Alhambra Resources Ltd. Announces Corporate Activities Update.

Business Editors

CALGARY, Alberta--(BUSINESS WIRE)--May 29, 2003

Alhambra Resources Ltd. (TSX Venture Exchange "ALH") is pleased to provide an update related to corporate activities including a progress report on the acquisition of Saga Creek Gold Company ("Saga Creek") and the preliminary assessment report completed by ACA Howe International Limited ("Howe") on Saga Creek's Uzboy gold project located in north central Kazakhstan.

Acquisition of Saga Creek - Uzboy Property

As previously announced on August 8th, 2002 and September 20th, 2002, the Corporation has entered into a unit purchase agreement, dated March 21, 2002, as amended, to purchase, directly or indirectly, all of the issued and outstanding units of Saga Creek in consideration of the issuance of 4,000,000 common shares of the Corporation and the granting of a net smelter return. Upon conclusion of this transaction, the Corporation will acquire the Uzboy mineral properties ("Uzboy Property"), that cover approximately 11,000 square kilometers located in the Akmola Oblast province of northern Kazakhstan, consisting of License MG No. 1029D, dated February 10, 1997, as amended, ("Uzboy License") and License MG No. 719DD, dated February 10, 1997, as amended, ("Sary-Arka License"), which licenses are valid for twenty-five (25) years and can be extended if requested. Although the TSX Venture Exchange has conditionally consented to the transaction, the transaction has not closed and will not be completed until the Corporation has complied with all conditions being imposed or to be imposed by the TSX Venture Exchange, and until the TSX Venture Exchange has provided final approval for the transaction.

Preliminary Assessment Report

The Corporation is pleased to announce that it has received from Howe the preliminary assessment report on the Uzboy oxide gold project located in north central Kazakhstan. Howe concludes that the project appears financially attractive.

The preliminary assessment study completed by Howe is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. In addition, there is no certainty that the results of this study will be realized. The qualified persons responsible for preparing the preliminary assessment report are R. L. Comeau, P. Geo., B. Brady, P. Eng., and A. Hayden, P. Eng. A copy of the Preliminary Assessment Report was filed on SEDAR on May 29, 2003.

A brief description of the main parameters of the preliminary assessment report is as follows:

Resources

Gemcom software was used to estimate measured, indicated and inferred resources pursuant to CIMM resource category definitions for the Uzboy east and Uzboy west zones of oxide gold mineralization. Resource estimations (using a 0.5 g/t cutoff) were completed on the upper and lower oxide zones and the transitional zone located between the oxide and primary sulphide mineralization. The oxide resources were estimated to a depth of 50 meters using an estimated density for each specific zone of mineralization.

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                         Uzboy West               Uzboy East
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Resource Category    Tonnes    Grade (g/t)      Tonnes   Grade (g/t)
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Measured          1,554,722      1.428          45,235     1.253
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Indicated           568,349      1.424         936,995     1.094
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In addition to the measured and indicated resources, an inferred resource of 1,902,843 tonnes at an average grade of 0.92 grams per tonne has also been estimated to occur on the Uzboy west and Uzboy east zones.

Operating Costs

Howe estimated the following operating costs parameters:

  Activity           Zone               Per tonne Ore Per tonne waste
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  Mining             Upper Oxide        $US0.76               $US0.68
                     Lower Oxide        $US0.89               $US0.80
                     Transitional       $US1.05               $US0.96

  Processing         Upper Oxide        $US3.40
                     Lower Oxide        $US3.90
                     Transitional       $US3.90

  Gold Recovery Oxide              70%
                     Transitional       50%

  General and Administration            $US35,000 per month

  Shipping Insurance and Refining       5.25% of sales

Based on column leach test performed in 2001, by Saga Creek, the cyanide and caustic consumption per tonne of material leached are estimated to be 0.71 kg and 2.00 kg respectively. Howe estimated the mining operating costs and the process operating costs are within an accuracy range of +/- 20%.

Environmental Considerations

Howe has completed a review of the permitting process and environmental considerations for the Uzboy project. An ecological study has been completed and a pre-OVOS study is underway to complete a preliminary evaluation of the influence of the project on the environment. A detailed OVOS study (equivalent to an environmental impact study) is to be completed before commencement of operations. In addition to the OVOS study, Saga Creek must complete a PDV (maximum permissible discharge) study to establish the basis for calculating the ecological payments related to discharges to the environment due to operations.

General and Administrative

General and administrative costs are estimated to be $US35,000 per month. Management estimates that at full production the project should employ a total of 207 people. Management also estimates that the mining and leaching operations would be operated on two 12-hour shifts with a 15 days crew rotation.

Financial Evaluation

Howe applied the Whittle pit optimization software over a range of gold prices using the measured, indicated and inferred resource blocks. Based upon a $US325 per ounce base case, the Whittle pit optimization software estimated that 2,418,572 tonnes (which included measured, indicated and inferred resources) at an average grade of 1.56 g/t would be exploited over the estimated life of the project. Howe used the following parameters for the base case financial analysis of the project; annual production of 650,000 tonnes, waste to ore ratio of 0.87, average gold recovery of 67%, capital costs including working and sustaining capital of $US3.8 million, four years of operations and gold sales of 81,761 ounces.

The base case for the project yielded $US10.2 million in operating income. Total cash costs are estimated to be $US201 per ounce. Project undiscounted cash flow after tax and capital cost recovery is estimated to be $US4.7 million. Using a discount rate of 10%, the Net Present Value of the cash flow is estimated to be $US2.9 million yielding an Internal Rate of Return ("IRR") of 44%.

Howe determined that the project is sensitive to gold price and grade, moderately sensitive to operating costs and not very sensitive to capital costs.

Conclusions and Recommendations

Howe concludes that the Uzboy deposit resource base is well defined but requires verification of analytical data through repeat fire assay check assaying. In addition the resource base should be further substantiated by the completion of the recommended core-drilling program.

Howe also concluded that a program of metallurgical test work, additional core drilling and preliminary environmental permitting work is warranted in order to prepare the project for a pre-feasibility study. The drilling program and pre-feasibility should be completed as expeditiously as possible.

Howe concludes that the project appears to be financially attractive stating, "We recommend that Saga Creek continue evaluating the Uzboy deposits with a view to obtaining tonnage, grade and metallurgical information sufficient to prepare a pre-feasibility study. A positive pre-feasibility study would result in a statement of reserves".

Howe has recommended a budget of $US880,000 including a 10% contingency fee to continue the work on the oxide gold mineralization at the Uzboy gold project. The budget calls for the drilling of 80 diamond drill holes totaling 7,160 meters for resource definition, 8,000 meters of reverse circulation drilling, metallurgical test work, project supervision, a quality control quality assurance program and preparation of a pre-feasibility report.

Future Exploration Plans

The Corporation intends to commence the program recommended by Howe with funds received from the recently announced private placement.

Elmer B. Stewart, MSc. P.Geol is a director of the Corporation and is the nominated Qualified Person responsible for monitoring the supervision and quality control of the exploration programs completed on the Uzboy Property.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.