Analyst: Victor Sula, Ph.D.

Initial Report
February 17th, 2009

2/13/09
TMBXF daily
0.25

0.20

0.15

0.10

Tombstone Exploration Corp.

0.05
1515 Red Top Rd. P.O. Box 1280
Tombstone, AZ. 85638 volume © BigCharts.com
3

Milliions
Tel: 520.457.3066 2

Fax: 520.457.3051 1
E-mail: abrown@tombstonemining.com 0
Website: www.tombstonemining.com Dec 09 Feb

MARKET DATA Company Introduction

Tombstone Exploration Corporation (TMBXF) is an exploration-
stage mining company involved in the acquisition, exploration and
Symbol TMBXF development of precious and base metals properties. The Company
Exchanges OTCOB
primarily focuses on silver, gold, barium, copper, lead, zinc, iron
Current Price $0.208
Price Target $0.44 and other precious and rare earth metals. TMBXF has the mineral
Rating Speculative Buy rights to approximately 11,500 acres located in Tombstone, Arizona,
Outstanding Shares 34.11 Million a known metal and mineral-rich area with a history of production.
Market Cap. $7.09 Million Its property claims encompass many well-known historical silver
Average 3M Volume 77,123 deposits such as San Pedro Group (Fox claims), State of Maine, Mer-
rimac, Free Coinage, Chance, Bonanza, Santa Ana, Solstice, Ace-in-
Source: Yahoo Finance, Analyst Estimates the-Hole, Black Horse, the Joseph group, Mamie, Sailor, Randolph,
and Groundhog. The Company is currently the largest landholder
in the Tombstone mining district, an area which has produced ore
valued at more than $85 million.

In 2007, the Company began an extensive drill program involving

geological research, testing, and identification of key target areas
and reserve categories. During the Phase 1 drill program, TMBXF
identified a very rich mineral zone that potentially represents a sig-
nificant precious and base metals discovery. The preliminary min-
eral inventory for the Tombstone project consisted of approximate-
ly 2.53 million tons at 141 grams/ton silver; 25,200 ounces of gold;
386,000 pounds of copper; 7.50 million pounds of lead and 1.25 mil-
lion pounds of zinc. In addition, the drill program indicated 205
million pounds of manganese deposits. This inventory is from dis-
coveries made on only 5% of the Company’s acreage; 95% remains
unexplored. In 2009, the Company plans to extend its exploration
and drilling program.

Tombstone Exploration Corp. (OTCOB: TMBXF) 1

 Analyst: Victor Sula, Ph.D.
Initial Report
February 17th, 2009

The Company was incorporated under the laws of Canada in October 1997 and is headquartered in Tombstone,
Arizona.

Investment Highlights
Business focused on precious/base metals exploration, development and mining

TMBXF has the mineral rights to approximately 11,500 acres of historical mining land, consisting of over 300
contiguous mineral claims. The property includes eight structures that were prolific producers in the past: State
of Maine, Bonanza-Solstice, Merrimac, Black Horse, Santa Ana, Mamie, Groundhog and Randolph.

The area’ss infrastructure is excellent with abundant water, energy, skilled man-power and excellent commu-
nications and transportation to support below average extraction costs. The project is easily accessible, located
only 70 miles from Tucson and close to an international airport.

Past production from Tombstone mining district valued at $85 million

The Company’s property portfolio is located in the historical Tombstone mining district and contains many his-
toric mines with confirmed silver mineralization. The Tombstone mining district has produced ore valued at $85
million. Approximately 20 mines in the Eastern or Bunker Hill area contributed ore valued at $79 million, and
a dozen mines in the Western or Mellgren area contributed ore valued at $6 million. Most of the Mellgren area
veins are located on TMBXF property. At today’s prices, historic production from the Mellgren area would be
valued at $194.5 million. In addition, historic production from these mines was minimal due to flooding encoun-
tered at 250 feet and drastically declining silver prices during the 1890’s. Operations were shut down decades
ago, and most of these mines have been idle since the 1930s.

