THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about thecontents of this document and what action you should take you are recommended immediately to seek your own financial advice froman independent financial adviser who specialises in advising on the acquisition of shares and other securities and is authorised underthe Financial Services and Markets Act 2000.

If you have sold or otherwise transferred all your shares in the Company, you should forward this document, together with theaccompanying Form of Proxy, immediately to the purchaser, transferee or the agent through whom the sale or transfer was effected,for onward transmission to the purchaser or transferee, except that this document should not be forwarded or transmitted into theUnited States, Canada, Japan, Australia, the Republic of Ireland, or South Africa or any other jurisdiction where it would be unlawfulto do so.

This document, which comprises an AIM Admission Document drawn up in accordance with the AIM Rules and the POS Regulations,has been issued in connection with the proposed re-admission of the Existing Ordinary Shares and the admission of the Placing Sharesto trading on the AIM Market of the London Stock Exchange Plc (“AIM”). Whilst this document has been drawn up in accordancewith the POS Regulations, this document does not constitute a prospectus and a copy of it has not been, and will not be, delivered tothe Registrar of Companies in England and Wales for registration under Rule 4(2) of the POS Regulations.

The Directors and Proposed Director of Chaco Resources Plc, whose names appear on page 3 of this document, accept responsibilityfor the information contained in this document including individual and collective responsibility for compliance with the rules for AIMpublished by the London Stock Exchange Plc. To the best of the knowledge and belief of the Directors and Proposed Director, whohave taken all reasonable care to ensure that such is the case, the information contained in this document is in accordance with thefacts and does not omit anything likely to affect the import of such information. The whole of this document should be read.

Application will be made for the Existing Ordinary Shares to be re-admitted and for the Placing Shares to be admitted to trading onAIM. Application will be made for the Consideration Shares to be admitted to trading on AIM upon the satisfaction of the conditionsto the Acquisition Agreement. AIM is a market designed primarily for emerging or smaller companies to which a higher investmentrisk tends to be attached than to larger or more established companies. AIM securities are not admitted to the Official List of theUnited Kingdom Listing Authority (“Official List”). A prospective investor should be aware of the risks in investing in such companiesand should make the decision to invest only after careful consideration and, if appropriate, consultation with an independent financialadviser. The rules of AIM are less demanding than those of the Official List. Neither the United Kingdom Listing Authority nor theLondon Stock Exchange Plc have examined or approved the contents of this document. It is expected that Admission will occur andthat trading in the Existing Ordinary Shares and Placing Shares will commence on 16 November 2004.

YOUR ATTENTION IS DRAWN TO THE RISK FACTORS SET OUT IN PART III OF THIS DOCUMENT.

Chaco Resources Plc(Registered in England and Wales with registered number 04030166)

Proposed Acquisition of Amerisur S.A. and Bohemia S.A.

Notice of Extraordinary General Meeting

Placing of 36,585,365 New Ordinary Shares of 0.1p each

Nominated Adviser and Broker

Daniel Stewart & Company plc

ORDINARY SHARE CAPITAL IMMEDIATELY FOLLOWING COMPLETION OF THE ACQUISITION AND THE PLACING

AUTHORISED ISSUED AND FULLY PAIDNumber Amount £ Number Amount £

600,000,000 600,000 417,258,324 417,258

The Placing Shares will, on Admission, rank in full for all dividends or other distributions hereafter declared, made or paid on the ordinaryshare capital of the Company after their date of issue and will rank pari passu in all other respects with all the Existing Ordinary Shares.

Daniel Stewart & Company PLC (“Daniel Stewart”), which is regulated by The Financial Services Authority, is acting as nominated adviserand broker to the Company in connection with the proposed Acquisition and with the Placing. Its responsibilities as the Company’s nominatedadviser and broker are owed solely to the London Stock Exchange Plc and are not owed to the Company or to any Director or to any otherperson in respect of his decision to acquire Ordinary Shares in reliance on any part of this document. No representation or warranty, expressor implied, is made by Daniel Stewart as to any of the contents of this document (without limiting the statutory rights of any person to whomthis document is issued) and Daniel Stewart has not authorised the contents of this document for the purposes of Regulation 13(1)(g) of thePOS Regulations. Daniel Stewart will not be offering advice and will not otherwise be responsible for providing customer protections torecipients of this document or for advising them or any other person on the contents of this document or any other matter.

A Notice convening an Extraordinary General Meeting of the Company to be held at the offices of Charles Russell, 8-10 New FetterLane, London EC4A 1RS at 10.00 a.m. on 15 November 2004 is set out at the end of this document. The enclosed Form of Proxy foruse at the Extraordinary General Meeting should be completed and returned to Capita Registrars, The Registry, 34 Beckenham Road,Beckenham, Kent BR3 4TU as soon as possible and to be valid must arrive not less than 48 hours before the time fixed for theExtraordinary General Meeting. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the time by which aperson must be entered on the Register of Members in order to have the right to vote at the meeting is 10.00 a.m. on 13 November2004 or 48 hours before any adjourned meeting. Changes to entries on the Register of Members after that time will be disregarded indetermining the right of any person to attend or vote at the meeting. Completion and return of a Form of Proxy will not precludeOrdinary Shareholders from attending and voting in person at the Extraordinary General Meeting should they so wish.

Copies of this document will be made available to the public during normal business hours on any week day (Saturdays and Public Holidaysexcepted) free of charge from the offices of Charles Russell at 8-10 New Fetter Lane, London EC4A 1RS and Daniel Stewart at 48Bishopsgate, London EC2N 4AJ and shall remain available for at least 14 days after the date of Admission.

This document should not be distributed in, into or from the United States of America, Canada or Australia or any other jurisdiction where todo so would be in breach of any applicable law and/or regulation. The Existing Ordinary Shares and the Placing Shares have not been, norwill they be, registered under the United States Securities Act of 1933 (as amended). Accordingly, such shares may not be offered, sold,renounced, taken up or delivered, directly or indirectly in or into the United States of America. Furthermore, such shares have not been andwill not be registered under any of the relevant securities laws of Canada, Japan or Australia. Accordingly unless an exception under relevantsecurities laws is applicable, such shares may not be offered, sold, renounced, taken up or delivered, directly or indirectly, in or into Canada,Japan or Australia. This document does not constitute an offer or the solicitation of an offer to subscribe or buy any of the Existing OrdinaryShares or the Placing Shares.

TABLE OF CONTENTS

Page

Directors, Secretary and Advisers 3

Definitions and Glossary of Terms 4

Expected Timetable 6

Acquisition and Placing Statistics 6

Part I Letter from the Chairman of Chaco Resources 7

Part II Information on Chaco Resources, Amerisur and Bohemia 10

Part III Risk Factors 16

Part IV Competent Person’s Report – PXP Report 20

Part V Financial Information on Chaco Resources 41

Part VI Financial Information on Amerisur 54

Part VII Financial Information on Bohemia 56

Part VIII Pro forma statement of combined net assets of the Enlarged Group 58

Part IX Summary of the principal terms relating to the Acquisition 61

Part X Additional Information 64

NOTICE OF EXTRAORDINARY GENERAL MEETING 82

2

DIRECTORS, SECRETARY AND ADVISERS

Directors: Jon Peter Pither Chairman – Non-ExecutiveThomas Gee Elder Deputy Chairman – Non-ExecutiveMartin Hugh Charles Groák Non-Executive – FinanceJohn Christopher Morris ExecutiveLee Allen Graber Non-Executive

Proposed Director: Douglas Jendry Non-Executive

All of

Prestige Travel SuiteBarclays Bank House81-83 Victoria RoadSurbiton, Surrey KT6 4NS

Company Secretary: David Parsons

Registered Office: Prestige Travel SuiteBarclays Bank House81-83 Victoria RoadSurbiton, Surrey KT6 4NS

Nominated Adviser and Broker: Daniel Stewart & Company PLC48 BishopsgateLondon EC2N 4AJ

Auditors and Reporting Grant Thornton UK LLPAccountants to the Company: 8 West Walk

Leicester LE1 7NH

Solicitors to the Company: Charles Russell8-10 New Fetter LaneLondon EC4A 1RS

Solicitors to the Placing: Finers Stephens Innocent179 Great Portland StreetLondon W1N 5LS

Registrars: Capita RegistrarsThe Registry34 Beckenham RoadBeckenhamKent BR3 4TU

3

DEFINITIONS AND GLOSSARY OF TERMS

The following definitions apply throughout this document, unless the context otherwise requires:

“A$” references to Australian currency

“Act” the Companies Act 1985 (as amended)

“Acquisition” the proposed acquisition of Amerisur and Bohemia, details of whichare set out in Part IX

“Admission” the re-admission of all of the Existing Ordinary Shares and theadmission of the Placing Shares to trading on AIM becoming effectivein accordance with the AIM Rules

“AIM” the market operated by the London Stock Exchange

“Amerisur” Amerisur S.A.

“Amerisur Shares” the issued share capital of Amerisur

“AIM Rules” the rules for companies admitted to trading on AIM, published by theLondon Stock Exchange

“Articles” the articles of association of the Company

“Bohemia” Bohemia S.A.

“Bohemia Shares” the issued shares in the share capital of Bohemia

“Board” or “Directors” the directors of the Company, including, for the purposes of thisdocument, the Proposed Director

“Chaco Share Option Scheme” the unapproved share option scheme of the Company, further details ofwhich are set out in Part X of this document

“Combined Code” the Combined Code on Corporate Governance published in July 2003

“Company” or “Chaco Resources” Chaco Resources Plc

“Concession Contract” a concession contract for exploration and subsequent exploitation ofhydrocarbons in an area within Paraguay executed by the Governmentof Paraguay and the relevant concessionaire, the concession contractnot at that point having been authorised by a law passed by the NationalCongress of Paraguay

“Consideration” US$900,000 to be satisfied by way of issue of the Consideration Shares

“Consideration Shares” 27,322,404 new Ordinary Shares to be issued to the Vendors pursuantto the Acquisition Agreement

“CREST” the computerised settlement system to facilitate the transfer of title ofshares in uncertificated form, operated by CRESTCo Limited

“Daniel Stewart” Daniel Stewart & Company PLC, nominated adviser and broker to theCompany

the extraordinary general meeting of the Company to be held at theoffices of Charles Russell, 8-10 New Fetter Lane, London EC4A 1RSat 10.00 a.m. on 15 November 2004, notice of which is set out at theend of this document

“Enlarged Group” the Company together with Amerisur and Bohemia

“Existing Ordinary Shares” the 353,350,555 Ordinary Shares in issue at the date of this document

“FSA” the Financial Services Authority

“EGM” or “ExtraordinaryGeneral Meeting”

4

“London Stock Exchange” London Stock Exchange Plc

“Medoro” Medoro Resources Ltd.

“Official List” the official list of the UK Listing Authority

“Options” the options granted or proposed to be granted under the Chaco ShareOption Scheme

“Ordinary Shares” ordinary shares of 0.1p each in the capital of the Company

“Paraguay” the Republic of Paraguay

“Permit” a prospecting permit for hydrocarbons issued pursuant to theHydrocarbons Law of Paraguay

“Placing” the proposed placing by Daniel Stewart as agent for the Company ofthe Placing Shares at the Placing Price pursuant to the PlacingAgreement

“Placing Agreement” the conditional agreement dated 20 October 2004 between theCompany (1), the Directors (2) and Daniel Stewart (3) and relating tothe Placing, further details of which are set out in paragraph 7 of PartIX of this document

“Placing Price” 2.05p per Placing Share

“Placing Shares” the 36,585,365 new Ordinary Shares to be issued pursuant to thePlacing

“POS Regulations” the Public Offers of Securities Regulations 1995, as amended

“Proposed Director” Mr Douglas Jendry, who will be appointed a director of the Companywith effect from Admission

an evaluation of the petroleum exploration permits held by Amerisurand Bohemia in Paraguay, prepared by PXP Management Limited forthe Company, set out at Part IV of this document

“Resolutions” the resolutions set out in the Notice of EGM at the end of this documentand reference to a “Resolution” shall be the relevant resolution set outin the Notice of EGM

“Shareholders” holders of Ordinary Shares

“Share Sale Agreement” the conditional agreement dated 27 September 2004, pursuant to whichChaco Resources has conditionally agreed to acquire the entire issuedshare capitals of Amerisur and Bohemia, respectively

“TSX Venture” the Toronto Stock Exchange Venture Exchange (formerly CanadianVenture Exchange)

“UK Listing Authority” the United Kingdom Listing Authority of the FSA, acting in itscapacity as the competent authority for the purposes of Part VI of theFinancial Services and Markets Act 2000

US$ United States Dollars

“Vendors” Candey S.A. and Daniel Sztern

£ British Pounds Sterling

“PXP Report” or “CompetentPerson’s Report”

5

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Admission Document publication date 20 October 2004

Last time and date for receipt of Forms of Proxy 10.00 a.m. on 13 November 2004

Extraordinary General Meeting 10.00 a.m. on 15 November 2004

Admission effective and dealing in Ordinary Shares (including the PlacingShares) expected to commence on AIM 16 November 2004

Expected date for CREST accounts to be credited (in respect of Placing Shares) 17 November 2004

Expected date for posting of the share certificates for the Placing Shares (where applicable) 17 November 2004

ACQUISITION AND PLACING STATISTICS

Placing Price 2.05p

Mid market price per share on the last practical date before publication of this document 2.15p

Placing price discount 0.10p

Number of Placing Shares 36,585,365

Gross Proceeds of Placing £750,000

Estimated net proceeds of the Placing receivable by the Company(net of the expenses of the Placing, the Admission and the Acquisition) £515,000

6

PART I

LETTER FROM THE CHAIRMAN

CHACO RESOURCES PLC

(Formerly called GOLD MINES OF SARDINIA PLC)

(Incorporated and Registered in England and Wales under the Companies Act 1985 with Registered Number 04030166)

Directors: Registered Office:

Jon Peter Pither (Chairman) Prestige Travel SuiteThomas Gee Elder Barclays Bank HouseJohn Christopher Morris 81-83 Victoria RoadLee Allen Graber SurbitonMartin Hugh Charles Groák Surrey KT6 4NSDouglas Jendry (Proposed Director)

20 October 2004

To: Shareholders and, for information only, to Optionholders

Dear Sir/Madam,

Proposed Acquisition of Amerisur S.A. and Bohemia S.A.

1 Introduction to the Acquisition

Your Board announced on 28 September 2004 that it had entered into a conditional agreement with theVendors relating to the sale and purchase of the entire issued share capital of Amerisur and Bohemia for atotal consideration of 27,322,404 new Ordinary Shares.

Amerisur and Bohemia are two Paraguayan companies. Amerisur holds two oil and gas prospecting Permitsin Paraguay and is the registered applicant for exploration and exploitation Concession Contracts over thesame Permit areas. Bohemia holds registered applications for an oil and gas prospecting Permit in Paraguayand for an exploration and exploitation Concession Contract over the same area. The exploration areascovered by these three applications comprise a total of approximately 48,000 square kilometres of theCurypayty and Paraná Basins. These basins extend respectively into Bolivia and Brazil, where commercialoil and gas production has been established for many years from similar geological sections.

The Consideration Shares will be allotted in tranches, subject to satisfaction of certain conditions relating toactions by the government of Paraguay which secure the concession rights in the areas to which theapplications relate. As the Acquisition represents a fundamental change in the business of the Company, itconstitutes a reverse takeover under the AIM Rules. Completion of the Acquisition is therefore conditional,inter alia, upon the approval of the Share Sale Agreement by the Shareholders in general meeting andAdmission. If these conditions have not been fulfilled within 12 months of the date of the Share SaleAgreement (being 27 September 2004), then neither the Vendors nor the Company will be obliged tocomplete the Acquisition and neither party shall have any further rights or obligations under the agreement(except in respect of a breach before the date of termination).

Further terms of the Acquisition and the Share Sale Agreement are set out in Parts II and IX of this document.

7

2 Background and Reasons for the Acquisition

In February 2004, the principal assets of the Company, held by its then Australian subsidiary, weretransferred into a newly-formed Canadian subsidiary of the Company. That Canadian subsidiary was thenamalgamated with Full Riches Investments Ltd., a TSX Venture listed company, to form Medoro. 50 percent. of the shares in Medoro (on a fully diluted basis) received as consideration for the amalgamation werethen distributed to Shareholders by way of a dividend in specie. Medoro was quoted on the TSX Venture andadmitted to trading on AIM.

On 29 June 2004, the Board announced that, having reviewed a number of sectors, they had decided torefocus the Company’s activity on oil and gas exploration. On 28 July 2004, the Company changed its nameto Chaco Resources plc from Gold Mines of Sardinia plc following the disposal of its Sardinian gold miningassets to Medoro.

The Company raised £790,000 of working capital through a private placing in April 2004 at 1p per OrdinaryShare, representing an 11.5 per cent. discount to the then ambient share price of 1.13p. Around this time, theCompany secured an exclusivity period to negotiate the acquisitions of Amerisur and Bohemia.

Following press speculation concerning the Acquisition, on 3 September 2004, the Board announced that itwas in negotiations for the acquisition of oil and gas exploration rights in Paraguay and that the terms of thepotential transaction were likely to constitute a reverse takeover under the AIM Rules. Consequently, theCompany requested on the same day that the London Stock Exchange suspend trading in its Ordinary Shares.Trading in the Ordinary Shares has been suspended since that date. On 28 September 2004, the Boardannounced that the Company had conditionally acquired Amerisur and Bohemia, the two Paraguayancompanies holding registered applications for hydrocarbon prospecting permits and concession contractsrelating to oil and gas exploration areas in Paraguay. The Directors believe that the exploration areas (theCurypayty and Paraná Basins), which border Bolivia and Brazil, are relatively lightly explored in terms ofoil and gas. In addition, the Directors have been advised that these basins extend respectively into Boliviaand Brazil, where commercial oil and gas production has been established for many years from similargeological sections.

3 Tax

A guide to the general tax position of Shareholders under UK law and Inland Revenue practice is set out inparagraph 8 of Part X of this document.

4 Placing

The Company intends to raise £515,000 (net of expenses of the Placing, the Admission and the Acquisition)pursuant to the Placing. The Placing is being effected to provide the Company with the additional funds itrequires to assist its future growth and development. Further details of the Placing are set out in paragraph 7of Part II of this document.

5 Directors’ Intentions

The Directors who hold Ordinary Shares have confirmed that they will vote in favour of the Resolutions.Accordingly, 4,750,000 Ordinary Shares (in aggregate) which, at the date of this document, representsapproximately 1.34 per cent. of the issued share capital of the Company will be voted in favour of theResolutions.

6 Extraordinary General Meeting

A notice is set out at the end of this document convening an Extraordinary General Meeting to be held at10.00 a.m. on 15 November 2004 at the offices of Charles Russell, 8-10 New Fetter Lane, London EC4A1RS. At the Extraordinary General Meeting, the following resolutions will be proposed:

Ordinary Resolution

1. To approve the Acquisition.

8

Special Resolution

2. To disapply the statutory pre-emption rights in respect of the issue of equity securities for cashpursuant to the Placing and to replace the current general disapplication of the pre-emption provisionsin respect of the issue of equity securities for cash with a new general disapplication in respect of suchshares up to an aggregate nominal amount of £41,725.83.

Approval of the Acquisition.

As the Acquisition constitutes a reverse takeover, Shareholder approval, as set out in Resolution 1, is requiredunder the AIM Rules. In addition, implementation of the Acquisition is conditional upon, inter alia, andrequires, the passing of Resolution 1.

Disapplication of pre-emption rights

The provisions of Section 89(1) of the Act, to the extent that they are not disapplied, confer on shareholdersrights of pre-emption in respect of the allotment of equity securities which are, or are to be, paid wholly incash. Pursuant to Resolution 2, the current disapplication authority will be replaced and the provisions ofSection 89(1) the Act will be disapplied in respect of the new Ordinary Shares to be issued pursuant to thePlacing and will be generally disapplied in connection with a rights or other pre-emptive issue and any otherissue of equity securities for cash which, when taken together with any other equity securities allotted forcash during the period of the disapplication, do not in aggregate exceed a nominal value of £41,725.83. Thisgeneral disapplication authority represents approximately 10 per cent. of the enlarged issued share capital ofthe Company assuming the issue of all the Placing Shares and the Consideration Shares.

7 Action to be Taken

You will find enclosed a Form of Proxy for the Extraordinary General Meeting. Whether or not you proposeto attend the meeting, you are requested to complete and return the Form of Proxy in accordance with theinstructions printed on it as soon as possible. The completion and return of a Form of Proxy will not preventyou from attending and voting in person if you wish to do so. The Form of Proxy should be returned toCapita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU as soon as possible andin any event not later than 10.00 a.m. on 13 November 2004.

8 Additional Information

Your attention is drawn to the additional information in Parts II to X which forms part of this document. Inaddition, the Company commissioned the Competent Person’s Report to provide information on theapplications for the petroleum exploration permits held by Amerisur and Bohemia. The Competent Person’sReport is set out in full in Part IV of this document.

9 Recommendation and Voting Intentions

The Directors consider that the Acquisition is in the best interests of the Company and of Shareholders takenas a whole. The Directors unanimously recommend all Shareholders to vote in favour of theResolutions on which they are entitled to vote, as they intend to do in respect of their own beneficialholdings of Ordinary Shares, amounting in aggregate to 4,750,000 Ordinary Shares (representingapproximately 1.34 per cent. of the issued share capital of the Company at the date of this document).

Yours faithfully,

Jon PitherChairman

9

PART II

INFORMATION ON CHACO RESOURCES, AMERISUR AND BOHEMIA

1 The Opportunity

The Company has chosen to proceed as an oil and gas exploration company. The Directors have decided tofocus on Paraguay, where it has negotiated the acquisition of two local companies, Amerisur and Bohemia.

The reasons for the Company’s interest in these prospects are twofold:

(a) these exploration areas of Paraguay (the Curypayty and Paraná Basins), which border Brazil andBolivia, are relatively lightly explored in terms of oil and gas; and

(b) these basins extend respectively into Bolivia and Brazil, where commercial oil and gas production hasbeen established for many years from similar geological sections.

Amerisur holds hydrocarbon prospecting Permits over approximately 2.4 million hectares in the north andsouth-east of Paraguay and applications for exploration and exploitation Concession Contracts over the sameareas. Bohemia holds applications for a hydrocarbon prospecting Permit over an area of approximately 2.4million hectares in the south-east of Paraguay and for an exploration and exploitation Concession Contractover the same area. The three territories cover a total area of approximately 4.8 million hectares. SeeDiagram 1 below.

The Permits are valid for one year from the date of grant and may be extended for a further year. TheAmerisur Permits were granted on 1 October 2004 and the Bohemia Permit application remains pending.The concessions each take the form of a Concession Contract between the Executive of the Republic ofParaguay and the holder of the concession and require ratification by the National Congress of Paraguay, tobe given final effect. When ratified, the concessions authorise prospecting for a period of one to two years,exploration for a further period of four years, extendable to six years and exploitation for a period of 20years, extendable to 30 years, in each case over lots progressively selected by the concession holders withinthe concession areas.

2 Terms of the Acquisition

A conditional agreement, dated 27 September 2004, was entered between the Vendors and the Companyrelating to the sale and purchase of the entire issued share capital of Amerisur and Bohemia. Amerisur andBohemia are being acquired based on an independent valuation for a combined total of US$900,000. Anaverage market price for the Consideration Shares and a £/US$ exchange rate were proposed to the Vendors,which resulted in the total agreed consideration for the Amerisur Shares and Bohemia Shares amounting toin aggregate of 27,322,404 new Ordinary Shares. This would represent 7.73 per cent. of the current issuedshare capital of the Company.

