YURA GOLD PROJECT

LATTITUDE 16° 21’ S LONGITUDE 71° 48’ W

DEPARTMENT OF AREQUIPA REPUBLIC OF

PERU

For:

Inversiones Mineras Stiles

Urb. Leon XIII G-2 – 2do. Piso - Cayma

Arequipa, Peru

(054) 275110

Prepared by:

Edward E Gates, M.Sc., P.Geo.

6611 W. Bernhill Rd.

Spokane, WA 99208

May 5, 2013

Updated August 6, 2014

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SUMMARY

The Yura Gold Project is located approximately 30 kilometers west of Arequipa, Peru, in
the northern part of the Atacama Desert. It comprises an 16,794 hectare group of
concessions which occupy most of a 9 by 12 kilometers circular feature of intense
faulting within quartz diorite and tonalite. Numerous quartz veins have been mapped and
sampled, many with impressive gold grades. A large breccia body has recently been
identified, which has yielded significant gold assays.

Permitting is in hand for drilling and exploration mining on many of the major gold targets.
An exploitation permit is also in hand for one group of the concessions. A permit is in
hand for drilling four water wells. A good neighbor agreement with local farmers and
communities is nearing completion.

Geological mapping has been completed on 4,520 hectares of the project and 1,713
rock chip samples have been collected.

Quartz veins can be up to six meters thick, although most a less than one meter. Some
have been mapped for several hundred meters along strike, and one is exposed on a
canyon wall for a vertical distance of 270 meters. The gold occurs both in the veins and
in the wallrock, and is free-milling. It has a very high correlation with tin, tellurium,
thallium and bismuth, which indicates that the mineralization is part of an intrusion-
hosted mesozonal gold system, similar to the Fort Knox Mine in Alaska. The veins are
also similar to those at the San Juan Chorunga, 62km to the northwest. Those veins
have been mined for 60 years and are at a depth of 1400 meters.

A large number of targets have been developed at the Yura Gold Project, and several
are being grouped together into a proposed underground mining zone. This zone will be
the focus of a first phase of drilling, together with the large breccia zone.

Positive aspects of the project also include:

Heavy equipment on site

Large capacity explosives magazine constructed, permitted and licensed
Licenses for explosives purchasing, transporting and using
Project administration in place
Camp facilities
Road access
Turn-key for immediate execution of drilling. Savings in time and money.
Project has industrial license from city of Yura.
Low elevation and close proximity to city
Good relations with nearby communities and a strong public relations program.
Registered in two new water resource dam projects

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 TABLE OF CONTENTS

SUMMARY........................................................................................................................2

TABLE OF CONTENTS.................................................................................................... 3

LOCATION, CLIMATE AND ACCESS.............................................................................. 5

HISTORY .......................................................................................................................... 5

INFRASTRUCTURE ......................................................................................................... 6

LAND................................................................................................................................. 7

PERMITTING.................................................................................................................... 8

GEOLOGY ........................................................................................................................ 8

LITHOLOGY...................................................................................................................... 8

STRUCTURE.................................................................................................................. 10

ALTERATION.................................................................................................................. 12

MINERALIZATION.......................................................................................................... 12

MODEL ........................................................................................................................... 17

TARGETS ....................................................................................................................... 18

PROJECT POTENTIAL .................................................................................................. 26

RECOMMENDATIONS................................................................................................... 27

REFERENCES CITED.................................................................................................... 28

STATEMENT OF QUALIFICATIONS ............................................................................. 30

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 LIST OF FIGURES

FIGURE 1 YURA GOLD PROJECT LOCATION MAP .............................................. 5

FIGURE 2 MINERAL CONCESSIONS ...................................................................... 7

FIGURE 3 GEOLOGIC MAPPING AND SAMPLING................................................. 9

FIGURE 4 VEIN TYPES .......................................................................................... 11

FIGURE 5 ROCK GEOCHEMISTRY - GOLD.......................................................... 15

FIGURE 6 HISTOGRAM OF GOLD GRADES ........................................................ 16

FIGURE 7 CORRELLATIONS WITH GOLD............................................................ 17

FIGURE 8 ORE DEPOSIT MODEL ......................................................................... 18

FIGURE 9 LILA – MARYLIN TARGET..................................................................... 19

FIGURE 10 ELDA TARGET - GEOLOGY ................................................................. 20

FIGURE 11 ELIANA TARGET - GEOLOGY ............................................................. 21

FIGURE 12 ELIANA - MAIN VEIN LONGITUDINAL SECTION................................ 22

FIGURE 13 SUZIE TARGET – GEOLOGY ............................................................... 23

FIGURE 14 PAMELA – ALMA - CHARLIE TARGET – GEOLOGY........................... 24

FIGURE 15 CHARLIE – ESPANOLA – SUZIE AREA - GEOLOGY .......................... 25

FIGURE 16 AYLIN TARGET – GEOLOGY................................................................ 26

FIGURE 17 LARGE-SCALE UNDERGROUND MINING CONCEPT ........................ 27

APPENDICIES

APPENDIX I YURA PROJECT SAMPLE RECORD (separate spreadsheet)............