Drilling program has identified key target areas

During the Phase 1 drill program, the Company identified a very rich mineral zone that may potentially rep-
resent a significant precious and base metals discovery. The preliminary mineral inventory for the Tombstone
project included approximately 10.4 million ounces of silver; 25,200 ounces of gold; 386,000 pounds of copper;
7.5 million pounds of lead, 1.25 million pounds of zinc and an estimated 205 million pounds of manganese. Only
5% of the acreage has been explored so far in the drill program.

Value of discovered inventory approaches $400 million

The results of 2007 and 2008 drilling campaigns were impressive

and proved that the Company’s acreage has strong potential as a
world-class silver deposit containing significant reserves amena-
ble to both underground mining and open pit mining operations.
The value of already identified mineral inventories approaches
$400 million at current metals prices. Since only 5% of the lateral
extent of the Tombstone acreage has been explored, and the de-
posit remains open at depth, the overall magnitude of the Tomb-
stone project may be substantially higher.

Tombstone Exploration Corp. (OTCOB: TMBXF) 2

 Analyst: Victor Sula, Ph.D.
Initial Report
February 17th, 2009

Rising silver prices

Higher prices for precious metals are enabling mining companies to profitably develop mineral resources that in
a low-prices environment would not be economically viable. Silver prices have increased from $4.39 per ounce in
2001 to $13.38 in 2007. By March 2008, silver prices exceeded $20 an ounce for the first time since November 1980.
Analysts expect silver will outperform gold in 2009 and that prices for both metals will exceed near record levels
reached in 2008. In 2009, silver is expected to trade in a $11/oz to $18/oz range with some high spikes. According
to RBC Capital Markets, the fundamental outlook for silver remains bullish for the next few years.

Business model

TMBXF identifies, acquires, and develops proven mineral de¬posits in the United States. The Company is focused
on silver and gold, as well as base metals such as copper, lead and zinc. In December 2006, the Company acquired
full rights to certain mining and exploration claims located in Arizona, along with related equipment and prop-
erty. TMBXF has the mineral rights to approximately 11,500 acres of historical mining land in an area near Tomb-
stone, Arizona, consisting of over 300 contiguous mineral claims. The property includes eight structures that were
significant ore producers in the past: State of Maine, Bonanza-Solstice, Merrimac, Black Horse, Santa Ana, Mamie,
Groundhog and Randolph. The Company also intends to invest in rehabilitating old shafts and workings located
on its properties to make them safe for renewed exploration and sampling.

TMBXF has spent the last few years laying the groundwork for a comprehensive exploration program. A drill
campaign was planned for 23 core holes drilled from 15 distinct drill sites and designed to intercept extensions
of the State of Maine mine, Bonanza-Solstice mines, Merrimac zone, and the Ace-in-the-Hole-Black Horse mine
sub-parallel trends. The Company has made substantial progress over the last two years, with 15 drill holes total-
ing 3,051 meters (10,160 ft) already completed. Twelve of the 15 drill holes test the central zone of the Bonanza
structure and three drill holes test the Ace-in-the Hole and Black Horse areas. Phase I drilling was done via re-
verse circulation and core diamond drilling, using HQ diameter and triple tube technology which yields recovery
of over 90% in most instances.

TMBXF utilizes modern technologies from advanced geology, geophysical and geochemical sciences to minimize
its exploration and production costs and enhance operating efficiency. The Company also uses work product
and information derived from historic maps, reports, exploratory drill logs, geological study, radioactive rock
samples, state organization reports, consultants and other exploratory information to guide its drilling efforts.

In addition, the Company has established relationships with mineral processing and consulting companies, refin-
eries, assay companies and engineering firms to assist in designing its overall mining operations. TMBXF is also
seeking joint venture partners to assist in exploring for non-precious metals on its properties. The Company’s

Tombstone Exploration Corp. (OTCOB: TMBXF) 3

 Analyst: Victor Sula, Ph.D.
Initial Report
February 17th, 2009

future plans call for two large scale mill sites once drill targets have been identified for key areas and production
permits have been obtained.

Corporate strategy

TMBXF`s strategy is to acquire and develop precious and base metals properties that either contain producing
mines, have been the subject of geological exploration, or are known to contain proved mineral reserves. By fo-
cusing on known properties, the Company expects to be able to produce metals and minerals at below average
extraction costs. In addition, the Company intends to selectively acquire properties with resources that can be
tapped through production.

