Gold-silver mineralization on the Mercedes property is hosted within epithermal, low-sulphidation (adularia-sericite) veins, stockwork, and breccia zones. These deposits form on predominately felsic subaerial volcanic complexes in extensional and strike-slip structural regimes. Near-surface hydrothermal systems, including surface hot springs and deeper hydrothermal fluid-flow zones, are the sites of mineralization. Mineral deposition takes place as the fluids undergo cooling by fluid mixing, boiling and decompression.

The geology of the Mercedes area is dominated by two northwest trending arches, cut by numerous northwest trending high-angle structures, which have exposed older marine sediments and overlying interbedded volcaniclastic sediments and lithic to quartz crystal lithic tuff units.

Over 16.5 km of veins have been identified within or marginal to the andesite-filled basins, which constitute a primary exploration target on the property. Major veins typically trend N30º-70ºW at 60º to 90º dips following the major regional structural pattern. Veins typically dip at greater than 60º, but locally range as low as 25º.A total of 16 low-sulphidation, epithermal vein/stockwork/breccia zones, have been identified on the Mercedes property and have been divided into three sub-district areas.

Mercedes Area (Mercedes-Barrancas)
The Mercedes vein system is the most prominent and continuous mineralized zone identified on the property, consisting of multiple quartz-carbonate veining, traced almost continuously on strike for nearly 3.5 km. The Mercedes fault system consists of numerous anastomosing strands within a zone over 50 m wide, where complex, multi-stage, anastomosing vein/breccia/stockwork zones 1 m to 15 m wide are emplaced in extensional open areas. The vein mineralogy (multiple quartz and carbonate stages) and morphology is quite variable along strike and down dip, where highly brecciated mineralized green-grey sugary to chalcedonic quartz is found cemented by 15% to 80% late stage grey calcite, rhodochrosite, and/or brown-black manganese-iron carbonates.

Klondike Area (Klondike-Rey de Oro)
The Klondike vein system differs from that at Mercedes, in that it forms as a tectonic breccia zone rather than fissure fill vein. The Klondike vein system trends N70ºW, dipping 65º to 80º southwest and is approximately 800 m long, with a maximum vertical range of nearly 300 m and width ranging from 0.5 m to over 50 m. Within the breccia zone, fissure filling veins over 0.5 m wide are rare, while variable lenses of brecciated white to green or grey quartz and abundant manganese carbonates and calcite are found. The overall zone of crackle brecciation and stockwork veining with silicification and strong manganese-iron oxides may be up to 50 m in width.

Diluvio Area (Lupita-Diluvio)
The Lupita vein zone outcrops on the surface for 1,800 m, ranging from 1 m to 5 m in thickness. The vein zone, consisting in multi-stage quartz-carbonate ± adularia veining, follows a contact between the overlying andesite package and underlying felsic package, and extends continuously down dip in places more than 450 m along most of the west half of the surface outcrop, and recent discoveries seem to suggest an extension up to 1 km east of the outcrop. Most importantly, at depths of 200 m to 300 m, the Diluvio zone reveals an extensive zone of multistage quartz-carbonate ± adularia vein breccias, stockwork, and hydrothermal breccia up to 150 m thick that is primarily hosted in the lithic tuff-volcaniclastic sequence. Based on geologic interpretation, it is proposed that mineralized fluid that circulated along the Lupita Fault infiltrated the tuff/volcaniclastic sequence due to its porosity and structural control, creating a large scale stockwork deposit. Diluvio therefore is the only mineral deposit in the district with the lower lithic tuff/volcaniclastic sequence as the primary host.

Mineralogical studies have identified opaque minerals, including iron oxides, pyrite, gold, electrum, stibnite, and rare pyrargyrite, within a gangue of substantial chalcedony, quartz, and carbonate. In addition to hematite, manganese oxides are an important component in some mineralized zones, possibly remnant after dissolution of manganese carbonates. Due to the depth of oxidation, sulphides are rarely observed. The few exceptions include one hole at depth in Klondike (visible galena and sphalerite) and hole L11-133D at Diluvio, which had an unoxidized vein interval containing widely disseminated pyrite, galena, sphalerite, and silver sulphosalts with greater than 500 gpt Ag.

Metallurgical studies have identified the presence of very small quantities of native gold, native silver, electrum, pyrargyrite, stibnite, galena, sphalerite, and chalcopyrite in heavy mineral concentrates. Copper minerals such as malachite and chrysocolla are most common as fracture fillings in breccias at Klondike, although rare specks are also seen in the Mercedes and LupitaDiluvio veins.

