PROJECTS

CHINCHILLAS SILVER PROJECT

Highlights

A Significant Silver-Lead-zinc Project with Growing Resources Creating a Path to Production

Golden Arrow holds a 100% interest in the Chinchillas project which hosts a resource of 100 million ounces of silver / 155 million ounces silver equivalent (AgEq) in the Measured & Indicated categories and 44 million ounces silver /90 million ounces AgEq in the Inferred category (See Table 1 below for details.) The updated resource estimate is part of the Chinchillas Project pre-development activities, funded by Silver Standard, which are being undertaken to evaluate the feasibility of creating a combined mining business with Silver Standard's Pirquitas mine, as announced October 1st, 2015.

Chinchillas has near-surface mineralization providing the potential for an open-pit mining scenario, plus conventional metallurgy that has shown high recoveries of silver lead and zinc to concentrates in bench-scale testing, and access to infrastructure including highways, power and water. The project is situated in mining-friendly Jujuy Province, northwest Argentina, approximately thirty kilometres from the Pirquitas mine.

In October 2015 the Company launched an aggressive Phase V drill program. The main objective of the program was to infill the Silver Mantos area of the deposit with sufficient density to convert a significant portion of the July 31st, 2015 resource estimate to the Measured and Indicated categories, as required for the pre-feasibility level studies being completed by Silver Standard. As demonstrated by the updated resource estimate, the Phase V drill program successfully converted more than fifty million ounces of silver equivalent ("AgEq") resources to the Measured and Indicated ("M+I") categories, at the base cut-off grade. This includes 17 million ounces of AgEq as Measured resources in the central part of the Silver Mantos zone, and expansion of Measured plus Indicated to the north, south and at depth. In addition, the average grade of M+I increased to 142 g/t AgEq.

For additional details see the news release dated April 12th, 2016, and the NI 43-101 Technical Report filed on SEDAR May 27th 2016.

Mineral resources, which are not mineral reserves, do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues. The quantity and grade of reported Inferred resources are uncertain in nature and there has been insufficient exploration to classify these Inferred resources as Indicated or Measured, and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured category.

Table 1. Mineral Resources of the Chinchillas Project by Mineralized Zone. Effective April 12th, 2016 by Robert Sim, P.Geo., Bruce Davis, FAusIMM, and Brian McEwen, P.Geol.

Type Mtonnes AgEq
(g/t)
Ag
(g/t)
Pb
(%)
Zn
(%)
AgEq
(Moz)
Ag
(Moz)
Pb
(Mlbs)
Zn
(Mlbs)
Measured
Silver Mantos 3.6 149 115 0.56 0.38 17 13 44 30
Indicated
Silver Mantos 11.9 118 72 0.63 0.64 45 28 166 168
Mantos Basement 13.6 176 125 1.16 0.27 77 55 347 81
Socavon 5.0 97 29 0.54 1.37 16 5 59 152
ALL 30.6 141 88 0.85 0.60 138 87 574 401
Measured and Indicated
Silver Mantos 15.5 125 82 0.62 0.58 62 41 210 198
Mantos Basement 13.6 176 125 1.16 0.27 77 55 347 81
Socavon 5.0 97 29 0.54 1.37 16 5 59 152
ALL 34.2 142 91 0.82 0.57 155 100 618 431
Inferred
Silver Mantos 4.1 115 58 0.78 0.83 15 8 71 76
Mantos Basement 1.5 107 78 0.64 0.14 5 4 22 5
Socavon 7.3 79 33 0.37 0.91 18 8 59 146
Socavon Basement 20.0 79 39 0.39 0.73 51 25 170 321
ALL 32.9 85 42 0.44 0.76 90 44 322 548

Notes to Table 1:

  • Totals may not add correctly due to rounding
  • Mineral resources are contained within a pit shell generated using a silver price of $25/oz.
  • Silver equivalent grades, and the base case cut-off grade of 45g/t AgEq, are based on metal prices of $19/oz silver and $1/lb for Lead and Zinc.
  • Mineral resources, which are not mineral reserves, do not have demonstrated economic viability.
  • The quantity and grade of reported Inferred resources are uncertain in nature and there has been insufficient exploration to classify these Inferred resources as Indicated or Measured, but it is reasonably expected that a majority of the reported Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.

