Discovery of the Juanicipio-Valdecañas Vein Zone,

Western Fresnillo District, Zacatecas Mexico.

Peter K.M. Megaw, IMDEX Inc., and MAG Silver Corp.

Abstract

The 2003-2005 discovery of the important Juanicipio-Valdecañas Vein zone in

the western part of the famous Fresnillo District was the result of ten years of
research and geological field work predicated on the idea that the Fresnillo
District was much larger than conventionally believed. High levels of vein
exposure, extensive cover and weak surface geochemical signatures have
historically hampered exploration in the district and arguably resulted in a limited
perception of the overall system, but to a significant degree this success was a
continuation of discovery history in the district, just with a wider application of
established concepts and scope of vision.

Published studies and reconnaissance field observations from the district were
combined with improved academic understanding of the importance of variations
in boiling levels in low sulfidation epithermal vein systems to generate the
concept that the extensive alteration zone 5 km west of the historic mining area
concealed additional veins. However, detailed geologic mapping, geochemical
sampling and geophysics were required to convince investors that the concept
was worth pursuing. The spectacular successes validate the work and
demonstrate that several mineralization centers, with variable boiling depths,
were active in different places at various times in the district. This creates new
exploration possibilities for the Fresnillo District and suggests that seeking
vertically and laterally shifting mineralization centers in any large epithermal vein
camp may be fruitful, especially where mining and exploration have been
confined to relatively limited areas or within vertically restricted zones.

Introduction

Mexico has produced a minimum of 10.2 billion troy ounces of silver since 1521;
more than 25% of all the silver estimated to have been mined in human history.
This makes it the world’s premier silver producer and the focus of intense on-
going exploration activity. Mexican silver comes dominantly from low-sulfidation
epithermal veins and carbonate replacement deposits (CRDs) that occur in a
broad NW-trending zone long referred to as the “Mexican Silver Belt”. This belt
lies parallel to a continental-over-oceanic subduction zone with related magmatic
belt that was active from the late Cretaceous through the Mid-Tertiary.
Mineralization throughout the belt is spatially and temporally associated with mid-
Tertiary igneous rocks and isotopic studies indicate a significant magmatic
component in the ore fluids, sulfur, and metals of many deposits.

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In several places the deposits fall along tight linear trends. The 500 km long
“Fresnillo Trend” (Fig. 1) , which extends from the Guanajuato district (1.3 billion
oz Ag) at the southeast through Zacatecas (>1.0 billion oz Ag) and Fresnillo (1.6
billion oz Ag) to the Sombrerete-San Martin-Sabinas District (>1.0 billion oz Ag)
and perhaps beyond is overwhelmingly the most productive silver deposit
alignment in Mexico, and probably the world. Ore deposits of the Fresnillo Trend
are dominated by low sulfidation Ag-Au-Pb-Zn (Cu) epithermal veins and Zn-Cu-
Pb-Ag (Au) skarn-CRD systems of mid-Tertiary (28-36 Ma) age, but include other
silver-bearing deposit types and a number of mercury and tin deposits. Satellite
imagery shows that the Fresnillo Trend is underlain by a regionally traceable
NW-SE trending sinistral shear zone periodically cut by younger NE-SW
structures (Megaw, 2007). Fresnillo Trend structures cut across a major
basement tectonostratigraphic terrane boundary and an overlying complexly
deformed sequence of interfingered island arc materials and carbonate
dominated sedimentary rocks deposited along the western margin of the
Mesozoic Central Mexico Basin. Mid-Tertiary resurgent calderas and
intermediate to silicic stocks and rhyolite flow dome complexes (many with
associated tin mineralization) occur regularly along the trend. There is a strong
spatial association between vein and CRD mineralization and felsic intrusion
centers, but no association between vein deposits and terrane or host rock
assemblages. Most of the deposits occur at intersections of the two major
structural trends, and many occur in zones of parallel dilational features related
to the principal northwest structural trend (Megaw, 2007).

All of the major silver districts known in the Fresnillo Trend were discovered in
outcrop (mostly in the sixteenth century) and over 65% of the trend is covered by
alluvium, greatly impeding exploration. However, the overwhelming favorability
of the trend has long fostered exploration interest and resulted in two nearly blind
discoveries that set the stage for present-day exploration efforts through cover.
Discovery of the Las Torres Orebody at Guanajuato in 1968 (Gross, 1975) and
the Santo Niño Veins at Fresnillo in 1976 (Chico, 1980) led to major advances in
the understanding of epithermal vein deposits and, combined with advances in
the understating of fluid inclusion systematics, culminated in recognition of boiling
as the principal mechanism of precious metal deposition in epithermal veins
(Buchanan, 1981). Buchanan’s widely-known model relates the long-recognized
vertical zoning of vein mineralization to ore-fluid boiling at shallow depth (Fig. 2)
and also illustrates the zoning of alteration styles that occur between the boiling
level and the paleosurface. Buchanan’s model (1981) also shows how
fluctuations in the depth of boiling can explain the complex overprinting of vertical
zoning patterns commonly seen in the largest epithermal vein systems.
Depending on the degree of fluctuation, this overprinting can range from
immediate juxtaposition of base-metal dominant “root” zone mineralization with
“Bonanza” zone silver-gold mineralization as seen at Zacatecas (Megaw, unpub.
data) to multiple repetitions of completely separate zoning sequences as seen at
Guanajuato (Gross, 1975). Another important variation occurs when the depth of
boiling changes vertically in combination with a lateral migration of the focus of

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fluid upwelling as documented at Fresnillo by Simmons (1991). Albinson (1988)
applied Buchanan’s model to the Fresnillo region, linking areas of pervasive
silicification and Advanced Argillic alteration to identify a regional mid-Tertiary
paleosurface and suggested exploration beneath those altered areas not known
to have associated vein deposits. Based on Albinson’s work, Sawkins (1988)
specifically suggested that such alteration lying west of Fresnillo might overlie
Fresnillo-style mineralization.

