Guaynopa ‐ Au Skarn Project

Overview

The Guaynopa gold project is located within the Sierra Madre Occidental precious metals mineral province of northern Mexico. The Corporation has optioned 1,110.19 ha in a region with known historic copper-gold workings. The Guaynopa was first mined for gold in a small scale in the 18th century and there have been some government exploration programs between 1986 and 2009.

The Corporation conducted property evaluation from September to December, 2011, which included detailed geological mapping, rock and soil geochemistry, and a magnetic and induced polarization ("IP") survey. Gold-bearing skarns at Guaynopa are observed in surface and old workings as tabular bodies attaining widths ranging from 1 to 10 meters and lengths from 2 to 50 meters. The skarn bodies are composed of massive magnetite with garnet and pyroxene. An overprinting hornblende-chlorite-calcite event contains 1% to 5% disseminated mixed sulphid(pyrite>chalcopyrite>>pyrrhotite+galena+sphalerite).

Upon signing of an option agreement respecting the Guaynopa property, the Corporation was required to pay US$40,000. The Corporation made additional payments of US$30,000 on April 4, 2012, US$50,000 on October 4, 2012, US$50,000 on April 4, 2013 and US$130,000 on October 4, 2013. The remaining payments are US$150,000 due on April 4, 2014, US$1,000,000 due on October 4, 2014, US$1,500,000 due on April 4, 2015, and US$3,850,000 due on October 4, 2015. Upon commencement of production, the agreement is subject to a NSR of 2.5%. The agreement is also subject to minimum exploration expenditures of US$400,000 by October 4, 2012 (which was extended until October 3, 2013), US$600,000 in the second year and US$900,000 in the third year.

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Figure 1. Location of the Guaynopa Project and Main Lithological Contacts.

Geologically, the Guaynopa project is underlain by Mesozoic limestone, sandstone, siltstone, and interlayered andesite-dacite volcanic flows. The sedimentary sequence had been correlated with the Lower Cretaceous Lampazos Formation by the Mexican Geological Survey. The Lampazos is a marine platform sedimentary sequence however, at Guaynopa bimodal volcanic rocks and red beds are present. Gold-bearing skarns at Guaynopa are observed in surface and old workings as tabular bodies attaining widths ranging from 1 to 10 meters and lengths from 2 to 50 meters. The skarn bodies are composed of massive magnetite with garnet and pyroxene. An overprinting hornblende-chlorite-calcite event contains 1% to 5% disseminated mixed sulphide (pyrite>chalcopyrite>>pyrrhotite+galena+sphalerite). The observed assemblage is considered typical of oxidized skarns. The magnetite-rich bodies can occur as vertical fault-controlled feeders, as steeply dipping bodies along contact zones with the intrusive rocks, as gently dipping bodies on the bottom or the top of diorite sills, or on the top of the main diorite stock. Many prospects are known to occur along the NW flank of the intrusive stock.

Rock sample analyses indicate that gold mineralization is restricted to the magnetite > garnet-pyroxene-amphibole skarn assemblage that contains 1% to 5% disseminated sulphides (pyrite>chalcopyrite>>pyrrhotite), with gold values exceeding 2.5 g/t being accompanied by anomalous Cu-As-Mo-Bi-Ag contents. The best gold showings are located along the northern and western contacts between the diorite stock and its sedimentary host rocks. Other mineral occurrences were observed in veins, cutting the diorite stock at La Victoria prospect that is interpreted as an area with sub-horizontal sill bodies with potential to host high grade manto-type mineralization. Magnetic and IP geophysical surveys were completed on the Guaynopa project. The geophysical grid consisted of a set of nineteen N/S lines spaced at 100 meters with an average line length of 3km.

The magnetic survey totaled 51 line-km whilst the IP survey totaled 19.8 line-km.