The Company`s strategy is summarized below:

• Expand target areas as drilling progresses and studies develop knowledge of properties;
• Acquire prospective mineral projects at various stages of exploration and development;
• Continue geological analysis including mapping and identification of drill targets;
• Utilize modern geophysical, drilling and engineering technologies;
• Integrate the extraction of precious and base metals through the acquisition of new properties;
• Interface with Arizona state agencies to establish Tombstone as a significant contributor to the state economy;
• Identify areas on the property for mill site operation;
• Improve off-road access by working closely with the city of Tombstone;
• Establish and leverage strong relationships with business partners
• Initiate marketing discussions with domestic and international utilities;
• Build well-financed, diversified exploration programs.

Properties
Tombstone silver project

The Company has acquired a portfolio of explora-

tion targets contained within four non-contiguous
parcels, consisting of approximately 11,500 acres
in the historical western Tombstone silver mining
district of Arizona. The largest parcel is in the west-
ern part and contains many smaller historic mines
with confirmed silver mineralization. The largest
historic mines dating from the late 1800s and early
1900s are located east on the central part of the dis-
trict. The project is easily accessible by paved roads
and is located only 70 miles from Tucson and close
to an international airport.

Historical mines such as State of Maine, Bonanza,

Merrimac and Santa Ana had produced ore valued
at over $6.0 million by the late 1930’s. Production from these mines was below expectations due to flooding prob-
lems at depths below 250 feet and falling silver prices in the 1890’s. Operations were halted and the mines were
worked only sporadically. Most of these mines have been essentially idle since the 1930s.

Tombstone Exploration Corp. (OTCOB: TMBXF) 4

 Analyst: Victor Sula, Ph.D.
Initial Report
February 17th, 2009

Tombstone property and mines with historical production

Source: Company presentation

Geology and mineralization

The Tombstone district sits astride a regional Northeastern trending structure. This structure is visible on topo-
graphic maps as well as in satellite images of the American Southwest. It is a northeast trending rift structure or
shear, traceable from southwest of the Huachuca Mountains of Arizona northeast to Silver City, New Mexico.

The principal trend of the mineralized structures in the Tombstone silver project area is northeasterly and dipping
steeply to the northwest. These structures are complexly intersected by other mineralized structures that trend in
different directions. Ore deposits occur in two styles: fracture-fill and strata-bound pod structures. The fracture-fill
structures are actually deep-seated fracture/fault zones trending northeast. These are considered feeder conduits
for the pod deposits, and represent the upper sector of the mineralization system. At the property, the fracture-fill
deposits are the predominant ore bodies.

Tombstone Exploration Corp. (OTCOB: TMBXF) 5

 Analyst: Victor Sula, Ph.D.
Initial Report
February 17th, 2009

This structural trend of mineralization presents an area of exceptional exploration potential, with precious met-
als and base metals distributed along and adjacent to the structure. The property encompasses 10-12 mainly
northeast trending structures of manganese oxides carrying strong silver mineralization with gold, lead, zinc
and copper. In addition, silver mineralization occurs in certain areas as lensoid bodies of high grade ore suitable
for bulk mining.

The majority of veins and mineralized structures within the Tombstone district and neighboring districts exhibit
the same northeast alignment. In neighboring districts along the Northeast rift, silver and gold mineralization
occur in igneous and sedimentary rocks, suggesting ore mineralization is pervasive and of considerable extent
along this northeast trending, regional rift.

Drilling program results

In 2007-2008, the Company undertook an active drilling program which resulted in the identification of a very
mineral rich zone. The table below summarizes the mineral inventory, grades and tonnages of the various min-
eral commodities of the Tombstone silver project at November 2008.

Mineral Quantity

Silver 2.53 million of tons at 141 g/t (metric)

Gold 25,200 ounces
Manganese 205 million pounds
Lead 7.50 million pounds
Zinc 1.25 million pounds
Copper 386,000 pounds

Source: Company presentation

In 2009, the Company plans to continue its aggressive exploration and drilling program.

