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LA QUEBRADA COPPER-SILVER PROJECT

CASA DE PIEDRA SECTOR

TECNICAL REPORT

REGION IV, COQUIMBO PROVINCE, CHILE

for

MANDALAY RESOURCES CORPORATION

August 14th, 2012

Prepared by:

Michael Easdon M.Sc., CPG-07646,

Alcantara 1128, Depto 905

Las Condes, Santiago, Chile

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TABLE OF CONTENTS

1. SUMMARY ................................................................................................................ 1

2. INTRODUCTION ....................................................................................................... 3

3. RELIANCE ON OTHER EXPERTS .......................................................................... 4

4. PROPERTY DESCRIPTION AND LOCATION ......................................................... 5

5. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ................................................................................................... 8

6. HISTORY ................................................................................................................ 10

7. GEOLOGICAL SETTING AND MINERALIZATION ............................................... 13

8. DEPOSIT TYPE ...................................................................................................... 25

9. EXPLORATION ...................................................................................................... 26

10. DRILLING ............................................................................................................... 28

11. SAMPLE PREPARATION, ANALYSES AND SECURITY ..................................... 33

12. DATA VERIFICATION ............................................................................................ 38

13. MINERAL PROCESSING AND METALLURGICAL TESTING .............................. 40

14. MINERAL RESOURCE ESTIMATES ..................................................................... 40

15. MINERAL RESERVE ESTIMATES ........................................................................ 42

16. MINING METHODS ................................................................................................ 42

17. RECOVERY METHODS ......................................................................................... 42

18. PROJECT INFRASTRUCTURE ............................................................................. 42

19. MARKET STUDIES AND CONTRACTS ................................................................ 43

20. ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY IMPACT ........................................................................................................................ 43

21. CAPITAL AND OPERATING COSTS .................................................................... 43

22. ECONOMIC ANALYSIS ......................................................................................... 43

23. ADJACENT PROPERTIES ..................................................................................... 43

24. OTHER RELEVANT DATA AND INFORMATION .................................................. 44

25. INTERPRETATION AND CONCLUSIONS ............................................................. 44

26. RECOMMENDATIONS ........................................................................................... 45

27. REFERENCES ........................................................................................................ 47

28. CERTIFICATE OF AUTHOR .................................................................................. 49

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FIGURES Figure 4.1 – Project Location Map ............................................................................... 5 Figure 4.2 – La Quebrada Property Mining Concessions Map ..................................... 7 Figure 4.3 – Casa de Piedra Sector Mining Concessions ............................................ 8 Figure 7.1 – La Quebrada Sector Regional Geology................................................... 16 Figure 7.2 – La Quebrada Sector Local Geology ........................................................ 18 Figure 7.3 – Casa de Piedra Sector Geological Map .................................................. 22 Figure 7.4 – Casa de Piedra Sector Cross Section A-A´ ............................................. 23 Figure 7.5 – Casa de Piedra Sector Cross Section B-B´ ............................................. 23 Figure 10.1 – Casa de Piedra Sector Plan Map Manto 1 .............................................. 32 Figure 10.2 – Casa de Piedra Sector Plan Map Manto 2 .............................................. 32 Figure 10.3 – Casa de Piedra Sector Plan Map Manto 3 .............................................. 33 Figure 11.1 – Casa de Piedra Sector Relative Assay Error- Geoanalitica-Act/ALS…...37

TABLES Table 1.1 – Casa de Piedra Sector Resource Estimate .............................................. 1 Table 1.2 – Casa de Piedra Sector 2103 Exploration Budget ..................................... 2 Table 4.1 – Casa de Piedra Sector Concessions ........................................................ 6 Table 6.1 – La Quebrada Project – UN-ENAMI Drill Results ..................................... 10 Table 6.2 – La Quebrada Project – Placer Dome Drill Results .................................. 10 Table 6.3 – La Quebrada Property – Casa de Piedra Sector 2003 Mineralized Intervals ...................................................................... 12 Table 7.1 – Casa de Piedra Sector – DHCP-17 Mantos ........................................... 24 Table 10.1 – Casa de Piedra Sector 2011 Drill Program ............................................. 29 Table 10.2 – Casa de Piedra Sector 2011 Drill Hole Intercepts .................................. 30 Table 10.3 – Casa de Piedra Sector 2012 Drill Program ............................................. 30 Table 10.4 – Casa de Piedra Sector 2012 Drill Hole Intercepts .................................. 31 Table 11.1 – Casa de Piedra Sector 2011 Barren Quartz Sample Inserts ................... 35 Table 11.2 – Casa de Piedra Sector 2012 Barren Quartz Sample Inserts ................... 36 Table 11.3 – Casa de Piedra Sector Summary Statistics ............................................. 36 Table 12.1 – La Quebrada Property Comparative Assays ........................................... 39 Table 14.1 – Casa de Piedra Sector Resource Estimate ............................................. 40 Table 26.1 – Casa de Piedra Sector 2013 Exploration Budget .................................... 46

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1. SUMMARY

Mr. Ronald Luethe, General Manager, Mandalay Resources Chile SpA Ltda (“Mandalay”) has retained Michael Easdon to prepare a report on behalf of Mandalay Resources Corporation, which is in compliance with the requirements of Canadian National Instrument 43-101, and which addresses mineral exploration at the Mandalay owned Casa de Piedra Sector (Casa de Piedra) of its 100% owned La Quebrada Copper (“Cu”) - Silver (“Ag”) Project, located in the Coast Range, Chile, and which describes the work performed, and the results obtained by, or on behalf of, Mandalay on the project to date. Mandalay Resources Corporation, which is listed on the Toronto Stock Exchange as MND, is headquartered at 76 Richmond Street East, Suite 330, Toronto, Ontario, M5C 1P1, Canada. This report, which is effective as at August 14th, 2012, updates the Casa de Piedra Sector of the La Quebrada Project Technical Report prepared by L. Diaz dated April 14th, 2010, which is filed on SEDAR (www.sedar.com).

The La Quebrada Project (“La Quebrada”) is located in Region IV, Chile, 40 km northeast from La Serena and approximately 400 km north of Santiago, Chile’s capital. The property is located in the Coastal Cordillera, and lies at altitudes ranging between 1,500 to 2,700 meters (“m”) above sea level.

Mandalay acquired a 100% interest in La Quebrada by the issuance of 400,000 shares to the previous owner on May 17th, 2010. La Quebrada comprises 76 predominantly contiguous concessions, which cover a total of 8,907 hectares (“ha”). The work that has been conducted at La Quebrada (trenching, mapping and drilling) has been designed to explore for copper-silver mineralization and to support the development of a copper-silver resource estimate.

The Casa de Piedra Sector (886 ha in 9 contiguous concessions) is the principal sector of the La Quebrada property that has been explored by Mandalay and within which an initial resource estimate, using a cut-off grade of 3m @ 0.3% Cu, was calculated June 18th, 2012, as shown in Table 1.1 below.

Table 1.1 - Casa de Piedra Sector, La Quebrada Project Resource Estimate

Using Cutoff of 3 m of 0.3% Cu

Grade

Tonnes (000,000)

Cu %

Ag g/t

Contained Cu lbs (000,000)

Contained Ag oz (000,000)

Indicated Resource 34.8 0.6 10 459 11.2

Inferred Resource 1 0.6 11 13 0.4

Notes:

1. CIM Definitions used for Indicated and Inferred Resources 2. Mineral Resource estimate prepared under the supervision of Ronald Luethe, (General Manager of

Mandalay Chile Ltda., an Idaho registered Professional Geologist and an American Institute of Professional Geologists (“AIPG”) Certified Professional Geologist, and a Qualified Person defined by NI 43-101); and reviewed and approved by Michael Easdon (Consultant, Certified Professional Geologist (CPG-07646) in good standing with the AIPG, and an Independent Qualified Person under Canadian NI 43-101).

3. No capping of copper or silver assays was used. 4. Ore grades for copper and silver for each 25 x 25 metre (“m”) x manto thickness Resource block were

estimated by the inverse distance cubed method inside of manually interpreted manto boundaries. 5. Mineral Resources are reported at a cut-off grade of 0.3% Cu. 6. A minimum manto width of 3 m was used, including diluting material of zero grade, where the mantos are

narrower. 7. A density of 2.71 t/m3 was used. 8. Resources were classified as Indicated if 2 or more holes were included in the 300 m search radius and

Inferred if only 1 hole was included in the search radius.

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9. Mineral Resources are reported at a cut-off grade of 0.3% Cu over a minimum manto thickness of 3 m which can include <0.3% Cu internal dilution.

10. Numbers may not add due to rounding.

An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. It cannot be assumed that the Inferred Mineral Resources will be upgraded to an Indicated Resource as a result of continued exploration. Furthermore, it cannot be assured that either the Indicated or the Inferred Mineral Resources will be converted to a “Reserve” category at such time as feasibility studies are initiated.

Mandalay has generated a development drilling (in-fill) budget that provides for the cost of drilling 3,600 m of core drill holes, initial metallurgical studies, modeling and initial scoping economic studies, water resource definition, and management and administration for the year 2013. The budgeted cost for 2013 is estimated to total US $1,498,700 as summarized in Table 1.2.

Table 1.2 - Casa de Piedra Sector - 2013 Budget

Item Cost USD

Management and Staffing 323,600

Trenching, Drill Road and Pad Construction 65,500

Drilling - 3,600 m 830,200

Assaying 22,100

Metallurgy 30,000

Other Items - including , Modeling, Scoping & Economic Studies

13,600

Field Office 7,500

Food and Lodging 96,200

Land Maintenance and Payments 110,000

TOTAL 1,498,700

The mapping, trenching and diamond drilling (7,430 m) performed by Mandalay at Casa de Piedra during the period 2011 to 2012, has allowed Mandalay to define 3 principal mineralized horizons (“mantos”). The mantos, which primarily comprise calcareous sedimentary rocks which host finely disseminated bornite and chalcopyrite, range in thickness from 1 - 27 m with intervening intervals of thin discontinuous mineralization (primarily fine disseminated bornite and chalcopyrite), which is hosted in calcareous sediments along with traces of chalcocite, digenite, covellite, tennantite and galena. Thin barite-quartz veins with minor bornite and chalcopyrite occur in overlying basalt and conglomerate units and in the underlying “ocoite” andesite.

Per Diaz, L., 2010, “the mineralization is hosted within units of the Lower Cretaceous Arqueros Formation (Fm), which formation is overlain by the Quebrada Marquesa Fm which is made up of clastic sedimentary rocks of largely continental origin and andesitic lavas, breccias and tuffs.

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The units are gently folded by a broad southward plunging anticline, with dips of typically less than 25 degrees being mapped. There have been three episodes of block faulting: 1) N to NNW normal faulting; 2) E-W reverse faulting; and 3) NW to NNE listric faulting. The listric faulting involved major vertical movements and the rotation of blocks which has displaced the mineralized mantos.” Based on more recent work by Mandalay geologists, mantos in the Casa de Piedra Sector are hosted within the basal unit of the Quebrada Marquesa Fm.

Diaz further states that “the only evidence for intrusive activity in the area is the presence of rhyolitic dikes in the northeast Casa de Piedra. There is no evidence for hydrothermal alteration being associated with the mineralized mantos. Barite and manganese mineralization (oxides?) is recognized locally towards the top of the Quebrada Marquesa Fm.

The Cu-Ag mineralization at Quebrada is considered to be a reduced-facies, syn-diagenetic sub-type of “Sediment-hosted Copper Deposit”, as suggested by the lack of hydrothermal alteration and absence of related intrusives.”

Per 43-101 requirements, the author has reviewed the proposed 2013 development program and budget. Based on his technical experience, the author believes that the property is of merit and warrants continuing exploration/development.

2. INTRODUCTION

Mr. Ronald Luethe, General Manager, Mandalay Resources Chile SpA. (“Mandalay”) which is a subsidiary of Mandalay Resources Corporation (76 Richmond Street East, Suite 330,Toronto, Ontario, Canada) has retained Michael Easdon to prepare a report which is in compliance with the requirements of Canadian National Instrument 43-101 (“NI43-101”), and which addresses mineral exploration at Casa de Piedra of La Quebrada located within the Coastal Cordillera near to La Serena, Chile. This report describes the work performed, and the results obtained by, or on behalf of, Mandalay on the project to date.

This Technical Report has been prepared in compliance with the TSX regulations which state that a Technical Report must be prepared within 45 days of the issuance of a Press Release which announces significant information with regard to the property in question. The Press Release dated July 3rd, 2012 reported an initial resource estimate for Casa de Piedra of the Quebrada Property as shown in Table 1.1.

M. Easdon, geologist, served as the Qualified Person responsible for the preparation of this report. Easdon is a Qualified Person according to the Canadian National Guidelines, and has more than 30 years of experience in exploration, including exploration for copper, gold and silver in the Andean Cordillera. The author understands that this report will be filed in SEDAR with the Canadian Securities Administrators and submitted to the TSX Exchange in support of filings by Mandalay.

The author of this report, Mr. Easdon, is considered to be an independent Qualified Person under NI 43-101CP guidelines and is responsible for verifying the accuracy of the scientific and technical information contained in this report. The author was requested to review the work that was performed by Mandalay and to confirm that Casa de Piedra, as summarized in this report, continues to warrant being held by Mandalay.

The purpose of this study is to update the Casa de Piedra section of the NI43-101 Technical Report prepared by L. Diaz (La Quebrada Project, La Serena, Chile; NI43-101; prepared for Mandalay Resources Corporation) in order to comply with the Standards of Disclosure for

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Mineral Projects NI43-101, its companion Policy 43-101CP and Form 43-101F1, and in accordance with the technical reporting guidelines and requirements in those documents. Specifically, Mandalay completed 2 phases of drilling at La Quebrada during the period 2011 and 2012, which work has allowed Mandalay to generate a mineral resource as reported in its Press Release dated July 3rd, 2012, and for which a Technical Report verifying the announced results must be prepared within 45 days of the Press Release.

This report is based on various geological reports, maps, assorted technical reports and papers, published government reports, company internal documents, letters, and memorandums, and public information as listed in Section 27 “References” at the conclusion of this report. The author has assumed that all of the information and technical documents listed under “References” are accurate and complete in all material aspects. The author also considers that the internal documents that support the work and activities on behalf of, or for, Mandalay contain relevant and accurate data.

