PROPERTY:

GEOLOGY

Mineral Reserve Estimates

• The Company’s geophysicist, Joseph Inman developed the surveys for the model using a a grid of geophysics lines oriented perpendicular to the three known vein systems with a maximum spacing between lines of 400 meters employing CSAMT (controlled source audio magnetotellurics), and Induced Polarization (IP).

• A 3D deposition model consistent with similar deposits found within the Faja de Plata at Fresnillio and Real de Angeles, emerged from the CSAMT and IP data. The resulting deposition model is consistent with the geophysics interpretation as well as the drill results.

• The model consists of a large hydrothermal system ‘driven’ by a deep magma. Ore deposition often occurs several times as the magma hydrothermal system pluses upward. At some elevation within the system the hydrostatic pressure confining the system is exceeded and ore bearing fluids ‘boil’ and cool as mixing with meteoric water takes place. The zone is typically 200 to 500 meters below the ground surface at the time the system is active and the zone of boiling ore bearing fluids, ‘the kettle’ has a depth on the order of 500 meters. While the ‘kettle’ likely extends under the entire Nieves Silver District, ore fluids and subsequent deposition of bonanza grade silver ore is concentrated in close proximity to “deep tapping” structural zones that acted as pathways or conduits for the ore bearing fluids migrating from below the kettle and from the kettle toward the surface.

• Interpretation of the geophysical data in conjunction

with the drill results further documents this mode of deposition and mineralization model.

• Conduction as defined by the 3D inversion of CSAMT data are coincident with the intense zones of alteration (quartz- pyrite veinlets) and silver vein mineralization found in Nieves holes QTA-30,-31,-29,-16,- 26....

• The shape, size and high conductivity zones (low resistivity) zones associated with each of the major vein systems is consistent with a kettle deposition model of boiling fluids creating sub-vertical zones of intensely altered rock within the structural conduits. The mineralization intercepts and increased intensity of alteration below an elevation below 1600km sea level 350km ground level in QTA-30 and the bottom of holes QTA -19 and 29 indicate the upper levels of the kettle were intercepted by these holes.

• In addition to high potential for deep thick zones of high grade silver mineralization within the ‘kettle itself’ as indicated by the large 1,900m x 1,000m ovoid magnetic low found on the western end of the Concordia Vein System and north of the Santa Vein System, drill results indicate the presence and potential for 3 types of associated mineralization immediately above the ‘kettle’ lid: narrow high grade veins (Concordia); wider ‘vein swarms’ containing bonanza grade (Delores, Santa Rita and California) and manto type mineralization (Cerro Gregorio Hill).

The Nieves project is a low sulfidation epithermal silver deposit hosted in three east-northeast trending, steeply south dipping vein systems with alteration and mineralization bearing strong similarities to the Fresnillo silver deposit.

 

The most economically significant mineralization occurs in anastomosing carbonate-quartz- sulfide veins that have been defined over a total strike length of 3.8 kilometers by 54,814 meters of drilling in 187 holes. The system develops to a maximum true width of in excess of 200 meters and has a proven down dip extent of approximately 525 meters.

 

The carbonate-quartz-sulfide veins contain the best grades of silver, gold, lead and zinc. This vein type consists of calcite that is partially to totally replaced by grey to white, chalcedonic, fine-grained quartz veins and veinlets. Individual veins vary in size from a few centimetres in width with a few up to 1.5 m wide with up to 50% sulfide minerals. Sulfides include pyrite, stibnite, sphalerite, galena, chalcopyrite and the silver sulphosalts: proustite, pyrargyrite, jamesonite and scarce tetrahedrite.


The central and most important of the three vein systems is the Concordia-San Gregorio-Dolores system which includes both the La Quinta and Gregorio North zones. Mineralization along the Concordia-San Gregorio-Dolores

vein has a known total strike length of 1,300 meters and a true width up to 100 meters. The mineralized zone in the Gregorio North area is approximately 1,200 meters long and up to 200 meters wide. The La Quinta and Gregorio North zones are the subject of the resource estimate in this report. Only the La Quinta zone has a designed open pit for the economic assessment.

 

The attitude and size of the mineralized zones along the Santa Rita zone to the south and California vein system to the north are not well understood at this stage of exploration. Drilling along the Santa Rita system suggests that the mineralized zone is at least 750 meters long and may be up to 340 meters wide. The mineralized zone along the California vein system is at least 550 meters long and may be up to 130 meters wide.

 

Recent drilling has expanded the size of mineralized zones along all vein systems and additional drilling may significantly enhance the resources and economics of the project. Many of the vein systems are open along strike and all remain open to depth. Because some zones may be terminated along strike by late vertical fault structures such as the one that offsets the Concordia from the San Gregorio vein systems, the discovery of strike extensions to the Nieves vein systems will only require continued drilling guided by the promising results of surface geophysical surveys.

