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Geological Analysis of the Shahuindo district, Cajabamba Province, Perú

Plunge view of Algamarca anticline from Pampa de Arena; central zone of mineralized Shahuindo corridor seen below left of anticline.

prepared by Dr. Steven Bussey* and Dr. Eric P. Nelson**

*Western Mining Services LLC **Colorado School of Mines AIPG Certified Professional Geologist #CPG-11102

prepared for Stéphane Amireault Sulliden Gold Corporation

9 November 2011

Confidential

Table of Contents Executive Summary ............................................................................................................ 3 1 Introduction ................................................................................................................. 5 2 Methodology ............................................................................................................... 5 3 Observations ............................................................................................................... 7 3.1 Lithology .............................................................................................................. 7 3.1.1 Sedimentary Units......................................................................................... 8 3.1.2 Intrusions....................................................................................................... 9 3.1.3 Intrusive Breccia ......................................................................................... 12 3.1.4 Lithological controls on mineralization ...................................................... 14 3.2 Alteration and mineralization ............................................................................. 16 3.2.1 Pyrite and iron oxide ................................................................................... 16 3.2.2 Euhedral quartz druse ................................................................................. 19 3.2.3 Sericite and white clay (illite) ..................................................................... 20 3.2.4 Alunite......................................................................................................... 22 3.2.5 Jarosite and scorodite .................................................................................. 23 3.3 Structural geology .............................................................................................. 25 3.3.1 Tectonic and geologic setting ..................................................................... 25 3.3.2 Previous structural models .......................................................................... 25 3.3.3 Structure of fold-thrust belts ....................................................................... 25 3.3.4 General Shahuindo structure ....................................................................... 27 3.3.5 Structural domains in the Shahuindo district .............................................. 31 3.3.6 Breccias ....................................................................................................... 37 3.3.7 Breccia genetic interpretation ..................................................................... 38 3.3.8 Faults ........................................................................................................... 41 3.3.9 Igneous dikes .............................................................................................. 47 3.3.10 District structural model ............................................................................. 49 3.4 Reconnaissance studies - NW Anomaly ............................................................ 52 3.5 Reconnaissance studies - Zinc Anomaly ............................................................ 52 4 Synthesis – Structural-Mineralization Model ........................................................... 53 4.1 Structural controls on mineralization ................................................................. 53 4.2 Intrusive centers ................................................................................................. 55 4.3 Metal zoning....................................................................................................... 56 5 Exploration guidelines .............................................................................................. 60 6 Recommendations ..................................................................................................... 61 6.1 Exploration recommendations............................................................................ 61 6.2 Procedural Recommendations ............................................................................ 61 7 References ................................................................................................................. 62 8 Appendix A – Field Site Location Maps .................................................................. 63 9 Appendix B – Structural Database............................................................................ 66 10 Appendix C – Fold axis models ................................................................................ 67

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Executive Summary Sulliden Gold Corporation (Sulliden) retained Western Mining Services (WMS) to evaluate district- and deposit-scale hydrothermal alteration and structural geology in mineral concessions controlled by Sulliden covering the Shahuindo project in Cajabamba Province in northern Perú. The purpose of the study was to improve the geologic model of the Shahuindo deposit and to identify geological features that could assist in the evaluation of exploration opportunities in the region. Dr. Steven Bussey of Western Mining Services and Dr. Eric Nelson of the Colorado School of Mines (a subcontractor for WMS) performed the field geological study of the Shahuindo district from 16 September to 4 October 2011. Systematic field mapping methods were employed along two NE-SW traverses across the main mineralized corridor at Shahuindo. In addition, 1-day field visits were made to specific satellite projects around the main Shahuindo corridor including the North Corridor, the Northwest Anomaly, and the Zinc Anomaly Zone. The Shahuindo district occurs within the Eocene fold-thrust belt of northern Peru that formed during the Incaic II orogeny at ~43 Ma. The district occurs along a localized belt of Miocene (~16 Ma) intrusions that is mostly parallel to the dominant structural grain in the fold-thrust belt. Mineralization appears to have formed in association with dacitic to rhyolitic magmatism and emplacement of related high-energy diatreme breccias. Five non-breccia intrusive phases and three intrusive breccia phases are recognized. Three main intrusive centers are present in the district: 1) along the main Shahuindo mineralized belt, 2) just west of the North Corridor Area, and 3) in the Zinc Anomaly Zone. Each intrusive center is characterized by bodies of diatreme or heterolithic breccia that postdate emplacement of dacite porphyry and andesite. The best mappable evidence of mineralization in oxidized and weathered rocks at surface includes the presence of voids and crystal molds after pyrite and other sulfides (especially when the original pyrite content is estimated to be >10%), and the presence of crystalline white clay or sericite. Field evidence indicates that important controls on mineralization include fold limbs and fold axial surfaces, fold-related fractures, faults and related extension fractures, irregular breccia bodies and breccia dikes, and igneous intrusive contacts. The principal mineralized zone at Shahuindo includes the San José fault and occurs in a NW-trending belt between two large-amplitude regional-scale folds, the Algamarca upright anticline and the Pampa de Arena overturned anticline. These folds form a large anticlinorium or box-fold structure that has an exceptional outcrop belt width between two regional-scale synclines. It is hypothesized that the Algamarca fold formed over the tip of a propagating fault that splayed off of a major detachment, and that this splay was localized over a basin architecture normal fault in the basement. The location of the San José fault, and thus the main Shahuindo corridor, is hypothesized to have been controlled by the NW-striking basement fault that also controlled the orientation of structures in the

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fold-thrust belt. This normal fault was reactivated in the Miocene and controlled intrusion of the dacite porphyry, the adjacent breccia complex, and much of the mineralization along the Shahuindo corridor. Sulfide mineralogy and associated alteration indicates the Algamarca-Shahuindo district is a Cordilleran-type polymetallic epithermal system such as Tantahuatay or Colquijirca. In particular, Shahuindo belongs to a sub-class of this deposit type, first described by Montoya et al. (1995) and referred to as sandstone-hosted gold deposits. Pyritetetrahedrite-tennantite-covellite mineralization is associated with an early alteration assemblage of alunite-pyrophyllite-diaspore and is cut by veinlets of pyrite, sphalerite, galena and stibnite associated with quartz-illite. Gold mineralization in the main corridor at Shahuindo seems to be associated with the late quartz-illite event.

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1

Introduction

Sulliden Gold Corporation (Sulliden) retained Western Mining Services (WMS) to evaluate district- and deposit-scale hydrothermal alteration and structural geology in mineral concessions controlled by Sulliden covering the Shahuindo project in Cajabamba Province in northern Perú. The purpose of the study was to improve the geologic model of the Shahuindo deposit and to identify geological features that could assist in the evaluation of exploration opportunities in the region. Dr. Steven Bussey of Western Mining Services and Dr. Eric Nelson of the Colorado School of Mines (a subcontractor for WMS) performed the field geological study of the Shahuindo district from 16 September to 4 October 2011 (Table 1). Yvan Espinoza and a number of site geologists are acknowledged for their help in understanding the geologic framework of the area and for field guidance. Ore shell models were reviewed with the help of Paul Tietz. 16 September 17 September 18 September 19 September 20 September 21 September 22 September 23 September 24 September 25 September 26 September 27 September 28 September 29 September 30 September 1 October 2 October 3 October 4 October 5 October

Travel Cajamarca-Shahuindo; field reconnaissance with William Chilon Morning review of maps, sections, and ore shell models; afternoon field work in Moyan Alto Field work, West zone – SW margin of main dacite intrusion Field work, West zone Field work, East zone – Quebrada Choloque (NE sector) Field work, East zone – Quebrada Choloque (central sector) Field work, Moyan Field work, Alto Redondo Field work, Cerro Redondo Field work, NE of West zone Field work, Central zone Field work, Pampa de Arena-Corridor Norte transect Data compilation and analysis Field work, North Corridor reconnaissance Field work, NW Anomaly reconnaissance Field work, ZN Anomaly reconnaissance Data analysis, presentation preparation Field trip and presentation of preliminary observations and geological interpretation Travel Shahuindo-Cajamarca; core study Travel Cajamarca-Lima

Table 1. Schedule of activities and field areas studied.

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Methodology

Drs. Bussey and Nelson worked as a synergistic team offering expertise in mineralization-alteration systems and structural geology, respectively. Although each collected individual GPS field site locations where geological observations and structural data were collected, Bussey and Nelson visited all field sites together. Nelson recorded 317 field site locations and Bussey recorded 221 locations. Systematic field mapping methods were employed along two NE-SW traverses across the main mineralized corridor at Shahuindo. In addition, 1-day field visits were made to specific satellite projects around the main Shahuindo corridor including the North Corridor, the Northwest Anomaly, and the Zinc Anomaly (Fig. 1). All geographic data were collected in the datum and map projection used by Sulliden for the project: PSAD 1956, UTM Zone 17

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South. All maps shown in this report were prepared using the same datum and projection. Lithology was mapped only in reconnaissance fashion to field check the geologic map currently available to Sulliden, to develop a model for the location of formational boundaries, and to place detailed alteration and mineralization mapping in the context of lithologic observations. Field and core observations were made and interpreted in the context of existing data (geological and geophysical maps, core logging, and geochemical data) and previous reports (e.g., Alvarez, 2010; Hodder, 2010a, 2010b; Hodder et al., 2010). Nelson collected approximately 477 structural measurements which were stored in Excel spreadsheet format (see Appendix B). Structural data for planes are presented in the report in right-hand-rule (RHR) format, in which azimuthal strike (0-360°) is counterclockwise from dip direction (strike/dip = xxx°/xx°). Structural data for lines such as fault slickenlines and fold axes are presented in the report as plunge/trend (xx°/xxx°). In the structural database, lines are presented in two other formats: 1) rake format (0-90°) measured in the fault plane from the strike line, 2) RHR rake format (0180°) measured in the fault plane from the RHR strike direction. Lower hemisphere equal area projection plots (‘stereonets’) are used to illustrate structural orientation data and to determine mean orientations of data sets.

Figure 1. Map showing named zones within the Shahuindo district.