There are three stages to acquiring an operating hydrocarbon concession in Paraguay:

(a) the registration and approval of a permit;

(b) the execution of a concession contract for exploration and subsequent exploitation of hydrocarbon bythe government of Paraguay;

(c) the ratification of the concession contract by the passing of a Concession law, passed by the NationalCongress of Paraguay and promulgated by the President of Paraguay.

10

The Directors concluded that, as the value of Amerisur and Bohemia will only be fully realised when stage(c) has been achieved for all three territories, it was agreed that the Consideration Shares will be allotted onthe following basis:

• 10 per cent. of the Consideration Shares (equal to 910,747 new Ordinary Shares) relating to any oneterritory will be allotted upon completion of stage (b); and

• 90 per cent. of the Consideration Shares (equal to 8,196,721 new Ordinary Shares) relating to any oneterritory will be allotted following the completion of stage (c).

The Permits over the northern and south-eastern areas applied for by Amerisur were granted on 1 October2004. The applications for the two concessions over those areas are being progressed through the responsibleMinistry and are expected to be granted by execution of the Concession contract by the Executive of theRepublic of Paraguay within one to two months after the grant of the Permits. The Concession Contractsmust then be placed before the National Congress for ratification. It is hoped that the concession lawsratifying the Concession Contracts will be passed by Congress and promulgated by early 2005. The progressof the applications for the Concession Contracts and the passing of the ratifying laws remain entirelydependent on the administrative, executive and legislative authorities in Paraguay and there can be noguarantee that the applications will be successful.

The Permit and Concession Contract applications over the south-eastern area made by Bohemia remainpending and are being progressed by the responsible Ministry. The expected date of grant of the Permit isnot known but it is hoped that this application will be granted by December 2004. Once this is granted, thenthe application for the Concession Contract will be considered.

As the Acquisition constitutes a reverse takeover under the AIM Rules, completion of the purchase ofAmerisur and Bohemia is conditional, inter alia, upon the approval of the Share Sale Agreement byShareholders in general meeting and the re-admission of the Existing Ordinary Shares and the admission ofthe Placing Shares to trading on AIM. If these conditions have not been fulfilled within 12 months of the dateof the agreement then neither the Vendors nor the Company will be obliged to complete the sale and purchaseof either the Amerisur Shares or the Bohemia Shares. The Vendors have given warranties to the Company,any breach of which affects the financial position or business prospects of that company gives the Companya right of termination subject to a 10 day remedy period.

These warranties include that the applications are in good standing, that the companies are debt free and thatthere are no liens or other encumbrances on the companies, their applications or the shares being acquired.

Further terms of the Acquisition and the Share Sale Agreement are set out in Part IX of this document.

3 Prospectivity for oil and gas discoveries in Paraguay

At present Paraguay has no significant commercial oil and gas production though it does have a 7,500bbl/day oil refinery.

Paraguay has 5 sedimentary basins or sub-basins containing sediments ranging in age from Cambrian toTertiary. To date, only 48 hydrocarbon exploration wells have been drilled in the entire country, 22 of whichare reported to have contained shows of oil and/or gas.

Drilling activity commenced in 1947 and the last well was drilled in 1995, with the distribution as follows,Carandayty Basin 28 wells, Piriti Basin 10 wells, Paraná Basin 5 wells, Curupayty Basin 4 wells, Pilar Basin1 well. The wells drilled in Paraguay to date have proved the existence of hydrocarbon source, seal andreservoir rocks, mainly in the Cretaceous and the Carboniferous to Devonian section. The Carandayty andCurupayty Basins have extensions and/or analogues in Bolivia, the Paraná extends into Brazil and the Piritiis the northern extension of the Argentinean Basin. Oil and gas production is presently taking place in rocksof similar age and geological type in Bolivia, Argentina and Brazil.

Data from three exploration permits under application in the Paraná and Curupayty Basins were examinedincluding seismic lines and geological reports. In the south east, two permits covering approximately 38,000square kilometres overlie the western extension of the larger Paraná Basin. The area contains five wells

11

drilled in the 1990s. The Mallorquin, Asuncion 1, Ines 1 and Ines 2 wells all reported shows of oil from thePalaeozoic section. To the east, in Brazil, production is taking place from the same section.

In the north, one Permit application covers approximately 10,000 square kilometres of the Curupayty Basin,which has a similar geological history to the Sub Andean region of Bolivia, a major producer of oil and gas.The Permit contains four wells drilled between 1957 and 1995 of which two reported oil shows from thePalaeozoic sections.

Diagram 1

The PXP Report, set out in Part IV of this document, gives details of the geology of each of the territories,the history of oil and gas exploration, and the valuation of the territory rights to be acquired.

4 Strategy, Development and Prospects

The Company has obtained historical seismic data relating to earlier exploration in Paraguay which can bere-interpreted, using modern computerised techniques, in order to pinpoint targets for deep-drillingexploration. The Board is intending to fund this initial process from its own cash resources, including theproceeds of the Placing.

Very substantial additional financing will be required for any deep-drilling exploration and commercialexploitation. The Board expects that such activities will be funded by farm-in arrangements with one or morepartners. Should the Company wish to participate in such funding, no assurances can be given that theCompany will be able to raise the additional finance that may be required for such future activities.

12

External funding sought through farm-in arrangements will be based on the Directors’ view at the time of:

• the risk and reward associated with the Company funding part of such works; and

• the appetite of investors to raise funds for such a venture.

5 Paraguay: Geographical, Regional, Economic and Political Factors

The Republic of Paraguay is a landlocked country located in central South America, covering an area ofapproximately 400,000 square kilometres. It is situated to the north-east of Argentina, south-west of Boliviaand west of Brazil. Democratic government was established in Paraguay in 1992 through a process ofconstitutional reform following the collapse of the Stroessner dictatorship. Paraguay has universal suffragefrom the age of 18 and has had relatively free and fair elections since 1993. The government of Mr DuarteFrutos, who took office in August 2003, enjoys approval ratings of over 60 per cent. The administration’sstructural reform agenda includes improved management and possible private-sector involvement in state-owned companies, liberalisation, and reform of the social security system. Mr Duarte Frutos has renewedties with Paraguay’s neighbours and in September 2003 he was granted a personal meeting with the USpresident, George W Bush, and is the first Paraguayan leader in many years to be invited to speak before theUN General Assembly.

Bolivia contains large reserves of natural gas and currently supplies Argentina and Brazil via an existing andextensive network of pipelines. Argentina in turn exports gas to Chile, which is dependent upon energyimports, having only limited indigenous energy resources. However, since peaking in 1998, Argentina’s oilproduction has been in decline, mainly due to its past economic crisis. In addition, the country is facing anatural gas shortage and, in April 2004, began restricting natural gas exports to Chile as well as increasingpower imports from Brazil. The Directors believe that all these inter-related power and gas shortages inneighbouring countries place Paraguay, both geographically and economically, at the central point fromwhich to supply oil, gas or energy to any of Brazil, Argentina and Chile.

There is an agreement in place between the governments of the United Kingdom and the Republic ofParaguay, specifically for the promotion and protection of investments by nationals and companies of onestate in the territory of the other.

6 Directors

Jon Peter Pither

Mr Pither (Age 70, British) is a graduate of Cambridge University. He is Chairman of Active Capital Trustplc and a number of other public and private companies. He was formerly the Managing Director of Amariplc, a director of Selection Trust plc, a director of the London Metal Exchange, a Council Member of theCBI, and President of the Aluminium Federation. Mr. Pither was also a director of Medoro Resources Ltd,the Canadian based parent of the Company’s former subsidiaries, until his resignation on 7 June 2004.

Thomas Gee Elder

Dr Elder (age 65, British) is President and Chief Executive Officer of Mano River Resources Inc (MRRI).He joined MRRI in 1998, bringing with him an extensive background in mineral exploration gained withmajor companies including BP and Rio Tinto. He is multilingual and ran exploration programmes in theUnited Kingdom, Spain, Italy, Portugal and Greenland for Cominco Limited, prior to his appointment asworldwide Exploration Manager for BP Minerals in 1983. Whilst with Rio Tinto, he had specialresponsibility for project development in the Former Soviet Union. Immediately prior to joining MRRI hewas CEO of Carpathian Gold, a private company with interests in precious metal exploration in Europe.

John Christopher Morris

Mr. Morris (age 60, British) has over 35 years experience in exploration, mining and the management ofpublic companies. He served as Managing Director of the Company from its establishment in 1987 until2000. He has remained an Executive Director of the Company. He has held prior directorships with a numberof Australian public companies, including Forsayth NL, Ramsgate Resources Limited, Northern Gold NL

13

and First Australian Resources NL; the first three being involved in the exploration and development of goldand the latter in oil and gas in Australia and other territories. He was a director of the Company’s formerAustralian subsidiaries and their Italian operating subsidiary, Sardinia Gold Mining SpA (“SGM”), until themerger of those entities with Medoro in February 2004.

Martin Hugh Charles Groák

Mr Groák (Age 53, British) is a Chartered Accountant with an Economics Degree from London University.He is multi-lingual and has an extensive background in international financial management. He was formerlyfinance director of Primary Industries Group and is also currently a director of Marker Management ServicesLimited and The AiM VCT plc. Mr. Groák was a director of SGM and Medoro until his resignation on 31March 2004.

Lee Allen Graber

Mr Graber (Age 57, American) has 30 years experience in strategic planning, mergers and acquisitions in themining, oil and gas and international construction industries, including 23 years with Homestake Mining,where he served as Vice President of Corporate Development. He has extensive experience in negotiatingand completing merger, acquisition, joint venture, financing, and asset sales agreements worldwide. Prior tojoining the board of the Company, he served on managing boards of public and private companies and jointventures in the resource industry. Most recently, from 2002 to 2004, he was the managing director of Mergersand Acquisitions for Endeavour Financial Ltd., an international resource industry investment banking firmbased in Vancouver. He is also currently a Director of Asia Pacific Resources Limited, Tenke MiningCorporation, Scorpio Mining Corporation and AuEx Inc.

Douglas Jendry (Proposed Director)

Mr Jendry (Age 53, Australian) has a degree in geology from Curtin University (formerly Western AustralianInstitute of Technology). He has had a career spanning more than 30 years in the oil and gas industry,including directorships and advisory and consulting roles with listed companies, frequently involvingfundraising and valuations. His exploration experience is worldwide, covering Australia, S.E. Asia, China,USA, N. Africa, S. America and the North Sea. From 1987 to 1994 he was Managing Director of FirstAustralian Resources NL. Between 1995 and 1999 he was Managing Director of Omega Oil NL. Since 2000,Mr Jendry has been Chairman of Impress Ventures Ltd., a company listed on the Australian stock exchangewith drilling interests in the Cooper Basin, Australia. Mr. Jendry will be appointed to the Board with effectfrom Admission.

Management

The Company has no employees. However, the Board intends to set up a small management team in duecourse.

7 Reasons for and Terms of the Placing

The Company intends to raise £515,000 (net of expenses of the Placing, the Admission and the Acquisition)pursuant to the Placing. The Placing is being effected to provide the Company with the additional funds itrequires to assist its future growth and development.

The Placing Shares represent approximately 9.38 per cent. of the share capital of the Company, as enlargedby the Placing Shares. The Placing is conditional upon, amongst other things, Admission.

Daniel Stewart has agreed as agent, pursuant to the Placing Agreement, to use its reasonable endeavours toconditionally place the Placing Shares. The Placing has not been underwritten.

The Placing Shares will be issued fully paid and, following allotment will rank equally in all respects withthe Existing Ordinary Shares including in respect of any dividends and distributions declared, paid or madein respect of the Ordinary Shares after the date of issue.

Further details of the Placing Agreement are set out in Part X of this document.

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8 Lock-ins and orderly market arrangements

Each of the Directors have given an undertaking that he will not sell, transfer or otherwise dispose of anyOrdinary Shares or interests in Ordinary Shares held on Admission for a period of 12 months fromAdmission except in certain limited circumstances including if a takeover offer is made for the Company orif that individual ceases to be a Director.

9 Dividend Policy

Any future decision to declare dividends on the Ordinary Shares will be made by the Directors dependingupon the financial requirements of the Company to finance growth, financial conditions of the Company andother factors which they may consider appropriate in the circumstances. The Company anticipates that futureearnings will be retained for the development of its business and does not anticipate the payment of dividendsto Shareholders for the foreseeable future.

10 Corporate Governance

The Directors intend to comply with the main provisions of the Combined Code in so far as they arepracticable for a company of its size and stage of development. The Company has appointed four non-executive Directors with relevant sector experience to complement the executive Directors.

The Board has established an audit committee, a remuneration committee and a nomination committee withformally delegated duties and responsibilities.

The audit committee consists of Mr Jon Pither, Mr Martin Groák and Mr Tom Elder and meets at least twicea year at appropriate times in the reporting and audit cycle. It is responsible for ensuring that the financialperformance of the Enlarged Group is properly monitored and reported on and for meeting with the auditorsand reviewing reports from the auditors relating to accounts and internal control systems. It meets with theauditors once a year without the Finance Director being present.

The remuneration committee consists of Mr Jon Pither and Mr Tom Elder and meets at least twice a year. Itreviews the performance of executive directors, sets the scale and structure of their remuneration and reviewsthe basis of their service agreements with due regard to the interests of the Shareholders. The remunerationcommittee also makes recommendations to the Directors concerning the allocation of share options toDirectors and employees. No Director is permitted to participate in discussions or decisions concerning hisown remuneration. The remuneration and terms of appointment of non-executive Directors is set by theBoard.

The nomination committee consists of Mr John Morris and Jon Pither and meets at least once a year. It isresponsible for reviewing the size, structure and composition of the Board, succession planning andidentifying and monitoring candidates to all vacancies. Appointments to the Board are made by the Board.

The Company has adopted and will operate a share dealing code for Directors and applicable employees andwill take all reasonable steps to ensure their compliance with the AIM Rules on share dealing.

11 Chaco Share Option Scheme

As at the date of this document, there are 9,240,000 unissued Ordinary Shares under option. Further detailsof the option scheme are set out in paragraph 3 of Part X of this document.

12 CREST

CREST is a paperless settlement procedure which enables securities to be evidenced other than by certificateand transferred other than by written instrument. The Articles permit the holding and transfer of OrdinaryShares under CREST. It is expected that the Placing Shares will be admitted to CREST on 17 November2004. CREST is a voluntary system and Shareholders who wish to receive and retain share certificates willbe able to do so.

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PART III

RISK FACTORS

Before deciding whether to invest in the Company’s Ordinary Shares, prospective investors shouldcarefully consider the risks described below together with all other information contained in thisdocument. If any of the following risks actually occur, the Company’s business, financial condition,results of operations and/or the scope of its operations and anticipated expansion could be materiallyand adversely affected. In such case, an investor may lose all or part of his or her investment.Additional risks and uncertainties not currently known to the Directors may also have an adverseeffect on the Enlarged Group’s business and the information set out below does not purport to be anexhaustive summary of the risks affecting the Enlarged Group.

1 Exploration Risk

The Enlarged Group has no established oil and gas production, and its future value is largely dependent onthe success or otherwise of the Enlarged Group’s activities, which are directed towards the search, evaluationand development of oil and gas reserves. Exploration for, and development of, resources is speculative andinvolves a significant degree of risk. Amerisur holds hydrocarbon prospecting Permits over approximately2.4 million hectares in the north and south-east of Paraguay and applications for exploration and exploitationConcession Contracts over the same areas. Bohemia holds applications for a hydrocarbon prospecting Permitover an area of approximately 2.4 million hectares in the south-east of Paraguay and for an exploration andexploitation Concession Contract over the same area. There is no guarantee that the grant of a Permit willlead to the execution of a Concession Contract with the Government of Paraguay or the ratification of theConcession Contract by the National Congress of Paraguay. In addition, whilst the rewards can besubstantial, there is no guarantee that exploration on the Enlarged Group’s permits will lead to commercialdiscovery or, if there is such discovery, that the Enlarged Group will be able to realise such reserves asintended. If at any stage the Enlarged Group is precluded from pursuing its exploration or productionprogrammes or decides not to continue with any of these, this is likely to have an affect on the value ofinvestors’ holdings.

Moreover, if the Enlarged Group does not meet its work and/or expenditure obligations under its Permits thismay lead to the loss of such Permits.

2 Drilling and Operating Risks

Exploration and development activities may be delayed or adversely affected by factors outside the controlof the Enlarged Group. These include the performance of joint venture or farm – in partners on whom theEnlarged Group may become reliant, compliance with governmental requirements, shortage or delays ininstalling and commissioning plant and equipment or import or customs delays. In addition, there is thetechnical risk associated with drilling and successfully completing wells, along with the likelihood orpotential for cost overruns associated with unforeseen down hole events. Problems may also arise due to thequality or failure of locally obtained equipment or interruptions to services (such as power, water, fuel,transport or processing capacity) or technical support which result in failure to achieve expected target datesfor exploration or production and/or result in a requirement for greater expenditure. Drilling may involveunprofitable efforts, not only with respect to dry wells, but also with respect to wells which, though yieldingsome oil or gas, are not sufficiently productive to justify commercial development or cover operating andother costs. Completion of a well does not ensure a profit on the investment or recovery of drilling,completion and operating costs, and there is no guarantee that drilling will discover any, or any economicallyviable, reserves of oil or gas.

3 Economic and Political Risk in Paraguay

Despite having had fully democratic elections since 1993, Paraguay suffers from periods of politicalinstability. The late 1990’s saw major political upheaval culminating in the assassination of the president, anattempted military coup and the attempted impeachment of the sitting president in 2002 for corruption and

16

mismanagement. In April 2003 Paraguay elected a new President on the back of a campaign that focussedon eliminating corruption and reinvigorating the stagnant economy. However, despite ambitious reformprograms, Paraguay continues to suffer from high unemployment, an economy in recession and endemiccorruption. In response to the insufficiencies of the reforms there have been violent demonstrations in thestreets by workers and roadblocks have been used to disrupt commercial activity. Along with workers strikesthese actions were sufficient to cause the administration to abandon a series of planned privatisations. Thearmy continues to be an influential force in the political arena. Another threat to the economic stability comesfrom Paraguay’s trading relationship with its neighbouring countries. The economy depends to a large extenton re-exporting goods to Brazil and Argentina and therefore is vulnerable to downturns in those economies.The government encourages foreign investment but widespread corruption is a major deterrant. The north-western Tri-Border region of Paraguay is known to be a centre for money-laundering, smuggling andorganised crime, although the risk of terrorism is thought to be low.

The Enlarged Group’s operations in Paraguay may therefore be subject to a number of associated risks overwhich it will have no, or limited, control. These may include economic, social, or political instability orchange, hyperinflation, currency non-convertibility or instability and changes of laws affecting foreignownership, government participation, taxation, working conditions, rates of exchange, exchange control,exploration licensing and petroleum export licensing and export duties as well as government control overdomestic oil and gas pricing.

A significant proportion of the Enlarged Group’s financial obligations are denominated in US Dollarsalthough it will report its financial results in Pounds Sterling. As a result, a number of foreign currencyeffects may arise from exchange rate movements.

There is no guarantee that the agreement between Paraguay and the United Kingdom specifically for thepromotion and protection of investments by nationals and companies of one state in the territory of the otherwill not be revised or cancelled to the detriment of the Enlarged Group.

4 Legal System in Paraguay

Paraguay, in which the Enlarged Group operates, may have less developed legal systems than moreestablished economies, which may result in risks such as: (i) potential difficulties in obtaining effective legalredress in its courts, whether in respect of a breach of law or regulation, or in an ownership dispute; (ii) ahigher degree of discretion on the part of governmental authorities; (iii) the lack of judicial or administrativeguidance on interpreting applicable rules and regulations; (iv) inconsistencies or conflicts between andwithin various laws, regulations, decrees, orders and resolutions; or (v) relative inexperience of the judiciaryand courts in such matters. In addition the commitment of local business people, government officials andagencies and the judicial system to abide by legal requirements and negotiated agreements may be moreuncertain, creating particular concerns with respect to licences and agreements for business. These may besusceptible to revision or cancellation and legal redress may be uncertain or delayed. There can be noassurance that joint ventures, licences, licence applications or other legal arrangements will not be adverselyaffected by the actions of government authorities or others and the effectiveness of and enforcement of sucharrangements in these jurisdictions cannot be assured.

5 Ability to exploit successful discoveries

It may not always be possible for the Enlarged Group to participate in the exploitation of successfuldiscoveries made in areas in which the Enlarged Group has an interest. Such exploitation may involve theneed to obtain licences or clearances from the relevant authorities, which may require conditions to besatisfied and/or the exercise of discretion by such authorities. It may or may not be possible for suchconditions to be satisfied. Furthermore, the decision to proceed to further exploitation may require theparticipation of other companies whose interests and objectives may not be the same as those of the EnlargedGroup. Such further work may also require the Enlarged Group to meet or commit to financing obligations,which it may not have anticipated or may not be able to commit to due to lack of funds or inability to raisefunds.

17

6 Environmental Regulation

Environmental and safety legislation in Paraguay and in any other jurisdictions in which the Enlarged Groupoperates, may change in a manner that may require stricter or additional standards than those now in effect,a heightened degree of responsibility for companies and their directors and employees and more stringentenforcement of existing laws and regulations. There may also be unforeseen environmental liabilitiesresulting from oil and gas activities, which may be costly to remedy. In particular, the acceptable level ofpollution and the potential clean up costs and obligations and liability for toxic or hazardous substances forwhich the Enlarged Group may become liable as a result of its activities may be impossible to assess againstthe current legal framework and current enforcement practices of the various jurisdictions.

7 Market Risk

In the event of successful exploration and development of oil and gas reserves, the marketing of the EnlargedGroup’s prospective production of oil and gas from such reserves will be dependent on market fluctuationsand the availability of processing and refining facilities and transportation infrastructure, including access toports, shipping facilities, pipelines and pipeline capacity at economic tariff rates over which the EnlargedGroup may have limited or no control. Pipelines may be inadequately maintained and subject to capacityconstraints and economic tariff rates may be increased with little or no notice and without taking into accountproducer concerns. The right to export oil and gas may depend on obtaining licences and quotas, the grantingof which may be at the discretion of the relevant regulatory authorities. There may be delays in obtainingsuch licences and quotas leading to the income receivable by the Enlarged Group being adversely affected,and it is possible that from time to time export licences may be refused.

8 Reliance on strategic relationships

In conducting its business, the Enlarged Group will rely on forming new strategic relationships with otherentities in the oil and gas industry, such as joint venture parties and farm – in partners, and also certainregulatory and governmental departments. Even if strategic partners can be found, the level of residualinterest retained by the Company will be negotiated between/among parties of unequal financial capabilitiesand to the extent that the Company is required to participate in programs and budgets, it may not have thefinancial resources to do so and therefore may be subject to dilution at penalty rates. There can be noassurance that new relationships will be successfully formed.

9 Competition

A number of other oil and gas companies may seek to establish themselves in Paraguay, and may be allowedto bid for exploration and production licences and other services, thereby providing competition to theEnlarged Group. Larger companies, in particular, may have access to greater resources than the EnlargedGroup, which may give them a competitive advantage. In addition, actual or potential competitors may bestrengthened through the acquisition of additional assets and interests.