The vein mineralogy exhibits:
- Multiple stages of quartz-carbonate and adularia/cemented by quartz pulses, as well as multiple stages of rhodochrosite and siderite pulses and barren calcite;
- A complex paragenesis: hydrothermal brecciation, multiple stages pre-syn and post-mineral tectonic brecciation and faulting;
- Quartz types: cover spectrum in colors, and occurring as chalcedony, sugary, granular and/or coarsely crystalline;
- Textures: crustiform, colloform, banded, lattice etc. (during the boiling);
- Rare specks of visible gold (VG) reported, associated locally to copper carbonates, green quartz, hematite.

The deposit geochemistry reveals that:
- There is no statistical correlation between Au and Ag distribution;
- The Ag:Au ratio is low in all veins, ranging from 5-13:1;
- No lateral or vertical Ag:Au zonation has been identified in any of the vein ore bodies due to complex multi-stage vein deposition and repeated brecciation, which has juxtaposed events;
- The dominant alteration consists of oxidation + chlorite + silicification, with pronounced depth of oxidation, from surface down to 500-600 m, where the veins still appear strongly oxidized;
- There is no evidence of refractory behavior in any of the deposits.

The Mine deposits are all near-surface ramp access mines. Each deposit is currently accessible to be mined aside from the Rey-de-Oro superior deposit, currently planned for portal development in late 2024. The level layouts and design are variable according to the deposit to be mined, with standard cut & fill mining applying to all deposits aside from Diluvio & Diluvio West, where the mining method represents a hybrid of both cut & fill and bulk drift & fill.

The expected productivity of the mine is covered in the life of mine plan, but is expected to average approximately 1,400 tpd (ore) over 5 years. The mine is the expected bottleneck of the operation with a mill capacity of 2,000 tpd.

The mechanized cut & fill mining method employed at the Mine is typically planned as an overhand mining method with multiple available mining horizons to increase the overall productivity of the method. A mining horizon is a block of three level accesses, with production able to progress upwards every third level. The typical sequence for a given reserve block is:
- Ramp down three total level accesses;
- Develop the 2nd and 3rd level accesses & infrastructure in unison, typically located central to the ore sill on that elevation;
- Begin the first cut on the 3rd access utilizing a -15% cut & fill ramp;
- Complete the ore sill on both sides of the cut & fill ramp;
- Barricade & pastefill the 1st cut, and re-establish access after curing to begin the next cut at level grade.

A modification to the method has been successfully applied in some of the deposits called split-blasting. The technique is used to minimize dilution when mining in narrow vein cut & fill areas and provide further selectivity to economically extract vein material. Split-blasting splits a round blast into two blasts, first drilling and blasting the vein material at a minimum width of 2 m, with a secondary blast to take the remainder of the face. Excavators are used underground to pull the material out of the two-metre cuts to be mucked with a scoop. While none of the current mine reserves have been assumed to be mined as split-blasting, it is recognized that the method has been used in the past and will continue to be used where beneficial.

Primary access to the Mercedes Mine is centrally located above the Corona de Oro zone. This portal provides access to the main decline designed nominally at 12% grade and 4.5 m wide by 4.3 m high to accommodate the ore haulage trucks. The decline is located approximately 60 m laterally from the orebody to minimize the level access drift lengths while still providing adequate length for level infrastructure. This decline also provides access to numerous internal declines for access to the other Mercedes Mine deposits - Brecha Hill, Aida, and Casa Blanca.

The Mercedes Mine has a second portal access to the Casa Blanca zone from surface. This excavation provides an additional source of fresh air to the mine, secondary egress, and an alternative traffic route to reduce delays in the main haulage ramp.

The Aida and Aida Norte deposits are located north-west of the Corona de Oro portal and are accessed via internal ramp at the upper end of the deposit. Development to Aida Norte has begun, but extraction is not expected to occur until 2025 with the current life-of-mine plan. A new 2.4 m diameter return air raise is included in the required capital development for Aida Norte.

The Barrancas and Lagunas mine deposits are accessed via two surface portals with declines to each respective zone. Each of these deposits has been mined with the same design parameters of the Mercedes deposit. The main declines for each deposit have been developed to the same dimensions of 4.5 m wide by 4.3 m high. The two deposits are connected underground with an internal ramp to facilitate easy equipment and material management between the zones. The Gap zone is accessed through the internal ramp between Barrancas and Lagunas and is planned to resume production in 2024.

The Marianas deposit development has begun with the main decline being developed from the lower levels of the Barrancas decline. Further ramp development is required for each lens of the deposit along with the development of a new ventilation raise to surface to support mining operations. The most recent life-of-mine plan has the Marianas deposit beginning production in 2022.

