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MANDALAY RESOURCES CORPORATION

TECHNICAL REPORT ON THE


CERRO BAYO PROJECT,
REGION XI (AISN), CHILE
NI 43-101 Report

Qualified Persons:
Normand L. Lecuyer, P.Eng.
Rosmery Julia Crdenas Barzola, P.Eng.

March 21, 2017


RPA 55 University Ave. Suite 501 I Toronto, ON, Canada M5J 2H7 I T + 1 (416) 947 0907 www.rpacan.com
Report Control Form

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


(AISN), Chile

Client Name & Address Mandalay Resources Corporation


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

Document Reference Status & FINAL


Project #2699 Issue No. Version

Issue Date March 21, 2017

Lead Author Rosmery Cardenas (Signed)


Normand Lecuyer (Signed)

Peer Reviewer Luke Evans (Signed)


David Smith (Signed)

Project Manager Approval Luke Evans (Signed)

Project Director Approval Deborah A. McCombe (Signed)

Report Distribution Name No. of Copies


Client

RPA Filing 1 (project box)

Roscoe Postle Associates Inc.


55 University Avenue, Suite 501
Toronto, ON M5J 2H7
Canada
Tel: +1 416 947 0907
Fax: +1 416 947 0395
mining@rpacan.com
www.rpacan.com

TABLE OF CONTENTS
PAGE

1 SUMMARY ...................................................................................................................... 1-1


Executive Summary ....................................................................................................... 1-1
Economic Analysis ......................................................................................................... 1-5
Technical Summary ....................................................................................................... 1-6
2 INTRODUCTION ............................................................................................................. 2-1
3 RELIANCE ON OTHER EXPERTS ................................................................................. 3-1
4 PROPERTY DESCRIPTION AND LOCATION ................................................................ 4-1
5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND
PHYSIOGRAPHY ............................................................................................................... 5-1
6 HISTORY ........................................................................................................................ 6-1
7 GEOLOGICAL SETTING AND MINERALIZATION .......................................................... 7-1
Regional Geology .......................................................................................................... 7-1
Local and Property Geology........................................................................................... 7-4
Mineralization ................................................................................................................ 7-9
8 DEPOSIT TYPES ............................................................................................................ 8-1
9 EXPLORATION ............................................................................................................... 9-1
Exploration Potential ...................................................................................................... 9-2
10 DRILLING .................................................................................................................... 10-1
Previous Drilling ........................................................................................................... 10-2
Mandalay Drilling ......................................................................................................... 10-3
11 SAMPLE PREPARATION, ANALYSES AND SECURITY ............................................ 11-1
Previous Work ............................................................................................................. 11-1
Mandalay Work ............................................................................................................ 11-3
12 DATA VERIFICATION ................................................................................................. 12-1
Data Validation ............................................................................................................ 12-1
Internal Quality Assurance and Quality Control ............................................................ 12-6
13 MINERAL PROCESSING AND METALLURGICAL TESTING ..................................... 13-1
14 MINERAL RESOURCE ESTIMATE ............................................................................. 14-1
Project Summary ......................................................................................................... 14-1
Resource Database ..................................................................................................... 14-2
Wireframe Models ........................................................................................................ 14-8
Assay Statistics.......................................................................................................... 14-11
Grade Capping .......................................................................................................... 14-15
Composites................................................................................................................ 14-18
Block Model Parameters ............................................................................................ 14-22
Density ...................................................................................................................... 14-24

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Grade Estimation ....................................................................................................... 14-24


Block Grade Validation .............................................................................................. 14-30
Resource Classification ............................................................................................. 14-42
Cut-off Grade ............................................................................................................. 14-43
Mineral Resource Estimate ........................................................................................ 14-45
Comparison with Previous Resource Estimates ......................................................... 14-47
15 MINERAL RESERVE ESTIMATE ................................................................................ 15-1
Reserve Estimation Methodology................................................................................. 15-1
Dilution and Extraction Factors .................................................................................... 15-3
Production for 2016 ..................................................................................................... 15-5
Reconciliation .............................................................................................................. 15-5
16 MINING METHODS ..................................................................................................... 16-1
Mine Design and Mining Method .................................................................................. 16-1
Geomechanics and Ground Support ............................................................................ 16-8
Pre-production Schedule ........................................................................................... 16-18
Life of Mine Plan ........................................................................................................ 16-18
Infrastructure ............................................................................................................. 16-21
17 RECOVERY METHODS .............................................................................................. 17-1
Mineral Processing ...................................................................................................... 17-1
Recovery ..................................................................................................................... 17-7
18 PROJECT INFRASTRUCTURE .................................................................................. 18-1
19 MARKET STUDIES AND CONTRACTS ...................................................................... 19-1
Markets ........................................................................................................................ 19-1
Contracts ..................................................................................................................... 19-1
20 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL OR COMMUNITY IMPACT
......................................................................................................................................... 20-1
Environmental Studies and Information ....................................................................... 20-1
Project Permitting ........................................................................................................ 20-3
Social or Community Requirements ........................................................................... 20-11
Mine Closure Requirements....................................................................................... 20-12
21 CAPITAL AND OPERATING COSTS .......................................................................... 21-1
Capital Costs ............................................................................................................... 21-1
Operating Costs ........................................................................................................... 21-2
22 ECONOMIC ANALYSIS............................................................................................... 22-1
23 ADJACENT PROPERTIES .......................................................................................... 23-1
24 OTHER RELEVANT DATA AND INFORMATION ........................................................ 24-1
25 INTERPRETATION AND CONCLUSIONS .................................................................. 25-1
26 RECOMMENDATIONS................................................................................................ 26-1
27 REFERENCES ............................................................................................................ 27-1
28 DATE AND SIGNATURE PAGE .................................................................................. 28-1
29 CERTIFICATE OF QUALIFIED PERSON .................................................................... 29-1

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LIST OF TABLES
PAGE
Table 1-1 Summary of Mineral Resources Inclusive of Mineral Reserves December 31,
2016 ................................................................................................................................... 1-2
Table 1-2 Summary of Mineral Reserves December 31, 2016 ....................................... 1-2
Table 1-3 LOM Capital Costs.......................................................................................... 1-11
Table 1-4 Operating Costs .............................................................................................. 1-12
Table 4-1 Property List ..................................................................................................... 4-1
Table 5-1 Water Permits ................................................................................................... 5-3
Table 6-1 Historical Mineral Resources ............................................................................ 6-3
Table 6-2 Historical Mineral Reserves .............................................................................. 6-3
Table 6-3 Production History ............................................................................................ 6-4
Table 10-1 Drill Hole Database ....................................................................................... 10-1
Table 14-1 Summary of Mineral Resources Inclusive of Mineral Reserves December 31,
2016 ................................................................................................................................. 14-2
Table 14-2 Resource Databases .................................................................................... 14-3
Table 14-3 Grade Capping Levels ................................................................................ 14-15
Table 14-4 Block Model Parameters ............................................................................. 14-23
Table 14-5 Vulcan Domain Search Directions............................................................... 14-26
Table 14-6 Grade Estimation Parameters ..................................................................... 14-27
Table 14-7 Diluted Vein Grades .................................................................................... 14-29
Table 14-8 Reserve Cut-off Grade Assumptions........................................................... 14-43
Table 14-9 Mineral Resources Inclusive of Mineral Reserves by Domain December 31,
2016 ............................................................................................................................... 14-45
Table 14-10 Comparison of 2016 and 2015 Resource Estimates Inclusive of Mineral
Reserves ........................................................................................................................ 14-47
Table 15-1 Conversion of Resources to Reserves Delia NW2 Vein ............................. 15-2
Table 15-2 Dilution Grades 2016 Reserves .................................................................... 15-3
Table 15-3 Mineral Reserves December 31, 2016 ....................................................... 15-4
Table 15-4 Production Results - 2016 ............................................................................. 15-5
Table 16-1 Geomechanical Characteristics - Q (Barton) vs. MRMR (Laubscher) ......... 16-9
Table 16-2 Stope Safety Factor Walls........................................................................ 16-10
Table 16-3 Stope Safety Factors - Roof ........................................................................ 16-10
Table 16-4 Ground Support Recommendations ............................................................ 16-12
Table 16-5 LOM Mine Development ............................................................................. 16-18
Table 16-6 LOM Production Schedule .......................................................................... 16-20
Table 16-7 Ventilation Requirements ............................................................................ 16-24
Table 16-8 Underground Equipment ............................................................................. 16-28
Table 16-9 Surface Equipment ..................................................................................... 16-29
Table 16-10 Equipment Availability ............................................................................... 16-30
Table 17-1 Process Plant - Major Equipment List ........................................................... 17-4
Table 17-2 Production Summary - Actual 2016............................................................... 17-6
Table 17-3 Production Summary - Budget 2016 ............................................................. 17-6
Table 17-4 Mill Performance in 2016 .............................................................................. 17-7
Table 20-1 Project Permits Laguna Verde Sector ........................................................ 20-4
Table 20-2 Project Permits Cerro Bayo Sector ............................................................ 20-5
Table 20-3 Project Permits Cascada Sector ................................................................ 20-5
Table 20-4 Project Permits Guanaco Sector ................................................................ 20-6
Table 20-5 Closure Costs Breakdown by Year ............................................................. 20-12

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Table 21-1 Capital Costs ................................................................................................ 21-1


Table 21-2 LOM Operating Costs ................................................................................... 21-2
Table 21-3 Company Manpower ..................................................................................... 21-3
Table 21-4 Contract Manpower ...................................................................................... 21-3

LIST OF FIGURES
PAGE
Figure 4-1 Location Map ................................................................................................... 4-5
Figure 4-2 Property Map ................................................................................................... 4-6
Figure 7-1 Regional Geology ............................................................................................ 7-3
Figure 7-2 Property Geology............................................................................................. 7-7
Figure 7-3 Property Geology Legend ................................................................................ 7-8
Figure 8-1 Regional Deposits ........................................................................................... 8-3
Figure 12-1 In-House Standard Results 2016 ............................................................ 12-13
Figure 12-2 Blank Assays Results 2016 .................................................................... 12-16
Figure 12-3 Pulp Duplicate Results - 2016.................................................................... 12-19
Figure 12-4 Reject Duplicate Results - 2016 ................................................................. 12-20
Figure 12-5 Precision Curves for Silver Duplicates ....................................................... 12-21
Figure 12-6 Precision Curves for Gold Duplicates ........................................................ 12-22
Figure 12-7 Certified Reference Material Results 2016 .............................................. 12-24
Figure 12-8 External Check Results - 2016 .................................................................. 12-27
Figure 12-9 Blind QA/QC - In-House Reference Material .............................................. 12-29
Figure 12-10 Blind QA/QC - Blank Assays .................................................................... 12-30
Figure 12-11 Blind QA/QC - Blank Assays .................................................................... 12-32
Figure 14-1 Coyita NW Au Grade Comparison ............................................................... 14-4
Figure 14-2 Coyita NW Ag Grade Comparison ............................................................... 14-5
Figure 14-3 Trinidad Au Grade Comparison ................................................................... 14-6
Figure 14-4 Trinidad Ag Grade Comparison ................................................................... 14-7
Figure 14-5 Vein Models in Laguna Verde Area Showing Drill Holes .............................. 14-9
Figure 14-6 Marcela Sur and Raul Vein Models in Cerro Bayo Area Showing Drill Holes ......
....................................................................................................................................... 14-10
Figure 14-7 Ag Box Plot and Assay Statistics Laguna Verde Area............................. 14-11
Figure 14-8 Au Box Plot and Assay Statistics - Laguna Verde Area ............................. 14-12
Figure 14-9 Ag Box Plot and Assay Statistics - Cerro Bayo Area .................................. 14-13
Figure 14-10 Au Box Plot and Assay Statistics Cerro Bayo Area ............................... 14-14
Figure 14-11 Coyita SE Ag Histogram Drill Hole Samples ......................................... 14-16
Figure 14-12 Coyita SE AG Probability Plot Channel Samples .................................. 14-17
Figure 14-13 Coyita SE Vein Drill Hole Samples - Ag Cutting Curve ............................ 14-18
Figure 14-14 Ag Box Plot and Composite Statistics - Laguna Verde Area .................... 14-19
Figure 14-15 Au Box Plot and Composite Statistics - Laguna Verde Area .................... 14-20
Figure 14-16 Ag Box Plot and Composite Statistics Cerro Bayo Area ........................ 14-21
Figure 14-17 Au Box Plot and Composite Statistics Cerro Bayo Area ........................ 14-22
Figure 14-18 Delia NW Correlogram ............................................................................. 14-25
Figure 14-19 Branca Vein Ag Block Grades ................................................................. 14-31
Figure 14-20 Coyita NW Vein Ag Block Grades ............................................................ 14-32
Figure 14-21 Coyita SE Vein Ag Block Grades ............................................................. 14-33
Figure 14-22 Delia NW Vein Ag Block Grades .............................................................. 14-34
Figure 14-23 Delia SE Vein Ag Block Grades ............................................................... 14-35

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Figure 14-24 Yasna Vein Ag Block Grades ................................................................... 14-36


Figure 14-25 Kasia Vein Ag Block Grades .................................................................... 14-37
Figure 14-26 Trinidad Vein Ag Block Grades ................................................................ 14-38
Figure 14-27 Marcela Sur Vein Ag Block Grades.......................................................... 14-39
Figure 14-28 Raul Vein Ag Block Grades ..................................................................... 14-40
Figure 14-29 Example of Resource and Reserve Seam Block Model ........................... 14-41
Figure 15-1 Reconciliation Methodology ......................................................................... 15-7
Figure 15-2 Reconciliation Steps .................................................................................... 15-8
Figure 15-3 Reconciliation For 2016 ............................................................................... 15-9
Figure 15-4 Branca Vein Longitudinal Section - Drilling and Mining Plan ...................... 15-10
Figure 15-5 Yasna Vein Longitudinal Section Drilling and Mining Plan ...................... 15-11
Figure 15-6 Delia NW Vein Longitudinal Section Drilling and Mining Plan ................. 15-12
Figure 15-7 Delia SE Vein Longitudinal Section Drilling and Mining Plan ................... 15-13
Figure 15-8 Marcela Vein Longitudinal Section Drilling and Mining Plan .................... 15-14
Figure 15-9 Coyita NW Vein Longitudinal Section Drilling and Mining Plan ............... 15-15
Figure 15-10 Coyita SE Vein Longitudinal Section Drilling and Mining Plan ............... 15-16
Figure 15-11 Trinidad Vein Longitudinal Section........................................................... 15-17
Figure 15-12 Raul Vein Longitudinal Section ................................................................ 15-18
Figure 16-1 Ramp Dimensions ....................................................................................... 16-3
Figure 16-2 Surface Plan with Portal Locations .............................................................. 16-4
Figure 16-3 Schematic Section of Longhole Retreat Stoping Method ............................. 16-5
Figure 16-4 Longhole Drill Section for Narrow Vein - Delia NW2 Vein Stope 146N
(Looking towards Access) ................................................................................................. 16-6
Figure 16-5 Longhole Drill Section for Wide Vein - Delia NW2 Vein Stope 146N (Looking
towards Access) ............................................................................................................... 16-7
Figure 16-6 Stability Graph MRMR vs. HR .................................................................. 16-9
Figure 16-7 Diamond Drill Holes for Crown Pillar .......................................................... 16-14
Figure 16-8 Crown Pillar Study ..................................................................................... 16-15
Figure 16-9 Laguna Verde Acoustic Basement Survey ................................................. 16-16
Figure 16-10 Acoustic Survey Line 6 Profile ................................................................. 16-17
Figure 16-11 Delia NW2 Vein 116-2 Level Plan and Ramp........................................... 16-22
Figure 16-12 Delia NW2 Ramp 101-2 ........................................................................... 16-23
Figure 16-13 Longitudinal Section - Delia NW 2 Ventilation Circuit ............................... 16-25
Figure 16-14 Underground Pumping System Schematic (Typical) ................................ 16-27
Figure 17-1 Crushing/Grinding Flow Sheet ..................................................................... 17-8
Figure 17-2 Flotation Circuit............................................................................................ 17-9
Figure 17-3 Reagent Dosages ...................................................................................... 17-10
Figure 17-4 Process Plant Water Balance .................................................................... 17-11
Figure 18-1 General Site Layout ..................................................................................... 18-3
Figure 18-2 Satellite View of Surface-Laguna Verde....................................................... 18-4
Figure 18-3 Tailings Facility ............................................................................................ 18-5

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1 SUMMARY
EXECUTIVE SUMMARY
Roscoe Postle Associates Inc. (RPA) was retained by Mandalay Resources Corporation
(Mandalay) to prepare updated Mineral Resource estimates, audit Mineral Reserve estimates,
and complete an independent Technical Report on the Cerro Bayo Project (the Project), in the
Aisn Region, near Chile Chico, Chile. The purpose of this report is to summarize the updated
Mineral Reserves and Mineral Resources as of December 31, 2016. This Technical Report
conforms to National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-
101). RPA most recently visited the property from January 12 to 14, 2016.

The Project consists of underground mines containing silver and gold veins, three of which are
currently mined from three individual portals. Veins with estimated Mineral Resources include
Yasna (Yasna Sur Zone), Coyita NW, Coyita SE, Delia NW, Delia SE, Trinidad, Marcela,
Branca, Kasia, and Raul. A processing facility, rated at 1,650 tonnes per day (tpd), is located
on the site and is operational. The plant produces a silver and gold flotation concentrate that
is trucked to the port of Puerto Chacabuco, Chile, and shipped to clients in Japan and South
Korea. Tailings are disposed of in a tailings facility located on site, with process water recycled
from the tailings facility. Power is generated on site from integrated diesel generation facilities
with 12 MW of total capacity, supplying the processing plant, surface facilities, and the
underground mines. A 1.8 MW eolic plant was commissioned in 2016 and supply from this
facility is integrated into the site generation and distribution system.

In August 2010, Mandalay purchased 100% of Compaa Minera Cerro Bayo Ltda. (CMCB),
then a subsidiary of Coeur dAlene Mines Corporation (Coeur). At that time, the Project was
under care and maintenance. Mining commenced in September 2010, with processing
initiated in January 2011. The current Life of Mine (LOM) plan, based on Proven and Probable
Reserves, outlines a mine life of three years with an average production rate of 1,000 tpd.

RPA previously completed Mineral Resource and Mineral Reserve estimates and NI 43-101
Technical Reports on the Project in March 2012, March 2013, March 2014, March 2015, and
March 2016.

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MINERAL RESOURCES AND MINERAL RESERVES


The Mineral Resource estimate as of December 31, 2016, is summarized in Table 1-1 at a cut-
off grade of 162 g/t of silver equivalent (AgEq).

TABLE 1-1 SUMMARY OF MINERAL RESOURCES INCLUSIVE OF MINERAL


RESERVES DECEMBER 31, 2016
Mandalay Resources Corporation Cerro Bayo Project

Grade Au Ag AgEq
Tonnes Ounces Ounces Ounces
Category (000) (g/t Au) (g/t Ag) (g/t AgEq) (000) (000) (000)
Measured 105 2.47 352 496 8 1,189 1,676
Indicated 915 3.05 349 526 90 10,266 15,490
Total M+ I 1,020 2.99 349 523 98 11,455 17,166

Inferred 543 2.49 206 350 43 3,592 6,117

Notes:
1. CIM definitions were followed for Mineral Resources.
2. Mineral Resources are estimated at a cut-off grade of 162 g/t silver equivalent (AgEq). The AgEq was
calculated using the formula AgEq = Ag + (Au x 58.25) where Ag and Au are in grams per tonne after
transport, treatment and refining costs are deducted.
3. Mineral Resources are estimated using a long-term gold price of US$1,400 per ounce and a long-term
silver price of US$24 per ounce.
4. A minimum mining width of 1.2 m was used.
5. Bulk density is 2.63 t/m3.
6. Mineral Resources are inclusive of Mineral Reserves.
7. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
8. Numbers may not add due to rounding.

The Mineral Reserve estimate as of December 31, 2016, is summarized in Table 1-2 at a cut-
off grade of 219 g/t AgEq.

TABLE 1-2 SUMMARY OF MINERAL RESERVES DECEMBER 31, 2016


Mandalay Resources Corporation Cerro Bayo Project

Au Ag AgEq
Grade
Tonnes Ounces Ounces Ounces
Category (000) (g/t Au) (g/t Ag) (g/t AgEq) (000) (000) (000)
Proven 103 1.91 282 409 6 931 1,352
Probable 876 2.33 282 436 66 7,932 12,289
Total Proven + Probable 979 2.29 282 434 72 8,864 13,641

Notes:
1. CIM definitions were followed for Mineral Reserves.
2. Mineral Reserves are estimated at a cut-off grade of 219 g/t silver equivalent (AgEq). AgEq is calculated
using the formula AgEq= Ag + (Au x 66.44) where Ag and Au are in grams per tonne. Metal prices for
determining cut-off grades were US$1,200/oz Au and $18/oz Ag.
3. Veins are diluted to 2.4 m minimum mining width and a mining extraction factor of 95% was applied to
stope tonnages.
4. A bulk density of 2.63 t/m3 was used.

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5. Dilution grades vary by vein.


6. Numbers may not add due to rounding.

RPA is not aware of any environmental, permitting, legal, title, taxation, socio-economic,
marketing, political, or other factors that could materially affect the Mineral Resource and
Mineral Reserve estimates.

CONCLUSIONS
RPA offers the following conclusions regarding the Cerro Bayo property:
The Project has met its 2016 exploration objectives in that new gold and silver
mineralization has been found and added to the Mineral Resources and Mineral
Reserves in the Laguna Verde sector under the lake.

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

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

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

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

The existing internal laboratory Quality Assurance/Quality Control (QA/QC) program is


appropriate, and Mandalay has implemented an additional blind QA/QC program for
enhanced validation of the accuracy and precision of the sample results.

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

Mineral Resources are reported inside vein wireframe models based on US$1,400 per
ounce gold and US$24 per ounce silver, at a 162 g/t AgEq cut-off grade, accounting
for concentrate transportation, treatment, and refining costs.

Mineral Reserves were estimated using prices of US$1,200 per ounce for gold and
US$18 per ounce for silver, at a 219 g/t AgEq cut-off grade accounting for concentrate
transportation, treatment, and refining costs.

The Mineral Reserves were estimated using a minimum mining width of 2.4 m for
longhole stoping. Based on previous observations on site, RPA is of the opinion that
the stope dilution factors could be significantly lower with continued careful planning
and execution of drilling and loading operations. Reduction of dilution in the

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development drives, however, is more difficult, as a minimum drift width is required to


accommodate equipment sizes and equipment clearance regulations.

The LOM plan, based on Mineral Reserves, shows a mine life of approximately three
years.

For the LOM plan, the expected capital investment totals approximately US$65 million,
including US$12 million for mine equipment and rebuilds, US$36 million in mine
development, US$12 million in closure costs, and a contingency of US$5 million. RPA
finds the capital costs to be reasonable.

The LOM plan forecasts a production rate averaging 1,000 tpd over the three year LOM
period. Production will come from ten veins during the LOM, accessed from portals,
which provide flexibility in production planning. Production will consist of approximately
75% from stoping and 25% from ore development during the LOM.

The mine development rates can be achieved provided sufficient manpower and
equipment are available and there are sufficient development headings. Planned
capital and operating development for 2017 to 2019 averages 26 m/day and
maintaining this rate will be critical in the preparation of stopes to meet LOM tonnage
forecasts.

The average LOM operating cost is estimated at US$97 per tonne milled, based on
2016 actual operating costs.

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

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

Mandalay is carrying out monthly reconciliations between the mine production, mill
throughput, and the mine block model. In RPAs opinion, this practice should be
continued as it allows tracking and better understanding of mine production variations.

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

RECOMMENDATIONS
RPA makes the following recommendations:

Review the uninterpreted vein intercepts with significant grades that were not included
in the 2016 models to evaluate their potential, and carry out more drilling from the
underground workings to establish vein continuity.

Perform infill drilling of the down-plunge and along-strike projections of the veins in
production or scheduled to be in production to support detailed mine planning

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especially in areas with high grade variability which are not captured by the wide-
spaced exploration drill grid.

Perform additional work including lithology, stratigraphy, and structural interpretations


to improve the understanding of the mineralization controls and grade distributions, to
assist future resource estimates, and to define new exploration targets. Post-
mineralization dykes are important to be modelled to assign internal waste into the
grade control and resource models.

Incorporate the unsampled drill hole and channel intervals into the Vulcan assay tables.

Add the structural data to the Vulcan database.

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

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

Sample all core intervals immediately adjacent to mineralization, to eliminate


undersampling of mineralized shoulders, with an additional review after assays have
been returned.

Continue selecting field core duplicates with representative grade ranges.

Review the channel sampling duplicate procedures.

Continue to digitize underground mapping and incorporate it into the model.

Continue to prepare short term block models and review reconciliation results for each
vein in production. Incorporate the unsampled data into the short term models.

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

Complete the 2017 exploration plan, consisting of a magnetometer survey,


geochemical sampling, and an 8,000 m drill program to explore new targets in the
Laguna Verde and Cerro Bayo sectors and the southern Pampa la Perra, budgeted for
approximately US$1.3 million.

ECONOMIC ANALYSIS
This section is not required as the property is currently in production, Mandalay is a producing
issuer, and there is no material expansion of current production.

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TECHNICAL SUMMARY
PROPERTY DESCRIPTION AND LOCATION
The Cerro Bayo property is located in the General Carrera Province, Aisn (XI) Region, Chile,
at approximately 72W longitude and 46.5S latitude. The Cerro Bayo property is situated
approximately 130 km south of Coyhaique, the capital of Region XI in southern Chile, and 12
km west of the town of Chile Chico, which is six kilometres west of the border with Argentina.

LAND TENURE
Mandalays mining rights comprise one contiguous block of exploitation concessions
(mensuras) that covers an area of 30,095 ha.

Mandalay owns 2,513 ha of surface rights, with another 5,373 ha held through surface use
agreements. All surface rights are located within the Cerro Bayo mining concessions.

Arrangements to complete the definitive purchase, from the Government, of land occupied by
the mill and tailings facility are expected to be finalised in 2017.

HISTORY
Gold and silver mineralization was discovered in the Cerro Bayo District (termed Fachinal at
the time), during the summer of 1984 by Freeport Chilean Exploration Company (FCEC).
Coeur subsequently purchased 100% of FCEC, including the Cerro Bayo properties, in early
1990. Construction of standard flotation mill installations started in 1994 and production
started in May 1995. Full production commenced in January 1996.

In 1995, mining started in the Laguna Verde sector of the district. Mining was concentrated in
several breccia bodies, large veins and stockworks, where three open pits were developed.
This area was the main focus of operations until 2000. Due to declining metal prices and
depletion of open pit reserves, the mine operation was suspended in November 2000.

Prior to the mine suspension in 2000, a drilling program outlined a high grade vein system near
the Cerro Bayo dome, located 14 km west of Chile Chico and 12 km east of the mill at Laguna
Verde. Coeur spent most of 2001 conducting additional infill drilling, and engineering and
economic evaluations of this area. Underground drifting commenced in November 2001,
followed by mine development. The Laguna Verde processing plant was re-started in April
2002. Operations were suspended again in 2008 due to the economic situation and depletion

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of developed reserves. Mandalay bought the property from Coeur in August 2010, and mine
development began in October 2010, with processing commencing in January 2011.

Historical production from the Project area pre-2002 was reported at 2.43 million tonnes with
production of 161,200 ounces of gold and 10.56 million ounces of silver, however, no detailed
reports are available. Based on detailed records, production over the period April 2002 to
August 2008 was 2.58 million tonnes grading 4.2 g/t Au and 346.7 g/t Ag, containing 317,000
ounces of gold and 27.7 million ounces of silver.

Production by Mandalay since 2010 to year-end 2016 totals 2.3 million tonnes with average
grades of 1.8 g/t Au and 237 g/t Ag.

GEOLOGY AND MINERALIZATION


The rocks exposed in the Cerro Bayo District are part of a thick pile of silicic volcanic rocks
assigned to the Ibaez Formation, and are believed to represent a more or less continuous
series of Jurassic to Cretaceous volcanism. The Paleozoic basement that regionally underlies
the Mesozoic volcanic rocks is not exposed in the district and extends at least to a depth of
370 m from the surface, although fragments of the metamorphic rocks are contained in the
overlying volcanic strata. The Mesozoic sequence is overlain by Tertiary basalts and minor
volcaniclastic rocks.

Three main district-scale structural orientations have been identified in the Cerro Bayo and
Laguna Verde areas: north-south, northeast-southwest to east-west, and northwest to
southeast. A Landsat lineament study across the district illustrates district and regional-scale
structures with similar orientations and locations as the local structures. These structures
correspond to arc-parallel (north-south), arc-normal (approximately east-west), and conjugate
transfer structures (northeast-southwest and northwest-southeast) trends. Pre- and post-
mineralization displacement is documented in all three of the structural orientations.

The Cerro Bayo District hosts at least 90 major veins, stockworks and breccias containing gold
and silver mineralization, located in six principal areas in the district. The deposits show
multiple stages of mineralization and display open-space filling and banding, typical of low-
sulphidation style epithermal mineralization. Mineralogy is complex and is associated with
alteration assemblages that suggest at least three stages of precious metal deposition.

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Gold mainly occurs as inclusions in pyrite, filling cavities and irregular surfaces in strongly
fractured porous grains. It has also been detected as inclusions along cleavages in galena
and iron-deficient sphalerite. Free gold occurs in quartz-bound grains, as irregular crusts and
flakes in micro cracks cutting the gangue, and within partially oxidized sulphide minerals.
Analyses with a Scanning Electron Microscope indicate that gold is argentian (electrum) with
a silver content that may reach 40%.

Silver is contained in a variety of minerals. Sulphosalts are the most common, including
freibergite, stephanite, proustite, pyrargyrite, and polybasite. Stromeyerite is also common, as
well as native silver. Argentite/acanthite, chlorargyrite, and boleite are supergene products of
surficial oxidation. In veins and veinlets, the silver minerals form irregular bands and patchy
aggregates, and are finely disseminated in the matrix of hydrothermal and tectonic breccias.
They are commonly included along fractures in pyrite grains and are also found on the margins
of galena aggregates. Larger sulphide grains may include sphalerite and electrum. Silver
minerals are more widespread than gold in the district.

Base metal sulphides are common, though not abundant in the district. These include mostly
sphalerite, galena, and chalcopyrite, forming irregular aggregates, stringers, and massive
veinlets. Tetrahedrite occurs rarely, as well as bornite and famatinite. Supergene base metal
minerals are rare in the area, and include covellite, chalcocite (digenite, idaite), cerussite,
smithsonite, and hydrohetearolite.

In the Guanaco and Cascada sector of the Cerro Bayo District, gold and silver mineralization
occurs in veins, vein systems and veinlets hosted in a moderately welded sequence of dacitic
and rhyolitic tuffs. The volcanic sequence is intruded by the Cerro Bayo and other dacitic
domes, considered as post-mineral events.

At Laguna Verde, gold and silver mineralization occurs in veins, hydrothermal and tectonic
breccias, stockworks (sheeted veins), and veinlets hosted in a moderately to strongly welded
sequence of rhyolitic and dacitic tuffs. Flow-banded dacitic domes intrude the volcanic
sequence at Coigues Hill, and at Cerro Bayo. Field evidence suggests post-mineral intrusion.

EXPLORATION
In 2016, exploration mostly consisted of infill and extension drilling of the existing zones of
Inferred Mineral Resources on previously known veins.

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MINERAL RESOURCES
RPA estimated Mineral Resources for the Yasna Sur, Coyita NW, Coyita SE, Delia NW, Delia
SE, Trinidad, Marcela, Kasia, Branca, and Raul veins located on the Cerro Bayo property as
of December 31, 2016 (Table 1-1). Mineral Resources are constrained by underground vein
models for reporting purposes. The cut-off grade was estimated at 162 g/t AgEq, taking into
account the transportation, treatment, and refining costs.

Lines based on the exploration drill holes, channel samples, and surface and underground
mapping were used in Vulcan software to create 3D vein wireframes, with a minimum thickness
of 1.2 m. Block grades were estimated by inverse distance cubed (ID3) method.

The Mineral Resource estimate and classification are in accordance with CIM definitions as
incorporated in NI 43-101.

MINERAL RESERVES
The Mineral Reserves are reported in Table 1-2. The Mineral Reserves were estimated by
Mandalay and reviewed and adopted by RPA with very slight adjustments where deemed
necessary. Mineral Reserves were estimated on all the veins included in the Mineral
Resources, except for the Kasia vein which has no reserves. The cut-off grade was estimated
at 219 g/t AgEq, taking into account the transportation, treatment, and refining costs.

The tonnages and grades were estimated using Vulcan software, with veins diluted to a
minimum mining width of 2.4 m for longhole stope mining. For veins over this width, an
additional 0.4 m of dilution width was added.

MINING METHOD
Mining is carried out using a longhole retreat stoping method. Good ground conditions allow
open stoping without backfill support. Planned sill and rib pillars are left at predetermined
spacing and in areas of lower grade to provide support. Development includes driving the
drifts through the vein at a minimum size of three metres by three metres, which is required for
the standard equipment sizes utilized.

The key to meeting the LOM production targets at Cerro Bayo is maintaining development
advance in order to provide sufficient working faces for production. Access to the veins via
separate portals and production from an average of four to five veins throughout most of the

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LOM should ensure meeting production requirements. On average, approximately 75% of


production will come from the stopes, with approximately 25% coming from active development
headings. During 2016, total development averaged 24 m per day, which is somewhat lower
than the planned 30 m per day, as there was approximately one month of lost productivity due
to a shutdown to investigate an accident. LOM development requirements average 26 m per
day for the period 2017 to 2019. An increase in the number of working faces over the LOM
will be required in order to achieve this higher rate of development. Mandalay has engaged a
mining contractor to supplement its own development capabilities.

MINERAL PROCESSING
The processing plant has a daily capacity of 1,650 tonnes producing on average approximately
31 tonnes of concentrate with grades of 70 g/t Au to 120 g/t Au and 10,000 g/t Ag to 13,000
g/t Ag. The process consists of crushing, primary grinding in a semi-autogenous grinding
(SAG) mill, classification in hydrocyclones, secondary grinding in a ball mill, flotation,
thickening, filtration, and concentrate storage. The mill presently uses four stockpiles for high,
medium, and low grade ore and a loader feeds the mill hopper based on the grades to provide
an average feed grade to the mill. Average mill recoveries utilized in the LOM plan are 87.2%
for gold and 90.8% for silver.

The concentrate is trucked to the Port of Chacabuco, approximately 250 km from the mine
site, where it is loaded for shipment to smelters.

PROJECT INFRASTRUCTURE
Cerro Bayo is a producing operation that includes a 1,650 tpd capacity flotation mill, power
supply from on site from integrated diesel generation facilities with 12 MW of total capacity,
supplying the processing plant, surface facilities, and the underground mines. A 1.8 MW eolic
plant was commissioned in 2016 and supply from this facility is integrated into the site
generation and distribution system.

Other infrastructure at the Laguna Verde site includes an administration building containing
offices plus a cafeteria, a service building equipped with a ten tonne crane used for equipment
servicing, and a separate building containing the assay laboratory.

The site also has a tailings facility with a capacity of approximately 2.5 million tonnes (sufficient
for the LOM requirement) and sedimentation basins and polishing ponds for water treatment.

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The tailings dam elevation will be increased by five metres during 2017. Explosives
magazines, compliant with Chilean regulations, are located nearby on the property.

MARKET STUDIES
Mandalay has concentrate sale agreements for 2017 concentrates with Dowa Metals and
Mining Co., Ltd. of Tokyo, Japan, LS Nikko Copper Inc. in South Korea, and Pan Pacific
Copper Co., Ltd., of Japan. The terms and conditions of the commercial sale are not disclosed
pursuant to confidentiality requirements. RPA has reviewed the agreements and is of the
opinion that the concentrate sales terms are within industry norms.

ENVIRONMENTAL, PERMITTING, AND SOCIAL CONSIDERATIONS


Mandalay has presented all Environmental Impact Assessments (EIA) and Environmental
Impact Declarations (DIA) to the designated authority of the Aisn Region. CMCB and
Mandalay have been processing and updating the permits required for the operations as
mining exploration has progressed and new areas have been incorporated into the mining
operation. Applications are submitted and processed through the Sistema de Evaluacin de
Impacto Ambiental (SEIA) in Chile.

CAPITAL AND OPERATING COST ESTIMATES


The capital costs over the LOM are presented in Table 1-3.

TABLE 1-3 LOM CAPITAL COSTS


Mandalay Resources Corporation Cerro Bayo Project

Description Total 2017 2018 2019 2020 2021-24


US$000 US$000 US$000 US$000 US$000 US$000
Fixed Assets 10,797 4,797 6,000 - - -
Capital Other 5,252 5,252 - - - -
Capital Development 23,658 11,186 8,972 3,500 - -
Exploration - Infill Inferred Resource 1,800 800 1,000 - - -
Exploration - Resources Extension and Infill 500 500 - - - -
Exploration - New Target Testing 500 - 500 - - -
Exploration - Target Generation - - - - - -
Exploration Total 2,800 1,300 1,500 - - -
Capital (Exploration and Other) 6,252 5,752 500 - - -
Total Sustaining Capital 36,255 16,783 15,972 3,500 - -
Total Growth Capital 5,752 5,752 - - - -
Total Capital Expenditure 48,260 28,287 16,472 3,500 - -
Closure/Reclamation 12,000 - - 1,000 1,000 10,000

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Description Total 2017 2018 2019 2020 2021-24


US$000 US$000 US$000 US$000 US$000 US$000
Contingency (RPA) (not applied to Closure) 10% 4,826 2,829 1,647 350 - -
Total 65,086 31,116 18,119 4,850 1,000 10,000

Note:
1. Numbers may not add due to rounding.

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

TABLE 1-4 OPERATING COSTS


Mandalay Resources Corporation Cerro Bayo Project

Avg. US$/Yr. US$/t


Description
(millions) processed
Mining 18.3 59.38
Processing 6.7 21.84
G&A 4.7 15.10
Total 29.7 96.32

Note:
1. Numbers may not add due to rounding.

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2 INTRODUCTION
Roscoe Postle Associates Inc. (RPA) was retained by Mandalay Resources Corporation
(Mandalay) to prepare updated Mineral Resource estimates, audit Mineral Reserve estimates,
and complete an independent Technical Report on the Cerro Bayo Project (the Project), in the
Aisn Region, near Chile Chico, Chile. The purpose of this report is to summarize the updated
Mineral Reserves and Mineral Resources as of December 31, 2016. This Technical Report
conforms to National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-
101).

The Project consists of underground mines exploiting silver and gold veins, four of which are
currently mined from three individual portals. Veins with estimated Mineral Resources include
Yasna (Yasna Sur Zone), Coyita NW, Coyita SE, Delia NW, Delia SE, Trinidad, Marcela,
Branca, Kasia, and Raul. A processing facility rated at 1,650 tpd is located on the site and is
operational. In August 2010, Mandalay purchased 100% of Compaia Minera Cerro Bayo
Ltda. (CMCB), then a subsidiary of Coeur dAlene Mines Corporation (Coeur), which owns and
operates the Cerro Bayo Mine. At the time, the mine was under care and maintenance.

The Cerro Bayo deposit was discovered in 2000 and Coeur commenced mining operations in
late 2001 with processing starting in April 2002. Coeur suspended mining operations at Cerro
Bayo in November 2008, due to the downturn in the economy, but continued exploration work
on the property in 2009. Scott Wilson Roscoe Postle Associates Inc. (predecessor to RPA)
prepared a resource estimate for the Fabiola, Dagny, and Yasna veins in February 2009, and
has updated Mineral Resources at the Project annually since 2011.

Mandalay commenced underground mining at Laguna Verde in September 2010. A total of


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

SOURCES OF INFORMATION
The most recent site visit was undertaken by Normand Lecuyer, P. Eng., RPA Principal Mining
Engineer, and Rosmery Cardenas, P.Eng., RPA Senior Geologist, from January 12 to 14,
2016. During the site visit, RPA inspected all of the underground operations, the processing
plant, and all surface infrastructure. No site visit was completed for the current report.

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The report was prepared by Mr. Lecuyer and Ms. Cardenas. Mr. Lecuyer is an independent
Qualified Person (QP) and is responsible for Sections 3, 5, 13, 15 to 22, 24 and parts of
Sections 1, 2, 25, 26, and 27. Ms. Cardenas is an independent QP and is responsible for
Sections 4, 6 to 12, 14, 23, and parts of Sections 1, 2, 25, 26, and 27.

Discussions were held with the following personnel from Mandalay Resources:
Mr. Dominic Duffy, P.Eng., Chief Operating Officer
Mr. Stuart OBrien, General Manager
Mr. Csar Becerra, Chief of Engineering Department
Mr. Jos Javier Santabrbara, Modelling and Resource Geologist
Mr. Sebastian Barron, Chief Mine Geologist
Mr. Scott Manske, Chief Cordilleran Geologist

The documentation reviewed, and other sources of information, are listed at the end of this
report in Section 27 References.

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LIST OF ABBREVIATIONS
Units of measurement used in this report conform to the metric system. All currency in this
report is US dollars (US$) unless otherwise noted. The exchange rate used in this report is
US$1 = CLP 500.

a annum kWh kilowatt-hour


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

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3 RELIANCE ON OTHER EXPERTS


This report has been prepared by Roscoe Postle Associates Inc. (RPA) for Mandalay
Resources Corporation (Mandalay). The information, conclusions, opinions, and estimates
contained herein are based on:
Information available to RPA at the time of preparation of this report,

Assumptions, conditions, and qualifications as set forth in this report, and

Data, reports, and other information supplied by Mandalay and other third party
sources.

