(NI) 43-101 Technical Report: Mineral Resources of the Los Gatos Project, Chihuahua, Mexico Latitude 27° 34' 17" N, Longitude 106° 21' 33" W Prepared for: Sunshine Silver Mines Corporation 370 17 th Street, Suite 3800 Denver, Colorado 80202 USA Prepared by: Tetra Tech, Inc. 350 Indiana Street, Suite 500 Golden, Colorado, 80401 (303) 217-5700 Fax (303) 217-5705 Project No. 114-311185 Effective Date: 21 st December 2012 Cutoff Date of Data: August 1, 2012 Qualified Persons: Rex Clair Bryan, Ph.D. Sections: 1-12, 14 and 23-28 Deepak Malhotra, Ph.D. Section: 13
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(NI) 43-101 Technical Report:
Mineral Resources of the Los Gatos
Project, Chihuahua, Mexico
Latitude 27° 34' 17" N, Longitude 106° 21' 33" W
Prepared for:
Sunshine Silver Mines Corporation
370 17th Street, Suite 3800
Denver, Colorado 80202 USA
Prepared by:
Tetra Tech, Inc.
350 Indiana Street, Suite 500
Golden, Colorado, 80401
(303) 217-5700
Fax (303) 217-5705
Project No. 114-311185
Effective Date:
21st December 2012
Cutoff Date of Data:
August 1, 2012
Qualified Persons:
Rex Clair Bryan, Ph.D. Sections: 1-12, 14 and 23-28
Deepak Malhotra, Ph.D. Section: 13
Technical Report: Mineral Resources of Los Gatos Sunshine Silver Mines Corporation
December 2012 iii
DATE AND SIGNATURE PAGE
CERTIFICATE OF AUTHOR
Rex Clair Bryan, Ph.D.
Senior Geostatistician
TETRA TECH, INC.
350 Indiana Street, Suite 350 Golden, Colorado 80401
a. I am currently employed by Tetra Tech, Inc. at:
350 Indiana Street, Suite 350
Golden, Colorado 80401
b. This certificate applies to the Technical Report titled “NI 43-101 Technical Report Mineral Resources of the Los Gatos Project, Chihuahua, Mexico” (Technical Report), effective December 21, 2012, issued December 21, 2012.
c. I graduated with a degree in Engineering (BS with honors) in 1971 and a MBA degree in 1973 from the Michigan State University, East Lansing. In addition, I graduated from Brown University, Providence, Rhode Island with a MS degree in Geology in 1977, and The Colorado School of Mines, Golden, Colorado, with a graduate degree in Mineral Economics (Ph.D.) in 1980. I have worked as a resource estimator and geostatistician for a total of thirty-one years since my graduation from university; as an employee of a leading geostatistical consulting company (Geostat Systems, Inc. USA), with large engineering companies such as Dames and Moore, URS, and Tetra Tech and as a consultant for more than 30 years. I am a Registered Member (#411340) of the Society for Mining, Metallurgy, and Exploration, Inc. (SME). I have read the definition of “qualified person” set out in National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101.
d. I have visited and inspected the subject from December 7th 2011 to December 8th 2011 and from July 17th 2012 to July 18th 2012. I am responsible for sections 1-12, 14 and 23-28 of this Technical Report.
e. I am independent of Sunshine Silver Mines Corporation, as set out in Section 1.5 of NI 43-101.
f. I have had prior involvement with the properties that are the subject of the Technical Report. My prior involvement consisted of acting as a qualified person for a report titled (NI) 43-101 Technical Report Addendum: Mineral Resource of the Amapola Zone dated January 24, 2012.
Technical Report: Mineral Resources of Los Gatos Sunshine Silver Mines Corporation
December 2012 iv
g. I have read NI 43-101, Form 43-101F1, and the Companion Policy to NI 43-101 (43-101 CP), and the Technical Report has been prepared in compliance with NI 43-101, Form 43-101F1, and 43-101 CP.
h. As of the effective date of the Technical Report, to the best of my knowledge, information and belief, the portions of the Technical Report for which I am responsible contain all scientific and technical information that is required to be disclosed to make the Technical Report not misleading.
i. I consent to the filing of the Technical Report with any stock exchanges or other regulatory authority and any publication of the Technical Report by them, including electronic publication in the public company files on their websites accessible by the public, of the Technical Report.
Dated this 21st day of December 2012
“Rex Clair Bryan, Ph.D.” - Signed
Signature of Qualified Person
Rex Clair Bryan, Ph.D.
Print name of Qualified Person
Technical Report: Mineral Resources of Los Gatos Sunshine Silver Mines Corporation
a. I am currently employed as President by Resource Development Inc. (RDi) at:
11475 W. I-70 Frontage Road North
Wheat Ridge, Colorado 80033
b. This certificate applies to the Technical Report titled “NI 43-101 Technical Report Mineral Resources of the Los Gatos Project, Chihuahua, Mexico” (Technical Report), effective December 21, 2012, issued December 21, 2012.
c. I graduated with an M.S. in Metallurgical Engineering and a Ph.D. in Mineral Economics from the Colorado School of Mines in 1974 and 1978, respectively. I have worked as a metallurgist/mineral economist for a total of 35 years and have been involved with the preparation of numerous reports, feasibility studies, and NI 43-101 documents. I am a Member of the Society for Mining, Metallurgy, and Exploration, Inc. (SME) and the Canadian Institute of Mining (CIM). I have read the definition of “qualified person” set out in National Instrument 43-101 (NI 43-101) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101.
d. I have not visited or inspected the subject property. I am responsible for section 13 of this Technical Report.
e. I am independent of Sunshine Silver Mines Corporation, as set out in Section 1.5 of NI 43-101.
f. I have had no prior involvement with the properties that are the subject of the Technical Report.
g. I have read NI 43-101, Form 43-101F1, and the Companion Policy to NI 43-101 (43-101 CP), and the Technical Report has been prepared in compliance with NI 43-101, Form 43-101F1, and 43-101 CP.
h. As of the effective date of the Technical Report, to the best of my knowledge, information and belief, the portions of the Technical Report for which I am responsible contain all scientific and technical information that is required to be disclosed to make the Technical Report not misleading.
Technical Report: Mineral Resources of Los Gatos Sunshine Silver Mines Corporation
December 2012 vi
i. I consent to the filing of the Technical Report with any stock exchanges or other regulatory authority and any publication of the Technical Report by them, including electronic publication in the public company files on their websites accessible by the public, of the Technical Report.
Dated this 21st day of December 2012
“Deepak Malhotra, Ph.D.” - Signed
Signature of Qualified Person
Deepak Malhotra, Ph.D.
Print Name of Qualified Person
Technical Report: Mineral Resources of Los Gatos Sunshine Silver Mines Corporation
December 2012 vii
TABLE OF CONTENTS
DATE AND SIGNATURE PAGE................................................................................................ III
Figure 5.2: Power Grid Infrastructure (SGM, CFE sources). .................................................... 35
Figure 7.1: Geologic Provinces Map Showing the SMO, Tectono-Stratigraphic Terranes, and Associated Mineral Deposits (SGM, Campa and Coney, 1987) ................................................ 40
Figure 14.3: Cerro Los Gatos Veins and Faults Blocks - Looking Southwest From Above ...... 94
Figure 14.4: Cerro Los Gatos Internal Zones 5aX, 5aY, and 5bX - Looking Southwest From Above ....................................................................................................................................... 95
Figure 14.5: Cerro Los Gatos Veins and Faults Blocks - Looking West ................................... 95
Figure 14.6: Search Ellipse, Along Strike and Down Dip – Cerro Los Gatos ........................... 97
Figure 14.7: Cerro Los Gatos Veins Block Classification - Looking Southwest From Above .... 98
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LIST OF APPENDICES
APPENDIX A: OPINION OF TITLE
APPENDIX B: MINERAL PROCESSING AND METALLURGICAL TESTING
APPENDIX C: DRILL HOLE LOCATION INFORMATION
APPENDIX D: OTHER AREA DRILL INTERSECTIONS WITHIN THE LOS GATOS PROJECT
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SUMMARY 1.0
1.1 Introduction
Sunshine Silver Mines Corporation (SSMC) has commissioned Dr. Rex Bryan, Ph.D. of Tetra Tech Inc. (Tt) of Golden, Colorado to produce an independent technical report of the Los Gatos Project. This technical report will replace the prior technical report for the property, (NI) 43-101 Independent Technical Report of the Los Gatos Exploration Project by Baltazar Solano-Rico, Dr. Robert Cameron and Joseph A. Kantor of Behre Dolbear dated July 6, 2011 (the “Prior Report”) and the subsequent addendum (NI) 43-101 Technical Report Addendum: Mineral Resource of the Amapola Zone by Rex Bryan Ph.D. of Tetra Tech dated January 24, 2012.
The purpose of this report is to update the mineral resources for the Cerro Los Gatos, Amapola, and Esther Zones to reflect the extensive drilling that has been completed by SSMC since the previous resource estimates.
Tt has adopted certain provisions from the two previous technical reports by Tt and Behre Dolbear and has cited such sections with revision as appropriate. Where Tt has adopted certain provisions from previous technical reports Tt has not relied upon previous authors and has taken responsibility and is the author of sections 1-12, 14 and 23-28 of this Technical Report.
1.2 Property Description, Location, and Infrastructure
Section 1.2 has been adopted from the Prior Report, with minor changes and updates.
The Los Gatos project is located in northern Mexico in the South-central part of the State of Chihuahua, within the Municipality of Satevo. It is roughly centered on Latitude 27° 34' 17" N, Longitude 106° 21' 33" W. The exploration concessions cover approximately 149,000 hectares in the area northwest of the town of San Jose del Sitio.
The project is approximately 120 km South of the state capital of Chihuahua City and approximately 100 km north/northwest of the historic mining city of Hidalgo de Parral. The site can be reached via Federal Highway 24 from either city in about 2.5 hours.
The Los Gatos Project is owned by Minera Plata Real S. de R.L de C.V (a fully owned subsidiary of Sunshine Silver Mines Corp). The present field camp for Minera Plata Real (MPR) is located in San Jose del Sitio, a community of approximately 200 persons, with electrical and water services, elementary school, and basic health services. Water resources in the region are mostly related to the Conchos River Basin, which includes the San Pedro, San Francisco de Borja, and Satevo River Sub-Basins. Locally, there is significant groundwater in the area, with shallow groundwater recorded from most exploration drilling conducted by MPR. San Jose del Sitio is served by a 13.8-KV line, providing sufficient capacity for domestic needs but not for industrial needs. Larger-capacity electrical lines service the nearby city of Valle de Zaragoza 45 km to the southeast of the project area, where the 113-MW Santiago (Valle de Zaragoza) electrical sub-station is located (Behre Dolbear, 2011).
MPR is the concession owner of a series of titled concession encompassing 149,082.7486 hectares. Titled Mining concessions are summarized in Table 4.1. MPR also holds the rights to the Los Gatos and Paula Adorada concessions (Table 4.1) through exploration agreements with purchase options that have been duly executed and recorded in the Mexican Public Registry of Mines. A detailed account of MPR's obligations for the purchase of Los Gatos and Paula Adorada concessions is included in Section 4.2.
In regard to the mining concessions, the author was provided copies of the titles of the concessions, as well as a copy of the Minera Plata Real Concessions, by a Vazquez, Sierra,
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and Garcia, S.C., that related to titles documentation, tax payments, and assessment works, presented September 26, 2012 to MPR. This legal opinion stated that all claims are in force and free of any liens and encumbrances. MPR's concessions have a period of validity that reaches between to 2054 and 2058. MPR information indicates that all the concessions have complied with their obligations as of July 2012, and mining duties have been paid, including the first six months of 2012 as documented in Appendix A.
MPR has arranged permission to enter and perform exploration activities in a number of private land properties in the project area. MPR has also purchased surface lands covering the Cerro Los Gatos, Esther and Amapola Resource areas.
In 2008, MPR obtained environmental permits for drilling, road construction, and surface access rights to local ranches. Subsequently, in January 2009 and September 2009, MPR submitted the corresponding notice of activities to the Federal Environmental Agency to cover the development of access roads and drill sites required to drill 50 holes and proposed a request to increase the number of drill holes to 250, following the Regulation NOM-120-SEMARNAT-1997. A new report filed on December 5, 2011 expands the permit to 600 drill holes. Copies of these reports and filing documents can be found in MPR's files. Environmental baseline data collection began in May 2010, to prepare for the development of future environmental studies (EIS) required for the project. Surface geology and drilling have revealed that most mineralized zones sub-outcrop and do not reach the surface. Only a few, small, historic mine workings exist. Waste dumps are small, in the order of hundreds of tonnes; and there is no knowledge or evidence of past processing plants or tailings that might be considered a potential liability to the project. MPR has reportedly followed the specifications of NOM-120, as defined in their activities reports. Copies of these reports and filing documents can be found in MPR's files (Behre Dolbear, 2011).
1.3 History
Section 1.3 has been adopted from the Prior Report, with minor changes and updates.
The Los Gatos project has been the subject of very limited historical prospecting and mineral exploration, including the development of shallow workings, limited production, and preliminary exploration activities by Consejo de Recursos Minerales (now SGM) at the Esther, Gavilana (Paula), and San Luis zones with references to the occurrence of silver, lead, and zinc. As a result of SGM’s exploration, a resource of approximately 80,000 tonnes at an average grade of 553 grams per tonne on the Tren/Margarita zone was reported, with potential for an additional 250,000 tonnes within the individual vein that was sampled. These figures are historic estimates that do not comply with current NI 43-101 definitions.
The project was initially recognized by reconnaissance activities by La Cuesta International Inc. in 2005 and later offered to Los Gatos Ltd. (parent of MPR). An initial letter of agreement for exploration work on the project was negotiated and a final contract ratified in April 2006 between MPR (a Mexican subsidiary of Los Gatos Limited) and La Cuesta International S. A. de C.V. (Mexican subsidiary of La Cuesta International Inc.). Only minor field work was conducted during 2006-2007 on the Los Gatos project during the waiting period for the initial concession to be titled, and formal exploration activities and drilling were conducted by MPR from 2008 (Behre Dolbear, 2011).
1.4 Geology
Section 1.4 has been adopted from the Prior Report, with minor changes and updates.
The Los Gatos project is located in the transition zone between the Sierra Madre Occidental volcanic province of western Mexico and the Mesozoic Chihuahua basin, largely sedimentary, to
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the east. It is also located in the general union of the Sierra Madre Occidental (SMO), Chihuahua, and Parral Tectonostratigraphic Terranes.
The area is largely characterized by a thick sequence of Tertiary volcanic rocks that are generally dissected by a strong north-northwest bearing fault system that divides the area into the plateau and barranca sections. This sequence is subdivided in two major units, the Lower Volcanic Group and the Upper Volcanic Group. The area is one of the largest known epithermal, precious-metal metallogenic provinces and is host to well-known gold-silver producing mining districts, including: Concheflo, Ocampo, Batopilas, San Dimas-Tayoltita, Topia, Guanacevi, and Bacis and recent discoveries such as Mulatos, La Cienega, El Sauzal, and Pinos Altos. The oldest rocks of the area are Mesozoic (Cretaceous) aged sedimentary rocks belonging to the Chihuahua Platform/Mesozoic Mexican Sea (open basin environment). Predominant silver-lead-zinc mineralization characterizes this region, and mineralization is commonly related to skarn, limestone replacement, and Mississippi Valley type deposits. Some of the best examples include Bismark, San Martin, Velardefla, La Negra, La Encantada, Concepcion del Oro, Charcas, San Martin, and many others.
The dominant rocks of the Los Gatos project area are thick accumulations of intermediate tuffs and lavas, with lesser felsic rocks with an age of deposition from 39-35.5 Ma; and Upper Cretaceous (Cenomanian) to Lower Paleocene aged sandstones, shales, and limestones correlative with the Mezcalera formation, locally metamorphosed to phyllites, quartzites, and marbles near areas of igneous activity. Rocks of this oldest sedimentary sequence occur within a small horst block located to the northwest of the Cerro Los Gatos Deposit, with prominent high-angle fault boundaries on the north and south, parallel to the regional trend of faulting. Intruding and deposited on the entire section are locally important rhyolite flows, flow domes, and dikes, usually strongly silicified, that have all of the varied textures expected with the development of flow domes, including autobreccias, flow banding, and intrusive/extrusive transitions. Each of the rocks in the section contains observable hydrothermal alteration , suggesting that mineralization in the area probably occurred late in the history of the development of the volcanic section. It is important to stress, however, that economic grades of mineralization have only thus far been identified in the andesite and dacite sections (Behre Dolbear, 2011).
1.5 Mineralization
Section 1.5 has been adopted from the Prior Report, with minor changes and updates.
The Los Gatos district hosts a series of quartz, quartz-calcite, and calcite veins in at least 8 separate vein systems that are exposed along a strike length of approximately 12 km and an outcrop belt width of approximately 5 km. Vein width is generally in the order of 1 meter (m), but local wide zones up to 8 m in outcrop and true vein widths in excess of 30 m are indicated by diamond drilling. Structurally, the veins form two sets, with north and northwest strikes and mostly steep dips. West/northwest trending fault and fracture zones probably reflect reactivated basement structures, whereas many of the north/northwest trending faults probably are associated with basin-and-range extension. Epithermal mineralization is associated with both phases of extension, so both trends have exploration potential; however, the basement architecture has overall control on the distribution of magmatic centers and hydrothermal systems. MPR suggests that the main west-northwest-trending fault zones are considered higher-priority targets.
Mineralization at Los Gatos is characterized by silver, lead, zinc, and copper sulfides (acanthite-proustite, galena, sphalerite, and chalcopyrite, respectively) and their corresponding oxides, along with fluorite, manganese, barite, and traces of gold associated with quartz and calcite veins. The veins vary in orientation from west-northwest to northwest to north-northwest to
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north-northeast and vary in thickness from 1 m to 8 m in outcrop, but with much greater true width at depth based upon diamond drilling. Study of the veins in hand specimen and thin section suggests that they are epithermal in origin and are likely of intermediate sulfidation composition, showing vein textures and gangue mineralogy (local chalcedony and calcite, and quartz-replaced lattice texture calcite) that indicate a relatively high-level hydrothermal system in the boiling environment. Breccia with clasts of vein quartz indicates a protracted hydrothermal system during multiple faulting events, a positive sign for economic epithermal veins. It has been interpreted that mineralized-shoots may extend relatively far down dip, possibly to at least 230 m.
The exploration model is mainly focused on the interpretation of geological, structural, mineralogical, and alteration features in order to identify areas where mineral deposition was most likely to occur due to paleo-boiling surfaces at depth. Such areas offer the greatest potential for economic concentrations of lead, zinc, silver, copper, and gold and particularly bonanza-grade mineralization, as described in a landmark paper by Dr. Larry J. Buchanan (1981) that set the basis for the understanding and interpretation of epithermal deposits that has been widely used in exploration. Other deposit types in the region suggest that higher-temperature mineralization can also occur, such as the skarn setting identified at the Santa Rita prospect located to the southeast of the concession block. These higher-temperature analogues have not yet been identified within the concession block (P. Pyle, 2010).
The Cerro Los Gatos is the most persistent vein system, with a general northwest trend dipping to the east, a mapped extension in the order of 10 km, and widths of as much as 8 m and local associated veining up to 50 m wide. Banded quartz veins and breccias are cemented by quartz, calcite, and abundant manganese oxides (in surface outcrops). A study based on geological characteristics and silver-lead-zinc (arsenic-antimony-mercury) anomalous sections of the vein resulted in the discovery of the Los Gatos sub-horizontal mineralized horizon hosting the steeply to shallowly dipping mineralized-shoots at depth. Mineralization of interest is seen for approximately 2,500 m in length and for an estimated average vertical extension in the order of 200 m. The reported average drilled true width of the structure is in the order of 6.2 m. It has been interpreted that the top of the mineralized horizon at Los Gatos is generally located at an elevation of 1,300m above sea level (masl) to 1,350 masl.
Original exploration activities at the Esther vein system indicated the presence of a narrow quartz vein, less than 1 m, with minor veining and silicification and noticeable lack of calcite. However, the presence of a small high-grade mineralized-shoot, probably 60 m deep, attracted interest in the area. Drilling of this area also resulted in the discovery of the Esther mineralized-shoot, which has a known length of 800 m for the main mineralized-shoot, as well as up to 1200 meters of additional mineralized vein. The height of the mineralized interval is indicated by drill holes ES-06 and ES-07 to be in the order of 100 m; most mineral intersections range in the order of 2 m to 8 m, with a probable average slightly over 3 m. It has been interpreted that the top of the favorable horizon at Esther is generally located about 120 m below the surface.
