ni 43 101 santo domingo project

A Member of the Behre Dolbear Group Inc. © 2009, Behre Dolbear Group Inc. All Rights Reserved.

SANTO DOMINGO II & NOMBRE DE DIOS CONCESSIONS HOSTOTIPAQUILLO AREA

STATE OF JALISCO, MÉXICO

NI 43-101 TECHNICAL REPORT SANTO DOMINGO SILVER-GOLD

EXPLORATION PROJECT

Latitude: 21º 06’ North; Longitude: 103º 59’ West

PREPARED FOR

STROUD RESOURCES LTD. 330 Bay Street, Suite 1115

Toronto, Ontario, Canada M5H 2S8 Tel.: +1 (416) 362-4126 Fax.: +1 (416) 362-4129

JANUARY 25, 2010

PREPARED BY

MR. BALTAZAR SOLANO-RICO QUALIFIED PERSON

BEHRE DOLBEAR DE MÉXICO, S.A. DE C.V.

Paseo de los Robles 4092 Fracc. San Wenceslao

45110 Zapopan, Jalisco, México Telephone: +52 (33) 3610 2113 Facsimile: +52 (33) 3610 2112

[email protected]

mailto:[email protected]�

NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, Jalisco, México January 25, 2010

2.0 TABLE OF CONTENTS

Project 09-070 i BEHRE DOLBEAR

3.0 SUMMARY ..................................................................................................................................... 1 3.1 LOCATION ........................................................................................................................ 1 3.2 MINERAL CONCESSIONS .............................................................................................. 1 3.3 SURFACE RIGHTS ........................................................................................................... 1 3.4 ENVIRONMENTAL EXPLORATION PERMITTING .................................................... 1 3.5 GEOLOGY ......................................................................................................................... 2 3.6 MINERALIZATION .......................................................................................................... 2 3.7 EXPLORATION ................................................................................................................ 2 3.8 MINERAL RESERVES AND RESOURCES .................................................................... 3 3.9 CONCLUSIONS AND RECOMMENDATIONS ............................................................. 4

4.0 INTRODUCTION ........................................................................................................................... 7 5.0 RELIANCE ON OTHER EXPERTS .............................................................................................. 9 6.0 PROPERTY DESCRIPTION AND LOCATION ......................................................................... 10

6.1 COMPANY RIGHTS TO MINING CONCESSIONS ..................................................... 10 6.2 COMPANY OWNERSHIP .............................................................................................. 14 6.3 SURFACE RIGHTS ......................................................................................................... 14 6.4 ENVIRONMENTAL PERMITTING FOR EXPLORATION ACTIVITIES .................. 14

7.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND PHYSIOGRAPHY ............................................................................................................... 16

8.0 HISTORY ...................................................................................................................................... 20 9.0 GEOLOGICAL SETTING ............................................................................................................ 27

9.1 REGIONAL GEOLOGY .................................................................................................. 27 9.2 LOCAL GEOLOGY ......................................................................................................... 30

9.2.1 Lithology .............................................................................................................. 30 9.2.2 Structure ............................................................................................................... 33 9.2.3 Mineralized zones ................................................................................................ 34

10.0 DEPOSIT TYPES .......................................................................................................................... 35 11.0 MINERALIZATION AND MINERALIZATION CONTROL .................................................... 38 12.0 EXPLORATION ........................................................................................................................... 41

12.1 HISTORIC EXPLORATION ........................................................................................... 41 12.2 STROUD RESOURCES EXPLORATION ..................................................................... 41

13.0 DRILLING ..................................................................................................................................... 43 13.1 DRILLING SUMMARY .................................................................................................. 43 13.2 DRILLING RESULTS SUMMARY ................................................................................ 43

14.0 SAMPLING METHOD AND APPROACH ................................................................................. 59 14.1 SAMPLING PROGRAMS ............................................................................................... 59 14.2 CORE HANDLING AND SAMPLING ........................................................................... 59 14.3 CORE RECOVERIES ...................................................................................................... 62 14.4 DRILL HOLE SURVEYING ........................................................................................... 63

15.0 SAMPLE PREPARATION, ANALYSES, AND SECURITY ..................................................... 65 15.1 ALS CHEMEX LABS QUALITY ASSURANCE/QUALITY

CONTROL (QA/QC) ....................................................................................................... 65 15.2 STROUD SAMPLE PREPARATION PROCEDURES .................................................. 65

16.0 DATA VERIFICATION ............................................................................................................... 67 16.1 STROUD QUALITY CONTROL .................................................................................... 67 16.2 BEHRE DOLBEAR DATA VERIFICATION ................................................................ 67 16.3 BEHRE DOLBEAR CHECK SAMPLING ...................................................................... 69


2.0 TABLE OF CONTENTS (CONTINUED)

Project 09-070 ii BEHRE DOLBEAR

17.0 ADJACENT PROPERTIES .......................................................................................................... 78 18.0 MINERAL PROCESSING AND METALLURGICAL TESTING .............................................. 79 19.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES ......................................... 80

19.1 GENERAL INFORMATION ........................................................................................... 80 19.2 MINERAL RESOURCE DEFINITIONS ......................................................................... 80

19.2.1 Mineral Resource (CIM, 2005) ............................................................................ 81 19.2.1.1 Inferred Mineral Resource ................................................................... 81 19.2.1.2 Indicated Mineral Resource ................................................................. 81 19.2.1.3 Measured Mineral Resource ................................................................ 81

19.2.2 Mineral Reserve (CIM, 2005) .............................................................................. 81 19.3 STROUD MINERAL RESOURCES ............................................................................... 82

19.3.1 Method of Resource Estimation .......................................................................... 82 19.3.2 Mineral Resources ............................................................................................... 83

20.0 OTHER RELEVANT DATA AND INFORMATION ................................................................. 98 21.0 INTERPRETATION AND CONCLUSIONS ............................................................................... 99

21.1 INTERPRETATION OF RESULTS ................................................................................ 99 21.2 OTHER RELEVANT INFORMATION ........................................................................ 100

21.2.1 Mineral Concessions .......................................................................................... 100 21.2.2 Surface Rights .................................................................................................... 100 21.2.3 Environmental Exploration Permitting .............................................................. 100

21.3 CONCLUSIONS ............................................................................................................ 100 22.0 RECOMMENDATIONS ............................................................................................................. 103 23.0 REFERENCES ............................................................................................................................ 106 24.0 DATE AND SIGNATURE PAGE .............................................................................................. 107 25.0 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON

DEVELOPMENT PROPERTIES AND PRODUCTION PROPERTIES ................................... 110 APPENDIX 1.0 TITLE OPINION ............................................................................................. A1-1 APPENDIX 2.0 ASSAY TECHNIQUES .................................................................................. A2-1 APPENDIX 3.0 CHECK ASSAYS............................................................................................ A3-1


Project 09-070 iii BEHRE DOLBEAR

LIST OF TABLES Table 3.1 Santo Domingo Project, Mineral Resource Estimate .......................................................... 4 Table 3.2 Phase 1 – Stroud Recommended Program and Budget ....................................................... 5 Table 3.3 Phase 2 – Stroud Recommended Program and Budget ....................................................... 6 Table 6.1 San Diego y La Española, S.A. de C.V Mining Rights (duties) of SDLE’s

Concessions for 2009 ........................................................................................................ 12 Table 7.1 Summary of Meteorological Information and Climate Classification .............................. 18 Table 8.1 Existing Mine Workings on Santo Domingo Project ........................................................ 21 Table 8.2 Noranda Drill Program Results ......................................................................................... 25 Table 8.3 Dump Sampling Program ................................................................................................. 26 Table 12.1 SDLE Core Drilling, 1999 – Selected Intervals ................................................................ 41 Table 13.1 Drill Hole Record 1999-2008 ........................................................................................... 44 Table 13.2 Summary of Significant Intersections ............................................................................... 54 Table 14.1 Core Recoveries of Mineralized Intersections Verified by Behre Dolbear’s

Qualified Person ............................................................................................................... 63 Table 16.1 Behre Dolbear Sample Verification .................................................................................. 70 Table 16.2 Behre Dolbear Sample Verification Assay Results – ALS Chemex Certificate

of Analysis ........................................................................................................................ 71 Table 16.3 Behre Dolbear Verification – Assay Comparison Between Stroud and BDM

Reports of ALS Chemex Labs .......................................................................................... 72 Table 19.1 Mineral Resources Estimate ............................................................................................. 83 Table 19.2 Mineral Resource Block Calculation ................................................................................ 86 Table 19.3 Mineral Resource Block Calculation ................................................................................ 87 Table 21.1 Mineral Resources Estimate ............................................................................................. 99 Table 22.1 Phase 1 – Stroud Recommended Program and Budget ................................................... 104 Table 22.2 Phase 2 – Stroud Recommended Program and Budget ................................................... 105


LIST OF FIGURES

Project 09-070 iv BEHRE DOLBEAR

Figure 4.1. Location map ...................................................................................................................... 7 Figure 6.1. SDLE Mine concessions map ........................................................................................... 10 Figure 7.1. Location and property access map .................................................................................... 16 Figure 7.2. Santo Domingo – Topographic relief and project infrastructure – Vein

Structures pass under the hill and parallel to the main valley in the background – Trees on hill in centre of Photo mark a Shaft on the Guadalupe System .......................... 17

Figure 7.3. Rio Grande de Santiago Valley, looking Northwest ......................................................... 18 Figure 8.1. Nombre de Dios open stope .............................................................................................. 22 Figure 8.2. Rayas Vein System in the Bellavista tunnel: timbering extends for 10 meters

across the vein system ....................................................................................................... 23 Figure 8.3. Timber wall holding up rock fill in 6 meter-wide stope – Socavón Intermedio ............... 23 Figure 8.4. View of the fortified compound that was probably the control center for the

mining operations – Opening in wall is for a road to El Zopilote Mine ........................... 24 Figure 9.1. Sierra Madre Occidental Province and associated Mineral Districts ................................ 27 Figure 9.2. Regional tectonic map of the southwestern part of the Sierra Madre Occidental –

Shaded area is the late Miocene to Quaternary Trans-Mexican Volcanic Belt ................ 28 Figure 9.3. Regional mineralized zones .............................................................................................. 29 Figure 9.4. Regional geologic map of the late Miocene to Quaternary Mexican Volcanic

Belt .................................................................................................................................... 31 Figure 9.5. Local geology and drill hole location map – Rayas, Guadalupe, La Española,

and Jasmine veins traces ................................................................................................... 32 Figure 9.6. Cliff southwest of camp showing the thick capping rhyolite volcanic ash –

El Zopilote Abajo is at bottom of cliff at center of photo ................................................. 33 Figure 10.1. Spatial relationship of the Gran Cabrera, Santo Domingo, and Cinco Minas

mineralized zones ............................................................................................................. 36 Figure 11.1. Boulder from La Raya showing brecciation of quartz in calcite ...................................... 38 Figure 11.2. Core showing a breccia with fragments of andesite and galena-sphalerite

mineralization in white quartz .......................................................................................... 39 Figure 13.1. Section 5275N – Drill hole mineral intersections and lithology ....................................... 45 Figure 13.2. Section 5345N – Drill hole mineral intersections and lithology ....................................... 46 Figure 13.3. Section 5365N – Drill hole mineral intersections and lithology ....................................... 47 Figure 13.4. Section 5375N – Drill hole mineral intersections and lithology ....................................... 48 Figure 13.5. Section 5475N – Drill hole mineral intersections and lithology ....................................... 49 Figure 13.6. Section 5530N – Drill hole mineral intersections and lithology ....................................... 50 Figure 13.7. Section 5555N – Drill hole mineral intersections and lithology ....................................... 51 Figure 13.8. Section 5640N – Drill hole mineral intersections and lithology ....................................... 52 Figure 13.9. Section 5835N – Drill hole mineral intersections and lithology ....................................... 53 Figure 13.10. Drilling Flat Hole SD-08-22 at entrance to Nombre de Dios Mine .................................. 56 Figure 13.11. Drilling Hole SD-08-23 .................................................................................................... 57 Figure 14.1. Core splitting facilities – Diamond saw ............................................................................ 60 Figure 14.2. Half core sample split ....................................................................................................... 60 Figure 14.3. Stroud’s core storage facilities at Labor de Guadalupe .................................................... 62 Figure 16.1. Drill hole location monument ........................................................................................... 68 Figure 16.2. Drill hole location monument partially covered with dirt ................................................. 68 Figure 16.3. Behre Dolbear check sampling ......................................................................................... 69 Figure 16.4. BD Check Sampling (g/t Au) ............................................................................................ 73


LIST OF FIGURES (CONTINUED)

Project 09-070 v BEHRE DOLBEAR

Figure 16.5. BD Check Sampling (Au) ................................................................................................. 74 Figure 16.6. BD Check Sampling (g/t Ag) ............................................................................................ 74 Figure 16.7. BD Checking Sampling (Ag) ............................................................................................ 75 Figure 16.8. BD Check Sampling Pb (%) ............................................................................................. 75 Figure 16.9. BD Check Sampling Pb (%) ............................................................................................. 76 Figure 16.10. BD Check Sampling Zn (%) ............................................................................................. 76 Figure 16.11. BD Check Sampling Zn (%) ............................................................................................. 77 Figure 19.1. Longitudinal Section Indicating Mineral Resources ......................................................... 85 Figure 19.2. Cross Section 5275 showing blocks for mineral resources estimation ............................. 88 Figure 19.3. Cross Section 5345 showing blocks for mineral resources estimation ............................. 89 Figure 19.4. Cross Section 5365 showing block for mineral resources estimation ............................... 90 Figure 19.5. Cross Section 5375 showing blocks for mineral resources estimation ............................. 91 Figure 19.6. Cross Section 5475 showing block for mineral resources estimation ............................... 92 Figure 19.7. Cross Section 5530 showing blocks for mineral resources estimation ............................. 93 Figure 19.8. Cross Section 5555 showing block for mineral resources estimation ............................... 94 Figure 19.9. Cross Section 5595 showing blocks for mineral resources estimation ............................. 95 Figure 19.10. Cross Section 5640 showing block for mineral resources estimation ............................... 96 Figure 19.11. Cross Section 5835 showing blocks for mineral resources estimation ............................. 97


Project 09-070 1 BEHRE DOLBEAR

3.0 SUMMARY Stroud Resources Ltd. (Stroud) owns 100% of the private Mexican company, Compañía Minera San Diego y La Española, S.A. de C.V. (SDLE). SDLE holds titles rights to the Santo Domingo II and Nombre de Dios mining concessions, comprising 40 hectares and 95 hectares, respectively. 3.1 LOCATION The concessions occur in the Hostotipaquillo Mining District which includes a number of established silver-gold epithermal mineral occurrences including the well known Monte del Favor, La Cabrera and Cinco Minas mines with a pre-twentieth century mining production history, reportedly most prolific in the seventeenth and eighteenth centuries. They are located approximately 80 kilometers (km) N53°W of Guadalajara, capital city of the State of Jalisco. The coordinates for the Santo Domingo II claim monument near the approximate center of the concessions, as reported in the assessment works and survey, are 21° 06’ 21” North latitude; 103° 58’ 43” West longitude. The corresponding UTM coordinates for the same location are Zone 13Q – 606,023.21 East, 2,334,200.76 North. 3.2 MINERAL CONCESSIONS Behre Dolbear has reviewed the Titles Opinion (Creel, García – Cuellar, Aiza y Enríquez Law Firm, Nov. 27, 2009), legal status and agreements, and technical data supplied to it by Stroud, SDLE and its agents, as well as other public technical information sources. Behre Dolbear has conducted a review and appraisal of the information used in the preparation of its report, and believes the information included in the preparation of the report, and in its conclusions and recommendations, is valid and appropriate considering the status of the project and the purpose for which the report is prepared. According to the Title Opinions for the Santo Domingo II and Nombre de Dios Concessions held by SDLE, “the said mining concessions (a) Are valid, enforceable and in good standing; and (b) Such mining concessions and the rights derived thereunder are free and clear of all liens, mortgages, claims, encumbrances, and security interests of any kind or nature.” 3.3 SURFACE RIGHTS Stroud has leased surface rights from the Community Ejido de Santo Domingo de Guzman to cover these mining concessions and the surrounding area, granted by a general meeting held November 3, 2002 in accord with Méxican regulations, and a lease agreement ratified before a Notary Public. The agreement has been extended to 2013. Copies of the Ejido agreements are in the files of SDLE and Stroud for consultation, if required. 3.4 ENVIRONMENTAL EXPLORATION PERMITTING In 1999, Stroud, then known as Stroud Resources de México, S.A. de C.V., carried out the first drilling campaign from then existing roads and mine patios. The second drilling campaign of 2003 was permitted by submitting an Environmental Permitting Notice report, according to Regulation NOM 120 ECOL 1997, which included the construction of 2,400 meters of access roads and drill pads (BDM, November 2002). Drill holes for the last drilling campaign between 2005 and 2008 were carried out from the access road permitted in 2002. Copies of the environmental report are in the files of SDLE and SDR for consult, if required.



3.5 GEOLOGY The oldest rocks in the western part of México are sedimentary and volcano-sedimentary units of the Guerrero Terrain overlain by Cretaceous volcano-sedimentary rocks locally affected by the Eocene Puerto Vallarta batholith (54 Ma). The region of interest presents a stratigraphic succession which includes a Cordilleran-equivalent basement, Oligocene-to-middle-Miocene Sierra Madre Occidental (SMO) volcanic rocks, and a Late Miocene-to-Quaternary Mexican Volcanic Belt (MVB) sequence. The SMO is a large Middle Tertiary volcanic province, which extends from the southwestern United States to central México. Regionally, the SMO Province shows two differentiated volcanic Groups according to its composition and age: the Lower Volcanic Group (LVG), forming the lowest part of the volcanic sequence of SMO, exhibits more intermediate to mafic composition; and the Upper Volcanic Group (UVG), which is more felsic than the LVG. The contact between these two units is commonly erosional with the local presence of red conglomerates filling ancient topography. The importance of the SMO Province is due to its being the host to one of the largest epithermal precious metal metallogenic provinces in the world, which encompasses well-known silver-gold (Ag-Au) producing mining districts in Mexico including active mines and advanced projects like Mulatos, Dolores, Palmarejo, Ocampo, Moris, Batopilas, El Sauzal, Guadalupe y Calvo, San Julián, San Dimas-Tayoltita, Bacis, Topia, La Ciénega, Guanaceví, and Metates. Closer to the subject area, the Hostotipaquillo District historic mines, Cinco Minas, Bolaños and San Martin de Bolaños are also enclosed in LVG rocks. Mineral zones in the Hostotipaquillo Mining District include the Casados, Mololoa, Salomón, Gran Cabrera, and other mines in the Monte del Favor area and the Santo Domingo, San Pedro Analco, and Cinco Minas in the Southeastern part of the District (R. Munroe, 2006). All of these deposits are related to silver-gold epithermal mineralization events associated with veins of quartz, quartz-calcite and quartz-calcite-adularia-sericite. At Santo Domingo, the two most important mineralized structures, Rayas and Guadalupe, have been identified over lengths of 500 and 900 meters, respectively, with intersections in the order of 10 to 50 meters in width and to a depth of 775 meters above sea level (masl) at the DH 06-11 intersection of the Guadalupe vein. Surface mapping, trenching, historic workings and 30 drill holes by SDR have defined the main silver-bearing veins, with associated gold structures, as a series of North West-trending veins and veinlets showing local brecciation and strong silicification and/or propilitization of the enclosing host rock, typical of epithermal vein systems. 3.6 MINERALIZATION Disseminated and veinlet-controlled mineralization at Santo Domingo includes argentite, sphalerite, galena, and minor native gold observed in the silicified rock matrix and quartz veins and veinlets. The sulphide mineralization content is low, and is estimated to be below 1% to 2% (vol.). In the near-surface environment, secondary oxide phases of the sulphide minerals, including malachite, are common. 3.7 EXPLORATION Stroud optioned the property in 1989 and conducted a limited program of check chip sampling in the accessible adits and surface mineralized zones. The early program was designed to substantiate the mineralization potential of the concessions. Stroud undertook an initial core drilling program of four holes in 1999 followed, in 2003, by an attempted drill program. Between 2005 and 2008, a successful drilling campaign was waged. In this 20 year time period, a total of 30 core holes have been drilled, of which



three were abandoned due to loose material, broken ground and/or mechanical problems. Over all, 5,335.60 meters have been drilled including the 169.5 meters lost in the three holes previously mentioned. Behre Dolbear has undertaken an independent review of the technical information related to the project, including check sampling and an independent analysis of 18 samples from the mineralized structures exhibited in recent drill core, by quartering split core. The results of the Behre Dolbear check assay program found that Au, Pb, and Zn analyses show good correlation values, however the correlation of silver assay results was not very good; it was concluded that the variations are probably caused by the irregular distribution of silver mineralization and that silver mineralization is possibly associated with high-grade oxide minerals or native silver since most of the higher Ag values are within the oxidation zone, close to surface. Future sampling campaigns should consider larger samples, in size and number. Also, higher assays, above 300 g/t, should be verified in a third laboratory until mineral graphic studies define the silver mineralogy and a better sample attack and analysis is deciphered. Behre Dolbear believes that the results reported are acceptable and therefore sampling by Stroud Resources is considered reliable. Behre Dolbear found that in general, mineralized intersections of drill holes show good core recovery, in the order of 96%, although varying from 87% to 100% depending upon the degree of fracturing exhibited by the intersections. Based on these estimates, it is considered that core recoveries are adequate for use in Mineral Resource calculation and reporting. Behre Dolbear made a review of Stroud’s sampling procedures. Sampling procedures and sample preparation procedures developed in 1999 by Stroud were followed during the first drilling campaign, with slight variations in the following campaigns. A total of 30 drill holes were sampled at variable intervals, depending on the geologic characteristics of the intersection and where the structure was found. Samples were taken of half-core splits of lengths varying from 0.3 to 2.0 meters although core sample lengths were in the order of 1.0 meters for the 1999 campaign and 1.5 meters for the 2003 and 2005-2008 campaigns. Behre Dolbear believes that Stroud’s sampling, sample preparation and assay procedures were within industry standards and were adequately followed through the sampling campaigns. Data collection improvements, mainly to the recording of the information, are recommended throughout this report. It is, therefore, estimated that samples and assay results are adequate for Mineral Resource estimation and reporting in accordance with NI 43-101 guidelines. 3.8 MINERAL RESERVES AND RESOURCES Mineral Reserves, as established by NI 43-101 guidelines and CIM definitions, have not been defined at Santo Domingo. According to Stroud estimates, Measured Resources total 1.85 million tonnes (Mt) grading 0.46 g/t Au and 90.0 g/t Ag and Indicated Resources total 2.50 Mt grading 0.39 g/t Au and 88.0 g/t Ag (Table 3.1).