The discovery discussed here of blind mineralization in the Juanicipio Claim was
a direct outgrowth of applying Buchanan’s (1981) model to the area of extensive
silicification and Advanced Argillically altered volcanic rocks in the Sierra
Valdecañas 5 km west of the center of the historic Fresnillo District. The concept
was proven with the first hole, which cut a 1.5m wide intercept in the Juanicipio
Vein grading 720 g/t (21 oz/t) silver and 10.9 g/t gold. The Juanicipio Vein
however did not flesh out significantly with further drilling. Progressive fence
drilling to the north of the Juanicipio Vein cut several narrow silver-rich intercepts
high, and narrow base metals-rich intercepts deep, until Hole JI05-16 intersected
the Valdecañas Vein 1.1 km to the north of the Juanicipio Vein. Hole 16 ran
1798 g/t (52 oz/t) Ag; 2.91 g/t Au, 3.43% Pb and 5.15% Zn over 6.35 meters.
Subsequent drilling has shown the Valdecañas Vein to extend for over 1,500 m
within the Juanicipio Claim with an average width of 6.1 m and an average in-
vein height of 400 m. Average grades are shown in Table 1. Grades show a
classic pattern of base metal values increasing with depth (Robinson, 2009).
However, gold grades are high (>2 g/t) throughout, in significant contrast to the
0.5 g/t average gold grades in the historic part of the district.

Table 1. Resources and Mineralization grade for the Valdecañas Vein

(Robertson, 2009)

The profound overlap and intergradation of mineralization styles found

Ag Au
Resource Category Million g/t g/t Pb % Zn %
Tonnes
Total Indicated 2.95 879 2.22 2.39 4.15
Total Inferred 7.21 458 1.54 1.89 3.14

throughout the district, coupled with relative paucity of information about large
areas of the district, strongly indicates that all mineralization found to date is part
of an integrated super-giant system that remains only partially explored and
understood. To emphasize that the center (or centers) of this ore system have
not yet been definitively determined, and to encourage unconstrained exploration
thinking, the area of principal mining activity around Cerro Proaño and Santo
Niño will be referred to as the “historic mining area”. The term “Fresnillo District”
will be used in the broadest sense, to incorporate all known mineralization: from

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Plateros on the northeast, through the “historic mining area”, to Juanicipio on the
west…and any extensions found between or beyond these.

Fresnillo District Overview

The Fresnillo District is remarkable both historically and geologically: historically

because multiple blind vein discoveries have been made there repeatedly; and
geologically because of the sheer magnitude and extent of the poorly-exposed,
multi-phase epithermal mineralization, whose limits have probably not yet been
reached. The Fresnillo District was discovered in outcrop in 1553 by Spanish
Conquistadores who noted an isolated hill, Cerro Proaño (Fig. 3), lying just west
of the Camino Real between Zacatecas (found in 1543) and Sombrerete (found
in 1546). The hill was literally laced with weathered veins, exposed about in the
middle of their Bonanza zones (Fig. 2) and probably dotted with shallow pits from
indigenous miners seeking ochre or perhaps silver. Its potential would have
been immediately apparent to the itinerant Spanish wealth-seekers. Although
Fresnillo supported hundreds of mines intermittently over the next 415 years, it
was never a major silver producer like Pachuca, Guanajuato, Tayoltita, or
Zacatecas, each of which had produced at least a billion ounces of silver by 1970
(Albinson, 2001). Fresnillo became an important lead-zinc-silver producer in
1957 when deep Pb-Zn-Ag replacement sulfide mantos and associated skarns
were found, but these ores were largely exhausted by 1976 and the mine was
slated to close. To that point Fresnillo had produced about 250 million ounces of
silver from ores grading under 400 g/T (MacDonald, 1977). Things changed very
quickly in mid-1976 with discovery of the completely blind, very high-grade Santo
Niño Vein group just south of the historic mining area (Fig. 3). These veins
average 780 g/t Ag, 0.56 g/t Au, 0.35% Pb; 0.77% Zn and 0.02% Cu over widths
ranging up to 20 m but averaging 2.5-4 meters (Trejo, 2001). Perhaps more
impressive than their grade, Santo Niño style veins show remarkable vertical and
lateral continuity with individual ore zones consistently running 350 m in height
and commonly exceeding 2 km in length (Ruvalcaba-Ruiz and Thompson,
1988). These veins have produced 600 million ounces of silver since 1977.
Combining the 858 million ounces of recorded production with published
reserves of 700 million ounces for the historic Fresnillo Mine and the Juanicipio
area (Fresnillo plc, 2008; Robertson, 2009) gives Fresnillo 1.56 billion ounces of
known silver, making it the world’s second largest epithermal silver vein camp,
behind only Cerro Rico de Bolivia (Graybeal, this volume).

Santo Niño style veins are ideal from an economic and academic perspective in
that the entire Bonanza zone is preserved, from the deep base-metal rich root
zone to the uppermost pinch out and transition into barren vein. However, this
“top-out” lies about 200-250m below the modern surface, about halfway between
the top of the Bonanza zone and the Advanced Argillic alteration-silica cap; a
very awkward depth from an exploration perspective (Fig. 2). They are
unprepossessing at the surface, being expressed as anastomosing groups of thin
irregular calcite veinlets, which only generally trace the orientation of the

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important veins below. To make exploration even more difficult, the historic
mining area is surrounded by cultivated fields that extend for nearly 4 km in all
directions except where young rhyolite ignimbrites or basalt flows make small
hills. This means there is very little outcrop outside of the area around Proaño
Hill and Plateros where the original outcrop discoveries were made. Where
outcrops of pre-mineral rocks can be found in creek bottoms, they show weak
propyllitic alteration and are cut by narrow calcite veinlets that at best are weakly
anomalous in arsenic and mercury. Despite this difficult exploration scenario,
geologists from the Fresnillo Mine have regularly made discoveries of additional
blind high-grade Santo Niño style veins through surface and underground drilling
programs and the mine has expanded to become the world’s premier primary
silver mine, with annual production approaching 35 million ounces of silver
(Fresnillo PLC, Annual Report, 2008).

