At El Castillo, gold is mainly associated with pyrite occurring as fracture fillings or stockworks and also occurring within areas of hydrothermal brecciation. Pyrite with gold also occurs as disseminations especially within intrusive rocks. Within the mine the host environment for gold mineralization is dominated by an alternating pattern of sediments and parallel intrusive sills that strike to the northwest and dip steeply to the northeast. The sedimentary units generally vary from 20 to 40 metres wide as do the intrusive sills. Many of the sills appear to have intruded along bedding planes by splitting the tabular sedimentary blocks into their present positions. This geologic event resulted in the unique alternating pattern of sediments and intrusive sills/breccias that are observed throughout the mine area. Extensive fracturing of the sedimentary blocks created favorable secondary permeability for the deposition of gold mineralization predominately associated with pyrite. As a result of this ground preparation, the northwest striking sediments can be better mineralized than the surrounding intrusive rocks.

There are two main controls to mineralization. The more important of these is a close association between gold and sedimentary stratigraphy that generally strikes northwest and dips to the northeast. The favored permeability and chemistry of these rocks strongly influenced the distribution and geometry of mineralization. The second control to mineralization is related to a northeast structural fabric that provided the main conduits to the mineral system. The combination of these geologic controls resulted in a northeast elongated gold zone that measures approximately 1,600 metres by 1,300 metres.

As with the nearby El Castillo property, the San Agustin Project does not fit entirely into an epithermal classification. The San Agustin deposit appears genetically and spatially related to a quartz monzonite stock with intense phyllic alteration and local tourmaline breccias. These factors may point towards a telescoped system associated with a deeper porphyry center. This is supported by broad zones of potassic alteration that are overlapped by pervasive phyllic alteration; however, locally on surface and in some drill holes boiling textures, suggestive of an epithermal system do occur. Mineralization is mainly associated with sulfides that fill fractures and occur in the matrix of hydrothermal breccias. These form an extensive system of sulfide stockworks dominated by pyrite with lesser percentages of sphalerite and galena. Mineralization is often contained within adularia haloes and can be associated with calcite veinlets.

The mining method employed at the El Castillo Mine consists of traditional open pit drill and blast operations followed by excavator loading of rigid body haul trucks for ore transport to heap leach pad or crusher with waste transported to designated dump locations.

San Agustin Pit, was designed with five mining phases and contains 72.4M t of Indicated mineral resources at an average grade of 0.32 g/t Au and 10.6 g/t Ag. The life-of-mine strip ratio is 0.39:1. Pit resources were broken into two different material types designated for heap leach processing: high-grade and low-grade. At a 6M tpy production rate of high-grade material during the first year and then increasing to 10.8M tpy from the second year to the end of mine life, it is expected that the potential mine life will be 6.5 years. The production schedule targeted a consistent total mine tonnage of approximately 18M tpy, consisting of high-grade, low-grade, and waste material.

The dimensions of the San Agustin Pit are 1,500 m in the east-west and 1,100 m in the north-south directions. One primary waste dump was designed and located 500 m south of the San Agustin Pit. An overview of the San Agustin Pit and waste dump.

The El Castillo Mine currently processes oxide and transition gold ore through a conventional heap leaching operation that includes single-stage and two-stage crushing , truck and portable conveyor transport to multi-lift heap leach pads, irrigation with cyanide solution, and gold recovery through Carbon-in-Column (“CIC”) gold recovery circuits. Loaded carbon is transported to the Corporation’s La Colorada Mine facilities for further processing to a final doré.

The current cut-off grade is 0.15 g/t gold. Softer ore with grades from 0.15 g/t gold and higher grade and harder ore from 0.15 g/t to 0.25 g/t gold are classified as single-stage crushed ore and are delivered to the West Crusher and crushed to -6 inches. Harder ore with grades greater than 0.25 g/t gold is classified as higher grade ore and transition ore with grades greater than 0.21 g/t gold are two-stage crushed at the East Crusher to -1 inches before being delivered to the leach pad by a portable conveyor system. Lime is added to all ore before delivery to the pad in order to maintain protective alkalinity with a target leach solution of 10.5 pH.

Heap leaching is presently conducted on the East and West Side heap leach pads. All of the leach pads are double lined with clay and one and a half mm high density polyethylene (HDPE). The East Side leach pads, which were completed in early 2012, are divided into five cells with a total capacity of 30 million tonnes. An additional 9 million tonne expansion was completed in August 2015. The original West Side leach pads were constructed by Castle Gold and expanded in five increments by Argonaut Gold from 2010 to 2015.

Gold contained in the pregnant leach solution (“PLS”) from the East Side heap leach pads, is recovered from solution in a standard CIC circuit that consists of a train of five cascade-type carbon columns designed to handle a nominal PLS flow-rate of 1,000m3/hr. Each carbon column has capacity for six tonnes of carbon. The CIC circuit on the East Side was modified in 2015 adding an additional five 1 tonne carbon columns with a capacity of 150m3/hour.

Gold contained in the PLS from the West Side heap leach pads, is recovered from solution in a standard CIC circuit that consists of a train of five cascade-type carbon columns designed to handle a nominal PLS flow-rate of 1,000 m3/hr. Each carbon column has capacity for six tonnes of carbon. The CIC circuit on the West Side was modified in 2014 adding an additional five 1.5 tonne carbon columns with a capacity of 250 m3/hour. The loaded carbon is sampled and sent to the Desorption Plant/Refinery located at the La Colorada Mine operations for offsite stripping and gold refining.