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LOCATION, CLIMATE AND ACCESS
The Yura Gold Project is located approximately 30 kilometers west of the city of
Arequipa, in southern Peru. It lies at the foot of the Cordillera Occidental Mountains, and
adjacent to the coastal plain. Elevations range from 1380 meters in the Yura River
canyon to 2570 meters at the northern end of the claim block.

The climate is sub-tropical desert, with most of the year being warm, sunny and dry.
Temperatures range from 5.5C at night in July to 22.6C in the daytime in October. A
rainy season generally starts in late December and usually ends by mid-March. Annual
precipitation at Arequipa averages 95 millimeters.

The property is reached by taking highway 34A northwest from Arequipa to the town of
Yura, then following Cemento Yura’s ore haulage road west and then to the south on the
property access road. The total distance is approximately 44 kilometers and takes
between 1.5 and 2 hours to drive. (Figure 1)

HISTORY
The project area has been the focus of a long history of informal mining. There
are numerous hand-dug adits, shafts and stopes. The mineralization was either
hauled from the site in sacks or leached with cyanide on-site.

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Donald Stiles began acquiring mining claims in the project area in 2004.

Zoro Mining Corporation began working on the Yura Gold Project in 2005. This
work included rock geochemical sampling, limited road cut mapping, trenching,
IP-resistivity surveys and aerial photography. Zoro walked away from the project
during the economic downturn of 2008.

In 2010, Minex reached an agreement with Donald Stiles and South American
Inmobiliaria (SAI) to conduct exploration mining. In 2011 work commenced on
three exploration shafts on the most prospective veins, and continued until April
of 2012. Mining was suspended due to the expiration of the permit and lack of
funding.

The current exploration work began in June of 2011, consisting of detailed

geologic mapping and geochemical rock sampling. In September of 2011,
Donald Stiles entered into a joint venture agreement with Zoro, Minex and South
American Inmobiliaria. One of the provisions of the JV agreement was that S.A.
Inmobiliaria would immediately transfer their Yebacha claims to Donald Stiles,
where they could be added to the JV exploration permitting and drilling program.
In return, they would be provided with stock in Formacion Yura Exploracion, a
Donald Stiles company which owns other Yebacha claims in the JV area. The
transfer took place in March of 2013. Another provision of the JV agreement was
that Zoro would provide funding for the permitting, exploration and administration
activities of the JV. Zoro fell far behind in providing funding, and for the past two
years, Donald Stiles has been personally covering most of the project costs. Zoro
was notified on April 22, 2014 that the joint venture was terminated.

INFRASTRUCTURE
In addition to the upgrade and maintenance of the 10 kilometer access road from
the north, approximately 31 kilometers of roads have been constructed within the
project area to provide access to mineralized zones.

A camp exists at the project, located on Shiprock Peru ground, which includes 8
housing cabins, an office, a kitchen-dining hall and bathroom. In 2011 a 288
square meter core shed was constructed at the camp. A number of other cabins
are found at various locations on the property.

At the Mercedes target, located on Shiprock Peru ground, underground mine

workings were converted into an explosives magazine with a licensed capacity of
60 tons.

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Exploration shafts and head frames have been developed on three of the veins.
The shafts have each reached a depth of about 30 meters.

LAND
The following table and Figure 2 show the ownership of the mineral concessions
that are part of the Yura Gold Project, which total 16,794 hectares. It should be
noted that the area listed for the concessions is the effective area. Some claims
overlap and this area is not counted twice.

AREA
OWNER CONCESSIONS
(HA)
Formacion Yura Exploracion S.A.C. Yebacha 2A, 5, 6, 7, 9 1,495
Yebacha 3, 4, 8, 11, 12, 13, 14, 17,
Donald Le Roy Stiles 18, 19, 21, 23, 24 13,889
Tonalia, Tonalia 1, 2, 3, 4, 5, 6, 7
Shiprock Peru Yebacha 1, 16, 26, 27, 28 1,410
Total 16,794

Land to the north of the joint venture area is controlled by a variety of owners,
especially Minera Laytaruma, which is very active in mining their concessions.

