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NI 43-101 TECHNICAL REPORT ON THE GAVILANES PROJECT

GEOLOGY, MINERALIZATION, AND HISTORICAL

EXPLORATION RESULTS

Gavilanes, Mexico

PREPARED FOR

SANTACRUZ SILVER MINING LTD. Rio Mississippi 421-B

San Pedro Garza Garcia, N.L. Mexico

AND

FORTE RESOURCES INC. 1750-999 West Hastings Street

Vancouver, B.C. V6C 2W2

Effective Date: December 19, 2011

Signature Date: December 20, 2011

PREPARED BY

M. Claiborne Newton, III, Ph.D., C.P.G. Donald E. Hulse, P.E.

Santacruz Resources, Inc. Date and Signature Pages Gavilanes Project NI 43-101 Technical Report

December 20, 2011 i

M. Claiborne Newton, III, Ph.D., C.P.G.

Vice President / Director – Geological Services ECSI, LLC[1]

1715 Pratt Dr., Suite 2600 Blacksburg, Virginia, USA 24060

Telephone: 540-953-4019 Facsimile: 866-322-3641 Email: [email protected]

CERTIFICATE of AUTHOR

I, M. Claiborne Newton, III, do hereby certify that:

1. I am currently employed as Vice President / Director – Geological Services by ECSI, LLC at:

1715 Pratt Dr. Suite 2600 Blacksburg, Virginia, USA 24060

2. I am a graduate of North Carolina State University with a Bachelor of Arts in Geology (1977), a Master of Science degree in Geological Sciences (1983) from Virginia Polytechnic Institute and State University and a Doctor of Philosophy degree in Geosciences (1990) from the University of Arizona. I have practiced my profession continuously since 1977.

3. I am a registered Professional Geologist in the State of Virginia (#2801001736), a Registered Member in good standing of the Society for Mining, Metallurgy and Exploration (#4145342RM) and a Qualified Professional Member in good standing of the Mining and Metallurgical Society of America (#01396QP) with recognized special expertise in geology, mining, and ore reserves. I am also a member of the Society of Economic Geologists.

4. I have worked as a geologist for a total of 34 years since graduation from university - as an employee of three major mining companies and two major engineering and geological consulting firms, as a consulting geologist and as a university instructor.

5. 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.

1 ECSI, LLC is part of a group of companies, including Gustavson Associates that are controlled by Ecology and Environment, Inc.


December 20, 2011 ii

6. I am responsible for Sections 1, 7-12, and 17 thru 20 of the technical report entitled “NI 43-101 TECHNICAL REPORT ON THE GAVILANES PROJECT Geology, Mineralization, and Historical Exploration Results Gavilanes, Mexico”, dated December 19, 2011 (the “Technical Report”), with specific responsibility. I most recently visited the property for one day on August 22, 2011.

7. I have not had prior involvement with the properties that are the subject of the Technical Report.

8. I am independent of Santacruz Silver Mining Ltd. and Forte Resources Inc. applying all of the tests in Section 1.5 of National Instrument 43-101.

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

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

Dated this 20th day of December, 2011 Signature of Qualified Person “M. Claiborne Newton, III” . Print name of Qualified Person


December 20, 2011 iii

DONALD E. HULSE, P.E. Principal Mining Engineer Gustavson Associates, LLC

274 Union Boulevard, Suite 450 Lakewood, Colorado 80228

Telephone: 720-407-4062 Facsimile: 720-407-4067 Email: [email protected]

CERTIFICATE of AUTHOR

I, Donald E. Hulse do hereby certify that:

1. I am currently employed as Vice President and Principal Mining Engineer by Gustavson Associates, LLC at:

274 Union Boulevard Suite 450 Lakewood, Colorado 80228

2. I am a graduate of the Colorado School of Mines with a Bachelor of Science in Mining Engineering (1982), and have practiced my profession continuously since 1983.

3. I am a registered Professional Engineer in the State of Colorado (35269).

4. I have worked as a mining engineer for a total of 29 years since my graduation from university; as an employee of a major mining company, a major engineering company, and as a consulting engineer.

5. 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.

6. I am responsible for Sections 1-6, 13-16 and 20of the technical report entitled NI 43-101 TECHNICAL REPORT ON THE GAVILANES PROJECT Geology, Mineralization, and Historical Exploration Results Gavilanes, Mexico”, dated December 19, 2011 (the “Technical Report”). I most recently visited the property for one day on August 22, 2011, with specific responsibility for the overall organization of the report and general content.

7. I have not had prior involvement with the properties that are the subject of the Technical Report.

8. I am independent of Santacruz Silver Mining, Ltd. and Forte Resources Inc. applying all of the tests in Section 1.5 of National Instrument 43-101.


December 20, 2011 iv

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

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

Dated this 20th day of December, 2011 Signature of Qualified Person “Donald E. Hulse” . Print name of Qualified Person

Santacruz Resources, Inc. Table of Contents Gavilanes Project NI 43-101 Technical Report

December 20, 2011 v

TABLE OF CONTENTS

SECTION TITLE PAGE NO.

1. SUMMARY ........................................................................................................................................................ 1

1.1 INTRODUCTION ................................................................................................................................................ 1 1.2 PROPERTY LOCATION AND HISTORY ................................................................................................................ 1 1.3 OWNERSHIP ...................................................................................................................................................... 1 1.4 GEOLOGY AND MINERALIZATION .................................................................................................................... 2 1.5 CONCEPT AND STATUS OF EXPLORATION ........................................................................................................ 2 1.6 MINERAL RESOURCE AND RESERVE ESTIMATES .............................................................................................. 2 1.7 CONCLUSIONS AND RECOMMENDATIONS ......................................................................................................... 2

2. INTRODUCTION .............................................................................................................................................. 4

2.1 PURPOSE .......................................................................................................................................................... 4 2.2 QUALIFIED PERSONS ........................................................................................................................................ 4 2.3 SITE VISIT OF QUALIFIED PERSON ................................................................................................................... 5 2.4 UNITS OF MEASURE ......................................................................................................................................... 5

3. RELIANCE ON OTHER EXPERTS ............................................................................................................... 6

4. PROPERTY DESCRIPTION AND LOCATION ........................................................................................... 7

4.1 LOCATION ........................................................................................................................................................ 7 4.2 MINERAL TENURE AND AGREEMENTS ............................................................................................................. 8

4.2.1 Mineral Rights ....................................................................................................................................... 8 4.3 ENVIRONMENTAL LIABILITY, PERMITTING, AND BONDING ............................................................................ 10

5. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY .......................................................................................................................................................................... 11

5.1 ACCESSIBILITY ............................................................................................................................................... 11 5.2 TOPOGRAPHY, ELEVATION, VEGETATION, AND CLIMATE .............................................................................. 11 5.3 LOCAL RESOURCES AND INFRASTRUCTURE ................................................................................................... 12

6. HISTORY ......................................................................................................................................................... 13

6.1 EXPLORATION HISTORY ................................................................................................................................. 14 6.2 MEASUREMENTS OF DENSITY AND SPECIFIC GRAVITY .................................................................................. 17 6.3 HISTORICAL RESOURCE AND RESERVE ESTIMATES ....................................................................................... 18

7. GEOLOGICAL SETTING AND MINERALIZATION .............................................................................. 20

7.1 REGIONAL GEOLOGY ..................................................................................................................................... 20 7.2 LOCAL GEOLOGY ........................................................................................................................................... 21 7.3 PROPERTY GEOLOGY ..................................................................................................................................... 21 7.4 MINERALIZATION ........................................................................................................................................... 22

8. DEPOSIT TYPES ............................................................................................................................................ 25

9. EXPLORATION .............................................................................................................................................. 26

9.1 SANTACRUZ EXPLORATION ............................................................................................................................ 26

10. DRILLING ....................................................................................................................................................... 27

10.1 INTERPRETATION OF RESULTS ................................................................................................................... 32

11. SAMPLE PREPARATION, ANALYSIS, AND SECURITY ....................................................................... 33

11.1 ANALYTICAL METHODS AND QUALITY ASSURANCE ................................................................................. 33

12. DATA VERIFICATION ................................................................................................................................. 34

Santacruz Resources, Inc. Table of Contents Gavilanes Project NI 43-101 Technical Report

December 20, 2011 vi

13. MINERAL PROCESSING AND METALLURGICAL TESTING ............................................................ 37

14. MINERAL RESOURCE ESTIMATES ......................................................................................................... 38

15. ADJACENT PROPERTIES ........................................................................................................................... 39

