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HISTORICAL OXIDE ZINC RESOURCE REVIEW
SIERRA MOJADA PROJECT
ESMERALDA, COAHUILA, MEXICO
Prepared For:
METALLINE MINING COMPANY
2200 – 885 WEST GEORGIA STREET
VANCOUVER, BC V6C 3E8
April 25, 2011
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1. Contents
1. Executive Summary ........................................................................................... 3
2. Introduction ........................................................................................................ 4
2.1 Terms of Reference ........................................................................................... 5
2.2 Personal Inspection ............................................................................................... 5
2. Reliance on Other Experts ................................................................................. 6
3. Property Description and Location ..................................................................... 6
4. Access, Climate, Local Resources, Infrastructure and Physiography ................ 6
5. History ................................................................................................................ 6
6. Geology and Mineralization ................................................................................ 6
7. Deposit Types .................................................................................................. 13
8. Exploration ....................................................................................................... 13
9. Drilling .............................................................................................................. 13
10. Sample Preparation, Analysis and Security .................................................. 14
11. Data Verification............................................................................................ 14
12. Mineral Processing and Metallurgical Testing ............................................... 14
13. Mineral Resource Estimates ......................................................................... 15
14. Adjacent Properties ....................................................................................... 16
15. Other Relevant Data and Information ........................................................... 16
16. Interpretation and Conclusions ..................................................................... 16
Recommendations ................................................................................................... 17
17. References ................................................................................................... 18
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2. Executive Summary
In January 2010 Pincock, Allen & Holt issued the “Technical Report and Resource
Estimate for the Sierra Mojada Project, Mexico”. On April 19th 2011 Geosim
Services Inc. and Nilsson Mining Services produced a technical report on the
“Shallow Silver Zinc Deposit, Sierra Mojada Project, Coahuila State, Mexico.”
This review does not disclose any new resource estimates for the Sierra Mojada
project and although it follows the format of the new CSA NI 43-101 form, it has not
been prepared to meet NI 43-101 standards for disclosure.
JDS Energy & Mining Inc. has incorporated information and resources from both
reports as well as reviewing internal company reports, press releases and SEC
filings. The purpose of this report is to identify important information about the
property and to provide value to the client by outlining an exploration direction to
improve the potential of adding or upgrading the presently understood resources.
JDS noted that since the merger with Dome Ventures Inc. Metalline Mining
Company (MMC) has been working diligently toward addressing the
recommendations of the PAH 2010 technical report. That report disclosed a
combined inferred resource of 48.82 million tonnes at 96.3g/t silver and 5.98% zinc.
Under CIM guidelines and inferred resource has uncertainty such that it cannot be
assumed that all or any part will be upgraded to indicated or measured resources.
Three key recommendations of the 2010 PAH report were to:
a. Conduct a robust QA/QC- program to provide a measure of confidence for
the sample data used to estimate the resource and potentially upgrade a
portion of the inferred resources.
b. An exploration drill program to “better delineate the north silver
mineralization as well as provide better geological information into the
continued development of the resource model”.
c. Surface and underground mapping and surveying to help address the
“considerable debate over the genesis of the Sierra Mojada deposits”.
The author of this review can confirm that:
a. The QA/QC program was completed and that future grade modeling
should have both measured and indicated resources.
b. A 99-hole drill program was initiated on January 4th, 2010 to address the
shallow silver mineralization. This program formed the basis for a new NI
43-101 technical report by GeoSim/Nilsson Mining Services.
c. Surface mapping was reviewed and areas around the test trench on Line
629600E remapped. For safety reasons no underground mapping or
surveying was permitted.
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In August 2010, Pincock, Allen & Holt completed the QA/QC campaign and wrote
that “Based on the execution of the Program and a detailed review of the results,
PAH concludes that the drill hole assay data for channel and core samples used in
its January 2010 resource estimate are of sufficient quality to support measured and
indicated resources. Note that converting inferred resources to measured and
indicated is contingent upon other factors not related to data quality.”
JDS is of the opinion that among “other factors” for upgrading inferred resources
would include increased drilling and sample density along with a robust lithology
model to constrain grade modeling methods.
