In order to exercise the initial portion of its Option to acquire an initial 60% undivided interest in and to the Property (the "First Option") the Company is required: (i) to pay to Petaquilla the aggregate sum of $600,000 in cash; (ii) issue to Petaquilla 4,000,000 common shares from the treasury of the Company; and (iii) incur, or cause to be incurred, directly or indirectly, and pay for an aggregate of $6,000,000 in "Exploration Expenditures" as follows:

Subject to the prior exercise of the First Option, and in accordance with the terms and conditions of the Option Agreement, Petaquilla has therein also granted to the Company the exclusive right and further portion of its Option (the "Second Option") to increase the Company's undivided interest in and to the Property from 60% to 70% by incurring and paying for $3,000,000 in Exploration Expenditures during the period between the delivery of the "Notice of Election" referred to below and May 31, 2010. In this regard, and within 60 days following the exercise of the First Option, the Company is required to give Petaquilla notice (the "Notice of Election") that either: (i) the Company elects to accept the grant of the Second Option; or (ii) the Company elects not to accept the Second Option. If the Company makes the election, then all further work on and with respect to the Property, and the subsequent relationship between the Petaquilla and the Company in relation to the Property, shall be governed by the form of joint venture agreement between the parties (the "JVA") which is attached as Schedule "B" to the Option Agreement. If the Company elects to be granted, but fails to exercise, the Second Option, the Company and Petaquilla shall have initial Interests of 60% and 40% respectively. The Company shall be deemed to have exercised the Second Option and shall have acquired a 70% undivided interest in and to the Property, by having incurred and paid for $3,000,000 in Exploration Expenditures during the period between the delivery of the Notice of Election and May 31, 2010. If the Company fails to incur the Exploration Expenditures listed above by the end of the last day on which the same was due to be incurred, the Company may, at any time within 15 days of such day, make a cash payment to Petaquilla in an amount equal to the deficiency in the Exploration Expenditures. Any cash payment so made shall be deemed to have been Exploration Expenditures duly and properly incurred in an amount equal to the cash payment.

In addition, and as soon as practicable following the execution and delivery of the Option Agreement, the Company is to establish a stock option plan which allocates not less than 15% of the then issued shares in the capital of the Company for the granting of options and shall grant to Petaquilla, or its nominees, stock options equal in number to not less than one-third of the number of options allocated under such plan. Thereafter, and during the currency of the Option Agreement, the Company is required to maintain the grants to Petaquilla or its nominees of stock options equal in number to not less than one-third of the number of options allocated under the Company's stock option plan then in effect.

During the currency of the Option Agreement, and in the event that the Company proposes to issue shares for cash (the "Offering"), the Company is required to provide written notice to Petaquilla containing all material details of the Offering. Within 15 days of receipt of such notice Petaquilla is required to provide notice to the Company as to whether Petaquilla wishes to participate in the Offering. If Petaquilla elects to participate in the Offering, it will have the right to purchase under the Offering such number of securities as will maintain Petaquilla's percentage holding of the issued shares of the Company as calculated on the date of receipt of the notice of the Offering.

Finally, and during the currency of the First Option and, if applicable, the Second Option, the Company has agreed to engage Petaquilla, or a subsidiary thereof (therein the "Operator"), as an independent contractor, to carry out all work on and in connection with the Property. Upon the execution of the Option Agreement the parties agreed that they would, in good faith, negotiate and execute a Technical Services Agreement substantially in the form attached as Schedule "C" to the Option Agreement. In this regard the Operator is required to prepare draft exploration programs for each calendar year and deliver such programs to the Company not fewer than 45 days prior to the anticipated date for the commencement of such program. The first program is to cover the partial year from the date of execution of the Option Agreement to December 31, 2006. The Operator and the Company shall review each draft program and budget, and each shall use its best efforts to agree with the other on the final program and budget terms and costs.