TABLE 3.1 SANTO DOMINGO PROJECT, MINERAL RESOURCE ESTIMATE

(D. MCBRIDE, 2009)

Classification Tonnes Gold (g/t)

Silver (g/t)

Gold (ounces)

Silver (ounces)

Measured 1,846,352 0.46 90 27,306 5,342,557 Indicated 2,501,382 0.39 88 31,364 7,077,092 Measured and Indicated 4,347,734 0.42 89 58,671 12,419,649 Indicated 3,424,622 0.33 83 36,817 9,135,864

Inferred Resources are estimated at 3.42 Mt grading 0.33 g/t Au and 83.0 g/t Ag. Behre Dolbear believes that the manual polygon method of mineral resource calculation utilized by Stroud in the estimation of Resources is adequate as a first attempt to define Resources, and was properly applied. This method has been in use in the industry for many years and has been considered standard for tabular deposits. 3.9 CONCLUSIONS AND RECOMMENDATIONS Stroud’s exploration program on the Santo Domingo Property has included the compilation of old reports and maps, geological reconnaissance and mapping along the main structures outcropping in the area, alteration and mineralization mapping, surface and underground chip sampling of main structures, and diamond drilling of 30 core holes at the Rayas and Guadalupe structures. A total 5,335.60 meters of drilling was completed, including 169.5 meters in three holes lost. Core recoveries of mineralized sections were acceptable, exceeding 95%. As a result of exploration activities, Stroud estimates the combined Measured and Indicated Resources in the order of 4.35 Mt averaging 0.42 g/t Au and 89 g/t Ag or an estimated 58,671 ounces of gold and 12.4 million ounces of silver. Based on these results, Stroud is proposing an accelerated drill program to trace the vein systems on the Santo Domingo II and Nombre de Dios properties. In the opinion of Behre Dolbear based on this review of Stroud’s Santo Domingo Silver-Gold Exploration Project, the mineralized structures warrant the further exploration proposed by SDLE. The proposed program has been divided in two phases, accounting for 11,000 meters and 22,000 meters, respectively as described below and shown in Table 3.2 (Phase 1) and Table 3.3 (Phase 2). Most of the future exploration should be used to expand the resource by drilling. Three holes should be drilled at the road level (approximately 980 masl) on Section 5470; the initial hole, SD-08-30, has been partially completed. To the north, drilling cannot be carried out on the road level and three holes should be drilled from the road bend at the 1,010 meter level on section 5720N. A second tier of holes on 50 meter centres are proposed for the “Pileta” or 1,040 meter level. A road is proposed from the pileta to Section 5450 N. A second road at his elevation will be pushed up from the site of holes 6, 14, 15, and 17 to drill sections 5300N to 5400N. To complete this program will require drill holes and approximately 1,000 meters per section or a total of 11,000 meters of drilling.



Contingent on the results of this program, a second program is recommended to explore further into the hill. Old roads will be upgraded to provide access up the hill and to construct drill platforms. Stroud estimates that the budget required for the development of Phase 1 and Phase 2 exploration programs is in the order of CA$3.0 million (US$2.8 million) and CA$5.7 million (US$5.4 million), respectively.

TABLE 3.2 PHASE 1 – STROUD RECOMMENDED PROGRAM AND BUDGET

(SANTO DOMINGO SILVER-GOLD PROJECT)

Item Essential Services Cost CAD Cost USD 1 Access and site roads (500 meters) 50,000 47,000

Pumps and Electrics, including electricity 10,000 9,400

2 Personnel Project Manager and Senior Geologist 160,000 150,400 Assistant Geologist 75,000 70,500 Trucks (3) – Operating Costs 35,000 32,900

3 Drilling Program

11,000 meters at $150.00 per meter 1,650,000 1,551,000 core boxes racks and storage 50,000 47,000

4 Analyses Core Assays: gold, silver, lead, and zinc 120,000 112,800 Analyses b.m. assays, petrographic, and microscopic 10,000 9,400

5 Support Facilities Project Vehicle 30,000 28,200 Travel Canada – Mexico 25,000 23,500 Accommodation, Telecommunication 80,000 75,200 Field Support, Land Rental, etc. 50,000 47,000

6 Environmental, Consultants 20,000 18,800

7 Surveying 20,000 18,800

8 Office Overhead ~10% 240,000 225,600

9 Contingency ~15% 390,000 366,600

Total Technical Program Phase 1 3,015,000 2,834,100





Item Essential services Cost CDN Cost US

1 Access and site roads (100 meters) 40,000 37,600 Pumps and Electrics, including electricity 50,000 47,000


3 Drilling Program



5 Support Facilities Project Vehicle 30,000 28,200 Travel Canada – Mexico 50,000 47,000 Accomodation, Telecommunication 160,000 150,400 Field Support Labour, Land Rental, etc. 110,000 103,400


7 Surveying 30,000 28,200

8 Office Overhead ~10% 450,000 423,000

9 Contingency ~15% 750,000 705,000




4.0 INTRODUCTION Stroud is an exploration company based in Toronto, Canada. It is the controlling – shareholder of Compañía Minera San Diego y La Española S.A. de C.V. (SDLE), a private Mexican company, which in turn holds encumbered title rights, as later described, to the Santo Domingo II and Nombre de Dios mining concessions, located approximately 80 km northwest of Guadalajara, the capital city of the State of Jalisco, Mexico (Figure 4.1). The concessions occur in the Hostotipaquillo Mining District, which includes a number of established silver-gold epithermal mineral occurrences, including the well known Monte del Favor, La Cabrera and Cinco Minas mines. The region has a pre-twentieth century mining history, reportedly most prolific in the seventeenth and eighteenth centuries. Stroud has undertaken diamond drilling, geological studies and underground mapping to establish the mineral potential.

Figure 4.1. Location map Behre Dolbear de México, S.A. de C.V. (BDM), the Mexican subsidiary of the Behre Dolbear Group Inc. of Denver, Colorado, USA, prepared, in January 2003, a Technical Qualifying Report of the Santo Domingo II and Nombre de Dios Concessions. BDM has now been requested to prepare a technical report with an update of the exploration work conducted by Stroud through 2009. The main purpose of the report is to provide with a review of Stroud´s mineral resource estimate and to ensure the data presented conforms to the requirements of report filing of public companies to Canadian regulatory authorities, following NI 43-101 Guidelines. BDM has examined the project site on several occasions and has undertaken an independent review of the project technical information. The Behre Dolbear study includes check sampling and analysis of: (1) samples from the mineralized structure exhibited in several of the adits, (2) from the two drilling



campaigns and drill core by quartering split core, and (3) by reanalysis of laboratory-filed Stroud core sample reject portions. The BDM site examination and report were undertaken by senior, experienced Qualified Persons. In the opinion of Behre Dolbear, based on its review of the SDLE – Santo Domingo Silver-Gold Exploration Project, the identified mineralized structure of the concessions illustrate the scope of structure and indicated mineralizing events in the appropriate geological setting to warrant the further exploration proposed herein by SDLE (Table 3.1, Table 3.2, and Table 3.3). Behre Dolbear’s Qualified Person for the Santo Domingo Project, Mr. Baltazar Solano-Rico, prepared Santo Domingo’s 2003 Technical Qualifying Report, having visited the property several times in 2002 and 2003. Extensive discussions regarding recent drilling results and knowledge of the geology and mineralization of Santo Domingo were held with Dr. McBride and George Coburn earlier in 2009. Later in the year Mr. Solano spent three days at the property between July 2 and July 4, 2009, reviewing some of the advances in the geological knowledge of the property and reviewing all vein intersections of the second drilling campaign from drill hole number 6 through drill hole number 30. The drill logs were analyzed and the mineralized intersections verified against existing core in Stroud´s core house and at Santo Domingo. A spot check of drill hole locations was also made while at the property. Finally, 18 check samples were taken and sent to a separate laboratory for analysis verification. The samples were taken from remaining drill core half-splits and selected to cover a wide spectrum of values from low-grade to high-grade silver values.



5.0 RELIANCE ON OTHER EXPERTS BDM has drawn the information presented herein from a series of documents, reports and communications provided by Stroud and SDLE, public information, and BDM’s own records, and technical publications. Most of the information used for the report has been derived from:

• Stroud Resources, Ltd., through Dr. Derek McBride, P.Eng., prepared an update of Behre Dolbear’s 2003 technical report using the additional information collected since the original report dated January 17, 2003;

• Stroud Resources, Ltd., several internal reports by Dr. Derek McBride, P.Eng., including geology, mineralization history of the Santo Domingo mines and proposed exploration programs;

• Stroud Resources, Ltd., concessions status and general information; • Stroud Resources, Ltd., geological maps and sections drill logs, surveys, assays and

general information; • Dr. Derek McBride, P.Eng., 2009, Santo Domingo Mineral Resource calculations. Stroud

Resources internal reports and tables; • ALS Chemex assay certificates; • Behre Dolbear de México, S.A. de C.V. , 2003, Technical Qualifying Report; • Ferrari Luca et al., several papers on the geology of the region; and • Servicio Geológico Mexicano, geological mapping information at 1:50,000 and

1:250,000 scales and geological descriptions. A comprehensive list of sources of information is included in Section 23.0 – References. Behre Dolbear has reviewed the Titles Opinion (Creel, García-Cuellar, Aiza y Enríquez Law Firm, November 27, 2009), legal status and agreements and the technical data supplied to it by Stroud, SDLE and its agents, as well as other public technical information sources. Behre Dolbear has conducted a review and appraisal of the information used in the preparation of its report, and believes the information included in the preparation of the report and in its conclusions and recommendations is valid and appropriate considering the status of the project and the purpose for which the report is prepared.



6.0 PROPERTY DESCRIPTION AND LOCATION SDLE mineral concessions are located approximately 80 km N53°W of Guadalajara, Capital City of the State of Jalisco, México within the Hostotipaquillo Mining District. The co-ordinates for the Santo Domingo II claim monument, as reported in the assessment works and survey, shows the approximate center of the concessions being located at 21° 06’ 21” North Latitude; 103° 58’ 43” West Longitude (Figure 6.1). The corresponding UTM coordinates for the same location are Zone 13Q – 606,023.21 East, 2,334,200.76 North.

Figure 6.1. SDLE Mine concessions map The mining concessions are located along the south side of the Rio Grande de Santiago valley and cover mine workings that date from Colonial times. The concessions are held in the name of San Diego y La Española S.A. de C.V. (SDLE). 6.1 COMPANY RIGHTS TO MINING CONCESSIONS SDLE, the subsidiary of Stroud in Mexico, owns 100% of the title rights to the Santo Domingo II (Title 186,469) and Nombre de Dios (Title 187,901) mining concessions located in the mining district of Hostotipaquillo in Jalisco State, Mexico. Hostotipaquillo is located approximately 100 km by road west of Guadalajara. The two mining concessions cover an area of 135 hectares and are described, as follows.

Santo Domingo II – The mining concession for exploitation number 186,469, covering the mining claim named “Santo Domingo II”, with surface area of 40 hectares, located in the Municipality of Hostotipaquillo, State of Jalisco, México, registered under entry number 349, page 88, volume 255, of the Book of Mining Concessions of the Public Registry of Mining. The



Santo Domingo II claim was staked under the name of Salvador Rodriguez López, for the production of gold, silver, lead, copper, and zinc. The Santo Domingo II exploitation concession terminates on April 1, 2015 and requires a payment in the order of $5,149.00 Pesos per semester for the year 2010, as shown in Table 6.1. (The mining duty varies according to a table published by the Mines Directorship every year.) Nombre de Dios – The mining concession for exploitation number 187,901, covering the mining claim named “Nombre de Dios”, with surface area of 95 hectares, located in the Municipality of Hostotipaquillo, State of Jalisco, México, registered under entry number 301, page 76, volume 257, of the Book of Mining Concessions of the Public Registry of Mining. The Nombre de Dios claim was staked under the name of José Manuel Rodríguez Cabrales, for the production of gold, silver, lead, copper, and zinc. The Nombre de Dios exploitation concession terminates on November 21, 2015 and requires a payment of $12,227.00 Pesos per semester for the year 2010, as shown in Table 6.1. (The mining duty varies according to a table published by the Mines Directorship every year.)

Table 6.1 shows a summary of the status and obligations for the SDLE concessions. Behre Dolbear notices that the Mexican Mining Law was amended by a Congress Decree dated February 22, 2005, published at the Official Daily of the Federation on April 28, 2005. According to said amendment, exploitation mining concessions are now only valid for 50 years and all existing exploration mining concessions are automatically converted into exploitation mining concessions from January 1, 2006. Figure 6.1 shows the boundaries of SDLE’s concessions at Santo Domingo and the relative position of the main mineralized structures within the claims. Mining concessions in Mexico are granted after a series of steps, which include the submittal of an application for mining rights at the nearest mining agency and the payment of corresponding fees. The Dirección de Minas, through the Regional Mining Delegations, controls the location and validity of claims; however, as a part of the process, it is the concession holder’s responsibility to submit proof of assessment works that must include surveying of claim monuments by a registered professional land man. The Dirección de Minas will verify and register the correctness and validity of this work. Once the due diligence of the request for concession is approved, a Title is issued to the applicant and biannual fees and annual assessment obligations are initiated. A titles opinion and the present status of the property titles was prepared by the Creel, García-Cuellar, Aiza y Enríquez Law Firm in México City on behalf of Stroud and was provided to BDM (Appendix 1.0). The normal investigation behind a Title Opinion includes a review of records existing in the Dirección de Minas (DM) including title status, annual assessment works submitted, bi-annual rights payments, and a search of the actual title rights holder in the Public Mining Registry to verify possible title encumbrances and/or sales, etc.



TABLE 6.1

SAN DIEGO Y LA ESPAÑOLA, S.A. DE C.V MINING RIGHTS (DUTIES) OF SDLE’S CONCESSIONS FOR 2009

Name Hectares Title

Granting Date

Title Number Granted To Actual Owner

(100%) Type of

Concession Expiration Date Mining Rights (Duties)

2nd Semester 2008 1st Semester 2009 2nd Semester 2009 Paid (Pesos) Paid (Pesos) Paid (Pesos)

Santo Domingo II 40.0000 186,469 Salvador Rodríguez López San Diego y la Española, S.A. de C.V. Exploitation April 1, 2015 $5,642.00 $5,189.00 $5,149.00 Nombre de Dios 95.0000 187,901 Jose Manuel Rodríguez Cabrales San Diego y la Española, S.A. de C.V. Exploitation November 21, 2015 $13,397.00 $12,323.00 $12,227.00 Total Hectares 135.0000



According to the Title Opinions dated November 27, 2009 for the Santo Domingo II and Nombre de Dios Concessions held by SDLE, quoted below:

Therefore, the said mining concessions (a) are valid, enforceable and in good standing; and (b) such mining concessions and the rights derived, thereunder, are free and clear of all liens, mortgages, claims, encumbrances and security interests of any kind or nature. Behre Dolbear reviewed the subject information by Creel and Associates but is not qualified to express any legal opinion with respect to the property titles and current ownership and the status of possible encumbrances. Behre Dolbear has no reason to infer that the information used in the preparation of the report is invalid or contains misrepresentations.



6.2 COMPANY OWNERSHIP The following paragraph, written by Stroud (D. McBride, October 2009, G. Coburn, November 2009) provides a summary of the property of the Santo Domingo concessions, liens and obligations and their current status: “Stroud Resources Ltd. and equal and joint venture partner New Bullet Group Inc. by agreement dated April 18, 2002 and as amended September 27, 2002 purchased 91.3% ownership of Compañía Minera San Diego y La Española, S.A. de C.V. (SDLE). Stroud Resources Ltd. (SDR) entered into an option agreement with the New Bullet Group Inc. (NBG) whereby NBG could earn a 50% interest in all of SDR’s interest in SDLE by matching SDR’s $1,000,000 investment in the property. In their January 17, 2003 technical qualifying report, Behre Dolbear and Company describe a lien against the property by Fideicomiso de Fomento Minero (FIFOMI) respectively. On March 8, 2004, an agreement was reached with FIFOMI in which SDLE paid FIFOMI a $200,000 settlement, which resulted in dismissal and removal of a lien and a claim against the property. Later, the New Bullet Group became Amerix Precious Metals Corporation (Amerix). Stroud and Amerix paid the original shareholders $200,000 each and each company granted them a 0.5% NSR, which is capped at $2.45 million. Subject to these interests, Stroud Resources Ltd. owns 100% of San Diego y La Española S.A. de C.V.” On August 8, 2006, Stroud paid Amerix $1.8 million for their interest in the property, subject to a 5% Net Smelter Return (NSR) from the sale of minerals. This interest is capped at $1 million. 6.3 SURFACE RIGHTS Mining concessions in Mexico do not include surface property; therefore, the surface rights must be obtained through purchase, rental, or other means, in order to make use of it. Surface rights for the SDLE claims belong to the Ejido Santo Domingo de Guzmán, a duly approved and registered communal property. Since 2003, negotiations were carried out by SDLE to obtain permission to carry out exploration activities, including access road, drilling and trenching. SDLE has leased surface rights from the Ejido of Santo Domingo de Guzman to cover these mining concessions and the surrounding area, granted by a general meeting held November 3, 2002 in accordance with Méxican regulations, and a lease agreement ratified before Notary Public number 1 Lic. Juan Peña Razo de Magdalena, Jal. The agreement extends to 2013 and requires an escalating annual rent of US$1,771.56 in 2008, rising at 10% per year to US$2,593.72 in 2013. Copies of the Ejido agreements are in the files of SDLE and Stroud Resources for consult if required. 6.4 ENVIRONMENTAL PERMITTING FOR EXPLORATION ACTIVITIES In 1999, Stroud Resources de México, S.A. de C.V. another subsidiary of Stroud, carried out the first drilling campaign which consisted of five holes of which two were lost and repeated. These holes were drilled from then existing roads and mine patios. The second drilling campaign of 2003 was permitted by submitting an Environmental Permitting Notice report, according to Regulation NOM 120 ECOL 1997, which included the construction of 2,400 meters of access roads and drill pads (BDM, November 2002).



However, the second drilling campaign in 2003 was terminated prior to the completion of a single hole due to drilling problems. Drilling was resumed in 2005 and has continued intermittently ever since. To date 25 holes have been completed in this program and the Rayas Vein System has been outlined for a length of 500 meters. The drill holes for the second drilling campaign between 2003 and 2009 were carried out from the access road permitted in 2002. Copies of the environmental report are in the files of SDLE and SDR for consultation, if required.



7.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND PHYSIOGRAPHY

The project site access from the State Capital of Guadalajara is, for the first 72 km, a toll, multi-lane paved highway to Magdalena, with a population of some 10,000, requiring approximately one hour travel (Figure 7.1). Hotel, communications, school and health services facilities exist at Magdalena. From Magdalena to the village of Santo Domingo de Guzmán, the paved highway to Hostotipaquillo can be followed or, at 80 km of highway to Tepic, an all-weather gravel road passing through San Simón and Labor de Guadalupe can be followed for approximately 27 km to Santo Domingo. Santo Domingo is a village of some 1,000 inhabitants with only basic services. The property is approximately 5 km from Santo Domingo de Guzman via a locally steep, narrow back country road that leaves from the local school and winds down into the valley of the Rio Grande de Santiago, just across the old San Pedro Analco mining zone.

