metal mining consultants inc hone 9137 s ridgeline …€¦ · 2016-03-17 · i, deepak malhotra ,...

METAL MINING CONSULTANTS, INC 9137 S RIDGELINE BLVD, SUITE 140 HIGHLANDS RANCH, CO 80129

PHONE: (720) 348 - 1646 FAX: (303) 790 - 1872 WWW.METALMININGCONSULTANTS.COM

NI 43-101 TECHNICAL REPORT MINERAL RESOURCE ESTIMATE

ARIZONA MINING INC HERMOSA TAYLOR DEPOSIT

SANTA CRUZ COUNTY, ARIZONA

MARCH 17, 2016

PREPARED BY METAL MINING CONSULTANTS INC

LEAD AUTHOR

SCOTT E. WILSON, C.P.G.

CO-AUTHOR DEEPAK MALHOTRA, SME-RM MARK OSTERBERG, SME-RM

Arizona Mining Inc. NI 43-101 Technical Report – Hermosa Taylor Deposit Page I

Metal Mining Consultants Inc. March 17th, 2016

DATE AND SIGNATURE PAGE

NI 43-101 Technical Report, Updated Mineral Resource, Arizona Mining Inc, Hermosa Taylor Deposit, Santa Cruz County, Arizona

The effective date of this report February 1, 2016

Dated March 17, 2016

[Signed and Sealed] Scott E. Wilson Scott E. Wilson, C.P.G. Geologist

[Signed and Sealed] Deepak Malhotra Deepak Malhotra, SME-RM Metallurgist

[Signed and Sealed] Mark Osterberg Mark Osterberg, SME-RM Geologist

Arizona Mining Inc. NI 43-101 Technical Report – Hermosa Taylor Deposit Page II


AUTHOR’S CERTIFICATE

I, Scott E. Wilson, of Highlands Ranch, Colorado, do hereby certify:

I am currently employed as President by Metal Mining Consultants Inc., 9137 S. Ridgeline Blvd., Suite 140, Highlands Ranch, Colorado 80129.

I am a co-author of the technical report titled “NI 43-101 Technical Report, Mineral Resource Estimate, Arizona Mining Inc, Hermosa Taylor Deposit, Santa Cruz County, Arizona” (the “Technical Report”) dated March 17, 2016 with an effective date of February 1st, 2016.

I graduated with a Bachelor of Arts degree in Geology from the California State University, Sacramento in 1989.

I am a Certified Professional Geologist and member of the American Institute of Professional Geologists (CPG #10965) and a Registered Member (#4025107) of the Society for Mining, Metallurgy and Exploration, Inc.

I have been employed as either a geologist or an engineer continuously for a total of 27 years. My experience included resource estimation, mine planning geological modeling and geostatistical evaluations of numerous projects throughout North and South America.

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.

I visited the Hermosa Taylor Deposit and surrounding area March 1st, 2016. I am responsible for sections 1 - 6, 12, 14 - 20 of the Technical Report. As of the date of the Technical Report, to the best of my knowledge, information and belief,

the Technical Report contains all scientific and technical information that is required to be disclosed to make the technical report not misleading.

I have had prior involvement with the property that is the subject of the Technical Report as an independent mining consultant.

That I have read NI 43-101 and Form 43-101F1, and this Technical Report was prepared in compliance with NI 43-101.

I am independent of the Arizona Mining Inc. applying all of the tests in Section 1.5 of NI 43-101.

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

Dated March 17th, 2016

[“Signed and Sealed”] Scott E. Wilson, C.P.G.

Arizona Mining Inc. NI 43-101 Technical Report – Hermosa Taylor Deposit Page III



I, Deepak Malhotra , do hereby certify:

I am currently employed as President of Resource Development Inc., (RDi) with the business address:

Resource Development Inc. (RDi) 11475 W. 1-70 Frontage Rd. North Wheat Ridge, CO 80033

I am a graduate of Colorado School of Mines with a Master of Science in Metallurgical Engineering (1974), and a PhD in Mineral Economics in (1978).

I am a registered member of the Society of Mining, Metallurgy and Exploration Inc. (SME), member No. 2006420RM and a Member of the Canadian Institute of Mining and Metallurgy (CIM) in good standing.

I have worked as a Metallurgist/Mineral Economist for a total of 43 years since my graduation from university; as an employee of several mining companies, an engineering company, a mine development and mine construction company, an exploration company and as a consulting engineer.


I am responsible for the preparation of the technical report titled "NI 43-101 Technical Report, Mineral Resource Estimate, Arizona Mining Inc., Hermosa Taylor Deposit Santa Cruz Country, Arizona, dated March 17, 2016 with specific responsibility for Section 13.

I have read National Instrument 43-101 and Form 43- 101, and the Technical Report has been prepared in compliance with that instrument and form.

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

As of the date of the Technical Report, to the best of my knowledge, information and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make the technical report not misleading.



[“Signed and Sealed”] Deepak Malhotra, SME-RM.

Arizona Mining Inc. NI 43-101 Technical Report – Hermosa Taylor Deposit Page IV



I, Mark Osterberg, of Marshfield, Wisconsin, do hereby certify:

I am currently employed as President and Chief Consultant by Mine Mappers, LLC, 1507 West 4th Street, Marshfield, WI 54449.

I am a co-author of the technical report titled “NI 43-101 Technical Report, Mineral Resource Estimate, Arizona Mining Inc, Hermosa Taylor Deposit, Santa Cruz County, Arizona” (the “Technical Report”) dated March 17, 2016 with an effective date of February 1st, 2016.

I graduated with a Ph. D. in geology from the University of Arizona in 1990. I am a Registered Professional Geologist in Wisconsin and Arizona and am a registered

member of the Society for Mining, Metallurgy and Exploration (#4203552). I have been employed as a geologist continuously for a total of 35 years. My experience

includes project evaluations, resource estimation, geological modeling, geostatistical evaluations, project development, and authorship of technical reports and assessments of various projects throughout North America, South America and Asia.


I visited the Hermosa Taylor Deposit and surrounding area numerous times in 2014, 2015 and 2016.

I am responsible for sections 7, 8, 9, 10 and 11 of the Technical Report. As of the date of the Technical Report, to the best of my knowledge, information and belief,

the Technical Report contains all scientific and technical information that is required to be disclosed to make the technical report not misleading.

I have had prior involvement with the property that is the subject of the Technical Report as an independent mining consultant.

That I have read NI 43-101 and Form 43-101F1, and this Technical Report was prepared in compliance with NI 43-101.


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


[“Signed and Sealed”] Mark Osterberg, SME-RM.

Arizona Mining Inc. NI 43-101 Technical Report – Hermosa Taylor Deposit Page V


TABLE OF CONTENTS

Date and Signature Page ................................................................................................................................ I

Author’s Certificate ....................................................................................................................................... II

Author’s Certificate ...................................................................................................................................... III

Author’s Certificate ...................................................................................................................................... IV

Table of Contents .......................................................................................................................................... V

List of Tables ................................................................................................................................................. X

List of Figures .............................................................................................................................................. XII

Summary ........................................................................................................................................... 1

Introduction .................................................................................................................................. 1 Property Description and Ownership ........................................................................................... 1 Geology and Mineralization .......................................................................................................... 2 Current Exploration and development ......................................................................................... 3 Mineral Resource Estimate ........................................................................................................... 3 Metallurgy ..................................................................................................................................... 3 Conclusion ..................................................................................................................................... 4 Recommendations ........................................................................................................................ 4

Drilling ................................................................................................................................... 4 Geology Model ...................................................................................................................... 5 Density .................................................................................................................................. 5 Metallurgy ............................................................................................................................. 6

Introduction ...................................................................................................................................... 7

Purpose of Technical Report ......................................................................................................... 7

Personal Inspection ............................................................................................................... 7 Terms of Reference ............................................................................................................... 7

Units of Measure - Abbreviations ................................................................................. 8 Acronyms and Symbols ................................................................................................. 8

Reliance on Other Experts .............................................................................................................. 10

Property Description and Location ................................................................................................. 11

Location ....................................................................................................................................... 11 Property Description ................................................................................................................... 12 Property Ownership .................................................................................................................... 13 Mineral Tenure ........................................................................................................................... 14 Options Agreements ................................................................................................................... 20 Agreements and Royalties .......................................................................................................... 20

Arizona Mining Inc. NI 43-101 Technical Report – Hermosa Taylor Deposit Page VI


Accessibility, Climate, Local Resources, Infrastructure and Physiography ..................................... 21

Accessibility ................................................................................................................................. 21 Climate ........................................................................................................................................ 21 Infrastructure .............................................................................................................................. 21

Water .................................................................................................................................. 21 Workforce ........................................................................................................................... 22 Commercial Resources and Services ................................................................................... 22 Social Services and Security ................................................................................................ 22 Power .................................................................................................................................. 22 Transportation .................................................................................................................... 22

Physiography ............................................................................................................................... 22

History ............................................................................................................................................. 23

General History, Mining History, and Production ....................................................................... 23 ASARCO Exploration History ....................................................................................................... 25 Property Ownership History ....................................................................................................... 25

Geological Setting and Mineralization ............................................................................................ 28

Regional Geology ........................................................................................................................ 28 Stratigraphy ................................................................................................................................. 28 Regional Structural Geology ....................................................................................................... 31

Laramide ............................................................................................................................. 31 Middle Tertiary .................................................................................................................... 31

Project Geology ........................................................................................................................... 32

Lithology and Stratigraphy .................................................................................................. 32 Alteration ............................................................................................................................ 39 Mineralization ..................................................................................................................... 39 Structural Geology .............................................................................................................. 40 Summary and Conclusions .................................................................................................. 40

Deposit Types .................................................................................................................................. 41

Exploration ...................................................................................................................................... 42

Drilling ............................................................................................................................................. 43

Introduction ................................................................................................................................ 43 ASARCO Exploration .................................................................................................................... 43 Arizona Mining Inc. Exploration .................................................................................................. 44

CRD Exploration Drilling ...................................................................................................... 44

Drilling Summary ......................................................................................................................... 48

Arizona Mining Inc. NI 43-101 Technical Report – Hermosa Taylor Deposit Page VII


Sample Preparation, Analyses, and Security................................................................................... 54

Sample Security ........................................................................................................................... 54

ASARCO Drill Program ......................................................................................................... 54 2010-2012 Drill Program ..................................................................................................... 54

Core Samples ............................................................................................................... 54 Reverse Circulation Samples ....................................................................................... 54

2014-2015 Drill Program ..................................................................................................... 54

Sample Preparation .................................................................................................................... 56

Skyline Laboratory ............................................................................................................... 56 ALS Minerals ........................................................................................................................ 56

Analysis ....................................................................................................................................... 56

Inpectorate and Skyline Laboratory .................................................................................... 56 ALS Minerals ........................................................................................................................ 56

Quality Assurance and Quality Control(QA-QC) ......................................................................... 56

2010-2012 dRILLRILL pROGRAM ......................................................................................... 57

Certified Standard Reference Material (CSRM) .......................................................... 57

Cross-Check Between Skyline and Inspectorate ..................................................... 57 Inspectorate 4-Acid, AAS AG Re-Assay Program .................................................... 58 Manto Re-Assay Program ....................................................................................... 60 Database Updates ................................................................................................... 62

Blanks .......................................................................................................................... 62 Duplicates .................................................................................................................... 62

2014-2015 Drill Program ..................................................................................................... 62 Certified Standard Reference Material (CSRM) .................................................................. 62

Conclusion ................................................................................................................... 64

Blanks .................................................................................................................................. 64 Duplicates ............................................................................................................................ 64

Replicate Analyses ...................................................................................................................... 65

ASARCO Pulp Re-Assay ........................................................................................................ 65

Data Verification ............................................................................................................................. 66

Mineral Processing and Metallurgical Testing ................................................................................ 68

Introduction ................................................................................................................................ 68 Metallurgical Test Work .............................................................................................................. 68

Arizona Mining Inc. NI 43-101 Technical Report – Hermosa Taylor Deposit Page VIII


Feed Preparation and Characterization .............................................................................. 68 Bond’s Ball Mill Work Index ................................................................................................ 71 Grind Studies ....................................................................................................................... 74 Flotation Tests ..................................................................................................................... 79

Projected Metallurgical Recoveries ............................................................................................ 82 Conclusions ................................................................................................................................. 82 Recommendations ...................................................................................................................... 82

Mineral Resource Estimates ........................................................................................................... 83

Database ..................................................................................................................................... 83 Exploratory Data Analysis ........................................................................................................... 83

Assay Statistics .................................................................................................................... 83 Grade Capping ..................................................................................................................... 84

CRD Estimation............................................................................................................................ 84

CRD Domain Model ............................................................................................................. 84 Drill Hole Compositing ........................................................................................................ 85 Block Model ........................................................................................................................ 86 Estimation Parameters ........................................................................................................ 87 Grade Estimation ................................................................................................................ 87

Post Processing ........................................................................................................................... 89

Specific Gravity .................................................................................................................... 89

Mineral Resource Classification .................................................................................................. 89 NI 43-101 Mineral Resource ....................................................................................................... 89

Reasonable Prospects ......................................................................................................... 89 Mineral Resource Statement .............................................................................................. 90

Environmental Studies, Permitting and Social or Community ........................................................ 91

Social and Community ................................................................................................................ 92 U.S. Federal Environmental Permitting ...................................................................................... 93 State Environmental Permitting ................................................................................................. 93

Adjacent Properties ........................................................................................................................ 95

Arizona Mining Inc. ..................................................................................................................... 95

Central Deposit ................................................................................................................... 95 Trench Property .................................................................................................................. 95 Bronco Creek ....................................................................................................................... 95

Other Relevant Data and Information ............................................................................................ 96

Interpretation and Conclusions ...................................................................................................... 97

Arizona Mining Inc. NI 43-101 Technical Report – Hermosa Taylor Deposit Page IX


Recommendations .......................................................................................................................... 98

Drilling ......................................................................................................................................... 98 Geology Model ............................................................................................................................ 98 Density ........................................................................................................................................ 99 Metallurgy ................................................................................................................................... 99

References .................................................................................................................................... 100

Arizona Mining Inc. NI 43-101 Technical Report – Hermosa Taylor Deposit Page X


LIST OF TABLES

Table 1-1: Taylor Deposit Mineral Resources ........................................................................................ 3

Table 1-2: 2016 Exploration Program .................................................................................................... 4

Table 4-1: Patented Claims Owned by Arizona Mining, Inc ................................................................. 16

Table 6-1: Historic Production from Hardshell Area Mine .................................................................. 24

Table 10-1: Drill Holes with CRD Mineralization .................................................................................... 46

Table 10-2: Drill Hole Collars for Holes with CRD Mineralization .......................................................... 46

Table 10-3: Taylor Deposit CRD Drilling Results Summary .................................................................... 48

Table 11-1: Summary of Results for CSRM Comparison Study .............................................................. 57

Table 11-2: Summary of Results and Comparisons Inspectorate Re-Assay Program ............................ 59

Table 11-3: Summary Statistics for Inspectorate Re-Assay Program..................................................... 60

Table 11-4: Re-Assay Program Assay Results for S-1 & S-2 Reference Standards & Lab Internal Standards AS-92-4A, ME 8-4A and SP49 ............................................................................. 61

Table 11-5: List of CSRM used in the 2014 – 2015 Drilling Campaign ................................................... 62

Table 11-6: Summarized Results for CSRM’s 2014 – 2015 CSRM’s ....................................................... 63

Table 12-1: MMC Data Verification Samples ........................................................................................ 67

Table 13-1: Hermosa NW Zn/Pb/ Ag/Cu Project Core Samples for Met Testing Submitted 10/2015 .. 69

Table 13-2: Head Analyses of Composite Sample .................................................................................. 70

Table 13-3: ICP Analyses of Composite Sample ..................................................................................... 70

Table 13-4: Bond Ball Mill, AZ Mining Master Composite ..................................................................... 71

Table 13-5: Bond Ball Mill ...................................................................................................................... 73

Table 13-6: Lead and Zinc Rougher Flotation Tests at Varying Primary Grind Size ............................... 79

Table 13-7: Lead and Zinc Rougher Flotation Results (Test No. 5) ........................................................ 80

Table 13-8: Lead Open-Circuit Cleaner Flotation Results (Test No. 5) .................................................. 81

Table 13-9: Zinc Open-Circuit Cleaner Flotation Results (Test No. 5) .................................................... 81

Table 13-10: ICP Analyses of Lead and Zinc Cleaner 2 Concentrates ...................................................... 81

Table 14-1: Drill Hole Statistics for Sulfide CRD Intervals in the 25 CRD Holes ..................................... 83

Table 14-2: Drill Hole Compositing Statistics ......................................................................................... 86

Table 14-3: Block Model Variables and Description .............................................................................. 86

Table 14-4: CRD Block Model Parameters ............................................................................................. 87

Arizona Mining Inc. NI 43-101 Technical Report – Hermosa Taylor Deposit Page XI


Table 14-5: Hermosa Taylor Deposit Estimation Parameters ................................................................ 87

Table 14-6: Density (S.G) Calculation Based on Ore Composition (Example) ....................................... 89

Table 14-7: Taylor Deposit Mineral Resources ...................................................................................... 90

Table 15-1: Major Permits and Approvals Required .............................................................................. 93

Table 19-1: 2016 Exploration Program .................................................................................................. 98

Arizona Mining Inc. NI 43-101 Technical Report – Hermosa Taylor Deposit Page XII


LIST OF FIGURES

Figure 4-1: Property Location Map Related to Arizona ........................................................................ 11

Figure 4-2: Hermosa Claim Status Map ................................................................................................. 19

Figure 7-1: Hermosa Property Regional Geologic Area ........................................................................ 30

Figure 7-2: Geological Map of Hermosa Project ................................................................................... 35

Figure 7-3: Generalized Long Section .................................................................................................... 36

Figure 7-4: Generalized Cross Section ................................................................................................... 37

Figure 7-5: Stratigraphic Column for the Hermosa Taylor Project Area ............................................... 38

Figure 10-1: CRD Drill Holes .................................................................................................................... 45

Figure 10-2: Drill Collar for Drill Hole HDS-335 ....................................................................................... 47

Figure 11-1: Core Storage Container ....................................................................................................... 55

Figure 11-2: Silver Check Assays Skyline and Inspectorate Laboratories................................................ 58

Figure 11-3: Location Map of the 188 Re-Assayed Dril Holes ................................................................. 61

Figure 11-4: Field Duplicate Paris ............................................................................................................ 65

Figure 12-1: Data Verification Samples Collected by MMC (MMC-HTD-001 and MMC-HTD-002.......... 66

Figure 13-1: Mill Feed Size Analysis ........................................................................................................ 72

Figure 13-2: Mill Product Size Analysis ................................................................................................... 72

Figure 13-3: AZ Mining Master Composite ............................................................................................. 74

Figure 13-4: AZ Mining Particle Size Analysis 1 ....................................................................................... 75



Figure 13-7 AZ Mining Particle Size Analysis 4 ....................................................................................... 78

Figure 13-8: Open-Circuit Lead-Zinc Process Flowsheet ......................................................................... 80

Figure 14-1: CRD Geologic Domains and Oxide Model ........................................................................... 85

Figure 14-2: North-South Cross Section Looking East (Left) and North-West Cross-Section Looking Northeast (Right) ................................................................................................................ 88

Arizona Mining Inc. NI 43-101 Technical Report – Hermosa Taylor Deposit Page 1


SUMMARY

INTRODUCTION

Arizona Mining Inc. (“AZ” or the “Company”, TSX: AZ), maintains an 80% interest in the Hermosa Property (the “Property”) which is situated near Patagonia Arizona. The land status of the Property is based on approximately 183 hectares (452 acres) of patented mining claims and approximately 5,469 hectares (13,516 acres) of unpatented mining claims. The Property hosts two known mineral deposits, the Hermosa Central Deposit and the Hermosa Taylor Deposit. The Hermosa Central Deposit was the subject of a National Instrument 43-101 Technical Report (“NI 43-101” or “43-101”) Preliminary Feasibility Study which was published on January 17, 2014. The Hermosa Taylor Deposit (the “Project” or the “Deposit”) is the subject of this technical report.

The Deposit is a sulfide carbonate replacement deposit (“CRD”) that lays down-dip to the oxide-manto mineralization of the Central Deposit. However, the deposit displays mineralogical characteristics that are not related to the Central Deposit. The deposit is a lead, zinc, silver deposit. The Deposit was discovered in 2015 and confirmed with a drilling program of 25 holes. As of the date of this report the extents of the Deposit have not been determined.

This report identifies a maiden resource estimate for the Deposit and only Inferred Mineral Resources have been identified. Care was taken to identify resources that meet the test of reasonable prospects of eventual economic extraction. Even though lead and zinc contribute equally to the mineral resources MMC chose to report mineralization with zinc-equivalent cutoff grades.

The recommendations of this report, described below in this section, are to implement a drilling program that will test the extents of the mineralization. The drilling program should also infill portions of the deposit, which will increase the accuracy of grade estimates. Continued refinements to the 3D geology model are recommended. Determining the baseline density and specific gravity measurements for the various stratigraphic units within the Deposit has been recommended. A metallurgical test program has been recommended to define reasonable processing and recovery parameters.

PROPERTY DESCRIPTION AND OWNERSHIP

The Hermosa Property is owned by the Company and its 80% owned subsidiary, Arizona Minerals Inc. (“Arizona Minerals” or “AMI”). The Project is located on the Hermosa Property which is a part of the Harshaw and Patagonia Mining Districts located in the Patagonia Mountains of Santa Cruz County, Arizona. The Project is located 10 kilometers (6 miles) southeast of the town of Patagonia, 24 kilometers (15 miles) northeast of Nogales and 80 kilometers (50 miles) southeast of Tucson, Arizona. The international border with Mexico is approximately 13 kilometers (8 miles) to the south. The elevations on the property range from 1,460 to 1,890 meters (4,800 to 6,200 feet). The area is sparsely populated, with livestock grazing being the dominant land use and is located within the USFS Farrell Grazing Allotment.

The property occupies an area of approximately, 54 square kilometers (21 square miles) and lies within the surveyed and protracted unsurveyed lines of Sections 27, 28, 29, 32, 33, 34, 35 and 36, Township 22 South, Range 16 East, Section 31, Township 22 South, Range 17 East, Sections 13, 24, 25, 29, 32 and 36, Township 23 South, Range 15 East, Sections 1, 2, 3, 4, 5, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21,



22, 23, 29, 30, 31 and 32, Township 23 South, Range 16 East, Sections 4, 5, 6, 7 and 18, Township 23 South, Range 17 East, Section 1, Township 24 South, Range 15 East and Section 6, Township 24 South, Range 16 East, G&SR Meridian, Santa Cruz County, Arizona. General property coordinates are 31° 28’ North latitude and 110° 43’ West longitude (NAD 83, Geographic, North America).

The Company and AMI control the Project through 24 patented mining claims totaling about 183.2 hectares (452.63 acres) with the surface and mineral rights owned fee simple. The patented land is surrounded by 724 contiguous “SHELL” unpatented lode mining claims totaling, approximately 5,470 hectares (13,516.04) acres. The patented mining claims are listed in Table 4-1 and all claims shown in Figure 4-1 of Section 4. In January of 2016, AZ officially acquired 16 patented “Trench” claims, approximately 121 hectares (300 acres) from the Asarco Environmental Multi-Land State Trust at a value of $10 increasing the total area of AZ and AMI’s patented land position to 183.2 hectares (452.63 acres). The acquisition of this land includes a requirement for installing a passive water treatment system to remediate mine influenced waters that emanate from historic mine workings located on the claims. These claims are directly adjacent (northwest) to the original 8 patented claims owned by the company. In November of 2015, AMI entered into an option agreement with Bronco Creek Inc. to acquire 16 unpatented claims, consisting of approximately 112 hectares (278 acres), bringing the total unpatented mining claims controlled including those under option by AMI to 740 consisting of approximately 5,582 hectares (13,794.04 acres).

GEOLOGY AND MINERALIZATION

The Project is located in the southeastern one-third of Arizona within a belt of 1600 to 1700 Ma Proterozoic rocks, dominated by the Pinal Schist, a greenschist-grade metamorphosed argillaceous quartz wacke (Anderson, 1989). These were covered by Phanerozoic shelf-type sediments, Upper Devonian sediments (the Martin Formation) and Pennsylvanian-Permian sandstones, shales and carbonates (Colina Limestone, Epitaph Formation, Scherrer Formation and Concha Limestone), which host the CRD mineralization. These carbonate formations hosting the CRD mineralization are disconformably overlain by Cretaceous Rhyolites, which has also been altered and to a lesser extent mineralized. The sulfide CRD mineralization, known as the Taylor Deposit, straddles this contact and occurs commonly as stratabound replacements and disseminations throughout the three underlying carbonate formations.

CRD mineralization is developed within the Concha limestone, Scherrer Formation and Epitaph Formation, particularly in the northwestern-most section of the property. This calc-silicate skarn type mineralization contains patches and massive, wholesale replacements of carbonate by very-fine-grained to massive, wollastonite-diopside and rhodonite, generally white to pink, very-fine-grained to aphanitic,. Significant zones occur in the ore body with coarse-grained, radiating crystal aggregates (up to 2 centimeters (0.78 in), that contain coarse-grained, euhedral-subhedral galena, sphalerite, chalcopyrite and pyrite.. Massive stratabound replacements of carbonate by galena, sphalerite, chalcopyrite and pyrite are not uncommon, some up to several meters to 30 meters (98 feet) thick. Light green, massive, coarse-grained garnet with abundant sulfides as disseminations, pods, masses and interstitial replacements are sparsely noted, deep within the Epitaph Formation, in the furthermost, northwestern core holes.



