La Cigarra Silver Project

PROJECT HIGHLIGHTS

  • Significant land package (over 18,000 hectares) located within a highly prospective mineral belt in the state of Chihuahua; 26 km from the historic silver mining city of Parral;
  • Property has good road access, gentle topography, power and water sources nearby;
  • The mineralized system at La Cigarra has been traced over approximately 6.5 kilometres and outcrops at surface as a silver soil anomaly with numerous historic surface workings along strike;
  • Results from 171 drill holes totaling over 30,935 metres clearly outline a continuously mineralized portion with a strike length of 3.6 kilometers encompassing the La Borracha, San Gregorio and Las Carolinas Zones; click the following link to view the comprehensive results of all the drill holes completed to date: La Cigarra Drill Results;
  • The current resource estimate incorporates data from 156 of 173 drill holes competed within a potentially surface minable mineralized area comprised of the San Gregorio and Las Carolinas mineralized zones, which combined form a total strike length of 2.4 kilometres;
  • The Property's current NI 43-101 mineral estimate hosts 51.5 million ounces of silver in the Measured & Indicated categories grading 86.3 g/t silver and 11.5 million ounces of silver in the Inferred category grading 80.0 g/t silver constrained within resource pit shell utilizing a $22 /oz silver price and reported at a 35 g/t silver cut-off grade, including metallurgical recoveries of 84% silver;
  • Current measured and indicated mineral resources represent a 14% increase in grade from the 2013 Resource Estimate with inferred mineral resource representing a 31% increase in grade from the 2013 Resource Estimate:click the following link to view the Technical Report: NI 43-101 La Cigarra Technical Report;
  • Total ounces of the current mineral resource represents an increase of 17% in total ounces from the 2013 Resource Estimate;
  • Higher than average grade is found in outcrop, which could improve project economics in the early years with significant by-products including gold, lead and zinc;
  • The deposit remains open along the 6km strike and at depth with potential to also expand near surface mineralization along the outer perimeter of the deposit;
  • The purchase of surface rights and a twenty (20) year lease agreement signed with the Ejido Estanzuela allows Kootenay to conduct exploration activities on the Property as well as future construction, mining and processing
  • La Cigarra was acquired by Kootenay Silver from the acquisition of Northair Silver Corp ("Northair"). To date, all technical reports have been prepared for Northair.

OVERVIEW

The La Cigarra silver project is located in the state of Chihuahua along the eastern fringes of the Sierra Madre Occidental in north central Mexico; 26 kilometres from the historic silver mining city of Parral. The project is close to power and has good road access, topography and infrastructure. La Cigarra was identified as an acquisition target by exploration staff in 2008 as part of the Company's generative exploration program. To date reconnaissance, sampling and drilling confirm numerous silver occurrences currently traced over a 6.5 kilometre trend of mineralization. Situated within a robust 3.5 kilometre mineralized trend, the 2.4 kilometre long La Cigarra silver deposit contains a potentially economic open-pittable mineral resource. Utilizing a $22 /oz silver price and reported at a 35 g/t silver cut-off grade, the NI 43-101 Mineral Resource Estimate comprises 51.5 million ounces of silver in the Measured & Indicated categories grading 86.3 g/t silver and 11.5 million ounces of silver in the Inferred category grading 80.0 g/t silver. The La Cigarra silver deposit also contains appreciable gold, lead and zinc values.

LA CIGARRA RESOURCE ESTIMATE

Resource Statement for the La Cigarra silver project located in Chihuahua State, Mexico: GeoVector Management Inc., Effective Date January 14, 2015, Authored by Allan Armitage, PhD, P. Geo. and Joe Campbell, B.Sc., P. Geo., of GeoVector Management Inc.

