BACKGROUND HISTORY

BOREALIS PROPERTY, NEVADA, U.S.A

In 1978, the Borealis gold deposit was discovered by S. W. Ivosevic (1979), a Houston International Minerals Company geologist (a subsidiary of Houston Oil and Minerals Corporation). The property was acquired through a lease agreement with the Whitney Partnership, which later became the Borealis Partnership, following Houston’s examination of the submitted property. Initial discovery of ore-grade gold mineralization in the Borealis district and subsequent rapid development resulted in production beginning in October 1981 as an open-pit mining and heap leaching operation. Tenneco Minerals, Inc. (“Tenneco”) acquired the assets of Houston International Minerals in late 1981 and continued production from the Borealis open-pit mine. Subsequently, several other gold deposits were discovered along the generally northeast-striking Borealis trend and mined by open-pit methods. Also, several small deposits were discovered further to the west in the outlying area known as Orion’s Belt (encompassing the Cerro Duro, Jaimes Ridge, and Purdy Peak deposits). Tenneco’s exploration in early 1986 discovered the Freedom Flats deposit and then in October 1986, Echo Bay Mines (“Echo Bay”) acquired the Nevada assets of Tenneco Minerals.

With the completion of mining of the readily available oxide ore in the Freedom Flats deposit and other deposits in the district, active mining was terminated in January 1990, and leaching operations ended in late 1990. All eight open-pit operations are reported to have produced 10.7 million tons of ore averaging 0.059 opt Au (Golden Phoenix Minerals, 2000). Gold recovered from the material placed on heaps was approximately 500,000 ounces plus an estimated 1.5 million ounces of silver. Reclamation of the closed mine began immediately and continued for several years. Echo Bay decided not to continue with its own exploration, and the property was farmed out as a joint venture in 1990-91 to Billiton Minerals, which drilled 28 reverse circulation (“RC”) exploration drill holes totaling 8,120 feet on outlying targets. Billiton dropped the property with no retained interest. Santa Fe Pacific Mining, Inc. (“Santa Fe Pacific”) then entered into a joint venture with Echo Bay in 1992-93 (Kortemeier, 1993), compiled data, constructed a digital drill hole database, and drilled 32 deep RC and core holes, including a number of holes into the Graben deposit. Santa Fe Pacific had success in identifying new sulfide-zone gold mineralization but terminated the joint venture because of reduced exploration budgets. Echo Bay completed all reclamation requirements in 1994, and then terminated its lease agreement with the Borealis Partnership in 1996.

In late 1996, J.D. Welsh & Associates, Inc. (“Welsh”) negotiated an option-to-lease agreement for the Borealis property from the Borealis Partnership and immediately joint-ventured the project with Cambior Exploration U.S.A., Inc. (“Cambior”). During 1996, Welsh drilled 11 auger holes (totaling 760 feet) into Heap 1 to determine if there was sufficient remaining gold to consider reprocessing the heap. During 1997, Cambior performed a major data compilation program and several gradient Induced Polarization (“IP”) surveys. In 1998, Cambior drilled ten holes, which succeeded in extending the Graben deposit and in identifying new zones of gold mineralization near Sunset Wash. Cambior terminated the joint venture in late 1998 because of severe budget constraints.

During the Cambior joint-venture period in late 1997, Golden Phoenix entered into an agreement to purchase a portion of the Welsh interest in the property. Welsh sold its remaining interest in the property to a third party, who in turn sold it to Golden Phoenix; therefore, in 2000 the company controlled 100 percent interest in the lease (Golden Phoenix Minerals, 2000). Golden Phoenix maintained the property during the years of low gold prices, compiled a database, validated the drill hole data, and developed new mineral resource estimates for the entire property.

In July 2003, the Borealis property was joint-ventured by Golden Phoenix with BMC, which is a wholly owned subsidiary of Gryphon Gold Corporation. BMC, the operator of the joint venture, originally controlled the property through an option agreement with Golden Phoenix whereby BMC could earn a 70 percent joint-venture interest in the property. BMC had the right to acquire its interest in the Borealis property with a combination of qualified expenditures on work programs, and/or making payments to Golden Phoenix, and/or delivering a feasibility study over a period of 5½ years beginning July 2003. In January 2005, BMC purchased 100 percent interest in the lease agreement, and Golden Phoenix surrendered its interest in the property.

COPPER BASIN PROPERTY, IDAHO, U.S.A.

Gryphon Gold controls the Copper Basin copper/silver prospect with 26 unpatented lode claims. These claims surround 10 patented, privately owned, lode claims that formed the center of the historic Copper Basin mining district. Gryphon’s claims cover all obvious copper mineralization outside of the patented claims.

Copper Basin is located in Custer County, Idaho and about 20 miles west of the town of Mackay. The district is known for high grade copper and silver mineralization from wide quartz veins. The property hosts both high-grade underground copper silver deposits and open pit low-grade copper oxide.

The district and Gryphon’s property has received very little modern exploration. The only recent work was done by Phelps Dodge Exploration in 1997 where they performed geologic mapping and sampling and drilled two holes. Highlights include a 25 foot serious of chip samples across several prospect pits and an adit portal, which averaged 5.7% copper and 10.3 opt silver. A 20 foot serious of chip samples perpendicular to the previous line averaged 1.86% copper. These assay results confirm the same underground mining production of the structures.

Two oriented soil lines yielded +200 ppm copper anomalies, which were tested by four drill holes. Hole 1 intersected 225 feet (50 to 275’) of 0.20% copper. Hole 2 intersected 235 feet (70 to 305’) of 0.23% copper and 35 feet (315 to 350’) of 1.79 ppm gold. Preliminary testing of surface samples showed a 95% leach recovery of the copper, with only moderate acid consumption.

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