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Observations

Lithological observations are presented first, as lithology played an important role in controlling alteration, mineralization, and structure. The lithology section is followed by description of alteration and mineralization features, and finally structural geology. 3.1

Lithology

Sulliden geologists have done a good job of outcrop mapping, and have presented a model for an interpretative lithological map. However, no attempt has been made to assign formations to the mapped lithological interpretation in the Goyllarisquizga Group. In order to understand the larger structural setting of the district and for the purpose of making district-scale cross sections, we made a preliminary geological map showing our interpretation of the distribution of formational units within the Shahuindo district (Fig. 2). This formational map model needs to be improved by Sulliden geologists most familiar with the stratigraphic section.

Figure 2. Preliminary geologic map with formational contacts inferred from field mapping and Sulliden’s lithology interpretation map.

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3.1.1

Sedimentary Units

Regional geologic mapping in this part of Perú (Rivera, 1980) indicates that the Shahuindo concession is underlain by sedimentary rocks of the Goyllarisquizga Group (Fig. 3). The upper Chimú Formation, well-exposed in the Algamarca anticline, consists of very thickly bedded sandstone that has been silicified to become quartzite. The overlying Santa Formation consists of mudstone with intercalations of limestone. It is exposed on the flanks of the Algamarca anticline with good exposures along the road above the informal miners (Chilca Zone) just before reaching the pass leading down to Algamarca. The Carhuaz Formation consists of interbedded sandstone, siltstone, and mudstone, with many sandstones displaying cross bedding and amalgamated wedgeshaped sandstone beds. It is the principal host for gold mineralization in the main corridor at Shahuindo. The Farrat Formation consists of cliff-forming siliciclastic strata dominated by sandstone. It lies mostly in the northern part of the property and is the host to gold mineralization in the North Corridor.

Figure 3. Regional stratigraphic column showing position of dominant Shahuindo mineralization and other nearby deposits (from Alvarez, 2010).

Importantly, a number of stratigraphic facing criteria were observed in the Carhuaz and Farrat Formations. These include tangential cross bedding, ripple cross bedding, channels, and load structures (Fig. 4). Sulliden geologists should learn to recognize these sedimentological features and assign stratigraphic facing (upright or overturned) to outcrops during mapping or even reconnaissance, as such information is critical in refining structural models.

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Figure 4. Annotated photographs illustrating sedimentological features useful for determining stratigraphic facing (depositional up). A. Tangential (at base) cross bedding (site EN-317). B. Load casts or channels on base of sandstone bed (site EN-128). C.-D. Channel in overturned fold limb (site EN-214). E. Load casts on vertical bed in Pampa de Arena overturned anticline (site EN-275).

3.1.2

Intrusions

Intrusions recognized by previous mapping in the Shahuindo area include rocks described as andesite, dacite porphyry, and intrusion breccia. The digital geologic map we were provided classifies the intrusive rocks as argillized, non-argillized, carbonate-altered, or undifferentiated porphyry. The map also includes a similar subdivision of igneous breccia, including undifferentiated, argillized, non-argillized, and carbonate-altered. Based on our field mapping we recognize five non-breccia intrusive phases and three 9

distinct intrusive breccia phases. We feel there is an opportunity to improve the geologic understanding of the district by carefully mapping the distribution of these intrusive phases and separating lithology from alteration. The five non-breccia intrusive phases recognized by WMS are diorite porphyry (known as “andesite” in the district), dacite porphyry, fine-grained dacite porphyry, quartz diorite porphyry, and foliated quartz diorite porphyry. The distribution of the five intrusion types (Fig. 5) is based on our field observations and the assumption that areas not visited are accurately mapped by Sulliden geologists. Mapped intrusions that we did not observe in the field are included in the undifferentiated intrusion class. The three intrusive breccia phases are heterolithic breccia with biotite diorite matrix, heterolithic breccia with fine-grained dacite matrix, and heterolithic megabreccia with foliated quartz-biotite dacite matrix.

Figure 5. Map showing the inferred distribution of non-breccia intrusions in the Shahuindo project area.

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Diorite porphyry (“andesite”) was observed in the southeast part of the main Shahuindo corridor and is inferred to be present on the northeast side of the Algamarca anticline and in the northeast part of the North Corridor zone (Fig. 5) based on other mapping and discussion with company geologists. The map pattern of the intrusion indicates emplacement mostly as sills in the Goyllarisquizga Group units. It is characterized by large (8 mm diameter) biotite phenocrysts, a lack of quartz, and has no evidence of hydrothermal alteration where seen in the field, although it is deeply weathered. In addition to biotite, it has a high percentage of large plagioclase and hornblende phenocrysts. Given its coarse grain size it could perhaps more properly be called diorite porphyry (or hornblende-biotite diorite porphyry). An isotopic age determination is reported to have been made (thought to be zircon U-Pb) on this intrusion and yielded an age of ~26 Ma. The dacite porphyry is characterized by 1 cm bipyramidal quartz phenocrysts, with biotite and plagioclase phenocrysts in an aphanititc groundmass. It is the most widespread intrusion in the Shahuindo district and is argillically altered wherever observed. The map distribution indicates that much of the dacite porphyry was emplaced as sills concordant to bedding in the Goyllarisquizga Group (Fig. 5). Nonetheless, the principal intrusion along the main Shahuindo corridor is a composite dike-like body with relatively steep discordant contacts, as is the dacite porphyry intrusion on the SW limb of the Algamarca anticline. Intrusions in the north part of the main Shahuindo corridor (West Zone) are larger and must have partially stoped wall rock or were forcibly emplaced. The large dacite porphyry body in the north part of the main corridor splays to the southeast into a series of dikes that narrow and disappear beneath cover in the Central Zone. They have not been mapped in the East or Moyan Zones. An isotopic age determination is reported to have been made (thought to be zircon U-Pb) on this intrusion and yielded an age of ~16 Ma. Fine-grained dacite porphyry is characterized by 3 mm quartz phenocrysts, often rounded, along with plagioclase and biotite phenocrysts. It looks very similar to the dacite porphyry but has fewer quartz phenocrysts, the size of all phenocrysts in smaller, and it has a slightly higher percentage of groundmass. It was only recognized at one site in the West Zone where it is completely altered to a quartz-illite assemblage. This unit is suspected to be the rock that forms the igneous component of the heterolithic breccia with fine-grained dacite matrix; its distribution is discussed later in the report. Quartz diorite porphyry is characterized by 1 cm bipyramidal quartz phenocrysts along with biotite and plagioclase phenocrysts. It is very similar to the dacite porphyry in terms of grain-size and phenocryst type and content, but this rock is unaltered. It was noted in the North Corridor area where it occurs adjacent and internal to the crescent-shaped body of heterolithic breccia with biotite diorite matrix (Fig. 5). Clasts of altered dacite porphyry in the heterolithic breccia suggest that the quartz diorite porphyry is a younger intrusion. However, the contact between quartz diorite porphyry and dacite porphyry was not observed so the age relationship between the two units is speculative.

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Foliated quartz diorite porphyry is characterized by about 50% phenocrysts of quartz and 5 mm-diameter biotite and plagioclase phenocrysts in a fine-grained groundmass. Where unaltered the rock is magnetic due to disseminated accessory magnetite. It was recognized only in the Zinc Anomaly Zone where it occurs along a prominent northwesttrending ridge. Foliation is defined by alignment of biotite phenocrysts and, to a lesser extent, plagioclase phenocrysts. Where observed in outcrop the foliation has variable orientation, but is often steep and parallel to the margin of the igneous matrix megabreccia which it surrounds suggesting foliation formed due to upward flow of magma. The two small bodies of foliated quartz biotite porphyry shown in the extreme northwest corner of the map were not visited. They are inferred to be foliated quartz diorite porphyry based on the fact that they are part of the same map unit that we mapped as foliated quartz diorite porphyry a few hundred meters to the southeast. However, these two small intrusions occur within areas of strongly anomalous soil geochemistry suggesting they are altered and mineralized, unlike the foliated quartz diorite porphyry body that we observed which is unaltered and distinctly lacks any geochemical anomaly. 3.1.3

Intrusive Breccia

Three intrusive breccia phases are recognized on the property and include heterolithic biotite diorite breccia, heterolithic fine-grained dacite breccia, and heterolithic megabreccia. Heterolithic fine-grained dacite breccia was recognized during mapping in the main Shahuindo corridor. It occurs as narrow dike-like bodies, no more than 3 meters in width, with rounded to subangular clasts up to 10 cm in diameter of sandstone, siltstone, dacite porphyry, and rare shale, in a matrix of fine-grained lithic clasts and clay with 1-3 mm quartz, biotite, and plagioclase crystals. The clay component of the matrix is thought to be argillically altered juvenile igneous material that is most similar to the fine-grained dacite porphyry with which it is often spatially associated. Locations where the breccia was noted in outcrop are shown on figure 6. Most of the locations are in the West Zone with two sites in the Central Zone; this breccia also was noted in core. In drill hole SH10-172 from the Central Zone, heterolithic fine-grained dacite breccia contains fragments of sedimentary rock mineralized with pyrite, sphalerite, quartz, and white clay, indicating that the breccia is younger than at least one stage of mineralization and that additional mineralized rock may be present at depth.

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Figure 6. Map showing the inferred distribution of intrusion breccia in the Shahuindo project area.

Heterolithic biotite diorite breccia is a matrix-supported breccia characterized by clasts of sandstone, siltstone, shale, and dacite porphyry that range in size from mm’s to 30 cm. The matrix is a mixture of sand-sized lithic clasts with biotite and plagioclase crystals. Juvenile igneous material is thought to be represented by small wispy fragments now altered to clay. Quartz crystals are rare and thought to be xenocrysts derived from clasts of dacite porphyry. Where unaltered, the rock is tan to light brown in color and easily weathered. It is recognized in two locations on the property: in the Zinc Anomaly Zone and just south of the North Corridor. In the Zinc Anomaly Zone it forms an irregularshaped body 1 km in diameter. The body just south of the North Corridor Zone forms an angular concentric-shape around the north side of the quartz-biotite porphyry which appears to have intruded the breccia. At this location the breccia appears to surround two or more very large fragments of limestone 100 m wide and 100’s of meters long near its outer margin. Heterolithic biotite diorite breccia is interpreted to be a diatreme breccia formed by explosive eruption of biotite diorite magma. The large limestone blocks in the

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breccia near the North Corridor are thought to be fragments of the overlying Chulec Formation that collapsed into the vent of the diatreme as the eruption ended. Heterolithic megabreccia is the name given to a breccia body in the Zinc Anomaly Zone that contains rock clasts over 10 meters in diameter in a matrix of foliated quartz diorite porphyry (described above). The clasts include fine-grained volcanic rock and various sedimentary rock types. Foliation in the matrix is defined by alignment of biotite crystals and wispy fiamme-like patches. Foliation is mostly steep to vertical, with variable strike that locally changes abruptly suggesting rotated blocks within the breccia. Only a portion of this unit was traversed so the foliation orientation across much of the unit is unknown. The breccia is not altered and is magnetic due to the presence of disseminated primary magnetite.