For the purpose of this report, RPA has relied on ownership information provided by Mandalay.
RPA has not researched property title or mineral rights for the Project and expresses no
opinion as to the ownership status of the property.

RPA has relied on Mandalay for guidance on applicable taxes, royalties, and other government
levies or interests, applicable to revenue or income from the Project.

Except for the purposes legislated under applicable securities laws, any use of this report by
any third party are at that partys sole risk.

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4 PROPERTY DESCRIPTION AND LOCATION


The Cerro Bayo property is located in the General Carrera Province, Aisn (XI) Region, Chile,
at approximately 72W longitude and 46.5N latitude. The Cerro Bayo property is situated
approximately 130 km south of Coyhaique, the capital of Region XI in southern Chile, and 12
km west of the town of Chile Chico, which is six kilometres west of the border with Argentina
(Figure 4-1). The centre of the currently defined mineralization is located at the boundary of
UTM Zones 18S and 19S, at approximately 725,930 mE and 4,734,910 mN (UTM Zone 18S),
and 269,810 mE and 4,846,020 mN (UTM Zone 19S).

LAND TENURE
CMCB mining rights comprise one contiguous block of exploitation concessions (mensuras)
that covers an area of 29,495 ha. The property list is provided in Table 4-1 and the concession
map is shown in Figure 4-2.

TABLE 4-1 PROPERTY LIST


Mandalay Resources Corporation Cerro Bayo Project

National Roll Area


Exploitation Concessions
Number (ha)
11201-0149-4 ARROYO 1-25 240
11201-0150-8 ARROYO 31-40 96
11201-0141-9 BUITRERA 61-90 300
11201-0142-7 BUITRERA 91-120 300
11201-0136-2 GUANACA 101-106 56
11201-0137-0 GUANACA 131-158 276
11201-0138-9 GUANACA 161-190 300
11201-0139-7 GUANACA 191-220 300
11201-0140-0 GUANACA 221-243 215
11201-0082-K JARA 1-100 990
11201-0143-5 NIEVES 1-30 300
11201-0144-3 NIEVES 31-60 300
11201-0145-1 NIEVES 61-90 300
11201-0146-K NIEVES 91-120 300
11201-0147-8 NIEVES 121-150 300
11201-0148-6 NIEVES 151-180 300
11201-0125-7 LAPIZ 1-7 70
11201-0126-5 LAPIZ 21-32 120
11201-0127-3 LAPIZ 41-52 120

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National Roll Area


Exploitation Concessions
Number (ha)
11201-0128-1 LAPIZ 61-72 120
11201-0129-K LAPIZ 81-92 120
11201-0130-3 LAPIZ 101-109 84
11201-0131-1 PERRA 101-123 225
11201-0132-K PERRA 131-160 300
11201-0133-8 PERRA 161-190 300
11201-0134-6 PERRA 191-220 300
11201-0135-4 PERRA 221-244 231
11201-0155-9 CARRERA 1-37 370
11201-0085-4 MALLINES 1-100 990
11201-0091-9 HORQUETAS 1-75 750
11201-0087-0 BUITRERA 1-60 600
11201-0092-7 BRILLANTES 1-100 990
11201-0088-9 BAYO 1-70 700
11201-0089-7 MESETA 1-100 990
11201-0090-0 AGUILA 1-100 990
11201-0086-2 SINTER 1-100 990
11201-0099-4 BAHIA 1-100 990
11201-0097-8 VERDE 1-60 600
11201-0096-K PERRA 1-66 660
11201-0098-6 VICUNA 1-45 426
11201-0094-3 LARGA 1-84 840
11201-0093-5 CASCADA 1-100 990
11201-0095-1 ALPACA 4-15, 19-45 390
11201-0083-8 GUANACA 6-17, 23-34, 38-87 717
11201-0084-6 LAGUNA 10-20, 30-40, 45-60, 62-80, 82-100 760
11201-0103-6 RIBERA 6-12, 18-24, 30-36, 41-48, 50-60 400
11201-0100-1 ROCA 5-15, 20-30, 32-100 900
11201-0102-8 PUNTA 3-15, 18-30, 33-45, 47-60, 62-75, 78-81, 88- 90 740
11201-0101-K ORILLA 12-15, 27-30, 37-45, 47-60, 62-75 450
11201-0203-2 EDITH 3 1/60 300
11201-0204-0 EDITH 4 1/60 300
11201-0205-9 EDITH 5 1/60 300
11201-0206-7 EDITH 6 1/60 300
11201-0207-5 EDITH 7 1/28 140
11201-0208-3 EDITH 8 1/56 280
11201-0209-1 EDITH 9 1/56 280
11201-0210-5 EDITH 10 1/38 154
11201-0211-3 EDITH 11 1/60 300
11201-0215-6 EDITH 12 1/40 200
11201-0216-4 EDITH 13 1/60 300
11201-0217-2 EDITH 14 1/60 300

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National Roll Area


Exploitation Concessions
Number (ha)
11201-0218-0 EDITH 15 1/50 250
11201-0219-9 EDITH 16 1/50 250
11201-0220-2 EDITH 17 1/43 215
11201-0199-0 MIRASOL 1 1/56 560
11201-0200-8 MIRASOL 2 1/36 360
11201-0201-6 MIRASOL 3 1/36 330
11201-0212-1 MIRASOL 4 1/20 200
11201-0213-k MIRASOL 5 1/30 300
11201-0214-8 MIRASOL 6 1/45 450
11201-0224-5 MIRASOL 7 1/15 30
11201-0221-0 JOE 1 1/20 100
11201-0222-9 EDITH 2 1/40 200
Total 29,495

A pedimento is valid for a maximum period of two years, at which time it may be either reduced
in size by 50% of the initial area and renewed for an additional two year period, or converted
to a manifestacin. A manifestacin is valid for 220 days and may be upgraded to a mensura
if a request is submitted within this time period.

The mensuras have been surveyed by a government licensed surveyor and subjected to field
inspection and verification prior to technical approval. Once constituted, an annual fee is
required to maintain the mensuras in good standing. Mandalays 2016 annual fee was CLP
150.946.380 (or approximately US$250,000 at an exchange rate of CLP 600 : US$1). There
is no expiration date for mensuras as long as the required fees have been submitted in a timely
fashion.

Mandalay has indicated to RPA that the subject concessions are currently in good standing
and that all required payments to the Chilean government have been made.

SURFACE RIGHTS
CMCB owns 2,513 ha of surface rights, with another 5,635 ha held by surface use agreements.
All surface rights are located within the Cerro Bayo mining concessions. These surface use
agreements include renewable contracts with the following entities:
Mara Helena Fica Burgos: 581 ha
Hctor Crespo: 949.17 ha
Yamil Hasen: 600 ha

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Hasen Burgos: 1,050 ha


Ral Lambert: 166.2 ha
Waldemar: 650 ha
Cerro Largo: 700 ha
Suc Octavio Vsquez: 587 ha
Elcira Padilla 43 ha
Arrendamiento al Fisco Sector Laguna Verde 89.71 ha
Arrendamiento al Fisco Sector Guanaco 218.6 ha

Arrangements to complete the definitive purchase, from the Government, of land occupied by
the mill and tailings facility are expected to be finalised in 2017.

TAXES AND ROYALTIES


The taxes and royalties that apply to the Cerro Bayo Project were provided by Mandalay and
are listed below:
In April 2016, Mandalay purchased from Coeur the 2% net smelter return (NSR) royalty
previously payable on cumulative gold production over 50,000 ounces and cumulative
silver production over five million ounces sold from the property.

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

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

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

RPA is not aware of any environmental liabilities on the property. Mandalay has all required
permits to conduct the proposed work on the property. RPA is not aware of any other
significant factors and risks that may affect access, title, or the right or ability to perform the
proposed work program on the property.

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Cobquecura R Parral
72 70 68
N

io
Talcahuano Chillan

Ita
Concepcion Legend:

ta
Llico BIO-BIO
National Capital
Los Angeles
Administrative Region
Canete Loncopue Capital
38 38
Victoria City, Town
ARAUCANIA Major Airport
Temuco National Boundary
Puerto Saavedra
Tolten Administrative Region
Boundary
Valdivia Panguipulli Main Road
40 Secondary Road
Caunao 40
LOS LAGOS Railroad CHILE
Osorno
Guayusca Area of
Puerto Montt
Interest
Los Muermos

42 Ancud
42
Chonchi
Ayacara ARGENTINA
Mar Chaiten
Chileno Quelln
Puerto Tictoc
CHILE
44 Puerto Puyuguapi 44
Pacific
Ocean Puerto Cisnes
Regions of Chile
I Tarapac
Puerto Chacabuco Coihaique II Antofagasta
Bonito III Atacama
46 Comodoro Rivadavia
AISEN 46 IV Coquimbo
Pennsula
de Chile Chico V Valparaso
Taitao Perito Moreno RM Santiago Metropolitan Region
Puerto
Guadal VI OHiggins
Bajo Caracoles
Gulfo de
Penas
CERRO BAYO PROJECT VII Maule
Puerto Alegre VIII Biobo
48 IX Araucana
48 X
Las Horquetas Los Lagos
XI Aisn
XII Magallanes
XIV Los Ros
XV Arica-Parinacota
Tres Lagos
50
50
El Calafate
Atlantic
MAGALLANES Ocean 0 100 200 300 kilometres
Cancha Carrera
Hill Station
Puerto Natales 0 100 200 miles
52
Gulfo Monte Dinero 52 March 2017
Sarmiento Puerto Delgada
de Gamboa Puerto Progreso Source: Map No. 4395, UNITED NATIONS, 2010.
Puerto Curtze
Punta Arenas
Ar

Porvenir San Sebastian Figure 4-1


ch
ipi
la

FuerteBulnes Puerto Yartou Rio Grande


go
De

54 Tierra del Fuego


Mandalay Resources Corporation
so

San Pablo 54
lac

Puerto Hope
in

Bahia Thetis
Mar Chileno
Puerto Williams Isla de Cerro Bayo Project
los Estados
Region XI (Aisn), Chile
56
Cabo de Hornos 56 Location Map
76 74 72 70 68 66 64

4-5
256000 260000 264000 268000 272000 276000 280000 284000 288000
4852000

4852000
4848000

4848000
PUNTA
RIBERA 3-15, 18-30, 33-45,
6-12, 18-24, 47-60, 62-75,78-81,
30-36, 41-48 88-90
50-60
N EDITH E
1

EDITH 11 1/60
12 1/40 JO

BRILLANTES 1-100
ORILLA EDITH 2 1/40

EDITH 13 1/60

EDITH 14 1/60
ROCAS
12-15, 27-30, 5-15, 20-30, 32-100 BAHIA 1-100
4844000

37-45, 47-60,

4844000
EDITH 3 1/60

10-20, 30-40, 45-60,


62-75

62-80, 82-100
LAGUNA
EDITH 4 1/60
CARRERA 1-37 EDITH 10 1/38

EDITH 15 1/50

EDITH 16 1/50
VERDE 1-60

PERRA 1-66
EDITH 9 1/56 EDITH 5 1/60

6-17, 23-24, 38-87


BAYO 1-70
JARA 1-100 EDITH 8 1/56 EDITH 6 1/60

GUANACA
GUANACA 101-106
EDITH 7 1/28 EDITH 17 1/43
4840000

4840000
4-6

VICUNA 1-45
ALPACA 1-45

MALLINES 1-100
ARROYO 1-25

MESETA 1-100

AGUILA 1-100
5
MIRASOL 6 1/4
MIRASOL 5

PERRA 221-244
PERRA 161-190

PERRA 191-220
PERRA 101-123

PERRA 131-160
MIRASOL 4 1/30
1/20 GUANACA LARGA 1:84
HORQUETAS

131-158
BUITRERA 91-12

BUITRERA 1-6
BUITRERA 61-90
MIRASOL 3 1/3

90
GUANACA 161-1

101-109
LAPIZ

LAPIZ

LAPIZ

LAPIZ

LAPIZ

LAPIZ
21-32

41-52

61-72

81-92
4836000

4836000
MIRASOL 7 1/15 1-7

CASCADA 1-100

SINTER 1-100
20
GUANACA 191-2
1-75

GUANACA 221-243
0
0
6

ARROYO 31-40
NIEVES 151-180
NIEVES 121-150
NIEVES 91-120
NIEVES 61-90
MIRASOL 2 1/3

NIEVES 31-60
NIEVES 1-30

6
MIRASOL 1 1/5
4832000

4832000
6

Figure 4-2

www.rpacan.com
Mandalay Resources Corporation

256000 260000 264000 268000 272000 276000 280000 284000


Cerro 288000
Bayo Project
Legend: 0 1000 2000 3000 4000 Region XI (Aisn), Chile
Exploitation Concession Metres Property Map
Exploitation Concession in Process Local Coordinates

March 2017 Source: Mandalay Resources Corp., 2016.


www.rpacan.com

5 ACCESSIBILITY, CLIMATE, LOCAL


RESOURCES, INFRASTRUCTURE AND
PHYSIOGRAPHY
ACCESSIBILITY
The site is approximately 30 km from the town of Chile Chico and accessible via Route 265, a
paved highway. This connects to Route 7, which ties to the city of Coyhaique (population
approximately 50,000 people) and to the port of Puerto Chacabuco approximately 250 km by
road from the mine. There is also ferry service across Lake General Carrera from Chile Chico
to Ibaez, which also allows access to Puerto Chacabuco. The concentrate is trucked from
the mine, usually once per week, to Puerto Chacabuco where it is loaded on ships for delivery
to smelting customers overseas.

CLIMATE
The climate in the area is sub-Mediterranean, with the winter months of June to August at
temperatures of -10C to 0C, with light snowfall and rain. Summers are warm and dry with
temperatures in the high teens to low 20C. Average annual precipitation is approximately 300
mm, most of which is rain. The humidity is generally around the 50% mark given the proximity
of Lake General Carrera. The area is located on the east side of the Andes Mountains and on
the edge of the Patagonia area, which is commonly windy. The climate permits year round
operation.

LOCAL RESOURCES
Most of the required labour for the mine is sourced locally, with some of the staff coming from
neighbouring Argentina. Supplies can be sourced from Chile Chico and other supply centres
in Chile, such as Coyhaique and Santiago.

INFRASTRUCTURE
At the time of acquisition by Mandalay, the surface and underground infrastructure at the Cerro
Bayo included the following:
A 1,650 tpd mill.

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 5-1
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A tailings pond with a capacity of approximately 2.5 million tonnes (measuring


approximately 240 m by 600 m), and a process water pond (measuring
approximately 210 m by 385 m) from which water is recycled.

A processing plant building measuring 22 m by 82 m.

A 1,500 tonne coarse ore bin and conveyor.

Integrated diesel generation facilities with 12 MW of total capacity, supplying the


processing plant, surface facilities and the underground mines.

A 1.8 MVA eolic plant comprising, three 600 kV wind turbines, integrated into the
site power generation and distribution system.

An administration building 20 m by 59 m and a laboratory building measuring 17


m.

A 27 m by 32 m service building with a ten tonne crane.

A pumping station.

Three declines, each with and a series of ramp-connected levels, and associated
power, ventilation and dewatering infrastructure.

The power supply for the site is provided by the integrated diesel generation facilities. The total
installed capacity is 13.8 MW (including the wind power) and the actual demand averages
approximately 5 MW. The plants deliver both 3.3 kV and 400 V power.

PHYSIOGRAPHY
The Project lies on the eastern side of the Andes Mountains at elevations that range from
approximately 200 MASL to 1,400 MASL. The topography varies from steep mountain valleys
to rolling farmland; the latter was largely agricultural prior to the eruption of the Hudson volcano
in 1991, which covered the area in ash. Subsequent recovery of vegetation in the area is
limited to grasses and trees. The landforms in the area consist of glacially eroded valleys and
glacial till soils deposits.

WATER SUPPLY
The process water is currently obtained from Lake General Carrera, surface streams, and
tailings recirculation. The water rights retained are currently sufficient for the plant. These
rights include a total of 680 L/s from Lake General Carrera and several additional smaller rights
of approximately 135 L/s. The list of water permits is provided in Table 5-1.

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 5-2
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TABLE 5-1 WATER PERMITS


Mandalay Resources Corporation Cerro Bayo Project

Location Date Resolution No. Qty. (L/s)


Lago General Carrera Feb. 1993 43 200
Lago General Carrera Feb. 1994 30 200
Lago General Carrera Jan. 1994 45 80
Lago General Carrera Apr. 1993 104 200
Estero El Rodeo Oct. 1993 452 100
Estero La Tina Oct. 1993 441 35
Total 815

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

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 5-3
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6 HISTORY
This section has been largely referenced from Sims (2010).

REGIONAL HISTORY
Gold and silver mineralization was discovered in the Cerro Bayo District (termed Fachinal at
the time), during the summer of 1984 by Freeport Chilean Exploration Company (FCEC).
Drilling of veins and potential bulk-minable stockworks commenced in 1986, and continued
until mid-1989. Exploration activities were discontinued in August 1989 due to Freeports
decision to terminate its Chilean investments.

Coeur subsequently purchased 100% of FCEC, including the Cerro Bayo property, in early
1990. CDE Chilean Mining Corporation, a wholly owned subsidiary of Coeur, resumed
evaluation of the area in the second quarter of 1990. Evaluation of the Project was continued
by Coeur South America (CSA) and subsequently, CMCB, both subsidiaries of Coeur. Infill
and step-out drilling and tunneling carried out from 1990 to 1993 resulted in an open pit and
underground reserve, followed by a feasibility study and production decision in mid-1994.

Construction of standard flotation mill installations started in 1994 and production started in
May 1995. Full production commenced in January 1996.

Mining was concentrated on several breccia bodies, large veins, and stockworks in the Laguna
Verde area, where three pits were developed. This area was the main focus of operations
until 2000. Due to declining metal prices and depletion of open pit reserves, the mine operation
was suspended in November 2000.

Prior to the mine suspension in 2000, a drilling program outlined a high grade vein system near
the Cerro Bayo dome, located 14 km west of Chile Chico and 12 km east of the mill at Laguna
Verde. Coeur spent most of 2001 conducting additional infill drilling, and engineering and
economic evaluations of this area. Underground drifting commenced in November 2001,
followed by underground mine development. The Laguna Verde processing plant was re-
started in April 2002.

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Production continued in 2003, from underground, as well as the Furioso (a subsidiary deposit
located 130 km SW of Chile Chico) and Tranque open pits, as well as from mineral purchased
from Coeurs Mina Martha mine located in Argentina. Exploration and development drilling
also continued through 2003. A pre-feasibility study was completed in 2004 for the expansion
of CMCBs operations to include heap leaching, however, CMCB decided not to proceed with
heap leaching.

Production continued from both open pit and underground sources in 2005. From 2006 to
2008, production was limited to only underground mining. Mining and processing operations
were suspended in late 2008 due to diminishing reserves and the global financial crisis.

A full geological review of Laguna Verde commenced in early 2007 to identify potential
exploration targets. Detailed surface mapping and channel sampling resulted in the surface
delineation of three main structures (Dagny, Fabiola and Coyita) characterized by exposures
of altered fractures, scattered zones of narrow veinlets, and some isolated outcrops of narrow
veins. Subsequent drilling and additional surface mapping identified up to six mineralized
veins, including the Delia and Yasna veins. Exploration continued during 2009 resulting in
reporting of Mineral Resources and Mineral Reserves.

Test geochemical studies were undertaken in 2009 in the Laguna Verde veins to assess the
possibility of using trace elements to determine the depth of mineralized shoots within the
veins. A series of vertical profiles were sampled in the Dagny and Delia veins, using surface
and core samples. Results were indeterminate and indicated that precious metal and trace
element anomalies (As, Ba, Cu, Pb, Zn, Mn, Sr) are restricted to the elevation in which shoots
develop (between 100 MASL and 220 MASL), decreasing upwards, to surface.

In August 2010, Mandalay purchased 100% of CMCB, then a subsidiary of Coeur, which owns
and operates the Cerro Bayo Mine in Chile. The mine was on care and maintenance from
October 2008 to September 2010, when Mandalay restarted mining. Processing commenced
in January 2011, with the first shipment of concentrate in February 2011.

HISTORIC RESOURCE ESTIMATES


CMCB reported mineral resources and mineral reserves from 2003 to 2008. Historical mineral
resources are presented in Table 6-1 and historical mineral reserves are presented in Table
6-2. The mineral resources are exclusive of the mineral reserves.

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Technical Report NI 43-101 March 13, 2015 Page 6-2
Technical Report NI 43-101 March 21, 2017
Mandalay Resources Corporation Cerro Bayo Project, Project #2699

TABLE 6-1 HISTORICAL MINERAL RESOURCES


Mandalay Resources Corporation Cerro Bayo Project

Measured Resources Indicated Resources Inferred Resources


Cut-off Au Ag Au Ag Au Ag
Year- US$/oz Us$/oz Tonnes Au Ag Tonnes Au Tonnes Au Ag
Grade Ounces Ounces Ounces Ag (g/t) Ounces Ounces Ounces
End Au Ag (000) (g/t) (g/t) (000) (g/t) (000) (g/t) (g/t)
(AuEq g/t) (000) (000) (000) (000) (000) (000)
2003 375 5.25 3.03 to 5.81 418.9 5.5 74.1 315 4,243 2,605.2 3.12 261 151 12,456.8 713.6 3.95 90.6 238 5,461
2004 390 6.00 3.03 to 5.81 583 3.45 64.6 197 3,691 1,450 2.38 110.9 113 5,271 1,441 2.88 133.4 161 7,462
2005 410 6.50 3.03 to 5.81 599 4.41 85 220 4,237 1,413 2.69 122.2 128 5,797 1,719 3.84 212 279 15,414
2006 475 8.00 4.0 to 5.0 413 5.67 75.3 321 4,267 659 4.7 99.6 209 4,436 1,204 5.37 207.7 309 11,944
2007 600 11.00 5.0 478.9 5.09 78.4 374 5,764.4 669.2 4.72 101.5 209 4,490.3 1,451 4.66 217.4 350 16,321.6
326.
2008 750 13.25 5.0 287 5.28 49 3,005 537 4.27 74 336.9 5,816 1,217 4.02 157 368.9 14,436
2

From Sims, 2010

TABLE 6-2 HISTORICAL MINERAL RESERVES


Mandalay Resources Corporation Cerro Bayo Project

Proven Reserves Probable Reserves Total Proven and Probable Reserves


Cut-off Au Ag Au Ag Au Ag
Year- US$/o US$/oz Tonnes Au Ag Tonnes Au Ag Tonnes Au Ag
Grade Ounces Ounces Ounces Ounces Ounces Ounces
End z Au Ag (000) (g/t) (g/t) (000) (g/t) (g/t) (000) (g/t) (g/t)
(AuEq g/t) (000) (000) (000) (000) (000) (000)
2003 375 5.25 4.7 to 5.3 265.5 5.25 44.8 278 2,375.7 319.6 4.77 49 292 3,001.3 585.1 4.98 93.8 286 5,377
2004 390 6.00 4.7 to 5.3 305 4.41 43.2 258 2,533 477 4.74 72.7 233 3,576 782 4.61 115.9 243 6,109
2005 410 6.50 4.7 to 5.7 398 5.31 67.9 294 3,764 450 4.4 63.7 257 3,712 848 4.83 131.6 274 7,476

www.rpacan.com
2006 475 8.00 5.0 to 5.83 340 6.86 75 357 3,902 235 6.22 47 297 2,242 575 6.6 122 332 6,144
2007 600 11.00 6.0 399.1 5.23 67.1 334 4,280.2 309.7 4.47 44.5 297 2,954.2 708.8 4.9 111.6 317 7,234.3
2008 750 13.25 5.8 - - - - - 496 2.39 38.1 349 5,563.8 496 2.39 38.1 349 5,563.8

From Sims, 2010


Page 6-3
www.rpacan.com

RPA did not review historic resource and reserve data, and therefore cannot comment on the
validity or reliability of these historic mineral resources and reserves, as it is unknown how they
were determined. These estimates are relevant, however, as they indicate the potential
mineralization on the Project. These historical estimates have been superseded by the current
resource and reserve estimates in this report and should not be relied upon. A Qualified
Person has not done sufficient work to classify the historical estimates as current Mineral
Resources or Mineral Reserves and Mandalay is not treating the historical estimates as current
Mineral Resources or Mineral Reserves.

HISTORIC PRODUCTION
The first mining in the district was focused on surface mining in the Laguna Verde zone
(formerly termed the Fachinal area) from 1995 to 2000. From May 2002 to 2008, underground
mining was carried out primarily to the east, in the Cerro Bayo and Cascada areas, and from
the Furioso and Tranque open pits. In 2008, mining commenced at the Coigues Este area of
Laguna Verde, involving pre-production development to establish access to the Dagny and
Fabiola veins. Operations terminated prior to any production from the Dagny and Fabiola
veins.

Production from the Project area pre-2002 was reported at 2.43 million tonnes with production
of 161,200 ounces of gold and 10.56 million ounces of silver but detailed reports are not
available. Between 2002 and 2008, a total of 2.6 million tonnes of ore was processed by the
Cerro Bayo plant, including approximately 0.3 million tonnes of ore from Coeurs Martha mine
in Argentina during 2003 to 2007. The Cerro Bayo Project was under care and maintenance
from late 2008 through August 2010, with no production. Operations at Cerro Bayo were
suspended to conserve existing Mineral Reserves and focus on exploration and development
of new discoveries in the Laguna Verde area and existing veins.

Production from the Project since 2010 is summarized in Table 6-3.

TABLE 6-3 PRODUCTION HISTORY


Mandalay Resources Corporation Cerro Bayo Project

Item Units 2010 2011 2012 2013 2014 2015 2016 Total
Tonnes dry t 12,048 207,783 358,944 385,221 452,429 456,128 382,942 2,255,495
Grade Au g/t 0.87 1.06 1.71 2.02 2.19 1.81 1.34 1.75
Grade Ag g/t 282 222 285 288 259 198 166 237

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7 GEOLOGICAL SETTING AND


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

REGIONAL GEOLOGY
The Cerro Bayo District is situated within a 250 km long north-south Mesozoic volcanic belt
that lies near the boundary between an eastern craton (Patagonian Plateau) and a western
magmatic arc (Patagonian Cordillera). Vast amounts of silicic to intermediate, calc-alkaline
volcanic rocks were erupted during Jurassic to Middle Cretaceous times in a sub-aerial, intra-
arc to back-arc environment, and deposited over a Late Paleozoic accretionary basement
prism. The volcanic pile contains large volumes of rhyolitic to dacitic ash flow tuffs and
pyroclastic rocks interpreted to be associated with large volcanic structures. Marine
sedimentary horizons deposited during restricted transgressions that occurred in the
Cretaceous and Tertiary Periods are interbedded with the volcanic rocks. The belt is
unconformably overlain by plateau basalts that range in age from Early to Late Tertiary.

Intrusive rocks are mainly exposed west from Cerro Bayo. They form the Patagonian Batholith,
core of the Andes in the region, and intrude Late Paleozoic fore-arc assemblages. The
Batholith is composed of a variety of granitoids that range in age from Jurassic to Miocene,
though most were emplaced in the Early to Middle Cretaceous. Small intrusive bodies have
been identified east of the Patagonian Batholith and are represented by coeval fine-grained
porphyries, Cretaceous rhyolitic and dacitic domes (such as the Cerro Bayo and Mallines
domes), and Tertiary dioritic-gabbroic porphyries and plugs. The distribution of plutons in the
region suggests the magmatic arc had oscillatory east-west behaviour since the Jurassic, a
feature that contrasts with the typical eastward migration of the central and northern Chile
magmatic arc.

Crustal shortening and deformation was less in the Aysn area of southern Chile than in other
Andean regions. It occurred mainly in the Middle Cretaceous resulting in gentle folds and
steep northeast normal faults. Major east-west to northeast fracture zones are also important
in the region with the topography being exaggerated by Pleistocene glacial erosion that

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Technical Report NI 43-101 March 21, 2017 Page 7-1
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modified the present topographic features such as the Lake General Carrera. The largest
regional structure is the Liquie-Ofqui fault, a large transform zone that controlled the
emplacement of Cenozoic eruptive centres, that locally overlap the Batholith, and along which
the coastal area appears to have been northerly displaced.

Figure 7-1 shows the regional geology.

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Technical Report NI 43-101 March 21, 2017 Page 7-2
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66

20
20 South
N America

Sedimentary Rocks CHILE


Quaternary
24
Tertiary Area of
Interest
Cretaceous

U
Jurassic-Cretaceous
Jurassic
72
28 U
Triassic
Carboniferous-Permian
N
Paleozoic U
Precambrian-Paleozoic
Igneous and Metamorphic Rocks
32 Quaternary Volcanics CHILE
Cretaceous-Tertiary Volcanics
Mesozoic Volcanics
CERRO BAYO
Mesozoic-Cenozoic Intrusives
ICE PROJECT
Paleo-Mesozoic Intrusives
36 48
Other Units
Water
ICE Glacial Ice
U Unmapped Area

40 48 ICE
U
PACIFIC ARGENTINA
OCEAN
44
0 200 400
U
Kilometres
44 U

78 72
ICE
48
CERRO BAYO PROJECT Source: www.geology.about.com, 2012.

48 ICE

Figure 7-1
ICE
52
Mandalay Resources Corporation

52 Cerro Bayo Project


ICE

Region XI (Aisn), Chile


78 72 66 Regional Geology
0 200 400 600 800
Kilometres March 2017

7-3
www.rpacan.com

LOCAL AND PROPERTY GEOLOGY


The rocks exposed in the Cerro Bayo District are part of a thick pile of silicic volcanic rocks
assigned to the Ibaez Formation, and are believed to represent a more or less continuous
record of Jurassic to Cretaceous volcanism. The Paleozoic basement that regionally underlies
the Mesozoic volcanic rocks is not exposed in the district, at least to a depth of 370 m from the
surface, although fragments of the metamorphic rocks are contained in the overlying volcanic
rocks. The Mesozoic units are overlain by Tertiary basalts and minor volcaniclastic rocks.

The volcanic sequence that hosts the precious metal mineralization is interpreted to be related
to a system of large volcanic centers and rhyolitic domes, the most prominent being the Cerro-
Bayo-Mallines dome complex, which is hosted in a regional north-south trending fracture zone.
The volcanic sequence consists of alternating units of pyroclastic rocks of rhyolitic to dacitic
composition, including basal surge deposits, interbedded with ash fall tuffs, lavas, and
sediments. The older units are exposed at Laguna Verde, while the youngest are exposed at
Brillantes. The thickness of individual flows varies from tens to over a hundred meters,
however, an estimate of the total thickness of the sequence is difficult to determine due to
block faulting of the units. Several volcanic cooling units displaying varying degrees of welding
are recognized in the area. Radiometric dates ranging from 130 Ma to 159 Ma have been
produced in volcanic and intrusive rocks from the Ibaez Formation south of the Cerro Bayo
District using K/Ar and Ar/Ar methods.

Extensive basaltic flows (Meseta Lago Buenos Aires Formation) top the sequence to the south
of the district, representing the westernmost outcrops of a large basaltic province. A 300 m
thick sequence of olivine tholeiites to alkaline basalts is exposed, consisting of five metre to
25 m thick flows, locally separated by interflow detrital or tuffaceous horizons. Radiometric
dating indicates two main cycles of effusion, during the Eocene and Miocene to Pliocene
respectively.

Intrusive rocks are sparsely exposed at Cerro Bayo, and are restricted to Mesozoic and
Tertiary subvolcanic domes, plugs, and dyke swarms of varying compositions. Mesozoic
intrusions are generally sub-circular, flow-banded rhyolitic and dacitic domes characterized by
columnar jointing and sharp walls that rise 100 m to 250 m above the surface. The most
prominent of these is the Cerro Bayo Dome. Their emplacement is controlled by deep regional
north-south fractures and/or intersections of major faults. The domes and a set of dacitic flow-

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banded dykes are estimated to be cogenetic with the felsic tuffs, predating and postdating the
main mineralization events. Andesitic dyke swarms controlled by east-northeast fractures are
common across the district, postdating mineralization. Tertiary necks and plugs of massive
basalts and dioritic-gabbro porphyries are exposed in the southern highlands of the district,
generating local argillization of the host rocks. These bodies are cogenetic with the Tertiary
basaltic volcanism.

STRUCTURAL GEOLOGY
Three main district-scale structural orientations have been identified in the Cerro Bayo and
Laguna Verde areas, north-south, northeast-southwest to east-west, and northwest to
southeast. A Landsat lineament study across the district illustrates district and regional-scale
structures with similar orientations and locations as the local structures. These structures
correspond to arc-parallel (north-south), arc-normal (approximately east-west), and conjugate
transfer structure (northeast-southwest and northwest-southeast) trends. Pre- and post-
mineralization displacement is documented in all three of the structural orientations.

ARC-PARALLEL STRUCTURES
Arc-parallel structures are part of a north-south oriented, deep-seated regional fault system
that controls the emplacement of the Cerro Bayo and other domes in the area, as well as some
veins. At Laguna Verde, a north-south to north-northeast arcuate fault system assumed to be
related to the arc-parallel structures contains brecciated veins and breccias with silver-gold-
molybdenum-lead-zinc mineralization. The entire district, particularly the Cerro Bayo area, is
contained within the arc-parallel structural corridors.

ARC-NORMAL STRUCTURES
Arc-normal structures are orientated east-west and are the least frequent in number. They
consist of faults with very large displacements, and control the southern boundary of the
Brillantes zone and the boundary between the southern Cerro Bayo area and the Raul Block.
Indications of dip-slip movements in excess of 400 m are suggested based on displacement
of volcanic units.

CONJUGATE TRANSFER STRUCTURES


Two main sets of structures are grouped within the conjugate transfer structures. The most
important is the northwest-southeast fracture system that controls the majority of the main

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stage precious metal epithermal veins, such as Lucero and Javiera at Cerro Bayo, the
Guanaco vein system at the Guanaco Block, and Delia, Dagny and Tranque veins at Laguna
Verde. A second structural system is a late stage, post-mineralization, right lateral east-
northeast fault system responsible for the block faulting that formed the present day
topography. The combined effects of the arc-normal and the northeast-southwest transfer
structures generally displace stratigraphy down dip to the north on a district scale.

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

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 7-6
7-7

Figure 7-2

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Mandalay Resources Corporation

Cerro Bayo Project


NOTE: Refer to Figure 7-3 for Property Geology Legend. Region XI (Aisn), Chile
Property Geology
March 2017 Source: Mandalay Resources Corp., 2016.
Horquetas Legend Laguna Verde Legend Brillantes / Guanaco Legend Cerro Bayo / Mallines Legend
TERTIARY

Symbols
Stratigraphic U. Intrusive Stratigraphic U. Intrusive Stratigraphic U. Intrusive Stratigraphic U. Intrusive
Chile Chico Upper (Basalts)
ChileChico Upper (Basalts)
Chile Chico Lower (Basalts) Quartz Veins
ChileChico Lower (Basalts) Basic Necks
CRETACEUS

undifferentiated Quartz Veins


LATE

Principal Road
Coigues Dacitic Dome
(82.6+/-0.2 Ma)

Toqui Fm (Fluvial sediments)


Andesitic Intrusive
EARLY CRETACEUS

Catedral Ignimbrite
(Rhyolithic Ignimbrite)

Cerro Torta (Pyroclastic flows) Cerro Torta (Pyroclastic flows)

Cerro Tehuelche (Andesitic ignimbrites) Cerro Tehuelche (Andesitic ignimbrites)


Cerro Colorado (Andesitic flow, SVC
and dacitic tuff) Andesitic Dike
Cerro Amarillo Extrusivo Dome Brillantes Upper (Andesitic flows)
Ambar Rhyolitic Dome complex Rodados Colorados (SVC) (Dacitic Ignimbrites) Felsic Dike
The Puesto F. (Ignimbrites & tuffs)
LATE JURASSIC

(149.3+/-0.7 Ma) Brillantes Lower (Aglomerates/Andesitic Brillantes Dome (Altered)


Diamantes F. ignimbrites)
Isla Rhyolitic Dome (147.5+/-0.2 Ma) Brillantes Dome (Andesitic)
7-8

Coigues F. (Dacitic Lithic tuff) Coigues F. (Dacitic Lithic tuff) Coigues F. (Dacitic Lithic tuff) Coigues F. (Dacitic Lithic tuff) Cerro Bayo Rhyolitic Dome
Basaltic necks and dikes (151+/-1.3 Ma) (146.5+/-0.2 Ma)
Temer F. (Rhyolitic tuff) Temer F. (Rhyolitic tuff) Temer F. (Rhyolitic tuff) Temer F. (Rhyolitic tuff)
Esperanza Rhyolitic Dome (154.5+/-1.4 Ma)
Guadal F. (Dacitic tuff) Guadal F.(Dacitic tuff)
Guadal F. (Dacitic tuff) Guadal F. (Dacitic tuff)
Los Juncos F. (Rhyolitic tuff)
Los Juncos F. (Rhyolitic tuff)

Figure 7-3

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Cerro Bayo Project


Region XI (Aisn), Chile
Property Geology Legend
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MINERALIZATION
This section has been largely referenced from Sims (2010).

The Cerro Bayo District hosts at least 90 major veins, as well as stockworks and breccias
containing gold and silver mineralization, located in six principal areas in the district (Figure 7-
2). The deposits show multiple stages of mineralization and display open-space filling and
banding, typical of low-sulphidation style epithermal mineralization. Mineralogy is complex
and is associated with alteration assemblages that suggest at least three stages of precious
metal depositional environments.
An early, mesothermal event with silver-gold and base metals (Mo, Zn, and Pb) hosted
in arcuate north-south to north-northeast veins and tectonic breccias. This style of
mineralization is interpreted as resulting from igneous intrusions, doming, and
subsequent collapse.

An epithermal gold-silver mineralization event hosted mainly in north-northwest and


north-south to north-northeast structural trends with local high grades, such as the
Cerro Bayo, Cascada, and Coigues Este veins.

A late mineralizing event is interpreted to coincide with the emplacement of a porphyritic


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

K/Ar and Ar/Ar dating carried out in veins from different areas in the district indicate an age of
alteration and/or mineralization ranging from Upper Jurassic (156 Ma) to Lower Cretaceous
(114 Ma). The oldest mineralization recorded is that of the Mallines and Guanaco veins, which
range in age between 156 Ma and 137 Ma. The veins in the Cerro Bayo area were dated at
128 Ma, indicating that mineralization pre-dates the Cerro Bayo dome, which is consistent with
the geological field evidence. Restricted data from the western part of the district suggests
that mineralization at Laguna Verde is younger than the rest (114 Ma).

Over 90 veins have been identified across the property, occurring in isolation or in clusters (as
in the Cerro Bayo and Laguna Verde areas). Veins pinch and swell following pre-mineral faults
and fractures. Exposed strike lengths vary from 300 m to 2,200 m with varying widths between
0.5 m to five metres, and local pods up to seven metres wide.

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Veins are typically banded and brecciated, showing a variety of textures (crustiform, colloform,
comb, and carbonate replacement) that indicate several pulses of silica deposition and
brecciation. Hydrothermal breccias are matrix-supported, tabular to lens shaped bodies,
formed by round to angular fragments of silica flooded tuffs in a matrix of dark saccharoidal to
chalcedonic quartz and sulphides, mainly pyrite and subordinate silver sulphosalts.

Mineralization is mainly structurally controlled. Mineral fluids were channeled along pre-
mineral faults or fracture zones that were in-filled during successive hydrothermal pulses. The
brittleness and plasticity of the host rock units also control the vein widths, the degree of
development of sheeted zones, and the variations in the dip of veins due to refraction.

MINERALOGY
Gold mainly occurs as inclusions in pyrite, filling cavities and irregular surfaces in strongly
fractured porous grains. It has also been detected as inclusions along cleavages in galena
and iron-deficient sphalerite. Free gold occurs in quartz-bound grains, as irregular crusts and
flakes in micro cracks cutting the gangue, and within partially oxidized sulphide minerals.
Analyses with a Scanning Electron Microscope indicate that gold is argentian (electrum) with
a silver content that may reach 40%.

Silver is contained in a variety of minerals. Sulphosalts are the most common, including
freibergite, stephanite, proustite, pyrargyrite, and polybasite. Stromeyerite is also common, as
well as native silver. Argentite/acanthite, chlorargyrite, and boleite are supergene products of
surficial oxidation. In veins and veinlets, the sulphide minerals form irregular bands and patchy
aggregates, and are finely disseminated in the matrix of hydrothermal and tectonic breccias.
They are commonly included along fractures in pyrite grains and are also found on the margins
of galena aggregates. Larger sulphide grains may include sphalerite and electrum. Silver
minerals are more widespread than gold in the district.

Base metal sulphides are common, though not abundant in the district. These include mostly
sphalerite, galena, and chalcopyrite, forming irregular aggregates, stringers, and massive
veinlets. Tetrahedrite occurs rarely, as well as bornite and famatinite. Supergene base metal
minerals are rare in the area, and include covellite, chalcocite (digenite, idaite), cerussite,
smithsonite, and hydrohetearolite.

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Molybdenum mineralization is common in veins and tectonic breccias in the Laguna Verde
zone and consists of specks and fine disseminations of molybdenite accompanied by tungsten
and zinc-rich wulfenite and jordisite. Oxidation has produced ferrimolybdite and ilsemanite
close to the surface.

Quartz is the primary gangue and occurs in a variety of grain sizes and textures. Several
stages of deposition occurred, alternating with periods of brecciation and cementation. Pyrite
is ubiquitous as disseminations, aggregates, and veinlets. Adularia is common, intergrown
with quartz and in veinlets. Carbonates are common, mostly in veinlets, including mainly
calcite and some rhodochrosite, ankerite and siderite. Fluorite and barite are late gangue
minerals. Clays are presents and form aggregates of kaolinite-illite, smectite, and very minor
sericite/pyrophyllite. Minor sericite occurs in host-rock fragments that are included in mineral
zones. Partly limonitized hematite occurs locally.

