The Geology and ore potential of the Rionegro Project, Santander, .

P. Geo. Ricardo A. Valls Álvarez, Fenix Geoconsult Ltd.,133 Richmond Street West, Suite 204, Toronto, ON, M5H 2L3, Canada, [email protected], +1-416-294-3896 Dr. Jorge Cruz Martin, Fenix Geoconsult Ltd.,133 Richmond Street West, Suite 204, Toronto, ON, M5H 2L3, Canada, [email protected], +57-310-855-4219 P. Geo., Dr. Vadim Galkine, Fenix Geoconsult Ltd., 133 Richmond Street West, Suite 204, Toronto, ON, M5H 2L3, Canada, [email protected], +1-647-501-0590 DOI: 10.17605/OSF.IO/EF7C5 Abstract Alicanto Mining Corp. through its fully owned Colombian subsidiary Alicanto Colombia S.A.S., has applied for two licenses in the Rionegro Project, northwest of , and encompassing disseminated gold mineralization in a marine basin. Within Rionegro II, the Client owns the exploitation area contract JG3-1392 (Mina Guayos) with 7.65 km2. Within the Rionegro applications there is an exploitation contract IH8-11141 of 4 km2 and the application license GEG-154A of 0.2 km2 located within the Mina Guayos exploitation contract that do not belong to the Client. Besides the known placers in the river, there is a clear potential for paleo placers associated to a Jurassic marine basin in the area, as well as gold associated to a sequence of Tertiary conglomerates. There is also the potential for a Carlin type of mineralization in the bituminous-rich limestones, as well as gold associated to a tonalite intrusive. All exploration permits have been obtained and are in order, and to the extent known, there are no royalties, back-in rights, payments or other agreements and encumbrances by third parties to which the licenses are subjected other than royalties to the government. A work program known as PTO in Colombia was approved and an Environmental Impact Study (EIA) have been filled for the exploitation of some paleo placers in Mina Guayos. The Client started the exploitation of the marine paleo placers using off-the-shelf gravimetric techniques. Parallel to this, they plan to study the rest of the paleo placers using a combination of GPR1, pitting, and soil geochemistry. The Client plans to explore the original source of gold in the paleo conglomerates and limestones using the GFcsa™2 to locate the most productive areas for further exploitation. Based on production data, we have defined 35.92 million cubic metres of sediments with a grade of 0.81 g/t which represent 58,916 kg of free gold (1,894,169 ozt). Within the same volume of sediments, we have defined 4.79 million cubic metres of magnetite (4.76%) with a grade of 1 g/t, 95% recovery, representing 4,548 kg of gold (146,229 ozt). In total, we have 63,464 kg of gold (2,040,398 ozt) of Inferred Mineral Resources. A combined budget of US$1,500,000 is proposed to explore and develop this target.

1 GPR stands for Ground Penetration Radar (http://www.groundradar.com/) 2 Geoconsult Fenix complex system approach- survey includes geology, geochemistry, and geophysics simultaneously. 1 Key words: Paleoplacer, gold, new gold district, magnetite, Witwatersrand, Carlin Resumen Alicanto Mining Corp., a través de su filial colombiana Alicanto Colombia S.A.S., ha solicitado dos licencias en el proyecto Rionegro, al noroeste de Bucaramanga, y que abarca la mineralización de oro diseminada en una cuenca marina. Dentro de Rionegro II, el cliente posee el contrato del área de explotación JG3-1392 (mina Guayos) con 7,65 km2. Dentro de las aplicaciones de Rionegro hay un contrato de explotación IH8-11141 de 4 km2 y la licencia de aplicación GEG-154A de 0,2 km2 se encuentra dentro del contrato de explotación de mina Guayos que no pertenece al cliente. Además de los placeres conocidos en el río, hay un potencial claro para los paleo placeres asociados a una cuenca marina jurásica en la zona, así como el oro asociado a una secuencia de terciario Conglomerados. También existe la posibilidad de un tipo de mineralización de Carlin en las calizas bituminosas, así como el oro asociado a un tonalite Intrusivo. Todos los permisos de exploración han sido obtenidos y están en orden, y en la medida en que se conocen, no hay regalías, derechos de devolución, pagos u otros acuerdos y gravámenes por parte de terceros a los que las licencias se someten a otros que las regalías al gobierno. Se aprobó un programa de trabajo conocido como PTO en Colombia y se completó un estudio de impacto ambiental (EIA) para la explotación de los paleo placeres en mina Guayos. El cliente comenzó la explotación de los placeres marinos usando técnicas gravimétricas fuera del estante. Paralelamente a esto, planean estudiar el resto de los placeres paleo usando una combinación de GPR3, pozos y geoquímica del suelo. El cliente planea explorar la fuente original de oro en los paleo conglomerados y las calizas utilizando el GFCsa™4 para localizar las áreas más productivas para una mayor explotación. Basado en datos de producción, hemos definido 35,92 millones de metros cúbicos de sedimentos con un grado de 0,81 g/t que representan 58.916 kg de oro libre (1.894.169 ozt). Dentro del mismo volumen de sedimentos, hemos definido 4.790.000 metros cúbicos de magnetita (4,76%) con un grado de 1 g/t, 95% de recuperación, representando 4.548 kg de oro (146.229 ozt). En total, hemos 63.464 kg de oro (2.040.398 ozt) de Mineral inferidos Recursos. Se propone un presupuesto combinado de US$1,500,000 para explorar y desarrollar este objetivo. Palabras claves: Paleoplaceres, oro, nuevo distrito minero, magnetita, Witwatersrand, Carlin

Introduction This paper has been prepared by P. Geo. Dr. Vadim Galkine, Dr. Jorge Cruz Martin, and P. Geo. Ricardo A. Valls of Fenix Geoconsult Ltd. to present an update on the geological knowledge and ore potential of the Rionegro Project in Colombia. The QPs used data and information from existing public sources and other information presented by local workers in the area. All coordinates in this report correspond to the WGS 84 datum. The

3 GPR significa radar de penetración de tierra (http://www.groundradar.com/) 4 Geoconsult Fenix complex system approach-el levantamiento incluye la geología, la geoquímica y la geofísica simultáneamente. 2 QPs adhered to the metric system and all costs are expressed in US dollars at a conversion rate of 2,383 Colombian pesos and 1.251 Canadian dollars. Based on production data, the QPs have defined 35.92 million cubic metres of sediments with a grade of 0.81 g/t which represent 58,916 kg of free gold (1,894,169 ozt). Within the same volume of sediments, we have defined 4.79 million cubic metres of magnetite (4.76%) with a grade of 1 g/t, 95% recovery, representing 4,548 kg of gold (146,229 ozt). In total, we have 63,464 kg of gold (2,040,398 ozt) of Inferred Mineral Resources. A combined budget of US$1,500,000 is proposed to explore and develop this target.

Project Description and Location The present study covers the applications of the company in the Rionegro Project as shown in Figure 1. These are licenses Rionegro I (PCL-11051 with 98.1 km2) and Rionegro II (PCL-11341 with 91.95 km2). Within the Rionegro II the Client has the exploitation area contract JG3-1392 (Mina Guayos) with 7.65 km2. Within the Rionegro applications there is an exploitation contract IH8-11141 of 4 km2 and the application license GEG-154A of 0.2 km2 located within the Mina Guayos exploitation contract that do not belong to the Client. Coordinates of the Rionegro applications are shown in Table 1.

Figure 1. Current applications in the area of Rionegro.

3 Table 1. Coordinates of the Rionegro I and II licenses in Colombia, WGS 84 UTM 18 N. Point UTM E UTM N 1 688817 808191 2 688811 811141 3 689438 810884 4 689933 809804 5 689846 809324 6 689993 808920 7 690001 808607 8 690167 808649 9 689897 809330 10 689965 809782 11 689541 810863 12 688811 811279 13 688810 811666 14 689259 812191 15 690809 812194 16 690779 808920 17 690816 808920 18 690780 808195 All exploration permits have been obtained and are in order, and to the extent known, there are no royalties, back-in rights, payments or other agreements and encumbrances by third parties to which the licenses are subjected other than royalties to the government. Environmental and production permits have been obtained for the exploitation of some marine paleoplacers in Mina Guayos.

Accessibility, Climate, Vegetation, Local Resources, Infrastructure, and Physiography Accessibility and Physiography There are currently six access routes to the license. The main access is by a paved road and then the last few kilometres by the ancient tracks of a railroad that used to serve the city of Bucaramanga and was discontinued. It takes around 2.5 hours to get to the site from the city of Bucaramanga and except for some wooden bridges, it does not need a 4x4 vehicle. The Rionegro Project is located on a plateau in the Cordillera Oriental of the Colombian , and many residents occupy unstable lands descending steeply from the meseta. Westbound of it, the Rio de Oro Canyon is located at an altitude of 600m.a.s.l. Eastbound, the Andean Range rises in high peaks, reaching almost 3,700m.a.s.l. in the place locally known as "Páramo de Berlín". The city of Bucaramanga is located at 7°08′N, 73°08′W. The Rionegro is a Horst/Graben system with relative steep walls on both sides of the river basin. Climate and Vegetation Under the Köppen climate classification5, Rionegro features a tropical monsoon climate, though it is a noticeably cooler version of the climate. It falls just short of a tropical rainforest climate as its driest month, January, averages just under 60mm of rainfall.

