Mexico Properties

Salamandra Project, Durango State, Mexico

• 2,900 hectares, direct staking and option to acquire 100% title
• Zinc, silver disseminated mineralization
• 35 km northeast of Durango
• Geologic setting similar to San Martin mine of Grupo Mexico
• Excellent infrastructure, power, water, services
• Moderate climate and topography, elevation of 1,800 m to 2,000 m
• Evaluation samples returned up to 6.59% Zn and 39.8 g/t Ag over 3 metres
• 3-D geophysics planned to test for mineralized structures
• Geological mapping and sampling to define drill targets

Location, access and infrastructure

The Salamandra project covers 2,900 hectares (7,613 acres), located 35 km NE of the city of Durango in the El Guadiana valley in Durango State, with good access from Durango via paved and gravel roads. The access, infrastructure, climate and topography at Salamandra provide favourable conditions for exploration and development.

Geology and Exploration History

The geological setting and mineralization at Salamandra is similar to the San Martin Mine of Grupo Mexico, located approximately 80 kilometres to the southeast. The San Martin Mine is the largest underground zinc-copper-silver mine in Mexico and currently operates at 5,600 tonnes per day.

Chip and grab samples at the Salamandra project contain encouraging grades of zinc and silver mineralization, grading up to 7.84% zinc and 25g/t silver over 3.2 metres. The mineralization is associated with fault and fracture replacement zones within a thin band of argilically altered and silicified siltstones and interbedded limestones along the southern contact of a rhyolite porphyry intrusive. The principal mineralized target area at the Salamandra project is a flat covered area to the south of the mineralized sediment outcrops covered by shallow gravel and basalt.

Nine historical samples taken from the area below the main intrusive body reported strong zinc and silver values as presented in the table below. Two check samples taken during a property evaluation visit in January 2006 confirmed the positive zinc and silver values reported, with anomalous copper grades.

Salamandra project, Durango, Mexico – historical and evaluation samples:

Canasil Exploration Program

Canasil completed a 3-Dimensional Induced Plarization geophysical survey at the Salamandra project in October 2006 to test for anomalous structures below the surface. At the same time a geological mapping and surface sampling program was completed for additional surface information. Based on the results of these surveys drill targets were identified, and a diamond drill program of 12 drill holes for a total of 3,595 metres was completed in 2007. Initial metallurgical tests have also been completed on blends of high and low grade samples, as well as petrographics and ore mineralogy on drill core samples.

3D-Induced Polarisation Geophysical Survey – October 2006 

The geophysical survey consisted of a 10 line kilometer 3-Dimensional Induced Plarization (IP) / Resistivity geophysical survey, which was completed in October 2006 to test for anomalous structures below the surface. The initial survey results show two large chargeability anomalies measuring 200 to 400 metres in width by 800 to 1,000 meters in strike, with thicknesses of 200 to 300 meters. The anomalies are located on the southern flank of an intrusive body below the area of previously sampled surface zinc and silver mineralization, as well as beneath the intrusive body at a depth of 200 to 500 meters.

The geophysical survey area covered the apex and southern flank of a rhyolite porphyry intrusive formation into siliceous-limy sediments. The survey was designed to test for sulphide mineralization with associated zinc and silver bearing zones within limestones and siltstones in a poorly exposed bedrock area along the margin of the rhyolite porphyry intrusive formation. Eleven previous rock chip and grab samples from this area range in value from 0.41% - 7.84 % Zinc and 4g/t - 39.8 g/t Silver, averaging 3.1 % Zinc and 15.8 g/t Silver.

The target is a sulphide mantle replacement zinc and silver mineralized formation along the intrusive contacts, similar to the San Martin deposit of Gruppo Mexico, located 80 kilometres to the southeast of the Salamandra project. Based on the results of the geophysical survey and the geochemical sampling program a Phase 1 diamond drill program was implemented in 2007 to test the drill targets indicated by these programs.