Figure 7.1. Location and property access map There are no public transportation services from Santo Domingo to Magdalena or Hostotipaquillo; private vehicles or rental vehicles are used for this purpose. The road condition from Santo Domingo to the site has been adequately up-graded to accommodate the present technical program recommended in this report, but will require minor refurbishment. The property is characterized by mature to youthful physiography that varies from gently rolling hills in the heights of the plateau to steep, abrupt topography in the slopes of the Rio Grande just below and



including the eastern part of the concessions. Drainage near the concessions is to the Rio Grande de Santiago northward to join the Rio Bolaños (Figure 7.2).

Figure 7.2. Santo Domingo – Topographic relief and project infrastructure – Vein Structures

pass under the hill and parallel to the main valley in the background – Trees on hill in centre of Photo mark a Shaft on the Guadalupe System

(D. McBride, 2009) Elevations vary in the district from a maximum at Cerro Magistral of approximately 2,200 meters above sea level (masl) to minimums, in the canyons of the Rio Grande de Santiago and Rio Bolaños, in the order of 400 to 350 masl. In the vicinity of the concessions, the topographic relief varies from 1,200 masl at the top of the La Española mountain just above the mine areas, to slightly less than 500 masl at the base of Rio Grande, near the bridge connecting with San Pedro Analco. The average elevation of the project is in the order of 900 masl. The valley slopes range from 30 degrees to vertical and locally average 45 to 50 degrees. Vertical cliffs up to 200 meters high are not uncommon (Figure 7.3). The project district climate is temporal and is made up of a dry season and a wet season which extends from June to October. Annual precipitation is in the order of 900 millimeters. The November to May period is dry and hot. Temperatures average 32°C in the day time, with the highest day time temperatures as much as 47°C, which was recorded at the Santo Domingo camp in 2008. During the winter months, December through March, frost may occur at higher elevations, but it is rare.



Figure 7.3. Rio Grande de Santiago Valley, looking Northwest (B. Solano, 2009) Hostotipaquillo, the closest weather station and 11.0 km to the SW, shares a similar climate, although 400 meters higher than Santo Domingo, that can be classified as: Warm, sub-humid with summer rainfall and extreme weather variations (E. García, 1988). Basic meteorological information is provided by three weather stations in the neighborhood.

TABLE 7.1 SUMMARY OF METEOROLOGICAL INFORMATION AND CLIMATE CLASSIFICATION

Station Altitude (meters) Latitude Longitude Rainfall

(mm) Temperature

(ºC) Hostotipaquillo 1,291 21°03’ 104°03’ 790.7 22.1 Magdalena 1,401 20°55’ 103°59’ 996.8 21.1 La Quemada 1,400 20°58’ 104°03’ 858.7 22.1

Source: “Modificaciones al sistema de clasificación climática de Köppen”, Enriqueta García, México, 1988. In the area of the concessions, the vegetation ground cover comprises mainly scrub trees and bushes. The area is sparsely populated; cattle raising with some cultivation of market crops comprise the main district land uses. Agricultural produce, for subsistence purposes, from the area comprises corn, beans, squash, nuts, and avocado and a variety of other fruits and vegetables are grown on moderate slopes and the limited flat ground available. The soil is not fertile and only supports subsistence farming.



Water is available throughout the year from the Rio Grande de Santiago, down slope to the northeast from the main adit and showing area, a distance of approximately 500 vertical meters. SDR has established pumping facilities for drilling purposes during previous campaigns and would have to acquire the corresponding water permit from the Comisión Nacional del Agua (CNA) for a future campaign. With the ongoing construction of the hydroelectric La Yesca Project dam, it is expected that the tail of the reservoir will reach the lower part of the project area, at the approximate 580 masl curve, outside Stroud boundaries. A 22,860-volt electrical transmission line crosses the project site. A new 112.5 kvA sub-station with voltage step-down from 22,860 volts to 480 volts, complete with 480 volt disconnects, was installed at the river side on SDLE’s concessions. The remnants of other site buildings includes an old cyanide mill from past underground mining programs; but none are in current use and it would not be feasible to re-use them. Stroud has carried out several exploration campaigns through the years 2002 to 2009 with the available local work force from Santo Domingo de Guzman and nearby ranches, including help from Labor de Guadalupe, where a warehouse/core house is maintained by the company. Technical personnel with computer, electrical, plumbing, mechanical, carpentry, drilling and some heavy equipment skills can be available in the Magdalena-Hostotipaquillo region due to the active opal mining activities. However, more specialized mining and other professionals will have to be imported when required.



8.0 HISTORY Stroud has undertaken a considerable amount of research on the history of the Hostotipaquillo Mining District and the Santo Domingo mine area, mainly through Dr. Derek McBride, P.Eng. The following excerpt is taken from his work with some additions from Behre Dolbear, 2003:

“Mineral exploration and mining in the Hostotipaquillo region goes back to the early sixteenth century. As a result of this activity the town of Hostotipaquillo was settled to become the centre of mining activity. Few records exist of the mining activities and boundaries of the active areas have changed. Santo Domingo seems to have been settled about this time, but was considered part of the San Pedro Analco mining camp until the 1850s. Prior to the 1850s, considerable mining took place at the present property. Remains of this infrastructure can be seen as mine workings shown below (Table 8.1), roads and some building sites. Initial prospecting identified high grade silver-gold veins made up of quartz, calcite, galena, sphalerite and chalcopyrite. Barren iron sulphides are only present in minor amounts. Over the next few decades, these high grade lenses were mined by hand; they can be differentiated from later late-eighteenth century workings by the lack of drill holes or blast patterns. Most of the investigated tunnels were excavated at this time. They followed the known mineralized shoots or were crosscut into them to provide access and ventilation. The Rayas vein system was followed from the Nombre de Dios Mine on the south (Figure 8.1), to the Bella Vista on the north, a distance of 500 meters (Figure 8.2). Tunnels show that the mineralizing system is continuous over this length. Individual lenses of high grade material were mined in the San Salomón, San Pedro, San Pedro el Alto, La Bonita, Rayas, and Bella Vista mines. Drilling by Stroud has intersected mine workings defined by voids and wood in the drill core. Approximately 100 meters southwest of the Rayas Vein System is the Socavon III-Guadalupe Vein System. Multiple mines are located along this structure. The most easterly is Socavon I; from it, the mineralization can be traced through Socavon II, Socavon Intermedio (Figure 8.3), and Socavon III on the south side of the ridge. Caved tunnels and a shaft trace the vein system over the ridge and down the north side of the hill through La Española to the Guadalupe Mine, a horizontal distance of close to 900 meters. Mineralization has been traced in these workings for depths of approximately 100 meters to the end of the high grade mineralization or to where the weathered rock terminated and hand mining was no longer possible. Many tunnels show timbering and stopes with timber retaining walls and cribbing for on-going mining. While many of the mine workings have collapsed, those that remain provide an estimate of the mining carried out in the sixteenth and seventeenth centuries. McBride has calculated the tonnes mined in those mines that he visited and mapped. He estimates that during the earliest mining Period between 150,000 and 250,000 tonnes were mined.



TABLE 8.1

EXISTING MINE WORKINGS ON SANTO DOMINGO PROJECT Name Northing Easting Elevation Details

THE LOS REYES SYSTEM

Los Reyes* 2334370 606643 994 entrance approximately 22 meters at 222°

San Pedro* 2334259 606709 991 entrance 7 meters at 33°, vein at 305° or 125°

San Salomón* 2334259 606709 991 entrance 9 meters at 213°, vein at 140°

Nombre des Dios* 2334201 606787 990 entrance 8 meters at 330° El Mano 2333984 606928 897 small workings, road to Soc 11

La Rosario* estimated below cattle grate on road and above Camp

El Mono 1 2335790 606225 600 estimated location tunnel at 210° for 28 meters

El Mono 2 2335818 606251 573 tunnel at 80° for 50 meters

El Mono Abajo 2335775 606200 555 estimated entrance, tunnel at 230° for 60 meters

Above San Salomón 2334240 606724 1,018 workings above San Salomón Small Tunnel at 350 2334229 606621 1,048 on Mina Jasmine system? Stope on Hill 2334288 606626 1,069 stope comes out cliff Poss. Soc. 2334514 606432 921 below San Pedro

La Bonita 2334233 606757 984 4 meters to tunnel at 160° for 24 meters, raise up

Bella Vista 2334530 606577 948 entrance at 224° for 130 meters JASMINE SYSTEM Mina Jasmine 2334381 606354 1,066 0.5 meter stope on vein Small Shaft and Tunnel 2334231 606570 1,116 on 10 cm vein THE GUADALUPE SYSTEM Socavon 111 2333991 606729 1,004 socavon at 330° Socavon 11 2334028 606847 930 entrance at 280° Socavon 1 2334016 606996 845 entrance at 260°

Socavon Intermedio 2333965 606783 960 entrance here, behind caved entrance for 20 meters

El Zorro 2334101 606560 1,168 caved workings La Española 2334551 606239 950 Entrance to mined lens

Guadalupe 2334590 606219 917 Monument, entrance, 20 meters at 215°

On Road to El Cobre 2334027 606853 952 possible entrance Dump lowest 2333924 606888 901 possible entrance Soc 11 Poss. Soc. 2334028 606721 1,010 Above Soc. 111 Stope 2334058 606686 1,027 El Cobre 2334250 606828 926 entrance La Esperanza 2334381 606893 841 entrance 240° for 6 meters



TABLE 8.1 EXISTING MINE WORKINGS ON SANTO DOMINGO PROJECT

Name Northing Easting Elevation Details El ZOPILOTE SYSTEM

El Zopilote 2334456 606278 1,034 tunnel at 240° stope in at 15 meters at 150, 60NE

El Zopilote West 2334692 606149 917 small tunnel at 150° 25 meters SANTA CLARA SYSTEM La Santa Clara SANTA FE SYSTEM La Santa Fe Source: D. McBride, 2008

Figure 8.1. Nombre de Dios open stope (B. Solano, 2009)



Figure 8.2. Rayas Vein System in the Bellavista tunnel: timbering extends for 10 meters across

the vein system (D. McBride, 2009)

Figure 8.3. Timber wall holding up rock fill in 6 meter-wide stope – Socavón Intermedio (D. McBride, 2009)



Further evidence of the extent of activity is seen in the infrastructure left behind. All present roads follow old Spanish pathways or caminos. Stone walls and rock excavations attest to the road system developed. A fortified compound approximately 25 by 40 meters seems to have been the main control point. It has one and a half meter walls and two gates, which lead to mine workings (Figure 8.4). Locally, small flat areas and stone walls may mark habitations; pottery fragments show that some are from pre-Columbian Indian sites. There does not seem to be any written records of this activity.

Figure 8.4. View of the fortified compound that was probably the control center for the mining

operations – Opening in wall is for a road to El Zopilote Mine (D. McBride, 2009)

A second period of exploration and mining is identified by the metal tools and drill holes. In some cases, tunnels bypass the Spanish mines and attempted to explore deeper into the mountain. Socavon III, Socavon Intermedio, and Socavon II have these tunnels. Two major cross cut tunnels are thought to have been excavated at this time, El Cobre and La Esperanza. El Cobre is at the same elevation as Socavon II and was designed to gain access to the two vein systems deeper in the mountain. It crossed the Rayas system and intersects the Soc. III – Guadalupe System. Some mining was carried out on the Raya system and the Soc. III – Guadalupe System was followed for some distance. Approximately 85 meters below this tunnel a parallel cross cut, La Esperanza, was driven as far as the Rayas system and some mining carried out. A small processing plant was built on the road between El Cobre and Socavon II. It has a stone grinding mill and some slag left over from attempts at smelting. Metal objects date this activity from the late nineteenth or early twentieth centuries. There is no evidence that significant production was achieved at this time”.

From the early 1900s to recent times, the history of mining in the district is incomplete and generalized. The composite production during the early time is not known, but is inferred not to have been significant.



In the period 1900 to 1940, North American interests were predominantly responsible for the financing and progressive development of the mines of the district. From the 1930s to the present, Mexican and foreign-based mining interests intermittently studied and developed producing operations, most notably at or nearby the most prolific mines, such as Bolaños and Cinco Minas. The record of precious metals production from the Bolaños area mines is not known with confidence. Estimates of mining production at Bolaños vary widely; however, silver production is suggested to have been in the order of 60 million troy ounces. The Cinco Minas mining operation is reported to have produced approximately 15 million ounces of silver and 97,500 ounces of gold from 1.2 million tonnes of ore, mainly in the years 1920 to 1940. Exploration up to the mid-1970s was carried out by Compañía Minera Las Cuevas S.A., then the Mexican subsidiary of Noranda Mines Limited, which conducted mapping and sampling in 1954 and between 1973 and 1974. Recorded results show values of economic interest, however Noranda did not do any follow up work. A summary of results is presented in Table 8.2. These results are considered historic and not compliant with NI 43-101 regulations.

TABLE 8.2 NORANDA DRILL PROGRAM RESULTS

Drill Hole Location Core Length (meters)

Silver (ppm)

Gold (ppm)

E-1 Top of Hill Above La Raya No Values No Values E-2 Underground in La Esperanza 5 48 1 E-3 Underground in La Esperanza 6 86 1.5

E-4 Underground in La Esperanza 37 47 Tr 3 80 Tr

E-5 Location Unknown E-6 Dump West of Lower Switch Back No Values No Values E-7 Proximity to Mina Jasmine 10 44 0.3

E-8 In Front of La Raya at 230º 2 1835 3.0 19 467 0.7

E-8A In Front of La Raya at 280º 21 219 0.7 E-8B In Front of La Raya at 200º 13 242 0.8 E-9 North of La Raya Near Power Line 15 89 0.1

During the latter 1970s and in 1988, the Comisión de Fomento Minero completed various technical studies in the area and conducted chip sampling in the concession adits. From this information, certain tabulations of reserves and resources were made. Behre Dolbear considered the results not acceptable for present resource/reserve standards. They were not considered in the 2003 report, nor herein. In 1994, the concessions owners requested the Consejo de Recursos Minerales, a government minerals resources agency now Servicio Geológico Mexicano, to conduct a sampling program of existing mine dumps, followed by a pitting and sampling program, which generated in the order of 77 samples for assay. At the time of the study, the mine dumps reportedly contained 21,595 tonnes of rock at a grade of 308 g/t Ag and 1.53 g/t Au (Table 8.3).



TABLE 8.3 DUMP SAMPLING PROGRAM

(CRM, 1994)

Dump Pits Number of Samples

Area (m2)

Depth (m) Tonnes Ag

(g/t) Au

(g/t) S. G.

Socavón No. 2 1st 16 29 2,686 1.85 7,950 273 1.38 1.6 Socavón No. 2 2nd 7 7 1,600 2.21 5,657 340 2.5 1.6 Española 17 17 976 1.57 2,452 380 0.78 1.6 Española Lower 11 11 1,144 1.36 2,451 325 1.08 1.58 Rayas 7 7 750 1.57 1,884 326 1.45 1.6 Socavón No. 3 6 6 537 1.57 1,201 179 0.6 1.42

Totals 64 77 21,595 308 1.53

The previous owners of SDLE, in an attempt to mine the Rayas Mine, in 1990 acquired an approximate US$93,000 debt in principal plus interest mill construction loan with the Fideicomiso de Fomento Minero (FIFOMI), a federal agency to the mining industry in México. Milling equipment was transported to the site but never installed. Production was never achieved and the loan became a burden on the mining claims. FIFOMI filed a lawsuit for payment and exerted its warranty upon SDLE claims with the Dirección de Minas, which claims were frozen until payment of the debt was made by Stroud. Stroud optioned the property in 1999 and conducted a limited program of check chip sampling in the accessible adits and surface mineralized zones to initially substantiate the mineralization potential of the concessions. Upon securing an agreement to purchase the concessions at that time, Stroud carried out some tunnel and surface sampling which, along with previous Las Cuevas and CRM results, confirmed the potential of the mining concessions. Stroud then undertook an initial core drilling program in 1999, and a second drilling phase. In 2003, followed by the most recent campaign between 2005 and 2008. The reader is referred to Section 12.2 (Stroud Resources Exploration) for a detailed account of recent exploration efforts.



9.0 GEOLOGICAL SETTING 9.1 REGIONAL GEOLOGY The Western part of México presents a stratigraphic succession, which includes a Cordilleran – equivalent basement, Oligocene to middle Miocene Sierra Madre Occidental (SMO) volcanic rocks and a Late Miocene to Quaternary Mexican Volcanic Belt (MVB) sequence (L. Ferrari, 1999). The oldest rocks in the region are sedimentary and volcano-sedimentary units of the Guerrero Terrain overlain by volcano-sedimentary rocks of the Cretaceous Tepalcatepec Formation locally affected by the Eocene Puerto Vallarta batholith, approximately 54 million years old (54 Ma). None of these units outcrop in the project area and are more typical of the area south of the MVB (SGM, 2004). The SMO is a large Middle Tertiary volcanic province, which extends from the southwestern United States to central Mexico (Figure 9.1). The average thickness of the SMO exceeds 1,000 meters and its width averages 150 km. The study area encompasses the southernmost part of the SMO. The existence of a pre-volcanic (Cretaceous?) basement as previously indicated, is substantiated by localized outcrops of argillite and limestone which were exposed along the lower part of the Rio Grande de Santiago canyon. The spatial association of these rocks with Late Oligocene to Early Miocene granite to granodiorite stocks suggest that they were roof pendants uplifted by the plutons. Although Eocene rocks are reported about 50 km northeast of San Cristobal and in the central SMO in Durango, no pre-Oligocene volcanic rocks have been found in the study region (L. Ferrari, 1999).

Figure 9.1. Sierra Madre Occidental Province and associated Mineral Districts



North of the Project area, the SMO volcanic sequence is characterized by more than 400 m of regional ash flow tuffs of early Miocene age, capped to the south by a basaltic sequence of 21.8 Ma age. The SMO units are sub-horizontal and locally dipping as much as 25 degrees from horizontal; these units were later covered in unconformity by the TMVB volcanism that ranged from 13 to 8.7 Ma basalts and up to 4.8 Ma ignimbrites (A. Rossotti, 2002). The Santo Domingo Project is located in the Southern part of the SMO Geological Province, which is one of the most extensive volcanic belts in the continent, some 25 km to the North of its limit with the MVB (Figure 9.2).

SANTO DOMINGO

Figure 9.2. Regional tectonic map of the southwestern part of the Sierra Madre Occidental –

Shaded area is the late Miocene to Quaternary Trans-Mexican Volcanic Belt The most widespread unit in the southern SMO is a succession of welded ash flow tuffs and minor andesitic lava flows, which attain an aggregate thickness of 800 meters in the southeastern part of the area. Oligocene ash flows (34-28 Ma) are found in the Santa Maria del Oro and Juchipila areas. In the western part of the area, these rocks are interbedded with, and capped by, volcano-clastic sequences made of clay, sandstone, and conglomerate. Most of the SMO, however, is covered by rhyolitic ash flow and pumice-flow with common obsidian and minor domes with ages of 26-17 Ma and which are only found in the southern SMO (L. Ferrari, 1999).



Regionally, the SMO Province shows two differentiated volcanic Groups according to its composition and age: the Lower Volcanic Group (LVG), forming the lowest part of the volcanic sequence of SMO, exhibits more intermediate to mafic composition; and the Upper Volcanic Group (UVG) that is more felsic than the LVG. The contact between these two units is commonly erosional with the local presence of red conglomerates filling ancient topography. The importance of the SMO Province is due to its being host to one of the largest epithermal precious metal metallogenic provinces in the world which includes some of the well-known silver-gold (Ag-Au) producing mining districts of Mexico. Figure 9.1 shows a map with the location of a number of Mineral Districts, active mines, and advanced projects. From North to South, are the Mulatos, Dolores, Palmarejo, Ocampo, Moris, Batopilas, El Sauzal, Guadalupe y Calvo, San Julián, San Dimas-Tayoltita, Bacis, Topia, La Ciénega, Guanaceví, and Metates. Closer to the subject area, the Cinco Minas (Figure 9.3), Bolaños and San Martin de Bolaños historic mines are also enclosed in LVG rocks, although there is evidence of mineralization passing through into the lower part of the UVG, as in the case of La Ciénega in Durango State.

Figure 9.3. Regional mineralized zones The highly mineralized nature of the LVG is readily evident when a regional geology and topography map of the SMO metallogenic province is observed. Most of the region is covered by sub-horizontal UVG rocks and shows only a modest number of mineral deposit showings and mines. However, where a river valley has incised through the ignimbrites and exposes LVG andesites, a large concentration of mineral deposits is found. This is further enhanced by the fact that the SMO is generally characterized by mountainous terrain with few roads and limited access, and has, therefore, been explored much less than other, more accessible areas.



