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LA JOYA SILVER PROJECT JV

Under the terms of the Definitive Agreement between Silver Dollar and First Majestic Silver Corp. (First Majestic), Silver Dollar has an exclusive option to acquire an initial 80% interest, and if exercised, a second option to acquire the remaining 20% interest for an aggregate 100% interest in First Majestic’s La Joya silver-copper-gold property (see news release of August 10, 2020). Located in the south-eastern portion of the State of Durango in the Mexican Silver Belt, this exploration and development stage property consists of 15 mineral concessions totalling 4,646 hectares and hosts the Main Mineralized Trend (MMT), Santo Nino and Coloradito deposits.

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The Property is situated approximately 75 kilometres (km) southeast of the state capital city of Durango in a prolific mineralized region with past-producing and operating mines including Grupo Mexico's San Martin Mine, Industrias Penoles' Sabinas Mine, Pan American Silver's La Colorada Mine and First Majestic's La Parrilla and Del Toro Silver Mines. Access and infrastructure near the Property are considered excellent with highway, rail and power lines nearby.

First Majestic acquired the La Joya Property as part of its acquisition of SilverCrest Mines Inc. (SilverCrest) in 2015. In 2013, Silvercrest disclosed a mineral resource estimate for the Property that was reported to conform to CIM definitions for resource estimation. A qualified person of Silver Dollar has not done sufficient work to classify this historical resource and the Company is not treating it as a current mineral resource. Independent data verification and an assessment of the mineral resource estimation methods are required to verify the historical mineral resource.

Table 2 (above) is from the National Instrument (NI) 43-101 Technical report titled “Preliminary Economic Assessment for The La Joya Property, Durango, Mexico”, dated 5 December 2013.

Key assumptions, parameters, and methods used to prepare the historical mineral estimate:

  1. 89 holes totaling 30,085 metres (m).
  2. Raw assay data was composited to 2 metres, capped at 550 gpt Ag, 5.5 gpt Au 6% Cu and interpolated into a block model using 5 m x 5 m x 5 m block size using inverse distance squared (ID2) methodology.
  3. Silver equivalency formula assumes Ag:Au is 50:1, Ag:Cu is 86:1, based on US$24/oz silver, US$1200/oz gold, US$3/lb copper and 100% metallurgical recovery.
  4. Mining by open-pit methods.
  5. Mining and process costs assumptions not specifically stated.

The signing of the definitive agreement to acquire the La Joya project is a very important milestone for us,” said Mike Romanik president of Silver Dollar. “We engaged some expert help to assist in our due diligence review of the historical data on the project and the unanimous feedback is that La Joya has incredible exploration and development potential, particularly in light of the significant move in metals prices since we signed the letter of intent.”

The Company is in the process of finalizing its initial exploration program for the Property and will provide an update in due course.

Under the terms of the Definitive Agreement, Silver Dollar may exercise the first option and acquire an initial 80% interest in the First Majestic subsidiary holding the La Joya Silver Project by:

a. paying to First Majestic a total of $1,300,000 plus annual holding costs for the Property, of which:

  1. $300,000 upon execution of the Definitive Agreement,
  2. $200,000 on or before the first anniversary of the Definitive Agreement,
  3. $200,000 on or before the second anniversary of the Definitive Agreement,
  4. $300,000 on or before the third anniversary of the Definitive Agreement, and
  5. $300,000 on or before the fourth anniversary of the Definitive Agreement;

b. incurring exploration expenditures on the Property of not less than $1,000,000 within three years of entering into a surface rights agreement relating to the Property, but in any event within five years of the date of the Definitive Agreement; and

c. issuing to First Majestic, within 45 days of the date of the Definitive Agreement, such number of common shares of the Company as is equal to 19.9% of the then-issued and outstanding shares of Silver Dollar.

If Silver Dollar incurs at least $1,000,000 of exploration expenditures on the Property within three years of the date of the Definitive Agreement, First Majestic will waive the third- and fourth-anniversary cash option payments described above totalling $600,000.

In addition, First Majestic will reserve a 2% net smelter returns royalty interest in all minerals produced from the Property.

Within 30 days after exercising its first option, Silver Dollar may exercise its second option and acquire the remaining 20% interest in the subsidiary that owns the La Joya Silver Project by delivering notice and issuing to First Majestic the number of shares as is equal to 5% of the then-issued and outstanding shares of Silver Dollar.

If Silver Dollar exercises its first option, but elects to not exercise its second option, Silver Dollar and First Majestic will be deemed to have formed a joint venture with respect to the Property.

Garry Clark, P.Geo., of Clark Exploration Consulting, a "Qualified Person" as defined in NI 43-101, has reviewed and approved the technical content on this website.