The resource estimate was calculated based on results from 156 of 173 holes totaling 27,617 metres drilled along the open ended La Cigarra mineralized system which has a defined strike length of at least three (3) kilometres. The 156 holes included in the Property's resource estimate were positioned within a potentially surface minable area comprised of the San Gregorio and Las Carolinas mineralized zones, which combined form a total strike length of 2.4 kilometres. The resource estimate was constrained by a constrained pit shell utilizing a $22 /oz silver price and reported at a 35 g/t silver cut-off grade, and considers metallurgical recoveries of 84% silver. A summary of the mineral resource estimate is listed below:

Resource
Category*
Tonnes In-Situ Grade Contained Metal
Ag (g/t) Au (g/t) Pb (%) Zn (%) Ag (oz) Au (oz) Pb (lbs) Zn (lbs)
Measured 3,620,000 88.9 0.074 0.14 0.19 10,340,000 9,000 10,920,000 15,510,000
Indicated 14,930,000 85.7 0.068 0.13 0.18 41,130,000 33,000 42,950,000 59,260,000
Meas + Ind 18,540,000 86.3 0.069 0.13 0.18 51,470,000 41,000 53,870,000 74,770,000
Inferred 4,450,000 80.0 0.058 0.13 0.16 11,460,000 8,000 12,680,000 15,610,000
Note:* Mineral resources are reported in relation to a conceptual pit shell at a 35 g/t silver cut-off grade and a $22/oz silver price. Mineral resources that are not mineral reserves do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate and numbers may not add up due to rounding.

Below is a 3D image of the La Cigarra silver resource looking southwest:

The La Cigarra mineral resource is sensitive to cut-off grade. To illustrate this, the block model quantities and grade estimates within the conceptual pit are presented in the following table at different cut-off grades utilizing a $22/oz silver price.

Resource
Category*
Cut-off grade Tonnes Ag (g/t) Ag (oz) Au (g/t) Pb (%) Zn (%)
Measured > 50 Ag g/t 2,670,000 105.7 9,060,000 0.082 0.15 0.20
> 40 Ag g/t 3,250,000 94.7 9,900,000 0.077 0.14 0.20
> 35 Ag g/t 3,620,000 88.9 10,340,000 0.074 0.14 0.19
> 30 Ag g/t 3,980,000 83.8 10,720,000 0.072 0.13 0.19
> 20 Ag g/t 5,020,000 71.6 11,550,000 0.067 0.12 0.17
> 10 Ag g/t 6,950,000 55.6 12,430,000 0.062 0.09 0.14
Indicated > 50 Ag g/t 10,700,000 102.9 35,410,000 0.075 0.14 0.20
> 40 Ag g/t 13,390,000 91.2 39,280,000 0.071 0.13 0.19
> 35 Ag g/t 14,930,000 85.7 41,130,000 0.068 0.13 0.18
> 30 Ag g/t 16,490,000 80.7 42,770,000 0.066 0.13 0.17
> 20 Ag g/t 19,820,000 71.3 45,430,000 0.063 0.12 0.16
> 10 Ag g/t 28,240,000 54.1 49,180,000 0.059 0.09 0.13
Inferred > 50 Ag g/t 3,080,000 97.1 9,600,000 0.063 0.15 0.19
> 40 Ag g/t 3,950,000 85.4 10,850,000 0.060 0.14 0.17
> 35 Ag g/t 4,450,000 80.0 11,460,000 0.058 0.13 0.16
> 30 Ag g/t 5,010,000 74.8 12,040,000 0.057 0.13 0.15
> 20 Ag g/t 6,830,000 61.2 13,440,000 0.056 0.13 0.13
> 10 Ag g/t 10,450,000 44.7 15,030,000 0.052 0.10 0.11
Note: * Values is this table are reported in relation to a conceptual pit shell at a $22/oz silver price and for cut-off grades below and above 35 g/t silver should not be misconstrued with a Mineral Resource Statement. The figures are only presented to show the sensitivity of the block model estimates to the selection of cut-off grade. All figures are rounded to reflect the relative accuracy of the estimate and numbers may not add due to rounding.

The development of the comparative tables above has relied on the work of experts. The following factors should also be noted:

The complete La Cigarra drill hole database includes 173 drill holes (15 RC and 158 core) for a total of 30,443 metres and 22,064 assays. This includes 17 drill holes (4,817 m) completed in 2014 in the Las Chinas, Las Venadas, San Gregorio, Las Carolinas and La Borracha zones. Of the 173 drill holes, 156 drill holes (11 RC and 145 core) were used in the preparation of the resource models and resource estimate.

