History of the Brodeur Diamond Property

The Corporation acquired its interest in its Brodeur Property pursuant to an agreement with Helix Resources Inc. (“Helix”), dated April 27, 2000, as amended by agreement dated May 5, 2005 (as amended, the “Helix Agreement”) pursuant to which the Corporation acquired three mining claims totaling 28.85 square kilometers (7,128.5 acres) staked on Brodeur. To maintain the Helix Agreement in good standing, the Corporation is required to pay Helix $150,000 annually, with the next payment due in January 2008. One half of these payments and all of certain payments made to Helix prior to 2005 are deemed advances against future royalty payments. In addition, under the terms of the Helix Agreement, $500,000 is due to Helix upon receipt of all development permits and $1,000,000 plus 500,000 pre-consolidation common shares (33,333 common shares) of the Corporation are due upon production of 500,000 carats. Subsequently, a 5% net profits interest and a 1% gross royalty are due after crediting previous payments. In addition, the Company holds 67 claims covering 151,415 acres as the Company decided to focus future exploration on those mining claims in and around the Freightrain-Cargo 1 pipe which have the greatest potential for diamond discovery. A total of 51.1 carats of high quality diamonds were recovered by the Company from Brodeur in 2001 and 2002 from a sample of 248.4 tonnes of ore. In 2003, a large kimberlite with significant coarse diamond content was discovered within 10 kilometers of the Freightrain and Cargo 1 kimberlites.

Location and Access

The Brodeur cluster of kimberlite pipes is located 12 kilometers east of Tidewater on the Brodeur Peninsula, on the west coast of Baffin Island. It is centered 3.3 kilometers south of Jackson River at 73°14' 48" latitude north and 88°16' 12" longitude west. Approximately 100 kilometers to the east is the community of Arctic Bay (Ikpiarjuk), which is linked by a 21 kilometre all-weather highway to the more easterly Nanisivik zinc mine and townsite.

Arctic Bay and Nanisivik have First Air Boeing 727 jet service twice weekly. Marine shipping companies make the first scheduled delivery in mid-July and the last in mid-September. Navigable waters of Admiralty Inlet, Lancaster Sound and Prince Regent Inlet bound the Brodeur Peninsula.

Geology

Flat-lying ordovician and silurian carbonates are exposed along the steep coastline of the Brodeur Peninsula and in the deeply incised river gorges. From the air, evidence of the Jackson Inlet cluster of kimberlite pipes is manifested as three dark brown circular patches along a northeast-southwest axis and surrounded by a 500 metres by 600 metres halo of tan colouration. Within the halo are patches of darker tan colour.

The unweathered kimberlite, sampled from three pipes, has a dark brownish green, fine-grained ground mass which comprises 20% to 30% of the rock. The remaining 70% to 80% is primarily light green olivine of random dimensions up to 2 centimetres. Fragments of limestone, shale and gneiss are also present. Although hand specimens are only slightly magnetic, many contain 5% to 10% very magnetic fragments. These fragments resemble a siliceous iron-manganese shale or iron formation and are prominent in the weathered material in permafrost and "soil" above the pipes.

Thin sections of various kimberlite samples were examined by microscope at Lakefield. The mineral assemblage consists of abundant olivine macrocrysts as well as scarce phlogopite and garnet macrocrysts set in a fine grained serpentine matrix. The presence of pyroclastic texture suggests crater facies material and a relatively shallow level of erosion.

Exploration

The Company incurred expenditures of $572,000 on Brodeur in 2006 but was unable to carry out an extensive summer program. An independent technical review was conducted to identify high-priority targets and 38 magnetic anomalies with characteristics reflective of shallow intrusive bodies such as kimberlite pipes were identified. Of these 38 targets, 12 were recommended as priority sites for investigation by drilling. A ground electro-magnetic survey of each site is required to determine the location of each anomaly source with enough accuracy to determine drilling locations. Future exploration would focus its efforts on the 67 mining claims covering 151,415 acres (613 square kilometers) which have the greatest potential for diamond discovery.