Although detailed petrologic studies of veins in the Velardeña property have not been completed, individual deposits within the nearby Santa María dome have been studied in some detail and found to correspond to both shallow epithermal and deeper-seated mesothermal styles of mineralization. Epithermal veins, often displaying banded and open-space-filling quartz, occur at the Industria Mine where they are clearly distal to the main intrusive mass. The higher-level veins at Velardeña appear to be of this type. Many veins, especially at deeper levels in the Santa Juana and Terneras mines, are dominated by high modal percentages of coarse and fine grained, polymetallic sulfides, have little silicate gangue, and occupy a position within and proximal to intrusions and their thermally metamorphosed aureoles.

True epithermal veins occur at Velardeña, but at depth the majority of veins, breccias, and massive sulfide replacements are mesothermal in character, commonly contain arsenopyrite, and may be related to a deeper intrusive source.

Two main vein systems are present on the Velardeña property. The first is the northwest striking system found in the Santa Juana deposit, while the second is the east-west trending vein array which includes the Terneras, San Juanes, Roca Negra and San Mateo deposits.

Mineralization consists primarily of calcite-quartz veins with minor calc-silicate hosted (“skarn”) and massive sulfide replacement bodies. All mineralization is essentially polymetallic, Ag, Au, Pb, Zn plus or minus Cu. Individual veins are usually thin (0.2 m to 0.5 m) but remarkably consistent along strike and down dip. Coxcomb and rhythmically banded textures are common in some vein exposures. Historical production in the district has been primarily from the oxide portions of the veins that can extend to depths of several hundred meters. Previous workers have suggested a vertical zonation with increasing Au:Ag and Cu:Pb with depth (Pinet, 2000).

Characteristics of the mineralization are summarized below:

- Veins occur in limestone, marble, calc-silicate and intrusive host rocks. The geometry of the veins is typically wider but more irregular in the limestone. In addition to being more consistent in width, veins within skarn and intrusive rocks tend to be narrower but higher grade with respect to precious metals. Skarn is the least favorable vein host.

- Although individual veins are typically narrow, zones of vein intersections and certain contacts between intrusions and limestone have focused brecciation and silicification, yielding mineralized chimneys which can reach 7 m in width and extend for tens of meters vertically.

- Within the Santa Juana sector, a zone of sheeted veins has been discovered near the intersection of northwest and east west trending veins. The overall dimensions of this corridor are approximately 500 m along strike and 250 m vertically (level 12 to level 18), with widths up to 100 m.

- Gangue minerals consist of calcite and quartz, which generally represent less than 20% of the volume of individual veins. Higher grade segments of veins generally conform to areas dominated by quartz or quartz-calcite mixtures; calcite rich zones are generally low grade. There is a distinct tendency for the upper portions of many of the veins to be calcite dominant, hence lower grades. Lateral changes in the gangue mineral composition have been observed, suggesting controls other than elevation are at work.

- Depth of oxidation is quite variable and the distribution of oxide and mixed mineral types complex. Within limestone host rocks, the veins are oxidized down to depths of up to 450 m. Oxides are rare in intrusive and calc-silicate host rocks, reportedly encountered only near the Tres Aguilas and Los Bancos faults, due to increased fracture-controlled permeability and fluid flow.

- The alteration zone along vein margins is generally less than 10 centimeters (cm) and is comprised of argillic alteration and silicification of the intrusive and skarn host rocks, and localized silicification and recrystallization of limestone. While precious and base metal mineralization is generally confined to the veins, sulfide stringers were observed extending
outwards along bedding planes within altered limestone.

- Underground drifting and drilling suggest many of the veins are open at depth below the 19th level.

During the year (2015) we used primarily shrinkage stope mining, standard mechanized cut and fill and overhand cut and fill mining methods.

Run of Mine (RoM) material is received from the underground mines by truck and unloaded onto a small area near the Plant #1 crushing circuit. The RoM material is reclaimed by a front-end loader and fed to a jaw crusher for primary crushing. The primary crushed material is sized by a vibrating screen operating in closed-circuit with a secondary cone crusher. The crushed fine material is conveyed to a 350-t fine ore bin ahead of the grinding circuit. The fine material is ground in two ball mills operating in parallel. The ball mill discharge is classified by cyclones, with the cyclone oversize returned back to the ball mills and the cyclone undersize, at 80% minus 200 mesh, advances to a conditioning tank ahead of Pb flotation. After conditioning, the slurry is fed to the Pb flotation circuit comprised of rougher, scavenger, and three stages of cleaner cells. The Pb concentrate from the cleaner cells represents the final Pb concentrate, which is then thickened and filtered to a moisture content of 10-12%, by weight, for shipment. The final Pb concentrate has a low projected grade of 35-40% Pb, which is rich in Au and Ag byproducts. The Pb and Ag recoveries to the Pb concentrate are projected to be over 65% and about 70% respectively.

There are two existing process plants, Plant 1 and Plant 2, at the Project. Plant 1 is designed to treat sulfide material to produce Pb, Zn and pyrite concentrates and is located near the village of Velardeña, approximately eight kilometers from the mining operations. Plant 1 has an operating capacity of 340 tpd with net capacity of 325 tpd at 95% operating time, equal to 112,775 tonnes per year (tpy) on a 347-day schedule. Plant 2 is an agitated leach plant for treating oxide Au-Ag mineralized material to produce Au-Ag doré. Plant 2 was purchased by William Resources in 1996. Operations were suspended at both plants in June 2013. In July 2014, Golden Minerals restarted mining operations to feed Plant 1, which started production on November 3, 2014. During the shutdown, Golden Minerals completed several capital projects at Plant 1 prior to restart including: overhauling the electrical system, installing new concentrate filters, and refurbishing the flotation cells. Oper ........