SANTO DOMINGO II & NOMBRE DE DIOS CONCESSIONS
                            HOSTOTIPAQUILLO AREA
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NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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three were a...
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NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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including th...
NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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Figure 7.3...
NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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Water is av...
NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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Figure 8.2...
NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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     Further...
NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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The Mexican ...
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Figure 9.4...
NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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Figure 9.5...
NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México
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Figure 9.6...
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NI 43 101 Santo Domingo Project

  1. 1. SANTO DOMINGO II & NOMBRE DE DIOS CONCESSIONS HOSTOTIPAQUILLO AREA STATE OF JALISCO, MÉXICO NI 43-101 TECHNICAL REPORT SANTO DOMINGO SILVER-GOLD EXPLORATION PROJECT Latitude: 21º 06’North; Longitude: 103º 59’ West PREPARED FOR STROUD RESOURCES LTD. 330 Bay Street, Suite 1115 Toronto, Ontario, Canada M5H 2S8 Tel.: +1 (416) 362-4126 Fax.: +1 (416) 362-4129 JANUARY 25, 2010 PREPARED BY M R . BALTAZAR SOLANO -R ICO Q UALIFIED P ERSON BEHRE DOLBEAR DE MÉXICO, S.A. DE C.V. Paseo de los Robles 4092 Fracc. San Wenceslao 45110 Zapopan, Jalisco, México Telephone: +52 (33) 3610 2113 Facsimile: +52 (33) 3610 2112 mexico@dolbear.com A Member of the Behre Dolbear Group Inc. © 2009, Behre Dolbear Group Inc. All Rights Reserved.
  2. 2. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 2.0 TABLE OF CONTENTS 3.0 SUMMARY ..................................................................................................................................... 1 3.1 LOCATION ........................................................................................................................ 1 3.2 MINERAL CONCESSIONS .............................................................................................. 1 3.3 SURFACE RIGHTS ........................................................................................................... 1 3.4 ENVIRONMENTAL EXPLORATION PERMITTING .................................................... 1 3.5 GEOLOGY ......................................................................................................................... 2 3.6 MINERALIZATION .......................................................................................................... 2 3.7 EXPLORATION ................................................................................................................ 2 3.8 MINERAL RESERVES AND RESOURCES.................................................................... 3 3.9 CONCLUSIONS AND RECOMMENDATIONS ............................................................. 4 4.0 INTRODUCTION ........................................................................................................................... 7 5.0 RELIANCE ON OTHER EXPERTS .............................................................................................. 9 6.0 PROPERTY DESCRIPTION AND LOCATION ......................................................................... 10 6.1 COMPANY RIGHTS TO MINING CONCESSIONS ..................................................... 10 6.2 COMPANY OWNERSHIP .............................................................................................. 14 6.3 SURFACE RIGHTS ......................................................................................................... 14 6.4 ENVIRONMENTAL PERMITTING FOR EXPLORATION ACTIVITIES .................. 14 7.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND PHYSIOGRAPHY ............................................................................................................... 16 8.0 HISTORY ...................................................................................................................................... 20 9.0 GEOLOGICAL SETTING ............................................................................................................ 27 9.1 REGIONAL GEOLOGY .................................................................................................. 27 9.2 LOCAL GEOLOGY ......................................................................................................... 30 9.2.1 Lithology.............................................................................................................. 30 9.2.2 Structure ............................................................................................................... 33 9.2.3 Mineralized zones ................................................................................................ 34 10.0 DEPOSIT TYPES .......................................................................................................................... 35 11.0 MINERALIZATION AND MINERALIZATION CONTROL .................................................... 38 12.0 EXPLORATION ........................................................................................................................... 41 12.1 HISTORIC EXPLORATION ........................................................................................... 41 12.2 STROUD RESOURCES EXPLORATION ..................................................................... 41 13.0 DRILLING..................................................................................................................................... 43 13.1 DRILLING SUMMARY .................................................................................................. 43 13.2 DRILLING RESULTS SUMMARY ................................................................................ 43 14.0 SAMPLING METHOD AND APPROACH ................................................................................. 59 14.1 SAMPLING PROGRAMS ............................................................................................... 59 14.2 CORE HANDLING AND SAMPLING ........................................................................... 59 14.3 CORE RECOVERIES ...................................................................................................... 62 14.4 DRILL HOLE SURVEYING ........................................................................................... 63 15.0 SAMPLE PREPARATION, ANALYSES, AND SECURITY ..................................................... 65 15.1 ALS CHEMEX LABS QUALITY ASSURANCE/QUALITY CONTROL (QA/QC) ....................................................................................................... 65 15.2 STROUD SAMPLE PREPARATION PROCEDURES .................................................. 65 16.0 DATA VERIFICATION ............................................................................................................... 67 16.1 STROUD QUALITY CONTROL .................................................................................... 67 16.2 BEHRE DOLBEAR DATA VERIFICATION ................................................................ 67 16.3 BEHRE DOLBEAR CHECK SAMPLING...................................................................... 69 Project 09-070 i BEHRE DOLBEAR
  3. 3. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 2.0 TABLE OF CONTENTS (CONTINUED) 17.0 ADJACENT PROPERTIES .......................................................................................................... 78 18.0 MINERAL PROCESSING AND METALLURGICAL TESTING .............................................. 79 19.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES ......................................... 80 19.1 GENERAL INFORMATION ........................................................................................... 80 19.2 MINERAL RESOURCE DEFINITIONS ......................................................................... 80 19.2.1 Mineral Resource (CIM, 2005) ............................................................................ 81 19.2.1.1 Inferred Mineral Resource ................................................................... 81 19.2.1.2 Indicated Mineral Resource ................................................................. 81 19.2.1.3 Measured Mineral Resource ................................................................ 81 19.2.2 Mineral Reserve (CIM, 2005) .............................................................................. 81 19.3 STROUD MINERAL RESOURCES ............................................................................... 82 19.3.1 Method of Resource Estimation .......................................................................... 82 19.3.2 Mineral Resources ............................................................................................... 83 20.0 OTHER RELEVANT DATA AND INFORMATION ................................................................. 98 21.0 INTERPRETATION AND CONCLUSIONS ............................................................................... 99 21.1 INTERPRETATION OF RESULTS ................................................................................ 99 21.2 OTHER RELEVANT INFORMATION ........................................................................ 100 21.2.1 Mineral Concessions .......................................................................................... 100 21.2.2 Surface Rights .................................................................................................... 100 21.2.3 Environmental Exploration Permitting .............................................................. 100 21.3 CONCLUSIONS ............................................................................................................ 100 22.0 RECOMMENDATIONS ............................................................................................................. 103 23.0 REFERENCES ............................................................................................................................ 106 24.0 DATE AND SIGNATURE PAGE .............................................................................................. 107 25.0 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT PROPERTIES AND PRODUCTION PROPERTIES ................................... 110 APPENDIX 1.0 TITLE OPINION ............................................................................................. A1-1 APPENDIX 2.0 ASSAY TECHNIQUES .................................................................................. A2-1 APPENDIX 3.0 CHECK ASSAYS............................................................................................ A3-1 Project 09-070 ii BEHRE DOLBEAR