CURRENT EXPLORATION AND DEVELOPMENT

Currently, drilling is focused on the expanding the CRD mineralization to the northwest on the newly acquired “Trench” claims; to the southwest on AMI’s unpatented claim block; and demonstrating continuity of mineralization between existing drill holes. The CRD mineralization is open in all directions except to the southeast where it transitions to oxide mineralization. Additional drilling will be required to define the limits of mineralization and is planned to take place over the remainder of 2016.

MINERAL RESOURCE ESTIMATE

The Mineral Resource Estimate for the Taylor Deposit was based on 25 drill holes totaling 19,648 meters (64,461 feet) of drilling that intercepted CRD mineralization. A geologic interpretation was made by AMI using geologic logs and mineral oxidation states. The geologic interpretation was modeled in Vulcan Software by MMC and utilized during the Mineral Resource estimate. The project has been modeled using Arizona State Plane Coordinates system. Industry accepted grade estimation techniques were used to develop a Mineral Resource block model. Table 1-1 lists the Inferred Mineral Resources as various cut-off grades effective March 17th, 2016.

Table 1-1: Taylor Deposit Mineral Resources

Zn Eq% Cutoff Zn Eq% Grade Tonnes (Mt) Pb% Zn% Cu% Ag g/t 3 8.01 72.3 3.21 3.23 0.10 50.78 4 8.98 59.5 3.63 3.63 0.11 55.78 5 9.98 48.7 4.04 4.03 0.12 61.25 6 11.04 39.4 4.48 4.48 0.14 66.91 8 12.89 27.2 5.24 5.26 0.16 76.35

12 16.80 12.1 6.88 6.84 0.21 97.90 15 19.70 6.6 8.26 7.80 0.27 113.75 20 24.57 2.2 10.37 9.86 0.34 133.64

Results are based on a ZnEq grade calculated with the following metal prices: $0.85/lb for lead and zinc; $2.25/lb for copper; $15/oz for silver. It is recognized for the Taylor Deposit that while Zn and Pb contribute approximately equally to the resource calculations, MMC has recommended to report Zn equivalent grades for the calculation of the cut-off grade as well as the equivalent grade for the resource. The Base Case resource estimate is highlighted in the table above.

Mineral resources are not mineral reserves and do not demonstrate economic viability. There is no certainty that all or any part of the mineral resource will be converted to mineral reserves. Quantity and grade are estimates and are rounded to reflect the fact that the resource estimate is an approximation.

METALLURGY

From 2015 to 2016, a scoping level metallurgical study was performed using a composite sample, from split core samples, of representative CRD mineralization and grades across the current resource. The results from the composite sample (9.14% Pb, 7.99% Zn, 126 g/t Ag, 0.243% Cu and 0.285 g/t Au) projects overall recoveries of 92.9% Pb; 85.5% Zn and 91% Ag based on industry standard froth flotation processing techniques. The concentrates produced from the mineralization contained no deleterious elements and



should not pose and issue for concentrate sales of the smelting of concentrates. The study was completed by Resource Development Inc. located in Wheat Ridge, Colorado.

CONCLUSION

Based on the exploration results from the Taylor Deposit to date, MMC is of the opinion that the project is of sufficient merit to warrant further exploration. Assaying, drill holes surveys, quality assurance procedures and the Taylor Deposit resource model have been carried out in accordance with best industry methods and standards.

RECOMMENDATIONS

DRILLING

Based on the favorable exploration results to date, the Taylor Deposit is of sufficient merit to warrant further exploration and mineral resource definition in order to increase confidence in grade continuity and determine the extents of mineralization, an infill drilling program and generative exploration program is recommended. The infill program will be conducted in the current resource area and will help define and demonstrate grade continuity between the current widely-spaced 25 holes that intercept sulfide mineralization. A generative exploration program that extends along strike (330°) to the northwest (on the newly acquired TRENCH claims, will test the extents of mineralization and test the hypothesis that mineralization is continuous from the current resource area to ASARCO drill hole THC-2. Data collected would be utilized to update the geologic model and further increase the confidence in the sulfide resource. The two programs are estimated to cost US $14,761,500. Breakdown of the costs associated with the recommended exploration program are shown in Table 1-1.

Table 1-2: 2016 Exploration Program

2016 Exploration Program Number of Holes $/ft Feet Total Cost Infill Drill Program 21 $65 127,100 US $8,261,500 Exploration on TRENCH claims 29 $65 100,000 US $6,500,000

Exploration Total ($ USD) US $14,761,500



GEOLOGY MODEL

The current resource model is based on a simplified geology model between the Upper Volcanics and the underlying sedimentary formations. However, based on the current understanding of the geology and the level of geologic data collected at the Taylor Deposit, it is recommended that AZ Mining construct a geologic model that captures all major stratigraphic formation logged and structural components identified through surface mapping and mineralized offsets interpreted by staff geologist. The geology model will be used to prioritize geologic controls in the resource modeling. A detailed geologic model should be constructed that includes the following components:

• Major stratigraphic formations that make up the geologic section

Cretaceous Volcanics Concha Formation Scherrer Formation Epitaph Formation

• Structural model • Oxidation model

The geology model will be utilized in the evaluation of resource modeling controls and assigning density values. A potential control to evaluate is the contact between the Scherrer Formation and Epitaph Formations which appears to be a favorable horizon for sulfide mineralization.

A structural model should be evaluated, based on surface mapping and interpreted mineralized offsets, to look at 3D relationships between faults and mineralization. At this time it is unknown whether the sulfide mineralization is only stratigraphically controlled or is concentrated in areas by vertical structural controls. Based on the findings, the structural model can be used to establish modeling parameters to accommodate the proper geometry of the mineralization.

The oxidation model should be re-evaluated with the addition of new data from the infill program. An increase in drill density could improve the sectional interpretation of oxide boundaries and their continuity between sections.

DENSITY

The method that is currently being used to calculate density (Section 14.4.1) is the most accurate way due to the variability of metal content of the mineralized zones. However, base line density values for each stratigraphic formation should be included in the density calculation. In order to establish a base line density value for each modeled formation it is recommended that Arizona Mining:

• Collect a minimum of 10 density samples per modeled lithology type

Samples should be representative of fresh rock to establish a base line density for each stratigraphic formation modeled.

In addition to establishing density values for each formation a study should be completed evaluating the relationship between pyrite(%) compared to lead(%) and zinc(%) composition of each sample. If a relationship can be determined, the pyrite(%) composition should be factored into the density calculation.



METALLURGY

A preliminary metallurgical scoping test was performed on recently drilled core holes as an important step in in understanding the metallic extraction characteristics of the Deposit. Testing indicated high recoveries of lead, zinc and silver from concentrates using traditional low cost processing techniques. The initial concentrates contained very low levels of deleterious elements which may indicate that the Deposit could yield high quality products to lead and zinc markets. Based on these results a second phase of testing has been recommended to investigate gold and copper recoveries, improved recoveries and concentrate grades and defining a flowsheet to produce a copper concentrate.



INTRODUCTION

Arizona Mining Inc. is a Canadian mineral exploration and development company focused on the exploration and development of the Hermosa Project located in Santa Cruz County, Arizona. Arizona Mining is listed on the TSX as “AZ”. This report is being prepared to incorporate, drilling and geologic data developed on the Hermosa Taylor Deposit (sulfide CRD mineralization) into an updated Mineral Resource Estimate.

PURPOSE OF TECHNICAL REPORT

At the request of Arizona Mining, Inc. (“AZ” or the “Company”) this technical report has been prepared by Metal Mining Consultants Inc. (“MMC”) on the Hermosa Taylor Deposit (the “Project”), Santa Cruz County, Arizona, USA. The purpose of this report is to provide Arizona Mining and its investors with an independent opinion on the technical aspects and mineral resources at the Project. This technical report documents a mineral resource statement for the Project prepared by MMC. The report has been prepared according to the guidelines of the Canadian Securities Administrators’ National Instrument 43-101 and Form 43-101F1 while the mineral resource statement reported herein has been prepared in conformity with generally accepted CIM “Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines”. The information in the report is current as of March 17th, 2016.

This report describes the property geology, mineralization, exploration activities and exploration potential based on compilations of published and unpublished data and maps, geological reports and a field examination by MMC. MMC has been provided with the necessary documents, maps, reports and analytical results by Arizona Mining. This report is based on the information provided, field observations and the author’s familiarity with mineral occurrences and deposits in the United States and worldwide.

This report was prepared by Scott E. Wilson (CPG #10965 and registered member of SME) and has participated in all aspects of the report. There is no affiliation between the author and Arizona Mining except that of an independent consultants/client relationship as described in Section 1.5 of NI 43-101.

PERSONAL INSPECTION

Scott E. Wilson conducted a property inspection of the Property on March 1st, 2016. While visiting the property, Mr. Wilson inspected a drill pad and drill collar preservation methods, reviewed the property geology with an Arizona Mining Inc. geologist, inspected the core storage and core sample preparation facilities, reviewed principal lithologic contacts and mineralized intervals in drill hole HDS-334 and collected two five foot quarter-core samples from HDS-334 for data verification.

TERMS OF REFERENCE

The terms of reference were to prepare a resource estimate and Technical Report as defined in Canadian Securities Administrators’ National Instrument 43-101, Standards of Disclosure for Mineral Projects, and in compliance with Form 43-101F1 (Technical Report).



UNITS OF MEASURE - ABBREVIATIONS

Units of Measure - Abbreviations Metricl Imperial

Unit Description Unit Description % Percent % Percent °C Degrees Celsius °F Degrees Farenheit cm Centimeter (Centimetre) in Inch m Meter (Metre) ft Foot (12 Inches) g Grams oz ounce g/t grams per tonne g/t grams per tonne ha Hectare (10,000 M2) ac Acres kg Kilogram lb Pounds km Kilometer (Kilometre) mi Miles KW or kW Kilowatt hp Horsepower mm Millimeters (Millimetres) in Inches opt Ounces Per Ton opt Ounces Per Ton ppm Parts Per Million ppm Parts Per Million SG Specific Gravity SG Specific Gravity μm Microns in Inches ft3 Cubic Feet m3 Cubic Meters (Metres) in3 Cube Inches cm3 Cubic Centimeter (Centimetre)

ACRONYMS AND SYMBOLS

Acronyms and Symbols Term Description

Ag Silver As Arsenic Au Gold AZ Arizona Mining Az Arizona AZPDEA Arizona Pollutant Department of Environmental System Ba Barium Bi Bismuth BLM United States Bureau of Land Management Cd Cadmium CIM Canadian Institute of Mining, Metallurgy and Petroleum CNF Coronado National Forest Co Cobalt Company Arizona Mining Cr Chromium CRD Carbonate Replacement Deposit Cu Copper CWA Clean Water Act EMT Emergency Medical Technician



Acronyms and Symbols ESA Endangered Species Act ICP Inductively Coupled Plasma ID5 Inverse Distance to the Fifth Power K Potassium Ma Million Years MMC Metal Mining Consultants Inc Mn Manganese Mo Molybdenum NAD North American Datum NEPA National Environmental Policy Act NHPA National Historic Preservation Act Ni Nickle NSR Net Smelter Return Pb Lead POO plan of operations Property Hermosa Taylor Depsoit QA Quality Assurance QA/QC Quality Assurance/Quality Control QC Quality Control QP(s) Qualified Person(s) RC or RVC Reverse Circulation Rdi Resource Development Inc RQD Rock Quality Designation Sr Strontium tpy Tons per Year US United States USFS United States Forest Service USGS United States Geological Survey V Vanadium W Tungsten WCR White Cloud Resources LLC Zn Zinc ZnEq Zinc Equivalent Grade



RELIANCE ON OTHER EXPERTS

Mr. Johnny Pappas is the Director of Environmental and Permitting for Arizona Mining Corporation, with over 25-years of permitting and environmental compliance in the mining industry. Mr. Pappas is not a Qualified Person as defined by NI43-101. However, Mr. Pappas' opinions regarding regulatory compliance and permitting are sought after and his recommendations are typically followed. The authors know of Mr. Pappas' reputation and have relied on his contributions to Section 19 of this report.



PROPERTY DESCRIPTION AND LOCATION

LOCATION

The Hermosa Taylor Deposit is located on the Hermosa Property and is part of the Harshaw and Patagonia Mining Districts located in the Patagonia Mountains of Santa Cruz County, Arizona (Figure 4-1 and Figure 4-2). The Hermosa Property is located 9.6 kilometers (6 miles) southeast of the town of Patagonia, which has a population of approximately 1,000 people.

Figure 4-1: Property Location Map Related to Arizona



The property is located 24.1 kilometers (15 miles) northeast of the Santa Cruz county seat at Nogales and 80.5 kilometers (50 miles) southeast of Tucson, in adjacent Pima County. The international border with Mexico is approximately 12.9 kilometers (8 miles) to the south.

The property occupies an area of approximately, 54.4 square kilometers (21 square miles) and lies within the surveyed and protracted unsurveyed lines of Sections 27, 28, 29, 32, 33, 34, 35 and 36, Township 22 South, Range 16 East, Section 31, Township 22 South, Range 17 East, Sections 13, 24, 25, 29, 32 and 36, Township 23 South, Range 15 East, Sections 1, 2, 3, 4, 5, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 29, 30, 31 and 32, Township 23 South, Range 16 East, Sections 4, 5, 6, 7 and 18, Township 23 South, Range 17 East, Section 1, Township 24 South, Range 15 East and Section 6, Township 24 South, Range 16 East, G&SR Meridian, Santa Cruz County, Arizona. General property coordinates are 31° 28’ North latitude and 110° 43’ West longitude (NAD 83, Geographic, North America).

Figure 4 2: Hermosa Project Location Map Related to Santa Cruz County, AZ

PROPERTY DESCRIPTION

The Hermosa Property is located on the northern end of the Patagonia Mountains. Elevations on the property range from 1,460 to 1,890 meters (4,900 to 6,200 feet) above sea level. The area is sparsely



populated and livestock grazing is the dominant land use. The property is located within the USFS Farrell Grazing Allotment of the United States Department of Agriculture, Forest Service (USFS).

The core of the property is composed of approximately 183.2 hectares (452.63 acres) of fee simple surface and mineral rights ownership on patented mining claims. These patented mining claims are surrounded by unpatented lode mining claims held by Arizona Minerals, Inc. These unpatented mining claims are federal lands where the subsurface is administered by the BLM and the surface is administered by the USFS, Coronado National Forest. The Sierra Vista Ranger District of the Coronado National Forest is the responsible agent.

The property contains shafts, trenches and other surface openings from historic mining and exploration activities. The area is accessed through a series of interconnected low maintenance roads and trails.

PROPERTY OWNERSHIP

The Hermosa Property is owned by Arizona Mining Inc. (formerly Wildcat Silver Corporation, AZ or the Company), a British Columbia corporation listed on the Toronto Stock Exchange under the symbol “AZ” and its 80% owned subsidiary, Arizona Minerals Inc. (Arizona Minerals or AMI) a Nevada corporation, which was registered on October 4, 2005 with the Arizona Corporation Commission to do business within the State of Arizona. On October 28, 2005, Arizona Minerals entered into an agreement with ASARCO, LLC to purchase the Hermosa Property. At that time, the property consisted of eight patented mining claims in three separate tax parcels acquired by a combination of patents in 1961 and purchases in 1968 and 1978; in addition, 26 unpatented “Shell No.” lode mining claims located in 1965 and 1968 by American Smelting and Refining Company. American Smelting and Refining Company later changed its name to ASARCO, Incorporated and was subsequently merged into ASARCO, LLC. On February 17, 2006, the US Bankruptcy Court, Southern District of Texas, Corpus Christi Division in Case 05-21207 approved the sale of the Hardshell Group of Mining Claims by ASARCO, LLC to Arizona Minerals, Inc. This acquisition closed on March 14, 2006, with the final payment made to ASARCO, LLC on March 14, 2007. Arizona Minerals has no royalty or other obligations due to ASARCO, LLC or any predecessor claim owners.

As part of the purchase agreement with ASARCO, LLC, Arizona Minerals also acquired all available original or copies of data, documents and reports pertaining to the property including information on land, geology, previous drilling, assays, engineering, groundwater and metallurgical studies. ASARCO, LLC also transferred the remaining drill core, samples and assay pulps to Arizona Minerals, Inc.

The remaining 20% interest in the common shares of Arizona Minerals is owned by5348 Investments Ltd. a private Canadian company controlled by AZ’s Executive Chairman. A Shareholders Agreement between Arizona Mining Inc., 5348 Investments Ltd. and Arizona Minerals governs the affairs of Arizona Minerals. On February 26, 2016 AZ announced it had entered into a letter of intent to acquire the 20% interest in the common shares of AMI that it does not currently own. The Company will issue 40 million common shares and 5 million common share purchase warrants to Seller as consideration for the acquisition. Each share purchase warrant is convertible into one common share of the Company at a price of $0.50 for a period of three years from closing. The acquisition is subject to, among others things, the approval of AZ’s shareholders.



MINERAL TENURE

The Hermosa Property consist of 24 patented mining claims totaling about 183.2 hectares (452.63 acres) with the surface and mineral rights owned fee simple. The patented land is surrounded by 724 contiguous “SHELL” unpatented lode mining claims totaling approximately 5,470 hectares (13,516.04) acres. Title to the mineral rights is vested in Arizona Mining and Arizona Mining’s majority-owned subsidiary Arizona Minerals, Inc. A map of the claims is shown as Figure 4-2.

In December 2006 and January 2007, Arizona Minerals located 44 unpatented lode mining claims, approximately 368 hectares (909 acres), surrounding the original 26 unpatented claims. in April and May 2007 an additional 77 lode claims, about 586 hectares (1,447 acres) were staked by Arizona Minerals, to the east toward the San Rafael Valley, and south to the Mowry Mining Camp. In 2008, 4 additional claims were staked to cover orphan fractions around the core patented claims, one unnecessary claim dropped, and 44 claims were amended at the recommendation of the BLM to cover slight imperfections in the descriptions of the quarter sections in this non-standard unsurveyed-protracted township. An additional 16 claims, approximately 133 hectares (330 acres), were staked in September 2008 to complete the NE corner of the claim block. In November 2011 an additional 85 claims, approximately 657 hectares (1,623 acres) were staked on the east side of the claim block. An additional 60 lode claims, approximately 502 hectares (1,240 acres) were staked contiguous to the northwest boundary of the existing “SHELL” claim block in March 2012 followed by 2 additional lode claims in May 2012, approximately 13 (32 acres) on the southwest side. In 2012 and 2013, 47 claims were amended to cover additional slight imperfections in the quarter section descriptions. From December 2012 through July of 2013, and contiguous to the existing “SHELL” claim block boundaries, another 87 unpatented lode mining claims were staked to the east and northeast, approximately 716 hectares (about 1,769 acres) and an additional 42 unpatented lode mining claims, approximately 231 hectares (570 acres), were added south to the Olive Mine below the Mowry Camp, as well as 6 small unpatented mining claims to cover fractional areas. Also in July of 2013, 276 unpatented mining claims, approximately 2,097 hectares (5,181 acres), known as the WCR claims, were acquired, at a value of $20,000 and paid BLM annual maintenance fees of $38,640 in a purchase from White Cloud Resources LLC. The total unpatented lode mining claims held by AMI on surface lands of the Coronado National Forest are 724 covering, approximately 5,470 hectares (13,516 acres). In October of 2015, AMI entered into an option agreement with Bronco Creek Exploration, Inc. to acquire 16 unpatented claims, approximately 112 hectares (278 acres), at a cost of $25,000 followed by three annual option payments of $20,000. The “Bronco Creek” claims are located about three quarters of a mile west of the Hermosa Taylor Deposit.

In January of 2016, AZ closed the acquisition of 16 patented claims “Trench” (approximately 121 hectares or 300 acres) from the Asarco Environmental Multi-Land State Trust. Consideration for the acquisition comprised $10 and the assumption of the environmental liabilities relating to the site that resulted from historic mining activity. AZ has an approved remediation plan to address the environmental liabilities that includes a plan for a passive water treatment system. These claims are directly adjacent (northwest) to the original 8 patented claims.

The combined AZ and AMI holdings now consist of 24 patented mining claims totaling approximately 183 hectares (452.63 acres) with the surface and mineral rights owned fee simple. The patented land is



surrounded by 724 contiguous “SHELL” unpatented lode mining claims totaling approximately 5,469 hectares (13,516 acres). Under the terms of United States mining law, the unpatented mining claims can be held as long as the federal annual maintenance fee is paid (no expiration date) to the United States Department of the Interior, Bureau of Land Management (BLM). Data on the individual patented claims is shown in Table 4-1.

AMI contracted a registered land surveyor, Darling Environmental & Surveying (Darling), to complete a Record of Survey (new corner pins reset where necessary) for eight of the patented claims. The Record of Survey for the last sixteen “Trench” claims was completed by CPE Consultants and Hess – Rountree, Inc. This was done, in part, to assist USFS and BLM in accurately reflecting the patented claims on government working maps. The Record of Survey was filed with the Santa Cruz County Recorder and has become part of the Official Title Record. The patented claim boundaries have been cleared and flagged by AMI to help better identify the boundaries. Unpatented claim boundaries were also checked or established (new claims) by Darling. Old unpatented claim corners were checked and new unpatented corners set, both using GPS survey methods by Darling. Differential GPS was used for the patent Record of Survey and primary control for the unpatented claims. Hand-held GPS and compass line-of-sight was used for secondary work on the May 2007 unpatented claims, and the 16 claims staked in September 2008 by Arizona Minerals used compass and tape survey methods starting from previous GPS corners. The most recent claims staked in late 2011, early 2012 and into 2013 used differential GPS surveying techniques.

The wholly-owned, patented land parcels with full surface and mineral rights are subject to annual real property tax payments to Santa Cruz County, Arizona. The mineral rights for the unpatented mining claims are held by the payment of federal annual maintenance fees to the BLM and record of such must also be filed with the Santa Cruz County Recorder. The unpatented mining claims can be held as long as the federal annual maintenance fee is paid to the BLM. The surface rights of the unpatented mining claims are administered by the USFS under multiple-use regulatory provisions.

John C. Lacy, attorney-at-law of the firm DeConcini, McDonald, Yetwin & Lacy, PC issued a 50-page Title Report, dated June 19, 2006. He found both patented and unpatented claims to be valid as of the date of the opinion, and that the necessary assessment work and annual payments for maintenance had been completed since before and after the federal BLM legal assessment changes of August 31, 1993, back to the origin of the claims. All real property taxes and other recording requirements with Santa Cruz County were also in order. In an updated 54 page Title Opinion of May 6, 2008, John C. Lacy stated that the surface and mineral estates of the 8 patented and 147 unpatented claims of Arizona Minerals, Inc. were still in order and that all required payments to the BLM and real property taxes to Santa Cruz County had been paid. Three hundred and one (301) unpatented lode mining claims have been staked and recorded subsequent to Mr. Lacy’s report as well as 276 claims acquired by purchase. The real property taxes due to Santa Cruz County for the 3 patented parcels are current and paid to date, and the federal annual maintenance fees have been paid to the BLM for holding all 724 unpatented lode mining claims through September 1, 2014.

All mineral resources disclosed in this report are fully contained within the property boundaries as described above.



Table 4-1: Patented Claims Owned by Arizona Mining, Inc

Un-Surveyed Sections 3, 4 and 5, Township 23 South, Range 16 East and Surveyed Section 32 Township 22 South, Range 16 East G&SRM, Santa Cruz County, Arizona

Patented Claim Name

BLM Recorded Patent No.

Patent Grant Date

Mineral Survey

Mineral Survey Approved/ Record of

Survey Record

Claim Acreage** Quadrant of Section Santa Cruz County Records

Document County Assessor

Parcel No. No. Lot

Camden Mine 1211192 8/5/1960 4460 * 05/13/1959/ 02/14/2008 20.64 Sec. 4: All Doc. 25, Page 30/ Seq. 2008-

01675 105-49-001A

Camden No. 2 1211192 8/5/1960 4460 * 05/13/1959/ 02/14/2008 20.63 Sec. 4 NE/4, NW/4 Doc. 25, Page 30/ Seq. 2008-

01675 105-49-001A

Hardshell No. 1 1211192 8/5/1960 4460 * 05/13/1959/ 02/14/2008 20.64 Sec. 4 NE/4, NW/4 Doc. 25, Page 30/ Seq. 2008-

01675 105-49-001A

Hardshell No. 15 1211192 8/5/1960 4460 * 05/13/1959/ 02/14/2008 17.08 Sec. 4 NE/4, NW/4 Doc. 25, Page 30/ Seq. 2008-

01675 105-49-001A

Bluff 10279 12/04/1885 500 50 06/05/1883/ 02/14/2008 19.4 Sec. 3 SW/4 Book 88, Page 476/ Seq. 2008-

01672 105-52-001

Hermosa 10278 12/04/1885 499 49 06/05/1883/ 02/14/2008 20.23 Sec. 3: SW/4, Sec.4:

SE/4 Book 88, Page 469/ Seq. 2008-01674 105-52-001

Salvador 10614 06/11/1886 498 48 06/05/1883/ 02/14/2008 13.75 Sec. 4: SE/4, SW/4 Book 88, Page 482/ Seq. 2008-

01676 105-52-001

Alta 8653 01/10/1884 84 38A 02/16/1877/ 02/14/2008 19.87 Sec. 4: NW/4 Book 17, Page 213 & Doc. 182,

Page 616/ Seq. 2008-01673 105-49-002

January 25015 12/04/1894 745 51 12/24/1885/ 12/1/2015 20.6 Sec. 5: NE/4, Sec.