ALTERATION
Pervasive silicification occurs as haloes around the major veins and vein clusters. Medium-
grained milky quartz was deposited in early stages and microcrystalline to opaline quartz in
late stages. Adularia occurs with quartz in veinlets adjacent to the veins. Very fine sericite,
illite, smectite, and calcite replace feldspar and biotite. Kaolinite is present as a supergene
mineral.

Weak pyritization is widespread in the district, mostly as an early stage of alteration with
medium grained quartz. Propylitic alteration marked by chlorite, epidote, carbonate,
saussuritization of feldspars and montmorillonitic clays, forms haloes surrounding bleached
zones. Deuteric alteration is common in tuffs outside the main mineralized areas forming
aggregates of plagioclase, epidote, sericite, and zeolites.

The age of alteration related to mineralization is unknown. The only available determination
(K/Ar) from sericite collected close to a major vein gave an age of 114 +/- 3 Ma (Early
Cretaceous), coincident with the most intensive period of intrusive magmatism in the region.

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GEOCHEMISTRY
Available data suggests that mineral deposition is best defined by gold and silver in the main
stage of mineralization, and also by high concentrations of zinc and molybdenum in the older
silver-rich and base metal stage.

The clearest enrichment in trace elements is evidenced in hydrothermal and tectonic breccias,
which are enriched in lead, zinc, and molybdenum. Silver values are more consistent and
relate to other trace elements, however, crosscutting quartz veinlets carrying gold complicate
the analyses. The best correlations are between base metals, silver and molybdenum, and
silver and zinc. Gold correlates poorly with other elements. The most significant signature of
the different mineralizing events is the Ag-Mo-Zn association (with subsidiary gold) for the
initial stage, and the Au-Ag-Cu-Pb association for the latter stage.

Stockworks are enriched in gold, molybdenum, and zinc, particularly where close to major
brecciated structures. A lesser enrichment in silver and lead is also evident. Silver values are
more related to other trace elements than gold. Best correlations are found in these zones
between base metals and between silver, molybdenum, lead, and zinc. Gold correlates poorly
with other elements, except for a minor relationship with copper. The different mineralizing
events are marked by the Ag-Mo-Pb-Zn association (with subsidiary gold) for the initial stage
and by Au-Cu for the late stage.

Veins are enriched in gold, silver, and zinc and to a lesser degree in lead. Molybdenum is
erratic with values of over 100 ppm only in restricted brecciated structures. The relationship
between precious and trace metals is not as clear as in the other mineralized bodies. Silver
correlates weakly with lead and zinc, and gold with copper. Molybdenum is unrelated to either
precious or base metals. Limited studies have been undertaken using other pathfinders, such
as mercury, antimony, arsenic, selenium, and barium. Mineralizing events are not well defined
by elementary associations.

CERRO BAYO - GUANACO - CASCADA


In the Guanaco and Cascada sectors of the Cerro Bayo district, gold and silver mineralization
occurs in veins, vein systems and veinlets hosted in a moderately welded sequence of dacitic
and rhyolitic tuffs. The volcanic sequence is intruded by the Cerro Bayo and other dacitic
domes, considered to be post-mineral events.

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The main vein systems have a 325 to 345 orientation, vary in dip from vertical to 75
northwest and southeast, with strike lengths between 50 m and 1,200 m. Additional extensions
in excess of 1,000 m have been disrupted by major faults trending east to northeast. Widths
are highly variable between the different vein systems and within individual veins along strike
and down dip, varying from centimetres up to five metres.

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


mineralization stage in the district. Veins are normally brecciated with local banded textures.
They consist mainly of fine-grained quartz and chalcedonic silica, adularia, and fluorite, with
minor amounts barite and carbonates. Sulphide content is less than 5% and consists mainly
of pyrite and silver sulphosalts as disseminations and bands. Moderate argillic alteration is
common in the area, with strong silicification and silico-argillic alteration occurring as haloes
along the veins.

LAGUNA VERDE
Gold and silver mineralization occur in veins, hydrothermal and tectonic breccias, stockworks
(sheeted veins) and veinlets hosted in a moderately to strongly-welded sequence of rhyolitic
and dacitic tuffs. Post-mineralization flow-banded dacitic domes intrude the volcanic sequence
at Coigues Hill.

Two main vein systems are recognized at Laguna Verde.


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

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

Strike lengths up to 800 m have been recognized in some of the vein systems. Widths are
highly variable between the different vein systems and within individual veins along strike and
down dip, varying from centimeters up to 50 m in breccias and stockworks (sheeted zones).

Two different mineralization events can be recognized at Laguna Verde.


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

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

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Brecciated veins and tectonic breccias are the typical structures of the early stage
mineralization, whereas the late stage epithermal mineralization is represented by banded
veins that are locally brecciated. The veins consist mainly of fine grained quartz and
chalcedonic silica, adularia, and fluorite, with minor amounts of barite and carbonates. The
overall sulphide content is less than 5%, although higher in the early stage event. Sulphides
are mainly pyrite, silver sulphosalts, and local sphalerite disseminations, clusters, and bands.

OTHER AREAS
Preliminary exploration has been conducted in the district outside of Laguna Verde, Cerro
Bayo, Guanaco, and Cascada. Epithermal veins and porphyry style alteration and
mineralization exist in the Mallines, Horquetas, Rodados Colorados, Meseta and Brillantes
areas.

Large vein systems and stockwork zones are exposed at Mallines, with textural and chemical
characteristics that suggest the present day exposure level is above the favourable horizon in
the epithermal system, though local indications of high grade mineralization have been found.

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

The Aisn region hosts precious and base metal mineralization. Lead-zinc-copper minerals
have been mined from veins and from irregular pods and stratiform bodies hosted in Mesozoic
volcanic rocks and sedimentary rocks, and in Paleozoic metamorphic rocks. Molybdenite-
quartz veins and veinlets occur in pegmatitic facies of the Patagonian Batholith that also
include scheelite and complex minerals of uranium and thorium. Precious metals related
locally to lead and zinc minerals have also been explored and mined in vein occurrences in
the Chilean-Argentinean Patagonia. Cerro Bayo in Chile, and Martha, Cerro Vanguardia,
Manantial Espejo, and San Jose in Argentina are the largest deposits presently known in the
region (Figure 8-1).

The mineralogy and textures of the main stage event and the associated alteration phases are
consistent with a low-sulphidation model for volcanic hosted precious metal deposits.

The following summary of low-sulphidation epithermal deposits is taken largely from Robert et
al. (2007).

The currently accepted definition of epithermal deposits includes precious and base metal
deposits forming at depths of <1.5 km and temperatures of <300C in subaerial environments
within volcanic arcs, at convergent plate margins and in intra- and back-arc as well as post-
collisional extensional settings. Epithermal systems can be grouped into high, intermediate,
and low sulphidation types based on variations in their hypogene sulfide assemblages (Sillitoe
and Hedenquist, 2003). Most epithermal gold deposits are Cenozoic in age, but some older
deposits are known, although none of the giant ones are older than Cretaceous.

Low sulphidation epithermal gold deposits of the alkalic and subalkalic subtypes share a
number of characteristics and are described together. Differing characteristics of the less
common alkalic low sulphidation deposits are highlighted where appropriate. Most low
sulphidation gold deposits are found in intra or back-arc rifts within continental or island arcs
with bimodal volcanism. Rifts may form during or after subduction or in post-collisional

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


volcanic arcs, but only in clearly extensional settings (Sillitoe and Hedenquist, 2003). Deposits
of the alkalic subset of low sulphidation epithermal deposits are specifically associated with
alkaline magmatic belts but share an extensional setting with their calk-alkaline counterparts
(Jensen and Barton, 2000).

At the deposit scale, low sulphidation gold deposits are typically hosted in volcanic units, but
can also be hosted by their basement. Vein development in the basement does not reflect
syn-mineral uplift, as is the case in high sulphidation and intermediate sulphidation systems,
but rather the intersection of the hydrothermal system with rheologically more favorable
basement host rocks. Syn-mineral mafic dykes are common in these deposits (Sillitoe and
Hedenquist, 2003). Both low-grade disseminated and structurally controlled high-grade
deposits can form, such as Round Mountain and Hishikari, respectively. Calc-alkalic low
sulphidation deposits have restricted vertical continuity, generally less than 300 m, whereas
alkalic low sulphidation deposits such as Porgera and Cripple Creek can extend in excess of
one kilometre vertically. Mineralization in subalkalic low sulphidation systems generally has
high silver (Au:Ag ratio <1) and low base metal content and gold is associated with pyrite
high-Fe sphalerite pyrrhotite arsenopyrite. In contrast, low sulphidation alkalic
mineralization commonly contains abundant telluride minerals, has elevated Au:Ag ratios, and
less voluminous quartz gangue (Jensen and Barton, 2000).

Alteration mineralogy in low sulphidation systems shows lateral zoning from proximal quartz-
chalcedonyadularia in mineralized veins, which commonly display crustiform-colloform
banding and platy, lattice-textured quartz indicative of boiling, through illite- pyrite to distal
propylitic alteration assemblages. Vertical zoning in clay minerals from shallow, low
temperature kaolinite-smectite assemblages to deeper, higher temperature illite have also
been described (Simmons et al., 2005). As with high sulphidation and low sulphidation
systems, host rock composition can also cause variations in the alteration mineral zoning
pattern in low sulphidation systems. Alteration assemblages in alkalic low sulphidation
deposits commonly contain roscoelite, a V-rich white mica, and abundant carbonate minerals
(Jensen and Barton, 2000).

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74 72 70 68 66 64

46

48
8-3

50

Figure 8-1

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Mandalay Resources Corporation
0 40 80 120 160 200
Kilometres
Cerro Bayo Project
Region XI (Aisn), Chile
Regional Deposits
March 2017 Source: Mandalay Resources Corp., 2011.
www.rpacan.com

9 EXPLORATION
Prior to 2009, Coeur had previously identified additional mineralized zones on the property
through detailed surface mapping and had started defining these targets, such as Cerro Bayo
Este, Pampa la Perra, La Tina, and Zone 2. In addition, detailed surface mapping was
conducted across Zone 2, resulting in the identification of the Gabriella and Gaby W vein
systems. Mapping in these areas delineated veins and veinlets of massive quartz between
0.1 m and 1.2 m in width, trending approximately 170 azimuth and dipping 86 east.

In 2011, Mandalay reviewed historic Coeur reports and data while continuing surface mapping
of the district.

In 2012, surface mapping was completed in the Mallines, Gabriela, and Laguna Verde zones
and exploration for new targets was carried out in the Esperanza, Antimonio, and Cerro
Amarillo zones.

In 2013, regional and local geochemical mapping was carried out using trace elements.
Surface mapping was completed in the Esperanza and Brillantes zones. Uraniumlead dating
of intrusive rocks was carried out in the Laguna Verde Island and Horquetas zones.
Hydrothermal alteration zones were mapped using Terraspec Hi Resolution Mineral
Spectrometer (ASD) and the lithological contact between Temer and Coigues units was
defined for the Laguna Verde and Cerro Bayo areas.

In 2014, surface mapping was updated in the Laguna Verde zone. Three-dimensional
modelling of the stratigraphic units was performed. Zircon uraniumlead dating in ignimbrite
rocks from Temer, Coigues, and Rodado Colorados units, and the Isla and Esperanza domes
was executed. The ages of these units were all determined to be the Lower Jurassic. Also,
argon-argon dating of adularia in Delia and Coyita SW veins at depth was carried out indicating
the hydrothermal event occurred in the Lower Cretaceous correlating with the dating of the
Cerro Bayo, Guanaco, and Brillantes hydrothermal events. Surface grids were executed in
Laguna Verde, Cerro Bayo and Mallines W producing a radiometric register (U, Th, K) using a
scintillometer and a mineralogical analysis using an ASD spectrometer. As a result, paleoflows
and new exploration targets were defined.

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In 2015, a detailed mapping was performed in the Brillantes zone. As a result, 20 new veins
were defined on surface along a length of 10,500 m, and a new interpretation of the
stratigraphy was completed. A magnetometer survey was performed under the lake as an aid
to guide the 2016 drilling program, discover new targets, and define intrusive extensions. Also,
hydrothermal pulse mapping was conducted for Coyita and Fabiola veins identifying the
paragenesis in each mineralizing events and their relationship with the gold and silver
concentrations (C. Rodriguez PHD Thesis).

In 2016, a detailed mapping was performed in the Cerro del Viento, Elsa-Pilar, and Co. Azul
zones. As a result, 20 new veins were defined on surface along a length of 10,500 m, and a
new interpretation of the stratigraphy was completed. Magnetometer surveys were performed
over Pampa La Perra, Pampa Mallines, and Pampa Marcela as aids to guide the 2017 drilling
program, discover new targets, and define intrusive extensions. In addition, a number of vein
and wall rock samples were taken for the manufacture of thin sections and study by reflected-
and transmitted-light microscopy, in order to clarify lithologic, alteration, and mineral
paragenesis relations.

EXPLORATION POTENTIAL
RPA is of the opinion that the Cerro Bayo Project hosts a significant silver and gold mineralized
system, and that there is good potential to increase the resource base where existing
mineralization and newly identified targets are open along strike and at depth, especially under
the Laguna Verde lake. Continued exploration is warranted.

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10 DRILLING
Drilling on the Cerro Bayo property has been conducted in phases by several companies from
1986 to 2016. Total drilling consists of 5,103 diamond drill holes for 698,439 m and 666
reverse circulation (RC) holes for 57,271 m. A small number of exploration drill holes outside
of the main mining areas are not included in the totals.

A summary of drilling by operator is included in Table 10-1. Drill hole locations for the modelled
veins in the Coigues Este area are included in Figures 14-5 to 14-6.

TABLE 10-1 DRILL HOLE DATABASE


Mandalay Resources Corporation Cerro Bayo Project

Core Holes RC Holes


Year No. No. No. No.
Area
Drilled Holes Metres Holes Metres
Cerro Bayo Dome/Guanaco Pre-2010 1,967 206,486 9 1,582
Mallines Pre-2010 54 6,995 - -
Cascada Pre-2010 153 24,828 - -
Pre-2010 1,583 195,087 657 55689
2010 15 2,668 - -
Laguna Verde (includes Coigues Este)
2011 290 60,457 - -
2012 230 62,189 - -
Laguna Verde Underground 2012 60 2,647 -
Horquetas 2012 14 3,743 - -
Cerro Bayo 2013 43 10,525 - -
Laguna Verde 2013 94 20,994 - -
Laguna Verde Underground 2013 97 2,013 - -
Mallines 2013 13 3,595 - -
Caadon 2013 12 2,329 - -
Laguna Verde 2014 69 24,552 - -
Laguna Verde Underground 2014 82 2,263
Mallines 2014 5 1,444 - -
Caadon Verde 2014 12 2,329 - -
Laguna Verde 2015 68 25,206 - -
Laguna Verde Underground 2015 85 1,749 - -
Brillantes 2016 24 8,181 - -
Cerro Bayo 2016 7 2,346 - -
Laguna Verde 2016 65 24,390 - -
Laguna Verde Underground 2016 61 1,424 - -
Total 5,103 698,439 666 57,271

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

RC drilling was carried out in the Laguna Verde area in the early stages of exploration in the
district, between 1990 and 1992, and again in late 2003 and early 2004. RC drilling was
conducted by contractors using 5.5 in. bits. Sampling of cuttings obtained from RC drilling was
taken on 0.5 m and 1.0 m increments with a targeted total sample size of 20 kg to 22 kg in the
first case, and 40 kg to 45 kg in the latter case. The drill hole cuttings were logged by the
geologists for lithological, structural, and mineralogical information. Boxes with splits of the
sampled intervals were stored. The reject material was bagged and stored until the drilling
campaign, interpretation, and modelling were complete, in order to review or resample if
required.

Until 2009, most of the core drilling was carried out by contractors and by Coeur personnel
using CMCB-owned drill rigs (Diamec 251 and Diamec 262). BQ diameter holes were drilled
underground and BQ, NQ, and HQ diameter holes were drilled from surface.

Drill hole collar coordinates were surveyed using industry standard surveying techniques by
in-house and contract surveyors.

Sperry Sun downhole surveys were taken on the majority of the core holes. Results from
Sperry Sun surveys showed slightly less than 4 horizontal and 1.5 vertical deviations per 100
m, based on 481 surveyed core holes. In 2004, a Reflex multi-shot downhole survey
instrument was purchased and used for subsequent drilling. Downhole surveys were not taken
on reverse circulation holes.

Company geologists logged lithological, structural, and mineralogical information, while other
company personnel logged recovery and rock quality designation (RQD) data.

All drill hole data was originally maintained in manual form. Since the early 1990s, the data
was entered and stored in Excel spreadsheets. Data was later stored in a centralized Access
database, then moved into an acQuire information management system database.

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MANDALAY DRILLING
2010-2011
Mandalay completed 63,125 m of core drilling in 305 holes during 2010 and 2011 at Laguna
Verde. The drilling was a part of the resource confirmation and extensional program conducted
by Mandalay Geological Team for Dagny, Fabiola, Yasna, Delia NW, Delia SE, Marcela Sur,
and Dalila veins. Blue sky exploration holes targeted the Gabriela vein.

Mandalay drilling was completed using Atlas Copco Diamec 262 and 252 drill rigs. Master
Drilling used Boart Longyear F90 and Max1000 drill rigs. All Mandalay drill core is stored at
Granja Temer in Laguna Verde, and older core is stored in Guanaco near Cerro Bayo.

Drill hole collars were surveyed by Mandalay surveyors using total station survey instruments.
Downhole surveys were completed by Mandalay and contract drillers after the hole was
complete using Maxibor II instruments. Some of the downhole surveys were corrected after
the collars were reviewed and resurveyed.

The diamond drill core was placed in appropriately labelled wooden core trays at the drill rig
prior to transport. Core was carefully transported by geological assistants to the on-site Granja
Temer core logging facility by truck.

All geological information was manually logged on paper, and then transferred to Excel
spreadsheets. In late 2011, core logging was entered digitally into Geovectras GVMapper
logging software program. All diamond drill core was photographed using a digital camera and
the images were stored in the master database.

Geological information recorded includes lithology, veins, core recovery, description of specific
structures and alteration styles, along with their width, intensity, and associated mineral
assemblage. In addition, RQD was undertaken to record the number and nature of natural
breaks in the core for subsequent geotechnical assessment.

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2012
The purpose of the 2012 Mandalay drilling programs was to drill infill holes and extend
resources of the Dagny, Delia NW, Delia SE, Coyita, Dalila, and Trinidad veins. Blue sky
exploration holes targeted the Gabriela vein.

Mandalay completed a total of 230 diamond drill holes totalling 62,189 m, of which 61% was
completed at Laguna Verde and Marcela Sur and the remaining 39% at Gabriela, Caiquenes,
and Guanaco veins. All holes were collared and finalized using BQ, NQ, and HQ diameter
core.

Following RPAs recommendations, Mandalay implemented standard operating procedures


for core logging, to be used by all current and future geology personnel.

2013
During 2013, Mandalay completed 162 drill holes for 37,445 m, of which 41% was infill drilling,
35% was extensional definition drilling for some of the veins, and 24% was exploration drilling
in new targets. The infill drilling focused on the Delia NW, Trinidad, Marcela Sur, Raul, and
Coyita veins. The extensional definition drilling was completed in the southeast area of the
Fabiola and Yasna veins under the Laguna Verde lake, at the Lourdes West and Wendy North
veins in the Cerro Bayo area, and at the Guanaco I, Juncos, Chinita, Chatito, Condor, and
Carola veins. The exploration drilling was concentrated on the new targets at the Esperanza,
Antimonio, and Mallines West veins.

As a result of the extensional drilling, Fabiola and Yasna vein mineralization was extended for
approximately 500 m to the southeast of the previous limits. The drilling also showed that
there is good potential to extend mineralization to the southeast of the Coyita vein.

In late 2013, there were five diamond drills on site. All five drills were company owned. Drilling
averaged approximately 3,000 m per month.

2014
During 2014, Mandalay completed 83 drill holes for 27,848 m, of which 47% was infill drilling,
34% was extensional definition drilling for some of the veins, and 19% was exploration drilling

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in new targets. The infill drilling focused on the Coyita and Yasna veins. The extensional
definition drilling was completed in Cristal and Coyita, Fabiola, Yasna, Kasia, and Irene veins
under Laguna Verde. The exploration drilling was concentrated on the new targets at the
Esperanza and Cerro Amarillo veins. As a result of the extensional drilling, Coyita vein
mineralization was extended approximately 650 m to the southeast.

In 2014, there were three diamond drills on site. All three drills were company owned. Drilling
averaged approximately 2,300 m per month.

2015
During 2015, Mandalay completed 83 drill holes for 26,702 m, of which 83% was infill drilling,
8% was extensional definition drilling for some of the veins, 2% was exploration drilling, and
6% was used in mine services (not considered in Table 10-1). The infill drilling focused on the
Coyita, Yasna, and Kasia veins. The extensional definition drilling was completed in Coyita,
Yasna, and Irene veins under Laguna Verde lake. The exploration drilling was concentrated
on the new target northeast of Coyita vein, and a new vein structure was intercepted with good
potential for additional mineralization. As a result of the extensional drilling, Coyita vein
mineralization was extended approximately 200 m to the southeast.

In 2015, there were three diamond drills on site. All three drills were company owned. Drilling
averaged approximately 2,300 m per month.

In addition, 7,753 m of underground channel samples corresponding to 11,089 samples has


been taken as at December 31, 2015 in Laguna Verde sector as is shown in Table 14-2.

2016
During 2016, Mandalay completed 96 drill holes (not including service and aborted holes) for
a total of 34,916.25 m, of which 48% was new target testing, 41% was infill drilling, 8% was
extensional definition drilling on veins, 11% was ore control drilling for longhole stope design
definition and remaining drilling was done for mine infrastructure projects (see Table 10-1).

The infill drilling focused on the Branca, Delia SE, and Dalila veins. The extensional definition
drilling was completed in Yasna Inflexion and Camila/L1. The exploration drilling was

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concentrated mainly on the Brillantes zone, where several vein-filled structures were
intercepted with significant width, but lacking in precious metals mineralization. As a result of
the infill drilling, Branca vein mineralization was extended approximately 200 m to the
southeast.

During 2016, Mandalay employed three company-owned diamond drill machines on-site.
Drilling averaged approximately 2,950 m per month.

In addition, a total of 1,424 m of underground drilling in 61 holes and a total of 2,027.6 m of


underground channel sampling were completed in the Laguna Verde sector. A total of 3,058
channel samples from the Laguna Verde sector were submitted for assaying to December 31,
2016 (Table 14-2; data from Cerro Bayo mine staff).

RPA is not aware of any drilling, sampling, or recovery factors that could materially impact on
the accuracy and reliability of the results.

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11 SAMPLE PREPARATION, ANALYSES AND


SECURITY
PREVIOUS WORK
This section has been largely taken from SRK (2010).

A complete assay laboratory owned by CMCB and located at the mill site near Laguna Verde,
contains facilities for sample preparation, fire, wet and atomic absorption assays. Both mine
and exploration samples are assayed at this facility. Outside consultants established testing
procedures in accordance with industry standards. SGS Lakefield Research Chile S.A. (SGS)
carried out an audit in 2011 and results showed that the laboratory meets international
standards. Prior to this, Snowden Mining Consultants Inc. and Jacobs Engineering Group Inc.
reviewed the laboratory in 2001. Although the laboratory was not certified, their findings were
that the laboratory met international standard operating procedures.

All exploration and production sampling has been carried out by CMCB personnel.

Each core sample is identified with a unique sample number tracked throughout the assaying
process. Samples are weighed prior to crushing, jaw crushed to produce a 9.5 mm product,
roll crushed to achieve 90% passing 2.0 mm (10 mesh ASTM) product, then split with a one
inch riffle to approximately 0.5 kg. This 0.5 kg sample is air dried for two hours at 102C prior
to pulverization using a plate pulverizer to 100% passing 0.15 mm (100 mesh ASTM). After
pulverizing each sample, the bowl, ring, and puck assembly are disassembled with the
pulverized sample, and placed on a rolling cloth. The pulverizer assembly is placed back in
the bowl with another sample. Two assemblies were used in an alternating fashion. The
pulverized sample is rolled and transferred to a numbered envelope. Silica sand is pulverized
at the end of the entire sample run to minimize possible contamination for the next run. No
cleaning or downgrading of the pulverizer assembly is performed during any single sample.
No significant material was carried over from sample to sample with this equipment.

Each RC sample is identified with a unique sample number tracked throughout the assaying
process. Samples are dried at 105oC, if required. Following drying, the sample is roll crushed

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to achieve 90% passing 2.0 mm (10 mesh ASTM) product, then split with a one inch riffle to
approximately 500 g. This sample is air dried for two hours at 105oC then pulverized using a
ring and puck pulverizer to 100% passing 0.15 mm (100 mesh ASTM). After pulverizing each
sample, the bowl, ring, and puck assembly are disassembled with the pulverized sample, and
placed on a rolling cloth. The pulverizer assembly is placed back in the bowl with another
sample. Two assemblies are used in an alternating fashion. The pulverized sample is rolled
and transferred to a numbered envelope. Silica sand is pulverized at the end of the entire
sample run to minimize possible contamination for the next run. No cleaning or downgrading
of the pulverizer assembly is performed during any single sample. No significant material is
carried over from sample to sample with this equipment.

Channel samples and stockpile samples are two types of mine production samples analyzed.

Each channel sample is identified with a unique sample number tracked throughout the
assaying process. Samples are dried at 105oC if required. Samples are jaw crushed to
produce a 9.5 mm product, roll crushed to achieve 90% passing 2.0 mm (10 mesh ASTM)
product, then split with a one inch riffle to approximately 500 g. This sample is air dried for two
hours at 105oC, and then pulverized using a ring and puck pulverizer to 100% passing 0.15
mm (100 mesh ASTM). After pulverizing each sample, the bowl, ring, and puck assembly
were disassembled with the pulverized sample, and placed on a rolling cloth. The pulverizer
assembly is placed back in the bowl with another sample. Two assemblies are used in an
alternating fashion. The pulverized sample is rolled and transferred to a numbered envelope.
Silica sand is pulverized at the end of the entire sample run to minimize possible contamination
for the next run. No cleaning or downgrading of the pulverizer assembly is performed during
any single sample. No significant material is carried over from sample to sample with this
equipment.

Each stockpile sample is identified with a unique sample number tracked throughout the
assaying process. Samples are dried at 105oC if required. Samples are jaw crushed to
produce a 9.5 mm and split with a one inch riffle to 20 kg. This split is then roll crushed to
achieve 90% passing 2.0 mm (10 mesh ASTM) product, and then split with a one inch riffle to
approximately 500 g. This sample is air dried for two hours at 105oC, then pulverized using a
ring and puck pulverizer to 100% passing 0.15 mm (100 mesh ASTM). After pulverizing each
sample, the bowl, ring, and puck assembly are disassembled with the pulverized sample, and

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placed on a rolling cloth. The pulverizer assembly is placed back in the bowl with another
sample. Two assemblies are used in an alternating fashion. The pulverized sample is rolled
and transferred to a numbered envelope. Silica sand is pulverized at the end of the entire
sample run to minimize possible contamination for the next run. No significant material is
carried over from sample to sample with this equipment.

All samples were assayed for gold and silver by fire assay and gravimetric finish using a 30 g
nominal sample weight (Cerro Bayo ME Grav21 method). Check assays, including duplicate
pulps and coarse rejects, totalling 285 samples, were carried out at the ALS Chemex
laboratory in La Serena, Chile, where samples were assayed by fire assay with a gravimetric
finish.

The gold and silver present in the sample were expressed according to the following formulae:

Au (g/t) = au (mg) / sample weight (g)


Ag (g/t) = (Au + Ag) (mg) Au (mg) / sample weight (g)

MANDALAY WORK
CORE SAMPLING
Core is sampled predominately on the basis of geological logging with sample intervals ranging
from a minimum sample length of 0.1 m and a maximum sample length of 1.5 m. Mineralized
intersections and adjacent intervals are selectively sampled for assaying for silver and gold
content. An electric diamond saw is used to cut the core lengthwise, which is then placed
correctly back into the tray. The half-core is then sampled by Mandalay geological assistants,
ensuring that the same side is consistently sampled, and placed into bags with the assigned
sample number, then closed and sealed with staples. The samples are then securely
transported by truck to the on-site laboratory. Intervals that are not assayed remain in storage
at the mine site.

Mandalay has implemented standard operating procedures for core sampling, as


recommended in RPA (2012).

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CHANNEL SAMPLING
Underground channel samples are collected from level development headings at an
approximate 2.4 m spacing. Veins and mineralization are selectively sampled on each face,
with samples taken across the whole face width every fifth round. The minimum sample length
is 0.1 m and the maximum length is 1.0 m. The width of the channel ranges from 0.2 m to 0.4
m and the depth is typically 0.2 m. Each sampled face is mapped and recorded with
corresponding channel sample information.

RPA recommends channel sampling across the entire face for each round to obtain additional
information on grade distribution, especially along indistinct contacts between mineralized and
non-mineralized zones, and for use in determination of dilution grades immediately adjacent
to veins.

Mandalay has implemented standard operating procedures for channel sampling.

SAMPLE ANALYSES
Assaying was completed by the on-site laboratory, which contains all facilities for sample
preparation, fire, wet and atomic absorption assays. The on-site laboratory is wholly-owned
by Mandalay and it is not certified.

In-house standard operating procedures have been developed and documented by Mandalay
for sample preparation, sample crushing and pulverizing, and fire assaying with a gravimetric
finish.

All samples are received at the laboratory with standard work orders for each batch.
Information on the work orders is checked against the sample number tags prior to sample
preparation. All wet samples are dried in the furnace prior to sample preparation.

Dried samples are crushed in two stages to 85% passing 10 mesh. A 400 g to 500 g split is
riffled off and the unused portion stored as a coarse reject. The entire split sample is pulverized
to 95% passing 140 mesh.

Assaying is done by fire assaying methods with a gravimetric finish based on an approximate
30 g sample. Each sample is fire-assayed using a traditional lead oxide flux as well as a known

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addition of silver, and then placed in fire assay furnaces. The fusion of the flux and inquarted
sample produced a molten mixture that is poured into conical molds and cooled. The lead
button formed during the fusion process is separated from the cooled slag and pounded to
remove any adhering slag. The lead button is then cupelled using a magnesium oxide cupel.
The remaining dor bead is flattened and weighed. The weighed dor is placed in a test tube
and concentrated nitric acid is added. The button is then rinsed, ammonia is added, and the
button rinsed again. The button is dried and roasted for five minutes at 700oC. The gold is
weighed after cooling. Silver to gold ratios are then checked. If the ratio is lower than 3:1,
additional silver and lead is added, and the sample is re-analyzed.

Coarse rejects and pulps are retained for future test work or further mineralogical and
metallurgical work.

SAMPLE SECURITY
Mandalays security procedure involves direct drill and sample management, secure
transportation methods, sampling, sawing, and logging areas.

LABORATORY AUDIT
SGS conducted a laboratory audit from August 24 to 25, 2011. All laboratory procedures for
sample analysis and the internal laboratory quality assurance/quality control (QA/QC)
program, and laboratory equipment were reviewed. Details are documented in the SGS
Laboratory Audit Report (SGS, 2011).

SGS did not identify any issues in general, regarding the technical level of laboratory
personnel, the overall laboratory data management procedures, or the execution of the sample
preparation and sample analytical procedures.

SGS recommended implementing a few changes with periodic reviews regarding training of
laboratory personnel, fire assay furnace temperature control, equipment calibration, and loss
of silver during the cupellation stage. SGS also recommended taking note of the shelf life of
standards used for calibration of atomic absorption equipment, the use of precision curves for
controlling repeatability of analyses, and regular checks on the status of the laboratory
equipment.

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Regarding Mandalays internal laboratory QA/QC program, SGS recommended the use of
certified reference materials (CRMs) as checks on the in-house reference materials used, and
the establishment of in-house procedures and control charts for timely review and validation
of analytical batches. All SGS recommendations above were implemented.

SGS also recommended that the on-site laboratory obtain ISO (International Organization for
Standardization) certification for accreditation, involving the establishment and implementation
of a quality management system.

In RPAs opinion, the sample preparation, analytical procedures, and security meet industry
standards and are acceptable to support the resource estimation work. The QA/QC
procedures and results are summarized in Section 12.

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12 DATA VERIFICATION
DATA VALIDATION
PREVIOUS WORK
This section has largely been taken from SRK (2010) and RPA (2012, 2013, 2014, and 2015).

2008 2009
Data verification was conducted on the Gemcom GEMS (Gemcom) resource databases used
for the 2008 Dagny, Fabiola, and Yasna resource models, and the 2009 Delia resource model
after the models were completed. The acQuire data management system was implemented
at Cerro Bayo in 2007 to 2008, but was not fully implemented at the time of modeling.
Discrepancies were identified when comparing the Gemcom databases to the acQuire
databases, due to missing assays in the Gemcom databases.

By early 2009, all Cerro Bayo data was stored in an acQuire database at the Coeur South
America (CSA) Exploration offices in Chile Chico and at the exploration office in Santiago. The
acQuire data management system stored data in a standardized structure, provided tools for
data QA/QC and reporting, and was securely backed up at the corporate office. All assay
certificates were imported directly into the acQuire database, and were linked to sample
numbers stored in the database, minimizing manual assay transfer errors.

CSA completed an extensive validation of the data collected from 2007 to 2009. Data
verification was limited to the data included in the mineral resource databases. No significant
discrepancies were found.

2010
Details of the following data verification conducted by SRK in 2010 are contained in SRK
(2010). The database verification consisted of checks in four drill holes from each of the Delia,
Dagny and the Fabiola-Yasna vein systems. Drill logs, collar information, assay intervals and
laboratory certificates were checked against vein cross section plots, and the acQuire
database. No significant discrepancies were identified.

Mandalay carried out a twin drill hole program in 2010. A total of 15 core holes were twinned
by a second core hole in the Cerro Bayo and Laguna Verde areas, including veins in the

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Coigues Este area. This total includes holes in the Dagny vein and two holes in the Fabiola-
Yasna vein system. Selected holes were representative of the different domains and grades
in each vein. Core was split, and one half was assayed at the ALS-Chemex (Geolab)
laboratory in Santiago or La Serena. Blanks and standards were included for laboratory
checks.

All duplicate holes intercepted the target vein at or close to the expected location. Comparative
results confirmed the general position and widths of the mineralized structures. Significant
variability in grades were encountered with high gold and silver values above 15 g/t Au and
1,000 g/t Ag, which is related to the variability of mineralization in epithermal veins. Grade
variability may also be affected by a smaller sample volume taken from the twinned holes (half
core compared to whole core from the original holes) and different core diameter of the twinned
holes.

SRK visited the core logging and storage facility located near Laguna Verde. Mineralized
intercepts from six core holes were examined and compared with the original geologic logs.
No significant differences were identified in the logged descriptions of the lithologies,
mineralization, structures, or measured intervals.

Based on data verification undertaken in 2010, and independent reviews completed


previously, SRK determined that the general flow of data from original drill hole logs, drill hole
surveys, sampling, sample preparation, laboratory procedures, laboratory certificates, and the
construction of cross sections, were completed in accordance with generally accepted best
practice standards.

2011
Patti Nakai-Lajoie, Principal Geologist with RPA, and an independent QP, visited the property
from September 29 to October 10, 2011. During the visit, Ms. Nakai-Lajoie examined
underground exposures of mineralization, reviewed plans and sections, visited the analytical
laboratory on site, and reviewed core logging and sampling procedures. As part of the data
verification process, RPA checked the databases against copies of the assay certificates,
checked a selection of drill hole collars, and reviewed QA/QC data collected by Mandalay.

The data verification and QA/QC conducted by RPA in 2011 are summarized as following:

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Surface drill hole locations were confirmed by RPA using a hand-held GPS. Identified
discrepancies were resolved through the implementation of an on-site transformed
coordinate system.

RPA checked a minimum of 10% of assay records in the Cerro Bayo drill hole and
channel databases against original hardcopy assay certificates. No significant
discrepancies were identified but a few minor database errors such as missing lithology
records and incorrect vein flag codes were noted.

2012
Rosmery Cardenas, Senior Geologist with RPA, and an independent QP, visited the property
from November 26 to 29, 2012. During the site visit, Ms. Cardenas examined underground
exposures of mineralization, reviewed plans and sections, visited the analytical laboratory on
site and the core shack, and reviewed core logging and sampling procedures. As part of the
data verification process, RPA checked the databases against copies of the assay certificates,
checked a selection of drill hole collars, and reviewed QA/QC data collected by Mandalay.

Details of the data verification conducted by RPA in 2012 are contained in RPA (2012). The
principal data verification findings of the RPA (2012) report are summarized as follows:
20% of 2012 assay records in the Cerro Bayo drill hole database were checked against
original digital assay certificates. All digital data included in the Cerro Bayo mineralized
zones were also checked against original logs for discrepancies in collar coordinates,
downhole surveys, and lithology records. Questionable drill holes were removed from
the final database. No significant discrepancies were found.

2013
Rosmery Crdenas, Senior Geologist with RPA, and an independent QP, visited the property
from January 8 to 10, 2014. During the site visit, Ms. Crdenas examined underground
exposures of mineralization for the Yasna, Fabiola, Dagny, Bianca, and Delia veins and
surface exposures of mineralization at the Raul open pit, reviewed plans and sections, and
visited the analytical laboratory. As part of the data verification process, Ms. Crdenas
checked the databases against copies of the assay certificates, checked a selection of drill
hole collars, and reviewed QA/QC data collected by Mandalay.

Details of the data verification conducted by RPA in 2013 are contained in RPA (2013). The
principal data verification findings of the RPA (2013) report are summarized as follows:
100% of 2013 assay records in the Cerro Bayo drill hole database were checked
against original digital assay certificates. All digital data included in the Cerro Bayo
mineralized zones were also checked against original logs for discrepancies in collar
coordinates, downhole surveys, and lithology records. No significant discrepancies

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were found. A few minor database errors were corrected prior to the resource
estimation work. Some discrepancies in drill hole collar coordinates with respect to the
topography were confirmed through a visual comparison of the drill hole vein
intersection location with underground mapping and channel samples, and collar
coordinates were deemed unreliable. In such cases, RPA gave more weight to the
underground data over the drill hole data.

2014
Rosmery Cardenas, Senior Geologist with RPA, and an independent QP, checked the
databases against copies of the assay certificates, checked a selection of drill hole collars and
drill hole core photos, and reviewed QA/QC data collected by Mandalay.

Details of the data verification conducted by RPA in 2014 are contained in RPA (2014). The
principal data verification findings of the RPA (2014) report are summarized as follows:
90% of 2014 assay records in the Cerro Bayo drill hole database were checked against
original digital assay certificates. All digital data included in the Cerro Bayo mineralized
zones were also checked against original logs for discrepancies in collar coordinates,
downhole surveys, and lithology records. RPA did not identify any significant
discrepancies but noted a few minor database errors such as missing lithology records,
incorrect vein flag codes, overlapping intervals, a few differences between database
assay values and certificate assay values, and a small number of duplicated sample
numbers, however, these inconsistencies were corrected prior to the resource
estimation work. Some discrepancies in drill hole collar coordinates with respect to the
topography were found. These discrepancies were confirmed through a visual
comparison of the drill hole vein intersection location with underground mapping and
channel samples, and collar coordinates were deemed unreliable. In the cases where
such discrepancies were identified, RPA gave more weight to the underground data
over the drill hole data.

2015
Rosmery Cardenas, Senior Geologist with RPA and an independent QP, visited the property
from January 12 to 14, 2016. During the site visit, Ms. Crdenas examined underground
exposures of mineralization for the Delia NW and Delia SE veins, examined five drill hole cores
for Coyita vein, checked the databases against copies of the assay certificates, checked a
selection of drill hole collars and drill hole core photos, and reviewed QA/QC data collected by
Mandalay.

Details of the data verification conducted by RPA in 2015 are contained in RPA (2015). The
principal data verification findings of the RPA (2015) report are summarized as follows.

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Approximately 80% of 2015 assay records in the Cerro Bayo drill hole database were checked
against original digital assay certificates. All digital data included in the Cerro Bayo mineralized
zones were also checked against original logs for discrepancies in collar coordinates,
downhole surveys, and lithology records. RPA did not identify any significant discrepancies
but noted a few minor database errors such as missing lithology records, incorrect vein flag
codes, overlapping intervals, a few differences between database assay values and certificate
assay values, and a small number of duplicated sample numbers, however, these
inconsistencies were corrected prior to the resource estimation work. Some discrepancies in
drill hole collar coordinates with respect to the topography were found. These discrepancies
were confirmed through a visual comparison of the drill hole vein intersection location with
underground mapping and channel samples, and collar coordinates were deemed unreliable.
In the cases where such discrepancies were identified, RPA gave more weight to the
underground data over the drill hole data.

CURRENT WORK
Rosmery Cardenas, Senior Geologist with RPA, and an independent QP, checked the
databases against copies of the assay certificates, checked a selection of drill hole collars and
drill hole core photos, and reviewed QA/QC data collected by Mandalay.

In 2016, Mandalay used the electronic assay certificates to check all the 2016 assays in the
database.

