Indications Boka resource significantly smaller

Vancouver – An audit by Southwestern Resources (SWG-T, SWGGF-O) and an independent mining consultant on the Boka project drill results likely indicates “that manual and deliberate changes were made to its prior database to increase the grade of samples within mineralized sections.”

Review of tens of thousands of data entries from the project in Chinas Yunnan Province now has Southwestern Resources acknowledging resources will be “significantly less than previously reported.” However the company does point out that there are still indications of gold mineralization in the drill holes and historical workings.

There have been no indications that there was any tampering with the actual samples sent for assay.

A new resource estimate has been commissioned and is expected by the end of October.

Southwestern Resources has initiated legal action against its former CEO and Qualified Person, John Patterson, and certain affiliated companies, for fraud, breach of fiduciary, statutory and contractual duties and insider trading seeking to recover all damages and losses.

Meanwhile, the company’s Chinese legal council has put its sights on former Boka project general manager John Zhang with similar claims.

Southwestern Resources has also seen the class-action lawsuit recently brought against it, and Paterson, rise to $320 million for allegedly misleading investors.

Exploration will continue on Boka and will be directed by the new technical report under preparation.

Shares of Southwestern Resources dropped 17% on the August 27th news, closing off 34 at $1.70 apiece. Based on its 45-million shares outstanding, it posts a $77-million market capitalization.

In its second quarter report ending June 30th, the company reports $28.6 million in cash and equivalents plus a further $3.2 million in short term investments.

In mid-June, former-CEO John Paterson resigned “effective immediately, citing personal reasons” (T.N.M., July 2/07). The move came a day after Southwestern tabled news its Boka pre-feasibility study, expected this summer, would be delayed until the end of 2007.

A subsequent review launched by Southwestern identified instances of compromised integrity of certain drill core samples. The event led the company to then retract all previous results from the project.

The 157-sq. km Boka project is held through a sino-foreign joint venture between Southwestern and Team No. 209 of the Yunnan nuclear industry of Yunnan province. The JV company, Yunnan Gold Mountain Mining, is held 90% by Southwestern’s subsidiary and 10% by Team No. 209 that has a carried interest.

In addition to Boka, Southwestern is joint ventured with Newmont Mining (NMC-T, NEM-N) on the Yunnan porphyry copper project in China and the Liam gold-silver in Peru. It also holds other mineral projects in Peru and has a 17.8% interest in Superior Diamonds (SUP-V, SUPYF-O) and owns 49.7% of Zincore Metals (ZNC-T, ZCRMF-O).