32: SE/4 T22S, R16E, Seq. 2010-03552(QCD), Seq. 2016-00445(QCD) 105-50-001B

Norton 19644 2/06/1892 929 52 7/25/1890/ 12/1/2015 19.63 Sec. 5: NE/4 Seq. 2010-03552(QCD), Seq.

2016-00445(QCD) 105-50-001B

Trench 2837 5/11/1878 28 37A 1/07/1874/ 3/23/2011 10.73 Sec. 5: NE/4

Seq. 2009-11239(QCD), Re-recorded 2010-03552(QCD), Seq. 2016-00443(QCD(6.00)), Seq. 2016-00444(QCD), Seq. 2011-02069(Survey)

105-50-001A

Trench No. 2 1107723 4/10/1940 4222 * 5/5/1939/ 3/23/2011 18.87 Sec. 5: NE/4


105-50-001A




Trench No. 3 1107723 4/10/1940 4222 * 5/5/1939/ 3/23/2011 20.66 Sec. 5: NE/4


105-50-001A

Trench No. 4 1107723 4/10/1940 4222 * 5/5/1939/ 3/23/2011 20.45 Sec. 5: NE/4


105-50-001A

Trench No. 5 1107723 4/10/1940 4222 * 5/5/1939/ 3/23/2011 20.45 Sec. 5: SE/4, NE/4


105-50-001A

Trench No. 6 1107723 4/10/1940 4222 * 5/5/1939/ 3/23/2011 20.66 Sec. 5: SE/4, NE/4


105-50-001A

Trench No. 7 1107723 4/10/1940 4222 * 5/5/1939/ 3/23/2011 20.4 Sec. 5: NE/4


105-50-001A

Trench No. 8 1107723 4/10/1940 4222 * 5/5/1939/ 3/23/2011 18.7 Sec. 5: NE/4


105-50-001A

Trench Ext. No. 1 1107723 4/10/1940 4222 * 5/5/1939/ 3/23/2011 14.2 Sec.4: NW/4

Doc. 119/393, Seq. 2009-11239(QCD), Seq. 2010-03552(QCD), Seq. 2016-00443(QCD), Seq. 2011-02069(Survey)

105-49-003

Trench Ext. No. 2 1107723 4/10/1940 4222 * 5/5/1939/ 3/23/2011 20.32 Sec. 5: NE/4


105-50-001A




Trench Ext. No. 3 1107723 4/10/1940 4222 * 5/5/1939/ 3/23/2011 19.4 Sec. 5: NE/4


105-50-001A

Trench Ext. No. 4 1107723 4/10/1940 4222 * 5/5/1939/ 3/23/2011 18.71 Sec.4: NW/4


105-49-003

Hardshell No. 7 1107723 4/10/1940 4222 * 5/5/1939/ 3/23/2011 15.97 Sec.4: NW/4


105-49-003

Josephine 1107723 4/10/1940 4222 * 5/5/1939/ 3/23/2011 20.65 Sec. 5: NE/4


105-50-001A

Note: Filed with the Official Records of Santa Cruz County, Nogales, Arizona and U.S. Bureau of Land Management, Phoenix, Arizona. The Bluff, Hermosa, Salvador and Alta claims, when surveyed and patented, were part of Pima County, Arizona Territory. Early records with Pima County, Tucson. These sections in T23S, R16E are non-standard, un-surveyed and protracted. * No lot number assigned. (QCD) Quick claim deed. **Record of Survey Total Acreage 452.63



Figure 4-2: Hermosa Claim Status Map



OPTIONS AGREEMENTS

Effective October 7, 2015 Arizona Minerals entered into an agreement with Bronco Creek Exploration, Inc. granting it permission to explore on 16 unpatented mining claims with an option to acquire the claims on fulfillment of the terms of the agreement. The agreement calls for the payment on execution of $25,000 followed by three annual payments of $20,000 for a total of $85,000. If AMI fulfills the terms of the agreement and exercises the option to acquire the claims then it will also convey an NSR Royalty interest of 2% of production returns to the seller.

AGREEMENTS AND ROYALTIES

There is a two% (2%) NSR Royalty payable by Arizona Minerals to a private Canadian company controlled by AZ’s Executive Chairman, from any future production extracted from the original eight patented mining claims and 26 unpatented mining claims acquired in 2005. There are no underlying royalties, fees or other obligations due to ASARCO, LLC or previous claim holders.

As discussed under 4.5, above, in the event Arizona Minerals exercises its option to acquire the Bronco Creek claims there will be a two% (2%) NSR Royalty payable from any production from those claims.

Arizona Minerals has granted a grazing lease to the Hale Family Revocable Trust doing business as the Hale Ranch on the patented 61.61 hectares (152.24 acres) in cooperation with the USFS, Sierra Vista Ranger District. This arrangement is a continuation of a similar lease that had existed between the Hale Ranch and ASARCO LLC since 1966. The Hermosa Deposit is under the American Peak Pasturage of the Farrell Grazing Allotment from the USFS to the Hale Ranch. Range Management on the unpatented ground is supervised by the USFS. Some arrangements will be required with the Hale Ranch/USFS Farrell Grazing Allotment for loss of grazing areas on the American Peak pasturage should the project progress to mine production.

Santa Cruz County has a 20 meter (66 feet) wide road easement centered on the Harshaw Road (USFS CNF Road No. 49). About 122 meters (400 feet) of the Harshaw Road crosses the northwest end of the Alta patented claim, where an access road to the property is located. The local power company, UniSource Energy Services, also has a high voltage power line with easements along the Harshaw Road, through the Alta patented claim. A branch of this power line also extends through the Harshaw townsite owned by the Hale Ranch and continues into the San Rafael Valley.



ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

ACCESSIBILITY

The Hermosa Property is located approximately 81 kilometers (50 miles) southeast of Tucson, Arizona; and 24 kilometers (15 miles) northeast of Nogales in Santa Cruz County, Arizona, and eight miles north of the international border with Mexico. The property is accessed via Harshaw Road, a Santa Cruz county road, leading six miles southeastward from Patagonia, Arizona to the Harshaw townsite. An interconnecting system of USFS numbered road network, originally constructed largely for exploration, mining and ranching, exists around Harshaw and the district. The property extends southward for approximately five kilometers (three miles) from Harshaw townsite and approximately 1.6 kilometers (one mile) southeast and southwest from Harshaw townsite. Access around the property is by unimproved two track roads.

The property lies on the eastern pediment flank of the Patagonia Mountains, a portion of the northwestern edge of the Mexican Highlands section of the Basin and Range Physiographic Province of the southwestern United States. Elevations in the mountains range up to 2,195 meters (7,200 feet) above sea level, while elevations on the property range from 1,460 to 1,890 meters (4,800 to 6,200 feet). The property is dominated by the western San Rafael Valley pediment plateau at about 1,646 meters (5,400 feet), which on-laps the higher foothills of the Patagonia range to the west. The plateau is deeply incised by tributaries of Harshaw Creek which drain to the north

CLIMATE

The Harshaw-Patagonia area has a semi-arid mountainous climate characteristic of the Arizona Uplands. Temperatures seldom remain above 32° Celsius (90° Fahrenheit) in the summer with warm to moderately cool nights. Winter days are usually mild with periodic frosts at night. Light snowfall is not uncommon but seldom remains for more than a few days. Cooler temperatures and higher winds occur at higher elevations in the area.

Precipitation, characteristic of this upland desert region, is variable and cyclic. Annual precipitation averages 43 centimeter (17 inches) and ranges from 20 to 91 centimeter (8 to 36 inches) per year with higher amounts of precipitation occurring at higher elevations in the range. More than 50% of the rainfall comes during the period from late June to early October in cyclonic, often torrential “monsoonal” thunderstorms, which are often accompanied by strong, destructive winds.

INFRASTRUCTURE

WATER

The local base level of the water table is approximately 1,509 meters (4,950 feet) elevation at Harshaw town site. The Hermosa project area and the local Harshaw Creek drainage are not part of an Arizona Department of Water Resources Active Management Area. Available well information suggests adequate water supplies are available for project requirements.



WORKFORCE

Southern Arizona hosts several major mining districts and the local area has several large active mines. Experienced, skilled workers are readily available within a reasonable commuting distance.

COMMERCIAL RESOURCES AND SERVICES

Resources in the town of Patagonia are limited. The town has a high school, a motel, several restaurants, a small grocery store and a gas station. Nogales, 24 kilometers (15 miles) southwest of Patagonia, has a population of approximately 25,000 people and is large enough to serve as a supply and service center for most needs. Nogales has rail freight service, and a small commercial airport.

Tucson, just over 80 kilometers (50 miles) to the north, is the commercial and service/supply center for one of the world’s largest mining districts. Tucson has a full-service commercial airport and is a large rail center.

SOCIAL SERVICES AND SECURITY

Patagonia has K-12 schools and a well-stocked town library.in addition, the community has a small family medical facility. EMT services are associated with the Volunteer Fire Department. Medical helicopter landing facilities are available. Patagonia has a small police force which is supplemented by the Santa Cruz County Sherriff and the Arizona Highway Patrol. The U.S. Border Patrol has a strong presence in the area. Nogales has a small regional hospital. Tucson’s large hospitals are easily accessible by ambulance or helicopter.

POWER

A 13.8 kV power line follows Harshaw Creek from west of Patagonia to the old town site of Harshaw and continues on to the San Rafael Valley. Higher capacity power lines traverse the Sonoita Creek Valley from Huachuca City to Sonoita-Elgin and Patagonia from the east. A major regional natural gas pipeline, owned and operated by El Paso Natural Gas extends from Nogales to the northeast through the Sonoita Valley and to localities to the east. A trunk phone line follows the Harshaw Creek Road with phone service available in Harshaw. Cellular telephone service is good in the Patagonia-Harshaw area.

TRANSPORTATION

The property is accessed via state and county hard surfaced roads and USFS secondary and tertiary roads, constructed largely for exploration, mining and ranching needs around Harshaw townsite and the district. A major rail hub is located approximately 24 kilometers (15 miles) south near the city of Nogales.

PHYSIOGRAPHY

The Hermosa property is located in an area of moderate to rugged topography, with numerous arroyos and canyons incised through volcanic and sedimentary stratigraphy. The arroyos and canyons contain streams which flow intermittently in response to rainfall events. Elevation on the property area ranges from 1,460 to 1,890 meters (4,800 to 6,200 feet) above sea level. Vegetation is typical of the Pinyon-Oak-Juniper woodland and is characterized by short evergreen trees and scrub oaks mixed with a variety of desert and upland shrubs. Lower slope faces are covered by open grasslands.



HISTORY

GENERAL HISTORY, MINING HISTORY, AND PRODUCTION

Mining in the Harshaw District dates from mid-18th century Spanish Colonial times, but is poorly documented before the 1870’s. Initially, oxide lead-silver vein ore was mined from the Trench property, located approximately one mile northwest of Hermosa and the Mowry property located approximately two miles to the south. This work continued intermittently until the late 19th century. History from the late 1800’s and early 1900’s can be found in Schrader (1915: USGS Bulletin 582) and Keith (1975: AZ Geol. Survey Bulletin 191). The district’s historic production is poorly constrained but is believed to be around 250,000 tons, yielding approximately two million ounces of silver with by-product lead, zinc, copper and manganese.

Early unnamed small-scale miners in the Hermosa area developed small tonnages of milling and direct-shipping oxidized ores in a number of small individual mines.

Production from the district was dominated by the Trench area mines, small mines on the Alta claim, the Hardshell Incline and the Hermosa mine. The Trench area mines and sulfide flotation custom mill, located a mile northwest of the Hermosa property produced primarily silver ores with minor by-product lead, but important production of direct-shipping manganese ores was recorded during World Wars I and II and the Korean War. The bulk of the production was from small underground operations in the area. Approximately half of the production was direct-shipping oxide ore and the balance was milling ore. The Trench mill produced both lead and zinc concentrates with copper, silver and minor gold by-product production.

The Alta Claim, staked in 1877, produced several thousand tons of oxidized high-grade lead-silver ore from a northeastward-dipping vein. The Hardshell Incline Mine, discovered in 1879, produced approximately 35,000 tons with an average grade of about 8 ounces per ton silver and 6 to 8 % lead between 1896 and 1964.

The Hermosa Mine located one-half mile to the southeast of the Hardshell Incline Mine and discovered about the same time, produced high-grade silver halide ores from a 30° north dipping stratiform vein, averaging approximately 20-ounces per ton silver. Approximately 70,000 tons were processed in a 100 ton per day mill over an 18 to 24 month period, producing 1.4 million ounces of silver, confirmed by Wells Fargo shipping records. Scavenging secondary production from 1902 to 1943 yielded an additional 600,000 ounces of silver with by-product lead and copper.

A summary of the historic production of the Hermosa area mines is presented in Table 6-1, derived from the Arizona Bureau of Mine Data (Bulletin 191, 1975) and ASARCO company files (Fleetwood Koutz, personal communication, 2006).



Table 6-1: Historic Production from Hardshell Area Mine

Mine Name Production Period *Tons Produced

Average Ore Grades Comments

Ag (oz/t) Zn (%) Pb (%) Cu (%) Au (oz/t) Mn (%) Alta Mine Before 1905 3,500 10 NA 35 1 minor NA Direct shipping ore Hardshell Incline 1896-1905 20,000 unknown unknown unknown unknown unknown NA Direct shipping and milling ore. Hardshell Mine 1921-1927 900 20 NA 20 NA NA NA Hardshell Mine 1905-1940 Several 000’s unknown unknown unknown unknown unknown unknown Direct shipping ore, with some Mn in WWI Hardshell Incline 1943-1948 2,500 8 NA 6 NA NA NA ASARCO production, direct shipping ore Hardshell Mine 1963-1964 2,900 8 NA 6 NA NA NA McFarland lease from ASARCO, smelter flux Hardshell Mine 1964 to present None

Hermosa Mine 1880-1902 70,000 20 unknown unknown unknown unknown unknown About 1.4 million ounces Ag produced in period

Salvador Mine 1880’s Unknown unknown unknown unknown unknown unknown unknown About 30,000 ounces Ag produced in period Black Eagle Mine 1880’s 4,900 22 NA NA NA NA unknown Direct shipping Mn-Ag ore Black Eagle Mine WWII Few hundred unknown NA NA NA NA unknown Direct shipping Mn ore Bender Mine Prior to WWI 50 20 NA NA NA NA NA Mn smelter fluxing ore Bender Mine WWI, WWII, 1952-55 6,000 unknown unknown unknown unknown unknown unknown Direct shipping Mn ore – US Gov’t Purchase Trench Mine 1850-1890; 1918-1945 237,000 13 6.3 8.5 unknown unknown unknown Operated 150 ton/day Pb-Zn floatation mill

Source: AZ Bureau of Mines, Bulletin 191, 1975



ASARCO EXPLORATION HISTORY

ASARCO operated the nearby Trench Mine, located approximately one mile northwest of Hermosa, between 1939 and 1949 and produced lead, zinc, silver, and copper from a fissure vein sulfide deposit. The 150-ton per day Trench lead-zinc flotation mill also treated district ores between 1939 and 1964 on a custom basis. The Hermosa Property was first used as a source of water for the Trench Mill, and was mapped and drilled in exploration programs from 1940 to 1991 by ASARCO.

ASARCO’s first diamond drilling program did not intercept significant extensions of Hardshell Incline lead-silver ores. Follow-up diamond drilling between 1947 and 1954 to the southeast of the Hardshell Incline discovered thick silve-lead-zinc bearing, manganese oxides of the main manto. The four main Hardshell claims were patented by ASARCO between 1958 and 1961 on the basis of this discovery. Rising silver prices in the mid-1960s led to renewed interest in Hermosa mineralization. Review of the data and geologic mapping led to additional claim staking in the district and acquisition of three patented claims of the Hermosa Group between 1965 and 1968. The Alta patented claim was purchased in the late 1970’s.

ASARCO undertook significant bench scale beneficiation testwork, including high-tension magnetic separation, electrostatic separation, reduction and segregation kilning, SO2 and thio-sulfate leaching as well as various cyanidation processes in the late 1970’s continuing to the early 1990’s. Only reduction roast tests progressed beyond bench scale testing.

ASARCO made a number of historical resource and reserve estimates for the Hermosa property. A 1968, open pit resource of 6.5 million tons at 5 ounces per ton silver; 1 to 2% lead + zinc and 15 % MnO2 was calculated and used in a number of older publications. An updated, open pit resource was calculated by ASARCO in 1975 to contain 20 million tons at an average grade of 3.33 ounces per ton silver with 8 % manganese, with a waste:ore stripping ratio of 2:1. A 1979 ASARCO estimate reported a range of resources, and the median was 6,586,500 tons at an average grade of 7.92 ounces per ton silver, at a cut-off grade of 5 ounces per ton silver. A mineral inventory estimate calculated by ASARCO in 1984 estimated a resource of 9,596,000 short tons with an average grade of 6.9 ounces per ton silver, at a cut-off grade of 1.5 ounces per ton silver.

Pan American Silver had a minimal lease/option/first right of refusal on most of ASARCO’s Hardshell property from 1994 to 2002, Pan American Silver did not undertake any significant exploration work, confining their activity to internal economic evaluations.

PROPERTY OWNERSHIP HISTORY

The Hermosa Property is owned by Arizona Mining Inc. (formerly Wildcat Silver Corporation, AZ or the Company), a British Columbia corporation listed on the Toronto Stock Exchange under the symbol “AZ” and its 80% owned subsidiary, Arizona Minerals Inc. (Arizona Minerals or AMI) a Nevada corporation, which was registered on October 4, 2005 with the Arizona Corporation Commission to do business within the State of Arizona. Arizona Minerals entered into an agreement with ASARCO, LLC to purchase the Hardshell (renamed to Hermosa) Property on October 28, 2005. The property consisted of the eight patented claims in three separate tax parcels as well as 26 unpatented “Shell” lode claims. The US Bankruptcy Court, Southern District of Texas, Corpus Christy Division, in Case 05-21207, approved the sale of the Hardshell Group of Mining Claims by ASARCO, LLC to Arizona Minerals, Inc., on February 17, 2006.



This acquisition closed on March 14, 2006. Final payment made to ASARCO, LLC on March 14, 2007. Arizona Minerals has no royalty or other obligations due to ASARCO, LLC or any predecessor claim owners.

Arizona Minerals also acquired all available originals or copies of data pertaining to the property including information on land, geology, previous drilling, assays, engineering, groundwater and metallurgical studies as part of the purchase agreement with ASARCO, LLC. The remaining drill cores, samples and assay pulps were also transferred to Arizona Minerals Inc.

Arizona Minerals located an additional 44 lode claims approximately 368 hectares (909-acres) surrounding the original 26 lode claims in December 2006 and January 2007. In April and May 2007 an additional 77 lode claims approximately 586 hectares (1,447 acres) were staked by Arizona Minerals, to the east toward the San Rafael Valley, and south almost to the Mowry Mining Camp. In 2008, four additional claims were staked to cover orphan fractions around patented ground, one unnecessary claim dropped, and 44 claims were amended at the recommendation of the BLM to cover slight imperfections in the descriptions of the quarter sections in this non-standard township. An additional 16 claims, approximately 134 hectares (330 acres) were staked in September 2008 to complete the northeast corner of the claim block.

In November 2011 an additional 85 claims 657 hectares (1,623 acres) were staked on the east side of the Arizona Minerals Inc., claim block. in March 2012, 60 more lode claims approximately 502 hectares (1,240-acres) were staked contiguous to the northwest boundary of the existing claim block followed by two additional lode claims in May 2012 approximately 13 hectares (32 acres) on the southwest side of the March block. In 2012 and 2013, 47 claims were amended to cover additional slight imperfections in the quarter section descriptions.

From December 2012 through July of 2013, and contiguous to the existing “SHELL” claim block boundaries, another 87 unpatented lode mining claims were staked to the east and northeast approximately 716 hectares (1,769 acres) and an additional 42 unpatented lode mining claims approximately 231 hectares (570 acres) were added south to the Olive Mine below the Mowry Camp, as well as 6 small unpatented mining claims to cover fractional areas. Also in July of 2013, 276 unpatented mining claims approximately 2,097 hectares (5,181 acres), known as the WCR claims, were acquired, at a value of $20,000 and paid BLM annual maintenance fees of $38,640 in a purchase from White Cloud Resources LLC.

The total unpatented lode mining claims held by AMI on surface lands of the Coronado National Forest are 724 covering, approximately 5,470 hectares (13,516 acres). In November of 2015, AMI entered into an option agreement with Bronco Creek Inc. to acquire 16 unpatented claims approximately 113 (278 acres), at a cost of $25,000 followed by three annual option payments of $20,000. The “Bronco Creek” claims are located about three quarters of a mile west of the Hermosa Taylor Deposit.

In January of 2016, AZ closed the acquisition of 16 patented claims “Trench” (approximately 121 hectares or 300 acres) from the Asarco Environmental Multi-Land State Trust. Consideration for the acquisition comprised $10 and the assumption of the environmental liabilities relating to the site that resulted from historic mining activity. AZ has an approved remediation plan to address the environmental liabilities that includes a plan for a passive water treatment system. These claims are directly adjacent (northwest) to the original 8 patented claims.



The AZ and AMI holdings now consist of 24 patented mining claims totaling about 183.2 hectares (452.63 acres) with the surface and mineral rights owned fee simple. The patented land is surrounded by 724 contiguous “SHELL” unpatented lode mining claims totaling, approximately 5,470 hectares (13,516.04) acres.



GEOLOGICAL SETTING AND MINERALIZATION

REGIONAL GEOLOGY

The regional geology of the area is shown in Figure 7-1, obtained from the Geologic Map of Arizona, published by the Arizona Geological Survey in 2000.

STRATIGRAPHY

The southeastern one-third of Arizona lies within a belt of 1600 to 1700 Ma Proterozoic rocks, dominated by the Pinal Schist, a greenschist-grade metamorphosed argillaceous quartz wacke (Anderson, 1989). The continental crust below these rocks is believed to consist of batholiths appended to the craton during the early Proterozoic. These rocks were then intruded by granitic stocks and batholiths at about 1450-Ma (Silver and others, 1977).

Late Precambrian-Early Paleozoic rifting split the Proterozoic basement into a number of separate continental blocks with passive continental margins (Dickinson, 1989). Phanerozoic shelf-type sediments overlie the Precambrian basement.

The oldest rocks in the Patagonia Mountains are Proterozoic granodiorite with subordinate amounts of pelitic schist, diorite and gabbro. Cambrian units in southern Arizona include the Bolsa Quartzite and the Abrigo Formation limestones, dolostones and clastic interbeds. Most of Arizona was above sea level during the Ordovician and Silurian; the Ordovician El Paso limestone, present only in southeastern Arizona is the only significant unit of this age (Middleton, 1989).

Widespread sedimentary deposition resumed in the upper Devonian. The Martin Formation carbonates are the prevalent Devonian units in the southern part of the state, along with the Percha Formation. They are overlain by the Mississippian Escabrosa Limestone, the dominant Mississippian unit in southern Arizona (Beus, 1989).

Pennsylvanian-Permian sandstones, shales and carbonates were laid down during a time of shifting and cyclical environments (Blakey and Knepp, 1989). The Pennsylvanian Naco Group of southeastern Arizona is composed of Pennsylvanian Horquilla Limestone, the Pennsylvanian-Permian Earp Formation and the Permian Colina Limestone, Epitaph Dolomite, Scherrer Formation and Concha Limestone (Gilluly and others, 1954).

The Epitaph Formation, Scherrer Formation and the Concha Limestone underlie the Hermosa project and are disconformably overlain by Cretaceous rhyolites. The carbonate replacement deposit (CRD), known as the Hermosa Taylor Deposit, mineralization focused along this disconformable contact and occurs intermittently throughout the three carbonate formations.

Mesozoic volcanic, sedimentary and intrusive rocks lie above the Paleozoic stratigraphic sequence. Cretaceous intermediate and felsic volcanic and intrusive rocks cover much of the project and surrounding areas. In the northwestern Patagonia Mountains, Jurassic granite intrudes Triassic to Jurassic volcanic and sedimentary rocks. Most of the central and southern parts of the range consist of Laramide (64 to 58 Ma), medium to coarse-grained hornblende granodiorite batholithic rocks. The batholith is bounded by northwest-striking faults and its emplacement is thought to be structurally controlled.



Laramide felsic volcanic and intrusive stocks are prevalent at Red Mountain and west of the historic Trench mining camp in the Chief-Sunnyside Diatreme area. Intrusive rocks and alteration at Sunnyside are thought to be coeval with alteration at Hermosa.

Late Oligocene to Miocene conglomerates, sandstones, ash flow tuffs and lakebed sedimentary rocks onlap the Hermosa Property and fill the San Rafael Basin to the east of the Patagonia Mountains and the northeastward trending Sawmill Creek Basin.



Figure 7-1: Hermosa Property Regional Geologic Area



REGIONAL STRUCTURAL GEOLOGY

The structural character of Arizona was largely established during the late Mesozoic and Tertiary, although there is evidence that older (Precambrian) structures were reactivated during this time (Krantz, 1989). Laramide, Mid-Tertiary, and Late Tertiary tectonic phases are recognized in southern Arizona

LARAMIDE

The Laramide orogeny in southern Arizona generated north-south and northeast-southwest compressional stresses that resulted in regional tectonic fabrics and thrust faulting. Structures in the southeast Arizona province have been particularly controversial. Interpretation of a regional overthrust terrane has been advocated by numerous workers, most prominently and recently by Harald Drewes (1981). The Drewes model proposes low-angle reverse and thrust faults as a response to southwest-northeast Laramide compressional stresses, with a thrust slip of perhaps 100 kilometers (62 miles). This model has been of particular interest in petroleum exploration circles.

