Gold and silver mineralization on the Pinos Property is typical of low sulphidation epithermal systems associated with alteration assemblages including quartz and clay minerals, showing ginguro bands in high grade zones. These deposits are formed at relatively shallow depth, typically from just below the surface to a little over one kilometer deep, from reduced, neutral-Ph hydrothermal fluids with temperatures of <150°C to 300°C.

Mineralization at Pinos is contained in veins, brecciated vein systems, and stockwork, which are localized by geological structures, and range in size from 0.5m to 10m wide for veins and 200m to 900m for stockworks. The three main mineralized vein structures trends are northeast, north, and northwest.

Mineralization is comprised of quartz veins and veinlets, vein stockworks, and hydrothermal breccias that carry gold, silver, and some microscopic sulfide minerals. The alteration halos extending outward in the wall rock away from the vein are typically small in extent and are overprinted by surficial oxidation and argillization. Soil and rock sampling results also indicate a very short dispersion of silver and gold from the mineralized veins structures. Strong silicification and lithocaps related to intermediate and advanced argillic alterations for San Ramón and San Matías, respectively, suggest a possible altered quartz-eye porphyry for Au disseminated deposit.

The primary mining method at the Project is Cut and Fill mining which is a cost-effective method to mine complex geology of Mine District.

Cut and Fill is a favored choice for steeply dipping and sometimes irregular ore bodies and preferred by mines that require the capability of selective mining and adaptability to variations in the rock mass. Cut and Fill mining is generally referred to as a medium & small-scale mining method. Mining is carried out in horizontal slices along the stopes, where the bottom slice is mined first. The excavated area is then backfilled, and production continues upwards. Each production level is accomplished by drifting until the entire slice has been mined. The slice is then backfilled, and the fill becomes the working platform from which the next slice is mined.

Mucking is done for providing access to the top slices within the stope. When a stope is completed, a new access drift from the ramp is created to continue the production within the upper stope. One of the advantages of Cut and Fill mining is the possibility to reuse waste for backfill material, such as waste rock from development.

After of Industrial Safety revisions and underground precision surveys, the first steps of Cut and Fill start with selection of economical mineable widths and the marking of it along the roof of the stope, then a second step depends on the hangingwall conditions and regularity of the mineral grades along vein, normally if the grade is irregular, the process continues with the stope drilling and only the charging and blasting of the best grades zones (mineable width selection), then miners ventilate the blast fumes and the ore selected by selection is mucked out and dumped into an orepass or onto a truck, finally miners continues with charging and blasting of the marginal grades or waste, this material will be used of backfilling.

Before continuing with the next round, the rocks need to be reinforced. How this is done is decided by the mine for each situation. The mining continues until the entire slice of the ore has been mined. Since the mining can be tailored to suit the shape of the orebody, it is possible to minimize dilution of waste rock.

In order to access more production points, a second entrance can be opened at another level in the ore body and excavated in parallel. The equipment used for mining the ore is usually the same as what is used for development. As the ore body is mined, the rock stresses increase in the pillar above the mine area. Cut and Fill method has the advantage of high selectivity with good ore recovery and low dilution.

Waste rock is moved from development to stopping whenever possible; if an area does notexist for wastefill for immediate disposal of waste rock, it is moved to surface waste rock deposit (Tepetatera), then the waste rock is hauled back into the mine as neededto the stopes for final disposal, normally the narrow veins are self-sufficient for backfill.

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The Pinos remanufactured process facility (purchased by CAND) will consist of the following circuits and include all pumping, piping, and electrical components.
• ROM crushing Plant to produce a mill feed size of P80 - -3/8-in. Circuit will include jaw crusher with closed circuit secondary and tertiary cone crushers.
• Milling Circuit including two (2) closed circuit balls mills, one (1) primary thickener, four(4) cyanidation leach tanks, four(4) counter current decantation washing thickeners.
• Complete Merrill Crowe Zinc Precipitation including clarification, deaeration, zinc feeding, and gold and silver precipitate filters to produce a saleable precipitate. The process milling rate will be starting with 200 mtpd in the first year, 300 mtpd on 2nd year and and 3rd years and 400 mtpd from 4th year to the 7th year, with designed recoveries of 90% for Gold and 80% for Silver.

Leaching
Mineral in form of pulp ranging from 25% to 30% solids is deposited in a Primary Thickener of 50’ x 10’, in this deposit start the recovery of rich solutions from the mill, if the process requires a major leaching reaction, engineers add a fresh cyanide solution of 1500 ppm to 1750 ppm NACN.

Rich solution from the primary thickener is transferred to clarifier and the pulp from the discharge of primary thickener is pumped to four agitation tanks type AIR-LIFT de 30’ x 30’, it is to continue with leaching process, the tanks have four lateral siphons, the objective is to make sure the maximal depletion of Au and Ag values.

Residence time of solutions into the agitation tanks is 96 hours (exceeding the required time from the testwork for high gold and silver recovery). Finally, the pulp of fourth agitation tank comeback to primary thickener tank through countercurrent washing, then the pulp continues again the process through agitation tanks, where the final pulp from last fourth agitation tank is pumped to tailings pond. The solution from countercurrent washing is send to primary thickener tank and then it is transferred to Mill Solution Tank for recirculation new use at mill process.

Filtration and Clarification
The pregnant solution from the leaching circuit will have suspended solids (200 – 300 ppm) that are deleterious to the Merrill Crowe Process – thus requiring two(2) stages to clarify the pregnant solution to contain less than 10 ppm, and preferably 5 ppm total suspended solids.

The first stage of solution clarification includes primary sand Filters followed by a second stage vacuum leaf clarifier / filter.

Merrill-Crowe
Following clarification of the Au-Ag rich process solution, the stream must deaerated utilizing a “packed” deaeration tower under high vacuum. Typical pregnant solution has dissolved oxygen ranging from 5-8 mg/L and needs to be reduced to 0.5-1.0 mg/L. Again, this ensure efficient utilization of the added zinc for precipitation of the gold and silver.

Pinos project scheduling does not consider the production of doré bars on site. The resultant precipitate from the Merrill Crowe process will be initially sold to refiners with the best refining terms. There is also the possibility of the construction of a refinery either on site or in the nearest commercial city.

Potable Water
Potable water is abundant in the town of Pinos and mine site for human consumption. It is supplied from the Pinos aqueduct; it crosses the mine property just 200 meters of San José de Peñitas portal and facilities and local water wells.

Process Water
To accomplish requirements dictated by SEMARNAT to grant the environmental permit EIA (MIA); as well as to secure enough water for processing plant, Candelaria did two hydrological studies; one for underground water in local aquifers performed by Sistemas Tecnológicos e Investigaciones en Ingeniería, S.A. de C.V. “Estudio Geohidrológico Realizado en el Municipio de Pinos, Zacatecas para la Minera Catanava”. April 2016, and the other for surficial, and underground old mining workings performed by the same company titled “Analisis Hidrológico, Tránsito por el Vaso y Diseño de Canal Pluvial para la Presa de Jales de la Mina Catanava en Pinos, Zacatecas.”

Results from these studies reveal that the Oasis Ranch’s well may yield over 400 m3 per day and that San Luis Shaft may produce 200 m3 per day.

Process water estimated consumption is for 200m3 per day. Candelaria will be supplied by San Luis Shaft (Candelaria has an active water use permit with CONAGUA and certified by SEMARNAT), for additional water requirements, the company may pump additional volumes from Candelaria and San Joaquín shafts. Also, if necessary Candelaria may take water for processing mineral from El Oasis Ranch well.