RPA conducted spot checks of the assay records in the Cerro Bayo drill hole database against
original digital assay. Some digital data included in the Cerro Bayo mineralized zones were
also checked against original logs for discrepancies in lithology records. RPA inspected the
drill holes in section and plan view to review vein and dyke interpretation related to drill hole
and channel database, and underground mapping, and found good correlation. RPA
incorporated additional dykes into the model that had not been interpreted previously. RPA
queried the database for unique headers, unique samples, duplicate holes, overlapping
intervals, blank and zero grade assays, and long interval sample. RPA did not identify any
significant discrepancies but noted a few minor database errors such as missing lithology
records, unpicked-up collar locations, incorrect vein flag codes, overlapping intervals, a few
differences between database assay values and certificate assay values, and a small number

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of duplicated sample numbers and total length discrepancies, however, these inconsistencies
were corrected prior to the resource estimation work.

Some discrepancies in drill hole collar coordinates with respect to the topography were found.
These discrepancies were confirmed through a visual comparison of the drill hole vein
intersection location with underground mapping and channel samples, and collar coordinates
were deemed unreliable. In the cases where such discrepancies were identified, RPA gave
more weight to the underground data over the surface drill hole data. RPA recommends that
Mandalay review drill holes with collar coordinates that do not correspond to the topographic
surface.

RPA also reviewed the minimum dilution thickness for the resource and diluted vein models.
There were some discrepancies, however, they were corrected prior to the resource estimation
work.

RPA recommends:
Incorporate the unsampled drill hole and channel intervals into the Vulcan assay tables.

Sampling all core intervals immediately adjacent to mineralization, as undersampling


of a few mineralized shoulders was noted. These unsampled intervals should also
be reviewed after assays have been returned.

Ensuring that each sample has a unique sample number

Adding an interpreted vein code to the assay table to validate efficiently each vein solid.

Incorporating structural data in the database to assist in the fault interpretations and
guide the preparation of future updates of the Mineral Resources.

Carrying out and documenting data verification programs semi-annually.

Developing a wireframe modelling procedure which includes wireframe model


validation.

INTERNAL QUALITY ASSURANCE AND QUALITY CONTROL


Quality assurance (QA) consists of evidence to demonstrate that the assay data has precision
and accuracy within generally accepted limits for the sampling and analytical method(s) used
in order to have confidence in a resource estimate. Quality control (QC) consists of procedures

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used to ensure that an adequate level of quality is maintained in the process of collecting,
preparing, and assaying the exploration drilling samples. In general, QA/QC programs are
designed to prevent or detect contamination and allow assaying (analytical), precision
(repeatability), and accuracy to be quantified. In addition, a QA/QC program can disclose the
overall sampling-assaying variability of the sampling method itself.

PREVIOUS WORK
2009 - 2010
Details of the QA/QC program conducted by CSA in 2009 are contained in Sims (2010) and
are summarized here. Samples collected in 2009 were assayed at the CMCB facilities in
Laguna Verde. Quality control procedures included routine check assays of sample pulps and
duplicate pulps prepared from coarse rejects, and the use of blanks and standards.

Six in-house standards were prepared for use by the CMCB laboratory at Cerro Bayo and used
during 2009. Results were considered generally acceptable, except for standards STD-2001-
1 and Std-4, which returned values beyond accepted failure limits at the primary laboratory. A
systematic bias was identified in standard STD-2001-1 where gold results were reported above
the expected value, with a 9.3% failure rate. Standard Std-4 returned silver values below the
expected value, with a 28.5% failure rate. The reason for the failures could not be identified
and CSA discontinued the use of both standards.

Blank samples were originally collected from barren core, then from a large silica replacement
body located in the southeast area of the Cerro Bayo district. No contamination was detected
from routine insertion of blanks in the sample stream, with the exception of three samples with
silver contamination. Whole batches containing the contaminated blanks were re-assayed.
The re-assayed samples returned results within expectations, but one blank failed a second
time, due to contamination during sample preparation.

Approximately 5% of pulp duplicates and preparation duplicates (rejects) were sent to ALS
Chemex Chile (ALS) (ISO 9001), in Santiago, Chile for verification. ALS results for both the
pulp duplicates and preparation duplicates indicated a high relative error in gold values below
0.7 g/t Au. At higher grades, the relative errors were within accepted industry standards.

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2011
RPA reviewed results from Mandalays internal laboratory QA/QC program undertaken from
January to October 2011 (Casanga, 2011). The following points summarize the principal
QA/QC findings:
Mandalay generated six property specific standards which were inserted into the
overall sample streams, including core, underground channel and grab samples,
concentrate, and environmental samples, at a rate of approximately one in 10 samples.
Results for the six standards are generally within acceptable limits, with a small
percentage of failures.

The grades for the six in-house reference standards in use in 2011 covered the range
of expected results, and were appropriate for use in Mandalays internal laboratory
QA/QC program.

Mandalays QA/QC protocol called for blanks to be inserted in the sample stream at a
rate of approximately one in 20 samples. The results indicated minimal evidence of
contamination, drift, or tampering.

Approximately 10% of the pulp samples were re-assayed. The pulp duplicate results
for gold and silver showed good precision.

Pulp samples from approximately 5% of the core samples and 2% of the channel
samples were sent to an outside laboratory for referee check assays. ALS Patagonia
S.A. (ALS), in Santiago, Chile, was used as the referee laboratory, and is accredited to
the ISO 17025 Standard by Certificate number 949. The mine and ALS assay results
showed good correlation and confirmed that the mine laboratory gold and silver assays
were reliable with no significant biases evident.

2012
RPA reviewed results from Mandalays internal laboratory QA/QC program undertaken from
January to October 2012 and found that the overall QA/QC results support the integrity of the
databases (RPA, 2012).

The following points summarize the principal findings of the RPA (2012) report:
Mandalay generated six property specific in-house standards which were inserted into
the sample stream. The standards cover the range of expected results and are
generally within acceptable limits, with a small percentage of failures.

Mandalay started the insertion of five CRMs in 2012, however, more data is needed
before meaningful conclusions can be made.

Mandalays QA/QC protocol called for blanks to be inserted in the sample stream at a
rate of approximately one in 20 samples. The results indicated minimal evidence of
contamination, drift, or tampering.

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A total of 8% of the pulps were re-assayed. The pulp duplicate results for gold and
silver showed good precision.

Pulp samples from approximately 5% of the core samples and 2% of the channel
samples were sent to ALS for referee check assays. The mine and ALS assay results
showed good correlation and confirmed the mine laboratory gold and silver assays
were reliable with no significant biases evident.

The 2012 RPA recommendations included the following:


The establishment of a QA/QC program that is blind to the laboratory and
implemented by the Geology production and exploration personnel. This involved the
insertion of CRMs, blanks, and duplicates that are unknown to the laboratory, as a
check on the accuracy and precision of the sample results.

2013
RPA reviewed results from Mandalays internal laboratory QA/QC program for 2013 and found
that the overall QA/QC results support the integrity of the databases (RPA, 2013).

The following points summarize the principal findings of the RPA (2013) report:
Mandalay generated six property specific in-house standards which were inserted into
the sample stream. The standards cover the range of expected results and are
generally within acceptable limits, with a small percentage of failures.

Mandalay uses five different CRMs developed and certified by CDN Resources
Laboratories Ltd. (CDN). RPA recommended the addition of a high grade silver CRM.

Mandalays QA/QC protocol called for blanks to be inserted in the sample stream at a
rate of approximately 1 in 20 samples. No failures identified for Au and Ag.

Approximately 11% of the pulps were re-assayed. The pulp duplicate results for gold
and silver showed good precision.

Pulp samples from approximately 2% of mine production and 5% of drill samples were
sent to ALS for referee check assays. The mine and ALS assay results showed good
correlation and confirmed the mine laboratory gold and silver assays were reliable and
accurate.

Mandalay established a QA/QC program that involves the insertion of CRMs, blanks,
and duplicates unknown to the laboratory, at a rate of approximately one in 30 samples
in drill hole and channel samples, as recommended in RPA 2012 report.
o Drill hole samples:
Mandalay inserted three different property specific in-house standards.
Results for the three standards are generally within acceptable limits
with a small percentage of failures.
Mandalay submitted coarse and fine blank samples. One failure for gold
and three failures for silver were recorded. The impact of these blank
failures is considered to be of no consequence due to the low grades

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reported but they indicate that a minor sample contamination problem


exists.
The duplicates results for gold are not representative as the majority of
the results are low grade values close to the detection limit. RPA
recommended selecting field duplicates that are representative of the
mineralization silver and gold grade ranges.
o Channel samples:
Mandalay decided to review the sampling procedure for taking channel
sample duplicates, as preliminary results showed poor precision. RPA
agreed with Mandalays plan to review the channel sampling and
channel sampling duplicate procedures.
Mandalay submitted coarse and fine blank samples. No failures were
reported.

2014
RPA reviewed results from Mandalays internal laboratory QA/QC program for 2014 and found
that the overall QA/QC results support the integrity of the databases (RPA, 2014).

The following points summarize the principal findings of the RPA (2014) report:
Mandalay generated eight property specific in-house standards which were inserted
into the sample stream. The standards cover the range of expected results and are
generally within acceptable limits, with a small percentage of failures.

Mandalay uses five different CRMs developed and certified by CDN Resources
Laboratories Ltd. (CDN). RPA recommended the addition of a high grade silver CRM.

Mandalays QA/QC protocol called for blanks to be inserted in the sample stream at a
rate of approximately 1 in 20 samples. No failures identified for Au and Ag.

Approximately 8% of the pulps were re-assayed. The pulp duplicate results for gold
and silver showed good precision.

Pulp samples from approximately 2% of mine production and 5% of drill samples were
sent to ALS for referee check assays. The mine and ALS assay results showed good
correlation and confirmed the mine laboratory gold and silver assays were reliable and
accurate.

Mandalay established a QA/QC program that involves the insertion of CRMs, blanks,
and duplicates unknown to the laboratory, at a rate of approximately one in 30 samples
in drill hole and channel samples, as recommended in RPA 2012 report.
o Drill hole samples:
Mandalay inserted three different property specific in-house standards.
Results for the three standards are generally within acceptable limits
with a small percentage of failures.
Mandalay submitted coarse and fine blank samples. No failures for gold
and three failures for silver were recorded. The impact of these blank
failures is considered to be of no consequence due to the low grades

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reported but they indicate that a minor sample contamination problem


exists.
The duplicates results for gold are not representative as the majority of
the results are low grade values close to the detection limit. RPA
recommended selecting field duplicates that are representative of the
mineralization silver and gold grade ranges.
o Channel samples:
Mandalay decided to review the sampling procedure for taking channel
sample duplicates, as preliminary results showed poor precision. RPA
agreed with Mandalays plan to review the channel sampling and
channel sampling duplicate procedures.
Mandalay submitted coarse and fine blank samples. No failures were
reported.

2015
RPA reviewed results from Mandalays internal laboratory QA/QC program for 2015 and found
that the overall QA/QC results support the integrity of the databases (RPA, 2015).

The following points summarize the principal findings of the RPA (2015) report:
Mandalay generated eight property specific in-house standards which were inserted
into the sample stream. The standards cover the range of expected results and are
generally within acceptable limits, with a small percentage of failures.

Mandalay uses seven different CRMs developed and certified by CDN Resources
Laboratories Ltd. (CDN). RPA recommended the addition of a high grade silver CRM.

Mandalays QA/QC protocol called for blanks to be inserted in the sample stream at a
rate of approximately one in 20 samples. No failures were identified for Au and Ag.

Approximately 7% of the pulps were re-assayed. The pulp duplicate results for gold
and silver showed good precision.

Pulp samples from approximately 2% of mine production and 5% of drill samples were
sent to ALS for referee check assays. The mine and ALS assay results showed good
correlation and confirmed the mine laboratory gold and silver assays were reliable and
accurate.

Mandalay established a QA/QC program that involves the insertion of CRMs, blanks,
and duplicates unknown to the laboratory, at a rate of approximately one in 30 samples
in drill hole and channel samples, as recommended in RPA 2012 report.
o Drill hole samples:
Mandalay inserted three different property specific in-house standards.
Results for the three standards are generally within acceptable limits
with a small percentage of failures.
Mandalay submitted coarse and fine blank samples. No failures for gold
and two failures for silver were recorded. The impact of these blank
failures is considered to be of no consequence due to the low grades

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reported but they indicate that a minor sample contamination problem


exists.
The duplicates results for gold are not representative as the majority of
the results are low grade values close to the detection limit. RPA
recommended selecting field duplicates that are representative of the
mineralization silver and gold grade ranges.
o Channel samples:
Mandalay decided to review the sampling procedure for taking channel
sample duplicates, as preliminary results showed poor precision. RPA
agreed with Mandalays plan to review the channel sampling and
channel sampling duplicate procedures.
Mandalay submitted coarse and fine blank samples. One failure for
silver was recorder. The impact of this blank failure is considered to be
of no consequence due to the low grades reported, however, it indicates
that a minor sample contamination problem exists.

CURRENT WORK
INTERNAL LABORATORY QA/QC
RPA reviewed results from Mandalays internal laboratory QA/QC program undertaken from
January to December 2016. Details are documented in Mandalays QA/QC report (Casanga,
2016) and summarized in the following sections. The figures have been provided by Mandalay
and are documented in Mandalays QA/QC report.

IN-HOUSE REFERENCE MATERIAL


Mandalay inserted seven property specific standards into the overall sample streams,
including core, underground channel and grab samples, concentrate, and environmental
samples, at a rate of approximately one in 10 samples. A total of 3,107 standards were
inserted for a total insertion rate of 13.1%. The in-house standards are not certified and their
expected values and standard deviations (SD) are listed in Table 12-1.

In RPAs opinion, the in-house standard grades cover the range of expected results, and are
appropriate for use in Mandalays internal laboratory QA/QC program. RPA recommends
reducing the standard insertion rate to approximately 5% in the future.

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TABLE 12-1 EXPECTED VALUES AND RANGES OF STANDARDS


Mandalay Resources Corporation Cerro Bayo Project

Au Results Ag Results Number of


Standard
Au (g/t) SD Ag (g/t) SD Assays
REL-03 0.26 0.04 21 1.01 1,044
FDD-06 0.45 0.04 89 2.07 680
FDD-08 1.60 0.07 248 4.10 714
FDD-07 9.62 0.16 1,226 13.60 464
STD-02 73.00 2.22 10,536 95.00 205

Note:
1. From Mandalay (2016)

Specific pass/fail criteria are determined from the standard deviation provided for the standard
reference samples. The conventional approach to setting reference standard acceptance
limits is to use the mean assay 2 standard deviations as a warning limit and 3 standard
deviations as a failure limit. Results falling outside of the failure limit must be investigated to
determine the source of the erratic result, either analytical or clerical.

RPA reviewed the results returned from the standard reference samples. The following graphs
in Figure 12-1 were prepared by Mandalay, which illustrate the gold and silver assay results
compared to the in-house standard grades. Results for the eight standards are generally within
acceptable limits with a small percentage of failures. The results confirm that the mine
laboratory gold and silver assays are accurate and no significant biases are evident.

FIGURE 12-1 IN-HOUSE STANDARD RESULTS 2016

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BLANKS
The regular submission of blank material is used to assess potential contamination during
sample preparation and to identify sample numbering errors. Mandalays QA/QC protocol
called for blanks to be inserted in the sample stream at a rate of approximately one in 20
samples.

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Mandalay submitted 441 blank samples of which there were no failures for gold or silver. RPA
considered an assay as failure if the result was higher than ten times the detection limit (DL)
of the method of analysis (for Au DL=0.1 g/t and for Ag DL=2 g/t). Results of the blanks are
illustrated in Figure 12-2 with Mandalays internal action threshold set at approximately 2.5
times the detection limits. In RPAs opinion, the results of the blanks are within acceptable
limits and the data can be used for resource estimation purposes.

FIGURE 12-2 BLANK ASSAYS RESULTS 2016

PULP AND REJECT DUPLICATES


Duplicates help assess the natural local-scale grade variance or nugget effect and are also
useful for detecting sample numbering mix-ups. The duplicates help monitor the grade
variability as a function of both sample homogeneity and laboratory error.

The Thompson-Howarth (T-H) precision plot can be used to compare results for the three
duplicate types (field duplicates, reject duplicates, and pulp duplicates). The field duplicates
are expected to have the lowest precision, followed by the coarse reject duplicates. The pulp
duplicates are expected to have the best precision as they are the finest grain size and are the
most homogenized.

RPA received the results from 782 (5.3%) coarse reject duplicate pairs and 1,231 (5.3%) pulp
duplicate pairs for silver and gold. Figures 12-3 to 12-6 illustrate the results of the duplicate

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pairs. Statistics for the duplicate results are shown in Table 12-2 for silver and in Table 12-3
for gold.

For silver, the precision for coarse reject duplicates is approximately 5.5% at 300 g/t and the
precision for the pulp duplicates is approximately 2.1% at 300 g/t (Figure 12-5). For gold, the
precision for the coarse reject duplicates is approximately 8.2% at 3 g/t and the precision for
the pulp duplicates is approximately 5.4% at 3 g/t (Figure 12-6).

The sample duplicates have good correlation coefficients for silver and the relative standard
deviation (RSD) range from 4% to 2% in the duplicates. The sample duplicates have good
correlation coefficients for gold and the RSD range from 7% to 6%, which is very good for gold
mineralization.

In RPAs opinion, the duplicate results indicate that the analytical procedures for gold have
very good precision and results are well within acceptable limits.

TABLE 12-2 SUMMARY STATISTICS FOR SILVER DUPLICATES


Mandalay Resources Corporation Cerro Bayo Project

Pulp Reject
Original Duplicate Original Duplicate
Number of Samples (N) 1,231 1,231 782 782
Mean Assay 524.28 524.53 367.48 368.12
Maximum Assay 70,583.49 70,351.56 15,848.93 15,957.85
Minimum Assay 1.00 1.00 1.00 1.00
Median Assay 109.32 107.91 58.89 58.66
Variance 6,611,059.36 6,589,593.21 1,027,922.11 1,033,098.71
Standard Deviation 2,571.20 2,567.02 1,013.86 1,016.41
Coefficient of Variation 4.90 4.89 2.76 2.76
Correlation Coefficient 1 1
RSD 2% 4%
% Difference Between Means -0.05% -0.2%

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TABLE 12-3 SUMMARY STATISTICS FOR GOLD DUPLICATES


Mandalay Resources Corporation Cerro Bayo Project

Pulp Reject
Original Duplicate Original Duplicate
Number of Samples (N) 1,231 1,231 782 782
Mean Assay 3.72 3.71 2.64 2.63
Maximum Assay 166.77 171.05 79.45 82.94
Minimum Assay 0.05 0.05 0.05 0.05
Median Assay 1.16 1.12 0.71 0.70
Variance 122.85 122.52 34.06 34.22
Standard Deviation 11.08 11.07 5.84 5.85
Coefficient of Variation 2.98 2.98 2.21 2.23
Correlation Coefficient 1 1
RSD 6% 7%
% Difference Between Means 0.2% 0.4%

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FIGURE 12-3 PULP DUPLICATE RESULTS - 2016

SILVER

GOLD

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FIGURE 12-4 REJECT DUPLICATE RESULTS - 2016

SILVER

GOLD

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FIGURE 12-5 PRECISION CURVES FOR SILVER DUPLICATES

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FIGURE 12-6 PRECISION CURVES FOR GOLD DUPLICATES

CERTIFIED REFERENCE MATERIAL


Weekly QA/QC checks using five different CRMs were performed on site. The CRMs were
developed and certified by CDN and their expected values and standard deviations (SD) are
listed in Table 12-4.

In RPAs opinion, the low and moderate grade ranges are covered by CRMs and the results
are appropriate for use in Mandalays internal laboratory QA/QC program.

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TABLE 12-4 EXPECTED VALUES AND RANGES OF CERTIFIED


REFERENCE MATERIAL
Mandalay Resources Corporation Cerro Bayo Project

Au Results Ag Results Number of


Standard
Au (g/t) SD Ag (g/t) SD Assays
CDN-ME-1101 0.56 0.05 68 2.29 127
CDN-ME-1206 2.61 0.10 274 5.36 109
CDN-GS-5J 4.90 0.23 73 2.73 22
CDN-ME-1302 2.41 0.1 419 7.04 105
CDN-GS-40 40.0 1.19 - - 91
CDN-ME-1408 2.88 0.12 391 5.33 63

RPA reviewed the results returned from the CRMs. The conventional approach to setting
reference standard acceptance limits is to use the mean assay 2 standard deviations as a
warning limit and 3 standard deviations as a failure limit. The graphs in Figure 12-7 illustrate
the gold and silver assay results compared to acceptable limits of 2 standard deviations.
Results for CRMs are generally within acceptable limits with a small percentage of failures.
The control charts show small positive gold biases for CRMs CDN-ME-1101, CDN-ME-1302,
and CDN-GS-40 for gold. A small negative silver bias is visible in the control chart for CDN-
ME-1302 and CDN-ME-1408. These biases should continue to be monitored on an ongoing
basis.

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FIGURE 12-7 CERTIFIED REFERENCE MATERIAL RESULTS 2016

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EXTERNAL CHECK ASSAY PROGRAM


Mandalay selected 2% of mine production sample pulps and 3% of drill sample pulps to send
to ALS for referee check assays. The results for silver gave a correlation coefficient of 1, which
is very good, and the secondary laboratory averages are only 0.7% lower than the primary
laboratory. For gold, the results gave a correlation coefficient of 0.995, which is also very
good, and the secondary laboratory averages are only 1.0% higher than the primary laboratory
(Figure 12-8). RPA is of the opinion that the external check assays confirm that the mine
laboratory gold and silver assays are accurate.

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FIGURE 12-8 EXTERNAL CHECK RESULTS - 2016

ExternalCheckResults2016 SilverCMCBvsALSMinerals
8000

ALSSecondaryLaboratoryAgg/t
6000

4000

2000

0
0 2000 4000 6000 8000
CMCBPrimaryLaboratoryAgg/t

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GEOLOGY DRILL CORE QA/QC


Mandalay established a QA/QC program that involves the insertion of CRMs, blanks, and
duplicates unknown to the laboratory, at a rate of approximately one in 25 samples.

IN-HOUSE REFERENCE MATERIAL


Mandalay inserted three property specific standards into the overall core sample stream, at a
rate of approximately one in 25 samples. Low grade standard #2 was used in late 2016 after
the low grade standard #1 was exhausted. A total of 308 standards were inserted. Five
standards were removed from the dataset due to possible mislabelling. The in-house
standards are not certified and their expected values and standard deviations (SD) are listed
in Table 12-5.

TABLE 12-5 EXPECTED VALUES AND RANGES OF STANDARDS


Mandalay Resources Corporation Cerro Bayo Project

Au Results Ag Results Number of


Standard
Au (g/t) SD Ag (g/t) SD Assays
High Grade 5.15 0.30 1,050 19.9 55
Moderate Grade 2.7 0.08 470 5.0 120
Low Grade 1 0.60 0.06 105 2.3 109
Low Grade 2 0.65 0.06 70 3.5 19
From Mandalay (2016)

The following control charts were prepared by Mandalay (Figure 12-9). Results for the three
standards are generally within acceptable limits. A small negative bias and one failure were
identified in the high standard for silver. These standards should be monitored on an ongoing
basis.

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FIGURE 12-9 BLIND QA/QC - IN-HOUSE REFERENCE MATERIAL

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BLANKS
Mandalay submitted approximately one coarse or fine blank samples every 25 samples. RPA
considered an assay a failure if the result was higher than ten times the DL of the method of
analysis (for Au DL=0.1 g/t and for Ag DL=2 g/t). No failures for gold and two failures for silver
were recorded (Figure 12-10). The impact of these blank failures is considered to be of no
consequence due to the low grades reported but they indicate that a minor sample
contamination problem exists. In RPAs opinion, the results of the blanks are within acceptable
limits and the data can be used for resource estimation purposes.

FIGURE 12-10 BLIND QA/QC - BLANK ASSAYS

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FIELD DUPLICATES
RPA reviewed the results from 19 field core duplicate pairs for silver and gold, which
represents less than one percent of the insertion rate. Statistics for the duplicates results, are
shown in Table 12-6 for silver and gold.

The duplicates results for silver and gold generally compared well, showing an overall
correlation coefficient of over 0.95%. RPA recommends continuing to select field duplicates
that are representative of the mineralization silver and gold grade ranges, completing ongoing
studies to investigate the component of variability that is inherent in the sample, versus the
component due to assay precision, and increasing the insertion rate to 2%.

TABLE 12-6 SUMMARY STATISTICS FOR DDH FIELD DUPLICATES


Mandalay Resources Corporation Cerro Bayo Project

Silver Gold
Original Duplicate Original Duplicate
Number of Samples 19 19 19 19
Mean Assay 142.95 150.60 1.61 1.42
Maximum Assay 609.00 719.00 10.13 10.52
Minimum Assay 1.00 1.00 0.05 0.05
Median Assay 61.32 48.00 0.86 0.83
Variance 33,501.05 40,585.27 5.66 5.68
Standard Deviation 183.03 201.46 2.38 2.38
Coefficient of Variation 1.28 1.34 1.48 1.68

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Correlation Coefficient 0.981 0.956


% Difference Between Means -5.4% 11.5%

EXTERNAL CHECK SAMPLES


Mandalay sends sample pulps to ALS for referee check assays. Approximately a two percent
insertion rate is used for external check samples.

RPA is of the opinion that the mine laboratory gold and silver assays are reliable and meet
industry standards.

GEOLOGY CHANNEL SAMPLE QA/QC


Mandalay established a QA/QC program that involves the insertion of blanks and duplicates
unknown to the laboratory, at a rate of approximately one in 20 samples.

BLANKS
Mandalay submitted coarse blank samples. RPA considered an assay as a failure if the result
was higher than ten times the DL of the method of analysis (for Au DL=0.1 g/t and for Ag DL=2
g/t). Only one failure for silver was recorded (Figure 12-11).

In RPAs opinion, the data can be used for resource estimation purposes.

FIGURE 12-11 BLIND QA/QC - BLANK ASSAYS

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FIELD DUPLICATES
Mandalay takes channel duplicate samples by grabbing a chip sample with a geological
hammer. The sampling process attempts to create channel samples that are approximately
20 cm x 10 cm x length of the sample and the resampling is carried out in the face of the
channel.

A total of 169 field duplicate samples for silver and for gold were collected at the Cerro Bayo
mine in 2016. Mandalay allows for a maximum difference of 30% between the duplicate
samples. The results from this methodology display great variation for both metals, silver and
gold, with more than 10% of the samples outside of the tolerance limits. Gold duplicates
tended to compare better than the silver duplicate results, however, both duplicates show a
fairly high level of scatter, which is to be expected in this kind of deposit due to the grade
variability. Statistics for the duplicates results, are shown in Table 12-7 for silver and gold.

Mandalay investigated two different sampling methodologies, sampling with mallet and chisel
and sampling with a jackhammer, to obtain more representative results and to have better
understanding of the precision levels. The results available to date are not representative due
to the low number of samples analyzed using both methods. Mandalay will continue tests until
a more representative population is obtained. RPA concurs with Mandalays plan to continue
reviewing the channel sampling and channel sampling duplicate procedures.

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TABLE 12-7 SUMMARY STATISTICS FOR CHANNEL FIELD DUPLICATES


Mandalay Resources Corporation Cerro Bayo Project

Silver Gold
Original Duplicate Original Duplicate
Number of Samples > DL (N) 169 169 169 169
Mean Assay 348.82 338.90 3.61 3.40
Maximum Assay 5,408.38 7,084.04 131.74 80.42
Minimum Assay 1.00 3.31 0.05 0.05
Median Assay 165.46 144.36 1.46 1.46
Variance 379,441.06 433,630.37 117.03 56.19
Standard Deviation 615.99 658.51 10.82 7.50
Coefficient of Variation 1.77 1.94 2.99 2.20
Correlation Coefficient 0.856 0.920
% Difference Between Means 2.8% 5.8%

QA/QC RECOMMENDATIONS
RPAs QA/QC recommendations are as follows:
Monitor and document the blind QA/QC results on a regular basis.

Select field core duplicates with representative ranges of grades and increase the
insertion rate to 2%.

Increase the insertion rate of the check assays for the geology QA/QC program to 5%
and incorporate 2% of blanks and 2% of CRMs.

Continue to review the channel sampling and channel sampling duplicate procedures.

In summary, the methods used by Mandalay meet standard industry practices and no
significant discrepancies were identified during the verification process.

RPA considers that the drill hole and underground channel databases are valid and are
suitable for use in Mineral Resource estimation at Cerro Bayo.

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13 MINERAL PROCESSING AND


METALLURGICAL TESTING
Metallurgical testing was carried out by CMCB in 2008 on samples from the Dagny and Fabiola
vein systems, the objectives of which were to assess the floatability and hardness of the
mineralization samples. In all, 16 composite samples were taken as listed in Table 13-1.

TABLE 13-1 COMPOSITE ORE SAMPLES


Mandalay Resources Corporation Cerro Bayo Project

Sample Weight Estimated Grade


Sample Description
(g) (g/t Au Eq)
Dagny (No. 1) 11,910 1-3.99
Dagny (No. 2) 120,030 4-5.99
Dagny (No. 3) 9,760 6-9.99
Dagny (No. 4) 12,610 >10.0
Dagny Norte (No. 1) 2,500 1-3.99
Dagny Norte (No. 2) 500 4-5.99
Dagny Norte (No. 3) 3,770 6-9.99
Dagny Norte (No. 4) 3,930 >10.0
Lazo Dagny (No. 1) 4,350 1-3.99
Lazo Dagny (No. 2) 3,370 4-5.99
Lazo Dagny (No. 3) 1,240 6-9.99
Lazo Dagny (No. 4) 8,690 >10.0
Fabiola (No. 1) 9,910 1-3.99
Fabiola (No. 2) 7,740 4-5.99
Fabiola (No. 3) 8,290 6-9.99
Fabiola (No. 4) 10,450 >10.0

The samples were taken from drill core and assayed at the Laguna Verde laboratory. Results
are listed in Table 13-2.

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TABLE 13-2 SAMPLE GRADES


Mandalay Resources Corporation Cerro Bayo Project

Au Assay Ag Assay Equiv. Grade


Sample Description
(g/t) (g/t) (g/t Au Eq)
Dagny (No. 1) 1.1 84.0 2.6
Dagny (No. 2) 2.1 137.0 4.6
Dagny (No. 3) 3.4 332.0 9.4
Dagny (No. 4) 3.3 879.0 19.3
Dagny Norte (No. 1) 1.1 62.0 2.2
Dagny Norte (No. 2) 0.0 0.0 0.0
Dagny Norte (No. 3) 1.1 237.0 5.4
Dagny Norte (No. 4) 4.2 592.0 15.0
Lazo Dagny (No. 1) 0.7 52.0 1.6
Lazo Dagny (No. 2) 1.0 203.0 4.7
Lazo Dagny (No. 3) 0.0 0.0 0.0
Lazo Dagny (No. 4) 5.1 897.0 21.4
Fabiola (No. 1) 0.6 101.0 2.4
Fabiola (No. 2) 1.0 203.0 4.7
Fabiola (No. 3) 2.7 258.0 7.4
Fabiola (No. 4) 3.8 690.0 16.3

The samples were screened through a six-mesh sieve. A 900 g portion of each sample was
taken to provide a total of approximately 14 kg, which was sent to an external laboratory for
hardness tests. To compare the hardness of the Dagny and Fabiola material, a second sample
from the Cerro Bayo veins was sent to SGS Lakefield Research Chile S.A. The rest of the
material was processed in the Cerro Bayo laboratory. The sample was passed through a sieve
to produce 100% passing 10 mesh, with each sample properly mixed, quartered to provide
one kilogram samples for flotation tests and 0.30 kg samples for chemical analysis.

The parameters used for all of the samples were as follows:


Grinding to 70% -200 mesh.
Time of grind 35 minutes.
Solids percentage 60% (by wt.).
Flotation time 15 minutes.
MIBC (20 g/t), Aerofloat P-3477 (40 g/t), Amil Xanthate (40 g/t).
Conditioning time 10 minutes.

Results of the hardness testing returned the following results:

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Cerro Bayo Bond Work Index (18.9 kWh/t)


Dagny Bond Work Index (15.8 kWh/t)

The flotation testing results are presented in Table 13-3 below.

TABLE 13-3 FLOTATION TEST RESULTS


Mandalay Resources Corporation Cerro Bayo Project

Sample Head Grade Recovery Conc. Conc. Grade Grind


Au Au Ag Ratio Au Ag -200M
Ag (g/t) (RC) %
(g/t) % % (g/t) (g/t)
Dagny No. 1 Test 1 1.0 90.2 87.6 86.7 11.8 9.0 714.0 70.0
Dagny No. 1 Test 2 0.8 86.5 91.0 80.4 17.5 11.9 1,007.0 69.8
Dagny No. 2 Test 1 2.3 151.9 91.9 86.3 9.5 18.7 1,118.0 71.5
Dagny No. 2 Test 2 2.1 151.4 93.5 87.5 12.5 22.7 1,469.0 70.8
Dagny No. 3 Test 1 3.3 344.7 94.5 91.8 9.5 27.9 2,791.0 69.0
Dagny No. 3 Test 2 3.2 344.3 97.9 92.9 10.3 29.9 3,100.0 70.8
Dagny No. 4 Test 1 3.2 888.5 88.7 91.3 8.7 20.9 6,353.0 71.3
Dagny N No. 1 Test 1 0.8 44.1 86.8 91.8 6.6 4.0 243.0 68.5
Dagny N No. 3 Test 1 2.8 248.1 89.6 89.1 6.6 15.3 1,312.0 71.0
Dagny N No. 4 Test 1 4.6 593.1 91.7 89.6 9.3 34.5 4,355.0 71.3
Lazo Dagny No. 1 Test 1 0.8 63.3 90.5 92.0 16.0 10.3 849.0 68.0
Lazo Dagny No. 2 Test 1 1.3 222.2 94.9 91.3 10.6 12.5 1,963.0 68.5
Lazo Dagny No. 4 Test 1 5.2 921.4 96.5 95.9 6.6 32.1 5,922.0 72.0
Lazo Dagny No. 4 Test 2 6.3 1,090.5 97.5 96.9 6.3 37.5 6,398.0 70.0
Fabiola No. 1 Test 1 0.8 112.8 84.7 90.7 7.1 4.2 638.0 69.5
Fabiola No. 1 Test 2 0.6 102.1 88.8 86.8 16.2 7.6 1,167.0 72.0
Fabiola No. 2 Test 1 1.0 190.7 95.1 93.7 6.4 5.1 987.0 71.3
Fabiola No. 2 Test 2 1.0 196.6 93.1 92.8 10.1 9.3 1,724.0 70.3
Fabiola No. 3 Test 1 2.3 248.6 94.3 87.6 10.2 21.4 2,022.0 69.0
Fabiola No. 3 Test 2 2.8 271.8 95.8 89.8 9.9 24.3 2,122.0 72.0
Fabiola No. 4 Test 1 3.7 679.0 88.3 93.5 10.0 27.5 5,744.0 73.0
Fabiola No. 4 Test 2 4.2 702.7 88.9 92.0 11.8 38.1 6,889.0 72.0

The conclusions drawn from the test work were as follows:


In general, the mineralized material lends itself to the flotation milling process.

The hardness of the mineralized material is similar for the tests performed.

The Fabiola samples produced a finer product after 30 minutes of grinding.

The samples from Dagny and Fabiola indicated a Bond Work Index of 15 kWh/t while
Cerro Bayo samples indicated a higher Bond Work Index of 17 kWh/t.

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The lower hardness of the Dagny and Fabiola mineralized material would result in lower
energy consumption under operating conditions.

In general, the higher the head grade, the higher the recovery.

Compared to the historical plant operating data, the gold head-grade and recovery
relationship is similar and the silver recovery was slightly lower than the historical data.

The higher gold recoveries were found to be in the range of 69% to 71% minus 200
mesh size, while the higher silver recoveries were approximately 71% minus 200 mesh.

With a larger number of samples, it would be possible to investigate the grinding size,
type, and combination of reagents and kinetic test to optimize recoveries.

Automation of the flotation system (FloatStar) to improve recoveries was engineered


and completed in 2012 and implemented in 2013.

The capital investment for the tailings dam lift of five metres will be carried out in 2017.

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14 MINERAL RESOURCE ESTIMATE


PROJECT SUMMARY
RPA prepared Mineral Resource estimates for the Yasna (Yasna Sur zone), Coyita (including
Coyita NW and SE), Delia NW, Delia SE, Trinidad, Branca, and Kasia veins, all located in the
Laguna Verde area and for the Marcela Sur vein located in the Cerro Bayo area. The estimates
for Raul, located in the Cerro Bayo area, and Yasna, located in the Laguna Verde area, have
remained unchanged since December 31, 2013 (RPA, 2014) and December 31, 2015 (RPA,
2016), respectively. The Mineral Resources are constrained by underground vein models for
reporting purposes.

Mandalay provided drill hole and density databases, lithology and mineralization wireframes,
as well as supporting documentation to RPA for use in resource estimation. Mineralized vein
models were interpreted and wireframed by Mandalay.

The Qualified Person for the Cerro Bayo Mineral Resource estimate is Rosmery Cardenas,
P.Eng., Senior Geologist with RPA. The effective date of the estimate is December 31, 2016.

The Mineral Resource estimate and classification are in accordance with the CIM (2014)
definitions incorporated by reference into NI 43-101.

RPA is not aware of any environmental, permitting, legal, title, taxation, socio-economic,
marketing, political, or other factors that could materially affect the Mineral Resource estimate.

The Cerro Bayo Mineral Resource estimate, inclusive of Mineral Reserves, is summarized in
Table 14-1.

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TABLE 14-1 SUMMARY OF MINERAL RESOURCES INCLUSIVE OF MINERAL


RESERVES DECEMBER 31, 2016
Mandalay Resources Corporation Cerro Bayo Project

Gold Silver AgEq Au Ag AgEq


Tonnes
Category Grade Grade Grade Ounces Ounces Ounces
(000) (g/t Au) (g/t Ag) (g/t AgEq) (000) (000) (000)
Measured 105 2.47 352 496 8 1,189 1,676
Indicated 915 3.05 349 526 90 10,266 15,490
Total M+ I 1,020 2.99 349 523 98 11,455 17,166

Inferred 543 2.49 206 350 43 3,592 6,117

Notes:
1. CIM definitions were followed for Mineral Resources.
2. Mineral Resources are estimated at a cut-off grade of 162 g/t AgEq. The AgEq was calculated using the
formula AgEq = Ag + (Au x 58.25) where Ag and Au are in grams per tonne after transport, treatment, and
refining costs are deducted.
3. Mineral Resources are estimated using a long-term gold price of US$1,400 per ounce and a long-term
silver price of US$24 per ounce.
4. A minimum mining width of 1.2 m was used.
5. Bulk density is 2.63 t/m3.
6. Mineral Resources are inclusive of Mineral Reserves.
7. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
8. Numbers may not add due to rounding.

RESOURCE DATABASE
The drill hole database was provided by Mandalay in Vulcan Isis format and comprises drill
hole collar coordinate data, drill hole collar azimuth and dip data, lithology, vein data, and
sample interval and assay data for the Yasna (Yasna Sur zone), Coyita, Delia NW, Delia SE,
Trinidad, Kasia, Branca, Raul, and Marcela Sur veins.

From 2011 to 2016, Mandalay collected numerous underground channel samples from the
Delia NW, Delia SE, Trinidad and Coyita NW veins, and surface channel samples for the Raul
vein. Underground samples from the Marcela Sur veins were collected by Coeur prior to
Mandalay. Channel sample databases were provided by Mandalay in Isis format (Vulcan
software) for the Delia NW, Delia SE, Trinidad, Coyita NW , Raul and Marcela Sur veins, and
comprise channel name, channel sample number, sample start and end location data, and
assay data. The channel sample databases were converted into drill hole databases for use
in interpretation and resource estimation. Dagny and Dalila veins were depleted in 2016.

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The effective date of the Cerro Bayo databases used by RPA is December 31, 2016. The
Cerro Bayo drill hole and channel sample databases are listed in Table 14-2.

TABLE 14-2 RESOURCE DATABASES


Mandalay Resources Corporation Cerro Bayo Project

No. of Drill No. of Core No. of Channel
Vein No. of Channels
Holes Samples Samples
Coyita NW 97 355 695 1,368
Coyita SE 97 403 - -
Branca 43 218 - -
Delia NW 353 1,346 2,915 7,478
Delia SE 171 833 572 1,346
Yasna 28 86 - -
Trinidad 117 271 236 433
Kasia 50 65 - -
Marcela Sur 128 489 693 1,840
Raul 136 569 616 1,725

Drill hole and channel sample databases were compared to identify any significant differences
with respect to data type in areas where both drill holes and channels are located in the Delia
SE and Delia NW veins. Results are shown in Figures 14-1 to 14-4.

In RPAs opinion, there are some differences between data types in the upper parts of the
Coyita NW and Trinidad veins based on statistical analyses and a visual check in Vulcan. This
is due to high grade zones defined by the channel samples that generally were not intersected
in the exploration drill holes, however, RPA reviewed the reconciliation using both databases
and determined that both databases were suitable for use in resource estimation.

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FIGURE 14-1 COYITA NW AU GRADE COMPARISON

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FIGURE 14-2 COYITA NW AG GRADE COMPARISON

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FIGURE 14-3 TRINIDAD AU GRADE COMPARISON

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FIGURE 14-4 TRINIDAD AG GRADE COMPARISON

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WIREFRAME MODELS
Mandalay provided a topographic surface and preliminary wireframe solid models for the
individual Coyita NW, Coyita SE, Delia NW, Delia SE, Trinidad, Marcela Sur, Branca, and
Kasia veins. Mandalay generated the preliminary wireframe models using Vulcan.

Polylines were digitized on section lines spaced approximately 20 m apart across individual
veins and tied to logged drill hole intervals, using a minimum thickness of 1.2 m. Some surface
drill holes with unreliable collar coordinates were ignored in the generation of wireframe solids.
Vein intersections of these drill holes were then manually flagged to be associated with each
respective wireframe.