  4. 4. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 LIST OF TABLES Table 3.1 Santo Domingo Project, Mineral Resource Estimate.......................................................... 4 Table 3.2 Phase 1 – Stroud Recommended Program and Budget....................................................... 5 Table 3.3 Phase 2 – Stroud Recommended Program and Budget....................................................... 6 Table 6.1 San Diego y La Española, S.A. de C.V Mining Rights (duties) of SDLE’s Concessions for 2009 ........................................................................................................ 12 Table 7.1 Summary of Meteorological Information and Climate Classification .............................. 18 Table 8.1 Existing Mine Workings on Santo Domingo Project........................................................ 21 Table 8.2 Noranda Drill Program Results ......................................................................................... 25 Table 8.3 Dump Sampling Program ................................................................................................. 26 Table 12.1 SDLE Core Drilling, 1999 – Selected Intervals................................................................ 41 Table 13.1 Drill Hole Record 1999-2008 ........................................................................................... 44 Table 13.2 Summary of Significant Intersections ............................................................................... 54 Table 14.1 Core Recoveries of Mineralized Intersections Verified by Behre Dolbear’s Qualified Person ............................................................................................................... 63 Table 16.1 Behre Dolbear Sample Verification .................................................................................. 70 Table 16.2 Behre Dolbear Sample Verification Assay Results – ALS Chemex Certificate of Analysis ........................................................................................................................ 71 Table 16.3 Behre Dolbear Verification – Assay Comparison Between Stroud and BDM Reports of ALS Chemex Labs .......................................................................................... 72 Table 19.1 Mineral Resources Estimate ............................................................................................. 83 Table 19.2 Mineral Resource Block Calculation ................................................................................ 86 Table 19.3 Mineral Resource Block Calculation ................................................................................ 87 Table 21.1 Mineral Resources Estimate ............................................................................................. 99 Table 22.1 Phase 1 – Stroud Recommended Program and Budget................................................... 104 Table 22.2 Phase 2 – Stroud Recommended Program and Budget................................................... 105 Project 09-070 iii BEHRE DOLBEAR
  5. 5. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 LIST OF FIGURES Figure 4.1. Location map ...................................................................................................................... 7 Figure 6.1. SDLE Mine concessions map ........................................................................................... 10 Figure 7.1. Location and property access map .................................................................................... 16 Figure 7.2. Santo Domingo – Topographic relief and project infrastructure – Vein Structures pass under the hill and parallel to the main valley in the background – Trees on hill in centre of Photo mark a Shaft on the Guadalupe System.......................... 17 Figure 7.3. Rio Grande de Santiago Valley, looking Northwest ......................................................... 18 Figure 8.1. Nombre de Dios open stope .............................................................................................. 22 Figure 8.2. Rayas Vein System in the Bellavista tunnel: timbering extends for 10 meters across the vein system....................................................................................................... 23 Figure 8.3. Timber wall holding up rock fill in 6 meter-wide stope – Socavón Intermedio ............... 23 Figure 8.4. View of the fortified compound that was probably the control center for the mining operations – Opening in wall is for a road to El Zopilote Mine ........................... 24 Figure 9.1. Sierra Madre Occidental Province and associated Mineral Districts ................................ 27 Figure 9.2. Regional tectonic map of the southwestern part of the Sierra Madre Occidental – Shaded area is the late Miocene to Quaternary Trans-Mexican Volcanic Belt ................ 28 Figure 9.3. Regional mineralized zones .............................................................................................. 29 Figure 9.4. Regional geologic map of the late Miocene to Quaternary Mexican Volcanic Belt .................................................................................................................................... 31 Figure 9.5. Local geology and drill hole location map – Rayas, Guadalupe, La Española, and Jasmine veins traces ................................................................................................... 32 Figure 9.6. Cliff southwest of camp showing the thick capping rhyolite volcanic ash – El Zopilote Abajo is at bottom of cliff at center of photo ................................................. 33 Figure 10.1. Spatial relationship of the Gran Cabrera, Santo Domingo, and Cinco Minas mineralized zones ............................................................................................................. 36 Figure 11.1. Boulder from La Raya showing brecciation of quartz in calcite ...................................... 38 Figure 11.2. Core showing a breccia with fragments of andesite and galena-sphalerite mineralization in white quartz .......................................................................................... 39 Figure 13.1. Section 5275N – Drill hole mineral intersections and lithology ....................................... 45 Figure 13.2. Section 5345N – Drill hole mineral intersections and lithology ....................................... 46 Figure 13.3. Section 5365N – Drill hole mineral intersections and lithology ....................................... 47 Figure 13.4. Section 5375N – Drill hole mineral intersections and lithology ....................................... 48 Figure 13.5. Section 5475N – Drill hole mineral intersections and lithology ....................................... 49 Figure 13.6. Section 5530N – Drill hole mineral intersections and lithology ....................................... 50 Figure 13.7. Section 5555N – Drill hole mineral intersections and lithology ....................................... 51 Figure 13.8. Section 5640N – Drill hole mineral intersections and lithology ....................................... 52 Figure 13.9. Section 5835N – Drill hole mineral intersections and lithology ....................................... 53 Figure 13.10. Drilling Flat Hole SD-08-22 at entrance to Nombre de Dios Mine .................................. 56 Figure 13.11. Drilling Hole SD-08-23 .................................................................................................... 57 Figure 14.1. Core splitting facilities – Diamond saw ............................................................................ 60 Figure 14.2. Half core sample split ....................................................................................................... 60 Figure 14.3. Stroud’s core storage facilities at Labor de Guadalupe .................................................... 62 Figure 16.1. Drill hole location monument ........................................................................................... 68 Figure 16.2. Drill hole location monument partially covered with dirt................................................. 68 Figure 16.3. Behre Dolbear check sampling ......................................................................................... 69 Figure 16.4. BD Check Sampling (g/t Au)............................................................................................ 73 Project 09-070 iv BEHRE DOLBEAR
  6. 6. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 LIST OF FIGURES (CONTINUED) Figure 16.5. BD Check Sampling (Au) ................................................................................................. 74 Figure 16.6. BD Check Sampling (g/t Ag)............................................................................................ 74 Figure 16.7. BD Checking Sampling (Ag) ............................................................................................ 75 Figure 16.8. BD Check Sampling Pb (%) ............................................................................................. 75 Figure 16.9. BD Check Sampling Pb (%) ............................................................................................. 76 Figure 16.10. BD Check Sampling Zn (%) ............................................................................................. 76 Figure 16.11. BD Check Sampling Zn (%) ............................................................................................. 77 Figure 19.1. Longitudinal Section Indicating Mineral Resources ......................................................... 85 Figure 19.2. Cross Section 5275 showing blocks for mineral resources estimation ............................. 88 Figure 19.3. Cross Section 5345 showing blocks for mineral resources estimation ............................. 89 Figure 19.4. Cross Section 5365 showing block for mineral resources estimation............................... 90 Figure 19.5. Cross Section 5375 showing blocks for mineral resources estimation ............................. 91 Figure 19.6. Cross Section 5475 showing block for mineral resources estimation............................... 92 Figure 19.7. Cross Section 5530 showing blocks for mineral resources estimation ............................. 93 Figure 19.8. Cross Section 5555 showing block for mineral resources estimation............................... 94 Figure 19.9. Cross Section 5595 showing blocks for mineral resources estimation ............................. 95 Figure 19.10. Cross Section 5640 showing block for mineral resources estimation............................... 96 Figure 19.11. Cross Section 5835 showing blocks for mineral resources estimation ............................. 97 Project 09-070 v BEHRE DOLBEAR
