The San José deposit is considered to be a typical low sulphidation (“LS”) silver-gold epithermal deposit.

Epithermal gold-silver deposits form in near surface environments, from hydrothermal systems at shallow crustal levels (<1 km) or low temperatures.

The most important control on mineralization at San José is structure, which governs the formation and opening of faults and fractures, and the creation of open space during the mineralizing events.

Huevos Verdes veins have the best developed ore shoots with respect to grade and width at strike directions of 320° to 305°. Vein segments with strikes greater than 325° usually lack significant mineralization and are characterised by brecciation and fault gouge. These findings led to the conclusion that the Huevos Verdes vein system developed in a sinistral strike-slip setting. Counter clockwise bending of a sinistral strike-slip fault creates a dilational setting, whereas clockwise bending creates a compressional environment. Therefore, open space will preferentially form in counter-clockwise bends whereas increased tectonic friction with fault gouge and brecciation will develop preferentially in a compressional setting along clockwise-rotated bends. With respect to the Huevos Verdes system, the best mineralization will generally occur where structures bend counter clockwise from the average strike (less than 325°). Mineralized shoots would be expected to occur along the vein system where vein strike bends towards less than 325°.

Early north-northwest striking normal faults were formed in the region in response to Permian-Triassic rifting (Dietrich et al. 2005). Dextral east-west to west-northwest trending wrench faulting associated with mineralization in the Deseado Massif occurred at 150 to 125 Ma. The Huevos Verdes vein system formed as sinistral extension fissures within this dextral wrench fault system. The Permian Triassic northnorthwest trending faults were reactivated and became hosts to mineralization.

The Huevos Verdes system is discontinuous and displays counter-clockwise bending at the tips of mineralized sections. This geometry is interpreted to reflect formation of mineralized tension fissures with sinistral strike-slip displacement in between dextral master wrench faults. The bending indicates proximity to dextral east-west trending master faults. Dextral wrench faulting is thought to have occurred during mid- to upper-Jurassic times in the region and related to the early opening of the southern Atlantic. Outcrops of east-west striking, weakly-to-unmineralized quartz veins are exposed in the intermittent segments between the three zones of the Huevos Verdes system. East-west trending lineaments are rare but are present in the northwestern Deseado Massif.

Sinistral, north-northeast striking lineaments on the San José Property, limit the known occurrences of the north-northwest striking mineralized veins such as Huevos Verdes. The Rio Pinturas and the San José lineaments form a prospective corridor, with no known mineralization either east or west of this corridor.

Litho-stratigraphy may also play an important role in governing mineralization where certain lithostratigraphic horizons favoured the opening of fractures. Mapping in the Pluma Zone noted that the fracturing of rocks is far more intense in andesitic lava flows than in underlying volcaniclastic rocks. Fracture controlled wall rock alteration and mineralization is more pronounced in the lava flows. Host lithology may be a factor controlling the depth of mineralized shoots.

San José is currently a ramp access underground mining operation. The San José veins are accessed from three main portals: The Tehuelche Portal, the Kospi Portal and the Güer Aike Portal. Initially two small inclined shafts were developed to provide access to the HVS and HVN veins. These shafts are now used to supplement the primary ventilation circuit. Main ramps are generally 4.0 m wide by 4.3 m high at a 12 % gradient on the straight sections and 10.5 % on the curves. A smaller profile is used in areas where truck access is not required. The main ramps are located about 50 m from the veins, depending on the dip of the ore. Cross-cuts to the ramp are centrally positioned on the vein and usually have an ore pass and a waste backfill pass.

The average mining width across all of the vein systems is approximately 2m. The dip of the veins varies from 55º to 70º. Mechanized Cut and Fill mining using scoop trams, and jacklegs (pneumatic rock drills) or single-boom jumbos, respectively, is utilized at San José. The majority of production ore is derived from the “uphole retreat” mining technique where a panel of approximately 50m in length is drilled with upholes and retreated along strike. Horizontal “breasting” is only used on the initial lift in each stope. A “resue” mining technique is employed in narrow high grade areas. Stoping areas are separated by 3 m high sill pillars. A timber floor mat, for narrow stopes, or cemented backfill, for wider stopes, is placed on the sill pillar (1st lift).

Development waste rock is usually hauled to a surface stockpile and then rehandled through waste passes when it is required underground as backfill. Supplementary backfill is available from a surface waste dump.

The ground support consists of random rockbolts with occasional mesh and shotcrete. Timber sets are also used in some areas. Groundwater inflow is estimated to be between 8 and 20 L/s. Floor gradients are constructed to assist the natural flow of water to the sumps.

The San José processing plant is a relatively complex facility, including primary circuits of conventional crushing, grinding, and product on by flotation of a silver-gold sulphide concentrate. This flotation concentrate tonnage is split between on-site production of a doré metal destined to a refinery and the shipment of moist concentrate to a smelter for toll processing. On site metal production facilities include intensive cyanide extraction of silver and gold from the flotation concentrate using Gekko technologies followed by countercurrent decantation solution recovery, electrowinning and refining in a foundry to produce silver-gold doré bars. A small Merrill Crowe facility is used to recover residual gold and silver from cyanide leach tailings pond water. Two types of tailings are produced – flotation and cyanide leach tailings. These are stored close to the plant in adjoining facilities are separated by a lined berm. Residual cyanide in the leach tailings is destroyed by hydrogen peroxide treatment before discharge. Water is recycled to the processes from both tailings facilities.

