mandalay resources corporation technical report on … · march 13, 2015 rpa inc. 55 university...

March 13, 2015

RPA Inc. T55 University Ave. Suite 501 I Toronto, ON, Canada M5J 2H7 I + 1 (416) 947 0907 www.rpacan.com

MANDALAY RESOURCES CORPORATION

TECHNICAL REPORT ON THECERRO BAYO PROJECT,REGION XI (AISÉN), CHILE

NI 43-101 Report

Qualified Persons:Normand L. Lecuyer, P.Eng.Rosmery Julia Cárdenas Barzola, MAusIMM CP (Geo)

Report Control Form Document Title Technical Report on the Cerro Bayo Project, Region XI

(AISÉN), Chile

Client Name & Address

Mandalay Resources Corporation 76 Richmond Street East, Suite 330 Toronto, Ontario M5C 1P1

Document Reference

Project #2366

Status & Issue No.

FINAL Version

Issue Date March 13, 2015 Lead Author Rosmery Cardenas

Normand Lecuyer

(Signed) (Signed)

Peer Reviewer Luke Evans

Jason J. Cox

(Signed) (Signed)

Project Manager Approval Luke Evans

(Signed)

Project Director Approval Deborah A. McCombe

(Signed)

Report Distribution Name No. of Copies Client RPA Filing 1 (project box)

Roscoe Postle Associates Inc.

55 University Avenue, Suite 501 Toronto, ON M5J 2H7

Canada Tel: +1 416 947 0907

Fax: +1 416 947 0395 [email protected]

mailto:[email protected]

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Mandalay Resources Corporation – Cerro Bayo Project, Project #2366

Technical Report NI 43-101 – March 13, 2015 Page i

TABLE OF CONTENTS PAGE

1 SUMMARY ........................................................................................................................ 1-1 Executive Summary ......................................................................................................... 1-1 Technical Summary ......................................................................................................... 1-6

2 INTRODUCTION ............................................................................................................... 2-1

3 RELIANCE ON OTHER EXPERTS ................................................................................... 3-1

4 PROPERTY DESCRIPTION AND LOCATION ................................................................. 4-1

5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ................................................................................................................. 5-1

6 HISTORY ........................................................................................................................... 6-1

7 GEOLOGICAL SETTING AND MINERALIZATION ........................................................... 7-1 Regional Geology ............................................................................................................ 7-1 Local and Property Geology ............................................................................................ 7-4 Mineralization .................................................................................................................. 7-9

8 DEPOSIT TYPES .............................................................................................................. 8-1

9 EXPLORATION ................................................................................................................. 9-1 Exploration Potential ........................................................................................................ 9-2

10 DRILLING ...................................................................................................................... 10-1 Previous Drilling ............................................................................................................. 10-1 Mandalay Drilling ........................................................................................................... 10-3

11 SAMPLE PREPARATION, ANALYSES AND SECURITY ............................................ 11-1 Previous Work ............................................................................................................... 11-1 Mandalay Work .............................................................................................................. 11-3

12 DATA VERIFICATION ................................................................................................... 12-1

13 MINERAL PROCESSING AND METALLURGICAL TESTING ..................................... 13-1

14 MINERAL RESOURCE ESTIMATE .............................................................................. 14-1 Cut-off Grade ............................................................................................................... 14-46 Mineral Resource Estimate ......................................................................................... 14-48

15 MINERAL RESERVE ESTIMATE ................................................................................. 15-1 Reserve Estimation Methodology .................................................................................. 15-1 Dilution and Extraction Factors ...................................................................................... 15-3 Reconciliation ................................................................................................................ 15-5

16 MINING METHODS ....................................................................................................... 16-1 Mine Design and Mining Method ................................................................................... 16-1 Geomechanics and Ground Support ........................................................................... 16-11 Pre-production Schedule ............................................................................................. 16-15

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Technical Report NI 43-101 – March 13, 2015 Page ii

Life of Mine Plan .......................................................................................................... 16-16 Infrastructure ............................................................................................................... 16-18

17 RECOVERY METHODS ............................................................................................... 17-1 Historical Recovery ........................................................................................................ 17-1 Current Recovery .......................................................................................................... 17-3

18 PROJECT INFRASTRUCTURE .................................................................................... 18-1

19 MARKET STUDIES AND CONTRACTS ....................................................................... 19-1 Markets .......................................................................................................................... 19-1 Contracts ....................................................................................................................... 19-1

20 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL OR COMMUNITY IMPACT ............................................................................................................................................ 20-1

Environmental Studies and Information ......................................................................... 20-1 Project Permitting .......................................................................................................... 20-3 Social or Community Requirements ............................................................................ 20-11 Mine Closure Requirements ........................................................................................ 20-11

21 CAPITAL AND OPERATING COSTS ........................................................................... 21-1 Capital Costs ................................................................................................................. 21-1 Operating Costs ............................................................................................................. 21-2

22 ECONOMIC ANALYSIS ................................................................................................ 22-1

23 ADJACENT PROPERTIES ........................................................................................... 23-1

24 OTHER RELEVANT DATA AND INFORMATION ......................................................... 24-1

25 INTERPRETATION AND CONCLUSIONS ................................................................... 25-1

26 RECOMMENDATIONS ................................................................................................. 26-1

27 REFERENCES .............................................................................................................. 27-1

28 DATE AND SIGNATURE PAGE ................................................................................... 28-1

29 CERTIFICATE OF QUALIFIED PERSON ..................................................................... 29-1

LIST OF TABLES PAGE

Table 1-1 Summary of Mineral Resources Inclusive of Mineral Reserves – December 31, 2014 ...................................................................................................................................... 1-2 Table 1-2 Summary of Mineral Reserves – December 31, 2014 ....................................... 1-2 Table 1-3 LOM Capital Costs ........................................................................................... 1-12 Table 1-4 Operating Costs ............................................................................................... 1-12 Table 4-1 Property List ....................................................................................................... 4-1 Table 5-1 Water Permits ..................................................................................................... 5-3 Table 6-1 Historical Mineral Resources .............................................................................. 6-3 Table 6-2 Historical Mineral Reserves ................................................................................ 6-3 Table 6-3 Production History .............................................................................................. 6-4 Table 10-1 Drill Hole Database ........................................................................................ 10-1

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Technical Report NI 43-101 – March 13, 2015 Page iii

Table 13-5 Production Summary - Actual 2014 ................................................................ 13-9 Table 13-6 Production Summary - Budget 2014 ............................................................ 13-10 Table 14-1 Summary of Mineral Resources Inclusive of Mineral Reserves – December 31, 2014 .................................................................................................................................... 14-1 Table 14-2 Resource Databases ...................................................................................... 14-3 Table 14-3 Grade Capping Levels .................................................................................. 14-15 Table 14-4 Block Model Parameters .............................................................................. 14-23 Table 14-5 Vulcan Domain Search Directions ................................................................ 14-26 Table 14-6 Grade Estimation Parameters ...................................................................... 14-27 Table 14-7 Diluted Vein Grades ..................................................................................... 14-29 Table 14-8 Comparison of RPA and Previous Resource Estimates Inclusive of Mineral Reserves .......................................................................................................................... 14-45 Table 14-9 Reserve Cut-off Grade Assumptions ............................................................ 14-46 Table 14-10 Mineral Resources Inclusive of Mineral Reserves by Domain – December 31, 2014 .................................................................................................................................. 14-48 Table 15-1 Conversion of Resources to Reserves - Yasna Vein ..................................... 15-2 Table 15-2 Dilution Grades 2014 Reserves ..................................................................... 15-3 Table 15-3 Mineral Reserves – December 31, 2014 ........................................................ 15-4 Table 15-4 Production Results - 2014 .............................................................................. 15-5 Table 16-1 Geomechanical Characteristics - “Q” (Barton) vs. MRMR (Laubscher) ....... 16-12 Table 16-2 Stope Safety Factor – Walls ......................................................................... 16-13 Table 16-3 Stope Safety Factors - Roof ......................................................................... 16-13 Table 16-4 Ground Support Recommendations ............................................................. 16-14 Table 16-5 Mine Development ....................................................................................... 16-16 Table 16-6 LOM Production Schedule ........................................................................... 16-17 Table 16-7 Ventilation Requirements ............................................................................. 16-22 Table 16-8 Underground Equipment .............................................................................. 16-27 Table 16-9 Surface Equipment ....................................................................................... 16-28 Table 16-10 Equipment Availability ................................................................................ 16-29 Table 17-1 Historical Mill Performance ............................................................................. 17-2 Table 17-2 Mill Performance in 2014 ................................................................................ 17-3 Table 20-1 Project Permits – Laguna Verde Sector ......................................................... 20-4 Table 20-2 Project Permits – Furioso Sector .................................................................... 20-5 Table 20-3 Project Permits – Cerro Bayo Sector ............................................................. 20-5 Table 20-4 Project Permits – Cascada Sector ................................................................. 20-6 Table 20-5 Project Permits – Guanaco Sector ................................................................. 20-6 Table 20-6 Closure Costs Breakdown by Year .............................................................. 20-12 Table 21-1 Capital Costs .................................................................................................. 21-1 Table 21-2 LOM Operating Costs ..................................................................................... 21-2 Table 21-3 Company Manpower ...................................................................................... 21-2 Table 21-4 Contract Manpower ........................................................................................ 21-3

LIST OF FIGURES PAGE

Figure 4-1 Location Map ..................................................................................................... 4-5 Figure 4-2 Property Map ..................................................................................................... 4-6 Figure 7-1 Regional Geology .............................................................................................. 7-3 Figure 7-2 Property Geology .............................................................................................. 7-7

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Technical Report NI 43-101 – March 13, 2015 Page iv

Figure 7-3 Property Geology Legend ................................................................................. 7-8 Figure 8-1 Regional Deposits ............................................................................................. 8-3 Figure 14-1 Fabiola Au Grade Comparison ...................................................................... 14-4 Figure 14-2 Fabiola Ag Grade Comparison ...................................................................... 14-5 Figure 14-3 Dagny Au Grade Comparison ....................................................................... 14-6 Figure 14-4 Dagny Ag Grade Comparison ....................................................................... 14-7 Figure 14-5 Vein Models in Laguna Verde Area Showing Drill Holes .............................. 14-9 Figure 14-6 Marcela Sur And Raul Vein Models in Cerro Bayo Area Showing Drill Holes ...... .......................................................................................................................................... 14-10 Figure 14-7 Ag Box Plot and Assay Statistics – Laguna Verde Area ............................. 14-11 Figure 14-8 Au Box Plot and Assay Statistics - Laguna Verde Area .............................. 14-12 Figure 14-9 Ag Box Plot and Assay Statistics - Cerro Bayo Area .................................. 14-13 Figure 14-10 Au Box Plot and Assay Statistics – Cerro Bayo Area ............................... 14-14 Figure 14-11 Fabiola Ag Histogram – Channel Samples ............................................... 14-16 Figure 14-12 Fabiola Ag Probability Plot – Channel Samples ........................................ 14-17 Figure 14-13 Fabiola Vein Channel samples - Ag Cutting Curve ................................... 14-18 Figure 14-14 Ag Box Plot and Composite Statistics - Laguna Verde Area .................... 14-19 Figure 14-15 Au Box Plot and Composite Statistics - Laguna Verde Area .................... 14-20 Figure 14-16 Ag Box Plot and Composite Statistics – Cerro Bayo Area ........................ 14-21 Figure 14-17 Au Box Plot and Composite Statistics – Cerro Bayo Area ........................ 14-22 Figure 14-18 Dagny Variogram ...................................................................................... 14-25 Figure 14-19 Dagny Vein Ag Block Grades .................................................................... 14-30 Figure 14-20 Coyita NW Vein Ag Block Grades ............................................................. 14-31 Figure 14-21 Coyita SE Vein Ag Block Grades .............................................................. 14-32 Figure 14-22 Dalila Vein Ag Block Grades ..................................................................... 14-33 Figure 14-23 Delia NW Vein Ag Block Grades ............................................................... 14-34 Figure 14-24 Delia SE Vein Ag Block Grades ................................................................ 14-35 Figure 14-25 Fabiola Vein Ag Block Grades .................................................................. 14-36 Figure 14-26 Yasna Vein Ag Block Grades .................................................................... 14-37 Figure 14-27 Kasia Vein Ag Block Grades ..................................................................... 14-38 Figure 14-28 Trinidad Vein Ag Block Grades ................................................................. 14-39 Figure 14-29 Marcela Sur Vein Ag Block Grades ........................................................... 14-40 Figure 14-30 Raul Vein Ag Block Grades ....................................................................... 14-41 Figure 14-31 Example of Resource and Reserve Seam Block Model ........................... 14-42 Figure 15-1 Coyita NW Vein Longitudinal Section - Drilling and Mining Plan .................. 15-7 Figure 15-2 Coyita SE Vein Longitudinal Section - Drilling and Mining Plan .................... 15-8 Figure 15-3 Dagny Vein Longitudinal Section - Drilling and Mining Plan ......................... 15-9 Figure 15-4 Dalila Vein Longitudinal Section - Drilling and Mining Plan ......................... 15-10 Figure 15-5 Delia NW Vein Longitudinal Section – Drilling and Mining Plan .................. 15-11 Figure 15-6 Delia SE Vein Longitudinal Section – Drilling and Mining Plan ................... 15-12 Figure 15-7 Fabiola Vein Longitudinal Section – Drilling and Mining Plan ..................... 15-13 Figure 15-8 Yasna Vein Longitudinal Section – Drilling and Mining Plan ....................... 15-14 Figure 15-9 Trinidad Vein Longitudinal Section – Drilling and Mining Plan .................... 15-15 Figure 15-10 Marcela Vein Longitudinal Section – Drilling and Mining Plan .................. 15-16 Figure 15-11 Raul Vein Longitudinal Section – Drilling and Mining Plan ....................... 15-17 Figure 16-1 Ramp Dimensions ......................................................................................... 16-3 Figure 16-2 General Plant Layout .................................................................................... 16-4 Figure 16-3 Schematic Section of Longhole Retreat Stoping Method .............................. 16-5 Figure 16-4 Dagny Mine - Production Drilling Cross Section (Typical)............................. 16-6 Figure 16-5 Delia NW Production Drilling Cross Section (Fan Drilling) ............................ 16-7 Figure 16-6 Fabiola Vein Longitudinal Section (2015-2016 Production) .......................... 16-8 Figure 16-7 Delia Vein Longitudinal Section (2015-2016 Production) .............................. 16-9

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Technical Report NI 43-101 – March 13, 2015 Page v

Figure 16-8 Dagny Vein Longitudinal Section (2015-2016 Production) ......................... 16-10 Figure 16-9 Stability Graph – MRMR vs. HR .................................................................. 16-12 Figure 16-10 Fabiola Mine Underground 3D View ......................................................... 16-19 Figure 16-11 Dagny Mine Underground 3D View ........................................................... 16-20 Figure 16-12 Fabiola 177 Level Plan .............................................................................. 16-21 Figure 16-13 Fabiola Mine Ventilation System ............................................................... 16-23 Figure 16-14 Delia Mine Ventilation System .................................................................. 16-24 Figure 16-15 Dagny Mine Ventilation System ................................................................ 16-25 Figure 17-1 Crushing/Grinding Flow Sheet ...................................................................... 17-4 Figure 17-2 Flotation Circuit ............................................................................................. 17-5 Figure 17-3 Reagent Dosages ......................................................................................... 17-6 Figure 17-4 Process Plant Water Balance ....................................................................... 17-7 Figure 18-1 General Site Layout ...................................................................................... 18-3 Figure 18-2 Satellite View of Surface-Laguna Verde ....................................................... 18-4 Figure 18-3 Tailings Facility .............................................................................................. 18-5

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Technical Report NI 43-101 – March 13, 2015 Page 1-1

1 SUMMARY EXECUTIVE SUMMARY Roscoe Postle Associates Inc. (RPA) was retained by Mandalay Resources Corporation

(Mandalay) to prepare updated Mineral Resource and Mineral Reserve estimates and an

independent Technical Report on the Cerro Bayo Project (the Project), in the Aisén Region,

near Chile Chico, Chile. The purpose of this report is to update Mineral Reserves and Mineral

Resources based on 2014 drilling and mine development. This Technical Report conforms to

National Instrument 43-101 (NI 43-101) Standards of Disclosure for Mineral Projects. RPA

most recently visited the property from January 8 to 10, 2014.

The Project consists of underground mines containing silver and gold veins, five of which are

currently mined from three individual portals. Veins with estimated Mineral Resources include

the Yasna, Fabiola, Dalila, Coyita, Dagny, Delia NW, Delia SE, Trinidad, Kasia, Marcela Sur,

and Raul. A processing facility, rated at 1,650 tonnes per day (tpd), is located on the site and

is operational. The plant produces a silver and gold flotation concentrate that is trucked to the

port of Puerto Chacabuco, Chile, and shipped to a client in Japan. Tailings are disposed of in

a tailings facility located on site, with process water recycled from the tailings facility. Power

is generated on site from a 7 MVA diesel power plant for the processing plant and surface

facilities and a 2.8 MVA diesel plant for the underground mines.

In August 2010, Mandalay purchased 100% of Compañía Minera Cerro Bayo Ltda. (CMCB),

then a subsidiary of Coeur d’Alene Mines Corporation (Coeur). At that time, the Project was

under care and maintenance. Mining commenced in September 2010, with processing

initiated in January 2011. The current Life of Mine (LOM) plan, based on Proven and Probable

Reserves, outlines a mine life of 5.5 years with an average production rate of 1,250 tpd.

RPA previously completed Mineral Resource and Mineral Reserve estimates and NI 43-101

Technical Reports on the Project in March 2012, March 2013, and March 2014.

MINERAL RESOURCES AND MINERAL RESERVES The Mineral Resource estimate as of December 31, 2014, is summarized in Table 1-1 at a cut-

off grade of 150 g/t of silver equivalent (AgEq).

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TABLE 1-1 SUMMARY OF MINERAL RESOURCES INCLUSIVE OF MINERAL RESERVES – DECEMBER 31, 2014

Mandalay Resources Corporation – Cerro Bayo Project

Category Tonnes

(000)

Au Grade (g/t)

Ag Grade (g/t)

AgEq (g/t)

Au Ounces

(000)

Ag Ounces

(000)

Ag Eq Ounces

(000) Measured 310 2.63 315 472 26 3,143 4,707 Indicated 1,685 3.28 323 519 178 17,525 28,132 Total M+ I 1,995 3.18 322 512 204 20,668 32,839 Inferred 585 2.26 218 353 43 4,112 6,647 Notes:

1. CIM definitions were followed for Mineral Resources. 2. Mineral Resources are estimated at a cut-off grade of 150 g/t AgEq. The AgEq was calculated using the

formula AgEq = Ag + (Au x 59.69) where Ag and Au are in grams per tonne after transport, treatment and refining costs are deducted.

3. Mineral Resources are estimated using a long-term gold price of US$1,400 per ounce and a long-term silver price of US$24 per ounce.

4. A minimum mining width of 1.2 m was used. 5. Bulk density is 2.63 t/m3. 6. Mineral Resources are inclusive of Mineral Reserves. 7. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. 8. Numbers may not add due to rounding.

The Mineral Reserve estimate as of December 31, 2014, is summarized in Table 1-2 at a cut-

off grade of 184 g/t AuEq.

TABLE 1-2 SUMMARY OF MINERAL RESERVES – DECEMBER 31, 2014 Mandalay Resources Corporation – Cerro Bayo Project

Category Tonnes

(000)

Au Grade (g/t)

Ag Grade (g/t)

AgEq (g/t)

Au Ounces

(000)

Ag Ounces

(000)

AgEq Ounces

(000) Proven 375 1.74 209 316 21 2,513 3,805

Probable 2,035 2.21 222 358 144 14,549 23,450 Total Proven and Probable

2,409 2.13 220 352 165 17,062 27,256

Notes:

1. CIM definitions were followed for Mineral Reserves. 2. Mineral Reserves are estimated at a cut-off grade of 184 g/t AgEq (silver equivalent). AgEq is calculated

using the formula AgEq= Ag + (Au x 61.66) where Ag and Au are in grams per tonne. Metal prices for determining cut-off grades were US$1,200/oz Au and $20/oz Ag.

3. Veins are diluted to 2.4 m minimum mining width and a mining extraction factor of 95% was applied to stope tonnages.

4. A bulk density of 2.63 t/m3 was used. 5. Dilution grades vary by vein. 6. Numbers may not add due to rounding.

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RPA is not aware of any environmental, permitting, legal, title, taxation, socio-economic,

marketing, political, or other factors that could materially affect the Mineral Resource and

Mineral Reserve estimates.

CONCLUSIONS

RPA offers the following conclusions regarding the Cerro Bayo property:

• The Project has met its 2014 exploration objectives in that significant new gold and silver mineralization has been found and added to the Mineral Resources and Mineral Reserves.

• The Project hosts a significant gold and silver mineralized system and there is good potential to further increase the resource base in defined veins and adjacent targets, especially under the Laguna Verde lake.

• Epithermal gold and silver mineralization is associated with quartz veining within a moderately welded sequence of dacitic and rhyolitic tuffs.

• Drilling to date has intersected high-grade mineralized veins and vein systems associated with alteration assemblages that suggest at least three stages of precious metal deposition.

• The sampling, sample preparation, and sample analysis programs are appropriate for the type of mineralization.

• The existing internal laboratory Quality Assurance/Quality Control (QA/QC) program is appropriate, and Mandalay has implemented an additional “blind” QA/QC program for enhanced validation of the accuracy and precision of the sample results, as previously recommended by RPA.

• Mineral Resources and Mineral Reserves were estimated according to the Canadian Institute of Mining, Metallurgy and Petroleum Definition Standards for Mineral Resources and Mineral Reserves dated May 10, 2014 (CIM definitions).

• Mineral Resources are reported inside vein wireframe models based on US$1,400 per ounce gold and US$24 per ounce silver, at a 150 g/t AgEq cut-off grade, accounting for concentrate transportation, treatment, and refining costs.

• Mineral Reserves were estimated using prices of US$1,200 per ounce for gold and US$20 per ounce for silver, at a 184 g/t AgEq cut-off grade accounting for concentrate transportation, treatment, and refining costs.

• The Mineral Reserves were estimated using a minimum mining width of 2.4 m. RPA is

of the opinion, based on observations on site, that the stope dilution factors could be significantly lower with continued careful planning and execution of drilling and loading operations. Reduction of dilution in the development drives, however, is more difficult, as a minimum drift width is required to accommodate equipment sizes and clearance regulations for such equipment.

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• The LOM plan, based on Mineral Reserves, shows a mine life of approximately five and half years.

• For the LOM plan, the expected capital investment totals approximately US$88 million, including US$28 million for mine equipment and rebuilds, US$30 million in mine development, US$18 million in closure costs, and a contingency of US$11.5 million. RPA finds the capital costs to be reasonable.

• The LOM plan indicates that production rate increases realized in 2014 can be maintained. Production will come from twelve veins during the LOM, accessed from portals, which provide flexibility and sufficient working faces to meet the average production rate of 1,250 tpd. Production will come from the Marcela and Raul veins from 2017 to 2019. Production will consist of approximately 80% from stoping and 20% from ore development during the LOM.

• The mine development rates can be achieved provided sufficient manpower and equipment is maintained.

• There may be opportunities to reduce operating costs (US$93.86/t milled during 2014), however, it is important that cost reductions do not come at the expense of reduced productivity. The average LOM operating cost is estimated at US$91.72 per tonne milled.

• Given the number of potential work areas that can be developed, the current productivity level, and the quality of the technical staff and management, RPA is of the opinion that the LOM plan can be achieved.

• RPA has verified the economic viability of the Mineral Reserves via cash flow modelling, using the inputs discussed in this report.

• Mandalay maintains longitudinal sections that identify the areas being mined and indicate those areas that are within and outside of the planned mining areas to facilitate future reconciliation. RPA supports this initiative.

RECOMMENDATIONS

RPA makes the following recommendations:

• Carry out additional density measurements on samples specific to individual veins, in order to identify local variations, as well as confirm and support future resource estimates.

• Develop a standard operating procedure for in-house density determinations and implement some outside checks on the density determinations to support and confirm in-house results.

• Carry out channel sampling across the entire face for each round, to obtain additional information on grade distribution, especially along indistinct contacts between mineralized and non-mineralized zones, and to determine dilution grades immediately adjacent to veins.

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• Document standardized checks of all core and channel sample data prior to entry into the master database.

• Sample all core intervals immediately adjacent to mineralization, to eliminate undersampling of mineralized “shoulders”, with an additional review after assays have been returned.

• Monitor and document the blind QA/QC results on a regular basis.

• Purchase a high grade silver certified reference material (CRM).

• Use CRMs for the “blind” QA/QC program.

• Select field core duplicates with representative ranges of grades.

• Review the channel sampling and channel sampling duplicate procedures.

• Resurvey drill hole collars that have discrepancies with the topographic surface.

• Build a relational database incorporating the lithology and structural tables.

• Digitize underground mapping and incorporate into the model.

• Review vein wireframes prior to the next resource update, as some modelled intersections were not tied to drill holes. Seam models are very sensitive to changes in orientation; Mandalay personnel should ensure that the vein wireframes achieve the resource minimum width criteria.

• Carry out a structural analysis to assist in construction of future domain models.

• Develop a wireframe modelling procedure which includes wireframe model validation to optimize the resource and diluted vein solids.

• Generate a short term block model for each vein in production to perform reconciliation more effectively.

• Complete reconciliation on a more regular basis. Reconciliation is recommended each

quarter to permit adjustments of the yearly budget plan. This should include reconciling tonnages and grades from stope operations to the mill production, and resource block model, as well as confirmation of dilution factors through use of a cavity monitoring system (CMS).

• For future mining that will be carried out on veins located under the Laguna Verde lake, RPA recommends developing a protocol for the approach which would include drilling of test holes above existing workings as well as out in front of the development headings as a precaution. A crown pillar of at least 50 m thick is planned to be left in place. Also, a program of monitoring, such as the use of extensometers, should be developed to provide information on a continual basis to ensure that any change in conditions is noted and mitigation measures can be taken.

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• Complete the 2015 exploration plan, consisting of geochemical sampling and a 28,000 m drill program, budgeted for approximately US$3.0 million to continue to define and infill the south extension of Yasna, Coyita, and Kasia veins under the lake and to explore for new veins.

TECHNICAL SUMMARY PROPERTY DESCRIPTION AND LOCATION The Cerro Bayo property is located in the General Carrera Province, Aisén (XI) Region, Chile,

at approximately 72°W longitude and 46.5°S latitude. The Cerro Bayo property is situated

approximately 130 km south of Coyhaique, the capital of Region XI in southern Chile, and 12

km west of the town of Chile Chico, which is six kilometres west of the border with Argentina.

LAND TENURE Mandalay’s mining rights comprise one contiguous block of exploitation concessions

(mensuras) that covers an area of 29,495 ha and one exploitation concession in process

(manifestación) that covers an area of 45 ha. The manifestación is a classification of

concessions that were previously exploration concessions (pedimentos), but are in the process

of transforming into exploitation concessions. Mandalay is in the process of upgrading all

exploration concessions to exploitation concessions.

Mandalay owns 2,513 ha of surface rights, with another 5,373.08 ha held through surface use

agreements. All surface rights are located within the Cerro Bayo mining concessions.

Negotiations are currently being carried out with the Government to purchase the land

occupied by the mill and tailings facility.

EXISTING INFRASTRUCTURE Cerro Bayo is a producing operation that includes a 1,650 tpd capacity flotation mill, a seven

MVA diesel plant for the mill and surface facility power, plus a 2.8 MVA diesel plant for

underground power requirements. Infrastructure at the Laguna Verde site includes an

administration building containing offices plus a cafeteria, a service building equipped with a

10 tonne crane used for equipment servicing, and a separate building containing the assay

laboratory.

The site also has a tailings facility with a capacity of approximately 2.5 million tonnes and

sedimentation basins and polishing ponds for water treatment. Explosives magazines are

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located nearby on the property, which adhere to regulation distances for explosives and

detonator magazines.

HISTORY Gold and silver mineralization was discovered in the Cerro Bayo District (termed Fachinal at

the time), during the summer of 1984 by Freeport Chilean Exploration Company (FCEC).

Coeur subsequently purchased 100% of FCEC, including the Cerro Bayo properties, in early

1990. Construction of standard flotation mill installations started in 1994 and production

started in May 1995. Full production commenced in January 1996.

In 1995, mining started in the Laguna Verde sector of the district. Mining was concentrated in

several breccia bodies, large veins and stockworks, where three open pits were developed.

This area was the main focus of operations until 2000. Due to declining metal prices and

depletion of open pit reserves, the mine operation was suspended in November 2000.

Prior to the mine suspension in 2000, a drilling program outlined a high grade vein system near

the Cerro Bayo dome, located 14 km west of Chile Chico and 12 km east of the mill at Laguna

Verde. Coeur spent most of 2001 conducting additional infill drilling, and engineering and

economic evaluations of this area. Underground drifting commenced in November 2001,

followed by mine development. The Laguna Verde processing plant was re-started in April

2002. Operations were suspended again in 2008 due to the economic situation and depletion

of developed reserves. Mandalay bought the property from Coeur in August 2010, and mine

development began in October 2010, with processing commencing in January 2011.

Historical production from the Project area pre-2002 was reported at 2.43 million tonnes with

production of 161,200 ounces of gold and 10.56 million ounces of silver, however, no detailed

reports are available. Based on detailed records, production over the period April 2002 to

August 2008 was 2.58 million tonnes grading 4.2 g/t Au and 346.7 g/t Ag, containing 317,000

ounces of gold and 27.7 million ounces of silver.

Production by Mandalay since 2010 totals 1.4 million tonnes with average grades of 1.8 g/t Au

and 268 g/t Ag.

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GEOLOGY AND MINERALIZATION The rocks exposed in the Cerro Bayo District are part of a thick pile of silicic volcanic rocks

assigned to the Ibañez Formation, and are believed to represent a more or less continuous

series of Jurassic to Cretaceous volcanism. The Paleozoic basement that regionally underlies

the Mesozoic volcanic rocks is not exposed in the district, at least to a depth of 370 m from the

surface, although fragments of the metamorphic rocks are contained in the overlying volcanic

strata. The Mesozoic sequence is overlain by Tertiary basalts and minor volcaniclastic rocks.

Three main district-scale structural orientations have been identified in the Cerro Bayo and

Laguna Verde areas: north-south, northeast-southwest to east-west, and northwest to

southeast. A Landsat lineament study across the district illustrates district and regional-scale

structures with similar orientations and locations as the local structures. These structures

correspond to arc-parallel (north-south), arc-normal (approximately east-west), and conjugate

transfer structures (northeast-southwest and northwest-southeast) trends. Pre- and post-

mineralization displacement is documented in all three of the structural orientations.

The Cerro Bayo District hosts at least 90 major veins, stockworks and breccias containing gold

and silver mineralization, located in six principal areas in the district. The deposits show

multiple stages of mineralization and display open-space filling and banding, typical of low-

sulphidation style epithermal mineralization. Mineralogy is complex and is associated with

alteration assemblages that suggest at least three stages of precious metal deposition.

Gold mainly occurs as inclusions in pyrite, filling cavities and irregular surfaces in strongly

fractured porous grains. It has also been detected as inclusions along cleavages in galena

and iron-deficient sphalerite. Free gold occurs in quartz-bound grains, as irregular crusts and

flakes in micro cracks cutting the gangue, and within partially oxidized sulphide minerals.

Analyses with a Scanning Electron Microscope indicate that gold is argentian (electrum) with

a silver content that may reach 40%.

Silver is contained in a variety of minerals. Sulphosalts are the most common, including

freibergite, stephanite, proustite, pyrargyrite, and polybasite. Stromeyerite is also common, as

well as native silver. Argentite/acanthite, chlorargyrite, and boleite are supergene products of

surficial oxidation. In veins and veinlets, the silver minerals form irregular bands and patchy

aggregates, and are finely disseminated in the matrix of hydrothermal and tectonic breccias.

They are commonly included along fractures in pyrite grains and are also found on the margins

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of galena aggregates. Larger sulphide grains may include sphalerite and electrum. Silver

minerals are more widespread than gold in the district.

Base metal sulphides are common, though not abundant in the district. These include mostly

sphalerite, galena, and chalcopyrite, forming irregular aggregates, stringers, and massive

veinlets. Tetrahedrite occurs rarely, as well as bornite and famatinite. Supergene base metal

minerals are rare in the area, and include covellite, chalcocite (digenite, idaite), cerussite,

smithsonite, and hydrohetearolite.

In the Guanaco and Cascada sector of the Cerro Bayo District, gold and silver mineralization

occurs in veins, vein systems and veinlets hosted in a moderately welded sequence of dacitic

and rhyolitic tuffs. The volcanic sequence is intruded by the Cerro Bayo and other dacitic

domes, considered as post-mineral events.

At Laguna Verde, gold and silver mineralization occurs in veins, hydrothermal and tectonic

breccias, stockworks (sheeted veins), and veinlets hosted in a moderately to strongly welded

sequence of rhyolitic and dacitic tuffs. Flow-banded dacitic domes intrude the volcanic

sequence at Coigues Hill, and at Cerro Bayo. Field evidence suggests post-mineral intrusion.

EXPLORATION In 2014, exploration mostly consisted of infill and extension drilling of the existing zones of

Inferred Mineral Resources on previously known veins in the Laguna Verde, especially Coyita

and Yasna veins. Kasia vein, a new vein under the Laguna Verde lake, was included in the

current Mineral Resources. Some drilling was carried out on new targets at Esperanza and

Cerro Amarillo veins.

MINERAL RESOURCES RPA estimated Mineral Resources for the Yasna, Fabiola, Dalila, Coyita, Dagny, Delia NW,

Delia SE, Trinidad, Kasia, Marcela Sur, and Raul veins located on the Cerro Bayo property as

of December 2014 (Table 1-1). Mineral Resources are constrained by underground vein

models for reporting purposes. The cut-off grade was estimated at 150 g/t AgEq, taking into

account the transportation, treatment, and refining costs.

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Lines based on the exploration drill holes, channel samples, and surface and underground

mapping were used in Vulcan software to create 3D vein wireframes, with a minimum thickness

of 1.2 m. Block grades were estimated by inverse distance cubed (ID3) method.

The Mineral Resource estimate and classification are in accordance with CIM definitions as

incorporated in NI 43-101.

MINERAL RESERVES The Mineral Reserves are reported in Table 1-2. The Mineral Reserves were estimated by

Mandalay and reviewed and adopted by RPA with very slight adjustments where deemed

necessary. The cut-off grade was estimated at 184 g/t AgEq, taking into account the

transportation, treatment, and refining costs.

The tonnages and grades were estimated using Vulcan software, with veins diluted to a

minimum mining width of 2.4 m. For veins over this width, an additional 0.4 m of dilution width

was added.

MINING METHOD Mining is carried out using a longhole retreat stoping method. Good ground conditions allow

open stoping without backfill support. Development includes driving the drifts through the vein

at a minimum size of three metres by three metres, which is required for the standard

equipment sizes utilized.

The key to meeting the LOM production targets at Cerro Bayo is maintaining development

advance in order to provide sufficient working faces for production. Access to the veins via

three separate portals and production from an average of three to four veins throughout most

of the LOM should ensure meeting production requirements. On average, approximately 81%

of production will come from the stopes, with approximately 19% coming from active

development headings. During 2014, total development averaged 21 m per day, which is

slightly lower than the planned 22 m per day. LOM development requirements average 24 m

per day, with a high of 34 m per day required during 2016. The addition of working faces over

the LOM will enable sustaining the level of development.

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MINERAL PROCESSING The processing plant has a daily capacity of 1,650 tonnes producing approximately 25 tonnes

of concentrate with grades of 70 g/t Au to 120 g/t Au and 10,000 g/t Ag to 13,000 g/t Ag. The

process consists of crushing, primary grinding in a semi-autogenous grinding (SAG) mill,

classification in hydrocyclones, secondary grinding in a ball mill, flotation, thickening, filtration,

and concentrate storage. The mill presently uses three stockpiles for high, medium, and low

grade ore and a loader feeds the mill hopper based on the grades to provide an average feed

grade to the mill. Average mill recoveries utilized in the LOM plan are 86.2% for gold and

90.2% for silver.

The concentrate is trucked to the Port of Chacabuco, approximately 250 km from the mine

site, where it is loaded for shipment to smelters.

PROJECT INFRASTRUCTURE The mine is well established with administration offices, catering service for the employees,

diesel power plant for the mill and surface facilities, and a separate diesel plant for the

underground facilities. A separate building houses the sample preparation and assay

laboratory. The mill operation is well run and kept clean.

There is a tailings facility with a storage capacity of 2.5 million tonnes on site. The containment

dam wall was raised during 2013 to provide sufficient capacity for the current LOM plan.

MARKET STUDIES Mandalay has concentrate sale agreements for 2015 concentrates with Dowa Metals and

Mining Co., Ltd. of Tokyo, Japan, LS Nikko Copper Inc. in Korea, Mitsubishi Materials

Corporation of Japan, and Pan Pacific Copper Co., Ltd., of Japan. The terms and conditions

of the commercial sale are not disclosed pursuant to confidentiality requirements. RPA has

reviewed the agreements and is of the opinion that the concentrate sales terms are within

industry norms.

ENVIRONMENTAL, PERMITTING, AND SOCIAL CONSIDERATIONS Mandalay has presented all Environmental Impact Assessments (EIA) and Environmental

Impact Declarations (DIA) to the designated authority of the Aisén Region. CMCB and

Mandalay have been processing and updating the permits required for the operations as

mining exploration has progressed and new areas have been incorporated into the mining

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operation. Current applications are submitted and processed through the Sistema de

Evaluación de Impacto Ambiental (SEIA) in Chile.

CAPITAL AND OPERATING COST ESTIMATES The capital costs over the LOM are presented in Table 1-3.

TABLE 1-3 LOM CAPITAL COSTS


Description Units 2015 2016 2017 2018 2019+ Total Capital Development US$000 6,673 10,584 10,434 2,874 - 30,565 Capital Equipment US$000 6,484 8,000 8,000 6,000 - 28,484

Reclamation/Closure US$000 781 1,199 19 1,208 14,247 17,454 Contingency (15%) US$000 2,091 2,967 2,768 1,512 2,137 11,475

Total US$000 16,029 22,750 21,221 11,594 16,384 87,978

The operating costs for the LOM are presented in Table 1-4.

TABLE 1-4 OPERATING COSTS Mandalay Resources Corporation – Cerro Bayo Project

Description US$/yr Av. (millions) US$/t

Mining 24.36 50.97 Processing 12.80 26.82

G & A 6.60 13.93 Total 43.60 91.72

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2 INTRODUCTION Roscoe Postle Associates Inc. (RPA) was retained by Mandalay Resources Corporation

(Mandalay) to prepare an updated Mineral Resource and Mineral Reserve estimate and an

independent Technical Report on the Cerro Bayo Project (the Project), near Chile Chico, Chile.

The purpose of this report is to update Mineral Reserves and Mineral Resources based on

2014 drilling and development results. This Technical Report conforms to NI 43-101

Standards of Disclosure for Mineral Projects.

The Project consists of underground mines exploiting silver and gold veins, four of which are

currently being mined from three individual portal accesses. A processing facility rated at

1,650 tpd is located on the site and is operational. In August 2010, Mandalay purchased 100%

of Compañia Minera Cerro Bayo Ltda. (CMCB), then a subsidiary of Coeur d’Alene Mines

Corporation (Coeur), which owns and operates the Cerro Bayo Mine. At the time, the mine

was under care and maintenance.