The database used to construct the San Gregorio/Las Carolinas resource models utilized 27,617 metres and 20,022 sample assays. Subsequent to the previous resource estimate, an additional 13 drill holes totalling 3,975 metres were completed. Of this drilling, 7 holes were positioned in the San Gregorio zone and 6 holes in the Las Carolinas zone. The resource estimate was constrained by a Whittle(tm) pit shell and is reported at an economic cut-off grade of 35 g/t of silver.

Grade control models (a high grade and a low grade silver model) of the San Gregorio/Las Carolinas deposit were constructed which involved outlining the limits of mineralization on 50 metre spaced cross sections based on histograms of silver, gold, lead and zinc values. Polygons of mineral intersections were made on each cross section and were wire framed together to create a contiguous resource model in Gemcom GEMS 6.6.0.1 software.

The grade control models were constructed to define silver mineralization, as controlled by interpreted geology and structure. A high grade core silver model was created to capture mineralization generally above a grade of 15 to 20 g/t silver. In addition a low grade envelope, which encompasses the high grade core model was defined to capture mineralization above a grade of 5 to 10 g/t silver. The modeling exercise incorporated predicted controls of the deposits dominant geology and geologic limits. The resource model extends for approximately 2.4 kilometres on a 320° trend with an average dip of 45° to the northeast. Mineralization extends from surface to depths of up to 380 metres.

For the resource estimate a block model with dimensions of 10 x 10 x 10 metres was utilized as were composite samples of 1.5 metres in length. Grades for silver, gold, lead and zinc were interpolated into resource blocks by the Ordinary Kriging ("OK") interpolation method.

Mineral resources were estimated in conformance with the CIM Mineral Resources definitions. The confidence classification of the resource is based on an understanding of geological controls of the mineralization, and the drill hole pierce point spacing in the resource area. Three passes were used to interpolate grade into all of the blocks in the wireframe. Mineral resources were classified as Measured if at least two drill holes were found within a 35 x 35 x 20 metre search radius. Blocks were classified as Indicated if two drill holes were found within a 60x60x30 metre radius and blocks were classified as Inferred if at least one drill hole was found within a 120x120x60 metre search radius. The Principal azimuth of the search ellipse is oriented at 059º, the Principal dip is oriented at -44° and the Intermediate azimuth is oriented at 325°.

Due to the lack of specific gravity data, average specific gravity ("SG") values were used for the resource estimation. Values used include: 2.45 for oxide mineralization, 2.55 for sulphide mineralization and 2.57 for waste. The average SG values are based on limited SG testing (406 samples from within the mineralized zones) of representative mineralized core that intersect the resource model.

The updated Measured, Indicated and Inferred mineral resource estimate was prepared by GeoVector and is disclosed in compliance with NI 43-101 and was estimated in conformity with generally accepted CIM "Estimation of Mineral Resource and Mineral Reserves Best practices" guidelines, including the critical requirement that all mineral resources "have reasonable prospects for economic extraction".

The "reasonable prospects for economic extraction" requirement generally implies that the quantity and grade estimates meet certain economic thresholds and that the mineral resources are reported at an appropriate cut-off grade taking into account extraction scenarios and processing recoveries. In order to meet this requirement, GeoVector considers that major portions of La Cigarra mineralization are amenable for open pit extraction.

In order to determine the quantities of material offering "reasonable prospects for economic extraction" by an open pit, GeoVector used Whittle(tm) pit optimization software and reasonable mining assumptions to evaluate the proportions of the block model (Measured, Indicated and Inferred blocks) that could be "reasonably expected" to be mined from an open pit.

The optimization parameters, found in the table below, were selected based on benchmarking against similar projects. Two phases of scoping level metallurgical testing were conducted in 2011 and 2012. These results are summarized in the table below and are discussed in detail in the 2013 Resource Estimate report.

