San Sebastian Gold Mine

SAN SEBASTIAN GOLD MINE

Property Description	San Sebastian Gold Mine located two and one-half miles northwest of the city of Santa Rosa de Lima and the Pan American Highway.
Nature of Interest	Mineral concession consisting of 100% ownership of the precious metals extracted from this mine. Environmental permit has been revoked but legal challenge is pending.
Date Interest was Acquired	1968
Cost of Interest	5% of the gross precious metal proceeds or $343 a month whichever is higher.
Amount of Funds to Make Property Operational	This is dependent on the scale of production that management decides to perform. The amount of investment could be from $5 million to $100 million.
Date Mine will be Operational	It was in operation on a curbed production basis from March 31, 1995 until December 31, 1999 when operations were suspended due to the need to overhaul, repair, restore and expand the SCMP facilities and due to the low price of gold.

General Location and Accessibility
The SSGM is situated on a mountainous tract of land owned by Misanse consisting of approximately 1,470 acres of explored and unexplored mining prospects. The SSGM is located approximately three miles off of the Pan American Highway, northwest of the city of Santa Rosa de Lima in the Department of La Union, El Salvador. The tract is typical of the numerous volcanic mountains of the coastal range of southeastern El Salvador. The topography is mountainous with elevations ranging from 300 to 1,500 feet above sea level. The mountain slopes are steep, the gulches are well defined, and the drainage is excellent.

There is good roadway access to the SSGM site. The reconstruction of the Pan American Highway from two lanes to four lanes (from the city of San Salvador to the Honduran border) has been completed. The city of Santa Rosa de Lima (approximately three miles from the SSGM) is one of the larger cities in the Eastern Zone. The SSGM is approximately 30 miles from the city of San Miguel, which is El Salvador’s third largest city, and approximately 108 miles southeast of El Salvador’s capital city, San Salvador. SSGM is also approximately 26 miles from the city of La Union which has port and railroad facilities. Major United States’ commercial airlines provide daily scheduled flights to the Comalapa Airport which is located on the outskirts of the city of San Salvador.

SSGM Mineralized Material
GOLD Mineralized Material (03/31/08)	Tons	Estimated Gold Grade (OPT)	Estimated Gold Ounces(1)
Virgin material (includes 960,000 tons of dump material)	14,404,096	0.081	1,166,732
Stope fill (estimated)	1,000,000	0.340	340,000
Estimated other mineralized material and open pit	122,815,134	0.016	1,948,748
Total estimated mineralized material	138,219,230	0.025	3,455,480

(1) The estimated recoverable ounces of gold by processing are: SCMP, 85% to 95%; heap leach, 65% to 70%. Because the Company does not have a final feasibility study completed within the past five years, a determination that the property contains valid reserve estimates is not possible at this time.

The dump material and stope fill at the SSGM are the by-products of past mining operations. The dump material was mined in the past in the search for higher grades of gold ore and piled to the side of past excavations as it was considered at that time to be too low of a grade of ore to process economically; however, it was reserved for future processing when the price of gold is at a level to process it profitably. The stope fill available in the past (1900 era) was considered to be too low of a grade of mineralized material to process economically, therefore it was primarily used to fill the voids in the underground workings to accommodate the extraction of the higher grade of gold mineralized material. Virgin material, as the term is used in this report, is mineralized material which is on the surface and readily available for processing; it also includes the undeveloped underground mineralized material.

At the turn of the twentieth century, the SSGM was rated as one of the richest gold mines in the world. The United Nations’ 1969 Mineral Survey Report states that “unquestionably the San Sebastian deposit was the jewel of the El Salvador mining industry and one of the most prolific gold mines in Central America.”

The Company estimates that at the SSGM it has 14.4 million tons of virgin mineralized material, including the dump waste material. The Company plans to use an open-pit mining method and will truck the lower grade mineralized material to one or more heap-leaching pads developed at the SSGM site. The use of open-pit mining and heap-leaching techniques will enable the Company to process a higher volume of low grade mineralized material than can be processed at the SCMP. The Company plans to continue to operate the SCMP after developing a leach-pad operation at the SSGM, using the facility to process the higher grade mineralized material it encounters in the course of mining at the SSGM. The milling operation at the SCMP is expected to return a higher rate of gold recovery than can be expected from heap-leaching techniques.

Approximately 960,000 tons of dump material present at the SSGM site, with grades estimated from 0.082 to 0.178 ounces of gold per ton, have been combined with the virgin ore reserves. The Company’s consulting geologist who has confirmed that about seven percent of the stope fill had been removed and processed during the 1973-1978 period made an analysis of the underground stope fill material. It is estimated that the grade of the stope fill averages 0.34 ounces of gold per ton and that there are about one million tons available for SCMP treatment from the underground operations. It is necessary to remove the material which has caved in the adits to reach the stope fill areas, or it eventually will be encountered in the open-pit operations.

