Properties

Sandra, Durango State, Mexico

• 7,512 hectares, direct staking, 100% title
• Epithermal veins, silver, gold, zinc, lead
• 183 km NE of Durango, Durango State
  Neighboring claims held by Pan American Silver
• Excellent infrastructure, power, water, services
• Surface samples up to 635 g/t Ag, 9.74 g/t Au, 2.46% Cu, 20.1% Pb
• Neighbouring Pan American Silver 634 hectare Escobar claims
• Agreement with pan American silver for Canasil to earn 51% INTEREST IN Escobar claims for $1 million expenditures followed by Pan American back-in option for joint venture to advance the combined claims to feasibility and production
• Potential for discovery of a large disseminated gold-silver deposit

Location, access and infrastructure

The Sandra claims are located 183 km northeast of the city of Durango and 40 km north of the community of Tepehuanes, in Durango State, Mexico. The property is located within easy access from Canasil’s operating base in Durango, with excellent infrastructure provided by paved roads (leading directly on to the property), power lines and water access in the district. The property was acquired through direct staking of claims and the Company holds 100% title.

Geology

The Sandra property hosts a prominent vein system, with preliminary surface samples returning encouraging gold and silver values, up to 686 g/t silver and 10.93 g/t gold. The mineralisation consists of low sulphidation veins hosting silver, gold, zinc, copper and lead, possibly in a transition between epithermal and mesothermal formations. The host rocks are composed of andesites, rhyolites and intrusive bodies, possibly of andesitic composition.

These veins form part of a high level Gold-Silver system centered on a large altered rhyolite dome complex, with surrounding geological formations, alteration patterns and extensive evidence of gold, silver and base metal mineralization. These features are indicative of a disseminated gold-silver system, similar to other large bulk tonnage gold-silver-base metal deposits associated with altered intrusive complexes, such as La Pitarrilla, El Cairo and San Agustin, located within a well recognized mineral trend in Durango State. The La Pitarrilla Silver Project of Silver Standard Resources is located 75 km ESE of the project area. The target objective at the Sandra-Escobar prospect is the discovery of a large disseminated gold-silver-base metal deposit

Surface Sampling and geological mapping – Sept/Oct 2005

A total of 120 samples were collected, including rock, vein and silt samples to investigate the mineralized structures observed on the Sandra I and Sandra II claims. The geological structure is typical of the Sierra Madre Occidental region, with Lower Volcanic Group sequence, composed of andesites, agglomerates and breccias, uncomformably overlain by the Upper Volcanic Group sequence, composed mainly of ignimbrites. Acidic dykes and porphyritic andesite form intrusions in these sequences.

The principal Maria Fernanda vein can be traced for 570 metres along strike from east to west, where it splits in two branches, and continues for a further 220 metres. Four other veins, the Sandra, Nora, Barite and Encino veins, outcrop over short distances to the east and west of the Maria Fernanda vein. The presumed extensions of these veins appear to be covered by overburden. The vein system observed on the Sandra project during this sampling program extends over an area of approximately 2,000 metres by 750 metres.

The vein outcrops at surface are relatively narrow, between 0.15 to 1.5 metres, although floats observed around the central part of the Maria Fernanda vein indicate wider widths. The mineralogy consists of argentite, native silver, electrum, sphalerite, galena and chalcopyrite. There is supergene enrichment consisting of malachite and azurite with small flakes of native silver. Gangue material is made up of quartz, calcite and chlorite. Of particular interest is the area around the Encino vein, which is covered by overburden. The mineralized zone sampled was observed in strongly altered bedrock, and returned 57.4 g/t silver over 7 metres. The table below lists the results of the surface sampling program:

Trenching Program – March 2006

Trench sampling confirmed silver and gold mineralization observed in earlier surface samples from the Barite, Maria Fernanda, and Encino veins. Assay results returned silver grades of up to 888 g/t (25.9 oz/t) silver over 0.7 metres at the Barite vein, and up to 9.95 g/t (0.29 oz/t) gold and 365 g/t (10.65 oz/t) silver over 0.5 metres at the Maria Fernanda vein, where trench samples indicate consistent silver/gold mineralization over a strike length of approximately 300 metres.

These results now confirm and define targets for drilling at the Sandra project in order to explore extensions of these veins along strike and at depth. The silver and gold grades observed in samples taken across the entire width of the mineralized structures are encouraging because they confirm the high grades seen in the earlier surface sampling program.  

