Properties

La Esperanza, Zacatecas State, Mexico

• Large project area – 18,954 hectares – with multiple high grade Silver-Zinc-Lead epithermal veins 
• Close to San Martin, La Colorado and La Parilla mines
• Option agreement for MAG Silver Corp. to earn 60% interest with $5 million expenditures and $500,000 cash payments over 4 years  
• Potential for large district scale high grade epithermal vein system
• Excellent infrastructure, power, water, services
• History of past small scale mining
• Dump samples returned up to 1,820 g/t Ag, 10.25% Pb, 8.25% Zn
• Sept. 2006 Phase 1 drill intercept 13.10 metres with 396 g/t silver, 0.71% zinc and 1.91% lead, including 2,144 g/t silver over 0.95 metres
• MAG completed 1,330 line-km airborne geophysics October 2010
• Drill testing, further mapping and sampling planned for 2011

Location, access and infrastructure:

The La Esperanza Silver-Zinc-Lead project covers 18,954 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 Silver 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  vein is 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.

Canasil Exploration Programs:

Surface sampling program:

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:

The Phase 1 diamond drill Program included 9 diamond drill holes for a total of 1,432 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:

* 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%

Expansion of Claim Area and District scale exploration potential:

Between 2007 to 2010 reconnaissance work indicated potential for further mineralized veins over a large area surrounding the original La esperanza claims. As a result the claims were gradually expanded to the current area of 18,954 hectares.  The La Esperanza Vein was traced by mapping of the collapsed workings over a strike length of 260 metres within rhyolite volcanics of the Upper Volcanic Series. Significant alteration zones are observed along strike extensions of the La Esperanza vein for over 4 km on a NW-SE trend. Additional vein outcrops and mineralized structures are also observed to the NW of the extended claim area approximately 15 km NW of the La Esperanza vein, indicating the potential for a large district scale epithermal system. Recent high grade silver-lead-zinc drill intercepts over significant widths reported by Pan American Silver at the La Colorada mine, located 35 km to the SE, confirm the potential in this district.

MAG Silver Exploration program:

ZTEM / Magnetic Aerial Survey / Geological mapping / Stream sediment sampling:

MAG Silver Corp. completed a 1,330 line-kilometre ZTEM (Z-Axis Tipper Electromagnetic System) helicopter-borne aerial geophysical survey on the property. The survey started on October 21, 2010, and was completed on October 27, 2010. The survey will be used to highlight geological structures in the project area, and together with further surface mapping and sampling will aid in defining drill targets.

MAG also conducted geological mapping and surface rock and stream sediment sampling focused on four known vein systems that have been traced over variable strike lengths ranging from 300 metres to over 1.9 kilometres. In anticipation of the 2011 diamond drill program MAG has also completed upgrades to over 30 kilometres of access roads within the project area.

Correlation of the structural features highlighted by the ZTEM survey and the aero-magnetic signature, coupled with the mineralized veins and structural lineaments outlined by the mapping and sampling and previous drilling by Canasil, has defined a number of high priority drill targets. MAG is currently evaluating the logistics for starting a drill program to test these targets in September 2011.

MAG Silver Joint Venture Agreement

In August 2010, Canasil and MAG Silver signed of a binding letter agreement providing for MAG to earn a 60% interest in the project. MAG is a leading silver exploration and emerging development company in Mexico, with considerable experience and a very successful track record of high-grade silver discoveries in epithermal vein systems of the Fresnillo Silver Trend. Canasil’s La Esperanza project is located on the northern extension of the Fresnillo Silver Trend and has the potential for hosting a district scale epithermal high-grade silver mineralized system. To complete the earn-in of 60% interest in the project, MAG must complete CAD$5,000,000 exploration expenditures and CAD$500,000 cash payments to Canasil over a period of four years. The initial payment of CAD$50,000 upon signature and first year expenditure of CAD$750,000 are firm commitments, and will include a minimum of 1,500 metres of drilling.