M3-PN100041 26 October 2010

Hardshell Project

NI 43-101 Technical Report Preliminary Economic Assessment Study Patagonia, Arizona REVISION 2 Prepared For:

M3 Engineering & Technology Corporation ● 2051 West Sunset Road, Tucson, AZ 85704 ● 520.293.1488

Suite 400 – 837 West Hastings Street Vancouver, BC, V6C 3N6 Tel: 604-484-3597 Fax: 604-687-1715 Email: [email protected] Web: www.wildcatsilver.com

June 15, 2011 Notice to Reader, The technical report entitled “Hardshell Project – Preliminary Economic Assessment, Santa Cruz County, Arizona, Revision 1, Prepared for Wildcat Silver Corporation” dated October 26, 2010 and originally filed on SEDAR on October 27, 2010 is herewith re-filed with the following corrections: 1. Pages 5 and 22 relating to the Net Smelter Return (“NSR”) - the NSR is due to Diamond Hill Investment Corp. from Arizona Minerals Inc. (not to Arizona Minerals Inc. from Wildcat Silver Corporation); and 2. Pages 9, 130 and 149 relating to the mining costs incorrectly stated – the correct mining operation costs are $27,943,000 (not $41,478,600) resulting in a per unit mining cost per ton of ore of $19.14 (not $28.41), processing costs are $61,338,160 (not $61,338,000) and G&A costs are $3,842,340 (not $3,842,000) resulting in a total operating cost of $93,123,500 (not $106,659,100) and a total per unit cost per ton of ore of $63.78 (not $73.05). If you should have any queries relating to the above please contact the writer at 604687-1717. Yours truly, /s/ Purni Parikh Purni Parikh Corporate Secretary

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY TABLE OF CONTENTS

SECTION

PAGE NI 43-101 TECHNICAL REPORT

1

TITLE PAGE .......................................................................................................................... 1

2

TABLE OF CONTENTS ....................................................................................................... 1

3

SUMMARY (SYNOPSIS)...................................................................................................... 2

4

5

3.1

FINANCIAL ANALYSIS .................................................................................................. 2

3.2

AUTHOR’S RECOMMENDATIONS................................................................................. 3

3.3

AUTHOR’S CONCLUSIONS............................................................................................ 4

3.4

PROPERTY LOCATION ................................................................................................. 4

3.5

PROPERTY DESCRIPTION............................................................................................. 4

3.6

MINERAL TENURE, ROYALTIES AND AGREEMENTS .................................................. 5

3.7

GEOLOGY AND MINERALIZATION .............................................................................. 5

3.8

MINING, EXPLORATION AND SAMPLING .................................................................... 5

3.9

MINERAL RESOURCE ESTIMATE ................................................................................ 6

3.10

MINERAL RESERVE ESTIMATE ................................................................................... 6

3.11

METALLURGICAL TESTING ......................................................................................... 6

3.12

PROCESSING FLOWSHEET ........................................................................................... 7

3.13

METAL RECOVERIES ................................................................................................... 7

3.14

POWER .......................................................................................................................... 7

3.15

WATER ......................................................................................................................... 7

3.16

PERMITS ....................................................................................................................... 8

3.17

OPERATING COSTS ...................................................................................................... 9

3.18

CAPITAL COST ESTIMATE ......................................................................................... 10

INTRODUCTION & TERMS OF REFERENCE ........................................................... 11 4.1

PURPOSE ..................................................................................................................... 11

4.2

SOURCES OF INFORMATION ...................................................................................... 11

4.3

PERSONAL INSPECTIONS............................................................................................ 11

4.4

UNITS AND ABBREVIATIONS ...................................................................................... 11

RELIANCE ON OTHER EXPERTS................................................................................. 14 5.1

RESOURCE MODELING .............................................................................................. 14 M3-PN100041 26 October 2010 Rev. 2

i

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

6

PRELIMINARY ECONOMIC ASSESSMENT STUDY

5.2

MINE PLANNING ........................................................................................................ 14

5.3

RESERVES ................................................................................................................... 14

5.4

GEOLOGY ................................................................................................................... 14

5.5

METALLURGICAL TESTING ....................................................................................... 14

5.6

FLOW SHEETS ............................................................................................................ 15

5.7

PROCESS PLANT COSTING......................................................................................... 15

PROPERTY DESCRIPTION & LOCATION ................................................................. 16 6.1

LOCATION .................................................................................................................. 16

6.2

PROPERTY DESCRIPTION........................................................................................... 18 6.2.1

Property Ownership ................................................................................ 18

6.3

MINERAL TENURE ..................................................................................................... 19

6.4

OPTION AGREEMENTS ............................................................................................... 22 There are no property or mineral option agreements for this project. ....................... 22

7

6.5

AGREEMENTS AND ROYALTIES ................................................................................. 22

6.6

PLACER CLAIMS ........................................................................................................ 22

ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ...................................................................................................... 23 7.1

ACCESSIBILITY ........................................................................................................... 23

7.2

CLIMATE .................................................................................................................... 23

7.3

LOCAL RESOURCES ................................................................................................... 23 7.3.1 7.3.2 7.3.3 7.3.4

7.4

INFRASTRUCTURE ...................................................................................................... 25 7.4.1 7.4.2

7.5 8

9

Water ....................................................................................................... 23 Workforce ............................................................................................... 24 Commercial Resources and Services...................................................... 24 Social Services and Security................................................................... 24 Power ...................................................................................................... 25 Transportation ......................................................................................... 25

PHYSIOGRAPHY .......................................................................................................... 25

HISTORY .............................................................................................................................. 26 8.1

GENERAL HISTORY, MINING HISTORY, AND PRODUCTION .................................... 26

8.2

ASARCO EXPLORATION HISTORY.......................................................................... 27

8.3

PROPERTY OWNERSHIP ............................................................................................. 28

GEOLOGICAL SETTING ................................................................................................. 29 M3-PN100041 26 October 2010 Rev. 2

ii

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

9.1

REGIONAL GEOLOGY ................................................................................................ 29

9.2

PROPERTY GEOLOGY ................................................................................................ 31

10

DEPOSIT TYPES ................................................................................................................. 37

11

MINERALIZATION............................................................................................................ 39

12

EXPLORATION................................................................................................................... 41

13

12.1

ASARCO EXPLORATION .......................................................................................... 41

12.2

WILDCAT SILVER EXPLORATION ............................................................................. 42

DRILLING ............................................................................................................................ 43 13.1

INTRODUCTION .......................................................................................................... 43

13.2

PREVIOUS DRILLING.................................................................................................. 45 13.2.1 13.2.2 13.2.3

13.3

WILDCAT SILVER DRILLING ..................................................................................... 46 13.3.1 13.3.2

13.4 14

DRILLING SUMMARY ................................................................................................. 48 ASARCO ................................................................................................................... 50 14.1.1 14.1.2

14.2

Core Samples .......................................................................................... 51 Reassay of ASARCO Pulp Samples ...................................................... 51

SAMPLE PREPARATION, ANALYSIS AND SECURITY .......................................... 52 15.1

ASARCO ................................................................................................................... 52

15.2

WILDCAT SILVER ANALYTICAL................................................................................ 54 15.2.1 15.2.2

17

Chip Samples .......................................................................................... 50 Core Samples .......................................................................................... 50

WILDCAT SILVER CORPORATION ............................................................................. 51 14.2.1 14.2.2

16

Comparative Drilling Evaluation............................................................ 47 Exploration Drilling ................................................................................ 47

SAMPLING METHOD AND APPROACH ..................................................................... 50 14.1

15

Summary ................................................................................................. 45 Air-Hammer Drilling .............................................................................. 45 Core Drilling ........................................................................................... 46

ASARCO Pulp Re-Analysis ................................................................... 54 Drill Sample Analysis ............................................................................. 55

DATA VERIFICATION ...................................................................................................... 57 16.1

WILDCAT SILVER PULP RE-ASSAY ........................................................................... 57

16.2

WILDCAT SILVER COMPARATIVE DRILLING ........................................................... 57

16.3

ADDITIONAL DATA VALIDATION .............................................................................. 59

ADJACENT PROPERTIES................................................................................................ 60 M3-PN100041 26 October 2010 Rev. 2

iii

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 18

MINERAL PROCESSING AND METALLURGICAL TESTING............................... 61 18.1

INTRODUCTION .......................................................................................................... 61 18.1.1 18.1.2

2005 Metallurgical Tests ........................................................................ 61 2008 Tests ............................................................................................... 61

18.2

OBJECTIVE AND SCOPE ............................................................................................. 62

18.3

EXPERIMENTAL PROGRAM ....................................................................................... 63 18.3.1 18.3.2 18.3.3 18.3.4 18.3.5 18.3.6 18.3.7 18.3.8 18.3.9 18.3.10 18.3.11 18.3.12 18.3.13

18.4

Batch SO2 Leaching of Composite A ..................................................... 63 Batch Cyanide Leaching of SO2 Leach Residue .................................... 66 Copper Removal by Reductive Cementation with Zinc Dust................ 69 Precipitation of Solubilized Iron ............................................................. 69 Results ..................................................................................................... 69 Solvent Extraction of Zinc ...................................................................... 71 Manganese Sulfate Production ............................................................... 72 Amine Leaching of Lead from SO2 Leach Residues ............................. 72 Physical Separation ................................................................................. 72 Revised Hazen Process Flowsheet ......................................................... 72 Manganese Carbonate............................................................................. 74 Mineralogy .............................................................................................. 74 Metallurgical Mass Balance ................................................................... 74

M3 PROCESS FLOW SHEETS ..................................................................................... 74 18.4.1 18.4.2 18.4.3

19

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Crushing and Grinding ........................................................................... 74 Refinery................................................................................................... 75 Removal of Lead Recovery .................................................................... 75

18.5

PROCESS PLANT ......................................................................................................... 77

18.6

EXTRACTION RATES .................................................................................................. 79

18.7

PROCESS REAGENTS .................................................................................................. 79

MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES .......................... 80 19.1

MODEL EXTENTS ....................................................................................................... 80

19.2

SURFACE TOPOGRAPHY ............................................................................................ 80

19.3

DRILL HOLE DATABASE ............................................................................................ 80

19.4

GEOLOGIC MODEL .................................................................................................... 81

19.5

MINERALIZATION CONTROLS ................................................................................... 81

19.6

COMPOSITING OF DRILL HOLE DATA ...................................................................... 82

19.7

MINERAL RESOURCE ESTIMATE .............................................................................. 82

19.8

VARIOGRAPHY ........................................................................................................... 92

19.9

GRADE MODEL .......................................................................................................... 92

M3-PN100041 26 October 2010 Rev. 2

iv

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

19.10 MATERIAL DENSITIES ............................................................................................... 93 19.11 BLOCK MODEL .......................................................................................................... 94 19.12 RESOURCE CLASSIFICATION ..................................................................................... 95 19.13 MINERAL RESERVE ESTIMATE ................................................................................. 95 20

OTHER RELEVANT DATA AND INFORMATION..................................................... 96 20.1

GEOTECHNICAL – SITE CONDITIONS AND FOUNDATION DESIGN ........................... 96

20.2

TAILINGS DESIGN ...................................................................................................... 96

20.3

WASTE ROCK STORAGE ............................................................................................ 96

21

INTERPRETATION AND CONCLUSIONS ................................................................... 97

22

RECOMMENDATIONS ..................................................................................................... 98 22.1

RISKS .......................................................................................................................... 98

22.2

OPPORTUNITIES ......................................................................................................... 98

22.3

RESOURCE DEVELOPMENT DRILLING...................................................................... 99

22.4

EXPLORATION STEP-OUT DRILLING ...................................................................... 100

22.5

METALLURGICAL TEST WORK............................................................................... 100

22.6

GEOTECHNICAL TEST WORK ................................................................................. 101

22.7

ENVIRONMENTAL STUDIES...................................................................................... 101

22.8

PREFEASIBILITY STUDY ENGINEERING .................................................................. 101

22.9

PREFEASIBILITY COST............................................................................................. 102

23

REFERENCES.................................................................................................................... 103

24

DATE AND SIGNATURES .............................................................................................. 105

25

ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT PROPERTIES AND PRODUCTION PROPERTIES .................. 106 25.1

MINE OPERATIONS .................................................................................................. 106 25.1.1 25.1.2

25.2

Open Pit ................................................................................................ 108 Underground Mine................................................................................ 115

POWER AND TRANSPORTATION .............................................................................. 119 25.2.1 25.2.2

Power .................................................................................................... 119 Transportation ....................................................................................... 120

25.3

WATER ..................................................................................................................... 120

25.4

PERMITTING AND ENVIRONMENTAL CONSIDERATIONS........................................ 120 25.4.1 25.4.2

M3-PN100041 26 October 2010 Rev. 2

Federal Permits ..................................................................................... 121 State of Arizona Permits ....................................................................... 121

v

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.4.3 25.4.4 25.5

Introduction ........................................................................................... 134 Assumptions.......................................................................................... 134 Estimate Accuracy ................................................................................ 134 Contingency .......................................................................................... 135 Documents ............................................................................................ 136 Construction Labor ............................................................................... 136 Direct Costs........................................................................................... 137 Indirect Costs ........................................................................................ 140 Area Notes ............................................................................................ 141 Owner’s  Costs ....................................................................................... 146 Items Excluded from the Estimate........................................................ 146

ECONOMIC ANALYSIS .............................................................................................. 146 25.7.1 25.7.2 25.7.3 25.7.4 25.7.5 25.7.6 25.7.7

26

Basis of Operating Cost ........................................................................ 130

CAPITAL COSTS ....................................................................................................... 132 25.6.1 25.6.2 25.6.3 25.6.4 25.6.5 25.6.6 25.6.7 25.6.8 25.6.9 25.6.10 25.6.11

25.7

Wilderness, Natural Areas and Other Special Status Lands ................ 122 Environmental, Ecological, and Archaeological Sensitivity................ 123

OPERATING COSTS .................................................................................................. 130 25.5.1

25.6

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Production Statistics ............................................................................. 147 Capital Expenditures ............................................................................. 148 Operating Cost ...................................................................................... 149 Revenues ............................................................................................... 149 Other...................................................................................................... 149 Project Financing and Economic Analysis ........................................... 151 Sensitivity Analysis .............................................................................. 153

25.8

MINE LIFE ................................................................................................................ 153

25.9

RECLAMATION AND CLOSURE ................................................................................ 153

ILLUSTRATIONS ............................................................................................................. 154

M3-PN100041 26 October 2010 Rev. 2

vi

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY LIST OF TABLES

TABLE NO.

DESCRIPTION

Table 3.1-1: Economic Summary ................................................................................................... 2 Table 3.9-1: Mineral Resource Estimate ($55/ton Cutoff) ............................................................. 6 Table 3.13-1: Metal Recovery ........................................................................................................ 7 Table 3.17-1: Operating Cost Summary ......................................................................................... 9 Table 3.18-1: Initial Capital Costs (US$000) ............................................................................... 10 Table 4.4-1: Units Terms and Abbreviations ................................................................................ 12 Table 6.3-1: Patented Mining Claims Situated in the Harshaw Mining District .......................... 22 Table 8.1-1: Historic Production from Hardshell Area Mines (AZ Bureau of Mines, Bulletin 191, 1975) ............................................................................................................................................. 27 Table 13.1-1: Drill Hole Summary ............................................................................................... 43 Table 13.3-1: Comparison Drill Hole Pairs .................................................................................. 47 Table 13.4-1: Exploration Drill Hole Interval Summaries ........................................................... 49 Table 16.1-1: ASARCO Drill Holes in Database - Old v. New Data ........................................... 57 Table 16.2-1: Comparison Drill Hole Pairs .................................................................................. 58 Table 16.2-2: Comparison of Drillhole Pairs ................................................................................ 58 Table 18.1-1: 2005 Composite Sample Assay .............................................................................. 61 Table 18.1-2: 2008 Composite Sample Assays ............................................................................ 62 Table 18.3-1: SO2 Bulk Leaching Results .................................................................................... 65 Table 18.3-2: Cyanide Leach Results ........................................................................................... 67 Table 18.3-3: Data Summary for Copper Precipitation with Zinc................................................ 70 Table 18.3-4: Data Summary for Iron Precipitation ..................................................................... 70 Table 18.3-5: Data Summary for Iron Precipitation Prior to Copper Removal ............................ 70 Table 18.3-6: Comparison of Zinc and Manganese Extractions for LIX 272 and DEHPA ......... 72 Table 18.6-1: Metal Recoveries .................................................................................................... 79 Table 18.7-1: Reagents and Consumption Rates .......................................................................... 79 Table 19.1-1: Resource Model Limits .......................................................................................... 80 Table 19.4-1: Lithologic Codes .................................................................................................... 81 Table 19.7-1: Mineral Resource Estimate ($55/t Cutoff) ............................................................. 83 Table 19.8-1: Variogram Parameters ............................................................................................ 92 M3-PN100041 26 October 2010 Rev. 2

vii

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Table 19.9-1: Search Ellipsoids .................................................................................................... 93 Table 19.10-1: Wildcat Silver Corporation Hardshell Project Tonnage Factors .......................... 94 Table 19.11-1: Block Model Assumptions ................................................................................... 94 Table 22.9-1: Estimated Costs for Prefeasibility Level Work .................................................... 102 Table 25.1-1: Resource Summary............................................................................................... 106 Table 25.1-2 Lerchs-Grossman Pit Optimization Parameters .................................................... 108 Table 25.1-3 Pit design criteria ................................................................................................... 109 Table 25.1-4 Resource Mined by Pit Phase (Includes 5% mining loses and 5% mining dilution) ..................................................................................................................................................... 114 Table 25.1-5 Open Pit Mine Operating Costs ............................................................................. 115 Table 25.1-6 Stope design parameters ........................................................................................ 115 Table 25.1-7 Resource mined by underground zone (Includes 5% mining loses and 10% mining dilution) ....................................................................................................................................... 118 Table 25.1-8 Unit Mining Costs ................................................................................................. 119 Table 25.1-9 Underground Mine labor and major commodity prices ........................................ 119 Table 25.1-10 Underground mine capital expenses .................................................................... 119 Table 25.4-1: List of Agencies and Permits................................................................................ 127 Table 25.5-1: Operating Cost Summary ..................................................................................... 130 Table 25.5-2: Reagent Consumption Rates and Unit Pricings ................................................... 132 Table 25.6-1: Initial Capital Expense Estimate .......................................................................... 133 Table 25.6-2: Estimate Accuracy................................................................................................ 135 Table 25.6-3: Construction Labor Rates ..................................................................................... 136 Table 25.7-1: Mine Production ................................................................................................... 147 Table 25.7-2: Commodity Production ........................................................................................ 147 Table 25.7-3: Smelter Return factors .......................................................................................... 148 Table 25.7-4: Operating Cost Summary ..................................................................................... 149 Table 25.7-5: Metal Prices .......................................................................................................... 149 Table 25.7-6: Economic Analysis Summary .............................................................................. 152 Table 25.7-7: Price Sensitivity.................................................................................................... 153

M3-PN100041 26 October 2010 Rev. 2

viii

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY LIST OF FIGURES

FIGURE

DESCRIPTION

Figure 3.4-1: Project Site Location ................................................................................................. 4 Figure 6.1-1: Location Map .......................................................................................................... 17 Figure 6.3-1: Project Claim Block ................................................................................................ 21 Figure 9.1-1: Geological Map ....................................................................................................... 30 Figure 9.2-1: Property Geology Map ............................................................................................ 32 Figure 9.2-2: Property Geology Cross Section - 167,800 N ......................................................... 33 Figure 9.2-3: Property Geology Cross Section – 1,075,400 E...................................................... 34 Figure 13.1-1: Drill Hole Location Map ....................................................................................... 44 Figure 18.3-1: Hazen Revised Flowsheet ..................................................................................... 73 Figure 18.4-1: Overall Process Flow Diagram ............................................................................. 76 Figure 18.5-1: Site Plan ................................................................................................................ 78 Figure 19.7-1: Manganese Cross Section: 167,800N ................................................................... 84 Figure 19.7-2: Silver Cross Section: 167,800N ............................................................................ 85 Figure 19.7-3: Block Value Cross-Section: 167,800N ................................................................. 86 Figure 19.7-4: Manganese Long Cross-Section: 1,075,400E ....................................................... 87 Figure 19.7-5: Silver Long Cross-Section: 1,075,400E ................................................................ 88 Figure 19.7-6: Block Value Long Cross-Section: 1,075,400E ..................................................... 89 Figure 19.7-7: Manganese Block Model-4775 Elevation ............................................................. 90 Figure 19.7-8: Silver Block Model-4775 Elevation ..................................................................... 91 Figure 25.1-1: Open Pit and Underground ................................................................................. 107 Figure 25.1-2: Lerch-Grossman nested pit incremental NPV .................................................... 108 Figure 25.1-3: Phase 1 Pit ........................................................................................................... 110 Figure 25.1-5: Ultimate Pit ......................................................................................................... 112 Figure 25.1-6: Section A-A' ........................................................................................................ 113 Figure 25.1-7: Section B-B' ........................................................................................................ 117

M3-PN100041 26 October 2010 Rev. 2

ix

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY LIST OF APPENDICES

APPENDIX A

DESCRIPTION

Professional Qualifications  Certificate  of  Qualified  Person  (“QP”)  and  Consent  of  Author  Résumés of Principal Authors Responsibility Principal Contributor Resource Modeling Mine Planning Geology, Sample Preparation and Security, Data Verification Metallurgical Testing Process Flow Sheets Process Plant Costing

B C D

Author Timothy S. Oliver Mark Odell Mark Odell

Registration P.E. P.E. P.E.

Company M3 P.M., LLC P.M., LLC

Fleetwood Koutz George Owusu Tom Drielick Conrad Huss

AIPG C.P.G. P.E. P.E. P.E.

Consultant Hazen M3 M3

List of Relevant Claims Hazen   Research,   Inc.   “Process   Development   Studies   for   the   Hardshell   Ore   Deposit,   Hazen Report 10758, August 2009 Hazen   Research,   Inc.   “Batch   Precipitation   and   Calcining   of   Manganese   Carbonate,   May 18, 2010

M3-PN100041 26 October 2010 Rev. 2

x

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 1

PRELIMINARY ECONOMIC ASSESSMENT STUDY

TITLE PAGE

This report is prepared in accordance with the Canadian Standard NI 43-101. The first two items of this 26-item outline are the Title Page and Table of Contents. For ease of cross-referencing during review, the first two subsections of this report (1.1 and 1.2) are incorporated into the format for this report. 2

TABLE OF CONTENTS

See discussion in subsection 1.1.

M3-PN100041 26 October 2010 Rev. 2

1

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 3

SUMMARY (SYNOPSIS)

3.1

FINANCIAL ANALYSIS

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Table 3.1-1: Economic Summary Total Ore Mined (t) Open Pit Underground Mine Life (years) Manganese Grade (%) Silver Grade (oz/t) Copper Grade (%) Zinc Grade (%)

23.8 million 16.0 million 7.8 million 17 8.6 3.2 0.087 1.7

Manganese Recovery (%) Silver Recovery (%) Copper Recovery (%) Zinc Recovery (%)

95 90 95 90

Manganese Production (t) Silver Production (000 oz) Copper Production (t) Zinc Production (t)

1,954,000 69,000 23,000 372,000

Manganese Price ($/lb) Silver Price ($/oz) Copper Price ($/lb) Zinc Price ($/lb)

0.41 16.78 3.07 0.91

Revenue – Total (000) Manganese Silver Copper Zinc

$3,548,000 $ 1,602,000 $1,142,000 $ 116,000 $688,000

Production Cash Cost (000)

$1,643,000

Income from Operations (000) Initial Capital Expenditures (30% mine development capital) Sustaining Capital (000) Income Taxes (000) Cash Flow After Taxes

$1,758,000 $297,000 $56,000 $362,000 $1,043,000

Property Economic Indicators: NPV @ 0% NPV @ 7.5% NPV @ 10% IRR Pay Back (years)

$1,043,000 $357,000 $238,000 19.0% 4.9

M3-PN100041 26 October 2010 Rev. 2

2

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 3.2

PRELIMINARY ECONOMIC ASSESSMENT STUDY

AUTHOR’S RECOMMENDATIONS

Wildcat Silver should proceed with the project to the prefeasibility study stage. To do so will require work in the following areas. Resource Development Drilling Resource development drilling needs to be conducted as in-filling within and around the periphery of the currently defined Hardshell resource, including at depth. Exploration Step-Out Drilling WSC has identified significant exploration potential to the north and northwest of the known Main Manto resource and plans to conduct step-out drilling concurrent with the resource development drilling discussed above. Metallurgical Studies A metallurgical pilot study should be completed on a scale sufficient to allow confidence for scale up to commercial production. The pilot plant should be designed for continuous operation rather than batch operation to provide the following data: A mass balance sufficient to allow accurate prediction of reagent consumption rates. An energy balance to provide a basis for design of the cogeneration system using sulphuric acid plant waste heat. A heat balance to allow design of process vessels so they can withstand heats of reaction from various process steps and so fluid temperatures can be maintained where necessary for process efficiency. Chemical and materials testing for selection of construction materials that will withstand aggressive chemical and physical environments in the process vessels. Sufficient duration of testing to reveal potential scaling, corrosion, stress, and other problems with materials. Sufficient scale to allow determination of any required ventilation, capture or other gas or vapor control issues. Sufficient testing to guide safety and environmental principals for operation. An evaluation of alternative lead recovery methods and/or tests and regulatory analysis to confirm that contained lead can be safely disposed with tailings in a manner approvable by the permitting agencies and acceptable in terms of environmental protection. Metal recovery variation by ore type should be examined. Geotechnical Studies A program of geotechnical engineering analysis needs to be expanded to include site geotechnical testing, pit slope stability evaluations, paste backfill testing, and mine waste and tailings pile design.

M3-PN100041 26 October 2010 Rev. 2

3

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 3.3

PRELIMINARY ECONOMIC ASSESSMENT STUDY

AUTHOR’S CONCLUSIONS

Based on the encouraging financial performance predicted by this preliminary economic assessment, M3 recommends Wildcat Silver Corporation consider proceeding to a full prefeasibility evaluation of the Hardshell property. Wildcat Silver should initiate whatever environmental studies are deemed appropriate for the prefeasibility stage such that the studies will eventually support permitting efforts. 3.4

PROPERTY LOCATION

The Hardshell Property is located six miles southeast of the town of Patagonia, Arizona, which has a population of approximately 1,000 people. The property is 15 miles northeast of the Santa Cruz County seat at Nogales and 50 miles southeast of the nearest large commercial center of Tucson, in adjacent Pima County. The international border with the State of Sonora, Mexico, is eight miles to the south.

Figure 3.4-1: Project Site Location 3.5

PROPERTY DESCRIPTION

The Hardshell Property is part of the Harshaw and Patagonia Mining Districts located in the Patagonia Mountains of Santa Cruz County, Arizona (Figure 3.4-1). The property covers about M3-PN100041 26 October 2010 Rev. 2

4

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

3,100 acres measuring about 2.6 miles in a north-south direction and about 2.3 miles in an eastwest direction. 3.6

MINERAL TENURE, ROYALTIES AND AGREEMENTS

The WSC claim holdings include eight patented claims totalling about 154 acres, with the surface and mineral rights owned outright. The patented land is surrounded by 166 contiguous unpatented Federal lode claims totalling approximately 3,100 acres. Under the terms of the United States mining law, the unpatented claims can be held as long as the annual Federal maintenance fee is paid (no expiration date). There is a 2 percent Net Smelter Return (NSR) Royalty payable by Arizona Minerals on any future production. 3.7

GEOLOGY AND MINERALIZATION

The Hardshell deposit is contained within a series of Cretaceous volcaniclastics that were deposited upon moderately north-dipping, Permian-age, Concha Limestone, and Scherrer Formation sandstone and carbonate rocks. The deposit is located in and above a series of uplifted Paleozoic horst blocks that were active during Cretaceous volcanism. The mineralization is contained within a manto-type replacement, with mineralization deposited into permeable, volcaniclastic sediments and tuffs, as well as underlying limestones. High-angle faults acted as conduits for mineralizing fluids that deposited manganese, zinc, copper and silver sulfides and sulfosalts as replacements and fracture fillings in the host rocks. Subsequent weathering has oxidized most of the sulfides to oxides, except in deep zones in the northern extension area. 3.8

MINING, EXPLORATION AND SAMPLING

The Hardshell deposit was discovered in 1879 and in addition to other similar deposits in the area, they were intermittently mined to 1964. Production from the Hardshell Incline Mine (a separate upper lead-silver oxidized mineral horizon with subordinate manganese oxides) and adjoining areas has amounted to 35,000 tons, with an average grade of about eight ounces of silver per ton. ASARCO conducted intermittent exploration of the Hardshell area between 1940 and 1991. Arizona Minerals, of which WSC is a majority owner, acquired the property from ASARCO in 2006. From the mid-1950s to 1991, ASARCO drilled 114 air-hammer and core holes with an aggregate length of 46,000 feet (14,000 meters) on the property. Drill logs and assay data sheets were available for 114 holes. Drill hole coordinates, sample intervals, and assays have been compiled for these holes into a computer database by WSC. Most core was split with one half preserved for reference. Reference portions of chips produced by air-hammer drilling were preserved. Samples were analyzed for silver by fire assay with, manganese, zinc, and copper by wet chemical or atomic adsorption methods or subsequent XRF methods by ASARCO.

M3-PN100041 26 October 2010 Rev. 2

5

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

WSC re-assayed all available pulps remaining from ASARCO laboratory analysis for silver, gold, manganese, zinc, and copper. Comparison showed similar values. The grade values were incorporated into the drillhole database, giving preference to the newer assays, and using the older assays only when older reference pulps were not available for another assay. WSC drilled a total of 13 diamond drill holes totalling 24,400 feet on the Hardshell Property. Four of these holes were part of a twin drilling program conducted in 2007 and the remaining nine holes tested for a northward extension of mineralization. 3.9

MINERAL RESOURCE ESTIMATE

The mineral resource estimate was prepared by Mine Reserves Associates, Inc. (MRA) in the early months of 2010 and completed on April 13, 2010. The resource estimate is detailed in Table 3.9-1. The author chose to report this estimate using a block value cutoff of $55 per ton to meet the criteria   that   a   resource   estimate   must   have   a   “reasonable prospect for economic extraction.”  Mineral  resources  that  are  not  mineral  reserves  do  not  have demonstrated economic viability. The mineral resource estimate was prepared in compliance with Canadian NI 43-101 standards. Table 3.9-1: Mineral Resource Estimate ($55/ton Cutoff) Tons Silver Manganese Zinc Copper (000s) (opt) (%) (%) (%) Oxide 6,618 5.48 6.83 1.03 0.10 Tons Silver Manganese Zinc Copper (000s) (opt) (%) (%) (%) Oxide 43,286 1.78 7.66 1.55 0.06 Sulfide 7,715 1.02 5.77 2.73 0.10 Total 57,619 2.11 7.31 1.65 0.07 3.10

MINERAL RESERVE ESTIMATE

Only mineral resources are estimated for the Hardshell Deposit in this report. Engineering, metallurgical studies and economic evaluations, while in progress at the time of this writing have not yet progressed sufficiently to support a mineral reserve estimate. 3.11

METALLURGICAL TESTING

Wildcat Silver Corporation intends to develop the Hardshell property for silver, copper, zinc, and manganese production. A global representative composite was prepared, along with three other composites that reflected three of the major observed variations in Hardshell mineralization. The global composite and one variation composite were used for initial 2008-09 test work. See Appendix C.

M3-PN100041 26 October 2010 Rev. 2

6

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 3.12

PRELIMINARY ECONOMIC ASSESSMENT STUDY

PROCESSING FLOWSHEET

The current metallurgical process flowsheet begins with conventional three-stage crushing followed by grinding in a ball mill. Ground ore is first leached with SO2 and sulfuric acid to solubilize manganese, copper, and zinc. Acid leach thickener overflow proceeds to copper removal, iron removal, zinc solvent extraction (SX) and electrowinning (EW), and manganese carbonate precipitation. Acid leach underflow is conditioned with lime to pH greater than 10.5 and leached with cyanide to free silver. Pregnant leach solution is treated by the Merrill Crowe process followed by filtration and smelting/refining to produce a silver doré. See the Figure 18.4-1,  M3’s  Overall  Process Flow Sheet in Section 18.4 of this report. 3.13

METAL RECOVERIES

The metal recoveries for this project have been estimated as follows: Table 3.13-1: Metal Recovery % Recovery Silver 90 Copper 95 Zinc 90 Manganese 95 3.14

POWER

The study assumes a power connection with the local power utility. A power transmission line extension will be erected from the nearest appropriate location. Operation of a sulfuric acid production facility will supply sufficient heat for steam to generate more than enough power to supply the mine and process requirements. The capital cost estimate for the sulfuric acid plant includes the cogeneration capacity. Operating cost estimate includes a credit for cogeneration in the sulfuric acid plant. 3.15

WATER

This evaluation assumes sufficient water will be available to supply process and potable requirements for the project. The volume required is estimated as one-half ton water for each ton of ore processed. This is an accepted rule of thumb for mining operations in arid regions and is conservative because tailings filtration will remove much of the water that would ordinarily be lost as interstitial water or to evaporation in conventional slurry disposal operations.

M3-PN100041 26 October 2010 Rev. 2

7

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Make-up water requirement is thus 0.5 x 4000 tpd = 2000 tpd x 240 gallons/ton = 320 gallons per minute. The study further assumes that half of the water will come from mine dewatering whether underground or open pit. The remainder of the water will come from local wells at depths, design and locations to be determined. Both mine dewater and well water will have satisfactory quality for process and potable uses. 3.16

PERMITS

Mine development requires a host of environmental and other development permits from Federal, State and local agencies. The most involved permit will likely be the approval of a mine plan of operations for the portions of the project on lands administered by the Federal government. Approval of the plan will probably require preparation of an environmental impact statement (EIS) under the National Environmental Policy Act. Other Federal permits may be required by the US Army Corps of Engineers, the Fish and Wildlife Agency, and perhaps others. Major permits required by the State of Arizona will include an air quality permit, aquifer protection permit (APP), water discharge permits under the Arizona Pollutant Discharge Elimination System, and others. Permitting will require several years to complete and will cost up to $15,000,000.

