The mineralization at La Parrilla occurs in veins, breccias, stockworks and replacements that are hosted by the Cretaceous limestones and shales of the Indidura Formation and by the granodiorite–quartz monzonite intrusion. Contact metamorphism and metasomatism resulted in the development of marble, hornfels, skarnoid, and skarn at the intrusive contact. Because the mineralization is related to the intrusive contact and skarn development, the deposits are proposed to be of the intrusionrelated hydrothermal type, and may represent mesothermal to epithermal environments.

Veins at La Parrilla are of two types: open space filling veins and fault-veins. The open space filling veins can consist of massive sulphides veins; quartz-calcite veins containing pyrite, sphalerite, and galena; and breccia veins cemented by quartz-calcite. Fault-veins consists of matrix-supported breccias or gouge containing disseminated sulphides and oxides. Open space filling veins can transition along strike into fault-veins and vice versa, and the presence of stockwork is common at the contacts of the vein with the host rock. Thus, it is interpreted that most veins were open or partially open faults and fractures, that they were flooded with hydrothermal fluids, and that some of these were reactivated by later faulting. Replacement deposits, on the other hand, occur as oblique or perpendicular splays to veins and faults, and as larger replacement deposits concordant with sedimentary bedding. Replacement deposits generally have limited strike extent and have irregular shape and thickness.

The La Parrilla deposits contain primary sulphides such as galena, sphalerite, pyrite, pyrrhotite, arsenopyrite, chalcopyrite, covellite, acanthite, native silver, and silver sulphosalts (tetrahedrite–freibergite solid solution). Due to supergene oxidation, the primary sulphides in the upper parts of some deposits have been altered to cerussite, anglesite, hemimorphite, hydrozincite, jarosite, goethite, hematite, cervantite, malachite, chrysocolla, chalcanthite, and native silver. The main nonmetallic gangue minerals present in the deposits are calcite, quartz, fluorite, and siderite. The main clay minerals associated with the deposits and alteration halos are smectite, illite-smectite, and kaolinite.

The San Marcos vein strikes N20°W on average, dips at 60° to the northeast (340°/60°), and has a known strike length of 600 metres. The vein is mineralized for a vertical extent of 280 metres, and its thickness varies from 0.5 to 17 metres. The structure is a fault-vein that marks the eastern contact of the stock with the Indidura Formation and it is concordant with bedding. The structure pinches and swells, reaching its maximum thickness in flexure zones along strike were it generally develops cymoid loops. The mineralogy of the vein consists of hematite, goethite, native silver, cerargyrite, quartz, and calcite.

Production in 2016 was from five underground sources and from the Quebradillas open pit. Oxide ores where supplied mainly by the Quebradillas open pit, and Quebradillas and San Marcos underground mines, while sulphide ores were supplied from Rosarios, Intermedia, Vacas and Quebradillas underground mines. Both the Quebradillas open pit and Vacas were mined out in 2016.

The underground mining operations currently use the Mechanized Cut and Fill (MCF) mining method. This is the mechanized version of a classic method for mining narrow orebodies and involves extracting the ore in small slices, 2 to 4 m high, working from the bottom of the mining block upwards. As each cut is extracted, the void is filled with waste rock from development to stabilize the walls and create a working platform for the next lift.

MCF mining for a new mining block begins by driving a 4 x 4m ramp on the footwall side of the ore body and establishing sub-levels at regular vertical intervals. A typical mining block at La Parrilla will have the main haulage levels every 50 m with three sub-levels at 12 m intervals. The main haulage levels will include any ventilation infrastructure, a remuck for storing broken ore, a truck loading area, electrical substations and sumps.

To access the ore body, an initial access drift or attack ramp is driven from the lower main level to near the middle of the bottom elevation of the MCF stope. Typical development methods are then used to drive sill drifts in ore to each extent of the ore body. Sill drifts are typically driven 3.5 to 4 m high to accommodate the production drilling.

At La Parrilla, production drilling is carried out by hydraulic jumbo drills where the veins are wider, and by handheld pneumatic jackleg drill in narrower sections. Blast holes are generally drilled as inclined up holes in the back of the stope. When drilling inclined up holes with jumbos (48 mm diameter x 3.6 m long drillholes), each lift of the MCF stope is nominally 2.8 m high, and when drilling with jackleg drills (32 mm diameter x 2.4 m long drillholes), each lift is nominally 2 m high.

The MCF cuts are mined by drilling and blasting inclined up holes with a jumbo in 15–30 m long sections starting at the extents of the ore body and retreating to the access. This drill, blast, muck cycles continues until the whole cut has been mined. With the stope now two cuts high, the stope is backfilled with waste rock from development to the required height to facilitate production drilling of the next cut, and the back of the access drift or attack ramp is drilled and blasted to allow access on top of the backfill.

First Majestic Silver (FMS) also employs MCF with resuing when the vein width is narrower than the minimum mining width required by the mobile equipment. All areas where resuing is used are drilled by handheld pneumatic drills. The only real difference between MCF and MCF with resuing is that waste rock is blasted in the stope to create enough room for the LHD (load-haul-dump machine) to operate, which creates some or all of the rockfill required for the cut.

In 2016, one longhole open stope was excavated at San Marcos as a trial. FMS plans to continue implementing the longhole mining method as there are many areas that are suited to the application of longhole open stope mining methods. One such area is the La Blanca area of the Rosarios mine where ground conditions are excellent, and the steeply dipping vein is 3 m wide or more. For purposes of this report and the mineral reserves reported herein, the underground mining method has been assumed as MCF.

A portion of the mineral reserves are in areas that are already developed, and represent stopes currently in production, or extension and remnants of past stopes. The following underground areas will be mined in the LOM plan:
• Rosarios deposit (including the La Blanca and San José zones): the oldest of the operating mines located at La Parrilla, with development down to around 470m depth at 14 Level; projected that the remaining sulphide ore will be mined at a rate of 120 ktpa.
• Intermedia deposit: an extension of the Rosarios deposit, connected to the San Marcos deposit; projected that the remaining mineral reserves will be mined out by the end of 2017.
• San Marcos deposit: an older mine, established prior to FMS’s property acquisition. Connected to the Intermedia and Rosarios deposits on 9 Level; projected that the remaining oxide material will be mined at rates that will vary between 30 and 78 ktpa over a four-year period.
• Quebradillas and adjacent San Nicolas deposits: San Nicolas is included with Quebradillas as it is accessed from the existing Quebradillas ramp system. The Quebradillas 550 vein will be mined at about 30 ktpa for a three-year period. The Quebradillas 460 vein, Quebradillas Tiro (shaft) vein, Quebradillas N-S vein and the original Quebradillas vein zones will be mined at a combined rate of up to 180 ktpa over a three year period.

La Parrilla operates two parallel processing circuits that recover metals from the two types of ore. The two ore types are oxide ores and sulphide ores; both types are polymetallic, containing silver, lead, zinc, and gold.

The flotation plant receives sulphide ores and produces a silver-rich lead concentrate and a zinc concentrate as saleable products. Precious metals are preferably deported to the lead concentrate with both concentrates showing payable values of silver.

The leaching plant receives oxide ores and produces doré bars as a saleable product.

The processing plants were originally designed to process 1,000 tonnes per day (tpd) per circuit for a combined throughput of 2,000 tpd. Total throughput was generally maintained at 2,000 tpd until mid-2015 when production from the Quebradillas open pit neared completion. After this time, the mining operations have been unable to provide 1,000 tpd of oxide ore from the remaining underground sources. FM ........