The author visited the Casa de Piedra Sector of the La Quebrada Project and facilities on May 1 and May 2, 2012, during which time he visited the property and confirmed that the drilling had been conducted as stated. The author also verified that the drill site locations and drill hole orientations were as stated and that Mandalay had complied with all of the environmental requirements. The author also visited the core/cuttings logging facilities in La Serena in which all of the core/cuttings/lab rejects and pulps are stored. The author also viewed assorted core intervals thereby confirming that the core had been properly logged, and marked for splitting, and that the appropriate intervals had been sawed in half using a diamond blade saw.

This report is based on that information known to Easdon as of August 14th, 2012.

3.0 RELIANCE ON OTHER EXPERTS

This document has been prepared with input from Mandalay. The author has relied upon, and believes that there is a reasonable basis to rely upon, the contribution of Mandalay and other parties mentioned below because all of the information presented in this report is verifiable.

The author has relied upon information provided by Mandalay that describes the terms of the lease-purchase option agreements, and subsequent modifications, under which Mandalay purchased the project and on data that describe the exploration rights, obligations and concession dimensions and coordinates. The author is not competent to comment on the ownership of the mining rights but has relied on information (Affidavit, dated 8th May, 2012) provided to him by Mandalay´s landman (Miguel Angel Tobar) in La Serena. The author has reviewed data that indicates that the appropriate concession payments have been properly paid and that the concessions are valid through April 2013 (Certificado de Vigencia, dated 22nd March, 2012) and that the property and the mineral rights are 100% owned by Mandalay (Refer to Section 4). The author has been informed by Mandalay and its legal counsel that, to the best of their knowledge, there are no current or pending claims or litigations that may be material to the La Quebrada Project assets. Mandalay assumes full responsibility for statements on mineral title and ownership. The author does not accept any responsibility for errors pertaining to information provided with regard to the title and purchase of the La Quebrada Project.

The author has relied on data, including drill hole logs, laboratory assays, drill hole and trench location surveys, which were provided by Mandalay and which describe the work performed during the 2011 and 2012 field seasons at La Quebrada, as described in Sections 9 and 10.

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The description of geology and related topics (Section 7) are based on information provided to him by Mandalay and that prepared by L. Diaz (References - Diaz, L., 2010). The author has also relied on his own personal field observations.

4. PROPERTY DESCRIPTION AND LOCATION

The Casa de Piedra Sector of La Quebrada, which is located approximately 40 km northeast from La Serena in Region IV, Chile (refer to Figure 4.1), comprises a total of 886 ha contained in 9 contiguous mining concessions. Casa de Piedra is located within and at the northern extent of the larger La Quebrada Property.

The approximate center of Casa de Piedra is located at UTM (Universal Transverse Mercator, a metric based coordinate system) PSAD 56 N6.709.000 and E315.700. The Casa de Piedra concessions are identified in Table 4.1 and depicted in Figures 4.2 and 4.3 below.

Per Díaz, L., 2010, Mandalay had acquired a 100% interest in the Casa de Piedra concessions which were optioned as part of the larger “La Quebrada” Property from Inversiones y Minería Andalé Limitada per option agreements referred to as the “La Quebrada” contract. This contract was signed on July 25, 2001 and subsequently amended on February 27, 2004, and March 31, 2009.

Figure 4.1 - Casa de Piedra Copper-Silver Project – Location Map

Prepared by Mandalay, 2012

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Table 4.1 - Casa de Piedra Sector – Concessions

Nº Concessions Rol Nacional Hectares

1 QUEBRADA DOS 1/20 04101-1973-0 100

2 QUEBRADA DOS 21/40 04101-1974-9 100

3 QUEBRADA DOS 41/60 04101-1975-7 90

4 QUEBRADA UNO 1/20 04101-1831-9 100

5 QUEBRADA UNO 21/40 04101-1830-0 100

6 QUEBRADA UNO 41/60 04101-1829-7 96

7 LOMA 8 21/40 04101-1971-4 100

8 LOMA OCHO 41/60 04101-1972-2 100

9 SAN PEDRO 1/20 04101-2161-1 100

TOTAL 886

Per documents dated May and June, 2010, Mandalay entered into agreements by which it acquired the La Quebrada concessions from Inversiones y Mineria Andalé Limitada for the equivalent of CDN $136,000 in Mandalay stock (400,000 shares) plus a 2% net smelter return (“NSR”) on production, as well as acquired the balance of the La Quebrada concessions for a cash payment of USD $250,000 plus a 2% NSR royalty on production. The 2% NSR royalty may be purchased for USD $1,000,000 prior to January 31st, 2013. Mandalay transferred 400,000 shares of Mandalay shares to Inversiones y Mineria Andalé Limitada and is 100% owner of the La Quebrada Property.

Mandalay has stated that the La Quebrada Project concessions (including the Casa de Piedra concessions) are in good standing until March 31, 2013 by which time the appropriate property payments must be made for the following year. Per data provided by Mandalay, the total cost to maintain the La Quebrada concessions, as they are currently constituted, for the period 2012-2013 was on the order of $61,900 based on the June 2011 (CH $39,689) UTM - a Chilean non-monetary inflation monthly adjustment unit - and the US dollar value (USD 512.47) as at June 6th, 2012. The estimated cost to maintain the La Quebrada concessions for the period 2013-2014 is estimated to be on the same order as for 2012. This estimated amount may be higher, or lower, depending on the inflation rate in Chile and the US dollar exchange rate at the time when the actual property payments are made. There are no work commitments that must be met to maintain mining concessions in Chile; however the filing costs must be made on an annual basis to maintain the concessions.

Mandalay has entered into agreements with the local community (Comunidad Agricola Olla de Caldera) that owns surface rights over the La Quebrada Property which allow Mandalay all rights of access throughout the property as well as the right to construct drill roads, pads, trenches, etc. Mandalay has agreed to restore the surface to as near as possible to its original conditions. Over the last three years Mandalay made payments to the community of CH $200,000 monthly in 2010, CH $1,000,000 monthly in 2011, and CH $1,800,000 monthly in 2012. Mandalay estimates that payments will be approximately CH $2,000,000 monthly in 2013. At the current exchange rate, CH $483 is equivalent to US $1.

The author is not aware of any back-in rights, encumbrances or additional payments that could affect the ownership of the Quebrada Property.

The author is not aware of any environmental liabilities to which the La Quebrada property may be subject.

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The author is not aware of any other significant factors or risks that may affect title, or the right or ability to perform work on the property.

A “Declaración de Impacto Ambiental” (“DIA”), equivalent to an Environmental Impact Assessment, is required for all ground-disturbing exploration activities in Chile. On October 27th, 2011 Mandalay filed a DIA that was approved by competent authorities on February 2nd, 2012. The DIA allowed Mandalay to conduct the road construction and drilling proposed for the 2012 field season. Mandalay agreed to fill in all trenches, cap all drill holes and restore the drill sites after the project was terminated. This work has been completed and signed off by the community. Photographs of the trenches and drill holes were taken and archived.

The surface rights belong to “Comunidad Agricola Olla de Caldera”. Mandalay has written agreements with the community that permit access, construction of a camp and exploration within the property.

Mandalay acquired permits from the Chilean environmental agency (Servicio de Impacto Ambiental), which allowed it to conduct the 2011 and 2012 drilling programs. Mandalay has agreed to restore the drill site, etc. to as near as possible to their original condition.

Figure 4.2 - Casa de Piedra Sector Concessions as located within La Quebrada Property

Drafted by Mandalay, 2012

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The author is not aware of any other significant factors or risks that may affect access, title, or the right or ability to perform work at the Casa de Piedra Project.

Figure 4.3 - Casa de Piedra Sector Concessions

Drafted by Mandalay, 2012

5. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

The following sections are taken from Diaz, L. 2010.

“Access from La Serena is via 33 kilometers of paved highway followed by good gravel roads via two alternative routes (total driving time approximately 2 hours). Access to and through most of the property is accessible by a network of old mining roads and bulldozer tracks which are largely accessible by two-wheel drive vehicles.

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The property is located at between 1,000 and 1,500 meters above sea level within the Cordillera Principal. Relief is moderate except where creeks have locally formed canyons.

The area is arid but frequently subject to low-level clouds and mist drifting into the valleys from the nearby coast. There is no surface water available. Vegetation consists of sparse desert grasses, shrubs and cactus.

Soil is considered to be mostly alluvial-colluvial, with coarse size particles, produced mostly by in-situ erosion with little displacement. Organic soil cover is low to non-existent.

Both the location and the climate within the property area afford year-round exploration and mining.

La Serena is a thriving city of approximately 200,000 inhabitants and is the nearest commercial center. It has been an important mining center since the discovery of silver in the nearby Arqueros District in 1825. The attitude to mining is positive as a result of a long tradition of small to medium scale copper mining, and large-scale iron and gold mining.

The climate at the project is clearly seasonal, with dry warm summers and colder, sometimes rainy winters. In summer, the temperatures vary from 12 to 24 degrees Celsius. Morning fogs are very common, but they tend to dissipate by noon.

In winter, the temperatures descend to between 6 and 12 degrees Celsius with slight rain that may become snow at higher altitudes. Precipitation averages less than 10 centimeters per year.”

”Goat and sheep herders living in temporary housing sparsely inhabit the area where the property sits. There is no infrastructure within the property other than gravel roads and exploration adits. Underground water has been intercepted in drill holes, but its quantity and quality have not been assessed. The nearby mines haul water from about 25 km from a source in the Elqui river valley. Suitable sites for dumps, tailing areas and potential processing plants should not be a problem due to the mostly gently sloping landscape.

Power may be obtained from the high voltage power line that runs along the Elqui river valley (about 25 km). This is part of the national grid system and currently feeds mines and local industries.

An experienced labor force and service facilities are available at La Serena. The Chilean mine industry is well developed, with the country being a major producer of copper, iron ore and other metals. Mining supplies and equipment, as well as highly trained technical and professional workforce are available in Chile. International engineering and mining service companies operate in Chile and provide support to foreign companies.”

La Serena can be accessed by air, both from Santiago and from (and to) most of Chile. Furthermore La Serena is accessed by the Pan American freeway Ruta 5 which extends from Puerto Montt in southern Chile through Santiago and to the border with Peru to the north.”

To date, Mandalay has not obtained any water rights in the vicinity of Casa de Piedra, and there is no assurance that Mandalay will be able to obtain a nearby source of water. Mandalay has been buying and transporting water for drilling purposes from the nearby village of Vicuña.

It is Easdon´s opinion that work can be performed year round on the property.

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6. HISTORY

The following is taken from Diaz, L. 2010, who states that “Most of the information on the previous exploration work performed was provided by Doug MacDonald of “Inversiones y Minería Andalé Ltda.” or from the J. Toohey (2001) report to Andalé.”

6.1. United Nations-ENAMI: “The Tugal concessions (covering approximately 200 hectares and presently owned by a local group) were first investigated by an United Nations-ENAMI joint venture from 1967 to 1970. They drilled eight short core holes, excavated several shallow shafts and short drifts, and performed limited preliminary metallurgical tests on bulk samples extracted from the underground workings. Drill intersections included:

Table 6.1 - La Quebrada Project - UN-ENAMI Drill Results

Drill Hole Interval (m)

% Cu DDH-1 1

0.0

1.07 DDH-2 3

.0

1.07 DDH-3 2

.4

1.22 DDH-5 4

.0

1.07 DDH-6 9

.0

1.01 DDH-7 4

.6

1.11 DDH-8 9

.0

1.06

The then owner of the Tugal property commissioned metallurgical tests in 1967. This work included four flotation tests that were carried out on a 50 kg sample. The best results yielded a Cu recovery of 96% after grinding to a 56%-100 mesh.

Further testing was carried out in 1969 and 1970 by the Denver Equipment Company Laboratory and by the Universidad de Concepcion. The former lab processed an 80 kg sample and the latter a 45 kg sample. The results have shown that a relatively fine primary grind (100-150 mesh) followed by regrinding to approximately 90% -325 mesh was required to achieve Cu recoveries of up to 85%. Silver recoveries of up to 88% were achieved.”

The Tugal Mine is adjacent to, but not part of, the La Quebrada property.

6.2. Placer Dome: “Placer Dome optioned part of the La Quebrada Property in 1981 and drilled an additional six core holes totaling 415 meters. Intersections included:

Table 6.2 - La Quebrada Project - Placer Dome Drill Results

Hole Interval (m) % Cu G/t Ag

81-1 6.99

1.47 23.5 81-2 9 1.47 58.1

81-3 No Limestone Intersected

81-4 No Limestone Intersected

81-5 5.35

0.14 9.4 81-6 5.

8 0.59 9.8

6.3. Noranda: Noranda optioned the La Quebrada Property from Inversiones y Minería Andalé Ltda. In December of 1995 and in 1996 Noranda carried out a program of rock chip, soil and stream sediment geochemistry, ground magnetic survey, and a single line of IP. Noranda

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reported assays of 0.64% Cu over 19.5 meters and 0.54% Cu over 43.5 meters from exposures of volcanics, and 1.06% Cu over 26.25 meters, 2.8% Cu over 10 meters, 2.07% Cu over 10 meters and 1.44% Cu over 7 meters (all reported as true thicknesses) from carbonate members overlying the volcanics.

Despite this initial encouragement, they concluded that the size potential of the mineralization was limited, and terminated their option agreement in January of 1997.”

6.4. Minera Teck Chile: “Minera Teck Chile S.A. optioned the La Quebrada Property in late 1998. Teck’s exploration work covered a period from 1998 to 2000. The initial program involved the collection of 230 channel samples from outcropping carbonate beds and the underlying altered volcanics. This zone, the Casa de Piedra Sector of the present day La Quebrada Property, was chosen because the entire stratigraphic section of the prospective host formation was preserved between footwall and hanging-wall volcanic units along the east slope of a deeply incised drainage and afforded the opportunity to test the stratigraphic continuity with the mineralized horizons. The objective was to characterize the grade distribution and continuity of mineralization over the entire thickness of the carbonate unit and over a significant continuous strike length; and to outline areas of more favorable grade for subsequent trenching.

The stratigraphic thickness-weighted average grades of the 93 channel samples of mineralized horizons within the carbonate package over 1.2 kilometers strike length were 1.30% Cu and 14.0 g/t Ag. The assays that comprised this average ranged from 0.13 to 3.06% Cu and from 1.6 to 77.4 g/t Ag. The stratigraphic thicknesses represented by these samples were between 0.6 and 3.4 meters (average of 1.65 meters). The distance between adjacent samples varied between 10 and 75 meters depending on the distribution of available outcrop.

Reconnaissance geological mapping of the area was carried out in conjunction with the channel-sampling program during 1999. Results identified three separate fault-bounded blocks that expose the prospective carbonate stratigraphy over relatively broad areas; (1) the Casa de Piedra – Tugal (presently third-party claims measuring 0.5 km x 0.25 km to 0.5 km) – Totorita block measuring 4.5 km x 0.5 to 1.2 km, (2) the Barrancones (Cerro Colorado) block measuring 1.2 km x 2.5 km, and (3) the Quebrada Mala block measuring 1.2 km x 2.5 km.

