Indé Project Zachary Black, SME-RM 4156858; Zachary Prepared for: Prepared Prepared by: Prepared EXPLORATION &MINING Indé, Durango, Indé Project NI 43-101Technical Report Global ResourceGlobal Engineering | 600Grant St. #975 |Denver, Colorado 80203 USA ECI

Kevin Gunesch, PE; Terre MMSA; Rick Lane Moritz MMSA August 19,2016 Date:Report May, 31, 2016 EffectiveDate: Kevin J. Gunesch

Principal Mining Engineer

Global Resource Engineering, Ltd

600 Grant St. #975

Denver, Colorado 80203

Telephone: 303-547-6587

Email: [email protected]

CERTIFICATE of AUTHOR

I, Kevin J. Gunesch do hereby certify that:

1. I am currently employed as Principal Mining Engineer by Global Resource Engineering, Ltd at: 600 Grant St. #975 Denver, Colorado 80203 2. I am a graduate of the Colorado School of Mines with a Bachelor of Science degree in Mining Engineering (2000). 3. I am a registered Professional Engineer in the State of (27448). 4. I have worked as a Mine Engineer for a total of 16 years since my graduation from university, as an employee as of several mining companies and as a consulting engineer. 5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43- 101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101. 6. I am responsible for the preparation of the technical report titled “NI 43-101 Technical Report NI 43-101 Technical Report Indé Project” with an effective date of May 31, 2016 (the “Technical Report”) with specific responsibility for overall organization, preparation and review of this technical report. I conducted a personal 5-day visit of the subject property in April 2016. 7. I have personally completed an independent review and analysis of the data and written information contained in this Technical Report. 8. As of the date of this certificate, to the best of my knowledge, information, and belief, this Technical Report contains all the scientific and technical information that is required to be disclosed to make this Technical Report not misleading. 9. I have not had prior involvement with the properties that are the subject of the Technical Report. 10. I am independent of the issuer applying all of the tests in Section 1.5 of National Instrument 43- 101. 11. I have read National Instrument 43-101 and Form 43-101, and the Technical Report has been prepared in compliance with that instrument and form. 12. I consent to the filing of the Technical Report with any stock exchanges or other regulatory authority and any publication by them, including electronic publication in the public company files on the websites accessible by the public, of the Technical Report.

Dated this 19th day of August 2016

Kevin J. Gunesch (Signature)

Signature of Qualified Person

“Kevin J. Gunesch” .

Print name of Qualified Person Zachary J. Black

Geological Engineer

Hard Rock Consulting, LLC

7114 W. Jefferson Ave, Suite 308

Lakewood, Colorado 80235

Telephone: 303-974-7946

Email: [email protected]

CERTIFICATE of AUTHOR

I, Kevin J. Gunesch do hereby certify that:

1. I am currently employed as Director of Resource Geology at Hard Rock Consulting, LLC: 7114 W. Jefferson Ave, Suite 308 Lakewood, Colorado 80235 2. I am a graduate of the University of with a Bachelor of Science degree in Geological Engineering, and have practiced my profession continuously since 2005. 3. I am a registered member of the Society of Mining Metallurgy and Exploration (No. 4156858RM). 4. I have worked as a Geological Engineer/Resource Estimation Geologist for a total of 11 years since my graduation from university, as an employee as of a major mining company, a major engineering company, and as a consulting engineer. 5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43- 101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101. 6. I am responsible for the preparation of the technical report titled “NI 43-101 Technical Report NI 43-101 Technical Report Indé Project” with an effective date of May 31, 2016 (the “Technical Report”) with specific responsibility for Sections 7, 8, and 14. 7. I have personally completed an independent review and analysis of the data and written information contained in this Technical Report. 8. As of the date of this certificate, to the best of my knowledge, information, and belief, this Technical Report contains all the scientific and technical information that is required to be disclosed to make this Technical Report not misleading. 9. I have not had prior involvement with the properties that are the subject of the Technical Report. 10. I am independent of the issuer applying all of the tests in Section 1.5 of National Instrument 43- 101. 11. I have read National Instrument 43-101 and Form 43-101, and the Technical Report has been prepared in compliance with that instrument and form. 12. I consent to the filing of the Technical Report with any stock exchanges or other regulatory authority and any publication by them, including electronic publication in the public company files on the websites accessible by the public, of the Technical Report.

Dated this 19th day of August 2016

Zachary J. Black (Signature)

Signature of Qualified Person

“Zachary J. Black” .

Print name of Qualified Person Terre A. Lane

Principal Mining Engineer

Global Resource Engineering, Ltd

600 Grant St. #975

Denver, Colorado 80203

Telephone: 720-373-5911

Email: [email protected]

CERTIFICATE of AUTHOR

I, Terre A. Lane do hereby certify that:

1. I am currently employed as Principal Mining Engineer by Global Resource Engineering, Ltd at: 600 Grant St. #975 Denver, Colorado 80203 2. I am a graduate of the Michigan Technology University with a Bachelor of Science degree in Mining Engineering in 1982. 3. I am a Qualified Professional with MMSA, member number 01407QP in Ore Reserves and Mining. 4. I have practiced my profession since 1982 in capacities from mining engineer to senior management positions for engineering, mine development, exploration, and mining companies. I have been involved in the estimation of resources and mine design for several hundred projects at locations in , Central America, South America, Africa, Australian/New Zealand, India, China, Russia and Europe. My relevant experience for the purpose of this technical report is as the resource estimator and mine engineer with over 30 years of experience. 5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43- 101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101. 6. I am responsible for the preparation of the technical report titled “NI 43-101 Technical Report NI 43-101 Technical Report Indé Project” with an effective date of May 31, 2016 (the “Technical Report”) with specific responsibility for Sections 14 and 16. I have not visited the property. 7. I have personally completed an independent review and analysis of the data and written information contained in this Technical Report. 8. As of the date of this certificate, to the best of my knowledge, information, and belief, this Technical Report contains all the scientific and technical information that is required to be disclosed to make this Technical Report not misleading. 9. I have not had prior involvement with the properties that are the subject of the Technical Report. 10. I am independent of the issuer applying all of the tests in Section 1.5 of National Instrument 43- 101. 11. I have read National Instrument 43-101 and Form 43-101, and the Technical Report has been prepared in compliance with that instrument and form. 12. I consent to the filing of the Technical Report with any stock exchanges or other regulatory authority and any publication by them, including electronic publication in the public company files on the websites accessible by the public, of the Technical Report.

Dated this 19th day of August 2016

Terre A. Lane (Signature)

Signature of Qualified Person

“Terre A. Lane” .

Print name of Qualified Person Richard D. Moritz

Principal Mining Engineer

Global Resource Engineering, Ltd

600 Grant St. #975

Denver, Colorado 80203

Telephone: 303-704-2589

Email: [email protected]

CERTIFICATE of AUTHOR

I, Richard D. Moritz do hereby certify that:

1. I am currently employed as Principal Mining and Process Engineer by Global Resource Engineering, Ltd at: 600 Grant St. #975 Denver, Colorado 80203 2. I am a graduate of the University of Nevada, Reno with a Bachelor of Science degree in Mining Engineering in 1979 and a MBA in 1987. 3. I am a Qualified Professional with MMSA, member number 01256QP in Metallurgy/Processing, and Mining. 4. I have practiced a Mine and Process Engineer for over 20 years since my graduation from university I have worked for several mine and process engineering companies, a royalty company, and several mining companies over the course of my career. I have been involved with review, design, engineering, construction, startup, and operations for numerous mines. 5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43- 101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101. 6. I am responsible for the preparation of the technical report titled “NI 43-101 Technical Report Indé Project” with an effective date of May 31, 2016 (the “Technical Report”) with specific responsibility for Sections 13, 16, and 17. I conducted a personal 5-day visit of the subject property in April 2016. 7. I have personally completed an independent review and analysis of the data and written information contained in this Technical Report. 8. As of the date of this certificate, to the best of my knowledge, information, and belief, this Technical Report contains all the scientific and technical information that is required to be disclosed to make this Technical Report not misleading. 9. I have not had prior involvement with the properties that are the subject of the Technical Report. 10. I am independent of the issuer applying all of the tests in Section 1.5 of National Instrument 43- 101. 11. I have read National Instrument 43-101 and Form 43-101, and the Technical Report has been prepared in compliance with that instrument and form. 12. I consent to the filing of the Technical Report with any stock exchanges or other regulatory authority and any publication by them, including electronic publication in the public company files on the websites accessible by the public, of the Technical Report.

Dated this 19th day of August 2016

Richard D. Moritz (Signature)

Signature of Qualified Person

“Richard D. Moritz” .

Print name of Qualified Person NI 43-101 Technical Report and PEA for Indé Project Page i ECI Exploration and Mining Project No.: 13-1068

TABLE OF CONTENTS 1.0 SUMMARY ...... 1 1.1 Existing Operation...... 1 1.2 Environmental and Permitting ...... 2 1.3 Operational Permits and Jurisdictions ...... 2 1.4 History and Ownership ...... 2 1.5 Geology ...... 3 1.6 Drilling and Exploration ...... 3 1.7 Metallurgy and Processing ...... 4 1.8 Mineral Resources ...... 4 1.9 Preliminary Economic Assessment ...... 5 1.10 Conclusions and Recommendations ...... 6 2.0 INTRODUCTION ...... 8 2.1 Purpose and Basis of Report ...... 8 2.2 Personal Inspection...... 8 2.3 Units & Abbreviations ...... 8 3.0 RELIANCE ON OTHER EXPERTS ...... 11 4.0 PROPERTY DESCRIPTION AND LOCATION ...... 12 4.1 Property Location ...... 12 4.2 Agreements and Royalties...... 15 4.3 Environmental Liabilities ...... 16 4.4 Water Availability ...... 17 4.5 Other Permits ...... 17 5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY...... 18 5.1 Accessibility ...... 18 5.2 Climate ...... 18 5.3 Local Resources and Infrastructure ...... 18 5.4 Physiography ...... 18 6.0 HISTORY...... 20 6.1 The 17th and 18th Centuries ...... 20 6.2 The 19th Century ...... 21 6.3 The 20th Century ...... 22 6.4 Indé as a National Mining Reserve (RMN) ...... 23 6.5 Silveyra Family ...... 23 6.6 Minera Electrum ...... 23 6.7 Production and Revenue Sources ...... 24 7.0 GEOLOGICAL SETTING AND MINERALIZATION ...... 25

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7.1 Regional Geological Setting ...... 25 7.2 Local Geologic Setting ...... 26 7.3 Lithologic Units ...... 29 7.3.1 Gran Tesoro Formation ...... 29 7.3.2 Mezcalara Group ...... 30 7.3.3 Tertiary Igneous Rocks ...... 31 7.3.4 Intrusive Rocks ...... 31 7.4 Mineralization...... 32 7.4.1 Type 1: Intrusive—Related and Structurally Controlled Polymetallic and Precious Metal Veins (Ag-Pb-Zn ± Au) ...... 32 7.4.2 Type 2: Polymetallic Base and Precious Metal CRD Deposits (Au-Ag-Pb-Zn) ...... 33 7.4.3 Type 3: Polymetallic Base and Precious Metal Skarn Mineralization (Ag-Pb-Zn+Au, El Gato Skarn) and (Cu-Al, Matrecal Skarn) ...... 34 7.4.4 Disseminated Polymetallic Mineralization (Ag-Zn-Pb ± Au) ...... 34 7.5 Alteration ...... 35 8.0 DEPOSIT TYPES...... 37 8.1 Intrusive-Related and Structurally Controlled Polymetallic Base and Precious Metal Veins Deposits (Ag-Pb-Zn ± Au) ...... 38 8.2 Polymetallic Base and Precious Metal Carbonate Replacement Deposits (Au-Ag-Pb-Zn) ...... 38 8.3 Polymetallic Base and Precious Metal Skarns (Ag-Pb-Zn + Au, El Gato Skarn) and (Cu-Au, Matracal Skarn)...... 38 9.0 EXPLORATION ...... 39 9.1 Summary ...... 39 9.2 ECI Exploration...... 39 9.3 Surface and Underground Rock and Dump Samples ...... 39 9.4 Exploration Mapping ...... 39 9.5 Geophysical Surveys ...... 40 9.6 ECI Sampling Method and Approach ...... 40 9.6.1 Surface Channel Samples ...... 40 9.6.2 Underground Mine Channel Samples ...... 40 10.0 DRILLING...... 42 10.1 ECI Exploration Drilling ...... 42 10.2 Drilling Conditions and Procedures ...... 45 10.3 Drilling Contractors ...... 45 10.4 Geological and Geotechnical Logging ...... 45 10.5 Drill Collar and Down-Hole Surveys ...... 46 10.6 Diamond Core Sampling ...... 46 11.0 SAMPLE PREPARATION, ANALYSES AND SECURITY ...... 47 12.0 DATA VERIFICATION ...... 50 12.1 GPS Drill Hole Survey and Outcrop Inspection ...... 50

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12.2 Comparison of Select Drill Holes to Geologic Logs ...... 53 12.3 Review of Mined Out Areas...... 55 12.4 Underground Tour of the Paco Mine ...... 56 13.0 MINERAL PROCESSING AND METALLURGICAL TESTING ...... 59 13.1 SGS Testing - Oxide Material ...... 59 13.2 SGS Testing - Sulfide Material...... 62 13.3 Metal Correlations ...... 62 13.4 Estimated Sulfide Recovery with Scavenger ...... 63 13.5 Existing Plant - Monthly Recovery Data ...... 65 13.6 Union Tailings, Bottle Roll Tests ...... 66 13.7 Recommendations ...... 67 14.0 MINERAL RESOURCE ESTIMATES ...... 68 14.1 Introduction ...... 68 14.2 Deposit Geology Pertinent to Resource Estimation ...... 68 14.3 Data Used for the Resource Estimation ...... 68 14.4 Density ...... 69 14.5 Polymetallic Veins ...... 69 14.6 Estimation Domains ...... 70 14.7 Compositing...... 70 14.8 Capping of Assays ...... 71 14.9 Variography ...... 73 14.10 Estimation Methodology ...... 75 14.11 Estimate Validation ...... 76 14.12 Mineral Resource Classification...... 79 14.13 Mineral Resource Tabulation ...... 79 15.0 MINERAL RESERVES ...... 85 16.0 MINING METHODS ...... 86 16.1 Mining Method Selection ...... 86 16.1.1 Production Rate and Mine Life ...... 87 16.1.2 Mine Layout and Design ...... 87 16.1.3 Design Criteria ...... 88 17.0 RECOVERY METHODS ...... 90 17.1 Proposed Flow sheet...... 90 17.2 Comminution ...... 90 17.3 Flotation ...... 92 17.4 Leaching ...... 92 17.5 CCD, Merrill-Crowe, Smelting and Tailings...... 92 18.0 PROJECT INFRASTRUCTURE ...... 96 18.1 Existing Operation...... 96

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18.2 Additional Infrastructure ...... 97 19.0 MARKET STUDIES AND CONTRACTS ...... 99 20.0 ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY IMPACT ...... 103 20.1 General ...... 103 20.2 Environmental Liabilities ...... 103 20.3 Water, Availability & Mine Water...... 103 20.4 Tailings Disposal...... 104 20.5 Other Permits ...... 104 20.6 Expected Community Impact for Expansion ...... 105 20.7 Mine Closure ...... 105 21.0 CAPITAL AND OPERATING COSTS ...... 106 21.1 Capital Costs ...... 106 21.1.1 Process Site Complex ...... 107 21.1.2 Surface Facilities ...... 108 21.1.3 Initial Mine Equipment...... 108 21.1.4 Additional Engineering Studies ...... 109 21.1.5 Closure ...... 110 21.1.6 Development ...... 110 21.1.7 Permitting ...... 111 21.1.8 First Fills...... 111 21.1.9 Tailings Storage Facility ...... 111 21.1.10 Equipment Rebuild and Replacement ...... 112 21.1.11 Working Capital ...... 112 21.2 Controllable Operating Costs ...... 112 21.2.1 Hourly and Salary Labor ...... 112 21.2.2 Unit Operations ...... 115 21.3 Non-Controllable Operating Costs ...... 117 21.3.1 Taxes & Royalties ...... 117 21.3.2 Exploration Permit Fees ...... 118 21.4 Additional Model Parameters ...... 118 21.4.1 Metal Prices ...... 118 21.4.2 Cutoff Grade ...... 118 21.4.3 Process Plant Recoveries ...... 118 21.4.4 Depreciation ...... 119 22.0 ECONOMIC ANALYSIS...... 120 22.1 Project Forecast ...... 120 22.1.1 Mining Sequence ...... 120 22.1.2 Preproduction – Year -1 ...... 120 22.1.3 Production Ramp Up – Year 1 ...... 121 22.1.4 Steady State Production – Years 2 through 10 ...... 121

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22.1.5 Declining Production – Years 11 through 13 ...... 121 22.1.6 Closure – Year 13 ...... 121 22.2 Economic Model Results ...... 121 22.3 Economic Model Sensitivities ...... 127 23.0 ADJACENT PROPERTIES ...... 132 24.0 OTHER RELEVANT DATA AND INFORMATION ...... 133 25.0 INTERPRETATION AND CONCLUSIONS ...... 134 25.1 Existing Operation...... 134 25.2 Larger Scale Mining Operation ...... 134 25.3 Geologic Potential and Current Mineral Resource Estimate...... 136 26.0 RECOMMENDATIONS...... 137 26.1 Existing Operation...... 137 26.2 Larger Scale Mining Operation ...... 137 26.3 Recommended Work Plan...... 138 27.0 REFERENCES ...... 139

LIST OF TABLES Table 1-1 Existing Plant Recoveries 2013 to 2016...... 4 Table 1-2 Underground Resources Summary at a $35 NSR Cutoff ...... 5 Table 1-3 Matracal Skarn Inferred Resource (Potential Open Pit) ...... 5 Table 1-4 Economic Model Summary Results ...... 6 Table 1-5: Work Plan ...... 7 Table 4-1 Indé Mining Concessions ...... 13 Table 4-2 Typical Permits for Construction and Operation ...... 17 Table 6-1 - Mining Claims in Indé - End of 19th Century ...... 21 Table 6-2 Registered Indé Production History ...... 24 Table 10-1 Summary of Drilling by Target Area ...... 42 Table 11-1 QA/QC Sample Insertion Program ...... 48 Table 12-1 Drill Hole GPS Survey & Comparison to Database ...... 51 Table 12-2 Percent of Resource by Vein on Tonnage Basis ...... 53 Table 12-3 Drill Holes Compared to Geologic Logs by Vein ...... 53 Table 13-1 Cyanidation Recoveries ...... 60 Table 13-2 Gravity Recoveries ...... 60 Table 13-3 Oxide Bulk Flotation with Sulfidation ...... 60 Table 13-4 Oxide Bulk Flotation ...... 61 Table 13-5 Oxide Selective Flotation with Sulfidation...... 61 Table 13-6 Sulfide Selective Flotation ...... 62 Table 13-7 Sulfide, Estimated Lead Concentrate Recovery ...... 64

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Table 13-8 Sulfide, Estimated Zinc Concentrate Recovery ...... 64 Table 13-9 Sulfide, Estimated Combined Recovery ...... 65 Table 13-10 Existing Plant Recoveries 2013 to 2016 ...... 66 Table 13-11 Union Tailings - Bottle Roll Leach Test ...... 66 Table 14-1 Density ...... 69 Table 14-2 Sample and Composite Quantities by Vein ...... 70 Table 14-3 Vein Orientation ...... 71 Table 14-4 Uncapped Composite Statistics for Each Vein ...... 71 Table 14-5 Capped Composite Statistics for Each Vein ...... 72 Table 14-6 Capping of Assays by Vein ...... 73 Table 14-7 Variogram Parameters by Vein ...... 74 Table 14-8 Leticia Vein System Mineral Resource ...... 80 Table 14-9 San Antonio Vein Mineral Resource...... 80 Table 14-10 Tablas Vein System Mineral Resource...... 81 Table 14-11 Caballo Vein System Mineral Resource ...... 81 Table 14-12 La Union Vein System Mineral Resource ...... 82 Table 14-13 El Barco Vein System Mineral Resource ...... 82 Table 14-14 Matracal Skarn Inferred Resource (Potential Open Pit) ...... 83 Table 14-15 Underground Mineral Resource Summary @ $35/NSR Cutoff...... 83 Table 16-1 Mine Method ...... 88 Table 16-2 Mine Equipment ...... 89 Table 19-1 Lead Concentrate Smelter Terms...... 99 Table 19-2 Zinc Concentrate Smelter Terms...... 99 Table 19-3 Selected Metal Prices ...... 102 Table 20-1 Base Engineering TSF Design Criteria ...... 104 Table 20-2 Typical Permits for Construction and Operation ...... 105 Table 21-1 Initial Capital Summary ...... 106 Table 21-2 Total Project Capital Summary ...... 106 Table 21-3 Surface Facilities...... 108 Table 21-4 Initial Mine Equipment Capital ...... 108 Table 21-5 Full Production Mine Equipment Fleet Capital ...... 109 Table 21-6 Unit Development Costs ...... 110 Table 21-7 First Fills ...... 111 Table 21-8 Sustaining Capital ...... 112 Table 21-9 Total Steady State Employees...... 113 Table 21-10 Mine Operations Employees by Crew ...... 113 Table 21-11 Mine Support Employees by Crew ...... 113 Table 21-12 Mine Hourly Wage Rates by Employee ...... 114 Table 21-13 Mine Maintenance Employees by Crew ...... 114 Table 21-14 Mill Workforce ...... 115 Table 21-15 Salary Workforce ...... 115 Table 21-16 Unit Operating Costs ...... 116

Global Resource Engineering August 19, 2016 NI 43-101 Technical Report and PEA for Indé Project Page vii ECI Exploration and Mining Project No.: 13-1068

Table 21-17 Sulfide Recoveries ...... 118 Table 21-18 Oxide Recoveries ...... 119 Table 22-1 Production ...... 122 Table 22-2 Net Revenue ...... 123 Table 22-3 Royalties, Operating Costs, Taxes, Depreciation, Net Income After Tax...... 124 Table 22-4 Capital Cost and After Tax Cash Flow ...... 125 Table 22-5 Average Operating Costs ...... 126 Table 22-6 Economic Model Results ...... 126 Table 25-1 Economic Model Summary Results ...... 135 Table 25-2 Underground Resources Summary at a $35 NSR cutoff ...... 136 Table 25-3 Matracal Skarn Inferred Resource (Potential Open Pit) ...... 136 Table 26-1 Work Plan ...... 138

LIST OF FIGURES Figure 4-1 Location Map ...... 12 Figure 4-2 Map of Mining Concessions ...... 14 Figure 4-3 Map of Surface Ownership ...... 15 Figure 6-1 Camino Real Adentro ...... 20 Figure 7-1 Geology of the ...... 25 Figure 7-2 Structural Development Stages ...... 27 Figure 7-3 Indé Surface Geology ...... 28 Figure 7-4 1st Derivative of the Total Magnetic Survey ...... 29 Figure 7-5 Indé Stratigraphic Column ...... 30 Figure 7-6 Surface Alteration Contour Map...... 35 Figure 8-1 Conceptual Cross-Section of the Indé Mining District and Mineralization Types ...... 37 Figure 10-1 Drill Hole Plan ...... 43 Figure 10-2 Barco Vein Drill Hole Plan Map ...... 44 Figure 10-3 Barco Vein Drill Hole Section Map 1 ...... 44 Figure 10-4 Barco Vein Drill Hole Section Map 2 ...... 45 Figure 12-1 Oxide/Sulfide Boundary Barco Vein ...... 54 Figure 12-2 Oxide/Sulfide Boundary Caballo Vein ...... 55 Figure 13-1 and Silver Recovery to Concentrate ...... 63 Figure 13-2 Correlation of Gold with Other Elements...... 63 Figure 14-1 3D View of the Caballo Vein System Model and ECI Surface Geology ...... 70 Figure 14-2 Barco Vein Silver (gpt) Cumulative Frequency Plot ...... 73 Figure 14-3 El Barco Vein Silver Correlogram ...... 75 Figure 14-4 Caballo Vein Silver Swath Plot ...... 76 Figure 14-5 Caballo Long Section with Silver Grades ...... 77 Figure 14-6 Caballo Long Section with Vein Thickness ...... 78

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Figure 14-7 Caballo Cumulative Frequency Plot of Silver Composite Grade, Kriged Block Grade, Inverse Distance Squared Block Grade, and Nearest Neighbor Block Grade ...... 79 Figure 16-1 Overhand Cut and Fill ...... 86 Figure 17-1 Conceptual Flow Sheet ...... 90 Figure 17-2 Comminution Circuit ...... 91 Figure 17-3 Flotation Circuit ...... 93 Figure 17-4 Leach Circuit ...... 94 Figure 17-5 CCD, Merrill Crowe, Smelting and Tailings Circuit ...... 95 Figure 18-1 General Facilities Layout ...... 98 Figure 19-1 Silver Price ...... 100 Figure 19-2 Gold Price ...... 100 Figure 19-3 Lead Price ...... 101 Figure 19-4 Zinc Price ...... 101

Figure 22-1 Sensitivity of NPV5 to Change in Silver Price ...... 127

Figure 22-2 Sensitivity of NPV5 to Change in Capital Costs...... 128

Figure 22-3 Sensitivity of NPV5 to Change in Operating Costs ...... 130

Figure 22-4 Sensitivity of NPV5 to Silver Recovery in Lead Concentrate ...... 131

LIST OF PHOTOS Photo 5-1 Typical Indé District Relief and Vegetation ...... 19 Photo 11-1 EIB-1 Drill Core with QA/QC Samples ...... 48 Photo 12-1 Kevin Gunesch GPS Survey Drill Hole EIB-4 ...... 51 Photo 12-2 Kevin Gunesch at Barco Outcrop and East Portal Entrance...... 52 Photo 12-3 Kevin Gunesch at Union Outcrop ...... 52 Photo 12-4 Brecciated Contact of Barco Vein, Drill Hole EIB-9 ...... 54 Photo 12-6 Rick Moritz at the Paco Mine Entrance ...... 56 Photo 12-7 Composite Photo showing Diesel Staining on Left and Surface Access Point on Right...... 57 Photo 12-8 Kevin Gunesch and Jose Luis with Caballo Vein ...... 58

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1.0 SUMMARY In August 2009, ECI Exploration and Mining Inc. (ECI or the Company), through its Mexican subsidiary Minera Electrum S.A. de C.V., entered into an agreement to earn into a 50% interest in, and operating control of, the Indé Project by completing an initial payment, fulfilling set exploration expenditures, providing a loan to Mexican partner Minera Scorpio (Scorpio), and proving a geologic resource that could support a 1,000 tonnes per day (tpd) mining operation for 5 years. To date, all requirements have been fulfilled. ECI completed the requirements of the agreement and attempted to exercise their option to acquire a majority interest in the property in 2012. This was met with opposition from Scorpio, and ECI entered into litigation to force Scorpio to uphold the 2009 agreement. In March 2016, ECI successfully took control of the operation. The study described herein documents the work completed on this property as of the effective date of the technical report.

The Indé District is located 6 kilometers (km) south of the municipal center of the town of Indé in the northern portion of the state of Durango, México. The project area is 175 kilometers southeast of Parral, by road and 235 kilometers west-northwest of Torreón, by road and is geographically centered at 25°52’ N latitude and 105°15’ W longitude (2,861,123 N, 475,940 E). Access to the Indé property is provided by paved highway from Parral, Chihuahua (175 km) to the northwest and from Torreón (235 km) to the east. Torreón is the site of a major smelter and metallurgical complex. A network of excellent quality gravel roads provides local property access south of the town of Indé. Travel from the town of Indé to the site takes approximately 20 minutes.

1.1 Existing Operation Indé is an active mining operation with a production rate of 100-130 tpd. The existing plant produces separate lead and zinc concentrates that are shipped to the Peñoles Smelter in Torreón, Coahuila. Tailings from the plant are disposed of in a valley fill tailings impoundment with the embankment constructed from cyclone tailings. Waste rock from the underground mines are dumped on the surface at the portal areas.

The current Indé mine is comprised of three active mining areas, Paco, Argentina, and Leticia, which include the Leticia hanging wall (HW), Leticia footwall (FW), Leticia del Bajo, Caballo, and Tablas II veins. Old mining works are contained within the San Antonio, Buena Suerte, and La Union veins. The mined out areas of the veins are not included in the resource estimate or future mine plan. Surface access roads and powerlines exist to all areas.

The sulfide process plant (Union) was in operation when ECI took control of the mine in March 2016. After the takeover, the process plant was shut down, and mining activities were suspended due to ECI’s lack of a blasting permit. ECI has obtained a provisional one-year blasting permit and is currently in the process of applying for the definitive permit. In the interim, ECI is performing housekeeping of all mining areas, updating the mine surveys, and completing an updated sampling program.

Major components of the Union plant have been disassembled for repair and maintenance. A new hopper and expansion of the floatation circuit is in progress to double the flotation capacity. Tonnes milled from 2013 to 2016 varied between 100 to 130 tpd. A new 55 tpd oxide circuit to process dry tailings has been Global Resource Engineering August 19, 2016 NI 43-101 Technical Report and PEA for Indé Project Page 2 ECI Exploration and Mining Project No.: 13-1068

added to the plant but has yet to be commissioned. An upstream raise cycloned tailings storage facility is located in the valley upstream of the Union processing plant.

A second tailings storage facility was under construction at the time of the takeover. The starter embankment and decant structure for the new facility are complete. The water recovery system is lacking the main return pump, booster pump, and equipment controls. A powerline to the water return tank is already in place. Work is now underway to finish the tailings storage facility.

1.2 Environmental and Permitting Mining activity has occurred in the Indé District for over 400 years. Like many old mining districts, numerous old workings, mine dumps, tailings dams, and other evidence of former mining activities exist throughout the area. Prior to beginning work on the property, ECI, in conjunction with its Mexican partner Minera Scorpio, formally petitioned and was accepted into the National Program of Voluntary Environmental Audit and Remediation with Federal Attorney for Environmental Protection (PROFEPA) and Secretary of Environmental and Natural Resources (SEMARNAT), the two environmental regulatory agencies with jurisdiction over mining in Mexico. Under this program, ECI and the Mexican government agreed to abide by a third party professional audit of existing conditions and an ongoing program of remediation activities. A regular review process is carried out by PROFEPA and SEMARNAT. During ECI’s tenure, all agreed upon tasks and schedules have been met or exceeded. While the program is in process, normal exploration and mining activities have been allowed to proceed. Acceptance into the voluntary audit program effectively results in a partnership between the Government and the Company with regard to responsible stewardship of the environment.

Normal permits needed for a mining operation will be processed as the project progresses. Initial assessment of water availability indicates that Indé is located in a free supply zone where water may be extracted and utilized without restriction. For statistical purposes, the National Water Commission (CNA) will register the volume of water used.

1.3 Operational Permits and Jurisdictions The Indé project is located in the Municipality of Indé, State of Durango, México. Durango is a mining state, and the procedures for permitting and operation are well established. The permits typically required for such an operation are listed in Table 4-2.

1.4 History and Ownership The Real de Indé was founded between 1563 and 1567. Nine operating mines were identified in a 17th century census. Between 1892 and 1894, thirty-three new mines were registered. The first processing plants were installed at the start of the 20th century, and eight mining companies were operating by 1907. In 1927, seven of the mines were consolidated by the City Mining and Smelting Co. In 1935, social movements in México forced foreign operated companies to abandon the installations to the miners working there. From 1952 through the 1960’s, two companies, one British and one American, operated four separate mines. Table 6-2 provides the best available information on the production history in Indé. Production totaling over 900,000 ounces (oz) of gold (Au) and nearly 5 million oz of silver (Ag) was

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documented. Historic production records are incomplete, and actual production, particularly of gold, may have been much higher.

In 1978, the Minerals Resource Council (CRM) declared 18,000 hectares at Indé as a National Mining Reserve. Though the pre-existing mining concessions were respected and remained valid, the Reserve prohibited further consolidation of the district. A report by Aguilera (Aguilera & Moreira, 1985) states that the CRM completed 12,699 m of drill holes and 2,718 m of drifting. In 2005, the National Mining Reserve was abandoned by the General Direction of Mines. With the abolishment of the mining reserve, the Silveyra family, who controlled much of the Indé district, was able to consolidate the district by filing claim to the 3,900 hectares surrounding their existing claims.

ECI currently controls the Indé District through Minera Electrum S.A. de C.V.

