February 26, 2008, the Company commenced legal action in Mexico with respect to its interests in Cinco Minas and Gran Cabrera (the “Assets”). Compensation being claimed by Bandera includes enforcement of the Option Agreement and damages arising from non-compliance by MSJ. A court of law in Guadalajara, Mexico has awarded, as a preventative measure in favor of the Company, encumbrances which have been filed against the applicable assets and mining concessions with the Mexico Mining Public Registry (“MPR”). The outcome of the claims for remedies and damages is not determinable; therefore no amounts have been recorded in these interim consolidated financial statements.

March 7, 2008, the State Court, Commercial Division of Guadalajara, Mexico, issued preventive measures in favor of the Company consisting of: (i) the encumbrance of assets of the defendants for an amount of CDN $6,000,000; (ii) the registration of the lawsuit on the files of each of the mining concessions subject to the Option Agreement before the MPR in Mexico City; and (iii) a prohibition for defendants, the legal representative of MSJ, to leave the Court’s jurisdiction (the Mexican State of Jalisco) until this case is settled, unless having appointed an Attorney to act on his behalf while he is away.

March 28, 2008, the defendant and the company offices of MSJ and Amajac (a company related to MSJ) were served with the lawsuit. The defendants have filed their defense to the action. In order for these preventive measures to be put in place and stay applicable, Bandera was required to place a refundable warranty bond at April 2, 2008 of $6,000,000 Mexican Pesos (“MXN”), (May 31, 2010 - $494,939 CDN; November 30, 2009 - $491,099 CDN) in order to respond to any damages and injury that the defendants may suffer as a result of the said preventive measures being put in place. This bond has been classified in deposits.

July 7, 2009, the Company obtained a favorable first instance ruling (the “Ruling”) from the Fifth Mercantile Court (Guadalajara) (the “Court”) in its lawsuit. The validity and enforceability of the Option Agreement has been confirmed by the Court and it reinstates the Company’s rights to the Assets by ordering the transfer of title to the Assets. Additionally, the Court has been notified that in a separate legal action, to which the Company was not a party, the labor court awarded a settlement against MSJ which resulted in the transfer of title to the Assets to a third party. This transfer appears to have occurred without proper notification to the Court or reference to the Company’s prior lien over the Assets as registered in the records of the MPR. The Company’s lawyers have commenced a case in the Federal courts, seeking an “Amparo judgment” (relief of violated civil rights by authorities). The Company’s lawyers have argued that the process resulting in the transfer was illegal and should be declared invalid, null and void.

August 30, 2009 the Amparo Court ruled in the Company’s favor that the lien over the Assets as registered in the MPR was valid, and that the transfer was illegal.

September 4, 2009 Bandera received notification of an appeal by MSJ to the Fifth Mercantile Court first instance ruling of July 7, 2009.

September 20, 2009 Bandera received notification of a request for a revision (“the request”) by the third party to the favorable ruling by the Amparo Court of August 30, 2009.

March 18, 2010 the 9th Local Appeal Court upheld the July 7, 2009 first instance ruling and denied all six arguments MSJ alleged in its appeal. MSJ has requested an “Amparo” before the Federal Civil Court to review the 9th Local Appeal Court Ruling. This is the final process available to MSJ in this mercantile case.

May 5, 2010

In Mexico, we were pleased to report that the Mercantile Appeal Court has upheld the earlier Mercantile Court ruling in favor of Bandera Gold on all counts in the ownership dispute with our joint-venture partner Minera San Jorge/George Barnett (MSJ). We are still awaiting notice as to MSJ’s request for an “Amparo” before the Federal Civil Court. This is essentially a review of the Mercantile Appeal Court decision. It is our view that we own a 60% interest in the Cinco Minas and Gran Cabrera Properties, and we have presented satisfactory evidence that has been validated through the courts. While we are not at all questioning the fairness of the Mexican legal system, this process has been disruptive and time consuming for all involved, including the local population that depends on the mine for employment. Bandera Gold invested over $7.0 million to advance and develop Cinco Minas into a high-value mine project and we remain committed to protect our ownership interests and to recommence operations as soon as we have entirely resolved this dispute.

Earlier this year Bandera Gold completed a small equity offering to help provide the financial backing that we feel is necessary to move the company forward in 2010. A large portion of this placement was subscribed by insiders and management. We have great confidence in the future of this company and our willingness to put new money in support of the company is a demonstration of this confidence.

June 18, 2010

As per our April 14, 2010 news release, the 9th Local Appeal Court upheld the earlier Mercantile Court ruling in favor of Bandera Gold on all counts in the ownership dispute with our joint–venture partner Minera San Jorge/George Barnett (MSJ) and denied all six arguments MSJ alleged in its appeal.

We have now received notice from our legal counsel in Mexico that MSJ has filed a request for an “Amparo” before the Federal Civil Court. The Federal Civil Court will now review the decision made by the 9th Local Appeal Court. As we understand, this Amparo is the final appeal available to MSJ in this mercantile case. We are expecting the final ruling on this Amparo by the end of September 2010.

Bandera remains fully committed to protecting our ownership interests in Mexico, and creating shareholder value in both Mexico and Colombia.

October 29, 2010

Edmonton, Alberta, – Bandera Gold Ltd. (“Bandera”) announces its legal counsel in Guadalajara, Mexico has been notified of a decision by the Fifth Federal Court of Amparo of Jalisco, Mexico (the “Amparo Court”) related to its dispute with Minera San Jorge SA de CV (a Mexican company) and others on the beneficial ownership of the “Cinco Minas” and “Gran Cabrera” mining projects in Mexico. The decision dated September 30, 2010, has determined that the Fifth Mercantile Court of the State of Jalisco, which rendered a first instance decision on this matter in favour of Bandera, was not competent to rule on the case. Therefore the Amparo Court has ordered the delivery of the file to the Ninth Appellate Court of the State of Jalisco with instructions to have the file distributed to a first instance Federal Court for ruling on the matter.

The Amparo Court determined that, as the dispute referred to mining concessions which are considered as “national assets”, the Jalisco State Mercantile Court was not competent to rule on the matter, but rather a Federal Court. Bandera has been advised by its Mexican counsel that the ruling of the Amparo Court has mistakenly assumed that the dispute related to the validity, or to a regulatory matter related to mining concessions (case in which the competent judicial authorities would have been the Federal courts), while the facts of the case are that the legal action initiated by Bandera against Minera San Jorge SA de CV and others refers to a commercial dispute about the beneficial ownership of the mining concessions of the projects known as “Cinco Minas” and “Gran Cabrera”, and not to any regulatory matter related to such concessions. Therefore, the matter was well within the jurisdiction of the Jalisco Mercantile Court.

The decision by the Amparo Court only refers to the issue of competent authority to rule on the matter and does not include any decision on the substance of the case.

Bandera Gold will continue to litigate the case and expects that the appropriate Mexican courts will ultimately ratify or uphold the judicial rulings on the matter so far, confirming Bandera’s ownership rights to the “Cinco Minas” and “Gran Cabrera” mining projects in the terms of the existing contracts.

We direct your attention to the FAQ’s section for further information.

Bandera Gold Ltd. (the ‘Company’) signed an Option Agreement dated November 15, 2005 with Minera San Jorge, S.A. de C.V. (‘MSJ’) to acquire a 60% interest in the Cinco Minas and Gran Cabrera Mexican mining properties (the ‘Properties’) by making option payments of $300,000, issuing 2,800,000 common shares of the Company to MSJ and providing financing of $7,600,000 to MSJ over a five year period for the exploration and development of the Properties.

The Company has now made all of the option payments, met its entire financing requirement on the Cinco Minas property and issued and delivered 650,000 common shares to MSJ. The Company issued an additional 900,000 common shares and will deliver the shares to MSJ upon the parties entering into a Joint Operating Agreement (‘JOA’). The Company will issue an additional 1,250,000 common shares to MSJ on the anniversary date of the signing of the JOA.

The Company has recently received an unsigned letter from an individual representing himself as Legal Representative of MSJ and purporting to terminate the Option Agreement. The Company has retained legal counsel to vigorously protect the Company’s interest in the Properties.

HIGHLIGHTS

• 60 Tpd Mill Fully Operational
• First Doré Produced
• 2 Kilometers of Strike on Structure Added

Our Engineering Team has just returned from a three-week visit to our Properties and Offices in Mexico. Our Mining Engineer, Mr. Philip de Souza, P.Eng, toured the Cinco Minas Mine Site on separate occasions with both our QP Geologists (as defined by NI 43-101), Mr. Richard Munroe, B.Sc., FGAC.,P.Geol. and Sr. Baltazar Solano-Rico, M.Sc., of Behre Dolbear de Mexico, S.A. de C.V., and all met jointly to discuss an ongoing program for Cinco Minas.

We are able to report that considerable advances have been made at the mine site on all fronts, exploration, mining and processing; and as a result, we are able to better define the work that needs to be undertaken in order for us to join the ranks of successful producing miners in Mexico.

Minera San Jorge, S.A. de C.V., our Mexican joint-venture partner, has identified and constructed roads to new dumps from old workings to the northwest of El Abra. These materials will be analyzed and if worthwhile, will be added to the feed for our 60 tonne per day test mill facility. The dumps are known as Las Amarillas and Magdalena, and together with the other old workings further to the northwest have added a further one kilometre to the length of mineralized zones in our area of activity.

Exploration, which is continuing in the central section near the areas identified as El Abrita and El Kilo, has uncovered the northerly extension of El Abrita and the fault contact that separates El Abrita from the further northwest El Abra. This area, now named Cristo Rey, will be subjected to future surface drilling to define the zone northwest of the fault, which has clearly been down-thrown. Even further to the south towards Cerro Colorado, a new high road has been extended to an interesting mineralized ridge above an additional old working known as El Cohete. Good mineralization, newly uncovered by the Caterpillar, was sampled by Mr. Munroe and taken for analysis.

Guillermo Cuellar, our Mexican joint-venture partner’s geological advisor, has been concentrating his efforts on an area to the southeast of Cerro Colorado previously identified by Mr. Munroe as having significant mineralization. This new zone referred to as El Limon provides us with an additional approximate length of one kilometre of strike on the structure hosting the old rich mines that are the focus of our intentions.

Our immediate plans are to better define the total dump tonnage and raise it to a proven resource through additional channel sampling and more accurate surveying and in the near term, to institute a new infill drilling program at El Abra as well as a better definition at Cerro Colorado and El Limon. This program will allow for detailed mine planning and lead to the completion of a Feasibility and Ore Reserve Study for our larger operation.

The underground mining program initiated by MSJ on the Destajos horizon of the El Abra Mine, has intersected the south-eastern extremes of the old workings and is now progressing along those workings clearing and supporting them where necessary and enlarging them to allow for modern equipment access. This new access will allow for sampling/assaying and surveying of the old areas so as to allow for the calculation of insitu reserves for future mining. We are now reviewing this program to determine whether it would be advisable to mine a new footwall access to intersect with old workings that are known to extend into the footwall. This would provide a safe and permanent access from which underground diamond drilling could be done as well as allow access for the assay and sampling as noted above and also provide the infrastructure for low cost sub-level induced block-cave mining.

The 60 ton per day ‘pilot’ mill is now fully operational. We now have to adjust grind parameters to achieve 80% -200 mesh from the present 20% - 200 mesh. This will enable us to reduce the retention time in the cyanide circuit as well as achieve higher recoveries, as the coarser particles will have been removed up front. This could be achieved from a low cost Cerro Colorado operation with an added sweetener from El Abra.

