Mineralization at Palmarejo is hosted in northwest-striking and west-dipping structures that cut through a volcano-sedimentary sequence of reworked volcaniclastic, massive and pyroclastic deposits. The volcaniclastic rocks include ash-rich mudstones and sandstones. The massive rocks include microcrystalline massive basalt, fine grained massive andesite and plagioclase crystal-rich massive andesite. The pyroclastic unit includes tuffaceous sandstone, lapillistone tuff and breccias (Galvan, 2007).

Palmarejo mineralization can be divided into three domains: the La Prieta and La Blanca vein domains, and the footwall and hangingwall stockwork domain developed along each of the two vein domains. The La Prieta vein domain consists of the La Prieta vein/breccia that dominated historic production from the area. The La Prieta footwall domain encompasses quartz stockwork mineralization and silicification within epiclastic rocks and andesitic tuffs. The La Prieta hangingwall domain consists of extensive sheeted-quartz-stockwork mineralization that is well exposed in the underground workings. The predominant geologic unit within this domain is an amygdaloidal andesite that lies between the La Prieta and La Blanca vein domains. The La Blanca vein domain consists of the La Blanca vein/breccia, which lies between porphyritic andesite on the hangingwall and amygdaloidal andesite and andesitic tuffs on the footwall. The La Blanca hangingwall domain includes quartz-stockwork mineralization within the porphyritic andesite.

The La Prieta structure extends for at least 3.5km, has a variable strike that averages about 115°, and dips to the southwest at 35° to 85°. The La Blanca structure strikes about 160°, has an average dip of about 50° to the southwest, and is thought to be a listric normal fault (Corbett, 2004) that parallels the trend of the regional faults in the SMO. Masterman et al. (2005) estimated up to 300m of throw on the La Blanca fault. Faults with similar orientations are the most commonly mineralized structures in the district.

A broad zone of mineralized quartz stockwork formed at the intersection of the La Blanca and La Prieta structures. North-trending splays from other north-northweststriking structures at Palmarejo may offset both the La Blanca and La Prieta faults (Beckton, 2004).

Gold-silver veins and vein/breccias occur within, and at the intersection of, the westnorthwest-striking La Prieta structure and the north-northwest-striking La Blanca structure. Multiple stages of hydrothermal activity and mineralization filled these structures with quartz veins and formed quartz stockwork mineralization within the wedge of rock formed by the intersection of the structures. Both the La Prieta and La Blanca veins have polymetallic silver-gold vein/breccias with an epithermal silver-gold overprint that forms high-grade shoots in the steeper-dipping portions of the listric normal faults (Corbett, 2004). Early mining focused on the La Prieta vein, where highgrade silver mineralization was present as bands of fine grained acanthite and galena within the vein.

Open pit mining will be carried out using conventional hard rock open pit mining methods.

Palmarejo is mined using longhole stoping methods with backfill. Stoping is carried out using transverse and longitudinal methods.

Transverse longhole mining is planned for the remaining Mineral Reserves in the Rosario Clavo. This area will be mining from underground, and will break through into the mined out open pit. Backfill (rockfill) will be placed into the mined void from the open pit. Approximately 280m of lateral development is required to mine this area.

Palmarejo‘s processing flowsheet consists of a standard crushing and grinding circuit (Jaw crusher - SAG mill – ball mill), followed by flotation, where the flotation concentrate is subjected to an intensive cyanide leach and flotation tailing is treated in agitated cyanidation. Finally, a Merrill Crowe circuit is used to recover gold and silver from the leachates.

The plant is designed to achieve an overall recovery of approximately 94.0% of the gold and 91.0% of the silver as a doré.

Ore is delivered from the underground and open pit mining activities either to a Run of Mine (ROM) stockpile located adjacent to the primary crusher area or directly to the primary crusher dump hopper. The dump hopper has a fixed grizzly on top with an approximate opening of 20 inches and an apron feeder at the discharge. The ROM is fed with a front end loader and oversize is broken with a backhoe fitted with a hammer. The installed jaw crusher is a Nordberg C-140 with an opening of approximately 1.1m by 1.4m capable of handling 350 tonne/hr at a 5? CSS (Close Side Setting).

Crushed ore is directly fed to the grinding circuit from the crushed ore stockpile. The grinding circuit consists of a SAG mill and a Ball mill operating in a closed circuit with a battery of cyclones for classification. The cyclone battery consists of nine 80-inch Krebs cyclones with an apex opening of 4.25 inches and vortex opening of 6 inches. Cyclone operational pressure is maintained in a range from 14 to 16 psi. The cyclone battery underflow reports to the ball mill to maintain a recirculating load to have a better control on the flotation feed size, while the cyclone overflow reports to flotation.

The ball mill cyclone overflows at a nominal 80% minus 75 µm in size with a pulp density of 30% solids flows by gravity to the rougher conditioner tank, where the slurry is conditioned with Aero 404 and potassium amyl xanthate (PAX). The conditioner tank overflows to feed a bank of six 100m3 capacity tank cells. Rougher flotation occurs at the first bank of two tank cells, and scavenger flotation occurs sequentially down the bank. Frother and PAX are added to rougher feed and during the scavenging flotation.

Cleaner flotation tailings are recycled to the rougher flotation conditioner tank or alternatively to the 3rd or 5 th rougher cell for additional treatment.

Flotation tailings are transferred to the tailings thickener for dewatering, and tailings thickener overflow reports to the grinding circuit as recycled water. Thickener underflow, at approximately 60% solids, is transferred to the Float Tails agitated leach circuit for cyanide leaching and dissolution of residual gold and silver values.

The concentrate leaching circuit is located in the Leaching/Recovery Area of the mill facilities and is comprised of four agitated leach tanks, each with a nominal capacity of 200m3, providing a total leaching time of 48 hours.

Thickened flotation concentrate is pumped to the concentrate leach circuit. The slurry is then diluted to approximately 50% solids, and sodium cyanide solution is added to maintain a concentration of 10 g/L NaCN. Oxygen is injected to the concentrate leach tanks to enhance the silver dissolution process, and also enables cyanide solution strength reduction from 50 g/L to 10 g/L NaCN, resulting in a substantial reduction of cyanide consumption.

Leached slurry from the concentrate leach circuit is then pumped to a triple stage countercurrent decantation (CCD) circuit to recover the dissolved gold and silver values. Each stage consists of a high rate, 9.0m diameter thickener and an inter-stage mixing tank to enhance washing efficiency. Pregnant solution containing metal bearing overflows from the first CCD thickener is pumped to the pregnant solution tank for subsequent delivery to the Merrill Crowe circuit, located at the refinery building for further treatment. Thickened underflow from the final CCD thickener is pumped to an agitated leach circuit for additional leaching and potential recovery of residual metal values.

The flotation tailings leaching circuit is also located in the Leaching/Recovery Area of the mill facilities.

Pregnant solution from the flotation concentrate leach CCD first thickener overflow is pumped to one of three batch solution tanks, and then pumped to a Merrill Crowe system, at a flow rate ranging from 55 to 60m 3/hr.

The precipitate produced by Merrill Crowe is dried in two electrical dryer ovens before being smelted in a 600kg/hr capacity electric induction furnace and poured into 30kg dore ingots.

Dore ingots are shipped by armored truck to a refinery.