The mineralized veins and structures identified by the earlier geologic mapping and surface sampling program (announced on November 2, 2005) were tested by trenches cut to expose the vein mineralization at approximately 25 - 50 metre intervals, depending on access and terrain. Samples were taken across the mineralized vein, the hanging wall and the footwall for analysis and interpretation. The results from samples taken from the Barite, Maria Fernanda, and Encino veins are presented below:

Barite Vein:
Two trenches, separated by a distance of approximately 40 metres, cut the Barite vein with the following results. The mineralized widths and high silver grades observed are very encouraging for future drilling to test this structure at depth.

Maria Fernanda Vein:
While the average width of the vein cut by the trenches was relatively narrow (0.30 to 1.0 metres), assays returned significant silver/gold mineralization over a strike length of over 300 metres. These results indicate that the Maria Fernanda vein is a strong mineralized structure carrying silver and gold, and drill testing will be required to test the width of the vein, grades and strike length at depth.

Encino Vein:
The Encino vein structure is buried under 2 –5 metres of overburden. Initial sampling of this structure returned silver values up to 113 g/t (3.30 oz/t) silver over 4.7 metres. The trenches cut to intersect the Encino vein did not reach the vein due to the depth of the overburden. However the exposed alteration zone confirmed the wide structure observed earlier, and returned anomalous silver values. The Encino structure shows potential for a wide, and possibly large, mineralized structure with lower silver grades than those observed at the Maria Fernanda and Barite veins. Drilling will be required to explore this structure below the overburden cover.

Two later check samples from an exposed section of the Encino vein returned the following values:

The strong mineralized structures identified by the earlier geologic mapping and surface sampling program, and now confirmed by the trenching program, have defined drill targets for future exploration at the Sandra project.

Pan American Silver Escobar Claims Agreement – March 2009

Canasil has signed an agreement with Pan American Silver Corp. prooviding an option for Canasil to earn a 51% interest in Pan American’s 634 hectare Escobar claims for US$1 million in exploration expenditures over 3 years. Pan American will then have the option either to back-in to a 51% interest in the combined Escobar and Sandra claims to form a joint venture with the objective of advancing the projects through to feasibility and to production if warranted, or to sell its 49% interest in the Escobar claims to Canasil. The initial letter agreement was signed on August 18, 2008.

Compilation and Review of Historical Data – 2009  

Compilation and review of historical geological mapping and surface sampling date from the project area has been completed. This data has identified a central 1.5 square kilometer zone of pervasive potassic alteration, centered on the rhyolite dome complex, and fringed by an extensive area with propylitic to advanced argillic alteration observed over 10 square kilometers. Stream sediment samples returned anomalous gold (+20 ppb) and silver (+1 ppm) values over an area of 5 square kilometers. Samples with over 100ppb gold, and some with over 1 ppm gold, occur within a smaller 2.5 square kilometer area. Surface rock-chip samples returned higher gold values ranging from 1.5 g/t to 15 g/t gold in multiple 1 to 3 meter wide fault/vein zones. Gold rich quartz-barite veins and veinlets are observed on the eastern flank of the main rhyolite dome, with gold, silver, copper, lead and zinc mineralization. A series of 12 underground samples taken by Pan American Silver (PAS) from shallow workings on narrow silver veins in this area, with an average width of 0.60 meters, returned consistently high silver values ranging from 172 g/t silver to 1,601 g/t silver. The alteration zones, anomalous gold-silver stream sediment signature, and associated pyrite mineralization are thought to represent a low-grade “halo” around gold-silver-base metal mineralization in a buried intrusive with a core of potassic alteration.

Epithermal gold and silver bearing veins are present on the outer fringes of the advanced argillic alteration zones on the south and west. The western epithermal vein system, mapped by PAS, extends over 1 kilometer with values ranging from 0.1 g/t to 5.8 g/t gold and 1.1 to 1,390 g/t silver over an average width of 0.65 meters in nine samples. The southern vein system mapped by Canasil consists of 5 vein systems over a strike of 2.5 kilometers. These veins include the Maria Fernanda vein with trench samples grading from 0.1 g/t up to 9.95 g/t gold and 8.1 g/t to 365 g/t silver over widths of 0.30 to 1.00 meters in 20 trench samples, and the Barite vein with trench samples grading from 6.2 g/t up to 888 g/t silver and 0.23% to 4.75% lead over widths of 0.70 to 2.00 meters in three trench samples collected by Canasil. The geological formations, alteration patterns and extensive areas with outcropping mineralized veins indicate an extended and complex period of intrusion and mineralization.

The geological mapping and surface sampling data from the combined project area includes 509 samples taken by Canasil, data on 61 samples provided by Pan American Silver, and 629 samples taken by La Cuesta International (LCI), Hecla Mining and Crown Resources, as well as mapping of geological formations and alteration patterns over the project area.

Further detailed surface sampling and geological mapping will be completed to investigate this system in detail and to define drill targets for further exploration.