5 http://koeppen-geiger.vu-wien.ac.at/ 4 Altitude affects not only temperature, but also vegetation. In fact, altitude is one of the most important influences on vegetation patterns in Colombia. The mountainous parts of the country can be divided into several vegetation zones according to altitude, although the altitude limits of each zone may vary somewhat depending on the latitude. The "tierra caliente" (hot land), below 1,006m, is the zone of tropical crops such as bananas. The tierra templada (temperate land), extending from an altitude of 1,006 to 2,012m, is the zone of coffee and maize. Wheat and potatoes dominate in the "tierra fría" (cold land), at altitudes from 2,012 to 3,200m. In the "zona forestada" (forested zone), which is located between 3,200 and 3,901m, many of the trees have been cut for firewood. Treeless pastures dominate the páramos, or alpine grasslands, at altitudes of 3,901 to 4,602m. Above 4,602m, where temperatures are below freezing, is the "tierra helada", a zone of permanent snow and ice. Vegetation also responds to rainfall patterns. A scrub woodland of scattered trees and bushes dominates the semiarid northeast. To the south, savannah (tropical grassland) vegetation covers the Colombian portion of the llanos. The rainy areas in the southeast are blanketed by tropical rainforest. In the mountains, the spotty patterns of precipitation in alpine areas complicate vegetation patterns. The rainy side of a mountain may be lush and green, while the other side, in the rain shadow, may be parched. Infrastructure and Local Resources The existing infrastructure forms the base of a successful exploitation program. Roads, water, and industrial electricity are readably available. Within the limits of the project’s license, there are areas for potential tailing storage, waste disposal, and potential processing plant sites. Experienced mining personnel will need to be brought in, although local workers and “bariqueros” are available in the area.

Geological Setting and Mineralization Regional Geology Figure 2 shows a section of the regional geology corresponding to the Rionegro area.

5 Figure 2. Regional geology of the Rionegro Project. The area of the Project is in the planes of the transition zone between the Eastern Cordillera and the Magdalena Middle Valley. In the region outcrop pre-Paleozoic to Cretaceous sedimentary rocks and Quaternary unconsolidated materials. The Project is located west of the Bucaramanga-Santa Marta Fault, which is the largest tectonic structure in the area. Within the Project there are other smaller structures such as the Solferino Fault, the Río Cáchira Fault, the Cuesta Rica Fault, the Lebrija Fault, as well as the synclinal and anticlinal of Venegas. The most recent stratigraphic column of the area compiled by P. Geo. R. Valls at a regional scale follows.

6 Figure 3. Regional stratigraphy of the area. The older formations in the area belong to the Proterozoic to Paleozoic Era and are not well studied yet. They do not outcrop within the limits of the license. Figure 4 shows a detail of this section.

Figure 4. Detail of the Paleozoic Stratigraphic Column for Rionegro.

7 According to Royero & Clavijo (2001) the area of the proposed placer operation corresponds to the structural depression of Venegas conformed of Paleozoic to Cretaceous formations oriented N-NW and limited to the East by the Solferino Fault and to the West by the Lebrija Fault. The depression appears to be the result of a Horst/Graben structure between the Solferino and the Lebrija Faults. Within the Bocas formation, there is an elongated rhyolite body probably related to the uplifting of the Horst structure. P. Geo. Valls and Dr. Cruz discovered a felsic intrusive with associated volcanic rock (tonalite) of possible Tertiary age on the Eastern flank of the Horst/Graben that probably caused the formation of multiple East-West minor fractures and faults in the area. The following is P. Geo. R. Valls current model of the evolution of the region. On a metamorphic Paleozoic basement (Fig. 5) a large marine environment expands from the Jurassic up to the Pliocene.

Figure 5. Paleozoic environment at Rionegro. From East to West this basin was deeper during the Jurassic and it gradually filled up with sediments as it is shown by the general sequence of clays to conglomerates in that same direction (Figs.6-8). There is evidence that the basin was under a more oxidizing environment during the Jurassic Period and a noticeably reduced environment during the Eocene.

8 Figure 6. Jurassic environment at Rionegro.

Figure 7. Cretaceous environment at Rionegro.

9 Figure 8. Tertiary environment at Rionegro.

During the displacement of the Caribbean Plate to the East, all these sediments compressed, and a series of horst/graben structures formed perpendicularly to the direction of the compression. Latest in the evolution of the area is the subduction event to the East that ended with the intrusion of tonalites along the main fault of the subduction border. Proterozoic Eon Proterozoic Superior Bucaramanga Complex (PEm): The original name of the Bucaramanga Gneiss was first used by Goldsmith, et al. (1971) and later by Ward, et al. (1973). It is composed by a sequence of quartz- feldspar, hornblende, mica and garnet-rich paragneiss with lesser amounts of amphibolites, migmatites, quartzites, marble and sometimes granulites. Proterozoic superior to Paleozoic inferior Berlin Orthogneiss (PEpa): It was first described by Ward, et al. (1973) as a massive meta intrusive, felsic to intermediate, with gneissic structure. The Berlin Orthogneiss intrudes the Bucaramanga Complex and is covered unconformably by sedimentary units of the Devonian. Paleozoic Era Silgará Formation (Pzm): The unit of the Cambrian-Ordovician was first used by Ward, et al. (1973) to describe a sequence metamorphosed clastic rocks, thinly stratified, composed by phyllites, quartzites, meta sandstones and lesser amounts of slates and carbonaceous-rich phyllites. Ordovician - Silurian (Pzms): The unit was first used by Forero (Clavijo, 1994) to describe a unit composed of phyllites, quartzites, meta sandstones, meta conglomerates, carbonaceous-rich meta siltstones and clayish-rich siltstone. Locally inside the dark gray marbles can be found fossiliferous layers. The metamorphism in this unit corresponds to the green schist facies. Silurian-Devonian (Pzpa): Cordani (Etayo, et al., 1983), determined the age of this unit using K/Ar as 394 ± 23 m.a. The unit is composed by a pink to gray, biotite-rich, phaneritic, equigranular 10 monzonites (Batolito de Mogotes) that locally varies into granites, aplites, and granodiorite, tonalities, and diorites. The Batolito de Mogotes is pink to gray El Tibet Formation (Dim). This Devonian formation was first described by Cediel (1969) to identify an epicontinental unit composed of sandstones at places conglomeratic, fine grained sandstones, alternating with red siltstones, sometimes with plant fossils. At the base, there is a silica-rich, white and red conglomerate. Floresta Formation. This mid Devonian marine platform unit has a thickness of 600-700 metres and was named by Olsson y Ramírez (Hubach, 1957) and later by Botero (1950), Cediel (1969) and Mojica and Villarroel (1984). From the base to the top, the unit is composed by black siltstones and multicolored sandstones with intercalations of reddish, purple, yellowish gray and reddish yellow siltstones with fossiliferous layers in dark gray sandstones. Diamante Formation (CP). This Carboniferous-Permian epicontinental unit was redefined by Ward, et al. (1973). The unit has a thickness of 550 m (Navas, 1962). The basis of the unit is composed by a purple gray, fine grained to coarse grained (sometimes up to conglomeratic) sandstone. The central part is composed by a dark gray siltstone with intercalations of limestones of the same color. At the top is composed by a dark gray cay-bearing siltstone with thin intercalations of siltstones and gray to reddish gray sandstones. Mesozoic Era Simití Formation (Kis). Etayo S. (1965) assigned an age of Superior Middle Albian to this formation and suggests a sedimentation environment with little ventilation in the seabed, producing intermittently reducing conditions allowing the margins to have benthic life. The formation is composed of black shales with thin interbedded sandstone-rich limestones and clayey fine-grained, grey yellowish sandstone, stratified into banks up to 50cm thick with ferruginous and calcareous nodules (Fig. 9). The overall thickness of the unit, based on the geological cross sections is 250 m.

Figure 9. Black shales of the Simití formation in the Rionegro Project.

11 The Luna Formation (Ksl) was first described by Garner (1926) in the Venezuelan section of the Perija Mountains. Contact of La Luna formation with the ferruginous Simití formation is in conformity. Later on Mendoza-Parada et al. (2009) subdivided the formation in three members- Salada, Pujamana, and Galembo. According to Royero & Clavijo (2001), in the type locality located near to the Sogamoso River town, the Salada member contains black and hard calcareous-rich slates of thin stratification, A few thin layers of black limestone of fine texture, are present with bands and pyrite concretions. Elliptical concretions of limestone with cross section and major axis of 10 to 15 cm, are characteristic of this unit (Fig. 10).

Figure 10. Elliptical concretions of limestone of the Salada member of the Luna Fm. in the Rionegro Project.

