Pele Mountain Resources Inc.

Incorporated in April 1996, Pele Mountain Resources Inc. was formed to acquire 1176125 Ontario Inc. and 1200157 Ontario Inc., mineral resource properties located in Canada and to carry out exploration activities thereon in search of economic deposits of gold and other precious metals and minerals. From 1996 to 2000, the company’s primary focus was on gold exploration at its Wawa and Ardeen projects, but Pele expanded its focus to include diamonds in fiscal 2000 with the acquisition of its Festival property. The company currently owns one nickel, two diamond and two gold exploration projects in northern Ontario.

The Festival diamond project is located 25 km north of Wawa, Ontario and has been the company’s primary focus since 2000. The property encompasses 101 square km of land, on which both commercial size and gem quality diamonds have been found. Surface expressions of the diamond deposits suggest the potential for significant tonnage, with individual deposits ranging in size up to hundreds of metres along strike and up to and over 100 metres wide in intermittent outcrop. Festival ties on to the Trans-Canada highway and area infrastructure is outstanding with a strong local support for mining projects. Pele’s land position is situated on patented ground and its tenure is secure through an exclusive mineral exploration licence agreement with the land owner.

In July 2003, Pele and De Beers Canada Exploration Inc. entered into an option and joint venture agreement for the Festival diamond project. Under the terms of the agreement, De Beers agreed to make $500,000 annual share subscriptions in Pele beginning in 2003 and continuing through 2008 at a minimum price of $0.50 per share. Also, the agreement gave De Beers the option to earn an initial 51% participating interest, and to form a joint venture, by spending $10 million by December 31, 2006. Unfortunately, in May 2004, De Beers informed the company that due to a rebalancing of global priorities, it would not make the 2004 share subscription or the 2004 expenditures under the agreement. Accordingly, the agreement came to an end with De Beers not earning any interest in Festival. Pele believes that the decision made by the global diamond giant was premature and remains firmly committed to the potential at the Festival diamond project.

The Ardeen gold mine project is located 110 km west of Thunder Bay, Ontario, along the Trans-Canada Highway. The project is 100% owned by Pele, covering over 10,000 acres. The Ardeen was northern Ontario’s first gold mine, producing 30,000 ozs Au and 175,000 ozs Ag from a 200 tonne per day mill during operations that continued intermittently until the mid 1930s. The mine and surrounding mineralized zones are characterized by structurally controlled, gold and silver mineralization hosted in quartz vein systems and iron formation. A sample from the Fisher zone assayed 43 ozs/tonne Au and has been archived at the Ministry of Northern Development and Mines offices in Thunder Bay.

There are eight established working levels at the mine, as well as a 1,250 foot shaft. Pele has spent approximately $4 million acquiring and exploring its Ardeen Gold Mine project, and has drilled more than 12,000 metres. Exploration has focused on high-grade zones near the old mine workings, including the nearby Pele and Fisher zones where high-grade gold and silver mineralization has also been confirmed. The Pele zone is an extension of the Ardeen vein system and has been traced for over two km from where the mine workings end. The Fisher zone is located just south of the mine workings and has returned high grade gold assays.

An independent resource estimation conducted by Minescape Exploration Inc. in 1998 (prior to the introduction of NI 43-101, but in accordance with the standards of the time) credited the Ardeen Gold Mine project with an indicated resource of 90,650 tonnes at 15.3 grams Au per tonne and an inferred resource totalling approximately 1 million tonnes at 14.4 grams Au per tonne. This calculation combined data from five different zones in close proximity to the old mine workings.

The Wawa Gold project is located 50 km northeast of Wawa, Ontario, within the Goudreau-Localsh Deformation Belt, home to several former gold producers, including the Edwards and Renabie gold mines and ties on to the property of Patricia Gold Mines which has recently been optioned to Richmont Mines (RIC:TSX). The local infrastructure needed to support a mining operation is exceptional with ample road and power access, as well as modern gold mills within close proximity. In April 2004, Pele completed the first drill program on the Golden Eagle zone at its 100% owned Wawa Gold project. Seven NQ size drill holes were completed to test the near surface gold potential of a recently uncovered 85 metre long portion of the Golden Eagle zone, which remains open at depth and along strike in both directions. The seven drill holes were spread along 60 metres of the Golden Eagle zone and tested this portion of the Zone to a vertical depth of 25 to 30 metres.

The Attawapiskat River Project is strategically located within and adjacent to the Attawapiskat cluster of diamond bearing kimberlite pipes in the James Bay Lowlands of northern Ontario, within close proximity to the land packages held by De Beers and Metalex Ventures Ltd. (MTX:TSX-V). The project is comprised of more than 25,000 acres, making Pele the second largest 100% owned claim holder within a 20 km radius of De Beers’ Victor Pipe, which is currently undergoing a full feasibility review. Pele has confirmed the presence of kimberlite indicator minerals in several samples collected from its claims and is currently evaluating geophysical data in preparation for an exploration program to test the diamond potential of its claims.

In the second half of 2003, the company acquired a nickel property near Timmins, Ontario, consisting of 41 mining claims for total consideration of cash and shares worth $95,000 and a net smelter return royalty of 1.5%.