To help improve understanding of the lithology and genesis of the deposit, Metalline
contracted the technical expertise from consulting geologists Jon Thorson PhD, and
Martin King after the issuance of the PAH resource. Mr. King has been retained to
continue surface mapping and interpretations which are presently being integrated
with those of the onsite geologists.
With respect to the conclusions and recommendations of the 2011 Geosim/NMS
Technical Report, Metalline is presently doing exploration drilling along strike to the
east and will commence infill drilling in late April.
There remains considerable upside potential within the zinc resource and three
obvious and immediate value-add opportunities that warrant further evaluation:
Upgrade a significant portion of the PAH 2010 resource from an Inferred
classification to Measured or Indicated (increased confidence);
Expand the resource at depth to include the smithsonite (white zinc) zone
(increased resource); and
Identify waste-stripping synergies between the zinc oxide and the near
surface silver resources (reduced stripping).
3. Introduction
Since both of the technical reports have associated zinc resources, it is important to
understand the spatial relationship between the two and put into context the upside
exploration potential and future zinc mining synergies that may be identified from the
2011 exploration program.
In March 2011 a large geophysical program was flown over the property to help
identify targets for future prospecting. Concurrent with that program, a 20,000m drill
program was implemented to address better geologic delineation and improve
confidence in the calculated resources. The infill program will also upgrade much of
the inferred and indicated resources into indicated and measured categories.
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JDS has been providing Metalline with overall project management assistance which
includes reviews of data collection and management; identifying productivity
improvements and implementing health and safety standards.
Site data management has been through the use of Gemcom Software
International’s GEMS®. JDS also uses this software and helped Metalline by
restructuring databases, introducing error traps and organizing additional training.
Currently SMP has identified three distinct mineralized zones in the primary zinc
resource zone at the base of the Sierra Mojada range:
1. The silver oxides (argentite/acanthite +/- silver halides) in a breccia zone
along the erosional unconformity below the Tertiary Upper Conglomerate
which overlies the breccia, the Aurora Formation limestone and dolomite
beds;
2. a lead-silver oxide manto higher in the stratigraphic sequence but historically
assumed to be mined out; and
3. two types of zinc oxide mantos:
a. the red zinc (hemimorphite, goethite, hematite) zone, and a deeper
b. white zinc (smithsonite) zone.
The inter-relationships of the mineralization and the fact that historical underground
mining focused on very high grade ores suggests that with improved mining and
milling techniques and current high silver and zinc commodity prices, the exploration
upside at the Sierra Mojada warrants further evaluation.
2.1 Terms of Reference
Metalline Mining Company (MMC) commissioned JDS to review all available
documentation stored at the Sierra Mojada project to help guide future exploration
plans. This information included historic internal company reports and investigations
by external consultants.
JDS Energy & Mining Inc. is independent of Metalline Mining Company. Fees for
this report and site services are not dependent in whole or in part on any prior or
future agreement or understanding resulting from the conclusions of this report.
2.2 Personal Inspection
JDS senior project manager Allan Reeves, P.Geo. R.E.T, PMP has been working
approximately 10-14 days per month at the project since August 2010. He was also
present for two of the site visits undertaken by Jon Nilsson in April (10-12th 2010 and
Jan 12-13th, 2011).
Mr. Reeves has had unrestricted access to all of Metalline’s historical and current
data and ample time and opportunity to converse with staff geologists and
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consultants Martin King and Jon Thorson with respect to the geology and
mineralization of the Sierra Mojada project.
JDS senior geologist Tony Gonzales conducted a site visit April 11-22, 2011. During
that time he reviewed the recent geologic reports and cross sections. He also had an
opportunity to examine some NITON® XRF data collected and do a preliminary
assessment of its use to correlate some elements with lithologies.
4. Reliance on Other Experts
JDS has not verified the published resources and relies on the work of both PAH
and Geosim/NMS in this overview. It is the author’s opinion that the data used by
PAH and Geosim/NMS was of sufficient quality to produce the technical reports and
notes that the quality is being maintained for future resource and economic
evaluations.
5. Property Description and Location
The property is located in the Mexican state of Coahuila approximately three hours
(250km northwest) by road north of Torreón.
