EXPLORATION ’87 RAYROCK

Rayrock Yellowknife Resources and Discovery West Corp. are related through intercompany shareholdings and are active in minerals and oil-and-gas production and exploration. Discovery is a new company created by the merger of Midcon Oil & Gas, which consolidates most of the oil-and-gas assets of the group and will permit the new company to be more active in seeking opportunities in the currently depressed oil patch. Discovery is not ignoring claims in the Geraldton area of northwestern Ontario and in the Matagami area of Quebec, where gold exploration work in 1987 is expected to cost about $300,000. Discovery also holds interests in several significant gold prospects in the Northwest Territories and Yukon and has been farming out these to companies which, in part, have been raising funds by flow-through shares.

Rayrock has major interests in mining as well as oil and gas. Nevada continues to be the main area of the company’s mining and exploration work. But this has been changing over the past year; Rayrock is now involved in projects in Chile and Costa Rica

In Nevada the company is the joint- venture manager of the Dee, Pinson and Preble open-pit gold mines and the Cordex exploration syndicate. Rayrock also manages and owns a 25% interest in Western Ag-Minerals, a specialty fertilizer produced from an underground mine and processing plant in New Mexico which was previously operated by Pennsoil- Duval. This mine produces langbeinite, a potassium-magnesium-sulphate mineral.

Cordex (70%) and Santa Fe Minerals (30%) continued joint-venture exploration work on the Marigold project in 1986 and have discovered several zones of gold mineralization under gravel cover in the Battle Mountain area of northern Nevada. The project holds a 35-sq-mi block of mineral rights covering 11 miles of strike on a favorable geological structure. One of the new gold zones is now being evaluated to determine mining economics.

Rayrock, on its own account, explores elsewhere in the western U.S. and is exploring for gold and high grade copper deposits in Chile. Recently Rayrock joined a joint venture between Midland Energy Corp. and Westlake Resources to explore and develop the Bellavista-Montezuma gold prospect in Costa Rica. This property is considered to have a good potential to develop into an open-pit mining project of several million tons grading 0.10-0.12 oz gold per ton.

Although exploration budgets are not yet settled for 1987, Rayrock anticipates managing mineral exploration activities of some $6 million and contributing about $2.7 million.