  7. 7. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 3.0 SUMMARY Stroud Resources Ltd. (Stroud) owns 100% of the private Mexican company, Compañía Minera San Diego y La Española, S.A. de C.V. (SDLE). SDLE holds titles rights to the Santo Domingo II and Nombre de Dios mining concessions, comprising 40 hectares and 95 hectares, respectively. 3.1 LOCATION The concessions occur in the Hostotipaquillo Mining District which includes a number of established silver-gold epithermal mineral occurrences including the well known Monte del Favor, La Cabrera and Cinco Minas mines with a pre-twentieth century mining production history, reportedly most prolific in the seventeenth and eighteenth centuries. They are located approximately 80 kilometers (km) N53°W of Guadalajara, capital city of the State of Jalisco. The coordinates for the Santo Domingo II claim monument near the approximate center of the concessions, as reported in the assessment works and survey, are 21° 06’ 21” North latitude; 103° 58’ 43” West longitude. The corresponding UTM coordinates for the same location are Zone 13Q – 606,023.21 East, 2,334,200.76 North. 3.2 MINERAL CONCESSIONS Behre Dolbear has reviewed the Titles Opinion (Creel, García – Cuellar, Aiza y Enríquez Law Firm, Nov. 27, 2009), legal status and agreements, and technical data supplied to it by Stroud, SDLE and its agents, as well as other public technical information sources. Behre Dolbear has conducted a review and appraisal of the information used in the preparation of its report, and believes the information included in the preparation of the report, and in its conclusions and recommendations, is valid and appropriate considering the status of the project and the purpose for which the report is prepared. According to the Title Opinions for the Santo Domingo II and Nombre de Dios Concessions held by SDLE, “the said mining concessions (a) Are valid, enforceable and in good standing; and (b) Such mining concessions and the rights derived thereunder are free and clear of all liens, mortgages, claims, encumbrances, and security interests of any kind or nature.” 3.3 SURFACE RIGHTS Stroud has leased surface rights from the Community Ejido de Santo Domingo de Guzman to cover these mining concessions and the surrounding area, granted by a general meeting held November 3, 2002 in accord with Méxican regulations, and a lease agreement ratified before a Notary Public. The agreement has been extended to 2013. Copies of the Ejido agreements are in the files of SDLE and Stroud for consultation, if required. 3.4 ENVIRONMENTAL EXPLORATION PERMITTING In 1999, Stroud, then known as Stroud Resources de México, S.A. de C.V., carried out the first drilling campaign from then existing roads and mine patios. The second drilling campaign of 2003 was permitted by submitting an Environmental Permitting Notice report, according to Regulation NOM 120 ECOL 1997, which included the construction of 2,400 meters of access roads and drill pads (BDM, November 2002). Drill holes for the last drilling campaign between 2005 and 2008 were carried out from the access road permitted in 2002. Copies of the environmental report are in the files of SDLE and SDR for consult, if required. Project 09-070 1 BEHRE DOLBEAR
  8. 8. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 3.5 GEOLOGY The oldest rocks in the western part of México are sedimentary and volcano-sedimentary units of the Guerrero Terrain overlain by Cretaceous volcano-sedimentary rocks locally affected by the Eocene Puerto Vallarta batholith (54 Ma). The region of interest presents a stratigraphic succession which includes a Cordilleran-equivalent basement, Oligocene-to-middle-Miocene Sierra Madre Occidental (SMO) volcanic rocks, and a Late Miocene-to-Quaternary Mexican Volcanic Belt (MVB) sequence. The SMO is a large Middle Tertiary volcanic province, which extends from the southwestern United States to central México. Regionally, the SMO Province shows two differentiated volcanic Groups according to its composition and age: the Lower Volcanic Group (LVG), forming the lowest part of the volcanic sequence of SMO, exhibits more intermediate to mafic composition; and the Upper Volcanic Group (UVG), which is more felsic than the LVG. The contact between these two units is commonly erosional with the local presence of red conglomerates filling ancient topography. The importance of the SMO Province is due to its being the host to one of the largest epithermal precious metal metallogenic provinces in the world, which encompasses well-known silver-gold (Ag-Au) producing mining districts in Mexico including active mines and advanced projects like Mulatos, Dolores, Palmarejo, Ocampo, Moris, Batopilas, El Sauzal, Guadalupe y Calvo, San Julián, San Dimas-Tayoltita, Bacis, Topia, La Ciénega, Guanaceví, and Metates. Closer to the subject area, the Hostotipaquillo District historic mines, Cinco Minas, Bolaños and San Martin de Bolaños are also enclosed in LVG rocks. Mineral zones in the Hostotipaquillo Mining District include the Casados, Mololoa, Salomón, Gran Cabrera, and other mines in the Monte del Favor area and the Santo Domingo, San Pedro Analco, and Cinco Minas in the Southeastern part of the District (R. Munroe, 2006). All of these deposits are related to silver-gold epithermal mineralization events associated with veins of quartz, quartz-calcite and quartz- calcite-adularia-sericite. At Santo Domingo, the two most important mineralized structures, Rayas and Guadalupe, have been identified over lengths of 500 and 900 meters, respectively, with intersections in the order of 10 to 50 meters in width and to a depth of 775 meters above sea level (masl) at the DH 06-11 intersection of the Guadalupe vein. Surface mapping, trenching, historic workings and 30 drill holes by SDR have defined the main silver-bearing veins, with associated gold structures, as a series of North West-trending veins and veinlets showing local brecciation and strong silicification and/or propilitization of the enclosing host rock, typical of epithermal vein systems. 3.6 MINERALIZATION Disseminated and veinlet-controlled mineralization at Santo Domingo includes argentite, sphalerite, galena, and minor native gold observed in the silicified rock matrix and quartz veins and veinlets. The sulphide mineralization content is low, and is estimated to be below 1% to 2% (vol.). In the near-surface environment, secondary oxide phases of the sulphide minerals, including malachite, are common. 3.7 EXPLORATION Stroud optioned the property in 1989 and conducted a limited program of check chip sampling in the accessible adits and surface mineralized zones. The early program was designed to substantiate the mineralization potential of the concessions. Stroud undertook an initial core drilling program of four holes in 1999 followed, in 2003, by an attempted drill program. Between 2005 and 2008, a successful drilling campaign was waged. In this 20 year time period, a total of 30 core holes have been drilled, of which Project 09-070 2 BEHRE DOLBEAR
  9. 9. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 three were abandoned due to loose material, broken ground and/or mechanical problems. Over all, 5,335.60 meters have been drilled including the 169.5 meters lost in the three holes previously mentioned. Behre Dolbear has undertaken an independent review of the technical information related to the project, including check sampling and an independent analysis of 18 samples from the mineralized structures exhibited in recent drill core, by quartering split core. The results of the Behre Dolbear check assay program found that Au, Pb, and Zn analyses show good correlation values, however the correlation of silver assay results was not very good; it was concluded that the variations are probably caused by the irregular distribution of silver mineralization and that silver mineralization is possibly associated with high-grade oxide minerals or native silver since most of the higher Ag values are within the oxidation zone, close to surface. Future sampling campaigns should consider larger samples, in size and number. Also, higher assays, above 300 g/t, should be verified in a third laboratory until mineral graphic studies define the silver mineralogy and a better sample attack and analysis is deciphered. Behre Dolbear believes that the results reported are acceptable and therefore sampling by Stroud Resources is considered reliable. Behre Dolbear found that in general, mineralized intersections of drill holes show good core recovery, in the order of 96%, although varying from 87% to 100% depending upon the degree of fracturing exhibited by the intersections. Based on these estimates, it is considered that core recoveries are adequate for use in Mineral Resource calculation and reporting. Behre Dolbear made a review of Stroud’s sampling procedures. Sampling procedures and sample preparation procedures developed in 1999 by Stroud were followed during the first drilling campaign, with slight variations in the following campaigns. A total of 30 drill holes were sampled at variable intervals, depending on the geologic characteristics of the intersection and where the structure was found. Samples were taken of half-core splits of lengths varying from 0.3 to 2.0 meters although core sample lengths were in the order of 1.0 meters for the 1999 campaign and 1.5 meters for the 2003 and 2005-2008 campaigns. Behre Dolbear believes that Stroud’s sampling, sample preparation and assay procedures were within industry standards and were adequately followed through the sampling campaigns. Data collection improvements, mainly to the recording of the information, are recommended throughout this report. It is, therefore, estimated that samples and assay results are adequate for Mineral Resource estimation and reporting in accordance with NI 43-101 guidelines. 3.8 MINERAL RESERVES AND RESOURCES Mineral Reserves, as established by NI 43-101 guidelines and CIM definitions, have not been defined at Santo Domingo. According to Stroud estimates, Measured Resources total 1.85 million tonnes (Mt) grading 0.46 g/t Au and 90.0 g/t Ag and Indicated Resources total 2.50 Mt grading 0.39 g/t Au and 88.0 g/t Ag (Table 3.1). Project 09-070 3 BEHRE DOLBEAR