3D Model

Chinchillas has near-surface mineralization providing the potential for an open-pit mining scenario, plus conventional metallurgy that has shown high recoveries of silver lead and zinc to concentrates in bench-scale testing, and access to infrastructure including highways, power and water.

Project Geology & Exploration Summary

Chinchillas is a Tertiary aged diatreme volcanic complex that has erupted through the Paleozoic basement sediments. The resulting depression or basin, filled with volcanic breccias and tuffs, is approximately 1.5 kilometres in diameter. Mineralization starts at surface within the basin, hosted in favorable volcanic tuff units, hydrothermal breccias, and along faults and structural zones, and is present in basement sediments and metasediments, as well as across the schist-volcanic contacts.

Mineralization at Chinchillas is dominated by silver with lesser values of lead and zinc occurring as disseminated sulphides and matrix infilling within the volcanic tuffs, and as matrix and fracture filling in breccias within the basement meta-sediments. Within the basement lithologies shears and structures are more commonly mineralized. Depth of oxidation is just a few metres within the volcanics and is insignificant within the basement rocks. Silver, lead and zinc bearing minerals include silver sulfosalts, boulangerite, tetrahedrite, freibergite, schalenblende sphalerite (zinc and iron), and argentiferous galena.

The deposit is divided into two main areas: The Silver Mantos in the western part of the basin and the Socavon Del Diablo in the east. Each area has zones of mineralization both within the basin and in the basement host rocks. Mineralization in the Silver Mantos basin is disseminated in multiple flat lying layers, or mantos, composed of strongly clay-altered volcanic tuffs and breccias. Within the Ordivician basement pelites and sandstones schists mineralization is more steeply dipping and hosted in breccias, minor small veinlets, fracture filling and mineralized structures. Mineralization is more silver and lead-rich in this zone.

On the eastern side of the basin, mineralization in the Socavon del Diablo is dominated by manto-style disseminated sulphides within favorable shallow dipping volcanic tuff horizons but also includes crosscutting structures, hydrothermal breccias, and some mineralized structures and breccias within the basement. Generally, mineralization is more zinc-rich in this area.

Figure 1. Schematic Geological Cross Section W-E with Mineralized Zones

Historical drilling on the property includes 2,996 metres in 14 holes (7 RC and 7 diamond holes) by two previous operators within a 1.0 kilometre by 0.4 kilometre area. This drilling tested five main mineralized targets, providing focus for the Company's first drill program on the two main zones.

Between April and June, 2012, the Company completed a Phase I, 27 hole, 3,224 m shallow drill program on the Silver Mantos (12 holes) and Socavon del Diablo (9 holes) areas of the basin, with the remaining 6 holes testing outside targets. The program was successful in confirming and expanding the mineralized zones, and in discovering new mineralization. Both Silver Mantos and Socavon del Diablo remained open in all directions.

Figure 2. Location of Drill HolesA Phase II drill program was concluded in early March 2013, and exceeded the planned 6500 metres of drilling with a total of 7,286 metres completed over 49 holes. The Phase II drilling further expanded the Socavon del Diablo and Silver Mantos mineralized zones in most directions. Exploration holes on the north side of the Chinchillas basin encountered significant mineralization providing new targets up to 200 metres to the north. In addition, a second style of mineralization was identified, characterized by silver, lead and zinc in structures and breccias at the contact with, and within, the Ordivician basement pelites and sandstone schists occurring beneath the volcanic hosts. Results of the Phase II and earlier drilling were incorporated into the first mineral resource estimate, published on SEDAR dated June 20th, 2013. This resource estimate was used as the basis for the first preliminary economic assessment ("PEA") on the project, which was detailed in a technical report filed on SEDAR on January 20th 2015. (Note: all Technical reports prior to the most recent one are no longer considered current.)