10 Volatility of Prices for Oil and Gas

The demand for, and price of, oil and gas is highly dependent on a variety of factors, including internationalsupply and demand, weather conditions, the price and availability of alternative fuels, actions taken bygovernments and international cartels, and global economic and political developments. Geographic locationand a lack of adequate infrastructure may also result in any oil or gas produced being sold at a discount toworld market prices for oil and gas. International oil and gas prices have fluctuated widely in recent yearsand may continue to fluctuate significantly in the future. Finally, the inter-related power and gas shortagesin neighbouring countries may be resolved, which, in the opinion of the Directors, may undermine anycommercial advantage from Paraguay being the central point from which to supply oil and gas to any ofBrazil, Argentina and Chile.

11 Taxation Framework

This Document has been prepared in accordance with current UK tax legislation, practice and concessionand interpretation thereof. Such legislation and practice may change and the current interpretation may

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therefore no longer apply. The Enlarged Group will be operating in foreign jurisdictions and as such will besubject to the various taxation and foreign currency laws, as they apply from time to time, and non-compliance with any such laws or regulations which may have an adverse effect on the Enlarged Group andmay result in additional tax liabilities.

12 Dependence on key personnel

The Enlarged Group has a small management team and the loss of a key individual or the Enlarged Group’sinability to attract suitably qualified personnel in the future could affect the Enlarged Group’s business.Difficulties may also be experienced in certain jurisdictions in employing and retaining qualified personnelwho are willing to work in such jurisdictions.

13 Results to date and additional requirement for capital

Chaco Resources is likely to remain cash flow negative for some time and, although the Directors haveconfidence in the future revenue earning potential of the Enlarged Group, there can be no certainty thatChaco Resources will achieve or sustain profitability or positive cash flow from its activities. The EnlargedGroup is not expected to make a profit until such time as the properties in which it retains an interest generateincome. Book profits are likely to be negative for the foreseeable future and cash flow as well. The Directorsare satisfied that the working capital available to the Enlarged Group will be sufficient for its presentrequirements. However, the Company will need to raise substantial additional capital in the future if itchooses to fund deep drilling exploration and commercial exploitation and actual future production, oil andgas prices, revenues, taxes, transportation costs, capital expenditures and operating expenses and geologicalsuccess will all be factors which have an impact on the amount of additional capital required. No assurancescan be given that the Company will be able to raise the additional finance that may be required forsuch future activities. Any farm-in arrangement with third parties or additional equity financing may bedilutive to Shareholders and debt financing, if available, may involve restrictions on financing and operatingactivities. Any additional equity financing may be dilutive to Shareholders and debt financing, if available,may involve restrictions on financing and operating activities. If Chaco Resources is unable to obtainadditional financing as and when needed, it may be required to reduce the scope of its operations oranticipated expansion. In addition, some of the data acquired is relatively old and despite modern methodsof re-interpretation may not provide sufficiently definitive data to prove attractive to farm-in partners.

14 Liquidity of the Ordinary Shares

Admission to AIM should not be taken as implying that there will be a liquid market for the Ordinary Shares.It may be more difficult for an investor to realise his or her investment on AIM than to realise an investmentin a company whose shares are quoted on the Official List. The share price of publicly traded emergingcompanies can be highly volatile. The price at which the Ordinary Shares will be traded and the price atwhich investors may realise their investments will be influenced by a large number of factors, some specificto the Enlarged Group and its operations and some which may affect small oil and gas exploration companiesor quoted companies generally. The market perception of small oil and gas exploration companies maychange which could impact on the value of investors’ holdings and impact on the ability of the Company toraise funds by the issue of further Ordinary Shares.

The risks above do not necessarily comprise all those faced by the Enlarged Group and are notintended to be presented in any assumed order of priority. An investment in the Ordinary Sharesdescribed in this document is speculative. Potential investors are accordingly advised to consult aperson authorised under the Financial Services and Markets Act 2000 who specialises in advising oninvestments of this kind before making any investment decisions. A prospective investor shouldconsider carefully whether an investment in the Company is suitable in the light of his or her personalcircumstances and the financial resources available.

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PART IV

THE PXP REPORT

PXP MANAGEMENT

An Evaluation of thePetroleum Exploration Permits

held byAmerisur S.A. and Bohemia S.A.

in Paraguay

forChaco Resources Plc

20 October 2004

4 Birds Hill Road, Oxshott, England KT22 0NJ – Tel 01372-844094 – Fax 01372-844094Email pnl.pxp@btinternet.com

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CONTENTS

1. Introduction

2 Tectonic History

3. The Paraná Basin Permits (San Pedro & Canindeyu Permits)3.1 Sedimentary Sequence3.2 History of Exploration in the Paraná

4. San Pedro Permit (Amerisur S.A.)4.1 Exploration Potential4.2 Conclusions

5. Canindeyu Permit (Bohemia S.A)5.1 Exploration Potential5.2 Conclusions

6 The Curupayty Permit (Amerisur S.A)6.1 Geological Setting6.2 The Sedimentary Sequence (Attachment 6)6.3 History of Exploration6.4 Exploration Potential6.5 conclusions

Attachment 1 Hydrocarbon Permits Fields & Basins

Attachment 2 Location of wells in Paraguay and Structural Elements

Attachment 3 Eastern Paraguay Paraná Basin Generalised Stratigraphic Column

Attachment 4 Paraguay - Paraná Basin Seismic coverage

Attachment 5 Structural Cross-section Asuncion 2 to AN-1-PR

Attachment 6 Structural cross-section through Mallorquin -1

Attachment 7 Curupayty Permit Base Map

Attachment 8 Paraguay-Curupayty Basin Schematic Stratigraphic Column

Attachment 9 Curupayty Permit Tarija – Top Devonian Isochron

Attachment 10 Phillips Paraguay Curupayty Block Prospect Inventory

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1.0 Introduction

This report is an independent evaluation of three petroleum exploration permits in Paraguay held byAmerisur S.A. and Bohemia S.A. The report was commissioned by John Morris of Chaco Resources Plc,and may not be reproduced without the author’s permission

The author, Dr Philip Linsley has a BSc and a Ph.D. in geology awarded by the University of London, anMBA by the University of Kingston, is a Fellow of the Geological Society, a Member of the Energy Institute,the Petroleum Exploration Society of Great Britain and the European Petroleum Negotiators Group. DrLinsley has thirty plus years of experience as geologist and manager in the petroleum exploration andproduction industry, including managing interests in major field developments in the UK and Africa.Following a career with Texaco, Mesa Petroleum and Western Mining Corporation, Dr Linsley has run asuccessful consultancy for 15 years. Projects include the technical and commercial evaluation of explorationand production projects, business development and contract negotiations in many parts of the world,including Australasia, America Africa, the U.K, Europe and the Middle East. In addition to many smallcompanies the client list includes Occidental, Lasmo, Monument, Ranger (CNR), Chase Manhattan Bank,Svenska Petroleum and Kerr McGee.

The report is based on information supplied by Amerisur S.A., Bohemia S.A. and Chaco Resources Plc,discussions with persons associated with those companies in Paraguay and information in the public domain.The conclusions reached are those of the author but no guarantee is offered in respect of them.

The permits are located in northern and eastern Paraguay (Attachment 1) and are large and only lightlyexplored. The northern permit covers 1 million hectares of the Curupayty Basin and the southern permits 3.8million hectares on the western flank of the Paraná Basin. Hydrocarbons in commercial quantities have beenfound in extensions of these basins. The Curupayty permit lies east of the Sub Andean basin, with which itshares much of the prospective section, while the southern permits lie to the west of discoveries andproducing fields in the Brazilian part of the Paraná Basin.

The 8 wells drilled in the permits (Attachment 2) have all encountered shows, yet previous explorationprogrammes were curtailed, most recently in the early 1990s when oil prices averaged less than $18 andexploration programmes around the world were cut back. At that time another factor may have been the lackof a gas strategy, the development of gas for power generation which is widely understood today.

Although no economic modelling has been carried out, it seems likely based on background data that evena relatively modest sized gas discovery in the tens of Bcf range could be the foundation of a power generationscheme in the southern permits. These permits are accessible to the markets, which is not the case for thenorthern Curupayty Permit where a gas field an order of magnitude higher would probably be required.However, this is not to suggest that the targets in any permit are necessarily small or gas prone.

Value

Exploration in these three permits is still at an early stage. Work to date has refined the focus notextinguished the notable exploration potential. Given the size of the permits it is concluded that there issignificant exploration potential remaining in all three permits and all could contain significant reserves.

Based on the exploration potential, the stage of the exploration and all other factors outlined briefly abovethe following values for the permits are proposed.

Curupayty USD 250,000San Pedro USD 300,000Canindeyu USD 350,000

——————USD 900,000——————

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2.0 Tectonic History

The tectonic history of both the Curupayty Basin and the Paraná Basin is broadly similar. The basins lie tothe west and south of stable Brazilian (Attachment 2) craton that was at the core of the Gondwanalandsupercontinent in the Palaeozoic.

The development of the Curupayty commenced in the Late Precambrian but, as in the Paraná Basin, the mainphase of development started in the Early Palaeozoic. Up to 10,000 metres of continental to marinesediments accumulated in the basins, including important Devonian source rocks and Carboniferousreservoirs, the key components in the fields in the sub-Andean basin to the west. Initial subsidence wasprobably the result of thermally induced crustal sag, perhaps controlled by deep-seated Precambrian faultzones.

Structuring was generally mild and was due either to the reactivation of the deep-seated faults, affecting theregional highs that separate the basins today (Alto Cerro Leon, Alto del Chaco Central, Asuncion Arch –Attachment 2) or was a response to eustatic adjustments. A combination of both probably controlled marineincursions into the basins from the proto-Pacific that lay to the present day westerly direction.

3.0 The Paraná Basin Permits (San Pedro & Canindeyu Permits)

The permits are located in south-eastern Paraguay (Attachment 2) and cover part of the western flank of theParaná Basin. The western limit is defined as the Asuncion Arch that is believed to have been a positivefeature in the Lower Palaeozoic. The arch separates the Paraná from similar basins to the west to which itwas connected from time to time (Attachment 2).

3.1 Sedimentary Sequence (Attachment 3)

Most sequence names are litho-stratigraphic as the biostratigraphy is poorly developed. The group andformation names are a mixture of Brazilian names, local Paraguayan names and names imported from somedistance. At least three stratigraphic columns have been published for the Brazilian Paraná and someformations are almost certainly the lateral equivalents of others. Nevertheless the general sequence can bediscerned as follows in eastern Paraguay.

Proterozoic-Cambrian

Arenaceous sediments deposited in a series of NE-SW trending grabens have been encountered in severalwells in the Brazilian part of the Paraná Basin to the east. Sediments of an equivalent age, the Maricá Groupin southern Paraguay, the Itapucumí Group and the Corumbá Limestones in which there are oil and gasseeps, outcrop to the north and west of the basin on the Bolivian-Brazilian border. Thus even though noequivalents are known in the subsurface the presence of Proterozoic-Cambrian sediments cannot bediscounted.

Ordovician-Silurian

The sequence is the start of a Palaeozoic sedimentary sequence of prospective marine, fluvio-lacustrine andglacial deposits capped by the Mesozoic. Major units are separated by gentle regional unconformities relatedto sea-level changes or broad regional uplifts.

The Caacupé of eastern Paraguay, the equivalent the Rio Ivaí Group in Brazil, is at the base of the sequenceand consists predominantly of continental sandstone with subordinate conglomerates. It is overlain by thefine-grained sands and silts of the Ayala Formation that in Asuncion-1 (see below) were porous (8-10%).

Regional subsidence or sea-level rise established a connection to the open sea in the early Silurian and theshallow marine shales of Vargas Peña Formation were deposited. The Vargas Peña, like the Vila Maria, itsequivalent in the northern part of the Brazilian Paraná, is a potential source rock. In Asuncion 1 & 2 theVargas Peña shales contained up to 2% TOC and were associated with gas shows and are in the oil to wet-gas window.

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At the end of the Silurian the marine sea withdrew from the Paraná and the fine to medium-gained deltaicsandstones of the Carly Formation were deposited. While this may have reservoir potential, it is unlikely tobe sealed.

Devonian

A regional unconformity separates the Ordovician-Silurian from the Devonian, which was a period of majorflooding of the cratonic area. The Devonian is represented by the sandy, shallow-marine, Furnas Formationand the overlying shales of the Ponta Grossa Formation. The Ponta Grossa is a good source rock, is believedto have sourced fields in the Brazilian Paraná and in Asuncion 1 & 2 is in the oil window.

Carboniferous – Permian

The early Carboniferous was marked by regional uplift followed by the glaciation of Gondwanaland, bothof which contributed to the erosion of the underlying Devonian.

The eroded surface is covered by Late Carboniferous diamictites (mixed glacial deposits) sandstones, tillites,breccias and lacustrine shales of the Coronel Orviedo Formation or Tubarão Formation. The facies changesreflect epeirogenic movements and the waxing and waning of the ice sheets to the south.

Fluvial sandstones in this sequence capped by intraformational shales are a potential reservoir forhydrocarbons generated from the Devonian Ponta Grossa and the deeper Vargas Peña shales.

The Carboniferous is overlain without unconformity by fluvial sands Permian San Miguel/Tacuary, theformer a cleaner barrier-bar sequence, the latter more lacustrine and shaly. The offshore equivalent of boththese formations is the marine Iratí Formation, a thick sequence of organic-rich shales that were depositedin a shallow restricted sea. The Iratí is described as the best source rock in the basin.

Following the deposition of the Iratí Formation there was a slow withdrawal of the sea from the basin andthe overlying sediments (Tacuary, Tappyta and Cabacua Formations) consist of lacustrine sandstones andsilts with occasional limestones.

Mesozoic

The Missiones Formation Paraguay is a red-bed sequence of uncertain age. It is described as late Triassicand also Jurassic. It is an extensive desert sequence that developed after a second major break insedimentation. The dune sands are covered by a very a thick sequence of lower Cretaceous lavas, amanifestation of the early stages of the opening of the South Atlantic. In turn these lavas are capped by thethick fluvio-aeolian sands of the Acaray Formation of Late Cretaceous-Tertiary age, that mark the end ofsedimentation in the Paraná Basin.

3.2 History of Exploration in the Paraná

Exploration in the Brazilian Paraná exploration began in the 19th century and more than 100 wells weredrilled before the 1990s of which 60 were drilled between 1955-1972 entirely by Brazilian companies. Manyof the early wells were drilled on surface shows, surface features and drainage pattern anomalies and therewere a number of sub-commercial discoveries of both gas and oil in the south-east of the basin. Seismic wasused but without much success, although the Paulipetro company did make a sub-commercial discoverybeneath the basalts in the early 1980s. However, as technology and seismic imaging improved in the 1990sso did the success rate and several commercial discoveries have been made. The best known fields are theMato Rico Field and the Barra Bonita (176 Bcf) fields that produce from Permo-Carboniferous sand sourcedand sourced by the Devonian shales. In the case of Barra Bonita not only does the trap result fromdeformation caused by a Cretaceous intrusion but the intrusion is also the seal.

Exploration of the Paraguayan Paraná started much later. The first geological map was produced in the early1950s and oil exploration started some 20 years later in the late 1970s when Anschutz flew an aeromagneticsurvey and drilled a number of shallow core holes in the Paraguayan Paraná. Concurrently, Shell (Pecten)acquired seismic, gravity and magneto-telluric data in two permits covering a large part of the area.

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4.0 San Pedro Permit (Amerisur S.A.)

Shell’s Lima and Vilarrica Permits covered a large part of the area between 23-27° South and 55° 40' – 57°West that includes the area of the Amerisur’s San Pedro permit and part of the western quarter of Bohemia’sCanindeyu Permit. (Attachment 1)

Shell acquired 2046 km of seismic data between 1979 and 1981 including a small area of detailedprogramme close to the town of Lima. In 1981 Shell spudded the Asuncion -1 not far to the south of the townand about 110 miles northeast of Asuncion (Attachment 2, well 38). The well was programmed to test abroad south-east trending arch in the Carboniferous at outcrop and one of a number of large, seismicallydefined closures that had been mapped within the presumed Palaeozoic. Closure was from 1500m down3300 metres. The reservoir objectives were Carboniferous, Devonian and Silurian sandstones and possibleshelf carbonates in the Ordovician. The identified source, by analogy with the Brazilian part of the basinwere the Permian Iratí shale, the Devonian Ponta Grossa shales and possibly Siluro-Ordovician Vargas Peñashales.

The Permian in Asuncion -1 was shallow and immature. However, shows were encountered in Carboniferoussands (15%), and shows with cut in porous (18%) oil-stained sands in the Middle Devonian below 2000 m.The well then passed through a number of thin, Cretaceous sills before hitting the top of the Silurian at2800m. At TD (3233m) the well was in the Ordovician.

Asuncion -2 (Attachment 2, well 39) was drilled soon after some 60 km to the north of the first well. It testeda seismic anomaly interpreted to be a Siluro-Ordovician carbonate build-up. Again, the well cut the PermianIratí at a shallow depth and the section was immature; porous sands were found in the Carboniferous andDevonian, in which there were oil shows, but the carbonate build-up proved to be a thick, diorite intrusionfrom 2840-2865 meters (TD).

4.1 Exploration Potential in the San Pedro Permit

Drilling in a small area of the Pedro permit area has demonstrated the following

(a) Source The Devonian Ponta Grossa shales are in the oil window. The Silurian Vargas Peña sourcesection is in the wet-gas window. The Permian Iratí is a potential source but immature in the area ofthe Asuncion wells but geochemical modelling indicates it should enter the oil window at depthsbelow 1500m (Attachment 4)

(b) Reservoirs There were porous sands (15% +) in several levels in the Carboniferous and Devonian.The presence of Cretaceous intrusives in the sequence has not destroyed the potential.

(c) Seals Potential intraformational seals are present in the Palaeozoic.

(d) Structure A brief review of Shell’s mapping shows that in addition to the two features that have beendrilled there are others that deserve further investigation.

The basin had a relatively quiet tectonic history but on the information available there is likely to be anunderlying, old, northwesterly grain. Any structuring is expected to be subtle but early drape over basementfeatures could be very prospective (Attachment 5) as it is quite possible that traps would have beenpreserved. While the focus in recent years has been on exploration in more tectonically active areas it shouldnot be forgotten that large amounts of oil and gas have been found in comparatively stable basins in onshoreUSA and the Cooper Basin of Australia.

Similarly, although there is little seismic eastwards from the Asuncion wells, in that direction the PermianIratí shales will be at a greater depth. Geochemical modelling by Union Pacific based on the Asuncion wellsand the 2-AN-1-PR of Petrobras (Attachment 5) indicates that at depths below 1500m (5000ft) it will be inthe oil window.

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Conclusions

The minor amount of drilling and exploration in this large permit has confirmed the presence of viablehydrocarbon exploration plays. Based on the exploration history of the Brazilian part of the basin, modernmethods in Eastern Paraguay could unlock significant potential.

5.0 Canindeyu Permit (Bohemia S.A)

In the late 1980s Texaco was awarded a concession that included the current permit. (Attachment 2) Texaco’sfirst step was to extend Shell’s seismic grid eastwards and southwards into the southeast corner of Paraguay.Having acquired 980 km of 60 fold 2D seismic plus gravity stations and aeromagnetic data Texaco drilledthe Mallorquin #1 well in 1990(Attachment 2, well 43), just west of the town of Juan Leon Mallorquin on asurface feature.

The target depth was 3270m (10,726 ft) in basement, the objectives as follows,

(a) U Permian sands sourced by the Iratí shales and sealed by the Iratí or by intraformational shales,

(b) Carboniferous fluvio-glacial sands which had been encountered in several wells in the Paraná sandssourced by the underlying marine Ponta Grossa and sealed by postulated intraformational lacustrineshales,

(c) Devonian Furnas sandstones source and sealed by the marine Ponta Grossa shales, and

(d) Vargas Peña shales sourcing and sealing the underlying Ayala sands and/or sands in the Ordovician-Silurian Caacupé at 3000m.

A secondary objective was to acquire detailed lithological data and to that end the well was drilled with aslim-hole rig and cored from 370-2990 metres (1210ft to 9811.2ft) at which point slow progress, mechanicaldifficulties or lack of the capacity of the rig caused the drilling to be curtailed.

Beneath a cover of Triassic Missiones sandstones (Attachment 3) the well entered the Upper PermianTacuary Formation at 245m (830 ft) in a deltaic facies overlying shallow marine limestones and shales of theIratí lying on the Lower Permian San Miguel Formation in which good quality reservoir rocks were found.In the fairly massive estuarine or lagoonal “C” sand at 708m (2325ft), near the top of San Miguel, porositiesof up to 25% and permeabilities of 700+md were measured. Below 718m (2345ft) in a tighter section withshales and silts, the core exhibited light oil staining and bubbling gas with and good florescence. Oil bleedingfrom fractures at 800m (2628ft) was interpreted by Texaco to be marginally mature and probably from aPermian source.

The top of the Carboniferous Coronel Oviedo Formation was encountered at 1253M (4112 ft.) in a typicalfluvio-glacial facies, although rather silty at the top. In a sand at 1324-1330m (4347-4367fr) there was a lightshow of gas on the mud log and a small cross over on the neutron density log. In fact there was reservoirpotential in many of the sands in the top 120m of the Carboniferous section and measured porosities of 17%and a permeability of 600md were recorded. Below 1520m (5000ft) the well cut three major Cretaceousintrusions before reaching TD (2990m, 9811ft) in tight, hard conglomerates attributed to the UpperCarboniferous Coronel Oviedo Formation. In total some 25% of the section below 1520m consisted ofintrusives.

Geochemical analysis established that in the Carboniferous, in the immediate vicinity of the intrusions thesection was overmature but deeper down the section appeared to be at lower levels of maturity.

These indications were sufficiently encouraging for Guarani Exploration and Development Corporation, acompany with strong local connections, to farmin to the permit in 1993 and drill 2 wells to test the Permianplay.

Ines G-1 was spudded 4.75 kilometres north of Mallorquin-1 in May 1994 and drilled to a depth of 774.5m(2541 ft) before being plugged and abandoned. The objective was the Permian sandstones in a fault trapmapped some 20m high to the Mallorquin well. In the event the well encountered the objective only 3.5mhigh before entering massive basalt at 740.m. Although the wireline logs indicated the presence of moveable

26

oil in the objective (18% porosity, Sw=53%) and specks of oil were noted in the mud pit, drill stem testingshowed that only residual oil was present and that the sand, though clean, was tight.

Ines G-2 was spudded in June 1994 just 733 metres east of Ines-G1 and drilled to a depth of 927m (3041 ft)without encountering the basalt seen in Ines G-1. The objective sand was encountered at 2342ft (714m) andas Ines G-1 florescence and cut were observed in the samples, but the sand was 18m low to Mallorquin. Loganalysis showed the sand was wet and the well was plugged and abandoned without testing.

Analysis of sidewall cores showed that the Permian Iratí contained 1.5% TOC of Type II to Type I oil-pronekerogen and was in the top of the main phase of oil and gas generation.

Texaco’s post drill interpretation was that the thin Permian section indicates that the Mallorquin feature is amajor uplift and that the fracturing seen in the core lends credence to the existence of a major fault on thewestern side of the closure. Gustavson & Associates in a report on the prospectivity of the Brazilian Paranásuggest that the most traps are either due to deformation associated with intrusions (a sill also acts as a sealin the Barra Bonita Field) or faulting, both normal and reverse. Reverse faults and associated warping theysuggested would be associated with the final compressional phases of the Andean orogeny, and thereforemore likely to be found on the western side of the basin. A brief review of the seismic lines across theMallorquin uplift suggest it might well be the sort of compressional feature identified by Gustavson &Associates. In fact on the pre-drill cross-section (Attachment 5) the structuring looks very much like a flowerstructure.