6. Access, Climate, Local Resources, Infrastructure and
Physiography
For the purposes of brevity, the author refers the reader to the Geosim/NMS
technical report for a concise and current description of local infrastructure etc.
7. History
For the purposes of brevity, the author refers the reader to the Geosim/NMS
technical report for a summary of the mining history of the Sierra Mojada district.
8. Geology and Mineralization
The Geosim/NMS report has an excellent summary of the current geologic model.
One aspect that requires further investigation is the width of the fluid-controlling
Sierra Mojada fault system.
As noted, consulting geologist Martin King is involved with surface mapping,
reviewing core logs and generating a current stratigraphic sequence in the
immediate area of the resources. The 2011 Shallow Silver Technical report has a
very complete summary of the geology and mineralization partially repeated here.
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In very general terms, the host rock for local mineralization is the Aurora Formation
limestone sequence which contains clean limestone, carbonaceous limestone and
dolomitic beds. Currently a correlation study between the zinc mantos and
favourable horizons is under review by the site geologists. The basic mineralization
zones have been described in the Geosim/NMS report as follows:
1. Zinc Manto Zone. Predominantly zinc dominated, but with subordinate Lead – rich manto (principally situated in the footwall rocks of the Sierra Mojada Fault System)
2. Shallow Silver Zone. Essentially the up-dip representation of the manto mineralization with supergene enrichment of silver in various breccias zones, predominantly of karstic derivation, located within and directly below a significant unconformity which represents the erosion of upper parts of the carbonate sequence,
3. Structurally controlled, sulphide-dominated Pb-Ag-(Cu) mineralization occurring along select segments of the Sierra Mojada Fault Zone principally along north-dipping structural segments along the Upper Conglomerate-Carbonate contact (Veta Rica Type mineralization).
4. Various Cu-Ag-Pb mineralization occurrences on locally mineralized shallow, north-dipping structures within the upper conglomerate and even within tectonic, structurally controlled allochthonous `rafts` in the Upper Conglomerate.
5. Disseminated copper mineralization within carbonaceous sandstones and
siliclastics in the lower parts of the carbonate sequence as observed in some of
the older workings on the `North-side` e.g. Tiro Escobedo and Tiro Volcan.
In 2010 Metalline Mining Company purchased a Niton® portable XRF unit for the
purpose of assisting in field reconnaissance programs. Initially the unit was used
during core logging to confirm that simple “grade or no-grade” determinations could
be made. This proved worthwhile and a second unit was purchased.
Niton® derived elemental concentration data were obtained from a select number of
2011 drill holes to determine the possibility of using the instrument to differentiate
rock types at the Sierra Mojada Project. Limestone and dolomite were chosen for
the test because they are typically easily identifiable, have chemical and genetic
variabilities and they provide a large number of sample points. Elements that were
present in detectable concentrations were used in the test and include: As, Ba, Ca,
Cs, Fe, K, Mn, Sr, Te and Zn.
The mean concentration of these elements were statistically evaluated using the F-
test two-sample for variances and Two-sample t-test statistics “built-in” functions in
MS Excel®. The aim of the test was to uncover statistical variations, if they exist,
between the limestone and dolomite chemistries at Sierra Mojada. The sample
sizes or “N” for the test were large enough (N > 30) to validate the method.
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The preliminary test results show that limestone and dolomite at Sierra Mojada can
be differentiated by Sr, Cs and Zn. The Niton® XRF Analyzer can be used to test
other rock types at Sierra Mojada and potentially aid in identifying difficult lithologies
for interpretations and developing the newly evolving stratigraphic ore model.
Figure 1 on the following page is the lithology for Section 631500E and was
prepared by site geologist Ing. Andres Castillos who has been with the project for
five years and has over sixteen years experience as an exploration geologist.
The current drill program is testing the geologic interpretation and grade control
features postulated. One target to be fully tested is the underlying white zinc manto
which presently has been defined to be about 165m thick and 450m of strike length.
It is not unreasonable to assume that its continuity may not be dissimilar to that of
the well-defined red zinc manto which has a known strike length of 2,400m and a
thickness up to 100m.
