2533 North Carson Street City of Carson City
State of Nevada 89706 Incorporated Since 2001 (Nevada)
PHONE: 1-775-513-1576
 EMAIL: darvin1@au-tech.com
www.americandiatomite.com
Dear Sir,
American Diatomite Inc. “ADI” may own one of the largest known ultra-pure Amorphous Silica deposits in the world. The United States Geological Survey “USGS” mineral and price data information, and two independent certified mineral valuation companies survey data were contracted for this report. ADI assets include:                                                                                   Proven Indicated Reserves: (192,000,000 Tons of High Purity Amorphous Silica valued at ($75,840,000,000.00). Probable Indicated Reserves: 232,000,000 Amorphous Silica Tons valued at ($54,984,000,000.00).                                      Amorphous silica is processed into 99.99999 % pure silica feedstock for the solar cell industries.  Direct smelt Metallurgical route produces silicon from ultra-high purity raw silica feedstock materials. Silicon production according to the SOLSILC technology/4/ has resulted in silicon of very high purity for the solar cell industries. Silica has over 7000 different market uses. Property consists of 1,700 acres of mineral product located on the surface in sight for easy mining. Mining methods include scooping up with a loader and loading into trucks. No underground mining.  This high valued mineral property is available for monetizing.  Selling price is $1,000,000,000. Or Best offer; Joint venture will be considered. Mineral property located in Esmeralda, NV.
Respectfully,
Darvin Wade

Key

Properties

3490 Kent Drive		(321) 242-6336
Melbourne, FL  32935		MarcusB48@hotmail.com

Revised September—2008 Summary
MINERAL APPRAISAL VALUATION
Proven Indicated:	$75,840,000,000.00 
Probable Reserves:	$54,984,000,000.00

American Diatomite Inc. has 192,000,000 tons of proven indicated high-grade fresh water amorphous silica.  American Assay Laboratories (Sparks, Nevada) and ALS Chemex (Sparks, Nevada—a British Columbia Laboratory) assayed samples from this amorphous silica deposit.  The deposit of silica [diatomaceous earth (D.E.)] was delineated by mapping the surficial exposures on a DOQQ (Digital Ortho Quarter Quad) and using a GIS (Geographic Information System – ArcView 9.2).  The volume calculation method is detailed below.  This proven indicated amorphous silica deposit is contiguous to additional indicated reserves of about 232,000,000 tons located under a large area of volcanic rocks.  This unique deposit could be one of the largest known DE deposits in the world.  The indicated reserves located under the volcanic field cannot be included as proven reserves until drilled and measured.  A 40% reduction was applied to the indicated silica reserves (232,000,000 tons x 0.6 reduction x $395 = $54,984,000,000).

Appraisal Net Valuation per Ton Amorphous Silica

	Selling price per ton FOB plant			=	$435 [USGS, 2006]
	Average production cost per ton		=	$40
	$395 net per ton x 192,000,000 tons	=	$75,840,000,000
The USGS 2006 Minerals Yearbook for Diatomite lists a maximum price of $932 and an intermediate price of $395 per metric ton.  Converting to short tons gives a maximum of $1025 and $435.  The quality of the D.E. appeared to be high enough to satisfy the applications that demand the higher price per ton.  However, to avoid overestimation, the intermediate price was used ($435/short ton) and is considered a lower limit.
Comparable Sales Methods.  A comparable sales method could not be established because no fresh water diatomaceous earth deposits of the size and magnitude of the American Diatomite Inc. assets have been recorded.  The income approach is the only viable method documented and available in the 2006 USGS Minerals Yearbook for Diatomaceous Earth.  American Diatomite Inc. amorphous silica deposit was appraised using the large database of accumulated D.E. sales over 50 years as documented by the U.S. Geological Survey.  The calculated weighted average unit value of diatomite sold or used by U.S. producers during 2006 for specialized or other uses increased by about 43% to $932 per ton, up from $652 per ton in 2005.  In 2008, specialized silica feedstock with 99.99999% purity has documented record prices of over $20,000 per ton and continues to rise.
Volume and Tonnage Calculation.  Exposures of D.E. were outlined with polygons, with the Coaldale NE DOQQ3 and DOQQ4 as background, using ArcView 9.2 (Figure 1).  Although there are many small exposures of D.E., only the largest (7) were delineated.