The Mexican Volcanic Belt (MVB) is a 1,000-km-long volcanic arc formed in response to the subduction along the Acapulco trench since the middle Miocene period (Figure 9.4). The western MVB has been often regarded as mainly Plio-Quaternary in age but a large amount of mafic lavas were also emplaced in Miocene time (L. Ferrari, et al., 1999, p. 11). In the Guadalajara region, a monotonous sequence of thin basaltic lava flows is exposed along the Rio Santiago east of Tequila. This succession has yielded rock ages of 10.2-8.5 Ma and the composition of the rocks tend to evolve up-section from alkali-basalts to basaltic andesites. Individual flows range between 2 and 10 meters in thickness and the exposed succession is over 600 meters thick. The Plio-Quaternary MVB consists mostly of basaltic cinder cones and shield volcanoes, andesitic to dacitic stratovolcanoes and dacitic to rhyolitic domes. In the Guadalajara and Hostotipaquillo areas, a peculiar variety of Early Pliocene porphyritic olivine-basalts with megacrysts of plagioclase are found within this group but the rest of these rocks are microporphyritic to aphyric (L. Ferrari, et al., 1999, p. 15). 9.2 LOCAL GEOLOGY 9.2.1 Lithology The Rio Santiago cuts through the Tertiary volcanic section and the oldest rocks are found along the river at an elevation in the order of 500 masl. These rocks are commonly termed andesites, but may be more basaltic (D. McBride, 2009). Mapping by Ferrari, et al. includes these rocks within their Tov unit (Figure 9.4) formed of Oligocene andesites, basalts, and felsic ash fall and ash flow tuffs, belonging to the SMO Group and reported, but not confirmed, as part of the UVG. However, it is believed that these rocks belong to the LVG, probably close to the contact of both Groups. These rocks have been altered by the granite-granodiorite stocks outcropping in the Río Grande, of a reported 35 to 17 Ma age, previous to the Miocene age of the UVG. Layering shows these rocks to be generally flat, but dips of up to 30 degrees have been measured locally. Above the andesites, an essentially conformable sequence of rhyolitic rocks extends to just below Santo Domingo’s football field (approximately at 1,200 masl). This sequence consists of local units that may or may not be present. They include a hard, fine-grained porphyritic tuff, a similar cherty looking rock that lacks the prophyritic character and rhyolite agglomerate. This last unit has an andesitic matrix but is termed rhyolite by the preponderance of polymict rhyolitic volcanic clasts (D. McBride, 2009). This rhyolitic agglomerate is the most important rock to date because most of the better mineralization occurs within it (Figure 9.5). The Rayas, Jasmine, Guadalupe and El Zopilote veins seem to be capped by a thick rhyolitic ash unit (Figure 9.6). This ash unit is a cliff-forming rock that is obvious south of the camp. Similar cliff-forming ash sequences are common in this part of the Sierra Madre Occidental. Above this unit, the Santa Fe and Santa Clara vein systems seem to occur in a second, and younger, rhyolite agglomerate unit. Above these rhyolites there are andesites that form the rocks near Santo Domingo de Guzman. Generally, the individual units are flat but seem to regionally dip to the south. Along the road to La Labor, another thick rhyolitic tuff-ash fall unit is exposed. It is capped on the height of land by a scoriaceous basalt to ultramafic sequence. It is diagnostic by its deep, rusty weathering. From the various bedding angles, the entire sequence is generally flat lying; however, local dips may be as steep as 30 degrees.



Figure 9.4. Regional geologic map of the late Miocene to Quaternary Mexican Volcanic Belt (after L. Ferrari, et al., 1999 – modified by B. Solano and J. Solis)



Figure 9.5. Local geology and drill hole location map – Rayas, Guadalupe, La Española, and Jasmine veins traces



Figure 9.6. Cliff southwest of camp showing the thick capping rhyolite volcanic ash – El

Zopilote Abajo is at bottom of cliff at center of photo (D. McBride, 2009) 9.2.2 Structure Faulting has been widely quoted in the literature, but in the field it is much harder to document. Major faulting is postulated along the Rio Santiago. It is difficult to see any regional structures in the river because the thick ash fall tuff units are not displaced. To produce a fault pattern would require complicated cross faulting that is not seen in the surrounding, well-exposed mountain ridges. Similarly, the fresh, flat lying volcanic sequence eliminates the presence of shear zones. Mud seams are common in the drill core and have been observed in the mine workings. They seem to represent minor normal faults; displacement of a couple of meters was observed in the San Pedro Alto tunnel. These faults are post-mineralization, having displaced individual veins. Minor faults have been seen in road outcrops near Hostotipaquillo, with displacement of less than one meter. Parallel faults in close proximity suggest that these are minor compaction structures (D. McBride, 2009). A northwest-trending broad zone of fracturing and pervasive silicification hosts quartz-calcite veins and veinlets with associated silver and secondary gold mineralization. The structural zone strikes N30° to 45 W and dips 70 degrees to 75 degrees northeast. The zone is exposed near the top of a hill, with steep local topography. The mineralized zone has been prospected where readily exposed, accessed by 10 adits, undergone small-scale test pitting with sampling programs and has been tested by core drilling programs by Compañía Minera Las Cuevas (Noranda affiliate) in 1974 and subsequently by Stroud in a limited program in 1999. The mineralized zone is established over a strike length of 900 meters and the width of the fractured and silicified zone may vary from 20 to 30 meters. A more prominently mineralized area within the structure has not been established (BDM, 2003, p. 15).



Figure 9.5 shows the local geology of the Guadalupe-La Española-Rayas area with the trace interpreted for the Guadalupe, Jasmine, and Rayas vein system. The figure also shows the location and distribution of Stroud drill holes and mine workings. 9.2.3 Mineralized zones At Santo Domingo, previous mine developments were made following the high grade ore shoots exposed at surface, cross cuts were driven to access ends of the zones or projected extensions along strike and down dip, particularly at the historic Guadalupe and Rayas mines. Mine openings show the distribution of mined-out areas and exploration investigations. Generally, the mined areas lie above the 900 masl, while exploration workings, commonly with test stopes, extend for 100 meters below to the 800 meter level on the south and 550 meter level on the north. Showings of mineralization can be traced to a shaft on the top of the hill at the 1,175 masl. Perpendicular to the vein systems, parallel vein systems can be found from Section 8900 East to 8000 East. Veins systems to the west seem to be buried by the capping volcanic ash fall above 1,200 masl. This unit dips to the northeast.



10.0 DEPOSIT TYPES The SMO is host to a large number of precious metals mines and mineral districts as previously described in Section 9.1 (Regional Geology) and shown in Figure 9.1. Other mineral zones in the Hostotipaquillo Mining District include the Casados, Mololoa, Salomón, Gran Cabrera, and other mines in the Monte del Favor area and Santo Domingo, San Pedro Analco, and Cinco Minas in the Southeastern part of the District (R. Munroe, 2006). All of these deposits are related to silver-gold epithermal mineralization events associated with quartz, quartz – calcite and quartz – calcite – adularia – sericite veins. The most important mining production in the area is reported from the Cinco Minas mine area, located only 9.5 km to the southeast of the Santo Domingo project along a parallel regional mineralized structure. The Cinco Minas mine zone was worked commencing during the 17th century Colonial time until recent time. Munroe (2006) reports that “between 1922 and 1928 approximately 1.083 Mt of ore averaging 3.17 g/t gold and 476 g/t silver, or 97,364 oz. of gold (2,760 kilograms) and 15,095,915 oz. of silver (427,954 kilograms) were produced.” It has been reported that recent metallurgical recoveries in the order of 88% to 90.5% have been achieved. Most interesting is that the main ore shoot varied in strike length at surface from approximately 550 meters to some 350 meters at the 500 meter level with a fang-like shape and the mined depth reached 700 meters (BDM, 2003, p. 16). This feature is unique for the type of epithermal deposit in the region, particularly when compared to other deposits with limited depth extension but important horizontal development, such as San Martín de Bolaños. “Mining at Cinco Minas took place over areas generally 5-7 meters in width, although sections as much as 30 meters wide were reported. Typical veins were rather complex, highly shattered zones with several pulses of cementing quartz rather than clean shear or quartz-filling vein systems. Alteration, brecciation, and calcitic cementing are also features of the system and the zones are random in their character and grade. Bonanza grade mineralization has been reported in recent work, and was observed in the drilling carried out by Tumi Resources” (R. Munroe, 2006). The Cinco Minas and Gran Cabrera properties both have been classified as low-sulfidation epithermal systems with adularia-sericite type quartz veins with gold, silver (and minor lead, zinc, and copper) mineralization with the full range of commonly associated minerals. Silver is the main component for identified historical ore grade minerals and all mining in the region has been primarily centered on silver production (Munroe, R., 2006). The mineralized zone of the Santo Domingo project appears to occur within a broad zone of fracturing, with pervasive silicification. Within the zone of fracturing, quartz-calcite veins and veinlets with low (less than 2%) sulphides are common. McBride (2009) reports that “a strong shear zone from which the established fracturing emanates is suspected (Cinco Minas structure), but is unrecognized to-date. Previous work on the concessions appears to be limited to the readily available exposures near the top of the hill. The Stroud work to-date indicates a strong structural zone of fracturing that is silicified and mineralized across a structural width in the order of 20 to 30 meters. Insufficient exploration has been completed in the search for a potential confined structural (shear) area with favorable mineralization or a potential bulk tonnage zone of moderate mineralization grades.” The main structure, Santo Domingo, is characterized by a series of northwest - trending veins and veinlets showing local brecciation and strong silicification and/or propilitization of the enclosing host rock, typical of epithermal vein systems (BDM, 2003, p. 17).



Figure 10.1, taken from Munroe (2006), shows the spatial relationship between the Gran Cabrera, Santo Domingo and Cinco Minas mines along a regional structural northwest-trending feature that defines a late Miocene tectonic depression.

Figure 10.1. Spatial relationship of the Gran Cabrera, Santo Domingo, and Cinco Minas

mineralized zones



McBride (2009) reports that the “mineralization is directly related to the volcanic host rocks however the rock composition does not seem to be important, but a change (from one...) rock type (to another...) for the localization of economic mineralization. At Santo Domingo, mining has been limited to the rhyolitic rocks overlying the river bottom andesites. Quartz-carbonate veins are concentrated within the rhyolitic rocks where three rock types are present: the lowest is a porphyritic fine-grained, purplish rhyolite tuff, followed by a more restricted pale green-yellow cherty rock that may be interbedded or lie above it. However, it is the third type that has proven to be the best host for mineralization. This rock consists of an andesitic green-to-red fine-grained porphyritic matrix with polymict rhyolitic fragments. Recent drilling has returned core, which has indicated mineralized widths in excess of 40 meters with 30 to 60 g/t silver values in an agglomerate that is hard but appears to be fresh and lacks alteration. Combined with the higher values in the vein systems, mineralized widths of up to 97 meters of economically significant values have been intersected. In most of these sections, the sulphide content is very low and barren iron sulphides are essentially absent. These veins have been traced down into the andesites where they seem to narrow and are more difficult to trace. They seem to be capped by the thick sequence of volcanic ash seen in Figure 9.6. In conclusion it can be said that the vein systems follow preferred fractures over a limited time span. The mineralizing system was probably driven by a nearby volcanic heat source and pulsed its way through the rocks. Fluid pressures seem to have been low and easily blocked by the rapidly-depositing, thick rhyolitic ash fall units. No mineralization has been found in these resistive units. The best guide for exploration is the presence of old Spanish mine workings. At Santo Domingo, the extent of these workings was not appreciated until Stroud investigated the known workings and located many unknown tunnels (McBride, 2007). The mineralization model generated by Stroud suggests that it is directly related to the volcanic host rocks and the upward migration of fluids that followed a northwest-southeast, steeply east-dipping trend. Exploration targets according to this model should follow the established structural pattern and the possible lithological unit changes, and focus particularly within the andesite-rhyolite agglomerate unit. In addition to the above assertion, Behre Dolbear believes that the following points are worth considering:

• It has been well documented that the upper part of the LVG and the lower part of the UVG may have intermediate and felsic units interbedded;

• The volcanic stratigraphy below the Rio Grande level is not well known, therefore the possibility of a favourable unit underlying the river andesites is possible; and

• The nearby presence of Cinco Minas, where the root or stem of mineralization deepened more than 700 meters from surface.

Therefore, Behre Dolbear believes that there is a potential for deep exploration following the mineralization model of Cinco Minas and the possibility of repeated favourable underlying felsic units.



11.0 MINERALIZATION AND MINERALIZATION CONTROL Disseminated and veinlet-controlled mineralization at Santo Domingo includes argentite, sphalerite, galena, and minor native gold observed in the silicified rock matrix and quartz veins and veinlets. The sulphide mineralization content is low, and is estimated to be below 1% to 2% (vol.). In the near surface environment, secondary oxide phases of the sulphide minerals, including malachite, are common (BDM, 2003, p. 17). “Mineralization is concentrated on northwest-southeast steeply dipping quartz-carbonate vein systems and their halos. Vein textures are interesting. Veins are commonly laminated and vuggy; many show white quartz fragments in a pale brownish-grey quartz matrix. They show brecciation of quartz in a matrix of calcite (Figure 11.1); laminations with vein and bedding parallelism and vugs throughout. Core banding angles vary, but overall seem to be vein-boundary parallel, however some suggest a parallelism to the host stratigraphy. This angle is supported by observations in outcrops.”

Figure 11.1. Boulder from La Raya showing brecciation of quartz in calcite (D. McBride, 2009) The disseminated mineralization in the fresh-looking host rocks suggest fluids passing through or along accumulating surfaces at moderate temperatures. The alteration seen in documented vein systems is lacking here, but the presence of silica is demonstrated by the rock hardness. These textures are interpreted as the product of a combination of near surface vein formation coupled with simultaneous sinter formation at the proximal surface. Metallic minerals seem to be deposited throughout this process. Figure 11.2 shows fragments of andesite and galena-sphalerite mineralization as part of a single fragment. These fragments are in a matrix of white quartz” (McBride, 2003, p. 14).



Figure 11.2. Core showing a breccia with fragments of andesite and galena-sphalerite

mineralization in white quartz (D. McBride, 2009) “Greatest vein development is present in the preferred rock unit. I believe that the underlying andesites possibly act as the source for the economic metals. Metallic minerals were deposited in the porous rhyolite agglomerate at and/or near the existing volcanic surface. As the volcanic agglomerate accumulated this depositing environment rose with it. The deposition was blocked by the rapid deposition of thick ash deposits that form the large plateaus seen throughout the Sierra Madre Occidental. Such a unit lies under the ridge behind the mine camp and caps the hill containing the mine workings. A vein system lies along the base of this unit north of Guadalupe mine. This ash fall seems to separate the described systems from the Santa Fe and Santa Clara Mines which occur in a younger rhyolite agglomerate. The Zopilote vein system consists of a rock breccia with a matrix of fine-grained specularite; lower in the vein structure, the vein contains some copper as seen by the malachite gossan. Similar oxide mineralization was seen by McBride at the top of the San Francisco Vein of Minefinders at Dolores in Chihuahua. It may represent the final phase of the mineralizing system” (McBride, 2007, p. 17). The best guide for exploration is the presence of old Spanish mine workings. At Santo Domingo, the extent of these workings was not appreciated until Stroud investigated the known mine workings and located many unknown tunnels (McBride, 2007). Mine workings illustrate that the high-grade shoots lie within broad zones of quartz veining. These zones may be up to 30 meters wide, trend in a northwest-southeast direction and dip at about 60 degrees to the east. Only open mine stopes remain from the early mining, but intersections in drill holes SD-07-12 and 13 show 1 to 3 meter-wide zones of semi-massive galena and sphalerite with silver and gold values. Partially digested slag contains significant galena, suggesting that the mined shoots were similar (McBride, 2007, p. 14). There are two main mineralized zones at Santo Domingo, known as the Rayas and the Guadalupe. They are situated at the centre of the property and dip 65 to 75 degrees northeast toward the river.



The Rayas zone is a well-defined structure commonly accompanied by a 30 to 35 meters wide silicification zone and has a known strike length of approximately 700 meters, based on observations in numerous pits and adits as well as core observations from the Stroud drilling program. The Guadalupe zone is sub-parallel to the Rayas vein system and lies approximately 125 meters to the southeast. The Guadalupe zone has an observed width in excess of 10 meters and a known strike length of over 700 meters, based on observations in old adits and pits.



12.0 EXPLORATION 12.1 HISTORIC EXPLORATION After the exploration and limited mining carried out during the XVIII, XIX, and early XX centuries, a formal exploration attempt was made by Compañía Minera Las Cuevas S.A., then the Mexican subsidiary of Noranda Mines Limited, which conducted mapping and sampling programs and a core drilling campaign in the Santo Domingo Area. In 1954 and 1973 to 1974, the company drilled 11 holes of which 3 were underground, from La Esperanza tunnel. Recorded results show values of economic interest, however, Noranda did not do any follow up work. The reader is referred to Section 8.0 (History), for a detailed account of previous exploration. 12.2 STROUD RESOURCES EXPLORATION Stroud became interested in the property and started limited exploration activities in 1997, conducting a limited program of check chip sampling in the accessible adits, and trenching and sampling of surface mineralized zones to initially substantiate the mineralization potential of the concessions. Upon securing an agreement to purchase the concessions in 1999, Stroud undertook an initial core drilling program of four holes, totalling 382 meters, to test the main mineral structure below the Rayas adit workings. The first drill hole was incomplete and abandoned before reaching the target mineral horizon (Table 12.1).

TABLE 12.1 SDLE CORE DRILLING, 1999 – SELECTED INTERVALS

Drill Hole

Selected Interval Meters

Average Assays Description From (m)

To (m)

Ag (g/t)

Au (g/t) Location Remarks

SD-99-1 - - - - - Rayas Zone Lost in Overburden

SD-99-2 51.00 75.00 24.00 228.10 0.57 Rayas Zone including:

58.00 75.00 17.00 283.50 0.72

SD-99-3 20.70 66.00 45.30 131.60 0.39 Rayas Zone –

including:

22.00 34.00 12.00 286.80 0.95 And, 59.00 66.00 7.00 224.60 0.57

SD-99-4 50.00 74.00 24.00 79.20 0.21 Rayaz-Esperanza Zone

Source: BDM, 2002 A second drilling campaign was aborted in 2003 due to bad ground conditions and later continued in the years 2005 through 2008. Surface and mine mapping by D. McBride resulted in the definition of a vein system. In order to establish a pattern of veins, all known workings were located and those accessible mapped and sampled. Mine and/or exploration workings on six vein systems have been identified and located by UTM coordinates



(Table 8.1). These workings suggest that known mineralization may extend further than first indicated by the current exploration. In summary, and as a result of the exploration carried out by Stroud, Santo Domingo is known to host a number of mineralized structures, with silver and associated gold, that have been identified by surface mapping, trenching, historic workings and the 29 drill holes by Stroud. The two most important mineralized structures, Rayas and Guadalupe, have been identified over lengths of 500 and 900 meters, respectively, with intersections in the order of 10 to 50 meters in width and to a depth of 775 masl at the DH 06-11 intersection of the Guadalupe vein. In addition, old mine workings and some of the drill holes indicate that another five vein systems are present.



13.0 DRILLING 13.1 DRILLING SUMMARY Three drilling campaigns have been carried out by Stroud since 1999. Drilling commenced on the property in 1999, was followed by an attempted drilling program in 2003 and continued between 2005 and 2008. A total of 30 core holes have been drilled of which three were abandoned due to loose material, broken ground and/or mechanical problems. Drill holes numbers SD 1, SD 5, and SD 9 were not completed. In total, 5,335.60 meters have been drilled, including 169.5 meters lost in the three holes previously mentioned. The geological map of Figure 9.5 shows the location and projected bearing of all drill holes. Core drilling was performed under contract by Canadian drilling contractors BDW (1999, 2003) and Heath and Sherwood (2005, 2006), and directly by Stroud beginning in 2007. Due to the poor soil cover conditions, loose material, and broken ground, drilling was commonly initiated with a tricone bit, cased and continued in HQ diameter (63.5 mm) and/or NQ diameter (47.6 mm) core after penetrating through the surficial broken or weathered ground. Recoveries will be analyzed in Section 14.0. Drill holes were oriented to the SW with an average azimuth in the order of 230 degrees, while inclination varied from a minimum of minus 6 degrees at drill hole SD-08-22 to minus 87 degrees at drill hole SD-08-26, with an average in the order of minus 55 degrees. The length of drill holes, not considering abandoned ones, varied from 89.30 to 376.90 meters, with an average of 183.50 meters. Cross-sections were drafted with the use of Explorepac® computer software, showing drill hole lithology and intersections. The software produced a set of sections where mineralized blocks were interpreted and used as a basis for a manual resource calculation. Table 13.1 shows a summary of characteristics of the drill holes. 13.2 DRILLING RESULTS SUMMARY Four holes were drilled during the 1999 drilling campaign, three of which penetrated the Rayas vein system (Figure 13.1). The assay values of core samples demonstrated that the mineralized zone was much wider than indicated by previous mine workings in the stopes of the Rayas tunnel. Drilling difficulties can be seen by the amount of broken and ground core, but the results were encouraging. Activity was renewed in 2003 with Hole SD-03-05, which was drilled 100 meters down the mountain side from the Rayas tunnel. This hole proved to be very difficult and was lost before it reached the mineralized zone and the project was then suspended. Geological investigations at this time identified a second vein system called the Guadalupe System. It was found to have been traced across the ridge by the Spanish, by numerous stopes, adits and shafts, for upwards of 100 meters into the mountain. Stroud returned in 2005 to mid-2006 and drilled 5 holes on the Guadalupe System. Figure 13.2 through Figure 13.9 show a set of cross sections with lithological intersections and mineralized zones with diagrammatic gold and silver grades depicted in blue and red bars, respectively as used for the estimate of Mineral Resources.