The variety of high-grade mineralization styles attracted significant academic

interest in the Fresnillo district (Chico, 1980, MacDonald and others, 1986),
culminating in a series of four papers published in Economic Geology in 1988
(Gemmell and others, 1988; Simmons and others, 1988; Lang and others, 1988,
and Ruvalcaba-Ruiz and Thompson, 1988) and a follow-up paper by Simmons in
1991. These papers documented the geology and evolution of the district,
provided age dates bracketing the igneous and mineralizing events, and detailed
fluid inclusion studies defining boiling levels and showing that these levels shifted
elevation dramatically (>450 m) during the epithermal events (Simmons, 1991).
These studies supported an asymmetrical district model with mineralization
zoning southward and eastward from the Fortuna Stock just north of Cerro
Proaño (Fig. 3). There were suggestions however, (Lang and others, 1988;
Sawkins, 1988) that the hills of extensively altered rhyolitic volcanics lying just 4
km west of the district in the Sierra Valdecañas might be related to the
mineralization, requiring rethinking of this model. In contrast, others (names
withheld to prevent embarrassment) posited that this alteration was definitely not
related to mineralization and that there was no point in exploring that far west of
the known mineralized areas.

This latter interpretation was evidently followed as the mineral concessions over
the ground were dropped, opening opportunity for testing a different perspective
on the district when the ground resurfaced in private hands in 1998 as the
Juanicipio Claim. Sunshine Mining Company immediately optioned the ground
on advice from IMDEX-Minera Cascabel, who were then contracted to explore
the property. Work included 1:50,000 regional mapping; 1:5,000 mapping of
what became the discovery area; selective geochemical sampling along
structures, Natural Source Audio Magneto Telluric (NSAMT) geophysics, drill
target delineation, and full drill permitting. Sunshine however did not survive the
exploration/mining down-turn of 1997-2003 and the Juanicipio property reverted
to its underlying Mexican owner in early 2002. IMDEX-Cascabel re-obtained the
exploration option for what became MAG Silver Corp in mid-2002 and drilling
was initiated on the property within three weeks of MAG Silver’s listing on the

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Toronto Venture Stock Exchange in April, 2003. MAG Silver’s first drillhole
confirmed the exploration model and a Joint Venture was established with
neighboring Fresnillo plc in 2005. Subsequent drilling was carried out by the
Joint Venture, discovered the Valdecañas Vein and is advancing it to pre-
feasibility as of this writing.

Historic Fresnillo District Geology

The geology of the Historic Fresnillo District is well documented (Gemmell and
others, 1988; Lang and others, 1988, Ruvalcaba-Ruiz and Thompson, 1988;
Simmons and others, 1988) and will only be summarized here. The stratigraphic
section consists of a complexly deformed, thrust faulted and titled sequence of
lower Cretaceous graywackes, calcareous shales and limestone known as the
Proaño Group (Fig. 1). These are overlain by basal Tertiary volcaniclastic
conglomerates and sandstones and rhyolitic welded ash-flow tuffs erupted from
nearby calderas. This section is cut by quartz monzonite stocks and rhyolite
dikes dated at 32.4 Ma by K/Ar (Lang and others, 1988) and 34.3 Ma Ar/Ar
(Velador, 2009). Upper Tertiary basalt flows interbedded with conglomerates
and finer-grained alluvium surround the historic mining area.

Mineralization and alteration affects the entire pre-Upper Tertiary section and is
zoned from base-metal rich intrusion-contact skarns, mantos and veins in the
northern part of the historic district to Bonanza grade silver veins 3 km to the
south (Simmons, 1991), and gold-rich veins 5 km farther to the southwest at
Saucito. The skarns and mantos extend from the 100 m diameter, 900 m tall
Fortuna quartz monzonite stock and are succeeded upwards and southwards by
northwest-trending lead-zinc-silver rich veins that cropped out around Proaño
Hill. At 200 to 250 meters below the modern surface, these base-metal rich
veins are cut by west and west-northwest-trending acanthite and pyrargyrite-rich
veins that reach their maximum development in the Santo Nino Vein area about
2 kilometers south of Proaño Hill (Figs. 2, 3 and 4) (Gemmell and others, 1988;
Simmons and others, 1988). Recently, similar blind northwest-trending veins
carrying gold rich mineralization have been discovered 5 km to the southwest in
the Saucito area (Fig. 3). Northwest-trending pyrargyrite-rich veins have also
been found northeast of the historic mining area at Plateros, where another
quartz monzonite stock crops out. Because of the extensive mantle of alluvium,
alteration patterns are hard to see in outcrop, but descriptions of kaolinite and
alunite alteration, silicification and calcite veining from drillholes around and
above mineralized veins can be found in the literature (cf. Simmons, 1991).

The pyrargyrite and acanthite dominant ”Santo Nino” veins are remarkable for
their vertical regularity and lateral continuity. Unlike most epithermal vein
systems, which are characterized by ore shoots 10s to 100s of meters wide with
variable vertical extents, the “oreshoots” in the Santo Niño style veins at Fresnillo
are continuous mineralization zones up to 4 kilometers long with remarkably
consistent 300-350 meter heights having “top-outs” lying essentially at a uniform

6
elevation (Simmons, 1991). Further, Santo Niño style veins cut across the tilted
and deformed host rock sequence with little thickness or grade variation with
respect to wall rock competence (Fig. 4). Local thinning and thickening of the
veins does occur in response to inflections in vein orientation, sigmoid loops and
hangingwall splays (Gemmell and others, 1988).

Simmons (1991) synthesized a vast array of geological, mineralogical,

geochemical, and fluid inclusion data for the district into a model showing that the
focus of mineralization shifted progressively from the Fortuna stock towards the
south, with a 450 m drop in the boiling level between Proaño Hill and the Santo
Niño vein zone (Fig. 5). The gold-rich Saucito veins were unknown to him, but
generally fit into a southwestern extension of the migration pattern he noted.
Simmons (1991) district scale model shows the district as strongly asymmetrical
and zoned to the southeast from the Fortuna quartz-monzonite stock. This
model strongly influenced exploration as the district came to be perceived as
lying in a northwest-southeast elongate area centered on Cerro Proaño and the
Santo Niño vein zone. The virtually identical mineralization at Plateros 5 km to
the northeast of Cerro Proaño did not fit well into this concept and apparently
was considered a separate system.