1.5 Geology The Indé Mining District is located within the High Plains sub-province of the Sierra Madre Occidental physiographic province, in the eastern foothills of the Sierra Madre mountain range. The district is oriented northwest-southeast, with known mineralization bound on either side by extensional normal faults. In the immediate area, folded and faulted sedimentary rocks of the Mezcalera Group are intruded by igneous rocks and are unconformably overlain by Cretaceous to Tertiary volcanic rocks. The intrusive history is multi-phased and includes distinct events of monzonite, rhyolite, and andesite intruded along the northwest-southeast structural trend.

Indé District mineralization is the result of a three-stage structural preparation associated with the Laramide orogeny. As the structural regime transitioned from compressional to extensional, thrust zones were reactivated as normal faults that acted as zones of low resistance for hydrothermal fluids and hypabyssal intrusives. The movement of the fluids and magmas through the structurally prepared conduits and dilational zones resulted in the enrichment of numerous polymetallic veins and gold-silver veins. Deposit types found on the property include:

· Structurally controlled silver-lead-zinc (Ag-Pb-Zn) veins · Copper-gold (Cu-Au) skarns · Au-rich carbonate replacement deposits 1.6 Drilling and Exploration Modern exploration and drilling was scant prior to the arrival of ECI in late 2009. The previous owners of the property intermittently operated a 150 tpd mine on the property since 1970 but conducted little systematic exploration or drilling. The most extensive exploration in the district prior to ECI was carried out by the Mexican government’s Minerals Resource Council between 1978 and 1980. During that time, the Indé District was declared a National Mining Reserve, and approximately 12,000 m of drilling was completed on some of the principal veins. In the late 1990s and early 2000s, limited exploration was carried out on small claims by three junior companies: Golden Hat Resources, Amarc, and Sydney Resources. The work by Amarc and Sydney consisted of 18 drill holes and a number of trenches in the historic gold zone on the western half of the district. While this exploration revealed some interesting drill

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intercepts and trench samples, exploration efforts were hampered by limited land availability and the fragmented nature of tenure at the time.

ECI’s exploration benefitted from the Silveyra family’s unification of the district in 2005. The resultant access to the entire district allows ECI to evaluate the district as a consolidated mineralized system. ECI has conducted extensive geological mapping and geochemical surface and underground sampling, re- interpreted a high-resolution airborne magnetic and EM geophysical survey, and completed approximately 27,000 m of diamond drilling on the property. Exploration and drilling have focused on delineating and expanding the known mineralized areas and newly discovered polymetallic silver veins. Drilling has also tested exploration targets, including extensions of the historic gold zone, Au-rich Carbonate Replacement Deposits (CRD), and Cu-Au skarn deposits.

ECI’s exploration drilling program began in early 2010 and has continued into 2013 with a prolonged break from November 2013 to March 2016 when the property was under exclusive operation by Scorpio. To date, 139 diamond core drill holes have been completed for a total of 27,097.82 m and 12,509 assayed intervals. ECI has tested mineralization with at least one drill hole in 21 separate target areas. All historic mapping, drilling, and geochemical data has been compiled and integrated into the ECI database, and that information is incorporated into the ongoing exploration program.

1.7 Metallurgy and Processing The existing plant includes a crushing a grinding circuit, flotation circuit, and partially complete oxide leach circuit to process dry tailings. There is an onsite laboratory with crushing, grinding, flotation, bottle roll, atomic absorption spectrometry (AAS) and Fire Assay capabilities. The available metallurgical testing to date includes the monthly recovery data from the existing operational flotation plant located at the site for September 2009 through September 2010, the second half of 2013, the complete years of 2014 and 2015, and the first two months of 2016. ECI also commissioned SGS Mineral Services of Durango, Mexico to complete metallurgical work in December 2011. Finally, bottle roll tests were completed on the flotation plant tailings in April 2016.

The results of the testing and the monthly recovery data show metal recoveries for the flotation plant as listed in Table 1-1. Bottle roll leach recoveries on the tailings samples for silver were 42%.

Table 1-1 Existing Plant Recoveries 2013 to 2016 Lead Concentrate % Recovery Ag 72% Au 22% Pb 69% Zinc Concentrate % Recovery Ag 9% Zn 71%

1.8 Mineral Resources GRE has updated the estimated mineral resources for the Leticia, Tablas, Caballo, El Barco, La Union, and San Antonio vein systems. These are the principal producing structures on the property at this time. GRE has not updated the inferred resource for the Matracal Skarn; the 2011 Gustavson report contains the Global Resource Engineering August 19, 2016 NI 43-101 Technical Report and PEA for Indé Project Page 5 ECI Exploration and Mining Project No.: 13-1068

most recent resource model for the Matracal Skarn. A block model was created for each vein system oriented along the strike of the vein being modeled. All blocks for all veins are 10 m horizontally by 10 m vertically, with block thickness being a variable of each block. The Matracal Skarn was modeled using blocks that are 20 m long, 20 m wide, and 10 m high with no rotation.

Estimates were calculated using data located within the defined variogram range using an oriented search. Search ranges were based on variography, and the orientation was based on a stereonet analysis of strike and dip measurements of the existing workings. The summary of underground mineral resources at a calculated $35/ton cutoff of Indé is presented in Table 1-2. Table 1-3 summarizes the Matracal Skarn inferred resources, which has potential for open pit mining. Mineral resources are not mineral reserves and do not have demonstrated economic viability.

Table 1-2 Underground Resources Summary at a $35 NSR Cutoff Au Ag Pb Zn Tonne oz (x lbs (x lbs (x Category (x 1000) ppm oz ppm 1000) % 1000) % 1000) Measured 1,268 0.61 24,987 206.00 8,398 0.86 24,122 1.78 49,653 Indicated 3,200 0.83 85,540 210.95 21,703 0.48 34,153 0.95 66,750 Inferred 2,766 0.93 83,060 182.84 16,260 0.51 31 0.75 45,812

Table 1-3 Matracal Skarn Inferred Resource (Potential Open Pit) Cutoff Tons Au Tons Cu (gpt) (x 1000) ppm oz Cutoff (x 1000) % lbs (x 1000) 0.5 8,619 1.359 376,600 0.2 8,776 0.63 121,117 2011 Gustavson Report Resource – included for completeness 1.9 Preliminary Economic Assessment A 1,500 tpd underground cut and fill mining operation was contemplated for the Preliminary Economic Assessment (PEA). A detailed mine layout and sequence was completed to estimate the project cash flows on a yearly and quarterly basis. Capital and operating costs were estimated using local estimates. A summary table of the input parameters and economic results of the PEA is shown below.

This preliminary economic assessment is preliminary in nature. It includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the results of the preliminary economic assessment will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

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Table 1-4 Economic Model Summary Results Parameter Value Gold Price $1,250.00 Silver Price $18.50 Lead Price $0.90 Zinc Price $0.90 NPV0 $81,336,051 NPV5 $43,069,038 NPV8 $26,190,720 IRR 14% Payback Period (Years) 6.98 Mine Life (Years) 13 Capital Cost Contingency 25% Operating Cost Contingency 25% Initial Capital $66,688,632 Total Capital Costs $152,500,466 Cash Cost per Ounce Ag Recovered, net of by products $9.43 All in sustaining Cost per Ounce Ag Recovered $12.34

1.10 Conclusions and Recommendations Indé is an active small mining operation with a mineral resource base sufficient to support higher production levels. Compilation of historic data and mapping and sampling by ECI in the Indé Mining District has verified the existence of an extensive mineral system. Drilling has expanded mineral resources within known mineralized veins and confirmed that mapped surface expressions of previously unknown veins extend underground. Exploration data indicates that a much larger intrusive mass at depth may be the source of metals in the district, and may represent a deep porphyry target. ECI is continuing their efforts to improve production and metal recovery of the existing operation while working to develop the full potential of the property.

The existing 100 tpd flotation plant is currently being refurbished and expanded to double the flotation capacity. A separate 55-tpd cyanide leach and Merrill-Crowe recovery circuit has been added to process dry tailings and is 90% complete. Metal recovery from bottle roll tests on the flotation plant tailings averaged 42% for silver and indicates the tailings are a potential resource. Additional outside metallurgical testing to improve gold and silver recovery from the flotation plant is currently underway. Diagnostic testing to determine the potential recovery routes for the Matracal resource is in progress by ECI.

The stability of the floating plant tailings facility is a known risk, and the stability of the facility has not been quantified. Nonetheless, the facility has been operating and stable since inception and has grown considerably in size since 2011. Survey monuments have been installed on the embankment, and daily measurements are being recorded. A new tailings facility is under construction.

The current Indé mine is comprised of three active mining areas, Paco, Argentina, and Leticia, which include the Leticia HW, Leticia FW, Leticia del Bajo, Caballo, and Tablas II veins. ECI is currently completing an underground sampling program and mine maintenance efforts and have developed a short term mine plan and budget for the existing operation.

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The PEA shows positive economics for a 1,500 tpd production scenario and therefore warrants moving the project forward to prefeasibility (PFS). Metal prices are the key economic drivers of the PEA analysis. Uncertainty in metal prices represent a project risk. Additional engineering analysis and more detailed cost estimates are required to bring all areas of the PEA analysis to a PFS level. Acceptance into the voluntary environmental audit program whereby the Mexican government and ECI agree to abide by third party professional audits and remediation activities minimizes the risk due to legacy environmental labilities.

To move the project toward a PFS, additional mine planning, metallurgical testing, and infill drilling should be completed. Sufficient detail should be incorporated to allow quantification of the production plan and subsequent cash flow at a prefeasibility level. The work plan below takes into account the needs of the current operation and the long term vision of a larger scale mining operation.

Table 1-5: Work Plan Estimated Work Plan Item & Description Cost $US Existing Plant Repairs & Upgrades Complete the planned repairs and expansion to the existing flotation plant. Complete $1,100,000 the outstanding items for the leach circuit for dry tailings. Flotation Plant Tailings Complete a sampling and testing program on the flotation plant tailings to quantify $100,000 the potential resource, determine expected metal recovery, and assess the potential for continued use of the facility. New Tailings Facility Finalize the engineering design and complete the construction of the new tailings $450,000 facility. Metallurgical Testing Complete the in-progress testing to improve gold and silver recovery from the existing $200,000 plant. Complete diagnostic testing of the Matracal resource. Short Term Mine Plan Complete a short term mine plan to detail production and cash flow over the next 12- $50,000 18 months. The mine plan should consider integration into the larger-scale mining operation contemplated in the PEA. Infill Drilling Complete infill drilling to upgrade the inferred resources considered in the PEA to $1,100,000 indicated. Permitting & Compliance Review $20,000 Review the existing permits and required compliance reporting for the operation. Mine Maintenance & Sampling $100,000 Continue the underground sampling and mine maintenance program. Prefeasibility Study Complete a prefeasibility study to analyze multiple production scenarios for the larger $500,000 scale operation and determine the most preferred option for feasibility. Total $3,620,000

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2.0 INTRODUCTION At the request of ECI Exploration and Mining Inc. (ECI), Global Resource Engineering Ltd. (GRE) has prepared a Preliminary Economic Assessment (PEA) in compliance with National Instrument 43-101 (NI 43-101) of ECI’s Indé Project located in the state of Durango, México.

The Qualified Persons responsible for this report are:

· Zachary J. Black, Associate, SME-RM · Kevin Gunesch, PE, Principal Mining Engineer, Global Resource Engineering Ltd. · Terre Lane, Principal Mining Engineer, Global Resource Engineering Ltd. QP-MMSA · Rick Moritz, Principal Mining Engineer, Global Resource Engineering Ltd. QP-MMSA

2.1 Purpose and Basis of Report The intent of this report is to provide an updated resource model of the Indé Mining District based on additional drill data as well as new surface and underground channel samples and the results of a PEA for a large scale mining operation. This is the second NI 43-101 technical report completed on the Indé Mining District project. This technical report is partially based on the published report “NI 43-101 Technical Report and Resource Estimate for Indé” (Gustavson Associates, 2011).

2.2 Personal Inspection Gustavson personnel visited the Indé Mining District from April 27 through April 30, 2011. During the site visit, Gustavson personnel reviewed drilling operations, sample handling and security, core logging protocols, data management, and quality assurance/quality control (QA/QC) programs.

GRE’s Kevin Gunesch and Rick Moritz visited the Indé mine from April 11 to April 15, 2016, to verify data and view the mine, mill, and site conditions. Details of the inspection are contained in Section 12.0.

2.3 Units & Abbreviations

Common Units Centimeter...... cm Cubic meter ...... m3 Cubic feet per minute...... cfm Degree Celsius...... °C

Grams ...... g Grams per tonne ...... gpt Horsepower ...... HP Kilograms per tonne...... kg/tonne Kiloliter ...... kL Kilometer...... km Millimeter...... mm Troy ounces ...... oz Parts per million...... ppm Percent ...... % Pound(s) ...... lb Global Resource Engineering August 19, 2016 NI 43-101 Technical Report and PEA for Indé Project Page 9 ECI Exploration and Mining Project No.: 13-1068

Metric ton...... tonne Year ...... yr Metric tonnes per day ...... tpd Tonnes per cubic meter...... t/m3

Abbreviations 2.5-dimensional ...... 2.5-D Absolute Relative Difference ...... ARD American Society for Testing and Materials...... ASTM Ammonium Nitrate/Fuel Oil...... ANFO Atomic Absorption Spectrometry ...... AAS Canadian Institute of Mining, and Metallurgy and Petroleum...... CIM Carbonate Replacement style Deposit...... CRD Chief Executive Officer ...... CEO Comma Separated Values ...... csv Copper...... Cu Counter-Current Decantation...... CCD Diamond Drill...... DD ECI Exploration and Mining Inc...... ECI Federal Attorney for Environmental Protection...... PROFEPA Foot Wall ...... FW General Mining Direction ...... DGM Global Positioning System...... GPS Global Resource Engineering Ltd...... GRE Gold...... Au Hanging Wall...... HW High Density Polyethylene...... HDPE Inductively Coupled Plasma...... ICP Internal Rate of Return...... IRR Intrusive-Related and Structurally Controlled...... IRSC Inverse Distance Squared...... ID2 Lead...... Pb Load Haul Dump...... LHD Mexican Geologic Service...... SGM Minera Indé de Durango ...... MID Minera Scorpio...... Scorpio Mining Public Registry...... RPM National Defense Secretary...... SEDENA National Institute of Archaeology and History ...... INAH National Instrument 43-101 ...... NI 43-101 National Water Commission...... CNA Net Present Value ...... NPV Net Smelter Return ...... ………………………………………………………………………. NSR Polyvinyl chloride...... Preliminary Economic Assessment ...... PEA Professional Engineer...... PE Qualified Person - Mining and Metallurgical Society of America .... QP-MMSA Quality Assurance/Quality Control ...... QA/QC Reverse Circulation ...... RC/RCV

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Rock Quality Designation...... RQD Secretary of Environmental and Natural Resources ...... SEMARNAT Selective Mining Unit ...... SMU Semi-Autogenous Grinding...... SAG Silver...... Ag Society for Mining, Metallurgy & Exploration-Registered Member ... SME-RM Tailings Storage Facility ...... TSF Three-Dimensional...... 3-D Two-Dimensional ...... 2-D Universal Transverse Mercator...... UTM US dollar ...... USD Vice President ...... V.P. Zinc...... Zn

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3.0 RELIANCE ON OTHER EXPERTS The authors of this report have taken reasonable care to ensure that the information presented in this report is accurate and suitable for inclusion. GRE relied on electronic information provided by the following ECI personnel:

· Robert Harrington – President and CEO, ECI · Victor Mendoza – ECI México General Manager

Additionally, this report is built upon information presented in the Indé project’s first NI 43-101 (Gustavson Associates, 2011). The Qualified Person responsible for that report was:

· Donald E. Hulse, PE, V.P. – Principal Mining Engineer, Gustavson Associates

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4.0 PROPERTY DESCRIPTION AND LOCATION

4.1 Property Location The Indé Project is located 6 km south of the municipal center of Indé in the northern portion of the state of Durango, Mexico. Indé is 175 km by paved highway southeast of Parral, Chihuahua, and 235 km by paved highway west-northwest of Torreón, Coahuila. The Indé project is centered at longitude 105° 15’ West and latitude 25° 52’ North (475,940 E; 2,861,123 N WGS84, Zone 13 North).

Figure 4-1 Location Map

ECI controls 3,958 hectares (9,799.86 acres) in 27 mining concessions that comprise more than 95% of the Indé Mining District. ECI established control of the property via an option to purchase agreement between their wholly owned subsidiaries, Minera Electrum S.A. de C.V. and Minera Scorpio S.A. (Scorpio). The agreement was executed on August 18, 2009, and was registered with the General Direction of Mines on September 24, 2009.

Titles were investigated and declared valid by Lic. Juan E. Pizarro-Suarez of Pizarro-Suarez Abogados, S.C., a legal consultancy specializing in the mining industry. The Pizarro-Suarez report is dated February 21, 2011 and was filed in the Mining Public Registry (RPM) of the General Mining Direction (DGM) of the Secretary of Economy of México.

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Table 4-1 and Figure 4-2 detail the surface area covered in the agreement.

Table 4-1 Indé Mining Concessions Surface Area No. Concession Owner (Hectares) Title No. Expiration Municipality 1 El Gran Lucero Francisco Silveyra I. 8.0000 148751 28-nov-2017 Indé, Dgo. 2 Perseverancia Francisco Silveyra I. 36.0000 155332 20-ago-2021 Indé, Dgo. Ampliación de 3 Minera Scorpio, S.A. 8.6891 168503 1-jun-2031 Indé, Dgo. Bienvenida Ampliación de 4 Minera Scorpio, S.A. 9.9787 168579 3-jun-2031 Indé, Dgo. Santa Barbara 5 Media Noche Minera Scorpio, S.A. 4.0000 168635 25-jun-2031 Indé, Dgo. 6 Santa Barbara Minera Scorpio, S.A. 12.0000 168682 1-jul-2031 Indé, Dgo. 7 El Repecho Minera Scorpio, S.A. 8.3658 168683 1-jul-2031 Indé, Dgo. 8 La Cruz Francisco Silveyra I. 28.0000 170967 3-ago-2032 Indé, Dgo. 9 Alexica Leticia Arias de Silveyra 2.2779 210721 25-nov-2049 Indé, Dgo. 10 El Viejo Francisco Silveyra I. 30.9533 215637 4-mar-2052 Indé, Dgo. 11 El Cambio Francisco Silveyra I. 9.7260 215638 4-mar-2052 Indé, Dgo. 12 Bienvenida Minera Scorpio, S.A. 4.4754 66260 7-feb-2026 Indé, Dgo. Comercializadora y 13 El Engaño 4.0000 162522 6-jul-2020 Indé, Dgo. Arrendadora Parral, S.A. 14 Tres Varones Leticia Arias de Silveyra 11.2151 165906 12-dic-2029 Indé, Dgo. 15 Leticia Leticia Arias de Silveyra 45.9754 171846 14-jun-2033 Indé, Dgo. 16 Linda Leticia Arias de Silveyra 4.0000 176648 15-dic-2035 Indé, Dgo. 22-mar- 17 Chapo Leticia Arias de Silveyra 14.2758 179959 Indé, Dgo. 2037 Comercializadora y 18 La Terrible 4.0000 181004 13-ago-2037 Indé, Dgo. Arrendadora Parral, S.A 19 Kissinger Leticia Arias de Silveyra 25.4080 192577 18-dic-2042 Indé, Dgo. Comercializadora y 20 Unificación Paco 240.5809 204514 27-feb-2021 Indé, Dgo. Arrendadora Parral, S.A Comercializadora y 21 El Matracal 26.6360 214123 8-ago-2051 Indé, Dgo. Arrendadora Parral, S.A Comercializadora y 22 La Discordia 3.5844 215091 6-feb-2052 Indé, Dgo. Arrendadora Parral, S.A 3,386.189 23 La Familia Leticia Arias de Silveyra 227590 17-jul-2056 Indé, Dgo. 5 24 Ernesto Ernesto Silveyra Arias 9.7287 215639 4-mar-2052 Indé, Dgo. 25 La Niña Fernando R. Silveyra I. 4.5827 162513 27-jun-2028 Indé, Dgo. 26 La Mula II Francisco Silveyra S. 8.0000 166903 25-jul-2030 Indé, Dgo. Compañía Minera Indé, 27 Coloradas 7.2119 181206 10-sep-2037 Indé, Dgo. S.A. de C.V. Note: The La Familia concession consolidates the various claims and is based off of the same departure point as the majority of the claims in the area. Control Point of the Mining Geodesic sub-network PC-1157.

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Figure 4-2 Map of Mining Concessions

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Scorpio owns the surface use rights for 250 hectares (617.76 acres) in the Indé District, as shown in Figure 4-3, and is working to acquire additional peripheral surface rights.

Figure 4-3 Map of Surface Ownership

4.2 Agreements and Royalties On August 18, 2009, ECI signed a definitive option agreement to purchase a 50% interest in the Indé land position held by Minera Scorpio, the Mexican mining company operating a 150 tpd underground mine on the property. The purchase document has been registered with the appropriate Mexican authorities, including the Ministry of Mines. Under the terms of the agreement, ECI earned a 50% interest in all of concessions surrounding Indé in return for:

· A one-time $300,000 (US) cash payment at the signing of the definitive agreement. · Expenditures of $4,700,000 (US) on district exploration over 5 years. · Providing a $2,000,000 (US) line of credit to be used for upgrades on the current mine. · Identifying a geologic resource capable of supporting a 1,000 tpd mill operation. · Payment of 50% of the value of existing mining infrastructure as appraised by a qualified specialist, acceptable to the concession holders after the other commitments are complete.

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The terms of this agreement on the ECI side were fulfilled on October 23, 2012, and ECI vested into its 50% ownership in May 2014 when both parties to the agreement formed a new company, Minera Indé de Durango (MID). ECI subsequently increased its shareholding into MID to 75.1% through a capital increase in which Minera Scorpio did not participate.

Minera Electrum also agreed to supervise the operation of the existing mine under a service contract during the earn-in period. The mine was run successfully under ECI management for 13 consecutive months (September 2009 through September 2010) before management was returned to Scorpio. ECI completed the requirements of the agreement and attempted to exercise their option to acquire a majority interest in the property in 2012. This was met with opposition from Scorpio, and ECI entered into litigation to force Scorpio to uphold the 2009 agreement. In March 2016, ECI successfully took control of the operation.

Production from the project is subject to a sliding NSR royalty due to Scorpio which varies as follows:

· 3.0% for NSR between $US 0 and $US 87,499 · 2.5% for NSR between $US 87,500 and $US 174,999 · 2.0% for NSR at or above $US 175,000

4.3 Environmental Liabilities Indé is an active mining operation with a production rate of 100-130 tonnes per day (tpd). The existing plant produces separate lead and zinc concentrates that are shipped to the Peñoles Smelter in Torreón, Coahuila. Tailings from the plant are disposed of in a valley fill tailings impoundment with the embankment constructed from cyclone tailings. Waste rock from the underground mines are dumped on the surface at the portal areas. Indé is located within the Zona Seca (dry zone) according to the hydrologic map published by SEMERNAT. The dry climate reduces the tendency of waste rock to produce acid rock drainage. During the site visit in April 2016, GRE observed historic dumps from the 1970s that still contain visible pyrite, indicating a slow oxidation process due to the lack of water.

Prior to beginning work at Indé, ECI voluntarily contacted the Mexican Environmental authorities regarding the requirements of and responsibilities for both historic and new disturbances in the Indé District. As a result of these consultations, Indé operates under the guidance of and in conjunction with SEMERNAT and PROFEPA (the environmental regulatory and compliance arms of the Mexican government). As part of this process, ECI and the federal authorities have selected Vidambiente as Independent auditors to validate the completion of the program. PROFEPA has approved Vidambiente (accreditation no. UV PROFEPA 062) in document PFPA/16.4/1S.3/084’10 dated March 2, 2010, and has assigned project number 8473 to the Indé program.

Mining activity has occurred in the Indé District for more than 400 years. As in many historic mining districts, there are numerous old workings, tailings dams, mine dumps, and other evidence of former mining activities on the property. Prior to beginning work on the property, ECI, in conjunction with its Mexican partner Minera Scorpio, formally petitioned and was accepted into the National Program of Voluntary Environmental Audit and Remediation with PROFEPA and SEMARNAT. Under this program, ECI and the Mexican government agreed to abide by a third party professional audit of existing conditions and an ongoing program of remediation activities. A regular review process is carried out by PROFEPA and Global Resource Engineering August 19, 2016 NI 43-101 Technical Report and PEA for Indé Project Page 17 ECI Exploration and Mining Project No.: 13-1068

SEMARNAT. During ECI’s tenure, all agreed upon tasks and schedules were met or exceeded. While ECI completed the environmental remediation requirements, normal exploration and mining activities were allowed to proceed. Acceptance into the voluntary audit program effectively made the Government a partner with the Company in the responsible stewardship of the environment. The audit program benefited ECI as it facilitated permitting dialogue with the governmental agencies.

4.4 Water Availability An assessment of future water availability was performed by Ing. Jaime A García Gómez. Indé is located above the 1009 Matalotes-El Oro aquifer, which is considered a zone of free supply with no restrictions on the extraction or use of ground water. In this area, water can be freely extracted and utilized, although the CNA will register the volumes used for statistical purposes. ECI will be required to subscribe to the Public Registry of Water Rights.

4.5 Other Permits Durango is a mining state, and the procedures for permitting and operation are well established. Prior to constructing new facilities and upgrading to a larger operation, ECI will be required to acquire the permits listed in Table 4-2. Conditions encountered during investigations associated with these permits may indicate the need for additional permits.

Table 4-2 Typical Permits for Construction and Operation Permit Agency When Required Environmental Impact Secretary of Environment and Natural Prior to construction Statement (MIA) Resources (SEMARNAT) Risk Analysis (Mining) SEMARNAT Prior to construction Land Use Change SEMARNAT and Municipality of Indé Prior to construction National Institute of Archaeology and History Archaeological Release Prior to construction (INAH) Prior to utilization of Water Use Registry National Commission of Water (CNA) water Construction Permit Municipality of Indé Prior to construction Explosives Purchase and Use Prior to Increased National Defense Secretary (SEDENA) Permit (expansion) production

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5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

5.1 Accessibility The Indé property is accessed by paved highway either from Parral, Chihuahua, 175 km to the northwest or from Torreón, 235 km to the east. Torreón is the site of a major smelter and metallurgical complex. The local property is accessed by a network of excellent quality gravel roads leading south from the town of Indé. Travel from the town of Indé to the site takes approximately 20 minutes.

The nearest town to the property is Indé, Durango, which is situated approximately 5 km north of the property and hosts a population of 3,000. The nearest city is Parral, Chihuahua, 180 km north of the town of Indé, which hosts a population of approximately 100,000.

5.2 Climate The climate in the area is semi-arid with moderately variable seasonal temperatures. In summer, temperatures generally register from 20°C to 27°C, rarely exceeding 30°C. Winter temperatures average 8°C with lows of -5°C. Annual precipitation ranges from 500 to 600 millimeters (mm). Exploration and mining operations can be carried out year-round in the Indé Mining District.

5.3 Local Resources and Infrastructure The town of Indé provides adequate housing and food services for technical staff and local mine personnel. The town of Santa María, approximately 50 km to the west-northwest of Indé by paved highway, is a full service community.

Power is available from a power line capable of supporting the current 150 tpd operation and mill. Numerous wells in the region provide water for livestock. The regional water table is approximately 100 meters (m) below ground surface. Water for the exploration drill program is collected from historic underground workings.

5.4 Physiography Topographic relief on the Indé property is moderate, with elevations ranging from 1,800 m above sea level at the town of Indé to 2,340 m at the summit of Bufa de Indé, the highest point in the Indé Mining District. Limestone and rhyolite cliffs and steep, brushy hillsides limit foot access to some areas of the property (Photo 5-1). Vegetation consists mainly of mesquite bushes, ocotillo, agave, and semi-arid grasses. Ocotillo and agave have a definite preference to grow in areas underlain by limestone.

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Photo 5-1 Typical Indé District Relief and Vegetation

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6.0 HISTORY Mining activity at Indé dates back prior to the arrival of the Spanish. The Real de Indé was founded between 1563 and 1567 by the Spanish Captain Rodrigo del Río de Lossa in the lands of the indigenous Tepehuana tribe. First named San Juán Bautista de Indé, Indé was an important mission on the Camino Real de Tierra Adentro (Royal Interior Road) connecting México City with Santa Fe, (Carrete, 1999) (Carrete, 2004).

Figure 6-1 Camino Real Adentro

6.1 The 17th and 18th Centuries A 17th century census reported nine operating mines and a population of 70 persons, excluding the Tepehuano, Tarasco, and Tlaxcalteca tribes. The tribes had been pacified by the Jesuits until an uprising in 1616. Another uprising followed in 1644, but in spite of the unrest the Real survived the century.

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The 18th century brought the formation of haciendas through royal grants of large land tracts. The intent of the royal grants was to establish a local population to guard and transport gold and silver produced throughout the region. Reported production in 1767 alone was 4,508 oz of gold and 5,600 oz of silver.

At the start of the quest for Independence by in 1810, Indé had 4,536 inhabitants. Once Independent, Indé became one of ten emerging zones of the new State of Durango. Indé became an area of interest with regard to mining investment promoted by the English government through the British diplomat G. Ward, though there are no remaining records indicating any investment.

By 1847, the economy of Indé was booming and the population had tripled. Setbacks included the collection of a forced contribution of 2,435 pesos to the central government to pay for the war with the U.S., an invasion by 200 while the collection was in process, and the death of 780 persons from cholera in 1849. Despite a period of unrest, Indé prevailed, and the haciendas and ranches grew in numbers and strength.

6.2 The 19th Century At end of the 19th century, during the “Porfiriato,” or dictatorship of Porfirio Diaz, Indé finally attracted foreign investment after several boom and bust cycles. The “Ferrocarril Central Mexicano”, or Central Railroad, by then provided a rapid connection from to El Paso on the US border.

Between 1892 and 1894, thirty-three new mines were registered, with 73% of these claimed during the months of June and July, 1894 (Table 6-1).

Table 6-1 - Mining Claims in Indé - End of 19th Century No. Mine Initial Claim Date 1 Las Tablas 27-sep-1892 2 Urique 24-mar-1893 3 La Purísima Concepción 10-jul-1893 4 El Fajo 7-ago-1893 5 María 6-sep-1893 6 Las Amarillas 19-sep-1893 7 El Salto 15-feb-1894 8 La Guadalupana 26-feb-1894 9 Santa Rita 20-abr-1894 10 La Casualidad 31-may-1894 11 El Ginete 5-jun-1894 12 Caballo y Nuevo Caballo 5-jun-1894 13 La Esmeralda 6-jun-1894 14 San Nicolás 15-jun-1894 15 El Refugio 16-jun-1894 16 San Pedro 18-jun-1894 17 La Mariposa 18-jun-1894 18 El Rosario 18-jun-1894 19 Las Coloradas 19-jun-1894 20 La Estrella 19-jun-1894 21 Alacrán 26-jun-1894

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No. Mine Initial Claim Date 22 Vinagrón 26-jun-1894 23 Azul 26-jun-1894 24 El Rey 26-jun-1894 25 San Joaquín 26-jun-1894 26 La Luz 26-jun-1894 27 La Guadalupana 28-jun-1894 28 La Trinidad 28-jun-1894 29 La Durangueña 28-jun-1894 30 La Esperanza 2-jul-1894 31 El Refugio 9-jul-1894 32 La Valenciana 21-jul-1894 33 El Ardimiento 21-jul-1894

On April 15, 1895, the first formal corporation, the Compañía Minera La Purísima Concepción, S.A., was formed in México City with capital of 250,000 pesos.

6.3 The 20th Century At the start of the 20th century, the first processing plants were installed, three utilizing cyanidation in the northeast portion of the property in the area of Cieneguillas. Eight mining companies were operating by the year 1907 (three American, one English, and four Mexican). Only one, the Guadalupe Consolidated Mining Co., had a smelting facility. Together they produced four tonnes of gold as well as silver and copper and employed 309 workers. Wisser (Wisser, 1930) reports production from 1908 through 1910 of 112,000 tonnes of ore containing 19.4 grams per tonne (gpt) Au and 133 gpt Ag from the Guadalupe Mine and 131,000 tonnes of 20.1 gpt Au from the El Terrible mine.

By 1910, the population of Indé had reached an all-time high. Operations were interrupted by the , but the region calmed in 1920 when accepted amnesty and was held at the Hacienda de Canutillo north of Indé. It was not until 1927 that seven of the mines were consolidated by the Kansas City Mining and Smelting Co., and a cyanide plant was installed with the capacity of 150 tpd.