M3-PN100041 26 October 2010 Rev. 2

8

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 3.17

PRELIMINARY ECONOMIC ASSESSMENT STUDY

OPERATING COSTS

Table 3.17-1 presents a summary of the operating cost estimate. Table 3.17-1: Operating Cost Summary Area Description

Annual Cost

Unit Cost/Ore Ton

Mining Operations

$27,943,000

$19.14

Process Plants Labor Electrical Power Reagents Wear Items Propane Maintenance Parts Supplies & Services

$10,490,200 ($2,952,816) $50,120,359 $427,050 $0 $2,227,367 $1,026,000

$7.19 ($2.02) $34.33 $0.29 $0.00 $1.53 $0.70

Total Process Plants

$61,338,160

$42.01

General Administration Labor Supplies & Services

$1,827,840 $2,014,500

$1.25 $1.38

Total General Administration

$3,842,340

$2.63

$93,123,500

$63.78

Total

M3-PN100041 26 October 2010 Rev. 2

9

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 3.18

PRELIMINARY ECONOMIC ASSESSMENT STUDY

CAPITAL COST ESTIMATE

Table 3.18-1 presents a summary of total initial capital costs. Table 3.18-1: Initial Capital Costs (US$000) Total Direct Field Cost (Without Mine) Mobilization AZ Transaction Privilege Tax @7% Fee - Contractor (5)

$176,422 $5,40 $5,414

Total Constructed Cost

$114,046

Management & Accounting Engineering Project Services Project Control Construction Management EPCM Fixed Fee Total EPCM

$855 $7,413 $1,140 $855,000 $6,842 $855 $17,962

Total Contracted Cost

$132,000

Sulfuric Acid Plant Mine Cost (100% Development) Commissioning And Spare Parts Contingency Bonds & Insurance Owner's Cost Total Evaluated Project Cost

M3-PN100041 26 October 2010 Rev. 2

$76,080 $68,331 $3,776 $51,029 $6,500 $337,723

10

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

4

INTRODUCTION & TERMS OF REFERENCE

4.1

PURPOSE

The purpose of the study is to prepare a reasonably executable plan of development for the Hardshell deposit and to apply accepted cost estimation tools to create operating and capital cost estimates for the plan. The financial model treats the cost estimates, along with reasonable projections for metal prices, taxes, and other financial elements to predict the economic performance of the project and to analyze the performance using standard economic metrics. 4.2

SOURCES OF INFORMATION

All information relied upon for this study was developed in support of the current development. 4.3

PERSONAL INSPECTIONS

On May 5, 2010, Jerry Bollman, Erin Kain, and Tim Oliver drove to the Hardshell project site. The purpose of the visit was to check out the terrain and inspect candidate facility sites. The inspection also reviewed the area to the east of the deposit to verify suitability for tailings disposal. 4.4

UNITS AND ABBREVIATIONS

The report considers US Dollars ($) only. Unless otherwise noted, all units are avoirdupois or English units, grades are described in terms of percent (%), grams per metric tonne (g/tonne) or troy ounces per short ton (oz/t), with tonnages stated in dry short tons (2,000 pounds). Salable base metals are described in terms of pounds or tons. Salable precious metals are described in terms of troy ounces. The following abbreviations are used in this report.

M3-PN100041 26 October 2010 Rev. 2

11

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Table 4.4-1: Units Terms and Abbreviations Abbreviation AA AAL Ag AG AT Au AZDWR ADEQ BLM CCD CNF CO3 COG Cu CV dba DDH DO DTB EMF EPA FA g/tonne GPS ICP IRR kcal kg km k kW-h L LOM Ma MRA Mn MY NFRAP NPL NPV NSR opt oz/t Pb PSD ppm PAH % QA/QC M3-PN100041 26 October 2010 Rev. 2

Unit or Term Atomic Adsorption American Analytical Laboratories Silver Autogenous Grinding Assay Ton Gold Arizona Department of Water Resources Arizona Department of Environmental Quality Bureau of Land Management Counter Current Decantation Coronado National Forest Carbonate Cutoff grade Copper Coefficient of Variation (standard deviation/mean) doing business as Diamond Drill Hole Dissolved Oxygen Draft-Tube Baffled Electromotive Force Environmental Protection Agency Fire Assay grams per metric tonne Global Positioning System Inductively-Coupled Plasma Internal Rate of Return Kilocalories Kilograms Kilometer Thousands Kilowatt-hour Liters Life of Mine Million years old Mine Reserves Associates Manganese Million years old No Further Remedial Action Planned National Priority List Net Present Value Net Smelter Return Troy ounces per English ton troy ounce per short ton Lead Particle Size Distribution Part per million Pincock, Allen & Holt Percent by weight Quality Assurance/Quality Control

12

WILDCAT SILVER CORPORATION HARDSHELL PROJECT Abbreviation RC t tpa tpy tpd US$ / USD USFS USGS WSC XRD XRF Zn 2-D 3-D 4WD

M3-PN100041 26 October 2010 Rev. 2

PRELIMINARY ECONOMIC ASSESSMENT STUDY Unit or Term Reverse Circulation Short Ton (2,000 lbs) Tons per annum Tons per year Tons per day United States Dollars United States Forest Service United States Geological Survey Wildcat Silver Corporation X-Ray Diffraction X-Ray Fluorescence Zinc Two-Dimensional Three-Dimensional Four-Wheel Drive

13

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 5

PRELIMINARY ECONOMIC ASSESSMENT STUDY

RELIANCE ON OTHER EXPERTS

In cases where the M3 Preliminary Economic Assessment Study author, Timothy S. Oliver, P.E., Qualified Person, has relied on contributions of the Qualified Persons listed in Appendix A, the conclusions  and  recommendations  are  exclusively  the  Qualified  Persons’  own.    The  results  and   opinions outlined in this report that are dependent on information provided by Qualified Persons outside the employ of M3 are assumed to be current, accurate and complete as of the date of this report. Reports received from other experts have been reviewed for factual errors by Wildcat and M3. Any changes made as a result of these reviews did not involve any alteration to the conclusions made. Hence, the statements and opinions expressed in these documents are given in good faith and in the belief that such statements and opinions are not false and misleading at the date of these reports. Metallurgical   testing   done   by   Wildcat’s   consultants   depends   on   the   samples’   accuracy   representing the ore body. The metal prices utilized herein were provided calculated by M3 in accordance with NI 43-101 requirements. Mining is a risky business. The risk must be borne by the Owner. M3 does not assume any liability other than performing this technical study to normal professional standards. 5.1

RESOURCE MODELING

Mark Odell, P.E., of P.M., LLC is the Qualified Person in charge of Resource Modeling. 5.2

MINE PLANNING

Mark Odell, P.E., of P.M., LLC is the Qualified Person in charge of Mine Planning. 5.3

RESERVES

Clayr Alexander, P.E., an independent consultant of Wildcat Silver Corporation, is the Qualified Person in charge of Resources. 5.4

GEOLOGY

Fleetwood Koutz, AIPG C.P.G., an independent consultant of Wildcat Silver Corporation is the Qualified Person in charge of Geology and project history for this study. 5.5

METALLURGICAL TESTING

George Owusu, P.E., of Hazen Research, Inc. is the Qualified Person in charge of Metallurgical Testing.

M3-PN100041 26 October 2010 Rev. 2

14

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 5.6

PRELIMINARY ECONOMIC ASSESSMENT STUDY

FLOW SHEETS

Tom Drielick, P.E., of M3 Engineering and Technology Corporation is the Qualified Person in charge of the Flow Sheets. Flow Sheet design was performed by Laurie Tahija and Erin Kain of M3 Engineering and Technology Corporation. 5.7

PROCESS PLANT COSTING

Conrad Huss, P.E., of M3 Engineering and Technology Corporation is the Qualified Person in charge of the Process Plant Costing. Estimates were performed by Joaquin Leyba of M3 Engineering and Technology Corporation.

M3-PN100041 26 October 2010 Rev. 2

15

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

6

PROPERTY DESCRIPTION & LOCATION

6.1

LOCATION

The Hardshell Property is part of the Harshaw and Patagonia Mining Districts located in the Patagonia Mountains of Santa Cruz County, Arizona (Figure 6.1-1). Hardshell is located six miles southeast of the town of Patagonia, which has a population of approximately 1,000 people. Note on location coordinates: This report uses the official Arizona State Plane Coordinate system; NAD 83; Central zone; in international feet.

M3-PN100041 26 October 2010 Rev. 2

16

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 6.1-1: Location Map M3-PN100041 26 October 2010 Rev. 2

17

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

The property is 15 miles northeast of the Santa Cruz county seat at Nogales and 50 miles southeast of the nearest large commercial center of Tucson, in adjacent Pima County. The international border with the State of Sonora, Mexico is eight miles to the south. The property covers about 2.6 miles in a north-south direction and about 2.3 miles in an east-west direction. The property is within Sections 2, 3, 4, 8, 9, 10, 11, 14, 15, and 16 of Township 23 South, Range 16 East, G&SR BL&M General   property   coordinates   are   31°   28’   North   latitude   and   110°   43’   West longitude. 6.2

PROPERTY DESCRIPTION

The Hardshell Project is located in the northern end of the Patagonia Mountains. Elevations on the property range from 4,900 to 6,200 feet above sea level. The area is sparsely populated. Livestock grazing is the dominant land use. The property is located within the USFS Farrell Grazing Allotment. The core of the property, 154 acres, is on mining claims patented in the 19 th century. As such, it is private property with both surface and mineral rights Most of the surrounding property, the unpatented claims and the Farrell Grazing Allotment, are Federal lands administered by the US Department of Agriculture, National Forest System, in the Sierra Vista Ranger District of the Coronado National Forest. The property contains remnants of historic mining and exploration activity including shafts, trenches and other surface openings. Dirt roads and primitive trails lace the area. They are used for recreation, access to grazing cattle and mining claims, and by suspected undocumented immigrants. 6.2.1

Property Ownership

The Hardshell Property is owned outright by Arizona Minerals, Inc., a Nevada Corporation which has been registered with the Arizona Corporation Commission to do business within the State of Arizona since October 4, 2005. On October 28, 2005, Arizona Minerals entered into an agreement with ASARCO, LLC to purchase the Hardshell Property. At that time, the property consisted of the eight patented claims in three separate tax parcels acquired by a combination of patents in 1961 and purchase in 1968 and 1978; as  well  as  26  unpatented  “Shell No.”  lode  claims   located in 1965 and 1968 by American Smelting and Refining Company. American Smelting and Refining Company later changed its name to ASARCO, Inc. and was subsequently merged into ASARCO LLC. On February 17, 2006, the US Bankruptcy Court, Southern District of Texas, Corpus Christy Division in Case 05-21207 approved the sale of the Hardshell Group of Mining Claims by ASARCO, LLC to Arizona Minerals, Inc. This acquisition closed on March 14, 2006, with the final payment made to ASARCO, LLC by March 14, 2007. Arizona Minerals has no royalty or other obligations due ASARCO, LLC or any predecessor claim owners. Arizona Minerals also acquired all available previous originals or copies of factual property, geologic, drilling, assay, engineering, water, metallurgical and other map and written data, M3-PN100041 26 October 2010 Rev. 2

18

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

including remaining core, samples and assay pulps from ASARCO, LLC at the completion of the property acquisition. Wildcat Silver Corporation, a Canadian Public Company, has an 80 percent stock interest in Arizona Minerals, Inc. Diamond Hill Investment Company, a private Canadian concern holds the remaining 20 percent of the shares of Arizona Minerals, Inc. Wildcat Silver Corporation is the operating company for the Hardshell Property and has been in charge of all exploration efforts at Hardshell since 2006. Wildcat Silver Corporation is listed on the Ventures Section of the Toronto Stock Exchange as of September 2008 under  the  symbol  “WS.” 6.3

MINERAL TENURE

The Hardshell Property consists of mining claims located in the Harshaw and Patagonia Mining Districts. The property purchased from ASARCO, LLC included 8 patented and 26 unpatented lode mining claims. The Title to Mineral Rights  is  vested  in  WSC’s  majority-owned subsidiary Arizona Minerals Inc. A map of the claims is shown as Figure 6.3-1. Arizona Minerals located an additional 44 lode claims (about 909 acres) surrounding the original 26 unpatented claims in December 2006 and January 2007. In April and May 2007 an additional 77 lode claims (about 1,447 acres) were staked by Arizona Minerals, to the east toward the San Rafael Valley, and south almost to the Mowry Mining Camp. In 2008, four additional claims were staked to cover orphan fractions around patented ground, one unnecessary claim dropped, and 44 claims were amended at the recommendation of the BLM to cover slight imperfections in the descriptions of the quarter sections in this non-standard unsurveyed-protracted township. An additional 16 claims (about 330 acres) were staked in September 2008 to complete the NE corner of the claim block. This brings the total to 166 unpatented lode claims on surface lands of the Coronado National Forest. The holdings now consist of eight patented lode mining claims totalling about 154 acres with the surface and mineral rights owned outright. The patented land is surrounded by 166 contiguous “Shell” unpatented lode mining claims totalling approximately 3,100 acres. Under the terms of United States mining law, the unpatented mining claims can be held as long as the annual federal maintenance fee is paid (no expiration date). Data on the individual claims is shown in Table 6.41 (Patented Claims) and Appendix B (Unpatented Claims) to this report. WSC contracted a registered land surveyor, Darling Environmental & Surveying (Darling), to complete a Record of Survey (new corner pins reset where necessary) for all eight patented claims. This was done, in part, to assist USFS and BLM in accurately reflecting the patented claims on government working maps, which previously were up to 600 feet off from the correct locations. The Record of Survey was filed with the Santa Cruz County Recorder and has become part of the Official Title Record. The patented claim boundaries have been brushed and flagged by WSC to help better identify the boundaries. Unpatented claim boundaries were also checked or established (new claims) by Darling. Old unpatented claim corners were checked and new unpatented corners set, both using GPS survey methods by Darling. Highly-accurate differential GPS was used for the patent Record of Survey and primary control for the unpatented claims. Hand-held GPS and compass line-of sight was used for secondary work on M3-PN100041 26 October 2010 Rev. 2

19

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

the May 2007 unpatented claims. The last 16 claims staked in September 2008 by Arizona Minerals used compass and tape survey methods starting from previous GPS corners. The wholly-owned, patented land parcels with full surface and mineral rights have annual payments of property taxes due to Santa Cruz County, Arizona who regulate land usage by zoning and other laws. The mineral rights for the unpatented mining claims are held by the annual payment of maintenance fees to the US Bureau of Land Management, U.S. Department of Interior for each claim. The receipt (Notice of Intent to Hold) for the payment of these BLM maintenance fees is also filed with the Santa Cruz County Recorder annually. Under the terms of the United States mining law, the unpatented claims can be held as long as the annual Federal maintenance fee is paid to the BLM (no expiration date). The surface rights of the unpatented mining claims are administered by the US Forest Service under multiple-use regulatory provisions. John C. Lacy, attorney-at-law of the firm DeConcini, McDonald, Yetwin & Lacy, PC issued a 50-page Title Report, dated June 19, 2006. He found both patented and unpatented claims to be valid as of the date of the opinion, and that the necessary assessment work and annual payments for maintenance had been completed since before and after the federal BLM legal assessment changes of August 31, 1993 back to the origin of the claims. All taxes and other recording requirements with Santa Cruz County were also in order. In an updated 54-page Title Opinion of May 6, 2008, John C. Lacy stated that the surface and mineral estates of the eight patented and 147 unpatented claims of Arizona Minerals, Inc. were still in order and that all required payments and taxes to the US BLM and Santa Cruz County had been made to date. Taxes due to Santa Cruz County for the three patented parcels have been paid to date. 19 unpatented claims were  staked  and  recorded  subsequent  to  Mr.  Lacy’s  report. Maintenance fees have been paid to the BLM for all unpatented claims through September 1, 2011. All mineral resources disclosed in this report are full contained within the property boundaries as described above.

M3-PN100041 26 October 2010 Rev. 2

20

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 6.3-1: Project Claim Block

M3-PN100041 26 October 2010 Rev. 2

21

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Table 6.3-1: Patented Mining Claims Situated in the Harshaw Mining District Un-Surveyed Sections 3, 4 & 9, Township 23 South, Range 16 East, G & SR Base Line & Meridian, Santa Cruz County, AZ Mineral Survey Santa Cruz County BLM Recorded Survey Claim Quadrant Claim Name County Records Page Assessor’s   Patent Number Completed Acreage of Section Number Lot Document Parcel Number Camden Mine 121192 4460 * 11/5/1958 20.66 SW,SE 4 Doc. 25 30 105-49-001A Camden No. 2 121192 4460 * 11/5/1958 20.66 SW,SE 4 Doc. 25 31 105-49-001A Hardshell No. 1 121192 4460 * 11/5/1958 20.66 SW,SE 4 Doc. 25 32 105-49-001A Hardshell No. 15 121192 4460 * 11/5/1958 17.3 SW,SE 4 Doc. 25 33 105-49-001A Bluff 10279 500 50 4/27/1883 20.07 SW3 Book 88 467 105-52-001 Hermosa 10278 499 49 4/27/1883 20.65 SW3,SE4 Book 88 469 105-52-001 Salvador 10614 498 48 4/26/1883 14.45 SE 4 Book 88 482 105-52-001 Alta 8635 84 38A 1/3/1877 20.11 NW,SE 4 Deed of Mines 213 105-49-002 Book 17 Filed with the Official Records of Santa Cruz County, Nogales, Arizona and U.S. Bureau of Land Management, Phoenix, Arizona. Note: the last four claims, when surveyed and patented, were part of Pima County, Arizona Territory. Early records with Pima County, Tucson. These sections in T23S, R16E are non-standard, un-surveyed and protracted. *No lot number assigned Total Acreage: 154.39

Find the remaining unpatented claim information in Appendix B to this report. 6.4

OPTION AGREEMENTS

There are no property or mineral option agreements for this project. 6.5

AGREEMENTS AND ROYALTIES

There is a 2 percent NSR Royalty payable by Arizona Minerals on any future production. There are no underlying royalties, other fees or obligations due to ASARCO, LLC or previous claim holders. Arizona Minerals has granted a grazing lease to the Hale Family Revocable Trust doing business as (dba) the Hale Ranch on the 154 patented acres in cooperation with the US Forest Service, Sierra Vista Ranger District. This is a continuation of a similar lease that had existed between the Hale Ranch and ASARCO LLC and predecessors since 1966. The Hardshell Deposit is under the American Peak Pasturage of the Farrell Grazing Allotment from the USFS to the Hale Ranch. Range Management on the unpatented ground is supervised by the USFS. Some arrangements will be required with the Hale Ranch/USFS Farrell Grazing Allotment for loss of grazing areas on the American Peak pasturage during mine production. Santa Cruz County has a 66-foot wide road easement centered on the Harshaw Road (USFS CNF Road No. 49). About 400 feet of the Harshaw Road crosses the northwest end of the Alta patented ground, where an access road to the property is located. The local power company, UniSource Energy Services also has a high voltage power line with easements along the Harshaw Road, through the Alta patented claim. Branch of this power line also extend through the Harshaw town site owned by the Hale Ranch and continue into the San Rafael Valley. 6.6

PLACER CLAIMS

There are no placer claims for this project. M3-PN100041 26 October 2010 Rev. 2

22

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

7

ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

7.1

ACCESSIBILITY

The Hardshell Property is located about 50 miles southeast of Tucson, Arizona and 15 miles northeast of Nogales, Arizona. The property is eight miles north of the international border with Sonora, Mexico, in Santa Cruz County, Arizona. Access to the property is either from Tucson or Nogales to the town of Patagonia. From Patagonia, a county road, mostly paved, leads six miles to the former town site of Harshaw. A significant USFS-numbered road network, originally constructed largely for exploration, mining and ranching; exists around Harshaw and the district; but only major arteries are maintained by the county. The property extends southward for about two miles from Harshaw. Access around the property is by graded dirt roads, some of which have been used since the 1870s. The property lies on the eastern pediment flank of the Patagonia Mountains that forms the northwestern edge of the Mexican Highlands section of the Basin and Range Physiographic Province of the southwestern United States. Elevations in the mountains range up to 7,200 feet above sea level, while elevations on the property range from 4,900 to 6,200 feet. The property is dominated by the western San Rafael Valley pediment plateau at about 5,400 feet, which onlaps to the west the higher foothills of the range. The plateau is deeply incised by tributaries of Harshaw Creek which drain to the north into Sonoita Creek at the Town of Patagonia. 7.2

CLIMATE

The Harshaw-Patagonia area has a semi-arid mountainous climate characteristic of the Arizona Uplands. Temperatures seldom remain above 90° Fahrenheit in the summer with warm to moderately cool nights. Winter days are usually mild with periodic frosts at night. Light snowfall is not uncommon but seldom remains more than a few days. Cooler temperatures and higher winds are found at higher elevations in the area, but are often channelled through narrow, lower valleys. Precipitation, characteristic of this upland desert region, is variable and cyclic. Annual precipitation averages 17 inches but has ranged from 8 to 36 inches per year over the years with higher values at higher elevations in the range, and 30 percent variability over a few miles of separation. Over half of the rainfall comes during the period of late June to early October in cyclonic,  often  torrential  “monsoonal”  thunderstorms,  often  with  very  high,  destructive  winds.   The operating and construction seasons for the Hardshell Property are year-long. 7.3 7.3.1

LOCAL RESOURCES Water

Historically, significant amounts of ground water have been produced for mining and milling from the Harshaw Creek drainage and the Hardshell property itself without diminishing local M3-PN100041 26 October 2010 Rev. 2

23

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

ranch and domestic supplies. The local base level of the water table is around 4,850 feet elevation at Harshaw. There are significant groundwater resources in the San Rafael Valley, often on private land, and often deep. The United States Geological Survey (USGS) and USFS regularly monitor stream flow and water quality in the district and region. Hardshell and the local area of the Harshaw Creek drainage are not part of an Arizona Department of Water Resources Active Management Area. Available information supports the assumption that adequate water supplies are available within a reasonable distance from the property. 7.3.2

Workforce

Southern Arizona hosts several major mining districts and the local area has several large active mines. Experienced, skilled workers are readily available within a reasonable commuting distance. 7.3.3

Commercial Resources and Services

Recourses in Patagonia are limited. The town has a high school, a hotel, several restaurants and bed & breakfasts, a small grocery store and a gas station. The town is not a significant source of supplies or services. Nogales, 20 miles southwest of Patagonia, is the county seat for Santa Cruz County. With a population of about 20,000, Nogales is large enough to serve as a supply and service center for most needs. Nogales has rail freight service, and a small commercial airport just 20 miles from the site. Many in the Patagonia area prefer doing business and working in rapidly growing Sierra Vista, in Cochise County with a population of 45,000, about 40 road miles to the east, with many modern stores and a variety of services and an airport with scheduled service. US Army Ft. Huachuca adjoins with a population of 8,300 and several other small towns and subdivisions have an added population of 5,000-8,000. The USFS Sierra Vista Ranger District has their headquarters in nearby Hereford. Tucson, just over 65 miles to the north, has historically been the commercial and service/supply center   for   one   of   the   world’s   largest   mining   districts.   Tucson   has   a   full-service commercial airport and is a large rail center. 7.3.4

Social Services and Security

Patagonia has K-12 schools and a well-stocked town library. Patagonia has a small local town police force. The Santa Cruz County Sherriff and the Arizona Highway Patrol also maintain order locally. Patagonia has a small family medical facility and EMT service associated with the Fire Department and helicopter landing facilities. The US Border Patrol has a major station in Sonoita

M3-PN100041 26 October 2010 Rev. 2

24

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

and also in Nogales and heavily patrols the region by land and air and assists in local law enforcement and emergency medical services. Nogales has a small regional   hospital.   Serious   cases   are   transported   to   one   of   Tucson’s   large   hospitals by ambulance or helicopter. Any other more specific social services are available in Nogales, Sierra Vista, or Tucson. 7.4 7.4.1

INFRASTRUCTURE Power

A major power line, 13.8 kV follows Harshaw Creek from west of Patagonia to Harshaw and through the San Rafael Valley to Mexico. Higher capacity power lines traverse the Sonoita Creek Valley from Huachuca City to Sonoita-Elgin and Patagonia from the east. A major regional natural gas pipeline (El Paso Natural Gas) from Nogales to the northeast, which is tapped for use in the Sonoita Valley. A trunk phone line (Qwest) follows the Harshaw Creek Road with phone service available in Harshaw. Cell phone service is usually good in the Patagonia-Harshaw area with cell towers on Red Mountain. 7.4.2

Transportation

See section 7.1 – Accessibility. 7.5

PHYSIOGRAPHY

The Hardshell property is located in an area of moderate to rugged topography, with numerous arroyos and canyons incised through volcanic stratigraphy. The arroyos and canyons contain intermittent streams that ordinarily flow in response to rainfall events or for extended periods during rainy periods. Elevation in the property area ranges from 4800 to 6,200 feet above sea level. Vegetation is typical of the Piñon-Oak-Juniper Woodland and is characterized by short (usually less than 20-feet tall) evergreen trees and oaks (up to 60 feet) mixed with a variety of desert and upland shrubs or open grasslands on the lower slopes of mountains.

M3-PN100041 26 October 2010 Rev. 2

25

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

8

HISTORY

8.1

GENERAL HISTORY, MINING HISTORY, AND PRODUCTION

Mining in the Harshaw District dates from Spanish Colonial times from the mid-18th century, but is often poorly documented before the 1870s. Oxide lead-silver vein ores were mined from the Trench property a mile to the northwest of Hardshell and the Mowry property several miles to the south. This work continued sporadically until the late 19th century. History from the late 1800s and early 1900s can be found in Schrader (1915: USGS Bulletin 582) and Keith (1975: AZ Geol. Survey Bulletin 191). Some of the early small-scale mine owners in the Hardshell area developed the ore deposits and registered small tonnages of production, mostly direct-shipping oxides. This production is seldom accurately recorded. The historic production from the individual mines in the Hardshell area is less than 150,000 tons, but around 2 million tons for the greater Harshaw district. The main focus of the production effort was silver and minor lead, but important production of directshipping manganese ores was recorded, especially during the two World Wars and Korean War. Historical production records from the Hardshell and adjacent properties are sketchy, but the bulk of the production from the small underground operations in the area were about half directshipping oxide ores with the remainder being milling ores. There was a small jig mill operating at the Hardshell Incline Mine from 1896 to 1905, as well as other local mills and smelters elsewhere in the area at various points in time. A summary of the historic production of the Hardshell area mines is found in Table 8.1-1. This table was derived from Arizona Bureau of Mine Data (Bulletin 191, 1975) and ASARCO file data compiled by Fleetwood Koutz, as part of his research work at the University of Arizona and at ASARCO. The Alta Claim just northwest of Hardshell was staked in 1877. It produced several thousand tons of oxidized high-grade lead-silver ores from a 35 degree NE-dipping narrow vein. The Hermosa mine, one-half mile to the southeast of Hardshell was discovered about the same time and developed into a major project that brought several thousand people to the Harshaw area in 1880 to 1883. The Hermosa developed high-grade silver halide ores, in a 30-degree northdipping stratiform vein, in the volcanic stratigraphy with mineralized cross structures that averaged 20 opt Ag. About 70,000 recorded tons were processed in a local 100 tpd mill, over an 18 to 24 month period. The 1.4 million ounces of production is confirmed by Wells Fargo shipping records. Additional production from 1902 to 1943 from scavenging in open cuts and the old workings might bring total Hermosa production up to 2 million ounces silver, including minor lead and copper. The Hardshell Incline Mine (separate mineralized horizon from the current Hardshell deposit) was discovered in 1879. Production from this and neighboring workings was carried out between 1896 and 1964 and amounted to about 35,000 tons with an average grade of about 8 ounces of silver per ton and around 6 to 8 percent lead. The Hardshell Incline Mine in 1919 produced jig concentrates averaging 40 percent manganese, 12 percent silica, 15 oz/t of silver, and 10 percent lead. M3-PN100041 26 October 2010 Rev. 2

26

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Table 8.1-1: Historic Production from Hardshell Area Mines (AZ Bureau of Mines, Bulletin 191, 1975) Mine Name

Production Period

*Tons Produced

Ag (oz/t) Zn (%) Alta Mine Before 1905 3,500 10 NA Hardshell Incline 1896-1905 20,000 unknown unknown Hardshell Mine 1921-1927 900 20 NA Hardshell Mine 1905-1940 Several  000’s unknown unknown Hardshell Incline 1943-1948 2,500 8 NA Hardshell Mine 1963-1964 2,900 8 NA Hardshell Mine 1964 to present None Hardshell Mine 1880-1902 70,000 20 unknown Hardshell Mine 1880’s Unknown unknown unknown Black Eagle Mine 1880’s 4,900 22 NA Black Eagle Mine WWII Few hundred unknown NA Bender Mine Prior to WWI 50 20 NA Bender Mine WWI, WWII, 1952-55 6,000 unknown unknown * Total production from mines in the Hardshell area is probably < 150,000 tons

8.2

Average Ore Grades

Comments

Pb (%) 35 unknown 20 unknown 6 6

Cu (%) 1 unknown NA unknown NA NA

Au (oz/t) minor unknown NA unknown NA NA

Mn (%) NA NA NA unknown NA NA

unknown unknown NA NA NA unknown

unknown unknown NA NA NA unknown

unknown unknown NA NA NA unknown

unknown unknown unknown unknown NA unknown

Direct shipping ore Direct shipping and milling ore. Direct shipping ore, with some Mn in WWI ASARCO production, direct shipping ore McFarland lease from ASARCO, smelter flux About 1.12 million oz Ag produced in period About 30,000 oz Ag produced in period Direct shipping Mn-Ag ore Direct shipping Mn ore Mn smelter fluxing ore Direct shipping Mn ore

ASARCO EXPLORATION HISTORY

ASARCO operated the nearby Trench Mine, one mile northwest of Hardshell, between 1939 and 1949, producing lead, zinc, silver, and copper from a fissure vein sulfide deposit. The 150-tpd Trench lead-zinc flotation mill also custom operated on district ores between 1939 and 1964. The Hardshell Property was first used as a source of water for the Trench Mill, and was explored by ASARCO by geological mapping and intermittent drill programs from 1940 until about 1991. The original diamond drilling, spurred by WWII premium metal prices, failed to find significant extensions of Hardshell Incline Pb-Ag ores, but several thousand tons of Pb-Ag moderate grade oxide ore were shipped from the lower levels of the incline from 1943 to 1948 and again in 1963 and 1964. Diamond drilling to the southeast of and stratigraphically below the incline led to the discovery of thick Ag-Pb-Zn bearing, apparently stratiform manganese oxides of the Main Manto from 1947-54. The four main Hardshell claims were patented by ASARCO on this basis from 1958 to 1961. Rising silver prices in the mid-1960s, after the closure of the Trench Mill, lead to renewed interest in Hardshell mineralization. Restudy of the data and geologic mapping lead to staking additional claims in the district and acquisition of three patented claims of the Hermosa Group from 1965 to 1968. The Alta patented claim was purchased in the late 1970s. Detailed studies continued in the late 1970s by ASARCO with significant beneficiation test work, usually pyrometallurgical, continuing up until the early 1990s. ASARCO conducted test work on many processes to recover the silver including gravity and high-tension magnetic separation, electrostatic separation, reduction and segregation roasting, SO2 and thio-sulfate leaching and various cyanidation processes, in both company and commercial test laboratories. This work, except for reduction roast, did not progress much beyond bench scale testing and previous work was sporadic due to fluctuating metal prices. Improvements in technology have been beneficial for the current test work. ASARCO made a number of historical resource and “reserve” estimates that pre-date the reporting requirements of Canadian National Instrument 43-101. A qualified person has not reviewed these estimates and it is not completely known what assumptions, parameters, and limitations were applied   and   as   such   are   considered   “non-compliant.”   As   such,   the   following   estimates are presented for historical reference only and are not to be relied upon.

