Mineralization at the project occurs as low and intermediate sulfidation epithermal veins within the Saladillo valley area. Historically, the most important veins at the project have been the Francine, East Francine, Middle and North veins located at the north end of the Saladillo valley and the Andrea Vein located 4 miles to the south. The veins are hosted within a series of shales with interbedded fine-grained sandstones interpreted to belong to the Cretaceous Caracol Formation. Most of the veins strike to the west-northwest and vein dips vary from steep toward the west to shallow toward the east. True vein widths range from 5 to 30 feet, and the average true width of the veins in the district is 8 feet.

Mineralization occurs in an epithermal setting at various paleo-depths. High-grade gold and silver occur both in the very shallow environment in the upper 1,000 feet of the crust and in deep silver-gold-lead-zinc root zones of the system at depths between 2,000 and 3,500 feet below the paleo-water table. Hypogene minerals include sphalerite, galena, argentite, pyrite, chalcopyrite, native silver and gold in electrum. The veins are oxidized down to approximately 300 feet below surface and the oxidized portions of the veins contain limonite, hematite, silver halides and various copper carbonates. Matrix minerals include fine-grained to coarsely crystalline quartz bands and chlorite-quartz-adularia bands and late calcite fill. Mineralization within the vein structures is generally deposited in high-grade “shoots” bound both laterally and horizontally by sharp gradients in grade-thickness.

Hecla operated the San Sebastian underground mine from 2001 to 2005. The life-of-mine production from the Francine and Don Sergio veins over four years was 11.2 million ounces of silver and 155,937 ounces of gold.

Hecla again operated San Sebastian using open pit and underground methods from 2015 to 2020. Production began with open pit mining and underground mining was added by 2018. The historical production during this period was 77.7 million ounces of silver and 1.4 million ounces of gold. Access to the underground workings was through ramps from the surface connecting one or more levels. Ore was mined by the cut-and-fill stoping method and extracted from the stopes using rubber-tired equipment and hauled to the surface in trucks. In the fourth quarter of 2020, San Sebastian was placed into care and maintenance upon depletion of the known economic resource. Exploration is ongoing

Run of mine ore was hauled in trucks by contractors to a toll processing facility near Velardeña, Durango, Mexico, which is located approximately 60 miles from the San Sebastian mine site. Before completion of production, processing of ore averaged approximately 474 tons per day in 2020, with recovery of approximately 91% for silver and 82% for gold.

The following items summarize the process operations required to recover gold and silver from the San Sebastian oxide material.

1. Oxide material from the San Sebastian Mine will be transported via highway to the Velardeña Mill.
2. A front-end loader will reclaim oxide material from a run-of-mine stockpile to feed the crushing circuit.
3. Oxide material will be processed through a primary and secondary crushing circuit. The primary crusher is a jaw type crusher and the secondary crusher is a cone type crusher. Both crushers are equipped with screens on the feed end to scalp material and direct it to the g ........