The Company’s geologists estimated the gold content of the mineralized material by calculating the gold content in an area consisting of 3,300 lineal feet in length, 825 lineal feet in width, and 660 feet in depth, to determine the volume. To support the additional mineralized material, this Company, since July 1987, has completed the following in the SSGM site: 116,121 lineal feet of 22 miles of surface trenching; 2,162 lineal feet of test pit hole excavation; 42,372 lineal feet of underground adit workings; and more than 19,775 feet of diamond core and reverse circulation drilling. A total of 78,441 fire assays were completed at the Company’s laboratory through 2004. Also, there were more than 30 miles of former adit excavations. These samples, extending the diamond core and reverse circulation drilling, reflected a grade of 0.025. Samples from the 30 miles of former underground workings were assayed through 2004.

All residue from the contemplated operations will be stockpiled for potential future processing dependent upon the price of gold, improvements in technology, and the depletion of higher grade material.

SSGM Joint Venture Arrangements
Commerce acquired 82 1/2% of the authorized and issued common shares of San Sebastian Gold Mines, Inc. (“Sanseb”), a Nevada corporation formed on September 4, 1968. Approximately 200 unrelated shareholders hold the balance of Sanseb’s shares. From 1969 forward, Commerce has provided substantially all of the capital required to develop a mining operation at the SSGM, to fund exploration, and to acquire, refurbish and operate the SCMP.

The Joint Venture Laboratories (Lab)
The Joint Venture has two laboratories: one located at the SCMP facilities and the other on real estate owned by the Company near the SSGM site. A total of 78,441 samples of exploration fire assays were logged through 2004. This total does not include the assays that were performed for production purposes. Assay work has not been performed at the laboratories since 2004.

Misanse Mining Lease(Click here for map)
The Company (previously through the Joint Venture) leases the SSGM from Mineral San Sebastian, S.A. de C.V. (“Misanse”), an El Salvadoran corporation. The Company owns 52% of the total of Misanse’s issued and outstanding shares. About 100 El Salvador, Central American and United States’ citizens own the balance of the shares. (Reference is made to Item 8. Financial Statements and Supplementary Data, Note 7, for related party interests.)

SSGM Mining Lease
On January 14, 2003, the Company entered into an amended and renewed lease agreement with Mineral San Sebastian Sociedad Anomina de Capital Variable (Misanse) pursuant to the approval of the Misanse shareholders and directors at a shareholders’ meeting and thereafter at a directors’ meeting both held on January 12, 2003. The renewed lease is for a period to coincide with the term of its Renewed SSGM concession, which it received on August 29, 2003 from the Department of Hydrocarbons and Mines (DHM). It was automatically amended on May 20, 2004 to coincide with the extension of the term of the Renewed SSGM Exploitation Concession from 20 to 30 years. The lease is automatically extendible for one or more equal periods. The Company will pay to Misanse for the rental of this real estate the sum of five percent of the sales of the gold and silver produced from this real estate, however, the payment will not be less than $343.00 per month. The Company has the right to assign this lease without prior notice or permission from Misanse. This lease is pledged as collateral for loans made to related parties (Item 8. Financial Statements and Supplementary Data, Note 7).

Misanse Mineral Concession-Government of El Salvador
In El Salvador, the rights to minerals below the sub-surface are vested with the government. The government through concessions grants mineral rights. Reference is made to the San Sebastian Gold Mine map and the exploration and exploitation maps included in this report.

On January 27, 1987, the Government of El Salvador granted a right to the SSGM mining concession (“concession”) to Misanse which was subject to the performance of the El Salvador Mining Law requirements. These rights were simultaneously assigned to the Joint Venture.

On July 23, 1987, the Government of El Salvador delivered and granted to Misanse, possession of the mining concession. At that time this provided the right to extract minerals and export gold and silver for a term of 25 years (plus a 25-year renewal option) beginning on the first day of production from the real estate which encompasses the SSGM owned by Misanse. Misanse assigned this concession to the Joint Venture.

Effective February 1996, the Government of El Salvador passed a law which required mining companies to pay to it three percent of its gross gold sale receipts and an additional one percent is to be paid to the El Salvador municipality which has jurisdiction of the mine site. As of July 2001, a series of revisions to the El Salvador Mining Law were made. A principal change is that the fee payable to the GOES has been reduced to two percent of the gross gold and silver receipts.