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Amazon Basin Gold Property

Location



This property is located south of the city of Manaus and encompasses approximately 1,370,368 hectares of 164 processos minerals (claims) in the states of Amazonas, Mato Grosso and Rondonia. It is centered between the Tapajos River on the east and the Mardeira River to the west in an area of extensive mining. There is an international airport at Manaus and highway access to the property is southbound to Humaita and then eastbound on the Transamazonia Highway using a complex system of secondary or tertiary gravel roads. The more remote portions of the property are accessible by local river transportation.

These mineral tenures have been grouped into nine projects according to their geographical location and geologic setting:


Amazonas State
These tenures -- Manicore, Aripuana and Curauai -- are located in the southeastern portion of Amazonas and comprise 35 mineral claims and encompass 338,262 hectares. The primary exploration targets are for gold with some diamond targets.

Mato Grosso State
The Madeirinha, Juruena, Matupa and Jatoba projects are located in the northern and southeaster portion of Mato Grosso and comprise 63 mineral claims comprising 512,641 hectares. The primary exploration targets are for gold except for the Jatoba project which was acquired for diamond exploration.

Rondonia State
Two projects -- the Cacoal and Theobrama projects -- are located in the east-central portion of the State. Comprised of 18 mineral claims over 49,364 hectares, the principal exploration targets are gold, diamonds, tin and copper.

Complete details on each of these Projects are available in the Technical Report posted above.

Climate & Topography

At only 6 degrees south of the Equator the climate is typically tropical with little mean yearly temperature changes. The area has two seasons, the rainy summer running from November through March and a dry winter. The prevailing vegetation is overgrown, tropical, slash and burn savannas consisting of dense jungle patches interspersed with open grassy fields.

The property is location primarily along the southern edge of the Amazon Basin and elevations range from 75 to 375 metres above sea level. The general area is one of gently rolling hills and the occasional steep valley and ravine. Most of the old growth jungle on our mineral claims was previously logged for the advancement of ranching, and logging remains a local, viable industry.

Geology

Most of the concessions, which lie within the Brazilian Shield, have been staked over Archaen to Lower Proterozoic greenstone belts as reported in the N.I. 43-101 Technical Report, which are considered to be prospective for gold. Small-scale garimpeiros (artisanal miners) are active in and around all of the concession areas. Gold production by garimpeiros in northern Mato Grosso from the end of the 1970s to 2000 is reported by the National Department of Mineral Production to have totalled 123t.

Historical Gold Production

The northern portion of the property lies within the western extension of the Tapajpos River Gold Belt, immediately west of historic gold production where gold was first documented in 1747. Gold production peaked during 1983-89 when more than 300,000 garimpeiros working alluvial deposits produced one million ounces per year. During the 1970s and 1980s the region produced between 30-40% of Brazil's total gold output. Data up to 1993 is officially estimated at 7 million ounces of gold although other estimates place it at anywhere between 22 and 30 million ounces.

Several mining companies are actively exploring the Amazonas region and developing properties, including Eldorado do Juma, Ouro Roxo (Amerix Precious Metals Corp), Crepori (Brazauro Resources Corp) and Serra Pelada (Colossus Minerals Inc.).

Armadillo's property covers known areas of garimpeiro operations which range from prospecting pits to large scale excavations and, throughout Brazil, many of these garimpeiro operations have transitioned from pits into significant deposits.

2011 Work Program

Minimal exploration has been carried out to date on the property although soil and saprolite surveys were carried by the previous owner in 2007.

In the October 2010 Technical Report prepared by David Reid and William Gilmour of Discovery Consultants, a two phase program of exploration was recommended. A Phase One program budgeted at $1,860,000 includes researching and evaluating the mineral licences controlled by Amazonia and although the emphasis is on gold exploration there is potential for base metals as well.

Armadillo Regional Manager Andre Klumb is presently in Brazil and has commenced work on a recommended exploration program which will be reviewed by Management.

Property Tenure

The Amazon Basin Gold Project was brought to Armadillo's attention by John Young who originally discovered and staked it for Swiss property owner Rusheen Handels AG. Young has a long and very profitable history in the mining business. He was instrumental in identifying early stage gold prospects and seizing opportunities that created several major NYSE listed companies including Gammon Gold's Ocampo Chia project, Mexico's second largest gold producer, Kinross' Kaspersky Hory project in the Czech republic, which is the second largest gold deposit in Europe and the Tonkin Springs project with approximately 1.4 million ounces of gold in place currently being developed by US Gold Corp.