Other vein systems detected during the early exploration stages included Mezcalera, La Cueva, Fortuna, Azul-Amanecer, El Valle, Amapola, Cieneguita, San Luis, Paula, and Tren/Margarita. Some of these veins, including the Ciendeguita and San Luis, host results of interest. Other areas drilled with variable results of interest include Katarinia, Torunos, and San Augustin.
1.6 Exploration Activities
MPR began its first phase of exploration in the Los Gatos project area in 2007 with a program of surface geologic mapping and rock sampling that identified more than 100 km of strike length of quartz and calcite veins, many of which contained anomalous lead, zinc, and silver mineralization. MPR expanded its program at the Los Gatos project and drilling began with one
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rig in October 2008 at the Paula zone and transitioned in early 2009 to the Cerro Los Gatos zone. The initial significant identification of silver was from hole GA04 in April 2009, where 73.6 grams of silver per tonne was found over 4 m from 152 m to 156 m depth. Also in early 2009, drilling began in the Esther zone, and significant mineralization was identified in hole ES04, with 14 m containing 79.8 grams of silver per tonne from 102 m to 116 m depth. (Behre Dolbear, 2011). As of July 2012, 345 drill holes had been completed for a total of 161,092.
Other exploration activities have included detailed soil geochemistry, topographic satellite mapping, three dimensional (3D) Induced Polarization (IP), preliminary metallurgical testing, geophysical surveys, and geological and structural mapping. Geochemical soil sampling programs have identified new veins in the Esther zone and revealed four separate structures between the Esther and Cerro Los Gatos zones. IP results suggest a correlation between vein mineralization at the Cerro Los Gatos zone and zones of high chargeability and low resistivity. In addition, the vein mineralization at the Esther zone suggests a similar relationship of high chargeability and low resistivity. The first holes to test the trends of mineralization from these surveys have successfully extended mineralization in both zones (P. Pyle, 2010). Detailed structural work suggests a relationship between mineralization and the presence of the younger dome rocks; it also identifies the younger northeast trending cross faults as a potentially important conduit for fluid flow during the mineralization phase.
Geological, exploration, and drilling information has identified a mineral resource in three of the targets explored, namely Cerro Los Gatos, Amapola and Esther.
1.7 Sample preparation, Analyses, and Security
MPR has carried out sampling campaigns that have included surface, limited underground, and core samples. Samples were taken by local crews under the supervision of a either a geologist of MPR or one of their contractors. Sampling intervals were, in most cases, 2 m, with local variations depending on vein geology to a minimum of 0.8 m where structures were found. Detailed sampling was carried out at intervals directed by geological criteria, with priority given to testing high-grade zones in the vein structures and attention also given to identifying possible mineralization in the wall rock and quartz stockwork veining.
MPR established a sampling protocol followed through the drilling campaign that in summary includes: supervision by MPR personnel, with the verification of core handling, recovery, core accommodation, and depth recording by the contractor; and core collection, measurement, core recovery, photographing, specific gravity, geotechnical information, and sampling interval selection by MPR geologists.
Detailed logging of the sample intervals is conducted once the core samples are sawed, with detailed descriptions and estimations of mineralogy and mineral content, hydrothermal alteration, veining, and fracturing. Assay intervals are divided in two equal parts by diamond saw, with most sampling conducted on 2 m intervals, except for specific vein intervals. Vein intervals are selected for more detailed sampling, with a minimum of 0.8 m per interval in the sample, and a maximum of 2 m.
Samples are collected in standard plastic sample bags and tagged with a unique sample number recorded for each interval. Samples are grouped by drill hole and transported by pickup truck to the ALS Chemex laboratories sample receiving location in Chihuahua City, Mexico. From the time the core samples leave the drill site to the time the samples are delivered to ALS Chemex, they are escorted and under the supervision of personnel from MPR.
Samples are dried, crushed, and pulverized by ALS Chemex in Chihuahua City. Assay orders are delivered to the lab, and a copy of the receipt obtained is filed and registered in MPR's database. Sample pulps are then shipped by ALS Chemex to their laboratory in Vancouver,
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Canada for ICP analyses of silver, base metals, and trace elements using a four-acid digestion technique. Gold assays are also completed using fire assay-AA preparation on 30-gram splits of the sample material.
ALS Chemex has developed and implemented at each of its locations a Quality Management System (QMS) designed to ensure the production of consistently reliable data. As a result, the lab has received, including its sample preparation section in Guadalajara, the ISO 9001:2000 QMS registration from QMI. The ALS Laboratory Vancouver branch has also been accredited as conforming to requirements of Canadian Regulations in this matter.
MPR has set up a Quality Assurance/Quality Control (QA/QC) program to monitor the drilling program at the Los Gatos project, including the use of: (1) Blanks (barren silica sand or barren andesitic flow material inserted wherever the geologist deems appropriate, but no less than 1 for every 40 samples focused on areas of higher metal values, which could lead to contamination. (2) Standards are added every 20th sample (MPR has purchased 12 different Standards from Rocklabs Ltd.). (3) Duplicates are also analyzed every 50 samples (each batch) by placing 2 sample tickets in the same sample bag and having the lab generate two pulps of the same sample for analysis.
It is believed that core sampling is representative of mineralized intersections, with minor variations due to irregularities in mineralization, and that the QA/QC programs established by MPR and the sampling process follow industry standards and are adequate for mineral resource estimates (Behre Dolbear, 2011).
1.8 Data Verification
A review was made of available information derived from previous exploration work. This information included geological and sampling reports, drill logs, as well as assay results. Verification consisted of a general review of geological characteristics of the main mineralized areas, shown by the MPR field checking of geological maps in all areas and of sampling procedures by MPR as well as a review of all vein intersections and discussions of detailed sample handling, sampling, and security procedures established by MPR. The original locations of samples reviewed were located, although most require being re-painted. Tt verified several drill hole location monuments with a handheld gps.
Behre Dolbear preformed a verification of core samples from the Los Gatos and Esther veins. The verification consisted of 16 core samples. Core samples were split in MPR's sample preparation facilities in San Jose del Sitio. Based on the information provided by the results of the sample verification, Behre Dolbear found the results reported to be acceptable, and therefore, sampling by MPR was considered reliable.
Tt has also conducted sample verification with samples from the Cerro Los Gatos and Amapola areas. 36 samples from Cerro Los Gatos and 16 samples from Amapola were chosen. Care was taken to select a fair distribution of samples based on the deposit. Core samples were split in MPR's sample preparation facilities in San Jose del Sitio from the remaining core halves. Tt has concluded that based on the results of the verification, MRP’s sampling can be considered reliable. The process and results of this verification are detailed in Section 11 of this report.
1.9 Exploration and Drilling Results
As of August 2012, 345 drill holes have been completed by MPR for a total of 161,092 meters. Appendix C lists the drill hole locations for completed holes as of August 2012.
Drill sites are selected based on surface vein outcrops and geometric projections into the subsurface, as well as geochemical, geophysical, and geological targets. Drilling is conducted using a wire line rig with diamond core capabilities. Holes begin with HQ size and are reduced, if
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necessary, to NQ and very rarely BQ, if difficult drilling conditions are encountered. Holes are surveyed with a Flexit EZ trac device at 50 m intervals, as the holes are completed. Surveys of drill hole surface locations are completed by a local contract topographer using a Topcon Total Station GTS-236W. All information pertinent to the drilling is stored in a master database in Microsoft Access® Tt has reviewed the drilling information to be used for modeling and found the database to be reasonably free of errors and appropriate for use in this report.
1.10 Adjacent Properties
The only active exploration program in the immediate area surrounding the Los Gatos project has been that of VVC Exploration on the Santa Valeria project, located adjacent to the southeast side of the Los Gatos project concession block. Various published accounts of their work suggest that they have conducted mapping and sampling and have completed a 7-hole drill program. The highlight of the drilling was a 1.5m apparent thickness containing 145 grams of silver per tonne. The Santa Valeria project is now owned by MPR and is held as a separate project from that at Cerro Los Gatos. Other active projects in the area of southern Chihuahua are the Joint Venture (JV) at San Juan Cordero project of Levon Resources and the La Cigarra project of International Northair Mines. MPR has five additional projects in the southern Chihuahua/northern Durango region: Mina Grande, Coronel, El Arco, Los Charcos, and San Fermin, (Behre Dolbear, 2011).
1.11 Mineral Processing and Metallurgical Testing
Resource Development Inc (RDi) has performed preliminary metallurgical testing. RDi received drill core from twinned holes for five composite samples for the study. The metallurgical study undertaken included sample preparation and characterization, rougher flotation tests to evaluate collector, grind size, flotation time and open-circuit cleaner flotation tests to determine the product quality. The scope of the program was expanded to include mineralogy of the composite samples and Bond’s abrasion and ball mill work indices. The entirety of the metallurgical report can be found in Appendix B of this report.
Based on the two phases of the scoping study, it is reasonable to conclude that the sequential flotation process with the selected reagent suite appears to work well for most of the composites but will need to be optimized for varying feed grades. It would be possible to produce marketable-grade lead and zinc concentrates from all composites except composite 4 which has very little lead or zinc minerals
1.12 Mineral Resource Estimates
Tt has produced 3D solid (wire frame) models and block model estimations for Cerro Los Gatos, Amapola, and Esther deposit areas. New wire frames were produced for each area based on the available new drilling data. The resulting wire frames were then used to create an estimate block models. Section 14 details the specifics of each of the three updated resources. Figure 1.1 shows triangulated solids created for the Cerro Los Gatos deposit.
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Figure 1.1: Cerro Los Gatos Veins and Faults Blocks - Looking Southwest From Above
A base case cutoff grade of 50 grams per Tonne equivalent Ag (g/t EqAg) has been selected and is highlighted in the tables below. At the 5-year trailing average Ag price ($22.30/Toz), this equates to approximately $35.85/Tonne which is deemed to be sufficient to define a “reasonable potential for economic extraction”, a necessary condition for the resource statement. As of the date of this report, no metallurgical recoveries have been determined for the Cerro Los Gatos, Amapola and Esther deposits, and 100% recovery is assumed for all metals.
The Los Gatos project wide indicated resources at a base case cutoff grade of 50 g/t EqAg include 6,370,000 Tonnes at 167 g/t Ag for 34,200,000 ounces of Ag. Table 1.1 lists project wide indicated resources from 50 to 100 g/t EqAg cutoffs. The Los Gatos project wide indicated resources are shown in Figure 1.2 as grade and tonnage curves at various cutoff grades.
The Los Gatos project wide inferred resources at a base case cutoff grade of 50 g/t EqAg include 19,120,000 Tonnes at 99 g/t Ag for 61,000,000 ounces of Ag. Table 1.2 lists project wide inferred resources from 50 to 100 g/t EqAg cutoffs. The Los Gatos project wide inferred resources are shown in Figure 1.3 as grade and tonnage curves at various cutoff grades.
Tt’s review of supplied data and site visits have shown exploration activities at the Los Gatos project meet or exceed standard practices and contribute to the reliability of resource estimation.
The Los Gatos project represents a new epithermal silver lead zinc district with three distinct resource areas. In addition to resource areas ten other areas within MPR’s holdings show positive drill results and warrant further exploration. Drilling has been conducted on only a small portion of the total land holdings. It is important to note that the three known resource areas show poor outcrop and contain resource grade mineralization several meters below the surface. Digitized surface mapping conducted by MPR indicates several kilometers of veining and mineralization that has yet to be drill tested.
1.14 Recommendations
Tt’s first recommendation is that MPR place additional drill holes using Tt’s resource models to target areas of high grade inferred mineralization, and attempt to further increase indicated resources. In addition Tt would recommend similar techniques are used to attempt to convert indicated resources to measured resources. Tt cannot guarantee additional drilling will convert current resources to a higher classification.
0
50
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Ag
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Tt’s second recommendation is that MPR commence a Preliminary Economic Assessment (PEA) given the size and continuity of the current indicated and inferred mineralization. In conjunction with a PEA, MPR should commence necessary engineering and environmental analysis to begin to address pre-feasibility.
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INTRODUCTION 2.0
Minera Plata Real, S. de R. L. de C.V. (MPR) is a fully owned Mexican subsidiary of Sunshine Silver Mines Corporation (SSMC). Sunshine Silver Mines has contracted with Tetra Tech Inc. (Tt) to complete updated resource models and estimates for their Los Gatos project in Chihuahua, Mexico.
The Prior Report was produced in 2011 by Baltazar Solano-Rico, Dr. Robert Cameron and Joseph A. Kantor of Behre Dolbear. This report provided the base text for many of the sections of this report, in some cases without changes or with minor updates (such as location, geological settings, and infrastructure). Tt produced an addendum to the Prior Report entitled (NI) 43-101 Technical Report Addendum Mineral Resource of the Amapola Zone, which details work done on the Amapola zone, as well as additional exploration areas. Portions of that Addendum report were also adopted within this report where appropriate.
Tt has reviewed the previous estimates and input data. Sample verification was performed for 52 samples over different vein areas. Qualified Person Dr. Rex Bryan has conducted two site visits, from December 7th 2011 to December 8th 2011 and the second from July 17th 2012 to July 18th 2012. Visits included observation of the deposit areas, review of sampling procedures, selection of samples for assay verification, a review of specific gravity procedures, and review site information with the geologic staff.
It is understood that the report may be used by MPR in technical support of filings with Canadian regulatory authorities.
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RELIANCE ON OTHER EXPERTS 3.0
The report relies on the information produced and provided by MPR and SSMC. Information for this report was, in part, provided by the current SSMC staff and consultants for the Los Gatos Project. Tt relied on SSMC Corporate Geologist, Mr. Phillip Pyle, and their Geological Consultant, Dr. Larry J. Buchanan.
Tt has adopted certain provisions from the two previous technical reports by Tt and Behre Dolbear and has cited such sections with revision as appropriate. Where Tt has adopted certain provisions from previous technical reports Tt has not relied upon previous authors and has taken responsibility and is the author of sections 1-12, 14 and 23-28 of this Technical Report.
In regards to the mining concessions, the author was provided with a title opinion by the law firm Vazquez, Sierra, and Garcia, S.C that related to titles documentation, tax payments, and assessment works, presented September 26, 2012 to MPR, the opinion stated that all claims are in force and free of any liens and encumbrances.
The author is not qualified to express a legal opinion with respect to the property title and associated matters related to land tenure, and therefore disclaims responsibility in respect of such matters.
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PROPERTY DESCRIPTION AND LOCATION 4.0
The Los Gatos project is located in the south-central part of Mexican State of Chihuahua, within the Municipality of Satevo (Figure 4.1). Chihuahua borders the neighboring states of Coahuila, Durango, Sinaloa and Sonora, and shares a common border with the United States of America.
Chihuahua has a long mining history with substantial production of silver, gold, lead and zinc from deposit districts such as Santa Eulalia, Naica, Santa Barbara, San Francisco del Oro, Bismark, and new deposits such as El Sauzal, Palmarejo, and Dolores.
Figure 4.1: Los Gatos Project Property Location Map (MPR, 2012)
4.1 Location
The Los Gatos Project is roughly centered on Latitude 27° 34' 17" N, Longitude 106° 21' 33" W, near the town of San Jose de Sitio. It is approximately 120 km south of the state capital of Chihuahua City and approximately 100 km north/northwest of the historic mining city of Hidalgo de Parral. The project is accessible by automobile from Mexican Federal Highway 24 to kilometer 81 and then turning west on an improved gravel road for 40 km west to the community of San Jose de Sitio, which is situated near the southeast end of the concession block. Travel time by automobile is approximately 2.25 hours either from Chihuahua City from the north or
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Hidalgo Parral from the south. The city of Valle de Zaragoza, located on federal highway 24, 35 km to the south of the turnoff to San Jose del Sitio is the nearest significant commercial center.
Mining Concession
MPR is the concession owner of a series of claim titles covering 149,082.7486 hectares and a series of concession applications for a total surface area of approximately 163,870 hectares. Titled Mining concessions are summarized in Table 4.1:
Table 4.1: Los Gatos Project Titled Mining Concessions
Concession Name Title Number Date Granted Hectares Concessionaire
1 Paula Adorada 223392 9-Dec-04 40.0000 Grupo Factor
2 Mezcalera 228249 17-Oct-06 4,991.6263 Minera Plata Real
3 Mezcalera 2 Fracción I 228929 21-Feb-07 39.2621 Minera Plata Real
4 Mezcalera 2 Fracción II 228930 21-Feb-07 26.1402 Minera Plata Real
5 Mezcalera 2 Fracción III 228931 21-Feb-07 29.0859 Minera Plata Real
6 Los Gatos 2 228950 22-Feb-07 10,719.5765 Minera Plata Real
7 Los Gatos 3 231076 16-Jan-08 27.2846 Minera Plata Real
8 Los Gatos 231498 4-Mar-08 19,711.6889 La Cuesta
9 San Luis 236908 5-Oct-10 16.0000 Minera Plata Real
10 Gavilana 237137 19-Nov-10 10.0000 Minera Plata Real
11 Etna 237167 19-Nov-10 45,995.9151 Minera Plata Real
12 La Gavilana Fraccion I 237461 21-Dec-10 44.0000 Minera Plata Real
13 Los Estados Fraccion I 237694 25-Apr-11 9.0000 Minera Plata Real
14 Los Estados Fraccion II 237695 25-Apr-11 44.0000 Minera Plata Real
15 Los Gatos 4 238511 23-Sep-11 52,596.9673 Minera Plata Real
16 Los Veranos 238573 23-Sep-11 14,739.8002 Minera Plata Real
17 San Luis 2 238694 18-Oct-11 42.3904 Minera Plata Real
18 San Luis 3 240592 23-May-12 0.0111 Minera Plata Real
Total 149,082.7486
SSMC holds these concessions through its 100%-owned Mexican subsidiary company, Minera Plata Real S. de R.L. de C.V. (MPR). MPR holds the rights to the concessions of Los Gatos and Paula Adorada through exploration agreements with purchase options, which have been duly executed and recorded in the Mexican Public Registry of Mines (Vazquez, Sierra, and Garcia, S.C) Appendix A
The details of the two contracts, as provided by MPR are, as follows:
La Cuesta International S.A. de C.V.—Los Gatos Concession
MPR is required to make semi-annual payments to obtain ownership of the concession, and is required to make a production royalty payment of 2% net smelter return on production from the Los Gatos concession (reduces to 0.5% upon all payments reaching $10 million) and 0.5% net smelter return from lands within a one kilometer boundary of the Los Gatos concession. Once total payments have reached $15 million, the Los Gatos concession ownership will be transferred to the Company. During the preproduction phase, the Company is obligated to annually complete a minimum of US $100 of exploration work on the concession. The agreement has no expiration date; however, the Company may terminate the agreement upon 30 day official termination notification.
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Negotiated Settlement
MPR has negotiated an agreement in principal with La Cuesta International for a cash-out and elimination of the royalty obligation in exchange for payment to LCI of US $6.75 million and initial payment of US $50,000 which has been paid. The balance of payment is due and the settlement completed upon the successful completion of an initial public offering by Sunshine Silver Mines Corporation, the parent company of MPR, which offering includes gross proceeds of not less than $150 million. If that offering is completed following December 31, 2012 but before March 31, 2014, the option price increases by 8% per annum. The agreement, once consummated, expires on April 1, 2014.
Grupo Factor-Paula Adorada Concession
MPR may purchase the Paula Adorada concession (40.000 hectares) for a total of US $500,000 by making payments according to the following schedule.
• October 8, 2010 US$45,000
• October 8, 2011 US$50,000
• April 8, 2012 US$50,000
• October 8, 2012 US$50,000
• April 8, 2013 US$100,000
• October 8, 2013 US$155,000
Once the final payment is made in 2013, the concession will be transferred to MPR with no further ongoing payment obligations to Grupo Factor.
Concession Applications
MPR has filed the following mining concession applications in process that have not yet been titled by the Mexico Direccion General de Minas (DGM — Department of Mines) (Table 4.2):
Table 4.2: Ming Concessions Applications Filed by MPR
Application Name File Number Hectares Filing Company
Los Estados 39246 241 Minera Plata Real
Atenas 39507 14,547 Minera Plata Real
Total 14,788
Internal Concessions Not Held by MPR
There are seven small concessions within the subject area that are not held by MPR that have been cancelled by DGM, but their liberation has not yet been published. MPR will apply for the concessions when they are formally liberated.