In contrast, the basement uplift model views the same nearly flat faults as normal in sense, with considerable lateral slip from apices of thrusted, folded basement rocks. In this manner, these “detachment faults” react to the same southwest-northeast stresses recognized by the overthrust model (Rehrig and Heidrick, 1976; Heidrick and Titley, 1982). This core complex–detachment theory is now widely viewed as the preferred structural model for southern Arizona, part of a pattern extending to the Canadian border. Detachment structures are now recognized as important hydrothermal metallic deposit hosts in the southwestern US.

MIDDLE TERTIARY

Laramide deformation was followed by a relative structural and magmatic respite during the Eocene epoch and then by renewed tectonism and magmatic activity during the Oligocene to mid-Miocene. Middle Tertiary tectonism was characterized by crustal extension, with stresses directed in an ENE-WSW axis, plus attendant magmatism dominated by intermediate to silicic melts. Extension resulted in normal faulting and rotation of fault blocks over much of Arizona.

Menges and Pearthree (1989) summarize mid-Tertiary extensional features as follows:

Calc-alkalic rhyolitic to basaltic volcanism Emplacement of shallow plutons Basin development and filling by sediments Rotation of sediments and volcanics on low-angle normal faults and detachment faults Shear zones and cataclastic fabrics at deeper levels Northeast-trending folds with amplitudes of several kilometers.

Detachment faults are the most important structural features active during the mid-Tertiary in Arizona. In contrast to detachment faults engendered by compression in Laramide times, mid-Tertiary detachments gained their low-angle normal displacement by means of crustal thinning. Isostatic uplift of crustal segments denuded by erosion is the preferred mechanism for this phase of detachment faulting. Evidence points to mid-Tertiary low-angle normal faulting accounting for 85 to 95% of Tertiary crustal extension, with late Tertiary normal faulting accounting for the remainder.



PROJECT GEOLOGY

The Hermosa Taylor Deposit is a stratigraphically-controlled, carbonate replacement deposit (CRD) formed at the contact between Permian carbonate rocks and overlying late-Cretaceous rhyolitic volcanic rocks which permeates downward, to significant depth, into the three recognized carbonate formations on the property. The deposit and its host rocks strike approximately southwest-northeast and dip ± 30° to the northwest. They do not appear to be significantly disrupted by post-mineralization faulting at deposit scale.

A new outcrop geological map with generalized long and cross sections of the Hermosa Taylor Deposit area are presented as Figure 7-2, Figure 7-3 and Figure 7-4 respectfully.

LITHOLOGY AND STRATIGRAPHY

The Cretaceous volcanic rocks and the underlying Permian sedimentary rocks of the Hermosa project area are divided into the following units (Figure 7-5), recognized across the property and in the drill holes. They are listed and described from youngest to oldest.

Trachyandesite of Meadow Valley. Designated andesite and (Kmv) on map and sections. It is an approximately conformable, complex flow unit that overlies the Hardshell Volcanic Sequence on the western and northern margins of the Hermosa property. Drilling shows local dikes of similar composition. The trachyandesite is variably described as dark gray to brown, fine to medium-grained with 1 to 3 millimeters euhedral-subhedral plagioclase phenocrysts and sparse 2 to 5 millimeters square K-feldspar phenocrysts in a fine-grained plagioclase-pyroxene-amphibole groundmass. It may contain interstitial magnetite and is generally fresh to weakly propylitized, especially on fractures.

Hardshell Volcanic Sequence. Five distinct rhyolitic volcanic units have been identified as making up the Hardshell sequence, and are correlated between map and drill holes.

Rhyolite crystal tuff. Designated (Khct) on map and cross-sections. Appears to be the uppermost unit in the Hardshell volcanic sequence and is conformable with underlying rhyolite breccia unit (Khb). Described as white to gray to buff to locally pale pink, fine- to medium-grained, and crystal-rich. Rare, thin, relict bedding planes. Abundant 1 to 3 millimeters plagioclase crystals and rare 0.5 millimeters, broken quartz eyes. Rare patches and zones of 5 to 15 millimeters, angular to subrounded lithic clasts.

Rhyolite Breccia. Designated (Khb) on map and cross-sections. Prominent outcrop former in the Hardshell Ridge zone. Clast-supported or nearly clast-supported fragmental unit with abundant 1 millimeters to 5 meters (15 feet), angular, unsorted, rhyolite clasts in very-fine-grained rhyolitic groundmass. Contains abundant clasts with diameters greater than core diameter.

Rhyolite Lithic Tuff. Designated (Khlt) on map and cross-sections. Gray to gray-green, locally crystal-rich tuff with common 5 to 25 millimeters rhyolitic lithic fragments. Abundant 1 to 25 millimeters, partially collapsed and flatted pumice fragments in very-fine-grained, partially welded groundmass give the rock a distinctive, eutaxitic texture.

Rhyolite Polymict Breccia. Designated (KhHZ) on map and cross-sections. This is the named the Hardshell Zone, and interpreted to be the primary host to the deposits exploited by the old



Hardshell Incline workings. Rhyolite volcaniclastic and fragmental unit with abundant 1 to 25 millimeters, angular, rhyolite lithic clasts in a welded, eutaxitic matrix. Distinguished from Khlt by the presence of sparse to very abundant sedimentary clasts derived from underlying Paleozoic rocks. Contains limestone clasts, up to 10 meters (3 feet) or more in diameter. Commonly mineralized with Mn-oxide as 1 to 10 millimeters blebs and larger pods up to complete replacements, as well as in veins/veinlets and fracture coatings. Limestone clasts are replaced by Pb-Zn-Ag sulfides, at depth, in the northwest area of the property. Local zones of gray, vuggy, pervasive silicification.

Rhyolite Tuff. Designated (Kht) on map and cross–sections. Basal unit in Hardshell Volcanic Sequence. Light gray, massive, rhyolite tuff with rare, fine-grained plagioclase phenocrysts and rare, < 10 millimeters lithic clasts in very-fine-grained, tuffaceous groundmass. Local irregular, faint relict bedding and weak, hematite-limonite liesegang banding. Lies directly on Paleozoic sedimentary rock in the western part of the property, and on the spherulite unit (KoSP) of the Older Volcanic Sequence to the east.

Older Volcanic Sequence. The Older Volcanic Sequence is a predominantly rhyolitic volcanic package that underlies the Hardshell Sequence in the southeastern part of the property and contains lithologies that occur as clasts in the Hardshell Volcanic Sequence, especially in the Khb and Khlt units. The Older Volcanic Sequence has not been mapped in detail, and relatively few core holes penetrate the unit. The following units have been recognized and placed in a tentative stratigraphic sequence.

Rhyolite Spherulite Zone. Designated (KoSP) on map and cross-sections. Abundant, crowded, 1 to 100 millimeters ³, semi-spherical, zoned, partially devitrified spherulites in very-fine-grained partially welded groundmass.

Rhyolite Welded Tuff. Designated (KoT) on map and cross-sections. Light reddish-gray to purple, densely welded crystal tuff with strong to subtle laminar eutaxitic texture. Abundant, 0.1 to 3 millimeters, subhedral to euhedral, plagioclase phenocrysts in shard-bearing, eutaxitic, very-fine-grained groundmass. Laminated to thin-bedded, locally contorted due to flowage. This rock type is the most common clast lithology in the Khb of the Hardshell Volcanic Sequence.

Latite Porphyry. Designated (KoLA) on map and cross-sections. Distinctly porphyritic intrusive and/or flow unit with prominent, abundant, 1 to 5 millimeters , subhedral to euhedral, white, prismatic plagioclase phenocrysts and less common 1 to 5 millimeters , euhedral, white, approximately equant K-feldspar phenocrysts. Rare, relict, 0.1 to 1 millimeters, rotten, biotite books in fine to medium-grained, red-brown groundmass.

Concha Formation. Designated Pzlc on map and cross-sections. Gray, massive, fine-grained, recrystallized limestone-marble with common 1 by 5 centimeters to 10 by 25 centimeters, irregular dark gray to black chert pods. Local 1 to 5 millimeters wide, irregular, discontinuous calcite veinlets. Prominent chert nodules and complete absence of sandy detritus distinguish the Concha formation limestone-marble from the underlying Scherrer formation.



Scherrer Formation. Comprised of calcareous sandstone. Designated Pzcs on map and cross-sections. Gray, massive to thin-bedded. 60% fine-grained, well-rounded, well-sorted quartz sand in calcareous matrix.

Epitaph Formation. Four separate lithologies comprise the Epitaph formation stratigraphy

Sandy Limestone. Designated Pzsl on map and cross-sections. Light gray, massive. 30 to 60%, fine-grained, well-rounded, well-sorted quartz sand in calcareous matrix. Sparse, relict thin bedding.

Limestone. Designated Pzls on map and cross-sections. Gray, bleached, massive to irregularly thin-bedded, very-fine-grained limestone with rare, 1 by 5 centimeters to 10 by 25 centimeters³, irregular dark gray to black chert pods with 1 to 10 millimeters , talc selvages. Common 1 to 25 millimeters ³, spots, pods and ovals of white calcite after gypsum.

Quartzite. Designated Pzq on map and cross-sections. Gray, massive to thin-bedded. 60% fine-grained, well-rounded, well-sorted quartz sand firmly indurated with quartz overgrowth cement. Non-calcareous.

Silty Limestone. Designated Pzst on map and cross-sections. Gray, thin-bedded, very-fine-grained, silty. Well preserved, 0.1 to 1 millimeters, regular, thin-beds. Common carbonaceous slips and partings. Common, very-fine-grained, pyritic partings. Common, short intervals without thin-bedding. Reactive.



Figure 7-2: Geological Map of Hermosa Project



Figure 7-3: Generalized Long Section



Figure 7-4: Generalized Cross Section



Figure 7-5: Stratigraphic Column for the Hermosa Taylor Project Area

Note: Individual units have not been measured for true Stratigraphic extent. Their thicknesses

are represented relative to one another).



ALTERATION

Rhyolitic rocks, particularly Khb, across the property are uniformly light gray to tan, with primary volcanic and clastic textures generally well preserved. The same rocks are generally shades of purple to maroon where they crop out at a distance from known mineralization. Locally, in otherwise unaltered rhyolite outcrops, small patches of fine-grained secondary K-feldspar have been noted. These observations suggest that the tan coloration proximal to mineralization may be pervasive and moderately strong potassic alteration. This alteration seems to form a broad background upon which later alteration more directly associated with the Hermosa project mineralization has been imposed. The clasts within Hardshell volcanic sequence lithic tuff and breccia are commonly selectively overprinted by white kaolinite-sericite veinlets and patches. The fine-grained, tuffaceous, matrix to the lithic tuff, polymict breccia and lower rhyolite tuff are pervasively overprinted by very-fine, disseminated kaolinite-sericite. In both cases, primary textures are generally very well preserved and the rock remains competent and hard.

Manto-type and CRD (where it occurs at the contact between Cretaceous and Permian rocks) mineralization are always surrounded by an asymmetric envelope of pervasive and strong silicification, referred to in the past as “jasperoid”. The greatest volume and the most massive expression of this silicification is within the rhyolite tuff in the hanging wall of the mineralization. There it commonly penetrates more than 10 meters (30 feet) above mineralization. In the footwall carbonates, silicification is less complete and penetrates only a few meters below into the Concha limestone. Primary mineralogy and texture in these rocks are completely replaced by gray, fine-grained quartz. Rare small patches or pods of ghostly relict volcanic texture have been noted.

Concha, Scherrer and Epitaph formation carbonate rocks are weakly to moderately recrystallized and contain fine to coarse, irregular and discontinuous calcite veinlets. They are commonly bleached to a light gray color. Fossils are normally well preserved along with fine primary sedimentary textures. Drill holes in the northwestern part of the property contain increasingly pervasive and stronger recrystallization in the carbonate rocks that ultimately grades into diopside-wollastonite-rhodonite calc-silicate skarn with associated base metal sulfide mineralization. Calcareous sandstone intervals contain fewer calcite veinlets but they are still present. Quartzite only rarely host calcite veinlets.

Andesite drill intercepts and outcrops typically contain fine, thin, irregular and discontinuous calcite veinlets and may also contain finely distributed groundmass calcite. Biotite, where present, is typically degraded with greenish chlorite selvages. Magnetite is occasionally noted and pyrite is by no means uncommon.

MINERALIZATION

Mineralization has been subdivided into two ore types shown on cross-sections (Figure 7-3 and Figure 7-4). The oxidized rhyolites overlying manto-style mineralization and the carbonate units contain irregular patches and zones of veinlet-controlled hematite-limonite and sooty Mn-oxide with accessory silver mineralization. Manto-style mineralization in rocks of rhyolitic composition is dominated by black, sooty cryptomelane, with or without yellowish orange secondary lead-oxides and with quartz-dominant gangue mineralogy. Manto-style mineralization in carbonate rocks does not typically contain lead-oxides. Strong, pervasive gray, silicification is also present and calcite occurs as veinlets, vugs and fracture fillings.



Drill core intercepts containing rhodochrosite and pink calcite are not uncommon and rarer intercepts of hard pinkish rhodonite-bustamite have also been noted.

A separate, noteworthy horizon in the Cretaceous rhyolitic volcanics has been designated the “Hardshell Zone” and labeled as CRD mineralization in (Figure 7-3). This zone supported historic mining at the Hardshell Incline mine and is composed of a 3 to greater than 30 meter (10 to 100-foot) thick polymict rhyolite breccia with a minor portion of clasts of carbonate sedimentary provenance and is the locus of partial to massive Mn-oxide replacement mineralization in the southeastern drill holes and partial to massive Pb-Zn sulfide replacement mineralization in the northwestern drill holes.

CRD mineralization is developed within the Concha limestone, Scherrer Formation and Epitaph Formation, particularly in the northwestern-most section of the property. This calc-silicate skarn type mineralization contains patches and massive, wholesale replacements of carbonate by very-fine-grained, massive, wollastonite-diopside and rhodonite, generally white to pink, very-fine-grained to aphanitic, hard and massive. Significant, sparse zones with coarse-grained, radiating crystal aggregates up to 2 centimeters, and common coarse-grained, euhedral-subhedral galena, sphalerite, chalcopyrite and pyrite are present. Massive replacements of carbonate by galena, sphalerite, chalcopyrite and pyrite are not uncommon, up to 6 meters (20 feet) thick. Light green, massive, coarse-grained garnet with abundant sulfides as disseminations, pods, masses and interstitial replacements are sparsely noted, deep within the Epitaph Formation, in the furthermost, northwestern core holes.

STRUCTURAL GEOLOGY

One of the main fault orientations on the property is a northeast-southwest trending structural zone that runs through the southeastern corner of the main patented claim block. This zone intersects a northwest-southeast trending conjugate set that lies south of the main Hermosa patented claim block and runs through the Black-Eagle and Bender mine areas. A second northwest-southeast trending structural zone runs through the center of the patented claim block and has been known by previous workers as the Hudson Fault Zone (Figure 7-2).

Outcrops, old workings and road cuts are commonly disrupted by irregular, discontinuous, complex structural zones. These zones are characterized by rubbly, broken, brecciated and sheared features that do not typically displace either lithologic contacts or alteration or mineralization zones at map or cross-section scale (typically 1:2400).

This fracturing and small-displacement faulting is confirmed by geotechnical measurements on core from the 2010-2012 and 2014-2015 drilling campaigns that showed the average core recovery was 89% and the average RQD measurement was only 29%.

SUMMARY AND CONCLUSIONS

The project geology is characterized by relatively un-disrupted volcanic and sedimentary stratigraphy, alteration and mineralization.

Alteration and mineralization combine to form coherent, continuous bodies. Manto Oxide and CRD ore types are based on gangue characteristics, lithological host and

grade profiles.



DEPOSIT TYPES

The Hermosa Taylor Deposit is a carbonate replacement deposit (CRD), located along the disconformable contact between Cretaceous rhyolite volcanic rocks and underlying Paleozoic carbonates which permeates downward, to significant depth, into the three recognized carbonate formations on the property. The CRD is composed predominately of zinc, lead and copper sulfide minerals. Zinc and lead metals occur as sphalerite and galena respectively. The galena contains significant amounts of silver.

Volcanic country rocks lying above the mineralized portions of the CRD deposit are oxidized and commonly host sooty Mn-oxide and Fe-oxide coated fractures and veinlets after sulfides. Metallurgical tests indicate that most of the silver and base metal mineralization is associated with these veinlets and fractures. A small portion of silver and base metal mineralization is hosted within crystal lattice sites in cryptomelane-type (manganese) minerals.

Pervasive potassic alteration assemblages overprint the rhyolite stratigraphic sequences. The limits of this potassic alteration lie beyond the project boundary. K-feldspar crystal aggregates with faces up to 1 millimeters across are commonly found in vein selvages and masses within the project area.

Weak phyllic alteration overprints the rhyolite volcanic rocks, andesites are overprinted by weak propylitic alteration assemblages.

Concha, Scherrer and Epitaph formation carbonate rocks are weakly to moderately recrystallized and contain fine to coarse, irregular and discontinuous calcite veinlets. They are commonly bleached to a light gray color. Drill holes in the northwestern part of the property contain increasingly pervasive and stronger recrystallization in the carbonate rocks that ultimately grades into diopside-wollastonite-rhodonite calc-silicate skarn with associated base metal sulfide mineralization.

The Laramide aged Red Mountain porphyry copper deposit is located approximately milestone mile north of the Hermosa project. The Laramide Sunnyside Diatreme is nearer to the Hermosa project, located approximately one-half mile northwest. The porphyry style alteration and the proximity to the Hermosa project area suggest a genetic link. Intrusive dikes were logged and noted in the most recent (2014 – 2015) drilling campaign, but direct evidence for an association with either or both of these intrusions has not been recognized to date.



EXPLORATION

While considerable exploration has been completed in the district, most has been directed at near surface vein type mineralization and manto-style manganese silver mineralization. The upper limits of the CRD mineralization occur approximately 240 meters (800 feet) below the current topographic surface and continue down-dip to at least 500 meters (1,700 feet) below the current topographic surface. Exploration for this mineralization has been limited to diamond core drilling and the utilization of a magnetic survey flown in 2011.

The magnetics, while not a direct targeting tool for the mineralization, have been helpful in identifying potential intrusive bodies at depth.



DRILLING

INTRODUCTION

The following discussion is an overview of the exploration programs conducted on the Hermosa property by Asarco Exploration and Arizona Mining Inc.

ASARCO EXPLORATION

ASARCO explored the Hermosa property with intermittent drill programs from 1940 through 1991, supplemented with geological mapping. The early program diamond drilling, spurred by WWII metal prices, failed to find significant extensions of Hardshell Incline lead-silver ores. Nonetheless, several thousand tons of moderate grade lead-silver oxide ore were shipped from the lower levels of the Hardshell Incline Mine from 1943 to 1948 and from 1963 and 1964. Second pass diamond drilling programs, undertaken from 1946 to 1953, located thick Ag-Pb-Zn bearing, manganese oxides of the Main Manto to the southeast of the Hardshell Incline. ASARCO patented the four main Hardshell claims to cover this discovery between 1958 and 1961.

Rising silver prices in the mid-1960s led to renewed interest in the Hermosa mineralization. Re-evaluation of the geologic data led to staking of additional claims in the district and the three patented claims of the Hermosa Group were acquired between 1965 and 1968. ASARCO used the newly developed, air-hammer rotary drilling in to drill the silica jasperoid cap and the vuggy Main Manto zone. Diamond drilling was used successfully in some outlying stratigraphic holes but attempts to deepen air-hammer drill holes in vuggy, silicified limestone often failed when drill fluid circulation was lost.

Geophysical surveying, detailed geologic and metallurgical studies on the manganese oxide ores began in the late 1960s and continued through 1991. Close-spaced, rotary hammer drilling partially defined heap leach amenable, low-grade manganese, low-grade silver resource located near the historic Hermosa mine workings. Three shallow rotary air-hammer drill holes were completed in 1989 for metallurgical samples and a 457 meter (1,500 foot) deep diamond drill hole in 1990-91 explored for deeper mineralization. ASARCO drilled 114 air-hammer and core holes, with an aggregate of approximately 14,021 meters (46,000 feet) on the Hermosa Property and surrounding area.

ASARCO conducted beneficiation tests to determine silver recovery processes. Bench scale, high-tension magnetic separation, electrostatic separation, reduction and segregation kilning, SO2 and thio-sulfate leaching and various cyanidation processes, in both company and commercial laboratories were tested. Little consideration was given to recovering other metals, including Mn, Zn, Cu, Au and potential co- products silica or clays. Minor test consideration was given to heap-leaching non-manganese low-grade silver ores.

Recovery by weight or footage, water levels and volumes, lithology, alteration, mineralization and miscellaneous comments were logged in the field for most ASARCO drill holes and posted to graphic logs and cross-sections. Most air-hammer holes were drilled dry or with minimal water injection for dust control. They were usually lost after the water table or significant fracture zones or voids were encountered. Most of this drilling did not penetrate the static water table. Down-hole deviation was not measured for any of the ASARCO drill holes at Hermosa.



ARIZONA MINING INC. EXPLORATION

Arizona Mining Inc. has been active on the Hermosa Property since 2006. A re-assay program of all remaining ASARCO assay pulps verified the silver and manganese assay data and added high-quality Pb, Zn, Cu, and Au values to the database. Rock types, alteration, and mineral codes from paper drill logs and cross sections were added to the electronic assay database. All available ASARCO drill assays and supplemental 16-element X-ray fluorescence analyses were captured electronically as well. Preliminary SO2 leach tests were run on two composite samples of assay pulps at Hazen Labs. A resource estimate and preliminary economic evaluation was included in a February 7, 2007 Preliminary Economic Assessment report written by Pincock, Allen and Holt.

Existing, active access roads, drill roads and pads were rehabilitated and new drill roads and pads were built on patented ground. A secure work site for sample storage, core logging and splitting was built in Harshaw townsite.

Four core holes totaling 1,356 meters (4,450 feet) were completed for comparison with four ASARCO rotary air-hammer drill holes in 2007. Three long exploration core holes, totaling 2,416 meters (7,928 feet), tested the Main Manto Zone mineralization along the Hogan Fault Zone in 2007 and 2008. Six long core holes, totaling 3,659 (12,005 feet), were also drilled to test targets peripheral to the Hogan Fault Zone in 2009. Results are available in Technical Reports of Exploration Progress, dated August 7, 2008, February 26, 2010 and May 26, 2010. Assay results from this work and bench-scale metallurgical testwork undertaken by Hazen Laboratory in Golden, Colorado in 2008 were used for a resource update and Preliminary Economic Assessment, completed and released in October 2010 by M3 Engineering of Tucson.

Arizona Mining Inc. embarked on a drilling campaign to define and classify the Hermosa mineralization in December, 2010. Supporting geological mapping, geochemical sampling and airborne geophysical projects were undertaken as well. The drilling project was completed on March 19, 2012 totaling 31,032 meters (101,813 feet) of reverse circulation drilling and 24,836 meters (81,486 feet) of core drilling.

Six additional reverse circulation drill holes, designed as twins for Asarco rotary air-hammer drill holes and to collect additional material for metallurgical testwork were completed in August 2012. Assay results from this work and metallurgical testwork completed by Hazen Laboratory in Golden, Colorado in 2012 and 2013 were used for the resource update included as part of this document.

A resource technical report, published on March 21, 2012 by Independent Mining Consultants of Tucson, Arizona documented interim progress for the Arizona Mining evaluation. An additional report, published by Metal Mining Consultants of Highlands Ranch, Colorado updated the resource and documented additional interim progress as part of a Preliminary Economic Assessment report, dated October 31, 2012.

CRD EXPLORATION DRILLING

Arizona Mining commenced a new drilling program between August 2014 and November 2015 was concentrated on the northwestern portion of the project area to further develop the Hermosa Taylor Deposit, the most recently identified mineral resource on the Property. Eight core holes, totaling



8,942 meters (29,336.5 feet) were drilled and completed. The drill program was designed to test the extension of the CRD mineralization to the north-west. All eight core holes intercepted CRD mineralization demonstrating the robust nature of the ore deposit. The eight holes completed in from 2014 – 2015 were used in the Mineral Resource estimate as well as 17 previously completed drill holes, totaling 10,706 meters (35,124.5 feet), from AIM drilling programs conducted from 2007 to 2009. To date, at total of 25 holes have intercepted CRD mineralization totaling 19,648 meters (64,461 feet) of drilling. CRD drill hole locations are displayed in Figure 10-1. A breakdown of the various drilling programs by drilling types and footages are listed in Table 10-1 and Collar coordinates, azimuth, dip and depth of the 25 drill holes targeting the CRD style mineralization are listed in Table 10-2.