  10. 10. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 TABLE 3.1 SANTO DOMINGO PROJECT, MINERAL RESOURCE ESTIMATE (D. MCBRIDE, 2009) Gold Silver Gold Silver Classification Tonnes (g/t) (g/t) (ounces) (ounces) Measured 1,846,352 0.46 90 27,306 5,342,557 Indicated 2,501,382 0.39 88 31,364 7,077,092 Measured and Indicated 4,347,734 0.42 89 58,671 12,419,649 Indicated 3,424,622 0.33 83 36,817 9,135,864 Inferred Resources are estimated at 3.42 Mt grading 0.33 g/t Au and 83.0 g/t Ag. Behre Dolbear believes that the manual polygon method of mineral resource calculation utilized by Stroud in the estimation of Resources is adequate as a first attempt to define Resources, and was properly applied. This method has been in use in the industry for many years and has been considered standard for tabular deposits. 3.9 CONCLUSIONS AND RECOMMENDATIONS Stroud’s exploration program on the Santo Domingo Property has included the compilation of old reports and maps, geological reconnaissance and mapping along the main structures outcropping in the area, alteration and mineralization mapping, surface and underground chip sampling of main structures, and diamond drilling of 30 core holes at the Rayas and Guadalupe structures. A total 5,335.60 meters of drilling was completed, including 169.5 meters in three holes lost. Core recoveries of mineralized sections were acceptable, exceeding 95%. As a result of exploration activities, Stroud estimates the combined Measured and Indicated Resources in the order of 4.35 Mt averaging 0.42 g/t Au and 89 g/t Ag or an estimated 58,671 ounces of gold and 12.4 million ounces of silver. Based on these results, Stroud is proposing an accelerated drill program to trace the vein systems on the Santo Domingo II and Nombre de Dios properties. In the opinion of Behre Dolbear based on this review of Stroud’s Santo Domingo Silver-Gold Exploration Project, the mineralized structures warrant the further exploration proposed by SDLE. The proposed program has been divided in two phases, accounting for 11,000 meters and 22,000 meters, respectively as described below and shown in Table 3.2 (Phase 1) and Table 3.3 (Phase 2). Most of the future exploration should be used to expand the resource by drilling. Three holes should be drilled at the road level (approximately 980 masl) on Section 5470; the initial hole, SD-08-30, has been partially completed. To the north, drilling cannot be carried out on the road level and three holes should be drilled from the road bend at the 1,010 meter level on section 5720N. A second tier of holes on 50 meter centres are proposed for the “Pileta” or 1,040 meter level. A road is proposed from the pileta to Section 5450 N. A second road at his elevation will be pushed up from the site of holes 6, 14, 15, and 17 to drill sections 5300N to 5400N. To complete this program will require drill holes and approximately 1,000 meters per section or a total of 11,000 meters of drilling. Project 09-070 4 BEHRE DOLBEAR
  11. 11. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 Contingent on the results of this program, a second program is recommended to explore further into the hill. Old roads will be upgraded to provide access up the hill and to construct drill platforms. Stroud estimates that the budget required for the development of Phase 1 and Phase 2 exploration programs is in the order of CA$3.0 million (US$2.8 million) and CA$5.7 million (US$5.4 million), respectively. TABLE 3.2 PHASE 1 – STROUD RECOMMENDED PROGRAM AND BUDGET (SANTO DOMINGO SILVER-GOLD PROJECT) Item Essential Services Cost CAD Cost USD 1 Access and site roads (500 meters) 50,000 47,000 Pumps and Electrics, including electricity 10,000 9,400 2 Personnel Project Manager and Senior Geologist 160,000 150,400 Assistant Geologist 75,000 70,500 Trucks (3) – Operating Costs 35,000 32,900 3 Drilling Program 11,000 meters at $150.00 per meter 1,650,000 1,551,000 core boxes racks and storage 50,000 47,000 4 Analyses Core Assays: gold, silver, lead, and zinc 120,000 112,800 Analyses b.m. assays, petrographic, and microscopic 10,000 9,400 5 Support Facilities Project Vehicle 30,000 28,200 Travel Canada – Mexico 25,000 23,500 Accommodation, Telecommunication 80,000 75,200 Field Support, Land Rental, etc. 50,000 47,000 6 Environmental, Consultants 20,000 18,800 7 Surveying 20,000 18,800 8 Office Overhead ~10% 240,000 225,600 9 Contingency ~15% 390,000 366,600 Total Technical Program Phase 1 3,015,000 2,834,100 Project 09-070 5 BEHRE DOLBEAR
  12. 12. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 TABLE 3.3 PHASE 2 – STROUD RECOMMENDED PROGRAM AND BUDGET (SANTO DOMINGO SILVER-GOLD PROJECT) Item Essential services Cost CDN Cost US 1 Access and site roads (100 meters) 40,000 37,600 Pumps and Electrics, including electricity 50,000 47,000 2 Personnel Project Manager and Senior Geologist 270,000 253,800 Assistant Geologist 100,000 94,000 Trucks (3) – Operating Costs 70,000 65,800 3 Drilling Program 22,000 meters at $150.00 per meter 3,300,000 3,102,000 core boxes racks and storage 20,000 18,800 4 Analyses Core Assays: gold, silver, lead, and zinc 240,000 225,600 Analyses b.m. assays, petrographic, and microscopic 20,000 18,800 5 Support Facilities Project Vehicle 30,000 28,200 Travel Canada – Mexico 50,000 47,000 Accomodation, Telecommunication 160,000 150,400 Field Support Labour, Land Rental, etc. 110,000 103,400 6 Environmental, Consultants 50,000 47,000 7 Surveying 30,000 28,200 8 Office Overhead ~10% 450,000 423,000 9 Contingency ~15% 750,000 705,000 Total Technical Program Phase 2 5,740,000 5,395,600 Project 09-070 6 BEHRE DOLBEAR
  13. 13. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 4.0 INTRODUCTION Stroud is an exploration company based in Toronto, Canada. It is the controlling – shareholder of Compañía Minera San Diego y La Española S.A. de C.V. (SDLE), a private Mexican company, which in turn holds encumbered title rights, as later described, to the Santo Domingo II and Nombre de Dios mining concessions, located approximately 80 km northwest of Guadalajara, the capital city of the State of Jalisco, Mexico (Figure 4.1). The concessions occur in the Hostotipaquillo Mining District, which includes a number of established silver-gold epithermal mineral occurrences, including the well known Monte del Favor, La Cabrera and Cinco Minas mines. The region has a pre-twentieth century mining history, reportedly most prolific in the seventeenth and eighteenth centuries. Stroud has undertaken diamond drilling, geological studies and underground mapping to establish the mineral potential. Figure 4.1. Location map Behre Dolbear de México, S.A. de C.V. (BDM), the Mexican subsidiary of the Behre Dolbear Group Inc. of Denver, Colorado, USA, prepared, in January 2003, a Technical Qualifying Report of the Santo Domingo II and Nombre de Dios Concessions. BDM has now been requested to prepare a technical report with an update of the exploration work conducted by Stroud through 2009. The main purpose of the report is to provide with a review of Stroud´s mineral resource estimate and to ensure the data presented conforms to the requirements of report filing of public companies to Canadian regulatory authorities, following NI 43-101 Guidelines. BDM has examined the project site on several occasions and has undertaken an independent review of the project technical information. The Behre Dolbear study includes check sampling and analysis of: (1) samples from the mineralized structure exhibited in several of the adits, (2) from the two drilling Project 09-070 7 BEHRE DOLBEAR
  14. 14. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 campaigns and drill core by quartering split core, and (3) by reanalysis of laboratory-filed Stroud core sample reject portions. The BDM site examination and report were undertaken by senior, experienced Qualified Persons. In the opinion of Behre Dolbear, based on its review of the SDLE – Santo Domingo Silver-Gold Exploration Project, the identified mineralized structure of the concessions illustrate the scope of structure and indicated mineralizing events in the appropriate geological setting to warrant the further exploration proposed herein by SDLE (Table 3.1, Table 3.2, and Table 3.3). Behre Dolbear’s Qualified Person for the Santo Domingo Project, Mr. Baltazar Solano-Rico, prepared Santo Domingo’s 2003 Technical Qualifying Report, having visited the property several times in 2002 and 2003. Extensive discussions regarding recent drilling results and knowledge of the geology and mineralization of Santo Domingo were held with Dr. McBride and George Coburn earlier in 2009. Later in the year Mr. Solano spent three days at the property between July 2 and July 4, 2009, reviewing some of the advances in the geological knowledge of the property and reviewing all vein intersections of the second drilling campaign from drill hole number 6 through drill hole number 30. The drill logs were analyzed and the mineralized intersections verified against existing core in Stroud´s core house and at Santo Domingo. A spot check of drill hole locations was also made while at the property. Finally, 18 check samples were taken and sent to a separate laboratory for analysis verification. The samples were taken from remaining drill core half-splits and selected to cover a wide spectrum of values from low- grade to high-grade silver values. Project 09-070 8 BEHRE DOLBEAR