Figure 7. Photograph of andesite(red pattern) that intruded the core of a fold and is cut by an altered dacite dike(yellow outline) in the North Corridor.

The oldest intrusions in the district, diorite porphyry (“andesite”) and dacite porphyry, were mostly emplaced as concordant bodies parallel to bedding in folded units of the Goyllarisquizga Group. Later intrusive phases, including the fine-grained dacite porphyry, quartz diorite porphyry, foliated quartz diorite porphyry, and all the igneous breccias, were emplaced as discordant bodies in the form of dikes, stocks or plugs. This suggests a change in style of emplacement from an early, more passive style to later more forceful emplacement. Evidence of the difference in emplacement style can be seen in the North Corridor Zone where andesite, emplaced as a sill within the core of the Pampa de Arena anticline, was cut by a later dacite dike (Fig. 7). Such a change in emplacement style may be related to a changing tectonic stress field and/or the composition and rheology of magmas. 3.1.4

Lithological controls on mineralization

The stratigraphic column in the Shahuindo district (in Alvarez, 2010; Fig. 3) shows that the upper Carhuaz Formation is the principal stratigraphic unit that is mineralized.

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However, mineralized rock in the Algamarca, North Corridor, NWAnomaly, and Zn Anomaly areas indicates that other formations have exploration potential, including the Chimú, Farrat, and volcanic or intrusive rocks. This exploration potential is supported by the fact that other epithermal deposits in the region are hosted in numerous other stratigraphic units (Fig. 3). Whereas sedimentologically mature (permeable) sandstone within the Carhuaz Formation is typically silicified (now quartzite), surrounding siltstone and shale are relatively unsilicified. Fibrous, milky quartz veinlets are locally present in the quartzite beds (Fig. 8c, d), and formed as the beds fractured, either during diagenetic burial compaction or during flexural slip folding associated with Eocene crustal shortening. The presence locally of bedding-parallel stylolites that truncate steeply dipping quartz veinlets (Fig. 8a, b) indicates that some silicification occurred during Cretaceous burial diagenesis. Silicification made sandstones preferentially brittle and prone to fracturing, and led to strong lithological and structural control during Miocene mineralization in the Chimú, Carhuaz, and Farrat Formations.

Figure 8. Photographs of bedding-parallel stylolites and en echelon, fibrous, milky quartz veins. A. Graphitefilled stylolite, Chimú quartzite (Algamarca townsite mine dump); graphite may have originated as hydrocarbon. B. Stylolites (site EN-129). C. En echelon quartz veinlet array; bedding horizontal (site EN179). D. Close-up of stylolite truncating quartz veinlets in (C).

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3.2

Alteration and mineralization

Mappable evidence of mineralization in oxidized and weathered rocks at surface includes the presence of voids and crystal molds after pyrite and other sulfides, the presence of iron oxide in boxwork textures after sulfides or as limonitic or gossanous coatings, the presence of fine-grained euhedral quartz druse as veinlets and vugs in brecciated zones, the presence of crystalline white clay or sericite, and the presence of alunite, jarosite, or scorodite in veins and veinlets (Fig. 9). 3.2.1

Pyrite and iron oxide

Pyrite veinlets, especially those in sedimentary rock preserved by silicification, are readily apparent in outcrops and roadcuts on the property. When pyrite crystals are wellformed, it is possible to make a reasonably accurate estimate of the amount of pyrite present in the rock before weathering and oxidation. Such an estimate was made at nearly each of the field sites and results are shown in Fig. 10a. The quantity of iron oxide in the form of gossan, limonitic coatings along fractures and in veins, or disseminated in a rock, also can give information about the quantity of pyrite originally present in a rock. A relative quantification was made at nearly every field site and results are shown in Fig 10b. However, because iron is soluble in acidic water and can be transported and deposited as iron oxide away from the site of the original sulfide, care needs to be taken when interpreting iron oxide abundance data. Estimates of original pyrite content are much higher in the East Zone than in the West Zone (Fig. 10a), despite the fact that there is no significant difference in gold content between the two zones. Estimates of iron oxide content in the West and East Zones are similar although iron oxide is more widely distributed in the East Zone. Evidence for the presence of very fine-grained pyrite, especially when disseminated in sandstone, is very difficult to recognize in outcrop. One explanation for the difference in estimates of original pyrite in the two zones could be a systematic increase in the grain size of pyrite from west to east. This could be due to rapid deposition of pyrite resulting in finer grain size in the west and slower crystallization of coarser pyrite in the east. This would imply that hydrothermal fluids were hotter in the west and cooler in the east and that there may have been a component of hydrothermal fluid flow from northwest to southeast across the district. Alternatively, it could be there is more siltstone and shale host rock in the east than in the west, and mineralization in siltstone/shale results in coarser pyrite crystals. Estimates of pyrite content appear to show good correlation to the mineralized corridor at Shahuindo, especially when combined with estimates of iron oxide content. Changes in the grain size of pyrite may also provide information about zoning within the hydrothermal system.

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Figure 9. Photographs of voids and molds of pyrite crystals now oxidized and weathered away and corresponding pyrite textures from unoxidized core. A. Sandstone with pyrite shapes preserved in vugs along discontinuous veinlets, and in fine-grained disseminations (outcrop in East Zone). B. Discontinuous pyrite veinlets and disseminated pyrite from drill hole SH10-111, 138 m in the Central Zone. C. Pyrite crystal molds along bedding in silicified siltstone from outcrop in Moyan Alto Zone. D. Coarse-grained pyrite crystals along bedding in siltstone from drill hole SH10-111, 159 m in the Central Zone.

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Figure 10. A. Map of main corridor showing mineralized zones from Surpac Au-grade model projected to surface (yellow: 0.7-2.5 g/t, orange: 2.5-6 g/t, red: >6 g/t) and point estimates of original pyrite content in outcrop. B. Map of main corridor showing mineralized zones from resource model and qualitative estimates of iron oxide abundance in outcrop.

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3.2.2

Euhedral quartz druse

Mineralization in the main corridor of the Shahuindo property is characterized by quartz veinlets 1 – 5 mm in width that often have very fine-grained comb quartz layers (Fig. 11). Quartz veinlets locally grade into narrow breccia zones which can have euhedral quartz druse lining cavities. Euhedral quartz is normally associated with intermediate- or lowsulfidation epithermal vein systems rather than high-sulfidation systems. Quartz veinlets cross-cut pure pyrite veinlets indicting they formed during a later stage of mineralization.

Figure 11. Photographs of euhedral quartz veinlets and druse from Shahuindo property. A. Sandstone with fine-grained euhedral quartz as crustifom bands in veinlets and as druse in breccia matrix; late jarosite is also present (East Zone). B. Euhedral quartz with hematitic iron oxide stain on clast of sandstone in breccia (West Zone). C. Quartz-pyrite veinlets, disseminated pyrite, and euhedral quartz in vugs in unoxidized sandstone (drill hole SH11-220, 245 m in West Zone).

The presence or absence of euhedral quartz druse in either veinlets or open-space in breccia was recorded at each field site and the distribution map is shown in Fig. 12. In general, the occurrence of euhedral quartz druse correlates with gold mineralization. However, euhedral quartz extends beyond the main mineralized Shahuindo belt north of West Zone, and both north and south of the belt in the East Zone. Euhedral quartz veinlets also are present in the Northwest Anomaly Zone and in samples from the Algamarca area. Based on study of thin-sections, Hodder (2010a) described both dissolution of quartz grains and deposition of cryptocrystalline to fine-grained quartz around primary quartz grains in mineralized clastic rocks. Early dissolution of quartz grains by acidic hydrothermal fluids is possible, resulting in a rock that could technically be called vuggy quartz. In outcrop, the dissolution and reprecipitation textures have resulted in giving clastic rocks a quartzite-like texture. However, these textures are not restricted to the mineralized zones and may reflect diagenetic or structurally-induced processes related to compressional deformation in the Eocene. Completely silicified siltstone or shale was rarely observed in the field, and jasperoid silica replacement of limestone was not noted. Silicification in the form of quartzite-like texture is only observed in sandstone and this is thought to be a function of the original porosity and permeability of this lithology.

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Figure 12. Map of the main Shahuindo corridor showing contours of ore grade from Surpac Au-grade model projected to surface (yellow: 0.7-2.5 g/t, orange: 2.5-6 g/t, red: >6 g/t) and sites where euhedral quartz is present in outcrop.

3.2.3

Sericite and white clay (illite)

White clay was noted in some quartz veinlets, in altered sandstones, in the matrix of some breccias, and in narrow clay veinlets (Fig. 13). It can be very difficult to identify specific clay minerals using only a hand lens. In general, veinlets of pure white clay typically consist of pyrophyllite, as seen in outcrop at North Corridor Zone. Hodder (2010a) reported the presence of pyrophyllite in thin sections from samples of Central, East and Moyan Alto Zones. Significant occurrences of white clay should be sampled for TerraSpec analysis (as was done at North Corridor) to confirm field identification. White clay associated with euhedral quartz druse is probably illite and this is the only white clay confidently identified in outcrop during this study. This is supported by several occurrences of sericite (coarse-grained illite) associated with fine-grained euhedral quartz veinlets. This assemblage is typically deposited under pH neutral to weakly acidic conditions. Microprobe and thin section studies by Hodder (2010a) confirm that illite and fine-grained muscovite (sericite) is the dominant white clay mineral in samples from the main corridor at Shahuindo. He also documented a systematic change in the composition of illite from early formed phengite to end-member muscovite.