16. OTHER RELEVANT DATA AND INFORMATION .................................................................................. 40

17. INTERPRETATIONS AND CONCLUSIONS ............................................................................................. 41

18. RECOMMENDATIONS ................................................................................................................................. 42

19. REFERENCES ................................................................................................................................................. 43

20. ILLUSTRATIONS ........................................................................................................................................... 44

LIST OF FIGURES FIGURE PAGE

FIGURE 4-1 GAVILANES PROPERTY LOCATION WITHIN DURANGO STATE. MODIFIED FROM CHAVEZ HERNANDEZ

(2008). .................................................................................................................................................................. 7 FIGURE 5-1 VILLAGE OF GAVILANES AND TYPICAL TOPOGRAPHY ............................................................................... 11 FIGURE 5-2 TYPICAL VEGETATION .............................................................................................................................. 12 FIGURE 6-1 GEOCHEMICAL ANOMALIES OF SURFACE SAMPLES. AFTER CHAVEZ HERNANDEZ (2008) ........................ 15 FIGURE 6-2 LOCATION OF HYDROTHERMAL ALTERATION BASED ON THE ASSOCIATED MINERALOGY SUB-

PROPYLITIZATION IS SHOWN BY THE RED DOTTED LINE AND INTERMEDIATE BY THE BLUE. FROM CHAVEZ

HERNANDEZ (2008) ............................................................................................................................................ 16 FIGURE 7-1 MAP SHOWING VEINS, DIKES AND PROPERTY BOUNDARIES. ................................................................... 22 FIGURE 7-2 SAWED HQ-SIZE CORE DISPLAYING A SULFIDE-BEARING QUARTZ VEIN. ............................................... 23 FIGURE 7-3 - SILVER GRADE IN GAVILANES SURFACE SAMPLES ................................................................................. 24 FIGURE 10-1 - HISTORIC SAMPLE LOCATIONS .............................................................................................................. 28 FIGURE 10-2 UNDERGROUND SAMPLE LOCATIONS ...................................................................................................... 31 FIGURE 12-1 FIELD VERIFICATION OF COLLAR LOCATIONS ........................................................................................ 34 FIGURE 12-2 SILICIFIED RHYOLITE DIKE IN FOOTWALL OF MINED GUADALUPE VEIN; SAMPLE SITE SC-1. ............... 35

LIST OF FIGURES FIGURE PAGE

TABLE 1-1 - ONE YEAR RECOMMENDED EXPLORATION BUDGET .................................................................................. 3 TABLE 4-1 SUMMARY OF GAVILANES LOTS .................................................................................................................. 8 TABLE 4-2 TYPICAL PERMITS FOR CONSTRUCTION AND OPERATION .......................................................................... 10 TABLE 6-1 SUMMARY OF GEOCHEMICAL VALUES....................................................................................................... 15 TABLE 6-2 SGS SAMPLE ANALYSIS ............................................................................................................................ 17 TABLE 7-1 - STRIKE LENGTH OF PRINCIPAL GAVILANES VEINS .................................................................................. 23 TABLE 10-1 DRILLHOLE SUMMARY ............................................................................................................................. 27 TABLE 10-2 SUMMARY OF SIGNIFICANT DRILLHOLE INTERCEPTS ............................................................................... 29 TABLE 10-3 UNDERGROUND CHANNEL SAMPLES ........................................................................................................ 30 TABLE 11-1 ANALYTICAL LABS AND TESTING METHODS ........................................................................................... 33 TABLE 11-2 QUALITY CONTROL REFERENCE SAMPLES ............................................................................................... 33 TABLE 12-1 GUSTAVSON SAMPLE ASSAY RESULTS .................................................................................................... 36 TABLE 18-1 - ONE YEAR RECOMMENDED EXPLORATION BUDGET .............................................................................. 42

Santacruz Resources, Inc. Summary Gavilanes Project NI 43-101 Technical Report

December 20, 2011 1

1. SUMMARY

1.1 Introduction

Gustavson Associates, LLC (“Gustavson”) was commissioned by Santacruz Silver Mining (Santacruz) to prepare a Canadian National Instrument 43-101 compliant Independent Technical Report on the mineral resource of the Gavilanes Project (the "Project") in the Municipality of San Dimas, Durango, Mexico. Santacruz has entered into a business combination agreement dated December 19, 2011 with Forte Resources, Inc. (Forte) pursuant to which Forte will acquire all of the issued and outstanding securities of Santacruz in exchange for the issuance of Forte securities on a one for one basis.

Gustavson Associates visited the Project on August 22, 2011, and reviewed data with Santacruz Resources staff August 21-August 24, 2011.

1.2 Property Location and History

The Gavilanes Project is located approximately ~110 km WNW of Durango City in the municipality of San Dimas in Durango State, Mexico (Figure 4-1). Nearby towns include San Miguel de Cruces (~40 km to the NE of Gavilanes) and Tayoltita (~ 23 km to the SW of Gavilanes) (Figure 4-2). The property is situated in the rugged Sierra Madre Occidental mountain range at 24°13'8"N 105°43'57"W.

The Gavilanes area has been worked since the time of the Spanish Colonies in the late 1700s. The property was worked intermittently on a small scale in the 1800’s and 1900’s. In 1984, a 120 ton/day mill was set up to process mine dump ore, but no new mining was performed. In 2007, Hochschild Mining performed exploration work, including a 10-hole drilling program. In 2010, Santacruz Resources acquired the rights to the Gavilanes HMX, Gavilanes MHM Fraccion 2, Victoria 4, San Jose, Maria Luisa, Gavilan, Nuevo Gavilanes, El Gavilan 2, and El Gavilan 2 Fraccion Uno concessions, as well as applying for their own concession (Guadalupe).

1.3 Ownership

Santacruz’s rights to the nine mining concessions have been acquired through its Mexican subsidiary Impulsora Minera Santacruz S.A. de C.V. (IMS). Pursuant to a mining exploration and exploitation and promissory assignment of rights agreement dated April 27, 2010 (as amended) and a mining exploration and exploitation and promissory assignment of rights agreement dated May 1, 2010 (as amended), IMS can acquire a 100% interest in the Victoria 4, San Jose, Maria Luisa, Gavilan, Nuevo Gavilanes, El Gavilan 2, and El Gavilan 2 Fraccion Uno concessions by making the payments set forth in Table 4-3. Pursuant to a purchase agreement dated September 6, 2010 (as amended), IMS has agreed to purchase the Gavilanes HMX and Gavilanes MHM Fraccion 2 from Minera Hochschild Mexico S.A. de C.V. (HMX) for $US100,000. Details of the concessions and payments are contained in Tables 4-1, 4-2 and 4-3.


December 20, 2011 2

1.4 Geology and Mineralization

The Gavilanes Project is located on the west side of the southern part of the Sierra Madre Occidental. The stratigraphy of this part of the Sierra Madre Occidental consists dominantly of Tertiary-Mesozoic volcanic and intrusive rocks with roof pendants of Paleozoic to Mesozoic sedimentary rocks. Two dominant sequences of volcanic rocks are recognized. A lower sequence, designated the Lower Volcanic Group, consists predominantly of Upper Cretaceous to Eocene andesitic tuffs and lavas, up to 2,000 meters thick. These intermediate volcanic rocks are unconformably overlain by a higher sequence, called the Upper Volcanic Group, or Supergroup, which comprises Eocene to Miocene felsic ash-flow tuffs 1,000 meters thick with local felsic dikes and domes. Intrusive rocks, primarily granite-granodiorite-quartz monzonite, and associated felsic dikes intrude the Lower Volcanic Group and basement rocks.

At Gavilanes, epithermal quartz veins carrying silver, gold and polymetallic sulfides are coeval with the Upper Volcanic Group and hosted by the Lower Volcanic Group. The veins are commonly associated with altered rhyolite dikes along N-S, NW-SE or NE-SW striking fault zones.

1.5 Concept and Status of Exploration

Santacruz is preparing an exploration program that will involve geologic mapping, surface and underground geochemical sampling and diamond core drilling.

1.6 Mineral Resource and Reserve Estimates

Mineral resources and reserves have not been estimated yet for the Project.

1.7 Conclusions and Recommendations

The Project has been underexplored and has the potential to host silver-rich polymetallic vein deposits, as shown by historic exploration and sampling efforts. Individual mineralized structures are continuous along strike with multiple structures mapped at greater than 1000m of strike length. All structures are open along strike and at depth with both the thickness and grade to be further developed as resources. At least one of the structures, the GSA, has been intercepted 300m below existing workings. Exploration drilling has not fully tested the depth of the high grade structures though the continuity between the existing workings and the few down dip drill intercepts shows that the tenor of the structures is consistent to that depth.

It is recommended that Santacruz take a thorough exploration approach – starting with geologic and structural mapping and rock and soil sampling. New drill targets, in addition to known mineralized zones, are likely to be generated by this mapping and sampling. Subsequently, an approximately 15-hole core drilling program should be undertaken, targeting surface geochemical anomalies, known mineralized veins and, in particular, projected vein intersections.


December 20, 2011 3

The cost of this proposed exploration program is estimated to be US$ 1,200,000, divided as follows:

Table 1-1 - One Year Recommended Exploration Budget

Mapping and sampling: $150,000

Drilling and sample analysis: $650,000

Updated resource estimate $150,000

Staffing and site costs (1year) $250,000

TOTAL $1,200,000

Santacruz Resources, Inc. Introduction Gavilanes Project NI 43-101 Technical Report

December 20, 2011 4

2. INTRODUCTION

Gustavson Associates, LLC (“Gustavson”) was commissioned by Santacruz Resources, Inc. to prepare a Canadian National Instrument 43-101 compliant Independent Technical Report on the mineral resource of the Gavilanes Project (the "Project") in the Municipality of San Dimas, Durango, Mexico. Santacruz has entered into a business combination agreement dated December 16, 2011 with Forte Resources, Inc. (Forte) pursuant to which Forte will acquire all of the issued and outstanding securities of Santacruz in exchange for the issuance of Forte securities on a one for one basis.

The effective date of this report is December 16, 2011.

2.1 Purpose

This NI 43-101 Technical Report describes the geology of the Project with respect to silver, lead and zinc mineralization and occurrence and details exploration work completed by previous owners of the property and Santacruz. This report also documents the results of a new, independent review of existing geologic data and observations recorded during recent field reconnaissance. This report was prepared in order to comply with obligations to file a Technical Report as set forth in Sections 4.1(1) and 4.2(1)(a) of NI Form 43-101F1. The information, opinions, conclusions, and estimates presented in this report are based on the following:

Information provided by Santacruz;

Assumptions, conditions, and qualifications as set forth in the report; and

Data, reports, and opinions from third-party entities and previous property owners.

Much of the data and some of the geologic interpretations and conclusions presented here were first presented in internal reports prepared by Hochschild Mining PLC. Data and reports used during this study are referenced in Section 19.

2.2 Qualified Persons

The qualified persons responsible for this report are:

Donald E. Hulse, PE, Principal Mining Engineer, Gustavson Associates

M. Claiborne Newton, III, PhD, CPG, Vice President, Geological Services, ECSI, LLC

Mr. Hulse acted as project manager during preparation of the NI 43-10 Technical Report, is specifically responsible for Sections 1 through 6, 13 and 16 through 20, and reviewed the entire document. Mr. Newton conducted a site visit on August 22, 2011, and is responsible for Sections 1, 7 through 12, and 17 through 20.

Santacruz Resources, Inc. Introduction Gavilanes Project NI 43-101 Technical Report

December 20, 2011 5

2.3 Site Visit of Qualified Person

Qualified Persons Clay Newton, Phd, CPG, and Donald E Hulse P.E., visited the site on August 22 2011. Mr. Newton and Mr. Hulse were accompanied in the field by Arturo Prestamo, Santacruz CEO, and Dante Rodriguez Montes, Santacruz Exploration Manager. While on site, Mr. Newton and Mr. Hulse verified drill collar locations, inspected underground workings, examined and channel-sampled open test trenches, sampled and took structural measurements on altered and mineralized outcrops, examined core and correlated laboratory assay sheets, Santacruz digital database entries and altered and mineralized sections in the core, discussed Santacruz’s drill, trench, and soil sampling QA/QC procedures, and reviewed hard copy project documents. Mr. Newton and Mr. Hulse also conducted general field reconnaissance in order to verify previous explanations of the geology of the project site.

2.4 Units of Measure

Units in this report are metric and tonnage figures are dry, metric tons. Precious metal content is reported in grams of metal per metric ton (gpt or g/t Au, gpt or g/t Ag) and reference to base metal content is reported in parts per million (ppm). Monetary considerations are reported in US dollars unless otherwise stated.

Santacruz Resources, Inc. Reliance on Other Experts Gavilanes Project NI 43-101 Technical Report

December 20, 2011 6

3. RELIANCE ON OTHER EXPERTS

The information, conclusions, and recommendations contained in this report are based largely upon review and analysis of digital and hard copy data and information supplied to Gustavson by Santacruz Silver Mining. Information was also obtained during discussions with Santacruz personnel familiar with the property. Several Santacruz Resources and other personnel, listed below, contributed substantially to this report. Each has well over 15 years of experience in their area of expertise.

Mr. Arturo Prestamo

Mr. Dante Rodríguez Montes, Geologist

This is the first NI 43-101 Technical Report completed on the Project.

Santacruz Resources, Inc. Property Description and Location Gavilanes Project NI 43-101 Technical Report

December 20, 2011 7

4. PROPERTY DESCRIPTION AND LOCATION

4.1 Location

The Project is located approximately ~110 km WNW of Durango City in the municipality of San Dimas in Durango State, Mexico (Figure 4-1). Nearby towns include San Miguel de Cruces (~40 km to the NE of Gavilanes) and Tayoltita (~ 23 km to the SW of Gavilanes). The Project is situated in the rugged Sierra Madre Occidental mountain range at 24°13'8"N 105°43'57"W.

Figure 4-1 Gavilanes Property Location within Durango State. Modified from Chavez Hernandez (2008).


December 20, 2011 8

4.2 Mineral Tenure and Agreements

4.2.1 Mineral Rights

The Project incorporates 9 concessions with a total of 7,347.49 hectares. Santacruz’s rights to the nine mining concessions have been acquired through its Mexican subsidiary IMS. Pursuant to a mining exploration and exploitation and promissory assignment of rights agreement dated 27 April 2010 (as amended) with Jorge de la Torre Robles and his wife Raquel Fernandez Zuñiga and a mining exploration and exploitation and promissory assignment of rights agreement dated 1 May 2010 (as amended) with Ricardo Flores Rodriguez, IMS can acquire a 100% interest in the Victoria 4, San Jose, Maria Luisa, Gavilan, Nuevo Gavilanes, El Gavilan 2 and El Gavilan 2 Fraccion Uno concessions by making the cash payments and net smelter royalty payouts described in Table 4-3. Pursuant to a purchase agreement dated September 6, 2010 (as amended) IMS agreed to purchase from HMX the Gavilanes HMX and Gavilanes MHM Fraccion 2 concessions for $US100,000, subject to a 3% net smelter return (NSR) payment. A summary of the concessions is given in Table 4-1 and Figure 4-2.

Table 4-1 Summary of Gavilanes Lots

Name Surface Area Concession Holder Title Expiration

Gavilanes HMX 2,285.86 HMX E25/33460 22 Jan 2059

Gavilanes MHM Fraccion 2 2,774.11 HMX 233289 22 Jan 2059

Victoria 4 81.51 Jorge de la Torre 172309 23 Nov 2033

San Jose 8.99 Jorge de la Torre 178392 6 Aug 2036

Maria Luisa 41.54 Jorge de la Torre 187678 16 Sep 2040

Gavilan 158.00 Ricardo Flores 221108 27 Nov 2053

Nuevo Gavilanes 99.00 Ricardo Flores 221107 27 Nov 2053

El Gavilan 2 1,859.49 Ricardo Flores 231437 27 Feb 2058

El Gavilan 2 Fraccion Uno 38.99 Ricardo Flores 231438 27 Feb 2058

Total 7,347.49


December 20, 2011 9

Figure 4-2 Gavilanes Concession Locations

The contracts to acquire rights to these concessions were executed according to the Table 4-2 and the obligations in Table 4-3.

Table 4-2 Acquisition of Gavilanes Concessions

Name Concession Holder Date Contracted

Gavilanes HMX Gavilanes MHM Fraccion 2

HMX 6 September 2010

Victoria 4 San Jose Maria Luisa

Jorge de la Torre 27 April 2010

Gavilan Nuevo Gavilanes El Gavilan 2 El Gavilan 2 Fraccion Uno

Ricardo Flores 1 May 2010


December 20, 2011 10

Table 4-3 Payment Obligations for Gavilanes Concessions

January 2012 $ 200,000.00 J. de la Torre

April 2012 $ 300,000.00 J. de la Torre

May 2012 $ 200,000.00 Flores Rodriguez

June 2012 $ 100,000.00 HMX

April 2013 $ 2,500,000.00 J. de la Torre

May-13 $ 300,000.00 Flores Rodriguez

November 2013 $ 400,000.00 Flores Rodriguez

May-14 $ 1,150,000.00 Flores Rodriguez

Total Cash Payments $ 5,050,000.00

Royalty to J. de la Torre* 3.0% NSR Up to $2,000,000

Royalty to Flores Rodriguez* 2.0% NSR Up to $1,000,000

Royalty to HMX* 3.0% NSR

* Royalties are applicable to the properties where the metals are produced

Santacruz is currently in negotiations with the Gavilanes Ejido to acquire access to the necessary surface rights to exploit the deposit which is located on ejido property. An ejido is Mexican communal ownership of (usually) agricultural land, which gives the members of the ejido (ejidatarios) surface rights to the land. The relationship with the ejido is cordial and undue difficulties are not expected in reaching an agreement. Two of the ejiditarios served as guides to the property during the sire visit and expressed nothing but positive feedback that the mine, their source of employment for many years, would return to production.

4.3 Environmental Liability, Permitting, and Bonding

Durango is a mining state, and the procedures for permitting and operation are well established. Prior to constructing new facilities and upgrading to a larger operation, Santacruz will be required to acquire the permits listed in Table 4-2. Conditions encountered during investigations associated with these permits may indicate the need for additional permits.

Table 4-4 Typical Permits for Construction and Operation

Permit Agency When Required

Environmental Impact Statement (MIA)

Secretary of Environment and natural Resources (SEMARNAT)

Prior to construction

Risk Analysis (Mining) SEMARNAT Prior to construction

Land Use Change SEMARNAT and Municipality of San Dimas Prior to construction

Archaeological Release Nation Institute of Archaeology and History (INAH)

Prior to construction

Water Use Registry National Commission of Water (CNA) Prior to utilization of water

Construction Permit Municipality of San Dimas Prior to construction

Explosives Purchase and Use Permit (expansion)

National Defense Secretary (SEDENA) Prior to Increased production

Santacruz Resources, Inc. Accessibility Climate Local Resources Infrastructure & Physiography Gavilanes Project NI 43-101 Technical Report


5. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

5.1 Accessibility

The Project is accessed by a dirt road from the town of San Miguel de Cruces. Driving distance from San Miguel de Cruces to Gavilanes is ~40 km over rough dirt road with a travel time of about 2 hours. The village of Gavilanes, directly adjacent to the property, is home to ~150 people. San Miguel de Cruces has a population of ~1816 people. It is accessible from Durango via Coyotes on paved road, a distance of ~210 km and 2.5 hours driving time.

Figure 5-1 Village of Gavilanes and typical topography

5.2 Topography, Elevation, Vegetation, and Climate

The topography of the Barrancas Profundas (deep canyons) sub-province of the Sierra Madre Occidental is steep and highly varying (Figure 5-1). The landscape is geologically young and there are many deep, narrow canyons near the Gavilanes project area. These canyons can be advantageous for geologic mapping as they expose large cross-sections of the local lithology, but make traversing the area difficult. The elevation of the property ranges from 800 to 2400 meters above sea level. The elevations are generally lower to the south where the landscape drops down to the Piaxtla River. Vegetation in the area consists of pine and oak temperate forest at the upper

Santacruz Resources, Inc. Accessibility Climate Local Resources Infrastructure & Physiography Gavilanes Project NI 43-101 Technical Report


elevations, grading into temperate and sub-tropical deciduous trees and tropical shrubs at lower elevations (Figure 5-2). The climate is classified as temperate sub-humid with summer rains. Precipitation occurs mostly as rain during the summer rainy season and totals ~1000 mm per year. Average annual temperature is ~15°C. The climate should not interfere with year-round operations.

Figure 5-2 Typical Vegetation

5.3 Local Resources and Infrastructure

The village of Gavilanes has no services or major infrastructure. There is currently no national grid power available on the property. Electrical lines would have to be installed from San Miguel de Cruces to the property. The road would also have to be improved to allow the passage of large equipment and vehicles. San Miguel de Cruces has basic services, telephone, internet, grocery, hotel, and is a potential source for labor. The city of Durango is the nearest source of skilled workers and specialized services and products. Surface water sufficient for exploration operations is available at the property.

Santacruz Resources, Inc. History Gavilanes Project NI 43-101 Technical Report


6. HISTORY

The Gavilanes area has been worked since the time of the Spanish Colonies in the late 1700s. Early processing was done by tahonas or arrastres: mule or water driven crushing wheels that pulverized the ore. Processing was done at a location known as El Pilar, and the ore was carried out by mule. Production was mostly abandoned during the War of Independence. Later, the property was worked by Mr. Vicente Garcia Granados and Mr. Manuel Gonzalez from Guatemala. They revived the mine and arranged for more water to be brought in to move the arrestres and ore. It seems they built a new road and perhaps a new processing plant. They produced silver ingots which they then shipped on to Guatemala. Historical records of production for the Gavilanes area are sparse and not likely to be accurate, but some reports indicate that the silver ingots produced an income of 300,000 pesos per month. After they left, the mine was sporadically prospected by private miners who continued to work the silver deposits. Organization returned when a German businessman, Mr. Maximiliano Damm, provided financial backing for Ramon and Joaquin Gurrola.

A second major phase of operations was overseen by an English company that minted coins in India. Three mining engineers for the company, Mr. Harris, Mr. McCaughan, and E.M. Bind, oversaw exploration and production at the property. They focused on the Hundido zone of the Descubridora vein and the Aranzazu vein. They implemented many improvements on the property, including driving several shafts and intersections. The Guadalupe Mine reportedly contained a 1.8 m wide portion of the Aranzazu vein that graded 1,750 g/t Ag for about 20,000 tons of ore.

This English company apparently went bankrupt, and an American capital firm, Luismin Mining Co., took over the property from 1920-1930. Luismin (now Goldcorp) made several important developments to the property, including several shafts and down-dip explorations on the Soledad vein, as well as development on the Alto vein in an attempt to connect it to the Guadalupe Mine. However, Luismin was more focused on their properties in Tayoltita and eventually let Gavilanes fall to the wayside.

Exploration efforts were renewed in the 1980s by the Central Zone Durango division of the San Luis, SA de CV industrial group (a successor company of LuisMin). They invested in additional geological investigations and information collection, concluding that the property warranted additional work and exploratory drilling programs. However, they only held a small part of the concessions, which were not sufficient to ensure the project would be profitable.

In 1984, Dr. Jorge de la Torre requested and was granted a loan from the Mining Development Commission to develop a Metallurgic Mining Project for the mines on the Gavilanes property. He installed a 120 ton/day mill that operated on material from the ore dumps of the Guadalupe-Soledad-Aranzazú (GSA) and San Marcial mines and veins. The concessions were obtained as a



transfer of rights from an Italian company. Without continued exploration to produce new ore and with mounting losses, mining operations ceased.

In the fall of 2007, Hochschild Mining entered into exploration agreements with Dr. Jorge de la Torre and Mr. Ricardo Flores, in addition to filing their own concession claims. They performed some exploration work, including a 10-hole drilling program, during their 3 year agreement.

In 2010, Santacruz acquired the rights to the concessions of Dr. Jorge de la Torre, Mr. Ricardo Flores, and Hochschild Mining.

6.1 Exploration History

The Gavilanes District was first operated in the 18th century with the original discovery in the collapse area of the Descubridora Vein. It was operated intermittently over the years by Germans, English and Mexicans with workings on the Descubridora and Guadalupe-Soledad-Aranzazú Veins (GSA).

Formal or modern exploration has been performed since the early 1980’s when LuisMin S.A. de C.V. (now Goldcorp) performed geologic reconnaissance and compiled historic data. Although they concluded that the property was a positive target for development, they were never able to control sufficient mining concessions to insure the profitability of the project.

In 1984, Dr. Jorge de la Torre, acquired a credit line of the Mining Development Commission to develop the Gavilanes Project. He installed a beneficiation plant with the capacity of 120 ton/day, having acquired the mineral rights from an Italian company. Dr. de la Torre, fed the plant with waste dumps from previous operations including (GSA) and San Marcial whose portal is adjacent to the plant. When the silver price moved below $US5.00, the project was forces to cease operations.