M3-PN100041 26 October 2010 Rev. 2

27

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

After initial drilling in 1968, an open pit resource of 6.5 million tons at 5 opt Ag, 1 to 2 percent total Pb+Zn, 15 percent MnO2 was calculated. This figure is contained in many older publications on Hardshell. An open pit resource was calculated by ASARCO in 1975 to contain 20 million tons at an average grade of 3.33 oz/t silver with 8 percent manganese, with a stripping ratio of 2:1 (waste:ore). An ASARCO resource estimate carried out in 1979 estimated a range of resources, the median of which is 6,586,500 tons, at an average grade of 7.92 oz/t silver, at a cutoff grade of 5 oz/t silver. A mineral inventory estimate calculated by ASARCO in 1984 estimated a resource of 9,596,000 short tons with an average grade of 6.9 oz/t silver, at a cutoff of 1.5 ounces of silver per ton. Numerous variations in the 1984 estimate were made using different cut-offs, multi-metal and Mn contents. From 1994 to 2002, Pan American Silver had a minimal lease/option/first right of refusal on most  of  ASARCO’s  Hardshell  property.  Pan  American  Silver  did  no  significant  field exploration work, though the company conducted internal economic evaluations. 8.3

PROPERTY OWNERSHIP

The Hardshell Property is owned outright by Arizona Minerals, Inc., a Nevada Corporation which has been registered with the Arizona Corporation Commission to do business within the State of Arizona since October 4, 2005. On October 28, 2005, Arizona Minerals entered into an agreement with ASARCO, LLC to purchase the Hardshell Property. At that time, the property consisted of the eight patented claims in three separate tax parcels acquired by a combination of patents   in   1961   and   purchase   in   1968   and   1978;;   as   well   as   26   unpatented   “Shell”   lode   claims   located in 1965 and 1968 by American Smelting and Refining Company. American Smelting and Refining Company later changed its name to ASARCO, Inc. and was subsequently merged into ASARCO LLC. On February 17, 2006, the US Bankruptcy Court, Southern District of Texas, Corpus Christy Division in Case 05-21207 approved the sale of the Hardshell Group of Mining Claims by ASARCO, LLC to Arizona Minerals, Inc. This acquisition closed on March 14, 2006, with the final payment made to ASARCO, LLC by March 14, 2007. Arizona Minerals has no royalty or other obligations due ASARCO, LLC or any predecessor claim owners. Arizona Minerals also acquired all available previous originals or copies of factual property, geologic, drilling, assay, engineering, water, metallurgical and other map and written data, including remaining core, samples and assay pulps from ASARCO, LLC at the completion of the property acquisition. Arizona Minerals located an additional 44 lode claims (about 909 acres) surrounding the original 26 in December 2006 and January 2007. In April and May 2007 an additional 77 lode claims (about 1,447 acres) were staked by Arizona Minerals, to the east toward the San Rafael Valley, and south almost to the Mowry Mining Camp. In 2008, four additional claims were staked to cover orphan fractions around patented ground, one unnecessary claim dropped, and 44 claims were amended at the recommendation of the BLM to cover slight imperfections in the descriptions of the quarter sections in this non-standard township. An additional 16 claims (about 330 acres) were staked in September 2008 to complete the NE corner of the claim block. This brings the total to 166 unpatented lode claims on lands of the Coronado National Forest. M3-PN100041 26 October 2010 Rev. 2

28

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 9

GEOLOGICAL SETTING

9.1

REGIONAL GEOLOGY

PRELIMINARY ECONOMIC ASSESSMENT STUDY

The regional geology of the area is shown in Figure 9.1-1. The geology below is summarized from Simons, 1972; Schrader and Hill, 1915; Koutz, 1984 and Berger et al, 2003. The oldest rocks in the Patagonia Mountains area are predominantly Proterozoic granodiorite with subordinate amounts of pelitic schist, diorite and gabbro. Phanerozoic siliclastic and carbonate rocks overlie the Precambrian basement. The Paleozoic section consists of Cambrian to Permian limestones, dolomites, and sandstones exposed at the Mowry historic mine located 2 miles south of Hardshell and in semi-homoclinal, 30 degree north-dipping section from Mowry to American Peak at Hardshell. The Permian section is known in the subsurface from drilling, for at least a mile north of American Peak. Mesozoic-aged volcanic, sedimentary and intrusive rocks are widely exposed. The oldest are Triassic to Jurassic-aged volcanic and sedimentary rocks. Volcanic rocks predominate; the sedimentary rocks include quartzite, sandstone, arkose and shale. Cretaceous andesitic (74 to 72 Ma) to felsic volcanic/volcaniclastic (83 Ma) and intrusive rocks cover much of the project area and extend to the north; on the western, southern, and eastern flanks of Red Mountain. Many of the Mesozoic volcaniclastic breccias demonstrate textural characteristics of caldron margin environments. Mesozoic and Cenozoic-aged granite intrusive rocks are widespread throughout the Patagonia Mountains. In the northwestern Patagonia Mountains, Jurassic-aged granite, dated at 160 million years (Ma), intrudes Triassic to Jurassic-age volcanic and sedimentary rocks. Most of the central and southern parts of the range consist of medium to coarse-grained hornblende granodiorite of Paleocene age (64 to 58 Ma). The main Paleocene aged Patagonia Granodiorite batholith is bounded by northwest-striking faults and its emplacement was structurally controlled. Paleocene-aged (Laramide) felsic volcanic and intrusive stocks are prevalent at Red Mountain (63 to 60 Ma) and west of the historic Trench mining camp in the Chief-Sunnyside Diatreme area (60 to 58 MA). Intrusions and alteration at Sunnyside are coeval with alteration at Hermosa (59 MA), east of Hardshell. The Hardshell area primary mineralization appears to be the outer zoned portions of the Sunnyside intrusive-mineralization center. Late Oligocene to Miocene-aged conglomerates, sandstones, ash flow tuffs and lake beds fill the San Rafael Basin to the east of the Patagonia Mountains and the northeast trending Sawmill Creek Basin. These basins have considerable Basin and Range-aged fault control, but earlier faulting may be present. Regionally, the most prominent faults strike northwest and northeast. Mineral occurrences are commonly localized at the intersection of these regional structures.

M3-PN100041 26 October 2010 Rev. 2

29

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 9.1-1: Geological Map In the Patagonia Mountains there are several parallel, northwest-striking, strike-slip fault zones, some of which were active during the Triassic and Jurassic, and again, episodically during the Cretaceous and early Tertiary. The Paleocene-aged Patagonia biotite-hornblende granodiorite batholith is elongated northwest and bounded by linear, sub-parallel fault zones. The strike-slip fault on its eastern margin is the Guajolote fault. To the northeast of the Guajolote fault is the northwest-striking Harshaw Creek fault, the most prominent fault in the range with up to seven M3-PN100041 26 October 2010 Rev. 2

30

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

miles of potential left-lateral, strike-slip displacement. Stratigraphic and structural relations between the two zones suggest that they were active during the Jurassic and Early Cretaceous, and that linking braided faults were developed and reactivated during the early Cenozoic. The Hogan-January-Norton-Alum Gulch fault, a northwest-striking high angle fault/shear zone extends from the Sonoita Valley west of Red Mountain southeast for at least five miles to Hardshell. There are both reverse (NE-side up) and right-lateral strike slip faulting along this zone. This fault zone is the locus of much of the mineralization in the Harshaw district including the  Flux,  Chief,  World’s  Fair,  Trench  Area, Alta, Hardshell and Hermosa. The American fault zone extends northward from Mowry and cuts across the east side of the Hardshell deposit. It is a normal fault and drops the Paleozoic section and covering volcanic section down to the east. The fault is apparently pre-mineral and confines the Hardshell Main Manto manganese oxide mineralization on the west of the fault. East of the American are two parallel normal faults, the North Hermosa and Hermosa, both of which also drop the volcanic section down to the east. These normal faults were active during Cretaceous volcanism, as shown by displaced horizons. Normal fault movement continued into the Tertiary along these and additional parallel zones into the San Rafael Basin and offset the Tertiary conglomerate section down into the basin. Northeast striking extensional faulting opens the Sonoita Valley into grabens and half-grabens northwest of Red Mountain and the town of Patagonia. Minor NE-striking normal faulting is also common in the Harshaw area. These faults commonly control stream drainages and cause minor offsets in the mineralized horizons at Hardshell. 9.2

PROPERTY GEOLOGY

A map showing the geology of the Hardshell property is presented in Figure 9.2-1. Geologic Sections, East-West and North-South, are shown in Figures 9.2-2 and 9.2-3. The Hardshell deposit is contained within a series of Cretaceous ash flow tuffs and volcanic breccias that were deposited upon an eroded paleosurface of gently north-dipping Permian-age carbonate units. The units mainly consist of the Concha Formation limestones, underlain by Scherrer Formation sandy, cherty, locally dolomitic limestones and sandstones, and in turn Epitaph Formation carbonates. The deposit is located in and above a series of uplifted, primarily north-south/east-west faulted, Paleozoic horst blocks that were active during Cretaceous volcanism. The Cretaceous-age tuffs and breccias are thinner over the Hardshell deposit than to the east and west where the tuffs and breccias rest conformably upon ignimbritic cooling units. Post ash-flow felsic feeder dikes and much later (72 ma) feeders to thick trachyandesite flows, that once completely covered the deposit area, intrude some of the bounding blocks of the horst. These trachyandesite feeders and relict outliers are common in the SW manto area and Hermosa.

M3-PN100041 26 October 2010 Rev. 2

31

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 9.2-1: Property Geology Map

M3-PN100041 26 October 2010 Rev. 2

32

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 9.2-2: Property Geology Cross Section - 167,800 N

M3-PN100041 26 October 2010 Rev. 2

33

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 9.2-3: Property Geology Cross Section – 1,075,400 E Figures 9.2-2 and 9.2-3 scales are in feet with no vertical exaggeration.

M3-PN100041 26 October 2010 Rev. 2

34

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

The major lithologic host for the Hardshell deposit is a fluvially reworked, epiclastic sandstone that is locally interbedded with very fine-grained tuff. This tuff is the poorly-welded facies of banded ignimbrites to rhyolite tuff breccias that occur at this stratigraphic horizon elsewhere on the property. The epiclastic sandstones are less well developed away from the center of the Hardshell manto but such tuffaceous, sandy, reworked horizons are common throughout the Hardshell volcanic section and are often well mineralized. High-angle faults, trending predominately north-south and east-west, bound the horst blocks in the area, and may have served as conduits for mineralizing fluids. However, recent diamond drilling has demonstrated the importance of the Hogan fault zone, a high-angle zone of braided shears, in-filled with clays and mineralization locally over several hundred feet wide which connects to the northwest with the January-Norton fault zone and becomes indistinct with the Hardshell deposit. There is 600 to 800 feet of reverse movement, northeast side up, on the Hogan zone at Alta and Hardshell Canyon based on offset 30-degree-dipping horizons in outcrop and in diamond drilling at depth. The Hogan Fault zone localizes but also laterally limits and offsets the Main Manto mineralization in the northern extension area. There is considerable low angle extensional faulting at Hardshell often along clayey bedding planes in the volcanic section. This faulting has controlled fracturing, alteration, mineralization and subsequent oxidation. The importance of low-angle faulting is especially well demonstrated in the Hardshell Incline horizon under Hardshell Ridge, where low-angle faulting rolls out of higher-angle, northeast striking normal faulting in heavily argillized areas. Development drilling of the Hardshell Deposit will continue to delineate the complex structural geology as well as the stratigraphy, as controls to mineralization. Drilling of the northern portion of the central horst block and under Hardshell Ridge has shown that volcanic and Paleozoic sections are apparently conformable, dipping about 30 degrees northeasterly and less so at the Alta claim. This would suggest possible local deposition of the volcanic section on a horizontal (or less steeply dipping) Paleozoic sequence, with post volcanic and probable pre-mineral tilting. The upper portion of the Concha Limestone is thinner in the Central horst block and has been apparently eroded away before volcanism compared to elsewhere in the deposit. The highest grade-thickness of silver, base-metal manganese oxide mineralization and alteration, drilled to date, is at the apex of the antiformal dome, formed by the central horst-block with the pre-mineral American Fault, along the easterly side. This suggests that deformation pre-dated the mineralizing event, that mineralizing fluids migrated to the topographically highest permeable area, fed by the Hogan fault zone, and that some post-mineral tilting and faulting of the deposit has occurred. However, in the southern part of the Hardshell Manto, south of Hardshell Ridge, and in the Salvador area, the lower part of the volcanic section appears to have very shallow dips and occurs in angular-unconformable contact with a hogback of the Paleozoic section, still with 30 degree northerly dips. Drilling to the south progressively encountered the underlying Scherrer and Epitaph units just below the volcanic section and the basal manganese oxide mineralization. This is particularly evident on the southern ends of N-S sections through the Hardshell Deposit. M3-PN100041 26 October 2010 Rev. 2

35

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Rotational or scissor faulting may be responsible for some of this dichotomous structural style in different portions of the Hardshell deposit. Complete exhumation and oxidation history of the Hardshell deposit is poorly understood but is important as Hardshell is primarily an oxidized deposit with considerable supergene silver enrichment. Fragments of massive silica alteration and manganese oxide mineralization are found in the late Tertiary basin-fill conglomerates to the east of Hardshell. Horizons of exotic manganese oxides, probably derived from the oxidation of Hardshell and associated manganese oxide-jasperoid rounded fragments are also apparent in the basin-fill conglomerates exposed in outcrop in the stream-dissected valleys and intersected in exploration drill holes east of the Hardshell-Hermosa plateau. The 26 to 28 Ma (Miocene) Harshaw Creek Tuff is found at the base of the basin-fill Tertiary section at the Harshaw town site and in valleys several miles to the east and in thin outlying scabs on the bedrock pediment surface west of the Hermosa workings and over the Hardshell deposit. Where not faulted or slumped this unit shows gentle 5 to 15 degree dips confirming that much of tilting of section in the Harshaw-Mowry area is pre-Miocene. The Harshaw Creek Tuff and associated poorly consolidated lacustrine and detrital sedimentary horizons exert strong control on the hydrology of the upper Harshaw Creek basin east of Hardshell-Hermosa plateau (Howser, 2005). Exposure of the Hardshell-Hermosa pediment surface at 28 Ma ago and its re-exhumation today suggests a long time of exposure, erosion and oxidation. This period provided time for strong supergene silver (and copper) enrichment which is evident in the mineralogy and high Ag-Cu grades in the shallow main manto compared to primary sulfide mineralization with relatively low Ag-Cu grades deep under northwest Hardshell Ridge and Canyon and Alta. The multiple erosion and exhumation over a considerable period of time also explains the very deep oxidation of mineralization, locally over 2,000-feet deep, while the present water table is seldom more than a few hundred feet below present valley bottoms. The 19 Ma oxidation age on cryptomelane, near the base of the main manto confirms this long period of oxidation (Koutz, 1984).

M3-PN100041 26 October 2010 Rev. 2

36

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 10

PRELIMINARY ECONOMIC ASSESSMENT STUDY

DEPOSIT TYPES

Hardshell mineralization generally has the form of a draped blanket, or manto-type, body of mineralization that replaced permeable, tuffaceous volcaniclastic units, as well as underlying limestones. The extent of mineralization and alteration varies from stockwork-fractured veinlets to pervasive replacement of the host rock. Regional, high-angle faults, such as the Hogan Fault Zone, extending to the northwest from Hardshell, acted as conduits for mineralizing fluids. Faulting and related argillic alteration also restricted diffusion of mineralizing fluids. These fluids introduced manganese, lead, zinc, and silver sulfides and sulfosalts, and remobilized large quantities of silica from the sandstones and from clay-and sericite-altered volcaniclastics to form a jasperoid silica cap that represents the boiling interface of the hydrothermal system. Subsequent Miocene-dated weathering has altered most of the sulfides to oxides, to depths up to 2,000 feet, depending on fracturing and permeability. The mineralization of the Main Manto Zone is almost completely oxidized, with mineralization transitioning to precursor sulfides with depth to the northwest. Upon oxidation, silver, base and other metals were largely taken into manganese oxides mineral lattice sites, rather than forming specific oxide minerals. Locally significant amounts of transported manganese and zinc oxides are found in fracture zones and permeable areas around and below oxidized mineralization and in local Tertiary basin-fill sedimentary and volcanic rocks. Mineralization at Hardshell is high-temperature epithermal, with quartz-adularia, and a suite of clays with outlying minor chlorite-epidote-montmorillonite propylitic zones in the mafic rocks and breccia clasts. Hardshell mineralization occurs in an outer Ag-Mn-Zn-Pb district scale zone several miles southeast from the age-dated, contemporaneous mesothermal Sunnyside coppermolybdenum porphyry system with deep, high temperature Cu-Zn-Pb-Ag skarns and carbonate replacement mineralization under Trench Camp. Significant amounts of apparent silver and copper enrichment now in oxide minerals is present at Hardshell. Silver and copper are most prevalent in the exposed multistage portions of the deposit located to the southeast. Silver and copper grades generally decrease with depth and to the northwest, particularly in the weakly oxidized to deep sulfide portions of the mineralization. Deeper parts of the carbonate-hosted mineralization at Hardshell contain significant amounts of wollastonite (CaSiO3), pink to tan rhodonite (MnSiO3) and other calc-silicate minerals with sulfides in contrast to the adjoining jasperoid-based sulfide mineralization. The amount of calcsilicates compared to jasperoid appears to increase to the northwest and at depth in the vicinity of the Alta claim. There is no known evidence of garnet-diopside skarn alteration at Hardshell but these minerals exist below the Trench Mine Area a mile to the northwest. There has been little evidence to-date of intrusive igneous activity directly related to mineralization on the Hardshell property which is in contrast to the Trench/Sunnyside mineralization. Fluidized breccia zones are rarely encountered in the volcanic or carbonate section from Hardshell to Alta with silicified and carbonate-flooded matrix and very rare rounded clasts of porphyry. It is not certain if these are related to Mesozoic volcanism or Laramide mineralization or both. Such fluidized breccia dikes, often with a definite igneous M3-PN100041 26 October 2010 Rev. 2

37

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

intrusive breccia clast component, are relatively commonly associated with deep Trench Camp mineralization a mile to the NW of Alta.

M3-PN100041 26 October 2010 Rev. 2

38

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 11

PRELIMINARY ECONOMIC ASSESSMENT STUDY

MINERALIZATION

The Hardshell deposit forms a gently-dipping blanket-like (manto) body replacing precursor volcanic and limestone host rocks. The manto as currently understood is up to 200 feet in thickness and occurs over an area of about 1,000 by 3,000 feet. The extent of mineralization and alteration varies from stockwork-fractured veinlets to pervasive replacement of the host rock. The manganese and iron oxides form crystalline veinlets and colliform and sooty encrustations that replace the host rock and fill open spaces. These are commonly intergrown with jasperoidal and coarse-grained quartz that has replaced permeable sandy and vuggy breccia horizons in the volcanic rocks. Massive jasperoid continues above the manganese oxide manto as a weaklymineralized caprock. Manganese oxide-rich mineralization and silicification also extend into the underlying Permian limestones and sandstones for variable distances in both stratigraphic and fault controlled zones. The mineralizing fluids originally introduced major amounts of alabandite (manganese sulfide), along with up to several percent each of galena, sphalerite and pyrite, with minor chalcopyrite and silver-bearing sulfosalts. Gangue minerals include manganese-bearing rhodonite and rhodocrosite, several stages of jasperodial to coarse grained quartz, adularia, calcite, wollastonite, and a variety of clays. With rare exceptions the precursor sulfides in the Main Manto Zone have been oxidized, and most of the silver and base metals are contained within manganese oxides. Silver, zinc, lead, and copper now occur predominately in the lattice-structure of cryptomelane (KMn8O16. H2O) as well as in chalcophanite (ZnMn3O7. 3H2O). Silver-poor willemite (zinc silicate: Zn2SiO4), hemimorphite (Zn4S2O7. H2O) and smithsonite (ZnCO3) are locally abundant. Zinc-manganese mineralization is more laterally extensive but not as continuous as lead-manganese-rich mineralization. Subordinate mineralized horizons overlie or are marginal to major fracture zones; these include the historic Hardshell Incline Zone and Hermosa deposits, which are contained within stratigraphically younger strata than the Hardshell Main Manto deposit. Peripheral manganese oxide mineralization, particular deeper varieties, can be quite weak in silver and base metals in spite of moderate to strong manganese content. The main Hardshell mineralization, the Main Manto Zone, has been subdivided into three mineral-types: 1. Volcanic hosted silicified material that shows some generalized differences between the upper and lower parts. 2. Underlying silicified and/or silicated/marbleized carbonate hosted material. 3. Silica caprock that is locally weakly mineralized with silver. In addition, there exist additional stratiform and stockwork-like manganese horizons both stratigraphically above and below the main manto mineralization. Disseminated manganese and iron oxides, adularia and quartz veinlets and silica flooding are the best surficial guides to underlying mineralization at Hardshell. M3-PN100041 26 October 2010 Rev. 2

39

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

The upper part of the Main Manto mineralization is generally characterized by a high lead to zinc ratio, and high manganese content. Silver content is variable, but can be very high, characteristic of strong supergene enrichment. The majority of silver, lead, zinc, and copper are contained in the lattice-structure of cryptomelane-type (KMn8O16) manganese oxide minerals. Minerals are colliform and sooty encrustations and replacements along fractures in vuggy, fine-grained silicified rock with significant amounts of coarse-grained quartz. Metal content of individual manganese-oxide grains varies widely. Silver, lead, and copper values are higher than in the lower, zinc-rich manto. A minor amount (less than 10 percent) of the silver is contained in ironoxides and clays as silver sulfides (acanthite), silver halides, and argentojarosite group minerals. There is minor pyromorphite-mimetite (Pb5 (PO4, AsO4)3 Cl) and anglesite (PbSO4) – cerussite (PbCO3) present. The upper contact of the Main Manto with the silica cap is relatively sharp. The lower part of the Main Manto changes gradationally downward from the upper part and is characterized by a generally higher zinc to lead ratio, generally higher manganese content, with variable but generally lower silver content than the upper part. The lower part of the manto is more vuggy than the upper part and the host rock is less completely silicified. At depth, the lower part of the Main Manto extends downward into carbonate host rocks, typically the Permian Concha Limestone. The limestone is commonly silicified and recrystallized. There are locally significant amounts of black calcite, characterized by finely divided manganese oxides in late calcite veinlets and flooding. Zinc-rich manganese oxides have often been transported in fracture and stratigraphic zones from the original locations of sulphide deposition. In the northern extension area, the stratigraphic level at which the Main Manto mineralization occurs is slightly lower, occurring in the base of the volcanic but more dominantly, in the top of the carbonate sequence. The silica caprock above the Main Manto Zone is composed of moderate to strongly silicified volcaniclastic and fine-grained clastic sedimentary rocks. Zones of similar silicification also occur above the caprock at contacts of formerly permeable zones. The silicified caprock consists of microcrystalline quartz and as a result is dense and hard, but brittle. The silver content is generally about 0.5 oz/t but locally is significantly higher. The majority of the silver is contained within late manganese oxide-quartz veinlets, but significant portions occur in copper and silver goethitic rims on pyrite and in iron oxides and sulfates after pyrite. There are minor amounts of silver halides and native silver in oxidized lead-arsenate minerals, after galena and sulfosalts. The silica caprock is thickest over the central and southern part of the manganese-oxide-rich Main Manto and has the highest silver content over the central part of the Main Manto. There are several minor stages of late cloudy to clear quartz and calcite that cover, encase, and encapsulate manganese and iron oxides and other oxidation products of sulfides, plus the relict sulfides themselves. An interesting aspect of the Hardshell mineralization is the great variety of rare arsenates, chlorides, hydrous silicates, and sulfates.

M3-PN100041 26 October 2010 Rev. 2

40

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 12

PRELIMINARY ECONOMIC ASSESSMENT STUDY

EXPLORATION

The following discussion is an overview of the exploration programs conducted on the Hardshell property by Asarco (1940 – 1991) and Wildcat Silver Corp. (2006 – 2010). 12.1

ASARCO EXPLORATION

The Hardshell Property was explored by ASARCO by geological mapping and intermittent drill programs from 1940 until about 1991. The original diamond drilling, spurred by WWII premium metal prices, failed to find significant extensions of Hardshell Incline Pb-Ag ores, but several thousand tons of moderate grade Pb-Ag oxide ore were shipped from the lower levels of the incline from 1943 to 1948 and again in 1963 and 1964. Diamond drilling in 1946 to 1953 located southeast of and stratigraphically below the incline led to the discovery of thick Ag-Pb-Zn bearing, apparently stratiform manganese oxides of the Main Manto. Based on this discovery, the four main Hardshell claims were patented by ASARCO from 1958 to 1961. Rising silver prices in the mid-1960s, after the closure of the Trench Mill, lead to renewed interest in the Hardshell mineralization. Restudy of the data and geologic mapping lead to staking additional claims in the district and acquisition of three patented claims of the Hermosa Group from 1965 to 1968. Because of the difficulty of penetrating the silica-jasperoid caprock and vuggy-silica manganese oxide ore zone with diamond drilling tools of the time, ASARCO used almost exclusively, newly developed, air-hammer drilling. Diamond drilling was used successfully in some outlying stratigraphic holes and only partially successfully to deepen hammer drill holes in vuggy, silicified limestones with lost-circulation problems. Geophysical, detailed geologic studies and metallurgical studies on the manganese oxide ores started in the late 1960s. In the 1970s to early 1980s, hammer drilling continued, some relatively close-spaced around higher grade silver zones to attempt to define a resource that could be developed by underground mining. Drilling from 1981 to 1984 partially defined a low manganese, heap-leachable, low-grade silver resource located at and north of the historic Hermosa mine workings. Three shallow hammer drill hole were completed in 1989 for metallurgical samples and a 1500 foot deep diamond drill hole in 1990-91 explored for deeper mineralization. In all, ASARCO drilled 114 air-hammer and core holes, with an aggregate of about 46,000 feet on the Hardshell Property. Drilling was often limited in depth and extent. Detailed mineralogy continued in the late 1970s by ASARCO with significant beneficiation test work, usually pyrometallurgical, continuing up until the early 1990s. ASARCO conducted test work on many processes to recover the silver including high-tension magnetic separation, electrostatic separation, reduction and segregation roasting, SO2 and thio-sulfate leaching and various cyanidation processes, in both company and commercial laboratories. This work usually did not progress beyond bench scale testing, except reduction roast, and previous work was sporadic due to fluctuating and low prices of many of the contained metals. Besides lead in some processes, little consideration was given to recovering other significant elements or materials present such as Mn, Zn, Cu, Au or trace elements or silica for flux and a wide variety of clays. Only minor test consideration was given to heap-leaching non-manganese low-grade silver ores such as in the Hermosa area. M3-PN100041 26 October 2010 Rev. 2

41

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 12.2

PRELIMINARY ECONOMIC ASSESSMENT STUDY

WILDCAT SILVER EXPLORATION

Wildcat Silver Corporation has been actively exploring the Hardshell Property since 2006. Initial work included the review and evaluation of all available ASARCO data, including remaining sample and core material. A major effort was made to re-assay all remaining ASARCO drill pulps, with standards and blanks, as a check of silver and manganese data files, but also to add high-quality Pb, Zn, Cu, and Au values to the database. Rock types, alteration, and mineral codes from paper drill logs and cross sections were added to the electronic assay database which included all known ASARCO assaying and 16 element X-ray fluorescence analyses. Preliminary SO2 leach tests were run on two composite samples of assay pulps at Hazen Labs. The work culminated in the preparation of a resource estimate and preliminary economic evaluation documented in a February 7, 2007 NI 43-101 Preliminary Assessment report, prepared by the mining consulting firm of Pincock Allen and Holt. Subsequently, 140 additional lode mining claims were staked in three stages. Patented claim lines were brushed out and flagged. All patented claim corners were checked, reset if necessary and a Record of Survey by a Register Land Surveyor filed with the Santa Cruz County Recorder. Historic access and drill roads plus drill pads were brushed out and returned to their former permitted condition of the 1960s through the 1980s. Additional drill roads and pads were built on patented ground. Office space and local housing was obtained outside of Patagonia. A secure work site for sample storage, core logging and splitting was built in Harshaw and has been expanded several times. Drilling   has   been   conducted   in   three   programs.   In   2007   four   “twin”   core   holes   totalling   4,450   feet were completed for comparison with previous ASARCO hammer drilling. In 2007 and 2008, three deep exploration core holes, totalling 7,928 feet, tested to the northwest of the Main Manto Zone mineralization along the Hogan Fault Zone, an important structural trend. In 2009, a follow up of positive exploration results was undertaken with six deep core holes sited in and peripheral to the Hogan Fault Zone, totalling 12,005 feet. These holes were located to test the down-dip projection of the Main Manto Zone and to determine the thickness and widths of this deeper mineralization.

M3-PN100041 26 October 2010 Rev. 2

42

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 13

DRILLING

13.1

INTRODUCTION

PRELIMINARY ECONOMIC ASSESSMENT STUDY

The Hardshell deposit has been mainly drilled by ASARCO with more recent work by WSC. Table 13.1-1 shows a drilling summary. Figure 13.1-1 is a map of drill hole collar locations. Table 13.1-1: Drill Hole Summary Rotary* Core** Total Number Footage Number Footage Number Footage ASARCO 92 31,000 22 15,000 114 46,000 Wildcat 0 0 13 24,400 13 24,400 Total 92 31,000 35 39,400 127 70,400 *The majority of the rotary holes are air-hammer drilling, with 1 reverse circulation hole. **A number of these core holes were started with air-hammer drilling.

M3-PN100041 26 October 2010 Rev. 2

43

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 13.1-1: Drill Hole Location Map

M3-PN100041 26 October 2010 Rev. 2

44

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 13.2 13.2.1

PRELIMINARY ECONOMIC ASSESSMENT STUDY

PREVIOUS DRILLING Summary

ASARCO drilled 114 air-hammer and core holes with an aggregate length of 46,000 feet (14,000 meters) on the Hardshell Property. This drilling took place from the early-1950s to the 1991. Driller’s  logs,  drill  supervisors  notes  and  monthly  reports,  geologic  and  graphic  logs  for  most  of   these holes are available. Data sheets for all assayed intervals are available, but prior to 1965 may not be the original lab assay certificates or the data was extracted from cross sections, graphic logs and old reports. Drill hole locations—many resurveyed, sample intervals, and assays have been compiled into a computer database. This information constitutes a portion of the data that was reviewed by PAH during the due diligence process for previous reports. 13.2.2

Air-Hammer Drilling

Asarco, through numerous drilling campaigns on the Hardshell, has completed 92 air hammer holes totalling 31,000 feet. Most of this drilling was completed dry above the water table. Drilling below the water table was limited by the technology and the amount of water present. Approximately half of ASARCO’s  air-hammer drill holes are concentrated in a 30 acre area. The drilling pattern is irregular with an average spacing of 150 to 200 feet. From a geologic perspective, this area covers much of the apex of the antiformal dome and contains some of the highest grades. The majority of the remaining air-hammer drill holes are located in the surrounding 150 acres. Here the drilling pattern is irregular and hole spacing can range from 100 to 800 feet. This drilling covers the flanks of the antiformal dome and extends to the east side of the American Fault. A rough field log of drilling, recovery, water comments, lithology, alteration, mineralization and other features was completed in the field for most holes. Besides bagged samples in the early portion of the program, a one-quart Mason jar of reject cuttings was preserved from each sample interval. These were used to produce chip boards in which coarse and panned samples from each sample interval were glued to a 3- to 4-foot long, ½-inch thick painted board, 4-inches wide in which the interval and assay data were annotated in colored India inks. Usually, a maximum of 300 feet was recorded on each chip board. Detailed logging, including various graphic logs and geologic logging was done from these boards, often under a binocular scope. This information was later compiled on detailed cross sections. The chips have been re-logged several times during re-examination of Hardshell. The Mason jar samples were initially available to assist, although almost all have since been composited for metallurgical studies or discarded. Over time, the glue on these chip boards has deteriorated in the Arizona heat with many chips falling off. At ASARCO operations, these labor-intensive chip boards were generally discontinued by the early 1970s. In the latter half of the air-hammer drill program (drill holes HDS-55 to HDS-97), 5 and 10 foot washed and sieved character samples were preserved in clear plastic medicine vials and stored in M3-PN100041 26 October 2010 Rev. 2

45

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

sequence in BX and NX core boxes. Some drill data and assays were recorded on these vials in colored felt markers. In some cases, very fine samples of clay and fault gouge were not washed or an additional unwashed vial was taken and annotated by the drill rig geotechnician. The waterfilled vials were further logged by a geologist under a binocular microscope and could always be opened for closer examination. Almost all of these vials have dried out over the years but are still in very good condition. Weighing of sample intervals was dispensed with later in the program. Field geologic logs were often not regularly made after the 1960s but many field notes were added to the vials or recorded in drill hole descriptions in monthly or drill project reports. In 1977, ASARCO experimented with newly developed RC drilling in hole HDS-70 to a depth of 713 feet using a hammer bit to 580 feet and a tri-cone button bit from 580 to total depth which was below the water table. The hole had much slower penetration rates and much higher costs (two or three times) than typical air-hammer drilling. There are no down-hole deviation surveys recorded on any of the ASARCO drill holes at Hardshell, although they are relatively shallow and no significant deviation would be expected. 13.2.3

Core Drilling

ASARCO records indicate that 15,000 feet of core drilling was done in 22 holes. A number of these were “core-tails,”   or   a   deepening   of   rotary drilled holes that had been terminated due to depth, excessive water, or poor ground conditions. Other coring was for deeper stratigraphic exploration, to examine lithologic variations and for geophysical testing, largely in outlying areas. The core was not split or sampled in obvious barren or low-grade zones. Early core drilling at Hardshell from 1942 to the 1950s was conventional, non-wire line, NX to AX diameters with mostly angle holes around the Hardshell Incline and in lower Hardshell Canyon. A limited portion of this early core remains, especially of mineralized zones, except for grab samples and skeletons. However, the logging is relatively good at least in mineralized zones and was rechecked in 1965 on available material with some additional assaying. Coring in the 1960s and 1970s was usually NX-NQ to BX-BQ and wireline. The small diameters of NX-NQ and BX-BQ cores and the cavernous nature of the main manto resulted in poor recovery in some holes (e.g., HDS-30D= 30 percent; HDS-50D= 82 percent recovery). The majority of the core drilled has been logged in considerable detail. Locally considerable petrography and mineralogical work was done on core. 13.3

WILDCAT SILVER DRILLING

WSC has drilled a total of 13 diamond drill holes on the Hardshell Property. Four of these holes were part of a twin drilling program conducted in 2007 and the remaining nine holes tested for a northwest extension of mineralization. Core was placed in 10-foot capacity waxed cardboard boxes with wooden blocks marking individual core runs. The core surface was washed by the drill helper if in coherent, non-clayey, M3-PN100041 26 October 2010 Rev. 2

46

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

non-vuggy or rubbly pieces. Otherwise, it was transferred directly from the split-tube halfsection to the core box. Core was initially examined, field-logged, and color-photographed by box by the project geologist. It was then logged for geotechnical characteristics using the Call & Nicholas Method by a mining engineer or geologist. Then the project geologist marked assay intervals with a footage-numbered card, recorded core recovery, fracturing and orientation, void and vugs, lithology, alteration and mineralization on each assay interval. Core recovery was measured by tape over length but also considered loss in volume over length by drilling and empty vugs. Percentages of alteration and ore minerals were recorded for each assay interval. Specific notes on possible contamination or loss of core material from drilling or handling were made. All WSC holes were surveyed down-the-hole for directional deviation using a Reflex EZShot magnetic survey tool. 13.3.1

Comparative Drilling Evaluation

WSC conducted a twin drilling program in 2007 to obtain core samples to compare with previously obtained ASARCO air-hammer samples, and at the same time test for deeper mineralized horizons. WSC drilled four such core holes, totaling 4,450 feet, adjacent to four previous air-hammer holes. The current drilling demonstrated similar assay results, confirming that the older holes provided representative sample results. Separation distances between the original drill holes and WSC test core holes ranged from 7 to 28 feet as shown in Table 13.3-1. The results did not show evidence of consistent grade difference (bias) and the variability that was observed is concluded to reflect natural short range grade differences in the deposit, rather than deficiencies in air hammer chip or drill core recoveries. The results have been presented in previous Technical Reports and are discussed more completely in the data verification section (Section 1.16) of this report. Table 13.3-1: Comparison Drill Hole Pairs New Core Core Hole Previous AirHole Number TD (feet) Hammer Number HDS-99 1,257.00 HDS-83 HDS-98 1,016.00 HDS-40 HDS-100 1,127.00 HDS-62 HDS-101 1,058.50 HDS-81 Note: All drill holes are vertical.