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Figure 13. Photographs of illite in outcrop and core. A. Illite in sandstone from East Zone; arrow points to light grey band where crystalline illite can be seen with hand lens. B. Arrow points to sericite (coarse-grained illite) in quartz veinlet from outcrop just above town of Algamarca. C. Pyrite-quartz altered sandstone with illite in breccia voids (SH11-220, 195 m). D. Illite-altered dacite porphyry from West Zone; arrows point to illite-altered plagioclase phenocrysts (there are many) with concentric fractures due to volume decrease as a result of alteration of original smectite to crystalline illite.

Illite is also inferred to have formed in the dacite porphyry adjacent to mineralized sedimentary rocks of the Goyllarisquizga Group (Fig. 13d). Evidence for this is the variation in hardness of dacite porphyry in contact with mineralized and brecciated sedimentary rock. Within 2 to 10 meters of the contact the porphyry is slightly harder than argillically altered porphyry more distant from the contact. In addition, within this 2 to 10 meter zone, plagioclase phenocrysts altered to illite often display fine concentric fractures due to volume loss associated with the change from original clay mineral to crystalline illite. Illite was confidently identified at only six sites (Fig. 14) where actual books or plates of white clay could be seen with a hand lens. However, a zone of illite alteration is inferred to extend along the main Shahuindo mineralized corridor (Fig. 14). Relatively coarse-grained sericite, similar to that shown in Fig. 13b, was seen in core hole SH10-172 at a depth of 212.8 meters, and it is likely that sericite is present throughout the main Shahuindo corridor. Cross-cutting relationships indicate illite/sericite was deposited late in the sequence of events at Shahuindo.

21

Figure 14. Map of the main Shahuindo corridor showing ore grade contours from Surpac Au-grade model projected to surface (yellow: 0.7-2.5 g/t, orange: 2.5-6 g/t, red: >6 g/t), sites where illite clay was noted in outcrop, and the inferred extent of illite alteration.

3.2.4

Alunite

In outcrop, alunite occurs as porcelaneous veins and veinlets in both dacite porphyry and sedimentary rock (Fig. 15). It never occurs with quartz and is hosted in illite-altered rock. It was recognized in road cut exposures at two sites in the Central Zone and one site in Moyan where it occurs in altered dacite porphyry and siltstone/shale

Figure 15. Photographs of alunite in outcrop and core. A. Alunite veins (arrows) in altered dacite porphyry exposed in road cut (Central Zone). B. Alunite veins in siltstone exposed in road cut (Central Zone). C. Cut core showing alunite vein (arrow) in siltstone clast in breccia (SH10-172, 211.6 m).

22

Figure 16. Map of the main Shahuindo corridor showing mineralized zones from Surpac Au-grade model projected to surface (yellow: 0.7-2.5 g/t, orange: 2.5-6 g/t, red: >6 g/t) and sites where alunite was noted in outcrop; alunite sites are surrounded with black dashed line.

lithologies (Fig. 16). These lithologies tend to be soft and easily weathered which may explain the low number of observations. These same lithologies also are the most aluminous in composition and may have provided much of the aluminum needed to form alunite. A fragment of alunite-veined siltstone within heterolithic fine-grained dacite breccia can be seen in core (Central Zone SH10-172 at 211.6 meters) and indicates that alunite veins formed prior to development of the breccia. Hodder (2010a) notes that alunite, along with minor pyrophyllite and diaspore is most common in the East Zone and the sub-zones of Pampa de Arena and Moyan Alto. Although no alunite was observed in outcrop in the West Zone, an alunite vein in dacite porphyry was noted in SH11-220 (West Zone) at 249 meters. Alunite occurrences in drill hole should be compiled to determine if alunite is actually more common in the southeastern part of the main Shahuindo corridor. 3.2.5

Jarosite and scorodite

Jarosite forms in acidic environments usually due to oxidation of pyrite-rich rocks in the near surface environment. At Shahuindo jarosite occurs in veins and as breccia matrix (Fig. 17). Because jarosite is precipitated from iron-rich acidic surface water, it often forms some distance away from the weathering pyrite-rich rock from which it is derived. Nonetheless, its presence in outcrop is a good indicator that pyrite-rich rocks are or were nearby. Sites where jarosite was noted are shown in Fig. 18 and it is no surprise that there is a good correlation with known mineralization.

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Figure 17. Photographs of jarosite in outcrop. A. Brown jarosite veins in sandstone (East Zone). B. Jarosite and grey-green scorodite (arrows) in breccia matrix exposed in road cut (Moyan Zone).

Scorodite (iron-arsenic oxide) often forms with jarosite during weathering of rocks that contained arsenic-bearing sulfides in addition to significant pyrite, and is an important mineral to map in the field. Scorodite was noted at two sites in East Zone (Fig. 18). Its presence is an indication that arsenic-bearing sulfides were oxidized along with pyrite.

Figure 18. Map of the main Shahuindo corridor showing mineralized zones from the resource model and sites where jarosite and scorodite were noted in outcrop.

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3.3 3.3.1

Structural geology Tectonic and geologic setting

The Shahuindo district occurs within the Eocene fold-thrust belt of northern Peru (Noble et al., 1990). Although most structural elements of the fold-thrust belt formed during the Incaic II orogeny at ~43 Ma, geochronological data and field relationships suggest that mineralization occurred in the Miocene beginning at ~16 Ma. The Shahuindo district occurs along a localized belt of intrusive rocks that is mostly parallel to the dominant structural grain in the fold-thrust belt. Pre-mineralization magmatism at ~26 Ma produced quartz diorite porphyry intrusions (mapped as andesite), and mineralization appears to have formed in association with dacitic to rhyolitic magmatism and associated brecciation, probably related to high-energy diatreme activity. Further geochronology is needed to test this model (see Recommendations). Although fold-thrust belt structures developed ~27 m.y. prior to mineralization, foldthrust belt structural elements controlled much of the mineralization. NW-trending Miocene dikes, diatremes, and mineralized breccias parallel regional strike (fold-thrust structure) and probably were emplaced along reactivated fold-thrust belt structural elements and/or basement structures. Field evidence indicates that both structure and lithology exert important controls on the location, shape, and orientation of mineralized rock. Important structural elements include fold limbs and fold axial surfaces, fold-related fractures, faults and related extension fractures, breccia dikes and irregular bodies, and igneous intrusive contacts. These structural elements are described below, and their geometry and spatial relation to mineralized zones are used to construct a new structural model for the Shahuindo district. 3.3.2

Previous structural models

Alvarez (2010) reviewed the geological setting of Shahuindo, but did not present a structural model for the district. Hodder (2010b, Hodder et al., 2010) presented a detailed thrust-duplex structural model, and although our detailed observations support some aspects of his model, many aspects of the model are fundamentally flawed. Based on our observations and data analysis, we propose an alternative model that significantly improves on Hodder’s original structural model. 3.3.3

Structure of fold-thrust belts

Three principal styles of fault-related folds may form in fold-thrust belts (Fig. 19; see caption for explanation of geometric features): 1. fault-bend folds 2. fault-propagation folds 3. detachment folds.

25

Figure 19. Cross section models of the three principal fault-related folds that may form in fold-thrust belts. A. Fault-bend fold model; note that fault displacement is equal at every point on the fault, and the fault transects the entire section. B. Fault-propagation fold; note that this is the only fault model with an overturned forelimb and a back-limb dip controlled by the fault ramp dip. C. Detachment fold; note that, in the core of the fold, the two anticlinal axial surface traces (dashed) in the box fold join to form a single, tight fold (Chimú Formation in Algamarca anticline).

Although all three fold styles are represented in the Shahuindo district, detachment folds constitute the dominant fold style in the Algamarca anticline and main Shahuindo mineralized belt. In addition, a long-wavelength (>1.5km), overturned anticline 1, mapped between Pampa de Arena and the Leona breccia “vein” ridge, is interpreted to be a huge fault-propagation fold (Fig. 20). Thrust faults in fold-thrust belts within well stratified rocks typically occur in two forms: 1) flats which are low-dip faults sub-parallel to bedding and localized in weak horizons (evaporate, mudstone), and 2) ramps, or steeper-dip (typically ~30°) faults that cut up section (Fig. 19). Thrust faults occur together with associated folds and second-order faults in thrust systems, which include a complex array of imbricate fan and thrust duplex geometries (Fig. 21). Hodder (2010) proposed a thrust-duplex structural model for the Shahuindo mineralized belt in which sub-horizontal floor and roof thrust faults bound a series of NE-vergent thrust fault-bounded blocks (horses)(Fig. 22c). A number of features of the model do not appear to apply to the Shahuindo district.

1

The fold is here named the “Pampa de Arena anticline”.

26

Figure 20. Pampa de Arena overturned fold. A. Schematic cross section model of fault-propagation fold. B. Photograph showing N-vergent thrust fault with ~1 m thick damage zone and drag fold (site EN-273, Quebrada Choloque). C and D. Annotated photographs of Pampa de Arena overturned anticline looking NW and SE, respectively.

3.3.4

General Shahuindo structure

The principal mineralized zone of Shahuindo district occurs in a belt between two largeamplitude regional-scale folds, the Algamarca anticline and the Pampa de Arena anticline. The Algamarca anticline has amplitude of at least 400m and is an upright, symmetrical, detachment fold similar to classic folds described in the Jura Mountains of Europe (Fig. 23). The Pampa de Arena fold has an amplitude of at least 300m and is an asymmetric, overturned, NE-vergent fold with low-angle dip (15°-20°) axial surface (it is nearly recumbent 2). Because of this, the mapped trace of the axial surface has a sinuous shape (Fig. 24).