Figure 10-1: CRD Drill Holes



Table 10-1: Drill Holes with CRD Mineralization

Company Core Holes Meters Feet

Arizona Mining (2007-2009) 8 5,580 18,307 Arizona Mining (2010-2012) 9 5,126 16,817.5 Arizona Mining (2014-2015) 8 8,942 29,336.5

Totals 25 19,648 64,461

Table 10-2: Drill Hole Collars for Holes with CRD Mineralization

DH_ID Easting (ft) Northing (ft) Elevation (ft)z az incl Length (ft) Length (m) HDS-102 1073955 169754.7 5076.9 0 -90 2328 709.6 HDS-103 1073631 170187 5034.6 0 -90 3103.5 945.9 HDS-104 1074431 169028.1 5100.7 0 -90 2497 761.1 HDS-105 1074625 168688.5 5129.3 0 -90 1877 572.1 HDS-106 1074719 169128 5242.8 0 -90 2255 687.3 HDS-107 1074384 169455.3 5084.5 0 -90 2517.5 767.3 HDS-108 1074411 168868.9 5117.2 215 -83 1747 532.5 HDS-109 1074393 169422.6 5086.1 240 -75 1982 604.1 HDS-129 1074133 169586 5090 0 -90 2217 675.7 HDS-137 1074545 168875.5 5119.7 0 -90 1947 593.4 HDS-145 1074266 169788.4 5051.8 0 -90 1615 492.3 HDS-152 1074783 168919.9 5242.3 0 -90 1802 549.2 HDS-153 1073976 169358.8 5122.2 0 -90 2204 671.8 HDS-188 1073878 169445.8 5101.1 0 -90 900 274.3 HDS-204 1074653 169301 5194.1 0 -90 1755.5 535.1 HDS-240 1074556 169102.7 5175.2 0 -90 2477 755.0 HDS-269 1074884 169184.1 5233.1 0 -90 1900 579.1 HDS-330 1074471 169226.7 5131.2 230 -80 2589 789.1 HDS-331 1073570 169665 5152 0 -90 3549 1081.7 HDS-332 1073620 169965 5110 0 -90 4097 1248.8 HDS-333 1073350 170110 5150 0 -90 4514 1375.9 HDS-334 1073130 170010 5135 0 -90 4337 1321.9 HDS-335 1073130 170010 5135 230 -85 3947 1203.0 HDS-336 1073220 170330 5030 0 -90 3164.5 964.5 HDS-337 1072957 170171 5000 0 -90 3139 956.8



Drill core was washed by the drill helper and transferred from split-tube half-section to the core box. It was photographed and logged for geotechnical characteristics, lithology, alteration and mineralization. Assay intervals were marked and recorded. All holes were surveyed for directional deviation using a Reflex EZ-Shot magnetic survey tool.

Drill collars are preserved with a ten foot section of drill steel with a steel cap and cemented in place. The drill hole number is inscribed in the metal cap for identification (Figure 10-2). Collar coordinates are surveyed by a licensed Arizona registered land surveyor. Collar locations are recorded using Arizona State Plane coordinate system.

Figure 10-2: Drill Collar for Drill Hole HDS-335



DRILLING SUMMARY

Drilling results are tabulated and summarized Table 10-3.

Table 10-3: Taylor Deposit CRD Drilling Results Summary

Taylor Deposit CRD Drilling Results Summary

DH_ID From (feet) To (feet) Interval (in feet)

From (meters) To (meters) Interval

(meters) Ag opt Pb% Zn% Cu%

HDS-102 897 918.5 21.5 273.4 279.9 6.6 1.16 2.33 4.79 0.01 HDS-102 1812 1837 25 552.4 560.1 7.6 0.97 1.72 1.95 0.05 HDS-102 1857 1922 65 566.0 585.8 19.8 1.97 4.79 7.11 0.12 Including High Grade 1886.5 1899 12.5 575.0 578.8 3.8 4.31 12.10 23.41 0.12 HDS-102 1956 1985 29 596.2 605.0 8.8 1.60 4.61 5.35 0.10

HDS-103 653 668 15 199.1 203.7 4.6 7.16 1.54 1.54 0.25 HDS-103 723 732 9 220.4 223.1 2.7 0.80 1.09 2.10 0.01 HDS-103 1857 1867 10 57.0 569.2 3.0 10.32 0.10 0.09 0.07 HDS-103 2231.5 2242 10.5 680.3 683.5 3.2 3.19 11.04 14.36 0.15 HDS-103 2338 2353 15 712.6 717.2 4.6 2.28 8.17 2.56 0.15 HDS-103 2678 2688 10 816.5 819.5 3.0 1.24 4.37 5.53 0.04 HDS-103 2703 2723 20 824.1 830.2 6.1 1.03 3.28 2.99 0.03 HDS-103 2733 2743 10 833.2 836.3 3.0 1.76 6.20 7.00 0.18

HDS-104 1007 1367 360 306.9 416.6 109.7 2.20 5.29 8.22 0.17 Including High Grade 1047 1077 30 319.1 328.3 9.1 4.08 8.57 13.24 0.10 Including High Grade 1087 1147 60 331.3 349.6 18.3 3.65 7.75 12.17 0.46 Including High Grade 1197 1212 15 364.9 369.5 4.6 1.64 2.42 13.73 0.07 Including High Grade 1272 1362 90 387.8 415.2 27.4 3.00 8.57 10.45 0.18 Including High Grade 1332 1357 35 406.0 413.6 10.7 4.77 13.99 15.18 0.17 HDS-104 1392 1477 85 424.3 450.2 25.9 1.15 2.58 2.73 0.43 Including High Grade 1442 1452 10 439.6 442.7 3.0 4.60 9.16 10.68 2.72 HDS-104 1547 1577 30 471.5 480.6 9.1 1.48 1.95 3.15 0.45 HDS-104 2217 2232 15 675.7 680.3 4.6 0.84 1.49 2.18 0.06

HDS-106 1405 1447 42 428.2 441.0 12.8 1.73 3.00 3.54 0.11 HDS-106 1477 1532 55 450.2 466.9 16.8 0.77 0.86 5.44 0.06

HDS-107 1477 1487 10 450.3 453.4 3.0 4.37 1.16 5.33 0.43







HDS-107 2392 2417 25 729.0 736.7 7.6 0.56 1.56 2.32 0.03

HDS-109 477 492 15 145.4 150.0 4.6 1.41 2.39 1.20 0.03 HDS-109 1072 1102 30 326.7 335.9 9.1 0.93 0.63 1.01 0.07 HDS-109 1552 1601 49 473.0 488.0 14.9 2.44 6.83 8.67 0.21 Including High Grade 1570 1601 31 478.5 488.0 9.4 3.05 8.40 11.38 0.29 HDS-109 1617 1707 90 492.8 520.3 27.4 1.46 4.16 6.96 0.27 Including High Grade 1657 1682 25 505.0 512.6 7.6 2.77 8.17 13.44 0.59 HDS-109 1747 1757 10 532.6 535.7 3.0 1.02 1.87 3.07 0.25 HDS-109 1787 1797 10 544.7 547.7 3.0 0.68 2.24 1.98 0.07

HDS-129 537 547 10 163.7 166.7 3.0 1.30 1.66 1.13 0.12 HDS-129 1667 1756 89 508.1 535.2 27.1 2.48 6.68 8.36 0.18 Including High Grade 1772 1746 34 540.1 532.2 10.4 2.91 7.84 14.02 0.20 HDS-129 1822 1837 15 555.3 559.9 4.6 1.54 4.15 3.65 0.15 HDS-129 1852 1862 10 564.5 567.5 3.0 1.41 2.05 1.74 0.33 HDS-129 1907 1972 65 581.2 601.0 19.8 1.04 2.96 3.66 0.11

HDS-137 1182.5 1212 29.5 360.4 369.4 9.0 0.99 2.74 5.79 0.04 HDS-137 1227 1267 40 374.0 386.2 12.2 1.00 1.82 3.21 0.15 HDS-137 1272 1281.5 9.5 387.7 390.6 2.9 1.63 4.36 2.13 0.07

HDS-145 1182 1220.5 38.5 360.3 372.0 11.7 2.36 2.03 3.29 0.21

HDS-152 1378 1417 39 420.0 431.9 11.9 0.16 0.09 4.83 0.01 HDS-152 1437 1462 25 438.0 445.6 7.6 0.15 0.05 13.24 0.01

HDS-153 451 461 10 137.5 140.5 3.0 1.68 3.46 1.45 0.01 HDS-153 1886 1914.5 28.5 574.8 583.5 8.7 1.00 3.34 5.32 0.31

HDS-188 725 750 25 221.0 228.6 7.6 3.63 2.10 3.43 0.20

HDS-204 1514 1549 35 461.4 472.1 10.7 0.15 0.11 4.24 0.02 HDS-204 1694 1704 10 516.3 519.4 3.0 0.15 0.04 3.53 0.03

HDS-240 1287 1382.5 95.5 392.3 421.4 29.1 1.80 3.71 5.51 0.26







Including High Grade 1290 1315.5 25.5 393.2 400.9 7.8 2.28 7.01 10.53 0.42 Including High Grade 1365 1377 12 416.0 419.7 3.7 6.29 8.59 11.47 0.74 HDS-240 1411.5 1424 12.5 430.2 434.0 3.8 2.49 5.56 6.30 0.20 HDS-240 1632 1642 10 497.4 500.5 3.0 3.85 8.17 2.40 0.75

HDS-269 1355 1365 10 413.0 416.0 3.0 0.78 2.55 5.63 0.07

HDS-330 1117 1122 5 340.4 342.0 1.5 1.41 4.25 10.55 0.16 HDS-330 1151 1330.5 179.5 350.8 405.5 54.7 1.62 4.34 7.50 0.15 Including High grade 1185.5 1221.5 36 361.3 372.3 11.0 4.22 11.88 18.76 0.36 HDS-330 1365.5 1372.5 7 416.2 418.3 2.1 0.76 2.31 4.16 0.12 HDS-330 1375 1379 4 419.1 420.3 1.2 0.92 3.38 1.79 0.07 HDS-330 1416 1452.5 36.5 431.6 442.7 11.1 1.71 4.01 5.52 0.22 HDS-330 1460.5 1508.5 48 445.1 459.8 14.6 4.46 5.00 4.63 0.21 HDS-330 1521 1547.5 26.5 463.6 471.7 8.1 2.06 4.51 7.34 0.40 HDS-330 1650 1654.5 4.5 502.9 504.3 1.4 1.33 3.04 5.65 0.08 HDS-330 2252 2272 20 686.4 692.5 6.1 1.67 2.12 2.86 0.12 HDS-330 2380 2390 10 725.4 728.4 3.0 5.76 12.66 21.10 0.50

HDS-331 572 604 32 174.3 184.1 9.8 4.13 5.18 9.57 0.02 Including High Grade 576 592 16 175.6 180.4 4.9 5.80 8.09 16.58 0.02 HDS-331 1967 1972 5 599.5 601.0 1.5 0.72 1.86 2.43 0.04 HDS-331 1977 1987 10 602.6 605.6 3.0 0.71 2.13 2.64 0.07 HDS-331 2045.5 2072 26.5 623.4 631.5 8.1 1.24 3.36 4.63 0.11 HDS-331 2122 2137 15 646.8 651.3 4.6 0.40 0.91 1.38 0.03 HDS-331 2152 2162 10 655.9 658.9 3.0 0.40 1.01 1.75 0.05 HDS-331 2297 2307 10 700.1 703.1 3.0 1.26 4.09 6.26 0.01 HDS-331 2481 2500 19 756.2 762.0 5.8 0.61 1.71 2.13 0.05 HDS-331 2507 2512 5 764.1 765.6 1.5 1.16 3.29 5.50 0.03 HDS-331 2527 2537 10 770.2 773.2 3.0 1.11 3.10 7.26 0.03 HDS-331 2587 2592 5 788.5 790.0 1.5 0.94 2.85 3.78 0.02 HDS-331 2647 2662 15 806.8 811.3 4.6 0.57 1.87 1.61 0.01 HDS-331 2682 2698 16 817.4 822.3 4.9 0.50 1.64 1.92 0.01 HDS-331 2720 2742 22 829.0 835.7 6.7 1.41 5.09 6.42 0.05 HDS-331 2870 2872 2 874.7 874.7 0.0 3.56 11.50 14.40 0.08 HDS-331 2913 2943.5 30.5 887.8 897.1 9.3 2.19 6.62 4.50 0.03







HDS-331 3107 3112 5 947.0 948.5 1.5 1.07 3.42 0.27 0.00 HDS-331 3172 3182 10 966.8 969.8 3.0 2.12 2.35 3.00 0.11 HDS-331 3263 3304.5 41.5 994.5 1007.2 12.6 6.37 19.68 9.73 0.89 HDS-331 3374 3387 13 1028.3 1032.3 4.0 9.84 7.05 11.32 0.70 HDS-331 3392 3397 5 1033.8 1035.4 1.5 0.86 1.97 2.03 0.02 HDS-331 3407 3412 5 1038.4 1039.9 1.5 3.00 6.40 5.83 0.14 HDS-331 3415 3422 7 1040.8 1043.0 2.1 22.06 9.20 4.87 0.97

HDS-332 1511.5 1555 43.5 460.7 473.9 13.3 5.63 9.93 24.19 0.07 HDS-332 1587 1610 23 483.7 490.7 7.0 0.75 1.34 2.12 0.19 HDS-332 2092 2097 5 637.6 639.1 1.5 1.84 1.17 2.86 0.16 HDS-332 2127 2169 42 648.3 661.1 12.8 1.25 3.92 4.10 0.04 HDS-332 2188 2196.5 8.5 666.9 669.5 2.6 1.17 1.86 3.12 0.11 HDS-332 2200.5 2210 9.5 670.7 673.6 2.9 0.88 1.74 1.85 0.08 HDS-332 2599 2604 5 792.1 793.7 1.5 0.69 1.98 3.47 0.03 HDS-332 2647 2652 5 806.8 808.3 1.5 0.75 2.27 3.45 0.01 HDS-332 2812 2852 40 857.1 869.2 12.2 1.25 3.77 4.61 0.05 HDS-332 2919 2921.5 2.5 889.7 890.4 0.8 3.15 8.91 7.52 0.02 HDS-332 2940 3067 127 896.1 934.8 38.7 0.97 2.74 1.54 0.00 Including High Grade 3049.5 3055 5.5 929.4 931.1 1.7 3.47 10.26 1.57 0.00 Including High Grade 3057.5 3060 2.5 931.9 932.6 0.8 3.21 9.01 4.54 0.01 HDS-332 3363 3464 101 1025.0 1055.8 30.8 2.88 8.13 4.80 0.35 HDS-332 High Grade 3363 3385 22 1025.0 1031.7 6.7 6.38 19.52 8.40 0.56 HDS-332 3780.5 3793.5 13 1152.2 1156.2 4.0 2.42 3.43 5.27 1.06

HDS-333 892.0 897.0 5.0 271.9 273.4 1.5 12.37 6.57 1.57 0.64 HDS-333 1327.0 1332.0 5.0 404.4 406.0 1.5 4.52 0.93 3.41 0.31 HDS-333 1437.0 1442.0 5.0 438.0 439.5 1.5 4.81 0.80 0.79 0.42 HDS-333 1502.0 1507.0 5.0 457.8 459.3 1.5 1.80 3.79 4.63 0.03 HDS-333 1557.0 1567.0 10.0 474.6 477.6 3.0 0.70 1.19 4.17 0.01 HDS-333 1812.0 1842.0 30.0 552.3 561.4 9.1 1.84 3.09 4.67 0.16 HDS-333 1847.0 1862.0 15.0 562.9 567.5 4.6 0.81 0.97 1.50 0.03 HDS-333 2032.0 2042.0 10.0 619.3 622.4 3.0 0.49 1.21 2.01 0.13 HDS-333 2282.0 2291.0 9.0 695.5 698.3 2.7 0.44 1.40 2.47 0.02 HDS-333 2294.0 2298.5 4.5 699.2 700.5 1.4 0.87 2.79 3.07 0.03 HDS-333 2339.5 2346.0 6.5 713.0 715.0 2.0 12.74 20.53 27.95 0.70







HDS-333 2358.5 2365.0 6.5 718.8 720.8 2.0 4.20 13.82 1.19 0.17 HDS-333 2378.0 2427.0 49.0 724.8 739.7 14.9 4.39 9.80 7.07 0.14 HDS-333 2457.0 2522.0 65.0 748.9 768.7 19.8 2.41 6.93 10.09 0.13 HDS-333 2532.0 2560.0 28.0 771.7 780.2 8.5 1.71 5.87 8.24 0.03 HDS-333 2566.0 2584.5 18.5 782.1 787.7 5.6 1.63 5.64 7.64 0.07 HDS-333 2591.0 2655.0 64.0 789.7 809.2 19.5 1.44 4.57 5.33 0.04 HDS-333 2665.0 2672.0 7.0 812.3 814.4 2.1 0.46 1.44 2.28 0.02 HDS-333 2677.0 2687.0 10.0 815.9 819.0 3.0 1.49 4.89 3.08 0.09 HDS-333 2692.0 2731.0 39.0 820.5 832.4 11.9 0.94 3.03 3.19 0.01 HDS-333 2747.0 2767.0 20.0 837.2 843.3 6.1 0.65 2.37 3.15 0.00 HDS-333 2807.0 2817.0 10.0 855.5 858.6 3.0 0.44 1.39 2.13 0.03 HDS-333 2827.0 2837.0 10.0 861.6 864.7 3.0 0.72 2.50 2.02 0.01 HDS-333 2842.0 2852.0 10.0 866.2 869.2 3.0 1.31 4.13 2.99 0.02 HDS-333 3257.0 3261.0 4.0 992.7 993.9 1.2 2.83 4.68 0.03 0.02 HDS-333 3466.0 3485.0 19.0 1056.4 1062.2 5.8 3.71 10.40 5.10 0.68

HDS-334 795.0 807.0 12.0 242.3 246.0 3.7 1.74 1.72 2.62 0.09 HDS-334 1087.0 1097.5 10.5 331.3 334.5 3.2 3.23 5.25 9.89 0.03 HDS-334 1308.0 1336.5 28.5 398.7 407.3 8.7 3.68 2.74 4.42 0.26 HDS-334 1416.5 1426.5 10.0 431.7 434.8 3.0 1.23 1.85 3.12 0.05 HDS-334 1542.0 1557.0 15.0 470.0 474.6 4.6 0.52 0.83 0.63 0.01 HDS-334 1627.0 1661.5 34.5 495.9 506.4 10.5 2.79 3.67 0.43 0.05 HDS-334 1752.0 1757.0 5.0 534.0 535.5 1.5 6.04 4.08 1.65 0.07 HDS-334 1782.0 1792.0 10.0 543.1 546.2 3.0 12.68 0.64 0.70 0.18 HDS-334 1807.0 1817.0 10.0 550.7 553.8 3.0 16.63 1.24 1.37 0.36 HDS-334 1847.0 1872.0 25.0 562.9 570.6 7.6 0.89 1.68 2.45 0.07 HDS-334 1907.0 2332.0 425.0 581.2 710.8 129.5 1.49 3.31 4.16 0.14 Including High Grade 2030.0 2093.0 63.0 618.7 637.9 19.2 3.12 8.56 9.68 0.31 Including High Grade 2142.0 2235.0 93.0 652.8 681.2 28.3 3.15 6.60 6.92 0.27 HDS-334 2427.0 2437.0 10.0 739.7 742.8 3.0 0.65 1.45 0.46 0.00 HDS-334 2466.0 2470.0 4.0 751.6 752.8 1.2 12.77 1.92 3.20 0.74 HDS-334 2501.0 2837.0 336.0 762.3 864.7 102.4 1.34 3.27 3.92 0.03 Including High Grade 2501.0 2532.0 31.0 762.3 771.7 9.4 5.79 8.52 13.35 0.20 Including High Grade 2590.0 2672.0 82.0 789.4 814.4 25.0 1.81 5.86 5.70 0.03 HDS-334 2872.0 2917.5 45.5 875.3 889.2 13.9 1.19 3.14 3.23 0.03 HDS-334 3106.5 3217.5 111.0 946.8 980.6 33.8 1.65 3.35 1.97 0.03







Including High Grade 3201.0 3209.5 8.5 975.6 978.2 2.6 8.99 21.62 17.66 0.08 HDS-334 3429.0 3450.0 21.0 1045.1 1051.5 6.4 6.53 23.78 1.14 1.05 HDS-334 3895.0 3903.0 8.0 1187.1 1189.6 2.4 2.08 2.48 5.24 0.14

HDS-335 2665.5 2882 216.5 812.4 878.4 66 1.35 4.48 5.09 0.03 Including High Grade 2670 2690 20 813.8 819.9 6.1 3.68 12.92 17.3 0.08 Including High Grade 2772 2807 35 844.9 855.5 10.7 1.89 6.22 7.53 0.07 Including High Grade 2847 2857 10 867.7 870.8 3 2.69 8.67 11.48 0.05 HDS-335 2907 2947 40 886 898.2 12.2 1.54 4.53 4.23 0.03 HDS-335 3167 3203.5 27.5 965.3 976.4 11.1 2.61 5.35 3.25 0.06 HDS-335 3270.5 3274 3.5 996.8 997.9 1.1 6.53 14.55 8.48 2.31 HDS-335 3371 3382 11 1027.4 1030.8 3.4 0.89 2.22 4.55 0.02 HDS-335 3397 3400 3 1035.4 1036.3 0.9 5.72 1.3 3.03 0.036

HDS-336 1857 1907 50 566 581.2 15.2 3.28 2.25 2.94 0.23 HDS-336 2106 2137 31 641.9 651.3 9.4 1.03 3.05 4.38 0.06 HDS-336 2502 2579 77 762.6 786 23.5 2.07 6.39 5.75 0.03 Including High Grade 2542 2557 15 774.8 779.3 4.6 3.51 11.94 11.09 0.06 HDS-336 2672 2677 5 814.4 815.9 1.5 2.89 5.23 3.87 0.42

HDS-337 1882 1892 10 573.8 576.8 3.0 3.4 1.99 1.62 0.21 HDS-337 2227 2232 5 679.0 680.5 1.5 3.38 5.94 2.19 0.18 HDS-337 2262 2267 5 689.6 691.2 1.5 0.89 3.28 3.21 0.02 HDS-337 2287 2297 10 697.3 700.3 3.0 0.42 1.36 2.35 0.06 HDS-337 2397 2412 15 730.8 735.4 4.6 0.04 0.14 0.23 0.01 HDS-337 2457 2467 10 749.1 752.1 3.0 0.92 2.16 1.73 0.02 HDS-337 2492 2502 10 759.8 762.8 3.0 1.27 4.07 5.65 0.05 HDS-337 2595.5 2662 66.5 791.3 811.6 20.3 1.75 5.54 4.46 0.03 Including High Grade 2595.5 2623.5 28 791.3 799.8 8.5 2.62 7.80 4.67 0.03 Including High Grade 2637 2657 20 804.0 810.1 6.1 1.83 6.52 7.50 0.04 HDS-337 2682 2747 65 817.7 837.5 19.8 1.89 4.91 5.13 0.07 Including High Grade 2712 2737 25 826.8 834.5 7.6 3.70 9.16 11.13 0.16 HDS-337 2762 2767 10 842.1 843.6 1.5 2.49 4.74 0.10 0.22 HDS-337 2777 2787 10 846.6 849.7 3.0 2.42 5.79 3.92 0.04 HDS-337 2802 2807 5 854.3 855.8 1.5 27.91 19.15 5.41 0.65



SAMPLE PREPARATION, ANALYSES, AND SECURITY

SAMPLE SECURITY

ASARCO DRILL PROGRAM

ASARCO drill programs generated chip samples derived from air rotary hammer drilling and core samples from diamond drill holes. ASARCO’s drilling programs were intended to further their assessment of the economic merits of Hermosa, and it is assumed that sampling conformed to standard industry practices of the time.

2010-2012 DRILL PROGRAM

CORE SAMPLES

Competent, intact core samples were divided with a hydraulic splitter. Spatulas and trowels were used for splitting the sample in clayey or rubbly intervals. Splitter and sample trays were carefully cleaned between samples. Typical, standard sample interval length was nominally set at 1.5 meters (5 feet). In areas of mineralogical or geologic interest, sample intervals ranged from 0.5 to 2.1 meters (1.5 to 7 feet).

One split was returned to the original core box for reference and long term storage. The other split was placed in a heavy gauge plastic bag marked with drill hole number and interval labels. These bags were closed with a wire tie, weighed and consolidated in shipping boxes or bulk shipping bags.

REVERSE CIRCULATION SAMPLES

Reverse circulation holes were drilled wet. The holes were cleaned and blown by the driller between each nominal five foot sample interval. A cyclone and wet rotary splitter were set up to obtain two identical splits, weighing approximately 4.5 to 7 kilograms (10 to 15 pounds). The original and duplicate samples were placed in Tyvek sample bags, collected on pallets, shrink wrapped and transported to the project sample processing facility.

The samples were then inventoried and weighed. Standards, blanks and duplicates were inserted in the sample stream. Shipment of samples to Skyline Laboratory of Tucson, Arizona for sample preparation and analyses occurred at regular intervals throughout the drilling campaign.


Core and samples are stored in secure shipping containers, owned by Arizona Mining, at the project and at the office located in Patagonia, AZ. The on-site storage location also has facilities for core logging, core cutting and core sampling. Core is stored in wax card boxes and organized in shipping containers by hole number which is shown in Figure 11-1.



Figure 11-1: Core Storage Container

Core is collected from the rig by an Arizona Mining field helper and brought to the on-site facility by an Arizona Mining truck where it is washed, photographed, logged and sampled. Diamond core is cut lengthwise by a 5hp diamond saw using a 14 inch diamond impregnated blade. Typical sample intervals lengths was nominally set at 1.5 meter (5 feet). In areas of mineralogical or geological interest, sample intervals range from one to seven feet.

After a sample is cut, one half core was returned to the original core box for reference and long term storage. The remaining half core was placed in a heavy gauge plastic bag marked with drill hole number and interval labels. The sample bags were closed with a wire tie, weighed and consolidated in shipping boxes or bulk shipping bags. They are transported by ALS Minerals to their laboratory in Tucson Arizona for sample preparation and analysis.