Figure 2 shows an underlay of the 631200E geology interpretation and the zinc
resource as it is currently understood. The geometry of the resource has been
defined by channel samples, underground long holes and sparse surface drilling. To
upgrade the inferred resource to the right of the figure, surface drilling is required.
PAH defined both a high-grade core and a low grade envelope. It is the opinion of
site staff that the high-grade core correlates well with a favourable horizon in the
Aurora Formation. Modifying the lithologic model and redoing a resource calculation
is unlikely to have much affect the contained metal within the high grade core but is
considered likely to have an impact on the metal content and distribution within the
low grade envelope.
Please note that the Mineral Resources referred to in this review follow the
guidelines of Canadian National Instrument 43-101 (“NI 43-101”). The modeling and
estimate of the Mineral Resources were done under the definitions and criteria set
forth in NI 43-101; by independent consultants. The Mineral Resources referred to
in this report conform to the definitions adopted by the Canadian Institute of Mining,
Metallurgy and Petroleum (“CIM”) in December 2000 and modified in 2005, and
meet the criteria of those definitions, where:
A Mineral Resource is a concentration or occurrence of natural, solid, inorganic or
fossilized organic material in or on the Earth‟s crust in such form and quantity and of
such a grade or quality that it has reasonable prospects for economic extraction. The
location, quantity, grade, geological characteristics and continuity of a Mineral
Resource are known, estimated or interpreted from specific geological evidence and
knowledge.
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Mineral Resources are sub-divided, in order of increasing geological confidence, into
Inferred, Indicated and Measured categories. An Inferred Mineral Resource has a
lower level of confidence than that applied to an Indicated Mineral Resource. An
Indicated Mineral Resource has a higher level of confidence than an Inferred Mineral
Resource but has a lower level of confidence than a Measured Mineral Resource.
An „Inferred Mineral Resource‟ is that part of a Mineral Resource for which quantity
and grade or quality can be estimated on the basis of geological evidence and
limited sampling and reasonably assumed, but not verified, geological and grade
continuity. The estimate is based on limited information and sampling gathered
through appropriate techniques for locations such as outcrops, trenches, pits,
workings and drillholes. Due to the uncertainty that may be attached to Inferred
Mineral Resources, it cannot be assumed that all or any part of an Inferred Mineral
Resource will be upgraded to an Indicated or Measured Mineral Resource as a
result of continued exploration.
An „Indicated Mineral Resource‟ is that part of a Mineral Resource for which quantity,
grade or quality, densities, shape and physical characteristics, can be estimated with
a level of confidence sufficient to allow the appropriate application of technical and
economic parameters, to support mine planning and evaluation of the economic
viability of the deposit. The estimate is based on detailed and reliable exploration
and testing information gathered through appropriate techniques from locations such
as outcrops, trenches, pits, workings and drillholes that are spaced closely enough
for geological and grade continuity to be reasonably assumed.
A „Measured Mineral Resource‟ is that part of a Mineral Resource for which quantity,
grade or quality, densities, shape, and physical characteristics are so well
established that they can be estimated with confidence sufficient to allow the
appropriate application of technical and economic parameters, to support production
planning and evaluation of the economic viability of the deposit. The estimate is
based on detailed and reliable exploration, sampling and testing information
gathered through appropriate techniques from locations such as outcrops, trenches,
pits, workings and drillholes that are spaced closely enough to confirm both
geological and grade continuity.
Under the definition of “inferred” resources this report cannot be construed as a
material change due to the uncertainty of the geologic model and limited drilling
information that was available for grade modeling in late 2009.
The principle of the current exploration program is that the zinc oxide resource is
amenable to open pit mining methods. The proximity of the shallow silver zone and
the zinc resource are shown on Figure 2 along with a rough pit outline that is guiding
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the program. At the top of the highwall (south side or to the right of the figure),
abandoned lead-silver manto workings have been highlighted although they are just
off the section to the east. A program to test for minable silver grades is needed as
this could further reduce the waste stripping to expose the zinc resource.
The south wall (highwall) is assumed to be completely in the Aurora Formation and
that slope angles could be increase to those seen at the adjacent Mina Dolomita
operated by Peñoles. Shown slope angles have been reduced to conservative
values of 35o within the Quaternary Alluvium/Cretaceous Upper Conglomerate, and
50o within the limestone/dolomite package. A full geotechnical drilling program and
analysis will be required for future design purposes.