  15. 15. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 5.0 RELIANCE ON OTHER EXPERTS BDM has drawn the information presented herein from a series of documents, reports and communications provided by Stroud and SDLE, public information, and BDM’s own records, and technical publications. Most of the information used for the report has been derived from: • Stroud Resources, Ltd., through Dr. Derek McBride, P.Eng., prepared an update of Behre Dolbear’s 2003 technical report using the additional information collected since the original report dated January 17, 2003; • Stroud Resources, Ltd., several internal reports by Dr. Derek McBride, P.Eng., including geology, mineralization history of the Santo Domingo mines and proposed exploration programs; • Stroud Resources, Ltd., concessions status and general information; • Stroud Resources, Ltd., geological maps and sections drill logs, surveys, assays and general information; • Dr. Derek McBride, P.Eng., 2009, Santo Domingo Mineral Resource calculations. Stroud Resources internal reports and tables; • ALS Chemex assay certificates; • Behre Dolbear de México, S.A. de C.V. , 2003, Technical Qualifying Report; • Ferrari Luca et al., several papers on the geology of the region; and • Servicio Geológico Mexicano, geological mapping information at 1:50,000 and 1:250,000 scales and geological descriptions. A comprehensive list of sources of information is included in Section 23.0 – References. Behre Dolbear has reviewed the Titles Opinion (Creel, García-Cuellar, Aiza y Enríquez Law Firm, November 27, 2009), legal status and agreements and the technical data supplied to it by Stroud, SDLE and its agents, as well as other public technical information sources. Behre Dolbear has conducted a review and appraisal of the information used in the preparation of its report, and believes the information included in the preparation of the report and in its conclusions and recommendations is valid and appropriate considering the status of the project and the purpose for which the report is prepared. Project 09-070 9 BEHRE DOLBEAR
  16. 16. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 6.0 PROPERTY DESCRIPTION AND LOCATION SDLE mineral concessions are located approximately 80 km N53°W of Guadalajara, Capital City of the State of Jalisco, México within the Hostotipaquillo Mining District. The co-ordinates for the Santo Domingo II claim monument, as reported in the assessment works and survey, shows the approximate center of the concessions being located at 21° 06’ 21” North Latitude; 103° 58’ 43” West Longitude (Figure 6.1). The corresponding UTM coordinates for the same location are Zone 13Q – 606,023.21 East, 2,334,200.76 North. Figure 6.1. SDLE Mine concessions map The mining concessions are located along the south side of the Rio Grande de Santiago valley and cover mine workings that date from Colonial times. The concessions are held in the name of San Diego y La Española S.A. de C.V. (SDLE). 6.1 COMPANY RIGHTS TO MINING CONCESSIONS SDLE, the subsidiary of Stroud in Mexico, owns 100% of the title rights to the Santo Domingo II (Title 186,469) and Nombre de Dios (Title 187,901) mining concessions located in the mining district of Hostotipaquillo in Jalisco State, Mexico. Hostotipaquillo is located approximately 100 km by road west of Guadalajara. The two mining concessions cover an area of 135 hectares and are described, as follows. Santo Domingo II – The mining concession for exploitation number 186,469, covering the mining claim named “Santo Domingo II”, with surface area of 40 hectares, located in the Municipality of Hostotipaquillo, State of Jalisco, México, registered under entry number 349, page 88, volume 255, of the Book of Mining Concessions of the Public Registry of Mining. The Project 09-070 10 BEHRE DOLBEAR
  17. 17. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 Santo Domingo II claim was staked under the name of Salvador Rodriguez López, for the production of gold, silver, lead, copper, and zinc. The Santo Domingo II exploitation concession terminates on April 1, 2015 and requires a payment in the order of $5,149.00 Pesos per semester for the year 2010, as shown in Table 6.1. (The mining duty varies according to a table published by the Mines Directorship every year.) Nombre de Dios – The mining concession for exploitation number 187,901, covering the mining claim named “Nombre de Dios”, with surface area of 95 hectares, located in the Municipality of Hostotipaquillo, State of Jalisco, México, registered under entry number 301, page 76, volume 257, of the Book of Mining Concessions of the Public Registry of Mining. The Nombre de Dios claim was staked under the name of José Manuel Rodríguez Cabrales, for the production of gold, silver, lead, copper, and zinc. The Nombre de Dios exploitation concession terminates on November 21, 2015 and requires a payment of $12,227.00 Pesos per semester for the year 2010, as shown in Table 6.1. (The mining duty varies according to a table published by the Mines Directorship every year.) Table 6.1 shows a summary of the status and obligations for the SDLE concessions. Behre Dolbear notices that the Mexican Mining Law was amended by a Congress Decree dated February 22, 2005, published at the Official Daily of the Federation on April 28, 2005. According to said amendment, exploitation mining concessions are now only valid for 50 years and all existing exploration mining concessions are automatically converted into exploitation mining concessions from January 1, 2006. Figure 6.1 shows the boundaries of SDLE’s concessions at Santo Domingo and the relative position of the main mineralized structures within the claims. Mining concessions in Mexico are granted after a series of steps, which include the submittal of an application for mining rights at the nearest mining agency and the payment of corresponding fees. The Dirección de Minas, through the Regional Mining Delegations, controls the location and validity of claims; however, as a part of the process, it is the concession holder’s responsibility to submit proof of assessment works that must include surveying of claim monuments by a registered professional land man. The Dirección de Minas will verify and register the correctness and validity of this work. Once the due diligence of the request for concession is approved, a Title is issued to the applicant and biannual fees and annual assessment obligations are initiated. A titles opinion and the present status of the property titles was prepared by the Creel, García-Cuellar, Aiza y Enríquez Law Firm in México City on behalf of Stroud and was provided to BDM (Appendix 1.0). The normal investigation behind a Title Opinion includes a review of records existing in the Dirección de Minas (DM) including title status, annual assessment works submitted, bi-annual rights payments, and a search of the actual title rights holder in the Public Mining Registry to verify possible title encumbrances and/or sales, etc. Project 09-070 11 BEHRE DOLBEAR
  18. 18. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 TABLE 6.1 SAN DIEGO Y LA ESPAÑOLA, S.A. DE C.V MINING RIGHTS (DUTIES) OF SDLE’S CONCESSIONS FOR 2009 Title Mining Rights (Duties) Title Actual Owner Type of Name Hectares Granting Granted To Expiration Date 2nd Semester 2008 1st Semester 2009 2nd Semester 2009 Number (100%) Concession Date Paid (Pesos) Paid (Pesos) Paid (Pesos) Santo Domingo II 40.0000 186,469 Salvador Rodríguez López San Diego y la Española, S.A. de C.V. Exploitation April 1, 2015 $5,642.00 $5,189.00 $5,149.00 Nombre de Dios 95.0000 187,901 Jose Manuel Rodríguez Cabrales San Diego y la Española, S.A. de C.V. Exploitation November 21, 2015 $13,397.00 $12,323.00 $12,227.00 Total Hectares 135.0000 Project 09-070 12 BEHRE DOLBEAR
  19. 19. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 According to the Title Opinions dated November 27, 2009 for the Santo Domingo II and Nombre de Dios Concessions held by SDLE, quoted below: Therefore, the said mining concessions (a) are valid, enforceable and in good standing; and (b) such mining concessions and the rights derived, thereunder, are free and clear of all liens, mortgages, claims, encumbrances and security interests of any kind or nature. Behre Dolbear reviewed the subject information by Creel and Associates but is not qualified to express any legal opinion with respect to the property titles and current ownership and the status of possible encumbrances. Behre Dolbear has no reason to infer that the information used in the preparation of the report is invalid or contains misrepresentations. Project 09-070 13 BEHRE DOLBEAR
  20. 20. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 6.2 COMPANY OWNERSHIP The following paragraph, written by Stroud (D. McBride, October 2009, G. Coburn, November 2009) provides a summary of the property of the Santo Domingo concessions, liens and obligations and their current status: “Stroud Resources Ltd. and equal and joint venture partner New Bullet Group Inc. by agreement dated April 18, 2002 and as amended September 27, 2002 purchased 91.3% ownership of Compañía Minera San Diego y La Española, S.A. de C.V. (SDLE). Stroud Resources Ltd. (SDR) entered into an option agreement with the New Bullet Group Inc. (NBG) whereby NBG could earn a 50% interest in all of SDR’s interest in SDLE by matching SDR’s $1,000,000 investment in the property. In their January 17, 2003 technical qualifying report, Behre Dolbear and Company describe a lien against the property by Fideicomiso de Fomento Minero (FIFOMI) respectively. On March 8, 2004, an agreement was reached with FIFOMI in which SDLE paid FIFOMI a $200,000 settlement, which resulted in dismissal and removal of a lien and a claim against the property. Later, the New Bullet Group became Amerix Precious Metals Corporation (Amerix). Stroud and Amerix paid the original shareholders $200,000 each and each company granted them a 0.5% NSR, which is capped at $2.45 million. Subject to these interests, Stroud Resources Ltd. owns 100% of San Diego y La Española S.A. de C.V.” On August 8, 2006, Stroud paid Amerix $1.8 million for their interest in the property, subject to a 5% Net Smelter Return (NSR) from the sale of minerals. This interest is capped at $1 million. 6.3 SURFACE RIGHTS Mining concessions in Mexico do not include surface property; therefore, the surface rights must be obtained through purchase, rental, or other means, in order to make use of it. Surface rights for the SDLE claims belong to the Ejido Santo Domingo de Guzmán, a duly approved and registered communal property. Since 2003, negotiations were carried out by SDLE to obtain permission to carry out exploration activities, including access road, drilling and trenching. SDLE has leased surface rights from the Ejido of Santo Domingo de Guzman to cover these mining concessions and the surrounding area, granted by a general meeting held November 3, 2002 in accordance with Méxican regulations, and a lease agreement ratified before Notary Public number 1 Lic. Juan Peña Razo de Magdalena, Jal. The agreement extends to 2013 and requires an escalating annual rent of US$1,771.56 in 2008, rising at 10% per year to US$2,593.72 in 2013. Copies of the Ejido agreements are in the files of SDLE and Stroud Resources for consult if required. 6.4 ENVIRONMENTAL PERMITTING FOR EXPLORATION ACTIVITIES In 1999, Stroud Resources de México, S.A. de C.V. another subsidiary of Stroud, carried out the first drilling campaign which consisted of five holes of which two were lost and repeated. These holes were drilled from then existing roads and mine patios. The second drilling campaign of 2003 was permitted by submitting an Environmental Permitting Notice report, according to Regulation NOM 120 ECOL 1997, which included the construction of 2,400 meters of access roads and drill pads (BDM, November 2002). Project 09-070 14 BEHRE DOLBEAR