In October 2010, Armadillo signed a letter of intent with Rusheen Handels AG, a private company based in Zurich ("RH"), to acquire approximately 50% of the issued Units of Amazonia Capital E Participacoes Ltd. a private Company based in Brazil ("Amazonia") (the "Purchase"). Amazonia is ninety nine percent owned by Raheen Handels AG and one percent by Kym Keeves of Brazil. In February 2011, the letter of intent was re-negotiated with RH to include 100% ownership of Amazonia. Armadillo is to pay 25,000,000 common shares for this acquisition.

Amazonia is the registered holder of approximately 860,000 hectares consisting of 116 o mineral claims in northern Brazil. The Company paid $310,000 on signing the initial letter of intent and at closing is to issue 12,500,000 shares of the Company. The finder's fee of 750,000 shares will be increased to 1,500,000 shares. In addition, Armadillo will assume 100% of Amazonia expenses.

Gold Mining in Brazil

Brazil is ranked as the world's fourth largest gold producer, has a stable geo-political climate, a development friendly regime, and access to low cost production.

In the late 1970s, Brazil's military government conducted a sweeping aerial survey of the region which helped to confirm the presence of the Guiana Shield, a massive two billion year old geological formation (discussed by Discovery as the Brazilian Shield in its N.I. 43-101 Technical Report) which is historically known to contain prolific gold resources. The Amazonian Guiana Shield is the other half of Africa's Guiana Shield, which is responsible for the gold and platinum wealth of South Africa and other countries in sub-Saharan Africa. During the Jurassic period, the Guiana Shield was split into two -- South America and Africa -- due to plate tectonic movement.

Today the Amazonian Guiana Shield covers over 100 million acres of jungle and savannah and is the site of an ongoing gold rush. An estimated 50 million ounces of gold have been recovered from the Amazonian Guiana Shield in comparison to the 12 million ounces of gold removed during the first five years of the California Gold Rush. It is currently estimated that there are still over 500,000 explorers and miners, including several publicly-traded gold mining companies, exploring and developing the Amazon Guiana Shield.

Jim O'Neill, global economist at Goldman Sachs, suggests the economic potential of Brazil, Russia, India, and China is such that they may become among the four most dominant economies by the year 2050. Brazilian exports are surging it is also energy independent. Brazil also no longer needs to rely on foreign sources to meet the country's energy needs due to a 30-year alternative energy campaign that has implemented the majority use of hydroelectric power to generate electricity and outfitted automobile filling stations with ethanol-based fuels. In addition, a 1995 foreign investment allows offshore companies to hold a 100% ownership in mineral properties, and new regulations regarding environmental and operating processes have successfully attracted new investment and diversified Brazil's mining industry.

According to the latest available figures from the Departamento Nacional de Produção Mineral (DNPM), gold production in 2006 was 40 tonnes, an increase of 4.5% compared to 2005. The production of the mines (companies and cooperatives) corresponded to 87.0% of the national production, an increase of 16.4% over the previous year. AngloGold Ashanti Mineração Ltda. led gold producers with 22.2% (7,7 t) of the national production, followed by Mineração Serra Grande S/A, a subsidiary of multinationals AngloGold Ashanti and Kinross Gold Corp. 16.9% (6,0 t) and Rio Paracatu Mineração S/A, of Group Kinross Gold Corp. 15.4% (5.4 t).

The DNPM also reported Yamana Gold Inc holds the exploitation rights on the mines of Jacobina, Morro do Vento and Canavieiras, located in the State of Bahia. Operating through its subsidiary Jacobina Mineração e Comércio Ltda., it resumed extraction and processing in 2005 at the Jacobina mine, producing 2.5 tonnes in 2006, 6.3% of the Brazilian production.

The production of gold extracted by artisans, estimated on the collection of the Tax on Financial Operations - IOF, of approximately 5.2 tonnes in 2006, featured for the second consecutive year a reduction of 38.0% as compared to 2005. It is estimated that the distribution of artisan-extraction activities in the main gold-producing states was: Pará (45.7%), Mato Grosso (20.3%), Amapá (15.5%), Rondônia (8.0%) and others (10.5%).

With over 2,500 currently known gold occurrences, Brazilian gold exploration, development, and production is expected to continue increasing significantly in the foreseeable future.  
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