As documented by Lewis and Murahwi (2013) and Munroe (2014), the San Sebastián del Oeste silver-gold district comprises classic, high grade silvergold, epithermal vein deposits, characterized by low-sulphidation mineralization and adularia-sericite alteration. The veins are typical of most other epithermal silver-gold vein deposits in Mexico in that they are primarily hosted in volcanic flows, pyroclastic and epiclastic rocks, or sedimentary sequences of mainly shale and their metamorphic counterparts.

Low-sulphidation epithermal veins in Mexico typically have a well-defined, subhorizontal ore horizon about 300m to 500m in vertical extent where the bonanza grade mineralization shoots have been deposited due to boiling of the hydrothermal fluids. Neither the top nor the bottom of the mineralized horizons at the Terronera Project has yet been established precisely.

Low-sulphidation deposits are formed by the circulation of hydrothermal solutions that are near neutral in pH, resulting in very little acidic alteration with the host rock units. The characteristic alteration assemblages include illite, sericite, and adularia that are typically hosted by either the veins themselves or in the vein wall rocks. The hydrothermal fluid can either travel along discrete fractures where it may create vein deposits or it can travel through permeable lithology such as a poorly welded ignimbrite flow, where it may deposit its load of precious metals in a disseminated deposit. In general terms, this style of mineralization is found at some distance from the heat source.

Geologic information and field observations indicate that the hydrothermal system at the Terronera vein is preserved over an elevation difference of 600m. Regionally, the known deposits contain polymetallic sulphide mineralization in wide vein structures. The veins at higher elevations may represent the tops of ore shoots containing significant silver and gold mineralization at depth.

The Mineral Reserve extends from the 1,610m to 1,260m elevations, a vertical distance of approximately 350m, and has a lateral extent of approximately 1,400m. A conceptualized mechanized cut and fill mining method plan has been laid out to extract the deposit using trackless underground equipment, including scooptrams, haulage trucks, and electric-hydraulic drill jumbos. A small amount (7% of total Mineral Reserve) of mechanized long hole mining is also required for the recovery of sill pillars.

Primary access to the deposit will be via a 526m long -12% 5m by 5m trackless haulage ramp, from the portal, at the 1469 m Level to the 1410m Level. The -12% haulage ramp will be driven an additional 283m to the 1380m Level haulage drift. The 1380m Level haulage drift will be driven at +1% for an addition 892m, during the next 3 quarters of a year to the end of the 1380m Level haulage drift.

Access to the mining zones will be via a series of five +/-12% up-and-down spiral ramps, access cross-cuts, and stope attack cross-cut ramps. This development will have cross-sectional dimensions of 4.5m by 4.5m.

The principal mining method envisaged is mechanized non-captive cut and fill using trackless underground equipment, including scooptrams, haulage trucks and electric-hydraulic drill jumbos. The average mining width is estimated to be 4.4m.

Initial access to the stope lifts will be via cross cut attack down slope ramps. The initial bottom cut and fill lift will be excavated 4m high by the width of the mineralized domain (up to 6m wide), as drift development. Stope lifts will be mined from the bottom up. The backs of the attack ramps will be slashed to access higher lifts. Stope lift strike lengths will be up to 300m in length and 150m in each direction from the attack ramp access. Mining breasts will be drilled using horizontal blast holes. Where more than one vein occurs in the same mining block, adjacent veins will not be mined) simultaneously at the same elevation.

A beneficiation plant utilizing a flotation process was selected for recovery of precious metals present in the Terronera deposit. A fine grind of 80 percent passing 200 mesh provides acceptable levels of gold and silver recovery. Precious metal values will be recovered into a flotation concentrate that may be sold in the open market. A cleaner scavenger tail (CST) flotation product will be shipped to a cyanide leach facility for further processing. The Dore produced via a cyanidation, Merrill – Crowe, and refinery system will enhance the overall precious metal recovery for Terronera.

The mineral processing facility design throughput is 1,000 dry tpd equivalent to 342,000 dry tpy for Years 1 and 2 and 2,000 dry tpd equivalent to 684,000 dry tpy from Year 3. The life-of-mine (LOM) for the project is estimated at 7 years.

A brief description of the processing circuits included in the design is as follows:

1. The crushing circuit is comprised of a dump ore pocket fitted with an apron feeder. The Apron feeder sends the ore to a primary jaw crusher to reduce the material to minus 150 mm. The oversize is broken with a hydraulic breaker.

2. The crushed material is transported to subsequent stages of screening and crushing in closed circuit to further reduce the material to minus 9 mm. Conveyor belts are used to transport the intermediate and fine crushed materials throughout the crushing circuit.

3. The crushing circuit design provides two weigh scales, crushed ore sampling system, and magnetic separators to protect the cone crusher from iron coming from underground mining operations. The finely crushed product is transported to a fine ore bin with 1,000 tonne live capacity.

4. A variable speed belt feeder transports the crushed material from the fine ore bin to the primary grinding mill. The material is ground to 80 percent minus 200 mesh (75 microns) in closed circuit with a battery of cyclones.

5. Some flotation reagents will be added into the grinding mill to allow for conditioning. Ground slurry (cyclone overflow) at approximately 30 percent solids is sent to a trash screen for removal of debris produced in the underground mining operation. After trash removal the clean slurry is directed to a conditioning tank where flotation reagents are added for conditioning prior to the flotation process.

6. The flotation circuit consists of banks of Rougher followed by Scavenger cells to achieve maximum precious metal recovery. The Rougher concentrate is sent to a two stage cleaning circuit to achieve the highest possible gold and silver grade in the final concentrate. The first cleaner tailing product and the scavenger concentrate are returned to the head of flotation. The cleaner scavenger tails (CST) report to the thickener and filtration area for dewatering.

7. The CST is filtered and the filter cake with a moisture ranging from 15% to 20% is stored and air dried in a warehouse prior to shipment.

8. The second cleaner concentrate reports to the concentrate thickener. The second cleaner concentrate is filtered and the filter cake (final concentrate)with moisture ranging from 15% to 20% is stored and air dried in a warehouse prior to shipment.

9. Each concentrate and CST shipment will be sampled and analyzed for precious metal and moisture contents. Impurities present in the concentrate will be quantified.

10. Flotation tails will be sent to a thickener and the higher density slurry filtered at a dry tailings filter plant prior to conveying the solids to the dry tailings storage facility (DTSF). A dry stack type of tailings storage has been selected for the Terronera Project.

11. After sedimentation and filtration, the flotation tailings will be transported to the dry tailings stacking area. The filtered tailing material will be placed in a stockpile by a radial stacker. Front end loaders and compaction equipment are ultimately used to spread and compact the tailing material as required.

12. Advantages of a dry stack tailings system include the following:
- Water reclaim maximization
- No embankment needed
- Minimal area required for placement
- Improved drainage control
- Lower reclamation cost