Location

The 8,000 acre Red Knoll property in Graham County, Arizona encompasses an area of favorable geology along the northeast flank of the Safford mining district. Lying adjacent to and northeast of Phelps Dodge's porphyry copper deposits, the property is located on the northeast-trending structural zone thought to control mineralization at the Safford district. The property also lies on a regional northeast-trending magnetic low connecting the Safford and Morenci camps.

Exploration Program

In May 2007, Franconia confirmed that the property hosts widespread potential host rocks for porphyry copper mineralization at a reasonable depth. The four-month drilling program tested for concealed porphyry-style copper mineralization buried beneath post-mineral volcanic cover, as well as for the depth of the potential Laramide-age metavolcanics. Three holes (RK-4, -5 and -6) totaling 6,862 feet were completed, investigating three of four IP anomalies generated by an earlier four-line, 17 line kilometre Titan 24 geophysical survey. While ore-grade mineralization has not yet been encountered, all three drill holes intercepted host rocks with the potential for porphyry copper mineralization at depths ranging from 979 to 1,782 feet.

One hole (RK-4), which tested an IP anomaly on the west end of Line 2, intercepted Laramide metavolcanics displaying strong to intense phyllic alteration with subordinate propylitic to phyllic transitional alteration. This alteration was accompanied by 1-3% pyrite starting at 1,616 feet (locally 4-6%) with anomalous copper values. Analytical results received to date indicate anomalous copper values from 979 to 2456 feet. The alteration and mineralization observed in RK-4 may indicate proximity to a porphyry copper system. The Company believes these results warrant additional geophysical examination as well as further drilling in the area, particularly to the east. In addition, based on depths-to-Laramide, a number of other geological targets have been identified that merit testing.

Historical Information

In June 2005 Franconia signed a Property Acquisition Agreement with Teck Cominco American Incorporated (Teck Cominco) for the Red Knoll Property. Under the terms of the Agreement, Franconia will earn a 100% interest in Teck Cominco's unpatented mining claims by spending US$2,000,000 over four years on exploration. The Agreement calls for a minimum expenditure of US$200,000 by Franconia in the first year. In addition, Franconia will reimburse Teck Cominco for land holding costs in 2004 and issue shares to Teck Cominco (see below). Following the issuance of shares on execution of the agreement, Teck Cominco will hold 425,000 shares in Franconia.

Upon Franconia completing US$2,000,000 in expenditures on the property, Teck Cominco will have a one-time option to elect to back-in to a 70% interest in the Red Knoll property by spending US$5,000,000. If Teck Cominco does not exercise its back-in right, it will have no further rights to the property except for a 2% NSR royalty. Franconia would also have the right to reduce the royalty to 1% by paying Teck Cominco US$1,500,000.

According to the Agreement and subject to TSX-V approval, on execution of this agreement Franconia will issue to Teck Cominco 150,000 units of Franconia at a price of Cdn$0.40 per unit. Each unit will consist of one common share of the Corporation and one-half of one common share purchase warrant. Each whole warrant entitles the holder thereof to purchase one common share at a price of Cdn$0.60 at any time prior to 5:00 p.m. Toronto time on the earlier of: a) 15 trading days after receiving notice from the Corporation that the weighted average price of the Common Shares has been equal to or greater than Cdn$0.70 for a period of 15 consecutive trading days; or b) two years from the date of issue of the units. Franconia will also issue an additional 100,000 units to Teck Cominco on each anniversary date during the term of the option.