Risk Factors

The business of the Company, will be subject to a number of risks due to the nature of the business and its present state of development. Shareholders should carefully consider these risk factors. The following is not intended to be an exhaustive list of the risk factors to which the Company and its business will be exposed.

Operations

The Company’s business operations are subject to risks and hazards inherent in the mining industry, including but not limited to unanticipated variations in resource grade and other geological problems, water conditions, surface or underground conditions, metallurgical and other processing problems, mechanical equipment performance problems, the unavailability of materials and equipment, accidents, labour force disruptions, force majeure factors, unanticipated transportation costs and weather conditions, any of which can materially and adversely affect, among other things, the development of properties, production quantities and rates, costs and expenditures and production commencement dates.

The Company does not have any operating history, although it should be noted that the Company’s Directors have between them significant operational experience. No assurance can be given that the Company will achieve commercial viability through the successful exploration and/or mining of its tenement interests.

Exploration and Development

Resource exploration and development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but also from finding mineral deposits that, though present, are insufficient in quantity and quality to return a profit from production. The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government regulations including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection, the combination of which factors may result in the Company not receiving an adequate return on investment capital.

The Target Properties to which the Company has a right to acquire or has acquired ownership are without a known body of commercial ore. Development of the Target Properties would follow only if favourable exploration results are obtained. The business of exploration for minerals and mining involves a high degree of risk. Few properties that are explored are ultimately developed into producing mines.

There is no assurance that the Company’s mineral exploration and development activities will result in any discoveries of commercial bodies of ore. The long-term profitability of the Company’s operations will in part be directly related to the costs and success of its exploration programs, which may be affected by a number of factors.

Substantial expenditures are required to establish reserves through drilling, to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operations or that funds required for development can be obtained on a timely basis.

Environmental Regulations, Permits and Licenses

The operations and proposed activities of the Company are subject to State and Federal laws and regulation concerning the environment. As with most exploration projects and mining operations, the Company’s activities are expected to have an impact on the environment, particularly when mine development proceeds. It is the Company’s intention to conduct its activities to the highest standard of environmental obligation, including compliance with all environmental laws. There is a plant in care and maintenance on site and a managed tailings storage facility (“TSF”) at the Blackburn Gold Project. In compliance with the statutory obligations, annual reporting on monitoring activities of the TSF and the existing pits is completed. Through this procedure, the owner of the plant would be likely to identify any environmental issue early, and considers the annual reporting and monitoring good practice for risk minimization.

An existing and valid mining lease covers the immediate mine site at the Blackburn Gold Project. For the mine to start operating again, a number of statutory obligations will need to be complied with such as occupational health and safety regulations; however the permits to mine have been granted. While compliance is achievable, the risk is that there may be delays in qualifying, and there may be additional costs not foreseen in meeting compliance. The Company may also require further changes to tenements, i.e. exploration converted to mining leases as the project progresses outside the area of the granted mining leases. It is possible that there may be delays and additional costs in granting these licenses, if required, in the future.

Government Concerns

Interests in tenements in Australia are governed by the respective State legislation and are evidenced by the granting of licenses or leases. Each license or lease is for a specific term and carries with it annual expenditure and reporting commitments, as well as other conditions requiring compliance. Consequently, the Company could lose title to or its interest in tenements if license conditions are not met or if insufficient funds are available to meet expenditure commitments.

Title Risks and Native Title

It is possible that, in relation to tenements which the Company has an interest in, there may be areas over which legitimate common law native title rights of Aboriginal Australians exist. If native title rights do exist, the ability of the Company to gain access to tenements (through obtaining consent of any relevant landowner), or to progress from the exploration phase to the development and mining phases of operations may be affected.

The directors will closely monitor the potential effect of native title claims involving tenements in which the Company has or may have an interest.

Factors that Apply to Mining Operations

Mining operations involve substantial development efforts by a mining Company. A mining Company may encounter various technical and control problems during its development of mining operations. No assurance can be given mining operations will not involve a longer period of time or the expenditure of a greater amount of funds and other resources than is presently contemplated. Such technical or operational problems may negatively impact the economic performance of the project.