Industry Outlook

The United States is the world’s largest user of mineral resources. Minerals are essential to the U.S. economy,
contributing to the real gross domestic product (GDP) at several levels—mining, processing, and manufactur-
ing of finished products. The estimated value of all mineral materials processed in the U.S. during 2006 totaled
$542 billion or 10% more than in 2005 and 23% more than in 2004. Mineral materials processed domestically ac-
counted for more than $575 billion of the U.S. economy in 2007.

The estimated value of U.S. metal mine production in 2006 was over $23.5 billion, or about 51% more than 2005.
Principal contributors to the total value of mine production were copper (36%), gold (22%), iron ore (13%), mo-
lybdenum (13%), zinc (10%), and lead (3%). Metals with the largest increase in value of mine production were
zinc (117%), copper (97%), palladium (65%), gold (68%), platinum (36%), and iron ore (31%)1.

1. http://minerals.usgs.gov/minerals/pubs/mcs/2007/mcs2007.pdf

Tombstone Exploration Corp. (OTCOB: TMBXF) 6

 Analyst: Victor Sula, Ph.D.
Initial Report
February 17th, 2009

Silver mining

Rising silver demand reflects investment interest in silver exchange traded funds (ETF) which were established in
2006 and modeled after the gold ETFs. Silver is also used in fabrication and industrial applications such as photog-
raphy, X-ray films, electronics and circuit boards, electroplating, hardening bearings, mirrors, solar cells, catalytic
converters and other uses. Consumption in industrial applications posted an impressive 7% gain in 2007 to 455.3
million ounces, the sixth consecutive year of growth in this category2. Jewelry demand declined by less than 2%
year-over-year to $163 million in 2007 despite large price increases.

Total global silver fabrication grew 1% in 2007 to 843.7 million ounces. Worldwide silver mine production rose by
4% that year, with particularly strong gains from Chile, China and Mexico. Total silver mine production was 670.6
million ounces. Silver is obtained as a by-product from processing and smelting copper, gold, and lead-zinc ores.
These polymetallic deposits account for more than two-thirds of U.S. and world silver resources.

Silver World Mine Production, 2000-2007, metric tons

Source: U.S. Geological Survey, 2000-2007

Silver mining in the United States

Silver mining in the United States began on a major scale with the discovery of the Comstock Lode in Nevada in
1858. The industry contracted significantly following the demonetization of silver in 1873, but silver mining con-
tinues on a smaller scale today.

The United States produced 1,220 metric tons of silver in 2007, or 35% of the silver it used. The remaining 65%
was imported from Mexico, Canada, Peru, and Chile. Alaska continues to be the country’s leading silver-produc-
ing state, followed by Nevada. Thirty-six U.S. mines reported silver production in 2007. There are 21 refiners of
commercial-grade silver, with an estimated total output of 3,000 tons from domestic and foreign ores and concen-
trates, and from old and new scrap.

2. www.gfms.co.uk/Press%20Releases/WSS%202008%20Press%20Release.pdf

Tombstone Exploration Corp. (OTCOB: TMBXF) 7

 Analyst: Victor Sula, Ph.D.
Initial Report
February 17th, 2009

U.S. silver industry, metric tons

2002 2003 2004 2005 2006 2007

Production:
- mine 1,350 1,240 1,250 1,230 1,140 1,220
- refinery:
- primary 2,580 2,580 1,140 2,530 3,150 2,500
- secondary 1,030 1,010 1,920 980 1,500 1,200
Imports 4,300 4,510 4,100 4,540 4,820 4,570
Exports 680 181 422 319 1,670 1,000
Consumption 5,980 6,440 6,700 7,560 7,550 7,980
Inventories, year-end 3,510 3,650 3,800 3,970 4,220 3,510

Source: The U.S. Geological Survey 2007.

For the first six months of 2008, domestic mines produced 583,000 kilograms of silver, or 10% less than produc-
tion in the first half of 2007.

Silver prices

Interest in silver mining has increased in recent years because of higher prices: average silver prices have in-
creased from $4.39 per ounce in 2001 to $11.61 per ounce in 2006. Led by continued strong investor interest and
industrial demand, silver prices climbed to $13.38 per ounce in 2007. On a percentage basis, silver’s price gain
was stronger than that enjoyed by gold, platinum and palladium last year. By March 2008, silver had jumped
above $20 an ounce for the first time since November 1980. However, since July 2008, silver prices have dropped
after Wall Street’s collapse forced hedge funds and other institutional investors to dump holdings in precious
metals to raise badly needed cash.

