The Santa Juana, Terneras, San Juanes and San Mateo vein deposits on the Velardeña property are hosted by Aurora Formation limestone, the Terneras intrusion and related skarn. The limestone is intruded by a series of multiphase diorite or monzodiorite stocks (Terneras intrusion) and dikes of Tertiary age that outcrop over a strike length of approximately 2.5 kilometers.

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

In the Santa Juana deposit, two main sets of vein trends are observed. The most significant is a steeply northeast dipping, northwest trending set that has acted as the main conduit for the mineralizing fluids in the Santa Juana deposit. This direction includes both linear and curved northwest vein sets.

The Terneras, San Juanes and San Mateo veins all strike east-west and dip steeply north. The most extensive of these is the Terneras vein, which was mined in the past over a strike length of 1,100 meters. All of these veins are observed to have extensive strike lengths and vertical continuity for hundreds of meters. The mineralogy of the east west system is somewhat different in that it contains less arsenic than the northwest Santa Juana veins.

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 seven m in width and extend for tens of meters vertically.

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.

Oxide Mineralogy
The oxide portions of the veins are composed of oxides, halides, carbonates and remnants of sulfide minerals. Concentrations of Cu oxides and carbonates are commonly seen along vein selvages in underground workings.

Sulfide Mineralogy
Within the sulfide zone, mineralization consists primarily of galena and sphalerite with lesser amounts of chalcopyrite, tetrahedrite, freibergite, and sulfosalts. Accessory sulfides including arsenopyrite, stibnite, pyrite, and pyrrhotite are locally abundant. Free gold or electrum is rarely seen as microscopic inclusions in pyrite and arsenopyrite Disseminated and stringer pyrite is very common in all rock types below 500 m depth and persists to much shallower levels within intrusive and calc-silicate host rocks.

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

The Velardeña Properties have two mills, each of which has its own tailings pond:

1. A 300 tonne-per-day flotation sulfide mill located near the town of Velardeña.

* The sulfide mill includes lead, zinc, and pyrite flotation circuits which produce lead, zinc and pyrite concentrates from the sulfide ore.

* Most of the silver is contained in the lead concentrate, while most of the gold has historically been in the pyrite concentrate.

2. A 550 tonne-per-day cyanide leach oxide mill with a Merrill Crowe precipitation circuit.

Plant #1 processes sulfide material in a conventional flow sheet of crushing, grinding, and differential flotation for the production of three separate concentrates - Pb-Ag, Zn, and pyrite.

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 crus ........