The Cerro Bayo deposit was discovered in 2000 and Coeur commenced mining operations in

late 2001 with processing starting in April 2002. Coeur suspended mining operations at Cerro

Bayo in November 2008, due to the downturn in the economy, but continued exploration work

on the property in 2009. Scott Wilson Roscoe Postle Associates Inc. (predecessor to RPA)

prepared a resource estimate for the Fabiola, Dagny, and Yasna veins in February 2009, which

has been updated by RPA annually since 2011.

Mandalay commenced underground mining at Laguna Verde in September 2010, and a total

of 1.4 million tonnes ore has been produced by Mandalay since the acquisition of the Project.

SOURCES OF INFORMATION A site visit was undertaken by Normand Lecuyer, P. Eng., RPA Principal Mining Engineer, and

Rosmery Cardenas, MAusIMM CP (Geo), RPA Senior Geologist, from January 8 to 10, 2014.

During the site visit, RPA inspected all of the underground operations, the processing plant,

and all surface infrastructure including the assay laboratory.

The report was prepared by Mr. Lecuyer and Ms. Cardenas. Mr. Lecuyer is an independent

Qualified Person (QP) and is responsible for Sections 1 to 3, 5, 13, 15 to 22, 24 and parts of

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Sections 25, 26, and 27. Ms. Cardenas is an independent QP and is responsible for Sections

4, 6, 7 to 12, 14, 23, and parts of Sections 25, 26, and 27.

Discussions were held with the following personnel from Mandalay Resources:

• Mr. Dominic Duffy, P.Eng., Chief Operating Officer • Mr. Ronald Luethe, P. Geo., Country Manager, Chile • Mr. Kalenci Flores Mercandante, General Manager • Mr. Marcelo Herrera, Superintendent of Milling Operations • Mr. Marcos Cuevas Benavides, Chief Engineering Department • Mr. Ariel Pablo Rolando, Superintendent of Geology • Mr. Jose Javier Santabarbara, Modelling and Resource Geologist, Mandalay • Mr. Roberto Casanga, Superintendent of Laboratory

The documentation reviewed, and other sources of information, are listed at the end of this

report in Section 27 References.

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LIST OF ABBREVIATIONS Units of measurement used in this report conform to the metric system. All currency in this

report is US dollars (US$) unless otherwise noted. The exchange rate used in this report is

US$1 = CLP 500.

a annum kWh kilowatt-hour A ampere L litre bbl barrels lb pound btu British thermal units L/s litres per second °C degree Celsius m metre C$ Canadian dollars M mega (million); molar cal calorie m2 square metre cfm cubic feet per minute m3 cubic metre cm centimetre µ micron cm2 square centimetre MASL metres above sea level d day µg microgram dia diameter m3/h cubic metres per hour dmt dry metric tonne mi mile dwt dead-weight ton min minute °F degree Fahrenheit µm micrometre ft foot mm millimetre ft2 square foot mph miles per hour ft3 cubic foot MVA megavolt-amperes ft/s foot per second MW megawatt g gram MWh megawatt-hour G giga (billion) oz Troy ounce (31.1035g) Gal Imperial gallon oz/st, opt ounce per short ton g/L gram per litre ppb part per billion Gpm Imperial gallons per minute ppm part per million g/t gram per tonne psia pound per square inch absolute gr/ft3 grain per cubic foot psig pound per square inch gauge gr/m3 grain per cubic metre RL relative elevation ha hectare s second hp horsepower st short ton hr hour stpa short ton per year Hz hertz stpd short ton per day in. inch t metric tonne in2 square inch tpa metric tonne per year J joule tpd metric tonne per day k kilo (thousand) US$ United States dollar kcal kilocalorie USg United States gallon kg kilogram USgpm US gallon per minute km kilometre V volt km2 square kilometre W watt km/h kilometre per hour wmt wet metric tonne kPa kilopascal wt% weight percent kVA kilovolt-amperes yd3 cubic yard kW kilowatt yr year

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3 RELIANCE ON OTHER EXPERTS This report has been prepared by Roscoe Postle Associates Inc. (RPA) for Mandalay

Resources Corporation (Mandalay). The information, conclusions, opinions, and estimates

contained herein are based on:

• Information available to RPA at the time of preparation of this report, • Assumptions, conditions, and qualifications as set forth in this report, and • Data, reports, and other information supplied by Mandalay and other third party

sources.

For the purpose of this report, RPA has relied on ownership information provided by Mandalay.

RPA has not researched property title or mineral rights for the Project and expresses no

opinion as to the ownership status of the property.

RPA has relied on Mandalay for guidance on applicable taxes, royalties, and other government

levies or interests, applicable to revenue or income from the Project.

Except for the purposes legislated under applicable securities laws, any use of this report by

any third party are at that party’s sole risk.

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4 PROPERTY DESCRIPTION AND LOCATION The Cerro Bayo property is located in the General Carrera Province, Aisén (XI) Region, Chile,

at approximately 72°W longitude and 46.5°N latitude. The Cerro Bayo property is situated

approximately 130 km south of Coyhaique, the capital of Region XI in southern Chile, and 12

km west of the town of Chile Chico, which is six kilometres west of the border with Argentina

(Figure 4-1). The centre of the currently defined mineralization is located at the boundary of

UTM Zones 18S and 19S, at approximately 725,930 mE and 4,734,910 mN (UTM Zone 18S),

and 269,810 mE and 4,846,020 mN (UTM Zone 19S).

LAND TENURE CMCB mining rights comprise one contiguous block of exploitation concessions (mensuras)

that covers an area of 29,495 ha and one exploitation concession in process (manifestación)

that covers an area of 45 ha. The manifestación is a classification of concessions that were

previously exploration concessions (pedimentos) but are in the process of transforming into

exploitation concessions. Mandalay is upgrading all exploration concessions into mensuras.

The property list is provided in Table 4-1 and the concession map is shown in Figure 4-2.

TABLE 4-1 PROPERTY LIST Mandalay Resources Corporation – Cerro Bayo Project

National Roll

Number Exploitation Concessions Area (ha)

11201-0149-4 ARROYO 1-25 240 11201-0150-8 ARROYO 31-40 96 11201-0141-9 BUITRERA 61-90 300 11201-0142-7 BUITRERA 91-120 300 11201-0136-2 GUANACA 101-106 56 11201-0137-0 GUANACA 131-158 276 11201-0138-9 GUANACA 161-190 300 11201-0139-7 GUANACA 191-220 300 11201-0140-0 GUANACA 221-243 215 11201-0082-K JARA 1-100 990 11201-0143-5 NIEVES 1-30 300 11201-0144-3 NIEVES 31-60 300 11201-0145-1 NIEVES 61-90 300 11201-0146-K NIEVES 91-120 300 11201-0147-8 NIEVES 121-150 300

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National Roll Number Exploitation Concessions Area

(ha) 11201-0148-6 NIEVES 151-180 300 11201-0125-7 LAPIZ 1-7 70 11201-0126-5 LAPIZ 21-32 120 11201-0127-3 LAPIZ 41-52 120 11201-0128-1 LAPIZ 61-72 120 11201-0129-K LAPIZ 81-92 120 11201-0130-3 LAPIZ 101-109 84 11201-0131-1 PERRA 101-123 225 11201-0132-K PERRA 131-160 300 11201-0133-8 PERRA 161-190 300 11201-0134-6 PERRA 191-220 300 11201-0135-4 PERRA 221-244 231 11201-0155-9 CARRERA 1-37 370 11201-0085-4 MALLINES 1-100 990 11201-0091-9 HORQUETAS 1-75 750 11201-0087-0 BUITRERA 1-60 600 11201-0092-7 BRILLANTES 1-100 990 11201-0088-9 BAYO 1-70 700 11201-0089-7 MESETA 1-100 990 11201-0090-0 AGUILA 1-100 990 11201-0086-2 SINTER 1-100 990 11201-0099-4 BAHIA 1-100 990 11201-0097-8 VERDE 1-60 600 11201-0096-K PERRA 1-66 660 11201-0098-6 VICUNA 1-45 426 11201-0094-3 LARGA 1-84 840 11201-0093-5 CASCADA 1-100 990 11201-0095-1 ALPACA 4-15, 19-45 390 11201-0083-8 GUANACA 6-17, 23-34, 38-87 717 11201-0084-6 LAGUNA 10-20, 30-40, 45-60, 62-80, 82-100 760 11201-0103-6 RIBERA 6-12, 18-24, 30-36, 41-48, 50-60 400 11201-0100-1 ROCA 5-15, 20-30, 32-100 900 11201-0102-8 PUNTA 3-15, 18-30, 33-45, 47-60, 62-75, 78-81, 88- 90 740 11201-0101-K ORILLA 12-15, 27-30, 37-45, 47-60, 62-75 450 11201-0203-2 EDITH 3 1/60 300 11201-0204-0 EDITH 4 1/60 300 11201-0205-9 EDITH 5 1/60 300 11201-0206-7 EDITH 6 1/60 300 11201-0207-5 EDITH 7 1/28 140 11201-0208-3 EDITH 8 1/56 280 11201-0209-1 EDITH 9 1/56 280 11201-0210-5 EDITH 10 1/38 154

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National Roll Number Exploitation Concessions Area

(ha) 11201-0211-3 EDITH 11 1/60 300 11201-0215-6 EDITH 12 1/40 200 11201-0216-4 EDITH 13 1/60 300 11201-0217-2 EDITH 14 1/60 300 11201-0218-0 EDITH 15 1/50 250 11201-0219-9 EDITH 16 1/50 250 11201-0220-2 EDITH 17 1/43 215 11201-0199-0 MIRASOL 1 1/56 560 11201-0200-8 MIRASOL 2 1/36 360 11201-0201-6 MIRASOL 3 1/36 360 11201-0212-1 MIRASOL 4 1/20 200 11201-0213-k MIRASOL 5 1/30 300 11201-0214-8 MIRASOL 6 1/45 450 11201-0221-0 JOE 1 1/20 100 11201-0222-9 EDITH 2 1/40 200

Total 29,495

National Roll Number Exploitation Concessions – In Process Area (ha)

Pending July 2015 MIRASOL 7 1/15 45

Total 45

A pedimento is valid for a maximum period of two years, at which time it may be either reduced

in size by 50% of the initial area and renewed for an additional two year period, or converted

to a manifestación. A manifestación is valid for 220 days and may be upgraded to a mensura

if a request is submitted within this time period.

The mensuras have been surveyed by a government licensed surveyor and subjected to field

inspection and verification prior to technical approval. Once constituted, an annual fee is

required to maintain the mensuras in good standing. Mandalay’s annual fee is CLP

133,907,951 (or approximately US$280,000 at an exchange rate of CLP 500 : US$1). There

is no expiration date for mensuras as long as the required fees have been submitted in a timely

fashion.

Mandalay has indicated to RPA that the subject concessions are currently in good standing

and that all required payments to the Chilean government have been made.

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SURFACE RIGHTS CMCB owns 2,513 ha of surface rights, with another 5,373.08 ha held by surface use

agreements. All surface rights are located within the Cerro Bayo mining concessions. These

surface use agreements include renewable contracts with the following entities:

• María Helena Fica Burgos: 581 ha

• Héctor Crespo: 949,17 ha

• Yamil Hasen: 600 ha

• Hasen Burgos: 1.050 ha

• Raúl Lambert: 166,2 ha

• Waldemar: 650 ha

• Cerro Largo: 700 ha

• Suc Octavio Vásquez: 587 ha

• Arrendamiento al Fisco Sector Laguna Verde 89,71 ha

Negotiations are currently being carried out with the Government to purchase the land

occupied by the mill and tailings facility.

TAXES AND ROYALTIES The taxes and royalties that apply to the Cerro Bayo Project were provided by Mandalay and

are listed below:

• There is a 2% net smelter return (NSR) royalty paid to Coeur on cumulative gold production over 50,000 ounces and cumulative silver production over five million ounces sold from the property. This NSR was applied to the cash flow calculations.

• The CMCB tax rate within Chile is 20% and this was applied to the cash flow. There is also a Value Added Tax (VAT) in Chile, although it does not affect CMCB since, as an exporter, 100% is recovered.

• There is a Mining Royalty applied by the Chilean government for all material sold exceeding an equivalent of 12,000 t of refined copper sold. This royalty was applied to the cash flow estimates using a copper price of US$3.50 per pound.

• All permits for the Project have been received and are in good standing.

RPA is not aware of any environmental liabilities on the property. Mandalay has all required

permits to conduct the proposed work on the property. RPA is not aware of any other

significant factors and risks that may affect access, title, or the right or ability to perform the

proposed work program on the property.

CHILE

ARGENTINA

PacificOcean

Gulfo dePenas

GulfoSarmiento

de Gamboa

AtlanticOcean

Mar Chileno

MarChileno

R

ioIta

ta

Puerto Williams

FuerteBulnes

Puerto Hope

Porvenir

Puerto Curtze

Puerto DelgadaPuerto Progreso

Bahia Thetis

San Pablo

Rio Grande

San Sebastian

Monte Dinero

Cancha Carrera

El Calafate

Punta Arenas

Puerto Alegre

PuertoGuadal

Chile Chico

Puerto Chacabuco

Bonito

Puerto Cisnes

Puerto Tictoc

Puerto Puyuguapi

Puerto NatalesHill Station

Tres Lagos

Las Horquetas

Bajo Caracoles

Coihaique

Quellón Chaiten

ChonchiAyacara

Ancud

Los Muermos

Guayusca

Caunao

Osorno

Puerto Montt

Puerto Yartou

Panguipulli

Puerto Saavedra

Victoria

Canete

Llico

ParralCobquecura

Perito Moreno

Loncopue

Valdivia

Talcahuano Chillan

Los Angeles

Concepcion

Temuco

Tolten

Comodoro RivadaviaAISEN

ARAUCANIA

BIO-BIO

LOS LAGOS

MAGALLANES

Penínsulade

Taitao

ArchipiélagoD

esolación

Tierra del Fuego

Cabo de Hornos

Isla delos Estados

40°

38°

68°

68° 66° 64°

48°

54°

56°56°

54°

48°

46°

5252

46°

44°

50°50°

44°

42° 42°

72°

72°76° 74°

70°

70°

40°

38°

Regions of Chile

I

II

III

IV

V

RM

VI

VII

VIII

IX

X

XI

XII

XIV

XV

TarapacáAntofagastaAtacamaCoquimboValparaísoSantiago Metropolitan RegionO’HigginsMauleBiobíoAraucaníaLos LagosAisénMagallanesLos RíosArica-Parinacota

CHILE

Area ofInterest

CERRO BAYO PROJECT

N

0

2000 100

100

300 kilometres

200 miles

March 2015

Source: Map No. 4395, UNITED NATIONS, 2010.

Legend:

National Capital

Administrative RegionapitalC

City, Town

Major Airport

National Boundary

Administrative Region

oundaryB

Main Road

Secondary Road

Railroad

Location Map

Cerro Bayo Project

Mandalay Resources Corporation

Region XI (Aisén), Chile

Figure 4-1

4-5

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EDITH 3 1/60

EDITH 6 1/60

EDITH 5 1/60

EDITH 4 1/60

EDITH 8 1/56

EDITH 9 1/56

ED

ITH

11 1

/60

EDITH 17 1/43

ED

ITH

13 1

/60

ED

ITH

14 1

/60

EDITH 10 1/38

ED

ITH

15 1

/50

ED

ITH

16 1

/50

EDITH

EDITH 7 1/28

MIRASOL 6 1/45

1/30MIRASOL 5

1/20MIRASOL 4

MIRASOL 1 1/56

MIR

AS

OL

3 1

/36

MIR

AS

OL

2 1

/36

GU

AN

AC

A

HO

RQ

UE

TA

S 1

-75

BU

ITR

ER

A1-6

0

ALP

AC

A1-4

5

NIE

VE

S 1

-30

NIE

VE

S 3

1-6

0

NIE

VE

S 6

1-9

0

NIE

VE

S 9

1-1

20

NIE

VE

S 1

21-1

50

NIE

VE

S 1

51-1

80

BU

ITR

ER

A61-9

0

BU

ITR

ER

A91-1

20

GUANACA 161-190

GUANACA 191-220

GUANACA

EDITH 2 1/40

JOE

1

JARA 1-100

BAHIA 1-100

ROCAS

AG

UIL

A1-1

00

SIN

TE

R 1

-100

LARGA 1:84

ME

SE

TA

1-1

00

LA

GU

NA

BAYO 1-70

ORILLA

12-15, 27-30,

6-12, 18-24,3-15, 18-30, 33-45,

5-15, 20-30, 32-100

CA

SC

AD

A1-1

00

MA

LLIN

ES

1-1

00

PE

RR

A1-6

6

BR

ILLA

NT

ES

1-1

00

VE

RD

E 1

-60

RIBERA

PE

RR

A161-1

90

PE

RR

A191-2

20

PE

RR

A221-2

44

PE

RR

A131-1

60

GUANACA 221-243 LA

PIZ

LA

PIZ

LA

PIZ

LA

PIZ

LA

PIZ

LAPIZ

ARROYO 31-40

256000

256000

260000

260000

264000

264000

268000

268000

272000

272000

276000

276000

280000

280000

284000

284000

288000

288000

4832000

4832000

4836000

4836000

4840000

4840000

4844000

4844000

4848000

4848000

4852000

4852000

PUNTA

VIC

UN

A1-4

5

ARROYO 1-25

CARRERA 1-37

10

-20

, 3

0-4

0,

45

-60

,

62

-80

, 8

2-1

00

6-1

7, 23-2

4, 38-8

7

GUANACA 101-106

81-9

2

41-5

2

21-3

2

61-7

2

101-1

09

1-7P

ER

RA

101-1

23

131-158

12 1/40

62-75

50-6088-90

37-45, 47-60,

30-36, 41-4847-60, 62-75,78-81,

MIRASOL 7 1/15

Exploitation Concession

Legend:

Exploitation Concession in Process

0 1000

Metres

2000 3000 4000

Local Coordinates

N

March 2015 Source 5: Mandalay Resources Corp., 201 .

Cerro Bayo Project

Property Map



Figure 4-2

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5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ACCESSIBILITY The site is approximately 30 km from the town of Chile Chico and accessible via Route 265, a

paved highway. This connects to Route 7, which ties to the city of Coyhaique (population

approximately 50,000 people) and to the port of Puerto Chacabuco approximately 250 km by

road from the mine. There is also ferry service across Lake General Carrera from Chile Chico

to Ibañez, which also allows access to Puerto Chacabuco. The concentrate is trucked from

the mine, usually once per week, to Puerto Chacabuco where it is loaded on ships for delivery

to smelting customers overseas.

CLIMATE The climate in the area is sub-Mediterranean, with the winter months of June to August at

temperatures of -10ºC to 0ºC, with light snowfall and rain. Summers are warm and dry with

temperatures in the high teens to low 20ºC. Average annual precipitation is approximately 300

mm, most of which is rain. The humidity is generally around the 50% mark given the proximity

of Lake General Carrera. The area is located on the east side of the Andes Mountains and on

the edge of the Patagonia area, which is commonly windy. The climate permits year round

operation.

LOCAL RESOURCES Most of the required labour for the mine is sourced locally, with some of the staff coming from

neighbouring countries such as Argentina. Supplies can be sourced from Chile Chico and

other supply centres in Chile, such as Coyhaique and Santiago.

INFRASTRUCTURE At the time of acquisition by Mandalay, the surface and underground infrastructure at the Cerro

Bayo included the following:

• A 1,650 tpd mill.

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• A tailings pond with a capacity of approximately 2.5 million tonnes (measuring approximately 240 m by 600 m), and a process water pond (measuring approximately 210 m by 385 m) from which water is recycled.

• A processing plant building measuring 22 m by 82 m. • A 1,500 tonne coarse ore bin and conveyor.

• A 7 MVA power plant building for the processing plant, measuring 16 m by 30 m.

• An administration building 20 m by 59 m and a lab building measuring 17 m².

• A 27 m by 32 m service building with a 10 t crane.

• A pumping station.

• Three declines, each with and a series of ramp-connected levels, and associated

power, ventilation and dewatering infrastructure.

The power supply for the site is provided via the 7 MVA plant for the processing plant and

surface facilities and a 2.8 MVA plant at the Dagny site for the underground mining operations.

The plants deliver both 3.3 kV and 400 V power.

PHYSIOGRAPHY The Project lies on the eastern side of the Andes Mountains at elevations that range from

approximately 200 MASL to 1,400 MASL. The topography varies from steep mountain valleys

to rolling farmland; the latter was largely agricultural prior to the eruption of the Hudson volcano

in 1991, which covered the area in ash. Subsequent recovery of vegetation in the area is

limited to grasses and trees. The landforms in the area consist of glacially eroded valleys and

glacial till soils deposits.

WATER SUPPLY The process water is currently obtained from Lake General Carrera, surface streams, and

tailings recirculation. The water rights retained are currently sufficient for the plant. These

rights include a total of 680 L/s from Lake General Carrera and several additional smaller rights

of approximately 135 L/s. The list of water permits is provided in Table 5-1.

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TABLE 5-1 WATER PERMITS Mandalay Resources Corporation – Cerro Bayo Project

Location Date Resolution No. Qty. (L/s) Lago General Carrera Feb. 1993 43 200 Lago General Carrera Feb. 1994 30 200 Lago General Carrera Jan. 1994 45 80 Lago General Carrera Apr. 1993 104 200 Estero El Rodeo Oct. 1993 452 100 Estero La Tina Oct. 1993 441 35 Total 815

There are sufficient surface rights for mining operations and related infrastructure.

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Mandalay Resources Corporation – Cerro Bayo Project, Project #2366 Technical Report NI 43-101 – March 13, 2015 Page 6-1

6 HISTORY This section has been largely referenced from Sims (2010).

REGIONAL HISTORY Gold and silver mineralization was discovered in the Cerro Bayo District (termed Fachinal at

the time), during the summer of 1984 by Freeport Chilean Exploration Company (FCEC).

Drilling of veins and potential bulk-minable stockworks commenced in 1986, and continued

until mid-1989. Exploration activities were discontinued in August 1989 due to Freeport’s

decision to terminate its Chilean investments.

Coeur subsequently purchased 100% of FCEC, including the Cerro Bayo property, in early

1990. CDE Chilean Mining Corporation, a wholly owned subsidiary of Coeur, resumed

evaluation of the area in the second quarter of 1990. Evaluation of the Project was continued

by Coeur South America (CSA) and subsequently, CMCB, both subsidiaries of Coeur. Infill

and step-out drilling and tunneling carried out from 1990 to 1993 resulted in an open pit and

underground reserve, followed by a feasibility study and production decision in mid-1994.

Construction of standard flotation mill installations started in 1994 and production started in

May 1995. Full production commenced in January 1996.

Mining was concentrated on several breccia bodies, large veins, and stockworks in the Laguna

Verde area, where three pits were developed. This area was the main focus of operations

until 2000. Due to declining metal prices and depletion of open pit reserves, the mine operation

was suspended in November 2000.

Prior to the mine suspension in 2000, a drilling program outlined a high grade vein system near

the Cerro Bayo dome, located 14 km west of Chile Chico and 12 km east of the mill at Laguna

Verde. Coeur spent most of 2001 conducting additional infill drilling, and engineering and

economic evaluations of this area. Underground drifting commenced in November 2001,

followed by underground mine development. The Laguna Verde processing plant was re-

started in April 2002.

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Production continued in 2003, from underground, as well as the Furioso (a subsidiary deposit

located 130 km SW of Chile Chico) and Tranque open pits, as well as from mineral purchased

from Coeur’s Mina Martha mine located in Argentina. Exploration and development drilling

also continued through 2003. A pre-feasibility study was completed in 2004 for the expansion

of CMCB’s operations to include heap leaching, however, CMCB decided not to proceed with

heap leaching.

Production continued from both open pit and underground sources in 2005. From 2006 to

2008, production was limited to only underground mining. Mining and processing operations

were suspended in late 2008 due to diminishing reserves and the global financial crisis.

A full geological review of Laguna Verde commenced in early 2007 to identify potential

exploration targets. Detailed surface mapping and channel sampling resulted in the surface

delineation of three main structures (Dagny, Fabiola and Coyita) characterized by exposures

of altered fractures, scattered zones of narrow veinlets, and some isolated outcrops of narrow

veins. Subsequent drilling and additional surface mapping identified up to six mineralized

veins, including the Delia and Yasna veins. Exploration continued during 2009 resulting in

reporting of Mineral Resources and Mineral Reserves.

Test geochemical studies were undertaken in 2009 in the Laguna Verde veins to assess the

possibility of using trace elements to determine the depth of mineralized shoots within the

veins. A series of vertical profiles were sampled in the Dagny and Delia veins, using surface

and core samples. Results were indeterminate and indicated that precious metal and trace

element anomalies (As, Ba, Cu, Pb, Zn, Mn, Sr) are restricted to the elevation in which shoots

develop (between 100 MASL and 220 MASL), decreasing upwards, to surface.

In August 2010, Mandalay purchased 100% of CMCB, then a subsidiary of Coeur, which owns

and operates the Cerro Bayo Mine in Chile. The mine was on care and maintenance from

October 2008 to September 2010 when Mandalay restarted mining. Processing commenced

in January 2011, with the first shipment of concentrate in February 2011.

HISTORIC RESOURCE ESTIMATES CMCB reported mineral resources and mineral reserves from 2003 to 2008. Historical mineral

resources are presented in Table 6-1 and historical mineral reserves are presented in Table

6-2. The mineral resources are exclusive of the mineral reserves.

TABLE 6-1 HISTORIC MINERAL RESOURCES Mandalay Resources Corporation – Cerro Bayo Project

Measured Resources Indicated Resources Inferred Resources

Year-End

US$/oz Au

Us$/oz Ag

Cut-off Grade

(AuEq g/t) Tonnes

(000) Au

(g/t) Au

Ounces (000)

Ag (g/t)

Ag Ounces

(000) Tonnes

(000) Au

(g/t) Au

Ounces (000)

Ag (g/t)

Ag Ounces

(000) Tonnes

(000) Au

(g/t) Au

Ounces (000)

Ag (g/t)

Ag Ounces (000s)

2003 375 5.25 3.03 to 5.81 418.9 5.5 74.1 315 4,243 2,605.2 3.12 261 151 12,456.8 713.6 3.95 90.6 238 5,461

2004 390 6.00 3.03 to 5.81 583 3.45 64.6 197 3,691 1,450 2.38 110.9 113 5,271 1,441 2.88 133.4 161 7,462

2005 410 6.50 3.03 to 5.81 599 4.41 85 220 4,237 1,413 2.69 122.2 128 5,797 1,719 3.84 212 279 15,414

2006 475 8.00 4.0 to 5.0 413 5.67 75.3 321 4,267 659 4.7 99.6 209 4,436 1,204 5.37 207.7 309 11,944

2007 600 11.00 5.0 478.9 5.09 78.4 374 5,764.4 669.2 4.72 101.5 209 4,490.3 1,451 4.66 217.4 350 16,321.6

2008 750 13.25 5.0 287 5.28 49 326. 2 3,005 537 4.27 74 336. 9 5,816 1,217 4.02 157 368.9 14,436

From Sims, 2010

TABLE 6-2 HISTORIC MINERAL RESERVES Mandalay Resources Corporation – Cerro Bayo Project

Proven Reserves Probable Reserves Total Proven and Probable Reserves

Year-End

US$/oz Au

US$/oz Ag

Cut-off Grade

(AuEq g/t) Tonnes

(000) Au

(g/t) Au

Ounces (000)

Ag (g/t)

Ag Ounces

(000) Tonnes

(000) Au

(g/t) Au

Ounces (000s)

Ag (g/t)

Ag Ounces

(000) Tonnes

(000) Au

(g/t) Au

Ounces (000)

Ag (g/t)

Ag Ounces (000s)

2003 375 5.25 4.7 to 5.3 265.5 5.25 44.8 278 2,375.7 319.6 4.77 49 292 3,001.3 585.1 4.98 93.8 286 5,377

2004 390 6.00 4.7 to 5.3 305 4.41 43.2 258 2,533 477 4.74 72.7 233 3,576 782 4.61 115.9 243 6,109

2005 410 6.50 4.7 to 5.7 398 5.31 67.9 294 3,764 450 4.4 63.7 257 3,712 848 4.83 131.6 274 7,476

2006 475 8.00 5.0 to 5.83 340 6.86 75 357 3,902 235 6.22 47 297 2,242 575 6.6 122 332 6,144

2007 600 11.00 6.0 399.1 5.23 67.1 334 4,280.2 309.7 4.47 44.5 297 2,954.2 708.8 4.9 111.6 317 7,234.3

2008 750 13.25 5.8 - - - - - 496 2.39 38.1 349 5,563.8 496 2.39 38.1 349 5,563.8

From Sims, 2010

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andalay Resources C

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arch 13, 2015

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RPA did not review historic resource and reserve data, and therefore cannot comment on the

validity or reliability of these historic mineral resources and reserves, as it is unknown how they

were determined. These are relevant as these indicate the potential mineralization on the

project. These have been superseded by the current resource and reserve estimates in this

report and should not be relied upon. A Qualified Person has not done sufficient work to

classify the historical estimates as current Mineral Resources or Mineral Reserves and

Mandalay is not treating the historical estimates as current Mineral Resources or Mineral

Reserves

HISTORIC PRODUCTION The first mining in the district was focused on surface mining in the Laguna Verde zone

(formerly termed the Fachinal area) from 1995 to 2000. From May 2002 to 2008, underground

mining was carried out primarily to the east, in the Cerro Bayo and Cascada areas, and from

the Furioso and Tranque open pits. In 2008, mining commenced at the Coigues Este area of

Laguna Verde, involving pre-production development to establish access to the Dagny and

Fabiola veins. Operations terminated before production from the Dagny and Fabiola veins.

Production from the Project area pre-2002 was reported at 2.43 million tonnes with production

of 161,200 ounces of gold and 10.56 million ounces of silver but detailed reports are not

available. Between 2002 and 2008, a total of 2.6 Mt ore was processed by the Cerro Bayo

plant, including during 2003 to 2007, ore from Coeur’s Martha mine in Argentina. The Cerro

Bayo Project was under care and maintenance from late 2008 through August 2010, with no

production. Operations at Cerro Bayo were suspended to conserve existing Mineral Reserves

and focus on exploration and development of new discoveries in the Laguna Verde area and

existing veins.

Production since 2010 is summarized in Table 6-3.

TABLE 6-3 PRODUCTION HISTORY Mandalay Resources Corporation – Cerro Bayo Project

Item Units 2010 2011 2012 2013 2014 Total

Tonnes dry t 12,048 207,783 358,944 385,221 452,429 1,416,425 Grade Au g/t 0.87 1.06 1.71 2.02 2.19 1.8 Grade Ag g/t 282 222 285 288 259 268

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7 GEOLOGICAL SETTING AND MINERALIZATION This section has been largely referenced from Sims (2010).

REGIONAL GEOLOGY The Cerro Bayo District is situated within a 250 km long north-south Mesozoic volcanic belt

that lies near the boundary between an eastern craton (Patagonian Plateau) and a western

magmatic arc (Patagonian Cordillera). Vast amounts of silicic to intermediate, calc-alkaline

volcanic rocks were erupted during Jurassic to Middle Cretaceous times in a sub-aerial, intra-

arc to back-arc environment, and deposited over a Late Paleozoic accretionary basement

prism. The volcanic pile contains large volumes of rhyolitic to dacitic ash flow tuffs and

pyroclastic rocks interpreted to be associated with large volcanic structures. Marine

sedimentary horizons deposited during restricted transgressions that occurred in the

Cretaceous and Tertiary Periods are interbedded with the volcanic rocks. The belt is

unconformably overlain by plateau basalts that range in age from Early to Late Tertiary.

Intrusive rocks are mainly exposed west from Cerro Bayo. They form the Patagonian Batholith,

core of the Andes in the region, and intrude Late Paleozoic fore-arc assemblages. The

Batholith is composed of a variety of granitoids that range in age from Jurassic to Miocene,

though most were emplaced in the Early to Middle Cretaceous. Small intrusive bodies have

been identified east of the Patagonian Batholith and are represented by coeval fine-grained

porphyries, Cretaceous rhyolitic and dacitic domes (such as the Cerro Bayo and Mallines

domes), and Tertiary dioritic-gabbroic porphyries and plugs. The distribution of plutons in the

region suggests the magmatic arc had oscillatory east-west behaviour since the Jurassic, a

feature that contrasts with the typical eastward migration of the central and northern Chile

magmatic arc.

Crustal shortening and deformation was less in the Aysén area of southern Chile than in other

Andean regions. It occurred mainly in the Middle Cretaceous resulting in gentle folds and

steep northeast normal faults. Major east-west to northeast fracture zones are also important

in the region with the topography being exaggerated by Pleistocene glacial erosion that

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modified the present topographic features such as the Lake General Carrera. The largest

regional structure is the Liquiñe-Ofqui fault, a large transform zone that controlled the

emplacement of Cenozoic eruptive centres, that locally overlap the Batholith, and along which

the coastal area appears to have been northerly displaced.

Figure 7-1 shows the regional geology.

Quaternary

Tertiary

Cretaceous

Jurassic-Cretaceous

Jurassic

Triassic

Carboniferous-Permian

Igneous and Metamorphic Rocks

Paleozoic

Precambrian-Paleozoic

Quaternary Volcanics

Cretaceous-Tertiary Volcanics

Mesozoic Volcanics

Mesozoic-Cenozoic Intrusives

Paleo-Mesozoic Intrusives

Sedimentary Rocks

Other Units

Water

Glacial Ice

Unmapped Area

ARGENTINA

CHILE

PACIFIC

OCEAN

ICE

ICE

ICE

U

ICE

ICE

ICE

ICE

U

U

U

U

U

U

36°

40°

44°

44°

48°

48°

48°

48°

52°

52°

32°

28°

24°

20°

20°

78°

78°

66°72°

72°

72°

66°

South

America

CHILE

InterestArea of

CERRO BAYO PROJECT

CERRO BAYO

PROJECT

N

N

0 200 800

Kilometres

400 600

0 200

Kilometres

400

March 2015

Source: www.geology.about.com, 2012.

Figure 7-1

Regional Geology

Cerro Bayo Project



7-3

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LOCAL AND PROPERTY GEOLOGY The rocks exposed in the Cerro Bayo District are part of a thick pile of silicic volcanic rocks

assigned to the Ibañez Formation, and are believed to represent a more or less continuous

record of Jurassic to Cretaceous volcanism. The Paleozoic basement that regionally underlies

the Mesozoic volcanic rocks is not exposed in the district, at least to a depth of 370 m from the

surface, although fragments of the metamorphic rocks are contained in the overlying volcanic

rocks. The Mesozoic units are overlain by Tertiary basalts and minor volcaniclastic rocks.

The volcanic sequence that hosts the precious metal mineralization is interpreted to be related

to a system of large volcanic centers and rhyolitic domes, the most prominent being the Cerro-

Bayo-Mallines dome complex, which is hosted in a regional north-south trending fracture zone.

The volcanic sequence consists of alternating units of pyroclastic rocks of rhyolitic to dacitic

composition, including basal surge deposits, interbedded with ash fall tuffs, lavas, and

sediments. The older units are exposed at Laguna Verde, while the youngest are exposed at

Brillantes. The thickness of individual flows varies from tens to over a hundred meters,

however, an estimate of the total thickness of the sequence is difficult to determine due to

block faulting of the units. Several volcanic cooling units displaying varying degrees of welding

are recognized in the area. Radiometric dates ranging from 130 Ma to 159 Ma have been

produced in volcanic and intrusive rocks from the Ibañez Formation south of the Cerro Bayo

District using K/Ar and Ar/Ar methods.

Extensive basaltic flows (Meseta Lago Buenos Aires Formation) top the sequence to the south

of the district, representing the westernmost outcrops of a large basaltic province. A 300 m

thick sequence of olivine tholeiites to alkaline basalts is exposed, consisting of five metre to

25 m thick flows, locally separated by interflow detrital or tuffaceous horizons. Radiometric

dating indicates two main cycles of effusion, during the Eocene and Miocene to Pliocene

respectively.

Intrusive rocks are sparsely exposed at Cerro Bayo, and are restricted to Mesozoic and

Tertiary subvolcanic domes, plugs, and dyke swarms of varying compositions. Mesozoic

intrusions are generally sub-circular, flow-banded rhyolitic and dacitic domes characterized by

columnar jointing and sharp walls that rise 100 m to 250 m above the surface. The most

prominent of these is the Cerro Bayo Dome. Their emplacement is controlled by deep regional

north-south fractures and/or intersections of major faults. The domes and a set of dacitic flow-

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banded dikes are estimated to be cogenetic with the felsic tuffs, predating and postdating the

main mineralization events. Andesitic dike swarms controlled by east-northeast fractures are

common across the district, postdating mineralization. Tertiary necks and plugs of massive

basalts and dioritic-gabbro porphyries are exposed in the southern highlands of the district,

generating local argillization of the host rocks. These bodies are cogenetic with the Tertiary

basaltic volcanism.

STRUCTURAL GEOLOGY Three main district-scale structural orientations have been identified in the Cerro Bayo and

Laguna Verde areas, north-south, northeast-southwest to east-west, and northwest to

southeast. A Landsat lineament study across the district illustrates district and regional-scale

structures with similar orientations and locations as the local structures. These structures

correspond to arc-parallel (north-south), arc-normal (approximately east-west), and conjugate

transfer structure (northeast-southwest and northwest-southeast) trends. Pre- and post-

mineralization displacement is documented in all three of the structural orientations.

ARC-PARALLEL STRUCTURES Arc-parallel structures are part of a north-south oriented, deep-seated regional fault system

that controls the emplacement of the Cerro Bayo and other domes in the area, as well as some

veins. At Laguna Verde, a north-south to north-northeast arcuate fault system assumed to be

related to the arc-parallel structures contains brecciated veins and breccias with silver-gold-

molybdenum-lead-zinc mineralization. The entire district, particularly the Cerro Bayo area, is

contained within the arc-parallel structural corridors.

ARC-NORMAL STRUCTURES Arc-normal structures are orientated east-west and are the least frequent in number. They

consist of faults with very large displacements, and control the southern boundary of the

Brillantes zone and the boundary between the southern Cerro Bayo area and the Raul Block.

Indications of dip-slip movements in excess of 400 m are suggested based on displacement

of volcanic units.

CONJUGATE TRANSFER STRUCTURES Two main sets of structures are grouped within the conjugate transfer structures. The most

important is the northwest-southeast fracture system that controls the majority of the main

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stage precious metal epithermal veins, such as Lucero and Javiera at Cerro Bayo, the

Guanaco vein system at the Guanaco Block, and Delia, Dagny and Tranque veins at Laguna

Verde. A second structural system is a late stage, post-mineralization, right lateral east-

northeast fault system responsible for the block faulting that formed the present day

topography. The combined effects of the arc-normal and the northeast-southwest transfer

structures generally displace stratigraphy down dip to the north on a district scale.

Figure 7-2 shows the property geology and a geology legend is provided in Figure 7-3.


NOTE:Refer to Figure 7-2Afor Property PropertyLegend.