Figure 1. The seven largest outcrops of D.E. mapped on the Coaldale NE Digital Ortho Quarter Quads.
Each of the seven polygons representing an outcrop of D.E. was treated as a right triangular solid.  This assumption assures that the subsequent volume (tonnage) calculation is a minimum, or lower bound, because lacustrine D.E. deposits in Nevada are known to have significant horizontal continuity.
The seven polygons were used as a layer on the 7.5’ Coaldale NE Digital Raster Graphic (DRG) image (Figure 2).  This DRG is GIS-compatible and has a contour interval of 20 feet.  A given polygon typically had some parallelism with a high and low contour on the DRG.  The elevation difference between the high and low contours was used as the length of the vertical side of a right triangle.  The horizontal distance between the high and low contours was used as the length of the horizontal side of a right triangle and the area of the triangle was calculated [(area of right triangle) = (0.5) * (length of vertical side) * (length of horizontal side)].
The length of the horizontal side of the right triangles was measured perpendicular to the contours on the DRG.  By measuring the length of a polygon parallel to the contours, the length of the right triangular solid was determined.  Multiplying the length of the right triangular solid by the area of the right triangle gave the volume of the right triangular solid.  Table 1 shows lengths and volumes for each of the seven polygons.  The total volume calculated from the seven polygons was 6 x 109 feet3.
Figure 2. Polygons representing the largest D.E. outcrops overlain on the Coaldale NE 7.5’ Digital Raster Graphic map.
D.E. Polygon	Volume (106 ft3)	
1	3110	
2	1500	
3	90	
4	45	
5	20	
6	35	
7	1200	
Total	6 x 109 ft3	
Table 1. Calculated volume (ft3) of each of the seven D.E. outcrops.
Diatomaceous Earth is a depositional product of fresh water embayments of Pliocene age.  In Nevada it has been observed in stratigraphic layers up to 300 feet in thickness, continuing for hundreds of feet horizontally.  In this depositional context, the 6 x 109 feet3 calculated by the triangular solid method assumes a near-impossible stratigraphic termination.  Based on observations of D.E. in other parts of Nevada, increasing the 6 x 109 feet3 volume by at least 100%, to 12 x 109 feet3, is a more accurate estimate.  This adjusted value is still a conservative estimate and represents a minimum volume of D.E.
A value for the tonnage was determined by multiplying the volume of the right triangular solids by the bulk density of the D.E. (32 lbs/ft3).  The total tonnage value calculated in this analysis was 192 x 106 tons.

____________________________

Marcus Borengasser, Ph.D. 

Marcus Borengasser, Ph.D.
3490 Kent Drive
Melbourne, FL  32935
321 242-6336
MarcusB48@hotmail.com

Professional Summary

Professional Geologist/Spatial Data professional with more than 20 years of experience.  Additional experience with hyperspectral remote sensing, image analysis, and geographic information systems (GIS), and all aspects of geoscience, plus university-level instructing.

Experience

Consultant
Professional Geologist. Geologic mapping using remote sensing and GIS technology

University College, London
Research Scientist: Modeling sea level change with satellite altimeter data

University of Nevada, Reno
Laboratory Manager: Remote sensing laboratory

University of Nevada, NASA/JPL
Co-Investigator: Shuttle Imaging Radar-B experiment

University of Nevada, CNES
Co-Investigator: SPOT/PEPS project 

Nevada Dept of Minerals
Primary Investigator: Mineral appraisal project

Chevron USA
Petroleum Geologist: CA/Santa Barbara Channel

Education

•	M.S., Computer Science, Florida Institute of Technology, Melbourne, FL 
•	Ph.D., Geology, University of Nevada–Reno, NV 
•	M.S., Geology, University of Arkansas–Fayetteville, AR 
•	B.S., Geology, University of Arkansas–Fayetteville, AR

computer skills

•	Programming languages:  C/C++, SQL, VBA, and proficiency with MATLAB
•	Geographic information system software: ArcView 9.2, Arc/Info, Spatial Analyst, Stereo Analyst
•	Image processing software: ENVI, ERDAS Imagine

Publications

Borengasser, M., Forensic Image Processing, McGraw-Hill, in preparation.