Under Mexican Mining Legislation, titled concessions must have submitted the required Surveying and Assessment Works to define their precise location and rights against any pre-existing mining claim. Once titled, concession owners have the obligation to submit annual Assessment of Work Reports for each concession or group of concessions based on minimum investment amounts. A second obligation that titled mining concessions must meet is the bi-annual payment of mining duties. According to the Title Opinion issued by the law firm Vazquez, Sierra, and Garcia, S.C.in 2012, the MPR concessions are in good standing.
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Titled mining concessions, following the amendments made to the Mining Law in 2005, have an effective period of 50 years counted from their registration in the Public Registry of Mines and can be renewed for equal periods provided there are no grounds for cancellation; therefore, MPR's concessions have a period of validity that reaches between 2054 and 2058 (Table 4.1).
MPR information indicates that all the concessions have complied with their obligations as of July 2012, and mining duties have been paid, including the first six months of 2012, as documented in Appendix A.
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4.2 Surface Rights
MPR has arranged permissions to enter and perform exploration activities on a number of land properties in the project area. Figure 4.3 shows the distribution of communal land and private property where permissions have been obtained and those under negotiation against the boundaries of mining concessions. MPR has purchased surface lands covering the known extents of the Cerro Los Gatos, Esther and Amapola Resource areas as shown in light blue in Figure 4.3.
Figure 4.3: Surface Rights and Exploration Permissions (MPR, 2012)
Environmental Permitting
Permitting mining activities in Mexico require the development of Environmental Preventative Reports, Environmental Impact Studies, or, in the case of exploration activities, an
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Environmental Report following Regulation NOM-120-SEMARNAT-1997 (Ministry of Environment and Natural Resources). During the months from June 2008 to October 2008, environmental permits for drilling and road construction were obtained by MPR, proposed drill areas were re-mapped and re-sampled, surface access rights were negotiated with local ranches, and drill access roads were constructed.
Subsequently, in January 2009, MPR submitted a First Report with the corresponding notice of activities to the Federal Representative of PROFEPA (Environmental Attorney Protection Agency) covering the development of access roads and drill sites required to drill 50 holes and proposed a 2-year period after submittal (January 2011). A Second Report of activities was filed in September 2009 with a request to increase the number of drill holes to 250, following the Regulation NOM-120-SEMARNAT-1997. Based on the report filed December 5, 2011, the number of drill holes permitted on the Los Gatos project was extended to 600 drill holes.
MPR has followed the specifications of NOM-120, as defined in their activities reports. Copies of these reports and filing documents can be found in MPR's files.
MPR drilling campaigns have resulted in the discovery of a mineral resource; further drilling and the definition of Indicated and Measured resources will require the constant updating of environmental permits. Environmental baseline data collection began in May 2010, using Servicios Ambientales, a Mexican contractor. Data on flora, fauna, water, air, climate, security, and social impacts are being collected on a routine monthly basis and will be integrated into future environmental studies required for the project. At the time of the site visit, a group of biologists had started to gather flora and fauna information for the said study.
Surface geology and drilling have revealed that most mineralized zones sub-outcrop and do not reach the surface. During the site visit and review of the geology of Los Gatos, it was noted that only a few, small, historic mine workings exist. Waste dumps are small, in the order of hundreds of tonnes; and there is no knowledge or evidence of past processing plants or tailings that might be considered a potential liability to the project.
Drilling activities are standard, using recyclable mud and biodegradable additives and reagents. Drill pads and access roads that will eventually be abandoned will require reclamation activities at the end of the exploration/mining activities, as defined by NOM-120 (Behre Dolbear, 2011).
4.3 Environmental Liabilities
The author is not aware of any environmental liabilities to which the property is subject.
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ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, AND 5.0INFRASTRUCTURE
5.1 Accessibility
San José del Sitio is accessible by an improved gravel road from the turnoff of Federal Highway 24 at the KM 81 marker between the cities of Chihuahua and Hidalgo de Parral. The improved gravel road passes through the valley of El Valerio and the mountain range of the Sierra Azul before reaching the town, located near the southeast corner of the project area. The access road can be traveled by any motorized vehicle and has regular bus and supply services to the surrounding communities. The project area is accessible by a large network of dirt and gravel roads that are used by local owners to access grazing areas for cattle and local ranches. Northern areas of the project are also accessible from several gravel roads connecting with Mexican Federal Highway 24 between the KM 60 to KM 81 markers. In more remote areas, the rolling topography permits easy access by foot into areas where roads do not exist (Figure 5.1) (Behre Dolbear, 2011)
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5.2 Climate, Vegetation, Soils, and Land Use
The project area is located in the Sierras y Llanuras del Norte Physiographic Province near the boundaries between the Gran Meseta y Cationes and the Sierras y Llanuras Tarahumara Sub Provinces. The general physiography of the Los Gatos area is characterized by low to middle rolling volcanic hills with local escarpments and flat valley floors. Altitudes vary with between 1,550 masl at the base of the Santo Toribio Creek and 1,780 masl at the top of the Los Gatos Hill, one of the highest peaks of the project area. The climate of the Los Gatos project is typical of desert areas of northwest Mexico, extreme semi-arid, with a maximum temperature in the order of 41.7°C and a minimum recorded at minus 14°C; annual average temperature is 18.3°C. Annual rainfall averages 363.9 millimeters (mm) over an average of 61 days, mostly during the rainy season of June through September, and relative humidity is 50%, with a dominant northeastward wind. There is abundant sunshine and little cloud cover during the majority of the year. Snow is a rare occurrence in southern Chihuahua but has been recorded on occasion. Exploration and mining activities are seldom interrupted by adverse weather conditions, with the exception of short-lived storms producing water floods and damage to access roads.
Vegetation is characterized by a semi-desert landscape, with typical low brush vegetation in the slopes including lechuguilla, sotol, yucca, sage, bear grass, and other types of indigenous grasses. Larger brush and trees are common along the main watercourses, with the presence of oak, cypress, poplar, huizache, and mesquite, among others.
The soils of the area are sandy to rocky and are composed of detrital material from the local volcanic and sedimentary rocks classified as lithosols and yermosols. The lack of flat areas with regular water sources and good soils results in only small areas useful for crops, but there is sufficient growth of native grasses and desert plant life to support the principal economic activity of the region, cattle grazing. Land tenure in the Satevo municipality is 25% communal (Ejido); and 52% private property, with predominantly cattle grazing and other agricultural use.
Locally, the surface lands are mostly owned by private individuals as small cattle ranches, with average sizes of 1,000 to 2,000 hectares. Many of these ranches are unimproved grazing lands with no structures; however, a few ranch houses exist in the scattered areas. Some landowners live locally in the community of San Jose del Sitio or surrounding communities, while others live in the surrounding cities of Zaragoza, Parral, and Chihuahua.
Two communities hold parcels of surface lands as agrarian communes or "Ejidos." These are the communities of la Esperanza and San Jose del Sitio, which have corporate ownership of their respective surface lands (Behre Dolbear, 2011).
5.3 Population Centers
The present field camp for MPR is located in San Jose del Sitio, categorized as a Municipal Section of the Satevo Municipality. It is a community of approximately 200 persons, with electrical and water services, elementary school, and basic health services available. Regular daily services connect the town with the capital city of Chihuahua. The city of Valle de Zaragoza, 45 km to the east-southeast of San Jose del Sitio, located on Federal Highway 24, 35 km to the south of the turnoff to San Jose del Sitio, is the nearest significant commercial center (Behre Dolbear, 2011).
5.4 Infrastructure
Water resources in the region are mostly related to the Conchos River Basin, including the San Pedro, San Francisco de Borja, and Satevo River Sub-Basins. A larger supply of surface water is associated with the Conchos River, located 7 km to the south of the main exploration areas. The Conchos River is dammed in several locations, including La Boquilla, a major hydro power
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plant in the region. Scattered ranch houses within the project area are normally serviced by generators and small wells or capture ponds from surface runoff waters (Figure 5.2).
Figure 5.2: Power Grid Infrastructure (SGM, CFE sources).
Locally, there are significant groundwater deposits, and shallow groundwater has been recorded from most exploration drilling conducted by MPR. Two exploration drill holes in the Cieneguita area produce artesian flows of groundwater, which are now being utilized to replenish a newly constructed reservoir that serves as a rural water supply for local cattle ranching and provides water for the exploration drilling activities of MPR. MPR has conducted preliminary hydrologic studies in the area.
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San Jose del Sitio is served by a 13.8-KV line, providing sufficient capacity for domestic needs but not for industrial needs. Larger-capacity electrical lines service the nearby city of Valle de Zaragoza 45 km to the southeast of the project area, where the 113-MW Santiago (Valle de Zaragoza) electrical sub-station is located. One of the closest sources of electrical generation is La Boquilla hydropower plant located 85 km east of San Jose del Sitio, producing approximately 25,000 KwH and interconnected to the national grid through the 164-MW Camargo and Santiago sub-stations.
There are a limited number of qualified workers on site; however, technical workers (miners, electricians, mechanics, computer skilled, etc.) can be found in the area and at Parral, 88 km southeast, including heavy equipment and specialized operators. Primary and secondary-level technical schools are available at Valle de Zaragoza, and all levels of schooling are available at Parral and/or Chihuahua, 2.5 hours away (Behre Dolbear, 2011).
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HISTORY 6.0
The following is an excerpt provided by MPR in regards to the historical and exploration activities in the area:
"The Los Gatos project area is considered virgin ground with only small showings of precious and base metal mineralization. It has been the subject of only very limited historical prospecting and mineral exploration. Various maps from the Servicio Geologico Mexicano (Mexican Geologic Survey) and its predecessors show prospect locations at the Esther, Gavilana (Paula), and San Luis zones with references to the occurrence of silver, lead, and zinc. Reports in the archives of the Servicio Geologico Mexicano reference field review of the Tren and Margarita prospects (Baca Carreon, 1964) in the northwest part of the Los Gatos concession as well the Santa Rita prospect (Ramirez, 1976), located to the east of San Jose del Sitio outside the southeastern limit of MPR's concession block.
Small prospect pits and minor workings are located in the Esther, San Luis, Tren/Margarita, and Paula zones. Local verbal accounts suggest that most of this development occurred in the period of 1920-1950, although there is reference to minor work at the Esther zone as recently as the 1960’s. From the limited development observed in each of these zones, it is unlikely that there was ever any record keeping of production. Surface work by MPR has not uncovered any evidence of modern prospecting activities in the area such as drill hole collars, survey points, or earlier sample locations.
The project was initially recognized by reconnaissance activities by Perry Durning and Frank Hillemeyer of La Cuesta International Inc. in 2005 while under contract with Silver Standard Resources. La Cuesta applied for the original Los Gatos concession in 2005 and recommended the target to Silver Standard for acquisition. Silver Standard geologists visited the project in 2005 but rejected further work and freed La Cuesta to promote their project to other entities.
Los Gatos Ltd. (then parent of MPR prior to the merger into Sunshine Silver Mines Corp in 2011) was contacted later in 2005 and the project was visited by Representative Jon Gelvin. An initial letter of agreement for exploration work on the project was negotiated between La Cuesta and Los Gatos Ltd. in 2006, and a final contract was ratified in April 2006 between Minera Plata Real S. de R. L. de C.V. (Mexican subsidiary of Sunshine Silver Mines Corp) and La Cuesta International S. A. de C.V. (Mexican subsidiary of La Cuesta International Inc.). Only minor field work was conducted during 2006-2007 on the Los Gatos project during the waiting period for the initial concession to be titled (P. Pyle, 2010)."
The only reference to a historic mineral resource estimate in the area is that of CRM's Julio Cesar Baca-Carreon (1964), who suggested a resource based on 16 samples taken on the Tren/Margarita zone.
Considering the lack of important mine workings and previous drilling or any other direct exploration, there are no other records of historical mineral resource and mineral reserve estimates. Any silver, lead, and zinc production that might have been carried out from the Esther, Gavilana (Paula), San Luis, Tren, and Margarita prospects was probably limited to a few hundreds of tonnes with irregular silver and lead-zinc concentrations (Behre Dolbear, 2011).
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GEOLOGICAL SETTINGS AND MINERALIZATION 7.0
7.1 Regional Geological Setting
The Los Gatos project is located in the transition zone between the Sierra Madre Occidental volcanic province of western Mexico and the Mesozoic Chihuahua basin, largely sedimentary, to the east. It is also located in the general union of the Sierra Madre Occidental (SMO), Chihuahua, and Parral Tectonostratigraphic Terranes (Figure 7.1).
The zone extends from the younger Trans-Mexican volcanic belt in the state of Jalisco in central Mexico northward through the states of Durango, Sinaloa, Chihuahua, and Sonora and partially into the southwestern United States. It is largely characterized by a thick sequence of Tertiary volcanic rocks that are generally dissected by a strong north-northwest bearing fault system that divides the area into the plateau and barranca sections. The sequence of volcanic rocks is subdivided in two major units.
Lower Volcanic Group (LVG): Characterized by a predominant pile of andesitic volcanoclastic rocks that characteristically outcrop at the bottom of the deep barrancas. The group is generally massive in nature and shows extensive propylitic alteration, commonly due to the alteration effects of coarse-grained to porphyritic intrusive rocks. Even though the volcanism is predominantly andesitic, the upper parts, toward the contact with overlying volcanics, tend to become more felsic, and thick beds of rhyodacite and rhyolite and are found intercalated with andesite and dacite.
Upper Volcanic Group (UVG): Characterized by a thick sequence of felsic volcanoclastic rocks, predominantly ignimbrites, that shows well-defined bedding and tuffaceous horizons. These rocks form most of the high scarps and cliffs that characterize this province. Normal extension faulting creates a series of large, gently dipping blocks with almost no signs of alteration. Volcanism in this area started 30 to 32 million years ago with the beginning of a sudden bimodal, calcalkalic event.
The SMO Province is one of the largest known epithermal, precious-metal metallogenic provinces and is host to well-known gold-silver producing mining districts, including Conchefio, Ocampo, Batopilas, San Dimas-Tayoltita, Topia, Guanacevi, and Bacis and recent discoveries such as Mulatos, La Cienega, El Sauzal, and Pinos Altos. It has been well established that most of these districts are enclosed within the LVG sequence, although few of them show mineralization transecting up to the base of the UVG, as evidenced at La Cienega and Ocampo.
The oldest rocks of the area are Mesozoic (Cretaceous) aged sedimentary rocks belonging to the Chihuahua Platform. Predominant silver-lead-zinc mineralization characterizes this region, and mineralization is commonly related to skarn, limestone replacement, and Mississippi Valley type deposits. Some of the best examples include Bismark, San Martin, Velardefia, La Negra, La Encantada, Concepcion del Oro, Charcas, San Martin, and many others.
Volcanic rocks of the Sierra Madre Occidental volcanic province were erupted upon an irregularly folded and faulted surface of these older sedimentary rocks.
Pre-volcanism compression (80-40 Ma) recorded in the underlying sedimentary sequence was followed by north-northeast extension (<29 Ma) in the region (Ferrari, et al., 2007). Ferrari, Valencia-Moreno, and Bryan (2007) state that the "Sierra Madre Occidental consists of five main igneous complexes: (1) Late Cretaceous to Paleocene plutonic and volcanic rocks; (2) Eocene andesites and lesser rhyolites, traditionally grouped into the Lower Volcanic Complex; (3) silicic ignimbrites mainly emplaced during two pulses in the Oligocene (ca. 32-28 Ma) and
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Early Miocene; (4) basaltic-andesitic lavas that erupted toward the end of, and after, each ignimbrite pulse, which have been correlated with the Southern Cordillera
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Figure 7.1: Geologic Provinces Map Showing the SMO, Tectono-Stratigraphic Terranes, and Associated Mineral Deposits (SGM, Campa and Coney, 1987)
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Basaltic Andesite Province of the southwestern United States; and (5) post-sub-duction volcanism consisting of alkaline basalts and ignimbrites emplaced in the late Miocene, Pliocene, and Pleistocene, directly related to the separation of Baja California from the Mexican mainland" (P. Pyle, 2010).
McDowell (2007) divides the volcanic stratigraphy of Central Chihuahua as follows (Figure 7.2).
The dominant rocks of the Los Gatos project area would be classified as Tv2, Tv3, and Tv4 placing the ages of deposition from 39-35.5 Mya (P. Pyle, 2010).
7.2 Property Geological Setting
The oldest rocks of the project area are Upper Cretaceous (Cenomanian) to Lower Paleocene aged sandstones, shales, and limestones correlative with the Mezcalera formation, deposited in the limits between the Aldama (limestone) Platform and the Mesozoic Mexican Sea (open basin environment). These rocks have been locally metamorphosed to phyllites, quartzites, and marbles near areas of igneous activity, including at the Santa Rita skarn area east of San Jose del Sitio adjacent to the southeast of the Los Gatos claim block. Rocks of this oldest sedimentary sequence occur within a small horst block located to the southwest of the Cerro Los Gatos deposit, with prominent high-angle fault boundaries on the north and south, parallel to the regional trend of faulting (Figure 7.2).
Rocks of the series locally referred to as the "Lower Volcanic Series" (Units Tv2, Tv3, and Tv4 from McDowell 2007) dominate the geology of the Los Gatos project area. The oldest of these units are composed of andesitic lava flows and pyroclastic breccias (Unit Tv2) that were deposited on irregular topographic surfaces and have variable thicknesses. The general orientation is relatively flat, with a low regional dip to the southeast of approximately 8 degrees. There are many exceptions to this orientation in outcrop, however, due to the irregular topography onto which the flows were deposited. Overlying and interbedded with the older andesitic flows are flows and tuffs of dacitic composition (Tv3). Volcanoclastic sandstones and sedimentary breccias occur in the northeastern portions of the Los Gatos project area in fault contact with the andesitic and dacitic flow rocks. It is possible that these rocks are correlative with the Ts unit of McDowell 2007, which is described as "coarse, generally lithified clastic deposits, associated with northwest trending linear basins. These rocks are derived from the andesitic and dacitic local terrain and occasionally contain fragments of hydrothermally altered material and vein fragments.
Intruding and deposited on the entire section are locally important rhyolite flows, flow domes, and dikes that are likely correlative with unit Tv4 of McDowell 2007. These rocks are usually strongly silicified and have all of the varied textures expected with the development of flow domes, including autobreccias, flow banding, and intrusive/extrusive transitions.
Each of the rocks in the section contains observable hydrothermal alteration, suggesting that mineralization in the area probably occurred late in the history of the development of the volcanic section. It is important to stress, however, that economic grades of mineralization have only thus far been identified in the andesite and dacite sections (Tv2 and Tv3) (P. Pyle, 2010).
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Figure 7.2: Regional Geologic Map (SGM, 1:1,000,000 Original Scale)
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7.3 Property Structural Setting
The Los Gatos District hosts a series of quartz, quartz-calcite, and calcite veins in at least eight separate vein systems that are exposed along a strike length of approximately 12 km and an outcrop belt width of approximately 5 km. Vein width is generally in the order of lm with local wide zones up to 8m.
Structurally, the veins form two sets with north and northwest strikes and mostly steep dips, consistent with formation as oblique-slip normal faults. Slicken line rakes indicate dominant normal faulting but with some significant dextral-slip components. A structural model is proposed in which veins formed in dextral-normal faults, with north-striking veins predicted to be thicker with dominant normal slip kinematics and northwest-striking veins predicted to have oblique-slip kinematics. A dextral component is consistent with horsetail structures (e.g., Mezcalera Vein) and dilatant bends and jogs (cymoid loops; e.g., San Luis system). District-scale east dip of volcanic units suggests a master normal fault to the east hidden below conglomeratic cover and a potential exploration target; geophysical techniques may be useful in such exploration (E.P. Nelson, 2007).
On a regional scale, both west-northwest and north-northwest trending structures are very common. The west-northwest trending fault and fracture zones probably reflect reactivated basement structures, whereas many of the north-northwest trending faults probably are associated with basin-and-range extension. In the region, epithermal mineralization is associated with both phases of extension, so both trends have exploration potential; however, the basement architecture has overall control on the distribution of magmatic centers and hydrothermal systems. This can be seen in the deflection of later basin-and-range faults and Laramide fold-thrust structures into the pre-existing west-northwest structural corridors. Because of this, the main west-northwest trending fault zones are considered to be higher-priority targets (T. Starling, 2010).
7.4 Mineralized Zones
Mineralization at Los Gatos is associated with a series of veins and vein systems, of which the main ones are described below and are shown in the geological map of Figure 7.3.
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Figure 7.3: Geological Map of the Los Gatos Project
Cerro Los Gatos System
This is the most persistent vein system, with a general northwest trend dipping to the east, a mapped extension in the order of 10 km, true widths of as much as 30 m at depth as demonstrated by diamond drilling, and local associated veining up to 50 m wide. Banded quartz veins and breccias are cemented by quartz, calcite, and abundant manganese oxides.