13.3.2

Air-Hammer Hole TD (feet) 480 570 385 500

Separation Distance (feet) 6.6 10.5 27.8 13.4

Exploration Drilling

Wildcat Silver identified the potential for northwestward down-dip extensions to the Main Manto deposit along the Hogan fault zone and initiated drilling in the prospective areas. Three holes were drilled in 2007 and 2008 (HDS-102, HDS-103, HDS-104), for a total of 7,928 feet. Following up on successful results, six additional holes were drilled in 2009 (HDS-105, HDS106, HDS-107, HDS-108, HDS-109, and HDS-110) for a total of 12,005 feet. These holes as well were successful in intercepting down-dip extensions of the Main Manto Zone and locally, the Incline Mine Zones. Holes were sited on the Alta and Camden No. 2 patented claims. Mineralization discovered in the drill holes that tested the down-dip extension of the current Hardshell resource have provided encouragement to significantly expand the existing resource. M3-PN100041 26 October 2010 Rev. 2

47

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

These holes intercepted mineralized manganese oxide intervals of the favorable Main Manto Zone that ranged from tens of feet to several hundred feet in thickness. Similar to the Main Manto Zone, mineralization occurred along the favorable stratigraphic zone at the base of the volcanic sequence and extended downward into the underlying carbonate sequence. Additional manganese oxide zones were intercepted deeper in the carbonate sequence. Manganese oxide mineralization was typical of that found in the Main Manto deposit, containing silver, zinc, lead, and copper. The silver and copper content appears to be somewhat less than that found elsewhere, likely due to a decrease in multistage supergene enrichment with depth. Another significant finding from this drilling was the identification of base-metal and manganese sulfide and manganese silicate mineralization, representing the precursor to the manganese oxide found in the main deposit area. The sulfide mineralization was found at depth in the deeper exploration holes. Silver-bearing, base metal and manganese sulfide intercepts also ranged from a few tens of feet to several hundred feet in thickness. Sulfide mineralization typically consists of moderate to very coarse sphalerite and galena with minor chalcopyrite, along with abundant alabandite and varying amounts of pyrite; hosted in a calc-silicate matrix of rhodonite, rhodocrosite, wollastonite and recrystallized calcite marble or in jasperoid with sulfides or mixtures of calc-silicates and jasperoid. No specific silver-bearing minerals were noted megascopically but because of the assayed antimony and arsenic contents of the mineralization and previous studied mineralization in the Hardshell Incline, Alta dumps and Trench mine, silver is believed to be contained in sulfosalts. 13.4

DRILLING SUMMARY

Mineralized intercepts for the 2008 and 2009 drilling are summarized in Table 13.4-1. The inclusion of these exploration holes from the northern expansion area significantly expanded the mineral resource as previously defined in the Feb 2007 PAH Report.

M3-PN100041 26 October 2010 Rev. 2

48

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Table 13.4-1: Exploration Drill Hole Interval Summaries Drill Depth (feet) Core Interval Ag Mn Pb Zn Cu Mineral Mineral Comments Hole % Rec Feet (oz/t) (%) (%) (%) (%) Zone Type From To HDS-102 1327 1422 99.0 95.0 1.07 4.39 0.49 1.23 0.06 Carbonate Oxide 1857 1922 98.0 65.0 1.96 6.74 4.79 7.11 0.12 Carbonate Sulfide 1956 2000 99.5 44.0 1.08 5.70 3.10 3.63 0.07 Carbonate Sulfide HDS-103 1627 1932 98.2 305.0 0.53 3.37 0.16 0.25 0.02 Main Manto Oxide 2231.5 2242 100 10.5 3.18 2.30 11.00 14.40 0.15 Carbonate Sulfide 2338 2373 100 35.0 1.00 2.12 3.58 1.17 0.07 Carbonate Sulfide HDS-104 843.5 1007 87.6 163.5 1.91 14.81 2.60 2.42 0.10 Main Manto Oxide 1007 1367 97.5 360.0 2.20 11.80 5.29 8.22 0.17 Carbonate Sulfide 1397 1512 99.6 115.0 0.97 6.64 2.05 2.17 0.32 Carbonate Sulfide HDS-105 626 777 92.7 151.0 3.07 15.8 1.66 2.29 0.1 Main Manto Oxide 5.5 feet missing 912 993.5 60.5 81.5 2.37 11.35 3.96 2.38 0.24 Carbonate Oxide 7.5 feet missing HDS-106 562 632 91.0 50.0 0.29 12.65 0.23 3.18 0.01 Main Manto Oxide 937.5 992 66.6 54.5 2.35 15.61 1.42 2.75 0.12 Main Manto Oxide Stuct. repeat 992 1167 98.0 175.0 0.32 5.75 0.17 0.24 0.01 Carbonate Oxide 1385 1427 88.0 42.0 0.95 8.48 2.06 3.03 0.05 Carbonate Oxide 1427 1537 96.0 110.0 0.77 2.74 0.93 3.37 0.06 Carbonate Sulfide HDS-107 1091 1182 96.0 91.0 1.32 10.6 0.63 0.84 0.1 Main Manto Oxide 2387 2432 97.0 45.0 0.32 2.6 0.91 1.36 0.02 Carbonate Sulfide HDS-108 707 757 75.8 50.0 1.42 2.75 0.2 0.91 0.08 Main Manto Oxide 852 907 99.1 55.0 1.42 12.34 1.13 2.69 0.03 Carbonate Oxide HDS-109 1002 1357 88.3 355.0 1.98 13.69 1.75 1.98 0.1 Main Manto Oxide 4.0 feet missing 1357 1407 17.4 50.0 2.39 0.76 10.59 5.51 0.12 Carbonate Oxide Low recov. intvl. 1437 1827 75.8 390.0 1.57 7.55 2.93 4.08 0.16 Carbonate Oxide HDS-110 772 847 90.5 75.0 5.12 12.91 1.52 2.69 0.18 Main Manto Oxide 857 1017 87.7 160.0 0.99 13.78 0.66 1.36 0.05 Carbonate Oxide 1252 1327 69.2 75.0 5.26 10.19 3.88 1.75 0.11 Carbonate Oxide 1) Mineral Zones: Main = Main Manto Zone, Carbonate = various deeper carbonate hosted zones. 2) Missing samples due to natural voids and lost recovery in fractured zones. 3) HDS-106 (75 deg. WSW) and HDS-109 (83 deg. SSW) are angle holes. The other 7 DDH were collared vertically. “True   thicknesses”   of   mineralization   in   the   above   widely-spaced drill intercepts in the Northern Extension Area are uncertain and not really meaningful in this bulk-tonnage style of disseminated stockwork replacement mineralization.

M3-PN100041 26 October 2010 Rev. 2

49

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

14

SAMPLING METHOD AND APPROACH

14.1

ASARCO

Drilling by ASARCO generated two types of samples: chip samples derived from air-hammer drill holes and core samples from diamond drill   holes.   ASARCO’s   drilling   programs   were   intended solely to further their assessment of the economic merits of Hardshell, and as such, it is assumed that sampling conformed to standard industry practices of the time. 14.1.1

Chip Samples

Cuttings brought to the surface from air-hammer drilling were usually collected on each sequential 5 or sometimes 10-foot drilling interval, measured from the surface. At the end of each sample interval, the bit was raised slightly from the hole bottom and the hole blown clean before resuming the next interval. The sample from the drill-interval was passed through a dry cyclone or a wet rotary splitter and multiple tiers of a Jones splitter to obtain a 5 to 15 pound sample that was placed in a labelled cloth bag. Duplicate chip samples were seldom taken except for late in the program. Heavy-duty plastic sample bags or plastic liners to cloth bags were used from some holes later in the program. The fraction of sample recovered was weighed in the early part of the program up to about HDS-50 and extrapolated to the full sample recovered from the interval and recorded by a geologist or geotechnician. ASARCO geologists and engineers were concerned that drill cuttings were not representative due to difficult drilling conditions. Examination of recovered sample weights down the hole gives some indication of this. A number of  tests  (data  in  drill  supervisor’s  files)  were  done  with   duplicate samples and different sampling methods and this was not found to be a significant problem except in very vuggy and wet ground. WSC has conducted validation of these earlier results as discussed further in Section 1.14.2. Careful drilling and sample collection, flushing holes, and cleaning sampling equipment between samples were just as important as they are today in reverse circulation (RC) drilling programs. Wet samples were not considered as reliable and local deeper, tri-cone, wet, air-lift or foam drilling were often considered suspect. A number of the holes that were terminated due to excessive water were later deepened by diamond drilling with limited success. Consequently the bottom of mineralization is locally often not very well defined . There may be additional mineralization below these holes that were terminated early due to poor drilling conditions, which has often been confirmed by nearby deeper drilling in later years with better suited equipment. 14.1.2

Core Samples

Core drilling by ASARCO was limited. Core was split longitudinally and one-half was collected for chemical analyses. Often the core was not split or sampled in obvious barren or low-grade zones. Some core samples are in areas of low recovery. Some cored intervals had low core recovery, often as low as 30%, so assay results applied to the full drilled sections are locally questionable. Core recoveries, where available, were added to the Drill Hole Assay Database as M3-PN100041 26 October 2010 Rev. 2

50

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

an indication of reliability. In 1920s to 1950s diamond drilling core sludges were often collected, assayed and weighted averaged into assay intervals. Sample intervals of ASARCO coring over the 50 years from 1942-1991 were varied. In earlier coring, sample intervals were geologic or chosen based on recovery runs, usually less than 5 feet. Later coring samples represented more regular intervals- often 5 feet run intercepts, on even 5 foot depth intervals, with some based on geologic or mineralization changes. 14.2

WILDCAT SILVER CORPORATION

WCS collected samples from its core drilling program and its program of re-assaying pulps generated by ASARCO as follows: 14.2.1

Core Samples

Core was typically sampled on 5-foot intervals, often based on core block runs. In areas of mineralogical or geologic interest, sampling often occurred at variable intervals ranging from 0.5 to 7 feet (usually in the 3 to 5 foot range). The core was split in half lengthwise by a geologist using a hydraulic splitter. Spatulas and trowels were used for splitting in clayey or rubbly core. The splitter and sample trays were carefully cleaned by brushes after each sample interval. Diamond core saws were specifically not used because of the volume loss of material in the saw cut, the length of time to saw jasperoid and silicified mineralized zones and to prevent soft clayey and friable material, especially manganese and iron oxides from being washed away by the saw fluid. The hydraulic splitter method provided a better analytical sample for analysis. The areal extent of the core samples is dictated by the spacing of the diamond drill holes. Four of WSC’s   diamond   drill   holes   are   located   in   the   area   most   densely   drilled   by ASARCO for the purpose   of   validating   ASARCO’s   sample   quality.   These   four   holes   are   clustered   in   an   area   of   approximately 1.5 acres and are spaced between 175 and 205 feet apart. The remaining nine core holes drilled by WSC were drilled to better define the northwestern extension of mineralization. These holes were drilled on approximately 400-600 foot centers. Core recovery was generally good, punctuated by limited intervals of moderate recovery representing sheared, broken and vuggy zones including voids. 14.2.2

Reassay of ASARCO Pulp Samples

ASARCO retained a large number of pulps from their sampling and assaying programs. These consisted of 150 to 300 grams of pulverized material stored in individual manila envelopes in labeled cardboard boxes. WSC removed and inventoried these pulps from secure ASARCO Tucson warehouse storage for the re-assaying program. Pulp samples were submitted to Skyline Laboratories in Tucson for analysis of manganese, lead, zinc, copper, gold, and silver. Approximately 50-200 grams or less now remain of many of these pulps.

M3-PN100041 26 October 2010 Rev. 2

51

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

15

SAMPLE PREPARATION, ANALYSIS AND SECURITY

15.1

ASARCO

For core samples, sample bags were emptied inside-out, with bag seams brushed, into sample pans and dried at 105° C. The samples were crushed in "chipmunk" jaw-crushers to <1/4 to 1/8" and about 500 grams were split out using tiered Jones splitters. A 150-300 gram fraction was split from this sample, pulverized (in the range of less than 150 to 200 mesh) in ceramic and ring and puck hardened steel pulverizers then stored in labeled brown paper envelopes for assay. Remaining crushed core was returned to sample bags for dry storage with a portion stored in sealed glass mason jars for record. Chip samples were processed in the same fashion excluding the initial crushing phase for most samples. It is assumed that these procedures conformed to industry standard practices at the time because ASARCO’s  efforts  were  intended  solely  to  further  their  assessment  of  the  economic  merits  of  the Hardshell Project. The early core drilling  from  1942  into  the  1950s  was  assayed  at   ASARCO’s  Trench  Unit,   one   mile NW of Hardshell. Assays were gravimetric fire for silver and sometimes gold and often wet-chemical Pb, Zn, Cu, and Mn. It was common practice for ASARCO to only sample and assay portions of the drill core with visible mineralization. Assay records are complete but few of the original certificates or lab record books have been preserved. These were by standard mine methods at the time and wet-chemical assay methods continue in routine higher-grade analytical use today.  A  few  checks  or  other  elements  routinely  analyzed  at  the  ASARCO’s  El  Paso  Smelter,   usually on >1 opt Ag composite intervals. In the 1960s, most chip and core samples up to HDS-38 were assayed at the ASARCO El Paso, Texas smelter, often called the El Paso Ore Testing Lab or the El Paso Umpire Lab. Initially these were   1   assay   ton   (AT)   gravimetric   fire   assays   for   silver.   Many   of   these   were   “verified   assays,”  a  standard  umpire  protocol- regularly run in duplicate and averaged. If the two values were not in close agreement they were rerun. The normal internal standards, duplicates and checks (especially samples of higher Ag grades) were done at well above the industry standard (and expense) for the time. A few other elements such as Pb, Zn, Mn, Cu, and Au were periodically run on individual pulps but generally only on physical composites of pulp samples. If the silver assay of the composite did not agree with the weighted arithmetic average, pulps were re-assayed to determine the reason. A few checks were made by Hawley & Hawley (predecessor of Skyline Labs), the outside El Paso Umpire Assayer. Later in the 1965-68 program, more assays were run at Hawley and Hawley in Tucson to save round-trip shipping and assay costs but these were single assays not the verified type and with less QA/QC. Atomic Absorption (AA) analyses of silver and gold were not considered reliable by ASARCO or others especially over 3 opt Ag in this high manganese environment and were never used, except for some low grade geochemical and water analysis work. All assaying of gold and silver were by fire gravimetric methods. Some ASARCO assays for Au in the 1980s had an AA finish of the fire assay. Other elements were run by standard wet chemical methods, some by AA.

M3-PN100041 26 October 2010 Rev. 2

52

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Although most Ag fire-assays used a one-assay ton charge, frothing in the higher Mn oxide samples or those in carbonate hosts required rerunning some samples several times, often at reduced weight one-half AT charges. ASARCO El Paso developed special fluxes for Hardshell fire assays which were also used by Hawley & Hawley. In some cases, the exact charge weight used is not clear on reported assay certificates. In most cases the original assay results have been superseded by the 2006 WSC-Skyline reassay program. Assaying from HDS 55 to 83 was done at American Analytical (AAL) Laboratories, a commercial lab in Tucson, Arizona. American Analytical supervisors were former Asarco employees and standard Hardshell assaying practices were followed. Mainly silver (1 AT fire gravimetric) was assayed for, but some Pb, Mn, Au and Zn analyses were made, especially in later years. Again frothing problems sometimes occurred and resultant ½ AT charges sometimes had to be used. Some multi-element checks on individual silver assay intervals plus multielements on composite intervals were completed but not as systematically in the 1960s. Very few outside duplicates or standards were run. A number of pulps from HDS 81-83 reporting assays values of > 1 opt Ag were re-assayed for Ag and Au at Legend Labs in Reno. By 1981 it was noted that AAL was producing high Au values, apparently from bad inquartation and low silver values, especially for higher manganese samples when Ag was greater than 10 to 15 opt. This was confirmed by re-assays of suspect pulps at the El Paso Smelter and in other metallurgical test work plus recent WSC pulp reassaying   at   Skyline   Labs.   The   highest   quality   values   available   were   used   in   ASARCO’s   computer database, but Au values, often at the limits of fire-assay detection, have a high variance. In 1977 and 1978, about 25 drill holes from the >1 opt Ag zone of the manto had 10 to 40 foot composites carefully prepared by F.R. Koutz from the original pulps. All these were analyzed (assay quality) for Mn,  Pb,  Zn,  Cu,  and  SiO2  by  ASARCO’s  Geochemical  Exploration  Labs  in   Salt Lake City. In addition some composites were also assayed for Al2O3, K2O, Na2O, CaO, MgO, As, Sb, Fe, and S. These had lab blanks and standards and results were periodically completed in duplicate. Some additional check work on this batch was done at Legend Labs mostly for Au but the silver values were generally not rechecked. Extensive geochemical work, including microprobe analyses and mineralogical work including X-Ray diffraction and polished and thin-section petrography especially on Mn oxides was completed on Hardshell in 1976 to 1978 and continued into the 1980s. Fire Assaying for HDS 84-97 was done at Skyline labs for silver and often Pb (AA) and Au (FA/AA) in >1 opt Ag pulps. All of these drill holes were from the Hermosa mine area. In addition, several hundred surface and underground samples from the Hermosa areas were also run at Skyline. Most of the Hermosa area samples had low manganese values. Silver and some manganese and lead assays for hammer-drilled HDS 89-1, -2, and -3 and DDH HDS 90-1 were done at Skyline. Skyline and other labs were checked periodically during the 1980s with ASARCO standard, blank and duplicates of drill cuttings and pulps. No specific QA/QC problems were found at the Skyline labs pertaining to Hardshell-Hermosa. Some cyanide-

M3-PN100041 26 October 2010 Rev. 2

53

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

leaching bottle-roll and other recovery tests on Hermosa material were completed at Silver Bell Mine Labs with some check assays of pulps. In early 1984 all available Hardshell drill hole pulps were run by X-Ray Fluorescence (XRF) on an automated XRF analyzer at Mission Mine Analytical Labs. Analytes included Cu, Mo, Fe, Zn, Al2O3, SiO2, CaO, S, Mn, Pb, Sb, Ti, Ba, and V2O5. These were calibrated to previous values obtained for some of the 1977-78 Salt Lake City lab composite samples, with many check and duplicate runs. The exact details of QA/QC are unknown for these analyses but precision and accuracy would be expected to be a little less on the high and low ranges of analyses with XRF. These results from about 3,500 pulps were used to better chemically define and quantify Hardshell drilling of fine-grained obscure, clayey and siliceous manganese and iron oxide drill chips into various alteration and mineralization types for mine planning and metallurgical work. WSC entered the data in a database with previous silver and other assays. All ASARCO pulps, samples, data and other records have been in a secure location since their collection.   In   spite   of   the   reduction   of   ASARCO’s   Exploration and Mining Departments, bankruptcy, and other troubles, almost all the files, data, and other records have been well preserved with multiple copies of the original data at different localities. Recent security from 2005 to 2007 was enforced by the bankruptcy court. Security at ASARCO, especially during drilling operations and transfer of samples to the assayer plus any computer files or resource calculations were better than most industry standards at the time work was completed. Protocols on this are  well  documented  and  can  be  viewed  in  the  ASARCO  drilling  supervisor’s  files.  This   security has hampered interpretation of older electronic media but fortunately paper copies have survived. The historic files and cabinets are well maintained at the WSC office near Patagonia. There are also duplicate copies of most of these files in other WSC offices. 15.2 15.2.1

WILDCAT SILVER ANALYTICAL ASARCO Pulp Re-Analysis

In order to have a complete database for all elements of interest, Wildcat conducted a major program to re-analyze all available sample pulps from previous ASARCO exploration work. Some pulps were no longer available as they had been previously used up for analyses or lost. Reanalysis of the available samples also allowed for a check of most silver and manganese values against older analyses (lesser comparisons for wet chemical zinc, lead, and copper values) serving as an additional quality control check. Sample preparation and Cu, Pb, Zn, and Mn analyses were conducted by Skyline Laboratories in Tucson, Arizona and Fire Assay for Ag and Au by Assayers Canada in Vancouver, British Columbia. Skyline Laboratories is a regionally recognized and accepted laboratory that has three Arizona Registered Professional Assayers certified by the Arizona State Board of Technical Registration, but was not ISO certified at the time. Skyline is used by several major as well as junior mining companies. Assayers Canada are an ISO-9001-2000 certified, Registered British Columbia laboratory. These pulps were prepared by ASARCO using the procedures described in Section 15.1. As previously noted, PAH & ACA did not have access to complete documentation describing sample preparation procedures used by ASARCO. M3-PN100041 26 October 2010 Rev. 2

54

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

It was often necessary to reduce the pulp charge in some high manganese samples. Skyline analyzed manganese, zinc, and lead using inductively-coupled plasma (ICP), while copper was analyzed by atomic absorption (AA). The pulps were run through Skyline in 60 sample batches. All were subject to routine quality control programs both externally by Wildcat and internally by Skyline and Assayers Canada. For analytical work by both Skyline and Assayers Canada, a standard sample was inserted every 20th sample as a check of assay accuracy, which with repeated analysis during the course of the analytical program also served as a check of assay precision. Five standard samples for the pulp reanalysis program were prepared and certified by Mineral Exploration Group (MEG) in Reno, Nevada, using mineralized material from the Hardshell deposit. Standards were prepared at five grade values based on a systematic round robin analytical program that included work by six different laboratories. Blank samples were also included later in the reanalysis program. Blank samples were prepared from local barren crushed, limestone decorative stone, silica sand and volcanic rocks. The standards and blanks served as quality control for silver, manganese, zinc, lead, copper, and gold analyses. No systematic or significant problems were noted in the quality control programs results. A few minor sample switches and clerical errors were identified and corrected. 15.2.2

Drill Sample Analysis

Drill core samples from Wildcat drilling programs carried out from July 2007 to October 2009 were processed at an on-site sample processing facility in Harshaw, Arizona. Most core was HQ diameter and usually triple-split tube core barrels were used, especially in clayey or vuggy, rubbly mineralized material in 2007 and 2008. Several holes were finished NQ diameter. The project geologist, once or twice daily, took custody of the boxes of core from the drillers at the drill site, after an initial inspection, and transported them to the Harshaw facility. Core samples were mechanically split with one half placed in externally labeled plastic bags for analysis with an additional internal sample tag the top of the bag closed and secured with a tie, and then weighed. All samples were kept in locked ocean-shipping containers until they were shipped to the lab, except when actually being worked on or transported. The Harshaw site was regularly patrolled for security (by local residents and law enforcement authorities). Split samples were periodically transported by an authorized company representative to Skyline Laboratory in Tucson, Arizona. After logging the samples in, Skyline crushed the core using a TM Terminator to produce a greater than 80 percent passing 10-mesh product. Samples were blended and divided using a two-stage riffle splitter and then pulverized in a TM Max 2 pulverizer to produce 300 to 400 grams of a 90 percent passing 150-mesh pulp product. Two duplicate pulp subsamples were produced in this manner. As a cleaning measure between each sample batch, Skyline passes silica rock through the crushers to remove any potential remaining material. Pulverizers also are cleaned between each sample batch. Both the remaining coarse reject and pulp samples were returned for secure storage to Wildcat in Harshaw and Patagonia. Crushed core rejects are stored dry in sealed 55-gallon barrels. Duplicate pulps are stored in two different dry, secure locations. In July 2008, PAH visited WSC- Harshaw field facilities and M3-PN100041 26 October 2010 Rev. 2

55

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Skyline   laboratory   and   reviewed   all   of   their   processing   protocols   for   Hardshell’s   2007   – 2008 drilling program and found them to be within industry standards. As discussed for the previous pulp re-assay sampling, all pulps were analyzed by Skyline Laboratories for manganese, copper, lead, and zinc. Gold and silver were subcontracted by Skyline to Assayers Canada and were analyzed by fire assay on a 30-gram pulp charge, again with some necessary reduction in charge weight for high Mn oxide samples. Often the duplicate pulp was sent to Assayers Canada. Skyline analyzed manganese, zinc, and lead using inductively-coupled plasma (ICP), while copper was analyzed by atomic absorption (AA). Each of the analytical batches was subject to routine quality control programs both externally by WSC and internally by Skyline. For analytical work by both Skyline and Assayers Canada, a standard sample was inserted every 20th sample as a check of assay accuracy, which with repeated analysis during the course of the analytical program also served as a check of assay precision. Standard samples for the pulp reanalysis program were prepared and certified by Mineral Exploration Group (MEG) in Reno, Nevada, using mineralized material from the Hardshell deposit. Standards were prepared at five grade values based on a systematic round-robin analytical program that included work by five different laboratories. Skyline also internally used routine Cu, Pb, and Zn standards and later in the program, a certified Mn standard. Both coarse-crushed preparation (marble material analyzed blank) and fine pulp blank samples (certified barren quartz sand) were included. Blanks were included at the beginning and end of each sample run and usually every 30th sample. The standards and blanks served as quality control for silver, manganese, zinc, lead, copper, and gold analyses. In addition, approximately six percent of samples were checked by ALS-Chemex Labs for gold, silver, manganese, copper, lead, and zinc using the same analytical methods as Skyline and Assayers Canada. Many of these checks were every 20th sample, often on the duplicate pulp, but checks on better grade samples and samples considered unusual were emphasized. In addition most of these check samples also had a Chemex 49 element ICP spectral scan for major, minor and trace elements. A few sample switches and clerical errors were noted and corrected at Skyline, Assayers Canada and Chemex but no systematic or significant problems were noted in the quality control programs results. In addition, Assayers Canada ran every 20th sample in duplicate for Au and Ag. ALS-Chemex is an internationally recognized commercial laboratory in Vancouver, British Columbia, that has ISO-9001-2000 certification and is a registered British Columbia laboratory. In summary, the core sample handling, preparation, and analysis was conducted by secure industry standard procedures by authorized personnel. Supervision, oversight, and chain-ofcustody recordation was provided where needed. The process was subject to routine quality control procedures to ensure that the sample results were representative.

M3-PN100041 26 October 2010 Rev. 2

56

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 16

PRELIMINARY ECONOMIC ASSESSMENT STUDY

DATA VERIFICATION

This section discusses the methods  and  results  of  WSC’s  effort  to  verify  the  historic  ASARCO   sample data. It is concluded that the data provided by WSC (inclusive of relevant ASARCO sample data) is of sufficient quality for use in a resource estimate consistent with Canadian reporting standards. 16.1

WILDCAT SILVER PULP RE-ASSAY

All available pulp material from the previous ASARCO drill hole analytical work was reanalyzed in 2006 and   included   4,272   pulps.   WSC’s   pulp   re-assay program was designed to replace ASARCO assay results when possible, complete assays for elements that were not analyzed previously or only analysed by XRF and to provide a means of verifying the quality of ASARCO assay results for samples where no pulps currently exist. Table 16.1-1 compares the number of new and old assays of ASARCO pulps that exist in the current drill hole database. For elements other than silver, over 90 percent of the data was generated  by  WSC’s  re-assay program. For silver, this total is 77 percent due to a larger number of original ASARCO silver values from pulps that were not available for re-assay. Table 16.1-1: ASARCO Drill Holes in Database - Old v. New Data New Pulp Reassay Data – Skyline Laboratories for Wildcat Silver Old Data – ASARCO (used where no new data available) Total number of ASARCO drill hole data values Percent of ASARCO drill hole data that is new (replaced)

Mn

Ag

Zn

Pb

Cu

Au

4,272 375 4,647 92%

4,272 1,302 5,574 77%

4,272 198 4,470 95%

4,272 349 4,621 92%

4,272 74 4,346 98%

4,272 55 4,327 99%

As the drill hole database used for the current resource estimate still contains a number ASARCO assays, it was important to confirm the validity of these results. To achieve this, WSC compared new and old assay pairs. This analysis is detailed in the 2008 Technical Report (Pincock, Allen & Holt, 2008). As a result, this work tends to confirm the general viability of the previous sample analysis values and supports the practice of using older analytical data where newer analytical data is not available. ACA concurs with this observation. 16.2

WILDCAT SILVER COMPARATIVE DRILLING

While   WSC’s   re-assay   program   serves   to   verify   ASARCO’s   analytical   results,   it   did   not   necessarily provide information about the quality and representativeness of the original drill hole material used for assaying. To investigate this issue, WSC conducted a twin hole drilling program in 2007, detailed in the Technical Report of August 7, 2008. In this program, WSC drilled four diamond drill holes proximal to existing ASARCO air-hammer holes. Core was sampled, prepared and assayed per current industry standard methods that included a rigorous QA/QC program. Comparison of assay results for twin hole pairs demonstrated similar results. Based on this comparison, it is concluded that quality of ASARCO samples is acceptable. Separation distances between drill holes ranged from 7 to 28 feet as shown in Table 16.2-1. All new holes were surveyed down-the-hole for directional deviation using a Reflex EZ-Shot M3-PN100041 26 October 2010 Rev. 2

57

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

magnetic survey tool. The results did not show evidence of consistent grade difference (bias) and the variability that was observed is concluded to reflect natural short range grade differences in the deposit, rather than deficiencies in air hammer chip or drill core recoveries. Table 16.2-1: Comparison Drill Hole Pairs New Core Hole Core Hole TD (feet) Number HDS-99 1,257.00 HDS-98 1,016.00 HDS-100 1,127.00 HDS-101 1,058.50 Note: All drill holes are vertical.

Previous AirHammer Number HDS-83 HDS-40 HDS-62 HDS-81

Air-Hammer Hole TD (feet) 480 570 385 500

Separation Distance (feet) 6.6 10.5 27.8 13.4

The results of the comparative drilling are summarized in Table 16.2-2. Both sets of holes intercepted similar material, characterized by mineralization that is the result of the complete oxidation of original sulfide replacements in the host rock. Due to the nature of this mineralization, drilling results are subject to natural geologic variation from vugs, fracture rubble, and mineral remobilization. Mineralized intervals were intercepted at very similar depths down hole and had very similar total interval lengths. It is noted that the top contact of the mineralization is typically sharp, while the lower contact is typically more gradational. Table 16.2-2: Comparison of Drillhole Pairs Hole HDS-98 vs. HDS-40 HDS-98 (Core) HDS-81 (Air-hammer) HDS-99 vs. HDS-83 HDS-99 (Core) HDS-81 (Air-hammer) HDS-100 vs. HDS-62 HDS-100 (Core) HDS-81 (Air-hammer) HDS-101 vs. HDS-81 HDS-101 (Core) HDS-81 (Air-hammer)

Interval (feet)

Thickness (feet)

Silver (opt)

Manganese (%)

Zinc (%)

Copper (%)

390-567 380-565

177 185

5.09 6.4

17.75 18.65

1.83 1.93

0.2 0.21

350-470 350-470

120 120

6.34 7.08

17.6 14.52

1.44 1.55

0.13 0.17

222-373 220-370

151 150

7.09 6.52

12.35 8.57

2.43 2.09

0.21 0.34

272-508 265-500

236 235

5.64 9.36

5.07 5.87

1.86 2.4

0.11 0.1

The sampling results for all metals show grade values similarly elevated to higher levels within the mineralized interval. Some variability is observed in the average metal values between the drill hole pairs, with the newer core hole sometimes being higher in value and sometimes lower. There is no evidence of consistent grade difference (bias) and PAH and ACA concluded that the variability reflects natural short range grade differences in the deposit rather than deficiencies in air hammer chip or drill core recoveries. The comparisons did not reflect any systematic bias between the older air-hammer holes and the newer core holes. Quality control work, using standards and blanks, supported the quality of the new analyses, both air-hammer and core. As a result, this newer work confirms the general viability of the previous air-hammer drill results for use in resource estimation work. M3-PN100041 26 October 2010 Rev. 2

58

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 16.3

PRELIMINARY ECONOMIC ASSESSMENT STUDY

ADDITIONAL DATA VALIDATION

Further data validation has included a review of core logging procedures, examination of some of the core, and review of assay sheets and logs and confirmed the similarity of multiple data sources. Much old drill core, chip boards and chip sample vials from the air-hammer holes were preserved by ASARCO for examination. The examination of drill core found that the observed intensity of mineralization was consistent with recorded laboratory analytical grades. The WSC drilling has well-marked cemented hole collar positions in the field as do many ASARCO holes including projecting, cemented casing with hole number-stamped metal tags. Some older ASARCO holes were observed as surface depressions around old drill cuttings sometimes accompanied by old weathered stakes or rotted wooden hole plugs, sometimes with relict metal tags. In a few places, drill road reconstruction exposed the trace of holes from ASARCO drilling. All known hole collar positions have been resurveyed by a licensed Arizona registered land surveyor. The WSC drill holes have all been surveyed downhole for hole deviation using acceptable magnetic surveying procedures.

M3-PN100041 26 October 2010 Rev. 2

59

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 17

PRELIMINARY ECONOMIC ASSESSMENT STUDY

ADJACENT PROPERTIES

Currently there are no significant operating mines in the Harshaw or nearby mining districts. Properties adjacent to Hardshell have had limited or no new work done. The mineralization discussed on adjacent properties is hosted by various types of deposits that are not directly related   to   WSC’s Hardshell deposit, nor a projection of the Hardshell deposit, and this information is not intended to indicate that such mineralization might be present on the Hardshell property. ASARCO   LLC’s Trench Property: The Trench mine produced silver, lead, and zinc from a vein system discontinuously between 1760 and 1949, with a custom mill that operated between 1938 and 1964. The last exploration in the area was conducted in 1979-1989. The mine and mill complex (~300 acres) included four tailings ponds, all of which were reclaimed by ASARCO between 1989-1994. The property has been transferred to the ASARCO Custodial Trust. Bronco Creek Exploration: Small block of PAT claims west of Hardshell property. No known activity. White Cloud Resources: Large Block of WCR claims west and south of Hardshell property. No known activity on claims adjacent to Hardshell. Mowry Group Patented Claims: Essentially contiguous to WSC’s  claims   to   the  south  of  the   Hardshell property. Consists of about 290 acres of patented ground. These workings produced oxidized silver and lead and manganese oxides from replacements in Paleozoic limestones along a strong east-northeast fault zone from the 1700s to 1952. This patented ground was traded to the US Government in 1992-94 with the USFS now administering the surface. The mineral rights (BLM administered) to these patented claims were also included in the trade and the ground is not  open  to  mineral  entry  as  they  are  “Acquired  Lands.”