Cerro Bayo Project

Property Geology



Figure 7-2

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Mb.Coigues (Dacitic Lithic tuff)

Mb.Temer (Rhyolitic tuff)

Mb.Guadal (Dacitic tuff)




Los Juncos (Rhyolitic tuff)




Los Juncos (Rhyolitic tuff)

Cerro Tehuelche (Andesitic ignimbrites)

Ambar SubvolcanicRhyolitic Dome

(149.3+/-0.7 Ma)

Extrusive

Cerro Tehuelche (Andesitic ignimbrites)

Cerro Amarillo Extrusivo Dome

The Puesto Fm (Ignimbrites & tuffs)

Diamantes Fm

Cerro Tcolorado (SVC)

Rodados Colorados (SVC)

Cerro Torta (Pyroclastic flows)

Basaltic necks and dikes(151+/-1.3 Ma)

Cerro Bayo RhyoliticSubvolcanic Dome(146.5+/-0.2 Ma)

Brillantes Fm(Andesitic tuffs and flows)




Cerro Torta (pyroclastic flows)

Cerro AmarilloSubvolcanic

Rhyolitic Dome

Laguna Verde RhyoliteDome (147.5+/-0.2 Ma)

Andesitic Intrusive

Coigues Dacitic Dome(82.6+/-0.2 Ma)

Esperanza RhyoliticDome

ChileChico Upper (Basalts)

ChileChico Lower (Basalts)

ChileChico Upper (Basalts)

ChileChico Lower (Basalts)

Toqui Fm (Fluvial sediments)

Catedral Ignimbrite(Rhyolithic Ignimbrite)

Basic Necksundifferentiated

Quartz Veins

Fault

Symbols

Principal Road

Lake

Brillantes / Guanaco Legend Cerro Bayo / Mallines LegendLaguna Verde LegendHorquetas Legend

Extrusive Extrusive Extrusive IntrusiveIntrusiveIntrusive

TE

RT

IAR

YE

AR

LY

CR

ETA

CE

US

LA

TE

JU

RA

SS

ICLA

TE

CR

ETA

CE

US

March 2015 Source: Mandalay Resources Corp., 2015.

Property Geology Legend

Cerro Bayo Project



Figure 37-

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MINERALIZATION This section has been largely referenced from Sims (2010).

The Cerro Bayo District hosts at least 90 major veins, as well as stockworks and breccias

containing gold and silver mineralization, located in six principal areas in the district (Figure 7-

2). The deposits show multiple stages of mineralization and display open-space filling and

banding, typical of low-sulphidation style epithermal mineralization. Mineralogy is complex

and is associated with alteration assemblages that suggest at least three stages of precious

metal depositional environments.

• An early, mesothermal event with silver-gold and base metals (Mo, Zn, and Pb) hosted in arcuate north-south to north-northeast veins and tectonic breccias. This style of mineralization is interpreted as resulting from igneous intrusions, doming, and subsequent collapse.

• An epithermal gold-silver mineralization event hosted mainly in north-northwest and north-south to north-northeast structural trends with local high grades, such as the Cerro Bayo, Cascada, and Coigues Este veins.

• A late mineralizing event is interpreted to coincide with the emplacement of a porphyritic stock and related apophyses at Rodados Colorados, which is characterized by a porphyry style alteration pattern. This includes moderately extensive propylitic alteration with chlorite, epidote, disseminated cubic pyrite, and specular hematite. Structures contain a gangue dominated by calcite with locally abundant oxides and relict pyrite. Mineralization is characterized by gold-silver associated with minor copper-lead-zinc. This type of mineral assemblage as well as the porphyry style alteration also occurs at the Horquetas zone in the western portion of the district, which is interpreted to belong to the same late stage event.

K/Ar and Ar/Ar dating carried out in veins from different areas in the district indicate an age of

alteration and/or mineralization ranging from Upper Jurassic (156 Ma) to Lower Cretaceous

(114 Ma). The oldest mineralization recorded is that of the Mallines and Guanaco veins, which

range in age between 156 Ma and 137 Ma. The veins in the Cerro Bayo area were dated at

128 Ma, indicating that mineralization pre-dates the Cerro Bayo dome, which is consistent with

the geological field evidence. Restricted data from the western part of the district suggests

that mineralization at Laguna Verde is younger than the rest (114 Ma).

Over 90 veins have been identified across the property, occurring in isolation or in clusters (as

in the Cerro Bayo and Laguna Verde areas). Veins pinch and swell following pre-mineral faults

and fractures. Exposed strike lengths vary from 300 m to 2,200 m with varying widths between

0.5 m to five metres, and local pods up to seven metres wide.

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Veins are typically banded and brecciated, showing a variety of textures (crustiform, colloform,

comb, and carbonate replacement) that indicate several pulses of silica deposition and

brecciation. Hydrothermal breccias are matrix-supported, tabular to lens shaped bodies,

formed by round to angular fragments of silica flooded tuffs in a matrix of dark saccharoidal to

chalcedonic quartz and sulphides, mainly pyrite and subordinate silver sulphosalts.

Mineralization is mainly structurally controlled. Mineral fluids were channeled along pre-

mineral faults or fracture zones that were in-filled during successive hydrothermal pulses. The

brittleness and plasticity of the host rock units also control the vein widths, the degree of

development of sheeted zones, and the variations in the dip of veins due to refraction.

MINERALOGY Gold mainly occurs as inclusions in pyrite, filling cavities and irregular surfaces in strongly

fractured porous grains. It has also been detected as inclusions along cleavages in galena

and iron-deficient sphalerite. Free gold occurs in quartz-bound grains, as irregular crusts and

flakes in micro cracks cutting the gangue, and within partially oxidized sulphide minerals.

Analyses with a Scanning Electron Microscope indicate that gold is argentian (electrum) with

a silver content that may reach 40%.

Silver is contained in a variety of minerals. Sulphosalts are the most common, including

freibergite, stephanite, proustite, pyrargyrite, and polybasite. Stromeyerite is also common, as

well as native silver. Argentite/acanthite, chlorargyrite, and boleite are supergene products of

surficial oxidation. In veins and veinlets, the sulphide minerals form irregular bands and patchy

aggregates, and are finely disseminated in the matrix of hydrothermal and tectonic breccias.

They are commonly included along fractures in pyrite grains and are also found on the margins

of galena aggregates. Larger sulphide grains may include sphalerite and electrum. Silver

minerals are more widespread than gold in the district.

Base metal sulphides are common, though not abundant in the district. These include mostly

sphalerite, galena, and chalcopyrite, forming irregular aggregates, stringers, and massive

veinlets. Tetrahedrite occurs rarely, as well as bornite and famatinite. Supergene base metal

minerals are rare in the area, and include covellite, chalcocite (digenite, idaite), cerussite,

smithsonite, and hydrohetearolite.

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Molybdenum mineralization is common in veins and tectonic breccias in the Laguna Verde

zone and consists of specks and fine disseminations of molybdenite accompanied by tungsten

and zinc-rich wulfenite and jordisite. Oxidation has produced ferrimolybdite and ilsemanite

close to the surface.

Quartz is the primary gangue and occurs in a variety of grain sizes and textures. Several

stages of deposition occurred, alternating with periods of brecciation and cementation. Pyrite

is ubiquitous as disseminations, aggregates, and veinlets. Adularia is common, intergrown

with quartz and in veinlets. Carbonates are common, mostly in veinlets, including mainly

calcite and some rhodochrosite, ankerite and siderite. Fluorite and barite are late gangue

minerals. Clays are presents and form aggregates of kaolinite-illite, smectite, and very minor

sericite/pyrophyllite. Minor sericite occurs in host-rock fragments that are included in mineral

zones. Partly limonitized hematite occurs locally.

ALTERATION Pervasive silicification occurs as haloes around the major veins and vein clusters. Medium-

grained milky quartz was deposited in early stages and microcrystalline to opaline quartz in

late stages. Adularia occurs with quartz in veinlets adjacent to the veins. Very fine sericite,

illite, smectite, and calcite replace feldspar and biotite. Kaolinite is present as a supergene

mineral.

Weak pyritization is widespread in the district, mostly as an early stage of alteration with

medium grained quartz. Propylitic alteration marked by chlorite, epidote, carbonate,

saussuritization of feldspars and montmorillonitic clays, forms haloes surrounding bleached

zones. Deuteric alteration is common in tuffs outside the main mineralized areas forming

aggregates of plagioclase, epidote, sericite, and zeolites.

The age of alteration related to mineralization is unknown. The only available determination

(K/Ar) from sericite collected close to a major vein gave an age of 114 +/- 3 Ma (Early

Cretaceous), coincident with the most intensive period of intrusive magmatism in the region.

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GEOCHEMISTRY Available data suggests that mineral deposition is best defined by gold and silver in the main

stage of mineralization, and also by high concentrations of zinc and molybdenum in the older

silver-rich and base metal stage.

The clearest enrichment in trace elements is evidenced in hydrothermal and tectonic breccias,

which are enriched in lead, zinc, and molybdenum. Silver values are more consistent and

relate to other trace elements, however, crosscutting quartz veinlets carrying gold complicate

the analyses. The best correlations are between base metals, silver and molybdenum, and

silver and zinc. Gold correlates poorly with other elements. The most significant signature of

the different mineralizing events is the Ag-Mo-Zn association (with subsidiary gold) for the

initial stage, and the Au-Ag-Cu-Pb association for the latter stage.

Stockworks are enriched in gold, molybdenum, and zinc, particularly where close to major

brecciated structures. A lesser enrichment in silver and lead is also evident. Silver values are

more related to other trace elements than gold. Best correlations are found in these zones

between base metals and between silver, molybdenum, lead, and zinc. Gold correlates poorly

with other elements, except for a minor relationship with copper. The different mineralizing

events are marked by the Ag-Mo-Pb-Zn association (with subsidiary gold) for the initial stage

and by Au-Cu for the late stage.

Veins are enriched in gold, silver, and zinc and to a lesser degree in lead. Molybdenum is

erratic with values of over 100 ppm only in restricted brecciated structures. The relationship

between precious and trace metals is not as clear as in the other mineralized bodies. Silver

correlates weakly with lead and zinc, and gold with copper. Molybdenum is unrelated to either

precious or base metals. Limited studies have been undertaken using other pathfinders, such

as mercury, antimony, arsenic, selenium, and barium. Mineralizing events are not well defined

by elementary associations.

CERRO BAYO - GUANACO – CASCADA In the Guanaco and Cascada sectors of the Cerro Bayo district, gold and silver mineralization

occurs in veins, vein systems and veinlets hosted in a moderately welded sequence of dacitic

and rhyolitic tuffs. The volcanic sequence is intruded by the Cerro Bayo and other dacitic

domes, considered to be post-mineral events.

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The main vein systems have a 325° to 345° orientation, vary in dip from vertical to 75°

northwest and southeast, with strike lengths between 50 m and 1,200 m. Additional extensions

in excess of 1,000 m have been disrupted by major faults trending east to northeast. Widths

are highly variable between the different vein systems and within individual veins along strike

and down dip, varying from centimetres up to five metres.

Mineralization is typically low sulphidation, epithermal, and representative of the main

mineralization stage in the district. Veins are normally brecciated with local banded textures.

They consist mainly of fine-grained quartz and chalcedonic silica, adularia, and fluorite, with

minor amounts barite and carbonates. Sulphide content is less than 5% and consists mainly

of pyrite and silver sulphosalts as disseminations and bands. Moderate argillic alteration is

common in the area, with strong silicification and silico-argillic alteration occurring as haloes

along the veins.

LAGUNA VERDE Gold and silver mineralization occur in veins, hydrothermal and tectonic breccias, stockworks

(sheeted veins) and veinlets hosted in a moderately to strongly-welded sequence of rhyolitic

and dacitic tuffs. Post -mineralization flow-banded dacitic domes intrude the volcanic sequence

at Coigues Hill.

Two main vein systems are recognized at Laguna Verde.

• North-south to north-northeast trending brecciated veins and breccias varying in dip from vertical to 45° E.

• 315° to 345° oriented veins varying in dip between vertical and 75° northwest and southeast.

Strike lengths up to 800 m have been recognized in some of the vein systems. Widths are

highly variable between the different vein systems and within individual veins along strike and

down dip, varying from centimeters up to 50 m in breccias and stockworks (sheeted zones).

Two different mineralization events can be recognized at Laguna Verde.

• A mesothermal early stage Ag-Mo-Zn-Pb event with lesser gold.

• A late stage epithermal low sulphidized gold-silver rich system, representative of the main mineralization stage of the district (Delia, Coigues Este, and Tranque vein systems).

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Brecciated veins and tectonic breccias are the typical structures of the early stage

mineralization, whereas the late stage epithermal mineralization is represented by banded

veins that are locally brecciated. The veins consist mainly of fine grained quartz and

chalcedonic silica, adularia, and fluorite, with minor amounts of barite and carbonates. The

overall sulphide content is less than 5%, although higher in the early stage event. Sulphides

are mainly pyrite, silver sulphosalts, and local sphalerite disseminations, clusters, and bands.

OTHER AREAS Preliminary exploration has been conducted in the district outside of Laguna Verde, Cerro

Bayo, Guanaco, and Cascada. Epithermal veins and porphyry style alteration and

mineralization exist in the Mallines, Horquetas, Rodados Colorados, Meseta and Brillantes

areas.

Large vein systems and stockwork zones are exposed at Mallines, with textural and chemical

characteristics that suggest the present day exposure level is above the favourable horizon in

the epithermal system, though local indications of high grade mineralization have been found.

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8 DEPOSIT TYPES This section has been largely referenced from Sims (2010).

The Aisén region hosts precious and base metal mineralization. Lead-zinc-copper minerals

have been mined from veins and from irregular pods and stratiform bodies hosted in Mesozoic

volcanic rocks and sedimentary rocks, and in Paleozoic metamorphic rocks. Molybdenite-

quartz veins and veinlets occur in pegmatitic facies of the Patagonian Batholith that also

include scheelite and complex minerals of uranium and thorium. Precious metals related

locally to lead and zinc minerals have also been explored and mined in vein occurrences in

the Chilean-Argentinean Patagonia. Cerro Bayo in Chile, and Martha, Cerro Vanguardia,

Manantial Espejo, and San Jose in Argentina are the largest deposits presently known in the

region (Figure 8-1).

The mineralogy and textures of the main stage event and the associated alteration phases are

consistent with a low-sulphidation model for volcanic hosted precious metal deposits.

The following summary of low-sulphidation epithermal deposits is taken largely from Robert et

al. (2007).

The currently accepted definition of epithermal deposits includes precious and base metal

deposits forming at depths of <1.5 km and temperatures of <300ºC in subaerial environments

within volcanic arcs, at convergent plate margins and in intra- and back-arc as well as post-

collisional extensional settings. Epithermal systems can be grouped into high, intermediate,

and low sulphidation types based on variations in their hypogene sulfide assemblages (Sillitoe

and Hedenquist, 2003). Most epithermal gold deposits are Cenozoic in age, but some older

deposits are known, although none of the giant ones are older than Cretaceous.

Low sulphidation epithermal gold deposits of the alkalic and subalkalic subtypes share a

number of characteristics and are described together. Differing characteristics of the less

common alkalic low sulphidation deposits are highlighted where appropriate. Most low

sulphidation gold deposits are found in intra or back-arc rifts within continental or island arcs

with bimodal volcanism. Rifts may form during or after subduction or in post-collisional

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settings. Additionally, some low sulphidation deposits are found in andesite-dacite-rhyolite

volcanic arcs, but only in clearly extensional settings (Sillitoe and Hedenquist, 2003). Deposits

of the alkalic subset of low sulphidation epithermal deposits are specifically associated with

alkaline magmatic belts but share an extensional setting with their calk-alkaline counterparts

(Jensen and Barton, 2000).

At the deposit scale, low sulphidation gold deposits are typically hosted in volcanic units, but

can also be hosted by their basement. Vein development in the basement does not reflect

syn-mineral uplift, as is the case in high sulphidation and intermediate sulphidation systems,

but rather the intersection of the hydrothermal system with rheologically more favorable

basement host rocks. Syn-mineral mafic dykes are common in these deposits (Sillitoe and

Hedenquist, 2003). Both low-grade disseminated and structurally controlled high-grade

deposits can form, such as Round Mountain and Hishikari, respectively. Calc-alkalic low

sulphidation deposits have restricted vertical continuity, generally less than 300 m, whereas

alkalic low sulphidation deposits such as Porgera and Cripple Creek can extend in excess of

one kilometre vertically. Mineralization in subalkalic low sulphidation systems generally has

high silver (Au:Ag ratio <1) and low base metal content and gold is associated with pyrite –

high-Fe sphalerite ± pyrrhotite ± arsenopyrite. In contrast, low sulphidation alkalic

mineralization commonly contains abundant telluride minerals, has elevated Au:Ag ratios, and

less voluminous quartz gangue (Jensen and Barton, 2000).

Alteration mineralogy in low sulphidation systems shows lateral zoning from proximal quartz-

chalcedony–adularia in mineralized veins, which commonly display crustiform-colloform

banding and platy, lattice-textured quartz indicative of boiling, through illite- pyrite to distal

propylitic alteration assemblages. Vertical zoning in clay minerals from shallow, low

temperature kaolinite-smectite assemblages to deeper, higher temperature illite have also

been described (Simmons et al., 2005). As with high sulphidation and low sulphidation

systems, host rock composition can also cause variations in the alteration mineral zoning

pattern in low sulphidation systems. Alteration assemblages in alkalic low sulphidation

deposits commonly contain roscoelite, a V-rich white mica, and abundant carbonate minerals

(Jensen and Barton, 2000).

66° 64°68°72° 70°74°

46°

50°

48°

0 40 200

Kilometres

80 120 160


Regional Deposits

Cerro Bayo Project



Figure 8-1

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9 EXPLORATION Prior to 2009, Coeur had previously identified additional mineralized zones on the property

through detailed surface mapping and had started defining these targets, such as Cerro Bayo

Este, Pampa la Perra, La Tina, and Zone 2. In addition, detailed surface mapping was

conducted across Zone 2, resulting in the identification of the Gabriella and Gaby W vein

systems. Mapping in these areas delineated veins and veinlets of massive quartz between

0.1 m and 1.2 m in width, trending approximately 170° azimuth and dipping 86° east.

In 2011, Mandalay reviewed historic Coeur reports and data while continuing surface mapping

of the district.

In 2012, surface mapping was completed in the Mallines, Gabriela, and Laguna Verde zones

and exploration for new targets was carried out in the Esperanza, Antimonio, and Cerro

Amarillo zones.

In 2013, regional and local geochemical mapping was carried out using trace elements.

Surface mapping was completed in the Esperanza and Brillantes zones. Uranium–lead dating

of intrusive rocks was carried out in the Laguna Verde Island and Horquetas zones.

Hydrothermal alteration zones were mapped using Terraspec Hi Resolution Mineral

Spectrometer (ASD) and the lithological contact between Temer and Coigues units was

defined for the Laguna Verde and Cerro Bayo areas.

In 2014, surface mapping was updated in the Laguna Verde zone. Three-dimensional

modelling of the stratigraphic units was performed. Zircon uranium–lead dating in ignimbrite

rocks from Temer, Coigues, and Rodado Colorados units, and the Isla and Esperanza domes

was executed. The ages of these units were all determined to be the Lower Jurassic. Also,

argon-argon dating of adularia in Delia and Coyita SW veins at depth was carried out indicating

the hydrothermal event occurred in the Lower Cretaceous correlating with the dating of the

Cerro Bayo, Guanaco, and Brillantes hydrothermal events. Surface grids were executed in

Laguna Verde, Cerro Bayo and Mallines W producing a radiometric register (U, Th, K) using a

scintillometer and a mineralogical analysis using an ASD spectrometer. As a result, paleoflows

and new explorations targets were defined.

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EXPLORATION POTENTIAL RPA is of the opinion that the Cerro Bayo Project hosts a significant silver and gold mineralized

system, and that there is good potential to increase the resource base where existing

mineralization and newly identified targets are open along strike and at depth, especially under

the Laguna Verde lake. Continued exploration is warranted.

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10 DRILLING Drilling on the Cerro Bayo property has been conducted in phases by several companies from

1986 to 2014. Total drilling consists of 4,793 diamond drill holes for 635,144 m and 666

reverse circulation (RC) holes for 57,271 m. A small number of exploration drill holes outside

of the main mining areas are not included in the totals.

A summary of drilling by operator is included in Table 10-1. Drill hole locations for the modelled

veins in the Coigues Este area are included in Figures 14-5 to 14-6.

TABLE 10-1 DRILL HOLE DATABASE Mandalay Resources Corporation – Cerro Bayo Project

Core Holes RC Holes

Area Year Drilled

No. Holes

No. Metres

No. Holes

No. Metres

Cerro Bayo Dome/Guanaco Pre-2010 1,967 206,486 9 1,582 Mallines Pre-2010 54 6,995 - - Cascada Pre-2010 153 24,828 - -

Laguna Verde (includes Coigues Este)

Pre-2010 1,583 195,087 657 55,689 2010 15 2,668 - - 2011 290 60,457 - - 2012 230 62,189 - -

Laguna Verde Underground 2012 60 2,647 - - Horquetas 2012 14 3,743 - - Cerro Bayo 2013 43 10,525 - -

Laguna Verde 2013 94 20,994 - - Laguna Verde Underground 2013 97 2,013 - -

Mallines 2013 13 3,595 - - Cañadon Verde 2013 12 2,329 - - Laguna Verde 2014 69 24,552 - -

Laguna Verde Underground 2014 82 2,263 Mallines W 2014 5 1,444 - -

Cañadon Verde 2014 12 2,329 - - Total 4,793 635,144 666 57,271

PREVIOUS DRILLING

PRE-2010 This section has been largely referenced from Sims (2010).

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RC drilling was carried out in the Laguna Verde area in the early stages of exploration in the

district, between 1990 and 1992, and again in late 2003 and early 2004. RC drilling was

conducted by contractors using 5.5 in. bits. Sampling of cuttings obtained from RC drilling was

taken on 0.5 m and 1.0 m increments with a targeted total sample size of 20 kg to 22 kg in the

first case, and 40 kg to 45 kg in the latter case. The drill hole cuttings were logged by the

geologists for lithological, structural, and mineralogical information. Boxes with splits of the

sampled intervals were stored. The reject material was bagged and stored until the drilling

campaign, interpretation, and modelling were complete, in order to review or resample if

required.

Until 2009, most of the core drilling was carried out by contractors and by Coeur personnel

using CMCB-owned drill rigs (Diamec 251 and Diamec 262). BQ diameter holes were drilled

underground and BQ, NQ, and HQ diameter holes were drilled from surface.

Drill hole collar coordinates were surveyed using industry standard surveying techniques by

in-house and contract surveyors.

Sperry Sun downhole surveys were taken on the majority of the core holes. Results from

Sperry Sun surveys showed slightly less than 4° horizontal and 1.5° vertical deviations per 100

m, based on 481 surveyed core holes. In 2004, a Reflex multi-shot downhole survey

instrument was purchased and used for subsequent drilling. Downhole surveys were not taken

on reverse circulation holes.

Company geologists logged lithological, structural, and mineralogical information, while other

company personnel logged recovery and rock quality designation (RQD) data.

All drill hole data was originally maintained in manual form. Since the early 1990s, the data

was entered and stored in Excel spreadsheets. Data was later stored in a centralized Access

database, then moved into an acQuire information management system database.

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MANDALAY DRILLING

2010-2011 Mandalay completed 63,125 m of core drilling in 305 holes during 2010 and 2011 at Laguna

Verde. The drilling was a part of the resource confirmation and extensional program conducted

by Mandalay Geological Team for Dagny, Fabiola, Yasna, Delia NW, Delia SE, Marcela Sur,

and Dalila veins. Blue sky exploration holes targeted the Gabriela vein.

Mandalay drilling was completed using Atlas Copco Diamec 262 and 252 drill rigs. Master

Drilling used Boart Longyear F90 and Max1000 drill rigs. All Mandalay drill core is stored at

Granja Temer in Laguna Verde, and older core is stored in Guanaco near Cerro Bayo.

Drill hole collars were surveyed by Mandalay surveyors using total station survey instruments.

Downhole surveys were completed by Mandalay and contract drillers after the hole was

complete using Maxibor II instruments. Some of the downhole surveys were corrected after

the collars were reviewed and resurveyed.

The diamond drill core was placed in appropriately labelled wooden core trays at the drill rig

prior to transport. Core was carefully transported by geological assistants to the on-site Granja

Temer core logging facility by truck.

All geological information was manually logged on paper, and then transferred to Excel

spreadsheets. In late 2011, core logging was entered digitally into Geovectra’s GVMapper

logging software program. All diamond drill core was photographed using a digital camera and

the images were stored in the master database.

Geological information recorded includes lithology, veins, core recovery, description of specific

structures and alteration styles, along with their width, intensity, and associated mineral

assemblage. In addition, RQD was undertaken to record the number and nature of natural

breaks in the core for subsequent geotechnical assessment.

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2012 The purpose of the 2012 Mandalay drilling programs was to drill infill holes and extend

resources of the Dagny, Delia NW, Delia SE, Coyita, Dalila, and Trinidad veins. Blue sky

exploration holes targeted the Gabriela vein.

Mandalay completed a total of 230 diamond drill holes totalling 62,189 m, of which 61% was

completed at Laguna Verde and Marcela Sur and the remaining 39% at Gabriela, Caiquenes,

and Guanaco veins. All holes were collared and finalized using BQ, NQ, and HQ diameter

core.

Following RPA’s recommendations, Mandalay implemented standard operating procedures

for core logging, to be used by all current and future geology personnel.

2013 During 2013, Mandalay completed 162 drill holes for 37,445 m, of which 41% was infill drilling,

35% was extensional definition drilling for some of the veins, and 24% was exploration drilling

in new targets. The infill drilling focused on the Delia NW, Trinidad, Marcela Sur, Raul, and

Coyita veins. The extensional definition drilling was completed in the southeast area of the

Fabiola and Yasna veins under the Laguna Verde lake, at the Lourdes West and Wendy North

veins in the Cerro Bayo area, and at the Guanaco I, Juncos, Chinita, Chatito, Condor, and

Carola veins. The exploration drilling was concentrated on the new targets at the Esperanza,

Antimonio, and Mallines West veins.

As a result of the extensional drilling, Fabiola and Yasna vein mineralization was extended for

approximately 500 m to the southeast of the previous limits. The drilling also showed that

there is good potential to extend mineralization to the southeast of the Coyita vein.

In late 2013, there were five diamond drills on site. All five drills are company owned. Drilling

averages approximately 3,000 m per month.

2014 During 2014, Mandalay completed 83 drill holes for 27,848 m, of which 47% was infill drilling,

34% was extensional definition drilling for some of the veins, and 19% was exploration drilling

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in new targets. The infill drilling focused on the Coyita and Yasna veins. The extensional

definition drilling was completed in Cristal and Coyita, Fabiola, Yasna, Kasia, and Irene veins

under Laguna Verde. The exploration drilling was concentrated on the new targets at the

Esperanza and Cerro Amarillo veins. As a result of the extensional drilling, Coyita vein

mineralization was extended approximately 650 m to the southeast.

In 2014, there were three diamond drills on site. All three drills are company owned. Drilling

averages approximately 2,300 m per month.

RPA is not aware of any drilling, sampling, or recovery factors that could materially impact on

the accuracy and reliability of the results.

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11 SAMPLE PREPARATION, ANALYSES AND SECURITY PREVIOUS WORK This section has been largely taken from SRK (2010).

A complete assay laboratory owned by CMCB and located at the mill site near Laguna Verde,

contains facilities for sample preparation, fire, wet and atomic absorption assays. Both mine

and exploration samples are assayed at this facility. Outside consultants established testing

procedures in accordance with industry standards. SGS Lakefield Research Chile S.A. (SGS)

carried out an audit in 2011 and results showed that the laboratory meets international

standards. Prior to this, Snowden Mining Consultants Inc. and Jacobs Engineering Group Inc.

reviewed the laboratory in 2001. Although the laboratory was not certified, their findings were

that the laboratory met international standard operating procedures.

All exploration and production sampling has been carried out by CMCB personnel.

Each core sample is identified with a unique sample number tracked throughout the assaying

process. Samples are weighed prior to crushing, jaw crushed to produce a 9.5 mm product,

roll crushed to achieve 90% passing 2.0 mm (10 mesh ASTM) product, then split with a one

inch riffle to approximately 0.5 kg. This 0.5 kg sample is air dried for two hours at 102°C prior

to pulverization using a plate pulverizer to 100% passing 0.15 mm (100 mesh ASTM). After

pulverizing each sample, the bowl, ring, and puck assembly are disassembled with the

pulverized sample, and placed on a rolling cloth. The pulverizer assembly is placed back in

the bowl with another sample. Two assemblies were used in an alternating fashion. The

pulverized sample is rolled and transferred to a numbered envelope. Silica sand is pulverized

at the end of the entire sample run to minimize possible contamination for the next run. No

cleaning or downgrading of the pulverizer assembly is performed during any single sample.

No significant material was carried over from sample to sample with this equipment.

Each RC sample is identified with a unique sample number tracked throughout the assaying

process. Samples are dried at 105oC, if required. Following drying, the sample is roll crushed

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to achieve 90% passing 2.0 mm (10 mesh ASTM) product, then split with a one inch riffle to

approximately 500 g. This sample is air dried for two hours at 105oC then pulverized using a

ring and puck pulverizer to 100% passing 0.15 mm (100 mesh ASTM). After pulverizing each

sample, the bowl, ring, and puck assembly are disassembled with the pulverized sample, and

placed on a rolling cloth. The pulverizer assembly is placed back in the bowl with another

sample. Two assemblies are used in an alternating fashion. The pulverized sample is rolled

and transferred to a numbered envelope. Silica sand is pulverized at the end of the entire

sample run to minimize possible contamination for the next run. No cleaning or downgrading

of the pulverizer assembly is performed during any single sample. No significant material is

carried over from sample to sample with this equipment.

Channel samples and stockpile samples are two types of mine production samples analyzed.

Each channel sample is identified with a unique sample number tracked throughout the

assaying process. Samples are dried at 105oC if required. Samples are jaw crushed to

produce a 9.5 mm product, roll crushed to achieve 90% passing 2.0 mm (10 mesh ASTM)

product, then split with a one inch riffle to approximately 500 g. This sample is air dried for two

hours at 105oC, and then pulverized using a ring and puck pulverizer to 100% passing 0.15

mm (100 mesh ASTM). After pulverizing each sample, the bowl, ring, and puck assembly

were disassembled with the pulverized sample, and placed on a rolling cloth. The pulverizer

assembly is placed back in the bowl with another sample. Two assemblies are used in an

alternating fashion. The pulverized sample is rolled and transferred to a numbered envelope.

Silica sand is pulverized at the end of the entire sample run to minimize possible contamination

for the next run. No cleaning or downgrading of the pulverizer assembly is performed during

any single sample. No significant material is carried over from sample to sample with this

equipment.

Each stockpile sample is identified with a unique sample number tracked throughout the

assaying process. Samples are dried at 105oC if required. Samples are jaw crushed to

produce a 9.5 mm and split with a one inch riffle to 20 kg. This split is then roll crushed to

achieve 90% passing 2.0 mm (10 mesh ASTM) product, and then split with a one inch riffle to

approximately 500 g. This sample is air dried for two hours at 105oC, then pulverized using a

ring and puck pulverizer to 100% passing 0.15 mm (100 mesh ASTM). After pulverizing each

sample, the bowl, ring, and puck assembly are disassembled with the pulverized sample, and

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placed on a rolling cloth. The pulverizer assembly is placed back in the bowl with another

sample. Two assemblies are used in an alternating fashion. The pulverized sample is rolled

and transferred to a numbered envelope. Silica sand is pulverized at the end of the entire

sample run to minimize possible contamination for the next run. No significant material is

carried over from sample to sample with this equipment.

All samples were assayed for gold and silver by fire assay and gravimetric finish using a 30 g

nominal sample weight (Cerro Bayo ME Grav21 method). Check assays, including duplicate

pulps and coarse rejects, totalling 285 samples, were carried out at the ALS Chemex

laboratory in La Serena, Chile, where samples were assayed by fire assay with a gravimetric

finish.

The gold and silver present in the sample were expressed according to the following formulae:

Au (g/t) = au (mg) / sample weight (g)

Ag (g/t) = (Au + Ag) (mg) – Au (mg) / sample weight (g)

MANDALAY WORK

CORE SAMPLING Core is sampled predominately on the basis of geological logging with sample intervals ranging

from a minimum sample length of 0.1 m and a maximum sample length of 3.0 m. Mineralized

intersections and adjacent intervals are selectively sampled for assaying for silver and gold

content. An electric diamond saw is used to cut the core lengthwise, which is then placed

correctly back into the tray. The half-core is then sampled by Mandalay geological assistants,

ensuring that the same side is consistently sampled, and placed into bags with the assigned

sample number, then closed and sealed with staples. The samples are then securely

transported by truck to the on-site laboratory. Intervals that are not assayed remain in storage

at the mine site.

Mandalay has implemented standard operating procedures for core sampling, as

recommended in RPA (2012).

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CHANNEL SAMPLING Underground channel samples are collected from level development headings at an

approximate 2.4 m spacing. Veins and mineralization are selectively sampled on each face,

with samples taken across the whole face width every fifth round. The minimum sample length

is 0.1 m and the maximum length is 1.0 m. The width of the channel ranges from 0.2 m to 0.4

m and the depth is typically 0.2 m. Each sampled face is mapped and recorded with

corresponding channel sample information.

RPA recommends channel sampling across the entire face for each round to obtain additional

information on grade distribution, especially along indistinct contacts between mineralized and

non-mineralized zones, and for use in determination of dilution grades immediately adjacent

to veins.

Mandalay implemented standard operating procedures for channel sampling.

SAMPLE ANALYSES Assaying was completed by the on-site laboratory, which contains all facilities for sample

preparation, fire, wet and atomic absorption assays. The on-site laboratory is wholly-owned

by Mandalay and it is not certified.

In-house standard operating procedures have been developed and documented by Mandalay

for sample preparation, sample crushing and pulverizing, and fire assaying with a gravimetric

finish.

All samples are received at the laboratory with standard work orders for each batch.

Information on the work orders is checked against the sample number tags prior to sample

preparation. All wet samples are dried in the furnace prior to sample preparation.

Dried samples are crushed in two stages to 85% passing 10 mesh. A 400 g to 500 g split is

riffled off and the unused portion stored as a coarse reject. The entire split sample is pulverized

to 95% passing 140 mesh.

Assaying is done by fire assaying methods with a gravimetric finish based on an approximate

30 g sample. Each sample is fire-assayed using a traditional lead oxide flux as well as a known

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addition of silver, and then placed in fire assay furnaces. The fusion of the flux and inquarted

sample produced a molten mixture that is poured into conical molds and cooled. The lead

button formed during the fusion process is separated from the cooled slag and pounded to

remove any adhering slag. The lead button is then cupelled using a magnesium oxide cupel.

The remaining doré bead is flattened and weighed. The weighed doré is placed in a test tube

and concentrated nitric acid is added. The button is then rinsed, ammonia is added, and the

button rinsed again. The button is dried and roasted for five minutes at 700oC. The gold is

weighed after cooling. Silver to gold ratios are then checked. If the ratio is lower than 3:1,

additional silver and lead is added, and the sample is re-analyzed.

Coarse rejects and pulps are retained for future test work or further mineralogical and

metallurgical work.

SAMPLE SECURITY Mandalay’s security procedure involves direct drill and sample management, secure

transportation methods, sampling, sawing, and logging areas.

LABORATORY AUDIT SGS conducted a laboratory audit from August 24 to 25, 2011. All laboratory procedures for

sample analysis and the internal laboratory quality assurance/quality control (QA/QC)

program, and laboratory equipment were reviewed. Details are documented in the SGS

Laboratory Audit Report (SGS, 2011).

SGS did not identify any issues in general, regarding the technical level of laboratory

personnel, the overall laboratory data management procedures, or the execution of the sample

preparation and sample analytical procedures.

SGS recommended implementing a few changes with periodic reviews regarding training of

laboratory personnel, fire assay furnace temperature control, equipment calibration, and loss

of silver during the cupellation stage. SGS also recommended taking note of the shelf life of

standards used for calibration of atomic absorption equipment, the use of precision curves for

controlling repeatability of analyses, and regular checks on the status of the laboratory

equipment.

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Regarding Mandalay’s internal laboratory QA/QC program, SGS recommended the use of

certified reference materials (CRMs) as checks on the in-house reference materials used, and

the establishment of in-house procedures and control charts for timely review and validation

of analytical batches.

SGS also recommended that the on-site laboratory obtain ISO (International Organization for

Standardization) certification for accreditation, involving the establishment and implementation

of a quality management system.

In RPA’s opinion, the sample preparation, analytical procedures, and sample preparation meet

industry standards and are acceptable to support the resource estimation work. The QA/QC

procedures and results are summarized in Section 12.

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12 DATA VERIFICATION DATA VALIDATION

PREVIOUS WORK This section has largely been taken from SRK (2010) and RPA (2012, 2013, and 2014).

2008 – 2009 Data verification was conducted on the Gemcom GEMS (Gemcom) resource databases used

for the 2008 Dagny, Fabiola, and Yasna resource models, and the 2009 Delia resource model

after the models were completed. The acQuire data management system was implemented

at Cerro Bayo in 2007 to 2008, but was not fully implemented at the time of modeling.

Discrepancies were identified when comparing the Gemcom databases to the acQuire

databases, due to missing assays in the Gemcom databases.

By early 2009, all Cerro Bayo data was stored in an acQuire database at the Coeur South

America (CSA) Exploration offices in Chile Chico and at the exploration office in Santiago. The

acQuire data management system stored data in a standardized structure, provided tools for

data QA/QC and reporting, and was securely backed up at the corporate office. All assay

certificates were imported directly into the acQuire database, and were linked to sample

numbers stored in the database, minimizing manual assay transfer errors.

CSA completed an extensive validation of the data collected from 2007 to 2009. Data

verification was limited to the data included in the mineral resource databases. No significant

discrepancies were found.

2010 Details of the following data verification conducted by SRK in 2010 are contained in SRK

(2010). The database verification consisted of checks in four drill holes from each of the Delia,

Dagny and the Fabiola-Yasna vein systems. Drill logs, collar information, assay intervals and

laboratory certificates were checked against vein cross section plots, and the acQuire

database. No significant discrepancies were identified.

Mandalay carried out a twin drill hole program in 2010. A total of 15 core holes were twinned

by a second core hole in the Cerro Bayo and Laguna Verde areas, including veins in the

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Coigues Este area. This total includes holes in the Dagny vein and two holes in the Fabiola-

Yasna vein system. Selected holes were representative of the different domains and grades

in each vein. Core was split, and one half was assayed at the ALS-Chemex (Geolab)

laboratory in Santiago or La Serena. Blanks and standards were included for laboratory

checks.

All duplicate holes intercepted the target vein at or close to the expected location. Comparative

results confirmed the general position and widths of the mineralized structures. Significant

variability in grades were encountered with high gold and silver values above 15 g/t Au and

1,000 g/t Ag, which is related to the variability of mineralization in epithermal veins. Grade

variability may also be affected by a smaller sample volume taken from the twinned holes (half

core compared to whole core from the original holes) and different core diameter of the twinned

holes.

SRK visited the core logging and storage facility located near Laguna Verde. Mineralized

intercepts from six core holes were examined and compared with the original geologic logs.

No significant differences were identified in the logged descriptions of the lithologies,

mineralization, structures, or measured intervals.

Based on data verification undertaken in 2010, and independent reviews completed

previously, SRK determined that the general flow of data from original drill hole logs, drill hole

surveys, sampling, sample preparation, laboratory procedures, laboratory certificates, and the

construction of cross sections, were completed in accordance with generally accepted best

practice standards.