In 1935, social movements in México forced the company to abandon the existing facilities to the miners working there. Over the next 20 years, most of the mines and associated infrastructure were destroyed during disputes and by poor mining practices. In 1944 and 1945, the Eagle Picher Mining and Smelting Company of México conducted an exploration program focused on base metals, but the exploration did not lead to production.

The Compañía San Juan de Cieneguillas was formed in 1952 and operated the La Union, Recompensa, and San Antonio mines utilizing a 50 tpd floatation plant. In the same year, Compañía Minera Bea, S.A initiated operations at the La Colorada mine, which was controlled in the 1960’s by Minera Scorpio and later by Compañía Minera La Reforma, S.A.

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6.4 Indé as a National Mining Reserve (RMN) In 1977, the Minerals Resource Council (CRM by its Spanish initials), today called the Mexican Geologic Service (SGM), upon invitation of Engineer Silveyra, performed an evaluation of the district. On March 27, 1978, the CRM declared 18,000 hectares at Indé a National Mining Reserve. Though the pre-existing mining concessions were respected and remained valid, the Reserve prohibited further consolidation of the mining claims within the district.

A report by Aguilera (Aguilera & Moreira, 1985) mentions that the CRM completed 12,699 m of drilling and 2,718 m of drifting. A total of 40 prospects were located, and 17 of those were evaluated. Resources were delineated in 12 of the 17, of which three were inconclusive and two were not pursued. This drilling encountered average grades in the veins of 0.67 gpt Au, 263 gpt Ag, 1.26% Pb, and 0.95% Zn. Between 1997 and 2000, the SGM drilled 1,500 m in five holes on the Indé Reserve, intersecting the Garabatos, Elida, and Argentina veins as well as a Cu-Au skarn. The National Mining Reserve was abandoned in 2005 by the General Direction of Mines due to non-completion of obligations to hold the mining concessions by SGM.

6.5 Silveyra Family The Silveyra family, through established companies such as Minera Scorpio, S.A. de C.V.; Comercializadora y Arrendadora de Parral, S.A. de C.V. and personal title, controlled the Indé district until ECI exercised their option to acquire a 50% interest and operating control of Indé in May 2014 via their Mexican subsidiary Minera Electrum.

The Silveyra family has strong roots in the region dating from the 16th Century. Published references place the family in the region from the Mexican Revolution to the present. The first notice of mining activity by the family is found in Russel (Russell, 1924) who mentions that eight families controlled 480 hectares in the district and that the Silveyra family had claimed four hectares. The family increased their claim position through the 1950’s by adding El Matracal. In 1958, Francisco Silveyra Ibarra acquired the Coloradas mine from Minera Bea, S.A., with an option to operate it. Several years later, the family took control of the concessions of the La Union area and in 1970 installed a 120 tpd beneficiation plant, which is still in operation.

In 1995, the Silveyra family optioned a small claim block to Golden Hat Resources in a historic mining zone adjacent to the RMN Indé, which included nearly 1.4 million metric tons of old tailings deposits. The option was never exercised. In 2002, the Canadian company Amarc optioned 278 hectares from the family in the Matracal-Cieneguillas area. Amarc drilled 4,360 m in 14 holes to test gold mineralization. In 2004, Amarc transferred their rights to Sydney Resources Co. who drilled 1,407 m in four holes and cut 15 trenches to the northwest of Cieneguillas. Amarc-Sydney ultimately dropped the option.

With the abolishment of the mining reserve in 2005, the Silveyra family was able to consolidate the district by filing a claim to the 3,900 hectares surrounding their existing claims called “La Familia.”

6.6 Minera Electrum In 2009, ECI entered into an agreement with Scorpio to receive a 50% interest and operating control of the property by completing an initial payment, fulfilling set exploration expenditures, providing a loan to

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Scorpio, and proving a geologic resource that could support a 1,000 tpd mining operation for 5 years. ECI completed the requirements of the agreement and attempted to exercise their option to acquire a majority interest in the property in 2012. This was met with opposition from Scorpio and ECI entered into litigation to force Scorpio to uphold the 2009 agreement. In March 2016, ECI successfully took control of the operation via their Mexican subsidiary Minera Electrum.

6.7 Production and Revenue Sources Cumulative production of gold can be roughly estimated based on a variety of references. Megaw (Megaw, 1991) reports “… the district is of special interest because it has produced a minimum of 1.5 million ounces of gold between 1910 and 1940 from a relatively small area.” The Guadalupe mine is reported in various sources to have produced 150 tpd from 1927 to 1936 with an average grade of 19.4 gpt Au and 133 gpt Ag (Wisser, 1930). Considering this information along with isolated mining records between 1907 and 1936, documented historical production of the Indé mining district exceeds 900,000 oz gold and 4.4 million oz silver (Table 6-2).

The only trustworthy records available from the colonial era (Carrete, 1999) (Carrete, 2004) indicate that in 1767, 4,508 oz gold and 5,600 oz silver were produced from the Cieneguillas area.

Table 6-2 Registered Indé Production History Years Gold (troy oz) Silver (troy oz) 1767 4,508 5,600 1907 151,100 NR 1908-1910 77,600 532,000 1913 94,039 NR 1927-1936 250,000 1,700,000 1906-1935 335,000 2,660,900 TOTAL 912,247 4,898,500 Note: This information is compiled from diverse and incomplete records from various sources with an estimate converted to ounces of metal.

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7.0 GEOLOGICAL SETTING AND MINERALIZATION

7.1 Regional Geological Setting The Indé Mining District is located on the southeastern flank of the Sierra Madre Occidental of México (Figure 7-1). The Sierra Madre Occidental belt is a 1,200 km by 300 km northwest trending mountain range extending from southeastern to Querétaro. The range hosts a number of México’s most historically important mineral deposits. This belt is characterized by a northwest trending broad anticline with shallowly dipping units to the east and steeply dipping units to the west.

Figure 7-1 Geology of the Sierra Madre Occidental

The geology of the Sierra Madre Occidental is characterized by a series of volcanic rocks known as the Upper and Lower volcanics. The Lower volcanic series are primarily andesitic in composition with interlayered felsic ash flow deposits (46 to 35 Ma). The Upper volcanic series of caldera-related, large- volume rhyolitic ash flow tuffs of Oligocene age (35 to 27 Ma) lies unconformably atop the Lower series. The Upper series generally consists of calc-alkalic rhyolitic ignimbrites with lesser andesite, dacite, and basalt with a cumulative thickness up to 1,000 m (Overbay, Page, Krasowski, Bailey, & Matthews, 2001).

The geology of the western half of the state of Durango is dominated by Tertiary volcanic rocks related to the Sierra Madre Occidental, with minor exposures of Cretaceous sedimentary rocks. In central and eastern Durango, Cretaceous sedimentary rocks, including marine platform and reef limestones of the

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Cupido, La Peña, Aurora, Cuesta del Cura, Indidura, and Caracol Formations, are widespread. Late Triassic to early Jurassic continental conglomerates of the Nazaz Formation are exposed in a few small areas in the northeastern portion of the state. Basal units of Upper Paleozoic Picacho Terrane outcrop southeast of Tamazula in western Durango, presenting an erosional window through the Sierra Madre Occidental (Cluff, Kilby, & Payne, 2002).

Intrusive igneous rocks including quartz diorite, granodiorite, granite, and porphyritic rhyodacites, occur throughout Durango and the Indé District (Cluff, Kilby, & Payne, 2002).

The Indé District lies within the transitional zone between the compressional tectonic setting of the Sierra Madre and the extensional tectonic setting of the Basin and Range province.

Regional and local structural data indicate three phases of deformation:

1. Laramide-age NE compression (~80-40 Ma) 2. Early, post-Laramide N to N-NE extension (0~32-27 Ma) 3. Subsequent and ongoing Basin and Range NE to E extension

All three of these phases probably played a significant role in the emplacement of high-level intrusive and extrusive rocks and influenced hydrothermal activity and mineralization in the region.

7.2 Local Geologic Setting The Indé Mining District is located within the Sierra Madre Occidental physiographic province, in the High Plains sub-province on the eastern flank of the mountain range. Local geology consists of folded and faulted Jurassic and Cretaceous metasediments and sediments intruded and mineralized by a series of Cretaceous to Tertiary-aged acidic igneous rocks, as shown in the lower diagram in Figure 7-2. The district is oriented NW-SE, with the bulk of known mineralization bound on either side by extensional normal faults. On the claim block, folded and faulted sedimentary rocks of the Late Jurassic to Early Cretaceous Mezcalera Group are intruded by igneous rocks and are unconformably overlain by Cretaceous to Tertiary volcanic rocks. Compositionally, the sediments include a thick package of intercalated limestones, sandstones, and shales, as well as a thick sequence of polymictic conglomerate and semi-massive “dirty” limestones. Igneous rocks include a series of monzonite dikes and sills as well as a series of rhyolitic domes, dikes, and associated felsites. Andesitic dikes are also present.

In the Indé District, structure and mineralization is partly the result of a three-stage structural preparation described below (Starling, 2010):

Stage 1- Laramide aged northeast compression (approximate age between 80-40 Ma)

The Laramide compressional deformation initially caused fold-thrust contractional deformation but in the latter stages of the orogeny it progressed to more complex sinistral transpression focused along a major WNW-trending regional fault zone that crosses the district owing to reactivation of basement structures between approximately 62 and 40 Ma. This event controlled the porphyry style sulfide-rich mineralization mainly along steep NNE to ENE trending conjugate and transfer faults that may have been dilated by shearing…

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Figure 7-2 Structural Development Stages

Stage 2- Early post-Laramide north to northeast striking extension (approximate age 32-27 Ma)

At around 32 Ma there was a significant switch to extensional conditions which coincided/controlled many important intermediate-sulphidation epithermal deposits in central and northern México and appears to have controlled a second phase of intermediate sulphidation epithermal mineralization at Indé that in part reactivated many of the pre-existing structures and mineralized veins as a higher level overprinting hydrothermal event.

Stage 3-Basin and Range E to NE Striking Extension

The clockwise strike-swing of extension at approximately 27 Ma resulted in early Basin and Range phase of deformation and caused uplift, extension and relatively minor faulting of the Indé District along with oxidation and perhaps supergene enrichment.

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This tectonic evolution is consistent with the structural models for other deposits in the region, but is also significant in that Indé was the site of at least two overprinting hydrothermal systems observed in several major deposits in central-northern México (e.g. Santa Barbara, Chih., San Martin, Zac.).

The hydrothermal fluids associated with intrusive and extrusive igneous activity are postulated to be the primary source of mineralization at Indé. The movement of fluids and magmas through structurally prepared conduits and dilatational zones and their interaction with reactive host rocks of the Mezcalera Formation resulted in the emplacement and enrichment of various types of mineralization. This mineralization includes numerous currently exploited polymetallic veins including lead, zinc, and silver with occasional gold within the Indé district. The veins total over 30 km of collective strike length and have been exploited by multiple mining operations over the past 400 years. Mapped and previously worked veins include the Buena Suerte, Cienguillas, El Barco, El Ratón, Esperanza, La Cruz, Leticia, Matracal, Tablas I & II, Caballo (Argentina/Paco), San Antonio, Siciliana, San Francisco, and La Unión. Minera Indé is currently operating within the Leticia, Paco, and Tablas II mines. ECI geologists have identified additional veins of similar composition south of the current operating area.

In addition to the polymetallic veins, three skarn areas have been identified along the contact of the Cretaceous sediments and igneous intrusives. The Matracal prospect is a Cu-Au skarn that strikes northwest along the contact of the limestones and conglomerates of the Mezcalera group and a rhyolitic intrusive to the west of the Scorpio mine. Mineralization north of the Matracal skarn includes a historically important carbonate replacement style deposit (CRD)- known as Cieneguillas. Additional mineralized skarn is currently being investigated in the silicified conglomerate to the southwest and the newly discovered El Gato skarn (Figure 7-3).

Figure 7-3 Indé Surface Geology

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The amount of fluid required to mineralize and alter the large volume of rock in the district, including the multiple alteration phases mapped on the surface and underground, could potentially indicate a complex porphyry deposit at depth. Airborne magnetic survey over the area indicates at least two intrusive bodies beneath the Indé district. The intrusive bodies outlined in white in the 1st derivative of the total magnetic survey (Figure 7-4) are potential indicators of a larger intrusive body at depth.

Figure 7-4 1st Derivative of the Total Magnetic Survey

North

7.3 Lithologic Units The geology of the Indé property is dominated by Jurassic to Cretaceous carbonate and clastic sedimentary rocks overlain and intruded by Tertiary igneous rocks. Individual formations and groups are described below, from oldest to youngest, and are presented graphically in Figure 7-5.

7.3.1 Gran Tesoro Formation The Gran Tesoro formation is the oldest unit recorded in the Indé Mining District. This unit is comprised of intensely deformed metasedimentary rocks, predominantly phyllites and schists. Radiometric K-Ar muscovite age dating indicates that the rocks are Carboniferous in age.

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Figure 7-5 Indé Stratigraphic Column

7.3.2 Mezcalara Group The Mezcalera group is divided into four principal members, of which three have been identified on the property:

Member I in the Mezcalera sequence consists of a package of sandstones that are Jurassic in age. Member I does not outcrop on the property.

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Member II consists of thinly interbedded flysch sandstone layers accompanied by a polymictic conglomerate facies. Member II is exposed in the operating mines, hosts the polymetallic veins, outcrops in the southeast, and extends along a northwest strike throughout the property.

Member III is exposed throughout the district in a northwest direction, and is composed of poorly sorted polymictic conglomerate with sub-rounded to sub-angular volcanic and metamorphic quartz clasts cemented in a sandy matrix. Interbeds of clay-rich reef limestone are present in Member III. Thickness of this unit is approximately 600 m.

Member IV outcrops in the northwest along the road into the town of Indé from the mine site. It is composed of interbedded sandstones, shales, and thinly stratified limestones.

7.3.3 Tertiary Igneous Rocks Unconformably overlying the Mezcalara formation is a package of volcanic rocks consisting of andesites, andesite breccias, tuffs, and rhyolitic flows thought to be Oligocene to Eocene in age. This package is found along the eastern margin of the district and in the area of the San Francisco vein and is thought to pre- date the monzonitic intrusives and rhyolitic domes, dikes and sills (mapped as felsites) associated with mineralization in the district.

A series of rhyolitic flows, dikes, sills, and domes outcrop throughout the Indé district. The dikes and sills cut and, in many places, the domes and flows cap both the Mezcalera Group sediments and the earlier andesites and rhyolite flows described above. The La Bufa rhyolite dome, the topographic high point of the district, is the most prominent and widespread extrusive expression of the local rhyolitic volcanic activity. The rhyolite flows are characterized by a predominately aphanitic groundmass with sparse but always present quartz phenocrysts. Flow banding is horizontal to sub horizontal, but becomes steeply dipping to overturned on the edges of the domes. Auto brecciation on the edges of the domes is common. Rhyolitic intrusions cross-cut all other stratigraphy in the district and are localized on the western portion of the property. Intrusive equivalents of the flows and domes are seen in drill core and are described as felsites. Geometrically, these felsic dikes may be up to 50 m wide and in some places outcrop continuously for up to 1.5 km. Gold mineralization along the western portion of the property, in the historic gold mining district at Indé, is associated with the felsic dikes.

Andesitic dikes emplaced during a similar time frame as the rhyolitic intrusions are present in the northeastern portion of the Indé property. These dikes are generally narrow (< 10 m wide) and are very fine-grained to aphanitic. The dikes are generally propylitically altered, with the most common alteration minerals being chlorite and epidote. Calcite veining is also a prominent feature of the dikes. While not ubiquitously associated with polymetallic mineralization, the andesite dikes outcrop in the north central portion of the district where silver mining has taken place for over 400 years.

7.3.4 Intrusive Rocks There are two phases of monzonite intrusives recognized at Indé. They are distinguished by texture, phenocryst composition, alteration, and cross-cutting relationships.

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1st Monzonite Intrusive

The oldest monzonite outcrops in the operational area and near Cieneguillas along the western margin of the Indé District. It occurs principally as sills and dikes, both concordant to and cross-cutting bedding within Member II of the Mezcalera formation. This monzonite displays several textural variations from fine- to coarse-grained. Phenocrysts include calcic plagioclase, hornblende, and quartz. The fine-grained matrix is almost ubiquitously altered to chlorite-epidote. Iron oxide and sericite are also common alteration products.

2nd Monzonite Intrusive

The younger of the two monzonites is found near the Matracal Skarn and in the Caballo vein system in the south-central portion of the district. It is distinguished from the first monzonitic pulse by the presence of sodium plagioclase. Alteration is principally propylitic and characterized by the presence of abundant epidote, calcite and, less frequently, sericite.

7.4 Mineralization Based on bedrock geology and structural mapping, geochemistry, alteration, geophysics, and drilling, mineralization within the Indé Mining District most likely occurred during two discrete time periods in relation to specific intrusive events controlled by major structural deformation. The styles of mineralization vary according to host rock and distance from the causative intrusives. Mineralization is divided into four distinct categories:

1. Intrusive-related and structurally controlled polymetallic base and precious metal veins (Ag-Pb- Zn±Au) 2. Polymetallic base and precious metal CRD deposits (Au-Ag-Pb-Zn) 3. Polymetallic base and precious metal skarns (Ag-Pb-Zn +Au, El Gato Skarn) and (Cu-Au, Matracal Skarn). 4. Disseminated polymetallic mineralization (Ag-Pb-Zn-Au).

7.4.1 Type 1: Intrusive—Related and Structurally Controlled Polymetallic and Precious Metal Veins (Ag-Pb-Zn ± Au)

7.4.1.1 Leticia Vein System The Leticia Vein set is a series of sub-epithermal structures dipping 65° to 75° to the south and striking east-west. It has a mapped length of 350 m along strike with an estimated average true width of 1.4 m. Mineralization has been encountered in drill holes to depths of up to 200 m. The vein surface has a halo of high oxidation and moderate to high argillization. Associated vein minerals include galena, sphalerite, and sulfosalts (tetrahedrite-tennantite) with pyrite, calcite, and some quartz found as gangue material.

7.4.1.2 Tablas Vein System The Tablas vein system is series of epithermal veins striking from N25°E (Tablas I) to N60°E (Tablas II). The veins dip from 75° to 85° to the southwest. The main structure within the system (Tablas II) has been mapped in the underground workings for a length of 300 m along strike with a calculated average true width of 2.4 m; however, within the mine workings, widths of up to 10 m have been encountered.

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Mineralization has been encountered in drill holes to depths up to 230 m. The Tablas I structure has been encountered in exploration drilling 220 m along strike with an average calculated true thickness of 1.4 m. The Buena Suerte Vein is part of the Tablas system and has been mapped along strike for 190 m with an average calculated width of 0.6 m. Associated vein minerals include galena, sphalerite, and sulfosalts (tetrahedrite-tennantite) with pyrite, calcite, and some quartz found as gangue material. The wall rock has been intensely argillized near the mineralized structures.

7.4.1.3 La Unión La Unión is believed to be the result of two mineralizing events: a primary base sulfide enrichment followed by an epithermal-type mineralization assumed to be responsible for the slight increase in gold and silver grades. Brecciated and banded quartz textures are exposed over 800 m with an overall east- west strike dipping 70° to the south and an average calculated average true width of 4.4 m. The vein has been encountered in exploration drilling at depths up to 255 m. Associated vein minerals include sulfides such as galena and sphalerite with additional sulfosalts (tetrahedrite-tennantite). Quartz, calcite, barite, fluorite, and pyrite can be found as gangue material within the vein. The main structure shows a broad halo of weak to strong argillization towards the eastern extent.

7.4.1.4 San Antonio San Antonio strikes N40°E dipping near vertical to the SE, with an average calculated true width of 1.2 m and a strike length of 400 m. Mineralization has been encountered in exploration drilling depths up to 120 m. Associated vein minerals include galena, sphalerite, and sulfosalts (tetrahedrite-tennantite) with pyrite, calcite, and some quartz found as gangue material.

7.4.1.5 Caballo Vein System The Caballo vein system is an epithermal polymetallic vein with a 2.7 km strike length in the south-central area of the district. This includes the Paco and Argentina mine areas of the deposit. The structure strikes N70°E to N65°E with an average calculated true width of 2.5 m. Mineralization has been encountered at depths of up to 250 m in exploration drill holes. Associated vein minerals include sphalerite, sulfosalts (tetrahedrite-tennantite), and galena. Quartz, barite, calcite, and fluorite occur as gangue material. The country rock (conglomerate) shows an intense silicification toward the western extent of the vein system. Exploration drilling has encountered two additional veins of similar composition to the north of Caballo.

7.4.1.6 El Barco The El Barco vein strikes east-west with a dip of 50° to the north, a calculated average true width of 2 m, and a mineralized extent of >1 km along strike. The mineralization is epithermal in character with the presence of two events of mineralization: an initial deposition of barite, followed by a sulfide enrichment of galena and sphalerite with silver and gold found in oxidized areas. Mineralization has been encountered in drill holes up to 160 m deep.

7.4.2 Type 2: Polymetallic Base and Precious Metal CRD Deposits (Au-Ag-Pb-Zn) CRD mineralization accompanied the emplacement of Cretaceous monzonite and rhyolitic stocks, sills, and dikes that intrude along the carbonate-rich horizons of Member IV of the Mescalera Formation. The predominant host is limestone where argentiferous galena, sphalerite, pyrrhotite, and pyrite have

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replaced carbonate beds along faults, veins, karst features, and near intrusive contacts. Exploration has begun in four areas along a strike length of 5 km: Cerro Prieto, Cieneguillas, Matracal, and further south toward Indio hill.

7.4.2.1 Cieneguillas CRD Cieneguillas is an historic CRD on the west side of the Indé District. Discrete mineralized bodies occur along a trend approximately 1 km long and 500 m wide. Individual mineralized bodies up to 30 m wide and 30-50 m deep with historic grades of 20 to 30 gpt Au have been reported. British and American entities operated in the oxide zone of Cieneguillas until the late 1930s, during which time they produced considerable amounts of gold. The main bodies in this area are El Terrible, Guadalupe, and Descubridora. In the Descubridora area, ECI drill hole EID-1 encountered 26.9 m of 1.96 gpt gold below historic mine workings.

7.4.3 Type 3: Polymetallic Base and Precious Metal Skarn Mineralization (Ag-Pb-Zn+Au, El Gato Skarn) and (Cu-Al, Matrecal Skarn)

7.4.3.1 Matracal Skarn The Matracal Skarn is a sub-vertical body developed concordantly with conglomerate and limestone layers, and exhibits a general dip of 70° to the southwest. It is believed to be over 1,000 m long by 150 m wide and at least 800 m deep based on diamond drilling, although evidence of skarn mineralization has been encountered in the Argentina mine 1300 m down dip. Copper and gold are present in disseminated sulfides (auriferous pyrite, chalcopyrite). Abundant disseminated specular hematite and minor amounts of massive magnetite with important trace elements (Mo, Bi) have all been identified. A retrograde alteration phase is indicated by calcite veins that break and in-fill the skarn, grading to propylitization, and finally silicification toward the protolith.

7.4.3.2 El Gato Skarn The El Gato Skarn outcrops 1.5 km to the southwest of the Matracal Skarn body as a semi-parallel skarn within the Mezcalera Formation. Several sub-vertical bodies have been discovered in the conglomerate, the largest of which is believed to be 400 m long by 30 m wide and over 100 m deep. Grossularite with some andradite is observed in the exoskarn, but the conglomerate shows remnants of the protolith, suggesting this skarn is somewhat more distal to the heat source than the Matracal Skarn. Mineralization at El Gato differs from Matracal in that, in addition to the presence of gold and copper as disseminated sulphides (pyrite and chalcopyrite), there is also a much richer base metal component to this skarn. For instance, hole ElG-1 at El Gato contained 10% combined Pb + Zn in addition to copper and gold (3.05 m @ 0.22 gpt Au, 394 gpt Ag, 4.32% Pb, 6.04% Zn and 0.13% Cu). The true thickness of the El Gato Skarn at hole EIG-1 is 2.4 m.

7.4.4 Disseminated Polymetallic Mineralization (Ag-Zn-Pb ± Au) While drilling for higher-grade structures as part of the initial resource-building phase, ECI has cut large volumes of disseminated polymetallic mineralization hosted both within the Mezcalera Formation and within the intrusive monzonites. Examples of this style of mineralization can be seen in most drill holes to a greater or lesser degree. Some of the better examples are seen in holes ElL-3 (51.8 m @ 0.1gpt Au, 22gpt Ag, 1% combined Pb+Zn), ElL-5 (33.5m @ 51gpt Ag, 0.9% Pb, 2.47% Zn), and ElL-6 (162m @ 8gpt Ag, 0.1%

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Pb, 0.56% Zn). The true thickness of the disseminated polymetallic mineralization at drill holes EIL-3, EIL- 5, and EIL-6 is 20.6 m, 18.1 m, and 99.7 m, respectively. Mineralization occurs in both veinlets and as disseminations.

Disseminated mineralization as a target has not yet been the focus of exploration but the large volumes of mineralized and altered rock in the district may be indicative of a larger mineralized zone if an area of sufficient ground preparation, either hydrothermal or tectonic, can be located.

7.5 Alteration As part of ECI’s exploration effort, over 1,000 alteration samples have been collected and analyzed. Onsite spectral analysis of alteration products was undertaken in the field and in the core shed with a hand held multi-element spectrometer. Alteration samples were taken to help delineate alteration zones, identify additional targets, and provide a better understanding of the overall mineralizing system. Petrographic analysis compliments the spectrographic work.

The results of the alteration mapping are plotted and contoured in Figure 7-6.

Figure 7-6 Surface Alteration Contour Map

North

One of the most important findings to come out of the alteration study was the identification of three discreet areas where illite-smectite alteration predominates (with illite dominant over smectite). These three areas are interpreted as being the loci of the most intense and highest temperature hydrothermal alteration in surface outcrops within the district. These three “alteration bull’s-eyes,” occur in the operation zone, in and around the Matracal Skarn, and along the eastern structurally controlled margin of the system. They are surrounded by areas of mixed high-temperature alteration and outboard from this there are areas clearly dominated by propylitic alteration, principally chlorite and epidote.

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Alteration of the monzonite in the northwest of the property is in general strongly propylitic with increasing intensity toward sericitic alteration to the southeast and at depth. This appears to be a Laramide-aged alteration associated with the first monzonite intrusive event. The sedimentary units near these intrusives have undergone extensive hornfelsing.

Vein-associated alteration is principally argillization as halos and selvedges and to a lesser degree silicification which alters the color of the country rock from dark grey to light brown several meters on both sides of the productive veins. This type of alteration is most consistently observed in the operational area and in other areas with strong hydrothermal activity.

CRD type bodies developed in carbonate horizons are located along the NW-SE corridor that runs from Cieneguillas to Cerro del Indio. Intrusive bodies in the country rock generate strong marbleisation and skarn in limestone, and strong silicification and skarn development in the conglomerate packages, taking advantage of the abundance of carbonate in the matrix and as limestone clasts. The Cieneguillas area in particular has an intense sericitic alteration near the intrusive contacts.

The best expression of skarn-related alteration can be seen in the Matracal Skarn main body. Within the skarn body, strong propylitization can be distinguished as a product of retrograde alteration represented by chlorite-epidote-actinolite-calcite. It is common to find disseminated specularite nodules with increasing amounts of magnetite content in the oxidation zone near the limestone contact. Silicification increases toward the protolith. ASD samples identified high temperature clays corresponding to the illite with a smectite zoning in the historically mined area. Additionally, the following alteration assemblages can be found:

1. Garnet associated with metasomatic processes. 2. Illite-smectite mixture associated with strong hydrothermal activity. 3. Chlorite/chlorite-goethite in more distal sectors with traces of illite-chlorite as a propylitic alteration zoning.

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8.0 DEPOSIT TYPES As outlined in Section 7.0, there are four main mineralization types at Indé. To date, three of these types of mineralization have been or are currently being mined on the property. The three deposit types that are currently exploited at Indé are:

1. Intrusive-related and structurally controlled polymetallic base and precious metal vein deposits (Ag-Pb-Zn±Au) 2. Polymetallic base and precious metal CRD deposits (Au-Ag-Pb-Zn) 3. Polymetallic base and precious metal skarns (Ag-Pb-Zn +Au, El Gato Skarn) and (Cu-Au, Matracal Skarn)

Figure 8-1shows a conceptual cross-section of deposit types and mineralization styles at Indé.

Figure 8-1 Conceptual Cross-Section of the Indé Mining District and Mineralization Types

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8.1 Intrusive-Related and Structurally Controlled Polymetallic Base and Precious Metal Veins Deposits (Ag-Pb-Zn ± Au) Intrusive-related and structurally controlled (IRSC) veins are found throughout the property. These veins host one of the mineral resource types referenced in this report. The structures host narrow (1-5 m wide) high grade veins, which characteristically strike east-west and dip steeply (average 75°) to the north. The combination of faults, folds, and fractures within the carbonate sedimentary rocks create favorable conditions for the enrichment of Ag-Pb-Zn ± Au veins probably related to hydrothermal fluids and intrusive bodies at depth. Two different types of veins can be differentiated as follows:

· Veins characterized by high-intermediate sulfidation and representative of the shallower parts of the porphyry system. In the operational zone, vetiform polymetallic sub-epithermal structures (Ag-Pb-Zn) are present. These veins are hosted in the Cretaceous sedimentary package. · More distal structures, represented by epithermal veins (Au-Ag to Ag-Cu), which appear to cut across the stratigraphic column. These vein structures are composed of banded quartz and epithermal textures and show minor brecciation.

8.2 Polymetallic Base and Precious Metal Carbonate Replacement Deposits (Au-Ag-Pb-Zn) Mining of CRD deposits within the massive limestones on the west-central portion of the Indé District has produced the vast majority of the gold mined to date. As previously mentioned, partial historical records document nearly 1 million oz of gold mined from these deposits in the 1930’s. Visual estimates and extrapolation of the partial production records suggest that gold production may well have been 1.5 to 2 times the “booked” ± 1 million oz.

The CRD deposits historically found in the Indé Mining District are primarily located along fault and linear- to-sub-linear intrusive contacts. Au-rich CRD mineralization is strongly associated with the occurrence of rhyolite dikes. Convective meteoric waters in the upper 50-100 m of limestone interacted with acidic intrusive waters, leaching the iron sulphides and releasing gold, silver, lead, zinc, and sometimes copper into areas of secondary porosity and fracturing, resulting in supergene enrichment zones that average 20 gpt Au.

8.3 Polymetallic Base and Precious Metal Skarns (Ag-Pb-Zn + Au, El Gato Skarn) and (Cu-Au, Matracal Skarn) Cu-Au and polymetallic skarn mineralization occur at several locations on the property. The Matracal Skarn deposit is a historically mined Cu-Au deposit that outcrops near the contact between polymictic conglomerates and massive limestones in the west central portion of the district. Mineralization occurs as discontinuous and irregular accumulations of chalcopyrite and auriferous pyrite. Matracal mineralization has been mapped on the surface and underground over an area roughly 400 m long x 30 m wide x 100 m deep. Drill holes have intersected similar skarn mineralization several hundred meters below the current known limit of this body.

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9.0 EXPLORATION

9.1 Summary ECI has conducted extensive geological mapping, geochemical surface and underground sampling campaigns and reinterpretation and re-processing of an airborne magnetic geophysical survey over the entire district to guide drilling. The exploration drilling to date has focused on delineating a resource in the known mineralized polymetallic veins, as well as testing new exploration targets. While at least three other groups have conducted limited modern exploration on portions of the current property package, previous exploration was severely restricted due to the fragmented nature of the property package prior to final consolidation. Previous exploration work includes small-scale surface and underground geochemical sampling and limited drilling exploration programs.

9.2 ECI Exploration ECI has assigned an experienced geologic staff with senior level managers to the Indé project since acquiring the Indé Mining District on August 18, 2009. Historic mapping, drilling, and geochemical data have been compiled. Since 2009, ECI geologists have been in the field checking historic information and mapping geology and alteration. They are continuously updating interpretations based on the information gained during drilling. The ECI concessions cover the entire known Indé Mining District and adjacent associated mineralization and alteration. While the core of the district has been well mapped and is currently being drilled, there is significant area yet to be explored in a detailed manner.

ECI geologists map and sample active mine workings to help guide the mining operations. This work has helped improve mining operations and better delineate mineralized zones. As a result, ECI geologists have expanded their understanding of the structure and mineralization throughout the Indé Mining District.

ECI has completed surface and underground channel sampling and exploration drilling throughout the mining district. Geophysical surveys, PIMA spectral analysis, whole rock geochemical analysis, surface and underground mine mapping, and a district-wide structural analysis have also been carried out.

