THORIUM & RARE EARTH RESERVES AND RESOURCES OF THORIUM ENERGY, INC., LEMHI PASS IDAHO AND MONTANA -APRIL 2008 

Prepared for:Thorium Energy, Inc.Williams Investment Company19 East 200 SouthSuite 1080Salt Lake City, Utah 84111 

Prepared by:Rich Reed, P.E., P.G., R.E.M.

IDAHO ENGINEERING & GEOLOGY, INC.CONSTRUCTION, ENVIRONMENTAL & NATURAL RESERVES

1846 Spring Meadow LaneBoise, ID  83706FAX (208) 345-1307   CELLULAR (208) 863-2112 

THORIUM & RARE EARTH RESERVES AND RESOURCES OF THORIUM ENERGY, INC., LEMHI PASS IDAHO AND MONTANA - APRIL 2008 

EXECUTIVE SUMMARY  

This report summarizes thorium and rare earth vein deposits of unpatented mining claims of Thorium Energy, Inc. located in the Lemhi Pass Thorium District of Idaho and Montana.  The report supersedes previous similar reports by Idaho Engineering & Geology, Inc. (IEG).  It also provides an estimate of proven, indicated, and inferred reserves of thorium and total rare earth elements in the Lemhi Pass of Idaho and Montana of Thorium Energy Inc. unpatented mining claims based upon reported reserves as resources by the United State Geological Survey (USGS) and IERCO a former subsidiary company of Idaho Power Company.   

Thorium and rare earth deposits in the Lemhi Pass of Idaho and Montana are the largest known in the United States.  The United State Geological Survey (USGS), the United States Atomic Energy Commission (AEC), the United States Defense Minerals Exploration Administration (DMEA), the United States Bureau of Mines (USBM), the Idaho Bureau of Mines & Geology (IBM&G) – Idaho Geological Survey (IGS), Montana Bureau of Mines & Geology (MBM&G) have performed a number of investigations throughout the years in greatly contributing to the current understanding of the thorium deposits in the Lemhi Pass.  In addition many private individuals, and a number of companies, including Nuclear Fuels and Rare Metals Corporation, Sawyer Petroleum and Union Pacific Railroad, Dow Chemical, Tenneco Oil Company, and Idaho Power Company to name a few have also actively explored and evaluated the mineral deposits in the Pass over the years and also have greatly contributed to their understanding.   

Further mapping and evaluation work of the Lemhi Pass Thorium District was done recently by the US Geological Survey and Idaho Geological Survey and this work has provided new insight of regional geology and tectonics in and around the Lemhi Pass and relations to the thorium and rare earth deposits. The Idaho Geological Survey began recent investigative work in 1999.   IGS has reported that mineralization in the Pass may possibly be similar in nature to proterozoic iron oxide copper gold (IOCG) type mineralization.  More recent work has led to the discovery of previously unknown intrusives in the Pass.  An ultramafic sill having possible carbonatitic affiliation and one lamprophyre dike is known to be cut by base metal mineralization.  Syenite cut by nonradioactive specular hematite veins has been found.  The age of the syenite has been dated as lower Cambrian and suggests that mineralization could be associated with a buried Precambrian or Cambrian alkaline intrusive complex or both.  Recent and on-going work suggests the potential for a larger mineralized system possibly similar in nature to peralkaline REE-Th, IOCG/Fe-REE and/or carbonatite models of depositions.  Detailed discussion regarding this potential is beyond the scope of this report. IGS conducted detailed mapping and sampling in 2006 and 2007.  Full results of recent mapping by the IGS were not available at the time of this report.  Geologic work by the Idaho Geological Survey is ongoing. In addition Idaho Engineering & Geology, Inc. examined most of reported thorium and rare earth vein deposits and intrusive dikes in the Lemhi Pass in 2006 and 2007.  IEG also collected rock samples of a number of the veins and intrusive dikes.  Duplicate samples were provided to IGS.  A select number of samples were analyzed for thorium and individual rare earth elements as well as other major and trace elements.  The thorium and total rare earth element concentrations from these recent analyses are provided herein.  The results collaborate earlier findings regarding thorium and rare earth concentrations of the vein deposits by previous investigators.    

The thorium and rare earth concentrations vary between and within the various vein deposits and the overall concentrations of these elements that have been reported by earlier investigations, including Staatz, 1979, are reasonable estimates. A more detailed discussion regarding the rare earth elements and other major and trace elements of the vein deposits of the Lemhi Pass is beyond the scope of this report and is provided in a separate report being prepared by Idaho Engineering & Geology, Inc. Based on applicable mine and milling methodologies and cost at the time, reported reserves or resources of thorium oxide, or ThO2 by the USGS and AEC range in reserves of about 46,850 to 68,000 short tons producible at less than $10-15/lb in 1978/1979 and a resource ranging from about 192,000 to 195,610 tons producible at less than $10-15/lb and as much as indicated reserves or/and resources of 305,400 short tons.  

The U.S. Geological Survey reported thorium and rare earth indicated reserves or resources in 1979.  The U.S. Geological Survey estimated an indicated reserve or resource in the Lemhi Pass Thorium District of 176,500 short tons of thorium as thorium oxide, ThO2 and an inferred reserve or resource of 128,900 short tons or a total indicated and inferred reserve or resource of 305,400 short tons of ThO2.  It also reported an indicated reserve or resource of 186,000 short tons and an inferred reserve or resource of 122,000 short tons of rare earths as rare earth oxide, REO or a combined indicated and inferred reserve of 308,000 short tons of REO.  For purposes of this report and respective reported values, total rare earth elements or rare earth oxide are treated as the same.  The amounts of thorium and rare earth contained in the claim holdings of Thorium Energy, Inc. in the Lemhi Pass District have been estimated from its proportionate holdings of the reported indicated reserves or resources by the U.S. Geological Survey.  It is estimated that an indicated reserve or resource of about 157,790 short tons of ThO2 and an inferred reserve or resource of 115,210 short tons of ThO2 or a combined reserve of 273,000 short tons of ThO2 at about an average concentration of 0.40 % (8 lbs. /ton) is contained within the claim holdings of Thorium Energy Inc.  In addition it is estimated that an indicated reserve or resource of about 212,855 short tons of REO and an inferred reserve or resource of 141,745 short tons of REO or a combined reserve of 354,600 short tons of REO at an average concentration of about 0.52 % (10 lbs. /ton) is also contained within the holdings of Thorium Energy Inc.  The Last Chance thorium and rare earth vein deposit is located in the Lemhi Pass and is part of the ThO2 and REO reserves reported by the U.S. Geological Survey.  It is held under claim by Thorium Energy, Inc. 

The Last Chance vein is reported to be the most significant thorium deposit in the Lemhi Pass and it is also the richest thorium vein deposit in the United States.  It has been reported to contain an average concentration of thorium oxide, ThO2 of 0.39 % (7.8 lb. /ton) and rare earth oxide, REO of 0.33 % (6.5 lbs. /ton).   It has a measured proven reserve of about 16,425 short tons of ore containing 387,120 lbs. (194 short tons) of ThO2 and 306,465 lbs. (153 short tons) of REO and a combined probable and possible reserve or resource of 582,850 short tons or 4,558,860 lbs. (2,279 short tons) of ThO2 and 3,793,035 lbs. (1,897 short tons) of REO. Recent interest in the nuclear generation of electricity and the use of thorium as a fuel source both in the United States and abroad and recent increases in the price of uranium should certainly renew interest of thorium and rare earth deposits in the Lemhi Pass of Idaho and Montana.  In addition, there has been an increase in demand and a decrease in the supply of available rare earths in recent years which have also added to the interest of the thorium and rare earth deposits. 