Our first ‘metal’ was poured on September 7th and our second, witnessed by Messrs de Souza and Munroe, was poured on September 22nd, 2007. Management is currently reviewing their options before finalizing the selection of a buyer of the Doré.

Since our last news release on mining activities in late April, the rainy season has been upon us slowing activity somewhat, however considerable advancement of the project on both the Cinco Minas and Gran Cabrera properties has occurred.

At Cinco Minas, testing continues on the mill circuitry including the crushers (jaw and cone), the ball mills (10 and 60 tonne), the agitation and settling tanks, the Merrill Crowe Zinc Precipitation Unit, the filter press, dore refinery and tailings pond. A new agitation tank, considerably larger than the two already in place has been constructed and is being added to the testing circuitry. This tank will actually be more integral to the expansion when the 250 tonne mill is brought online, but forms a valuable tool during the 60 to 70 tonne testing phase. A Falcon Gravity Concentrator, delivered in July has been set in place just behind the ball mills in the mill circuitry. The Gravity Concentrator has been added to the system in order to collect ‘free’ silver and gold which would not be collected in the cyanide process. It is expected that the amount of silver and gold collected in this manner could be as much as 1/3 of the silver and gold collected in the total circuit, so it is a very important part of the process.

Infrastructure at the Cinco Minas property has advanced considerably since our last report including the commissioning of the new connection to the Federal Electrical Grid and installation of a new water line from creek sources a number of kilometers away which is to be used both for mine water supply and enhancement of the community’s system. The road system within the Cinco Minas area has been considerably improved and added to over the past number of months. The total length of roadway added to or which has been rebuilt exceeds 6 kilometers.

The top of the Cerro Colorado area which is to be used as feedstock for the heap leach facility to be constructed later this fall is presently being sampled at the surface and at depth by use of an air-track drill. The upper portion of the deposit is weathered considerably and can be ripped and excavated by caterpillar rather than having to be drilled and blasted. It is expected that at least 30,000 tonnes and maybe as high as 50,000 tonnes of heap leach feed stock can be accessed in this manner allowing costs for mineralized grade materials supplied to the heap leach to be kept to a minimum.

At Destajos, advancement has been made underground toward the old Destajos workings where a block of high grade mineralization in the vicinity of Tumi’s RC hole No. 30 exists. It is expected that the total amount of exploration in progress and to be completed in the near future will involve approximately 90 meters of drifting, 105 meters of cross-cuts plus about 60 meters of raising and shaft sinking (to levels approximately 10 meters above and below Destajos). This could develop a substantial amount of high grade mineralization (estimated to be 9,000 to 10,000 t) for short term operation (150 plus days) of the 60 to 70 tonne pilot plant.

At Gran Cabrera, approximately 20 kilometers of new and/or refurbished roadway has been completed over the last number of months in order to advance exploration including exposure of mineralization, access to old workings, sampling by in-house geological teams and some mapping of the area. As well, the top of one of the many mineralized areas within the property has been stripped off allowing for sampling to take place and sufficient room for a helicopter to land if required. The total amount spent as a result of this activity is well in excess of $300,000.00 since the signing of the Option Agreement in November of 2005, and this expenditure will put us in an excellent position in order to be able to advance the property from a geological point of view.

Behre Dolbear de Mexico, S.A. de C.V., our consulting geologists, are in the process of reviewing exploration and development activities. Baltazar Solano Rico, who heads up our geological team, will be working in conjunction with Bandera Gold Ltd. and our joint venture partner, Minera San Jorge, S.A. de C.V., to provide a geological exploration plan for the next six to twelve months. This is expected in the near future.

Bandera Gold Ltd. is a Junior Canadian Exploration Company whose corporate strategy is to build shareholder value by finding and developing overlooked and undervalued mineral properties in North America and South America. By partnering with an experienced mining and mineral exploration entity, the Company’s core focus will be the continued exploration and advancement of the Cinco Minas property in Mexico to production, exploration of the Gran Cabrera property in Mexico and the exploration of the Belmira property in Colombia.

Bandera Gold Ltd. (BGL) is pleased to announce today that it, together with its joint venture partner, Minera San Jorge, S.A. de C.V. (MSJ), celebrated the commencement of test production with festivities at the Cinco Minas mine on April 21, 2007. We were honoured to have in attendance numerous officials representing Federal, State and Municipal levels of Government including Federico G. Lepe, Deputy Secretary Foreign Trade and Investment for the state of Jalisco. Also in attendance was the president of Behre Dolbear de México, S.A. de C.V., Baltazar Solano - Rico, qualified person (QP) for Bandera Gold under NI 43-101.

On Sunday, April 22, 2007 the Secretary of Economic Promotion for the state of Jalisco, Guillermo Martinez Mora, attended the site. He dedicated the Destajos level exploration adit.

With the commencement of test production, dump materials containing significant grades of silver and gold, along with high grade materials obtained at the El Abra underground workings, will be used to feed the pilot plant. Sufficient high grade feed stock is present to run the 60 tonne per day mill for the testing period. Production and sale of silver/gold concentrate is expected shortly resulting in positive cash flow from the mine. An increase in production to 300 tonnes per day is planned for the near future. Historically, the area has been mined for some 500 years. At its height, silver and gold mining in the Cinco Minas area supported a community of more than 20,000 people.

In addition to the previously planned resource study by Behre Dolbear, we have expanded the scope of work to include a review of resources that will constitute the feed to the 60 tonne per day mill and its expansion to 300 tonnes per day for the next 6 months.

Bandera Gold Ltd. is a Junior Canadian Exploration Company whose corporate strategy is to build shareholder value by finding and developing overlooked and undervalued mineral properties in North America and South America. By partnering with MSJ, an experienced mining and mineral exploration entity, the Company’s core focus will be the continued exploration and advancement of the Cinco Minas property in Mexico to production, exploration of the Gran Cabrera property in Mexico and the exploration of the Belmira property in Colombia.

Bandera Gold Ltd. (the ‘Company’) announced today that it is entering negotiations to form a joint venture with Industrias Peñoles S.A. de C.V. (Peñoles) regarding the exploration and development of its Cinco Minas silver/gold property in Mexico.

Peñoles began operations in 1887 as a mining company. They have integrated operations in the areas of exploration, mining, metallurgy and chemicals, and together with its subsidiaries, make up one of Mexico’s largest industrial conglomerates. Listed on the Mexican Stock Exchange since 1968; the stock is included in the IPC index. Peñoles is one of the largest net exporters in Mexico’s private sector and is the world’s largest producer of refined silver, metallic bismuth and sodium sulphate, and a leader in Latin America in refined gold, lead and zinc.

Main mining facilities:

• Fresnillo: the world’s richest silver mine.
• La Ciénega: Mexico’s richest gold mine.
• La Herradura: Mexico’s largest gold mine.
• Naica: largest lead producing mine in Mexico.
• Francisco I. Madero: Mexico’s largest zinc mine.

Main metallurgical operations:

• Met-Mex: the world’s fourth largest metallurgical complex, and the largest producer of refined silver and metallic bismuth.

Main chemical operations:

• Química del Rey: world’s largest sodium sulfate producing plant.

Bandera Gold Ltd. is a Junior Canadian Exploration Company whose corporate strategy is to build shareholder value by finding and developing overlooked and undervalued mineral properties in North America and South America. By partnering with an experienced mining and mineral exploration entity, the Company’s core focus will be the continued exploration and advancement of the Cinco Minas property in Mexico to production, exploration of the Gran Cabrera property in Mexico and the exploration of the Belmira property in Colombia.

As previously reported, the object of Bandera’s exploration program is to increase the geological knowledge of the property and develop significantly greater resource definition.

To that end, Bandera has commissioned Behre Dolbear to review the existing geological interpretation of El Abra cross-sections and to define a recommended drilling program to support the classification of proven/probable reserves in this area. This review has already begun and is expected to be completed by late March, 2007.

In addition, exploration and development at the San Diego level has begun with the drilling and blasting of the high grade footwall section of the mineralized area in order to connect with existing underground workings at that level.

Cinco Minas Production Update

Dry run testing of the crushing equipment (jaw and cone crushers), conveyance system and milling equipment (60 tonne ball mill and 10 tonne regrind mill) is presently taking place. Wet run testing of the complete circuit will take place during the month of March, 2007.

High grade materials obtained through drilling and blasting to connect to the San Diego adit will supplement existing high grade feed to the 60 ton per day pilot plant.

The technical information contained in this news release was collected and compiled by Bandera Gold and reviewed by Baltazar Solano-Rico, Geol. Eng., M.Sc., General Director, Behre Dolbear de Mexico, S.A. de C.V., a qualified person under NI43-101.

Bandera Gold Ltd. is a Junior Canadian Exploration Company whose corporate strategy is to build shareholder value by finding and developing overlooked and undervalued mineral properties in North America and South America. By partnering with an experienced mining and mineral exploration entity, the Company’s core focus will be the continued exploration and advancement of the Cinco Minas property in Mexico to production, exploration of the Gran Cabrera property in Mexico and the exploration of the Belmira property in Colombia.

Bandera Gold Ltd. is pleased to announce that Behre Dolbear de Mexico, S.A. de C.V., has been retained to complete a technical review of the mineral resources contained in the El Abra Mine area of the Cinco Minas project.

Behre Dolbear is a preeminent international mineral industry consultant. It is one of the oldest continually operating minerals industry consulting firms in the world with offices in North and South America, Europe, Australia and the far east,.

The QP and project manager on this project will be Baltazar Solano-Rico, General Director, Behre Dolbear de Mexico, S.A. de C.V. Mr. Solano-Rico has a BS in Geological Engineering at the Universidad Nacional Autonoma de Mexico (1972), and has an MS in Geology at the University of Arizona (1975). He will be assisted by Qingping Deng, President of Behre Dolbear (Asia) Inc.

Bandera Gold Ltd. is a Junior Canadian Exploration Company whose corporate strategy is to build shareholder value by finding and developing overlooked and undervalued mineral properties in North America and South America. By partnering with an experienced mining and mineral exploration entity, the Company’s core focus will be the continued exploration and advancement of the Cinco Minas property in Mexico to production, exploration of the Gran Cabrera property in Mexico and the exploration of the Belmira property in Colombia.