Source: www.kitcosilver.com

Tombstone Exploration Corp. (OTCOB: TMBXF) 8

 Analyst: Victor Sula, Ph.D.
Initial Report
February 17th, 2009

Analysts expect silver will outperform gold in 2009 and that prices for both metals will exceed the peak highs
reached in 2008. The main reason is reduced base metal production (silver is a by-product) and suspension of
exploration and development projects by large mining companies in an effort to control losses. In addition, new
communications technologies that utilize silver are coming on-line with no apparent slowdown. In 2009, silver is
expected to trade in a $11/oz to $18/oz range with some high spikes. According to RBC Capital Markets, funda-
mentals for silver should remains bullish for the next few years.

Manganese mining

Most manganese (around 90% of global output) is used in the production of steel and iron, an application in which
this metal is essential and has no real substitutes. Trends in manganese consumption reflect those of the global
steel industry. Steel production rose on average 6% annually between 2000 and 2007. Steel demand was forecast to
increase 7% in 2008 and 4-5% annually through 2015. Based on those forecasts, demand for manganese is expected
to reach 18-19 million tons per year by 20153.

Forecasts of manganese ore output (`000 million tons)

Source: Metal Expert, www.metalexpert-group.com/

The United States does not produce manganese ore, but imports it instead from Gabon (65%), South Africa (19%),
Australia (7%) and Ghana (2%). Manganese demand comes mainly from construction, machinery, and transporta-
tion applications, which account for about 24%, 10%, and 10% of demand, respectively, and accounted for $730
million of purchases in 2007. In the U.S., manganese ore is consumed mainly by eight firms with plants located in
the East and Midwest. Most ore consumption is related to steel production, directly in pig iron manufacture and
indirectly through upgrading ore to ferroalloys.

3. www.the-infoshop.com/study/ros59657-econo-manganese.html

Tombstone Exploration Corp. (OTCOB: TMBXF) 9

 Analyst: Victor Sula, Ph.D.
Initial Report
February 17th, 2009

Manganese ore prices skyrocketed in 2007 as steel production grew 7%; manganese alloys supply was up 11%
while demand was up 15%; manganese ore production capacity was down 1%; and the dollar depreciated. Ore
supply is expected to remain tight until 2011–2012 and prices are expected to remain at historically high levels
of $14-16/dry metric ton unit (dmtu).

Gold

At 3,547 tons, identifiable gold demand in 2007 was 4% higher than in 20064. This was equivalent to a rise of 1/5
in dollar terms, which increased the value of demand 19% to $79.2 billion, a fourth successive annual record.
The majority of gold is consumed by in jewelry manufacturing. The global jewelry market consumed 2,400 tons
of gold in 2007, a 5% increase compared to 2006 and 22% higher in dollar terms, followed by identifiable invest-
ment of 657 tons for industrial applications and dental consumption of 4461 tons. Jewelry demand fell 11% in
2008 to its lowest level since 1989, while implied net investment grew by around 20% to over 200 tons in 2008.

Mine production fell by 88 tons in 2008, the third consecutive year of decline. Declines were recorded in Indone-
sia, South Africa and Australia while gains were recorded in China and Russia. Output in the first half of 2009 is
forecast to grow slightly5.

Gold prices

Since August 2007, gold prices have steadily climbed to new records. Gold prices in 2007 averaged slightly less
than $700 per ounce and represented an all-time high. By March, 2008, gold prices had surged nearly 20%, fu-
eled by a weak dollar, record crude oil prices, production disruptions at a number of mining operations in South
Africa, worries about the health of Wall Street banks and concerns over a faltering U.S. economy. Gold is seen as
a safe haven against inflation and GDP outlook play a major role in determining gold prices.