2

horizontal axial surface

27

Hodder et al. (2010) interpreted the Chimúcored Algamarca anticline either as an allochthonous fault-bend fold in the hanging wall of the duplex roof thrust (Fig. 22a), or as an anticlinal stack of folded strata and folded thrust faults all above the proposed roof thrust (Fig. 21). He placed the subhorizontal roof thrust at approximately 3200 m elevation just below the base of the Algamarca anticline cliff (Fig. 22c). However, analysis of old mine workings in the Algamarca mine suggest that the southern limb of the Algamarca anticline continues to at least the 2690 level (Fig. 25). Figure 21. Early thrust system classification of The fundamental fold style in Hodder’s model is the fault-bend fold, which is formed Boyer and Elliott (1982). Hodder (2010) also showed this classification and proposed that the by bending of strata as the thrust hangingShahuindo district structure was a combination wall moves over a thrust ramp. However, of a hinterland-dipping duplex (for main geometric features of the Algamarca Shahuindo mineralized belt) and an antiformal stack (for the Algamarca anticline). anticline (symmetrical, upright, box shape) indicate that it is probably a detachment fold, not a fault-bend fold. In addition, the structural geometry proposed by Hodder et al. (2010) requires duplication of section (Fig. 22), which is not seen in the Shahuindo belt. The strain in fold-thrusts belts is typically partitioned or compartmentalized along strike by transverse accommodation faults (also known as tear faults). The existence of tear faults in Shahiundo district was noted by Hodder (2010b) and Hodder et al. (2010); such faults include the Choloque, La Cruz, and Los Alisos faults. Although these faults likely exist (the evidence is mostly from topographic lineament mapping), they display a combination of kinematics and strong displacement gradients (see discussion below). Although not well-exposed at surface, they are thought to have a steep dip. The La Cruz Fault, although it terminates the Algamarca anticline where it accommodated much vertical displacement, cannot be traced north of the main Shahuindo corridor and it terminates before reaching the Pampa de Arena anticline. The Los Alisos Fault, inferred to be present based on a topographic lineament and alignment of intrusive bodies, shows no displacement of units and does not correlate with transverse veins in the Algamarca district. However, the Los Alisos Fault appears to terminate the main Shahuindo mineralized corridor to the northwest.

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Figure 22. Cross sections illustrating thrust duplex geometries. A. Geometric features required in fault-bend fold and thrust duplex model of Hodder et al. (2010). Note the incorrect inclined axial surface of Algamarca anticline and lack of cutoff of both limbs. Also, note structural duplication of section that is not seen in the Shahuindo district. B. Schematic development of thrust duplex in 3 time steps. C. Hodder et al. (2010) cross section models of thrust duplex.

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Figure 23. Top: Classic cross section of Jura Mountains (Switzerland) showing box-fold geometry developed by detachment folding above a ductile weak evaporate sequence. Brown axial surface traces show that two axial traces of box fold join to form one fold at depth. Bottom: Photograph looking NW of box-fold geometry of Algamarca anticline NW of Zn anomaly area.

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Figure 24. Hillshade map of topography in Shahuindo district showing structural domains. Surpac Au-grade model projected to surface (yellow: 0.7-2.5 g/t, orange: 2.5-6 g/t, red: >6 g/t).

Figure 25. Algamarca mine analysis. A. Stereonet showing transverse, NE-strike veins (black great circles) and fold-limb parallel veins (dashed gray great circles) compared to orientation of anticline. B. Map showing underground workings. C. Map showing structure contours on “veins” derived from underground workings.

3.3.5

Structural domains in the Shahuindo district

Four structural domains were defined in the Shahuindo district based on field mapping and district-scale structural features (Fig. 24). From SW to NE, the domains are: 1. Algamarca anticline 2. Shahuindo folds 3. NE dip domain 4. Overturned fold limb

31

Algamarca anticline domain

This domain is characterized by the huge Chimú-cored anticline, which has historic mine workings on a number of strike-parallel and transverse veins. The Algamarca anticline has an amplitude of at least 400m and is an upright (generally vertical axial plane), symmetrical, detachment fold similar to classic folds described in the Jura Mountains of Europe (Fig. 23). The plunge/trend of the Algamarca anticline axis is ~8°/311°, and fold limb orientations are ~134°/46° (SW limb) and ~302°/50° (NE limb), as calculated from dip slope topography. The Algamarca anticline occurs only NW of the La Cruz fault. Vertical displacement on the fault, at the cliff-face exposing the anticline, is at least 600 m but could be as much as 800 m. SE of the fault (domain 2), strata of the Santa or Carhuaz formations are folded at wavelengths much smaller than the Algamarca anticline. The Escalon Chimú-cored, upright anticline is present on the SE side of the La Cruz fault, but ~5.5 km to the SW. However, the La Cruz fault dies out within ~1 km to the NE of the Algamarca anticline within the Shahuindo mineralized belt as it does not cut nor displace the Pampa de Arena overturned fold. Therefore, the Algamarca and Escalon anticlines are not offset by 5.5 km of dextral strike-slip displacement, but rather formed in their present locations, with the La Cruz fault acting as a transverse accommodation structure, or tear fault (Fig. 26). The Algamarca and Escalon anticlines formed as detachment folds with the detachment probably localized within the thick, shaley Chicama Formation. Shahuindo folds domain

This domain coincides with the main Shahuindo mineralized belt but also occurs SE of the La Cruz transverse fault and the termination of the Algamarca anticline (Fig. 26). The distribution of mapped folds is shown in figure 27. This domain is characterized by short wavelength (6 g/t).

In the west zone, most breccias are present in a zone up to 100 m wide on the NE side of the main quartz-phyric dacitic intrusive body, and some follow the axial surface of folds. This zone is likely the location of the San José fault zone proposed by previous workers. In the east zone breccias are generally tabular, between 1-4 meters thick, and most follow the axial surface of folds (Fig. 31). The orientation of breccia dikes and generally planar breccia contacts is variable (Fig. 38). However, the dominant set strikes NW with an average orientation of 118°/76°. Most breccias have relatively steep dip (Fig. 38c). 3.3.7

Breccia genetic interpretation

Breccias in the Shahuindo district formed before, during, and after mineralization. Much of the mineralization, particularly in the western zone of the district, occurs within breccia bodies. Although monolithic sedimentary-clast breccia could have formed during Eocene fold-thrust belt development, the presence of these breccias as dikes within the dacite porphyry (Fig. 36b) indicates that most of these breccias formed in the Miocene. Many igneous-matrix breccias contain both sedimentary and igneous clasts. The fact that some breccias with porphyritic igneous clasts also contain clasts with pyrite veinlets indicates that brecciation was a continuous, protracted process during both mineralization and igneous activity. Rounding of clasts occurs through rotation of clasts in a

38

cataclastically 3 deforming matrix. This process requires high energy and probably represents volcanic eruption or diatreme-related activity.

Figure 36. Photograph showing monolithic-clast breccias (Bx-m). A. Sub-angular quartzite-clast breccia, matrix supported (site EN-215). B. Sedimentary-clast breccia cutting dacite (site EN-208). C. Pebble dike (sill here) with rounded quartzite clasts (site EN-37). D. Sub-rounded sandstone-clast breccia dike cutting sandstone-siltstone sequence (site EN-203).

3

Cataclastic = grain size reduced through fracturing.

39

Figure 37. Photograph of core showing vein and breccia textures and cross-cutting relationships. A. Laminated shale-siltstone with crackle breccia formed of pyrite-filled micro-faults (SH09-111, 159m)). B. Bxm breccia with sedimentary clasts that have pre-breccia pyrite veins and disseminations. Matrix is sericitequartz (SH10-172, 212m). C. Bx-h with clasts of pyrite (py), porphyritic igneous rock (ig), pyritic shale (pysh), and deformed lapilli (lapilli) (SH10-172, 195m). D. Bx-m with rounded sedimentary clasts (s) cutting irregular alunite veinlet (al) in altered igneous rock (SH10-172, 207m).

40

Figure 38. Stereonets and histogram showing breccia orientation analysis. A. Poles to breccias with pole density contour plot; gray shades are percent of population per 1% area of net. Average of dominant NWstrike set shown as great circle and as pole (triangle). B. Same data as (A) shown as great circles. C. Histogram of breccia dip.

3.3.8

Faults

Mappable features used to prove the existence of faults include topographic or other lineaments, offset contacts, tectonic breccia, and fault slip planes with slickenlines. More than one of these criteria is best in confirming the presence of a given fault. Some lineaments, interpreted in past reports and maps as faults, may be faults, but definitive evidence has not been presented. A number of topographic lineaments were mapped at the regional and district scales (Figs. 39, 40). At the regional scale, the Shahuindo district is located near a major orogenic bend in the Peruvian fold-thrust belt, and where long NE-trending lineaments intersect the NW-trending fold belt (Fig. 39). At a district scale, most lineaments trend NE or ENE (Fig. 40), and a number of obvious NE-trending topographic lineaments have been mapped as faults by company geologists and consultants, and include the Choloque, Los Alisos, and La Cruz lineaments. Although it is believed that these structures represent faults, most are not considered to have major strike-slip displacement. The La Cruz fault has significant dip-slip displacement of up to 800m where it bounds the Chimú-cored Algamarca anticline, but this fault appears to die out to the NE as it does not displace the Pampa de Arena overturned anticline. No obvious topographic lineament coincides with the modeled Shahuindo ore zone. Nonetheless, Alvarez (2010) inferred a fault (San Jose fault or “vein”) along the ore zone. Although there is no direct field evidence for this fault, it is likely a fault zone given the generally linear shape of the modeled ore zone, and its coincidence with the margins of igneous dikes and breccia dikes. The geologic map shown in figure 2 includes two “veins” that we feel can be supported by geologic evidence; the San Jose and Leona “veins”. However, these are not typical veins which are tabular bodies of epigenetic minerals such as banded quartz-sulfide veins. Rather, they are 1 to 3+ meter wide, tabular to semi-tabular zones of alteration and relatively high grade gold mineralization associated with breccia, and are interpreted to be fault zones. The San Jose fault zone, which controls the main Shahuindo ore zone, consists of a series of parallel or anastomosing, steeply-dipping high-grade zones; the 41

fault trace on figure 2 represents the best-fit surface to this semi-tabular fault zone. The Leona vein is a moderate to steep southwest-dipping mineralized zone in the North Corridor. In detail, the Leona vein at surface is parallel to bedding in the overturned limb of the Pampa de Arena anticline but cuts bedding in the upright limb. It is interpreted that the Leona vein may be a splay off of the steep structural zone just south of the North Corridor Zone that focused diatreme breccias. The modeled gold resource at Shahuindo shows that the main Shahuindo corridor consists of two NW-trending segments separated by a jog or stepover in the Central Zone (Fig. 41). Some ENE to EW alignments can be identified, although their significance is not clear. Hodder et al. (2010) proposed that the structure at Shahuindo district is dominated by low-dip floor and roof thrusts of a duplex structure (Fig. 22c). However, we found no field evidence for these thrust faults. In fact, the roof thrust proposed by Hodder et al. (2010) at his site 280/281 (the correct UTM coordinates are site EN-21) is actually an unfaulted sandstone bed intercalated between siltstone-mudstone units (Fig. 42). Nonetheless, we believe that the presence of large detachment folds and fault-propagation folds infers that sub-horizontal bedding-parallel detachment (thrust) faults are likely present at depth.