THORIUM & RARE EARTH RESERVES AND RESOURCES OF THORIUM ENERGY, INC., LEMHI PASS, IDAHO AND MONTANA -APRIL 2008 

INTRODUCTION

This report summarizes thorium and rare earth vein deposits of unpatented mining claims of Thorium Energy, Inc., located in the Lemhi Pass Thorium District of Idaho and Montana.  The district strides the continental divide separating Montana and Idaho (See Figure 1).  The report supersedes previous similar reports by Idaho Engineering & Geology, Inc. (IEG).  It also provides an estimate of proven, indicated, and inferred reserves of thorium and total rare earth elements in the Lemhi Pass of Idaho and Montana of Thorium Energy Inc. (Thorium Energy) unpatented mining claims based upon reported reserves as resources by the United State Geological Survey (USGS) and IERCO, a former subsidiary company of Idaho Power Company.  For purposes of this report and respective reported values, total rare earth elements or rare earth oxide are treated as the same. A brief description of historical background information, general geology and mineralogy, and recent and on-going work is also included.  More detailed information regarding these topics can be found in the cited references.  Mr. Rich Reed and Mr. Steve Derricott provided claim staking services for Thorium Energy in 2006 and 2007.  They also examined a number of veins and intrusive dikes in the Lemhi Pass and collected samples for petrologic examination and analytical analysis of thorium, rare earth elements, and other trace and major elements on behalf of Thorium Energy and Idaho Geological Survey (IGS).  The thorium and total rare earth element concentrations from these recent analyses are provided herein.  The results collaborate earlier findings regarding thorium and rare earth concentrations of the various vein deposits reported by previous investigators.   

A more detailed discussion regarding the rare earth and other major and trace elements of the vein deposits of the Lemhi Pass is provided in a separate report being prepared by Idaho Engineering & Geology, Inc. This report was prepared by Rich Reed of Idaho Engineering & Geology, Inc. (IEG).  Mr. Reed is a registered professional engineer and geologist.  Mr. Reed worked on a number of the same thorium and rare earth veins in the late 1970s thru the early 1980s in the Lemhi Pass while employed by Idaho Power Company.  Mr. Steve Derricott an independent registered professional geologist worked on these same veins with Mr. Reed while he was also employed by Idaho Power Company.  Mr. Reed and Mr. Derricott have experience in mineral exploration and mining claim staking, recordation, and filing.  Each is familiar with the Lemhi Pass area having done mineral exploration, claim examinations, and claim staking in the Lemhi Pass in the late 1970s and early 1980s on behalf of Idaho Power Company.  Each has worked on a number of the thorium vein systems and corresponding claims, commonly known by historic name and location, including a number of the same veins and same corresponding claims of Thorium Energy.    Thorium was initially discovered in 1828 by the Swedish chemist, Baron Jons Jacob Berzelius, who later applied the name thorina or thoria after the Norse god Thor to the element (Newton, 1960). We now use the term thorium for the element and thoria for its oxide.   Thorium is a radioactive metal and has been used in conjunction with uranium to fuel electrical generating nuclear power plants.  Although uranium can be converted into a fissionable material in a breeder reactor, the conversion of the thorium is more efficient.   The first types of nuclear power plants developed used fissionable material that did not have any breeding potential; that is the ability of producing its own additional fuel. 

Commercial breeder reactors were first put into production at Elk River, Minnesota in 1963 and at Peach Bottom, Pennsylvania in 1964 (Geach, 1966).  Both used fuel composed of uranium and thorium.  Its use in high temperature gas cooled reactors was principally developed by France in the 1970s.  Its potential use in high temperature gas cooled reactors was of primary interest by Idaho Power Company and affiliated power companies at that time.  Currently thorium is also used in reactors in India.  One benefit of thorium over uranium is that it has a greater cross sectional area making it more efficient in the fission process discussed above.  Additionally, very advanced separation and enrichment processes are necessary to developed weapons grade material from spent fuel and therefore limit potential nuclear proliferation as compared to uranium.   

Recent interest in the nuclear generation of electricity and the use of thorium as a fuel source both in the United States and abroad and recent increases in the price of uranium should certainly renew interest of thorium deposits in the Lemhi Pass of Idaho and Montana. In addition there has been an increase in demand and a decrease in the supply of available rare earths in recent years which have also added to the interest of the thorium deposits. The United State Geological Survey (USGS), the United States Atomic Energy Commission (AEC), the United States Defense Minerals Exploration Administration (DMEA), the United States Bureau of Mines (USBM), the Idaho Bureau of Mines & Geology (IBM&G) – Idaho Geological Survey (IGS), Montana Bureau of Mines & Geology (MBM&G) have performed a number of investigations throughout the years in greatly contributing to the current understanding of the thorium deposits in the Lemhi Pass.  In addition many private individuals, and a number of companies, including Nuclear Fuels and Rare Metals Corporation, Sawyer Petroleum and Union Pacific Railroad, Dow Chemical, Tenneco Oil Company, and Idaho Power Company to name a few have also actively explored and evaluated the mineral deposits in the Pass over the years and also have greatly contributed to their understanding.  Thorium Energy Inc. acquired all of Idaho Power Company’s data and files in 2006, which included available information and data of Sawyer Petroleum and Union Pacific Railroad, and Tenneco.  Work by the USGS and IGS continues on the thorium deposits in the Lemhi Pass.  Officers of Thorium Energy began investigating and acquiring thorium vein deposits in about 1998.     

The Lemhi Pass Thorium District, as it is commonly referred to, covers approximately 55 square miles in the central part of the Beaverhead Mountains lying astride the Continental Divide in Idaho and Montana.  The area is principally contained in T19N, R24E and R25E and in part within T18N, R24E and 25E, BM in Idaho and T10S, R15W and in part within T11S, R15W, MM in Montana. It is located about 20 miles southeast of Salmon, Idaho and lies in Beaverhead County, Montana and Lemhi County, Idaho (See Figure 1 from Staatz, 1979).  A panoramic view of the area near the divide in Idaho is provided in Figure 3.  The district can be primarily accessed from a gravel county road from Tendoy, Idaho located off Idaho State Highway 28 about 10 miles south of Salmon that follows along much of Agency Creek and crosses the Divide at Lemhi Pass then follows Trail Creek over to Armstead, Montana.  Secondary unimproved Forest Service and BLM roads access the district along the Continental Divide from the Lemhi Pass and from a number of others off Trail Creek in Montana and others in Idaho including Pattee, Yearian, Reese, and Peterson Creeks off the Lemhi Valley.  Maximum relief of the area is about 4,000 feet with the lower part along the Lemhi River Valley at about 5,000 feet and highest part along the Continental Divide at about 9,000 feet above sea level.  Snow is abundant from late October to late May and access to the higher elevations may typically be as late as the end of June of longer.      

PURPOSE

The purpose of the report is primarily to summarize thorium and rare earth vein deposits of unpatented mining claims of Thorium Energy, Inc. located in the Lemhi Pass Thorium District of Idaho and Montana and provide an estimate of proven, indicated, and inferred reserves of thorium and total rare earth elements of Thorium Energy’s unpatented mining claims based upon reported reserves as resources by the United State Geological Survey (USGS) and IERCO, a former subsidiary company of Idaho Power Company.  For purposes of this report and respective reported values, total rare earth elements or rare earth oxide are treated as the same.

