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 Lattice textures in which calcite crystals have been replaced by quartz and brecciation are also common characteristics.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.

Since the local topography at the deposit site will permit tunnel access to the Ayelén vein from the Huanchuy and Tocash valleys, primary access/haulage levels have been designed along the Ayelén vein at elevations of 4,350 4,400, 4,450, 4,500, and 4,550m above sea level. Access to the Ayelén vein from the Huanchuy valley can be made from the surface down to elevation 4,300m, while the Tocash will allow access to the vein from the surface to deeper elevations.

Concrete lined portals will be constructed at each of the access drifts. These portals are estimated to take one month each to construct.

Current mine planning has the four access/haulage ways being developed simultaneously at an average advance rate of 120 meters per month, each. The total construction time for the access drifts is estimated to take approximately 14 months, although only 5 months will be needed to have enough accesses to start getting ore from stopes.

Each haulage way will be driven at a +0.3% inclination, and include a 0.3m x 0.3m water drainage ditch.

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.

The primary dump hopper will be fitted with an inclined stationary grizzly to remove oversize. Ore will be reclaimed from the hopper with a vibrating grizzly feeder which will remove undersize material ahead of the primary crusher. Oversize will discharge directly into the crusher. Crushed ore and vibrating grizzly undersize will be conveyed to a vibrating screen. A magnet will remove tramp metal from the conveyor.

Screen oversize will be discharged to a secondary cone crusher with secondary crushed ore being conveyed back to the vibrating screen. Screen undersize will be conveyed to the fine ore bin ahead of grinding.

Ball mill feed will be reclaimed from the fine ore bin by a variable speed belt feeder which discharges onto a conveyor equipped with a belt scale to control and record tonnage. The fixed speed ball mill will operate in closed circuit with hydrocyclones. A trommel screen will remove over size from the mill discharge slurry.

Lime will be added to the feed conveyor prior to the ball mill, for pH control and sodium cyanide solution will be pumped continuously to the ball mill feed chute. Grinding media will be added once per day. The grinding circuit will be designed for a recirculating load of 200%. Mill discharge slurry will be pumped to hydrocyclones. Cyclone feed density will be adjusted by adding barren solution to the mill discharge sump. Cyclone underflow reports to the gravity concentrator and the gravity tails return to the grinding mill. Cyclone overflow will pass through a single deck, high frequency, trash screen and then report to the leach circuit. Trash from the screen will discharge to a tote bin.

The grinding bay will be provided with a 2 tonne capacity, pendant controlled hoist for grinding media handling.

The grinding area will be curbed so that spillage may be collected and pumped to the mill discharge sump.

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:
• ........