2011 Patti Nakai-Lajoie, Principal Geologist with RPA, and an independent QP, visited the property

from September 29 to October 10, 2011. During the visit, Ms. Nakai-Lajoie examined

underground exposures of mineralization, reviewed plans and sections, visited the analytical

laboratory on site, and reviewed core logging and sampling procedures. As part of the data

verification process, RPA checked the databases against copies of the assay certificates,

checked a selection of drill hole collars, and reviewed QA/QC data collected by Mandalay.

The data verification and QA/QC conducted by RPA in 2011 are summarized as following:

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• Surface drill hole locations were confirmed by RPA using a hand-held GPS. Identified discrepancies were resolved through the implementation of an on-site transformed coordinate system.

• RPA checked a minimum of 10% of assay records in the Cerro Bayo drill hole and channel databases against original hardcopy assay certificates. No significant discrepancies were identified but a few minor database errors such as missing lithology records and incorrect vein flag codes were noted.

2012 Rosmery Cardenas, Senior Geologist with RPA, and an independent QP, visited the property

from November 26 to 29, 2012. During the site visit, Ms. Cardenas examined underground

exposures of mineralization, reviewed plans and sections, visited the analytical laboratory on

site and the core shack, and reviewed core logging and sampling procedures. As part of the

data verification process, RPA checked the databases against copies of the assay certificates,

checked a selection of drill hole collars, and reviewed QA/QC data collected by Mandalay.

Details of the data verification conducted by RPA in 2012 are contained in RPA (2012). The

principal data verification findings of the RPA (2012) report are summarized as follows:

• 20% of 2012 assay records in the Cerro Bayo drill hole database were checked against original digital assay certificates. All digital data included in the Cerro Bayo mineralized zones were also checked against original logs for discrepancies in collar coordinates, downhole surveys, and lithology records. Questionable drill holes were removed from the final database. No significant discrepancies were found.

2013 Rosmery Cárdenas, Senior Geologist with RPA, and an independent QP, visited the property

most recently from January 8 to 10, 2014. During the site visit, Ms. Cárdenas examined

underground exposures of mineralization for the Yasna, Fabiola, Dagny, Bianca, and Delia

veins and surface exposures of mineralization at the Raul open pit, reviewed plans and

sections, and visited the analytical laboratory. As part of the data verification process, Ms.

Cárdenas checked the databases against copies of the assay certificates, checked a selection

of drill hole collars, and reviewed QA/QC data collected by Mandalay.

Details of the data verification conducted by RPA in 2013 are contained in RPA (2013). The

principal data verification findings of the RPA (2013) report are summarized as follows:

• 100% of 2013 assay records in the Cerro Bayo drill hole database were checked against original digital assay certificates. All digital data included in the Cerro Bayo mineralized zones were also checked against original logs for discrepancies in collar coordinates, downhole surveys, and lithology records. No significant discrepancies

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were found. A few minor database errors were corrected prior to the resource estimation work. Some discrepancies in drill hole collar coordinates with respect to the topography were confirmed through a visual comparison of the drill hole vein intersection location with underground mapping and channel samples, and collar coordinates were deemed unreliable. In such cases, RPA gave more weight to the underground data over the drill hole data.

CURRENT WORK In 2014, Rosmery Cardenas, Senior Geologist with RPA, and an independent QP, checked

the databases against copies of the assay certificates, checked a selection of drill hole collars

and drill hole core photos, and reviewed QA/QC data collected by Mandalay.

RPA checked 90% of 2014 assay records in the Cerro Bayo drill hole database against original

digital assay certificates. All digital data included in the Cerro Bayo mineralized zones were

also checked against original logs for discrepancies in collar coordinates, downhole surveys,

and lithology records. RPA queried the database for unique headers, unique samples,

duplicate holes, overlapping intervals, blank and zero grade assays, and long interval sample.

RPA did not identify any significant discrepancies but noted a few minor database errors such

as missing lithology records, incorrect vein flag codes, overlapping intervals, a few differences

between database assay values and certificate assay values, and a small number of duplicated

sample numbers, however, these inconsistencies were corrected prior to the resource

estimation work.

Some discrepancies in drill hole collar coordinates with respect to the topography were found.

These discrepancies were confirmed through a visual comparison of the drill hole vein

intersection location with underground mapping and channel samples, and collar coordinates

were deemed unreliable. In the cases where such discrepancies were identified, RPA gave

more weight to the underground data over the drill hole data. RPA recommends that Mandalay

review drill holes with collar coordinates that do not correspond to the topographic surface.

RPA also reviewed the minimum dilution thickness for the resource and diluted vein models.

There were some discrepancies, however, they were corrected prior to the resource estimation

work.

RPA recommends:

• Validating all core and channel sample data prior to entry into the master database.

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• Building a relational database and creating queries to validate data.

• Sampling all core intervals immediately adjacent to mineralization, as undersampling

of a few mineralized “shoulders” was noted. These unsampled intervals should also be reviewed after assays have been returned.

• Ensuring that each sample has a unique sample number.

• Carrying out and documenting data verification programs annually particularly in the new exploration areas where there is a significant amount of historical data.

• Developing a wireframe modelling procedure which includes wireframe model validation.

QUALITY ASSURANCE AND QUALITY CONTROL Quality assurance (QA) consists of evidence to demonstrate that the assay data has precision

and accuracy within generally accepted limits for the sampling and analytical method(s) used

in order to have confidence in a resource estimate. Quality control (QC) consists of procedures

used to ensure that an adequate level of quality is maintained in the process of collecting,

preparing, and assaying the exploration drilling samples. In general, QA/QC programs are

designed to prevent or detect contamination and allow assaying (analytical), precision

(repeatability), and accuracy to be quantified. In addition, a QA/QC program can disclose the

overall sampling-assaying variability of the sampling method itself.

PREVIOUS WORK 2009 - 2010 Details of the QA/QC program conducted by CSA in 2009 are contained in Sims (2010) and

are summarized here. Samples collected in 2009 were assayed at the CMCB facilities in

Laguna Verde. Quality control procedures included routine check assays of sample pulps and

duplicate pulps prepared from coarse rejects, and the use of blanks and standards.

Six in-house standards were prepared for use by the CMCB laboratory at Cerro Bayo and used

during 2009. Results were considered generally acceptable, except for standards STD-2001-

1 and Std-4, which returned values beyond accepted failure limits at the primary laboratory. A

systematic bias was identified in standard STD-2001-1 where gold results were reported above

the expected value, with a 9.3% failure rate. Standard Std-4 returned silver values below the

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expected value, with a 28.5% failure rate. The reason for the failures could not be identified

and CSA discontinued the use of both standards.

Blank samples were originally collected from barren core, then from a large silica replacement

body located in the southeast area of the Cerro Bayo district. No contamination was detected

from routine insertion of blanks in the sample stream, with the exception of three samples with

silver contamination. Whole batches containing the contaminated blanks were re-assayed.

The re-assayed samples returned results within expectations, but one blank failed a second

time, due to contamination during sample preparation.

Approximately 5% of pulp duplicates and preparation duplicates (rejects) were sent to ALS

Chemex Chile (ALS) (ISO 9001), in Santiago, Chile for verification. ALS results for both the

pulp duplicates and preparation duplicates indicated a high relative error in gold values below

0.7 g/t Au. At higher grades, the relative errors were within accepted industry standards.

2011 RPA reviewed results from Mandalay’s internal laboratory QA/QC program undertaken from

January to October 2011 (Casanga, 2011). The following points summarize the principal

QA/QC findings:

• Mandalay generated six property specific standards which were inserted into the overall sample streams, including core, underground channel and grab samples, concentrate, and environmental samples, at a rate of approximately one in 10 samples. Results for the six standards are generally within acceptable limits, with a small percentage of failures.

• The grades for the six in-house reference standards in use in 2011 covered the range of expected results, and were appropriate for use in Mandalay’s internal laboratory QA/QC program.

• Mandalay’s QA/QC protocol called for blanks to be inserted in the sample stream at a rate of approximately one in 20 samples. The results indicated minimal evidence of contamination, drift, or tampering.

• Approximately 10% of the pulp samples were re-assayed. The pulp duplicate results

for gold and silver showed good precision.

• Pulp samples from approximately 5% of the core samples and 2% of the channel samples were sent to an outside laboratory for referee check assays. ALS Patagonia S.A. (ALS), in Santiago, Chile, was used as the referee laboratory, and is accredited to the ISO 17025 Standard by Certificate number 949. The mine and ALS assay results showed good correlation and confirmed that the mine laboratory gold and silver assays were reliable with no significant biases evident.

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2012 RPA reviewed results from Mandalay’s internal laboratory QA/QC program undertaken from

January to October 2012 and found that the overall QA/QC results support the integrity of the

databases (RPA, 2012).

The following points summarize the principal findings of the RPA (2012) report:

• Mandalay generated six property specific in-house standards which were inserted into the sample stream. The standards cover the range of expected results and are generally within acceptable limits, with a small percentage of failures.

• Mandalay started the insertion of five CRMs in 2012, however, more data is needed before meaningful conclusions can be made.

• Mandalay’s QA/QC protocol called for blanks to be inserted in the sample stream at a rate of approximately one in 20 samples. The results indicated minimal evidence of contamination, drift, or tampering.

• A total of 8% of the pulps were re-assayed. The pulp duplicate results for gold and

silver showed good precision.

• Pulp samples from approximately 5% of the core samples and 2% of the channel samples were sent to ALS for referee check assays. The mine and ALS assay results showed good correlation and confirmed the mine laboratory gold and silver assays were reliable with no significant biases evident.

The 2012 RPA recommendations included the following:

• The establishment of a QA/QC program that is “blind” to the laboratory and implemented by the Geology production and exploration personnel. This involved the insertion of CRMs, blanks, and duplicates that are unknown to the laboratory, as a check on the accuracy and precision of the sample results.

2013 RPA reviewed results from Mandalay’s internal laboratory QA/QC program for 2013 and found

that the overall QA/QC results support the integrity of the databases (RPA, 2013).

The following points summarize the principal findings of the RPA (2013) report:

• Mandalay generated six property specific in-house standards which were inserted into the sample stream. The standards cover the range of expected results and are generally within acceptable limits, with a small percentage of failures.

• Mandalay uses five different CRMs developed and certified by CDN Resources Laboratories Ltd. (CDN). RPA recommended the addition of a high grade silver CRM.

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• Mandalay’s QA/QC protocol called for blanks to be inserted in the sample stream at a rate of approximately 1 in 20 samples. No failures identified for Au and Ag.

• Approximately 11% of the pulps were re-assayed. The pulp duplicate results for gold

and silver showed good precision.

• Pulp samples from approximately 2% of mine production and 5% of drill samples were sent to ALS for referee check assays. The mine and ALS assay results showed good correlation and confirmed the mine laboratory gold and silver assays were reliable and accurate.

• Mandalay established a QA/QC program that involves the insertion of CRMs, blanks,

and duplicates unknown to the laboratory, at a rate of approximately one in 30 samples in drill hole and channel samples, as recommended in RPA 2012 report. Drill hole samples: • Mandalay inserted three different property specific in-house standards. Results for

the three standards are generally within acceptable limits with a small percentage of failures.

• Mandalay submitted coarse and fine blank samples. One failure for gold and three failures for silver were recorded. The impact of these blank failures is considered to be of no consequence due to the low grades reported but they indicate that a minor sample contamination problem exists.

• The duplicates results for gold are not representative as the majority of the results are low grade values close to the detection limit. RPA recommended selecting field duplicates that are representative of the mineralization silver and gold grade ranges.

Channel samples: • Mandalay decided to review the sampling procedure for taking channel sample

duplicates, as preliminary results showed poor precision. RPA agreed with Mandalay’s plan to review the channel sampling and channel sampling duplicate procedures.

• Mandalay submitted coarse and fine blank samples. No failures were reported.

CURRENT WORK INTERNAL LABORATORY QA/QC RPA reviewed results from Mandalay’s internal laboratory QA/QC program undertaken from

January to December 2014. Details are documented in Mandalay’s QA/QC report (Casanga,

2014) and summarized in the following sections. The figures have been provided by Mandalay

and are documented in Mandalay’s QA/QC report.

IN-HOUSE REFERENCE MATERIAL Mandalay inserted eight property specific standards into the overall sample streams, including

core, underground channel and grab samples, concentrate, and environmental samples, at a

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rate of approximately one in 10 samples. A total of 3,061 standards were inserted for a total

insertion rate of 14.9%. The in-house standards are not certified and their expected values

and standard deviations (SD) are listed in Table 12-1.

In RPA’s opinion, the in-house standard grades cover the range of expected results, and are

appropriate for use in Mandalay’s internal laboratory QA/QC program.

TABLE 12-1 EXPECTED VALUES AND RANGES OF STANDARDS Mandalay Resources Corporation – Cerro Bayo Project

Standard Au Results Ag Results Number of

Assays Au (g/t) SD Ag (g/t) SD REL-01 0.25 0.03 32 1.15 182 REL-02 0.25 0.03 29 1.73 820 FDD-04 0.35 0.05 63 1.60 319 FDD-06 0.45 0.06 90 2.70 222 FDD-05 1.87 0.07 316 3.67 804 FDD-03 7.82 0.25 1,740 10.4 137 FDD-07 9.57 0.22 1,225 14.1 384 STD-02 73.6 2.47 10,605 81.8 193

From Mandalay (2014)

Specific pass/fail criteria are determined from the standard deviation provided for the standard

reference samples. The conventional approach to setting reference standard acceptance

limits is to use the mean assay ±2 standard deviations as a warning limit and ±3 standard

deviations as a failure limit. Results falling outside of the failure limit must be investigated to

determine the source of the erratic result, either analytical or clerical.

RPA reviewed the results returned from the standard reference samples. The following graphs

in Figure 12-1 were prepared by Mandalay, which illustrate the gold and silver assay results

compared to the in-house standard grades. Results for the eight standards are generally within

acceptable limits with a small percentage of failures. The results confirm that the mine

laboratory gold and silver assays are accurate and no significant biases are evident.

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FIGURE 12-1 IN-HOUSE STANDARD RESULTS – 2014

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BLANKS The regular submission of blank material is used to assess potential contamination during

sample preparation and to identify sample numbering errors. Mandalay’s QA/QC protocol

called for blanks to be inserted in the sample stream at a rate of approximately one in 20

samples.

Mandalay submitted 377 blank samples of which there were no failures for gold or silver. RPA

considered an assay as failure if the result was higher than ten times the detection limit (DL)

of the method of analysis (for Au DL=0.1 g/t and for Ag DL=2 g/t). Results of the blanks are

illustrated in Figure 12-2 with Mandalay’s internal action threshold set at approximately 2.5

times the detection limits. In RPA’s opinion, the results of the blanks are within acceptable

limits and the data can be used for resource estimation purposes.

FIGURE 12-2 BLANK ASSAYS RESULTS – 2014

PULP AND REJECT DUPLICATES Duplicates help assess the natural local-scale grade variance or nugget effect and are also

useful for detecting sample numbering mix-ups. The duplicates help monitor the grade

variability as a function of both sample homogeneity and laboratory error.

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The Thompson-Howarth (T-H) precision plot can be used to compare results for the three

duplicate types (field duplicates, reject duplicates, and pulp duplicates). The field duplicates

are expected to have the lowest precision, followed by the coarse reject duplicates. The pulp

duplicates are expected to have the best precision as they are the finest grain size and are the

most homogenized.

RPA received the results from 854 (5.8%) coarse reject duplicate pairs and 1,465 (8.1%) pulp

duplicate pairs for silver and gold. Figures 12-3 to 12-6 illustrate the results of the duplicate

pairs. Statistics for the duplicates results are shown in Table 12-2 for silver and in Table 12-3

for gold.

For silver, the precision for coarse reject duplicates is approximately 3.8% at 300 g/t and the

precision for the pulp duplicates is approximately 1.6% at 300 g/t (Figure 12-5). For gold, the

precision for the coarse reject duplicates is approximately 6.9% at 3 g/t and the precision for

the pulp duplicates is approximately 4.7% at 3 g/t (Figure 12-6).

The sample duplicates have good correlation coefficients for silver and the relative standard

deviation (RSDs) range from 3% to 1% in the duplicates. The sample duplicates have good

correlation coefficients for gold and the RSDs range from 8% to 4%, which is very good for

gold mineralization.

In RPA’s opinion, the duplicate results indicate that the analytical procedures for gold have

very good precision and results are well within acceptable limits.

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TABLE 12-2 SUMMARY STATISTICS FOR SILVER DUPLICATES Mandalay Resources Corporation – Cerro Bayo Project

Pulp Reject Original Duplicate Original Duplicate

Number of Samples > DL (N) 1,465 1,465 854 854 Mean Assay 463.26 463.11 411.04 412.12 Maximum Assay 21,150 21,244 15,060 14,915 Minimum Assay 1.00 1.00 1.00 1.00 Median Assay 132.15 131.73 75.33 75.65 Variance 1,433,037 1,431,736 1,457,081 1,458,041 Standard Deviation 1,197 1,197 1,207 1,207 Coefficient of Variation 2.58 2.58 2.94 2.93 Correlation Coefficient 1 1 RSD 1% 3% % Difference Between Means 0.032% -0.26%

TABLE 12-3 SUMMARY STATISTICS FOR GOLD DUPLICATES Mandalay Resources Corporation – Cerro Bayo Project

Pulp Reject Original Duplicate Original Duplicate

Number of Samples > DL (N) 1,465 1,465 854 854 Mean Assay 3.36 3.37 2.80 2.81 Maximum Assay 150.93 152.82 123.72 125.54 Minimum Assay 0.10 0.12 0.05 0.05 Median Assay 1.33 1.32 0.85 0.86 Variance 60.93 61.35 56.77 57.40 Standard Deviation 7.81 7.83 7.53 7.58 Coefficient of Variation 2.32 2.33 2.69 2.70 Correlation Coefficient 1 0.999 RSD 4% 8% % Difference Between Means -0.3% -0.4%

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FIGURE 12-3 PULP DUPLICATE RESULTS - 2014

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FIGURE 12-4 REJECT DUPLICATE RESULTS - 2014

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FIGURE 12-5 PRECISION CURVES FOR SILVER DUPLICATES

FIGURE 12-6 PRECISION CURVES FOR GOLD DUPLICATES

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CERTIFIED REFERENCE MATERIAL Weekly QA/QC checks using five different CRMs were performed on site. The CRMs were

developed and certified by CDN and their expected values and standard deviations (SD) are

listed in Table 12-4.

In RPA’s opinion, the low and moderate grades ranges are covered by CRMs and the results

are appropriate for use in Mandalay’s internal laboratory QA/QC program.

TABLE 12-4 EXPECTED VALUES AND RANGES OF CERTIFIED REFERENCE MATERIAL



Assays Au (g/t) SD Ag (g/t) SD CDN-ME-1101 0.56 0.04 68 2.00 118 CDN-ME-5 - - 206 3.81 88 CDN-ME-1206 2.61 0.12 274 5.74 90 CDN-GS-5J 4.90 0.20 73 2.15 98 CDN-ME-1302 2.41 0.14 419 6.17 40 CDN-GS-40 40.0 0.96 - - 62

RPA reviewed the results returned from the CRMs. The graphs in Figure 12-7 illustrate the

gold and silver assay results compared to acceptable limits of ±3 standard deviations. Results

for CRMs are generally within acceptable limits with a small percentage of failures. The control

charts show small positive gold biases for CRMs CDN-ME-1101 CDN-GS-5J for gold and

CDN-GS-40 for silver. A small negative silver bias is visible in the control charts for CDN-ME-

1101 and CDN-GS-5J. These should continue to be monitored on an ongoing basis.

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FIGURE 12-7 CERTIFIED REFERENCE MATERIAL RESULTS – 2014

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EXTERNAL CHECK ASSAY PROGRAM Mandalay selected 2% of mine production sample pulps and 5% of drill sample pulps to send

to ALS for referee check assays. The results for silver gave a correlation coefficient of 1, which

is very good, and the secondary laboratory averages are only 0.1% lower than the primary

laboratory. For gold, the results gave a correlation coefficient of 0.998, which is also very good,

and the secondary laboratory averages are only 0.1% lower than the primary laboratory (Figure

12-8). RPA is of the opinion that the external check assays confirm that the mine laboratory

gold and silver assays are accurate.

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FIGURE 12-8 CHECK RESULTS - 2014

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DRILL HOLE SAMPLE “BLIND” QA/QC Mandalay established a QA/QC program that involves the insertion of CRMs, blanks, and

duplicates unknown to the laboratory, at a rate of approximately one in 30 samples, as

recommended in the RPA 2012 report.

IN-HOUSE REFERENCE MATERIAL Mandalay inserted three property specific standards into the overall core sample stream, at a

rate of approximately one in 30 samples. A total of 155 standards were inserted. One standard

was removed from the dataset due to possible mislabelling. The in-house standards are not

certified and their expected values and standard deviations (SD) are listed in Table 12-5.

TABLE 12-5 EXPECTED VALUES AND RANGES OF STANDARDS Mandalay Resources Corporation – Cerro Bayo Project


Assays Au (g/t) SD Ag (g/t) SD High Grade 5.15 0.3 1,050 9.4 36

Moderate Grade 2.7 0.10 470 5.3 53 Low Grade 0.60 0.07 105 2.07 65

From Mandalay (2013)

The following control charts were prepared by Mandalay (Figure 12-9). Results for the three

standards are generally within acceptable limits with a small percentage of failures. A small

negative bias was identified in the high standard for silver. These should be monitored on an

ongoing basis.

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FIGURE 12-9 BLIND QA/QC - IN-HOUSE REFERENCE MATERIAL

BLANKS Mandalay submitted coarse and fine blank samples. RPA considered an assay a failure if the

result was higher than ten times the DL of the method of analysis (for Au DL=0.1 g/t and for

Ag DL=2 g/t). No failures for gold and three failures for silver were recorded (Figure 12-10).

The impact of these blank failures is considered to be of no consequence due to the low grades

4.37

4.57

4.77

4.97

5.17

5.37

5.57

5.77

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

Au g/t

Nº Control

Control Estándar 2014 Estándar Alta ley ( 5.15 g/t Au )

Valor Recomendado Límite Inferiror Límite Superiror Control

1020

1030

1040

1050

1060

1070

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

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Nº Control

Control Estándar 2014 Estándar Alta ley ( 1050 g/t Ag )

Valor Recomendado Límite Inferiror Límite Superior Control

2.40

2.50

2.60

2.70

2.80

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Au g/t

Nº Control

Control Estándar 2014 Estándar media ley ( 2.7 g/t Au )

Valor Recomendado Límite Inferiror Límite Superiror Control

450

460

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0 10 20 30 40 50

Ag g/t

Nº Control

Control Estándar 2014 Estándar media ley ( 470 g/t Ag )

Valor Recomendado Límite Inferiror Límite Superior Control

0.30

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0.70

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0.90

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Au g/t

Nº Control

Control Estándar Mayo-Junio 2014 Estándar baja ley ( 0.6 g/t Au )

Valor Recomendado Límite Inferior Límite Superiror Control

90

95

100

105

110

115

120

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Ag g/t

Nº Control

Control Estándar Julio 2014 Estándar baja ley ( 105 g/t Ag )

Valor Recomendado Límite Inferior Límite Superior Control

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reported but they indicate that a minor sample contamination problem exists. In RPA’s opinion,

the results of the blanks are within acceptable limits and the data can be used for resource

estimation purposes.

FIGURE 12-10 BLIND QA/QC - BLANK ASSAYS

FIELD DUPLICATES RPA reviewed the results from 39 field core duplicate pairs for silver and gold. Statistics for

the duplicates results, after the removal of four silver outliers, are shown in Table 12-6 for silver

and gold.

0.00

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Au g/t

Nº Control

Control Blanco fino 2014 ( 0.1 g/t Au )

Treshold Blankl

0

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Ag g/t

Nº Control

Control Blanco fino 2014 ( 2 g/t Ag )

Treshold Blank

0.00

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Control Blanco Grueso 2014 ( 0.1 g/t Au )

Treshold Blank

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Ag g/t

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Control Blanco Grueso 2014 ( 2 g/t Ag )

Treshold Blank

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The duplicates results for silver and gold are not representative as the majority of the results

are low grade values close to the detection limit. RPA recommends selecting field duplicates

that are representative of the mineralization silver and gold grade ranges.

TABLE 12-6 SUMMARY STATISTICS FOR FIELD DUPLICATES Mandalay Resources Corporation – Cerro Bayo Project

Silver Gold Original Duplicate Original Duplicate

Number of Samples > DL (N) 39 39 39 39 Mean Assay 6.16 6.58 0.12 0.12 Maximum Assay 52.24 74.88 0.40 0.63 Minimum Assay 2.00 2.00 0.10 0.10 Median Assay 2.00 2.00 0.10 0.10 Variance 131.79 239.99 0.01 0.01 Standard Deviation 11.48 15.49 0.08 0.10 Coefficient of Variation 1.86 2.35 0.60 0.78 Correlation Coefficient 0.863 0.818 RSD 90% 32% % Difference Between Means -6.9% 0.7%

CHECK SAMPLES Mandalay selected 83 sample pulps and sent to ALS for referee check assays. The results for

silver gave a correlation coefficient of 0.998, which is very good, and the secondary laboratory

averages are only 1.9% higher than the primary laboratory (Figure 12-11). For gold, after the

removal of one outlier, the results gave a correlation coefficient of 0.998, which is also very

good, and the secondary laboratory averages are only 1.9% higher than the primary laboratory

(Figure 12-12). RPA is of the opinion that the mine laboratory gold and silver assays meet

industry standards.

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FIGURE 12-11 SILVER CHECK RESULTS 2014

FIGURE 12-12 GOLD CHECK RESULTS 2014

CHANNEL SAMPLE “BLIND” QA/QC Mandalay established a QA/QC program that involves the insertion of blanks and duplicates

unknown to the laboratory, at a rate of approximately one in 30 samples, as recommended in

the RPA 2013 report.

0

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0 1000 2000 3000 4000 5000 6000 7000

ALS

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ry F

ield

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ect (

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/t)

CMCB LaboratoryField Assay (Ag g/t)

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ALS

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ield

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/t)

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BLANKS Mandalay submitted coarse blank samples. RPA considered an assay as a failure if the result

was higher than ten times the DL of the method of analysis (for Au DL=0.1 g/t and for Ag DL=2

g/t). No failures exist (Figure 12-13).

In RPA’s opinion, the data can be used for resource estimation purposes.

FIGURE 12-13 BLIND QA/QC - BLANK ASSAYS

FIELD DUPLICATES Mandalay takes channel duplicate samples by grabbing a chip sample with a geological

hammer. The sampling process attempts to create channel samples that are approximately

20 cm x 10 cm x length of the sample and the resampling is carried out in the face of the

channel. Mandalay allows for a maximum difference of 30% between the duplicate samples.

The results from this methodology display great variation for both metals, silver and gold, with

more than 10% of the samples outside of the tolerance limits.

Mandalay investigated two different sampling methodologies, sampling with mallet and chisel

(thirty samples) and sampling with a jackhammer (nine samples), to obtain more

representative results and to have better understanding of the precision levels. The results

available to date are not representative due to the low number of samples analyzed. Mandalay

0

5

10

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20

25

0 10 20 30 40 50 60

Ag g/t

Nº Control

Control Blanco Grueso 2014 ( 2 g/t Ag )

Threshold Blank

0.00

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1.00

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Au g/t

Nº Control

Control Blanco Grueso 2014( 0.1 g/t Au )

Threshold Blank

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will continue tests until a more representative population is obtained. RPA concurs with

Mandalay’s plan to continue reviewing the channel sampling and channel sampling duplicate

procedures.

QA/QC RECOMMENDATIONS RPA’s QA/QC recommendations are as follows:




• Continue to review the channel sampling and channel sampling duplicate procedures.

In summary, the methods used by Mandalay meet standard industry practices and no

significant discrepancies were identified during the verification process.

RPA considers that the drill hole and underground channel databases are valid and are

suitable for use in Mineral Resource estimation at Cerro Bayo.

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13 MINERAL PROCESSING AND METALLURGICAL TESTING METALLURGICAL TESTING Metallurgical testing was carried out by CMCB in 2008 on samples from the Dagny and Fabiola

vein systems, the objectives of which were to assess the floatability and hardness of the

mineralization samples. In all, 16 composite samples were taken as listed in Table 13-1. The

reference report is entitled “Informe Pruebas Flotacion Minerales Veta Dagny” completed in

May 2008.

TABLE 13-1 COMPOSITE ORE SAMPLES Mandalay Resources Corporation – Cerro Bayo Project

Sample Description Sample Weight (g)

Estimated Grade (g/t Au Eq)

Dagny (No. 1) 11,910 1-3.99 Dagny (No. 2) 120,030 4-5.99 Dagny (No. 3) 9,760 6-9.99 Dagny (No. 4) 12,610 >10.0 Dagny Norte (No. 1) 2,500 1-3.99 Dagny Norte (No. 2) 500 4-5.99 Dagny Norte (No. 3) 3,770 6-9.99 Dagny Norte (No. 4) 3,930 >10.0 Lazo Dagny (No. 1) 4,350 1-3.99 Lazo Dagny (No. 2) 3,370 4-5.99 Lazo Dagny (No. 3) 1,240 6-9.99 Lazo Dagny (No. 4) 8,690 >10.0 Fabiola (No. 1) 9,910 1-3.99 Fabiola (No. 2) 7,740 4-5.99 Fabiola (No. 3) 8,290 6-9.99 Fabiola (No. 4) 10,450 >10.0

The samples were taken from drill core and assayed at the Laguna Verde laboratory. Results

are listed in Table 13-2.

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TABLE 13-2 SAMPLE GRADES Mandalay Resources Corporation – Cerro Bayo Project

Sample Description Au Assay (g/t)

Ag Assay (g/t)

Equiv. Grade (g/t Au Eq)

Dagny (No. 1) 1.1 84.0 2.6 Dagny (No. 2) 2.1 137.0 4.6 Dagny (No. 3) 3.4 332.0 9.4 Dagny (No. 4) 3.3 879.0 19.3 Dagny Norte (No. 1) 1.1 62.0 2.2 Dagny Norte (No. 2) 0.0 0.0 0.0 Dagny Norte (No. 3) 1.1 237.0 5.4 Dagny Norte (No. 4) 4.2 592.0 15.0 Lazo Dagny (No. 1) 0.7 52.0 1.6 Lazo Dagny (No. 2) 1.0 203.0 4.7 Lazo Dagny (No. 3) 0.0 0.0 0.0 Lazo Dagny (No. 4) 5.1 897.0 21.4 Fabiola (No. 1) 0.6 101.0 2.4 Fabiola (No. 2) 1.0 203.0 4.7 Fabiola (No. 3) 2.7 258.0 7.4 Fabiola (No. 4) 3.8 690.0 16.3

The samples were screened through a six-mesh sieve. A 900 g portion of each sample was

taken to provide a total of approximately 14 kg, which was sent to an external laboratory for

hardness tests. To compare the hardness of the Dagny and Fabiola material, a second sample

from the Cerro Bayo veins was sent to SGS Lakefield Research Chile S.A. The rest of the

material was processed in the Cerro Bayo laboratory. Finally the sample was passed through

a sieve to produce 100% passing 10 mesh, with each sample properly mixed, quartered to

provide one kilogram samples for flotation tests and 0.30 kg samples for chemical analysis.

The parameters used for all of the samples were as follows:

• Grinding to 70% -200 mesh. • Time of grind 35 minutes. • Solids percentage 60% (by wt.). • Flotation time 15 minutes. • MIBC (20 g/t), Aerofloat P-3477 (40 g/t), Amil Xanthate (40 g/t). • Conditioning time 10 minutes.

Results of the hardness testing returned the following results:

• Cerro Bayo Bond Work Index (18.9 kWh/t) • Dagny Bond Work Index (15.8 kWh/t)

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The flotation testing results are presented in Table 13-3 below.

TABLE 13-3 FLOTATION TEST RESULTS Mandalay Resources Corporation – Cerro Bayo Project

Sample Head Grade Recovery Conc.

Ratio (RC)

Conc. Grade Grind -200M

% Au (g/t) Ag (g/t) Au

% Ag %

Au (g/t)

Ag (g/t)

Dagny No. 1 Test 1 1.0 90.2 87.6 86.7 11.8 9.0 714.0 70.0 Dagny No. 1 Test 2 0.8 86.5 91.0 80.4 17.5 11.9 1,007.0 69.8 Dagny No. 2 Test 1 2.3 151.9 91.9 86.3 9.5 18.7 1,118.0 71.5 Dagny No. 2 Test 2 2.1 151.4 93.5 87.5 12.5 22.7 1,469.0 70.8 Dagny No. 3 Test 1 3.3 344.7 94.5 91.8 9.5 27.9 2,791.0 69.0 Dagny No. 3 Test 2 3.2 344.3 97.9 92.9 10.3 29.9 3,100.0 70.8 Dagny No. 4 Test 1 3.2 888.5 88.7 91.3 8.7 20.9 6,353.0 71.3 Dagny N No. 1 Test 1 0.8 44.1 86.8 91.8 6.6 4.0 243.0 68.5 Dagny N No. 3 Test 1 2.8 248.1 89.6 89.1 6.6 15.3 1,312.0 71.0 Dagny N No. 4 Test 1 4.6 593.1 91.7 89.6 9.3 34.5 4,355.0 71.3 Lazo Dagny No. 1 Test 1 0.8 63.3 90.5 92.0 16.0 10.3 849.0 68.0 Lazo Dagny No. 2 Test 1 1.3 222.2 94.9 91.3 10.6 12.5 1,963.0 68.5 Lazo Dagny No. 4 Test 1 5.2 921.4 96.5 95.9 6.6 32.1 5,922.0 72.0 Lazo Dagny No. 4 Test 2 6.3 1,090.5 97.5 96.9 6.3 37.5 6,398.0 70.0 Fabiola No. 1 Test 1 0.8 112.8 84.7 90.7 7.1 4.2 638.0 69.5 Fabiola No. 1 Test 2 0.6 102.1 88.8 86.8 16.2 7.6 1,167.0 72.0 Fabiola No. 2 Test 1 1.0 190.7 95.1 93.7 6.4 5.1 987.0 71.3 Fabiola No. 2 Test 2 1.0 196.6 93.1 92.8 10.1 9.3 1,724.0 70.3 Fabiola No. 3 Test 1 2.3 248.6 94.3 87.6 10.2 21.4 2,022.0 69.0 Fabiola No. 3 Test 2 2.8 271.8 95.8 89.8 9.9 24.3 2,122.0 72.0 Fabiola No. 4 Test 1 3.7 679.0 88.3 93.5 10.0 27.5 5,744.0 73.0 Fabiola No. 4 Test 2 4.2 702.7 88.9 92.0 11.8 38.1 6,889.0 72.0

The conclusions drawn from the test work were as follows:

• In general, the mineralized material lends itself to the flotation milling process.

• The hardness of the mineralized material is similar for the tests performed.

• The Fabiola samples produced a finer product after 30 minutes of grinding.

• The samples from Dagny and Fabiola indicated a Bond Work Index of 15 kWh/t while Cerro Bayo samples indicated a higher Bond Work Index of 17 kWh/t.

• The lower hardness of the Dagny and Fabiola mineralized material will result in lower energy consumption under operating conditions.

• In general, the higher the head grade, the higher the recovery.

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• Compared to the historical plant operating data, the gold head-grade and recovery relationship is similar and the silver recovery was slightly lower than the historical data.

• The higher gold recoveries were found to be in the range of 69% to 71% minus 200 mesh size, while the higher silver recoveries were approximately 71% minus 200 mesh.

• With a larger number of samples, it would be possible to investigate the grinding size, type, and combination of reagents and kinetic test to optimize recoveries.

• Automation of the flotation system (FloatStar) to improve recoveries was engineered and completed in 2012 and implemented in 2013.

• The capital investment for the tailings dam lift of two metres will be carried out in 2014.

GENERAL The Cerro Bayo processing plant has a daily capacity of 1,650 t producing approximately 25 t

of concentrate with grades of 70 g/t Au to 120 g/t Au and 10,000 g/t Ag to 13,000 g/t Ag. The

process is simple, consisting of crushing, primary grinding in a semi-autogenous (SAG) mill,

classification in hydrocyclones, secondary grinding in a ball mill, flotation, thickening, filtration,

and concentrate storage. The mill presently draws from three stockpiles (high, medium, and

low grade ore), and a loader feeds the mill hopper based on the grades to provide an average

feed grade to the mill.

The FloatStar System for automation has resulted in an increase in recovery of almost 1%

since it was put on stream. This system, coupled with a new programmable control system

(PLC) system, has improved recovery and plant operations by providing immediate response

to any required adjustments and operators are extremely pleased with the system.

INSTRUMENTATION AND CONTROL The plant utilizes an Allen Bradley SLC 500 PLC in the control room. Status of the operations,

from the coarse ore bins to the filtering of the final concentrate, including the water recycling

is indicated on the controller. All systems are displayed including the instrumentation, control

loops, and the electrical distribution system.

The atomization of the plant will add level sensors in the floatation, pressure gauges, density

meters, and two blue star online analyzers. The programs MillStar and FloatStar will be

installed for grind and float optimization.

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CRUSHING The plant stockpiles receive muck from the underground via 25 t trucks. A loader feeds the

crusher hopper that feeds the 42 in. by 48 in. Allis Minerals jaw crusher (200 HP). The crusher

product is 80% minus six inches that discharges onto a 900 mm belt that delivers the ore to a

1,500 t storage silo.

GRINDING The ore is fed via two Skako vibrating feeders to a belt with a weightometer that controls the

weight delivered to the 18 ft by 9.25 ft SAG mill (Marcy/Allis Minerals) operating with a 1,340

HP (1,000 kW) motor.

The ball charge occupies 12% of the internal mill volume and the ball sizes are made up of

30% of five inch balls and 70% of four inch balls. The mill is equipped with an internal

recirculation trammel that returns material over 10 mm in size. The minus 10 mm fraction goes

to a pump box and is fed to the ball mill circuit. A Warman 8 in. by 6 in. pump, of hardened

steel pumps the slurry to a bank of four Warman cyclones each 381 mm (15 in.) for

classification. The cyclones can function individually via control valves to maintain operating

requirements.

The discharge from the hydrocyclones (oversize) is fed to the 11.5 ft by 18.0 ft ball mill

(Marcy/Allis Minerals) that is driven by a 1,340 HP motor, and is subjected to the secondary

grind. The ball mill operates with a load of 38% of 2.5 in. balls.

The final product of the grinding circuit is 70% minus 200 mesh (74 µm) which is fed to the

flotation circuit.

FLOTATION The final product from the grinding circuit feeds the conventional flotation circuits consisting of

the following stages: roughers, scavengers, cleaners, and columns. There is a column cell

that is used for “flash” flotation to recover coarsely liberated gold and silver, into a flotation

concentrate that can be sent directly to the final concentrate. The rougher/scavenger circuit

consists of seven 14.2 m³ Wemco cells with a residence time of 28 minutes, which generates

a low grade concentrate of approximately 30 g/t Au and 1,500 g/t Ag. The product from the

rougher/scavenger feeds the cleaner circuit consisting of six conventional Agitair cells with

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4.25 m³ capacity each and a column cell 10 m high by 1.10 m in diameter to produce a final

grade of 80 g/t Au to 120 g/t Au and 10,000 g/t Ag to 13,000 g/t Ag. The rougher/scavenger

tails do not contain commercial value and are pumped to the tailing facility for storage. The

tails are fed through a group of six hydrocyclones of six inch diameter (Warman) to thicken the

tails and the water, containing residual reactants, is recycled to the process, in order to

minimize use of fresh makeup water.