9.3 Surface and Underground Rock and Dump Samples ECI has sampled bedrock throughout the district with emphasis on areas of known mineralization. A total of 2,114 surface and 1,392 underground rock samples have been collected. Rock chip samples were taken during reconnaissance geological traverses, prospect mapping, and target delineation. Character samples are taken where appropriate to verify rock type and check for specific sulfides or gangue within veins. Historic waste (mine dump) characterization samples and/or high grade grabs are selectively collected to test the relative grades of mineralized material at any one site.

Grab samples have been taken throughout the district for alteration mapping, thin-section work, and whole-rock analysis.

9.4 Exploration Mapping ECI geologists are systematically mapping with the goal of understanding the structural and intrusive history of the area and defining the paragenesis of metal deposition and associated alteration patterns

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and extents. Once this picture has been fully understood, existing drill targets will be better defined and new drill targets will become evident.

An extensive, 1:2000-scale, detailed geological mapping program of the core of the district is being conducted. Completed geology maps have been scanned and digitized into ArcGIS®, where a new district geology map is being compiled at a 1:5000-scale.

ECI contracted Tony Starling to complete a detailed structural analysis of the district. This study has provided new information into the district structural regime and its relationship to intrusive events and mineralization (Starling, 2010).

A thorough investigation of the relationship between emplacement of the intrusives and the associated mineral alteration is underway in order to help explain the overall geologic evolution and economic potential of the Indé district. Work to date indicates a complex, multi-phased intrusive history that had both base metal and precious metal aspects. Alteration mapping efforts to date have concentrated along veins and replacement zones in existing underground workings as well as on surface exposures. This mapping has helped to define the intrusive contact and vein selvage alteration sequences as well as discreet centers of higher temperature alteration that are alteration targets in their own right.

9.5 Geophysical Surveys ECI purchased a high-quality airborne magnetic geophysical survey flown by Fugro Airborne Surveys of Mississauga, Ontario, Canada. The survey covers the entire Indé Mining District and surrounding properties. Several anomalous magnetic features, thought to represent buried magnetic intrusives, were detected by this survey. The magnetic lows associated with these features are plainly evident, as shown in Figure 7-4. Integration of the geophysics with the other data layers has allowed ECI geologists to target potential buried intrusives and alteration zones that may be mineralized.

9.6 ECI Sampling Method and Approach In order to estimate the mineral resources of discrete mineralized areas within the Indé district, ECI has collected drill core, surface outcrop, dump, underground channel, surface channel, trench channel, and historical tailings samples.

9.6.1 Surface Channel Samples Chip channel samples are collected across zones of mineralization, alteration, and structure by taking a 10-20 cm chip every 50-100 cm across a given, geologically defined traverse.

9.6.2 Underground Mine Channel Samples Underground channel samples are marked by a line at each end of the channel and are separated by ore- waste relationships, structure, and wall rock. The sample site is washed with high pressure water and a 2- kg sample is chipped from the face with a mallet and chisel and captured by a 1x1 m canvas. The canvas is cleaned after each sample has been taken, and a lithologic description is recorded. Samples larger than 2 kg are manually split by homogenization and quartering. Both sides of the sample bag are numbered, and the bag is sealed with a sample tag inside. Individual samples are placed into numbered sacks of 10 each along with the appropriate blanks and standards and stored in a locked warehouse at the mine site

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10.0 DRILLING This section provides a brief summation of all drilling conducted by ECI within the Indé Mining District. Prior to ECI’s acquisition of the district, 83 core holes had been completed by previous exploration companies. A portion of the data from these drill holes has been recovered by ECI. All available drill core has been re-logged and integrated into the ECI database. At the time of this report, none of the previous drill hole data had been provided to GRE. Drilling results reported by previous operators are used as a guide for ECI’s exploration program, but were not used in the calculation of the estimated resource in this report. Discussion regarding drilling, sampling, and quality control will be limited to work conducted by ECI.

10.1 ECI Exploration Drilling ECI’s exploration drilling program began in early 2010 and has continued into 2013 with a prolonged break from November 2013 to March 2016 when the property was under exclusive operation by Scorpio. To date, 139 diamond core drill holes totaling 27,097.82 m and accounting for 12,509 assayed intervals have been completed. ECI has selectively targeted areas of potential mineralization identified through surface mapping, previous underground mine operations, and geophysical surveys. ECI has tested the mineralization in 21 different target areas with at least one drill hole. The drilling program is summarized by target area in Table 10-1.

Table 10-1 Summary of Drilling by Target Area Target Number of Holes Meters Drilled Aguilla 1 306.9 Cerro Prieto 1 401.7 El Barco 10 2,544.9 Esperanza 1 226.2 Buena Suerte 3 800.7 Discubridora 11 2,201.75 Dique Regina 5 598.00 Gato/El Raton 8 1,895.35 Leticia 27 3,356.27 La Cruz 3 644.45 Matracal 16 3,623.5 Cieneguillas (Libertad) 5 678.05 Nor Weste 6 1,524.15 Paco/Caballo 10 2,447.25 La Palmera 2 294.5 Siciliana 2 597.2 San Antonio 9 1,017.75 San Francisco 1 273.25 Tablas I and II 7 1,513.33 Tres Verones 2 290.9 La Union 7 1,513.30 La Sirena 2 308.45 Total 139 27,097.82

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Figure 10-1Figure 10-1 shows the distribution of drilling in the Indé Mining District completed by ECI, as of the effective report date. Mineralization defined in the Indé Mining District is still being encountered on an ongoing basis in veins, CRDs, and skarn. Within the veins, mineralization remains open along strike and down-dip. Vein intersections with other veins and prospective stratigraphies are still being investigated.

Figure 10-1 Drill Hole Plan

The majority of the drilling has targeted the structurally controlled veins within the property. The plan and section maps in Figure 10-2 through Figure 10-4 provide an example of the drilling completed on the Barco vein. Similar exploration drilling has been performed on the main veins within the property which consist of Leticia, La Union, El Barco, San Antonio, Caballo, Buena Suerte, and Tablas II.

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Figure 10-2 Barco Vein Drill Hole Plan Map

Figure 10-3 Barco Vein Drill Hole Section Map 1

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Figure 10-4 Barco Vein Drill Hole Section Map 2

10.2 Drilling Conditions and Procedures Drilling conditions in the Indé Mining District area are optimal for year-round exploration. Drill sites are constructed by digging a sump and, if necessary, by leveling a pad for the drill. Existing roads throughout the district are maintained by mine personnel. Onsite mine equipment is used when significant construction is required for drill sites. No ground water has been encountered in any drill holes completed to date. Almost all holes are collared in bedrock. The mineralized zones were often more fractured than the surrounding country rock and contained more clay and brecciation than non-mineralized intervals.

Diamond drill holes are drilled with HQ (63.5 mm) size core. Core recovery is generally very good with an average of 95%. As often occurs in mineralized zones, particularly in structurally controlled veins, core loss increases as fractures, clay content, and brecciation become more prevalent.

10.3 Drilling Contractors ECI contracted Globe Explore (Globe) Drilling to complete diamond core drilling on the project. Globe utilized a skid mounted core drill rig with HQ (63.5 mm) diameter drilling rods. ECI completes a safety and drilling QA/QC checklist every day at the time of sample collection.

10.4 Geological and Geotechnical Logging ECI project personnel follow sample handling and logging protocols outlined in a written procedures document. Drill core samples are collected from Globe at least once a day and are transported from the field to a secure onsite core shed. Once at the facility, each core is washed and photographed, with the

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photos downloaded to the onsite server. Photos are inspected for clarity and lighting, with repeat photos taken as needed. Geological and geotechnical logs are completed on paper logs for each drill hole. Geotechnical data collected includes recovery and rock quality designation (RQD). Geologic features logged include rock class, formation, lithology, alteration, mineralization, structure, and texture. Additionally, a paper cross-section detailing the geology intersected by the drill hole is completed. All of the data collected in paper format is then digitized or hand entered into electronic format for storage on the server. At the time of the author’s site visit, data for each drill hole was stored in individual folders on the server. Each folder contains the geology log, assay data, digitized geologic cross-section, drill core photos, drill site photos, and any other information related to the drill hole.

All drill hole data is printed and stored with the original paper documents in binders by drill hole name. All collar and drill log information is imported into ECI’s mining software to further safeguard digital data. ECI has also created a secure exploration database.

10.5 Drill Collar and Down-Hole Surveys Initial collar locations are surveyed using a global positioning system (GPS) with a surveyed landmark as a local station. Final collar locations are surveyed with a differential GPS.

Down-hole surveys are completed by Globe using the Reflex EZ-Shot instrument. Surveys are collected at the bottom of the hole and on 50 m increments thereafter. At each survey point, six parameters are recorded: azimuth, inclination, magnetic tool face angle, gravity roll angle, magnetic field strength, and temperature. All parameters are recorded on the driller’s log and submitted to ECI personnel.

10.6 Diamond Core Sampling In the ECI drilling program, HQ core is recovered using a split tube assembly. Recovered core is placed in plastic boxes at the drill site, with the core footage marked on wood blocks, and the drill hole name and interval marked on the outside of the box. At least once per day, an ECI geologist collects the full core boxes and transports them to the secure onsite facility. The core is photographed, logged, and marked for sample intervals.

Core is sampled in intervals appropriate to the rock being sampled, ranging from 0.1 m up to 53.3 m, honoring geologic contacts where appropriate. The preferred sample interval is 2 m. After the core has been logged, samples selected to be assayed are split by ECI personnel. The split core is placed back in the sample boxes and returned to the geologist. The sample is bagged in large heavy duty plastic bags. Both sides of the sample bag are numbered, and the bag is sealed with a sample tag inside. Individual samples are placed into numbered sacks of 10 each, along with the appropriate blanks and standards, and stored in a locked warehouse at the mine site until shipped. Samples are shipped by ECI personnel to the ALS Chemex lab facility in Chihuahua, arriving there the same day they leave the site.

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11.0 SAMPLE PREPARATION, ANALYSES AND SECURITY GRE reviewed ECI’s 11-page written drilling control procedure which covers:

· Location of the drill hole · Alignment of the drill rig · Measurement of drill hole azimuth and dip · Transportation of core to the core shack · Logging procedure for drill hole depth, geology, recovery, and RQD · Location and demarcation of assay samples · Photographic logging of core boxes · Preparation of assay samples · Sample control and chain of custody documentation for shipment

GRE also reviewed ECI’s 25-page written sampling Quality Assurance/Quality Control (QA/QC) procedure which covers:

· Collection of samples · Sample contamination · Sample preparation · Primary and secondary laboratory selection · Discussion of accuracy and precision · Analysis method · QA/QC sample insertion · QA/QC monthly reporting · Database management · Register of errors and corrections · Storage of pulps and rejects · Dispatch and transport of samples to laboratory

The following is a condensed version of the procedures used when collecting drill core samples. Drill core is collected at the drill site by the ECI geologists, placed in plastic core boxes, and transported to the core shack for logging. The entire drill core is logged by the ECI geologist for geology, recovery, and RQD. Assay samples are selected by the geologist with QA/QC samples inserted into the sample sequence. Core boxes are arranged in groups of 4, wetted, and photographed showing each sample number including the QA/QC samples. Core samples are taken as half core using a diamond core saw following the sample marks from the geologist. Six QA/QC samples are inserted for every 24 core samples resulting in 25% of the total samples as quality control samples. Table 11-1 details the QA/QC sample insertion program within each 30 assay sample set. QA/QC samples are highlighted in green, Table 11-1. Photo 11-1 is an example photograph from drill hole EIB-1 showing the QA/QC samples inserted in the assay sample sequence.

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Table 11-1 QA/QC Sample Insertion Program Generic Sample Number Sample type Responsible Person Sample Location 1 Fine Blank ECI Geologist Project 2 Coarse Blank ECI Geologist Project 3 - 7 Half Core Samples ECI Geologist Project 8 Coarse Duplicate Lab QA/QC Supervisor Assay Lab 9 - 13 Half Core Samples ECI Geologist Project 14 Fine Duplicate Lab QA/QC Supervisor Assay Lab 15 - 17 Half Core Samples ECI Geologist Project Alternating Standard (low, 18 medium, high grade) ECI Geologist Project 19-22 Half Core Samples ECI Geologist Project 23 Quarter Core Sample ECI Geologist Project 24 Twin Quarter Core ECI Geologist Project 25 - 30 Core Samples ECI Geologist Project

Photo 11-1 EIB-1 Drill Core with QA/QC Samples

* Photograph shows fine blank, coarse blank, and coarse duplicate QA/QC samples circled in red.

Samples are placed in individual bags containing the unique sample numbers. Samples are then collected in groups of 10 and placed in a burlap sack, which is labeled in permanent marker with company name, sample group number, sample sequence contained within the sample group, along with the name and

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All samples for the Indé mine were sent to ALS Chemex in Chihuahua Mexico, an ISO 9001:2000 and ISO 17025:2000 registered laboratory. ECI did not systematically use a secondary laboratory to check the results from ALS Chemex. Upon arrival, the samples are bar coded, weighed, split to 250 grams, pulverized to 85% passing 75-micron screen, and split to 30-gram samples for assay, with duplicates retained and stored. A 30-gram sample is assayed for gold by fire assay with AAS finish within 0.01-100 parts per million (ppm) range (ALS code – AA23). An additional 30-gram split is assayed for 35 elements using aqua regia digestion and inductively coupled plasma (ICP) (ALS code – ME-ICP41). Individual silver assays are 30-gram splits at 1-1500 ppm range with aqua regia digestion and ICP or AAS finish (ALS code – Ag-OG46). Completed assay certificates are received electronically in pdf format and comma separate values (csv) files, which are then directly imported into ECI’s database.

ECI completes monthly and quarterly reports of the QA/QC program. Duplicate samples are taken at three distinct sample sizes, core, coarse, and pulp, and are evaluated based on a 90% sample passing rate. The permitted error ranges for core, coarse, and pulp duplicates are ±30%, ±20%, and ±10%, respectively. Blank and standard samples are evaluated based on a 100% sample passing rate. Blank samples must be below three times the detection limit for coarse blanks and one times the detection limit for fine blanks. Standard samples must be within plus or minus two standard deviations of the recommended value of the reference material. Several standards were used during ECI’s sampling program and, in general, most standards were polymetallic with recommended values for gold, silver, copper, lead, and zinc. Any discrepancies detected are checked with the control documentation to determine if they were mislabeled. Sample discrepancies remaining after checking the control documentation are reassayed at the lab.

GRE reviewed the quarterly reports from ECI and considers the QA/QC program to be adequate and well within standard industry practice.

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12.0 DATA VERIFICATION It is not known what systematic data checks and validation procedures were carried out by historical workers in the Indé Mining District prior to the arrival of ECI. Cluff, et. al. (2002) discuss general sampling sites, numbers, and types of analytical procedures used in their report on Amarc’s work in the Indé Mining District. The Amarc report also includes surface maps with sample sites and drill results. Work by Sydney in 2004 is represented by individual files, maps, sections, and documentation of the work completed, but no formal report is included. Amarc and Sydney’s files include photos of the core holes drilled on the property, but no core is available for inspection. Numerous company in-house reports exist in the ECI files that contribute to the overall composite picture, including detailed field mapping, sampling, and inspection of the Indé Mining District.

Gustavson personnel visited the Indé Mining District from April 27 through April 30, 2011. During the site visit, Gustavson personnel reviewed drilling operations, sample handling and security, core logging protocols, data management, and QA/QC programs.

GRE’s Kevin Gunesch and Rick Moritz visited the Indé mine from April 11 to April 15, 2016 to verify data and view the mine, mill, and site conditions. Kevin Gunesch performed the following verification tasks during the site visit:

· GPS survey of select surface drill holes and inspection of outcrops of the El Barco and La Union veins · Visual inspection and comparison of select drill hole intervals with geologic logs · Review of the sample preparation, QA/QC procedures, chain of custody control documentation, and lab assay certificates (as described in Section 11.0). · Review of the updated mining maps to determine mined out areas of the resource · Underground tour of the Paco mine, which contains the Caballo vein

12.1 GPS Drill Hole Survey and Outcrop Inspection Kevin Gunesch and Sergio Bueno, geologist for ECI, toured select drill holes from the Barco and Union veins on April 14, 2016 (Photo 12-1). Concrete monuments with PVC tubing indicating the drill hole azimuth and dip are located at each past drill site. The concrete is engraved with the drill hole number, which is also written in permanent maker on the PVC tubing. Each drill hole visited was surveyed with a Garmin handheld GPS, which was then compared to the coordinates in the exploration database. A total of nine drill holes were surveyed, including six holes from Barco and three holes from Union. Initially, each drill hole showed a fixed offset from the database around +47 m in Easting and -195 m in Northing. This was due to incorrectly choosing the NAD27 datum on the Garmin GPS. The drill holes were surveyed using a differential GPS and the WGS84 datum. After converting the coordinates, the field survey compared well with the database coordinates (Table 12-1).

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Photo 12-1 Kevin Gunesch GPS Survey Drill Hole EIB-4

Table 12-1 Drill Hole GPS Survey & Comparison to Database GPS survey Database Collar Coordinates Difference GPS to Collar DH E N Z E N Z E N Z EIB-4 477,931 2,860,406 1,945 477,923 2,860,411 1,938 8 (5) 7 EIB-1 478,109 2,860,324 1,958 478,099 2,860,329 1,950 10 (5) 8 EIB-5 477,672 2,860,236 1,933 477,662 2,860,242 1,932 10 (6) 1 EIB-3 477,792 2,860,219 1,936 477,782 2,860,227 1,932 10 (8) 4 EIB-6 477,358 2,860,149 1,965 477,348 2,860,155 1,962 10 (6) 3 EIB-9 477,209 2,860,099 2,004 477,199 2,860,104 2,008 10 (5) (4) EIU-4 476,196 2,862,147 2,046 476,182 2,862,153 2,037 14 (6) 9 EIU-5 476,251 2,862,104 2,038 476,240 2,862,109 2,039 11 (5) (1) EIU-2 475,758 2,861,973 1,984 475,748 2,861,979 1,986 10 (6) (2) * Converted coordinates shown

Outcrops of both the Barco and Union vein were also visited during the field tour (Photo 12-2 and Photo 12-3). The Barco vein outcrops to surface at several locations along a hillside at its northeast extent. Two portals exist on either end of the hillside. The outcrops are clearly visible on the surface, showing areas of sulfide mineralization although they are mainly oxidized. Barite within the vein was observed at the east portal entrance and also at the outcrop locations. The outcrop dips at approximately 70 degrees, with an azimuth around 80 degrees. The Union vein outcrops along a steep hillside located adjacent to the process plant. Old open stopes are present at the surface on the hillside next to the process plant. The outcrop dips at approximately 70 degrees, with an azimuth around 80 degrees.

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Photo 12-2 Kevin Gunesch at Barco Outcrop and East Portal Entrance

Photo 12-3 Kevin Gunesch at Union Outcrop

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12.2 Comparison of Select Drill Holes to Geologic Logs The resource estimate used in the PEA for Indé is comprised of 7 veins. Table 12-2 lists each vein area and the approximate percentage of the vein resource on a tonnage basis.

Table 12-2 Percent of Resource by Vein on Tonnage Basis Vein Percent of Resource Barco 42% Caballo 19% Union 19% Leticia 10% Tablas II 5% San Antonio 3% Buena Suerte 2%

Four of these veins (Barco, Caballo, Union, and Leticia) contain approximately 90% of the vein resource. GRE compared select drill holes for these veins with the geologic logs. The comparison was focused on the mineralized intervals that were used in the resource estimate. The drill holes selected, organized by vein, and the comparison interval are listed in Table 12-3. Each interval compared well with the geologic logs showing the mineralized vein.

Table 12-3 Drill Holes Compared to Geologic Logs by Vein Vein Drill Hole Interval EIB-1 180 - 183 EIB-5 239 - 241 El Barco EIB-7 185 - 188 EIB-9 230 - 233 EIP-4 204 - 207 Caballo EIP-8 287 - 290 EIU-4 76 - 82 La Union EIU-7 227 - 229 EIL-6 300 - 301 Leticia EIMLE-15 52 - 54

Photo 12-4 shows drill hole EIB-9 with the brecciated contact of the mineralized vein to the left of the paper section.

GRE also verified the oxide/sulfide boundary for the Caballo and Barco veins during the drill core inspection. Drill holes within the oxide zones (EIP-4, EIP-8, EIB-1) showed oxidation of the vein, while drill holes within the sulfide zones (EIB-5, EIB-5, EIB-9) were not oxidized.

Figure 12-1 and Figure 12-2 show the long sections containing the defined oxide sulfide boundary with the Caballo and Barco veins and the drill hole intercepts.

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Photo 12-4 Brecciated Contact of Barco Vein, Drill Hole EIB-9

Figure 12-1 Oxide/Sulfide Boundary Barco Vein

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Figure 12-2 Oxide/Sulfide Boundary Caballo Vein

* EIP-8 on extreme NE end of Caballo Vein not shown

12.3 Review of Mined Out Areas GRE met with Jose Luis Guerro, ECI mine geologist, to determine the mined out areas of the resource within each vein area. GRE completed an initial assessment of the mined out areas in 2014 showing current and historic mined areas in the Leticia, Buena Suerte, San Antonio, Tablas II, Union, and Caballo veins. Both the Leticia and Caballo veins have been mined since 2014 and required an update.

The Leticia hanging wall was previously mined out above the 1,800-m level. Mining has progressed in this vein down to the 1,770-m level according to the updated long section. In addition, the ramp access from the 1,800-m level to the 1,770-m level was driven within the vein and has resulted in thin wedges of ore between the ramp switchbacks. These areas are likely not recoverable due to instability of the vein and safety concerns with mining in these areas.

The Caballo vein was previously mined on the north east end via the Argentina Mine. Previous mining in Argentina was in two main areas with old workings in between. On the northeast side, the vein was mined out to the 2,015-m level. On the southwest side, the vein was mined out to the 1,985-m level. The old workings between these two areas were mined out to the 1,9500-m level. Mining has now progressed in Argentina on the southwest side to the 1,950-m level. No significant progress was made on the northeast side of the Argentina mine. During the review, an expanded long section of the Argentina mine was located showing additional strike length along the vein to the southwest. Old workings (Matracal), that were previously unknown to GRE, exist above drill hole intercepts EIP-8 and EIP-3. The old workings extend for approximately 200-m along the vein and are mined out down to the 2,000-m level.

The Paco mine, on the southwest end of the Caballo vein, contained only access drifts in the vein on three separate levels in 2014. Mining has progressed on the upper two levels in a non systematic manner both above and below the access drifts. Mined out stopes are shown on the long section ranging from 50 meters along strike and 25 meters along dip to 200 meters along strike and 10 meters along dip.

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Fortunately, each level had access to the surface and therefore ramps were not driven between the levels within the vein, which would have resulted in sterilizing portions of the resource similar to Leticia.

12.4 Underground Tour of the Paco Mine GRE visited the Paco mine with Edwardo Javier Flores, ECI mine manager, and Jose Luis Guerrero, ECI geologist, on the morning of April 15, 2016. The portal area contained stockpiles of both oxide and sulfide ore. The main access drift measured 3.5-m X 3.5-m and was developed in competent rock to the surface. A 730 cubic feet per minute (cfm) Sullair rotary screw compressor was located at the portal site. A 1-inch high density polyethylene (HDPE) water line, 4-inch HDPE air line, and 3/0 power cable are the main utility lines. The air line is reduced to a 2-inch HDPE line for auxiliary workings. The entire mine has very competent rock. No rock bolts, wire mesh, or shotcrete were observed within the mine. The drift is well maintained, and visible grade survey lines are present along the ribs. No water inflows were observed within the mine. One section of the mine has increased humidity to the point where mud is present on the floor. A new sump was observed under construction. The mine has been shut down for approximately one month since ECI took over control of the operation. ECI has performed general maintenance of the mine since that time, washing down the headings, updating the mine surveys, and collecting channel samples. In general, the mine is clean, well organized, has good demarcation, and contains physical barriers of known hazards such as open stopes and raises.

Photo 12-5 shows the mine entrance.

Photo 12-5 Rick Moritz at the Paco Mine Entrance

Diesel smoke staining was present in several areas of the mine, indicating a lack of ventilation (Photo 12-6). ECI has planned two ventilation raise bores for the Paco mine. The location of these raise bores should be well-planned to service the largest extent of the mine and may even be situated to ventilate the Argentina mine when the mine areas are connected. There are several access points to the surface which could be used for exhaust or forced air ventilation (Photo 12-6). It may be possible to sufficiently

Global Resource Engineering August 19, 2016 NI 43-101 Technical Report and PEA for Indé Project Page 57 ECI Exploration and Mining Project No.: 13-1068 ventilate the Paco mine using these access points in the short term to allow for a more efficient positioning of the raise bore ventilation shafts to serve future expansions.

Photo 12-6 Composite Photo showing Diesel Staining on Left and Surface Access Point on Right

The group visited several sulfide stopes within the mine. Access to the stope areas are not well planned. The main access is along the vein, and one particular set of stopes has access that passes from the footwall, through an active stope, and then through the hanging wall to access the adjacent stope. Stope areas are also not systematically mined at a constant level. Some stope areas have large cuts into the back next to adjacent areas with smaller cuts. The larger cuts have sporadic pillars and stalls for support. The previous operator high-graded the vein in several areas, only taking the hanging wall and leaving up to 1 meter of the footwall. Eduardo Javier Flores is aware of these past operational issues and plans to remedy these during the implementation of the new mine plan.

The Caballo vein is clearly visible and allows for easy sampling of the vein (Photo 12-7). Markings from past channel samples were observed throughout the mine. The vein width varies from 1-3 meters, with a higher grade section within the brecciated portion of the vein. The strike and dip of the vein are very constant. This feature, combined with the larger vein width, provides the opportunity to use long hole stoping within the mine, which would greatly increase the mine production rate.

The group also visited the oxide portion of the Caballo vein. Access to the oxide area is within the hanging wall and should be moved to the footwall. The vein within this area is visibly oxidized and confirms the current sulfide/oxide boundary used for the resource estimate.

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Photo 12-7 Kevin Gunesch and Jose Luis Guerrero with Caballo Vein

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13.0 MINERAL PROCESSING AND METALLURGICAL TESTING The existing operation has a laboratory with crushing, grinding, flotation, bottle roll, AAS, and Fire Assay capabilities. Brief historical metallurgical testing of sulfide composites and tailings was completed by workers in the past with inconclusive results due to the small size and lack of representative samples. Prior to the onsite laboratory, visual ore control was used and the mill yielded saleable concentrates. During the year that ECI operated the mine (2009-2010), improved geologic ore control and mining practice resulted in increased operating profits. The verifiable measure of ore quality is provided by the assay receipt from the smelter when the concentrates are sold.

GRE reviewed the available metallurgical test work completed to date on the Indé mine in Durango, Mexico. This included the monthly recovery data from the existing operational flotation plant located at the site for September 2009 through September 2010, the second half of 2013, the complete years of 2014 and 2015, and the first two months of 2016. ECI also supplied samples and commissioned SGS Mineral Services of Durango, Mexico to complete metallurgical work in December 2011. Work completed by SGS was a high quality initial program. A total of five materials were tested, each at a high, medium and low grade. The samples ranged from sulfide to mixed and oxidized. Four of the five material types tested represent the main resource areas for the project which are utilized in the preliminary economic analysis; the Matracal resource is not included in the PEA. Review of these samples was broken into two areas, oxide (including mixed material) and sulfide material.

13.1 SGS Testing - Oxide Material Direct cyanidation of the El Barco, Caballo, and Matracal samples was completed using bottle roll leaching. Average recoveries ranged from 71% to 78% for gold and 44% to 79% for silver. The Caballo material is highly oxidized, which is reflected in the cyanide recoveries. El Barco appears to be a mixed or transitional material, specifically the silver mineralization. The Matracal material appears to be the least oxidized material based on the cyanide recoveries. Mineralogy work completed identified Freibergite

(Ag6Cu4Fe2Sb4S13-x), Argentite (Ag2S), and Stromeyerite (CuAgS) within the El Barco material. These minerals would have limited cyanide solubility and would be a contributor to the low silver recovery. Recoveries from direct cyanidation are summarized in Table 13-1.

A stand-alone gravity test was completed on El Barco, not sequential with cyanide testing, which gave good results. If the middlings gravity product responded to cleaning, a significant portion of the gold and silver could be recovered prior to cyanidation. Good gravity recoveries are not surprising since the silver sulfide minerals previously identified have a specific gravity range of 4.9 to 7.3, which is much greater than the gangue material. Gravity work was completed at 80% passing 200 mesh. Optimization of gravity treatment may indicate testing at a different size. Gravity recoveries are summarized in Table 13-2.

Bulk flotation with sulfidation testing completed on El Barco oxide material resulted in recovery of 26% of the gold and silver. This may be a viable process route to improve the overall recovery of the oxide material if used in conjunction with cyanidation. Silver recovery for Caballo was less responsive to bulk flotation, although it was very responsive to selective flotation with sulfidation. Gold recovery was the same in Caballo for both methods. Lead grades within the concentrate were very good, but the overall

Global Resource Engineering August 19, 2016 NI 43-101 Technical Report and PEA for Indé Project Page 60 ECI Exploration and Mining Project No.: 13-1068 lead recovery was poor, most likely due to oxidation. Bulk flotation recoveries are summarized in Table 13-3, Table 13-4, and Table 13-5.

Table 13-1 Cyanidation Recoveries Calculated Head (gpt) Recovery (%) Sampled Head (gpt) Gold Silver Gold Silver Gold Silver El Barco High 0.12 371 66.9 51.7 0.11 377 Medium 0.18 247 89.7 65.8 0.08 243 Low NA 11 NA 63.1 0.03 13 Average 78.3 60.2 Caballo High 1.12 5,189 69.0 84.2 1.17 5,612 Medium 1.94 487 76.4 76.0 2.16 464 Low 0.65 663 73.4 77.4 0.64 687 Average 72.9 79.2 Average of El Barco and Caballo 75.6 69.7 Matracal High 5.96 44 31.0 5.5 6.81 40 Medium 1.3 2 94.6 65.6 1.76 2 Low 0.25 8 87.8 63.2 0.21 9 Average 71.1 44.8

Table 13-2 Gravity Recoveries Calculated Head (gpt) Recovery (%) Sampled Head (gpt) Gold Silver Gold Silver Gold Silver El Barco High 0.13 376 22.2 10.0 0.11 377 Medium 0.07 246 0.2 6.0 0.08 243 Low 0.08 25 6.3 4.1 0.03 13 Average 9.6 6.7 El Barco (with Middlings) High 0.13 376 50.1 44.4 0.11 377 Medium 0.07 246 12.5 13.8 0.08 243 Low 0.08 25 30.3 28.4 0.03 13 Average 31.0 28.9

Table 13-3 Oxide Bulk Flotation with Sulfidation Calculated Head (gpt) Recovery (%) Sampled Head (gpt) Gold Silver Gold Silver Gold Silver El Barco High 0.12 410 38.4 26.0 0.11 377 Medium 0.08 251 32.6 37.2 0.08 243 Low 0.08 11 6.3 15.4 0.03 13 Average 25.7 26.2

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Table 13-4 Oxide Bulk Flotation Calculated Head (gpt) Recovery (%) Sampled Head (gpt) Gold Silver Gold Silver Gold Silver Caballo High 0.97 13 37.5 10.6 2.4 22 Medium 0.75 16.04 32.4 3.4 1.02 32 Low 0.18 1.33 39.2 0.2 0.17 2 Average 36.3 4.7 Matracal High 4.6 32.7 25.6 31.7 6.81 40 Medium 1.3 2.0 17.5 2.2 1.76 < 2 Low 0.2 7.5 52.6 34.3 0.21 9 Average 31.9 22.7

Table 13-5 Oxide Selective Flotation with Sulfidation Calculated Head (gpt) Recovery (%) Sampled Head (gpt) Gold Silver Gold Silver Gold Silver Caballo Lead Concentrate (Sulfide Portion) High 0.73 5,657 9.6 1.9 1.17 5,612 Medium 1.68 534 4.3 3.2 2.16 464 Low 0.66 843 8.8 6.6 0.64 687 Average 7.5 3.9 Lead Concentrate (Oxide Portion with Sulfidation) High 0.73 5,657 6.0 81.2 1.17 5,612 Medium 1.68 534 33.2 55.3 2.16 464 Low 0.66 843 11.4 31.3 0.64 687 Average 16.9 55.9 Combined Lead Concentrate High 0.73 5,657 15.6 83.0 1.17 5,612 Medium 1.68 534 37.5 58.5 2.16 464 Low 0.66 843 20.2 37.9 0.64 687 Average 24.4 59.8 Zinc Concentrate High 0.73 5,657 13.7 6.9 1.17 5,612 Medium 1.68 534 2.7 6.0 2.16 464 Low 0.66 843 7.8 7.3 0.64 687 Average 8.1 6.7 Combined Lead and Zinc Concentrate High 0.73 5,657 29.3 89.9 1.17 5,612 Medium 1.68 534 40.2 64.5 2.16 464 Low 0.66 843 28.0 45.2 0.64 687 Average 32.5 66.5

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13.2 SGS Testing - Sulfide Material Test work completed by SGS included primary and final concentrates made from the Leticia sample. Test work included producing and primary and final concentrate, however no scavenger step to recover silver from the cleaner tails was performed. Table 13-6 presents the recovery data for the final concentrate.