Juanicipio Area Geology

The Juanicipio Claim begins about 5 km west of the principal production

headframes of the Fresnillo Mine and occupies most of the northern end of the
Sierra Valdecañas, which rises sharply from the intervening plains (Fig. 3).
Despite being a topographic high, the Sierra Valdecañas is a structurally
downthrown block that lies at the intersection of several major regional NW and
NE-trending structures, the most important of which is the Valdecañas Fault
which forms the eastern and northern limit of the Sierra. The Sierra Valdecañas
is composed of Tertiary rhyolite ignimbrites, volcaniclastics and flow domes
erupted from at least 4 overlapping resurgent calderas (Megaw and Ramirez,
2001). Older rocks, including the Cretaceous graywackes of the Proaño Group
that are the principal host rocks to district veins (Ruvalcaba-Ruiz and Thompson,
1988), crop-out sparingly in the bottoms of canyons cutting the rhyolites.

The Tertiary section divides readily into two packages separated by a

pronounced angular unconformity. The lower unit, termed the “Linares
Volcanics” consists of a thin basal volarenite overlain by up to 250 m of
moderately to densely welded rhyolite ash-flow tuffs. The Linares Volcanics are
block faulted, tilted and pervasively silicified and argillically altered over extensive
areas. Significant topography was developed on the surface of the Linares
Volcanics with conglomerates containing abundant semi-rounded fragments of
pervasively silicified Linares Volcanic units deposited in paleo-lows. The bulk of
the overlying “Altamira Volcanics” are a flat-lying series, up to 450 m thick, of
unaltered, variably welded, dominantly rhyolitic welded ash-flow tuffs erupted
from nearby resurgent calderas. Lang and others (1988) report 38.4 Ma K/Ar

7
dates for the uppermost part of the Linares package and 27.7 Ma K/Ar dates for
the lowermost part of the Altamira package. More recent Ar/Ar dates (Velador,
2009) refine the dating considerably, with the Altamira volcanics at 31.1 +/- 0.16
Ma and the lower part of the Linares group at 44.73 +/- 0.2 Ma.

The eastern and northern margins Sierra Valdecañas are defined by the north-
northwest to northwest-trending Valdecañas Fault, which does not crop out but is
inferred from parallel structures, alteration patterns and NSAMT geophysics
where it shows up very clearly as a strong conductivity contrast (Zonge, 2001,
see below). Historically, the Fresnillo District was considered to be dropped-down
relative to the Sierra Valdecañas along what is now termed the Valdecañas Fault
(Ruvalcaba and Thompson, 1988). However, several NW-trending minor faults
that parallel its trend are locally exposed along the largely talus-covered slope
just uphill from the inferred position of the Valdecañas Fault, and these dip
steeply to the SW. Further, pervasively silicified Volcanics Linares along the
northeastern flank of the Sierra Valdecañas terminate as an abrupt scarp with
Proaño Group sedimentary units exposed sparsely in creek bottoms on lower the
northeast side. These combined features suggest normal, down to the
southwest, movement on the Valdecañas Fault indicating that the historic mining
area is structurally higher than the Juanicipio area. Similar exposures of
pervasively silicified Linares Volcanics end abruptly at the north end of the Sierra
Valdecañas and give way to an east-west oriented valley approximately 3 km
wide and 6 km long that contains local basalt flows. The important San Carlos
Vein is known to run very close to this southern limit (Fig. 3). Linares Volcanics
appear again along the northern flank of this valley, but are only very slightly
altered. This sharp contrast in alteration and the abundant basalt flows suggest
a buried fault or faults control the valley and were a significant control on
hydrothermal fluid migration.

Several groups of linear fault trends cut across the northern end of the Juanicipio
area of the Sierra Valdecañas. The central and northwestern areas are marked
by through-going NNW to N-S structures cut by a few NW and NE-trending
faults. The northeastern part of Juanicipio is dominated by major N20W-N20E
("N-S" for simplicity), N50-70W, and minor N40-50E structures. The area of
principal exploration interest is cut by a series of very strong and continuous
N50-70 structures, which dip S and N (Fig. 6). Most are high angle (60-90o) but a
few dip as shallowly as 35o. Many are traceable for 500-3000m with little
difficulty except for where they are lost under slide blocks along canyons. These
structures are typically composite fault zones up to 150m wide comprising
several individual strands. Individual faults are marked by multi-stage breccias,
strong silicification, iron-oxide flooding, local pyritization, and extensive advanced
argillic alteration (Megaw and Ramirez, 2001). Many show pinnate structures
indicating dextral movements similar to that inferred regionally (Starling, 2005).
These fault zones clearly cut across the zones of massive silicification, but locally
coincide with zones of thickest silicification, suggesting they acted as feeders for

8
silicification prior to being reactivated for later iron-oxide flooding and subsequent
silicification.

From an exploration standpoint, the N50-70W structures show the strongest

alteration and although many have been superficially prospected they only locally
show anomalous geochemistry. They are parallel to many mineralized
structures in the Fresnillo District (Compare Figs. 3 and 6). The fact that many of
these structures are broad, multi-strand structural zones suggests that these may
be near surface "horsetailing" zones that may coalesce into a master structure at
depth. Similar features are noted in many epithermal vein systems (Buchanan,
1981). These structures were the obvious early exploration targets, but
presented challenges regarding which strand to treat as the master structure.

MINERALIZATION AND ALTERATION

Mineralization

Despite lying next to the world’s largest active silver vein mine there are virtually
no outcrops of mineralization in the 5 km stretch between Cerro Proaño and the
Sierra Valdecañas (Fig. 3). This is partly because most of the area is masked by
alluvium, but more importantly because most known veins in this zone pinch out
more than 200 m below the surface. The important San Carlos Vein is an
exception to this as recent work shows that it reaches the surface at Cerro Fierro,
a low isolated hill with historic workings lying about 1 km north of the Juanicipio
Claim boundary (Fig. 3).

Numerous small prospect pits, presumably dug seeking indications of Fresnillo

style veins, have been found and sampled within Juanicipio. One yielded 0.9 g/t
Au and another 12 g/t Ag, the remainder gave weakly anomalous results for As,
Sb and Hg.

Silicification

Pervasive silicification, ranging from 5 to over 100m thick, affects rhyolite

ignimbrites of the Linares Volcanics along the northeastern flank of the Sierra
Valdecañas (Fig. 7). Subsequent Advanced Argillic alteration overprints the
silicification so this alteration zone shows up on satellite images as a very
prominent 3 by 6 km northwest elongate color anomaly (Fig. 8). The silicification
disappears under younger volcanic rocks to the west and southeast and
terminates abruptly against alluvium along the eastern and northern limits of the
Sierra Valdecañas. Silicification re-appears from under younger volcanic cover
in the extreme northwest corner of the Sierra Valdecañas and also along the
central-eastern flank of the range 4 km south of the Piedras mercury prospect.