(Clarification)Some highlights of the NI43-101 Technical Report completed on December 11, 2006, and filed with the TSX Venture Exchange, in addition to selected information regarding our anticipated work schedule for the next six months to a year, are as follows:

1. The chronological history of the Cinco Minas and area mines illustrates the vast potential of this overall mining area to support economical mining activities today and in the future. Bandera Gold Ltd., together with our joint venture partner Minera San Jorge (MSJ), is making considerable positive strides to make this happen. The company cautions that a feasibility study has not been completed and there is no certainty that the Company’s proposed operations will be economically viable.
2. New low level aerial photography and GPS controlled survey work will be undertaken during the early spring of 2007 when vegetative cover is at a minimum in order to proceed with field exploration and mapping of known mineralized deposits in the El Abra and El Abrita areas of the Cinco Minas property. This will allow for new three dimensional mapping to be completed in order to be able to prepare a thorough block model of the fault structure and related cross structures.
3. Test production of high grade materials (old tailings dump material and other materials obtained from small high grade deposits on the Cinco Minas property) will be commenced between late February and early March when construction of the 60 tonne/day mill has been completed. There is sufficient high grade material within the old dumps (greater than 6000 tonnes selectively determined) to run the mill for at least 100 days. Assays taken indicate an average grade of 3.44 g/t (0.100 oz/st) Au and 333.02 g/t (9.71 oz/st) Ag (see Appendix 1).
4. Additional high grade feed for the mill will come from the Destajos and Trinidad level adits as well as other high grade areas which have been and are being identified. This high grade material will be blended with lower grade materials from Cerro Colorado and/or additional old tailings dump materials. It is expected that sufficient volumes of high grade material will be available to run the 60 tonne/day mill in a testing mode for at least an additional year and that these will provide sufficient feed for the 250 tonne/day mill (to be constructed later this year) for at least as long. Sampling in the San Diego Cross area of the Destajos level produced an average grade across 6.3m of 4.0 g/t (0.117 oz/st) Au and 458 g/t (13.36 oz/st) Ag (see report at page 1). Disclosures of gross value in the January 31 news release are hereby retracted.
5. Bulk sampling has been completed at the crest of Cerro Colorado and this lower grade material will be used in a test heap leach operation with the objective of expanding the heap leach pad to at least 500,000 tonnes over the next six months to a year. An agreement has been reached with the local council to develop an area of approximately 244,750 square meters (24.5 hectares) for use in the test heap leach operation (see page 27). It is expected that the pad will be ready for initial heap leach testing by late summer or fall of 2007.
6. The mineral resource volumes have increased significantly for the inferred resource category to 4.80 million tonnes from 0.40 million tonnes, a twelve-fold increase (see Mineral Resource and Mineral Reserve Estimates at page 81). The following table summarizes both indicated and inferred resource information as per our technical report:
   
   
7. To date, references from older reports have indicated that only 20% of the known main Cinco Minas vein system has been tested. Bandera intends to continue field work begun in 2006 to identify new sources of mineralized sections. It is expected that this work will considerably enhance the reported mineral resource volumes given in this technical report.
   
   The technical information contained in this news release was collected, compiled and reviewed by Richard Munroe, B.Sc., FGAC, P.Geo., a qualified person under NI43-101.

Bandera Gold Ltd. is a Junior Canadian Exploration Company whose corporate strategy is to build shareholder value by finding and developing overlooked and undervalued mineral properties in North America and South America. By partnering with an experienced mining and mineral exploration entity, the Company’s core focus will be the continued exploration and advancement of the Cinco Minas property in Mexico to production, exploration of the Gran Cabrera property in Mexico and the exploration of the Belmira property in Colombia.

Some highlights of the NI43-101 Technical Report completed on December 11, 2006, and filed with the TSX Venture Exchange, in addition to selected information regarding our anticipated work schedule for the next six months to a year, are as follows:

1. The chronological history of the Cinco Minas and area mines illustrates the vast potential of this overall mining area to support economical mining activities today and in the future. Bandera Gold Ltd., together with our joint venture partner Minera San Jorge (MSJ), is making considerable positive strides to make this happen.
2. New low level aerial photography and GPS controlled survey work will be undertaken during the early spring of 2007 when vegetative cover is at a minimum in order to proceed with field exploration and mapping of known mineralized deposits in the El Abra and El Abrita areas of the Cinco Minas property. This will allow for new three dimensional mapping to be completed in order to be able to prepare a thorough block model of the fault structure and related cross structures.
3. Test production of high grade materials (old tailings dump material and other materials obtained from small high grade deposits on the Cinco Minas property) will be commenced between late February and early March when construction of the 60 tonne/day mill has been completed. There is sufficient high grade material within the old dumps (greater than 6000 tonnes selectively determined) to run the mill for at least 100 days. Assays taken indicate an average grade of 3.32 g/t (0.104 oz/t) Au and 324.2 g/t (10.42 oz/t) Ag (see Appendix 1). This works out to a total value of metal recovered of approximately $1.1M (US) or about $330,000.00 (US) per month, assuming an average gold price of $640 US per oz and an average silver price of $13.20 US per oz.
4. Additional high grade feed for the mill will come from the Destajos and Trinidad level adits as well as other high grade areas which have been and are being identified. This high grade material will be blended with lower grade materials from Cerro Colorado and/or additional old tailings dump materials. It is expected that sufficient volumes of high grade material will be available to run the 60 tonne/day mill in a testing mode for at least an additional year and that these will provide sufficient feed for the 250 tonne/day mill (to be constructed later this year) for at least as long. Sampling in the San Diego Cross area of the Destajos level produced an average grade across 6.3m of 4.0 g/t (0.125 oz/t) Au and 458 g/t (14.35 oz/t) Ag (see report at page 1).
5. Bulk sampling has been completed at the crest of Cerro Colorado and this lower grade material will be used in a test heap leach operation with the objective of expanding the heap leach pad to at least 500,000 tonnes over the next six months to a year. An agreement has been reached with the local council to develop an area of approximately 244,750 square meters (24.5 hectares) for use in the test heap leach operation (see page 27). It is expected that the pad will be ready for initial heap leach testing by late summer or fall of 2007.
6. The mineral resource volumes for indicated and inferred resources have increased to 7.07 million tonnes from 2.67 million tonnes in the previous report of March 2006 (see Mineral Resource and Mineral Reserve Estimates at page 81). This is triple the previously reported volume of mineral resources based on the very structured and concise format required under NI43-101. The resource is representative of approximately 235.70 thousand oz of Au and 23.33 million oz of Ag. These quantities of gold and silver are representative of a present supportable valuation of the project according to NI43-101 of approximately Four Hundred and Sixty Million dollars ($460,000,000.00) US at the present day gold and silver prices of $640 per oz Au and $13.20 US per oz Ag (see page 85).
7. To date, references from older reports have indicated that only 20% of the known main Cinco Minas vein system has been tested. Bandera intends to continue field work begun in 2006 to identify new sources of mineralized sections. It is expected that this work will considerably enhance the reported mineral resource volumes given in this technical report. The technical information contained in this news release was collected, compiled and reviewed by Richard Munroe, B.Sc., FGAC, P.Geo., a qualified person under NI43-101.

Bandera Gold Ltd. is a Junior Canadian Exploration Company whose corporate strategy is to build shareholder value by finding and developing overlooked and undervalued mineral properties in North America and South America. By partnering with an experienced mining and mineral exploration entity, the Company’s core focus will be the continued exploration and advancement of the Cinco Minas property in Mexico to production, exploration of the Gran Cabrera property in Mexico and the exploration of the Belmira property in Colombia.

In August and early September 2006, the horizontal and vertical extent of potential ore zones has been increased dramatically as a result of ongoing geological work in the area. A significant amount of work has been completed to expose vein locations that were either not reported upon in earlier reports or the information was limited. The thrust of these investigations is to increase the geological knowledge of the property and develop significantly greater resource definition.

Three zones have been identified and intensively explored during this period outside of the main mine workings at Cinco Minas. The zones are just NW of the San Juan mine (La Mina Del Coral), the volcanic cone structure NNW of Coral and Cerro Colorado. Cerro Colorado, which was reported on in our last exploration update, has been sheared down to a flat quarry plateau and is now ready for quarry development. The exposed vein system now at surface is approximately 55 meters with a variable true width up to 8 meters dipping to the SW at roughly 60°. Approximately 4,000 tonnes of mineralized vein rock has been stockpiled from this operation to date.

Other structures, the Las Animas mine and the La Plascencia, adjacent to, but independent of the main mine workings at Cinco Minas have shown considerable potential for development. Field explorations identified the hosting volcanic base rocks that come from a large extincty and exploded crater that borders the north side of the vein. This crater is a massive structure that warrants further attention. Several field trips across the cone were taken and many new volcanic sequences have been identified and sampled. Very old Spanish mines were uncovered and sampled. Some of these very large, near vertical flow and vein structures have been extensively worked but no history is available on them. From this work it appears that the potential of very high grade workings can be developed in the footwall structures that are adjacent to but independent of the main mine workings. Assay values of Au between 1.5 and 2.2 ppm and Ag between 192 and 400 ppm have been obtained from exposed vein rock.

The grid sample program also resulted in the discovery of no less than 5 old mines that had been lost to the dense bush overgrowth. Some of these mines extend for over 40 meters and have several cross adits, raises and collapsed drifts. It is safe to say that the minable area presented on this end on structure is very large. It reaches over 100 meters in vertical exposure and is easily reached by existing roads.

The information gained during the last several months of geological work will be used to supplement additional information being developed presently for the updated NI43-101 report expected to considerably enhance resource definition and be issued later this fall.

Production Update

A decision has been made to increase the capacity of the small scale pilot plant from 20 tonnes per day to 60 tonnes per day based on a thorough review by field engineering staff. The resultant increase in capacity will allow for significantly more material to be processed over a shorter period of time, but this also necessitates the installation of a larger process system. This work is ongoing and is expected to be complete later this fall in spite of delays in shipment of materials to site because of extremely wet conditions.

The majority of the equipment for the intermediate sized mill is now on site and installation is expected to be complete early in 2007 increasing the processing capacity to approximately 250 tonnes per day.

Metric conversion:

• 1 ppm (1 gram per tonne) equals 0.0292 troy ounces per ton
• 1 meter equals 3.215 feet

The technical information contained in this news release was collected, compiled and reviewed by Richard Munroe, B.Sc., FGAC, P.Geo., a qualified person under NI 43-101.

Bandera Gold Ltd. is a Junior Canadian Exploration Company whose corporate strategy is to build shareholder value by finding and developing overlooked and undervalued mineral properties in North America and South America. By partnering with an experienced mining and mineral exploration entity, the Company’s core focus will be the continued exploration and advancement of the Cinco Minas property in Mexico to production, exploration of the Gran Cabrera property in Mexico and the exploration of the Belmira property in Colombia.

Exploration Activities

The main thrust of the geological development program revolved around the new Cerro Colorado quarry site and the opening of the San Diego adit to gain entry to the Destajos level. Re-excavation of the San Diego adit is presently underway and significant progress has been made in advancing the adit toward the Destajos level.

The work at Cerro Colorado quarry site has been progressing smoothly and the access road and initial ‘topping’ of Cerro Colorado was completed on July 17.

By the end of that day, approximately 100 tonnes of highly mineralized breccia from the main Cinco Minas vein was put into stockpile. This stockpiling work using a Komatsu caterpillar equipped with a two-fingered ripper resulted in the development of a small plateau.

The vein material at the surface of Cerro Colorado is deeply weathered and easily mined with the caterpillar equipment. By late on July 18, the plateau area had increased to roughly 610 square meters and the volume of stockpiled material had grown to around 800 tonnes of 0.3 metre minus material. It is important to note that all of the material encountered at the crest to date is similar in nature to the traditional El Abra type mineralized rock encountered further to the North West along the Cinco Minas vein. Daily grading samples are being taken as the pile grows and these samples are presently in the lab system for analysis.

As the plateau or quarry floor descends as a result of stripping, it is expected that the contact between the Cinco Minas vein and the footwall elements will be exposed along the base. After the removal of the majority of the deeply weathered vein material, and after the boundary between the vein and footwall elements has been determined, the method by which the quarry will be advanced will change to a more conventional benched operation using standard drilling and blasting equipment.

The above noted exploration activities in conjunction with the test production are expected to increase the potential resource area which will serve to increase property value.