  21. 21. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 However, the second drilling campaign in 2003 was terminated prior to the completion of a single hole due to drilling problems. Drilling was resumed in 2005 and has continued intermittently ever since. To date 25 holes have been completed in this program and the Rayas Vein System has been outlined for a length of 500 meters. The drill holes for the second drilling campaign between 2003 and 2009 were carried out from the access road permitted in 2002. Copies of the environmental report are in the files of SDLE and SDR for consultation, if required. Project 09-070 15 BEHRE DOLBEAR
  22. 22. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 7.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND PHYSIOGRAPHY The project site access from the State Capital of Guadalajara is, for the first 72 km, a toll, multi-lane paved highway to Magdalena, with a population of some 10,000, requiring approximately one hour travel (Figure 7.1). Hotel, communications, school and health services facilities exist at Magdalena. From Magdalena to the village of Santo Domingo de Guzmán, the paved highway to Hostotipaquillo can be followed or, at 80 km of highway to Tepic, an all-weather gravel road passing through San Simón and Labor de Guadalupe can be followed for approximately 27 km to Santo Domingo. Santo Domingo is a village of some 1,000 inhabitants with only basic services. The property is approximately 5 km from Santo Domingo de Guzman via a locally steep, narrow back country road that leaves from the local school and winds down into the valley of the Rio Grande de Santiago, just across the old San Pedro Analco mining zone. Figure 7.1. Location and property access map There are no public transportation services from Santo Domingo to Magdalena or Hostotipaquillo; private vehicles or rental vehicles are used for this purpose. The road condition from Santo Domingo to the site has been adequately up-graded to accommodate the present technical program recommended in this report, but will require minor refurbishment. The property is characterized by mature to youthful physiography that varies from gently rolling hills in the heights of the plateau to steep, abrupt topography in the slopes of the Rio Grande just below and Project 09-070 16 BEHRE DOLBEAR
  23. 23. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 including the eastern part of the concessions. Drainage near the concessions is to the Rio Grande de Santiago northward to join the Rio Bolaños (Figure 7.2). Figure 7.2. Santo Domingo – Topographic relief and project infrastructure – Vein Structures pass under the hill and parallel to the main valley in the background – Trees on hill in centre of Photo mark a Shaft on the Guadalupe System (D. McBride, 2009) Elevations vary in the district from a maximum at Cerro Magistral of approximately 2,200 meters above sea level (masl) to minimums, in the canyons of the Rio Grande de Santiago and Rio Bolaños, in the order of 400 to 350 masl. In the vicinity of the concessions, the topographic relief varies from 1,200 masl at the top of the La Española mountain just above the mine areas, to slightly less than 500 masl at the base of Rio Grande, near the bridge connecting with San Pedro Analco. The average elevation of the project is in the order of 900 masl. The valley slopes range from 30 degrees to vertical and locally average 45 to 50 degrees. Vertical cliffs up to 200 meters high are not uncommon (Figure 7.3). The project district climate is temporal and is made up of a dry season and a wet season which extends from June to October. Annual precipitation is in the order of 900 millimeters. The November to May period is dry and hot. Temperatures average 32°C in the day time, with the highest day time temperatures as much as 47°C, which was recorded at the Santo Domingo camp in 2008. During the winter months, December through March, frost may occur at higher elevations, but it is rare. Project 09-070 17 BEHRE DOLBEAR
  24. 24. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 Figure 7.3. Rio Grande de Santiago Valley, looking Northwest (B. Solano, 2009) Hostotipaquillo, the closest weather station and 11.0 km to the SW, shares a similar climate, although 400 meters higher than Santo Domingo, that can be classified as: Warm, sub-humid with summer rainfall and extreme weather variations (E. García, 1988). Basic meteorological information is provided by three weather stations in the neighborhood. TABLE 7.1 SUMMARY OF METEOROLOGICAL INFORMATION AND CLIMATE CLASSIFICATION Altitude Rainfall Temperature Station Latitude Longitude (meters) (mm) (ºC) Hostotipaquillo 1,291 21°03’ 104°03’ 790.7 22.1 Magdalena 1,401 20°55’ 103°59’ 996.8 21.1 La Quemada 1,400 20°58’ 104°03’ 858.7 22.1 Source: “Modificaciones al sistema de clasificación climática de Köppen”, Enriqueta García, México, 1988. In the area of the concessions, the vegetation ground cover comprises mainly scrub trees and bushes. The area is sparsely populated; cattle raising with some cultivation of market crops comprise the main district land uses. Agricultural produce, for subsistence purposes, from the area comprises corn, beans, squash, nuts, and avocado and a variety of other fruits and vegetables are grown on moderate slopes and the limited flat ground available. The soil is not fertile and only supports subsistence farming. Project 09-070 18 BEHRE DOLBEAR
  25. 25. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 Water is available throughout the year from the Rio Grande de Santiago, down slope to the northeast from the main adit and showing area, a distance of approximately 500 vertical meters. SDR has established pumping facilities for drilling purposes during previous campaigns and would have to acquire the corresponding water permit from the Comisión Nacional del Agua (CNA) for a future campaign. With the ongoing construction of the hydroelectric La Yesca Project dam, it is expected that the tail of the reservoir will reach the lower part of the project area, at the approximate 580 masl curve, outside Stroud boundaries. A 22,860-volt electrical transmission line crosses the project site. A new 112.5 kvA sub-station with voltage step-down from 22,860 volts to 480 volts, complete with 480 volt disconnects, was installed at the river side on SDLE’s concessions. The remnants of other site buildings includes an old cyanide mill from past underground mining programs; but none are in current use and it would not be feasible to re-use them. Stroud has carried out several exploration campaigns through the years 2002 to 2009 with the available local work force from Santo Domingo de Guzman and nearby ranches, including help from Labor de Guadalupe, where a warehouse/core house is maintained by the company. Technical personnel with computer, electrical, plumbing, mechanical, carpentry, drilling and some heavy equipment skills can be available in the Magdalena-Hostotipaquillo region due to the active opal mining activities. However, more specialized mining and other professionals will have to be imported when required. Project 09-070 19 BEHRE DOLBEAR
  26. 26. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 8.0 HISTORY Stroud has undertaken a considerable amount of research on the history of the Hostotipaquillo Mining District and the Santo Domingo mine area, mainly through Dr. Derek McBride, P.Eng. The following excerpt is taken from his work with some additions from Behre Dolbear, 2003: “Mineral exploration and mining in the Hostotipaquillo region goes back to the early sixteenth century. As a result of this activity the town of Hostotipaquillo was settled to become the centre of mining activity. Few records exist of the mining activities and boundaries of the active areas have changed. Santo Domingo seems to have been settled about this time, but was considered part of the San Pedro Analco mining camp until the 1850s. Prior to the 1850s, considerable mining took place at the present property. Remains of this infrastructure can be seen as mine workings shown below (Table 8.1), roads and some building sites. Initial prospecting identified high grade silver-gold veins made up of quartz, calcite, galena, sphalerite and chalcopyrite. Barren iron sulphides are only present in minor amounts. Over the next few decades, these high grade lenses were mined by hand; they can be differentiated from later late-eighteenth century workings by the lack of drill holes or blast patterns. Most of the investigated tunnels were excavated at this time. They followed the known mineralized shoots or were crosscut into them to provide access and ventilation. The Rayas vein system was followed from the Nombre de Dios Mine on the south (Figure 8.1), to the Bella Vista on the north, a distance of 500 meters (Figure 8.2). Tunnels show that the mineralizing system is continuous over this length. Individual lenses of high grade material were mined in the San Salomón, San Pedro, San Pedro el Alto, La Bonita, Rayas, and Bella Vista mines. Drilling by Stroud has intersected mine workings defined by voids and wood in the drill core. Approximately 100 meters southwest of the Rayas Vein System is the Socavon III- Guadalupe Vein System. Multiple mines are located along this structure. The most easterly is Socavon I; from it, the mineralization can be traced through Socavon II, Socavon Intermedio (Figure 8.3), and Socavon III on the south side of the ridge. Caved tunnels and a shaft trace the vein system over the ridge and down the north side of the hill through La Española to the Guadalupe Mine, a horizontal distance of close to 900 meters. Mineralization has been traced in these workings for depths of approximately 100 meters to the end of the high grade mineralization or to where the weathered rock terminated and hand mining was no longer possible. Many tunnels show timbering and stopes with timber retaining walls and cribbing for on-going mining. While many of the mine workings have collapsed, those that remain provide an estimate of the mining carried out in the sixteenth and seventeenth centuries. McBride has calculated the tonnes mined in those mines that he visited and mapped. He estimates that during the earliest mining Period between 150,000 and 250,000 tonnes were mined. Project 09-070 20 BEHRE DOLBEAR