Finally, in the Colombian stratigraphy, there is a member of the La Luna Formation, the Galembo member, that is described as predominantly thin, black, hard, stratification of calcareous-rich shales with thin interbedded clay-rich limestone. There are concretions of discoid limestone, with major axis up to of 8 m with thin layers of dark blue chert. Phosphate layers near the top of the Galembo contain abundant bone fragments and vertebrae of fish and a few teeth. Also from the Cretaceous Period is the Umir Fm (Ksu). Mendoza-Parada et. al. (2009) dated this formation as Upper Cretaceous Epoch, Campanian-Maastrichtian age. The formation is indicative of an age of marine regression and is conformed from top to bottom by soft greenish-gray shales with layers of a fine-grained, hard sandstone and thin layers of coal that turns to gray to bluish-gray shales at the bottom of the profile with grains and phosphatide fragments of the lower La Luna Formation (Fig. 11). The bottom is a non-conformance contact and represents a variable amount of erosion in the La Luna formation before the deposition of shales of the Umir Fm., as it was revealed in the studies of phosphatic residuals of the La Luna formation.

12 Figure 11. Coal bed in a carbon-rich shale. Cenozoic Era Paleogene Period Lisama Formation (Tpl). Taborda, (1965) suggested that this unit was deposited during the Paleocene. The unit was named by Mendoza-Parada et al. (2009). It consists of brown and violet, soft, micaceous-rich clay; interspersed with fine grain and medium hardness, slightly conglomeratic greenish-grey, micaceous-rich sandstones also some clayey strata containing thin layers of gypsum and mantles of coal towards the top of this unit. The low hardness of these clay layers makes the Lisama formation widely vulnerable to the generation of colluvial deposits (Fig. 12).

Figure 12. Lisama formation in the Rionegro Project.

13 La Paz Formation (Tel). By chrono-stratigraphic correlation with adjacent units, the La Paz Fm. has been given an Eocene Age. It lies at an angular unconformity with the Lisama Formation. The La Paz formation consists of hard, conglomeratic, mica-rich, grey fine-grained sandstones, with pebbles of quartz, intercalated with gray violet, soft and mica-rich clays. Esmeralda Formation (Tee). Pilsbury & Olsson (1941) assigned an Eocene Age, based on gastropods and pelecypods. The unit lies conformably on top of La Paz Fm. It represents the top of the western slope of the La Paz ridge. This unit is formed by mica-rich fine-grained, yellowish grey and yellowish-brown sandstone, with cross-bedding and layers of grey clay at the top La Mugrosa Formation (Tom). This formation is of Oligocene Age and has two members. The Inferior Member (Tomi) is composed of yellowish grey and yellowish-white, fine grain, weakly consolidated and argillaceous sandstone; interleaved with greenish-gray mica and clay-rich limonite. The Superior Member (Toms) is composed of gray-green and violet clay with layers of coarse- grained sandstone, with feldspar and quartz pebbles, as well as a layer of coarse-grained brown and yellowish conglomerate with angular quartz, feldspar and fragments of metamorphic rocks. The description includes the sporadic presence of glauconite. Towards the top of the formation there is a fossil horizon with presence of freshwater gastropods and bones of fish, dating of Oligocene age. In the Valley of the Magdalena this unit is currently drilled for oil. Neogene Period Colorado Formation (Toc). Taborda (1965) dated freshwater gastropods which indicate an age of transition between the upper Oligocene to lower Miocene periods. The formation is composed of layers of gray, hard, conglomerates with pebbles from limestone, chert, and metamorphic rocks, intercalated with lenticular layers of gray coarse-grained sandstone and sand-rich clay. Real group (Tmr). The typical location outcrops at the Doradas creek and it is composed of three members, but in the area, we only see the medium Group (Tmrm) consisting of layers of medium to coarse grained feldspathic, massive light grey sandstone, with some layers of sand-rich clay and a yellowish white sandstone and quartz-rich conglomerate. According to Mendoza-Parada et al. (2009) the age of this Group is Miocene based on leaves of plants and gastropods which indicates a continental origin. The Inferior Group (Tmri) consists of a sequence of thick yellowish-grey conglomerates with pebbles of sandstones, igneous and metamorphic rocks, which are interbedded with coarse-grained volcanic and metamorphic lithic-rich sandstones. La Mesa Formation, Inferior member (Ymi). The thickness of this unit is of approx. 1,100 m and there are no recorded fossils that allow a determination of its age but based on chrono-stratigraphic correlations its age is estimated as lower Pliocene Epoch. In the area, this formation consists of yellowish to yellowish gray, medium to coarse and moderately consolidated grain structures of cross-bedding conglomeratic-rich sandstones. Intercalated are clusters of yellowish-grey to grey- brown, little consolidated, jagged layers and lenses with pebbles from sandstone, quartz, rocks, igneous, metamorphic and volcanic lithic-rich conglomerates (Fig. 13).

14 Figure 13. La Mesa Formation, Inferior member (Ymi) in the Rionegro Project.

Quaternary Period In the area, there are two important materials of recent formation, corresponding to colluvial and alluvial deposits. Colluvial Deposits (Q). These are caused by processes of weathering and degradation of the rocks that make up the soil or subsoil generating through the erosion of rock, from fragments of the lithologic units emerging in higher areas, then they are transported by means of a natural agent, which is usually rain water. They are mainly located in some sectors of the western slope of the plateau of Lebrija (Fig.14).

Figure 14. Thick paleo placer deposits in the Rionegro Project.

15 Alluvial Deposits (Qal). They cover much of the area, on the banks of the Lebrija River. These units are set to the topographical lower areas and they are generated by the deposition of fluvial load material (Fig. 15). They form a flat to soft wavy relief on which the development of cattle ranching has been established.

Figure 15. Wide alluvial deposits in the Rionegro Project.

Local Geology The area of the mining concession of Mina Guayos consists of 55% alluvial Quaternary deposits (Qal) and the rest of sedimentary rocks from the Cretaceous La Luna formation (Ksl). In this section, the focus is on the alluvial Quaternary deposit formed by the Lebrija River, since the mineral of interest is the alluvial gold. Figure 16 shows a typical profile of the alluvial sediments at the bed of the river.

16 Figure 16. Alluvial profile at Rionegro.

Among the host rocks within the limits of the area, besides the Cretaceous limestones of the La Luna Formation, the Client has mapped a tonalite intrusive with several zones of intense alteration, represented by acid water (pH 4.5-5) and oxidized stains with noticeable sulphur smell (Fig. 17).

Figure 17. Oxidized acid water draining from the tonalite intrusive.

17 We have also mapped an outcrop of a silica cap as well as several outcrops of basalts to andesite- basalt which indicate the presence of volcanic activity in the area that has not been mapped yet.

Structural Geology The study area presents numerous faults and folds that correspond to structures of the North to Northwest structural depression of Venegas. The most important structures starting with the more regional character are: Bucaramanga - Santa Marta Fault. With a SSE-NNW direction this sinestral fault system has had over time various vertical components. Its importance lies in the contribution to the development of the Magdalena Valley and the lifting of the Santander Massif. Lebrija Fault. It is located approximately 1.7 km west of the Township of Venegas with a sinuous course towards NNW, until it reaches the municipality of Rionegro. It is a normal fault with a light displacement on the slates of the Q'umir Formation in the Quebrada Salamaga. Main vertical displacement can be seen in the municipality of Rionegro. Cuesta Rica Fault. This fault intersects the Lebrija Fault and moves slightly to the Northwest. Apart from this displacement the fault ends in Tertiary units West of the Lebrija Fault. It is estimated a vertical displacement of 400m in Tambor-Giron contact. Anticline and Syncline Venegas. Royero & Clavijo (2001) describe the Anticline of Venegas as a structure with a somewhat undulating axis and soft pitching towards the South. Regarding the Venegas Syncline, which occurs in continuity to the Southeast, the study states it pitches toward the South and disappears beneath the Lebrija River alluvial Quaternary sediments. The studied area corresponds to a large Horst/Graben structure, possible pre-PZ in age with an N-S orientation that tends to be diverted to the SW in the direction of the Boyacá folded structures. Horsts are elevated blocks delimited by parallel normal faults on both sides. Grabens are block sunk bounded on both sides by parallel normal faults. These faults represent the structures of the first order and are the oldest in the area. The Graben has served as a perfect watershed both for active sediments as for paleo placers, and it is very likely that the secondary fractures and faults have helped concentrate the heavy mineralization along such structures. QP Dr. Galkine, P.Geo. completed a lineament study of the whole area of the Rionegro application. The analysis includes the following consequent techniques: - Lineament (fault and fractures) Analysis using aerial and satellite data of various sources (available for purchase or free of charge on the Net). The analysis itself is purely manual procedure. Hence, apart from natural occasional human errors, and distortions or the flaws of the images, no artificial systemic errors (such as automatic processing bias) affect the results 18 - Physical (analogue) modeling of the main lineament/structural frame mechanical response to the different geodynamic conditions - Processing of the data with various computer programs (custom-built and commercial) and creating contour maps of lineament densities and strain levels for the area - Analysing the data and outlining the areas which should be the Primary Exploration Targets from the standpoint of the method ideology The final part of the method (Analyzing the resulted maps and schemes along with geological/geophysical/geochemical data) was processed by P. Geo. R. Valls. The agreed area for the analysis was 1,300 km2. The boundary effect distorts the automatic contouring, that is why the study area should normally be larger than the studied object itself.