There is an automatic sampler at the final grinding product stage that feeds the rougher

flotation circuit, at the final concentrate and at the final waste stream. The samples are sent

to the laboratory for analysis for use in the metallurgical balance and to manage plant

performance.

REACTANTS There is an area dedicated to the preparation of reactants, storage, and distribution for different

areas in the circuits. The reactants utilized in the process include Potassium Amil Xanthate

(x-350) collector and Aerofloat A-3477, Methyl Isobutyl Carbinol (MIBC) frother. The two

collectors are prepared in a 5% solution and the MIBC is fed in pure form.

THICKENING The final concentrate is approximately 25% solids, which is increased to 60% solids via a nine

metre diameter thickener and to promote sedimentation and solid-liquid separation, Superfloc

A-110 flocculant is used.

FILTERING The thickened concentrate is pumped to a surge tank 3.5 m in diameter by 5.2 m high where

the contents are agitated prior to filtration via Larox filters (one operating and one standby

unit). The filter has a surface area of 6.2 m² and operates automatically with batch cycles

every eight minutes, producing a concentrate with 8% to 9% humidity. The filtered concentrate

is stored and then transported by company owned trucks to the port of Chacabuco, Chile where

it is loaded onto ships for delivery to the clients.

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TAILINGS Tailings are pumped to the tailing facility located nearby. Water from the tailings facility is then

recycled to the plant for reuse. The tailings dam was raised to the 318 m elevation during

2014 and is scheduled to be lifted a further two metres in 2016.

MAJOR EQUIPMENT A list of major equipment in the processing plant is shown in Table 13-4.

TABLE 13-4 PROCESS PLANT - MAJOR EQUIPMENT LIST Mandalay Resources Corporation – Cerro Bayo Project

Item Size Description Qty. HP

Crushing Plant Apron Feeder 48” x 20” Stephen-Adamson 1 10 Jaw Crusher 42” x 48” Allis Chambers 1 200 Conveyor 1 36” x 6’ 1 2 Conveyor 2 36” x 10.5’ 1 15

Conveyor-Silo 36” x 107’ 1 30 Conveyor-SAG 36” x 79” 1 15 Coarse Ore Bin 1,500 t Vibrating Feeder Skako 2 1.5 Grinding Circuit

SAG Mill 18’ x 9.25’ Svedala 1 1,341 Ball Mill 11.5’ x 18.0’ Svedala 1 1,341

Cyc. Feed Pump 8” x 6” Warman 1+1 150 Cyclones D-15 Warman 2+2 -

Spiral Classifier 42” 1 10 Flotation Circuit Flash Flotation 150 ft³ Wemco 2 40 Rougher Flot. 500 ft³ Wemco 5 40

Scavenger Flot. 500 ft³ Wemco 4 40 Cleaner 1 Flot. 150 ft³ Agitair 2 30 Cleaner 2 Flot. 150 ft³ Agitair 2 30 Cleaner 3 Flot. 150 ft³ Agitair 4 30

Column Flotation 42” x 33’ 1 Dewatering Cir. Conc. Thickener 30’ Dia. Envirotech 1 2

Conc. Filter 67 ft² Larox 2 5+15 Compressor 36L x 15 Bar Atlas Copco 2 50

Mandalay’s silver and gold recovery assumptions are based on the metallurgical test work and

the actual plant recoveries. In general, the test samples from Dagny and Fabiola cover a wide

range of grades that are representative of the mineralization at Cerro Bayo. There are no

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known processing factors or deleterious elements that have a significant impact on the gold

and silver recoveries. The actual silver and gold recoveries for 2014 were 92% and 89%,

respectively (Table 13-5). The actual silver and gold recoveries were higher than the budget

values of 90% and 87%, respectively (Table 13-6). Both silver and gold production were 4%

over budget, which is associated with the better recoveries and higher grades processed.

TABLE 13-5 PRODUCTION SUMMARY - ACTUAL 2014 Mandalay Resources Corporation – Cerro Bayo Project

Description Units Jan. Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

Ore tonnes milled dry t 28,649 32,952 43,068 36,495 37,786 40,015 42,228 12,164 44,799 46,808 41,144 46,322 452,429

Grade Ag g/t 258 239 257 223 231 241 274 278 306 250 252 293 259

Au g/t 1.5 2.1 1.9 2.1 2.4 2.0 2.2 2.8 2.3 2.0 2.6 2.7 2.19

Contained Metal Ag Oz 237,438 252,771 356,340 261,751 280,869 310,472 371,397 108,871 440,813 376,160 333,828 436,184 3,766,893

Au Oz 1,338 2,229 2,632 2,515 2,896 2,635 2,949 1,094 3,291 2,955 3,392 3,957 31,883

Recovery Ag % 91% 91% 91% 90% 89% 91% 93% 92% 93% 93% 93% 92% 92%

Recovery Au % 85% 87% 88% 87% 86% 88% 90% 91% 89% 91% 90% 89% 89%

Tonnes Concentrate t 578 604 902 603 684 713 950 288 1,092 1,025 857 1,086 9,383

Concentrate grade Ag g/t 11,663 11,807 11,191 12,182 11,417 12,260 11,284 10,876 11,619 10,591 11,218 11,468 11,440

Au g/t 61.6 99.9 80.1 113.1 113.2 100.7 87.2 107.2 83.7 81.2 111.3 101.0 94

Metal produced Ag Oz 216,694 229,430 324,455 236,318 251,048 281,104 344,758 100,700 408,046 349,154 308,937 400,335 3,450,979

Au Oz 1,144 1,941 2,324 2,194 2,490 2,309 2,664 992 2,939 2,677 3,065 3,527 28,266

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TABLE 13-6 PRODUCTION SUMMARY - BUDGET 2014 Mandalay Resources Corporation – Cerro Bayo Project

Description Units Jan. Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

Ore tonnes milled dry t 33,577 34,232 42,110 42,057 42,037 42,401 42,147 42,159 42,023 42,009 42,047 42,016 488,815

Grade Ag g/t 244 216 259 253 262 257 196 249 228 230 226 197 235

Au g/t 2.37 1.78 1.90 2.12 2.31 2.26 1.82 2.19 2.02 1.74 1.63 1.67 1.98

Contained Metal Ag Oz 263,274 238,026 350,211 341,476 354,076 350,089 265,465 337,719 307,744 310,322 305,109 265,705 3,689,216

Au Oz 2,563 1,964 2,574 2,866 3,117 3,085 2,472 2,968 2,735 2,352 2,203 2,252 31,150

Recovery Ag % 90% 89% 90% 90% 90% 90% 89% 90% 90% 90% 90% 89% 90%

Recovery Au % 87% 86% 88% 88% 88% 88% 86% 87% 87% 87% 87% 86% 87%

Tonnes Concentrate t 640 575 851 833 858 857 659 811 750 750 738 657 8,977

Concentrate grade Ag g/t 11,525 11,508 11,560 11,502 11,596 11,475 11,163 11,671 11,442 11,544 11,531 11,209 137,728

Au g/t 109 92 83 94 99 98 100 100 98 85 80 91 1,129

Metal produced Ag Oz 236,982 212,867 316,185 307,961 319,855 316,029 236,361 304,211 276,063 278,419 273,485 236,589 3,315,007

Au Oz 2,242 1,695 2,258 2,512 2,741 2,710 2,118 2,596 2,375 2,041 1,908 1,928 27,125

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Page 14-1 Mandalay Resources Corporation – Cerro Bayo Project, Project #2366 Technical Report NI 43-101 – March 13, 2015

14 MINERAL RESOURCE ESTIMATE PROJECT SUMMARY RPA prepared updated Mineral Resource estimates for the Yasna, Fabiola, Dalila, Coyita

(including Coyita NW and SE), Dagny and Delia NW veins, and estimated Mineral Resources

for the Kasia vein, all located in the Laguna Verde area. The estimate for Delia SE, which is

also located in the Laguna Verde area, has remained unchanged since the December 31,

2012 estimate (RPA, 2013). The estimates for Trinidad, Raul, and Marcela Sur, located in the

Cerro Bayo area, have remained unchanged since the December 31, 2013 (RPA, 2014). The

Mineral Resources are constrained by underground vein models for reporting purposes.

Mandalay provided drill hole and density databases, lithology and mineralization wireframes,

as well as supporting documentation to RPA for use in resource estimation. Mineralized vein

models were interpreted and wireframed by Mandalay.

The Qualified Person for the Cerro Bayo Mineral Resource estimate is Rosmery Cardenas

MAusIMM CP (Geo.), Senior Geologist with RPA. The effective date of the estimate is

December 31, 2014.

The Cerro Bayo Mineral Resource estimate, inclusive of Mineral Reserves, is summarized in

Table 14-1.

TABLE 14-1 SUMMARY OF MINERAL RESOURCES INCLUSIVE OF MINERAL RESERVES – DECEMBER 31, 2014


Category Tonnes Au

Grade Ag

Grade AgEq Grade (g/t)

Au Ounces

Ag Ounces

Ag Eq Ounces

(000) (000) (g/t) (g/t) (000) (000) Measured 310 2.63 315 472 26 3,143 4,707 Indicated 1,685 3.28 323 519 178 17,525 28,132 Total M+ I 1,995 3.18 322 512 204 20,668 32,839 Inferred 585 2.26 218 353 43 4,112 6,647

Notes:

1. CIM definitions were followed for Mineral Resources.

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2. Mineral Resources are estimated at a cut-off grade of 150 g/t AgEq. The AgEq was calculated using the formula AgEq = Ag + (Au x 59.69) where Ag and Au are in grams per tonne after transport, treatment, and refining costs are deducted.



The Mineral Resource estimate and classification are in accordance with the CIM (2014)

definitions incorporated in NI 43-101.


marketing, political, or other factors that could materially affect the Mineral Resource estimate.

RESOURCE DATABASE The drill hole database was provided by Mandalay in Vulcan Isis format and comprises drill

hole collar coordinate data, drill hole collar azimuth and dip data, lithology, vein data, and

sample interval and assay data for the Yasna, Fabiola, Coyita, Dagny, Delia NW, Trinidad,

Kasia, Raul, and Marcela Sur veins.

Numerous underground channel samples were collected by Mandalay in 2011, 2012, 2013,

and 2014 from the Dagny, Fabiola, Dalila, Yasna, and Delia NW veins, and previously by

Coeur from the Fabiola and Marcela Sur veins, and surface channel samples for Raul vein.

Channel sample databases were provided by Mandalay in Isis format (Vulcan software) for the

Yasna, Dalila, Dagny, Fabiola, Delia NW, Raul and Marcela Sur veins, and comprise channel

name, channel sample number, sample start and end location data, and assay data. The

channel sample databases were converted into drill hole databases for use in interpretation

and resource estimation.

The effective date of the Cerro Bayo databases used by RPA is January 19, 2015. The Cerro

Bayo drill hole and channel sample databases are listed in Table 14-2.

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TABLE 14-2 RESOURCE DATABASES Mandalay Resources Corporation – Cerro Bayo Project

Vein No. of Drill Holes

No. of Core Samples No. of Channels No. of Channel

Samples Coyita NW 75 274 - - Coyita SE 31 143

Dagny 147 572 2,274 3,879 Dalila 75 172 323 510

Delia NW 336 1,244 1,759 4,454 Delia SE 127 628 - - Fabiola 154 471 2,281 3,884 Yasna 133 428 1,542 2,405

Trinidad 101 188 - - Kasia 17 44 - -

Marcela Sur 128 489 693 1,840 Raul 136 569 616 1,725

Drill hole and channel sample databases were compared to identify any significant differences

with respect to data type in areas where both drill holes and channels are located in the Dagny

and Fabiola veins. Results are shown in Figures 14-1 to 14-4.

In RPA’s opinion, there is some difference between data types in the upper parts of the Dagny

and Fabiola veins based on statistical analyses and a visual check in Vulcan. This is due to

high grade zones defined by the channel samples that generally were not intersected in the

exploration drill holes, however, RPA reviewed the reconciliation using both databases and

determined that both databases were suitable for use in resource estimation.

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FIGURE 14-1 FABIOLA AU GRADE COMPARISON

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FIGURE 14-2 FABIOLA AG GRADE COMPARISON

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FIGURE 14-3 DAGNY AU GRADE COMPARISON

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FIGURE 14-4 DAGNY AG GRADE COMPARISON

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WIREFRAME MODELS Mandalay provided a topographic surface and preliminary wireframe solid models for the

individual Yasna, Fabiola, Coyita NW, Coyita SE, Dagny, Delia NW, and Kasia veins.

Mandalay generated the preliminary wireframe models using Vulcan.

The topographic surface was generated from detailed topographic surveys conducted by

Coeur and Mandalay surveyors from 1994 to 2011.

Intrusive dikes and post mineral units intersecting the Coyita NW, Coyita SE, Yasna, Delia

NW, and Fabiola veins were modelled based on lithology and structure from surface and

underground mapping, and drill hole data.

RPA refined the preliminary wireframe models provided for the Coyita NW, Coyita SE, Dagny,

Delia NW, Fabiola, Yasna, Trinidad, and Kasia veins based on drill hole and channel sample

data. Polylines were digitized on section lines spaced approximately 20 m apart across

individual veins and tied to logged drill hole intervals, using a minimum thickness of 1.2 m.

Some surface drill holes with unreliable collar coordinates were ignored in the generation of

wireframe solids. Vein intersections of these drill holes were then manually flagged to be

associated with each respective wireframe. Vein models are shown in Figures 14-5 and 14-6.

RPA recommends review and revision of the vein models as new data become available prior

to the next resource update.

As requested by Mandalay, diluted vein wireframe solids were generated by Mandalay and

reviewed and adjusted by RPA for the Yasna, Fabiola, Coyita NW, Coyita SE, Dagny, and

Delia NW, using a minimum thickness of 2.4 m, and a minimum dilution width of 0.2 m on each

side of the vein for use in Mineral Reserve estimation.

Mandalay generated Vulcan long sections of mined out areas, based on underground surveys

conducted by Mandalay surveyors. RPA generated solid models from the longitudinal

sections, which were removed from the final vein and diluted vein models.

270,500 E 271,000 E 271,500 E 272,000 E 272,500 E

4,8

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4,8

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270,500 E 271,000 E 271,500 E 272,000 E 272,500 E

Fabiola

Kasia

Coyita NW

Coyita SE

Yasna

Dalila

Dagny

Delia SE

Delia NW

Trinidad

0 100 500

Metres

200 300 400

N

March 2015

Vein Models in Lagunas VerdeArea Showing Drill Holes

Cerro Bayo Mine



Figure 14-5

14-9

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Marcela Sur

Raul

280,0

00 E

0 100 500

Metres

200 300 400

N

March 2015

Cerro Bayo Project



Marcela Sur and RaulVein Models in Cerro Bayo Area

Showing Drill Holes

Figure -14 6

1 04-1

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ASSAY STATISTICS The resource wireframes for the Yasna, Fabiola, Dalila, Coyita NW, Coyita SE, Dagny, Delia

NW, Delia SE, Trinidad, and Kasia veins contain a total of 4,164 assay intervals from 1,196

drill holes, and 15,132 channel assays from 8,179 channels. A total of 1,058 assay intervals

from 264 drill holes and a total of 3,565 channel assays from 1,309 channels are included in

the Raul and Marcela Sur resource wireframes. Sample statistics of the assayed information

are shown in Figures 14-7 to 14-10.

FIGURE 14-7 AG BOX PLOT AND ASSAY STATISTICS – LAGUNA VERDE AREA

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FIGURE 14-8 AU BOX PLOT AND ASSAY STATISTICS - LAGUNA VERDE AREA

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FIGURE 14-9 AG BOX PLOT AND ASSAY STATISTICS - CERRO BAYO AREA

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FIGURE 14-10 AU BOX PLOT AND ASSAY STATISTICS – CERRO BAYO AREA

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GRADE CAPPING Capping levels were determined for raw assays for individual mineralization domains prior to

compositing in order to limit the influence of high grade outliers. All assays located inside each

mineralization wireframe were combined to determine an appropriate capping level for each

mineralized zone. Table 14-3 lists the capping levels determined for each sample type and

vein. Histograms, probability, percentile, and cutting curve plots were used, with examples

shown in Figures 14-11 to 14-13.

TABLE 14-3 GRADE CAPPING LEVELS Mandalay Resources Corporation – Cerro Bayo Project

Vein Sample Type

Capping Level

No. Capped Assays

No. Uncapped

Assays

Capping Level

No. Capped Assays

No. Uncapped

Assays (Au g/t) (Ag g/t) Trinidad DDH 15 4 184 1,000 3 185

Kasia DDH 10 1 43 700 1 43 Coyita NW DDH 15 5 269 2,500 3 271 Coyita SE DDH 30 7 136 3,000 5 138

Dagny DDH 30 5 567 3,000 3 569 CHN 40 33 3,761 5,000 53 3,741

CHN - HG 50 1 84 10,000 6 79

Dalila DDH 20 5 167 2,500 3 169 CHN 40 7 503 5,000 6 504

Delia NW DDH 30 12 1,232 3,000 11 1,233 CHN 50 35 4,419 5,000 31 4,423

Delia SE DDH 40 11 617 4,000 10 618

Fabiola DDH 20 9 462 3,000 9 462 CHN 40 33 3,851 5,000 61 3,823

Yasna DDH 10 5 356 3,000 3 358

DDH - UL 10 2 65 700 2 65 CHN 20 28 2,377 5,000 40 2,365

Marcela Sur DDH 15 7 482 3,000 4 485 CHN 40 8 1,717 4,000 20 1,705

Raul DDH 20 5 564 2,000 7 562 CHN 20 8 1,832 3,000 4 1,836

HG: High grade envelope, UL: Under the lake zone

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FIGURE 14-11 FABIOLA AG HISTOGRAM – CHANNEL SAMPLES

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FIGURE 14-12 FABIOLA AG PROBABILITY PLOT – CHANNEL SAMPLES

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FIGURE 14-13 FABIOLA VEIN CHANNEL SAMPLES - AG CUTTING CURVE

COMPOSITES Run-length composites across the width of the domains were generated inside the vein domain

wireframes, flagged by mineralization domain. Where the vein wireframe was extended out to

a minimum 1.2 m width, some run-length channel composites were lengthened to extend to

the wireframe width. This occurred where channel samples were not taken across the entire

face width, but were restricted to only the vein, leaving unsampled intervals in the footwall and

hangingwall. Unsampled intervals were replaced with gold and silver grades based on

statistical analyses of assays adjacent to and outside of the original vein models, but inside

the diluted vein models, prior to compositing. All composites located inside underground

mined models were maintained in the resource database. The classical statistics for the final

composites are presented in Figures 14-14 to 14-17.

0.00

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0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0.00 1000.00 2000.00 3000.00 4000.00 5000.00 6000.00 7000.00 8000.00 9000.00 10000.00

Aver

age

Capp

ed G

rade

Percent Metal Loss and Average Capped Grade - Ag

Metal Loss Average grade

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FIGURE 14-14 AG BOX PLOT AND COMPOSITE STATISTICS - LAGUNA VERDE AREA

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FIGURE 14-15 AU BOX PLOT AND COMPOSITE STATISTICS - LAGUNA VERDE AREA

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FIGURE 14-16 AG BOX PLOT AND COMPOSITE STATISTICS – CERRO BAYO AREA

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FIGURE 14-17 AU BOX PLOT AND COMPOSITE STATISTICS – CERRO BAYO AREA

BLOCK MODEL PARAMETERS For the current Mineral Resource estimate, RPA generated rotated seam block models for the

1) Yasna vein, 2) Fabiola vein, 3) Coyita NW vein, 4) Coyita SE vein, 5) Dagny vein, 6) Delia

NW vein, 7) Dalila vein, and 8) Kasia vein using Maptek Vulcan version 9.0.1 software. Block

models were constructed along individual vein orientations. The final block dimensions were

controlled by the vein domain wireframes and have variable vein widths and are one metre

high by one metre along strike.

For the Delia SE vein, RPA generated seam block model in 2012 using Maptek Vulcan 8.1.4.

For the Trinidad, Marcela Sur, Raul Norte, and Raul Sur veins, RPA generated seam block

model in 2013 using Maptek Vulcan 8.2.3. The block models were not updated because no

new drilling has been carried out at these veins. Block model parameters are listed in Table

14-4.

TABLE 14-4 BLOCK MODEL PARAMETERS Mandalay Resources Corporation – Cerro Bayo Project

Vein/Block Model

Azimuth (X)

Origin Length (m) Parent Block Size (m) Sub-block Size (m) X Y Z X Y Z X Y Z X Y Z

Yasna 45° 271,947 4,840,640 -100 200 1,400 500 200 1 1 0.1 1 1 Fabiola 45° 271,654 4,840,905 -10 150 1,000 390 150 1 1 0.1 1 1 Dalila 55° 271,267 4,840,830 30 300 700 350 300 1 1 0.1 1 1

Coyita NW 50° 271,920 4,840,871 -150 500 1,200 550 500 1 1 0.1 1 1 Coyita SE 60° 272,082 4,840,411 -150 500 550 550 500 1 1 0.1 1 1

Dagny 45° 271,478 4,840,382 -50 300 740 380 300 1 1 0.1 1 1 Delia NW 33° 271,471 4,840,197 -90 300 1,120 390 300 1 1 0.1 1 1 Delia SE 25° 272,021 4,840,038 -45 250 620 320 250 1 1 0.1 1 1 Trinidad 25° 271,690 4,840,110 0 120 900 300 120 1 1 0.1 1 1 Kasia 50° 272,049 4,840,644 -80 60 700 350 60 1 1 0.1 1 1

Marcela Sur 70° 280,003 4,840,516 10 400 1,500 450 400 1 1 0.1 1 1 Raul Norte 73° 280,321 4,839,555 328 150 780 210 150 1 1 0.1 1 1 Raul Sur 109° 280,277 4,839,465 328 70 155 230 70 1 1 0.1 1 1 w

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DENSITY Coeur evaluated the densities of all major veins in the Fachinal District. A total of 270 samples

were tested for density determinations, resulting in an average density of 2.64 t/m3 (Sims,

2010).

RPA reviewed 253 density determinations taken by Coeur from 55 holes drilled in the Delia

NW and Delia SE veins in 2009. Most samples were taken from inside these major veins, and

along most of the strike length of the veins. Results ranged from 2.42 t/m3 to 3.55 t/m3,

averaging 2.63 t/m3. It is unknown how the bulk densities were determined. Mandalay has

not undertaken additional density determinations.

RPA is of the opinion that the density determinations are acceptable for use in resource

estimation, as the average is comparable to other similar quartz vein deposits. RPA

recommends taking additional density samples specific to individual veins in order to identify

local variations and to confirm and support future resource estimates. RPA also recommends

developing a standard operating procedure for in-house density determinations and

implementing some outside checks on the density determinations to support and confirm in-

house results.

GRADE ESTIMATION Gold and silver grades were estimated for each block using the inverse distance cubed (ID3)

method. Domain models were used as hard boundaries to limit the extent of influence of

composite grades within the domains.

RPA constructed a variogram model using channel composites located inside the Dalila,

Dagny, Fabiola, Yasna, Delia NW, Marcela Sur, and Raul veins. Suitable variograms could

not be generated for other individual domain models due to either the small number of

contained sample composites or the presence of multiple trends. Similar ranges were

approximated for the Delia SE, Coyita NW, Coyita SE, Kasia, and Trinidad veins based on

visual inspection of grade continuity. Variogram ranges were used to support pass estimation

search ranges for the Dagny, Delia NW and SE, Fabiola, Yasna, Dalila, Coyita NW and SE,

Trinidad, Kasia, Marcela Sur, and Raul veins. A directional variogram example for the Dagny

vein is shown in Figure 14-18.

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FIGURE 14-18 DAGNY VARIOGRAM

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Search directions were determined visually for each domain. In general, isotropic search

ranges in the major and semi-major directions following the trend of the domain models were

applied. There were some veins where the anisotropic search ranges were applied to follow

the trend of the mineralization. Some of the veins were divided into zones (Figures 14-20, 14-

22, 14-23, and 14-26) in order to align the search ellipses to the local strikes and dips. Search

directions and trends are listed in Table 14-5.

TABLE 14-5 VULCAN DOMAIN SEARCH DIRECTIONS Mandalay Resources Corporation – Cerro Bayo Project

Vein Area / General Trend Vulcan Rotation High

Grade Strike Plunge Dip Z rotation

Y rotation

X rotation

Coyita NW Z1 140 -5 -75E 140 -5 75 Z2 140 -10 -70E 140 -10 70

Coyita SE - 150 -35 -70E 150 -35 70

Dagny HG 135 5 -75W 135 5 -75

- 135 -20 -75W 135 -20 -75 Dalila - 145 -5 -70W 145 -5 -70

Delia NW Z1 125 -30 -70E 125 -30 70 Z2 125 0 -70E 125 0 70

Delia SE - 115 0 -65E 115 0 65 Fabiola - 135 -5 -75E 135 -5 75

Yasna Z1 135 -10 -80W 135 -10 -80 Z2 155 -10 -70W 155 -10 -70 Z3 135 -10 -80W 135 -10 -80

Kasia - 140 -15 -80E 140 -15 80 Trinidad - 115 0 -85E 115 0 85

Marcela Sur - 160 0 -60W 160 0 -60 Raul Norte 163 0 -70W 163 0 -70 Raul Sur 20 0 -75E 20 0 75

Z1: Zone 1, Z2: Zone 2, Z3: Zone 3, HG: High grade envelope

All grade estimation passes were made inside a silver equivalent envelope of 120 g/t AgEq

and the last pass outside the envelope. Three grade estimation passes were run for Coyita

NW, Coyita SE, Dalila, Dagny, Delia NW, Delia SE, Fabiola, Yasna, Kasia, Trinidad, Marcela

Sur, and Raul Norte and Raul Sur veins, with increased search ranges used for the second

and third estimations. In Dagny, the first pass was run inside a high grade envelope. A few of

the second pass search ranges used for the minor axes were not increased, as the first pass

search ranges were sufficiently large to include all run-length composites. In Dalila, a high

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yield limit was applied to the composites greater than 10 g/t Au and 1,500 g/t Ag to restrict their

influence to produce high grade lenses with dimensions similar to those observed in the mine.

Estimation flags were stored for all estimation runs based on search distances. The number

of samples was stored in a separate block variable for use in determining resource

classification. Grade estimation parameters are listed in Table 14-6.

TABLE 14-6 GRADE ESTIMATION PARAMETERS Mandalay Resources Corporation – Cerro Bayo Project

Vein Estimation Run

Area

HG/AGEQ Envelope

Search Ranges Number of samples per estimate

Major Axis

Semi-major Axis

Minor Axis

Min. samp/est

Max samp/est

Max samp/dh

Coyita NW

1 Z1

inside AGEQ Env. 50 50 15 2 5 - 2 inside AGEQ Env. 70 70 35 1 6 - 1

Z2

inside AGEQ Env & HG Env 60 40 20 2 5 - 2 inside AGEQ Env & HG Env 120 80 40 1 6 - 1 inside AGEQ Env 60 40 20 2 5 - 2 inside AGEQ Env 120 80 40 1 6 - 3 All zones outside AGEQ Env, 70 70 35 1 6 -

Coyita SE

1 inside AGEQ Env & HG Env 60 40 20 1 5 - 2 inside AGEQ Env & HG Env 120 80 40 1 6 - 1 inside AGEQ Env 60 40 20 1 5 - 2 inside AGEQ Env 120 80 40 1 6 - 3 outside AGEQ Env, 120 80 40 1 6 -

Dalila

1 Z1

inside AGEQ Env 60 50 20 2 5 - 2 inside AGEQ Env 60 50 20 1 6 - 1 Z2 inside AGEQ Env 60 50 20 2 5 - 3 All zones outside AGEQ Env, 60 50 20 1 6 -

Dagny

1 inside AGEQ Env & HG Env 30 50 15 2 5 - 1 inside AGEQ Env. 50 50 15 2 5 - 2 inside AGEQ Env. 100 100 30 1 6 - 3 outside AGEQ Env, 100 100 30 1 6 -

Delia NW

1 Z1

inside AGEQ Env. 70 50 20 2 5 - 2 inside AGEQ Env. 70 60 20 1 6 - 1

Z2 inside AGEQ Env. 70 60 20 2 5 -

2 inside AGEQ Env. 70 60 20 1 6 - 3 All zones outside AGEQ Env, 60 60 20 1 6 -

Delia SE

1 inside AGEQ Env. 50 50 15 2 5 - 2 inside AGEQ Env. 60 60 20 1 6 - 3 outside AGEQ Env. 60 60 20 1 6 -

Fabiola 1 inside AGEQ Env. 70 60 20 2 5 - 2 inside AGEQ Env. 70 60 20 1 6 - 3 outside AGEQ Env 70 60 20 1 6 -

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Vein Estimation Run

Area

HG/AGEQ Envelope

Search Ranges Number of samples per estimate

Major Axis

Semi-major Axis

Minor Axis

Min. samp/est

Max samp/est

Max samp/dh

Yasna

1 Z1

inside AGEQ Env 40 45 15 2 5 - 2 inside AGEQ Env 60 70 30 1 6 - 1 Z2 inside AGEQ Env 80 90 30 1 6 - 2 Z3 inside AGEQ Env 80 90 30 1 6 - 3 All zones outside AGEQ Env. 80 90 30 1 6 -

Kasia 1 inside AGEQ Env 50 50 15 2 5 - 2 inside AGEQ Env 100 100 30 1 6 - 3 outside AGEQ Env. 100 100 30 1 6 -

Trinidad 1 inside AGEQ Env. 50 50 15 2 5 - 2 inside AGEQ Env. 70 70 35 1 6 - 3 outside AGEQ Env. 70 70 35 1 6 -

Marcela Sur


Raul Norte


Raul Sur


Z1: Zone 1, Z2: Zone 2, Z3: Zone 3

Channel and drill hole composites were used to estimate grades in the first run for the Dalila,

Dagny, Fabiola, Yasna, Delia NW, Marcela Sur, and Raul veins. Drill hole composites were

then used in grade estimation for the following runs. The Coyita, Kasia, Delia SE, and Trinidad

veins were estimated using only drill hole composites. Figures 14-19 to 14-30 illustrate the

silver block grades for each vein.

Dilution grades were applied to those blocks located outside the final vein models and inside

the larger diluted vein models. Dilution grades were statistically determined for each diluted

vein based on drill hole assays located only inside the portion of the diluted vein models outside

of the final vein models, and listed in Table 14-7. Diluted vein grades and models were used

only for Mineral Reserves, and not used for reporting Mineral Resources. The resource blocks

were reblocked into the diluted block model. The reblocked grades were assigned based on

volume weighting of the original block grades. An example of the final resource and reserve

seam block models is shown in Figure 14-31.

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TABLE 14-7 DILUTED VEIN GRADES Mandalay Resources Corporation – Cerro Bayo Project

Zone Dilution Grade

(Au g/t) Dilution Grade

(Ag g/t) Dagny 0.15 10

Delia NW 0.18 11 Delia SE 0.18 11 Fabiola 0.13 15 Yasna 0.13 15

Coyita NW 0.14 11 Coyita SE 0.14 11

Dalila 0.10 7 Trinidad 0.14 7

Marcela Sur 0.15 10 Raul Norte 0.2 14 Raul Sur 0.2 14

BLOCK GRADE VALIDATION Visual validation comparing assay and composite grades to block grade estimates showed

reasonable correlation with no significant overestimation or overextended influence of high

grades in all domains.

Average block grades were compared to average composite grades by vein for the Dagny,

Delia NW and SE, Fabiola, Yasna, Dalila, Coyita NW and SE, Kasia, Trinidad, Marcela Sur,

and Raul veins. This visual comparison generally showed good spatial correlation between

composite and block grades.

The vein wireframe volumes are within three percent of the block model volumes reported at

a zero grade cut-off.

The block grades were statistically validated for all veins and no significant discrepancies were

identified.

N

100 m

27

00 E

10

27

00 E

11

300 L

100 L

Drill Hole Trace

Surface

200 L

0 L

Contact Limitwith Bianca

4841000 N

271300 E

271500 E

4840900 N

4840800 N

4840600 N

4840700 N

4840500 N

271100 E

271200 E

Drill Hole Trace

Looking NortheastPLAN VIEW

4840400 N

271600 E

271700 E

271400 E

27

00 E

12

27

00 E

07

27

00 E

08

27

00 E

09

27

00 E

04

27

00 E

05

27

00 E

06

27

00 E

03

27

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02

50 m

Silver Composites (g/t)

< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

Silver Blocks (g/t)

< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

March 2015

Cerro Bayo Project

Dagny VeinAg Block Grades



Figure 1914-

130

4-

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w.rp

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.co

m

PLAN VIEW

N

100 m

ZONE 2

ZONE 1

27

00 E

06

271

00 E

1

271

00 E

2

271

00 E

6

0 L

-100 L

Drill Hole Trace

Drill Hole Trace

Surface

200 L

300 L

27

00 E

20

271

00 E

8

271900 E

271400 E

271500 E

4841800 N

4841600 N

4841700 N

271600 E

271800 E

Looking Northeast

4841500 N

4841300 N

4841400 N

4841200 N

271700 E

272000 E

272100 E

27

00 E

19

27

00 E

22

271700 E

271

00 E

3

271

00 E

4

271

00 E

5

271

00 E

0

27

00 E

09

27

00 E

08

27

00 E

07

27

00 E

05

100 L

27

00 E

21

4841100 N

271300 E

271200 E

50 m


< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

Silver Blocks (g/t)

< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

March 2015

Cerro Bayo Project

Coyita VeinNWAg Block Grades



Figure 2014-

14-3

1

ww

w.rp

acan

.co

m

PLAN VIEW

N

100 m

27

00 E

24

271

00 E

1

271

00 E

2

271

00 E

6

0 L

-100 L

Drill Hole Trace

Drill Hole Trace

50 m

Surface

200 L

27

00 E

20

271

00 E

8

272200 E

272300 E

4841000 N

4840800 N

4840900 N

272400 E

Looking Northeast

4840600 N

27

00 E

19

27

00 E

22

271700 E

271

00 E

3

271

00 E

4

271

00 E

5

271

00 E

0

27

00 E

09

27

00 E

08

27

00 E

07

27

00 E

23

100 L

27

00 E

21

4840700 N

272100 E

272000 E


< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

Silver Blocks (g/t)

< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

March 2015

Cerro Bayo Project

Coyita VeinSEAg Block Grades



Figure 2114-

14-3

2

ww

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m

PLAN VIEWN

100 m

ZONE 2

ZONE 1

484

0N

100

400 L

100 L

Drill Hole TraceSurface

200 L

4840

N800

4840

N900

484

1N

100

484

2N

100

484

4N

100

484

3N

100

484

5N

100

300 L

Looking Northeast

Drill Hole Trace

271100 E

271200 E

4841400 N

4841500 N

271300 E

271500 E

4841300 N

4841100 N

4841200 N

4841000 N

271400 E

4840900 N

271000 E

270900 E

0 L

50 m


< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

Silver Blocks (g/t)

< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

March 2015

Cerro Bayo Project

Dalila VeinAg Block Grades



Figure 14-22

14-3

3

ww

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m

4840700 N

N

100 m

ZONE 2

ZONE 1

270700 E

271000 E

271100 E

200 L

100 L

Drill Hole Trace

Surface

0 L

270800 E

270900 E

271500 E

271400 E

271300 E

271200 E

300 L

50 m

27

11

00

E

27

14

00

E

27

15

00

E

4840800 N

4840600 N

27

16

00

E

27

12

00

E

4840500 N

4840300 N

4840400 N

27

13

00

E

27

10

00

E

27

09

00

E

27

06

00

E

27

07

00

E

27

08

00

E

4841000 N

4840900 N

Looking Northeast

PLAN VIEW

271

00 E

6

270

00 E

4

270

00 E

5

270

00 E

6

270

00 E

2

270

00 E

3

Drill Hole Trace


< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

Silver Blocks (g/t)

< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

March 2015

Cerro Bayo Project

Delia VeinNWAg Block Grades



Figure 2314-

14-3

4

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N

Drill Hole Trace

PLAN VIEW

271600 E

271700 E

271800 E

271900 E Fau

lt

272000 E

272100 E

200 L

100 L

Drill Hole Trace50 m

Surface

0 L

< 50.00000

< 100.00000

< 300.00000

< 500.00000

< 800.00000

< 1500.00000

< 3200.00000

< 99999.00000

Legend: Samples: Ag

0.00000 <=

50.00000 <=

100.00000 <=

300.00000 <=

500.00000 <=

800.00000 <=

1500.00000 <=

3200.00000 <=

< 50.00000

< 100.00000

< 300.00000

< 500.00000

< 800.00000

< 1500.00000

< 3200.00000

< 99999.00000

Legend: Blocks: Ag

0.00000 <=

50.00000 <=

100.00000 <=

300.00000 <=

500.00000 <=

800.00000 <=

1500.00000 <=

3200.00000 <=

March 2015

Cerro Bayo Project

Delia SE VeinAg Block Grades



Figure 14-24

14-3

5

ww

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27

11

00

E

N

100 m

27

10

00

E

27

14

00

E

27

15

00

E

4841000 N

27

12

00

E

27

13

00

E

PLAN VIEW2

74

80

0 E

27

16

00

E

27

17

00

E

4841400 N

4841200 N

4841300 N

4841100 N

4841600 N

4841500 N

200 L

Drill Hole Trace

50 m

Surface

300 L

0 L

271600 E

271

00 E

7

271

00 E

8

271

00 E

9

100 L

Looking Northeast

271

00 E

5

271

00 E

4

271

00 E

3

27

00 E

20

27

00 E

09

271

00 E

0

271

00 E

1

271

00 E

2

27

00 E

08

27

00 E

07

27

00 E

06

27

00 E

05

27

00 E

04

27

00 E

03

Drill Hole Trace


< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

Silver Blocks (g/t)

< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

March 2015

Cerro Bayo Project

Fabiola VeinAg Block Grades



Figure 14-25

14-3

6

ww

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m

N

100 m

ZONE 2

ZONE 3

ZONE 1

300 L

271700 E

200 L

100 L

Drill Hole Trace

50 m

Surface

271

00 E

8

271

00 E

9

0 L

27

14

00

E

4841000 N

272000 E

27

12

00

E

4840900 N

27

13

00

E

274800 E

271900 E

271600 E

271700 E

4841400 N

4841200 N

4841300 N

4841100 N

4841600 N

4841500 N 271500 E

4840800 N

Looking Northeast

271

0 E

40

271

00 E

5

271

00 E

6

271

00 E

1

271

00 E

2

271

00 E

3

27

0 E

080

27

00 E

09

271

00 E

0

27

0 E

040

27

00 E

05

27

0 E

060

27

00 E

07

27

0 E

020

27

00 E

03

27

00 E

20

27

00 E

22

27

00 E

21

-100 L

PLAN VIEW

Drill Hole Trace

4840700 N


< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

Silver Blocks (g/t)

< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

March 2015

Cerro Bayo Project

Yasna VeinAg Block Grades



Figure 614-2

14-3

7

ww

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N

100 m

4841200 N

271900 E

272100 E

4841100 N

4841000 N

4840800 N

4840900 N

271700 E

271800 E

Drill Hole Trace

PLAN VIEW

272200 E

272300 E

272000 E

4840700 N

27

00 E

17

27

00 E

18

300 L

100 L

Drill Hole Trace

Surface200 L

0 L

27

00 E

20

27

00 E

15

27

00 E

16

27

00 E

19

27

00 E

12

27

00 E

13

27

00 E

14

27

00 E

11

27

00 E

10

50 m

27

00 E

21

Looking Northeast


< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

Silver Blocks (g/t)

< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

400 L

-100 L

March 2015

Cerro Bayo Project

Kasia VeinAg Block Grades



Figure 714-2

14-38

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N

100 m

271000 E

271100 E

271200 E

271300 E

271400 E

271500 E

300 L

100 L

Drill Hole Trace50 m

Surface

200 L

Drill Hole Trace

271100 E

271400 E

271500 E

4840400 N

271200 E

4840300 N

271300 E

4840500 N

4840200 N

271600 E

PLAN VIEW

271000 E

Looking Northeast


< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

Silver Blocks (g/t)

< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200March 2015

Cerro Bayo Project

Trinidad VeinAg Block Grades



Figure 814-2

14-3

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200 m

N

27

00 E

98

27

00 E

99

200 E

800

280100 E0 L

200 L

Drill Hole Trace50 mSurface

300 L

Drill Hole Trace

279600 E

280200 E

280400 E

279800 E

4841800 N280000E

270600 E

PLAN VIEW

279400 E

Looking Northeast400 L

100 L

4841000 N

4841200 N

4841400 N

4841600 N

4840800 N

4840600 N

280800 E


< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

Silver Blocks (g/t)

< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

March 2015

Cerro Bayo Project

Marcela Sur VeinAg Block Grades



Figure 914-2

14-4

0

ww

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m

100 m

N

200 E

802

280300 E

500 L

Drill Hole Trace

50 mSurface

300 L

Drill Hole Trace

Raul Norte Block Model

Raul Sur Block Model

280200 E

280300 E

4840200 N

280100 E

280400 E

PLAN VIEW

Looking Northeast

400 L

4839800 N

4839900 N

4840000 N

4840100 N

4839700 N

4839600 N

280500 E

280300 E

280600 E

280700 E

280800 E

280900 E

4839500 N

281000 E

Raul Norte Raul Sur


< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

Silver Blocks (g/t)

< 50

50 - 100

100 - 300

300 - 500

500 - 800

800 - 1,500

1,500 - ,3 200

> 3,200

March 2015

Cerro Bayo Project

Raul VeinAg Block Grades



Figure 3014-

14-4

1

ww

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Resource Block Model Reserve Block Model

Vein Thickness Diluted VeinThickness

0 2 10

Metres

4 6 8

March 2015

Example of Resource andReserve Seam Block Model

Cerro Bayo Project



Figure 3114-

14-42

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RESOURCE CLASSIFICATION The Cerro Bayo Mineral Resource classification complies with the CIM (2014):

A “Measured Mineral Resource” is that part of a Mineral Resource for which quantity, grade

or quality, densities, shape, and physical characteristics are estimated with confidence

sufficient to allow the application of Modifying Factors to support detailed mine planning

and final evaluation of the economic viability of the deposit. Geological evidence is derived

from detailed and reliable exploration, sampling and testing and is sufficient to confirm

geological and grade or quality continuity between points of observation.