The silicification dominantly affects moderately-welded rhyolite ash-flow tuffs and

grades from pervasive silica flooding developed along major feeder structures

9
into laterally thinning and diminishing moderate to weak silicification. Silicification
overlaps where the controlling structures are closely spaced, creating a zone of
nearly pervasive silicification 3 km wide and 6 km long. Breccias showing
multiple silicification stages are common mega-textures in the silicification which
ranges from chalcedonic and glassy, to very fine-grained, to sugary, to druzy.
Commonly, the druzy crystals show skeletal growth suggesting vapor-phase
deposition. As silicification diminishes away from the inferred feeders (10s to
100s of meters) it can be very difficult to distinguish from volcanic cooling-related
vapor-phase silicification and in many places doubtless overprints this.
Volcaniclastic units above, below, and occasionally between, pervasively
affected zones are flooded with iron-oxides locally encapsulated by a distinctive
cellular "clinkery" silicification that is locally anomalous in arsenic and mercury.

Similar silicification is reported surrounding vein structures in the upper parts of

the Fresnillo Mine and in shallow drill holes above the top out of mineralization
(Simmons and others, 1988). Silicification from the mine area and two areas in
the Sierra Valdecañas has been studied and interpreted as hot springs
silicification deposited in a very near surface environment from near neutral
chloride waters probably related to Fresnillo mineralization (Simmons, 1991; and
Albinson, 1988) The fact that silicification occurs for at least 6 kilometers along
the southeastern flank of the Sierra Valdecañas and in a large area in the
northwestern part of the Juanicipio Claim suggests that substantial areas remain
open for exploration.

Hematite, Specularite and Pyrite Flooding

The silicification is clearly cut by numerous younger structures filled with earthy
hematite, specular hematite or fine-grained pyrite that extend laterally as irregular
dispersions into the surrounding rocks. Many of these structures occur as
northwest-trending swarms of closely spaced fractures that show repeated
brecciation, silicification and sequential emplacement of the various iron species.
The largest structural zones of this type range from 50 to 100 meters wide and
can be traced for over 4 km across the northeast corner of the Juanicipio Claim.
They generally show central zones of brick-red pervasive earthy hematite flanked
by marginal zones showing distinctive purplish infusions of very fine-grained
specular hematite. These are locally cut, or flanked, by pyrite-rich veinlets. Some
also control later Advanced Argillic alteration. These materials are only locally
geochemically anomalous in As, Hg and locally Ag (12 g/t maximum).

Advanced Argillic Alteration

In many places, the pervasively silicified and iron-oxide altered zone is cut by
younger structures hosting very well developed creamy-white Advanced Argillic
alteration affecting welded rhyolite ash-flow tuff and flow domes of the Linares
Volcanics. This material also occurs as massive vein fillings several meters wide
and has been mined for ceramic mill feed in several places in and around

10
Juanicipio. Northwest-trending veins of it have been systematically prospected
for over 3 km across the property. Detailed field and core logging with a Short
Wave Infrared Spectrometer (Tarnokai, 2004) shows the Advanced Argillic
assemblage here includes ammonium kaolinite, ammonium alunite and
buddingtonite. Veinlets of coarsely crystalline ammonium alunite to 5 cm thick
and vugs with buddingtonite crystals to 3 mm across have been found. In places
younger silicification has affected or replaced the Advanced Argillic alteration
minerals leaving pseudomorphs of silica after leafy alunite.

Kaolinite, alunite and natroalunite are reported by Simmons (1991) as post-

silicification alteration minerals in the upper portions of the Santo Niño-style veins
in the historic mining area. The presence of similar material cutting pervasive
silicification along structures in Juanicipio, roughly parallel to the major Santo
Niño veins, indicated another link between the two areas.

GEOCHEMISTRY

Overall, the geochemistry of Juanicipio is subtle except for selected samples,

which fits with the generally inconspicuous surface geochemistry in the historic
part of the district (Simmons, 1991). Surface veinlet samples in the Santo Niño
Vein outcrops along Chilitos Arroyo are weakly anomalous in Pb and slightly
stronger in Zn, As and Hg. Sb is very low and Ag is virtually undetectable. This
is in contrast to strong dispersion anomalies in wallrocks to veins reported from
the 270 and 425 levels which yielded high Ag, Sb, As, Zn, and Pb (Gemmel and
others, 1988; Simmons and others, 1988).

Rock chip and dump samples (n = 120) were taken of altered and mineralized
materials throughout the reconnaissance and detailed mapping phases in
Juanicipio (Megaw and Ramirez, 2001). Values for Au, Ag, Pb, Zn and Cu were
consistently low, but weak anomalies could be defined associated with
silicification and iron-oxide flooding or pyritization along northwest-trending
structures. Tin values exceeding the 200 ppm detection limit were also found in
several of these structures as well as in the surface outcrops of the San Carlos
Vein at Cerro Fierro. Antimony and bismuth were also weakly anomalous along
northwest structures with either iron-oxide flooding or alunite development.
Neither correlated well with silicification. Arsenic was persistently anomalous
along northwest structures with silicification and iron-oxide flooding. The highest
As values (>500 ppm) were found in distinctive irregular ropy chalcedony
developed along the base of the pervasive silicification. Mercury was the most
consistently anomalous element throughout the area with many samples
exceeding 10 ppm and some exceeding 100 ppm. Mercury is strongest along
the N50-70W trending faults, with specific structures having the most consistently
elevated values. Many of these structures have associated kaolinite, alunite,
buddingtonite and pyrite and most coincide with strong NSAMT anomalies. Not
surprisingly these were the initial drill targets, and two have proven to be
significant veins.