Phase 1 Diamond Drill Program – 2007

The Phase 1 diamond drill program at the Salamandra zinc-silver project included a total of 3,595 meters in 12 drill holes in two stages of 8 drill holes followed by a further 4 drill holes. Seven out of the eight initial drill holes intersected zinc-silver mineralized zones with a total combined width of 489.07 metres. Six of the eight drill holes returned higher grade zones with a total combined width of 56.26 metres. A table showing the significant mineralized intercepts from these drill holes is attached below.

The initial drill program tested one of the target areas indicated by surface geochemical sampling and 3D-IP geophysics over a strike length of 500 metres with 5 drill holes (SA-07-01 to SA-07-05) collared at 100-metre to 200-metre intervals along a NW-SE line. The remaining 3 drill holes (SA-07-06 to SA-07-08) stepped out laterally by 50 metres in the central area of this zone. This systematic drill pattern provided a basis for the initial evaluation of this prospective mineralized zone. Higher grade mineralization was intersected towards the center of this area in drill holes 02, 03, 06, 07, & 08. Lower grades were intersected at the outer edges in drill holes 01, 04 and 05. The position of the 8 drill holes in the Phase 1 diamond drill program is indicated on the drill plan map.

At Salamandra zinc-silver minerlization is associated with fracture controlled and disseminated replacement zones in hornfelsed limy sediments in contact with a quartz porphyry intrusive. Zinc-silver mineralization consists of higher grade sections from 5 -10 meters in width grading between 2% -12% zinc and 10 g/t - 100 g/t silver, within wider mineralized sections of 20 - 45 metres in width grading from 0.32% -1.08% zinc and 2 g/t – 45 g/t silver In drill holes SA-07-02 to SA-07-08, the weighted average of all 489.07 metres of lower grade mineralized drill intersections is 1.09% zinc and 12.65 g/t silver, and the weighted average grade of 55.26 metres of higher grade intercepts is 4.73% zinc and 54.73 g/t silver.

This initial program indicates the discovery of a potentially large zinc-silver mineralized system, including sections of high grade mineralization, at the Salamandra Project. Soil and rock geochemical sampling indicate the mineralized trend extends on strike for an additional 1,000 meters.

A further 4 drill holes (SA-07-09 to SA-07-12) continued to intersect significant higher-grade zinc and silver intercepts within broader zones of lower grade mineralization. They extended the area over which the zinc-silver mineralized system is observed at the Salamandra project from 500 metres to 700 metres along strike. Eleven of the twelve drill holes have intersected zinc-silver mineralized zones with significant grades and widths. The mineralized zones identified to date appear to be part of a potentially large mineralized system, which is open along strike and to depth, and only a small part of which has been explored to date.

Higher-grade Silver and Zinc drill intercepts:

Assay results from the 2007 drill program returned several high grade silver and zinc intercepts in drill holes SA-07-02 to SA-07-12. The selected higher grade assay results (over 50g/t silver and/or over 3% zinc) are listed below for reference:

Initial Metallurgical Testing, Petrography and Ore Mineralogy – 2007

Preliminary results from initial metallurgical testing on separate blends of high-grade and low-grade samples indicate the potential for high silver and zinc recoveries to two separate clean concentrates. Thin section petrographics of core samples and studies of ore mineralogy also indicate that there are no deleterious materials with negative implications on future processing of mineralized material based on current drill core samples. These results provide further positive indicators for continued exploration at the Salamandra project.

Recommended further Geophysical Survey:

The existing 10 line-kilometre 3-D IP Geophysical Survey has only tested the southern flank of the outcropping rhyolite-quartz porphyry formation. Significant geochemical rock and soil anomalies of silver, zinc, lead and copper are present on the western, eastern, and northern margins of the intrusive formation. The 3-D IP survey should be extended in these areas for at least a further 20 line-kilometres to test these areas.

Recommended further Drilling:

The extensive zinc-silver mineralization intersected in the 2007 drill program, and the large areas of geophysical chargeability anomalies extending to a projected depth of 500 metres, are highly encouraging and indicate additional drill targets for further testing. Additional drilling is warranted to test: