The Cuyoaco property has the potential to host both a high grade gold system and a large copper-gold skarn deposit. It is located in the Talpizaco-Tateno Mining District and is a historic copper and gold project in the north-west of Puebla State, approximately 155 kilometers north east of Puebla city. The Cuyoaco property covers 643 hectares over two mineralized targets: the Pau copper-silver-gold skarn, and the Santa Anita gold project.

The Pau Skarn Project

The Pau Project is a copper-silver-gold skarn in Santa Fe Metals’ Pau claims and in the western part of its Santa Anita claims. The claims cover an area of approximately 3 square kilometers of epidote-garnet skarn mineralization around a large granodioritic pluton.

Figure 2 - The Crespo Adit near the El Magistral Zone

In total there are 16 documented, historical workings on the Pau project, many of which are believed to be as old as 16th century. The largest workings include the 170 m x 200 m ‘El Magistral’ open pit, 3 levels of underground workings at ‘California’ as well as ‘Lincon’ (two 50 m adits), ‘La Juanita’ (two adits), ‘La Verdiosa’ and ‘El Toro’. Sampling in 2008 returned high-grades of copper, silver, gold, lead and zinc from the exposed rock within workings, and mapping in 2011 found that many of the adits ended in mineralisation.

Figure 3 - Historical workings in the Skarn Mineralization of the Pau Project

Geology

Figure 4 - Geology of the Cuyoaco property

Geology on the Pau Project is characterized by garnet-actinolite-quartz-hematite skarn style mineralization associated with two copper, silver, gold rich zones along the western and eastern margins of the granodioritic pluton. Skarn mineralization is exposed at surface in several locations and in the historical workings. Secondary (oxidized) enrichment extends for at least 10 m below surface and is characterized by malachite, azurite and chalcocite but most likely does not form the bulk of the mineralization.

The skarn mineralization is divided into 3 alteration styles:

The Endo Skarn is hosted within the intrusive itself and is found along the southern boundary of the property. It is characterized by coarse garnets and high-grade copper and gold values. Veins of quartz and coarse grained garnets form zones of parallel sheeted veins. Close to the intrusive-limestone contact the intrusive often contains up to 20 % disseminated pyrite.

The granodiorite pluton is leucocratic, coarse-grained and in places altered wide zones of Kaolinisation.

The Proximal Skarn is found at the contact between the granodiorite and calcareous sedimentary rock. Proximal alteration is hosted within the limestone and is characterized by a skarn assemblage of garnet, hematite and actinolite. There is little preservation of the host rock and no stratabound banding. The highest grade samples from the El Magistral zone were taken from this rock. In 2011 a new zone of proximal skarn alteration was mapped in outcrop in the north of the property however no copper mineralization was seen.

The ‘Distal’ Stratabound Skarn is characterized by bedding parallel bands of copper mineralization, garnets and quartz grading outwards into recrystallized silicified limestone with bands of k-feldspar, and finally into the unaltered limestone.

From field mapping the intrusive was intruded into the limestone largely along bedding planes and the resultant hydrothermal fluid utilized bedding planes as a channel to travel through the host rock.

Previous Work

PRE 1900s

The exact age of the workings is unknown however it is thought that many of the workings were started during the first colonization by the Spanish in the 16th century (Tribe, 2008). Several of these workings were in operation until at least the 1900s.

1966 - Geophysics Eastern Pau Skarn Trend

In 1966 the SGM (Mexican Geological Survey) conducted a geophysics survey over the eastern part of the Pau zone. This survey identified a large sulphide zone in the east of the Pau project characterized by high chargeability (Figure 9) and skarn mineralization characterized by high resistivity (Figure 10).

Induced Polarization:
A chargeability anomaly (>14 sec), interpreted as sulfides disseminated in the intrusive.

South of California shaft: a high chargeability (14 msec) attribute to mineralization in skarn at the intrusive contact.

Southeast of the Burkel: high chargeability zone.

Resistivity:
Shows a marked contrast between the skarn, the limestone and the intrusive.

A high resistivity anomaly at the core (400 ohm-m plus) over the skarn outcrop.

North of La Verdiosa adit there is a high resistivity anomaly (500 ohm-m) over skarn.

2008 - Rock sample and soil geochemical mapping

Work in 2008 on the Pau Project by Oremex included the collection of over 100 rock samples and 317 soil samples focused particularly on the ‘El Magistral open pit’ area (Figure 11). This work outlined several prominent copper-gold anomalies (Figure 12), the largest of which extends 1.1 km from the southern property boundary to the La Juanita adit in the north.

Figure 11 - Location of the Soil and Rock samples collected during the 2008 sampling program

Figure 12 - Results of the 2008 Sampling program

2011 - Sampling and Mapping

Sampling by Santa Fe Metals in 2011 focused on further exploration of the northern part of the Pau Claim and mapping skarn mineralization between known adits. Notable discoveries include low grade gold within the granodiorite itself, and a previously unknown skarn showing in the north of the property, a further 1 km north of the La Juanita adits.

Table 1 - Sampling highlights from 2011 sampling and mapping

Planned Work

Following the results of the 2008 geochemical survey as well as continuing mapping program, Santa Fe Metals has identified several drill targets on the east facing slope of the El Magistral skarn anomaly. Santa Fe Metals is currently applying for an Environmental Permit to complete a drilling program that would start later this year.

Figure 13 - Locations for planned drill holes

The Santa Anita Project

Santa Anita is a historic dyke and sill hosted gold rich deposit found in the east of the Cuyoaco property. It is characterized by a zone of parallel gold rich dykes and sills approximately 1 km along and 800 meters wide. In 2011 a parallel dyke and sill system 200 m wide and 600 m in length was discovered to the north east.

Figure 14 - Locations of the Santa Anita and New Santa Anita Zones

Geology

The Santa Anita gold project covers a series of parallel, gold-rich dykes and sills that have intruded and altered a sedimentary sequence of limestone and mudstones. The dykes and sills are between 1 m and 10 m wide and form a 1 km by 800 m NW-SE trending zone (Figure 14). The dykes and sills are porphyritic dacites that contain varying amounts of feldspar and hornblende phenocrysts and in places up to 10% fine grained disseminated pyrite. Previously published reports have identified gold within the calcite veinlets that typically line the outside of the dykes (Tribe, 2008). Sampling in 2008 also found gold in the hornfelsed metasediments (Figure 15).

Previous Exploration

The exact age of the workings is unknown however it is thought that many of the workings were started during the first colonization by the Spanish in the 16th century (Tribe, 2008). Five large adits were developed into the surface expressions of mineralization: Santa Elena 1, Santa Elena 2, Santa Elena 3, Santa Elena 4 and Santo Niño.

1966 - Geophysics

The 1966 SGM (Mexican Geological Survey) geophysics survey of the area covered the eastern part of the Pau zone. This survey identified a distinct negative chargeability and resistivity low over the region of gold enrichment. This anomaly extends north westward outside of the Santa Anita zone.

2008 - Soil sampling, rock sampling

An extensive surface geochemical mapping program, together with a limited drilling program in 2008, delineated a large gold rich envelope called the Santa Anita zone. Elevated gold values were found in both soil samples as well as in rock samples collected from the Santa Anita zone (Figure 18 and 19).

Mineralization was found to be coarse free metallic gold and electrum in calcite stringers associated to narrow dacitic dikes hosted in a skarn-hornfels-limestone sequence. A limited chip sampling program of the underground workings returned an average grade of 3 g/t. 58 samples from individual workings (Santa Elena 1 to 4 and Santo Niño) returned average values of:

Figure 18 - Location of the Soil and Rock samples collected during the 2008 sampling program

Figure 19 - Results of the 2008 sampling program

2008 - Drilling

Results of 607 meters of drilling in five holes (all of which did not reach their target depths) demonstrated the existence of a large gold mineralized system.

Drill results included 28m of 1.3 g/t gold (hole 1 from 38 to 66m), 12m of 0.946 g/t gold (hole 3 from 60 to 72m), 51m of 0.258 g/t gold (hole 4 from 8 to 59m) and 29m of 0.511 g/t gold (hole 5 from 84 to 113m). Holes 1, 4 and 5 ended in gold rich mineralization (NI 43-101 compliant Technical Report – Tribe, 2008; Mexican Geological Survey - Santa Anita Project Drill Logs, 2008).

Table 2 - Notable intercepts from the 2008 drilling of the Santa Anita project. Three of the five
holes ended in anomalous gold values and did not reach their targeted depth program.

2011

Rock and channel samples collected by Santa Fe Metals in 2011 outline a large low grade gold anomaly that extends beyond the historical boundary of the Santa Anita gold deposit and indicates that the zone of gold rich mineralization is considerably larger than previously thought. The parallel dyke system, named ‘Santa Anita Nuevo’, has a (surface) width of 200 meters and a strike length of 600 meters. To date, Santa Fe Metals has collected 29 channel samples from dykes to the north of the property that have returned values greater than 0.1 g/t. It is important to note that the higher grade dykes in the Santa Anita zone have a similar low grade surface expression.

Figure 20 - Channel sampling on the new Santa Anita Zone

Plan of Work

Based on the success of its sampling program in 2011, Santa Fe Metals is currently planning a drill program that would build on the 2008 drilling program (Figure 21) in order to begin generating a resource estimate for the Santa Anita project.

Figure 21 - 2008 and planned drill programs