Table 13-6 Sulfide Selective Flotation Sample Calculated Lead Concentrate Zinc Concentrate Sampled Ag Head (gpt) Silver Recovery (%) Head (gpt) High 793 71.3 1.8 728 Medium 87 53.8 25.1 82 Low 149 70.8 13.0 136 Average 65.3 13.3 Pb Head (%) Lead Recovery (%) Head (%) High 9.1 73.7 1.0 9.2 Medium 0.4 56.4 12.7 0.3 Low 3.1 79.4 7.6 3.2 Average 69.8 7.1 Zn Head (%) Zinc Recovery (%) Head (%) High 8.7 2.9 34.2 9.3 Medium 3.6 1.4 80.6 3.6 Low 5.1 2.3 90.0 5.1 Average 2.2 68.3 Au Head (gpt) Gold Recovery (%) Head (gpt) High 2.34 13.0 0.4 2.12 Medium 0.33 2.8 3.2 0.36 Low 0.42 7.1 2.8 0.39 Average 7.7 2.1 13.3 Metal Correlations As part of the future testing program, it is desired to improve the silver recovery to concentrate as well as improve the gold recovery, which is 15% and 4% to the lead and zinc concentrate, respectively. Correlation of gold recovery to silver recovery in both the lead and zinc concentrate is very high, albeit lower, see Figure 13-1Figure 13-1. Reagent modification might allow for improvement in gold flotation recovery or perhaps cyanidation of the tails.

Most likely the gold is associated with arsenopyrite. This is hypothesized since there is a high correlation between gold and arsenic as well as gold and sulfur, with little correlation between gold and iron, see Figure 13-1 and Figure 13-2. Since there is an association between the gold and sulfides, it may be possible to increase the gold recovery within the sulfide circuit. When sulfurization was implemented on the Caballo oxide material, there was a significant increase in gold recovery from 7.5% to 24.5%. This may indicate the potential to improve gold flotation recovery.

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Figure 13-1 Gold and Silver Recovery to Concentrate

Figure 13-2 Correlation of Gold with Other Elements

13.4 Estimated Sulfide Recovery with Scavenger The final concentrate was cleaned, although there was not a scavenger step to recover additional silver from the cleaner tail. If we were to assume 50% of the silver in the cleaner tail could be recovered, silver recovery would be approximately 70% to the lead concentrate. This includes one sample that was fairly low grade, 82 grams per tonne silver, less than half of the projected average grade. Silver recovery to zinc

Global Resource Engineering August 19, 2016 NI 43-101 Technical Report and PEA for Indé Project Page 64 ECI Exploration and Mining Project No.: 13-1068 averaged 15%. The average grade of the tests was much higher than the average grade of the deposit. Specific flotation reagents used in the actual plant operations is unknown. With processing enhancement and optimization, it is possible the actual plant recoveries could be improved. Specific reagent schemes used for the SGS flotation test work are available within the document appendix. These should be reviewed for appropriateness and improvement. All flotation test work was completed at one grind size, 80% passing 200 Mesh. Sulfide recoveries are summarized in Table 13-7, Table 13-8, and Table 13-9.

Table 13-7 Sulfide, Estimated Lead Concentrate Recovery Lead Final Estimated 50% Concentrate Recovery in Estimated Final Recovery (%) Cleaner Loss Scavenger Recovery (%) Silver 71.3 13.0 6.5 77.8 53.8 3.6 1.8 55.6 70.8 6.7 3.4 74.1 Average 65.3 69.2 Lead 73.7 12.5 6.3 79.9 56.4 3.4 1.7 58.0 79.4 6.1 3.1 82.4 Average 69.8 73.5 Zinc 2.9 4.9 2.5 5.3 1.4 9.1 4.6 5.9 2.3 3.5 1.8 4.0 Average 2.2 5.1 Gold 13.0 10.6 5.3 18.3 2.8 7.1 3.6 6.4 7.1 5.8 2.9 10.0 Average 7.7 11.6

Table 13-8 Sulfide, Estimated Zinc Concentrate Recovery Zinc Final Estimated 50% Concentrate Recovery in Estimated Final Recovery (%) Cleaner Loss Scavenger Recovery (%) Silver 1.8 1.3 0.7 2.5 25.1 9.2 4.6 29.7 13.0 0.3 0.2 13.2 Average 13.3 15.1 Lead 1.0 0.8 0.4 1.4 12.7 9.2 4.6 17.3 7.6 0.3 0.1 7.7 Average 7.1 8.8

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Zinc Final Estimated 50% Concentrate Recovery in Estimated Final Recovery (%) Cleaner Loss Scavenger Recovery (%) Zinc 34.2 8.6 4.3 38.5 80.6 5.6 2.8 83.4 90.0 0.5 0.3 90.3 Average 68.3 70.7 Gold 0.4 0.5 0.2 0.6 3.2 5.4 2.7 5.7 2.8 1.5 0.8 3.5 Average 2.1 3.4

Table 13-9 Sulfide, Estimated Combined Recovery Combined Final Estimated Concentrate Final Recovery Recovery (%) (%) Silver 73.1 80.3 79.0 85.4 83.8 87.3 Average 78.6 84.3 Gold 13.3 18.9 6.0 12.3 9.9 13.6 Average 9.8 14.9 2.9 5.3 1.4 5.9 2.3 4.0 Average 2.2 5.1 13.0 18.3 2.8 6.4 7.1 10.0 Average 7.7 11.6

13.5 Existing Plant - Monthly Recovery Data Historically, the sulfide material from Indé has been treated using selective flotation to produce a lead and zinc concentrate. Monthly recovery data for September 2009 through September 2010, the second half of 2013, the complete years of 2014 and 2015, and the first two months of 2016 were supplied for review. The data included metallurgical balances on the ore grade and tonnage processed, the concentrate quantity including all assays, and the quantity and grade of the tailings. The data for 2013 to 2016 was more complete than the 2010 data. GRE used the recent data from 2013 to 2016 to obtain an average metal recovery to the concentrate. Two months were excluded from the calculations, January and October of 2015. During the month of January of 2015, there were only eight operating days with

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very erratic throughput and recovery. October 2015 was reported as “oxide” material and had very poor recoveries in comparison to the typical sulfide recoveries. Recoveries derived from the provided data are shown inTable 13-10.

Table 13-10 Existing Plant Recoveries 2013 to 2016 Lead Concentrate % Recovery Ag 72% Au 22% Pb 69% Zinc Concentrate % Recovery Ag 9% Zn 71%

Plant recoveries met or exceeded the metallurgical testing performed by SGS. The gold recovery during 2015 and 2016 (28%) exceeded the recoveries experienced in 2013 and 2014 (17%) by a significant amount. It is not known if this occurred due to a change in mineralogy or a change in plant operating practice.

13.6 Union Tailings, Bottle Roll Tests The Union Tailing pile is a potential resource containing a significant amount of flotation tailings. Initial sampling and assaying of the tailings showed gold and silver grades of 0.6 gpt and 77 gpt, respectively. Subsequent to GRE’s visit to the site during mid April 2016, site personnel conducted cyanide bottle roll leach tests of the union tailings to preliminarily investigate leach recovery. The results show an average silver recovery of 42%; no recovery data was calculated for gold. Details of the tests are shown in Table 13.11.

Table 13-11 Union Tailings - Bottle Roll Leach Test Weight Test Conditions NaCN (ppm) Ag Grade (g/t) n ) r o i h t ) r ( p e % e s ( b m d m i y i u m l r ) ) s ) T u l o e g n ( S ) v n m N m o l t g ( o o p e ( C i a c l n r ) p t r l ( e e p g e l a N N e a d ( t c i t R a l C C a n i r t l O i m a i i ) n a a e g g e H a a a a i g n S A M W P N C p I F N ( C H T A 1 24 200 400 33.3 0.8 2.0 12.1 2,000 890 0.444 1,000 77 44 42.6 2 24 200 400 33.3 1.0 2.0 12.5 2,500 1,110 0.556 940 77 45 41.3 3 48 200 400 33.3 0.8 2.0 12.1 2,000 750 0.500 850 77 45 41.3 4 48 200 400 33.3 1.0 2.0 12.5 2,500 1,010 0.596 1,180 77 44 42.6 5 72 200 400 33.3 1.3 2.0 12.1 4,000 2,400 0.520 1,650 77 46 39.9 6 72 200 400 33.3 2.0 2.0 12.5 5,000 3,820 0.472 2,120 77 43 43.9

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13.7 Recommendations Indé process plant operations from 2013 to 2016 show acceptable recovery of sulfide ores; however, significant opportunity for improvement exists. The preliminary cyanide bottle roll leach test work of the Union Tails indicates silver recovery in the range of 40-45% is feasible; more test work is warranted. Gold recovery was not reported. Scoping level metallurgical flotation testing by SGS showed mixed recovery of sulfide ores and low recovery of oxide ore. Flotation testing with and without gravity concentration and cyanidation of tailings is currently in process to optimize the process flow sheet, reagent suite, metal recovery, and project economics.

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14.0 MINERAL RESOURCE ESTIMATES

14.1 Introduction GRE has updated the narrow vein underground resource models originally developed in 2011 by Gustavson (Gustavson Associates, 2011). Since the previous resource calculation in September 2011, nearly 6,000 additional meters has been drilled on the property. Using the additional drill data as well as new surface and underground channel samples, GRE updated the resource estimation for the Leticia, Tablas, Caballo, El Barco, La Union, and San Antonio vein systems. The potentially open pit minable mineral resource for the Matracal Skarn was not updated because no new information has been developed. GRE reviewed the Matracal Skarn estimate from the 2011 estimate and supports that estimate, which is included in this report for reference. GRE created three-dimensional (3D) solids using the past model and the updated database, completed an exploratory data analysis on the new data set within the 3D solids, and finally estimated grade within these solids to define the resource.

The mineral resources reported here are classified as Measured, Indicated, and Inferred in accordance with standards defined by Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) “CIM Definition Standards - For Mineral Resources and Mineral Reserves”, prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council on May 10, 2014. Classification of the resources reflects the relative confidence of the grade estimates.

14.2 Deposit Geology Pertinent to Resource Estimation Mineralization in the Indé Mining District is the result of tectonic activity during the Laramide orogeny that folded and faulted the Cretaceous sediments. As the structural regime transitioned from compressional to extensional, paleo thrust zones were reactivated as normal faults. These faults acted as zones of low resistance for hydrothermal fluids and hypabyssal volcanic intrusives.

The introduction of hydrothermal fluids and emplacement of felsic intrusive rocks are thought to be the primary mineralizing events. The movement of the fluids and magmas through the structurally prepared conduits and dilatational zones resulted in the enrichment of multiple polymetallic veins and some distal gold-silver veins within the Indé mining district.

In addition to the polymetallic veins, skarns have been recognized along contacts between the cretaceous sediments and intrusives. The Matracal skarn strikes northwest along the contact of limestones and conglomerates of the Mezcalera group with a rhyolitic intrusive located to the west of the mine area.

14.3 Data Used for the Resource Estimation GRE created models for estimating mineral resources at Indé from data provided by ECI. Drill hole data representing collar coordinates, downhole surveys, sample assay intervals, and geologic logs were provided as Microsoft® csv files. Channel surface samples and channel samples from the Leticia, Tablas, San Antonio, Argentina, and El Barco underground mine workings were provided in the same format as the exploration drill holes. Geology surface maps, geophysical studies, and cross-sections detailing the geology interpretations from each drill hole were provided in electronic format.

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The updated drill hole database contains gold, silver, lead, zinc, and copper assay information on 12,509 samples from drill hole intervals, 1,516 samples from mine channels, and 1,834 samples from the surface. The previous drill hole spacing was designed for 100-meter spacing with azimuth and dip designed to intersect the veins perpendicularly, and the additional data from the new drilling program continues this trend. Figure 10-1 illustrates the distribution of the drill holes in the resource area.

14.4 Density ECI commissioned SGS of México to perform density and specific gravity tests on 52 bulk samples and 77 drill hole intervals from various mineralized zones. The densities for the domains are shown in Table 14-1.

Table 14-1 Density Domain No. of Samples Average Density Leticia* 52 3.23 Caballo/Paco 4 2.24 El Barco 6 3.59 Skarn 15 3.09 * Includes the Tablas, San Antonio, and La Union Vein Systems 14.5 Polymetallic Veins GRE updated the previous model and estimated the underground narrow vein mineral resources by constructing a 3D vein model for each vein with sufficient data. A geostatistical analysis of the available data was completed to define the parameters used to estimate vein thicknesses and grades into a 3D block model. Leapfrog 3D® v2.6.0 geological modeling software (ARANZ Geo Limited) was used to create 3D solids of each vein using the drill hole intercepts. MicroMODEL v8.0 mining software (Randall K. Martin and Associates) was used to estimate vein thickness and grades for gold, silver, lead, zinc, and copper within the 3D solids.

ECI defined the structure, stratigraphy, and alteration for each drill hole on cross-sections oriented along the strike of the drill hole to best account for orientation of the vein target. GRE combined the ECI subsurface interpretations with the surface geology to create 3D solids representing the veins (Figure 14-1) and the skarn area.

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Figure 14-1 3D View of the Caballo Vein System Model and ECI Surface Geology

14.6 Estimation Domains The Indé vein system was separated into individual domains with each vein representing a single domain. A 2.5-dimensional (2.5-D) block model was created for each vein by defining a two-dimensional (2-D) plane coincident with the overall strike and dip of the vein. A 2.5-D model is a 2-D grid in the defined plane of each vein with the thickness of the vein represented as a variable within the model. The true vein thickness was taken from the 3-D model of the composite vein intercepts and projected to the 2-D plane.

14.7 Compositing The drill hole, channel, and surface samples were composited with one composite representing the entire width of the vein. The true thickness was calculated using the strike and dip of the vein. The number of samples and composites for each vein is shown in Table 14-2. Table 14-3 shows the vein orientations.

Table 14-2 Sample and Composite Quantities by Vein Domain Surface Channel Drill Hole Composite Barco 4 143 31 115 Buena Suerte 0 0 7 5 Caballo 7 260 13 163 Leticia 0 203 41 38 San Antonio 6 110 3 69 Tablas II 1 95 24 67 Union 20 0 18 26 Total 38 811 137 483

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Table 14-3 Vein Orientation Average True Vein Azimuth Dip Thickness (m) El Barco 348 60 1.1 Buena Suerte 159 90 0.6 Caballo 330 75 1.4 Leticia del Bajo 15 70 1.2 Leticia FW 22 56 1.2 San Antonio 127 85 1.5 Tablas 339 70 1.3 La Union 170 68 1.5

14.8 Capping of Assays GRE evaluated the cumulative frequency plots for each of the estimated metals in each vein with an adequate population. The Leticia Hanging Wall and Leticia Foot Wall veins were analyzed as one unit, but modeled as separate veins. Uncapped composite statistics for each vein are shown in Table 14-4. Capped Composite statistics for each vein are shown in Table 14-5. The results of the capping analysis are outlined in Table 14-6. Figure 14-2 shows a cumulative frequency plot of silver values within the Barco vein as an example. A clear trend and outliers above 1,000 ppm Ag are readily apparent in the figure.

Table 14-4 Uncapped Composite Statistics for Each Vein Number of Standard Coefficient Metal Composites Minimum Maximum Mean Variance Deviation of Variance El Barco Gold 115 0.005 2.240 0.3692 0.1749 0.4182 1.1327 Silver 115 1.800 2029.412 173.892 57,417.184 239.619 1.3780 Lead 115 0.001 2.808 0.1848 0.1802 0.4245 2.2973 Zinc 115 0.003 8.052 0.3793 1.1701 1.0817 2.8518 All Leticia Gold 185 0.020 8.930 1.3939 2.867 1.6932 1.2147 Silver 185 2.000 3,210.00 378.96 211,216.00 459.58 1.2127 Lead 185 0.020 20.000 3.4107 14.574 3.8176 1.1193 Zinc 185 0.040 28.000 5.9777 24.528 4.9526 0.8285 Caballo Gold 163 0.005 5.1185 0.7060 0.4266 0.6531 0.9251 Silver 163 0.700 6,809.122 595.84 907,986 952.88 1.5992 Lead 163 0.003 20.1006 2.9408 13.876 3.725 1.2667 Zinc 163 0.034 9.8612 1.3740 2.644 1.626 1.1834 Tablas II Gold 67 0.010 4.8000 0.9741 0.08407 0.9169 0.9413 Silver 67 2.077 3,530.016 452.986 465,075.86 681.96 1.5055 Lead 67 0.009 7.1000 1.4100 3.3290 1.8245 1.2940 Zinc 67 0.0184 23.3001 4.1837 17.143 4.1404 0.9896 San Antonio Gold 69 0.010 3.100 0.3453 0.2111 0.4595 1.3308 Silver 69 0.700 1,459.993 182.821 44,217.69 210.28 1.1502 Global Resource Engineering August 19, 2016 NI 43-101 Technical Report and PEA for Indé Project Page 72 ECI Exploration and Mining Project No.: 13-1068

Number of Standard Coefficient Metal Composites Minimum Maximum Mean Variance Deviation of Variance Lead 69 0.002 13.175 2.4505 6.2411 2.4982 1.0195 Zinc 69 0.002 26.300 6.3223 35.579 5.9648 0.9024 La Union Gold 26 0.044 19.3501 1.7431 14.468 3.8037 2.1821 Silver 26 4.450 908.00 120.771 33,208 182.23 1.5089 Lead 26 0.008 2.6200 0.3733 0.4006 0.6329 1.6954 Zinc 26 0.0017 7.3863 0.4126 2.1185 1.4555 3.5273

Table 14-5 Capped Composite Statistics for Each Vein Number of Standard Coefficient Metal Composites Minimum Maximum Mean Variance Deviation of Variance El Barco Gold 115 0.005 2.240 0.36919 0.17641 0.42002 1.1377 Silver 115 1.800 1,000.000 164.94 33,625 183.37 1.1117 Lead 115 0.001 0.400 0.09997 0.01531 0.12373 1.2376 Zinc 115 0.003 0.400 0.1489 0.01552 0.12456 0.8365 All Leticia Gold 185 0.020 8.930 1.3939 2.867 1.6932 1.2147 Silver 185 2.000 3,210.00 378.96 211,216 459.58 1.2127 Lead 185 0.020 20.000 3.4107 14.574 3.8176 1.1193 Zinc 185 0.040 28.000 5.9777 24.528 4.9526 0.8285 Caballo Gold 163 0.005 2.100 0.68232 0.30313 0.55057 0.8069 Silver 163 0.700 6,809.100 595.84 907,986 952.88 1.5992 Lead 163 0.003 20.101 2.9408 13.876 3.725 1.2667 Zinc 163 0.034 9.861 1.374 2.644 1.626 1.1834 Tablas Gold 5 0.030 1.040 0.34067 0.16915 0.41128 1.2073 Silver 5 26.320 305.000 156.24 11,432 106.92 0.6843 Lead 5 0.020 1.590 0.75527 0.5173 0.71923 0.9523 Zinc 5 0.080 5.600 2.8892 6.2439 2.4988 0.8649 San Antonio Gold 68 0.010 3.100 0.34038 0.21564 0.46437 1.3254 Silver 68 0.700 800.000 175.8 26,238 162.26 0.923 Lead 68 0.002 10.000 2.4398 5.4716 2.3392 0.9588 Zinc 66 0.002 26.300 6.6096 35.579 5.9648 0.9024 La Union Gold 26 0.044 19.350 1.7431 14.468 3.8037 2.1821 Silver 26 4.450 908.00 120.77 33,208 182.23 1.5089 Lead 26 0.008 2.620 0.3733 0.4006 0.6329 1.6954 Zinc 26 0.002 7.386 0.4126 2.1185 1.4555 3.5273

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Table 14-6 Capping of Assays by Vein Au Ag Pb Zn Vein ppm ppm % % Barco 1,000 0.4 0.4 Caballo 2.1 Leticia del Bajo Leticia Veta San Antonio 800 10 Tablas II 2.8 7 Union

Figure 14-2 Barco Vein Silver (gpt) Cumulative Frequency Plot

14.9 Variography Variography is the measure of the variability of samples with distance in a particular direction. This is accomplished by comparing the value of one sample with other samples at similar distances in a given direction or envelope. The parameters resulting from this analysis are used to estimate values for each block of the block model. Variography was completed for all of the veins that have sufficient data. All samples for the three Leticia veins were combined within a single model. Similarly, Tablas II and Buena Suerte were combined into one model as they are parallel vein structures. Models were applied to veins with similar geologic and statistical characteristics where sample data was not dense enough for variograms to be calculated with any reliability. Table 14-7 lists the model parameters by vein. Figure 14-3

Global Resource Engineering August 19, 2016 NI 43-101 Technical Report and PEA for Indé Project Page 74 ECI Exploration and Mining Project No.: 13-1068 is an example of a spherical correlogram (a form of variogram that uses covariance) along the major axis of the Barco vein. The correlogram is orientated horizontally along the strike of the vein.

Table 14-7 Variogram Parameters by Vein Model 1 Model 2 Vein Metal Nugget Sill Range (m) Type Sill Range (m) Type El Barco Ag 0.55 0.45 40 spherical Au 0.377 0.473 14 exponential 0.15 35 exponential Zn 0.15 0.6 14 spherical 0.25 55 spherical Pb 0.771 0.229 20 spherical All Leticia Ag 0.7 0.3 31 spherical Au 0.2 0.227 14 exponential 0.573 60 exponential Zn 0.7 0.3 60 spherical Pb 0.7 0.3 41 spherical Caballo Ag 0.571 0.429 100 spherical Au 0.27 0.3 9 spherical 0.43 80 spherical Zn 0.5 0.5 25 spherical Pb 0.475 0.13 25 spherical 0.395 100 spherical San Antonio Ag 0.71 0.29 33 spherical Au 0.59 0.14 17 spherical 0.27 62 spherical Zn 0.4 0.6 70 spherical Pb 0.3 0.7 60 spherical Tablas II Ag 0.6 0.4 24 spherical Au 0.55 0.45 40 spherical Zn 0.7 0.3 15 spherical Pb 0.7 0.3 30 spherical

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Figure 14-3 El Barco Vein Silver Correlogram

The deposit variography has a high nugget, indicating high local variability. The parameters generated from the analysis from the variography of each vein were used as parameters for grade estimation for the kriged model and for search criteria in the inverse distance squared (ID2) block model.

14.10 Estimation Methodology A 2-D gridded model was created for each of the narrow veins and rotated and translated to align with the 3-D solid created in Leapfrog. All blocks for all veins are 10 m horizontally by 10 m vertically, with block thickness being a variable of each block. The wireframe solid true thickness from Leapfrog was assigned to the gridded model. The block model coordinates correspond to the vein model as follows:

· X axis is along the strike of the vein · Y axis is along the true thickness direction of the vein (perpendicular to the plane of the vein) · Z axis is along the dip direction of the vein

Gold, silver, zinc, lead, and copper grades were estimated for each block using a cubic search method. The cubic search volume was used to delineate resource block shapes similar to the anticipated stoping method.

The estimation parameters were:

· Maximum search range was 150 m · The estimate was made in two dimensions, along strike and down dip. Anisotropy search ranges were 150 m along strike, 150 m along dip direction. · The maximum number of composites allowed for a block was 5 · The minimum number of composites needed for a block was 1

The search volumes were defined based on experience with similar resource estimates and the maximum continuity defined by the variogram from the Leticia Vein. Each vein was estimated using ID2, ordinary

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kriging (OK), and nearest neighbor (NN) methods. After validating the models, ID2 was selected for reporting due to a better fit with the composite data throughout each of the models.

14.11 Estimate Validation Validation of each vein model was conducted by analyzing cross-sections and long sections of each vein with assay data overlaid to determine if the block grade was a fair representation of the geologic data from the sample data. Validation also included swath plots for each metal along the horizontal axis as well as the vertical axis (strike and dip) for composite data, ID2, OK and NN; and in the case of thickness, the measured thickness from the wireframe solids extracted from Leapfrog was also examined in the swath plots. Figure 14-4 is an example for the Caballo vein Silver Swath plot along the horizontal axis. Figure 14-5 is an example of a long section with Ag grade for the Caballo vein; Figure 14-6 is an example of a long section with vein thickness for the Caballo vein. A combined cumulative frequency plot with the composite data, ID2, OK, and NN was also created for each metal/thickness and each vein. Channel samples underground are very close together, creating a significant clustering effect in composite statistics. A nearest neighbor estimate is one form of declustering. Silver composite statistics and estimated grade for method are shown for the Caballo vein in Figure 14-7. Each of the grade estimates show a significant reduction in grade from composite data as a result of declustering.

Figure 14-4 Caballo Vein Silver Swath Plot 700 Silver Swath Plot Horizontal Along X Axis 600

Ag Composites Ag Kriged 500 Ag ID2 Ag NN

) 400 m p p ( r e v l i

S 300

200

100

0 5 25 45 65 85 105125145165185205225245265285305325345365385405425445465485 Northing (m)

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Figure 14-5 Caballo Long Section with Silver Grades

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Figure 14-6 Caballo Long Section with Vein Thickness

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Figure 14-7 Caballo Cumulative Frequency Plot of Silver Composite Grade, Kriged Block Grade, Inverse Distance Squared Block Grade, and Nearest Neighbor Block Grade

14.12 Mineral Resource Classification GRE classified the mineral resources into measured, indicated, and inferred based on the number of composites and distance from the closest composite. Measured resources are those blocks with at least three composites within a radius of 50 meters from the block centroid. Indicated resources are those blocks with at least two composites within a radius of 100 meters. Inferred resources are those blocks within a radius of 150 meters. It is important to note that the resource category search radius was spherical, while the grade estimation search was within a cube. Only a small percentage of inferred resources have been included in the mine plan and project economics.

14.13 Mineral Resource Tabulation The updated Indé mineral resource estimate for the narrow veins is summarized in Table 14-8 through Table 14-13. Table 14-14 shows the potential Matracal open pit skarn resource. This updated resource estimation includes all drill data through the last drill campaign in April 2014, and has been independently verified by GRE. A net smelter return (NSR) value was calculated for each block using the current smelter schedules and metal recoveries stated Section 19.0. A base case cutoff of $35/tonne was determined from analyzing 2013 and 2014 published production cost data for various operations in Mexico that are similar in geology, mineralization, orientation, and underground mining method. The resource estimate tables provide the tonnage and grade within each vein system at varying cutoffs both above and below base case. As previously stated, GRE updated the resource for all areas except for the Matracal Skarn. No new data exists for the Matracal Skarn. GRE reviewed the previous estimate completed by Gustavson in 2011

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Table 14-8 Leticia Vein System Mineral Resource Tonne Au Ag Pb Zn (x oz (x lbs (x lbs (x Cutoff 1000) ppm oz ppm 1000) % 1000) % 1000) Leticia Foot Wall Measured Resource 45 9 0.3443 100 101.8 29 0.59 118 2.14 425 35 16 0.3256 167 82.0 42 0.56 199 1.99 703 25 24 0.3046 235 68.2 53 0.51 272 1.82 965 Leticia Foot Wall Indicated Resource 45 43 0.575 795 158.4 219 1.04 985 3.18 3,010 35 43 0.575 795 158.4 219 1.04 985 3.18 3,010 25 43 0.575 795 158.4 219 1.04 985 3.18 3,010 Leticia Foot Wall Inferred Resource 45 317 0.965 9,835 170.2 1,735 1.34 9,330 2.03 14,208 35 353 0.902 10,237 157.1 1,783 1.24 9,611 1.92 14,911 25 353 0.902 10,237 157.1 1,783 1.24 9,611 1.92 14,911 Leticia Hanging Wall Measured Resource 45 52 0.58 965 309.47 517 3.51 4,028 5.98 6,854 35 52 0.58 965 309.47 517 3.51 4,028 5.98 6,854 25 52 0.58 965 309.47 517 3.51 4,028 5.98 6,854 Leticia Hanging Wall Indicated Resource 45 6 0.62 119 256.34 49 2.21 293 3.89 515 35 6 0.62 119 256.34 49 2.21 293 3.89 515 25 6 0.62 119 256.34 49 2.21 293 3.89 515 Leticia Hanging Wall Inferred Resource 45 0 0 - 0 - 0 - 0 - 35 0 0 - 0 - 0 - 0 - 25 0 0 - 0 - 0 - 0 - Leticia del Bajo Measured Resource 45 123 1.25 4,939 203.69 806 1.61 4,358 3.07 8,317 35 123 1.25 4,939 203.69 806 1.61 4,358 3.07 8,317 25 123 1.25 4,939 203.69 806 1.61 4,358 3.07 8,317 Leticia del Bajo Indicated Resource 45 72 1.414 3,273 232.17 537 1.69 2,678 2.97 4,719 35 72 1.414 3,273 232.17 537 1.69 2,678 2.97 4,719 25 72 1.414 3,273 232.17 537 1.69 2,678 2.97 4,719 Leticia del Bajo Inferred Resource 45 24 0.98 757 125.55 97 1.07 568 2.46 1,304 35 24 0.98 757 125.55 97 1.07 568 2.46 1,304 25 24 0.98 757 125.55 97 1.07 568 2.46 1,304

Table 14-9 San Antonio Vein Mineral Resource

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Tonne Au Ag Pb Zn (x oz (x lbs (x lbs (x Cutoff 1000) ppm oz ppm 1000) % 1000) % 1000) San Antonio Measured Resource 45 79 0.23 594 151.47 385 2.50 4,361 5.76 10,030 35 86 0.22 608 142.78 395 2.34 4,437 5.41 10,255 25 98 0.20 633 129.68 409 2.10 4,533 4.86 10,509 San Antonio Indicated Resource 45 125 0.25 1,009 136.77 550 1.99 5,476 5.25 14,462 35 132 0.24 1,023 132.25 561 1.91 5,567 5.09 14,801 25 132 0.24 1,019 131.95 560 1.91 5,555 5.08 14,780 San Antonio Inferred Resource 45 24 0.26 202 97.78 75 1.56 823 5.08 2,688 35 25 0.26 208 97.07 78 1.55 854 5.02 2,767 25 25 0.26 208 97.07 78 1.55 854 5.02 2,767

Table 14-10 Tablas Vein System Mineral Resource Tonne Au Ag Pb Zn (x oz (x lbs (x lbs (x Cutoff 1000) ppm oz ppm 1000) % 1000) % 1000) Tablas Measured Resource 45 236 0.60 4,568 176.08 1,336 0.48 2,492 1.38 7,190 35 250 0.58 4,638 169.34 1,361 0.48 2,640 1.36 7,507 25 257 0.57 4,677 166.22 1,373 0.47 2,663 1.33 7,553 Tablas Indicated Resource 45 121 0.43 1,677 131.38 511 0.63 1,673 2.18 5,807 35 125 0.43 1,712 129.34 520 0.61 1,681 2.11 5,826 25 130 0.42 1,743 126.32 528 0.59 1,691 2.04 5,838 Tablas Inferred Resource 45 5 0.55 89 145.47 23 0.75 82 0.74 81 35 5 0.55 89 145.47 23 0.75 82 0.74 81 25 5 0.55 89 145.47 23 0.75 82 0.74 81 Buena Suerte Measured Resource 45 44 0.34 484 146.61 207 0.85 828 3.37 3,266 35 50 0.33 530 134.83 217 0.77 843 3.05 3,364 25 59 0.32 598 120.54 229 0.66 857 2.68 3,486 Buena Suerte Indicated Resource 45 102 0.42 1,390 143.16 469 0.75 1,693 3.10 6,964 35 106 0.42 1,421 140.17 478 0.73 1,701 3.01 7,025 25 112 0.41 1,469 134.84 486 0.70 1,716 2.89 7,138 Buena Suerte Inferred Resource 45 66 0.42 895 206.42 438 0.61 893 2.79 4,064 35 66 0.42 895 206.42 438 0.61 893 2.79 4,064 25 66 0.42 895 206.42 438 0.61 893 2.79 4,064