An “Indicated Mineral Resource” is that part of a Mineral Resource for which quantity, grade

or quality, densities, shape and physical characteristics are estimated with sufficient

confidence to allow the application of Modifying Factors in sufficient detail to support mine

planning and evaluation of the economic viability of the deposit. Geological evidence is

derived from adequately detailed and reliable exploration, sampling and testing and is

sufficient to assume geological and grade or quality continuity between points of

observation.

An “Inferred Mineral Resource” is that part of a Mineral Resource or which quantity and

grade or quality are estimated on the basis of limited geological evidence and sampling.

Geological evidence is sufficient to imply but not verify geological and grade or quality

continuity.

Resource classification within mineralization domains was primarily based on drill hole spacing

and continuity of grade, and was manually completed. Manual adjustments were made to

eliminate any unusual artifacts generated from the estimation passes.

The classification of the Mineral Resource estimate was applied in the following way:

• Blocks estimated for the Dalila, Dagny, Fabiola, Yasna, Delia NW, and Raul veins during the first estimation pass with a minimum of two composites, with distance to the holes consistently less than 15 m and well established geological and grade continuity, were classified as Measured Resources.

• Blocks estimated for the Dagny, Fabiola, Yasna, Delia NW and SE, Dalila, Coyita NW

and SE, Trinidad, Marcela Sur, and Raul veins with a minimum of one and a maximum of six composites, with a maximum search radius of 30 m, and demonstrating reasonable geological and grade continuity, were classified as Indicated Resources.

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This search range is similar to previous search ranges used for the Indicated Resource classification.

• All blocks completely or partially contained within a wireframe model were assigned a

minimum classification of Inferred. All blocks estimated for Kasia vein were classified as Inferred due to the wide spacing of drill holes.

COMPARISON WITH PREVIOUS RESOURCE ESTIMATES A comparison of the current RPA estimate, inclusive of Mineral Reserves, to the previous 2013

Mineral Resource estimate is presented in Table 14-8. The reasons for the changes are

primarily due to the addition of the new resources through exploration diamond drilling and the

subtraction of material through mining. Also, the Bianca vein has been mined out.

Since the previous Mineral Resource estimate, Mandalay has undertaken surface drilling and

underground channel sampling programs to infill and extend existing mineralization along

strike and at depth, in addition to delineating mineralization in newly discovered veins. This

additional data has increased the extents of the Dagny, Delia NW, Coyita NW, Fabiola, Yasna,

Marcela Sur, and Raul mineralized zones, with resultant increases in Mineral Resource

tonnages, and gold and silver metal content. Mineral Resources were not previously estimated

for the Raul vein.

Closely spaced channel samples were used to estimate Mineral Resources for the Dalila,

Dagny, Fabiola, Delia NW, Yasna, and Raul veins, and confirmed geological and grade

continuity with sufficient confidence for classification as Measured Resources.

Overall, exploration activities have been successful at replacing the Measured and Indicated

material that was mined in 2014 and the Inferred tonnage has increased.

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TABLE 14-8 COMPARISON OF RPA AND PREVIOUS RESOURCE ESTIMATES INCLUSIVE OF MINERAL RESERVES


Resource Class

December 31, 2014 December 31, 2013

Tonnes (000)

Grade Contained Metal Tonnes

(000)

Grade Contained Metal

Au g/t

Ag g/t

Au Ounces

(000)

Ag Ounces

(000) Au g/t Ag g/t

Au Ounces

(000)

Ag Ounces

(000) MEASURED

Yasna 50 2.41 445 4 715 62 2.18 473 4 950 Fabiola 20 2.51 201 2 132 71 2.47 466 6 1,063 Dalila 40 2.56 323 3 416 - - - - - Coyita - - - - - - - - - - Dagny 65 2.97 326 6 686 114 3.89 473 14 1,734 Bianca - - - - - 16 3.59 201 2 105 Delia NW 107 2.83 294 10 1,009 122 5.11 398 20 1,564 Delia SE - - - - - - - - - - Trinidad - - - - - - - - - - Marcela Sur - - - - - - - - - - Raul 27 1.61 214 1 185 25 1.66 220 1 179 Kasia - - - - - - - - - - TOTAL MEASURED 310 2.63 315 26 3,143 411 3.60 423 48 5,596 INDICATED Yasna 65 2.42 354 5 739 60 2.03 278 4 536 Fabiola 22 2.20 129 2 89 55 2.29 155 4 276 Dalila 60 2.86 239 6 462 102 3.09 268 10 879 Coyita 531 2.82 357 48 6,096 286 1.79 296 17 2,724 Dagny 24 2.12 195 2 153 69 2.64 306 6 681 Bianca - - - - - 1 2.47 114 0 2 Delia NW 293 3.06 248 29 2,336 391 3.17 278 40 3,494 Delia SE 274 6.14 470 54 4,138 273 6.15 471 54 4,135 Trinidad 73 3.87 113 9 264 70 3.94 115 9 260 Marcela Sur 254 2.26 328 18 2,675 242 2.32 339 18 2,637 Raul 90 1.92 199 6 572 82 2.01 207 5 549 Kasia - - - - - - - - - - TOTAL INDICATED 1,685 3.28 323 178 17,525 1,633 3.18 308 167 16,172 TOTAL MEASURED AND INDICATED 1,995 3.18 322 204 20,668 2,044 3.26 331 214 21,768 INFERRED Yasna 74 1.70 225 4 533 66 1.99 358 4 759 Fabiola 13 2.75 114 1 49 72 6.53 1264 15 2,926 Dalila 6 2.01 122 0 24 23 1.81 172 1 124 Coyita 140 2.11 321 9 1,442 39 2.88 305 4 380

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Resource Class

December 31, 2014 December 31, 2013

Tonnes (000)

Grade Contained Metal Tonnes

(000)

Grade Contained Metal

Au g/t

Ag g/t

Au Ounces

(000)

Ag Ounces

(000) Au g/t Ag g/t

Au Ounces

(000)

Ag Ounces

(000) Dagny 18 1.38 179 1 101 12 1.20 283 0 109 Bianca - - - - - - - - - - Delia NW 37 3.46 109 4 131 36 3.63 122 4 141 Delia SE 43 4.77 270 7 377 43 4.80 271 7 376 Trinidad 34 2.14 120 2 130 32 2.16 123 2 127 Marcela Sur 119 2.33 173 9 663 111 2.43 178 9 637 Raul - - - - - - - - - - Kasia 102 1.42 202 5 662 - - - - - TOTAL INFERRED 585 2.26 218 43 4,112 433 3.33 400 46 5,580

CUT-OFF GRADE Table 14-9 outlines the parameters used to estimate the 184 g/t AgEq Mineral Reserve cut-off

grade. The 150 g/t AgEq Mineral Resource cut-off grade was estimated using the same

assumptions but higher gold and silver prices of $1,400/oz and $24/oz, respectively. The input

parameters were derived from information provided by Mandalay for smelter terms and actual

mining costs over the last year.

TABLE 14-9 RESERVE CUT-OFF GRADE ASSUMPTIONS Mandalay Resources Corporation – Cerro Bayo Project

Mine Production Tonnes 000 487

Gold Grade g/t 2.0 Silver Grade g/t 216.3

Mill Total Ore Milled Tonnes 000 487 Gold Grade g/t 2.0 Silver Grade g/t 216.3 Recoveries Gold % 89 Silver % 91.5 Concentrate Ag-Au Concentrate dmt 8,236 Concentrate ratio 59.14 Gold Grade g/t 102.79 Silver Grade g/t 11,703

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Revenue Metal Prices Gold US$/oz 1,200 Silver US$/oz 20.00 Contained Au ounces 27,218 Contained Ag ounces 3,098,727 Payable Au % 97.0 Payable Ag % 96.5 Payable Au Metal ounces 26,322 Payable Ag Metal ounces 2,981,300 Gross Value Gold US$000 31,586 Silver US$000 59,626 Total US$000 91,212 Transport Charges Truck US$000 200.00 US$/wmt conc 1,795 Ship US$000 200.00 US$/wmt conc 1,795 Treatment Charges Concentrate US$000 300.00 US$/dmt conc 2,471 Refining Charges Gold in conc. US$000 6.00 US$/oz 158 Silver in conc. US$000 1.00 US$/oz 2,981 Price Participation Base Escalator Silver US$000 20.00 5% - Penalty Charges US$000 In Conc. Units - As+Sb in conc. US$000 3.00 0.00 % - Pb+Zn in conc. US$000 3.00 0.00 % - Hg in conc. US$000 2.00 0.00 ppm - Fe in conc. US$000 3.00 0.00 ppm - Al2O3+MgO in conc. US$000 3.00 0.00 % - Net Smelter Return US$000 82,012 US$/t ore 168.37

NSR Model Factors Net Revenue by Metal Gold % 35.8 Silver % 64.2 Revenue per Metal Unit (NSR Factor) Gold $ per g Au 30.83 Silver $ per g Ag 0.50

Silver Equivalent Factor g Ag per g Au 61.66

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Operating Costs

Underground Mining US$000 51.00 US$/t 24,842 Processing US$000 27.00 US$/t 13,152 G & A US$000 14.00 US$/t 6,819 Total Operating Costs US$000 44,813 US$/t 92.00 US$/g Ag 0.47

Cut-Off Grades Break-Even COG g AgEq 184 Incremental COG g AgEq 82

MINERAL RESOURCE ESTIMATE The Cerro Bayo Mineral Resource estimate, inclusive of Mineral Reserves, is summarized by

domain at a 150 g/t AgEq cut-off grade in Table 14-10.

TABLE 14-10 MINERAL RESOURCES INCLUSIVE OF MINERAL RESERVES BY DOMAIN – DECEMBER 31, 2014


Measured Resources

Category Tonnes

(000)

Au Grade (g/t)

Ag Grade (g/t)

AgEq Grade (g/t)

Au Ounces

(000)

Ag Ounces

(000)

Ag Eq Ounces

(000) Yasna 50 2.41 445 588 4 715 946 Fabiola 20 2.51 201 351 2 132 230 Dalila 40 2.56 323 475 3 416 614 Coyita - - - - - - - Dagny 65 2.97 326 503 6 686 1,059 Delia NW 107 2.83 294 463 10 1,009 1,590 Delia SE - - - - - - - Trinidad - - - - - - - Marcela Sur - - - - - - - Raul 27 1.61 214 310 1 185 268 Kasia - - - - - - - Total 310 2.63 315 472 26 3,143 4,707

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Indicated Resources

Category Tonnes

(000)

Au Grade (g/t)

Ag Grade (g/t)

AgEq Grade (g/t)

Au Ounces

(000)

Ag Ounces

(000)

Ag Eq Ounces

(000) Yasna 65 2.42 354 498 5 739 1,041 Fabiola 22 2.20 129 260 2 89 181 Dalila 60 2.86 239 410 6 462 792 Coyita 531 2.82 357 526 48 6,096 8,974 Dagny 24 2.12 195 322 2 153 252 Delia NW 293 3.06 248 430 29 2,336 4,056 Delia SE 274 6.14 470 836 54 4,138 7,359 Trinidad 73 3.87 113 343 9 264 804 Marcela Sur 254 2.26 328 462 18 2,675 3,771 Raul 90 1.92 199 313 6 572 902 Kasia - - - - - - - Total 1,685 3.28 323 519 178 17,525 28,132

Measured and Indicated Resources

Category Tonnes

(000)

Au Grade (g/t)

Ag Grade (g/t)

AgEq Grade (g/t)

Au Ounces

(000)

Ag Ounces

(000)

Ag Eq Ounces

(000) Yasna 115 2.42 393 537 9 1,454 1,987 Fabiola 42 2.35 164 304 3 221 411 Dalila 100 2.74 273 436 9 879 1,406 Coyita 531 2.82 357 526 48 6,096 8,974 Dagny 90 2.74 290 454 8 839 1,311 Delia NW 400 3.00 260 439 39 3,345 5,646 Delia SE 274 6.14 470 836 54 4,138 7,359 Trinidad 73 3.87 113 343 9 264 804 Marcela Sur 254 2.26 328 462 18 2,675 3,771 Raul 116 1.85 202 312 7 757 1,170 Kasia - - - - - - - Total 1,995 3.18 322 512 204 20,668 32,839

Inferred Resources

Category Tonnes

(000)

Au Grade (g/t)

Ag Grade (g/t)

AgEq Grade (g/t)

Au Ounces

(000)

Ag Ounces

(000)

Ag Eq Ounces

(000) Yasna 74 1.70 225 327 4 533 774 Fabiola 13 2.75 114 279 1 49 120 Dalila 6 2.01 122 242 0 24 47 Coyita 140 2.11 321 447 9 1,442 2,007 Dagny 18 1.38 179 261 1 101 148 Delia NW 37 3.46 109 316 4 131 377 Delia SE 43 4.77 270 555 7 377 775

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Inferred Resources

Category Tonnes

(000)

Au Grade (g/t)

Ag Grade (g/t)

AgEq Grade (g/t)

Au Ounces

(000)

Ag Ounces

(000)

Ag Eq Ounces

(000) Trinidad 34 2.14 120 248 2 130 267 Marcela Sur 119 2.33 173 312 9 663 1,193 Raul - - - - - - - Kasia 102 1.42 202 287 5 662 941 Total 585 2.26 218 353 43 4,112 6,647

Notes:

1. CIM definitions were followed for Mineral Resources. 2. Mineral Resources are estimated at a cut-off grade of 150 g/t AgEq. The AgEq was calculated using the

formula AgEq = Ag + (Au x 59.69) where Ag and Au are in grams per tonne after transport, treatment and refining costs are deducted.




marketing, political, or other factors that could materially affect the estimate of Mineral

Resources.

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15 MINERAL RESERVE ESTIMATE RESERVE ESTIMATION METHODOLOGY The Mineral Reserves were estimated by Mandalay using the RPA resource block model. For

conversion to Mineral Reserves, all Mineral Resources were diluted to a mining width of 2.4

m, and an extraction factor of 95% was applied to the stopes (exclusive of designed crown and

rib pillars). For veins over 2.4 m in width, an additional 0.4 m of dilution was included.

Reserves within drifts were additionally diluted to a minimum thickness of 3.0 m, to which a

zero grade dilution was applied. RPA has reviewed the assumptions and methodology used

in preparation of the Mineral Reserve estimate and is of the opinion that the estimate is

consistent with CIM definitions.

Dilution grades vary from vein to vein. The dilution grades are shown in Table 15-2. Dilution

tonnages, at the dilution grades, were added to the vein tonnages using a weighted average

calculated to determine the final equivalent silver grade of the ore. The AgEq grade is

calculated using the ratio of gold to silver to determine the equivalent ounces of silver, taking

into account the transportation, treatment, and refining costs. An extraction factor of 95% was

then applied to the stopes to arrive at the final reserve tonnage.

An example of the conversion of Mineral Resources to Mineral Reserves for the Yasna Vein

is presented in Table 15-1. The dilution grades and extraction factors are applied to the

resources that are included in the underground level development and stopes. All of these are

summed and reported for each vein.

TABLE 15-1 CONVERSION OF RESOURCES TO RESERVES - YASNA VEIN Mandalay Resources Corporation – Cerro Bayo Project

Mineral Resources (min 1.2 m)

Stope + Drift Dilution (min 2.4 m)

Additional Drift Dilution (min 3.0 m)

Cat. Mass Au Ag Mass Dil. Au Ag Mass Dil. Au Ag Mass Au Ag AgEq t g/t g/t t t g/t g/t t t g/t g/t t g/t

Mineral Reserves Ag AgEq Au g/t g/t oz koz koz

Drift 102N

Meas. 264 2.87 287 547 283 0.13 15 682 135 0.00 0 682 1.16 117 189 26 2.58 4.15 Ind. 804 3.10 278 1,638 834 0.13 15 2,043 405 0.00 0 2,043 1.27 116 194 84 7.59 12.75

102S Meas.

Ind. 1,293 2.90 786 2,574 1,281 0.13 15 3,319 745 0.00 0 3,319 1.18 312 385 126 33.31 41.08 Stope 102N

Meas. 3,372 3.79 358 6,673 3,301 0.13 15 6,339 1.98 189 311 403 38.44 63.32 Ind.

102S Meas. 6,342 2.86 807 11,469 5,127 0.13 15 10,896 1.64 453 554 573 158.64 194.00

Ind. 901 3.25 986 1,738 837 0.13 15 1,652 1.75 518 626 93 27.53 33.24 Proven 9,979 3.19 152 18,689 8,710 0.13 15 682 135 0.00 0 17,917 1.75 349 454 1,002 199.65 261.46

Probable 2,998 3.06 340 5,951 2,952 0.13 15 5,362 1,150 0.00 0 7,014 1.37 318 386 302 68.43 87.07 To LOM 12,977 3.16 198 24,640 11,663 0.13 15 6,044 1,285 0.00 0 24,931 1.66 341 435 1,305 268.08 348.54

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andalay Resources C




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TABLE 15-2 DILUTION GRADES 2014 RESERVES Mandalay Resources Corporation – Cerro Bayo Project

Zone Dilution Grade (Au g/t)

Dilution Grade (Ag g/t)

Dagny 0.15 10 Delia NW 0.18 11 Delia SE 0.18 11 Fabiola 0.13 15

Marcela Sur 0.15 10 Yasna 0.13 15 Coyita 0.14 11 Dalila 0.10 7

Trinidad 0.14 7 Raul Norte 0.20 14 Raul Sur 0.20 14

DILUTION AND EXTRACTION FACTORS The Mineral Resources were reported at the vein width and diluted to an average mining width

of 2.4 m for conversion to Mineral Reserves. The dilution for the development averages 85%

while the stope dilution averages 50%. The Marcela Vein is not included in the dilution

numbers as the reserve was carried forward from the last year. It represents a very small

fraction of the total reserves (less than 3%). An extraction factor of 95% was applied, to

account for various losses.

The drifts in the ore zones are driven at three metres by three metres. The stope design allows

for production drilling to be carried out with an offset of approximately 150 mm from the hanging

wall and footwall contacts of the ore, while the minimum stope width utilized is 2.4 m. For the

stopes wider than 2.4 m, an additional 0.4 m is included for dilution beyond the vein width.

Vein widths for the different zones vary from 1.2 m up to over three metres, with an average

of approximately 1.8 m. Based on observations on site, RPA is of the opinion that the stope

dilution factors indicated above can be significantly lower with careful planning and execution

of drilling and loading operations. Dilution in the development, however, provides less of an

opportunity as a minimum drift width is required to accommodate equipment sizes and

clearance regulations for such equipment.

The Mineral Reserves for the Cerro Bayo Project are listed in Table 15-3.

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TABLE 15-3 MINERAL RESERVES – DECEMBER 31, 2014 Mandalay Resources Corporation – Cerro Bayo Project

VEIN Tonnes

(000) Au

Grade (g/t)

Ag Grade (g/t)

AgEq (g/t)

Au Ounces

(000)

Ag Ounces

(000)

AgEq (000)

Fabiola 28 1.45 121 211 1 108 188 Yasna 66 1.38 258 343 3 548 730 Dagny 89 1.97 212 334 6 610 959 Yasna Sur - - - - - - - Dalila 56 1.70 207 312 3 371 558

Proven Delia NW-1 41 1.86 109 224 2 144 295 Delia NW-2 80 1.92 253 371 5 653 957 Raul 15 1.34 168 251 1 80 119 Subtotal 375 1.74 209 316 21 2,513 3,805 Fabiola 6 2.17 66 200 0 13 39 Yasna 17 1.27 303 382 1 168 212 Dagny 7 1.40 89 176 0 20 40 Yasna Sur 52 1.74 195 303 3 330 511 Dalila 85 1.66 148 251 5 403 682

Probable Delia NW-1 2 0.96 60 119 0 4 8 Delia NW-2 293 2.35 202 347 22 1,898 3,261

Delia SE 411 3.44 272 485 46 3,603 6,411 Marcela 237 1.77 261 370 14 1,991 2,824 Coyita 742 1.81 233 345 43 5,557 8,222 Trinidad 87 2.48 65 218 7 183 612 Raul 95 1.33 124 205 4 378 627 Subtotal 2,035 2.21 222 358 144 14,549 23,450

Proven Fabiola 34 1.58 111 209 2 121 227 and Yasna 83 1.36 267 351 4 717 942

Probable Dagny 96 1.93 203 322 6 630 998 Yasna Sur 52 1.74 195 303 3 330 511 Dalila 140 1.68 172 275 8 774 1,240 Delia NW-1 43 1.81 107 218 3 148 303 Delia NW-2 373 2.26 213 352 27 2,550 4,219 Delia SE 411 3.44 272 485 46 3,603 6,411 Marcela 237 1.77 261 370 14 1,991 2,824 Coyita 742 1.81 233 345 43 5,557 8,222 Trinidad 87 2.48 65 218 7 183 612 Raul 110 1.33 130 212 5 458 747 Total 2,409 2.13 220 352 165 17,062 27,256

Notes:

1. CIM definitions were followed for Mineral Reserves.

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2. Mineral Reserves are estimated at a cut-off grade of 184 g/t AgEq (silver equivalent). AgEq is calculated using the formula AgEq= Ag + (Au x 61.66) where Ag and Au are in grams per tonne. Metal prices for determining cut-off grades were US$1,200/oz Au and $20/oz Ag.

3. Veins are diluted to 2.4 m minimum mining width and a mining extraction factor of 95% was applied to stope tonnages.

4. A bulk density of 2.63 t/m3 was used. 5. Dilution grades vary by vein. 6. Numbers may not add due to rounding. 7. Yasna Sur is the south part of the Yasna vein. Delia NW-1 and Delia NW-2 are parts of Delia NW.

Coyita consists of Coyita NW and Coyita SE.


marketing, political, or other factors that could materially affect the Mineral Reserve estimate.

RECONCILIATION The production for 2014 is shown in Table 15-4.

TABLE 15-4 PRODUCTION RESULTS - 2014 Mandalay Resources Corporation – Cerro Bayo Project

YTD 2014 Item Units Actual Budget Variance Milling Dry Tonnes 452,429 488,815 93% Grade Ag (g/t) 259 235 110% Au (g/t) 2.19 1.98 111% Contained Metal Ag (oz) 3,766,893 3,689,216 102% Au (oz) 31,883 31,150 102% Recovery Ag 92% 90% 102% Au 89% 87% 102% Concentrate Tonnes 9,383 8,977 105% Concentrate Grade Ag (g/t) 11,440 11,486 100% Au (g/t) 93.70 93.98 100% Metal Produced Ag (oz) 3,450,979 3,315,007 104% Au (oz) 28,266 27,125 104%

Table 15-4 indicates very close reconciliation of the planned and actual production results for

2014. Only the processed tonnage was slightly below forecast, with all other metrics above the

budget indicating a high level of accuracy in the forecasting.

Figures 15-1 to 15-11 show the areas of the veins that were mined in 2014 with corresponding

explanatory information for areas that were mined outside of the original plan for the year.

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RPA recommends that reconciliation be completed on a more regular basis. It is

recommended that Mandalay carry out reconciliation each quarter to permit timely adjustments

of the yearly budget plan. This should include reconciling tonnages and grades from stope

operations to the mill production and resource block model as well as confirmation of dilution

factors through use of a cavity monitoring system (CMS).

RPA notes that Mandalay currently maintains up-to-date longitudinal sections of each vein

illustrating the mining completed in order to provide current information on the source of the

resources for reconciliation purposes. RPA agrees with this practice.

NW SE

0 100

Metres

20015050



Cerro Bayo Project

Coyita VeinNWLongitudinal Section

Drilling and Mining Plan


Figure 115-

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Cerro Bayo Project

Coyita VeinSELongitudinal Section



Figure 215-

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Metres

100 150 200



Cerro Bayo Project

Dagny VeinLongitudinal Section



Figure 15-3

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Metres

100 150 200

March 2015 Source 5.: Mandalay Resources Corp., 201


Cerro Bayo Project

Dalila VeinLongitudinal Section



Figure 15-4

10

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NW SE

0 100

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Cerro Bayo Project

Delia NW VeinLongitudinal Section



Figure 15-5

15-1

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NW SE

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Cerro Bayo Project

Delia SE VeinLongitudinal Section



Figure 15-6

15-1

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NW SE

0 50

Metres

100 150 200

March 2015 Source 5.: Mandalay Resources Corp., 201


Cerro Bayo Project

Fabiola VeinLongitudinal Section



Figure 15-7

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200 Z

100 Z

300 Z

NW SE

-100 Z

0 Z

0 100

Metres

20015050



Cerro Bayo Project

Yasna VeinLongitudinal Section



Figure 15-8

15-1

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Cerro Bayo Project

Trinidad VeinLongitudinal Section



Figure 15-9

15-1

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Cerro Bayo Project

Marcela Sur VeinLongitudinal Section



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Cerro Bayo Project

Raul VeinLongitudinal Section



Figure 1115-

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16 MINING METHODS MINE DESIGN AND MINING METHOD The mine design for the Cerro Bayo vein systems includes the main access via 4.0 m by 4.5

m decline ramps because most veins are less than 200 m below surface. The ramps are

typically driven in the footwall of the target vein at a gradient of -12.5%. The ramp arrangement

is shown in Figure 16-1. The access drifts driven from the ramp to the ore are three metres

by three metres as are the access drifts to the ventilation raises. The ground conditions were

very good in all areas visited. During the site visit, RPA inspected the Dagny mine and Fabiola

mine accesses where stoping operations were underway and the Delia mine was visited where

development was underway. All of the portals are located within a radius of one kilometre of

the processing plant. The surface plan is shown in Figure 16-2 illustrating the general plant

layout.

As a result of the very good ground conditions, a longhole mining method is employed although

shrinkage stoping was used in the past by Coeur. Production development includes driving

the drifts on ore at a minimum dimension of three metres by three metres, which is required

for the standard equipment sizes utilized. The appropriate name for the type of stoping method

is “longhole retreat stoping”. The average production rate over the LOM is 1,290 tpd.

Stoping is carried out with the drilling of 54 mm diameter production holes drilled upwards from

the drill drift towards the upper drift. Production drill holes are drilled to within approximately

one metre of breakthrough and stopped at that point in order to avoid blockage of the hole.

Typically, blasting will start at the lateral limit of ore on a particular level and the stope will

advance in a “retreat” fashion towards the main access drift. The drifts on ore are driven in

both directions from the access drift, to provide two production headings from which drilling,

blasting, and mucking operations can take place simultaneously. The stope dimensions, and

method, are shown in Figure 16-3.

The 54 mm production drill holes are drilled close to the vein contact (approximately 150 mm)

and upwards, following the dip of the vein. The final stope width is estimated at 2.4 m based

on an average vein width of 1.2 m. If the vein is wider than 2.4 m, an additional dilution width

of 0.40 m is added when estimating the Mineral Reserves. A typical stope cross section is

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shown in Figure 16-4. The typical drill pattern in narrow stopes is a 2-1-2 pattern with a one

metre burden. In the wider stopes, like those at Delia, fan drilling is used as indicated in Figure

16-5. While the holes are angled to follow the dip of the vein, RPA recommends also that drill

holes be systematically angled into the stope at 70°, providing for safer conditions when

loading the holes with explosives prior to blasting. This is standard practice in many mines

using the smaller diameter longhole drill method.

Longitudinal sections of the Fabiola, Delia, and Dagny veins, with the mining sequence

indicated for 2015 onwards, are shown in Figures 16-6 to 16-8. Typical level intervals are 15

m but can range from 12 m to 15 m. Rib pillars are typically left at approximately 80 m

(vertically) centred along strike. Crown pillars are left at approximately 45 m to 55 m spacing,

horizontally. These pillars are normally referred to as “Sill Pillars” with the Crown pillar

designation reserved for the surface Crown pillar. Raises to “re-slot” are driven conventionally

(by hand) where the rib pillars are left for regional support. The result of stope blasting was

observed underground with excellent ground control noted. Both hanging wall and footwall

contacts were visible with little overbreak beyond the contacts observed. The blasted ore is

mucked by scooptram back to the access drift and loaded into haul trucks for haulage to the

surface stockpile.

Split Set Bolts

4 m

4,5

m

Split Set Bolts

Split Set Bolts

Split Set Bolts Leaky Feeder

Ø1,1 m

Ventilation Duct 110mm

Electric CableCompress Air Line 4"ØWater Line 2"ØPump Line 3"ØPump Line 3"Ø


Cerro Bayo Project

Ramp Dimensions4.0 m x 4.5 m



Figure 16-1

16-3

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SEDIMENTATION BASINS

AREA INSTALLATIONS

EXPLOSIVES

TOP SOILBORROW PIT

PORTALDAGNY

PORTALDELIA

PORTALFABIOLA



PORTALDELIASOUTH

TAILINGS FACILITY

Laguna Verde

Laguna Verde

STOCKPILE

MINESITE

Water Pond312.4

Fresh Water

Acces

sRoa

dto

Min

e

Hydro Line

Future W

all

Hyd

roLine

271,500 E271,750 E 271,000 E 271,250 E270,500 E270,250 E270,000 E

4,8

41,5

00 N

4,8

41,2

50 N

4,8

40,7

50 N

4,8

41,0

00 N

4,8

40,2

50 N

4,8

40,5

00 N

269,750 E2 , 0 E69 502 , 0 E69 252 , 0 E69 00

4,8

41,

0 N

75

4,8

40,

0 N

00

4,8

41,5

00 N

4,8

41,2

50 N

4,8

40,7

50 N

4,8

41,0

00 N

4,8

40,2

50 N

4,8

40,5

00 N

4,8

41,

0 N

75

4,8

40,

0 N

00

271,500 E271,750 E 271,000 E 271,250 E270,500 E270,250 E270,000 E269,750 E2 , 0 E69 502 , 0 E69 252 , 0 E69 00

0 100 500

Metres

200 300 400

N

March 2015 Source: 5Mandalay Resources Corp., 201 .

General Plant Layout

Cerro Bayo Project



Figure 16-2

16

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Rib Pillars(Planned)

Vein

Open Stope(Mined Out) 15.0m

15.0m

15.0mVein

Vein

Open Stope(Mined Out)

Mucking

Rib Pillars

Production Drift 3.0mAccess DriftDrilling

Rai

se

Access Drift

Crown Pillar

Rai

se

Rai

se

Sill Pillar

Production Drift 3.0m


Cerro Bayo Project

Schematic Section of LongholeRetreat Stoping Method



Figure 16-3

16

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1 2 32 31 2 3

Lower Sublevel

Nv. 145. South

Vein

Upper Sublevel

Nv. 160. South

FR

ON

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AC

CE

SS

123

Blasthole Layout Report

Layout : PAR52

Angle : -89.0L : Left R : RightIncline Holes : 1 degreeR6 / R7 PIVOT : 0.65

18 R18 R18 R

0.68 L0.00 R0.71 R

12.1312.0512.25

1010

10 1/4Total Lenght

Hole Distance L/R Angle L/R Lenght Rods

36.43

0 1 5

Metres

2 3 4



Cerro Bayo Project

Dagny MineRegion XI (Aisén), Chile

Production Drilling Cross Section(Typical)

Figure 16-4

16-6

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10

11

12

1314 15

6

7

8

9

1 2 3 4 5

Lower Sublevel

Nv. 176. North

Metres of Hole Loaded

Vein

Upper Sublevel

Nv. 191. North

FR

ON

T

AC

CE

SS

123456789101112131415

Blasthole Layout Report

Layout : PAR.66

Angle : -89.0L : Left R : RightIncline Holes : 1 degreeR6 / R7 PIVOT : 0.65

22 R22 R23 R28 R32 R38 R44 R53 R62 R73 R85 R99 R113 R141 R125 R

1.73 L0.83 L0.06 R0.06 R0.06 R0.06 R0.06 R0.06 R0.06 R0.06 R0.06 R0.06 R0.06 R0.06 R0.06 R

9.909.81

10.2410.8511.639.977.475.684.814.123.433.143.040.952.10

8 1/48 1/48 1/2

99 3/48 1/46 1/44 3/4

43 1/22 3/42 1/22 1/2

3/41 3/4

Total Lenght

Hole Distance L/R Angle L/R Lenght Rods

97.14

0 1 5

Metres

2 3 4



Cerro Bayo Project

Delia NW MineProduction Drilling Cross Section

(Fan Drilling)


Figure 16-5

16-7

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150 m 300 m

100 m

300 m

450 m

200 m

100 m

300 m

200 m

282 Lv

297 Lv

312 Lv

222 Lv

207 Lv

252 Lv

267 Lv

87 Lv

177 Lv

162 Lv

147 Lv

132 Lv

117 Lv

102 Lv

192 Lv

150 m 300 m

Looking Northeast

Surface

237 Lv

750 m600 m

400 m

400 m

450 m

Mined Out Q2 2015Q1 2015 Q4 2015Q3 2015

0 25 100

Metres

50 75

Mined Out Q2 2015Q1 2015 Q4 2015Q3 2015

March 2015 Source: Mandalay Resources, 2015.

Cerro Bayo Project

Fabiola Vein Longitudinal Section(2015-2016 Production)


Alsén Region (XI), Chile

Figure 16-6

16-8

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150 m 300 m

100 m

300 m

450 m

200 m

100 m

300 m

200 m

206 Lv

221 Lv

236 Lv

176 Lv

161 Lv

86 Lv

71 Lv

191 Lv

146 Lv

116 Lv

206 Lv

131 Lv

116 Lv

101 Lv

86 Lv

101 Lv

71 Lv

150 m 300 m

Looking Northeast

191 Lv

176 Lv

161 Lv

146 Lv

131 Lv

221 Lv

236 Lv

Surface

Mined Out Q2 2015Q1 2015 Q4 2015Q3 2015

0 25 100

Metres

50 75


Cerro Bayo Project

Delia NW-N VeinLongitudinal Section

(2015-2016 Production)



Figure 16-7

16-9

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150 m 300 m

100 m

750 m

500 m

600 m

300 m

450 m

200 m

400 m

100 m

500 m

300 m

200 m

400 m

250 Lv

Looking Northeast

Surface

220 Lv

190 Lv

175 Lv

160 Lv

145 Lv

205 Lv

235 Lv

115 Lv100 Lv

130 Lv

70 Lv

55 Lv

85 Lv

150 m 300 m 450 m

0 25 100

Metres

50 75

Mined Out Q2 2015Q1 2015 Q4 2015Q3 2015 2016


Cerro Bayo Project

Dagny Vein Longitudinal Section(2015-2016 Production)



Figure 16-8

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GEOMECHANICS AND GROUND SUPPORT Ground support varies depending on the type of opening. The most recent geomechanical

study was carried out by Sociedad Geoconsultora Ltda. (Geoconsultora), of Chile, in

November 2010. The study was carried out in preparation for development of the Delia vein

system and is titled “Estudio de Diseño Geomecanico Preliminar y Recomendaciones de

Fortificación Proyecto Delia NW”. The geomechanical study included an approach using three

stages to evaluate support requirements. These methods included the following:

1. Support required for the underground openings and evaluation of the stability using

empirical methods, in particular the concept of hydraulic radius (HR). This is done by

determining the “Q” Index by Barton. This index is applied with the determination of

rock mass classification, or Mining Rock Mass Rating (MRMR) by Laubscher. The

results indicated the requirement of Rib Pillars positioned at 80 m horizontal intervals

along the vein structure. Recommended pillar widths were five metres in order to

support an opening twice that of the vein width.

The hydraulic radius is defined as the perimeter of an opening divided by the area of

the opening. A graph showing the relationship of the HR with MRMR is shown in Figure

16-9.

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FIGURE 16-9 STABILITY GRAPH – MRMR VS. HR

Geoconsultora proceeded to carry out testing in the Fabiola and Dagny mines to obtain

data to determine the “Q” factors. This included nine principal mapping areas; five in

Fabiola and four in Dagny. In all, 54 data points were acquired which permitted

determining the factors indicated in Table 16-1.

TABLE 16-1 GEOMECHANICAL CHARACTERISTICS - “Q” (BARTON) VS. MRMR (LAUBSCHER)


Value “Q” MRMR Minimum 1 39 Maximum 67 79 Average 12 59

Using the graph above, it can be determined that, in order to maintain stability of the

stope, a minimum HR of 12 must be maintained. Also considering that the veins dip

from 60° and steeper, analysis indicated that, in order to avoid caving of the

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hangingwall, it was necessary to place rib pillars at 80 m spacing along strike with

possible variances of 10 m to 20 m. Also, the rib pillars should have a width double

that of the width of the vein or five metres.

