Geological Setting and Mineralisation

Local Geology

The El Palmar Project is located in a geological district with a very dynamic history, which caused the successive accretion of fragments of the oceanic crust against the continental crust, giving rise in this process to the development of mining deposits that are currently being explored. It is located on the metallogenic volcanic arc of the Western Cordillera of Ecuador, which ranges in age from Jurassic to Tertiary, with most of the mineralization corresponding to the Miocene Period.

Controlling factors affecting mineralisation within the concession include:

The NE-SW orientation of regional lithological bodies.

• The presence of the Toachi Fault, which has a similar NE-SW orientation and is linked to the occurrence of the deposits and mining indications "El Corazón", "El Palmar", "Llurimagua", "La Merced de Buenos Aires", "Cascabel".
• The presence of the "Apuela" batholith, which probably used the fracture planes of the Toachi Fault, to rise by intruding older rocks, generating the heat source that was in turn the source of the hydrothermal process that gave rise to some mining deposits.
• The Toachi Fault also brings into contact two different geological environments, with oceanic crust rocks to the NW and accreted continental slope and continental arc rocks to the SE.

The diagram below illustrates alteration zones linked to the Toachi Fault and a currently eroded volcanic structure. They have a NE-SW orientation, similar to the orientation of the Toachi fault and similar to the orientation of the metallogenic belt developed around the aforementioned fault. In general, to the NW of the Toachi Fault, the rocks have an igneous affinity, with volcanics and intrusives of different compositions, while to the SE, the rocks have a continental slope affinity.

 Collapsing structure and alteration zones NW of the Toachi Fault, within the Mandariyacus concession.

The alteration and mineralization found within the El Palmar project area is related to igneous and volcanic rocks, which developed in an oceanic crustal setting. The structure, which follows a well defined topographical feature, controls the location of mineralised structures and igneous intrusions, partially covered by very young volcanic ash, probably from the Cotacachi volcano, which regularly covers the soils of the vast majority of the mining concession area.

The units within the concession (as shown below) includes: Diorite and Diorite Porphyry, Andesite-Dacite Porphyry, Hornblende Quartz-Diorite Porphyry, Altered Igneous Breccias, Dacite-Andesite Porphyry, Arenites, Volcaniclastic sediments, Metamorphic Sediments, and Marine Sediments. Structurally, the dominant trend is ENE-WSW, sub parallel to the trend of the Toachi Fault, with a series of secondary faults in a NW-SE direction which are parallel to the orientation of Bi-Modal Syn-Mineral Quartz Diorite dykes, considered the main mineralizing units within the concession.

Concession Geology

Structural Geology

The most important structure in the area is related to the Northeast-Southwest regional orientation of the Mulaute, Tortugo, and Macuchi formations, located north of the great fault of the Guayllabamba River. There are two other structural orientations that are very important: one conjugated to the previous one, in a Northwest-Southeast direction, and another in a North-South direction, with limited variations. There are indications of a fourth that would be conjugated to the last, in an East-West direction, although it is less abundant.

Epithermal veins have formed in structures that have virtually all of the orientations described; however, it can be seen that they develop with greater ease and grade, when they have Northwest-Southeast, and North-South orientations. All veins found in the El Palmar area have the characteristics of well-developed shears, with the formation of structural "eyes" ranging from a few centimeters long to tens of meters. These "eyes" also develop in the host rock, up to several meters outside the veins.

The Cu-Au porphyry bodies are related to a regional structure that coincides with the geomorphological collapse in the south of the east, when it has a NE-SW orientation. Geochemistry shows that the largest Cu-Au-Mo anomalies extend along this structure, penetrating both porphyries and the breccia.  It is interesting to note that other Cu-Au-Mo anomalies are located on the other side of the surface-mapped breccia, suggesting that at the base or below this lithology, there is an interesting, mineralized body, which has not yet been drilled.  Quartz-magnetite or quartz-sericite stockworks have formed in these rocks, with at least two developmental phases intersecting locally.

Mineralisation

The high-grade mineralisation at T1 is dominantly hosted in Syn Mineral Quartz Diorite, Diorite, and Bi-Modal Quartz Diorite. These units are hosted in Early Mineral Quartz Diorite and Glomerocrystic Quartz Diorite, which are host to low grade mineralisation. The Glomerocrystic Quartz Diorite which is volumetrically the dominant unit is bounded to the south with a sedimentary package.

Deposit Geology, looking down

Deposit Geology, section A-A’ (looking North)

Deposit geology, section B-B’ (looking East)

Mineralised domains

The diamond drilling completed during 2021 to 2023 by STM over the El Palmar Project has facilitated the development of a detailed and zoned domain strategy over the main mineralised body.

Broadly speaking, in total 7 primary geological domains have now been defined over the El Palmar mineralisation.

Typical oblique section – El Palmar geological domains as defined by STM

The key geological units identified during logging which have been incorporated into the final domaining approach and are denoted on the basis of the relative timing of the intrusions in comparison to the mineralising event/s are as follows:

• Syn-mineral Diorite in the form of dykes (DI_SM)
• Bimodal Quartz Diorite in the form of dkyes (BM_QD_SM)
• Quartz Dorite in the form of dkyes and diffusive mineralisation (QD_EM)
• El Palmar quartz diorite in the form of dkyes and diffusive mineralisation (QD_EM)
• Glomerocrytic Quartz Diorite (GMQD_EM)
• Volcano sediments, intercalated fine to coarse grained (SED)

Alteration Assemblages – El Palmar

Alteration zones grade from subordinate relics of potassic alteration within the interior intrusions, outward to areas of argillic alteration that overprint potassic alteration within the outer regions of the stock, and then laterally to propylitic alteration on the flanks of the diorite and outward into the transitional and oxide mineralised zones to epidotic and chloritic propylitic alteration at the extremities and finally intermediate argillic alteration.

Typical oblique section – El Palmar alteration assemblages as defined by STM

The alteration zonation in and around the main mineralised zones are frequently dominated by hornblends altered to chlorite and minor magnetite and secondary biotite with plagioclases altered to illite and calcite. The following alteration domains have been defined:

• POT (Potassic alteration)
• POT-PROP (Potassic to propylitic alteration)
• EP-PROP (Epidotic to propylitic alteration)
• CHL-PROP (Chloritic to propylitic alteration)
• Country rock minor weak alteration and un-altered fresh rock