Union Pacific Petroleum carried out the only other recent exploration program in the area of the San PedroBlock. In 1992 Union acquired 250km of regional seismic on the northern edge of the block and identifiedstructural trends and potential intrusions using innovative methods but relinquished their permit withoutfurther work during a time when the average oil price was below $16.

5.1 Exploration Potential in the Canindeyu Permit

Exploration concentrated in a very small area of the permit has demonstrated the following

(a) Source Rocks There are potential source rocks in the Permian Iratí Formation, but these wereimmature on the complex Mallorquin Uplift. Below 5000 feet source rocks of this age should enterthe oil-window. The presence of older source rocks of Devonian and Silurian age has not beendemonstrated by the drilling but are known to exist in the basin. The presence of Cretaceous intrusivesin the sequence has not destroyed potential beyond a very local scale. (In Brazil it is suggested thatthe Cretaceous intrusions have beneficially raised the level of maturity.)

(b) Reservoir Rocks Potential reservoirs were encountered in the Carboniferous in Mallorquin and in thePermian in Mallorquin and Ines 1 & 2

(c) Seals There are potential intraformational seals in the Permian and the Carboniferous.

(d) Structure Drilling to date has investigated a single complex feature.

5.2 Conclusions

All the elements for a successful oil and gas exploration appear to be present. The challenge will be to findtraps, structural or otherwise. Data collection may not be easy but as the line through Mallorquin illustrates,there are consistent, mapable reflectors and is it is possible to discern both sedimentary and intrusive events.

Given the size of the permit there is reason to believe that there remains significant untested potential,especially in the western half of the permit, to the west of the volcanics in outcrop.

6.0 The Curupayty Block (Amerisur S.A)

The block is located in northernmost Paraguay and covers the southern end of the Curupayty Basin(Attachments 1, 2, 7). The basin is Palaeozoic in age and lies between the Brazilian craton to the northeast,the central Chaco High to the south and the Izozog Arch (Alto Cerro Leon) to the southwest.

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The Curupayty Basin opens north-westwards towards Bolivia, in the direction of the open sea during thePalaeozoic and the Sub Andean foreland basin. The Curupayty contains sediments of Ordovician toQuaternary age and shares much of the prospective Palaeozoic stratigraphy present in the sub Andean basin,but in a more stable structural setting.

6.1 Geological Setting

During the Palaeozoic the Curupayty area lay along the eastern margin of a broad intracratonic rift basin thatstretched from Bolivia to Argentina and had first formed during the Late Precambrian. Over 10,000 metresof section were deposited in the axial portion of the basin during the Lower Palaeozoic before sedimentationwas interrupted in the late Devonian by the Lower Hercynian Orogeny. Gentle folding in the axial areas,uplift of the basinal areas to the south and a minor unconformity in central Bolivia record the disturbancebut in most of the Curupayty region the orogeny is not well marked.

Following the orogeny deposition resumed in the Lower Carboniferous and thick a sequence of marine,fluvio-glacial sediments and deltaic sediments were laid down.

During a period of regional uplift glacial melt waters from the south eroded valleys up to 20 kilometres widein the Carboniferous landscape, creating a series of linear highs, perhaps controlled by deep seated faulting.

As the basin subsided gently again the valleys were filled and deposition continued through the UpperCarboniferous and into the Permian, when subsidence apparently came to a halt as no Triassic or Jurassicdeposits are known in the Curupayty. Sedimentation resumed when the Cretaceous seas spread from the westbut much of it was later removed following the reactivation and uplift of the Izozog Arch to the west

Over 2000m meters of Quaternary sediments accumulated in the Sub Andean basin to the west, in theCurupayty only a hundred or so meters is present and there is little evidence of the movements that createdthe Andes.

6.2 The Sedimentary Sequence (Attachment 8)

Although the basin probably developed at the end of the Precambrian, the section is not exposed in northernParaguay nor is it known in the subsurface. However, regional studies and seismic indicate a thick fluvio-marine clastic sequence could be present.

According to published sources there are up to 2,500 metres of Cambrian clastics overlying the Precambrianin the Curupayty basin. The seismic sections indicate that there may be older sedimentary section but theoldest sediments penetrated to date is the Silurian El Carmen (Kirusillas) Formation at the southern limit ofthe basin in the Madrejon-1 well. (Attachment 2, well 6) Although the well cut only 287m of Siluriansediments up to 800 metres of shallow marine sandstones and shales are said to be present in the basin.

Shallow marine clastics of the Devonian Robore Formation and the Limoncito Group lie unconformably butwithout any great angularity on the Silurian. In the Curupayty permit the thickness exceeds 2,000 metres.The Robore at the base consists mostly of fine-grained sandstones and is overlain by the Limoncito Group,which is divided into the Icla, Huamampampa, Los Monos and Iquirí Formations (Bolivian formationnames). The Icla and Los Monos are mainly black shales and the source rocks in the fields in the Sub Andeantrend to the west. The shales are potential source rocks in the Curupayty basin and the interbedded Devonianreservoirs are potential targets in the Curupayty Block, the same combination as in the Bolivian oil and gasfields.

Following the Lower Hercynian orogeny sequence of marine and fluvio-glacial sediments were laid down inthe Late Carboniferous unconformably on the Devonian. The Saipuru Formation at the base, a sequence ofshales and interbedded sandstones, is followed conformably by the Tupambi Formation, a channel anddeltaic sequence of stacked sandstones, with minor conglomerates, siltstones and shales that prograded fromthe south. The Tupambi is one of the main reservoirs in the Sub Andean fields. Well data from Gato -1 well(Attachments 7 & 8) in conjunction with regional seismic, shows that the Tupambi is a massive fluvialchannel 200m thick that northwards, in a distal direction, is likely to be more areally extensive.

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Above the Tupambi is the Itacuamí Formation, also called the T-2 Shale and an important seal in the SubAndean Region. The Itacuami is about 100 metres thick and was deposited in a quiet marine environmentwith some glacial influence.

The overlying Tarija Formation is another channel and fan sequence with intercalations of dark greysiltstones and shales. Predominately fluvial, but with some glacial influence the formation reaches 300metres in thickness.

In Gato-1 but the upper portion of the Tarija has been removed by erosion but in Toro-1 the entire Tupambi-Tarija section plus some of the Devonian is missing because the well is located in one of the palaeo-valleyseroded by glacial melt-waters (Attachment 9).

The Chorro Formation that fills the valleys is a massive sandstone sequence with silt and shale intercalationsand conglomerates up to 400m thick. It does not appear to have covered the emergent linear highs betweenthe valleys suggesting that deep-seated faulting may have controlled the highs.

The Taiguati Formation (T-1 shales) overlying the Chorro/Tarija is composed of up to 200m of red and violetshales and laminated siltstones deposited in the in a mixed marine environment with glacial influences.

Massive medium to coarse sands with minor conglomerates and shales of the Escarpment Formation liediscordantly on the Taiguati Formation. The sands pass up in to interbedded diamictites, red to grey mediumsandstones and green shales of the Permian San Telmo/Toro Formation, the last of the glacial deposits.

As noted earlier, Triassic and Jurassic rocks are missing in the Curupayty either due to none deposition orregional uplift and erosion. With the uplift of the Izozog Arch and the development of the Andean foredeepup to 2,500 metres of Cretaceous and Tertiary accumulated in the Sub Andean basin. However, eastwards onto the cratonic block, the section thins rapidly and it is only 100-200 meters thick in the Curupayty Permit.

6.3 History of Exploration

An exploration programme was initiated by the Pure Oil Company in the late 1950s and led to the drillingof two wells. Madrejón-1, drilled in 1958 just to the south of the Curupayty Permit (Attachment 7) and closeto the basin edge, cut 1287m of Devonian beneath a thin Quaternary cover before entering 287m of tightSilurian quartzites above TD (1727m).

Pure Oil then drilled La Gerenza-1 (TD 2892m) in 1959 75 km the west of the permit. It too was pluggedand abandoned as a dry hole, although there were some minor gas shows in the Tertiary.

In the mid 1970s Texaco initiated the next phase of exploration and acquired over 1840 kilometres ofseismic, mostly in a regional 20 x 40 kilometre grid. After some infill of the grid Texaco drilled Cerro Léon-1 in 1977 about 50 km west of the permit (Attachment 7) to a total depth of 1970 metres. The well passedthrough a thin Quaternary cover into 1200m of Carboniferous mudstones, silts and minor sandstones andthen nearly 1900m of Devonian shales and mudstones before penetrating 150m of tight Silurian (?)quartzites. Fluorescence and cut were reported from several levels in Devonian and Silurian but the well wasplugged and abandoned as a dry hole.

In 1978 Texaco drilled 2 further wells in the southeast of the permit, Toro-1 and Gato-1 (Attachment 7).Toro-1, a test of a large seismically defined feature, was drilled to a total depth of 3417 metres in theDevonian. As noted earlier, the Carboniferous Tumpambi and Tarija objectives were absent and the wellfailed to encounter good reservoirs. However, several oil and gas shows (C5+) were recorded in the Devonianbelow 1500 metres, two cores were cut and 5 drillstem tests carried out, but all intervals were either dry ortight and the well was plugged and abandoned.

Gato-1 was then drilled 10km northeast of Toro-1 reached a total depth of 1646 meters in the CarboniferousTupambi Formation. There were scattered shows in the well but after testing it was plugged and abandoned.

Phillips acquired a concession in the area in 1992, reprocessed the old data and acquired 817 kilometres ofnew seismic. With the new data Phillips were able to map the palaeo-valleys and highs (Attachment 9).Pantera-1 (1995) was a drilled on seismically defined closure on a palaeo-high in the Tarija Formation, in a

29

structurally similar position to the Tita Field, on trend to the northwest in Bolivia. The secondary target wasan aggradational fan lobe within the Tupambi Formation (Prospect L, Attachment 10).

The well was drilled to a total depth of 2133m in Devonian clastics. The Tarija objective came in high andhad good sand development and although in closures, was devoid of shows. The deeper Tupambi was siltyand tight, it had did not have the sand development seen in Gato-1.

Although Phillips had mapped a number of other leads/prospects (Attachment 10, N & H) the permit wasrelinquished at a time of low oil prices and no other exploration has been carried out since.

6.4 Exploration Potential

Exploration to date has demonstrated the following in the Curupayty Basin in Paraguay

(a) Source Rocks Shows have been recorded in the Devonian in wells near and within the CurupaytyBlock and geochemical analysis has shown that the Devonian is potentially a rich, liquid prone algalsource rock. In Pantera-1 samples from the Devonian had Total Organic Carbon values in the range1.44 -1.86, Hydrogen Index values are also good and the section is mature for oil generation today.This is the same section that has sourced light oil, condensate and gas in commercial quantities fromfields in the Sub Andean foldbelt to the west.

(b) Reservoir Rocks The primary reservoirs are expected to be the porous sandstones of the TurijaFormation (100m net sand, 18% average porosity in Pantera-1). The Tupambi Formation is theprimary reservoir in the Sub Andean trends and at Gato it had the characteristics of a blocky channelsand, but in Pantera -1 it was silty and shaly, perhaps in an overbank facies.

(c) Towards the north the feeder channels are likely to be more extensive and the internal morphology offan lobes can enhance the vertical closure. Using modern seismic methods it may be possible todistinguish channel sands and shales.

(d) Seals Most of the potential reservoirs are overlain by thick shales and there are intraformational shaleswithin the sequences.

(e) Structure Structuring is gentle and subtle. However, the fact that palaeo-valleys trend around highswould seem to indicate that there was relief on these structures during the development of the valleys.Phillips mapped two other leads just to the north of the Curupayty Permit Boundary.

6.5 Conclusion

It has been demonstrated that there is source and reservoir potential in the block, but traps are less easilydefined. Apart from two areas close to the wells, the seismic cover is sparse.

Phillips only detailed the Pantera structure, leaving the two others just to the north of the Curupayty Permitonly partially defined. With additional seismic it would seem likely that these or other large drillablelocations, prospective for oil will be identified on the permit. It follows that it must be a priority to acquirea permit over features N & H.

NB. The area although remote is an accessible part of the Chaco plain. Cattle ranching and arable farmingis carried out in the area and there is a military base to the east. The many small watercourses could makeoperations difficult, especially seismic, during the wet season.

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ATTACHMENT 1

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ATTACHMENT 2

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ATTACHMENT 3

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ATTACHMENT 4

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ATTACHMENT 5

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ATTACHMENT 6

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ATTACHMENT 7

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ATTACHMENT 8

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ATTACHMENT 9

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ATTACHMENT 10

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PART V

FINANCIAL INFORMATION ON CHACO RESOURCES

Grant Thornton UK LLP8 West WalkLeicester LE1 7NH

The DirectorsChaco Resources plcPrestige Travel SuiteBarclays Bank House81-83 Victoria RoadSurbitonSurrey KT6 4NS

and

The DirectorsDaniel Stewart & Company plc48 BishopsgateLondon EC2N 4AJ

20 October 2004

CHACO RESOURCES PLC (‘THE COMPANY’)

1 INTRODUCTION

1.1 We report on the financial information set out in paragraphs 2 to 7. This financial information has beenprepared for inclusion in the AIM Admission document issued by Chaco Resources plc, dated20 October 2004.

Basis of Preparation

1.2 The financial information set out in paragraphs 2 to 7 below is based on the audited company financialstatements of Chaco Resources plc (formerly Gold Mines of Sardinia plc), for the 15 months ended31 March 2004, for the year ended 31 December 2002, and for the period from incorporation to 31December 2001, and has been prepared on the basis set out in paragraph 3 after making suchadjustments as we considered necessary. Information in respect of the consolidated results of theCompany and its subsidiaries for the same periods has not been presented, as in the opinion of theDirectors and the Nominated Adviser, it is not relevant to shareholders’ understanding of the proposedtransaction.

Responsibility

1.3 The financial statements on which this financial information is based are the responsibility of theDirectors of the Company who approved their issue.

1.4 The Directors of Chaco Resources plc are responsible for the contents of the AIM Admissiondocument in which this report is included.

1.5 It is our responsibility to compile the financial information set out in our report from the financialstatements, to form an opinion on the financial information, and to report our opinion to you.

Grant Thornton

41

Basis of opinion

1.6 We conducted our work in accordance with the Statements of Investment Circular ReportingStandards issued by the Auditing Practices Board. Our work included an assessment of evidencerelevant to the amounts and disclosures in the financial information. It also included an assessment ofsignificant estimates and judgements made by those responsible for the preparation of the financialstatements underlying the financial information and whether the accounting policies are appropriateto the entity’s circumstances, consistently applied and adequately disclosed.

1.7 We planned and performed our work so as to obtain all the information and explanations which weconsidered necessary in order to provide us with sufficient evidence to give reasonable assurance thatthe financial information is free from material misstatement whether caused by fraud or otherirregularity or error.

Opinion

1.8 In our opinion the financial information gives, for the purposes of the AIM Admission document dated20 October 2004, a true and fair view of the results and cash flows of the Company for the fifteenmonths ended 31 March 2004, for the year ended 31 December 2002, and for the period fromincorporation to 31 December 2001, and the state of affairs of the Company at the end of each of thoseperiods.

Consent

1.9 We consent to the inclusion in the AIM Admission document dated 20 October 2004 of this report andaccept responsibility for this report for the purposes of paragraph 45(2)(b)(iii) of Schedule 1 to thePublic Offers of Securities Regulations 1995.

2 STATUTORY INFORMATION

2.1 The Company was incorporated in the United Kingdom on 5 July 2000.

2.2 At the date of this report the Company’s share capital comprised 353,350,555 ordinary shares, whichhave been issued and fully paid.

2.3 The Company’s current principal activity is investing in natural resource projects, in particularseeking opportunities in oil and gas exploration. Previously, until 24 March 2004, the Company’sprincipal investment was in gold exploration and extraction in Sardinia, Italy, on which date thisactivity was disposed of to Medoro Resources Ltd.

2.4 Following approval at the AGM in July 2004, the Company changed its name from Gold Mines ofSardinia plc to Chaco Resources plc with effect from 28 July 2004.

2.5 The Company has no subsidiary undertakings as of the date of this report.

3 ACCOUNTING POLICIES

The financial information has been prepared under the historical cost convention and in accordance withapplicable UK accounting standards, up to and including Financial Reporting Standard 19. The principalaccounting policies, which are set out below, represent the most appropriate in accordance with FinancialReporting Standard 18, and have remained unchanged throughout the periods.

3.1 Basis of preparation

The Company (formerly Gold Mines of Sardinia plc (“GMS plc”)) was incorporated on 5 July 2000.On 20 November 2002 the Company acquired 100 per cent. of the issued share capital of Gold Minesof Sardinia Pty Ltd (GMS Australia) following implementation of a Scheme of Arrangement (underAustralian law) and was admitted to AIM.

42

The financial statements for the period ended 31 March 2004, for the year ended 31 December 2002,and for the period from incorporation to 31 December 2001, represent the results and assets of theCompany and not the group. This is because, with effect from 24 February 2004, GMS plc disposedof all its interests in its subsidiaries to Medoro Resources Ltd. as a result of the Business Combinationtransaction entered into with Full Riches Investments Ltd. (see further under 7.7 below).

3.2 Deferred taxation

Deferred taxation is recognised in respect of all timing differences that have originated but notreversed at the balance sheet date where transactions or events have occurred at that date that willresult in an obligation to pay more, or a right to pay less or to receive more, tax with the followingexceptions:

Deferred tax assets are recognised only to the extent that the Directors consider that it is more likelythan not that they will be recovered.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in theperiods in which the timing differences reverse, based on tax rates and laws enacted or substantiallyenacted at the balance sheet date.

3.3 Investments

All non-current investments are carried at the lower of cost and net realisable value, less any provisionfor diminution in value.

3.4 Foreign currencies

Transactions in foreign currencies are translated at the rate ruling at the date of the transaction or atthe contracted rate if the transaction is covered by a forward exchange contract. Monetary assets andliabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at thebalance sheet date or if appropriate at the forward contract rate.

4 PROFIT AND LOSS ACCOUNTS

15 months Year Periodended ended ended

31 March 31 December 31 December2004 2002 2001

Note £’000 £’000 £’000

Turnover 7.1 – – –

Administrative expenses (674) (53) –———— ———— ————

Operating loss 7.1 (674) (53) –

Exceptional item – disposal of investment 7.1 (8,119) – –

Exceptional item – Scheme of Arrangement 7.1 – (202) –———— ———— ————

Loss on ordinary activities before taxation (8,793) (255) –

Tax on loss on ordinary activities 7.4 – – –———— ———— ————

Loss for the financial period (8,793) (255) –

Dividends 7.5 (4,830) – –———— ———— ————

Retained loss attributable to shareholders 7.11 (13,623) (255) –———— ———— ————Loss per share – basis and fully diluted 7.6 (3.25)p (0.84)p –———— ———— ————There were no recognised gains or losses in each period other than the losses noted above.

43

5 BALANCE SHEETS

At 31 March At 31 December2004 2002 2001

Note £’000 £’000 £’000Fixed assetsInvestments 7.7 – 13,162 –

———— ———— ————– 13,162 –

———— ———— ————Current assetsDebtors 7.8 360 55 –Cash at bank and in hand 1 – –

———— ———— ————361 55 –

Creditors: amounts falling due within one year 7.9 (77) (310) –———— ———— ————

Net current assets/(liabilities) 284 (255) –———— ———— ————

Total assets less current liabilities 284 12,907 –———— ———— ————Capital and reservesCalled up share capital 7.10 274 13,162 –Other reserves 7.11 – – –Profit and loss account 7.11 10 (255) –

———— ———— ————Total shareholders’ funds 7.12 284 12,907 –———— ———— ————The Company balance sheet at 31 December 2001 comprised debtors, being unpaid share capital, and calledup share capital of £2 each.

6 CASH FLOW STATEMENTS

15 months Year Periodended ended ended

31 March 31 December 31 December2004 2002 2001

Note £’000 £’000 £’000

Net cash (outflow) / inflow from operatingactivities 7.13a (738) 46 –

———— ———— ————Returns on investments and servicing of financeInterest paid – – –

Capital expenditure and financial investmentSale of investments – – –(Decrease) / increase in borrowings (261) 156 –Exceptional item – Scheme of Arrangement costs – (202) –

———— ———— ————Net cash outflow from capital expenditure

and financial investment (261) (46) –

FinancingIssue of shares 1,000 – –

———— ———— ————Net cash inflow from financing 1,000 – –

———— ———— ————Increase in cash 7.13b 1 – –———— ———— ————

44

7 NOTES TO THE FINANCIAL INFORMATION

7.1 Turnover and operating loss

Turnover and operating loss related entirely to the Company’s principal continuing area of activity,being investment in mineral resource projects.

Operating loss is stated after charging:

15 months Year Periodended ended ended

31 March 31 December 31 December2004 2002 2001

£’000 £’000 £’000Auditors remuneration:

Audit services – UK 10 18 –Non audit services – UK 101 – –Non audit services – overseas 6 – –

Exceptional item – loss on disposal of investment 8,119 – –Exceptional item – Scheme of Arrangement costs – 202 –———— ———— ————Exceptional item – disposal of investment

As part of the Business Combination transaction in February 2004, the shares in GMS Australia weredisposed of by the Company to Medoro Resources Ltd, resulting in a loss on disposal of £8,332,000.In consideration of the assignment of intercompany balances with subsidiary companies (other thanGMS Australia) to Medoro Resources Ltd, a loan of US$1,500,000 granted by Full Riches InvestmentLtd to the Company was novated to Medoro Resources Ltd. The net effect of this novation was a creditto the profit and loss account of £213,000, which has been offset against the loss on disposal withinthe exceptional item.

The exceptional item in 2002 represented legal and professional costs incurred in respect ofcompleting the relocation of the holding company’s domicile from Australia to the UK, whichincluded the setting up of GMS plc and the admission of GMS plc to AIM, replacing the dual listingof GMS Australia.

Non audit services represent work carried out by the auditors in connection with the BusinessCombination transaction.

7.2 Directors’ emoluments

Emoluments in respect of Directors for each period were as follows:

15 months Year Periodended ended ended

31 March 31 December 31 December2004 2002 2001

£ £ £

Directors’ emoluments 205,471 191,157 –———— ———— ————

45

7.2 Directors’ emoluments (continued)

The emoluments of the highest paid Director in each period were as follows:

15 months Year Periodended ended ended

31 March 31 December 31 December2004 2002 2001

£ £ £

Directors’ emoluments 63,000 128,329 –———— ———— ————Directors’ emoluments

Period ended 31 March 2004Base Other Total

Fee (vi) Pension 2004£ £ £ £

J Pither(i) 43,750 – – 43,750T Elder 12,500 7,500 – 20,000M Groák(ii) 12,500 50,500 – 63,000J Morris(iii) 61,221 – – 61,221J Chappell(iv) 5,000 – – 5,000L Graber 12,500 – – 12,500S Iacono(v) – – – –J Arata(v) – – – –

(i) paid to Surrey Management Services Limited, a company in which Mr. Pither has a financial interest

(ii) paid to Marker Management Services Limited, a company in which Mr. Groak has a financial interest

(iii) paid to Forman Pty Ltd, a company in which Mr. Morris has a financial interest

(iv) resigned 31 July 2003

(v) appointed 20 October 2003; resigned 5 March 2004

(vi) other amounts paid to directors represent additional time charged on an hourly basis, particularly in respect of workin connection with the Business Combination transaction, which was in addition to their normal quarterly timecommitment under the terms of their service contracts.