The plant was operating reasonably well at the facility nominal capacity of 1,650 tonnes of ore per day. Ore supply tonnage was observed to be very good with a large number of stockpiles containing dry ore and these were being replenished by mineaccessible trucks. The truck contents were being directed to the appropriate stockpile by the geology department. Pads for larger stockpiles were being prepared near the plant. No significant amount of oversize was observed in the ore being delivered to the plant.

The current San José plant flowsheet indicates that flotation concentrate would be split 50:50 between concentrate bagging/sale and cyanide leaching. In practice, flotation concentrate is distributed to the two sections using valves and flow monitors on a single SRLtype pump discharge; in 2013 the percentage of flotation concentrate leached was 39% of total concentrate. A flowsheet and actual plant modification from previous years was the configuration of the ILR reactors into 2 by 2 format as opposed to 4 reactors operating in parallel.

Because active crushed ore capacity is only 2,000t, the crushing plant operates 14-16 hours per day. Two stages of crushing are used – a single Metso C-100 jaw crusher followed by two Metso-Nordberg HP200’s operating in parallel. Double deck screening produces a ball mill feed of a P80 (80% size less than) of 8,000µm, and 93% < 3/8 inches.

The feed tonnage (825t to each of 2 grinding and flotation circuits) to grinding is recorded by belt weightometers which are calibrated weekly by the plant instrument technicians. Grab samples are obtained bi-hourly from the parallel feed conveyors to assess moisture content. The two parallel grinding and flotation circuits were observed to be operating steadily with limited amounts of oversize ore fragments being screened out by the ball mill discharge trommel screens. An internal audit of the grinding circuits in May 2013 indicated a high (average) circulating load of 315% and a low cyclone efficiency of 46%. Grinding performance over the year was very consistent at 66.7% -200M.

The flotation circuit is composed of 2 parallel circuits of Denver DR-30 roughers and scavengers, and DR-24 Sub-A cleaners. The circuit was observed to be operating well – consistent with observations in previous years. Laboratory-scale kinetic tests in 2013 with a variety of reagents confirmed that rougher flotation is reasonably fast. Silver recovery is essentially complete in 4-5 minutes and gold in 6-8 minutes.

Flotation feed and flotation tailings are sampled with a two-stage sampler – the flotation feed sampler was observed to operating property, with a primary cut every 5 minutes. Secondary samples are collected every 4 and 12 hours for assay. While there are two grinding and flotation circuits, grinding discharge is combined, sampled and subsequently split for flotation feed. Flotation concentrate is combined in one pump box, then split for distribution to leaching and concentrate filtering and bagging. If the tonnage split of concentrate to leaching and filtration would be about 50:50 as earlier considered, isolation of the two grinding and flotation circuits with concentrate 1 going to leaching and concentrate 2 going to filtration would provide the opportunity for more accurate metallurgical accounting in each pathway. At the present time (according to the flowsheet provided and as observed in the plant), the following process streams are combined and subsequently split – grinding cyclone overflow, rougher flotation concentrate, scavenger concentrate and cleaner concentrate. All of the splitters can considered to be only approximately accurate including the split of the flotation cleaner concentrate, the flow of which to leaching is measured by flow and density instrumentation. This instrumentation was observed to be attached to a horizontal discharge line of an SRL type pump, which was pumping frothy material. It is challenging to achieve accurate calibration and measurement in such conditions (measurements on a full vertical line are preferred).

The leaching circuit and CCD circuits were operating well during the visit and ambient cyanide levels were noticeably (by odour) reduced (from previous years’ observations) as a result of the newly installed ventilation. These two circuits have been installed in limited space rendering routine operator movement and maintenance somewhat difficult. Two mechanics were observed to have positioned themselves on process piping 2-3 metres above the plant floor to conduct valve repair on the feed lines to one of the ILR reactors which was in operation. A nearby emergency shower was tested and found to be inoperable.

It remains unclear which pipelines carry which specific liquids or slurry in the leaching area. This aspect could benefit from some review. For example, normally, in such a leaching facility, pipelines and valves carrying concentrated cyanide solutions would be clearly identified (colour coded) stainless steel.

While the time for review of the actual leaching/CCD circuits was limited during the visit, based on the flowsheet provided, some potential improvements in solution management around the leaching and CCD circuits are possible. For example, adjustments in reagent conditions could be made at the discharge of the first ILR’s which feeds the second reactors.

Peroxide for leaching and detoxification (detox) is now being distributed from a central facility, an important improvement from the previous usage of 1-tonne tote bins.

The concentrate thickening, filtration and bagging facilities were observed to be operating normally. An appropriately sized forklift has been acquired, replacing an oversize unit. The secure foundry facility containing electrowinning (EW) cells, furnaces and the Merrill Crowe circuit was visited. Two EW units were observed to be out of service as was the Merrill Crowe circuit. Plant personnel indicated that the Merrill Crowe circuit stoppage was the result of employee concerns about cyanide contamination in workplace air. The overall foundry facility was observed to be in need of cleaning and “housekeeping”.