TABLE 13.1

DRILL HOLE RECORD 1999-2008 (AFTER MCBRIDE, 2009)

Hole No.

East North Direction Dip Started Finished Length metres Cum. Length Comments / Drilling Eqpt. / Contractor

1999

SD-99-01 606645 2334362 240 -58 18.00 18.00 BDW - Abandoned

SD-99-02 606645 2334362 240 -58 114.00 132.00 BDW

SD-99-03 606619 2334398 210 -55 125.00 257.00 BDW

SD-99-04 606664 2334345 256 -45 114.00 371.00 BDW

2003

SD-03-05 606743 2334553 220 -55 02/01/2003 3/21/2003 102.50 473.50 BDW - Abandoned

2005-2008

SD-05-06 606771 2334114 230 -45 6/23/2005 7/29/2005 109.20 582.70 CABO-MANCHUK

SD-05-07 606779 2334201 230 -45 08/01/2005 8/26/2005 235.20 817.90 CABO-MANCHUK

SD-05-08 606631 2334362 230 -86 8/30/2005 11/06/2005 251.20 1,069.10 CABO-MANCHUK

SD-05-09 606840 2334560 224 -45 11/09/2005 11/16/2005 49.00 1,118.10 CABO-MANCHUK. Abandoned

SD-06-10 606711 2334303 230 -86 5/24/2006 6/17/2006 192.50 1,310.60 CABO-MANCHUK

SD-06-11 606483 2334601 230 -45 8/21/2006 9/15/2006 346.50 1,657.10 CABO-McBRIDE

SD-06-12 606779 2334201 230 -60 9/28/2006 11/03/2006 203.00 1,860.10 CABO-McBRIDE

SD-06-13 606779 2334201 230 -80 11/04/2005 11/17/2008 201.40 2,061.50 CABO-McBRIDE

SD-07-14 606771 233414 230 -72 10/12/2008 10/19/2008 89.30 2,150.80 STROUD McBRIDE











SD-0825A 606534 2334399 235 -27 03/04/2008 03/06/2008 66.00 3,992.10 SDR-McBride Abandoned in rubble






SD-08-30 606692 2334313 230 -45 05/11/2008 NA 195.30 5,355.60 In progress July 30th

TOTAL 5,355.60

UTM Dates



Figure 13.1. Section 5275N – Drill hole mineral intersections and lithology



A summary description of drill hole intersections and a table showing the most relevant values that were intersected (Table 13.2), follows (McBride, 2009).

TABLE 13.2 SUMMARY OF SIGNIFICANT INTERSECTIONS

(D. MCBRIDE, 2009)

Hole No. Core

Length True Width Au

ppm Ag

ppm Cu % Pb % Zn % SD-99-01 - SD-99-02 24 22.6 0.62 228.5 SD-99-03 18.5 32.0 0.82 203.6 8 0.51 203.8 11 0.73 125.5 SD-99-04 11 11.2 0.25 109.7 5 0.13 99.2 SD-03-05 - SD-05-06 17.4 16.4 0.43 83.4 SD-05-07 7.8 7.3 2.88 97.6 0.03 0.4 0.67 SD-05-08 10.00 15.2 0.24 171.00 0.05 0.24 0.92 SD-05-09 - SD-06-10 4 - 0.31 109.8 0.05 0.57 1.73 SD-06-11 10.5 31 0.43 65.4 1.5 4.5 30 SD-06-12 4.5 3.7 0.93 105.3 0.01 0.19 0.75 4.5 0.84 92 0.12 2.95 5.73 SD-06-13 18 10.3 0.67 37.6 0.05 0.45 1.2 3 0.64 165 0.27 2.02 3.55 SD-07-14 12.1 8.3 0.75 149.4 SD-07-15 34.6 17.3 0.51 84.2 0.05 0.54 0.82 SD-07-16 12.7 11.1 1.52 252.8 0.02 0.39 0.63 SD-07-17 39.2 18.4 0.53 136.9 0.05 0.56 0.89 SD-07-18 3.05 2.1 11.82 74.1 0.02 0.31 2.47 SD-07-19 19.8 17.9 0.61 153.3 0.01 0.53 0.62 SD-08-20 19.8 14.0 1.25 170.6 0.02 0.31 0.64 SD-08-21 9.15 9.1 0.96 203.5 0.02 0.25 0.48 1.55 2.21 142 0.01 0.07 0.07 4.9 0.58 60.4 0.11 1.11 2.74 SD-08-22 16.8 16.8 1.12 124.2 0.02 0.21 0.75 5.1 0.3 46 0.01 0.03 0.09 SD-08-23 47.55 30.5 0.22 79.5 0.01 0.08 0.14 Incl. 15.2 0.32 100.8 0.06 0.12 22.9 0.38 110.5 0.17 0.31 SD-08-24 4.6 0.6 105.6 0.11 0.06 9.15 0.13 90.2 0.13 0.04 16.75 12.9 0.47 55.49 0.03 0.05 SD-08-25 18.95 19 0.51 122.6 0.07 0.09 6.1 73 52.6 0.02 0.02 SD-08-26 12.2 5.7 0.79 281.2 0.04 0.4 0.54 4.5 0.92 122.4 0.01 0.05 0.08 SD-08-27 97.6 58.6 0.49 158.8 0.07 0.17 Incl. 61 0.64 220.3 0.09 0.21 Incl. 4.6 1.15 1521.2 0.18 0.21 SD-08-28 32.6 23.5 0.12 42.1 0.14 0.21 3.05 0.03 98.1 0.06 0.17 15.25 0.48 73.1 0.02 0.04



“Hole SD-05-06 tested this new vein system. It intersected a core length of 17.4 meters grading 83.4 grams of silver and 0.43 grams of gold per tonne. The next hole, SD-05-07, tested the Rayas Vein System below the Nombre de Dios Mine and returned a core length of 7.8 meters that ran 97.3 grams silver and 2.88 grams gold per tonne. It was followed by a vertical hole, SD-05-08, at the site of hole SD-99-02, directly in front of the Rayas Tunnel. Ten meters grading 117.0 g/t of silver and 0.24 g/t of gold per tonne were intersected. Hole SD-05-09 was located half-way down the slope to the river, on the road to the middle pump, at the pump pad location. Its aim was to test the Rayas mineralization well below the structure in La Esperanza Tunnel. This hole was abandoned before it reached the projected depth of the zones. Drilling continued in 2006 with Hole SD-06-10. This hole was to intersect the Rayas mineralization below the San Pedro Mine. It cut 4 meters of 109.8 g/t silver and 0.31 g/t gold at the 75 meters depth, within a larger, low-grade zone. Hole SD-06-11 was drilled to test the north end of the Guadalupe and Rayas structures and was designed to test the continuity of these structures. The Rayas structure was not intersected even though it occurs in the Bellavista Tunnel some 75 meters to the south. A change in the character of the rhyolitic rocks may be responsible for this change. Deeper in the hole, the Guadalupe System was intersected and returned 10.5 meters of 65.4 grams of silver and 0.43 gram of gold per tonne. A third vein system was cut 65 meters beyond the Guadalupe; it returned 1.5 meters of 30 grams of silver and 4.5 grams of gold per tonne. This intersection was the first indication that an additional vein system occurs west of the Guadalupe System. The 2006 drill program continued with holes SD-06-12 and SD-06-13. Both were drilled on the same section as SD-05-07, which had undercut the Nombre de Dios Mine. Hole 12 was at minus 65 degrees and returned intersections of 4.5 meters of 105.3 grams of silver and 0.93 gram of gold per tonne; a second intersection of 4.5 meters carried 92 grams of silver and 0.84 gram of gold per tonne. Hole SD-06-13 undercut the previous and returned a 60 meter section of silver-gold values including 18 meters of 37.6 grams of silver and 0.67 gram of gold per tonne. Both holes carried lead-zinc values in the plus 1% range over 1 to 3 meters. Lead, zinc, and copper was added to the analysed metals; copper was later dropped because the values were so low. High grade precious metal mineralization was lacking in the lead-zinc zones. It is thought that the ore shoots mined by the Spanish resembled these zones but with higher silver-gold values. After this drilling program, the 2007 drilling commenced a systematic program to test the known vein systems from the main road, or 980 meter level. Holes SD-06-14, 15 and 16 were drilled at the southeast of the Guadalupe System, from the same location as hole SD-05-06. SD-06-15 and 16 were drilled at an azimuth of 230 degrees to intersect the vein system on Section 5300 N based on the distance from the known surface mining. However, the mineralization was intersected much closer to the top of the hole so the actual section is 5275N. Hole SD-06-14 returned 12.1 meters grading 0.75 gram of gold and 149.4 grams of silver per tonne. Below it, Hole SD-06-15 returned 34 meters of 0.51 gram of gold and 84.2 grams of silver per tonne. These results extended the vein system down dip for 50 meters. Considerable rubble was intersected and only one hole was drilled to hit Section 5250N. This hole, SD-08-17, was a steep hole and intersected 39.2 meters of 136.9 grams silver and 0.53 gram gold per tonne. Mine workings are known in proximity to these drill holes in Socavon Intermedio and Socavon III, but Socavon II below, may have been too short to intersect the mineralization. Mineralization is present in a parallel zone, 50 meters to the east; however, the rock changes at the bend of the tunnel and does not intersect the Guadalupe vein system.



Section 5375N was the next section tested; the drill setup was at the entrance to the Nombre de Dios Mine and holes were drilled at two azimuths to intersect the Guadalupe zone on sections 5350 and 5400N. Holes SD-07-16 and 18 were drilled at the azimuth of 215 degrees and holes 19 to 22 were drilled at 240 degrees (Figure 13.10). All holes cut the Rayas mineralization within the top 30 meters. Holes 16 and 18 intersected core lengths of 12.7 and 3.05 meters with grades of 1.52 and 11.82 grams of gold per tonne and 252.8 and 74.1 grams of silver per tonne, respectively. Holes SD-08-19 to 22 were drilled more northerly; widths of 16.8 to 19.8 meters were intersected except in the vertical hole where the thickness was 9.25 meters. Values ranged from 0.61 to 1.25 grams of gold and 124.2 to 203.5 grams of silver per tonne. A second, weaker zone is present between 55 and 70 meters depth. Generally, the background values, between these zones, were elevated. This section was the first to indicate that the mineralization was vein controlled but had another parameter. Prior to these holes, the only indication that something was different was the fact that the mineralization seemed to be concentrated at the andesite-rhyolite agglomerate contact, but at the same time occurred in steeply-dipping vein systems.

Figure 13.10. Drilling Flat Hole SD-08-22 at entrance to Nombre de Dios Mine (D. McBride, 2009) On each section, the minus 45 degree holes were drilled beyond the projected down dip position of the Guadalupe Vein System. Hole SD-07-16 was drilled to 349.4 meters. In it the Guadalupe System is represented by a quartz vein which is anomalous in gold, silver, lead and zinc. Hole SD-07-19, drilled in a more westerly direction, intersected minor quartz veins at 130 meters depth which may represent the Guadalupe system. Once these holes were completed, drilling continued on section 5600 N. Four holes, SD-07-23 to 26 (Figure 13.11), tested this section and showed that the rhyolitic agglomerate unit dips gently to the northwest. The minus 45 degree hole (SD-08-23) was drilled to 350 meters depth and shows continuous mineralization for 81 meters from the casing at 6.2 meters, with grades of 0.25 gram gold and 83.2 grams silver. Within this section were large voids and “wood core”, indicating mine workings. Re-examination



of the surface shows large areas of collapsed stopes nearby, but no evidence that the rocks would contain significant silver. In SD-08-24, drilled at minus 65 degrees, low grade mineralization extends from the end of the casing to 198 meters depth, with three mineralized sections of which the best is 16.75 meters grading 0.51 gram of gold and 55.49 grams of silver per tonne.”

Figure 13.11. Drilling Hole SD-08-23 (D. McBride, 2009) Hole SD-07-26 was a sub-vertical hole with a 12.2 meter intersection from the end of the casing grading 0.79 gram gold and 281.2 grams silver per tonne. Anomalous values continue to 94 meters downhole and spotty values thereafter to the end of the hole. The last hole drilled on this section, number SD-07-25, was a shallow hole. It experienced many problems, mainly due to the presence of mine workings. From the end of the casing at 29.9 meters, an 18.9 meter section averaging 0.51 gram gold and 122.6 grams silver per tonne was recovered, after which anomalous silver continues to 80 meters. Section 5650 illustrates the values in the rhyolite agglomerate and the associated vein systems. Drill testing on Section 5650N was the last section completed in the summer-2008 program. Hole SD-08-27 was drilled at minus 45 degrees and ended at 310.7 meters depth. It produced a 97.6 meter section grading 0.49 grams of gold and158.8 grams silver per tonne from the 5.2 meter point of the hole. Within this section, 60 meters assayed 0.61 gram gold and 220.3 grams silver per tonne. Hole SD-08-28 undercut this hole at minus 65 degrees. It intersected 31.1 meters of 0.12 gram of gold and 43.9 grams silver per tonne near the top of the hole and encountered a second section of 13.75 meters grading 0.52 gram of gold and 78.8 grams of silver per tonne. Spotty assay values occur between these sections. The last hole on this section was SD-08-29, drilled at minus 27 degrees. A 53.7 meter intersection grading 0.18 gram of gold and 81.2 grams of silver per tonne outlined the Rayas vein system. The hole was lost before it reached the Jazmín and Guadalupe vein systems.



Hole SD-08-30 was started on Section 5475 to intersect the Rayas system at the west end of the San Pedro Mine; it intersected mineralization from 34 meters, including 10.65 meters grading 0.43 gram of gold and 111.7 grams of silver per tonne plus 7.6 meters grading 0.38 gram of gold and 69.9 grams of silver per tonne. The drill hole passed into andesite at 80 meters length and the assay values become erratic before dropping to background levels until bottomed at 159.50 meters. It is possible that all the holes on Section 5600N and 5650N intersected mine workings. Wood was cored in one hole and one-and-a-half to 2 meter voids were intersected in most. To the north, the Bellavista Tunnel showed that, at the 950 meter level, there are two parallel, mined stopes extending to the south. The stopes are known to come within 20 to 40 meters of this section and the second stope has air flowing from it from a southerly direction, indicating interconnection with an adit somewhere. The nearest openings are in the vicinity of the Rayas mine on Section 5540N. All intersected mineralization is around this depth. Together these drill sections and surface workings define the Rayas and Guadalupe Vein Systems. Both are continuous and together with other parallel vein systems show the extent of the mineralized rocks. From these results a calculation of the silver-gold resource has been determined” (McBride, 2009).



14.0 SAMPLING METHOD AND APPROACH 14.1 SAMPLING PROGRAMS During the latter 1970s and in 1988, the Comision de Fomento Minero completed various technical studies and chip sampled some of the adits. From this information, certain tabulations of reserves and resources were made. The concessions owners requested the Consejo de Recursos Minerales (CRM), a government minerals resource agency, conduct a sampling of the existing mine dumps by pits and trenches. From 77 samples, the CRM estimated that the mine dumps contained 21,595 tonnes grading 308 grams of silver and 1.53 grams of gold per tonne (Section 8.0, this report). Behre Dolbear considers the results expressed not acceptable for present resource standards and only refers to them as historical data. Beginning in 1997, Stroud carried out a general surface and accessible underground mine sampling program, reported in the 2003 Technical Report. Sampling included channel, chip and grab samples, following a protocol of sampling procedures developed by Mr. Bertram Starke, Stroud’s QP at the time. General procedures, as reported by Stroud, included:

• Channel sampling controls including the recording of sample size, channel sample and sample location;

• One every 15 samples were duplicated and sent to analysis; • Every 15 samples one blank sample was inserted; • Control and verification of sampling numbering; and • Sample shipping.

Similar to surface samples, mine samples were taken by local crews under the supervision of a geologist of SDLE, or one of their contractors. Chip samples were cut with chisel and hammer, collected on a canvas and placed in a plastic bag to be labelled, recorded and shipped to the laboratory for assay. 14.2 CORE HANDLING AND SAMPLING In the case of core sampling Stroud, through their QP, developed a protocol of sampling procedures and sample preparation procedures and analyses, closely following those of then Chemex Labs. Stroud sampled all drill holes by cutting the core in half on its long axis, originally with a mechanical core splitter, then with a diamond saw during the last drilling campaigns (Figure 14.1). A total of 30 drill holes were sampled at variable intervals, depending on the geologic characteristics of the intersection and where structure was found. Samples were taken of half-core splits (Figure 14.2), with lengths varying from 0.30 meters to 2.0 meters, although samples were in the order of 1.0 meters for the 1999 campaign and 1.5 meters for the 2003 and 2005-2008 campaigns. In all cases, detailed sampling was carried out on intervals directed by geological criteria, with a priority to test high grade zones in the vein structures and also for the purpose of establishing possible disseminated mineralization in the wall rock and alteration zones.



Figure 14.1. Core splitting facilities – Diamond saw (B. Solano, 2009)

Figure 14.2. Half core sample split (B. Solano, 2009)



General procedures for core handling, security, sampling and shipping control, as discussed with Stroud’s geotechnician and geologists, are summarized as follows.

• Stroud geotechnicians were present at the drill rig to ensure that core handling, recovery, core accommodation, box numbering and depth recording was properly made by the contractor and core boxes were hauled to Stroud´s sampling facilities in Santo Domingo.

• Depth marker wood plugs were checked for completeness and depth accuracy. • Assessment of core recoveries and RQD, measured by geotechnicians, as well as logging

by Stroud’s geologists, were completed before core splitting and sampling. • RQD measurements, expressed as a percentage of core length, were taken as a function of

core diameter (using 12 cm fragment size in the case of HQ and 9 cm in the case of NQ) and were recorded as a percentage of the sum of fragments larger than 12 or 9 cms, divided by the length of that particular run.

• Samples were marked by the geologist and tags placed at the beginning and end of the interval to be sampled.

• Core boxes were photographed and a record kept in Stroud’s project and office files. • Boxes of core were sent to be split, with a mechanical splitter during the first campaign,

then sawed by a diamond saw during the last two campaigns. • Half-core splits were placed in plastic bags and tied with plastic belts by the

geotechnician under the supervision of Stroud’s Senior Geologist Derek McBride, who would keep a record in the sampling tag booklets and transfer records to a sampling control and shipment sheet.

• Sample tags would have three portions for the box, the sample bag and the record booklet.

• Five to 10 sample bags were put in larger bags and shipped to ALS Chemex labs in Guadalajara, directly by Stroud personnel under the geologist’s supervision.

• The samples were then bar-coded in the lab and weighed prior to being processed. Once processed, pulps were shipped to ALS Chemex laboratories in Vancouver, British Columbia; sample tracking is made electronically until assayed and reported.

• The remainder of the samples were returned to the core box and transferred to Stroud’s core house in Labor de Guadalupe.

• Regarding security, all samples were collected and shipped by Stroud personnel. The core and samples remained under Stroud’s supervision from the time of collection of core boxes from the drill site until the time they were handed over to the ALS Chemex preparation lab in Guadalajara. All core and sample splits are kept in locked storage facilities in Labor de Guadalupe (Figure 14.3).



Figure 14.3. Stroud’s core storage facilities at Labor de Guadalupe (B. Solano, 2009) 14.3 CORE RECOVERIES Core recoveries were recorded for all drill holes, while RQD measurements were initiated with drill hole SD-14. It is noted that core recoveries were sometimes not included in drill logs, but in the RQD reports and are commonly incomplete. A core review detected frequent small displacements in the location of depth marker tags and some core recoveries greater than 100%. Taking this into consideration, Behre Dolbear made a rough estimate of core recovery based on selected intersections coincident with Behre Dolbear check sampling. All measured core recoveries were made in mineralized or altered material; therefore, are considered representative of the different types of mineralization. It was found that, in general, drill holes show good core recovery – in the order of 96% (Table 14.1), although varying from 87% to 100%, depending upon the degree of rock fracturing in mineralized zone intersections. Based on these estimates, Behre Dolbear considers core recoveries as being adequate for use in Mineral Resource calculation and reporting.