Mineralization Gold mineralization at Rionegro is currently found in the placer, but the Authors believe that an additional source of gold could be the hydrothermally altered conglomerates or the gold bearing limestones within the Horst/Graben structure. The Client requested a Wavelength-Dispersive X-Ray Spectroscopy (WDS) study of some gold nuggets from the placers of the Lebrija River. Table 2 shows the results of this test.

19 Table 2. WDS analysis of gold nuggets from the Lebrija River. WDS Spots Au 1 Au 2 Au 37.30 54.40 Ag 26.00 26.50 Pb 5.60 10.60 S 14.60 4.30 Fe 10.80 0.40 Sub-Total 94% 96% Mo 0.10 0.20 Hg 0.10 0.20 Te 0.00 0.10 Sb 0.20 0.10 In 0.05 0.05 Zn 0.04 0.02 Cd 0.00 0.02 Co 0.00 0.01 Bi 0.10 0.00 Cu 0.03 0.00 Other 5.10 3.20 Total 100% 100%

6 Based on this composition, sample 1 maybe composed of Weishanite ((Au,Ag)3Hg2), with possible inclusions of galena, pyrite and/or magnetite. Sample 2 appears to be composed of Krennorite7 8 ((Au0.8,Ag0.2)Te2), Anyuiite (Au(Pb,Sb)2), and possible galenite. SGS examined two samples (Black Sands and Pan Gold). Tassos Grammatikopoulos from Lakefield SGS prepared two polished mounts from each sample in order to determine the presence of gold. Tassos Grammatikopoulos used a Tescan scanning electron microscope (SEM) equipped with an energy dispersive spectrometer (EDS) to scan the samples. The gold scan of the Pan Gold mounts identified only one coarse gold grain. There was no microscopic (visible gold greater than 1 micron) identified in the Black Sands.

6 http://www.mindat.org/min-4261.html 7 http://en.wikipedia.org/wiki/Krennerite 8 http://www.mindat.org/min-271.html 20 Table 3. Composition in weight% of the gold grains.

Spectrum Au Hg Total Mineral ID 1 100.0 100.0 Au 2 87.9 12.1 100.0 Au-Hg Alloy

Both samples consist primarily of magnetite and hematite, non-opaque minerals (NOP), and traces of sulphides including mainly pyrite and rare chalcopyrite and pyrrhotite. Note that the NOP cannot be identified because the mineralogical examination was conducted on polished mounts and reflected light only). The Fe-oxides range from <50 to 800 μm but are typically <200 μm. Both magnetite and hematite form distinct minerals, but hematite very commonly variably replaces magnetite. They are weakly intergrown with NOP and can carry sulphide inclusions. Sulphides are generally subhedral to rounded and <300 in size. They are mainly free but weakly associated with the Fe-oxides. NOP minerals range mainly from <<50 to 300 μm, are subhedral and free.

Deposit Types According to what we know from the property, apart from the active and paleo placers associated to the conglomerates, we may also have disseminated gold in a porphyry system associated to the tonalite intrusions. Most of the information presented here is quoted from the Ministry of Energy, Mines and Petroleum Resources of British Columbia, Deposit Types/Mineral Deposit Profiles9. The presence of pyrite, coal, and other indicators seems to support P. Geo. R. Valls idea of the Rionegro conglomerates to be similar to a younger version of the Witwatersrand type from South Africa. There is also the potential for Carlin and skarn type of mineralization in the area.

Marine basin paleo placers Synonyms: Paleoplacers deposits; paleochannel deposits; fluvial and alluvial placers. Commodities: Mainly Au and PGE {also Cu, Ag, garnet, cassiterite, rutile, diamond and other gems: corundum (rubies, sapphires), tourmaline, topaz, beryl (emeralds), spinel; zircon, kyanite, staurolite, chromite, magnetite, ilmenite, barite, cinnabar}. Most of the minerals listed in brackets are recovered as by-products. Examples: Williams Creek, Bullion, Lightning Creek, Otter Creek, Spruce Creek all of them in British Columbia, Canada. Other examples include Chaudière Valley (Au, Québec, Canada), Livingstone Creek (Au, Yukon, Canada), Valdez Creek (Au, Alaska, USA), Ballarat (Au, Victoria, Australia), and Bodaibo River (Au, Lena Basin, Russia). GEOLOGICAL CHARACTERISTICS

9 http://www.empr.gov.bc.ca/mining/geoscience/mineraldepositprofiles/pages/default.aspx 21 Capsule Description: Detrital gold, platinum group elements and other heavy minerals occurring in buried valleys (typically with at least several metres of overlying barren material, usually till, clay or volcanic rocks), mainly as channel-lag and gravel-bar deposits. Tectonic Settings: Coarse-grained, paleo channel placer Au deposits occur mainly in Cenozoic and Mesozoic accretionary orogenic belts and volcanic arcs, commonly along major faults that may also control paleo drainage patterns. Fine-grained paleo placers also may occur in stable tectonic settings (shield or platform environments) where reworking of clastic material has proceeded for long periods of time. Depositional environment/Geological Setting: Mainly incised paleo channels in mountainous areas including: high-gradient (generally >0.05, less commonly >0.1), narrow bedrock-floored valleys (paleo gulches); high-level, abandoned tributary valleys with intermediate gradients (typically 0.01 to 0.1); large, buried trunk valleys (on the order of 100 m deep, a few hundred metres wide and >1 km long) with low channel gradients (generally <0.02 in mountainous reaches and <0.001 in plateau areas); channels buried in modern alluvial valleys with gradients similar to the modern streams. The first two settings are dominated by high-energy, low-sinuosity, single-channel, coarse-grained autochthonous placer deposits, whereas the latter two are characterized by autochthonous and allochthons placers deposited in wandering gravel-bed river, braided stream and alluvial fan environments. In most paleo channels, coarse-grained placer concentrations occur mainly along channel floors or along other erosional surfaces such as at the base of cut-and-fill sequences; in meandering stream environments, finer grained placers also occur along point bar margins and in other areas of slack water. Age of Mineralization: Mostly Tertiary and Pleistocene. Older paleo placers (excepting the Proterozoic Witwatersrand placers) are rare, due to poor long-term preservation of deposits in high- relief, subaerial environments. Host/Associated Rock Types: Coarse (pebble to boulder), rounded gravels (or conglomerate), commonly with sandy interbeds or lenses. Gravels usually imbricated, clast supported, open work or with a sandy matrix, and typically with abundant resistant rock types (quartzite, quartz vein, chert, basalt, granite) and minor, less resistant, lithology (shale, siltstone, schist, etc.). Au placers are commonly associated with rock types hosting epithermal or mesothermal vein deposits. Paleo placers can be buried under a variety of materials, including lacustrine silts and clays, fluvial sands and gravels, marine sediments and basalt flows. Deposit Forms: Highly variable and laterally discontinuous; pay streaks typically thin (<2m), lens shaped and tapering in the direction of paleo flow; usually interbedded with barren sequences. Texture/Structure: Typically, well rounded, flattened flakes or plates of low sphericity; coarse, more spherical nuggets common in high-gradient channels; fine (flour) gold common in distal stream reaches; evidence of primary crystal structure very rare. Ore Mineralogy (principal and subordinate): Au nuggets, flakes and grains and PGE minerals, Cu, Ag, and various industrial minerals and gemstones. Gangue Mineralogy: Quartz, pyrite and other sulphides and in many deposits sub economic concentrations of various heavy minerals, especially magnetite and ilmenite. Alteration Mineralogy: Fe and Mn oxide precipitates common. Clay alteration of unstable clasts and matrix in some deposits. 22 Ore Controls: Dominant controls on the geographic distribution of ore include the location of paleo drainage channels, proximity to bedrock sources, and paleo relief. Paleo channels are locally controlled by faults and less resistant rock units. Stratigraphically, placers accumulate mainly at the base of erosional successions along unconformities overlying bedrock or resistant sediments such as basal tills or glacio-lacustrine clays. Overlying bedded gravel sequences generally contain less placer minerals and reflect bar sedimentation during aggradational phases. Aggradation is the depositional process where material is added in a vertical filling. (Aggradation is sometimes referred to as vertical accretion). In the stratigraphic sequence, there is no generalized grain size distribution in the vertical direction because each bed usually displays varying texture and composition. There may be a tendency to coarsen toward the source of the sediment. The bedding is usually relatively flat and may thin in one direction. Aggradation is normally associated with vertical basin filling10.

Figure 18. One of the many paleo placers at the Rionegro Project.

Genetic Model: Placer deposits are buried when base level rises, or channel abandonment occurs. Factors inducing these changes include glaciation, volcanism, stream capture and cut-off, or rising sea level.

