On June 24, 2008, Geograce Resources Philippines, Inc. announced the signing of an agreement with Vale Exploration Philippines Inc., a subsidiary of Companhia Vale do Rio Doce (Vale) for the joint exploration and assessment of the Masbate Copper-Gold Project.

Under the agreement, Vale Exploration Philippines Inc. may provide US$6 million over three years to fund early-stage exploration on Geograce’s Masbate claims. Geograce will be responsible for managing the permit approvals and community relations aspect of the project. At the end of the early-stage exploration, Vale has the option to take an undivided 51% interest in the Masbate claims in a joint venture with Geograce. The joint venture will be responsible for commissioning a Pre-Feasibility and Bankable Feasibility Study on the Masbateclaims.

The Masbate exploration project involves 7 mineral claims covering 84,046 hectares on Masbate Island located in the central portion of the Philippine archipelago, approximately 350 kilometres south of Manila. The island has a previous history of gold mining dating back to the 1980s and is once again attracting interest for its mineral resources. Geograce’s Masbate claims are adjacent to the Aroroy gold mine being developed by CGA Mining of Australia, which has already established a significant mineral resource base and was the first open pit gold mine operating in the Philippines from 1980 to 1994. Masbate was the subject of previous studies done by international agencies, which indicated high prospectivity for gold and copper deposits based on the island’s extensive mineralization.

The Masbate project is well-located relative to established infrastructure, with large portions of the project in close proximity to the island’s capital, Masbate City, and other major population centres. Access throughout the project area is reportedly good with the topography comprising undulating hills between 100 and 500 meters above sea level.

The project overlies Cretaceous to early Miocene-aged volcanic and sedimentary units which have been intruded by numerous dioritic to andesitic porphyry intrusions to the west of the Philippine Fault Zone. Gold mineralisation within the region surrounding the project is reportedly associated with quartz veining within volcanic rocks, whilst copper mineralisation is typically hosted within dioritic intrusives. Extensive alteration halos, principally silica-dominated, are also associated with the known mineralisation.

The climate is tropical with a wet season and a hot, dry season but overall poorly defined climatology. The area experiences occasional typhoons averaging between 1 and 3 per year that cause heavy rainfall. The wet season commences June and lasts until February. The average temperatures range from 28oC to 33oC during the wet season and 30oC to 35oC during the dry season. Thick forest cover is limited to the higher mountainous portions in the northern section of the island. The western and southeastern parts for the most part have been logged and are covered by cogonal grasses with scattered secondary growth low forest. The lowlands are generally cultivated with rice, corn and coconuts as the primary crops. The topography in both areas is rolling and between 100 and 500m asl. The vegetation is generally cogonal grasses and coconut trees with secondary tropical growth especially about rivers and peaks.

The Masbate tenements have copper, lead, zinc, arsenic, silver, mercury, pH and electrical conductivity anomalies that coincide with known mineralized areas prospective for epithermal gold and copper deposits and show some additional anomalies that have yet to be explored. Masbate Island consists of a belt of calc-alkaline intrusives that intrude an ophiolite basement and later marine and volcanogenic sediments. The intrusive belt extends from Southwest Negros in the south, through Eastern Panay to Masbate in the north. It is thought that this volcanic belt is due to the collision of the sub-continental Palawan tectonic plate into the Philippine Mobile belt and subsequent eastwards plunging subduction under these regions. This subduction-related volcanic belt is characterized by numerous epithermal gold deposits, base metal vein deposits and porphyry copper deposits.

Masbate Island consists of southwest and longer southeast trending limbs that converge almost at right angles at their northern ends. The southeastern limb projects towards Northwestern Leyte, while the southwestern limb extends towards Eastern Panay. The Philippine Fault Zone lies immediately parallel, offshore of the eastern Masbate coastline coming ashore near Uson.

The southwest limb of Masbate Island is underlain by an ophiolitic basement of pillow basalt and occasional gabbro with pelagic sediments. The diorite in Eastern Panay, intrusives in Southwest Negros and the Aroroy and Mobo Diorites of Masbate Island are considered to be part of an Oligocene-Miocene plutonic arc that extends towards northwest Mindanao. This arc is correlated with an east-dipping trench whose northern part is now partly buried under the Iloilo basin. This trench is believed to be connected with the present Negros Trench.

Central Masbate is comprised of Early Miocene agglomerates and sedimentary rocks (Sambulawan Fm) overlain by andesitic volcanic flows (Lamon Andesite and intruded by porphyritic hornblende diorite (Mobo Diorite). Small remnants of Buyag (Uson) limestone remain at Uson, Dimasalang and Palanas and are correlated with the Lamon Andesite and Sambulawan Fm.

The Mandaon area is underlain by Cretaceous sedimentary Boracay and Mandaon formations. The Boracay formation is composed of ophiolitic sediments whereas the Mandaon formation is composed of volcanogenic sediments. Both formations are intruded by Nabongsoran hornblende andesite porphyry. It is not yet clear whether these intrusives might form the source for some hydrothermal mineralzation.

The nearest active volcanoes are located northeast of Masbate; namely, Mt. Mayon and Mt. Bulusan in southeastern Luzon – the Bicol Peninsula.

Geograce is currently conducting soil sampling program, geological alteration mapping and community relations work on the Masbate project to identify areas for further exploration, with advice and assistance from Vale personnel.

The exploration program also includes an aeromagnetic survey to be flown over the area.

All this data will form the basis for the selection of future drilling targets to find deep-seated porphyry copper & gold deposits.