Year ended 31 December 2002Termination and similar Total

Base Fee Other payments Pension 2002£ £ £ £ £

J Pither(i) 35,699 – – – 35,699T Elder 16,641 – – – 16,641J Morris 49,268 11,868 58,384(iii) 8,809 128,329J Chappell 8,223 – – – 8,223L Graber 1,130 – – – 1,130M Groak(ii) 1,135 – – – 1,135P A Chare(iv) – – – – –

(i) paid to Surrey Management Services Limited, a company in which Mr. Pither has a financial interest

(ii) paid to Marker Management Services Limited, a company in which Mr. Groak has a financial interest

(iii) this payment represented statutory annual and long service leave

(iv) resigned 12 July 2002.

Period ended 31 December 2001

There were no payments to Directors in respect of services performed for the Company for the periodended 31 December 2001.

46

7.3 Employees

The Company had no employees during the periods other than Directors.

The average number of employees (including directors) of the Company during each period was:

15 months Year Periodended ended ended

31 March 31 December 31 December2004 2002 2001

Number Number Number

Australia 1 3 2United Kingdom 3 2 1United States of America 1 1 –Rest of the World 1 – 1

———— ———— ————6 6 4———— ———— ————

7.4 Tax on loss on ordinary activities

No tax arises on the loss for the period (2002: £nil; 2001: £nil). The tax assessed for the period differsfrom the standard rate of corporation tax in the UK of 30 per cent. (2002: 30 per cent.; 2001: 30 percent.). The differences are explained as follows:

15 months Year Periodended ended ended

31 March 31 December 31 December2004 2002 2001

£’000 £’000 £’000

Loss on ordinary activities before tax (8,793) (255) –———— ———— ————Loss on ordinary activities multiplied by the

standard rate of corporation tax in the UK of 30% (2002: 30%; 2001: 30%) (2,638) (77) –

Effect of:Expenses not deductible for tax purposes 43 59 –Loss on disposal of subsidiaries 2,436 – –Carry forward of unutilised tax losses 159 18 –

———— ———— ————Current tax charge for period – – –———— ———— ————Unrelieved tax losses remain available to offset against future taxable profits. These losses have notbeen recognised within the financial information as they do not meet the conditions required inaccordance with FRS 19. Losses carried forward in the UK total £591,000 – tax effect is £177,000(2002: losses of £60,000 – tax effect is £18,000; 2001: £nil).

7.5 Dividends

Dividends in the period ended 31 March 2004 were the dividend in specie totalling £4,830,000,representing the distribution by the Company to shareholders of the shares received in MedoroResources Ltd (2002: £nil; 2001: £nil). This was equivalent to 1.76p per share (2002: nil; 2001: nil).

47

7.6 Loss per share

The calculation of basic loss per share is based on a loss for the periods of £8,793,000 (2002:£255,000; 2001: £nil), and on 270,768,684 ordinary shares (2002: 30,290,602 ordinary shares; 2001:40 ordinary shares), being the weighted average number of ordinary shares in issue during the periods.

The loss attributable to ordinary shareholders and the weighted average number of ordinary shares forthe purpose of calculating the diluted earnings per share are identical to those used for the basicearnings per share. This is because the exercise of share options would have the effect of reducing theloss per share and is therefore not dilutive under the terms of FRS 14.

7.7 Investments

Investment in subsidiary undertakings

Total£’000

Cost:At incorporation –

————At 31 December 2001 –Additions 13,162

————At 31 December 2002 13,162Disposals (13,162)

————At 31 March 2004 –

————Net book value at 31 March 2004 –————Net book value at 31 December 2002 13,162————Net book value at 31 December 2001 –————The movements in the periods are represented as follows:

• In November 2002 the Company issued by way of a Scheme of Arrangement 263,239,404shares in return for the share capital of Gold Mines of Sardinia Pty Ltd (“GMS Australia”), alisted entity until 20 November 2002 on both the Australian Stock Exchange and AIM. TheCompany was admitted to AIM on 20 November 2002. Having taken advantage of the mergerrelief provisions under s131 Companies Act 1985, the investment in Gold Mines of SardiniaPty Ltd was recorded at the nominal value of the shares issued as consideration.

• In November 2003 a new subsidiary was incorporated, Medoro Resources Ltd, in the YukonTerritory, Canada. This company was 100 per cent. owned directly by the Company, with 100common shares issued at C$0.10 (10 Canadian cents = £0.04 approx).

• Following shareholder approval at the EGM in December 2003, the Company disposed of itsshares in GMS Australia to Medoro Resources Ltd.

• In February 2004, Medoro Resources Ltd was amalgamated with Full Riches Investments Ltdto form a new company, also called Medoro Resources Ltd. In consideration, the Companyreceived on behalf of its shareholders shares in Medoro Resources Ltd representing, inaggregate, 50 per cent. of the issued and outstanding shares (on a fully diluted basis) as at thedate of completion of the Amalgamation Agreement.

• These shares received as consideration were valued by the Directors for the purposes of thefinancial statements, based upon an estimate of the net book value of the combined entity of£9,660,000. The value of the consideration received (£4,830,000) resulted in a loss on disposalarising within the Company of £8,332,000.

48

7.7 Investments (continued)

• The Medoro Resources Ltd shares received have been passed on to shareholders by way of adividend in specie, in the ratio of 1 share received for every 7.0844 ordinary shares held bythem on completion.

Details of the investments in which the Company held 90 per cent. or more of the nominal value ofany class of share capital during the periods are as follows:

Subsidiary undertakings

% VotingRights and Country of

Name of Subsidiary Shares Held Incorporation Business

Gold Mines of Sardinia Pty Ltd 100 Australia Intermediate Holding CompanyMedoro Resources Ltd 100 Canada Intermediate Holding Company

Gold Mines of Sardinia Pty Limited had the following subsidiaries:

Class of% Interest Held Shares

Mediterranean Gold Mines Pty Limited(Incorporated in Australia)(ii) 100 OrdinaryEuro Mining Pty Ltd (Incorporated in Australia)(ii) 100 OrdinarySardinia Gold Mining SpA (Incorporated in Italy)(i) 90 Ordinary

The subsidiaries carried on business in their country of incorporation:

(i) Sardinia Gold Mining SpA is engaged in mining and exploration operations.

(ii) These are non-trading intermediate holding companies, which meet the definition of a smallproprietary limited company as set out in the Australian Corporations Act 2001.

BUSINESS COMBINATION TRANSACTION

On 24 February 2004, Medoro Resources Ltd, a wholly owned subsidiary of the Companyincorporated in the Yukon Territory, Canada (“GMS Canada”) was merged (“the Merger”) with FullRiches Investments Ltd. (“Full Riches”), a company incorporated in the Yukon Territory, Canada andlisted on the TSX Venture Exchange. The resulting merged company is also traded on the TSXVenture Exchange and AIM, and is also called Medoro Resources Ltd. (“Medoro”).

Immediately prior to the Merger, the shares of Gold Mines of Sardinia Pty Ltd. (“GMS Australia”)were disposed of to GMS Canada in exchange for 50 per cent. of the shares in Medoro (on a fully-diluted basis). GMS Australia owned indirectly all of the significant assets of the former Gold Minesof Sardinia plc Group, notably 90 per cent. of Sardinia Gold Mining S.p.A.

Under the terms of the Amalgamation Agreement governing the Merger, the shares in Medororeceivable by the Company were distributed by way of dividend to its shareholders. Each shareholderof the Company received one common share of Medoro for every 7.0844 Company share held.Similarly, each shareholder of Full Riches received one common share of Medoro for every two FullRiches shares held.

Outstanding options and warrants for each company were also consolidated on a similar basis, thosefor the Company being dealt with in accordance with the following formula (“the Formula”): Eligibleemployees holding options in the Company were granted options over 1 common share in Medoro forevery 7.0844 Company share options held. The exercise price applicable to these Medoro options was7.0844 times the exercise price of the Company options, converted at a rate of £1 = Canadian $ 2.25(Options previously granted in the Company continue to be valid for those option holders who wereemployees of SGM at 16 June 2004).

49

7.7 Investments (continued)

Similarly, 11,111,111 warrants held by Sargold Resource Corp (“Sargold”, formerly CanleyDevelopment Inc) were replaced by warrants in Medoro in accordance with the Formula under theterms of a novation agreement forming part of the completion of the Business Combination, whichalso caused Sargold’s warrants in the Company to lapse.

The Company had in addition agreed to grant share options to Bolivar Gold Corp. (“Bolivar”) for upto 10 per cent. of the Company’s issued capital under the terms of an option agreement to joint venturethe Monte Ollasteddu prospect in Sardinia. These options would have been granted oncommencement of an approved drilling programme. The rights and obligations under the optionagreement were novated to Medoro. Under the novation agreement, Bolivar became entitled to3,872,626 Medoro warrants in lieu of the Company options, which lapsed.

All outstanding contractual obligations of the Company of a commercial nature and in respect of itsSardinian gold operations, including ongoing consulting agreements and the joint venture agreementswith Sargold and Bolivar, were novated to Medoro upon the completion of the Merger.

7.8 Debtors

31 March 31 December2004 2002 2001

£’000 £’000 £’000

Prepayments and other debtors 42 8 –Due from former group undertaking 318 47 –

———— ———— ————360 55 –———— ———— ————

GMS Australia is indebted to the Company in the sum of £318,000 (“the Australian IntercompanyIndebtedness”) and, under the Amalgamation Agreement, the Company agreed to novate all rights andbenefits to the intercompany indebtedness in general to Medoro Resources Ltd. However, under anagreement dated 25 February 2004, GMS Australia, Full Riches and Medoro have agreed that theAustralian Intercompany Indebtedness will not be so novated to the extent of this amount.

In consideration of this agreement, the Company agreed that it would use its reasonable endeavoursto novate the entire Australian Intercompany Indebtedness to Medoro, and to relinquish and releaseany and all rights by taking all such actions as it may lawfully and properly do, including utilisingfunds received from debtors (beyond those needed for the general day to day operation of theCompany) and/or other available reserves and/or undertaking a further reduction of capital (subject toit being commercially viable to do so). Until such time as any action is undertaken, this balanceremains recoverable from GMS Australia.

On 25 February 2004, Mr. Jon Pither, Mr. Martin Groak and Mr. John Morris (directors of theCompany) and others (each a “Guarantor”) entered into guarantees in favour of Medoro. Inconsideration of Cdn $1.00, each Guarantor severally guaranteed to Medoro the repayment of theAustralian Intercompany Indebtedness to the extent that GMS Australia has been required and haspaid over part or all of the Australian Intercompany Indebtedness to the Company. In the case of Mr.Morris, liability is limited to £100,000. In the case of Mr. Groak, liability is limited to £50,000. In thecase of Mr. Pither, liability is limited to £50,000. In the case of the other guarantors, liability is limitedto, in aggregate, £118,000.

The maximum liability of each Guarantor is reduced by an amount equal to that Guarantor’s pro-rataportion of the Australian Intercompany Indebtedness as assigned and novated to Medoro by theCompany. Upon the payment of any Australian Intercompany Indebtedness by GMS Australia to theCompany, Medoro may treat an amount equal to the guaranteed liabilities as due and payable and maydemand payment under the guarantee and collect from the Guarantor his pro-rata portion of theAustralian Intercompany Indebtedness paid by GMS Australia to the Company. The guarantee isgoverned by the laws of the Province of Ontario, Canada.

50

7.9 Creditors

31 March 31 December2004 2002 2001

£’000 £’000 £’000Amounts falling due within one yearTrade creditors 20 51 –Other creditors and accruals 57 56 –Amounts owed to former group undertakings – 203 –

———— ———— ————77 310 –———— ———— ————

Other creditors at 31 March 2004 included £2,000 owed by the Company to Mr. M Groak, a directorof the Company, which was provided in February 2004 for working capital purposes to coverimmediate financial necessities until further funding was provided. The loan became repayable, plusinterest at a rate of 12 per cent. per annum, on or before 31 March 2004. The loan was not secured.The loan was repaid in full on 26 April 2004.

7.10 Share capital

31 March 31 December2004 2002 2001

£’000 £’000 £’000

Authorised2004: 600,000,000 ordinary shares of 0.1 pence each2002: 400,000,000 ordinary shares of 5 pence each2001: 400,000,000 ordinary shares of 5 pence each 600 20,000 20,000———— ———— ————Issued and fully paid2004: 274,350.555 ordinary shares of 0.1 pence each2002: 263,239,444 ordinary shares of 5 pence each2001: 40 ordinary shares of 5 pence each 274 13,162 –———— ———— ————The Company was incorporated on 5 July 2000, with authorised share capital of £100,000 divided into100,000 ordinary shares of £1 each. Upon incorporation, 2 ordinary shares were issued. Pursuant to aspecial resolution of the Company dated 4 October 2000, each of the existing issued and unissuedordinary shares of £1 each were sub-divided into 2,000,000 ordinary shares of 5 pence each. Inaddition, on 4 October 2000 the authorised share capital was increased to £20,000,000 by the creationof an additional 398,000,000 ordinary shares of 5 pence each. On 20 November 2002, 263,239,404ordinary shares of 5p each were issued on a share for share basis in exchange for the entire issuedshare capital of GMS Australia following implementation of a Scheme of Arrangement. The issue ofshares was recorded at nominal value as the Company has taken advantage of merger relief.

The Company, by an ordinary resolution passed on 31 July 2003, increased its authorised share capitalfrom £20,000,000 to £30,000,000 divided into 600,000,000 ordinary shares of 5 pence each. TheCompany then, by a special resolution passed on 23 December 2003 duly sanctioned by the Court,reduced its share capital by the cancellation of 4.9 pence on each of the ordinary shares of 5 penceeach and reduced the nominal value of each ordinary share from 5 pence to 0.1 pence, such that theauthorised share capital of the Company following the reduction of capital is £600,000 divided into600,000,000 ordinary shares of 0.1 pence each.

On 28 May 2003 the Company placed 11,111,111 ordinary shares at a price of £0.09 per share.

On 28 May 2003 the Company placed 11,111,111 warrants over ordinary shares. These lapsed uponcompletion of the Business Combination transaction, when they were replaced by warrants in MedoroResources Ltd.

51

7.10 Share capital (continued)

On 2 October 2003 the Company allotted 1,000,000 options to Directors over unissued shares at aprice of £0.11. On October 22, 2003 the Company allotted 1,000,000 options over unissued shares ata price of £0.11. These were issued to Messrs. Arata and Iacono. These options lapsed upon theirresignation as directors on 5 March 2004. At 31 March 2004 and at the date of this report, thefollowing unlisted options are outstanding:

• 2,500,000 options exercisable at £0.15 on or before 18 February 2005

• 200,000 options exercisable at £0.15 on or before 31 May 2005

• 200,000 options exercisable at £0.14 on or before 8 August 2005

• 900,000 options exercisable at £0.12 on or before 1 February 2006

• 415,000 options exercisable at £0.13 on or before 1 March 2006

• 1,500,000 options exercisable at £0.16 on or before 8 June 2006

• 2,025,000 options exercisable at £0.13 on or before 1 February 2006

• 500,000 options exercisable at £0.15 on or before 1 July 2007

• 1,000,000 options exercisable at £0.11 on or before 2 October 2010

On 29 April 2004 the Company issued 79,000,000 ordinary shares of 0.1 pence at a price of 1 penceper share by way of a private placement.

7.11 Reserves

Share Profit andPremium Loss Account Total

£’000 £’000 £’000

At incorporation – – –Issue of shares – – –Retained loss for the period – – –

———— ———— ————At 31 December 2001 – – –Issue of shares – – –Retained loss for the period – (255) (255)

———— ———— ————At 31 December 2002 – (255) (255)Issue of shares 444 – 444Cancellation of shares (444) 444 –Reduction of share capital – 13,444 13,444Retained loss for the period – (13,623) (13,623)

———— ———— ————At 31 March 2004 – 10 10———— ———— ————

52

7.12 Reconciliation of movement in shareholders’ funds

31 March 31 December2004 2002 2001

£’000 £’000 £’000

Loss for the financial period (8,793) (255) –Dividends and other appropriations (4,830) – –Shares issued 1,000 13,162 –

———— ———— ————Net (decrease)/increase in shareholders’ funds (12,623) 12,907 –Shareholders’ funds brought forward 12,907 – –

———— ———— ————Shareholders’ funds carried forward 284 12,907 –———— ———— ————

7.13 Notes to the cash flow statement

(a) Reconciliation of operating loss to net cash (outflow)/inflow from operating activities

15 months Year Periodended ended ended

31 March 31 December 31 December2004 2002 2001

£’000 £’000 £’000

Operating loss (674) (53) –(Increase) in debtors (34) (8) –(Decrease)/increase in creditors (30) 107 –

———— ———— ————Net cash outflow from operating activities (738) 46 –———— ———— ————

(b) Analysis of net cash

2004 2002 2001£’000 £’000 £’000

Cash at bank and in hand 1 – –———— ———— ————7.14 Related party transactions

The Company is exempt from disclosing transactions with former subsidiaries in which it held aninterest of 90 per cent. or more during the periods. All transactions with the Directors in the periodshave been disclosed within this financial information.

7.15 Post balance sheet events

On 29 April 2004, the Company announced that it had raised £790,000 in cash through the placementof 79,000,000 new ordinary shares of 0.1 pence in the capital of the Company at a price of 1 penceper new ordinary share. The issue price represents a discount of 11.5 per cent. to the closing middlemarket price of 1.13 pence per ordinary share on 28 April 2004, the last business day prior to thisannouncement.

Yours faithfully,

GRANT THORNTON UK LLP

53

PART VI

FINANCIAL INFORMATION ON AMERISUR

Grant Thornton UK LLP8 West WalkLeicester LE1 7NH

The DirectorsChaco Resources plcPrestige Travel SuiteBarclays Bank House81-83 Victoria RoadSurbitonSurrey KT6 4NS

and

The DirectorsDaniel Stewart & Company plc48 BishopsgateLondon EC2N 4AJ

20 October 2004

AMERISUR S.A. (“THE COMPANY”)

1 INTRODUCTION

1.1 We report on the financial information set out in paragraphs 2 and 3 below. This financial informationhas been prepared for inclusion in the AIM Admission document issued by Chaco Resources plc dated20 October 2004.

Basis of preparation

1.2 The financial information set out in paragraphs 2 and 3 below is based on the transactions of theCompany from incorporation on 8 February 2001 to 31 August 2004.

Responsibility

1.3 The Directors of Chaco Resources plc are responsible for the contents of the AIM Admissiondocument in which this report is included.

1.4 It is our responsibility to compile the financial information set out in our report from the underlyingfinancial records, to form an opinion on the financial information and to report our opinion to you.

Basis of opinion

1.5 We conducted our work in accordance with the Statements of Investment Circular ReportingStandards issued by the Auditing Practices Board. Our work included an assessment of evidencerelevant to the amounts and disclosures in the financial information. It also included an assessment ofsignificant estimates and judgements made by those responsible for the preparation of the financialstatements underlying the financial information and whether the accounting policies are appropriateto the entity’s circumstances, consistently applied and adequately disclosed.

1.6 We planned and performed our work so as to obtain all the information and explanations which weconsidered necessary in order to provide us with sufficient evidence to give reasonable assurance that

Grant Thornton

54

the financial information is free from material misstatement whether caused by fraud or otherirregularity or error.

Opinion

1.7 In our opinion the financial information gives, for the purposes of the AIM Admission document dated20 October 2004, a true and fair view of the state of affairs of the Company at 31 August 2004.

Consent

1.8 We consent to the inclusion in the AIM Admission document dated 20 October 2004 of this report andaccept responsibility for this report for the purposes of paragraph 45(2)(b)(iii) of Schedule 1 to thePublic Offers of Securities Regulations 1995.

2 STATUTORY INFORMATION

2.1 The Company was constituted by public deed number 3 dated 8 February 2001 in Asuncion, Paraguay,recorded by Notary Marta Elizabeth Closs. The Company was registered in the Public Register ofCommerce under number 66 Series A Folio 432 on 6 March 2001. The Company was registered inthe Registry of Legal Entities and Associations under number 243 Folio 2008 Series D on 6 March2001.

2.2 At the date of this report the Company’s share capital comprised 200 shares, which have beensubscribed for by the incorporators, paid up and issued.

2.3 The Company has, by decision of its Shareholders in the Extraordinary Meeting held on 27 May 2004,amended Article 3 of its Bylaws to include under its permitted activities those related to prospecting,exploration, exploitation, production, commercialisation and distribution of hydrocarbons in its ownname or in association with third parties. The amendment to the Bylaws was recorded in public deednumber 17 dated 19 July 2004 by Notary Oscar Ariel Escudero. Registration of the amendment in thePublic Register of Commerce and the Public Register of Legal Entities and Associations is completeand in effect.

3 FINANCIAL INFORMATION

3.1 The Company has not completed its first accounting period. No statutory financial statements havebeen prepared, audited or filed with the appropriate authorities since incorporation.

3.2 The Company was incorporated with a corporate capital of 200,000,000 guarani, represented by 200shares of 1,000,000 guarani each.

3.3 The total authorised share capital of the Company is an unlimited number of common shares.

3.4 As at the date of this report the Company has carried out no trading, and the only transactions of theCompany have been the allotment of shares.

3.5 There have been no other transactions in the Company having a financial impact.

3.6 As at 31 August 2004 the Company has not entered into any material contracts other than thosedisclosed in paragraph 7 of Part X of this AIM Admission document.

Yours faithfully,

GRANT THORNTON UK LLP

55

PART VII

FINANCIAL INFORMATION ON BOHEMIA

Grant Thornton UK LLP8 West WalkLeicester LE1 7NH

The DirectorsChaco Resources plcPrestige Travel SuiteBarclays Bank House81-83 Victoria RoadSurbitonSurrey KT6 4NS

and

The DirectorsDaniel Stewart & Company plc48 BishopsgateLondon EC2N 4AJ

20 October 2004

BOHEMIA S.A. (“THE COMPANY”)

1 INTRODUCTION

1.1 We report on the financial information set out in paragraphs 2 and 3 below. This financial informationhas been prepared for inclusion in the AIM Admission document issued by Chaco Resources plc dated20 October 2004.

Basis of preparation

1.2 The financial information set out in paragraphs 2 and 3 below is based on the transactions of theCompany from incorporation on 14 February 2002 to 31 August 2004.

Responsibility

1.3 The Directors of Chaco Resources plc are responsible for the contents of the AIM Admissiondocument in which this report is included.

1.4 It is our responsibility to compile the financial information set out in our report from the underlyingfinancial records, to form an opinion on the financial information and to report our opinion to you.

Basis of opinion

1.5 We conducted our work in accordance with the Statements of Investment Circular ReportingStandards issued by the Auditing Practices Board. Our work included an assessment of evidencerelevant to the amounts and disclosures in the financial information. It also included an assessment ofsignificant estimates and judgements made by those responsible for the preparation of the financialstatements underlying the financial information and whether the accounting policies are appropriateto the entity’s circumstances, consistently applied and adequately disclosed.

1.6 We planned and performed our work so as to obtain all the information and explanations which weconsidered necessary in order to provide us with sufficient evidence to give reasonable assurance thatthe financial information is free from material misstatement whether caused by fraud or otherirregularity or error.

Grant Thornton

56

Opinion

1.7 In our opinion the financial information gives, for the purposes of the AIM Admission document dated20 October 2004, a true and fair view of the state of affairs of the Company at 31 August 2004.