  27. 27. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 TABLE 8.1 EXISTING MINE WORKINGS ON SANTO DOMINGO PROJECT Name Northing Easting Elevation Details THE LOS REYES SYSTEM entrance approximately 22 meters Los Reyes* 2334370 606643 994 at 222° entrance 7 meters at 33°, vein at San Pedro* 2334259 606709 991 305° or 125° entrance 9 meters at 213°, vein at San Salomón* 2334259 606709 991 140° Nombre des Dios* 2334201 606787 990 entrance 8 meters at 330° El Mano 2333984 606928 897 small workings, road to Soc 11 estimated below cattle grate on La Rosario* road and above Camp estimated location tunnel at 210° El Mono 1 2335790 606225 600 for 28 meters El Mono 2 2335818 606251 573 tunnel at 80° for 50 meters estimated entrance, tunnel at El Mono Abajo 2335775 606200 555 230° for 60 meters Above San Salomón 2334240 606724 1,018 workings above San Salomón Small Tunnel at 350 2334229 606621 1,048 on Mina Jasmine system? Stope on Hill 2334288 606626 1,069 stope comes out cliff Poss. Soc. 2334514 606432 921 below San Pedro 4 meters to tunnel at 160° for La Bonita 2334233 606757 984 24 meters, raise up Bella Vista 2334530 606577 948 entrance at 224° for 130 meters JASMINE SYSTEM Mina Jasmine 2334381 606354 1,066 0.5 meter stope on vein Small Shaft and Tunnel 2334231 606570 1,116 on 10 cm vein THE GUADALUPE SYSTEM Socavon 111 2333991 606729 1,004 socavon at 330° Socavon 11 2334028 606847 930 entrance at 280° Socavon 1 2334016 606996 845 entrance at 260° entrance here, behind caved Socavon Intermedio 2333965 606783 960 entrance for 20 meters El Zorro 2334101 606560 1,168 caved workings La Española 2334551 606239 950 Entrance to mined lens Monument, entrance, 20 meters at Guadalupe 2334590 606219 917 215° On Road to El Cobre 2334027 606853 952 possible entrance Dump lowest 2333924 606888 901 possible entrance Soc 11 Poss. Soc. 2334028 606721 1,010 Above Soc. 111 Stope 2334058 606686 1,027 El Cobre 2334250 606828 926 entrance La Esperanza 2334381 606893 841 entrance 240° for 6 meters Project 09-070 21 BEHRE DOLBEAR
  28. 28. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 TABLE 8.1 EXISTING MINE WORKINGS ON SANTO DOMINGO PROJECT Name Northing Easting Elevation Details El ZOPILOTE SYSTEM tunnel at 240° stope in at El Zopilote 2334456 606278 1,034 15 meters at 150, 60NE El Zopilote West 2334692 606149 917 small tunnel at 150° 25 meters SANTA CLARA SYSTEM La Santa Clara SANTA FE SYSTEM La Santa Fe Source: D. McBride, 2008 Figure 8.1. Nombre de Dios open stope (B. Solano, 2009) Project 09-070 22 BEHRE DOLBEAR
  29. 29. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 Figure 8.2. Rayas Vein System in the Bellavista tunnel: timbering extends for 10 meters across the vein system (D. McBride, 2009) Figure 8.3. Timber wall holding up rock fill in 6 meter-wide stope – Socavón Intermedio (D. McBride, 2009) Project 09-070 23 BEHRE DOLBEAR
  30. 30. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 Further evidence of the extent of activity is seen in the infrastructure left behind. All present roads follow old Spanish pathways or caminos. Stone walls and rock excavations attest to the road system developed. A fortified compound approximately 25 by 40 meters seems to have been the main control point. It has one and a half meter walls and two gates, which lead to mine workings (Figure 8.4). Locally, small flat areas and stone walls may mark habitations; pottery fragments show that some are from pre-Columbian Indian sites. There does not seem to be any written records of this activity. Figure 8.4. View of the fortified compound that was probably the control center for the mining operations – Opening in wall is for a road to El Zopilote Mine (D. McBride, 2009) A second period of exploration and mining is identified by the metal tools and drill holes. In some cases, tunnels bypass the Spanish mines and attempted to explore deeper into the mountain. Socavon III, Socavon Intermedio, and Socavon II have these tunnels. Two major cross cut tunnels are thought to have been excavated at this time, El Cobre and La Esperanza. El Cobre is at the same elevation as Socavon II and was designed to gain access to the two vein systems deeper in the mountain. It crossed the Rayas system and intersects the Soc. III – Guadalupe System. Some mining was carried out on the Raya system and the Soc. III – Guadalupe System was followed for some distance. Approximately 85 meters below this tunnel a parallel cross cut, La Esperanza, was driven as far as the Rayas system and some mining carried out. A small processing plant was built on the road between El Cobre and Socavon II. It has a stone grinding mill and some slag left over from attempts at smelting. Metal objects date this activity from the late nineteenth or early twentieth centuries. There is no evidence that significant production was achieved at this time”. From the early 1900s to recent times, the history of mining in the district is incomplete and generalized. The composite production during the early time is not known, but is inferred not to have been significant. Project 09-070 24 BEHRE DOLBEAR
  31. 31. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 In the period 1900 to 1940, North American interests were predominantly responsible for the financing and progressive development of the mines of the district. From the 1930s to the present, Mexican and foreign-based mining interests intermittently studied and developed producing operations, most notably at or nearby the most prolific mines, such as Bolaños and Cinco Minas. The record of precious metals production from the Bolaños area mines is not known with confidence. Estimates of mining production at Bolaños vary widely; however, silver production is suggested to have been in the order of 60 million troy ounces. The Cinco Minas mining operation is reported to have produced approximately 15 million ounces of silver and 97,500 ounces of gold from 1.2 million tonnes of ore, mainly in the years 1920 to 1940. Exploration up to the mid-1970s was carried out by Compañía Minera Las Cuevas S.A., then the Mexican subsidiary of Noranda Mines Limited, which conducted mapping and sampling in 1954 and between 1973 and 1974. Recorded results show values of economic interest, however Noranda did not do any follow up work. A summary of results is presented in Table 8.2. These results are considered historic and not compliant with NI 43-101 regulations. TABLE 8.2 NORANDA DRILL PROGRAM RESULTS Core Length Silver Gold Drill Hole Location (meters) (ppm) (ppm) E-1 Top of Hill Above La Raya No Values No Values E-2 Underground in La Esperanza 5 48 1 E-3 Underground in La Esperanza 6 86 1.5 37 47 Tr E-4 Underground in La Esperanza 3 80 Tr E-5 Location Unknown E-6 Dump West of Lower Switch Back No Values No Values E-7 Proximity to Mina Jasmine 10 44 0.3 2 1835 3.0 E-8 In Front of La Raya at 230º 19 467 0.7 E-8A In Front of La Raya at 280º 21 219 0.7 E-8B In Front of La Raya at 200º 13 242 0.8 E-9 North of La Raya Near Power Line 15 89 0.1 During the latter 1970s and in 1988, the Comisión de Fomento Minero completed various technical studies in the area and conducted chip sampling in the concession adits. From this information, certain tabulations of reserves and resources were made. Behre Dolbear considered the results not acceptable for present resource/reserve standards. They were not considered in the 2003 report, nor herein. In 1994, the concessions owners requested the Consejo de Recursos Minerales, a government minerals resources agency now Servicio Geológico Mexicano, to conduct a sampling program of existing mine dumps, followed by a pitting and sampling program, which generated in the order of 77 samples for assay. At the time of the study, the mine dumps reportedly contained 21,595 tonnes of rock at a grade of 308 g/t Ag and 1.53 g/t Au (Table 8.3). Project 09-070 25 BEHRE DOLBEAR
  32. 32. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 TABLE 8.3 DUMP SAMPLING PROGRAM (CRM, 1994) Number of Area Depth Ag Au Dump Pits Tonnes S. G. Samples (m2) (m) (g/t) (g/t) Socavón No. 2 1st 16 29 2,686 1.85 7,950 273 1.38 1.6 Socavón No. 2 2nd 7 7 1,600 2.21 5,657 340 2.5 1.6 Española 17 17 976 1.57 2,452 380 0.78 1.6 Española Lower 11 11 1,144 1.36 2,451 325 1.08 1.58 Rayas 7 7 750 1.57 1,884 326 1.45 1.6 Socavón No. 3 6 6 537 1.57 1,201 179 0.6 1.42 Totals 64 77 21,595 308 1.53 The previous owners of SDLE, in an attempt to mine the Rayas Mine, in 1990 acquired an approximate US$93,000 debt in principal plus interest mill construction loan with the Fideicomiso de Fomento Minero (FIFOMI), a federal agency to the mining industry in México. Milling equipment was transported to the site but never installed. Production was never achieved and the loan became a burden on the mining claims. FIFOMI filed a lawsuit for payment and exerted its warranty upon SDLE claims with the Dirección de Minas, which claims were frozen until payment of the debt was made by Stroud. Stroud optioned the property in 1999 and conducted a limited program of check chip sampling in the accessible adits and surface mineralized zones to initially substantiate the mineralization potential of the concessions. Upon securing an agreement to purchase the concessions at that time, Stroud carried out some tunnel and surface sampling which, along with previous Las Cuevas and CRM results, confirmed the potential of the mining concessions. Stroud then undertook an initial core drilling program in 1999, and a second drilling phase. In 2003, followed by the most recent campaign between 2005 and 2008. The reader is referred to Section 12.2 (Stroud Resources Exploration) for a detailed account of recent exploration efforts. Project 09-070 26 BEHRE DOLBEAR
  33. 33. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 9.0 GEOLOGICAL SETTING 9.1 REGIONAL GEOLOGY The Western part of México presents a stratigraphic succession, which includes a Cordilleran – equivalent basement, Oligocene to middle Miocene Sierra Madre Occidental (SMO) volcanic rocks and a Late Miocene to Quaternary Mexican Volcanic Belt (MVB) sequence (L. Ferrari, 1999). The oldest rocks in the region are sedimentary and volcano-sedimentary units of the Guerrero Terrain overlain by volcano- sedimentary rocks of the Cretaceous Tepalcatepec Formation locally affected by the Eocene Puerto Vallarta batholith, approximately 54 million years old (54 Ma). None of these units outcrop in the project area and are more typical of the area south of the MVB (SGM, 2004). The SMO is a large Middle Tertiary volcanic province, which extends from the southwestern United States to central Mexico (Figure 9.1). The average thickness of the SMO exceeds 1,000 meters and its width averages 150 km. The study area encompasses the southernmost part of the SMO. The existence of a pre-volcanic (Cretaceous?) basement as previously indicated, is substantiated by localized outcrops of argillite and limestone which were exposed along the lower part of the Rio Grande de Santiago canyon. The spatial association of these rocks with Late Oligocene to Early Miocene granite to granodiorite stocks suggest that they were roof pendants uplifted by the plutons. Although Eocene rocks are reported about 50 km northeast of San Cristobal and in the central SMO in Durango, no pre-Oligocene volcanic rocks have been found in the study region (L. Ferrari, 1999). Figure 9.1. Sierra Madre Occidental Province and associated Mineral Districts Project 09-070 27 BEHRE DOLBEAR