11
EXPLORATION RESULTS AND DRILL TARGETING

The silicification, Advanced Argillic alteration iron-flooding and geochemistry

described from Juanicipio (Megaw and Ramirez, 2001) fit closely with what
Buchanan’s (1981) model indicates for the surface expression of an epithermal
vein system (Fig. 2), so clearly drilling for vein targets was justified. However, it
remained uncertain if any veins present in Juanicipio were part of the large-scale
integrated Fresnillo District and whether mineralization comparable in size and
grade to that in the historic mining area could be found. Indications for the latter
were considered strong:

1. Lang and other’s (1988) K/Ar age dating indicated that both Juanicipio
silicification and Fresnillo mineralization occurred within a span of less
than 3.5 million years, suggesting it was more likely that they were
products of a single large mineralizing event than separate major
mineralizing and altering events. [More recent Ar/Ar age dating by Velador
(2009) narrows this gap to within the error limits of his age dates].
2. The two areas occur in comparable structural environments with
Juanicipio displaying northwest-trending alteration-controlling structures
parallel to the principal productive structures in the historic mining area.
An important reinforcement is the extreme lateral continuity of Fresnillo
veins (Gemmell and others, 1988), which suggested that mineralization
could be expected to be laterally very extensive. This was supported by
Fresnillo Mine drilling on the San Carlos Vein, which at the time was
approaching the northeastern corner of the Juanicipio Claim. [San Carlos
is now known to extend well past this limit].
3. The multi-stage alteration history with repeated silicification cut by iron-
oxide, pyrite, kaolinite-alunite-buddingtonite stages is analogous to that
seen in the upper reaches of the Santo Niño zone (Simmons, 1988),
suggesting overlap between the top of one and the bottom of the other.
4. The similar surface geochemistry was considered equivocal evidence
because both areas have a subdued geochemical signature. However, the
metals that are anomalous in the historic mining area are anomalous in
Juanicipio in the same low amounts and proportions, and in both cases
the samples were taken several hundred meters above the top-out on the
veins, so strong geochemical signatures were not expected.

Although the indictors for Fresnillo District style mineralization existing under
Juanicipio were positive, questions remained about why similar widespread
silicification and alteration was not present over the historic mining area when it
supposedly lay structurally lower than Juanicipio. The reinterpretation of down to
the southwest normal movement on the Valdecañas Fault suggested the obvious
answer that Juanicipio-style silicification once extended over the historic mining
area but had been eroded off, so Recent conglomerates and alluvium east and
downstream from the historic district were examined and found to contain a high

12
percentage of fragments of silicified rocks (Megaw and Ramirez, 2001). A well
established drainage divide separates the historic mining area from Juanicipio so
it is not likely that these silicified fragments come from Juanicipio. Combining
these field relations with reports of silicification and argillic alteration surrounding
the upper parts of Santo Niño veins (Simmons, 1991) indicated that only the
roots of Juanicipio style silicification remained uneroded in the historic mining
area.

DRILL TARGETING

The preponderance of data were considered favorable enough to warrant drilling

and the N50-70W structural zones with combined alteration, geochemistry and
alignment with known veins to the east were clearly the top priority targets for
Santo Niño-style high-grade mineralization. However, concerns existed about
which of the many individual structures in the broad fault zones would be the
master structure at depth, and more importantly how deep to drill. Indications
were that the Sierra Valdecañas is dropped down relative to the historic Fresnillo
District, so any mineralization present would be exposed at a significantly deeper
level and we would have to combine an estimate of this vertical displacement
with the thickness of any pre-mineral rocks preserved above the level of
stratigraphic exposure in the historic mining area to determine how deep to target
drilling.

Working from Simmons (1991) model of descending boiling levels tables in the
historic mining area, and factoring in geology and topography, we made a first
order estimate of how deep the top-outs of possible Santo Niño-style veins
should lie below the surface in Juanicipio (Fig. 5). The model sections show two
geological possibilities: that Juanicipio is dropped down relative to Fresnillo along
the Valdecañas Fault; or that it isn't and the paleosurface dips down towards
Juanicipio from Fresnillo in a manner analogous to that suggested by Nolan’s
(1936) work at Tonopah, Nevada. Our geological mapping better supported the
former interpretation, but note that it made little difference in terms of depth to
"top-out".

The Santo Niño-style veins "top-out" at 2000 m elevation, about 200 m below the
current surface and about 500m below the inferred paleosurface at the time of
early Cerro Proaño mineralization (Fig. 2). Taking the base of the Juanicipio
silicification, which lies at 2300 m elevation as reflecting the same paleosurface,
the "top-out" of Santo Nino stage veins in Valdecañas was calculated to lie at
about 1800 m elevation. This was clearly a very rough estimate and we
anticipated an error of 100 m (or more). Extensive drilling on the vein shows the
top out lies at about 1825 m elevation (Robertson, 2009).

13
GEOPHYSICS

We were not sure of which structure to drill first because of a combination of

having dozens of parallel structures, many of which showed significant
“horsetailing” (Fig. 6), so Natural Source Audio Magneto Tellurics (NSAMT) was
run perpendicular to the structural grain along approximately 8km of line across
the northeast corner of Juanicipio. NSAMT was selected because of its ability to
discriminate horizontal and vertical discontinuities (stratigraphic breaks and
structures); measure resistivity contrasts across these breaks; penetrate to
depths of >1km with minimal loss of resolution; high flexibility in line orientation;
and low cost. The NSAMT study (Zonge, 2001) was done with a 50 meter
spacing and revealed a series a strong vertical discontinuities that roughly
coincided with the major structures mapped on surface. Several of these had
strong conductors along their profiles at 1600 m elevation, so the initial drilling
was targeted on the strongest of these anomalies. Mineralization in early drilling
was found near several of the discontinuities, but detailed reconciliation with
drilling results could not verify that the NSAMT significantly improved targeting.

Summary and Implications for the future

In hindsight, it is perhaps easy to consider the discovery of important

mineralization in the Juanicipio zone as an ordinary example of brownfields
exploration. We generated a concept from the existing published literature and
geologic models and applied it to an area that history now shows is so well
mineralized that a significant discovery was virtually guaranteed. Although the
basis was simple: to critically re-examine and challenge the conventional wisdom
about a major, complex, poorly exposed and partially understood ore system;
getting past the barrier “conventional wisdom” poses to creative exploration
thinking was difficult. We first had to overcome skepticism that the neighboring
operating company with many years of exploration experience in the district
would have overlooked such an obvious concept, and then come up with the
backing to drill some deep holes on that improbable concept. Having the
headframe of the world’s largest active silver mine 5 km away helped, as did
market timing, but so did having 2 years worth of detailed mapping, geochemistry
and geophysics behind the project. Despite proving the exploration concept with
our first drillhole, doubts of its significance lingered until the discovery of the
Valdecañas Vein two years later clearly demonstrated that Fresnillo District
mineralization extended into the Sierra Valdecañas.