Borengasser, M., Hungate, W. and Watkins, R., Hyperspectral Remote Sensing with Applications, CRC Press, 2007.

Diatom Hill Project, Esmeralda County, Nevada

A field review was conducted of American Diatomite’s “Diatom Hill Project” on October 4, 2008 with Darvin Wade.  The aerial extent of the bedded diatomite unit was verified along strike and dip at several locations within the claim block.  In addition it was noted that the diatomaceous unit is exposed over a wide area along the west side of the Monte Cristo Range.  Exploration potential beyond the identified Indicated Mineral Resource of 192 million tons identified in the Borengasser report is excellent.
Ownership:  
The project consists of 35 unpatented placer mining claims totaling 1700 acres.  The claims are located in Sections 25 and 26, Township 4 North, Range 37 East, Esmeralda County, Nevada.  American Diatomite owns a 100% interest in the claim group and has paid all annual assessment fees to the county and the BLM.  
History:  
The diatomite occurrences have been known since the early 1920s.  They are first mentioned in a 1923 regional report on Nevada mineral resources by F. C. Lincoln.  Historic exploration within the existing project area is evidenced by a series of small pits, tunnels, and declines.  Shu Fly diatomite deposit located west of American Diatomite’s holdings has seen minor production.  The Nevada Bureau of Mines and Geology reports that the diatomite deposits are hosted in Miocene to Pliocene Age sediments.  The Basalt diatomaceous earth deposits located approximately 25 miles west of Diatom Hill were operated from 1944 to mid 1970s by GREFCO.  They are hosted in a similar geologic setting as Diatom Hill.  The United States Geological Survey has mapped the Monte Cristo Range at a scale of 1 inch equals 1 mile.  Their work identified extensive sedimentary diatomite occurrences in the mid-Miocene McLeans Formation.
Previous Exploration Activity:  
As mentioned above prospecting of the diatomite has occurred since the 1920s with limited production.  American Diatomite has been in the process of evaluating the property since 2002.  Their work to date has been to sample outcroppings and conduct shallow drill holes to collect samples for geochemical analysis.  Marcus Borengasser completed a mineral appraisal evaluation based American Diatomite’s and public domain information. 
Geology:  
Diatomite is a chalk-like, soft, friable, earthy, very fine grained, siliceous sedimentary rock comprised of fossilized diatom remains. Diatomite often has a light color (white if pure, commonly buff to gray in-situ, and rarely black). It’s extremely light because of its low density and high porosity, and essentially chemically inert. All of this matches the Diatomite member of the McLeans Formation, the host unit at the Diatom Hill Property.
The Tertiary, Miocene age McLeans Formation ranges in age from 15 to 18 million years ago.  This sedimentary formation is a series of siltstone, shale and sandstone that contain interbedded diatomite.  Average thickness of the bedded diatomite is approximately 100 feet.  The unit can locally be up to 300 feet thick.  The McLeans Formation is typical of most fresh water diatomite deposits in the Western United States that formed during the Miocene and Pliocene.  The Miocene climate in the region was fairly mild and wet gradually becoming drier in the late Miocene.    Lakes formed throughout the western United States during this period under numerous different geologic conditions. The McLean Formation formed in a freshwater lake setting with Diatom blooms occurring over several million years.  Diatom growth and formation relies on an influx of silica and nutrients.  Silica is needed to form their skeletons.  Streams carried silica and important nutrients such as phosphorus into the lakes.  Volcanic ash, produced from nearby and regional eruptions lands on and settles through a lake and can react with the water, releasing silica.  Diatomite deposits form from an accumulation of amorphous hydrous silica cell walls of dead diatoms in this fresh water setting. These microscopic single-cell aquatic plants (algae) contain an internal, elaborate siliceous skeleton consisting of two frustules (valves) that vary in size from less than 1 micrometer (µm) to more than 1 millimeter in diameter, but are typically 10 to 200 µm in diameter. The frustules have a broad variety of delicate, lacy, perforated shapes, including cylinders, discs, feathers, ladders, needles, and spheres.