During year 2008, Hochschild mining executed an exploration program, including a core drilling program, which is discussed in Section 10. Prior to their drilling program, Hochschild Mining PLC performed a 71 sample geochemical survey, based on the Lepeltier method, which uses logarithmic vs. probability graphs for select background and enriched levels. The samples were taken of gravels weathered from outcrops of veins and alteration zones, and were geo-referenced by use of a GPS (Geographic Positioning System), as well as by compass and chain surveying.

ALS Chemex S.A. de C.V. was the commercial laboratory utilized for chemical analysis, using Induction Coupled Plasma (ICP) with a gold plus 35 element packet. As it is recommended that at least 100 samples be used in this analysis, the confidence of a test with 71 samples is limited, though strong correlations existed between the following elements. Au – As, Au – Mo, Ag – Be, Ag – Cu, Ag – Pb, Ag – S, As – Sb and Pb - S.

A summary of the geochemical values measured is shown in Table 6-1.



Table 6-1 Summary of Geochemical Values

Figure 6-1 maps the anomalies identified by Hochschild Mining.

Figure 6-1 Geochemical Anomalies of Surface Samples. after Chavez Hernandez (2008)

Hochschild also performed spectral reflectance analysis of the clay minerals in surface samples with an Analytical Spectral Device (ASD) combined with ArcView and ArcGIS to map the results. Samples were collected on mineralized structures, country rock, road cuts, and the San Marcial adit, totaling 97 samples.

Au Ag Cu Pb Zn Sb Hg As Sb

BACKGROUND 20 0-0.6 0-3.1 0-33 0-100 0-3 0-30 0-9.2 0-3

THRESHOLD >20 0.6-3 3.1-10 33-300 100-320 3-17.0 30-60 9.2-21 3-17.0

A. BAJA 3-9.5 10-22.0 300-4800 320-670 >17 60-225 21-790 >17

A. MEDIA 9.5-90 22-170 > 4800 670-1300 225-720 >790

A. ALTA >90 >170 >1300 >720



Within the district of Gavilanes, it was interpreted that there is a concurrence of illite and illite-smectite with mineralized structures and with the outcrops of the rhyolitic dikes. Even near the contacts with the andesite, kaolinite, montmorillonite, and traces of calcite are present. The principal structures contain high occurrence of high temperature minerals such as quartz and epidote. In summary, the mineralized structures have associated intermediate argillic alteration with a peripheral zone of subpropylitic alteration. Figure 6-2 shows the chemical/temperature combinations that can result in this mineralization. Temperatures of concurrent minerals range from 300⁰ to 200⁰ C (illite) down to 150⁰ C to reach the illite-smectite association.

Temperatures continue decreasing, passing below 100⁰ C where kaolinite and calcite are formed. Within contact between the country rock and the mineralized structures, the minerals are higher temperature such as epidote, chlorite and quartz.

Figure 6-2 Location of Hydrothermal Alteration Based on the Associated Mineralogy Sub-Propylitization is shown by the red dotted line and intermediate by the blue. From Chavez Hernandez (2008)

123 core samples were collected from the prior drilling. Later 894 spectral readings were taken from the core from the first phase of Hochschild drilling. Samples were analyzed pertaining to the G-S-A-Descubridora structure, the La Tuna and La Cruz veins.



There are occurrences of propylitic alteration on the property associated with chlorite rich mineral assemblages such as chamosite and proclorite, calcite and epidote with varieties of piemontite. These minerals are presented as primary veins and stockworks, and the majority are associated with disseminated sulfides. Deposition temperatures vary between 200º - 250º C.

According to the analysis various species of illite (paragonite, illite and fengite) can be used as indicator vectors for mineralization. The regional background of fengite can be differentiated from hydrothermically altered paragonite. In the zones impacted by the GSA and Descubridora structures paragonite (Na) and illite(K) are proximal to the mineralization and Fe-Mg rich fengita is more distal.

6.2 Measurements of Density and Specific Gravity

20 samples were analyzed by SGS Laboratory in Durango to determine the specific gravity and bulk density of the mineralized rock.

Table 6-2 SGS Sample Analysis

DESCRIPTIONSPECIFIC GRAVITY

BULK DENSITY

HGVMD-3 2.56 2.44

HGVMD-7 2.65 2.54

HGVMD-9 2.8 2.72

HGVMD-10 2.7 2.55

HGVMD-12 2.63 2.49

HGVMD-18 2.73 2.57

HGVMD-20 2.17 2.15

HGVMD-23 2.56 2.09

HGVMD-25 2.68 2.63

HGVMD-29 2.65 2.61

HGVMD-32 2.65 2.55

HGVMD-33 2.56 2.23

HGVMD-35 2.63 2.51

HGVMD-38 2.7 2.51

HGVMD-39 2.5 2.21

HGVMD-43 2.75 2.62

HGVMD-44 2.7 2.58

HGVMD-46 2.73 2.51

HGVMD-48 2.52 2.34

HGVMD-49 2.59 2.32

AVERAGE 2.62 2.46

STANDARD DEVIATION

0.133 0.175



6.3 Historical Resource and Reserve Estimates

The historical resource and reserve estimates described in this section are taken from various historical records. These resource and reserve estimates have not been verified, and are not considered reliable. In historic reporting, the terms “resource” and “reserve” are not necessarily used according to current NI 43-101 definitions.

Gustavson has reviewed the historic estimates, as well as the most recent estimate created by Hochschild. The various estimates present a wide range of values, and although they suggest good potential for the property, the qualified persons consider that these results are not compliant with NI 43-101 or the CIM standards. Gustavson considers that the true value of the resources for the GSA and Descubridora veins is within the range that Hochschild has reported, but that that range is too broad to be used for drawing a conclusion. Gustavson does agree that neither of the resources reported below are closed by drilling, and there is potential for expansion of both resources from the non-compliant values entered below.

The resource and reserve estimates described below are considered preliminary and are disclosed here for historical completeness only. These resources are NOT NI 43-101 compliant and should be considered preliminary only.



Table 6-3 - Gavilanes Historical Resource Estimates

Block Minimum Maximum

Area 30000 100000

thickness 1.38 2.64

Bulk Density 2.46 2.46

Tons 101844

102000 650000

Au (g/t) trace 0.48

Ag (g/t) 142 443.86

Pb (%) not assayed 4.37

Zn (%) not assayed 3.80

Cu (%) not assayed 0.61

Descubridora

Minimum Maximum

Area 20450 20450

thickness 2.52 14.16

Bulk Density 2.46 2.46

Tons 126773.64 712347

127000 710000

Au (g/t) trace 0.2

Ag (g/t) 190 314

Pb (%) 0.21 0.29

Zn (%) 0.19 0.35

Cu (%) trace 0.1

Total

Minimum Maximum

thickness 2.01 14.16

Tons 229000 1360000

Au (g/t) trace 0.57

Ag (g/t) 168 500

Pb (%) 0.21 5.18

Zn (%) 0.19 4.51

Cu (%) trace 0.72

.

Santacruz Resources, Inc. Geological Setting and Mineralization Gavilanes Project NI 43-101 Technical Report


7. GEOLOGICAL SETTING AND MINERALIZATION

7.1 Regional Geology

The Gavilanes project is located on the west side of the southern part of the Sierra Madre Occidental. The Sierra Madre Occidental mountain range is the result of Cretaceous to Miocene magmatism and tectonism related to the subduction of the Farallon plate beneath the North American plate and to subsequent Basin and Range transtension and the opening of the Gulf of Mexico. The stratigraphy of this part of the Sierra Madre Occidental consists dominantly of Tertiary-Mesozoic volcanic and intrusive rocks with roof pendants of Paleozoic to Mesozoic sedimentary rocks. Two dominant sequences of volcanic rocks are recognized. A lower sequence, designated the Lower Volcanic Group, consists predominantly of Upper Cretaceous to Eocene andesitic tuffs and lavas, up to 2,000 meters thick. These intermediate volcanic rocks are unconformably overlain by a higher sequence, called the Upper Volcanic Group, or Supergroup, which comprises Eocene to Miocene felsic ash-flow tuffs 1,000 meters thick with local felsic dikes and domes. Intrusive rocks, primarily granite-granodiorite-quartz monzonite, and associated felsic dikes intrude the Lower Volcanic Group and basement rocks. The Eocene granitic Pixatla Batholith outcrops west of Gavilanes.

