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Pinaya Gold Project Exploration Update

September 2, 2004
ASC Industries Ltd. has provided the following review on exploration of its wholly owned Pinaya gold project, located in southern Peru. The property, which is approximately 110 kilometres northeast of the city of Arequipa, is road accessible and lies within seven kilometres of the BHP-Billington Tintaya mine road. The project encompasses approximately 4,200 hectares or 42 square kilometres.

Gold mineralization at Pinaya is hosted by early Tertiary-aged Puno group volcanics and sediments. It is considered a structurally controlled epithermal gold deposit. Limited sampling and mapping of the main gold zone by the company have shown that it may have a strike length of more than 2.7 kilometres. Within the main gold zone, artisanal miners have produced an open cut approxiamtely 300 metres (m) long, 30 m to 40 m wide and up to 20 m high. A total of 27 samples; including grab samples, one-metre and three-metre chip samples, were collected from within the area of the open cut and returned an average of 1.47 grams per tonne (g/t) gold (Au). Most of the samples were collected from the wall rock, indicating bulk minable potential. Higher-grade structures within the open cut have returned from two g/t to six g/t Au across widths of one m and three m.

Exploration work, including grid establishment, soil sampling, induced polarization (IP), and magnetic geophysical surveys, sampling and mapping of old trenches is continuing. A grid measuring 1,300 m by 1,000 m, with 100-metre-spaced lines, has been established over the main pit and surrounding area.

To date, a number of coincident geochemical and geophysical anomalies have been identified.

Coincident with the known Au zone is a northwest-trending IP geophysical anomaly that is up to 200 m to 300 m wide and exceeds 1,400 m length. The presumed geophysical expression of the Pinaya Au zone is much larger than anticipated and is coincident with an Au soil anomaly with assay values between 100 parts per billion (ppb) and 3,080 ppb Au. The Au soil anomaly exceeds 1,400 m length and also extends beyond the limits of the grid. The open pit is within the west-central part of the anomaly. Preliminary channel sample data for a trench about 225 m southeasterly of the open pit have shown: 1.54 g/t Au and 0.20 per cent copper (Cu) across 17-1/2 metres. This trench will be extended about 75 m to the southwest, where two highly anomalous soil samples, spaced 25 m apart, have returned 1.77 g/t and 3.04 g/t Au. The company awaits rock and channel sample results for the remainder of this zone.

A second anomaly, between 100 m and 400 m east of the main pit, consists of a coincident Au soil anomaly and an IP geophysical anomaly. As the target is located at the valley bottom, it is based on scattered soil samples with between 100 ppb and 2,190 ppb Au over an area of about 300 m by 400 m. The IP anomaly crosses the main anomaly just south of the open pit and extends north to northeasterly, below the soil anomaly and beyond. This anomaly exceeds 1,000 m length and is up to 200 m or more wide.

As the exploration is continuing, additional results will be released when available. The company anticipates that its first phase of drilling will commence at Pinaya in late September or early October.

The 2004 exploration program at Pinaya, including the collection of all rock and soil samples, is being conducted and managed by Dahrouge Geological Consulting Ltd. under the direction of Jeff Reeder, PGeo, a qualified person under National Instrument (NI) 43-101.
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