The topographic surface was generated from detailed topographic surveys conducted by
Coeur and Mandalay surveyors from 1994 to 2011.

Intrusive dykes and post mineral units intersecting the Coyita NW, Coyita SE, Delia NW, Delia
SE, Trinidad, Kasia, and Branca veins were modelled based on lithology and structure from
surface and underground mapping, and drill hole data.

RPA refined the preliminary wireframe models provided for the Branca and Kasia veins and
dykes based on drill hole data using Leapfrog 3.1 software. Vein models are shown in Figures
14-5 and 14-6.

RPA recommends review and revision of the vein models and dyke solids as new data become
available prior to the next resource update.

As requested by Mandalay, diluted vein wireframe solids generated by Mandalay were


reviewed and adjusted by RPA for the Trinidad, Coyita NW, Coyita SE, Branca, Kasia, Marcela
Sur, Delia SE, and Delia NW using a minimum thickness of 2.4 m and a minimum dilution width
of 0.2 m on each side of the vein for use in Mineral Reserve estimation.

Mandalay generated Vulcan long sections of mined out areas based on underground surveys
conducted by Mandalay surveyors. RPA generated solid models from the longitudinal
sections, which were removed from the final vein and diluted vein models.

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271,000 E 271,500 E 272,000 E 272,500 E

Fabiola
N
Coyita NW

4,841,500 N
4,841,500 N

Dalila

4,841,000 N
4,841,000 N

Kasia
Coyita SE

Yasna

Delia NW Dagny

4,840,500 N
4,840,500 N

Delia SE Branca

Trinidad

271,000 E 271,500 E 272,000 E 272,500 E

Figure 14-5

Mandalay Resources Corporation


0 100 200 300 400 500
Metres
Cerro Bayo Mine
Region XI (Aisn), Chile
Vein Models in Lagunas Verde
Area Showing Drill Holes
March 2017 Source: RPA, 2017.

14-9
www.rpacan.com

Marcela Sur

280,000 E

0 100 200 300 400 500


Metres

Figure 14-6 Raul

Mandalay Resources Corporation


Cerro Bayo Project
Region XI (Aisn), Chile
Marcela Sur and Raul
Vein Models in Cerro Bayo Area
Showing Drill Holes
March 2017 Source: RPA, 2016.

14-10
www.rpacan.com

ASSAY STATISTICS
The resource wireframes for the Yasna, Coyita NW, Coyita SE, Delia NW, Delia SE, Trinidad,
Branca, and Kasia veins contain a total of 3,577 assay intervals from 956 drill holes, and
10,625 channel assays from 4,418 channels. A total of 1,058 assay intervals from 264 drill
holes and a total of 3,565 channel assays from 1,309 channels are included in the Raul and
Marcela Sur resource wireframes. Sample statistics of the assayed information are shown in
Figures 14-7 to 14-10.

FIGURE 14-7 AG BOX PLOT AND ASSAY STATISTICS LAGUNA VERDE


AREA

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FIGURE 14-8 AU BOX PLOT AND ASSAY STATISTICS - LAGUNA VERDE


AREA

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FIGURE 14-9 AG BOX PLOT AND ASSAY STATISTICS - CERRO BAYO AREA

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FIGURE 14-10 AU BOX PLOT AND ASSAY STATISTICS CERRO BAYO AREA

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GRADE CAPPING
Capping levels were determined for raw assays for individual mineralization domains prior to
compositing in order to limit the influence of high grade outliers. All assays located inside each
mineralization wireframe were combined to determine an appropriate capping level for each
mineralized zone. Table 14-3 lists the capping levels determined for each sample type and
vein. Histograms, probability, percentile, and cutting curve plots were used, with examples
shown in Figures 14-11 to 14-13.

TABLE 14-3 GRADE CAPPING LEVELS


Mandalay Resources Corporation Cerro Bayo Project

Capping No. No. Capping No. No.


Vein Sample Type Level Capped Uncapped Level Capped Uncapped
(Au g/t) Assays Assays (Ag g/t) Assays Assays
DDH-DOM1 15 2 89 1,000 2 89
DDH-DOM2 10 5 106 1,000 2 109
Trinidad DDH-DOM3 10 2 67 1,000 1 68
CHN-DOM1 30 5 191 1,500 12 184
CHN-DOM2 20 6 231 2,500 4 233
Kasia DDH 10 0 65 700 0 65
DDH-DOM1,2 10 2 166 2,000 3 165
Coyita DDH-DOM3 10 4 183 1,500 3 184
NW CHN-DOM1 15 8 649 3,000 11 646
CHN-DOM2 15 10 701 3,500 19 692
Coyita
DDH 40 9 394 3,500 7 396
SE
Delia DDH 30 11 1,332 3,000 11 1,332
NW CHN 50 42 7,436 5,000 42 7,436
DDH-DOM1,5,6 15 4 196 1,000 4 196
DDH-DOM2-3-4HG 30 17 329 3,000 14 332
Delia DDH-DOM2-3LG 15 3 284 1,000 3 284
SE CHN-DOM1 15 0 79 1,000 1 78
CHN-DOM2-3HG 30 5 836 5,000 12 829
CHN-DOM2-3LG 15 0 426 1,000 1 425
Yasna DDH UL 10 2 84 1,500 4 82
Marcela DDH 10 12 468 2,500 6 474
Sur CHN 30 20 1,705 3,500 26 1,699
DDH 20 5 564 2,000 7 562
Raul
CHN 20 8 1,832 3,000 4 1,836

Note:
1. HG: High grade envelope, LG: Low grade envelope, UL: Under the lake zone (Yasna Sur), DOM:
Domain

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FIGURE 14-11 COYITA SE AG HISTOGRAM DRILL HOLE SAMPLES

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FIGURE 14-12 COYITA SE AG PROBABILITY PLOT CHANNEL SAMPLES

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FIGURE 14-13 COYITA SE VEIN DRILL HOLE SAMPLES - AG CUTTING CURVE

COMPOSITES
Run-length composites across the width of the domains were generated inside the vein domain
wireframes, flagged by mineralization domain. Where the vein wireframe was extended out to
a minimum 1.2 m width, some run-length channel composites were lengthened to extend to
the wireframe width. This occurred where channel samples were not taken across the entire
face width, but were restricted to only the vein, leaving unsampled intervals in the footwall and
hanging wall. Unsampled intervals were replaced with gold and silver grades based on

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statistical analyses of assays adjacent to and outside of the original vein models, but inside
the diluted vein models, prior to compositing. All composites located inside underground
mined models were maintained in the resource database. The classical statistics for the final
composites are presented in Figures 14-14 to 14-17.

FIGURE 14-14 AG BOX PLOT AND COMPOSITE STATISTICS - LAGUNA


VERDE AREA

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FIGURE 14-15 AU BOX PLOT AND COMPOSITE STATISTICS - LAGUNA


VERDE AREA

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FIGURE 14-16 AG BOX PLOT AND COMPOSITE STATISTICS CERRO BAYO


AREA

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FIGURE 14-17 AU BOX PLOT AND COMPOSITE STATISTICS CERRO BAYO


AREA

BLOCK MODEL PARAMETERS


For the current Mineral Resource estimate, RPA generated rotated seam block models for the
Coyita NW, Coyita SE, Branca, Delia NW, Delia SE, Trinidad, Kasia, and Marcela Sur veins
using Maptek Vulcan version 9.1.5 software. Block models were constructed along individual
vein orientations. The final block dimensions were controlled by the vein domain wireframes
and have variable vein widths and are one metre high by one metre along strike.

For the Raul Norte and Raul Sur veins, RPA generated seam block models in 2013 using
Maptek Vulcan 8.2.3. RPA also generated a seam block model in 2015 for Yasna. These
block models were not updated because no new drilling has been carried out at these veins.
Block model parameters are listed in Table 14-4.

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TABLE 14-4 BLOCK MODEL PARAMETERS


Mandalay Resources Corporation Cerro Bayo Project

Vein/Block Azimuth Origin Length (m) Parent Block Size (m) Sub-block Size (m)
Model (X) X Y Z X Y Z X Y Z X Y Z
Yasna 50 271,940 4,840,570 -100 200 800 500 200 1 1 0.1 1 1
Coyita NW 50 271,920 4,840,871 -75 500 1,200 500 500 1 1 0.1 1 1
Coyita SE 60 272,220 4,840,375 -200 400 650 600 400 1 1 0.1 1 1
Branca 27.5 272,340 4,840,530 -230 100 500 100 100 1 1 0.1 1 1
Delia NW 33 271,471 4,840,197 -90 300 1,120 390 300 1 1 0.1 1 1
Delia SE 25 272,150 4,839,975 -100 250 920 400 250 1 1 0.1 1 1
Trinidad 20 271,701 4,840,156 0 120 900 300 120 1 1 0.1 1 1
Kasia 50 272,200 4,840,680 -80 80 650 350 80 1 1 0.1 1 1
Marcela Sur 70 280,003 4,840,516 10 400 1,500 450 400 1 1 0.1 1 1
Raul Norte 73 280,321 4,839,555 328 150 780 210 150 1 1 0.1 1 1
Raul Sur 109 280,277 4,839,465 328 70 155 230 70 1 1 0.1 1 1

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DENSITY
Coeur evaluated the densities of all major veins in the Fachinal District. A total of 270 samples
were tested for density determinations, resulting in an average density of 2.64 t/m3 (Sims,
2010).

RPA reviewed 253 density determinations taken by Coeur from 55 holes drilled in the Delia
NW and Delia SE veins in 2009. Most samples were taken from inside these major veins, and
along most of the strike length of the veins. Results ranged from 2.42 t/m3 to 3.55 t/m3,
averaging 2.63 t/m3. It is unknown how the bulk densities were determined. In 2015, Mandalay
took 95 additional density determinations and in 2016 took 94 additional density
measurements confirming the assigned density average value.

RPA is of the opinion that the density determinations are acceptable for use in resource
estimation, as the average is comparable to other similar quartz vein deposits. RPA
recommends taking additional density samples specific to individual veins in order to identify
local variations and to confirm and support future resource estimates. RPA also recommends
developing a standard operating procedure for in-house density determinations and
implementing some outside checks on the density determinations to support and confirm in-
house results.

GRADE ESTIMATION
Gold and silver grades were estimated for each block using the inverse distance cubed (ID3)
method. Domain models were used as hard boundaries to limit the extent of influence of
composite grades within the domains.

RPA constructed a variogram model using channel composites located inside the Delia NW,
Delia SE, Coyita NW, Marcela Sur, and Raul veins. Suitable variograms could not be
generated for other individual domain models due to either the small number of contained
sample composites or the presence of multiple trends. Similar ranges were approximated for
Coyita SE, Kasia, and Branca veins based on visual inspection of grade continuity. Variogram
ranges were used to support pass estimation search ranges for the Delia NW and SE, Yasna,
Branca, Coyita NW and SE, Trinidad, Kasia, Marcela Sur, and Raul veins. A directional
correlogram example for the Delia NW vein is shown in Figure 14-18.

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 14-24
www.rpacan.com

FIGURE 14-18 DELIA NW CORRELOGRAM

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 14-25
www.rpacan.com

Search directions were determined visually for each domain. In general, isotropic search
ranges in the major and semi-major directions following the trend of the domain models were
applied. There were some veins where the anisotropic search ranges were applied to follow
the trend of the mineralization. Some of the veins were divided into domains or zones (Figures
14-20, 14-21, 14-22, 14-23, 14-26, and 14-27) in order to align the search ellipses to the local
strikes and dips. Search directions and trends are listed in Table 14-5.

TABLE 14-5 VULCAN DOMAIN SEARCH DIRECTIONS


Mandalay Resources Corporation Cerro Bayo Project

Area / General Trend Vulcan Rotation


Vein Z Y X
High Grade Strike Plunge Dip
rotation rotation rotation
Coyita DOM1 140* -5* -75E* 140* -5* 75*
NW DOM2 140* -10* -70E* 140* -10* 70*
DOM3 150* -5* -70E* 150 -5 70
DOM1 150 -5 -70E 150 -5 70
Coyita DOM2-HG 140 -35 -70E 140 -35 70
SE DOM2 140 -10 -70E 140 -10 70
DOM3-HG 125 -35 -70E 125 -35 70
DOM3 140 -10 -70E 140 -10 70
Inside AGEQ Env 117.5 -15 -75W 145 15 -75
Branca
Outside AGEQ Env 117.5 -5 -75W 140 -5 -75
Delia Z1 125 -30 -70E 125 -30 70
NW Z2 125 0 -70E 125 0 70
Delia
- 115* 0* -65E* 115* 0* 65*
SE
Z2 155 -10 -70W 155 -10 -70
Yasna
Z3 135 -10 -70W 135 -10 -70
Kasia - 135 -30 -85E 135 -30 85
DOM1,2- 160 -30* -60W 115* -30* -60
Trinidad
DOM3 160 0 -60W 160 0 -60
Marcela
- 160 0 -60W 160 0 -60
Sur
Raul
163 0 -70W 163 0 -70
Norte
Raul
20 0 -75E 20 0 75
Sur

Note:
1. Z1: Zone 1, Z2: Zone 2, Z3: Zone 3, HG: High grade envelope, * : dynamic anisotropy

All grade estimation passes were made inside a silver equivalent envelope of 120 g/t AgEq
and the last pass outside the envelope. Three grade estimation passes were run for Coyita
NW, Coyita SE, Branca, Delia NW, Delia SE, Yasna, Kasia, Trinidad, Marcela Sur, and Raul

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 14-26
www.rpacan.com

Norte and Raul Sur veins, with increased search ranges used for the second and third
estimations. In Delia SE, a second capping was used for the third run in composites greater
than 7 g/t Au and 700 g/t Ag to restrict their influence to produce high grade lenses with
dimensions similar to those observed in the mine. Estimation flags were stored for all
estimation runs based on search distances. The number of samples was stored in a separate
block variable for use in determining resource classification. Grade estimation parameters are
listed in Table 14-6.

TABLE 14-6 GRADE ESTIMATION PARAMETERS


Mandalay Resources Corporation Cerro Bayo Project

Search Ranges Number of samples per estimate


Estimation Semi-
Vein Area HG/AGEQ Envelope Major Minor Min. Max Max
Run major
Axis Axis samp/est samp/est samp/dh
Axis
1 inside AGEQ Env. 10 20 5 2 5 -
2 inside AGEQ Env. 10 40 10 2 5 -
DOM1
3 inside AGEQ Env 80 80 20 2 5
1 inside AGEQ Env 20 20 5 2 5
Coyita 2 inside AGEQ Env 40 40 10 2 5
DOM2
NW 3 inside AGEQ Env 80 80 20 2 5
1 inside AGEQ Env & HG Env 70 40 20 2 5 -
1 DOM3 inside AGEQ Env 60 40 20 1 5 -
2 inside AGEQ Env 120 80 40 1 5 -
4 All zones outside AGEQ Env, 80 80 35 1 6 -
1 inside AGEQ Env & HG Env 50 50 20 2 5 -
2 inside AGEQ Env & HG Env 100 100 30 2 5 -
Z1
1 inside AGEQ Env 80 80 20 2 5 -
2 inside AGEQ Env 100 100 30 1 5 -
1 inside AGEQ Env & HG Env 60 60 30 2 5 -
Coyita 2 Z2 inside AGEQ Env 80 80 20 2 5 -
SE 1 inside AGEQ Env 80 80 20 1 5 -
1 inside AGEQ Env & HG Env 50 50 20 2 5 -
2 inside AGEQ Env & HG Env 100 100 30 2 5 -
Z3
1 inside AGEQ Env 80 80 20 2 5 -
2 inside AGEQ Env 100 100 30 1 5 -
3 All zones outside AGEQ Env, 100 100 30 1 5 -
1 inside AGEQ Env & HG Env 50 50 20 2 5 -
2 inside AGEQ Env & HG Env 100 100 50 2 5 -
Branca 1 inside AGEQ Env 80 80 20 2 5 -
2 inside AGEQ Env 120 120 20 1 6 -
3 All zones outside AGEQ Env, 100 100 20 1 5 -
Delia 1 inside AGEQ Env. 70 50 20 2 5 -
DOM1
NW 2 inside AGEQ Env. 70 50 20 1 6 -

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 14-27
www.rpacan.com

Search Ranges Number of samples per estimate


Estimation Semi-
Vein Area HG/AGEQ Envelope Major Minor Min. Max Max
Run major
Axis Axis samp/est samp/est samp/dh
Axis
1 inside AGEQ Env. 10 20 5 2 5 -
2 DOM2 inside AGEQ Env. 40 70 20 2 5 -
3 Inside AGEQ Env 40 70 20 1 6
All
3 outside AGEQ Env, 60 60 20 1 6 -
domains
1 inside AGEQ Env. 10 20 10 2 5 -
2 DOM1 inside AGEQ Env. 60 70 20 1 5 -
1 inside AGEQ Env & HG Env. 10 20 10 2 5
2 inside AGEQ Env & HG Env. 50 70 20 1 5
DOM2
1 inside AGEQ Env 10 20 10 2 5
2 inside AGEQ Env 60 70 30 1 5
1 inside AGEQ Env & HG Env. 10 20 10 2 5
2 inside AGEQ Env & HG Env. 50 70 20 1 5
DOM3
Delia 1 inside AGEQ Env 10 20 10 2 5
SE
2 inside AGEQ Env 50 70 30 1 5
1 inside AGEQ Env & HG Env. 10 20 10 2 5
DOM4
2 inside AGEQ Env & HG Env. 50 70 20 1 5
1 inside AGEQ Env. 50 70 30 2 5
DOM5
2 inside AGEQ Env. 70 110 30 1 5
1 inside AGEQ Env. 50 70 30 2 5
DOM6
2 inside AGEQ Env. 70 110 30 1 5
All
3 outside AGEQ Env. 60 60 20 1 6 -
domains
1 Z2 inside AGEQ Env 80 90 30 1 6 -
Yasna 1 Z3 inside AGEQ Env 80 90 30 1 6 -
3 All zones outside AGEQ Env. 80 90 30 1 6 -
1 inside AGEQ Env 80 60 30 2 5 -
Kasia 2 inside AGEQ Env 100 75 35 1 6 -
3 outside AGEQ Env. 100 100 35 1 6 -
1 inside AGEQ Env. 10 20 5 2 5 -
2 DOM1 inside AGEQ Env. 20 50 10 1 5 -
1 inside AGEQ Env 10 20 5 2 5
Trinida DOM2
d 2 inside AGEQ Env 20 50 10 1 5
1 DOM3 inside AGEQ Env 25 50 10 1 5
All
3 outside AGEQ Env. 70 70 35 1 5 -
domains
1 DOM1 inside AGEQ Env. 50 50 20 2 5 -
2 inside AGEQ Env. 85 85 20 1 5 -
1 inside AGEQ Env. 10 20 5 2 5
Marcel 2 DOM2 inside AGEQ Env. 10 40 5 2 5
a Sur 3 inside AGEQ Env 50 70 10 1 5
1 inside AGEQ Env 10 20 5 2 5
2 DOM3 inside AGEQ Env 10 40 10 2 5
3 inside AGEQ Env 50 70 10 1 5

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 14-28
www.rpacan.com

Search Ranges Number of samples per estimate


Estimation Semi-
Vein Area HG/AGEQ Envelope Major Minor Min. Max Max
Run major
Axis Axis samp/est samp/est samp/dh
Axis
All
4 outside AGEQ Env. 85 85 20 1 6 -
domains
1 inside AGEQ Env. 75 25 20 2 5 -
Raul
2 inside AGEQ Env. 75 30 20 1 6 -
Norte
3 outside AGEQ Env. 75 30 20 1 6 -
1 inside AGEQ Env. 25 25 20 2 5 -
Raul
2 inside AGEQ Env. 35 35 20 1 6 -
Sur
3 outside AGEQ Env. 35 35 20 1 6 -

Note:
1. DOM : Domain, Z1: Zone 1, Z2: Zone 2, Z3: Zone 3

Channel and drill hole composites were used to estimate grades in the first run for the Trinidad,
Yasna, Delia NW, Delia SE, Coyita NW, Marcela Sur, and Raul veins. Drill hole composites
were then used in grade estimation for the following runs. The Coyita SE, Kasia, and Branca
veins were estimated using only drill hole composites. Figures 14-19 to 14-28 illustrate the
silver block grades for each vein.

Dilution grades were applied to those blocks located outside the final vein models and inside
the larger diluted vein models. Dilution grades were statistically determined for each diluted
vein based on drill hole assays located only inside the portion of the diluted vein models outside
of the final vein models (Table 14-7). Diluted vein grades and models were used only for
Mineral Reserves, and not used for reporting Mineral Resources. The resource blocks were
reblocked into the diluted block model. The reblocked grades were assigned based on volume
weighting of the original block grades. An example of the final resource and reserve seam
block models is shown in Figure 14-29.

TABLE 14-7 DILUTED VEIN GRADES


Mandalay Resources Corporation Cerro Bayo Project

Dilution Grade Dilution Grade


Zone
(Au g/t) (Ag g/t)
Branca 0.10 11
Delia NW 0.18 11
Delia SE 0.18 11
Yasna 0.13 15
Coyita NW 0.14 11
Coyita SE 0.14 11
Trinidad 0.14 7

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 14-29
www.rpacan.com

Dilution Grade Dilution Grade


Zone
(Au g/t) (Ag g/t)
Marcela Sur 0.15 10
Raul Norte 0.2 14
Raul Sur 0.2 14

BLOCK GRADE VALIDATION


Visual validation comparing assay and composite grades to block grade estimates showed
reasonable correlation with no significant overestimation or overextended influence of high
grades in all domains.

Swath plots compare the mean block grades estimated to the declustered capped data
(Nearest Neighbour estimate) in the X, Y, and Z directions. Results indicate that estimated
grades conform to the informing data.

The vein wireframe volumes are within three percent of the block model volumes reported at
a zero grade cut-off.

RPA compared mean grades of assays, composites, and blocks for the main veins. The block
grades were statistically validated for all veins and no significant discrepancies were identified.

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 14-30
Surface

200 L

Dyke 50 m

Dyke

100 L
Drill Hole Trace

Cerro Colorado
0L Contact
14-31

Peninsula Silver Blocks (g/t) Silver Composites (g/t)


Fault < 50 < 50
-100 L
4841900 N

4841700 N

4841500 N

4841300 N

4840900 N
4841100 N
50 - 100 50 - 100
100 - 300 100 - 300
300 - 500 300 - 500
500 - 800 500 - 800

Looking Northeast 800 - 1,500


1,500 - 3,200
800 - 1,500
1,500 - 3,200
PLAN VIEW > 3,200 > 3,200
N
4840800 N
Drill Hole Trace

Figure 14-19
Peninsula
Fault

www.rpacan.com
4840700 N Mandalay Resources Corporation

100 m
Cerro Bayo Project
Dyke
Region XI (Aisn), Chile
Branca Vein
272000 E

272100 E

272200 E

272300 E

4840600 N

Ag Block Grades
March 2017 Source: RPA, 2017.
Surface Looking Northeast

Upper Sill 300 L

50 m

Drill Hole Trace


200 L

Dyke

Dyke
100 L
14-32

DOM 1 DOM 2 DOM 3

Lower Sill
0L
4842300 N

4842200 N

4841400 N

4841300 N
4841600 N

4841500 N
4841800 N

4841700 N
4842100 N

4842000 N

4841900 N

PLAN VIEW 4842000 N

N 4841900 N

Drill Hole Trace


4841800 N
DO

4841700 N Silver Blocks (g/t) Silver Composites (g/t)


M

< 50 < 50
1

4841600 N
50 - 100 50 - 100 Figure 14-20
100 m
4841500 N 100 - 300 100 - 300
300 - 500 300 - 500

www.rpacan.com
4841400 N

500 - 800 500 - 800 Mandalay Resources Corporation


4841300 N
800 - 1,500 800 - 1,500
4841200 N 1,500 - 3,200 1,500 - 3,200 Cerro Bayo Mine
DO

> 3,200 > 3,200 Region XI (Aisn), Chile


M

4841100 N
2

4841000 N Coyita NW Vein


271800 E

271900 E

272000 E

272100 E

272200 E

272300 E

272500 E
271000 E

271200 E

271300 E

271400 E

271500 E

272400 E
271600 E

271700 E
271100 E

4840900 N Ag Block Grades


March 2017 Source: RPA, 2017.
Dykes
ace
Surf
200 L

Drill Hole Trace

100 L

Cerro Colorado
Contact

0L

50 m
14-33

Lagunas Peninsula Intermediate Dyke


Verde Fault Fault
Fault -100 L

DOM 1 DOM 2 DOM 3


4841300 N

4841200 N

4841000 N

4841000 N

4840900 N

4840700 N

4840600 N

4840500 N

4840400 N
Coyita Sur
Fault

Drill Hole Trace PLAN VIEW


Peninsula
Looking Northeast
Lagunas Fault 4841000 N
Verde Silver Blocks (g/t) Silver Composites (g/t)
Fault
N
4840900 N < 50 < 50
Figure 14-21
50 - 100 50 - 100

www.rpacan.com
100 - 300 100 - 300
4840800 N
Mandalay Resources Corporation
300 - 500 300 - 500
Dyke 4840700 N 500 - 800 500 - 800
Dyke 800 - 1,500 800 - 1,500 Cerro Bayo Mine
100 m
Coyita Sur
Fault
4840600 N
1,500 - 3,200 1,500 - 3,200 Region XI (Aisn), Chile
> 3,200 > 3,200
Coyita Sur
Fault
4840500 N Coyita SE Vein
Ag Block Grades
272100 E
271900 E

272000 E

272200 E

272300 E

272400 E

272500 E

272600 E

272700 E

272800 E

March 2017 Source: RPA, 2017.


300 L
Surface Looking Northeast Drill Hole Trace

200 L

100 L

50 m
4841900 N

4841800 N

4841700 N

4841600 N

4841500 N

4841400 N

4841300 N

4841200 N

4841000 N

4840900 N

4840800 N

4840700 N

4840600 N

4840500 N
4841100 N
14-34

0L

4841000 N

PLAN VIEW Silver Blocks (g/t) Silver Composites (g/t)


< 50 < 50

4840900 N
ZO 50 - 100 50 - 100
NE
1 100 - 300 100 - 300
Drill Hole Trace
300 - 500 300 - 500
500 - 800 500 - 800
4840800 N
800 - 1,500 800 - 1,500
N
1,500 - 3,200 1,500 - 3,200
> 3,200 > 3,200
4840700 N
ZO
NE
2
Figure 14-22
4840600 N

www.rpacan.com
Mandalay Resources Corporation

4840500 N 100 m Cerro Bayo Mine


Region XI (Aisn), Chile
Delia NW Vein
270700 E

270800 E

270900 E

271000 E

271200 E

271300 E

271400 E

271500 E
271100 E

4840400 N

Ag Block Grades
March 2017 Source: RPA, 2017.
Surface

200 L
Drill Hole Trace

Intermediate
Fault
100 L
50 m

DOM 1 DOM 2 DOM 3 DOM 4 Caadon


Fault
Peninsula
0 L Trinidad Laguna Verde Fault
14-35

Fault

272000 E

272100 E

272200 E
Fault

271900 E
271400 E

271500 E

271600 E

271700 E

271800 E
Silver Blocks (g/t) Silver Composites (g/t)
< 50 < 50
271400 E

271500 E

271600 E

271700 E

271800 E

271900 E

272000 E

272100 E
N
Looking Northeast 50 - 100 50 - 100
100 - 300 100 - 300
Drill Hole Trace 4840400 N
300 - 500 300 - 500
500 - 800 500 - 800
800 - 1,500 800 - 1,500
1,500 - 3,200 1,500 - 3,200
DO 4840300 N
M1 > 3,200 > 3,200
DO
M5
DO
Figure 14-23
M6
DO 4840200 N
M2

www.rpacan.com
Mandalay Resources Corporation

DO 4840100 N
Cerro Bayo Project
M3
Region XI (Aisn), Chile
PLAN VIEW DO
M4 Delia SE Vein
Ag Block Grades
March 2017 Source: RPA, 2017.
Looking Northeast
50 m
Surface
Drill Hole Trace
14-36

271800 E

271900 E

272000 E

272100 E

272200 E

PLAN VIEW
ZO
N

4841200 N
E

Silver Blocks (g/t) Silver Composites (g/t) Figure 14-24


1

Zone 1: Yasna Norte Depleted N


Zone 2 & Zone 3: Yasna Sur < 50 < 50
4841100 N
50 - 100 50 - 100
ZO

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Mandalay Resources Corporation
NE

100 - 300 100 - 300


4841000 N
2

300 - 500 300 - 500

4840900 N
500 - 800 500 - 800 Cerro Bayo Mine
800 - 1,500 800 - 1,500
ZO

Drill Hole Trace


Region XI (Aisn), Chile
NE

100 m 1,500 - 3,200 1,500 - 3,200


Yasna Vein
3

4840800 N
> 3,200 > 3,200
271700 E
271600 E

272300 E

272400 E
271500 E

Ag Block Grades
March 2017 Source: RPA, 2016.
www.rpacan.com
Surface 200 L

Branca Vein

50 m

Dyke

100 L

Drill Hole Trace

0L
4841000 N

4840900 N

4840800 N

4840700 N
4841100 N

Looking Northeast
PLAN VIEW

4841000 N

Drill Hole Trace Silver Blocks (g/t) Silver Composites (g/t)


Dyke < 50 < 50
50 - 100 50 - 100
4840900 N
100 - 300 100 - 300
300 - 500 300 - 500
500 - 800 500 - 800

4840800 N
800 - 1,500 800 - 1,500
1,500 - 3,200 1,500 - 3,200
50 m Branca Vein
> 3,200 > 3,200
271800 E

271900 E

272000 E

272100 E

272200 E

272300 E

4840700 N

Figure 14-25

Mandalay Resources Corporation

Cerro Bayo Project


Regin XI (Aisn), Chile
Kasia Vein
Ag Block Grades
March 2017 Source: RPA 2017.

14-37
Looking Northeast
DOM 2 DOM 1
Surface

Drill Hole Trace


50 m
14-38

271300 E

271400 E

271500 E

271600 E
Trinidad
Fault

Silver Blocks (g/t)


< 50
50 - 100
271000 E

271200 E

271300 E
271100 E

271400 E

271500 E

271600 E

100 - 300
4840500 N
300 - 500
DO 500 - 800
N
M3 Trinidad
Fault 800 - 1,500
1,500 - 3,200
4840400 N Figure 14-26
> 3,200

www.rpacan.com
Silver Composites (g/t) Mandalay Resources Corporation
Drill Hole Trace
4840300 N < 50
DO
M2 50 - 100
100 m
100 - 300
Cerro Bayo Project
50 m
DO
M1 300 - 500 Region XI (Aisn), Chile
4840200 N
500 - 800
PLAN VIEW
800 - 1,500
Trinidad Vein
1,500 - 3,200 Ag Block Grades
> 3,200
March 2017 Source: RPA, 2017.
400 L Surface

DOM 1 DOM 2

Drill Hole Trace


300 L

200 L
Sur
fac
e

100 L 50 m
Marcela Central
Fault
4841700 N

4841600 N

4841500 N

4841400 N

4841300 N

4841200 N

4841000 N

4840900 N

4840800 N

4840700 N
4841100 N
14-39

0L

Looking Northeast
280400 E

Silver Blocks (g/t) Silver Composites (g/t)


280000E
279000 E

279600 E

279800 E

280200 E
279200 E

279400 E

< 50 < 50
4841800 N
50 - 100 50 - 100
N
100 - 300 100 - 300
N
4841600 N
300 - 500 300 - 500
500 - 800 500 - 800
DOM

Drill Hole Trace


800 - 1,500 800 - 1,500
1,500 - 3,200 1,500 - 3,200
1

4841400 N
> 3,200 > 3,200

Marcela Central Figure 14-27


4841200 N
Fault
100 m

www.rpacan.com
Mandalay Resources Corporation
DO

4841000 N
M

200 m
Cerro Bayo Project
2

4840800 N Region XI (Aisn), Chile


Marcela Sur Vein
PLAN VIEW 4840600 N
Ag Block Grades
March 2017 Source: RPA, 2017.
Looking Northeast

Drill Hole Trace


500 L
50 m
Surface

400 L

Raul Norte Raul Sur

300 L
280200 E

280300 E

280300 E
14-40

PLAN VIEW Silver Blocks (g/t) Silver Composites (g/t)


4840200 N
< 50 < 50
280200 E

280300 E

280400 E

280500 E

280600 E

280700 E

280800 E

280900 E

281000 E
280100 E

50 - 100 50 - 100
4840100 N
100 - 300 100 - 300
N 300 - 500 300 - 500
Raul Norte Block Model 500 - 800 500 - 800
4840000 N
800 - 1,500 800 - 1,500
1,500 - 3,200 1,500 - 3,200

4839900 N
> 3,200 > 3,200
Drill Hole Trace

Figure 14-28
4839800 N

www.rpacan.com
4839700 N
Mandalay Resources Corporation
100 m
Cerro Bayo Project
4839600 N
Region XI (Aisn), Chile
Raul Sur Block Model
4839500 N
Raul Vein
Ag Block Grades
March 2017 Source: RPA, 2016.
www.rpacan.com

Resource Block Model Reserve Block Model

Vein Thickness Diluted Vein


Thickness

0 1 2 3 4
Metres

Figure 14-29

Mandalay Resources Corporation


Cerro Bayo Project
Region XI (Aisn), Chile
Example of Resource and
Reserve Seam Block Model
March 2017 Source: RPA, 2016.

14-41
www.rpacan.com

RESOURCE CLASSIFICATION
The Cerro Bayo Mineral Resource classification complies with the CIM (2014):

A Measured Mineral Resource is that part of a Mineral Resource for which quantity, grade
or quality, densities, shape, and physical characteristics are estimated with confidence
sufficient to allow the application of Modifying Factors to support detailed mine planning
and final evaluation of the economic viability of the deposit. Geological evidence is derived
from detailed and reliable exploration, sampling and testing and is sufficient to confirm
geological and grade or quality continuity between points of observation.

An Indicated Mineral Resource is that part of a Mineral Resource for which quantity, grade
or quality, densities, shape and physical characteristics are estimated with sufficient
confidence to allow the application of Modifying Factors in sufficient detail to support mine
planning and evaluation of the economic viability of the deposit. Geological evidence is
derived from adequately detailed and reliable exploration, sampling and testing and is
sufficient to assume geological and grade or quality continuity between points of
observation.

An Inferred Mineral Resource is that part of a Mineral Resource or which quantity and
grade or quality are estimated on the basis of limited geological evidence and sampling.
Geological evidence is sufficient to imply but not verify geological and grade or quality
continuity.

Resource classification within mineralization domains was primarily based on drill hole spacing
and continuity of grade, and was manually completed. Manual adjustments were made to
eliminate any unusual artifacts generated from the estimation passes.

The classification of the Mineral Resource estimate was applied in the following way:
Blocks estimated for the Trinidad, Coyita NW, Yasna, Delia SE, Delia NW, and Raul
veins during the first estimation pass with a minimum of two composites, with distance
to the holes consistently less than 15 m, or by composites from one hole within 7.5 m
of a block and well established geological and grade continuity, were classified as
Measured Resources.

Blocks estimated for the Trinidad, Branca, Yasna, Delia NW and SE, Coyita NW and
SE, Trinidad, Kasia, Marcela Sur, and Raul veins supported by composites from two
holes, with distance situated within 30 m of a block or by composites from one hole

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 14-42
www.rpacan.com

within 15 m of a block, and demonstrating reasonable geological and grade continuity,


were classified as Indicated Resources.

All blocks completely or partially contained within a wireframe model were assigned a
minimum classification of Inferred.

CUT-OFF GRADE
Table 14-8 outlines the parameters used to estimate the 219 g/t AgEq Mineral Reserve cut-off
grade. The 162 g/t AgEq Mineral Resource cut-off grade was estimated using the same
assumptions but higher gold and silver prices of $1,400/oz and $24/oz, respectively. The input
parameters were derived from information provided by Mandalay for smelter terms and actual
mining costs over the last year.

TABLE 14-8 RESERVE CUT-OFF GRADE ASSUMPTIONS


Mandalay Resources Corporation Cerro Bayo Project

Description Units Inputs Value


Mine Production Tonnes '000s 358
Gold Grade g/t 2.48
Silver Grade g/t 234.0
Total Waste Tonnes '000s

Mill Total Ore Milled Tonnes '000s 358


Gold Grade g/t 2.48
Silver Grade g/t 234.0

Recoveries
Gold % 87.3%
Silver % 90.8%

Concentrate
Ag-Au Concentrate dmt 7,189
Concentrate ratio 49.85
Gold Grade g/t 107.82
Silver Grade g/t 10,597

Revenue Metal Prices


Gold US$/oz 1200
Silver US$/oz 18.00

Contained Au ounces 24,920


Contained Ag ounces 2,449,278
Payable Au % 97.0%
Payable Ag % 96.5%
Payable Au Metal ounces 24,100
Payable Ag Metal ounces 2,356,463

Gross Value
Gold US$'000s 28,920
Silver US$'000s 42,416

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 14-43
www.rpacan.com

Description Units Inputs Value


Total US$'000s 71,336

Transport Charges
Truck US$'000s 265.00 US$/wmt conc 2,034
Ship US$'000s 150.00 US$/wmt conc 1,151

Treatment Charges
Concentrate US$'000s 320 US$/dmt conc 2,300

Refining Charges
Gold in conc US$'000s 6.00 US$/oz 145
Silver in conc US$'000s 0.50 US$/oz 1,178

Price Participation Base Escalator


Silver US$'000s 20 5% -

Penalty Charges US$'000s In Conc. Units -


As+Sb in conc. US$'000s na 0.00 % -
Pb+Zn in conc. US$'000s na 0.00 % -
Hg in conc. US$'000s na 0.00 ppm -
Fe in conc. US$'000s na 0.00 ppm -
Al2O3+MgO in conc. US$'000s na 0.00 % -

Net Smelter Return US$'000s 64,528


US$/t ore 180.05

NSR Model Factors


Net Revenue by Metal
Gold % 41.1%
Silver % 58.9%

Revenue per Metal Unit (NSR Factor)


Gold $ per g Au 29.90
Silver $ per g Ag 0.45

Silver Equivalent Factor g Ag per g Au 66.44

Operating Costs
Underground Mining US$'000s 61.99 US$/t 22,110
Processing US$'000s 21.99 US$/t 7,881
G&A US$'000s 15.65 US$/t 5,609

Total Operating Costs US$'000s 35,600


US$/t 99.33
US$/g Ag 0.47

Cut-Off Grades
Break-Even COG g AgEq 219
Incremental COG g AgEq 83

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 14-44
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MINERAL RESOURCE ESTIMATE


The Cerro Bayo Mineral Resource estimate, inclusive of Mineral Reserves, is summarized by
domain at a 162 g/t AgEq cut-off grade in Table 14-9.

TABLE 14-9 MINERAL RESOURCES INCLUSIVE OF MINERAL RESERVES BY


DOMAIN DECEMBER 31, 2016
Mandalay Resources Corporation Cerro Bayo Project

Measured Resources
Gold Silver AgEq Au Ag AgEq
Tonnes Grade Grade Grade Ounces Ounces Ounces
Category (000) (g/t Au) (g/t Ag) (g/t AgEq) (000) (000) (000)
Yasna - - - - - - -
Fabiola - - - - - - -
Branca - - - - - - -
Coyita 34 2.03 437 555 2 477 606
Dagny - - - - - - -
Delia NW 18 2.52 313 460 1 178 261
Delia SE 16 3.32 542 735 2 282 383
Trinidad 12 4.23 190 436 2 72 165
Marcela Sur - - - - - - -
Raul 25 1.66 219 318 1 180 261
Kasia - - - - - - -
Total 105 2.47 352 496 8 1,189 1,676

Indicated Resources
Gold Silver AgEq Au Ag AgEq
Tonnes Grade Grade Grade Ounces Ounces Ounces
Category (000) (g/t Au) (g/t Ag) (g/t AgEq) (000) (000) (000)
Yasna 60 1.95 361 471 4 700 913
Fabiola - - - - - - -
Branca 48 1.59 236 329 2 368 512
Coyita 423 3.60 408 618 49 5,547 8,396
Dagny - - - - - - -
Delia NW 15 2.06 264 383 1 128 185
Delia SE 106 3.45 248 449 12 845 1,528
Trinidad 7 3.39 126 324 1 27 70
Marcela Sur 161 2.94 390 561 15 2,013 2,895
Raul 82 2.00 207 326 5 545 860
Kasia 14 1.40 215 297 1 94 130
Total 915 3.05 349 526 90 10,266 15,490

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 14-45
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Measured and Indicated Resources


AgEq Au Ag Ag Eq
Tonnes Au Grade Ag Grade Grade Ounces Ounces Ounces
Category (000s) (g/t) (g/t) (g/t) (000s) (000s) (000s)
Yasna 60 1.95 361 471 4 700 913
Fabiola - - - - - - -
Branca 48 1.59 236 329 2 368 512
Coyita 457 3.48 410 613 51 6,024 9,002
Dagny - - - - - - -
Delia NW 33 2.31 290 425 2 305 446
Delia SE 122 3.43 287 487 13 1,127 1,911
Trinidad 19 3.92 167 395 2 99 235
Marcela Sur 161 2.94 390 561 15 2,013 2,895
Raul 107 1.92 210 325 7 725 1,121
Kasia 14 1.40 215 297 1 94 130
Total 1,020 2.99 349 523 98 11,455 17,166

Inferred Resources
Gold Silver AgEq Au Ag AgEq
Tonnes Grade Grade Grade Ounces Ounces Ounces
Category (000) (g/t Au) (g/t Ag) (g/t AgEq) (000) (000) (000)
Yasna 45 1.77 310 411 3 447 591
Fabiola - - - - - - -
Branca 24 1.27 188 262 1 145 202
Coyita 208 2.07 207 327 14 1,384 2,190
Dagny - - - - - - -
Delia NW 14 1.98 232 347 1 103 154
Delia SE 110 3.93 219 447 14 771 1,577
Trinidad 22 3.25 79 269 2 55 186
Marcela Sur 93 2.64 170 323 8 508 966
Raul - - - - - - -
Kasia 28 1.36 199 278 1 179 251
Total 543 2.49 206 350 43 3,592 6,117

Notes:
1. CIM definitions were followed for Mineral Resources.
2. Mineral Resources are estimated at a cut-off grade of 162 g/t AgEq. The AgEq was calculated using the
formula AgEq = Ag + (Au x 58.25) where Ag and Au are in grams per tonne after transport, treatment and
refining costs are deducted.
3. Mineral Resources are estimated using a long-term gold price of US$1,400 per ounce and a long-term
silver price of US$24 per ounce.
4. A minimum mining width of 1.2 m was used.
5. Bulk density is 2.63 t/m 3.
6. Mineral Resources are inclusive of Mineral Reserves.
7. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
8. Numbers may not add due to rounding.