Nieves 2005 Silver Deposit Deposition Model

• The Company’s geophysicist, Joseph Inman developed the surveys for the model using a grid of geophysics lines oriented perpendicular to the three known vein systems with a maximum spacing between lines of 400 meters employing CSAMT (controlled source audio magnetotellurics), and Induced Polarization (IP).

 

• A 3D deposition model consistent with similar deposits found within the Faja de Plata at Fresnillio and Real de Angeles, emerged from the CSAMT and IP data. The resulting deposition model is consistent with the geophysics interpretation as well as the drill results.

 

• The model consists of a large hydrothermal system ‘driven’ by a deep magma. Ore deposition often occurs several times as the magma hydrothermal system pluses upward. At some elevation within the system the hydrostatic pressure confining the system is exceeded and ore bearing fluids ‘boil’ and cool as mixing with meteoric water takes place. The zone is typically 200 to 500 meters below the ground surface at the time the system is active and the zone of boiling ore bearing fluids, ‘the kettle’ has a depth on the order of 500 meters. While the ‘kettle’ likely extends  under the entire Nieves Silver District, ore fluids and subsequent deposition of bonanza grade silver ore is concentrated in close proximity to “deep tapping” structural zones that acted as pathways or conduits for the ore bearing fluids migrating from below the kettle and from the kettle toward the surface.

• Interpretation of the geophysical data in conjunction with the drill results further documents this mode of deposition and mineralization model. Conduction as defined by the 3D inversion of CSAMT data are coincident with the intense zones of alteration (quartz-pyrite veinlets) and silver vein mineralization found in Nieves holes QTA-30,-31,-29,-16,-26….

 

• The shape, size and high conductivity zones (low resistivity) zones associated with each of the major vein systems is consistent with a kettle deposition model of boiling fluids creating sub-vertical zones of intensely altered rock within the structural conduits. The mineralization intercepts and increased intensity of alteration below an elevation below 1600km sea level 350km ground level in QTA-30 and the bottom of holes QTA -19 and 29 indicate the upper levels of the kettle were intercepted by these holes.

 

• In addition to high potential for deep thick zones of high grade silver mineralization within the ‘kettle itself’ as indicated by the large 1,900m x 1,000m ovoid magnetic low found on the western end of the Concordia Vein System and north of the Santa Vein System, drill results indicate the presence and potential for 3 types of associated mineralization immediately above the ‘kettle’ lid: narrow high grade veins (Concordia); wider ‘vein swarms’ containing bonanza grade (Delores, Santa Rita and California) and manto type mineralization (Cerro Gregorio Hill).

Significant Intercepts Along the Concordia Vein

• The Company’s geophysicist, Joseph Inman developed the surveys for the model using a grid of geophysics lines oriented perpendicular to the three known vein systems with a maximum spacing between lines of 400 meters employing CSAMT (controlled source audio magnetotellurics), and Induced Polarization (IP).

 

• A 3D deposition model consistent with similar deposits found within the Faja de Plata at Fresnillio and Real de Angeles, emerged from the CSAMT and IP data. The resulting deposition model is consistent with the geophysics interpretation as well as the drill results.

 

• The model consists of a large hydrothermal system ‘driven’ by a deep magma. Ore deposition often occurs

several times as the magma hydrothermal system pluses upward. At some elevation within the system the hydrostatic pressure confining the system is exceeded and ore bearing fluids ‘boil’ and cool as mixing with meteoric water takes place. The zone is typically 200 to 500 meters below the ground surface at the time the system is active and the zone of boiling ore bearing fluids, ‘the kettle’ has a depth on the order of 500 meters. While the ‘kettle’ likely extends  under the entire Nieves Silver District, ore fluids and subsequent deposition of bonanza grade silver ore is concentrated in close proximity to “deep tapping” structural zones that acted as pathways or conduits for the ore bearing fluids migrating from below the kettle and from the kettle toward the surface.

Epithermal High Grade Silver Veins

Within the Altiplano Region of Mexico, epithermal silver veins are the dominant deposit type with world-class examples such as Pachuca, Zacatecas, Fresnillo, and Guanajuato. The closest of these world-class deposits/examples is Fresnillo, the world’s number one silver producer, located 90 km south of Nieves. The geology of Fresnillo has been well studied (see Image B) and appears to be very similar to the geology and geophysical modeling observed at Nieves. In the Fresnillo District, epithermal fluids ascended along steeply dipping extensional fault structures generally orientated east-west. On the Nieves property there are several north-northwest trending mapped faults as well as a vein system orientation east to west, very similar to mineralized veins and structures found at Fresnillo.

Image B

Nieves Property —  2012 Map

• 55 Square miles

• Shows eastern 2 km of the three known major braided vein systems

Image C