 HISTORICAL BACKGROUND INFORMATION

The earliest descriptions of the Lemhi Pass area can be found in the journals of Lewis and Clark expedition of 1804 to 1806. Early geologic reconnaissance of the area include that by Bell, 1901; Umpleby, 1913; Anderson, August 1949; and Vhay, 1949 & 1951 (Sharp, 1962).  With renewed interest in radioactive minerals in the early 1950s, additional work in the Pass was done under contracts of the Defense Minerals Exploration Administration and included work by Trites and Tooker, 1950; Weis, 1958; and the Idaho Bureau of Mines and Geology, 1958 (Sharp, 1962).  Additional geological and metallurgical studies have been made (Anderson, 1958; Austin, 1970; Borrowman, 1962; Geach, 1966; Newton, 1966; Sharp, 1968; Staatz, 1972 & 1979).  Staatz, in his 1972 and 1979 reports, provides the most complete discussion of all the known veins in the District and presents the most published thorium and rare earth assay data.  Staatz also provides estimates of potential and inferred thorium and rare earth reserve amounts.  Over the years the USGS and or other governmental agencies have collected and analyzed several hundred vein samples.  Unpublished reports by or on behalf of private companies have also been done on a number of the known veins and prospects.  Sawyer Petroleum and Union Pacific Railroad examined a number of deposits and performed sampling and analysis of underground workings and from a number of exploration drill holes from the Last Chance vein.  Tenneco Oil Company investigated a number of deposits and performed a large number of analytical analyses of samples during its initial evaluation work.  It also performed additional exploration drilling and sampling on the Last Chance vein.  IERCO made substantial analytical analysis on a number of deposits and collected and analyzed over several hundred samples from the surface and from extended underground workings of the Last Chance vein. In addition, metallurgical beneficiation and recovery studies have been done by the US Bureau of Mines, Tenneco Oil Company (Tenneco) and IERCO.  Unpublished assay data and information includes that by Tenneco, 1975, and Idaho Power Company (IPCo.)-Idaho Energy Reserves Company (IERCO), 1986, 1987 and 1991.         Thorium was first discovered in the Lemhi Pass in 1949.  A large number of the veins were claimed by individual staking throughout the early 1950s.  Most of the properties were consolidated into ownership of a few individuals and companies by 1960.  Major holdings were by Nuclear Fuels and Rare Metals Corporation, Rare Metals Corporation of America, Dow Chemical Company, Sawyer Petroleum Company and Union Pacific Railroad (Hetland, 1968), and later Tenneco and IERCO.  Exploration and development of a few of the larger veins was done under D.M.E.A. loans in the early 1950s and a number of investigations were made by the A.E.C. in 1960-61 and 1965-66 (Hetland, 1968).  Work on a number of thorium deposits in the Pass was done under U.S. Defense Minerals grants in the 1950s and, according to Staatz, 1979, both drilling and underground work has been done on the Last Chance and Wonder lode veins.  Sawyer Petroleum acquired an interest in thorium in the Lemhi Pass sometime in the 1950s.  Most of their work concentrated on the Last Chance lode vein in Montana. According to IERCO, 1987, Sawyer subsequently leased its holdings in the 1960s to Union Pacific Railroad who also concentrated their exploration efforts on the Last Chance lode vein.  Both Sawyer and Union Pacific developed proven and provable thorium reserves of the Last Chance vein.  Tenneco became active in the area in the 1970s, and after making an initial evaluation of a number of vein deposits, acquired a number of properties through leases including two of the largest known veins in the Pass; Last Chance and Shear Zone vein systems in Montana.  Tenneco concentrated most of its work on these two veins although it evaluated a number of veins in the district in its evaluation and acquisition efforts.  Tenneco continued development of the Last Chance vein and reported thorium reserves in 1979.    Idaho Power Company through its subsidiary, Idaho Energy Reserves Company (IERCO), consolidated all of the larger known veins in the Pass primarily through leases or purchases during the late 1970s through the mid 1980s.  IERCO performed some mapping, radioactivity and electromagnetic surveys and chemical analysis on a number of the veins from the early 1980s through 1993 that included extending the underground workings on the Last Chance vein.  IERCO also determined proven and probable reserves of the Last Chance vein.  The Last Chance lode vein is the only property that has been developed extensively enough to provide proven reserves.  An extensive amount of sampling and analysis has been done by these companies over the years.  A large portion of this work was done on most of the thorium vein lodes that are currently controlled by Thorium Energy.  In addition IERCO had extensive metallurgical testing performed on bulk ore samples for beneficiation and purification.  To date, several hundred thousands of dollars have likely been spent on exploration and development of the thorium and rare earth deposits in the Lemhi Pass over the years by the various companies.  Idaho Power Company initially acquired its thorium holdings for long term energy reserves for purposes of developing nuclear powered electrical generation.  After the nuclear Three Mile Island accident in the 1970s, the general public and electrical industry as a whole turned away from nuclear power.  Idaho Power Company shifted its position from a long term holding of thorium as an energy reserve to development of the rare earths but found that under supply and demand conditions in the early 1990s, production of rare earths from the Lemhi Pass was not economical.  Very little activity has occurred since, other than recent geologic mapping of the area and evaluation of the mineral deposits in the Lemhi Pass by the United States Geological Survey (USGS) and the Idaho Geological Survey (IGS), formerly the Idaho Bureau of Mines and Geology (IBM&G).   

