Zone 120 in the eastern portion of the San Rafael deposit contains silver-copper mineralization within garnet-pyroxene-calcite skarn. The strong metasomatic alteration and the close spatial relationship with a large dioritic intrusion suggest that Zone 120 represents a proximal skarn deposit. El Cajón is a proximal silver-copper skarn related to an adjacent nearly cylindrical diorite intrusive body. Mineralization at El Cajón is replacement type and occurs as horizons in recrystallized limestone which are connected by mineralized zones localized by steeply dipping contacts, faults and fractures.

Zone 120 occurs not as a single horizon, but as multiple bedding- and intrusive-contact-related mineralized horizons. As currently defined, the Zone 120 mineralization occurs within a rock volume that is approximately 600m long, 250m wide and extends to a depth of about 350m below the surface. It strikes in a direction of 330°, and below the massive sulphide, the bedding-related mineralization dips steeply to the northeast at approximately 50°. The Zone 120 mineralization is interpreted to occur along near-vertical contacts between diorite and skarn-altered lime rich volcarenites in the lower parts, and in quartz-sericite-pyrite-altered volc-arenites in the upper portions. The quartz altered material is now referred to as hornfels, differing from earlier interpretations. Hornfels seems to be developed in carbonate poor rocks whereas the more highly mineralized skarn is developed in more carbonate rich rocks. Carbonate content is judged based on fragments and inclusions with the Va2 or volc-arenite package. The Zone 120 mineralization extends upwards to overlap with the San Rafael Main Zone mineralization. Mineralization is associated with generally 2 to 10% sulphides and is more irregular in shape and more variable in mineral character than the San Rafael Main Zone. It consists of silver-copper-gold mineralization in the form of chalcopyrite and tetrahedrite with minor pyrite, galena, sphalerite, arsenopyrite, chalcocite, jalpaite, native silver, copper and bismuth. This mineralization accompanies pyroxene-garnet-calcite skarn alteration. Mineralization is best developed in unit Va2, a volcarenite with a high component of carbonaceous fragments and carbonate. These are contained with beds of the same unit which a more siliceous and from hornfels instead of calcareous skarn. The hornfels are not a favourable host generally. Both skarn alteration and sulphide mineralization are spatially associated with intermediate dikes, sills and small stocks.

El Cajón mineralization consists of mantos and chimneys developed in skarn and recrystallized limestone. El Cajón and Zone 120 mineralization are similar in character consisting of veinlets and replacements of chalcopyrite and tetrahedrite-tennantite. The El Cajón deposit is roughly oval shaped extending 550m east-west and 400m north-south, with the mineralization aligned along the general 330° strike and 20° northeast dip of the limestone country rock. It varies in depth from approximately 20m below surface to a depth of approximately 250m.

The EC120 project is a part of Cosalá operations. EC120 includes both El Cajón Mine and Zone 120 deposits.

The EC120 Project considers underground mining at both the El Cajón and Zone 120 deposits. These deposits are located approximately 1.5km from each other on surface and limited portions of the Mineral Resources underground, are as close as 600m.

The El Cajón underground mine is accessed by an existing decline that portals at surface near the El Cajón administration building. The Zone 120 underground mine will be accessed from the existing development at the San Rafael mine, which is accessed by an existing decline that portals at surface near the San Rafael surface infrastructure. Access to the stoping areas at the EC120 Project is provided by primary ramp and lateral access development. Ramp development is limited to a maximum gradient, both positive and negative, of 15% to allow mobile equipment to work efficiently.

The El Cajon mine decline development continues from the existing main decline to access the stoping areas defined by the Mineral Reserves. There are two main stoping areas in the mine that are both accessed from the same decline. The ventilation system consists of a series of vertical raises developed both conventionally and by a raise bore. The RB-01 bored raise is approximately 84m and the RB-02 bored raise is approximately 161m.

The Zone 120 mine ramp access extends from an area near the existing Upper Zone incline in San Rafael to approximately the middle of the Mineral Reserves. From this point, the ramp system continues as an incline and decline to access the stoping areas defined by the Mineral Reserves. There are three main stoping areas in the mine that are accessed from this internal ramp system. The ventilation system consists of a series of vertical raises developed both conventionally and by a raise bore. The RB-03 bored raise is approximately 193m and the RB-04 bored raise is approximately 155m.

Due to the depth, variable dip angle (shallow to near vertical) and variable thickness of the mineralization the mining method proposed at EC120 is a combination of post-pillar cut and fill and overhand cut and fill. This mining method is very selective and adaptable to changes in the mineralization in terms of shape, dip, thickness and lateral extent. The designed widths for the stoping areas at EC120 range from a minimum of 4m to a maximum of approximately 60m.

Stopes are accessed from a primary stope access driven at a -15% decline. After mining of each successive 5m high cut of ore, the stope is backfilled and the access “backslashed” to allow for mining of the next cut. This sequence is repeated up to five times until the stope access reaches an incline of +15%. Access to the next cut is then provided by a -15% stope access driven from a higher elevation. The nominal level spacing between main accesses is planned to be 25m.

Ore will be mucked from the stopes to muck bays located on the main level access using loadhaul-dump equipment (“LHD”). LHDs will load trucks equipped for both underground and surface use at the truck loadout area. Ore will be hauled directly from the underground to the processing plant to avoid re-handling. On their return trip from the plant, trucks will be loaded with waste fill and travel directly or adjacent to the stopes requiring backfill. Final placement of the waste fill in stopes will be done using LHDs.

The pre-production period is approximately 18 months as a significant amount of development is required to access the bottom of the stoping areas in both deposits and provide enough production stoping areas to reach the targeted mining rate. The maximum stoping rate scheduled at both El Cajon and Zone 120 is 1,000tpd or approximately 9m/d assuming an average stope mined width of 7m and height of 5m. Backfill is scheduled at a maximum rate of 750tpd.

Over the projected five year mine life, a total of 2.9 million tonnes of Mineral Reserves are planned to be mined, at grades of 157g/t Ag and 0.42% Cu.

The EC120 Project plans to process ore from the combined underground operations at El Cajón and Zone 120 at the Los Braceros plant. The plant will only require minor modifications to piping and the reagent scheme in order to process this ore and will produce a silver-copper concentrate.

Processing of material from EC120 is expected to start after the cessation of production from San Rafael mine.

The Los Braceros process plant is a conventional polymetallic concentrator currently configured to produce zinc and lead concentrates. Throughput has recently been approximately 1,750 tonnes per operating day. The plant is configured to handle 1,800 tonnes per operating day.

Key processing equipment currently installed at the Los Braceros plant includes:
• Three-stage crushing plant; 0.76m x 1.07m jaw crusher, 1.67m standard cone crusher, 1.67m shorthead cone crusher;
• 800 tonne fine ore bin;
• Primary grinding mills: two each, 3.0m x 3.2m, 600kW ........