Consent

1.8 We consent to the inclusion in the AIM Admission document dated 20 October 2004 of this report andaccept responsibility for this report for the purposes of paragraph 45(2)(b)(iii) of Schedule 1 to thePublic Offers of Securities Regulations 1995.

2 STATUTORY INFORMATION

2.1 The Company was constituted by public deed number 5 dated 14 February 2002 in Asuncion,Paraguay, recorded by Notary Josefina del Carmen Pedersen Fernandez. The Company was registeredin the Public Register of Commerce under number 146 Series C Folio 1619 on 7 March 2002. TheCompany was registered in the Registry of Legal Entities and Associations under number 110 Folio1194 Series B on 7 March 2002.

2.2 At the date of this report the Company’s share capital comprised 200 shares, of which 50 have beenissued.

2.3 The Company, by decision of its Shareholders in the Extraordinary Meeting held on 27 May 2004,has amended Article 2 of its Bylaws to include under its permitted activities those related toprospecting, exploration, exploitation, production, commercialisation and distribution ofhydrocarbons in its own name or in association with third parties. The amendment to the Bylaws wasrecorded in public deed number 18 dated 19 July 2004 by Notary Oscar Ariel Escudero. Registrationof the amendment in the Public Register of Commerce and the Public Register of Legal Entities andAssociations is complete and in effect.

3 FINANCIAL INFORMATION

3.1 The Company has not completed its first accounting period. No statutory financial statements havebeen prepared, audited or filed with the appropriate authorities since incorporation.

3.2 The Company was incorporated with a capital of 1,000,000,000 guarani represented by 100 shares of10,000,000 guarani each. All the capital was subscribed by the incorporators, of which 25 per cent.was paid in. Subsequently, by Extraordinary Shareholders Meeting of 27 May 2004, the Bylaws ofthe Company were amended to change the number and nominal value of the shares. The capital of theCompany is now represented by 200 shares of nominal value 5,000,000 guarani, of which 50 shareshave been issued for a total of 250,000,000 guarani.

3.3 The total authorised share capital of the Company is an unlimited number of common shares.

3.4 As at the date of this report the Company has carried out no trading, and the only transactions of theCompany have been the allotment of shares.

3.5 There have been no other transactions in the Company having a financial impact.

3.6 As at 31 August 2004 the Company has not entered into any material contracts other than thosedisclosed in paragraph 7 of Part X of this AIM Admission document.

Yours faithfully

GRANT THORNTON UK LLP

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PART VIII

PRO FORMA STATEMENT OF COMBINED NET ASSETS OF THE ENLARGED GROUP

The following table sets out the unaudited pro forma statement of net assets of Chaco Resources plc(“Chaco”) following completion of the proposed acquisition of Amerisur S.A. and Bohemia S.A. and thePlacing. This table has been prepared for illustrative purposes only and, because of its nature, may not givea true picture of the financial position of Chaco following the transaction.

The net assets of Chaco have been extracted from the balance sheet of Chaco as at 31 March 2004 as set outin the Accountants’ Report in Part V. The net assets of Amerisur S.A. have been extracted from theAccountants’ Report contained in Part VI. The net assets of Bohemia S.A. have been extracted from theAccountants’ Report contained in Part VII. The balance sheets of Amerisur and Bohemia have beentranslated based on the exchange rate between the Paraguayan Guarani and Sterling at 30 September 2004,being 1£ equals 10,871 Guarani. The pro forma statement has been prepared to illustrate the effect on the netassets of the proposed acquisition and Placing, and other adjustments noted below, as if they had taken placeon 31 March 2004.

Chaco Amerisur BohemiaAs at As at As at

31 March 31 August 31 August Pro forma2004 2004 2004 Sub-total Adjustments net assets

£’000 £’000 £’000 £’000 £’000 £’000Fixed assetsGoodwill – – – – 5003 500

———— ———— ———— ———— ———— ————– – – – 500 500

———— ———— ———— ———— ———— ————Current assetsDebtors 360 18 92 470 (110)2 360Cash 1 – – 1 1,2451 1,246

———— ———— ———— ———— ———— ————361 18 92 471 1,135 1,606

———— ———— ———— ———— ———— ————Creditors:within one year (77) – – (77) – (77)

———— ———— ———— ———— ———— ————Net current assets 284 18 92 394 1,135 1,529

———— ———— ———— ———— ———— ————Total assets less current

liabilities 284 18 92 394 1,635 2,029———— ———— ———— ———— ———— ————Notes to the pro forma statement of net assets

(1) Adjustments to bank and cash balances reflect:

(i) the placing in April 2004 to raise £790,000

(ii) the proposed Placing described elsewhere in this document, raising £515,000, net of expenses

(iii) the expenditure of £60,000 ($100,000) on the acquisition of information, as explained morefully in Part I of this document

(2) Reflects the elimination of debtor balances for unpaid share capital in Amerisur and Bohemia, theliability for which will pass to Chaco on acquisition.

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(3) Represents goodwill arising on completion of the Acquisition, calculated as follows:

£

Fair value of consideration given for the acquisition of Amerisur 333,333Fair value of consideration given for the acquisition of Bohemia 166,667

————500,000

Fair value of net assets acquired –————

Goodwill on acquisition 500,000————In calculating the fair value of the consideration given, each Chaco share has been valued at 1.83pence.

In calculating the fair value of assets acquired:

(i) no value has been ascribed to debtors for unpaid share capital, on the basis that the liability forsettlement will fall upon Chaco

(ii) no value has been ascribed to the exploration permits held by Amerisur and Bohemia due to theuncertainty of discovery of commercially exploitable oil or gas reserves.

(4) No adjustment has been made for any event since 31 March 2004, save as disclosed above, and inparticular the pro forma statement of net assets does not take into account any trading or workingcapital movements arising since that date.

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Grant Thornton UK LLP8 West WalkLeicester LE1 7NH

The DirectorsChaco Resources plcPrestige Travel SuiteBarclays Bank House81-83 Victoria RoadSurbitonSurrey KT6 4NS

and

The DirectorsDaniel Stewart & Company plc48 BishopsgateLondon EC2N 4AJ

20 October 2004

Dear Sirs,

PRO FORMA STATEMENT OF NET ASSETS

We report on the pro forma statement of net assets set out in Part VIII of the AIM Admission document dated20 October 2004, which has been prepared, for illustrative purposes only, to provide information about howthe proposed acquisition of Amerisur S.A. and Bohemia S.A., the proposed Placing and certain other matters,might have affected the financial information presented had it occurred at that date.

Responsibilities

It is the responsibility solely of the directors of Chaco Resources plc to prepare the pro forma financialinformation. It is our responsibility to form an opinion on the pro forma financial information and to reportour opinion to you. We do not accept any responsibility for any reports previously given by us on anyfinancial information, including the Accountants’ Reports set out in Parts V, VI and VII, used in thecompilation of the pro forma financial information beyond that owed to those to whom the reports wereaddressed by us at the dates of their issue.

Basis of opinion

We conducted our work in accordance with the Statements of Investment Circular Reporting Standards andBulletin 1998/8 “Reporting on pro forma financial information pursuant to the Listing Rules” issued by theAuditing Practices Board. Our work, which involved no independent examination of any of the underlyingfinancial information, consisted primarily of comparing the unadjusted financial information with the sourcedocuments, considering the evidence supporting the adjustments and discussing the pro forma financialinformation with the directors of Chaco Resources plc.

Opinion

In our opinion:

1. the pro forma statement of net assets has been properly compiled on the basis stated;

2. such basis is consistent with the accounting policies of Chaco Resources plc; and

3. the adjustments are appropriate for the purposes of the pro forma statement of net assets as disclosed.

Yours faithfully,

GRANT THORNTON UK LLP

Grant Thornton

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PART IX

SUMMARY OF THE PRINCIPAL TERMS RELATING TO THE ACQUISITION

1 SHARE SALE AGREEMENT

The Share Sale Agreement is a conditional agreement between the Vendors and the Company relating to thesale and purchase of the entire issued share capital of Amerisur and Bohemia dated 27 September 2004. Thefollowing is a summary of the key terms and conditions of the Share Sale Agreement:

Sale and Purchase

The Company conditionally agrees to acquire the entire issued share capital of Amerisur and Bohemia, withfull title guarantee although the agreement can be terminated in relation to one of these companies but willremain binding in relation to the other.

Amerisur

The acquisition of Amerisur will take place following the satisfaction of the Chaco Conditions (as describedbelow) and the execution by the government of Paraguay and by Amerisur of a concession contract inrelation to either the regions described as Amerisur North or Amerisur South (subject to the right of theCompany to approve any conditions not specified under the Hydrocarbons law 779/95).

Consideration for the purchase of the shares in Amerisur is the allotment to the Vendors of 18,214,936 newOrdinary Shares. Of these shares, 910,747 new Ordinary Shares will be allotted on the occurrence of theexecution by the Government of Paraguay and by Amerisur of a concession contract in relation to either ofAmerisur North or Amerisur South. A further 910,747 new Ordinary Shares will be allotted on theoccurrence of the execution by the Government of Paraguay and by Amerisur of a concession contract inrelation to the other Amerisur area.

A further 8,196,721 new Ordinary Shares will be allotted only upon the promulgation of the concession lawfor each of Amerisur North and Amerisur South by the President of the Republic of Paraguay.

Bohemia

The acquisition of Bohemia will take place following the satisfaction of the Chaco Conditions (as describedbelow) and the execution by the Government of Paraguay and by Bohemia of a concession contract (subjectto the right of the Company to approve any conditions not specified under the Hydrocarbons law 779/95).

Consideration for the purchase of the shares in Bohemia is the allotment to the Vendors of 9,107,468 newOrdinary Shares. Of these shares, 910,747 new Ordinary Shares will be allotted on the occurrence of theexecution by the Government of Paraguay and by Bohemia of the concession contract The remaining8,196,721 new Ordinary Shares will be allotted only upon the promulgation of the concession law by thePresident of the Republic of Paraguay.

In each case, the Vendors agree to cause the respective companies to pursue the respective licences andconcessions and the Company agrees to provide such assistance as may reasonably be requested by theVendors. Furthermore, completion of each stage and the issue of new Ordinary Shares is subject to admissionto trading on AIM of such shares.

Condition and Rescission

Completion of the sale and purchase of the entire issued share capital of each of Amerisur or Bohemia isconditional, inter alia, upon the approval of the agreement by the shareholders of the Company in generalmeeting and the Admission (“the Chaco Conditions”).

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If any of the Chaco conditions has not been fulfilled within 12 months of the date of the agreement, thenneither the Vendors nor the Company will be obliged to complete the sale and purchase of either theAmerisur Shares or the Bohemia Shares.

Furthermore, unless the parties agree otherwise, if the promulgation of the concession laws by the Presidentof the Republic of Paraguay has not occurred within 18 months of the date of the agreement in relation toany of the areas, the agreement may be terminated in so far as it relates to that area.

The Company also has the right to terminate the agreement in relation to either or both Amerisur andBohemia if it becomes aware of any breach of the warranties (either as given at the date of the agreement orif they are repeated at any time up to the relevant final closing) or a breach of any other provision of theagreement or to any other event occurring which, in the reasonable opinion of the Company, is likely to orwill effect the financial position or business prospects of either Amerisur or Bohemia, subject in each caseto a 10 business day opportunity to remedy such breach at the Vendors’ expense.

Covenants

Pending completion, the Vendors have agreed to procure that each company carries on its business inaccordance with the restrictions set out in the Share Sale Agreement. These restrictions include, inter alia,incurring of capital expenditure, other liabilities, selling, signing or transferring its assets, charging its assets,terminating its contracts, declaring or paying dividends, initiating or soliciting any proposals in relation toselling share capital of either Amerisur or Bohemia without the prior written consent of the Company, asrequired by law or if required by the Share Sale Agreement.

Upon the issue of all of the consideration shares, the Vendors may nominate a person to be appointed to theboard of the Company if they hold more than 10 per cent. of the issued share capital of the Company at thattime. The Company has the right to approve such appointee, in consultation with its nominated adviser. TheVendors can continue to nominate directors until one is approved.

The Vendors have also given covenants to assist the Company in applying for permits and/or concessions inParaguay for a period of two years. During this period they have also agreed not to apply for or acquire aninterest in any permit or concession in Paraguay without the prior written consent of the Company and haveagreed not to assist others in so doing. The Vendors are permitted to acquire or apply for permits and theCompany cannot unreasonably withhold its consent to such applications or acquisitions being made whereit has first had a reasonable opportunity to apply for or acquire the permits or concessions. The Share SaleAgreement is made subject to English law.

Warranties

The Share Sale Agreement contains warranties given by the Vendors for the benefit of the Company relatingto the business, the assets and liabilities of both Amerisur and Bohemia.

2 RELATED DOCUMENTS

2.1 Escrow Agreement

An agreement dated 27 September 2004 made between the Vendors, the Company and Peroni, Sosa,Tellechea, Burt and Narvaja (“the Escrow Agent”).

Pursuant to this agreement, the Company and the Vendors appointed the Escrow Agent as their jointagent to hold certain documents relating to the share sale and purchase agreement including thetransfers and share certificates for the transfer of the shares in Amerisur and Bohemia and the transfersof such shares to the Company from the Vendors, such shares to be released when an original orcertified copy of the concession agreement in relation to that area is delivered to the Escrow Agent oras directed by the Vendors and the Company.

In the event that an original or certified copy of the concession agreement in relation to that area isnot delivered to the Escrow Agent within 18 months of the date of the Escrow Agreement or the Share

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Sale Agreement is otherwise terminated, then the Escrow Agent will promptly return the documentsto the Vendors. If the Chaco Conditions have not been satisfied within 12 months of the date of suchagreement, then the documents will also be promptly returned to the Vendors.

Both the Vendors and the Company have agreed to jointly and severally indemnify the Escrow Agentagainst any claims made against him in respect of his performing his obligations under the agreementsave where the Escrow Agent has acted fraudulently, intentionally in default or if there is a materialbreach by the Escrow Agent of the terms of the Escrow Agreement. The agreement is subject toEnglish law.

2.2 Information Sale Agreement

An agreement between the Vendors and the Company pursuant to which the Vendors agreed to sell tothe Company certain information including all surveys, maps, plans, diagrams, drill samples, reports,geological, geochemical and geophysical samples and reports, feasibility studies, know how, tradesecrets and information with governmental bodies in relation to the areas the subject of the Share SaleAgreement for a consideration of US$100,000.

Pursuant to this agreement, the Vendors warrant that they have title to such information and haveagreed to indemnify the Company from and against all losses resulting from a breach of suchwarranty. The Vendors also agree to keep the information confidential and not to use it in the future.This agreement is made subject to English law.

2.3 Lock-In Agreements from the Directors

Each of the Directors have given an undertaking that he will not sell, transfer or otherwise dispose ofany Ordinary Shares or interests in Ordinary Shares held on Admission for a period of 12 months fromAdmission except in certain limited circumstances including if a takeover offer is made for theCompany or if that individual ceases to be a director.

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PART X

ADDITIONAL INFORMATION

1 THE COMPANY

1.1 The Company is registered in England and Wales, having been incorporated on 5 July 2000 under theAct under the name Gold Mines of Sardinia plc with company registration number 4030166 as a publiclimited company. On 28 July 2004, the name of the Company was changed to Chaco Resources Plc.

1.2 The principal legislation under which the Company operates is the Act.

1.3 The registered office of the Company is at Prestige Travel Suite, Barclays Bank House, 81-83 VictoriaRoad, Surbiton, Surrey KT6 4NS.

1.4 The liability of the members of the Company is limited.

1.5 As at the date of this document, the Company has no subsidiaries.

1.6 The Company received a Certificate of Entitlement to do business and borrow under Section 117(1)of the Act on 20 November 2002.

2 SHARE CAPITAL

2.1 At the date of incorporation the Company had an authorised share capital of £100,000 divided into100,000 ordinary shares of £1.00 each.

2.2 By special resolution dated 4 October 2000:

2.2.1 issued and unissued ordinary shares of £1.00 each were subdivided and redesignated as2,000,000 ordinary shares of 5p each;

2.2.2 the authorised share capital of the Company was increased by £19,900,000 to £20,000,000 bythe creation of 398,000,000 new ordinary shares of 5p each;

2.3 By special resolution dated 31 July 2003, the authorised share capital of the Company was increasedfrom £20,000,000 to £30,000,000 divided into 600,000,000 ordinary shares of 5p each.

2.4 By special resolution dated 23 December 2003 and a Court Order, on 23 January 2004:

2.4.1 the authorised share capital of the Company was reduced to £600,000;

2.4.2 the nominal value of each of the issued and unissued ordinary shares of 5p each was reducedto 0.1p.

2.5 The authorised and issued share capital of the Company as at the date of this document is as follows:

Authorised Ordinary Shares of 0.1p each Issued and fully paidNumber £ Number £

600,000,000 600,000 353,350,555 353,351

The issued share capital of the Company, as enlarged by the Placing Shares (assuming fullsubscription under the Placing), immediately following Admission will be £389,936 divided into389,935,920 Ordinary Shares.

2.6 At the Annual General Meeting of the Company held on 28 July 2004 by the passing of an ordinaryresolution and a special resolution respectively:

2.6.1 the Directors were generally and unconditionally authorised in accordance with section 80 ofthe Companies Act 1985 (“the Act”) to exercise all the powers of the Company to allot relevantsecurities (as defined in section 80(2) of the Act) provided that:

(a) the authority was given in substitution for any equivalent authority which may have beengiven to the Directors prior to the date of the passing of the resolution;

(b) the authority shall be limited to the allotment of relevant securities up to an aggregatenominal value of £106,005.16;

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(c) unless previously revoked, varied or extended, the authority shall expire five years afterthe date of the passing of the resolution except that the Company may at any time beforesuch expiry make an offer or agreement which would or might require relevant securitiesto be allotted after such expiry and the Directors may allot relevant securities inpursuance of such an offer or agreement as if the authority had not expired; and

(d) in relation to the grant of any right to subscribe for, or convert any security into, sharesin the Company, the reference in the resolution to the maximum amount of relevantsecurities that may be allotted is to the maximum amount of shares which may beallotted pursuant to such right.

2.6.2 the Directors were empowered pursuant to section 95 of the Act to allot equity securities (asdefined in section 94(2) of the Act) for cash as if section 89(1) of the Act did not apply to suchallotment provided that:

(a) the power shall be limited to:

(i) the allotment of equity securities in connection with an invitation or offer ofequity securities to holders of ordinary shares in proportion to their respectiveholdings of such securities or in accordance with the rights attached to suchsecurities (but subject to such exclusions or other arrangements as the Directorsmay deem necessary or expedient in relation to fractional entitlements or legal orpractical problems under the laws of, or the requirements of any regulatory bodyor any stock exchange in, any territory); and

(ii) the allotment, otherwise then pursuant to paragraph (i) above, of equity securitiesup to an aggregate nominal amount of £35,335;

(b) unless previously revoked, varied or extended, this power shall expire on the earlier ofthe conclusion of the next Annual General Meeting of the company and the date falling15 months after the date of the passing of the resolution except that the Company maybefore the expiry of this power make an offer or agreement which would or mightrequire equity securities to be allotted after such expiry an the Directors may allot equitysecurities in pursuance of such offer or agreement as if this power had not expired; and

(c) in the resolution the nominal amount of any securities should be taken to be, in the caseof a right to subscribe for or convert any securities into shares of the Company, thenominal amount of the shares which may be allotted pursuant to such right.

2.6.3 At the Extraordinary General Meeting of the Company, convened for 10.00 a.m. on15 November 2004, a resolution will be proposed to replace the current disapplicationauthority. Pursuant to Resolution 2, the provisions of Section 89(1) of the Act will be disappliedin respect of the Placing Shares and will be generally disapplied in connection with a rights orother pre-emptive issue or any other issue of equity securities for cash which, when takentogether with any other securities allotted for cash during the period of disapplication, do notexceed a nominal value of £41,725.83.

3 SHARE OPTIONS

The Chaco Share Option Scheme

3.1 Background

The Company adopted the Chaco Share Option Scheme on 20 November 2002 (“the Date ofAdoption”), pursuant to a resolution of the remuneration committee of the Board (“the RemunerationCommittee”).

3.2 Participation

Options may be granted to any part time employee, full time employee, consultant, executive or non-executive director of the Company or a member of the group (as defined in the scheme) who has been

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employed by, consulting to or a director of the Company or such member of the group for not lessthan 6 months (“Eligible Employee”).

3.3 Grant of Options

The Remuneration Committee may grant Options to such Eligible Employees as it may select in itsabsolute discretion. An option may only be granted within the period of 7 years beginning with theDate of Adoption.

Each Option is personal to the option holder and any transfer, assignment, charge or other disposal ofthe Option shall cause it to lapse (save in the case of a transfer to a nominee of the Eligible Employee).

3.4 Option Price

The Remuneration Committee shall determine the option price before the grant of the relevant option,but such price shall not be less than the higher of:

(a) the market value of the share at the date of the grant being the average mid market price for the5 days preceding the date of the grant; and

(b) the nominal value of an Ordinary Share.

3.5 Restrictions on the Grant of an Option

The percentage of ordinary share capital of the Company that can be used for the Options grantedpursuant to the Chaco Share Option Scheme and any other scheme (approved or unapproved) islimited to ten per cent. of the ordinary share capital of the Company.

3.6 No person shall be granted any Option which would, at the time of grant, cause the number ofOrdinary Shares which he has acquired or may acquire under the Chaco Share Option Scheme or anyother discretionary scheme (approved or unapproved) to exceed five per cent. of the ordinary sharecapital of the Company.

3.7 Limit on Option Holders

No Option may be granted to an Eligible Employee if the result of that grant would be that theaggregate subscription price under all Options granted to him during the preceding seven years underthe Chaco Share Option Scheme or any other share option scheme would exceed four times theEligible Employee’s current annual remuneration.

3.8 Exercise of Options

The exercise of an Option shall be effected in such manner as the Remuneration Committee prescribe.

3.9 The Option is exercisable any time after the date of grant.

3.10 The Remuneration Committee may impose one or more objective conditions on any Optionpreventing its exercise unless such condition has been complied with.

3.11 If an option holder ceases to be an Eligible Employee, the right to exercise the Option ceases, providedthat the Board may at its discretion allow such holder to exercise his Option within six months of thedate of such cessation.

3.12 Notwithstanding any other provision of the Chaco Share Option Scheme, an Option may not beexercised after the expiration of seven years beginning with the date upon which the Option is granted.

3.13 On the exercise of an Option, Ordinary Shares will be allotted and/or transferred within 30 days andwhere ordinary shares are issued, they will rank pari passu in all respects with other Ordinary Sharesthen in issue.

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3.14 Adjustment of Options

In the event of any increase or variation of the share capital of the Company, including any rightsissue, capitalisation, consolidation, sub-division or reduction of capital by the Company, theRemuneration Committee may adjust the number of shares over which the option exists and theexercise price, provided that no adjustment shall be made where it would result in an ordinary sharebeing issued at less than its nominal value.

3.15 Take-over, Merger or Winding Up of the Company

In the event of a take-over, all outstanding options may be exercised at any time during the period ofsix months after the time when the offeror has obtained control of the Company and any conditionssubject to which the offer is made have been satisfied. If not so exercised, the option shall lapseimmediately.

3.16 In the event of a merger, the Company reserves the right to cancel the Options and issue new optionsin the resultant merged entity with a value and exercise rights determined by the auditors of theCompany as being a reasonable substitute for the Options.

3.17 In the event of a voluntary winding up, all outstanding Options may be exercised, conditionally on thepassing of a resolution, at any time during the period commencing on the date the notice is given andending on the commencement of the winding up. If not so exercised, the Options shall lapseimmediately.