Table 14-11 Caballo Vein System Mineral Resource

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Tonne Au Ag Pb Zn (x oz (x lbs (x lbs (x Cutoff 1000) ppm oz ppm 1000) % 1000) % 1000) Caballo Measured Resource 45 178 0.739 4,229 231.0 1,322 1.26 4,929 0.89 3,473 35 185 0.722 4,294 224.6 1,336 1.22 4,980 0.88 3,581 25 186 0.719 4,300 223.1 1,334 1.21 4,970 0.88 3,592 Caballo Indicated Resource 45 460 0.548 8,105 247.1 3,654 0.88 8,904 0.81 8,214 35 478 0.532 8,176 240.5 3,695 0.85 8,978 0.79 8,315 25 497 0.514 8,213 233.4 3,729 0.82 9,029 0.77 8,382 Caballo Inferred Resource 45 389 1.071 13,395 227.0 2,839 1.16 9,965 0.77 6,629 35 464 0.927 13,829 198.7 2,964 1.10 11,283 0.67 6,884 25 553 0.793 14,099 177.0 3,148 0.95 11,545 0.58 7,071

Table 14-12 La Union Vein System Mineral Resource Tonne Au Ag Pb Zn (x oz (x lbs (x lbs (x Cutoff 1000) ppm oz ppm 1000) % 1000) % 1000) La Union Measured Resource 45 128 0.66 2,716 155.05 638 0.45 1,259 2.55 7,207 35 129 0.66 2,737 154.43 640 0.45 1,266 2.55 7,252 25 129 0.66 2,737 154.20 640 0.44 1,263 2.55 7,246 La Union Indicated Resource 45 732 1.72 40,385 134.39 3,163 0.35 5,584 0.84 13,604 35 752 1.68 40,690 132.43 3,202 0.34 5,620 0.82 13,661 25 778 1.64 41,122 129.33 3,235 0.33 5,677 0.80 13,687 La Union Inferred Resource 45 449 2.41 34,819 105.47 1,523 0.22 2,217 0.77 7,573 35 453 2.40 34,881 105.11 1,531 0.22 2,227 0.76 7,580 25 463 2.35 35,041 103.63 1,543 0.22 2,246 0.75 7,635

Table 14-13 El Barco Vein System Mineral Resource Tonne Au Ag Pb Zn (x oz (x lbs (x lbs (x Cutoff 1000) ppm oz ppm 1000) % 1000) % 1000) El Barco Measured Resource 45 359 0.52 5,990 263.51 3,041 0.17 1,345 0.22 1,773 35 377 0.50 6,109 254.40 3,084 0.17 1,371 0.22 1,820 25 381 0.50 6,125 252.39 3,092 0.16 1,378 0.22 1,831 El Barco Indicated Resource 45 1471 0.60 28,282 262.36 12,408 0.20 6,616 0.27 8,821 35 1486 0.59 28,331 260.42 12,442 0.20 6,650 0.27 8,878 25 1491 0.59 28,331 259.77 12,452 0.20 6,640 0.27 8,908 El Barco Inferred Resource 45 1376 0.50 22,164 211.26 9,346 0.18 5,551 0.27 8,221

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Tonne Au Ag Pb Zn (x oz (x lbs (x lbs (x Cutoff 1000) ppm oz ppm 1000) % 1000) % 1000) 35 1376 0.50 22,164 211.26 9,346 0.18 5,551 0.27 8,221 25 1376 0.50 22,164 211.26 9,346 0.18 5,551 0.27 8,221

Table 14-14 Matracal Skarn Inferred Resource (Potential Open Pit) Cutoff Tonnes (x Au Tonnes (x (gpt) 1000) ppm oz Cutoff 1000) Matracal Skarn Inferred Resource† 2.0 1,471 3.211 151,900 1 1,858 1.0 4,316 2.007 278,500 0.5 4,726 0.5 8,619 1.359 376,600 0.4 5,635 0.3 11,803 1.097 416,300 0.3 6,967 0.2 17,073 0.834 457,800 0.2 8,776 0.1 35,693 0.470 539,400 0.1 13,301 †2011 Gustavson Report Resource – included for completeness

Table 14-15 Underground Mineral Resource Summary @ $35/NSR Cutoff Au Ag Pb Zn Tonnes (x oz (x lbs (x lbs (x Vein 1000) ppm oz ppm 1000) % 1000) % 1000) Measured Mineral Resource Leticia FW 16 0.33 167 82.00 42 0.56 199 1.99 703 Leticia HW 52 0.58 965 309.47 517 3.51 4,028 5.98 6,854 Leticia del Bajo 123 1.25 4,939 203.69 806 1.61 4,358 3.07 8,317 San Antonio 86 0.22 608 142.78 395 2.34 4,437 5.41 10,255 Tablas 250 0.58 4,638 169.34 1,361 0.48 2,640 1.36 7,507 Buena Suerte 50 0.33 530 134.83 217 0.77 843 3.05 3,364 Caballo 185 0.72 4,294 224.60 1,336 1.22 4,980 0.88 3,581 La Union 129 0.66 2,737 154.43 640 0.45 1,266 2.55 7,252 El Barco 377 0.50 6,109 254.40 3,084 0.17 1,371 0.22 ,1820 TOTAL 1,268 0.61 24,987 206.00 8,398 0.86 24,122 1.78 49,653 Indicated Mineral Resource Leticia FW 43 0.58 795 158.40 219 1.04 985 3.18 3,010 Leticia HW 6 0.62 119 256.34 49 2.21 293 3.89 515 Leticia del Bajo 72 1.41 3,273 232.17 537 1.69 2,678 2.97 4,719 San Antonio 132 0.24 1,023 132.25 561 1.91 5,567 5.09 14,801 Tablas 125 0.43 1,712 129.34 520 0.61 1,681 2.11 5,826 Buena Suerte 106 0.42 1,421 140.17 478 0.73 1,701 3.01 7,025 Caballo 478 0.53 8,176 240.50 3,695 0.85 8,978 0.79 8,315 La Union 752 1.68 40,690 132.43 3,202 0.34 5,620 0.82 13,661 El Barco 1,486 0.59 28,331 260.42 12,442 0.20 6,650 0.27 8,878 TOTAL 3,200 0.83 85,540 210.95 21,703 0.48 34,153 0.95 66,750 Inferred Mineral Resource Leticia FW 353 0.90 10,237 157.10 1,783 1.24 9,611 1.92 14,911 Leticia HW ------

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Au Ag Pb Zn Tonnes (x oz (x lbs (x lbs (x Vein 1000) ppm oz ppm 1000) % 1000) % 1000) Leticia del Bajo 24 0.98 757 125.55 97 1.07 568 2.46 1,304 San Antonio 25 0.26 208 97.07 78 1.55 854 5.02 2,767 Tablas 5 0.55 89 145.47 23 0.75 82 0.74 81 Buena Suerte 66 0.42 895 206.42 438 0.61 893 2.79 4,064 Caballo 464 0.93 13,829 198.70 2,964 1.10 11,283 0.67 6,884 La Union 453 2.40 34,881 105.11 1,531 0.22 2,227 0.76 7,580 El Barco 1,376 0.50 22,164 211.26 9,346 0.18 5,551 0.27 8,221 TOTAL 2,766 0.93 83,060 182.84 16,260 0.51 31,069 0.75 45,812

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15.0 MINERAL RESERVES Mineral reserves estimates have not been calculated for the Indé Project.

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16.0 MINING METHODS The PEA presented in this report contemplates expanding the existing operation to 1,500 tpd. The following sections detail the mine plan, design, and layout for the expanded operation. Details of the existing operation are contained in Section 18.0.

16.1 Mining Method Selection The overhand cut and fill mining method was selected for the PEA study due to its prominence as a preferred mining method, the ability to provide a high degree of grade control, the lower preproduction development requirements, better ability to mine difficult or broken ground, and the availability to backfill the stopes throughout the mine life with a tailings slurry. Some resource areas have mineralized widths greater than 2-3 m and could employ sublevel open stoping. However, that method was not considered in the PEA for simplicity.

Cut and fill mining offers a high degree of flexibility during the mining process. This method completes a defined cut within the stope and then fills that void before each successive cut. Overhand cut and fill progresses from the bottom of the stope to the top and uses the fill as the working platform for the following cut. Overhand cut and fill requires a lower strength fill relative to underhand cut and fill since the fill acts as the working platform. In contrast, underhand cut and fill requires a higher strength fill but does allow for mining the deposit from the top down, which decreases the required up-front development. The main benefit to cut and fill mining is mining selectivity. Although steady-state operating costs are higher than for shrinkage stoping, broken ore can be quickly delivered to the mill for processing rather than being captive in the stope until the mining in the stope has finished. Cut and fill often requires less preproduction development and is better able to mine difficult or broken ground. Figure 16-1 shows a conceptual overhand cut and fill stope.

Figure 16-1 Overhand Cut and Fill

Source: Hartman, Howard L. SME Mining Engineering Handbook. Aug – 1992. Sacramento, CA. (Hartman, 1992)

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16.1.1 Production Rate and Mine Life The mine production rate and mine life were determined from the new resource estimate stated in Section 14.0. Preliminary mining blocks were created using long sections delimiting the resource above a NSR cutoff of $35/tonne. Each potential mining block was then broken out into the resource categories: measured, indicated, and inferred. An infill drilling and underground channel sampling plan was developed to upgrade the logical portions of the inferred resources within each block to measured and indicated. New mining blocks were then delimited including measured, indicated, and only the inferred resources to be upgraded through the infill drilling and underground channel sampling program. Several mine production rates were evaluated, and 1,500 tpd was selected as the preferred option. A single stope production rate of 150 tpd was estimated from first principles and compares well with past production data. The mine schedule is 350 working days per year. After detailed estimation of the unit operating cost, the stope resource used in the economic model was updated to reflect a higher $38/tonne NSR cutoff, which provides better economics. There is a one-year plant construction period during which development is advanced sufficiently to provide the required number of active stopes for full production. A ramp up period of one year to 1,500 tpd follows the plant construction and initial development. The ramp up period during Year 1 allows for training of the new mine workforce and determination of the logistics for stope production from 10 active stope areas. The resultant mine life is 12.5 years.

16.1.2 Mine Layout and Design The mine layout for the 1,500 tpd production operation was created on longitudinal sections of each vein. The mine was divided into 4 separate areas based on the vein layout:

· Area 1 – Leticia HW, Leticia FW, Leticia del Bajo, Tablas II, San Antonio, Buena Suerte · Area 2 – La Union · Area 3 – Caballo · Area 4 – Barco

The Leticia and Caballo veins have been significantly mined and have existing underground development: Leticia HW down to the 1,770-m elevation and the Caballo vein in the northeast portion (Argentina) to the 1,950-m elevation. The southwest portion of Caballo (Paco) has three access levels established in the hillside at 2,100-m, 1,940-m, and 1,890-m elevations. Two access portals exist for Barco. Various access portals and shafts exist for the Leticia, San Antonio, Buena Suerte, and Tablas II veins. No portals exist for the Union vein; however, open workings are present at surface.

The existing mine infrastructure and underground development will be utilized to the greatest extent possible for the expanded operation. Existing development headings measure 3.5 m X 3.5 m, while the expanded operation calls for 4.0-m X 4.0-m cross-sections. Past mining areas will be completed to a constant level during the ramp up period, with existing equipment using the smaller development headings. This will complete mining to a constant elevation within active areas. Development headings on this level will be expanded to the larger cross-section to permit larger mining equipment to access each vein at depth. New ramps and level will be developed at the larger cross-sections.

The expanded mine plan includes a main portal at each area, with La Union containing two ancillary portals to reduce the required development to the upper levels. Approximately 80% of the resource mined in the

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PEA is contained within the La Union, Caballo, and Barco veins. Caballo, Barco, and the Leticia veins each contain one ventilation raise that will service the underground workings. A central ventilation raise will serve the Tablas II, San Antonio, and La Union veins located at the approximate connection point of the strike lines of the vein systems. Development ramps will be driven at 10% maximum grade to access all areas of the mine. Crosscuts from each main haulage level will provide access to the stopes with a total of two crosscuts per 120-m-long stope. Crosscuts for the Leticia vein system will cross the hanging wall, footwall, and the del bajo mineralized veins. Only one vein is mined in the other mining areas. Due to the narrow mining width of 1.5 m within most stopes, slushers will be utilized within each stope to pull ore to the closest ore chute, where rubber tired load haul dumps (LHDs) and trucks will be used to load and haul ore out of the mine. Backfilling of the stopes with a tailings slurry will be completed on one half of the stope while mining progresses on the other half so that stope production is never delayed by backfilling. A new process plant complex is situated in a relatively flat ridgeline area along the existing access route between the La Union and El Barco veins. A cycloned tailings storage facility is located to the northeast of the plant area below the elevation of the process plant, which will permit gravity tailings disposal to the facility. Existing roads between the resource blocks and the process plant will be improved to allow for surface ore haulage to the plant at 10% maximum road grades.

16.1.3 Design Criteria A detailed set of mine design criteria are shown in Table 16-1 and Table 16-2.

Table 16-1 Mine Method Design Item Criteria Mine Method Mine Method Overhand Cut and Fill Stope cut Type Back Stoping Haulage Type Rubber-tired LHD and Truck Main Mining Equipment Slusher, Jackleg Drill, Stoping Drill Mine Layout Stope Length ~120 m Stope Min./Max./Avg. Height 50 m/115 m/ 80 m Stope cut Height 2.3 m Cribbed ore chutes 3 per 120 m stope Crosscuts 2 per 120 m stope Wood Slides 1 per stope Cribbed Manways 1 per stope Sill Pillar Thickness None, cribbing extended from bottom of cut Definition drilling 2 drilling stations and 4 core holes per stope Crown Pillar Thickness 6 m initial, 3 m final after pillar recovery Minimum Mining Width 1.5 m Ramp Heading Cross Section (width x height) 4.0 m x 4.0 m Crosscut Heading Cross Section (width x height) 3.0 m x 3.0 m Stope Powder Factor 1.48 kilograms per tonne (kg/tonne) Development Powder Factor 2.41-2.61 kg/tonne Ventilation Exhaust raise - Axial Fan, 1 minimum per area Underground Shop/Warehouse/Safety Refuge 4 total: one for each main portal area (Leticia, La Union, Caballo, El Barco)

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Design Item Criteria Operational Recovery and Dilution Extraction Ratio 96%, based on average stope height and remaining pillars Final Recovery of Crown Pillar 50% Fill dilution to backfill 0% - due to cemented fill cap. Recovery loss 5%, due to drilling short to minimize dilution Fill Design Cemented Top Thickness 0.3 m Percent cement for cap 5% cement by weight Uncemented Thickness 2.0 m Production Rate Tonnes per Day Nominal 1,500 tpd; 940 avg. tpd Year 1 during ramp up; 1,500 tpd remaining years Tonnes per Day/Stope 150 tpd/stope Weeks off per Year 2 wks Mine Operating Days per Year 350 days Annual Tonnage 525,000 tonnes Total Tonnes Mined 5,418,000 tonnes Mine life 12.5 years (yrs) Material Properties Ore Density 3.2 tonnes per cubic meter (t/m3) Waste Density 2.7 t/m3 Swell 40% Tailings Dry Density 1.55 t/m3

Table 16-2 Mine Equipment Equipment Quantity Major Surface Mine Equipment 2.3 cubic meter (m3) Wheel Loader - Plant 1 6 m3 Highway Dump Truck 2 3.7 m Grader (Surface) 1 11.4 kiloliter (Kl) Water Truck 1 Major Underground Mine Equipment 4 m3 LHD 3 30 tonne Haul Truck 3 Underground Grader 1 Scissor Lift 2 Development Jackleg Drills 9 Underground Core Drill 2 160 cfm Stoper 14 30 horsepower (HP) Slusher 10

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17.0 RECOVERY METHODS GRE visited the Indé process plant facility during the April 2016 site visit. The facility was in a state of partial disassembly during the site visit. A expansion to flotation circuit to increase capacity was underway, and a new oxide leach plant was partially constructed. Detailed drawings showing the planned configuration were not available. The proposed flow sheet for the new large 1,500 tpd processing facility is based on the current facility and other similar operations.

17.1 Proposed Flow sheet The proposed process flow sheet for the expanded operation considers a sulfide flotation circuit followed by leaching of the sulfide circuit tailings for all sulfide and transitional ore by direct cyanidation. Oxide ore will be sent directly to the leach circuit following comminution. The simplified block diagram below illustrates the conceptual flow sheet.

Figure 17-1 Conceptual Flow Sheet

GRE has described each of the unit operations in the following sections. Those unit operations include; comminution, flotation, leaching, counter-current decantation (CCD), Merrill-Crowe, smelting, and tailings. Merrill-Crowe, smelting, and tailings are included as part of the CCD unit operation.

17.2 Comminution Ore from the underground mine is hauled by truck and dumped on a coarse ore storage stockpile with a reclaim belt feeder. The ore is conveyed to a jaw crusher where it is crushed to minus 6 inches. Crushed ore is stored in a fine ore bin ahead of a semi-autogenous grinding (SAG) mill fitted with a trommel screen. Oversize material is returned to the SAG; undersize material falls into a common sump and is pumped to a cyclone. Underflow from the cyclone is fed to a ball mill, while overflow goes to flotation. Discharge from the ball mill is returned to the SAG mill (common) sump and again pumped to the cyclone. Figure 17-2 shows the proposed comminution circuit.

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Figure 17-2 Comminution Circuit

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17.3 Flotation The cyclone overflow is pumped to a conditioning tank where reagents are added, prior to being pumped to lead rougher flotation. Concentrate from the rougher is reground prior to cleaning, while the lead rougher tail is fed to the lead scavenger. The froth from the final lead cleaner is the saleable lead concentrate product. Tails from the lead scavenger are pumped to the zinc rougher, and the froth from the lead scavenger is returned to primary lead rougher flotation. The zinc flotation circuit is similar to the lead circuit, having a zinc scavenger and a series of zinc cleaners. The froth from the final zinc cleaner is the saleable zinc concentrate. Tailings from the zinc scavenger are pumped to the leach circuit. Figure 17-3 shows the proposed flotation circuit.

17.4 Leaching Feed from the flotation circuit is fed to a pH conditioning tank where lime is added to bring the pH up to approximately 10.5. Overflow from the pH conditioning tank is fed to the first leach tank, where a sodium cyanide (NaCN) solution is added. Four leach tanks are included, with the overflow of the first cascading to the second, and the overflow from the second cascading the third, etc. Four tanks are used to prevent short circuiting. Total leach time is expected to be less than 24 hours. The overflow from the final leach tank is sent to the CCD circuit. Figure 17-4 shows the leach circuit.

17.5 CCD, Merrill-Crowe, Smelting and Tailings The last of the unit operations includes CCD, Merrill-Crowe metal precipitation, smelting, and finally tailings. CCD involves advancing the solids from first tank through the circuit to the end tank and then tails, while the liquid portion is advanced from the end tank progressively forward, to the first tank, where the pregnant solution is collected and sent to the Merrill-Crowe circuit. Merrill-Crowe involves clarifying the solution to remove suspended solids, de-aeration to removed entrained air/oxygen, zinc addition, and then filtering the zinc precipitate from solution using a filter press. The silver- and gold-bearing zinc precipitate is sent to a drying oven and then to smelting. Figure 17-5 shows the CCD, Merrill-Crowe, smelting, and tailings circuit.

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Figure 17-3 Flotation Circuit

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Figure 17-4 Leach Circuit

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Figure 17-5 CCD, Merrill Crowe, Smelting and Tailings Circuit

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18.0 PROJECT INFRASTRUCTURE

18.1 Existing Operation In 2009, ECI entered into an agreement with Minera Scorpio (Scorpio) to receive a 50% interest and operating control of the property by completing an initial payment, fulfilling set exploration expenditures, providing a loan to Scorpio, and proving a geologic resource that could support a 1,000 tpd mining operation for 5 years. ECI completed the requirements of the agreement and attempted to exercise their option to acquire a majority interest in the property in 2011. This was met with opposition from Scorpio, and ECI entered into litigation to force Scorpio to uphold the 2009 agreement. In March 2016, ECI successfully took control of the operation.

Scorpio produced lead and zinc concentrates from Indé ore since 1970, when the existing beneficiation plant was constructed. The plant has been in semi-continuous operation since 1980. During Scorpio’s tenure, veins were mined using cut and fill methods. A 2.5-yard LHD transported ore to the portal. The ore was loaded into 15-ton trucks by a front end loader and then hauled to the plant for processing. Historically, the operation was mined in stull stopes, and several of these stand open and are stable. Oxide ore was shipped to a plant in de Parral, Chihuahua. Sulfide ore was processed into concentrates onsite. The plant consisted of a jaw crusher, two ball mills, and two flotation circuits: one circuit for lead and one for zinc. The plant operated three 8-hour shifts/day except for a monthly shut down of two days for preventative maintenance. Concentrates were shipped to the Peñoles concentrator in Torreón, Coahuila, in 20- and 35-ton trucks. Historic production was around 100 tpd milled.

The current Indé mine is comprised of three active mining areas, Paco, Argentina, and Leticia, which includes the Leticia HW, Leticia FW, Leticia del Bajo, Caballo, and Tablas II veins. Old mining works are contained within the San Antonio, Buena Suerte, and La Union veins. The mined out areas of the veins are not included in the resource estimate or future mine plan. Surface access roads and powerlines exist to all areas.

The sulfide process plant (Union) was in operation when ECI took over the mine in March 2016. Since the takeover, the process plant has been shut down, and mining activities have been suspended due to ECI’s lack of a blasting permit. ECI has obtained a provisional one-year blasting permit and is currently in the process of applying for the definitive permit. In the interim, ECI is performing housekeeping of all mining areas, updating the mine surveys, and completing an updated sampling program.

Major components of the Union plant have been disassembled for repair and maintenance. A new hopper and expansion of the floatation circuit is in progress to double the flotation capacity. Tonnes milled from 2013 to 2016 varied between 100 to 130 tpd. A new 55-tpd oxide circuit to process dry tailings has been added to the plant but has yet to be commissioned. An upstream raise cycloned tailings storage facility is located in the valley upstream of the Union processing plant.

A second tailings storage facility was under construction at the time of the takeover. The starter embankment and decant structure for the new facility are complete. The water recovery system is lacking the main return pump, booster pump, and equipment controls. A powerline to the water return tank is already in place. Work is now underway to finish the tailings storage facility. Global Resource Engineering August 19, 2016 NI 43-101 Technical Report and PEA for Indé Project Page 97 ECI Exploration and Mining Project No.: 13-1068

18.2 Additional Infrastructure The existing infrastructure will be used to the greatest possible extent to support increasing the operation from its current 100 tpd capacity to 1,500 tpd. The main access route will remain by paved highway either from Parral, Chihuahua (175 km) to the northwest or from Torreón (235 km) to the east with access to the site via high quality gravel roads leading south from of the town of Indé. Interior access roads to the project areas will remain mostly unchanged. Some site roads will need to be improved to provide dependable access to the project site facilities as well as ore haulage from the portals to the plant site complex. This may include widening, reducing the maximum grade, placement of a graded road base surface, and constructing surface water control structures such as diversion ditches, culverts, and low water crossings.

A new tailings storage facility (TSF) and plant site complex are envisioned for the project. These facilities will be more centrally located between the La Union and El Barco resource areas along the existing access road. The existing power lines run directly adjacent to the new plant site complex location. The plant site complex will be constructed close to and upstream of the TSF to permit gravity disposal of tailings via a dedicated pipeline route. The plant complex will include a new process plant, assay lab, change room, maintenance shop, warehouse, management offices, backfill plant, and fuel depot. The TSF will consist of an engineered starter embankment with cyclone tailings raises, storage impoundment for the process plant tailings, and disposal pipeline that will run along the embankment crest for cyclone tailings raises with discharge lines into the impoundment for disposal of the fine tailings slurry. Waste rock created during development will be used in the starter embankment construction or disposed of in the impoundment as needed. The high explosives magazine and ammonium nitrate/fuel oil (ANFO) storage bin will be located at a safe distance from the TSF and plant site complex.

The capacity of the existing well is unknown. ECI will need to conduct testing to determine if it has sufficient capacity to support the expanded operations. If required, a raw water pond will be constructed near the plant site complex to provide surge capacity for the plant while maintaining a constant well pumping rate. A new pipeline will be constructed from the existing well to the raw water pond/plant site complex.

Mine portal areas will be expanded and improved as necessary to accommodate the increase in production. The improved portal areas will include a graded area of sufficient dimensions to accommodate both ore and waste stockpiles, laydown yard, ore storage bin, tool storage and supply container, mobile office trailer, power center, and compressor station.

Figure 18-1 shows the general layout of the resource areas, plant site complex, and tailings storage facility. Existing facilities are also shown on the drawing.

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Figure 18-1 General Facilities Layout

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19.0 MARKET STUDIES AND CONTRACTS The existing operation has produced lead and zinc concentrates from Indé ore. The concentrates are shipped to the Peñoles smelter in Torreón, Coahuila in 20 and 35 ton trucks. GRE reviewed available smelter terms and payments from the Peñoles smelter from 2012 and found them to be in line with current payment schedules for lead and zinc concentrates. Table 19-1 and Table 19-2 summarize the payments terms for each concentrate type.

Table 19-1 Lead Concentrate Smelter Terms Pay percentage of Pb, Ag, Au % 95% Pb deduction units 3 Treatment charge $/tonne dry concentrate $230 Impurity charge $/tonne dry concentrate $12 Transportation charge $/tonne wet concentrate $17.36 Au deduction g/tonne dry concentrate 1.5 Ag deduction g/tonne dry concentrate 50.0 Ag Refining charge $/troy ounce payable $2.50 Au Refining charge $/troy ounce payable $8.00

Table 19-2 Zinc Concentrate Smelter Terms Pay percentage of Zn % 85% Pay percentage of Ag % 70% Zn deduction units 8 Treatment charge $/tonne dry concentrate $240 Impurity charge $/tonne dry concentrate $12 Transportation charge $/tonne wet concentrate $17.36 troy oz./tonne dry Ag deduction concentrate 3.0 Ag Refining charge $/troy ounce payable $0.00

Metal prices paid on the documents provided reflect the then-current spot prices for gold, silver, lead, and zinc. Figure 19-1 through Figure 19-4 present the average monthly metal prices through April 2016, along with trailing averages for 12, 24, 36, 48, and 60 months. The metal prices used in the PEA are approximately the 3-year trailing average, which compares well with the prices used by other Mexican silver producers for their resource estimates. The prices are noted as “Selected Price” on Figure 19-1 through Figure 19-4.

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Figure 19-1 Silver Price

LME Silver Cash Price

$45

PM Fix $40 12-mo Avg. 24-mo Avg. 36-mo Avg $35 48-mo Avg 60-mo Avg $30 Selected Silver Price

$25 z o - g A / $20 $ S U

$15

$10

$5

$0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Month Figure 19-2 Gold Price

LME Gold Cash Price

$2,000

$1,800

$1,600

$1,400

$1,200 z

o $1,000 - u A / $ S $800 U

PM Fix $600 12-mo Avg. 24-mo Avg. $400 36-mo Avg 48-mo Avg $200 60-mo Avg Selected Gold Price $0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Month

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Figure 19-3 Lead Price

LME Lead Spot Price

210 200 190 180 PM Fix 12-mo Avg. 170 24-mo Avg. 160 36-mo Avg 150 48-mo Avg 140 60-mo Avg 130 Selected Price 120 b P -

b 110 l / s t 100 n e

C 90 80 70 60 50 40 30 20 10 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Month Figure 19-4 Zinc Price

LME Zinc Cash Price

210 200 190 PM Fix 180 12-mo Avg. 170 24-mo Avg. 160 36-mo Avg 150 48-mo Avg 140 60-mo Avg Selected Price 130 120 n Z -

b 110 l / s t 100 n e

C 90 80 70 60 50 40 30 20 10 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Month

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Table 19-3 Selected Metal Prices Metal Unit Price Gold Price $/troy oz $1,250 Silver Price $/troy oz $18.50 Lead Price $/lb $0.90 Zinc Price $/lb $0.90

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20.0 ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY IMPACT

20.1 General Indé is an active mining operation with a production rate of 100-130 tpd. The existing plant produces separate lead and zinc concentrates that are shipped to the Peñoles Smelter in Torreón, Coahuila. Tailings from the plant are disposed of in a valley fill tailings impoundment with the embankment constructed from cyclone tailings. Waste rock from the underground mines are dumped on the surface at the portal areas. Indé is located within the Zona Seca (dry zone) according to the hydrologic map published by SEMERNAT. The dry climate reduces the tendency of waste rock to produce acid rock drainage. During the site visit, GRE observed historic dumps from the 1970s that still contain visible pyrite, indicating a slow oxidation process due to the lack of water.

20.2 Environmental Liabilities Prior to beginning work at Indé, ECI voluntarily contacted the Mexican Environmental authorities regarding the requirements of and responsibilities for both historic and new disturbances in the Indé District. As a result of these consultations, Indé operates under the guidance of and in conjunction with SEMERNAT and PROFEPA (the environmental regulatory and compliance arms of the Mexican government). As part of this process, ECI and the federal authorities have selected Vidambiente as independent auditors to validate the completion of the program. PROFEPA has approved Vidambiente (accreditation no. UV PROFEPA 062) in document PFPA/16.4/1S.3/084’10 dated March 2, 2010, and has assigned project number 8473 to the Indé program.

Mining activity has occurred in the Indé District for more than 400 years. As in many historic mining districts, there are numerous old workings, tailings dams, mine dumps, and other evidence of former mining activities on the property. Prior to beginning work on the property, ECI, in conjunction with its Mexican partner Minera Scorpio, formally petitioned and was accepted into the National Program of Voluntary Environmental Audit and Remediation with PROFEPA and SEMARNAT. Under this program, ECI and the Mexican government agreed to abide by a third party professional audit of existing conditions and an ongoing program of remediation activities. A regular review process is carried out by PROFEPA and SEMARNAT. During ECI’s tenure, all agreed upon tasks and schedules were met or exceeded. While ECI completed the environmental remediation requirements, normal exploration and mining activities were allowed to proceed. Acceptance into the voluntary audit program effectively made the Government a partner with the Company in the responsible stewardship of the environment. The audit program benefited ECI as it facilitated permitting dialogue with the governmental agencies.

20.3 Water, Availability & Mine Water An assessment of future water availability was performed by Ing. Jaime A García Gómez. Indé is located above the 1009 Matalotes-El Oro aquifer, which is considered a zone of free supply with no restrictions on the extraction or use of ground water. In this area, water can be freely extracted and utilized, although the CNA will register the volumes used for statistical purposes. ECI will be required to subscribe to the

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Public Registry of Water Rights. Water for the existing operation is currently sourced from a well located southwest of the process plant. The current mining operations encounter small sources of water during operations. This water is pumped to a main sump area and finally to the surface where it is stored in a surface tank for use in beneficiation process. Overflow water from the surface tank is discharged to a small dam.

20.4 Tailings Disposal A new tailings storage facility is envisioned for the expanded operation. This facility will be located next to the new plant site complex, centrally located between the La Union and El Barco mining areas. The TSF will consist of an engineered starter embankment with cyclone tailings raises, storage impoundment for the process plant tailings, and disposal pipeline that will run along the embankment crest for cyclone tailings raises with discharge lines into the impoundment for disposal of the fine tailings slurry. Waste rock created during development will be used in the embankment construction or disposed of in the impoundment as needed. A preliminary layout of the facility was completed for the PEA. This included calculating the storage requirement for the planned mined resources and layout of the footprint for the engineered embankment. The base engineering design criteria for the TSF are listed in Table 20-1.

Table 20-1 Base Engineering TSF Design Criteria Design Item Criteria or Approach Total Tailings Production 5,400,000 tonnes Specific Gravity 3.3 t/m3 Tailings Settled Dry Density 1.55 t/m3 Total Storage Capacity, 3,200,000 t (2,090,000 m3) ~60% of total production. Dam Construction Type Upstream raise cyclone tailings Diversion Uphill perimeter diversion to divert rainwater from collecting in impoundment. Operational Discharge Operational discharge by floating barge pump Dam Slopes 2H:1V upstream and downstream slopes Dam Crest Width 10 m Impoundment Type lined Tailings Disposal Line Perimeter and embankment disposal to control location of water pool, away from dam at all times Water Return Barge pump with flexible connection pipe for free movement within the water pool area Impoundment Closure Tailings surface graded to drain toward spillway and capped with 1 m inert waste rock and topsoil for revegetation.