However, questions remained about just how significant the western Fresnillo
District discoveries were until an additional six well mineralized veins were found
by Fresnillo plc just east of Juanicipio by drilling a series of known structures at
the same elevation as the Valdecañas Bonanza zone (Fig. 3). Bonanza-grade
mineralization is now known to extend for six kilometers beyond the previously
conceived western limit to mineralization; metals zoning patterns are now known
to be very complicated, with vertical, eastward, and westward increases in silver

14
and base metals noted in and between many of the district’s veins; and gold is
significantly higher throughout the western area. Combining these data with
Simmons (1991) work showing that the center of mineralization shifted 450
meters vertically and nearly three kilometers laterally between Cerro Proaño and
Santo Nino Vein stages strongly indicates that Fresnillo was a very long-lived
system with multiple, or migrating, mineralization centers. Adding this to the fact
that the Valdecañas Vein shows the characteristics of all of the major
mineralization stages/zones seen in the historic mining area [base metal rich;
acanthite dominant; pyrargyrite dominant and finally gold dominant] as four
distinct cross-cutting mineralization stages within a single, large composite vein,
suggests that another mineralization center lies in/near Juanicipio. These results
together suggest that not enough is yet known about the overall Fresnillo system
to define its center (or centers) and believing we do closes off manifold
exploration possibilities. It is very likely that additional major discoveries will be
made, giving Fresnillo a significant chance to become the world’s largest silver
vein district.

15
ACKNOWLEDGEMENTS

Fifteen years involvement at Juanicipio stems from an initial casual visit in 1995
with my friend Martin Sutti, who ultimately acquired the claim and brought us in to
explore it in 1998. Bill Bond, then with Sunshine Mining Company, shared our
enthusiasm for the area and oversaw the early work. R. Michael Jones, with
whom we co-founded MAG Silver, gets major credit for bringing the market savvy
and wherewithal to get MAG rolling to the party. MAG Silver President Dan
MacInnis has been a pleasure to work with, his appreciation for the persistence
needed to make a discovery made all the difference. MAG’s shareholders are
also due a sincere debt of gratitude for backing such wholly conceptually based
exploration. The entire MAG-Peñoles-Fresnillo exploration team should be very
proud of their contributions to making the concept a reality. Larry Buchanan,
John Dreier, James I. Lyons, Spencer Titley and Jeffrey Wilson are due thanks
for making signal contributions to my schooling in epithermal vein systems.
Stuart Simmons, Bruce Gemmel, Barbu Lang, Tommy Thompson, Delfino
Ruvalcaba-Ruiz and especially the late Half Zantop deserve major kudos for their
contributions to understanding of the geologic framework of Fresnillo, as does
Kenneth F. Clark for bringing many of these papers together in the December,
1988 issue of Economic Geology. Sam Sawkins and Tawn Albinson had the
crystal ball to see this coming: I wish I had found Sam’s paper earlier. My
partners Tony Kuehn and Porfirio Padilla deserve major thanks for their fortitude
and shared perception that the 1998-2002 “nuclear-winter” in exploration
represented a once in a lifetime opportunity. Finally I gratefully acknowledge the
major contributions to the Juanicipio story made by Ings. Rene Ramirez and
Gabriel Arredondo with whom I mapped, drilled, lived and breathed this project
for several years.

16
 REFERENCES
Albinson-F., T., 1988, Geologic Reconstruction of the Paleosurface in the
Sombrerete, Colorada and Fresnillo Districts, Zacatecas State, Mexico:
Economic Geology, v. 83, p. 1647-1667.

Albinson-F., T. Norman, D.I., Cole, D., and Chomiak, B., 2001, Controls on
formation of low-sulfidation epithermal deposits in Mexico: Constraints from Fluid
Inclusion and Stable Isotope data, In, Albinson-F., T. and Nelson, C.E. eds. New
Mines and Discoveries in Mexico and Central America: Society of Economic
Geologists, Special Publication No. 8., Littleton CO, p. 1-32.

Buchanan, L. J., 1981, Precious metal deposits associated with volcanic

environments in the Southwest in Dickinson, W.R. and Payne, W.D., eds.,
Relations of tectonics to ore deposits in the southern Cordillera: Arizona
Geological Society Digest, v. 14, p. 237-262.

Chico, S.E., 1980, Descubrimiento de la Veta Santo Niño en Fresnillo,

Zacatecas: Unpublished thesis, Facultad de Ingeneria, Universidad Autonoma de
Mexico (UNAM), 101 p.

Earthman, M.A., Velador, J.M., and Campbell, A.R., 2009, Stable isotope study
of new prospect veins of the Fresnillo Silver district, Zacatecas, Mexico:
Geological Society of America, Abstracts with Programs, Vol. 41, No. 7., p. 681,
Paper 263-8.

ERA-Maptec, 1992, Landsat TM Structural interpretation of the Zacatecas

Region, Mexico for silver, base metal and gold exploration: 35p.

Foshag, W.F. and Fries, C., Jr., 1942, Tin deposits of the Republic of Mexico:
U.S. Geological Survey Bulletin 935-C, p. 99-176.

Fresnillo plc, 2008: Prospectus

Garcia, M.E., Querol, S.F. and Lowther, G.K., 1991, Geology of the Fresnillo
mining district, Zacatecas.: in: Salas, G.P., ed., Economic Geology, Mexico,
Geological Society of America, Boulder, CO, DNAG Volume P-3, p. 383-394.

Gemmell, J.B., Simmons, S.F. and Zantop, H., 1988, The Santo Niño silver-lead-
zinc vein, Fresnillo District, Zacatecas, Mexico; Part I, Structure, vein
stratigraphy, and mineralogy: Economic Geology, v. 83, no. 8, p. 1597-1618.

Gross, W.H., 1975, New ore discovery and source of silver gold-veins,
Guanajuato, Mexico: Economic Geology, v. 70, no. 7, p. 1175-1189.