Production Update

Due in part to the significant progress achieved on the Cerro Colorado quarry, the decision was made to wait for this higher grade material before initiating test production. Resources previously allocated to the test production have been directed to the set up of a larger crusher and advancing the installation of the intermediate production plant. This decision is expected to shorten the transition from small scale test production (20 tonnes per day) to intermediate production (200 plus tonnes per day). ‘This is a prime example of exploration success dictating an adjustment of the operational plan’ stated Bandera’s president, Kelvin Williams. ‘Our operational plan was constructed to allow for small adjustments when warranted. The potential to confirm the existence of higher grade material in large quantities outside of the previously explored area this early in the process should be considered very positive for shareholders.’

The technical information contained in this news release was collected, compiled and reviewed by Richard Munroe, B.Sc., FGAC, P.Geo., a qualified person under NI 43-101.

Bandera Gold Ltd. is a Junior Canadian Exploration Company whose corporate strategy is to build shareholder value by finding and developing overlooked and undervalued mineral properties in North America and South America. By partnering with an experienced mining and mineral exploration entity, the Company’s core focus will be the continued exploration and advancement of the Cinco Minas property in Mexico to production, exploration of the Gran Cabrera property in Mexico and the exploration of the Belmira property in Colombia.

Bandera is pleased to report that the delivery and set up of a pilot processing plant has taken place at its Cinco Minas project near Magdelana, Mexico. Testing of gold and silver mineralization from current mine dumps containing bonanza grade silver-gold ores, processing and testing of 3,000 cubic meters of untreated tailings left in the old mill agitation tanks when it was dismantled is slated to begin in the first week of July.

Processing of virgin ores from outcroppings and near-surface and new open pit cuts into deeper mineralization is also scheduled to take place. In addition to the pilot processing plant, the Company has taken delivery of portions of a larger processing unit that is being assembled to expand the productive capacity into the ‘intermediate’ category as announced in its press release of May 29, 2006.

In preparation for the launch of test production the Company has sampled the tailings at 2 meter intervals across the tailings piles and is pleased to present the results in the tables below. When the mill closed in 1928, several thousand tonnes of tailings and crushed feedstock material were simply pushed over the bank to cover the old foundations once the mill was sold and moved. This resulted in irregular mounds of material that were subsequently covered by the vegetative growth. The refurbishing of the old mill site to provide the working envelope for the new mill complex required the tailings to be loaded by backhoe and trucked off site to a staging area nearby. The tailings were collected and piled from a rather large area in excess of an acre and were mixed with other rock in the process during the excavation, transportation and stockpiling process.

Table 1 below represents the average tailings assay results from 205 samples.

Table 1

Sample	Au	Ag	Cu	Pb	Zn
Unit	g/mt	Ppm	ppm	ppm	ppm
Average	0.98	87.4	507	1,532	1,842

It is also interesting to note that there is a large fluctuation of assay grades per sample with the ranges listed in table 2.

Table 2

Sample	Au	Ag	Cu	Pb	Zn
Unit	g/mt	Ppm	ppm	ppm	ppm
High Value	2.40	402.6	4,705	3156	4653
Low Value	0.50	34.0	176	770	843

These fluctuations are understandable due to the changes in the historical production figures and the mixing of the tailings material during the stockpile process. We also note that these are samples of materials that have already undergone liberation and were considered plant waste at the time of production. Re-processing of these materials will only require screening and introduction to the new mill process. Bandera views these results as very encouraging as the indication is that this pre-crushed ore is suitable for heap leaching.

In addition and in concert with the test production the Company is expanding exploration activities for the next 30 to 60 days which will include further sampling of the tailings, dump areas, untested exposed surface and near surface showings and existing adits. Access to the 300 meter level of the El Abra mine has been achieved by opening up the San Diego adit to the Destajos level. Being able to sample and drill into the insitu resource from this level will expedite the conversion of the indicated and inferred resource to a measured category. Other exploration activities will include mapping and locating of both new showings as well as old mine workings.

The above noted exploration activities in conjunction with the planned test production are expected to increase the potential resource area which will serve to increase property value.

The technical information contained in this news release was collected, compiled and reviewed by Richard Munroe, B.Sc., FGAC, P.Geo., a qualified person under NI 43-101.

Bandera Gold Ltd. is a Junior Canadian Exploration Company whose corporate strategy is to build shareholder value by finding and developing overlooked and undervalued mineral properties in North America and South America. By partnering with an experienced mining and mineral exploration entity, the Company’s core focus will be the continued exploration and advancement of the Cinco Minas property in Mexico to production, exploration of the Gran Cabrera property in Mexico and the exploration of the Belmira property in Colombia.

Bandera Gold Ltd. (TSX Venture: BGL) is pleased to announce the hiring of Eng. Ismael Manriquez Olmos, an experienced Senior Mining Engineer, as the Project Manager for the Cinco Minas test facility and all subsequent mining and milling operations. Mr. Manriquez has degrees in both mining engineering and metallurgy. He has worked in senior management positions for the Fresnillo Mining Co. at Fresnillo, Zacatecas, one of the largest operating silver mines in the world today. Eng. Manriquez later worked for one of the largest gold producers in Mexico at El Cubo located in the historic Guanajuato mining district directing the expansion of milling and mining operations.

Bandera is also pleased to announce the hiring of Eng. Armando Gabriel Hernandez, a renowned mexican metallurgist bringing more than 30 years of experience in metallurgy ranging from the selective flotation of complex ores to the cyanidation leaching of ores in heap leaching operations and leaching using agitation in tanks with cyanide. Notably, Eng. Armando Gabriel was the lead metallurgist at the Federal Government’s large gold mine, El Barqueño and later worked on cyanide leaching with agitation in tanks for First Silver Reserve. He is now working for Bandera as a resident consulting metallurgist.

Bandera Gold Ltd. is fortunate to have this exciting combination of seasoned professionals in its employ as it begins installing the pilot test facility. The Company has purchased a small pilot plant which is the first step towards establishing a larger ‘intermediate’ mill at Cinco Minas. Upon delivery, management anticipates start up of this mode to be approximately 60 days. Testing will initially include gold and silver mineralization from current mine dumps containing bonanza grade silver-gold ores, processing and testing 3,000 cubic meters of un-treated tailings left in the old mill when it was dismantled and virgin ores from outcropping, near-surface and new open pit cuts blasting out deeper mineralization for testing.

Exploration is currently focused on better defining existing, known mineralization and taking bulk samples which will help determine metallurgical characteristics of mineralization from various mineralized zones. The Company will use the test results from the initial small milling operations to design and install the ‘intermediate’ plant facility.

Concurrent with the construction of the ‘intermediate’ milling operation, the Company will conduct bulk tests in order to process gold ores using conventional, well known heap leach technology.

The ‘final’ phase of work will involve designing and construction of milling and heap leaching operations optimized to treat different grades of mineralization with differing metallurgical characteristics. Based on historical processing at the old mill site of more than one (1.0) million tonnes of silver and gold ores with grading up to 476 g/t of silver and 3.17 g/t of gold (previously reported in a BGL news release dated Nov 16/05), Bandera’s consultants do not foresee any metallurgical problems regarding recovery of more than approximately 90 percent of the contained silver and gold using well known, conventional processing methods and a Merrill-Crowe precipitation unit(s) for production of precipitates that will be smelted to produce impure silver-gold bars known as doré.

Work continues on upgrading the camp facilities and new haul roads designed around the current pilot test mill facility and future site for the full-sized mill. The haulage road to the pilot mill test site has been finished. Construction of the haulage roads to the heap leach site and final tailings site is proceeding as well as a newer access to the top of the pilot processing plant site.

The Agrarian Community (‘Ejido’) of Cinco Minas has signed an agreement for granting the Minera San Jorge and Bandera Joint Venture slightly over three hundred fourteen (314) hectares to the JV. This includes all surface areas planned for mining and beneficiation facilities, underground and open pit mines, milling operations for the pilot test plant and the future larger full-scale mill and/or heap leaching operations, crushers and conveyor systems

A recent visit to the Cinco Minas project by senior management accompanied by Senior Mining Consultants for both geology and mining/metallurgical testing and review of the design for the pilot test plant resulted in approvals for all phases of work done to date and for the current work program by the board of directors.

Bandera’s joint venture partner, Minera San Jorge, is creating a foundation for the local members of the Cinco Minas Ejido donating nearly twenty percent of its gross proceeds to the locals and to regional development under the care and management of a Trust Committee comprised of three men and two women and three independent Trustees. This foundation will provide scholarships for education, local transportation, busing of school children and support for improving local health services or more costly medical procedures. This is in support of the Bandera/MSJ joint venture which has set a goal to enhance living conditions and future prospects for the local community.

Exploration programming for this month and for the following four months includes mobilizing three track drills to drill and blast mineralization exposed at the surface. One drill will be dedicated to working on the El Abra area, the famous old Spanish ore shoot developed to a depth of more than 2000 feet in the early 1900’s by the company operating Cinco Minas established by the founder of Anaconda Mining Co. A second track drill will continue on the project with the assignment of cutting into the top of the El Abrita zone where old workings indicate interesting values of gold and silver at the surface and in the shallow underground workings. The third track drill is programmed to work on expanding mineralization at the Cerro Colorado site and opening up this area for determination of continuity and grade of outcropping silver and gold mineralization with grades similar to those processed in other mining operations by either milling or in conventional heap leach operations.

Senior management from Bandera acting on the recommendation of their consulting mining engineer and geologist have approved the driving of a horizontal drift into the Destajos Level and accessing underground workings to use them to bulk test known mineralization containing bonanza grades of silver and gold once the ‘Destajos’ mine dump is removed and processed. During the month of May, major advances include the purchasing of milling equipment and completion of access roads as well as discovery of interesting silver and gold mineralization exposed at the surface that remains open both at depth and along strike. Bandera Gold’s management is committed to providing reliable testing of precious metals mineralization at Cinco Minas and enhancing shareholder value in this exciting project.

The technical information contained in this news release was collected and complied by Richard Munroe, B.Sc., FGAC, P.Geo., a qualified person under NI 43-101.

Bandera Gold Ltd. is a Junior Canadian Exploration Company whose corporate strategy is to build shareholder value by finding and developing overlooked and undervalued mineral properties in North America and South America. By partnering with an experienced mining and mineral exploration entity, the Company’s core focus will be the continued exploration and advancement of the Cinco Minas property in Mexico to production, exploration of the Gran Cabrera property in Mexico and the exploration of the Belmira property in Colombia.

Bandera Gold Ltd. (the ‘Company’) announced today that it has received approval of its option agreement with Minera San Jorge, S.A. de C.V. (‘MSJ’) through the TSX Venture Exchange. The Company has made the final option payment of (CDN) $250,000 and has issued 650,000 common shares to MSJ pursuant to the terms of the agreement. MSJ is a privately held Mexican company which has Mr. George Barnett as its legal representative.

The shares issued pursuant to the option agreement have a hold period expiring August 5, 2006.

The focus of the work to be completed during the first half of 2006 will be dedicated to the exploration and development of the Cinco Minas property. The Cinco Minas property has an area of approximately 10 750 ha.

The scope of this work is set out to accomplish the following two objectives: first; to initiate small scale test production of approximately 100 tons/day and second; to complete geological work to provide a data set to begin expansion of the insitu resource.

