The Ayungon Project is a 4,717 hectare porphyry copper-gold prospect on the island of Negros, Philippines. The project comprises two Exploration Permit Applications (“EPA”) and one Mineral Production Sharing Agreement (“MPSA”).

The properties are within the southeastern part of Negros Island where positive indications of precious (gold and silver), base metals (copper, lead, zinc) and other metallic mineralization are present. Previous mining and exploration activities have focused heavily on southwest Negros because of two major porphyry copper (Sipalay and Hinobaan) and one gold deposit (Bulawan) there. Recent geological data indicate,
however, that such types of mineralization are not limited to southwest Negros, but may also exist in the southeast, where a major deposit is yet to be discovered. In addition to gold and copper possibilities, other base and precious metal mineralization, as well as non-metallic deposits, are also prospective and warrant serious consideration.

The Ayungon Project was previously evaluated by Philex Mining Corporation from 1989 to 1991; Western Mining Corporation from 1996 to 1998; and Normandy in 1999. Initial findings based on geological mapping and sampling are highly indicative of a potential low to medium grade but large volume porphyry copper mineralization, amenable to bulk mining and with associated gold at depth. The area’s prospectivity is enhanced by the geological materials and settings associated with high-level to subvolcanic multi-episode felsic intrusives in tectonic collisional belts, which are favourable for rich depositional
environment. Due to the unfavourable economic and political conditions at that time in global metal prices and Philippine mining respectively, development of the project was never pursued further.

The key promising features of the property are:
• Good potential for vein-type and hydrothermal breccias epithermal gold deposition.
• Close association of sulfur and silica deposit to gold mineralization in the area, which may relate to porphyry copper mineralization at depth.
• Possible porphyry copper mineralization at depth indicated by previous geochemical data.

On January 8, 2008, Geograce Resources Philippines Inc. signed a Heads of Agreement with Negros 745 Philippines, Inc., which holds the claims for the two Exploration Permit Applications (EXPA0074-
VII and EXPA 0075-VII) and approved Mineral Production Sharing Agreement (MPSA 218-2005-VII) situated in the Municipalities of Ayungon and Bindoy, province of Negros Oriental, covering an aggregate area of 4,717 hectares.

Negros is a northeast – southwest trending, boot-shaped island located in the central part of the Visayan Group of Islands. It lies directly west of Cebu Island across the Tanon Strait. The Province of Negros Oriental is serviced by four daily flights to and from Manila by Cebu Pacific and Air Philippines, with scheduled arrivals and departures in the morning and early afternoon, and a flight time of about one hour. The Sibulan-Dumaguete Airport is located 3 kilometers, a five-minute ride from the Dumaguete City center. An alternative point of access by air is Bacolod City in Negros Occidental, which is also
serviced by Philippine Airlines aside from the two other two major airlines. From Dumaguete City, the Ayungon project site is 2 to 3 hours drive northeast via the coastal road.

The central part of the area is within the 25-year Zayco Mining Lease Contract (MLC) encompassing 486 hectares where the Ma. Cristina silica quarry is located. The property was previously surveyed by several companies including Philex Mining Corporation, from June 28, 1988 to June 14, 1991; and Western Mining Corporation from April 19, 1996 to April 1998.

Surrounding the Zayco MLC is a much larger claim area known as the Epithermal Gold EPA. It covers 94 meridional blocks that includes several individual claims with a total aggregate area of about 7,614 hectares. Management of the consolidated area has been given to Mr. Alfredo San Miguel, who also represents the Zayco MLC.

The Ayungon area includes the watershed between east and west-draining rivers at elevations of 800 to 900 meters. Eastern-draining rivers, the Ayungon and Iniban rivers, flow through deep valleys with convex profiles in their lower courses, indicative of uplift and rejuvenation. The Banban River, draining westwards, is relatively poorly incised.

Several relict planation surfaces evidenced by gently rolling topography cut by steep sided valleys are visible at different elevations up to around 700 meters. The Banban and Tambo perched valleys have flat floors at elevations of 540 and 430 meters, respectively. Both are drained by streams, which exit through steep narrow valleys. Other indications of young uplift are the gently westward-dipping and poorly dissected land surface west of the Banban River at elevation of 800 to 900 meters and by a relict terrace of silicic debris at around 350 meter around the eastern side of the Maria Cristina silica valley.

The Philippine archipelago is extremely prospective for gold, copper, chromium, platinum, nickel, molybdenum and other precious and base metals. Many prospects being explored today have a history of past mining operations. Mitchell and Leach (1991) devised a prospectivity map based on the occurrence of ancient volcanic arcs, subduction zones and mineral occurrences. Based on past production, Mitchell and Leach (1991) defined the Philippines mineral endowment for gold as second in the world after South Africa.

A northeast-southwest trending volcanic chain that includes the active Mt. Canlaon characterizes Negros Island. This volcanic chain is related to the active subduction of the Miocene Sulu sea basin along the Negros Trench.

The oldest pre-volcanic arc rocks in Eastern Negros consist of Eocene Limestone and sedimentary rocks exposed in the north of the island. These were followed by a younging sequence of the Miocene Macasilao Formation (carbonaceous shale, sandstone, conglomerate, coal and limestone) and Panghumayan Formation (tuff, tuff brecia, wackes, siltstone, andesite lava, pyroclastic and debris flow). Pliocene volcanics and sediments occur extensively in the north, surrounding the Quaternary volcanic centers of Canlaon and Madalagan. In central Negros, the widespread andesitic rocks and ash agglomerate including the Capuan plug represent Pliocene volcanism. Quaternary volcanoes in the north and Cuernos de Negros near the City of Dumaguete manifest the youngest volcanic activity in the area.

The central portion of the Ayungon area is underlain by andesite lavas with minor intercalations of tuff, tuff breccia, wackes and conglomerate, overprinted by intense and extensive silica and clay alteration. These are overlain/blanketed by post mineral andesitic pyroclastics and, further to the south, intruded by the andesitic Capuan plug. The host andesitic lavas and minor clastics probably correlates stratigraphically with the upper member of the Paghumayan Formation and the Pliocene volcanism in the East Negros arc. To the south and west of Maaslum and Banban is an extensive unit of massive coralline
limestone with abundant calcarenite at the base. This unit belongs to the Talave Limestone Formation.

Ayungon is an area of extensive intense hydrothermal alteration encompassing more than 10,000 hectares including the silica quarries in Maria Cristina, Banban and Kang ikis. The zone of alteration appears to be controlled by a northeast trending fault structure. These faults are interpreted to have served as the channel ways for the up-flow of hydrothermal fluid that crossed highly permeable layers in the volcaniclastic sequence resulting in a wider lateral outflow. Outward from the feeder fault, the silicified zones are mostly enveloped by argillic (illite-pyrite) alteration. A number of mineral prospects and deposits are known in the general area, some of which have actually been earlier explored and exploited. The most prominent of these deposits are the two silica deposits in Ayungon and Bindoy and the Maaslom copper prospect (formerly Blue Ridge Mineral Corp.) in Ayungon

Highlighting the available data in the Zayco MPSA property is the soil geochemistry of the Mambago area. It features an overlapping multi-element association with significantly anomalous values for individual trace elements. The geochemical zonation shows a central core of Cu, As, Mo, Pb, Au depleted in Zn. The peak value of gold is at 794 ppb and the contrast of anomalous values versus average background levels is relatively high. The northern extremity of the anomaly is masked by young andesite cover and hugs the northern outcrop of the argillic chlorite zone rimming the silica.