SAMPLE PREPARATION

SKYLINE LABORATORY

Skyline Laboratory prepared two identical 250 gram pulps from each sample. One pulp was retained by Skyline Laboratory and the second pulp was sent to Inspectorate Laboratories of Sparks, Nevada for the 2010 to 2012 drilling campaign. The duplicate pulps from the 2006 and 2009 drilling campaigns were sent to Assayers Canada.

ALS MINERALS

Samples were prepared by ALS Minerals at their laboratory in Tucson, Arizona. The sample preparation procedure was to log the samples into the tracking system and add a bar code label (code LOG-22), weight the samples (code WEI-21), fine crush by jaw crusher to better than 70% passing 2 millimeters (code CRU-31), split off 250 grams using a Boyd Crusher/rotary splitter(code SPL-22Y), and pulverize the 250 grams split to better than 85% passing 75 microns (200 mesh) in a ring and puck style grinding mill (code PUL-31).

ANALYSIS

INPECTORATE AND SKYLINE LABORATORY

Pulps were analyzed by ICP at Skyline for% copper, lead, zinc, and manganese after a multi-acid digestion. Inspectorate Laboratory determined silver values by gravimetric fire assay with gold values determined by AA finish on the same dissolved doré bead. Remaining portions of the core and all assay pulps are stored in locked, steel shipping containers on property owned or controlled by Arizona Mining.

A partial re-assay program of sample pulps was undertaken in October and November 2013 to address an under-reporting bias detected by the in-place quality assurance-quality control program. Inspectorate Laboratory determined silver values by four acid digestion followed by atomic absorption spectroscopy (AAS).

ALS MINERALS

ALS Minerals shipped the sample pulps from Tucson, Arizona to their laboratory in Vancouver, British Columbia for analysis. A 1 g subsample of the sample pulp was analyzed for 33 elements using four acid digestions and ICP – AES (ME-ICP61) and a 30 g subsample of the sample pulp was analyzed for Au using Au – ICP21. Ore grade values for Ag, Pb and Zn (Ag>100 ppm, Pb>10,000 ppm and Zn>10,000 ppm) are re-evaluated as “high grade ore” using four acid digestion with ICP-AES finish and reported (OGS62).

The sample weight and results for ME-ICP61, Au-ICP21 and OGS62 are reported to Arizona Mining on Excel Spreadsheets and in Certificates of Analysis in secure Adobe Acrobat file format, transmitted by email and available on a secure internet sample tracking site called Webtrieve.

QUALITY ASSURANCE AND QUALITY CONTROL(QA-QC)

Arizona Mining has a comprehensive QA-QC program for drill core samples that meets the best practices guidelines currently used within the industry.



2010-2012 DRILLRILL PROGRAM

In 2012, Arizona Mining retained the services of Analytical Solutions Ltd to assess the effectiveness of the quality assurance, quality control program used by the company for the 2010 – 2012 drilling campaign. Analytical Solutions Ltd concluded that the QA/QC program was adequate to ensure a reliable resource level estimate. They also identified the following shortcomings in the reference standard portion of the program addressed in Section 11.4.1.1.

Standards were inserted every 20th sample as a check of assay accuracy and precision. Field duplicates from core and chips were taken at intervals of approximately 15 meters (50 feet). Core duplicates were quarter-splits, chip duplicates were nominally full sample weight. Blank samples were used to check the integrity of sample preparation procedures and were inserted at the beginning and end of every sample batch run

CERTIFIED STANDARD REFERENCE MATERIAL (CSRM)

Five standards were prepared for the Hermosa project and certified by Mineral Exploration Group of Reno, Nevada using a systematic, six laboratory, round-robin analytical program and used during the 2010-2012 drill program.

Silver values of the reference standard S-1 is biased low by 29%, S-2 is biased low by 7.8% and S-3 is biased low by 10.1% compared to expected values of the reference standards (Table 3.2.1-a from the ASL report, reproduced here as Table 11-1. These standards contain less than 6.21 ounces per ton Ag, within the average grade range for the Hermosa deposit. Analytical Solutions, Ltd submitted two batches of the S-1, S-2 and S-3 standards to TSL, Saskatoon for additional analysis and the 2008 reference standard assays were found consistently low by 5 to 10%.

Table 11-1: Summary of Results for CSRM Comparison Study

RM N Expected Ag (oz/ton) Observed Ag (oz/ton) Percent of Expected

QC Failures Average Stdev Average Stdev

S-1 95 0.47 0.16 0.334 0.049 1 3 S-1 77 4.14 0.69 3.82 0.18 92.2 3 S-3 183 6.21 0.72 5.58 0.27 89.9 7 S-4 172 12.16 1.62 11.9 0.43 98.6 5 S-5 61 32.99 1.62 33.37 0.86 101.2 4 S-900 series 208 n.a. 6.68 0.22 n.a. 7

796 29

Note: Twenty of the 29 listed silver quality control/quality assurance failures were incorrectly designated as standards. These 20 cases have been corrected and do not require additional follow up.

CROSS-CHECK BETWEEN SKYLINE AND INSPECTORATE

Cross-check exchange analyses between Skyline and Inspectorate laboratories were done for silver from 242 pulps (Figure 11-2). There is broad, general correspondence between the two sets of silver results. Specific differences may be related to acid digestion procedures used at Skyline and Inspectorate Laboratories.



Figure 11-2: Silver Check Assays Skyline and Inspectorate Laboratories

INSPECTORATE 4-ACID, AAS AG RE-ASSAY PROGRAM

The requested analytical method used for the Hermosa assays by Inspectorate Labs was 30 gram weight fire assay with gravimetric Ag. This technique adds an Ag inquart to all samples to ensure the presence of a Doré bead. In addition, a number of blanks with the Ag inquart but not with any sample are included with each sample batch to determine the correction factor for Ag loss in the fire assay cupellation step. The correction factor was then applied to the weighed bead to yield the Ag assay value.

For samples containing <10 milligrams Ag, a standard, 6 % correction factor was routinely applied to yield the reported Ag assay value. Subsequent to the detection of the under-reporting bias, Inspectorate Labs undertook additional Ag loss validation studies and further divided the <10 milligrams categories to <3, <5, <7 and <10 milligrams with correction factors of 0.00%, 9.0%, 8.0% and 6% respectively.

This modification to the analytical protocol did not completely account for the under-reporting bias and it was suggested that the inherent accuracy and precision of the 30 gram, fire assay, gravimetric Ag assay method was inadequate for the lower grade ranges at Hermosa. Inspectorate recommended an alternative approach using an acid digestion followed by AAS with higher grade, over-limit samples processed by 30 gram, fire assay, gravimetric Ag.

A subset of 298 samples with assays within the 0.4 to 6 opt Ag were pulled from the pulp archives, randomized and re-submitted to Inspectorate Labs for re-analysis to test this suggested alternative



analytical protocol. Each sample was subjected to Aqua Regia and 4 Acid digestions followed by AAS trace element analysis and a duplicate 1 assay ton, gravimetric Ag finish. The results and comparisons are detailed in Table 11-2.

Table 11-2: Summary of Results and Comparisons Inspectorate Re-Assay Program

Existing Re-Assay Sample Blind ID Type Ag AR-TR 4A-TR AT-GV AR-OR

AMIS0020-1 RA10007 AMIS0020 0.51 0.53 0.59 0.93 0.52 AMIS0020-2 RA10014 AMIS0020 0.51 0.52 0.57 0.61 0.53 AMIS0020-3 RA10031 AMIS0020 0.51 0.52 0.59 0.32 0.57 AMIS0020-4 RA10047 AMIS0020 0.51 0.52 0.59 0.41 0.53 AMIS0020-5 RA10058 AMIS0020 0.51 0.53 0.59 0.35 0.53 AMIS0020-6 RA10088 AMIS0020 0.51 0.51 0.58 0.70 0.57 AMIS0020-7 RA10137 AMIS0020 0.51 0.53 0.55 0.55 0.50 AMIS0020-8 RA10172 AMIS0020 0.51 0.52 0.57 0.38 0.53 AMIS0020-9 RA10216 AMIS0020 0.51 0.52 0.59 0.15 0.50 AMIS0020-10 RA10222 AMIS0020 0.51 0.51 0.62 0.23 0.49 AMIS0020-11 RA10240 AMIS0020 0.51 0.53 0.64 0.55 0.50 S-1-1 RA10033 S-1 0.47 0.32 0.55 0.26 0.33 S-1-2 RA10062 S-1 0.47 0.39 0.58 0.53 0.39 S-1-3 RA10065 S-1 0.47 0.34 0.52 0.50 0.34 S-1-4 RA10262 S-1 0.47 0.33 0.51 0.41 0.33 S-1-5 RA10283 S-1 0.47 0.31 0.54 0.55 0.35 S-3-1 RA10003 S-3 6.21 6.16 6.64 6.16 5.68 S-3-2 RA10037 S-3 6.21 7.01 7.14 7.01 5.48 S-3-3 RA10144 S-3 6.21 5.99 6.77 5.99 5.40 S-3-4 RA10146 S-3 6.21 5.87 6.74 5.87 5.33 S-3-5 RA10187 S-3 6.21 6.37 7.47 6.37 5.43 S-3-6 RA10204 S-3 6.21 6.19 7.26 6.19 5.31 S-3-7 RA10265 S-3 6.21 7.15 7.14 7.15 5.39 S-3-8 RA10274 S-3 6.21 6.92 7.14 6.92 5.51 S-3-9 RA10277 S-3 6.21 7.07 7.16 7.07 5.42



The existing, accepted reference standard values for sample types S-1 and S-3 were established by round-robin analyses as described in Chapter 11 and are a strict average of 2, 3 and 4 acid, AAS and ICP analyses. The AMIS0020 standard is a provisional concentration established by an 18-lab round-robin, involving 8 duplicate samples per lab. Ag results are reported for multi-acid digestions followed by AAS or ICP analyses.

The descriptive statistics for the remaining 271 samples of the re-assay program are presented in Table 11-3.

Table 11-3: Summary Statistics for Inspectorate Re-Assay Program

Method Count Mean Minimum Maximum Range Variance StdDeviation Ag 1AT-GV_opt 271 1.58 0.12 8.82 8.70 2.50 1.58 Ag_AR-TR_opt 271 1.53 0.00 14.45 14.45 4.10 2.03 Ag_4A-TR_opt 271 2.00 0.03 13.67 13.64 3.98 2.00 Ag_AT-GV_opt 271 1.69 0.15 14.45 14.31 3.96 1.99 Ag_AR-OR_opt 271 1.20 0.01 5.84 5.83 1.84 1.36

MANTO RE-ASSAY PROGRAM

Based on the recommendation from Inspectorate, 8,078 sample intervals with assay grades between 0.4 and 7 opt Ag were selected for re-assay using the 4-acid, AAS finish analytical method. Pulps for these assays were retrieved from the sample archive and re-submitted to Inspectorate Labs. Of these, 6,735 samples were from assay intervals that were used for resource estimation (of the Hermosa Central Deposit), and the remaining 1,343 were standards and duplicates. An additional 1,492 internal check and standard samples were added to the 8,078 by the laboratory, yielding a total re-assay sample set of 9,570.

The samples were distributed over 188 drill holes and included intervals from the Upper Silver, Hardshell and Manto Oxide ore types as seen in Figure 11-3.



Figure 11-3: Location Map of the 188 Re-Assayed Dril Holes

Table 11-4: Re-Assay Program Assay Results for S-1 & S-2 Reference Standards & Lab Internal

Standards AS-92-4A, ME 8-4A and SP49

Reference Material N Expected Ag (oz/t) Observed Ag (oz/t) Mean Stdev Mean Stdev

S-1 9 - - 0.537 0.03 S-2 43 - - 4.73 0.239 AS-92-4A 315 - - 0.03 0.019 ME-8-4A 322 - - 1.892 0.064 SP49 94 - - 1.764 0.082



DATABASE UPDATES

The re-assay results for Ag using the 4 acid, AAS finish were inserted into the assay database, replacing all assays between 0.0221 and 5.0 opt Ag. Samples with assay grades greater than 5.0 opt Ag retained the 1 ton, fire-assay, gravimetric Ag finish, judged to be a more accurate and precise for higher grade Hermosa materials

BLANKS

Throughout the 2010 – 2012 campaign, blank samples had been prepared and certified by Mineral Exploration Group of Reno, Nevada from limestone, silica sand and volcanic rocks.

DUPLICATES

The 298 core duplicate pairs were submitted for silver and gold assays and 322 pairs were submitted for manganese, lead, zinc and copper analyses. Assays for duplicate pairs agree within acceptable limits. Approximately 70% of the duplicate pairs agree within 25% for all elements except gold.

The 183 reverse circulation sample duplicates were submitted for silver and gold assays and 180 pairs for manganese, lead, zinc and copper. Assays for duplicate pairs agree within acceptable limits. Approximately 70% of the duplicate pairs agree within 20% for all elements except gold.


Standards were inserted every 20th sample as a check of assay accuracy and precision. Field duplicates from core were taken at intervals of approximately 15 meters (50 feet). Core duplicates were quarter-splits. Blank samples were used to check the integrity of sample preparation procedures and were inserted at the beginning and end of every sample batch run as well as intermittently throughout each run.

CERTIFIED STANDARD REFERENCE MATERIAL (CSRM)

For the 2014 – 2015 drilling campaign, three standards were prepared for the Hermosa project and certified by Ore Research & Exploration Pty Ltd of Melbourne, Australia using the recommendation of Analytical Solutions Ltd. From August 2014 to November of 2015 Arizona Mining Corporation completed a drilling project consisting of 8 diamond core holes, HDS-330 through HDS-337. All of the samples that were to be assayed from the drilling were sent to ALS Minerals lab in Tucson, AZ. Accompanying the samples were numerous quality control samples with the purpose of supporting the assay results. There were 154 sets of field duplicates (A and B), 3 reference standards: OREAS 131a with 85 samples, OREAS 132a with 79 samples and OREAS 133b with 70 samples as well as 60 fine blank samples. The results were reported in parts per million (ppm) and percent.

Table 11-5: List of CSRM used in the 2014 – 2015 Drilling Campaign

CRM Ag (ppm) Cu (%) Pb (%) Zn (%) OREAS 131a 30.9 0.03 1.72 2.83 OREAS 132a 57 0.05 3.64 4.98 OREAS 133b 104 0.03 5.06 11.35

The mean and standard deviation of each reference standard, for the elements Ag, Cu, Pb and Zn, was calculated. The range from greater than 2 standard deviations and less than 2 standard deviations from



the mean was determined. Column graphs for Ag, Cu, Pb and Zn were created to illustrate any outliers or abnormal results.

Certified reference material: OREAS 131a (Ag) had an observed average of 31.81 ppm, a +2 standard deviations of 34.31 ppm and 2 standard deviations of 29.30 ppm. OREAS 132a (Ag) had an average of 58.48 ppm, a +2 standard deviations of 62.74 ppm and 2 standard deviations of 54.23 ppm. OREAS 133b (Ag) had an average of 105.20 ppm, a +2 standard deviations of 108.72 ppm and -2 standard deviations of 101.68 ppm. There were no outliers in these sets of samples. All of the standards were within a reasonable range of +/- 2 standard deviations (Table 11-6) and were within 5% of the expected average values (as documented in OREAS’s certificates of analysis) for Ag, Cu, Pb and Zn (Table 11-5).

Table 11-6: Summarized Results for CSRM’s 2014 – 2015 CSRM’s

OREAS 131a Ag_ppm Cu_ppm Pb_% Zn_%

Std.Dev. 2X S.D. Std.Dev. 2X S.D. Std.Dev. 2X S.D. Std.Dev. 2X S.D. 1.25 2.50 10.95 21.90 0.03 0.06 0.04 0.09

Mean +2 S.D. Mean +2 S.D. Mean +2 S.D. Mean +2 S.D. 31.81 34.31 331.26 353.15 1.70 1.75 2.84 2.93

-2 S.D. -2 S.D. -2 S.D. -2 S.D. 29.30 309.36 1.64 2.75

Max 34.80 Max 353.00 Max 1.78 Max 3.00 Min 27.20 Min 281.00 Min 1.62 Min 2.73

OREAS 132a

Ag_ppm Cu_ppm Pb_% Zn_% Std.Dev. 2X S.D. Std.Dev. 2X S.D. Std.Dev. 2X S.D. Std.Dev. 2X S.D.

2.13 4.25 15.73 31.46 0.06 0.11 0.08 0.17 Mean +2 S.D. Mean +2 S.D. Mean +2 S.D. Mean +2 S.D.

58.48 62.74 463.05 494.52 3.61 3.72 5.01 5.18 -2 S.D. -2 S.D. -2 S.D. -2 S.D.

54.23 431.59 3.50 4.85 Max 62.70 Max 496.00 Max 3.73 Max 5.22 Min 53.40 Min 428.00 Min 3.46 Min 4.80

OREAS 133b

Ag_ppm Cu_ppm Pb_% Zn_% Std.Dev. 2X S.D. Std.Dev. 2X S.D. Std.Dev. 2X S.D. Std.Dev. 2X S.D.

1.76 3.52 8.31 16.61 0.09 0.18 0.20 0.41 Mean +2 S.D. Mean +2 S.D. Mean +2 S.D. Mean +2 S.D.

105.20 108.72 325.93 342.54 5.06 5.24 11.36 11.77 -2 S.D. -2 S.D. -2 S.D. -2 S.D.

101.68 309.32 4.89 10.95 Max 110.00 Max 347.00 Max 5.30 Max 11.95 Min 100.00 Min 307.00 Min 4.83 Min 10.80



CONCLUSION

The certified reference materials OREAS 131a, OREAS 132a and OREAS 133b did not have any samples outside a reasonable range of +2 standard deviations or below -2 standard deviations of the mean. Column graphs for Ag, Cu, Pb and Zn did not visually illustrate any outliers for any of the 3 certified reference materials. Conclusively, there were no abnormal assays in any of the sets of samples, and the results confirm that the each of the 3 certified reference materials were consistent.

BLANKS

Blank samples, for the 2014 – 2015 campaign, were prepared and certified by Ore Research & Exploration Pty Ltd of Melbourne, Australia using the recommendation of Analytical Solutions Ltd.

A table presenting the fine blank sample assays was generated to observe and compare samples used in the assay program.

DUPLICATES

A table and column graph were created to compare field duplicate pairs, and to conclude if any of the duplicate pairs were incorrectly matched.

There were 154 field duplicate pairs. None of the duplicate pairs were incorrectly matched; however 3 of the duplicates were outside an anticipated range of one another (Table 11-4). Sample HDS-330 1472-1477A had a Ag value of 76.6 ppm while the duplicate HDS-330 1472-1477B had a Ag value of 45.1 ppm. Sample HDS-331 517-522A had a Ag value of 21 ppm while the duplicate HDS-331 517-522B had a Ag value of 3.3 ppm. Additionally sample HDS-334 1752-1757A had a Ag value of 304 ppm while the duplicate HDS-334 1752-1757B had a Ag value of 207 ppm. The Cu, Pb and Zn values also displayed noteworthy differences for each of these duplicate intervals. Core boxes for these 3 intervals were pulled to further evaluate the discrepancies.



Figure 11-4: Field Duplicate Paris

All of the field duplicate pairs were correctly matched. After comparing the duplicate pairs, using a column graph, 3 of the pairs were found to be outside a reasonable range of one another.

The intervals HDS-330 1472-1477 and HDS-334 1752-1757 are within CRD mineralization zones. Galena, sphalerite, pyrite and chalcopyrite mineralization can be irregular. A duplicate sample from a quarter split could simply have abundant CRD mineralization in duplicate-A and moderate mineralization in the duplicate-B sample.

The interval HDS-331 517-522 is within a “Hardshell” mineralization zone. The most logical explanation for discrepancies seems to be that there are large limestone clasts in the Hardshell zone that can be mineralized, these limestone clasts occur intermittently. Therefore duplicate-A sample could have abundant mineralization while duplicate-B sample could have moderate mineralization.

REPLICATE ANALYSES

ASARCO PULP RE-ASSAY

ASARCO retained a large proportion of pulps from their sampling and assaying programs. Arizona Mining took possession and inventoried these pulps in 2006. Sample preparation and copper, lead, zinc, and manganese analyses were conducted by Skyline Laboratories in Tucson, Arizona using inductively-coupled plasma and atomic absorption methods. A split of each pulp was then sent to Assayers Canada in Vancouver, British Columbia for silver and gold fire assays. Approximately 4,272 ASARCO pulp samples were re-analyzed



DATA VERIFICATION

The author independently collected two quarter core samples and four certified standard reference material (CSRM) samples (3-Standards, 1-Blank). The six samples were submitted to ALS Laboratory in Reno, NV (sample preparation) then shipped to the ALS Laboratory in Vancouver, CA (assay analysis) to independently verify the existence of the mineralization and to review the reproducibility of the original Arizona Mining assays. No limitations were placed on the author’s ability to review data or to independently verify the data used in the Mineral Resource estimate. Verification core samples were photographed and core boxes were marked by MMC with information regarding the selected sample (Date, MMC Sample#, HoleID, From, To). MMC bagged the quarter core samples on-site and sent them to ALS for analysis. Figure 12-1 show the cut quarter core samples, the sample tags placed on the core boxes and the sample bags used to collect the samples that were shipped to the laboratory by MMC. Due to the turnaround time at ALS, the results of the check assays had not been received by MMC prior to the file date of the Technical Report. Table 12-1 lists the samples and original assay values for Ag, Pb, Zn, Au and Copper.

Figure 12-1: Data Verification Samples Collected by MMC (MMC-HTD-001 and MMC-HTD-002



Table 12-1: MMC Data Verification Samples

MMC Data Verification Samples - 2016 Hermosa Taylor Deposit - NI 43-101

AZ Mining Sample # MMC Sample # Hole ID From To Original Value Au Ag (opt) Cu% Pb% Zn%

HDS-334 2030-2035 MMC-HTD-001 HDS-334 2030 2035 0.0005 1.37 0.0792 3.37 5.6 HDS-334 2057-2062 MMC-HTD-002 HDS-334 2057 2062 0.0011 2.415 0.167 3.16 3.82 OREAS 131a MMC-HTD-003 na na na <0.001 0.90 0.03 1.72 2.83 OREAS 132a MMC-HTD-004 na na na <0.001 1.66 0.05 3.64 4.98 OREAS 133b MMC-HTD-005 na na na <0.001 3.03 0.03 5.06 11.35 Blank MMC-HTD-006 na na na <0.001 <0.5 1 <2 <2

The authors conclude that:

• Sampling, sample security, sample preparation and analyses have been carried out in accordance with best current industry standard practices and are suitable for estimation of mineral resources and to plan further exploration;

• The exploration programs are well planned and executed and supply sufficient information to plan further exploration;

• Sampling and analyses include quality assurance and quality control procedures.



MINERAL PROCESSING AND METALLURGICAL TESTING

INTRODUCTION

Arizona Mining Inc. awarded the contract to Resource Development Inc. (RDi) to undertake scoping level metallurgical testwork for the Hermosa Taylor Deposit. The metallurgical test program objective was to perform preliminary flotation testwork with a composite sample to determine if a conventional process flowsheet for processing polymetallics would work and project the metal recoveries and concentrate grades. RDi received approximately 138 kilograms (304 pounds) of drill core samples from six holes for the study. The test procedures and results obtained in the study are summarized in the section.

METALLURGICAL TEST WORK

RDi received samples from six drill holes for the metallurgical testwork. The testwork consisted of sample preparation and characterization, Bond’s ball mill work index determination, grinding studies and rougher and cleaner flotation tests.

FEED PREPARATION AND CHARACTERIZATION

The drill core samples used to prepare the master composite are listed in Table 13-1. The projected grade of the composite was anticipated to be ± 5% Pb and ± 5% Zn.



Table 13-1: Hermosa NW Zn/Pb/ Ag/Cu Project Core Samples for Met Testing Submitted 10/2015

Hermosa Taylor Deposit - Zn/Pb/ Ag/Cu Project Core Samples for Metallurgical Testing Submitted 10/2015 Hole Sample From To Interval Ag Au Mn Pb Zn Cu Formation Weight (lbs)

HDS-330 HDS-330 1162 .5-1167 1162.5 1167 4.5 0.59 0.00 10.00 2.20 4.01 0.09 Concha 5 .8 HDS-330 HDS-330 1189.5-1195 1189.5 1195 5.5 4.73 0.00 5.75 14.30 22.80 0.47 Concha 7.8 HDS-330 HDS-330 1497-1502 1497 1502 5 0.9 2 0.00 10.00 2.41 2.44 0.10 Epitaph 7.8 HDS-331 HDS-3311967-1972 1967 1972 5 0.72 0.00 8.33 1.86 2.43 0.04 Concha 7.1 HDS-331 HDS-33 12060-2065.5 2060 2065.5 5.5 1.15 0.00 2.97 3.39 4.91 0.07 Concha 7.9 HDS-331 HDS-331 2727-2732 2727 2732 5 1.79 0.00 1.87 7.06 9.39 0.14 Epitaph 6.5 HDS-332 HDS-332 2092-2097A 2092 2097 5 1.84 0.001 3.02 1.17 2.86 0.16 Concha 7 HDS-332 HDS-332 2 161-2165 2161 2 165 4 3.70 0.003 3.79 11.10 12.45 0.10 Epitaph 8.8 HDS-332 HDS-332 2987-2992 .5 2987 2992.5 5.5 1.22 0.001 0.68 3 .87 3.75 0.00 Epitaph 8.2 HDS-333 HDS-333 1817-1822 1817 1822 5 1.13 0.001 3.59 3 .27 4.97 0.08 Concha 5.8 HDS-333 HDS-333 2422-2427 2422 2427 5 0.53 0.000 1.36 1.22 2.81 0.03 Epitaph 7.8 HDS-333 HDS-333 3475-3480 3475 3480 5 4.81 0.001 1.31 14.05 10.55 1.23 Epitaph 8 HDS-334 HDS-334 1852- 1857 1852 1857 5 0.55 0.000 5.58 1.17 2.26 0.01 Concha 5.5 HDS-334 HDS-334 2085-2090 2085 2090 5 9.10 0.001 1.17 28.43 18.85 1.32 Concha 8.9 HDS-334 HDS-334 2527-2532 2527 2532 5 5.13 0.001 1.72 3.82 4.39 0.39 Epitaph 9.3 HDS-335 HDS-335 2317-2323 23 17 2323 6 14.00 0.001 1.65 1.93 2.37 0.41 Epitaph 7.2 HDS-335 HDS-335 2684.5-2690 2684 .5 2690 5.5 5.86 0.001 0.98 22.20 19.80 0.13 Epitaph 11.4 +HDS-335 HDS-335 2742-2747 2742 2747 5 1.50 0.001 2.05 4.89 1.11 0.02 Epitaph 7.7

Total Weight 138.5

Note: Samples are 1/4 splits from HX sized drill core. Samples were collected by Jack Mueller and Chuck Blair.



