Mineralization at the Property occurs in an epithermal setting at various paleo-depths. Known mineralization, occurs in high-level vein systems (Don Sergio-Andrea Vein and Antonella Vein), intermediate-level vein systems (North Vein, Esperanza Vein, and Orona Vein), and deep-level vein systems (Francine Vein-Hugh Zone). Highgrade gold and silver occur both in the very shallow epithermal environment in the upper 350 m of the crust (Don Sergio Vein), as well as deep in the root zones of a silver-gold-lead-zinc vein at depths between 600 and 1,130 m below the paleo water table (Francine Vein-Hugh Zone).

The upper levels of the epithermal systems at the Saladillo district are characterized by silicification and argillic alteration as seen in the rhyolite volcanics to the north of the San Sebastian resource area and at La Roca. This type of upper level alteration is common in many epithermal vein systems in Mexico and is the result of oxidation and condensation of magmatic gasses in the vadose above the paleo-water table. This indicates that mineralization at the Property is likely to be related to an interpreted deep magmatic source intrusion. Mineralization at the Property occurs in both low-sulfidation and intermediate-sulfidationstyles of epithermal veins. The Andrea Vein, North Vein, and the historically mined portions of the Don Sergio Vein and the upper and peripheral portions of the historically mined Francine Vein are low-sulfidation style Ag-Au veins. The bulk of the Francine Vein and the deeper Hugh Zone consist of an intermediate sulfidation style of epithermal polymetallic mineralization. The Middle Vein is dominated by a low-sulfidation style Ag-Au epithermal vein with some gradation to intermediate-sulfidation style mineralization at depth.

Due to the presence of carbonates in the northern portion of the San Sebastian project area, the Saladillo district potentially may host other styles of mineralization, including skarn and Carbonate Replacement Deposit (CRD) mineralization. However, to date only epithermal veins have been identified at the Property.

Access to both 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.

Recent exploration success on the Middle, North, and East Francine veins and completion of a Preliminary Economic Assessment lead to the decision in the third quarter of 2015 to develop shallow open pit mines on those veins, with development commencing in the fourth quarter of 2015. Ore production from the Middle and East Francine veins commenced late in the fourth quarter of 2015, and from the North Vein in the first quarter of 2016. Production from the current pits concluded in December 2017. An extension of the North Vein pit is planned, with surface ore production anticipated to resume in mid-2018. The pits were extended to a maximum of approximately 270 feet in depth. Near-surface material is excavated, with drill and blast techniques used for deeper material. Total production from the expanded North Vein pit is anticipated to range from 1,000 to 17,000 tons of ore per month over approximately 20 months, with variable quantities of waste, for total ore production of approximately 150,000 tons. Production was achieved through excavating and drilling and blasting the shallow-dipping, high-grade silver veins which carried significant gold credits. Third-party contractors are used for mining from the pits.

In January 2017, work commenced to build a new underground decline and rehabilitate historical underground workings at the San Sebastian mine, in order to mine deeper ore from the Middle Vein. Limited underground production began in January 2018 using third-party contractors, and is anticipated to total approximately 263,000 tons over 2 years. We expect to mine ore by the cut- and-fill stoping method and for the ore to be extracted from the stopes using rubber-tired equipment and hauled to the surface in trucks.

Run of mine ore is hauled in trucks by contractors to a processing facility near Velardeña, Durango, Mexico, which is located approximately 60 miles from the San Sebastian mine site. Hecla Mining Company previously owned the Velardeña mill, but now use it to process ore under a lease arrangement. Processing of ore from the open pits averaged approximately 391 tons per day in 2016, with recovery of approximately 94% silver and gold. As of December 31, 2016, Hecla have the ability to extend the lease through 2018. The mill is a conventional leach, counter-current decantation and Merrill Crowe precipitation circuit capable of processing up to approximately 550 tons per day, depending on ore hardness. The ore is crushed in a two-staged crushing plant consisting of a primary jaw, a secondary cone crusher and a doubledeck vibrating screen. The grinding circuit includes a primary ball mill and cyclone classifiers. The ground ore is thickened followed by agitated leaching and four stages of counter-current decantation to wash solubilized silver and gold from the pulp. The solution bearing silver and gold is clarified, deaerated and zinc dust added to precipitate silver and gold that is recovered in plate and frame filters. The precious metal precipitate is smelted and refined into doré, and is then shipped to a thirdparty refiner. Since construction of the mill in 1994, two leach tanks were added in 2001, a filter press was added in 2002, and the Merrill Crowe system and Autojet Filters were expanded and modified in 2012. In addition, rehabilitation of various components of the mill was completed in 2015 prior to the start of processing of the ore from the open pits.