Mineralization at the Cusi Mine has been variously described as a) low-sulfidation epithermal (Ciesielski, 2007), b) high-sulfidation epithermal (SGS, 2008) and linked epithermal-base metal system (Meinhert, 2006). Meinhert (2006) notes that although shallow (<100 m) historic mining is reported to have encountered grades exceeding 1,000 oz/ton Ag, the veins currently exposed are more base-metal rich than would be expected in an epithermal system. However, Sierra Metals geologists consider the abundance of base metals on the property to be primarily a function of depth of exposure and SRK agrees with this interpretation. Mineralization occurs along narrow fractures containing quartz, sphalerite and galena, and wall rock alteration consists primarily of silicification and the development of clays and iron oxides. The veins contain quartz with crustiform and banded textures typical of epithermal systems.

The property lies within a possible caldera that contains a prominent rhyolite body interpreted as a resurgent dome. The rhyolite dome trends northwest-southeast with an exposure of roughly 7 km by 3 km and hosts mineralization. It is bounded (cut) on the east side by strands of the NWtrending Cusi fault and on the west by the Border fault. The Cusi fault has both normal and rightlateral strike-slip senses of shear. Strands of the Cusi fault are intersected by NE-trending faults, some of which indicate left-lateral strike-slip shear. NE-trending veins associated with these faults dip steeply either NW or SE. High-grade and wide alteration and mineralization zones exist in the areas of intersection of NW and NE structures.

The property tectonically formed during dextral transtension associated with oblique subduction of the Farallon Plate beneath the North American Plate. Strike-slip and normal faults related to this transtension controlled igneous and hydrothermal activity in the region. Regional NW-trending faults like Cusi are generally right-lateral strike-slip faults with a normal slip component. NE- trending faults are commonly left-lateral strike slip faults which were antithetic Riedel shears in the overall dextral transtensional tectonic regime.

The Cusi fault is a regional fault that may have controlled the location of the caldera and resurgent dome. Continued movement on the Cusi fault and related faults cut and brecciated the caldera and dome rocks and provided conduits for mineralizing fluids.

The hydrothermal processes occur as filling structures associated to the Cusi regional fault which has been partially mineralized and reactivated tectonically. Post-mineral intrusive phase is characterized by basic and andesitic dikes.

Numerous epithermal mineralized veins exist on the property. Typically, these are moderately to steeply dipping to the southeast, southwest, and north, ranging from less than 0.5 m to 2 m thick, and extend 100 m to 200 m along strike and up to 400 m down-dip. Small open pits were typically developed at vein intersections.

The epithermal mineralization associated to structures, breccias and filling fractures ranging from less than 1 m to 10 m thick, with a polymetallic filling of Ag-Pb-Zn sulphides and minor contents of copper and variable contents of gold. Crustiform and banded epithermal textures are common, and there is pervasive silicification with some sericite and disseminated pyrite. Zones with argillic alteration are common at the borders of the pervasive silicification, including kaolinite and montmorillonite. Oxidation is characterized by hematite, limonite and manganese oxides.

Zones of micro-veinlets and dissemination associated to intense fracturing related to the main structures are observed in the area of Promontorio. In Eduwiges, veins and zones of “stockwork” of quartz with pyrite and silicification alteration of 60 m to 150 m width and 200 m to 250 m extension are observed (Geomaps, 2012).

In La Durana (La India) zone, quartz veins with argillic and silicification alteration halos form zones of low-grade mineralization. The San Ignacio structure is an SW extension of the Promontorio vein displaced by the San Nicolas vein and shows an apparently sterile 30 m to 40 m silicified halo of white quartz micro-veins (Geomaps, 2012).

The upper part of Promontorio is characterized by argillic-silica alteration and to depth an argillic-silica-propylitic alteration association (Geomaps, 2012).

Current production at Cusi comes from the Promontorio and Santa Rosa de Lima mineralized zones.

Each mine area is accessed from a spiral ramp (4 meters square), as well as a single shaft in each area. Minimal development is needed to exploit mineralized zones, and contract miners are developing ramps at both mines to exploit ores at depth.

Mineralized material is currently hauled to the surface using one of several adits or declines accessing the mineralized zones, and is then dumped onto small pads outside of the portals.

The mining sequence through this method is of a descending type, that is, the upper levels are mined, while in the lower ones the necessary preparations are made to start mining once the mineralized material has been extracted from the upper stopes. Within a sublevel, mining is carried out in retreat, starting at the ends of the stope and retreating towards the entrance.

Bench and Fill
In veins less than 3 m wide, sublevels are vertically spaced 16 m, and the access drift is 4 m x 4 m. Blastholes are vertically drilled 8.5 m thus leaving a sill pillar of 3.5 m under the overlying stope.

In veins wider than 3 m but less than 5, sublevels are vertically spaced 16 m, and the access drift is 4 m x 4 m. Blastholes are vertically drilled 8.5 m thus leaving a sill pillar of 3.5 m under the overlying stope.

Room and Pillars
Where veins are wider than 5 m, levels are spaced every 16 m and mining is carried out using the room and pillar mining method. Pillars are 7 m x 7 m and square rooms span 7 m x 7 m.

Stopes have access drifts of 4 m x 4 m. Fanned blastholes are drilled to develop the room with a maximum vertical height excavated to 12.5 m (as measured from floor) thus leaving a 3.5 m sill pillar under the overlying stope.

The concentrator's processing facilities include a crushing circuit consisting of a 50 t bulk hopper, a Metso TK9-32-22V vibratory feeder, a C96 Metso jaw crusher, an HP300 secondary cone crusher, a tertiary cone crusher HP300, a 6’x 20’ Trio double-bed primary vibrating screen, a 6’x20’ Trio double-bed secondary vibrating screen and a 5’x14’ double-bed secondary vibrating screen. The material is crushed to 90% passing -5/16" and is then deposited into three fine hoppers with an aggregate storage capacity of 1000 t.

The grinding circuit consists of a 7’x 10’ ball mill with a 250 HP motor, an 8’x 7’ ball mill with a 250HP motor and an 8’x14’ ball mill with a 600HP motor, and the classification system consists of D20 hydrocyclones.

The Cusi processing facilities include two interconnected process plants, which are the Mal Paso mill purchased from Rio Tinto, and the El Triunfo (Triungo) mill. Both mills are conventional ball mill and flotation plants fed from a single crushing circuit. The flotation circuit has the ability to produce lead concentrate and zinc concentrate, although the Pb circuit represents a comparably higher percentage of concentrate production.

El Triunfo includes a cyanide leach plant that has been used to process legacy tailings and, at times, fresh tails from Mal Paso. The leach plant was idled in mid 2012 with no indication that it is scheduled to restart.

Cusi’s Mal Paso processing facility consists of a conventional concentration plant including crushing, grinding, flotation, dewatering of final concentrate, and a tailings disposal facility.

Mineralized material produced from the Cusi mine is hauled to Mal Paso Mill using dump trucks. Trucks are weighed ........