The drill core samples were individually crushed to 6 mesh, blended and split into two halves. One half of the sample was stored in the freezer and the other half of each sample was blended to prepare a composite sample for testwork. The composite sample was split into 1 kilogram charges, bagged and stored in the freezer.

A 1- kilograms charge was pulverized to 150 mesh, and a representative split taken out for head analyses for Pb, Zn, Cu, Au, Ag, forms of sulfur and ICP analyses of 30 elements. The data are summarized in Tables 13-2 and 13-3.

Table 13-2: Head Analyses of Composite Sample

Head Analyses of Composite Sample Element Assay

Pb % 9.14 Zn % 7.99 Cu % 0.243

Au, g/t 0.285 Ag, g/t 126 STotal, % 8.81 SSulfide, % 3.57 SSulfate, % 5.24

Table 13-3: ICP Analyses of Composite Sample

ICP Analyses of Composite Sample Element Assay % Element Assay, ppm

Al 1.15 As 106 Ca 7.95 Ba 89 Fe 4.03 Bi <10 K 0.87 Cd 238

Mg 1.09 Co 30 Na 0.05 Cr 127 Ti 0.05 Cu 2418

Mn 36478 Mo 10 Ni 29 Pb 91009 Sr 16 V 30 W 143 Zn 79934

The test results indicate the following:

• The composite sample assayed 9.14% Pb, 7.99% Zn, 0.243% Cu, 126 g/t Ag, • 0.285 g/t Au and 8.81% STotal. • The forms of sulfur analyses indicate that only 40.5% of the sulfur in the sample was sulfide

sulfur. The remaining sulfur was sulfate sulfur.



• The smelter penality elements (like As Bi, etc.) are not present in significant amounts to create problems in sale of concentrates.

BOND’S BALL MILL WORK INDEX

Bond’s ball mill work index was determined at 100 mesh for the composite sample. The test data are presented in Tables 13-4 and Table 13-5 and Figure 13-1 through Figure 13-2. The sample has a work index of 14.03 which is considered to be moderately hard.

Table 13-4: Bond Ball Mill, AZ Mining Master Composite

SIZE Mill Feed Tyler Mesh Microns Weight (g) Weight % Retained % Passing %

6.0 3350.0 0.0 - - 100.0 8.0 2360.0 39.0 18.8 18.8 81.2

10.0 1700.0 58.5 28.1 46.9 53.1 14.0 1180.0 38.4 18.5 65.4 34.6 20.0 850.0 21.1 10.1 75.6 24.4 28.0 600.0 14.3 6.9 82.5 17.5 35.0 425.0 9.9 4.8 87.2 12.8 48.0 300.0 4.5 2.2 89.4 10.6 65.0 212.0 6.6 3.2 92.6 7.4

100.0 150.0 3.7 1.8 94.3 5.7 Pan 11.8 5.7 100.0

Total 207.7 100.0

Cycle # grams / revolution Mill Feed Weight (grams) 1421.6 n-2 1.545 Desired Mesh of Grind 100 n-1 1.558 Desired Micron of Grind 150 n 1.51 Circulating Load (%) 250

Average 1.538 Circulating Load (grams) 406.2

SIZE Ground Product Tyler Mesh Microns Weight (g) Weight % Retained % Passing %

65.0 212.0 - - - 100.0 100.0 150.0 3.7 0.9 0.9 99.1 150.0 106.0 112.9 28.8 29.8 70.2 200.0 75.0 64.6 16.5 46.3 53.7 270.0 53.0 47.9 12.2 58.5 41.5 400.0 38.0 32.0 8.2 66.7 33.3 Pan 0.0 130.5 33.3 100.0 -

Total 391.6 100.0

Interpolated Graphic

F80 2,331 2,392 P80 121 121

Work Index 14.06 14.03

Average 14.03



Figure 13-1: Mill Feed Size Analysis

Figure 13-2: Mill Product Size Analysis



Table 13-5: Bond Ball Mill

Bond Ball Mill Average wt of 3 - 700 ml samples

Y= A1 divided by 3.5 for 250% circulating load A1 wt (1) 1441.9 X= average wt % of undersize from screening A1 wt (2) 1402.9 Y= 406.2

A1 wt (3) 1419.9 X= 5.7 Average 1421.6

Variable A B C D E F G

Calcs average wt of 3 700 ml samples

A multiplied by

X

Y minus

B

C1 divided by

1.2 wt of product

E minus

B

F divided by

D

A2 = E1, A3 = E2, etc.

C2 divided by

G1

Undersize (g) Mill Production (g)

Cycle # Feed (g) In Feed To be

Produced Mill Revs Wt of

Undersize (g) Total Net Per Rev

1 1421.6 80.5 325.6 277 543.7 463.2 1.671 2 543.7 30.8 375.4 225 424 393.2 1.751 3 424 24 382.1 218 363.9 339.9 1.557 4 363.9 20.6 385.5 248 398.5 377.9 1.526 5 398.5 22.6 383.6 251 410.9 388.3 1.545 6 410.9 23.3 382.9 248 409.5 386.2 1.558 7 409.5 23.2 383 246 394.2 371 1.51

Size Mill Feed

Tyler Mesh Microns

Screen #1 Weight (g)



Weight %

Retained %

Passing %

6 3,350 0 0 0 - - 100 8 2,360 41.1 42.2 33.6 18.8 18.8 81.2

10 1,700 59.3 61.5 54.6 28.1 46.9 53.1 14 1,180 35.8 39.9 39.6 18.5 65.4 34.6 20 850 19.5 20.7 23 10.1 75.6 24.4 28 600 13.7 13.1 16.2 6.9 82.5 17.5 35 425 9.8 8.5 11.4 4.8 87.2 12.8 48 300 4.9 3.6 4.9 2.2 89.4 10.6 65 212 6.8 5.2 7.9 3.2 92.6 7.4

100 150 4.2 2.7 4.1 1.8 94.3 5.7 Pan 13.7 8.5 13.1 5.7 100

Total 208.8 205.9 208.4 100



GRIND STUDIES

A series of grind tests with 1 kilogram charges were performed in a laboratory mill at 50% solids for the composite sample to establish the grind time-grind size relationship.

Laboratory rod mill simulates a ball mill-cyclone circuit in actual operation. The ores were ground for varying times and the ground pulp was wet screened on 400 mesh. Both the plus 400 mesh and the minus 400 mesh fraction were dried and the plus 400 mesh fraction was dry screened. All the size fractions were weighed and the size distributions were calculated.

The test results are given in Figure 13-3 through Figure 13-7. Grind times to achieve the desired grind size was determined from the grind data.

Figure 13-3: AZ Mining Master Composite



Figure 13-4: AZ Mining Particle Size Analysis 1



Figure 13-7 AZ Mining Particle Size Analysis 4



FLOTATION TESTS

The primary objective of flotation testwork was to produce two concentrates (i.e. lead and zinc) that could be marketed. Initially, three rougher flotation tests were performed using standard reagents and sequential flotation procedure, namely, float lead and then zinc. The process variables were the primary grind size of P80 of 100 and 200 mesh (Tests 1 and 2) and addition of supplementary collector AP 404 (Test 4). The two concentrates were collected for 8 minutes each. The test results are summarized in Table 13-6.

Table 13-6: Lead and Zinc Rougher Flotation Tests at Varying Primary Grind Size

Lead and Zinc Rougher Flotation Tests at Varying Primary Grind Size

Product Rougher Concentrate Assay Rougher Concentrate Recovery % % Pb % Zn AG g/t % Cu Wt. Pb Zn Ag Cu

Test No. 1: P80=100 mesh Pb Rougher Conc. 57.1 5.69 739 0.70 13.1 95.6 9.2 80.6 32.4 Zn Rougher Conc. 0.85 34.8 89.9 0.85 20.2 2.2 86.8 15.2 60.6

Tailing 0.26 0.49 7.6 0.03 66.7 2.2 4.0 4.2 7.0 Cal Feed 7.82 8.12 120 0.28 100.0 100.0 100.0 100.0 100.0

Test No. 2: P80=200 mesh Pb Rougher Conc. 59.5 4.92 699 0.39 13.1 97.1 8.4 77.2 19.4 Zn Rougher Conc. 0.45 34.2 111 0.99 19.5 1.1 86.7 73.0 18.4

Tailing 0.22 0.56 7.8 0.03 67.4 1.8 4.0 4.4 7.6 Cal Feed 8.02 7.70 119 0.27 100.0 100.0 100.0 100.0 100.0

Test No. 4: P80=200 mesh and AP404 Pb Rougher Conc. 57.4 5.17 69.5 0.5 13.2 96.4 9.2 77.9 25.2 Zn Rougher Conc. 0.39 30.8 96.5 0.96 20.8 1.0 85.8 17.0 69.9

Tailing 0.31 0.57 9.0 0.03 66.0 2.6 5.1 5.0 6.9 Cal Feed 7.87 7.45 118 0.29 100.0 100.0 100.0 100.0 100.0


• The flotation reagent suite did produce relatively high-grade lead and zinc rougher concentrates at both grind sizes.

• The flotation time of 8 minutes each for both lead and zinc concentrates was appropriate to get over 95% of the metals in their respective concentrates.

• The silver recovery was higher in the lead concentrate at coarser grind of P80 of 100 mesh.

A flotation test was also performed to float copper minerals first. However, the amount of lead mineral was several folds higher in the ore than copper. It was difficult to float them separately. Further testwork is needed to decide the best approach for producing a separate copper concentrate.

Based on the rougher flotation results, an open-circuit rougher-cleaner flotation was performed to produce marketable-grade lead and zinc concentrates. The flowsheet is given in Figure 13-8.



Figure 13-8: Open-Circuit Lead-Zinc Process Flowsheet

The test data results are summarized in Tables 13-7 to Table 13-10.

Table 13-7: Lead and Zinc Rougher Flotation Results (Test No. 5)

Lead and Zinc Rougher Flotation Results (Test No. 5)

Product Assay Distribution % Pb % Zn % Ag, g/t Cu % Wt. Pb Zn Ag

Pb Rougher Conc. 51.7 6.41 632 0.51 15.8 97.1 12.8 81.4 Zn Rougher Conc. 0.65 33 96.8 1 20 1.5 83.2 15.8 Tailing 0.18 0.49 5.4 0.02 64.2 1.4 4 2.8 Cal. Feed 8.43 7.92 123 0.29 100 100 100 100



Table 13-8: Lead Open-Circuit Cleaner Flotation Results (Test No. 5)

Lead Open-Circuit Cleaner Flotation Results (Test No. 5)


Pb Cleaner 2 Conc. 75.1 1.13 804 0.32 7.3 65.4 1 48.1 Pb Cleaner 2 Tail 54.7 8.24 665 0.43 1.1 7.3 1.2 6.1 Cal Pb Cleaner 1 Conc. 72.4 2.08 785 0.33 8.5 72.8 2.2 54.2 Pb Cleaner 1 Tail 27.9 11.4 455 0.72 7.3 24.3 10.6 27.2 Cal. Pb Rougher Conc. 51.7 6.41 632 0.51 15.8 97.1 12.8 81.4

Table 13-9: Zinc Open-Circuit Cleaner Flotation Results (Test No. 5)

Zinc Open-Circuit Cleaner Flotation Results (Test No. 5)


Zn Cleaner 2 Conc. 0.31 56.3 144 1.28 8.3 0.3 58.8 9.7 Zn Cleaner 2 Tail 0.72 43.5 109 1.45 2.3 0.2 12.8 2.1 Cal Zn Cleaner 1 Conc. 0.4 53.5 136 1.32 10.6 0.5 71.5 11.8 Zn Cleaner 1 Tail 0.94 9.9 52.2 0.64 9.4 1 11.7 4 Cal. Zn Rougher Conc. 0.65 33 33.3 1 20 1.5 83.2 15.8

The final lead and zinc concentrates were analyzed for smelter-penality elements. The data is summarized in Table 13-10.

Table 13-10: ICP Analyses of Lead and Zinc Cleaner 2 Concentrates

ICP Analyses of Lead and Zinc Cleaner 2 Concentrates Element Percent Pb Cl 2 Conc. Zn Cl 2 Conc.

Pb 77.4 0.35 Zn 1.14 55.8 Al 0.03 0.06 Ca 0.09 0.14 Cu 0.03 0.18 Fe 0.34 3.73 K 0.01 0.02

Mg 0.03 0.03 Na 0.07 0.08

ppm As 118 191 Ba 8 7 Bi 10 <10 Cd 58 1439 Co 3 128 Cr 6 11

Mn 1029 13376 Mo 9 4 Ni 5 13 Sr <5 <5



ICP Analyses of Lead and Zinc Cleaner 2 Concentrates Ti 37 65 V 0 6 W 10 10


• Though two-stages of cleaner flotation may not be needed, the test was performed with two stages of cleaners. The second-cleaner lead concentrate assayed 75.1% Pb, 1.13% Zn, 0.32% Cu and 804 g/t Ag. The concentrate had no delritreous elements.

• The second-cleaner zinc concentrate assayed 56.3% Zn, 0.31% Pb, 1.28% Cu and 144 g/t Ag. The concentrate had no delritreous elements.

These results indicate that conventional process flowsheet and simple reagent suite will produce marketable-grade lead and zinc concentrates.

PROJECTED METALLURGICAL RECOVERIES

The scoping level metallurgical tests indicated excellent rougher recoveries of lead and zinc minerals and final concentrate grades. Based on our extensive experience, RDi in the final recovery of lead, zinc and silver in the plant assuming that 95% of the metal values in the rougher flotation will report to the final concentrate. The following recoveries of metals were estimated:

• Lead concentrate will have 92.9% of lead and 76% of silver in the ore. The concentrate will assay 75.1% Pb, 804 g/t Ag and 1.13% Zn.

• Zinc concentrate will have 85.5% of zinc and 15% of silver in the ore. The concentrate will assay 56.3% Zn, 0.31% Pb and 144 g/t Ag.

CONCLUSIONS

The following conclusions were drawn from the scoping level study:

• The composite sample assayed 9.14% Pb, 7.99% Zn, 0.243% Cu, 126 g/t Ag, 0.285 g/t Au and 8.81% STotal.

• Sulfide sulfur accounted for 40.5% of the total sulfur. • The composite sample was moderately hard with a Bond’s ball mill work index of 14.03. • Conventional process flowsheet for Pb/Zn ores and standard suite of reagents produced

marketable-grade concentrates of lead and zinc. • The metal recoveries are projected to be 92.9% of lead and 76% of silver in lead concentrate

and 85.5% of zinc and 15% of silver in zinc concentrates.

RECOMMENDATIONS

Based on encouraging results in the scoping level study, RDi recommends that the company should proceed with pre-feasibility level testwork.

During the next phase of testing, one needs to also follow the gold and copper distribution in the proposed flowsheet.



MINERAL RESOURCE ESTIMATES

Mineral Resources stated for the Hermosa Taylor Deposit conform to the definition standards adopted by the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), May 10th, 2014. Mineral Resources have been reported in accordance with the disclosure obligations under NI 43-101.

Vulcan Software was used to estimate and quantify the Project mineral resources and was constructed in Arizona State Plane coordinate system. Vulcan software utilizes a block modeling approach to represent the deposit as a series of 3-D blocks to which grade attributes, and other attributes can be assigned. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the mineral resource will be converted to mineral reserves

DATABASE

Arizona Mining Inc. provided MMC with a drill hole database in the form of Microsoft Excel spreadsheets which contained collar location, surveys, recovery, structure, assays, lithology, oxide state, mineralization and alteration data for 363 drill holes. The drill hole database has been converted to a Vulcan Isis database with the identifier “mmc_crd_2016-01-11.dhd.isis” a naming convention that works with Vulcan Software and validated for errors. Validation checks were performed to identify overlapping intervals and inconsistencies in the database. All errors and inconsistencies were reviewed with Arizona Mining Inc. and corrections were made to the master Vulcan database.

EXPLORATORY DATA ANALYSIS

ASSAY STATISTICS

The data provided to estimate the mineralization inventory consists of data from 363 drill holes. Of the 363 holes only 179 holes lie within the Hermosa Taylor Deposit block model extents and only 25 of these holes contain CRD mineralization were used to estimate the mineral inventory. Each sampled interval in the data base is given an oxidation code (0-neither, 1-oxide, 2-sulfide). All oxide samples (1) were excluded from the resource estimate. Table 14-1 presents the Ag, Cu, Pb and Zn statistics for the modeled CRD domains.

Table 14-1: Drill Hole Statistics for Sulfide CRD Intervals in the 25 CRD Holes

Drill Hole Statistics: Oxide Type 0 and 2 Element Sample Count Min Max Average Std Ag opt. 10803 0.0015 56.20 0.33 1.42

Cu % 10804 0.0001 6.63 0.02 0.13 Pb % 10804 0.0002 56.96 0.51 2.27 Zn % 10804 0.0002 44.96 0.60 2.38

Statistics Exclude Non-Sampled (-99) Intervals and oxide(1) samples



GRADE CAPPING

Grade capping was evaluated and determined not to be necessary for this deposit. Sample values for Ag, Cu, Pb and Zn were plotted as histograms and as log normal probability plots. Samples above the 99.9th percentile or above significant breaks at the high end of the distribution were then removed from the sample population. The results for Pb and Zn showed almost no impact of the coefficient of variation and that even the highest grade samples are in part of the sample population. Removing “high grade” samples above the 99.9th percentile for Ag and Cu grades also had a small impact on the coefficient of variance and are handled/smoothed when composited.

CRD ESTIMATION

CRD DOMAIN MODEL

A total of three geologic domains, based on a geologic interpretation made from geologic logs and mineral oxidation states, were modeled for the Taylor Deposit (Manto, Top and Bottom). The Top and Bottom domains were created to define the upper and lower limits of CRD sulfide mineralization which is defined by the boundary between the overlying Cretaceous volcanic units and lower Concha, Scherrer, Epitaph carbonate units, as well as two oxidized ore types (Manto). Within the Top and Bottom domains are horizons of sulfide and oxide mineralization. Sulfide mineralization is hosted in intervals marked as containing no iron oxide minerals but containing sulfide minerals of lead, zinc, copper and iron. Oxide mineralization, those zones in the core containing predominantly iron oxide, is mineralogically different from the sulfide mineralization and is excluded from this mineral estimate.

Due to the irregular pattern of the mineralization, it was determined that modeling the CRD mineralization with polygons was not realistic. Instead, a nearest neighbor indicator estimate was used to flag blocks within the model with oxide codes 0, 1, and 2. This method was very effective in honoring the variable nature and relationship between oxide and sulfide intervals identified in the drilling. The oxide indicators were used to limit the resource estimate by eliminating all oxide samples and blocks from the sulfide resource. Only blocks and samples with oxidation codes 0 and 2 were allowed to estimate CRD mineralization. The indicator estimate used the same estimation parameters described in Section 14.3.4 (Estimation Parameters), with the exception of minimum 1 and maximum 1 sample per estimate (nearest neighbor). Figure 14-1 displays the Top, Bottom and Manto domains as well as the results from the oxide indicator estimate.



Figure 14-1: CRD Geologic Domains and Oxide Model

DRILL HOLE COMPOSITING

Composites for Hermosa were constructed using 6 meter (20 feet) down-the-hole composite lengths with the identifier “wcsmmc_crd_2016-01-11.cm1.isis”. A total of 2,893 x 6 meter (20 feet) composites were constructed for Ag and 2,894 x 6 meter (20 feet) composites were constructed for Cu, Pb and Zn respectfully, that contain CRD sulfide mineralization. Intervals with missing assays (-99) were ignored and a new composite centroid was generated at that point. Geologic contacts were treated as hard boundaries. A composite would truncate at a geologic boundary and then a new composite would be generated. Composite lengths were chosen based on the block size length in the z direction [6 meters (20 feet)]. A merge tolerance of 3 meter (10 feet) was used to reduce the number of “short” composites [<3 meters (<10 feet)]. Small intervals at lithology contacts less than 3 meters (10 feet) in length were combined with adjoining samples to produce a composite of 6 ± 3 meters (20 ± 10 feet). After the



composite database was generated, it was back flagged by the oxide block model and each composite was assigned an oxide type based on the indicator oxide estimate. Composites less than 3 meters (10 feet) in length were not used in the estimation. Table 14-2 list the composite statistics which exclude composites with length [<3 meters (<10 feet)] and composites flagged as oxide (1).

Table 14-2: Drill Hole Compositing Statistics

Composite Statistics: Oxide Type 0 and 2 Element Count Min Max Average Std

Ag 2646 0.0015 16.95 0.30 0.88 Cu 2647 0.0001 1.32 0.02 0.07 Pb 2647 0.0002 32.58 0.45 1.73 Zn 2647 0.0007 26.88 0.54 1.91

Count - Excludes composites with length <=3 meters (10 feet)

BLOCK MODEL

The Mineral Resource block model contains information about the deposit and is stored in each block. The block model has the identifier “Hermosa_2016_CRD.bmf”. Table 14-3 lists the variables stored in the model and Table 14-4 lists the block model parameters.

Table 14-3: Block Model Variables and Description

Variables Default Type Description ag -99 double ID5 Estimation - Ag OPT pb -99 double ID 5 Estimation - Pb % zn -99 double ID 5 Estimation - Zn % cu -99 double ID 5 Estimation - Cu % zneq -99 double ID 5 Estimation - Calculated ZnEq % nn_pb -99 double ID 5 Estimation - Nearest Neighbor distance -99 double ID 5 Estimation - Distance samples -99 integer ID 5 Estimation - Number of Samples holes -99 integer ID 5 Estimation - Number of Holes zone na name upper, lower, manto oxide 1 integer 0=neither, 1=oxide, 2=sulfide density 0 double densities are calculated in script post bm creation mined 0 double 1 = mined, 0 = available - Proportional Evaluation % class 3 integer 3 inferred, 2 indicated, 1 measured grade_shell 0 integer Grade Shell @ 1% ZnEq = 1 py -99 float Zn+Pb ge 5, py = 10 else py = 5 galena -99 float galena ore composition sphal -99 float sphalerite ore composition chalc -99 float chalcopyrite ore composition lime -99 float limestone ore composition sg -99 float calculated ore sg pyrite -99 float pyrite ore composition



Table 14-4: CRD Block Model Parameters

Item Easting Northing Elevation Block Model Reference Point 1071000 167500 0 Number of Blocks 250 250 325 Parent Block Size (ft) 20 20 20 Bearing/Dip/Plunge 0/0/0

ESTIMATION PARAMETERS

Metal grades were estimated using inverse distance to the fifth (ID5). Search ellipsoid orientation was determined by the trend of the mineralization, and strike and dip of the limestone beds that host the deposit. A large search ellipsoid was used in order to collect multiple composites from multiple drill holes, in the central part of the model, where there is the highest drill density. Blocks estimated in the central area are consistently supported by three and four holes per estimate and demonstrate continuity of mineralization along the Major and Semi-Major Axis. A smaller search ellipsoid would have yielded an estimate based on 1 and 2 hole with a limited number of samples for support which reduces confidence in the estimate. Estimated blocks along the margins of the deposit have limited sample and hole support. These areas need additional drilling to increase drill hole and sample support to demonstrate continuity of mineralization. Table 14-5 lists the estimation parameters used.

Table 14-5: Hermosa Taylor Deposit Estimation Parameters

Hermosa Taylor Deposit - Estimation Parameters Estimation Type Inverse Distance to the Fifth (ID5)

Search Ellipsoid Bearing Plunge Dip Top and Bottom Domains 300 -20 -20

Search Distance (ft) Major Axis Semi-Major Axis Minor Axis Single Pass 400 300 40

Samples Min Max Single Pass 2 10

Maximum Samples per Drillhole Max Single Pass 4

GRADE ESTIMATION

CRD blocks (oxide = 0 and 2) were estimated within the Top and Bottom CRD domains independently. For example: in the Top CRD Domain, only sulfide bocks with an oxide value of 0 or 2 , within the Top domain, were allowed to be estimated using composites flagged with an oxide value of 0 or 2 within the Top domain. This same condition was used for blocks and composites in the Bottom domain. Oxide blocks and composites flagged with an oxidation value of 1 were not used in the estimate. Composites less than 3 meters (10 feet) in length were also not used in the estimate. Figure 14-2 are cross-sections showing the results of the mineral estimate (blocks represent ZnEq grade



Figure 14-2: North-South Cross Section Looking East (Left) and North-West Cross-Section Looking Northeast (Right)

*



POST PROCESSING

SPECIFIC GRAVITY

Block density was calculated based on the estimated ore composition of each block (% Galena, % Sphalerite, % Chalcopyrite, % Pyrite and %Limestone). Ore composition of Galena, Sphalerite and Chalcopyrite was calculated from Pb%, Zn% and Cu% values assigned to each block during the grade estimation. Ore composition of pyrite (5% or 10%) was based on whether or not the combined % Pb + % Zn grade is greater than 5%. If the combined value is greater than or equal to 5%, then pyrite = 10%. If the combined value is less than 5% then pyrite = 5%. The ore composition of limestone makes up the remaining percentage of material for each block. A post estimation script was run to calculate a Specific Gravity value for each block value. Table 14-6 is an example of the how the ore composition values and SG value was calculated using estimated grades of Pb%, Zn% and Cu%.