The felsic ash-flow tuffs of the Upper Volcanic Group are generally flat-lying or gently dipping, forming a dissected plateau. Locally overlying the felsic ash-flow tuffs are Late Oligocene to Miocene basaltic andesites related to a magmatic arc on the western side of the Sierra Madre Occidental.

The Lower Volcanic Group is thought to represent a long period of continental arc volcanism which slowly migrated eastward in the early Tertiary. Then the magmatic front retreated westward rapidly, probably as subduction of the Farallon plate slowed and the net movement of oceanic plates began to transition to northwest motion, leading to right-lateral transtension in western Mexico. During this period, the Upper Volcanic Group and felsic batholiths were emplaced in one of the greatest upwellings of felsic magma in Earth’s history. At the end of Oligocene time, the magmatic front was back at the western edge of the continent. A new arc developed in Miocene time west of the Sierra Madre Occidental, which eventually split and separated as the Gulf of California opened.

The western side of the Sierra Madre Occidental contains a major epithermal gold-silver-lead-zinc-copper vein province, which formed coevally with the Upper Volcanic Group. There appears to be a regional zonation from silver-dominated deposits (Au:Ag ratios of 1:150) to the west to more gold-rich deposits (Au:Ag ratios of 1:40) to the east. Gavilanes, a silver-rich deposit, lies in the western part of this province. Veins are structurally controlled primarily along NW-SE, N-S and NE-SW faults. Right-lateral transtension with NW-trending right-lateral strike-slip faults and N-S normal faults was probably operative in and adjacent to the Sierra Madre Occidental during mineralization.



7.2 Local Geology

The Gavilanes project is located in the Barrancas (canyon) sub-province of the western Sierra Madre Occidental. The canyons were formed as the uplifted volcanic piles eroded, and the pre-Tertiary basement may even be exposed in the lower reaches of some canyons. The Gavilanes property is stratigraphically at the top of the Lower Volcanic Group, and the Upper Volcanic Group can be seen high in the canyon walls.

7.3 Property Geology

Vein zones at Gavilanes vary from < 1 meter to zones 35 meters thick, and contain primarily quartz with silver, lead, zinc and copper sulfide minerals. The veins occupy faults and fractures, which have three primary trends, NNW-SSE to N-S, NW-SE and NE-SW. NNW-SSE structures measured by the authors at Gavilanes show normal sense of shear, and it is suspected that NW-trending faults are strike-slip faults. Rhyolite dikes are common along the mineralized structures and are commonly altered and mineralized themselves. At Gavilanes, the mineralized veins and dikes are hosted in the andesitic rocks of the Lower Volcanic Group, which may also be altered and mineralized for up to several meters adjacent to the veins. Figure 7-1 shows the major vein systems and their orientations at Gavilanes.



Figure 7-1 Map Showing Veins, Dikes and Property Boundaries.

7.4 Mineralization

The major veins, labeled in Figure 7-1, are the La Cruz, La Tuna, Providencia, El Muerto, Descubridora, San Nicolas, and Guadalupe-Soledad-Aranzazú (GSA) veins. These structures together have nearly 5,000m of strike length with average widths of about 1.5m. Samples from the various veins depicted run up to 4 g/t Au, 1,100+ g/t Ag, 9% lead, 5 % zinc and 6% copper. Mining has opened access to the Soledad and Guadalupe veins, which were sampled by the qualified persons. Drill core was examined on-site and Figure 7-2 shows a section of the Soledad vein zone, ~0.3 m wide, with an interior dark gray zone rich in silver, lead and zinc sulfide minerals.

The Hundido area is a zone of stockwork sulfide mineralization along the southern extension of the GSA vein where the hill falls off to the river below. The Hundido has been mined historically. There is surface exposure, however due to the steepness of the slope it has been



impossible to sample safely. One drill hole B1AT appears to intersect a stockwork near the area of the Hundido with silver grades up to 1000g/t.

Figure 7-2 Sawed HQ-Size Core Displaying a Sulfide-Bearing Quartz Vein.

Mapping from surface outcrops and surface and underground sampling confirm the continuity of the structures. Table 7-1 lists the strike length of the veins as mapped and the outcrop length that has been sampled. Figure 7-3 shows the sample locations and silver grades. Except for the south end of the La Cruz vein, all veins are open along strike to additional mineralization. Areas where vein structures converge are potential sites of high-grade zones. Existing drill intercepts in the GSA vein that show existence of the vein and comparable grades at least 300m below existing workings.

Table 7-1 - Strike Length of Principal Gavilanes Veins

Vein Outcrop Length

Mapped Length

Azimuth

La Cruz 200m 1500m N 5 E

La Tuna 900m 900m N-S

Descubridora 700m 1200m N-S

Guadalupe-Soledad-Aranzazú 700m 1000m N 15 W



Figure 7-3 - Silver Grade in Gavilanes Surface Samples

Santacruz Resources, Inc. Deposit Types Gavilanes Project NI 43-101 Technical Report


8. DEPOSIT TYPES

The veins at Gavilanes, and in the belt in general, are epithermal veins, probably best categorized as intermediate-sulfidation type, temporally and spatially associated with felsic volcanic and intrusive facies coeval with the Upper Volcanic Group.

The epithermal vein type of deposit is the most common type of high-grade gold and silver deposit in the Cordilleran province of western North America, which includes the Sierra Madre Occidental mountain range. The veins in this province are generally Tertiary in age and associated with felsic volcanism, although they are commonly hosted in andesitic country rocks. They are localized by volcanic structures and regional tectonic fault systems and form within 350 meters of the surface. They are considered to be the feeder parts of surface hot spring systems.

Epithermal veins have characteristic suites of alteration and gangue minerals which include quartz, chlorite, alunite, adularia, calcite, fluorite and hematite. They commonly display open-space filling textures and multiple generations of brecciation. Epithermal vein systems are often low tonnage (< 1 million tons) but high-grade (e.g., 17 g/t gold). Famous examples are the Comstock Lode in Nevada, USA and Pachuca in Hidalgo, Mexico.

At Gavilanes, silver, lead and zinc sulfide minerals are common. Pyrite is locally abundant. Hydrothermal fluids and dike-forming magmas were channeled along faults and fractures that were probably part of a regional fault system related to right-lateral transtension. The dominant gangue mineral in the veins is fine-grained chalcedonic and jasperoidal quartz. Brecciation in the veins is common, and may have been hydrothermal and/or tectonic.

The stockworks in the Hundido area may be the result of intersecting structures allowing the development of broader mineralized zones from the same events which created the other veins.

Santacruz Resources, Inc. Exploration Gavilanes Project NI 43-101 Technical Report


9. EXPLORATION

9.1 Santacruz Exploration

Santacruz Resources, Inc is preparing an exploration program that will involve geologic mapping, surface and underground geochemical sampling and diamond core drilling. The main goal will be to increase the confidence and quantity of identified resources.

Santacruz Resources, Inc. Drilling Gavilanes Project NI 43-101 Technical Report


10. DRILLING

In the 1980’s Dr. de la Torre drilled 4 diamond core holes. The core is on site, and has been reviewed. These holes were only assayed in samples determined by logging to be within the veins and no records of QA/QC data are available. Further investigation and reassaying of the core may allow these holes to be used in the future.

In 2008, Hochschild completed a program of 10 diamond core holes, based on the geochemical and structural anomalies described in section 6.1. The objective was to explore the continuity of mineralization of the dikes and associated veins Guadalupe-Soledad-Aranzazú (GSA), Descubridora, La Cruz and La Tuna. To accomplish this, Hochschild built 2km of new access roads, rehabilitated 4km and built 10 drill pads. The program ran from March through June of 2008.

The holes are listed in Table 10-1, and hole locations are shown in Figure 10-1. Significant intercepts in this program are summarized Table 10-2.

