Mexico Properties

• 435 hectares, option to acquire 100% interest
• Epithermal veins, silver, lead, zinc
• 100 km SSE of Durango on the Durango-Zacatecas border
• Excellent infrastructure, power, water, services
• Moderate climate and topography
• Close to San Martin, La Colorada and La Parilla mines
• History of past small scale mining
• Dump samples returned up to 1,820 g/t Ag, 10.25% Pb, 8.25% Zn
• Drilling in progress to investigate below old workings

Location, access and infrastructure:

The La Esperanza Silver-Zinc-Lead project covers 435 hectares, located 100 km SSE of the city of Durango on the border between Durango and Zacatecas States. The project site is easily accessible from Canasil’s operating base in Durango. The area is well served with power lines, water access and services, such as banks, medical services and labour, which are available in local municipalities. The project is also close to a number of prominent silver mines – San Martin mine operated by Grupo Mexico, the La Colorada mine of Pan American Silver and La Parrilla mine of First Majestic Resource Corp.  The climate and topography are moderate and typical of the Eastern edge of the Sierra Madre Occidental volcanic province, with the rainy season between June and September, and colder temperatures in December and January.

Geology and exploration history:

The La Esperanza property hosts a banded and cockade white to grey quartz breccia epithermal vein with silver, lead and zinc mineralization associated with argentiferours galena, silver sulfasalts and sphalerite. There has been a history of past mining activity at La Esperanza with direct shipments of reportedly high-grade ore to local smelters. There are a number of surface pits and dumps with ore left over from past mining operations around the vein and mine area. The mine was last active in 1970, and was reportedly mined on three levels, using a main access shaft down to a depth of approximately 90 metres. The old workings reportedly caved in when some of the main ore rich pillars were exploited.

The La Esperanza Vein has been traced by mapping of the collapsed workings over a strike length of 260 metres within rhyolite volcanics of the Upper Volcanic Series. Mapping shows andesitic volcanics of the Lower Volcanic Series outcrop lower in elevation and to the south of the La Esperanza Vein. There is good potential to outline mineralization, or additional blind mineralized vein structures, at depth within the lower volcanic sequence, which is the main host rock for vein type mineralization observed at la Esperanza.

Canasil Exploration Programs:

Surface sampling program – November 2005:

An initial geologic mapping and sampling program, undertaken in November 2005, included  thirty-eight samples taken from dumps close to the vein and from surface pits over the vein and analyzed for gold plus 41 elements by ICP-MS by ALS Chemex Laboratories, Vancouver. The highest grades observed in these samples were 1,820 g/t silver, 10.05% lead and 8.66% zinc. 31 samples returned assays with over 100 g/t silver, with an average grade of 413 g/t silver, 2.17% lead and 3.08% zinc, as detailed in the table below and on the attached map:

Phase 1 Diamond Drill Program completed October 2006 Outlines High-Grade Silver-Zinc-Lead Mineralized Panel

The Phase 1 diamond drill Program included 8 diamond drill holes for a total of 1,182 metres. This program has outlined a mineralized panel with a strike length of over 150 metres and depth of 100 metres, which is open in all directions, with vein widths of up to 10.30 metres carrying high-grade silver mineralization. Seven drill holes intersected the main La Esperanza vein (LE) and a hanging wall vein (HW) over significant widths The weighted average grade of mineralization intersected in the La Esperanza vein is 330 g/t (9.62 oz/ton) silver, 0.93% (18.60 lbs/ton) zinc and 1.57% (31.40 lbs/ton) lead over an average width of 4.21 metres. This vein includes several intercepts with very high silver grades of up to 2,144 g/t (62.53 oz/ton) silver over 0.75 metres. Average assay results are detailed below:

La Esperanza Project – Phase 1 Diamond Drill Program
Vein or Structure	Interval – Metres From       To			True Width Metres	Grades
					Silver g/t	Silver oz/ton*	Zinc %	Zinc lbs/ton**	Lead %	Lead lbs/ton**
Diamond Drill Hole ES-06-02
Avg. LE	100.22		107.74	5.14	210	6.13	1.25	25.00	1.03	20.60
Incl.	101.68		107.74	3.46	249	7.25	1.48	29.60	1.22	24.20
And	101.68		104.17	1.42	458	13.36	2.20	44.00	2.31	46.20
And	102.60		103.75	0.66	615	17.94	3.37	67.40	2.12	42.40
Diamond Drill Hole ES-06-03
Avg. HW	78.90		80.66	1.44	274	7.99	0.20	4.00	0.10	2.00
Incl.	78.90		79.74	0.69	449	13.10	0.20	4.00	0.09	1.80
Avg. LE	102.80		104.30	1.23	287	8.37	0.38	7.60	2.12	42.40
Diamond Drill Hole ES-06-04
Avg. HW	88.45		90.80	1.79	142	4.14	2.32	46.40	1.07	21.40
Avg. LE	116.83		127.25	7.52	388	11.32	1.36	27.20	1.35	27.00
Incl.	118.92		121.58	2.09	634	18.49	1.56	29.00	1.45	29.00
And	124.47		127.25	2.12	593	17.30	0.35	7.00	1.09	21.80
Diamond Drill Hole ES-06-05
Avg. HW	118.46		119.88	1.12	471	13.74	3.11	62.20	6.04	120.80
Avg. LE	147.82		160.92	10.30	396	11.55	0.71	14.20	1.96	39.20
Incl.	147.82		152.03	3.31	746	21.76	0.57	11.40	2.20	44.00
And	148.22		150.15	1.52	1,360	39.67	0.38	7.60	3.40	68.00
And	148.22		149.17	0.75	2,144	62.53	0.29	5.80	3.20	64.00
Incl.	154.35		159.10	2.73	389	11.35	0.97	19.40	3.30	66.00
Diamond Drill Hole ES-06-06
Avg. HW	116.23		118.15	1.35	160	4.67	1.18	23.60	1.40	28.00
Avg. LE	130.35		130.76	0.29	192	5.60	0.60	12.00	0.51	10.20
Diamond Drill Hole ES-06-07
Avg. HW		152.68	154.65	1.65	551	16.07	0.42	8.40	1.47	29.40
Includes		152.68	153.60	0.77	945	27.56	0.35	7.00	1.95	39.00
Avg. LE		160.02	162.40	1.99	272	7.93	0.34	6.80	0.24	4.80
Diamond Drill Hole ES-06-08
Avg. LE		183.85	196.40	4.69	115	3.35	1.02	20.40	1.30	26.00
Includes		183.85	189.30	2.04	122	3.56	0.96	19.20	1.66	33.20
And		192.63	196.40	1.41	168	4.90	1.04	20.80	1.57	31.40
Average width and grades HW				1.53	324	9.45	1.37	27.40	1.80	36.00
Average width and grades LE				4.21	330	9.62	0.93	18.60	1.57	31.40

* g/t (grams per metric tonne) is converted to oz/ton (ounces per short ton) by a conversion factor of 34.2856
** % zinc and % lead is converted to lbs/ton (pounds per short ton) using a conversion factor of 20 lbs per 1%

The first drill hole, ES-06-01, intersected the lower limit of the historic mine workings at a drill depth of 75 metres. All the remaining seven drill holes, ES-06-02 to ES-06-08, returned mineralized vein intercepts carrying high-grade silver and zinc and lead values, with minor gold and copper values. The consistency of the vein intercepts, strong widths and high silver grades observed are particularly encouraging. The vein system is open in both directions along strike and at depth, and the interpretation of the surface and down-hole geology (contact between the upper volcanic series Rhyolites anl lower volcanic series Andesites) provide further drill targets and potential for a larger mineralized system. Based on these encouraging results the Company is planning an aggressive Phase 2 drill program to further delineate the extent of this strongly mineralized system.

The widths and grades observed in the Phase 1 drill program exceed initial expectations in a strongly mineralized system, which is open in all directions with potential for delineating additional mineralized zones. Information from several operating mines located close to the La Esperanza project provides references for local operating conditions and costs. The relatively high silver grades and zinc and lead content for in-situ mineralization observed in the veins at La Esperanza (average values of 9.45 to 9.62 oz/ton silver, 18.60 to 27.40 lbs per ton zinc and 31.40 to 36.00 lbs per ton lead), compare favourably with those at local operating mines.

Erme Enriquez, Director of Exploration and Development of Minera Canasil S.A. de C.V., the Company’s wholly owned Mexican subsidiary, is responsible for the planning and implementation of the drill program. All core samples are processed at the Company’s core processing and storage facility in Durango, Mexico. Samples are cut by diamond saw, and half is sent for assay and half secured for reference. Samples are sent to the SGS Laboratories in Durango for processing and assay analysis for gold and silver by fire assay with an atomic absorption finish (“FA-AA”) on a 30 gram split, and for copper, lead and zinc by digestion of 1.00 gram sample in aqua regia and analysis by AA. A duplicate set of pulp samples are also sent to ALS Chemex Laboratories in Vancouver for check assays. Gary Nordin, P. Geo. British Columbia and Director of Canasil, is the designated Qualified Person for this project in accordance with National Instrument 43-101.

La Esperanza Project, Zacatecas, Mexico
Long Section showing Phase 1 drill intercepts