the Masarita Vein, and development on Bonanza number two and Don Fernando. To date, 3,598 m of waste drifting and 611 m of ore drives have been completed.

The major drilling program to define the vein extensions on strike and at depth from old workings continues, with over 32,000 m completed. Drilling is currently focused on southern extensions of the Maligaya Trend with extensions into the Jessie and Sandy vein areas where high grade intercepts have been previously reported.

Prior to Crew’s acquisition in 2005, systematic drilling had not been undertaken on the different vein systems at Masara. Most historic development was small-scale mining of vein systems exposed on surface. Historically, the Maligaya system has been partially mined from the Masara vein above the 590 m level and from the Bonanza vein between the 560 and 590 m levels. Drilling to date has indicated that the mineralized systems at Masara could be more substantial than previously anticipated and that within the more than 70 m wide Maligaya Trend alteration zone several additional veins are splitting and merging in an anastomizing pattern. These veins and splits are essentially un-mined and the drilling and new resource evaluation in this structure has added significantly to the increased resources. Underground mine development along the full length of the Maligaya trend will allow for a progressive increase of production, as more levels become established along the more than 2,000 m strike length that is potentially accessible from the Malumon River valley.

Drilling has exposed well-mineralized Bonanza-Masara veins to depths of around 400 m above sea level to the north which, in combination with the higher topography towards the south, already indicates more than 500 m vertical extent of mineralization. Similar mineralization along the projected strike of the Maligaya Trend in the St Benedict vein that outcrops at 1,200 masl, suggests the vertical height of the mineralized system may well exceed 1,000 m.

Regular underground development on four levels has now demonstrated that the alteration envelope around the veins is significantly mineralized, occasionally with higher grades than those of the main vein, but more erratic distribution. Systematic sampling over a total of more than 500 m of sub-level drifts on four levels indicates the Bonanza Vein has a constant mineable average width of 4 m on all levels and average gold grades between 4 and 13 g/t over significant intervals of 25 to 100 m length. Underground development on the Bonanza #1 ramp system has encountered an interpreted high grade pay shoot plunging to the north and which shows increasing grades in deeper levels where a more than three fold increase in grade has been encountered, from 4.0 g/t Au on average in level-605 through 6.3 g/t Au in level-575 and to 13.7 g/t Au currently found in level-560.

Resources have been classified as inferred primarily because the estimation of grade is uncertain, considering the relatively wide drill spacing and variable intensity of the epithermal vein mineralization. Continuing underground development and sampling on the Maligaya Trend (Bonanza-Masara and Sandy-Jessie veins) will enable conversion of these inferred resources into measured and indicated resources and, subsequently, mineral reserves as stope designs are completed.

In 2007, Crew will also undertake drilling on several of the porphyry copper-gold targets located in the west of the property, where a historic (pre-NI 43-101) resource estimate stated approximately 84 million tonnes at 0.4% Cu and 0.4 g/t Au (672 million lbs contained copper and 1.08 million oz contained gold). Some of these targets show a significant gold content of over 2 g/t which, combined with the high copper, makes them obvious targets for inclusion in the current processing plans.

Mining

The mining methodology of the vertical vein systems chosen for the redevelopment of the property is sub level open stoping, with mechanized and non mechanized stoping. Such mining requires substantial underground development, both infrastructural and the vein sub levels. The upper levels of the mine left by historical mining between the surface and 200 m below are largely inaccessible and mined out. It appears that there are resources which may occur immediately below the historic workings and a further down dip that can be accessed. The sub level system provides for vein drive at 15 m vertical intervals with major footwall drives and haulages at 60 m vertical intervals. Ramp systems to access the horizontal drives will be provided approximately every 500 m along the strike of the vein systems.

The ore will initially be sourced from the development of the veins in the four areas, and stoping will commence early in 2007. Additional mining areas are also being developed which will allow for flexibility and possible changes in production due to exploration and sampling results. The production ramp up, however, will be dependent on a number of factors most notably the availability of mining equipment, the rate of underground development and the granting of necessary operational permits.

Processing

During the year, the Company completed refurbishment of the existing processing plant (Phase 1 – 500 t/d) and commenced the design and preliminary construction work for an additional 2,400 t/d processing plant (Phase 2), which, together, will provide a total plant capacity of 2,900 t/d.

Ore will be crushed and screened through a rotating trammel and then fed to the grinding circuit. The processing plant at Masara will be a conventional circuit comprising grinding with gravity recovery of free gold, flotation recovery of fine gold associated with sulphides to a concentrate, and leach recovery of fine gold in a carbon-in-leach circuit. Doré bullion will be smelted at site. Process tailings will be treated through a cyanide destruction circuit prior to pumping to a tailings storage facility.

Once fully commissioned, the Masara operation is anticipated to have the capacity to process 2,900 t/d ore which is expected to produce between 85,000 and 180,000 oz of gold and 500,000 to 600,000 oz of silver annually. The amount of silver will depend on the percentages of treated ore from the various vein systems as the content of silver varies dramatically.

Environmental

The Company is working closely with the local government agencies to ensure that all appropriate environmental permits and operating permits are in place prior to commencement of operations.

Water sampling by the local government agencies continues to record any contamination of the rivers by local small scale miners. All the Corporation’s tailings will be placed in a new tailings storage facility to be constructed to meet all permitting and environmental control requirements.

Corporate Social Responsibility

Local residents in the mine portal areas and within the tailings pond area have been and are being relocated for safety reasons. Government assessments have been made of their existing properties and they have been provided with a new developed area to relocate and assistance provided for their relocation. As part of the relocation, a new elementary school has been built by the Corporation in the Masara area, to provide better facilities and to protect the children from the mining area. Tree planting is being conducted and several community development projects are carried being out to provide safer rights of way and local transportation routes for school children. An alliance with a telecommunications provider has been established, which has provided telecommunication to the staff and local residents.