The reader is cautioned that the results from the pit optimization are used solely for the purpose of testing the "reasonable prospects for economic extraction" by an open pit and do not represent an attempt to estimate mineral reserves. There are no mineral reserves on the La Cigarra Project. The results are used as a guide to assist in the preparation of a mineral resource statement and to select an appropriate resource reporting cut-off grade.

Parameter Value Unit
Silver Price $ 22.00 US$ per ounce
Gold Price $1,250.00 US$ per ounce
Lead Price $ 0.95 US$ per pound
Zinc Price $ 0.95 US$ per pound
Mining Cost $ 2.00 US$ per tonne mined
Processing (Sulphide material) $ 15.00 US$ per tonne of sulphide feed
Processing (Oxide Material) $ 12.00 US$ per tonne of oxide feed
General and Administrative $ 1.00 US$ per tonne of feed
Overall Pit Slope 45 Degrees
Silver Recovery 84 Percent
Lead Recovery 62 Percent
Zinc Recovery 55 Percent
Gold Recovery 17 Percent
Dilution 10 Percent

Sensitivity Analysis for the La Cigarra Mineral Resource Estimate

A +/- 30% price sensitivity analysis was prepared using a downside scenario silver price of $17/oz reflective of today's spot price as well as an upside scenario at $29/oz silver price, with the latter also serving as a comparison to the 2013 Resource Estimate.

The following table summarises a Whittle(tm) pit constrained resource calculated at a $17/oz silver price and reported at a 35 g/t silver cut-off grade:

Resource
Category*
Tonnes In-Situ Grade Contained Metal
Ag (g/t) Au (g/t) Pb (%) Zn (%) Ag (oz) Au (oz) Pb (lbs) Zn (lbs)
Measured 3,050,000 93.7 0.075 0.14 0.19 9,180,000 7,000 9,250,000 12,540,000
Indicated 11,990,000 92.2 0.072 0.13 0.18 35,540,000 28,000 35,160,000 46,750,000
Meas + Ind 15,030,000 92.5 0.072 0.13 0.18 44,720,000 35,000 44,410,000 59,290,000
Inferred 3,680,000 80.2 0.062 0.12 0.14 9,480,000 7,000 9,900,000 11,320,000
Note:* Values is this table are reported in relation to a conceptual pit shell at a 35 g/t silver cut-off grade and $17/oz silver. Figures presented in this table should not be misconstrued with the Company's Mineral Resource Statement set out on the first page hereof and is presented as a conservative/down side case only. Mineral resources that are not mineral reserves do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate and numbers may not add due to rounding.

For the purpose of comparison, a Whittle(tm) pit optimization was also prepared for the current resource utilizing a silver price of $29/oz and a cut-off grade of 35 g/t. The results are as follows:

Resource
Category*
Tonnes In-Situ Grade Contained Metal
Ag (g/t) Au (g/t) Pb (%) Zn (%) Ag (oz) Au (oz) Pb (lbs) Zn (lbs)
Measured 3,940,000 85.8 0.072 0.14 0.19 10,870,000 9,000 11,740,000 16,730,000
Indicated 16,270,000 83.6 0.067 0.13 0.18 43,720,000 35,000 46,200,000 65,060,000
Meas + Ind 20,200,000 84.0 0.068 0.13 0.18 54,590,000 44,000 57,950,000 81,790,000
Inferred 5,950,000 75.7 0.052 0.12 0.16 14,480,000 10,000 16,050,000 21,440,000
Note:* Values in this table are reported in relation to a conceptual pit shell at a 35 g/t silver cut-off and $29/oz silver and are provided as an upside scenario and for comparison purposes to the 2013 Resource Estimate.. Figures presented in this table should not be misconstrued as a current Mineral Resource Statement set out on the first page hereof and is presented as an upside case only as these parameters may not be considered reasonable mining assumptions in the context of the current market. Mineral resources that are not mineral reserves do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate and numbers may not add due to rounding.