Figure 39. Map showing regional-scale topographic lineaments and changes in the trend of fold-thrust belt.

42

Figure 40. Map showing district-scale topographic lineaments (does not include Algamarca anticline or obvious stratigraphic sequences). Surpac Au-grade model projected to surface (yellow: 0.7-2.5 g/t, orange: 2.5-6 g/t, red: >6 g/t).

Figure 41. Map showing district-scale alignments of mineralized rock compared to NE-strike topographic lineaments and Algamarca mine workings. Surpac Au-grade model projected to surface (yellow: 0.7-2.5 g/t, orange: 2.5-6 g/t, red: >6 g/t).

43

In addition, we believe that the rocks described as mylonites by Hodder (2010b, figures 8 and 9) are not, in fact, mylonites. Mylonites are high-strain shear zone rocks formed at high temperatures through crystal-plastic deformation mechanisms, and their formation is inconsistent with the structure of the Shahuindo belt, in which essentially no ductile foliations or fold cleavage were recognized. The only possible fold cleavage found is a weak pencil cleavage in mudstones (site EN-292) that likely formed as a pressure solution cleavage during folding. The pencil cleavage (a linear, not planar, structural element; Fig. 43) is sub-parallel to the Algamarca anticline (Fig. 32).

Figure 42. Photographs of Hodder’s site 280/281 (site EN-21; Hodder’s UTM coordinates are incorrect in his report, 2010b). A. From Hodder (2010b); blue line represents Hodder’s interpreted “gently-dipping thrust fault”. B. and C. from this study. Sandstone (ss) is intercalated within siltstone-shale (slt-sh) sequence; no thrust fault is present at this outcrop. Arrows in (B) show small-displacement, high-angle fault cutting sandstone bedding surface.

Faults recognized in the field with slickenlines show two main orientation sets: NE-strike and NW-strike (Fig. 44a, b). The NE-strike set shows dominant dextral strike-slip kinematics and the NW-strike set shows dominant dip-slip kinematics with sinistral strike-slip component (Fig. 44d, e). Because of the relatively consistent orientation and kinematics of the two fault sets, a paleo-stress model was generated using the Faultkin program (Allmendinger et al., 2001). Only faults with moderate to good quality slipsense determination were considered (Fig. 45). 44

The model shows an ENE-WSW shortening axis and NNW-SSE extension axis resulting in a conjugate system of dominantly strike-slip faults. In the model, the NW-strike sinistral fault (e.g., San José fault) is generally parallel to NW-strike breccias and nearly all mesoscopic and megascopic folds in the district. Because the San José fault has a steep dip, using the NE margin of the dacite porphyry dike as a proxy, we believe that the NW-strike sinistral faults probably formed Figure 43. Photographs of pencil cleavage during Miocene oblique extension (thus allowing magmas and diatremes to transect the formed along the line of intersection between fissile bedding in mudstone and axial plane crust), rather than during Eocene folding. A cleavage (site EN-292). NNW-SSE extension axis is oblique to the 120° trend of the Shahuindo corridor and would have caused oblique opening (sinistralnormal faulting) along the belt, and would have promoted intrusion of NW-strike igneous dikes (Fig. 46). The location of the San José fault, and thus the main Shahuindo corridor, is hypothesized to have been controlled by a NW-striking basement fault that also controlled the orientation of structures in the fold-thrust belt. Such faults are common in fold-thrust belts and originated as basin architecture faults.

Figure 44. Fault orientation and classification. Stereonets show NE-strike faults (A), NW-strike faults (B), and all fault (C). Red circles show slickenline orientation. Histograms show fault classification from slickenline rake angle for NE-strike faults (D) and NW-strike faults (E). F. Fault classification explanation.

45

Figure 45. Stereonets showing fault kinematic data (A) and paleo-stress model (B). A. Great circles showing faults with slickenlines and moderate to good quality slip-sense determination; arrows show relative motion of hanging wall. B. Average fault sets shown as great circles on net and as strike/dip symbol outside net; red circles represent predicted slickenline orientation in model. Principal paleo-stress axes (σ1, σ2, σ3) shown as white squares. Large gray arrows show general shortening direction, white arrows general extension direction. C. Paleo-stress model with NW-strike breccia orientations superimposed as great circles. D. Mesoscopic fold axes in Shahuindo district shown as red triangles, and megascopic Algamarca anticline (A) and Pampa de Arena overturned anticline (P) axes shown as large circles; same as figure 32b.

46

3.3.9

Igneous dikes

Igneous dikes and intrusive contacts measured in this study show a dominant NW-SE strike and moderate to steep dips with average orientation ~127°/78° (Fig. 46). These dikes, along with the large dacite porphyry body adjacent to and parallel to the main Shahuindo corridor, are parallel to fold trends. In some cases dikes are controlled by steep overturned fold limbs but eventually cut across upright fold limbs. Examples include thinner dikes that are apophyses SE of the main dacite intrusion (Fig. 47), and dacite dikes in the Pampa de Arena fold (Fig. 7). Phreatomagmatic dikes (diatreme breccias) also have this general NW trend indicating both low-energy and high-energy intrusions were controlled by fold-thrust belt structure. The diatreme breccia and adjacent carbonate breccia, exposed west of the Leona vein ridge in the North Corridor, also trend NW. The carbonate breccia probably formed as a block dropped down along an extensional (normal) fault as the diatreme activity waned.

Figure 46. Stereonet showing dike and intrusive contact orientations as great circles and poles. Dominant set is NW-strike with average of ~127°/78°.

47

Figure 47. A. Location map of site EN-242 in Central Zone. B. Photograph mosaic and drawing showing dacite porphyry dike emplaced parallel to overturned limb of Eocene fold. Note presence of monolithic sedimentary-clast breccia along dike margin, suggesting three events: sediment-clast breccia forms along fault parallel to fold limb, the dike intrudes along the same fault, and the fault then reactivate again at a late stage.

48

3.3.10 District structural model

The Algamarca and Pampa de Arena anticlines actually form an anticlinorium 4 structure which consists of a huge box-fold (Fig. 23) that occurs between two relatively narrow regional synclines (Fig. 48). Analysis of the INGEMMET 1:100,000-scale geologic map (Rivera, 1980) shows that, whereas most regional folds are relatively narrow in this part of the fold-thrust belt, the anticlinorium displays an exceptionally wide outcrop belt of Carhuaz and Farrat Formations that occurs where the gently NE-dipping box-fold limb forms a dip slope (NE dip domain).

Figure 48. INGEMMET 1:100,000-scale geologic map (Rivera, 1980) showing exceptional width of Farrat Formation outcrop belt on NE flank of Algamarca anticlinorium. Regional cross section lines (A-A’ and BB’) are approximately located (see figure 49 for accurate locations).

A new structural model for the Shahuindo district is proposed based on our field observations, analysis of the 1:100,000-scale geologic map, and two district-scale cross sections (Fig. 49, 50) that were constructed from a combination of sources. Importantly, the cross sections are located on both sides of the La Cruz transverse fault (Fig. 49), as both sections must conform to the principles of strain compatibility, and must explain the huge difference in structural relief across the La Cruz fault along the axis of the Algamarca anticline. Note that the sections are drawn with constant formation thickness (thicknesses were taken from figure 3). Nonetheless, structural thickening is likely, particularly where second-order folds in the Carhuaz Formation are shown with dashed 4

An anticlinorium is a broad anticlinal structure with lower-amplitude folds developed disharmonically in the anticlinal hinge area.

49

lines. The Chicama Formation shows the most structural thickness changes that are related to ductile flow of the thick, shale-rich sequence above the principal detachment. The cross sections infer that large-scale folds formed over a major, bedding-parallel detachment within or at the base of the Chicama mudstone-rich sequence (Fig. 50). In this model, the structural relief between the detachment and the base of the Chimú Formation is filled by highly deformed Chicama Formation. Smaller-amplitude detachment folds are present in the strongly layered siliciclastic strata of the Carhuaz Formation in a belt that is partly coincident with the main Shahuindo corridor, probably above detachments in the Santa Formation mudstone or local detachments in mudstone units within the Carhuaz Formation. The Carhuaz Formation developed detachment folds with a smaller wavelength than the Algamarca anticline because of the thinner bedding and interbedded nature of the unit (sandstone, siltstone, shale).

Figure 49. Location of regional cross-sections A-A’ and B-B’. The detailed geology shown inside the Sulliden concession is the same as shown in Fig. 2. The legend is for geologic units shown beyond the detailed geology and is from the 1:100,000-scale (INGEMMET) geology (Rivera, 1980).

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Although Hodder et al. (2010) proposed that detachment faults are mineralized, we believe this to be unlikely. Detachment faults commonly develop within strata that are mechanically weaker and more ductile than surrounding brittle strata. Such weak lithologies (typically mudstone and evaporate) are also less permeable, less brittle, and thus less likely to become mineralized.

Figure 50. Cross sections of Shahuindo district; cross section locations are shown on figure 49. Dot-dash lines are axial surface traces. Note that the sections are drawn with constant formation thickness (thicknesses from figure 3). Nonetheless, structural thickening is likely, particularly where second-order folds in the Carhuaz Formation are shown with dashed lines. The Chicama Formation shows the most structural thickness changes that are related to ductile flow of the thick, shale-rich sequence above the principal detachment.

We hypothesize that the Algamarca-Pampa de Arena box fold formed over the tip of a propagating fault or fault zone that splayed off of the major detachment, and that this splay was localized over a step in the basement associated with a basin architecture

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normal fault (Fig. 50). This normal fault was reactivated in the Miocene by a shift in tectonics to allow localized extension, and thus controlled intrusion of the dacite porphyry dike, the adjacent breccia complex, and much of the mineralization along the Shahuindo corridor. Mineralized breccia dikes along steep fold limbs and fold axial surfaces indicate Miocene reactivation of structural weaknesses in the fold-thrust belt.