2. The second stage of the study included refining the results obtained in the initial steps

by applying semi-analytical approximations based on classical solutions of stress

distributions around underground openings. Of special relevance in this phase of the

study was the application of the “K” factor (ratio of in-situ stresses) using a very

conservative figure of 1.4 (maximum). The results are summarized in Tables 16-2 and

16-3 of safety factors for stope heights of 55 m.

TABLE 16-2 STOPE SAFETY FACTOR – WALLS Mandalay Resources Corporation – Cerro Bayo Project

Horizontal Stresses - Stopes 55 m High

Constant K Stress σA Safety Factor 0.5 2.33 20 1.0 1.01 47 1.4 0.004 12.83

TABLE 16-3 STOPE SAFETY FACTORS - ROOF Mandalay Resources Corporation – Cerro Bayo Project

Roof (Back) Stresses - Stopes 55 m High

Constant K Stress σB Safety Factor 0.5 12.56 3.8 1.0 27.77 1.7 1.4 39.33 1.2

The assumptions made in the above analysis included an average vein width of two

metres and rock density of 2.5 t/m3. Also the strength of the rock mass was evaluated

at 47 MPa. The safety factors shown in the table correspond to the ratio of resisting

stresses of the rock mass and induced stresses (σA and σB). Different stope heights

were analyzed with the results indicating the optimum stope height of 55 m, with a

crown pillar twice the width of the vein or four metres in thickness. Typically, a factor

of safety of 1.3 is used to ensure stability of openings. Although the factor of safety

indicated in the table is 1.2, the level of risk is considered low due to the following:

• Constant monitoring of the stope backs is being carried out. • Analysis is provisional and under normal operations, other levels will be opened

above, thereby reducing the intensity of the induced stresses. • The criteria adopted for the analysis are considered extremely conservative.

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3. The third phase of the rock mechanics analysis included numerical modelling using the

software Phase2, which permits the study of stresses and gradual deformations of the

rock mass. This utilizes semi-numerical methods to refine the preliminary results. The

modelling investigated the effects of stope heights, hanging wall dip angles, and rock

types for the resulting potential of collapse or caving of the hangingwall. The results of

this analysis showed that a) it was not recommended to mine without the use of crown

pillars for intermediate support, b) it is recommended to position crown pillars each 45

m, where the results of the analysis were most favorable, and c) it is possible to

consider an increase in the crown pillar spacing to 60 m, but only with strict restrictions,

hence this approach is not recommended.

4. With respect to the sequence of mining, this will depend on operational factors,

however, in general the mining should be carried out in two phases, with the

intermediate or upper stopes completed first, followed by the lower level stopes. This

is recommended in order to protect the integrity of the crown pillar on the lower level

which will be subjected to the highest stress levels. If mining is required to start on the

lower levels, the use of controlled blasting and constant monitoring of the crown pillar

can be implemented without serious problems.

5. The use of Barton’s “Q” Index permitted the estimation of ground control requirements

for the conditions indicated in Table 16-4 below.

TABLE 16-4 GROUND SUPPORT RECOMMENDATIONS Mandalay Resources Corporation – Cerro Bayo Project

Quality

Rock Mass Range of

“Q” Application Support

Very Good Q≥40 General Split Set Bolts, 2.6 m Good 10≤Q≥40 Roof Split Set Bolts, 2.6 m, spacing 2 m2 and

1.7 m2 if required Good “ “ “ Wall Split Set Bolts, 2.6 m Fair 1≤Q≥10 Roof Split Set Bolts, 2.6 m, spacing at 1.5 m2,

screen (Inchalam 10006 or 3500) Fair “ “ “ Wall Split Set Bolts, spacing at 1.5 m2, screen

(Inchalam 10006 or 3500).

The control of blast vibration levels was also addressed and the standard “Scaled Distance”

formula can be used to determine the weight of explosives per delay in order to keep the

vibration levels within recommended limits to avoid damage. The standard drill pattern is 2-1-

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2 in narrow veins and 3-3 in wider veins, with a one metre burden between drill holes rings.

Only one hole per delay is blasted with an average hole length of 12.5 m, therefore vibrations

from blasting are kept very low, ensuring no damage to the stope walls and surrounding areas.

Recommendations with respect to future development include geomechanical mapping of the

openings, incorporating the geomechanical information in the planning process, refine and

optimize mining designs, better definition of support requirements and a rigorous program of

control and monitoring of blasting methods and procedures to continue optimization.

CROWN PILLAR STUDY Since future mining in the Yasna, Coyita, Fabiola, and Dagny veins will be carried out under

the Laguna Verde lake, Mandalay requested that a study be completed to evaluate the

thickness of the crown pillar that was required in order to safely carry out mining operations.

The study “Modelo Conceptual Inicial De La Explotación de las Vetas Coyita, Yasna, Fabiola

y Dagny Bajo la Laguna Verde” was completed by Subterra Ingenieria and the report was

issued on January 28, 2015. The results of the analysis indicated that mining of openings of

15 m widths with a 15 m pillar in between was possible while maintaining a safety factor of at

least 1.4 and using a 40 m thick crown pillar. The approach taken by Mandalay is to use a

crown pillar thickness of 50 m to provide an additional margin of safety. RPA recommends

that a protocol be created for the development of openings under the lake consisting of drilling

test holes above and ahead of future openings, to ensure rock conditions and quality are as

anticipated.

PRE-PRODUCTION SCHEDULE The Fabiola, Dagny, and Delia NW veins are presently producing milling ore from development

and stope operations. Ore production started in October 2010, with milling starting in January

2011. During 2014, production was provided from the Dagny (30%), Fabiola (35%), and Delia

NW (34%). Delia SE is in the permitting process with production to commence in 2015.

Marcela and Raul are former mines in the Cerro Bayo area that operated in the past and will

be re-opened. They are currently scheduled for production on a continuous basis starting in

2017 and 2018, respectively, and ending in 2020, the last year of the current LOM. In total,

nine vein structures will provide the production tonnage over the current six year mine life,

which is completed in Q3 of 2020.

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LIFE OF MINE PLAN Based on the current reserves, the present LOM plan anticipates a production period of

approximately six years, culminating in 2020. Diamond drilling will continue with the intent to

increase the Mineral Resources and Mineral Reserves and to increase the mine life.

Development rates vary over the mine life from 34 m/day in 2016 to 13 m/day in 2019 for an

overall average of 24 m/day. This is an average of approximately 8,700 m per year, which, in

RPA’s opinion, is sufficient to access and develop the stoping areas for production

requirements.

The annual development, including capital and operating, is shown in Table 16-5.

TABLE 16-5 MINE DEVELOPMENT Mandalay Resources Corporation – Cerro Bayo Project

Item Units Total 2015 2016 2017 2018 2019 2020

Lateral Primary Capital m 19,064 3,184 5,394 4,132 4,858 1,339 158

Lateral Secondary Oper. m 31,040 5,863 7,081 6,235 7,609 3,425 827

Vertical Primary Capital m 1,153 268 285 218 342 40 - Vertical Secondary

Oper. m 4,672 1,589 1,211 698 774 400 -

Total m 55,928 10,904 13,970 11,283 13,583 5,204 985

Lateral Dev./day m 24 25 34 28 34 13 3

Vertical Dev./day m 3 5 4 3 3 1 -

RPA is of the opinion that the development rates listed in Table 16-5 can be achieved provided

sufficient manpower is available and equipment is maintained.

Production from stoping over the mine life ranges from an annual high of 1,358 tpd in 2016 to

a low of 791 tpd in 2020, averaging 1,252 tpd over the 5.5 year mine life. Maintaining the

average daily production should be achievable, requiring a stope advance average of

approximately 13 m (linear) of stope per day or 10 m of stope per day with an equivalent of

three drift rounds (at three metre lengths), providing approximately 200 tpd. The average stope

will provide 80 tonnes per metre of advance, based on a stope width of 2.4 m, stope height of

12.5 m, and a tonnage factor of 2.63 t/m3. The present LOM is shown in Table 16-6.

TABLE 16-6 LOM PRODUCTION SCHEDULE Mandalay Resources Corporation – Cerro Bayo Project

Units Total Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 2015 2016 2017 2018 2019 2020

Operating Days 1,925 350 350 350 350 350 175Tonnes milled per day 1,252 1,358 1,340 1,217 1,341 1,232 791

Production '000 tonnes 2,409 475 469 426 469 431 138Au g/t 2.1 1.8 2.1 2.4 2.1 2.2 2.5Ag g/t 220 215 220 235 193 213 309

Waste '000 tonnes - - - - - - -Ore Production tpd 1,252 1,358 1,340 1,217 1,341 1,232 791

Total Moved '000 tonnes 2,409 475 469 426 469 431 138Mill Feed '000 tonnes 2,409 475 469 426 469 431 138

Au g/t 2.13 1.82 2.12 2.37 2.05 2.22 2.53 Ag g/t 220 215 220 235 193 213 309

Contained Au oz 165,353 27,857 32,030 32,424 30,980 30,802 11,260 Contained Ag oz 17,061,746 3,281,663 3,311,102 3,214,857 2,919,941 2,957,658 1,376,525

Concentrate Produced t 41,852 8,058 8,185 7,960 7,135 7,232 3,283

Flotation Recovery % Au 86.2% 86.0% 86.3% 86.9% 85.0% 85.9% 88.7% Ag 90.2% 90.1% 90.2% 90.6% 89.6% 90.1% 91.5%

Metal Recovered oz Au 142,542 23,971 27,641 28,165 26,333 26,445 9,986 Ag 15,394,884 2,957,223 2,988,227 2,911,107 2,615,191 2,663,857 1,259,278

AgEq 23,947,017 4,395,393 4,646,632 4,600,954 4,195,121 4,250,520 1,858,397

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andalay Resources C




arch 13, 2015

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INFRASTRUCTURE

MINE ACCESS AND UNDERGROUND ARRANGEMENT The veins at Cerro Bayo are all accessed via a 4.5 m by four metre ramp driven at a -12.5%

grade. All of the materials required for the underground operations are delivered underground

via the main ramp system. The major underground installations include the main ventilation

raises that deliver the required volume of ventilating air necessary for the diesel equipment

operating on the various levels and areas of the mine. Emergency egress from the mine is

provided via escape raise systems which are equipped with manways that lead through to the

surface.

Figures 16-10 and 16-11, respectively, show an underground 3D views of the Fabiola and

Dagny mines. Figure 16-12 is a typical level plan showing development off of the main access

ramp on the Fabiola and Yasna veins. This plan shows that the veins are relatively straight

along strike with little complicating sinuosity.

MATERIAL HANDLING All of the material required for the underground operations, such as explosives, drill steel and

accessories and general materials, such as pumps, are delivered by vehicle via the main ramp.

BACKFILLING There is no systematic backfilling planned for the Cerro Bayo mine operations. Waste is

dumped underground when possible but for the most part it is hauled and dumped on the

surface waste stockpile. If deemed necessary in the future, a system of backfill raises could

be designed to permit some backfilling of underground stopes.

Portal

Access X-Cuts

Main Ramp

Emergency Exit

Ventilation Raise



Cerro Bayo Project

Fabiola MineUnderground 3D View


Figure 16-10

16-19

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Portal

Main Ramp

Emergency Exit

Ramp 55 Level

Access X-Cuts

Ventilation Raise



Cerro Bayo Project

Dagny MineUnderground 3D View


Figure 16-11

16-2

0

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Level Development (ore)

Ramp

Level Development (ore)Yasna Vein

Fabiola Vein

271,6004,8

41,5

00

271,500271,400271,300271,2004,8

41,4

00

4,8

41,3

00

4,8

41,5

00

4,8

41,4

00

4,8

41,3

00

4,8

41,2

00

4,8

41,2

00

271,700

271,600271,500271,400271,300271,200 271,700

0 25 100

Metres

50 75

N

Source: Mandalay Resources, 2015.March 5201

Cerro Bayo Project

Fabiola-Yasna 177 Level Plan



Figure 16-12

16-2

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VENTILATION The ventilation circuits for the Fabiola, Delia, and Dagny mines are shown in Figures 16-13,

16-14, and 16-15, respectively. Main fan and measuring locations are shown as well as air

volumes measured. Auxiliary fans are used on the levels to provide air to all of the headings,

but are not shown in the figures. These fans feed the headings before the air exhausts up the

stopes or back to the main ramp and up the exhaust air system. Egress from the mine is

provided via raises that lead to the surface and are accessible from each level underground.

These raises are downcast, to ensure that the personnel are always in fresh air.

The minimum air requirements for the various underground equipment, is shown in Table 16-

7.

TABLE 16-7 VENTILATION REQUIREMENTS Mandalay Resources Corporation – Cerro Bayo Project

Description HP Vol. (m3/min.) Vol. (cfm) Scooptrams 190 538 18,989 UG Truck 250 708 24,985

Jumbo Drill 70 198 6,996 LH Drill 74 209 7,396

Service Unit 82 232 8,195 Truck-Explosives 125 354 12,493

Truck-Service 125 354 12,493 Service Vehicle 100 283 9,994

Personnel 3 106

5303.3 m³/min89.5 m³/sec.

76.5 m³/min1.3 m³/sec.

88.5 m³/sec.

Portal

Ramp

Ventilation Raise (exhaust)Ventilation Raise (escape way)

Lateral Development (ore)Auxilary Fans

Ventilation Measuring Station

A-16

A-13

A-1 A-15


Cerro Bayo Project

Fabiola MineVentilation System



Figure 16-13

16-2

3

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4162.8 m³/min69.38 m³/sec.

162.5 m³/min2.71 m³/sec.

67.04 m³/sec.

Ramp

Level Dev. (ore)

Ramp

Ventilation Raise (exhaust)

Ventilation Raise (escape way)

Lateral Development

Auxilary Fans



Cerro Bayo Project

Delia MineVentilation System



Figure 16-14

16-2

4

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6703.05 m³/min111.7 m³/sec.

209.6 m³/min13.5 m³/sec.

56.5 m³/sec.

A-2

A-21

A-20

Portal

Downcast (Escape way)

Lateral Dev. (ore)

Exhaust

Ramp

Ventilation Raise (exhaust)

Ventilation Raise (escape way)

Lateral Development

Auxilary Fans



Cerro Bayo Project

Dagny MineVentilation System



Figure 16-15

16-2

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DEWATERING Dewatering of the underground mines is completed with simple sump arrangements that are

located off of the ramp or nearby. The mines are considered quite dry in terms of dewatering

requirements.

Two main types of submersible pumps, a 12 kW and 20 kW pump, with heads of 30 m to 50

m, and pumping capacities of 10 L/s to 20 L/s, are capable of keeping the mine adequately

dewatered.

Sumps are excavated as the ramp advances and the sump pumps are slung from the back to

provide for easy service. As the sumps are fairly shallow, the pumps are not required to be

fully submerged.

POWER Power for the underground mines is delivered via electrical cables installed in the ramp and

fed to the substations underground. Power cables are also run via boreholes that

breakthrough on levels underground when possible. For the main ramps, the power cable

utilized is a 4/0 super flex 3/120 + 1/70 at 400 volts, 50 hertz and in the level development, the

cable utilized is a 2/0 super flex 3/120 + 1/50 at 400 volt, 50 hertz capacity. The drill jumbos

and production drills are electrically driven.

The underground transformers include a 300 KVA unit plus a substation that houses an 800

KVA and 400 KVA unit at the Delia mine and also two 400 KVA transformers at both the Fabiola

and Dagny mines.

A 7MVA diesel plant supplies power to the processing plant and surface facilities. Six

Caterpillar generators (1995) with 1,150 KVA driven by 3516 motors provide 3.3 KV for the

main grinding mills and 400 volt service for other areas. Underground, power is supplied by

the 2.8 MVA generating plant at Dagny, using two Atlas Copco QAC1000 units with 1,000 KVA

capacity (one 2011 and one 2010) and one Caterpillar 3412 unit with 800 KVA capacity (2007),

with a high voltage of 3.3 KV and low voltage side of 400 volts.

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MAINTENANCE All of the equipment maintenance is carried out in the surface shop and only minor services

are provided underground, such as changing of hydraulic hoses. As the mines are quite

shallow in depth, transporting equipment to the surface shop does not present major delays or

problems. The main central surface shop has three bays and is equipped with a 10-ton crane.

There is also a smaller shop facility at the Fabiola portal, where minor repairs and service are

implemented.

COMMUNICATIONS Underground communication is provided by a leaky feeder system that allows for efficient

communications from basically every point in the mine. The site is also serviced with 12

telephone lines plus internet service.

MINE EQUIPMENT A list of the mine equipment is provided in Table 16-8.

TABLE 16-8 UNDERGROUND EQUIPMENT Mandalay Resources Corporation – Cerro Bayo Project

Description Qty Status Year

Jumbo Drill BOOMER 281 1 Operating 2005 DD310 1 Operating 2008 DD311-40 2 Operating 2012 / 2013 LH Drill DL 210-5 3 Operating 2012 / 2013 / 2014 Mini Raptor1 1 Operating 2006 Raptor DH 1 Operating 2011 Personnel Vehicle Chevrolet NKR 512 2 Operating 2013/2014 Chevrolet NKR 513 2 Operating 2010 / 2013 / 2014 Scooptram LH 307 4 Operating 2008 / 2013 / 2014 R1300G 3 Operating 2011/ 2012 / 2013 Service Truck Explosives Chevrolet NKR 513 2 Operating 2010 / 2013 / 2014 Service Unit Manitou MT 1030 2 Operating 2007 / 2011 Manitou MTX-1030S 2 Operating 2013 / 2014

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Description Qty Status Year UG Truck AD 30 1 Operating 2011 TH 320 2 Operating 2008 TH 430 2 Operating 2013 / 2014

Notes: 1. To be discharged in Q1 2015

SURFACE EQUIPMENT The surface equipment at the Cerro Bayo project is shown in Table 16-9.

TABLE 16-9 SURFACE EQUIPMENT Mandalay Resources Corporation – Cerro Bayo Project

Description Qty Year Status

Crane Helli 1 2011 Operating Excavator CAT 320 L 1 2007 Operating Grader CAT 14 G 1 1995 Operating Leeboy - 685B 1 2008 Operating Loader Fel CAT 924HZ 1 2012 Operating CAT 962H 1 2012 Operating CAT 980 1 1995 Operating Volvo MC110C 1 2013 Operating Truck Cat 769 WTC 1 1995 Operating Chevrolet FTR 1524 1 2012 Operating Mercedes 1315C 1 2006 Operating Mercedes 1720 1 2005 Operating Mercedes 915 C 2 2007 Operating Mitsubishi 3.9 1 2005 Operating Mitsubishi 5.7 1 2008 Operating Volvo BM 310 1 2011 Operating

The mine site also has approximately forty various service vehicles, including an ambulance,

personnel vehicles, and other miscellaneous small vehicles.

Equipment availability, for the year-end 2014 is shown in Table 16-10.

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TABLE 16-10 EQUIPMENT AVAILABILITY Mandalay Resources Corporation – Cerro Bayo Project

Equipment Availability

(%) Scoop LH 307 68 Scoop LH 307 77 Scoop LH 307 90 Scoop LH 307 92 Scoop R-1300 72 Scoop R-1300 66 Scoop R-1300** NA Average Scoops 78 Truck TH 320 76 Truck TH 320 67 Truck TH 430 86 Truck TH 431 91 Truck AD-30 80 Average Trucks 80 Jumbo BOOMER 281 75 Jumbo DD 310 66 Jumbo DD 311 85 Jumbo DD 311 80 Average Jumbo Drills 77 RAPTOR DH 73 DL/210 76 DL/210 81 DL/210 85 Average Production Drills 79 MANITOU 1030S 70 MANITOU 1030S 88 MANITOU 1030S 95 MANITOU 1030S 93 Average Manitou Forklifts 87

** Out of service for the last nine months because of incident in the mine and completion of evaluation to repair this equipment by insurance company.

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17 RECOVERY METHODS HISTORICAL RECOVERY The production figures for 2002 to 2008 are summarized in Table 17-1. The recoveries for Ag

and Au averaged 94.7% and 92.2% respectively in 2007 and 93.01% and 90.1% respectively

in 2008. Daily throughput averaged 1,053 tonnes in 2007 and dropped, in 2008, to an average

of 650 tonnes, as the company was in operation only from January through August. Over the

seven years of operating experience, the average grades were 4.2 g/t Au and 346.7 g/t Ag

with recoveries averaging 90.7% for Au and 93.3% for Ag. Production from the Project area

pre-2002 was reported at 2.43 million tonnes with production of 161,200 ounces of gold and

10.56 million ounces of silver but detailed reports were not available.

Year Tonnes Ratio Au Ag Au Ag Au Ag Conc. Au Ag

HeadsAu Ag (g/t) (g/t) (g/t) (g/t) (g/t) (g/t) % %

2002 310,819 5.2 344.5 217.6 15,967.7 0.70 33.46 87.0 90.5 47.71 45,580 3,344,363 2003 451,146 4.7 349.9 179.2 14299.4 0.53 29.91 89.0 91.6 42.89 60,602 4,836,209 2004 442,574 4.4 329.1 161.1 13658.0 0.38 22.21 91.5 93.4 40.30 56,878 4,822,241 2005 398,040 4.9 411.6 194.7 16679.9 0.40 21.84 92.2 94.8 42.74 58,293 4,994,472 2006 419,463 3.3 363.8 118.2 13396.0 0.25 19.85 92.5 94.7 38.76 41,118 4,660,997 2007 383,189 3.2 357.2 108.7 12461.1 0.29 19.77 91.2 94.6 36.87 36,321 4,164,338 2008 171,887 3.7 172.9 148.8 7225.9 0.37 12.27 90.1 93.1 44.92 18,310 889,055

Total 2,577,118 4.2 346.7 160.7 13866.0 0.41 23.4 90.7 93.3 41.6 317,102 27,711,675

Concentrate Tailings Recovery Concentrate Oz.

TABLE 17-1 HISTORICAL MILL PERFORMANCEMandalay Resources Corporation – Cerro Bayo Project

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Mandalay R

esources Corporation – C

erro Bayo Project, Project #2366

Technical Report N

I 43-101 – March 13, 2015

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CURRENT RECOVERY The plant performance for 2014 is shown in Table 17-2. RPA is of the opinion that recoveries

obtained in the past years, as shown in Table 17-1 can be achieved. Also strict adherence to

the mine plan should improve head grades, as compared to 2011 when a significant amount

of mining was completed outside of the resources planned for extraction during the year.

TABLE 17-2 MILL PERFORMANCE IN 2014 Mandalay Resources Corporation – Cerro Bayo Project

YTD DECEMBER 2014

Description Units Actual Budget Variance Milling Dry Tonnes 452,429 488,815 93% Grade Ag (g/t) 259 235 110%

Au (g/t) 2.19 1.98 111% Contained Metal Ag (oz) 3,766,893 3,689,216 102%

Au (oz) 31,883 31,150 102% Recovery Ag 92% 90% 102%

Au 89% 87% 102% Concentrate Tonnes 9,383 8,977 105%

Concentrate Grade Ag (g/t) 11,440 11,486 100% Au (g/t) 93.70 93.98 100%

Metal Produced Ag (oz) 3,450,979 3,315,007 104% Au (oz) 28,266 27,125 104%

Of the total tonnage milled during 2014, 30% was from the Dagny vein, 35% from the Delia

NW vein, and 35% from the Fabiola vein. Of the total ore milled approximately 20% came

from development of the drifts in ore, which totaled about 3,400 m during the year.

The crushing and grinding circuit is shown in Figure 17-1, the flotation circuit in Figure 17-2,

the reagent amounts in Figure 17-3, and the plant water balance in Figure 17-4.

SILO1500Ton

BALL MILL11.5’ x 18’

WATER

JAW CRUSHER

HOPPER

42” x 48”TO OUGHERR

C DYCLONES -15

ORESTOCKPILE

SAG MILL18’ x 9.25’


Cerro Bayo Project

Process PlantCrushing / Grinding Flow Sheet



Figure 17-1

17-4

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THICKENER

30’

FILTERING

CONCENTRATE

SALA

1

FINALTAILS

ROUGHERS

3 Cel s 500 Ft3l

SCAVENGERS

4 s 500 Ft3Cell

C 2LEANER

2 Cel s 150 Ft3l

C 1LEANER

4 s 150 Ft3Cell

C 3LEANER

2 C 150 Ft3ells

CLEANER

TAILS

CYCLONES

CYCLONES

D-6

D-15


Cerro Bayo Project

Process PlantFlotation Circuit



Figure 17-2

17

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FLOTA NTIOROUGHER

FLOTA NTIOSCAVENGER

1 st. AND 2ndCLEANERS

MILL

XANTHATE

MIBC

AERO-3477

550 cc/min21 g/ton

200 cc/min8 g/ton

100 cc/min4 g/ton

800 cc/min28 g/ton

300 cc/min10 g/ton

50 cc/min2 g/ton

25 cc/min18 g/ton

8 cc/min6 g/ton


Cerro Bayo Project

Process PlantReagent Dosages



Figure 17-3

17-6

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PROCESSWATER

400 m3

GRINDING

REGRIND

FLOTA IONT

RECYCLED TAILINGS WATER

TAILINGS CONCENTRATE

TAILINGS FACILITY

121,3 m3/h

18,5 m3/h

3,2 m3/h

4 m3/h

THICKENER

FRESHWATER

430 m3


Cerro Bayo Project

Process PlantWater Balance



Figure 17-4

17-7

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18 PROJECT INFRASTRUCTURE A site surface plan is shown in Figure 18-1. Figure 18-2 shows a satellite photo of the surface

plan with the portal locations and extents of underground workings. The mine site is accessed

from the town of Chile Chico, located 35 km to the east.

Production of a concentrate containing silver and gold is carried out on site in a 1,650 tpd

capacity processing plant. Presently, the concentrate produced is hauled by company trucks

(20 t capacity) 215 km to the port of Chacabuco two times per week on average. During 2014,

approximately 9,000 dmt of concentrate were shipped. During the LOM plan, approximately

8,000 t of concentrate will be produced and shipped annually.

TAILINGS FACILITY The tailings facility at Cerro Bayo is shown in Figure 18-3. The tailings dam was raised to the

317 m elevation during 2014. The capacity of the tailings facility at the 320 m permitted

elevation is reported as being 2.5 million tonnes, which will satisfy the requirements of the

current LOM plan.

POWER SUPPLY Power is generated on site by a diesel plant because no grid power is available in the area.

The main power plant supplying the processing plant and surface infrastructure consists of a

7 MVA plant from six diesel generators with 1,150 kVA capacities, providing 3.3 kV power for

the SAG and Ball Mill as well as 400 V power for other areas of the site.

Power for the underground facilities is generated via a 2.8 MVA plant from two QAC 1,000

KVA, Atlas Copco generators and one Cat 3412- 800 kVA unit, also generating 3.3 kV and

400 V power for the equipment.

SERVICE FACILITY A three bay service garage is located on surface, where all major mechanical repairs are

carried out. The facility is equipped with a 10 ton overhead crane for heavy work and other

equipment necessary for the equipment maintenance.

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WASTE ROCK DUMPS The two main surface waste rock dumps shown on the surface plan are the Los Juncos dump

and the Los Cisnes dump, of which the use is not contemplated at this time. The Los Juncos

waste dump has a capacity of 453,000 t, with approximately 180,000 t currently being utilized.

In 2012, the historical Tranque open pit located close to the designed Delia SE mine portal

was authorized for 290,000 t of waste rock placement.

MINE WATER The water from the underground operations is pumped to surface and to the sedimentation

basins, where the suspended solids are allowed to settle out. Water is recycled back to the

underground for reuse.

The process water from the mill tailings is recycled back to the processing plant for reuse.

269,000 E 269,500 E268,000 E 268,500 E267,500 E

4,8

42,0

00 N

271,000 E270,000 E 270,500 E

4,8

41,5

00 N

4,8

41,0

00 N

4,8

40,5

00 N

4,8

40,0

00 N

4,8

39,5

00 N

4,8

39,0

00 N

4,8

42,0

00 N

4,8

41,5

00 N

4,8

41,0

00 N

4,8

40,5

00 N

4,8

40,0

00 N

4,8

39,5

00 N

4,8

39,0

00 N

Taitao

II N

ort

e

Waste DumpLos Cisnes

Waste DumpLos Juncos

Tailings Facility

Juncos

Chile Chico

Grandja Temer

Top Soil Deposit Water

CONDORES

CAIQUENES

CAIQUENES ESTE

Breccia

Waste Stockpile

Stock Pile

ProcessPlant

Offices

Top Soil Storage Area

Cap Magazine

Powder Magazine

Sedimentation Basins

LagunasLos Cisnos

Area Instalations

Portal 2

DAGNY

Delia Mine

FABIOLAPortal 1

Lagunas

Nueva

LagunasVerde

LagunasSalada

Est

ero L

as

Horq

uet

as

LagunasLos Patos

Lake Gen

eral C

arrer

a

Taitao Sur

Taitao Sur

Temer

Veta

Centra

l Veta

Este

1

Veta

Este

269,000 E 269,500 E268,000 E 268,500 E267,500 E 271,000 E270,000 E 270,500 E

0 2 00 10 00

Metres

4 00 6 00 8 00

N


General Site Layout

Cerro Bayo Project



Figure 18-1

18-3

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LAGUNA VERDE

TailingsFacilities

WasteDump

DagnyPortal

Delia SouthPortal

DeliaPortal

Magazines

FabiolaPortal

Plant

Source: Mandalay Resources Corp., 2014.March 5201


Cerro Bayo Project

Satellite View of SurfaceLaguna Verde


Figure 18-2

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TAILING FACILITY

Pumps

Process Water

Water Elev. 308.314

CREST

CREST

MURO 2

PORTAL

Elev. 305

Elev. 318.00

270.000 E 270.500 E

4.8

40.5

00 N

4.8

40.7

50 N

270.250 E

4.8

40.2

50 N

270.750 E

TOE OF WALL

M-1

M-2

M-3

M-4

M-5

M-6

M-7

M-8

M-9

4.8

40.5

00 N

4.8

40.7

50 N

4.8

40.2

50 N

270.000 E 270.500 E270.250 E 270.750 E

PLANT TAILINGS LINE

0 50

Metres

100 200 250150

N


Cerro Bayo Project

Tailings Facility



Figure 318-

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19 MARKET STUDIES AND CONTRACTS MARKETS The principal commodities at Cerro Bayo are silver and gold, which are freely traded at prices

that are widely known, so that prospects for sale of any production are virtually assured. For

the cash flow, RPA used prices of US$1,200 per ounce for gold and US$20 per ounce for

silver.

CONTRACTS CMCB have concentrate sale agreements for the sale of concentrate in 2015 with Dowa Metals

and Mining Co., Ltd., Mitsubishi Materials Corporation, and Pan Pacific Copper Co., Ltd., all in

Japan and LS Nikko Copper Inc., in Korea. The terms and conditions of the commercial sale

are not disclosed pursuant to confidentiality requirements. RPA has reviewed the agreements

and is of the opinion that the concentrate sales terms are within industry norms.

Other contracts that exist with the mine and suppliers include those for:

a. Catering: SODEXO, with prices varying with the number of meals served during the day.

b. Drilling Consumables: Atlas Copco Chilena S.A.C. for drilling consumables including drill bits, drill rods and accessories on a cost per metre drilled basis.

c. Explosives: Orica Chile SA, for supply of explosives and explosives accessories such as Excel LP and SP delays, electric delays, other minor accessories and Amex explosive in 25 Kg bags and Cartridge explosives and Pentex boosters. Orica is also responsible for administration of the explosives magazines on site. Contract duration is three years.

d. Security: Servicios Integrales de Seguridad de la Patagonia, for security on the Cerro Bayo mine site, providing for 17 security personnel, on average, to control site access and safety aspects on the site, including use of the ambulance service.

e. Personnel Transport: Sotraser Limitada, for the transport of employees to and from the mine to the town of Chile Chico.

f. Ore Transport: ICA S.A., for the transport of ore from the mine portal stockpiles to the

mill site using two 13 m3 capacity trucks and one 3 m3 front end loader.

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CMCB also has a collective bargaining agreement with the Sindicato de Trabajadors de

Compañía Minera Cerro Bayo Ltda. The collective bargaining agreement was signed on July

25, 2012, and is in effect for three years until July 24, 2015.

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20 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL OR COMMUNITY IMPACT The following information on the environmental aspects of the Project was provided by

Mandalay.

The Environmental Impact Assessment (EIA) for the Fachinal Project in the Laguna Verde

sector dates back to October 1994 and is covered under Resolution 001 of the CONAMA-SEA,

National Environmental Commission of Chile. The various installations were examined during

RPA’s site visit previously and in January 2014, and no major issues were noted with respect

to environmental planning, monitoring, and management.

ENVIRONMENTAL STUDIES AND INFORMATION Since 2001, CMCB has been mining in a district that was originally mined from 1994 to 2000

by Compañia Minera CDE Fachinal.

The mining operations were concentrated in two areas, Cerro Bayo and Laguna Verde, located

16 km apart. The latter is located near the processing plant, the tailings facility, and surface

installations including offices, services buildings, maintenance facilities, etc.

The initial mining from 1994 to 2000, predominantly by open pit, was in the Laguna Verde area.

In 2002, the mining moved to the Cerro Bayo area and was predominantly underground.

Changes to the original project were submitted to the environmental authorities and the

projects that contained changes to the exploration or exploitation mining methods were

submitted to the Sistema de Evaluación de Impacto Ambiental (SEIA) legal entity in Chile.

The operations were suspended in October 2008 due to the downturn in the economy and a

lack of developed ore. The mining operations were based on reserves contained in the veins

of Cerro Bayo and Laguna Verde.

The different areas of exploitation at Cerro Bayo include:

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1. Cerro Bayo Area is located nine kilometres west of the town of Chile Chico. This is the location of the Cerro Bayo vein system mined underground from 2002 to 2008 by Coeur.

2. Guanaco Area is located 12 km west of the town of Chile Chico and comprises the old Coeur exploration area of the Guanaco mine. The operational installations include offices, exploration facilities, and core storage facilities.

3. Laguna Verde Area is located 25 km west of the town of Chile Chico. This is the location of the processing plant, the tailings facility, and veins where mining is currently carried out. This is also where Coeur operated an open pit from 1995 to 2000.

4. Cascada Area is located seven kilometres west of the town of Chile Chico. This will

undergo rehabilitation during 2015. All services installation have been removed from this area.

5. Furioso Area is: located 130 km southwest from Chile Chico. It was exploited in 2002

and 2003 and produced 48,727 t of ore and 584,724 t of waste rock. Reclamation of this site was completed in the second quarter of 2012 and a closure report has been submitted to Sernageomin, the National Geology and Mining Service in Chile, seeking sign-off on the closure.

The environmental studies for the mining areas were prepared in 1994 under the original

Environmental Impact Study for the Fachinal Project and EIA for the Furioso Project in 1999.

All projects requiring an environmental approval were presented under a Declaration of

Environmental Impact. Baseline studies were completed to characterize factors such as

biological, hydrological, hydrochemical, and archeological, including information for monitoring

the chemical quality of the water for all areas of influence of the Projects.

In October 2013, CMCB submitted a report to the Servicio Nacional de Geologia y Mineria

Zona Sur and the Superintendincia de Medio Ambiente XI Region, Gobierno de Chile for the

Mina Furioso, “post-closure” monitoring of surface waters for 2011, 2012, and 2013. Monitoring

of the surface waters indicates that all of the parameters are within the maximum permissible

limits of the current regulations.

In September 2014, CMCB received a report from Sernageomin following the site inspection

visit of the Furioso property by the environmental agency.

While there is no formal community development plan, there have been donations to certain

sectors of the community. During 2014, the company has been able to provide assistance in

the areas of education (bursaries and pre-university subsidies), health (donations of new beds

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for the hospital), infrastructure (Fachinal gymnasium is used by at least six organizations in

Chile Chico), plus other cultural activities.

PROJECT PERMITTING In Chile, Law 19.300 (1994) and subsequent modifying Law 20.417 (2010) regulates the

environmental impact studies of public and private investment projects or activities. EIA

regulations were enacted in April 1997, by D.S. No. 30 (Ministry of the General Secretary of

the Presidency) and modified by D.S. 95 (2001). The law provides that projects or activities

listed therein may only be “executed” or “modified” after an assessment of their environmental

impact. The main environmental authority in Chile is the Ministerio del Medio Ambiente (MMA)

whose functions and administration are regulated by Law 19.300. In addition, the government

organized a ministry level Advisory Council (Consejo Consultivo) and Regional Ministerial

Secretaries (SERIMIs) in each region of the Chilean territory reporting to the environmental

sub-secretary.

REQUIRED ENVIRONMENTAL PERMITS Law 19.300 creates a system that integrates much of the sectorial environmental

requirements, known as “the single window”. This is coordinated through the Servicio de

Evaluación Ambiental (SEA) with all the public agencies during the assessment process via

the Sistema de Evaluación de Impacto Ambiental (SEIA). The corresponding environmental

resolution of SEA is based on reports from relevant public agencies that participate in the

evaluation of the assessment documents. If the assessment is favourable, and the final

approval is issued, no public agency may deny the pertinent environmental authorizations. On

the contrary, if the decision is negative, those same agencies must deny such authorization.

Additionally, there are also a number of other sectorial permits of a non-environmental nature

that are required for the mining operations.

STATUS OF CHILEAN REQUIRED PERMITS CMCB has presented all EIAs and Environmental Impact Declarations (DIA) to the competent

authorities. In the case of Cerro Bayo, the competent authority was COREMA of the Aisén

Region. CMCB has been processing and updating the permits required for its operations as

mining exploration has progressed and new areas have been incorporated into the mining

operation. Current applications are submitted and processed through the SEIA.

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Many environmental permits have been received since the start of operations for the various

sectors. A list of these permits, with resolution numbers, dates, and locations, follows in Tables

20-1 to 20-5.