Reconnaissance mapping and prospecting of the La Quebrada Property revealed of sulfide and metal zoning. The mineralization at the Casa de Piedra and Tugal sectors comprises primary bornite and chalcopyrite largely replaced by chalcocite, which is commonly replaced by covellite, suggesting proximity to a source of progressively more Cu-rich fluids. At the Totorita zone to the southwest, the mineralization is mainly bornite, chalcopyrite and pyrite, with lesser replacement of chalcocite. Farther southwest the sulfide assemblage includes chalcopyrite and their progressive conversion to chalcocite occurred in conjunction with the oxidation of detrital magnetite to specularite. This is evident from the petrographic observation of specularite growing at the expense of magnetite contemporaneously with the precipitation of bornite and chalcocite. It is a common feature of syngenetic sediment-hosted stratiform copper occurrences (Kapler, 1998).”

6.5. Mandalay Resources (2003): “Information about exploration conducted by Mandalay Resources was taken mainly from the Sandidge and Cox (2005) Technical Report. In 2003, Mandalay Resources Corp. undertook an exploration program consisting of reverse circulation (“RC”) and diamond (“DD”) core drilling, logging, assaying, and subsequent geological mapping and outcrop sampling throughout areas of the La Quebrada Property.”

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6.5.1. Reverse Circulation and Diamond Drilling: “A drilling program was conducted in mid-2003 in the most accessible areas of the property and within 150 [to] 300 m distances from the previously sampled manto outcrops. Fourteen RC drill holes were spaced over an area more than 10 km long. Major Drilling Chile Ltda. drilled fourteen vertical holes totaling 1,914 meters to an average depth of 120 m. Three vertical diamond holes were drilled as twin holes at selected RC sites. RC drilling was done using a UDR 100 (ED-6) machine and the DD drilling was done using a UDR 200 (ED-10) machine.

The DD holes were drilled at sites PQ5, PQ10 and PQ 13 primarily to study the lithological and structural patterns of the mineralization, but also to check continuity between drilling methods, especially on the contents of micro-scale of mineralization. The results were comparable with those obtained from RC drilling.”

Diaz, L. (2010) states “that previous outcrop mapping and sampling was performed by Mandalay in the areas of Las Dálmatas and Barrancones – Quebrada Casa de Piedra – Loma Gruesa – Cerro Colorado – Quebrada Totoritas. The objective was to support previously obtained data from the channel and chip sampling programs and to locate viable sites for a new stage of exploration drilling.”

Several areas were identified during mapping as having good potential to host additional copper and silver resources. These areas were selected for the phase two drilling program that is the main focus of this report.

6.6 Mandalay Resources (2006): “One hundred and eleven (111) reverse circulation and 11 diamond drill (DD) holes were drilled during the 2006 campaign. The bulk of this drilling was performed in the Leoncita – Dálmatas areas and where 9 DD holes (DDH-01 to DDH-09) and 97 reverse circulation (RC) holes (RC-001 to RC-095, and RC-098-099) were drilled. Two RC holes (RC-096 and 097) and two DD holes (DDH-10 and DDH-11) were drilled at Casa de Piedra.

The following tables, which are taken from Diaz, L., 2010, summarize the drill results obtained from Casa de Piedra. Mineralized intervals were calculated at a 0.2 % copper cut-off, with a minimum 3 m interval length and 2 meters maximum internal dilution.

Table 6.3 - La Quebrada Project – Casa de Piedra Sector Mineralised Intervals (2003)

Hole ID Location X Location Y Interval

PQ-03

314,950

6,708,100 4 m (22 - 26) @ 0.47 Cu %, 3.5 gpt Ag 6 m (34 - 40) @ 0.6 Cu %, 5 gpt Ag

PQ-04

314,547

6,707,616

6 m (19 - 25) @ 0.76 Cu %, 6.7 gpt 5 m (31 - 36) @ 0.27 Cu %, 2.7 gpt Ag 4 m (46 - 50) @ 1.05 Cu %, 7.5 gpt Ag

PQ-05

314,435

6,707,484

5 m (9 - 14) @ 0.76 Cu %, 8.6 gpt Ag

7 m (20 - 27) @ 0.19 Cu %, 4.2 gpt Ag 4 m (36 - 40) @ 0.69 Cu %, 6 gpt Ag

PQ-06 314,435 6,707,176 6 m (23 - 29) @ 0.93 Cu %, 9 gpt Ag

“Geological mapping and sampling of outcrops were carried out in the areas of Las Dálmatas and Barrancones – Quebrada Casa de Piedra – Loma Gruesa – Cerro Colorado – Quebrada Totoritas. The objective was to support previously obtained data from the channel and chip sampling programs and to locate viable sites for a new stage of exploration drilling. Several areas were identified during mapping as having good potential to host additional copper and silver resources. These areas were selected for the phase two drilling program which is the main focus of this report (Diaz, L., 2010).”

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The author is not aware that any of the above listed companies prepared any type of resource estimation.

No significant historical mineral resource or mineral reserve estimates have been prepared for the La Quebrada Property, including Casa de Piedra.

There has not been any significant production from the La Quebrada Property, other than from very limited amounts of small-scale artisanal mining on narrow zones of copper oxides in 5 areas within Casa de Piedra. There is no ongoing small-scale mining at La Quebrada at this time.

7. GEOLOGICAL SETTING AND MINERALIZATION

Tectonic Setting of Central and Northern Chile: The following is taken from Diaz, L. 2010. “Subduction at the western margin of the South American plate has dominated the structural and magmatic evolution of the Central Andes since the beginning of the Jurassic. The resumption of subduction at this time marked the breakup of Pangea-Gondwana and the beginning of the Andean Tectonic Cycle (Mpodozis and Allmendinger, 1993).

During the Jurassic to Early Cretaceous, prior to 127 Ma, South America was stationary relative to the mantle, the subduction boundary was retreating and extensional deformation characterized the overriding plate. A composite system of magmatic arcs and related back-arc basins prevailed during an episode of intra-continental rifting, spreading and subsidence along the western continental margin. The convergence direction during this period is inferred to have been generally perpendicular to the arc. Alternating periods of predominately volcanism or plutonism reflect changes in the rate of subduction, as a reduced subduction rate would lead to dormancy in the extensional fault systems and an increase in subduction rate would have resulted in their reactivation (Dallmeyer et al, 1996).

A transition from extensional dip-slip to transpressive sinistral strike-slip tectonics at the Andean plate boundary at about 126 Ma suggests that a change in the convergence rate and vector is inferred to have reduced the rate of subduction boundary retreat and led to the onset of oblique subduction.

This transition was coeval with the initiation of the opening of the South Atlantic and may reflect global plate reorganization (Dallmeyer et al, 1996).

Reactivation of extensional tectonics occurred from 106-103 Ma in northern Chile and is interpreted as a temporary return to more perpendicular convergence. This event was followed by another transition to sinistral strike-slip deformation, marking the resumption of oblique subduction (Dallmeyer et al, 1996).

Late Cretaceous recorded a major tectonic change at the Andean Plate boundary. This resulted in destruction of the back-arc basins and left a series of eastward migrating continental magmatic arcs as the dominant tectonic element (Mpodozis and Ramos, 1990). This change was related to more rapid opening of the South Atlantic and initiation of more rapid westward drift of the South American plate. From this time onward through the Tertiary, changes in the velocity and direction of plate convergence determined the various deformational events in the Andes.

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Migration of the magmatic arc eastward with time is a consequence of the relative rates of drift of the South American plate and subsidence at its western margin, with the continent essentially overriding its subduction zone (Mpodozis and Allmendinger, 1993).”

Regional Setting: The following is taken from Diaz, L. 2010. “At the beginning of the Jurassic, the paleogeographic configuration of the coastal range comprised a north-south trending marine and sub-aerial volcanic chain and marine back-arc basin situated along the western edge of the South American continental plate (Espinoza, et al, 1996).

The Jurassic to Early Cretaceous arc-back arc basin system in northern Chile is divided into 2 segments. The northernmost segment extends from Arica (latitude 18oS) to Chañaral (latitude 26°S) and consists of the La Negra arc and the Tarapaca back-arc basin (Mpodozis and Ramos, 1990).

The La Negra Formation comprises more than 10,000 m of tholeitic to calc-alkaline olivine basalt, basaltic andesite and andesite lavas and pyroclastics with intercalations of marine clastic and volcanoclastic sediments (Losert, 1974 and Buchelt and Tellez, 1988). The volcanic series also includes basaltic to andesitic subvolcanic plugs, dikes, and intrusives of gabbroic granodioritic composition (Sillitoe, 2003).

Deposition of the La Negra Formation extended from the Middle to Late Jurassic. It consists of a series of relatively thin amygdaloidal flows with partially eroded scoria or brecciated flow tops in- filled with volcanoclastic sediments and tuffs. Some authors have interpreted these rocks as a volcanic arc while others have suggested that they were erupted into an ensialic back-arc basin. The gabbros, diorites and granodiorites intruding the volcanic pile range in age from 202-103 Ma and show five distinct eastward younging ages (Boric et al, 1985).

Varying degrees of regional alteration of the La Negra Formation, involving the association of epidote, chlorite, calcite, actinolite, quartz, hematite, albite, prehnite and pumpellyite, have been documented and are interpreted as low-grade burial metamorphism. The alteration is controlled by the primary permeability of the lavas.

East of the La Negra volcanic succession lies the Tarapaca back-arc basin, which during the Jurassic received marine sedimentation. A north to south marine regression resulted in the basin being filled with continental red beds by the late Early Cretaceous.

The volcanic/plutonic cycle is repeated in the Early Cretaceous with deposition of the Bandurrias Group volcanic sequence to the east of the La Negra volcanic belt followed by emplacement of Early Cretaceous plutons that are coeval with the beginning of strike-slip deformation on the Atacama Fault System beginning at about 126 Ma (Dallmeyer et al, 1996).

The southern segment of the Jurassic to Early Cretaceous arc-back basin system extends south from the latitude 26ºS to latitude 33ºS. This segment comprises a Jurassic magmatic arc, the Central Chile “aborted” marginal basin, and the Aconcagua back-arc sedimentary platform (Mpodozis and Ramos 1990). The marginal basin is referred to as “aborted” because, despite eruption into the basin of large volumes of flood basalts, no oceanic lithosphere was formed and the basin failed to evolve into a marginal basin sensu stricto (Aberg, et al, 1984).

This segment had completed one cycle of volcanic arc and basin development by the end of the Jurassic and a new cycle began in the Early Cretaceous with formation of a volcanic arc and an ensialic trough. The Early Cretaceous arc formed on eroded Jurassic rocks and pre-Andean basement within the continental margin and material from it was deposited into the trough to the east (Aberg, et at, 1984).

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The environment of deposition within the marginal basin changed over time from shallow marine to alternating shallow marine and continental. During the early part of the Middle Cretaceous, turbidites, limestones and continental sediments intercalated with dacitic ignimbrites and basaltic flows were deposited on the western side of the basin. A 2000 m thick sequence of marine clastics, limestone and gypsum intercalated with dacitic tuff and basaltic lava was deposited on the eastern side of the basin.

During the Early Cretaceous, a thick sequence of mafic to intermediate lavas were erupted on the western side of the basin with flood basalts in the lower and middle parts of the sequence and andesitic flow breccias in the upper parts. This volcanism continued into the Middle Cretaceous.

Rapid subsidence of the basin and rapid accumulation of volcanic material kept the depositional surface close to sea level (Aberg, et al, 1984). Large volumes of volcanic rocks were erupted during a period of crustal extension and attenuation giving rise to an elevated thermal gradient, which, combined with the rapid subsidence, caused pervasive burial metamorphism of the volcanic pile (Mpodozis and Ramos, 1990).

At the beginning of the Late Cretaceous, the marginal basin began to be filled with continental clastics and subaerial andesitic volcanics. The rocks of the marginal basin were intruded by large granodioritic plutons and magmatic activity continued into the Miocene in discrete eastwardly younging belts (Rivano, et al, 1985).

Sequences of volcanic and intercalated and inter-fingering sedimentary rocks representing the Early Cretaceous arc and back-arc basin of the central portion of the arc are traced nearly continuously from north of Copiapó to south of La Serena. The composite Coast Batholith, comprised principally of Early to Late Cretaceous granodiorites, diorites and quartz diorites intruded the volcanic arc and the western side of the back arc basin throughout the axis of the arc.

To the west lie mainly meta-sediments, volcanics and intrusives that make up the Pre-Andean Paleozoic/Mesozoic basement to the arc, and volcanics and intrusives of the earlier cycle Jurassic volcanic arc. To the east lie continental sediments and volcanics marking the destruction of the back-arc basin and eastward migration of the magmatic arc commencing in the Late Cretaceous.”

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Figure 7.1 - La Quebrada Property Regional Geology

Taken from Sernageomin 1999, Map 12

Regional Geology Legend

QUATERNARY

Qc – Colluvial Qa – Alluvial Qf1 – Fluvial, weakly consolidated Qf2 – Recent, poorly consolidated Qm – Poorly consolidated polymict fragments < 1 to 5 m in size

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WESTERN PORTION

Middle Cretaceous

Kmd – Cretaceous monzonites – diorites. Kgac – C

o El Chivata Intrusive Complex – granodiorites, porphyritic diorites and andesites.

Kv – Viñitos Fm. – continental volcanics with intercalated sediments. Kgit – Estratos de Qbda La Totora – conglomerates with interbedded sandstones, and limestones and calcareous sediments. Lower Cretaceous Kgm – Qbda Marquesa Formation – calcareous sediments, epiclastic and lithic breccias, underlying andesites with ash flow tuffs, red sediments and volcanic sandstones. Kad – andesitic basalts, pillow basalts, limestones, calcareous sandstones, sedimentary breccias, lithic andesite breccias, and conglomeratic epiclastic breccias.

CENTRAL PORTION

Paleocene and Paleocene

Pactb – Caldera Tierras Blancas – ash flow tuffs, porphyritic andesites and andesitic volcanic breccias, dacitic dykes, ignimbrites. Pael – El Inca Volcanic Complex (ca. 60 ma) – tuffs, lithic breccias, porphyritic basaltic andesites, rhyolitic domes. Palc – La Crina Volcanic Complex (ca. 60 ma) – andesites and basaltic andesites, daci-andesites, intercalated tuffs, lithic and volcanic conglomerates.