17
Lang, B., Steinitz, G., Sawkins, F.J. and Simmons, S.F., 1988, K-Ar age studies
in the Fresnillo silver district, Zacatecas.: Economic Geology, v. 83, no. 8, p.
1642-1646.

MacDonald, A.J., Kreczmer, M.J. and Kesler, S.E., 1986, Vein, manto, and
chimney mineralization at the Fresnillo silver-lead-zinc mine, Mexico: Canadian
Journal of Earth Sciences, v. 23, no. 10, p.1603-1614.

Megaw, P.K.M., 2007, Geologic Framework, Ore Deposits and Exploration of the
Fresnillo Trend, Zacatecas-Guanajuato, Mexico: Abstract, Arizona Geological
Society, “Ores and Ore Genesis” Symposium, September 27, 2007, Tucson,
Arizona.

Megaw, P.K.M., and Ramirez-Lopez, R., 2001, Report on Phase 1 data

compilation and geological, geochemical and geophysical study of the Juanicipio
Claim, Fresnillo District, Zacatecas, Mexico: Unpublished report to Minera
Sunshine de Mexico, April 2001, 62p.

Nolan, T.B., 1935, The underground geology of the Tonopah Mining District,
Nevada: University of Nevada bulletin -- vol. 29, no. 5, 49p.

Robertson, J., 2009, Valdecañas Project-Scoping Study: NI 43-101 Technical

Report prepared for Minera Juanicipio S.A. de C.V. by Wardrop, August 19,
2009, 1939. (Filed with SEDAR and EDGAR).

Ruvalcaba-Ruiz, D.C. and Thompson, T.B., 1988, Ore deposits at the

Fresnillo Mine, Zacatecas, Mexico: Economic Geology, v. 83, no. 8,
p. 1583-1596.

Sawkins, F.J., 1988, Anatomy of a world-class silver system, and implications

for exploration; Fresnillo District, Zacatecas, Mexico in Jones, M.J., Silver;
exploration, mining and treatment: Institution of Mining and Metallurgy [London],
p. 33-39.

Simmons, S.F., Gemmell, J.B. and Sawkins, F.J., 1988, The Santo Niño silver-
lead-zinc vein, Fresnillo District, Zacatecas; Part II, Physical and chemical nature
of ore-forming solutions: Economic
Geology, v. 83, no. 8, p. 1619-1641.

Simmons, S.F., 1991, Hydrologic implications of alteration and fluid inclusion

studies in the Fresnillo District, Mexico; evidence for a brine reservoir and a
descending water table during the formation of hydrothermal Ag-Pb-Zn
orebodies: Economic Geology, v. 86, no. 8, p. 1579-1601.

Starling, T.S., 2004, Structural review of the Juanicipio Project Area, Zacatecas,
Mexico: Telluris Consulting Proprietary report 07-04 to MAG Silver, 20p.

18
Tarnokai, C., 2004: Short Wave Infrared Spectral study of core and surface
alteration at the Juanicipio Project Area, Fresnillo District, Zacatecas, Mexico:
Proprietary report to MAG Silver, 10 p.

Trejo-de la Cruz, P., 2001, Geology of the Fresnillo Southwest Mine, Fresnillo,
Zacatecas, Mexico. In, Albinson-F., T. and Nelson, C.E. eds. New Mines and
Discoveries in Mexico and Central America: Society of Economic Geologists,
Special Publication No. 8., Littleton CO, p. 105-114.

Velador, J.M., Earthman, M.A., and Campbell, A.R., 2009, Spatial variation of
physio-chemcial conditions of the hydrothermal fluids in Fresnillo based on fluid
inclusion studies: Geological Society of America, Abstracts with Programs, Vol.
41, No. 7., p. 681, Paper 263-9.

ZONGE Engineering, 2001, Interpretive report, revised, Natural Source NSAMT

Geophysical Survey, Juanicipio #1 Project Area, Fresnillo, Zacatecas, Mexico:
Proprietary report to Minera Sunshine, February 15, 2001, 24p.

19
FIGURE CAPTIONS: Note that these are being redrafted with MAG Silver
logos, and extraneous background stuff is being removed.

Figure 1. Fresnillo Silver Trend showing location in Mexico and position of

Fresnillo District with respect to other major epithermal vein and carbonate
replacement deposits of the belt.

Figure 2. Buchanan’s (1981) Epithermal Vein model showing vertical

mineralization and alteration zoning with respect to the Fresnillo District. (Note
top out depths from 2B will be combined with 2a…and much of the MAG specific
comments will be removed)

Figure 3. Location of major vein zones of historic mining area, Saucito and
Juanicipio areas of the Fresnillo District. Shaded area on left side represents the
volcanic edifice of the Sierra Valdecañas with the outline of the Juanicipio Claim.
(Note that this is being redrafted to remove the MAG specific data and show the
veins immediately east of the Sierra Valdecañas…found since 3a was drafted!)

Figure 4. Cross Section across the Santo Niño vein zone of the historic mining
area, showing host rocks and veins that topped out below the present surface.
(modified from Garcia and others, 1985)

Figure 5. Original Figure 41 from Megaw and Ramirez (2001) showing

projections of Simmons (1991) model of descending boiling levels for the historic
mining area into the Juanicipio area. (I would prefer to leave this in its original
form as a “historical” artifact).

Figure 6. Detailed geologic map of the northeastern corner of the Sierra

Valdecañas, showing volcanic units, pervasive silicification, structures and trace
of NSAMT survey. (Modified from Megaw and Ramirez, 2001).

Figure 7. View of pervasively silicified rhyolite welded ash-flow tuffs from canyon
bottom in the Juanicipio Claim.

Figure 8. Oblique view of ASTER imagery of the Sierra Valdecañas. Advanced

Argillic alteration and silicification of the Linares Volcanics in the Juanicipio area
shows as the diagonal pink-orange band across the middle of the image.
Unaltered younger Altamira Volcanics are the dark brown units overlying the
alteration band. The city of Fresnillo and Cerro Proaño lie in the extreme lower
right corner. (Image processing by Starling, 2004)

20
Figure 1

Peñasquito

21
Figure 2a

Figure 2b

22
Figure 3a

Fresnillo Silver District

Figure 3b

23
Figure 4

24
Figure 5

25
Figure 6

26
Figure 7

27
Figure 8

28