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PERMITTING
Formacion Yura Exploracion – This permit is under small mining, and is for 19
drilling platforms, trenching and limited exploration mining. The permit is in-hand
and has been initiated.

Donald Le Roy Stiles – This exploration permit is under large mining, and is for
60 drilling platforms, road construction trenching and limited exploration mining.
The permit is in-hand and has been initiated.

Shiprock Peru – This permit is under small mining, and is for exploitation of 90
tons per day. Under this permit, an ulimited amount of drilling could also be done.
This permit is in hand and has been initiated.

Water – Shiprock has a permit in hand to explore and develop underground

water from four wells.

Usarios – An agreement was reached with the water canal Usarios in order to get
them to support the project. One important aspect of the agreement is the
establishment of a restricted zone that covers the farms, rivers, canal and the
steep slopes above the canal. In this zone, special permission would need to be
granted by the usarios prior to any road construction or surface mining.

GEOLOGY
Approximately one quarter of the project area has been mapped and rock-chip
sampled. Since June, 2011, a total of 4,520 hectares have been mapped in detail
and 1,713 samples have been collected. Mapping is conducted on a Quickbird
satellite image and then entered into ArcGIS (Figure 3). Rock geochemical
samples are collected from outcrops, informal miner prospect dumps and float. In
addition to the surface mapping, underground mapping has been conducted at
the Aylin, Charlie, June and Mercedes Mines, along with several of the informal
mine workings.

LITHOLOGY
Quartz Diorite is the most widespread and presumably oldest rock in the project
area. It is characterized by having abundant felsic dikes and commonly weathers
to leave patches of outcrop on the tops of hills and large parts of the slopes
covered with boulders and sub-crop of mineral grains with abundant muscovite.

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The quartz diorite can also have abundant rectangular patches composed of
chlorite. They look like hornblende megacrysts, but have no thickness as
hornblende would.

Feldspar Porphyry has been mapped in the eastern part of the project area. It
contains approximately 30-50% feldspar crystals and has a somewhat smaller
average grain size than the quartz diorite. It has been seen intruding the quartz
diorite, but has about the same quantity of felsic dikes, suggesting an age not
much younger than the quartz diorite.

Mafic Dikes are common, but are concentrated more in the southern part of the
project area. While they are dark and appear to be mafic, they were determined
to be dacite through petrography. There are multiple phases of these dikes, with
some being strongly chlorite altered.

Felsic Dikes are very common in the project area. Petrographic analysis was
done on one sample, which was determined to be quartz monzonite porphyry.
The dikes range from a few centimeters thick to several meters. They commonly
have trends of northwest, north, northeast or east-west. There are multiple

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phases of these dikes. They have been observed cutting the mafic dikes and
being cut by the mafic dikes.

Tonalite intrudes the quartz diorite in the southern part of the project area, with
dimensions of approximately 2.5 by 3.5 kilometers. Along the eastern contact,
tonalite dikes are observed intruding the quartz diorite. At the southern contact, a
large amount of shearing is observed in the quartz diorite, dipping away from the
tonalite. The tonalite has been cut by very few felsic and mafic dikes. Its
weathering appearance is usually quite “fresh” looking compared to the quartz
diorite. Hill slopes are generally covered with boulders.

Diorite is tentative name given to several bodies that intrude the quartz diorite
and tonalite, as dikes or larger masses. They have a fine to medium-grained
texture and appear to be of intermediate composition.

Several andesite(?) dikes have been mapped in the project area, in the eastern
and western parts. In both areas, they cut the quartz diorite. They generally strike
northwest and have steep dips. They look similar to the tonalite, but no
petrographic work has been done on them.

Gabbro Diorite forms an elliptical body in the southwestern part of the mapped
area. Its dimensions are approximately 0.8 by 1.3 kilometers. It appears to
intrude the tonalite-quartz diorite contact, but this relationship is uncertain. It is
not cut by any dikes, and the only alteration seen was a very small amount of
chalcedonic quartz.

Tertiary Sencca pyroclastic volcanic rocks occupy canyon bottoms and low lands
on the eastern part of the project area, and form the plateau east of the project
camp.

Recent air fall ash deposits are common on the hillsides and form considerable
thicknesses in canyon bottoms. Wind-blown deposits of this ash are also
common.