Source: www.goldprices.com, price in $ per oz

4. www.gold.org/assets/file/pub_archive/pdf/GDT_Q4_2007.pdf
5. www.gfms.co.uk/Press%20Releases/UP208_overview.pdf

Tombstone Exploration Corp. (OTCOB: TMBXF) 10

 Analyst: Victor Sula, Ph.D.
Initial Report
February 17th, 2009

In March 2008, gold prices hit $1,009 per ounce on the New York Mercantile Exchange before slipping back. The
current turmoil in the financial markets is creating enormous confusion and demand for dollars is rising as inves-
tors head for cash, all of which is weighing on gold. GFMS analysts expect gold prices to reach new highs in the
first half of 2009 as net investment surges. Overall, analysts expect the bulk of gold trading in 2009 to be within
the $700/oz to $1,300/oz range6.

Financial Analysis

The Company is in the exploration stage and has yet to generate revenues from operations. TMBXF reported a
$1.4 million net loss in 2007. The Company’s 2007 operating expenses consisted mainly of general and administra-
tive expenses and accounting and legal fees related to reporting obligations under the Securities Exchange Act of
1934. We expect the Company’s operating expenses to increase in 2009 as it extends its exploration program for
the Tombstone property.
Income Statement, $

2006 2007 % Chg

Revenues - - n/m
Professional fees 25,792 19,217 -25.5%
Consulting expenses 60,000 190,648 217.7%
General and administrative 72,391 1,210,130 1571.7%
Loss from operations (1,419,995) n/m
Total other income (expenses) (158,183) (3,553) n/m
Net income (loss) (1,423,548) n/m
EPS 851,808 (0.07) n/m

Source: SEC Filings

At December 31, 2007, TMBXF had cash of $252,718 and liabilities, consisting mainly of accounts payable and
related party payables, totaling $122,199.

Balance Sheet, $

31-Dec-06 31-Dec-07

Cash and cash equivalents 42,981 252,718

Fixed Assets, Net - 96,326
Mineral properties 900,000 893,620
Total Assets 942,981 1,242,664

Total Current Liabilities 81,227 122,199

Total Stockholders’ Equity (Deficit) 861,754 1,120,465

Source: SEC Filings

6. www.scotiamocatta.com/prec/pdfs/GOLD_Forecast_2009.pdf

Tombstone Exploration Corp. (OTCOB: TMBXF) 11

 Analyst: Victor Sula, Ph.D.
Initial Report
February 17th, 2009

Since its incorporation, the Company has financed its operations almost exclusively through the sale of common
shares to investors. TMBXF is still primarily focused on exploration activities and is not likely to produce operat-
ing income or cash flow during 2009. Thus, the Company will require external financing and/or assistance from
a joint venture partner to implement its 2009 drilling program.

Outlook

The Company completed two drilling programs during the field sessions of 2007 and 2008, consisting of 15 drill
holes totaling 3,051 meters (10,160 ft). Twelve of 15 drill holes tested the central zone of the Bonanza structure
and three drill holes tested the Ace-in-the Hole and Black Horse structures.

Results of drill programs exploring about 5% of the lateral extent of the Tombstone acreage indicated very
mineral-rich zones and a potentially major precious metals and base metals discovery. The mineral inventory
includes some 2.53 million tons of 141 gram/ton Ag (silver), plus significant quantities of gold and base metals
and a large manganese discovery.

TMBXF mineral inventory as of November 2008

Reserves Market price Reserves

estimates value, $

Silver 10,400,000 ounces 11.92 $/oz 123,968,000

Gold 25,200 ounces 888 $/oz 22,377,600
Copper 386,000 pounds 1.44 $/lbs 555,840
Lead 7,500,000 pounds 0.5 $/lbs 3,750,000
Zinc 1,250,000 pounds 0.5 $/lbs 625,000
Manganese 205,000,000 pounds 1.2 $/lbs 246,000,000
Total 397,276,440

Source: http://www.mineralprices.com/

The Company’s acreage has the signature of a world-class silver deposit. The value of the Company’s mineral
inventories approaches $400 million at current metals prices. Since only 5% of the Tombstone acreage has been
explored, the value of reserves not yet identified could be significantly greater.

Extraction costs are likely to be comparatively low, given the area’s excellent infrastructure with abundant water,
energy, skilled man-power, communications and transportation. The Company is currently identifying targets
for this year’s drill program expected to commence in February 2009.

Valuation

TMBXF’s current properties are believed to contain mineral resources worth nearly $400 million at today’s met-
als prices. The Company’s $7.1 million market capitalization represents a fraction of the value of its mineral re-
sources. In addition, the Company’s market value is well below that of other similar development-stage mining
companies.