GEOLOGY & MINEROLOGY

As discussed previously there are a number of published reports that have been done on the District since the early 1950s.    Geologic discussion herein is limited to only a brief and general description of the thorium and rare earth vein deposits summarized from a number of the earlier reports.  Details regarding geology and mineralogy can be found in the references cited.    One of the earlier reports was by the IBM&G (Anderson, 1958).  According to Anderson, the deposits are distributed along a broad zone about 6 miles wide that crosses the area southeasterly-northwesterly.   The deposits are contained in broadly folded and faulted metamorphosed sedimentary rocks of the Precambrian Belt Series that are intruded by scattered small dioritic and lamprophyric dikes of late Cretaceous or early Tertiary age.  These older rocks are overlain by Tertiary Challis volcanics and lake beds in some areas.  Locally Quaternary terrace gravels and alluvium occur.  Anderson presents a much generalized geologic map of the area and includes the location of a few of the known deposits at the time of his work.  The deposits occur as veins or lodes in complex shear and fracture zones and in earlier gold-quartz veins and copper lodes.  The deposits are in quartzitic and phyllitic rocks of the Pre-Cambrian series.  He reported that the deposits contained considerable concentrations of thorium and rare earth elements associated with silicon, phosphate, barium, potassium, calcium, iron, and sulfates.  Principal minerals include thorite, allanite monazite, apatite, specular hematite, barite, feldspar, calcite, and quartz.  The minerals typically are microscopic and generally can not be detected by the unaided eye.  Specularite and feldspar typically are the main markers of mineralization, but radioactivity is the principal guide to the ore.  Anderson believed that the deposits are younger than the Idaho batholith and genetically related with late Cretaceous or early Tertiary magmatic activity.  Anderson reports that Sharp and Cavender, 1953, classified the deposits into four types of quartz veins based on the principal mineral constituents: 1) veins containing copper bearing sulfides; 2) veins containing hematite; 3) veins containing barite, hematite, and thorite; and 4) veins containing copper-bearing sulfides and thorite.   Concentrations as high as 9.5 and 13.5 percent thoria (thorium as THO2) and rare earth oxides have been reported and earlier analysis by others indicates that the thoria in most of the deposits  range from 0.1 to 2 percent, averaging just less than 1 percent and a number of the deposits may average well over 1 percent (Anderson, in 1958).    Newton, 1960, presents some interesting discussion regarding thorium and its properties including discussion on its radioactivity and decay products.  He also presents beneficiation and treatment testing of thorite from vein samples collected from the Cago No. 12 lode claim.  Brief summary descriptions of geology, characteristics of the deposits, structural relations, mineralogy, and ore tenor are discussed in his report.   Results of additional mapping to ascertain geologic relations and detailed geology of the veins, including sampling and analysis by the USGS was reported by Sharp, 1962.  Sharp reported similar mineral types and assemblages and provided more detailed mapping of the area including abundant faulting and in particular recognized the occurrence of a number of the more prominent mineral deposits with the Lemhi Pass fault zone.  He reports the Precambrian host rock as predominately fine grained micaceous quartzite with interbedded siltites and occurrences of a number of intrusive diorite dikes and possible associations with or lacking thereof with mineral deposits.  A detailed geologic map is presented and includes mapped or inferred faulting and locations of a number of deposits as wells springs.  Also provided are geologic maps of a number of deposits depicting locations of adits, drill holes, and underground workings including the Buffalo, Copper Queen, Wonder, Last Chance, Trapper No. 1 & Lucky Strike (Montana Beaverhead), and Frying Pan lode veins.  It also contains uranium, thorium, and rare earth analytical analysis of a number of vein samples.  Sharp does not report tonnage estimates but reports that the average content of thoria of a number of the better explored veins exceeds 0.25 percent and the ratio of total rare earth oxides to thoria ranges from 0.05 to 5.2.  The US Bureau of Mines reported results of the recovery of thorium from thorite ore from the Powderhorn and the Wet Mountains districts of Colorado, and the Lemhi Pass area of the Idaho-Montana border (Borrowman, 1962).  It was determined that all the thorite ores tested were amendable to treatment by an acid leach solvent extraction process similar to that used at that time by some of the uranium mills in the western United States. Geach, 1966, of the Montana Bureau of Mines and Geology, reported on the thorium deposits in the Lemhi Pass district in Montana.  Geach provides some general discussion regarding geology, structure and mineralization and geologic maps of the Last Chance-Shady Tree, Shear Zone, Trapper No. 1, Beaverhead, Brown Bear, Frying Pan, and Black Rock (Montana) No. 1 veins.  He also provides results of x-ray spectrographic analysis of select samples from these veins.  He indicates that Yttrium is the dominant rare earth element.  Special discussion regarding the use of thorium in nuclear reactors is also presented. The US Atomic Energy Commission reported its expanded and more detailed work on the Lemhi Pass thorium deposits, including estimates of indicated and inferred reserves and projected and undiscovered potential reserves (Sharp, July 1968). Discussion related to mining and milling methods is also presented.  Reserve estimates are provided in subsequent discussion.  Sharp indicates that there is no apparent restriction on depth of mineralization in that rich veins occur at the top of the continental divide as well as in the low foothills, some 4,000 feet of vertical relief. Some general geologic discussion and related structural influences and origin and mode of mineralization are also presented.             Work regarding the mineralogy of the Lemhi Pass thorium and rare-earths deposits by the IBM&G was reported by Austin, 1970.  Austin reports some zonation, with quartz-hematite-thorite veins with primarily the Yttrium-group of rare earths in quartzite and phyllite predominating toward the southeast, and monazite replacement deposits with primarily the cerium-group of rare earths, most commonly in gneiss and schist, increasingly dominant toward the northwest.  According to Austin, the principal thorium mineral is thorite or an altered variety containing phosphate, possibly auerlite.  Monazite is the most abundant thorium and rare-earth mineral in the replacement deposits in the gneiss and schist where it is more readily recognizable.  Monazite also occurs in some of the quartz-hematite-thorite veins, and thorite accompanies it in some of the replacement deposits.  Other thorium and rare earth minerals identified include allanite, bastnaesite, ancylite, and euxenite.  Bastnaesite and ancylite are likely secondary.  He reports that veins crop out over a vertical range of about 4,000 feet and individual veins are exposed over a vertical range of 2,000 feet.  He also discusses preliminary metallurgical testing by the US Bureau of Mines that indicated that 85 percent recovery of the thorium and 50 to 70 percent recovery of rare earths could be obtained although recovery of the rare earths would require acid curing. Extensive work encompassing geologic mapping and examination of mineralogy and analytical analysis was reported by the USGS in 1972 (Staatz, 1972).  Over one hundred vein locations were identified, many of which were examined in the field.  Analytical analysis was performed on a number of these veins.  He also provides strike and dip of a large number of these veins.  Although he presents results of his analytical data, he cites a similar average amount of thoria of 0.25 percent and a range of ratio of total rare earth oxides to thoria of 0.05 to 5.2 as presented by Sharp in 1962.  He found that many of the samples were depleted in cerium and enriched in europium as compared to other normal distributions of the lanthanides.  Staatz identified a number of faults but recognized several sets with typical general trends that were formed prior to the Challis volcanics, N25-40°E, N15-20° W, and N67° E.  He also recognized the three largest faults that formed after the Challis volcanics; the Lemhi Pass, Bull Moose, and Dan Patch and that the thorium bearing veins are most abundant where the three major Tertiary faults intersect.  Seventy percent of the veins are located in this area and most are within a mile of the of the Dan Patch, Bull Moose, or Lemhi Pass faults.  He classified the veins of the district into three categories; 1) veins that contain thorium, 2) veins that contain copper but do not contain thorium, and 3) barren quartz veins.  He also provides historical discussion related to copper mining.  He also concluded that the veins were formed after the Challis volcanics and the intrusive bodies of diorite.   Staatz, 1979 expanded upon his earlier work reported in 1972. Extensive work encompassing geologic mapping and examination of mineralogy and analytical analysis was done.  Additional veins were examined and a total 192 vein locations are reported for which a number of them were examined in the field.  Analytical analysis was performed on a number of these veins.  He again provides strike and dip of a large number of these veins.  He reports that the average concentrations of ThO2 of 420 samples from the district ranges from 0.008 to 9.4 percent.  He indicates that many of the larger veins have a ThO2 content of more than 0.4 percent.  He also reports that the overall rare earth oxide content is about equal to the thoria content.  Neodymium is reported as the most abundant rare earth in many of the veins and europium makes up a greater portion of total rare earths in about 70 percent of the veins in the Lemhi Pass as compared to other reported occurrences.  He also reports indicated thorium and rare earth reserves or resources in the district which is subsequently discussed and used in estimating respective reserve holdings of Thorium Energy.               