STRUCTURE
The region of the project is dominated by a large circular feature, measuring
approximately 9 kilometers north-south by 12 kilometers east-west, as seen on
aerial photography (Figure 3). Within this feature there is an intense pattern of
northeast and northwest lineaments, which undoubtedly represent fault zones.
Some fault zones are characterized by extensive development of caliche. Others
have chlorite or epidote along them.

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Over three thousand quartz veins have been mapped so far. They fit nicely into
the transpressional model for stress in brittle rocks. The main shear trend is
parallel to the Peruvian coast and the edge of the South American tectonic plate.
Figure 4 (modified after Tourigny, G., et al, 2004) shows a figure adapted from
geologic literature on which the various vein trends from the Yura Gold Project
have been highlighted. Most of the veins that form our inventory of exploration
targets fall within the Main Shear Trend and R-type Vein categories, with some
important examples in the Extension Vein type and the P-type structures.

Ore shoots formed along the fault structures in response to a variety of factors.
The most common control for ore shoots is flexures in the strike and/or dip of the
vein. When the movement occurred along the fault, an open space developed at
the flexure, providing a conduit for mineralizing fluids. Ore shoots have also been
identified resulting from the intersection of cross faults or fractures with the vein
trend.

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ALTERATION
Propylitic

The most common alteration present in the project area is propylitic, where iron
and magnesium bearing hydrothermal fluids have attacked biotite and
hornblende. The resulting rock contains epidote, chlorite and albite, and has a
distinct pistachio green color. This alteration is most common in the eastern part
of the project area, and reaches an intense level along the access road near the
access control gate. It is also common along fault zones and some quartz veins.

Sericite

This alteration is directly associated with mineralization and is an important

indicator of strong gold grades in the quartz veins. It forms as selvages along the
veins and can occur on fractures within the veins. It is a white to very light green,
fine-grained mica, which sometimes is stained by iron oxide to shades of yellow
to light brown.

Clay

It is common to have a few centimeters clay developed along the mineralized

quartz veins.

Caliche

Deposits of white calcium carbonate (caliche) are found at the surface, and for
several meters depth, along veins & possibly larger areas of fracture-controlled
mineralization. These deposits typically occur in limestone terrains, where
carbonate is abundant. The source of the carbonate at the Yura Gold Project is
from the destruction of feldspar in the host rocks by hydrothermal fluids. These
caliche zones may prove to be important guides to mineralization.

MINERALIZATION
Gold

Gold has been found in both quartz veins, wall rock and in breccia. The gold is
free-milling and has been exploited by informal miners for many years. Most of
the exposures of mineralization have resulted from vein exploration and
exploitation by the informal miners, which have left hundreds of prospect pits,
adits, shafts and stopes scattered across the project area. The informal miners
panned gold at the sites. In some places, they set up vat-type cyanide leach

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operations, processing several hundred tons. They have also packed out large
amounts of material for processing elsewhere.

There appear to be at least two phases of gold deposition. An early phase

consists of small gold flakes, up to roughly 0.5 millimeter, that are distributed for
about a centimeter around limonite pods. Limonite pods have also been seen
that have gold flakes within them. A later phase of gold mineralization has
deposited gold on fracture surfaces with limonite, and also as crystals perched
on druzy quartz in vugs.

Quartz Veins

At least 3,000 quartz veins have been mapped so far. They seem to be fairly
evenly spread throughout the project area. Lengths range up to hundreds of
meters and thicknesses range up to 12 meters. Most mineralized veins are less
than a meter thick; however, there are notable exceptions at Aurora, Aylin, Eliana
and Suzie. Because of the large amount of relief along the Yura River canyon,
the Charlie vein system can be traced over a vertical distance of 300 meters,
indicating large depth extent, as would be expected in a mesothermal gold
system. Ore shoots are commonly developed where there are bends in the veins
or intersections with other structures.

Textures of the quartz vary considerably. Sucrossic texture is common in quartz

with substantial gold, while glassy quartz usually has little. The color varies from
white to shades of red and brown, depending on the amount of iron oxide. The
veins are commonly shattered, with iron oxide coating the fracture surfaces, and
in places have developed into vein breccias. The veins which carry gold
commonly have limonite pods, and it is believed that these limonites are after
bornite and sometimes pyrite.

Breccia

A body of breccia has been identified in the western part of the circular feature,
and has been the subject of considerable informal mining activity. The clasts of
the breccia are intensely altered to sericite and clay(?). The matrix of the breccia
consists of euhedral crystals of quartz and limonite after pyrite. Three higher
grade zones within the breccia have been observed, and have been exploited by
the informal miners. There is much cover in the area, and it is not known what
the full dimensions of the breccia bodies are, or whether there are additional
higher grade zones.

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