The San Luis vein system is a typical volcanic hosted low sulphidation epithermal quartz/precious metal deposit. The deposit is very similar to numerous other volcanic-hosted epithermal vein deposits that occur in the Rocky Mountain, Sierra Nevada, Sierra Madre, and Andean cordilleras, including those in districts in Ouray/Telluride and Creede, Colorado, Silver Peak, Nevada, Guanajuato, Fresnillo, and Pachuca, Mexico, and Morococha, Quirivilca, and Casapalca, Peru.

Vein gangue mineralization in the San Luis deposit consists of quartz, chalcedony, calcite and minor adularia. Gold occurs as electrum and silver is present as acanthite, other silver sulphosalts, and electrum. Other sulphides include trace amounts of pyrite, chalcopyrite, galena and sphalerite The veins display common epithermal textures including crustiform banding that often display the interlayers of quartz and sulfide minerals described in Item 10. Bands are frequently disrupted, indicating repeated pulses of mineralization. Lattice textures in which calcite crystals have been replaced by quartz and brecciation are also common characteristics. Faulting and fracturing are key elements in the localization of mineralization in the vein system. Mineralized “shoots” typically occur in dilational zones that are the result of a variety of local stresses, and often these stresses are repeated along the length of a vein structure, resulting in multiple mineralized-shoots.

The Ayelén vein is the better mineralized of the known vein structures. Trenching and diamond drilling have traced this structure along a strike of 340° to 345° for a length of over 720m, with down-dip extensions of more than 325m. Surface mapping shows that the vein structure dips -75° to -85° west-southwesterly, but drilling results show that the controlling fault structure(s), subsurface individual vein segments and post-mineral dikes dip vertically to -80° west-southwesterly. True thicknesses of individual vein segments vary from ten’s of centimeters to more than 10m, with an average of 1.5m to 3.0m wide.

The Inéz vein, which is situated approximately 110m east of the Ayelén vein, strikes northwesterly at 320° to 340° and dips -50° to -75° to the northeast. The vein outcrops as a series of discontinuous resistant ridges for more than 2,200m along strike, with apparent widths of 2.0m to 7.5m. However, only a relatively short section of the Inéz vein contains significant amounts of gold and silver, and this section occurs where the Inéz vein is closest to the Ayelén vein.

The selected mining method is “mechanized overhand cut and fill”. This method is very selective, both in the horizontal and vertical directions, handles weak ground well, and allows a reasonable productivity (generally about 3 to 5 tonnes per manshift in the mine) in the mining process. Mining will be performed conventionally with stoper drills and small, captive, electric scoops.

There is the potential to use mill tailings for hydraulic backfill but this requires further evaluation. Waste rock can be economically hauled to the stopes from mine development (when available), or from the broad colluvium deposits located near each mine entrance.

The stope is prepared with a backfill/ventilation raise in the center of the stope, and two, vertical access raises (1.5m x 3.0m) on the strike of the vein, located at the stope extremities. These access raises are as wide as the mineralization, or the minimum mining equipment width requirement, and about two meters in depth. At the San Luis Project, the second cut will be accessed by ramping from the first cut inside the stope. This succession is planned for each new cut, leaving the equipment used for drilling and mucking captive in the stope until the level above is reached. This can lower productivity in the stope considerably, since all equipment repairs and maintenance must be performed in the stope. It also requires that extra stopes be prepared at all times to provide the programmed plant feed when scheduled stopes are down for equipment repairs. The advantage of this method is quick access to ore and substantially less capital development in waste rock. Due to the relatively short mine life and ease of access to additional stopes, the captive equipment approach is appropriate for this deposit.

All stope blasthole drilling is to be performed with stopers, drilling 85º inclined up-holes in the back. The blasted ore will be removed by electric 0.7yd3 micro-scoops when the vein is less than two meters in width, and electric 2.5yd3 scoops, when the vein is over two meters width. The blasted ore will be deposited in a raise driven along the vein from the lower haulage to the upper haulage. From there, it will be loaded into low profile 20 tonne trucks, which will haul the ore to the ROM stockpile. A second raise, located at the stope extremities, will provide access for personnel, materials, and ventilation.

Once the ore pass is completed from Level 4,400 and 4,550, ore from the upper levels will be passed through it to Level 4,400, where it will be hauled by a 20-tonne low-profile truck to the ROM stockpile.

Once a stope cut has been emptied, it will be backfilled with waste rock to about two meters from the cut back. This backfill will be passed down the backfill raise from the level above into the cut, and distributed within the cut with the corresponding electric scooptram.

The expected production from cuts (stopes) having a width of less than two meters is 1,700 tonnes per month, and 4,200 tonnes per month from cuts (stopes) having a width of two meters, or more.

Gold and silver will be extracted from San Luis ore by a combination of gravity and cyanide leach processes. The plant will operate at a nominal capacity of 400 tonnes per day.

The process flow sheet includes two-stage crushing and screening, fine ore storage, grinding and classification, gravity concentration, cyanide leaching, thickening and CCD washing of leach discharge slurry. Leached tailings will be discharged to a tailings storage facility near the process plant with cyanide solution being recycled to the process circuit. Pregnant leach solution will be clarified and deaerated prior to the injection of zinc dust to precipitate gold and silver. Precipitates will be collected in a filter press, then dried and smelted to produce doré bars for final refining offsite. The crushing and screening circuits as well as smelting section will operate on day shift only. All other process facilities will operate 24 hours a day.