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 14-46
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RPA is not aware of any environmental, permitting, legal, title, taxation, socio-economic,
marketing, political, or other factors that could materially affect the estimate of Mineral
Resources.

COMPARISON WITH PREVIOUS RESOURCE ESTIMATES


A comparison of the current RPA estimate, inclusive of Mineral Reserves, to the previous 2015
Mineral Resource estimate is presented in Table 14-10. The Measured and Indicated Mineral
Resources have decreased significantly. This decrease includes mine production in 2016 of
2.1 million ounces of silver and 16, 000 ounces of gold, in addition to the combined impacts of
the increased cut-off grade and adjustments to the resource estimation and classification
criteria made on the basis of additional geological data obtained during 2016, primarily from
on vein development. These decreases were partially offset by the addition of new resources
at Branca.

TABLE 14-10 COMPARISON OF 2016 AND 2015 RESOURCE ESTIMATES


INCLUSIVE OF MINERAL RESERVES
Mandalay Resources Corporation Cerro Bayo Project

31-Dec-16 31-Dec-15
Grade Contained Metal Grade Contained Metal
Au Ag Au Ag
Tonnes Au Ag Ounces Ounces Tonnes Au Ag Ounces Ounces
Resource Class (000) g/t g/t (000) (000) (000) g/t g/t (000) (000)
MEASURED
Yasna - - - - - - - - - -
Fabiola - - - - - - - - - -
Dalila - - - - - 30 2.73 268 3 255
Branca - - - - -
Coyita 34 2.03 437 2 477 - - - - -
Dagny - - - - - 21 2.47 182 2 124
Delia NW 18 2.52 313 1 178 52 2.83 295 5 492
Delia SE 16 3.32 542 2 282 - - - - -
Trinidad 12 4.23 190 2 72 - - - - -
Marcela Sur - - - - - - - - - -
Raul 25 1.66 219 1 180 30 1.53 203 1 193
Kasia - - - - - - - - - -
TOTAL MEASURED 105 2.47 352 8 1,189 132 2.46 250 10 1,065

INDICATED
Yasna 60 1.95 361 4 700 77 1.69 306 4 753
Fabiola - - - - - - - - - -

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 14-47
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31-Dec-16 31-Dec-15
Grade Contained Metal Grade Contained Metal
Au Ag Au Ag
Tonnes Au Ag Ounces Ounces Tonnes Au Ag Ounces Ounces
Resource Class (000) g/t g/t (000) (000) (000) g/t g/t (000) (000)
Dalila - - - - - 27 2.26 145 2 125
Branca 48 1.59 236 2 368
Coyita 423 3.60 408 49 5,547 701 2.94 340 66 7,653
Dagny - - - - - 17 2.35 159 1 88
Delia NW 15 2.06 264 1 128 112 2.63 186 9 671
Delia SE 106 3.45 248 12 845 274 6.11 466 54 4,107
Trinidad 7 3.39 126 1 27 77 3.73 110 9 272
Marcela Sur 161 2.94 390 15 2,013 278 2.13 308 19 2,745
Raul 82 2.00 207 5 545 112 1.69 177 6 637
Kasia 14 1.40 215 1 94 25 1.50 200 1 160
TOTAL INDICATED 915 3.05 349 90 10,266 1,699 3.16 315 173 17,211

TOTAL MEASURED AND


INDICATED 1,020 2.99 349 98 11,455 1,832 3.11 310 183 18,276

INFERRED
Yasna 45 1.77 310 3 447 53 1.59 281 3 475
Fabiola - - - - - - - - - -
Dalila - - - - - 9 1.91 86 1 26
Branca 24 1.27 188 1 145
Coyita 208 2.07 207 14 1,384 167 2.23 182 12 979
Dagny - - - - - 5 1.89 146 0 26
Delia NW 14 1.98 232 1 103 32 2.80 119 3 125
Delia SE 110 3.93 219 14 771 51 4.14 243 7 400
Trinidad 22 3.25 79 2 55 16 2.78 49 1 25
Marcela Sur 93 2.64 170 8 508 135 2.18 156 9 677
Raul - - - - - - - - - -
Kasia 28 1.36 199 1 179 43 1.45 184 2 251
TOTAL INFERRED 543 2.49 206 43 3,592 511 2.32 181 38 2,984

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 14-48
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15 MINERAL RESERVE ESTIMATE


RESERVE ESTIMATION METHODOLOGY
The Mineral Reserves were estimated by Mandalay using the RPA resource block model. For
conversion to Mineral Reserves, all Mineral Resources were diluted to a mining width of 2.4
m, and an extraction factor of 95% was applied to the stopes (exclusive of designed crown and
rib pillars). For veins over 2.4 m in width, an additional 0.4 m of dilution was added. Reserves
within drifts were additionally diluted to a minimum width of 3.0 m, with zero grade applied to
the dilution. RPA has reviewed the assumptions and methodology used in preparation of the
Mineral Reserve estimate and is of the opinion that the estimate is consistent with CIM
definitions.

Dilution grades vary from vein to vein. The dilution grades are shown in Table 15-2. Dilution
tonnages, at the dilution grades, were added to the vein tonnages using a weighted average
calculated to determine the final equivalent silver grade of the ore. The AgEq grade is
calculated using the ratio of gold to silver to determine the equivalent ounces of silver, taking
into account the transportation, treatment, and refining costs. A recovery (extraction) factor of
95% was then applied to the stopes to arrive at the final reserve tonnage. This factor covers
losses of ore as a result of incomplete mucking due to equipment limitations, losses of ore
from hang-ups and other production losses.

An example of the conversion of Mineral Resources to Mineral Reserves for the Delia NW2
vein is presented in Table 15-1. The dilution grades and extraction factors are applied to the
resources that are included in the underground level development and stopes. All of these are
summed and reported for each vein.

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 15-1
TABLE 15-1 CONVERSION OF RESOURCES TO RESERVES DELIA NW2 VEIN
Mandalay Resources Corporation Cerro Bayo Project
Technical Report NI 43-101 March 21, 2017
Mandalay Resources Corporation Cerro Bayo Project, Project #2699

Stope + Drift (Dil. Additional Drift


Item Cat. Mineral Resources (1.2m) Mineral Resources (2.4m) Mineral Reserves
Solid 2.4 m) Dilution (3m)
Tonnes Au g/t Ag g/t Tonnes Au g/t Ag g/t Tonnes Tonnes Tonnes Au g/t Ag g/t Ag Eq g/t Au (oz) Ag (oz) AgEq (oz).
Drifts
Drift 56 N1 2 164 3.06 104 264 2.13 72 271 144 415 1.39 47 139 19 627 1,860
Drift 56 N2 2 202 0.94 185 412 0.58 104 419 107 526 0.47 83 114 8 1,399 1,922
Drift 56 N3 2 668 2.84 339 1350 1.62 188 1362 373 1,734 1.27 148 232 71 8,225 12,940
Drfit 56 N4 2 85 0.93 102 171 0.57 59 172 46 - 0.45 46 77 - - -
Drift 56 N5 2 616 2.30 350 1297 1.28 188 1297 443 1,739 0.96 140 203 53 7,823 11,377
Drift 56 S1 2 303 1.17 275 615 0.72 152 606 164 770 0.56 120 157 14 2,969 3,894
Stopes
Stope 56 N1 1 127 4.11 799 272 2.26 428 277 4 263 2.26 428 579 19 3,621 4,891
Stope 56 N1 2 83 3.55 674 192 1.93 355 195 3 185 1.93 355 483 11 2,113 2,875
Stope 56 N2 1 819 3.52 442 1487 2.18 267 1475 -12 1,401 2.18 267 412 98 12,045 18,572
Stope 56 N2 2 499 3.35 425 968 1.92 239 960 -8 912 1.92 239 367 56 7,012 10,758
Stope 56 N3 1 1617 3.35 398 2577 2.34 273 2616 39 2,485 2.34 273 429 187 21,838 34,285
Stope 56 N3 2 927 3.15 373 1720 1.90 221 1746 26 1,659 1.90 221 347 101 11,795 18,534
Stope 56 S1 1 659 1.34 341 1,027 1.00 243 1,010 - 17 960 1.00 243 309 31 7,490 9,539
Stope 56 S1 2 406 1.33 324 731 0.89 202 719 - 12 683 0.89 202 261 20 4,441 5,737
Total Proven 1 3,222 3.01 413 5,363 2.04 274 5,378 15 5,109 2 274 410 336 44,994 67,287
Total Probable 2 3,954 2.50 337 7,721 0.80 107 7,747 1,276 8,624 1 167 252 354 46,404 69,899
Total 7,176 2.73 372 13,084 1.31 175 13,125 1,290 13,733 2 207 311 689 91,398 137,186

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Page 15-2
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TABLE 15-2 DILUTION GRADES 2016 RESERVES


Mandalay Resources Corporation Cerro Bayo Project

Dilution Grade Dilution Grade


Zone
(Au g/t) (Ag g/t)
Branca 0.10 11
Delia NW 0.18 11
Delia SE 0.18 11
Yasna 0.13 15
Coyita NW 0.14 11
Coyita SE 0.14 11
Trinidad 0.14 7
Marcela Sur 0.15 10
Raul Norte 0.2 14
Raul Sur 0.2 14

DILUTION AND EXTRACTION FACTORS


The Mineral Resources were reported at the vein width and diluted to an average mining width
of 2.4 m for conversion to Mineral Reserves. The internal dilution for the development
averages 65% while the stope dilution averages 35%. The Marcela vein is not included in the
dilution numbers as the reserve was carried forward from the last year. It represents a very
small fraction of the total reserves (less than 3%). An extraction factor of 95% was applied, to
account for mining losses.

The drifts in the ore zones are driven at three metres by three metres. The stope design allows
for production drilling to be carried out with an offset of approximately 150 mm from the hanging
wall and footwall contacts of the ore, while the minimum stope width utilized is 2.4 m. For the
stopes wider than 2.4 m, an additional 0.4 m is included for dilution beyond the vein width.
Vein widths for the different zones vary from 1.2 m up to over three metres, with an average
of approximately 1.8 m. Based on observations on site, RPA is of the opinion that the stope
dilution factors indicated above could be lower with careful planning and execution of drilling
and loading operations. Dilution in the development, however, provides less of an opportunity
as a minimum drift width is required to accommodate equipment sizes and clearance
regulations for such equipment.

The Mineral Reserves for the Cerro Bayo Project are listed in Table 15-3.

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 15-3
TABLE 15-3 MINERAL RESERVES DECEMBER 31, 2016
Mandalay Resources Corporation Cerro Bayo Project

Classification Vein Tonnes (t) Grade Au (g/t) Grade Ag Grade AgEq Ounces Au Ounces Ag Ounces AgEq
(g/t) (g/t)* (oz) (oz) (oz)*
Technical Report NI 43-101 March 21, 2017
Mandalay Resources Corporation Cerro Bayo Project, Project #2699

Fabiola - - - - - - -
Yasna - - - - - - -
Branca - - - - - - -
Yasna Sur - - - - - - -
Dalila - - - - - - -
Delia NW-1 - - - - - - -
Proven Delia NW-2 16,958 2.05 258 394 1,119 140,438 214,799
Delia SE 17,272 2.79 459 645 1,552 254,871 357,979
Marcela - - - - - - -
Coyita N 40,199 1.46 313 411 1,892 404,997 530,706
Coyita S - - - - - - -
Trinidad 13,663 2.56 116 286 1,124 51,145 125,807
Raul 14,791 1.34 168 257 639 79,951 122,400
Proven Subtotal 102,882 1.91 282 409 6,326 931,401 1,351,691

Fabiola - - - - - - -
Yasna - - - - - - -
Branca 22,026 1.32 199 287 936 140,770 202,983
Yasna Sur 55,665 1.49 261 360 2,661 467,615 644,444
Dalila - - - - - - -
Delia NW-1 - - - - - - -
Probable
Delia NW-2 8,624 1.28 167 252 354 46,404 69,899
Delia SE 102,257 2.60 197 370 8,540 647,509 1,214,924
Marcela 159,786 2.37 307 465 12,173 1,577,833 2,386,633
Coyita N 100,294 1.18 214 292 3,817 688,549 942,120
Coyita S 344,891 3.00 363 562 33,280 4,023,154 6,234,291
Trinidad 3,489 2.13 66 207 239 7,394 23,263
Raul 78,692 1.41 132 226 3,578 332,961 570,664
Probable Subtotal 875,725 2.33 282 436 65,578 7,932,190 12,289,221

Fabiola - - - - - - -
Yasna - - - - - - -
Branca 22,026 1.32 199 287 936 140,770 202,983
Yasna Sur 55,665 1.49 261 360 2,661 467,615 644,444
Dalila - - - - - - -
Delia NW-1 - - - - - - -

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Proven & Probable Delia NW-2 25,581 1.79 227 346 1,473 186,842 284,698
Delia SE 119,530 2.63 235 409 10,092 902,380 1,572,903
Marcela 159,786 2.37 307 465 12,173 1,577,833 2,386,633
Coyita N 140,493 1.26 242 326 5,709 1,093,546 1,472,825
Coyita S 344,891 3.00 363 562 33,280 4,023,154 6,234,291
Trinidad 17,152 2.47 106 270 1,363 58,539 149,070
Page 15-4

Raul 93,482 1.40 137 231 4,217 412,912 693,064


Proven + Probable Total 978,607 2.29 282 434 71,904 8,863,592 13,640,912
Notes:
1. CIM definitions were followed for Mineral Reserves.
2. Mineral Reserves are estimated at a cut-off grade of 219 g/t AgEq (silver equivalent). AgEq is calculated using the formula AgEq= Ag + (Au x 66.44) where Ag and Au are in grams per tonne.
Metal prices for determining cut-off grades were US$1,200/oz Au and $18/oz Ag.
3. Veins are diluted to 2.4 m minimum mining width and a mining extraction factor of 95% was applied to stope tonnages.
4. A bulk density of 2.63 t/m3 was used.
5. Dilution grades vary by vein.
6. Numbers may not add due to rounding.
7. Yasna Sur is the south part of the Yasna vein. Delia NW-1 and Delia NW-2 are parts of Delia NW. Coyita consists of Coyita NW and Coyita SE
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RPA is not aware of any mining, metallurgical, infrastructure, permitting, or other relevant
factors that could materially affect the Mineral Reserve estimate.

PRODUCTION FOR 2016


The production for 2016 is shown in Table 15-4.

TABLE 15-4 PRODUCTION RESULTS - 2016


Mandalay Resources Corporation Cerro Bayo Project

Item Units Actual Plan Variance*


Ore tonnes milled dry t 396,508 503,798 -21%
Grade Ag g/t 162 226 -28%
Au g/t 1.31 1.87 -30%
Contained Metal Ag Oz 2,061,860 3,654,111 -44%
Au Oz 16,647 30,286 -45%
Recovery Ag % 87% 90% -3%
Recovery Au % 85% 86% -2%
Tonnes Concentrate t 6,069 8,946 -32%
Concentrate grade Ag g/t 9,236 11,475 -20%
Au g/t 72 91 -20%
Metal produced Ag Oz 1,802,060 3,300,519 -45%
Au Oz 14,135 26,157 -46%

Table 15-4 indicates a substantially lower performance in 2016 due in large part to a work
related fatality that caused the loss of approximately one full month of production followed by
the normal delays to achieve normal production levels when operations resumed.

Figures 15-4 to 15-12 depict geological longitudinal sections for each vein, drill hole intercepts,
and the extents of the Mineral Reserves estimated in the report. The longitudinal sections also
show the extents of the developed and mined out areas in the veins through to February 2017.

RECONCILIATION
Mine staff carry out reconciliation of mine production and mill production compared to the
resource model on a monthly basis.

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 15-5
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The reconciliation methodology is shown in Figure 15-1. Figure 15-2 indicates the steps taken
to complete the reconciliation which include: 1) tabulation of mine production sources; 2)
tabulation of planned and unplanned production; and 3) tabulation of mined and unmined
reserve areas. Figure 15-3 shows the comparison of contained silver, contained gold, and
tonnes mined for the 2016 reconciliation.

In RPAs opinion, the reconciliation process is reasonable and permits mine staff to know the
grade variance on a regular basis. Dilution is estimated from the variance in the reconciliation
process. CMS measurements are not taken at the current time as reconciliation is considered
reasonable and RPA is in agreement with this approach.

The reconciliation to December 31, 2016 indicates that 9% of the production tonnage came
from unmodelled areas or outside of the reserves. Average external dilution for the stopes is
approximately 50%.

RPA notes that Mandalay currently maintains up-to-date longitudinal sections of each vein
illustrating the mining completed in order to provide current information on the source of the
resources for reconciliation purposes. RPA agrees with this practice.

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 15-6
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2a & 2b)

Data Consolidation for December 2016 Reconciliation


Mine Production Estimate is
Reserve depletion total for Mine Production Estimate reconciled against Actual Plant
Period Type 1 & 2 for period Production for the period
MINE

PLANT
Variance from Mined Estimate
is distributed proportionally on
a tonnage & ounce basis

Figure 15-1

Mined Production calculated on Plant Actual basis Mandalay Resources Corporation


= Plant Feed + EOM - SOM

Cerro Bayo Project


Region XI (Aisn), Chile

Reconciliation Methodology
March 2017 Source: RPA., 2017

15-7
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Figure 15-2

Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile

Reconciliation Steps
March 2017 Source: RPA., 2017

15-8
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Reconciliation 2016 Production
Contained Ag (oz.)
1200000

1000000
Ag Ounces

800000
.
z
O 600000
g
A
400000

200000

0
Dagny Fabiola Trinidad Delia NW2 Delia SE Coyita
BM Estimate 413529 160972 58901 777670 1015208 637806
Reconciled Mine Prod. 224936 34068 35713 624981 645953 305305
Unmodelled Areas 19985 873 14235 61884 24145 63820

Veins Figure 15-3


Reconciliation 2016 Production
Contained Au (oz.)
Mandalay Resources Corporation
10000

9000

8000
Cerro Bayo Project
7000
Region XI (Aisn), Chile
Au Ounces

. 6000
z
O 5000
Reconciliation Tables
u
A 4000

3000

2000

1000

0
Dagny Fabiola Trinidad Delia NW2 Delia SE Coyita
BM Estimate 4761 584 1648 9298 6985 3206
Reconciled Mine Prod. 2975 141 648 6150 3431 1606
Unmodelled Areas Prod. 226 8 164 678 133 332

Veins Veins

Reconciliation 2016 Production


Tonnes Mined
140000

120000

100000

s 80000
Tonnes

e
n
n
o 60000
T

40000

20000

0
Delia
Dagny Fabiola Trinidad Delia SE Coyita
NW2
BM Estimate 91996 11342 20325 125175 116174 81096
Reconciled Mine Prod. 56871 4803 10896 130747 94142 51055
Unmodelled Areas 5580 489 3706 11308 5953 8674

Veins

March 2017 Source: RPA., 2017

15-9
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Note: Grades are diluted to


Figure 15-4
2.4m minimum mining width
(64.66 g/t Au = 1 g/t Au)

Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Branca Vein
Longitudinal Section
March 2017 Source: Mandalay Resources Corp., 2017

15-10
Figure 15-5

SE Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Yasna Vein
Longitudinal Section
15-11

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Note: Grades are diluted to
2.4m minimum mining width
(66.44 g/t Au = 1 g/t Au)

March 2017 Source: Mandalay Resources Corp., 2017.


Figure 15-6

Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Delia NW Vein
NW SE
Longitudinal Section
15-12

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Note: Grades are diluted to
2.4m minimum mining width
(66.44 g/t Au = 1 g/t Au)

March 2017 Source: Mandalay Resources Corp., 2017.


Figure 15-7

Mandalay Resources Corporation

SE Cerro Bayo Project


Region XI (Aisn), Chile
Delia SE Vein
Longitudinal Section
15-13

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Note: Grades are diluted to
2.4m minimum mining width
(66.44 g/t Au = 1 g/t Au)

March 2017 Source: Mandalay Resources Corp., 2017


15-14

Note: Grades are diluted to


2.4m minimum mining width
(66.44 g/t Au = 1 g/t Au) Note: Grades are diluted to
2.4m minimum mining width
(66.44 g/t Au = 1 g/t Au)

Figure 15-8

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Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Marcela Sur Vein
Longitudinal Section
March 2017 Source: Mandalay Resources Corp., 2017.
Figure 15-9
SE
Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Coyita NW Vein
Longitudinal Section
15-15

www.rpacan.com
Mandalay Resources Corporation

March 2017 Source: Mandalay Resources Corp., 2017


15-16

Figure 15-10

Mandalay Resources Corporation

www.rpacan.com
Cerro Bayo Project
Note: Grades are diluted to Region XI (Aisn), Chile
2.4m minimum mining width
(66.44 g/t Au = 1 g/t Au) Coyita SE Vein
Longitudinal Section
March 2017 Source: Mandalay Resources Corp., 2017.
15-17

Note: Grades are diluted to


2.4m minimum mining width
(66.44 g/t Au = 1 g/t Au)

Figure 15-11

www.rpacan.com
Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Trinidad Vein
Longitudinal Section
March 2017 Source: Mandalay Resources Corp., 2017.
15-18

Note: Grades are diluted to


2.4m minimum mining width
(66.44 g/t Au = 1 g/t Au)

Figure 15-12

www.rpacan.com
Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Raul Vein
Longitudinal Section
March 2017 Source: Mandalay Resources Corp., 2017.
www.rpacan.com

16 MINING METHODS
MINE DESIGN AND MINING METHOD
The mine design for the Cerro Bayo vein systems includes the main access via 4.0 m by 4.5
m decline ramps because most veins are less than 200 m below surface. The ramps are
typically driven in the footwall of the target vein at a gradient of -12.5%. The ramp arrangement
is shown in Figure 16-1. The access drifts driven from the ramp to the ore are three metres
by three metres as are the access drifts to the ventilation raises. The ground conditions were
very good in all areas visited in the past. All of the portals are located within a radius of one
kilometre of the processing plant. The surface plan is shown in Figure 16-2 illustrating the
general plant layout and portal locations.

As a result of the very good ground conditions, a longhole mining method without backfill is
employed although shrinkage stoping was used in the past by Coeur. Production development
includes driving the drifts on ore at a minimum dimension of three metres by three metres,
which is required for the standard equipment sizes utilized. The appropriate name for the type
of stoping method is longhole retreat stoping. The average production rate over the LOM is
1,000 tpd.

Stoping is carried out with the drilling of 54 mm diameter production holes upwards from the
drill drift towards the upper drift. Production drill holes are drilled to within approximately one
metre of breakthrough and stopped at that point in order to avoid blockage of the hole from
loose material on the overcut floor. Typically, blasting starts at the lateral limit of ore on a
particular level and the stope advances in a retreat fashion towards the main access drift.
The drifts on ore are driven in both directions from the access drift, to provide two production
headings from which drilling, blasting, and mucking operations can take place simultaneously.
The stope dimensions, and method, are shown in Figure 16-3. In locations where pillars can
be left due to waste or below cut-off material, a slot raise is driven providing the opening to
recommence production drilling and blasting in the stope. Both sill and rib pillars are designed
to provide stability along strike and on dip and prevent sloughing of the hanging wall.

The 54 mm production drill holes are drilled close to the vein contact (approximately150 mm)
and upwards following the dip of the vein. The final stope width is estimated at 2.4 m based

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 16-1
www.rpacan.com

on an average vein width of 1.2 m. If the vein is wider than 2.4 m an additional dilution width
of 0.40 m (at zero grade) is added when estimating the Mineral Reserves. A typical stope
cross section is shown in Figure 16-4. The typical drill pattern in narrow stopes is a 2-1-2
pattern with a one metre burden. In the wider stopes, like those at Delia, fan drilling is used
as indicated in Figure 16-5. While the holes are angled to follow the dip of the vein, standard
practice is to systematically angle into the stope, or dump forward at approximately 70,
providing for safer conditions when loading the holes with explosives prior to blasting and
improved breakout at the toe of blind holes.

Typical level intervals are 15 m and range from 12 m to 15 m. Rib pillars are typically left at
approximately 80 m (vertically) centred along strike. Crown pillars are left at approximately 45
m to 55 m spacing, horizontally. These pillars are normally referred to as Sill Pillars with the
Crown pillar designation reserved for the surface Crown pillar. Raises to re-slot have been
driven conventionally (by hand) in the past but are now opened by longhole raises, called
inverse raises with drilling of up-holes followed by loading and blasting, resulting in a much
safer procedure. The result of stope blasting has been observed underground in the past by
RPA with excellent ground control noted. Both hanging wall and footwall contacts are visible
with little overbreak beyond the contacts observed. The blasted ore is mucked by load-haul-
dump units (scooptrams) back to the access drift and loaded into haul trucks for haulage to
the surface stockpile.

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 16-2
www.rpacan.com

Split Set Bolts


Split Set Bolts

Ventilation Duct 1100mm Split Set Bolts

Split Set Bolts Leaky Feeder

1m
1,

Compress Air Line 4"


Electric Cable Water Line 2"
Pump Line 3"
Pump Line 3"
4,5 m

4m

Figure 16-1

Mandalay Resources Corporation


Cerro Bayo Project
Region XI (Aisn), Chile
Ramp Dimensions
4.0 m x 4.5 m
March 2017 Source: Mandalay Resources Corp., 2011.

16-3
270000 270500 271000 271500 272000 272500 273000 273500

4842000
4842000

N
4841500

4841500
Coyita Portal
Fabiola Portal

LAGUNA VERDE
4841000

4841000
16-4

Dagny Portal
PLANT
Delia NW Portal
4840500

4840500
TAILINGS
FACILITY

Figure 16-2

4840000
4840000

Delia Sur Portal

www.rpacan.com
Mandalay Resources Corporation

Cerro Bayo Project


270000 270500 271000 271500 272000 272500 273000 273500
Region XI (Aisn), Chile
0 250 500 750 1000 Surface Plan with
Metres Portal Locations
March 2017 Source: Minera Cerro Bayo Ltda., 2016.
Crown Pillar

Rib Pillars
Open Stope Open Stope
15.0m
(Mined Out) (Mined Out)

Raise

Raise
Mucking Vein 15.0m
Raise
16-5

Access Drift Production Drift 3.0m

Vein Rib Pillars Vein 15.0m


(Planned)

Drilling Access Drift Production Drift 3.0m


Sill Pillar

Figure 16-3

www.rpacan.com
Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Schematic Section of Longhole
Retreat Stoping Method
March 2017 Source: Mandalay Resources Corp., 2011.
www.rpacan.com

Towards
Acess
Front

Upper Drift

Longholes 54mm dia.

1 2 3

Drill Drift

Blasthole Layout Report Figure 16-4


Layout: Ring No. 167
Mandalay Resources Corporation
Degrees Forward (dump): -75.0
L: Left R: Right Cerro Bayo Project
Hole Angle L/R Length No. Rods Region XI (Aisn), Chile
1 22 R 11.46 9 1/2
2 22 R 11.69 9 3/4
Longhole Drill Section for Narrow Vein
3 25 R 12.21 10 1/4 Delia NW2 Vein - Stope146N
Total Length 35.36
(Looking towards Access)
March 2017 Source: Minera Cerro Bayo Ltda., 2016.

16-6
www.rpacan.com

Towards
Acess
Front

Upper Drift

Longholes 54mm dia.

1 2
3 4
5

6
Ore Contact
7
8
9
10
11
12
Drill Drift 14 13

Blasthole Layout Report

Layout: Ring No. 75

Degrees Forward (dump): -75.0


L: Left R: Right

Hole Angle L/R Length No. Rods


1 28 R 13.79 11 1/2
2 29 R 14.09 11 3/4
3 31 R 14.93 12 1/2
4 35 R 16.51 13 3/4 Figure 16-5
5 39 R 15.01 12 1/2
6 44 R 12.59 10 1/2
7
8
51
59
R
R
10.31
8.59
8 1/2
7 1/4
Mandalay Resources Corporation
9 67 R 7.35 6 1/4
10 77 R 6.68 5 1/2 Cerro Bayo Project
11 86 R 5.98 5 Region XI (Aisn), Chile
12 99 R 5.62 4 3/4
13 111 R 5.20 4 1/4 Longhole Drill Section for Wide Vein
14 131
Total Length
R 2.04
138.69
1 3/4 Delia NW2 Vein - Stope146N
(Looking towards Access)
March 2017 Source: Minera Cerro Bayo Ltda., 2016.

16-7
www.rpacan.com

GEOMECHANICS AND GROUND SUPPORT


Ground support varies depending on the type of opening. Geomechanical studies have been
carried out by Sociedad Geoconsultora Ltda. (Geoconsultora), of Chile, in November 2010 and
December 2015. The first study was carried out in preparation for development of the Delia
vein system and is titled Estudio de Diseo Geomecanico Preliminar y Recomendaciones de
Fortificacin Proyecto Delia NW and the second study was in preparation for mining in the
Coyita vein and is titled Estudio de Diseo Geomecnico Preliminar y Recomendaciones de
Fortificacin Proyecto Coyita Norte. The geomechanical studies included an approach using
three stages to evaluate support requirements which were determined to be the same for both
mines. These methods included the following:

1. Support required for the underground openings and evaluation of the stability using
empirical methods, in particular the concept of hydraulic radius (Hr). This is done by
determining the Q Index by Barton. This index is applied with the determination of
rock mass classification, or Mining Rock Mass Rating (MRMR) by Laubscher. The
results indicated the requirement for Rib Pillars positioned at approximately 80 m
horizontal intervals along the vein structure. Recommended pillar widths were five
metres in order to support an opening twice that of the vein width.

The hydraulic radius is defined as the perimeter of an opening divided by the area of
the opening. A graph showing the relationship of the Hr with MRMR is shown in Figure
16-6.

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 16-8
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FIGURE 16-6 STABILITY GRAPH MRMR VS. HR

For the first report, Geoconsultora proceeded to carry out testing in the Fabiola and
Dagny mines to obtain data to determine the Q factors. This was followed up with
analysis of different ranges of Q values of Barton and permitted determination of the
Mining Rock Mass Rating (MRMR) using the relationship: MRMR Laubscher = 19.5
(log Q) + 43. The factors are indicated in Table 16-1. The values plotted in Figure 16-6
indicate the minimum hydraulic radius (Hr) required to maintain stability of the stope
opening.

TABLE 16-1 GEOMECHANICAL CHARACTERISTICS - Q (BARTON) VS.


MRMR (LAUBSCHER)
Mandalay Resources Corporation Cerro Bayo Project

Value Q MRMR
Minimum 1.6 47
Maximum 12.9 65
Average 4.7 56

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 16-9
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Using the above graph, it can be determined that, in order to maintain stability of the
stope, a minimum Hr of 16 must be maintained. Also considering that the veins dip
from 60 and steeper, analysis indicated that, in order to avoid caving of the hanging
wall, it was necessary to place rib pillars at 80 m spacing along strike with possible
variances of 10 m to 20 m. Also, the rib pillars should have a width double that of the
width of the vein or five metres.

2. The second stage of the study included refining the results obtained in the initial steps
by applying semi-analytical approximations based on classical solutions of stress
distributions around underground openings. Of special relevance in this phase of the
study was the application of the K factor (ratio of in-situ stresses) using a very
conservative figure of 1.4 (maximum). The results are summarized in Tables 16-2 and
16-3 of the safety factors for stope heights of 55 m.

TABLE 16-2 STOPE SAFETY FACTOR WALLS


Mandalay Resources Corporation Cerro Bayo Project

Horizontal Stresses - Stopes 55 m High


Constant K Stress A Safety Factor
0.5 2.33 20
1.0 1.01 47
1.4 0.004 12.83

TABLE 16-3 STOPE SAFETY FACTORS - ROOF


Mandalay Resources Corporation Cerro Bayo Project

Roof (Back) Stresses - Stopes 55 m High


Constant K Stress B Safety Factor
0.5 12.56 3.8
1.0 27.77 1.7
1.4 39.33 1.2

The assumptions made in the above analysis included an average vein width of two
metres and rock density of 2.5 t/m 3. The strength of the rock mass was evaluated at
47 MPa. The safety factors shown in the table correspond to the ratio of resisting
stresses of the rock mass and induced stresses (A and B). Different stope heights
were analyzed with the results indicating the optimum stope height of 55 m, with a
crown pillar twice the width of the vein or four metres in thickness. Typically, a factor
of safety of 1.3 is used to ensure stability of openings. Although the factor of safety

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 16-10
www.rpacan.com

indicated in the table is 1.2, the level of risk of failure is considered low due to the
following:
Constant monitoring of the stope backs is being carried out.
Analysis is provisional and under normal operations, other levels will be opened
above, thereby reducing the intensity of the induced stresses.
The criteria adopted for the analysis are considered extremely conservative.

3. The third phase of the rock mechanics analysis included numerical modelling using the
software Phase2, which permits the study of stresses and gradual deformations of the
rock mass. This utilizes semi-numerical methods to refine the preliminary results. The
modelling investigated the effects of stope heights, hanging wall dip angles, and rock
types for the resulting potential of collapse or caving of the hanging wall. The results
of this analysis showed that a) it was not recommended to mine without the use of
crown pillars for intermediate support, b) it is recommended to position sill pillars each
45 m, where the results of the analysis were most favorable, and c) it is possible to
consider an increase in the crown pillar spacing to 60 m, but only with strict restrictions,
hence this approach was not recommended.

4. With respect to the sequence of mining, this will depend on operational factors,
however, in general the mining should be carried out in two phases, with the
intermediate or upper stopes completed first, followed by the lower level stopes. This
is recommended in order to protect the integrity of the sill pillar on the lower level which
will be subjected to the highest stress levels. If mining is required to start on the lower
levels, the use of controlled blasting and constant monitoring of the crown pillar can be
implemented without serious problems.

5. The use of Bartons Q Index permitted the estimation of ground control requirements
for the conditions indicated in Table 16-4.

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 16-11
www.rpacan.com

TABLE 16-4 GROUND SUPPORT RECOMMENDATIONS


Mandalay Resources Corporation Cerro Bayo Project

Quality Range of
Application Support
Rock Mass Q
Very Good Q40 General Split Set Bolts, 2.6 m
Good 10Q40 Roof Split Set Bolts, 2.6 m, spacing 2 m2 and 1.7 m2 if
required
Good Wall Split Set Bolts, 2.6 m
Fair 1Q10 Roof Split Set Bolts, 2.6 m, spacing at 1.5 m2, screen
(Inchalam 10006 or 3500)
Fair Wall Split Set Bolts, spacing at 1.5 m2, screen
(Inchalam 10006 or 3500).

The control of blast vibration levels was also addressed and the standard Scaled Distance
formula can be used to determine the weight of explosives per delay in order to keep the
vibration levels within recommended limits to avoid damage. The standard drill pattern is 2-1-
2 in narrow veins and 3-3 in wider veins, with a one metre burden between drill holes rings.
Only one hole per delay is blasted with an average hole length of 12.5 m, therefore vibrations
from blasting are kept very low, ensuring limited potential damage to the stope walls and
surrounding areas.

Recommendations with respect to future development include geomechanical mapping of the


openings, incorporating the geomechanical information in the planning process, refining and
optimizing of mining designs, better definition of support requirements, and a rigorous program
of control and monitoring of blasting methods and procedures to continue optimization.

CROWN PILLAR STUDY


Since future mining in the Yasna Sur, Coyita, Fabiola, and Dagny veins will be carried out
under the Laguna Verde lake, Mandalay requested that a study be completed to evaluate the
thickness of the surface crown pillar that was required in order to safely carry out mining
operations. The study Modelo Conceptual Inicial de la Explotacin de las Vetas Coyita,
Yasna, Fabiola y Dagny bajo la Laguna Verde was completed by Subterra Ingenieria and the
report was issued on January 28, 2015. The results of the analysis indicated that mining of
openings of 15 m widths with a 15 m pillar in between was possible while maintaining a safety
factor of at least 1.4 and using a 40 m thick crown pillar. Subterra Ingenieria also completed a
final report entitled Anlisis Geolgico-Geotcnico y Diseo Del Pilar Corona de la
Explotacin de las vetas Coyita, Yasna, Fabiola y Dagny bajo le Laguna Verde, dated April

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 16-12
www.rpacan.com

24, 2015. Geomechanical analysis was carried out with logging of two diamond drill holes
(DLV14-045 and DLV14-054) shown in Figure 16-7 as well as geotechnical/hydrogeological
mapping on the Dagny 85 and Yasna 117 levels. The RQD and rock mass rating (RMR) were
evaluated for the different rock types including the main Coigues and Temer formations. An
initial analysis for sensitivity using Examine 2D software was carried out, with an additional
more refined conceptual analysis also completed. A cross section was prepared in 2D using
Phase 2 (finite element) with the recommended crown pillar dimensions. In addition, a three
dimensional numeric model was completed using FLAC3D version 5.01 (method of explicit
finite differences). The results are shown in a simplified manner in Figure 16-8. The figure
shows a three-dimensional view of the stopes, rib pillar, crown pillar, and the level intervals (15
m). The middle portion of the figure shows the resulting analysis with the crown pillar thickness
that would remain in place following mining to the depth of the 12 Level based on the
dimensions of the stope openings and the various pillar spacings. A linear graph indicates the
Safe crown pillar dimension that would be left in place. As the graph indicates, a safe pillar
thickness of 30 m would remain based on an initial 50 m crown pillar thickness. The approach
taken by Mandalay is to use a crown pillar thickness of 50 m to provide an additional margin
of safety. RPA supports the use of a 50 m crown pillar and recommends that a protocol be
created for the development of openings under the lake consisting of drilling test holes above
and ahead of future openings, to ensure rock conditions and quality are as anticipated.

Surveying Control Systems, Grupo SA, was retained to carry out a bathymetric lake bottom
survey in late 2016 to determine the bedrock profile and characteristics. A report was
produced on December 31, 2016 entitled Anlisis De Registros De Perfilador Du Subfondo
Laguna Verde- Chile Chico. The survey lines are shown in Figure 16-9. In general, the depths
varied from 40 m to 80 m, with a typical line section shown in Figure 16-10. These profiles will
permit Mandalay mine staff to prepare adequate planning for mining of the veins beneath the
lake.

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 16-13
www.rpacan.com

0 100 200 300 400 500


Metres

Figure 16-7

Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Diamond Drill Holes for
Crown Pillar
March 2017 Source: Minera Cerro Bayo Ltda., 2016.

16-14
www.rpacan.com
FLAC3D 5.01
2015 Itasca Consulting Group Inc.
Step 0 Gravels
08/04/2015 11:49:07
Zone r
Wedge: active on back Cro wn Pilla
Colorby: Group 2
cpillar
Level 1
Level 10
Level 11
Level 12 Coigues
Level 2
Level 3
Level 4
Level 5
Level 6
Level 7
Level 8
Level 9 Protection
rpillar
spillar Pillar
terreno (against fault)

Temer

Fault

Details of Stopes, Rib Pillar and Fault Pillar

5.0 m 30 m
15 m 40 m 50 m
30 m

Level 3
Level 3
Level 3

Level 6
Level 6
Level 6

Level 9
Level 9
Level 9
Level 12
Level 12
Level 12

30 m Crown Pillar 40 m Crown Pillar 50 m Crown Pillar


Height of Remaining Crown Pillar
(with 12 Levels Mined)
Height of Safe Crown Pillar (m)

Hypothesis 1 (D=.4 in the rock mass)


50
45
40
35
30
25 30m Crown
20
40m Crown
15
50m Crown
10
5
0
1 2 3 4 5 6 7 8 9 10 11 12
30m Crown 27.5 25 25 22.5 10 5 5 5 5 5 5 5
40m Crown 37.5 35 35 35 35 32.5 20 20 20 20 15 15
50m Crown 46.25 46.25 45 45 45 43.75 43.75 42.5 30 30 30 30

Excavation Level

Figure 16-8

Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Crown Pillar Study

March 2017 Source: Subterra Ingenieria Ltd., 2015.

16-15
Figure 16-9

Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Laguna Verde
Acoustic Basement Survey
4633'0"S
16-16

4633'0"S
4633'0"S

www.rpacan.com
7159'0"W 7158'0"W 7157'0"W
March 2017 Source: Mandalay Resources Corp., 2017.
Perfil 6
Laguna Verde-Chile Chico, Regin de Aysn
Profundidad (m)

Cruce Cruce Cruce


16-17

Cruce
Linea 10 Linea 3 Linea 4 Linea 1
Profundidad (m)

Basamento acustico

Figure 16-10

www.rpacan.com
Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Acoustic Survey
Line 6 Profile
March 2017 Source: Mandalay Resources Corp., 2017.
www.rpacan.com

PRE-PRODUCTION SCHEDULE
During 2016, production was provided from the Dagny (16%), Fabiola (1%), Delia NW (36%),
Delia SE (26%), Coyita (18%), and Trinidad (4%) veins. Marcela and Raul are former mines
in the Cerro Bayo area that operated in the past and will be re-opened. They are currently
scheduled for production on a continuous basis starting in 2018 through to the first quarter of
2020, the last year of the current LOM. In total, nine vein structures will provide the production
tonnage over the current three year mine life, which is completed in Q1 of 2020.