Upper Cretaceous

Ksgd – (71-68 ma) granodiorites to diorites. Kgy – Estatos de Jungay (70-64 ma?) – welded tuffs, andesitic and dacitic tuffs, ash flow tuffs, rhyolitic – basaltic andesite flows. Kle – Las Elquinas Fm (71-65 ma?) - porphyritic andesites to basaltic diorites, porphyritic dacite. Ksih – (83-76 ma) – Hypabbysal andesites, basaltic andesites and dacitic intrusives. Kcei – Caldera C

o. El Indio (85-72 ma?) – welded tuffs, porphyritic dacitic domes, clast supported breccias,

porphyritic dacitic dykes. Kcc – Caldera Condoriaco (ca. 85 ma) – tuffs, lithic breccias, welded tuffs, volcanic breccias, rhyolite dikes, dacitic flows, sandstone, shale.

Middle Cretaceous

Kv – Viñita Fm. – continental volcanics with intercalated calcareous sediments, basalt-dacite flows, lithic breccias, ash flow tuff breccia, vitric tuffs, andesites and conglomerates.

EASTERN PORTION

Middle to Upper Eocene

Eih – 43-34 ma hypabbysal intrusives and domes, rhyolitic to dacitic and andesitic and dioritic porphyries. Eb – Middle – Upper Eocene? Qbda Represita Fm. - lenticular monomict to polymict breccias. Ecv – Co Blanco Volcanic and Altos de Yaretal Complex (45 – 44 ma) – ash flow lithic tuffs, rhyodacitic tuffs, porphyritic andesites, rhyolites and dacitic flows. Lower Paleocene - Eocene

PaEgcl (56-51 ma) – granitic to dioritic intrusives. PaEgc (58-53 ma) – Estratos de Qbda del Calvario –welded, pumiceous and vitric tuffs with intercalated pyroclastics, porphyritic basaltic andesites and cataclastic breccias.

Cretaceous

Kv - Viñita Fm; andesite flows and tuffs, welded dacitic tuffs, cataclastic breccias.

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Kp – Pucalume Fm. – continental sediments, including breccias, conglomerates, sandstone and cataclastic breccias.

Jurassic – Lower Cretaceous

Jka – Algarrobal Fm. – continental andesitic volcanics, intercalated with epiclastic breccias and coarse conglomerates. Jtc (Upper Triassic?) – Las Breas Fm. – continental volcanics and sediments and epiclastic polymict breccias, sandstones, shales, rhyodacitic welded tuffs and rhyolite, andesite and basaltic andesite. PTrih (Upper Permian-Lower Triassic) hypabyssal rhyolitic intrusives. Pm (Permian?) – Matahuaico Fm. – continental volcanic – sedimentary sequence, vitric tuffs, rhyolite porphyry, arkosic greywackes.

Carboniferous

Cch (ca 300 ma) – granodiorite with andesitic, basaltic and rhyolitic dikes.

Property Geology: The following is taken from Diaz, L. 2010. “The Lower Cretaceous Arqueros Formation hosts the Cu-Ag mineralization at the La Quebrada Property. The Arqueros Formation has been mapped and described by previous workers. It comprises five members in a conformable sequence with an approximate aggregate thickness of 1,250 m. The base of the Arqueros Formation is not exposed in the region. At its top, it is concordant with the overlying Quebrada Marquesa Formation. Figure 7.1 depicts the Local Geology for the La Quebrada Property.

In general terms, Ka1, Ka3 and Ka5 are volcanic or lava units and Ka2 and Ka4 sedimentary units. Mineralization in the form of copper oxides (on surface) and secondary sulphides occurs at the base of the Ka2 and Ka4 units. The volcanic units do show copper mineralization, but it seems to be more discontinuous and localized.

In the lower unit (Ka2), the mineralization appears related to brecciated calcareous sandstones and chert levels that occur mainly in the Leoncita area.

In the upper horizon (Ka4), the mineralization is related to limestone and sedimentary breccias, and extends into the top of the underlying andesites.

Figure 7.2 - La Quebrada Property Local Geology

Taken from Diaz., L., 2010

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Arqueros Formation: The Arqueros formation has been sub-divided in five units, Ka1 to Ka5, of which the Ka2 and Ka4 units are predominantly sedimentary. The Cu-Ag mineralization of the La Quebrada Property is hosted by Ka2 and Ka4 units of this Formation.

Ka1: The Ka1 unit is comprised almost exclusively of porphyritic andesitic lavas of the type known in Chile as “ocoites”. They are in part amygdaloidal with an aphanitic groundmass that is olive-gray to bluish green-gray when fresh, but weathers to a chocolate red color. Plagioclase phenocrysts are tabular, very abundant, and commonly reach 2 cm in length. Some of the lavas exhibit pillow structures indicating possible submarine origin.

The lowermost strata observed contain a medium-grained conglomerate with a purplish to pinkish gray matrix. The Ka1 unit has a minimum thickness of 330 m.

Ka2: The Ka2 unit characteristically outcrops in the form of abrupt cliffs in sharp contrast to the recessively weathering of the Ka1 unit. It is comprised essentially of limestones, calcareous sandstones, cherts and sedimentary breccias with a calcareous matrix, and is characterized by abundant fragments of Ostrea fossils.

A typical section contains:

Dark greenish-gray fine to coarse-grained sandstone, conglomerate and shale; clasts are sub-rounded to rounded and derived from the underlying andesites. It also includes sub- angular fragments of plagioclase similar to that, which makes up the phenocrysts. (35 meters)

Medium- to dark-gray yellow-weathering limestone with abundant fossil fragments especially of Ostrea. (5 m)

Pale orange-white chert. (25 m)

Medium gray limestone with abundant fragments of Ostrea. (20 m)

Yellow-weathering dark gray limestone. (10 m)

Brecciated limestone with large black Ostrea. (25 m)

Pale yellow-white chert. (15 m)

Coquina limestone with a dense calcareous matrix and angular to sub-angular clasts of andesites. (15 m)

The average thickness of the Ka2 unit is 150 m but in some areas, it exceeds 250 m.

Ka3: The Ka3 unit is composed of andesitic lavas very similar in appearance to those of the Ka1 unit though in general they contain fewer amygdules and have relatively abundant phenocrysts of amphiboles. In one location, there is a 5 m thick intercalation of medium- to dark-gray limestone with fragments of the underlying andesites including fragments derived from the plagioclase and amphibole phenocrysts. The Ka4 unit varies between 100 and 200 m in thickness and averages about 150 m. It weathers recessively similar to the Ka1 unit.

Ka4: The Ka4 unit, which is a resistive cliff former, is also principally composed of calcareous sandstones, limestones, breccias and conglomerates. In the approximate center of the section, there is an intercalation of porphyritic andesite similar to that seen in the Ka1 and Ka3 units. This carbonate unit is conspicuous for its abundance of rudist fragments, which have been classified as Agria blumenbachi. The rudist-bearing unit attains a thickness of more than 7 m.

A typical section is as follows:

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Medium-gray, fine-grained calcareous sandstone intercalated with purplish gray conglomerate sandstone, clasts derived from andesitic lavas similar to Ka1 and Ka3 (20 m).

Purplish-gray, fine- to medium-grained calcareous sandstone with abundant rudists (6 m).

Calcareous breccia with a dark pinkish gray matrix and clasts with dimensions of up to 4-5 cm derived from limestones and andesitic volcanics similar to Ka1 and Ka3 (4 m).

Gray limestone and olive-gray, fine-grained calcareous sandstone both with abundant rudists. Intercalations of purplish-gray, coarse-grained sandstone and conglomerate with sub-angular clasts that are made up of andesite, magnetite grains, and fragments of amphibole and plagioclase phenocrysts (10 m).

Porphyritic andesite similar to Ka1 and Ka3 (20 m).

Very light-gray limestone (3 m).

Light-gray limestone with rudists (4 m)

Banded grayish-yellow limestone (8 m)

Gray limestone with intercalations of purplish-gray medium to coarse-grained calcareous sandstone (30 m).

The Ka4 unit averages about 150 m in thickness. Ka5: The Ka5 unit is made up of andesitic lavas with a lower-middle section of intercalated red volcanic- derived sandstones, which host strata-bound manganese deposits. A representative section follows:

Porphyritic andesites with a grayish-purple aphanitic groundmass and abundant plagioclase phenocrysts up to 2 mm in maximum dimension. In many locations, these andesites are brecciated (50 to 300 m).

Grayish-red, fine- to medium-grained volcanic-derived sandstone with scarce calcite cement and clasts of andesitic lavas and plagioclase fragments. Within the sandstones are intercalations of manganese (12 to 15 m).

Porphyritic andesites similar to the Ka1 and Ka3 (50 to 150 m) units.

The thickness of Ka5 unit is highly variable due to the lenticular nature of the lavas in the upper part of the section but is between approximately 120 to 400 m.

7.1 Quebrada Marquesa Formation: The Quebrada Marquesa Formation conformably overlies the Ka5 unit and is generally made up of clastic sedimentary rocks of continental origin and pinkish gray andesitic lavas, breccias and tuffs. The volcanics are more abundant in the lower sections, where there are also calcareous lenses with fossil marine fauna representing the final marine transgression in the area. The Quebrada Marquesa Formation varies in thickness between 820 and 1,900 m.

7.2 Structural Setting: The strata are gently folded by the broad southward plunging Talcuna Anticline. Within the property area, dips of up to 25o are recorded on the western limb of this anticline but dips are generally much lower. The stratigraphy is disrupted by three episodes of block faulting:

1. N to NNW normal faulting of probably Early Cretaceous age; 2. E-W reverse faulting cross-cutting the earlier normal faults; and

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3. NW to NNE listric normal faulting of Tertiary age.

The latter event involved major vertical displacements and block rotations and resulted in de- roofing of the Arqueros Formation in the area of the La Quebrada Property. This also resulted in reactivation of earlier normal faults that displace the lower members of the Arqueros Formation.

The most important displacement is on a north-striking regional-scale fault. This down-drop its eastern block juxtaposing Arqueros Formation rocks to the west and Quebrada Marquesa Formation volcanics to the east. The amount of stratigraphic displacement across this fault has not been determined.

Local faulting and associated tilting of the beds may produce steep dips.

Veins and faults occur in a NW-SE orientation. Extensive calcite-barite (+/-quartz, jasper, and chalcopyrite) veins/veinlets are observed in the Ka4 unit and partly in the Ka3 unit. There is generally some displacement within the planes of the calcite veins.

The NE-SW faults typically occur as normal and reverse block faults. Large continuous individual dikes as well as numerous narrow mafic dikes occur in the NE orientation. These faults appear to offset the NW veins.

The Arqueros Formation is gently folded by the southward plunging Talcuna antiform at Casa de Piedra. North and east of the antiformal axis the formation dips 10o to 25o to the northeast and southeast. South or west of the antiformal axis the formation dips toward the south-southwest. The axis of the antiform can be traced from the Casa de Piedra area northward to Quebrada San Antonio.

A similarly oriented fault (with a slight NW orientation) occurs just east of the Casa de Piedra area, which terminates the eastward extent of the Ka4 strata. Again, units east of the fault are down-thrown. The rocks to the east of the fault consist of a thick sequence of andesitic flows and tuffs. Previous authors have attributed these rocks to the Ka5 unit. Movement on this fault appears to be considerable as no units similar to those found below the bottom of the Ka5 unit occur in the deep (>80 m) quebradas to the east of the fault.

Intrusives: Scarce intrusive bodies have been recognized in the area. The most common are rhyolitic dikes that occur in the Casa de Piedra Project area and in the northern sector of the Quebrada Property. There is no important hydrothermal activity in the area, although there are areas where locally barite and manganese mineralization are recognized, and which mineralization is always related to the upper part of the Ka5 unit.

Of note is that these dikes seem to parallel the strike of the major axis of the Tugal anticlinal, perhaps indicating that the age of the intrusions can be related to the folding.”

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Figure 7.3 - Casa de Piedra Sector Geologic Map

Prepared by Mandalay, June 2012

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Figure 7.4 - Casa de Piedra Sector Geologic Cross Section A-A´ Looking North East

Prepared by Mandalay, June 2012

Figure 7.5 - Casa de Piedra Sector Geologic Cross Section B-B´ Looking North East

Prepared by Mandalay, June 2012

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The drilling and trench mapping has confirmed the existence of the NE and ~E-W trending faults which have been displaced by NNW trending faults. Per Sections A-A´ and B-B´ and bounding DHCP-27, the faults are normal and steeply dipping to the SE. Movement on these faults is variable and ranges from ~ 15 m to ~ 55 m. The bulk of the mineralization, as currently defined, lies to the east of the major displacement, and as depicted in Figures 7.2 and 7.3.

Mineralization: The Casa de Piedra Sector comprises an area 1.5 x 1.5 km2 and is approximately centered on coordinates 6,709,000N and 315,700E. The area lies at the north-east end of the La Quebrada Property where the Arqueros formation sediments and volcanics outcrop and where they are partially covered by basaltic rocks of the Quebrada Marquesa Fm. Copper–silver mineralization occurs in stratiform “manto” type bodies, which are present in the sedimentary sequence at the base of the Quebrada Marquesa Fm where the sediments have been intercepted in drill holes and exposed in trenches.

Per the geologic mapping and drilling that has been performed at the La Casa de Piedra Sector (Figure 7.2) there are (typically) 3 copper-silver mantos (horizons) which can be traced with variable continuity over a distance of approximately 1.5 km. Thin intervals of discontinuous mineralization are found in between the principal mantos. The true thicknesses of the mineralized mantos are variable, and range between =/< 10 cm and ~25 m as generally measured in the field and as defined by the drilling (refer to Table 14.1 and Figure 14.1). Table 7.1 depicts the mantos as intercepted in DHCP-17. These mineralized intervals are defined as those beds (typically the calcareous arkoses) that carry visible sulphides. The stratiform copper-silver mineralization is associated principally with calcareous sediments and to a lesser degree with the volcanic rocks. The sedimentary units consist mostly of bioclastic limestones, calcareous sandstones, conglomerates and sedimentary breccias.