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Figure 1 - Section 631200E
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Figure 2 – 632100E lithology underlay with GEMS data overlay.
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9. Deposit Types
The zinc mantos are likely low-temperature carbonate hosted replacement deposits
(CRD’s) formed from basinal brines that may have undergone a later supergene
remobilization and reconstitution of sulphide mineralization.
10. Exploration
Since August 2010 a concerted effort has been made to compile historical mining
level maps and cross sections. Some of this information dates back to the 1930’s.
Many of the abandoned stopes and tunnels were re-surveyed over the past few
years with a total station (Sokkia 5” accuracy) and it is now possible to correctly
orient the historic mine grids to the NAD 83 Zone 12 datum. Structure and geologic
contacts on the old level plans/sections are being transferred to the digital database.
Present exploration outside of the main deposit has only recently commenced.
Initially it consists of ground-truthing the geology of many of the old prospects that
outcrop at surface. Grab samples and specimens for thin section have been taken
although when the results will be obtained is unknown at this time.
Going forward, Metalline plans prospect sampling and mapping of areas outside of
the main deposit which should lead to the identification of additional targets. These
targets will be mapped and sampled in greater detail and tested by drilling. The use
of geophysical techniques and geological models will also be considered as
additional target generation tools.
11. Drilling
As noted in both of the technical reports, historical drilling has been significant
although the vast majority of the meterage had been obtained during underground
zinc oxide resource delineation. At the time of the PAH 2010 report the underground
longholes and channel samples were not considered acceptable for modeling the
resource to measured and indicated classifications. Metalline followed up the PAH
2010 recommendation for a robust QA/QC program and in August 2010 PAH
confirmed that the data could be utilized in future resource calculations to reclassify
some of the inferred resources to indicated and measured.
Of particular note is that the smithsonite zone is considered to sit lower in the
stratigraphic sequence. As described by PAH “The Red Zinc zone has a known
strike length of 2,400m and a thickness up to 100m. This zone appears to be parallel
or semi-parallel to the primary dolomitic host bedding, which dips to the south at
approximately 15o. PAH has interpreted a higher grade zone of semi-massive to
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massive hemimorphite (minor smithsonite), within a halo of fracture fill and
replacement lower grade mineralization”.
JDS concurs with site staff that the higher grade hemimorphite zone was likely
favouring a particular horizon of the stratigraphic sequence. It is not unreasonable
to assume that the underlying smithsonite zone could have similar dimensions and
attributes. Given the lack of drill data to depth, there are large areas still untested.
For 2011, the 20,000 metre drill program is split about 50/50 between testing the
shallow silver zone and infill drilling of the red zinc manto. Several of the holes over
the primary red zinc resource will be extended to test the smithsonite zone. The
intent is to get enough intercepts in the smithsonite to develop robust geologic and
grade models that will allow calculation of NI43-101 compliant resources that will
include measured, indicated and inferred classifications.
12. Sample Preparation, Analysis and Security
It is the author’s opinion that the current core handling, addition of blanks and
standards and security are acceptable for resource analyses. With the closure of
the onsite assay lab, any questions of impropriety or poor techniques were laid to
rest.
13. Data Verification
Metalline mining company has implemented the services of ioGlobal Services Inc. to
collect the core logging spreadsheets from site and the ALS-Chemex (Chihuahua
lab) reports for QA/QC. The final approved spreadsheets are returned and comma
separated values files produced for input into programs such as MapInfo® and
GEMS®.
14. Mineral Processing and Metallurgical Testing
As reported in the Geosim/NMS technical report, metallurgical testing is in progress
and once the results are made available, JDS has been requested to produce a
preliminary economic assessment of the silver resource. Given the importance of
the current drilling campaign and assessment of the lithologic models, the PEA may
be delayed until late Q3 2011.
Once the spatial relationships of the silver and zinc deposits is properly understood,
a new program of metallurgical testing should be conducted by either using some of
the remaining core or implementing a program of metallurgical drill testing.
