Mineralization at San Felipe can be classified as a zinc-lead skarn (Einaudi et al, 1981). These skarn systems commonly occur in continental settings associated with either subduction or rifting. They are sulphide rich with Zn + Pb commonly ranging from 10-20 % and Ag from 30-300 g/t. Zinc-lead skarns are often transitional to massive-sulphide veins and often lack significant calc-silicate alteration. The San Felipe district is characterized by a strong structural control on hydrothermal fluid movement and resulting alteration / mineralization in the northern areas (Ventana, Transversales and San Felipe) and a more disseminated style to the south (Lamas). Calc-silicate alteration at San Felipe is Mn-rich including bustamite-rhodonite, piemontite, garnet and pyroxene.

The San Felipe District contains a series of easterly-trending Pb-Zn-Ag-Mn skarn veins and pipes that cut the Lower Metamorphic sequence and intrusive rocks. The district hosts five principal, westerly-striking, vein systems that include Artemisa-Cornucopia, Las Lamas, San Felipe, Transversales and La Ventana. Primary minerals are sphalerite, galena, pyrite, and magnetite with lesser native silver, chalcopyrite, arsenopyrite, scheelite, and covelite within a gangue of garnet, pyroxene, epidote, quartz, rhodonite, and carbonate (Roldan-Quintana, 1979: Calmus et al., 1996).

Three types of felsic intrusions are spatially associated with the deposits and include the San Felipe rhyolite porphyry, ........

A variety of mining methods will be used at the San Felipe project including conventional open pit and underground methods applied to the four deposits targeted for mining at this time. The La Ventana deposit will be mined using a combination of open pit and underground methods, as will the San Felipe deposit. Las Lamas will be mined using underground methods only and Transversales will be mined using open pit methods only.

At an average mining and processing rate of 1,250 tonnes per day the anticipated life of mine is expected to be 7.5 years.

Underground development requirements for La Ventana, San Felipe and Las lamas total approximately 8,100 meters and includes ramps, level accesses, and vertical developments such as ventilation and service raises.

La Ventana underground mining will be a variation of longhole open stoping with rock backfill provided from surface using waste rock reclaimed from Ventana open pit operations. During the first year when the La Ventana pit is providing mill feed, the underground development of La Ventana will begin on levels 800, 780 and 760 with completion of the sill drifts on these levels in year 1. Access to the levels above 800 will be from the pit floor designed for this interface and transition.

For La Ventana underground mining a dilution factor of 20% at zero grade was assumed and 20% mining losses were applied.

The HW-1 structure of the San Felipe deposit will be mined beyond wha ........

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