RECENT AND ONGOING WORK

New mapping of the Salmon National Forest including portions of the Lemhi Pass in Idaho was done by the USGS (Lund, 2003).  Based upon review by IEG, mapping by Lund was on a much broader scale and likely relied primarily on aerial photography and not necessarily on ground proofing.  Lund’s mapping is also restricted to Idaho and does not extend into Montana.  More recent work by the IGS has focused on mapping in the field but results are not yet available.  Major differences in mapping in the Lemhi Pass thorium district by Lund versus that of Sharp, 1962 and Staatz, 1972 & 1979 includes the occurrence of thrust faulting along the west side of the divide in Idaho.  Lund also omitted most all of the northeasterly trending faults identified by Sharp and Staatz.  In addition Lund has classified older Precambrian Belt Series rock classified by Staatz as undifferentiated siltite and quartzite as younger Gunsight Precambrian described by Staatz as grey feldspathic quartzite and by Lund as dark grey medium grained feldspathic metasandstone.  This change of rock classification is of primary interest along the west side (Idaho side) of the Divide from the Lemhi Pass south to about the headwaters of Yearian Creek.  More notable thorium and rare earth veins that appear to be included in the reclassified Gunsight host rock include the Lucky Horseshoe, Buffalo, Wonder, and Cago No. 12 as well as those veins on the Divide extending south from the Wonder No. 18 vein to the Saddlehorn No. 3 vein.  Portions of older undifferentiated Precambrian rock north of the Lemhi Pass Fault have also been reclassified as younger Gunsight quartzite.   Further mapping and evaluation work of the Lemhi Pass Thorium District has been recently done by the IGS (Gillerman, 2000, 2001, 2002, 2003, and 2008).  Gillerman reported that the structure and petrology of some of the deposits in the Lemhi Pass are petrologically similar to Mesoproterozoic epigenetic mineralization, and display many features of Iron Oxide-Copper-Gold-Uranium-Rare Earth Element Deposits (Gillerman, 2000, 2001 & 2003).  Gillerman, 2000, indicates that reconnaissance work suggests that the Lemhi Pass mineralization may better be explained as a variant on Olympic Dam type Proterozic Cu-U-Fe-REE association.  She also suggests that copper present in veins with or without thorium may possibly be associated with Protoerozoic-age mafic sills and dikes.   Gillerman, 2002, in her first abstract indicates that both Tertiary and Precambrian ages have been suggested for mineralization which could belong to the Fe-Cu-U-REE class of deposits she described in 2000.  She reports that age dating of monazite deficient in thorium is 800-1100Ma with thin rims of thorium enriched monazite being considerably younger or about 200-400 Ma based on samples of the Lucky Horseshoe thorium vein of the Lemhi Pass.  She also reports that the older monazite correlates well with the age dating of molybdenite of 1055 Ma from a nearby copper vein.  Gillerman, 2002, in her second abstract also reports that stoichiometric thorite with high lead provide ages of 330-280 Ma similar to the monazite rims dating about 200-400 Ma.  Two other altered populations of thorite give ages of 200-280 Ma and 100-180 Ma, but lacked Tertiary signature.  The results were considered consistent with field relations and confirm Precambrian regional relations and provide “hidden” evidence of a Paleozoic hydrothermal event and document secondary alteration probably related to Mesozoic structural and magmatic evolution.  Mapping by the IGS has provided new insights into regional geology and tectonics in and around the Lemhi Pass and has revealed numerous examples of where the thorium and rare earth deposits were cut by likely Cretaceous age structures or pre-Tertiary unconformities (Gillerman, 2003).  Reed and Gillerman, 2008, and Gillerman, 2008, recently reported on newly discovered intrusives and recent rare earth and thorium analysis in the Lemhi Pass.  Gillerman reports the discovery of an ultramafic sill having possible carbonatitic affiliation and one lamprophyre dike being cut by base metal mineralization.  She also reports the discovery of syenite cut by nonradioactive specular hematite veins (See Figure 3). The age of the syenite is dated as lower Cambrian and suggests that mineralization could be associated with a buried Precambrian or Cambria alkaline intrusive complex or both. Recent and on going work suggests the potential for a larger mineralized system possibly similar in nature to peralkaline REE-Th, iron oxide copper gold (IOCG)/Fe-REE and/or carbonatite models of depositions. Detailed discussion regarding this potential is beyond the scope of this report.        The syenite discovered by the IGS during mapping in 2006 is located in the south-eastern corner, Sec. 23, T19N, R23E (Boise Meridian), just on the Idaho side of the Continental Divide near Staatz’s Bull Moose Fault.  The syenite, was dated by U-Pb methods at 529.1 million years old (with an error of approximately 5 million years).  The syenite is most likely cut off by the fault, although outcrop is poor and the direction of offset is only conjecture.  A single subcrop of syenite was also found in a trench below and south of the Bluebell copper claims, and the significant amount of epidote-bearing hornfels in the area is compatible with a buried intrusive.  New, unpublished Ar40/Ar39 ages of hornblende from two mafic dikes are also compatible with an earliest Cambrian intrusive complex.  Red-brown hornblende in the sulfide-mineralized Copper Queen porphyry dike is older than 400 Ma, and brown hornblende megacrysts in the Location 77 carbonate-matrix breccia pipe gave a good “plateau age” of 558 Ma.  Thus, although the exact relations between the Th-REE veins and the intrusives are yet to be determined, evidence for a Cambrian alkaline intrusive system is mounting.  There is actually a NW-trending belt of Neoproterozoic-Paleozoic alkaline affinity systems extending through the region, according to USGS work and older maps.  However, economic thorium mineralization is not known elsewhere in the region.  Furthermore, a digital compilation of the USGS regional scale aeromagnetic survey (USGS OFR 99-371) does show a magnetic high along the Continental Divide with a low (often associated with alteration) near the north side of Lemhi Pass and a small circular high just south of the syenite, approximately between the Cago and Last Chance mines.  The resolution of the aeromag data is insufficient for precise location of intrusives or alteration systems.  The lack of drilling or detailed geophysics in the district makes it impossible to better evaluate the subsurface potential for a causative, deeper and larger system, whether alkaline intrusive, carbonatite, or even IOCG.    However, the age constraints do indicate that both veins and intrusives are likely to have been offset by the faults shown on Staatz’ map and by any Cretaceous thrusts or Tertiary low-angle faults.  Fieldwork by the IGS suggests that resolving the quartzite’s into mappable units is nearly impossible and that determining the complex (and undoubtedly overprinted) structural offsets is very difficult and would require an immense amount of very detailed work in the district and region.  Work is still ongoing by the IGS and may further document the relationship between the various types of mineralization and the intrusives.   Staatz, 1979 recognized three largest faults that he believed formed after the Challis volcanics; the Lemhi Pass, Bull Moose, and Dan Patch and that the thorium bearing veins are most abundant where the three major Tertiary faults intersect.  Seventy percent of the veins are located in this area and most are within a mile of the of the Dan Patch, Bull Moose, or Lemhi Pass faults.  It is believed based on some of the more recent work that these faults may be much older dating back possibly to Cambrian or earlier and that renewed movement likely occurred during Tertiary.    More extensive and detailed mapping will likely be required to more fully understand the regional geology and structure and their bearing on mineral deposits in the Lemhi Pass. Further mapping, evaluation, and sampling was done in 2006 and 2007 by IGS and IEG on behalf of IGS and Thorium Energy and included collection of whole rock and vein samples for geochemical analysis for trace and associated elements, base and precious metals in addition to uranium, thorium and rare earths.  Evaluation of this work is on going. A report regarding the rare earths is currently being prepared by IEG.  Full results of recent mapping by the IGS were not available at the time of this report.  Geologic work by the Idaho Geological Survey is ongoing. 

SUMMARY OF UNPATENTED MINING CLAIMS AND THORIUM VEINS OF THORIUM ENERGY, INC.

A general location map of contiguous unpatented mining claims and respective thorium and rare earth veins of Thorium Energy in the Lemhi Pass Area of Idaho and Montana is shown on Figure 2.  A summary of claim holdings as of the end 2007 of Thorium Energy and respective thorium lode veins historically identified by Staatz, 1979 is provided on Table 1.  Thorium vein holdings by claim of Thorium Energy in Idaho includes: the Lucky Horseshoe lode claims and vein, the Buffalo lode claim and vein, the Deer, Black Bull, and Roadside lode claims, inclusively containing the Deer Fraction 1A and other unidentified Deer lode veins, Black Bull Fraction No.4 and Black Bull No.3 lode veins; the Wonder, Caga, Big Lost, the Cago # 12 lode vein, and the Cago # 10 lode vein claim groups and the Idaho Ridge Group of claims consisting of a number of the Wonder, Caga, Eureka, Idaho Beaverhead, and Benny lode claims containing the Wonder 18 lode vein, the Contact lode vein, the Benny lode vein, the Little Dandy lode veins, and other unnamed lode veins identified as Localities 50, 58, 62, 63, and 69 by Staatz;  the Chief Tendoy lode claims, containing the Chief Tendoy # 6 and Localities 117, 118, and 119, 122, and 123 lode veins; the Saucer lode claim containing the Sauser lode vein; the Silver Queen 52B and the Lone Star lode claims, containing the Silver Queen 52B lode veins and the Lone Star # 2 lode vein; the Silver Queen 38A and Apex lode claims, containing the Silver Queen 38A lode veins; the Mountain View claim holding of the Black Rock Idaho and Scott lode veins; the Elkhorn No. 1 and No.2 claims containing the Elkhorn No. 1 and No.2 lode veins; the Viola claim of the Viola lode veins; the Elkhorn claim and Elkhorn and Lucky Strike No. 2 lode veins; the THO2 and THOR claim holdings, containing the ThO2 and Thors No. 1 and 2  lode veins, including and the Locality 191 lode vein, Black Bear No. 2 claim containing the Black Bear No. 2 vein, Thorite claim and Thorite No. 1 vein, Idaho State Mining Lease # 9407 containing Localities 99 – 103 veins, inclusive, including Big Thor No. 1 and 2 veins, Iola claims containing the Iola veins, the Mornell claim containing the Mornell vein; and the Brown Bear No. 2 – ID claim containing the Brown Bear No. 2 vein in Idaho and Montana.  Thorium vein holdings by claim of Thorium Energy in Montana includes: the Montana Ridge Group of claims consisting of the Ragand, Grouse, Montana Beaverhead, Trapper claims, containing Localities 53 thru 57, 59, 61, 64, 65, & 66 veins, and the Beaverhead and Trapper No. 1 lode veins, Last Chance and Shady Tree claims containing the Last Chance lode veins, the Last Chance, Ragand, and Trapper group of claims containing the Shear Zone lode vein; the Frying Pan claims, containing the Fry Pan and Frying Pan No. 2 lode veins; the G&G lode claims, containing the G&G Nos. 6 & 8 and 1,2 & 5 lode veins;  the Dan Patch lode claim containing the Dan Patch Nos. 1 & 2 lode veins; the Atomic Blast lode claim and vein; and the Katie Lynn claims containing the Reactor Nos. 1, 3 & 5  lode veins; the Saddlehorn claim and Saddlehorn No. 3 vein; the Shady Tree Oversight claims containing the Bull Moose vein; and the Brown Bear No. 2 – MT claim containing the Brown Bear No. 2 vein in Idaho and Montana.    The ten largest veins according to Staatz are the Last Chance vein, Shear Zone vein, Black Rock (Montana) vein, main vein on the THO2, Cago No. 12 vein, Contact vein, north vein of G&G Nos. 1, 2 & 5, the vein on G&G Nos. 6 & 8, the Lucky Horseshoe vein, and Montana Beaverhead vein.  Thorium Energy’s holdings include all of these largest veins except the Black Rock - Montana vein. Portions or all of the Roadside, Deer Fraction, and Deer 1 thru Deer 3 unpatented mining claims conflict with a U.S. public withdrawal and may not be valid.  Thorium and rare earth reserves and resources contained within these claims are not considered as part of Thorium Energy’s holdings. 