3.18 Alterations

The Remuneration Committee may at any time alter the provisions of the Chaco Share Option Schemeor the terms of an option granted under it. No alteration shall be made which may materially adverselyaffect an option granted prior to the alteration without the consent of option holders who, if theyexercised their options in full would become entitled, in aggregate, to not less than three quarters ofall the Ordinary Shares which would fall to be allotted upon exercise in full of all outstanding Options.

3.19 Listing

Whilst the Ordinary Shares are traded on a recognised investment exchange, the Company shall, at itsown expense, make application for the admission to trading on such exchange of those OrdinaryShares allotted pursuant to the exercise of any Option.

3.20 Termination

The Company in general meeting or the Remuneration Committee may at any time resolve toterminate the Chaco Share Option Scheme.

3.21 The following table sets out details of options to subscribe for shares in the Company outstanding asat 15 October 2004 (being the latest practicable date prior to the publication of this document) underthe (Chaco Share Option Scheme (all of which were granted for no consideration):

Exercise Price Period of ExerciseDate of Grant No. of Options (pence) (on or before)

20 November 2002 2,500,000 15 18 February 200520 November 2002 200,000 15 31 May 200520 November 2002 200,000 14 8 August 200520 November 2002 900,000 12 1 February 200620 November 2002 2,025,000 13 1 February 200620 November 2002 415,000 13 1 March 200620 November 2002 1,500,000 16 8 June 200620 November 2002 500,000 15 1 July 20072 October 2003 1,000,000 11 2 October 2010

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The Board agreed that those persons who were employed by Sardinia Gold Mining S.p.A (“SGM”),which until February 2004 was a subsidiary of the Company, and who had been granted Options underthe Gold Mines of Sardinia plc Employee Option Plan (now the Chaco Share Option Scheme), shouldbe entitled to retain their Options notwithstanding that they are no longer associated with theCompany.

4 MEMORANDUM AND ARTICLES OF ASSOCIATION

4.1 Memorandum of Association

The Memorandum of Association of the Company provides that the Company’s principal objects, areto carry on business as a general commercial company. The objects of the Company are set out in fullin Clause 4 of its Memorandum of Association.

4.2 Articles of Association

The following is a description of the rights attaching to the shares based on the Company’s Articlesof Association. This description does not purport to be complete and is qualified in its entirety by thefull terms of the Articles.

4.2.1 Rights attaching to Ordinary Shares

(a) Voting

Subject to disenfranchisement in the event of (1) non-payment of calls together with anyinterest and expenses due and payable in respect of any class of shares or (2) non-compliance with a statutory notice requiring disclosure as to beneficial ownership ofshares, and, subject to the Statutes (as defined in the Articles) and any special terms asto voting on which any shares may be issued, at any general meeting, and on a show ofhands every member who is present in person shall have one vote, and on a poll everymember who is present in person or by proxy shall have one vote for each share held.

In the event of an equality of votes at a general meeting, whether on a show of hands ora poll, the Chairman at the meeting shall be entitled to a second or casting vote inaddition to any other vote that he may have.

(b) Dividends

Subject to the Statutes and any provisions set out in the Articles, the Company may byordinary resolution declare dividends to be paid to members according to theirrespective rights and interests in the profits of the Company, but no dividend shall bedeclared in excess of the amount recommended by the Board.

Except insofar as the rights attaching to any share otherwise provide, all dividends shallbe declared and paid according to the amounts paid up (otherwise than in advance ofcalls) on the shares on which the dividend is paid and shall be apportioned and paidproportionately to the amount that is paid up on the shares during any portion or portionsof the period in respect of which a dividend is paid.

Subject to the Statutes, the Board may declare and pay such interim dividends as appearsto the Board to be justified by the profits of the Company available for distribution. Anydividend unclaimed for a period of 12 years after having been declared or become duefor payment shall be forfeited and shall cease to remain owing by the Company.

(c) Distribution of Assets on Liquidation

On a winding-up, the liquidator may, with the sanction of a special resolution of theCompany and subject to and in accordance with the Statutes, divide among the membersin specie the whole or any part of the assets of the Company.

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4.2.2 Transferability of Shares

Subject to any restrictions in the Articles, a member may transfer all or any of his shares byinstrument of transfer in writing in any usual form or in any other form approved by the Board.The instrument of transfer shall be executed by or on behalf of the transferor and (in the caseof a transfer of a share which is not fully paid up) by or on behalf of the transferee. All transfersof shares which are in uncertificated form may be effected by means of a relevant system.

The Board may, in its absolute discretion and without giving any reason, refuse to register anytransfer of shares (or renunciation of a renounceable letter of allotment), unless any suchrefusal is in respect of a share which is fully-paid up or a share upon which the Company hasno lien or is in respect of only one class of share or is in favour of either a single transferee ornot more than four joint transferees or it is duly stamped. The Board may also, in their absolutediscretion without giving any reason, refuse to register any transfer of shares (or annunciationof a renounceable letter of allotment) unless it is delivered for registration to the Office or suchother place as the Board may from time to time determine (as defined in the Articles)accompanied by the relevant share certificates and such other evidence as the Board mayreasonably require to prove the title of the transferor or person renouncing.

The Board may also refuse to register a transfer of uncertified shares in such othercircumstances as may be permitted by the Uncertificated Securities Regulations 1995 or therelevant system.

4.2.3 Variation of Rights

If at any time the share capital of the Company is divided into shares of different classes, anyof the rights for the time being attached to any share or class of shares in the Company (whetheror not the Company is being wound-up) may be varied or abrogated in such manner as may beprovided by such rights or, in the absence of any such provision, either with the written consentof the holders of not less than three-quarters in nominal value of the issued shares of that classor with the sanction of an extraordinary resolution passed at a separate general meeting of theholders of shares of the class duly convened. At such meeting, there should be a quorum of notless than two persons holding or representing by proxy at least one-third of the nominal valuepaid up on the issued shares of that particular class.

Subject to the terms of issue of all rights attached to any shares, the rights attached to any classof share shall not be deemed to be varied or abrogated by the creation or issue of any newshares ranking pari passu therewith or by the purchase or redemption by the Company of itsown shares in accordance with the Statutes and the provisions of the Articles.

4.2.4 Changes in Capital

Subject to the Statutes and to any special rights for the time being attached to any existingshares, the Company may issue redeemable shares.

Subject to the Statutes and to any special rights for the time being attached to any existingshares, any shares may be allotted or issued with such preferred, deferred or other special rightsor restrictions as the Company may from time to time by ordinary resolution determine. Whereno such ordinary resolution has been passed or as far as such ordinary resolution does not makespecific provision, the Board may determine such special rights or restrictions.

The Company may by ordinary resolution increase its share capital, consolidate and divide allor any of its share capital into shares of a larger amount than its existing shares, cancel anyshares which have not been taken or agreed to be taken by any person and diminish the amountof its share capital by the amount of the shares so cancelled and, subject to the Statutes, sub-divide its shares into shares of smaller amounts and determine that one or more of the sharesmay, as compared with the others have any such preferred, deferred or other special rights orbe subject to such restrictions as the Company has the power to attach to unissued or newshares.

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Subject to the provisions of the Statutes and to any rights for the time being attached to anyshares, the Company may by special resolution reduce its share capital, or any capitalredemption reserve or share premium account in any way. The Company may also, subject tothe requirements of the statutes, purchase its own shares.

4.2.5 Untraced Shareholders

Subject to various notice requirements as provided for in the Articles, the Company may sell,at the best price reasonably obtainable, any share of a member or any share which a person isentitled to by transmission provided that during the period of twelve years prior to the date ofpublication of advertisements forming part of the notice requirements, no cheque, order orwarrant in respect of such share sent by the Company to the member’s address on the Register(as defined in the Articles) or other last known address given by the member has been cashedand the Company has received no communications in respect of such share from such memberor person and also provided that during such twelve year period, the Company has paid at leastthree cash dividends (whether interim or final) and no such dividend has been claimed by theperson entitled to it.

4.2.6 Non-UK Shareholders

No member is entitled to receive notices from the Company, including notices of generalmeetings, unless he has given an address in the UK to the Company to which such notices maybe sent or is registered on an overseas branch register.

4.2.7 Sanctions on Shareholders

A holder of shares loses his rights to vote in respect of shares if for and so long as he or anyother person appearing to be interested in those shares fails to comply with a request by theCompany under the Act requiring him to give particulars of any interest in those shares within14 days.

Where the shares subject to the notice represent at least 0.25 per cent. in nominal value of theissued shares of the class, any dividend or other money payable in respect of the shares shallbe withheld by the Company, unless the Board otherwise determines. Furthermore, in suchcircumstances, no transfer other than an accepted transfer, of any shares held by the membershall be registered unless the member is not himself in default as regards supplying theinformation required and the member proves to the satisfaction of the Board that no person indefault as regards supplying such information is interested in any of the shares which aresubject of the transfer.

4.2.8 Directors

The Directors (other than alternate Directors) shall be entitled to receive by way of fee for theirservices such sum as the Board may from time to time determine. Any fees payable pursuantto the above provisions shall be distinct from any salary, remuneration or other amountspayable to a Director and shall accrue from day to day. A Directors shall be entitled to be repaidall reasonable travelling, hotel and other expenses properly incurred by him in or about theperformance of his duties as a Director.

Save as provided for in the Articles, a Director shall not vote on, or be counted in the quorumin relation to, any resolution of the Board or committee of the Board concerning any contract,arrangement, transaction or any other proposal whatsoever to which the Company is or is to bea party and in which he has an interest which (together with any connected interest) is to hisknowledge a material interest. This prohibition shall not, however, apply to:

(a) the giving of any guarantee, security or indemnity in respect of money lent orobligations incurred by him or any other person at the request of or for the benefit of theCompany or any of its subsidiaries;

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(b) the giving of any guarantee, security or indemnity in respect of a debt or obligation ofthe Company or any of its subsidiaries for which he himself has assumed responsibilityin whole or in part under a guarantee or indemnity or by the giving of security;

(c) any proposal concerning an offer of shares, debentures or other securities of or by theCompany or any of its subsidiaries in which offer he is or may be entitled to participate;

(d) any proposal concerning any other company in which he (together with any personsconnected with him) does not to his knowledge have an interest (as that term is used inPart VI of the Act) in one per cent. or more of the issued equity share capital or thevoting rights in such company;

(e) any proposal relating to an arrangement for the benefit of employees of the Company orany of its subsidiaries which does not award him any privilege or benefit not generallyawarded to the employees to whom such arrangement relates; or

(f) any proposal concerning insurance which the Company proposes to maintain orpurchase for the benefit of, inter alia, the Directors.

Subject to the provisions of the Statutes, and provided that a Director has disclosed to the Boardthe nature and extent of any material interest he may have, a Director may notwithstanding hisoffice, enter into or otherwise be interested in any contract, transaction, arrangement orproposal with the Company or in which the Company is otherwise interested, either with regardto his tenure of any office or place of profit or as vendor, purchaser or otherwise, and may holdany other office or place of profit under the Company (except that of auditor) in conjunctionwith the office of Director and may act by himself or through his firm in a professional capacityfor the Company on such terms as to remuneration and otherwise as the Board may arrange,either in addition to or in lieu of any remuneration provided for by the Articles. Such Directormay also be a director or other officer of, or employed by, or a party to any transaction orarrangement with or otherwise interested in, any company promoted by the Company or whichthe Company is otherwise interested or as regards which the Company has any powers ofappointment. A Director shall not be liable to account to the Company for any profit,remuneration or other benefit realised by any such office, employment, contract, arrangement,transaction or proposal and no such contract, arrangement, transaction or proposal should beavoided on the grounds of any such interest or benefits.

Notwithstanding Section 293 of the Act, a Director aged 70 or more shall be capable of beingappointed a Director and shall not be required to retire by reason of his age.

A Director shall not be required to hold any qualifying shares in the Company.

At each annual general meeting of the Company one third (or the nearest number to one-third)of the Directors who shall retire from office. In addition to any Directors required to retire byrotation, any Director who at an annual general meeting of the Company shall have then beena Director at each of the preceding two annual general meetings of the Company, and who wasnot required to retire by rotation at those previous general meetings and who has not otherwiseceased to be a Director and then been re-appointed at a general meeting, shall also be requiredto retire.

Subject to the provisions of the Statutes and of the Articles, the Directors to retire by rotationat each annual general meeting shall be, firstly any Director who wishes to retire and not offerhimself for re-election and secondly those Directors who have been longest in office since theirlast appointment or re-appointment. The Directors to retire on each occasion shall bedetermined by the composition of the Board at the start of business on the date of the noticeconvening the annual general meeting notwithstanding any change in the number or identity ofthe Directors after that time but before the close of the meeting.

A Director who retires at an annual general meeting may be re-appointed.

Subject to the provisions of the Articles, the Company may by ordinary resolution appoint aperson who is willing to act to be a Director. Unless determined by the Company by ordinaryresolution, the number of Directors shall be not less than two but there shall be no maximum.

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Subject to the provisions of the Statutes, the Board may from time to time appoint one or moreDirectors to hold any employment or executive office for such period and on such terms as itdecides.

4.2.9 Borrowing Powers

The Board may exercise all the powers of the Company to borrow money and to mortgage orcharge all or any part of the undertaking, property and assets and uncalled capital of theCompany and, subject to the provisions of the Statutes, create and issue debenture and otherloan stock and debentures and other securities, whether outright or as collateral security for anydebt, liability or obligations of the Company or of any third party.

4.2.10 Reserves

The Board may, before recommending any dividend, carry to reserve out of the profits of theCompany such sums as it thinks fit.

The Board may also, with the authority of an ordinary resolution of the Company, resolve tocapitalise any undivided profits of the Company not required for paying any preferentialdividend or any sum standing to the credit of any reserve or fund of the Company which isavailable for distribution or standing to the credit of the share premium account or capitalredemption reserve or other undistributable reserve.

5 DIRECTORS’ AND OTHER INTERESTS

5.1 Directors’ Interests

The interests (all of which are beneficial unless stated otherwise) of the Directors and their immediatefamilies and the persons connected with them (within the meaning of Section 346 of the Act) whichare required to be notified to the Company pursuant to Sections 324 and 328 of the Act or are requiredto be disclosed in the Register of Directors’ interests pursuant to Section 325 of the Act in the issuedshare capital of the Company and the existence of which is known to, or could with reasonable duediligence be ascertained by, any Director as at the date of this document are as follows:

No. of OrdinaryNo. of % of Shares over

Ordinary Issued Share which Options Name Shares Capital granted

J Pither 150,000 0.04 500,000T Elder 0 0 500,000J Morris 2,600,000 0.74 500,000L Graber 0 0 500,000M Groák 0 0 500,000D Jendry1 2,000,000 0.57 Nil1 1,000,000 shares are held by D&J Superannuation Fund. 1,000,000 shares are held by Jendry Management Pty. Ltd.

5.2 Save as disclosed above, none of the Directors (or persons connected with the Directors within themeaning of Section 346 of the Act) has any interest, whether beneficial or non-beneficial, in any shareor loan capital of the Company.

5.3 There are no outstanding loans granted or guarantees provided by the Company to or for the benefitof any of the Directors.

5.4 Save as otherwise disclosed in this document, no Director has any interest, whether direct or indirect,in any transaction effected by any shareholder of the Company which is or was unusual in its natureor conditions or significant to the business of the Company taken as a whole and which was effectedby the Company since its incorporation and which remains in any respect outstanding or under-performed.

5.5 None of the Directors or any person connected with them (within the meaning of section 346 of theAct) is interested in any related financial product referenced to the Ordinary Shares (being a financial

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product whose value is, in whole or in part, determined directly or indirectly by reference to the priceof the Ordinary Shares including a contract for difference or a fixed odds bet).

5.6 Directors’ Service Agreements and Letters of Appointment

The terms of the Directors’ letters of appointment are as follows:

(a) Thomas Elder and Martin Groák entered into agreements with the Company to act as Non-Executive Directors on 10 October 2004 with effect from 20 November 2002. Lee Graberentered into an agreement with the Company to act as a Non-Executive Director on 11 October2004 with effect from 20 November 2002. Douglas Jendry entered into an agreement with theCompany on 20 October 2004 to act as a Non-Executive Director with effect from Admission.The appointments are for an indefinite period subject to 3 months’ notice by either party at anytime and are also subject to the Articles. Thomas Elder, Martin Groák, Douglas Jendry and LeeGraber will receive an annual fee of £10,000 (plus VAT, if any) payable in quarterly instalmentsof £2,500 in arrears on 25th (or nearest working day) of March, June, September andDecember. This fee will be reviewed annually and any increase will be entirely at the discretionof the Company. If awarded, any increase in the fee will take effect from the monthimmediately following the review date. The Non-Executive Directors will not be entitled to anybonus, pension or other benefits. They are subject to confidentiality obligations and provisionsrelating to conflicts of interest. In the event of termination of the appointment of any of theNon-Executive Directors, howsoever caused, the Non-Executive Director will not be entitled toany compensation for loss of office. The Non-Executive Directors are entitled to participate inthe Company’s share option scheme and, in addition to the £10,000 annual fee, will be eligibleto be reimbursed for all reasonable out of pocket expenses properly incurred in the course ofproviding the services, subject to the production of valid receipts.

(b) Jon Pither entered into an agreement with the Company to act as a Non Executive Director andChairman of the Company on 10 October 2004 with effect from 20 November 2002. Theappointment is for an indefinite period subject to 3 months’ notice by either party at any timeand also subject to the Articles. Jon Pither will receive an annual fee of £35,000 (plus VAT, ifany) in respect of his services as a Non-Executive Director and Chairman. This fee is payablein quarterly instalments of £8,750 per quarter in arrears on 25th (or nearest working day) ofMarch, June, September and December. The fee will be reviewed annually and any increasewill be entirely at the discretion of the Company. Jon Pither will not be entitled to any bonus,pension or other benefits. He is subject to confidentiality obligations and provisions relating toconflicts of interests. In the event of termination of his appointment, howsoever caused, JonPither has agreed that he will not be entitled to any compensation for loss of office. Jon Pitheris entitled to participate in the Company’s share option scheme and, in addition to his annualfee, will be reimbursed for any reasonable out of pocket expenses properly incurred in thecourse of providing the services to the Company, subject to the production of valid receipts.

(c) John Morris entered into an agreement with the Company to act as Executive Director on20 October 2004 (the “Executive Undertaking”) with effect from the date of the agreement. TheExecutive Undertaking was entered into in consideration of the Company entering into anagreement with Forman Pty. Ltd (the “Consultancy Agreement”) for the provision ofconsultancy services. Both agreements govern the appointment of John Morris as ExecutiveDirector of the Company. The appointment is for an indefinite period subject to 3 months’notice by either the Company, John Morris or Forman Pty. Ltd. Forman Pty. Ltd will receivean annual fee of £50,000 (plus VAT, if any) payable in monthly instalments in respect of theservices provided through John Morris. The Company shall reimburse Forman Pty. Ltd for anyreasonable expenses incurred by John Morris during the course of providing the services,subject to the production of valid receipts. Both John Morris and Forman Pty. Ltd are subjectto confidentiality and intellectual property obligations and provisions relating to conflicts ofinterests/non-solicitation and non-dealing restrictions. No relationship of employer andemployee or partners arises between the Company and John Morris or between the Companyand Forman Pty. Ltd as a result of these agreements. Forman Pty. Ltd is responsible for the

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payment of any remuneration payable to and benefits provided for John Morris under hiscontract of employment or otherwise and Forman Pty. Ltd agrees to indemnify the Companyin respect of any claims thereof.

Save as disclosed in paragraph 5.6 above, there are no service contracts, existing or proposed, betweenany Director and any member of the Enlarged Group.

Marker Management Services Limited (of which Martin Groák is a shareholder) will receiveconsultancy fees in relation to the Acquisition, the Admission and the Placing amounting to £33,000(in aggregate).

5.7 The aggregate remuneration, including benefits in kind, of the Directors of the Company for thefifteen month period ended 31 March 2004 amounted to £205,471. It is estimated that under thearrangements currently in force, the aggregate remuneration and benefits in kind to be paid to theDirectors for the financial period from 31 March 2004 and ending on 31 March 2005 will beapproximately £200,000.

There will be no variation in the total emoluments receivable by the Directors as a result of thePlacing.

5.8 Additional Information on the Directors

5.8.1 In addition to the directorships in the Company, the Directors hold or have held the followingdirectorships or partnerships within the five years immediately prior to the date of this document:

Director Current Directorships/Partnerships Past Directorships/Partnerships

Tanfield Group plcCorpex LimitedJourdan plcSOC Group plcSOC Insurance Fund plcSurrey Management Services LimitedActive Capital Trust plc (formerly The

Aim Trust plc)The AiM VCT plcAlumasc Group plcTransense Technologies plcAortech International plcINS Underwriting 100 LimitedSt Helens Capital plc

Equinox International LimitedBranston Old Rectory (TP) Limited

(formerly Kemira CoatingsInvestments Limited)

Prestige Travel LimitedEmerald Energy plcWorld Telecom plcCity Technology Holdings LimitedSedgwick Oakwood LloydsUnderwriting Agents LimitedAvon Group Holdings LimitedAvon Holdings LimitedLady in Leisure Group plcFenns Bank Estates LimitedCorporate Synergy Holdings PlcRandom Number Lottery LimitedBarncross LimitedSoundworth LimitedMetnor Group plcBoldappeal LimitedSourceunit LimitedCrossway Marketing LimitedEllegance LimitedAbingdon Capital PlcPacesetter Travel LtdMedoro Resources LtdSOC Private Capital LimitedPolymetal LimitedHealthsource LimitedEurokit UK LimitedGalatial Ace plcPremier Direct Group plcPremier Books UK LimitedUltimate Leisure Group plcUltimate Leisure LimitedUltimate Leisure (Coast) LimitedDolomore LimitedMaison Caurette Holdings Limited

Jon Pither1, 2, 3, 4, 5, 6, 7, 8

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Director Current Directorships/Partnerships Past Directorships/Partnerships

1 Jon Pither became non-executive Chairman of Dolomore Limited (“Dolomore”) in September 1995 at theinstigation of the majority shareholders in Dolomore. Dolomore was an unquoted holding company withsubsidiaries operating in the food and beverage sector. On 25 March 1996, Dolomore was put into administrativereceivership. The directors’ sworn statement of affairs for Dolomore showed an estimated deficiency as regardsholders of unsecured loan notes and sundry creditors of £5,062,470.

2 Jon Pither was a director of Maison Caurette Holdings Limited (“Maison Caurette”) which was a non-tradingsubsidiary of Dolomore. Maison Caurette went into administrative receivership on 25 March 1996.

3 Jon Pither became a director of World Telecom Public Limited Company in July 1994. An administrative receiverwas appointed in December 1999 under powers contained in a security document dated 7 January 1999 grantingfixed and floating charges over all property and assets of the company in favour of Chase Manhattan Bank.

4 Jon Pither became a director of Avon Group Holdings Limited and a number of its trading and non-tradingsubsidiaries on 1 October 1992. The company was a private, unquoted holding company and was placed inadministrative receivership in January 2001 at the instigation of its bankers, Lloyds TSB, Fenns Bank EstatesLtd., a wholly owned subsidiary of the group, was placed into creditors voluntary liquidation in February 2002,at which time the company was wound up.

5 In May 1996, Jon Pither became a non-executive chairman of Lady in Leisure Group plc. An administrativereceiver was appointed in August 2001, under powers contained in a security document, granting fixed andfloating charges over all property and assets of the group, in favour of Barclays Bank plc.

