GoldQuest Mining Corp. - Toral

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Spain Toral Spanish Photos

Toral Location Map

Toral Geo

SUMMARY
GoldQuest has acquired all of the outstanding shares of Lundin Mining Exploration S.L. ("Lundin SL") from its parent company Lundin Mining Corporation ("Lundin"). Lundin SL holds a 100% interest in the Toral Project which reportedly has a historical resource estimate of 5.4 million tonnes grading 9 % Zinc, 6 % Lead and 45 g/t Silver which has not been calculated in accordance with National Instrument 43-101 ("NI 43-101").

TARGET MINERALS: Lead, Zinc and Silver

LOCATION & ACCESS:
The 2,850 ha property is located approximately 400 km northwest of Madrid, near to the regional city of Ponferrada and is accessed by excellent infrastructure, including a regional highway, high-voltage power line and a railway line which links to the Asturianas zinc-lead smelter via the city of León.

PROJECT HISTORY
Toral Project area was originally investigated by Peñarroya-España and associates from 1975 to 1985 and included over 42,000 metres of diamond drilling. These drill holes reportedly delineated mineralization that average 3.7 metres wide, and that is a continuous, sub-vertical, tabular zone of coarse-grained lead-zinc-silver sulphide mineralization with a reported 1,100 metres strike length and a vertical height exceeding 400 metres.

Based on the previous drilling, the historical estimate of Toral was estimated at 5.4 million tonnes grading 9 % Zn, 6 % Pb and 45 g/t Ag. This historical estimate dated June 1997 was calculated by Spanish Mining Engineer Dr. Rufino Gea Javaloy on behalf of Geominera S.A. and Peñarroya-España and is not compliant to NI 43-101 standards.

PROJECT GEOLOGY:
GoldQuest believes that the Toral Project has potential for further exploration with the majority of historical drilling completed in one relatively small part of the property. The zone of sulphide mineralization is reportedly open along strike to the northwest towards a known lead deposit as well as along strike to the southeast and down dip. The drill core is still available including the remaining halved sulphide intercepts.

The Toral Project covers over 6 km of strike length of the prospective Lower Cambrian Vegadeo Limestone formation which is regionally mineralized along more than 40 km of its extent, and including the Rubiales zinc-lead-silver deposit, located about 30 km northwest of Toral.

Rubiales reportedly contained an estimated 18.6 million tonne mineral resource grading 7.3 % Zn, 1.3 % Pb and 13 g/t Ag and was mined by Cominco from 1976 to 1991. Rubiales reportedly produced high-quality zinc concentrate (life-of-mine average of 61% Zn with 95% zinc recovery; the lead concentrate contained 70% Pb and 500 g/t Ag with an 85% lead recovery). The concentrates were transported to the Asturianas zinc-lead smelter, located on the Asturias coast about 200 km to the west. Sulphide mineralization at Toral closely resembles the coarse-grained sphalerite and galena mineralization at Rubiales but Toral contains significantly more silver.

Mining has traditionally been a significant part of the economy of this region which is supporting the re-entry of new exploration and mining projects. Certain exploration and mine development expenditures are eligible for economic development grants and interest free loans.

The historical estimate quoted above was prepared prior to the implementation of NI 43-101. The historical estimate quoted herein does not use the resource categories stipulated in Section 1.3 of NI 43-101, which are "inferred mineral resource", "indicated mineral resource" and "measured mineral resource". Rather, the historical resource estimate for the "Mina de Toral" calculated and reported by Spanish Mining Engineer Dr. Rufino Gea Javaloy on behalf of Geominera S.A. and Peñarroya-España refers to "5.4 million tonnes" is not a category stipulated in National Instrument 43- 101. The Company believes that term "resources" is used differently from the use of that term in NI 43-101. The Company does not have, and is not aware of, any more recent resource estimates or data which conform to the standards laid out in NI 43-101.

The Company advises that it has not yet completed sufficient detailed exploration work necessary to verify the relevance, reliability and classification of the historical estimate and it has not been verified by a Qualified Person. The Company is not treating the historical estimate as a current NI 43-101 defined resource or reserve, and accordingly, the historical estimate should not be relied upon.

THE GOLDQUEST-LUNDIN AGREEMENT:
For the various assets in Spain including the Toral project GoldQuest has agreed to pay Lundin Mining $5M upon commercial production from the Toral property, to purchase all of the outstanding shares of Lundin SL the Spanish company that holds the Toral Project.

The agreement allows Lundin to retain a 1.5% royalty on the Net Smelter Return (NSR) from the Toral Project. Lundin retains a one-time back-in right to reacquire a fifty-one (51%) percent interest in the Toral Project once GoldQuest provides written notice to Lundin within 10 days of the following events occurring: delineation of an inferred resource on the Toral Project of greater than 1 Million tonnes of lead and zinc (contained), as demonstrated in a National Instrument 43-101 compliant report and completion of not less than 5,000 meters of drilling.

To exercise the back-in right, Lundin must spend an amount equal to 2.5 times the aggregate expenditures made by GoldQuest on the Toral Project. If Lundin elects to exercise the back-in right, the right of Lundin to receive the 1.5% NSR and the $5M cash payment payable upon production will be terminated.

If the above is completed, a Joint Venture will be formed pursuant to which Lundin will have 51% interest and GoldQuest will have a 49% interest in the Toral Project. Upon formation, each party will either fund their proportional share of the expenditures or Lundin may elect to increase its participating interest in the Joint Venture from 51% to 65% by completing a full feasibility study on the Toral Project.