Location, History and Prospectivity
The Company entered into a joint venture agreement with Cherry Hill Mining, a Ghanaian company, to develop the Homase Prospecting License. The Homase License is wholly owned by Cherry Hill and forms the subject of the Joint Venture Agreement. The license area falls in the Bekwai District of the Ashanti Region in Ghana c. 15km from the town of Obuasi. It is approximately 115 square kilometres in extent and lies c. 15km north-east of Anglo-Gold Ashanti's fifty million ounce Obuasi Mine.

Regionally the Homase License is located within the well mineralised Ashanti Gold Belt where more than seventy million ounces of gold have been discovered (Figure 1). The Directors believe the Homase License covers the same structure that controlled the formation of the Obuasi gold deposit which has been exploited at surface and underground over the last 100 years (Figure 2). Shea Gold Limited (“Shea”), a subsidiary of Dominion Mining Limited, a previous explorer in the area, targeted this structure within the Homase License and drilled more than 130 boreholes during 1998, 1999 and 2000 to quantify the continuous gold mineralisation along a three kilometre strike length (Figure 3).

Some of the most significant intersects drilled by Shea are listed below:

Ashanti Goldfields (“AG”) acquired the Homase License from Shea Limited during 2001 for a production based consideration of approximately US$550,000 and mined ore from two pits (“Homase Pits”) during 2002 and 2003 (Figure 4). The mining was limited to a strike length of 800 metres of the three kilometre mineralised zone. The ore was trucked to AG's nearby Obuasi oxide processing plant and approximately 40,000 ounces of gold mainly from the oxide portion of the mineralized zone were recovered at a reported recoverable grade varying between 2.6 and 2.7 g/t. AG stopped mining operations in the Homase License area during 2003 at a time when the gold price was between US$320 and US$380 per ounce at a reported operating cost per ounce of US$220 and $280.

The Directors believe the close proximity of the Homase License area to the modern mining town of Obuasi will simplify the sourcing of the required exploration and mining skills as well as the equipment needed to advance this exploration property.

From geological information and historicial data currently available to the Company, the Directors believe the Homase License is prospective because:

o A code compliant gold resource may be achievable after limited due diligence drilling and mainly based on historical drill data;
o The mineralisation in the Homase Pits area appears to extend below (down dip of) the pit and appears not to have been tested to its full extent;
o Shea has demonstrated that the mineralisation continues north along strike of the Homase Pits and requires further investigation; and 
o The Homase License area also contains several additional targets at various stages of exploration that deserve further follow up. For some of these targets Shea reported gold intersections in boreholes and trenches while other targets consist of gold in soil anomalies. 

Exploration Strategy
GoldStone believes that the Obuasi gold deposit and the Homase Pits have the same style of hydrothermal mineralisation and lie on the same controlling structure. The mineralisation at Obuasi is well understood with extensive research published on it. The Company intends to utilise an exploration strategy that is most suitable for this type of mineralisation and will focus its exploration on:

o compiling historical drill information into a three dimensional model to quantify any potential gold resource;
o drilling inclined boreholes to:
       o test the extent of high grade mineralisation below the current  Homase Pits 
          and whether future exploitation would be better suited to deeper open pit
          or underground mining methods;
       o test if the mineralisation along strike of the Homase Pits is suitable for
          open pit mining, and
       o follow up on the regional targets identified by previous holders of the licence.

The directors of GoldStone consider that the Company currently has sufficient funds to quantify a potential code compliant gold resource and to undertake confirmatory drilling.

Joint Venture Agreement
GoldStone has the right to earn an interest in the Homase License subject to it financing exploration expenditure and making payment of participation monies to Cherry Hill in pre-agreed phases, which may be summarized as follows:

- A tenement due diligence phase of up to 30 days to receive confirmation from the Minerals Commission of Ghana that the Homase License is in good standing and that it may be the subject of the Agreement. Once confirmation is received by GoldStone payment of a participation fee of US$15,000 will be made to Cherry Hill.
- A geological and further legal due diligence phase of up to five months primarily in order to allow GoldStone to obtain, collate, interpret and assess available historical data. No exploration expenditure is committed to and no participation fees will be paid at commencement of this phase.
- Exploration Expenditure will commence with a geological target generation phase which has to be conducted within a period of 12 months. Participation fees of US$16,000 are payable to Cherry Hill at commencement of this phase and the Company has to spend no less than US$200,000 in order to acquire a provisional 10% interest in the Homase License, which interest will become permanent as soon as GoldStone acquires a 51% interest.
- A further exploration phase potentially comprising of initial target drilling and regional exploration is to be conducted over a maximum period of 12 months with the right to earn a total provisional interest of 25% after having spent an additional amount of US$500,000. Participation fees of US$20,000 are payable to Cherry Hill at commencement of this phase.
- After expending of a further amount of no less than US$800,000 over a maximum period of 12 months or upon defining a code compliant inferred resource of any magnitude (whichever occurs the earliest), the Company will earn a permanent interest of 51% in the Homase License. Participation fees of US$24,000 will be payable to Cherry Hill at commencement of this phase.
- A minimum of US$ 1 million has to be expended during the next phase or a pre-feasibility study conducted over any defined resources (whichever comes earliest) in order to earn a permanent 65% interest in the Homase license. Participation fees of US$30,000 will be payable at commencement of this phase.
- If a successful Feasibility study is conducted over the area the Company will have earned an interest of 85% in the Homase license. Participation fees of US$60,000 are payable to Cherry Hill at commencement of this phase.

The Agreement also determines that if exploration expenditure in any phase exceeds the minimum amount of expenditure, the Company is obliged to expend the excess which will be credited towards subsequent phases. In addition GoldStone has the right to withdraw from the Joint Venture agreement at any time without penalty provided that it will retain no interest in the Homase license if it withdraws before acquiring a permanent interest of 51% and provided further that all technical reports generated by GoldStone on the Homase License are disclosed to Cherry Hill. The Agreement envisions the creation of a Joint Venture Company upon commencement of a development programme, to whom the Homase License and/or any ensuing mining licenses will be transferred in proportion to the respective interests held by GoldStone and Cherry Hill. 


Ghana
Ghana, formerly the Gold Coast, is Africa's second largest gold producing country after South Africa with over 55 million ounces of gold having been mined over the last century. Gold mining contributes approximately 45% of the country's gross export earnings and mining generally enjoys a preferent status with a regulatory system that encourages further investment. Ghana has a stable and well established democratic system and has attracted most of the world's major gold producers including AngloGold Ashanti, Newmont, Golden Star and Goldfields.

Regulatory Environment
In terms of Ghanaian law the Government of Ghana is entitled to a 10% free carried interest in any mining ventures and Ghana's Minerals Act stipulates a mining royalty of not more than 6% and not less than 3% of the total revenue obtained from mining operations. The Corporate tax rate for Ghanaian Companies and for income derived from Ghana is 25% and dividends attract a withholding tax of 8%.



Figure 1: The Homase Licence covers rocks of the Birimian Formation and lies within the prospective Ashanti Gold Belt where more than seventy million ounces of gold were discovered. This belt also includes AngloGold Ashanti’s Obuasi Mine and Golden Star’s Prestea Mine.

Figure 2: A simplified map of the Homase Licence area shows that the mineralisation in the Homase Pit Area potentially lies on the same structure as the fifty million ounce Obuasi Gold Mine. AngloGold Ashanti’s processing plant is within trucking distance of the permit area (15 km). Future exploration will focus on the mineralised structure between the Homase Pit Area and Pampanso, and on other regional exploration targets as indicated on the map.

Figure 3: An enlarged view of the Homase Pit area. During 1998, 1999 and 2000 more than 130 boreholes were drilled by a previous explorer (Shea Gold Ltd.) to quantify the open pitable mineralisation from Homase South to Donkwase. Ashanti Goldfields acquired the permit from Shea and recovered approximatelly 40,000 ounces of gold from two pits (Homase Pits 1 and 2) during 2002 and 2003. The ore was processed at their oxide plant in Obuasi. GoldStone’s exploration will be aimed at determining which part of the gold deposit remained unmined and also to test for potential strike and down dip extensions of the known mineralisation.

Figure 4: A photograph of the larger Ashanti Goldfields pit (Homase Pit 1), looking north. The long axis of the pit measures approximatelly 500 metres. GoldStone intends to drill inclined boreholes to test if higher grade mineralisation exists below the Homase Pits and if it would be suitable to deeper open pit or underground mining.