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A study based on geological characteristics and silver-lead-zinc (arsenic-antimony-mercury) anomalous sections of the vein resulted in the discovery of the Cerro Los Gatos sub-horizontal mineralized horizon hosting steeply to shallowly dipping mineralized-shoots at depth. Mineralization of interest occurs for approximately 2,500 m in length, between an elevation varying roughly between 1,200 masl and 1,400 masl through a mineralized vertical extension of between 50m and 250m and an estimated average in the order of 200 m. The reported average drilled width of the structure is in the order of 8.9 m. It is noticed that some sections of the vein required deeper drilling and some holes intersected mineralization of interest. (Figure 7.4 through Figure 7.6).
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It has been interpreted that the top of the mineralized horizon at Los Gatos is generally located at an elevation of 1,300 masl to 1,350 masl. The surface is in the order of 1,570 masl ± 50 masl (Dr. Larry J. Buchanan, 2010).
Esther System
At Esther, mapping has indicated the presence of a narrow quartz vein, less than l m in width, with minor veining and silicification and a noticeable lack of calcite. However, the presence of a small mineralized shoot, probably 60 m deep, with values up to 800 g/t silver, 4% lead, and <1% zinc, attracted interest in the area.
Drilling of this area also resulted in the discovery of the Esther mineralized shoot, which has a known length of 800 m. The height of the mineralized interval as indicated by drill holes ES-06 and ES-07 is in the order of 100 m. Most mineral intersections range in the order of 2 m to 8 m, with a weighted average true thickness of 4.3 m (Figure 7.7-7.8) It has been interpreted that the top of the favorable horizon at Esther is generally located about 120 m below the surface (Dr. Larry J. Buchanan, 2010)
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Amapola System
The Amapola Zone is characterized by a series of parallel mineralized veins striking north to south and west-northwest to east-southeast with sub-vertical dip. The Amapola Zone is located on the regional west-northwest trend of the Cerro Los Gatos Zone 4.5 km to the northwest, however the highest grade mineralization does not share the same strike orientation. The principal features of the Amapola Zone are the Albita and Elizabeth veins which are parallel, but separated only by a few meters. The Albita and Elizabeth together strike at 350 degrees and have a sub vertical dip. Together the Albita and Elizabeth host a mineralized thickness of several tens of meters up to ~50 m. The main north south trend of the Amapola Zone has been drilled for 2 km and is open along strike in both directions.
There are few isolated vein outcrops within the Amapola Zone, none of which return significant mineralized grade assays. Nonetheless, the surface outcrops provided clues of mineralization below ground by alteration patterns and vein textures. As such, the currently known mineralization has been identified by drilling from 1,700 to 960 m above sea level; this mineralization is open down dip (Figure 10-12. Unlike Cerro Los Gatos or the Esther vein systems, the Amapola zone is more Ag-dominant with relatively minor Au, Pb, Zn, or Cu.
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Other Systems
In addition to the Cerro Los Gatos, Esther, and Amapola areas, exploration drilling has identified ten other prospects. These prospects are broadly similar to the others of the Los Gatos Project in that they represent steeply dipping quartz veins with polymetallic mineralization comprising variable Ag, Au, Cu, Pb, and Zn.
Mineralized Zones
Mineralization of interest and high-grade mineralization have been identified in the different vein systems at Los Gatos. Lead, zinc, and silver have been identified from epithermal quartz veins at the surface and from drilling intersections, while smaller, but important quantities of gold and copper associated with the veins have been intersected. Anomalous values have, thus far, been identified in the Cerro Los Gatos, Esther, Amapola, Cieneguita, San Luis, Paula, Tren/Margarita, and Mezcalera zones. Drilling has identified a continuous geometry of the mineralization in the Cerro Los Gatos and Esther zones.
Lead mineralization occurs primarily as galena and lead oxide minerals of varying grain sizes that are disseminated in quartz vein material, as open-space filling in cavities, and as replacements in the andesitic and dacitic flow units.
Zinc mineralization occurs as sphalerite and zinc oxide minerals of variable grain sizes disseminated in quartz vein material, as open-space filling in cavities, and as replacements in the andesitic and dacitic flow units. Sphalerite ranges from yellow to brown in color and is deposited in a similar style but is not always associated with the galena mineralization.
Silver mineralization occurs as acanthite and native silver and has been detected in thin sections as proustite as small inclusions within galena grains.
Copper mineralization occurs as chalcopyrite and occasional native copper disseminated within quartz veins. Gold mineral species have not been identified visually but are present in small quantities in assay results.
The veins themselves display variable gangue mineralization, depending on the depth of exposure within the epithermal environment. It is common to observe calcite or manganese oxide mineralization at high levels within the epithermal system, which transitions to barite, fluorite, and quartz at lower levels. Adularia, albite, and alunite have also been observed within the veins but only in small percentages and usually at high levels. Within the mineralized portions of the veins, it is common to see quartz with minor fluorite and occasional minor calcite associated with lead, zinc, silver, copper, and gold mineralization. The veins are typically rhythmically banded on a scale of 1 mm to 10 mm per band, with repeated pulses of quartz carrying the metals and other gangue minerals. It is common to see multiple pulses of mineralization where small veins crosscut each other. It is also common to see various coloration of quartz in the multiple pulses, ranging from milky white to vitreous gray to amethystine purple (P. Pyle, 2010).
It is apparent that most of the values are associated with sulfide mineralization since this is present at surface outcrops and oxide mineralization is limited at depth, and is commonly related to fracture, breccia zones, and open spaces within the veins. Although preliminary metallurgical testing has not been carried out due to the early stage exploration, it is expected that the effect of oxidation in the recovery process may not be important (Behre Dolbear, 2011).
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DEPOSIT TYPES 8.0
Veins at Los Gatos show vein textures and gangue mineralogy (local chalcedony and calcite, and quartz-replaced lattice texture calcite) that indicate a relatively high-level hydrothermal system in the boiling environment. Breccia with clasts of vein quartz indicates a protracted hydrothermal system during multiple faulting events, a positive sign for economic epithermal veins. It has been interpreted that mineralized-shoots may extend relatively far down dip, possibly to at least 230 m (Figure 8.1).
Mineralization at Los Gatos is characterized by, silver, lead, zinc, and copper sulfides and their corresponding oxides, along with fluorite, manganese, barite, and traces of gold associated with quartz and calcite veins. The veins vary in orientation from west-northwest to northwest to north-northwest to north-northeast and vary in thickness from 1 m to 8 m in outcrop but displaying much greater true thickness at depth. Study of the veins in hand specimen and thin section suggests that they are epithermal in origin and are likely of intermediate sulfidation composition.
The exploration model for these types of veins was put forward in a landmark paper by Dr. Larry J. Buchanan (1981) that set the basis for the understanding and interpretation of epithermal deposits that has been widely used in exploration. Dr. Larry J. Buchanan now serves as a special consultant to SSMC and has been instrumental in the recognition of the importance of the mineralogy of the veins and the expected transitions of the veins in the sub-surface.
Exploration of epithermal veins at Los Gatos is mainly focused on the interpretation of geological, structural, mineralogical, and alteration features in order to identify those areas within where mineral deposition was most likely to occur due to paleo-boiling surfaces at depth. These specific levels within the veins are where economic concentrations of lead, zinc, silver, copper, and gold and particularly bonanza-grade mineralization can be expected. Additional exploration is being targeted to other areas where mineralization can be concentrated, such as in the hanging wall fracture zones to the veins, the flanks of the flow domes, and structural intersections within the vein trends.
Other deposit types in the region suggest that higher-temperature mineralization can also occur, such as the skarn setting identified at the Santa Rita prospect located to the southeast of the concession block. These higher-temperature analogues have not yet been identified within the concession block (P. Pyle, 2010).
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Figure 8.1: Idealized Section of a Bonanza Epithermal Deposit (Buchanan L.J., 1981)
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EXPLORATION 9.0
9.1 Historic Exploration
Apart from small pits and workings in the Gavilana (Paula), San Luis, Tren/Margarita, and Esther zones, there has been little to no previous exploration work within the Los Gatos project area. No evidence of systematic prospecting, sampling, or drilling has thus far been identified. The only record of historic sample collection is from Baca Carreon, 1964, where 16 samples along the Tren/Margarita zone were taken.
9.2 Current Exploration
MPR began its first phase of exploration in the Los Gatos project area in 2007 with a program of surface geologic mapping and rock sampling covering approximately 60% of the original Los Gatos concession within the core of the claim block. This work was conducted by a local Mexico-based consulting group, Grupo Azta, and is detailed in a report by J. Islas (2008).
Work by Grupo Azta identified more than 100 km of strike length of quartz and calcite veins, many of which contained anomalous lead, zinc, and silver mineralization. Grupo Azta took 1,217 rock samples from surface outcrops of vein and wall rocks. Of the 1,217 samples, 200 samples contained values in excess of 10 grams of silver per tonne.
As the mapping by Grupo Azta progressed, it became clear that there were several orientations of prospective veins within the Los Gatos project area. Consultant Eric Nelson was brought in to review the structural geology of the area and make recommendations of the more prospective trends. The results of his work, contained in Nelson (2007), suggested that the most favorable vein trend was north-northwest and an initial program of drilling was proposed (J. Islas, 2008).
MPR expanded its program at the Los Gatos project in June 2008, employing its own local technical staff, under the supervision of Philip Pyle, Jon Gelvin, and Dr. Larry J. Buchanan. During the months from June 2008 to October 2008, environmental permits were obtained, proposed drill areas were re-mapped and re-sampled, surface access rights were negotiated with local ranches, and drill access roads were constructed.
Drilling began with one rig in October 2008, at the Paula zone, and transitioned in early 2009 to the Cerro Los Gatos zone. The initial significant identification of silver was from hole GA04 in April 2009, where 73.6 g/t silver was found over 4m from 152m to 156m depth. This was quickly followed by significant intercepts in hole GA06 and then GA09, which contained 34 m of 414 g/t silver, 2.0% lead, and 4.85% zinc. At this point in the drilling program, the geometry and the preferred level for mineral deposition was identified, and a series of holes were drilled that indicated a continuous mineralized body of apparent high grade mineralization with lead, zinc, and silver mineralization over a strike length in excess of 2.5 km, a dip extent in excess of 200 m, and an average thickness of 6.2 m, within the Cerro Los Gatos banded vein complex.
Also in early 2009, drilling in the Esther zone commenced, with one rig moving back and forth between the Cerro Los Gatos and Esther zones. Significant mineralization was identified in hole ESO4, with 14 m containing 79.8 g/t silver from 102 m to 116 m depth. This was followed with significant offsets in mineralization holes ES05 and ES06, proving a continuous geometry of mineralization for over 1 km of strike length, with an average thickness of more than 3.4 m and a minimum down dip extent of 200 m.
A decision was made to replace the original drilling rig in June 2009 with one of larger capacity, followed quickly by the addition of a second and third drilling rig during the summer of 2009. As of July 2012, 345 drill holes have been completed by MPR for a total of 161,092 m.
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Detailed soil geochemistry programs were conducted over the Esther zone and the area between the Cerro Los Gatos and Esther zones. Results of the sampling identified new veins in the Esther zone and revealed four separate structures between the Esther and Cerro Los Gatos zones.
Detailed topographic mapping was created using Photosat, a Canadian contractor. The topography was created at l m, 5 m, 10 m, and 50 m contours from Geoeye® satellite coverage captured exclusively for the survey. Survey control points were established on the surface, with coordinates by total station in order to guarantee the accuracy of the survey.
A detailed 3D IP survey was conducted during July 2010 using SJ Geophysics, a contractor from Canada. Lines were initially spaced at 100 m with stations every 25 m and later tightened to 50 m by 25 m. Data from the survey was processed using the UBC inversion algorithms, and the results suggest a correlation between vein mineralization at the Cerro Los Gatos zone and zones of high chargeability and low resistivity. In addition, the vein mineralization at the Esther zone suggests a similar relationship of high chargeability and low resistivity. The first holes to test the trends of mineralization from these surveys have successfully extended mineralization in both zones. As a result of the good correlation with mineralization, extensions of the surveys were begun in November 2010 in both the Cerro Los Gatos and Esther zones. Additionally, data are being collected in the Amapola and San Agustin zones to determine the signature of mineralization in these new areas for drilling.
Detailed geologic mapping has been conducted over approximately 40% of the Los Gatos concession utilizing both local staff from MPR and independent contractors. Regional-scale mapping has taken place on the remaining 60%.
A second review of structural geology of the Los Gatos and surrounding areas was prepared in March 2010 by consultant Tony Starling of Telluris Consulting. His work suggests a relationship between mineralization and the presence of the younger dome rocks and identifies the younger northeast trending cross faults as a potentially important conduit for fluid flow during the mineralization phase. In the report (Starling (2010)) also identifies a number of other favorable zones from Geoeye, Spot, and Aster imagery, which may serve as loci for mineralization, that are not well exposed in outcrop.
A detailed study of the local geology in the San Agustin zone was prepared during October 2010 and detailed in a report by Byington (2010). This work suggests a strong preference for north-northeast trending veins, and a series of drilling recommendations were made. A test of the drill proposals was made with mostly negative results.
Geological, exploration, and drilling information has identified a mineral resource in three of the targets explored, Amapola, Cerro Los Gatos, and Esther. MPR produced preliminary resource estimates internally and through Rowearth Consulting of the Esther and Los Gatos zones. (Behre Dolbear, 2011).
It is the author’s opinion that the samples collected for exploration purposes are representative of project area. Soils and surface rock chip samples were assayed and used for location purposes only and were not incorporated in mineral resource estimates. Assayed drill core was the only source of grade and thickness data incorporated in the mineral resource estimate.
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DRILLING 10.0
As of August 2012, 345 drill holes had been completed by MPR for a total of 160,445 m. Appendix C shows the location information of the holes drilled through August 2012.
Drilling was initiated at the Los Gatos project in October 2008 using a hydracore rig from Minera Gavilan, a Mexican contractor with Canadian ownership. Drilling with this rig was conducted from October 2008 to May 2009, when the rig was replaced with a Major 5000 rig from Major Drilling. Two additional Major 5,000 rigs were brought in during July 2009 to September 2009. Between one and four rigs have been operating at the site continuously through the end of September 2012.
Drill sites are selected based on surface vein outcrops and geometric projections into the sub-surface, as well as on geochemical, geophysical, and geological targets. Access to surface parcels has been negotiated with the individual ranch owners in return for improvement to roads and water supplies. Ten ranch parcels have been purchased by MPR in the Cerro Los Gatos, Esther, and Amapola areas that will facilitate further future development work.
Drilling is conducted using a wire line rig with diamond core capabilities. Holes begin with HQ size and are reduced, if necessary, to NQ and very rarely to BQ, if difficult drilling conditions are encountered. Holes are surveyed with a Flexit EZ trac device at 50 m intervals, as the holes are completed. Accuracy of the Flexit EZ trac is reported by its manufacturer to be 0.25 degrees in calculation of both the azimuth and inclination. Surveys of hole coordinates are completed by a local contract topographer using a Topcon Total Station GTS-236W. All collar and survey information is stored in a master database in Microsoft Access® (Behre Dolbear, 2011).
Drill holes are positioned to intersect targets at nearest to perpendicular to strike and dip as possible however, drilling capabilities and surface placement do not always make it possible to achieve. In the three mineral resource areas true thickness is determined and constrained by 3D wireframe solids. Outside the mineral resource areas drill hole intersection are corrected for true thickness based on surface measurements of strike and dip.
Location, orientation, and depth of all drill holes can be found in Appendix C. Intersection of interest within the threel resource areas are shown in Section 7 and 14 of this report in maps, 3D views and cross-sections. Drill hole intersections outside of the three resource areas are available in Appendix C.
Other Drilling Areas
In addition to the drilling conducted at the Cerro Los Gatos, Esther and Amapola zones, Minera Plata Real has conducted limited exploration drilling programs in ten other areas which include Cieneguita, San Luis, Paula Adorada, San Agustin, Mezcalera, Torunos, Rodeo, Boca de Leon, Eva, and El Lince. While anomalous levels of mineralization have been identified in each of these ten zones, drilling data is too limited to speculate as to the presence of economic quantities of mineralization. Additional drilling will be required in each area to delineate the mineralization identified. A summary of drill intersections from the Other Drilling Areas is included in Appendix D.
Cieneguita Zone
The Cieneguita zone is located 1 km to the northwest of the Cerro Los Gatos zone along the strike projection of the Los Gatos fault and San Luis vein structure. A total of 13 diamond drill holes were completed in the Cienguita zone during late 2009 and mid 2010 for a total of 6,416 meters. The drilling was focused on extending mineralization from the Cerro Los Gatos zone to the northwest across a series of younger northeast trending faults which mark the northwestern
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limit of the Cerro Los Gatos zone. One zone of outcrops of the San Luis vein is shown to exist in the Cieneguita with banded quartz veining, which was the early focus of drilling. Results from the drilling were mostly negative, however Holes CI04 and CI09 contained anomalous values of silver.
San Luis Zone
The San Luis zone is located 2 km to the northwest of the Cerro Los Gatos zone along a northwestern strike projection of quartz vein outcrops with limited artisanal surface workings. A total of 7 holes were completed in the San Luis zone during early 2010 for a total of 3,761 meters. The focus of the drilling in this area was to test below the limited workings which are rich in manganese oxides, but do not possess the banded texture of quarts as observed in the Cerro Los Gatos zone. Results from the drilling were mostly negative with the exception of hole SL02 which contained anomalous values of silver.
Paula Adorada Zone
The Paula Adorada zone is located 3 km to the northwest of the Cerro Los Gatos zone along a northwestern strike projection of quartz veins outcrops with limited artisanal surface workings. A total of 17 holes were drilled in 2 campaigns in late 2008 and mid 2010 for a total of 7,859 meters. The focus of the drilling was to test below the old workings where visible galena and sphalerite had been recognized associated with north-northwesterly trending quartz veins in a hill named Cerro las Minas. This area was recognized to contain the strongest potential for mineralization based on surface outcrops and was the first area to be drilled by Minera Plata Real in October 2008. Results from the drilling were mostly negative, with the exception of holes PA01, PA03 and PA15 which contained anomalous values of silver.
San Agustin Zone
The San Agustin zone is located 3.5 km to the northwest of the Cerro Los Gatos zone, and immediately west/northwest of the Paula Adorada zone. A total of 10 holes were drilled in the San Agustin zone in early 2011 for a total of 4,459 meters. The focus of the drilling was to test a series of north trending quartz veins to depth below surface outcrops. Results were mostly negative with the exception of hole SA04 which contained anomalous levels of silver.
Mezcalera Zone
The Mezcalera zone is located 6 km to the NW of the Cerro Los Gatos zone associated with a northwesterly striking series of quartz veins. A total of 5 holes were drilled At the Mezcalera zone during mid-2009 for a total of 2,490 meters. Results of the drilling were mostly negative, with the exception of holes ME01 and ME04 which contained anomalous values of silver.
Los Torunos Zone
The Los Torunos zone is located 4.5 km west of the Cerro Los Gatos zone and is associated with a series of quartz veins in outcrop with northerly and northwesterly orientations. A total of 6 holes were drilled in the Los Torunos area during mid-2010 for a total of 2,454 meters. Drilling was focused to test below outcrops of the veins recognized at the surface. Three of the six holes contained anomalous levels of gold and silver.
El Rodeo Zone
The El Rodeo zone is located 5.5 km west of the Cerro Los Gatos zone and is associated with a series of northwesterly trending banded epithermal quartz veins in outcrop. A total of 13 holes were drilled in the Rodeo zone in mid-2011 for a total of 8063 meters. Drilling was focused to test below two parallel veins recognized at the surface which have similar banded textures to
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those seen at the Cerro Los Gatos zone. Drilling encountered anomalous levels of silver, lead and zinc in 3 holes - RO02, RO07 and RO13B.
Boca De Leon Zone
The Boca de Leon zone is located approximately 9 km southwest of the Cerro Los Gatos system and is represented by outcrops of quartz vein material with minor historical workings in a north/northwest orientation parallel and northeast of the Rio Conchos River Valley. A total of ten holes were drilled at Boca de Leon with intercepts of interest in 2 holes BL01 and BL03.
Eva Zone
The Eva zone is located 1 km to the west of the Amapola zone associated with quartz vein outcrops on the flank of a rhyodacitic dome complex. A total of three holes targeted the vein system with three intercepts of interest in hole AM80.