10 23 Associated Deposits Types: Paleo channel placer deposits are associated with alluvial fan and fan- delta paleo placer deposits in some areas. Autochthonous fluvial and alluvial placers commonly derive from hydrothermal vein deposits. Comments: Alluvial fan and fan delta paleo placer sequences comprise a distinct subtype of buried placer deposits. They occur in relatively unconfined depositional settings compared to paleo channel placer deposits and typically are dominated by massive or graded, poorly sorted gravels and sands, locally with interbedded diamicton11. They are generally lower grade and larger volume than fluvial deposits, but they contain relatively uniform placer concentrations. Paleo fan deposits are mainly local in origin as indicated by high clast angularity and local derivation. Placer minerals occur in both poorly sorted debris-flow sediments and interstratified fluvial gravels and sands. Concentrations are commonly highest at sites of subsequent fluvial degradation.

Modern Placers Synonyms: Holocene placer deposits; terrace placers; fluvial, alluvial, colluvial, aeolian (rare) and glacial (rare) placers. Commodities: Au, PGEs and Sn, {locally Cu, garnet, ilmenite, cassiterite, rutile, diamond and other gems - corundum (rubies, sapphires), tourmaline, topaz, beryl (emeralds), spinel - zircon, kyanite, staurolite, chromite, magnetite, wolframite, sphene, barite, cinnabar}. Most of the minerals listed in brackets are recovered in some deposits as the principal product. Examples: In British Columbia, we find Fraser River (Au) and the Quesnel River (Au). Also in Canada, we have the North Saskatchewan River (Au, Alberta, Canada), Vermillion River (Au, Ontario, Canada), Rivière Gilbert (Au, Québec, Canada), Klondike (Au, Yukon, Canada). International examples include Rio Tapajos (Au, Brazil), Westland and Nelson (Au, New Zealand), Yana-Kolyma belt (Au, Russia), Sierra Nevada (Au, California, USA). GEOLOGICAL CHARACTERISTICS Capsule Description: Detrital gold, platinum group elements and other heavy minerals occurring at or near the surface, usually in Holocene fluvial or beach deposits. Other depositional environments, in general order of decreasing importance, include: alluvial fan, colluvial, glaciofluvial, glacial and deltaic placers. Tectonic Settings: Fine-grained, allochthons placers occur mainly in stable tectonic settings (shield or platform environments and inter-montane plateaus) where reworking of clastic material has proceeded for long periods of time. Coarse, autochthonous placer deposits occur mainly in Cenozoic and Mesozoic accretionary orogenic belts and volcanic arcs, commonly along major faults. Depositional Environment/Geological Setting: Surficial fluvial placer concentrations occur mainly in large, high-order, stream channels (allochthons deposits) and along bedrock in high-energy, steep- gradient, low-sinuosity, single-channel streams (autochthonous deposits). Concentrations occur along erosional surfaces at the base of channel sequences. Alluvial fan, fan-delta and delta deposits are distinct from fluvial placers as they occur in relatively unconfined depositional settings and typically are dominated by massive or graded sands and gravels, locally with interbedded diamicton.

11 Diamicton is a sediment that consists of a wide range of non-sorted to poorly sorted terrigenous sediment, i.e. sand or larger size particles that are suspended in a mud matrix. 24 Colluvial placers generally develop from residual deposits associated with primary lode sources by sorting associated with downslope migration of heavy minerals. Glacio-fluvial and glacial placers are mainly restricted to areas where ice or meltwater has eroded pre-existing placer deposits. Age of Mineralization: Generally Tertiary or younger in unglaciated regions. Host/Associated Rock Types: Well sorted, fine to coarse-grained sands; well rounded, imbricated and clast-supported gravels. Deposit Form: In fluvial environments, highly variable and laterally discontinuous; pay streaks typically thin (< 2 m), lens shaped and tapering in the direction of paleo flow; usually interbedded with barren sequences. Texture/Structure: Grain size decreases with distance from the source area. Gold typically fine grained (< 0.5 mm diameter) and well rounded; coarser grains and nuggets rare, except in steep fluvial channel settings where gold occurs as flattened flakes. Placer minerals associated with colluvial placer deposits are generally coarser grained and more angular. Ore Mineralogy (principal and subordinate): Au, PGE and cassiterite (Cu, Ag and various industrial minerals and gemstones). Gangue Mineralogy: Quartz, pyrite and other sulphides and in many deposits sub economic concentrations of various heavy minerals such as magnetite and ilmenite. Alteration Mineralogy: Fe and Mn oxide precipitates common; Ag-depleted rims of Au grains increase in thickness with age. Ore Controls: In fluvial settings, placer concentrations occur at channel irregularities, in bedrock depressions and below natural riffles created by fractures, joints, cleavage, faults, and foliation or bedding planes that dip steeply and are oriented perpendicular or oblique to stream flow. Coarse- grained placer concentrations occur as lag concentrations where there is a high likelihood of sediment reworking or flow separation such as at the base of channel scours, around gravel bars, boulders or other bedrock irregularities, at channel confluences, in the lee of islands and downstream of sharp meanders. Basal gravels over bedrock typically contain the highest placer concentrations. Fine-grained placer concentrations occur where channel gradients abruptly decrease or stream velocities lessen, such as at sites of channel divergence and along point bar margins. Gold in alluvial fan placers is found in debris- flow sediments and in interstratified gravel, sand and silt. Colluvial placers are best developed on steeper slopes, generally over a weathered surface and near primary lode sources. Economic gold concentrations in fluvial deposits occur mainly along erosional unconformities within otherwise a gradational sequence and typically derive their gold from older placer deposits. Genetic Model: Fluvial placers accumulate mainly along erosional unconformities overlying bedrock or resistant sediments such as basal tills or glacio-lacustrine clays. Basal gravels over bedrock typically contain the highest placer concentrations. Overlying bedded gravel sequences generally contain less placer minerals and reflect bar sedimentation during aggradation phases. Frequently the generation of more economically attractive placer deposits involves multiple cycles of erosion and deposition.

25 Associated Deposit Types: Fluvial placers commonly derive from hydrothermal vein deposits and less commonly from porphyry and skarn deposits. Allochthons fluvial placers are far traveled and typically remote from source deposits.

Porphyry Cu±Mo±Au P. Geo. R. Valls believes that the tonalite intrusives from the Rionegro Project has most of the hallmarks of a Porphyry Cu±Mo±Au deposit (Figure 19).

Figure 19. Hydrothermal Mineral Deposits Model.

CAPSULE DESCRIPTION: Stockworks of quartz veinlets, quartz veins, closely spaced fractures and breccias containing pyrite and chalcopyrite with lesser molybdenite, bornite and magnetite occur in large zones of economically bulk-mineable mineralization in or adjoining porphyritic intrusions and related breccia bodies. Disseminated sulphide minerals are present, generally in subordinate amounts. The mineralization is spatially, temporally, and genetically associated with hydrothermal alteration of the host rock intrusions and wall rocks. TECTONIC SETTINGS: In orogenic belts at convergent plate boundaries, commonly linked to subduction-related magmatism. Also, in association with emplacement of high-level stocks during extensional tectonism related to strike-slip faulting and back-arc spreading following continent margin accretion.

