The Sao Francisco Mine is a shear hosted lode gold deposit. It is epigenetic, structurally controlled, and composed of narrow, 1 to 5 cm wide, quartz veins containing free gold. The veins and vein systems and stockworks both parallel and crosscut the bedding planes and appear to represent separate but closely related ineralizing events.

The local rocks at the Sao Francisco Mine have been subjected to low-grade metamorphism. They consist of fine to coarsegrained meta-arenites (metamorphic sandstones), with locally reddish-coloured metapelites (metamorphic mudstones) and occasionally metaconglomerates (old pebble beds) of the Fortuna Formation, the basal unit of the Aguapeí Group. The metaconglomerates are composed of quartz pebbles and grains set in a siliceous sandy matrix. Primary sedimentary structures such as cross-bedding, graded bedding, and ripple marks are commonly observed.

Mineralization is enclosed by a hydrothermal alteration zone (“HAZ”). The HAZ occurs as a regular steeply dipping tabular zone; the depth of the HAZ has yet to be defined by drilling. Alteration associated with mineralization in the HAZ consists of silicification and occasional sericite and chlorite.

The gold occurs as free gold and frequently as coarse nuggets measuring several millimeters in diameter with the quartz, as laminations along the fracture planes, and within limonite boxwork after pyrite and arsenopyrite.

Mining at the Sao Francisco Mine is carried out by contractors using a combination of hydraulic excavators, front end loaders, and 35 t haulage trucks with typical pit support equipment to sustain the operation. The pit is accessed via a standard access road or ramp 15 m wide at a minus 10% grade which provides access to the benches. Benches are 10 m high, with alternating 4.3 and 10 m wide safety berms.

Production drilling is carried out with 5.5 inch diameter holes and patterns for waste and ore of 6 x 4 m and 3.5 x 4.5 m, respectively. Standard bench height is 10 m, with one meter of sub-grade drilling for floor control.

The crushing circuit was designed with an operational efficiency of 90%. The design feed rate to the circuit is 850 tph.

ROM is fed through a fixed grizzly. A hydraulic rock breaker is available to assist with oversize material. Grizzly undersize is fed to the primary crusher via a vibrating feeder. Primary crushing is carried out using a jaw crusher with a closed side setting (“CSS”) of 6 - 1/2 inches. Primary crusher product is transported via conveyor belt to the primary two-deck screen.

The oversize from the primary screen is fed directly to the secondary cone crusher with a CSS of 1-1/4 inches. The primary screen undersize joins with the secondary crusher product, which is then fed to a stockpile.

Material from this stockpile is fed to a small feed bin. The bin feeds the two (2) secondary two-deck screens operating in parallel. The oversize from each screen feeds one (1) of the two (2) tertiary cone crushers, operating in parallel. Each tertiary crusher has a CSS of ½ inch.

The undersize of the secondary screens is combined with the tertiary crusher product and fed to the tertiary two-deck wet vibrating screen. The undersize of the tertiary screen becomes the feed to the gravity circuit. The oversize of the tertiary screen is fed to a silo where lime is added. The discharge from the silo is then hauled via truck to the heap leach pad.

The Sao Francisco Mine is an open-pit operation that is designed to send a steady feed of crushed gravity leach ore (“CGO”), on a daily basis, to the gravity circuit while lower grade material that was the run-of-mine dump leach ore (“DLO”) is now being stockpiled and will be run through the plant at the end of the mine life.

The Sao Francisco Mine’s mineral processing system consists of a gravity concentration circuit combined with a multi-lift, heap leach operation. During 2011, the two categories of lower grade material were stockpiled separately. Sub-marginal grade is material between 0.15 g/t Au to 0.25 g/t Au, low grade is material between 0.25 g/t Au to 0.40 g/t Au. CGO or high grade is material above 0.40 g/t Au. The CGO is processed by crushing and gravity concentration, followed by heap leaching of the tailings product from the circuit.

The crushing circuit consists of three stages of crushing and has been designed to generate a product of 30% passing le ........