The above sensitivity analysis illustrates the robust nature of the deposit particularly at today's spot price of $17/oz demonstrating a 20% increase in the average M&I grade to that reported in the 2013 Resource Estimate with no loss in total ounces. Additionally there is an overall increase of approximately 30% in total contained silver ounces at the upside scenario of $29/oz. The 2015 figures presented in the context of this sensitivity analysis should not and are not intended to be interpreted as a current resource.

RESOURCE EXPANSION POTENTIAL

Kootenay’s Management sees three parts to further drill testing of the project leading to a Resource Estimate and Preliminary Economic Assessment:

  1. testing of the strike extension of the La Cigarra Resource starting in the target areas of La Soledad and Navidad;
  2. testing of separate mineralized trends starting at RAM; and
  3. drilling to test the strike extension of the current Resource with particular focus on grade.

The La Cigarra Resource sits within a structural zone measuring over 6 kilometres in length, which remains largely undrilled. There are also additional mineralized structural zones such as the RAM target that will be drill tested. There are currently 8 priority areas to be followed up with drilling. The first areas to be drilled will test the RAM, Soledad and Navidad zones in a broad spaced first pass program. This will be followed up by additional drilling along those trends and on areas that are strongly mineralized. The Navidad and Soledad targets sit on the continuation of the La Cigarra mineralized structure hosting the Resource Estimate. Concurrent evaluation of the high grade areas of the La Cigarra Resource will be done prior to a drill program that will test the open ended strike extensions as well as the extensions of the high grade trends. Once these programs are complete, the results will form the basis of follow up drilling, with the intent of updating the existing Resource Estimate and moving the project towards a Preliminary Economic Assessment.

METALLURGICAL INFORMATION

Three phases of metallurgical testing between 2011 and 2015 to investigate the recovery of silver from the La Cigarra silver project.

The Phase 3 test program completed in June 2015 was designed to a Preliminary Economic Assessment level and initiated to study the metallurgy of the entire resource comprising both the San Gregorio and Las Carolinas Zones. The test program culminated in significant improvements to the flow sheet and metallurgical performance developed in Phase 2. Positive findings from the Phase 3 test program include the following:

  • A significant increase to 88% overall silver recovery (concentrates and leaching) compared with 82% in the 2012 Phase 2 program; producing a high grade lead-silver concentrate of 34% lead and 23,000g/t silver;
  • An increase in the primary grind size to 80% passing106 microns (up from a grind size of 80% passing 75 microns in 2012);
  • A more streamlined flow sheet with the elimination of the previous pre-flotation circuit for organic carbon removal;
  • The reduction in the number of lead cleaner flotation stages from 3 to 2;
  • The option of adding a zinc recovery circuit to produce a zinc-silver concentrate of up to 58% zinc and 2,500 g/t silver (referred to as Flow Sheet Option 2 - see Northair Silver news release dated June 29, 2015).

Tests on the oxide material were completed on a composite covering 9 drill holes in San Gregorio and 11 drill holes in Las Carolinas. The silver in oxide is more amenable to whole ore leaching than flotation. Approximately 88% of the silver was extracted from material containing 78 g/t silver in 96 hours of whole ore cyanidation at a grind size of 55 microns.

In comparison, the 2012 whole ore leach on the oxide extracted approximately 90% of the silver in 48 hours at 60 micron grind size from a head grade of 59 g/t silver.

GEOLOGY

The La Cigarra mineralized system is hosted within sedimentary rocks and can be traced in outcrop for upwards of 6.5 kilometres on strike. The mineral system strikes northwest and dips moderately northeast and mirrors the strike and dip of the host sediments. Mineralization is spatially associated with narrow diorite to granodiorite sills. Silver and base metals occur in sulfides hosted within quartz-vein stockwork zones and silicified breccias containing disseminated sulphides. The recognition of disseminated style of mineralization strongly enhances the economic potential of the Project.

WORKED PLANNED

Kootenay is currently conducting a 3,000 metre core drill program at La Cigarra with initial focus on the RAM target and the Navidad and Soledad areas along the extension of the La Cigarra mineralized structure.