TABLE 14.1 CORE RECOVERIES OF MINERALIZED INTERSECTIONS

VERIFIED BY BEHRE DOLBEAR’S QUALIFIED PERSON

It is also believed that sampling procedures followed by Stroud are common to the industry and have been adequately followed through the sampling campaigns. It is, therefore, concluded that samples are adequate for Mineral Resource calculation and reporting. Due to topographic restrictions, several drill holes had to be fanned from single drill pads, therefore not all were perpendicular to the structures and projections to the nearest section had to be made, both in horizontal and vertical planes, to calculate the true width of intersections for volume calculations. 14.4 DRILL HOLE SURVEYING Stroud carried out a control of drill hole deviation with depth, through the use of a down hole single EZ-Shot® instrument handled by the drilling contractor during the first campaign. Reportedly, the majority of the drill holes in the 2005-2008 drilling campaign were surveyed by a down-hole Pajari Instrument, the

HOLE FROM TO INT. CORE % RECOV SD-05-06 48.50 51.30 2.80 2.80 100% SD-05-06 62.14 63.10 0.96 0.96 100% SD-05-07 36.50 38.30 1.80 1.75 97% SD-05-07 55.00 56.50 1.50 1.50 100% SD-06-12 75.00 76.50 1.50 1.40 93% SD-06-13 133.00 134.00 1.00 1.00 100% SD-06-11 234.00 235.50 1.50 1.45 97% SD-07-14 60.06 61.20 1.14 1.00 88% SD-07-17 7.30 8.20 0.90 0.90 100% SD-07-17 66.40 67.68 1.28 1.28 100% SD-08-21 11.30 12.80 1.50 1.30 87% SD-08-22 8.20 9.80 1.60 1.45 91% SD-08-24 53.95 55.50 1.55 1.55 100% SD-08-25 37.20 38.70 1.50 1.50 100% SD-08-26 40.25 41.75 1.50 1.50 100% SD-08-27 40.25 41.75 1.50 1.20 80% SD-08-28 35.65 37.20 1.55 1.55 100% SD-08-29 26.50 28.05 1.55 1.52 98% SD-08-30 41.75 43.25 1.50 1.50 100%

AVERAGE 1.48 1.43 96%

STROUD RESOURCES LTD.

DDH CORE RECOVERY BD ESTIMATE SANTO DOMINGO PROJECT. HOSTOTIPAQUILLO, JAL.



hole locations were determined by GPS and will be surveyed in 2010 (G. Coburn, 2009). Apparently, the tropari readings were not introduced in the Explorepac® database to produce cross sections. Surveying information was obtained for only nine out of the 30 holes drilled. Measurements were obtained irregularly, apparently trying to gather data at the collar and bottom of the holes and every 50 meters at depth. Measurements available to Behre Dolbear included hole numbers 2 through 8, 24, and 27. The length of drill holes, not considering abandoned ones, varied from 89.30 to 376.90 meters with an average of 183.50 meters. Only two deep holes were reported, SD-24, at 255.90 meters, and SD-27, at 310.75 meters. Behre Dolbear notices that the variation in inclination in this hole was a minimal 1.0 degree to the bottom of the hole, however, the deviation in bearing was of 6 degrees. Similarly, in hole SD-24, bearing deviation was up to 8 degrees at 160 meter depth. It is also considered that the deviation of the holes was minimal in shallow holes but could be significant in holes over 150 meters in depth. Behre Dolbear notes that hand-held GPS measurements of DH locations are not accurate due to the inherent precision of the instrument. This, along with the slight deviation of holes, implies that the projected location of intersections to the cross sections and plan map may be slightly different and may have had a minor, but not quantified, affect in the block resources estimate by Stroud. Behre Dolbear opines that, considering the Mineral Resource estimate method used by Stroud (manual polygon method), the variation will be minimal. Nonetheless, Behre Dolbear recommends that the location of drill holes be re-surveyed with a high precision GPS station or a standard Total Station surveying instrument and all tropari readings are to be included in the Explorepac® data base to produce an updated set of cross sections and Resource estimate.



15.0 SAMPLE PREPARATION, ANALYSES, AND SECURITY 15.1 ALS CHEMEX LABS QUALITY ASSURANCE/QUALITY CONTROL (QA/QC) ALS Chemex Laboratory Group, based in Vancouver, Canada, was the primary analytical laboratory for all samples collected, with Bondar Clegg assay labs used as a secondary check lab in 1999. A second lab was not used to check assays in the 2005-2008 drilling campaign. ALS Chemex has developed and implemented a Quality Management System (QMS) at each of its locations, designed to ensure the delivery of consistently reliable data. As a result the lab has received, including its sample preparation section in Guadalajara, the ISO 9001:2000 and ISO 17025 Quality Management System registration from QMI in North America. The ALS laboratory in Vancouver has also been accredited, conforming to requirements of Canadian regulations. Detailed sample preparation procedures, assay protocols and quality controls can be consulted in www.alsglobal.com/Mineral/. Routine QC procedures require the analysis of quality control samples (reference materials, duplicates and blanks) with all sample batches. As part of the assessment of every data set, results from the control samples are evaluated to ensure they meet set standards determined by the precision and accuracy requirements of the assay method. In the event that any reference material or duplicate result falls outside the established control limits, an Error Report is automatically generated. This ensures the person evaluating the sample set for data release is made aware that a problem may exist with the data set and investigation can be initiated. All data generated from quality control samples are automatically captured and retained in a separate database used for Quality Assessment. Control charts for in-house reference materials from frequently used analytical methods are regularly generated and evaluated by senior technical staff at Quality Assurance meetings of the assay laboratory to ensure internal specifications for precision and accuracy are being met. 15.2 STROUD SAMPLE PREPARATION PROCEDURES Core samples during the first drilling campaign of 1999 were prepared according to the following sample preparation and analysis procedures:

• Samples were sent to Chemex Laboratories in Guadalajara where they were crushed, split, and pulverized;

• Procedures defined by Stroud included crushing, pulverizing and cleaning instructions (Chemex Codes 226, 1388, 1316);

• Au analysis was instructed (1.0 assay ton/FA-AA) and repetition of over-limit assays with FA-Gravimetric methods (Chemex Code 997);

• Ag analysis by Aqua Regia – AA and repetition of over-limit assays with FA-Gravimetric methods (Chemex Code 384); and

• One sample out of 15 was check-assayed by Bondar Clegg Labs in San Luis Potosí, México.

For the most recent drilling campaigns, in 2008-2009, samples were also sent to the now ALS Chemex’s sample preparation facility in Guadalajara, Mexico following the protocol below (D. McBride, 2009).

• Samples were crushed, split and partially pulverized. • A 100 to 200 gram representative pulverized sample is air-shipped to the ALS Chemex

assay facility in Vancouver, Canada, where 50 gram samples are assayed.

http://www.alsglobal.com/Mineral/�



• All reject material is returned to SDR’s storage building in Labor de Guadalupe. • Gold and silver are fire assayed with gravimetric finish following ALS Chemex

procedures numbers ME-GRA21 (Appendix 2.0): gold and silver are assayed using a 50 gram sample which is fused with lead oxide, sodium carbonate, borax, silica and other agents to produce a lead button. This button is compelled to remove the lead. The remaining bead is weighed and the silver and gold are parted with dilute nitric acid and weighed to determine the gold. Silver weight is calculated by the weight difference.

• Copper, lead and zinc are assayed with Atomic Absorption (AA) following ALS Chemex procedures numbers Cu-AA46, Pb-AA46, Zn-AA46 and/or ICP 41 – ICP 61: copper, lead, and zinc are determined using a 0.4 gram sample which is digested with concentrated nitric acid. Hydrochloric acid is added to produce aqua regia and the mixture is digested for one hour and a half. The resulting solution is diluted to a fixed volume with de-mineralized water and analyzed by atomic absorption spectrometry against matrix-matched standards.

• Security. Samples are retrieved from drill sites and subject to the logging and sampling process by Stroud personnel as described before. Bagged samples are subject to a chain of command process that includes the fill-out of shipping formats and double verification by sampling personnel and the geologist in charge and on duty. Sample bags are put in large plastic bags, marked, sealed, and shipped by Stroud personnel directly from the sampling facilities at Santo Domingo to ALS Chemex facilities and an acknowledgement of the receipt of the samples is issued by the lab. The samples are then bar-coded and weighed prior to being processed. Once processed, pulps are shipped to ALS Chemex laboratories in Vancouver, Canada; sample tracking is made electronically until samples have been assayed and reported.

• Preliminary assay results are issued by the lab in electronic format and a final Assay Certificate mailed to the client.

Behre Dolbear concludes that the sampling methods, sample preparations, analyses and check sampling procedures developed by Stroud are adequate and follow accepted industry standards.



16.0 DATA VERIFICATION 16.1 STROUD QUALITY CONTROL Prior to the beginning of the 1999 drilling campaign, Stroud prepared a protocol of Sampling Procedures that included QA/QC. A summary follows:

• Sample size 2.5 kg for channel – chip – grab samples and half split for core samples; • Channel sample length, 1.0 or 2.0 meters; • Duplicate samples inserted every 15 samples; • Blanks inserted approximately every 15 samples; • Numbering system that will ensure that inserted duplicates and blanks will not be

detected by the lab; • For the last drilling campaign some modifications were made by Stroud to include a

blank from a known rock source every tenth sample. Approximately 200 assays of this rock were determined;

• Periodically, a pre-assayed silver-gold sample was inserted instead of a blank. These control samples provided a control over contamination in the field.

• Three standard samples were prepared by ALS Chemex in 2006 (OREAS 61Pa, OREAS 61Pb, Blank); and

• Additionally, ALS Chemex runs a series of standard samples with every batch submitted by Stroud. A review of the two sets of standards shows that the analyses are within acceptable analytical precision.

16.2 BEHRE DOLBEAR DATA VERIFICATION Behre Dolbear made a review of available information derived from previous exploration work. This information basically included geological reports, drill logs, sampling procedures, and assay results. Verification consisted of field checking of geology as well as a review of all vein intersections and detailed discussions of the sample handling, sampling, and security procedures established by Stroud. A random check of the location of drill holes was also made, finding that a number, particularly from the first stages of exploration, have been covered with dirt and are difficult to find or were not found (Figure 16.1 and Figure 16.2). It was recommended to Stroud that the missing holes be relocated and marked again.



Figure 16.1. Drill hole location monument (B. Solano, 2009)

Figure 16.2. Drill hole location monument partially covered with dirt (B. Solano, 2009)



Behre Dolbear also reviewed the Mineral Resource Calculations as described in Section 19.0 and the exploration program proposed by Stroud. 16.3 BEHRE DOLBEAR CHECK SAMPLING Behre Dolbear carried out the verification of core samples of the Rayas and Guadalupe vein systems by taking eighteen samples of core, which were split from remaining halves of the core (Figure 16.3, Table 16.1).

Figure 16.3. Behre Dolbear check sampling (B. Solano, 2009)



TABLE 16.1 BEHRE DOLBEAR SAMPLE VERIFICATION

From To WidthDrill hole Sample Number

BDM 1 460431 SD-05-06 76013 62.14 63.10 0.96 BDM 2 460432 SD-07-14 74786 60.06 61.20 1.14 BDM 3 460433 SD-07-17 74751 66.40 67.68 1.28 BDM 4 460434 SD-05-07 76053 55.00 56.50 1.50 BDM 5 460435 SD-06-12 74628 75.00 76.50 1.50 BDM 6 460436 SD-06-13 74718 133.00 134.00 1.00 BDM 7 460437 SD-06-11 76467 234.00 235.50 1.50 BDM 8 460438 SD-07-16 74858 7.30 8.20 0.90 BDM 9 460439 SD-08-21 76641 11.30 12.80 1.50 BDM 10 460440 SD-08-22 76668 8.20 9.80 1.60 BDM 11 460441 SD-08-29 77661 26.50 28.05 1.55 BDM 12 460442 SD-05-08 76121 36.50 38.30 1.80 BDM 13 460443 SD-08-24 76899 53.95 55.50 1.55 BDM 14 460444 SD-08-25 77169 37.20 38.70 1.50 BDM 15 460445 SD-08-26 77029 40.25 41.75 1.50 BDM 16 460446 SD-08-27 77271 40.25 41.75 1.50 BDM 17 460447 SD-08-28 77438 35.65 37.20 1.55 BDM 18 460448 SD-08-30 77729 41.75 43.25 1.50

STROUD RESOURCES LTD.

BD CORE SAMPLING VERIFICATION

Stroud(m)

LocationBehre Dolbear

Sample Number

SANTO DOMINGO PROJECT

Behre Dolbear samples were taken by the QP and personally delivered to ALS Chemex preparation labs in Guadalajara and pulps sent to ALS Chemex, Vancouver to be assayed for Au and Ag (fire assay/gravimetric finish, ALS Chemex Code GRA-21). Pb and Zn were assayed with Aqua-Regia digestion and AAS (ALS Chemex Code AA-46). Considering that Cu was not routinely assayed during the Stroud drilling campaigns, its analysis was not included in the BD verification. ALS Chemex assay certificates are found in the Appendix 3.0. In all cases, assay methods were either the same or similar to the ones used for Stroud samples.



TABLE 16.2 BEHRE DOLBEAR SAMPLE VERIFICATION ASSAY RESULTS – ALS CHEMEX

CERTIFICATE OF ANALYSIS GU09071283 - FinalizedCLIENT : "OYN - Stroud Resources LTD."# of SAMPLES : 18

ASSAY METHOD ME-GRA21 ME-GRA21 Pb-AA46 Zn-AA46SAMPLE Au Ag Pb ZnDESCRIPTION ppm ppm % %

460431 0.83 89 0.056 0.048460432 1.04 403 1.47 1.93460433 0.37 62 0.078 0.233460434 15.1 170 1.64 0.904460435 1.7 149 0.101 0.354460436 0.7 168 0.258 0.468460437 0.71 313 0.278 0.108460438 1.32 491 0.279 0.577460439 3.36 381 0.695 0.82460440 0.77 140 0.049 0.118460441 0.29 41 0.019 0.057460442 0.49 480 0.533 1.09460443 <0.05 33 0.039 0.219460444 1.38 279 0.167 0.128460445 0.31 312 1.435 3.09460446 1.09 123 0.043 0.049460447 0.1 77 0.219 0.274460448 1.29 182 0.336 1.015

ALS Chemex electronic certificate assay results. July 21, 2009

DATE RECEIVED : 2009-07-16 DATE FINALIZED : 2009-07-21PROJECT : "Santo Domingo"CERTIFICATE COMMENTS : ""PO NUMBER : " "



TABLE 16.3

BEHRE DOLBEAR VERIFICATION – ASSAY COMPARISON BETWEEN STROUD AND BDM REPORTS OF ALS CHEMEX LABS

BD Sample ME-GRA21ME-GRA21 Pb-AA46 Zn-AA46 ME-GRA21ME-GRA21 Pb-AA46 Zn-AA46Au Ag Cu Pb Zn Au Ag Cu Pb Zn

1 460431 0.83 89 0.06 0.05 0.69 1082 460432 1.04 403 1.47 1.93 0.93 270 0.03 1.04 1.34 3 460433 0.37 62 0.08 0.23 0.7 562 0.08 0.07 0.21 4 460434 15.1 170 1.64 0.90 13.25 239 0.06 1.40 0.96 5 460435 1.7 149 0.10 0.35 1.88 170 0.01 0.12 0.53 6 460436 0.7 168 0.26 0.47 0.81 306 0.03 0.09 0.30 7 460437 0.71 313 0.28 0.11 0.28 2778 460438 1.32 491 0.28 0.58 1.19 732 0.05 0.25 0.85 9 460439 3.36 381 0.70 0.82 1.79 168 0.03 0.21 0.67 10 460440 0.77 140 0.05 0.12 0.77 115 <0.01 0.02 0.08 11 460441 0.29 41 0.02 0.06 0.29 38 0.02 0.07 12 460442 0.49 480 0.53 1.09 0.46 242 0.14 0.73 1.66 13 460443 0.05 33 0.04 0.22 0.11 101 0.02 0.21 0.05 14 460444 1.38 279 0.17 0.13 1.02 215 0.01 0.15 0.12 15 460445 0.31 312 1.44 3.09 0.22 186 0.03 0.25 0.90 16 460446 1.09 123 0.04 0.05 1.32 139 <0.01 0.04 0.05 17 460447 0.1 77 0.22 0.27 0.2 99 0.03 0.22 0.39 18 460448 1.29 182 0.34 1.02 1.68 197 0.41 1.04

1.72 216 Note * 0.43 0.64 1.53 231 0.04 0.33 0.58 Note * .- Copper assay not included

ppm g/t ppm

ALS CHEMEX RESULTS

STROUD RESOURCES LTD.BD CHECK SAMPLING

Number of samples

(July, 2009)

ALS CHEMEX RESULTS

Averages

g/t



The graphs of Figure 16.4 to Figure 16.11 show a very good correlation of gold assays between samples taken by Behre Dolbear compared to Stroud results and good correlation for Pb and Zn. It is noticed that some samples were not assayed for Pb and Zn, therefore, not included in the graphs. In the case of silver the correlation is not very high, ranking in the order of R2 = 0.47; sample 460433 showed an assay of 62 g/t versus 562 g/t Ag, therefore it was not included. In spite of these results, the average silver value for the 18 samples is 225 g/t Ag for Behre Dolbear versus 212 g/t Ag for Stroud samples, or a 6% difference, but with a large standard deviation of S =148 and 153 g/t Ag, respectively. Values are more irregular in the upper quartile, particularly above 300 g/t. Behre Dolbear concludes:

• Au, Pb, and Zn analyses show high positive correlation values. In the case of silver the correlation is not very high;

• Greater differences found in assays of the same core sample were due to the different core halves taken for analysis and irregularities in mineralization (commonly known as the “nugget effect”);

• Considering the assay correlation between elements and the average silver value of the 18 samples, with low variation, it is concluded that the variations are probably caused by the irregular distribution of silver mineralization;

• It is suggested that silver mineralization is possibly associated to high-grade oxide minerals or native silver since most of the higher values are within the oxidation zone, close to surface;

• Future sampling campaigns should consider larger samples, in size and number. Also, higher assays, above 300 g/t, should be verified in a third laboratory until mineral graphic studies define the silver mineralogy and a better sample attack and analysis is deciphered; and

• Behre Dolbear believes that the results reported are acceptable and therefore sampling by Stroud is considered reliable.

Figure 16.4. BD Check Sampling (g/t Au)



Figure 16.5. BD Check Sampling (Au)

Figure 16.6. BD Check Sampling (g/t Ag)



Figure 16.7. BD Checking Sampling (Ag)

Figure 16.8. BD Check Sampling Pb (%)



Figure 16.9. BD Check Sampling Pb (%)

Figure 16.10. BD Check Sampling Zn (%)



Figure 16.11. BD Check Sampling Zn (%)



17.0 ADJACENT PROPERTIES The general Hostotipaquillo District is host to a number of historic mines and properties. Numerous mineral prospects are known throughout the Rio de Santiago Valley and surrounding areas. The Stroud concessions occur in the Hostotipaquillo Mining District, which includes a number of established silver-gold epithermal mineral occurrences such as the well known Monte del Favor, La Cabrera Santo Domingo, San Pedro Analco, and Cinco Minas mines with a pre-twentieth century mining production history, reportedly most prolific in the nineteenth century. The previously mentioned locations, including Santo Domingo, are located in the margins of a major Late Miocene tectonic depression, the Zacoalco Graben (Figure 10.1). According to Munroe (2006) the Monte de El Favor mine was active around 1912 and operated a small flotation plant. “Development included three levels that extended 140 meters in depth. The underground workings totalled 2,743 meters of mine works and production was estimated to be in the order of 500,000 tonnes of high-grade silver ore with a significant gold credit. The gold ore grade was reported at 2-3 g/t and the silver was in the order of 1,000 g/t. The strike length was noted at a minimum of 900 meters with up to 200 meters of zone width. Reportedly, actual stopes were reported to have measured up to 12 meters in width and had variable gold values, up to 8 g/t.” Currently, the mine is flooded and a recent effort to rehabilitate the mill to process the existing tailings failed due to property issues. However, it is observed that the mineralization at surface bears significant amounts of Mn-oxides and metallurgical recovery of silver may be deficient. Cinco Minas is a property located 9.5 km to the southeast of Santo Domingo, where a significant epithermal ore shoot, more than 700 meters deep, was mined out in the early 1900s with a reported production in the order of 1.0 Mt of ore at 3.17 g/t Au, and 476 g/t Ag for a total of 97,000 ounces of gold and 15 million ounces of silver recovered. Behre Dolbear notes that the Cinco Minas ore shoot is the deepest epithermal mine in the Sierra Madre Occidental Metallogenic Province. Mineral concessions at Cinco Minas are controlled by Minera San Jorge and Bandera Gold Ltd. Considerable work has been reported for the Cinco Minas project, including the building of a 60 tpd pilot mill that was commissioned but halted after several months of testing and minor production throughput. In May 2006, Bandera Gold announced an Indicated Resource of 2.27 million tonnes grading 171.9 grams of silver and 1.22 grams of gold per tonne. Bandera and San Jorge are now in court proceedings and currently proceeding to the evidentiary phase. According to local sources the project is inactive. Across the river to the northeast, the past producing San Pedro Analco mining camp has been optioned by Premium Exploration Inc. In a September 18, 2008 press release, the company said it was reviewing the historical data to plan a drill program and would be completing permits for this program. The reader is advised that, with the exception of Santo Domingo, all properties referred to are outside Stroud concessions and the information is not necessarily indicative of the mineralization on the property that is the subject of this technical report. This information is only included to establish that the general geology, deposit type and controls of mineralization are similar to that on the Stroud property.