TABLE 20-1 PROJECT PERMITS – LAGUNA VERDE SECTOR Mandalay Resources Corp. – Cerro Bayo Project

SERVICE PROJECT NAME RES. Nº Date Status

CONAMA / SEA- National

Environmental Commission

Environmental Impact Study (EIA) “Proyecto Fachinal” 001 26-Oct-94 In Force “Proyecto Modificaciones Plan Minero” 062/98 24-Dec-98 For Closure Modification to Monitoring Plan for Cía. Minera CDE Fachinal Ltda. 004/ 2000 10-Mar-00 For Closure Project “Modificación Plan Minero 1999 “ 002 04-Feb-00 For Closure “Modificación Procesamiento de Concentrado Final” 0703 26-Sep-02 In Force “Modificación Proyecto Fachinal, Transporte de Concentrado” 0002 05-Jan-04 In Force DIA Raising of Tailings Dam for Fachinal Project 188 13-Apr-10 In Force Dagny Vein 129 17 Jan 08 In Force DIA Expansion of the Dagny Project 93 11 Feb 10 In Force DIA Delia Sur 165 18 Apr 12 In Force DIA Expansion of tailings dam (project presented December, 2013) 236 14 Jul 14 Approved

National Geology and Mining Service (Sernageomin)

Underground Mining Project- Delia Sur 33 18 Dec 13 To Commence Underground Mining Project - Dagny Veins 1313 08-Jul-09 In Force Construction and Operation of the Tailings Dam for the Fachinal Processing Plant 731 25-Oct-94 In Force

Construction and Operation of the Waste Dumps for the Fachinal Mine 719 19-Oct-94 In Force Exploitation Project for the Mine and Processing Plant 681 07-Oct-94 In Force

Regional Secretariat of the Ministry of Health (SEREMI

SALUD)

Landfill Expansion for domestic and non Dangerous Industrial wastes for the Laguna Verde Sector 364 15-Jun-05 In Force

Installation and Operation of the First Aid Room for Laguna Verde y Guanaco 819 11-Jun-96 In Force

Authorization N° for generation of Dangerous Wastes 94 24-Jan-06 In Force Operation of landfills in the Laguna Verde y the Guanaco Sector 128 08-Feb-96 In Force Operation of the Sewer System for the Laguna Verde Mining Camp 124 08-Feb-96 In Force Operation of the Potable Water system for the Laguna Verde Mining Camp 126 08-Feb-96 In Force Approval of the Potable Water and Sewer System Project 636 04-Sep-95 In Force Approval of the final disposal of used lubricants modification 0441 26-Dec-01 Not in force. Operation of the Sanitary Landfill Expansion for the laguna Verde Sector 1097 05-Dec-11 In Force Approval of the Potable Water System Installation 634 04-Sep-95 In Force

Director General for Water (DGA)

Surface water usage rights – General Carrera Lake (4840690N, 727589E) 30 01-Feb-93 In Force Surface water usage rights – General Carrera Lake (4841334N, 728235E) 43 09-Feb-93 In Force Authorization of tailings dam construction 0729 06-Feb-94 In Force Surface water usage and El Baño estuary rights 45 20-Jan-94 In Force Surface and confined water usage rights – General Carrera Lake (4841431N, 728398E) 104 01-Apr-93 In Force

La Tina natural river bed diversion 617 23-Sep-09 In Force Approval of water usage from La Tina estuary 441 26-Oct-93 In Force Approval of water usage from El Rodeo estuary 452 29-Oct-93 In Force Approval and authorization of the Fachinal Tailings dam construction 729 25-May-06 In Force

Ministry of Agriculture Land Use permission for 992 ha Fachinal Project sector Laguna Verde 4 03-Oct-94 In Force Land Use permission for 540 ha Fachinal Project sector Laguna Verde 5 03-Oct-94 In Force

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TABLE 20-2 PROJECT PERMITS – FURIOSO SECTOR Mandalay Resources Corp. – Cerro Bayo Project


CONAMA- National

Environmental Commission

Environmental Impact Study “Proyecto Furioso, Explotación Veta Laguna” 025/99 24-Jun-99 Closed Declaration of Admissible Modifications for the Proyecto Furioso Explotación Veta Laguna 795 22-Oct-02 Closed

“Modificación del Medio de Transporte de Minera, Proyecto Furioso” 043 27-Oct-00 Closed “Acopio Temporal de Mineral, Proyecto Furioso” 036 16-Mar-01 Closed Temporary Authorization for Storage of Ore for the Furioso project. 571 14-Aug-02 Closed

Sernageomin Approval of Closure Plan for the Furioso Mine. 2930 22-Sep-11 Closed Combination of open pit (Slot Cut) and underground (Shrinkage stoping) exploitation methods. 1321 01-Dec-99 Closed

SEREMI HEALTH Landfill for Solid Wastes and the “Patio de Salvataje” appendix – Furioso project 65 18-Apr-00 Closed

Procedure for Neutralization of acid water with lime 4 20-Jan-00 Closed

Director General for

Water (DGA)

Approval of surface water usage from the Furioso River, Furioso Mine Project. 271 24-Jun-03 Closed

Approval of surface water usage from the Pintura Chico Estuary, Furisoso Mine Project. 008 26-May-03 Closed

Approval of surface water usage from the Los Carneros Estuary, Furioso Mine Project. 10 26-May-03 Closed

SEREMI Ministry of

Agriculture

Land Use permission for 0,5 ha for the Camp, Furioso Mine Project 19 15-Jul-03 Closed Land Use permission for 158 ha for Javiera, surface with land use permission- authorization for 140 ha. 16 18-Jun-03 In Force

Land Use permission for 28 ha for the Veta Laguna, Furioso Mine Project 12 10-Jun-03 Closed Land Use permission for 0.2 ha for the Mallin Grande Sector for temporary waste rock storage. 9 12-Jun-01 Closed

Land Use permission for 0.48 for the Mallin Grande Sector for temporary waste rock storage. 8 02-Jun-01 Closed

National Property Nulification of D.S.N° 15 d 1998 (National Reserves) 219 18-May-98 Closed

TABLE 20-3 PROJECT PERMITS – CERRO BAYO SECTOR Mandalay Resources Corp. – Cerro Bayo Project


Sernageomin Project for Modification of Mining Plan 2011 for Bayo Veins. 3196 7-Nov-01 Standby

SEREMI HEALTH

Operating of the Casino building located in the Cerro Bayo Sector. 329 29-Jul-02 Standby Potable Water and Sewer System Project for the Cerro Bayo Camp. 151 11-Apr-02 Standby Installation and operation of Potable Water and Sewer system for the Ra ûl and Guanaco II South Veins. 268 15-Jun-04 Standby

Approval of the Potable Water and Sewer System Project 006 8-Jan-02 Standby

SEREMI Ministry of Agriculture

Land Use permission for 158 for Javiera, surface with land use permission and authorization for 140 16 18-Jun-03 In Force

Land Use Permit 70 007 18-May-00 In Force Land Use Permit 70 015 6-Aug-01 In Force Land Use permission for Predio Sra. Elcira Padilla and Bahía Jara 006 20-Apr-00 In Force Land Use permission for 91 ha Raul west, 35 ha Raul y 8,3 ha Bayo Sur. 14 2-May-02 In Force

CONAMA

DIA, “Report on Modification for the Fachina l Project, Sedimentation Basins for the Javiera Vein.” 363 12-Sep-05

In Force (Temporary Standby)

Declaration of Environmental Impact “Mining Plan 2006-2011” 613 01-Sep-06 In Force

(Temporary Standby)

Declaration of Environmental Impact “Modifications Fachinal Project, Exploitation of Javiera Vein.” 341 20-May-03

In Force (Temporary Standby)

Declaration of Environmental Impact “Modification Fachinal Project, Exploitation of the Guanaco 2 Sur Vein” 255 02-Apr-04 Closed

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SERVICE PROJECT NAME RES. Nº Date Status Declaration of Environmental Impact (DIA) “Modification of Mining Plan 2001, Bayo Veins” 0135/2001 26-Jun-01 Standby

Declaration of Environmental Impact “Modification Fachinal Project, Exploitation of the Raúl Vein” 0336 20-May-03 Standby

“Furioso Project” 012 19-Dec-97 Closed

TABLE 20-4 PROJECT PERMITS – CASCADA SECTOR Mandalay Resources Corp. – Cerro Bayo Project

SERVICE PROJECT NAME RES. Nº Date Status CONAMA Declaration of Environmental Impact “ Cascada Project” 201 4-May-07 Abandoned and Closed

SEREMI HEALTH Potable Water and Sewer System, Cascada Project 341 08-May-07 Cancelled Approval of Potable Water and Sewer System Project 0341 22-May-07 Cancelled

Roads & Highways Access to Route Ch-265 601 25-Mar-07 In Force

SEREMI Ministry of Agriculture

Land Use permit for 6,85 hectares 10 03-Sep-07 In Force

Sernageomin Approval of the Waste Material deposit Project 976 13-Nov-07 Abandoned and Closed

TABLE 20-5 PROJECT PERMITS – GUANACO SECTOR Mandalay Resources Corp. – Cerro Bayo Project


SEREMI HEALTH

Approval of the Potable Water and Sewer System Project 635 04-Sep-95 In Force Approval of the Potable Water Installation 633 04-Sep-95 In Force Approval for operating storage building GU-7 for storage of non-toxic, domestic and industrial wastes. 563 07-Sep-05 In Force

Installation and operation of Potable Water and Sewer Systems for Raûl and Guanaco II Sur Projects. 268 15-Jun-04 Dismantled

Approval of the Sewer System for the Area Guanaco camp. 125 8-Feb-96 In Force Approval of the Potable Water usage for the Guanaco Camp. 127 8-Feb-96 In Force Authorization of the Casino operation 849 21-Nov-95 Closed

CONAMA Declaration of Environmental Impact “Modification for Fachinal Project, Exploitation of the Guanaco 2 Sur Vein” 255 02-Apr-04 Closed

TAILINGS FACILITY The Fachinal tailings facility is part of the exploitation project that was approved by the

environmental authority in 1994.

Since it opened in October 1995, the tailings facility has operated for 12 years. The operations

were suspended from 2000 to 2002 and again from 2008 to 2011 due to a temporary closure

of the mine operations. Mandalay resumed tailings storage in January 2011. In December

2008, the tailings dam wall was 23.1 m high, equivalent to an elevation of 316.1 m, and

contained 4,956,714 t of dry tailings. The permit for the tailings facility has been in force since

April 13, 2010. The major concern was potential infiltration of the tailings water into the

underground water. During the approval process, it was proposed to monitor the water every

quarter and analyze it for the various parameters.

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The tailings capacity was increased by raising the dam during 2014 which will provide for 2.5

million tonnes of additional capacity.

PROCESSING PLANT The processing plant for the Fachinal Project was approved in 1994. The plant consists of

installations for crushing, grinding, flotation, thickening, agitation, and filtration with a capacity

of 1,650 tpd. The plant is located close to other installations including, offices, service

buildings, storage buildings, generator building (for plant), etc. The plant has continued

operating without any significant modifications since the original approval and thus the permits

remain valid.

MINING EXPLOITATION IN LAGUNA VERDE Presently, the sectors where mining operations are authorized in the Laguna Verde area

include the Delia NW, Dagny, and Fabiola veins, each accessed via its own portal and decline.

The Dagny mine received environmental approval in February 2009. The permit includes

exploitation of the Dagny vein. The waste material is estimated to be 126,000 t, and this will

be stockpiled in the existing Los Juncos waste dump, which has sufficient capacity. This dump

has a capacity of 453,600 t with approximately 180,000 t presently stored and therefore a

balance of 273,600 t of remaining capacity. The Project required the construction of four

basins for each portal, consisting of three decantation basins and one recirculation basin with

a capacity of 600 m³ each.

Submitted in September 2009, the “Dagny Expansion Project” was approved in February 2010.

The permit included incorporation of the Delia NW mine to the mining operation, with extraction

of 17,000 t per month over a four year period. The waste dump for this project was the Los

Juncos dump, which has sufficient capacity. The estimated waste volume for the expansion

project was 86,000 tonnes.

Submitted in January 2012, “The Delia South Project” was approved in April 2012. The permit

was for the operation of the Delia SE mine with extraction of 450 tpd over a period of four

years. The Tranque open pit was authorized to be used as the waste dump and was permitted

for 290,000 t of waste rock.

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MINING EXPLOITATION OF THE CERRO BAYO AREA The exploitation of the Cerro Bayo area includes the Marcela Sur and Raul veins.

The most recent project presented for approval in this area was the “Mining Plan 2006-2011”,

approved in September 2006. The permits included exploitation of new deposits in the Cerro

Bayo area (the Raul and Bayo veins of the mineralized system Bayo 1-170 and Mallines 1-

100) using the shrinkage mining method. The mining plan included a production of 40,500 t

per month over a five year period, with project completion by 2014 (Ref. GER-CMCB/0025-11,

May 17, 2011). The Raul vein is now scheduled for mining in the current LOM in 2018, while

the Marcela vein is scheduled in the LOM from Q3 2017 through Q1 2020.

The project includes a water management system consisting of sumps within the mine, four

basins for primary sedimentation for each portal (with a capacity of 600 m³ each) and an

emergency sedimentation basin (with a capacity of 25,000 m³). Water will be recirculated to

the mine for drilling water (189 m³/d), and a portion of the water will be used for dust control

for the underground roadways and also for emergency purposes.

The waste dumps No. 1, 2, and 6 were approved in 2001 and have a sector approval

(Sernageomin) and environmental approval (CONAMA). The waste dumps No. 3 and 4 were

authorized by the environmental authority under the approval of “Mining Plan 2006-2011”,

however, the approval from Sernageomin was not received.

From October 2008 to September 2009, the operation was under care and maintenance

status. During that time, the underground workings were allowed to flood. Consequently, it

was necessary to receive permission to pump the water from the mine workings to an adjacent

dry lake (Laguna Bayo) that was dry due to a reduction in precipitation and natural evaporation.

The request for permission was submitted to the Superintendent of Sanitary Services (SISS)

at the end of 2009. The discharge was considered by CMCB to be a “residual industrial liquid”

(RIL) and as a result required the DS No. 90, however, CMCB personnel received a response

from the SISS (Ord. No. 763 date March 17, 2010) stating that the discharge was not a RIL

and that the CONAMA should be consulted in this case. The request will be submitted to the

proper ministry and if the permit is not received, the water will be pumped to old areas of the

Cerro Bayo mine operation and into decantation basins where the water will evaporate.

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WATER RIGHTS CMCB has water right permits that exceed its requirements. The water right permits are

presented in Tables 20-1 to 20-5.

PERMITS TO REINITIATE OPERATIONS Cerro Bayo has requested and received the necessary permits and licences to operate for the

life of the Project.

In the Cerro Bayo area, the mining activities have received authorization from both sectoral

and environmental authorities following the proposed “Mining Plan 2006-2011”, approved in

2006, that included exploitation of deposits within the mineralized systems of Bayo 1-170 and

Mallines 1-100, with a monthly production rate of 40,500 t for a period of five years and a total

of 3.3 million tonnes of waste.

The plan should have commenced between 2006 and 2008 (when the operation was

suspended) and theoretically should have finished in 2011. However, as the mining operations

ceased, the period will be extended as the production limits will not be significantly exceeded

(if the modifications to the original project submitted to the SEA are realized).

For this area, the only permit that was not obtained was that from Sernageomin for the

exploitation and for the waste dumps No. 3 and 4, which will be updated. According to CMCB

personnel, only waste dump No. 4 was built and has not reached its full capacity. Also there

was an important permission for this area concerning water stored underground after the

operations were completed. As mentioned previously, the request was sent to the SISS, which

referred this matter for consideration by the CONAMA. The request will be sent to the

CONAMA and if no response is received, the water will be pumped to the existing facilities at

Cerro Bayo as mentioned above.

For the Laguna Verde area, the exploitation approval was received for the Dagny project,

including the exploitation of the Dagny and Delia NW. Dagny has received an approval for

extraction of approximately 25,000 tonnes per month for a period of five years, and Delia NW

for an extraction of 17,000 tonnes per month for a period of five years. The waste dump

approved by the environmental and sectoral authorities is Los Juncos, with 126,000 tonnes for

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Dagny and 86,000 tonnes for Dalia NW. The remaining capacity of the waste dump will be

61,600 tonnes.

The processing plant retains the original permits and sufficient capacity to receive any new

production.

The tailings facility was raised to an elevation of 316 m. The present plan calls for raising the

dam eventually up to a final elevation of 322 m, which will be done in two phases over the next

two years.

Any major change in the requested modifications to installations or works would require a new

application to the authorities. Depending on the magnitude of any change or modification, this

would require and EIA or DIA as mentioned previously.

ENVIRONMENTAL MANAGEMENT The environmental management of the operation will be based on the monitoring program for

Water Quality, Meteorology, Air Quality, Soil Quality, Vegetation Quality and monitoring of the

fauna. CMCB carries out acid base accounting (ABA) periodically to determine and monitor

any acid water generation potential for the mine and waste dumps. The results are reported

to the authorities. However, there have not been any specific studies that summarize results

of the water quality monitoring or geochemical monitoring. Also, there is no formal plan

available for environmental management which details objectives, procedures, and definition

of responsibilities (the company has procedures which covers the most important aspects in

terms of environmental management). Similarly, there are no procedures for quality control

and consequently validation of results with authorities has been somewhat problematic. ABA

and NAG tests were carried out by SGS and SGS’s June 2013 report concluded that the waste

dumps had little or no potential for acid drainage.

RPA also reviewed the monthly reports for July and September 2013, completed by SGS, for

monitoring of the air quality and meteorology as well as respirable particulate matter and

suspended solids which indicated that the measured values are within the required regulatory

limits.

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SOCIAL OR COMMUNITY REQUIREMENTS The company, under the collective bargaining agreement, provides for educational funds from

elementary through to university classes, plus employee celebrations at Christmas and the

annual Mining Day Celebration that takes place in the town of Chile Chico.

The Company is also heavily involved in the local community with the following programs:

• Seven university scholarships and one sporting scholarship for students from Chile Chico.

• Major sponsorship of Chile Chico week in January and many other functions during the year.

• Bringing medical specialist to Chile Chico on an annual basis.

• Sponsorship of many sporting, social, government, and educational institutions in Chile Chico.

• Diverse courses organized and funded by the company for the general public of Chile Chico.

• Construction of a community plaza and playground in the centre of Chile Chico.

• Construction of a workshop for the local women’s group to build and sell artisanal souvenirs and clothing.

MINE CLOSURE REQUIREMENTS The closure plan was updated by Mineria y Medioambiente Limitada (MYMA), from the

previous estimate that was prepared in 2008. The updated closure plan is shown in Table 20-

6.

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TABLE 20-6 CLOSURE COSTS BREAKDOWN BY YEAR Mandalay Resources Corp. – Cerro Bayo Project

Item US$(000)

Direct Cost 11,343 Indirect Cost 1,134 Monitoring 159 Contingency 1,895 Subtotal 14,531 I.V.A. (19%) 2,761 Total 17,292

The closure plan for the site areas include those for properly sealing of portals, rehabilitation

of waste and stockpile areas, rehabilitation of all sedimentation and other water basins, and

miscellaneous clean-up to ensure the site conditions are returned to as near as natural

condition.

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21 CAPITAL AND OPERATING COSTS CAPITAL COSTS The Cerro Bayo Project has been in production since 2011, after a three year shutdown. The

capital costs for equipment, rebuilds, ventilation, etc., are shown in Table 21-1. Also included

in the table is the sustaining capital cost for deferred development required, as well as the

closure cost estimated by year.

TABLE 21-1 CAPITAL COSTS Mandalay Resources Corporation – Cerro Bayo Project

Description Units 2015 2016 2017 2018 2019+ Total

Capital Development US$000 6,673 10,584 10,434 2,874 - 30,565 Capital Equipment US$000 6,484 8,000 8,000 6,000 - 28,484

Reclamation/Closure US$000 781 1,199 19 1,208 14,247 17,454 Contingency (15%) US$000 2,091 2,967 2,768 1,512 2,137 11,475

Total US$000 16,029 22,750 21,221 11,594 16,384 87,978

The capital development shown in the table above consists of 1,900 m of horizontal

development at a direct unit cost of $1,500 per metre. This development is carried out in waste

and made up of ramp, access drifts, and other miscellaneous openings such as sumps. The

capital development makes up approximately 34% of the total development carried out in the

mine. Development requirements are relatively lower for the mines at Cerro Bayo because of

the mining method. No hanging wall or footwall drifts are driven along strike and drawpoints

are not utilized. The access drift is driven along the vein and mining progresses in a “retreat”

fashion towards the entry point from the main ramp. In this way, waste development is reduced

significantly. RPA recommends that mine planners investigate the potential use of some

additional waste development, for example to create easier and safer mucking where the veins

are much larger than normal or where very poor ground conditions may be avoided and dealt

with on the final retreat. Where the vein is large, for example, a second drawpoint can be very

useful to optimize extraction.

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OPERATING COSTS Operating costs for the Cerro Bayo LOM plan are shown in Table 21-2. The actual operating

costs for year to date December 2014 were US$93.86 per tonne milled. Production will

average approximately 1,250 tpd over the LOM.

TABLE 21-2 LOM OPERATING COSTS Mandalay Resources Corporation – Cerro Bayo Project

Description US$/yr Avg. (millions) US$/t

Mining 24.36 50.97 Processing 12.80 26.82

G & A 6.60 13.93 Total 43.60 91.72

RPA is of the opinion that, with the higher throughput forecasted in the LOM plan, the operating

cost per tonne could be reduced, however, it is important that the throughput be realized.

Given the number of potential work areas that can be developed, the current productivity level,

and the quality of the technical staff and management, RPA is of the opinion that the LOM plan

can be achieved. All of the mines were visited during the site visit and RPA noted that

development is sufficiently kept well ahead of the stoping to achieve the production forecasts

of the LOM.

MANPOWER The current manpower level at the Cerro Bayo Project is shown in Table 21-3. It is anticipated

that this level of manpower will be necessary for the remainder of the LOM period. Current

contractor personnel are shown in Table 21-4. With the exception of the current tailings dam

work, this level of contractor reliance is expected to continue throughout the LOM period.

TABLE 21-3 COMPANY MANPOWER Mandalay Resources Corporation – Cerro Bayo Project

Area Number Management 4 Mine Operation 197 Eng. & Survey 10 Geol. & D.D. 67 Processing 32 Laboratory 12

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Area Number Mtce & Services 71 Accounting 7 Logistics 17 Environment 4 Risk Prevention 5 Human Resources 4 Camp Services 8 Total 438

TABLE 21-4 CONTRACT MANPOWER Mandalay Resources Corporation – Cerro Bayo Project

Area Number Orica 8 Security 24 Sodexco 21 Sotraser (transp.) 14 Luiz Munoz (vulcanization) 2 Atlas Copco 3 Ore Transport 8 Juan Nunez (garbage) 2 Sergio Azocar (tanker truck) 2 Robinson Casanova (sanitary) 2 Raul Vernal (Conc. Transport) 3 Trapanada (pest control) 2 Transporte Benumapu (fuel) 1 Rodrigo Gomez (tanker truck) 2 Juan Nunez (water) 1 Raul Bernal(cierre cascada) 4 Luis Hernandez(cpr consultoria) 2 Sandvik SA Chile 2 Filter Part Service (FPS) 3 Richard Candia 2 Victor Soto (arriendo de equipo) 1 Total 107

The mine has varying schedules for personnel. The miners work a ten day on five day off

schedule, the plant personnel work a seven and seven schedule, the geology personnel work

a fourteen and seven schedule, cleaning personnel a six and one schedule, and the

administration personnel a five and two schedule.

There are a number of bonuses offered by the company as listed below.

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• Production and cost bonus

• Safety bonus

• Night shift bonus

• Housing bonus

• Legal holiday bonus

• School scholarships for employee dependents

• Festive day bonus

• Seniority bonus

• The company also offers benefits for medical plan, life insurance, death leave and benefits, meals on site, clothing for winter season, annual vaccinations, transportation benefits, and other benefits

RPA has reviewed the wages and benefits and these are comparable to other Chilean

operations.

Most of the hourly workforce comes from Chile Chico or nearby towns and villages and

employee turn-over is very low, the mine being of major economic importance to the area. An

exception to this is the geology staff, of which 60% come from Argentina, hence the 14 and

seven work day cycle.

Relations with the site contractors appear to be very good as well as those with the mine

management and the workforce in general.

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22 ECONOMIC ANALYSIS This section is not required as the property is currently in production, Mandalay is a producing

issuer, and there is no material expansion of current production. RPA has verified the

economic viability of the Mineral Reserves via cash flow modelling, using the inputs discussed

in this report.

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23 ADJACENT PROPERTIES RPA is not aware of any significant deposits on adjacent properties.

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24 OTHER RELEVANT DATA AND INFORMATION No additional information or explanation is necessary to make this Technical Report

understandable and not misleading.

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25 INTERPRETATION AND CONCLUSIONS RPA offers the following conclusions regarding the Cerro Bayo property:

• The Project has met its 2014 exploration objectives in that significant new gold and silver mineralization has been found and added to the Mineral Resources and Mineral Reserves.

• The Project hosts a significant gold and silver mineralized system and there is good potential to further increase the resource base in defined veins and adjacent targets, especially under the lake.

• Epithermal gold and silver mineralization is associated with quartz veining within a moderately welded sequence of dacitic and rhyolitic tuffs.

• Drilling to date has intersected high-grade mineralized veins and vein systems associated with alteration assemblages that suggest at least three stages of precious metal deposition.

• The sampling, sample preparation, and sample analysis programs are appropriate for the type of mineralization.

• The existing internal laboratory QA/QC program is appropriate, and Mandalay has implemented an additional “blind” QA/QC program for enhanced validation of the accuracy and precision of the sample results, as previously recommended by RPA.

• Mineral Resources and Mineral Reserves were estimated according to the CIM definitions (2014).

• Mineral Resources are reported inside vein wireframe models based on US$1,400 per ounce gold and US$24 per ounce silver, at a 150 g/t AgEq cut-off grade, accounting for concentrate transportation, treatment, and refining costs.

• Mineral Reserves were estimated using prices of US$1,200 per ounce for gold and US$20 per ounce for silver, at a 184 g/t AgEq cut-off grade accounting for concentrate transportation, treatment, and refining costs.

• The Mineral Reserves were estimated using a minimum mining width of 2.4 m. RPA is

of the opinion, based on observations on site, that the stope dilution factors could be significantly lower with continued careful planning and execution of drilling and loading operations. Reduction of dilution in the development drives, however, is more difficult, as a minimum drift width is required to accommodate equipment sizes and clearance regulations for such equipment.

• The LOM plan, based on Mineral Reserves, shows a mine life of approximately five and half years.

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• For the LOM plan, the expected capital investment totals approximately US$88 million, including US$28 million for mine equipment and rebuilds, US$30 million in mine development, US$18 million in closure costs, and a contingency of US$11.5 million. RPA finds the capital costs to be reasonable.

• The LOM plan indicates that production rate increases realized in 2014 can be maintained. Production will come from twelve veins during the LOM, accessed from portals, which provide flexibility and sufficient working faces to meet the average production rate of 1,250 tpd. Production will come from the Marcela and Raul veins from 2017 to 2019. Production will consist of approximately 80% from stoping and 20% from ore development during the LOM.

• The mine development rates can be achieved provided sufficient manpower and equipment is maintained.

• There may be opportunities to reduce operating costs (US$93.86/t milled during 2014), however, it is important that cost reductions do not come at the expense of reduced productivity. The average LOM operating cost is estimated at US$91.72 per tonne milled.

• Given the number of potential work areas that can be developed, the current productivity level, and the quality of the technical staff and management, RPA is of the opinion that the LOM plan can be achieved.

• RPA has verified the economic viability of the Mineral Reserves via cash flow modelling, using the inputs discussed in this report.

• Mandalay maintains longitudinal sections that identify the areas being mined and indicate those areas that are within and outside of the planned mining areas to facilitate future reconciliation. RPA supports this initiative.

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26 RECOMMENDATIONS RPA makes the following recommendations:

• Carry out additional density measurements on samples specific to individual veins, in order to identify local variations, as well as confirm and support future resource estimates.

• Develop a standard operating procedure for in-house density determinations and implement some outside checks on the density determinations to support and confirm in-house results.

• Carry out channel sampling across the entire face for each round, to obtain additional information on grade distribution, especially along indistinct contacts between mineralized and non-mineralized zones, and to determine dilution grades immediately adjacent to veins.

• Document standardized checks of all core and channel sample data prior to entry into the master database.

• Sample all core intervals immediately adjacent to mineralization, to eliminate undersampling of mineralized “shoulders”, with an additional review after assays have been returned.


• Purchase a high grade silver CRM.



• Review the channel sampling and channel sampling duplicate procedures.

• Resurvey drill hole collars that have discrepancies with the topographic surface.

• Build a relational database incorporating the lithology and structural tables.

• Digitize underground mapping and incorporate into the model.

• Review vein wireframes prior to the next resource update, as some modelled intersections were not tied to drill holes. Seam models are very sensitive to changes in orientation; Mandalay personnel should ensure that the vein wireframes achieve the resource minimum width criteria.

• Carry out a structural analysis to assist in construction of future domain models.

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• Develop a wireframe modelling procedure which includes wireframe model validation to optimize the resource and diluted vein solids.

• Generate a short term block model for each vein in production to perform reconciliation more effectively.

• Complete reconciliation on a more regular basis. Reconciliation is recommended each

quarter to permit adjustments of the yearly budget plan. This should include reconciling tonnages and grades from stope operations to the mill production, and resource block model, as well as confirmation of dilution factors through use of a CMS.

• For future mining that will be carried out on veins located under the Laguna Verde lake, RPA recommends developing a protocol for the approach which would include drilling of test holes above existing workings as well as out in front of the development headings as a precaution. A crown pillar of at least 50 m thick is planned to be left in place. Also, a program of monitoring, such as the use of extensometers, should be developed to provide information on a continual basis to ensure that any change in conditions is noted and mitigation measures can be taken.

• Complete the 2015 exploration plan, consisting of geochemical sampling and a 28,000 m drill program, budgeted for approximately US$3.0 million to continue to define and infill the south extension of Yasna, Coyita, and Kasia veins under the lake and to explore for new veins.

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27 REFERENCES Casanga, R., 2014, Informe, Aplicación Programa QA/QC, Dpto. Control de Calidad, Enero-

Octubre 2013, in-house report prepared for Compañia Minera Cerro Bayo Ltda., 2014. Casanga, R., 2013, Informe, Aplicación Programa QA/QC, Dpto. Control de Calidad, Enero-



Octubre 2011, in-house report prepared for Compañia Minera Cerro Bayo Ltda., 2011. Casanga, R., 2011, Informe, Procedimiento de Determinación Oro-Plata por Ensayo a Fuego

Via Gravimetrica, in-house report prepared for Compañia Minera Cerro Bayo Ltda., June 1, 2011.

Casanga, R., 2011, Informe, Procedimiento de Preparación Mecánica de Muestra Mineral, in-

house report prepared for Compañia Minera Cerro Bayo Ltda., June 1, 2011. Casanga, R., 2011, Informe, Procedimiento Uso Chancador de Mandíbula, in-house report

prepared for Compañia Minera Cerro Bayo Ltda., May 30, 2011 Casanga, R., 2011, Informe, Procedimiento Uso Chancador de Rodillo, in-house report

prepared for Compañia Minera Cerro Bayo Ltda., May 30, 2011 Casanga, R., 2011, Informe, Procedimiento Uso Chancador de Pulverizador, in-house report

prepared for Compañia Minera Cerro Bayo Ltda., June 1, 2011 CIM, 2014, CIM Definition Standards - For Mineral Resources and Mineral Reserves, Prepared

by the CIM Standing Committee on Reserve Definitions, Adopted by CIM Council on May 10, 2014.

Jensen E.P. & Barton M.D., 2003, Gold deposits related to alkaline magmatism; In Society of

Economic Geologists Reviews in Economic Geology 13, 279-314. Lecuyer, N., and Cardenas, R., 2014, Technical Report on the Cerro Bayo Project, Region XI

(Aisén), Chile, NI 43-101 Report, prepared for Mandalay Resources Corporation by Roscoe Postle Associates Inc., March 27, 2014.

Lecuyer, N., and Cardenas, R., 2013, Technical Report on the Cerro Bayo Project, Chile, NI

43-101 Report, prepared for Mandalay Resources Corporation by Roscoe Postle Associates Inc., March 27, 2013.

Lecuyer, N., and Nakai-Lajoie, P., 2012, Technical Report on the Cerro Bayo Project, Chile,

NI 43-101 Report, prepared for Mandalay Resources Corporation by Roscoe Postle Associates Inc., March 16, 2012.

www.rpacan.com


Martinez, Marcos O. Quezada, May 15, 2008, Informe Pruebas Flotación Minerales Veta Dagny, Planta Procesos- Compañia Minera Cerro Bayo Ltda. 37 pp.

O’Leary, B., and Sims, J., 2009, Cerro Bayo Mine, Technical Report, prepared for Coeur

d’Alene Mines Corporation, January 1, 2009. Robert, F., Brommecker, R., Bourne, B.T., Dobak, P.J., McEwan, C.J., Rowe, R.R., Zhou, X.

2007: Models and Exploration Methods for Major Gold Deposit Types; In "Proceedings of Exploration 07: Fifth Decennial International Conference on Mineral Exploration" edited by B. Milkereit, 2007; Ore Deposits and Exploration Technology, p. 691-711.

Rolando, A.P., 2014, Programa QA/QC aplicado a muestras de sondajes, 2014, in-house

report prepared by Grupo Exploración C.M.C.B., 2014. Rolando, A.P., 2014, Programa QA/QC aplicado a muestras de mina, 2014, in-house report

prepared by Grupo Mina C.M.C.B., 2014. Rolando, A.P., 2013, Programa QA/QC aplicado a muestras de sondajes, 2013, in-house

report prepared by Grupo Exploración C.M.C.B., 2013. Rolando, A.P., 2013, Programa QA/QC aplicado a muestras de mina, 2013, in-house report

prepared by Grupo Mina C.M.C.B., 2013. Rolando, A.P., 2013, Informe Geología de Exploración, Diciembre de 2013, in-house report

prepared by Grupo Exploración C.M.C.B., 2013. Rolando, A.P., 2011, Informe Geología de Exploración, Diciembre de 2011, in-house report

prepared by Grupo Exploración C.M.C.B., 2011. SGS Lakefield Research Chile S.A., Informe Final, Auditoria Técnica a Procesos de

Laboratorio Químico de Compañia Minera Cerro Bayo, in-house report prepared for Compañia Minera Cerro Bayo Limitada, Sept. 14, 2011.

Sillitoe, R.H., and Hedenquist, J.W, 2003, Linkages Between Volcanotectonic Setting, Ore-

fluid Compositions, and Epithermal Precious Metal Deposits, in Society of Economic Geologists Special Publication 10, 315-343.

Simmons, S.F., White, N.C. and John, D.A., 2005, Geological characteristics of epithermal

precious and base metal deposits, in Economic Geology 100th Anniversary Volume, 485-522.

Sims, J., 2010, Cerro Bayo Mine, Technical Report, prepared for Coeur d’Alene Mines

Corporation, January 1, 2010. SRK Consulting, 2010, NI 43-101 Technical Report, Cerro Bayo Mine, Chile, prepared for

Mandalay Resources Corp., May 14, 2010. Tomás Salgado Meza, Ing. Analista Geomecánico, 8 Nov., 2010, “Estudio De Diseño

Geomecánico Preliminar y Recomendaciones De Fortificacioñ Proyecto Delia NW” Compañia Minera Cerro Bayo Ltda., Informe Final.

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www.geology.about.com, 2012, derived from A. Alden USGS OFR 97-470D (Generalized Geologic Map of Chile).

http://www.geology.about.com/

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28 DATE AND SIGNATURE PAGE This report titled “Technical Report on the Cerro Bayo Project, Region XI (Aisén), Chile” and

dated March 13, 2015, was prepared and signed by the following authors:

(Signed & Sealed) “Normand L. Lecuyer” Dated at Toronto, ON Normand L. Lecuyer, P.Eng. Principal Mining Engineer (Signed & Sealed) “Rosmery J. Cárdenas Barzola” Dated at Toronto, ON March 13, 2015 Rosmery J. Cárdenas Barzola, MAusIMM CP (Geo) Senior Geologist

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29 CERTIFICATE OF QUALIFIED PERSON NORMAND L. LECUYER I, Normand L. Lecuyer, P.Eng., as an author of this report entitled “Technical Report on the Cerro Bayo Project, Region XI (Aisén), Chile” prepared for Mandalay Resources Corporation (the “Issuer”) and dated March 13, 2015, do hereby certify that:

1. I am Principal Mining Engineer with Roscoe Postle Associates Inc. of Suite 501, 55 University Ave Toronto, ON, M5J 2H7.

2. I am a graduate of Queen’s University, Kingston, Canada, in 1976 with a B.Sc. (Hons.)

degree in Mining Engineering.

3. I am registered as a Professional Engineer in the provinces of Ontario (Reg. # 26055251), Québec (Reg. # 34914) and Newfoundland and Labrador (Reg. #06161). I have worked as a mining engineer for a total of 37 years since my graduation. My relevant experience for the purpose of the Technical Report is: • Review and report as a consultant on numerous exploration and mining projects

around the world for due diligence and regulatory requirements. • Vice-President Operations for a number of mining companies. • Mine Manager at an underground gold mine in Northern Ontario, Canada. • Manager of Mining/Technical Services at a number of base-metal mines in Canada

and North Africa. • Vice-President Engineering at two gold operations in the Abitibi area of Quebec,

Canada.

4. I have read the definition of "qualified person" set out in National Instrument 43-101 (NI 43-101) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a "qualified person" for the purposes of NI 43-101.

5. I visited the Cerro Bayo Project from January 8 to 10, 2014.

6. I am responsible for the overall preparation of the Technical Report, for Sections 1 to 3, 5, 13, 15 to 22 and 24 as well as parts of Sections 25, 26 and 27 of the Technical Report.

7. I am independent of the Issuer applying the test set out in Section 1.5 of NI 43-101.

8. I have prepared previous Technical Reports in 2012, 2013, and 2014 on the property that is the subject of this Technical Report.

9. I have read NI 43-101, and those sections of the Technical Report for which I am responsible, have been prepared in compliance with NI 43-101 and Form 43-101F1.

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10. At the effective date of the Technical Report, to the best of my knowledge, information, and belief, those sections of the Technical Report for which I am responsible contain all scientific and technical information that is required to be disclosed to make the Technical Report not misleading.

Dated this 13th day of March, 2015 (Signed & Sealed) “Normand L. Lecuyer” Normand L. Lecuyer, P.Eng.

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ROSMERY J. CÁRDENAS BARZOLA I, Rosmery J. Cárdenas Barzola, MAusIMM CP (Geo), as an author of this report entitled “Technical Report on the Cerro Bayo Project, Region XI (Aisén), Chile” prepared for Mandalay Resources Corporation (the “Issuer”) and dated March 13, 2015, do hereby certify that: 1. I am Senior Geologist with Roscoe Postle Associates Inc. of Suite 501, 55 University Ave

Toronto, ON, M5J 2H7. 2. I am a graduate of Universidad Nacional de Ingenieria, Lima, Peru, in 2002 with a B.Sc.

degree in Geological Engineering. 3. I am registered as a MAusIMM Chartered Professional under the Discipline of Geology in

the Province of Carlon South – Victoria, Australia (Reg. #302872). I have worked as a geologist for a total of 11 years since my graduation. My relevant experience for the purpose of the Technical Report is: • Geological modelling and QA/QC experience. • Evaluation Geologist and Resource Modelling Geologist with Barrick Gold Corporation

at Pueblo Viejo Project (Dominican Republic) and Lagunas Norte Mine (Peru). 4. I have read the definition of "qualified person" set out in National Instrument 43-101 (NI 43-

101) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a "qualified person" for the purposes of NI 43-101.

5. I visited the Cerro Bayo Project from January 8 to 10, 2014.

6. I am responsible for Sections 4, 6 to 12, 14 and 23 as well as parts of Sections 1, 2, 25,

26, and 27 of the Technical Report. 7. I am independent of the Issuer applying the test set out in Section 1.5 of NI 43-101. 8. I have prepared previous Technical Reports in 2013 and 2014 on the property that is the

subject of this Technical Report. 9. I have read NI 43-101, and those sections of the Technical Report for which I am

responsible, have been prepared in compliance with NI 43-101 and Form 43-101F1. 10. At the effective date of the Technical Report, to the best of my knowledge, information, and

belief, those sections for which I am responsible in the Technical Report contain all scientific and technical information that is required to be disclosed to make the Technical Report not misleading.

Dated 13th day of March, 2015 (Signed & Sealed) “Rosmery J. Cárdenas Barzola” Rosmery J. Cárdenas Barzola, MAusIMM CP (Geo)

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