REPORTED THORIUM AND RARE EARTH RESERVES AND RESOURCES OF THE LEMHI PASS

Thorium and rare earth deposits in the Lemhi Pass of Idaho and Montana are the largest known in the United States (Austin, 1970).  He reported enriched thorium oxide, ThO2 contents at the surface of the veins assaying from 3 to 17 percent and greater than 0.3 percent at depths of 200 feet below the surface. Austin reports that veins crop out over a vertical range of about 4,000 feet and individual veins are exposed over a vertical range of 2,000 feet.   The deposits in the Lemhi Pass have the greatest potential for thorium than any other known district in the United States.  Austin reports that there are several hundred thousand short tons of ThO2 in the Lemhi Pass estimated by projecting persistent veins to depths of 3, 000 feet.  In addition to being the largest thorium deposit in the United States, it also contains several thousand short tons of rare-earths (Austin, 1970).   Preliminary metallurgical testing by the US Bureau of Mines reported by Austin, 1970 indicated that an 85 percent recovery of the thorium and a 50 to 70 percent recovery of rare earths could be obtained although recovery of the rare earths would require acid curing.  Recovery and beneficiation testing was done by Hazen Research Labs on behalf of Tenneco in the early 1980s that yield about an 88 % recovery of ThO2 using acid leach and as much as 20% REO utilizing a pre-leach acid bake step.     During the mid 1980s Colorado School of Mines Research Institute, Hazen Research Labs, and Taylor Research Labs on behalf of IERCO investigated various methods of beneficiation and recovery, particularly for REO.  At that time they determined that a 90% recovery of ThO2 could be obtained and as much as a 30% recovery of REO could be gained by gravity and magnetic separation.  Reported thorium and rare earth indicated and inferred reserves and potential resources are summarized on Table 2.  Based on applicable mine and milling methodologies and cost, Sharp and Hetland, January 1978 report mineable indicated and inferred reserves of 46,843 short tons of thorium oxide, ThO2 and a projected potential resource of  195,610 short tons of ThO2.  This would equate to a total reserve and potential resource of 242,453 short tons producible at less $10/lb of ThO2. Staatz and Lemons, 1979 report that veins are the highest grade source of thorium in the United States and provide an estimate of thorium and rare earth reserves and resources of the Lemhi Pass based on applicable mine and milling methodologies and cost.  They report a thorium reserve of 68,000 short tons and an additional probable potential resource of 124,000 short tons or a total resource of 192,000 tons of thorium producible at less than $15/lb from 43,000,000 tons of are at an average grade of 0.13 percent.  They estimate an equivalent amount of rare earths.   The U.S. Geological Survey (Staatz, 1979) estimated an indicated reserve or resource in the Lemhi Pass Thorium District of 176,500 short tons of thorium as thorium oxide, ThO2 and an inferred reserve of 128,900 short tons or a total indicated and inferred reserve of 305,400 short tons of ThO2.  It also reported an indicated reserve of 186,000 short tons and an inferred reserve of 122,000 short tons of rare earths as rare earth oxide, REO or a combined indicated and inferred reserve of 308,000 short tons of REO. Therefore, as shown on Table 2 reported reserves or resources of thorium oxide, or ThO2 range in reserves of about 46,850 to 68,000 short tons producible at less than $10-15/lb in 1978/1979 and a resource ranging from about 192,000 to 195,610 tons producible at less than $10-15/lb to as much as indicated reserves or resources of 305,400 short tons.   IERCO, 1991 provides proven through probable thorium and rare earth reserves of the Last Chance vein reported by Sawyer Petroleum in 1960, Union Pacific Railroad in 1968, Tenneco in 1979, and IERCO in 1991.  Reported reserves were refined by additional work by each company and IERCO’s estimate in 1990 is very similar to that reported by Tenneco in 1979 and is considered a reasonable estimate of thorium and rare earth reserves of the Last Chance vein.  An ore block map of IERCO of reported ThO2 and REO reserves and resources is provided on Figure 4. These reserves and resources are provided separately within the report.   