We assume the following in our valuation calculations:

Tombstone Exploration Corp. (OTCOB: TMBXF) 12

 Analyst: Victor Sula, Ph.D.
Initial Report
February 17th, 2009

Free Cash Flow margin – 25%

Additional investment required – $10 million
Commencement of large-scale mining – 2011
Years of operation - 15 years

We derive a future value for the Tombstone project of $29 million. Discounting this 2011 value target at a Weighted
Average Cost of Capital of 15%, we obtain a fair value for TMBXF assets of $22 million, or $0.44/share, assuming
50 million fully diluted shares outstanding.

We believe our assumptions are conservative since the Company has explored only about 5% of its acreage. En-
couraging results from the 2007-2008 drilling programs suggest TMBXF has a better-than-average likelihood of
economic production. Moreover, strong metals prices create a favorable outlook for mining companies. We be-
lieve TMBXF is significantly undervalued at current share price levels and are initiating coverage of the Company
with a Speculative Buy rating and a $0.44 price target. However, we strongly advise investors to consider the risk
factors mentioned below since the Company faces many challenges in achieving its production targets.

Tombstone Exploration Corp. (OTCOB: TMBXF) 13

 Analyst: Victor Sula, Ph.D.
Initial Report
February 17th, 2009

Investment Risks
No assurance that properties contain commercially exploitable quantities of metals

Despite the acquisition of mineral claims and rights, TMBXF has not established that any of its claims contain
commercially exploitable mineral reserves. The search for valuable minerals as a business is extremely risky. The
probability of any individual prospect having commercially exploitable mineral reserves is extremely remote.
Additional challenges that may prevent the Company from discovering or developing reserves include, but are
not limited to, unanticipated problems relating to exploration and additional costs and expenses that may ex-
ceed current estimates. Most of these factors are beyond the Company’s control, and any of these factors could
make extraction of identified mineral resources unprofitable.

Volatility of mineral prices

The markets for precious metals and other minerals are volatile and prices fluctuate widely. Metals prices are
affected by numerous factors, including international economic and political trends, expectations of inflation,
currency exchange fluctuations, interest rates and global or regional consumption patterns, speculative activities
and increased production due to improved mining and production methods. Supply and demand for metals
is affected by political events, economic conditions and production costs in major mineral-producing regions.
Volatile metals prices may impact the Company’s ability to raise funds for its exploration and drilling program.

Lack of revenues and operating cash flows

TMBXF has not generated operating revenues in the last five years and will likely continue to incur operating
losses until its mining properties are in commercial production. The Company has modest amounts of cash and
will require outside financing for its 2009 drilling program. In addition, there is no assurance that the Company
will be able to successfully explore and develop its mining properties. Failure to obtain additional financing
could result in a delay or indefinite postponement of further exploration and development of the Company’s
projects with the possible loss of such properties.

Limited operating history

TMBXF has no operating history related to the acquisition and exploration of mineral properties. At this early
stage in its mining operations, the Company faces risks, uncertainties, expenses and difficulties frequently en-
countered by companies at the start-up stage of their business development. Moreover, there is no historical
track record for evaluating the success of the Company’s mining strategies and business model.

Tombstone Exploration Corp. (OTCOB: TMBXF) 14

 Analyst: Victor Sula, Ph.D.
Initial Report
February 17th, 2009

Management

Alan Brown Prior to founding Tombstone Exploration Corp., Alan Brown spent many years investing in the develop-
ment and success of Tombstone. He serves as both its President and Chief Financial Officer. Mr. Brown has
President/Chief Financial an extensive background in financial accounting and is very experienced in corporate mergers & acquisi-
Officer/Director tions, real estate acquisitions and real estate development. Prior to founding Tombstone, Mr. Brown was
the Controller of a real estate development company involved in multi-million dollar projects. Mr. Brown
spent several years working for a Chartered Accounting firm on Vancouver Island.