The primary operations will begin at the historic Cinco Minas camp immediately with new field mapping, surface exploration and the development of a test mill operation. The new test mill will be constructed on the same site as the old mill. There are no extraordinary infrastructure costs to be incurred as existing roads, electrical power and water are all in close proximity to the historic Cinco Minas camp.

Initial activities will be simple low cost quarry processes with the potential to develop new underground workings in three directions from the primary excavation site. Once constant head grade values are established from the main quarry, additional underground work can access the high grade ore shoots that have been identified in drilling and mapping. This will provide a constant source of new feed to augment the waste dump materials going to the mill while the old mine workings are being re-visited.

All of these operations can start immediately with minimal cost and planning. This process will allow for both new and old ore grade materials to be assessed for optimum recovery and refinement at the outset.

Bandera Gold Ltd. is a Junior Canadian Exploration Company whose corporate strategy is to build shareholder value by finding and developing overlooked and undervalued mineral properties in North America and South America. By partnering with an experienced mining and mineral exploration entity, the Company’s core focus will be the continued exploration and advancement of the Cinco Minas property in Mexico to production, exploration of the Gran Cabrera property in Mexico and the exploration of the Belmira property in Colombia.

Bandera Gold Ltd. (‘Bandera’) announced today that it has signed an Option Agreement with Minera San Jorge, S.A. de C.V. (‘MSJ’) to acquire a 60% interest in the Cinco Minas and and Gran Cabrera Mexican mining properties (the ‘Properties’) by making option payments of $300,000, issuing 2,800,000 common shares of Bandera to MSJ and providing financing of $7,600,000 to MSJ over a five year period for the exploration and development of the Properties.

Bandera made an initial option payment of $50,000 to MSJ and has incurred approximately $11,000 in due diligence costs which will credited to Bandera and deducted from the initial option payment.

Bandera is required to make a final option payment of $250,000 to MSJ within 7 days of receipt of the approval of the TSX Venture Exchange (the ‘Exchange’) of the Option Agreement.

Bandera will be required to issue to MSJ 650,000 common shares in year 1, 900,000 common shares in year 2 and 1,250,000 common shares in year 3. The work commitments to be financed by Bandera are $800,000 in year 1, $1,300,000 in year 2, $2,000,000 in year 3, $2,000,000 in year 4 and $1,500,000 in year 5.

MSJ will retain a 2.0% Net Smelter Return on the Properties. Bandera has the right to purchase the remaining 40% interest in the Properties anytime within one year after Bandera has earned its 60% interest in the Properties by paying to MSJ 40% of the NPV of the Properties as defined in the Option Agreement by a 20% cash payment and the remaining 20% in cash and/or common shares at Bandera’s sole discretion.

The Properties are 95 km. north of Guadalajara in the Hostotoipaquillo Mining District, State of Jalisco, Mexico.

The Cinco Minas property is comprised of 12 licenses (Exploitation Mining Concessions) totaling 10,750 ha.

The Gran Cabrera property is 4,242 ha. comprised of three concessions for exploration and two for exploitation.

Bandera proposes to complete a private placement of up to 8,571,428 units of Bandera at a price of $0.175 per unit, for proceeds of up to $1,500,000. Each unit will consist of one common share and a warrant to purchase an additional common share at a price of $0.25 per share for a period of two years from closing of the private placement. The net proceeds of the private placement will be used for the final option payment to MSJ, the required year 1 work commitments on the Properties and general working capital.

There are no Finders Fees to be paid pursuant to the Option Agreement. Finders Fees will be paid on the private placement in accordance with the policies of the Exchange and applicable securities laws.

The Option Agreement and private placement are subject to regulatory approval including the approval of the Exchange.

Bandera Gold is pleased to announce it is currently in negotiations with Minera San Jorge (MSJ) to acquire the Cinco Minas and Gran Cabrera projects in Mexico, including the historical Cinco Minas Mine. The previous operators (founders of the Anaconda Mining Co.) of the Cinco Minas Mine mined 1,083,000 tonnes of ore averaging 3.17 g/t gold (97,364 oz of gold) and 476 g/t silver (15,095,915 oz silver) from 1922 to 1928. Cinco Minas is an adularia-sericite-type epithermal silver/gold deposit that historically produced bonanza grade silver ore with significant gold credits. The main zone of adularia-sercite quartz veins has been identified over a strike length of approximately 5 kilometers. This project is considered now by Bandera to be one of the most advanced silver-gold exploration projects currently available for further exploration and development in Mexico.

Bandera is evaluating the geologic setting of several old historical producers along the Cinco Minas system (Cinco Minas) in order to determine if open pit mining or underground mining of bonanza grade silver and gold mineralization is a viable option or whether heap leaching with selective mining and milling of higher grade silver ores is more appropriate. The acquisition fits strategically with the company's overall precious metals focus, and may potentially provide desirable feed to either a heap leaching operation processing oxidized gold ores with relatively low silver values and/or milling ores with either higher grades of gold or silver or both.

The addition of the even more prospective Gran Cabrera area of mines may prove even more significant in the future to Bandera Gold. Geologists have been dispatched to review the technical database and visit the property in the field and review areas reportedly containing good grades of silver and gold in immediately adjacent area in the coming weeks. The company is reviewing previous operator’s results in a careful and meticulous manner in order before proceeding with this proposed acquisition

The Gran Cabrera project, northwest of Guadalajara consisting of approximately 4300 hectares with 22 historic silver-gold mine sites. Within the Cabrera claims silver-gold mineralization occurs in quartz-calcite epithermal vein systems hosted by felsic volcanics. The mineralization occurs as argentite, galena, ceragyrite, native silver and native gold.

In many cases old workings were abandoned simply because they were too remote to continue operations or the ore began to run into silicified materials. In the vicinity of Hostotipaquillo, ore was discovered in 1605 and several mines were developed. The town soon became the administrative centre for the region and later the Municipal capital. However in the Gran Cabrera region, 10-20 kilometres northwest of the town, mining had already begun and many operations were developed. The rugged terrain made working these properties difficult and would qualify as models of excellence in mine development in rugged conditions. In examining the ruins of the Monte de El Favor and Gran Cabrera mine camps, the sheer magnitude of the regional historical development is simply amazing. While the environment has overtaken many of the road, rail and cable footprints, the evidence still exists. The degree of adit and shaft development done in the individual mines is remarkable.

While mining was growing in the Cabrera area, it was also advancing to the east towards and into Cinco Minas. In the early 1900s, a series of independent mine operations became the critical mass for the development of the town of Cinco Minas. Power was brought into the area and extensive mill operations were established. It became the local mine centre for the area and the reported 10,000 person camp resulted. The Cinco Minas deposit was developed to its peak by Marcus Daly with the Cinco Minas Mining Company. He transformed the random mining operation into a 500 tonne per day producer by 1922. The following table from the Mexican geological Bulletin #58 written in 1963 shows the volumes and grades removed from the deposit between 1922 and 1928.

Cinco Minas Mine Production History from 1922 to 1928

Year	Tonnes Milled	Grade		Metal Content		Recovery (%)		Production
		Au (g/t)	Ag (g/t)	Au (OZ)	AG (OZ)	Au	Ag	Au (OZ)	Ag (OZ)
1922	170,000	3.00	420	16,397	2,295,562	88.40	89.90	14,495	2,063,710
1922	170,000	3.00	420	16,397	2,295,562	88.40	89.90	14,495	2,063,710
1923	150,000	2.50	400	12,057	1,929,043	89.80	90.00	10,827	1,736,139
1924	161,000	3.50	604	18,117	3,126,465	89.70	94.70	16,251	2,960,762
1925	151,040	3.84	519	18,647	2,520,287	75.00	92.10	13,985	2,321,185
1926	129,467	2.93	470	12,184	1,956,355	81.50	81.10	9,930	1,586,604
1927	163,782	3.10	464	16,324	2443,289	94.70	92.90	15,459	2,269,816
1928	158,601	3.32	455	16,909	2,320,107	97.10	93.00	16,418	2,157,700
Total	1,083,890	3.17	476	110,633	16,591,109	88.32	90.79	97,364	15,095,915

While not a complete estimation of the total volumes removed during the life of the property, the recorded 1,083,890 tonnes of gold/silver ore grading 3.17 g/t Au and 476 g/t Ag is significant. Most of the ore is reported to have come from the El Abra mine area which represents only a small portion of the known fault strike length. Nebocat (August 2004 Tumi report) completed a back calculation on production records and determined that volume of material mined was actually “in the order of 2.1 million tonnes of 0.13 oz/t Au (4.46 g/t) and 18.6 oz/t Ag (637 g/t)”.

In a 1981 margin note by Zahoney in Wisser’s report from circa 1930 data, he reaches the same values but pegs the noted values as head grades. Zahoney noted the removal grade as 0.12 oz/st Au (4.11 g/t) and 16.7 oz/st Ag (572.57 g/t).

In a 1916 report on the region, Villafana reports that mine workings in the upper part of Cinco Minas are very old. While a writer today would consider 1916 to be very old for a mine camp, he refers to work started in the 1500’s by the Spanish. At that time, adits were hand cobbed into the vein to win the very high grade ore. In 1916, 3 kg/t silver was considered very high grade ore, but there are still several references to bonanza zones that obviously superseded those grades. It becomes a matter of perspective to the writer based on current knowledge and experience. It is also possible that the Spanish considered the Cinco Minas area a marginal property as the quartz cemented breccia made artisan or hand cobbed operations difficult to mine. It was also reported in areas such as Los Alamos, Sonora that grades approaching 60 kg/t were encountered from time to time. As a result, depending on the perception at the time, the grades in Cinco Minas may have been considered average.

Historical reporting details the nature of the vein exposures and how the adits were simply followed to only take the central high grade ore. The high grade ores were located in the centre of the vein in an almost symmetrical or concentric manner. The early reporting suggests that mine cut off grades were in the order of 750 g/t silver and lower grades were simply left behind as the chase for the core materials continued. The irregular adit and stope patterns produced by the Spanish led workers are still visible at Cinco Minas today in the upper reaches of the mine. They certainly did not have the benefit of drill testing to follow ore grades and it is expected that in certain cases, high grade vein cores will still be encountered.

This is established by some of the Tumi drill intersections encountered during the recent drill programs between 2003 and 2004. When a significant drill intersection was encountered, press releases were issued announcing the hit. It should be noted that records of bonanza zones being located date back to 1824 at Cinco Minas and they are still being found today. These are indicators that the area is certainly not mined out and determining average grade and volume estimates is difficult. Many people have tried to provide those estimates over time and the picture continues to change with time. It is also important to note that Villafana also related that;

“The 2nd and 3rd [La Trinidad] levels are opened in very low-grade ores and it is not possible to define with great precision the form of the rich ore shoots or the bonanza-grade parts within the body of the vein.”

This is a critical observation as even in 1916 the upper levels were considered low grade zones. Deeper levels and exploration cross cuts were used to locate new high grade materials. What is of the greatest importance is that subsequent to the 1916 report, the company went on to extract in the order of one to two million tonnes of rock and ore in developing the mine. As development became more standardized and sophisticated, the older adits would have been widened and remnant ore removed. What is left in the upper levels is the essentially fully picked over mine surfaces and that is exactly where most of the recent assessment and exploration work has been concentrated since 1930.

While the foregoing historical information is replicated from the writer’s previous report, it was important to re-state these facts to provide continuity to this report. The essence of the historical factors provides a strong foundation for today’s work. Considering the mine workings and general area were under full scale operation around 1930 it was important to understand where people looked for ore once the mill operations ended. Approximately 1,000 people were employed at the mine at the time the mill closed and it was felt by this author that mine work must have continued in some fashion.