El Lince Zone
The El Lince zone is near the Tren/Margarita area located approximately 12 km northwest of Cerro Los Gatos. The area is marked by outcropping quartz veins with anomalous silver values along a west/northwest trend which host the mineralization of the Tren/Margarita occurrences referenced by Baca Carreon, 1964. As of the time of this report seven holes have been completed at the El Lince zone with assays received for four of the holes. Of the first four holes there is one with an intercept of interest.
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SAMPLE PREPARATION, ANALYSES, AND SECURITY 11.0
11.1 Sample Number and Location
During the early exploration stages, Grupo Azta took 1,215 rock samples from surface outcrops of vein and wall rocks from all mineralized structures identified through geological mapping and reconnaissance. A complete database with sample number, location, rock type, alteration, mineralization, assay order, assay results, and digital codes is in MPR's files (Geochem_database_ rep_ 0707.xls) (Table 11.1).
Table 11.1: Summary of Samples Taken at Los Gatos
Type of Sampling MPR Sampling
Vein Sampling Number of Samples
Surface Sampling
San Luis 248
Los Gatos 103
Fortuna 153
Le Cueva 193
Mezcalera 145
El Aguaje 10
Sistema Azul-Amanecer 152
sistem El Valle 48
Cerro Las Minas 163
Total Number of Samples 1,215
Core Sampling 15,537
Total 16,752
MPR has taken 15,537 core samples, which form part of the master database that has been used for the preliminary resource estimates.
11.2 Sampling Method and Types
Vein Sampling
MPR has carried out sampling campaigns that have included surface, limited underground, and core samples. Samples were taken by local crews under the supervision of a either a geologist of MPR or one of their contractors. Chip samples were cut with chisel and hammer or pick and collected in plastic bags to be labeled, recorded, and shipped to the laboratory for assay.
MPR sampling was carried out by the consulting group, Grupo Azta, in the San Luis, Los Gatos, Fortuna, La Cueva, Mezcalera, El Aguaje, Azul-Amanecer, El Valle, and Cerro Las Minas vein systems. Local grab and dump material samples were also collected, particularly near the portals of the mines. The locations and UTM coordinates of all samples were obtained and recorded, using handheld GPS readings and the NAD27 Mexico global projection system. Hanging wall and footwall host rocks were commonly sampled (Behre Dolbear, 2011).
Core Sampling
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As of August 2012, 345 drill holes totaling 161,092 meters were completed and sampled by MPR. Sampling intervals were, in most cases, 2.0 m, with local variations depending on vein geology to a minimum of 0.8 m where structures were found. Detailed sampling was carried out at intervals directed by geological criteria, with a priority to test high-grade zones in the vein structures and to establish possible mineralization in the wall rock and quartz stock work veining.
General procedures for core handling, security, sampling, and shipping control, as described by MPR's Philip Pyle, are summarized as follows.
• MPR geologists are randomly present at the drill rigs to ensure that core handling, recovery, core accommodation, and depth recording were done properly by the contractor.
• Core samples are collected from the top of the bedrock to the bottom of each hole and placed in plastic core boxes. Boxes of core are transported from the drill site to MPR's core processing facility in San Jose del Sitio by MPR personnel.
• Cores are measured, logged, and photographed in San Jose del Sitio by geologists of MPR, and intervals are selected for assay. Data are also collected on cores to gather geotechnical information, including rock quality data (RQD), fracturing, weathering, and rock hardness, and are recorded in MPR's RQD data formats.
• Assay intervals are divided in two equal parts by diamond saw, with most sampling conducted on 2m intervals, except for specific vein intervals. Vein intervals are selected for more detailed sampling, with a minimum of 0.8m per interval and a maximum of 2m.
• Detailed logging of the sample intervals is conducted once the core samples are sawed, with detailed descriptions and estimations of mineralogy and mineral content, hydrothermal alteration, veining, and fracturing.
• Data are collected on specific gravity of sample intervals using a water balance method with epoxy resin impregnation. Data for specific gravity are maintained in a master database in Microsoft Access®.
• Assay samples are collected in standard plastic sample bags and tagged with a unique sample number recorded for each interval. Samples are grouped by drill hole and transported by pickup truck to the ALS Chemex laboratory sample receiving location in Chihuahua City. From the time the core samples leave the drill site to the time the samples are delivered to ALS Chemex, they are escorted and under the supervision of personnel from MPR.
• Samples are dried, crushed, and pulverized by ALS Chemex in Chihuahua City. Assay orders are delivered to the lab, and a copy of the receipt obtained is filed and registered in MPR's database.
• Sample pulps are then shipped by ALS Chemex to their laboratory in Vancouver for ICP analyses of silver, base metals, and trace elements using a four-acid digestion technique. Gold assays are also completed using fire assay-AA preparation on 30-gram splits of the sample material (P. Pyle, 2010).
• Half core is placed in plastic bags and tied with plastic belts by the geotechnician under the supervision of MPR's geologists, who keep a record in the sampling tag booklets and transfer the information to a sampling control and shipment sheet.
• Samples are placed in large sample bags, registered, and personally taken by MPR personnel to the ALS Chemex sample preparation facilities in Chihuahua City.
• The remainder of the samples are kept in MPR's core storage facility in San Jose del Sitio.
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• Regarding security, all samples are collected and accompanied by MPR personnel from the time of collection at the drill rig until the time they are delivered to ALS Chemex.
11.3 Core Recoveries
Core recoveries are measured, registered, and reported in MPR's log formats. General results of recovery are good and vary from excellent to acceptable. Local fracture and breccias zones may have poor recoveries; however, vein intersections are normally good.
Considering this, a random review was made of core logs, and was found that, in general, drill holes show a good core recovery, while vein intersections show a variable core recovery depending upon the degree of fracturing shown by the intersections. Based on core recoveries of vein intersections and check sampling carried out by the authors, recoveries varied between 75% and 100%, with an average of almost 95% (Table 11.2). Behre Dolbear, 2011
Table 11.2: Core Recovery Verification
Area DH From (m) To (m) Meter Core % Recovery Check Sample
Los Gatos GA31 490.67 492.06 1.39 1.37 98.6 BD725832
Los Gatos GA02 84.00 86.00 2.00 2.00 100.0 BD725833
Los Gatos GA15-B 305.80 307.50 1.70 1.70 100.0 BD725834
Los Gatos GA32 474.00 475.05 1.05 1.05 100.0 BD725835
Los Gatos GA18 301.75 302.70 0.95 0.95 100.0 BD725836
Los Gatos GA41 421.10 422.65 1.55 1.55 100.0 BD725837
Los Gatos GA38 480.00 481.60 1.60 1.60 100.0 BD725838
It is believed that core sampling by MPR is representative of mineralized intersections, with minor variations due to irregularities in mineralization, and the sampling process is considered to follow industry standards and to be adequate for mineral resource estimates.
11.5 Sample Preparation
MPR has set up an effective QA/QC program to monitor the drilling program at the Los Gatos project, as follows (P. Pyle, 2010).
• Blank material, usually barren silica sand or barren andesitic flow material (approximately 250 grams per sample bag), is inserted wherever the geologist deems appropriate but no less than one for every 40 samples. Insertion of blanks is focused on areas of higher metal values, which
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could lead to contamination. The blanks are inserted by the geologist and are sent with the shipment.
• Standards (as Standard Reference Material (SRM)) are added every 20th sample. MPR has purchased 12 different SRMs from Rocklabs Ltd. in Auckland, New Zealand and their resellers. These samples are purchased in plastic bags containing 50-gram charges, which are inserted into the sample stream. The type (numbers) of the SRM is marked on the sample sheets.
• Duplicates are also analyzed every 50 samples (each batch) by placing 2 sample tickets in the same sample bag and having the lab generate two pulps of the same sample for analysis.
• This protocol is considered the minimum required; however, geologists are encouraged to insert more blanks, standards, and/or duplicates, as they deem appropriate. All SRMs and duplicates are analyzed together for any given batch.
11.6 Blanks
Blanks, usually barren silica sand or barren andesitic flow material (approximately 250 grams per sample bag), are submitted routinely into the assay stream for all labs used and are evaluated when the results are obtained. In all cases, the analyses of the blanks have been within industry standard levels.
11.7 Standards
Standards are added every 20th sample. MPR has used a number of SRMs purchased from Rocklabs Ltd. in Auckland, New Zealand and their resellers. These samples are contained in 50-gram charges and inserted into the sample stream. The type (numbers) of the SRM is marked on the sample sheets. The results from standards assayed during the program are typically well within the expected error range, and when not, they are re-analyzed
11.8 Duplicates
Duplicate samples are inserted every 50 samples, and analyses have shown results consistent within the margin of error for all samples. The results from the drilling program at the Los Gatos project are deemed to be of sufficient quality to use in a resource estimate
11.9 Same Protocol For Rock and Soil Samples
MPR has established a protocol for sample collection as follows:
Soil Samples: Soil samples are collected by qualified junior geologists at approximately 25m to 50m intervals. Sample locations are determined by a handheld GPS. Material is collected at the appropriate depth for the selected soil horizon and placed in a labeled sample bag and sealed for transport. Duplicate samples are taken every 20 samples as a quality assurance check. The samples are transported to the ALS Chemex receiving lab in Chihuahua City. Samples are analyzed using an ME-ICP41 system for silver, base metals, and trace elements and Au-AA23 for gold. Silver samples in excess of 100 ppm are reanalyzed using an AA46 process.
Rock Samples: Rock samples are collected by qualified Mexican geologists/prospectors, with data including UTM coordinates, lithology, and mineralization recorded in field books. Grab and representative chip samples are placed in standard plastic rock sample bags and tagged, and the locations are recorded in a master database. The plastic bags are sealed using plastic pull ties. All samples are taken to a central logging facility, where they are stored in secure areas. The samples are transported to the ALS Chemex receiving laboratory in Chihuahua City. Once prepared, the pulps are forwarded to the ALS Chemex laboratory in Vancouver for analysis by fire assay, with an AA finish for gold and the ME-ICP41 method. Silver samples, in excess of 100 ppm, are re-analyzed using an AA46 process (Behre Dolbear, 2011).
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11.10 Drill Core Samples
Sampling is carried out at mostly 2m intervals, with the exception of select vein material that is collected at minimum 0.8m intervals. Most of the core is fairly hard and competent, and a diamond saw is used to cut the core in half (lengthwise). Rubble that is too small to cut is collected using a spatula-like blade, with 1/2 being scooped out for the sample. Larger samples within the rubble zones are sawed in half where possible. Care is taken to keep the saws as clean as possible. One-half of the core is put into individual sample bags, while the remaining half is retained and stored on site in San Jose del Sitio. All management of the core samples is by trained employees of MPR (Behre Dolbear, 2011).
11.11 Sample Security
Assay samples are bagged, tagged, and zip-tied in secure bags and then transported in larger sacks one or more times a week to Chihuahua City, where they are immediately delivered to the ALS Chemex receiving laboratory. A Chain of Custody form is used to track the samples once they have left the security of the core facility in San José del Sitio. Samples are prepared, and the pulps are sent by air to the ALS Chemex Vancouver laboratory for analysis by a four-acid digestion process: ME-ICP41 for silver, base metals, and trace elements and AA23 (fire assay AA prep with 30-gram digestion) for gold (Behre Dolbear, 2011).
11.12 Adequacy and Independence
It is the author’s opinion that the sample preparation, security and analytical procedures are adequate and conform with industry best practices.
The ALS Chemex laboratory in Vancouver is ISO certified (9001:2000) and is independent of MPR and SSMC.
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DATA VERIFICATION 12.0
A review was made of available information derived from previous exploration work. This information included geological and sampling reports, drill logs, and assay results. Verification consisted of a general review of geological characteristics of the main mineralized areas, shown by the MPR field checking of geological maps in all areas, and of sampling procedures by MPR, as well as a review of all vein intersections and discussions of detailed sampling, sample handling, and security procedures established by MPR. The original locations of samples reviewed were located, although most require being repainted (Behre Dolbear, 2011).
12.1 Behre Dolbear’s Check Sampling
A verification of the core samples of the Los Gatos and Esther Veins was made based on 16 core samples. Core samples were split in MPR's sample preparation facilities at San Jose del Sitio, from the remaining halves of the core (Table 12.1 to Table 12.3).
Table 12.1: Sample Verification
Location
Behre Dolbear Minera Plata Real From To Width
Sample Number Drill hole Sample Number (m)
CORE SAMPLES
AREA LOS GATOS
BDM 1 725832 GA 31 MPR 27160 490.67 492.06 1.39
BDM 2 725833 GA 02 MPR 2992 84.00 86.00 2.00
BDM 3 725834 GA 15-B MPR 6021 305.80 307.50 1.70
BDM 4 725835 GA 32 MPR 27358 474.00 475.05 1.05
BDM 5 725836 GA 18 MPR 5573 301.75 302.70 0.95
BDM 6 725837 GA 41 MPR 28587 421.10 422.65 1.55
BDM 7 725838 GA 38 MPR 28118 480.00 481.60 1.60
AREA ESTER
BDM 8 725839 ES 02 MPR 2199 94.00 96.00 2.00
BDM 9 725840 ES 03 MPR 2437 72.00 74.00 2.00
BDM 10 725841 ES 04 MPR 2657 110.00 112.00 2.00
BDM 11 725842 ES 05 MPR 4152 102.00 104.00 2.00
BDM 12 725843 ES 06 MPR 4262 122.00 124.00 2.00
BDM 13 725844 ES 09 MPR 7830 382.70 383.75 1.05
BDM 14 725845 ES 13 MPR 9628 172.00 174.00 2.00
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Table 12.2: Sample Verification Assay Results
CLIENT : "PLAREA - Minera Plata Real S de RL de CV"
# of SAMPLES : 14
DATE RECEIVED : 2011-01-20 DATE FINALIZED : 2011-02-02
PROJECT : "Los Gatos"
CERTIFICATE COMMENTS : ""
PO NUMBER : "MPR-AG 42"
Au-
AA23 Ag-AA46 / ME-
ICP41 Pb-OG46 / ME-
ICP41 Zn-OG46 / ME-
ICP41 ME-
ICP41
SAMPLE Au Ag Pb Zn Cu
DESCRIPTION ppm ppm % / ppm % / ppm % / ppm
BD 725832 0.228 186 10.65 >30.0 3920
BD 725833 0.163 105 1835 1835 73
BD 725834 0.575 726 9080 2.8 1600
BD 725835 0.162 39.3 7980 1.62 2410
BD 725836 0.065 270 764 764 35
BD 725837 0.011 40 3.38 12.45 2030
BD 725838 0.127 24.1 4.43 3.21 301
BD 725839 0.012 39 1.25 1.705 234
BD 725840 0.041 136 3130 3130 222
BD 725841 0.07 145 1.03 1.21 213
BD 725842 0.013 274 5570 5570 70
BD 725843 0.05 270 1.32 8.22 459
BD 725844 0.256 108 3.57 6.06 411
BD 725845 0.026 74 1335 1335 18
Note: ALS Chemex certificate of analysis showing different assay methodologies used.
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These new samples were personally taken and delivered to the ALS Chemex preparation laboratory in Chihuahua City, and the pulps were sent to ALS Chemex Vancouver to be assayed for gold (fire assay/AAS finish, ALS Au23 Method) plus ICP-35 elements (ALS ICP-41 Method). High-grade samples (+10 grams of gold per tonne) were analyzed by fire assay/gravimetric finish in 30-gram pulp samples. In the case of silver, lead, copper, and zinc, above the recommended ICP detection limits, they were assayed with Aqua-Regia digestion and ICP/AES finish. In all cases, assay methods were either the same or similar to the ones routinely used for MPR's samples.
Samples were taken from the Los Gatos and Esther Veins and were collected as evenly distributed as possible, including shallow, intermediate, and deep intersections, to be representative of the different types of mineralization of the two veins
Assay results by ALS Chemex produced similar results for both sets of samples. The graphs of Figure 12.1 through Figure 12.11 show a very good correlation of core samples taken by the authors compared to MPR's results.
Figure 12.1: Lineal Check Samples Versus MPR
Figure 12.2: Silver Grams per Tonne Check samples Versus MPR
Figure 12.3: Lead (%) Check Samples Versus MPR
Figure 12.4: Zinc (%) Check Samples Versus MPR
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Figure 12.11: Check Sampling (Copper)
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December 2012 75
Behre Dolbear concluded:
• The statistical analyses of check sampling versus MPR sampling shows very good correlation values.
• The difference of average values of all elements, with the exception of lead, is less than 12%.
• In the case of lead, the difference between means is probably due to the different core halves taken for analysis and irregularities in mineralization.
• Consequently, the results reported are acceptable; and, therefore, sampling by MPR is considered reliable.
12.2 Tetra Tech’s Check Sampling
Amapola Assays
Tt completed verification of the Amapola Zone assays by independent collection of 16 core samples (Table 12.4). Tt identified core intervals for verification assay and directed sawing, bagging, and labeling of each sample. Samples were prepared by sawed splits of half-core remaining after MPR sampling.
Table 12.4: Amapola Zone Sample Verification
Tetra Tech Minera Plata Real From To Width
Sample Number Drill hole Sample Number (m) (m) (m)
MPR-23967 AM-03 PLG-0125 262.00 264.00 2.00
MPR-23968 AM-03 PLG-0138 284.00 286.00 2.00
MPR-23969 AM-23 PLG-04967 334.00 336.00 2.00
MPR-23970 AM-25 PLG-07452 553.00 554.00 1.00
MPR-23971 AM-25 PLG-07448 549.00 550.00 1.00
MPR-23972 AM-36 PLG-13457 692.00 693.00 1.00
MPR-23975 AM-37 PLG-14558 422.00 424.00 2.00
MPR-23973 AM-37 PLG-14550 408.00 410.00 2.00
MPR-23974 AM-37 PLG-14555 416.00 418.00 2.00
MPR-23976 AM-46 PLG-15426 526.00 528.00 2.00
MPR-23977 AM-47 PLG-16821 410.00 412.00 2.00
MPR-23978 AM-47 PLG-16838 438.00 440.00 2.00
MPR-23979 AM-48 PLG-15559 274.00 276.00 2.00
MPR-23980 AM-48 PLG-15560 276.00 278.00 2.00
MPR-23981 AM-49 PLG-16934 316.00 318.00 2.00
As with sample verification conducted by Behre Dolbear, verification samples collected under the supervision of Tt were analyzed by ALS Chemex (Table 12.5). High grade silver samples were re-assayed by method similar to that routinely used by MPR.
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Log-log comparison of MPR assay results vs. Tt verification results show generally good correlation (Figure 12.12 to 12.16). Correlation coefficients on the log-transformed data vary from a low of 0.760 for Zn, to 0.964 for Ag (Table 12.6) with a mean correlation of 0.89. Additional comparison (Figures 12.17 – 12.21) shows good correlation for Au and Ag; some variation is noted at higher concentrations of Cu, Pb, and Zn. It is Tt’s opinion that two samples contribute to most of the variability and are not statistically significant.
Overall, comparison of MPR’s QA/QC duplicate sampling and Tt’s sample verification show very similar results. Limitations of the sample verification conducted by Tt include a small sample size and bias toward the moderate grade mineralization. Tt recommends that future confirmatory sampling be focused on higher grades of Ag, Pb, Zn, Cu, and Au that more closely reflect the high grade intercepts modeled in the Albita and Elizabeth veins and that contribute substantially to the resource estimation.
Based on independent sample verification of the Amapola Zone, Tt concludes the data collected by MPR to be adequate for the purposes used in this technical report.