Table 7.1 - Casa de Piedra Sector – DHCP-17

DHCP-17

SAMPLE DATA

Ag_ppm Cu_% SAMPLE FROM TO THICKNESS TRUE THICKNESS

LITHOLOGY

20278 83.80 86.10 2.30 SPC 2 0.136

20280 90.68 92.30 1.62 CS 3 0.196

20281 92.30 93.90 1.60 1.58 CS 5 0.342

20283 95.75 97.30 1.55 1.53 CS 5 0.275

20285 98.80 100.80 2.00 1.97 CS 11 0.945

20286 100.80 102.80 2.00 1.97 CS 11 1.035

20287 102.80 104.60 1.80 CS 2 0.244

20291 109.70 111.96 2.26 SPC 1 0.125

20292 111.96 114.50 2.54 2.39 CS 7 0.479

20293 114.50 116.90 2.40 2.26 CS 2 0.204

20294 116.90 119.45 2.55 CS 3 0.162

20295 119.45 121.40 1.95 CS 3 0.276

20296 121.40 123.00 1.60 CS 2 0.103

20298 123.00 124.60 1.60 CS <1 0.125

20299 124.60 126.75 2.15 2.03 CS 5 0.732

20300 126.75 129.10 2.35 2.22 CS 7 0.721

Azimuth 130 Dip 80 Total Length 131.52 m

The basal Quebrada Marquesa sedimentary unit is the principal target at Casa de Piedra. The mineralization consists of small veinlets and micro veinlets with bornite and chalcopyrite and disseminated bornite and chalcopyrite and traces of chalcocite, digenite, covellite, tennantite

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and galena. Pyrite, hematite/specularite and magnetite are also associated with the copper mineralization.

Copper oxides locally occur at the surface with the most common oxides being malachite, chrysocolla and copper-wad.

No silver minerals were recognized, however the strong correlation between silver and copper suggests that the silver is associated with the copper sulphides. Silver may also occur in the rare galena present.

The copper mineralization is very fine-grained and occurs in two forms: as small veinlets and micro veinlets, commonly associated with calcite, and as disseminations in the calcitic cement of the sedimentary rocks. The individual sizes of the copper sulphides grains range between 0.05 to 0.4 mm.

The chalcopyrite-calcite-quartz veinlets, which locally crosscut finely disseminated chalcocite and minor calcite, suggest that there may be at least two mineralizing events.

The drilling that was performed by Mandalay has generally defined a zone containing up to 3 significant copper-silver mineralized horizons (mantos) at the Casa de Piedra Sector, and which has approximate dimensions of 1.5 km in an east-west sense, and 1.25 km in a north-south sense. The individual mantos (comprising subunits of the basal Quebrada Marquesa Fm. calcareous sediments) range from < 1 m to 25 m thick (as defined by Mandalay´s initial cut-off parameters - ≥3m grading ≥0.3% Cu). The western limit is defined by the fault contact with the ocoite andesite of the Arqueros Fm. and continues beyond the limits of the drilling to the east. The mineralization appears to have been deposited in a redox environment comprising primarily calcareous sedimentary rocks and to a lesser extent permeable andesitic volcanic rocks both of which have been variably faulted by NE-SW trending faults/veins and NW trending veins. The mineralized calcareous basal Quebrada Marquesa horizon is the principal target at Casa de Piedra. The mineralization consists of chalcocite, bornite, chalcopyrite, minor covellite and traces of galena. Pyrite, hematite/specularite and magnetite are also associated with the copper mineralization. Chalcocite is the most common sulfide present. Silver is associated with the sulphides although no silver minerals have been identified. Locally extensive and crosscutting calcite-barite (±quartz, jasper, and chalcopyrite) veins/veinlets are observed. There is generally some displacement within the planes of the calcite veins.

The southern limit of the Casa de Piedra mineralization extends south of the Mandalay property boundary where it is being mined at the Geronimo Tugal Mine (refer to Section 25 – Adjacent Properties).

8. DEPOSIT TYPE

The copper-silver mineralization, which is the exploration/development target at Casa de Piedra, is primarily hosted by the calcareous sediments of the basal Quebrada Marquesa Fm.

The copper-silver occurrences at Casa de Piedra are considered to be a reduced-facies subtype of Sediment-hosted Copper Deposits (SCD), as based on the composition and texture of the host rocks. The field relationships, the (general) lack of hydrothermal alteration and absence of related intrusives, strongly suggest a syn-diagenetic origin for the Cu-Ag mineralization observed at Casa de Piedra.

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Diaz, L., 2010 discusses the genetic model for the Sediment-hosted Copper Deposit type where he states that the SCD deposit type “consists essentially of a footwall source (basin filling red-bed and/or volcanic strata or metamorphosed basement rocks) which releases metals to a warm or even hot brine; an oxidized aquifer (footwall red-beds) and/or deep rift-basin faults, which allow circulation of the metalliferous brine across thermal and/or hydraulic gradients; and a fine-grained, reducing, sulfur-rich, host rock on the hanging-wall side of a chemically distinct redoxcline (refer to Chartrand and Brown, 1985)”.

The 2011-2012 drilling was conducted to determine the potential continuity of the manto-hosted mineralization. This work established that the 3 principal mantos were generally continuous over distances of at least 300 m indicated by the mapping and further confirmed by the variography performed by Mandalay which allowed for the inverse distance cubed (Vulcan) estimation of an indicated resource (refer to Table 1.1). Mandalay has budgeted for 3,600 m of DD drilling which will, in part be conducted to allow for the generation of measured resources (although there is no guarantee that these will be developed), and in part will be used to test for additional extensions of the mineralization at Casa de Piedra as well as testing additional areas (Leoncita) within the La Quebrada Project area.

9. EXPLORATION

9.1. Introduction: The following is taken from Diaz, L. 2010. “In 2006, Mandalay conducted a trenching and drilling campaign on the La Quebrada property. One hundred and thirty-two shallow hand-dug trenches were dug and 101 reverse circulation holes and 11 core recovery holes were drilled across the property. In October 2009, Mandalay started detailed mapping of the property to complement previous work and to gain a better understanding of the tectonically complex locality. At the same time, the prior drill data was recovered and compiled.

9.2. Geological Mapping: The following information has been obtained from internal reports and on-site discussions.

Preliminary and reconnaissance style mapping was initiated by Richard Jeanne of Richard A. Jeanne Ltd. in 2009 (Section 27 References).

Stratigraphic work at La Quebrada was initiated on the Leoncita-Dálmatas Sectors of the La Quebrada Property where the best exposures of the Arqueros Fm are considered to be located. These more complete and detailed stratigraphic sections are the basis for the entire project area stratigraphy.

Diaz, L., 2010 states “that the Casa de Piedra [Sector] was mapped at a scale of 1:5000 over a ~15 km2 area, and that an additional 20+ km2 were reconnoitered and, locally, reconnaissance mapped.”

9.2.1. Stratigraphic Summary at Casa de Piedra: Basal sedimentary rocks of the Quebrada Marquesa Fm. rest on an undetermined thickness of ocoite (porphyritic plagioclase feldspar) andesite correlated with the Arqueros Fm. Ka5 unit. These basal Quebrada Marquesa sediments consist of 0 to 40 m of calcareous sandstone, limestone and sandy to pebbly limestone. The clastic content decreases and the carbonate content increases toward the top of this unit and the uppermost limestone beds contain fossil rudist shells. The clastic sedimentary rocks are overlain by basalt, basaltic agglomerate and volcanoclastic sediments of the Quebrada Marquesa Formation. Evidence indicates a period of erosion occurred that removed unit Ka5 and the upper portions of Ka4 prior to deposition of the Quebrada Marquesa Fm.

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9.2.2. Casa de Piedra: There are two major occurrences of limestones in the vicinity of Casa de Piedra which are referred to as Areas 1 and 2.

Area 1 contains calcareous sediment rocks of the Quebrada Marquesa Fm, in which rudist fossils occur in abundance. This area is the site of previous drilling and is located about 1.5 km northeast of the Tugal pit. Area 2, located about 2.5 km north of the Tugal pit, contains exposures of Arqueros Fm. unit Ka2 that contains abundant fossil oyster shells.

In Area 1, mollusk fossils noted at Casa de Piedra and another locality south of Casa de Piedra outside of the tenure block are identical to fossils identified by Aguirre & Egert (1965) as the rudist genus, Hippurites(?) from other localities in the vicinity. As per Richard Jeanne (verbal communication) there appears to be no difference in these fossils at each locality.

Oyster fossils are present in the Ka2 units at both Leoncit-Dalmatas.

Oyster fossils are present in the Ka2 units at both Leoncita-Dálmatas (8 km SW of Casa de Piedra) and Area 2 of Casa de Piedra in the lower sequence of sediments. However, the species appears to be different, as those at Casa de Piedra are larger than those at Leoncita.

Three sections were measured in the sedimentary sequences at Casa de Piedra. The extent of their exposures is small enough that for the most part, correlations can be made simply by tracing beds.

Additionally, the stratigraphy of the overlying Quebrada Marquesa formation has been described and mapped in more detail than had been done previously.”

9.3. Trenching and Channel Chip Sampling

As report by Diaz (2010), “one hundred and thirty two hand-dug trenches were dug in the central zone of the La Quebrada property. Samples were obtained from those trenches by chip sampling along the trench in samples of variable length. This information was the basis for the subsequent drilling campaign. Most trenches were located in the Ka2 and Ka4 (sedimentary) units of the Arqueros Formation.

The trenches were located perpendicular to the bed dips, with lengths varying between 8 and 120 meters (down-slope). The stipulated length of the samples was 15 meters, but allowances were made for the terrain slopes.”

The La Quebrada property was initially rock chip sampled and mapped by Mandalay in 2003. The author has no knowledge as to the sampling methods used or the sample quality at the time of this early exploration campaign. The objective of the sampling was to define areas of potential interest which could be further explored by a combination of trenching and drilling, and which work was subsequently performed in various areas of the La Quebrada Property, and including the Casa de Piedra Sector.

Per Sandidge and Cox, 2005, Mandalay (2003) took 201 rock chip (5-10 kg) samples within Casa de Piedra sector; Sandidge and Cox took an additional 19 rock chip samples. The samples were taken over an area totaling approximately 886 has, or approximately 1 rock chip sample per 4 ha. The samples were selectively taken across predominantly mineralized stratigraphic intervals of calcareous sediments (predominantly the basal unit of the Quebrada Marquesa Fm. over true thicknesses (intervals) ranging from ~0.4 to 2.9 m, and which returned values ranging from <0.1 – 3% Cu and <0.1 – 77 g/t Ag. Mandalay also cut 3 trenches, which

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ranged in length from 32 - 94 m and which were sampled at 2 m intervals. The trenching returned values which ranged from 0.1 – 3% Cu and 1 – 52 g/t Ag.

The 201 trench samples were taken as continuous channel chip samples (hammer and chisel) with approximately 10 kg of material being taken per interval sampled. On average, the samples consisted of rock chips with dimensions on the order of 2-5 cm3. The samples are generally considered to be representative of the mineralization and/or favorable units being explored. The author is not aware of any factors that may have resulted in sample biases. However, since many of the sample locations cannot be verified, trench samples were not used to estimate resources.

The sampling and mapping that was performed at Casa de Piedra has resulted in the successful placement of core holes such that the bulk of the holes that were drilled have intersected varying degrees of mineralization in the anticipated mantos and which drilling has allowed for the development of indicated and inferred mineral resources (Table 1.1).

An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit.

An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. It cannot be assumed that the Inferred Mineral Resources will be upgraded to an Indicated Resource as a result of continued exploration. Furthermore, it cannot be assured that either the Indicated or the Inferred Mineral Resources will be converted to a “Reserve” category at such time as feasibility studies are initiated.

10. DRILLING

Mandalay drilled at Casa de Piedra in both 2011 and 2012 at which time HTW and NTW diameter core was recovered over the entire length of the holes. Core recoveries were excellent, generally exceeding 95%. The drilling was performed by Atacama Drilling in 2011 and by Expert Drilling (predecessor of Atacama Drilling) in 2012.

Mandalay states that it had a geologist in the field supervising the drilling as well as a technician on site at all times at each machine during both drilling campaigns and that the technician confirmed and measured the individual core runs as well as assured that the core was properly placed into appropriately marked and numbered wooden core boxes each of which can hold approximately 3 m of core. The core boxes were numbered sequentially and the start and end of each individual run were marked with wooden blocks each marked with the corresponding meterage. The drilled interval (starting and ending) was also marked on the core box. Each time the core barrel was removed from the drill string, the entire core sample was taken from the core barrel and carefully placed in a split core barrel where it was reassembled such that all the pieces were in their original position to replicate actual recovery. For the few intervals that were fragmented and broken (faulted or strongly fractured), the pieces were arranged such that the fragments were level with the top of the core box and the recovered length was calculated by multiplying the length of the fractured material by a factor of 0.45.

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Using a 2.5 tonne closed truck, Mandalay delivered up to 100 core boxes per load from the drill site to the Mandalay storage facility in La Serena. The core boxes were stacked to a maximum height of 4 core boxes, and empty boxes were used to space the stacks such that movement of the boxes was kept to an absolute minimum.

The core boxes were unloaded at the storage facility in La Serena and the appropriate rock quality determinations (“RQD”) were performed: the length of each piece of core > 10 cm was measured and recorded and the appropriate calculations was performed per the formula RQD = the sum of all fragments ≥ 10 cm divided by the length of the core run and multiplied by 100%.

A Mandalay geologist logged the core before delineating intervals to be sent to the analytical laboratory for sawing in half. The sawed core was returned to the Mandalay storage facility, and the Mandalay geologists then supervised bagging half of the core from appropriate intervals before randomly numbering the bags and inserting blank samples for assaying. A total of 16 blanks were inserted in the 2011 drilling program and 19 blanks were inserted in the 2012 program.

The drilling that was performed during the period 2011 and 2012 at Casa de Piedra allowed for the estimation of an inferred and indicated resource (as shown in Table 1.1). This drilling confirmed the mapping/trenching, which indicates that the mineralized mantos are generally continuous as shown in Figures 7.3 through 7.4, and, which can therefore be reliably modeled for a resource estimation.

The author is not aware of any drilling, sampling or recovery factors that might affect the accuracy and reliability of the results. However, it is the author´s opinion that Mandalay needs to improve its QA/QC program to properly verify the quality of the assay results.

Figure 10.1 through 10.3 depict plan views of the drilling at Casa de Piedra and show the drill intercepts for each of Manto 1, Manto 2, and Manto 3.

During 2011 (Table 10.1), Mandalay drilled 17 diamond core holes (2,932 m total) at the Casa de Piedra Project. Table 10.2 lists those intervals containing at least 3 m grading 0.2% or more Cu, and which may include intervals of <0.2% Cu internal dilution.