After interviewing several of the elders from Cinco Minas, it was determined that in fact, the mine did remain active. Once the company left the site, the people formed a co-operative and kept the mine running until 1943. Miners also continued to descend to the lower levels until after 1947 to hand cob the high grade 3 kg/t veins being worked at the very bottom of the mine. At the peak of mine production around 1928, trains were being used to haul seventy 2.5 tonne cars from the Cinco Minas level. This equated to 500 tonnes per day of mill feed running 24 hours a day. Within the levels, 16 car electric trains serviced 10-12 man teams advancing the faces roughly 5metres per day. Of special note was the comment during the interviews that in 1927, the company did not consider mineralized rock under 1 kg/t as ore. This lower grade material was simply sent to the waste piles.

Every 15 days, 35 kg bars of gold and silver were being shipped via the rail at Magdalena to the USA. This 24 hour a day operation paid the miners 2-3 pesos per day in gold and silver coins. There were also at least 4 large lime kilns in operation producing 10 mule loads a day for building cement and mill flux. Three of the kilns were at Cerro Colorado and a fourth located on the main Cinco Minas River separating the mine and the town. The area around Cerro Colorado was considered the “bad” side of town and relegated to malcontents and the highly persecuted local natives. This was also a reason why that portion of the property suite was not actively mined and only had artisan work done on its flanks. The thrust was only in and around the main mine and little exploration and development outside that area was even considered at the time.

These statements go a long way in explaining the lack of lateral development in the region as no one wanted to push onto lower grade waste materials under 1 kg/t. This adds to the clarity of why 300-500 g/t Ag adits were simply left. Many old adits and workings dot the landscape but unless plus 1 kg/t grade materials were located at the outset, the site was abandoned and new locations scouted.

The co-operative began to dissolve around 1945 when costs rose too high as contract miners were now needed to work the lower stopes. The mine was not being run as a business and reinvestment into infrastructure was not being made. Ore was originally being direct shipped to Zacatecas and paid for with silver coins at a high loss ratio for the mine. When the mill began to demand too much for the ore, it became too costly to ship frequently and ore was stockpiled for yearly shipments. This resulted in poor cash flow and interruption of payment to the contract miners who simply left the job. The stories of skimming off the gold to line the pockets of the mine managers and cooperative leaders cannot be substantiated, but it is plausible that this indeed did happen as there were no reporting controls in place to stop any fraud or theft.

Once the mill finally closed in 1947 and the power was turned off, some long time local miners continued to work the mine as artisans until the lower sections began to flood from groundwater seepage. Hunt and peck mining continued for a few decades and the entire community finally fell into disrepair and in fighting until the mining operation simply stopped.

In this period of civil unrest and suffering, the loss of an economic engine in the region, depleted mining, and the loss of mine focus caused the area to begin to drift into marginal subsistence agriculture. At the present time the regional manpower is involved roughly in 65% agricultural operations and only 2% mining. Over the past several decades outside industrial and investment interests began to re-visit the region to establish new footholds in mining. The key to successful mining in all regions is extensive ground control with good title. This has been difficult to establish in many cases locally due to the complex mining past. However, MSJ was able to develop an extensive footprint over the past decade while establishing a solid reputation with the local population on many fronts. This type of integration into the community and attention to detail has allowed MSJ to become a premier player in the region. All companies wishing to undertake operations within the region would be well served to follow the MSJ model of long term committed and meaningful involvement in the local community. Only after a demonstrated concern and commitment to the best interests of the population will mine operations be allowed by the local community. Simple mine title does not automatically ensure acceptance and success in this region.

In 1968 Mr. P.S. Friesen, from Trans-Pacific Engineering and Management Ltd., visited the Cinco Minas area to undertake an examination of the deposit for an unknown group. He took a series of samples for assay but the writer has not seen the results. In his brief report he detailed the ownership of the mine area relating to 11 parcels. The actual property descriptions are brief and do not provide any accurate data to pin point the actual title locations apart from general terms.

He advised that the 11 parcels were split between 6 held by Senor Thomas Moore of El Aguila who apparently held the Cinco Minas mine. The El Aguila property consisted of 5 parcels owned by Lic Fernando Ysita. The two packages represented an area covering 1500 feet by 4500 feet trending northwest on the log axis. This is roughly the centre line of the present Cinco Minas land position held by MSJ. In addition to the listed parcels, he advised that an additional area both northwest and southeast of the block should be acquired for at least 6000 feet in both directions. It is not known by the writer as to how the negotiations proceeded, but the entire area including the buffer is now presently held by MSJ.

The present property ownership and mine right title is detailed in the Property and Location section. All historical work effectively ended in 1947 and only began again in 2002 with the previous joint venture agreements between MSJ and Tumi Resources Ltd. However, there is a reference in Friesen’s report that Thomas Moore was operating a small 20 ton per day mill with ore from the Cinco Minas Mine in 1968. The past or present location and history of that mill was not known by the writer at the time of the first reporting but was subsequently located in the brush near the San Juan mine. The ball mill remains on concrete foundations and some of the water tank and other foundation structures remain. However the mill would take a significant amount of work to re-use as railway tracks were welded to the interior of the mill housing to replace pad liners.

It is always difficult to fully detail historical aspects of old mine property. Some records exist and others are lost to time. However MSJ has done an excellent job of obtaining whatever historical data that was available and a synopsis is presented by this writer to attempt to follow the intellectual development stream of the property. A series of authors have presented written works detailing their thoughts on what they felt the deposit was telling them at the time. The older reports are certainly germane as they were done in a period when first-hand observations of the workings at depth in the operating mine was available. The portions that were paraphrased for continuity are italicized. This writer has attempted to capture the full essence of the reporting.

The first report was done by Mr. Ed Wisser in a file report indicating he was assessing work done by Mr. S.C. Feeley. References to the 1930s are made but the actual age of the document can only be stated as older. Following a review of this and the other reports, the reader should be able to develop a comfort level with how the mine was developed in a scientific manner and will bring the reader to the present day knowledge base. This information, while reported on in the March 2006 report as well, is important in discussing the proposed exploration plan and the importance of each aspect. The 43-101 standard reports require complete presentation of pertinent fact in each issuance of new material. This results in some repetition but the information is critical to understanding the intellectual development process of the property. Wisser

The main feature is a regional fault line striking N45W and dipping 50-65 SW with an overall displacement of 600-900 metres distributed over several planes. The main fault plane forms the immediate hanging wall of the Cinco Minas fracture but it is usually some distance away. The main fault zone is displaced by cross faults with strikes ENE to WNW in the NW segment of the main fault at Aguila (Eagle). Displacements are normal to the main fault.

The cross faults appear to be post mineral, intra-mineral cross faulting and have helped to localize the ore shoots. Wall rock of the Cinco minas vein is andesite in the upper levels and possibly to the bottom of the mine, some 700 metres below the outcrop levels. The Cinco Minas Vein is not a simple filled fissure as it seldom shows clean cut walls. The vein is a mineralized fracture zone, irregular in width and in intensity of fracturing. Fracturing varies from mere sheeting with displacement to intense shattering and crushing.

Vein matter may consist of thin irregular stringers or be present in amounts of cemented jumbled andesite fragments. In some areas a solid vein several metres wide occurs. The footwall appears generally the least shattered with closely spaced stringers or good thicknesses of massive quartz with or without calcite. Shattering increases towards the hanging wall and the vein consists of andesite and quartz fragments cemented by quartz and calcite. Calcite is usually more abundant next to the hanging wall.

Note: This is a potentially important observation as it assists in present day field mapping in trying to locate the actual main vein parameters. It should be noted that a significant spike in calcite grades were noted above background assays on two locations on the southwest dip slope of Cerro Colorado. The writer’s original report sample #15 (IPL #18) was taken from adit number 3 which is at the far south edge of Cerro Colorado. This grade was 4.36% Ca. Sample #24 (IPL#24) was taken from the wall rock of a mined out surface pit some 50 metres northwest of sample #15. This grade was 7.62% Ca. This could suggest that the hanging wall to the main vein runs along the southwest edge of Cerro Colorado. The literature indicates that old lime kilns were observed in the area to the southeast of Cerro Colorado on the flanks of the outcrop extension. This would be on strike with the fault line and suggests that a significant amount of calcite must be present in that area to support kiln activity. As an example of that potential grade assay samples were taken from the area surrounding the old lime kilns located on the SW slope at the SE end of Cerro Colorado. One assay of what appeared to be kiln feed stock (KA-03) returned an assay of 41.74% CaO.

It is also important to note that additional lime kilns were situated roughly 1.5 kilometres NE of these kilns in the valley, running parallel with the main shear zone. These kilns was not located during the summer work, but reported upon by locals. This presents a model of replicated calcite rich zones covering a zone in excess of 2 kilometres wide. This calcite signature suggests the actual main shear zone is actually very wide and complex with many features muted under the talus and assorted flow materials. This is a significant development in the understanding of the geological character of the system as it provides a framework for a much larger system than originally considered. This larger system also has the potential to host much more metalliferous zones within the assorted fractures.

Silicification is varied and complex. It appears from coarse to fine grain approaching chalcedonic, sulfides consist of pyrite (the earliest sulphide) and blend into more contemporaneous galena and chalcopyrite. The silver which occurs mostly as argentite appears to come later than the base sulfides. The sulfides in the upper levels are erratic and do not have an apparent association with the silver ore. They occur northwest and southeast of the main Cinco Minas ore body and doubtless occurred within the ore body. However, the upper portions of the Cinco Minas Vein are largely free of sulfides, but the information suggests that sulfides increase at depth.

Barrera

In 1931 in a Mexican geological bulletin (#51), Tomas Barrera advised that pre-mineral rhyolite dykes cross the main vein in several places.

Stages of Formation:

• Shattering along the Cinco Minas fracture zone caused by movement along the fracture itself probably aided by movement along the zone of faults in the hanging wall.
• Silicification of walls and rock fragments of the fracture zone. Filling of open spaces with considerable replacement of included rock fragments by quartz of varying texture. Some calcite deposited. Persistent shattering through this stage.
• Continued shattering and beginning of sulfide introduction with continued deposition of quartz.
• Similar conditions as noted above, but an increase of base sulfides. Start of important silver deposition.
• Shattering continues. Deposition of base sulfides rapidly declines and silver continues. Silver deposition decreases and then ceases. Most of the hanging wall calcite is probably deposited at this stage.
• Slight shattering continues. Oxidation and leaching. There are no gaps in the stages as each graded into the one succeeding.

Copper is sporadic and silver does not seem to go with the chalcopyrite. The Cinco Minas ore body was 450 metres long and 750 metres deep which results in a ratio of length to depth of at least 1:2, which is similar to Bolanos and this ratio may be characteristic of ore deposits on major fault zones. The shape of the Cinco Minas ore shoot suggests rather strongly the influences of ground water deposition of epithermal ore.

The variable composition and structure of the vein is explained by its complex mode of origin. Solutions were constantly changing in composition. Shattering occurred at irregular time intervals and different places along the vein. When a particular type of solution was at hand certain portions of the vein were permeable and permitted deposition.