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Table 12.5: Amapola Zone Sample Verification Assay Results
Correlation Coefficient "r" on Log Transformed Data
Tetra tech
Au Ag Pb Zn Cu
MP
R
Au 0.960
Ag 0.964
Pb 0.953
Zn 0.76
Cu 0.841
Figure 12.12: Amapola Zone Au (ppm) Check Samples Vs. MPR Samples
Figure 12.13: Amapola Zone Ag (ppm) Check Samples Vs. MPR Samples
Figure 12.14: Amapola Zone Pb (ppm) Check Samples Vs. MPR Samples
Figure 12.15: Amapola Zone Zn (ppm) Check Samples Vs. MPR Samples
0.005
0.05
0.5
0.005 0.05 0.5MP
R O
rig
ina
l Ass
ay
Au
pp
m
Tt Check Sample Au ppm
MPR vs. Tt Check Samples Au
ppm
5
50
5 50
MP
R O
rig
ina
l Ass
ay
Ag
pp
m
Tt Check Sample Ag ppm
MPR vs. Tt Check Samples Ag
ppm
50
500
50 500
MP
R O
rig
ina
l Ass
ay
Pb
pp
m
Tt Check Sample Pb ppm
MPR vs. Tt Check Samples Pb
ppm
75
750
7500
75 7500
MP
R O
rig
ina
l Ass
ay
Zn
p
pm
Tt Check Sample Zn ppm
MPR vs. Tt Check Samples Zn
ppm
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December 2012 79
Figure 12.16: Amapola Zone Cu (ppm) Check Samples Vs. MPR Samples
Figure 12.17: Amapola Zone Comparative Check Sampling (Au)
Figure 12.18: Amapola Zone Comparative Check Sampling (Ag)
Figure 12.19: Amapola Zone Comparative Check Sampling (Pb)
Figure 12.20: Amapola Zone Comparative Check Sampling (Zn)
Figure 12.21: Amapola Zone Comparative Check Sampling (Cu)
5
50
500
5 50 500
MP
R O
rig
ina
l Ass
ay
Cu
pp
m
Tt Check Sample Cu ppm
MPR vs. Tt Check Samples Cu
ppm
0
0.05
0.1
0.15
0.2
0.25
PLG
-01
25
PLG
-04
96
7
PLG
-14
55
8
PLG
-15
42
6
PLG
-14
55
5
PLG
-01
38
PLG
-16
93
4
PLG
-15
56
0
PLG
-07
45
2
PLG
-07
44
8
PLG
-14
55
0
PLG
-13
45
7
PLG
-16
82
1
PLG
-15
55
9
PLG
-16
83
8
Au
(p
pm
)
Sample Assays
Tt Check Sampling (Au)
au_ppm_Tt
au_ppm
0
50
100
150
200
250
300
PLG
-01
25
PLG
-04
96
7
PLG
-14
55
8
PLG
-15
56
0
PLG
-07
45
2
PLG
-16
93
4
PLG
-07
44
8
PLG
-15
42
6
PLG
-14
55
5
PLG
-16
83
8
PLG
-13
45
7
PLG
-15
55
9
PLG
-01
38
PLG
-16
82
1
PLG
-14
55
0
Ag
(pp
m)
Sample Assays
Tt Check Sampling (Ag)
ag_ppm_Tt
ag_ppm
0
200
400
600
800
1000
1200
1400
1600
1800
2000
PLG
-14
55
8
PLG
-01
25
PLG
-16
82
1
PLG
-14
55
5
PLG
-16
83
8
PLG
-04
96
7
PLG
-16
93
4
PLG
-15
56
0
PLG
-15
55
9
PLG
-14
55
0
PLG
-01
38
PLG
-07
44
8
PLG
-07
45
2
PLG
-15
42
6
PLG
-13
45
7
Pb
(p
pm
)
Sample Assays
Tt Check Sampling (Pb)
pb_ppm_Tt
pb_ppm
0
2000
4000
6000
8000
10000
12000
PLG
-01
25
PLG
-16
82
1
PLG
-14
55
8
PLG
-01
38
PLG
-16
83
8
PLG
-14
55
5
PLG
-14
55
0
PLG
-15
42
6
PLG
-16
93
4
PLG
-04
96
7
PLG
-13
45
7
PLG
-15
55
9
PLG
-15
56
0
PLG
-07
44
8
PLG
-07
45
2
Zn
(p
pm
)
Sample Assays
Tt Check Sampling (Zn)
zn_ppm_Tt
zn_ppm
0
100
200
300
400
500
600
700
800
PLG
-01
25
PLG
-14
55
8
PLG
-16
82
1
PLG
-14
55
5
PLG
-16
93
4
PLG
-01
38
PLG
-15
56
0
PLG
-14
55
0
PLG
-04
96
7
PLG
-16
83
8
PLG
-15
55
9
PLG
-07
44
8
PLG
-13
45
7
PLG
-15
42
6
PLG
-07
45
2
Cu
(p
pm
)
Sample Assays
Tt Check Sampling (Cu)
cu_ppm_Tt
cu_ppm
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December 2012 80
Cerro Los Gatos Assays
Tt also completed verification of the Cerro Los Gatos Zone assays by independent collection of 36 core samples (Table 12.7). Tt identified core intervals for verification assay and directed sawing, bagging, and labeling of each sample. Samples were prepared by sawed splits of half-core remaining after MPR sampling.
Table 12.7: Cerro Los Gatos Zone Sample Verification
Tetra Tech Minera Plata Real From To Width
Sample Number Drill hole Sample Number (m) (m) (m)
MPR02977 GA-02 PLG-10051 54.00 56.00 2.00
MPR03995 GA-06 PLG-10052 186.00 188.00 2.00
MPR04474 GA-08B PLG-10053 174.00 176.00 2.00
MPR04616 GA-09 PLG-10054 240.00 242.00 2.00
MPR04802 GA-11 PLG-10055 162.00 164.00 2.00
MPR-04862 GA-12 PLG-10056 232.00 234.00 2.00
MPR04966 GA-14 PLG-10057 260.00 262.00 2.00
MPR05317 GA-15 PLG-10058 302.00 303.34 1.34
MPR06041 GA-15B PLG-10059 330.00 332.00 2.00
MPR05552 GA-18 PLG-10060 268.00 269.60 1.60
MPR05563 GA-18 PLG-10061 287.60 289.60 2.00
MPR06583 GA-19 PLG-10062 377.00 379.00 2.00
MPR06840 GA-20 PLG-10063 308.00 310.00 2.00
PLG-12749 GA-72 PLG-10064 278.00 280.00 2.00
MPR07920 GA-25 PLG-10065 378.00 380.00 2.00
MPR07927 GA-25 PLG-10066 390.00 392.00 2.00
MPR08079 GA-26 PLG-10067 160.00 162.00 2.00
MPR08982 GA-27 PLG-10068 283.90 284.80 0.90
MPR27116 GA-31 PLG-10069 424.00 424.95 0.95
MPR27145 GA-31 PLG-10070 468.00 470.00 2.00
MPR27506 GA-33 PLG-10071 398.00 399.00 1.00
MPR-27706 GA-35 PLG-10072 400.00 402.00 2.00
MPR-27731 GA-36 PLG-10073 310.00 312.00 2.00
MPR-27748 GA-36 PLG-10074 336.00 338.00 2.00
MPR-28248 GA-39 PLG-10075 378.00 381.00 3.00
MPR-28288 GA-39A PLG-10076 360.00 362.00 2.00
MPR-28315 GA-39A PLG-10077 406.00 408.00 2.00
MPR-28568 GA-41 PLG-10078 394.60 396.60 2.00
MPR-28776 GA-44 PLG-10079 387.10 388.30 1.20
PLG-11276 GA-49 PLG-10080 238.00 240.00 2.00
PLG-11325 GA-50 PLG-10081 282.00 283.00 1.00
PLG-11423 GA-57 PLG-10082 256.00 258.00 2.00
PLG-12609 GA-62 PLG-10083 282.00 284.00 2.00
PLG-19825 GA-73 PLG-10084 314.00 316.00 2.00
PLG-20057 GA-80 PLG-10085 297.00 298.00 2.00
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As with sample verification conducted by Behre Dolbear, verification samples collected under the supervision of Tt were analyzed by ALS Chemex (Table 12.8). High grade silver samples were re-assayed by method similar to that routinely used by MPR.
Log-log comparison of MPR assay results vs. Tt verification results show generally good correlation (Figure 12.22 to 12.25). Correlation coefficients on the log-transformed data vary from a low of 0.943 for Zn, to 0.985 for Ag (Table 12.9) with a mean correlation of 0.967. Additional comparison (Figures 12.27 – 12.31) shows good correlation for Au and Ag; some variation is noted at higher concentrations of Cu, Pb, and Zn. Overall, comparison of MPR’s QA/QC duplicate sampling and Tt’s sample verification show very similar results
Based on independent sample verification of the Cerro Los Gatos Zone, Tt concludes the data collected by SSMC to be adequate for the purpose used in this technical report.
Table 12.8: Cerro Los Gatos Zone Sample Verification Assay Results
Values in database below reporting limit were reported as the detection limit
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Table 12.9: Cerro Los Gatos Check Sampling Correction Correlation Coefficients
Tetra tech Check Sampling
Correlation Coefficient "r" on Log Transformed Data
Tetra tech
Au Ag Pb Zn Cu
MP
R
Au 0.970
Ag 0.985
Pb 0.986
Zn 0.943
Cu 0.954
Figure 12.22: Cerro Los Gatos Zone Au (ppm) Check Samples vs. MPR Samples
Figure 12.23: Cerro Los Gatos Zone Ag (ppm) Check Samples vs. MPR Samples
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Figure 12.24: Cerro Los Gatos Zone Cu (ppm) Check Samples vs. MPR Samples
Figure 12.25: Cerro Los Gatos Zone Pb (ppm) Check Samples vs. MPR Samples
Figure 12.26: Cerro Los Gatos Zone Zn (ppm) Check Samples vs. MPR Samples
Figure 12.27: Cerro Los Gatos Zone Comparative Check Sampling (Au)
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Figure 12.28: Cerro Los Gatos Zone Comparative Check Sampling (Ag)
Figure 12.29: Cerro Los Gatos Zone Comparative Check Sampling (Cu)
Figure 12.30: Cerro Los Gatos Zone Comparative Check Sampling (Pb)
Figure 12.31: Cerro Los Gatos Zone Comparative Check Sampling (Zn)
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MINERAL PROCESSING AND METALLURGICAL TESTING 13.0
SSMC initiated the scoping level metallurgical test work for the Los Gatos polymetallic prospect located in Mexico. The primary objective of the scoping level study initiated in 2011 was to determine if the conventional processing scheme would recover lead, silver and zinc minerals.
The metallurgical test work was performed by Resource Development Inc. (RDi) located in Wheat Ridge, Colorado. The following two reports issued by RDi were reviewed and a brief summary of the results are presented in this section:
• Scoping Metallurgical Study for Minera Plata Real Los Gatos Samples, Mexico: Phase I
Report, RDi Report dated May 29, 2012.
• Scoping Metallurgical Study for Minera Plata Real Los Gatos Samples, Mexico: Phase II
Report, RDi Report dated July 3, 2012.
13.1 Phase I Study
RDi received drill core from twinned holes for five composite samples for the study. The metallurgical study undertaken included sample preparation and characterization, rougher flotation tests to evaluate collector, grind size, flotation time and open-circuit cleaner flotation tests to determine the product quality. The scope of the program was expanded to include mineralogy of the composite samples and Bond’s abrasion and ball mill work indices.
A summary of the testwork can be found in Appendix B of this report.
Phase I Test Result Highlights
The five composite samples investigated had variable amounts of lead, zinc and silver as shown in Appendix B, Table 13-1. The feed assays ranged between 0.52% and 4.62% for lead, 1.532% and 7.10% for zinc and 9.6 g/t and 289.7 g/t for silver.
The mineralogical study indicated that all composites had quartz as the primary gangue phase, galena as the primary lead mineral and sphalerite as the primary zinc mineral. Although the majority of the silver was present as argentite, native and ruby silver were also identified in some composites. Silver may also be present in tetrahedrite. The composites tested are metallurgically and spatially represented of the Cerro Los Gatos deposit.
The grindibility test data, presented in Appendix B, Table 13-2 indicate that the composite samples were generally abrasive and relatively hard.
Conventional sequential process flow sheet given in Appendix B, Figure 13-1 was evaluated. Rougher flotation test results, presented in Appendix B, Table 13-3, indicated that conventional sequential flotation process using sodium isopropyl xanthate (SIPX) as the collectors and zinc sulfate and sodium cyanide as the zinc depressants and copper sulfate as the zinc activator appears to work well for the composites. The finer the primary grind, the higher the silver recovery in the lead rougher concentrate. A primary grind size of P80 of 200 mesh was selected for cleaner flotation studies.
Two to three stages of cleaner flotation without regrind for lead and zinc circuits produced marketable-grade products in the open-circuit tests as shown in Appendix B, Tables 13-4 to 13-11. Tests show no known deleterious elements are present in the composites that could negatively affect the process. The open-circuit rougher-cleaner flotation test flow sheet is shown in Figure 13-1.
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Figure 13.1: Open-Circuit Rougher – Cleaner Flotation Test Flow Sheet
MILL FEED
GRIND
Pb ROUGHER FLOTATION
Zn CLEANER # 2 FLOTATION
Zn CLEANER # 3 FLOTATION
REGRIND
CONDITIONER
Zn CLEANER # 1 FLOTATION
ZINC ROUGHER FLOTATION
TAILING
FIGURE 13-2. OPEN-CIRCUIT ROUGHER- CLEANER FLOTATION TEST FLOWSHEET
CLEANER 1 TAILS
REGRIND
Pb CLEANER # 1 FLOTATION
Pb CLEANER # 2 FLOTATION
CLEANER 2 TAILS
Pb CLEANER # 3 FLOTATION
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Pb CONCENTRATE
CLEANER 1 TAILS
CLEANER 2 TAILS
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Zn CONCENTRATE
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13.2 Phase II Study
The primary objective of the Phase II test work was to determine the reproducibility of the small-scale (1kg) and large-scale (10kg) tests.
New composites were prepared from the remaining coarse samples stored at RDi for this phase of the study.
Phase II Test Result Highlights
The comparison of the head analyses of the new composites, old composites and calculated core assays are given in Table 13-12. The analyses of the new composites are closer to the old composites and vary significantly from the calculated core assays.
Based on the two phases of the scoping study, it is reasonable to conclude that the sequential flotation process with the selected reagent suite appears to work well for most of the composites but will need to be optimized for varying feed grades. It would be possible to produce marketable-grade lead and zinc concentrates from all composites except composite 4 which has very little lead or zinc minerals.
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MINERAL RESOURCE ESTIMATES 14.0
Tt has produced 3D solid (wire frame) models and block model estimations for Cerro Los Gatos, Amapola, and Esther deposit areas. New wire frames were produced for each area based on the available new drilling data. The resulting wire frames were then used to create an estimate block models. Section 14 details the specifics of each of the three updated resources.
A base case cutoff grade of 50 grams per Tonne equivalent Ag (g/t EqAg) has been selected and is highlighted in the tables below. At the 5-year trailing average Ag price ($22.30/Toz), this equates to approximately $35.85/Tonne which is deemed to be sufficient to define a “reasonable potential for economic extraction”, a necessary condition for the resource statement. As of the date of this report, no metallurgical recoveries have been determined for the Cerro Los Gatos, Amapola and Esther deposits, and 100% recovery is assumed for all metals.
Table 14.1: Calculation of Equivalent Ag Grade
Metal *Value in $/Toz(lb) Conversion Value in $/g
Ag $22.30 31.103g/toz $0.717/g
Au $1214.81/oz 31.103g/toz $39.06/g
Cu $3.29/lb 453.6g/lb $0.007/g
Pb $0.97lb 453.6g/lb $0.002/g
Zn $0.91/lb 453.6g/lb $0.002/g
Notes:
Toz = troy ounce
Lb = avoir
*Metal Prices are 5-year average ending September 30, 2012.
EqAg Formula:
Total $ for Ag+Au+Cu+Pb+Zn
Divide by Ag's price of $0.717/g to get EqAg in grams
The Los Gatos project wide indicated resources at a base case cutoff grade of 50 g/t EqAg include 6,370,000 Tonnes at 167 g/t Ag for 34,200,000 ounces of Ag. Table 14.2 lists project wide indicated resources from 50 to 100 g/t EqAg cutoffs. The Los Gatos project wide indicated resources are shown in Figure 14.1 as grade and tonnage curves at various cutoff grades.
Technical Report: Mineral Resources of Los Gatos Sunshine Silver Mines Corporation
The Los Gatos project wide inferred resources at a base case cutoff grade of 50 g/t EqAg include 19,120,000 Tonnes at 99 g/t Ag for 61,000,000 ounces of Ag. Table 14.3 lists project wide inferred resources from 50 to 100 g/t EqAg cutoffs. The Los Gatos project wide inferred resources are shown in Figure 14.2 as grade and tonnage curves at various cutoff grades.
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14.1 Cerro Los Gatos Zone
Cerro Los Gatos Drill Hole Database
Tt queried the database only for data identified in the drill hole collar file as belonging to the Los Gatos Zone and this data was used for the resource estimation. At the time of this report there were 124 drill holes (Appendix C) that are flagged as the Cerro Los Gatos prospect all of which contain assay data.
The Cerro Los Gatos assay database contains 7,763 assays for 14,778 m of sampling with an average length of 1.9 m with the majority of sampling at 2 m. All samples have been assayed by multi-element ICP analysis for 36 elements by ALS Chemex of Vancouver, as described in Section 11.0 of the report. Tt concludes that the database provided by MPR is sufficiently free of recognized errors and of excellent quality and organization.
Cerro Los Gatos Geologic Modeling
The Cerro Los Gatos Zone is represented by a vein system that has been modeled over 2,500 meters in strike length. Within the vein system, the mineralization is represented by three major mineralized zones, with lower grade interburden. The general trend of the mineralization appears to track the same as the local north-northwest structures and is offset by several additional faults crosscutting the mineralized zone. The main mineralized zone varies in thickness, from 1 meter, to approximately 50 meters (including lower grade interburden). The faults were previously modeled by David Rowe for internal work for MPR. These faults were compared to the current drilling data available and considered to be accurate for the use of modeling for this technical report. The model was created and estimated by fault block (Figure 14.3). Seven fault blocks were assigned to the vein solids and then used in the modeling process.
Tt’s geologic understanding of the Cerro Los Gatos vein is based on review of drill hole data, drill core and most importantly, discussions with MPR exploration staff regarding their interpretation of the mineralizing systems and controls at the Los Gatos Zone. Geologic interpretation began with MPR’s preparation of surface geologic maps showing structural trends and alteration patterns which guided the drill hole program. General trends established by the surface mapping are supported at depth by the drilling data collected and used for Tt’s geologic interpretation.
Following identification of mineralized downhole intervals of Ag, Pb, and Zn to corresponding veins, hanging wall and foot wall coordinates for each vein interval was determined. Hanging wall and foot wall distinctions for the Cerro Los Gatos zone were based on the general assumption that the Cerro Los Gatos mineral corridor has a strike of 302 degrees to the northeast and dip of 70 to 30 degrees to the east.
Using the hanging wall and foot wall points, interpolated point grids were produced using MapInfo® GIS software. One hanging wall and one foot wall point grid was produced for each vein using a minimum curvature algorithm, which is analogous to a 3D spline fit. The algorithm is a good estimation of the hanging wall and foot wall surface; however, the original hanging wall and foot wall points are not honored exactly. The interpolated grid points are removed where true data points are present. The corrected interpolated point grid for each hanging wall and foot wall is then used to create a triangulated surface using MicroMine®.
The resultant hanging wall and foot wall surface for each of the three veins were then clipped by a series of shapes. The clipping shapes are long-section perimeters based on criteria including thickness and distance from nearest sample.
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The thickness criteria is satisfied only where the difference between the hanging wall and foot wall surfaces is greater than or equal to 1 m. Thickness was considered simultaneously with vein interval selections so internally the veins are greater than 1 m and are only clipped on the outside edge of the vein limiting the extent of the vein away from observed data points.
The distance from the sample clipping perimeter is determined by a perimeter extending approximately 100 m from the furthest sample on the vein plane up and down dip and along strike. Internal distances between samples were permitted to be greater than 100 m, where vein continuity could be assumed.
Figure 14.3 shows offsetting faults and vein solids. Vein solid “a” is shown in red, “b” in green, “c” in cyan, “d” in orange and “e” in yellow. Vein solids were named by reference to the offsetting faults 1 to 7 and their reference to a, b, c, d, and e. Starting from the northwest, right in Figure 14.3, the solids were named 1 through 7; no solid was interpreted in fault block 6 due to absence of drilling. The primary solids of the Cerro Los Gatos zone are 5a, 5b, and 5c.
Within solids 5a and 5b high grade Pb and Zn combined solids were constructed. Figure 14.4 is the same perspective as Figure 14.3 but show internal solids 5aX, 5aY and 5bX. Vein solid “5aX” is shown in yellow, “5aY” in magenta, “5bX” in salmon.
Figure 14.3: Cerro Los Gatos Veins and Faults Blocks - Looking Southwest From Above
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Figure 14.4: Cerro Los Gatos Internal Zones 5aX, 5aY, and 5bX - Looking Southwest From Above
Figure 14.5: Cerro Los Gatos Veins and Faults Blocks - Looking West
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Cerro Los Gatos Assays and Composting
A total of 719 assays were identified within vein intervals for the Cerro Los Gatos zone, Table 14.4 details the assay statistics.