Scott Davis From a 5th generation mining family in Tombstone, Arizona, Mr. Davis has been exposed to mining all
of his life. He has over ten years experience in underground mining and worked as the cyanide recovery
V.P. Project Manager plant supervisor for PBR Minerals for three years. He has also built or assisted in building various small
mills and plants. He worked for the State of Maine Mining Company assisting in the manufacturing of
Merrill Crowe Cyanide precipitation plants. He holds an Associate’s Degree as an Environmental Facilities
Technician, and has studied electrical controls, HVAC, and mechanical engineering. In addition, Mr. Davis
has 15 years experience working with heavy equipment and has held numerous supervisory positions in
the construction industry.

Mr. Montecinos has worked as an exploration geologist for over 40 years in some 20 countries, including
Francisco P. Montecinos Chile, the United States, Mexico, Central and South America countries and some of the Caribbean island
VP of Exploration countries. He has spent the last 25 years in North and Central America as a project manager and regional
exploration manager for several multi-national mining companies including Glencairn Gold Corp., Mon-
tana Gold Corp., TVX and Intrepid Minerals Corp. In addition, he has worked for Codelco (Anaconda Min-
ing Co.), Noranda, Homestake Mining Co., and MAPCO in porphyry copper, uranium and polymetallic
deposits exploration and mining, open pit and underground mining. He has degrees from the University of
Chile (M.S.-Science Geology), and University of California-Berkeley (Volcanology & Ore Deposits graduate
studies). He has also completed studies at the Colorado School of Mines and Harvard University.

Mr. Escapule was born in Tombstone in 1952 and is a fourth generation Tombstone native. His father, Ernie
John Escapule Escapule, was the first miner to perfect and commercialize cyanide leach extraction techniques for com-
Chief Operating Officer mercial mining. He has vast experience with underground mining and heavy equipment operation. Mr.
Escapule has several years experience in contract drilling of declines. He has a degree in Geology from the
University of Mexico in Mexico City and spent several years setting up Merrill-Crowe plants for precious
metal recovery in both the United States and Latin America, all the while working as a consultant for the
State of Maine Mining Company. Mr. Escapule has been certified by the Mine Safety and Health Adminis-
tration as a mine safety instructor.

Mr. Dalton received a B.S. in Geology from the University of California, Long Beach and a M.S. in Mining
Dennis Dalton Engineering from the McKay School of Mining at the University of Nevada. A geologist since 1976, Mr.
Chief Geologist Dalton has extensive experience in mining, geology and environmental engineering.

Tombstone Exploration Corp. (OTCOB: TMBXF) 15

 Analyst: Victor Sula, Ph.D.
Initial Report
February 17th, 2009

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party compensation received has been disclosed within each individual profile in accordance with section 17(b) of the Securities Act of 1933. This compensa-
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ments are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ ma-
terially from those anticipated. Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s
most recent reports or registration statements filed with the SEC. You should consider these factors in evaluating the forward looking statements included in
the report and not place undue reliance upon such statements.

We are committed to providing factual information on the companies that are profiled. However, we do not provide any assurance as to the accuracy or com-
pleteness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions. We
have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and
we make no attempt to do so. Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which
we believe to be reliable.

To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information
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We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.
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All decisions are made solely by the analyst and independent of outside parties or influence.

I, Victor Sula, Ph.D, the author of this report, certify that the material and views presented herein represent my personal opinion regarding the content and se-
curities included in this report. In no way has my opinion been influenced by outside parties, nor has my compensation been either directly or indirectly tied to
the performance of any security listed. I certify that I do not currently own, nor will own and shares or securities in any of the companies featured in this report.

Victor Sula, Ph.D. - Senior Analyst

Victor Sula, Ph.D. has held the position of Senior Analyst with several independent investment research firms since 2004. Prior to 2004, Mr. Sula held Senior
Financial Consultant positions within the World Bank sponsored Agency for Restructuring and Enterprise Assistance and TACIS sponsored Center for Produc-
tivity and Competitiveness of Moldova, where he was involved in corporate reorganization and liquidation. He is also employed as Associate Professor at the
Academy of Economic Studies of Moldova. Mr. Sula earned his Ph.D. degree in 2001 and bachelor’s degree in Finance in 1997 from the Academy of Economic
Studies of Moldova. Mr. Sula is currently a level III candidate in the CFA program.

Tombstone Exploration Corp. (OTCOB: TMBXF) 16