Mining operations inherently imply certain risk of which investors should be aware, as follows:

• Worldwide economic cycles influence prices of base and precious metals. As economies recede, demand for these commodities may decline, which may negatively impact the supply and demand ratio, causing prices to respond accordingly. The cash flow generated by mining activities is dependent on price levels of the metals produced. Future worldwide economic cycles may cause prices to vary outside assumed parameters in cash flow models that include certain price assumptions.
• Resource estimates are expressions of judgement based on knowledge, experience and industry practice. Estimates which were valid when originally calculated may alter when new information or techniques become available. In addition, by their very nature, resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. As further information becomes available through additional fieldwork and analysis, the estimates may change. This could result in alterations to development and mining plans which may, in turn, adversely affect a mining Company’s operations.
• Ore grades vary within ore bodies. Lower grades than predicted might negatively impact cash flow since less metal may be produced from specific ore blocks.
• The economic performance of a mining operation is dependent upon production of the predicted and planned tonnage and grade from the mine. Ground conditions in underground mines can cause fluctuation of tonnage production from that planned. Lower tonnage from that planned would imply less metal production, and would negatively impact cash flow.
• Economic performance of the mining operation is dependent on sales of the mine production. While both base and precious metals are commodities that are sold worldwide, they still must be sold. Failure to maintain an orderly market for the products would cause an interruption to cash flow until the production is sold.
• The regularity of cash flow is dependent upon a regular sales program.
• Smelting costs fluctuate over time.
• The start date of mining operations may be impacted by delays in the various permits required by government agencies. While valid and current mining leases are held over the properties, recommencement of mining operations will require compliance with statutory obligations in addition to the license; i.e. Variation to the Notice of Intent, Occupational Safety and Health issues. Such compliance is achievable but the Company may incur unforeseen costs and time delays as a consequence of attaining the necessary permissions.

Competition

The Company will compete with substantially larger companies in the acquisition of properties and the production and sale of minerals and/or metals and may be considered to be at a competitive disadvantage compared to such companies. However, the Company may not be disadvantaged in acquiring smaller, possibly higher grade, properties which might not be of significant interest to larger companies. The price which the Company may receive for its production will depend almost entirely upon market conditions over which it will have no control. The Company believes that it can promptly sell at current market prices all of the minerals and/or metals that it can produce.

Insurance

The mining industry is subject to risks of human injury, environmental liability and loss of assets. While the Company, as operations expand, intends to acquire insurance coverage consistent with industry practice, the Company can give no assurance that this level of insurance can cover all risks of harm to the Company associated with being involved in the mining business.

Price Volatility

If the Company achieves exploration success leading to mineral production, the revenue it will derive through the sale of commodities may expose the potential income of the Company to commodity price and exchange rate risks. Commodity prices fluctuate and are affected by many factors beyond the control of the Company. Such factors include supply and demand fluctuations for precious and base metals, technological advancements, forward selling activities and other macro-economic factors. If prices for commodities and/or metals decline, it may not be economically feasible for the Company to continue its development of a project or to continue commercial production of some of its properties.

Furthermore, international prices of various commodities are denominated in United States dollars, whereas the income and expenditure of the Company are and will be taken into account in Australian currency, exposing the Company to the fluctuations and volatility of the rate of exchange between the United States dollar and the Australian dollar as determined in international markets.

Conflicts of Interest

Some of the directors and officers are engaged, and will continue to be engaged, in the search for additional business opportunities on behalf of other corporations, and situations may arise where these directors and officers will be in direct competition with the Company. Conflicts, if any, will be dealt with in accordance with the relevant provisions of the Yukon Business Corporations Act or the British Columbia Business Corporations Act, as applicable.

Some of the directors and officers of the Company are or may become directors or officers of other companies engaged in other business ventures. In order to avoid the possible conflict of interest which may arise between the directors’ duties to the Company and their duties to the other companies on whose boards they serve, the directors and officers of the Company have agreed to the following:

• participation in other business ventures offered to the directors will be allocated between the various companies and on the basis of prudent business judgement and the relative financial abilities and needs of the companies to participate;
• no commissions or other extraordinary consideration will be paid to such directors and officers; and
• business opportunities formulated by or through other companies in which the directors and officers are involved will not be offered to the Company except on the same or better terms than the basis on which they are offered to third party participants.

Speculative Nature of Investment

The above risk factors should not be taken as exhaustive of the risks faced by the Company or by investors in the Company. The above factors and and others not specifically referred to above, may in the future materially affect the financial performance of the Company and the value of its shares. Therefore the shares carry no guarantee with respect to the payment of dividends, return of capital or the market value of those shares.

Potential investors should consider that an investment in the Company is speculative.

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