M3-PN100041 26 October 2010 Rev. 2

60

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

18

MINERAL PROCESSING AND METALLURGICAL TESTING

18.1

INTRODUCTION

Wildcat Silver Corporation intends to develop the oxide-based Hardshell property in southern Arizona for silver, copper, zinc, and manganese production. Hazen Research, Inc. performed two stages of laboratory testing for process development. 18.1.1

2005 Metallurgical Tests

Hazen conducted the first stage tests on composite samples prepared from drill-hole pulps (finely ground material) from two locations: HDS-23 and HDS-82 (both air-hammer holes). WSC provided the pulp samples from secure ASARCO storage from regions in the deposit that, in their view, are above average grade, but reasonably reflect the physical characteristics of the manganese oxide mineralization. The weight of each of the samples was about 6.5 pounds. The sample material from HDS-23 was ground to 80% passing 65 microns. The sample material from HDS-82 was ground to 80% passing 129 microns. Table 18.1-1 shows the head grades of the two samples. Table 18.1-1: 2005 Composite Sample Assay Sample HDS-23 HDS-82

Mn(%) 19.5 24.3

Ag (oz/t) 11.4 14.6

Zn (%) 2.34 5.86

Cu (%) 0.38 0.19

The test work consisted of sequential leaching; first by sulfurous acid (generated by bubbling sulfur dioxide gas into the stirred slurry), and second by dilute cyanide solution. This stage successfully demonstrated that sequential leaching with SO2 and then cyanide will extract the desired elements into solution. No attempt was made to recover the dissolved metals. 18.1.2

2008 Tests

Hazen conducted a second round of tests in 2008. The Hardshell ore body can be divided into three mineralized zones, each with its own characteristic composition. Composite samples were prepared from a global sample selected across all three mineral types, and a selection of samples from each zone. Composite A is the global sample prepared from 49 crushed drill core sample rejects obtained from depth intervals spanning the two upper volcanic-hosted mineralized zones in four boreholes: HDS-98, HDS-99, HDS-100 and HDS-101. Composite B represents the upper part of the volcanic-hosted zone represented by 22 core samples from drillholes HDS-98 over intervals from 406 to 470 feet beneath surface, and HDS100 over intervals from 225 to 296 feet. Composite C represents the lower part of the volcanic hosted zone represented by 22 core samples from HDS-98 over intervals from 498-554 feet, HDS-99 from 402-452 feet and HDS-100 from 314-381 feet. Composite D represents the lower M3-PN100041 26 October 2010 Rev. 2

61

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

carbonate hosted zone and was taken from 17 core samples from HDS-101 over depths from 367-508 feet. Table 18.1-2 summarizes assays for the target metals. Table 18.1-2: 2008 Composite Sample Assays Sample Mn(%) Ag (oz/t) Zn (%) Composite A 11.6 203 1.64 Composite B 10.2 208 1.36 Composite C 12.0 102 2.55 Composite D 5.9 188 2.97

Cu (%) 0.16 0.25 0.10 0.12

Pulps split by Hazen from these homogenized, crushed samples were analyzed by Hazen and separately by ALS-Chemex for WSC as checks. The composites A, B, and C are similar and contain 10 to 12 percent Mn, 1.3 to 2.6 percent Zn, 0.10 to 0.25 percent Cu, 102–208 g/tonne Ag, 0.2 to 0.4 g/tonne Au, 1 to 2 percent Pb, and 0.04 to 0.13 percent C as carbonate; Composite D is a high-carbonate material containing 6 percent Mn, 3 percent Zn, 0.1 percent Cu, 188 g/tonne Ag, 0.05 g/tonne Au, 1.7 percent Pb, and 3.4 percent C as carbonate or an estimated 28% carbonate. Because these composites where made from crushed core sample intervals from the 4 twinned holes in the higher-grade portion of the main manto, silver, manganese and base-metal grades were somewhat above average grades determined for the overall main manto at the time. The remainder of this discussion pertains only to the 2008 testing. 18.2

OBJECTIVE AND SCOPE

Hazen Research, Inc. continued the process development experimental work by expanding the scope of their earlier study. Scope items were to include: Demonstrate the technical feasibility of each unit operation in a preliminary flowsheet using a single composite material (Composite A). Zinc EW and cyanide destruction were not part of the original scope. Generate preliminary METSIM mass balance data that could be used for a process prefeasibility study and/or to design a pilot plant to demonstrate the process. Complete optical mineralogy of feed and leach residues. Explore other processes that may enhance recovery of metal values. Evaluate the response of other ore types (from the same orebody) to the process parameters identified earlier (with Composite A ore). Develop a better understanding as to where trace elements report in the flowsheet. Appendix  C  is  Hazen’s  report  on  the  2008  tests.

M3-PN100041 26 October 2010 Rev. 2

62

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 18.3

PRELIMINARY ECONOMIC ASSESSMENT STUDY

EXPERIMENTAL PROGRAM

18.3.1

Batch SO2 Leaching of Composite A

18.3.1.1

Procedure

Hazen ran a series of batch leaching experiments using Composite A as feed material. Fifteen experiments used an initial slurry consisting of 150 g of feed material and 450 g of deionized water at ambient conditions. The slurry was agitated at about 600 rpm as a Na2S2O5 solution was added directly to the slurry. H2SO4 was added to control pH. The two reagents were added to control and maintain the slurry redox potential (emf) and pH within prespecified ranges. The batch leaching experiment conditions were: Temperature: H2SO4 addition: Na2S2O5 addition: PSD (P80): Agitation rate: Retention time:

Ambient To  target  pH  ≤3 To target emf = 350-420 mV 70, 130, 200, 600, or 1,680 µm 600 rpm 4 or 24 hours

Based on the leach parameters determined by the first fifteen runs, four bulk leaching experiments were run using 6 kg samples to generate sufficient enough solution for downstream process testing. One of the four 6 kg sample tests used SO2 gas rather than Na2S2O5 to eliminate sodium carryover to magnesium sulphate crystals. 18.3.1.2

Results

 The leaching test achieved satisfactory extraction of manganese with all five experiments achieving better than 96% extraction.  Within the PSD range evaluated, the extractions were generally not sensitive to the PSD of the feed material.  Operating the SO2 leach process at a pH above 2 could negatively affect the extraction of metal values.  For a given set of operating conditions (of particle size, total retention time, and target pH), the EMF did not have much influence on the extraction of metal values in the SO2 leaching process within the 350-420 mV range evaluated.  Dissolution of metal values was generally completed within a 4-6 hour residence time; operating a leach process in excess of six hours may have a negative effect on manganese dissolution. No samples were leached for less than four hours in any experiment.  Bulk leaching resulted in extraction rates similar to the smaller-scale tests. Reagent consumptions were similar as well except the single experiment using SO2 gas consumed more equivalent SO2 (411 kg/tonne compared to an average of 254 kg/tonne using Na2S2O5) and less H2SO4 (78 kg/tonne compared to an average of 280 kg/tonne using Na2S2O5). M3-PN100041 26 October 2010 Rev. 2

63

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Reagent doses were high to drive the reactions. Reagent consumption rates are probably not representative of consumption rates in an operating environment. Reagent use needs optimization. Table 18.3-1 presents batch SO2 leaching results.

M3-PN100041 26 October 2010 Rev. 2

64

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Table 18.3-1: SO2 Bulk Leaching Results 3146-46

3146-47

3146-48

3144-50

3165-36

130

130

130

130

na

7

7

7

7

6

Target pH

1.5

1.5

1.5

1.5

2

Target emf, mV

350

350

350

350

350

Experiment Conditions P80, µm Leach time, h

Reagent Consumption Source of SO2

Na2S2O5

Na2S2O5

Na2S2O5

Na2S2O5

SO2 Gas

Reagent Dose, kg/tonne

353

379

520

260

411

Equivalent SO2, kg/tonne

238

255

350

175

411

H2SO4, kg/tonne

262

339

345

195

78

Zn, g/L

6.21

8.43

6.98

6.63

6.23

Cu, g/L

0.54

0.76

0.64

0.59

0.52

Mn, g/L

51.2

68.8

53.5

51

51.2

Fe, g/L

1.86b

1.78

1.45

2.49b

2.11

Fe2+, g/L

2.57b

1.62

1.51

2.79b

na

Measured pH

1.68

1.68

1.68

1.66

1.95

Measured emf,a mV

352

380

373

350

350

Ag, mg/kg

244

233

268

193

249

Zn, %

0.3

0.33

0.24

0.18

0.35

Cu, %

0.02

0.03

0.02

0.02

0.05

Mn, %

0.2

0.38

0.49

0.35

0.18

Fe, %

2.08

2.25

1.5

1.17

2.42

24.9

22.9

19.2

18.9

24.2

Ag

8

9.7

-8.8

23.1

15.5

Zn

87

85.1

88.8

89.7

85.3

Cu

89.5

83.9

89.8

88.1

78.9

Mn

98.7

97.6

96.7

97

98.9

Fe

29.5

21.5

45.2

31.7

21.9

Ag

92

90.3

109

76.9

84.5

Zn

81.9

105

85.8

99.3

100.5

Cu

76.9

104

84.5

100.6

102.5

Mn

81.1

106

84.1

105.2

99.1

Fe

86.1

92.9

66.6

102.3

99.4

Leach Filtrate

Leach Residue

Extraction, % Weight Loss

Mass Balance, %

M3-PN100041 26 October 2010 Rev. 2

65

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 18.3.2

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Batch Cyanide Leaching of SO2 Leach Residue

18.3.2.1

Procedure

Hazen performed cyanide leach tests on SO2 leach sample residues from the bulk leaching. Filter cake material was slurried with water to about 30% solids and agitated. pH was adjusted to 10.5 or greater using Ca(OH)2. Dissolved oxygen (DO) was measured in the slurry with a target of 3 ppm or greater. The slurry was conditioned if the DO was less than the target concentration by  “gentle  agitation  of  the  slurry  over  an  extended  period  of  time  with  or  without  air  sparging.” Once the target pH and DO levels were achieved, NaCN crystals were added to the slurry until the desired concentration of either 3 ppm or 6 ppm was achieved. The cyanide leaching experimental conditions were: Target pH Target DO: Target cyanide (as NaCN) concentration: Total residence time: pH modifier: 18.3.2.2

≥10.5 ≥3  ppm 3 or 6 g/L 24 or 48 hours Ca(OH)2

Results

Silver extraction was satisfactory in the leach runs with 7-24 hour conditioning times. But the 1hour conditioning runs did not achieve satisfactory extraction rates. Conditioning  methods  consisted  of  “gentle  agitation  of  the  slurry  over  an  extended  period  of  time   with   or   without   air   sparging.”   The   conditioning   method   and   conditioning   times   need   further   evaluation and testing. Gold values are very low, approaching detection limits. Gold is not considered a payable metal in the economic analysis. Table 18.3-2 shows the test results.

M3-PN100041 26 October 2010 Rev. 2

66

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY Table 18.3-2: Cyanide Leach Results

314664 314647-5

314665 314647-5

314666 314647-5

314667 314647-5

314668 314647-5

314669 314647-5

314670 314647-5

314671 314647-5

314672 314647-5

314673 314647-5

314674 314647-5

314675 314647-5

314676 314647-5

314677 314647-5

314678 314647-5

314679 314647-5

Ag, mg/kg

240

240

240

240

277

250

250

250

263

250

250

278

258

258

258

255

Au, mg/kg Feed PSD (P80,um)

0.36

0.36

0.36

0.36

0.3

na

na

na

na

na

na

1.24

na

na

0.55

0.55

SO2 leach

130

130

130

130

130

130

130

130

130

130

130

130

130

130

130

130

CN- leach Inputs and Conditions

115

115

115

115

78

78

78

78

61

61

61

61

25

25

25

25

7

7

7

7

1

1

1

1

24

24

12

12

12

12

12

12

24

48

24

48

24

48

24

48

24

48

24

48

24

48

24

48

Temperature, °C

AMB

AMB

AMB

AMB

AMB

AMB

AMB

AMB

AMB

AMB

AMB

AMB

AMB

AMB

AMB

AMB

Target pH Target CN conc., g/L

11–12

11–12

11–12

11–12

11–12

11–12

11–12

11–12

11–12

11–12

11–12

11–12

11–12

11–12

11–12

11–12

3

3

6

6

3

3

6

6

3

3

6

6

3

3

6

6

Sample, g

76

76

76

76

83.4

83.4

83.4

83.4

84.8

84.8

84.8

84.8

84

84

84

84

Water, g

177

177

177

177

195

195

195

195

198

198

198

198

196

196

196

196

Total, g Reagent Consumption

282

282

282

282

282

282

282

282

282

282

282

282

282

282

282

282

Total lime, g

0.95

0.95

0.96

0.95

0.76

0.76

0.84

0.76

0.76

0.76

0.76

0.76

0.76

0.76

0.76

0.76

Total NaCN, g

0.57

0.57

1.19

0.67

0.68

0.68

1.26

1.36

0.69

0.69

1.29

1.43

0.69

0.69

1.27

1.31

CaO, kg/tonne

12.4

12.4

12.6

12.4

9.1

9.1

10.1

9.1

8.9

8.9

8.9

8.9

9

9

9

9

NaCN, kg/tonne

0.78

1.3

2.64

-4.07

1.19

1.69

1.82

3.13

0.75

0.91

2.22

2.7

1.19

1.44

2.56

2.44

Experiment Number Feed (From SO2 Leach Residues) Analysis

Condition time, h Leach time, h

Outputs M3-PN100041 26 October 2010 Rev. 2

67

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

314664 314647-5

314665 314647-5

314666 314647-5

314667 314647-5

314668 314647-5

314669 314647-5

314670 314647-5

314671 314647-5

314672 314647-5

314673 314647-5

314674 314647-5

314675 314647-5

314676 314647-5

314677 314647-5

314678 314647-5

314679 314647-5

440

475

450

560

675

600

610

550

580

660

485

660

580

660

530

670

Ag, mg/L

36

32

34

28

7

23.1

7.2

12.4

30.9

26

32.2

26.4

29.6

24.6

31.8

25.7

Au, mg/L

<0.05

<0.05

na

0.05

na

na

na

na

na

na

na

<0.05

na

na

<0.05

<0.05

76.06

75.36

75.13

75.42

84.95

84.75

85.06

84.75

84.53

85.54

85.11

85.29

84.43

85.06

84.08

84.94

Ag, mg/kg

24.7

23.2

31.2

23.1

181

49.8

173

133

26.3

28.5

36.9

27.3

32.3

29.3

25.2

27.1

Au, mg/kg

0.17

0.12

na

0.15

na

na

na

na

na

na

na

0.23

na

na

0.21

0.2

Weight Loss

-0.1

0.8

1.1

0.8

-1.9

-1.6

-2

-1.6

0.3

-0.9

-0.4

-0.6

-0.5

-1.3

-0.1

-1.1

Ag

89.7

90.4

86.8

90.4

33.4

79.8

29.4

45.9

90

88.5

85.2

90.1

87.4

88.5

90.2

89.3

Au

52.7

66.9

na

58.6

na

na

na

na

na

na

na

81.3

na

na

61.8

63.2

Ag

106.6

103.6

100.2

105

87.3

86.7

91.6

86.8

90.3

92.4

88.5

92

91.8

86.4

103

100.2

Au

127.7

119.9

na

143.7

na

na

na

na

na

na

na

50

na

na

95.6

109.3

Experiment Number Feed (From SO2 Leach Residues) 24-h preg soln (with wash), ml

Residue Total Weight, g

Extractions, %

Mass Balance, %

M3-PN100041 26 October 2010 Rev. 2

68

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 18.3.3

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Copper Removal by Reductive Cementation with Zinc Dust

18.3.3.1

Procedure

Measured volumes of SO2 leach filtrate were treated with zinc dust and gently agitated. Zinc was added either 100% at the beginning or 60% up front and 40% after 10 minutes. Experimental conditions were: Zn/Cu mole ratio: Temperature: Residence time: Zinc dust addition: Target residual copper concentration: 18.3.3.2

1.1:1 to 4:1 Ambient and 50C 10-120 minutes 100% or 60%/40% split <40 mg/L

Results

In the lower Zn:Cu molar ratio ranges (1:1 to 2:1), copper cementation efficiency ranged from 33-76%. Temperature was not a factor. Zn:Cu ratios equal or greater than 3:1 achieved copper cementation efficiencies of 93-99%. Silver did not precipitate significantly. Table 18.3-3 shows the test data. 18.3.4

Precipitation of Solubilized Iron

18.3.4.1

Procedure

Measured volumes of solution from the copper precipitation step were agitated and heated to temperatures ranging from 25C to75C. Tech grade O2 gas was continuously sparged through the solution at 1 L/min. Ca(OH)2 was used to maintain the pH. Experimental conditions were: Target pH range: O2 flow rate: Temperature Range: Residence time range: Target residual iron concentration: 18.3.5

3.0-3.8 1 L/min 25-75C 1-4 hours ≤5  mg/L

Results

Acceptable iron removal by precipitation required temperatures of at least 75C and pH greater than 3.5. Oxygen flow was not optimized. Table 18.3-4 shows the test data.

M3-PN100041 26 October 2010 Rev. 2

69

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Table 18.3-3: Data Summary for Copper Precipitation with Zinc Experiment 3146-54 3146-55 3146-56 3146-57 3146-58 3146-59 3146-60 3146-61 3146-62 3146-63 3146-95 3146-80 3146-82 3146-96 3146-81 3146-83 3146-84 3146-85

Feed Cu (g/L) 0.62 0.62 0.62 0.62 0.62 0.62 0.62 0.62 0.62 0.62 0.62 0.62 0.62 0.62 0.62 0.62 0.62 0.62

Feed Zn (g/L) 7.11 7.11 7.11 7.11 7.11 7.11 7.11 7.11 7.11 7.11 7.11 7.11 7.11 7.11 7.11 7.11 7.11 7.11

Temp. (C) 22 22 22 22 22 50 50 50 50 50 22 50 50 22 50 50 50 50

Zn:Cu mole ratio 1.1:1 1.3:1 1.5:1 1.8:1 2.0:1 1.1:1 1.3:1 1.5:1 1.8:1 2.0:1 3.0:1 3.0:1 3.0:1 4.0:1 4.0:1 4.0:1 4.0:1 4.0:1

Filtrate Cu (g/L) 0.42 0.38 0.30 0.28 0.18 0.43 0.33 0.31 0.20 0.15 0.001 0.03 0.05 0.00 0.005 0.008 0.008 0.003

Cu removal (%) 33.0 39.4 51.8 55.8 70.9 30.9 46.6 50.0 67.2 76.0 99.8 95.5 92.7 99.4 99.2 98.7 98.8 99.6

Table 18.3-4: Data Summary for Iron Precipitation Experiment 3146-86 3146-87 3146-88 3146-89 3146-89 3146-90 3146-91 3146-26 3146-33 3146-90 3146-91 3146-92 3146-93 3146-94

Feed Cu (g/L) 0.03 0.03 0.03 0.03 0.0004 0.03 0.03 0.01 0.01 0.00 0.001 0.001 0.02 0.001

Feed Fe (g/L) 1.90 1.90 1.75 1.75 2.67 1.75 1.75 1.33 1.36 2.00 2.00 2.00 1.07 2.08

Feed Mn (mg/L) 62.2 62.2 62.2 62.2 56.4 62.2 62.2 60.5 65.4 58.9 59.1 59.1 66.2 60.4

Temp. (C) 55 55 25 25 65 75 75 75 75 75 75 75 75 75

Residence Time (min) 150 150 150 150 120 150 150 120 120 120 240 240 240 240

pH 3.2 3.4 4.1 3.5 3.8 2.9 3.8 3.9 3.9 3.8 3.7 3.8 3.7 3.8

Filtrate Fe (g/L) 1.58 1.98 1.57 1.72 2.08 0.93 0.00 0.00 0.04 0.84 0.03 0.002 0.001 0.002

Filtrate Mn (g/L) 65.9 72.5 Na 60.6 60.4 66.9 61.5 67.3 71.9 60.8 61.7 59.0 63.7 61.6

Fe Removal (%) 16.8 -4.2 10.3 1.7 22.1 46.7 99.8 99.7 97.3 58.3 98.6 99.9 99.9 99.9

Table 18.3-5: Data Summary for Iron Precipitation Prior to Copper Removal Experiment 3146-97 3165-37

Feed Cu (g/L) 0.66 0.52

Feed Fe (g/L) 1.76 2.11

M3-PN100041 26 October 2010 Rev. 2

Feed Mn (mg/L) 59.6 51.2

Temp. (C) 75 75

Residence Time (min) 150 240

pH 3.6-3.8 3.6-3.8

Filtrate Fe (Mg/L) 0.002 0.003

Filtrate Mn (g/L) 61.6 51.3

Fe Removal (%) 99.9 99.9

70

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 18.3.6

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Solvent Extraction of Zinc

Filtrate samples free of copper and iron from the tests discussed above were composited and used as feed to batch bench-scale zinc SX experiments. Two cationic extractants and two diluent types were evaluated. Extractants were di-2-ethylhexyl phosphoric acid (DEHPA) and bis-(2, 4, 4-trimethylpentyl) phosphoric acid (LIX 272). The diluents were Oroform SX-80 and Exxsol D80. 18.3.6.1

Procedure

A measured volume of the copper and iron-free solution was contacted with a measured volume of a given organic formulation for 3-5 minutes. Both organic and aqueous phases were sampled and analyzed. Experimental conditions were: Extractant: Diluent: Range of extractant concentrations: Extraction equilibrium pH for Lix 272: Extraction equilibrium pH for DEHPA: pH modifiers: Extraction and strip temperature: Stripping solution: 18.3.6.2

LIX 272 or DEHPA SX-80 or Exxsol D80 10-25% by volume 3.0-3.2 2.0-2.5 NaOH or NH4OH 40C 180-190 g/L H2SO4

Results

The data generated from each of these reactants show that the zinc extraction and co-extraction of other metals in solution are very dependent on the equilibrium pH of the process. Increasing the equilibrium pH increases the zinc extraction and co-extraction of other metals. Optimum zinc extraction (with minimum co-extraction of other metals in solution) occurs at about pH 2.0 to 2.4 for DEHPA and pH 2.8 to 3.2 for LIX 272. McCabe-Thiele equilibrium data show that at an aqueous-to-organic (A/O) ratio of 1:1 and 20 volume percent DEHPA or 25% by volume LIX 272, two or three extraction stages are required to process a 12.5 g/L zinc feed solution in a continuous process; loaded organics can be completely stripped in one or two stages using 180–200 g/L H2SO4 solution. High ferric iron levels in feed to SX may gradually lower the loading capacity or poison the recirculating organic solvent. Therefore, the feed to zinc SX should have very low, preferably less than 2 mg/L, residual iron and copper concentrations. The current efficiency of the subsequent zinc EW process could be negatively affected by high iron and copper concentrations in the feed to the SX process. Potentially interfering metals (copper, iron, cadmium, and selenium) and halides (chlorine, bromine, and iodine) were not identified.

M3-PN100041 26 October 2010 Rev. 2

71

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Table 18.3-6 summarizes the zinc and manganese extractions achieved with LIX 272 and DEHPA. The table shows identical zinc extractions at pH values of 2 and 3 for 20 volume percent DEHPA and 20 to 25 volume percent LIX 272, respectively, regardless of the diluent type; co-extraction of manganese was low or negligible. DEHPA is considered a better choice of extractant because of pH control and is being successfully used at Anglo American’s  Skorpion   Mine in Namibia. Table 18.3-6: Comparison of Zinc and Manganese Extractions for LIX 272 and DEHPA Diluent Equilibrium Type pH Exxsol DEHPA 20 2.0 D80 2.2 Exxsol LIX 272 25 D80 3.0 2.0 Oroform LIX 272 20 SX-80 3.0 O Notes: A/O = 1:1; Contact time of 4 min at 40 C Extractant

Conc, Vol %

Feed, g/L Zn Mn 10.6

62.4

10.0

66.7

9.8

67.3

Raffinate, g/L Zn Mn

Extraction, % Zn Mn

1.1

60.3

89.4

3.3

6.2 1.3 6.9 1.2

68.0 67.3 67.1 66.9

37.5 87.1 30.0 88.2

0.3 0.6

Hazen also conducted a series of tests on stripping of the organic. Acceptable stripping was demonstrated at low (1:1 to 1:3) aqueous to organic ratios. 18.3.7

Manganese Sulfate Production

Hazen’s  scope  at  this  stage  included  experiments to evaluate production of manganese sulphate as a marketable product. As explained below, a decision was made after completion of the study to produce manganese carbonate instead. Details of the manganese sulphate production experiments are thus not relevant for this study. 18.3.8

Amine Leaching of Lead from SO2 Leach Residues

Hazen’s   experiments   included   a   process   to   recover   lead   by   leaching   SO2   leach   residue   with   a   diethyl triamine (DETA) lixiviants. Though the experiments were successful, the recovery process was not economical and was not considered for this study. 18.3.9

Physical Separation

Hazen performed a series of tests using magnetic separation. Though the results showed some promise, the process is not included in this study. 18.3.10

Revised Hazen Process Flowsheet

Hazen developed a revised metallurgical process flowsheet containing the process steps detailed above as well as upstream processes such as crushing and comminution. See Figure 18.3-1.

M3-PN100041 26 October 2010 Rev. 2

72

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 18.3-1: Hazen Revised Flowsheet

M3-PN100041 26 October 2010 Rev. 2

73

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 18.3.11

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Manganese Carbonate

Hazen’s   scope   for   the   2008   study   was   to   experimentally   produce   manganese   sulfate   crystals.   However, as the project progressed, marketing considerations caused manganese sulfate crystals to be dropped from consideration as a product. Both electrolytic manganese metal and magnesium oxide were evaluated as potential manganese products. In the end, manganese carbonate was selected as the final product for the purpose of this study. Hazen conducted further studies on manganese carbonate precipitation and prepared a report titled   “Batch   Precipitation   and   Calcining   of   Manganese   Carbonate”   which   was   published   May   18, 2010. Hazen used a synthetic zinc SX raffinate and used sodium carbonate (Na2CO3) as a precipitant to produce the manganese carbonate (MnCO3). Hazen also ran experiments to generate preliminary information on pelletizing methods for the carbonate and to determine the physical characteristics of pellets produced by different means. 18.3.12

Mineralogy

Spot analyses of polished sections of SO2 leach residues show predominantly lead-bearing minerals (anglesite, cerussite, residual galena etc.). Analyses of polished sections of cyanide leach residues show that unextracted silver values were generally associated with manganeseand/or lead-bearing minerals or still locked in fine-grain silica. 18.3.13

Metallurgical Mass Balance

Hazen prepared a METSIM metallurgical mass balance around their experimental flow sheet. M3 used the METSIM balance as a starting point for creation of the flow diagram actually used for this study. 18.4

M3 PROCESS FLOW SHEETS

M3  modified  Hazen’s  flow  sheet  in  several  key  ways  to  enhance  constructability,  operability  and   economic feasibility based on engineering judgment and past experience. M3’s  key  changes are described in the following sections. 18.4.1

Crushing and Grinding

Hazen proposed a jaw crusher followed by a fully autogenous grinding (AG) mill. M3 is not aware of any comminution testing that demonstrates the ore is suitable for an AG mill. AG mills are not common in the base and precious metals industries. M3 therefore replaced the jaw crusher/AG mill combination with conventional three-stage crushing and grinding in a ball mill.

M3-PN100041 26 October 2010 Rev. 2

74

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 18.4.2

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Refinery

M3 added a refinery, with smelting to produce doré, to the flow sheet.   Hazen’s   sheet   stopped   after Merrill Crowe. Refining was likely implied, but not specifically shown. 18.4.3

Removal of Lead Recovery

Lead   recovery   via   amine   leach   is   not   economic.   M3’s   flow   sheet   does   not   recover   lead   and   assumes the lead can safely be disposed of with the filtered, alkaline tailings. Figure 18.4-1 is the M3 process flow diagram.

M3-PN100041 26 October 2010 Rev. 2

75

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 18.4-1: Overall Process Flow Diagram

M3-PN100041 26 October 2010 Rev. 2

76

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 18.5

PRELIMINARY ECONOMIC ASSESSMENT STUDY

PROCESS PLANT

The process operations required to extract the metals from the Wildcat Silver ore are summarized as follows. Figure 18.5-1 is a process plant site plan. 1. Size reduction in a three stage (jaw crusher, secondary and tertiary cone crushers with tertiary crusher in closed circuit). 2. Stockpiling primary crushed ore in an uncovered stockpile and then reclaiming by feeders and conveyor belt. 3. Grinding ore to a final product size in a ball mill in closed circuit with cyclone separators. Final mill product will be 80 percent passing 200 microns (65 mesh). 4. The ground ore will be using sulfuric acid and SO2 to remove the copper, zinc, and manganese. 5. Acid leach thickener underflow will be neutralized with lime and conditioned by air sparging in preparation for cyanide leaching to recover silver. 6. The cyanide leached slurry will be washed in countercurrent decantation (CCD) thickeners. 7. Pregnant solution from the first CCD thickener will be sent to a Merril-Crowe circuit where silver will be precipitated out with zinc dust. 8. CCD thickener underflow will proceed to a cyanide recovery thickener and thence to cyanide detoxification and filtration. 9. Tailings will be either sent to the mine for backfill or disposed of by dry stacking on-site. 10. The precious metals precipitate will then be smelted to produce Dore’  bars. 11. Acid leach thickener overflow will first be treated in a copper recovery circuit to remove copper as cemented copper using zinc dust. The cement copper will be re-leached in mild sulfuric acid to dissolve the un-reacted metallic zinc and upgrade the copper values. 12. The copper free solution will than pass through an iron removal circuit. Iron will be precipitated using lime and air. 13. The iron free solution will then be treated in a zinc solvent extraction (SX) and electrowinning (EW) circuit to produce zinc cathode. 14. The raffinate from the zinc SX circuit will then be treated using sodium carbonate as industrial grade trona to recover manganese as manganese carbonate.