Table 10.1 - Casa de Piedra Project 2011 Drill Program

HOLE EAST NORTH ELEV AZIMUTH DIP DEPTH

DHCP-01 314566 6707456 1135 0 -90 80.3

DHCP-02 314668 6707629 1170 0 -90 78.4

DHCP-03 314604 6707740 1171 0 -90 84.38

DHCP-04 314798 6707847 1187 0 -90 93.72

DHCP-05 314648 6707842 1166 0 -90 99.84

DHCP-06 314882 6707884 1178 0 -90 96.72

DHCP-07 315065 6708210 1097 0 -90 184.85

DHCP-08 315085 6707331 1144 0 -90 200.66

DHCP-09 315231 6707706 1100 0 -90 233.64

DHCP-10 315416 6707556 1125 0 -90 292.42

DHCP-11 315341 6707982 1099 0 -90 166.94

DHCP-12 315465 6707356 1129 0 -90 214.28

DHCP-13 314466 6707273 1126 0 -90 148.42

DHCP-14 315404 6707126 1149 0 -90 211.34

DHCP-15 314891 6707207 1167 0 -90 366.58

DHCP-16 314582 6707293 1139 130 -70 248.04

DHCP-17 314586 6707150 1170 130 -80 131.52

Total Drilled 2,932.05

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Table 10.2 - Casa de Piedra Project - 2011 Drill Hole Intercepts

Drill Hole Interval in meters Estimated Average Grade Including

True Width

From To Total Meters Cu % Ag ppm

DHCP-01 22.50 30.50 8.00 7.04 0.80 12 2m @ 1,4% Cu

DHCP-01 36.50 42.50 6.00 5.28 0.38 6

DHCP-01 47.15 52.30 5.15 4.53 0.95 12 1,05m @ 2,2% Cu

DHCP-02 41.10 47.30 6.20 5.46 0.42 8

DHCP-02 51.50 59.70 8.20 7.22 0.69 3

DHCP-02 66.00 70.30 4.30 3.78 0.21 1

DHCP-03 51.00 56.90 5.90 5.19 0.48 6

DHCP-03 64.90 70.80 5.90 5.19 0.27 4

DHCP-03 74.60 79.35 4.75 4.18 0.24 6

DHCP-04 < 3 m @=/+0,2% Cu

DHCP-05 70.70 74.70 4.00 3.52 0.46 3

DHCP-06 66.10 70.60 4.50 3.96 0.49 13

DHCP-06 80.50 84.50 4.00 3.52 0.79 8 2m @ 1,4% Cu

DHCP-07 < 3 m @=/+0,2% Cu

DHCP-08 165.80 171.20 5.40 4.75 0.82 11

DHCP-09 139.70 144.00 4.30 3.78 1.03 11 2,2m @ 1,5% Cu

DHCP-10 134.00 141.40 7.40 6.51 0.77 11 1,9m @ 1,8% Cu

DHCP-11 124.05 128.20 4.15 3.65 0.79 17

DHCP-12 < 3 m @=/+0,2% Cu

DHCP-13 < 3 m @=/+0,2% Cu

DHCP-14 175.00 185.70 10.70 9.42 0.42 5

DHCP-15 213.80 223.90 10.10 8.89 0.57 9

DHCP-15 227.80 231.80 4.00 3.52 0.36 6

DHCP-16 87.10 92.90 5.80 5.45 0.73 6

DHCP-16 101.55 117.10 15.55 14.51 0.38 0.3

DHCP-17 92.30 102.80 10.50 9.24 0.48 6

DHCP-17 111.96 129.10 17.14 16.10 0.37 4

During 2012 (Table 10.3) Mandalay drilled 24 diamond core holes (5,157 m) in the Casa de Piedra Sector. Table 10.4 lists those intervals of at least 3 m thickness containing grades of at least 0.2% Cu. Higher grade intercepts as depicted in Tables 10.2 and 10.4 are considered to be the result of increased permeability of the receptive sedimentary host horizons.

Table 10.3 - Casa de Piedra Project - 2012 Drill Program

HOLE EAST NORTH AZIMUTH DIP DEPTH

DRILLED

DHCP-18 314698 6707775 0 90 90

DHCP-19 314606 6707654 0 90 90

DHCP-20 314763 6707321 130 80 270

DHCP-21 314819 6707448 0 90 260

DHCP-22 314793 6707086 130 90 260

DHCP-23 314702 6707847 130 80 90

DHCP-24 315067 6708178 130 80 120

DHCP-25 314946 6707993 130 80 120

DHCP-25A 314946 6707993 0 90 122

DHCP-26 314997 6708085 130 80 120

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DHCP-27 315055 6707825 130 80 160

DHCP-28 314819 6707448 0 90 180

DHCP-29 315227 6707382 130 80 210

DHCP-30 315201 6707145 130 80 210

DHCP-31 315590 6707558 130 80 300

DHCP-32 315470 6707337 130 80 240

DHCP-33 315591 6707170 130 80 250

DHCP-34 315909 6707818 130 80 280

DHCP-35 315889 6707085 130 80 250

DHCP-36 315889 6707371 130 80 320

DHCP-37 315852 6707606 130 80 310

DHCP-38 315638 6708101 0 90 250

DHCP-39 315524 6708216 130 80 205

DHCP-40 315558 6708023 0 90 170

DHCP-41 315670 6707824 130 80 280

Table 10.4 - La Quebrada Project - Casa de Piedra 2012 Drill Hole Intercepts

Drill Hole Interval in meters Estimated Average Grade Including

True Width

From To Total Meters Cu %

Ag ppm

DHCP-18 57.80 61.65 3.85 0.49 6

DHCP-18 67.95 75.00 7.05 0.30 4

DHCP-19 53.8 62.8 9.00 0.25 0.5

DHCP-19 67.76 71.51 3.75 0.55 2

DHCP-20 212.85 218.40 5.55 0.79 18

DHCP-21 192.00 210.20 18.20 0.59 6 1,45 m @ 1,45% Cu

DHCP-22 232.45 240.50 8.05 0.85 14 1,6 m @ 1,5% Cu

DHCP-23 96.35 99.65 3.30 0.67 10

DHCP-24 <3m @=/+0,2% Cu 0.00

DHCP-25 <3m @=/+0,2% Cu 0.00

DHCP-25A <3m @=/+0,2% Cu 0.00

DHCP-26 61.75 65.50 3.75 3.52 0.65 10

DHCP-27 128.35 131.75 3.40 3.34 0.70 13

DHCP-27 135.90 139.75 3.85 3.78 0.21 2

DHCP-28 210.25 216.95 6.70 6.39 0.63 6

DHCP-29 <3m @=/+0,2% Cu 0.00

DHCP-30 116.40 136.80 20.40 19.18 0.39 5 2,5 m @ 1,03% Cu

DHCP-30 141.90 154.05 12.15 0.38 4

DHCP-31 174.55 189.15 14.60 14.42 0.43 6

DHCP-32 123.75 139.55 15.80 0.31 6

DHCP-33 206.25 217.60 11.35 0.54 17 1,7 m @ 1,53% Cu

DHCP-34 124.80 128.80 4.00 0.26 3

DHCP-35 200.75 227.35 26.60 25.00 0.32 6

DHCP-36 193.75 198.20 4.45 4.18 0.40 4

DHCP-36 203.80 206.85 3.05 2.87 0.42 3

DHCP-37 <3m @=/+0,2% Cu 0.00

DHCP-38 <3m @=/+0,2% Cu 0.00

DHCP-39 162.00 189.45 27.45 0.44 4 1,75 m @ 1,1% Cu

DHCP-40 <3m @=/+0,2% Cu

DHCP-41 175.10 191.30 16.20 0.66 7 2,5 m @ 2,35% Cu

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Figure 10.1 - Casa de Piedra Sector – Plan Map Manto 1

Drafted by Mandalay 2012

Figure 10.2 - Casa de Piedra Sector – Plan Map of Manto 2

Drafted by Mandalay 2012

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Figure 10.3 - Casa de Piedra Sector – Plan Map of Manto 3

Drafted by Mandalay 2012

11. SAMPLE PREPARATION, ANALYSES AND SECURITY

Samples from the drilling campaigns were prepared on site by Mandalay employees under the supervision of a geologist. During 2010, the assaying was performed by the ALS Chemex (currently ALS Minerals, “ALS”) and Actlabs (both independent ISO 9001:2000 certified) laboratories, which are both located in Coquimbo, Chile. During 2011 and 2012, the assaying was performed solely by ALS in Coquimbo.

During the 2011 and 2012 drilling campaigns, Mandalay states that it used geologists and technicians to supervise the drilling and the core recovery at all times. The majority of core recovered was unbroken; however some intervals are fragmented and broken due to faulting or strong fracturing. Where such intervals occur, the pieces were arranged such that the fragments were level with the top of the core box, and where the recovery was reconfirmed using a factor of 0.45 for the length of the fractured material. The fragmented/broken portions were split along the axis of the core box using a brush or spoon to pick up the material. The core boxes were transported to the core sawing facility (predominantly the ALS facility) with the boxes sealed. A plastic foam cover was used to cover the core so that any broken or fragmented material was prevented from shifting or moving prior to sealing the boxes. The boxes that contained sedimentary sections were sent to the ALS laboratory for sawing. As a result of ALS becoming backlogged during part of the 2012 year, a portion of the core was sent to Actlabs for sawing. At both the facilities, only one box was opened at a time as the core was

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sawed. After sawing, the boxes were returned to the Mandalay storage and logging facility in La Serena where the split core was bagged and randomly numbered and submitted to the laboratory for assay. One half of the core was placed into a heavy duty plastic sample bag which had been pre-marked with a permanent marker (with the appropriate and sequential sample number) and the appropriate sample tag was inserted into the bag with the sawed core and a second tag was placed into the top of the folded sample bag which was then stapled shut. Fine material and broken rock resultant from the sawing was evenly divided between the sample and the core box. The sample bags were folded, etc., to assure that the bag was properly sealed and that no portion of the sample could be lost.

Typically mineralized intervals on the order of 2 m were submitted to the laboratories for assay, although the selected intervals ranged in length from 1.5 m to 4.58 m.

Mandalay inserted a total of 16 blanks into the mineralized sample sequence during the 2011 drill program (4% of the total samples), and 19 blanks (4% of the total samples) during the 2012 drill program. In 2 instances Mandalay inserted 2 blank samples in the same drill hole.

The core sawing facilities at both laboratories are spotlessly maintained. After each sample is sawed, the saw platform is completely cleaned and the facility is swept and vacuumed so that potential for contamination is non-existent.

Where un-mineralized sections of the Marquesa Fm were logged the core was not split or sampled.

Approximately 8-9 samples were placed in a plastic fiber bag that was used to transport the samples to the chosen laboratory. The sample numbers and number of sample bags were recorded on a shipping slip which was delivered to the laboratory with each sample shipment, and which is signed by both the person delivering the samples to the laboratory and by the representative at the receiving laboratory. During 2011, Mandalay submitted a total of 434 samples for analysis in 4 batches; in 2012 a total of 489 samples were submitted in 2 batches.

Prior to signing off on the shipment of samples, the samples were individually weighed and the weights noted on the shipment slips. Mandalay and the laboratory retain copies of the shipping slips. No officer or director of Mandalay was at any time involved in any of the handling of the core, samples, or delivery of such to the assay facility.

All core samples were cut using a diamond disc saw by trained local helpers and sampled according to instructions of the geologist. Samples were tagged and put in thick plastic bags labeled with a permanent marker on the outside. The remaining half core was stored in wooden boxes together with the un-mineralized intervals, which were not sampled. All of the core is stored in an appropriate and secure facility in La Serena.

At the ActLabs (ISO 17025 accredited) laboratory, the samples were crushed to finer than 70% passing 10 mesh, split with a rifle splitter and 250 grams was pulverized to finer than 95% passing -150 mesh). The samples were then analyzed for ME-ICP61-ICP 33 element with 4 acid aqua regia digestion and Atomic Absorption Spectometery. Actlabs states that its accuracy for ICP analyses is ±5 – 20% if at +10% of the detection limit (1 ppm) to 10% Cu. It has been the author´s experience that ICP analyses typically are within the ±10% accuracy range.

At the ALS Laboratory (ISO 17025 accredited and 9001:2008 certified), the samples were crushed to finer than 70% passing 2 mm, and then pulverized to 85% passing -75 mesh then split down to a 200 gram retained sample. Of this 0.4 grams of the pulp is digested in nitric acid for 30 minutes; after cooling aqua regia is added and the sample is allowed to digest for an

35

additional 90 minutes. The resultant solution is diluted with deionized water to 100 ml and is analyzed utilizing ICP-AES methodology. The lower detection limit for copper is stated to be 5 ppm Cu and 1 g/t for silver, and results to 10% Cu and 100 ppm Ag can be generated. ALS takes 1 coarse duplicate sample for every 50 samples run and assays the coarse duplicate. It also includes blank, standard and duplicate samples.

The author sent his own check samples to the Geoanalitica Laboratory located in Coquimbo. Geoanalitica is an independent ISO 9001:2008 certified laboratory. The author´s check samples (pulps) were assayed for Cu and Ag using an aqua regia digestion and Atomic Absorption Spectometery. The detection limit for copper was 0.01% and < 1 g/t for silver, although the effective limit based on laboratory comparisons is slightly higher.

Mandalay used minimal analytical quality control procedures, which were put in place at the start of the 2011 and 2012 drilling programs. This consisted of the insertion of blanks at selected intervals within the mineralized sequences. The laboratories self-monitor themselves by the use of laboratory internal quality control procedures that were provided to Mandalay. However, Mandalay did submit 10% (every tenth sample pulp) to Actlabs in La Serena for check assay.

Barren quartz blanks were prepared from an outcropping quartzite unit located close to Coquimbo and were utilized in the 2011 drill program as listed in Table 11.1. This material was assayed by Actlabs for ME-ICP61-ICP 33 element with 2 acid (HNO3 and HCl) digestion Atomic Absorption Spectrometry.

Table 11.1 - Casa de Piedra 2011 Barren

Quartz Sample Insertions

HOLE METER SAMPLE Ag Cu

ppm ppm

DHCP-01 62.30 6025 1 65

DHCP-02 39.00 20005 <1 <5

DHCP-03 54.90 20035 <1 42

DHCP-05 62.50 20070 <1 67

DHCP-06 92.00 20099 <1 19

DHCP-07 29.20 20194 <1 <5

DHCP-08 173.40 200.57 <1 <5

DHCP-09 153.70 20175 1 <5

DHCP-10 143.35 20212 <1 9

DHCP-11 142.20 20236 <1 <5

DHCP-14 190.50 20255 <1 <5

DHCP-15 247.30 20126 <1 6

DHCP-16 112.95 20273 2 5

DHCP-17 123.00 20297 <1 8

DHLN-01 61.40 20328 1 <5

DHLN-02 70.60 20391 1 12

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During the 2012 drill program Mandalay purchased certified blanks from the ALS Laboratory in Coquimbo, and which were utilized as listed in Table 11.2.