Table 14.4: Assay Statistics In Modeled Veins – Cerro Los Gatos
Metal Number of Samples Mean Minimum Maximum
Ag 719 162.0 g/t 0.5 g/t 4780 g/t
Au 718 0.29 g/t 0.005 g/t 33.1 g/t
Pb 719 1.6 % 0.001 % 20.0 %
Zn 719 3.4 % 0.002 % 30.0 %
Cu 719 0.079 % 0.0002 % 1.37 %
A total of 223 assays were identified within solids 5aX, 5aY and 5bX, Table 14.5 details the assay statistics.
Table 14.5: Assay Statistics In Modeled Veins 5aX, 5aY and 5bX – Cerro Los Gatos
Metal Number of Samples Mean Minimum Maximum
Ag 223 327.9 g/t 4.4 g/t 4780 g/t
Au 223 0.29 g/t 0.011 g/t 3.31 g/t
Pb 223 3.6 % 0.078 % 20.0 %
Zn 223 7.0 % 0.202 % 30.0 %
Cu 223 0.127 % 0.005 % 0.59 %
Assays intervals with the vein zones were reviewed using probability plots and log normal histograms and top cut values were determined, Table 14.6 details top cut values and samples cut.
Table 14.6: Assay Top Cutting – Cerro Los Gatos
Metal Top Cut Value Number of Samples Cut
Ag 1700 g/t 11
Au 3.4 g/t 3
Pb 13.5 % 8
Zn 20.4 % 13
Cu 0.7 % 4
Following top cutting raw assays were composited to a length of 2m across interpreted vein intervals only. Samples outside the interpreted veins or intervals less than 1m after compositing were not used for estimation.
Cerro Los Gatos Variography and Search Orientation
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Omni-directional and down hole natural log transformed variograms were calculated using assays from within the Cerro Los Gatos interpreted veins only. Variograms of sufficient quality were derived to establish a nugget and sill to facilitate a Kriged estimate.
The down hole variogram in conjunction with the omni-directional variogram were used to establish a relativized nugget at 28% of the sill, using a spherical model. The omni-directional variogram indicated a sill at a range of 125m. From 0 to 20 m a nested variogram with 0 nugget was used to better honor data locally.
Search orientation and anisotropy ratios were determined by the author using the physical properties of the mineralized body. Anisotropy of 125:82.5:25 was used. The search ellipse was orientated along an azimuth of 300, with a plunge of 6 along the main axis, and a plunge of 40 along the secondary axis. Figure 14.6 shows the search ellipse orientated along strike and down dip.
Figure 14.6: Search Ellipse, Along Strike and Down Dip – Cerro Los Gatos
Cerro Los Gatos Resources Estimation and Categorization
Grade estimation of the Cerro Los Zone resource was completed with MicroMine® using ordinary Kriging. A single Kriging pass and secondary nearest neighbor inferred pass was made for each vein within each of the 6 fault blocks.
A total of 21 individual block models were generated from a parent model of the Cerro Los Gatos zone with a block size of 10x10x5. Each block in the parent model was queried for its portion that resided within each vein solid. Each block was indexed by column, row, level, vein (a, b, c, d, e) and fault block (1-7).
Each of the 21 models was estimated separately. Samples only with the same identifier as the block model being estimated were used in the estimate for that model. Samples from veins with the same vertical identifier (a, b, c, d, e) were permitted to estimate using samples with the same identifier reside across fault contacts but were not permitted to estimate using samples with a different vertical identifier. For instance, a block within solid 1a could estimate its grade using assay intervals flagged as 2a but not 1b or 2b.
Blocks estimated within the internal solids 5aX, 5aY and 5bX were only permitted to use assay intervals within their respective solids. After blocks from 5aX, 5aY, and 5bX were estimated there portion within the solids was used to determine their weight averaged contribution to a
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parent block within the greater solid. For instance estimates made for a block that was fully contained within solid 5a and 50% with 5aX would be equally weight averaged.
Kriging was performed on all five vertical grade zones within the deposit. The anisotropic search ratio of the search ellipse used is 125:82.5:25. A maximum of two composite values per drill hole per block estimate were permitted, along with an absolute maximum of ten points for each block estimate.
Within the first pass all samples estimated were initially assigned to the inferred class. Then any block that was estimated from the first pass from samples derived from at least two drill holes and had a relative Kriging error of less than 1.45 was then assigned to the indicated class.
A second nearest neighbor pass with a spherical range of 75 m used the block values estimated in the first pass cut to the 90th percentile as its source data. Cut values from the blocks were used to prevent high-grade influencing from within the higher grade core of the deposit, and provide a more moderated estimate on the extents of the modeled veins. Both passes were constrained inside of the 3D mineralized solids, therefor the nearest neighbor pass was subject to the 100 m down-dip and along strike extension of the solids.
The first and second pass routines were then preformed on the remaining metals (Au, Cu, Pb and Zn) in the same manner as with Ag.
Figure 14.7 shows all vein models combined, green blocks are classified as indicated and blue blocks are classified as inferred.
Figure 14.7: Cerro Los Gatos Veins Block Classification - Looking Southwest From Above
Cerro Los Gatos Specific Gravity
Specific gravity measurements were provided by MPR with the project database. Specific gravities were measured and recorded on site by MPR staffing using an epoxy dip air weight/water weight specific gravity method. Samples are taken by MPR with consideration of mineralized zones and provide good coverage to estimate the density of the veins of the Cerro Los Gatos Zone.
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Measured specific gravity samples that fell inside the modeled vein solids were flagged and used for multi regression analysis. A multi regression was calculated for Ag, Au, Pb, Zn, and Cu. The regressions from metals with less than 95% confidence determined by the p-value were rejected, for Cerro Los Gatos only Pb and Zn were considered as contributors to the linear regression. A regression factor for Pb grade ppm plus Zn grade ppm of 0.000003 and a base specific gravity of 2.6 was used to determine specific gravity for each composite. Specific gravity composites were then Kriged in the same manner as Ag, Au, Cu, Pb, Zn to determine the Specific gravity of each block.
Cerro Los Gatos Deposit Resource Estimate
The Cerro Los Gatos Deposit indicated resources at a base case cutoff grade of 50 g/t EqAg include 5,270,000 Tonnes at 179 g/t Ag for 30,400,000 ounces of Ag. Table 14.7 lists the Cerro Los Gatos Deposit indicated resources from 50 to 100 g/t EqAg cutoffs. The Cerro Los Gatos Deposit indicated resources are shown in Figure 14.8 as grade and tonnage curves at various cutoff grades.
Table 14.7: Estimated Indicated Resources – Cerro Los Gatos Deposit
Cutoff EqAg
g/t Tonnes
EqAg g/t
Ag g/t Ag
Ounces Au g/t
Pb % Zn % Cu %
50 5,270,000 382 179 30,400,000 0.31 2.0 4.2 0.1
60 5,180,000 388 182 30,300,000 0.32 2.0 4.3 0.1
75 5,060,000 395 186 30,200,000 0.32 2.1 4.4 0.1
100 4,800,000 412 193 29,800,000 0.33 2.1 4.5 0.1
Note1: Figures may not total due to rounding of significant figures.
Note2: Indicated resources are equivalent to US SEC Industry Guide 7 “Mineralized Material”.
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Figure 14.8: Grade Tonnage Curve Indicated Cerro Los Gatos Deposit
The Cerro Los Gatos Deposit inferred resources at a base case cutoff grade of 50 g/t EqAg include 10,200,000 Tonnes at 99 g/t Ag for 32,400,000 ounces of Ag. Table 14.8 lists the Cerro Los Gatos Deposit inferred resources from 50 to 100 g/t EqAg cutoffs. The Cerro Los Gatos Deposit inferred resources are shown in Figure 14.9 as grade and tonnage curves at various cutoff grades.
Table 14.8: Estimated Inferred Resources – Cerro Los Gatos Deposit
Cutoff EqAg
g/t Tonnes
EqAg g/t
Ag g/t Ag
Ounces Au g/t
Pb % Zn % Cu %
50 10,200,000 272 99 32,400,000 0.17 1.7 3.6 0.1
60 9,910,000 278 101 32,100,000 0.17 1.8 3.7 0.1
75 9,510,000 287 104 31,700,000 0.17 1.8 3.8 0.1
100 8,540,000 310 111 30,500,000 0.18 2 4.1 0.1
Note1: Figures may not total due to rounding of significant figures.
Note2: Inferred resources are not defined or recognized by US SEC Industry Guide 7.
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Figure 14.9: Grade Tonnage Curve Inferred Cerro Los Gatos Deposit
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14.2 Amapola Zone
Amapola Drill Hole Database
Tt queried the database only for data identified in the drill hole collar file as belonging to the Amapola Zone and created a subset used for this resource estimation. At the time of this report there were 79 drill holes (Appendix C) that had the prefix of “AM” all of which contain assay data.
The Amapola assay database contains 6,655 assays for 12,704.6 m of sampling with an average length of 1.9 m with the majority of sampling at 2 m. All samples have been assayed by multi-element ICP analysis for 36 elements by ALS Chemex of Vancouver, as described in Section 11.0 of the 2011 Behre Dolbear Report. Tt concludes that the database provided by MPR is free of recognized errors and of excellent quality and organization.
Amapola Geologic Modeling
The Amapola Zone contains several vein systems at varying degrees of strike and dip that are the target of MPR exploration. Currently four of these veins comprise adequate Ag grade and thickness to be considered as mineralized material and geologically modeled. The four veins include the Albita, Elizabeth, Cascajal, and Julia.
The resource is principally focused on the Albita and Elizabeth veins which together comprise a “corridor” of mineralization up to ~50 m thick. The Albita and Elizabeth mineral corridor is a general zone of alteration, where distinctions between the Albita and Elizabeth veins are difficult to make without the assistance of chemical assay and 3D review in advanced mining software. The remaining veins were, for the purposes of this interpretation, considered with a lower level of geologic confidence. The interpretation of the Cascajal and Julia veins are based on fewer data points and are in general thinner and of lower average grade.
Tt’s geologic understanding of the Amapola veins are based on review of drill hole data, drill core and most importantly discussions with MPR exploration staff regarding their interpretation of the mineralizing systems and controls at the Amapola Zone. Geologic interpretation began with MPR’s preparation of surface geologic maps showing structural trends and alteration patterns which guided the drill hole program. General trends established by the surface mapping are supported at depth by data collected from the 79 drill holes used in Tt’s geologic interpretation.
Planar relationships between drill hole intercepts of anomalous values of Ag, Pb, Zn were used as the main indicators defining the various veins. Ag is the principal element for defining mineralized downhole intercepts at Amapola. Despite a positive correlation, unlike the Cerro Los Gatos Zone, the Amapola Zone has disproportionately low base metal content. Lack of base metal grade negated the use of metal price equivalency at the geologic interpretation stage, but is considered in the final calculation of resources.
Ca and Ba have also been identified by MPR staff to be indicators of high grade mineralization and have a correlation with Ag relative to elevation at the highest values of Ag; these variables assisted in defining the separation between the Albita and Elizabeth veins. Unique to Amapola, Ca concentrations trend inversely and Ba trends directly with change in elevation.
Following identification of mineralized downhole intervals of Ag and assigning those intervals to corresponding planar veins, hanging wall and foot wall coordinates for each downhole interval were determined. Hanging wall and foot wall distinctions for the Albita and Elizabeth veins were based on the general assumption that the Albita and Elizabeth mineral corridor has a strike of 351 degrees and a west dip of 88 degrees. In places the dip is vertical or “overturned”, however
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hanging wall and foot wall distinctions are kept consistent with the foot wall as the east boundary and the hanging wall the west boundary.
Using the hanging wall and foot wall points, interpolated point grids were produced using MapInfo® GIS software. One hanging wall and one foot wall point grid was produced for each vein using a minimum curvature algorithm, which is analogous to a 3D spline fit. The algorithm is a good estimation of the hanging wall and foot wall surface; however, the original hanging wall and foot wall points are not honored exactly. The interpolated grid points are removed where true data points are present. The corrected interpolated point grid for each hanging wall and foot wall is then used to create a triangulated surface using MicroMine®.
The resultant hanging wall and foot wall surface for each of the four veins were then clipped by a series of shapes. The clipping shapes are long-section perimeters based on criteria including thickness, distance from nearest sample.
The thickness criteria is satisfied only where the difference between the hanging wall and foot wall surfaces is greater than or equal to 1 m. Thickness was considered simultaneously with vein interval selections so internally the veins are generally greater than 1 m and are only clipped on the outside edge of the vein limiting the extent of the vein away from observed data points.
The distance from the sample clipping perimeter is determined by a perimeter extending approximately 100 m from the furthest sample on the vein plane up and down dip and along strike. Internal distances between samples were permitted to be greater than 100 m.
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Technical Report: Mineral Resources of Los Gatos Sunshine Silver Mines Corporation
A total of 235 assays were identified within vein intervals for the Cerro Los Gatos zone, Table 14.9 details the assay statistics.
Table 14.9: Assay Statistics In Modeled Veins – Amapola
Metal Number of Samples Mean Minimum Maximum
Ag 235 91.8 g/t 0.5 g/t 1450 g/t
Au 235 0.08 g/t 0.005 g/t 0.61 g/t
Pb 235 0.20 % 0.001 % 13.7 %
Zn 235 0.38 % 0.001 % 19.4 %
Cu 235 0.025 % 0.0007 % 0.8 %
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Assays intervals with the vein zones were reviewed using probability plots and log normal histograms and top cut values were determined, Table 14.10 details top cut values and samples cut.
Table 14.10: Assay Top Cutting – Amapola
Metal Top Cut Value Number of Samples Cut
Ag 743 g/t 2
Au 0.51 g/t 2
Pb 0.88 % 5
Zn 2.4 % 6
Cu 0.24 % 2
Following top cutting raw assays were composited to a length of 2m across interpreted vein intervals only. Samples outside the interpreted veins or intervals less than 1m after compositing were not used for estimation.
Amapola Variography and Search Orientation
Geostatistical modeling of spatial relationships of the Ag assay data was completed by indicator variogram analysis. Indicator variograms were calculated on assays from within the Albita and Elizabeth mineralized corridor, encompassing the high grade within the modeled veins but also with lower grade assays present within the corridor. Incorporating the lower grades was essential for the reliability and usefulness of the variograms. Individual variograms were generated along strike, down dip, and down hole of the Albita and Elizabeth mineral corridor and were applied to the subordinate veins which contain limited data.
The down hole variogram in conjunction with along strike and down dip indicator variograms were used to establish a relativized nugget at 45% of the sill, using a spherical model. The indicator variogram indicated a sill at 130 m. The range was limited to 100 m for the Cascajal and Julia veins.
Indicator variograms calculated for Ag were applied to the additional metals estimated in this resource; separate variograms were not calculated for Au, Cu, Pb and Zn.
Search orientation and anisotropy ratios were determined by the author using the physical properties of the mineralized body. Anisotropy of the search ellipse was 130:78, the third axis was the same dimension as the primary access to correct for undulations in the mostly planar veins.. The search ellipse was orientated along an azimuth of 350, with a plunge of -16 along the main axis, and a plunge of -74 along the secondary axis. A large third axis was permissible because the estimate was contained by a vein solid in the third axis direction and the number of samples per drill hole was limited to two.
Amapola Resources Estimation and Categorization
Grade estimation of the Amapola Zone resource was completed with MicroMine® using ordinary Kriging. A single Kriging pass was made on each of the four veins and secondary nearest neighbor inferred pass was made only for the Albita and Elizabeth veins.
A total of four individual block models were generated from a parent model of the Amapola zone with a block size of 5x10x10. Each block in the parent model was queried for its portion that resided within each vein solid. Each block was indexed by column, row, level, and vein.
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Each of the four models was estimated separately. Samples only with the same vein identifier as the block model being estimated were used in the estimate for that model.
A maximum of two composite values per drill hole per block estimate were permitted, along with an absolute maximum of ten points for each block estimate.
Within the first pass all samples estimated were initially assigned to the inferred class. Then any block that was estimated from the first pass from samples derived from at least two drill holes and had a relative Kriging error of less than 1.04 was then assigned to the indicated class. Only blocks within the Albita and Elizabeth solids were eligible to be classified as indicated.
A second nearest neighbor pass with a spherical range of 50 m used the block values estimated in the first pass cut to the 90th percentile as its source data. Cut values from the blocks were used to prevent high-grade influencing from within the higher grade core of the deposit, and provide a more moderated estimate on the extents of the modeled veins. Both passes were constrained inside of the 3D mineralized solids, therefor the nearest neighbor pass was subject to the 100 m down-dip and along strike extension of the solids.
The first and second pass routines were then preformed on the remaining metals (Au, Cu, Pb and Zn) in the same manner as with Ag.
Figure 14.12 shows all vein models combined, green blocks are classified as indicated and blue blocks are classified as inferred.
Figure 14.12: Amapola Vein Block Classification Looking West
Amapola Specific Gravity
Specific gravity measurements, which were collected on site by MPR staffing using an epoxy dip air weight/water weight specific gravity method, were provided by MPR with the project database. Samples are taken by MPR with consideration of mineralized zones and provide good coverage to estimate the density of the veins of the Amapola Zone.
The samples that fall inside the mineralized zone were then flagged. The flagged samples were then used for multi element statistical evaluation. A linear fit regression was performed to determine which of the elements contributed to the specific gravity of the sample. For Amapola,
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December 2012 108
the contributing metals for specific gravity were Silver and Zinc. The other metals did not show a statistically significant contribution to the specific gravity for this zone. For Amapola, the regression factor for Silver is 0.0003209 and 0.0000050 for Zinc. The base specific gravity was 2.4870111. These values were then used to determine a specific gravity value for each composite. The specific gravity values were then Kriged along with the other elements in the model.
Amapola Deposit Resource Estimate
The Amapola Deposit indicated resources at a base case cutoff grade of 50 g/t EqAg include 480,000 Tonnes at 101 g/t Ag for 1,600,000 ounces of Ag. Table 14.11 lists the Amapola Deposit indicated resources from 50 to 100 g/t EqAg cutoffs. The Amapola Deposit indicated resources are shown in Figure 14.13 as grade and tonnage curves at various cutoff grades.
The Amapola Deposit inferred resources at a base case cutoff grade of 50 g/t EqAg include 5,980,000 Tonnes at 106 g/t Ag for 20,300,000 ounces of Ag. Table 14.12 lists the Amapola Deposit inferred resources from 50 to 100 g/t EqAg cutoffs. The Amapola Deposit inferred resources are shown in Figure 14.14 as grade and tonnage curves at various cutoff grades.
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14.3 Esther Zone
Esther Drill Hole Database
Tt queried the database only for data identified in the drill hole collar file as belonging to the Esther Zone and this data was used for the resource estimation. At the time of this report there were 42 drill holes (Appendix C) that had the prefix of “ES” all of which contain assay data. Drill hole ES-42 is the cut off for this report.
The Esther assay database contains 4,959 assays for 9,715.07 m of sampling with an average length of 1.9 m with the majority of sampling at 2 m. All samples have been assayed by multi-element ICP analysis for 36 elements by ALS Chemex of Vancouver, as described in Section 11.0 of the report. Tt concludes that the database provided by MPR is free of recognized errors and of excellent quality and organization.
Esther Geologic Modeling
The Esther Zone contains several vein systems at varying degrees of strike and dip that are the target of MPR exploration. Tt modeled one main vein, as well as two secondary veins that appear to be associated with the main vein. The main vein was modeled with higher confidence than the two secondary veins. The main vein is approximately 1 to 10 m thick.
Tt’s geologic understanding of the Esther vein is based on review of drill hole data, drill core and most importantly discussions with MPR exploration staff regarding their interpretation of the mineralizing systems and controls at the Esther Zone. Geologic interpretation began with MPR’s preparation of surface geologic maps showing structural trends and alteration patterns which guided the drill hole program. General trends established by the surface mapping are supported at depth by the drilling data collected and used for Tt’s geologic interpretation.
Following identification of mineralized downhole intervals of Ag and assigning those intervals to corresponding planar veins, hanging wall and foot wall coordinates for each downhole interval were determined. Hanging wall and foot wall distinctions for the Esther zone were based on the general assumption that the Esther mineral corridor has a strike of 110 degrees and a southwest dip of -57 degrees.
Using the hanging wall and foot wall points, interpolated point grids were produced using MapInfo® GIS software. One hanging wall and one foot wall point grid was produced for each vein using a minimum curvature algorithm. The algorithm is a good estimation of the hanging wall and foot wall surface; however, the original hanging wall and foot wall points are not honored exactly. The interpolated grid points are removed where true data points are present. The corrected interpolated point grid for each hanging wall and foot wall is then used to create a triangulated surface using MicroMine®.