Table 10-1 Drillhole Summary

HOLE STRUCTURE COORDINATES Azi. DIP LENGTH (meters)

HGVG-1 GSA-DES 425,510 E 2,678,412 N 90° -60° 280.55

HGVG-2 GSA-DES 425,558 E 2,678,479 N 85° -60° 315.20

HGVG-3 GSA-DES 425,518 E 2,678,810 N 95° -60° 333.05

HGVG-4 GSA-DES 425,518 E 2,678,810 N 97° -55° 399.35

HGVG-5 GSA-DES 425,277 E 2,679,123 N 42° -50° 284.25

HGVG-6 GSA-DES 425,507 E 2,678,408 N 120° -80° 356.60

HGVC-1 LA CRUZ 424,527 E 2,678,278 N 90° -55° 274.20

HGVT-2 LA TUNA 424,635 E 2,678,435 N 90° -50° 237.40

HGVT-3 LA TUNA 424,874 E 2,678,562 N 90° -50° 200.10

GPE-1 GSA-DES 425,620 E 2,678,712 N 78° -54° 97.60

GPE-2 GSA-DES 425,620 E 2,678,712 N 78° -15° 137.00

GPE-3 GSA-DES 425,643 E 2,678,605 N 55° -20° 161.00

B1AT GSA-DES 425,545 E 2,678,328 N 88° -25° 145.50

TOTAL 3,221.80m



Figure 10-1 - Historic Sample Locations



Table 10-2 Summary of Significant Drillhole Intercepts

Hole From To Description Width Au Ag Pb Zn Cu GSA - Descubridora

HGVG-1 119.10 123.30 Descubridora Dike 4.20 tr 190 0.21 0.19 0.03

214.66 215.80 GSA Vein 1.14 0.65 102 8.51 4.96 1.19

HGVG-2 174.54 176.15 GSA Vein 1.61 0.52 171 2.82 4.20 0.39

HGVG-3

196.55 208.76 Descubridora Dike 12.21 0.03 11 0.16 0.16 --

203.44 204.97 Included in Prior

Interval 1.53 0.03 80 0.20 0.30 --

221.72 225.30 GSA Vein 3.58 0.03 3 tr tr --

HGVG-4

169.80 175.90 Descubridora Dike 6.10 0.03 11 tr tr --

295.10 299.59 GSA Vein 4.49 0.03 2 0.15 0.22 --

300.56 301.68 Rhyolitic Dike 1.12 0.08 20 0.94 1.02 --

HGVG-5 210.20 235.60 Low Grade

Dissemination of Iron Sulfides

25.40 0.03 4 tr tr --

HGVG-6

67.50 68.35 Quartz Breccia 0.85 0.20 556 0.71 1.14 0.42

129.60 141.20 Disseminated in

Andesita 11.60 0.03 28 0.24 0.15 tr

149.85 156.65 Descubridora Dike 6.80 0.05 20 0.06 0.03 tr

218.35 220.05 GSA Vein 1.70 0.03 18 0.29 0.13 0.20

GPE-1 89.40 90.00 GSA Vein 0.60 -- 218.00 -- -- --

GPE-2 119.00 121.58 GSA Vein 2.58 -- 781.44 -- -- --

GPE-3 91.5 98.45 GSA Vein 6.95 -- 501.47 -- -- --

B1AT 55.72 72.00 Stockwork 16.28 --

504.16

-- -- --

78.90 91.10 Stockwork 5.10 -- 127.65 -- -- --

La Tuna

HGVT-2 68.10 72.50 Quartz Breccia 4.40 0.05 5 0.13 Tr --

HGVT-3 94.10 97.75 Rhyolitic Dike 3.65 0.03 9 tr tr --

La Cruz

HGVC-1 44.90 51.00 Quartz Breccia 6.10 0.03 2 tr tr --

In 2011, Santacruz Resources has been sampling the underground workings, principally along the GSA vein. They have taken 31 samples which are listed in Table 10-3. The locations of these samples are shown in Figure 10-2.



Table 10-3 Underground Channel Samples

Coordinates Length Ag Pb Zn

North East Elevation mts. g/t % %

2,678,455.00 425,702.00 2124.50 0.30 4.0 0.20 0.18

2,678,452.00 425,702.50 2124.00 0.70 18.0 0.12 0.11

2,678,448.50 425,703.50 2124.50 0.60 60.0 0.57 1.70

2,678,446.00 425,703.00 2124.50 0.80 49.0 0.33 0.71

2,678,443.00 425,704.00 2124.25 1.00 38.0 0.36 0.51

2,678,439.50 425,703.00 2124.50 0.60 37.0 0.78 1.34

2,678,437.00 425,703.75 2124.50 0.60 134.0 0.19 0.43

2,678,434.00 425,704.50 2125.00 1.10 399.0 1.60 0.54

2,678,409.00 425,708.25 2124.00 1.65 352.0 31.00 28.00

2,678,406.75 425,709.50 2125.00 1.55 218.0 28.00 46.00

2,678,403.00 425,711.00 2126.50 1.65 420.0 0.45 0.28

2,678,400.50 425,712.00 2125.50 2.00 365.0 0.89 0.31

2,678,397.50 425,713.00 2125.50 1.65 427.0 0.32 0.68

2,678,394.50 425,713.50 2125.00 1.65 483.0 0.67 0.84

2,678,386.50 425,716.50 2126.50 1.20 217.0 0.60 0.72

2,678,383.00 425,717.50 2125.50 1.60 119.0 0.54 0.51

2,678,379.00 425,718.00 2124.50 2.10 227.0 0.68 0.49

2,678,376.50 425,720.50 2125.00 1.30 434.0 0.54 0.61

2,678,373.50 425,721.50 2126.50 1.40 258.0 0.23 0.31

2,678,370.50 425,722.50 2125.00 0.50 85.0 0.25 0.42

2,678,367.50 425,722.50 2123.50 1.30 66.0 0.18 0.45

2,678,364.00 425,722.50 2124.50 1.50 28.0 0.22 0.39

2,678,361.50 425,723.00 2124.00 0.95 17.0 0.06 13.00

2,678,356.00 425,721.50 2124.00 1.40 37.0 0.08 28.00

2,678,355.75 425,721.50 2123.75 1.25 26.0 0.03 0.18

2,678,353.00 425,721.00 2128.50 0.80 59.0 0.06 0.18

2,678,350.00 425,720.50 2124.00 1.20 64.0 0.15 39.00

2,678,337.00 425,719.50 2124.50 0.90 82.0 0.23 0.38

2,678,334.50 425,719.00 2125.00 1.30 108.0 0.18 0.30

2,678,331.50 425,718.00 2125.00 0.55 473.0 0.89 0.33

2,678,332.50 425,718.50 2125.00 1.00 36.0 0.09 0.27



Figure 10-2 Underground Sample Locations



10.1 Interpretation of Results

The historical results reported above are consistent with grades of gold, silver, copper lead and zinc obtained in independent sampling by the qualified person as reported below in section 12. As is typical in epithermal metal veins, the grade values have wide variability.

Gustavson feels that though the grades and thickness of the structures are consistent with what was observed on site, the data is not well enough known to be considered a good representation of the whole mineral deposit. Although quality checks were performed during the assaying that meet industry standard practice, none of these was available for review by the Gustavson team.

Gustavson judges that the historic data is adequate as a foundation for future work to truly understand the potential of the Gavilanes project. Further exploration work has been proposed that will test the validity of this data.

Santacruz Resources, Inc. Sample Preparation Analysis & Security Gavilanes Project NI 43-101 Technical Report


11. SAMPLE PREPARATION, ANALYSIS, AND SECURITY

As all drilling was done prior to Santacruz’s involvement, Gustavson was unable to review or confirm the procedures. Field control of the drilling consisted of supervision of construction and preparation of drill pads and access roads, survey and marking of hole locations, geologic logging of core, marking and sampling of core with rotary core saw, application of quality control procedure, labeling and storage of core boxes, and drafting of cross sections and geologic interpretation of drill results.

11.1 Analytical Methods and Quality Assurance

The samples were sent to two laboratories.

Table 11-1 Analytical Labs and Testing Methods

Laboratory Location Analyses

ALS Chemex Guadalajara, Jalisco MEXICO

Au+ICP 41 element

MINERALESLAB Mazatlan, Sinaloa MEXICO

Au fire assay w/ AA finish Ag Atomic Absorption Pb Atomic Absorption Zn Atomic Absorption Cu Atomic Absorption

As all laboratory testing was done prior to Santacruz’s involvement, Hochschild describes the QA/QC as the insertion of reference materials, as listed in Table 11-2, at critical points along the sample flow path as well as in each batch of samples sent for analysis. Gustavson believes that the procedures meet industry standards although the comparisons of the results of this procedure were not available for review at this time. Finding the data from this quality control testing will be critical to utilize the existing drilling in a future mineral resource estimate.