Phase III drilling commenced in February 2014 and continued to June 2014. Originally planned and budgeted for 6,000 metres, the program was twice expanded based on good results, for a total of 37 holes or 8,985 metres drilled. The program was designed to increase the existing resources at the Chinchillas deposit through exploration proximal to the deposit and in new areas of the properties. The program was deemed a success, with excellent intercepts of silver, lead and zinc in holes within and around the existing resource that were incorporated into the new mineral resource estimate released August 29th, 2014. The new resource estimate was used to update the PEA, and the updated technical report was filed on SEDAR dated February 13th, 2015. (Note: all Technical reports prior to the most recent one are no longer considered current. For details on the Phase III drill program results please refer to original news releases.)

Between November 2014 and April 2015 the Company conducted a Phase IV drilling program at Chinchillas. The program was planned to include up to 16,000 metres of diamond drilling with goals of: testing the limits of the deposit in all directions, including at depth; in-filling drill hole spacing to facilitate the upgrade of the resource categories to Measured and Indicated, and; drilling for infrastructure and geotechnical studies. Nearly all holes intersected new silver, lead and zinc mineralization, extending the deposit without reaching the limits. Therefore the drill program was stopped with 11,162 metres drilled in order to update the mineral resource estimate and assess the remainder of the program. The updated estimate was announced on July 31st, 2015, with a substantial increase in resources but not an upgrade of a significant portion to higher categories, as was originally planned.

The Company thereafter designed the Phase V 15,000 metre drill program with a primary goal of upgrading resources in the main Silver Mantos area. The program was completed between October 2015 and February 2016, with results being incorporated into the April 12 2016 resource estimate detailed in Table 1 above. Once again, the program was deemed a success, with a substantial portion of the Inferred and Indicated resources upgraded to the Indicated and Measured categories. (For additional details please refer to the press release dated April 12 2016.)

Property Exploration Potential

Figure 3. Chinchillas Project exploration potentialDuring the Phase III program, drilling in areas as much as 1.5 kilometres to the south of the main Chinchillas deposit intercepted significant silver, lead and zinc mineralization in brecciated basement and tuff rock units. Management was very encouraged by these results and defined a target potential for the new Chinchillas South zone. This covered an area of approximately 0.8 square kilometres with an estimated average thickness of 50 to 80 metres. There has been insufficient exploration to define a mineral resource in this area, and it is uncertain that further exploration will result in the target being delineated as a resource. However using conceptual grades and quantities derived from the drill results a target potential of 100 to 160 million tonnes at average grades of 32 to 40 g/t silver equivalent was estimated. (Silver Equivalent grades were calculated using US$20/oz. for silver, US$0.94/lb. for lead and US$0.94/lb. for zinc. For details please refer to original news release dated July 22nd 2014.)

Three additional holes were drilled in Chinchillas South in the Phase V program, with all three returning significant intervals, particularly in zinc. (See news releases March 3rd and March 30th, 2016.)

The Company plans to continue exploration work for new resources throughout the property, with a particular focus on the Chinchillas South area.

Preliminary Metallurgy

Preliminary bench-scale metallurgical testing on samples from the main zones at Chinchillas, including locked cycle testing, has demonstrated amenability to selective flotation and yielded commercial concentrates by conventional methods, with no significant penalty elements in the concentrates.

Option Agreement Terms:

Golden Arrow has acquired a 100% interest in the Chinchilla and Chinchilla I properties by making the cash payments to the vendor totaling $1.866 million. The Company must make an additional payment of $1.2 million to the vendor upon the commencement of commercial production.