The resultant hanging wall and foot wall surface for each of the three veins were then clipped by a series of shapes. The clipping shapes are long-section perimeters based on criteria including thickness and distance from nearest sample.
The thickness criteria is satisfied only where the difference between the hanging wall and foot wall surfaces is greater than or equal to 1 m. Thickness was considered simultaneously with vein interval selections so internally the veins are generally greater than 1 m and are only clipped on the outside edge of the vein limiting the extent of the vein away from observed data points. The thickness criteria was relaxed in areas of the Esther Offset and Esther Footwall veins, these vein were permitted to be a minimum of 0.5m thick in some areas as a result all blocks from these veins were restricted to inferred.
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December 2012 112
The distance from the sample clipping perimeter is determined by a perimeter extending approximately 100 m from the furthest sample on the vein plane up and down dip and along strike. Internal distances between samples were permitted to be greater than 100 m.
Figure 14.15: Esther Zone Wireframes Looking Northwest
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December 2012 113
Figure 14.16: Esther Zone Wireframes Looking North
Esther Assays and Composting
A total of 88 assays were identified within vein intervals for the Esther Deposit, Table 14.13 details the assay statistics.
Table 14.13: Assay Statistics In Modeled Veins – Esther
Metal Number of Samples Mean Minimum Maximum
Ag 88 94.8 g/t 1 g/t 857 g/t
Au 74 0.10 g/t 0.005 g/t 0.93 g/t
Pb 88 1.0 % 0.031 % 7.7 %
Zn 88 2.2 % 0.031 % 17.4 %
Cu 88 0.037 % 0.0006 % 0.63 %
Assays intervals with the vein zones were reviewed using probability plots and log normal histograms and top cut values were determined, Table 14.14 details top cut values and samples cut.
Table 14.14: Assay Top Cutting – Esther
Metal Top Cut Value Number of Samples Cut
Ag 480 g/t 2
Au 1.0 g/t 0
Pb 5.0 % 5
Zn 7.8 % 4
Cu 0.22 % 1
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December 2012 114
Following top cutting raw assays were composited to a length of 2m across interpreted vein intervals only. Samples outside the interpreted veins or intervals less than 1m after compositing were not used for estimation.
Esther Variography and Search Orientation
Geostatistical modeling of spatial relationships of the Ag assay data was completed by indicator variogram analysis. Indicator variograms were calculated on assays from within the three main veins and the mineralized corridor, encompassing the high grade with in the modeled veins but also with lower grade assays present within the corridor. Individual variograms were generated along strike, down dip, and down hole of the mineral corridor.
The down hole variogram in conjunction with along strike and down dip indicator variograms were used to establish a relativized nugget at 37% of the sill, using a spherical model. The indicator variogram indicated a sill at 130 m.
Indicator variograms calculated for Ag were applied to the additional metals estimated in this resource; separate variograms were not calculated for Au, Cu, Pb and Zn.
Search orientation and anisotropy ratios were determined by the author using the physical properties of the mineralized body. Anisotropy of the search ellipse was 130:65:26. The search ellipse was orientated along an azimuth of 110, with a plunge of 8 along the main axis, and a plunge of -64 along the secondary axis.
Esther Resources Estimation and Categorization
Grade estimation of the Esther Zone resource was completed with MicroMine® using ordinary Kriging. An initial Kriging pass was made on each of the three veins and followed by secondary nearest neighbor inferred pass.
A total of three individual block models were generated from a parent model of the Esther zone with a block size of 10x5x10. Each block in the parent model was queried for its portion that resided within each vein solid. Each block was indexed by column, row, level, and vein.
Each of the three models was estimated separately. Samples only with the same vein identifier as the block model being estimated were used in the estimate for that model.
A maximum of two composite values per drill hole per block estimate were permitted, along with an absolute maximum of ten points for each block estimate.
Within the first pass all samples estimated were initially assigned to the inferred class. Then any block that was estimated from the first pass from samples derived from at least two drill holes and had a relative Kriging error of less than 1.25 was then assigned to the indicated class. Only blocks within the Main vein solid were eligible to be classified as indicated.
A second nearest neighbor pass with a spherical range of 50 m used the block values estimated in the first pass cut to the 90th percentile as its source data. Cut values from the blocks were used to prevent high-grade influence from within the higher grade core of the deposit, and provide a more moderated estimate on the extents of the modeled veins. Both passes were constrained inside of the 3D mineralized solids, therefor the nearest neighbor pass was subject to the 100 m down-dip and along strike extension of the solids.
The first and second pass routines were then preformed on the remaining metals (Au, Cu, Pb and Zn) in the same manner as with Ag.
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Figure 14.17 shows all vein models combined, green blocks are classified as indicated and blue blocks are classified as inferred.
Figure 14.17: Esther Zone Block Classification Looking North
Esther Specific Gravity
Specific gravity measurements, which were collected on site by MPR staffing using an epoxy dip air weight/water weight specific gravity method, were provided by MPR with the project database. Samples are taken by MPR with consideration of mineralized zones and provide good coverage to estimate the density of the veins of the Esther Zone.
The samples that fall inside the mineralized zone were then flagged. The flagged samples were then used for multi element statistical evaluation. A linear fit regression was performed to determine which of the elements contributed to the specific gravity of the sample. For Esther, the contributing metal for specific gravity was and Zinc. The other metals did not show a statistically significant contribution to the specific gravity for this zone. For Esther, the regression factor 0.00000244 for Zinc. The base specific gravity was 2.53515226. These values were then used to determine a specific gravity value for each composite. The specific gravity values were then Kriged along with the other elements in the model.
Esther Deposit Resource Estimate
The Esther Deposit indicated resources at a base case cutoff grade of 50 g/t EqAg include 620,000 Tonnes at 113 g/t Ag for 2,300,000 ounces of Ag. Table 14.15 lists the Esther Deposit indicated resources from 50 to 100 g/t EqAg cutoffs. The Esther Deposit indicated resources are shown in Figure 14.18 as grade and tonnage curves at various cutoff grades.
Technical Report: Mineral Resources of Los Gatos Sunshine Silver Mines Corporation
The Esther Deposit inferred resources at a base case cutoff grade of 50 g/t EqAg include 2,940,000 Tonnes at 87 g/t Ag for 8,200,000 ounces of Ag. Table 14.16 lists the Esther Deposit inferred resources from 50 to 100 g/t EqAg cutoffs. The Esther Deposit inferred resources are shown in Figure 14.19 as grade and tonnage curves at various cutoff grades.
The author is unaware of any environmental, permitting, legal, title, taxation, socio-economic, marketing, political, or other relevant factors which the mineral resource estimate could be materially affected by.
0
50
100
150
200
250
300
350
400
450
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
0 50 100 150 200 250 300
g/T
To
nn
es
(x1
00
0)
Cutoff EqAg g/T
Grade Tonnage Curve
Inferred Resource Esther
Tonnes
EqAg
Ag
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December 2012 118
MINERAL RESERVE ESTIMATES 15.0
This section is for advanced stage properties only and does not apply.
MINING METHODS 16.0
This section is for advanced stage properties only and does not apply.
RECOVERY METHODS 17.0
This section is for advanced stage properties only and does not apply.
PROJECT INFRASTRUCTURE 18.0
This section is for advanced stage properties only and does not apply.
MARKET STUDIES AND CONTRACTS 19.0
This section is for advanced stage properties only and does not apply.
ENVIRONMENTAL STUDIES, PERMITTING, AND 20.0SOCIAL/COMMUNITY IMPACT
This section is for advanced stage properties only and does not apply.
CAPITAL AND OPERATING COSTS 21.0
This section is for advanced stage properties only and does not apply.
ECONOMIC ANALYSIS 22.0
This section is for advanced stage properties only and does not apply.
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December 2012 119
ADJACENT PROPERTIES 23.0
The only exploration program in the immediate area surrounding the Los Gatos project was conducted by VVC Exploration on the Santa Valeria project. The Santa Valeria project is now owned by MPR. The Santo Valeria project located adjacent to the southeast side of the Los Gatos project concession block and is considered as separate project. Previously published accounts by VVC Exploration indicate that they have conducted mapping, sampling and have completed a 7-hole drill program. The highlight of the drilling was a 1.5m apparent thickness interval containing 145 grams of silver per tonne. Since the sale of the project to MPR the details of VVC Exploration’s work at the Santa Valeria project are no longer publically available. As the current owner MPR is the source of this data.
The author has been unable to verify the information relating to the Santa Valeria project and the information provided is not necessarily indicative of the mineralization on the property that is the subject of this technical report.
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December 2012 120
OTHER RELEVANT DATA AND INFORMATION 24.0
During 2011 and 2012, MPR initiated a number of activities to characterize additional data for the Cerro Los Gatos deposit area. These activities included:
• The conceptual design of an exploration decline in order to access the mineralized zone underground for additional exploration drilling,
• Geotechnical drilling along the designed trace of the potential exploration decline, • Hydrological studies of the Cerro Los Gatos drainage basin, • Installation of a meteorological station for the collection of atmospheric data, • Environmental impact studies for the deposition of waste rock material from the potential
exploration decline, • Construction of an explosives storage facility for the facilitation of the proposed
exploration decline which would be required for explosives permitting.
The author anticipates, when finalized, the results of the activities listed above will be made available in subsequent technical reports filed by the company.
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December 2012 121
INTERPRETATIONS AND CONCLUSIONS 25.0
Tt’s review of supplied data and site visits have shown exploration activities at the Los Gatos project meet or exceed standard practices and contribute to the reliability of resource estimation.
The Los Gatos project represents a new epithermal silver lead zinc district with three distinct resource areas. In addition to resource areas ten other areas within MPR’s holdings show positive drill results and warrant further exploration. Drilling has been conducted on only a small portion of the total land holdings. Initial exploration results on satellite prospects merit further drilling with the potential for the identification of additional mineral resource(s) to accompany that of Cerro Los Gatos, Esther, and Amapola. It is important to note that the three known resource areas show poor outcrop and contain resource grade mineralization several meters below the surface. Digitized surface mapping conducted by MPR indicates several kilometers of veining and mineralization that has yet to be drill tested.
The author is not aware of any significant risks uncertainties that could reasonably be expected to affect the reliability or confidence in the exploration information or mineral resource estimates.
Technical Report: Mineral Resources of Los Gatos Sunshine Silver Mines Corporation
December 2012 122
RECOMMENDATIONS 26.0
Tt first recommends that MPR place additional drill holes using Tt’s resource models to target areas of high grade inferred mineralization, and attempt to further increase indicated resources. In addition Tt would recommend similar techniques be used to attempt to convert indicated resources to measured resources. Tt cannot guarantee additional drilling will convert current resources to a higher classification.
Second, Tt recommends that MPR commence a Preliminary Economic Assessment (PEA) given the size and continuity of the current indicated and inferred mineralization. In conjunction with a PEA, MPR should commence necessary engineering and environmental analysis to begin to address pre-feasibility.
Third, Tt recommends that MPR continue to explore prospect areas with limited drilling that have shown indications of mineralization in drill core and also drill in areas identified by surface mapping that are currently untested.
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December 2012 123
REFERENCES 27.0
Baca Carreon, Julio Cesar (1964), Informe Preliminar de Reconocimiento de los Lotes Mineros El Tren y
Margarita, Servicio Geologico Mexican Public archives report.
Buchanan, Larry, 2010, Internal Minera Plata Real Reports.
Byington, Craig (2010), Preliminary Geological Evaluation of the Guadalupe area, Internal Company Report
Diaz, Bouchot y Raya, Abogados (2009), "Legal Title Opinion and Related Matters to the Mining
Concessions," Letter to Minera Plata Real dated September 21, 2009 by Diaz, Bouchot y Raya, a
Law firm based in Mexico City
Ferrari, Luca, Valencia-Moreno, Martin and Bryan, Scott (2005), Magmatismo y tectonica en la Sierra Madre Occidental y su relacion con la evolucion de la margen occidental de Norteamerica, BOLETiN DE LA SOCIEDAD GEOLOGICA MEXICANA VOLUMEN CONMEMORATIVO DEL CENTENARIO TEMAS SELECTOS DE LA GEOLOGiA MEXICANA TOMO LVII, NUM. 3, 2005, P. 343-378
Islas, Jorge (2007), Proyecto Los Gatos Internal Company Report
McDowell, Fred W. (2007), Geologic Transect Across the Northern Sierra Madre Occidental Volcanic Field, Chihuahua and Sonora, Mexico, The Geological Society of America Digital Map and Chart Series 6
Nelson, Eric 2007, Structural Geological Analysis of the Los Gatos District Chihuahua, Mexico, Internal Company Report
Pyle, P (2010), Los Gatos Project Background Information, Internal Company Report
Ramirez, Enrique (1976), Informe Geologico de la Mina Santa Rita, Servicio Geologico Mexican archival report
Rowe, David, (2010), Proyecto Los Gatos Internal Company Report Rowearth Consulting. Rollingbay, Washington
Starling, Tony, (2010), Structural Review of the Etna, Gatos, and Zaragoza projects, Chihuahua, Mexico, Internal Company Report
Behre Dolbear, (2011), (NI) 43-101 Independent Technical Report of the Los Gatos Exploration Project
Tetra Tech, (2012) (NI) 43-101 Technical Report Addendum: Mineral Resource of the Amapola Zone
Technical Report: Mineral Resources of Los Gatos Sunshine Silver Mines Corporation
December 2012 124
ILLUSTRATIONS 28.0
All figures, tables and illustrations have been included in their respective sections.
13. MINERAL PROCESSING AND METALLURGICAL TESTING – LOS GATOS PROJECT Sunshine Silver Mines Corporation initiated the scoping level metallurgical testwork for the Los Gatos polymetallic prospect located in Mexico. The primary objective of the scoping level study initiated in 2011 was to determine if the conventional processing scheme would recover lead, silver and zinc minerals. The metallurgical testwork was performed by Resource Development Inc. (RDi) located in Wheat Ridge, Colorado. The following two reports issued by RDi were reviewed and a brief summary of the results are presented in this section:
• Scoping Metallurgical Study for Minera Plata Real Los Gatos Samples, Mexico: Phase I
Report, RDi Report dated May 29, 2012.
• Scoping Metallurgical Study for Minera Plata Real Los Gatos Samples, Mexico: Phase II
Report, RDi Report dated July 3, 2012.
13.1 Phase I Study RDi received drill core from twinned holes for five composite samples for the study. The metallurgical study undertaken included sample preparation and characterization, rougher flotation tests to evaluate collector, grind size, flotation time and open-circuit cleaner flotation tests to determine the product quality. The scope of the program was expanded to include mineralogy of the composite samples and Bond’s abrasion and ball mill work indices. The highlights of the test results indicate the following:
• The five composite samples investigated had variable amounts of lead, zinc and silver
as shown in Table 13-1. The feed assays ranged between 0.52% and 4.62% for lead,
1.532% and 7.10% for zinc and 9.6 g/t and 289.7 g/t for silver.
• The mineralogical study indicated that all composites had quartz as the primary gangue
phase, galena as the primary lead mineral and sphalerite as the primary zinc mineral.
Although the majority of the silver was present as argentite, native and ruby silver were
also identified in some composites. Silver may also be present in tetrahedrite.
Table 13-1. Head Analyses of Composite Samples
Assay Composite No.
1 2 3 4 5
Au, g/t 0.453 0.202 0.175 0.806 0.185
Ag, g/t 225.3 141.2 9.6 289.7 53.9
Cu, % 0.0944 0.0824 0.127 0.316 0.0974
Pb, % 1.622 2.168 4.620 0.540 1.799
Zn, % 3.62 5.08 7.10 1.532 4.050
STotal, % 3.27 1.08 3.67 2.10 3.18
SSulfide, % 3.27 1.08 3.67 2.07 3.18
SSulfate, % <0.01 <0.01 <0.02 0.03 <0.02
• The grindibility test data, presented in Table 13-2 indicate that the composite samples
were generally abrasive and relatively hard.
Table 13.2. Crushability, Abrasion, Rod Mill and Ball Mill Work Indices for the Composite Samples
Composite No. Ai CWi (kwh/st) RM Wi (kwh/st) BM Wi (kwh/st)
1 0.3467 8.96 13.53 17.86
2 0.4080 10.38 13.91 18.23
3 0.6128 8.63 14.87 15.44
4 0.4000 - 13.65 17.88
5 0.2249 - 11.58 17.23
• Conventional sequential process flowsheet given in Figure 13-1 was evaluated.
Rougher flotation test results, presented in Table 13-3, indicated that conventional
sequential flotation process using sodium isopropyl xanthate (SIPX) as the collectors
and zinc sulfate and sodium cyanide as the zinc depressants and copper sulfate as the
zinc activator appears to work well for the composites. The finer the primary grind, the
higher the silver recovery in the lead rougher concentrate. A primary grind size of P80 of
200 mesh was selected for cleaner flotation studies.
ORE
GRIND
Pb ROUGHER FLOTATION
ZINC DEPRESSANTS
LEAD COLLECTOR AND
FROTHER
TIMED Pb/ Cu CONS
CONDITIONER ZINC
ACTIVATORS
ZINC ROUGHER FLOTATION
TAILING
Figure 13.1. Pb/Zn Differential Flotation Test Flowsheet
TIMED Zn CONS
ZINC COLLECTOR
AND FROTHER
Table 13.3. Flotation Test Results for Composite Samples
FIGURE 13-2. OPEN-CIRCUIT ROUGHER- CLEANER FLOTATION TEST FLOWSHEET
CLEANER 1 TAILS
REGRIND
Pb CLEANER # 1 FLOTATION
Pb CLEANER # 2 FLOTATION
CLEANER 2 TAILS
Pb CLEANER # 3 FLOTATION
CLEANER 3 TAILS
Pb CONCENTRATE
CLEANER 1 TAILS
CLEANER 2 TAILS
CLEANER 3 TAILS
Zn CONCENTRATE
13.2 Phase II Study The primary objective of the Phase II testwork was to determine the reproducibility of the small-scale (1kg) and large-scale (10kg) tests. New composites were prepared from the remaining coarse samples stored at RDi for this phase of the study. The highlights of the testwork indicated the following:
• The comparison of the head analyses of the new composites, old composites and
calculated core assays are given in Table 13-12. The analyses of the new composites
are closer to the old composites and vary significantly from the calculated core assays.
Table 13-12. Comparison of Calculated Twin Hole Data and Original and New Composites
Sample
Assay
Au,
g/t
Ag,
g/t
Cu,
%
Fe,
%
Pb,
%
S,
%
Zn,
%
Comp.
No. 1
Core Average
Original Composite
New Composite
Calc.
Assay
Assay
0.445
0.453
1.17
406
225
322
0.119
0.094
0.100
2.49
2.34
2.18
2.12
1.62
1.18
3.00
3.27
2.99
3.94
3.62
3.21
Comp.
No. 2
Core Average
Original Composite
New Composite
Calc.
Assay
Assay
0.253
0.202
0.410
171
141
211
0.067
0.082
0.093
3.21
3.37
3.54
1.30
2.17
1.91
2.37
1.08
3.43
4.02
5.08
4.90
Comp.
No. 3
Core Average
Original Composite
New Composite
Calc.
Assay
Assay
0.210
0.175
0.210
77.8
9.6
147
0.056
0.127
0.118
1.91
2.87
2.86
1.35
4.62
3.40
0.62
3.67
3.25
1.25
7.10
5.73
Comp.
No. 4
Core Average
Original Composite
New Composite
Calc.
Assay
Assay
0.047
0.806
0.210
22.2
290
34.3
0.017
0.316
0.446
2.47
4.52
5.59
0.135
0.540
0.387
0.66
2.10
2.48
0.244
1.53
0.762
Comp.
No. 5
Core Average
Original Composite
New Composite
Calc.
Assay
Assay
0.133
0.185
0.070
23.7
53.9
60.2
0.019
0.097
0.079
3.90
4.92
4.61
0.400
1.80
1.72
1.52
3.18
3.10
1.26
4.05
3.68
• Replicate tests with 1kg charge, given in Table 13-13 indicate reasonably good
reproducibility of lead and zinc concentrates. However the reproducibility was
reasonable but not very good for the 10kg tests which included cleaner flotation tests as
can be seen in Table 13-14.
Table 13-13. Replicate Rougher Flotation Test Results with 1kg Ore at Primary Grind of P80 of 200 Mesh (Composite No. 1)
Based on the two phases of the scoping study, it is reasonable to conclude that the sequential flotation process with the selected reagent suite appears to work well for most of the composites but will need to be optimized for varying feed grades. It would be possible to produce marketable-grade lead and zinc concentrates from all composites except composite 4 which has very little lead or zinc minerals.