3.4

Reconnaissance studies - NW Anomaly

On 30 September 2011 a reconnaissance study was undertaken in the NW Anomaly area and part of the Zinc Anomaly area. Field observations indicate that stratified rocks in the NW Anomaly area probably represent the Chimú and Santa formations. However, site geologists could not positively identify these strata, and further mapping and stratigraphic studies are recommended. Structurally, the area occurs along the NW projection of the Algamarca anticline. A steep, axial-plane-parallel fracture pattern was recognized in Chimú quartzites and also in slightly silicified dacite near the quartzite contact. Pencil cleavage occurs in mudstone near the base of the Santa formation (Fig. 43); pencil cleavage represents a linear structural fabric formed by the intersection of bedding and axial plane cleavage in finegrained sedimentary rocks (shale). Mineralization in the Chimú comprises quartz-pyrite veinlets up to 1 cm wide and brecciated sandstone with pyrite, euhedral quartz druse lining vugs, and locally coarse-grained illite (sericite). Pyrite has been oxidized but cubic and pyritohedron voids up to 3 mm in diameter filled with hematitic Fe-oxides indicate the presence of significant pyrite. This mineralization is similar to that found in the main Shahuindo zone, although the quartz veinlets are slightly wider and euhedral quartz crystals larger. Illegal miners (informales) are working veins with NE-strike that consist of crackle and rotated-clast breccia in Chimú quartzite; open-space hydrothermal fill consists of drusy quartz and various sulfides (pyrite, chalcopyrite, tennantite-tetrahedrite, and possibly chalcocite). Illegal miners also work brecciated zones along the contact between Chimú quartzite and xenolith-rich dacite. Numerous breccia types were recognized along the transect, including most of the types encountered in the main Shahuindo district. These include monolithic-clast breccia (quartzite clasts), heterolithic igneous-matrix breccia (diatreme breccia with sedimentary and porphyry clasts), and monolithic igneous-matrix breccia with sedimentary clasts (along the Chimú-dacite contact).

3.5

Reconnaissance studies - Zinc Anomaly

On 1 October 2011 a reconnaissance visit was made to the Zinc Anomaly area. The area is situated on a NW-trending topographic ridge that follows the trend of the Algamarca anticline. Folded sedimentary rocks of the Carhuaz Formation were intruded by a large irregularly-shaped body of heterolithic biotite diorite breccia about 1 km in diameter, which was in turn intruded by foliated biotite quartz diorite porphyry (1 km in diameter), then cut by a circular body of heterolithic megabreccia (described previously) 500 meters in diameter. 52

The heterolithic biotite diorite breccia displays strong quartz-illite-pyrite alteration for 30 to 40 meters on the SE contact with foliated biotite quartz diorite porphyry (site SB-204). The foliated biotite quartz diorite and the heterolithic megabreccia are magnetic and show only traces of weak chlorite-epidote alteration. At the NW contact with foliated biotite quartz porphyry (sites SB-216 and SB-217), heterolithic biotite diorite breccia is again strongly altered to quartz-illite assemblage and may include zones with pyrophyllite and alunite. Brecciated sandstone adjacent to the igneous matrix breccia appears to originally have had up to 10% pyrite in areas that now have abundant iron oxide and jarosite. Informales are also working in this area. We did not have time to hike to the bottom of the ridge but the Sulliden geologic map shows a circular intrusion 500 meters in diameter just beyond the northwestern most part of our traverse. This intrusion appeared to be altered and may be the center of a mineralized system in the Zinc Anomaly Zone. The unaltered foliated biotite quartz porphyry and heterolithic megabreccia are thought to be post-mineralization in age. The possible nature of the mineralization is discussed in more detail in the Metal Zoning section of this report (Fig. 54).

4

Synthesis – Structural-Mineralization Model

Mineralization occurred late during the second phase of Miocene magmatism. Steep faults parallel to strike of the fold-thrust belt focused intrusion of dacite porphyry dikes. These structures were reactivated during emplacement of high-energy breccia dikes (both igneous-matrix and non-igneous matrix breccias) and subsequent flow of hydrothermal mineralizing fluids. Some breccias are transverse to fold-thrust belt strike indicating Miocene reactivation of Eocene transverse faults (e.g., La Cruz fault, Algamarca mine veins). 4.1

Structural controls on mineralization

On a district scale, the main Shahuindo mineralized corridor is linear with a known strike length of nearly 4 km. The mineralized zone follows the NW-trending, steeply-dipping dacite porphyry, both being controlled by the hypothesized San José fault. Based on Sulliden mapping, the mineralized belt, the dacite porphyry, and assumedly the San José fault all terminate to the NW at the lineament mapped as the Los Alisos Fault. The belt of dacite dikes and stocks jogs to the west along the NW Anomaly Zone, and then continues to the NW along the axis of the Algamarca anticline. This pattern is interpreted to reflect a localized EW-trending dilatant jog (here termed the Chilca jog) that connects two segments of a NW-trending sinistral (normal) fault in a fault system that follows fold-thrust belt trends (Fig. 51). Note that the jog is localized where the Los Alisos Fault crosses the Algamarca anticline.

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Figure 51. Maps illustrating geologic features (A) and structural interpretation (B) of Shahuindo district.

Larger-scale structural controls on mineralization within the Shahuindo district include faults, igneous and breccia dikes, and fractures, some of which are related to fold geometric features (steep fold limbs, axial surfaces, and transverse fractures). We propose that the main Shahuindo mineralized belt was controlled by a steep NW-strike fault zone that originated as a basin architecture normal fault in the basement and was reactivated both during Eocene fold-thrust development and during Miocene mineralization. Folding of sandstone beds in fault-bend folds and detachment folds causes fracturing that promotes structural permeability during mineralization (Fig. 52). Mineralization in the Algamarca district is dominantly along transverse fractures and faults, but also occurs in strike-parallel structures which coincide more with fold limbs than with the axial surface (Fig. 25). However, presence of breccias and geochemical soil anomalies (see below) along the NW continuation of the Algamarca anticlinal axis suggests that the axial surface may have controlled intrusion, brecciation, and mineralization processes in this area. Mineralization in the North Corridor area is along faults parallel to the steep overturned limb of the Pampa de Arena fold (Leona “vein”; Fig. 20c), but also may be controlled by brittle fracturing along bedding and/or the fold axial surface. The Au soil anomaly in the North Corridor essentially follows the trace of the axial surface as it changes from near EW trend to near NS trend as the trace crosses the Los Alisos quebrada (Fig. 24).

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Figure 52. Photographs and line drawings illustrating fracture patterns in mesoscopic folds that contributed to structural permeability in the main Shahuindo belt. A-B. Fractures formed by outer-arc extension in sandstone within detachment fold (same fold as Fig. 29). C-D. Fractures formed in fault-bend fold above small fault ramp (see Fig. 21). Inset shows position of outcrop (site EN-268) in overturned limb of Pampa de Arena anticline; mesoscopic fault and fold formed due to flexural slip folding and shear of fold limb.

4.2

Intrusive centers

Two main intrusive centers are present in the district; one just west of the North Corridor Area and the other in the Zinc Anomaly Zone (Fig. 52). Each intrusive center is characterized by a body of diatreme breccia that postdates emplacement of dacite porphyry and andesite. At the North Corridor, the diatreme breccia is cut by a central stock of quartz-diorite-porphyry. The southwestern part of the North Corridor intrusive complex has not been mapped in detail so the extent of igneous diatreme breccia and younger quartz-diorite porphyry is not known. The Zinc Anomaly intrusive complex consists of an early diatreme breccia cut by a foliated quartz-biotite porphyry stock, which in turn is cut by a circular body of igneous megabreccia 500 meters in diameter. The foliated quartz-biotite porphyry stock is very similar in mineralogy and grain size to the quartz-diorite porphyry identified at the North Corridor intrusive complex and they may be related. As described previously, the heterolithic igneous megabreccia contains blocks of volcanic rock 10 meters or more in diameter in a matrix of foliated quartzdiorite porphyry. In addition to the North Corridor and Zinc Zone intrusive centers, it is possible another igneous intrusive complex is present beneath the main corridor at

55

Shahuindo based on the distribution heterolithic fine-grained dacite breccia dikes (red stars in Fig. 52).

Figure 52. Generalized geologic map of the district showing the location of explosive igneous complexes.

4.3

Metal zoning

Metal zonation was assessed using the soil geochemistry data set, plan maps and sections based on the latest gold resource model, and observations from the few core holes we logged. A more complete picture could be obtained from a systematic study of drill hole geochemistry and compilation of the distribution of sulfide minerals from core logging. We understand that Sulliden is currently in the process of re-logging all available drill holes from the property and this should provide a much better understanding of mineral zonation. The soil geochemistry data set provides a first order view of the distribution of hydrothermal centers in the district. The geochemical point data for selected elements

56

was gridded using an inverse-distance-squared interpolation method. A quick inspection shows that the data set consists of two or more surveys with each having a different lower analytical detection limit. This could be the result of different analytical techniques, different laboratories, or different sampling methods. For example, in the results for Bi (Fig. 53a) two lower detection limit populations are apparent in the data. The survey that covers the trend of the main corridor and extends northwest over the Algamarca district to the limit of the property appears to have a lower detection limit and more coherent data than the surveys to the northeast and southwest. Despite this limitation, geochemical zoning can be seen in the data. The distribution of Cu shows high values in the Zinc Anomaly Zone, the Algamarca-NW Anomaly Zone, North Corridor, and the Central Zone of the main Shahuindo corridor (Fig. 53b). The Cu anomaly at Algamarca-NW Anomaly Zone is probably enhanced in size due to surface contamination related to historic mining in the area. These four areas probably represent the central and hottest parts of separate mineralizing centers. The distribution of Zn (Fig. 53c) is more difficult to interpret. In the Zinc Anomaly Zone, the highest Zn values are coincident with the highest Cu values. In the AlgamarcaNW Anomaly Zone the highest Zn values extend almost 2 km to the north into the Zinc Anomaly Zone, and northeast toward North Corridor. At North Corridor, high Zn values extend 1 km to the southwest along the trend of the Leona vein. In the Central Zone, Zn is quite low although there are small areas of high Zn just to the west. The distribution of As shows a large anomaly centered on the main mineralized corridor at Shahuindo that extends west along the NW Anomaly Zone and then north into the Zinc Anomaly Zone (Fig. 53d). Anomalous As values extend from the main corridor up to the North Corridor. The Algamarca area has anomalous but not high As values which is surprising given the expected contamination from historic mining in the area. The distribution of Au in soils nicely outlines the main mineralized corridor at Shahuindo (Fig. 53e). The east-trending NW Anomaly Zone is obvious as is the North Corridor. There is a zone of anomalous Au located about 1 km south of the East and Moyan Alto Zones. This area was visited in the field at one locality and evidence of mineralization along narrow, steep-dipping, northeast-trending breccia zones was noted. The area of the Zinc Anomaly Zone has only a few spots of anomalous Au in the soil. The distribution of Sb is similar to that of Au with strong anomalies at the east end of the main Shahuindo corridor, North Corridor and NW Anomaly Zone (Fig. 53f). The Zinc Anomaly Zone has no Sb anomalies except for a few low values in the area of high Cu.