LIFE OF MINE PLAN


Based on the current reserves, the present LOM plan anticipates a production period of
approximately three years, culminating in the first quarter of 2020. Diamond drilling will
continue with the intent to increase the Mineral Resources and Mineral Reserves and to
increase the mine life.

Development rates average 24 m/day over the LOM period. This is an average of
approximately 10,000 m per year, for 2017 through 2019 which, in RPAs opinion, is sufficient
to access and develop the stoping areas for production requirements, however maintaining
adequate manpower will be essential in achieving this development rate. Average lateral
development was 24 m/day in 2016, however, a month of mine closure related to a fatal
accident affected the rate.

The annual development over the LOM, including capital and operating, is shown in Table 16-
5.

TABLE 16-5 LOM MINE DEVELOPMENT


Mandalay Resources Corporation Cerro Bayo Project

Development (m) Total 2017 2018 2019 2020


Days 1,110 350 350 350 60
Total Mine
Capital Lateral 11,585 3,890 4,109 3,587 0
Operating Lateral 15,554 5,205 4,535 5,587 227
Capital Vertical 1,082 234 426 422 0
Operating Vertical 0 0 0 0 0
Total Lateral 27,140 9,095 8,644 9,174 227
Total Vertical 1,082 234 426 422 0

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 16-18
www.rpacan.com

Development (m) Total 2017 2018 2019 2020


Lateral Dev. (m/d) 24 26 25 26 4
Vertical (m/d) 1 0.7 1.2 1.2 0.0

Based on historical performance, RPA is of the opinion that the development rates listed in
Table 16-5 can be achieved provided sufficient manpower is available and equipment is
maintained.

Production from stoping over the mine life will average approximately 1,000 tpd over the three
year mine life. Maintaining the average daily production should be achievable, requiring a
stope advance of approximately 10 m (linear) per day or 8 m per day with an equivalent of
three drift rounds (at three metre lengths), providing approximately 200 tpd. The average stope
will provide 80 tonnes per metre of advance, based on a stope width of 2.4 m, stope height of
12.5 m, and a density of 2.63 t/m 3. The current LOM is shown in Table 16-6.

Mandalay Resources Corporation Cerro Bayo Project, Project #2559


Technical Report NI 43-101 March 21, 2017 Page 16-19
TABLE 16-6 LOM PRODUCTION SCHEDULE
Technical Report NI 43-101 March 21, 2017
Mandalay Resources Corporation Cerro Bayo Project, Project #2699

Mandalay Resources Corporation Cerro Bayo Project

Year 1 Year 2 Year 3 Year 4


Description Units Total 2017 2018 2019 2020
Operating Days 1,110 350 350 350 60
Tonnes milled per day 811 725 1,082 1,034

Production '000 tonnes 979 284 254 379 62


Au g/t 9.14 1.9 2.6 2.4 2.3
Ag g/t 281.7 233 307 317 187

Mill Feed '000 tonnes 979 284 254 379 62


Au g/t 2.29 1.90 2.57 2.38 2.29
Ag g/t 282 233 307 317 187
Contained Au oz 71,909 17,369 20,939 29,033 4,567
Contained Ag oz 8,863,736 2,129,207 2,504,358 3,857,195 372,976
Concentrate Produced t 17,793 5,162 4,615 6,889 1,128
Conc. Ratio 55 55 55 55 55
Flotation Recovery
Au 87% 87% 86% 86% 89%
Ag 90% 91% 90% 90% 92%
Metal Recovered

www.rpacan.com
Au oz 62,323 15,161 18,033 25,077 4,053
Ag oz 8,018,647 1,934,259 2,259,708 3,483,261 341,420
Eq.Ag oz 12,159,388 2,941,569 3,457,788 5,149,357 610,674
Page 16-20
www.rpacan.com

INFRASTRUCTURE
MINE ACCESS AND UNDERGROUND ARRANGEMENT
The veins at Cerro Bayo are all accessed via a 4.5 m by four metre ramp driven at a -12.5%
grade. All of the materials required for the underground operations are delivered underground
via the main ramp system. The major underground installations include the main ventilation
raises that are used to deliver the required volume of ventilating air necessary for the diesel
equipment operating on the various levels and areas of the mine. Emergency egress from the
mine is provided via escape raise systems which are equipped with manways that lead through
to the surface.

Figures 16-11 and 16-12, respectively, show a level plan with the ore drifts following the vein
and a typical level plan showing development off of the main access ramp on the Delia NW2
vein. This plan shows that the veins are relatively straight along strike with little complicating
sinuosity. There are splays that split off from some main veins.

MATERIAL HANDLING
All of the material required for the underground operations, such as explosives, drill steel and
accessories and general materials, such as pumps, are delivered by vehicle via the main ramp.

BACKFILLING
There is no systematic backfilling planned for the Cerro Bayo mine operations. Waste is
dumped underground when possible, however, for the most part it is hauled and dumped on
the surface waste stockpile. If deemed necessary in the future, a system of backfill raises
could be designed to permit some backfilling of underground stopes, however, there is
currently no need for backfill due to good ground conditions.

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 16-21
271000 271050 271100 271150 271200 271250 271300 271350
4840700

4840700
Figure 16-11
N
Mandalay Resources Corporation
4840650

4840650
Cerro Bayo Project
Region XI (Aisn), Chile
Delia NW2 Vein
Vein Ramp 116-2 Level Plan and Ramp
16-22

O
re
4840600

4840600
Dr
ift
11
6-2
No
rth
4840550

4840550
Ore
Drif
t 11
6-2
Sou

4840500
th

www.rpacan.com
4840500

271000 271050 271100 271150 271200 271250 271300 271350

0 25 50 75 100
Metres
March 2017 Source: Minera Cerro Bayo Ltda., 2016.
www.rpacan.com
271200 271250

N
4
18
6.
10

Manway Access
3.5 x 3.5 m @ +2%

@
+2
13 m long

%
-12
.5% Ramp
@
4 x 4.5 m @ -12.5%
126 m long per level
103.133

@
-1
2
@+2%

.5
%
Vent Rse Access 100
3.5 x 3.5 m @ +2% .76
0
20 m long

2%
4840600

4840600
@+
Remuck
@ %
-1
2.
4 x 4 m @ +2% @
+2
5%
15 m long

2.5%
@-
5% Refuge Station Bay

@-1
0

3.5 x 3.5 m @ +2%


.30
100

12 m long
260
.

@-
115

12.
5%
2%
@+

@
-1
5%
8
91
1.

Sump
11

101
.00 3 x 3 m @ -15%
0 Access X-cut
12 m long
3.5 x 3.5 m @ +2%
25 m long
4840550

4840550

Figure 16-12

Mandalay Resources Corporation

271200 Cerro Bayo Project


Region XI (Aisn), Chile
0 50 100 150 200 250
Delia NW2 Vein
Metres
Ramp 101-2
March 2017 Source: Minera Cerro Bayo Ltda., 2016.

16-23
www.rpacan.com

VENTILATION
The ventilation circuit for the Delia NW2 mine is shown as an example in Figure 16-13. Main
fan and measuring locations are shown as well as air volumes measured. Auxiliary fans are
used on the levels to provide air to all of the headings, but are not shown in the figures. These
fans feed the headings before the air exhausts up the stopes or back to the main ramp and up
the exhaust air system. Egress from the mine is provided via raises that lead to the surface
and are accessible from each level underground. These raises are downcast, to ensure that
the personnel are always in fresh air.

The minimum air requirements for the various underground equipment are shown in Table 16-
7.

TABLE 16-7 VENTILATION REQUIREMENTS


Mandalay Resources Corporation Cerro Bayo Project

EQUIPMENT HP/Unit Vol Vol (cfm)


(m 3/min)
Scoop (R1300) 190 538 18,989
Scoop (LH 307) 201 569 20,088
Truck (TH-430) 393 1,112 39,277
Truck (EJC522) 250 708 24,985
Jumbo (Axera DD-311) 74 209 7,396
Working Platform (Manitou MT1030) 82 232 8,195
Grader (Leeboy 650) 100 283 9,994
Personnel Carrie2 (Mitsubishi Canter) 125 354 12,493
Explosives Transport (Mitsubishi Canter) 125 354 12,493
Pickup 100 283 9,994

PERSONNEL Vol (m 3/min) Vol (cfm)


Maximum Workforce UG 3 105.9

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 16-24
0.0m 100.0m 200.0m 300.0m 400.0m 500.0m 600.0m 700.0m 800.0m

NW Figure 16-13 SE

Mandalay Resources Corporation


400.0m

400.0m
Cerro Bayo Project
Delia Mine Region XI (Aisn), Chile
Longitudinal Section - Delia NW2
~3700 m/min
Ventilation Circuit
~1250 m/min ~1900 m/min
300.0m

300.0m
236 Lv

221 Lv
16-25

206 Lv 206-2 Lv

191 Lv 191-2 Lv

176 Lv 176-2 Lv

161 Lv 161-2 Lv
200.0m

200.0m
146 Lv 146-2 Lv

131 Lv 131-2 Lv

116 Lv 116-2 Lv

130 Lv

86 Lv
Delia NW 2
71 Lv

Delia NW 1
100.0m

100.0m
www.rpacan.com
0.0m 100.0m 200.0m 300.0m 400.0m 500.0m 600.0m 700.0m 800.0m
Legend: 0 50 100 150 200
Ramp Development Return Air Flow Ventilation Fan Metres
Waste Development Fresh Air Flow
March 2017 Source: Minera Cerro Bayo Ltda., 2016.
www.rpacan.com

DEWATERING
Dewatering of the underground mines is completed with simple sump arrangements that are
located off of the ramp or nearby. The mines are considered quite dry in terms of dewatering
requirements.

Two main types of submersible pumps, a 12 kW and 20 kW pump, with heads of 30 m to 50


m, and pumping capacities of 10 L/s to 20 L/s, are capable of keeping the mine adequately
dewatered.

Sumps are excavated as the ramp advances and the sump pumps are slung from the back to
provide for easy service. As the sumps are fairly shallow, the pumps are not required to be
fully submerged. The typical sump system is shown in Figure 16-14.

POWER
Power for the underground mines is delivered via electrical cables installed in the ramp and
fed to the substations underground. Power cables are also run via boreholes that
breakthrough on levels underground when possible. For the main ramps, the power cable
utilized is a 4/0 super flex 3/120 + 1/70 at 400 V, 50 Hz and in the level development, the cable
utilized is a 2/0 super flex 3/120 + 1/50 at 400 V, 50 Hz capacity. The drill jumbos and
production drills are electrically driven.

The underground transformers include a 300 KVA unit plus a substation that houses an 800
KVA and 400 KVA unit at the Delia mine and also two 400 KVA transformers at both the Fabiola
and Dagny mines.

Integrated diesel generation facilities with 12 MW of total capacity, supply power to the
processing plant, surface facilities and the underground mines at Laguna Verde. The facilities
include four (4) Caterpillar generators (1995) with 1,150 KVA driven by 3,516 motors and eight
(8) Atlas Copco (2012-2015) QA1000 units. The total diesel generating capacity is
supplemented by a 1.8 MVA eolic plant, comprising three 600 kV wind turbines, which is
integrated into the site power generation and distribution system.

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 16-26
www.rpacan.com

Surface Bassins
Length 362 m Elev. 308 m
Head 44 m

282 Sump (no pump)


Elev. 294 m

252 Sump (Maxi)


Elev. 265 m
Length 375 m
Head 45 m
237 Sump
Not in service

222 Sump (no pump)


Elev. 235 m

207 Sump (Maxi)


Elev. 220 m
Length 369 m
Head 44 m
192 Sump (no pump)
Elev. 205 m

177 Sump
Not in service

162 Sump (Maxi)


Elev. 175 m
Length 263 m
Head 35 m
147 Sump
Not in service

132 Sump (Matador)


Elev. 144 m

117 Sump (no pump) Length 239 m


Elev. 131 m Head 29 m

Length 126 m 102 Sump (Master Tetra SH)


Head 15 m

Figure 16-14
87 Sump (Master Proline)
Elev. 100 m
Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Underground Pumping System
Schematic (Typical)
March 2017 Source: Minera Cerro Bayo Ltda., 2016.

16-27
www.rpacan.com

MAINTENANCE
All of the equipment maintenance is carried out in the surface shop and only minor services
are provided underground, such as changing of hydraulic hoses. As the mines are quite
shallow in depth, transporting equipment to the surface shop does not present major delays or
problems. The main central surface shop has three bays and is equipped with a 10-ton crane.

COMMUNICATIONS
Underground communication is provided by a leaky feeder system that allows for efficient
communications from basically every point in the mine. The site is also serviced with 12
incoming telephone lines plus internet service.

MINE EQUIPMENT
A list of the mine equipment is provided in Table 16-8.

TABLE 16-8 UNDERGROUND EQUIPMENT


Mandalay Resources Corporation Cerro Bayo Project

Description Qty Status Year


Jumbo Drill
BOOMER 281 1 Operating 2005
DD310 1 Operating 2008
DD311-40 2 Operating 2012 / 2013
LH Drill
DL 210-5 3 Operating 2012 / 2013 / 2014
Raptor DH 1 Operating 2011
Personnel Vehicle
Chevrolet NKR 512 1 Operating 2014
Chevrolet NKR 513 2 Operating 2010 / 2013 / 2014
Scooptram
LH 307 4 Operating 2008 / 2013 / 2014
R1300G 2 Operating 2011/ 2012 / 2013
Service Truck Explosives
Chevrolet NKR 513 2 Operating 2013 / 2014
Service Unit
Manitou MT 1030 2 Operating 2007 / 2011
Manitou MTX-1030S 3 Operating 2013 / 2014 / 2016
UG Truck
AD 30 1 Operating 2011
TH 320 2 Operating 2008
TH 430 3 Operating 2013 / 2014

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 16-28
www.rpacan.com

SURFACE EQUIPMENT
The surface equipment at the Cerro Bayo project is shown in Table 16-9.

TABLE 16-9 SURFACE EQUIPMENT


Mandalay Resources Corporation Cerro Bayo Project

Description Qty Status Year


Crane
Helli 1 Operating 2011
Excavator
CAT 320 L 1 Operating 2007
Grader
CAT 14 G 1 Operating 1995
Leeboy - 685B 1 Operating 2008
Loader FEL
CAT 924HZ 1 Operating 2012
CAT 962H 1 Operating 2012
CAT 980 1 Operating 1995
Volvo MC110C 1 Operating 2013
Truck

Chevrolet FTR 1524 1 Operating 2012


Mercedes 1315C 1 Operating 2006
Mercedes 1720 1 Operating 2005
Mercedes 915C 2 Operating 2007
Mitsubishi 3.9 1 Operating 2005
Mitsubishi 5.7 1 Operating 2008
Volvo BM 310 1 Operating 2011

The mine site also has approximately forty various service vehicles, including an ambulance,
personnel vehicles, and other miscellaneous small vehicles.

Equipment availability and utilization for the year-end 2016 are shown in Table 16-10.

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 16-29
www.rpacan.com

TABLE 16-10 EQUIPMENT AVAILABILITY


Mandalay Resources Corporation Cerro Bayo Project

Availability Utilization
Equipment (%) (%)
Jumbo Drills 80 31
Production Drills 78 33
Scoops 67 50
Trucks 64 53
Manitou 86 38

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 16-30
www.rpacan.com

17 RECOVERY METHODS
MINERAL PROCESSING
GENERAL
The Cerro Bayo processing plant has a daily capacity of 1,650 t producing approximately 31 t
of concentrate with grades of 70 g/t Au to 120 g/t Au and 10,000 g/t Ag to 13,000 g/t Ag. The
process is simple, consisting of crushing, primary grinding in a semi-autogenous (SAG) mill,
classification in hydrocyclones, secondary grinding in a ball mill, flotation, thickening, filtration,
and concentrate storage. The mill presently draws from three stockpiles (high, medium, and
low grade ore), and a loader feeds the mill hopper based on the grades to provide an average
feed grade to the mill.

The FloatStar System for automation has resulted in an increase in recovery of almost 1%
since it was put on stream. This system, coupled with a new programmable control system
(PLC) system, has improved recovery and plant operations by providing immediate response
to any required adjustments.

INSTRUMENTATION AND CONTROL


The plant utilizes an Allen Bradley SLC 500 PLC in the control room. Status of the operations,
from the coarse ore bins to the filtering of the final concentrate, including the water recycling
is indicated on the controller. All systems are displayed including the instrumentation, control
loops, and the electrical distribution system.

The atomization of the plant will add level sensors in the floatation, pressure gauges, density
meters, and two blue star online analyzers. The programs MillStar and FloatStar were installed
for grind and float optimization and have resulted in improved recoveries.

STOCKPILES
Ore delivered from the underground in the haul trucks is directed to the stockpile area close to
the jaw crusher facility. Some blending is possible as four areas are identified by colour which
guides the loader operator feeding the crusher. The ore grades are identified as follows:

1.) Green colour 150 g/t Ag

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 17-1
www.rpacan.com

2.) Brown colour 151-250 g/t Ag


3.) Orange colour 251-500 g/t Ag
4.) Red colour > 500 g/t Ag

The plant supervisor advises the loader operator as to the quantity of feed from each pile for
the daily throughput.

CRUSHING
The plant stockpiles receive muck from the underground via 25 t trucks. A loader feeds the
crusher hopper that feeds the 42 in. by 48 in. Allis Minerals jaw crusher (200 HP). The crusher
product is 80% minus six inches that discharges onto a 900 mm belt that delivers the ore to a
1,500 t storage silo.

GRINDING
The ore is fed via two Skako vibrating feeders to a belt with a weightometer that controls the
weight delivered to the 18 ft by 9.25 ft SAG mill (Marcy/Allis Minerals) operating with a 1,340
HP (1,000 kW) motor.

The ball charge occupies 12% of the internal mill volume and the ball sizes are made up of
100% of four inch balls. The mill is equipped with an internal recirculation trommel that returns
material over 10 mm in size. The minus 10 mm fraction goes to a pump box and is fed to the
ball mill circuit. A Warman 8 in. by 6 in. pump, of hardened steel pumps the slurry to a bank
of four Warman cyclones each 381 mm (15 in.) for classification. The cyclones can function
individually via control valves to maintain operating requirements.

The discharge from the hydrocyclones (oversize) is fed to the 11.5 ft by 18.0 ft ball mill
(Marcy/Allis Minerals) that is driven by a 1,340 HP motor, and is subjected to the secondary
grind. The ball mill operates with a load of 38% of 2.5 in. balls.

The final product of the grinding circuit is 70% minus 200 mesh (74 m) which is fed to the
flotation circuit.

FLOTATION
The final product from the grinding circuit feeds the conventional flotation circuits consisting of
the following stages: roughers, scavengers, cleaners, and columns. There is a column cell

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 17-2
www.rpacan.com

that is used for flash flotation to recover coarsely liberated gold and silver, into a flotation
concentrate that can be sent directly to the final concentrate. The rougher/scavenger circuit
consists of seven 14.2 m Wemco type cells with a residence time of 28 minutes, which
generates a low grade concentrate of approximately 30 g/t Au and 1,500 g/t Ag. The product
from the rougher/scavenger feeds the cleaner circuit consisting of six conventional Agitair cells
with 4.25 m capacity each and a column cell 10 m high by 1.10 m in diameter to produce a
final grade of 80 g/t Au to 120 g/t Au and 10,000 g/t Ag to 13,000 g/t Ag. The
rougher/scavenger tails do not contain commercial value and are pumped to the tailing facility
for storage. The tails are fed through a group of six hydrocyclones (six inch diameter Warman
type) to thicken the tails and the water, containing residual reactants, is recycled to the
process, in order to minimize use of fresh makeup water. The tails generated from the
rougher/scavenger flows directly to the tailings facility and is deposited in the east portion of
the facility.

There are three automatic samplers at the final grinding product stage that feeds the rougher
flotation circuit, at the final concentrate and at the final waste stream. The samples are sent
to the laboratory for analysis for use in the metallurgical balance and to manage plant
performance.

REACTANTS
There is an area dedicated to the preparation of reactants, storage, and distribution for different
areas in the circuits. The reactants utilized in the process include Potassium Amil Xanthate
(x-350) collector and Aerofloat A-3477, Methyl Isobutyl Carbinol (MIBC) frother. The two
collectors are prepared in a 5% solution and the MIBC is fed in pure form.

THICKENING
The final concentrate is approximately 25% solids, which is increased to 60% solids via a nine
metre diameter thickener and to promote sedimentation and solid-liquid separation, Superfloc
A-110 flocculant is used.

FILTERING
The thickened concentrate is pumped to a surge tank 3.5 m in diameter by 5.2 m high where
the contents are agitated prior to filtration via Larox filters (one operating and one standby
unit). The filter has a surface area of 6.2 m and operates automatically with batch cycles

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 17-3
www.rpacan.com

every eight minutes, producing a concentrate with 8% to 9% humidity. The filtered concentrate
is stored and then transported by company owned trucks to the port of Chacabuco, Chile where
it is loaded onto ships for delivery to clients.

TAILINGS
Tailings are pumped to the tailing facility located nearby. Water from the tailings facility is then
recycled to the plant for reuse. The tailings dam was raised to the 317 m elevation during
2014 and is scheduled to be lifted a further five metres in 2017 to an ultimate 322 m elevation,
sufficient for the LOM production.

MAJOR EQUIPMENT
A list of major equipment in the processing plant is shown in Table 17-1.

TABLE 17-1 PROCESS PLANT - MAJOR EQUIPMENT LIST


Mandalay Resources Corporation Cerro Bayo Project

Item Size Description Qty. HP


Crushing Plant
Apron Feeder 48 x 20 Stephen-Adamson 1 10
Jaw Crusher 42 x 48 Allis Chambers 1 200
Conveyor 1 36 x 6 1 2
Conveyor 2 36 x 10.5 1 15
Conveyor-Silo 36 x 107 1 30
Conveyor-SAG 36 x 79 1 15
Coarse Ore Bin 1,500 t
Vibrating Feeder Skako 2 1.5
Grinding Circuit
SAG Mill 18 x 9.25 Svedala 1 1,341
Ball Mill 11.5 x 18.0 Svedala 1 1,341
Cyc. Feed Pump 8 x 6 Warman 1+1 150
Cyclones D-15 Warman 2+2 -
Spiral Classifier 42 1 10
Flotation Circuit
Flash Flotation 150 ft Wemco 2 40
Rougher Flot. 500 ft Wemco 5 40
Scavenger Flot. 500 ft Wemco 4 40
Cleaner 1 Flot. 150 ft Agitair 2 30
Cleaner 2 Flot. 150 ft Agitair 2 30
Cleaner 3 Flot. 150 ft Agitair 4 30
Column Flotation 42 x 33 1
Dewatering Cir.
Conc. Thickener 30 Dia. Envirotech 1 2
Conc. Filter 67 ft Larox 2 5+15
Compressor 36L x 15 Bar Atlas Copco 2 50

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 17-4
www.rpacan.com

Mandalays silver and gold recovery assumptions are based on the metallurgical test work and
the actual plant recoveries. In general, the test samples from Dagny and Fabiola cover a wide
range of grades that are representative of the mineralization at Cerro Bayo. There are no
known processing factors or deleterious elements that have a significant impact on the gold
and silver recoveries. The actual silver and gold recoveries for 2016 were 87% and 85,
respectively (Table 17-2). The actual silver and gold recoveries were lower than the budget
values by 3% and 1%, respectively (Table 17-3). Both silver and gold production were below
budget, due to the lower tonnage throughput for the year in part attributed to interruption to
mining operations as a result of a fatal accident and below plan development performance.

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 17-5
Technical Report NI 43-101 March 21, 2017
Mandalay Resources Corporation Cerro Bayo Project, Project #2699

TABLE 17-2 PRODUCTION SUMMARY - ACTUAL 2016


Mandalay Resources Corporation Cerro Bayo Project

Item Units Jan. Feb. Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Ore tonnes milled dry t 37,196 32,789 35,361 33,509 41,892 41,289 40,151 29,954 14,556 29,027 31,171 29,613 396,508
Grade Ag g/t 156 182 180 152 142 144 183 183 166 153 165 140 162
Au g/t 1.5 1.6 1.4 1.2 1.2 1.3 1.3 1.3 1.3 1.1 1.2 1.2 1.3
Contained Metal Ag Oz 186,781 191,608 204,776 163,928 190,749 191,365 236,648 176,446 77,786 142,410 165,777 133,587 2,061,860
Au Oz 1,752 1,723 1,571 1,282 1,643 1,728 1,701 1,208 628 1,049 1,174 1,188 16,647
Recovery Ag % 91% 92% 92% 89% 89% 85% 79% 87% 85% 88% 86% 85% 87%
Recovery Au % 88% 88% 87% 85% 85% 82% 81% 84% 83% 86% 85% 83% 85%
Tonnes Concentrate t 473 483 520 409 598 501 717 628 244 500 566 431 6,069
Concentrate grade Ag g/t 11,129 11,332 11,256 11,126 8,823 10,103 8,154 7,590 8,410 7,843 7,865 8,230 9,236
Au g/t 101 98 82 83 73 88 60 50 66 56 55 71 72
Metal produced Ag Oz 169,414 175,802 188,141 146,135 169,620 162,680 187,982 153,197 65,905 126,011 143,228 113,944 1,802,060
Au Oz 1,543 1,519 1,373 1,092 1,402 1,412 1,379 1,011 521 902 994 988 14,135
Note: Actual production includes 13,566 tonnes of low grade stockpile ore.

TABLE 17-3 PRODUCTION SUMMARY - BUDGET 2016


Mandalay Resources Corporation Cerro Bayo Project

Item Units Jan. Feb. Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Ore tonnes milled dry t 39,574 40,339 41,657 42,128 41,831 42,750 42,930 43,112 42,875 42,914 42,345 41,341 503,798
Grade Ag g/t 193 186 189 215 217 248 242 269 264 242 229 208 226
Au g/t 1.9 1.9 1.6 1.8 1.7 1.8 1.8 1.9 1.9 2.2 2.1 2.0 1.87
Contained Metal Ag Oz 244,927 241,043 253,547 290,615 292,360 340,369 334,324 372,181 363,850 333,873 311,086 275,935 3,654,111
Au Oz 2,359 2,413 2,102 2,401 2,350 2,412 2,474 2,605 2,675 3,022 2,863 2,610 30,286
Recovery Ag % 90% 89% 89% 90% 90% 91% 91% 91% 91% 91% 90% 90% 90%

www.rpacan.com
Recovery Au % 85% 85% 85% 86% 86% 87% 87% 88% 88% 87% 87% 86% 86%
Tonnes Concentrate t 609 593 613 726 697 822 810 917 912 810 770 667 8,946
Concentrate grade Ag g/t 11,215 11,297 11,507 11,224 11,743 11,676 11,630 11,493 11,298 11,619 11,365 11,567 11,475
Au g/t 103 107 90 89 90 80 83 78 80 101 100 104 91
Metal produced Ag Oz 219,525 215,459 226,633 262,113 263,208 308,618 302,870 338,957 331,373 302,462 281,324 247,978 3,300,519
Page 17-6

Au Oz 2,008 2,043 1,780 2,070 2,018 2,102 2,152 2,289 2,351 2,628 2,481 2,234 26,157
www.rpacan.com

RECOVERY
The plant performance for 2016 is shown in Table 17-4. RPA is of the opinion that recoveries
obtained in the past years, of approximately 93% for silver and 91% for gold, can be achieved
in the future.

TABLE 17-4 MILL PERFORMANCE IN 2016


Mandalay Resources Corporation Cerro Bayo Project

Item Units Actual Plan Variance*


Ore tonnes milled dry t 396,508 503,798 -21%
Grade Ag g/t 162 226 -28%
Au g/t 1.31 1.87 -30%
Contained Metal Ag Oz 2,061,860 3,654,111 -44%
Au Oz 16,647 30,286 -45%
Recovery Ag % 87% 90% -3%
Recovery Au % 85% 86% -2%
Tonnes Concentrate t 6,069 8,946 -32%
Concentrate grade Ag g/t 9,236 11,475 -20%
Au g/t 72 91 -20%
Metal produced Ag Oz 1,802,060 3,300,519 -45%
Au Oz 14,135 26,157 -46%

Of the total tonnage milled during 2016, 16% was from the Dagny vein, 62% from the Delia
NW and SE veins, and 4% from the Trinidad vein, with a minor 1% from the Fabiola vein. Of
the total ore milled, approximately 22% came from development of the drifts in ore, which
totalled approximately 3,568 m during the year.

The crushing and grinding circuit is shown in Figure 17-1, the flotation circuit in Figure 17-2,
the reagent amounts in Figure 17-3, and the plant water balance in Figure 17-4.

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 17-7
www.rpacan.com

HOPPER

42 x 48
JAW CRUSHER TO ROUGHER
ORE
STOCKPILE

CYCLONES D-15

WATER
SILO
1500
Ton

SAG MILL
18 x 9.25

BALL MILL
11.5 x 18

Figure 17-1

Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Process Plant
Crushing/Grinding Flow Sheet
March 2017 Source: Mandalay Resources Corp., 2011.

17-8
CYCLONES
D-6

THICKENER
30
SALA
1

CLEANER 3 CLEANER 2 CLEANER 1


2 Cells 150 Ft3 2 Cells 150 Ft3 4 Cells 150 Ft3
CLEANER
TAILS
17-9

FILTERING

ROUGHERS
SCAVENGERS
3 Cells 500 Ft3
4 Cells 500 Ft3
FINAL
TAILS

CONCENTRATE
CYCLONES
D-15
Figure 17-2

www.rpacan.com
Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Process Plant
Flotation Circuit
March 2017 Source: Mandalay Resources Corp., 2011.
www.rpacan.com

800 cc/min MILL 550 cc/min


28 g/ton 25 cc/min 21 g/ton
18 g/ton

MIBC

8 cc/min
6 g/ton

ROUGHER
XANTHATE AERO-3477
300 cc/min FLOTATION 200 cc/min
10 g/ton 8 g/ton

50 cc/min 100 cc/min


2 g/ton
SCAVENGER 4 g/ton

FLOTATION

1 st. AND 2nd


CLEANERS

Figure 17-3

Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Process Plant
Reagent Dosages
March 2017 Source: Mandalay Resources Corp., 2011.

17-10
www.rpacan.com

RECYCLED TAILINGS WATER

4 m3/h

THICKENER

FRESH PROCESS
WATER WATER

430 m3 400 m3

GRINDING 121,3 m3/h

REGRIND 18,5 m3/h

FLOTATION 3,2 m3/h

TAILINGS CONCENTRATE

TAILINGS FACILITY

Figure 17-4

Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
Process Plant Water Balance
March 2017 Source: Mandalay Resources Corp., 2011.

17-11
www.rpacan.com

18 PROJECT INFRASTRUCTURE
A site surface plan is shown in Figure 18-1. Figure 18-2 shows a satellite photo of the surface
plan with the portal locations and extents of underground workings. The mine site is accessed
from the town of Chile Chico, located 35 km to the east.

Production of a concentrate containing silver and gold is carried out on site in a 1,650 tpd
capacity processing plant. Presently, the concentrate produced is hauled by contractor trucks
(20 t capacity) 215 km to the port of Chacabuco two times per week on average. During 2016,
approximately 5,500 dmt of concentrate were shipped. During the LOM plan, approximately
7,500 t of concentrate will be produced and shipped annually.

TAILINGS FACILITY
The tailings facility at Cerro Bayo is shown in Figure 18-3. The tailings dam was raised to the
317 m elevation during 2014. The capacity of the tailings facility at the 322 m permitted
elevation (to be completed in 2017) will be an accumulated nine million tonnes, which will
satisfy the requirements of the current LOM plan. Figure 18-3 shows the tailings facility
monitoring instrumentation that consists of three inclinometers and six piezometers. These
instruments will be extended as the tailings dam increase in height at shown in the figure. A
cross section of the tailings dam indicates some further details with respect to construction and
elevations and the final dam profile. Mandalay identified three borrow pits nearby to provide
construction material for the dam construction.

POWER SUPPLY
Integrated diesel generation facilities with 12 MW of total capacity, supply power to the
processing plant, surface facilities, and the underground mines at Laguna Verde. The facilities
include four (4) Caterpillar generators (1995) with 1,150 KVA driven by 3,516 motors and eight
(8) Atlas Copco (2012-2015) QA1000 units. The total diesel generating capacity is
supplemented by a 1.8 MVA eolic plant, comprising three 600 kV wind turbines, which is
integrated into the site power generation and distribution system. Power is supplied to the ball
and SAG mills at 3.3 kV and other fixed plant and mobile equipment is supplied at 400V.

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


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SERVICE FACILITY
A three-bay service garage is located on surface, where all major mechanical repairs are
carried out. The facility is equipped with a 10-ton overhead crane for heavy work and other
equipment necessary for the equipment maintenance.

WASTE ROCK DUMPS


The two main surface waste rock dumps shown on the surface plan are the Los Cisnes dump,
not in use at this time, and the Los Juncos dump. The Los Juncos waste dump is centrally
located with respect to the three operating mines and has a capacity of 453,000 t, with
approximately 200,000 t currently being utilized.

Permitting for two new waste dumps, respectively proximal to the portals of the Coyita
(155,000m) and Delia SE (50,000 m) mines was initiated in 2016 and approvals for use of
these installations is expected in 2017. Meanwhile, the design of earthworks for the
construction of the tailing facility expansion in 2017 includes provision for use of up to 50,000m
of mine waste.

MINE WATER
The water from the underground operations is pumped to surface and to the sedimentation
basins, where the suspended solids are allowed to settle out. Water is recycled back to the
underground for reuse.

The process water from the mill tailings is recycled back to the processing plant for reuse.

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267,500 E 268,000 E 268,500 E 269,000 E 269,500 E 270,000 E 270,500 E 271,000 E

N
4,842,000 N

4,842,000 N
Lagunas
Los Cisnos

ra Lagunas
re
C ar Breccia
Nueva
l
ra
ne

Taitao II Norte
4,841,500 N

4,841,500 N
e
eG
Waste Dump
Los Cisnes
k Area Instalations
La Waste Stockpile
CONDORES
Top Soil Storage Area
r
Taitao Su FABIOLA
Portal 1
Sedimentation Basins

Ve
ta
Cap Magazine

Ce
ntr
4,841,000 N

4,841,000 N
Temer
Stock Pile

al

Ve
Veta
ta E
Powder Magazine Portal 2
Taitao Sur

Este
ste
DAGNY

1
Process Waste Dump
Plant Los Juncos Delia Mine
Offices
4,840,500 N

4,840,500 N
Top Soil Deposit Water Lagunas
Verde

Tailings Facility
4,840,000 N

4,840,000 N
S
CAIQUENE
E
CAIQUENES EST

Juncos
uetas
4,839,500 N

4,839,500 N
Horq
o Las

r
Ester

eme
dja T
Lagunas Gran
Los Patos
Lagunas
Salada Chile Chico
4,839,000 N

4,839,000 N
267,500 E 268,000 E 268,500 E 269,000 E 269,500 E 270,000 E 270,500 E 271,000 E

0 200 400 600 800 1000


Metres

Figure 18-1

Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile
General Site Layout
March 2017 Source: Mandalay Resources Corp., 2011.

18-3
Magazines

Coyita
Fabiola Portal
Portal

Dagny
Portal LAGUNA VERDE
Plant Waste Delia
Dump Portal
18-4

Tailings
Facilities

Delia South
Portal

Figure 18-2

www.rpacan.com
Mandalay Resources Corporation
Cerro Bayo Project
Region XI (Aisn), Chile
Satellite View of Surface
Laguna Verde
March 2017 Source: Mandalay Resources Corp., 2014.
www.rpacan.com

Figure 18-3

Mandalay Resources Corporation

Cerro Bayo Project


Region XI (Aisn), Chile

Tailings Facility
Tailings Facility
Tailings Dam

Piezometers & Inclinometers


Location

PLAN VIEW OF TAILINGS FACILITY

PIEZOMETERS INCLINOMETERS
Projected Top Tailing Projected Dam
El. 320.5 m El. 322 m

Fill Material

Tailings
Elevation

ELEV=304.00

Tailings
Waste Rock

Starter Dam
Natural Topography

Accumulated Distance

Elevation

March 2017 Source: Mandalay Resources Corp., 2017.

18-5
www.rpacan.com

19 MARKET STUDIES AND CONTRACTS


MARKETS
The principal commodities at Cerro Bayo are silver and gold, which are freely traded at prices
that are widely known, so that prospects for sale of any production are virtually assured. For
the cash flow, RPA used prices of US$1,200 per ounce for gold and US$18 per ounce for
silver.

CONTRACTS
CMCB has concentrate sale agreements for the sale of concentrate in 2017 with Dowa Metals
and Mining Co., Ltd. and Pan Pacific Copper Co., Ltd., both in Japan, and LS Nikko Copper
Inc., in Korea. The terms and conditions of the commercial sale are not disclosed pursuant to
confidentiality requirements. RPA has reviewed the agreements and is of the opinion that the
concentrate sales terms are within industry norms.

Other contracts that exist with the mine and suppliers include those for:
Catering: SODEXO, with prices varying with the number of meals served during the
day.

Drilling Consumables: Atlas Copco Chilena S.A.C. for drilling consumables including
drill bits, drill rods, and accessories on a cost per metre drilled basis.

Explosives: Orica Chile SA, for supply of explosives and explosives accessories such
as Excel LP and SP delays, electric delays, other minor accessories and Amex
explosive in 25 Kg bags and Cartridge explosives and Pentex boosters. Orica is also
responsible for administration of the explosives magazines on site. Contract duration
is three years.

Security: Servicios Integrales de Seguridad de la Patagonia, for security on the Cerro


Bayo mine site, providing for 17 security personnel, on average, to control site access
and safety aspects on the site, including use of the ambulance service.

Personnel Transport: Sotraser Limitada, for the transport of employees to and from the
mine to the town of Chile Chico.

Ore Transport: ICA S.A., for the transport of ore from the mine portal stockpiles to the
mill site using two 13 m 3 capacity trucks and one 3 m 3 front end loader.

Concentrate Logistics: Empresa de Maquinarias y Equipos Raul Vernal O E.I.R.L


provides haulage service between the mine site and the Port of Chacabuco.

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Constructora Gardilcic Limitada; Contract No. CMCB-MIN-SE-074-2016, Contract for


Mine Development of the Coyita Vein (Contrato Por Servicios De Desarrollo Con
Jumbo En Mina Coyita).

CMCB also has a collective bargaining agreement with the Sindicato de Trabajadores de
Compaa Minera Cerro Bayo Ltda. The collective bargaining agreement was signed on June
25, 2015, and is in effect for two years until June 24, 2017. CMCB has also negotiated a
collective bargaining agreement with the Sindicato de Trabajadores Planta y Afines de
Compaia Minera Cerro Bayo Ltda., for a three-year period signed on June 25, 2015 and valid
until June 24, 2018. Employee relations are considered to be good in RPAs opinion.

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20 ENVIRONMENTAL STUDIES, PERMITTING,


AND SOCIAL OR COMMUNITY IMPACT
The following information on the environmental aspects of the Project was provided by
Mandalay.

The Environmental Impact Assessment (EIA) for the Fachinal Project in the Laguna Verde
sector dates back to October 1994 and is covered under Resolution 001 of the CONAMA-SEA,
National Environmental Commission of Chile. The various installations were examined during
RPAs site visit previously and in January 2016, and no major issues were noted with respect
to environmental planning, monitoring, and management.

ENVIRONMENTAL STUDIES AND INFORMATION


Since 2001, CMCB has been mining in a district that was originally mined from 1994 to 2000
by Compaia Minera CDE Fachinal.

The mining operations were concentrated in two areas, Cerro Bayo and Laguna Verde, located
16 km apart. The latter is located near the processing plant, the tailings facility, and surface
installations including offices, services buildings, maintenance facilities, etc.

The initial mining from 1994 to 2000, predominantly by open pit, was in the Laguna Verde area.
In 2002, the mining moved to the Cerro Bayo area and was predominantly underground.

Changes to the original project were submitted to the environmental authorities and the
projects that contained changes to the exploration or exploitation mining methods were
submitted to the Sistema de Evaluacin de Impacto Ambiental (SEIA) legal entity in Chile.

The operations were suspended in October 2008 due to the downturn in the economy and a
lack of developed ore. The mining operations were based on reserves contained in the veins
of Cerro Bayo and Laguna Verde.

The different areas of exploitation at Cerro Bayo include:

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Cerro Bayo Area is located nine kilometres west of the town of Chile Chico. This is the
location of the Cerro Bayo vein system mined underground from 2002 to 2008 by
Coeur.

Guanaco Area is located 12 km west of the town of Chile Chico and comprises the old
Coeur exploration area of the Guanaco mine. The operational installations include
offices, exploration facilities, and core storage facilities.

Laguna Verde Area is located 25 km west of the town of Chile Chico. This is the
location of the processing plant, the tailings facility, and veins where mining is currently
carried out. This is also where Coeur operated an open pit from 1995 to 2000.

Cascada Area is located seven kilometres west of the town of Chile Chico. Planned
closure works at this site were completed in 2015 and CMCB is awaiting the regulators
approval of this work in order to commence the post-closure environmental monitoring
phase.