Table 11.2 - Casa de Piedra 2012 Barren

Quartz Sample Insertions

HOLE METER SAMPLE Ag Cu

ppm ppm

DHCP-18 76.95 20462 <1 9

DHCP-19 75.15 20488 <1 54

DHCP-20 226.55 20515 <1 9

DHCP-20 191.85 20907 <1 14

DHCP-21 193.40 20542 <1 24

DHCP-22 235.65 20573 <1 26

DHCP-23 80.70 20597 <1 <5

DHCP-26 63.55 20740 <1 15

DHCP-27 130.05 20856 1 21

DHCP-30 129.95 20870 1 42

DHCP-31 157.55 20626 <1 <5

DHCP-32 125.55 20818 <1 29

DHCP-33 207.95 20695 <1 24

DHCP-34 139.15 20726 <1 15

DHCP-35 222.55 20656 <1 <5

DHCP-36 200.35 20794 <1 5

DHCP-41 175.10 20770 <1 18

DHCP-39 156.1 20917 <1 <5

DHCP-39 175.00 20928 <1 30

Mandalay submitted 31 duplicate pulps (2011 program) and 44 duplicate pulps (2012 program) to Actlabs for check assaying. This work generally confirmed the ALS results (ALS results being marginally higher grade than Actlabs) as demonstrated in Table 11.3 and Figure 11.1 below.

Table 11.3 - Casa de Piedra Sector – Summary Statistics Cu > 0.05%

ALS Actlab Difference

Relative Variation

Number 28 28 28 28

Minimum 0.0515 0.0448 -0.0077 0.0000

Maximum 1.1700 1.0703 0.0997 0.0170

Median 0.3677 0.3463 0.0215 0.0038

Standard Deviation 0.3324 0.3138 0.0269 0.0046

T Test

0.18 Relative Error

6.2%

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The Relative Assay Error (Figure 11.1) between the authors check samples (Geoanalitica and the Actlabs/ALS) showed a 6% failure at a 10% relative error which is considered to be an acceptable relative assay error.

Figure 11.1 - Casa de Piedra Project – Relative Assay Error Graph

Geoanalitica – Actlabs/ALS

Prepared by Mandalay

ActLabs utilizes 3 lab duplicates, 4 blanks and 4 standards for its internal QA/QC. ALS utilizes 8 lab duplicates, 6 blanks and 4 standards for its internal QA/QC.

Actlabs used an aqua regia digestion on a 0.25 g sample with an ICP-AES analytical method (detection limits from 1 to 10,000 ppm), which is considered to generate results that are +5 to +20% accurate. Actlabs states that “this type of analysis is NOT suitable to use if ore reserves are to be calculated”. ALS used an aqua regia digestion on a 0.4 g sample with an ICP-AES analytical method (detection limits from 5 to 50,000 ppm), which is considered to generate results that are +10% accurate.

The Relative Assay Error Graph (figure 11.1) generated for the author´s Geoanalitica – ALS/Actlabs check assays returned a 6% Relative Assay Error failure rate, which is considered to be acceptable.

The author´s check assays (which are not statistically significant) averaged 6% (2-15%) less than the Actlabs assays, and 9% (3-17%) less than the ALS Laboratory assays (excluding the results for sample #20585). The check work generally confirms the results obtained from both ALS and Actlabs.

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ALS on its webpage (www.alsglobal.com) states that multi-element scan analysis has a lower level of accuracy and that accuracies are + 5-20% if the analyte is 10 times the detection limit (5 ppm Cu) or +50 ppm Cu.

In 2012, Mandalay submitted 73 samples for check assay with Actlabs. Of these, 31 samples carried in excess of 0.01% Cu. A comparative check of samples over 0.01% Cu between the two labs determined that Actlabs ran 7% higher (7 samples) than ALS; 8 samples were within 5% of each other and that 16 samples, generally at or near the detection limits, were between +10% and 44% less than ALS.

The author is not aware of any drilling, sampling or recovery factors that could affect the accuracy and reliability of the results. The author is familiar with both laboratories and has generally considered that the work performed by both laboratories to be reliable. However, it is evident that the discrepancies between the results generated by Actlabs (apparently low) and those generated by ALS, in combination, would generate a lower grade resource as indicated by the Relative Error graph (Figure 11.2). The author proposes that Mandalay re-assay 10% of the intervals which carry + 0.15% Cu utilizing conventional atomic absorption spectrometry with a third laboratory.

At no time, or in any aspect, was an officer, director or associate of Mandalay involved in the sample preparation. At no time, or in any aspect, was the author involved in the sample preparation of the samples that he submitted to Geoanalitica for check assaying.

12. DATA VERIFICATION

Data used in this report were obtained from Mandalay and were examined at the Mandalay core/cuttings storage facility/office in La Serena. The author visited Casa de Piedra on May 1st and May 2nd, 2012 at which time he confirmed that the geology and mineralization was generally as described by Mandalay, and that Mandalay had constructed roads/trenches/drill sites in and through portions of the property and that these had been sampled as described in Section 11.1.

Assay, geological and location data were provided by Mandalay in Microsoft Access™ format. After retrieval of the assay data from spreadsheets, approximately 10% of the data was manually compared with the laboratory certificates. No differences were found.

The author checked 4 collar locations (UTM, elevation) with a GPS (global positioning system) against the geology logs and found that the discrepancies were within acceptable ranges. The database is considered to be consistent and generally complete. The core recovery is generally greater than 95%.

Mandalay has not conducted down-hole surveying. The author confirmed that for those drill holes checked the azimuths and inclinations were as plotted by Mandalay. The inclination was set by the inclination angle of the rig boom. It is the author’s opinion, which is based on examination of down-the-hole drill data at various other projects, that where relatively short (< 300 m) and steep holes are being drilling, there is minimal migration of the holes.

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Mandalay selectively sampled the mineralized intervals that transected the basal sedimentary unit of the Quebrada La Marquesa Fm. at intervals that ranged from 1 m to 4.15 m and most commonly ranged between 1.5 and 2.5 m in length.

Geological data was hand-written in tabular logging sheets that were later compiled into the electronic database. Assay data were entered into the Mandalay database from the electronic version as delivered by the laboratory.

Approximately 10% of the plotted assays were compared to the laboratory issued Assay Certificates. No differences were found and the assay data was assumed correct.

The author submitted 17 samples (pulps) of selected mineralized intervals from the 2011 and 2012 drilling campaigns to Geoanalitica Laboratory located in Coquimbo. Table 12.1 lists the check samples results for Cu and Ag vs the original Mandalay assay results. Figure 12.1 shows the Relative Assay Error Graph – for the Easdon check assays vs the original ActLabs/ALS assays.

Table 12.1 - La Quebrada Project - Comparative Assays

Drill Hole Sample ALS/ActLabs Geoanalítica

No No Cu % Ag g/t Cu % Ag g/t

DHCP-05 20067 0.416 7 0.386 9

DHCP-10 20210 1.755 24 1.672 21

DHCP-08 20054 1.045 13 1.004 13

DHCP-11 20228 0.891 18 0.776 20

DHCP-11 20229 0.586 16 0.547 17

DHCP-14 20248 0.266 10 0.262 11

DHCP-18 20906 0.38 6 0.363 6

DHCP-24 20619 0.1 5 0.093 5

DHCP-26 20739 0.87 13 0.742 14

DHCP-30 20865 0.14 2 0.133 3

DHCP-30 20878 0.48 2 0.453 3

DHCP-31 20632 0.7 10 0.655 11

DHCP-33 20696 1.53 43 1.47 43

DHCP-35 20649 0.35 4 0.307 6

DHCP-37 20785 0.03 1 0.113 <1

DHCP-41 20677 0.32 3 0.312 3

DHCP-41 20673 2.35 3 2.004 18

It is the author´s opinion that the samples were properly prepared and securely submitted to the laboratories that Mandalay used to perform the assays. However, there is an acceptable disparity between the samples analyzed by ALS and those analyzed by Actlabs. Both ALS and Actlabs used aqua regia digestion, but also used different sample weights, digestion procedures and ICP instrumentation.

The data that Mandalay has generated is adequate for the purposes of the report, subject to the comments, etc., made previously.

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13. MINERAL PROCESSING AND METALLURGICAL TESTING

No metallurgical work has been performed on material from the Casa de Piedra Sector. However, preliminary metallurgical studies are budgeted for in the 2013 Casa de Piedra Budget (refer to Table 25.1).

14. MINERAL RESOURCE ESTIMATES

The mineral resources for the Casa de Piedra Project were estimated by Mandalay using an inverse distance cubed (ID3) weighted block model created with Vulcan v.8.1 software. Wireframe solids were generated for each manto based on drill hole assays constrained by lithology. Assays were then composited for each drill hole intercept within each respective manto. Subsequently, 25 m by 25 m plan by variable thickness blocks were constructed within each manto wireframe domain. Grades were estimated by the inverse distance cubed method with limits constrained by hard boundaries. Based on a variogram model of drill hole composites, search radius was limited to 300 meters. Resources were classified as Indicated if 2 or more holes were included in the search radius and Inferred if only 1 hole was included in the search radius. Resources were estimated for various copper cutoff grades, using a minimum 3 meters diluted thickness assuming zero grade for diluting material. The resource estimation was completed June 18th, 2012.

The Specific Gravity (SG) used for the tonnage estimation was 2.71. This figure is based on the average value obtained for 20 core measurements that were performed on samples taken from the 2011 and 2012 drilling. The SG determinations ranged between 2.60 and 2.77. ActLabs in Coquimbo preformed the Specific Gravity determinations. The procedure used by ActLabs involved weighing a completely dry sample, immersing the sample in water and allowing the water to displace any air that may exist in any cavities before weighing the sample again. The SG is calculated by dividing the weight of the thoroughly dried sample (in air) by the weight of the sample in air less the weight of the sample in water.

Table 14.1 - Casa de Piedra Sector Resource Estimate

Casa de Piedra Sector, La Quebrada Project Resource Estimate Using Cutoff of 3 m of 0.3% Cu

Grade

Tonnes (000,000)

Cu %

Ag g/t

Contained Cu lbs (000,000)

Contained Ag oz (000,000)

Indicated Resource 34.8 0.6 10 459 11.2

Inferred Resource 1 0.6 11 13 0.4

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Cut off Grade

Resource Type

Tons Diluted

Cu Grade Diluted

Ag Grade Diluted

% Cu MM % g/t

MANTO 1

0.3 Indicated 16.3 0.64 10

Inferred 0.2 0.45 7

0.5 Indicated 11.3 0.74 11

Inferred 0.0

0.6 Indicated 9.1 0.78 11

Inferred 0.0

MANTO 2

0.3 Indicated 11.0 0.57 10

Inferred 0.6 0.46 5

0.4 Indicated 8.5 0.63 11

Inferred 0.2 0.67 7

0.5 Indicated 5.8 0.72 14

Inferred 0.2 0.67 7

0.6 Indicated 4.3 0.77 16

Inferred 0.2 0.68 7

MANTO 3

0.3 Indicated 7.5 0.71 10

Inferred 0.2 1.25 34

0.4 Indicated 6.4 0.76 11

Inferred 0.2 1.25 34

0.5 Indicated 5.4 0.82 12

Inferred 0.2 1.25 34

0.6 Indicated 4.5 0.87 12

Inferred 0.2 1.25 34

Notes: 11. CIM Definitions used for Indicated and Inferred Resources 12. Mineral Resource estimate prepared under the supervision of Ronald Luethe, (General Manager of

Mandalay Chile Ltda., an Idaho registered Professional Geologist and an American Institute of Professional Geologists (“AIPG”) Certified Professional Geologist, and a Qualified Person defined by NI 43-101); and reviewed and approved by Michael Easdon (Consultant, Certified Professional Geologist (CPG-07646) in good standing with the AIPG, and an Independent Qualified Person under Canadian NI 43-101).

13. No capping of copper or silver assays was used. 14. Ore grades for copper and silver for each 25 x 25 metre (“m”) x manto thickness Resource block were

estimated by the inverse distance cubed method inside of manually interpreted manto boundaries. 15. Mineral Resources are reported at a cut-off grade of 0.3% Cu. 16. A minimum manto width of 3 m was used, including diluting material of zero grade, where the mantos are

narrower. 17. A density of 2.71 t/m3 was used. 18. Resources were classified as Indicated if 2 or more holes were included in the 300 m search radius and

Inferred if only 1 hole was included in the search radius. 19. Mineral Resources are reported at a cut-off grade of 0.3% Cu over a minimum manto thickness of 3 m which

can include <0.3% Cu internal dilution.

20. Numbers may not add due to rounding.

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An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. It cannot be assumed that the Inferred Mineral Resources will be upgraded to an Indicated Resource as a result of continued exploration. Furthermore, it cannot be assured that either the Indicated or the Inferred Mineral Resources will be converted to a “Reserve” category at such time as feasibility studies are initiated.

The author hand-estimated the tonnage and grade potential for the first (upper most) manto using the plan map of the geology showing the drill holes and estimating the tonnage potential envelope about each drill holes based on up to a 300 meter polygonal projection as developed by the variography, and/or the geological contacts. The volume for each area was based on the drill-indicated true thickness for each drill hole, and a factor of 2.71 (Specific Gravity) was used to estimate the tonnage about each drill hole. The author used a cut-off grade which is equivalent to 3 m grading 0.2% Cu, and which can include 2 m of <0.2% Cu internal dilution. The author´s hand estimated resource for the Manto 1 confirmed the resources developed by Mandalay to within 10% for both the tonnage and grade.

15. MINERAL RESERVE ESTIMATES

No mineral reserves have been estimated.

16. MINING METHODS

Mandalay has not discussed mining methods. However, it is the opinion of the author that the material, if found to be economically exploitable, will most probably be extracted by a combination of open pit and room-and-pillar mining methods.

17. RECOVERY METHODS

In so far as no metallurgical test work has been undertaken to date on material from Casa de Piedra, no recovery methods have been considered or defined.

18. PROJECT INFRASTRUCTURE

Casa de Piedra is located approximately 40 km northeast of and up the Elqui Valley from the City of La Serena, which is easily accessible by paved, and variously maintained dirt roads. A power line is developed which ties into the national network and to which Mandalay should have access. Port facilities are available at Coquimbo, 15 km south of La Serena. The topography

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about the Casa de Piedra Sector can be easily adapted to provide space for a process plant, waste dumps and tailings piles.

