July 2004

El Capitan Signs Letter of Intent for Sale of 1.8 Million Tons of Iron Ore

Englewood, CO— El Capitan Precious Metals, Inc. announced that it has signed a non-binding letter of intent with Asia Finance Corporation (AFC) to deliver up to 1.8 million tons of iron ore per year over a 10-year period. Based on a third-party report, the company estimates it has approximately 25 million tons of iron ore in reserve at its El Capitan mine. AFC is the United States representative for a significant Chinese corporation. Completion of this transaction is subject to further due diligence by each party, negotiation and execution of a definitive agreement, and any necessary state or federal regulatory approvals.

“This contract, if consummated, should not affect our precious metals recovery,” El Capitan President, Chuck Mottley, said. “AuRIC Metallurgical Labs has done the research for us, and over 80% of the precious metals values are in the non-magnetic ore. We plan to use magnetic separators to separate the iron ore from the precious metals, and this will be the first step of concentration. The second step of concentration will be leaching chemically the precious metals from the non-metallic ore.

“AuRIC Metallurgical Labs is designing the flow sheet and the process to recover the precious metals. In their tests of head ore, AuRIC has identified commercial values of platinum and palladium. We are beginning the process of filing for the necessary permits so that we are prepared if this comes to fruition,” continued Mr. Mottley.

“Under the terms of the letter of intent with AFC, we would receive the capital necessary to begin the operation without the need for further financing, assuming we are able to execute a definitive agreement for the transaction. We are ready for this challenge and are in the process of lining up the necessary personnel and equipment, should we be successful in closing the transaction,” Mr. Mottley concluded.

El Capitan Precious Metals, Inc. is a nominally capitalized development-stage company that owns a 40% interest in the El Capitan mine located near Capitan, New Mexico, as well as a joint venture and 20% ownership of 13 mining claims and other assets known as the C.O.D. Property located near Kingman, Arizona.