The McLeans Formation is situated below the “Blair Junction sequence”. This sequence includes three major units: an upper and lower andesite and dacite flows and associated sedimentary and intrusive with a medial tuff unit composed of lithic and pumice-rich, vitric, nonwelded, pyroclastic tuff.   The Gilbert Andesite underlies the McLeans Formation.  It forms massive resistant outcrops capping many of the ridge lines in the Monte Cristo Range.  The formation consists of andesite and trachyandesite flows and volcanic breccia. The striking white color of the diatomite sandwiched between the two darker volcanic formations make for easy field and air photo identification.  
The USGS has mapped the McLeans diatomite over 3.5 miles of strike at an average width of a ½ mile. American Diatomite’s claim block is central to this zone.  The USGS also identified several species of the Melosira diatoms in samples taken immediately west of the claim block.  The potential for the diatomite unit extending under volcanic cover or a thin veneer of recent float is excellent.
Geochemistry:  
Sampling conducted by American Diatomite and Marcus Borengasser were assayed by ALS Chemex in Reno, Nevada and Huffman Laboratories in Golden, Colorado.  Results from both labs average 89% SiO2.
Exploration Potential: 
The potential to increase the existing Indicated Mineral Resource beyond 192,000,000 tons is excellent.  An Inferred Mineral Resource in the diatomite bearing McLean Formation beneath the Blairs Junction volcanics could exceed 232,000,000 tons as per the Borengasser report.  The SiO2 content of the later Inferred Mineral Resource is not known but is probably similar to the Indicated Mineral Resource.  Detailed sampling and mapping would be required to verify the economic potential of the diatomite unit.
Mineral Resource:  
American Diatomite Controls an Indicated Mineral Resource of 192,000,000 tons of diatomite with an average grade of 89% SiO2 at their Diatom Hill Project.  The USGS recently released the 2007 Minerals Yearbook for Diatomite.  This report was not available when Borengasser completed his review of the property. The USGS report gives an average unit value of $237 per ton, an increase of 8% over 2006. Unit value for diatomite fillers is $438 per ton and increase of 11% over 2006.  The only negative is in the price of specialized uses, dropping to $230 per ton.  Using the average production cost of $40 per ton the value of the indicated resource is between $35.5 to $76.4 billon dollars. Exploration potential to add significant tonnage to the indicated resource is excellent.  
I only reviewed the data supplied by American Diatomite which includes the report by Marcus Borengasser.  This was combined with observations from the field review conducted with Darvin Wade and public domain information acquired from the Nevada Bureau of Mines and Geology and United States Geologic Survey.  All conclusions were drawn from these information sources.  
Recommendations:
Consolidate claim block and complete a claim location map.  Combine this with public domain geologic mapping and field mapping and expand claim block to cover surface exposures of diatomite. Use this same base map and plot all available geochemical sample locations.  This would establish a preliminary silica grade contour map. It would aid in eventual identification of mineable resources and tonnages.  With the consolidation of the claim block keep in mind that access has to be protected.  A third party can’t acquire adjacent ground and force a negotiation in order for American Diatomite to establish mine access to the resource.  Also if exploration to establish additional tonnage is an objective then the ground should be acquired before any potential competition does.  
Current claim block covers approximately 1700 acres, slightly over 1 square mile.  The claims need to be contiguous so a third party can’t acquire any holes or open ground in the claim block.  Surface outcrops of diatomite and secure access would require further field evaluation prior to expanding the current land position.  At a minimum, a two or three fold increase from the current 35 claims would be required. 

Russell W. Allen
Professional Registered Geologist
Q.P. 

	RUSSELL W. ALLEN
	1585 Satellite Drive
	Sparks, Nevada 89509
	(775) 233-8327 
                                             REGISTERED GEOLOGIST
                                                dancnbear @charter.net
        ____________________________________________________________________

	SUMMARY

Thirty three years of extensive experience in minerals exploration, fifteen of that in senior management positions.  This includes preparing and making budget presentations to management, securing bids, negotiating contracts, and acquiring the necessary permits.  I have worked closely with state and federal regulators to secure permits and resolve conflicts