SUMMARY OF THORIUM AND RARE EARTH RESERVES AND RESOURCES OF THORIUM ENERGY, INC

The amounts of thorium and rare earth contained in the claim holdings of Thorium Energy, Inc. in the Lemhi Pass District have been estimated from its proportionate holdings of the reported reserves or resources by Staatz, 1979 and IERCO, 1991.  Reported reserves and resources of ThO2 and REO reported by Staatz were used because his reported amounts are based on selected thorium veins whereas the reported amounts by others represent the district as a whole.   Reported reserves by IERCO are considered a valid estimate of thorium and rare earth reserves of the Last Chance vein. INDICATED & INFERRED RESERVES AND RESOURCES Results of field work and related analytical data reported by Tenneco, 1975 and IERCO, 1986, 1987, and 1991 of thorium and rare earth veins held by Thorium Energy was reviewed and compared with analytical data reported by the USGS, Staatz, 1972 & 1979 (See Table 3).  Other than their work on the Last Chance vein, most of the work by Tenneco and IERCO was done to initially rank the known veins in order of economic importance.  However, after its initial acquisition of properties, IERCO evaluated their economic importance respective of their REO content and not ThO2 content.  IERCO beginning in about 1985 made field reviews of about every significant vein deposit in the Lemhi Pass.  They collected and made chemical analysis on a number of vein samples taken from a number of the veins.  IERCO concluded that some of the larger veins such as the Silver Queen 52 B contained significant amounts of ThO2 but was relatively low in amounts of REO while the Lucky Horseshoe vein contained the highest amount of REO of any vein in the Pass, but contained mostly those rare earths of the lowest value at the time.  As such it concentrated its efforts primarily on the Last Chance vein, including the Ridge Group of veins where the amounts and types of rare earths were more favorable for REO development.   Tenneco performed a very rigorous sampling and analytical analysis of the thorium lode veins that they investigated in 1975.  Of those investigated Tenneco ranked 18 veins in order of potential economic importance primarily based on ThO2 and REO content, length and width.  A few of the larger veins such as the G&G lode veins were not investigated.  In order of decreasing economic importance they include: Last Chance, Silver Queen, Cago, Lucky Horseshoe, Shear Zone, Contact, Deer, Trapper No. 1, Beaverhead, Black Bull, Black Rock - Montana, Reactor, Bull Moose, IP-8, Dan Patch, Frying Pan, Wonder, and Locality 66.  All of these veins are currently controlled under claim by Thorium Energy except for Black Rock - Montana, Bull Moose, IP-8 (vein and/or location unknown), and the Deer veins.  The Deer veins lie within a mineral withdrawal area recently designated by the U.S. Forest Service and BLM and therefore is currently not open to development.          Idaho Engineering & Geology, Inc. examined most of reported thorium and rare earth vein deposits and intrusive dikes in the Lemhi Pass in 2006 and 2007.  IEG also collected rock samples of a number of the veins and intrusive dikes.  Duplicate samples were provided to IGS.  A select number of samples were analyzed for thorium and individual rare earth elements as well as other major and trace elements.  The purpose of the recent sampling and analytical analysis was to evaluate thorium, rare earth, and other trace and major element concentrations and possible association as part of the ongoing investigative work and to provide a reasonable check of reported thorium and rate earth concentrations.  In addition, a cursory evaluation of individual rare earth elements was also made to make a reasonable verification of repotted individual concentrations that are discussed in more detail in a separate report regarding the rare earths.  The relative ratios and comparisons of individual rare earth elements was also made to assist in evaluating possible origin or model of mineralization and potential implications related to larger buried types of deposits possibly similar in nature to IOCG, Iron-REE, peralkaline, or carbonatite.  Detailed discussion regarding results and potential implications is beyond the scope of this report.  The thorium and total rare earth element concentrations from these recent analyses are provided in Table 3.  The results collaborate earlier findings regarding thorium and rare earth concentrations of the vein deposits by previous investigators.    The thorium and rare earth concentrations vary between and within the various vein deposits and that the overall concentrations of these elements that have been reported by earlier investigations, including Staatz, 1979 are reasonable estimates. A more detailed discussion regarding the rare earth elements and other major and trace elements of the vein deposits of the Lemhi Pass is provided in a separate report being prepared by Idaho Engineering & Geology, Inc.  Thorium and rare earth concentrations of recent sampling by IGS and IEG have also been included in Table 3.   ThO2 and REO concentrations of analysis by IERCO and Tenneco were compared to that made by Staatz, 1972 and 1979 (See Table 2). Their analytical results of ThO2 and REO concentrations collaborate with those reported previously by Staatz and others.  According to Staatz, 1979 the ten largest veins in the district have an average grade of 0.43 % ThO2 and contain 96 percent of the indicated reserves.  The average concentration of ThO2 of the combined analytical results of these ten largest veins by Tenneco, IERCO and Staatz is 0.47 %.    Staatz reported a REO to ThO2 ratio of about 1.33 or a concentration of about 0.57 % REO.  The average concentration of REO based on the combined IERCO, Tenneco, and USGS analysis is 0.52 % for the reported ten largest veins.  The average ThO2 concentration of the combined analytical data of the six remaining veins reported by Staatz to be greater than 1000 feet in length is 0.37% and includes the Reactor, Frying Pan, Deer Frt. 1, Silver Queen 52B, Viola, and Iola veins.  Not all veins or samples thereof have been analyzed for both ThO2 and REO.  The average REO concentration of the combined analytical data available for these six veins is 0.24 %.  Based on the combined data, the average ThO2 concentration of all veins held by Thorium Energy Inc., excluding the ten largest veins reported by Staatz is 0.29 percent and the average REO concentration is 0.20 %.        Staatz, 1979 estimates that indicated reserves or resource in the district are 176,500 short tons of ThO2 and that inferred reserves or resources are 128,900 short tons or a total indicated and inferred reserve or resource of 305,400 short tons of ThO2.  He also reports indicated reserves of 186,000 short tons and inferred reserves or resources of 122,000 short tons of REO or a combined indicated and inferred reserve of 308,000 short tons of REO based on analysis of twenty five veins.  As such, indicated REO reserve is about 60% of the total reserve estimated.  Staatz estimated a combined total REO reserve or resource of all the veins in the Pass to be about 406,000 short tons REO based on the measured REO to ThO2 ratio of 1.33 for the twenty five veins.  Therefore of the total REO reserve it is estimated that there is an indicated reserve of about 243,600 short tons REO and an inferred reserve or resource of about 162,400 short tons of REO.  Potential undiscovered resources are not presented but potential resources are considered substantial. Both the IERCO and Tenneco data is not sufficient to directly estimate indicated or inferred reserve or reserve amounts of ThO2 or REO in the veins other than the Last Chance lode vein discussed previously.  Weighted vein widths and lengths were used by Tenneco primarily in their analysis in ranking the veins that it investigated and they also applied lengths reported by Staatz in some of their analysis.  Similarly some vein widths and lengths were inferred by IERCO, but nothing definitive enough was done to form a basis for specifically estimating reserves, since its program was primarily geared to evaluating REO content. However, the ThO2 and REO concentrations of the combined analytical data were equal to or even greater than that reported by Staatz for the larger veins of estimated reserves.  As such, the individual veins were weighted on their respective width and length reported by Staatz, 1979 and then applied to the holdings of Thorium Energy to arrive at a reasonable estimate of indicated and inferred thorium and rare earth reserves or resources controlled by Thorium Energy.     Thorium Energy’s holdings include nine of the ten largest veins reported by Staatz.  The ten largest veins according to Staatz are the Last Chance vein, Shear Zone vein, Black Rock or Radio (Montana) vein, main vein on the THO2, Cago No. 12 vein, Contact vein, north vein of G&G Nos. 1, 2 & 5, the vein on G&G Nos. 6 & 8, the Lucky Horseshoe vein, and the Montana Beaverhead vein. According to Staatz these veins contain 96 percent of the estimated ThO2 and REO reserves. Proven and possible reserves of ThO2 and REO of the Last Chance lode vein are included in the estimate of combined indicated and inferred reserves within the Lemhi Pass. Ninety six percent of indicated and inferred reserves or resources is equal to about 169,440 short tons and 123,744 short tons of ThO2, respectively or a combined reserve or resource of 293,184 short tons of ThO2 and indicated and inferred reserves or resources of 243,600 short tons and 162,400 short tons of REO, respectively or a combined REO reserve of 406,000 short tons.  Thorium Energy’s holdings include all of these largest veins except the Black Rock - Montana (state and private land) and a portion of the THO2.  On a weighted basis derived from vein width and length reported by Staatz, 1979, these two veins account for about 10 % of the 96 % of the ThO2 and REO reserves or resources reported by Staatz to be contained in the ten largest veins.  As such, indicated and inferred reserve holdings of Thorium Energy from these largest veins is estimated to be about 152,495 short tons ThO2 and 210,470 short tons of REO and 111,370 short tons of ThO2 and 140,314 short tons of REO, respectively or a combined reserve or resource of 263,865 short tons  of ThO2 and 350,785 short tons of REO.  The remaining 4 % of indicated and inferred thorium and rare earth reserves or resources reported by Staatz are contained in the remaining veins.  As discussed previously Thorium Energy controls all of the other remaining larger veins estimated to be greater than 1000 feet in length by Staatz except for the Deer vein(s), including the Deer Frt. 1 vein and also controls most all of the other larger known veins, including the Wonder, Wonder No. 18, Trapper No. 1, Buffalo, Lone Star No. 2, Silver Queen 38A, Buffalo, Chief Tendoy, Elkhorn & Elkhorn No.1, Bull Moose, Brown Bear 2, Black Bear 2, Mornell, Saddlehorn No. 3, Thorite No. 1, and the Dan Patch.  It is estimated that the Iola and Deer vein(s) and the balance of the other veins not under control by Thorium Energy is less than 1 percent of the remaining 4 percent of the reserve or resources not included in the 10 largest veins reported by Staatz.  As such 75 % of the balance of these remaining reserves estimated by Staatz is indicated and inferred reserves or resources of 5,291 short tons and 3,840 short tons of ThO2, respectively or a combined reserve of 9,135 short tons of ThO2 is contained within the remaining claim holdings of Thorium Energy.  This would also include indicated and inferred reserves or resources of 7,016 short tons and 4,210 short tons of REO or a combined additional reserve or resource of 11,226 short tons of REO.  The average REO of the combined analytical data of all veins exclusive of the ten largest veins reported by Staatz is about 0.20% or about 34 percent less than the estimate of REO applied by Staatz of 0.58 %.   As such, indicated and inferred reserves or resources of 2,385 short tons and 1,431 short tons of REO or a combined additional reserve or resource of 3,816 short tons of REO are estimated to be contained within the remaining claim holdings of Thorium Energy.  Therefore, it is estimated that an indicated reserve or resource of about 157,790 short tons of ThO2 and an inferred reserve or resource of 115,210 short tons of ThO2 or a combined reserve or resource of 273,000 short tons of ThO2 at about an average concentration of 0.40 % (8 lbs. /ton) is contained within the claim holdings of Thorium Energy.  In addition it is estimated that an indicated reserve or resource of about 212,855 short tons of REO and an inferred reserve or resource of 141,745 short tons of REO or a combined reserve or resource of 354,600 short tons of REO at an average concentration of about 0.52 % (10 lbs. /ton) is also contained within the holdings of Thorium Energy.  

