VANADIUM PROJECT

In June 2000 Pinnacle Resources announced that it had acquired a 100% ownership of Vanadium and Magnetite Exploration and Development (Pty) Ltd. (V-MED). V-MED, a South African corporation that holds an exclusive 30-year mineral lease on five contiguous farms near Potgietersrus, South Africa. The farms cover 17,188 acres within the Bushveld Complex, a region that accounts for 50 percent of the world's vanadium supply. They host a 6-meter thick main layer magnetite, approximately 17 kilometers in strike length, which is believed to be the largest underdeveloped resource of vanadium in the world. The indicated size of the mineralized body in the main magnetite layer to a depth of only 80 meters is estimated to be 100 million tones of magnetite containing 1.67 million tons of vanadium pentoxide. Assays from diamond core drilling show that the "run-of-mine ore" contains an average of 1.24% vanadium pentoxide and 11.88% titanium dioxide. The outcropping and shallow magnetite layer offers a low cost, open-pit mining potential.

Beneath the main magnetite layer lies a 20-meter thick horizon averaging 35% magnetite containing 1.71% vanadium pentoxide. Inferred resources to a depth of 200 meters are estimated to be 320 million tones of magnetite and 2.69 million tons of vanadium. Total resources on the properties to a depth of 200 meters are therefore on the order of 570 million tons of magnetite containing 6.87 million tons of vanadium pentoxide.

In March 1997 a techno-economic study to beneficiate the ore from the main magnetite layer on V-MED's properties was conducted by the Council for Mineral Technology (Mintek), world-renowned specialists in mineral and metallurgical technology. The Department of Mining Engineering, University of Witwatersrand also undertook mining studies. Ross Glanville & Associates of Vancouver, Canada used the results of these investigations for an economic valuation of the properties. They concluded that over a 20-year project life at an annual production rate of 4,120 tons of ferrovanadium (FeV) and a price of $17/kg FeV, the operation showed a net present value (NPV) of $70 million. In May 1998 with increased vanadium prices, Glanville repeated the study using $22/kg FeV that returned an NPV of $111 million.

Recent research and development into the beneficiation of vanadiferous titano-magnetite ores indicates that it may now be economically feasible to extract not only vanadium from the deposits, but also titanium and iron. V-MED is investigating two breakthrough processes utilizing the expertise of Bateman Minerals and Metals subsidiary, Bateman Titaco (Pty) Ltd., and Mintek.

Pinnacle has complied with the South African mining policy to have national involvement by selling one-third of its interest to a Black Empowerment Group. The Company has completed a mining plan and environmental impact study that have been submitted to the South African government and is presently awaiting a mining authorization. The Company has initiated negotiations with major international steel companies to joint venture the building of a mine.


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