The next report on file is done by P.S. Friesen in October 1968. In his report he concluded that:

There is an untouched vein approximately 1000 feet long at the northwest end of the old mine workings that would represent 6,750,000 tons of ore. Plus the 2000 feet of mined area at Cinco Minas could still represent additional tonnage of 12 million tons even though the high grade has been mined out. He also notes the potential of additional ore in the direction of Cerro Colorado. It must be noted that all references to ore, ore volumes, reserves, or resources are historical estimates only based on the required criteria at the time of reporting.

In summary, he feels that in the order of 20 million tons of ore are possible for extraction with an average grade of $4 to $5 / ton for the 6,750,000 tons and $1 / ton for the remaining 12 million. No estimate was given for the Cerro Colorado portion. He then concludes with:

“The development of this property on a large scale, low grade, open pit operation is not a question of ore reserves as much as it is a metallurgical problem, If the economic minerals can be extracted at less than $2/ ton an extensive exploration program is warranted.“

It is important to note that even as far back as 1968, it was understood that extraction costs and metallurgical concerns were taken into consideration during property evaluations. The current 43-101 F1 process revolves around such issues in a more modern style but a similar result is achieved. Historical notations such as Friesen’s impart an implied credibility to the past reporting practices when valuation concerns are raised. However, the current resource estimates prepared under the 43-101 F1 format should be considered the present benchmarks to current valuations.

The next author on file is Mr. Craig Byington, an independent consulting geologist hired by MSJ, who examined the Cinco Minas property in June 1997. In his report he relates to his field visit and subsequent analysis of the exploration techniques of a company identified as Minera Las Cuevas who performed work on the property in around 1981. Byington provides some important insight into the structural aspects of the faulting and tips on field observations with respect to mine targets and exploration.

He points out that some located veins running east of and parallel to the main Cinco minas vein near the old mine dip to the northwest at about 60 degrees where as the main Cinco Minas vein dips in the opposite direction at about the same angle. Mr. Rosas of MSJ advised that the veins are virtually identical to the main vein in every respect including gangue mineralogy, sulfide content and brecciation. The geometry and similarity of the two vein sets strongly suggest that they are conjugate shear systems. As such they would have been open to the same mineralizing fluids. The geometry indicates normal movement during the deposition of quartz. It is important to recognize that this was the movement direction only during quartz deposition time.

“Normal movement is also confirmed by the geometry of the quartz veins as shown from both the current and earlier mapping. Both maps confirm that the veins are quite extensive along strike but pinch out along the dip in a fraction of the strike length. This is the type of geometry that is only possible with dip slip movement such as would be the case with normal movement. In the surrounding outcrops there are a number of quartz veinlets which are found in a normal- movement extension fracture orientation. These are found adjacent to the main Cinco Minas vein and in more distal outcrops.

From the observations it is very apparent that the ore-metal containing shear and quartzvein fracture are different fractures. In fact only coincidentally do both of the fractures coincide directly. The ore metal fracture is later than the quartz vein and often diverges from the quartz vein. Within the workings it is readily apparent that the stopes completely ignore the wide and very obvious quartz vein to preferentially follow the limonite stained but subtle shear in the footwall. Obviously, this shear contained the precious metal values as can be seen from the amount of stoping found along it. There is virtually no stoping along the main quartz vein.

The later metalliferous shear is the one which should be followed by the current exploration effort. Following the quartz vein will be unsuccessful as was the 1981 Minera Las Cuevas program. That program confirmed that in the 300 metres of vein directly adjacent to the known workings, additional ore shoots did not occur. Current sampling has focused on the quartz vein to the exclusion of the metal carrying shear. It is unlikely that any of the earlier workers in the district recognized this relationship and therefore it is unlikely that the true ore controlling fracture(s) have been sampled. It is important that workers understand this basic ore control to allow for a predictive capability.

The second point references the earlier vintage Las Cuevas surface geology map spoken of previously. In addition to the surface geology, it also contains a composite plan of the underground workings. In a longitudinal section view these workings could be described as extending to a considerable depth but being very limited along strike. In fact the dimensions referenced in the Las Cuevas report describes the vein as being approximately 180 metres along strike and 460 along the dip of the ore shoot. This is the opposite type of geometry that was described for the quartz vein and reflects strike- slip movement. The quartz and the ore metals came into the rock at different times and entered different openings with different geometry.

Wrench faulting then was responsible for generating the openings during the time when the ore metals were emplaced in the rock. As such, the ore shoots will occur where the fault inflects into the correct strike orientation. By identifying the more favorable and less favorable strike orientations in the field, the explorationist can predict where the ore shoots will occur. Identifying the correct areas and confirming the prediction with surface sampling will certainly identify drill targets that the previous workers would not have recognized.

The correctness of the above statements was easily tested by making observations at different outcrops along the strike of the vein. For example the outcrop where the eagle (La Aguila) outline occurs was visited. While the quartz vein is so obvious that it is responsible for making the La Aguila outline, there was no mining along the quartz vein.

However in the footwall again there is a notable fracture similar to the one that was mined in the main workings nearly a kilometre to the southeast. The fact that it is the main metal conduit was immediately obvious from the abundance of malachite staining. The trace of the fracture was as obvious as if the dark maroon volcanic rock had been painted green.

Reportedly the better values of precious metals are often associated with manganese oxides. This is a correlation that is very common throughout the world with this type of geochemical system. Most often the manganese comes from minerals such as rhodochrosite or rhodenite which are often directly associated with the bonanza mineralization. Recognizing that relationship can provide the explorationist with a useful visual tool. The occurrence of manganese oxides should prompt sampling as should the occurrence of malachite or other secondary ore minerals. This is not necessarily being done at the present time.”

Note: The relationship with the manganese is an important factor in light of the current assay work done on the Chino outcrop noted earlier in this report. The original Munroe report (March 2006) sample #16 (IPL #20) was taken near the old mill site next to the town at a new road cut. The 131,017 ppm or 13% manganese assay value, certainly suggests further exploration at this site is warranted. However, due the presence of residential structures above the outcrop area and the critical nature of the area for transportation, it will have to be a future drill target only at this time.

Significant exposures of manganese mineralization were also encountered during the examination of the Minas del Coral slope in the summer 2006 program. This area is separated from El Aguila by two structural valley systems with a similar joining aspect that intersect at the main fault. The most southern valley was called El Scorpion after the concrete sealed mine of the same name located at the base of the valley above the main fault. This valley was mapped and found to be generally barren but up to 20metreswide. It certainly follows the wrench faulting scenario noted above. The other valley will have to be examined once the vegetation is off the hills. The steep incline and heavy cover made summer examination of limited value.

“Only by recognizing the major ore controls and utilizing the predictive capability that such knowledge brings will it be possible to define new ore zones like these. However, if for whatever reason this group employs the same techniques and concepts that their predecessors used, it would only be logical to expect the same results.

What I am trying to illustrate here is that the necessity for an entirely different exploration model is obvious. Recognition of the model will afford the exploration team a powerful predictive tool. Admittedly the concept requires that a more sophisticated effort be applied than to simply map and sample the bull quartz vein as has been done in the past, but there are a number of mineralogical clues and structural techniques which can greatly assist with the effort. Confirmation sampling will define the location for series of follow up drill holes.”

From this report it becomes clear that as the sophistication in mining increases, so does the opportunity to re-evaluate old sites. While a great deal of fundamental work was done in the past, new tools and methods are certainly required to properly evaluate old workings. Appendix 2 details the results of the most current examination of the mine dumps for tonnage and grade estimates. However, as the dumps were not able to be opened during the summer program, the reported tonnages were not included in the resource estimates at this time. After Byington, the next authors are from the Tumi Resources Ltd. group. The main author is John Nebocat, who conducted a series of drill programs, assay work and other exploration programs between 2002 and 2005. His work is well reported and covers many of the current issues surrounding modern mine development. He created three major reports on the exploration work at Cinco Minas. His reporting and other public documents such as the press releases from Tumi during the joint venture program with MSJ provide a very modern overview of current understanding of the area. However, due to the restrictions contained within the strict 43-101 reporting format, direct quotations of post 2001 reporting is not allowed. To comply with the reporting guidelines, the writer undertook the auditing review and verification of all the estimate numbers stated in the quoted Tumi reporting and found them to be verifiable in the March 2006 report. Due the requirement of the 43-101 reporting structure, the March 2006 estimates are included in this report. Additional work done by MSJ was also verified, but since the original author of that work is not considered a qualified person under the current 43-101 reporting guidelines, none of the resources figures used or reported in that work had been expressed in the original report. However some of the work by Morin was verified and accepted by the writer in the Coral, El Kilo and Cerro Colorado areas. The new resource estimates are discussed in the Resources section of this report.

In 2004 Tumi prepared a resource estimate on the Cinco Minas property that was based on work by Nebocat and the independent consulting firm of Behre Dolbear de Mexico. This estimate was based on the drilling, trenching and field exploration since 2003. Based on their examinations and calculations they reported the following:

• an indicated resource of 2.27 million tonnes of 171.9 gram silver containing 12.5 million oz. of silver and 1.22 gram gold containing 89,100 oz. of gold
• an inferred resource of 400,000 tonnes of 137.9 gram silver containing 1.8 million oz. of silver and 1.07 gram gold containing 13,800 oz. of gold

The writer has reviewed all of the available Tumi reports that detail the drill records, assay results and mapping. After a thorough review of all the data sets, the writer concurs with the above noted estimate. It should be noted that in the summer 2006 exploration work several trips underground were made into the main El Abra mines. These explorations allowed the writer to confirm and carry out further check samples of the Tumi work. The mapping by Nebocat was found to be complete and the reported results were verified.

Later work done on the property by MSJ has become partially relevant to this estimate as while it was not completed by a Qualified Person as set out in the NI-43-101, this work has been thoroughly examined and discussed with the MSJ author. This writer concurs with the work as set out in the MSJ documents. These observations have been discussed in the resources section.

Tumi press releases also indicated the presence of bonanza grade ore at various intersections in the drill program. In a Nov. 19, 2003 press release from the Frankfurt exchange, TUMI reported that bore hole CMRC30 encountered bonanza quality values of a 20 metre intersection with average values of 3.2g/t gold and 845g/t silver including a 6 metre intersection with 9 g/t gold and 2608g/t silver.

40 In a Nov. 25, 2003 press release, TUMI announced additional bonanza intersections as follows: CMRC34 – 22.5m with average values of 1.5g/t gold and 289g/t silver including 5.1m on the average 3.9g/t gold and 732g/t silver. Another interesting hole that was reported in the Nov. 19 release was CMRC-20 that resulted in a 24 metre intercept with grades averaging 1.56 g/t Au and 248 g/t Ag, including a 4 metre intercept producing 7.01 g/t Au and 1,099 g/t Ag. The company also reported that they were very encouraged by the drill results as these bonanza shoots appear to be separate bodies that were intercepted over a strike length of 190 metres.

However, even in light of these and other press releases touting the positive results during the program, the project was dropped by Tumi in a press release of May 18, 2005. It advised that a high strip ratio and too long a time frame to achieve an advanced project status were the main factors in its decision. They determined that they could not establish a viable open pit or underground mining operation in the old workings in the time frames set forth in Tumi’s agreement with MSJ. These observations were part of the underlying reason for the exploration effort to be expanded to other areas of the property that did not have the same overburden issues. The targets were Coral, the El Cohete razorback and Cerro Colorado. Development of these areas will provide mineralized materials for test mill feed and expand the surficial knowledge of the property significantly.