The Diluvio and Lupita deposits share a surface access portal and main decline ramp. The decline is developed at 12% grade and is 4.5 m wide by 4.3 m high. The Diluvio West deposit is accessed through an internal ramp from mid-way through the Diluvio deposit. Main decline development is progressing, and the deposit is expected to start production in 2021. Vertical development for Diluvio West consists of a 2.4 m diameter FAR located at the top of the deposit ramp to service both Diluvio and Diluvio West.

The Klondike deposit is accessed through a surface portal connected to a 4.5 m wide by 4.3 m high decline at 12% grade. Toward the bottom of the deposit, an internal ramp has been developed to access the Rey de Oro deposit, located approximately 1200 m south-east of Klondike.

The Rey de Oro Superior deposit is not currently accessible from surface or underground. The satellite deposit was formerly planned to be mined as an open pit but has since been modified to be extracted with underground cut & fill methods. The current life-of-mine plan has development of the surface portal and decline beginning in late 2024 to support production in 2025.

The average drift size for waste development is 4.0 m wide by 4.0 m high. The minimum ore drift size is 3.0 m wide by 4.0 m high. The ore drift sizing is modified according to width of the mineralized material in order to reduce dilution where the zone is narrow and increase recovery where the zone is wide. Often multiple cut & fill drift passes are required to fully extract the level.

Crushing
Run of mine (ROM) stockpiles ahead of the crusher are used to blend different grades of ore. ROM ore is transported to the primary jaw crusher dump hopper. From the dump hopper, the ore discharges onto a vibrating grizzly feeder that feeds the ore into the primary jaw crusher. The jaw crusher product discharges onto the crusher discharge belt feeder and then onto a transfer conveyor that transports the crushed ore to the coarse ore bin. A hydraulic rock breaker, mounted on a mobile backhoe, is used at the crusher dump pocket to break oversize ROM ore.

A reclaim feeder transfers crushed ore from the coarse ore bin to the reclaim conveyor. The reclaim conveyer transports the primary crushed ore to the secondary screen. Secondary screen undersize material (final product) discharges to the screen undersize conveyor, which transports it to the fine ore bin. Oversize material from the secondary screen is crushed in the secondary cone crusher. The discharge from the secondary crusher is routed to the tertiary screen.

Oversize material from the tertiary screen discharges into the tertiary cone crusher surge bin and is crushed in the tertiary cone crusher. Tertiary screen undersize (final product) discharges onto the screen undersize collection conveyor. Undersize material from the secondary and tertiary screens are combined and conveyed to the fine ore bin.

Grinding and Classification
The grinding circuit reduces the crushed ore from a particle size of 80% passing (P80) 12.5 mm (1/2 in.) to a nominal P80 of 45 µm.

A single ball mill measuring 5.03 m in diameter and 8.84 m long, powered by a 3,430 kW motor, is operated in closed circuit with hydrocyclones. The reclaim belt feeders from the fine ore bin discharge crushed ore to the ball mill feed. The ball mill discharges to the cyclone feed sump. Slurry is pumped from the sump using variable speed horizontal centrifugal slurry pumps to five operating 254 mm (10 in.) hydrocyclones. A portion of the cyclone underflow flows by gravity to the gravity concentration circuit when it is in use. The remainder of the slurry from the cyclone underflow is combined with the tailings from the gravity concentration circuit when it is in use and returned to the ball mill for further grinding. Overflow from the cyclones is the final product from the grinding circuit. The slurry flows by gravity to the pre-leach thickener.

Pebble lime is added to the ball mill feed conveyor to adjust the pH of the slurry. Sodium cyanide solution is added into the cyclone feed sump.

A transfer chute, belt feeder and additional conveyor were added in 2020 to provide an option to bypass the fine ore bin and feed directly to the grinding (ball) mill.

The plant is capable of processing approximately 2,000 tpd and is comprised of:
- Three-stage crushing;
- Single stage grinding and classification with cyclones;
- Gravity concentration (available but not normally required or used);
- Agitated cyanide leaching;
- Counter-current decantation (CCD) thickener wash circuit;
- Merrill-Crowe precious metal recovery circuit;
- Cyanide detoxification of tailings;
- Refinery.

Gravity Concentration
Approximately 25% of the hydrocyclone underflow is directed to a 762 mm diameter bowl style gravity concentrator when it is in use. Tailings from the gravity concentrator are returned to the ball mill circuit. Gravity concentrate flows by gravity to a magnetic separator and shaking table circuit. Non-magnetic concentrate ........