M3-PN100041 26 October 2010 Rev. 2

77

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 18.5-1: Site Plan

M3-PN100041 26 October 2010 Rev. 2

78

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 18.6

PRELIMINARY ECONOMIC ASSESSMENT STUDY

EXTRACTION RATES

Table 18.6-1 shows the estimated recovery rates. Table 18.6-1: Metal Recoveries Silver Copper Zinc Manganese

18.7

% Recovery 90 95 90 95

PROCESS REAGENTS

Table 18.7-1 shows process reagents and consumption rates. Table 18.7-1: Reagents and Consumption Rates Reagent Sulfur Dioxide Sulfuric Acid Lime Sodium Cyanide Zinc Dust Extractant (DEHPA) Diluent (Oroform SX 80) Cobalt Sulfate Sodium Carbonate (Trona) Diatomaceous Earth Antiscalant Copper Sulfate Sulfur Flux Flocculant

M3-PN100041 26 October 2010 Rev. 2

Lb-Gal/Ore Ton 338.56 553.41 41.72 3.34 0.68 0.04 0.86 0.00 263.70 0.10 0.07 0.00 0.01 0.53 0.21

Lb/year 494,297,600 807,974,721 60,905,040 4,872,000 997,641 57,510 1,256,070 1,804 385,000,000 140,000 106,346 227 13,356 776,160 308,000

79

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 19

PRELIMINARY ECONOMIC ASSESSMENT STUDY

MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES

The mineral resource estimate was prepared by Mine Reserves Associates, Inc. (MRA) in the early months of 2010 and completed on April 13, 2010. This resource estimate is an update to the February 26, 2010 report to incorporate 2009 drill results in the northern extension area defined by nine deep diamond drill holes. The present report includes resources from both the northern extension area and the southern main manto area. A three-dimensional (3-D) block model of the Hardshell Deposit was constructed and mineral resources were   estimated   using   Mintec’s   MineSight®   mining   software   package.   Only   mineral   resources are estimated for the Hardshell Deposit in this report. Engineering studies and economic evaluations, while in progress at the time of this writing have not yet progressed sufficiently to quantify an estimate of mineral reserves. The subsections that follow describe the parameters and methodology for this work. 19.1

MODEL EXTENTS

The horizontal coordinate system is State Plane Coordinate System Of 1983 (Arizona Central Zone) expressed in international feet. The model coordinate system is based on North American Datum Of 1983  (NAD  83)  standards.  As  a  validation  of  the  internal  consistency  between  WSC’s   current surveying and that of the base map coordinate system, WSC had four of the original survey control points resurveyed and found that they compared to a high degree of accuracy. All WSC location data, including drill hole collar positions and claim information are recorded in this system. Table 19.1-1 summarizes the limits of the 3-D block model. Table 19.1-1: Resource Model Limits Direction X (Easting) Y (Northing) Z (Elevation)

19.2

Minimum (feet) 1,073,000 165,000 1,900

Maximum (feet) 1,077,000 171,000 5,950

Block Size (feet) 25 25 25

No. of Blocks 160 240 162

SURFACE TOPOGRAPHY

The vertical datum is based on the North American Vertical Datum Of 1988 (NAVD88). WSC provided topographic data to MRA in the form of a .DXF electronic file. The topographic surface elevations were loaded into 2-D surface and 3-D block model files. A block model variable stores the percentage of each block below topography. 19.3

DRILL HOLE DATABASE

The Hardshell Deposit drill hole database contains collar locations, drill hole azimuth and dip information, sample assay results, and geological information from a recent drilling program by WSC and from several exploration drilling campaigns conducted by ASARCO. In all, 88 drill holes occurring within the deposit model boundary were used to estimate this resource. Of these, 41 are diamond core (including seven holes started as air-hammer and completed as core), 46 are M3-PN100041 26 October 2010 Rev. 2

80

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

air-hammer, and 1 is a reverse circulation hole. The drilling programs included a good mix of vertical and inclined holes designed to test both the strata-form lithologic units and the high angle structures. Stored in the drill hole database used for grade modeling in the model are 9,782 individual sample intervals representing approximately 58,500 feet of drilling. Each sample interval record contains a position to store assay values for Ag, Au, Mn, Cu, Pb, and Zn. All the drill holes have mostly complete assay values for Ag, however, a number of the older Asarco drill hole samples were not assayed for other metals, or had assays for only some selected metals. A statistical study was conducted including frequency distribution histograms and cumulative probability graphs for the individual metals. Graphs were also compiled for each metal within each of the lithologic types. Histograms indicated that high grade outliers are present in a number of the metal populations. Inspection of the cumulative probability graph for Ag assays showed an inflection point in the curve at approximately 70.0 oz/t. The high grade outlier portion of the population above 70 oz/t accounts for 0.01 percent of the total population, but, if left unadjusted, would bias the model grade estimation upward. For that reason, the Ag assays were capped at 70 oz/t. A similar situation existed with the Au, Pb, and Zn populations. Accordingly, Pb grades at 11.0 percent and Zn grades at 12.0 percent. The cumulative probability graphs for Mn and Cu exhibited better behaved populations with no high grade outlier segments and consequently no capping adjustments were made for either of these metals. Gold values in the deposit are low and difficult to measure with accuracy and hence have not been modelled. 19.4

GEOLOGIC MODEL

A detailed geologic representation for the deposit was developed in the computer model from drill hole cross-sections and level plan maps. Lithologic types and structural outlines were digitized on 100-foot sections, then modified on 25-foot interval level plans and loaded into the model blocks. In all, five individual lithologic units were delineated. The selection of these units was based on the original geologic cross-sections provided by WSC geologists. The lithologic composition and model code numbers for each unit are shown in Table 19.4-1 in their correct stratigraphic sequence. Table 19.4-1: Lithologic Codes Lithologic Composition Trachyandesite – Lava Flows Undifferentiated Volcanics (above massive silica cap) Massive Silica Cap (jasperoid) Tuffaceous Sandstone and Agglomerate (below massive silica cap) Limestone

19.5

Lithologic Code 21 40 81 49 60

MINERALIZATION CONTROLS

In this deposit, all of the rock types are mineralized to some degree. Some lithologies are better hosts due to protolith composition and/or close relationship to feeder structures. However, the M3-PN100041 26 October 2010 Rev. 2

81

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

largest volume of the best grade material in the Main Manto area occurs in the original Cretaceous fine-grained tuffaceous sandstone below the massive silica unit (rock code 49). Texturally the massive silica or jasperoidal cap rock appears be derived from hydrothermal leaching of tuffaceous sandstone, leaving behind clay minerals and void space filled with original sulfide minerals. The silica layer appears to have acted as a cap to ascending mineralizing fluids, forcing lateral dispersion into the permeable tuff protolith, resulting in metal concentration limited by an associated outward silicification front. Toward the NW into the NW Extension zone both the top and bottom of the silica cap rock and underlying silver, base-metal manganese oxide mineralization plunges at a steeper angle than the Cretaceous fine-grained tuffaceous sandstone / Permian Concha Limestone unconformable contact with the majority of mineralization hosted in the Paleozoic (rock code 60) section. Better welding of the fine-grained, ignimbritic tuff with fewer permeable sandy horizons may contribute to this change in mineralized horizons, but a deeper NW source of mineralizing fluids are probably indicated as responsible for lower horizons being mineralized in the NW Extension. 19.6

COMPOSITING OF DRILL HOLE DATA

The drill hole sample assay intervals were weight averaged to 25-foot composites on even level intervals to approximate a possible mining bench height (bench composites). Geological lithologic unit codes were added to each composite by back-assignment from model blocks. All further statistical analyses and model grade estimation were based on these composite data. Cumulative probability graphs were generated for each of the Ag, Au, Mn, Cu, Pb, and Zn composite grade populations. Coefficients of variation (CV = standard deviation/mean) for the various metals were 2.29 for Ag, 2.20 for Mn, 1.87 for Cu, 2.36 for Pb, and 2.66 for Zn, indicative of relatively large variations in metal grades. 19.7

MINERAL RESOURCE ESTIMATE

The block model developed as described above was used to tabulate the mineral resource for the Hardshell deposit. The resource estimate for the Hardshell deposit is detailed in Table 19.7-1. This estimate includes the southern area and now includes material from the northern extension area. The estimate is presented in Imperial units where tons refer to short dry tons (2,000 pounds). A block value cutoff of $55 per ton was selected to meet the criteria that a resource estimate  must  have  a  “reasonable prospect   for  economic  extraction”.  See  Section   1.19.11 for a detailed discussion on the calculation of block value. Mineral resources that are not mineral reserves do not have demonstrated economic viability. No mineral reserves are calculated here. The mineral resource estimate was prepared in compliance with Canadian NI 43-101 standards. An oxide/sulfide contact surface was developed to differentiate oxide resources from deeper sulphide resources. The sulfide resources will require a separate metallurgical process with different costs and recoveries which have not yet been determined. The sulfide material has only been identified in deep drill holes in the northern extension area. Of the total indicated and inferred resource, approximately 60 percent is silicified volcanic hosted and 40 percent is silicified carbonate hosted. M3-PN100041 26 October 2010 Rev. 2

82

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Table 19.7-1: Mineral Resource Estimate ($55/t Cutoff) Oxide Oxide Sulfide

Tons (000s) 6,618 Tons (000s) 43,286 7,715

Silver (opt) 5.48 Silver (opt) 1.78 1.02

Manganese (%) 6.83 Manganese (%) 7.66 5.77

Zinc (%) 1.03 Zinc (%) 1.55 2.73

Copper (%) 0.10 Copper (%) 0.06 0.10

Block model sections for manganese along 167,800N and 1,075,400E are shown in Figures 19.71 and 19.7-4, respectively. Block model sections for silver along 167,800N and 1,075,400E are shown in Figures 19.7-2 and 19.7-5, respectively. Block model sections for block value along 167,800N and 1,075,400E are shown in Figures 19.7-3 and 19.7-6, respectively. These sections are in the Main Manto area. Block model plans for manganese and silver along deeper levels of the northern extension area (elevation 4775 feet) are shown in Figures 19.7-7 and 19.7-8, respectively.

M3-PN100041 26 October 2010 Rev. 2

83

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 19.7-1: Manganese Cross Section: 167,800N M3-PN100041 26 October 2010 Rev. 2

84

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 19.7-2: Silver Cross Section: 167,800N M3-PN100041 26 October 2010 Rev. 2

85

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 19.7-3: Block Value Cross-Section: 167,800N M3-PN100041 26 October 2010 Rev. 2

86

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 19.7-4: Manganese Long Cross-Section: 1,075,400E M3-PN100041 26 October 2010 Rev. 2

87

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 19.7-5: Silver Long Cross-Section: 1,075,400E M3-PN100041 26 October 2010 Rev. 2

88

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 19.7-6: Block Value Long Cross-Section: 1,075,400E M3-PN100041 26 October 2010 Rev. 2

89

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 19.7-7: Manganese Block Model-4775 Elevation

M3-PN100041 26 October 2010 Rev. 2

90

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 19.7-8: Silver Block Model-4775 Elevation

M3-PN100041 26 October 2010 Rev. 2

91

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 19.8

PRELIMINARY ECONOMIC ASSESSMENT STUDY

VARIOGRAPHY

Variograms were calculated to determine the continuity directions and ranges of mineralization. Each lithology type was reviewed separately, but reasonable directional variograms could not be developed primarily because not enough composite data points were available. The problem was compounded by the fact that the deposit is basically an antiformal shape with each limb dipping off the apex at a different angle. This tends to make it very difficult to develop variograms in a specific direction because of lack of data. As a compromise, omni-directional variograms were developed for each metal using composite grades from the main mineralized zone. This proved to be a workable solution from which parameters could be selected for the block grade estimation equations. A spherical model was fit to each of the experimental variograms and the following parameters were selected (see Table 19.8-1). Table 19.8-1: Variogram Parameters Parameter Nugget Sill Range

19.9

Silver 11.83 55.20 110.00

Manganese 12.88 57.16 170.00

Copper 0.01 0.02 135.00

Lead 0.06 1.68 114.00

Zinc 0.64 2.37 185.00

GRADE MODEL

The relatively high coefficient of variation for all the metals, as discussed in Section 19.8, suggested that ordinary kriging would not be appropriate for grade estimation in this model as it is unsuited for handling outlier data. A high CV indicates that higher grade outliers in the population, if not controlled, could upwardly bias the estimation of block grades. For that reason, a modified single indicator kriging method (Outlier Restricted Kriging) was selected for grade estimation in the model. In this method, one first determines the outlier grade cutoff and then calculates the probability of the outlier data occurring within each individual block. This is done by assigning a single grade cutoff indicator (1=outlier, 0=below outlier) to the surrounding composite data points and then interpolating the block outlier probability from these surrounding points. The block outlier probability is actually the outlier kriging weight. Since the total kriging weights for the block must sum to 1.0 (to remain an unbiased estimator), the below outlier kriging weight must be 1.0 minus the outlier kriging weight. The appropriate block kriging weights are then assigned to the surrounding composite points as outlier or below outlier values. These composite values are then used to estimate average block grades using a kriging process that was modified to accommodate both the outlier and below outlier kriging weights. The method essentially retains values in the higher grade blocks but limits the influence of the outlier grades to a more restricted area than would be possible with ordinary kriging. Each lithologic type was interpolated separately (hard boundaries), with the sole exception of a soft boundaries imposed between rock codes types 21 (trachyandesite) and 40 (undifferentiated volcanic rocks above the silica cap). Also, since the deposit has an antiformal shape in the southern portion of the model, it was necessary to divide the model into three interpolation zones representing a west limb, an apex, and an east limb. Soft interpolation boundaries were used M3-PN100041 26 October 2010 Rev. 2

92

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

between the three zones. In the northern portion of the current model, geology and mineralization are defined by faulting. Three additional interpolation zones were delineated to accommodate the displacement of the lithologic units on either side of the major fault plane. These zones were interpolated separately, but hard boundaries were imposed between them to insure that block grade assignments were not allowed to cross fault boundaries. The search ellipsoid alignment and ranges used in the interpolation process were oriented to reflect the mineralized directions and continuity ranges detected in the variogram analysis and also from the lithologic trends observed in the geologic cross-sections. Three interpolation zones were used in the southern area to approximate the two limbs and top of an antiformal structure, as was done in the previous model. Three additional zones were implemented in the northern extension area to accommodate structural blocks associated with faulting. Search ellipsoid ranges and orientations for each of the six zones are shown in Table 19.9-1. Table 19.9-1: Search Ellipsoids Model Codes 21, 40, 81, 49

60

Interpolation Zones 1 2 3 4 5 6 1 2 3 4 5 6

Primary 300 300 300 300 300 300 200 200 200 300 300 300

Distance (ft) Secondary 300 300 300 300 300 300 100 100 100 300 300 300

Tertiary 30 30 30 30 30 30 20 20 20 30 30 30

Strike 20 deg 20 deg 20 deg 335 deg 315 deg 315 deg 20 deg 20 deg 20 deg 335 deg 315 deg 315 deg

Orientation Dip 12 West 0 25 East 0 0 12 East 12 West 0 25 East 0 0 12 East

Plunge 0 0 0 0 0 0 -20 -20 -20 0 0 0

The interpolation search ranges were the same for each individual metal and also for each lithologic type with one exception. The limestone unit (rock code 60) in the southern area exhibits both horizontal manto like geometry associated with the volcanic/limestone contact zone, with a component of more vertical (feeder associated) geometry at depth. In the northern extension area, the mineralization appears to occur in more horizontal manto like geometry associated with the volcanic/limestone contact zone and other stratigraphic horizons. As such the search ranges for the limestone in the south were reduced to acknowledge this difference. A maximum of nine and a minimum of two composites, with only three composites allowed from any one hole, were used in the calculation of any one block grade. 19.10 MATERIAL DENSITIES Shown in Table 19.10-1 are the bulk tonnage factors that were assigned to the various lithologic types in the block model. A default tonnage factor of 12.5 cubic feet per ton was used where no lithology codes exist.

M3-PN100041 26 October 2010 Rev. 2

93

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Note that these represent altered and mineralized rock tonnage factors, especially code 49. Code 40 was used for unmineralized, unaltered tuffaceous sandstone and agglomerate below the massive silica cap. Tonnage factors are based on a combination of historic assumption including mineral densities and percentages (with some test work) and limited test work by WSC. Table 19.10-1: Wildcat Silver Corporation Hardshell Project Tonnage Factors Lithologic Code

Lithology Trachyandesite-Lava Flows Undifferentiated Volcanics (above massive silica cap) Massive Silica Cap (jasperoid) Tuffaceous Sandstone and Agglomerate (below massive silica cap) Limestone

21 40 81 49 60

Tonnage Factor (cu. ft/ ton) 11.8 12.5 12.3 11.5 11.8

19.11 BLOCK MODEL Since this is a poly-metallic deposit, a value equivalency for each block was calculated in order to determine a cutoff for reporting a resource for the deposit. Revenue from silver, manganese, lead, zinc, and copper was included. Gold values are low and difficult to accurately measure in the deposit and as such were not included in this calculation. A block value, in dollars per ton, was calculated for each model block based on the block grade, approximate metallurgical process recoveries, and estimated metal prices. A cutoff value was then used that approximated the anticipated costs of mining and processing, along with requirements for general and administrative (G&A) and sustaining capital. The metal price assumptions used in this calculation were based on estimated metal market prices believed to be reasonable for longer term price projections. The block value calculation assumptions are shown in Table 19.11-1. Table 19.11-1: Block Model Assumptions Metal Silver Manganese Copper Lead Zinc Metal Mining Process G&A Sustaining Capital

Price

Process Recovery (%) 14.00 $/oz 85 0.61 $/lb 95 2.00 $/lb 90 0.5 $/lb 80 0.75 $/lb 90 Costs $1.80/ton of material $50.00/ton processed $2.00/ton processed $0.30/ton of material

A block value (dollars per ton) was calculated and stored for each block in the model that had received metal grade estimates. The block value for Ag is equal to metal price x percent recovery x block metal grade. The values for Mn, Cu, Pb, and Zn are equal to metal price x 20 x percent recovery x block metal grade. The value of the material contained in each block then equals the sum of the dollar values per ton for each metal.

M3-PN100041 26 October 2010 Rev. 2

94

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

The cutoff was determined by summing the cost assumptions of open pit mining, processing, G&A and sustaining capital. The break-even cutoff of $54.10 per ton was rounded up to $55.00 per ton for the purpose of resource reporting. 19.12 RESOURCE CLASSIFICATION Resources were classified into indicated and inferred categories following Canadian NI 43-101 compliant standards. In the northern extension area in which information is limited (approximately north of 168,600N) all blocks were considered to be inferred. In the southern area in which considerably more data is available, the category assignments were based on composite to block distances and the number of composites used in the kriging estimations. A block was designated as indicated if it was within the average range of 125 feet (variogram distance) and was estimated by composites from at least three drill holes. A block was considered to be inferred if it was greater than 125 feet from any drill hole or did not meet the minimum number of drill holes required for the indicated classification. The above method was used for all the lithologic type block assignments with the single exception of the limestone host (rock code 60) in the southern model area. As noted in Section 19.11, the character of the mineralization is more sporadic and less continuous so the classification method for type 60 was changed to accommodate these conditions. The classification for indicated limestone blocks was reduced to within 75 feet from a drill hole and estimated by at least three drill holes. A limestone block was assigned as inferred if it was greater than 75 feet from any drill hole and did not meet the minimum number of drill holes required for the indicated classification. 19.13 MINERAL RESERVE ESTIMATE Only mineral resources are estimated for the Hardshell Deposit in this report. Engineering studies and economic evaluations, while in progress at the time of this writing have not yet progressed sufficiently to quantify an estimate of mineral reserves.

M3-PN100041 26 October 2010 Rev. 2

95

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

20

OTHER RELEVANT DATA AND INFORMATION

20.1

GEOTECHNICAL – SITE CONDITIONS AND FOUNDATION DESIGN

Geotechnical studies for site conditions or foundation design are not generally conducted at the PEA study level. The site plan (Figure 18.5-1) was laid out such that heavier structural loads are placed on cut material rather than fill. No known major geotechnical problems exist. 20.2

TAILINGS DESIGN

The study basis is that tailings are to be filtered prior to disposal directly on cleared and grubbed earth. The tailings disposal area is shown in Figure 18.5-1. Approximately half of all tailings generated will be used for underground backfill. 20.3

WASTE ROCK STORAGE

Open pit mine planning included haulage and disposal of waste rock. Waste rock piles are shown on Figure 18.5-1.

M3-PN100041 26 October 2010 Rev. 2

96

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 21

PRELIMINARY ECONOMIC ASSESSMENT STUDY

INTERPRETATION AND CONCLUSIONS

Hardshell is an epithermal manto replacement deposit developed along a stratigraphic level characterized by Cretaceous aged tuffs and extending downward into Paleozoic limestones. Hydrothermal solutions moving along conduits associated with steep high-angle faults introduced silver, manganese, lead, zinc, and copper sulfides into the permeable sediments and remobilized large quantities of silica from the host rocks to form a silica cap (jasperoid). Subsequent weathering has altered most of the sulfides to oxide, except in deep zones in the northern extension area. The vast majority of exploration drilling for the Hardshell Property was conducted by the previous owner ASARCO. This work yielded geologic logs, assay records and pulp samples. The drilling method and sampling practices used historically have been validated by check work conducted by WSC. Validation included reanalysis of all available historical analytical pulp samples and the drilling of four confirmation core holes adjacent to historical holes. The success of these programs in validating the integrity of the historical work allows for this data to be used with confidence in current resource estimation work. It has been observed that the WSC-provided data on exploration and sampling and analysis programs used standard practices, providing generally reasonable results. The resulting data can be affectively used in the current resource estimation work. The mineral resource for the Hardshell Deposit has previously been reported as indicated and inferred oxide material. Newly incorporated WSC exploration holes from the north extension area have identified sulfide material in deeper intercepts. Both oxide and sulfide mineralization for the northern extension area are classified as inferred based on limited drilling in that area. The resource estimate for the Hardshell Deposit is reported at a block value cutoff value of US$55 per ton for both oxide and sulphide material. The oxide resource consists of 6.6 million tons indicated resource with a silver grade of 5.5 oz/t and a manganese grade of 6.83 percent and 43.3 million tons of inferred resource with a silver grade of 1.8 oz/t and a manganese grade of 7.66 percent. In addition, there is a sulphide resource in the north extension area that consists of 7.7 million tons inferred resource with a silver grade of 1.0 oz/t and a manganese grade of 5.77 percent. The resource model from which this estimate was tabulated is a reasonable representation of the data provided.

M3-PN100041 26 October 2010 Rev. 2

97

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 22

RECOMMENDATIONS

22.1

RISKS

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Beyond the ordinary risks faced by industrial and commercial development projects, the following are identified as significant to the Hardshell Project. The metallurgical testing thus far indicated the chemical processes are feasible. However, the scale of the tests has not been sufficient to determine if excessive heat loads and aggressive chemical environments will require equipment and safeguards beyond those envisioned in this report. There is a risk that that equipment costs could escalate beyond those contained in this cost estimate. Metal prices are volatile. Hardshell is somewhat insulated due to the unique mix of manganese, zinc and silver, but long-term collapse in either the silver or manganese markets would likely render the project uneconomic. Nothing is certain in the realm of environmental permitting. The nearby Rosemont project has seen several delays in their permitting schedule and significant local opposition. While the Hardshell project is very different from Rosemont in location, scale, and visual impact, there are risks of delays or denial of permits. Carbonate- hosted manganese oxide mineralization has not been fully metallurgically evaluated. 40% of presently scheduled mineable oxide ore in is carbonate-hosted which may lead to unacceptable reagent consumption particularly of acids and SO2. 22.2

OPPORTUNITIES

Considerable additional exploration potential exists at Hardshell at depth and on projections especially to the north and northwest. There is also considerable low-grade silver, not associated with manganese oxides, that has not been fully accessed. . Pilot studies and further research may lead to improvements and optimization of the processes resulting in lower operating costs. This evaluation does not consider recovery of gold. Gold does exist in measurable quantities in the deposit. More gold mineralization and better grades are possible. Major prefeasibility work elements would include resource development drilling, exploration step-out drilling, metallurgical test work, geotechnical evaluation, environmental evaluation, and metals marketing. Prefeasibility would be an intermediary step before a full feasibility is undertaken. The study costs have been estimated based on current pricing and may be subject to change as actual contracts are executed. Major parts of the work required for prefeasibility are discussed below.

M3-PN100041 26 October 2010 Rev. 2

98

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 22.3

PRELIMINARY ECONOMIC ASSESSMENT STUDY

RESOURCE DEVELOPMENT DRILLING

Resource development drilling needs to be conducted as in-filling within and around the periphery of the Hardshell deposit, including at depth. Some older holes were lost or did not penetrate the full thickness of mineralization. Drilling depths and step-outs were also somewhat limited  by  ASARCO’s  conception  of  economics  of  this  deposit  in  the  mid-1960s to early 1980s when almost all holes were drilled. Hardshell drilling conditions are difficult, time consuming and expensive because of jasperoidal silica, vuggy silicified and clayey mineralized zones, local rubble, faults and lost circulation. It is planned in any cases that reverse circulation air/foam hammer drilling would be used to pre-collar and case many of the deeper infill drill holes, down to the mineralized zone. Before the mineralized zone is reached, core drilling would be used to continue through the mineralized interval and continue to total depth. Recent WSC drilling has intersected significant mineralized intercepts providing the potential for additional resources to the north and northwest of the known deposit area. This development plan provides only for partial step-out drilling in this direction. There is considerable additional exploration potential in these northern and northwest areas as well as elsewhere on the claim block around old workings, strong alteration, and anomalous geochemistry. A total of 77 resource development holes for a total of 58,150 feet are proposed. Drill hole depths in the southern part of the known deposit area ranges from 300 to 600 feet. Because of the shallow depths, these holes could be drilled as core holes, without pre-collaring. Drill depth over the central to northern parts of the deposit range from 700 to 1,200 feet. These holes will mostly be drilled by pre-collaring with reverse circulation and casing above the Main Manto Zone and will be core drilled through the Main Manto Zone. It is expected that some holes will be completed RC and cased and completed for interim water wells for development drilling or possibly OP/UG dewatering or as water level, quantity and quality monitor wells. It is estimated that 50 percent of the planned development hole footage could be drilled using reverse circulation drilling or about 29,075 feet, at an estimated direct drilling cost of $25 per foot, or $726,875. Other reverse circulation drilling costs, including drilling supplies, drill road work, sample analysis, and personnel would be an additional $30 per foot, or $872,250. The combined cost of direct drilling and other associated costs for reverse circulation drilling would be $1,599,125. The balance of the development hole footage could be completed using core drilling for 29,075 feet, at an estimated direct cost of $47 per foot, or $1,366,525. Other core drilling costs, including drilling supplies, drill road, work, drilling water, sample analysis, and personnel would be a further $57 per foot, or $1,657,275. The combined cost of direct drilling and other associated costs for core drilling would be $3,023,800. The total development drilling cost is thereby estimated to be $4,622,925. Assuming 300 feet per day of reverse circulation drilling (29,075 feet) would require 97 days of reverse circulation drilling. For one reverse circulation drill this is about 5 months (at 20 drill days/month). Assuming 100 feet per day of core drilling (29,075 feet) would require 291 days of core drilling. For two core drills this is about 7½ months (at 20 drill days/month), not including contingency. M3-PN100041 26 October 2010 Rev. 2

99

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 22.4

PRELIMINARY ECONOMIC ASSESSMENT STUDY

EXPLORATION STEP-OUT DRILLING

WSC has identified significant exploration potential to the north and northwest of the known Main Manto deposit and plans to conduct step-out drilling concurrent with the resource development drilling discussed above. The current plan allows for the drilling of 10 exploration holes for a total of 15,000 feet. Since these drill targets are the down-dip extension of the Main Manto Zone, these drill holes range from 800 to 2,500 feet in depth. Core drilling is planned in order to provide for the additional structural and mineralogical details not easily discerned in reverse circulation chips. Also, because of the amount of water expected to be encountered, RC drilling is not practical at these depths. Depending on the success of the exploration step-out drilling, additional in-fill holes will eventually be needed that are not budgeted for in this set of recommendations. The estimated cost of the exploration step-out drilling is based on a total of 15,000 feet, at an estimated direct cost of $47 per foot, or $705,000. Other core drilling costs, including drilling supplies, drill road, work, drilling water, sample analysis, and personnel would be a further $57 per foot, or $855,000. The combined cost of direct drilling and other associated costs for core drilling would be $1,560,000. Assuming 100 feet per day of core drilling (15,000 feet) would require 150 days of exploration step-out core drilling. For one core drill this is about 7½ months (at 20 drill days/month), not including contingency. 22.5

METALLURGICAL TEST WORK

A metallurgical pilot study of a scale sufficient to allow confidence for scale up to commercial production. The pilot plant be designed for continuous operation rather than batch operation to provide the following data: A mass balance sufficient to allow accurate prediction of reagent consumption rates, An energy balance to provide a basis for design of the cogeneration system using sulphuric acid plant waste heat, A heat balance to allow design of process vessels so they can withstand heats of reaction from various process steps and so fluid temperatures can be maintained where necessary for process efficiency, Chemical and materials testing for selection of construction materials that will withstand aggressive chemical and physical environments in the process vessels, Sufficient duration of testing to reveal potential scaling, corrosion, stress, and other problems with materials. Sufficient scale to allow determination of any required ventilation, capture or other gas or vapor control issues. An evaluation of alternative lead recovery methods and/or tests and regulatory analysis to confirm that contained lead can be safely disposed of with tailings in a manner approvable by the permitting agencies and acceptable in terms of environmental protection. M3-PN100041 26 October 2010 Rev. 2

100

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 22.6

PRELIMINARY ECONOMIC ASSESSMENT STUDY

GEOTECHNICAL TEST WORK

A program of geotechnical engineering analysis needs to be expanded. Five 2007-08 WSC diamond drill holes were geothechnically logged. All new resource development drilling will be logged geotechnically and the information compiled into a database. In addition, rock density measurements will be periodically made for use in tonnage factors in resource modeling. Rock mechanics testing and evaluation will also be conducted to characterize the geotechnical character of the lithologic and alteration units in the deposit and to evaluate the structural elements (constitution) of the deposit. The cost estimate for geotechnical work is estimated to be $250,000. Geotechnical and rock mechanics test work will be conducted from six oriented core holes for a total of 5,000 feet of drilling, at a cost of $520,000 ($104 per foot). 22.7

ENVIRONMENTAL STUDIES

Various environmental studies need to be initiated or expanded from current levels. Baseline information on fauna and flora, water resources, archeology, and meteorology needs to be collected. Socioeconomic and infrastructure information needs to be compiled. Test work will be conducted to evaluate mine rock material for environmental characteristics. These results will be analyzed to help develop the prefeasibility mine operations plan and for submission to various regulatory agencies. Some of this information will also be necessary for a USFS Plan of Operation for road and site construction, drilling and reclamation on unpatented mining claims. WSC has been collecting necessary baseline meteorological data for Hardshell for three years. This data will be used in the application for air quality permits. This collection will be continued during prefeasibility and with interim results evaluated with the regulatory agencies at the end of 2010. The program should be augmented by collection of PM10 particulate concentration data in representative and sensitive locations. Environmental studies and permitting are estimated to cost $15 million. This is a sunk cost. 22.8

PREFEASIBILITY STUDY ENGINEERING

Data collected from resource drilling will be compiled and used to upgrade the project mineral resource estimates. Mine engineering will then be carried out to determine the project mine plan and mineable reserves. This work, along with metallurgical test work, geotechnical engineering, and environmental studies, will be used in a prefeasibility level evaluation of the project economic viability. The prefeasibility study will include a comprehensive economic evaluation, including estimates of project capital and operating costs. Quantities and values of saleable metal products from the deposit will be determined. Manganese project market research will be incorporated for applying appropriate manganese sales pricing. The completion of these results will guide the project to the subsequent full feasibility stage. Project engineering is estimated to cost $1.0 million.

M3-PN100041 26 October 2010 Rev. 2

101

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 22.9

PRELIMINARY ECONOMIC ASSESSMENT STUDY

PREFEASIBILITY COST

The estimated costs of the work items discussed above are totaled in Table 22.9-1. It is anticipated that the prefeasibility work would start in the early part of 2010. The work for the prefeasibility is planned to be fairly complete, such that the additional data collection for the subsequent feasibility work will be minimal. Table 22.9-1: Estimated Costs for Prefeasibility Level Work Cost Item Resource Development Drilling Exploration Step-Out Drilling Metallurgical Test Work (including drilling) Geotechnical Test Work (including drilling) Environmental/Permitting Prefeasibility Engineering TOTAL

M3-PN100041 26 October 2010 Rev. 2

Cost (US$ - millions) 4.62 1.56 2.11 0.77 0.50 1.00 $ 10.56

102

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 23

PRELIMINARY ECONOMIC ASSESSMENT STUDY

REFERENCES

Sources of information utilized for this report include the following items. 1. Arizona Department of Environmental Quality, January 15, 2003. Proposal of a Total Maximum Daily Load For: Upper Harshaw Creek, Sonoita Creek Basin, Santa Cruz River Watershed, Coronado National Forest, near Patagonia, Santa Cruz County, Arizona. 2. Baughman, David. 2005. SO2 and cyanide leaching experiments on Hardshell samples. Hazen Research, Inc., company report (Project 10253), June 7, 2005. 3. Peter W. Harben, Inc., December 2006, Manganese-Potential Commercial Products and Markets from the Hardshell Property, Arizona. 4. Hadley, D. and Sheridan, T.E., 1995, Land Use History of the San Rafael Valley, Arizona: 1540-1960: USDA-Forest Service RMF&R Tech Report 269, 279p. 5. Hazen Research Inc., June 7, 2005, SO2 and Cyanide Leaching Experiments on Hardshell Samples, Hazen Project 10253. 6. Keith, S.B., 1975 Index of Mining Properties in Santa Cruz County, Arizona, Arizona Bureau of Mines Bulletin 191. 7. Koutz, F. R.,  “The  Hardshell  Silver,  Base-metal, Manganese Oxide Deposit, Patagonia Mountains,  Santa  Cruz  County,  Arizona:  a  Field  Trip  Guide”,  Arizona  Geological  Society   Digest, Volume 15, 1984. 8. Koutz, F. R., 2006, personal communication regarding sampling and assaying procedures. 9. Lacy, John, May 6, 2006, Second Updated Status of Title Report. 10. Pincock, Allen & Holt, February 2007, Preliminary Assessment Report, Hardshell Project, Santa Cruz County, Arizona. 11. Pincock, Allen & Holt, August 2008, Technical Report – Exploration Progress, Hardshell Project, Santa Cruz County, Arizona 12. Schrader, F.C. and Hill, J.M., 1915, Mineral Deposits of the Santa Rita and Patagonia Mountains, Arizona, USGS Bulletin 582. 13. Science Applications International Corporation, May 5, 2006. Alum Gulch/Flux Canyon Watershed Final Engineering Evaluation/Cost Analysis (EE/CA) Report – Volume I. Prepared for the U.S. Forest Service – Southwestern Region. 14. Simons, F.S., 1974, Geologic Map and Sections of the Nogales and Lochiel Quadrangles, Santa Cruz County, Arizona, USGS Miscellaneous Investigation Map I-762. M3-PN100041 26 October 2010 Rev. 2

103

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

15. U.S. Forest Service, 2005, Environmental Assessment Farrell, Harshaw, Lewis, McFarland, and Weiland Range Allotment Analysis, Sierra Vista Ranger District, Coronado National Forest, Santa Cruz County, Arizona. 16. Wardrop Engineering Inc., May 6, 2005, Technical Report on the Hardshell Property, Santa Cruz County, Arizona. 17. Washington Group International, May/June 2005, August Resource Corporation, Hardshell Project, Metallurgical Testwork.

M3-PN100041 26 October 2010 Rev. 2

104

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 24

PRELIMINARY ECONOMIC ASSESSMENT STUDY

DATE AND SIGNATURES The information in this report is current as of October 26, 2010

Tim Oliver _______________________________________ (Signature)

M3-PN100041 26 October 2010 Rev. 2

___________________ (Date)

105

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

25

ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS DEVELOPMENT PROPERTIES AND PRODUCTION PROPERTIES

25.1

MINE OPERATIONS

ON

The Hardshell deposit will be extracted using a combination of open pit and underground mining methods. Open pit mining will provide 67% of the ore while long hole stoping will provide the bulk of underground ore. During the first four years of operation the open pit will produce all of the ore processed. In year five underground mine production will begin at a rate of 1,560 tons per day (tpd) and the open pit production rate will be reduced to 2,440 tpd. These rates will remain unchanged throughout the remainder of the project life and the underground and open pit mines will be exhausted simultaneously in year 18. Table 25.1-1: Resource Summary Resource Class Measured Indicated

Source Open Pit

Underground Total

Inferred Measured Indicated Inferred Measured Indicated Inferred

M3-PN100041 26 October 2010 Rev. 2

Tons (000)

Ag opt

Mn %

Cu %

Pb %

Zn %

6,166

5.40

6.75%

0.10%

1.05%

1.02%

9,875

2.90

9.30%

0.06%

0.71%

1.11%

7,780

2.50

9.28%

0.113%

2.91%

3.07%

6,166 17,655

5.40 2.72

6.75% 8.18%

0.10% 0.08%

1.05% 1.68%

1.02% 1.97%

106

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 25.1-1: Open Pit and Underground

M3-PN100041 26 October 2010 Rev. 2

107

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.1.1 25.1.1.1

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Open Pit Optimization

Practical Mining LLC performed a Lerchs-Grossman optimal pit analysis using the grade model created by Mine Reserve Associates (MRA) and the parameters listed in Table 25.1-2. Multiple nested pits were created by incrementing metal revenue from 10 to 100% in 10% increments. Table 25.1-2 Lerchs-Grossman Pit Optimization Parameters Metal Revenue Silver Manganese Copper Lead Zinc Costs Mining Processing Capital Silver Refining & Sales Manganese Sales Copper Sales Zinc Sales Pit Slopes Discount Rate

Revenue $ 14.00 / oz $ 0.60 / lb $ 2.00 / lb $ 0.50 / lb $ 0.75 / lb

Recovery 85% 95% 90% 80% 90%

$ 2.50 / ton $50.00 / ton $ 100 million $ 0.50 / oz. $ 0.00 / lb $ 0.00 / lb $ 0.00 / lb 45 degrees 10%

The incremental net present value (NPV) of these pits is illustrated in Figure 25.1-2. The 10 and 20% increments did not produce an economic pit while the 90 and 100% increments had zero or negative value. The 80% increment was the last increment with a positive value and was chosen as the basis of design for a practical pit.