Details of the Tumi decision pathway events were contained in the Nebocat report of July 4, 2003 wherein issues relating to the exploration program thoughts were reported. Nebocat noted that MSJ had recognized the potential for bulk mining in the near surface portion of the main vein. They had performed a channel sample program of accessible underground workings from certain zones of the main vein. The MSJ sample program that has been reviewed and verified by the author during the summer 2006 program, resulted in composite averages that reached or exceeded 1.0 g/t Au and 100 g/t Ag. The composite widths could also be tens of metres in width depending on the location along strike.

Tumi did check work of the MSJ program and obtained results that supported and often exceeded the MSJ results in the upper levels. The main targets were the Destajos and La Trinidad levels and assorted sub levels between them. In April 1999 reporting from G. Cuellar, one of the sub level assays produced an average grade over 2 metres of 13.5 g/t Au and 1,840 g/t Ag. This author had occasion to conduct channel sampling opposite the Destajos level in the area referred to as the San Diego Cross.

The samples (RMT 1012, 1013, 1014) produced an average grade across 6.3m of 4.0 g/t Au and 458 g/t Ag. Further sampling on the San Diego cross was not possible due to a collapse zone in the adit to the south. It is also important to note that this high grade mineralized section opens into the existing stope and can be easily liberated in a modernized underground operation. The strike length of the zone could not be determined as the void space next to the zone did not permit examination.

Murphy has postulated that the Destajos level may not have been extended to surface for security reasons as the ore from his sample from the adit extension face on the roadway (original report sample 17 – IPL#21) was certainly ore grade. (3.97 g/t Au and 255.0 g/t Ag) It will be interesting to note the grades obtained and geological character of the rock when the level is exposed and extended into the mine. The underground program for Tumi and MSJ was terminated as they encountered difficulty in working in the haulage ways due to overburden filling old workings and haulage ways from open ore passes above. The writer concurs that these open workings do present a logistical issue but should not be an overbearing concern to restarting underground operations. It was possible for this writer to descend in the workings for approximately 122 vertical metres to approximately 20m above the Cinco Minas level. It should also be noted that the Cinco Minas level appeared to be dry during inspection. A significant bat population lives in these lower regions of the mine which also stalled further sample work in the deeper levels. Proper breathing apparatus will be required to safely expand the exploration work in these lower portions until the bat population and resultant fecal matter is removed.

Tumi concentrated on new surface drilling with 50 metre spacing. A combination of twenty nine reverse circulation and diamond drill holes were drilled to a combined length of 1,941 metres. From the drilling it was determined that the true average width of the main vein is 17.3 metres and ranged from 7.3 to 28.1 metres. In addition to the holes noted previously, CMDD-15 produced results yielding 19.4 metres with an average grade of 0.76 g/t Au and 118 g/t Ag. These values are significantly lower than the portions of the vein that were high graded during the 1920s where production grades were in the range of 3 g/t Au and 400-600 g/t Ag. New infill drill holes with 25 metre spacing will be required to provide data to bring these results up to a drill measured category. The drilling should be done with RC equipment to obtain the best depth and production results in this rock type. RC drilling can reduce ore grades due to the water circulation flushing action, but the past diamond drill work was much slower, expensive and produced poor core return. A drill program has been discussed but not planned at this time.

Tumi drilling also encountered lower grades in two holes placed in the San Pedro mine area (CMRC-12,13) and further drilling there was suspended. It is interesting to note that this area of the vein appears to be truncated or constricted based on available surface mapping and lower grades may well be expected. The San Juan mine is due west and on strike of the San Pedro adit. The surface mapping indicates a podding of the vein materials that is truncated to the west by a normal fault and main vein offset to the north of roughly 100 metres. The new Coral surface exploration work attempted to get above the San Juan area to better understand the structure elements.

San Juan was also subject to a series of drill holes in the 2003 program (CMRC-11,44,45,46,47) and higher values were obtained in proximity to the old workings. The quartz veined andesite intersected in the hanging wall during the drilling produced trace to low metal assays while the portions in proximity to the brecciated quartz vein workings averaged 51 to 316 g/t Ag and traces of Au. Nebocat states that holes 44 to 46 were designed to locate mineralization in the hanging wall stock work as this zone overlaid the Magdalena vein within the San Juan mine. If one considers the cautions raised by Byington, the low results would be expected.

The original examination of the San Juan mine by the writer and Murphy resulted in the observations that a significant amount of new malachite and azurite staining had occurred on the walls of the adits in several locations since the mine had closed. Staining was noted on the walls, ceilings and within the water flows in the mine. Murphy’s original sample #14 (IPL # 16) was taken from an area of intense staining 10 metres in from the adit opening. The assay results of 0.31 g/t Au and 112.2 g/t Ag with 6788 ppm Cu were interesting as no visible sulphides were noted from the adit wall sample. The writer submitted this sample to Dr. Harris for petrographic examination for the March 2006 report to try and determine any potential flow characterization within the wall rock and what the ore host may be.

In his report he noted that Harris Sample E, was a quartz – cemented breccia with sharply defined vari-sized, angular clasts of chloritized trachybasalt set in a texturally heterogeneous matrix of quartz. The field noted azurite was not visible on thin section and the only traces of mineralization were partially oxidized pyrite. Harris continued in his description to relate that the potassic xenoliths (breccia fragments) may have originated as a loose breccia and were then cemented by vein- type quartz.

This observation further suggests that the geological character of the hosting flank of the proposed caldera on the footwall may have some yet to be determined participation in mineralization dynamics. The malachite staining observed in several areas of the old workings and on field exposures appears to have in at least some instances a mineralized source of copper sulfide that has not been properly assessed.

The Murphy sample from the Gran Cabrera Chorrillo Blanco adit (original sample #8 – IPL #9) bears witness to the volcanic association hypothesis as similar materials were assayed and a result of 0.84g/t Au, 484.4g/t Ag, 18041 ppm Cu, 14083 ppm Pb, 11016 ppm Zn was obtained. This sample was taken from deep within the adit at a highly malachite stained exposure. Gran Cabrera is similar to Cinco Minas as both display a low amount of materials that could be described as true fault gouge. The contribution of the volcanic hosts to preferential fault failure from the regional dynamics was studied further in the expeditions into and along the crater rim to the northwest and northeast.

Roughly a kilometre to the north of the Coral area a series of old mine adits were located on July 31, 2006. They were referred to by the locals as the el Jaguex de don Pancho mine (JDP). These adits are situated some 185 metres below the crater rim and drive roughly horizontally into the steep face. Two main adit entrances were uncovered but more may be in the area. Both adits were collapsed in a similar manner right at the mouth and it appeared to be an intentional act. These adits reportedly produced high grade copper ore that was shipped to Monterey in the 1980’s. The following table details the assay results from the mouth and aprons of the adits. The adits would have to be opened to locate the working faces and examine and verify the presence of high grade materials. It is interesting to note that the apron samples from this area are significantly higher than the heavy azurite staining found in the San Juan mine (IPL#16- 6788 ppm Cu).

Several field days were committed to the more regional examination of the caldera and vein relationships. These fieldtrips provided significant background information to the writer and Murphy to further understand the structural aspects of the deposit. Large near vertical quartz vein systems were encountered along with five old mine sites inside the caldera to the northnortheast of the main El Abra mine working. These additional mines appear to be in a strictly volcanic host and bare no obvious relationships to the main mineralized Cinco Minas vein apart from a sub parallel orientation. The structural mapping that was completed on the property has detailed several interesting relationships between the faulted blocks. These relationships will be detailed in the Geological Setting section.

In 2005, MSJ re-calculated the mineralized zones in the San Juan and San Pedro areas and reported tonnage with grades at 0.56 g/t Au and 97.93 g/t Ag. Further work has been suggested on the NW vein extension as far back as Wisser but no reporting has been located apart from the TUMI work near the San Juan mine. Byington also discussed the importance of understanding the significance of the observed main vein pinching and wrenching with respect to the variability of grade content. His observations may answer in part why the Tumi results were low in this and other areas of the hanging wall drilling.

The writer also supported the need for better structural control over the region. High level satellite photographs were examined and it appears that the offset fault near the San Juan mine is buried under the erosional debris to the southwest. This portion of the area should also be considered as a primary target for geophysical study. A significant amount of groundwork has been completed during the summer 2006 field program in the area to the north and northwest of the San Juan mine by this writer and Murphy. The results are encouraging and provide the basis for further ongoing testing.

The decision to move exploration development opportunities away from the main el Abra mine during the primary stages of the program was championed by Bandera who re-evaluated Tumi’s withdrawal decision. Bandera has explored other options such as beginning quarry operations at Cerro Colorado where bonanza values were found in the Tumi drilling and better defining the El Cohete razor back. This approach allowed immediate production with limited stripping concerns and the ability to gain an operational foothold on the main vein to establish meaningful bulk grades for the test leaching. The newly constructed footprint will allow the company to gain on end views of main vein and exploration faces to extend the property both southeast and northwest from the main quarry site.

The close proximity of the newly refurbished mill site done by MSJ since November 2005 to Cerro Colorado and the new exposures around the old mine will allow for an economic flow of high-grade mineralized rock. This will be further aided by the new mine road construction done by MSJ to link all the target sites. In addition to the test face areas, old mine waste dumps have also been sampled and it has been determined that material is present that can add to values and tonnage calculations once the dumps are opened and properly sampled.

Cabrera Property

The Gran Cabrera property contains extensive underground workings that are largely underreported due to the present inaccessibility of the property. Historical information from a July 1923 report by Mr. E. Thompson stated that ore from the Cabrera-Animas mines could obtain assays in the order of 9 kilograms (290 oz) silver and about 10.3 grams (0.3 oz) gold in bulk operations. These would be high-end bonanza grade values and could not be sustained. The expected grades from this area should be in the order of 200-500 gram silver and 0.3 gram gold based on average assays from chip and channel samples conducted by MSJ.

For the March 2006 assessment, a sample was obtained from the Chorrillo Blanco mine which provided 484.4g/t silver and 0.84g/t gold in the original report sample (original sample #8 - IPL#9). As a side note, during a field trip in May 2006 to the area the writer had an opportunity to sample a piece of waste from the area of the neighboring El Favor mine. This sample produced a value of 0.25 oz/st gold (8.57 g/t) and 1468.7 g/t silver.

Based on the examination of available historical literature, it is possible that the Gran Cabrera deposit could easily provide a sizable quantity of bulk grade ore. An original sample (#7-IPL #8) that was obtained during the first evaluation upslope from Chorrillo Blanco along a fresh bulldozer cut-line displayed extensive dendritic manganese gossan interspersed with the host rock. This sample assayed out at 2.6 g/t silver and 0.01 g/t gold but spiked at 3740 ppm manganese concentration. This is typical of an oxidizing surface and, in keeping with Byington’s postulation; the manganese spike suggests greater mineralization value at depth. The literature also indicates that multiple parallel veins exist that are sub parallel to the Rio Santiago River. As reported earlier, the river is suspected to follow the major fault lines for the regional fracture displacement and subsequent pulsed emplacement of highly mineralized grade materials. This postulation was further confirmed by the writer’s examination of the Stroud Resources property at Santo Domingo in September 2006 which is on the river system strike.

In addition to the Chorrillo Blanco adits, there are four more mines indicated that are south of this adit system and also sub parallel to the river. The other mines are La Cobriza, El Huizache, Los Negros, and La Peralta. These mines all run towards the core of the volcanic dome and constitute the rough northern flank of the cone.