6 Jon Pither became a director of Eurokit UK Ltd in July 1991. An administrative receiver was appointed in March2001.

7 Jon Pither became a director of Belco 10 Ltd in June 1996. Belco was liquidated in March 1999.

8 Jon Pither became a director of Galatial Ace plc on 16 April 1996. The company was put into members’ voluntaryliquidation on 12th February 2004. The liquidator was appointed on 12 February 2004 and Jon Pither resignedfrom the company on 25 March 2004.

9 Mr Groák was a director of Lazarus Metal Resources (UK) Limited and Lazarus Metals Limited, a UK basedmetals trader. Both companies were put into administrative receivership in January 2001 following the loss of acargo at sea for which financial recovery could not be obtained from the insurers. The directors were exoneratedby the Administrator in his report.

5.8.2 Save as disclosed, none of the Directors has:

(a) any unspent convictions in relation to indictable offences; or

(b) had any bankruptcy order made against him or entered into any voluntary arrangements;or

(c) been a director of a company which has been placed in receivership, compulsoryliquidation, creditors voluntary liquidation, administration, been subject to acompany(voluntary arrangement or any composition or arrangement with its creditors

Impress Ventures LtdCarpathian Resources LtdJendry Management Pty LtdMontgomery Burns Pty Ltd

Lion Energy LtdDouglas Jendry

Asia Pacific Resources LimitedTenke Mining CorporationScorpio Mining CorporationAuEx Ventures Inc.

Lachlan Resources NLLee Graber

Uruguay Minerals Exploration Inc. Sardinia Gold Mining SpAGold Mines of Sardinia Pty Ltd

John Morris

St Michaels Residents Company LimitedMano River Resources Inc.Centamin Egypt Ltd

Carpathian Gold LtdTom Elder

Marker Management Services LtdThe AiM VCT plc

Lazarus International LtdLazarus Metal Resources LtdLazarus Metal Resources (UK) LtdMedoro Resources LtdSardinia Gold Mining SpA

Martin Groák9

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generally or any class of its creditors whilst he was a director of that company or withinthe 12 months after he ceased to be a director in that company; or

(d) been a partner in any partnership which has been placed in compulsory liquidation,administration or been the subject of a partnership voluntary arrangement whilst he wasa partner in that partnership or within the 12 months after he ceased to be a partner inthat partnership; or

(e) owned, or been a partner in a partnership which owned, any asset which while he ownedthat asset, or while he was a partner or within 12 months after his ceasing to be a partnerin the partnership which owned that asset, entered into receivership; or

(f) been publicly criticised by any statutory or regulatory authority (including recognisedprofessional bodies); or

(g) been disqualified by a court from acting as a director of any company or from acting inthe management or conduct of affairs of a company.

6 SUBSTANTIAL SHAREHOLDERS

Save as disclosed in paragraph 5.1 above, the Company is only aware of the following persons who as at15 October 2004 (being the latest practicable date prior to the publication of this document), disregardingany Placing Shares to be acquired in the Placing, are interested, whether directly or indirectly, jointly orseverally, in 3 per cent. or more of the Company’s issued share capital of the Company or could exercisecontrol over the Company:

Name Shareholding Percentage

Willbro Nominees Limited 81,842,901 23.2Chase Nominees Limited 25,360,000 7.2Fitel Nominees Limited 12,250,000 3.5Homestake Mining Company of California (Barrick Gold Corp) 17,334,396 4.9BNY (OCS) Nominees Limited 11,437,500 3.2

Save as disclosed in this paragraph 6 and paragraph 5.1 the Directors are not aware of any person or personswho is, directly or indirectly, jointly or severally, at the date of this document, or immediately followingAdmission exercise, will exercise or could exercise control over the Company.

7 MATERIAL CONTRACTS

In addition to the contracts referred to in Part IX above, the following contracts, not being contracts enteredinto in the ordinary course of business, have been entered into by the Company or its subsidiaries during thetwo years immediately preceding the date of this document and are or may be material:

7.1 Amalgamation Agreement

An amalgamation agreement dated 28 November 2003 between (1) the Company, (2) MedoroResources Ltd and (3) Full Riches Investments Ltd (“FRI”) pursuant to which FRI and MedoroResources Ltd agreed to amalgamate under the Business Corporations Act (Yukon) to form a newcorporation, Medoro.

On 24 February 2004, Medoro Resources Ltd, a wholly-owned subsidiary of the Companyincorporated in the Yukon Territory, Canada (“GMS Canada”) was merged (the “Merger”) with FRI,a company incorporated in the Yukon Territory, Canada and listed on the TSX Venture Exchange. Theresulting merged company is also traded on the TSX Venture and AIM and is also called Medoro.

Immediately prior to the Merger, the shares of Gold Mines of Sardinia Pty Ltd. (“GMS Australia”)were transferred to GMS Canada in exchange for 50 per cent. of the shares in Medoro (on a fully-diluted basis). GMS Australia owned indirectly all of the significant assets of the former Gold Minesof Sardinia plc Group, notably 90% of Sardinia Gold Mining SpA.

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Under the terms of the Amalgamation Agreement governing the Merger, the shares in Medororeceivable by the Company were distributed by way of dividend to its shareholders. Each shareholderof GMS plc received one common share of Medoro for every 7.0844 shares held in the Company.

Similarly, each shareholder of FRI received one common share of Medoro for every two FRI sharesheld.

Outstanding options and warrants for each company were also consolidated on a similar basis, thosefor the Company being dealt with in accordance with the following formula (“the Formula”): Eligibleemployees holding options in the Company were granted options in 1 common share in Medoro forevery 7.0844 share options held in the Company. The exercise price applicable to these Medorooptions was 7.0844 times the exercise price of the Company’s options, converted at a rate of £1 =Canadian $2.25 (Options previously granted in the Company continue to be valid for those optionsholders who were employees of SGM at 16 June 2004).

Analogously, 11,111,111 warrants held by Sargold Resource Corp (“Sargold”, formerly CanleyDevelopment Inc) were replaced by warrants in Medoro in accordance with the Formula under theterms of the novation agreement forming party of the completion of the Business Combination, whichalso caused Sargold’s warrants in the Company to lapse.

The Company had in addition agreed to grant share options to Bolivar Gold Corp (“Bolivar”) for upto 10 per cent. of the Company’s issued capital under the terms of an option agreement to joint venturethe Monte Ollasteddu prospect. These options would have been granted on commencement of anapproved drilling programme. The rights and obligations under the option agreement were novated toMedoro. Under the novation agreement, Bolivar became entitled to 3,872,626 Medoro warrants in lieuof the options in the Company, which lapsed.

All outstanding contractual obligations of the Company of a commercial nature, including ongoingconsulting agreements and the joint venture agreements with Sargold and Bolivar, were novated toMedoro upon the completion of the Merger.

7.2 Nominated Adviser Agreement with Daniel Stewart

A nominated adviser and broker agreement dated 11 August 2004 between the Company and DanielStewart pursuant to which the Company has appointed Daniel Stewart to act as nominated adviser andbroker to the Company for the purposes of AIM. The Company has agreed to pay Daniel Stewart anannual fee of £30,000 plus VAT for its services as a nominated adviser and broker. The agreementcontains certain warranties and undertakings by the Company and indemnities given by the Companyin respect of, inter alia, compliance with all applicable and regulations. The agreement continues foreighteen months from the date of the agreement and thereafter is subject to termination, inter alia, byeither the Company or Daniel Stewart on the giving of not less than three months’ prior written notice.

7.3 Placing Agreement with Daniel Stewart

The Placing Agreement dated 20 October 2004 between Daniel Stewart (1) and the Company (2) andthe Directors (3) pursuant to which Daniel Stewart agreed, as agent for the Company, conditionally touse its reasonable endeavours to procure placees for the Placing Shares at the Placing Price. Under theterms of the Placing Agreement, the Company has agreed to pay Daniel Stewart a corporate financefee of £70,000 and in addition, commission of 5 per cent. of the value of Placing Shares subscribedfor at the Placing Price and expenses of the Placing, including professional charges. The PlacingAgreement contains certain representations and warranties given by the Company and certain of theDirectors and (in respect only of the Company) an indemnity in favour of Daniel Stewart. The PlacingAgreement also contains provisions which enable Daniel Stewart to terminate the Placing Agreementin certain circumstances prior to the completion of the Placing, including (amongst other matters)circumstances where any warranties are found to be untrue or inaccurate in any material respect.

Save as set out in this paragraph 7, there are no contracts (not being in the ordinary course of business)entered into by any member of the Enlarged Group which are or may be material.

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8 TAXATION

The following comments are intended as a general guide to certain aspects of current tax law andUnited Kingdom Revenue Practice. This should not be a substitute for individual advice from anappropriate professional adviser. Any Shareholder who is in any doubt as to his or her tax position orwho is subject to tax in a jurisdiction other than the United Kingdom should consult a professionaladviser without delay. In particular, all Shareholders, including all UK resident Shareholders, areadvised to consider the potential impact of any relevant double tax treaty.

The comments are based on the law and understanding of the practice of the tax authorities in the UK at thedate of this document.

8.1 Taxation of Dividends

Under current United Kingdom legislation, no tax is required to be withheld from dividend paymentsby the Company. A Shareholder (other than a company) receiving a dividend from the Company alsoreceives a tax credit in respect of the dividend of an amount equal to one ninth of the amount of thedividend which is 10 per cent. of the sum of the dividend and the tax credit. Generally, the liability toUnited Kingdom income tax is calculated on the sum of the dividend and the tax credit (‘’the dividendincome’’). Individual Shareholders whose income is within the starting rate or basic rate tax bandswill be subject to income tax at the rate of 10 per cent. on their dividend income, so that suchShareholders will have no further liability to income tax on that dividend income. The higher rate ofincome tax is 32.5 per cent. in respect of dividend income. A higher rate tax payer may set the taxcredit against his liability to income tax on the dividend income and will have further tax to pay of22.5 per cent. of the dividend income. A Shareholder who is not liable to income tax on the dividendincome (or any part of it) may not generally claim payment of the tax credit (or part of it) from theInland Revenue.

A United Kingdom resident corporate Shareholder is not normally liable to United Kingdom taxationon any dividend received. United Kingdom resident Shareholders (including authorised unit trusts andopen-ended investment companies) and pension funds are not entitled to payment in cash of the taxcredit. Whether Shareholders who are resident for tax purposes in countries other than the UnitedKingdom are entitled to a payment from the Inland Revenue of a proportion of the tax credit in respectof dividends on their Shares depends in general upon the provisions of any double taxation conventionor agreement which exists between such countries and the United Kingdom. In addition, individualShareholders who are resident in countries other than the United Kingdom but who areCommonwealth citizens, nationals of member states of the European Economic Area or fall withincertain other categories of person within Section 278 of the Income and Corporation Taxes Act 1988are entitled to the entire tax credit which they may set against their total United Kingdom income taxliability or, in appropriate cases, reclaim in cash.

Non-United Kingdom resident Shareholders should consult their own tax advisers on the possibleapplication of such provisions and the procedure for claiming any relief or credit in respect of suchtax credit in their own jurisdictions. However, in general, no cash payment will be recoverable fromthe Inland Revenue in respect of the tax credit.

8.2 Stamp Duty and Stamp Duty Reserve Tax (‘’SDRT’’)

No stamp duty or SDRT will be payable on the issue of shares save that special rules apply to personsoperating clearance services or depository receipt services. A transfer or sale of shares will generallybe subject to ad valorem stamp duty at the rate of 0.5 per cent. rounded up to the nearest multiple of£5 on the amount or value of the consideration paid by the purchaser. If an unconditional agreementfor the transfer of such Shares is not completed by a duly stamped transfer to the transferee by theseventh day of the month following the month in which the agreement becomes unconditional, SDRTwill be payable on the agreement at the rate of 0.5 per cent. of the amount of value of considerationpaid. Liability to SDRT is generally that of the transferee. Where a purchaser or transfer is effectedthrough a member of the London Stock Exchange or a qualified dealer, the said member or dealer willnormally account for the SDRT. When Shares are transferred to a CREST member who holds those

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shares in uncertificated form as a nominee for the transferor, no stamp duty or SDRT will generallybe payable. When Shares are transferred by a CREST member to the beneficial owner (on whosebehalf it has held them as nominee), no stamp duty or SDRT will generally be payable. Where achange in beneficial ownership of shares held in uncertificated form occurs and such change is forconsideration in money or money’s worth (whether the transferee will hold those shares in certificatedor uncertificated form) a liability to SDRT at the rate of 0.5 per cent. of the amount or value of theconsideration will arise. This will generally be met by the new beneficial owner.

8.3 Section 574 Relief

Section 574 of the Income and Corporation Taxes Act 1988 permits a loss on investment incurred byan individual in ordinary shares subscribed for in a qualifying trading company to be relieved againstan individual investor’s taxable income as an alternative to setting the loss against capital gains. Uponmaking the appropriate claim, relief is given against income in the tax year in which the loss arises,or the preceding year.

8.4 Inheritance Tax (‘’IHT’’) Relief

Unquoted ordinary shares in companies whose shares are listed on AIM qualify for 100 per cent. IHTBusiness Property Relief provided that they have been held for two years prior to an event giving riseto a potential charge of IHT. Any shareholder who has any doubts as to his IHT position shouldconsult a professional adviser, especially before making any gift or transfer of shares.

9 WORKING CAPITAL

The Directors are of the opinion that, having made due and careful enquiry and taking into account theexisting available facilities and the net proceeds of the Placing receivable by the Company, the workingcapital available to the Enlarged Group will be sufficient for its present requirements, that is, for at least thenext twelve months from the date of Admission.

10 LITIGATION

There are no legal or arbitration proceedings (including, to the knowledge of the Directors, any suchproceedings which are pending or threatened or being brought by or against the Enlarged Group) which mayhave or have had during the 12 months immediately preceding the date of this document a significant effecton the financial position of the Enlarged Group.

11 GENERAL

11.1 Daniel Stewart has given and not withdrawn its written consent to the issue of this document includingreferences to its name in the form and context in which they appear.

11.2 PXP Management Limited has given and not withdrawn its written consent to the inclusion in thisdocument of its report in Part IV of this document and to the issue of this document and the referencesto its name in the form and content in which it appears.

11.3 Grant Thornton UK LLP have given and not withdrawn their written consent to the inclusion in thisdocument of their reports in Parts V, VI, VII and VIII of this document and to the issue of thisdocument and the references to their name in the form and context in which they appear.

11.4 Save as disclosed in this document and specifically the share placing in April 2004 (raising proceedsof £790,000) and the acquisition of data (the subject of the Information Sale Agreement (referred toin paragraph 2.2 of Part IX)) in September 2004, there has been no significant change in the financialor trading position of the Company since 31 March 2004, being the date to which the last auditedfinancial statements of the Company were published.

11.5 Save as disclosed in this document, there are no investments by the Enlarged Group in progress whichare significant.

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11.6 Save as disclosed in this document, the Directors are not aware of any exceptional factors which haveinfluenced the Company’s recent activities.

11.7 The total costs and expenses payable by the Company in connection with or incidental to theAcquisition, the Placing and Admission including registration and London Stock Exchange fees,printing, advertising and distribution costs, legal and accounting fees are estimated to amount to£197,500 (excluding VAT). The gross proceeds of the Placing to the Company are expected to be£750,000 and the net cash proceeds to the Company of the Placing are expected to be £515,000.

The commissions payable by the Company in connection with or incidental to the Admission, thePlacing and the Acquisition are estimated to amount to approximately £37,500 (excluding VAT).

11.8 The period within which placing participations may be accepted pursuant to the Placing andarrangements for the payment and holding of subscription monies pending Admission are set out inthe Placing Agreement and in the placing letters sent to prospective placees.

11.9 The Placing Shares are not being offered generally and no applications have or will be accepted otherthan under the terms of the Placing Agreement and the placing letters. All the Placing Shares havebeen conditionally placed. The Placing is not being guaranteed or underwritten by any person. Moniesreceived from applicants pursuant to the Placing will be held in accordance with the terms andconditions of the Placing until such time as the Placing Agreement becomes unconditional in allrespects. If the Placing Agreement does not become unconditional in all respects by 10 December2004, application monies will be returned to Placees at their risk without interest.

11.10 The Company is placing 36,585,365 new Ordinary Shares pursuant to the Placing. It is expected thatdefinitive share certificates will be despatched by hand or first class point by 17 November 2004. Inrespect of uncertificated shares, it is expected that Shareholders’ CREST stock accounts will becredited on 17 November 2004.

11.11 Save as disclosed in this Document, no payment (including commissions) or other benefit has been oris to be paid or given to any promoter of the Company.

11.12 The minimum amount which in the opinion of the Directors must be raised by the Placing in order toprovide the sums required to be provided pursuant to paragraph 21(a) to Schedule 1 of the POSRegulations is £750,000 which will be applied as follows:

(i) purchase price of property – nil

(ii) commissions and expenses of the Placing, the Admission and the Acquisition – £235,000

(iii) repayment of borrowings – nil

(iv) working capital – £515,000

11.13 Other than the proposed application for Admission, the Ordinary Shares have not been admitted todealings on any recognised investment exchange nor has any application for such admission beenmade and there is not intended to be made any other arrangements for dealings in the Ordinary Shareson any such exchange.

11.14 Daniel Stewart has been appointed nominated adviser and broker to the Company and is registered inEngland and Wales with company number 02354159 and its registered office is at 48 BishopsgateLondon EC2N 4AJ. Daniel Stewart is regulated in the UK by the Financial Services Authority.

11.15 No person (excluding professional advisers otherwise disclosed in this document and trade suppliers)has:

11.15.1 received, directly or indirectly, from the Enlarged Group within 12 months preceding theCompany’s application for Admission; or

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11.15.2 entered into contractual arrangements (not otherwise disclosed in this document) to receive,directly or indirectly, from the Enlarged Group on or after Admission any of the following:

(a) fees totalling £10,000 or more; or

(b) securities in the Company with a value of £10,000 or more calculated by referenceto the Placing Price; or

(c) any other benefit with a value of £10,000 or more at the date of Admission.

Between June and August 2004, Douglas Jendry undertook consultancy services in relation to theAcquisition for the Company with a value of approximately A$30,000.

11.16 The Company’s accounting reference date is 31 March.

11.17 Save as disclosed in this document, there are no patents or other intellectual property rights, licencesor particular contracts which are, or may be, of fundamental importance to the business of theCompany.

12 DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of Charles Russell, 8-10New Fetter Lane, London EC4A 1RS, during normal working hours on any week day (Saturdays, Sundaysand public holidays excepted) from the date of this document up to and including the date of the EGM. Thedocuments will also be available for inspection at the Extraordinary General Meeting:

12.1 The Memorandum and Articles of Association of the Company;

12.2 The Competent Person’s Report set out in Part IV of this document;

12.3 The Financial Information set out in Parts V, VI, VII and VIII of this document;

12.4 The material contracts referred to in paragraph 7 of Part X of this document;

12.5 The letters of consent referred to in paragraph 11 of Part X of this document; and

12.6 The Notice of EGM.

12.6 The Annual Report of the Company for the fifteen month period ended 31 March 2004;

Dated 20 October 2004

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CHACO RESOURCES PLC(Incorporated and Registered in England and Wales under the Companies Act 1985

with Registered Number 04030166)

(“the Company”)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT an Extraordinary General Meeting of the Company will be held atthe offices of Charles Russell, 8-10 New Fetter Lane, London EC4A 1RS at 10.00 a.m. on 15 November2004 for the purpose of considering and, if thought fit, passing the following resolutions, of which resolution1 will be proposed as an ordinary resolution and resolution 2 will be proposed as a special resolution.

ORDINARY RESOLUTION

1. THAT the proposed acquisition (“the Acquisition”) by the Company of the entire issued share capitalsof Amerisur S.A. and Bohemia S.A. on the terms and subject to the conditions of the agreement (“theAcquisition Agreement”) as described in the Circular to shareholders of the Company dated20 October 2004 (“the Circular”) be and is hereby approved and that the board of directors of theCompany (or a duly constituted committee of that board) be and is hereby authorised to waive, amend,vary or extend any of the terms and conditions of the Acquisition or the Acquisition Agreement (butnot to any material extent) and do all such things as it may consider necessary or desirable inconnection with the Acquisition.

SPECIAL RESOLUTION

2. THAT subject to, and conditional upon, Resolution 1 having been passed and in substitution for theprevious authority, the Directors be and are empowered pursuant to Section 95 of the Act and pursuantto the general authority conferred on the Directors under s.80 of the Act by resolution of the Companypassed at the Annual General Meeting of the Company on 28 July 2004 to allot equity securities (asdefined in Section 94(2) of the Act) for cash as if Section 89(1) of the Act did not apply to suchallotment provided that:

(a) this power shall be limited to:

(i) the allotment of up to 36,585,365 new ordinary shares in the capital of the Companypursuant to the Placing (as defined and described in the Circular);

(ii) the allotment of equity securities in connection with an invitation or offer of equitysecurities to holders of ordinary shares in proportion to their respective holdings of suchsecurities or in accordance with the rights attached to such securities (but subject to suchexclusions or other arrangements as the Directors may deem necessary or expedient inrelation to fractional entitlements or legal or practical problems under the laws of, or therequirements of any regulatory body or any stock exchange in, any territory); and

(iii) the allotment, otherwise than pursuant to paragraphs (i) and (ii) above, of equitysecurities up to an aggregate nominal amount of £41,725.83;

(b) unless previously revoked, varied or extended, this power shall expire on the earlier of theconclusion of the next Annual General Meeting of the Company and the date falling 15 monthsafter the date of the passing of this resolution except that the Company may before the expiryof this power make an offer or agreement which would or might require equity securities to beallotted after such expiry and the Directors may allot equity securities in pursuance of suchoffer or agreement as if this power had not expired;

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(c) in this resolution the nominal amount of any securities should be taken to be, in the case of aright to subscribe for or convert any securities into shares of the Company, the nominal amountof the shares which may be allotted pursuant to such right.

Notes:

1 A member entitled to attend and vote at the meeting is also entitled to appoint one or more proxies to attend and, on a poll,vote instead of him/her. The proxy need not be a member of the Company.

2 To be valid a form of proxy, together with a power of attorney or other authority, if any, under which it is executed or anotarilly certified copy thereof, must be deposited at Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, KentBR3 4TU not less than 48 hours before the time for holding the meeting or adjourned meeting. A form of proxy is enclosedwith this notice.

3 In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to theexclusion of the votes of any other joint holders. For these purposes, seniority shall be determined by the order in which thenames stand in the register of members in respect of the joint holding.

4 In the case of a corporation, the form of proxy must be executed under its common seal or signed on its behalf by a dulyauthorised attorney or duly authorised officer of the corporation.

5 The Company, pursuant to regulation 41 of the Uncertificated Securities Regulations 2001, specifies that only thoseshareholders registered in the register of members of the Company as at 10.00 a.m. on 13 November 2004 shall be entitled toattend and vote, whether in person or by proxy, at the Extraordinary General Meeting, in respect of the number of OrdinaryShares registered in their name at that time. Changes to entries in the register of members after 10.00 a.m. on 13 November 2004 shall be disregarded in determining the rights of any person to attend or vote at the Extraordinary General Meeting. Ifthe Extraordinary General Meeting is adjourned, entitlements to attend and vote will be determined by reference to the registerof members of the Company 48 hours before the time of the adjourned meeting.

6 Completion and return of the form of proxy will not preclude members from attending or voting in person at the meeting ifthey so wish.

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sterling 64508