20.5 Other Permits Durango is a mining state, and the procedures for permitting and operation are well established. Prior to constructing new facilities and upgrading to a larger operation, ECI will be required to acquire the permits listed in Table 20-2. Conditions encountered during investigations associated with these permits may indicate the need for additional permits.

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Table 20-2 Typical Permits for Construction and Operation Permit Agency When Required Environmental Impact Secretary of Environment and natural Prior to construction Statement (MIA) Resources (SEMARNAT) Risk Analysis (Mining) SEMARNAT Prior to construction Land Use Change SEMARNAT and Municipality of Indé Prior to construction Nation Institute of Archaeology and History Archaeological Release Prior to construction (INAH) Prior to utilization of Water Use Registry National Commission of Water (CNA) water Construction Permit Municipality of Indé Prior to construction Explosives Purchase and Prior to Increased National Defense Secretary (SEDENA) Use Permit (expansion) production

20.6 Expected Community Impact for Expansion Expanding the current operation to 1,500 tpd will require construction of new facilities and upgrading the infrastructure within the project property limits. Construction of the new facilities is estimated at 1 year and will result in increased truck traffic within the project vicinity. Once operational, the increased production rate will require a larger workforce. The temporary increase due to construction and the increased labor need are not anticipated to negatively affect the surrounding community as they are accustomed to the existing mining operation.

20.7 Mine Closure Mine closure will be completed during the year following the end of mine operations. This will consist of reclaiming the tailings storage facility, removing all surface facilities and equipment, closing and sealing all underground mine workings, and regrading and revegetating any areas disturbed during the mine life.

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21.0 CAPITAL AND OPERATING COSTS

21.1 Capital Costs Capital costs for the process plant and new surface facilities were completed using estimates from Mine and Mill Equipment Cost Guide 2015 published by InfoMine (InfoMine, 2015) and past professional experience for similar operations. The existing operation has several facilities that will be utilized for the expanded operation including office buildings, guardhouse, explosive magazines, maintenance shop, warehouse, assay lab, and water supply well. Capital costs for mining equipment were sourced from local vendor quotes. The expanded operation calls for larger mining equipment and therefore only a small portion of the existing equipment will be utilized. The tailings storage facility was estimated using the unit cost for the partially constructed facility onsite. Where appropriate, adjustments have been made to InfoMine estimates to account for Mexican labor and construction costs. Table 21-1 provides a summary of the initial capital costs for the project. A 25% contingency was added to all capital costs. Initial capital totals for the plant site complex reflect 75% of the total cost and are incurred in Year -1. The remaining 25% of the cost is incurred in Year 1. Initial capital for mine equipment reflects the equipment required to support initial development activities in Year -1 and the production ramp period during Year 1. This total equates to about 60% of the overall fleet cost required for full production. Total project capital costs are presented in Table 21-2.

Table 21-1 Initial Capital Summary Capital Category Total Capital Cost ($US) Plant Site Complex $41,000,000 Surface Facilities $2,000,000 Mine Equipment $3,100,000 Additional Engineering Studies & Site Investigations $1,800,000 Development $1,200,000 Permitting $1,000,000 First Fills $2,800,000 Tailings Storage Facility $300,000 Working Capital $200,000 Contingency $13,300,000 Total $66,700,000

Table 21-2 Total Project Capital Summary Capital Category Total Capital Cost ($US) Plant Site Complex $54,700,000 Surface Facilities $2,100,000 Mine Equipment $6,800,000 Additional Engineering Studies & Site Investigations $1,800,000 Closure $5,000,000 Development $35,700,000 Permitting $1,000,000 First Fills $2,800,000 Tailings Storage Facility $2,900,000 Equipment Rebuild and Replacement $7,300,000

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Capital Category Total Capital Cost ($US) Working Capital $7,200,000 Contingency $31,800,000 Total $159,100,000

21.1.1 Process Site Complex A new process plant is required for the increased production rate. The capital cost estimate for the process plant was sourced from Infomine (InfoMine, 2015) for a two concentrate Flotation Mill with an added circuit for Agitated Cyanide Leach. Metallurgical testing has indicated that oxide, sulfide, and transitional ore types exist within the deposit. Discrete oxide ore is processed only by the leach circuit of the plant. To maximize the recovery of precious metals, all sulfide and transitional ore is first run through the sulfide float circuit with the flotation tailings being additionally processed in the cyanide leach circuit. The capital cost estimate includes the purchase and installation of all equipment required for the plant unit operations. All wiring, piping, foundations, on-site utilities, mill buildings, offices, labs, tailings disposal, and coarse ore storage are included. The unit operations covered in this capital cost estimate are as follows:

Common Comminution Circuit · Crushing · Grinding Sulfide Circuit · Flotation · Thickening · Concentrate Filtering · Concentrate Drying Oxide and Sulfide Tailings Circuit

· Agitation Leaching · Countercurrent decantation · Pregnant solution holding · Pressure clarification · De-aeration · Merrill-Crowe zinc precipitation · Precious metal (zinc precipitate) pressure filtration · Carbon column scavenger recovery from bleed streams and tailing return water · Acid pre-treatment of precipitates · Bullion refining and casting · Tailings disposal Plant construction costs were adjusted to reflect Mexican labor rates. The total estimate for the plant complex is $US 54.7 million. Seventy-five percent of this cost ($US 41.0 million) is expected to be incurred in Year -1 with the remaining twenty-five percent ($US 13.7 million) in Year 1.

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21.1.2 Surface Facilities The existing operation has several facilities that will be utilized for the expanded operation, including office buildings, guardhouse, explosive magazines, maintenance shop, warehouse, assay lab, and water supply well. Therefore, only the additional facilities required for the expanded operation are included in the cost estimate. Costs for new portals are contained in the development costs, which are detailed in Section 21.1.6. Costs for surface facilities were sourced from Infomine (InfoMine, 2015) and professional experience. A listing the individual facilities and their estimated costs are shown in Table 21-3.

Table 21-3 Surface Facilities Unit Capital Cost Total Capital Cost Surface Facility Quantity ($US) ($US) Emergency Vehicle/Supplies 1 $100,000 $100,000 Change Room 1 $182,400 $182,400 Backfill Plant 1 $1,500,000 $1,500,000 Fuel Depot 1 $366,375 $366,375 Rounded Total $2,150,000

21.1.3 Initial Mine Equipment Capital costs for mining equipment were sourced from local vendor quotes. The expanded operation calls for larger mining equipment and, therefore, only a small portion of the existing equipment will be utilized. Required equipment for the surface, underground, and process plant operations were determined by estimating the productivity, calculating the operational hours required for equipment type, and dividing by the total available operating hours per piece of equipment. This calculation included an allowance for 85% equipment availability and 75% efficiency since the mine trucks and LHDs will move between different stopes during operations, which requires unproductive tramming time. The requirement for small equipment was based on the number of active concurrent resource blocks and stopes during the mine life. The initial mine equipment capital breakout is shown in Table 21-4. Additional mine equipment is required to achieve steady state production of 1,500 tpd. The total required mining fleet at full production is shown in Table 21-5.

Table 21-4 Initial Mine Equipment Capital Approximate Unit Capital Cost Total Capital Cost Equipment Quantity* ($US) ($US) 4 m3 LHD 1 $611,490 $707,876 30 tonne haul truck 1 $715,943 $828,794 Scissor lift 2 $135,000 $236,250 Underground grader 1 $115,411 $100,985 14 m3 Surface dump truck 2 $71,270 $106,905 5000 gallon Surface water truck 1 $85,490 $64,118 Surface grader 1 $132,750 $99,563 Plant loader 0 $70,000 $26,250 Underground Core Rig 1 $87,000 $43,500 Auxillary Vent Fan - 20,000 cfm 5 $4,500 $22,500 20 HP Submersible Pump 5 $16,848 $84,240

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Approximate Unit Capital Cost Total Capital Cost Equipment Quantity* ($US) ($US) 150 HP Submersible Pump 2 $99,601 $199,202 4x4 Pickup Truck 1 $20,000 $16,684 4x4 SUV 1 $42,038 $48,664 Mechanics Truck 1 $145,000 $111,904 Lube Truck 1 $145,000 $111,904 160 cfm Stoper 4 $4,757 $21,213 Slushers 5 $42,084 $210,420 ANFO Air Loader 6 $936 $5,418 Rounded Total $3,000,000 *Approximate quantity based on capital cost incurred in Year 1 Table 21-5 Full Production Mine Equipment Fleet Capital Unit Capital Cost Total Capital Cost Equipment Quantity ($US) ($US) 4 m3 LHD 3 $611,490 $1,834,470 30 tonne haul truck 3 $715,943 $2,147,829 Development Jacklegs 9 $6,280 $56,520 Scissor lift 2 $135,000 $270,000 Underground grader 1 $115,411 $115,411 14 m3 Surface dump truck 2 $71,270 $142,540 5000 gallon Surface water truck 1 $85,490 $85,490 Surface grader 1 $132,750 $132,750 Plant loader 1 $70,000 $70,000 Underground Core Rig 2 $87,000 $174,000 Auxillary Vent Fan - 20,000 cfm 10 $4,500 $45,000 20 HP Submersible Pump 10 $16,848 $168,480 150 HP Submersible Pump 4 $99,601 $398,404 4x4 Pickup Truck 4 $20,000 $80,000 4x4 SUV 3 $42,038 $126,114 Mechanics Truck 2 $145,000 $290,000 Lube Truck 2 $145,000 $290,000 160 cfm Stoper 14 $4,757 $66,598 Slushers 10 $42,084 $420,840 ANFO Air Loader 15 $936 $14,040 Rounded Total $6,900,000

21.1.4 Additional Engineering Studies An allowance has been made to account for additional engineering studies to advance the project to a level sufficient for construction. This includes $US 300,000 for metallurgical studies to further define the metal recoveries and plant design parameters and $US 1.5 million for additional drilling and a project feasibility study, totaling $US 1.8 million.

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21.1.5 Closure Closure costs for the project consist of reclaiming the tailings storage facility, removing all surface facilities, closing access to all underground workings, and revegetation of any disturbed lands. Reclaiming the tailings storage facility will include capping the entire surface with an engineered cover, revegetation, grading the area to drain out a permanent spillway, and constructing riprap channels along the regraded surface to prevent erosion. An allowance of $US 5.0 million was included to account for anticipated closure costs.

21.1.6 Development Costs for mine development were estimated by the actual meters of development scheduled for each year multiplied by the calculated unit development cost for each activity. Underground mine development consists of six main development activities:

1. Ramp (4-m x 4-m nominal cross-section) 2. Level (4-m x 4-m nominal cross-section) 3. Crosscut with Utilities (3-m x 3-m nominal cross-section) 4. Crosscut without Utilities (3-m x 3-m nominal cross-section) 5. Ventilation/Ore Raise (1.8-m diameter) 6. Ventilation Shaft Raisebore (1.8-m diameter)

The unit cost for each development activity was determined by estimating productivity, equipment hours, and the materials required for one blasting round of each operation and then dividing by the meters of advance. Labor was not included in these unit costs (or other unit operating costs) but was estimated for the project by labor category. Ramps include fixed utilities (power, air, water, backfill pipe, and ventilation tubing) for their entire length. Ramps only include the replacement cost of utilities which will be moved to subsequent levels upon completion of mining. Two types of crosscuts were estimated, one with and one without utilities. Utilities are only required in one crosscut per stope. Ventilation shafts were broken up into two categories: ventilation/ore raises that are internal to each stope and ventilation raisebore shafts, which connect mining levels and ultimately extend to the surface. The cost for steel-covered ladders and landing platforms is included in the ventilation shafts, which will be used as a secondary escapeways. Table 21-6 lists the development unit costs used to estimate the mine development capital. A more detailed discussion of each development unit operation is included in section 21.2.2.

Table 21-6 Unit Development Costs Development Type $US/m Ramp $459 Level $386 Crosscut with Utilities $168 Crosscut without Utilities $165 Ventilation/Ore Raise $1,100 Ventilation Shaft $1,230

Underground facilities included in the development costs are an underground shop, refuge, and warehouse, in addition to the main and ancillary portals. Development costs also include upgrading the

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project access roads to permit efficient truck transportation of ore to the process plant, overhead power lines as required to new project areas, and an underground coring operation to delineate each mining stope in detail.

21.1.7 Permitting ECI will be required to obtain the permits listed in Section 20.5. A lump sum allowance of $US 1.0 million is included to account for Permitting.

21.1.8 First Fills An allowance for the first fills of consumables for the process plant, mine mobile equipment, explosives, tools, and miscellaneous parts was estimated on a line item basis and reduced by 50% to account for existing inventory. The breakout and total for first fills is shown in Table 21-7.

Table 21-7 First Fills Unit Capital Cost Total Capital Cost Item Quantity ($US) ($US) Lime (lbs) 100000 $0.10 $6,352 Diesel (gallons) 40000 $3.81 $125,662 Gasoline (gallons) 4000 $3.24 $10,681 Crusher liners allowance $100,000 $100,000 SAG mill liners allowance $200,000 $200,000 Parts for Mobile Equipment allowance $1,000,000 $1,000,000 Ball mill liners allowance $200,000 $200,000 Collector (A-238) allowance $100,000 $100,000 Collector (Xanthate) (tons) 50 $1,550 $77,500 Frother allowance $100,000 $100,000 Fuel oil (gallons) 4000 $3.81 $12,566 Sodium hydrosulfide allowance $100,000 $100,000 Flocculant allowance $100,000 $100,000 Anti-scalent allowance $100,000 $100,000 ANFO (lbs) 1000000 $0.30 $412,886 Caps (tons) 1000 $3.00 $1,950 Boosters (tons) 1000 $4.58 $2,900 Tires allowance $1,000,000 $1,000,000 Warehouse Tools/Parts $2,000,000 $2,000,000 Rounded Total $5,600,000 Reduced by 50% $2,800,000

21.1.9 Tailings Storage Facility The TSF estimate was completed using the unit cost estimate for the partially constructed facility onsite and the total tonnes of required storage. Phased construction of the TSF occurs every two years throughout the mine life beginning in Year -1. The cost for each phase is roughly $US 550,000 with a total cost of $US 2.9 million.

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21.1.10 Equipment Rebuild and Replacement A major equipment replacement schedule was calculated using the hours required for each piece of equipment and the equipment life. The weighted average replacement schedule for all equipment was then determined using the replacement schedule for each piece of equipment and the number machines required. Equipment rebuilds are included in the unit operating costs. Replacement for ancillary equipment such as pickup trucks and pumps was calculated using a 5-year replacement schedule. Table 21-8 summarizes the annual replacement allowance by equipment type.

Table 21-8 Sustaining Capital Annual Replacement Allowance Equipment Type (% of Capital Cost) Major 8% Ancillary 20%

21.1.11 Working Capital Three months of operating costs were added for working capital, providing a 3-month cash buffer to account for the time period between accounts payable and accounts receivable. This amount increases to a total $US 7.1 million once steady state production is realized in Year 3 of the project. Working capital is recaptured at the end of the project life.

21.2 Controllable Operating Costs Controllable costs were estimated for each unit operation, excluding labor. Labor costs for mine operations, mine maintenance, mill operations, and salary labor were estimated separately. Hourly labor rates and annual salaries were obtained from the 2013 Mexican Mine Salaries, Wages and Benefits Survey Results from Infomine and then further adjusted based on known labor costs for similar operations in 2015. An exchange rate of 16.74 Mexican Pesos to 1 US dollar (USD) was used to convert labour costs to USD. This exchange rate is the 1-year trailing average through April 2016. Local costs for diesel and electricity were used in all estimates. A 25% contingency was added to all operating costs in the economic model.

21.2.1 Hourly and Salary Labor A total workforce of 234 hourly employees and 25 salary employees is estimated for the mine and mill operations during steady state operations (Table 21-9). The number of hourly and salary employees was determined from the number of people for each shift operation and the shift rotation schedule. The mine operates two 12-hour shifts per day, while the mill operates three 8-hour shifts per day. Hours worked over 8 hours per day is considered overtime. Therefore, the mine carries a 33% overtime rate while the mill has a 0% rate. Overtime hours are paid at double the normal wage rate. A burden rate of 30% was added to both salary and hourly labour costs. General and administrative personnel were included in the mine support employees and the salary workforce to account for G&A costs for the project.

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Table 21-9 Total Steady State Employees Employee Type Number Mine Salary 8 Plant Salary 17 Total Salary 25 Mine Hourly Operations 160 Mine Hourly Maintenance 27 Plant Hourly Operations & Maintenance 47 Total Hourly 234

21.2.1.1 Mine Hourly Production & Support The mine will be operated 350 days per year with two 12-hour shifts per day for total of 8,400 operating hours. Each crew will work a 14-on 7-off schedule, completing 16.7 rotations per operating year. Taking the rotations per operating year, working days per rotation, and 12-hour shifts results in 2,800 working hours per year per crew. Therefore, a total of three crews will be required to provide full 24-hour coverage of the operations. Each mining crew will support the active unit operations during the shift. Table 21-10 and Table 21-11 detail the employees required per active unit operation at full production.

Table 21-10 Mine Operations Employees by Crew Number of Active Employees per Total Employees Unit Operation Operations Active Area Required Stope Production 10 3 30 Stope Backfill 5 2 10 Underground Haulage 2 1 2 Surface Haulage 2 1 2 Total 44

Table 21-11 Mine Support Employees by Crew Number of Active Employees per Total Employees Type Operations Active Area Required Safety 1 1 1 Security 1 4 4 Warehouse 1 1 1 Accounting 1 4 4 Total 10

Wage rates were estimated by employee job position. Table 21-12 lists the hourly labor rates used in the economic model.

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Table 21-12 Mine Hourly Wage Rates by Employee Hourly Rate Employee Type ($US/hr) Operations Crew Driller $4.20 Mucker $4.20 Helper $2.90 Fill Crew Timberman $5.00 Fill Operator $3.50 Underground Haulage Crew Truck Driver $3.80 Surface Haulage Crew Truck Driver $3.80 Support Safety $2.60 Security $2.60 Warehouseman $3.10 Accountant $4.65

21.2.1.2 Mine Hourly Maintenance The mine maintenance crew is estimated to contain a total of nine employees: three laborers, three mechanics, and three electricians. This provides three separate maintenance crews to cover the active operations during each shift. Given that three crews are required to provide 24-hour coverage, the entire maintenance workforce is 27 employees. Table 21-13 illustrates the maintenance crew and hourly rate by position.

Table 21-13 Mine Maintenance Employees by Crew Hourly Wage Mine Maintenance Workforce ($US/hr) Per Crew Laborer $2.90 3 Mechanic $4.10 3 Electrician $4.10 3 Total 9

21.2.1.3 Mill Hourly Operations & Maintenance The mill will be operated 365 days per year with three 8-hour shifts per day. Crushing operations will operate on a 5-day per week schedule and two 8-hour shifts per day. The mill workforce was taken from the 2-product flotation mill cost model published in Infomine (InfoMine, 2015). Four crews are required for 24-hour operation of the mill. Table 21-14 shows the mill crew and hourly rate by position.

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Table 21-14 Mill Workforce Hourly Wage Mill Operations and Maintenance Workforce ($US/hr) Per Crew Control Room Operator $2.80 1 Crusher Operator $2.50 1 Grinding Operator $2.50 1 Flotation Operator $2.50 1 Filter Operator $2.50 1 Dryer Operator $2.50 1 Assayers $2.50 1 Samplers $2.50 1 Laborers $2.10 2 Mechanics $2.90 2 Electricians $2.90 1 Total 13

21.2.1.4 Project Salary Staff The salary workforce is estimated to be comprised of 25 individuals. Table 21-15 presents the salary workforce and their annual salary.

Table 21-15 Salary Workforce Salary Workforce Annual Wage $US Number General Manager $150,000 1 Controller $49,300 1 Environmental/Health & Safety Manager $32,200 1 Mine Superintendent $42,000 1 Mine Foreman $34,300 4 Mine Engineer $40,000 1 Mine Geologist $38,000 1 Surveyor $18,000 1 Plant Superintendent $52,000 1 Maintenance Foreman $26,000 1 Plant Foreman $24,500 4 Metallurgist $23,000 1 Process Technician $16,000 2 Instrument Technician $19,500 2 Process Foreman $18,500 3 Total 25

21.2.2 Unit Operations Unit operating costs were determined by estimating the productivity, equipment hours, and required material to complete one work cycle. The total cost to a complete a work cycle was divided by the number of tonnes produced, meters of advance, or totaled per day. Table 21-16 summarizes the unit costs for

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each operation. The unit costs reflect line power supply at $US 0.0789/kwh and diesel cost of $US 0.83/liter. Hourly and salary labor required for operations was estimated separately.

Table 21-16 Unit Operating Costs Unit Operation $US/tonne $US/m $US/day Stope Production $2.80 Ramp Development $459 Level Development $386 Crosscut with Utilities Development $168 Crosscut without Utilities Development $165 Ventilation Shaft Development $1,230 Ventilation Raise Development $1,100 Ore Chute $1.86 Slash Raise $3.13 Stope Backfilling $1.81 Surface Ore Haul $0.86 Support Equipment $3,154 Plant Processing (Sulfide Flotation and Tailings Leach) $22.05 Plant Processing (Oxide Leach) $16.05

Stope production unit costs considered one production round measuring 1.5-m-wide by 30-m-long with a 2.3-m-thick cut. The production block is drilled with pneumatic stopper drills, blasted, and then mucked to the ore pass by a 0.25 m3 slusher. Once the ore has been mucked to the ore pass, LHDs remuck the ore, hauling it out the crosscut, and load it into a low profile haulage truck for transport out of the mine. The loaded ore trucks dump the broken ore into a storage bin of a batch loadout system located at each portal. As the stope is mined, a cribbed ore raise is constructed near one end of the stope, with angle iron covering the upper edges of each timber to protect the cribbing as ore falls down the chute.

Ramp and level development considered a production heading 4.0-m-wide by 4.0-m-high with a 2.1-m round length. The heading is drilled with jacklegs, blasted, and mucked with an LHD to a muck bay cut out along the ramp or level approximately 15 meters from the active face. Once the face is clear, roof bolts are installed in the new portion of the heading, as required, and drilling commences again. Remucking of the ore from the muck bay into haulage trucks by LHDs occurs simultaneously with roof bolting and the beginning of drilling for the new development face. Permanent utility installation is included in the unit cost estimate for ramps, while levels contain a utility replacement only cost.

Crosscut development considered a production block 3.0-m-wide by 3.0-m-high with a 2.1-m round length. Operations for the crosscut development are similar to ramp and level development, with the difference that mucking of the crosscut heading by the LHD brings the ore out to a muck bay located on the main haulage level instead of a muck bay interior to the crosscut. Utility installation occurs in only one crosscut per stope and is removed once the stope is mined out.

Ventilation raises are driven through the height of each stope prior to mining. Ventilation raises are completed using contractor raisebore and considered a 1.8-m-diameter cross-section. A pilot hole is drilled the entire length of the raise. A cutting head (reamer) is then attached to the drill steel and pulled back up to the machine with cuttings dropping to the level below. The cuttings are mucked from below

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by an LHD to an adjacent muck bay. The waste is then remucked with an LHD into a haulage truck and transported to the surface. As mining progresses within each stope, two cribbed ore chutes with a central manway between them are installed along the ventilation raise cut through the stope. Utilities are placed in the manway to provide power, air, water, and access for the backfill pipe to the working stope level. Access ladders and slides within the manway provide for worker access and the ability to bring materials to the working stope level. Ventilation shafts are completed in a similar way to ventilation raises but are driven between mining levels. A steel ladder with landing platforms every 50 m is installed in ventilation shafts to serve a secondary escapeway.

Stope backfilling considers backfilling one-half of a typical stope length or 60 m. The backfill volume is equal to the displaced ore volume within the stope, allowing for a simple calculation of cost per tonne of ore. Backfilling is completed for the entire 2.3-m-high ore cut. During backfilling, the ore chutes and manway are raised above the fill level and wrapped in burlap. A polyvinyl chloride (PVC) pipe is extended to end of the area to be backfilled, with a second pipe installed in the floor to serve as a drain. The backfill slurry is pumped into the fill area from a slurry pump on the surface. The top 0.3-m of backfill contains 5% cement by volume to create a stable working surface to prevent ore loss into the backfill during slushing operations. No ore loss is anticipated due to the cemented fill cap placed on the stope backfill.

The unit cost for surface ore hauling took into account hauling 1,500 tpd to the process plant. Trucks are loaded through the batch loading system at each portal location. The tonne weighted average haul distance of 3.1 km was used to determine the truck productivity and required number of trucks during the mine life. Two 10-cubic meter dump trucks are required to haul the ore to the plant during each shift.

The plant unit costs include the operating costs for the sulfide flotation circuit and the oxide and sulfide tailings leach circuit. The plant power was increased to account for the additional leach circuit.

Finally, all support equipment for the mine and plant operations were combined to calculate a cost per day. This included the support loader, pickups, SUVs for mine personnel transport, fuel & lube truck, mechanics truck, mine dewatering pumps, main ventilation fan, auxiliary fans, and air compressors. The power demand for other facilities, including the office buildings, maintenance shop, change room, and water supply well, was estimated from a similar operation in Mexico.

21.3 Non-Controllable Operating Costs

21.3.1 Taxes & Royalties GRE accessed tax information provided by the Mexican government for the project. The corporate income tax rate in México is 30%. In 2014, México passed a tax reform that directly affects mining operations. Under the new tax reform, a Mexican Royalty Fee of 7.5% is assessed from any profits derived from the sale or transfer of extraction activities. Additionally, mining projects with sales derived from silver, gold, or platinum are required to pay a Mexican Super Royalty Fee of 0.5% on their gross income. Finally, Scorpio has a sliding NSR royalty on the project which varies as follows:

· 3.0% for NSR between $US 0 and $US 87,499 · 2.5% for NSR between $US 87,500 and $US 174,999 · 2.0% for NSR at or above $US 175,000

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21.3.2 Exploration Permit Fees There are no outstanding exploration permit fees to be paid. Landowner permits are in progress.

21.4 Additional Model Parameters

21.4.1 Metal Prices Constant metal prices were used throughout the model. The prices were selected after reviewing the average monthly metal prices through April 2016 along with trailing averages for 12, 24, 36, 48, and 60 months and comparing those to prices used by silver producers in Mexico to report their most recent resources and reserves. Graphs detailing the performance of each metal and the metal price selected are presented in Section 19.0 and the selected metal prices are presented in Table 19-3.

21.4.2 Cutoff Grade A detailed calculation of the net smelter return was completed to calculated the $/tonne ore received from the smelter. The parameters used in this calculation are presented in Section 19.0. A cutoff grade of $38 per tonne was used in this analysis, which provides the best economics in the model.

21.4.3 Process Plant Recoveries The base case economic model contains a sulfide flotation process circuit and a leach circuit of the sulfide flotation tailings and oxide ore. Process plant recoveries were based on the metallurgical testing to date and the available recovery data from the existing sulfide flotation plant from 2013 to 2016. There is excellent correlation between the plant recoveries and the metallurgical testing recoveries for silver in the lead concentrate with less than 2% deviation. Silver recovery in the zinc concentrate for the process plant was much lower than the average from the testing, 4% compared to 15%. Lead and zinc recoveries correlated well with the plant data with deviations around 10% for each value. No data on gold recovery exists for the current plant. The recovery data from the existing plant for all metals except gold was used in the economic model. Table 21-17 below summaries the sulfide recoveries by concentrate and metal type.

Table 21-17 Sulfide Recoveries Lead Concentrate % Recovery Ag 72% Au 22% Pb 69% Zn 0% Zinc Concentrate % Recovery Ag 9% Au 0% Pb 0% Zn 71%

A leach circuit will be included in the expanded plant to process the oxide ore and tailings from the sulfide flotation circuit. The metallurgical testing to date indicates good recoveries for gold and silver from oxidized material. Table 21-18 lists the oxide recoveries used in the economic model.

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Table 21-18 Oxide Recoveries Metal % Recovery Ag 70% Au 76%

An estimate of 42% recovery of the gold and silver contained in the sulfide tailings was used in the economic model based on the bottle roll testing completed in May 2016 on the union plant tailings. Only silver recovery was reported.

21.4.4 Depreciation All capital expenditures were depreciated on a straight-line basis over 10 years from the date of expenditure.

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22.0 ECONOMIC ANALYSIS

22.1 Project Forecast An economic model was created using the above capital and operating cost estimates. These costs, along with the NSR from concentrate metal sales and direct sales of gold and silver produced in the leach circuit, were estimated on a yearly basis to generate net cash flow rates. The economic model evaluated production rates from 750 tpd to 1,500 tpd and processing options of flotation of sulfide ore only, flotation of sulfide ore and leaching of oxide ore, and flotation of sulfide ore with leaching of the sulfide tailings and oxide ore. Additionally, the cutoff grade and mining sequence was varied to optimize the net present value (NPV) and internal rate of return (IRR). The model determined that a 1,500-tpd production rate with the processing option of leaching both the sulfide tailings and the oxide ore produced the best economic results. The selected cutoff grade of $38/tonne NSR provides the maximum net present value while providing an internal rate of return close to its maximum value.

Based on the above results, the base case economic scenario was selected as follows:

· Production Rate 1,500 tpd · Processing Option sulfide flotation with leaching of both the sulfide circuit tailings and the oxide ore. · Cutoff grade $38/tonne net smelter return

22.1.1 Mining Sequence Mining continues in the general sequence listed below, completing first the sulfide material and then the oxide material:

· Leticia Years 1-2 · El Barco Sulfide Years 1-7 · El Barco Oxide Years 4-7 · Caballo Sulfide Year 7 · Caballo Oxide Years 6-8 · San Antonio Years 7-8 · La Union Years 8-12 · Tablas II Years 10-12 · Buena Suerte Years 10-13

22.1.2 Preproduction – Year -1 A preproduction period of 1 year is required to expand the process plant from its current capacity to a 1,500 tpd facility. A leach circuit will be installed during this time to process the oxide ore and tailings from the sulfide circuit. During the plant expansion, underground development in the Leticia and El Barco veins will be sufficiently advanced to provide 10 available stopes in the following year. Each active stope will eventually produce 150 tpd with 10 stopes providing the steady state production rate of 1,500 tpd. Construction of the first phase of the tailings dam will also begin during Year -1. Mine salary labor is slightly

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reduced to account for hiring of the mine foreman during the year. Full mine crews are only required for the development operations.

22.1.3 Production Ramp Up – Year 1 Mine production of the newly developed stopes begins in Year 1 and ramps up to full production during the year with an average production rate of 941 tpd. The first phase of the tailings dam is completed, and deposition in the new impoundment area adjacent to the plant complex commences. Mining and plant operations crews reach their full complement of crews per working area to maintain steady state production at 1,500 tpd by year-end. Mining of the Leticia vein is almost completed during the year, and mining of the El Barco vein begins. A total of 10 mining production crews and four development crews are active by year end.

22.1.4 Steady State Production – Years 2 through 10 During steady state production, 10 mining production crews and an average of four development crews are required to maintain production at 1,500 tpd. Raises are completed on the tailings dam every two years. Mining is completed in Leticia in Year 1, and mining production remains fully within El Barco through Year 6. Some stopes in El Barco continue to be mined through Year 6. Mining transitions to Caballo in Year 7 and to La Union in Year 8.

22.1.5 Declining Production – Years 11 through 13 Production begins to decline in Year 11 as the resource areas are mined out. At the end of the mine life, only a few large-tonnage stopes remain, resulting in the reduced production rate. At the end of Year 11, only four stopes are active. This number is reduced to two stopes by the end of Year 13. Mining production ends during the 2nd quarter of Year 13.

22.1.6 Closure – Year 13 Mine closure is completed in Year 13 after the cessation of mining. All surface facilities are removed and access points to the underground workings are sealed. A permanent spillway is constructed for the tailings impoundment. The impoundment surface is covered with an inert rock fill and topsoil, graded to drain, and revegetated.