18.0 MINERAL PROCESSING AND METALLURGICAL TESTING No preliminary processing or metallurgical tests have been performed on samples of the Santo Domingo mineralization. Some historical processing and metallurgy was performed but the results, while reportedly favorable, were not available to Behre Dolbear for review. Core logging has provided some insight into the metallurgical character of the mineralization. The main minerals are galena, sphalerite, chalcopyrite, and possibly argentite as well as fine, black-colored, silver-sulphosalts (possibly tetrahedrite or tennantite). The occurrence of pyrite and pyrrhotite are rare. The combination of sulphide minerals indicates that a flotation circuit followed by cyanidation could provide good recovery of the payable metals. Assay verification performed by Behre Dolbear indicates a high variability of silver values within the oxidation zone, possibly due to the presence of high-grade, irregular silver halides or metallic silver. In any event, Behre Dolbear recommends that metallurgical testing be initiated, separating the two apparent types of mineralization. Both flotation and bottle roll tests are recommended.



19.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES 19.1 GENERAL INFORMATION A mineral resource estimate has been calculated by Stroud using information derived from drill holes SD-99-02 to SD-08-30. The calculations were made by Dr. Derek McBride, P.Eng., a qualified person under NI 43-101 guidelines. Dr. McBride used the polygon method of resource estimation in a manual calculation. Dr. McBride has more than 35 years experience in resource calculations, including teaching of the technique as part of his course in Economic Geology at St. Francis Xavier University in eastern Canada. Resource calculations are not a major part of his exploration activities but have been calculated numerous times on past projects. This calculation was designed to fulfill the requirements of the NI 43-101 guidelines. Behre Dolbear’s QP made a thorough review of the methods used in the calculation, including a review of data in the original database.

• Drill hole information in the master Excel spreadsheet was verified against original logs, and summaries of assay information.

• Considering that all assay information was received directly from the labs in digital format, only random checks were made against assay certificates.

• Dr. McBride prepared a spreadsheet where drill hole intersections were recalculated to account for the dip of structures and inclination of the holes to define the true thickness of the mineralized zones. Behre Dolbear’s QP verified that the spreadsheet worked properly.

• Mineral intersections were verified against cross sections showing mineralized blocks. • The specific gravity of mineralized zones used in calculations were verified by sending

13 samples to the lab. The development of this document has been totally independent of the issuer (Stroud or any of its subsidiaries) and there is no circumstance that could, in the opinion of a reasonable person aware of all relevant facts, interfere with the qualified person’s judgment regarding the preparation of the technical report. Behre Dolbear’s QP is not aware of any material fact or material change with respect to the subject matter of the Technical Report that is not reflected in the Technical Report. 19.2 MINERAL RESOURCE DEFINITIONS The mineral resources as calculated by Stroud and verified by Behre Dolbear follow Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects, Form 43-101F1 and Companion Policy 43-101CP and CIM Definition Standards, November 22, 2005. According to NI43-101 standards “the terms “mineral resource,” “inferred mineral resource,” “indicated mineral resource,” and “measured mineral resource” have the meanings ascribed to those terms by the Canadian Institute of Mining, Metallurgy and Petroleum, as the CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by CIM Council, as those definitions may be amended.”



19.2.1 Mineral Resource (CIM, 2005) A Mineral Resource is a concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories. An Inferred Mineral Resource has a lower level of confidence than that applied to an Indicated Mineral Resource. An Indicated Mineral Resource has a higher level of confidence than an Inferred Mineral Resource but has a lower level of confidence than a Measured Mineral Resource. 19.2.1.1 Infer red Mineral Resource An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. 19.2.1.2 Indicated Mineral Resource An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed. 19.2.1.3 Measured Mineral Resource A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity. 19.2.2 Mineral Reserve (CIM, 2005) A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined.



The terms “mineral reserve,” “probable mineral reserve,” and “proven mineral reserve” have the meanings ascribed to those terms by the Canadian Institute of Mining, Metallurgy and Petroleum, as the CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by CIM Council, as those definitions may be amended. Mineral Reserves are subdivided in order of increasing confidence into Probable Mineral Reserves and Proven Mineral Reserves. A Probable Mineral Reserve has a lower level of confidence than a Proven Mineral Reserve. 19.3 STROUD MINERAL RESOURCES 19.3.1 Method of Resource Estimation Dr. Derek McBride, author of SDR’s Mineral Resource estimate, used the following criteria for his calculation.

• A potential precious metals low-grade mineral deposit indicated by Stroud’s drilling, amenable to open pit extraction was considered.

• The possible economic interest of the property is based on a preliminary cut-off grade that was considered more or less arbitrary, but similar to that used in other published calculations, in the order of US$20.00 per tonne. The estimated cost is considered by the author reasonable for an open pit operation.

• At this point in time it was not considered that a narrow-vein, underground operation might be economic based on historical workings and drill intersections.

• A minimum intersection of 3 meters in true width was considered and grade composites were made for each hole and transferred to the data base and cross sections.

• The values were included as analyzed by ALS Chemex; they were not cut nor the grades affected by tonnage or grade dilution; therefore, reported resources are IN SITU.

• The mineralized system was considered to have vertical and horizontal continuity over the block encompassed by the resource calculation. This continuity had been established by drilling on 50 meter centres and the position of Spanish mine workings. Where possible, all mine workings were surveyed with a compass and Field Ranger distance measuring device.

• Considering the stage of exploration, distribution of drill holes and interpreted mineralized structures (mostly tabular) the selected resource calculation method was of polygons approximately centered in drill hole intersections.

• Resource classifications were defined by the distance from the drill holes in horizontal and vertical directions: • Measured Resources were considered from 0 to 25 meters; • Indicated Resources from 25 to 50 meters; and • Inferred Resources from 50 to 75 meters.

• A specific gravity of 2.65 was used for vein and host rock. • Considering the preliminary stage of resource reporting and lack of metallurgical testing

and or mine planning and capital and operating costs, the calculation of metal equivalent values, recoveries, NSR refinery costs, and all other relevant conversion factors were not attempted.



19.3.2 Mineral Resources Table 19.1 shows a summary of Mineral Resources as calculated by Stroud. On Table 19.2 and Table 19.3 the detailed calculation of tonnage and grade for blocks presented in the corresponding cross sections is shown. The resource calculation includes the Rayas vein system and the ends of the Guadalupe vein system. Measured resources total 1.8 Mt grading 0.46 g/t gold and 90.0 g/t silver and indicated resources total 2.5 Mt grading 0.39 g/t gold and 88.0 g/t silver (Table 19.1). The combined measured and indicated resources are in the order of 4.3 Mt averaging 0.42 grams of gold and 89 grams of silver per tonne, which equates to approximately 58,000 ounces of gold and 12.4 million ounces of contained silver.

TABLE 19.1 MINERAL RESOURCES ESTIMATE

(D. MCBRIDE, 2009)


Silver (g/t)

Gold (ounces)

Silver (ounces)

Measured 1,846,352 0.46 90 27,306 5,342,557 Indicated 2,501,382 0.39 88 31,364 7,077,092 Measured and Indicated 4,347,734 0.42 89 58,671 12,419,649 Inferred 3,424,622 0.33 83 36,817 9,135,864

Inferred resources are estimated at 3.4 Mt grading 0.33 g/t gold and 83.0 g/t silver. According to Stroud, no work has been performed to determine the influence of mining method, metallurgy, or infrastructure. Mining would most likely be by open pit methods; mineralization is on a spur that sticks out into the main Rio Santiago valley. Workings occur on either side of this spur and suggest that the mineralizing system is best developed within 300 meters of the hill top and through the spur.

• Figure 19.1 shows the Mineral Resource blocks distribution as drafted by Stroud on longitudinal section (next page).

• Figure 19.2 to Figure 19.11 show the mineralization on cross sections and mineral blocks used for mineral resource estimation.

• Jasmine and El Zopilote mineralization, indicate that the system is larger than indicated by drilling. If the recommended program is performed, there is potential to increase the resource significantly.”

• It is also concluded that additional work is required on the topographic surveying of the area, mineralogic studies, geostatistical block modeling, resource estimation, and process metallurgical investigation, for a future exploration phase.

• Future sampling campaigns should consider larger samples, in size and number. Also, higher assays, above 300 g/t, should be verified in a third laboratory until mineral graphic studies define the silver mineralogy and a better sample attack and analysis is deciphered.



• Behre Dolbear believes that the manual Polygon method utilized by Stroud in the calculation of resources is adequate as a first attempt to define resources and was properly applied. This method has been in use in the industry for years and was long considered the standard for tabular deposits.



Figure 19.1. Longitudinal Section Indicating Mineral Resources



TABLE 19.2

MINERAL RESOURCE BLOCK CALCULATION (D. MCBRIDE, 2009)

Hole Section Block Class Hor. Average Average Vol in SG Tonnes Tonnes TonnesNo. Width Height Length M 3 poss Measured Indicated Inferred

SD-2 5555N 2A Measured 24.5 50 7.5 9187.5 2.65 24346.875SD-2 5555N 2B Indicated 24.5 50 7.5 9187.5 2.65 24346.875SD-2 5555N 2C Inferred 24.5 50 7.5 9187.5 2.65 24346.875SD-3 5595N 3A Measured 18.4 2.4 49 2163.84 2.65 5734.176SD-3 5595N 3B Indicated 18.4 0 0 0 2.65 0 0SD-3 5595N 3C Inferred 18.4 0 0 0 2.65 0 0SD-3 5595N 3A Measured 17.8 2.4 49 2093.28 2.65 5547.192SD-3 5595N 3B Indicated 17.8 0 0 0 2.65 0 0SD-3 5595N 3C Inferred 17.8 0 0 0 2.65 0 0SD-4 5530N 4A Measured 13.6 50 30 20400 2.65 54060SD-4 5530N 4B Indicated 13.6 75 25 25500 2.65 67575SD-4 5530N 4C Inferred 13.6 75 25 25500 2.65 67575SD-4 5530N 4A Measured 6.3 50 30 9450 2.65 25042.5SD-4 5530N 4B Indicated 6.3 75 25 11812.5 2.65 31303.125SD-4 5530N 4C Inferred 6.3 75 25 11812.5 2.65 31303.125SD-6 5275N 6A Measured 21.6 32.5 50 35100 2.65 93015SD-6 5275N 6B Indicated 21.6 25 164 88560 2.65 234684SD-6 5275N 6C Inferred 21.6 25 214 115560 2.65 306234SD-7 5345N 7A Measured 7.9 37.5 44 13035 2.65 34542.75SD-7 5345N 7B Indicated 7.9 25 54 10665 2.65 28262.25SD-7 5345N 7C Inferred 7.9 12 25 2370 2.65 6280.5SD-8 5555N 8A Measured 6.5 50 17 5525 2.65 14641.25SD-8 5555N 8B Indicated 6.5 50 17 5525 2.65 14641.25SD-8 5555N 8C Inferred 6.5 50 17 5525 2.65 14641.25SD-10 5475N 10A Measured 0 2.65 0SD-10 5475N 10B Indicated 0 2.65 0SD-10 5475N 10C Inferred 0 2.65 0SD-11 5835N 11A Measured 39.1 50 50 97750 2.65 259037.5SD-11 5835N 11B Indicated 39.1 12 625 293250 2.65 777112.5SD-11 5835N 11C Inferred 39.1 20 625 488750 2.65 1295187.5SD-12 5345N 12A Measured 5.2 30 44 6864 2.65 18189.6SD-12 5345N 12B Indicated 5.2 30 25 3900 2.65 10335SD-12 5345N 12C Inferred 5.2 30 9.5 1482 2.65 3927.3SD-12 5345N 12A Measured 11.3 30 44 14916 2.65 39527.4SD-12 5345N 12B Indicated 11.3 30 25 8475 2.65 22458.75SD-12 5345N 12C Inferred 11.3 30 9.5 3220.5 2.65 8534.325SD-13 5345N 13A Measured 10.6 44 48 22387.2 2.65 59326.08SD-13 5345N 13B Indicated 10.6 99 25 26235 2.65 69522.75SD-13 5345N 13C Inferred 10.6 149 50 78970 2.65 209270.5SD-14 5275N 14A Measured 17.2 19 50 16340 2.65 43301SD-14 5275N 14B Indicated 17.2 19 50 16340 2.65 43301SD-14 5275N 14C Inferred 17.2 19 50 16340 2.65 43301SD-15 5275N 15A Measured 29 35 25 25375 2.65 67243.75SD-15 5275N 15B Indicated 29 85 25 61625 2.65 163306.25SD-15 5275N 15C Inferred 29 129 25 93525 2.65 247841.25SD-16 5365N 16A Measured 13.1 33 16 6916.8 2.65 18329.52SD-16 5365N 16B Indicated 13.1 20 16 4192 2.65 11108.8SD-16 5365N 16C Inferred 13.1 0 0 0 2.65 0SD-17 5275N 17A Measured 31.6 34 25 26860 2.65 71179SD-17 5275N 17B Indicated 31.6 84 25 66360 2.65 175854SD-17 5275N 17C Inferred 31.6 130 25 102700 2.65 272155SD-18 5365N 18A Measured 2.8 28 16 1254.4 2.65 3324.16SD-18 5365N 18B Indicated 2.8 25 16 1120 2.65 2968SD-18 5365N 18C Inferred 2.8 25 16 1120 2.65 2968



TABLE 19.3

MINERAL RESOURCE BLOCK CALCULATION (D. MCBRIDE, 2009)

Hole Section Block Class Hor. Average Average Vol in SG Tonnes Tonnes TonnesNo. Width Height Length M 3 poss Measured Indicated Inferred

SD-19 5365N 19A Measured 21.4 4.3 28 2576.56 2.65 6827.884SD-19 5365N 19B Indicated 21.4 4.3 25 2300.5 2.65 6096.325SD-19 5365N 19C Inferred 21.4 0 2.65 0SD-20 5365N 20A Measured 22.4 5 28 3136 2.65 8310.4SD-20 5365N 20B Indicated 22.4 5 25 2800 2.65 7420SD-20 5365N 20C Inferred 22.4 0 0 2.65 0SD-21 5365N 21A Measured 4.4 27 28 3326.4 2.65 8814.96SD-21 5365N 21B Indicated 4.4 52 25 5720 2.65 15158SD-21 5365N 21C Inferred 4.4 50 25 5500 2.65 14575SD-21 5365N 21A Measured 8.2 27 28 6199.2 2.65 16427.88SD-21 5365N 21B Indicated 8.2 52 25 10660 2.65 28249SD-21 5365N 21C Inferred 8.2 50 25 10250 2.65 27162.5SD-22 5365N 22A Measured 16.6 22.5 28 10458 2.65 27713.7SD-22 5365N 22B Indicated 16.6 53 25 21995 2.65 58286.75SD-22 5365N 22C Inferred 16.6 25 25 10375 2.65 27493.75SD-23 5595N 23A Measured 85.3 13 28 31049.2 2.65 82280.38SD-23 5595N 23B Indicated 85.3 0 25 0 2.65 0SD-23 5595N 23C Inferred 85.3 0 0 2.65 0SD-24 5595N 24A Measured 3.8 13 28 1383.2 2.65 3665.48SD-24 5595N 24B Indicated 3.8 0 2.65 0SD-24 5595N 24C Inferred 3.8 0 2.65 0SD-24 5595N 24A Measured 7.5 13 28 2730 2.65 7234.5SD-24 5595N 24B Indicated 7.5 0 2.65 0SD-24 5595N 24C Inferred 7.5 0 2.65 0SD-24 5595N 24A Measured 13.7 13 38 6767.8 2.65 17934.67SD-24 5595N 24B Indicated 13.7 0 0 2.65 0SD-24 5595N 24C Inferred 13.7 0 0 2.65 0SD-25 5595N 25A Measured 21.9 31 39 26477.1 2.65 70164.315SD-25 5595N 25B Indicated 21.9 25 39 21352.5 2.65 56584.125SD-25 5595N 25C Inferred 21.9 25 39 21352.5 2.65 56584.125SD-26 5595N 26A Measured 7.7 31 39 9309.3 2.65 24669.645SD-26 5595N 26B Indicated 7.7 25 39 7507.5 2.65 19894.875SD-26 5595N 26C Inferred 7.7 25 39 7507.5 2.65 19894.875SD-27 5640N 27A Measured 69.7 4.3 49 14685.79 2.65 38917.3435SD-27 5640N 27B Indicated 69.7 4.3 25 7492.75 2.65 19855.7875SD-27 5640N 27C Inferred 69.7 4.3 25 7492.75 2.65 19855.7875SD-27 5640N 27A Measured 21 4.3 49 4424.7 2.65 11725.455SD-27 5640N 27B Indicated 21 4.3 25 2257.5 2.65 5982.375SD-27 5640N 27C Inferred 21 4.3 25 2257.5 2.65 5982.375SD-28 5640N 28A Measured 21.6 29.3 49 31011.12 2.65 82179.468SD-28 5640N 28B Indicated 21.6 25 74 39960 2.65 105894SD-28 5640N 28C Inferred 21.6 25 103 55620 2.65 147393SD-29 5640N 29A Measured 37.6 29.5 49 54350.8 2.65 144029.62SD-29 5640N 29B Indicated 37.6 25 74 69560 2.65 184334SD-29 5640N 29C Inferred 37.6 25 103 96820 2.65 256573SD-29 5640N 29A Measured 15.9 29.5 49 22983.45 2.65 60906.1425SD-29 5640N 29B Indicated 15.9 25 74 29415 2.65 77949.75SD-29 5640N 29C Inferred 15.9 25 103 40942.5 2.65 108497.625SD-30 5475N 30A Measured 60.1 50 50 150250 2.65 398162.5SD-30 5475N 30B Indicated 60.1 25 60 90150 2.65 238897.5SD-30 5475N 30C Inferred 60.1 25 52 78130 2.65 207044.5Sum 1846352.096 2501382.038 3424622.163

Tonnes Tonnes TonnesMeasured Indicated Inferred

Average Tonnes 1,846,352 2,501,382 3,424,622 Au (g/t) 0.46 0.39 0.33 Ag (g/t) 90.00 88 83



Figure 19.2. Cross Section 5275 showing blocks for mineral resources estimation



Figure 19.4. Cross Section 5365 showing block for mineral resources estimation



20.0 OTHER RELEVANT DATA AND INFORMATION Not Applicable



21.0 INTERPRETATION AND CONCLUSIONS 21.1 INTERPRETATION OF RESULTS The Stroud Mineral exploration on the Santo Domingo Property has included the compilation of old reports and maps, geological reconnaissance and mapping along the main structures outcropping in the area, alteration and mineralization mapping, surface and underground chip sampling of main structures, and the drilling of 30 diamond core holes at the Rayas and Guadalupe structures, with a total 5,335.60 meters, including 169.5 meters in three holes lost. Core recoveries of mineralized sections were acceptable, over 95%. In 1999, Stroud developed a protocol of sampling and sample preparation procedures and analyses that was followed during the first 1999 drilling campaign with slight variations in the following campaigns in 2003, and 2005 to 2008. The sampling procedures utilized by Stroud are common to the industry and were adequately followed through the sampling campaigns. It is, therefore, estimated that samples and assay results are adequate for Mineral Resource estimates and for reporting according to NI43-101 standards. In 2009, Stroud prepared a Mineral Resource estimate based on drilling intersections between 10 meters and 75 meters depth and the continuity of mineralization observed in surface and underground geological mapping and old workings. The selected resource calculation method was rectangular polygons, approximately centered at drill hole intersections. The resource calculation was to consider a potential, precious metals low-grade mineral deposit of economic interest, amenable to open pit extraction methods. Considering the preliminary stage of resource reporting and lack of metallurgical testing, mine planning and estimates of capital and operating costs, no attempt was made to calculate metal equivalent values, metal recoveries, NSR refinery costs, or other relevant factors in an economic analysis. According to Stroud estimates, Measured Resources total 1.8 Mt grading 0.46 g/t gold and 90.0 g/t silver and Indicated Resources total 2.5 Mt grading 0.39 g/t gold and 88.0 g/t silver. The combined Measured and Indicated Resources are in the order of 4.3 Mt averaging 0.42 grams of gold and 89 grams of silver per tonne, which equates to approximately 58,000 ounces of gold and 12.4 million ounces of contained silver (Table 21.1).

