Geology and Mineralization

The primary target for the Luna Roja Project is a low sulphidation system of gold and silver disseminated in tuffs and occurring in stockworks and veinlets in rhyolite domes. The Luna Roja Project is centred on a 3 km-long, north-northwest-striking fault, the Via Lactea Fault. The main lithologies are a package of felsic, lithic to lithic crystal tuffs and ash tuffs which are broken up by rhyolite domes. The tuffs are silicified in the vicinity of the fault and form a low rounded hill on the footwall side, whereas on the hanging wall side the tuffs are argillized and form a recessive area (Figure 2).

Trenching across the Via Lactea Fault, adjacent to rhyolitic dome rocks and argillized tuffs, has revealed several zones of continuous mineralization at the surface. Assay results in the Cruz del Sur Zone include 55 m of 0.41 ppm Au and 13.2 ppm Ag in Trench 2 and 35 m of 0.10 ppm Au with 7.6 ppm Ag in trench 1. To the west of, and in the hanging wall of the Via Lactea Fault, there are pervasively argillized and locally silicified tuffaceous rocks where hanging wall structures provide a favourable environment for disseminated and vein-style mineralization.

First phase drilling constituting 1,184 m of diamond core from 8 holes was completed between January 12, 2019 and January 31, 2019, in a program designed to test three target areas – Cruz Del Sur, Orion and Estrella del Norte (Figure 2).

All 8 holes were silicified throughout their lengths and a significant discovery was made in the Cruz del Sur Zone with holes LR_DDH001 and 2 which returned long disseminated intercepts. The Cruz del Sur discovery, which lies toward the southern end of the project, on the Via Lactea Fault, is associated with Au in rock chips and trench channel samples on the southwestern edge of a major rhyolitic and tuffaceous dome complex, (see Figure 2a).

Drill hole LR_DDH001 intersected 51.4 m of 0.26 g/t Au and 9.37 g/t Ag at a depth of 44.6 to 96.0 m, including, 2.0 m of 1.08 g/t Au and 79.60 g/t Ag at a depth of 62.0 to 64.0 m.

Drill hole LR_DDH002 intersected 75.0 m of 0.62 g/t Au and 5.6 g/t Ag (from 37.0 m to 112.0 m). The deepest part of the zone, which is oxidized (Figure 2b), included 42.0 m of 1.01 g/t Au and 4.6 g/t Ag (from 68.0 m to 110.0 m), indicating increased grade with depth.

Drill holes LR_DDH001 and LR_DDH002 target structurally controlled mineralization beneath wide Au anomalies in trenches 1 and 2. Figure 3 illustrates a West-East cross section, which includes LR_DDH002 and LR_DDH003. The Trench 2 intercept of 55 m of 0.41 g/t Au and 13.2 g/t Ag occurs above the LR_DDH002 drill intercept and is structurally related to the oxidized zone of 1.01 g/t Au between 47 and 78 m vertical depth. Mineralization appears to be controlled largely by the high permeability of the tuffaceous units to the West of the Via Lactea Fault, implying that the system is open to the west.

Trench 1 reported 25 m of 0.1 g/t Au and 7.6 g/t Ag, which occurs above the LR_DDH001 intercept and is structurally related to the mineralized zone with 0.26 g/t Au and 9.7 g/t Ag between 30 and 70 m vertical depth (see Figure 4). Additionally, Trench 1 reported three zones of anomalous gold comprising 5 m of 0.1 g/t, 5 m of 0.13 g/t and a further 5 m of 0.6 g/t. Together, these anomalies support the concept of disseminated targets up to 250 m to the west of the Via Lactea Fault.

Of the 8 holes drilled, only LR_DDH001 and 002 were drilled directly through the Via Lactea Fault, with the other holes collaring further east and intercepting silicification with As, Zn, and Sb with occasional trace Au (Figure 5).

Mineralization is open along the Via Lactea Fault and at depth, and to the north-northwest, as well as to the south-southeast. There is also potential for disseminated mineralization to the west of the Via Lacteal Fault across a largely covered surface area of 8 km2 (Figure 6) between the Via Lactea Fault and the Au and Sb-bearing Cae El Sol and Luna Crescente Zones.