Table 11-2 Quality Control Reference Samples

Analytical Blanks

Standard Reference Materials

Coarse Duplicates

Fine Duplicates

Twin Samples

Santacruz Resources, Inc. Data Verification Gavilanes Project NI 43-101 Technical Report


12. DATA VERIFICATION

Gustavson representatives Don Hulse, Clay Newton and Kelsey Zabrusky conducted an on-site visit to the Gavilanes property on August 22, 2011, and reviewed available hard copy and digital records both on- and off-site between August 21 and September 6, 2011. The on-site visit included examination of surface and underground historical workings, outcrops, drill hole collar locations, and drill core with corresponding analytical results. The results of field reconnaissance of bedrock lithologies and orientation measurements with regard to structures exposed in bedrock outcrops is generally conformable in structure, gross geometry, and apparent map units to figures presented by Santacruz Resources. Drill hole collar locations were verified in the field using hand-held GPS equipment (Figure 12-1), and samples were collected at select locations for analysis and comparison with previous test results, with data discussed below.

Figure 12-1 Field Verification of Collar Locations

Digital data files were reviewed on site and results were visually compared with associated core sample intervals. Core samples are well marked and assay results compared favorably with visual inspection of associated sample intervals.

Surface workings along the Guadalupe vein were examined and a sample was taken in the silicified rhyolite dike footwall (see Figure 12-2). Surface and underground workings were



examined on the Soledad vein and channel samples of vein material were taken underground and on surface.

Structural measurements were taken on veins in outcrop. The Guadalupe vein, dike and fault strike NNW and dip 60° to the west (Figure 12-2), and shear-indicators suggest normal slip. A NW trending vein along a structural trend defined by topography strikes WNW and dips 65° to the south. This orientation suggests the structure is likely a right-lateral strike-slip fault. Likewise, the Aranzazú vein, south of the Soledad vein, likely trends NNW based on topography, and it may offset or terminate the Soledad vein. The intersection zone of such WNW and NNW faults would plunge about 60° WSW and such a dilatant zone would be expected to focus hydrothermal fluids and localize high-grade ore shoots.

Figure 12-2 Silicified Rhyolite Dike in Footwall of Mined Guadalupe Vein; Sample Site SC-1.



During the site visit, Gustavson took three independent rock samples on the property and had them analyzed by SGS Minerales–Durango in Durango, Mexico. All samples remained in Gustavson custody until personally handed by the qualified person to SGS personnel. Gold and silver were analyzed by fire assay with either an atomic absorption or gravimetric finish and copper, lead and zinc were processed by 4-acid digestion and inductively coupled plasma analysis. The results are reported in Table 12-1. Sample 951 was a surface grab sample of silicified rhyolite dike in the footwall of the Guadalupe vein, sample 952 was an underground 0.6 meter channel sample across the Soledad vein and sample 953 was a grab sample of an unnamed NW-trending quartz vein where the Guadalupe and Soledad veins converge.

Gustavson’s independent sampling (Table 12-1) verifies anomalous silver and base metals in the Gavilanes system, and substantiates rock and drill sampling results of Santacruz Resources, Inc. and predecessors.

Table 12-1 Gustavson Sample Assay Results

Sample ID Sample

Type Au g/t

Ag g/t

Cu wt%

Pb wt%

Zn wt%

951 Rock <0.01 44 <0.01 0.28 0.22

952 Rock 0.041 399 0.04 0.63 2.23

953 Rock 3.97 516 <0.01 0.24 0.08

The independent sampling by the qualified person has yielded similar grades as the reported historical data, and those data are considered valid for the purposes of this geological report. However, this is not to imply that the locations and reported assay values of historical data have been verified and validated for other purposes such as resource modeling or mine planning.

Santacruz Resources, Inc. Mineral Processing and Metallurgical Testing Gavilanes Project NI 43-101 Technical Report


13. MINERAL PROCESSING AND METALLURGICAL TESTING

Studies for flotation and cyanidation of Gavilanes ores were performed by the internal laboratories of the Mining Development Commission (Comisión de Fomento Minero), of the Mexican government in 1985. There is no documentation on the source of the samples, and it is assumed that many were from mine waste piles or ore stock piles. Gustavson does not consider the results trustworthy for the project.

Santacruz Resources, Inc. Mineral Resource Estimates Gavilanes Project NI 43-101 Technical Report


14. MINERAL RESOURCE ESTIMATES

Mineral Resources were estimated for the Gavilanes property by Ledesma (2003). Gustavson has not had access to his data base, and the estimate does not meet NI 43-101 standards. No NI 43-101 compliant mineral resource estimate has been performed as part of this report on the Gavilanes Property, and Santacruz Resources is treating the property as an exploration target at this time.

Santacruz Resources, Inc. Adjacent Properties Gavilanes Project NI 43-101 Technical Report


15. ADJACENT PROPERTIES

Though the Minera Bacis project operated by J. Gutierrez, the Tayoltita Mine (21 km) and the Cienega Mine operated by Peñoles are considered geologically similar, neither is adjacent to the Gavilanes project.

Santacruz Resources, Inc. Other Relevant Data and Information Gavilanes Project NI 43-101 Technical Report


16. OTHER RELEVANT DATA AND INFORMATION

Gustavson does not consider the minimal data related to the historic production on the project to be relevant to this study.

Santacruz Resources, Inc. Interpretations and Conclusions Gavilanes Project NI 43-101 Technical Report


17. INTERPRETATIONS AND CONCLUSIONS

The Gavilanes property has been underexplored and has the potential to host major silver-rich polymetallic vein deposits. Individual mineralized structures are continuous along strike with multiple structures mapped at greater than 1000m of strike length each. All structures are open along strike and at depth with both the thickness and grade to be further developed as resources. Lower grade intercepts are found within the mineralized zones and additional work will be necessary to define the extent of the resource. It is recognized that areas where two or more structures converge have the potential to contain high grade targets, and such intersections should be primary exploration targets.

No deep exploration has been performed though the continuity between the existing workings and the few down dip drill intercepts shows that the tenor of the structures is consistent for at least that distance.

Gustavson judges that the Gavilanes project is worthy of further exploration work to better outline the potential of the deposit.

Santacruz Resources, Inc. Recommendations Gavilanes Project NI 43-101 Technical Report


18. RECOMMENDATIONS

It is recommended that Santacruz Resources take a thorough exploration approach – starting with geologic and structural mapping and rock and soil sampling. New drill targets, in addition to known mineralized zones, are likely to be generated by this mapping and sampling. Subsequently, an approximately 15-hole core drilling program should be undertaken; targeting surface geochemical anomalies, known mineralized veins and, in particular, projected vein intersections. The cost of this proposed exploration program is estimated to be US$ 1,200,000, divided as follows:

Table 18-1 - One Year Recommended Exploration Budget

Mapping and sampling: $150,000

Drilling and sample analysis: $650,000

Updated resource estimate $150,000

Staffing and site costs (1year) $250,000

TOTAL $1,200,000

Santacruz Resources, Inc. References Gavilanes Project NI 43-101 Technical Report


19. REFERENCES

Chavez Hernandez, A., 2008, Exploration Stage Report, Gavilanes Project, Hochschild summary report (Spanish).

Farias, R., 1989, Compania Minera Pilares y Gavilanes, LuisMin summary report (Spanish).

Ferrari, L., Valencia-Moreno, M., Bryan, S., 2007, Magmatism and tectonics of the Sierra Madre Occidental and its relation with the evolution of the western margin of North America, Geol. Soc. Amer. Spec. Pap. 422, 39 p.

Ledezma, I., 2000, Evaluation of Optimal Zones for Extraction of High Grade Ores to Operate a 30 t/day Mill, Proyecto Minero Gavilanes (Spanish).

Ledezma, I., 2000, Geologic Study of the Gavilanes Mining Project, Proyecto Minero Gavilanes (Spanish).

Ledezma, I., 2003, Geologic Study of the Gavilanes Mining Project, Proyecto Minero Gavilanes (Spanish).

Reyes, F.J., Lopez, A., Nieto, R., 1985, Metallurgical Study of Silver Ore Flotation, Gavilanes Mine, San Dimas, Durango State, Mining Development Commission study (Spanish).

Rogers, T., 1998, Preliminary Geologic Evaluation of the Gavilanes Property, Municipality of San Dimas, Durango, Mexico, CANARC Resource Corporation summary report.

Torre, J. De La, 2010, Gavilanes Project, PowerPoint Presentation.

Ward, P.L., 1991, On plate tectonics and the geologic evolution of southwestern North America, Journal of Geophysical Research, v. 96, p. 12,479-12,496.

Wisser, E., 1966, The Epithermal Precious-Metal Province of Northwest Mexico.

Santacruz Resources, Inc. Illustrations Gavilanes Project NI 43-101 Technical Report


20. ILLUSTRATIONS

All figures, diagrams and illustrations are incorporated throughout the body of the report to facilitate references and readability.

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