26 DEPOSITIONAL ENVIRONMENT/GEOLOGICAL SETTING: High-level (epizonal) stock emplacement levels in volcano-plutonic arcs, commonly oceanic volcanic island and continent- margin arcs. Virtually any type of country rock can be mineralized, but commonly the high-level stocks and related dykes intrude their coeval and cogenetic volcanic piles. AGE OF MINERALIZATION: Deposits are mainly Tertiary but range from Archean to Quaternary. HOST/ASSOCIATED ROCK TYPES: Intrusions range from coarse-grained phaneritic to porphyritic stocks, batholiths, and dike swarms; rarely pegmatitic. Compositions range from calcalkaline quartz diorite to granodiorite and quartz monzonite. Commonly there is multiple emplacement of successive intrusive phases and a wide variety of breccias. Alkalic porphyry Cu- Au deposits are associated with syenitic and other alkalic rocks and are considered to be a distinct deposit type. DEPOSIT FORM: Large zones of hydrothermally altered rock contain quartz veins and stockworks, sulphide-bearing veinlets; fractures and lesser disseminations in areas up to 10 km2 in size, commonly coincident wholly or in part with hydrothermal or intrusion breccias and dyke swarms. Deposit boundaries are determined by economic factors that outline ore zones within larger areas of low-grade, concentrically zoned mineralization. Cordilleran deposits are commonly subdivided according to their morphology into three classes - classic, volcanic and plutonic (see Sutherland Brown, 1976; McMillan and Panteleyev, 1988). In the area of the project there may be one or both of the following classes: Classic deposits (e.g. Berg) are stock-related with multiple emplacements at shallow depth (1 to 2 km) of generally equant, cylindrical porphyritic intrusions. Numerous dykes and breccias of pre-, intra-, and post-mineralization age modify the stock geometry. Ore bodies occur along margins and adjacent to intrusions as annular ore shells. Lateral outward zoning of alteration and sulphide minerals from a weakly mineralized potassic/propylitic core is usual. Surrounding ore zones with potassic (commonly biotite-rich) or phyllic alteration contain molybdenite chalcopyrite, then chalcopyrite and a generally widespread propylitic, barren pyritic aureole or 'halo'. Plutonic deposits (e.g. the Highland Valley deposits) are found in large plutonic to batholithic intrusions immobilized at relatively deep levels, say 2 to 4 km. Related dikes and intrusive breccia bodies can be emplaced at shallower levels. Host rocks are phaneritic coarse grained to porphyritic. The intrusions can display internal compositional differences as a result of differentiation with gradational to sharp boundaries between the different phases of magma emplacement. Local swarms of dykes, many with associated breccias, and fault zones are sites of mineralization. Ore bodies around silicified alteration zones tend to occur as diffuse vein stockworks carrying chalcopyrite, bornite and minor pyrite in intensely fractured rocks but, overall, sulphide minerals are sparse. Much of the early potassic and phyllic alteration in central parts of ore bodies is restricted to the margins of mineralized fractures as selvages. Later phyllic- argillic alteration forms envelopes on the veins and fractures and is more pervasive and widespread. Propylitic alteration is widespread but unobtrusive and is indicated by the presence of rare pyrite with chloritized mafic minerals, saussuritized plagioclase and small amounts of epidote. TEXTURE/STRUCTURE: Quartz, quartz-sulphide and sulphide veinlets and stockworks; sulphide grains in fractures and fracture selvages. Minor disseminated sulphides commonly replacing primary mafic minerals. Quartz phenocrysts can be partially resorbed and overgrown by silica. 27 ORE MINERALOGY (Principal and subordinate): Pyrite is the predominant sulphide mineral; in some section hematite is abundant. Ore minerals are chalcopyrite; lesser bornite and other copper sulphides, manganese, and sphalerite. GANGUE MINERALOGY (Principal and subordinate): Gangue minerals in mineralized veins are mainly quartz, feldspar, with lesser K-feldspar, chlorite, calcite, epidote, and fluorite. Many of these minerals are also pervasive alteration products of primary igneous mineral grains. ALTERATION MINERALOGY: Quartz, K-feldspar, albite, chlorite, epidote, calcite, clay minerals, fluorite. Early-formed alteration can be overprinted by younger assemblages. Central and early formed potassic zones (K-feldspar and biotite) commonly coincide with ore. The older alteration assemblages in cupriferous zones can be partially to completely overprint by later biotite and K-feldspar and then phyllic (quartz-sericite-pyrite) alteration, less commonly argillic, and rarely, in the uppermost parts of some ore deposits, advanced argillic alteration (kaolinite- pyrophyllite). WEATHERING: Secondary (supergene) zones carry chalcocite, covellite, and other Cu2S minerals (digenite, djurleite, etc.), chrysocolla, native copper and copper oxide, carbonate and sulphate minerals. Oxidized and leached zones at surface are marked by ferruginous 'cappings' with supergene clay minerals, limonite (goethite, hematite and jarosite) and residual quartz. ORE CONTROLS: Igneous contacts, both internal between intrusive phases and external with wall rocks; cupolas and the uppermost, bifurcating parts of stocks, dyke swarms. Breccias are mainly early formed intrusive and hydrothermal types. Zones of most intensely developed fracturing give rise to ore-grade vein stockworks, notably where there are coincident or intersecting multiple mineralized fracture sets. ASSOCIATED DEPOSIT TYPES: Skarn Cu, porphyry Au, epithermal Au-Ag in low sulphidation type or epithermal Cu-Au-Ag as high-sulphidation type enargite-bearing veins, replacements and stockworks; auriferous and polymetallic base metal quartz and quartz- carbonate veins, Au-Ag and base metal sulphide mantos and replacements in carbonate and non- carbonate rocks, and placer Au.

Carbonate hosted Au-Ag The USGS12 provides the following description of the Carlin model of mineralization.

12 http://pubs.usgs.gov/bul/b1693/html/bullfrms.htm 28 Figure 20. Model of formation of Carlin type gold deposits.

APPROXIMATE SYNONYM Carlin-type or invisible gold. DESCRIPTION Very fine-grained gold and sulfides disseminated in carbonaceous calcareous rocks and associated jasperoids. GENERAL REFERENCE Tooker (1985). GEOLOGICAL ENVIRONMENT Rock Types Host rocks: thin-bedded silty or argillaceous carbonaceous limestone or dolomite, commonly with carbonaceous shale. Intrusive rocks: felsic dikes. Textures Dikes are generally porphyritic. Age Range Mainly Tertiary but can be any age. Depositional Environment Best host rocks formed as carbonate turbidites in somewhat anoxic environments. Deposits formed where these are intruded by igneous rocks under nonmarine conditions. Tectonic Setting(s) High-angle normal fault zones related to continental margin rifting. Associated Deposit Types W-Mo skarn, porphyry Mo, placer Au, stibnite-barite veins. DEPOSIT DESCRIPTION Mineralogy Native gold (very fine grained) + pyrite + realgar + orpiment ± arsenopyrite ± cinnabar ± fluorite ± barite ± stibnite. Quartz, calcite, carbonaceous matter. Texture/Structure Silica replacement of carbonate. Generally, less than 1 percent fine-grained sulfides.

29 Alteration Unoxidized ore: jasperoid + quartz + illite + kaolinite + calcite. Abundant amorphous carbon locally appears to be introduced. Hypogene oxidized ore: kaolinite + montmorillonite + illite + jarosite + alunite. Ammonium clays may be present. Ore Controls Selective replacement of carbonaceous carbonate rocks adjacent to and along high- angle faults, or regional thrust faults or bedding. Weathering Light-red, gray, and (or) tan oxides, light-brown to reddish-brown iron-oxide-stained jasperoid. Geochemical Signature Au + As + Hg + W ± Mo; As + Hg + Sb + Tl ± F (this stage superimposed on preceding); NH3 important in some deposits.

Skarn Deposits The USGS provides the following description for skarn deposits.

Figure 21. Cartoon cross section of Cu skarn deposit showing relationship between metamorphic zones, ore bodies, and igneous intrusion (Source USGS).

GEOLOGICAL ENVIRONMENT

30 Rock Types Tonalite to monzogranite intruding carbonate rocks or calcareous clastic rocks. Textures Granitic texture, porphyry, granoblastic to hornfelsic in sedimentary rocks. Age Range Mainly Mesozoic but may be any age. Depositional Environment Miogeosynclinal sequences intruded by felsic plutons. Tectonic Setting(s) Continental margin late orogenic magmatism. Associated Deposit Types Porphyry Cu, zinc skarn, polymetallic replacement, Fe skarn. DEPOSIT DESCRIPTION Mineralogy Chalcopyrite + pyrite ± hematite ± magnetite ± bornite ± pyrrhotite. Also, molybdenite, bismuthinite, sphalerite, galena, cosalite, arsenopyrite, enargite, tennantite, loellingite, cobaltite, and tetrahedrite may be present. Au and Ag may be important products. Texture/Structure Coarse granoblastic with interstitial sulfides. Bladed pyroxenes are common. Alteration Diopside + andradite center; wollastonite + tremolite outer zone; marble peripheral zone. Igneous rocks may be altered to epidote + pyroxene + garnet (endoskarn). Retrograde alteration to actinolite, chlorite, and clays may be present. Ore Controls Irregular or tabular ore bodies in carbonate rocks and calcareous rocks near igneous contacts or in xenoliths in igneous stocks. Breccia pipe, cutting skarn at Victoria, is host for ore. Associated igneous rocks are commonly barren. Weathering Cu carbonates, silicates, Fe-rich gossan. Calc-silicate minerals in stream pebbles are a good guide to covered deposits. Geochemical Signature Rock analyses may show Cu-Au-Ag-rich inner zones grading outward to Au-Ag zones with high Au:Ag ratio and outer Pb-Zn-Ag zone. Co-As-Sb-Bi may form anomalies in some skarn deposits. Magnetic anomalies.

Lineament Analysis The data was created by QP V. Galkine and processed by QP R. Valls. The complete statistical analysis of the lineament study included the following procedure: 1. The original data and the weighted data are presented in separated tabs (RAW, Weighted and stress and strain, etc.). 2. Exploratory analysis using factor analysis by Winstat (an add-in to Excel) confirmed that there is no significant difference between both suites, so we will only use the RAW data. 3. I used SURFER to combine these tables. 3a. First, we create a grid file for each parameter. The grid was 100 x 98 points. 3b. In the case of the stress and strain, we need to input that grid. 3c. We use Surfer to open each grid file and export it as TXT. 3d. Finally, we combined all this in one single tab (Grid data). 4. For the grid data, we determine: 31 4a. Hurricane values using four times the standard deviation limit. The statistical outliers are changed for the value of the original mean 4b. Determination of the distribution law using asymmetry and excess. The parameters with values of asymmetry and/excess above 3, were transformed to logarithms. Original negative values were changed to 0.00001. 5. Correlation analysis. 6. Factor analysis using WINSTAT. 7. Preparing the final table for SURFER (SURFER) using the RAW data. 7a. Add the elastic and plastic data to that TAB at the right end of the table. 8. Variogram analysis on SURFER- correct the title, select the variance line, and eliminate the subtitle. Also add the information of the adjusted curve to the graphic by copying and cropping the screen in SURFER. 9. Grid file using kriging and Variogram information for all the RCCs, the Factors, and elastic and plastic. 9a. Remember to use the right X,Y coordinates for the plastic and elastic columns. 10. Anomaly levels for the different parameters (opacity 70%). 11. Quartile analysis13 to combine all the parameters into a single prospecting map. 11a. Since the plastic and elastic data have a different scale of measurements, first we need to convert them into the same 100*98 grid of the rest of the parameters for that we open the plastic and elastic data and fix the grid to the 100*98 Now we can use the Math option under Grid in Surfer to add both grids- that will be named Totalq. The quartile map included the results of the physical modelling (strain and stress analysis) and the three identified factors: Factor 1=ST+ALL+TT+T+S+SS Factor 2=TC+MC+C+CC+MM+MS Factor 3=MT+M Once combined, the quartile anomalies will indicate the best potential targets in the area. Figure 22 shows the quartile map for the Rionegro project with the location of the main and secondary hard rock targets to explore in the area.

