Peñasco Quemado

Size: 3,746.18 hectares
Location: Sonora, Mexico
Target: Silver ± Gold (Epithermal)
Development Stage: Resource Definition

Location and Access: The Peñasco Quemado property is located within the northcentral portion of the state of Sonora, Mexico. The property is approximately 70 kilometres (km) southwest of Nogales, on the border with the American state of Arizona and 77 km northwest of the Mexican city of Magdalena de Kino (Magdalena).

Summary: 

Lodestar filed an independent technical report for the Peñasco Quemado Project  (“PQ” or the “Project”) updated Mineral Resource Estimate (“MRE”). The report titled “NI 43-101 Technical Report for the 2023 Mineral Resource Estimate on the Peñasco Quemado Project, Sonora, Mexico” is dated April 17, 2023 (with an effective date of March 21, 2023) and can be found here.

The Technical Report was prepared in accordance with National Instrument 43-101 (“N.I. 43101”) Standards of Disclosure for Mineral Projects by Micon International Ltd. (“Micon”) of Toronto, Canada. Highlights of the MRE include:

• 6.2 million ounces (“Moz”) silver classified as inferred (“inf”) at Peñasco Quemado with an average grade of 168.6 grams per tonne (“g/t”) silver
• Conservative base-case estimate uses 85 g/t silver cut-off grade
• Relatively low strip ratio of 2.25:1 for Peñasco Quemado resource.
• Future resource growth potential remains at Peñasco Quemado.

Geology: The Peñasco Quemado property lies within the Sierra Madre Occidental metallogenic province, which extends along western Mexico from the border of the Mexican and American states of Sonora and Arizona south to the state of Jalisco. The deposit is hosted within Volcaniclastic Conglomerate and Upper Conglomerate, which is up to 200 m thick. The conglomerate is in a high-angle fault contact with a volcanic sequence that includes andesite tuffs, andesite breccia and andesite flows.

The deposit mineralization consists of silver with minor amounts of copper. To date, the specific silver minerals have not been identified. However, a preliminary petrography and mineralogical study interpreted that the silver mineralization is in the form of cerargyrite and argentojarosite. The preliminary study also found that the silver-copper mineralization at Peñasco Quemado corresponds to an enrichment, which created a concentration within the clastic sequence deformed by shearing. More investigation needs to be conducted to determine more accurately the silver mineral species present within the deposit and other mineral associations.

Exploration Upside: The 2023 MRE objective was to upgrade the historic Peñasco Quemado resource estimate to current standards under the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”). The most notable change in the 2023 MRE is the significant decrease in resource tonnage and a notable resource classification category limited to only inferred resources. The Peñasco Quemado resource now contains 6.2 Moz silver in 1.1 Mt at an average grade of 168.6 g/t silver in the Inferred category.

In addition to its defined silver resources at PQ mineralized zone, a separate pit was generated for the PQ South zone; however, this does not meet the requirement for being potentially economic, as it generated a negative net present value. Thus, a pit-constrained mineral resource could only be reported for the PQ mineralized zone. This leaves Lodestar with a significant opportunity to expand and build upon the established resources at the Peñasco Quemado property: Further drilling in and around this area may be able to enlarge the existing PQ mineral resource, and this would assist in potentially bridging the gap between the two detached mineralized zones and increasing the resource potential beyond the extent of the current pit shell.

Table 1: Mineral Resource Estimate for the Peñasco Quemado Project at 85 g/t Ag Cut-off as of March 21, 2023

Figure 1: Location and Claims disposition of the Peñasco Quemado Property.

The Peñasco Quemado Project 2023 Mineral Resource Estimate (“2023 MRE”) has been prepared by W.J. Lewis, P.Geo., of Micon International (“Micon”), in co-operation with; C., Sarkar, M.Sc, P.Geo (also of Micon), and R., Calles-Montijo, CPG (of Servicios Geológicos IMEx, S.C.); all of whom are Qualified Persons Independent of the company. The report entitled:  NI 43-101 Technical Report for the 2023 Mineral Resource Estimate on the Peñasco Quemado Project, Sonora, Mexico, dated April 17, 2023,  with an effective date of March 21, 2023.  was prepared in conformance with the Canadian Institute of Mining, Metallurgy, and Petroleum (“CIM”) “Estimation of Mineral Resources and Mineral Reserves Best Practice” guidelines and are reported in accordance with the Canadian Securities Administrators National Instrument (“NI”) 43-101. Refer to the news release dated May 8th, 2023, for more information on the 2023 MRE.

Mineral resources which are not mineral reserves do not have demonstrated economic viability. Therefore, the QP believes that, at this time, the mineral resource estimate is not materially affected by environmental, permitting, legal, title, socio-political, marketing, or other relevant issues. However, as the Peñasco Quemado Project advances, further required studies in these areas or other socio-political factors may affect the resource estimate.

As it relates to the 2023 MRE, the following should be noted:

• First, the mineral resources are reported based on open-pit mining method scenarios.
• The pit was constrained based on a bench slope of 30° for the overlying alluvium and 45° for the remaining lithologies.
• The mineralized wireframes (PQ zone) within which the resources are contained were modelled on a cut-off silver grade of 25 g/t.
• Grade capping was applied to reduce the influence of outlier samples, and a cap of 460 g/t silver was applied for the PQ zone.
• The economic parameters used to define mineral resources are a metal price of USD25 per troy ounce of silver, a mining cost of USD2/t, a processing cost of USD40/t and a G&A cost of USD5/t, for a total of USD47/t mined and processed. The silver recovery was estimated at 69%.
• The resource is estimated for silver only, as manganese is not recoverable into a salable product for Peñasco Quemado Project.
• The entire mineral resource has been categorized in the Inferred category.
• The mineral resource estimate has been prepared without reference to surface rights or the potential presence of overlying infrastructure.
• Figures may not be total due to rounding.

Figure 2: 3D Perspective of the Peñasco Quemado Project Drill Hole Locations and the Two Mineralized Envelopes

Figure 3: 3D Perspective of the PQ Mineralized Zone Block Model, also showing the area of Pit -Constrained Resources