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Figure 53. Soil geochemistry maps of the Shahuindo district. The main corridor and North Corridor gold mineralized zones are shown in black outlines. Areas of high Cu in soil are outlined in green. See text for discussion.

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Based on the few holes we logged, data from the Hodder (2010a) report, examples of mineralization from the Algamarca waste dumps and the soil geochemistry database, we make the following observations about the Shahuindo system. Sulfide mineralogy and associated alteration indicates the Algamarca-Shahuindo district is a Cordilleran-type polymetallic epithermal system such as Tantahuatay or Colquijirca. In particular, Shahuindo belongs to a sub-class of this deposit type, first described by Montoya et al. (1995) and referred to as sandstone-hosted gold deposits. These deposits are known in the Cajabamba-Huamachucho-Angasmarca region south of Cajamarca and include Alto Chicama (Laguna Norte), La Virgin, El Toro, and Santa Rosa. A recent compilation of isotopic age dates for Late Tertiary deposits in northern Peru (Noble et al., 2004) suggests most of the deposits formed in the middle Miocene from 19 – 14 Ma, although Yanacocha and Tantahuatay in the middle of the northern Peru belt formed slight later at 14 – 10 Ma. Most of the districts in which these deposits occur contain porphyry CuMo±Au mineralization and porphyry systems are thought to underlay most polymetallic epithermal systems. At Algamarca-Shahuindo, pyrite-tetrahedrite-tennantite-covellite mineralization is associated with an alteration assemblage of alunite-pyrophyllite-diaspore-kaolinite-illite and appears to be paragenetically early. Pyrite, sphalerite, galena and stibnite associated with quartz-illite (sericite) can be seen to cut veins of pyrite-tetrahedrite-tennantitecovellite. This is supported by the observation that, in the core holes we logged, high gold values do not necessarily correlate to zones of high Cu and vice versa. In a study of Miocene mining districts in northern Peru (Gustafson et al., 2004), it was found that structurally controlled high gold zones formed late and are associated with intermediatesulfidation state alteration assemblages. Gold mineralization in the main corridor at Shahuindo seems to have these characteristics. By analogy with known systems, the highest Cu values should be associated with the central and deepest part of the epithermal system. With this in mind it is interesting to study the soil geochemistry of the Zinc Anomaly Zone (Fig. 54). Cu in soil geochemistry shows a large anomaly that is coincident with a 500-meter diameter intrusion. It also shows a distinct low associated with the foliated quartz-biotite diorite and the heterolithic igneous megabreccia, confirming that these are post-mineral in age. A strong Mo anomaly is spatially restricted to the area around the 500-meter diameter intrusion. Other elements show only weak anomalies right at the margin of the intrusion. We were unable to visit this intrusion in the field but it should be mapped in more detail to determine the nature of the intrusion and if there is any evidence of porphyry-style mineralization or alteration.

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Figure 54. Zoomed in view of Mo and Cu Soil geochemistry maps of the Zinc Anomaly Zone. A. Mo displays a strong but spatially restricted anomaly associated with a 500m-diameter intrusion (arrow). B. Cu displays a larger anomaly centered over the same intrusion; black dashed line (arrow) is limit of post –mineral intrusion and diatreme breccia.

5

Exploration guidelines

Some of the most effective exploration techniques are already being utilized by Sulliden at the Shahuindo projects, such as soil geochemistry and ground-based geophysical techniques. Based on features we observed in the district, we offer the following guidelines that could be used to help evaluate new exploration opportunities for Shahuindo-type mineralization in the region. •

Regional fold-thrust belt strike is the preferred orientation, but not the only orientation, for mineralized belts. The EW trend of the NW Anomaly Zone and similar ENE alignments of outlying mineralized zones, although not fully understood, may be controlled by local openings within jogs that link sinistral (normal) NW-strike fault segments (Fig. 51).

•

Dacite porphyry dike margins (e.g. San José fault) control most Shahuindo mineralization and this is true for the NW Anomaly Zone and much of the Algamarca mineralization, as well.

•

Much mineralization is hosted in breccia dikes, which occur preferentially along steep fold limbs, steep axial surfaces, and dacite porphyry dike margins.

•

Intersections of transverse faults with structures parallel to regional strike are important; for example, the highest-grade mineralization occurs where the La Cruz fault intersects the San José fault.

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•

6 6.1

Alteration zonation vectors to Au mineralization: the best gold mineralization appears to be associated with  late quartz-illite/sericite alteration  rock with evidence for high (>10%) sulfide content.

Recommendations Exploration recommendations

o Geochronological studies are recommended to define the age range for plutonism, alteration, and mineralization. New absolute ages, combined with careful petrographic and field mapping of igneous rocks and related breccias, will improve the exploration vectoring methodology. o Undertake a detailed stratigraphic study of the Shahuindo district, with assistance from a sedimentologist/stratigrapher with experience in, or familiarity with, the local stratigraphic sequence. Make a series of detailed measured sections and correlate with stratigraphically relogged core to help define formational boundaries and lateral facies changes. Knowledge of formational boundaries and unit characteristics will improve district-scale structural cross section models. Lateral facies changes commonly control the locations of ramp structures and related structural domain boundaries. A Peruvian stratigrapher to consider is David Davila ([email protected]). o Map fresh road cuts shortly after they are made and before reclamation occurs. Collect lithological, structural, alteration, and mineralization data. o Map axial surface traces of folds when identified. o Determine stratigraphic facing direction from sedimentological features (e.g., cross bedding, graded bedding, load casts) to identify overturned bedding. Plot overturned bedding orientations with appropriate map symbol. o Produce a formational interpretation layer on geological maps. Also include formational interpretation in core logging. o Determine relative stratigraphic ages from fossils when present.

6.2

Procedural Recommendations

o Translate all consulting reports from English to Spanish. This will encourage geologists with poor English skills to read observations and interpretations of outside consultants.

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o Although not an easy task, Sulliden geologists must attempt to define formational contacts and add the contacts to both the interpretative geological map and cross sections. This is very important for two reasons: 1) formation contacts will help constrain the overall structural interpretation, and 2) lateral facies changes, defined through recommended stratigraphic studies, may constitute an important exploration tool, as such changes are commonly controlled by basement structure. Employing a Peruvian sedimentological/stratigraphy expert will greatly assist this task.

7

References

Alvarez. M., 2010, Structural Overview and Recognition of Metal Drilling: Minera Sulliden-Shahuindo S.A.C. Report, 32p. Allmendinger, R.W., Marrett, R.A., and Cladouhos, T., 2001, FaultKin Version 1.2.2 (for Windows), computer program and user’s manual (for v.1.1), 29 p., http://www.geo.cornell.edu/geology/faculty/RWA/programs.html Boyer, S., and Elliott, D., 1982, Thrust systems, American Association of Petroleum Geologists Bulletin, v. 66, p.1196-1230. Gustafson, L.B., Vidal, C.E., Pinto, Rita, and Noble, D.C., 2004, Pophyry-epithermal transition, Cjamarca Region, Northern Peru, SEG Special Publication 11, pp.279-299. Hodder, R.W., 2010a, The Shahuindo epithermal gold occurrence Cajabamba Province, Peru: Petrographic reconnaissance & interpretation of shape and size, Consulting report prepared for Sulliden Exploration Inc., May 31, 2010, 98p Hodder, R.W., 2010b, The Shahuindo epithermal gold occurrence: an addendum to the June 30, 2010, Consulting report prepared for Sulliden Gold Corporation Ltd., December 15, 2010, 32p. Hodder, R.W., et al., 2010, The Shahuindo epithermal gold occurrence Cajabamba Province, Peru: Petrographic reconnaissance & interpretation of shape and size, Consulting report prepared for Sulliden Gold Corporation Ltd., June 30, 2010, 112p. Montoya, D.E., Noble, D.C., Eyzaguirre, V.R., and DesRosiers, D.F., 1995, Sandstone hosted gold deposits: A new exploration target is recognized in Peru, E&MJ, June, p.3441. Noble, D.C., Mckee, E.H., Mourier, T., and Mégard, F., 1990, Cenozoic stratigraphy, magmatic activity, compressive deformation, and uplift in northern Peru, Geological Society of America Bulletin 1990, v.102, no. 8, p.1105-1113. Noble, D.C, Vidal, C.E., Peralló, J. and Rodríguez P., Omar, 2004, Space-time realtionships of some porphyry Cu-Au, epithermal Au, and other magmatic-related mineral deposits in northern Peru: SEG Special Publication 11, pp. 313-318. 62

Rivera, L., R., 1980, Geologia de los Cuadrangulos de Cajamarca, San Marcos y Cajabamba, Boletin No. 31, Serie A. Carta Geologia Nacional, Instituto Geologico Minero y Metalurgico, Lima, Peru, 67p.

8

Appendix A – Field Site Location Maps

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Figure A-1. Location map for all Nelson (EN-#) field sites.

Figure A-2. Location map of Nelson field sites by date.

9

Appendix B – Structural Database

Provided digitally as file: Structural Geology Database Shahuindo.xlsx.

10 Appendix C – Fold axis models

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