Furioso Area is: located 130 km southwest from Chile Chico. It was exploited in 2002
and 2003 and produced 48,727 t of ore and 584,724 t of waste rock. Reclamation of
this site was completed in the second quarter of 2012 and post closure environmental
monitoring obligations were completed in 2016.

The environmental studies for the mining areas were prepared in 1994 under the original
Environmental Impact Study for the Fachinal Project and EIA for the Furioso Project in 1999.
All projects requiring an environmental approval were presented under a Declaration of
Environmental Impact. Baseline studies were completed to characterize factors such as
biological, hydrological, hydrochemical, and archeological, including information for monitoring
the chemical quality of the water for all areas of influence of the Projects.

In October 2013, CMCB submitted a report to the Servicio Nacional de Geologia y Mineria
Zona Sur and the Superintendincia de Medio Ambiente XI Region, Gobierno de Chile for the
Mina Furioso, post-closure monitoring of surface waters for 2011, 2012, and 2013. Monitoring
of the surface waters indicated that all of the parameters were within the maximum permissible
limits of the current regulations.

In September 2014, CMCB received a report from Sernageomin following the site inspection
visit of the Furioso property by the environmental agency. The post-closure environmental
monitoring at Furioso was completed in 2016, with no further obligations for CMCB.

Closure works at Cascada are pending the final inspection and acceptance by Sernageomin
and then this property will enter the phase of post-closure monitoring.

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PROJECT PERMITTING
In Chile, Law 19.300 (1994) and subsequent modifying Law 20.417 (2010) regulates the
environmental impact studies of public and private investment projects or activities. EIA
regulations were enacted in April 1997, by D.S. No. 30 (Ministry of the General Secretary of
the Presidency) and modified by D.S. 95 (2001). The law provides that projects or activities
listed therein may only be executed or modified after an assessment of their environmental
impact. The main environmental authority in Chile is the Ministerio del Medio Ambiente (MMA)
whose functions and administration are regulated by Law 19.300. In addition, the government
organized a ministry level Advisory Council (Consejo Consultivo) and Regional Ministerial
Secretaries (SERIMIs) in each region of the Chilean territory reporting to the environmental
sub-secretary.

REQUIRED ENVIRONMENTAL PERMITS


Law 19.300 creates a system that integrates much of the sectorial environmental
requirements, known as the single window. This is coordinated through the Servicio de
Evaluacin Ambiental (SEA) with all the public agencies during the assessment process via
the Sistema de Evaluacin de Impacto Ambiental (SEIA). The corresponding environmental
resolution of SEA is based on reports from relevant public agencies that participate in the
evaluation of the assessment documents. If the assessment is favourable, and the final
approval is issued, no public agency may deny the pertinent environmental authorizations. On
the contrary, if the decision is negative, those same agencies must deny such authorization.
Additionally, there are also a number of other sectorial permits of a non-environmental nature
that are required for the mining operations.

STATUS OF CHILEAN REQUIRED PERMITS


CMCB has presented all EIAs and Environmental Impact Declarations (DIA) to the competent
authorities. In the case of Cerro Bayo, the competent authority was COREMA of the Aisn
Region. CMCB has been processing and updating the permits required for its operations as
mining exploration has progressed and new areas have been incorporated into the mining
operation. Current applications are submitted and processed through the SEIA.

Many environmental permits have been received since the start of operations for the various
sectors. A list of these permits, with resolution numbers, dates, and locations, follows in Tables
20-1 to 20-4. RPA notes no changes in the period of 2014 to 2016 for permits.

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TABLE 20-1 PROJECT PERMITS LAGUNA VERDE SECTOR


Mandalay Resources Corp. Cerro Bayo Project

SERVICE PROJECT NAME RES. N Date Status


Environmental Impact Study (EIA) Proyecto Fachinal 001 26-Oct-94 In Force
Proyecto Modificacio n es Plan Minero 062/98 24-Dec-98 For Closure
Modification to Monitoring Plan for Ca. Minera CDE Fachinal Ltda. 004/ 2000 10-Mar-00 For Closure
Project Modificacin Plan Minero 1999 002 04-Feb-00 For Closure
CONAMA / SEA- Modificacin Procesamiento de Concentrado Final 0703 26-Sep-02 In Force
National
Modificacin Proyecto Fachinal, Transporte de Concentrado 0002 05-Jan-04 In Force
Environ m e nt al
Commissio n DIA Raising of Tailings Dam for Fachinal Project 188 13-Apr-10 In Force
Dagny Vein 129 17-Jan-08 In Force
DIA Expansion of the Dagny Project 93 11-Feb-10 In Force
DIA Delia Sur 165 18-Apr-12 In Force
DIA Expansion of tailings dam (project presented December, 2013) 236 14-Jul-14 Approved
Underground Mining Project- Delia Sur 33 18-Dec-13 In Force
Underground Mining Project - Dagny Veins 1313 08-Jul-09 In Force
National Geology andConstruction and Operation of the Tailings Dam for the Fachinal Processing 731 25-Oct-94 In Force
Mining Service Plant
(Sernageomin) Construction and Operation of the Waste Dumps for the Fachinal Mine 719 19-Oct-94 In Force
Underground Mining Project Coyita Mine 240 4-Feb-17 In Force
Exploitation Project for the Mine and Processing Plant 681 07-Oct-94 In Force
Landfill Expansion for domestic and non Dangerous Industrial w astes for the
364 15-Jun-05 In Force
Laguna Verde Sector
Installation and Operation of the First Aid Room for Laguna Verde y
819 11-Jun-96 In Force
Guanaco
Authorization N for generation of Dangerous Wastes 94 24-Jan-06 In Force
Regional Secreta riat Operation of landfills in the Laguna Verde y the Guanaco Sector 128 08-Feb-96 In Force
of the Ministry of Operation of the Sewer System for the Laguna Verde Mining Camp 124 08-Feb-96 In Force
Health (SEREMI
SALUD) Operation of the Potable Water system for the Laguna Verde Mining Camp 126 08-Feb-96 In Force
Approval of the Potable Water and Sew er System Project 636 04-Sep-95 In Force
Approval of the final disposal of used lubricants modification 0441 26-Dec-01 Not in force.
Operation of the Sanitary Landfill Expansion for the laguna Verde Sector 1097 05-Dec-11 In Force
Approval of the Potable Water System Installation 634 04-Sep-95 In Force
Surface w ater usage rights General Carrera Lake (4840690N, 727589E) 30 01-Feb-93 In Force
Surface w ater usage rights General Carrera Lake (4841334N, 728235E) 43 09-Feb-93 In Force
Authorization of tailings dam construction 0729 06-Feb-94 In Force
Surface w ater usage and El Bao estuary rights 45 20-Jan-94 In Force
Director General for Surface and confined w ater usage rights General Carrera Lake
104 01-Apr-93 In Force
Water (DGA) (4841431N, 728398E)
La Tina natural river bed diversion 617 23-Sep-09 In Force
Approval of w ater usage from La Tina estuary 441 26-Oct-93 In Force
Approval of w ater usage from El Rodeo estuary 452 29-Oct-93 In Force
Approval and authorization of the Fachinal Tailings dam construction 729 25-May-06 In Force
Land Use permission for 992 ha Fachinal Project sector Laguna Verde 4 03-Oct-94 In Force
Ministry of Agriculture
Land Use permission for 540 ha Fachinal Project sector Laguna Verde 5 03-Oct-94 In Force

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TABLE 20-2 PROJECT PERMITS CERRO BAYO SECTOR


Mandalay Resources Corp. Cerro Bayo Project

SERVICE PROJECT NAME RES. N Date Status


Sernageomin Project for Modification of Mining Plan 2011 for Bayo Veins. 3196 7-Nov-01 Standby
Operating of the Casino building located in the Cerro Bayo Sector. 329 29-Jul-02 Standby
Potable Water and Sew er System Project for the Cerro Bayo Camp. 151 11-Apr-02 Standby
SEREMI HEALTH Installation and operation of Potable Water and Sew er system for the
Ra l and Guanaco II South Veins. 268 15-Jun-04 Standby
Approval of the Potable Water and Sew er System Project 006 8-Jan-02 Standby
Land Use permission for 158 for Javiera, surface with land use
16 18-Jun-03 In Force
permission and authorization for 140
Land Use Permit 70 007 18-May-00 In Force
SEREMI Ministry of
Land Use Permit 70 015 6-Aug-01 In Force
Agriculture
Land Use permission for Predio Sra. Elcira Padilla and Baha Jara 006 20-Apr-00 In Force
Land Use permission for 91 ha Raul w est, 35 ha Raul y 8,3 ha Bayo
14 2-May-02 In Force
Sur.
In Force
DIA, Report on Modification for the Fachina l Project, Sedimentation
363 12-Sep-05 (Temporary
Basins for the Javiera Vein.
Standby)
In Force
Declaration of Environmental Impact Mining Plan 2006-2011 613 01-Sep-06 (Temporary
Standby)
In Force
Declaration of Environmental Impact Modifications Fachinal Project,
CONAMA 341 20-May-03 (Temporary
Exploitation of Javiera Vein.
Standby)
Declaration of Environmental Impact Modification Fachinal Project,
255 02-Apr-04 Closed
Exploitation of the Guanaco 2 Sur Vein
Declaration of Environmental Impact (DIA) Modification of Mining Plan
0135/2001 26-Jun-01 Standby
2001, Bayo Veins
Declaration of Environmental Impact Modification Fachinal Project,
0336 20-May-03 Standby
Exploitation of the Ral Vein

TABLE 20-3 PROJECT PERMITS CASCADA SECTOR


Mandalay Resources Corp. Cerro Bayo Project

SERVICE PROJECT NAME RES. N Date Status


CONAMA Declaration of Environmental Impact Cascada Project 201 4-May-07 Abandoned and Closed
Potable Water and Sew er System, Cascada Project 341 08-May-07 Cancelled
SEREMI HEALTH
Approval of Potable Water and Sew er System Project 0341 22-May-07 Cancelled
Roads & Highw ays Access to Route Ch-265 601 25-Mar-07 In Force
SEREMI Ministry of Land Use permit for 6,85 hectares 10 03-Sep-07 In Force
Agriculture
Sernageomin Approval of the Waste Material deposit Project 976 13-Nov-07 Abandoned and Closed

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TABLE 20-4 PROJECT PERMITS GUANACO SECTOR


Mandalay Resources Corp. Cerro Bayo Project

SERVICE PROJECT NAME RES. N Date Status


Approval of the Potable Water and Sew er System Project 635 04-Sep-95 In Force
Approval of the Potable Water Installation 633 04-Sep-95 In Force
Approval for operating storage building GU-7 for storage of
563 07-Sep-05 In Force
non-toxic, domestic and industrial wastes.
SEREMI HEALTH Installation and operation of Potable Water and Sewer
Systems for Ral and Guanaco II Sur Projects. 268 15-Jun-04 Dismantled
Approval of the Sew er System for the Area Guanaco camp. 125 8-Feb-96 In Force
Approval of the Potable Water usage for the Guanaco Camp. 127 8-Feb-96 In Force
Authorization of the Casino operation 849 21-Nov-95 Closed
Declaration of Environmental Impact Modification for Fachinal
CONAMA 255 02-Apr-04 Closed
Project, Exploitation of the Guanaco 2 Sur Vein

TAILINGS FACILITY
The Fachinal tailings facility is part of the exploitation project that was approved by the
environmental authority in 1994.

Tailings storage commenced in October 1995 and the operations were suspended from 2000
to 2002 and again from 2008 to 2011 due to a temporary closure of the mine operations.
Mandalay resumed tailings storage in January 2011. In December 2015, the tailings dam wall
was 24.0 m high, equivalent to an elevation of 317 m, and contained 6,819,561 t of dry tailings.
The permit for the tailings facility has been in force since April 13, 2010. Monitoring facilities
at the dam wall include six vibrating-wire piezometers and two inclinometers. Information from
these instruments is collected monthly and reported to Sernageomin on a quarterly basis.
Monitoring of the facility continued during 2016 to confirm that the infrastructure is in good
order.

The tailings dam wall is planned to be raised from its current elevation of 317 m to its final
height of 322 m by civil works, which were initially planned to start in 2016 but were
rescheduled to early 2017. Remaining tailings storage capacity, including that which will be
made available with the final expansion, is approximately 2.5 million tonnes.

PROCESSING PLANT
The processing plant for the Fachinal Project was approved in 1994. The plant consists of
installations for crushing, grinding, flotation, thickening, agitation, and filtration with a capacity
of 1,650 tpd. The plant is located close to other installations including, offices, service
buildings, storage buildings, generator building (for plant), etc. The plant has continued

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operating without any significant modifications since the original approval and thus the permits
remain valid.

MINING EXPLOITATION IN LAGUNA VERDE


Presently, the sectors where mining operations are authorized in the Laguna Verde area
include the Delia NW, Dagny, and Fabiola veins, each accessed via its own portal and decline.

The Dagny mine received environmental approval in February 2009. The permit includes
exploitation of the Dagny vein. The waste material is estimated to be 126,000 t, and this will
be stockpiled in the existing Los Juncos waste dump, which has sufficient capacity. This dump
has a capacity of 453,600 t with approximately 180,000 t presently stored and therefore a
balance of 273,600 t of remaining capacity. The Project required the construction of four
basins for each portal, consisting of three decantation basins and one recirculation basin with
a capacity of 600 m each.

Submitted in September 2009, the Dagny Expansion Project was approved in February 2010.
The permit included incorporation of the Delia NW mine to the mining operation, with extraction
of 17,000 t per month over a four year period. The waste dump for this project was the Los
Juncos dump, which has sufficient capacity. The estimated waste volume for the expansion
project was 86,000 t.

Submitted in January 2012, The Delia South Project was approved in April 2012. The permit
was for the operation of the Delia SE mine with extraction of 450 tpd over a period of four
years. The Tranque open pit was authorized to be used as the waste dump and was permitted
for 290,000 t of waste rock.

The environmental permit for the Expansion of the Dagny Project was ratified by a resolution
on December 18, 2015 from the Environmental Evaluation Services of the Government of
Chile, for the Regin of Aysn. This resolution confirmed that planned development of the
mining operations at Coyita as well as in the Dagny, Fabiola, Dalila, and Yasna veins continue
to be authorized under the Dagny Expansion Project. The current facilities for handling of
mine water, refuse, and mine tailings are satisfactory to meet all environmental regulations.

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MINING EXPLOITATION OF THE CERRO BAYO AREA


The exploitation of the Cerro Bayo area includes the Marcela Sur and Raul veins.

The most recent project presented for approval in this area was the Mining Plan 2006-2011,
approved in September 2006. The permits included exploitation of new deposits in the Cerro
Bayo area (the Raul and Bayo veins of the mineralized system Bayo 1-170 and Mallines 1-
100) using the shrinkage mining method. The mining plan included a production of 40,500 t
per month over a five year period, with project completion by 2014 (Ref. GER-CMCB/0025-11,
May 17, 2011). The Marcela vein is scheduled in the LOM from 2018 through 2019 and Raul
during 2019 and Q1 2020.

The project includes a water management system consisting of sumps within the mine, four
basins for primary sedimentation for each portal (with a capacity of 600 m each) and an
emergency sedimentation basin (with a capacity of 25,000 m). Water will be recirculated to
the mine for drilling water (189 m/d), and a portion of the water will be used for dust control
for the underground roadways and also for emergency purposes.

The waste dumps No. 1, 2, and 6 were approved in 2001 and have a sector approval
(Sernageomin) and environmental approval (CONAMA). The waste dumps No. 3 and 4 were
authorized by the environmental authority under the approval of Mining Plan 2006-2011,
however, the approval from Sernageomin was not received.

From October 2008 to September 2009, the operation was under care and maintenance
status. During that time, the underground workings, including those in Marcela, were allowed
to flood. Consequently, it is necessary to obtain permission to dewater the mine and a
Declaration of Environmental Impact (DIA) for dewatering, by pumping to the Laguna Salitrosa,
was submitted in February 2017.

The request for permission was submitted to the Superintendent of Sanitary Services (SISS)
at the end of 2009. The discharge was considered by CMCB to be a residual industrial liquid
(RIL) and as a result required the DS No. 90, however, CMCB personnel received a response
from the SISS (Ord. No. 763 date March 17, 2010) stating that the discharge was not a RIL
and that the CONAMA should be consulted in this case. A Declaration of Environmental
Impact (DIA) for dewatering the Marcela underground workings into Laguna Salitrosa, a lagoon

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located approximately 2 km NW of the workings, was submitted in February 2017 and is


expected to take four to six months for approval. .

WATER RIGHTS
CMCB has water right permits that exceed its requirements. The water right permits are
presented in Tables 20-1 to 20-4. To RPA knowledge, no changes have occurred to the water
permits.

PERMITS TO REINITIATE OPERATIONS


Cerro Bayo has requested and received the necessary permits and licences to operate for the
life of the Project.

In the Cerro Bayo area, the mining activities have received authorization from both sectorial
and environmental authorities following the proposed Mining Plan 2006-2011, approved in
2006, that included exploitation of deposits within the mineralized systems of Bayo 1-170 and
Mallines 1-100, with a monthly production rate of 40,500 t for a period of five years and a total
of 3.3 million tonnes of waste.

The authorized five year operating plan should have commenced between 2006 and 2008
(when the operation was suspended) and theoretically finished in 2011. However, as the
mining operations ceased in 2008, approximately four years of permitted operations remain.
Prior to the resumption of mining at Cerro Bayo, regulators will need to be notified of the revised
forecast for completion of permitted operations. Authorized quantities for ore and waste
production at Cerro Bayo are not expected to be exceeded by mining of mineral reserves.

For this area, the only permit that was not obtained was that from Sernageomin for the
exploitation and for the waste dumps No. 3 and 4, which will be updated. According to CMCB
personnel, only waste dump No. 4 was built and has not reached its full capacity. Also there
was an important permission for this area concerning water stored underground after the
operations were completed. As mentioned previously, a DIA for dewatering the Marcela
underground workings into Laguna Salitrosa, a lagoon located approximately 2 km NW of the
workings, was submitted in February 2017 and is expected to take four to six months for
approval.

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For the Laguna Verde area, the exploitation approval was received for the Dagny project,
including the exploitation of the Dagny and Delia NW. Dagny has received an approval for
extraction of approximately 25,000 tonnes per month for a period of five years, and Delia NW
for an extraction of 17,000 tonnes per month for a period of five years. The waste dump
approved by the environmental and sectorial authorities is Los Juncos, with 126,000 tonnes
for Dagny and 86,000 tonnes for Dalia NW. The remaining capacity of the waste dump will be
61,600 tonnes.

The processing plant retains the original permits and sufficient capacity to receive any new
production.

The environmental permit for raising the tailing storage facility from its current elevation of 317
m to 322 m is in hand. Sectorial permits for construction and operation of this expansion were
requested in 2015 and granted in 2016. The present plan calls for raising the dam up to a final
elevation of 322 m in 2017.

Any major change in the requested modifications to installations or works would require a new
application to the authorities. Depending on the magnitude of any change or modification, this
would require and EIA or DIA as mentioned previously.

ENVIRONMENTAL MANAGEMENT
The environmental management of the operation will be based on the monitoring program for
Water Quality, Meteorology, Air Quality, Soil Quality, Vegetation Quality and monitoring of the
fauna. On a quarterly basis, CMCB carries out sampling and analysis for acid base accounting
(ABA) and net acid generation (NAG) to determine and monitor any acid water generation
potential for the mine and waste dumps. Samples are analysed in the on-site laboratory and
also by ALS Life Sciences in Santiago with results, including ALS laboratory certificates,
uploaded to the digital platform (SINFA Sistema de Seguimiento Ambiental) on which
compliance with regulatory obligations from environmental permits are reported by the
regulator. In accordance with Mine Closure legislation, acid generation potential of waste rock
is considered to determine the measures required in the mine closure plan. In general, waste
rock produced from the operating mines since 2011 is classified as non-acid generating, with
occasional samples showing uncertainty as to their potential for acid generation.

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RPA also reviewed the ABA and NAG sampling results for 2015 and 2016 both by CMCB and
ALS and concurs with the above statement. CMCB carried out monitoring of water quality in
piezometers at the foot of storage piles, however, it has not detected any issue requiring
treatment at Laguna Verde. CMCB has a containerized lime addition plant, which was used
at the Furioso site and is available if ever required. For new waste dumps being permitted,
the regulators now require construction of lined ponds for storage and treatment, if required,
of the runoff, independent of the quality of the material anticipated. As noted, the waste rock
produced is considered benign and not much water percolates through as a result of the
location and climate of the area.

RPA reviewed the report for the air quality monitoring during 2016 summarizing the results for
each month for monitoring of the air quality and meteorology as well as respirable particulate
matter (MP-10) and suspended solids (MPS). There are three measuring stations including
the Estacin Tranque Este, Baha Jara, and Estacin Chile Chico. For the respirable
particulate matter, there were no critical periods of contamination during the year, while for the
suspended solids matter, there were three months where the levels were higher than the
maximum permissible due to the high winds characteristic of this area of the country.

SOCIAL OR COMMUNITY REQUIREMENTS


The company, under the collective bargaining agreement, provides for educational funds from
elementary through to university classes, plus employee celebrations at Christmas and the
annual Mining Day Celebration that takes place in the town of Chile Chico.

Mandalay employs a Public Relations Coordinator, based in Chile Chico, who oversees
community initiatives which focus on contributions in three strategic areas of education, health,
and cultural activities. Contributions made in 2016 included the following:
Seven university scholarships and one sporting scholarship for students from Chile
Chico.

Bringing medical specialist to Chile Chico on an annual basis.

Sponsorship of many sporting, social, government, and educational institutions in Chile


Chico.

Diverse courses organized and funded by the company for the general public of Chile
Chico.

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Operation and maintenance of recreation facilities, including an indoor gymnasium and


childrens playground, made available for community use.

A trade course in welding and metal fabrication conducted for local residents.

MINE CLOSURE REQUIREMENTS


The closure plan was updated in 2015 by Mineria y Medioambiente Limitada (MYMA) from the
previous estimate that was prepared in 2008. The updated closure plan is shown in Table 20-
5.

TABLE 20-5 CLOSURE COSTS BREAKDOWN BY YEAR


Mandalay Resources Corp. Cerro Bayo Project

Cost (US$000) Total 2019 2020 2021 2022 2023 2024


Reclamation 12,000 1,000 1,000 1,000 1,000 4,000 4,000

The closure plan for the site areas includes properly sealing of portals, rehabilitation of waste
and stockpile areas, rehabilitation of all sedimentation and other water basins, dismantling and
removal of all fixed plant infrastructure and miscellaneous clean-up to ensure the site
conditions are returned to as near as natural condition.

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21 CAPITAL AND OPERATING COSTS


CAPITAL COSTS
The Cerro Bayo Project has been in production since 2011, after a three year shutdown. The
capital costs for equipment, rebuilds, ventilation, etc., are listed in Table 21-1. The table also
shows the sustaining capital cost for deferred development required, as well as the closure
cost estimated by year.

TABLE 21-1 CAPITAL COSTS


Mandalay Resources Corporation Cerro Bayo Project

Description Total 2017 2018 2019 2020 2021-24


US$000 US$000 US$000 US$000 US$000 US$000
Fixed Assets 10,797 4,797 6,000 - - -
Capital Other 5,252 5,252 - - - -
Capital Development 23,658 11,186 8,972 3,500 - -
Exploration - Infill Inferred Resource 1,800 800 1,000 - - -
Exploration - Resources Extension and Infill 500 500 - - - -
Exploration - New Target Testing 500 - 500 - - -
Exploration - Target Generation - - - - - -
Exploration Total 2,800 1,300 1,500 - - -
Capital (Exploration and Other) 6,252 5,752 500 - - -
Total Sustaining Capital 36,255 16,783 15,972 3,500 - -
Total Growth Capital 5,752 5,752 - - - -
Total Capital Expenditure 48,260 28,287 16,472 3,500 - -
Closure/Reclamation 12,000 - - 1,000 1,000 10,000
Contingency (RPA) (not applied to Closure) 10% 4,826 2,829 1,647 350 - -
Total 65,086 31,116 18,119 4,850 1,000 10,000

The capital development shown in Table 21-1 consists of approximately 11,000 m of horizontal
capital development at a direct unit cost of $2,725 per metre over the LOM period. This
development is carried out in waste and made up of ramp, access drifts, and other
miscellaneous openings such as sumps. The capital development makes up approximately
30% of the total development carried out in the mine. Development requirements are relatively
low for the mines at Cerro Bayo because of the mining method. No hanging wall or footwall
drifts are driven along strike, and drawpoints are not utilized. The access drift is driven along
the vein and mining progresses in a retreat fashion towards the entry point from the main
ramp. In this way, waste development is reduced significantly.

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OPERATING COSTS
Operating costs for the Cerro Bayo LOM plan are shown in Table 21-2. The actual operating
costs for year to date December 2016 were US$85.56 per tonne milled. Production will
average approximately 1,000 tpd over the LOM.

TABLE 21-2 LOM OPERATING COSTS


Mandalay Resources Corporation Cerro Bayo Project

US$/yr Avg.
Description US$/t
(millions)
Mining 18.3 59.38
Processing 6.7 21.84
G&A 4.7 15.10
Total 29.7 96.32

RPA notes that there was an increase in operating costs to $97/t processed during 2016
against the budget of US$72.05/t processed. The increased cost was a result of a mine
interruption of approximately one month following a fatality on site. The 2016 operating budget
was based on a throughput of 504,000 tonnes significantly higher than the realized 397,000
tonnes. Projected operating costs for the LOM are approximately 13% higher than the 2016
year to date costs. Mineral Reserves have reduced over the last year and access to mine
areas requires additional development and preparation time for mining. Some opportunities
may exist by finding parallel vein structures.

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

MANPOWER
The current manpower level and approximate average wage/salary at the Cerro Bayo Project
is shown in Table 21-3. It is anticipated that this level of manpower will be necessary for the
remainder of the LOM period. Current contractor personnel are shown in Table 21-4. With
the exception of the current tailings dam work, this level of contractor reliance is expected to
continue throughout the LOM period.

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TABLE 21-3 COMPANY MANPOWER


Mandalay Resources Corporation Cerro Bayo Project

Item No. Avg. Wage


US$/mo.
Staff 4 2,500
UG Mine 150 1,400
Geology 41 2,226
Engineering 9 2,792
Plant 38 1,815
Laboratory 13 1,648
Maintenance 59 1,768
Acct. & Logistics 22 1,714
Environment 5 2,113
Safety 5 3,416
Human Resources 4 3,429
Camp Services 10 1,137
Total 359 1,909

TABLE 21-4 CONTRACT MANPOWER


Mandalay Resources Corporation Cerro Bayo Project

Name Number
Orica 9
Gardilcic (Mine contractor) 66
Empresa Seguridad Fisica (Security) 25
Sodexo S.A. Chile 23
Sotraser 14
Atlas Copco 3
Juan Nuez (Garbage removal) 2
Aysen Transport (Ore) 9
Robinson Casanova Ferrat (Sanitary) 2
Juan Nuez (Water Truck) 3
Raul Vernal (Concentrate Transport) 15
Trapananda (Pest Control) 2
Enex (Fuel Transport) 1
Luis Hernandez (Consultant SPA) 3
Rodrigo Gomez Vial (Water Truck) 3
Rodrigo Miguel Ramirez (Labour) 12
Filter Part Services 11
Richard Candia 2
Victor Soto Urrutia (Equipment Rental) 1
Seawind (Wind Power Project) 1
Total 207

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The mine has varying schedules for personnel. The miners work a ten day on five day off
schedule, the plant personnel work a seven and seven schedule, the geology personnel work
a fourteen and seven schedule, cleaning personnel a six and one schedule, and the
administration personnel a five and two schedule.

There are a number of bonuses offered by the company as listed below.


Production and cost bonus
Safety bonus
Night shift bonus
Housing bonus
Legal holiday bonus
School scholarships for employee dependents
Festive day bonus
Seniority bonus
The company also offers benefits for medical plan, life insurance, death leave and
benefits, meals on site, clothing for winter season, annual vaccinations, transportation
benefits, and other benefits

RPA has reviewed the wages and benefits and these are comparable to other Chilean
operations.

Most of the hourly workforce comes from Chile Chico or nearby towns and villages and
employee turn-over is very low, the mine being of major economic importance to the area. An
exception to this is the geology staff most of whom are foreign residents who work a 14 day
work cycle with seven days off.

Relations with the site contractors appear to be very good as well as those with the mine
management and the workforce in general.

To supplement the mine development, Mandalay hired underground mining contractor


Constructora Gardilcic in mid-2016 to complete 3,671 m of underground development by June
2017 including some 1,100 m of ramp, 845 m of vertical development, 838 m of vertical
emergency exists, 160 m of access drifts, 583 m of ore drifts, and miscellaneous development
for the Coyita vein system. The contractor will supply the necessary equipment including two
Boom Jumbo drills, scooptrams (6.5 yd3), trucks (22 tonne), and support equipment plus three

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20 man crews to cover the 14 day in and 7 days out rotation for ten hours shifts with two hours
between the shifts to clear blasting fumes from the mine.

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22 ECONOMIC ANALYSIS
This section is not required as the property is currently in production, Mandalay is a producing
issuer, and there is no material expansion of current production. RPA has verified the
economic viability of the Mineral Reserves via cash flow modelling, using the inputs discussed
in this report.

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23 ADJACENT PROPERTIES
RPA is not aware of any significant deposits on adjacent properties.

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24 OTHER RELEVANT DATA AND


INFORMATION
No additional information or explanation is necessary to make this Technical Report
understandable and not misleading.

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25 INTERPRETATION AND CONCLUSIONS


RPA offers the following conclusions regarding the Cerro Bayo property:

The Project has met its 2016 exploration objectives in that new gold and silver
mineralization has been found and added to the Mineral Resources and Mineral
Reserves in the Laguna Verde sector under the lake.

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

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

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

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

The existing internal laboratory QA/QC program is appropriate, and Mandalay has
implemented an additional blind QA/QC program for enhanced validation of the
accuracy and precision of the sample results.

Mineral Resources and Mineral Reserves were estimated according to the CIM
definitions.

Mineral Resources are reported inside vein wireframe models based on US$1,400 per
ounce gold and US$24 per ounce silver, at a 162 g/t AgEq cut-off grade, accounting
for concentrate transportation, treatment, and refining costs.

Mineral Reserves were estimated using prices of US$1,200 per ounce for gold and
US$18 per ounce for silver, at a 219 g/t AgEq cut-off grade accounting for concentrate
transportation, treatment, and refining costs.

The Mineral Reserves were estimated using a minimum mining width of 2.4 m for
longhole stoping. Based on previous observations on site, RPA is of the opinion that
the stope dilution factors could be significantly lower with continued careful planning
and execution of drilling and loading operations. Reduction of dilution in the
development drives, however, is more difficult, as a minimum drift width is required to
accommodate equipment sizes and equipment clearance regulations.

The LOM plan, based on Mineral Reserves, shows a mine life of approximately three
years.

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For the LOM plan, the expected capital investment totals approximately US$65 million,
including US$12 million for mine equipment and rebuilds, US$36 million in mine
development, US$12 million in closure costs, and a contingency of US$5 million. RPA
finds the capital costs to be reasonable.

The LOM plan forecasts a production rate averaging 1,000 tpd over the three year LOM
period. Production will come from ten veins during the LOM, accessed from portals,
which provide flexibility in production planning. Production will consist of approximately
75% from stoping and 25% from ore development during the LOM.

The mine development rates can be achieved provided sufficient manpower and
equipment are available and there are sufficient development headings. Planned
capital and operating development for 2017 to 2019 averages 26 m/day and
maintaining this rate will be critical in the preparation of stopes to meet LOM tonnage
forecasts.

The average LOM operating cost is estimated at US$97 per tonne milled, based on
2016 actual operating costs.

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

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

Mandalay is carrying out monthly reconciliations between the mine production, mill
throughput, and the mine block model. In RPAs opinion, this practice should be
continued as it allows tracking and better understanding of mine production variations.

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

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26 RECOMMENDATIONS
RPA makes the following recommendations:

Review the uninterpreted vein intercepts with significant grades that were not included
in the 2016 models to evaluate their potential, and carry out more drilling from the
underground workings to establish vein continuity.

Perform infill drilling of the down-plunge and along-strike projections of the veins in
production or scheduled to be in production to support detailed mine planning
especially in areas with high grade variability which are not captured by the wide-
spaced exploration drill grid.

Perform additional work including lithology, stratigraphy, and structural interpretations


to improve the understanding of the mineralization controls and grade distributions, to
assist future resource estimates, and to define new exploration targets. Post-
mineralization dykes are important to be modelled to assign internal waste into the
grade control and resource models.

Incorporate the unsampled drill hole and channel intervals into the Vulcan assay tables.

Add the structural data to the Vulcan database.

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

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

Sample all core intervals immediately adjacent to mineralization, to eliminate


undersampling of mineralized shoulders, with an additional review after assays have
been returned.

Continue selecting field core duplicates with representative grade ranges.

Review the channel sampling duplicate procedures.

Continue to digitize underground mapping and incorporate it into the model.

Continue to prepare short term block models and review reconciliation results for each
vein in production. Incorporate the unsampled data into the short term models.

For future mining that will be carried out on veins located under the lake in the Laguna
Verde sector, RPA recommends developing a protocol that includes drilling test holes
above existing workings as well as out in front of the development headings to monitor
rock conditions and potential water issues. A crown pillar of at least 50 m thick is
planned to be left in place. Also, a program of monitoring, such as the use of
extensometers, should be considered to provide information on a continual basis to

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ensure that any change in rock conditions and quality is noted and mitigation measures
can be taken.

Complete the 2017 exploration plan, consisting of a magnetometer survey,


geochemical sampling, and an 8,000 m drill program to explore new targets in the
Laguna Verde and Cerro Bayo sectors and the southern Pampa la Perra, budgeted for
approximately US$1.3 million.

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report prepared by Grupo Exploracin C.M.C.B., 2016.

Santabrbara, J.J, 2016 Programa QA/QC aplicado a muestras de mina, 2016, in-house report
prepared by Grupo Mina C.M.C.B., 2016.

SGS Lakefield Research Chile S.A., Informe Final, Auditoria Tcnica a Procesos de
Laboratorio Qumico de Compaia Minera Cerro Bayo, in-house report prepared for
Compaia Minera Cerro Bayo Limitada, Sept. 14, 2011.

Sillitoe, R.H., and Hedenquist, J.W, 2003, Linkages Between Volcanotectonic Setting, Ore-
fluid Compositions, and Epithermal Precious Metal Deposits, in Society of Economic
Geologists Special Publication 10, 315-343.

Simmons, S.F., White, N.C. and John, D.A., 2005, Geological characteristics of epithermal
precious and base metal deposits, in Economic Geology 100th Anniversary Volume, 485-
522.

Sims, J., 2010, Cerro Bayo Mine, Technical Report, prepared for Coeur dAlene Mines
Corporation, January 1, 2010.

SRK Consulting, 2010, NI 43-101 Technical Report, Cerro Bayo Mine, Chile, prepared for
Mandalay Resources Corp., May 14, 2010.

Subterra Ingenieria, 24/04/2015, Informe Final, Anlisis Geolgico-Geotcnico y Diseo Del


Pilar Corona De la Explotacin de las Vetas Coyita, Yasna, Fabiola y Dagny Bajo la
Laguna Verde. Compaa Cerro Bayo Limitada.

Surveying Control Systems, Grupo S.C.S., Estudio Tcnico, Anlisis De Registros De


Perfilador De Subfondo Laguna Verde Chile Chico, Regin De Aysn, 31 De Diciembre,
2016.

Toms Salgado Meza, Ing. Analista Geomecnico, 8 Nov., 2010, Estudio De Diseo
Geomecnico Preliminar y Recomendaciones De Fortificacio Proyecto Delia NW
Compaia Minera Cerro Bayo Ltda., Informe Final.

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 27-3
www.rpacan.com

www.geology.about.com, 2012, derived from A. Alden USGS OFR 97-470D (Generalized


Geologic Map of Chile).

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 27-4
www.rpacan.com

28 DATE AND SIGNATURE PAGE


This report titled Technical Report on the Cerro Bayo Project, Region XI (Aisn), Chile and
dated March 21, 2017, was prepared and signed by the following authors:

(Signed & Sealed) Normand L. Lecuyer

Dated at Toronto, ON Normand L. Lecuyer, P.Eng.


March 21, 2017 Principal Mining Engineer

(Signed & Sealed) Rosmery J. Crdenas Barzola

Dated at Toronto, ON
March 21, 2017 Rosmery J. Crdenas Barzola, P.Eng.
Senior Geologist

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 28-1
www.rpacan.com

29 CERTIFICATE OF QUALIFIED PERSON


NORMAND L. LECUYER
I, Normand L. Lecuyer, P.Eng., as an author of this report entitled Technical Report on the
Cerro Bayo Project, Region XI (Aisn), Chile prepared for Mandalay Resources Corporation
(the Issuer) and dated March 21, 2017, do hereby certify that:

1. I am Principal Mining Engineer with Roscoe Postle Associates Inc. of Suite 501, 55
University Ave Toronto, ON, M5J 2H7.

2. I am a graduate of Queens University, Kingston, Canada, in 1976 with a B.Sc. (Hons.)


degree in Mining Engineering.

3. I am registered as a Professional Engineer in the provinces of Ontario (Reg. #


26055251), Qubec (Reg. # 34914) and Newfoundland and Labrador (Reg. #06161).
I have worked as a mining engineer for a total of 39 years since my graduation. My
relevant experience for the purpose of the Technical Report is:
Review and report as a consultant on numerous exploration and mining projects
around the world for due diligence and regulatory requirements.
Vice-President Operations for a number of mining companies.
Mine Manager at an underground gold mine in Northern Ontario, Canada.
Manager of Mining/Technical Services at a number of base-metal mines in Canada
and North Africa.
Vice-President Engineering at two gold operations in the Abitibi area of Quebec,
Canada.

4. I have read the definition of "qualified person" set out in National Instrument 43-101 (NI
43-101) and certify that by reason of my education, affiliation with a professional
association (as defined in NI 43-101) and past relevant work experience, I fulfill the
requirements to be a "qualified person" for the purposes of NI 43-101.

5. I have visited the Cerro Bayo Project multiple times, most recently from January 12 to
14, 2016.

6. I am responsible for the overall preparation of the Technical Report, for Sections 3, 5,
13, 15 to 22 and 24 as well as parts of Sections 1, 2, 25, 26, and 27 of the Technical
Report.

7. I am independent of the Issuer applying the test set out in Section 1.5 of NI 43-101.

8. I have prepared previous Technical Reports in 2012, 2013, 2014, 2015, and 2016 on
the property that is the subject of this Technical Report.

9. I have read NI 43-101, and those sections of the Technical Report for which I am
responsible, have been prepared in compliance with NI 43-101 and Form 43-101F1.

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 29-1
www.rpacan.com

10. At the effective date of the Technical Report, to the best of my knowledge, information,
and belief, those sections of the Technical Report for which I am responsible contain
all scientific and technical information that is required to be disclosed to make the
Technical Report not misleading.

Dated this 21st day of March, 2017

(Signed & Sealed) Normand L. Lecuyer

Normand L. Lecuyer, P.Eng.

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 29-2
www.rpacan.com

ROSMERY J. CRDENAS BARZOLA


I, Rosmery J. Crdenas Barzola, P.Eng., as an author of this report entitled Technical Report
on the Cerro Bayo Project, Region XI (Aisn), Chile prepared for Mandalay Resources
Corporation (the Issuer) and dated March 21, 2017, do hereby certify that:

1. I am Senior Geologist with Roscoe Postle Associates Inc. of Suite 501, 55 University Ave
Toronto, ON, M5J 2H7.

2. I am a graduate of Universidad Nacional de Ingenieria, Lima, Peru, in 2002 with a B.Sc.


degree in Geological Engineering.

3. I am registered as a Professional Engineer in the province of Ontario (Reg. # 100178079).


I have worked as a geologist for a total of 15 years since my graduation. My relevant
experience for the purpose of the Technical Report is:
Resource estimation, geological modelling, and QA/QC experience.
Review and report as a consultant on numerous exploration, development, and
production mining projects around the world for due diligence and regulatory
requirements.
Evaluation Geologist and Resource Modelling Geologist with Barrick Gold Corporation
at Pueblo Viejo Project (Dominican Republic) and Lagunas Norte Mine (Peru).

4. I have read the definition of "qualified person" set out in National Instrument 43-101 (NI 43-
101) and certify that by reason of my education, affiliation with a professional association
(as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be
a "qualified person" for the purposes of NI 43-101.

5. I have visited the Cerro Bayo Project multiple times, most recently from January 12 to 14,
2016.

6. I am responsible for Sections 4, 6 to 12, 14 and 23 as well as parts of Sections 1, 2, 25,


26, and 27 of the Technical Report.

7. I am independent of the Issuer applying the test set out in Section 1.5 of NI 43-101.

8. I have prepared previous Technical Reports in 2013, 2014, 2015, and 2016 on the property
that is the subject of this Technical Report.

9. I have read NI 43-101, and those sections of the Technical Report for which I am
responsible, have been prepared in compliance with NI 43-101 and Form 43-101F1.

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 29-3
www.rpacan.com

10. At the effective date of the Technical Report, to the best of my knowledge, information, and
belief, those sections for which I am responsible in the Technical Report contain all
scientific and technical information that is required to be disclosed to make the Technical
Report not misleading.

Dated 21st day of March, 2017

(Signed & Sealed) Rosmery J. Crdenas Barzola

Rosmery J. Crdenas Barzola, P.Eng.

Mandalay Resources Corporation Cerro Bayo Project, Project #2699


Technical Report NI 43-101 March 21, 2017 Page 29-4