La Colorada is located in a region with significant silver and base metal production from vein and skarn deposits, and is considered a typical hydrothermal polymetallic deposit, with a transition of silver rich mineralization to more base metal rich mineralization at depth. This is the geological model considered for exploration and mineral resource and reserve estimation.

The skarn deposit is a typical skarn system comprising altered diorite and quartz feldspar intrusive stocks on the contact with limestone and siltstone. Zoned endoskarn and exoskarn are present, with a prograde garnet and pyroxene zone, and a retrograde zone with zinc, lead, copper, and silver mineralization. Carbonate replacement deposits, breccia pipes, epithermal silver, lead, and zinc systems, and a deep copper molybdenum porphyry are present, related to multiphase hydrothermal and magmatic activity.

Economic mineralization at La Colorada is found in veins, replacement mantos within limestone, and skarn. The majority of the mineral resources and reserves are sourced from the NC vein series, the HW vein series, and Veta 3, all at the Candelaria mine; the Amolillo vein system at the Estrella mine; vein and manto mineralization at the Recompensa system at the Recompensa mine; and the new undeveloped skarn deposit, which is parallel to and below the NC vein series, east of the Candelaria mine.

Most mineralized veins on the Property strike east to northeast and dip moderately to steeply to the south. Veins occur in dacite and limestone, and cross cut bedding and lithological contacts. Most of the mineralization of economic significance is located in quartz veins that average 1 metre to 2 metres wide, but may be significantly wider. The vein fillings consist of quartz, calcite, and locally barite and rhodochrosite. Galena, sphalerite, pyrite, native silver, and silver sulphosalts are present in unoxidized veins. The major mineralized veins are strongly brecciated and locally oxidized. Amolillo strikes over 1.5 km to the northeast and dips 60° to the southeast, for over 800 metres down dip. The average vein width is 2.2 metres. The NC series of veins lies around 700 m to the southeast of Amolillo. The most significant of these veins, NC2, strikes around 1.2 km to the northeast and dips 75° to the southeast, for over 1 km down dip. The average vein width is 1.9 metres. The HW series is the western continuation of the NC series, strikes east-west, and dips 50° to the south, for over 600 m down dip. The average vein width is 1.8 metres. Veta 3 runs parallel to the HW and NC series, strikes for over 900 m to the northeast, and dips 75° to the northwest, for around 400 m down dip. The average vein width is 1.7 metres.

Manto style mineralization is found near vein contacts where the primary host rock is limestone. This style of mineralization was mined at Recompensa and can also be seen in some areas of the Candelaria mine.

A significant skarn deposit was discovered in 2018 at depth and to the east of the Candelaria mine. With increasing depth, mineralization styles progress from epithermal style veins, to manto style mineralization in calcareous sediments, skarn, magmatic hydrothermal breccia skarn, proximal skarn, epithermal veins overprinting porphyry, and copper-molybdenum porphyry. Common minerals include galena and sphalerite, with quartz, carbonate, feldspar, pyroxene, and garnet. The deposit, as currently defined, comprises several zones of mineralization located between 600 metres to 1,700 metres below surface, over an area of around 500 metres by 600 metres.

Underground mining currently takes place at the Candelaria and Estrella mines utilizing cut and fill and long hole open stoping methods. The main access ramps and haulage drifts are designed at 3.5 metres wide by 3.5 metres high, with a maximum gradient of 15%. Main levels have a vertical interval of 30 metres. Minimum mining widths are either 1.8 metres with planned dilution of 0.3 metres either side, or 1.5 metres with planned dilution of 0.2 metres either side, depending on vein width, and cuts are 2.4 metres high.

Hand held drills or electric hydraulic jumbo drills are used for development mining to access the ore, depending on the size of excavation required. Scoops are used for tramming ore and backfill to and from stopes, and haul trucks are used for underground ore haulage. Ground support is provided by rock bolts, with screen and shotcrete as required, as well as by backfilling mining voids with development waste rock or mill tailings. Ore is hoisted to the surface in a shaft with a capacity in excess of 2,300 tpd, and hauled to the mill crusher stockpile. When required, ore can be hauled to the surface using the two mine access ramps present in both mines.

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Ore processing is by separate oxide and sulphide circuits. The processing capacity is a nominal 400 tonnes per day in the oxide plant and a nominal 1,400 tonnes per day in the sulphide plant, although 1,700 tonnes per day in the sulphide plant is regularly achieved. Metallurgical recoveries in the oxide plant average around 84% for silver and 48% for gold. In the sulphide plant, recoveries average 93% silver, 61% gold, and 88% for both lead and zinc.

Oxide
Cyclone overflow reports to two 7.9 metre x 2.4 metre primary leach thickeners. Clear solution overflow from the thickeners reports to the pregnant solution tank and slurry underflow reports to a series of seven agitated leach tanks. The slurry passes through five of these agitated leach tanks for leaching and then reports to a 7.9 metre x 2.4 metre intermediate leaching thickener. Clear solution overflow reports to the pregnant solution tank and the slurry underflow reports to a series of four additional agitated le ........