PROVEN RESERVES AND RESOURCES OF LAST CHANCE VEIN

According to IERCO, 1991, the Last Chance property is the most significant thorium deposit in the Lemhi Pass.  It is also the richest thorium vein deposit in the United States.  IERCO, 1986, 1987 and 1991 completed substantial surface and subsurface sampling and analytical analysis of the Last Chance vein between 1985 and 1990.  IERCO used this data in conjunction with available data collected previously by USGS, Sawyer Petroleum-Union Pacific Railroad, and Tenneco to identify proven, probable, and inferred reserves.  IERCO applied standard professional practices similar to Tenneco in determining reserves.  IERCO determined a weighted average content of ThO2 of 0.39 % (7.82 lb. /ton) and REO of 0.33 % (6.5 lbs. /ton).  This agrees with similar reported average ThO2 concentrations reported by Union Pacific Railroad of 0.318 % and that reported by Tenneco of 0.342 %.     IERCO measured a proven reserve of 16,427 short tons of ore containing 387,120 lbs. (194 short tons) of ThO2 and 306,465 lbs. (153 short tons) of REO; a probable reserve or resource of 79,985 short tons of ore or 932,674 lbs. (466 short tons) of ThO2 and 772,480 lbs. (386 short tons) of REO, and a possible reserve or resource of 486,519 short tons or 3,239,068 lbs. (1,620 short tons) of ThO2 and 2,714,091 lbs. of REO for a combined reserve or probable and possible resource of 582,850 short tons of ore or 4,558,860 lbs. (2,279 short tons) of ThO2 and 3,793,035 lbs. (1,897 short tons) of REO. This report is privileged and confidential and is the sole property of Thorium Energy Incorporated.  Copies can not be made or distributed without the expressed written consent of Thorium Energy Inc.   

LIST OF REFERENCES: Anderson, Alfred, “Geology and Mineral Resources of the Salmon Quadrangle, Lemhi County, Idaho,” IBM&G Pamphlet No. 106, July 1956. Anderson, Alfred A., “Geology and Mineral Resources of the Baker Quadrangle, Lemhi County, Idaho,” IBM&G Pamphlet No. 112, July 1957.  Anderson, Alfred A., “Uranium, Thorium, Columbium, and Rare Earth Deposits in the Salmon Region Lemhi County, Idaho,” IBM&G Pamphlet No. 115, July 1958. Anderson, Alfred A., “Geology and Mineral Resources of the North Fork Quadrangle, Idaho, Lemhi County, Idaho,” IBM&G Pamphlet No. 118, July 1959 – page 54 carbonate altered dike? Anderson, Alfred A.,” Geology and Mineral Resources of the Salmon Quadrangle, Lemhi County, Idaho,” Pamphlet No. 124, 1961.  Austin, S. R., “Thorium, Yttrium, and Rare Earth Analysis, Lemhi Pass – Idaho Montana,” Technical Memorandum, AEC-RID-2, April 1968. Austin, S. R., Hetland, D.L., and Sharp, B.J., “Mineralogy of the Lemhi Pass Thorium and Rare-Earth Deposits,” IBM&G Mineral Reserves Report No. 11, 1970. Borrowman, S.H. and Rosenbaum, J.B., “Recovery of Thorium from Ores in Colorado, Idaho, and Montana,” U.S. Department of Interior, Bureau of Mines, 1962.  Geach, Robert D., “Thorium Deposits of the Lemhi Pass District, Beaverhead County, Montana,” MBM&G Special Publications 41, November 1966. Gibson, Paul E., “Origin of the Lemhi Pass REE-Th Deposits, Idaho/Montana: Petrology, Mineralogy, Paragenesis, Whole-Rock Chemistry and Isotope Evidence,” MS Thesis, University of Idaho, Fall, 1998.  Gillerman, Virginia, S., et al, “Newly Discovered Intrusives at the Lemhi Pass Thorium - REE Iron Oxide District, Idaho: Cambrian Syenite and Mystery Ultramafics – Signatures of a Buried Alkaline Complex or Twp Systems,” GSA Cordilleran Section 104th Annual and Rocky Mountain Section 60th Annual Joint Meeting, Las Vegas, NV., March 19-21, 2008.   Gillerman, Virginia S. IGS, Lund, Karen, and Evans, Karl V. USGS, “Stratigraphy, Structure, and Mineral Deposits of the Lemhi Pass Area, Central Beaverhead Mountains, Eastern Idaho,” Northwest Geology, Vol. 32, 2003 Tobacco Root Geological Society Field Conference at the Belt Symposium IV, Missoula, MT & Salmon, ID August7-12, 2003.Gillerman, Virginia, S., et al, “U-Pb and Re-Os geochronology Suggests a Multistage Precambrian-Mesozoic History for Thorium and Copper Mineralization, Lemhi Pass, Idaho,” Geological Society of America Abstracts with Programs, v. 34.6 p. 337, GSA Annual Meeting Denver, Colorado, 2002.   Gillerman, Virginia, S., et al, “Site Inspection Report for the Abandoned and Inactive Mines in Idaho on Bureau of Land Management Property in the Lemhi Pass Area,” unpublished Idaho Geological Survey report, 2001.   Gillerman, Virginia, S., et al, “Lemhi Pass Thorium District: A Variant of Proterozoic Iron Oxide (Cu-U-Au-REE) Deposits,” Geological Society of America Abstracts with Programs, v. 32.7 p. 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Card No. 95-71236 Lund, K.I. and etal, “Geologic Map of the Eastern Part of the Salmon National Forest and Vicinity, East-Central Idaho,” USGS, Geological Investigations Series I-2765, 2003 Newton, Joseph, and etal, “Study of Two Idaho Thorite Deposits,” IBM&G Pamphlet No. 122, September, 1966. Reed, Rich, IEG and Gillerman, Virginia S., IGS, “Thorium and Rare Earths in the Lemhi Pass Region,” SME Annual Meeting, Salt Lake City, UT, February 24-27, 2008.   Sampson, Iain M., and Wood, Scott A., “The Rare Earth Elements: Behavior in Hydrothermal Fluids and Concentration in Hydrothermal Mineral Deposits, Exclusive of Alkaline Settings,” Rare Earth Geochemistry and Mineral Deposits: Geological Association of Canada, GAC Short Course Notes 17, p.269-297, 2005.   Sharp, William and Cavender, Wayne, “Geology and Thorium Bearing Deposits of the Lemhi Pass Area, Lemhi County, Idaho and Beaverhead County, Montana,” U.S. Geological Survey Bulletin 1126, 1962. Sharp, Byron J. and Hetland, Donald L., “Thorium and Rare Earth Resources of the Lemhi Pass Area, Idaho and Montana,” Summary Report U.S. Atomic Energy Commission Resource Investigation Division July 1968, Issued by USDOE, RA-12, January 1978. Silberman, Byron, and Randolph, Koki, “K-Ar Relations of the Granodiorite Emplacement and Tungsten and Gold Mineralization near the Getchell Mine, Humboldt County, Nevada,” Economic Geology, Vol. 69, 1974, pp. 646-656. Staatz, Mortimer H., “Geology and Descriptions of the Thorium Bearing Veins, Lemhi Pass Quadrangle, Idaho and Montana,” U.S. Geological Survey Bulletin 1351, 1972. Staatz, Mortimer H., “Thorium-Rich Veins of Hall Mountain in Northern Most Idaho” and Montana,” Economic Geology, Vo. 67, pp. 72-82 1972. Staatz, Mortimer H., “Occurrence and Distribution of Rare Earths in the Lemhi Pass Thorium Veins, Idaho and Montana,” Economic Geology, Vo. 67, pp. 240-248, 1972. Staatz, Mortimer H., “Thorium Veins in the United States,” Economic Geology, Vo. 69, pp. 494-507, 1974. Staatz, Mortimer H., etal “Distribution and Occurrence of Rare Earths in the Thorium Veins on Hall Mountain, Idaho,” USGS Journal of Research Vol. 2, No 6, p. 677-683, Nov.-Dec. 1974. Staatz, Mortimer H., “Update on Thorium Resources,” USGS October, 1978. Staatz, Mortimer H. and Lemons, Jim F., and etal, “Principal Thorium Resources in the United States,” Geological Survey Circular 805, 1979. Staatz, Mortimer H., “Geology and Mineral Resources of the Lemhi Pass Thorium District, Idaho and Montana,” Geological Survey Professional Paper 1049-A, 1979. Staatz, Mortimer H. etal, “Thorium Resources of Selected Regions in the United States,” Geological Survey Circular 824, 1980. Tenneco, Wilson, and etal, “Vein Evaluation of Lemhi Pass Thorium & Rare Earths,” Tenneco Report, 1975.  This report is privileged and confidential and is the sole property of Thorium Energy Incorporated.  Copies can not be made or distributed without the expressed written consent of Thorium Energy Inc.