La Manchuria Project

The La Manchuria Project area is situated approximately 60km north northeast of Gobernador Gregores in the Santa Cruz Province. Good access to the project area, less than two hour’s drive from Gobernador Gregores, is via paved provincial highways and secondary dirt roads.

In regional geological terms the area is situated in the same structural corridor that hosts the operating, high grade silver, Mina Martha mine, situated approximately 60km to the southeast by road, in the southwest portion of the Deseado Massif geological province of southern Patagonia.

The Manchuria Project area comprises a total of 5,575 hectares, held 100% by Patagonia Gold S.A (PGSA). These concessions were acquired in February 2007 from subsidiaries of Barrick Gold Corporation.

Geologically located in the western portion of the Deseado Massif geological province of southern Patagonia, this Jurassic aged volcanic complex is widely acknowledged as an emerging world class, epithermal Au-Ag mining district. Several producing and advanced stage gold-silver projects including Cerro Vanguardia- 4.4Moz Au equiv (AngloGold-Ashanti), Cerro Negro- +2.5Moz Au equiv (Andean Resources), Manantial Espejo- 1.2Moz Au equiv (Pan American Silver), San Jose- 1.99Moz Au equiv (Hochschild/Minera Andes) and Mina Martha- 22Moz Ag equivalent (Coeur D’Alene) are hosted in this metallogenic province.

The project area encompasses four defined zones of epithermal veining and alteration throughout a 600m x 800m NW trending structural corridor. Veining is exposed within a broadly 900m x 900m, fault bounded block of shallow dipping rhyolitic tuff of the Jurassic age Chon Aike Formation, which is underlain by andesitic flows of the Bajo Pobre Formation.

High grade Au-Ag mineralization within the central Main Zone is associated with a low to intermediate sulphidation style, with classic CRT, crustiform banded and ginguru textures in a epithermal quartz-adularia vein system the textures of which show strong similarities to that of mineralization found in Cerro Vanguardia and Manantial Espejo.

Au-Ag mineralization is comprised of NW to NNW trending, principal dilatational, banded veins 0.2-1.5m wide which are enveloped by 5-15m wide zones hosting sub parallel, densely sheeted 1-5cm wide veining. Typically the bonanza grade values correlate with ‘ginguro’ black sulphidic banded veining containing visible argentite and ruby silver. The vein geometry is interpreted to have been spatially controlled by dextral displacement along a WNW trending, regional transtensional fault array.

Historic exploration completed between 1997-1999 concentrated on the central portion of the property covering areas denominated as the Main and Eastern Zones and included soil sampling, trenching and sawn channel sampling, geological mapping and the drilling of 22 holes for a total of 3,104 m. In addition over 15km line km of electrical geophysics and 27km of magnetic surveying were completed.

Results from drilling and trenching reported numerous bonanza grade Au-Ag values corresponding to narrow banded veins up to 1.5m wide hosted within the rhyolitic tuff unit over an approximate area of 150m x 400m within the Main zone. Re-sampling and validation of these results was conducted by PGS.

The phase I drill program was completed in April 2007 and 3,965.45 metres was drilled in 20 diamond drill holes. A total of 3,686 samples were dispatched. The significant intersections are shown in the table below and the drill hole locations shown in the included plan.

Based on the reappraisal of the geological, geochemical and geophysical data as well as the results from the first phase drilling from LM-01 to LM-20 a further drill program was undertaken in late 2008 comprising an additional 20 holes.

This second phase of drilling at Manchuria completed to LM-40 for 4,118.50 metres. The drill program was most encouraging returning significant results confirming the robust mineralisation in what is indicated as a geologically and structurally complex environment.

All results have now been received including the final results for the spectacular intersection in LM-30 which can now be confirmed to contain, from 142.5 m, 3.0 m @ 34.77 g/t Au and 4,164 g/t Ag.

Additionally a 100 m down dip step back to LM-20, hole LM-37 reported from 248.65 metres, 1.15 m @118.5 g/t Au and 127 g/t Ag.

Geological and geochemical appraisal indicates the model remains consistent with previous interpretation of a mineralised ‘package’, consisting of several narrow but very high grade discontinuous epithermal veins contained within more extensive disseminated mineralization, contained within a dominant structural corridor.

The corridor has had only limited drilling further to the north and still remains open to the south as well as down dip.

A drill program is currently being planned with the objective of infill drilling throughout the Main Zone not only infilling the mineralised corridor but extending the high grade mineralisation along strike and down dip in order to define a resource so as to advance towards the delineation of a N143-101 compliant resource.