The Sandra Escobar Project is a silver and gold exploration property located 40 km north of the community of Tepehuanes and 180 km north of the City of Durango in Durango State, Mexico.
The project consists of the Sandra Property of 6,335 hectares and Escobar Property of 635 hectares of mineral concessions and covers multiple mineralized epithermal quartz veins, disseminated horizons and breccia structures, located halfway between the mining districts of Guanacevi (Endeavour Silver) and Tovar (Minera de Atocha) and 75 km west of the giant La Pitarrilla Deposit (SSM Mining), in the prolific "Mexican Silver Trend."
These veins form a high-level silver-gold-base metals system, hosted in andesitic and rhyolitic rocks, centered on a large rhyolite dome complex in the north and silver systems in smaller rhyolite complexes to the southeast. Intense alteration zones and fluid flooding in permeable formations indicates the presence of bulk tonnage targets. Excellent infrastructure exists in the Sandra Escobar area, including paved road access, electrical power, water and manpower from nearby communities.
The Boleras Silver Deposit, a near surface silver resource hosted in a crystal rhyolite tuff, is located on the Sandra Property (see Orex news release dated 31 October 2016). At a "Base Case" of 45 g/t Ag cut-off, the Inferred Resource Estimate yielded 9.75 million tonnes grading 106.2 g/t Ag for a total of 33.3 million ounces of silver.
On December 19, 2017, Orex signed a non-binding letter of intent ("LOI") with Canasil Resources Inc. - (TSX.V: CLZ) ("Canasil") and Pan American Silver Corp. - (TSX: PAAS - NASDAQ: PAAS) through its subsidiary Plata Panamericana SA de CV ("Pan American") to advance exploration in the Sandra Escobar Mining Camp, northern Durango State, Mexico.
The interests of the parties are currently governed by separate agreements. Pan American and Canasil entered into an option agreement dated March 24, 2009, pursuant to which Canasil earned a 40% interest in the Escobar Property with the remaining 60% interest held by Pan American. On September 15, 2015, Canasil and Orex entered into an option agreement under which Orex completed the required conditions to earn a 55% interest in Canasil's interest in the project such that Orex and Canasil agreed to proceed as a joint venture, of which Orex will have a 55% interest, and Canasil will have the remaining 45% interest (the "Orex Canasil JV").
Terms of the Agreement
The obligations of the parties under the LOI are subject to the parties entering into a definitive agreement that reflects the terms of the LOI. Under the terms of the LOI:
1. The Orex-Canasil JV will grant to Pan American an undivided 10% interest in the Sandra Property.
2. During the four years after the effective date of the definitive agreement (the "Earn-In Period"), Pan American will have the right to earn an additional 41% undivided interest in the Sandra Property by contributing an aggregate amount of US$5 million toward the operations on both properties, of which US$2 million will be required within the initial two years of the Earn-In Period.
3. Should Pan American choose not to continue during the Earn-In Period, the initial 10% interest in the Sandra Property granted to Pan American would revert back to the Orex-Canasil JV.
4. Also, during the Earn-In Period, the Orex-Canasil JV will have the right to earn an additional 9% undivided interest in the Escobar Property by contributing an aggregate amount of US$1 million toward the operations on both properties. Transfer of this 9% interest in the Escobar Property will only take place once both the Pan American contribution and the Orex-Canasil JV contribution are made in full.
5. Upon completion of all required financial contributions by all parties, Pan American will hold an undivided 51% interest and the Orex-Canasil JV will hold an undivided 49% interest in the Escobar and Sandra properties.
6. If Pan American elects to further advance the properties by completing a pre-feasibility study, each party's respective interest will be adjusted at the completion of the pre-feasibility study, such that Pan American will hold an undivided 60% interest and the Orex-Canasil JV will hold the remaining 40% interest in the Escobar and Sandra properties.
7. During the term of the definitive agreement, a "Technical Committee" will be formed consisting of representatives from each party. This committee will review and recommend exploration programs. The Orex-Canasil JV will be the operator under the agreement.
The geological setting of the Sandra Escobar property can be divided into three regions.
Orex has drilled 8,372 metres in 62 diamond drill holes in the southeastern region of the project. The first 59 diamond drill holes formed the basis for an initial resource estimate on the "Boleras Silver Deposit." At a "Base Case" of 45 g/t Ag cut-off, the Inferred Resource Estimate yielded 9.8 million tonnes grading 106 g/t Ag for a total of 33.3 million ounces of silver (See Orex news release of 31 October 2016).
For detailed information on the Inferred Resource Estimate, please refer to the "Technical Report" filed on SEDAR entitled:
Collins, J.M., Fowler, A. and Butler, S., 2016, "Sandra Escobar Project Technical Report, Boleras Mineral Resource Estimate, December 2016." Mining Plus Canada Consulting Ltd. on behalf of Orex Minerals Inc. and Canasil Resources Inc., 93 p. (effective date: 25 October 2016).
<a href="http://www.orexminerals.com/s/Drilling-SandraEscobar.asp" target="_blank">(Results of drilling here)</a></html>.