22.2 Economic Model Results The following tables present annual summaries of the economic model by category:

· Production · Net Revenue · Royalties, Operating Costs, Taxes, Depreciation, and Net Income · Capital Cost and After Tax Cash Flow

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Table 22-1 Production Indé Mine - Economic Model by Years

Year - number -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Totals Start Day 1/1/2018 1/2/2019 1/2/2020 1/1/2021 1/1/2022 1/2/2023 1/2/2024 1/1/2025 1/1/2026 1/2/2027 1/2/2028 1/1/2029 1/1/2030 1/2/2031 1/2/2032 Days/Period 365.0 365.0 366.0 365.0 365.0 365.0 366.0 365.0 365.0 365.0 366.0 365.0 365.0 365.0 366.0 End of period 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 12/31/2026 12/31/2027 12/31/2028 12/31/2029 12/31/2030 12/31/2031 12/31/2032

Production Oxide Tonnes 44,235 362,262 410,550 442,724 146,365 40,566 1,446,702 Sulfide Tonnes 327,945 526,438 525,000 480,765 162,738 115,888 82,276 378,635 484,434 520,364 246,543 98,754 21,670 3,971,451 Total Tonnes 327,945 526,438 525,000 525,000 525,000 526,438 525,000 525,000 525,000 520,364 246,543 98,754 21,670 5,418,153 Cummulative Tonnes 327,945 854,384 1,379,384 1,904,384 2,429,384 2,955,822 3,480,822 4,005,822 4,530,822 5,051,186 5,297,729 5,396,483 5,418,153 5,418,153

Sulfide Pb Pounds Recovered 5,198,868 2,632,205 1,305,949 964,069 255,970 209,378 477,098 6,187,029 2,511,818 2,867,837 1,333,842 767,233 147,029 24,858,325 Zn Pounds Recovered 10,402,263 4,171,613 1,975,620 1,700,052 798,661 678,335 906,203 12,823,440 6,342,768 10,588,413 6,111,276 4,167,326 670,160 61,336,130 Ag Ounces Recovered 1,935,791 3,743,892 3,116,327 2,795,496 1,127,072 799,291 466,634 1,297,262 1,593,166 1,655,775 810,341 452,539 33,782 19,827,368 Au Ounces Recovered 2,005 2,350 1,657 1,699 767 621 336 3,354 5,295 3,539 1,160 471 62 23,315

Oxide Ag Ounces Recovered 190,711 368,843 307,016 466,800 2,183,925 1,959,184 2,108,534 977,548 561,391 163,124 79,834 44,583 3,328 9,414,822 Au Ounces Recovered 2,985 3,500 2,467 3,047 5,873 7,105 8,737 7,199 8,213 5,270 1,728 701 92 56,917

Total Ag Recovered Ounces 2,126,502 4,112,735 3,423,343 3,262,296 3,310,997 2,758,475 2,575,168 2,274,810 2,154,556 1,818,899 890,175 497,122 37,110 29,242,189 Total Au Recovered Ounces 4,990 5,850 4,124 4,746 6,639 7,725 9,073 10,554 13,507 8,809 2,888 1,172 153 80,231

Ag Recovered grade gpt 176 243 203 193 196 163 153 135 128 109 116 151 27 168 Au Recovered grade gpt 0.40 0.35 0.24 0.28 0.39 0.46 0.54 0.62 0.80 0.53 0.36 0.36 0.11 0.46

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Table 22-2 Net Revenue

Indé Mine - Economic Model by Years

Year - number -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Totals Start Day 1/1/2018 1/2/2019 1/2/2020 1/1/2021 1/1/2022 1/2/2023 1/2/2024 1/1/2025 1/1/2026 1/2/2027 1/2/2028 1/1/2029 1/1/2030 1/2/2031 1/2/2032 Days/Period 365.0 365.0 366.0 365.0 365.0 365.0 366.0 365.0 365.0 365.0 366.0 365.0 365.0 365.0 366.0 End of period 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 12/31/2026 12/31/2027 12/31/2028 12/31/2029 12/31/2030 12/31/2031 12/31/2032

Revenue Pb Concentrate Pb Payment $4,311,681 $2,183,019 $1,083,089 $799,550 $212,289 $173,648 $395,681 $5,131,212 $2,083,177 $2,378,441 $1,106,222 $636,305 $121,938 $20,616,252 Pb Concentrate Ag Payment $30,112,704 $58,422,779 $48,651,633 $43,647,999 $17,601,036 $12,481,516 $7,278,060 $20,113,008 $24,826,630 $25,795,912 $12,626,321 $7,050,675 $524,111 $309,132,383 Pb Concentrate Au Payment $2,119,746 $2,658,867 $1,901,966 $1,969,055 $897,778 $726,571 $374,739 $3,672,925 $6,161,328 $4,058,782 $1,311,029 $520,764 $65,681 $26,439,232

Zn Concentrate Zn Payment $7,321,113 $2,935,981 $1,390,441 $1,196,496 $562,098 $477,412 $637,786 $9,025,137 $4,464,040 $7,452,125 $4,301,116 $2,932,964 $471,659 $43,168,368 Zn Concentrate Ag Payment $2,427,959 $5,243,705 $4,416,164 $3,963,993 $1,594,289 $1,126,782 $640,297 $1,425,994 $2,074,446 $2,018,650 $956,003 $507,961 $25,581 $26,421,826

Treatment Charges ($3,255,415) ($1,415,776) ($682,454) ($555,085) ($221,097) ($186,169) ($288,473) ($3,968,424) ($1,852,388) ($2,825,321) ($1,565,936) ($1,039,151) ($171,873) ($18,027,562) Impurity Charges ($165,048) ($71,942) ($34,695) ($28,176) ($11,167) ($9,400) ($14,633) ($201,131) ($93,719) ($142,522) ($78,881) ($52,294) ($8,658) ($912,265) Transportation Charges ($246,279) ($107,878) ($52,078) ($42,155) ($16,525) ($13,901) ($21,858) ($299,907) ($139,209) ($210,325) ($116,041) ($76,760) ($12,738) ($1,355,652) Ag Refining Charges ($4,069,284) ($7,894,970) ($6,574,545) ($5,898,378) ($2,378,518) ($1,686,691) ($983,522) ($2,717,974) ($3,354,950) ($3,485,934) ($1,706,260) ($952,794) ($70,826) ($41,774,646) Au Refining Charges ($13,566) ($17,017) ($12,173) ($12,602) ($5,746) ($4,650) ($2,398) ($23,507) ($39,433) ($25,976) ($8,391) ($3,333) ($420) ($169,211)

Ag Oxide Payment $3,528,158 $6,823,590 $5,679,794 $8,635,809 $40,402,610 $36,244,903 $39,007,876 $18,084,645 $10,385,726 $3,017,803 $1,476,922 $824,794 $61,571 $174,174,201 Au Oxide Payment $3,731,397 $4,374,642 $3,083,946 $3,808,964 $7,340,758 $8,880,908 $10,921,360 $8,999,239 $10,266,106 $6,587,486 $2,159,867 $876,605 $114,513 $71,145,792

Net Revenue $45,803,167 $73,135,001 $58,851,090 $57,485,470 $65,977,805 $58,210,928 $57,944,917 $59,241,218 $54,781,754 $44,619,121 $20,461,971 $11,225,736 $1,120,539 $608,858,718 Lead and Zinc Percent of net revenue 30% 11% 7% 7% 3% 2% 2% 30% 23% 31% 33% 36% 59% 15%

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Table 22-3 Royalties, Operating Costs, Taxes, Depreciation, Net Income After Tax Indé Mine - Economic Model by Years

Year - number -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Totals Start Day 1/1/2018 1/2/2019 1/2/2020 1/1/2021 1/1/2022 1/2/2023 1/2/2024 1/1/2025 1/1/2026 1/2/2027 1/2/2028 1/1/2029 1/1/2030 1/2/2031 1/2/2032 Days/Period 365.0 365.0 366.0 365.0 365.0 365.0 366.0 365.0 365.0 365.0 366.0 365.0 365.0 365.0 366.0 End of period 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 12/31/2026 12/31/2027 12/31/2028 12/31/2029 12/31/2030 12/31/2031 12/31/2032

Royalties NSR Scorpio/Vendor Royalty ($1,190,308) ($1,828,375) ($1,471,277) ($1,437,137) ($1,649,445) ($1,455,273) ($1,448,623) ($1,481,030) ($1,369,544) ($1,115,478) ($613,859) ($336,772) ($33,616) ($15,430,738) Mexican Royalty Fee ($2,057,286) ($3,337,114) ($2,270,911) ($2,193,372) ($3,009,187) ($2,448,743) ($2,451,980) ($2,382,501) ($1,988,530) ($1,220,085) ($472,479) ($355,607) ($24,187,794) Mexican Super Royalty Fee ($229,016) ($365,675) ($294,255) ($287,427) ($329,889) ($291,055) ($289,725) ($296,206) ($273,909) ($223,096) ($102,310) ($56,129) ($5,603) ($3,044,294) Total Royalties ($3,476,610) ($5,531,164) ($4,036,444) ($3,917,936) ($4,988,521) ($4,195,070) ($4,190,328) ($4,159,738) ($3,631,982) ($2,558,659) ($1,188,648) ($748,507) ($39,219) ($42,662,826)

Operating Costs Labor ($573,246) ($3,342,234) ($4,690,686) ($4,687,216) ($4,687,216) ($4,687,216) ($4,690,686) ($4,687,216) ($4,687,216) ($4,687,216) ($4,665,008) ($2,792,582) ($1,767,537) ($690,835) ($51,336,113) Mining ($4,124,724) ($6,613,470) ($6,594,353) ($6,594,353) ($6,594,353) ($6,613,470) ($6,594,353) ($6,594,353) ($6,594,353) ($6,542,016) ($3,100,950) ($1,242,399) ($272,101) ($68,075,248) Plant Ops ($7,231,192) ($11,607,966) ($11,576,250) ($11,310,839) ($9,402,680) ($9,144,665) ($8,919,907) ($10,698,059) ($11,332,852) ($11,474,032) ($5,436,268) ($2,177,516) ($477,833) ($110,790,060) Operating Cost Contingency ($143,311) ($3,674,538) ($5,728,030) ($5,714,455) ($5,648,102) ($5,171,062) ($5,112,205) ($5,050,369) ($5,494,907) ($5,653,605) ($5,670,264) ($2,832,450) ($1,296,863) ($360,192) ($57,550,355) Total Operating Costs ($716,557) ($18,372,688) ($28,640,152) ($28,572,274) ($28,240,511) ($25,855,312) ($25,561,026) ($25,251,845) ($27,474,536) ($28,268,027) ($28,351,320) ($14,162,251) ($6,484,315) ($1,800,961) ($287,751,775)

Net Operating Margin ($716,557) $23,953,869 $38,963,685 $26,242,372 $25,327,024 $35,133,972 $28,454,831 $28,502,744 $27,606,945 $22,881,745 $13,709,142 $5,111,072 $3,992,914 ($719,641) $278,444,116

Depreciation & Amortization $0 ($9,273,383) ($10,556,601) ($11,035,166) ($11,398,947) ($11,881,824) ($12,402,537) ($13,160,128) ($13,874,350) ($14,535,895) ($13,246,543) ($5,964,492) ($4,753,086) ($2,197,803) $0 ($134,280,748)

Taxable Income before NOL ($716,557) $14,680,486 $28,407,084 $15,207,207 $13,928,076 $23,252,148 $16,052,295 $15,342,616 $13,732,594 $8,345,850 $462,599 ($853,419) ($760,172) ($2,917,444) $0 $144,163,369

Net Operating Loss Adjustment ($716,557) ($0) ($716,564)

Income Tax ($4,189,200) ($8,522,000) ($4,562,000) ($4,178,400) ($6,975,600) ($4,815,600) ($4,602,800) ($4,119,600) ($2,503,600) ($138,800) ($44,607,600)

Net Income After Tax ($716,557) $9,774,729 $19,885,084 $10,645,207 $9,749,676 $16,276,548 $11,236,695 $10,739,816 $9,612,994 $5,842,250 $323,799 ($853,419) ($760,172) ($2,917,444) $98,839,205

Non-Case Adjustments Add back: Depreciation/Reclamation Deductions ($0) $9,273,383 $10,556,601 $11,035,166 $11,398,947 $11,881,824 $12,402,537 $13,160,128 $13,874,350 $14,535,895 $13,246,543 $5,964,492 $4,753,086 $2,197,803 ($0) $134,280,748 Reverse: NOL Adjustment $716,557 $0 $716,564 Total Non-Case Adjustments ($0) $9,989,940 $10,556,601 $11,035,166 $11,398,947 $11,881,824 $12,402,537 $13,160,128 $13,874,350 $14,535,895 $13,246,543 $5,964,492 $4,753,086 $2,197,803 $134,997,311

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Table 22-4 Capital Cost and After Tax Cash Flow Indé Mine - Economic Model by Years

Year - number -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Totals Start Day 1/1/2018 1/2/2019 1/2/2020 1/1/2021 1/1/2022 1/2/2023 1/2/2024 1/1/2025 1/1/2026 1/2/2027 1/2/2028 1/1/2029 1/1/2030 1/2/2031 1/2/2032 Days/Period 365.0 365.0 366.0 365.0 365.0 365.0 366.0 365.0 365.0 365.0 366.0 365.0 365.0 365.0 366.0 End of period 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 12/31/2026 12/31/2027 12/31/2028 12/31/2029 12/31/2030 12/31/2031 12/31/2032

Capital Costs Tailings Storage Facility ($279,220) ($542,542) ($541,800) ($542,542) ($541,800) ($395,724) ($62,139) ($2,905,767) Development ($1,186,011) ($4,515,670) ($1,910,502) ($2,541,667) ($2,225,649) ($3,333,232) ($2,653,146) ($6,713,917) ($3,393,368) ($4,952,860) ($1,664,774) ($773,900) ($225,802) ($51,540) ($36,142,039) Mining Equipment ($3,090,699) ($2,110,409) ($1,562,741) ($6,763,849) Equipment Rebuild and Replacement ($442,045) ($705,752) ($705,074) ($705,074) ($705,074) ($705,752) ($705,074) ($705,074) ($705,074) ($700,731) ($334,554) ($134,093) ($29,316) ($7,282,687) Plant Capital ($41,025,000) ($13,675,000) ($54,700,000) First Fills ($2,825,249) ($2,825,249) General & Administrative ($1,965,588) ($171,738) ($10,734) ($671) ($42) ($3) ($0) ($0) ($0) ($0) ($0) ($0) ($0) ($0) ($0) ($2,148,775) Owner's Costs ($2,800,000) ($5,000,000) ($7,800,000) Working Capital ($179,139) ($4,414,033) ($2,566,866) $7,160,038 Capital Contingency ($13,337,726) ($6,332,224) ($1,824,784) ($811,853) ($868,141) ($1,009,577) ($975,360) ($1,854,748) ($1,160,060) ($1,414,484) ($690,307) ($277,113) ($105,509) ($1,270,214) ($0) ($31,932,101) Total Capital Costs ($66,688,632) ($31,661,119) ($9,123,921) ($4,059,264) ($4,340,706) ($5,047,886) ($4,876,801) ($9,273,738) ($5,800,302) ($7,072,418) ($3,451,537) ($1,385,567) ($527,543) $808,968 ($0) ($152,500,466)

After-Tax Cash Flow ($67,405,189) ($11,896,450) $21,317,764 $17,621,108 $16,807,918 $23,110,486 $18,762,430 $14,626,205 $17,687,043 $13,305,728 $10,118,806 $3,725,505 $3,465,371 $89,327 ($0) $81,336,051 Cumulative After-Tax Cash Flow ($67,405,189) ($79,301,640) ($57,983,875) ($40,362,767) ($23,554,849) ($444,363) $18,318,067 $32,944,272 $50,631,315 $63,937,042 $74,055,848 $77,781,353 $81,246,724 $81,336,051 $81,336,051 1 1 1 1 1 1 1 1 1 0.976316328 After-Tax NPV $81,336,051 After-Tax NPV 5% $43,069,038 payback 6.98 After-Tax NPV 8% $26,190,720 After-Tax IRR 14%

Cash Cost per Ounce Ag Recovered, World Gold Council (WGC) Adjusted Operating Costs definition ($7.67) ($9.74) ($10.83) ($10.76) ($9.50) ($9.50) ($8.94) ($7.09) ($7.85) ($9.49) ($11.18) ($8.83) ($35.86) ($9.43) (negative number) = cost, positive = credit

Cash Cost per Ounce Ag Recovered, WGC Adjusted Operating Costs definition ex by-products ($15.89) ($12.69) ($13.01) ($13.14) ($12.22) ($13.22) ($13.73) ($18.89) ($18.51) ($20.75) ($21.15) ($18.82) ($56.71) ($14.95) (negative number) = cost, positive = credit

All-In Sustaining Cost per Ounce Ag Recovered, World Gold Council (WGC) ($12.34) (negative number) = cost, positive = credit

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Table 22-5 Average Operating Costs Average cost $US Operating cost per tonne mined $53.11 Total cost per tonne mined $81.26 Operating cost per ounce silver $9.84 produced

Table 22-6 Economic Model Results Result Category $US, %, Years (Cumulative Cash Flow) NPV@0% $81,336,051 NPV@5% $43,069,038 NPV@8% $26,190,720 IRR 14% Payback 7.0 years

The results of the base case economic model show that the project is economically viable, producing a 14% IRR. This preliminary assessment is preliminary in nature. It includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the results of the preliminary economic assessment will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

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22.3 Economic Model Sensitivities Model sensitivities were run for silver price, capital costs, operating costs, and silver recovery in the lead concentrate.

Figure 22-1 Sensitivity of NPV5 to Change in Silver Price

Figure 22-1 shows the sensitivity of the NPV at a 5% discount rate to silver price. For each dollar the silver price increases, the NPV at a 5% discount rate increases around $US 13.5 million. A silver price below $15.40/troy ounce results in a negative NPV at a 5% discount rate.

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Figure 22-2 Sensitivity of NPV5 to Change in Capital Costs

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Figure 22-2 shows the sensitivity of the NPV at a 5% discount rate to capital cost. For each 10% the capital cost increases, the NPV at a 5% discount rate decreases around $US 11.2 million. The project can withstand an operating cost at 138% of the planned costs and still return a positive NPV at a 5% discount rate.

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Figure 22-3 Sensitivity of NPV5 to Change in Operating Costs

Figure 22-3 shows the sensitivity of the NPV at a 5% discount rate to operating cost. For each 10% the operating cost increases, the NPV at a 5% discount rate decreases around $US 14.9 million. The project can withstand an operating cost at 129% of the planned costs and still return a positive NPV at a 5% discount rate.

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Figure 22-4 Sensitivity of NPV5 to Silver Recovery in Lead Concentrate

Figure 22-4 shows the sensitivity of the NPV at a 5% discount rate to the percent silver recovery in the lead concentrate. For each 1% the recovery increases, the NPV at a 5% discount rate increases around $US 1 million. The project still returns favorable NPV values at a 5% discount rate at much lower recoveries than anticipated.

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23.0 ADJACENT PROPERTIES The Indé project is located in the State of Durango in México.

GRE used no information from adjacent properties to estimate the Indé mineral resource. Silver Standard’s La Pitarilla is also located in the Indé municipality, GRE does not believe that they are geologically related.

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24.0 OTHER RELEVANT DATA AND INFORMATION The most relevant information about the Indé mine is the status of the existing operation. This information is contained within the main body of the report and is reiterated here for additional clarity and transparency.

In 2009, ECI Exploration and Mining Inc. (ECI) entered into an agreement with Minera Scorpio (Scorpio) to earn into a 50% interest and operating control of the property by completing an initial payment, fulfilling set exploration expenditures, providing a loan to Scorpio, and proving a geologic resource that could support a 1,000 tpd mining operation for 5 years. ECI completed the requirements of the agreement and attempted to exercise their option to acquire a majority interest in the property in 2011. This was met with opposition from Scorpio, and ECI entered into litigation to force Scorpio to uphold the 2009 agreement. In March 2016, ECI successfully took control of the operation.

Scorpio produced lead and zinc concentrates from Indé ore since 1970, when the existing beneficiation plant was constructed. The plant has been in semi-continuous operation since 1980. During Scorpio’s tenure, veins were mined using cut and fill methods. A 2.5-yard LHD transported ore to the portal. The ore was loaded into 15-ton trucks by a front end loader and then hauled to the plant for processing. Historically, the operation has been mined in stull stopes, and several of these stand open and are stable. Oxide ore was shipped to a plant in Hidalgo de Parral, Chihuahua. Sulfide ore was processed into concentrates onsite. The plant consisted of a jaw crusher, two ball mills, and two flotation circuits: one circuit for lead and one for zinc. The plant operated three 8-hour shifts/day except for a monthly shut down of two days for preventative maintenance. Concentrates were shipped to the Peñoles concentrator in Torreón, Coahuila, in 20- and 35-ton trucks. Historic production was around 100 tpd milled.

The sulfide process plant (Union) was in operation when ECI took control of the mine in March 2016. Since the takeover, the process plant has been shut down, and mining activities have been suspended due to ECI’s lack of a blasting permit. ECI has obtained a provisional one-year blasting permit and is currently in the process of applying for the definitive permit. In the interim, ECI is performing housekeeping of all mining areas, updating the mine surveys, and completing an updated sampling program.

Major components of the Union plant have been disassembled for repair and maintenance. A new hopper and expansion of the floatation circuit is in progress to double the flotation capacity. Tonnes milled from 2013 to 2016 varied between 100 to 130 tpd. A new 55-tpd oxide circuit to process dry tailings has been added to the plant but has yet to be commissioned. An upstream raise cycloned tailings storage facility is located in the valley upstream of the Union processing plant.

A second tailings storage facility was under construction at the time of the takeover. The starter embankment and decant structure for the new facility are complete. The water recovery system is lacking the main return pump, booster pump, and equipment controls. A powerline to the water return tank is already in place. Work is now underway to finish the tailings storage facility.

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25.0 INTERPRETATION AND CONCLUSIONS Indé is an active small mining operation with a mineral resource base sufficient to support higher production levels. ECI is continuing their efforts to improve production and metal recovery of the existing operation while working to develop the full potential of the property. The preliminary economic assessment shows positive economics for a 1,500 tpd production scenario and therefore warrants moving the project forward to prefeasibility. Acceptance into the voluntary environmental audit program whereby the Mexican government and ECI agree to abide by third party professional audits and remediation activities minimizes the risk due to legacy environmental labilities.

The conclusions below are categorized between the existing operation, the larger production scenario contemplated in the PEA, and the geologic potential of the property including the current mineral resource.

25.1 Existing Operation · The existing 100-tpd flotation plant is currently being refurbished and expanded to double the flotation capacity. A separate 55-tpd cyanide leach and Merrill-Crowe recovery circuit has been added to process dry tailings and is 90% complete. · Metal recovery from bottle roll tests on the flotation plant tailings averaged 42% for silver and indicates the tailings are a potential resource. At the time of the study, no recovery data was calculated for gold. · The stability of the floatation plant tailings facility is a known risk and has not been quantified. Nonetheless, the facility has been operating and stable since inception and has grown considerably in size since 2011. Survey monuments have been installed on the embankment, and daily measurements are being recorded. · A new tailings facility is under construction. · Additional outside metallurgical testing to improve gold and silver recovery from the flotation plant is currently underway. Diagnostic testing to determine the potential recovery routes for the Matracal resource is in progress by ECI. · The current Indé mine is comprised of three active mining areas, Paco, Argentina, and Leticia, which include the Leticia HW, Leticia FW, Leticia del Bajo, Caballo, and Tablas II veins. ECI is currently completing an underground sampling program and mine maintenance efforts. · ECI is developing a short term mine plan and budget for the existing operation. · The status of existing permits and compliance reporting has not been documented by the mine staff. · Areas of poor ventilation exist within the current mine layouts.

25.2 Larger Scale Mining Operation The preliminary economic assessment shows positive economics for a 1,500 tpd production scenario and therefore warrants moving the project forward to prefeasibility. Metal prices are the key economic drivers of the PEA analysis. Uncertainty in metal prices represent a project risk. Additional engineering analysis

Global Resource Engineering August 19, 2016 NI 43-101 Technical Report and PEA for Indé Project Page 135 ECI Exploration and Mining Project No.: 13-1068 and more detailed cost estimates are required to bring all areas of the PEA analysis to a PFS level. A summary of input parameters and economic results of the PEA is shown below.

Table 25-1 Economic Model Summary Results Parameter Value Metal Prices Gold Price $1,250.00 Silver Price $18.50 Lead Price $0.90 Zinc Price $0.90 Metal Recovery – Lead Concentrate Ag 72% Au 22% Pb 69% Zn 0% Metal Recovery – Zinc Concentrate Ag 9% Au 0% Pb 0% Zn 71% Metal Recovery – Oxide Leach Ag 70% Au 76% Metal Recovery – Flotation Tailings Leach Ag, Au 42% Production Quantities Total Tonnes 5,418,153 Total Ag Recovered Ounces 29,242,189 Total Au Recovered Ounces 80,231 Project Economics NPV0 $81,336,051 NPV5 $43,069,038 NPV8 $26,190,720 IRR 14% Project Costs Op Cost/ Tonne $53.11 Total Cost/ Tonne $81.26 Op Cost/ Ag Ounce Recovered $9.84 Payback Period (Years) 6.98 Mine Life (Years) 13 Capital Cost Contingency 25% Operating Cost Contingency 25% Initial Capital $66,688,632 Total Capital Costs $152,500,466 Cash Cost per Ounce Ag Recovered, net of by products $9.43 All in sustaining Cost per Ounce Ag Recovered $12.34

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25.3 Geologic Potential and Current Mineral Resource Estimate Compilation of historic data and mapping and sampling by ECI in the Indé Mining District has verified the existence of an extensive mineral system. Drilling has expanded mineral resources within known mineralized veins and confirmed that mapped surface expressions of previously unknown veins extend underground. Exploration data indicates that a much larger intrusive mass at depth may be the source of metals in the district, and may represent a deep porphyry target. Newly identified veins and the deep porphyry will be a targets for future exploration efforts by ECI. A sustained and well-funded program by ECI, including efficient and adequate testing by core and reverse circulation (RC) drilling, has excellent potential to identify additional resources within the Indé Mining District.

At least four types of mineralization have been identified by ECI’s exploration program. These are:

1. Intrusive-related and structurally controlled polymetallic base and precious metal veins (Ag-Pb- Zn+/-Au) 2. Polymetallic base and precious metal CRD (Au-Ag-Pb-Zn) 3. Polymetallic base and precious metal skarns (Ag-Pb-Zn +Au, El Gato Skarn) and (Cu-Au, Matracal Skarn) 4. Disseminated polymetallic mineralization (Ag-Pb-Zn-Au)

To date, ECI exploration work supports estimation of mineral resources in accordance with NI 43-101 for mineralization types 1 and 3. The mineral resources are divided between underground vein resources and open pit resources according to the tables below.

Table 25-2 Underground Resources Summary at a $35 NSR cutoff Au Ag Pb Zn Tonne (x Category oz (x lbs (x lbs (x 1000) ppm oz ppm % % 1000) 1000) 1000) Measured 1,268 0.61 24,987 206.00 8,398 0.86 24,122 1.78 49,653 Indicated 3,200 0.83 85,540 210.95 21,703 0.48 34,153 0.95 66,750 Inferred 2,766 0.93 83,060 182.84 16,260 0.51 31 0.75 45,812

Table 25-3 Matracal Skarn Inferred Resource (Potential Open Pit) Cutoff Tons (x Au Tons (x Cu (gpt) 1000) ppm oz Cutoff 1000) % lbs (x 1000) 0.5 8,619 1.359 376,600 0.2 8,776 0.63 121,117 2011 Gustavson Report Resource – included for completeness

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26.0 RECOMMENDATIONS Indé is an active small mining operation with a mineral resource base sufficient to support higher production levels. The preliminary economic assessment shows positive economics for a 1,500 tpd production scenario. ECI should move the project forward to prefeasibility.

The recommendations below are categorized between the existing operation and the larger production scenario contemplated in the PEA. An overall recommended work plan and cost estimate is provided at the end of this section.

26.1 Existing Operation · ECI should restart the existing plant in the shortest time possible to provide a revenue stream from the operation. · A comprehensive sampling and testing program of the flotation plant tailings should be initiated to permit quantification of the resource and overall metal recovery. Gold recovery should be measured during testing. · In conjunction with the flotation plant tailings sampling program for metallurgical testing, strength index parameters should be gathered to permit a stability analysis of the existing tailings facility. An upstream diversion should be constructed to route storm water around the impoundment. · Construction of the new tailings facility should be fast tracked to provided tailings storage for leached tailings from the flotation plant. · A thorough review of the existing permits and compliance reporting should be initiated by the mine staff to document compliance with regulatory requirements. · ECI should continue their underground sampling program and mine maintenance efforts. · The detailed short term mine plan and schedule in progress by ECI should include development, production, ventilation, equipment requirements, and drilling stations for continued resource definition. Integration of the mine plan into the larger scale mining operation should be considered, especially for ventilation.

26.2 Larger Scale Mining Operation · Areas of sufficient vein width should be detailed to incorporate long-hole open stoping into the mine plan. · Definition of various ventilation scenarios should be completed with enough detail to permit trade-off studies between the identified options. · The mine development and production plan generated on long sections should be detailed in 3D. · ECI should engage in active discussions with the Peñoles smelter in Torreon as well as competing smelters to ascertain the terms of each company’s smelter schedule and impact on project economics. · Additional engineering analysis and more detailed cost estimates should be completed to bring the all areas of the PEA analysis to a PFS level.

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26.3 Recommended Work Plan To move the project toward a PFS, additional mine planning, metallurgical testing, and infill drilling should be completed. Sufficient detail should be incorporated to allow quantification of the production plan and subsequent cash flow at a PFS level. The work plan below takes into account the needs of the current operation and the long term vision of a larger scale mining operation.

Table 26-1 Work Plan Work Plan Item & Description Estimated Cost $US Existing Plant Repairs & Upgrades Complete the planned repairs and expansion to the existing flotation plant. Complete $1,100,000 the outstanding items for the leach circuit for dry tailings. Flotation Plant Tailings Complete a sampling and testing program on the flotation plant tailings to quantify $100,000 the potential resource, determine expected metal recovery, and assess the potential for continued use of the facility. New Tailings Facility Finalize the engineering design and complete the construction of the new tailings $450,000 facility. Metallurgical Testing Complete the in-progress testing to improve gold and silver recovery from the existing $200,000 plant. Complete diagnostic testing of the Matracal resource. Short Term Mine Plan Complete a short-term mine plan to detail production and cash flow over the next 12 $50,000 to 18 months. The mine plan should consider integration into the larger scale mining operation contemplated in the PEA. Infill Drilling Complete infill drilling to upgrade the inferred resources considered in the PEA to $1,100,000 indicated. Permitting & Compliance Review $20,000 Review the existing permits and required compliance reporting for the operation. Mine Maintenance & Sampling $100,000 Continue the underground sampling and mine maintenance program. Prefeasibility Study Complete a prefeasibility study to analyze multiple production scenarios for the larger $500,000 scale operation and determine the most preferred option for feasibility. Total $3,620,000

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27.0 REFERENCES Aguilera, G. and Ortega, J.F., 1983. Informe Geológico – Minero del Area “La Batalla”, Proyecto Reserva Minera Nacional, Indé, Durango.

Aguilera, G. and Dominguez, B., 1984. Informe Anual Mina La Argentina, Proyecto: R.M.N., Indé, Durango. Consejo de Recursos Minerales, Gerencia de Apoyo, Subgerencia Regional Zona NW.

Aguilera, G. and Moreira, F., 1985. Visita de Reconocimiento al Fundo “La Mula II” en el Municipio de Indé, Durango. Consejo de Recursos Minerales, Gerencia de Apoyo, Subgerencia Regional Zona NW.

Aguilera, G., Guereca, R. and Dominguez, B., 1988. Informe Final del Contrato de Exploración Fundo Minero “Paco”, Distrito Minero Indé. Consejo de Recursos Minerales, Gerencia de Apoyo, Subgerencia Regional Zona NW.

Aguirre, S.F., 1980. Estudio Geologico Minera del Area “Reserva Mineras Nacionales Indé I” Indé, Durango. Tesis Profesional, México, Universidad Autonoma de San Luis de Potosi, Escuela de Ingenieria.

Alba, P.J.A., 1969. Estudio Geologico Preliminar del Distrito de Indé, Estado de Durango. Tesis Profesional, México, Universidad Nacional Autonoma, Facultad de Ingenieria.

Austin, J.B., 1998. Memo of Metallurgical Results Carried out on Samples from the Indé Project, México. Private Company Document.

Blum, A., 1932. Project of Development Works for the Mining Properties of Societe Des Mines De Matracal. Historical Private Company Document.

Carrete, E. S. (1999). Haciendas y minas: Una Historia de Santa Maria del Oro, Durango y s región, Talleres Gráfica Antares S.,A. de C.V. México DF 1999.

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Overbay, W.J., Page, T.C., Krasowski, D.J., Bailey, M.H. and Matthews, T.C., 2001, Geology, Structural Setting, and Mineralization of the Dolores District, Chihuahua, México: in New Mines and Discoveries in México and Central America, Tawn Albinson and C.E. Nelson, edts., Society of Economic Geologists Special Publication No. 8, 362pp.

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