The processing criteria consider:
• The mining department will schedule ore deliveries and blend ore types to prevent plant throughput impacts from items such as over size rock at the primary crusher, plugging due to high moisture and excessive feed grade variations.
• A primary jaw crusher will reduce the run-of mine (ROM) feed size to a P80 of 55mm.
• Secondary crushing will reduce the size of material to a nominal P80 of 10mm (3 /8").
• Fine crushed material will be screened and fed to a fine ore bin. Material will discharge from the fine ore bin onto a belt feeder and then to a conveyor where lime is added before feeding into the ball mill. Cyanide solution will be added to the ball mill to control slurry density.
• Material will discharge from the ball mill and be cycloned. Cyclone underflow is fed to a rougher gravity concentrator. Gravity tails recycles back to the ball mill. Cyclone overflow is fed to the leach circuit.
• Gravity concentrate will be upgraded via cleaner tables, dried and fed to the smelting furnace. Cleaner table tails will be fed to the leach circuit.
• Gold and silver in the cyclone overflow will be leached using sodium cyanide solution. Leach discharge solution will be washed in a CCD circuit to produce a pregnant leach solution. The washed solids material will discharge to a Tailings Storage Facility (TSF).
• Gold and silver will be recovered from the pregnant leach solution using zinc dust in a MerrillCrowe plant.
• Zinc precipitate will be dried, mixed with fluxes and smelted to produce silver-gold doré bars, the final product from the processing facility.

The processing circuit will operate as a closed circuit, with barren solution recycled. Plant streams will include pregnant solution, barren solution, process water and fresh water. Reagents used in the process include sodium cyanide, lead nitrate, pebble lime, diatomaceous earth, zinc dust, flocculant and antiscalant. Storage, preparation and distribution of these reagents is included as part of the process plant. Process control and monitoring is considered to be accomplished using a system of PLC’s (Programmable Logic Controllers) interfaced with workstations.

ROM ore will be transported from underground in haul trucks and discharged onto the ROM stockpile pad, adjacent to the crusher. The ROM pad will store up to a nominal 4,000 tonnes of ore (ten days production) which will be reclaimed by a front end loader and fed to the crushing plant.

Gravity concentrate will feed into a holding tank. From there, the material will pass over concentrating tables to remove gangue material. The resulting high grade concentrate will be collected in a container, dried and mixed with smelting furnace feed. Table concentrator tails will be pumped to the ball mill feed.

Cyclone overflow discharges to the first leach tank. Three mechanically agitated leach tanks will operate in series to provide a total residence time of 72 hours. Leach solutions will be separated from leached solid residues with three CCD washing thickeners.

Compressed air, necessary to support the chemical dissolution of gold and silver will be injected into the slurry below the leach tank agitators. Three blowers (two operating and one standby), operating in parallel, will provide air to the leach tanks. The first leach tank will overflow to the second and the second will overflow to the third. Leach tank feed and discharge launders will be arranged such that any tank can be bypassed for maintenance without interrupting process operations.

Cyanide strength will be adjusted as required throughout the leach circuit by the addition of sodium cyanide solution.

The leaching area will be curbed and spillage can be returned to the circuit.

CCD washing will be achieved in three high rate thickeners. The third leach tank discharges to CCD 1 washing thickener. In the CCD circuit the thickener underflow, at 65% solids, will be pumped from CCD 1 to CCD 2 and then from CCD2 to CCD 3. Thickener overflow will flow counter current from CCD 3 to CCD 2 and then to CCD1. A distributor will add barren solution to the feed of CCD 3. Overflow from CCD 1 discharges to the pregnant solution tank. Underflow from CCD 3 is pumped to the tails sump from which it will be pumped to the TSF.

Thickener feed and discharge piping will be arranged such that any thickener can be bypassed for maintenance without interrupting process operations.

The CCD area will be curbed and spillage can be returned to the circuit.

Gold and silver is recovered from CCD circuit pregnant solution by zinc precipitation of metal ions using zinc dust and then smelting the precipitate to produce doré. This will be accomplished by use of a conventional Merrill Crowe process. The recovery of silver and gold by this process includes:
• Clarification of pregnant solution to remove suspended solids.
• De-aeration of pregnant solution to reduce dissolved oxygen.
• Precipitation of gold and silver metal by addition of zinc dust.
• Filtering and drying of precipitate.
• Smelting the precious metal precipitate in a furnace to produce doré bars.

The precious metal recovery circuit is designed to process approximately 79,200 ounces of gold and 1,885,000 ounces of silver annually.

Zinc precipitate is placed in carts and dried in ovens along with gravity concentrate. The carts containing dry material are removed from the ovens by forklift and tipped into the furnace feed hopper. A smelting flux mixture is then added.

The smelting furnace is propane fired. The charge is melted and the majority of slag is decanted into conical molds. The decant slag is cooled and checked for any contained metal prior to short term storage and disposal. Following the final decant step, doré bullion comprised of silver and gold, is poured and sinks to the bottom of semi-cylindrical bar molds for subsequent handling. Small quantities of bar slag, containing fused fluxes, impurities, and minor amounts of doré splash and prills are recycled to the next smelting charge.

Bars are cleaned at a bar cleaning station using a sand blasting technique and a needle gun, weighed and stamped with an ID number and weight. Doré bars weighing approximately 110 kilograms are the final product of the operation and stored in a vault until shipment to an off site facility for further refining.

Fumes from the melting furnace are collected through ductwork and cleaned in a dust collector before discharging to atmosphere.