Morley the Company through CarderoIron Ore USA Inc

The excellent potential to further expand the knowndeposit was a key driver in this acquisition.Longnose Historical Resource EstimateIn a 1992 internal report entitled "Longnose, Minnesota Prospect SummaryReport", BHP Minerals International Inc. (a subsidiary of Broken HillProprietary Company, a precursor to BHP Billiton Limited (the world'slargest mining conglomerate)), the author of the report estimated aresource for Longnose of 27.57 million tonnes (30.36 million short tons)at a grade of 21.3 titanium oxide (TiO2), which he classified as a"probable reserve". This historical estimate was based on results from 8of the 11 diamond drill holes drilled into the deposit by Westmont MiningInc., and the results of mineralogical testing and SEM analysis, as wellas Ti02 recovery rates, for the ilmenite concentrate produced byWestmont EurGeol Mr Keith J. Henderson, Cardero's VicePresident-Exploration and a qualified person as defined by NationalInstrument 43-101, has reviewed the available data, and believes that thehistoric resource estimate was carried out in a professional andcompetent manner and that the estimated resource most closely responds tothe NI 43-101 category of "indicated resources". This historical resourceestimate is considered relevant by the Company, both for the purposes ofthe Company's decision to acquire the property and to guide the Companyin formulating an exploration program for the property. However, theCompany cautions that both the BHP report and the included resourceestimate were prepared before the introduction of NI 43-101, and aretherefore historical in nature and the Company is not treating suchresources as a current resource under NI 43-101. Investors are furthercautioned that a qualified person has not yet completed sufficient workto be able to verify the historical resources, and therefore they shouldnot be relied upon.Existing InfrastructureThe project is located approximately 100 kilometres north of Duluth, nearthe town of Hoyt Lakes and less than 10 kilometres from the historicalErie Iron Mine (production commenced in 1957), which was part of thelarge-scale taconite (iron ore) mining operations of the Mesabi IronRange.

Port facilities near Duluth allow easy export access to the GreatLakes system. The history of mining and the desire for increased miningactivity in the area makes this region ideal for future mineral resourcedevelopment. The state of Minnesota is supportive and actively promotesmining and exploration.Processing & Metallurgical TestingPickands-Mather, Hazen Research and the Natural Resources ResearchInstitute (NRRI) completed beneficiation and metallurgical testing ofsamples of the Longnose mineralization. Grinding, gravity concentration,magnetic concentration and electrostatic methods were all tested andconceptual flowsheets designed. This extensive initial work indicatesthat TiO2 recoveries average 78.1 to produce a 46.4 TiO2 concentrate.As with all initial metallurgical test-work, improved recoveries can beanticipated with additional focused work.Future WorkThe Company is presently designing an initial work program for Longnose.The program will include definition and exploration drilling, andadditional recovery tests for concentrate production.

Cardero will alsocomplete an updated and 43-101-compliant resource estimate. Allhistorical studies at Longnose focussed on production of a saleabletitanium concentrate, and Cardero will not only advance these studiesfurther, but will also evaluate the potential recovery of titanium fromilmenite and titaniferous-magnetite together with pig iron production asa second high-value revenue stream.Agreement with The Morley Group Inc.Pursuant to an agreement dated November 26, 2008 and accepted on December8, 2008 between Cardero Iron Ore Company Ltd and Raymond L. Morley (onbehalf of The Morley Group Inc.) ("Morley"), the Company, through CarderoIron Ore (USA) Inc. (its wholly owned subsidiary) has been granted theoption to acquire up to an 85 interest in the interest of Morley incertain existing mineral leases, and in a lease to be entered into,covering 100 of the fee mineral rights (approximately 200 acres) locatedin St. Louis County, Minnesota just north of the town of Hoyt Lakes.The Company can earn an initial 70 interest by incurring cumulativeexpenditures of USD 1,850,000 over 4 years to December 8, 2012 (USD100,000 before December 8, 2009) and a payment of USD 50,000 to Morley onor before August 15, 2009 (and each an every August 15th thereafter) tobe used by Morley to make the annual USD 50,000 advance royalty paymentdue to the underlying landowners.

The Company can earn an additional 15interest (85 overall) by delivering a feasibility study (no time limitfor delivery). Upon the Company having earned a 70 or 85 interest,Morley can elect to convert its interest to a 10 net profits interest(if the Company elects not to earn the additional 15 interest) or a 5net profits interest (if the Company elects to earn the full 85interest). If Morley does not so elect, upon the Company having earnedits 70 or 85 interest, as applicable, the Company and Morley will enterinto a joint venture, with each party being responsible for its pro ratashare of all joint venture expenditures. If a party to the joint ventureis diluted to a 10 or lesser interest, such interest will be convertedto a 2.5 net profits interest.Titanium BackgroundTitanium metal is consumed primarily in the commercial and militaryindustries.