13 Quartile analysis is a mathematical method developed by P. Geo. R. Valls that allows the combination of all the parameters into a single map, which makes the interpretation more direct. 32 0 0 0

6 0 2000 4000 6000 2 8 0 0 0 4 2 8 T 3 0 0 0 2 2 8 T 7 0

0 Total 0

0 Quartiles 2 8 T 8 0 0 0 8 1 8 N 0

A+3 0 0 6 1 M 8 T 0 T 4 T 6 0 0

U T 5 4 215 1 8 0 0 0 2 1

8 A+2 0 0 0 0 1 8 193 0 0 0 8 0

8 T 2 0

0 A+1 0 6 0

8 T 1 0 0 0

4 140 0 8 676000 678000 680000 682000 684000 686000 688000 690000 692000 694000 UTM E Geoconsult Fenix Ltd. Legend Rionegro Project- Colombia Rionegro Project First targets Rionegro application Quartile Map Final Interpretation Secondary targets Geologist: P. Geo. Ricardo Valls Date: June 22, 2015 Guayos mining license Potential paleo-placers File: 3000-200-10 Lineamientos Plan 5

Figure 22. Quartile map for Rionegro with suggested hard rock targets.

We also recommend a heavy mineral survey study with spectral analysis of the different fractions along the banks of the Lebrija River to find the best places for the exploitation of such placers. The paleo placers should be explored with a combination of GPR to define the potential banks, with pitting and geochemical sampling to confirm the presence of precious metals. The host rocks should 33 be studied with a combination of lineament and satellite interpretation followed by the GFcsa™ to identify the source of the gold in the placers.

Satellite Interpretation The present section shows the results of the processing and interpretation by P. Geo. Ricardo A. Valls of satellite data information purchased by Bill Mavridis from Zsolt Katona (GIS fejlesztőmérnök, Envirosense Hungary). The original data was processed using SURFER and Excel to eliminate the noise in the data and to include the information from the variogram analysis (anisotropy) in the final maps. This report includes the final interpretation of each image as well as the geological interpretation that provides additional information on the geological model of the Rionegro Project. Processing of the data The original suite included ASCII files from five mineral assemblages, as well as two files with DEM data, however they did not cover the whole area of the project. As a base for topography we used a model previously provided by Dr. Galkine (Valls et al., 2015). Each assemblage contained over 14.5 million points which forced us to use SURFER v.14 to create smaller datasets that were representative of the original data by Kriging. Each suite of data was processed as follows: 1. Using SURFER v.14, I created GRD files consisting of 100 lines and 99 columns each for a total of 9900 points per file. 2. I exported these GRD files as DAT files adding the adjective “reduced” to the original file name. 3. I opened each file now using Excel, determined the minimum value (which always was a negative number) and eliminated all negative values by adding a number slightly larger than the minimum value to all the data. For example, if the minimum data was -9.53, I added 10 to all the data. 4. I then completed a correlation analysis (RCC) and a factor analysis of the assemblages (Fitch, 2014). Both methods gave the same results. The complete step-by-step procedure is shown in file “Satellite total reduced” that can be downloaded from Mendeley datasets at DOI: 10.17632/jfkfpb5yzp.1. By looking at the data it was obvious that each assemblage was composed of two populations, one of which comprising above 90% of the totality of the data. I initially tried to normalize the data set by using their logarithms, but the difference between the sub compositions was too large. Therefore, I separated the first quartile (Q25) from each data set as “noise” and saved it separately as TXT files. The upper Q25 part was also saved as TXT and further processed using SURFER v.14. 5. I analyzed the variogram for each data set to determine the anisotropy of the data. 6. Using the data from the variograms, I created GRD files using Kriging.

34 7. Using SURFER v.14 I created individual maps for each dataset. The anomaly levels on those maps correspond to the Q75, Q90, and Q95 as defined within the software. When combining the obtained maps, I obtained these classical associations in the Rionegro Project (Fig 23). We can trust this interpretation, because we have previously mapped a tonalitic intrusive at the centre of the area which was perfectly mapped by these assemblages.

Figure 23. Geological interpretation of the satellite data.

35 The method used for the modelling and interpretation of the satellite raw data allowed the extraction of useful geological information from the raw satellite data. The interpretation of several other porphyritic intrusives in the area, as shown in Fig. 81, is of capital importance because it explains the potential source of the younger gold in the paleoplacers. The Authors recommend conducting a soil sampling program using Enzyme Leach method over these silica centres to determine the possible gold content of these host rocks as an original exploitable source and not only as a source of the mineralization currently in the paleoplacer. The Authors also recommend investigating the ore potential of the intrusive to the SE of the current limits of the Rionegro Project.

Drilling No drilling has been conducted at the area, except for one test using manual augers completed over a zone of accumulation within a paleo placer (Fig. 24).

Figure 24. Using a manual auger at the Rionegro Project.

36 As a quick method for testing, the manual auger is very efficient and unobtrusive, but the presence of conglomerates or boulders can block the test. In this case, the test was stopped at 2.5m, but the two samples (1m and 1.5m) assayed as soil sampling (no panning) detected hurricane grades of gold on both samples. That is the reason why we do not use them in our resource estimations. Going forward, for efficiency sake, the QP recommends the use of mechanical augers14, or RC or similar drilling method.

Mineral Resources Estimates Definition of Mineral Resources Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated, and Measured categories. An Inferred Mineral Resource has a lower level of confidence than that applied to an Indicated Mineral Resource. An Indicated Mineral Resource has a higher level of confidence than an Inferred Mineral Resource but has a lower level of confidence than a Measured Mineral Resource. A 'Mineral Resource' is a concentration or occurrence of material of intrinsic economic interest in or on the earth's crust in such form, quality and quantity that there are reasonable Prospects for eventual economic extraction. Mineral Resources are further sub-divided, in order of increasing geological confidence, into Inferred, Indicated, and Measured categories. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated, or interpreted from specific geological evidence and knowledge. The term Mineral Resource covers mineralization and natural material of intrinsic economic interest which has been identified and estimated through exploration and sampling and within which Mineral reserves may subsequently be defined by the consideration and application of technical, economic, legal, environmental, socio-economic, and governmental factors. The phrase “reasonable Prospects for economic extraction” implies a judgment by the Qualified Person in respect to the technical and economic factors likely to influence the Prospect of economic extraction. A Mineral resource is an inventory of mineralization that under realistically assumed and justifiable technical and economic conditions might become economically extractable. These assumptions must be presented explicitly in both public and technical reports. Current norms define three levels of resources. Inferred Mineral Resource is that part of a mineral resource for which tonnage, grade, and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological/or grade continuity. It is based on information gathered through appropriate techniques from location such as outcrops, trenches, pits, workings, and drill holes which may be of limited or uncertain quality and reliability. Due to the uncertainty that may be attached to Inferred Mineral Resources, it cannot be assumed that all or any part of an Inferred Mineral Resource will be upgraded to an Indicated or Measured Mineral Resource as a result of continued exploration. Confidence in the estimate is insufficient to allow the meaningful application of technical and economic parameters or to enable an evaluation of economic viability worthy of public disclosure. Inferred Mineral Resources must be excluded from estimates forming the basis of feasibility or other economic studies.

14 http://www.littlebeaver.com/products/big-beaver-auger-drill-rig/ 37 Indicated Resources are simply economic mineral occurrences that have been sampled (from locations such as outcrops, trenches, pits and drill holes) to a point where an estimate has been made, at a reasonable level of confidence, of their contained metal, grade, tonnage, shape, densities, and physical characteristics. Measured Resources are Indicated Resources that have undergone enough further sampling that a 'competent person' has declared them to be an acceptable estimate, at a high degree of confidence, of the grade, tonnage, shape, densities, physical characteristics, and mineral content of the mineral occurrence. The Authors cannot consider the amount of exploration in the area insufficient to establish Measured Mineral Reserves. Therefore, this Technical Report has only determined Indicated Mineral Resources for the property.

