The Cusi Project area lies within a possible caldera that contains a prominent rhyolite body interpreted as a resurgent dome. The rhyolite dome hosts mineralization and trends northwest-southeast with an exposure of roughly 7 by 3 km. It is bounded (cut) on the east side by strands of the NW-trending Cusi fault and on the west by the Border fault. The Cusi fault has both normal and right-lateral slip senses. 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 Cusi fault is a regional fault that may have controlled the location of the caldera and resurgent dome. Continued movement on the Cusi and related faults cut and brecciated the caldera and dome rocks and provided conduits for mineralizing fluids.

Numerous mineralized veins on the property, typically moderately to steeply dipping to the southeast, southwest, and north, range from less than 0.5 m to 2 m thick, extend 100 m to 200 m along strike and up to 400 m down-dip. There are at least six major mineralized veins within the Cusi area, described below. Small open pits were typically developed at vein intersections. Mineralization mainly occurs in faults, epithermal veins, breccias, and fractures ranging from 1 to 10 meters thick.

Two of the mineral resource areas, Promontorio and Santa Eduwiges, are modeled as structurally complex zones at the intersection of NW and NE trending structures that display discrete vein mineralization as well as a disseminated-style to highly fractured/stockworked mineralization surrounding discrete veins. The remaining two resource areas, San Juan and La India, are modeled as simple, typical epithermal vein deposits with one or a few easily identified, discrete veins.

The La India and San Juan resource areas are more traditional epithermal vein structures. These areas were modeled as discrete veins based on high grade intervals and surface structural mapping.

The primary underground mining method employed at Cusi in 2017 is overhand cut and fill which represents 93% of the production with the remaining 7% by shrinkage stoping. Sierra Metals intends to adjust the mining methods in the near term to a combined cut and fill with longhole stoping, thereby eliminating the shrinkage method entirely.

As of December 2017, the mining operation produced an average of approximately 270 tonnes of ore per day, and 214 tonnes of waste per day. The source of mined material is split between the Promontorio (83%) and Santa Eduwiges (17%) mine areas at this time.

The primary underground mining method currently employed at Cusi is overhand cut and fill. This mining method is appropriate for the narrow and anastomosing veins at Cusi. Minimum mining widths are generally about 2.5 m with this method, with small 1 cu yd Scooptrams used for mucking ore from these zones and drilling facilitated by pneumatic jacklegs.

Ore zones are developed from the bottom up in 3-m- high slices along strike. Access ramps, also known as attack ramps, are developed at one end of the mineralized zone and driven initially at a negative 15% grade. Once the bottom-most mineralized cut has been mined out, the cavity is filled with waste rock generated by development to other mineralized zones. This material is stored underground in unused drifts and on the surface.

The waste rock allows mining to continue on similar 3-m-high cuts upward. Typically, a total of five 3 m cuts make up a stope block at Cusi. Because of the competent rock in the mineralized zone and waste area, ground support at Cusi is used infrequently, and is generally utilized in areas of fault zones.

The shrinkage stoping has been used in modern mining at Cusi, but currently makes up a comparably minor portion of the active mining operations. Sierra intends to eliminate this method entirely and implement longhole mining methods in the near term.

The sublevel shrinkage stope is accomplished by developing a haulage level drift in the lower portion of the vein structure and creating draw points for the removal of ore. A raise is constructed on each end of the vein and a cross– cut in the vein is established with the broken ore falling down into the draw points. The mining is then accomplished by drilling out the vein and working off the broken material from the bottom of the vein working up the vein.

Jackleg drills that are capable of drilling approximately 2.6 m (8 ft) cut are used as the primary drilling tool in shrinkage stoping scenarios. The holes are loaded and shot. The haulage then takes place with a mini-scoop loading out of the drawpoint into a truck or to an ore pass to the ultimate level. This mining method allows following the vein, and mining width can adjust with the vein thickness. The majority of the veins that are 1 to 1.5 m thick, and SRK would consider 1.5 m a minimum sustainable mining width for use with the jackleg drilling method.

The Cusi concentrator is located in the outskirts of Cuauhtemoc City, approximately 50 km by road from Cusi operations.

The Cusi processing facilities include two interconnected process plants, which are the Malpaso mill purchased from Rio Tinto, and the El Triunfo 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.

Based on the provided schematic process flowsheets a single crushing plant reduces ROM feed to minus ¼ inch feeding both mills. Primary crushing is done through a 36 inch X 24 inch Voest jaw crusher. Primary crush material is screened with oversize reporting to a Symons gyratory 4 ½ crusher. Fine ore, minus ¼ inch, is conveyed to any of four fine ore silos: two each 70 t capacity and two each 150 t.

The Malpaso flowsheet indicates three ball mills: one 4.5 ft X 6 ft, one 4 ft X 6 ft and one 5’ X 8’. Each mill is operated in closed circuit through cyclones. Fine cyclone overflow reports to lead flotation through two conditioner tanks. Lead flotation is arranged with three rougher cells followed by three scavengers (all 50 ft3). Rougher con advances to two first cleaners (50 ft3) and four second cleaners (30 ft3). The concentrates are thickened and filtered but this equipment in not indicated on the flow sheet.

El Trimfo plant includes two ball mills: one 8 ft X 7 ft and one 7 ft X 10 ft., each operating in closed circuit. Lead flotation includes an 8 ft X 8 ft conditioning tank, six rougher cells followed by four scavenger cells, all (50 ft3). Lead concentrate advances to 3 first cleaner cells and two second cleaners (not sized on the flow sheet but presumed to be 50 ft3 cells).