Figure 25.1-2: Lerch-Grossman nested pit incremental NPV

M3-PN100041 26 October 2010 Rev. 2

108

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Subsequent to the optimal pit analysis several scenarios ranging from 100% open pit mining to 100% underground mining were evaluated and a combination of methods provided the best financial return. In this scenario the main manto zone is mined by the open pit while the deeper zones are mined via the underground mine. This pit corresponds to the 60% revenue increment in Figure 25.1-2. 25.1.1.2

Pit Design

Due to the irregularity of the ore, and relatively low production rate required, a bench height of 25 feet was selected to maintain dilution within acceptable limits. All of the design criteria for the pit are given in Table 25.1-3. Table 25.1-3 Pit design criteria Haul Road Width Bench Height Bench Face Angle Catch Bench Width Catch Bench Interval Overall slope angle

110 ft 25 ft 70 degrees 32 ft 50 ft 45 degrees

To aide production scheduling the pit was subdivided into three unequal phases with emphasis placed on the early years of mining. These are shown in Figures 25.1-3 through 25.1-6 and resource tonnages for each are summarized in Table 25.1-4.

M3-PN100041 26 October 2010 Rev. 2

109

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 25.1-3: Phase 1 Pit M3-PN100041 26 October 2010 Rev. 2

110

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 25.1-4: Phase 2 Pit M3-PN100041 26 October 2010 Rev. 2

111

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 25.1-5: Ultimate Pit M3-PN100041 26 October 2010 Rev. 2

112

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 25.1-6: Section A-A' M3-PN100041 26 October 2010 Rev. 2

113

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Table 25.1-4 Resource Mined by Pit Phase (Includes 5% mining loses and 5% mining dilution)

Phase I

Pit

Resource Class

Tons (000)

Measured

-

-

Phase II

-

Pb %

-

Zn %

-

-

4.16

5.16%

0.07%

0.79%

0.73%

Inferred

832

2.94

4.76%

0.04%

0.58%

0.40%

-

-

-

-

-

-

2,980

6.30

7.46%

0.12%

1.26%

1.023%

972

4.10

5.93%

0.07%

0.96%

0.757%

-

-

-

-

-

-

Indicated

2,394

4.70

6.39%

0.088%

0.89%

1.1%

Inferred

8,071

2.75

10.18%

0.06%

0.69%

1.2%

-

-

-

-

-

-

Indicated

6,166

5.40

6.75%

0.10%

1.05%

1.02%

Inferred

9,875

2.90

9.30%

0.06%

0.71%

1.1%

Waste

12,420 7.6 1-3

Measured Indicated Inferred Waste

31,611

Stripping Ratio

8.0

Year

3-6

Measured Phase III

Cu %

791

Year

Waste

46,138

Stripping Ratio

4.4

Year

6 - 17

Measured Total

Mn %

Indicated

Stripping Ratio

Waste

90,169

Stripping Ratio Year

25.1.1.3

Ag oz/t

5.6 1 - 18

Waste Rock Disposal

Waste rock from phases I – II would be placed in a waste rock disposal area on the northeast side of Hardshell Ridge and north of the Hermosa patented claim. The phase I and II pits can be backfilled with 15.9M tons of waste from the phase III pit while the balance of phase III waste will be placed in the same facility as the waste from phases I-II.

M3-PN100041 26 October 2010 Rev. 2

114

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.1.1.4

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Labor Requirements

Mining contractor labor requirements will be 52 miners during the first five years of mining and then begin to decline as production from the underground mine begins and waste mining declines. Wildcat salary labor requirements total six for supervision, engineering, geology and ore control. 25.1.1.5

Operating Costs

All site development, prestripping and open pit mining operations will be performed by a mining contractor. Contractor supervision, engineering, geology and grade control functions will be performed by Wildcat personnel. Open pit operating costs are summarized in Table 25.1-5. Table 25.1-5 Open Pit Mine Operating Costs Item Mining Contractor Engineering, Geology and Ore Control General and Administrative

25.1.1.6

$/t $ 2.40 $ 0.17 $ 0.10

Capital Costs

Mine development includes 23.1 M tons of waste prestripping and 1.9M tons of excavation for the processing plant and other facilities. Development work will take 18 months to complete and is estimated to cost $1.91/ ton for a total of $31.2 million in Year 1 and $16.4 million in year 2. 25.1.2

Underground Mine

To  aide  underground  mine  design,  three  dimensional  grade  shells  were  created  from  the  MRA’s   grade model at net smelter return (NSR) values of $65 and $100 per ton. The revenue and recovery parameters listed in Table 25.1-2 were used to generate these values. 25.1.2.1

Mining Methods

The irregularity of the ore grade mineralization necessitates a mining method that allows a high degree of selectivity. Long hole stoping with delayed backfill meets this criteria and is suitable for use in fair to good ground conditions. This method can be supplemented with breasting up the sill or overhand drift and fill when the deposit geometry dictates. Stope design parameters are given in Table 25.1-6. Table 25.1-6 Stope design parameters Parameter Width Height Footwall Gradient Hanging wall Gradient Development Drift Gradient

M3-PN100041 26 October 2010 Rev. 2

Long hole Stoping 25 ft ≤150  ft 50 – 90 degrees 50 – 90 degrees +/- 10%

Sill Breasting 25 ft ≤30  ft 25% 45 – 70 degrees +/- 10%

Overhand Drift and Fill 25 ft 15-20 ft + 20%

115

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Practical Mining LLC designed stopes on vertical sections spaced at 25 ft intervals across the extents of each zone using Vulcan™ software. A typical cross section through the underground stopes is shown in Figure 25.2-1.

M3-PN100041 26 October 2010 Rev. 2

116

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Figure 25.1-7: Section B-B' M3-PN100041 26 October 2010 Rev. 2

117

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.1.2.2

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Backfill

Prior to mining stopes above or laterally adjacent, the excavated stope will be backfilled with cemented mill tailings. Whole mill tailings will be mixed with 6% cement and pumped from the surface down a borehole into the underground workings were it can be piped to the area being filled. Backfilling will consume 0.7 ton of tailings per ton of ore mined. Laboratory testing will need to be undertaken during the prefeasibility study to confirm the paste backfill parameters. Table 25.1-7 Resource mined by underground zone (Includes 5% mining loses and 10% mining dilution)

Total

West

Inter-mediate

Zone

25.1.2.3

Resource Class

Tons (000's)

Ag oz/t

Mn %

Cu %

Pb %

Zn %

Measured

-

-

-

-

-

-

Indicated

-

-

-

-

-

-

Inferred

1,655

2.50

11.40%

0.08%

1.81%

1.66%

Measured

-

-

0.00%

-

-

-

Indicated

-

-

0.00%

-

-

-

Inferred

6,125

1.67

8.70%

0.12%

3.21%

3.45%

Measured

-

-

0.00%

-

-

-

Indicated

-

-

0.00%

-

-

-

Inferred

7,780

1.84

9.28%

0.11%

2.91%

3.07%

Mine Infrastructure and Development

Access to the mine will be through a single portal located at the 5050 foot elevation in Hardshell Canyon. Primary mine development drifts are planned at 18 feet high by 18 feet wide to accommodate 55 ton haul trucks and 10 cubic yard loaders. The gradient of the development drifting will not exceed +/- 15%. Primary and secondary development drifting will total 20,730 and 4,150 feet respectively. Ventilation and secondary egress will be provided by vertical raise bores equipped with ladder ways or automatic escape hoists where necessary. 25.1.2.4

Labor Requirements

The mine will operate seven days per week 24 hours a day. The hourly work force will be divided into four crews of 11 each working 12 hour shifts. Salary labor requirements total 16 for supervision, engineering and geology.

M3-PN100041 26 October 2010 Rev. 2

118

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.1.2.5

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Underground Mine Costs

Mining costs estimates for each type of excavation and are summarized in Table 25.1-8. Local labor and major commodity prices used in preparing these estimates are shown in Table 25.1-9. Table 25.1-8 Unit Mining Costs Type Primary Development 6 m x 6 m Secondary Development 5 m x 5 m Expensed Waste Development 5 m x 5 m Stope Development 7.6 m x 5 m Stoping Paste Backfill

$/ft $ 1,135 $ 775 $ 790 $ 1,080

$/ton $ $ $ $ $ $

68.08 55.08 35.62 28.77 15.23 11.88

Table 25.1-9 Underground Mine labor and major commodity prices Item Hourly Labor Electrical Power Diesel Cement Ammonium Nitrate Swellex Rock Bolt, 8 ft.

25.1.2.6

Rate $ 23.30 – $26.50 hour $ 0.08 / kW-h $ 2.20 / gallon $115 / ton $ 0.22 / lb $ 13.00 / each

Capital Costs

Life of mine capital requirements total $62.1 M. Capital costs are detailed in Table 25.1-10. Table 25.1-10 Underground mine capital expenses Mine Development Equipment Spare Parts Total

25.2 25.2.1

$ 32.5 M $ 29.0 M $ 0.6 M $ 62.1 M

POWER AND TRANSPORTATION Power

A major power line, 13.8 kV, follows Harshaw Creek from west of Patagonia to Harshaw and through the San Rafael Valley to Mexico. Higher capacity power lines traverse the Sonoita Creek Valley from Huachuca City to Sonoita-Elgin and Patagonia from the east. A major regional natural gas pipeline (El Paso Natural Gas) from Nogales to the northeast, which is tapped by Unisource for use in the Sonoita Valley. A trunk phone line (Qwest) follows the Harshaw Creek Road with phone service available in Harshaw. Cell phone service is usually good in the Patagonia-Harshaw area with cell towers located above the town on Red Mountain.

M3-PN100041 26 October 2010 Rev. 2

119

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.2.2

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Transportation

The Hardshell Property is located about 50 miles southeast of Tucson, Arizona and 15 miles northeast of Nogales, Arizona. The property is eight miles north of the international border with Sonora, Mexico, in Santa Cruz County, Arizona. Access to the property is either from Tucson or Nogales to the town of Patagonia. From Patagonia, a county road, mostly paved, leads six miles to the former town site of Harshaw. A significant USFS-numbered road network, originally put in place largely for exploration, mining and ranching; exists around Harshaw and the district; but only major arteries are maintained by the county. The property extends southward for about two miles from Harshaw. Access around the property is by graded dirt roads, some of which have been used since the 1870s. The property lies on the eastern pediment flank of the Patagonia Mountains that forms the northwestern edge of the Mexican Highlands section of the Basin and Range Physiographic Province of the south-western United States. Elevations in the mountains range up to 7,200 feet above sea level, while elevations on the property range from 4,900 to 6,200 feet. The property is dominated by the western San Rafael Valley pediment plateau at about 5,400 feet, which onlaps to the west the higher foothills of the range. The plateau is deeply incised by tributaries of Harshaw Creek which drain to the north into Sonoita Creek at the Town of Patagonia. 25.3

WATER

This evaluation assumes sufficient water will be available to supply process and potable requirements for the project. The volume required is calculated as one-half of water for each ton of ore processed. This is an accepted rule of thumb for mining operations in arid regions and is conservative because tailings filtration will remove much of the water that would ordinarily be lost as interstitial water in conventional slurry disposal operations. Water requirement is thus 0.5 x 4000 tpd = 2000 tpd x 240 gallons/ton = 330 gallons per minute. The study further assumes that half of the water will come from mine dewatering whether underground or open pit. The remainder of the water will come from five local wells at depths, design and locations to be determined. Both mine dewater and well water should have satisfactory quality for process and potable uses. 25.4

PERMITTING AND ENVIRONMENTAL CONSIDERATIONS

Table 25.4-1 lists the major permits required for construction.

M3-PN100041 26 October 2010 Rev. 2

120

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.4.1

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Federal Permits

NEPA Requirements under the National Environmental Policy Act (NEPA) pose the greatest permitting challenges  in  terms  of  cost  and  length  of  time  required.  NEPA  review  is  required  for  any  “major   federal  action  significantly  affecting  the  quality  of  the  human  environment.” Much of the land surface upon which the project would be built is public land under the stewardship of the US Department of Agriculture, Coronado National Forest (CNF), Sierra Vista Ranger District (USFS). The USFS will most likely be the lead agency in the NEPA effort. Use of federal lands by private parties is governed under the Federal Land Policy and Management Act (FLPMA). Regulations under FLPMA will require that Wildcat obtain approval from CNF of a mine Plan of Operations (POO) for construction and operation of a mine on   CNF   jurisdiction   land.   The   decision   to   approve   the   POO   is   a   “major   federal   action,”   triggering NEPA. NEPA requires preparation of an Environmental Impact Statement (EIS) to support a decision to approve the POO. Preparation of the EIS is the responsibility of the CNF, not the mine developer. CNF has neither the resources not the technical capability to prepare an EIS in a timely manner. So, in order to expedite the process, CNF may hire a third party contractor to prepare the EIS. Wildcat would pay the bill. The EIS process requires intensive public involvement and a series of administrative and technical stages. The time required from beginning the NEPA process to issuance of a final record of decision (ROD) could be from two to three years or more if the project stirs significant controversy. Cost can exceed a million dollars. Clean Water Act (CWA) CWA permits are relatively routine and can be secured with little delay or cost. Corps of Engineers (COE) Section 404 Dredge and Fill permits should also be reasonably straightforward and not particularly costly since the NEPA process has already been triggered by the POO approval requirement. Other federal permits amount to little more than notification and recordkeeping requirements. 25.4.2

State of Arizona Permits

Arizona’s   most   important   programs   for   mine   development   are   the   Aquifer   Protection   Permit   (APP) program and the air quality permit program. Both fall within the jurisdiction of the Arizona   Department   of   Environmental   Quality   (ADEQ).   Arizona’s   mine reclamation program M3-PN100041 26 October 2010 Rev. 2

121

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

falls   under   the   State   Mine   Inspector’s   jurisdiction.   It   is   a   lesser,   but   still   important   permit   program. Aquifer Protection Permits (APP) APPs cover practices posing a hazard to ground water quality. For mine operations, affected facilities for mine operations would be tailings ponds, leach pads, process water ponds, landfills, and other surface impoundments. Air Quality Arizona operates the air quality permit program under jurisdiction granted by EPA. The complexity of the application and approval process depends upon the quantity of emissions. 25.4.3

Wilderness, Natural Areas and Other Special Status Lands

The Miller Peak Wilderness in the southern Huachuca Mountains is about 18 miles east of the property. Coronado National Monument extends from this Wilderness south to the Mexican border. The Mount Wrightson Wilderness in the southern Santa Rita Mountains starts about 14 miles  north  northeast.  Both  are  in  Hardshell’s  viewshed.    The  new  Sonoita  Creek  State  Natural   Area is adjacent to Patagonia Lake State Park; about 10 miles to the west of Hardshell. Sonoita Creek near Patagonia is a world-famous bird-watching center. The Patagonia-Sonoita Creek Preserve is owned by The Nature Conservancy. It is only about a mile from the town of Patagonia. See the attached map showing proximity to the wilderness areas. The Patagonia Mountains and Harshaw in particular are favorite bird-watching and moth, butterfly and other insect collecting areas. The Arizona Trail passes about four miles to the north of the site. This should not pose a significant obstacle to development. There is a new State Park (or State Natural Area) on the Mexican border at the south end of the San   Rafael   de   la   Zanja   (“SRZ”)   land   grant   in   the   San   Rafael   Valley   (“SRV”).     The   park is 5 square miles in size. The main SRZ land grant (~28 square miles in size) takes up much of S. SRV, which is now owned by Nature Conservancy, who lease the ground out for well-supervised cattle grazing. Many SRV ranches, some with considerable owned fee land as well as USFS grazing allotments have very restrictive Conservation Easements and are very concerned about their cattle, wildlife, water, dust, view sheds and local lighting. On occasion these ranches have very lucrative contracts with film and advertising companies that they do not want encumbered by other activities in the region. The Bog Hole State Wildlife Area (200 acres) is 3 miles east of Harshaw, and contains bison fossils and is a favorite wildlife observation and hunting area for ducks (6 acre pond) and other birds. This area is managed by Arizona Game and Fish (AZG&F) and there is heavy deer and bird hunting in the area. M3-PN100041 26 October 2010 Rev. 2

122

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

The Empire Ranch/Las Cienegas (BLM) National Conservation Area is just northeast of Sonoita but should not be a major consideration. The  distinctive  brick  (“Findley”-1890) House in Harshaw is on the list of National Register of Historic Places and once was the main office of the Harshaw Mining Company for Hermosa operations. Many of the buildings or parts of them at the Hale Ranch Headquarters date from the 1880s to the early 20th century. 25.4.4

Environmental, Ecological, and Archaeological Sensitivity

Water Quality Surface water flows generally to Harshaw Creek and then to Sonoita Creek. While it has no officially designated  sensitivity  such   as  “Wild  and  Scenic,”  Sonoita  Creek   and Harshaw Creek are somewhat sensitive as they supports the high quality bird-watching in the riparian habitat between Patagonia and Lake Patagonia. The flow in the creek segment northwest of Patagonia is perennial due to the discharge from the Patagonia sewer treatment plant. No surface water from the Hardshell Claims is in the SRV Drainage area except for the extreme southeast corner and should not be influenced by the project. Surface runoff in the southern reaches of the Hardshell property could flow to the San Rafael Valley and from there to the Santa Cruz River flowing into Mexico near Lochiel, Arizona. Surface water quality issues such as a potential spill to Harshaw Creek could pose an obstacle to mine development, but it should be manageable. Significant amounts of ground water is in the Harshaw Creek drainage because of steam piracy from SRV Gravels. Harshaw Creek, although draining into Sonoita Creek and Santa Cruz River, is not part of the Santa Cruz Active Management Area. The   Cienega   Creek   “drainage”   is   not   an   Arizona Department of Water Resources Active Management Area. Ground water will not likely constitute a major issue for the project. The geographic setting would indicate there is little potential for a large or very productive aquifer. Modern environmental practice and state regulations will encourage and require lined impoundments with leak protection systems. Ground water quality should not pose a major obstacle to mine development. Air Quality The   area   is   designated   as   “attainment”   for   all   ambient   air   quality   standards.   Mines   and   mills   typically can secure air quality construction and operating permits in attainment areas by using standard emission control measures. WSC has been collecting weather data for future Air Quality permits since August 2007. M3-PN100041 26 October 2010 Rev. 2

123

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Air quality should not pose a major obstacle to mine development. Solid and Hazardous Waste Most mine and milling wastes are exempt from regulation. Beyond that, mines and mills typically do not produce enough non-exempt hazardous waste to trigger permit requirements. Other solid waste permits are usually not troublesome. Waste management should not pose a major obstacle to mine development. Endangered, Threatened and Special Status Species A full endangered species evaluation is beyond the scope of this evaluation. However, there is nothing outstanding or unique about the habitat at the site. It is typical piñon/juniper/oak forest undistinguishable from thousands of acres of surrounding forestland. There are Mexican spotted owl nesting sites 1-2 miles west of Hardshell and elsewhere in the Patagonia Mountains. The Harshaw Area is a major world-class bird-watching and moth/butterfly collection area. The area is also a purported jaguar, and perhaps, ocelot, habitat, as is most of Santa Cruz County. Endangered species issues should not pose a major obstacle to mine development. Cultural Resources A full archaeological evaluation is beyond the scope of this evaluation. The site visit revealed no obvious artifacts from past mining or populations. However, there are likely to be some historic traces given the historic mining activity. The Arizona State Historic Preservation Office (ASHPO )has been known to consider old mine roads eligible for historic designation. There were 2000 people in the area in the early 1880s, including several hundred who lived at the operating Hermosa Mine (mostly on the Patented, Hermosa, Bluff and Salvador claims). There are many cultural scatter sites on patented and unpatented land at Harshaw. There are watch towers and a border fence to the south of the area due to it being a potential smuggling or illegal immigration route. Nevertheless, there is no reason cultural resource issues should pose a major obstacle to mine development. Visual Resources Mt. Hopkins, in the Santa Rita Mountains near the Mt. Wrightson Wilderness, is clearly visible from the old Hardshell mine site. It is likely that mine development would be visible from the M3-PN100041 26 October 2010 Rev. 2

124

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Mt. Wrightson Wilderness. Likewise, mine operations facilities located on hilltops will be visible from the San Rafael Valley. While there is no legal or regulatory reason that visibility issues might impede mine development, scenic resources could become an issue of some concern as they are at Rosemont. Likewise, the Whipple observatory on Mt. Hopkins will be sensitive to excess lighting from the mine. Community Acceptance Nogales, with a population of 20,878, is the Santa Cruz County seat on the international border and is the nearest town with more than 10,000 inhabitants. At 26 road miles away from Hardshell, it is easy commuting distance from the property. Nogales would very likely be supportive of the mine development and historically has provided numerous mine-workers, mine supplies and mining infrastructure for the region. A rapidly-growing  “suburb”  of  Nogales,  Rio   Rico, is immediately north of Nogales, with a population of around 10,000, is partially unincorporated but some has been annexed or soon will be into the City of Nogales. Patagonia, with a population of 881, is the nearest town, eight miles away. Culturally, Patagonia has historically been a mining, ranching and railroad community. The mining and railroad are gone and ranching is greatly diminished. Recently, the town has attracted more artists and upscale, well-educated retirees and professional/technical personnel who commute to work elsewhere. Many local businesses partially cater to the tourist and outdoor sporting industry. Several upscale gated subdivisions have sprouted up in the past few years. Others are barely developed or in financial trouble. While the long-term residents and some business-owners would likely support mine development as a source of jobs and economic stimulus, the newer arrivals may be resistant to mine development in the immediate area. Fortunately, the mine is not immediately adjacent to the town or the subdivisions. Many of the town residents, their parents and older relatives worked for ASARCO at the Trench Unit, 1-2 miles NW of Hardshell or other mining operations in the Patagonia Mountains from before the 1930s into the 1960s. Nevertheless, the prospect of increased traffic, population growth and other socioeconomic effects could arouse resistance. Mr. Wildcat Silver has made some initial outreach contacts with the Patagonia Area business community and other interested parties. Sonoita, with a population of 826, was historically a cattle ranching town. Its main reason for existence was to load cattle on the now-abandoned Benson-to-Nogales Railway. In recent years Sonoita has become an upscale residential center for horse-lovers. 12 miles northeast of Patagonia, it is within reasonable commuting distance of Tucson. It is also the center of Arizona’s  nascent  wine  industry. Outside opposition from more distance communities such as Tucson, Tubac, Rio Rico or the Sierra Vista area, or environmental activist organizations are also a possibility. A perception of a

M3-PN100041 26 October 2010 Rev. 2

125

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

threat to the bird populations or riparian habitat near and in the Patagonia-Sonoita Creek Preserve could attract attention from outsiders.

M3-PN100041 26 October 2010 Rev. 2

126

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY Table 25.4-1: List of Agencies and Permits

Agency

Item

Description

Term

Conditions

US Department of Agriculture, US Forest Service (USFS)

Federal Land Policy and Management Act (FLPMA) Plan of Operations (POO) Including Closure Plan and Reclamation Bond

Plan for mining operations on NFS lands

Life of mine with annual renewals

Prepare a plan and manage according to the plan, update as required. Post reclamation bond.

USFS

Closure Plan

Bonding requirements for operations in the National Forest

Life of mine with annual renewals

Prepare a plan and manage according to the plan, updates as required

USFS

National Environmental Policy Act (NEPA) Review

POO   approval   is   a   “major   federal   action”   triggering   NEPA   review   including preparation of an Environmental Impact Statement (EIS).

One-time effort. Process can take several years.

Substantial public involvement, comprehensive baseline studies, evaluation of alternatives, multiple agency involvement, culminating in a Record of Decision (ROD).

US Department of Agriculture, National Forest Service (NFS)

Federal Land Policy and Management Act (FLPMA) Plan of Operations (POO) Including Closure Plan and Reclamation Bond

Plan for mining operations on NFS lands

Life of mine with annual renewals

Prepare a plan and manage according to the plan, update as required. Post reclamation bond.

NFS

Closure Plan

Bonding requirements for operations in the National Forest

Life of mine with annual renewals

Prepare a plan and manage according to the plan, updates as required

USFS

National Environmental Policy Act (NEPA) Review

POO   approval   is   a   “major   federal   action”   triggering   NEPA   review   including preparation of an Environmental Impact Statement (EIS).

One-time effort. Process can take several years.

Substantial public involvement, comprehensive baseline studies, evaluation of alternatives, multiple agency involvement, culminating in a Record of Decision (ROD).

Federal Permits

M3-PN100041 26 October 2010 Rev. 2

127

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Agency

Item

Description

Term

Conditions

Environmental Protection Agency (EPA)

Clean Water Act (CWA) National Pollutant Discharge Elimination System (NPDES) storm water permits: construction and industrial operations.

Regulates releases of storm water runoff through requirement for Storm Water Pollution Prevents Plans (SWPPPs)

Life of construction, life of project

Requires Best Management Practices for erosion and sedimentation control and control and removal of industrial contaminants such as oil and grease or process byproducts.

EPA

Hazardous Waste – Resource Conservation and Recovery Act (RCRA), RCRA ID Number

Waste activities and disposal of hazardous waste

Life

Manifests, reporting, and inspections

U.S. Army Corps of Engineers

CWA Section 404 Permit

Discharge   of   fill   material   to   “waters   3 years of  the  United  States”  including  most   major washes

Variety

Mine Safety and Health Administration

MSHA Number

Miner registration number

Life

Operate following MSHA rules

US Fish and Wildlife Service

Endangered  species  “taking”

Only required if species will die relocation.

Once

Can be covered by overall NEPA review

Department of Transportation

Hazardous Materials Transportation Registration

Shipment of hazardous materials

Annual or 3 year renewal

Labeling, packaging, and shipping

U.S. Environmental Protection Agency

Hazardous Waste – RCRA, RCRA ID Number

Waste activities and disposal of hazardous waste

Life

Manifests, reporting, and inspections

Bureau of Alcohol, Tobacco, and Firearms

Blasting Operator Registration

Registration of all personnel that may handle blasting materials

As needed

Background and fingerprint checks of all persons with access, update as required by Federal Agencies

Federal Communications Commission

Radio Licenses Industrial/Business Conventional Use

Communications equipment must be licensed

10 years

Follow license requirements

M3-PN100041 26 October 2010 Rev. 2

for Pool

endangered or require

128

WILDCAT SILVER CORPORATION HARDSHELL PROJECT Agency

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Item

Description

Term

Conditions

Arizona Department of Environmental Quality

Aquifer Protection Permit

Dumps, tailings, leaching facilities, processing plant for ground water protection

Life

Inspections, monitoring, maintenance, and reporting

Arizona Department of Environmental Quality

Air Quality Permit

Mobile and sources

5 years

Inspections, monitoring, maintenance, and reporting

Arizona Department of Environmental Quality

AZPDES Construction Storm Water Permit/General Storm Water Permit

Discharge of storm water

Period of construction/5 years

Delineated in management plan

Arizona Department of Environmental Quality

Solid Waste Management Inventory Number

Landfill and requirements

Life

Monitoring, operations

maintenance,

and

Arizona Department of Environmental Quality

Hazardous Waste Management Number

Management of hazardous waste

Life

Monitoring, operations

maintenance,

and

Arizona Department of Environmental Quality

Waste Tire Cell Registration

Management of off-road tires greater than 3 feet in diameter

Life

Annual reporting, cover requirements

Arizona Department of Water Resources

Groundwater Permits

Groundwater withdrawal rights

20 years

Groundwater withdrawal, reporting required

Arizona Department of Water Resources

Safety of Dams Permit

Requirements for dam construction

Life

Monitoring, maintenance

Arizona State Mine Inspector

Reclamation Plan

Post-mining land uses and plans for regrading

Life

Annual updates

State Permits

M3-PN100041 26 October 2010 Rev. 2

Withdrawal

stationary

emission

waste

area

129

storm

water

Annual

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.5

PRELIMINARY ECONOMIC ASSESSMENT STUDY

OPERATING COSTS Table 25.5-1: Operating Cost Summary Processing Units (tons) Total Tons Mined (tons)

Area Description

1,460,000 1,460,000 Open Pit & Underground Annual Cost Unit Cost/Ore Ton

Mining Operations

$ 27,943,000

$19.14

Process Plants Labor Electrical Power Reagents Wear Items Propane Maintenance Parts Supplies & Services EMM

$10,490,200 ($2,952,816) $50,120,359 $427,050 $0 $2,227,367 $1,026,000 $0

$7.19 ($2.02) $34.33 $0.29 $0.00 $1.53 $0.70 $0.00

Total Process Plants

$61,338,160

$42.01

General Administration Labor Supplies & Services

$1,827,840 $2,014,500

$1.25 $1.38

Total General Administration

$3,842,340

$2.63

$93,123,500

$ 63.78

25.5.1 25.5.1.1

Basis of Operating Cost General Administration

Labor The General Administration area includes the general manager’s   office,   accounting   office,   purchasing and warehousing, information services and safety and environmental departments. A total of 21 employees are considered in these departments at an average annual wage of $64,000 with fringe benefits of 36% of annual wages.

M3-PN100041 26 October 2010 Rev. 2

130

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Supplies and Services Annual allowances for expenses in the General Administration area include supporting departments, legal, risk insurance, travel, training, communication and community relation expenses to name a few. The basis for these annual allowances was estimated using data from other M3 projects. These costs do not include salaries for these departments. 25.5.1.2

Process Plants

Labor The  process  plants’  staffing  has  been  estimated  to  have  127  employees  (operations  71  employees   and maintenance 56 employees) included in the process plants staffing is the laboratory staffing. The maintenance staff was assumed to be 1 to1 ratio to the operation staff exception the administration and supervision staff. An average annual wage of $59,000 with fringe benefits of 40% of annual wages was used. Electrical Power Electrical power consumption is estimated using connected kW power requirements by area and discounted for operating time and anticipated operating load level. Power costs were based on a unit price of $0.06 per kW-h. The negative cost shows the result of production of power on-site using heat generated by exothermic chemical processes. Reagents and Wear Items Reagents for the process plants include sulfur dioxide, sulfuric acid, lime sodium cyanide, zinc dust, extractant (DEHPA), Diluent (Oroform SX 80), cement, binder and sodium carbonate. Consumption rates were determined from the metallurgical test data or industry practice. Budget quotations were obtained for reagents where available or from other M3 projects with an allowance for freight to site. Liner consumption was based on industry practice or other M3 projects. Unit prices were obtained from other M3 projects. Consumption rates and unit pricings are as follows:

M3-PN100041 26 October 2010 Rev. 2

131

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Table 25.5-2: Reagent Consumption Rates and Unit Pricings Reagents Sulfur Dioxide Sulfuric Acid Lime Sodium Cyanide Zinc Dust Extractant (DEHPA) Diluent (Oroform SX 80) Sodium Carbonate Diatomaceous Earth Antiscalant Copper Sulfate Sulfur Flux Flocculant

Lb/t 338.56 553.41 41.72 3.34 0.68 0.04 0.86 263.70 0.10 0.07 .0002 0.01 0.53 0.21

$/Lb $0.01 $0.014 $.067 $1.04 $1.70 $5.00 $0.702 $0.053 $0.35 $1.22 $1.75 $2.00 $1.36 $1.95

Maintenance Parts and Supplies An allowance was made to cover the cost of maintenance parts and supplies of the process plants. The allowance was 5% of the direct capital cost of equipment. Supplies and Services An allowance for operating supplies such as safety items, tools, lubricants and office supplies was made using data from other M3 projects on a unit cost per ton basis. 25.6

CAPITAL COSTS

Table 25.6-1 shows a summary of estimated initial capital expenses.

M3-PN100041 26 October 2010 Rev. 2

132

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Table 25.6-1: Initial Capital Expense Estimate M3 PN100041 Wildcat Silver Corp. TOTAL PROJECT COST SUMMARY SHEET Hardshell Preliminary Economic Assessment - Hybrid Option Plant Area -----

980 Plant Construction Total Description Man-hours Equipment Material Labor Subcontract Equipment --------------------------------------------------------------------------- ----------------- ------------------------ --------------------- ---------------------- ------------------- ---------------------------- ------------------------***DIRECT COST***

000 050 060 100 150 200 300 350 400 410 420 430 440 450 510 600 650 700 750 800 900 950

General Site 2,122 $0 $114,139 $104,212 $0 $64,646 $282,997 Mine 0 $10,369,669 $0 $0 $57,961,647 $0 $68,331,316 Environmental 0 $0 $0 $0 $0 $0 $0 Primary Crushing 19,437 $2,439,880 $1,293,465 $1,113,853 $0 $168,925 $5,016,122 Overland Conveyor 0 $0 $0 $0 $0 $0 $0 Fine Crushing, Stockpile & Reclaim 26,955 $996,815 $1,121,577 $1,473,848 $0 $349,875 $3,942,116 Grinding & Classification 42,500 $8,550,000 $2,250,000 $2,550,000 $750,000 $900,000 $15,000,000 Acid Leaching and Neutralization 55,763 $6,866,907 $4,729,120 $2,891,402 $0 $526,912 $15,014,341 Cyanide Leaching and Detox 87,619 $9,073,850 $6,019,184 $5,045,682 $0 $828,343 $20,967,060 Precious Metal Merrill Crowe 14,565 $3,192,291 $1,278,116 $885,372 $0 $67,250 $5,423,029 Copper Cementation 5,667 $1,140,000 $300,000 $340,000 $100,000 $120,000 $2,000,000 Manganese Recovery 14,167 $2,850,000 $750,000 $850,000 $250,000 $300,000 $5,000,000 Lead Amine Leaching 0 $0 $0 $0 $0 $0 $0 Zinc SX-EW 3,117 $627,000 $165,000 $187,000 $55,000 $66,000 $1,100,000 Precious Metals & Refinery 6,826 $669,009 $251,380 $374,464 $0 $83,605 $1,378,457 Tailings & Reclaim Water 1,116 $0 $0 $66,956 $0 $18,988 $4,000,000 Fresh/Plant Water 2,562 $0 $11,091 $125,795 $3,550,000 $2,200 $3,689,086 Main Plant Substation 8,000 $2,520,000 $520,000 $480,000 $400,000 $80,000 $4,000,000 Off-Site High Voltage Power 2,667 $880,000 $200,000 $160,000 $2,760,000 $0 $4,000,000 Reagents 11,333 $2,280,000 $600,000 $680,000 $200,000 $240,000 $4,000,000 Ancillaries 32,065 $1,595,000 $4,894,846 $2,449,400 $4,300,000 $38,231 $13,277,477 Off-sites 0 $0 $0 $0 $0 $0 $0 --------------------------------------------------------------------------- ----------------- ------------------------ --------------------- ---------------------- ------------------- ---------------------------- ------------------------Subtotal DIRECT COST 336,480 $54,050,421 $24,497,917 $19,777,984 $70,326,647 $3,854,975 $176,422,000 see note 18 NOTES: TOTAL DIRECT FIELD COST $176,422,000 1 Specific Indirect Field Costs have been added to the direct labor rates listed for each Area TOTAL DIRECT FIELD COST w/o Mine $108,090,684 Indirects added to direct labor include: field payroll burden, overtime adjustment, small tools and expendables allowance, field supervisory labor & burden, contractor operating overheads and profit ADDITIONAL INDIRECT FIELD COST (1,2) $0 2 Additional Indirects: Refer to attached list MOBILIZATION (3) $540,453 3 Mobilization 0.5% of Total Direct Cost without Mine & Mobile Equipment 4 AZ Transaction Privilege Tax not applied to Plant Equipment AZ TRANSACTION PRIVILEGE TAX @7% (4) $5,414,408 5 Contractors' fee included in labor rates and Subcontract unit cost. FEE - CONTRACTOR (5) 6 Management & accounting included at .75% of Total Constructed Cost w/o mine 7 Engineering is included at 6.5% of Total Constructed Cost w/o mine TOTAL CONSTRUCTED COST $114,045,546 8 Project services included at 1.0% of Total Constructed Cost w/o mine 9 Project control included at 0.75% of Total Constructed Cost w/o mine 960 10 Construction Management included at 6.0% of Total Constructed Cost w/o mine MANAGEMENT & ACCOUNTING (6) $855,300 11 EPCM Fixed Fee at 5% of other EPCM costs ENGINEERING (7) $7,412,960 12 Operating spare parts included at 5.5% of Plant Equipment. Commissioning spares are included PROJECT SERVICES (8) $1,140,455 at 0.55% of plant equipment. Spare parts for mining equipment included at 2.5%. Initial fills are PROJECT CONTROL (9) $855,342 in owner's costs.Contractors commissioning crew and vendors representatives are included at 2% of the process CONSTRUCTION equipment cost. MANAGEMENT (10) $6,842,733

13 14 15 16 17 18

Contingency is included at 25% of Total Contracted Cost including commissioning & spare parts

EPCM Fixed Fee (11)

Bonding and insurance costs not included in this estimate.