Artisanal Production The area of the Client has not seen any type of artisanal production except for local “bariqueros” that pan the active alluvial sediments of the Lebrija River after a heavy rain, taking advantage of the eroded gold from the nearby California Gold District. Downstream from the Client’s license there are thee Colombian semi-industrial operations that are reporting between 1.5 and 2.5 kg of gold per each 1,800 m3 of washed sediments. Currently it takes them between 4 and 5 days to process this volume of sediments.

Exploration target The following estimations are based on the current production from the paleo placers within the license are considered compliant with CIM and NI 43-101. The Authors used the most conservative figures possible. The Authors estimated three case scenarios- (i) Only free gold, (ii) only gold encapsulated in the magnetite and (iii) total gold. Other assumptions are: 1. Maximum depth 10 meters. 2. 4.76% of black sand (concentrate) is extracted from the washed sediments. 3. The black sand is composed of mostly magnetite. We consider extracting 95% of the encapsulated gold in the magnetite15. 4. The gold grade in the magnetite is considered at 1 g/t16. 5. The gold grade in the sediment is considered as 0.81 g/t of sediment17. Under these conditions we estimated the inferred resources as follow (Table 4).

15 Based on the studied completed in Canada (Ortech, 2015). 16 Gold grades in the magnetic fraction has been assayed as high as 200 to 400 g/t in other samples by reputable laboratories both in Colombia (SGS) and Canada. 17 Based on the current average production of the exploitation from the Mina Guayos license. 38 Table 4. Inferred Mineral Resources. Conditions for the estimation Length 5,000 m Width 1,000 m kg ozt Depth 10 m 1 32.1505 Volume 50,000,000 m3 Volume correction 0.72 % Corrected volume 35,921,695.57 m3 Dry density 2.02 t/m3 Ponderated free gold grade 0.81 g/t

Magnetite 4.76 % Volume 1,709,873 m3 Dry density 2.8 t/m3 Magnetite, t 4,787,644 t Gold grade in magnetite 1 g/t

Au, kg Au, ozt Fre gold 58,916 1,894,169 Gold in magnetite 4,548 146,229 Total gold 63,464 2,040,398 Based on production data, we have defined 35.92 million cubic metres of sediments with a grade of 0.81 g/t which represent 58,916 kg of free gold (1,894,169 ozt). Within the same volume of sediments, we have defined 4.79 million cubic metres of magnetite (4.76%) with a grade of 1 g/t, 95% recovery, representing 4,548 kg of gold (146,229 ozt). In total, we have 63,464 kg of gold (2,040,398 ozt) of Inferred Mineral Resources.

Interpretation and Conclusions The Rionegro Project represents a Horst/Graben structure formed over a marine basin of Jurassic to Tertiary Age, covered by Quaternary sediments. The work completed in the Rionegro Project has confirmed the presence of active and paleo placers associated to the Lebrija River that flows across the Horst/Graben structures that are oriented N-S. The Tertiary host rocks have also potential as a source of gold mineralization in the paleo conglomerates, in the tonalite intrusive and on the gold-bearing limestones (Carlin type?). Of great importance is the discovery of gold encapsulated in the magnetite of these placers, which constitutes an additional gold source currently unexploited in the region. According to studies completed by Process Ortech by request of the Client it is possible to extract up to 96% of the gold encapsulated in the magnetite. The lineament analysis allowed the Client to identify a Tertiary tonalite intrusive that could have been the key for the remobilization and concentration of gold associated with zones of hydrothermal and metasomatic alterations, controlled by the sub-parallel faults. The water coming out from some of these faults are oxidized with sulphur smell and a pH of 4.5-5 indicating the presence of sulfurs in the host rock. The Inferred Mineral Resources estimated in this report are based on the gold production reported on Mina Guayos (JG3-16392), within the limits of the Client’s property of Rionegro

39 and other studies completed by the Client using certified laboratories. The Authors used the minimum values reported from these laboratories to be as conservative as possible. Based on production data, we have defined 35.92 million cubic metres of sediments with a grade of 0.81 g/t which represent 58,916 kg of free gold (1,894,169 ozt). Within the same volume of sediments, we have defined 4.79 million cubic metres of magnetite (4.76%) with a grade of 1 g/t, 95% recovery, representing 4,548 kg of gold (146,229 ozt). In total, we have 63,464 kg of gold (2,040,398 ozt) of Inferred Mineral Resources.

Recommendations The current recommendations and budget are just for the concession contract JG3-16392 (Mina Guayos). To obtain a more global understanding of the gold potential of the licenses in the area the Authors suggest a heavy mineral survey (HMC) of the Lebrija River as well as some of its tributaries within the limits of both Rionegro licenses. The objective of this exploration program is to find the best areas for an industrial operation of up to 200 t/h to obtain not only the precious metals, but also magnetite and other products that could be commercialized. The source of the precious metals should also be explored in the conglomerates and other host rocks using a combination of lineament analysis, satellite interpretation, mapping, geophysics, and geochemistry (GFcsa™).

Proposed budget The Authors present here a budget in three stages. The initial stage has been almost completed and it was estimated at US$259,381. Stage I corresponds to the calibration of the exploration methods in the area. The authors estimate US$40,533 for this stage which includes a combination of GPR, soil sampling, and pitting. The cost of the linear kilometre of GPR is currently US$330 and represents the largest portion of the cost to study the paleo placers. The Authors estimate 12 linear kilometres, the cost should be around US$4,000. Stage II consists of the proper exploration of the license, including more geochemical and geophysical work, as well as drilling. The Authors estimated a first campaign of 121 holes at a grid of 100x100 and an average depth of 10 m, followed if necessary, by a more detail campaign of 10 infill holes using a 50x50m grid and the same average depth of 10 m. The drilling could be done with mechanical augers or RC. The Authors used an average cost of 60 US$ per metre for this drilling program. This stage includes the construction of a base camp. The Authors estimate US$216,695 for this stage. The advance to the third stage is contingent on positive results of stage II. The third stage is estimated at almost one million US dollars and includes all the necessary capital and operational costs to start the exploitation of the Client’s license.

40 ReferencesXBerger, B. R. (1986). Descriptive Model of Low-sulphide Au-Quartz Veins in Mineral Deposit Models. U.S. Geological Survey, 239–243. Chernicoff, C.J., Richards, J.P. and Eduardo O. Zappettini (2002). Crustal lineament control on magmatism and mineralization in northwestern Argentina: geological, geophysical, and remote sensing evidence, Ore Geology Reviews, 21, 127–155. CIM. (2000). Exploration Best Practices Guidelines. Retrieved February 17, 2015, from http://web.cim.org/standards/documents/Block465_Doc21.pdf Cruz Martin, J., Valls, R. A., & F. V. Jones Navas. (2015). Estudio de Impacto Ambiental (EIA), Proyecto Mina Guayos, Contrato de Concesión JG3-16392 (p. 358+illustrations). Bucaramanga, Santander. Etayo S, F. (1965). Sinopsis estratigráfica de la región de Villa Leiva y zonas próximas. Bol. Geol., (21), 19–32. Fitch, R. (2014). Winstat. Retrieved from www.winstat.com. Garner, A. H. (1926). Suggested nomenclature and correlation of the geological formations in Venezuela. Am. Inst. Min. Metall. Eng., Tr, 677–684. Mendoza-Parada, J. E., Moreno-Murillo, J. M., & G. Rodríguez-Orjuela. (2009). Sistema Cárstico de la Formación Rosablanca Cretácico inferior, en la provincia santandereana de Vélez, Colombia. Retrieved February 13, 2015, from http://www.bdigital.unal.edu.co/32558/1/32094- 117831-1-PB.pdf Ortech. (2015). PRO’s Au Process Testing for Alicanto Mining Corp. Sample-1 (Black River) (p. 4). Mississauga. Pilsbury, H. A., & A. A. Olsson. (1941). A Pliocene fauna from western Ecuador. Academy of Natural Sciences of Philadelphia, (93), 1–79. Royero, J., & J. Clavijo. (2001). Memoria explicativa mapa geológico generalizado Departamento Santander. Ingeominas. Bogotá. Retrieved from https://scholar.google.ca/scholar? q=memoria+explicativa+del+mapa+geologico+de+santander&hl=en&as_sdt=0,5&scilu=3,1799 4603431291092350:1&scisig=AMstHGQAAAAAVNuvnIpy8wkZhiqwP_RtiSZEURnk405V#1 Selby, J. (1987). Patterns in the crust: a key to ore discovery, Geology Today, September- October, 160-164. Sibson, R. H., Robert, F., & H. Poulsen. (1989). Gold Production and Reserves in British Columbia. B.C. Ministry of Energy, Mines and Petroleum Resources, Open File , 86. Taborda, B. A. (1965). Guidebook to the geology of the De Mares Concession. Colombian Soc. Petroleum Geologists and Geophysicists (p. 25). Thorpe, R. I., & J. M. Franklin. (1984). Volcanic-associated Vein and Shear Zone Gold; in Canadian Mineral Deposit Types, A Geological Synopsis. Geological Survey of Canada, Economic Geology Report 36, 38. Valls, R. A. (2011). Quality assurance and Quality Control for the Field Work in Colombia. A Guideline for Calvista Gold Corporation. (1st ed., p. 72). California, : Calvista Gold Corp.

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