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15. Mineral Resource Estimates
The two mineral resource estimates for the Sierra Mojada Project are shown in the
following tables. Please note that remodeling or recalculating either of the current
zinc or silver resources is beyond the scope of this report.
Table 1- PAH 2010 Resources
Table 2 - Geosim/NMS 2011 Resource
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16. Adjacent Properties
There are no nearby zinc or silver producing mines. Valuable information on
equipment suppliers, labour costs and mining activities have been kindly provided by
Peñoles Mina Dolomita Mine Manager Ruben Esquivel Carrillo.
17. Other Relevant Data and Information
JDS is not aware of any other relevant data or information with respect to the
project.
18. Interpretation and Conclusions
Better delineation of the stratigraphic sequence is likely to reduce the thickness of
the low grade portion of the red zinc manto within the geologically identified
limestone and dolomite horizons. This area contains inferred resources with low
confidence and uncertainty. Many areas are under-drilled.
By using well-defined geologic contacts, updated grade modeling may allow
Metalline the opportunity to segregate and stockpile lower grade red zinc resources
until later in any potential mine life while focusing on processing high-grade zinc
lenses.
Historic mining confirms that exploration potential in the lower white zinc manto
should be tested to NI 43-101 standards. This resource has positive implications to
the project, particularly if the geologic model confirms grade and continuity of similar
dimensions to the red zinc manto.
Furthermore, the shallow silver zone could be expected to have a positive impact on
any economic zinc oxide pit by reducing the overall waste stripping ratio. A two-
stage processing circuit that could capitalize on silver mining first and stockpiling
zinc-rich mineralized horizons for later processing is worthy of further consideration.
In summary, three obvious and immediate value-add opportunities for the project
should result from the 2011 infill drill program:
Upgrade a significant portion of the resources from an Inferred classification to
Measured or Indicated (increased confidence);
Expand the resources up and down dip, along strike to include the smithsonite
zone and expand the shallow silver zone (increased resources); and
Identify waste-stripping synergies between the zinc oxide and the near surface
silver resources (reduced stripping).
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19. Recommendations
It is recommended that Metalline conduct a two phase data collection program. The
first phase would be to have the site staff:
Complete the collation and integration of zinc-related historic plans and
sections onto updated sections for digitizing;
Complete the surface mapping and sampling program;
Incorporate any recommendations from the geophysical program that have a
direct implication on the zinc resource;
Summarize the evolving geological model and use it to guide the drill
program;
Continue drilling the zinc mantos with particular emphasis on
deeper holes that will allow the incorporation of the white zinc
resource;
Test the lead-silver manto for possible incorporation into the
shallow silver zone modeling;
Be dynamic in rapidly modifying the drill program as drill results
dictate; and
Continue metallurgical testing by selecting composite samples that are
representative of limestone or dolomite horizons.
The second stage of data collection would include:
Embark on a baseline environmental program;
Complete the acquisition of outstanding land holdings;
Conduct preliminary socio-economic studies;
Consider a program of geotechnical drilling for the determination of pit slope
angles;
Investigate potential tailings storage sites;
Continue the identification of possible production water well locations.
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20. References
Ahn, Hye In; Mineralogy and Geochemistry of the Non-sulfide Zn Deposits in the
Sierra Mojada district, Coahuila, Mexico, MSc Thesis, The University of Texas
(Austin) August 2010.
Canadian Securities Administrators, Repeal and Replacement of National
Instrument 43101 Standards of Disclosure for Mineral Projects, Form r3-101F1
Technical Report, and Companion Poliy 43-101CP, April 8, 2011.
King. M. A. A Geological Review of the Sierra Mojada Zinc-Lead-Silver-Copper
Project. 25 June 2010
Kyle, J.R., PhD, 2009, Sierra Mojada Ore Characterization and Mineralization
Controls Project; December 28, 2009
Pincock, Allen & Holt, Technical Report and Resource Estimate for the Sierra
Mojada Project, Mexico. January 29, 2010
Pincock, Allen & Holt, Re-Sampling Program for the Sierra Mojada Project, August
11, 2010.
Pincock, Allen & Holt, Metalline Mining Summary Letter, April 1, 2011.
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