PROPERTY GEOLOGY
The San Francisco property lies in a portion of the Mojave-Sonora megashear belt characterized by the presence of Precambrian to Tertiary age rocks represented by different grades of deformation and metamorphism as evidenced in the field by imbricate tectonic laminates. The rocks principally involved in the process of deformation and associated with the gold mineralization in the region are of Precambrian, Jurassic and Cretaceous age.

The metamorphic rocks are intruded by a Tertiary igneous package, which includes leucocratic granite with visible feldspar and quartz, and is porphyritic to gneissic in texture. It appears that the granite was emplaced along low angle northwest-southeast shear zones in the system which developed between an older gabbro and the metamorphic sequence. This is the reason that in some places the granite bodies appear as stratiform lenses that vary in width from centimetres to more than 40 m and are subparallel to the foliation. It is seen, however, that the emplacement of leucocratic granite also favours the N30°W fault system, causing the granite to take an elongated form, principally in direction N60°W, but with extensions along the N30°W system.

MINERALIZATION
The San Francisco property is located within the Sierra Madre Occidental metallogenic province which extends along western Mexico from the state of Sonora, south to the state of Jalisco. In the state of Sonora, the most important metal produced in the Sierra Madre province is copper, with the Cananea porphyry copper deposit being the most well-known. Gold and silver projects are next in importance and are hosted mainly in sedimentary rocks and brecciated volcanic domes.

At the San Francisco Project, gold occurs principally as free gold and occasionally as electrum. Gold is found, in decreasing abundance, with goethite after pyrite, with pyrite and, to a much lesser extent, with quartz, galena and petzite (Ag3AuTe2). Although it is clear that the gold was deposited at the same time as the sulphides, the paragenetic relationships are not well understood. There is the possibility that some secondary remobilization may have occurred as evidenced by minor amounts of gold occurring in irregular forms along with or on top of drusy quartz (Prenn, 1995).

The gold occurs in a granitic gneiss and the presence of pyrite (or goethite after pyrite) may be an indication of gold. Stockwork quartz veinlets, some with tourmaline, also exist in the mineralized zone. However, the presence of quartz, even with tourmaline, is not necessarily an indication of the presence of gold. Quartz veinlets with tourmaline but without gold mineralization were found hundreds of metres away from the San Francisco deposit. Alvarez (in Prenn, 1995) suggested that some tourmaline was part of the mineralizing system, but could be distinguished from the tourmaline found elsewhere.

DEPOSIT TYPES
At the San Francisco Project, Alio was targeting large volume, low-grade disseminated gold deposits contained within leucocratic granite, granite-gneiss and gneiss and schist horizons. Leucocratic granite and gneiss are the main rocks hosting the gold mineralization.

The gold mineralization occurs in a series of west-northwest to east-northeast trending quartztourmaline veins and veinlets that lie sub-parallel to the local lithology and foliation trends, dipping to the southwest, within the more brittle rocks such as the leucocratic granite and more felsic lithologies within the Precambrian sequence. Extensive studies of the veins and alteration describe the mineralization as mesothermal/orogenic in style, but with a potential link to magmatic fluids and an intrusive source (Calmus et al., 1992; Luna and Gastelum, 1992; Perez Segura, 1992; Perezsegura et al., 1996; Perez Segura, 2008; Albinson, 1997; Poulsen and Mortensen, 2008).

Micon has conducted a number of discussions with Alio personnel during its prior site visits to the mine and in Hermosillo and notes that the exploration programs at the San Francisco Project were planned and executed on the basis of the deposit models discussed above. Micon has also observed the various stages of the drilling programs during a number of site visits at the San Francisco Project since 2005 and notes that those programs were always been conducted according to the deposit model which has been proposed for the Project.

Mining at the San Francisco and La Chicharra pits is conducted by a contractor, using open pit mining methods. At the San Francisco pit, a small underground mine was exploited during the second half of 2020 in order to accelerate cash flow by targeting some higher-grade mineralization in the block model.

Magna has now started to process ore from the low-grade stockpiles as well from the La Chicharra pit and plans to initiate underground mining from the higher grade lenses in the southwall of the San Francisco pit, as well as resuming open pit mining in portions of the San Francisco pit.

Magna will also establish its own stockpile for the lower grade material (but above the cut-off grade) being mined. This lower grade material can be processed later in the mine life, used to top up the crushing capacity from time to time or left to be processed at the end of the mine life.

Mine Plans and Activities
Production from the La Chicharra deposit recommenced in June, 2020. The San Francisco and La Chicharra pits are planned to be mined at the same time. Magna is also processing the remainder of Alio’s low-grade stockpile. The La Chicharra pit is located 1,000 m west of the San Francisco pit.

All mining activities are being conducted by the contractor, Peal Mexico, S.A. de C.V. (Peal Mexico), of Navojoa, Mexico. The contractor is obliged to supply and maintain the appropriate principal and auxiliary mining equipment and personnel required to produce the tonnage mandated by Magna, in accordance with the mining plan. Peal Mexico was also the contractor for Alio, during its mining phase at the San Francisco Project.

Magna provides contract supervision, geology, engineering and planning and survey services, using its own employees at the mine.

Underground Design
Alio previously conducted an investigation into whether or not it would be economical to conduct limited underground mining beneath the southern pit wall of the San Francisco pit. In 2015, Alio conducted limited underground drifting to expose the mineralized high-grade lenses outlined in preliminary drilling. In September, 2015, Alio ceased the underground drifting, after exposing the mineralization along two lenses. Alio ultimately decided not to conduct the underground mining and to mine this area via a pushback of the pit wall,mas was noted in Micon’s 2017 Technical Report on the San Francisco Project.

In Magna’s current mine plan, the high-grade ore lenses previously identified to be mined via an open pit pushback of the pit will now be mined using an underground cut and fill mining method, during the 2020 calendar year. The remainder of the ore in the pushback will be mined as part of the Phase 7B of the mine production plan at the San Francisco pit.

The underground development and mining will occur during the second half of 2020. The underground mine will be accessed through three portals installed in the pit wall at the 640 m, 632 m and 604 m elevations. The 632 m portal and development of that level was conducted in 2015.

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PROCESSING DESCRIPTION
The process used at the mine comprises multi-stage crushing and screening to 100% passing 9.5 mm, conveying and stacking of crushed material onto a heap leach pad, cyanide heap leaching and gold recovery from the pregnant solution using carbon columns, Zadra type elution, elecrowinning and smelting to produce a doré product containing over 90% precious metals.

Leaching
Product from the crushing plants is transported to the leach pad on overland conveyors and deposited on the pad with a stacker, forming 8 m to 12 m high lifts. A bulldozer is used to level the surface of each lift. The irrigation pipelines are then installed to distribute the leach solution over the entire surface of the lift. The design primary leach time is reported to be 180 days although, in practice, this can be extended when leaching a lift placed on top of a previous lift.

The leach solution fed to the heap consists of 0.05% sodium cyanide, with li ........