Table 14-6: Density (S.G) Calculation Based on Ore Composition (Example)

Estimated Grades Pb% Zn% Cu% 6.25 7.12 0.227

Minerals % Galena % Sphalerite % Chalcopyrite % Pyrite % Limestone

Ore Composition 7.22 10.61 0.66 10.00 71.52 Minerals in % 0.0722 0.1061 0.0066 0.1000 0.7152 Mineral SG 7.50 4.00 4.20 5.10 2.70

Calculated Ore SG 3.43

The calculated SG value was then converted from g/cm3 to tons/ft3. Below is the equation used to calculate a density value for each block:

density = [(3.3 g/cm3*62.43)/2000 lb] = 0.1030095 tons/ ft3

MINERAL RESOURCE CLASSIFICATION

All blocks are classified as Inferred Mineralization based on limited geologic evidence and sampling.

NI 43-101 MINERAL RESOURCE

REASONABLE PROSPECTS

To demonstrate the reasonable prospects of eventual economic extraction, discontinuous and isolated pods of mineralization were excluded from the mineral resource estimate. Excluded blocks do not represent mineable volumes of material and do not meet the reasonable prospects of eventual economic extraction for resource classification. Continuous blocks, that imply continuity of mineralization, were further evaluated to establish a breakeven ZnEq cutoff grade. It is assumed that industry standard froth flotation will be used as the mineral processing method. Assumptions used to calculate a breakeven ZnEq cut-off grade are $US45.75/tonne (mining, processing and G&A), 85% zinc recovery and $US0.85 per lb. zinc selling price. A breakeven ZnEq cut-off grade of 3% was estimated. A 6% ZnEq grade was selected as the Base Case cut-off grade for this updated resource estimate.



MINERAL RESOURCE STATEMENT

Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no certainty that all or any part of mineral resources will be converted to mineral reserves. Inferred Mineral Resources are based on limited drilling (25 holes) which suggests the greatest uncertainty for a resource estimate and that geological continuity is only implied. Additional drilling will be required to verify geological and mineralization continuity and there is no certainty that all of the inferred resources will be converted to measured and indicated resources. Quantity and grades are estimates and are rounded to reflect the fact that the resource estimate is an approximation (Table 14-7).

Table 14-7: Taylor Deposit Mineral Resources

Zn Eq% Cutoff Zn Eq% Grade Tonnes (Mt) Pb% Zn% Cu% Ag g/t 3 8.01 72.3 3.21 3.23 0.10 50.78 4 8.98 59.5 3.63 3.63 0.11 55.78 5 9.98 48.7 4.04 4.03 0.12 61.25 6 11.04 39.4 4.48 4.48 0.14 66.91 8 12.89 27.2 5.24 5.26 0.16 76.35

12 16.80 12.1 6.88 6.84 0.21 97.90 15 19.70 6.6 8.26 7.80 0.27 113.75 20 24.57 2.2 10.37 9.86 0.34 133.64

Note: Results are based on a ZnEq grade calculated with the following metal prices: $0.85/lb for lead and zinc; $2.25/lb for copper; $15/oz for silver. It is recognized for the Taylor Deposit that while Zn and Pb contribute approximately equally to the resource calculations, we have chosen to report Zn equivalents for calculation of the cut-off grade and the equivalents grade for the resource. Base Case highlighted.



ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY

The purpose of this section is to identify those environmental permits and approvals that are required to progress the permitting schedule for the Hermosa Taylor Deposit Project.

First, we provide a brief overview of the social and community setting within which the Hermosa Taylor Deposit Project will be developed. Then, we discuss the U.S. federal permitting processes that will likely drive the permitting schedule for project development. Finally, we provide an overview of the key permits administered by the State of Arizona that will be required to develop the Hermosa Taylor Deposit Project. These state permits are separate from the federal permitting processes, but analyses, modeling, and baseline data collected for state permits can be used to provide baseline information for federal evaluation under the National Environmental Policy Act (NEPA) process.

Several federal agencies have a role in the review and approval of the Hermosa Taylor Deposit Project. The US Forest Service (USFS) must approve an exploration and mine plan of operations (POO) that will be prepared and submitted to the Coronado National Forest (CNF) by Arizona Minerals, Inc. (AMI) to develop the Hermosa Taylor Deposit Project. If the U.S. Army Corps of Engineers (Corps) determines that the Project will impact surface water features considered waters of the U.S., a permit issued by the Corps in accordance with the requirements of Section 404 of the Clean Water Act (CWA) and its implementing regulations will be required. Offsite utility infrastructure improvements needed to develop the Hermosa Project (power, and possibly water supply) may, upon final design, cross public lands administered by the Bureau of Land Management (BLM) and require authorization from that agency as well. Approval of the proposed Project by these agencies will require compliance with NEPA.

NEPA is the centerpiece of US federal environmental policy. NEPA provides a process that federal agencies must follow to ensure that environmental effects of federal actions (approval of the Hermosa Taylor Deposit Project POO, CWA Section 404 Permit, FERC authorization etc.) are disclosed to the public, offer the public opportunity to provide input during the review process, and ensure that environmental resources are considered in the decision-making process. Considering the federal agencies likely to be involved in the review and approval of the Hermosa Project, we anticipate that the CNF will take the lead for federal agencies for implementation of the NEPA review process, and that the other federal agencies will act as cooperating agencies for the purpose of NEPA compliance.

Other key federal permits required to develop the Hermosa Taylor Deposit Project include the Endangered Species Act (ESA) and the National Historic Preservation Act (NHPA). As with the NEPA process, we anticipate that the CNF will be the lead agency for ESA and NHPA compliance for the Hermosa Taylor Deposit Project.

Primary state environmental permits that will be required to develop the Hermosa Taylor Deposit Project are an Air Quality Permit pursuant to the Clean Air Act (CAA), an Aquifer Protection Permit (APP), and a permit to discharge stormwater under the Arizona Pollutant Discharge Elimination System (AZPDES). The Environmental Protection Agency (EPA) has granted Arizona Department of Environmental Quality (ADEQ) authority over the CAA and Section 402 of the CWA in relation to stormwater discharge permits. These permitting processes are expected to proceed concomitantly with the NEPA process, and any data



analysis, collection, and modeling performed to support these permits will be used to disclose and analyze effects in the CNF NEPA process.

SOCIAL AND COMMUNITY

The Project is located in a relatively remote area eight miles north of the international border with Mexico in Santa Cruz County, Arizona. Nogales, the Santa Cruz county seat, is located approximately 20 miles by road to the southwest, with a 2010 population of approximately 20,800. The second largest community in the county is Rio Rico, also approximately 6 kilometers (20 miles) away, with a 2010 population of approximately 19,000. Both of these communities are located along Interstate 19, the principal interstate highway connecting Nogales to Interstate 10 in Tucson, Arizona. Santa Cruz County also includes several small towns and communities, of which Patagonia, with approximately 900 residents, is the closest to the Hermosa Project, Patagonia straddles State Route (SR) 82 and is located about 6 miles northwest of the Hermosa Project. in addition to Nogales, other major population and economic centers in the region include Sierra Vista, with a 2010 population of approximately 43,900, located approximately 14 kilometers (45 miles) to the east, and Tucson, with a 2010 population of approximately 520,100, located approximately 20 kilometers (65 miles) to the north. Pima County, where Tucson is located, had a 2010 population of approximately 980,300.

Patagonia has limited social and economic infrastructure with capacity to support the Project. The Town has a public elementary and middle school and a high school serving approximately 90 students from grades 9 through 12. There is one hotel, two bed-and-breakfast lodges, several restaurants, a small grocery store and a gas station. Patagonia has a Police Department with a small, but fully-staffed force. The Santa Cruz County Sheriff and the Arizona Department of Public Safety Highway Patrol Division patrol the area around Patagonia and the Project. Medical facilities in Patagonia include a small family medical clinic and the Patagonia Fire Department’s Emergency Medical Technician (EMT) service. The Fire Department also has helicopter landing facilities for transporting serious medical cases to larger hospitals in Nogales or Tucson. Nogales has a regional hospital. The Tucson metropolitan area of eastern Pima County has historically been the commercial and service/supply center for the mining industry in southern Arizona. Tucson has a commercial airport and large rail center.

Although the Patagonia area has historically been a mining, ranching, and railroad community that would generally be favorable to development of a major mining operation with the attendant economic benefits and increase in employment opportunities, the Project has already attracted the attention of local and national environmental organizations and the community appears to be divided in its support of the Project. Sonoita is also home to a nascent wine industry. Many local businesses cater to the tourist and outdoor sporting industry. The Patagonia Mountains, in which the Hermosa Taylor Deposit Project is located, have been noted internationally as a bird-watching destination to observe numerous species of rare and exotic birds. The area is also popular for other outdoor recreational activities, including hiking, biking, horseback riding, and off-road four-wheel driving within the CNF lands. As a result, it is expected that the Hermosa Taylor Deposit Project will attract similar levels of opposition as has other recent mine permitting efforts in the region.



U.S. FEDERAL ENVIRONMENTAL PERMITTING

A variety of U.S. federal permits and approvals must be obtained prior to operating the proposed Hermosa Taylor Deposit Project. A summary of the expected major federal permits/approvals, the lead agency for each federal permit/approval and comments relevant to each are provided in Table 19-1. This list has been prepared based on the current understanding of the Project approach and the regulations currently in effect. The list may be subject to change as Project design is developed. The timeframes mentioned are based on recent projects in Arizona, but are subject to change, depending on the complexity of the Project, public opinion, agency capabilities and priorities and other factors outside of AMI’s control.

STATE ENVIRONMENTAL PERMITTING

A variety of state permits and approvals must be obtained prior to operating the proposed Hermosa Taylor Deposit Project. A summary of the expected state permits/approvals, the lead agency for each permit/approval, and comments relevant to each are provided in Table 19-1. This list has been prepared based on the current understanding of the Project approach and the regulations currently in effect. The list may be subject to change as Project design is developed. The timeframes described are based on recent projects in Arizona, but are subject to change depending on the complexity of the project, public opinion, agency capabilities and priorities and other factors outside of AMI’s control.

Table 15-1: Major Permits and Approvals Required

Lead Agency Permit, Approval or other Action Comments

US Department of Agriculture, US Forest Service, Coronado National Forest (USFS)

Plan of Operations (POO) approval for Environmental and Exploration Drilling

POO for exploration and hydrogeologic drilling on lands managed by USFS requires approval before the work can be implemented.

USFS

Compliance and Decision pursuant to National Environmental Policy Act of 1969 (NEPA) for drilling activities

USFS needs to comply with NEPA before making a decision on the POO. An EA is in process and expected to take between 12 and 24 months, including potential appeals procedures.

USFS POO Approval for Mining

POO for mining operations, if operations will affect federal land or create a federal nexus (i.e., impacts to waters of the U.S. (WOUS)), to be submitted after completion of a favorable EA or Feasibility Study, incorporating the results of the drilling activities described above. USFS needs to comply with NEPA before making a decision on the POO.

USFS NEPA Compliance and Decision pursuant to NEPA for mining operations

An EIS will be required for the mining operation affecting federal land or has a federal nexus. The EIS process, including obtaining the ROD, is expected to take 4 to 6 years or more to complete. EPA has review authority of EISs under the Clean Air Act, Section 309.



Lead Agency Permit, Approval or other Action Comments

U.S. Army Corps of Engineers (Corps) CWA Section 404 Permit

Permit(s) required for discharge of fill material to waters of the U.S., including jurisdictional wetlands. An individual permit is likely to be required, unless affected tributaries on the site are determined by the Corps to be “non-jurisdictional”. An individual permit requires NEPA compliance and a Record of Decision (ROD) and is expected to be performed in coordination with the CNF NEPA process. Timeline is generally coincident with the CNF NEPA process. EPA has authority to review the CWA 404 permit public notice, elevate concerns, and require restrictions related to the discharge area.

Federal Energy Regulatory Commission (FERC)

Section 7 of the Natural Gas Act Certificate of Public Convenience

Approval required for interstate natural gas pipelines. Includes NEPA review at the EA or EIS level expected to be performed in coordination with the CNF NEPA process.

US Fish and Wildlife Service (USFWS)

Endangered Species Act Section 7 Consultation

USFWS review and consultation is likely to be required for CNF POO decision, Section 404 permit, and FERC permit. Consultation documentation and process generally occurs in coordination with NEPA.

Consultation with the State Historic Preservation Office (SHPO)

Section 106 of the National Historic Preservation Act (NHPA)

Consultation with the SHPO and consulting Native American tribes is required for CNF POO decision, Section 404 permit, and FERC permit. Consultation documentation and process generally occurs in coordination with NEPA.

Arizona Department of Environmental Quality (ADEQ)

Air Quality Permit

EPA has granted air permitting primacy to the ADEQ. Required for mobile and stationary emission sources, including any source that may emit air pollutants (e.g. dust, listed air pollutants). Usually requires baseline studies and monitoring of weather and ambient air conditions. EPA may exercise authority to review the air permit.

ADEQ Aquifer Protection Permit (APP)

Required for waste dumps, tailings storage, leaching facilities, process-water ponds and reservoirs, or any other facility that has the potential to “discharge” to the aquifer or vadose zone. Requires hydrogeologic study and the submission of construction plans for the proposed facilities.

ADEQ

Arizona Pollutant Discharge Elimination System (AZPDES) for Stormwater Discharges Associated with Industrial Activity-Mineral Industry General Stormwater Permit

EPA has granted ADEQ administration authoring of permits associated with Section 402 of the CWA. Regulates discharge to receiving waters Substantive requirements are development and implementation of a SWPPP, best management practices, and regular inspections and monitoring.



ADJACENT PROPERTIES

Currently there are no significant operating mines in the Harshaw or nearby mining districts. Properties adjacent to the Hermosa Property have had limited or no recent exploration. The mineralization discussed on adjacent properties is hosted by various types of deposits that are not directly related to Arizona Mining’s Hermosa Taylor Deposit sulfide CRD mineralization nor a projection of the mineralization types found on the Hermosa Property, and this information is not intended to indicate that such mineralization might be present on the Hermosa Property.

ARIZONA MINING INC.

CENTRAL DEPOSIT

The Company owns another project on the Hermosa Property that is a silver-manganese manto oxide development (“Central Deposit”) that has had a prefeasibility study completed in December 2013 by M3 Engineering and Technology Corporation (M3) titled: “Hermosa Project, Form 43-101F1 Technical Report, Pre-Feasibility Study, Santa Cruz County Arizona”. The proposed Central Deposit is an open pit silver and manganese mine that delivers mineralized material to a processing facility that handles up to 13,700 tpd (tons per day) or 5,000,000 tpy (tons per year). The processing facility treats the material with crushing, dry magnetic separation, grinding, calcining, leaching, zinc solvent extraction and electrowinning, SART precipitation and Merrill Crowe refining. Additionally, the tailings material will be sent through a wet high-intensity magnetic separation (WHIMS) process to produce a 35% manganese concentrate that will be processed through an electrowinning plant to produce an electrolytic manganese metal (EMM) product. The project is located near Patagonia, Arizona, USA, which has a balance of remoteness and proximity to infrastructure.

The Hermosa Taylor Deposit (sulfide CRD mineralization) is in close proximity to, but not mineralogically related to, the oxide-manto mineralization of the Central Deposit. The Hermosa Taylor Deposit Mineral Resource estimate is exclusive of oxide mineralization and was evaluated independently.

TRENCH PROPERTY

The Trench mine produced silver, lead, and zinc from a vein system discontinuously between 1860 and 1949, with a custom mill that operated between 1938 and 1964. The last exploration in the area was conducted in 1979-1989. The mine and mill complex (~121 hectares or ~300 acres) included four tailings ponds, all of which were reclaimed by ASARCO between 1989 and 1994. The property was recently purchased by Arizona Mining from the ASARCO Custodial Trust. The author has not independently verified the property and cannot confirm that the mineralization has similar characterizations to Hermosa Taylor Deposit sulfide CRD mineralization.

BRONCO CREEK

Bronco Creek Exploration holds a small block of unpatented (PAT) claims located on the western margin of Hermosa property. There is no known exploration activity. AMI optioned the rights to these claims in late 2015 and not control the properties subject to certain conditions precedent and a 2%NSR royalty. The author has not independently verified the properties and cannot confirm that the mineralization has similar characterizations to Hermosa Taylor Deposit sulfide CRD mineralization.



OTHER RELEVANT DATA AND INFORMATION

There is no other relevant data or information about the Hermosa Taylor Deposit.



INTERPRETATION AND CONCLUSIONS

The Hermosa Taylor Deposit is located 3 miles south of the Laramide Red Mountain porphyry copper The Laramide Sunnyside Diatreme is nearer to the Hermosa project, located approximately one-half mile northwest. The porphyry style alteration and the proximity to the Hermosa Taylor Deposit suggest a genetic link.

Exploration results at the Hermosa Taylor Deposit has defined CRD mineralization with a strike length of 914 meters (3,000 feet) and over 457 meters (1,500 feet) of continuous vertical mineralization. CRD mineralization is developed within the Concha limestone, Scherrer Formation and Epitaph Formation, particularly in the northwestern-most section of the property. The CRD mineralization is best described as calc-silicate skarn type mineralization with replacement of carbonate by wollastonite-diopside and rhodonite and coarse-grained, euhedral-subhedral galena, sphalerite, chalcopyrite and pyrite. Massive replacements of carbonate by galena, sphalerite, chalcopyrite and pyrite are not uncommon, up to 6 meters (20 feet thick). Light green, massive, coarse-grained garnet with abundant sulfides as disseminations, pods, masses and interstitial replacements are sparsely noted, deep within the Epitaph Formation, in the furthermost, northwestern core holes.

MMC reviewed pertinent data from Hermosa Taylor Deposit regarding exploration data and methods and resource estimates. The resource prepared by MMC for Arizona Mining’s Hermosa Taylor Deposit is in accordance with Canadian National Instrument 43-101 as set forth in the CIM standards and definitions on Resources and Reserves, Definitions and Guidelines (2005). MMC completed its review of the project in preparation for this Technical Report. MMC concludes:

• Assaying and drill hole surveys have been carried out in accordance with best industry standards practices and are suitable to support resource estimates.

• Sampling and assaying included quality assurance procedures, including submission CSRM’s, blanks and duplicates into the sample stream.

• The Hermosa Taylor Deposit resource model was developed using industry accepted methods.

• Mineral Resources are classified as Inferred Mineral Resources. Inferred Mineral Resources are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological grade or quality continuity.

• The Hermosa Taylor Deposit is a property of Merit and has enough potential that future exploration is warranted. The Deposit has merit and potential for minable Ag, Pb, Zn and Cu and should be explored in more detail.

• MMC met their objectives for Arizona Mining regarding the Hermosa Taylor Deposit.



RECOMMENDATIONS

DRILLING

Based on the favorable exploration results to date, the Taylor Deposit is of sufficient merit to warrant further exploration and mineral resource definition. In order to increase confidence in grade continuity and determine the extents of mineralization, an infill drilling program and generative exploration program is recommended. The infill program will be conducted in the current resource area and will help define and demonstrate grade continuity between the current widely-spaced 25 holes that intercept sulfide mineralization. A generative exploration program that extends along strike (330°) to the northwest (on the newly acquired TRENCH claims, will test the extents of mineralization and test the hypothesis that mineralization is continuous from the current resource area to ASARCO drill hole THC-2. Data collected would be utilized to update the geologic model and further increase the confidence in the sulfide resource. The two programs are estimated to cost US $14,761,500. Breakdown of the costs associated with the recommended exploration program are shown in Table 26-1.

Table 19-1: 2016 Exploration Program

2016 Exploration Program Number of Holes $/ft Feet Total Cost Infill Drill Program 21 $65 127,100 US $8,261,500 Exploration on TRENCH claims 29 $65 100,000 US $6,500,000

Exploration Total ($ USD) US $14,761,500

GEOLOGY MODEL

The current resource model is based on a simplified geology model between the Upper Volcanics and the underlying sedimentary formations. However, based on the current understanding of the geology and the level of geologic data collected at the Taylor Deposit, it is recommended that AZ Mining construct a geologic model that captures all major stratigraphic formation logged and structural components identified through surface mapping and mineralized offsets interpreted by staff geologist. The geology model will be used to prioritize geologic controls in the resource modeling. A detailed geologic model should be constructed that includes the following components:

• Major stratigraphic formations that make up the geologic section

Cretaceous Volcanics Concha Formation Scherrer Formation Epitah Formation

• Structural model • Oxidation model

The geology model will be utilized in the evaluation of resource modeling controls and assigning density values. A potential control to evaluate is the contact between the Scherrer Formation and Epitaph Formations which appears to be a favorable horizon for sulfide mineralization.



A structural model should be evaluated, based on surface mapping and interpreted mineralized offsets, to look at 3D relationships between faults and mineralization. At this time it is unknown whether the sulfide mineralization is only stratigraphically controlled or is concentrated in areas by vertical structural controls. Based on the findings, the structural model can be used to establish modeling parameters to accommodate the proper geometry of the mineralization.

The oxidation model should be re-evaluated with the addition of new data from the infill program. An increase in drill density could improve the sectional interpretation of oxide boundaries and their continuity between sections.

DENSITY

The method that is currently being used to calculate density (Section 14.4.1) is the most accurate way due to the variability of metal content of the mineralized zones. However, base line density values for each stratigraphic formation should be included in the density calculation. In order to establish a base line density value for each modeled formation it is recommended that Arizona Mining:

• Collect a minimum of 10 density samples per modeled lithology type

Samples should be representative of fresh rock to establish a base line density for each stratigraphic formation modeled.

In addition to establishing density values for each formation a study should be completed evaluating the relationship between pyrite(%) compared to lead(%) and zinc(%) composition of each sample. If a relationship can be determined, the pyrite(%) composition should be factored into the density calculation.

METALLURGY

Based on favorable results in the scoping level study, RDi recommends that the company should proceed with pre-feasibility level testwork. During the next phase of testing, one needs to also follow the gold and copper distribution in the proposed flowsheet.



REFERENCES

Beus, S.S., 1989, Devonian and Mississippian geology of Arizona, in Jenney,J.P., and Reynolds, S.J., eds., Geologic evolution of Arizona: Arizona Geological Society Digest 17, p. 287-311.

Bloom, L., 2012. Review of Wildcat Silver Corporation’s Assay Quality Control Program. Unpublished report, Analytical Solutions Ltd. 152 pages.

Dickinson, W.R., 1989, Tectonic setting of Arizona through geologic time, in Jenney, J.P., and Reynolds, S.J., eds., Geologic evolution of Arizona: Arizona Geological Society Digest 17, p. 1-16.

Drewes, H.D., 1981, Tectonics of southeastern Arizona: U.S. Geological Survey Professional Paper 1144, 96 p., 10 plates.

Drielick, Thomas L., Easton, George, Timothy J., Christopher L., McNulty, Terance P., Osterberg, Mark W., Smith, Michael R., Snider, Joshua W., Taylor, Mark F., 2014 Hermosa Project, Form 43-101F1 Technical Report, Pre-Feasibility Study, Santa Cruz County, Arizona, M3, January 17, 2014.

Gilluly, James, Cooper, J.R., and Williams, J.S., 1954, Late Paleozoic stratigraphy of central Cochise County, Arizona: U.S. Geological Survey Professional Paper 266, 49 p., 1 sheet, scale 1:62,500.

Heidrick, T.L., and Titley, S.R., 1982, Fracture and dike patterns in Laramide plutons and their structural and tectonic implications, American southwest, in Titley, S.R., ed., Advances in geology of the porphyry copper deposits, southwestern North America: Tucson, University of Arizona Press, p. 73-91.

Krantz, R.W., 1989, Laramide structures of Arizona, in Jenney, J.P., and Reynolds, S.J., eds., Geologic evolution of Arizona: Arizona Geological Society Digest 17, p. 463-483.

Malhotra, 2015. Scoping Metallurgical Testing of Hermosa NW Polymetallic Project, Unpublished report, Resource Development Inc. 43 pages.

Middleton, L.T., 1989, Cambrian and Ordovician depositional systems in Arizona,in Jenney, J.P., and Reynolds, S.J., eds., Geologic evolution of Arizona: Arizona Geological Society Digest 17, p. 273-286.

Rehrig, W.A., and Heidrick, T.L., 1976, Regional tectonic stress during the Laramide and late Tertiary intrusive periods, Basin and Range province, Arizona, in Wilt, J.C., and Jenney, J.P., eds., Tectonic digest: Arizona Geological Society Digest, v. 10, p. 205-228.

Silver, L. T., Bickford, M. E., Van Schmus, W. R., Anderson, J. L., Anderson, T. H., and Medaris, L. G. Jr., 1977. The 1.4-1.5 b.y. transcontinental anorogenic plutonic perforation of North America: Geological Society of America Abstracts with Programs, v. 9, no. 7, p. 1176-1177.

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