Total EPCM

$855,340 $17,962,130

Added Owners Cost - number provided by Owner. All costs are in end of 1st quarter 2010 US dollars with no escalation Total Evaluated Project Cost is projected to be in the range of -25% to +25%. Note: Construction Man-hours do not include subcontract hours. Conversion Rates used for the estimate are as follows: AS OF 3-31-2010 1 USD = 0.7393 EURO AS OF 3-31-2010 1 USD = 1.0906 AUD AS OF 3-31-2010 1 USD = 93.4 JPY * Preliminary - based on judgement of Engineers subject to revision.

M3-PN100041 26 October 2010 Rev. 2

TOTAL CONTRACTED COST

$132,007,675

Acid Plant MINE COST COMMISSIONING AND SPARE PARTS (12) CONTINGENCY (13) BONDS & INSURANCE (14) 990 - ADDED OWNER'S COST (15) TOTAL CONTRACTED AND OWNER'S COST

$76,080,000 $68,331,316 $3,775,542 $51,028,633 $0 $6,500,000 $337,723,166

ESCALATION (16) TOTAL EVALUATED PROJECT COST (17)

$0 $337,723,166

133

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.6.1

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Introduction

In general M3 based this capital cost estimate on its knowledge and experience of similar types of facilities and work in similar locations. Resources available to M3 included recent cost data collected for a nearby mining project now in the detailed engineering phase, and plant designs for similar process plants under construction, design or study in other locations. To assist in the estimating, M3 used quantity estimates, and in some cases costs, supplied by specialist subconsultants, including:  Practical Mining, LLC (P.M.): Mine plan and mine equipment and development costs,

and  Hazen Research Inc.: Reagent consumption.

25.6.2

Assumptions

The project is assumed to be constructed in a conventional EPCM format, i.e. Wildcat Silver will retain a qualified contractor to manage and design the project; bid and procure materials and equipment as agent for Wildcat Silver; bid and award construction contracts as agent; and manage the construction of the facilities as agent. Wildcat Silver will order major material supplies (i.e., structural and mechanical steelwork) as well as bulk orders (i.e., piping and electrical). These will be issued to construction contractors on site using strict inventory control. All costs to date by Owner are considered as sunk costs. Any costs incurred for this preliminary economic assessment, the upcoming pre-feasibility study and the completion of any future feasibility study (including field drilling and lab testing) are not included. “Initial  Capital”  is   defined  as   all  capital   costs  through  to   the   end  of  construction  or  the  end  of   Year 1 of the mine life defined as the year in which commercial scale production starts. Capital costs predicted for later years are carried as sustaining capital in the financial model. All costs are in 2nd quarter 2010 US dollars. 25.6.3

Estimate Accuracy

The accuracy of this estimate for those items identified in the scope-of-work is estimated to be within the range of plus 30% to minus 30%; i.e., the cost could be 30% higher than the estimate or it could be 30% lower. Accuracy is an issue separate from contingency, the latter accounts for undeveloped scope and insufficient data (e.g., geotechnical data).

M3-PN100041 26 October 2010 Rev. 2

134

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Table 25.6-2 below presents the method of estimate for each cost area, the estimated accuracy of the method in each area, the anticipated value of the deviation, and a calculated overall estimate accuracy of 30%. Table 25.6-2: Estimate Accuracy Area 000

Description General Site

050 100 200 300 350 400 410 420 430 450 510 600 650 700 750 800 900

Mine Primary Crushing Fine Crushing, Stockpile & Reclaim Grinding & Classification Acid Leaching and Neutralization Cyanide Leaching and Detox Precious Metal Merrill Crowe Copper Cementation Manganese Recovery Zinc SX-EW Precious Metals Refinery Tailings & Reclaim Water Fresh/Plant Water Main Plant Substation Off-Site High Voltage Power Reagents Ancillaries Sulfuric Acid Plant

Estimated Cost $282,997 $68,331,316 $5,016,122 $3,942,116 $15,000,000 $15,014,341 $20,967,060 $5,423,029 $2,000,000 $5,000,000 $1,100,000 $1,378,457 $4,000,000 $3,689,086 $4,000,000 $4,000,000 $4,000,000 $13,277,477 $76,080,000

Method MTO Quote/En g. File File File/Eng. MTO/Build MTO/Build Quote Eng. Eng Eng Quote Eng File/Eng. Eng. Eng. Eng. File/Eng. File

Accurac y 25%

Deviation $70,749

25% 25% 25% 40% 25% 25% 15% 50% 50% 50% 15% 50% 40% 50% 50% 50% 40% 25%

$17,082,829 $ 1,254,031 $ 985,529 $6,000,000 $3,753,585 $ 5,241,765 $813,454 $1,000,000 $2,500,000 $550,000 $206,769 $2,000,000 $1,475,634 $2,000,000 $2,000,000 $2,000,000 $5,310,990 $19,020,000

Total 29% $73,265,336 $252,502,000 Notes: MTO: material takeoff, File: M3 file costs, scaled for capacity and escalated for inflation, Eng.:  engineers  best  estimate,  Build:  estimate   built   from  equipment  list  and   “File”  costs,  Quote:   vendor’s  budgetary  quote.  Total  accuracy  is  the  total  deviation  divided  by  total  cost.

PM provided estimates for the mine capital expenses. Their estimates are compatible with the overall estimate accuracy of ±30%. 25.6.4

Contingency

Based on the level of engineering completed and definition of scope, M3 estimated the contingency at 25% of the direct and indirect costs (Contracted Cost). Contingency is intended to cover unallocated costs from lack of detailing in scope items. It is a compilation  of  aggregate  risk  from  all  estimated  cost  areas.  Contingency  is  not  simply  a  “buffer”   to cover estimate inaccuracy. Properly calculated contingency will be spent.

M3-PN100041 26 October 2010 Rev. 2

135

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.6.5

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Documents

Documents available to the estimators include the following: Design Criteria Equipment List Equipment Specifications Construction Specifications Flowsheets P&IDs General Arrangements Architectural Drawings Civil Drawings Concrete Drawings Structural Steel Drawings Mechanical Drawings Electrical Schematics Electrical Physicals Instrumentation Schematics Instrument Log Pipeline Schedule Valve List Cable and Conduit Schedule 25.6.6

(No) (Yes) (No) (No) (Yes) (No) (Yes) (No) (Yes) (No) (No) (No) (No) (No) (No) (No) (No) (No) (No)

Construction Labor

Labor rates are based on prevailing shop wages in Arizona. Craft labor has been estimated at the average rates shown in Table 25.6-3. Table 25.6-3: Construction Labor Rates Craft Carpenter Cement Mason Electrician Ironworker Laborer Millwright Operator Painter Plumber Sheet Metal Worker Truck Driver

M3-PN100041 26 October 2010 Rev. 2

Base Rate US $/h $29.55 $19.30 $32.37 $44.11 $22.05 $33.93 $33.47 $23.97 $47.13 $33.93 $13.98

Indirect Cost Incl. Supervision $19.37 $12.65 $21.22 $28.91 $14.45 $22.24 $21.94 $15.71 $30.89 $22.24 $ 9.06

Total Rate US $/h $48.92 $31.95 $53.59 $72.03 $36.50 $56.17 $55.41 $39.68 $78.02 $56.17 $23.14

136

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

The estimate assumes no adjustment to standard worker productivity, i.e., Productivity factor = 1. 25.6.7 25.6.7.1

Direct Costs Sitework

General site excavation, grading and backfill quantities for the process plant buildings and ancillary structures were estimated  using  Autodesk’s  Land  Development  program  for  AutoCAD   applied to preliminary facility layouts prepared by M3. Site platforms were benched and sloped according to general arrangements for the facilities and to minimize earthmoving where possible. Likewise, ponds were located and arranged to take advantage of existing land contours where possible and to minimize earthmoving. Service roads are designed according to M3 standard road designs with quantities calculated using AutoCAD. The study assumes the existing roads will suffice for construction roads. Mine haul road costs were estimated by PM and are included in mine development costs. Specific labor, material and equipment costs apply to each category. Costs are based on standard worker productivity figures for construction trades derived from cost estimating handbooks and equipment productivity information obtained from manufacturers, adjusted for any given situation  according  to  M3’s  experience  and  judgment. In general, the estimate assumes mine overburden and suitable (non acid-generating) mine waste will be used as the bulk fill material for large fills. Therefore, the mine haulage cost estimate covers excavation, transportation and dumping of material in major structural fills. 25.6.7.2

Concrete

Concrete quantities, along with associated rebar and formwork quantities, were based on direct material takeoffs from drawings of conceptual designs. Concrete costs were estimated based on costs recently collected for another project in southern Arizona. 25.6.7.3

Structural Steel

Structural steel quantities were based on direct material takeoffs from conceptual designs. Steel costs were estimated based on costs recently collected for another project in southern Arizona.

M3-PN100041 26 October 2010 Rev. 2

137

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.6.7.4

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Architectural

Architectural costs are based on M3 records of similar sized projects for the major buildings. 25.6.7.5

Mechanical Steel

Major items of chutework, skirting, liners etc. were estimated from data collected from other, similar projects. The cost of the steel was based on quotes for recently constructed projects. 25.6.7.6

Process Equipment

Process equipment costs were estimated in a variety of ways. Certain process stages include unit operations common in the processing of base and precious metals including: Crushing, grinding, cyanide leach and Merrill Crowe recovery. M3 has an extensive library of projects and estimates to these stages. In certain cases, capital costs were estimated by scaling costs according to production capacity or other appropriate metrics (flow, surface area, energy consumption, etc.). In other cases, M3 sought vendor quotes for process equipment assemblies. Certain other areas were estimated solely based on the professional judgment and experience of M3 engineers. Table 25.6-2 gives a breakout of estimating methods by area. Estimating methods for each process area are detailed in the area-specific discussions. All equipment is priced as new. Opportunity may exist at the time of project execution to obtain suitable used equipment for capital cost savings. 25.6.7.7

Electrical Equipment

Electrical Equipment, Instrumentation, in areas where costs are built from the equipment list, is estimated as 15% of the mechanical equipment cost. 25.6.7.8

Piping

Piping, in areas where costs are built from the equipment list, is estimated as 15% of the mechanical equipment cost and an allowance of 10% of materials cost for fittings and supports. 25.6.7.9

Instrumentation

Instrumentation, in areas where costs are built from the equipment list, is estimated as 15% of the mechanical  equipment  cost.  These  allowances  are  based  on  M3’s  experience and judgment.

M3-PN100041 26 October 2010 Rev. 2

138

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.6.7.10

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Demolition

Demolition costs for any existing facilities have not been included. demolition requirements. 25.6.7.11

There are no known

Construction Equipment

Construction equipment costs were estimated according to the tasks performed and the crew hours involved. Construction equipment is included as a part of the direct cost. 25.6.7.12

Mine Operations

The estimated mine capital cost is in 2nd Quarter 2010 dollars and includes the following items:      

Mine major equipment Mine support equipment Shop tools Initial spare parts Engineering and geology equipment, and Mine preproduction development expenses

The following mine related structures were estimated by others and are included in area 900:    

The mine truck shop, mine dry and mine warehouse. Fuel and lubricant storage facilities. Explosive storage facilities. Office facilities.

25.6.7.13

Mine Major Equipment

The estimate is based on vendor quotations for equipment, the required number of units for each year and an appropriate equipment replacement schedule for each piece of equipment. The replacement schedule for the equipment is based on the estimated life of the equipment in metered hours and the number of shifts that the equipment is scheduled for each production year during the mine life. PM has assumed metered time as 11 hours per shift. Initial capital was estimated based on equipment expenditures from Year (-2) to the end of Year (+1). Sustaining capital was estimated based on equipment replacement expenditures from Year (+2) to the end of mine life. 25.6.7.14

Mine Support Equipment

Small mine support equipment was estimated on an allowance basis as 5% of major equipment costs for each year. This includes items such as mechanics trucks, welding trucks, cranes, shop forklifts, pickup trucks, etc. This allowance also includes mine engineering equipment, mine safety equipment, GPS systems, surveying equipment, computers, etc. M3-PN100041 26 October 2010 Rev. 2

139

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Initial Spare Parts and Shop Tools An annual allowance for initial equipment spare parts and shop tools was capitalized as 8% of major equipment costs for each year from Year (-2) through Year (+2), the period of major capital build-up. Ongoing spare parts to operate repair and maintain mine equipment, and consumables costs including fuel, explosives, power, ground engaging tools and tires for all equipment are included in the operating cost estimate and comprise about 72% of the average annual unit mining cost. 25.6.7.15

Mine Preproduction and Development Expense

Mine pre-production development expenses have been capitalized from Year -3 to Year -1 and were estimated based on the operating costs of stripping waste, mining heap ore, and stockpiling mill ore (59.3 M t total). The costs were estimated assuming small equipment contractor mining operations  coupled  with  owner’s  supervision  in  Year  -3, and large  equipment  owner’s  operations   in Years (-2) and (-1). 25.6.8

Indirect Costs

25.6.8.1

Freight

Freight has been included as a10% of equipment cost in the estimate for domestic sourced equipment. Some equipment quotes may include international sourced equipment freight which has been priced and listed separately. 25.6.8.2

Other Indirect Field Costs

Spare parts are included from quotations when available or at a percentage of the purchase price of the remaining equipment. The following categories are identified:  Startup /commissioning spares  First year operating spares

0.55% of purchased price 5.5% of purchased price

Vendors’   representatives   are   included   for   major   equipment   installations   at 2% of the process equipment cost. Mobilization listed below the Area Direct Costs at 0.5% of Total Direct Cost. 25.6.8.3

Professional Indirects

EPCM indirect costs have been assumed as follows: Management & accounting: Engineering: Project services: Project control: M3-PN100041 26 October 2010 Rev. 2

0.75% Total Direct Cost 6.5% Total Direct Cost 1.0% Total Direct Cost 0.75% Total Direct Cost

140

WILDCAT SILVER CORPORATION HARDSHELL PROJECT Construction management: EPCM fee:

PRELIMINARY ECONOMIC ASSESSMENT STUDY 6.0% Total Direct Cost 5.0% Other EPCM costs

The engineering and procurement included is based on the proposed activities for the current scope of work. An allowance has been made for field engineering. For the tabulation of this estimate, indirect field labor costs are included as direct field costs. 25.6.8.4

Commissioning Costs

Costs are included for plant acceptance and initiation of operations according to the following:      

Mechanical completion – by Contractor Commissioning – by Contractor Initial fills – By Owner Startup – Contractor and Owner Demonstration test if needed – by Owner Vendor reps – included as line item at summary level

25.6.8.5

Taxes

The following taxes have been considered for this estimate:  Gross Receipts Taxes (Sales and Use)  Payroll taxes are included in the labor rates

25.6.8.6

Working Capital

Working capital is accounted for in the financial model. 25.6.8.7

Sustaining Capital

PM provided mine sustaining capital for surface equipment replacement, future stripping, underground development and other costs. The process plant sustaining capital totals $13.8 million spread over years 2, 3 and 7. It is an allowance based on professional judgment. Reclamation costs are estimated at $10 million during the last four years of the mine life. The estimate is based on professional judgment. 25.6.9

Area Notes

The following discussions highlight special aspects of the capital cost estimate and describe the battery limits for each operating area.

M3-PN100041 26 October 2010 Rev. 2

141

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Area 050 – Mining Area 50 area includes all operations directly associated with extraction, transportation and deposition of mine waste to storage or disposal facilities, transportation of barren rock as building materials, and transportation of ore to low-grade or storage stockpiles or to downstream processing facilities during the pre-production years. Direct costs begin in Year (-2) with prestripping and development of roads, stockpiles and transportation and deposition of material civil works. The downstream battery limit for Area 050 is the point where ore leaves the haul truck at the crusher. It is expected that much of the early development and prestripping will be performed by contractors and the costs are capitalized in this area accordingly. Area 050 includes electrical power supply to the drills and shovels starting at and including each of the four portable mine substations. All the initial mining equipment fleet is captured in Area 050 and includes units for drilling, blasting, loading, hauling and dumping ore and waste as well as certain equipment necessary for maintenance of haulage roads such as dozers, graders and water trucks. Area 050 will also cover engineering and geology equipment. The following mine related structures are included in area 900: The mine truck shop and equipment, Mine Administration Building Area 100 – Primary Crushing Area 100 starts at the dump pocket. It includes the retaining wall and mass earthworks associated with construction of the retaining wall, all process equipment, structural steel, concrete, electrical equipment, piping and instrumentation associated with the facility. Structural earthwork, concrete and steel costs were developed from material takeoffs from drawings. Equipment costs came from M3 project files and were escalated to bring costs up-to-date. Escalation factors are standard ENR indices or equivalent. The downstream battery limit for Area 100 is the drop from the stockpile feed conveyor to the coarse ore stockpile. Area 200—Stockpile, Reclaim and Fine Crushing Area 200 includes the stockpile; reclaim chutes, belt feeders, conveyor feeding the grinding mill, belt scales, and the tunnel which houses these facilities. M3-PN100041 26 October 2010 Rev. 2

142

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Structural earthwork, concrete and steel costs were developed from material takeoffs from drawings. Equipment prices were escalated and scaled from other projects in M3 files or were estimated according to the experience and judgment of M3 engineers. Allowances were applied to the mechanical equipment costs to estimate electrical, instrumentation and piping costs. The downstream battery limit for Area 200 is the point of discharge to the fine ore bin. Area 300—Grinding and Classification Area 300 includes the ball mill, trommel, cyclone separators and cyclone feed pumps, and the grinding thickener. The area also included associated bins, conveyors, screens, scales, and associated equipment. Costs for this area were derived entirely by scaling and escalating costs from similar plants designed by M3. The downstream battery limit for Area 300 is the discharge, both overflow and underflow, from the grinding thickener. Area 350-Acid Leaching and Neutralization Area 350 covers SO2/H2SO4 leaching of the grinding thickener underflow to liberate manganese, zinc and copper.

Structural earthwork, concrete and steel costs were developed from material takeoffs from drawings. M3 process engineers prepared an equipment list for the process plant. The equipment costs came from scaled and escalated costs from similar projects in M3 files and from the experience and judgment of M3 engineers. Allowances were applied to the mechanical equipment costs to estimate electrical, instrumentation and piping costs. Area 400—Cyanide Leaching and Detox Area 400 covers all process equipment and ancillary equipment, piping, electrical and instrumentation associated with neutralization and conditioning of the acid leach thickener overflow, cyanide leaching and CCD thickening of the leached slurry and detoxification and filtering of the tailings pulp. Structural earthwork, concrete and steel costs were developed from material takeoffs from drawings. M3 process engineers prepared an equipment list for the process plant. The equipment costs came from scaled and escalated costs from similar projects in M3 files and from the experience M3-PN100041 26 October 2010 Rev. 2

143

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

and judgment of M3 engineers. Allowances were applied to the mechanical equipment costs to estimate electrical, instrumentation and piping costs. The downstream battery limits for Area 400 are the CCD overflow and the transfer and disposal of the filtered tailings. Area 410-Precious Metal Merrill Crowe M3 process engineers developed estimates solution tenors reporting to the Merrill Crowe plant. Summit Valley Engineering provided a quote for the entire plant. The downstream battery limit for Area 410 is transfer of filtered precipitate to the refinery and return of filtrate to the tailings detox filter. Area 420—Copper Cementation and Iron Removal Area 420 covers removal of copper and iron from acid leach solutions destined for the Area 450—zinc SXEW. Costs were estimated based on the experience and judgment of M3 engineers. Downstream battery limits are the transfer of final thickener overflow to Area 450 for zinc recovery, transfer of iron sludge to tailings, and shipping of copper filter cake offsite. Area 430—Manganese Recovery Area 430 covers the precipitation of manganese carbonate from acidic solution using industrial grade trona, or sodium carbonate, and pelletizing manganese carbonate for market. Costs were estimated based on the experience and judgment of M3 engineers. Downstream battery limits for Area 430 are loading and shipping of manganese carbonate pellets. Area 450 – Zinc SXEW Area 450 covers solvent extraction of zinc from treated aced leach solution followed by electrowinning of zinc metal as cathode zinc. Costs were based on prior estimates for similar processes in the copper industry, data from metallurgical process literature, and the experience and judgment of M3 engineers. Downstream battery limits are loading and shipping of zinc metal for market.

M3-PN100041 26 October 2010 Rev. 2

144

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Area 510—Precious Metals Refinery Area 510 covers treatment of precipitates for silver recovery as doré. Summit Valley Engineering provided a budgetary quote for all the Area 510 equipment. Downstream battery limits are shipment of the doré offsite and recycling of the furnace slag. Dust collected from the retort will either be recycled to the process or shipped offsite for disposal. Area 600 -- Tailings & Reclaim Water Area 600 is the process area that covers the tailings dewatering and disposal. Costs for filtering and reclaim water management were estimated based on the experience and judgment of M3 engineers. The disposal facility cost was based on a similar disposal practice for a copper mining project now being permitted in southern Arizona. Downstream battery limits are transfer of reclaim (tailings filter filtrate) water to the ball mill and disposal of filtered tailings in a tailings disposal facility. Area 650 -- Fresh Water/Plant Water Area 650 includes production from mine dewatering wells and dedicated production wells. Also included are facilities for managing water within the process plant. The estimate is based on an M3 design for a similar water system for a smaller underground precious metal mine. Area 700 – Main Plant Substation The main plant substation cost was estimated based on similar past projects and the experience and judgment of M3 Engineers. Area 750 – Off-site High Voltage Power Area 750 covers upgrading and new construction for the existing power supply from the local utility. The cost is based on experience and judgment of M3 engineers. Area 800 -- Reagents Area 800 covers the receiving, storage, mixing and distribution of reagents. The cost is based on similar M3 projects elsewhere and the experience and judgment of M3 engineers. M3-PN100041 26 October 2010 Rev. 2

145

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Battery limits are represented by the point at which reagents are delivered to the facility and the point at which the reagent streams enter the process areas. Area 900 – Ancillaries Area 900 includes offices, shops, process plant buildings, the laboratory, guard house, etc. Area 900 also includes $2 million for two lined evaporation ponds to dewater plant blowdown. Costs for these facilities were based on other projects of similar scale and under similar duty. The other project costs are escalated for inflation and scaled for capacity or size. 25.6.10

Owner’s  Costs

Owner’s   costs   prior   to   full   project   release   are   deemed   sunk   and   not   included   in   this   estimate.     Owner’s  costs  incurred  during  the  project  development include: First fills and consumables Owners’  team Project insurance Consultants other than EPCM Letters of credit Office equipment, furniture and hardware 25.6.11

Items Excluded from the Estimate

Finance and interest charges. Depreciation and depletion allowances. Future feasibility studies. Future exploration drilling and metallurgical testing. 25.7

ECONOMIC ANALYSIS

The Wildcat project economics were completed using a discounted cash flow model. The financial indicators examined for the project included the Net Present Value (NPV), Internal Rate of Return (IRR) and payback period (time in years to recapture the initial capital investment). Annual cash flow projections were estimated over the life of the mine based on capital expenditures, production costs, transportation and treatment charges and sales revenue. The life of the mine is approximately 17 years. A hybrid mining option showing an open pit and underground mining was evaluated. Products will be zinc cathode, copper cake, silver doré, and manganese carbonate.

M3-PN100041 26 October 2010 Rev. 2

146

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.7.1

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Production Statistics

Mine Production Statistics Mine production is reported as ore and waste from the mining options. The annual production figures were obtained from the mine plan as reported previously. The life of mine sulfide ore quantities and ore grade are presented in Table 25.7-1 below. Table 25.7-1: Mine Production Open Pit Mining Underground

Ore Tons (000) 16,044 7,780

Waste Tons (000) 69,010

Zinc % 1.07% 3.07%

Copper % 0.07% 0.11%

Manganese % 8.32% 9.28%

Silver (oz/t) 3.86 1.84

Process Plant Production Statistics The following products will be produced from the Process Plant:  Zinc Cathode  Copper Cake  Silver Doré  Manganese Carbonate The estimated recoveries for each metal are as follows:  Zinc 90%  Copper 95%  Silver 90%  Manganese 95% . Life of mine saleable production is presented in Table 27.7-2 below. Table 25.7-2: Commodity Production Metal Production

Zinc (000 lb) 739,886

Copper (000 lb) 39,299

Manganese Carbonate (000 lbs) 3,907,913

Silver (000 oz) 69,000

Smelter Return Factors The process plant products will be shipped from the site to smelting and refining companies. The smelter and refining treatment charges will be subject to negotiation at the time of final agreement. A smelter may impose a penalty either expressed in higher treatment charges, or in metal deductions to treat concentrates that contain higher than specified quantities of certain elements. It is expected that the concentrate will not pose any special restrictions on smelting and refining, and that the concentrates will be marketable to smelting and refining companies. M3-PN100041 26 October 2010 Rev. 2

147

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

The smelting and refining charges calculated in the financial evaluation include charges for smelting and refining these products. The off-site charges that will be incurred are presented in Table 25.7-3 below. Table 25.7-3: Smelter Return factors Smelter Return Factors Zinc Concentrates Payable zinc Treatment charge - $/lb. Shipping charge - $/ton

100.0% $0.00 $31.5

Copper Cake Payable copper Shipping charge - $/ton

96.5% $75.00

Manganese Carbonate Payable manganese Treatment charge - $/ton Shipping charge - $/ton

25.7.2

100.0%

Shipping charge - $/ton

$75.00

Silver Doré Payable copper Treatment charge - $/oz Refining charge - $/oz. Shipping charge - $/oz

99.0% $0.25 $0.20 $1.15

Capital Expenditures

Initial Capital The total capital of new construction (includes direct and indirect costs) is estimated to be $337.7 million. This amount includes $68.3 million for the mine, $262.9 million for the process plant and infrastructure, and  $6.5  million  for  owner’s  cost. Table 25.6-1 details initial capital. Any   land   acquisition   or   exploration   costs   or   other   owner’s   study   expenditures   prior   to   this   Scoping  Study  have  been  treated  as  “sunk”  costs  and  have  not  been  included  in  the  analysis. Sustaining Capital The total life of mine sustaining capital is estimated to be $56 million. Preproduction Mining Cost Seventy percent of the preproduction mining cost was expensed the year incurred and the remainder was amortized over five years.

M3-PN100041 26 October 2010 Rev. 2

148

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.7.3

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Operating Cost

The average Operating Costs over the life of the mine include mine, process plant, general administrative, treatment and refining charges, transportation are shown in Table 25.7-4. See Table 25.5-1 for more detail. Table 25.7-4: Operating Cost Summary Life of Mine $ $27,943,000 $61,338,160 $3,842,340

Mining Process G&A Total Operating Cost

25.7.4

$/t ore

$93,123,500

$19.14 $42.01 $2.63 $63.78

Revenues

Annual revenue is determined by applying estimated metal prices to the annual payable metal before treatment, refinery and transportation charges for each operating year. Sales prices have been applied to all life of mine production without escalation or hedging. The evaluation used a deck of prices with zinc, copper and silver prices calculated by M3 based on weighted average prices for NI-43-101 reporting purposes, 60 % historical prices; 40% futures forecast prices. A forward market is not available for manganese. The long term price is estimated to be $8.13 per DMTU, or $0.41 per pound contained manganese. The three-year trailing average for manganese is $9.53 per DMTU, or $0.43 per pound contained manganese. Metal sales prices used in the evaluation are shown in Table 25.7-5. Table 25.7-5: Metal Prices Zinc Copper Manganese Silver

25.7.5

$0.91/lb $3.07/lb. $0.41/lb $16.78/oz

Other

Salvage Value An allowance of $1.8 million has been included in the cash flow analysis as a return of capital from the salvage and resale of equipment at the end of mine life. Fees and Royalties Royalties are calculated at 2% of the net smelter returns.

M3-PN100041 26 October 2010 Rev. 2

149

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Depreciation Depreciation percentages were based on the MACRS using a 7 year life using a half year convention for the first and last year of depreciation and capital assets were depreciated using these percentages. The last year of production was used as a catch up year to fully depreciate any assets that had not been fully depreciated. Below are the percentages that were applied by year: 1 2 3 4 5 6 7 8

14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46%

Depletion The percentage depletion method was used in the evaluation. It is determined as a percentage of gross income from the property, not to exceed 50% of taxable income before the depletion deduction. The gross income from the property is defined as metal revenues minus downstream costs from the mining property (smelting, refining and transportation). Taxable income is defined as gross income minus operating expenses, overhead expenses, and depreciation and state taxes. A depletion rate of 15% was used. Income Taxes Taxable income for income tax purposes is defined as metal revenues minus operating expenses, royalty, property and severance taxes, reclamation and closure expense, depreciation and depletion. Income tax rates for state and federal are as follows:  State rate  Federal rate  Combined effective tax rate

7.0% 35.0% 39.6%

The combined effective tax rate was calculated as follows (use decimal format to calculate): state rate (7.0%) + federal rate 35.0 % * (1-state rate 7.0%). Income taxes were calculated on the taxable income described above using the federal and state rates.

M3-PN100041 26 October 2010 Rev. 2

150

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.7.6

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Project Financing and Economic Analysis

It is assumed for the purposes of this study that the project will be all equity financed. No leverage or debt expense has been applied in the financial analysis. M3 projected economic performance using standard financial analysis tools such as Net Present Value, Internal Rate of Return, and Payback Period. The analysis considered the capital and operating costs presented above as well as the costs discussed below. Various sensitivity analyses were performed to provide an understanding of the major financial drivers for the mine. Table 25.7-6 summarizes the results of the financial analysis.

M3-PN100041 26 October 2010 Rev. 2

151

WILDCAT SILVER CORPORATION HARDSHELL PROJECT

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Table 25.7-6: Economic Analysis Summary Total Ore Mined (t) Open Pit Underground Mine Life (years) Manganese Grade (%) Silver Grade (oz/t) Copper Grade (%) Zinc Grade (%)

23.8 million 16.0 million 7.8 million 18 8.6 3.2 0.087 1.7

Manganese Recovery (%) Silver Recovery (%) Copper Recovery (%) Zinc Recovery (%)

95 90 95 90

Manganese Production (t) Silver Production (000 oz) Copper Production (t) Zinc Production (t)

1,954,000 69,000 23,000 372,000

Manganese Price ($/lb) Silver Price ($/oz) Copper Price ($/lb) Zinc Price ($/lb)

0.41 16.78 3.07 0.91

Revenue – Total (000) Manganese Silver Copper Zinc

$3,548,000 $ 1,602,000 $1,141,000 $ 116,000 $688,000

Production Cash Cost (000)

$1,643,000

Income from Operations (000) Initial Capital Expenditures (30% mine development capital) Sustaining Capital (000) Income Taxes (000) Cash Flow After Taxes

$1,758,000 $297,000 $56,000 $362,000 $1,043,000

Property Economic Indicators: NPV @ 0% NPV @ 7.5% NPV @ 10% IRR Pay Back (years)

$1,043,000 $357,000 $238,000 19.0% 4.9

M3-PN100041 26 October 2010 Rev. 2

152

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 25.7.7

PRELIMINARY ECONOMIC ASSESSMENT STUDY

Sensitivity Analysis

Price sensitivity was tested using three commodity price decks: a conservative deck suggested by Wildcat Silver Corporation, the M3 60/40 described earlier, and COMEX spot closing on August 19, 2010. Table 25.7-7: Price Sensitivity Economic Indicators after Taxes NPV @ 0% ($000) NPV @ 7.5% ($000) NPV @ 10% ($000) IRR % Payback - years

WC Cons. $892,661 $275,939 $169,581 16.5% 5.5

M3 $1,042,835 $356,732 $237,523 19.0% 4.9

COMEX $1,167,377 $423,209 $293,278 21.0% 4.5

As expected, economic performance is very sensitive to the price for the product within current ranges. 25.8

MINE LIFE

The mine life is 18 years. 25.9

RECLAMATION AND CLOSURE

A total of $10 million dollars is allocated for reclamation during years 14, 15, 16 and 17. The cost is based on the judgement and experience of M3 engineers in collaboration with experts available to WSC.

M3-PN100041 26 October 2010 Rev. 2

153

WILDCAT SILVER CORPORATION HARDSHELL PROJECT 26

PRELIMINARY ECONOMIC ASSESSMENT STUDY

ILLUSTRATIONS

Drawings and other graphic figures are embedded within the report.

M3-PN100041 26 October 2010 Rev. 2

154