19. MARKET STUDIES AND CONTRACTS

No market studies have been undertaken for the potential copper-silver production at Casa de Piedra, and no contracts have been entered into.

20. ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY IMPACT

To date, Mandalay has not performed any environmental studies that would relate to a mining operation, other than that required to obtain the two Environmental Impact Statements that allowed Mandalay to drill in 2011 and 2012. The author is not aware of any environmental issues that could impact on Mandalay´s being able to extract any mineral resources developed.

The author is not aware of the requirements and plans that would be needed for waste and tailings disposal, site monitoring, and water management during operations and mine closure.

The author is not aware of the project permitting requirements which will be needed if, and when, it is determined that Casa de Piedra might be minable, and furthermore has no knowledge as to what the requirement are to post performance and reclamation bonds.

To date the local community (Comunidad Agricola Olla de Caldera) has cooperated fully with Mandalay in allowing it to construct trenches, roads and drill pads. It is anticipated that the community will continue to cooperate with Mandalay should a decision be made to exploit the Casa de Piedra mineral resources.

The author has no knowledge of what the mine closure remediation and reclamation requirements and costs would be, should a mine be developed.

21. CAPITAL AND OPERTATING COSTS

No Capital or Operating Costs have been estimated to date.

22. ECONOMIC ANALYSIS

To date Mandalay has not performed any economic analyses. Costs for preliminary scoping studies are included in the 2013 budget (Table 26.1).

23. ADJACENT PROPERTIES

Compañia Minera San Geronimo operates the Tugal open pit copper mine immediately south of the Casa de Piedra concession block. Diaz, L., 2010 states that “The mineralization being mined is a continuation of the type being explored for at Casa de Piedra, as based on a brief

44

visit made by the author to the Tugal Mine circa 2007, and confirmed by visits to the Tugal Mine by Mandalay personnel.”

The following is translated from the Diario Oficial de la Republica de Chile, Viernes 11 de Enero, 2008 (www.anepe.cl/gobierno transparente) and describes the environmental impact statement that San Geronimo filed with the Region IV Environmental Agency:

“The Tugal orebody comprises a Copper and Silver deposit which is located in the Arqueros Plains located to the northeast of the city of La Serena. The average elevation above sea level is 1,400 m. Geological resources (CuT) are estimated at about 14,412,099 tons. The magnitude and quality of the resources allow for open pit mining, leading to a low-cost mining operation, which is an important condition for the economic success of the project. The extracted material will be processed in the company´s Talcuna processing plant.”

24. OTHER RELEVANT DATA AND INFORMATION

The author is not aware of any additional data that maybe necessary to make the technical report understandable and not misleading.

25. INTERPRETATION AND CONCLUSIONS

In 2011 and 2012, Mandalay drilled a total of 42 diamond drill holes (7,430 m total) at the Casa de Piedra Project of the La Quebrada Property, which has allowed for the definition of an Indicated Resource of 35M tonnes at a grade of 0.6% Cu and 10 g/t Ag and an Inferred Resource of 1M tonnes grading 0.6% Cu and 11 gpt Ag.

An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. It cannot be assumed that the Inferred Mineral Resources will be upgraded to an Indicated Resource as a result of continued exploration. Furthermore, it cannot be assured that either the Indicated or the Inferred Mineral Resources will be converted to a “Reserve” category at such time as feasibility studies are initiated.

The author concurs with Mandalay that the resources are largely hosted in 3 key mineralized horizons (mantos) within the basal calcareous sedimentary horizon of the Quebrada Marquesa Fm, and that the deposit type is characteristic of sediment-hosted copper-silver deposit.

Variography has indicated that the grades of mineralization in the three mantos can be reasonably projected for up to 300 m from the drill intercepts. It is the author’s opinion that this projection is reasonable, and can be generally verified by the continuity of the mantos as exposed and mapped at the surface at the La Quebrada property.

Because the mineralized intervals were analyzed using a multi-element ICP analytical method for low grade samples, the ALS Laboratory indicates that there is an inherent potential variation

45

of ±10% (see http://www.alsglobal.com/minerals.aspx), the resultant calculated mineral resource grade would be subject to a similar variation. A Relative Analytical Error Graph suggested that the relationship between the ALS and Actlabs analyses carried a failure rate of 10.9% at a 10% relative error, which likewise suggests that the estimated resource grade may have a significant variation. In the author’s opinion, any future economic evaluation could be subject to such variation, possibly invalidating the evaluation, if the confidence level is not better validated. The author has recommended that Mandalay re-assay 10% of the intervals which carry +0.15% Cu utilizing conventional atomic absorption spectrometry with a third laboratory. This work could assist in lowering the relative assay error to an acceptable range (<10%) and would allow for a higher level of confidence in the estimation of the resource.

It is the author’s opinion that the Casa de Piedra Project has been properly conceived and that

the proposed exploration and development program for the year 2013 should be conducted.

26. RECOMMENDATIONS

Mandalay has planned a total of US $1,498,700 to be spent on the La Quebrada project in 2013 (see Table 25.1 below). Key elements of this work include: additional mapping and sampling; 3,600 m of diamond core drilling; metallurgical tests; initial scoping engineering and economic studies. The drilling will be performed at Casa de Piedra and, in part, at the Leoncita Sector of the project (which is considered to have potential for mineralization similar to that found at Casa de Piedra).

Based on the data that has been generated and which the author has reviewed, it is the author’s opinion that continued exploration and development of the Casa de Piedra Sector is warranted. The author concurs with Mandalay that the next phase of work (2013) that should be done at the La Quebrada Property should include addition drilling to expand the resource at the Casa de Piedra Sector and further test the Leoncita Sector. The work will comprise 3,600 m of diamond drilling as well as an expanded mapping and sampling program of the Quebrada La Marquesa Fm. to further define the drill targets. Preliminary metallurgical testing will be conducted so as to provide Mandalay with input for its initial modeling and scoping studies. The proposed budget (Table 25.1) is considered by the author to be appropriate for this property considering the current stage of exploration at Casa de Piedra.

The budget (US $1,498,700) is detailed as follows: dri l l road and pad construct ion and core dr i l l ing (3,600 m) and related activities are US $991,900; assaying costs (surface and drill core) are U S $22,100. Management and staff related costs, including salaries, room, board and travel plus field office are US $331,100; property costs, including community payments and property maintenance are US $110,000; metallurgical testing and a scoping economic assessment are US $43,600. The Chilean value-added tax (IVA) of 19% is included in the budget where applicable.

46

Table 26.1 - Casa de Piedra Sector - 2013 Budget

Item Cost USD

Management and Staffing 323,600

Trenching, Drill Road and Pad Construction 65,500

Drilling - 3,600 m 830,200

Assaying 22,100

Metallurgy 30,000

Other Items - including , Modeling, Scoping & Economic Studies

13,600

Field Office 7,500

Food and Lodging 96,200

Land Maintenance and Payments 110,000

TOTAL 1,498,700

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27. REFERENCES

Aberg, G., Aguirre, L., Levi, B., and Nystrom, J., 1984; Spreading, Subsidence, and Generation of Ensialic Marginal Basins: An Example from the Early Cretaceous of Central Chile, in: Kokelaar, B.P., and Howells, M.F. (Ends.), Marginal Basin Geology: Geological Society of London, Special Publication 16, 185-193.

Aguirre Le-Bert, L. and Egert Ruiz, E., 1965; Cuadrángulo Quebrada Marquesa, Provincia de Coquimbo. Escala 1:50,000. Instituto de Investigaciones Geológicas. Chile. Carta No. 15.

Agterberg, F.P., 1974, Geomathematics; Developments in Geomathematics 1, Elsevier

Scientific Publ. Co., Amsterdam, 596p.

Boric, R. 1985; Geología y Yacimientos Metálicos del Distrito Talcuna, IV Región de Coquimbo. Revista Geológica de Chile n. 25-26, p. 57-75.

Boric, R., Diaz, F., and Maksaev, V., 1985; Magmatic Events and Related Metallogenesis in the Antofagasta Region, Northern Chile: Santiago, Departamento de Geología, Universidad de Chile, Comunicaciones, 35, 37-40.

Buchelt, M. and Tellez, C., 1988; The Jurassic La Negra Formation in the Area of Antofagasta, Northern Chile (Lithology, Petrology, Geochemistry), in: The Southern Central Andes, H., Bahlburg, C. Brietkreuz, and P. Giese (eds.): Springer, Lecture Notes in Earth Sciences, 17, 171- 182.

Business News, Nov., 2010; San Geronimo Tugal Open Pit Mine.

Chartrand, F.M. and Brown, A.C., 1985; The diagenetic origin of stratiform copper mineralization, Coates Lake, Redstone Belt, N.W.T., Canada: Economic Geology, 80, 325-343.

Cisternas, M.E. and Diaz. L.L.. 1990; Geologic Evolution of the Atacama Basin During the Lower Cretaceous, in Stratabound Ore Deposits in the Andes, L. Fonbote. G.C. Amstutz, M. Cardozo, E. Cedillo. J. Frutos (Eds.).

Cox, Dennis P., Lindsay, David A., Singer, Donald A., and Diggles, Michael F., 2003; Sediment- Hosted Copper Deposits of the World: Deposit Models and Database: U.S. Geological Survey Open-File Report 03-107.

Dallmeyer, R.D., Brown, M., Grocett, J., Taylor, G.K., and Treloar, P.J.; 1996, Mesozoic Magmatic and Tectonic Events Within the Andean Plate Boundary Zone, 26o-27o30’, North Chile: Constraints from 40Ar/39Ar Mineral Ages: Journal of Geology, 104, 19-40.

Diaz, F. (1976); Exploración Geoquímica en Distritos Argentíferos de Chile – II Arqueros, IV Región, SCM Placer Metal Ltda.

Diaz, L. (2010), La Quebrada Project, La Serena, Chile; National Instrument 43-101; prepared for Mandalay Resources Incorporated.

Davis, J.C., 1986, Statistics and data analysis in geology (2nd ed.); John Wiley and Sons Inc.,

New York, 646 p.

Espinoza, S., Veliz, H., Esquivel, L., Arias, J., and Moraga B., 1996; The Cupriferous Province of the Coastal Range, Northern Chile, in Andean Copper Deposits: New Discoveries.

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Ferraris, F (2007), La Quebrada Project, Advance Report. Internal Report Mandalay Resources Corporation. 17 p. Kapler, J.J.; 1998, Internal Memorandum Re: Doug Mac Donald, La Quebrada (Tugal) Prospect, Chile, November 18, 1998, Teck Resources Inc.

Losert, J., 1974; The Formation of Stratiform Copper Deposits in Relation to Alteration of Volcanic Series (on North- Chilean Examples): Rozpravy Ceskoslovenske Akad Ved, Rocnik, 84 (5), 77 p.

Mpodozis, C. and Allmendinger, R.W., 1993; Extensional Tectonics, Cretaceous Andes, Northern Chile, (27°S): Geol. Soc. Am. Bull., 105, 1462-1477.

Mpodozis, C. and Ramos, V., 1990; The Andes of Chile and Argentina: Circum-Pacific Council for Energy and Mineral Resources, Earth Science Series, 11, 59-90.

Rivano, S., Sepulveda, M., Herve, M., and Puig, A.; 1985, Geocronología K-Ar de las rocas intrusivas entre los 31-32 latitud Sur, Chile: Revista Geológica de Chile, 24, 63-74

Sandidge, M.H. And Cox, D.P., 2005; National Instrument 43-101 qualifying property report on the Leoncita Property, IV Region, Northern Chile.

Sernageomin, 1999; Geologic Map of the Condoriaco – Rivadavia Area, Region of Coquimbo; Map No. 12.

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27. CERTIFICATE OF AUTHOR

I, Michael Easdon, do hereby certify that:

1. I am the author of the Technical Report entitled La Quebrada Copper-Silver Project; Casa de Piedra Sector, Technical Report prepared for Mandalay Resources Corporation (the Issuer) and dates August 14th, 2012 (“The Technical Report”).

2. I am a consulting geologist to the mining and mineral exploration industry with an office at Alcantara 1128, Depto. 905, Las Condes, Santiago, Chile; Tel: 5697-897-6872; Email: mikeasdon@gmail.com.

3. I obtained a Bachelor of Science degree in Geology in 1960 and a Master of Science degree in Geology in 1970 from McGill University in Montreal, Quebec, Canada.

4. I am Certified Professional Geologist (CPG-07646) in good standing with the American Institute of Professional Geologists, Colorado, USA and have been continuously practicing my profession as an exploration geologist (exploration for and development of mining properties) since 1965.

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 NI43-101) and past relevant work experience, I fulfill the requirement of “qualified person” for purposes of NI 43-101. This report is based on my personal review of information provided by the Issuer (and other published and unpublished information), and on discussions with Issuer’s representatives. My relevant experience for the purpose of the Technical Report is:

* Sr. Exploration Geologist, Duval Corporation (Reno, Nevada), 1970-1978; engaged in exploration for porphyry copper deposits.

* Consultant, Precious and Base Metals Exploration, including review and preparation of resources estimations, 1987-1993.

* General Manager, Copper-Gold and Precious Metals Exploration, Chile, Minera Newcrest Chile Limitada, 2007-2008.

* Consultant, Base and Precious Metals Exploration, including the review and preparation of resources estimations - 1995-2007, and June 2008 - present; including the preparation and/or participation in various N43-101 Technical Reports.

6. The Technical Report is based upon a review of proprietary, published and printed reports and maps on the subject property and surrounding area and on a site visit to the Casa de Piedra Project on May 1st and 2nd, 2012. I am responsible for the report in its entirety.

7. As at the effective date of this Technical Report and certificate (August 14th, 2012) to the best of my knowledge, information and belief, the Technical Report contains all of the scientific and technical information that is required to be disclosed to make this Technical Report not misleading.

8. I am independent of the Issuer as set out in Section 1.5 of NI43-101.

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9. I, or any affiliated entity of mine, have not earned the majority of our income during the preceding three years from the Issuer, or any associated or affiliated companies.

10. I have no interest, nor have I had any prior interest, in the subject property, either directly or indirectly.

11. I, or any affiliated entity of mine, do not own, directly or indirectly, nor expect to receive, any interest in the properties or securities of the Issuer, or any associated or affiliated companies.

12. I have read National Instrument 43-101 “Standards of Disclosure for Mineral Projects” and Form 43-101F1. This Technical Report has been prepared in compliance with the foregoing Instrument and Form.

13. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and any publication by them, including electronic publication in the public company files on their websites accessible to the public of the Technical Report.

Dated this day of 14th day of August 2012, in Santiago, Chile.

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Michael Easdon, M.Sc., Prof. Reg. Geol.