TABLE 21.1 MINERAL RESOURCES ESTIMATE

(D. MCBRIDE, 2009)


Silver (g/t)

Gold (ounces)

Silver (ounces)

Measured 1,846,352 0.46 90 27,306 5,342,557 Indicated 2,501,382 0.39 88 31,364 7,077,092 Measured and Indicated 4,347,734 0.42 89 58,671 12,419,649 Inferred 3,424,622 0.33 83 36,817 9,135,864

Inferred Resources are estimated at 3.4 Mt grading 0.33 g/t gold and 83.0 g/t silver. Behre Dolbear believes that sampling, sample preparation and assay procedures used by Stroud are to acceptable Industry Standards and were adequately followed through the sampling campaigns. It is



therefore determined that samples and assay results are adequate for Mineral Resource calculation and reporting purposes. Improvements, mainly to the recording of the field information, are recommended. Behre Dolbear believes that the manual polygon method of resource calculation utilized by Stroud is adequate as a first attempt to define Resources and was properly applied. This method has been in use in the industry for years and was long considered the standard for tabular deposits; 21.2 OTHER RELEVANT INFORMATION 21.2.1 Mineral Concessions Behre Dolbear has reviewed the Titles Opinion (Creel, García-Cuellar, Aiza y Enríquez Law Firm, November 27, 2009), legal status and agreements and technical data supplied to it by Stroud, SDLE and its agents, as well as other public, technical information sources. Behre Dolbear has conducted a review and appraisal of the information used in the preparation of its report, and believes the information included in the preparation of the report and in its conclusions and recommendations is valid and appropriate considering the status of the project and the purpose for which the report is prepared. According to the Title Opinions of the Creel, García-Cuellar, Aiza y Enríquez Law Firm, (November 27, 2009), for the Santo Domingo II and Nombre de Dios Concessions held by SDLE, “the said mining concessions: (a) Are valid, enforceable and in good standing; and (b) Such mining concessions and the rights derived thereunder are free and clear of all liens, mortgages, claims, encumbrances and security interests of any kind or nature.” 21.2.2 Surface Rights Stroud Resources Ltd. has leased surface rights from the Community Ejido de Santo Domingo de Guzman to cover these mining concessions and the surrounding area, granted by a general meeting held November 3, 2002 in accordance with Mexican regulations, and a lease agreement ratified before a Notary Public. The agreement has been extended to 2013. Copies of the Ejido agreements are in the files of SDLE and Stroud for consultation, if required. 21.2.3 Environmental Exploration Permitting In 1999, Stroud Resources de México, S.A. de C.V., carried out the first drilling campaign from then existing roads and mine patios. The second drilling campaign of 2003 was permitted by submitting an Environmental Permitting Notice report, according to Regulation NOM 120 ECOL 1997, which included the construction of 2,400 meters of access roads and drill pads (BDM, November 2002). Drill activities, for the most recent drilling campaign between 2005 and 2008, were conducted from the access road permitted in 2002. Copies of the environmental report are in the files of SDLE and Stroud for consultation, if required. 21.3 CONCLUSIONS

• Mineral exploration and mining in the Hostotipaquillo region dates from pre-Independence days. Initial prospecting identified high grade silver-gold veins made up of quartz, calcite, galena, sphalerite and chalcopyrite. Barren iron sulphides are only present in minor amounts.



• The Hostotipaquillo Mining District, which includes the Monte del Favor, La Gran Cabrera, Santo Domingo and Cinco Minas mineralized zones among others, is characterized by a gold and silver-bearing polymetallic, epithermal mineralizing system.

• At Santo Domingo, mineralization has been traced with the location of previous mine developments, particularly at the historic Guadalupe and Rayas mines. Five parallel vein systems make up the area of interest; an estimate of between 150,000 and 250,000 tonnes are reported to have been mined out (McBride, 2007).

• At Santo Domingo, mineralization occurs in northwest-trending quartz veins, stockwork veinlets and hydrothermal breccias hosted in a rock assemblage of volcanic and volcanoclastic andesites, with associated porphyry-felsic intrusions.

• Disseminated and veinlet-controlled mineralization at Santo Domingo includes argentite, sphalerite, galena, and minor native gold observed in the silicified rock matrix and quartz veins and veinlets. The sulphide mineralization content is low, and is estimated to be below 1% to 2% (vol.). In the near surface environment, secondary oxide phases of the sulphide minerals, including malachite, are common.

• Generally the mined-out areas lie above the 900 masl datum while exploration workings, commonly tunnels with test stopes, extend for 100 meters below to the 800 meter level on the south and the 550 meter level on the north. Showings of mineralization can be traced to a shaft on the top of the hill at the 1,175 masl elevation. The approximate length of exposure and exploration of the Rayas and Guadalupe veins within Stroud’s holdings are in the order of 600 meters and 900 meters, respectively.

• Stroud exploration work in the Santo Domingo Property has included the compilation of old reports and maps, geological reconnaissance and mapping along the main structures outcropping in the area, alteration and mineralization mapping, surface and underground chip sampling of main structures, and the drilling of 30 diamond core holes at the Rayas and Guadalupe structures, with a total 5,335.60 meters including 169.5 meters in 3 holes lost. Core recoveries of mineralized sections were acceptable, over 95%.

• The Stroud exploration program has been successful in that it has demonstrated that a silver-gold mineralized system of interest is present with combined Measured and Indicated Resources in the order of 4.3 million tonnes averaging 0.42 grams of gold and 89 grams of silver per tonne, which equates to approximately 58,000 ounces of gold and 12.4 million ounces of contained silver.

• It is noticed that, according to the concession sketch map of Figure 6.1, the Guadalupe structure is still open to the northwest, beyond the Guadalupe P.P. monument. This is within Stroud’s Santo Domingo II claim. The Rayas structure extends for about 700 meters to the northwest within the Santo Domingo II and Nombre de Dios claims. Both structures may be open to the southeast within the Nombre de Dios concession for another 500 meters; however, their continuity within the same is uncertain.

• In the Santo Domingo longitudinal section it is noticed that most drilling was made above the 850 masl datum but more than 150 meters of strike length has very shallow information (950 masl) underneath the San Pedro and Rayas mines. Deeper drilling of the Rayas structure is required.

• Behre Dolbear concludes that more exploration is required to investigate the northwest and southeast extensions of the Guadalupe and Rayas veins, and to test the presence and mineralization of the Guadalupe structure between the Guadalupe and the Rayas mines.

• Behre Dolbear believes that the surface and drilling exploration program as envisioned by Stroud Resources is justified.

• According to Dr. McBride “the investigation of old mine workings from el Manto to Bella Vista and from Socavon II to Guadalupe plus the Jazmine and El Zopilote



mineralization, indicate that the system is larger than indicated by drilling. If the recommended program is performed, there is potential to increase the resource significantly.”

• It is also concluded that additional work is required on the topographic surveying of the area, mineralogic studies, geostatistical block modeling, resource estimation, and process metallurgical investigation, for a future exploration phase.

• Future sampling campaigns should consider larger samples, in size and number. Also, higher assays, above 300 g/t, should be verified in a third laboratory until mineral graphic studies define the silver mineralogy and a better sample attack and analysis is deciphered.

• Behre Dolbear believes that the manual Polygon method utilized by Stroud in the calculation of resources is adequate as a first attempt to define resources and was properly applied. This method has been in use in the industry for years and was long considered the standard for tabular deposits.



22.0 RECOMMENDATIONS Based on these results, Stroud is proposing an accelerated drill program to trace the vein systems on the Santo Domingo II and Nombre de Dios properties. In the opinion of Behre Dolbear based on this review of Stroud’s Santo Domingo silver-gold Project, the mineralized structures warrant the further exploration proposed herein by SDLE. The proposed program has been divided into two phases, amounting to 11,000 meters and 22,000 meters, respectively, as described below and shown in Table 22.1 (Phase 1) and Table 22.2 (Phase 2). Most of the future exploration funding should be used to expand the resource by drilling. On the road level (approximately 980 masl) Section 5470 should be completed with three holes; the initial hole, SD-08-30, has been partially completed. To the north, drilling can not be carried out on the road level and three holes should be drilled from the road bend at the 1010 meter level on Section 5720N. A second tier of holes on 50 meter centres are proposed for the “Pileta” or 1,040 meter level. A road is proposed from the pileta to Section 5450N. A second road to this elevation will be pushed up from the site of holes 6, 14, 15, and 17 to drill Sections 5300N to 5400N. To complete this program will require drill holes and approximately 1,000 meters per section or a total of 11,000 meters of drilling. Contingent on the results of this program, a second program is recommended to explore further into the hill. Old roads must be upgraded to provide access up the hill and drill platforms must be constructed.





Item Essential Services Cost CAD Cost USD 1 Access and site roads (500 meters) 50,000 47,000

Pumps and Electrics, including electricity 10,000 9,400


3 Drilling Program



5 Support Facilities Project Vehicle 30,000 28,200 Travel Canada – Mexico 25,000 23,500 Accommodation, Telecommunication 80,000 75,200 Field Support, Land Rental, etc. 50,000 47,000


7 Surveying 20,000 18,800

8 Office Overhead ~10% 240,000 225,600

9 Contingency ~15% 390,000 366,600






Item Essential services Cost CDN Cost US

1 Access and site roads (100 meters) 40,000 37,600 Pumps and Electrics, including electricity 50,000 47,000


3 Drilling Program



5 Support Facilities Project Vehicle 30,000 28,200 Travel Canada – Mexico 50,000 47,000 Accomodation, Telecommunication 160,000 150,400 Field Support Labour, Land Rental, etc. 110,000 103,400


7 Surveying 30,000 28,200

8 Office Overhead ~10% 450,000 423,000

9 Contingency ~15% 750,000 705,000




23.0 REFERENCES Behre Dolbear de México, S.A. de C.V. and Behre Dolbear and Company Ltd., Technical Qualifying

Report, Santo Domingo Silver-Gold Exploration Project prepared for Compañía Minera San Diego y La Española, S.A. de C.V. 2003.

Behre Dolbear de México, S.A. de C.V, 2002, Aviso de inicio de actividades del Proyecto de Exploración con Barreación a Diamante Santo Domingo, Hostotipaquillo, Jal. ( Deacuerdo con la Norma Oficial Mexicana NOM-120-ECOL-1997). November 2, 2002.

Canadian Institution of Mining, 2005, CIM Definitions Standards for Mineral Resources and Mineral Reserves. Prepared by the CIM Standing Committee on Reserve Definitions. Adopted by CIM Council on December 11, 2005

Canadian National Instrument 43-101 - Standards of Disclosure for Mineral Projects, Form 43-101F1 and Companion Policy 43-101CP and CIM Definition Standards, November 22, 2005:

Creel, García – Cuellar, Aiza y Enríquez Law Firm,, 2009. Title opinion regarding San Diego y la Española mining concessions in the Santo Domingo project. Stroud Resources internal document, November 27 2009.

Ferrari, L., Pasquarè, G., Saul Venegas, S. and Romero, F., 1999, Geology of the western Mexican Volcanic Belt and adjacent Sierra Madre Occidental and Jalisco block. Geological Society of America, Special Paper 334, 1999.

Ferrari, L., López Martínez, M and Rosas Elguera, J. 2002. Ignimbrite flare-up and deformation in the southern Sierra Madre Occidental, western Mexico:Implications for the late subduction history of the Farallon plate. In: Tectonics, Vol. 21, No. 4, 10.1029/2001TC001302, 2002

Kerr, D. 2001: Exploration Potential of the Santo Domingo Ag-Au Property in the Hostotipaquillo Mining District, State of Jalisco, Mexico. 11p.

McBride, D. E. 2007: Investigation of 300 Year Old Mine Workings Defines New Potential, Santo Domingo Project Stroud Resources Ltd. Power Point Presentation; Guadalajara Feb. 8, 2007.

McBride, Derek., 2009, Sto. Domingo “Body Background” Technical Report prepared for Stroud Resources Ldt internal communication. February 2009.

McBride, Derek, 2009, Santo Domingo Mineral Resource calculations. Stroud Resources internal reports and tables;

Munroe, Richard, 2006, Technical Brief on the Cinco Minas Mine Property, andThe Gran Cabrera Mine Properties. Municipality of Hostotipaquillo, Jalisco, Mexico. Prepared for; Bandera Gold Ltd. December 11, 2006. In: SEDAR web site.

Rossotti, Andrea et al , 2002, Geology of the boundary between the Sierra Madre Occidental and the Trans-Mexican Volcanic Belt in the Guadalajara region, western Mexico. Revista Mexicana de Ciencias Geológicas, v. 19 No. 1 2002, pp 1-15.

Servicio Geológico Mexicano, 2004, Carta Geológico-Minera Guadalajara, F13-12 Jalisco, Michoacán y Guanajuato, Esc. 1:250,000. First Edition, Abstract.

Servicio Geológico Mexicano, 2004, Carta Geológico-Minera Guadalajara, F13-12 Jalisco, Michoacán y Guanajuato, Esc. 1:250,000. First Edition, Abstract.

Solano - Rico, Baltazar y Jorge Solís Vorrath, 1999, Plano Geológico Regional en: Proyecto para el Estudio de Ópalo y Obsidiana en la Región de Magdalena Jal. Reporte de Terra Quaestum, S.C. para la Secretaría de Promoción Económica del Estado de Jalisco, Nov. 1999.



24.0 DATE AND SIGNATURE PAGE

CERTIFICATE OF AUTHOR

I, Baltazar Solano-Rico, M.Sc., Geol. Eng., do hereby certify that : 1) I am currently a Senior Associate of Behre Dolbear and Company, Inc. and Managing Director of

Behre Dolbear de México, S.A. de C.V., with business office at : Behre Dolbear de México, S.A. de C.V. Paseo de los Robles 4092, Fracc. San Wenceslao Zapopan, Jalisco, C.P. 45110, México. Telephone: 52 33 3110-2113 Facsimile: 52 33 3110-2112. E-mail: [email protected]

2) I am a Geological Engineer registered at the Professions Directorship of the Public Education Ministry in México, holder of a Registry Certificate number 181191.

3) I am a graduate of the National University of México with a degree of Geological Engineer (1970) and of the University of Arizona, with a Master of Science degree in Geological Engineering (Exploration of Mineral Deposits), 1975.

4) I am an active member of the AUSIMM, The Australasian Institute of Mining and Metallurgy with membership number 221983. I am an active member of the AIMMGM and CIMMGM (Mining, Metallurgical and Geological Professional Association and College of México).

5) I have read the definition of “qualified person” set out in National Instrument 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 and am the “qualified person” for the purposes of NI 43-101 and this report in its entirety.

6) I have practiced my profession continuously since graduation and have acted in a responsible manner throughout my professional career. For a period of more than 39 years, I have performed predominantly field, supervision, management, and consulting assignments with respect to exploration, evaluation, development and economic analysis of mineral deposits in México, the United States of America, Canada, and Latin America.

7) My experience in the geology and mineralization of the ore deposits in the particular area of interest, and other mining Districts of the State of Jalisco, is of more than 25 years, while my experience in the area of precious and base metals ore deposits in México is of more than 40 years. I have made several site visits to the property during 2002, 2003, and from July 2 through July 4, 2009.

8) I am responsible for the preparation of the technical report titled “NI 43-101 Technical Report, Santo Domingo Silver-Gold Exploration Project, (Santo Domingo II and Nombre de Dios mining concessions)” in the Hostotipaquillo Area, State of Jalisco, México and dated 16 December 2009 (Technical Report).

9) I am not aware of any material fact or material change with respect to the subject matter of the Technical Report that is not reflected in the Technical Report, the omission to disclose which makes the Technical Report misleading.

10) I am independent of the issuers applying all the tests in Section 1.5 of National Instrument 43-101.

11) I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report has been prepared in compliance with that instrument and form.

mailto:[email protected]�



12) 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 this 25th day of January 2010.

___________________ Baltazar Solano-Rico Geol. Eng., M.Sc., Ing.



CONSENT OF AUTHOR

TO: British Columbia Securities Commission Alberta Securities Commission Ontario Securities Commission TSX Venture Exchange

I, Baltazar Solano-Rico, Geol. Eng., MSc., am a qualified person as defined in National Instrument 43-101, and was responsible for preparing the technical report entitled “NI 43-101 Technical Report Santo Domingo Silver Gold Exploration Project”, with effective date December 16, 2009 for Stroud Resources Ltd. (the “Technical Report”). I do hereby consent to the filing, with the regulatory authorities referred to above, of the Technical Report and to the written disclosure of the Technical Report and of extracts from or a summary of the Technical Report in the press release of Stroud Resources Ltd. dated December 16, 2009 (the "Press Release").

I also confirm that I have read the Press Release and believe that it fairly and accurately

represents the information in the Technical Report that supports the disclosure.

Dated this 25th day of January 2010.

___________________ Baltazar Solano-Rico Geol. Eng., M.Sc., Ing.



25.0 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT PROPERTIES AND

PRODUCTION PROPERTIES Not applicable


Project 09-070 A1-1 BEHRE DOLBEAR

APPENDIX 1.0 TITLE OPINION



APPENDIX 2.0 ASSAY TECHNIQUES



Assay Procedure – ME-AA46 Evaluation of Ores and High Grade Materials by Aqua Regia

Digestion – AAS Sample Decomposition: Aqua Regia Digestion (ASY-AR01) Analytical Method: Atomic Absorption Spectroscopy (AAS) A prepared sample (0.4) g is digested with concentrated nitric acid for one half hour. After cooling, hydrochloric acid is added to produce aqua regia and the mixture is then digested for an additional hour and a half. An ionization suppressant is added if molybdenum is to be measured. The resulting solution is diluted to volume (100 or 250) mL with demineralized water, mixed and then analyzed by atomic absorption spectrometry against matrix-matched standards.

Element Symbol Units Lower Limit

Upper Limit

Default Over Limit

Method

Silver Ag ppm 1 1500 Ag-GRA21

Arsenic As % 0.01 30

Bismuth Bi % 0.001 30

Cadmium Cd % 0.0001 10

Cobalt Co % 0.01 50

Copper Cu % 0.01 50

Iron Fe % 0.01 30

Manganese* Mn % 0.01 50

Molybdenum Mo % 0.001 10

Nickel Ni % 0.01 50

Lead Pb % 0.01 30

Antimony Sb % 0.01 20

Zinc Zn % 0.01 30

* Element generally reported as oxide.



Geochemical Procedure - ME-ICP41 Trace Level Methods Using Conventional ICP-AES Analysis

Sample Decomposition: Nitric Aqua Regia Digestion (GEO-AR01) Analytical Method: Inductively Coupled Plasma - Atomic

Emission Spectroscopy (ICP - AES) A prepared sample is digested with aqua regia for in a graphite heating block. After cooling, the resulting solution is diluted to 12.5 mL with deionized water, mixed and analyzed by inductively coupled plasma-atomic emission spectrometry. The analytical results are corrected for inter-element spectral interferences. NOTE: In the majority of geological matrices, data reported from an aqua regia leach should be considered as representing only the leachable portion of the particular analyte.


Upper Limit

Default Overlimit Method

Silver Ag ppm 0.2 100 Ag-OG46

Aluminum Al % 0.01 25

Arsenic As ppm 2 10000

Boron B ppm 10 10000

Barium Ba ppm 10 10000

Beryllium Be ppm 0.5 1000

Bismuth Bi ppm 2 10000

Calcium Ca % 0.01 25

Cadmium Cd ppm 0.5 1000

Cobalt Co ppm 1 10000

Chromium Cr ppm 1 10000

Copper Cu ppm 1 10000 Cu-OG46

Iron Fe % 0.01 50



Geochemical Procedure – ME-ICP61 Trace Level Methods Using Conventional ICP-AES Analysis

Sample Decomposition: HNO3-HClO4-HF-HCl digestion, HCl Leach

(GEO-4ACID) Analytical Method: Inductively Coupled Plasma - Atomic

Emission Spectroscopy (ICP - AES) A prepared sample (0.25 g) is digested with perchloric, nitric, hydrofluoric and hydrochloric acids. The residue is topped up with dilute hydrochloric acid and the resulting solution is analyzed by inductively coupled plasma-atomic emission spectrometry. Results are corrected for spectral interelement interferences. NOTE: Four acid digestions are able to dissolve most minerals; however, although the term “near-total” is used, depending on the sample matrix, not all elements are quantitatively extracted.


Upper Limit

Default Overlimit Method

Silver Ag ppm 0.5 100 Ag-OG62

Aluminum Al % 0.01 50

Arsenic As ppm 5 10000

Barium Ba ppm 10 10000

Beryllium Be ppm 0.5 1000

Bismuth Bi ppm 2 10000

Calcium Ca % 0.01 50

Cadmium Cd ppm 0.5 500

Cobalt Co ppm 1 10000 Co-OG62

Chromium Cr ppm 1 10000

Copper Cu ppm 1 10000 Cu-OG62



Fire Assay Procedure – Ag-GRA21, Ag-GRA22, Au-GRA21 and Au-GRA22

Precious Metals Gravimetric Analysis Methods Sample Decomposition: Fire Assay Fusion (FA-FUSAG1,

FA-FUSAG2, FA-FUSGV1 and FA-FUSGV2)

Analytical Method: Gravimetric A prepared sample is fused with a mixture of lead oxide, sodium carbonate, borax, silica and other reagents in order to produce a lead button. The lead button containing the precious metals is cupelled to remove the lead. The remaining gold and silver bead is parted in dilute nitric acid, annealed and weighed as gold. Silver, if requested, is then determined by the difference in weights.

Method Code Element Symbol Units

Sample Weight

(g)

Detection Limit

Upper Limit

Ag-GRA21 Silver Ag ppm 30 5 10,000

Ag-GRA22 Silver Ag ppm 50 5 10,000

Au-GRA21 Gold Au ppm 30 0.05 1000

Au-GRA22 Gold Au ppm 50 0.05 1000



APPENDIX 3.0 CHECK ASSAYS

ni 43 101 santo domingo project

Business

exploration activities

historic exploration

stroud resources exploration

mxico ni

local resources

company rights

surface rights

drilling summary