  34. 34. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 North of the Project area, the SMO volcanic sequence is characterized by more than 400 m of regional ash flow tuffs of early Miocene age, capped to the south by a basaltic sequence of 21.8 Ma age. The SMO units are sub-horizontal and locally dipping as much as 25 degrees from horizontal; these units were later covered in unconformity by the TMVB volcanism that ranged from 13 to 8.7 Ma basalts and up to 4.8 Ma ignimbrites (A. Rossotti, 2002). The Santo Domingo Project is located in the Southern part of the SMO Geological Province, which is one of the most extensive volcanic belts in the continent, some 25 km to the North of its limit with the MVB (Figure 9.2). SANTO DOMINGO Figure 9.2. Regional tectonic map of the southwestern part of the Sierra Madre Occidental – Shaded area is the late Miocene to Quaternary Trans-Mexican Volcanic Belt The most widespread unit in the southern SMO is a succession of welded ash flow tuffs and minor andesitic lava flows, which attain an aggregate thickness of 800 meters in the southeastern part of the area. Oligocene ash flows (34-28 Ma) are found in the Santa Maria del Oro and Juchipila areas. In the western part of the area, these rocks are interbedded with, and capped by, volcano-clastic sequences made of clay, sandstone, and conglomerate. Most of the SMO, however, is covered by rhyolitic ash flow and pumice-flow with common obsidian and minor domes with ages of 26-17 Ma and which are only found in the southern SMO (L. Ferrari, 1999). Project 09-070 28 BEHRE DOLBEAR
  35. 35. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 Regionally, the SMO Province shows two differentiated volcanic Groups according to its composition and age: the Lower Volcanic Group (LVG), forming the lowest part of the volcanic sequence of SMO, exhibits more intermediate to mafic composition; and the Upper Volcanic Group (UVG) that is more felsic than the LVG. The contact between these two units is commonly erosional with the local presence of red conglomerates filling ancient topography. The importance of the SMO Province is due to its being host to one of the largest epithermal precious metal metallogenic provinces in the world which includes some of the well-known silver-gold (Ag-Au) producing mining districts of Mexico. Figure 9.1 shows a map with the location of a number of Mineral Districts, active mines, and advanced projects. From North to South, are the Mulatos, Dolores, Palmarejo, Ocampo, Moris, Batopilas, El Sauzal, Guadalupe y Calvo, San Julián, San Dimas-Tayoltita, Bacis, Topia, La Ciénega, Guanaceví, and Metates. Closer to the subject area, the Cinco Minas (Figure 9.3), Bolaños and San Martin de Bolaños historic mines are also enclosed in LVG rocks, although there is evidence of mineralization passing through into the lower part of the UVG, as in the case of La Ciénega in Durango State. Figure 9.3. Regional mineralized zones The highly mineralized nature of the LVG is readily evident when a regional geology and topography map of the SMO metallogenic province is observed. Most of the region is covered by sub-horizontal UVG rocks and shows only a modest number of mineral deposit showings and mines. However, where a river valley has incised through the ignimbrites and exposes LVG andesites, a large concentration of mineral deposits is found. This is further enhanced by the fact that the SMO is generally characterized by mountainous terrain with few roads and limited access, and has, therefore, been explored much less than other, more accessible areas. Project 09-070 29 BEHRE DOLBEAR
  36. 36. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 The Mexican Volcanic Belt (MVB) is a 1,000-km-long volcanic arc formed in response to the subduction along the Acapulco trench since the middle Miocene period (Figure 9.4). The western MVB has been often regarded as mainly Plio-Quaternary in age but a large amount of mafic lavas were also emplaced in Miocene time (L. Ferrari, et al., 1999, p. 11). In the Guadalajara region, a monotonous sequence of thin basaltic lava flows is exposed along the Rio Santiago east of Tequila. This succession has yielded rock ages of 10.2-8.5 Ma and the composition of the rocks tend to evolve up-section from alkali-basalts to basaltic andesites. Individual flows range between 2 and 10 meters in thickness and the exposed succession is over 600 meters thick. The Plio-Quaternary MVB consists mostly of basaltic cinder cones and shield volcanoes, andesitic to dacitic stratovolcanoes and dacitic to rhyolitic domes. In the Guadalajara and Hostotipaquillo areas, a peculiar variety of Early Pliocene porphyritic olivine-basalts with megacrysts of plagioclase are found within this group but the rest of these rocks are microporphyritic to aphyric (L. Ferrari, et al., 1999, p. 15). 9.2 LOCAL GEOLOGY 9.2.1 Lithology The Rio Santiago cuts through the Tertiary volcanic section and the oldest rocks are found along the river at an elevation in the order of 500 masl. These rocks are commonly termed andesites, but may be more basaltic (D. McBride, 2009). Mapping by Ferrari, et al. includes these rocks within their Tov unit (Figure 9.4) formed of Oligocene andesites, basalts, and felsic ash fall and ash flow tuffs, belonging to the SMO Group and reported, but not confirmed, as part of the UVG. However, it is believed that these rocks belong to the LVG, probably close to the contact of both Groups. These rocks have been altered by the granite-granodiorite stocks outcropping in the Río Grande, of a reported 35 to 17 Ma age, previous to the Miocene age of the UVG. Layering shows these rocks to be generally flat, but dips of up to 30 degrees have been measured locally. Above the andesites, an essentially conformable sequence of rhyolitic rocks extends to just below Santo Domingo’s football field (approximately at 1,200 masl). This sequence consists of local units that may or may not be present. They include a hard, fine-grained porphyritic tuff, a similar cherty looking rock that lacks the prophyritic character and rhyolite agglomerate. This last unit has an andesitic matrix but is termed rhyolite by the preponderance of polymict rhyolitic volcanic clasts (D. McBride, 2009). This rhyolitic agglomerate is the most important rock to date because most of the better mineralization occurs within it (Figure 9.5). The Rayas, Jasmine, Guadalupe and El Zopilote veins seem to be capped by a thick rhyolitic ash unit (Figure 9.6). This ash unit is a cliff-forming rock that is obvious south of the camp. Similar cliff-forming ash sequences are common in this part of the Sierra Madre Occidental. Above this unit, the Santa Fe and Santa Clara vein systems seem to occur in a second, and younger, rhyolite agglomerate unit. Above these rhyolites there are andesites that form the rocks near Santo Domingo de Guzman. Generally, the individual units are flat but seem to regionally dip to the south. Along the road to La Labor, another thick rhyolitic tuff-ash fall unit is exposed. It is capped on the height of land by a scoriaceous basalt to ultramafic sequence. It is diagnostic by its deep, rusty weathering. From the various bedding angles, the entire sequence is generally flat lying; however, local dips may be as steep as 30 degrees. Project 09-070 30 BEHRE DOLBEAR
  37. 37. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 Figure 9.4. Regional geologic map of the late Miocene to Quaternary Mexican Volcanic Belt (after L. Ferrari, et al., 1999 – modified by B. Solano and J. Solis) Project 09-070 31 BEHRE DOLBEAR
  38. 38. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 Figure 9.5. Local geology and drill hole location map – Rayas, Guadalupe, La Española, and Jasmine veins traces Project 09-070 32 BEHRE DOLBEAR
  39. 39. NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010 Figure 9.6. Cliff southwest of camp showing the thick capping rhyolite volcanic ash – El Zopilote Abajo is at bottom of cliff at center of photo (D. McBride, 2009) 9.2.2 Structure Faulting has been widely quoted in the literature, but in the field it is much harder to document. Major faulting is postulated along the Rio Santiago. It is difficult to see any regional structures in the river because the thick ash fall tuff units are not displaced. To produce a fault pattern would require complicated cross faulting that is not seen in the surrounding, well-exposed mountain ridges. Similarly, the fresh, flat lying volcanic sequence eliminates the presence of shear zones. Mud seams are common in the drill core and have been observed in the mine workings. They seem to represent minor normal faults; displacement of a couple of meters was observed in the San Pedro Alto tunnel. These faults are post- mineralization, having displaced individual veins. Minor faults have been seen in road outcrops near Hostotipaquillo, with displacement of less than one meter. Parallel faults in close proximity suggest that these are minor compaction structures (D. McBride, 2009). A northwest-trending broad zone of fracturing and pervasive silicification hosts quartz-calcite veins and veinlets with associated silver and secondary gold mineralization. The structural zone strikes N30° to 45 W and dips 70 degrees to 75 degrees northeast. The zone is exposed near the top of a hill, with steep local topography. The mineralized zone has been prospected where readily exposed, accessed by 10 adits, undergone small-scale test pitting with sampling programs and has been tested by core drilling programs by Compañía Minera Las Cuevas (Noranda affiliate) in 1974 and subsequently by Stroud in a limited program in 1999. The mineralized zone is established over a strike length of 900 meters and the width of the fractured and silicified zone may vary from 20 to 30 meters. A more prominently mineralized area within the structure has not been established (BDM, 2003, p. 15). Project 09-070 33 BEHRE DOLBEAR

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